TaxTMI Updates e-Newsletter
Apr 03,2023

Provisional attachment to protect revenue under Section 83 - Limitation of attachment power to taxable persons and persons specified in Section 122(1A) - Attachment of bank accounts as a draconian measure - Protection of Government revenue

Provisional attachment to protect revenue under Section 83 - Limitation of attachment power to taxable persons and persons specified in Section 122(1A) - Attachment of bank accounts as a draconian measure - Validity of provisional attachment of the petitioners' bank accounts under Section 83 when the petitioners are not taxable persons nor persons specified in Section 122(1A). - HELD THAT: - The Court noted the scope of the power under Section 83 which permits provisional attachment of property, including bank accounts, only where the property belongs to a taxable person or a person specified in Section 122(1A). The petitioners were conceded to be not taxable persons nor persons covered by Section 122(1A). The respondent's rationale - that funds in the petitioners' accounts belonged to partners of a firm under investigation - did not bring the petitioners within the statutory class whose assets may be provisionally attached. The Court emphasised that attachment of bank accounts is a draconian step and must be exercised strictly within the confines of the statutory provision; it is not open to the authority to attach accounts of third parties on the mere assumption that funds therein are owned by a taxable person. Consequently, the impugned order effecting attachment of the petitioners' accounts could not be sustained. [Paras 13, 16, 17, 18, 19]

The provisional attachment of the petitioners' bank accounts under the impugned order is set aside as beyond the power conferred by Section 83.

Final Conclusion: The petition succeeds; the order dated 06.02.2023 attaching the petitioners' bank accounts is quashed insofar as it affects the petitioners, without prejudice to the respondent taking other lawful steps to protect revenue.

Opportunity of hearing - adjudication of show cause notice under the Central Goods and Services Tax Act, 2017 - quashing of administrative order for failure to afford adequate opportunity - restoration of show cause notice and time bound fresh adjudication

Opportunity of hearing - quashing of administrative order for failure to afford adequate opportunity - Whether the impugned order dated 23 March 2022 should be quashed for failure to afford the petitioner adequate opportunity to reply to the show cause notice. - HELD THAT: - The court examined the sequence of communications between the petitioner and the adjudicating authority, including the petitioner's requests for time to collect supplier data and attend proceedings through its chartered accountant. The court found that the petitioner's request for an extension-on grounds that relevant records predated online availability and had to be collected manually from dispersed small suppliers-was not wholly unreasonable. In view of the short extension sought and the factual circumstances explained, the court held that denial of a sufficient opportunity to submit the petitioner's reply warranted interference. The court therefore set aside the impugned order without expressing any view on the merits of the underlying show cause allegations.

Impugned order dated 23 March 2022 quashed and set aside for failure to afford adequate opportunity.

Restoration of show cause notice and time bound fresh adjudication - adjudication of show cause notice under the Central Goods and Services Tax Act, 2017 - Whether the show cause notice should be restored and the matter remitted for fresh, time bound adjudication. - HELD THAT: - The court restored the show cause notice in order to permit fresh adjudication after giving the petitioner a final opportunity to file its reply. A specific timetable was imposed: the petitioner to file its reply by the date fixed by the court, to appear before the officer on the stated hearing date, and the officer to either proceed on that date or fix a suitable date and complete the proceedings within four weeks thereafter. The court accepted the petitioner's undertaking not to seek further time and confined relief to procedural vacation and remand for adjudication within the prescribed timetable. The court expressly refrained from commenting on the merits of the underlying case.

Show cause notice restored and matter remitted for fresh adjudication on a time bound schedule; petitioner to file reply and appear as directed and adjudicating officer to conclude proceedings within four weeks of hearing.

Final Conclusion: The court quashed the impugned order for lack of adequate opportunity, restored the show cause notice and remitted the matter for fresh, time bound adjudication after the petitioner files its reply; no observation was made on the merits.

Zero-rated supply - Refund of unutilised input tax credit - Rule 89(4)(C) of the CGST Rules - Ultra vires - Manifest arbitrariness / Vagueness - Violation of Article 14 and Article 19(1)(g) of the Constitution - Misuse as a ground for subordinate legislation

Rule 89(4)(C) of the CGST Rules - Zero-rated supply - Refund of unutilised input tax credit - Ultra vires - Manifest arbitrariness / Vagueness - Violation of Article 14 and Article 19(1)(g) of the Constitution - Misuse as a ground for subordinate legislation - The amended clause in Rule 89(4)(C) restricting refund by reference to domestic supplies and a multiplier of 1.5 is ultra vires and invalid. - HELD THAT: - The Court held that the impugned words inserting a cap - "or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed supplier" - in Rule 89(4)(C) are inconsistent with the object and scheme of Section 16 of the IGST Act and Section 54 of the CGST Act, which aim to zero-rate exports and permit refund of unutilised input tax credit so that exports are not burdened by tax. The amendment effectively curtails the full refund of input tax credit on exports by importing domestic turnover as a limiting criterion, thereby defeating the zero-rating principle. The Court further found the amendment to be arbitrary and violative of Article 14 and Article 19(1)(g) because it creates a discriminatory and irrational classification between exporters who export under bond/LUT and those who export on payment of IGST; the terms "like goods" and "similarly placed supplier" are vague and open-ended and no guidelines are provided for their application; and the amendment was justified merely by a generalized apprehension of misuse without case-specific data, which cannot sustain such a restrictive measure. For these reasons the impugned words were declared ultravires and struck down. [Paras 17, 18, 22, 26, 28]

The offending words in Rule 89(4)(C) (introducing the 1.5x domestic-value cap and related comparison) are declared ultra vires, arbitrary, vague and violative of Articles 14 and 19, and are quashed.

Quashing of order - Direction to grant refund with interest - Refund of unutilised input tax credit - Zero-rated supply - The departmental order rejecting the petitioner's refund claims dated 30.06.2020 is quashed and the revenue is directed to accept and grant the refund claims with interest. - HELD THAT: - Since the impugned order was founded on the invalid amendment to Rule 89(4)(C), the Court quashed the order rejecting the petitioner's refund applications for the specified tax periods. The Court directed the respondents to accept the petitioner's refund applications (filed on 25.05.2020, 27.05.2020 and 28.05.2020 for the periods May 2018, July 2018, August 2018, November 2018, December 2018 and March 2019) and to grant the refund together with applicable interest, observing that the refund claims relate to periods prior to the impugned amendment and that the denial was therefore unsustainable. [Paras 3, 28, 30]

Impugned order dated 30.06.2020 is quashed; respondents directed to accept the petitioner's refund applications and grant refund with interest within three months.

Final Conclusion: The amendment to Rule 89(4)(C) introducing a cap linked to domestic supplies is struck down as ultra vires, arbitrary and void; the departmental order rejecting the petitioner's pre-amendment refund claims is quashed and the revenue is directed to accept and pay the refunds with interest within three months.

Summary order. Writ petition disposed of as infructuous as the petitioner filed revised FORM GST TRAN 1 pursuant to the remedy provided by the Supreme Court; grievance is held to be redressed and the petition is disposed of, pending I.A. closed.

Agent - supplier - taxable person - supply of service under Schedule II - exemption under S. No. 4 of Notification No. 12/2017-Central Tax (Rate) - governmental authority (Explanation to Clause (16) of Section 2 of the IGST Act) - Article 243W (Twelfth Schedule) functions of municipality

Agent - supplier - taxable person - Liability of the appellant to pay GST on sale of commercial built-up area sold on behalf of MoHUA by treating the appellant as agent/supplier/taxable person. - HELD THAT: - The Appellate Authority examined the MOU, the role of the appellant in organising e-auctions, obtaining bookings on behalf of MoHUA, and the fact that sale deeds are to be signed by a nominated officer of MoHUA. The statutory definitions in Section 2(5) (agent) and Section 2(105) (supplier) of the CGST Act were read together: an agent who supplies on behalf of a principal falls within the definition of supplier, and a person required to be registered under Sections 22/24 is a taxable person under Section 2(107). On the facts the appellant acted as an agent in the business of supplying commercial built-up space on behalf of MoHUA, did not acquire any right or interest in the project, and received project management and agency charges. Consequently the appellant is a taxable person and is liable to collect/deposit GST in respect of the taxable supplies made by it as agent of MoHUA. [Paras 11]

Appellant is an agent and thus a supplier and taxable person under the CGST Act and is liable to discharge GST on the sale of commercial built-up area made on behalf of MoHUA.

Exemption under S. No. 4 of Notification No. 12/2017-Central Tax (Rate) - governmental authority (Explanation to Clause (16) of Section 2 of the IGST Act) - Article 243W (Twelfth Schedule) functions of municipality - Whether MoHUA's sale of commercial built-up space is exempt from GST as an activity entrusted to a municipality under Article 243W and thus covered by S. No. 4 of Notification No. 12/2017. - HELD THAT: - The Authority noted that S. No. 4 originally exempted services by Central/State/UT/local government or governmental authority in relation to functions entrusted to a municipality, but an amendment (Notification No. 14/2018) restricted the exemption to services provided by a "governmental authority". The IGST Act explanation requires that a "governmental authority" be set up or established (with 90% participation by equity or control) to carry out functions of the Twelfth Schedule. The Twelfth Schedule functions are public-welfare oriented. On the facts, the activity - sale of commercial built-up spaces to private buyers for commercial use - is not a municipal function as envisaged by Article 243W and is not a facility for common public welfare. Therefore the sale does not fall within the exemption. The Authority rejected the appellant's contention that construction and sale here are covered municipal functions or exempt by virtue of earlier formulations of the notification. [Paras 12]

Sale of commercial built-up space by or through the project is not covered by the Article 243W municipal functions exemption and MoHUA is not entitled to the S. No. 4 notification exemption in the circumstances.

Supply of service under Schedule II - Whether GST is payable on services supplied under the GST regime w.e.f. 01.07.2017 even where part of the consideration was received prior to 01.07.2017. - HELD THAT: - The Authority held that supplies falling under the GST regime are taxable with effect from 01.07.2017; departmental FAQs were only clarificatory. The appellant's reliance on pre-GST service tax jurisprudence and on absence of a pre-GST valuation mechanism for declared services was not found applicable to displace the statutory charging provisions under GST. Accordingly the appellant remains liable to pay GST on supplies under the GST regime notwithstanding part payments received before 01.07.2017. [Paras 13]

Appellant is liable to pay GST on services supplied w.e.f. 01.07.2017 even if part consideration was received prior to 01.07.2017.

Supply of service under Schedule II - Liability to pay GST on consideration received under an agreement to sell constructed units in a building which is under construction. - HELD THAT: - The Appellate Authority accepted the impugned authority's treatment of sale of built-up area (including where construction is ongoing) as a taxable supply under applicable provisions and noted that the DAAR had addressed these submissions in its order. The appellate body found no reason to re-open the analysis and upheld the DAAR's conclusion on this aspect. [Paras 14]

Appellant is liable to pay GST on consideration received under agreements to sell constructed units in buildings under construction, as concluded by DAAR.

Final Conclusion: The order of the Delhi Authority for Advance Ruling dated 05.10.2018 is upheld; the appeal by M/s NBCC (India) Limited is dismissed as devoid of merit.

Search and seizure - income from undisclosed sources - addition to income - voluntary surrender during search - reconciliation of surrendered amount against additions - appellate deletion of additions - NRE gift treated as income

Addition to income - appellate deletion of additions - reconciliation of surrendered amount against additions - Validity of additions made by Assessing Officer and subsequent deletions by appellate authorities leading to net taxable income - HELD THAT: - The Assessing Officer made multiple additions to the returned income after search and seizure, aggregating to additions which were adjusted against a voluntary surrender of Rs.10 lacs made during the search. The Commissioner (Appeals) deleted various components of the additions resulting in a net deletion of Rs.6,15,291/-, and the Assessing Officer's net addition of Rs.6,15,291/- was deleted. The Tribunal, after hearing and considering written submissions, upheld deletion of the larger additions and left a limited sum disputed. The High Court observed that on account of the deletions, the assessee's declared income of Rs.12 lacs stood accepted except for a meagre disputed amount, and that there was no arguable substantial question of law arising from the appellate outcomes to warrant interference.

Additions as reduced by the appellate authorities stand; the major additions were deleted and the declared income accepted.

Income from undisclosed sources - NRE gift treated as income - Whether the sum of Rs.1 lac characterised as NRE gift could be treated as income from undisclosed sources and added to assessee's income - HELD THAT: - The Tribunal held that the amount of Rs.1 lac, reflected by the assessee as an NRE gift, was rightly added to the income as income from undisclosed sources because the assessee failed to satisfactorily explain the source and genuineness of the gift. The High Court noted that the challenge before it concerned only this limited sum after substantial deletions below and found no persuasive ground to reverse the Tribunal's conclusion; reliance placed by the assessee on other judgments was held inapplicable on facts.

Tribunal's addition of Rs.1 lac as income from undisclosed source (NRE gift) is upheld; no substantial question of law for interference.

Final Conclusion: The appeal is dismissed: the appellate deletions left the assessee's declared income substantially accepted, and the limited remaining addition of Rs.1 lac treated as income from undisclosed sources (NRE gift) was upheld by the Tribunal; no substantial question of law survives for this Court to entertain.

