TaxTMI Updates e-Newsletter
Apr 02,2021

Summons under Section 70 of the CGST Act not being notice under Rule 159(5) of the CGST Rules - Provisional attachment of bank accounts under Rule 159 - power and procedure - Requirement of opportunity of personal hearing and a speaking order before confirming provisional attachment - Judicial direction to consider interim relief to lift limited attachments to protect business interest - Remand for fresh consideration of representation against provisional attachment

Summons under Section 70 of the CGST Act not being notice under Rule 159(5) of the CGST Rules - Summons issued under Section 70 of the CGST Act does not operate as a notice under Sub rule (5) of Rule 159 of the CGST Rules for the purpose of challenging provisional attachment. - HELD THAT: - The Court held that the summons dated 27.01.2021, issued under Section 70 in connection with an investigation, cannot be construed as the notice contemplated by Rule 159(5) which provides the procedure for objection to a provisional attachment. The summons was directed to secure attendance in an investigation and thus is distinct from the statutory mechanism under Rule 159(5) that enables a person whose property is provisionally attached to file an objection seeking release under Form GST DRC 23. Consequently, the appellants could not rely on the summons as having satisfied the Rule 159(5) notice requirement.

Summons under Section 70 is not a Rule 159(5) notice; the attachment procedure under Rule 159 remains the appropriate route for challenging provisional attachment.

Provisional attachment of bank accounts under Rule 159 - power and procedure - Requirement of opportunity of personal hearing and a speaking order before confirming provisional attachment - Judicial direction to consider interim relief to lift limited attachments to protect business interest - Remand for fresh consideration of representation against provisional attachment - Whether the provisional attachment of multiple bank accounts ought to remain in force pending completion of investigation and what procedural steps the tax authority must take when a representation is made against such attachment. - HELD THAT: - The Court observed that provisional attachment under Rule 159 is intended to protect Government revenue and can be ordered by the Commissioner in writing if satisfied it is necessary. However, the statutory procedure under Rule 159 affords the attached person a remedy by filing an objection within seven days and being heard before release by order in Form GST DRC 23. The business interest of the taxpayer, particularly where multiple accounts are attached in an employee driven business, is a relevant consideration. Given that investigation is incomplete and the taxpayer had submitted a representation dated 27.01.2021, the Court directed a personal hearing for the authorised representative and required the first appellant to pass a speaking order within ten days of that hearing. The Court further required the authority to consider, as an interim measure while the representation is pending, whether limited lifting of some attachments is tenable to enable business continuity. These directions operate as a remand to the tax authority to reconsider the attachments in accordance with Rule 159 and the principles identified by the Court.

Order stayed subject to directions: authorised representative to be heard; authority to pass a speaking order within ten days; and consideration of interim partial lifting of attachments to protect business operations, thereby remanding the representation for fresh consideration.

Final Conclusion: The appeal is partly allowed: the Court clarified that a Section 70 summons is not a Rule 159(5) notice, directed the tax authority to grant a personal hearing and pass a speaking order within ten days on the representation against provisional attachments, and required consideration of interim relief by selective lifting of attachments to protect the taxpayer's business pending fresh disposal.

Abeyance of summons - lifting of bank attachments - jurisdictional challenge to summons - direction to Assessing Authority

Abeyance of summons - lifting of bank attachments - jurisdictional challenge to summons - Whether the bank attachments consequent to the impugned summons must be lifted while the summons is kept in abeyance and is challenged on jurisdictional grounds. - HELD THAT: - The Court found that the bank attachments flow directly from the impugned summons. Since this Court had earlier kept the impugned summons in abeyance and the summons itself is challenged on the ground of lack of jurisdiction (as noted in paragraphs 3 and 4 of the order dated 08.02.2021), the attachments cannot remain in force. The abeyance of the summons therefore entails that consequential steps taken pursuant to it, namely the attachment of the petitioner's bank accounts, must be lifted. The Court emphasised that the Assessing Authority has been specifically directed to lift the attachments in view of the jurisdictional challenge and the interim order keeping the summons in abeyance. [Paras 3]

Attachments of the petitioner's bank accounts arising from the impugned summons shall be lifted; the Assessing Authority is directed to comply.

Service of counter - opportunity to file rejoinder - Whether the petitioner should be served with the counter and given an opportunity to file a rejoinder. - HELD THAT: - The Court ordered that a copy of the counter filed by R2 and R3 be served on the learned counsel for the petitioner to enable him to file a rejoinder, if he so desires. This is a procedural direction to ensure that the petitioner has the opportunity to respond to the material placed by the respondents. [Paras 4]

Copy of the counter to be served on the petitioner's counsel and the petitioner given liberty to file a rejoinder.

Final Conclusion: The Court ordered that the bank attachments effected pursuant to the impugned summons be lifted in view of the summons being kept in abeyance and challenged for want of jurisdiction; directed service of the respondents' counter on the petitioner with liberty to file a rejoinder, and listed the matter for further hearing on 24.03.2021.

Allocation of jurisdiction to avoid overlapping assumption of jurisdiction under Section 6 of the Central Goods and Services Tax Act, 2017 - abeyance of summons where State proceedings have been initiated - inter-governmental non-overlap of tax jurisdiction

Allocation of jurisdiction to avoid overlapping assumption of jurisdiction under Section 6 of the Central Goods and Services Tax Act, 2017 - abeyance of summons where State proceedings have been initiated - Summons issued by the Central authority were kept in abeyance in view of earlier-initiated State proceedings and the principle in Section 6 of the CGST Act preventing overlapping assumption of jurisdiction. - HELD THAT: - The Court noted that Section 6 of the Central Goods and Services Tax Act, 2017 authorises officers of State tax or Union territory tax to act as proper officers in specified circumstances so as to avoid overlapping assumption of jurisdiction. In the present matter, the Assistant Commissioner of SGST (R3) issued notices on 17.12.2020 and the petitioner filed a reply on 29.12.2020, indicating that proceedings before the State authority had already been initiated. Applying the non-overlap principle embodied in Section 6, the Court kept the summons issued by the Central authority (R1) in abeyance until the next date of hearing and directed pleadings and service as recorded. The order is procedural and interlocutory, preserving the primacy of the State-initiated proceedings for the time being pending further consideration. [Paras 3, 4]

Summons issued by the Central authority kept in abeyance in view of prior State proceedings; matter listed for further hearing with directions for service and filing of counter.

Final Conclusion: The Court, invoking the allocation principle under Section 6 of the CGST Act to prevent overlapping jurisdiction, kept the Central authority's summons in abeyance because proceedings had been initiated by the State authority; further pleadings and service ordered and matter listed for 10.03.2021.

Allowability of depreciation on property acquired in exchange for relinquishment of tenancy rights - depreciation on payment for non compete as a business or commercial right - taxability under Section 28(iv) of excess of net book value taken over on amalgamation (amalgamation reserve)

Allowability of depreciation on property acquired in exchange for relinquishment of tenancy rights - treatment of payment for surrender of tenancy right as capital transaction - Depreciation is allowable on the property acquired where the acquisition followed payment in relation to surrender of tenancy rights and there was no exchange of one property for another. - HELD THAT: - The Court accepted the Division Bench decision in the assessee's own case which held that surrender of tenancy rights is a capital transaction and, on the facts, the amount paid for surrender was given to the builder and there was no exchange of properties. Consequently the asset acquired was eligible for depreciation despite no separate monetary consideration having been paid for the new property. The Tribunal's grant of depreciation was affirmed. [Paras 8, 9, 10]

Answered against the Revenue; depreciation allowed.

Depreciation on payment for non compete as a business or commercial right - test for capital versus revenue expenditure in relation to non compete fees - The payment characterized as a non compete fee qualified as an asset of a nature attracting depreciation under Section 32 and the Tribunal correctly allowed depreciation. - HELD THAT: - The Court upheld the Tribunal's reliance on earlier decisions in the assessee's favour and distinguished the Delhi High Court decision in Sharp Business System on facts. The Court noted binding consistency in earlier assessment years where the claim was allowed and observed that factual differences (including the nature and purpose of the non compete arrangement) meant Sharp Business System was not applicable. Applying the tests for whether an expenditure creates or adds to the capital or profit making apparatus, the Tribunal's view that depreciation was allowable was endorsed. [Paras 11, 16, 17]

Answered against the Revenue; depreciation on non compete fee allowed.

Taxability under Section 28(iv) of excess of net book value taken over on amalgamation (amalgamation reserve) - distinction between capital transaction on amalgamation and income arising from business or profession - The excess of net book value of entities taken over on amalgamation over the consideration paid (reflected as amalgamation reserve) did not fall within the ambit of Section 28(iv) and was not taxable as business income. - HELD THAT: - The Court agreed with the Tribunal that the amalgamation was a capital transaction and not part of the assessee's ordinary business; consequently the amalgamation reserve did not constitute a benefit or perquisite arising from business so as to attract Section 28(iv). The Court relied on Supreme Court authority (Commissioner v. Mahindra & Mahindra Ltd.) and earlier High Court decisions holding that amounts reflected as reserves post amalgamation are capital in nature and not taxable under Section 28(iv). The Revenue's reliance on a different factual decision (Aries Advertising) was rejected as distinguishable on facts. [Paras 18, 20, 21, 22, 24]

Answered against the Revenue; excess net book value on amalgamation not taxable under Section 28(iv).

Final Conclusion: The Revenue's appeal is dismissed. All substantial questions of law raised (relating to depreciation on the Lucknow property, depreciation on non compete fee, and taxability of amalgamation reserve under Section 28(iv)) are answered against the Revenue.

Section 273B - reasonable cause for waiver or reduction of penalty - Section 271C - penalty for failure to deduct or remit tax at source - distinction between Section 271C(1)(a) and Section 271C(1)(b) - Section 273B non-obstante clause and its effect on Section 271C - binding effect of Full Bench precedent

Section 273B - reasonable cause for waiver or reduction of penalty - Section 271C - penalty for failure to deduct or remit tax at source - distinction between Section 271C(1)(a) and Section 271C(1)(b) - binding effect of Full Bench precedent - Whether the explanation offered by the assessee for belated remittance of TDS could be considered under Section 273B and whether penalty under Section 271C for delayed deposit of tax deducted at source is attracted. - HELD THAT: - The High Court held that the questions in these appeals are no longer res integra in view of the Full Bench decision in Lakshadweep Development Corporation Ltd. The Full Bench construed Section 273B as a provision beginning with a non-obstante clause that extends the benefit of waiver or reduction of penalty to failures covered by the whole of Section 271C, and expressly rejected the view that failure to remit TDS (section 271C(1)(b)) is excluded from Section 273B. Once an assessee discharges the burden of showing good and sufficient cause, the authorities are obliged to consider, with application of mind, whether penalty should be waived or reduced. The departmental and tribunal orders confirming penalty for delayed remittance of TDS were contrary to that Full Bench declaration. Applying that precedent to the facts of these appeals, the Court concluded that levy of penalty for delayed deposit of TDS is not attracted and the impugned orders confirming penalty must be set aside. [Paras 4, 6]

Following the Full Bench precedent, the appeals are allowed; the orders imposing penalty for delayed deposit of TDS are set aside.

Final Conclusion: Appeals allowed in favour of the assessee; impugned orders confirming penalty for delayed remittance of TDS set aside and levy of penalty under Section 271C in the stated assessment years held not attracted.

