TMI Tax Updates e-Newsletter
Apr 14,2026

Power's of the Commissioner Or an authorised officer to block a taxpayer's Electronic Credit Ledger under rule 86A - Negative blocking of input tax credit - reason to believe - literal interpretation - preventive measure - principles of natural justice.

Whether Rule 86-A of Goods and Services Tax Rules, 2017 (for short Rules, 2017) permit the Commissioner or an officer authorized by him to block a tax payer’s ECL by an amount exceeding the credit available at the time of issuance of said order? - HELD THAT:- It is a matter of record that petitioner is registered with respondent authorities under HGST Act, 2017 having GST Identification. Learned counsel for respondent, on advance notice, was unable to deny that ECL of petitioner was blocked on 02.12.2024. Negative balance is thus reflected from the copy of ECL entries attached as Annexure P-5.

As the provision is for meeting an emergent situation, the view that prior notice (Show Cause Notice) is not required was endorsed. However, at the same time, without availability of credit in the ECL, there cannot be ‘negative blocking’. It is always open to the authorities to resort to statutory measures available for recovery of amount. Whether input tax credit was wrongly availed or utilised would be determined by competent authority in terms of Section 73 and 74 of HGST.

Following its earlier decision in M/s Shyam Sunder Strips [2022 (2) TMI 843 - GUJARAT HIGH COURT], the Court held that the plain language of Rule 86A makes the availability of input tax credit in the Electronic Credit Ledger a condition precedent for exercise of the power to restrict debit. The provision authorises only a temporary disabling of debit of available credit and does not empower the authorities to create an artificial negative balance or to block credit in excess of what stands to the taxpayer's credit. Such negative blocking travels beyond the scope of Rule 86A; if credit has been wrongly availed or utilised, the authorities must resort to the statutory recovery mechanisms available in law. The Court also reiterated that prior show cause notice is not required for invoking Rule 86A, but that does not enlarge the power to permit negative blocking. [Paras 10, 11, 12, 13]

The entry blocking the petitioner's Electronic Credit Ledger in excess of the credit available therein was held unsustainable and the writ petition was allowed on the same terms as in M/s Shyam Sunder Strips, with liberty to the respondents to proceed for recovery in accordance with law.

Final Conclusion: The Court allowed the writ petition and held that Rule 86A cannot be used to create a negative balance by blocking credit beyond the amount actually available in the Electronic Credit Ledger. The impugned blocking to that extent was set aside, while leaving it open to the authorities to pursue recovery by lawful statutory means.

Cancellation of GST registration for non-filing of returns - Restoration of registration - Compliance under proviso to Rule 22(4) - non-filing of GST return for a continuous period of 6 (six) months, on account of the fault of his Tax Consultant - served with a Show-Cause Notice - Pending returns - Full payment of tax dues - Applicable interest and late fee.

GST registration cancellation - HELD THAT: - The Court held that the case was squarely covered by the earlier decision of the same Court on similar facts and law in Coordinate Bench of this Court in the case of Dhirghat Hardware Stores [2025 (10) TMI 1070 - GAUHATI HIGH COURT]. Adopting that view, it accepted that where cancellation had occurred for non-filing of returns, and the petitioner expressed readiness to furnish all pending returns and discharge tax dues with applicable interest, penalty and late fee, the proper authority was required to consider restoration of registration in accordance with the proviso to Rule 22(4) of the CGST Rules, 2017. The Court therefore treated the matter as one warranting an opportunity for post-cancellation compliance rather than a final denial of restoration. [Paras 11, 13, 14]

The petitioner was permitted to approach the concerned authority within sixty days for restoration of GST registration, and on compliance with the requirements under the proviso to Rule 22(4), the authority was directed to consider the application and take steps for restoration expeditiously; the period under Section 73(10) was directed to be computed from the date of the order, except for Financial Year 2024-25, which was to be governed as stated in the order.

Final Conclusion: Following its earlier decision on similar facts, the Court disposed of the writ petition by permitting the petitioner to seek restoration of GST registration within the specified period and directing the authority to consider such request on compliance with the statutory requirements.

Scope of prohibition contained in Section 6(2)(b), against initiation of parallel proceedings on the same subject-matter, despite an earlier initiation of proceedings by another jurisdictional authority - overlapping action by the Central and State GST authorities - Summons and initiation of proceedings - Intelligence-Based Enforcement Action - Formal Commencement of Adjudicatory Proceedings - Writ Jurisdiction - Inter-departmental Coordination.

Section 6(2)(b) bar on parallel proceedings - HELD THAT: - The Court held that the governing principles stood concluded by M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. [2025 (8) TMI 991 - SUPREME COURT]. Applying that law, it observed that the statutory bar under Section 6(2)(b) operates against parallel adjudicatory proceedings on the same subject matter, but issuance of summons and other investigative steps do not by themselves amount to initiation of such proceedings. As material on record showed action by both State and Central authorities, the Court declined to adjudicate the merits of the overlap itself and instead directed the petitioner to comply with the summons, raise all available contentions before the authority, and inform the authorities of the alleged overlap, whereupon the State and Central authorities were required to communicate and coordinate so that the assessee is not subjected to multiple adjudicatory processes on the same subject matter. [Paras 11, 12, 13]

No relief on merits was granted; the petition was disposed of with directions to the petitioner and both tax authorities to follow the law declared in Armour Security, while keeping all merits and contentions open.