Sanction for prosecution under Section 276B for failure to remit TDS - distinction between failure to deduct and failure to remit - consideration of assessee's explanation before sanctioning prosecution - remand for fresh consideration after hearing and evidence

Sanction for prosecution under Section 276B for failure to remit TDS - consideration of assessee's explanation before sanctioning prosecution - distinction between failure to deduct and failure to remit - Validity of the sanction for prosecution under Section 276B where the assessing authority did not advert to the assessee's specific submission that in several instances payments were only accounted and not actually made, and whether that omission vitiated the sanction. - HELD THAT: - The Court found that the impugned order sanctions prosecution for alleged failure to deposit tax deducted at source, but the officer's conclusion that no explanation had been furnished was incorrect because the assessee had, by reply dated 23.03.2015, specifically stated that certain payments were only accounted for (accrual accounting) and not paid, and that delayed remittances had been regularised with interest and penalty. The Court noted the statutory distinction between deduction and remittance - following amendment to Section 276B which removed prosecution for failure to deduct and confined penal liability to failure to remit tax actually deducted - and held that the respondents failed to consider the assessee's contention which was material to whether tax was ever deducted. That omission rendered the impugned sanction orders unsustainable without fresh consideration of that explanation and any supporting evidence. [Paras 5, 7]

Impugned sanction orders set aside insofar as they proceeded without considering the assessee's specific explanation; the orders were quashed and the matter required fresh consideration.

Remand for fresh consideration after hearing and evidence - consideration of assessee's explanation before sanctioning prosecution - Procedure to be followed on remand and scope of reconsideration by the Revenue authority. - HELD THAT: - In the interests of balancing parties, the Court directed that the assessee be permitted to appear before the respondent without awaiting further notice to press its legal submission and to place on record any evidence in support. The respondents were directed to hear the assessee on the legal submission and consider any evidences filed, and thereafter to pass orders in accordance with law within the time prescribed by the Court. The remand is for fresh consideration on merits of the explanation and accompanying evidence, not for summary denial without addressing that contention. [Paras 9]

The matter is remitted to the respondent to hear the assessee and consider the legal submissions and evidence afresh, with directions to pass orders within the timeframe specified by the Court.

Final Conclusion: Writ petitions allowed: impugned sanction orders under Section 276B set aside for failure to consider the assessee's specific contention (that payments were only accounted and not paid and that delayed TDS was regularised); matter remitted to the Revenue to hear the assessee and decide afresh on the explanation and any evidence within the period directed by the Court.

Additions under section 56(2)(viib) - share premium and burden on the taxpayer to justify fair market value - Additions under section 68 - unexplained cash credits and the necessity to prove identity, genuineness and creditworthiness - Territorial jurisdiction of the Tribunal and non maintainability of transfer petition under section 255

Additions under section 56(2)(viib) - share premium and burden on the taxpayer to justify fair market value - Validity of additions made under section 56(2)(viib) in respect of alleged exorbitant share premium - HELD THAT: - The Tribunal found that the assessees failed to furnish requisite details and supporting evidence, including justification for receipt of varying and large sums as share premium and a demonstration of fair market value by prescribed methods. The statutory onus to justify share premium vis-a -vis fair market value was not discharged during assessment or in remand proceedings directed by the CIT(A). In view of the absence of necessary proof and supporting material, the Tribunal adopted judicial consistency with the factual findings and affirmed the additions under section 56(2)(viib). [Paras 2, 4]

Additions under section 56(2)(viib) affirmed for Assessment year 2013-14

Additions under section 68 - unexplained cash credits and the necessity to prove identity, genuineness and creditworthiness - Sustainability of additions made under section 68 on account of unexplained cash credits - HELD THAT: - The Tribunal noted that the assessees did not prove identity, genuineness and creditworthiness of the cash credits. Reliance was placed on the coordinate bench's reasoning in a related appeal where similar unexplained credits were held not proved in light of established authorities requiring consideration of evidence on human probabilities and not treating mere production of documents as conclusive. Given the failure to discharge the evidentiary burden, the Tribunal affirmed the additions under section 68. [Paras 2, 3, 4]

Additions under section 68 affirmed for Assessment year 2013-14

Territorial jurisdiction of the Tribunal and non maintainability of transfer petition under section 255 - Maintainability of transfer petitions and the territorial jurisdiction of the Tribunal - HELD THAT: - The Tribunal recorded that transfer petitions filed by the assessees on grounds of head office location, poor finances and manpower were not maintainable. It applied the apex court's decision in Pr. CIT vs. ABC Papers Ltd. to hold that the situs of the Assessing Officer is determinative for appellate jurisdiction and relied on the jurisdictional High Court's decision that such transfer prayers cannot be entertained under section 255. The Tribunal also noted that the assessments dated 23.03.2016 fell within the territorial jurisdiction of the Pune Benches as per the Tribunal's Standing Order, and therefore dismissed the transfer pleas and affirmed jurisdiction. [Paras 4]

Transfer petitions not maintainable; territorial jurisdiction of Pune Benches upheld

Final Conclusion: The appeals are dismissed; the Tribunal affirmed the additions under sections 56(2)(viib) and 68 for Assessment year 2013-14 and held the transfer petitions non maintainable while confirming the Pune Benches' territorial jurisdiction.

Rejection of books of account under section 145(3) of the Income tax Act - treatment of unexplained cash credit under section 68 of the Income tax Act - taxation under section 115BBE of the Income tax Act - assessment completed under section 144 read with section 143(3) of the Income tax Act - taxation of profit element of excess sales as business income

Treatment of unexplained cash credit under section 68 of the Income tax Act - taxation of excess cash sales - Whether the aggregate excess cash sales of Rs.18,07,500/- identified by the Assessing Officer could be treated as unexplained cash credit and fully taxed as income. - HELD THAT: - The Tribunal observed that the Assessing Officer and the CIT(A) had doubts about the genuineness of abruptly increased cash sales in October-November 2016 and that no independent inquiry was made into the purchaser details furnished by the assessee. While accepting that the abnormal spike in sales legitimately raised suspicion, the Tribunal also noted that the Assessing Officer did not investigate the details provided by the assessee and that the books and supporting documents (sales bills, stock register, VAT returns) were not found defective. To avoid revenue leakage but also to account for the absence of full verification, the Tribunal directed a limited adjustment: instead of taxing the entire excess sales amount, 25% of the profit on the excess sales identified by the Assessing Officer is to be treated as the taxable element attributable to those alleged unidentifiable sales and included in income. [Paras 11]

Addition confirmed only to the limited extent that 25% of the profit on the excess sales identified be treated as taxable income; balance not sustained.

Taxation under section 115BBE of the Income tax Act - taxation of business income under normal provisions - Whether the addition so sustained ought to be taxed under the special presumptive tax provision section 115BBE or as business income under normal provisions of the Act. - HELD THAT: - Having directed that only the profit element (25% of profit on the excess sales) be brought to tax, the Tribunal held that the admitted/sustained portion represents business income rather than an unexplained credit attracting the special tax regime. Accordingly, the Tribunal directed that the sustained amount be taxed under the normal provisions of the Act and not under section 115BBE. [Paras 12]

Sustained addition to be treated as business income and taxed under normal provisions; taxation under section 115BBE disallowed.

Rejection of books of account under section 145(3) of the Income tax Act - Whether the books of account of the assessee ought to be rejected. - HELD THAT: - The Tribunal found that because it has partly sustained the action of the lower authorities by taxing a portion of the excess sales (profit element), the question of complete rejection of books has become academic and does not require separate adjudication. [Paras 13]

Adjudication on rejection of books rendered academic; no separate order on rejection required.

Final Conclusion: Appeal partly allowed: addition of Rs.18,07,500/- set aside except that the Assessing Officer is directed to tax 25% of the profit on the excess sales identified as taxable business income under normal provisions; taxation under section 115BBE is disallowed; the question of rejection of books is rendered academic.

Deduction under Section 80P(2)(d) - definition of "co-operative society" - treatment of co-operative banks vis-a -vis Sec.80P(4) - revisional jurisdiction under Section 263 - precedential conflict among High Courts - view favourable to assessee

Deduction under Section 80P(2)(d) - treatment of co-operative banks vis-a -vis Sec.80P(4) - definition of "co-operative society" - Claim for deduction under Section 80P(2)(d) in respect of interest income earned by a co-operative society from deposits/investments with co-operative banks. - HELD THAT: - The Tribunal held that Sec.80P(2)(d) permits deduction of interest income where such income is derived by a co-operative society from investments made with any other co-operative society. Although Sec.80P(4) (inserted by Finance Act, 2006) operates to exclude co-operative banks from claiming benefits under Sec.80P themselves, that amendment does not negate the plain-language entitlement of a co-operative society to deduct interest received from investments with an entity that is a "co-operative society" as defined in the Act. A co-operative bank, being registered under the co-operative societies statute, falls within the statutory definition of a "co-operative society"; accordingly, interest earned by a co-operative society on deposits with a co-operative bank is eligible for deduction under Sec.80P(2)(d). The Tribunal noted conflicting High Court decisions but followed the jurisprudence favouring the assessee and the principle that, where non-jurisdictional High Courts conflict, the view beneficial to the assessee may be preferred. Applying these legal principles, the Tribunal found the Assessing Officer's allowance of the claim to be a plausible view taken after verification and correctly in conformity with coordinate decisions and therefore sustainable. [Paras 4, 5]

Deduction under Section 80P(2)(d) was rightly allowed in respect of interest income on deposits with co-operative banks; the Assessing Officer's view stands.

Revisional jurisdiction under Section 263 - Validity of the Principal CIT's exercise of revisional jurisdiction under Section 263 to set aside the Assessing Officer's order that allowed the Sec.80P(2)(d) claim. - HELD THAT: - The Tribunal concluded that the Pr. CIT erred in invoking Sec.263 to dislodge the Assessing Officer's order because the AO had taken a possible and plausible view after necessary verifications which was not perverse. Where the AO's conclusion is a tenable one and is supported by judicial precedents of coordinate benches, the Pr. CIT exceeded his revisional jurisdiction in setting aside that order. On that basis the revisional directions were held unjustified and liable to be set aside. [Paras 2, 10]

Pr. CIT's exercise of revisional power under Section 263 was unwarranted and is set aside; the Assessing Officer's assessment is restored.

Final Conclusion: The appeal is allowed: the Principal CIT's revision directions under Section 263 are reversed and the Assessing Officer's assessment dated 18.02.2021 (for AY 2012-13) is restored, confirming the assessee's entitlement to deduction under Section 80P(2)(d) for interest on deposits with co-operative banks.

Penalty under section 271(1)(c) for concealment of income - Bona fide disclosure and surrender of income during assessment proceedings - Ignorance of law as defence to penalty

Penalty under section 271(1)(c) for concealment of income - Bona fide disclosure and surrender of income during assessment proceedings - Ignorance of law as defence to penalty - Whether penalty under section 271(1)(c) is sustainable where the assessee surrendered capital gains and paid the tax before completion of assessment, relying on bona fide belief and ignorance of Indian tax procedure. - HELD THAT: - The Tribunal found that the assessee, an NRI and first-time respondent before the Department, sold ancestral immovable property and, upon notice and during assessment proceedings, offered the long term capital gains for taxation and paid the tax with interest before completion of assessment. The Assessing Officer had levied penalty treating the non-filing/initially invalid return and the undisclosed deposits as concealment; the CIT(A) confirmed penalty following a precedent that supported imposition in different facts. The Tribunal examined authorities relied upon by the parties and distinguished Zoom Communication on its facts. Applying the principle that penalty under section 271(1)(c) requires conscious concealment or furnishing of inaccurate particulars, the Tribunal accepted that the assessee's conduct - surrender of the disputed income and payment of tax during assessment proceedings, accompanied by explanations and affidavit evidence regarding power of attorney and deposit of sale proceeds - demonstrated absence of mala fide intent. On these facts the Tribunal concluded that there was no material to show deliberate concealment and directed deletion of the penalty. [Paras 13, 14]

Penalty under section 271(1)(c) deleted as the assessee bona fide surrendered the capital gains and paid tax before completion of assessment, showing no mala fide concealment.

Final Conclusion: Appeal allowed; penalty imposed under section 271(1)(c) is set aside because the assessee voluntarily offered the capital gains and paid the tax before completion of assessment, demonstrating absence of deliberate concealment.

Deduction under section 80P(2)(a)(i) - Deduction under section 80P(2)(d) - Interest income on surplus investments - Co-operative bank as co-operative society - Power of revision under section 263 - Erroneous and prejudicial to the interests of revenue - Plausible or debatable view

Power of revision under section 263 - Erroneous and prejudicial to the interests of revenue - Plausible or debatable view - Deduction under section 80P(2)(a)(i) - Deduction under section 80P(2)(d) - Interest income on surplus investments - Co-operative bank as co-operative society - Whether the Commissioner was justified in invoking revision under section 263 to set aside the assessment because the Assessing Officer allowed deduction under section 80P in respect of interest income earned on investments with other co-operative banks. - HELD THAT: - The jurisdictional power under section 263 can be exercised only where the assessment order is both erroneous and prejudicial to the interests of revenue; the error must be one that is not open to a debatable or plausible view. The Assessing Officer had examined the claim for deduction under section 80P and taken a view in favour of the assessee. There exists a clear cleavage of judicial opinion on whether interest earned on surplus funds invested with banks or co-operative banks qualifies for exemption under section 80P(2)(a)(i) or section 80P(2)(d). Coordinate-bench and High Court decisions have taken differing views; several decisions (including those relied upon by the Tribunal) hold such interest income eligible for deduction, and co-operative banks may be treated as another specie of co-operative society for the purposes of section 80P(2)(d). Because the question is a purely legal and debatable one, the Assessing Officer's allowance represented a plausible view and the revision jurisdiction under section 263 was not attracted. In these circumstances the Commissioner was not justified in setting aside the assessment without showing that the AO's view was indefensible as a matter of law. [Paras 9, 10, 11, 12, 13]

The exercise of revision under section 263 was unjustified and the revision order is set aside; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the question whether interest on surplus investments with other co-operative banks qualifies for deduction under section 80P(2)(a)(i) or section 80P(2)(d) is debatable and, since the Assessing Officer took a plausible view, the Commissioner's exercise of revision under section 263 was not warranted.