Applicability of Accounting Standard-7 - completed contract method of accounting - percentage completion method of accounting - revenue neutrality (tax neutrality) of accounting method - recognition of income by real estate developers

Applicability of Accounting Standard-7 - percentage completion method of accounting - completed contract method of accounting - Whether the Tribunal was justified in holding that Accounting Standard-7 did not require the assessee (a real estate developer) to adopt the percentage completion method instead of the completed contract method - HELD THAT: - The Court examined earlier decisions of this High Court and the Supreme Court cited by the assessee, and noted that the Revenue itself had accepted the completed contract method for subsequent assessment years. Applying those precedents and having regard to the factual position that the assessee had followed the completed contract method and that subsequent years' assessments accepted that method, the Court held that the Tribunal was correct in not obliging the assessee to apply AS-7 and to substitute the completed contract method with the percentage completion method in the years under consideration. The Court answered the substantial question of law on this point against the Revenue and in favour of the assessee. [Paras 8]

The Tribunal was justified in holding that AS-7 did not compel the assessee to adopt the percentage completion method over the completed contract method for the assessment years in dispute; this question is answered against the Revenue.

Revenue neutrality (tax neutrality) of accounting method - recognition of income by real estate developers - Whether the Tribunal was justified in holding that the tax effect of allowing the completed contract method was revenue neutral and not contrary to the real income/pay-as-you-earn theory - HELD THAT: - The Court considered the submissions and the authorities relied upon, including decisions accepting that different permissible methods of accounting, if lawfully adopted, do not result in permanent loss to the revenue because amounts not taxed in an earlier year would be brought to tax in subsequent years. In the factual matrix before it and on the precedents relied upon, the Court found the Tribunal's conclusion that the issue was revenue neutral and therefore not determinative of the substantial question to be correct. [Paras 8]

The Tribunal's finding of tax neutrality of the accounting method adopted by the assessee is upheld and the question is answered against the Revenue.

Recognition of income by real estate developers - completed contract method of accounting - Whether the assessing authority was justified in adopting the percentage completion method and making additions by treating the assessee's adoption of the completed contract method as a tactic to postpone taxation - HELD THAT: - The Court observed that the assessing authority's approach ran contrary to the line of decisions relied on by the assessee and to the Revenue's own acceptance of the completed contract method for later assessment years. The Court concluded that there was no sufficient legal basis to treat the assessee's method as a mere tactic to postpone tax liability and that the additions made by adopting the percentage completion method were not sustainable in the circumstances. [Paras 8]

The assessing authority's adoption of the percentage completion method to make additions is not sustained; the additions on that basis are set aside.

Final Conclusion: Having regard to binding and persuasive precedents and the Revenue's acceptance of the completed contract method for subsequent years, the substantial questions of law are answered against the Revenue and in favour of the assessee; the appeals are dismissed.

Re-opening beyond four years under proviso to Section 148 - failure to disclose material facts - change of opinion doctrine - disclosure of all material facts during original assessment

Re-opening beyond four years under proviso to Section 148 - failure to disclose material facts - change of opinion doctrine - Validity of re-opening assessment beyond four years where no failure to disclose material facts was recorded and re-opening appears to be based on change of opinion. - HELD THAT: - The re-opening notice impugned was issued on 28.03.2011 in respect of assessment year 2004-05, i.e., beyond four years from the end of the relevant assessment year. The proviso to Section 148 permits such belated re-opening only where the assessee has failed to disclose fully and truly all material facts necessary for assessment. In the original assessment the assessee had filed particulars regarding legal and professional expenses and the Assessing Officer examined those particulars; no finding of non-disclosure was recorded in the assessment order. In that factual matrix the attempt to re-open the assessment amounts to a mere change of opinion by the assessing authority, which is impermissible under the proviso. The Tribunal correctly concluded that the re-opening was unsustainable.

Re-opening beyond four years set aside as it was based on change of opinion and no failure to disclose material facts was found.

Disclosure of all material facts during original assessment - Whether the assessee had produced all material information required for the purpose of the original assessment. - HELD THAT: - On the material on record the assessee had duly filed details and particulars in support of the legal and professional expenses during the regular assessment proceedings, and those were examined by the Assessing Officer. No omission or concealment of material facts was pointed out in the assessment order. Given the presence of those disclosures in the original assessment, the requirement in the proviso to Section 148 for failure to disclose material facts (as a precondition for re-opening after four years) was not satisfied. The Tribunal's finding that the assessee had produced all requisite material information was upheld.

Finding that the assessee had produced all material information was affirmed and precluded belated re-opening.

Final Conclusion: The Tribunal's order dismissing the Revenue's appeal was upheld: the re-opening of assessment for AY 2004-05, initiated beyond four years, was unsustainable as it amounted to a change of opinion and there was no failure by the assessee to disclose material facts in the original assessment; the Tax Case Appeal is dismissed.

Proviso to Section 281 (protection of bona fide purchasers) - voidness of transfers under Section 281 - Rule 11 of the Second Schedule (remedy against attachment) - attachment by Tax Recovery Officer under Schedule-II - procedural safeguards before passing orders on attachment

Voidness of transfers under Section 281 - proviso to Section 281 (protection of bona fide purchasers) - Whether the provisional/final attachment of the property purchased by the petitioner after registration of sale deed on 06.05.2011 was contrary to Section 281 and whether the petitioner prima facie falls within the proviso protecting a bona fide purchaser. - HELD THAT: - The court found that the Encumbrance Certificate produced by the petitioner indicates no charge on the property at the time of purchase on 06.05.2011 and therefore, prima facie, the petitioner's case falls within the proviso to Section 281. The court observed the change in statutory language since the decision in Tax Recovery Officer v. Gangadhar Vishwanath Ranade and noted that the proviso's clause concerning transfers for adequate consideration and without notice is intended to protect a bona fide purchaser. However, the court did not finally decide the applicability of the proviso on merits because the assessment orders and background material that led to attachment were not placed before it; accordingly the matter of whether the proviso applies must be examined and determined by the competent Tax Recovery Officer on the record and after following the prescribed procedure. [Paras 33, 34, 35, 36, 37]

Prima facie protection under the proviso to Section 281 is indicated but final determination whether the petitioner is a bona fide purchaser entitled to protection is remitted to the Tax Recovery Officer for decision on merits.

Rule 11 of the Second Schedule (remedy against attachment) - attachment by Tax Recovery Officer under Schedule-II - procedural safeguards before passing orders on attachment - Whether the Tax Recovery Officer and the Principal Commissioner complied with the procedural machinery (Rule 11) and whether the petitioner's remedy lay before the Tax Recovery Officer. - HELD THAT: - The court held that Rule 11 of the Second Schedule prescribes the method for redressal of claims and objections to attachment and that the Tax Recovery Officer is the competent authority to investigate and decide such claims. The court noted that the petitioner had made representations to the Income Tax Officer and the Tax Recovery Officer which remained unanswered and that the Principal Commissioner's impugned order did not consider the petitioner's pleas. In view of the statutory procedure, the court concluded that the matter should be decided by the Tax Recovery Officer after complying with all procedural requirements and hearing the petitioner. [Paras 31, 32, 36, 37, 43]

The impugned order is set aside and the matter is remitted to the Tax Recovery Officer to decide the petitioner's representations under Rule 11 after following the prescribed procedures and safeguards.

Proviso to Section 281 (protection of bona fide purchasers) - attachment by Tax Recovery Officer under Schedule-II - Reliefs and procedural directions to be followed on remand including disclosure of assessment orders to the petitioner. - HELD THAT: - For a proper adjudication, the court directed the Deputy Commissioner (Company Circle IV(1)) to furnish copies of the assessment orders for the Assessment Years in dispute to the petitioner within thirty days. The petitioner may, if advised, file an additional representation to the Tax Recovery Officer within thirty days of receipt of those orders. The Tax Recovery Officer is directed to pass final orders on merits after considering such representation within ninety days and to comply with all procedural requirements, including hearing the petitioner. [Paras 38, 40, 41, 42, 43]

Assessment orders to be furnished to the petitioner; opportunity to file additional representation; Tax Recovery Officer to decide final orders on merits within the stipulated time and after observing procedural safeguards.

Final Conclusion: The impugned order dated 26.10.2016 is quashed. The question whether the petitioner is protected as a bona fide purchaser under the proviso to Section 281 and the validity of attachment are remitted to the Tax Recovery Officer for decision under Rule 11 of the Second Schedule after supplying the assessment orders to the petitioner and after affording opportunity to be heard; directions and timelines for such proceedings have been specified.

Re-assessment proceedings under Section 148 of the Income Tax Act, 1961 - bar under Section 245F(2) - proceedings before the Settlement Commission - proceedings before the Settlement Commission under Section 245D/245C - cancellation of registration under Section 12AA of the Income Tax Act - escapement of income as contemplated in Explanation 2 to Section 147

Re-assessment proceedings under Section 148 of the Income Tax Act, 1961 - bar under Section 245F(2) - proceedings before the Settlement Commission - proceedings before the Settlement Commission under Section 245D/245C - cancellation of registration under Section 12AA of the Income Tax Act - Validity of the re-assessment notice dated 22.1.2021 issued for the assessee's trust for Assessment Year 2013-14 while Settlement Commission proceedings and challenge to registration under Section 12AA were pending. - HELD THAT: - The Court noted that the assessment for the relevant year was already before the Settlement Commission in terms of Section 245F(2) and that the application under Section 245C had been permitted to proceed under Section 245D; those proceedings have been stayed by the Supreme Court in earlier litigation. It was also noted that the order cancelling registration under Section 12AA was itself under challenge before this Court. In view of the pendency of the Settlement Commission proceedings (and the stay thereof) together with the ongoing challenge to the registration cancellation, the Court found no apparent reason for issuance of a fresh re-assessment notice at this stage. The Court therefore restrained operation of the impugned notice and directed the opposite parties to file a detailed counter-affidavit within four weeks and listed the matter along with connected writ petitions for joint consideration.

Impugned re-assessment notice dated 22.1.2021 shall remain stayed; opposite parties granted four weeks to file a detailed counter-affidavit and matter listed along with connected writ petitions.

Final Conclusion: The High Court granted interim protection by staying the re-assessment notice dated 22.1.2021 for Assessment Year 2013-14 in light of pending Settlement Commission proceedings (stayed by the Supreme Court) and the challenge to the cancellation of registration, while directing the respondents to file a detailed counter-affidavit for further consideration.

Income Tax Settlement Commission - filing of application for settlement under Section 245C - Finance Bill not enforceable until enacted - obligation to receive applications pending legislative repeal

Income Tax Settlement Commission - filing of application for settlement under Section 245C - Finance Bill not enforceable until enacted - obligation to receive applications pending legislative repeal - Settlement Commission shall continue to receive and entertain applications under the existing law until any legislative change is brought into force, and it cannot refuse receipt of an application solely because a Finance Bill proposing abolition has been introduced but not enacted. - HELD THAT: - The Court observed that a Finance Bill placed before Parliament and not yet assented to by the President remains a proposal and is not enforceable law. In the absence of any enacted statutory change, the existing statutory scheme, including the procedure under Section 245C for settlement applications, remains operative. On the material before it the Court was prima facie satisfied that the Settlement Commission had not been abolished and that it was under a duty to receive an application presented in accordance with the Act. Consequently, as an interim measure the petitioner was granted liberty to file an application and the Commission was directed to receive it; further consideration was left to be completed after the parties seek instructions and the matter is listed again.