Final Conclusion: The writ petition was disposed of by directing the petitioner to raise its objection regarding overlap before the concerned authority and by requiring the State and Central GST authorities to coordinate in accordance with the law declared in Armour Security, so that no parallel adjudicatory proceedings continue on the same subject matter. The Court expressly left the merits of the allegations and the validity of the summons and notice open.

Entitlement to regular bail in a GST prosecution - accused remained in custody for over eight months and the trial was likely to take considerable time - Speedy trial under Article 21 - Custodial Incarceration.

Regular bail - Documentary evidence - Protracted trial - HELD THAT: - The Court held that grant of bail was justified having regard to the nature of the prosecution and the stage of the case. It emphasised that the offence was triable by a Magistrate and carried a maximum sentence of five years; cognizance had already been taken; the prosecution case was primarily based on documentary evidence; the petitioner was not stated to be involved in any other case; and there were 10 witnesses, indicating that the trial would take time. In these circumstances, continued incarceration was found to offend the petitioner's right under Article 21, including the right to a speedy trial. [Paras 5, 6]

Regular bail was granted subject to conditions to be imposed by the trial Court/Duty Magistrate, with liberty to the State to seek cancellation in case of breach.

Final Conclusion: The petition for regular bail was allowed. The Court ordered release on bail on the ground that further custody, in the facts of the case and the likely delay in trial, would be inconsistent with the petitioner's right to speedy trial under Article 21.

Invocation of extended period for fraudulent availment of input tax credit - Wrongly availed and utilised input tax credit - non-consideration of reply and written notes - non-existent supplier vis-a-vis input tax credit availed - initiation of proceeding under Section 74 of the GST Act by issue of SCN in contradiction to guidelines contained in F.No. CBIC - Interest on reversal of input tax credit - Double taxation - Voluntary Reversal of Input Tax Credit - Electronic Credit Ledger - contravention of Section 16(2) of the GST Act - Whether interest under Section 50 and penalty under Section 74 would be attracted when the input tax credit availed has been reversed voluntarily by utilising Electronic Credit Ledger leaving excess balance after such adjustment by reversing such input tax credit, both the matters are taken up for final hearing at the stage of “Fresh Admission”.

Fraud or wilful suppression - HELD THAT: - For invocation of power under Section 74(1), the circumstances are spelt out, which in the humble opinion of this Court are absent in the present case. It is emerged from the chronology of events obtained on record that after the period of limitation stipulated in Section 73 is lapsed, the Adjudicating Authority has sought to initiate proceeding under Section 74 by issue of Letter dated 17.07.2024 of the Superintendent (Anti-Evasion). The Show Cause Notice itself indicates that pertaining to transactions during August, 2017 to December, 2017, the proceeding under Section 74 is drawn up by issue of Summary of Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 conspicuously after 8 years of the alleged transactions.

In view of Northern Operating Systems Pvt. Ltd. [2022 (5) TMI 967 - SUPREME COURT], Lipi Boilers Ltd. [2025 (11) TMI 505 - SUPREME COURT] and Bharti Airtel Ltd. [2021 (11) TMI 109 - SUPREME COURT] the Revenue having failed to bring in wilful intention to evade tax it is safe to say that the petitioner could not be held to have availed input tax credit “wrongly availed or utilised by reason of fraud, or any wilful misstatement or suppression of facts to evade tax”.

The Court found that the adjudicating authority proceeded mechanically on the DGGI alert and the third-party supplier's admission, without examining the petitioner's complicity, the status of the supplier during the relevant period, or any material showing conscious involvement of the petitioner in a fraudulent arrangement. The petitioner had already reversed the disputed input tax credit when the issue was brought to notice, which negated the basis for alleging fraudulent availment to evade tax. Since Section 74 is invocable only where there is material evidence of fraud, wilful misstatement or suppression with intent to evade tax, and the period under Section 73 had already elapsed, recourse to Section 74 was held impermissible. [Paras 8]

The initiation of proceedings under Section 74 was held unsustainable in law.

Interest on wrongly availed and utilised input tax credit - HELD THAT: - The Court accepted the documentary record showing that the petitioner had reversed the disputed credit through GSTR-3B returns before the show cause notice was issued. Reading Section 50(3), Rule 88B and the clarification dated 17.07.2023 together, the Court held that interest arises only where wrongly availed credit is also utilised, and such utilisation is to be determined with reference to whether the balance in the Electronic Credit Ledger fell below the amount of wrongly availed credit. As the ledger had surplus balance even after the reversal, no interest could be demanded. [Paras 8, 9, 11]

The levy of interest under Section 50 was held to be without authority of law.

Penalty under Section 74 - Double taxation - Net tax effect - HELD THAT: - The Court held that once the Revenue accepted that the petitioner had already reversed the disputed input tax credit before initiation of proceedings, a further demand of the same amount without giving credit to that reversal would amount to double taxation. With the reversal already effected, the net tax effect was treated as zero, and penalty could not be imposed mechanically under Section 74 on the same transaction. The adjudicating authority was therefore found to have acted beyond jurisdiction. [Paras 10, 11]

The tax demand and consequential penalty were held unsustainable and liable to be set aside.