Estimation of profits without rejecting books of account is impermissible - Power to estimate income after rejection of books of account under section 145(3) - Onus on the assessee to substantiate expenditure with documentary evidence - Assessing Officer's obligation to disallow unproved expenditure rather than estimate gross profit where books are accepted

Estimation of profits without rejecting books of account is impermissible - Power to estimate income after rejection of books of account under section 145(3) - Validity of the Assessing Officer's estimation of profits in the absence of rejection of the books of account - HELD THAT: - The Assessing Officer proceeded to estimate business profits by applying assumed percentages on main and sub-contracts despite not rejecting the assessee's books of account under the procedure prescribed in section 145(3). The Tribunal noted that established judicial authority holds that an assessment to the best of judgment (estimation of income) is permissible only where the Assessing Officer is not satisfied with the correctness of the accounts and has rejected the books; absent such rejection, the books, if maintained in the regular course, form the basis for computation of income. While the Assessing Officer could, if dissatisfied with claimed expenditures, disallow those expenditures for lack of documentary proof, he was not permitted to bypass the statutory requirement and estimate gross profits without first rejecting the accounts. The Tribunal applied these principles to the facts, observed that the AO's estimation was made without following the rejection route under section 145(3), and, relying on the consistent reasoning of higher authorities, held the estimation invalid and allowed the ground raised by the assessee. [Paras 5]

The estimation of profits made by the Assessing Officer without rejecting the books of account is not sustainable; the ground raised by the assessee is allowed.

Final Conclusion: The appeals are allowed; the additions by way of estimated profits confirmed by the authorities are set aside for A.Y. 2013-14 to A.Y. 2016-17.

Income from House Property - Profits and Gains from Business or Profession - Memorandum of Association and scope of corporate objects - commencement of business of a private limited company - deduction of interest relating to acquisition of property under section 24(b) of the Income Tax Act, 1961 - processing fee characterised as interest under section 2(28A) of the Income Tax Act, 1961 - capitalisation of interest and pre acquisition expenses - inapplicability of Chennai Properties and Investments Ltd precedent to company's objects in this case

Income from House Property - Profits and Gains from Business or Profession - Memorandum of Association and scope of corporate objects - inapplicability of Chennai Properties and Investments Ltd precedent to company's objects in this case - Classification of rental receipts from the Bangalore property as Income from House Property and not as business income. - HELD THAT: - The Tribunal examined the objects clause of the assessee's Memorandum of Association and found that, while acquisition of property including on lease is expressly provided, there is no specific declaration that letting out property (earning rental income) is an activity of the company. Words in the objects must be read in context and cannot be expanded to include letting out where not intended. For these reasons the Tribunal held that the decision in Chennai Properties and Investments Ltd does not apply on the facts, and the CIT(A)'s conclusion that the receipts are chargeable under the head Income from House Property was correct. [Paras 12, 13]

Rental income from the Bangalore property is taxable as Income from House Property and not as business income; the CIT(A)'s rejection of the assessee's plea is upheld.

Commencement of business of a private limited company - purchase of business asset - Whether the assessee had commenced business. - HELD THAT: - The Tribunal noted that a private limited company need not obtain a commencement certificate and may begin business upon incorporation. The assessee, soon after incorporation, raised loans, incurred routine business expenses and purchased the Bangalore property; these transactions were found to be part of its business operations. Accordingly the Tribunal accepted that the assessee had commenced business. [Paras 14]

Assessee is held to have commenced its business.

Processing fee characterised as interest under section 2(28A) of the Income Tax Act, 1961 - deduction of interest relating to acquisition of property under section 24(b) of the Income Tax Act, 1961 - capitalisation of interest and pre acquisition expenses - Deductibility of loan processing fee and interest - extent allowable as revenue deduction and extent required to be capitalised. - HELD THAT: - While the CIT(A) accepted that the processing fee is to be treated as interest, and that interest relating to loans for acquisition of the income yielding Bangalore property is deductible under the Act, the Tribunal held that sums (processing fee and interest) attributable to the portion of borrowed funds used as advance for an unacquired Hyderabad property cannot be claimed as revenue deduction. Giving an advance does not amount to acquisition of a business asset or readiness for use; until the property is acquired and ready for business purposes such expenditure must be capitalised. The Tribunal therefore upheld the CIT(A)'s restriction of deduction to the proportion of interest/processing fee relatable to repayment of the debt incurred for acquiring the Bangalore property and the disallowance/capitalisation of the remainder. [Paras 15, 16, 18]

Processing fee and interest deductible only to the extent attributable to loans used for repayment of debt incurred for the Bangalore income yielding property; the balance is to be capitalised and not allowed as revenue deduction.

Final Conclusion: All appeals allowed in part: rental receipts held to be taxable as Income from House Property; assessee held to have commenced business; deduction of interest and processing fee restricted to amounts relatable to the Bangalore property with the remaining amounts required to be capitalised.

Transition amount - section 115JB(2C) - compound financial instrument - Ind AS 32 - equity instrument versus financial liability - convergence date - other equity - book profit - first-time adoption (Ind AS 101)

Compound financial instrument - Ind AS 32 - equity instrument versus financial liability - Classification of the convertible debentures (ZOFCDs/FCDs) under Ind AS 32 - whether they are compound financial instruments or instruments entirely equity in nature. - HELD THAT: - Ind AS 32 requires an issuer to classify a financial instrument (or its components) at initial recognition according to the substance of the contractual arrangement. A compound financial instrument requires both (a) creation of a financial liability and (b) an option granted only to the holder to convert into equity. The Tribunal examined the contractual terms as on the convergence date: the instruments were convertible into a fixed number of equity shares; conversion could be effected unilaterally by either the issuer or the holder; there was no unconditional contractual obligation on the issuer to deliver cash (early redemption required mutual agreement) and settlement would be by a fixed number of equity shares. On these facts there was no embedded liability component (no periodic interest payable, no unconditional right of holder to demand cash, and no variable-number settlement). Applying Paras 15-16, 28-32 of Ind AS 32, the instruments therefore satisfied the conditions for classification as equity instruments rather than a liability or as a compound instrument with a liability component. The Tribunal held that the convertible debentures did not give rise to a financial liability and thus were not compound financial instruments. [Paras 72, 73, 74]

The convertible debentures are instruments entirely equity in nature and not compound financial instruments.

Transition amount - section 115JB(2C) - other equity - book profit - first-time adoption (Ind AS 101) - Whether the entire amount represented by the convertible debentures is includible in the 'transition amount' under section 115JB(2C) and hence requires addition to book profit. - HELD THAT: - Section 115JB(2C) defines 'transition amount' as amounts adjusted in 'other equity' on the convergence date (with specified exclusions) that affect profit or loss but were recorded in other equity due to transition to Ind AS. The Tribunal analysed the purpose and definition of 'transition amount' and the illustrative accounting under Ind AS 32, which treats only the liability component of a compound instrument as the element that produces notional interest affecting profit or loss. Because the instruments were held to be entirely equity in nature (no liability component, no notional interest charged to profit and loss, and no embedded liability value as per the Ind AS 32 example), the amounts in question were capital in character and did not represent transition adjustments intended by section 115JB(2C). The Tribunal found that PCIT erred in treating the entire face value as transition amount; only an embedded liability component (if any) would qualify, and none existed here. Consequently no part of the convertible debentures' value was required to be added to book profit under section 115JB(2C). [Paras 80, 81, 85]

The aggregate amount of the convertible debentures is not a 'transition amount' under section 115JB(2C); no addition to book profit is required under that provision.

Final Conclusion: The Tribunal allowed the appeal: the convertible debentures were held to be instruments entirely equity in nature and not compound financial instruments, and the amount represented by them is not includible in the 'transition amount' under section 115JB(2C); the PCIT's revisionary order under section 263 was reversed and no adjustment to book profit under section 115JB(2C) was directed.

Reimbursement of salary as cost-to-cost payment - fees for technical services / fees for included services - make available (as test for fees for included services) - service permanent establishment (Service PE) - scope of remand - limits on fresh adjudication - tax deduction at source - section 195 and section 192 interplay - consequential relief on interest - section 234B

Reimbursement of salary as cost-to-cost payment - fees for technical services / fees for included services - make available (as test for fees for included services) - tax deduction at source - section 195 and section 192 interplay - Reimbursement of salary and related costs received by the assessee is not taxable as fees for technical services/fees for included services. - HELD THAT: - The Tribunal examined the secondment agreement and facts showing that the Indian company exercised control and supervision over the secondee during assignment, that payroll formalities and withholding under section 192 were complied with in India, and that reimbursements were made on a cost-to-cost basis without mark-up. Applying the make available test, the Tribunal found no transfer or imparting of technical knowledge, skill or know how enabling the Indian entity to deploy the technology or expertise independently; the payments were mere reimbursement of salary and related costs. The Tribunal followed earlier coordinate bench and High Court authorities holding that pure cost to cost reimbursements for secondees (where Indian employer performs withholding under section 192) do not constitute fees for technical services or fees for included services, and that section 195 does not apply in such circumstances. Consequently, the addition treating the reimbursement as FTS/FIS was deleted and related disallowance under section 40(a)(i) was held not warranted (decision recorded). [Paras 11, 12, 23]

Addition of Rs.1,49,96,676 by treating reimbursements as fees for technical/included services deleted; reimbursements held not chargeable as FTS/FIS.

Scope of remand - limits on fresh adjudication - service permanent establishment (Service PE) - Finding of a Service PE by the Assessing Officer on remand was beyond the scope of the Tribunal's directions and therefore set aside. - HELD THAT: - The Tribunal noted that the coordinate bench had remanded the matter for re appreciation of correct facts limited to the issue under appeal and that the AO, in the second round, recorded an altogether fresh conclusion on existence of a Service PE. Citing the principle that an appellant should not be placed in a worse position on account of filing an appeal and that the Tribunal cannot enhance assessment by remand, the Tribunal held the AO's Service PE finding to be beyond the remand directions and bad in law. The Service PE conclusion was therefore set aside. [Paras 9]

AO's finding of Service PE in India set aside as beyond scope of remand.

Consequential relief on interest - section 234B - Levy of interest under section 234B was rendered consequential and allowed for statistical purposes. - HELD THAT: - Having decided in favour of the assessee on the taxable character of the reimbursement, the Tribunal treated the levy of interest under section 234B as consequential. Relying on applicable precedent, the Tribunal allowed relief in respect of interest for statistical purposes. [Paras 13]

Interest under section 234B allowed for statistical purposes (consequential relief).

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: the reimbursement of salary and related costs was held not to be fees for technical/included services and the addition was deleted; the AO's Service PE finding made on remand was set aside as beyond the scope of remand; consequential relief on interest under section 234B was granted.

Advancement of object of general public utility - proviso to section 2(15) - section 13(8) - forfeiture of exemption when proviso to section 2(15) applies - application of income and exemption under section 11 and 12 - investment restrictions under section 11(5) and consequence under section 13(1)(d) - tax treatment of income from investments made in contravention of section 11(5) - treatment of tax deducted at source for application-of-income purposes - allowance of depreciation where capitalisation was earlier treated as application of income

Advancement of object of general public utility - proviso to section 2(15) - section 13(8) - forfeiture of exemption when proviso to section 2(15) applies - application of income and exemption under section 11 and 12 - Whether the Gujarat Maritime Board's activities are excluded from 'charitable purpose' by the proviso to section 2(15) and, if so, whether section 13(8) deprives it of exemptions under sections 11 and 12 for the years under consideration. - HELD THAT: - The Tribunal examined earlier decisions in the assessee's own case and binding rulings of the Gujarat High Court and ITAT which held that where an entity constituted under statutory public law (here the Gujarat Maritime Board Act, 1981) is managed and controlled by the State and applies income for development of minor ports, the charging of fees may be incidental to its statutory public utility function and not an activity in the nature of trade, commerce or business. Respectfully following the coordinate-bench ITAT decision for AY 2014-15 and the Gujarat High Court's dismissal of the Revenue's appeal in that matter, the Tribunal held that the proviso to section 2(15) did not apply to the assessee for the years before it; consequently section 13(8) did not operate to deny exemptions under sections 11 and 12. The Tribunal therefore allowed the assessee the benefits of sections 11 and 12 for the years in question, subject to consequential mechanical computations (including direction to allow depreciation as appropriate when assessed as AOP/business income where applicable). [Paras 7, 8]

Grounds 1 to 3 allowed; proviso to section 2(15) held not attracted and section 13(8) not operative so as to deny exemption under sections 11 and 12 for the years under consideration.