Liberty granted to the petitioner to file an application under the existing procedure; the Settlement Commission shall receive the application notwithstanding the pendency of the Finance Bill, which is not yet law.

Final Conclusion: The petition was allowed in the limited interim sense that the petitioner may file an application under the existing Section 245C procedure and the Settlement Commission is directed to receive it; broader questions were not finally adjudicated and the matter was listed for further consideration.

Holding period for capital gains - date of allotment treated as date of acquisition - date of registration not relevant for computing holding period - long-term capital asset - short-term capital gain - indexation benefit - right to property conferred by allotment letter

Holding period for capital gains - date of allotment treated as date of acquisition - date of registration not relevant for computing holding period - long-term capital asset - indexation benefit - right to property conferred by allotment letter - Whether the property was a long-term capital asset and the assessee was entitled to indexation by computing holding period from the date of allotment/agreement rather than from the date of registration - HELD THAT: - The Tribunal found that the assessee received an allotment on 30th October, 2007, entered into a buyer's agreement on 22nd January, 2008 and made payments through May 2010, while the conveyance was executed on 24th May, 2011 and possession taken in January 2011. The Tribunal applied the principle that for computing the period of holding the relevant date is the date of allotment/agreement and not the date of registration. The decision relies on the jurisdictional High Court ruling in CIT v. K. Ramakrishna and consistent coordinate-bench precedents (including Ranjana Bammi, Praveen Gupta and Madhu Kaul) which hold that an allottee acquires a right in the property on issuance of the allotment letter and that consequential acts (payments, identification of flat, delivery of possession) relate back to rights conferred by allotment. On that basis the Tribunal held the asset to be a long-term capital asset and that the assessee was entitled to indexation from the date of allotment/agreement; the Tribunal set aside the CIT(A)'s conclusion treating the transfer as short-term and directed the AO to accept the assessee's computation of long-term capital gain with indexation. [Paras 9, 11, 12]

The asset is a long-term capital asset and the assessee is entitled to indexation from the date of allotment/agreement; the CIT(A)'s order treating the gain as short-term is set aside and the AO is directed to accept the assessee's computation.

Final Conclusion: Appeal allowed: the Tribunal held that the period of holding runs from the date of allotment/agreement (not registration), treated the asset as long-term and directed acceptance of the assessee's indexation-based computation of capital gain.

Assessee in default under Section 201(1) - Recovery provision and requirement of pending demand against the payee - Validity of acceptance of Form 15G/15H for non-deduction of TDS - Compensatory nature of interest under Section 201(1A)

Assessee in default under Section 201(1) - Recovery provision and requirement of pending demand against the payee - Validity of acceptance of Form 15G/15H for non-deduction of TDS - Whether the Assessing Officer could treat the bank as assessee in default under Section 201(1) for nondeduction of TDS where payees had submitted Form 15G/15H and no demand had been shown to be pending against those payees. - HELD THAT: - The Tribunal accepted the assessee's submission that Section 201 is a recovery provision which cannot be invoked in the absence of a jurisdictional fact - namely, a subsisting tax demand against the recipient-payee. The bank had accepted Form Nos. 15G/15H filed by payees, which are statutory declarations seeking non-deduction of TDS. The AO did not record any finding that tax demands were outstanding against the payees; instead the AO inferred taxability merely from the quantum of interest paid. The Tribunal followed the view in the jurisdictional decisions relied upon by the assessee and the earlier coordinate Bench decision in respect of the same branch, holding that absent proof of pending demand against the payees the deductor cannot be treated as assessee in default under Section 201(1). No distinguishing features were shown for the assessment years under appeal and the identical issue was allowed for both years.

The orders treating the bank as assessee in default under Section 201(1) in respect of payments made to persons who submitted Form 15G/15H were quashed and the appeals allowed.

Compensatory nature of interest under Section 201(1A) - Assessee in default under Section 201(1) - Whether interest under Section 201(1A) could be levied where the bank was not validly declared an assessee in default under Section 201(1), and if leviable, the appropriate period for charging such interest. - HELD THAT: - The Tribunal noted that interest under Section 201(1A) is compensatory in nature and can be imposed only after the deductor is declared an assessee in default under Section 201(1). Since the Tribunal held that the statutory precondition for declaring the bank in default was not satisfied (no pending demand against payees established), interest under Section 201(1A) could not be sustained. The Tribunal also observed the settled principle that, where interest is chargeable, it is to be computed from the date of deductibility till the date of actual payment, but that question did not require independent decision once the foundational declaration of default was set aside.

Interest under Section 201(1A) could not be sustained in the absence of a valid declaration of the deductor as assessee in default; accordingly the demand for interest did not survive.

Final Conclusion: Appeals allowed: the Tribunal set aside the orders treating the bank as assessee in default under Section 201(1) and consequential interest under Section 201(1A) for AY 2014-15 and 2015-16, holding that Section 201 cannot be invoked without establishment of a pending tax demand against the payees who submitted Form 15G/15H.

Maintenability of Revenue appeal under CBDT Circular No.3/18 dated 11.07.2018 - Tax effect threshold of Rs. 50 lakhs - Applicability of CBDT circulars to pending proceedings

Maintenability of Revenue appeal under CBDT Circular No.3/18 dated 11.07.2018 - Tax effect threshold of Rs. 50 lakhs - Applicability of CBDT circulars to pending proceedings - Revenue's appeal dismissed as not maintainable under CBDT Circular No.3/18 dated 11.07.2018 since the tax effect is less than Rs. 50 lakhs and no exception under the Circular applies. - HELD THAT: - The Department contested the appeal but the tax effect involved is admittedly less than Rs. 50 lakhs. CBDT Circular No.3/18 dated 11.07.2018 precludes the Department from filing appeals before the Tribunal except where an exception in the Circular is attracted. The Revenue failed to demonstrate applicability of any exception. The Tribunal also noted precedent treatment that CBDT instructions apply to pending proceedings. In view of the Circular and the absence of any shown exception, the Revenue's appeal is not maintainable and must be dismissed without adjudicating the merits remitted earlier by the High Court. [Paras 6, 7]

Revenue's appeal dismissed as not maintainable under CBDT Circular No.3/18 dated 11.07.2018; appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal as not maintainable under CBDT Circular No.3/18 dated 11.07.2018 because the tax effect was less than Rs. 50 lakhs and no exception applied; the substantive issues remitted earlier by the High Court were not adjudicated.

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - formation of AO's satisfaction in the course of assessment - requirement under Section 271(1B) that satisfaction must precede penalty proceedings - penalty not to be imposed absent mala fides, deliberate defiance of law or contumacious conduct - inadmissibility of treating quantum additions as automatic basis for penalty

Formation of AO's satisfaction in the course of assessment - requirement under Section 271(1B) that satisfaction must precede penalty proceedings - Validity of initiation of penalty proceedings where the AO's satisfaction formed during assessment is vague and does not specify the nature of default. - HELD THAT: - The Tribunal found that the assessment order and the subsequent show-cause notice did not clearly indicate whether the alleged default was 'furnishing inaccurate particulars' or 'concealment of particulars of income'. Section 271(1)(c) operates only where the Assessing Officer is satisfied during the course of proceedings about the nature of the default; that satisfaction cannot be vague or formed only during penalty proceedings. Because the condition precedent for jurisdiction under Section 271(1)(c) read with Section 271(1B) was not met-the assessment and notice being ambiguous as to the nature of the charge-the initiation of penalty proceedings was invalid and the consequential penalty could not stand. [Paras 7]

Penalty proceedings quashed as initiation was based on a vague, non specific satisfaction formed in assessment and therefore jurisdictional condition under Section 271(1)(c)/271(1B) was not satisfied.

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - penalty not to be imposed absent mala fides, deliberate defiance of law or contumacious conduct - inadmissibility of treating quantum additions as automatic basis for penalty - Whether, on merits, penalty under Section 271(1)(c) was exigible having regard to bonafides, mitigating circumstances and evidentiary deficiencies. - HELD THAT: - The Tribunal held that even on merits the imposition of penalty was not justified. The assessee had offered explanations, the transactions were through banking channels, third party statements were not cross examined, and the assessee had shown circumstances creating reasonable doubt about malafide or deliberate concealment. It reiterated that a finding of addition in assessment cannot automatically substitute for the mental element required for penalty; absent proof of deliberate or contumacious conduct, penalty under Section 271(1)(c) is not ordinarily warranted. Given these mitigating factors, the penalty could not be sustained. [Paras 8]

Penalty deleted on merits as the requisite element of deliberate concealment or dishonest conduct was not established and mitigating circumstances militated against imposition of penalty.

Final Conclusion: The appeal is allowed: the penalty imposed under Section 271(1)(c) for AY 2007-08 is quashed and deleted because (i) the jurisdictional satisfaction required to initiate penalty proceedings was vague and unspecified, and (ii) on the merits no culpable mental element or contumacious conduct was established to justify penalty.

Addition under section 68 - seized master cash book versus ledger and summary sheet - double addition / double counting of same receipts - surrender of cash receipts accepted by department

Addition under section 68 - seized master cash book versus ledger and summary sheet - double addition / double counting of same receipts - surrender of cash receipts accepted by department - Validity of addition made u/s 68 on basis of seized ledger/summary when the same receipts were recorded in a seized master cash book and surrender in respect of those inflows had been made and accepted. - HELD THAT: - The Tribunal accepted the factual finding that the seized master cash book (AA-6) recorded the primary cash inflows and corresponding withdrawals/deposits; the ledger printouts (A-2) are party-wise records derived from that master cash book and the summary sheet (A-5) is a further compilation of those ledger entries. The Assessing Officer added the figure shown in the summary/ledger as unexplained receipts, notwithstanding that the underlying inflows appearing in the master cash book had been surrendered by the assessee and his son and the surrender was accepted by the department. The CIT(A) examined entries across the seized documents, demonstrated that the ledger and summary merely reflect the same transactions recorded in the master cash book, and concluded that the AO's addition resulted in double counting of the same receipts. On independent examination the Tribunal agreed with the CIT(A)'s factual and legal conclusion that no independent undisclosed income arose from the ledger/summary beyond what was already recorded and surrendered in the master cash book; accordingly the addition was not sustainable. [Paras 6, 9, 10]

The addition made by the AO u/s 68 was deleted as it amounted to double addition of receipts already recorded in the seized master cash book and surrendered/accepted by the department; the CIT(A)'s order deleting the addition is confirmed and the revenue's appeals are dismissed.

Final Conclusion: On the facts and seized material the ledger and summary sheet were found to be derived from the master cash book whose inflows were surrendered and accepted; the AO's addition under section 68 therefore amounted to double counting and is set aside, and the revenue appeals for the three assessment years are dismissed.