Final Conclusion: The High Court quashed the impugned orders in both writ petitions, holding that Section 74 had been invoked mechanically without material showing fraud or wilful suppression, that no interest was payable as the wrongly availed credit had been reversed before notice and had not been utilised, and that the further tax demand and penalty were unsustainable.

Validity of ex parte adjudication orders for the relevant tax years, passed without the benefit of a reply and with procedural objections raised to the audit and notice stage - discrepancy between GSTR-3B and GSTR- 2A -Opportunity to file reply - Principles of natural justice.

Ex parte adjudication - Opportunity to file reply - HELD THAT: - The Court found that the adjudication had been completed on the basis of an alleged discrepancy between GSTR-3B and GSTR-2A, but the order was ex parte. In view of the petitioner's stand that material was available to show that the discrepancy itself did not exist, the Court held that an opportunity to reply ought to be granted before the matter was concluded. [Paras 5, 6]

The order at Annexure-A1 was set aside and the matter was remitted to the stage of reply to the show cause notice, subject to payment of 10% of the tax demand.

Ex parte adjudication - Principles of natural justice - HELD THAT: - The Court noted that the order had been passed without any reply from the petitioner and that contentions had been raised regarding the validity of the procedure preceding the audit, including alleged breach of the prescribed notice requirement. Without deciding those contentions on merits, the Court held that, since the order itself was ex parte and had been made without affording the petitioner the benefit of a reply, the matter required restoration to that stage. [Paras 9, 10]

The order at Annexure-B1 was set aside and the matter was remitted to the stage of reply to the show cause notice, subject to payment of 10% of the tax demand, with all contentions kept open.

Final Conclusion: The writ petition was disposed of by setting aside both ex parte adjudication orders for 2020-21 and 2021-22 and remitting the proceedings to the stage of reply to the respective show cause notices. The restoration was made conditional upon payment of 10% of the tax demand in each proceeding, with all contentions left open.

Provisional attachment of bank accounts - absence of a properly formed opinion, tangible material, and due compliance with the statutory safeguards - compliance with the mandatory requirements governing exercise of power under section 83 - Arbitrary exercise of statutory power - Personal costs for abuse of power - Doctrine of Proportionality.

Provisional attachment of bank accounts - HELD THAT: - It is well settled that when such power to take drastic action is conferred on the authorities, it is coupled with an onerous duty to adhere to the provisions of law and the procedure so established. There cannot be a conscious departure from such mandatory requirements of law. Any action on the part of the officers who are supposed to act within the framework of law, cannot be taken in a high handed manner and/or for extraneous considerations, as rightly contended by the learned counsel for the Petitioner. It is the rule of law which is taken to the ransom by such officials when they knowingly breach the law, that too with impunity.

The Petitioner had not only furnished correct legal information but also provided an alternate security to avoid such drastic action of attachment of the petitioner’s bank account. However, the officer remained satisfied on maintaining such attachment. Thus, the whole approach of the concerned officer was of unwarranted coercion by attaching the bank accounts and that too without issuance of a show cause notice. Such attachment has continued to operate for three months depriving the Petitioner of the valuable right guaranteed under Article 300A of the Constitution of India apart from the petitioner being put to a live death on the business being brought at a standstill. This has certainly resulted into civil consequences and serious prejudice to the Petitioner in complete breach of the principles of law.

The Court held that provisional attachment of a bank account is a drastic measure and can be sustained only upon a prior and valid formation of opinion, based on tangible material, that such attachment is necessary to protect the revenue. The pre-intimation as well as the attachment communication were found to be vague and to disclose no such opinion or material. The attachment was issued on the same day as the pre-attachment communication, and even the basic statutory and procedural requirements were overlooked. Applying the principles in Radha Krishan Industries Vs. State of Himachal Pradesh [2021 (4) TMI 837 - SUPREME COURT] and Chokshi Arvind Jewellers Vs. Union of India and others [2024 (3) TMI 605 - BOMBAY HIGH COURT], the Court held that the designated officer had acted in breach of the law and of the petitioner's civil rights. [Paras 9, 10, 12, 15]

The impugned attachment orders were quashed, with liberty to the authorities to issue a show cause notice and proceed in accordance with law if tangible material exists.

Personal costs for abuse of power - High-handed exercise of statutory power - HELD THAT: - The Court found the case to be a gross instance of breach of law, where the officer had disregarded mandatory legal requirements governing a draconian power, continued the attachment despite the petitioner's objection pointing out the legal position, and failed to respond even when alternate security was offered. The Court observed that such arbitrary action, causing serious civil consequences and paralysing business, could not be treated as a routine illegality and that mere setting aside of the order would provide no deterrence against repetition of such conduct. [Paras 10, 11, 12, 13]

The Joint Commissioner of State Tax, Investigation-A was directed to personally deposit costs with the Maharashtra State Legal Services Authority.

Final Conclusion: The Court set aside the bank attachment orders as unlawful for failure to satisfy the mandatory conditions for provisional attachment. It also imposed personal costs on the concerned officer, while leaving it open to the authorities to initiate proper proceedings by issuing a show cause notice if supported by tangible material.