Investment restrictions under section 11(5) - tax treatment of income from investments made in contravention of section 11(5) - section 13(1)(d) - Whether breach of the investment modes prescribed by section 11(5) results in denial of exemption under section 11 and 12 for the entire income of the trust or only for income attributable to the non permitted investments. - HELD THAT: - The Tribunal relied on judicial precedents holding that contravention of section 11(5) draws the consequences of section 13(1)(d) only in relation to the income derived from such impermissible investments or deposits. Violation does not operate to deprive the trust of exemption for its other income which otherwise satisfies the conditions for exemption. Thus only the relevant income attributable to the prohibited investments would lose exemption and be taxable; the balance income remains eligible for section 11 relief. [Paras 12, 13]

Ground 4 allowed; only income attributable to investments in contravention of section 11(5) will forfeit exemption under section 13(1)(d), not the whole income of the trust.

Treatment of tax deducted at source for application-of-income purposes - application of income and exemption under section 11 - Whether amounts deducted as tax at source (TDS) and thus representing tax payable on receipts can be excluded from income available for application under section 11(1)(a) and therefore should not be added back to the assessee's income. - HELD THAT: - Following High Court precedents, the Tribunal held that tax deducted at source is a charge on income and, when deducted, reduces the income available for application; such amounts should be considered in computing application of income under section 11(1)(a). The Assessing Officer erred in treating the TDS amounts as income of the trust and adding them back. For the years under appeal the Tribunal allowed the assessee's claim to treat the TDS amounts as rightly deducted for application-of-income purposes and not to be brought back as income. [Paras 17, 18, 20, 21]

Ground 5 for AY 2015-16 and corresponding ground 1 for AY 2016-17 allowed; the TDS amounts should not have been added back as income.

Allowance of depreciation where capitalisation was earlier treated as application of income - application of income and exemption under section 11 - Whether depreciation can be allowed on assets the cost of which had earlier been allowed as application of income, particularly where the position on exemption under sections 11 and 12 is contested. - HELD THAT: - The Department challenged the Tribunal's direction to allow depreciation and contended that permitting depreciation would amount to double benefit where the cost had earlier been treated as application of income. The assessee invoked the amendment to section 11(6) (Finance Act, 2015 w.e.f. 01-04-2015) as relevant. Having considered the submissions, the Tribunal accepted the departmental contention in part and allowed the Department's grounds 3 and 4 for AY 2016-17, i.e., permitted re-examination of the issue in light of the statutory amendment and accepted that the question of allowing depreciation subject to earlier treatment may be decided against the assessee for that year. [Paras 29, 30, 31]

Department's grounds 3 and 4 allowed for AY 2016-17; Tribunal partly allowed the Department's appeal and directed that depreciation/related relief be addressed in view of the amended statutory position.

Final Conclusion: The Tribunal partly allowed the assessee's appeals: it held that the proviso to section 2(15) did not apply (grounds 1-3 allowed) and directed relief on TDS and the limited effect of section 11(5)/13(1)(d) (grounds 4-5 allowed), for AYs 2015-16 and 2016-17; the Department's appeal for AY 2016-17 was dismissed on questions relating to proviso to section 2(15) but was partly allowed on issues concerning allowance of depreciation in view of amendments to section 11(6).

Arm's Length Price - Transfer Pricing - Transactional Net Margin Method (TNMM) - Comparability analysis - functions, assets and risks (FAR) - Working capital adjustment - currency specific interest rate - Risk adjustment in transfer pricing - Section 14A read with Rule 8D - disallowance relating to exempt income - Foreign exchange (forex) gain/loss treated as operating income

Comparability analysis - functions, assets and risks (FAR) - Arm's Length Price - Exclusion of Accentia Technologies Ltd. and Eclerx Services Ltd. from the final set of comparables - HELD THAT: - The DRP directed deletion of Accentia Technologies Ltd. and Eclerx Services Ltd. from the TPO's comparable set after noting that coordinate Tribunal and High Court decisions in the assessee's own earlier proceedings had excluded these companies for being functionally dissimilar. The Tribunal examined those precedents and the factual material and found no infirmity in the DRP's directions to exclude these two entities from the final comparable set for determining ALP under TNMM.

Directions of the DRP to exclude Accentia Technologies Ltd. and Eclerx Services Ltd. from the final set of comparables upheld.

Comparability analysis - functions, assets and risks (FAR) - Arm's Length Price - Inclusion of CGVAk Software Limited in the final set of comparables - HELD THAT: - The Tribunal noted that facts for AY 2010-11 were identical and that both the Tribunal and the Delhi High Court had earlier directed inclusion of CGVAk as a comparable, following the principle that turnover alone is not a valid ground for exclusion when functional similarity exists. On that basis the Tribunal directed the AO/TPO to include CGVAk Software Limited in the final comparable set for AY 2011-12.

AO/TPO directed to include CGVAk Software Limited in the final set of comparables.

Comparability analysis - functions, assets and risks (FAR) - Exclusion of Informed Technologies India Ltd. from the final set of comparables - HELD THAT: - The Tribunal reviewed the TPO's reasons and found that Informed Technologies was rejected because its service income constituted less than the prescribed filter (other income/rental formed a substantial part of total income), so it failed the service income filter and was therefore rightly excluded. The Tribunal rejected the assessee's contention that exclusion was on the ground of low turnover and upheld the DRP/TPO direction to exclude the company.

Informed Technologies India Ltd. excluded from the final comparable set; DRP/TPO direction upheld.

Comparability analysis - functions, assets and risks (FAR) - Inclusion of R. Systems International - BPO services as a comparable - HELD THAT: - The TPO had rejected R. Systems because it followed a calendar year (different financial year ending). Applying binding precedent, the Tribunal held that different financial year ending is not a ground for exclusion if functional comparability exists and financial data can be reasonably extrapolated. The Tribunal directed AO/TPO to include R. Systems International - BPO services in the comparable set.

AO/TPO directed to include R. Systems International - BPO services as a comparable.

Comparability analysis - functions, assets and risks (FAR) - Exclusion of ICRA Techno Analytics Ltd. from the final set of comparables - HELD THAT: - On review of the annual report and earlier Tribunal decisions, the Tribunal accepted that ICRA Techno Analytics carried out diversified activities (software development, consultancy, engineering services, web hosting and other segments) and lacked significant identifiable BPO segmental information; coordinate Tribunal precedent had held it functionally dissimilar. The Tribunal directed AO/TPO to exclude ICRA Techno Analytics Ltd.

ICRA Techno Analytics Ltd. excluded from the final comparable set.

Comparability analysis - functions, assets and risks (FAR) - Arm's Length Price - Treatment of Infosys B.P.O. Ltd. in the comparable analysis - remand for re examination - HELD THAT: - Earlier decisions in the assessee's own case had excluded Infosys B.P.O. Ltd. for AY 2010-11 due to an extraordinary acquisition; for AY 2011-12 no specific extraordinary event was shown. The Tribunal observed that TPO had not examined several relevant factors (large scale operations, high end integrated services, goodwill/intangibles) and therefore restored the matter to the AO/TPO to re examine inclusion/exclusion of Infosys B.P.O. Ltd. in light of the Tribunal and Delhi Bench decisions.

Issue remanded to AO/TPO for fresh examination of inclusion/exclusion of Infosys B.P.O. Ltd. in the comparable set.

Comparability analysis - functions, assets and risks (FAR) - TCS e Serve Ltd. - remand to AO/TPO for re examination - HELD THAT: - The Tribunal found that in the preceding assessment year the matter had been restored to the AO/TPO for further examination of functional profile, brand value, intangibles and extraordinary events. Given the range of factual contentions and precedents pointing in different directions, the Tribunal considered it appropriate to restore the issue to the AO/TPO for fresh adjudication keeping those observations in view.

Issue remanded to AO/TPO for re examination of TCS e Serve Ltd.'s inclusion/exclusion as a comparable.

Comparability analysis - functions, assets and risks (FAR) - Exclusion of Acropetal Technologies Ltd. (segment) from the final set of comparables - HELD THAT: - The Tribunal reviewed the nature of Acropetal's engineering design segment and coordinate Tribunal precedent which treated Acropetal's engineering design services as high end and functionally dissimilar to routine ITES/BPO services. Applying that reasoning to the facts, the Tribunal directed the AO/TPO to exclude Acropetal Technologies Ltd. (segment) from the comparable set.

Acropetal Technologies Ltd. (engineering design segment) excluded from the final comparable set.

Risk adjustment in transfer pricing - Direction to AO/TPO to consider risk adjustment afresh - HELD THAT: - The assessee sought a risk adjustment; the Revenue opposed automatic adjustments. The Tribunal held that risk adjustment requires case specific consideration and remitted the issue to the AO/TPO to decide afresh after hearing the assessee and in accordance with relevant precedents and law.

Issue remanded to AO/TPO to determine any risk adjustment in comparability in accordance with law after affording opportunity to the assessee.

Working capital adjustment - currency specific interest rate - Re computation of working capital adjustment using currency appropriate interest rate and re examination of inclusion of Philippines PE branch - HELD THAT: - The Tribunal noted that in the assessee's earlier Tribunal and High Court decisions the working capital interest rate must be determined with reference to the currency of receipts (US$) rather than SBI PLR in rupees and set aside the impugned computation. The Tribunal directed the AO/TPO to re compute the working capital adjustment applying the appropriate US currency interest rate (following the cited precedents) and to re examine whether the Philippines permanent establishment, which the assessee contended had ceased operations before the year, should be included in the working capital computation. Adequate opportunity and working details must be furnished to the assessee.

AO/TPO directed to re compute working capital adjustment using the interest rate relevant to US$ receipts and to re examine the inclusion of Philippines PE in the computation; provide workings and opportunity to the assessee.

Section 14A read with Rule 8D - disallowance relating to exempt income - Treatment of Rule 8D disallowance - exclude investments that do not yield exempt dividend income - HELD THAT: - AO applied Rule 8D(2)(iii) to disallow a percentage of average investment value, including investments that did not yield exempt dividend. The DRP directed recomputation excluding investments which do not yield exempt dividend income and restricting disallowance to the exempt dividend. The Tribunal found no infirmity in the DRP's direction and upheld the recomputation approach limiting disallowance to investments yielding exempt dividend income.

DRP direction upheld: disallowance under Rule 8D to be recomputed excluding investments that do not yield exempt dividend income and restricted to the dividend income earned.

Foreign exchange (forex) gain/loss treated as operating income - Whether forex gain/loss should be treated as operating income for ALP determination - HELD THAT: - Relying on the Tribunal's earlier decision in the assessee's own case and the Supreme Court authority on forex fluctuations, the Tribunal held that forex gain/loss related to sale price in US$ are trading receipts/operating in nature and must be treated as operating income/loss both for the tested party and comparables when determining PLI under TNMM. The Revenue's contention to treat forex gain/loss as non operating was rejected.

Forex gain/loss related to export receipts in US$ to be treated as operating income/loss for ALP determination; Revenue's ground rejected.

Final Conclusion: The assessee's appeal is partly allowed and the Revenue's appeal is dismissed. The Tribunal upheld several DRP directions excluding certain comparables (Accentia, Eclerx, Informed Technologies, ICRA, Acropetal) and directed inclusion or re examination of others (CGVAk included; R. Systems included; Infosys BPO and TCS e Serve remanded to AO/TPO). The Tribunal remitted specific factual and computation issues - risk adjustment and working capital adjustment (to be recomputed using the currency appropriate interest rate and re examining Philippines PE inclusion) - to the AO/TPO for fresh adjudication in accordance with law. The DRP's direction to restrict Rule 8D disallowance to investments yielding exempt dividend income was upheld, and forex gain/loss was held to be operating in nature for ALP determination.

Limitation under Section 92CA(3A) for passing Transfer Pricing Officer orders - mandatory nature of timelines for transfer pricing in relation to Section 153 - eligibility under Section 144C(15)(b)(i) where variation arises from TPO order - consequences of a time barred TPO order on draft assessment and final assessment proceedings

Limitation under Section 92CA(3A) for passing Transfer Pricing Officer orders - mandatory nature of timelines for transfer pricing in relation to Section 153 - Validity of the Transfer Pricing Officer's order dated 01/11/2019 in the light of the time limit prescribed by Section 92CA(3A). - HELD THAT: - Section 92CA(3A) requires that an order under Section 92CA(3) be made at any time before sixty days prior to the date on which the period of limitation under Section 153 expires. For A.Y.2016-17 the limitation under Section 153 expired on 31/12/2019 (after applicable extension), and excluding that terminal date the sixtieth day prior falls on 31/10/2019. Consequently an order under Section 92CA(3) had to be passed on or before 31/10/2019. The TPO's order dated 01/11/2019 was therefore passed after the prescribed cut-off and is barred by limitation. The Tribunal, following the reasoning that the temporal prescription in Section 92CA(3A) is mandatory (and not merely directory) in view of the statutory scheme and consequences for assessment timelines, held the TPO order to be time barred and invalid. [Paras 4]

The Transfer Pricing Officer's order dated 01/11/2019 is barred by limitation and is invalid.