Remand for fresh consideration - ex parte hearing - opportunity of being heard - non-speaking remand report - requirement for specific findings when rejecting explanation

Remand for fresh consideration - non-speaking remand report - requirement for specific findings when rejecting explanation - opportunity of being heard - Validity of the CIT(A)'s confirmation of the addition of Rs. 7,00,000 on account of alleged undisclosed cash deposits and whether the matter required fresh consideration. - HELD THAT: - The Tribunal found that the CIT(A) affirmed the addition relying on the AO's remand report and on the view that the assessee had been given sufficient opportunity and had offered shifting explanations. The Tribunal observed that the CIT(A)'s conclusion in para 3.4 is at odds with the assessee's earlier written explanation (para 3.1) which indicated production of registries and identification of sources (friends from whom amounts were allegedly borrowed). The Tribunal emphasised that where an explanation links deposits to identified sources or to agricultural realizations, the authority rejecting that explanation must record specific findings-for example, demonstrating lack of nexus by reference to dates of Form-J vis-a -vis deposit dates-before discarding it as unsupported. Reliance upon a non-speaking remand report and an unarticulated finding of prior opportunity, without confronting the asserted documentary sources or indicating deficiencies, was held to be an unfair exercise of power. Given that the assessee sought to obtain further documentary evidence, the Tribunal considered it appropriate in the interests of substantial justice to set aside the impugned order and remit the matter to the CIT(A) to specifically examine the evidence relied upon, confront any insufficiencies with the assessee, afford an effective opportunity to remedy deficiencies, and thereafter pass a speaking order in accordance with law. [Paras 6, 7, 8]

Impugned order set aside and matter remitted to the CIT(A) to examine the evidences, confront deficiencies with the assessee, provide effective opportunity of hearing, and thereafter pass a speaking order.

Ex parte hearing - opportunity of being heard - Consequences of proceeding ex parte after rejection of adjournment and availability of remedies to the assessee. - HELD THAT: - The Tribunal noted that the assessee's adjournment request was rejected and the appeal was heard ex parte. While the Tribunal proceeded ex parte in the absence of the assessee, it expressly recorded that if the assessee suffered prejudice from non-representation at the virtual hearing, remedies such as recall under the ITAT Rules remain available and may be invoked as per law. This preserves the assessee's procedural remedies in the event of demonstrable prejudice. [Paras 2, 9]

Proceeding ex parte recorded; availability of recall or other remedies under the ITAT Rules to the assessee preserved if prejudice is shown.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the CIT(A)'s order confirming the addition and remitting the matter to the CIT(A) for specific examination of the evidences, provision of effective opportunity to the assessee, and passing of a speaking order; the record of ex parte hearing is without prejudice to the assessee's right to seek recall if prejudiced.

Disallowance of business expenditure - evidence to substantiate deductions - recomputation of long term capital gains under section 50C - reference to the Valuation Officer under section 50C(2)

Disallowance of business expenditure - evidence to substantiate deductions - Disallowance of discounts allowed to customers debited under 'other expenses' remanded for fresh consideration - HELD THAT: - The Tribunal recorded that the Assessing Officer had disallowed deductions claimed as 'discount allowed to customers' on the ground that the expenditure was not supported by necessary evidence and appeared contrary to prescribed rates. Both parties agreed that the matter should be reconsidered. The Tribunal therefore set aside the appellate order and directed the Assessing Officer to give the assessee an opportunity to produce and have its evidences examined and to reconsider the disallowance in the light of those evidences without adjudicating the merits on appeal. [Paras 7]

Remitted to the file of the Assessing Officer for fresh consideration and opportunity to the assessee to furnish and have its evidences examined.

Recomputation of long term capital gains under section 50C - reference to the Valuation Officer under section 50C(2) - Recomputation of long term capital gains by adoption of stamp-duty market value remanded for referral to the Valuation Officer - HELD THAT: - The Tribunal noted that the Assessing Officer applied the higher stamp-duty value for computation of capital gains under section 50C. The assessee had requested referral to the Valuation Officer (DVO) contending that the guideline/stamp-duty value did not reflect realisable market value. With the consent of both parties, the Tribunal did not decide the merits but directed the Assessing Officer to determine the correct market value by referring the valuation to the DVO in accordance with section 50C(2) and to reconsider the recomputation of long term capital gains after such determination. The assessee was directed to furnish necessary evidences before the Assessing Officer. [Paras 7]

Remitted to the file of the Assessing Officer with direction to refer valuation to the DVO under section 50C(2) and to recompute capital gains thereafter.

Final Conclusion: The Tribunal set aside the orders below and remitted both the disallowance of discounts and the recomputation of long term capital gains to the Assessing Officer for fresh consideration (including referral to the Valuation Officer under section 50C(2)), and treated the appeal as allowed for statistical purposes.

Additions on account of undisclosed on-money - probative value of seller's admission and documentary evidence - materiality of omission of co-seller's name - requirement of specific date on incriminating document - failure to cross-examine / non-appearance of summoned witness - treatment of multiple precedents and cumulative effect of decisions

Materiality of omission of co-seller's name - Omission of the name of one of the joint sellers in the Tribunal's recital does not affect the validity of additions. - HELD THAT: - The Tribunal's reference to the land being sold by the Tapadia family while omitting the Bansal family was held to be immaterial because the land was in fact sold jointly by both families. The mere omission of the co-seller's name in the recital does not alter the substance of the transaction or the basis for the additions, and therefore has no bearing on the correctness of the Tribunal's decision. [Paras 4, 11]

The omission of the Bansal family's name is immaterial and does not vitiate the additions.

Requirement of specific date on incriminating document - probative value of seller's admission and documentary evidence - Absence of a specific date on the incriminating document did not preclude confirmation of additions where the sellers admitted receipt of on-money and documentary evidence was found. - HELD THAT: - The Tribunal found that the Tapadia family admitted receiving on-money in the financial years relevant to the assessment years under consideration. Once the fact of receipt is established by admission and supported by documentary material found during search - and the sellers acknowledged the genuineness of those documents and offered the amounts to tax - the absence of a specific cash-payment date on the document is not significant. There is no separate temporal partitioning between the year of receipt by the seller and the year of payment by the buyer when the combined evidence points to the same period. [Paras 5, 6, 13]

Lack of a date on the document does not negate the probative force of admissions and documentary evidence; additions were rightly confirmed.

Treatment of multiple precedents and cumulative effect of decisions - Tribunal need not expressly discuss every decision relied upon if the cumulative effect and ratio of the cited authorities have been considered. - HELD THAT: - The Tribunal considered the substance and ratio of relevant decisions. Where the issue has been decided on the entirety of facts and circumstances, there is no obligation to mention or analyse each and every precedent relied upon by the assessee, particularly when the additional decisions are repetitive and their ratio has already been taken into account. Omission to refer to further similar decisions does not render the order defective. [Paras 7, 8, 9]

No infirmity in the order for not separately discussing every decision; cumulative effect was considered.

Failure to cross-examine / non-appearance of summoned witness - probative value of seller's admission and documentary evidence - Non-appearance of the witness for cross-examination did not invalidate the additions where independent documentary evidence and the sellers' admissions supported the assessment. - HELD THAT: - Although summons were issued and the witness did not appear for cross-examination, the Tribunal noted that the assessment was not founded solely on the witness statement. Documentary evidence discovered during the search corroborated the receipt of on-money, and the Tapadia family admitted the genuineness of those documents and offered the amounts to tax. Considering the admissions alongside documentary material, the absence of cross-examination of Shri Ajay Tapadia did not vitiate the additions. [Paras 12, 13]

Non-completion of cross-examination of the seller does not nullify the additions where admissions and documentary evidence corroborate the taxability.

Final Conclusion: Both Miscellaneous Applications filed by the assessee were dismissed; the Tribunal's confirmation of additions for on-money in assessment years 2006-07 and 2010-11 was upheld for the reasons stated above.

Eligibility for Merchandise Exports from India Scheme (MEIS) - procedural versus mandatory requirement for declaration of intent on shipping bills - discrimination between EDI and non-EDI shipping bills - amendment of shipping bills under Section 149 of the Customs Act, 1962 - ultra vires status of subordinate legislation prescribing time-limit by circular

Eligibility for Merchandise Exports from India Scheme (MEIS) - procedural versus mandatory requirement for declaration of intent on shipping bills - discrimination between EDI and non-EDI shipping bills - The writ-applicant is entitled to claim MEIS benefits for exports during the period between 1.4.2015 and 31.5.2015 despite the absence of the declaration of intent on non-EDI shipping bills. - HELD THAT: - The Court held that eligibility under the MEIS is determined by the product and destination and not by the mechanical presence of the declaration on the shipping bill. The goods in question were examined and the shipping bills bore endorsements; therefore verification and safeguards under the Customs Act, 1962 were complied with. The requirement of a declaration in Clause 3.14 of the Handbook is a procedural provision introduced for administrative convenience and, particularly for the initial period, the authorities themselves were uncertain about its mandatory application (as reflected in public notices and by seeking DGFT clarification). The distinction in practice between EDI and non-EDI exporters-where relaxation was repeatedly afforded to EDI exporters but denied to non-EDI exporters-was held to be unreasonable and discriminatory. Prior decisions of this Court and other High Courts permitting amendment of free/non-EDI shipping bills and grant of MEIS benefits where substantive eligibility is established were followed as covering the present case. [Paras 31, 33, 35, 36, 39]

The writ-applicant's omission to mention the declaration on non-EDI shipping bills is a curable procedural lapse and shall not disentitle it from MEIS benefits.

Amendment of shipping bills under Section 149 of the Customs Act, 1962 - no time limit in Section 149 - Amendment of the shipping bills under Section 149 is permissible after export on the basis of documentary evidence existing at the time of export, and no time-limit can be read into Section 149 by way of a circular. - HELD THAT: - The Court noted that Section 149 expressly permits amendment of shipping bills after export when supported by documentary evidence existing at the time of export, and there is no statutory time-limit contained in Section 149. Consequently, respondents cannot impose additional restrictions or time-limits de hors the statute. The authorities themselves invited the applicant to remove the defect and had sought DGFT clarification, which militates against treating the applicant as having unduly delayed. The Court relied on the statutory text and consistent judicial precedent that limits cannot be introduced by subordinate instruments where the parent provision is silent. [Paras 21, 27, 28]

The applicant's application for amendment under Section 149 is maintainable and the defect is curable by amendment based on documentary evidence on record.

Ultra vires status of subordinate legislation prescribing time-limit by circular - time limit cannot be introduced by circular - Circular No.36/2010 (prescribing a three-month time-limit) cannot be relied upon to bar amendment under Section 149 as it is ultra vires and subordinate legislation cannot impose a limitation not found in the parent statute. - HELD THAT: - The Court observed that when Section 149 contains no time-bar, a circular purporting to fixed a three-month limitation is beyond the powers of subordinate legislation. The Court referred to earlier decisions of this Court holding that time-limits cannot be introduced by way of a circular and to a specific decision (M/s. Mahalaxmi Rubtech) declaring the circular ultra vires Articles 14 and 19(1)(g) and Section 149. In the present facts, the authorities had sought DGFT clarification and had not required the applicant to apply under Section 149 within three months, so reliance on the circular to deny relief was unjustified. [Paras 24, 25, 26, 27]

The Circular cannot operate to preclude the applicant from seeking amendment and is not a valid impediment to the amendment sought under Section 149.

Final Conclusion: Writ petition allowed: the petitioner is entitled to MEIS benefits for the exports in question and to have its shipping bills amended; the authorities are directed to process and complete the exercise and grant the reliefs claimed within eight weeks from receipt of this order.