Cancellation of GST registration - rejection of the revocation application - failure to consider the petitioner's explanation and for want of reasons in the show-cause notices - Vague show-cause notice - Non-application of mind - Principles of natural justice.

Cancellation of GST registration - HELD THAT:- The Court held that the matter was a genuine case in which the petitioner's explanation for temporary discontinuance of business was not considered at all. It found that neither the show-cause notices nor the impugned orders contained any discussion or reasoning, and that the orders were passed mechanically in a standardised manner without application of mind. Applying the consistent view of this Court, including Makersburry India Pvt. Ltd. v. State of Maharashtra [2023 (10) TMI 792 - BOMBAY HIGH COURT], Monit Trading Private Limited v. Union of India [2023 (7) TMI 911 - BOMBAY HIGH COURT] and Nirakar Ramchandra Pradhan v. Union of India [2023 (9) TMI 1176 - BOMBAY HIGH COURT], the Court reiterated that a show-cause notice proposing cancellation of registration must set out adequate reasons enabling an effective reply, and an order passed on a vague notice or without dealing with the assessee's case is arbitrary and violative of natural justice. On that basis, the notices and consequential orders were quashed, with restoration of registration, while leaving it open to the department to initiate fresh proceedings in accordance with law on a properly reasoned notice and after granting opportunity of hearing. [Paras 8, 9, 10, 11, 12]

The impugned show-cause notices and consequential orders cancelling registration and rejecting revocation were set aside, the registration stood restored, and liberty was reserved to the respondents to proceed afresh in accordance with law.

Final Conclusion: The Court quashed the show-cause notices and consequential orders cancelling the GST registration and rejecting revocation, holding them to be arbitrary and unsupported by reasons. The petitioner's registration stood restored, while preserving the respondents' liberty to initiate fresh proceedings in accordance with law.

Eligibility of availment of Input Tax Credit - mismatch between Form GSTR-3B and Form GSTR-2A and other ITC-related discrepancies - Failure to follow binding prescribed procedure for dealing with discrepancies under Circular No. 183/15/2022-GST - Reverse Charge Mechanism entries.

Input tax credit mismatch reconciliation - HELD THAT:- The Court recorded that the contention regarding non-following of the prescribed procedure for dealing with mismatch between Form GSTR 3B and Form GSTR 2A was not controverted. In that view, and having regard to the fact that the impugned order had made detailed findings on wrongful availment of ITC, the matter required reconsideration after permitting reconciliation in terms of Circular No. 183/15/2022-GST. Since the adjudication itself was set aside on that procedural ground, the assessee was left free to raise all other contentions before the assessing officer in the remanded proceedings. [Paras 7, 8, 9]

The impugned adjudication order and consequential demand were set aside, and the matter was remitted for fresh consideration from the stage of reply to the show cause notice after allowing reconciliation of the ITC mismatch in accordance with the circular.

Final Conclusion: The Court set aside the adjudication order and consequential demand because the prescribed procedure for reconciling the ITC mismatch between Form GSTR 3B and Form GSTR 2A had not been followed. The matter was remanded for fresh consideration, with all other contentions kept open.

Legality of the assessment order passed under Section 74, rejecting the claimed input tax credit - denial of a proper personal hearing - Reasonable Opportunity of Hearing - Principles of natural justice - Vagueness of show cause notice.

Principles of natural justice - Vagueness of show cause notice - Opportunity of personal hearing - HELD THAT: - The Court found that the affidavit of the authorised representative, stating that he was directed to appear before a subordinate officer instead of being properly heard, could not be brushed aside, particularly when the counter affidavit admitted that he had in fact been sent to another officer for verification of documents. The Court therefore held that the petitioner deserved one more effective opportunity of hearing. The Court also found merit in the objection that the show cause notice was vague, since the specific details of the allegations later set out in the order were not sufficiently disclosed in the notice itself, thereby impairing the petitioner's ability to respond effectively. On these procedural defects, the matter required reconsideration. [Paras 7, 8, 9]

The impugned order was quashed and the matter was remitted for fresh consideration after granting the petitioner an opportunity of hearing and permitting production of additional documents.

Final Conclusion: The writ petition was allowed to the extent of quashing the impugned assessment order. The authority was directed to reconsider the matter afresh after giving a proper hearing and allowing the petitioner to place additional materials on record.

Validity of Reassessment - original return had been processed under Section 143(1) and the challenge to reopening was not specifically pursued by the Revenue before the Tribunal -Interest on funds inextricably linked to setting up of business

Reassessment after intimation u/s 143(1) - Change of opinion - Powers of the Tribunal - HELD THAT: - We are in agreement with the conclusion of the ITAT that the CIT(A) erred in holding that the notice under Section 148 of the Act was based on a change of opinion in as much as the assessment which stood completed was reopened pursuant to the judgment of the Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd [1997 (7) TMI 4 - SUPREME COURT] -The initiation of assessment under Section 143(1) of the Act cannot be treated to be an ‘assessment order’ where the AO has formed an opinion and passed an order.

The Court held that where the original processing was only u/s 143(1), there was no assessment order reflecting formation of opinion in the manner contemplated u/s 143(3). In such a case, reopening cannot be invalidated on the ground of mere change of opinion if the AO had reason to believe that income had escaped assessment. The Court also rejected the objection that the Tribunal could not examine the jurisdictional issue in the absence of a specific ground by the Revenue, holding that the Tribunal's power extends to all questions going to the subject matter of the appeal and is not confined to the memorandum of appeal. [Paras 45, 46, 47]

Question of law (1) was answered in favour of the Revenue.