Eligibility under Section 144C(15)(b)(i) where variation arises from TPO order - consequences of a time barred TPO order on draft assessment and final assessment proceedings - Whether a time barred TPO order removes the assessee from the definition of "eligible assessee" under Section 144C(15)(b)(i) and the effect on the draft assessment dated 07/12/2019 and final assessment dated 31/03/2021. - HELD THAT: - The definition of "eligible assessee" in Section 144C(15)(b)(i) is confined to persons in whose case the variation arises as a consequence of a valid order of the TPO under Section 92CA(3). A TPO determination that is time barred is a nullity and cannot give rise to a lawful variation. In the absence of any valid TPO order, the assessee does not qualify as an "eligible assessee" under Section 144C(15)(b)(i). Consequently, the statutory scheme for issuing a draft assessment under Section 144C(1) does not arise; the draft assessment dated 07/12/2019 (issued pursuant to the invalid TPO order) is therefore void ab initio, and all subsequent proceedings including the DRP directions and the final assessment dated 31/03/2021, which flowed from that void foundation, are also void. The Tribunal followed earlier decisions of coordinate benches and High Court reasoning to conclude that the temporal invalidity of the TPO order vitiates the consequent 144C proceedings. [Paras 4]

Because the TPO order is time barred, the assessee is not an "eligible assessee" under Section 144C(15)(b)(i); the draft assessment dated 07/12/2019 and the final assessment dated 31/03/2021 are void ab initio and are quashed.

Final Conclusion: The Tribunal allowed the appeal for A.Y.2016-17, holding the TPO order dated 01/11/2019 barred by limitation under Section 92CA(3A); as a result the assessee was not an "eligible assessee" under Section 144C(15)(b)(i), and the draft assessment dated 07/12/2019 and final assessment dated 31/03/2021 were void ab initio and quashed.

Summary dismissal for non prosecution - duty to record points for determination and reasons - requirement of hearing and opportunity before disposal of appeal - de novo disposal on remand

Summary dismissal for non prosecution - duty to record points for determination and reasons - Validity of the Commissioner (Appeals)' order dismissing the assessee's appeal in limine for non compliance with notices of hearing without deciding the appeal on merits. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) disposed of the appeal in a summary manner by treating non attendance as an admission and dismissing the appeal without adjudicating the merits. Section 250(6) obliges the Commissioner (Appeals) to dispose of an appeal in writing stating the points for determination, the decision thereon and the reasons for the decision. The CIT(A)'s in limine dismissal, without recording points and reasons or deciding the grounds, was therefore contrary to the statutory mandate and vitiated the appellate order.

The CIT(A)'s summary dismissal for non prosecution is unsustainable and set aside.

Requirement of hearing and opportunity before disposal of appeal - de novo disposal on remand - Remedial direction as to the course to be followed after setting aside the CIT(A)'s order. - HELD THAT: - Having set aside the impugned order, the Tribunal directed that the matter be remitted to the CIT(A) for fresh adjudication. The CIT(A) must provide the assessee a reasonable opportunity of hearing and, in accordance with section 250(6), pass a de novo order in writing, stating the points for determination, decisions thereon and reasons. The remand was for fresh consideration and disposal in accordance with law rather than for mere formalities.

Matter remitted to the CIT(A) to decide afresh after giving reasonable opportunity and complying with the requirements of section 250(6).

Final Conclusion: The CIT(A)'s appellate order dated 14/12/2016 dismissing the appeal in limine is set aside; the appeal is remitted to the CIT(A) for de novo disposal after affording the assessee a reasonable opportunity of hearing and ensuring compliance with section 250(6) of the Income tax Act.

Customs valuation and re-determination of transaction value - market survey-based valuation of imported goods - acceptance of re-determined value by customs house agent and payment of differential duty - requirement of a speaking order under Section 17(5) of the Customs Act, 1962

Customs valuation and re-determination of transaction value - market survey-based valuation of imported goods - Validity of enhancement of value of imported alloy wheels on the basis of a market survey and related orders in respect of identical/similar goods. - HELD THAT: - The Tribunal upheld the re-determination of value because the assessing authority's action was founded on an independent market survey conducted in the presence of the proprietor of the appellant and on an order in the case of identical goods dated May 05, 2017, which had been the subject-matter of a separate appeal and dismissed. The proprietor had been shown the basis of calculation during the market survey, had accepted the market-ascertained value in a recorded statement and undertaken to pay the differential duty with interest. The Tribunal therefore treated the valuation determination, as applied to these Bills of Entry, as supported by contemporaneous investigation and accepted methodology, and concluded that reconsideration of the same submissions was unnecessary in the present appeals. [Paras 4, 6]

The enhancement of value based on the market survey and the related re-determination was sustained and the appellant's challenge on merits was rejected.

Acceptance of re-determined value by customs house agent and payment of differential duty - requirement of a speaking order under Section 17(5) of the Customs Act, 1962 - Whether a speaking order under Section 17(5) was required where the customs house agent accepted the re-determined value on hardcopies and the appellant paid the differential duty. - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that no speaking order was necessary after the value loading had been accepted in writing through the customs house agent and the differential duty was duly discharged by the appellant with knowledge that the value had been re-determined. The Commissioner (Appeals) had relied on the Department's communication which recorded that the CHA accepted the re-determined value and on the existence of the prior order and market survey; since the appellant sought a speaking order only after having accepted the value and cleared the goods, the request did not warrant upsetting the assessment. The Tribunal therefore found no merit in the contention that absence of a speaking order rendered the enhancement invalid. [Paras 3, 5, 7]

No requirement to set aside the value enhancement for want of a speaking order where the re-determined value was accepted by the CHA and duty paid; the appeals were dismissed.

Final Conclusion: The appeals were dismissed: the re-determined market-value-based enhancement was sustained and no speaking order was necessary after acceptance of the enhanced value by the customs house agent and payment of differential duty.

Classification of CKD/SKD kits as complete article - Rule 2(a) of the General Rules for the Interpretation (GRI) - classification of parts under Section Note 2(a) of Section XVI - suitability for use / principal use test - classification of Heat Exchange Units (HEX) and their parts

Classification of CKD/SKD kits as complete article - Rule 2(a) of the General Rules for the Interpretation (GRI) - Whether imported CKD/SKD kits of air-conditioners (except capacitors) presented together at assessment acquire the essential characteristics of an air-conditioner and are classifiable as air-conditioners under Heading 8415 (specific sub-headings 8415 10 / 8415 81 / 8415 82 / 8415 83 as applicable). - HELD THAT: - The Authority applied Rule 2(a) of the GRI which treats an article presented unassembled or disassembled as the complete article provided the incomplete article, as presented, has the essential character of the finished article. Taking the applicant's description of the kits and the submissions of the Customs Commissioner, the Authority accepted that the kits (even without capacitors) acquire the primary characteristics of an air-conditioner. Although technical literature may indicate capacitors perform important functions, the Authority accepted that the described CKD/SKD kits possess the essential characteristics required under Rule 2(a). Consequently, when such kits are presented together for assessment under a common invoice and bill of entry they must be classified as the air-conditioning machine itself and not as separate parts, to be assigned to Heading 8415 and the appropriate sub-heading (8415 10 or 8415 81 or 8415 82 or 8415 83) according to configuration and model type. [Paras 7]

Imported CKD/SKD air-conditioner kits described in the application, when presented together for assessment, are classifiable as air-conditioners under Heading 8415 and the appropriate sub-heading (8415 10 / 8415 81 / 8415 82 / 8415 83) by application of Rule 2(a) GRI.

Classification of parts under Section Note 2(a) of Section XVI - classification of Heat Exchange Units (HEX) and their parts - Rule 2(a) of the General Rules for the Interpretation (GRI) - Whether IDU/ODU or Heat Exchange Units (HEX), and the parts of HEX, imported in CKD/SKD condition and presented separately, are classifiable as parts of air-conditioners under sub-heading 8415 90 00 or require independent classification (including as Heading 8419 50) when not presented as part of an air-conditioner kit. - HELD THAT: - The Authority recognised that IDU/ODU and HEX are components/parts of air-conditioners and, when presented separately rather than as part of a complete kit, they merit classification as parts of air-conditioners under sub-heading 8415 90 00. Conversely, if HEX units are presented together within a CKD/SKD kit that otherwise amounts to an air-conditioner, Rule 2(a) requires classification of the kit (including HEX) as the air-conditioning machine under Heading 8415. The Authority also noted that HEX, when imported as standalone finished units not presented as parts of an air-conditioner, are independently classifiable under sub-heading 8419 50; and parts of HEX, when presented separately (not as part of an air-conditioner kit), are to be treated as parts and classified under sub-heading 8415 90 in accordance with Rule 2(a) and the Section Notes. [Paras 7]

IDU/ODU and HEX imported and presented separately are classifiable as parts of air-conditioners under sub-heading 8415 90 00; if HEX are presented within a CKD/SKD kit that qualifies as an air-conditioner the entire kit (including HEX) is classifiable under Heading 8415; standalone HEX may be classifiable under 8419 50 and parts of HEX presented separately are classifiable under 8415 90 00.

Final Conclusion: The Authority ruled that the applicant's described imports of air-conditioner CKD/SKD kits (except capacitors), when presented together for assessment under a common invoice and bill of entry, are classifiable as air-conditioning machines under Heading 8415 (appropriate sub-heading depending on model). Where IDU/ODU or HEX or parts of HEX are imported and presented separately (not as part of a kit that qualifies as a complete machine), they are classifiable as parts of air-conditioners under sub-heading 8415 90 00, whereas standalone HEX may be classifiable under sub-heading 8419 50.

Classification of goods by reference to the terms of the headings and relevant section/chapter notes (GRI-1) - Applicability of General Rules of Interpretation (GRIs 2-6) where GRI-1 is inconclusive - Electrical apparatus for control or distribution of electricity (Heading 8537) - Electrical transformers and static converters (Heading 8504) and the concept of conversion - Residual classification under electrical machines and apparatus having individual functions (Heading 8543) - HSN explanatory notes on 'individual functions' and assemblies of apparatus of Headings 8535/8536

Electrical apparatus for control or distribution of electricity (Heading 8537) - Electrical transformers and static converters (Heading 8504) and the concept of conversion - Residual classification under electrical machines and apparatus having individual functions (Heading 8543) - Classification of goods by reference to the terms of the headings and relevant section/chapter notes (GRI-1) - Classification of the 'Indra Smart Pro' EVSE imported device under the Customs Tariff - HELD THAT: - The device supplies AC power from the grid or a converted solar source to the on-board charger of an electric vehicle and does not convert AC to DC for supply to the vehicle. It incorporates relays/contactors, surge protection (fuse elements), plugs/sockets and additional circuitry and programmable 'smart' features (app control, scheduling, OTA updates). GRI-1 requires classification according to the headings and relevant notes. Heading 8504 describes transformers and static converters that adapt or convert electrical energy; the Indra Smart Pro does not perform such conversion and therefore does not fall within Heading 8504. Heading 8543 is a residual entry for electrical apparatus having individual functions not specified elsewhere; however, the HSN explanatory notes require that a residual heading be applied only if no other heading more specifically covers the product by function, description or use. The functions of the Indra Smart Pro-control and distribution of electricity together with protective features and programmable control-fall squarely within the scope of Heading 8537, which covers assemblies (boards, panels, consoles, etc.) equipped with two or more apparatus of Headings 8535 or 8536 for electric control or distribution, including programmable and meter/control features. The device's constituent apparatus (switches, fuses, relays, contactors, surge suppressor and control electronics) and its smart/programmed control functionalities align with the explanatory notes to Heading 8537. Consequently, the specific heading 8537 displaces the residual Heading 8543. [Paras 6, 7]

The 'Indra Smart Pro' merits classification under sub-heading 8537 10 00 of the First Schedule to the Customs Tariff Act, 1975.

Final Conclusion: The Authority ruled that the Indra Smart Pro EVSE is classifiable under sub-heading 8537 10 00 (boards/panels for electric control or distribution for voltage not exceeding 1,000 V) and is not classifiable under Heading 8504 or the residual Heading 8543.

Power of the Registrar to remove name of company from register of companies - Section 10A - commencement of business and declaration - Service of notice in Form STK-1 by speed post - Presumption of service on dispatch by registered/speed post - Publication requirement under Rule 7 and Form STK-5/STK-7 - Appeal to the Tribunal under Section 252 and availability of alternative remedy - Restoration of company on compliance/penalty and exercise of discretionary relief

Service of notice in Form STK-1 by speed post - Presumption of service on dispatch by registered/speed post - Power of the Registrar to remove name of company from register of companies - Validity of striking off in light of notices issued under Section 248 and the Rules, including whether service by speed post complied with Rule 3(2) and sufficed for the ROC to proceed - HELD THAT: - The Court found that notices in Form STK-1 were issued by the Registrar and dispatched by speed post in accordance with Rule 3(2) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. While notices could also be sent by email as a practice, service by speed post conforms to the statutory mode and attracts the presumption of service. The onus could not be shifted to the Registrar merely because the petitioner contended that consignments were not received. The Registrar had also followed the publication requirements (STK-5 and STK-7) prior to striking off under Section 248. Accordingly, the striking off cannot be impugned on the ground that notices were not sent by email when dispatch by speed post in terms of the Rules was effected. [Paras 16]

Notified procedure for striking off satisfied; dispatch by speed post in Form STK-1 complied with the Rules and sufficed for the Registrar to proceed under Section 248.