Procedure for revoking licence or imposing penalty under Regulation 20 of the Customs Broker Licensing Regulation, 2013 - 90-day limitation from date of receipt of offence report - mandatory nature of time-limit prescribed by Regulation 20(1) - suspension and revocation of customs broker licence

90-day limitation from date of receipt of offence report - procedure for revoking licence or imposing penalty under Regulation 20 of the Customs Broker Licensing Regulation, 2013 - mandatory nature of time-limit prescribed by Regulation 20(1) - Validity of the show cause notice issued after the expiry of ninety days from the date of receipt of the offence report under Regulation 20. - HELD THAT: - Regulation 20 requires that the Commissioner of Customs shall issue a notice in writing to the customs broker within ninety days from the date of receipt of an offence report stating the grounds for proposed revocation of licence or imposition of penalty and requiring a written statement of defence within thirty days. In the present case the offence report is recorded as received on 7.9.2016, making the 90th day fall on 06.12.2016, whereas the impugned show cause notice was issued on 31.01.2017. The Court examined the Regulation and relevant precedents and held that the notice issued after the 90-day period was beyond the limitation prescribed under Regulation 20. Following the view taken by this Court in earlier decisions, the mandatory time-limit in Regulation 20(1) was treated as determinative of the validity of the show cause notice; issuance beyond the ninety days rendered the notice and the consequential order liable to be quashed. [Paras 9, 10, 11]

The show cause notice issued on 31.01.2017 was beyond the 90-day period prescribed by Regulation 20 and is quashed; the writ petition is allowed.

Final Conclusion: The writ petition is allowed and the impugned show cause notice/order issued after the expiry of the 90-day period under Regulation 20 is quashed; no costs.

Moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 - recovery of property by owner/lessor during moratorium - actual physical occupation - insolvency commencement date and duration of corporate insolvency resolution process - cessation of moratorium upon approval of resolution plan or liquidation order or expiry of CIRP period

Moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 - recovery of property by owner/lessor during moratorium - actual physical occupation - Property occupied by the Corporate Debtor cannot be recovered by the owner/lessor while the moratorium is in effect. - HELD THAT: - The Tribunal applied its earlier decision in M/s Navbharat Castings LLP v. Moserbear India Ltd. and the Supreme Court authority in Rajendra K. Bhutta to interpret Section 14(1)(d) as prohibiting recovery of property that is in the actual physical occupation of the Corporate Debtor during the moratorium. The Court emphasised that 'occupied' refers to actual physical occupation and not merely rights or interests in the property. Accordingly, where the Corporate Debtor is in physical possession, the owner/lessor is barred from recovering possession while the moratorium continues to operate.

Recovery by the owner/lessor of premises in the physical occupation of the Corporate Debtor is not permissible during the moratorium.

Insolvency commencement date and duration of corporate insolvency resolution process - cessation of moratorium upon approval of resolution plan or liquidation order or expiry of CIRP period - Moratorium ceased to operate after expiry of the statutory CIRP period when no extension was sought or granted, permitting the lessor to seek recovery thereafter. - HELD THAT: - Section 14(4) provides that moratorium lasts until completion of the CIRP, but the proviso states it ceases on approval of a resolution plan or on a liquidation order. The Tribunal noted that the 180 day CIRP period expired on 26th January, 2020 and the Resolution Professional did not apply for an extension; no resolution plan was approved and no liquidation order had been passed before that date. Consequently, the moratorium ceased to operate beyond 26th January, 2020. Once the prohibition of recovery under the moratorium had ended, the owner/lessor could lawfully seek possession and the admitted claim for rental arrears could be pressed.

As CIRP expired without extension or approval of a resolution plan, the moratorium ceased to operate from the expiry date and the lessor's entitlement to recover possession and claim dues was available thereafter.

Final Conclusion: The impugned order directing the Resolution Professional to hand over possession and permitting claim of rental dues is legally sustainable in view of cessation of the moratorium upon expiry of the CIRP period; the appeal is dismissed.

Liquidation under section 33 of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' unanimous resolution for liquidation - Appointment of Liquidator from IBBI panel - Refusal by Committee of Creditors to appoint Resolution Professional as Liquidator - Handover of assets and records to Liquidator - Public notice of liquidation and cessation of moratorium - Powers of board to vest in Liquidator

Liquidation under section 33 of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' unanimous resolution for liquidation - Initiation of liquidation process of the Corporate Debtor in view of the Committee of Creditors' resolution. - HELD THAT: - The Tribunal noted that no resolution plan was received in response to the invitation for Expressions of Interest and that the Committee of Creditors, in its fifth meeting, resolved unanimously in favour of liquidation. In view of the CoC's resolution and the absence of any viable revival proposal, the Tribunal admitted the application and directed initiation of the liquidation process under section 33 of the I&B Code. [Paras 11, 13]

MA 4008 of 2019 in CP 4524 of 2018 is allowed and the liquidation process against the Corporate Debtor is initiated.

Appointment of Liquidator from IBBI panel - Refusal by Committee of Creditors to appoint Resolution Professional as Liquidator - Selection and appointment of the Liquidator where the CoC did not confirm the Resolution Professional as Liquidator. - HELD THAT: - Although the Resolution Professional expressed willingness to be appointed as Liquidator, the majority of CoC members voted against his appointment. The Tribunal observed a subsequent belated consent from a major creditor but found the earlier practice of withholding or delaying consent unacceptable. Exercising its powers, the Tribunal appointed a Liquidator from the IBBI panel and specified that his fees shall be regulated under the Liquidation Process Regulations. [Paras 12, 14, 15]

Mr. Anjan Bhattacharya is appointed as Liquidator from the IBBI panel and the RP is not appointed as Liquidator in view of the CoC majority dissent.

Handover of assets and records to Liquidator - Public notice of liquidation and cessation of moratorium - Powers of board to vest in Liquidator - Ancillary directions necessary to give effect to initiation of liquidation and to enable the Liquidator to proceed. - HELD THAT: - The Tribunal ordered immediate handover of possession, assets and documents by the Applicant/RP to the Liquidator, directed issuance of the statutorily required public notice in specified newspapers, declared the moratorium under section 14 to cease, and held that powers of the board and key managerial personnel shall cease and vest in the Liquidator. The Tribunal further authorized the Liquidator to manage suits and represent the Corporate Debtor before authorities subject to statutory provisions, directed cooperation by personnel of the Corporate Debtor, and required service of the order on the Applicant, Liquidator and Registrar of Companies for updating records. [Paras 16]

The Tribunal issued ancillary directions (handover, public notice, cessation of moratorium, vesting of powers in the Liquidator, cooperation by personnel, representation before authorities, and service of the order) to implement the liquidation.

Final Conclusion: The Tribunal initiated liquidation of Idhasoft Limited under section 33 of the I&B Code on the CoC's resolution, appointed a Liquidator from the IBBI panel, declined to appoint the RP as Liquidator due to CoC majority dissent, and made consequential directions to enable and effectuate the liquidation process.

Undervalued transaction under Section 49 - fraudulent/wrongful trading under Section 66 - intent to defraud creditors - restoration of position and cancellation of transaction - liability of persons knowingly party to fraudulent transactions

Undervalued transaction under Section 49 - intent to defraud creditors - restoration of position and cancellation of transaction - Whether the sale/transfer of plant and machinery to Respondent No.3 amounted to an undervalued transaction deliberately entered into to keep assets beyond the reach of creditors and thus liable to be set aside under Section 49. - HELD THAT: - The transaction audit reported transfer of fixed assets by book entries shortly before initiation of CIRP; the book value of machinery in the books was substantially higher than the consideration recorded in the bills produced. The Auditors recorded no agreements or valuation supporting the low consideration and observed apparent attempts to exclude assets from secured creditors. The Tribunal found that the directors were aware of the pending Section 9 application and, on scrutiny of documents on record, deliberately entered into undervalued transactions with the effect of keeping assets beyond the reach of persons entitled to claim. These facts satisfy the requirement of a deliberate undervalued transaction intended to adversely affect creditors, bringing the transaction within the scope of the provision and permitting restoration of the pre-transaction position. [Paras 11, 12]

Sale/transfer of plant and machinery to Respondent No.3 declared cancelled; possession to be handed over to the Resolution Professional and steps taken to safeguard assets for creditors.

Fraudulent/wrongful trading under Section 66 - liability of persons knowingly party to fraudulent transactions - intent to defraud creditors - Whether the conduct of the suspended directors and the sale to Respondent No.3 constituted fraudulent trading such that the suspended directors are liable to make contributions and the sale must be set aside under Section 66. - HELD THAT: - Section 66 requires intention to defraud creditors or carrying on business in a fraudulent manner. The Tribunal accepted the transaction auditor's findings and the documentary record showing transfers shortly before CIRP and the directors' knowledge of the pending insolvency petition. On that basis the Tribunal concluded the suspended directors knowingly carried out transactions in a manner intended to defraud creditors. Consequently, those persons who were knowingly party to the fraudulent transactions can be held liable to make contributions and to restore the position. [Paras 11, 12]

Respondent Nos.1 and 2 (suspended directors) held liable to compensate and refund amounts realised from sale; they are to bear liability of the Corporate Debtor in respect of the fraudulent transactions.

Final Conclusion: IA No. 2277/2020 is allowed: the sale/transfer of plant and machinery to Respondent No.3 is cancelled, possession is directed to be handed to the Resolution Professional for safeguarding assets for creditors, and the suspended directors are held liable to compensate and refund proceeds of the transactions.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Public announcement and submission of claims under Section 15 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional and formation of Committee of Creditors - Duties of Interim Resolution Professional including convening CoC and identification of prospective Resolution Applicant within 105 days - Operational creditor's deposit towards IRP's preliminary expenses

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The Section 9 petition by the operational creditor seeking initiation of Corporate Insolvency Resolution Process against the corporate debtor is admitted. - HELD THAT: - The Tribunal found the petition complete in all respects, noted that the operational creditor served a demand notice and that the corporate debtor neither replied to the demand notice nor filed any reply affidavit before the Adjudicating Authority. Having considered the petition and its annexures and after hearing counsel, the Tribunal held that the statutory preconditions for admission under Section 9 were satisfied and proceeded to admit the petition. [Paras 8, 9]

Petition under Section 9 admitted and CIRP initiated against the corporate debtor.

Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Public announcement and submission of claims under Section 15 of the Insolvency and Bankruptcy Code, 2016 - A moratorium is declared and public announcement for submission of claims is directed to be made on initiation of CIRP. - HELD THAT: - On admission of the Section 9 petition the Tribunal directed the declaration of moratorium with effect from the date of admission until completion of the CIRP, and ordered immediate public announcement pursuant to the provisions governing initiation of the resolution process. The order specifies the statutory consequences of moratorium including prohibition of institution or continuation of suits, transfer or disposal of assets by the corporate debtor, enforcement of security interests, and recovery of property occupied by the corporate debtor. The Tribunal also clarified that supply of essential goods or services shall not be terminated during the moratorium and that exceptions notified by the Central Government will apply.

Moratorium declared; public announcement to be made and claims to be called in terms of the Code.