Interest on funds inextricably linked to setting up of business - Pre-operative expenses - Income from other sources - taxability of interest earned on bank deposits out of funds earmarked for acquisition of technical know-how, land, machinery and related project commitments - HELD THAT: - On the facts found, the deposited amounts were not idle or surplus funds but formed part of monies raised and earmarked for setting up the assessee's manufacturing business, including balance payments for plant, machinery and technical know-how. The temporary parking of such funds until their deployment did not sever their nexus with the project. Applying the principle that receipts inextricably linked to the setting up of the business are to be adjusted against pre-operative expenditure, the Court held that the case fell within the line of authority represented by Bokaro Steel and not within Tuticorin Alkali, which governs interest earned on truly surplus funds. [Paras 52, 54, 55, 56, 57]

Question of law (2) was answered in favour of the assessee; the Tribunal's view treating the interest as income from other sources was set aside.

Final Conclusion: The Court upheld the validity of the reassessment on the ground that the original processing was only u/s 143(1), but held on merits that the interest was earned on funds inextricably linked with the setting up of the assessee's business and therefore could not be assessed as income from other sources. Accordingly, the Tribunal's order was set aside and the appeals were allowed.

Addition of interest accrued on the advances to the subsidiary/associates -Accrual of interest under mercantile system - Commercial expediency - Bad debt write-off - Actual payment requirement for deduction

Accrual of interest under mercantile system - Commercial expediency - disallowance of notional interest on advances to subsidiary companies - HELD THAT: - The Court held that the assessee had earlier treated the advances as interest-bearing and had offered accrued interest to tax. In the years under consideration, the omission to charge interest was sought to be justified on the financial condition of the subsidiaries and by invoking commercial expediency. The Court found that such justification did not fit the facts, since there was no established change in the character of the advances and the appellate authorities had accepted assertions regarding own funds and commercial justification without proper verification. The Tribunal had also introduced fresh reasons not borne out by the pleadings or records. On that basis, the reliance on S.A.Builders was held to be erroneous, and the issue required fresh examination by the appellate authority. [Paras 38, 39, 46, 47]

The findings deleting the interest addition were set aside and the matter was remitted to the Commissioner of Income Tax (Appeals) for fresh consideration.

Bad debt write-off - Actual write-off in accounts - whether the claim for bad debt deduction was allowable on a consolidated write-off without party-wise details and without showing an actual write-off in the relevant debtor accounts? - HELD THAT: - The Court held that after 01.04.1989, a mere provision or a general assertion of irrecoverability is insufficient; the statutory requirement is an actual write-off in the accounts in the manner explained in Southern Technologies Ltd. [2010 (1) TMI 5 - SUPREME COURT], Vijaya Bank Ltd [2010 (4) TMI 46 - SUPREME COURT] and T.R.F Ltd [2010 (2) TMI 211 - SUPREME COURT]

The appellate authorities had accepted the assessee's claim without adequate reasons and without production of party-wise details or branch-level records necessary to rule out escaped income. The analogy drawn from banking cases was held inapposite on the facts. Since the governing principles had not been properly applied, the Court directed a fresh test of the claim in light of those decisions. [Paras 32, 33, 34, 46, 47]

The allowance of the bad debt claim was set aside and remitted to the CIT (Appeals) for reconsideration under the correct legal standard.

Actual payment requirement for deduction - Non-speaking factual reversal - disallowance relating to the amount debited to the share premium account - HELD THAT: - The Court noted that the amount represented interest or redemption premium that had remained unpaid and was later waived on one-time settlement. The Tribunal accepted the assessee's case by referring generally to the paper book, but failed to specify the material relied on, while the appellate authority and Tribunal also omitted to deal with the fact that the amount had not been included in the audit report disallowance under Section 43B. The Court held that, if factual reappreciation on the basis of new plea or documents was required, fairness demanded a remand for proper examination rather than outright relief. The factual deletion was therefore found unjustified. [Paras 41, 42, 43, 44, 45]

The relief granted on this claim was set aside and the issue was remitted to the Commissioner of Income Tax (Appeals) for fresh consideration.

Final Conclusion: The High Court held that the appellate authorities had erred in deleting the additions relating to accrued interest on advances to subsidiaries, in accepting the bad debt claim without proper application of the post-1989 write-off requirements, and in granting relief on the Section 43B issue without adequate factual basis. The orders of the Commissioner of Income Tax (Appeals) and the Tribunal were set aside, and both matters were remitted to the Commissioner of Income Tax (Appeals) for fresh consideration of all grounds.

Nature of expenditure - expenditure incurred for replacement of machinery - revenue expenditure instead of capital expenditure - legal test governing current repairs - reliance on High court decision which was overruled

HELD THAT: - The Court found that the Tribunal had decided the issue without independent discussion and only on the basis of Janakiraman Mills Ltd. [2005 (4) TMI 39 - MADRAS HIGH COURT], which stood reversed by the Supreme Court in Saravana Spinning Mills (P) Ltd [2007 (8) TMI 16 - SUPREME COURT] and was referred to in Ramaraju Surgical Cotton Mills [2007 (8) TMI 39 - SUPREME COURT]

Applying the principle noticed in Sri Mangayarkarasi Mills (P) Ltd [2009 (7) TMI 17 - SUPREME COURT], the Court held that in a textile mill the machinery cannot be treated as a single asset whose replacement would automatically amount to preservation or maintenance, since each machine is an independent entity.