Section 10A - commencement of business and declaration - Power of the Registrar to remove name of company from register of companies - Appeal to the Tribunal under Section 252 and availability of alternative remedy - Maintainability of writ despite existence of statutory remedy before the NCLT under Section 252 and whether Court should relegated petitioners to NCLT - HELD THAT: - The statutory scheme envisages restoration and remedies before the Tribunal under Section 252, including condonation of delay and payment of penalties under Section 10A. However, the Court found that in the peculiar facts - where the petitions concerned running companies whose bank accounts had been frozen and whose business suffered prejudice - it was appropriate in the exercise of discretionary writ jurisdiction not to relegated the petitioners to the alternative remedy. The Court observed that striking off is not permanent and is subject to restoration by the Tribunal, but relegation at that stage would cause further delay and prejudice. [Paras 22, 23]

Writ entertained notwithstanding availability of remedy under Section 252, by exercising discretion due to bona fide status of petitioners and imminent/prejudicial consequences of striking off.

Restoration of company on compliance/penalty and exercise of discretionary relief - Section 10A - commencement of business and declaration - Relief to be granted and conditions for provisional restoration of companies and lifting of freezing orders - HELD THAT: - The Court directed provisional and conditional relief: each company was ordered to make a pro tem deposit as a penalty under Section 10A(2) within the stipulated period, to file representations under Section 248, and upon such deposit the ROC was directed to restore the companies' names and remove any freezing orders to permit normal bank operations. The ROC was to consider the representations and impose any penalties as per law; communications by the ROC were directed to be made both by email and speed post. The Court left open the statutory remedies before the Tribunal. [Paras 24]

Conditional restoration directed on specified compliance (deposit and representation); freezing orders to be removed upon deposit; ROC to consider representations and communicate orders by email and speed post; NCLT remedies preserved.

Final Conclusion: The Court held that the Registrar complied with the statutory procedure for striking off by dispatching Form STK-1 by speed post and publishing STK-5/STK-7; nevertheless, exercising discretionary writ jurisdiction on the facts, the Court granted conditional restoration of the companies on specified deposits and representations, directed lifting of freezing orders upon compliance, required ROC to consider representations and communicate by email and speed post, and left open remedies before the Tribunal.

Debit freeze - Section 17(1A) of the Prevention of Money-Laundering Act, 2002 - retention of assets for adjudication under Section 8 of PMLA - interim bank guarantee to secure interests during litigation - appellate remedy under Section 26 of PMLA - continuation of interim directions pending disposal of appeal - maintainability of appeal and limitation

Debit freeze - Section 17(1A) of the Prevention of Money-Laundering Act, 2002 - interim bank guarantee to secure interests during litigation - continuation of interim directions pending disposal of appeal - Writ petitions challenging the debit freeze orders were disposed of by relegating petitioners to pursue appeals before the Appellate Tribunal and the interim arrangements directed by this Court were ordered to continue until the Tribunal disposes of the interim applications or the appeals. - HELD THAT: - The Court noted that the original debit freeze orders had been subsumed by the Adjudicating Authority's order dated 21st December, 2022 and that the petitioners had availed or were in the process of availing their statutory appellate remedy under Section 26 of the PMLA. Given the availability of the appellate forum and the pendency of appeals, the High Court directed that the petitioners pursue interim applications and appeals before the Appellate Tribunal, and recorded that the interim arrangements previously ordered by the High Court (including maintenance of specified balances and provision of a bank guarantee) shall continue until the Tribunal decides the interim applications or finally disposes of the appeals. The Court also directed expeditious listing and adjudication by the Tribunal within specified short timelines for interim relief and final hearing. [Paras 10, 11, 12]

Petitions disposed of by relegating parties to the Appellate Tribunal; interim High Court directions to continue until Tribunal decides the interim applications or the appeals.

Appellate remedy under Section 26 of PMLA - maintainability of appeal and limitation - Maintainability of the appeal by Grand Prospect International Communication Pvt. Ltd. on account of delay was not decided by this Court and was directed to be raised and adjudicated by the Appellate Tribunal. - HELD THAT: - Counsel for the Enforcement Directorate raised that GPICPL had not filed the appeal and that limitation had elapsed, potentially affecting maintainability. The High Court declined to adjudicate the limitation/maintainability question itself and explicitly left the issue to be argued and decided by the Appellate Tribunal in the appeal proceedings. [Paras 13]

Limitation/maintainability objection to be raised and decided by the Appellate Tribunal; Court did not decide the point.

Final Conclusion: The writ petitions challenging the debit freeze orders were disposed of by directing the petitioners to pursue interim applications and appeals before the Appellate Tribunal under the PMLA; the interim High Court directions (including maintenance of specified balances and bank guarantee arrangements) are to continue until the Tribunal disposes of the interim applications or the appeals; the question of maintainability on limitation grounds (as to one petitioner) is left to the Tribunal to decide.

Anticipatory bail under Section 45(1) of the Prevention of Money Laundering Act - Revival of the twin conditions in Section 45(1) by the Finance Act, 2018 amendment - Presumption of constitutionality of legislative amendment - Application of proviso for accused who are sick, infirm or accused of money laundering of less than one crore rupees - Grant of anticipatory bail in cases involving disproportionate assets less than one crore

Revival of the twin conditions in Section 45(1) by the Finance Act, 2018 amendment - Presumption of constitutionality of legislative amendment - Whether the twin conditions in Section 45(1) of the PMLA, struck down by the Supreme Court in Nikesh Tarachand Shah, stand revived by the 2018 amendment - HELD THAT: - The Court accepted the reasoning of the Division Bench of the Bombay High Court in Ajay Kumar that the Legislature has competence to amend Section 45 and the amended provision has not been struck down. Relying on the effect of the Finance Act, 2018 amendment and the principle that a statute must be given effect unless struck down, the Court held that the amendment altered the complexion of Section 45 and, until the amendment is judicially invalidated by the Apex Court, the twin conditions must be treated as revived and operative. The Court noted that challenges to the constitutional validity of the amendment are not before it and that the presumption of constitutionality applies to the amendment in force. The Court therefore declined to treat the pre amendment twin condition ruling as reviving its prior effect in light of the legislative change. [Paras 26, 27]

The twin conditions in Section 45(1) of the PMLA, after the 2018 amendment, stand revived and operate until the Hon'ble Supreme Court decides otherwise.

Anticipatory bail under Section 45(1) of the Prevention of Money Laundering Act - Application of proviso for accused who are sick, infirm or accused of money laundering of less than one crore rupees - Grant of anticipatory bail in cases involving disproportionate assets less than one crore - Whether the petitioners should be granted anticipatory bail in the facts of these cases - HELD THAT: - The Court applied the amended Section 45 and its proviso dealing with persons who are under sixteen, women, sick or infirm, or accused of money laundering of less than one crore rupees. Having found that the assessed disproportionate assets in the case are less than one crore and on the material placed regarding serious infirmity/ill health (brain haemorrhage and surgery in respect of the father; epilepsy for the son), the Court exercised discretion to grant anticipatory bail. The Court imposed conditions customary under Section 438(2) CrPC together with specific conditions: furnishing bail bonds with sureties, a family member as one bailor with proof of bona fides, regular attendance on each trial date (failure for two consecutive dates to invite cancellation), prohibition on tampering with witnesses or evidence, and surrender of passports, if any. The order prescribes surrender or appearance before the trial court within four weeks and framing of bonds to the satisfaction of the Special Judge (PMLA), Patna. [Paras 30, 31, 32, 33, 34]

Anticipatory bail granted to both petitioners on the stated conditions and subject to compliance with the terms specified in the order.

Final Conclusion: The Court held that the 2018 amendment to Section 45(1) of the PMLA operates to revive the twin conditions until the Supreme Court rules otherwise, and on the facts (disproportionate assets below one crore and documented infirmity) granted anticipatory bail to the two petitioners subject to specified conditions.

Regular bail - parity in grant of bail - conditions for grant of bail including surety, fixed deposit and lien - mitigation of risk of tampering, intimidation and fleeing by imposing conditions - proportionality of bail conditions - discretionary exercise of bail jurisdiction

Regular bail - parity in grant of bail - discretionary exercise of bail jurisdiction - Petitioner entitled to regular bail on parity with co-accused who was earlier granted bail. - HELD THAT: - The Coordinate Bench had earlier granted regular bail to the main accused Vikram Kumar Seth and that order was not challenged before the Supreme Court. Having regard to parity and the fact that each accused's case stands on a different footing, the petitioner is squarely covered by the earlier grant of bail to the co-accused. The Court, without expressing any opinion on merits, found that parity coupled with the overall facts and principles governing bail warrants release subject to appropriate conditions. [Paras 5]

Bail granted to the petitioner on parity with the co-accused who earlier obtained regular bail.

Conditions for grant of bail including surety, fixed deposit and lien - proportionality of bail conditions - Bail to be released subject to specified conditions including personal bond, choice of surety or fixed deposit with lien, attendance bond and disclosure of contact details. - HELD THAT: - The Court imposed specified and proportionate conditions to secure attendance and protect investigation: a personal bond, choice between furnishing a surety or depositing a fixed amount with automatic renewal and lien in favour of the Chief Judicial Magistrate, obligation to disclose permanent address and contact details on the bond, and an attendance bond. The Court recognized the accused's option to choose between modes (surety or deposit) and permitted substitution between modes, and allowed applications for reduction or modification of conditions where they impose genuine hardship or infringe rights. [Paras 15, 16, 17, 20]

Petitioner released on bail subject to the court-specified conditions and with liberty to seek modification where conditions are onerous or violative of rights.

Mitigation of risk of tampering, intimidation and fleeing by imposing conditions - discretionary exercise of bail jurisdiction - Risks of tampering with evidence, intimidating witnesses or fleeing can be addressed by stringent bail conditions rather than denial of bail. - HELD THAT: - Relying on settled principles, the Court held that potential risks posed by the accused-such as influencing investigation, tampering with evidence, intimidating witnesses, or absconding-can be adequately mitigated by imposing elaborate and restrictive conditions. The Court reiterated that grant or refusal of bail is discretionary and must balance personal liberty with integrity of investigation and trial; conditions should not be so strict as to be incapable of compliance. [Paras 11, 12, 16]

Potential investigative risks addressed through conditional bail rather than outright denial.

Discretionary exercise of bail jurisdiction - proportionality of bail conditions - Court's power preserved for further investigation and for cancellation of bail on breach or subsequent serious offence; bail deemed to extend to newly added sections of no greater sentence. - HELD THAT: - The order expressly preserves the rights of investigating agencies to continue investigation and to seek cancellation of bail if the accused commits a subsequent offence punishable with imprisonment exceeding seven years or violates bail conditions. The Court also provided that if new sections are added to the FIR whose maximum sentence is not greater than the sections already specified, the bail shall be deemed to extend to such sections; if greater, the accused shall be given seven days' notice to avail remedies. This preserves prosecutorial and judicial safeguards while granting bail. [Paras 17, 21, 22]

Bail is subject to continued investigatory rights and is liable to cancellation or modification in specified circumstances; limited extension to newly added sections as stated.

Final Conclusion: Petition allowed: petitioner released on regular bail on parity with the co-accused, subject to specified and proportionate conditions (personal bond, choice of surety or fixed deposit with lien, disclosure and attendance obligations), with liberty to seek modification and with preservation of investigative and cancellation rights.

Limitation for filing appeal - condonation of delay - sufficient cause - statutory proviso restricting extension beyond prescribed period - appeal barred if filed beyond extended period

Condonation of delay - sufficient cause - statutory proviso restricting extension beyond prescribed period - appeal barred if filed beyond extended period - Whether the Commissioner (Appeals) had power to condone the delay in filing the appeal filed after the one month extended period provided by section 85(3A) of the Finance Act, 1994, and whether the appeal filed on 20.06.2014 was entertainable. - HELD THAT: - Section 85(3A) prescribes that an appeal must be presented within two months from receipt of the order and contains a proviso permitting the Commissioner (Appeals) to allow presentation within a further period of one month if satisfied that the appellant was prevented by sufficient cause. The statutory language confines the appellate authority's power to condone delay to that one month extension only. The Supreme Court's decision in Singh Enterprises, construing a provision pari materia, holds that the appellate authority's power to condone is limited to the period expressly provided by the statute and that Section 5 of the Limitation Act cannot be invoked to extend that period beyond the statutory proviso. In the present case the appellant received the adjudicating authority's order on 06.09.2012 but filed the appeal on 20.06.2014, which is well beyond the initial two months and the one month extension; accordingly the delay was not condonable under the statutory proviso and the Commissioner (Appeals) rightly dismissed the appeal as barred by limitation. The Tribunal accordingly declined to entertain the merits of the departmental demand because the appeal was time barred. [Paras 7, 8, 10, 11]

The delay in filing the appeal was beyond the one month extension permitted by section 85(3A) and therefore not condonable; the appeal is dismissed as time barred.

Final Conclusion: The Tribunal affirmed the Commissioner (Appeals)'s order dismissing the appeal as barred by limitation because it was filed after the statutory two month period and beyond the one month extension permitted by the proviso to section 85(3A); the merits were not adjudicated.