Appointment of Interim Resolution Professional and formation of Committee of Creditors - Duties of Interim Resolution Professional including convening CoC and identification of prospective Resolution Applicant within 105 days - An Interim Resolution Professional is appointed and directed to ascertain creditors, convene the Committee of Creditors and identify prospective resolution applicants within the statutory timeframe. - HELD THAT: - The Tribunal appointed the named insolvency professional as Interim Resolution Professional subject to his written consent and directed him to cause the public announcement, ascertain particulars of creditors, convene the Committee of Creditors and facilitate submission of claims. The IRP was further directed to convene the CoC and identify prospective resolution applicants and manage the process within 105 days from the insolvency commencement date, as contemplated by the Code.

IRP appointed; IRP to carry out duties including convening CoC and identification of resolution applicant within 105 days.

Operational creditor's deposit towards IRP's preliminary expenses - The operational creditor is directed to deposit an amount as advance towards IRP's preliminary expenses and the Registry is directed to communicate the order to concerned parties. - HELD THAT: - The Tribunal ordered the operational creditor/applicant to deposit the specified sum with the IRP within three days of the order to meet preliminary expenses; it further provided that IRP's fees and preliminary expenses would be claimable subject to CoC approval after constitution. Administrative directions were also issued for communication of the order to the operational creditor, corporate debtor, IRP and Registrar of Companies and for listing the matter for a progress report.

Operational creditor to deposit the directed sum with the IRP; Registry to communicate the order and matter listed for progress report.

Final Conclusion: The Section 9 petition is admitted, CIRP is initiated against the corporate debtor with a moratorium declared and public announcement directed; an Interim Resolution Professional is appointed to undertake statutory functions including convening the CoC and identifying resolution applicants within 105 days, the operational creditor is directed to deposit an advance for IRP's preliminary expenses, and administrative directions for communication and follow-up are issued.

Initiation of Corporate Insolvency Resolution Process - default under the Insolvency and Bankruptcy Code - compliance with Section 9(3) of the Code - notice under Section 8 of the Code - minimum default requirement under Section 4 - moratorium under Section 14(1) of the IBC - public announcement of CIRP under Section 13 - appointment of Interim Resolution Professional

Initiation of Corporate Insolvency Resolution Process - minimum default requirement under Section 4 - notice under Section 8 of the Code - The Section 9 applications filed by the Operational Creditors are complete and liable to be admitted, and CIRP is to be initiated against the Corporate Debtor. - HELD THAT: - The Tribunal noted that the Operational Creditors issued demand notices under Section 8 which were received by the Corporate Debtor and that the claim amount met the minimum default requirement applicable prior to the notification of 24th March 2020. The Corporate Debtor did not controvert the asserted default or appear despite service efforts, and the Tribunal therefore accepted the Applicants' submissions and documentary material as establishing an unpaid operational debt and default. On these bases the Tribunal concluded that the applications satisfy the statutory requirements for admission under Section 9 and ordered initiation of CIRP. [Paras 11, 12]

Applications IBA/22/KOB/2020 and IBA/23/KOB/2020 are admitted and CIRP is ordered against the Corporate Debtor.

Default under the Insolvency and Bankruptcy Code - The date of default is recorded as May 2018. - HELD THAT: - The Applicants stated that the default occurred during May 2018 and, in the absence of any controverting material or appearance by the Corporate Debtor, the Tribunal accepted May 2018 as the date of default for both proceedings. [Paras 9]

Date of default taken as May 2018.

Compliance with Section 9(3) of the Code - The Operational Creditors complied with the documentary requirements under Section 9(3) of the Code. - HELD THAT: - The Tribunal examined the requirement that an operational creditor furnish a copy of the invoice/demand notice, an affidavit stating that no notice of dispute was given by the corporate debtor, and a certificate from the financial institution confirming non-payment. Having perused the applications and the Section 8 notices and found the notices received without payment or dispute from the Corporate Debtor, the Tribunal held that the statutory prerequisites under Section 9(3) were satisfied. [Paras 10, 11]

Statutory requisites under Section 9(3) are fulfilled.

Moratorium under Section 14(1) of the IBC - public announcement of CIRP under Section 13 - A moratorium under Section 14(1) is imposed and public announcement of the CIRP is directed. - HELD THAT: - Upon admission of the Section 9 applications, the Tribunal directed that the moratorium provisions as set out in Section 14(1) will operate in relation to the Corporate Debtor, including prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property occupied by the Corporate Debtor. The Tribunal further directed that the public announcement of the CIRP be made immediately as specified under Section 13. [Paras 13]

Moratorium under Section 14(1) imposed; public announcement of CIRP to be made immediately.

Appointment of Interim Resolution Professional - An Interim Resolution Professional is appointed from the panel and the Applicants are directed to deposit funds with the IRP. - HELD THAT: - As no Insolvency Professional was proposed by the Applicants, the Tribunal selected a name from the Kerala panel for the prescribed tenure and appointed the selected individual as Interim Resolution Professional to perform functions under the IBC. The Tribunal also directed the Operational Creditors to deposit a specified amount with the IRP for initiation of proceedings, subject to ratification by the Committee of Creditors, and instructed that IRP/RP fees shall comply with IBBI regulations. [Paras 14, 15]

Mr. Renahan Vamakesan is appointed as Interim Resolution Professional and the Operational Creditors shall deposit the directed amount with the IRP.

Final Conclusion: The Tribunal admitted both Section 9 applications, recorded the date of default as May 2018, held that the statutory requirements for admission were met, imposed the moratorium under Section 14(1), directed public announcement of the CIRP, appointed an Interim Resolution Professional from the panel and directed the Operational Creditors to deposit the prescribed amount with the IRP.

Franchisee services - Representational right - Service tax on development compensation charges - Service tax on POP charges - CENVAT credit - Capital goods - Functional utility test - Remand for fresh consideration

Franchisee services - Representational right - Service tax on development compensation charges - Liability to service tax on amounts received as Development Compensation Charges on the basis that the agreement amounted to a franchise - HELD THAT: - The Agreement transferred to the Project Development Company/JDP a bundle of rights to develop, build and receive revenues for a limited concession period and MTNL received development compensation in consideration. However, the charging provision for 'franchisee services' requires the grant of a representational right such that the franchisee represents the franchisor and loses its separate identity. The Department neither alleged nor established that a representational right was conferred; the Agreement does not indicate that the developer was to represent MTNL or subsume its identity. Applying the governing authorities on the definition of franchise/representational right, the Tribunal held that this essential element of the charging provision is absent and therefore service tax could not be imposed on the Development Compensation Charges. [Paras 34, 35, 36]

Demand of service tax on Development Compensation Charges set aside.

CENVAT credit - Capital goods - Functional utility test - Validity of denial of CENVAT credit claimed on purchase of towers and other capital goods - HELD THAT: - The Commissioner had disallowed the entire CENVAT credit on the ground that towers classifiable under Chapter 73 do not qualify as capital goods under the CENVAT Rules and, alternatively, because towers were not used for the assessee's output services. The appellant demonstrated that the bulk of the disputed credit related to goods under Chapters 84 and 85 and provided duty documents. Further, binding judicial reasoning (including the Delhi High Court decision reproduced in the order) supports treating towers and related shelters as capital goods/inputs where they satisfy the functional utility test and are integrally connected to provision of telecom services. On these bases the Tribunal accepted the appellant's submissions that much of the credit was admissible and that the denial could not be sustained to the extent shown to relate to Chapters 84 and 85 and to towers qualifying as capital goods/inputs. [Paras 37, 38, 39, 40]

Denial of CENVAT credit set aside in respect of credits shown to relate to permissible capital goods/inputs; the Commissioner's disallowance of the entirety of the credit overturned.

Service tax on POP charges - Remand for fresh consideration - Correctness and quantum of service tax demand relating to POP charges (IUC component) charged for the year 2007-08 - HELD THAT: - The show cause notice sought service tax on POP charges for amounts billed to an operator. The appellant contended that service tax was payable only from 01.06.2007 and that pro rata computation was required; the appellant also accepted that documentation was not furnished to the Commissioner. Given absence of full details before the Commissioner and the competing contentions on period/quantum, the Tribunal found it appropriate to remit the matter to the Commissioner for fresh decision. The appellant was directed to submit relevant documents within six weeks and the Commissioner to decide within three months. [Paras 41, 42, 43]

Issue remanded to the Commissioner for fresh consideration on production of documents; earlier confirmation on POP charges set aside for that purpose.

Final Conclusion: The appeal is allowed in part: the service-tax demand on Development Compensation Charges is set aside for lack of a representational right necessary to constitute franchisee services; the blanket denial of CENVAT credit is set aside insofar as credit is shown to relate to permissible capital goods/inputs (including items under Chapters 84 and 85 and towers held to qualify under authorities); the demand on POP charges is remitted to the Commissioner for fresh adjudication upon production of relevant documents within the timeframe directed.

Entitlement to refund under Section 11B(2) proviso - unjust enrichment - incidence of excise duty having been passed on to the buyer - rebuttable presumption under Section 12B - effect of post-clearance credit notes on refund claim - verification by Revenue to identify ultimate consumer

Effect of post-clearance credit notes on refund claim - incidence of excise duty having been passed on to the buyer - unjust enrichment - Whether issuance of credit notes after clearance negates the presumption that the incidence of duty was passed on and entitles the manufacturer to refund under the proviso to Section 11B(2). - HELD THAT: - The Court held that where the assessee admittedly collected the additional duty from its customers at the time of issuance of invoices/gate passes, the incidence of duty is deemed to have been passed on to the buyers. Subsequent issuance of credit notes, made after clearance, does not alter that legal position so as to entitle the manufacturer to a refund under the proviso to Section 11B(2). Allowing refund in such circumstances would result in unjust enrichment unless it is established that the ultimate buyer bore the duty and did not pass it on. The Court therefore upheld the findings of the adjudicating and appellate authorities and the Tribunal that the post-clearance credit notes were of little avail to sustain the refund claim where the incidence was passed on at clearance. [Paras 18, 19]

Post-clearance credit notes do not entitle the manufacturer to refund where the incidence of duty was passed on at the time of clearance; refund denied to avoid unjust enrichment.

Rebuttable presumption under Section 12B - verification by Revenue to identify ultimate consumer - entitlement to refund under Section 11B(2) proviso - Whether the statutory presumption under Section 12B that duty has been passed on is rebuttable and what role verification by the Revenue plays in refund claims. - HELD THAT: - The Court reaffirmed that Section 12B creates a presumption that the incidence of duty has been passed on to the buyer, but noted that the scheme of the Act and precedents recognise the possibility of refund to the person who can satisfy that he bore the burden. The word 'buyer' in clause (e) to the proviso of Section 11B(2) is not confined to the first buyer; it may include downstream buyers. Nevertheless, verification by the Revenue to ascertain who ultimately bore the duty is a legitimate and necessary exercise. If the ultimate consumer cannot be identified, the excess duty remains in the Consumer Welfare Fund. Thus, while the presumption is operative, it can be tested by evidence and verification; in the present case, the admitted passing-on at clearance and absence of proof that a buyer ultimately bore the duty led to rejection of the claim. [Paras 13, 18]

Section 12B presumption operates but is subject to testing by evidence; Revenue's verification to identify the ultimate person who bore the duty is proper and, where the presumption stands unrebutted, refund cannot be allowed.