For a claim to fall within current repairs, the assessee must satisfy the governing test indicated by the Supreme Court, including the circumstances referred to in Mahalakshmi Textile Mills Ltd. [1967 (5) TMI 4 - SUPREME COURT]

Since that examination had not been undertaken by the Tribunal, and this Court's decision in the assessee's own case in Super Spinning Mills Ltd. [2013 (9) TMI 88 - MADRAS HIGH COURT] was considered directly relevant, the matter had to go back to the appellate authority for fresh adjudication after giving the assessee opportunity to place necessary material. [Paras 17, 18, 19]

Final Conclusion: The appeals were disposed of by holding that the Tribunal had allowed the assessee's claim solely on the basis of a precedent that no longer held the field. The issue whether the replacement expenditure was revenue or capital was remitted to the appellate authority for fresh decision under the correct legal principles.

Monetary limit exceptions in departmental appeals - Interpretation of law enforcement agencies in CBDT circular - Rectification u/s 254(2)

Whether DGCEI falls within the expression of law enforcement agencies contemplated in clause 10(e) of the circular dated 11.07.2018 read with the circular dated 20.08.2018, and the Tribunal erred in rejecting the Revenue's rectification application on the contrary view? - HELD THAT: - The Court held that clause 10(e), which refers to agencies such as CBI, ED, DRI, SFIO and DGGI, uses those agencies illustratively and not exhaustively. Since DGCEI is admittedly an enforcement agency, it is akin to the agencies mentioned in the clause and could not have been excluded from its ambit.

Tribunal therefore misinterpreted the circulars in holding that DGCEI was not a law enforcement agency, and its rejection of the application under section 254(2) on that basis could not be sustained. [Paras 6, 7, 8]

The impugned order was set aside, MA No. 24/SRT/2020 was restored to the Tribunal, and the matter was remanded for fresh decision after hearing both sides, with all contentions kept open.

Final Conclusion: The High Court held that DGCEI is a law enforcement agency within the scope of clause 10(e) of the relevant circulars. On that basis, the Tribunal's order rejecting the Revenue's rectification application was set aside and the matter was remanded for fresh consideration.

Addition of bogus purchases of capital assets - claim of assessee that it had purchased fixed assets after obtaining loan from the financial institutions and all the relevant details regarding purchases were placed on record which includes invoices, transportation advise, loan agreement, bank statement, insurance policy etc. Had there been no purchases, bank had not financed assets - HELD THAT:- Had there been no purchases, bank had not financed assets. Moreover, insurance company has given insurance policy only after physical inspection of the assets. All these facts established that assessee had made purchases of machineries however, the AO without brought any material on record solely based on so-called information received from the Investigation Wing that compnay, from whom the assessee had made the purchases, related to one Shri Joginder Pal Gupta engaged in the business of providing accommodation entries, had made the additions.

Once the assessee has been able to establish that goods have been purchased with every plausible evidences and had not claimed said purchases as expenditure in Profit & Loss Account and treated the same as capital assets it is also a matter of fact that assessee has claimed depreciation which stood allowed and gross amount of purchases was disallowed by ignoring the fact that such purchases was never claimed as expenditure.

Copy of the bank loan agreement clearly shows that the bank has financed the assets which were insured by United India Insurance Company Ltd. in terms of policy Burglary B.P. policy.

This further established the fact that assets under dispute was in existence where after examination insurance policy was issued by the company. All these facts lead to belief that allegation of the Revenue of accommodation entries, is not correct.

AO has made an error of fact of treating the purchases of capital assets as bogus purchases of goods and made the addition thereon. Accordingly, we delete the additions so made and allowed Grounds of appeal Nos. 1 to 4 raised by the assessee.

Bogus purchases - as per DR parities were found engaged in the business of providing accommodation entries to the beneficiaries after charging commission - HELD THAT:- Once the assessee has discharged the burden casted upon it of proving the purchases as genuine and AO has filed to make any independent inquiry whatsoever to support the allegations made, no addition could be made towards the genuine purchases by holding the same as bogus. Under these circumstances, purchases cannot be held as bogus and accordingly, the addition made by AO is hereby, deleted. All the grounds of appeal of the assessee are thus allowed.

Final conclusion: - Tribunal deleted addition of bogus purchases of capital assets and other purchases as assessee has discharged the burden casted upon it of proving the purchases as genuine.