Refund of service tax paid by mistake - construction of complex versus single residential unit - definition of residential complex - exemption for construction of single residential unit otherwise than as part of a residential complex - unjust enrichment - limitation on refund where tax was paid by mistake (section 11B not applicable)

Construction of complex versus single residential unit - definition of residential complex - exemption for construction of single residential unit otherwise than as part of a residential complex - Whether the constructions carried out by the appellant fell within 'construction of complex' and were therefore taxable for the periods in dispute - HELD THAT: - The Tribunal examined the statutory definitions and prior decisions and held that a 'residential complex' means a building or buildings having more than twelve residential units; independent residential units or buildings each having not more than twelve units do not fall within that definition. The appellant produced certification that the houses were individual/independent residential units with separate approaches and utilities and the buildings in question had fewer than twelve residential units. Reliance was placed on earlier Division Bench precedents which interpreted the same statutory definitions to exclude individual residential units from the levy. Consequently, the constructions in the periods pleaded were not construction of a 'residential complex' and were not leviable service tax under the provision as it stood prior to and with effect from July 1, 2012; the Exemption Notification for single residential units otherwise than as part of a residential complex therefore applied. [Paras 18, 19, 20, 25, 28]

The Tribunal allowed the appeals on the ground that the constructions were of single/independent residential units and did not amount to 'construction of complex'; the appellant was entitled to the benefit of the exemption.

Refund of service tax paid by mistake - unjust enrichment - Whether the refund claimed by the appellant was barred by the principle of unjust enrichment - HELD THAT: - The Commissioner (Appeals) found the work orders to be inclusive of service tax and treated the claims as hit by unjust enrichment. The Tribunal disagreed. It noted that the contracts expressly allocated the tax burden to the contractor and that the appellant had borne the incidence of tax; further, the Housing Board had deducted its share under reverse charge. Reliance on authority that a person who has borne the incidence of tax can claim refund was accepted. On these facts the principle of unjust enrichment did not preclude refund. [Paras 7, 8, 27]

The Tribunal held that the refund claims were not barred by unjust enrichment and allowed the appellant to the extent so pleaded.

Refund of service tax paid by mistake - limitation on refund where tax was paid by mistake (section 11B not applicable) - Whether the refund in respect of the period affected by a limitation plea (Service Tax Appeal No. 50524 of 2017) was barred - HELD THAT: - The Commissioner (Appeals) rejected one refund on limitation grounds. The Tribunal referred to a prior decision holding that the limitation under section 11B of the Excise Act does not apply where an amount was paid under a mistaken belief and was not in fact leviable as tax/duty. Applying that principle, the Tribunal found that the payment being a mistake (in respect of non-leviable construction), limitation under section 11B did not bar the refund claim. [Paras 4, 29, 30]

The Tribunal held that the limitation bar did not preclude refund of amounts paid by mistake and allowed the appeal on that ground as well.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order dated November 28, 2016 and allowed all four Service Tax Appeals: the constructions were held not to be 'construction of complex' within the statutory definition, the refunds were not barred by unjust enrichment, and limitation under section 11B did not apply to payments made by mistake.

Definition of "works contract" under section 65(105)(zzzza) - exclusion from levy of service tax for construction of pipeline or conduit primarily not for commerce or industry - construction of pipelines/conduits for water supply or sewerage for Government is non-commercial/non-industrial - precedential effect of the Tribunal Larger Bench decision in Lanco Infratech Ltd. on classification of pipeline works

Definition of "works contract" under section 65(105)(zzzza) - exclusion from levy of service tax for construction of pipeline or conduit primarily not for commerce or industry - construction of pipelines/conduits for water supply or sewerage for Government is non-commercial/non-industrial - Laying of pipeline/conduit for sewerage/water supply purposes executed for the Government does not fall within the definition of 'works contract' and is not exigible to service tax under section 65(105)(zzzza). - HELD THAT: - The Tribunal applied the Explanation (ii) to section 65(105)(zzzza) which excludes from the definition of works contract construction of a pipeline or conduit "primarily for the purposes of commerce or industry." Relying on the Larger Bench decision in Lanco Infratech Ltd., the Tribunal held that construction of pipelines/conduits for water supply or sewerage when carried out for Government/Government undertakings is for non-commercial, non-industrial purposes and therefore falls within the exclusion in clause (b) of Explanation (ii). The Division Bench decision in Angraj Civil Projects Pvt. Ltd., following Lanco, was also noted. Applying these precedents and the statutory wording, the Tribunal concluded that the appellant's activity of laying pipeline for sewerage purposes is outside the ambit of 'works contract' exigible to service tax, and consequently the Commissioner (Appeals) order confirming service tax liability could not be sustained. [Paras 9, 11, 13]

Impugned order upholding service tax on the appellant's pipeline works set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that laying of pipeline/conduit for water supply or sewerage for the Government is excluded from the definition of 'works contract' under section 65(105)(zzzza) and is not liable to service tax; the Commissioner (Appeals) order is set aside.

Commercial or industrial construction service - works contract service - sub-lease versus sale - penalty for service tax - remand for fresh adjudication

Commercial or industrial construction service - sub-lease versus sale - remand for fresh adjudication - Whether the demand confirmed under "commercial or industrial construction" service could be sustained in view of the appellant's contention that only sub-leases (and not sales) were executed - HELD THAT: - The Tribunal found that the specific contentions and supporting documents now relied upon by the appellant (including lease and sub-lease arrangements) were not examined by the Commissioner in the first instance. Because these grounds and documents were not before the Commissioner, the Tribunal declined to adjudicate the controversy itself and instead remitted the matter to the Commissioner for fresh consideration. The appellant was granted liberty to place all documents allowed into the appeal before the Commissioner and to urge the additional grounds; the Commissioner is directed to afford an opportunity of hearing and to decide the issue in accordance with law without being influenced by observations in the Tribunal's order. [Paras 10]

Remitted to the Commissioner for fresh adjudication on the question whether the transactions fall within "commercial or industrial construction" service (having regard to the contention of sub-leases and the documents now filed).

Works contract service - penalty for service tax - remand for fresh adjudication - Whether, alternatively, the services (if any) rendered fall under "works contract" and whether penalty should be imposed - HELD THAT: - The Tribunal recorded the appellant's alternative plea that, if any service is held to have been provided, it would fall within "works contract" and not under "commercial or industrial construction", and that the appellant contests imposition of penalty. These contentions were not examined by the Commissioner earlier. In view of the Tribunal's allowance of additional grounds and documents, it remitted the alternative classification issue and the question of penalty to the Commissioner for fresh decision after giving the appellant an opportunity to be heard. The Commissioner is to decide both classification and penalty in accordance with law, uninfluenced by the Tribunal's observations. [Paras 10, 11]

Remitted to the Commissioner for fresh consideration of the alternative plea of "works contract" classification and of the liability to penalty, with liberty to the appellant to raise these grounds and place documents before the Commissioner.

Final Conclusion: The appeal is disposed of by remitting the disputed classification (commercial/industrial construction v. works contract) and the question of penalty to the Commissioner for fresh adjudication after granting the appellant liberty to place the additional documents and grounds before the Commissioner and after affording an opportunity of hearing; the Commissioner shall decide the matter in accordance with law without being influenced by the Tribunal's observations.

Cenvat credit of Education Cess and Secondary and Higher Education Cess - Transitional input tax credit under Section 140 of the CGST Act and effect of Explanations 1-3 - Exclusion of cesses from 'eligible duties and taxes' by Explanation 3 to Section 140 - Refund of amounts 'eventually accruing' under Section 142(3) of the CGST Act and requirement to comply with existing law (Section 11B of the Central Excise Act) - Scope of Rule 5 of the CENVAT Credit Rules, 2004 - refund restricted to cases connected with export where adjustment is not possible - Concept of a 'dead claim' where levy is omitted and limitation/revival principles

Cenvat credit of Education Cess and Secondary and Higher Education Cess - Scope of Rule 3 of the CENVAT Credit Rules, 2004 - Whether Education Cess (EC) and Secondary and Higher Education Cess (SHEC) were admissible as Cenvat credit and the permissible utilisation of such credit. - HELD THAT: - The Tribunal found that EC and SHEC were expressly made Cenvatable by Rule 3(1)(vi) and (via) of the CENVAT Credit Rules, 2004. However, the Rules themselves (notably sub-clause (vii) of Rule 3) restricted utilisation of such CENVAT credit so taken: EC and SHEC credit could be utilised only towards payment of the respective cesses on output and not against normal excise duty or service tax. Thus, while EC and SHEC qualified as Cenvat credit under the statutory scheme, their use was confined to payment of the specific cesses and cross-utilisation against other duties was not permitted, a position not disputed on the record. [Paras 10, 11]

EC and SHEC were cenvatable but their utilisation was restricted to payment of the respective cesses and not for cross-utilisation against normal excise or service tax liability.

Transitional input tax credit under Section 140 of the CGST Act and effect of Explanations 1-3 - Exclusion of cesses from 'eligible duties and taxes' by Explanation 3 to Section 140 - Concept of a 'dead claim' - Whether unutilized EC and SHEC credit could be transitioned to and utilized in the GST regime under Section 140 of the CGST Act, 2017. - HELD THAT: - The Tribunal examined Section 140 and its three Explanations. Explanation 1 confines 'eligible duties' to certain specified duties (seven categories) and Explanation 2 similarly limits the scope for input services; EC and SHEC are not among the specified duties. Explanation 3, inserted in negative terms, excludes any cesses not specified in Explanations 1 and 2 from being 'eligible duties and taxes'. The Tribunal held that these provisions, read harmoniously, demonstrate legislative intent to exclude the EC and SHEC from transition to the GST electronic credit ledger. Further, because the levies of EC and SHEC were omitted by the Finance Act, 2015, any unutilized credit became a 'dead claim' as of that time and could not be revived or carried forward for utilization under CGST merely by making entries in TRAN-1 or the electronic ledger. [Paras 19, 21, 22, 23, 24]

Unutilized EC and SHEC credit could not be transitioned or utilized under Section 140 of the CGST Act; Explanation 3 excludes such cesses and the credits became dead claims when the levies were omitted.

Refund of amounts 'eventually accruing' under Section 142(3) of the CGST Act and requirement to comply with existing law (Section 11B of the Central Excise Act) - Scope of Rule 5 of the CENVAT Credit Rules, 2004 - refund restricted to export-linked adjustments - Whether the appellant could obtain a cash refund of the unutilized EC and SHEC under the transitional provision Section 142(3) of the CGST Act or under existing refund provisions (Section 11B CEA or Rule 5 CCR, 2004). - HELD THAT: - The Tribunal construed Section 142(3) to mean that any refund claims in respect of amounts arising under the existing law must be disposed of in accordance with that existing law, notably Section 11B(2) of the Central Excise Act. Section 11B(2) permits payment in cash only in specified circumstances (e.g., rebate on export, unspent advance deposits, refund of credit relatable to inputs used in accordance with rules, etc.), none of which applied to the appellant's case. Separately, Rule 5 CCR, 2004 was interpreted as allowing refund of CENVAT credit only in the context of inputs used in goods or services exported, and where adjustment is not possible; it does not provide for refund simply because the credit could not otherwise be utilized domestically. Relying on these provisions and precedent, the Tribunal concluded there was no statutory basis to allow a cash refund of the EC and SHEC credit claimed by the appellant. [Paras 13, 14, 15, 25]

Refund under Section 142(3) is subject to conditions of existing law; neither Section 11B(2) nor Rule 5 CCR, 2004 authorized cash refund of the unutilized EC and SHEC in the facts of this case, so the refund claim fails.

Final Conclusion: The Tribunal dismissed the appeal. It held that although EC and SHEC were cenvatable, their utilisation was restricted to payment of the respective cesses; Explanation 3 to Section 140 excludes such cesses from being transitioned to GST and the credits became dead claims when the levies were omitted; and Section 142(3) does not create an independent right to cash refund since any refund must meet the conditions of existing law (Section 11B and Rule 5 CCR, 2004), which do not permit the claimed refund in the present circumstances.

Interest on delayed refund of amount deposited under Section 35F - Pre-deposit treated as revenue deposit - Section 35FF entitlement to interest from date of payment - Section 11B/11BB not applicable to deposits during investigation - Appropriate rate of interest at 12% per annum on refunded pre-deposit

Pre-deposit treated as revenue deposit - Section 35FF entitlement to interest from date of payment - The amounts deposited by the appellant (Rs.10,00,000 on the date of search and Rs.40,00,000 pursuant to Tribunal directions) are pre-deposits/revenue deposits and the appellant is entitled to interest on refund from the respective dates of deposit under Section 35FF. - HELD THAT: - The Tribunal held that the Rs.40,00,000 deposited pursuant to its order dated 13 May/12 August 2011 was a pre-deposit under section 35F, as reflected in the Tribunal's order (paragraph 7). Section 35FF mandates payment of interest on amounts deposited under section 35F from the date of payment until the date of refund. Applying settled precedents treating deposits made during investigation or on interim directions as revenue deposits (including decisions cited by the Tribunal), the amount was not an amount of duty and therefore refund of the deposit carries interest from the date of respective payments. The adjudicating authority's conclusion that the amount was duty and restriction of interest only from the date of filing of appeal was held to be contrary to law and prior decisions. [Paras 7, 8, 11]

The deposited sums are pre-deposits/revenue deposits and interest on the refunded amount is payable from the dates of their respective deposit.