Entitlement to refund under Section 11B(2) proviso - verification by Revenue to identify ultimate consumer - Whether the Tribunal failed in its statutory duty by not examining documentary evidence relied upon by the assessee and by not determining the factual question of who bore the incidence of duty. - HELD THAT: - The Court examined the record and concluded that the Tribunal and the appellate authorities had considered the material facts and applicable precedents. Given the admitted fact that the assessee collected the additional duty at the time of clearance, and in view of settled law regarding passing-on and unjust enrichment, the Tribunal was justified in affirming the denial of refund. The Court found no failure of the Tribunal to perform its statutory duty of fact-finding in the light of the admitted factual position and binding precedents. [Paras 18, 19]

The Tribunal did not fail in its statutory duty; its affirmation of the denial of refund was warranted by the facts and law.

Final Conclusion: Writ petition dismissed. The Tribunal and lower authorities were correctly affirmed: where duty was admittedly passed on at clearance, subsequent credit notes do not sustain a refund claim under Section 11B(2) and the statutory presumption under Section 12B, subject to verification, precludes refund absent proof that the ultimate buyer bore the duty; substantial questions of law answered against the petitioner.

Maintainability of writ petition despite availability of alternate remedy - compliance with court directions and contempt - duty of litigant to furnish full and correct instructions to counsel - consequences of false or misleading averments in pleadings - exclusion of period for computation of limitation

Maintainability of writ petition despite availability of alternate remedy - exceptions to bar on writs when alternate remedy exists - Whether the writ petition was maintainable notwithstanding the availability of an alternate remedy and whether the Single Bench's dismissal on that ground should stand. - HELD THAT: - The Court noted that although ordinarily an alternate remedy precludes entertaining a writ, there exist recognised exceptions permitting writ jurisdiction. The Division Bench initially held the writ appeal admissible to decide the matter on merits. However, on examination of subsequent proceedings and the parties' conduct it concluded that the appellants had made a material misrepresentation about non-compliance with an earlier order and that the Department had, in fact, taken steps accepting Tribunal orders and passing orders-in-original in conformity with the earlier High Court directions. In these circumstances the Court confirmed the dismissal by the Single Judge on the ground of availability of alternate remedy and the appellant's failure to place correct facts before the Court precluded relief in writ jurisdiction.

Writ appeal dismissed and the Single Bench order confirming non-maintainability on the ground of alternate remedy is affirmed.

Compliance with court directions and contempt - consequences of false or misleading averments in pleadings - Whether the respondents had complied with the earlier High Court order and whether failure to comply warranted contempt proceedings. - HELD THAT: - The Court examined the affidavit filed by the Additional Commissioner which set out that, pursuant to the High Court's remand directions, the Department had issued Orders-in-Original accepting the Tribunal's findings and had dispatched those orders to the appellant. On this factual foundation the Court held that the appellant's assertion that no compliance had occurred was incorrect. While observing that non-compliance with court orders may give rise to contempt, the Court declined to initiate contempt proceedings because the factual position established compliance by the Department.

Court records that the Department complied with the earlier order and refrains from contempt action.

Duty of litigant to furnish full and correct instructions to counsel - consequences of false or misleading averments in pleadings - Whether the appellant's failure to inform its counsel of receipt of departmental orders and the resulting false averment warranted punitive measures. - HELD THAT: - The Court found that the appellant failed to provide full and accurate instructions to its counsel, resulting in a false statement before the Court that earlier directions had not been complied with. The Bench characterised this as irresponsible conduct by the appellant rather than an inadvertent oversight by counsel. Although the Court expressed disapproval and admonished the appellant to be careful in future proceedings, it chose not to impose costs or other punitive orders, noting the appellant's belated realisation and intention to pursue available appellate remedies.

Appellant admonished for conduct; no costs imposed; permitted to pursue appellate remedies.

Exclusion of period for computation of limitation - Whether, if the appellant files an appeal before the Tribunal, any period should be excluded while computing limitation on account of the writ proceedings. - HELD THAT: - The Court directed that if the appellant avails the appellate remedy before the Tribunal, the period from filing the writ petition to fifteen days after receipt of the certified copy of this judgment shall be excluded in computing limitation. This is a limited procedural accommodation to ensure the appellant is not penalised for the time spent in pursuing the writ remedy.

If an appeal is filed, the Tribunal shall exclude the period from the date of filing the writ petition until fifteen days after the appellant receives the certified copy of this judgment when computing limitation.

Final Conclusion: The writ appeal is dismissed and the Single Bench order is confirmed; the appellant is admonished for failing to place correct facts before the Court but no costs are imposed; the appellant remains free to file an appeal to the Tribunal, which is directed to exclude the period specified for computation of limitation.

Violation of principles of natural justice - introduction of new material in final order not disclosed in show cause notice - right to personal hearing before adjudicatory authority - quashing of order for procedural irregularity - remand for fresh consideration and re-hearing

Violation of principles of natural justice - introduction of new material in final order not disclosed in show cause notice - quashing of order for procedural irregularity - Impugned adjudication is vitiated by introduction, in the final order, of a pamphlet not disclosed in the show cause notice or raised at the personal hearing, thereby violating principles of natural justice. - HELD THAT: - The assessing authority, in its final order, relied upon the petitioner's pamphlet for classification of the goods although that pamphlet was neither referred to in the show cause notice nor formed the subject-matter of the personal hearing. The Court reaffirmed the settled principle that material not disclosed in the show cause notice and first introduced in the final order takes the noticee by surprise and constitutes a breach of natural justice. On that limited procedural ground the impugned order was found unsustainable and was quashed. [Paras 5]

Impugned order quashed for breach of natural justice occasioned by introduction of undisclosed material in the final order.

Right to personal hearing before adjudicatory authority - remand for fresh consideration and re-hearing - Matter remitted to the assessing authority for fresh consideration after affording personal hearing to the petitioner; merits left open. - HELD THAT: - In view of the procedural infirmity, the Court directed that the assessing authority shall grant personal hearing to the petitioner on the specified date without issuing a separate notice. The petitioner may place their contentions and relevant materials in response to matters already appearing in the impugned order. The respondent was directed to independently consider the materials and pass orders in accordance with law. The Court expressly refrained from deciding the substantive classification issue and kept the contentions of both parties open for fresh adjudication. [Paras 6]

Remitted for fresh consideration after hearing; substantive issues not decided by the Court.

Final Conclusion: The writ petition is allowed: the impugned order is quashed for breach of natural justice by introduction of undisclosed material; the matter is remitted to the assessing authority for fresh consideration after affording personal hearing, the Court not expressing any view on the merits.

Best judgment assessment - purchase tax - assessment on deemed assessment basis - remand for fresh consideration - quash and remit

Purchase tax - assessment on deemed assessment basis - best judgment assessment - Validity of levying purchase tax by applying an arbitrary formula on total turnover instead of segregating transactions or conducting a proper best judgment assessment. - HELD THAT: - The Court found that the assessing authority, faced with alleged absence of separate accounts, applied a formula to the entire turnover to estimate taxable local purchases without first calling upon the petitioner to segregate transactions or seeking requisite records. The Court held that where records are not available the authority must resort to a proper best judgment assessment exercise rather than make unsupported assumptions or 'guess work'. Because the impugned orders relied on an arbitrary computation of proportionate local purchases based on overall turnover instead of undertaking assessment in accordance with law, the orders were unsustainable. [Paras 5, 6]

Impugned assessment orders quashed and matter remitted to the respondent for fresh decision in accordance with law, with direction to undertake appropriate assessment steps rather than apply the arbitrary formula.

Remand for fresh consideration - quash and remit - Condition on which the writ relief would operate and effect of non-compliance with the undertaking given by the petitioner. - HELD THAT: - The petitioner offered to remit a specified sum to the respondent by a stated date, and the Court made the efficacy of its order conditional upon compliance with that undertaking. The Court directed that the quashing and remittal would take effect only if the petitioner remitted the sum by the stipulated date; failure to do so would render the order ineffective and result in dismissal of the writ petitions. [Paras 1, 6]

Writ petitions allowed and remitted on the condition that the petitioner remits the stated sum by the specified date; non-compliance will result in dismissal of the petitions.

Final Conclusion: The High Court quashed the impugned assessment orders for assessment years 2011-12, 2012-13 and 2013-14 and remitted the matters to the assessing authority to re-decide in accordance with law using proper best judgment assessment procedures; the order is operative only if the petitioner complies with the undertaking to remit the stated amount by the deadline, failing which the petitions will be dismissed.

Best judgment assessment under Section 22(4) and (5) of TNVAT Act - Deemed assessment on self-assessment under Section 22 - Preclusion on initiating assessment action before the cutoff date of deemed assessment - Requirement to take into account Form WW report before proceeding with assessment - Lift of consequential attachment of bank account on setting aside original order

Best judgment assessment under Section 22(4) and (5) of TNVAT Act - Deemed assessment on self-assessment under Section 22 - Preclusion on initiating assessment action before the cutoff date of deemed assessment - Validity of initiating best-judgment assessment proceedings against the dealer prior to the deemed assessment cutoff date - HELD THAT: - The Court found that the petitioner, being a dealer who filed returns on self-assessment basis under Section 22, was deemed to have been assessed on 31.10.2016. The impugned proceedings under Section 22(4) and (5) were initiated by issuance of show-cause notice in August 2016, i.e., before the deemed assessment date. The Court held that action under Section 22(4) could not validly be initiated before the expiry of the deemed assessment period (31.10.2016) and consequently quashed the assessment order insofar as it was founded on proceedings commenced prior to that cutoff. [Paras 4, 5]

The assessment action initiated before 31.10.2016 was invalid; the impugned order is quashed and the matter is remitted for fresh consideration in accordance with law.

Requirement to take into account Form WW report before proceeding with assessment - Whether the assessing authority could proceed without taking into account the Form WW report filed by the dealer - HELD THAT: - The Court noted that the dealer's turnover exceeded the statutory threshold requiring filing of a Form WW report by 31.12.2016 and that the petitioner had filed the Form WW report by that due date. The assessing authority proceeded without considering the Form WW report. The Court held that initiation of assessment proceedings without taking into account the Form WW report was impermissible, and this omission formed one of the grounds for quashing the impugned order. The matter was remitted to the assessing authority to pass orders afresh after considering the Form WW report as required by law. [Paras 4, 5]

Proceedings conducted without considering the Form WW report were set aside; matter remitted for fresh adjudication after taking the Form WW report into account.

Lift of consequential attachment of bank account on setting aside original order - Validity and consequence of attachment of the dealer's bank account made pursuant to the impugned order - HELD THAT: - The Court recorded that the bank account attachment by the second respondent followed from the first respondent's impugned order. Since the impugned order has been set aside, the attachment, being consequential thereto, also stands vacated. The Court further excluded the period from filing of the writ petition to disposal for the purpose of limitation. [Paras 5]

The attachment of the petitioner's bank account is vacated as consequential to setting aside the impugned order; limitation period exclusion directed.