Depreciation on intangible assets - Rule of consistency - Written down value - Book profit adjustment under section 115JBon disallowance u/s 14A - Disallowance under section 14A in absence of exempt income - Prospective operation of amendment

Depreciation on intangible assets - Rule of consistency - Written down value - depreciation on the trademark forming part of the block of intangible assets in the post-amalgamation years - HELD THAT: - The Tribunal found that the claim of depreciation on the trademark had been specifically examined in scrutiny in the first year of claim, namely the year immediately following the effective date of amalgamation, and was allowed without any disallowance. In the years under appeal, the claim was only on the opening written down value of that block. The record also showed that no proceedings had been taken by the Revenue to disturb the assessment of the first year. In these circumstances, and there being no change in facts, the Revenue could not reopen the very eligibility of the asset in a subsequent year by alleging that the trademark was fictitious. The Tribunal also noted that the material placed on record did not support the Assessing Officer's conclusion that the trademark was non-existent. Applying the rule of consistency, it held that the depreciation claim on the opening written down value had to be allowed. [Paras 22, 23, 25, 29, 35]

The disallowance of depreciation on the trademark was held to be unjustified, and the Assessing Officer was directed to allow depreciation on the opening written down value for all the assessment years under appeal.

Book profit adjustment under section 115JB - Section 14A disallowance - HELD THAT: - The Tribunal followed the Special Bench decision in Vireet Investments Pvt. Ltd [2017 (6) TMI 1124 - ITAT DELHI] holding that computation under clause (f) of Explanation 1 to section 115JB(2) has to be made independently and not by importing the computation contemplated u/s 14A read with Rule 8D. On that basis, it upheld the deletion of the adjustment made by the AO while computing book profit. [Paras 31]

The deletion of the section 14A-based adjustment to book profit for assessment year 2019-20 was upheld.

Disallowance u/s 14A in absence of exempt income - Prospective operation of amendment - HELD THAT: - The Tribunal recorded that the assessee had not earned any exempt income during the relevant year and had not claimed any exemption on that account. Following the High Court decision of M/s Era infrastructure (India) Ltd, [2022 (7) TMI 1093 - DELHI HIGH COURT] it held that section 14A does not operate in such a situation. It further held that the amendment made by the Finance Act, 2022, which states that the provision shall apply even where no exempt income has accrued, arisen or been received, is prospective and applies from assessment year 2022-23 onwards. Therefore, the disallowance made by the AO u/s 14A read with Rule 8D was unsustainable. [Paras 37, 38, 39]

The deletion of the disallowance under section 14A read with Rule 8D for assessment year 2020-21 was upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeals for assessment years 2017-18 to 2020-21 and allowed the assessee's cross-objections. Depreciation on the trademark was directed to be allowed on the opening written down value, the section 14A-based book profit adjustment for assessment year 2019-20 was deleted, and the section 14A disallowance for assessment year 2020-21 was held to be unsustainable in the absence of exempt income.

Bogus purchases - Addition by invoking the provisions of section 69C r.w.s 115BBE - Validity of notice issued u/s 148

Bogus purchases - onus to prove - Genuineness of purchases - Reversal of input tax credit - incident report received from DGGI Zonal Unit, Nagpur wherein there was transaction made by company with assessee without receipt of goods. Assessee reversed ITC claimed which implies that corresponding purchases are not genuine - HELD THAT:- The assessee has duly discharged the onus cast upon it by furnishing complete documentary evidences, including Purchase invoices, Ledger accounts of suppliers, transport delivery receipts, proof of payments made through banking channels and Books of account maintained in the ordinary course of business These evidences clearly substantiate the genuineness of the transactions.

CIT(A), however has erred in disregarding these evidences and instead relied on generalized allegations pertaining to the suppliers without establishing any direct nexus with the assessee. CIT(A) has further erred in holding that the assessee failed to discharge its burden of proof completely ignoring the substantial evidences placed on record.

In view of above facts and settled legal position the findings of the learned CIT(A) are based on surmises, conjectures and extraneous considerations and therefore deserve to be set aside. The confirmation of the addition under section 69C is thus wholly erroneous, unjustified, and liable to be deleted.

The addition made by AO and upheld by CIT(A) is held to be not in accordance with law and contrary to documentary legal evidence on record to substantiate the genuineness of purchases.

Validity of notice issued u/s 148 - information received from the DGGI and Insight Portal - Reasons to believe - independent application of mind or borrowed satisfaction - HELD THAT:- Purchase from disputed party were accepted by department in the case of an associate company and information pertained to GST Department. Facts in the case of assessee are similar. Respectfully following the same we hold that notice issued u/s 148 and order passed u/s 148A(d) of the Act in the case of assessee is not in accordance with law.

In the case of assessee information and material has not been supplied along with the notice issued u/s 148A(b) of the Act. The aforesaid fact is evident from the reply submitted. Despite requests no information is provided and voluminous documentary evidence placed on record has been not accepted for no valid justification. Ratio laid down by the judgement of Hon’ble Delhi Bench in B. C. Enterprises [2025 (4) TMI 405 - ITAT DELHI] squarely applies to the facts in the case of assessee. Respectfully following the same we hold that notice issued u/s 148 and order passed u/s 148A(d) of the Act is not in accordance with law.

Final conclusion:- Tribunal held that addition u/s 69C is thus wholly erroneous, unjustified, and liable to be deleted as assessee has duly discharged the onus cast upon it by furnishing complete documentary evidences, and Reopening proceedings set aside as no information is provided and voluminous documentary evidence placed on record has been not accepted for no valid justification.