Appropriate rate of interest at 12% per annum on refunded pre-deposit - Section 11B/11BB not applicable to deposits during investigation - Interest on the refunded pre-deposits is to be awarded at the rate of 12% per annum until sanction; provisions under Section 11B/11BB are not the applicable source for interest on such deposits. - HELD THAT: - The Tribunal observed that interest under Section 35FF is to be paid on pre-deposits and, having regard to precedents and varying notified rates under related provisions, deemed 12% per annum appropriate (paragraphs 9-11). It further held that Section 11B/11BB could not be invoked for deposits made during investigation since such deposits are revenue/pre-deposits and not duty, and the Commissioner (Appeals) erred in restricting interest to the date of filing of the appeal. [Paras 9, 10, 12]

Interest on the refunded pre-deposits granted at 12% per annum until payment; Section 11B/11BB not applicable to these deposits.

Final Conclusion: The appeal is allowed; the order under challenge is set aside and the appellant is entitled to refund of the deposited amounts with interest at 12% per annum from 30th September, 2008 in respect of the first deposit and from 1st August, 2011 in respect of the pre-deposit, until sanction of refund.

Accrual of interest under Section 38(3)(a)(ii) read with Section 42 - Claim for refund made in the return versus claim in Form DVAT-21 - Applicability of Rule 34(4) where refund arises out of an order or judgment - Power to withhold refund under Section 39 and entitlement to interest on successful appeal - Application of excess refund towards recovery under Section 38(2)

Accrual of interest under Section 38(3)(a)(ii) read with Section 42 - Claim for refund made in the return versus claim in Form DVAT-21 - Whether interest on the refund accrues from two months after filing the return or from two months after filing a fresh claim in Form DVAT-21 where the refund was claimed in the return - HELD THAT: - The Court held that where a refund has been claimed in the return, the timeline in Section 38(3)(a)(ii) governs accrual of interest and Rule 34(1) makes clear that Form DVAT-21 is required only for claims not made in the return. The assessee filed a revised return on 10.07.2015 claiming the refund; accordingly, the right to refund crystallised on expiry of the two month period prescribed by Section 38(3)(a)(ii). Subsequent issuance of a notice under Section 59(2) (dated 11.09.2015) and the default assessment order did not negate the fact that the claim for refund had already accrued under Section 38. The Tribunal correctly proceeded on the basis that interest was payable from the date the entitlement accrued (as determined in this case), and the Tribunal's conclusion that the assessee was entitled to interest for the period ending with receipt of the refund was sustained. [Paras 14, 15, 16, 18, 23]

Interest accrues in accordance with Section 38(3)(a)(ii) from the date the refund claim in the return crystallised and the assessee was not required to file a fresh claim in Form DVAT-21 to trigger interest.

Applicability of Rule 34(4) where refund arises out of an order or judgment - Power to withhold refund under Section 39 and entitlement to interest on successful appeal - Whether Rule 34(4) (requiring DVAT-21 with certified copy of an order) applied where the refund entitlement was embedded in the return and an intervening assessment order was later set aside by the OHA - HELD THAT: - The Court analysed Rule 34(4) and observed it applies specifically where the refund 'is arising out of a judgement of a Court or an order of an authority under the Act' and therefore is not engaged where the refund was originally claimed in the return. The order of the OHA set aside the default assessment which had temporarily obstructed the refund; that order merely removed the impediment and did not create the refund entitlement. Section 39(2) further makes clear that where a refund was withheld but, on appeal or other proceedings, entitlement is established, the dealer is entitled to interest under Section 42(1). Reading Rule 34(4) in consonance with Section 39 and Rule 34(5) leads to the conclusion that filing DVAT-21 was not a precondition to interest where the claim was embedded in the return and later vindicated by setting aside the assessment. [Paras 16, 17, 18, 19, 24]

Rule 34(4) did not apply; the assessee was not required to file Form DVAT-21 because the refund claim was made in the return and the OHA's setting aside of the assessment restored the claim, entitling the assessee to interest under Section 42(1).

Application of excess refund towards recovery under Section 38(2) - Claim for refund made in the return versus claim in Form DVAT-21 - Whether the Tribunal erred in not following its earlier decision in M/s Gupta Traders and whether the Tribunal's conclusion in the present case was correct - HELD THAT: - The Court reviewed the facts of the cited Tribunal precedent and found them distinguishable: in M/s Gupta Traders the assessee had not challenged the adjustment order before the OHA and had not asserted that the refund claim originated in its return; the OHA had also found the return to be false, misleading or deceptive. By contrast, in the present case the refund claim was made in the revised return, the adjustment was subsequently set aside by the OHA, and there was no finding that the return was false. Given these material differences, the Tribunal did not err in reaching a different conclusion; the Tribunal's decision was correct on the facts and law of this case. [Paras 20, 21, 25]

The Tribunal correctly distinguished and did not follow M/s Gupta Traders; its conclusion in favour of the assessee was sustained.

Final Conclusion: The Tribunal's order dated 20.06.2022 is upheld. The assessee is entitled to simple interest at the notified rate of 6% per annum on the refunded sum for the period recognised by the Court (from 11.09.2015 to 14.08.2020). The revenue's appeal is dismissed and the writ petition seeking implementation of the Tribunal's order is allowed; interest is to be quantified on the refunded principal and paid within the time directed by the Court.

Time-barred reassessment under Section 27 - deemed date of assessment under proviso to Section 22(2) - limitation for escaped assessment - separate notices for distinct assessment years

Time-barred reassessment under Section 27 - deemed date of assessment under proviso to Section 22(2) - The demand notice issued for the assessment years 2006-07 upto 2010-11 was barred by limitation and liable to be quashed. - HELD THAT: - The Court accepted the respondent's concession that reassessment for escaped turnover must be made within six years from the date of assessment as prescribed by Section 27(1)(a). For returns of years 2006-07 to 2010-11, the proviso to Section 22(2) deems assessment to have occurred on 30.06.2012 where assessment orders were not passed. In the present case the notice of demand for those years was issued only on 15.02.2019 and the re-assessment order was passed on 31.03.2021, which falls beyond the six-year period calculated from the deemed assessment date. Consequently the impugned demand for assessment years 2006-07 upto 2010-11 is time-barred and was quashed. [Paras 5, 6, 8, 10]

Demand notice dated 12.07.2021 insofar as it pertains to assessment years 2006-07 upto 2010-11 is quashed as barred by limitation.

Limitation for escaped assessment - separate notices for distinct assessment years - The notices relating to assessment years 2011-12 upto 2015-16 were within the six-year limitation period and the challenge to those notices was rejected; the notices are separate and are not a single composite notice. - HELD THAT: - The Court examined the notices relied upon by the petitioner and found that although both notices bear the same date, they are separate documents-one addressing 2006-07 upto 2010-11 and the other addressing 2011-12 upto 2015-16. The respondent submitted, and the Court accepted, that the demand for the later block of years was made on 15.02.2019 which is within six years from the respective dates of assessment as governed by Section 27(1). The petitioner had not challenged the underlying assessment orders for 2011-12 upto 2015-16; accordingly the Court declined to interfere with the demand notice for those years and left the petitioner free to pursue statutory remedies against the assessment orders if aggrieved. [Paras 3, 5, 9, 11]

The contention against the notice dated 12.07.2021 insofar as it relates to assessment years 2011-12 upto 2015-16 is rejected; those demands are not barred by limitation and the notices stand.

Final Conclusion: Writ petition allowed in part: the demand notice dated 12.07.2021 is quashed insofar as it relates to assessment years 2006-07 upto 2010-11 as time-barred; the challenge to the separate notice for assessment years 2011-12 upto 2015-16 is rejected and those notices remain extant, with liberty to the petitioner to challenge the assessment orders by appropriate proceedings.

Liability under Section 138 of the Negotiable Instruments Act - legally enforceable debt - criminal liability of guarantor / vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of statutory notice under Section 138 of the Negotiable Instruments Act - acquittal for lack of legally enforceable debt

Legally enforceable debt - liability under Section 138 of the Negotiable Instruments Act - Whether the accused could be convicted under Section 138 of the Negotiable Instruments Act when the cheque was not issued for a legally enforceable debt. - HELD THAT: - The Court found that although the respondent established initial presumptions regarding the dishonour of the cheque, the petitioner successfully rebutted that presumption by evidence and documentary replies. The petitioner asserted that he acted as an adviser/consultant and denied issuance of the cheque for any legally enforceable debt, produced documentary material including a reply to the statutory notice and other documents, and pointed to findings in separate proceedings which indicated fabricated claims by the respondent and non existence of the alleged third parties. The Court held that where the cheque was issued, if at all, as a guarantor for amounts claimed to be due from third parties and there was no legally enforceable debt against the petitioner himself, the essential requirement for an offence under Section 138 - that the cheque be issued for discharge of a legally enforceable debt - was not satisfied. The Court further observed that both courts below had mechanically convicted the petitioner without adequately appreciating the rebuttal evidence and the absence of a legally enforceable debt against him. [Paras 11, 12, 13, 17]

The cheque was not issued for any legally enforceable debt by the petitioner and conviction under Section 138 could not be sustained.

Criminal liability of guarantor / vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of statutory notice under Section 138 of the Negotiable Instruments Act - Whether the petitioner, alleged to have stood as guarantor for third parties, could be fastened with criminal liability under Section 138 in the absence of notice and prosecution of those third parties and in light of the civil nature of guarantor's liability. - HELD THAT: - The Court noted that the petitioner was alleged to have stood as guarantor for two third parties and that the respondent did not issue the statutory notice to those companies nor make them parties to the criminal proceedings. The Court emphasised that guarantor's liability under contract law is civil in nature and vicarious criminal liability under Section 141 cannot be imposed merely because a civil liability exists. Vicarious liability under Section 141(1) requires that the person be in overall control of the day to day business of the company or firm; mere guarantee or alleged introduction of parties does not suffice to pin criminal liability. In the circumstances, and given the failure to pursue the third parties or issue them the requisite notice under Section 138, the requisites for sustaining criminal prosecution of the petitioner as guarantor were not met. [Paras 15, 16]

The petitioner could not be held criminally liable as a guarantor where the statutory notice to the principal debtors was not issued and where vicarious criminal liability was not established.

Final Conclusion: The revision is allowed; the convictions and sentences imposed by the trial and appellate courts under Section 138 are set aside, the petitioner is acquitted, bail bond (if any) is cancelled and any fine paid is ordered to be refunded.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Probable defence / rebuttable presumption - Dishonour of cheque issued as security attracts Section 138 - Limited revisional jurisdiction of High Court under Section 397 Cr.PC

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Probable defence / rebuttable presumption - Conviction under Section 138 of the Negotiable Instruments Act was valid and is upheld. - HELD THAT: - The courts below found that the cheque was issued by the accused and the signature on the cheque was not disputed, thereby attracting the statutory presumption in favour of the payee under Sections 118 and 139 of the Negotiable Instruments Act. That presumption is rebuttable but requires the accused to raise a probable defence by reference to materials on record or by leading cogent evidence. The accused failed, despite opportunities, to probabilize his defence. The complainant proved service of notice and non-payment after notice, presentation and dishonour of the cheque, and the banks corroborated dishonour for insufficient funds. On this basis the trial and appellate courts correctly concluded that all ingredients of Section 138 were established and there was no successful rebuttal of the presumption. [Paras 6, 7, 9, 13]

Conviction and sentence under Section 138 are sustained; courts below properly appreciated evidence and the statutory presumption was not rebutted.

Dishonour of cheque issued as security attracts Section 138 - Defence that the cheque was issued as security was not proved and does not by itself negate maintainability under Section 138. - HELD THAT: - The court noted that a cheque described as issued 'as security' is not excluded from the operation of Section 138. Whether a cheque is a 'security cheque' depends on pleadings and evidence; if a loan exists and the cheque issued as security is presented on maturity and dishonoured, Section 138 consequences follow. In the present case the accused's assertion that the cheque was given as security remained unprobabilized and the evidence showed an advance of money with the cheque being presented and dishonoured; therefore the defence failed. [Paras 14, 15]

The plea that the cheque was issued as security was not established; dishonour of such cheque attracted liability under Section 138.

Limited revisional jurisdiction of High Court under Section 397 Cr.PC - High Court will not re-appreciate evidence in revision where concurrent findings of fact by trial and appellate courts are not shown to be perverse or to cause gross miscarriage of justice. - HELD THAT: - Relying on established precedent, the court reiterated that its revisional power under Section 397 Cr.PC is supervisory and not equivalent to appellate review. Re-appreciation of evidence is generally inappropriate when both the trial court and the first appellate court have concurrently and reasonably appreciated the evidence, unless a glaring illegality, perversity or miscarriage of justice is demonstrated. No such material irregularity or perversity was pointed out by the defence in the present matter; consequently there was no occasion to exercise revisional jurisdiction to upset the concurrent findings. [Paras 16, 17, 19]

High Court declines to interfere in revision; concurrent findings are not vitiated by any demonstrable illegality or miscarriage of justice.

Final Conclusion: Criminal revision dismissed; convictions and sentences under Section 138 of the Negotiable Instruments Act affirmed by the High Court, interim directions vacated and the petitioner directed to surrender to serve the sentence; amount deposited, if any, to be released to the complainant on appropriate application.