Final Conclusion: The impugned assessment order is quashed for being initiated before the deemed assessment date and for proceeding without considering the Form WW report; the matter is remitted to the assessing authority to pass fresh orders in accordance with law, the consequential bank attachment is vacated, and the period from 27.12.2016 to 02.03.2021 is excluded for limitation.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - presumption under Section 118(a) of the Negotiable Instruments Act - burden of proof on accused to rebut presumption - signed blank cheque and continuing liability - appellate interference with concurrent findings of fact

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - presumption under Section 118(a) of the Negotiable Instruments Act - burden of proof on accused to rebut presumption - signed blank cheque and continuing liability - Whether the complainant proved the offence under Section 138 of the Negotiable Instruments Act and the accused failed to rebut statutory presumptions, warranting restoration of conviction. - HELD THAT: - The appellant proved execution and delivery of Ext.P3 cheque in discharge of an asserted legally enforceable liability and established issuance, dishonour on account of insufficiency of funds and service of statutory notice without response. The trial court accordingly convicted. The Sessions Court reversed that conviction by relying on alleged inconsistencies between witnesses, non-production of account statements and the contention that the underlying scheme had ended in 2005 making a 2008 cheque improbable. This Court held that those aspects did not overturn the prosecution case. Execution of the cheque was admitted; therefore statutory presumptions under Sections 118(a) and 139 were rightly attracted. Reliance on the Supreme Court authority that a voluntarily signed blank cheque filled up by another still attracts the presumption was accepted. The mere non-production of statement of accounts or minor variations in witness testimony did not suffice to discharge the presumptions; the accused did not adduce evidence or otherwise satisfactorily rebut the presumption that the cheque was issued for discharge of liability. The Sessions Judge's reasons were insufficient to displace the concurrent finding of the trial court that the appellant had proved its case beyond reasonable doubt. Accordingly the appellate acquittal was set aside and the trial court's conviction restored. [Paras 11, 12, 13, 16, 17]

Conviction under Section 138 restored; accused sentenced to pay fine and default simple imprisonment as ordered.

Final Conclusion: Appeal allowed; the Sessions Court's reversal of the trial court's conviction was set aside, conviction under Section 138 of the Negotiable Instruments Act restored and sentence imposed by this Court.

Presumption under Section 139 of the Negotiable Instruments Act - Presumption under Section 118 of the Negotiable Instruments Act - Signed blank cheque and liability - Rebuttal of statutory presumption on preponderance of probabilities - Burden of proving repayment/discharge as defence - Offence under Section 138 of the Negotiable Instruments Act

Signed blank cheque and liability - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption on preponderance of probabilities - Whether the admitted signature on a cheque - including a signed blank cheque - attracts the statutory presumption and whether the accused successfully rebutted that presumption. - HELD THAT: - The Court found that Ext.P1 bears the admitted signature and name of the first respondent. Relying on binding authority regarding signed blank cheques, the court held that a cheque duly signed by the drawer attracts the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, and the mere fact that other particulars may have been filled in by a third person does not obliterate the presumption. Once the complainant establishes signature and presentation/dishonour, the onus shifts to the accused to rebut the presumption at least on the preponderance of probabilities. The first respondent's explanations were inconsistent: initial statements in cross-examination and subsequent defence testimony differed as to who borrowed the money and whether the cheque was issued as security or in discharge of liability, and particulars of alleged repayment were not proved. The court drew adverse inference from the accused's refusal to receive the lawyer's notice at her correct address. On the evidence, the first respondent failed to discharge the burden of rebuttal or to satisfactorily prove repayment or discharge of the liability; consequently the statutory presumption stood unrebutted and the ingredients of Section 138 were made out. [Paras 7, 8, 9, 10, 12]

The admitted signature on Ext.P1 attracts the statutory presumption under Sections 118 and 139, the first respondent failed to rebut that presumption, and thus the offence under Section 138 is established.

Burden of proving repayment/discharge as defence - Offence under Section 138 of the Negotiable Instruments Act - Whether the Sessions Court was justified in acquitting the first respondent in view of the evidence on repayment, identity of the complainant, and receipt of notice. - HELD THAT: - The High Court examined the factual findings reversed by the Sessions Court and concluded that the appellate court's reliance on differences in handwriting of the non-signature parts of the cheque was immaterial once the signature was admitted. The accused's defence of prior repayment lacked particulars and corroboration; she did not take reasonable steps to retrieve the cheque after alleged repayment. Her later denial of knowledge of the complainant contradicted her earlier sworn chief examination, undermining her challenge to the complainant's identity. The Sessions Court's acquittal could not be sustained because it did not appreciate that the statutory presumptions arose on admitted signature and presentation, and that the defence failed to rebut those presumptions. [Paras 8, 9, 11, 12]

The acquittal by the Sessions Court is unsustainable and is interfered with; the conviction of the trial court is to be restored.

Final Conclusion: The appeal is allowed; the conviction recorded by the trial court under Section 138 of the Negotiable Instruments Act is restored and the first respondent is sentenced to pay the fine ordered by this Court, default of which attracts the stipulated period of simple imprisonment, such realisation to be paid to the complainant as compensation.

Maintainability of writ jurisdiction under Article 226 where disputed questions of fact are involved - appointment and conferment of powers under Section 13 of the Code of Criminal Procedure, 1973 - cognizance and trial of offences under Section 138 of the Negotiable Instruments Act governed by Section 142 - non-obstante clause in Section 142 and competence of courts to try cheque bouncing offences - distinction between powers of Special Judicial Magistrate and Sessions Judge where retired judicial officers are appointed

Maintainability of writ jurisdiction under Article 226 where disputed questions of fact are involved - The writ petition was not maintainable insofar as it sought adjudication of disputed questions of fact concerning the issuance, theft or genuineness of the cheques. - HELD THAT: - The Court held that serious disputed questions of fact-whether the cheques were issued by the petitioner or were stolen-are central to the controversy and cannot be resolved in writ proceedings under Article 226. Those factual disputes must be examined and decided by the competent criminal court in summary trial proceedings; therefore, the challenge on factual grounds in the writ petition cannot be entertained at this stage. [Paras 27]

Writ petition not maintainable to the extent it seeks determination of disputed factual issues relating to the cheques.

Appointment and conferment of powers under Section 13 of the Code of Criminal Procedure, 1973 - distinction between powers of Special Judicial Magistrate and Sessions Judge where retired judicial officers are appointed - The appointment of retired District & Sessions Judges as Presiding Officers of temporary Additional Courts and conferral of powers on them as Special Judicial Magistrates was valid and intra vires the High Court's power under Section 13 Cr.P.C. - HELD THAT: - The Court reviewed the statutory scheme and legislative history underlying Section 13 Cr.P.C., noting that Parliament left specification of qualifications and the choice of conferrable powers to the High Court. The High Court constituted a committee, invited options from eligible retired judicial officers, specified tenure limits and scope of jurisdiction, and recommended appointments to the State Government which issued the impugned orders. The appointment was for limited purposes (motor vehicle challans, insurance claims and cheque matters), did not vest Sessions Court powers in the appointees and was therefore a permissible exercise of authority under Section 13. The limited-term arrangement also permits evaluation before extension. [Paras 28, 31, 33, 35]

Appointment of retired District & Sessions Judges as Presiding Officers of the Additional Courts, with powers as Special Judicial Magistrates, is valid.

Cognizance and trial of offences under Section 138 of the Negotiable Instruments Act governed by Section 142 - non-obstante clause in Section 142 and competence of courts to try cheque bouncing offences - The Additional Courts presided over by retired judicial officers do not contravene Section 142 of the Negotiable Instruments Act, 1881; they are competent to try offences under Section 138 so long as they possess the requisite magistrate level powers. - HELD THAT: - Section 142 contains a non obstante clause governing cognizance of Section 138 offences and bars trial by any court inferior to a Metropolitan Magistrate or a Judicial Magistrate of the first class. The Court held that the persons appointed to the 38 Additional Courts are retired officers of the U.P. Higher Judicial Services and are not 'inferior' to the magistrates contemplated by Section 142. Further, the High Court conferred only magistrate level powers on them (i.e., as Special Judicial Magistrates) and they have not been vested with Sessions Court jurisdiction. Consequently, the challenge that such courts are incompetent under Section 142 was rejected. [Paras 36, 37]

The Additional Courts so constituted are competent to take cognizance and try offences under Section 138 of the Negotiable Instruments Act.

Final Conclusion: The writ petition is dismissed: it is not maintainable insofar as it seeks adjudication of disputed facts, and the challenge to the creation and functioning of the Additional Courts presided over by retired District & Sessions Judges-appointed and empowered as Special Judicial Magistrates under the scheme considered-fails on merits.

Compounding of offence under the Negotiable Instruments Act - conviction under Section 138 of the Negotiable Instruments Act - scope and effect of Section 147 of the Negotiable Instruments Act - analogy to Section 320 Cr.P.C. and acquittal on compounding - guidelines for compounding and costs as laid down in Damodar S. Prabhu - exercise of Article 142 of the Constitution to do complete justice - summary trial and closing proceedings under Section 143 read with Section 258 Cr.P.C.

Compounding of offence under the Negotiable Instruments Act - conviction under Section 138 of the Negotiable Instruments Act - scope and effect of Section 147 of the Negotiable Instruments Act - analogy to Section 320 Cr.P.C. and acquittal on compounding - Whether the offence under Section 138 can be compounded after conviction/appeal and the consequential effect on conviction and sentence. - HELD THAT: - The Court applied binding Supreme Court authorities holding that offences under Section 138 are compoundable and that once parties are permitted to compound (including under Section 147 of the Act) the conviction and sentence recorded under Section 138 are to be set aside. The Court relied on the established principle that Section 147 makes compounding available and, by analogy to Section 320 Cr.P.C., compounding permits acquittal where the complainant has been compensated. Having considered the parties' compromise deed and the opposite party's affidavit stating full receipt of the cheque amount with interest and no objection to compounding, the Court held that the offence can be compounded and the conviction and sentence may be set aside. [Paras 10, 11, 12, 13, 15]

The Court allowed compounding on the basis of the compromise deed and held that, subject to fulfilment of conditions imposed, the judgment and sentence under Section 138 shall be set aside and the accused acquitted.

Guidelines for compounding and costs as laid down in Damodar S. Prabhu - exercise of Article 142 of the Constitution to do complete justice - summary trial and closing proceedings under Section 143 read with Section 258 Cr.P.C. - Whether, in view of the delay in seeking compounding and the stage at which compromise was effected, the Court should impose costs and the quantum of such costs. - HELD THAT: - Applying the Damodar S. Prabhu guidelines, which permit courts to impose graded costs where compounding is sought at later stages, the Court found that the revisionist had not taken effective steps to compound at an earlier stage and caused undue delay. In exercise of the Court's discretion (and having regard to precedents and the compensatory object of Section 138), the Court directed payment of 15% of the cheque amount to the High Court Legal Services Committee as a condition for allowing compounding, to be deposited within four weeks. Upon compliance, the conviction and sentence confirmed by lower courts would be set aside. [Paras 11, 12, 13, 14]

The revisionist is directed to deposit 15% of the cheque amount with the High Court Legal Services Committee within four weeks; on such deposit the conviction and sentence are set aside and the revision is allowed.

Final Conclusion: The Court, applying settled Supreme Court precedents and the Damodar S. Prabhu guidelines, permitted compounding of the offence based on the parties' compromise, directed payment of 15% of the cheque amount as costs to the High Court Legal Services Committee within four weeks due to delay, and ordered that upon such deposit the conviction and sentence dated 06.09.2018 (confirmed on 01.02.2020) shall be set aside and the revision allowed.