Addition u/s 68 and 69C - sale proceeds of shares as unexplained cash credit u/s. 68 and addition towards alleged commission expenditure u/s. 69C - proof of Payment in respect to sale proceeds of shares

HELD THAT:- Issue involved in the present appeal is squarely covered by the decision of this Bench of the Tribunal in the case of Rameshwarlal Mathuraprasad (HUF) [2025 (5) TMI 2236 - ITAT NAGPUR] AS HELD

Evidences furnished by the assessee to prove the purchase and sale of shares, payment made/received, entry/exit of shares in the demat account of the assessee etc., are not found to be incorrect.

Since the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee.The entire case of the Assessing Officer is based on the preponderance of probabilities and the normal human conduct to allege that the transaction undertaken by the assessee was not genuine. It is a settled position in law that the onus of proving that the apparent is not real is on the person who alleges it to be so.

Sale consideration received on sale of shares cannot be assessed as unexplained cash credit u/s 68 of the Act. Long term capital gains declared in the return of income and exemption claimed hereby accepted as shown in return of income.

Also there remains no case for any alleged commission which calls for any addition at the hands of assessee. The very premise for which the addition is made has been held to be incorrect and thus consequent addition made by the Assessing Officer for alleged expenditure u/s 69C is unjustified and unsustainable.

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition under section 68 by accepting the long term capital gain exemption claimed under section 10(38), deleted the consequential addition under section 69C, and held that reliance on general investigation reports and untested statements without opportunity for confrontation could not sustain the assessments.

Denial of benefit of Section 11 and 12 - Belated filing of Form 10B - Procedural compliance - effect of technical default

HELD THAT: - Though the Tribunal noticed that the filing of Form 10B was substantially delayed, it held, in the interest of justice, that procedural technicality should not defeat the substantive claim in the peculiar facts of the case.

Applying the principle drawn from Aurangabad Electricals Pvt. Ltd. [2010 (11) TMI 8 - SUPREME COURT] and following Shamal Mohan Patil Education Society [2025 (11) TMI 1853 - BOMBAY HIGH COURT] it directed the Assessing Officer to treat Form 10B filed by the trust as having been filed within the stipulated time and to process the return in accordance with the exemption claimed under sections 11 and 12. [Paras 10]

Final Conclusion: The Tribunal allowed the appeal, holding that the delay before the CIT(A) could not defeat the assessee's claim and condoning the delayed filing of Form 10B in the peculiar facts of the case. The Assessing Officer was directed to treat the form as filed within time and process the return in accordance with the exemption claimed under sections 11 and 12.

On-money addition for property purchase - Third-party search material - Rebuttable presumption u/s 132(4A) and 292C - Protective and substantive additions - Estimation of profit on unaccounted sales

Unsubstantiated on-money addition - Third-party seized document - HELD THAT: - The Tribunal held that the addition rested entirely on material found in the search of the Omaxe group and on papers recovered from another person, without any direct or corroborative evidence against the assessee. The property actually purchased by the assessee did not match the project details relied upon by the Assessing Officer; the price notings in the seized papers were themselves variable; and there was no admission by the assessee or by Shri Inder Kalta of any cash payment. Since the allegation of on-money remained unsupported and the recorded consideration was shown to have been paid through banking channels, the addition was held to be based only on presumption and assumption. [Paras 4]

The addition for alleged on-money in Smt. Ranjana Kalta's case for AY 2020-21 was deleted.

Addition of unaccounted purchases - Third-party search material - Rebuttable presumption u/s 132(4A) and 292C - Additions for alleged unaccounted purchases based on diaries and entries found from third parties - HELD THAT: - The Tribunal found that the entries relied upon by the Assessing Officer were found in the course of search on Shri Kapil Gupta and, in part, in material referring only to 'Kalta', without establishing that they specifically pertained to the concerned assessees or their respective concerns. It held that the presumptions under sections 132(4A) and 292C operate primarily against the person from whose possession the material is found and, in any event, remain rebuttable. In the cases of the wholesale liquor concerns, no concrete evidence of corresponding unaccounted sales was unearthed, though such sales would ordinarily follow any out-of-books purchases. In the absence of a clear nexus and corroboration, the additions, whether made substantively or protectively, were held to be based merely on presumption, assumption and surmise. [Paras 5, 7, 19, 27]

The additions relating to alleged unaccounted purchases from Shri Kapil Gupta, and the protective additions of the same nature in Shri Inder Kalta's case, were deleted for the relevant years.

Unsigned agreement to sell - Protective addition - Evidentiary value - addition relating to the Navbhar/Murray field property founded on an unsigned and unregistered agreement and contradictory valuation reports - HELD THAT: - The Tribunal held that the entire case was built on an unsigned, unregistered and unenforceable agreement to sell found in WhatsApp exchanges, which was not even between the actual purchaser and the seller. That document did not record any cash component, and no enquiry had been made from the seller to support the allegation of on-money. The valuation reports relied upon by the Assessing Officer were contradictory and only reflected opinions of valuers. The Tribunal further held that bank transfers made to Smt. Ranjana Kalta could not, by themselves, be treated as income of Shri Inder Kalta. On these facts, neither the protective addition in the hands of Smt. Ranjana Kalta nor the substantive addition in the hands of Shri Inder Kalta was sustainable. [Paras 12, 29]

The protective addition in Smt. Ranjana Kalta's case and the substantive addition in Shri Inder Kalta's case relating to the property transaction were deleted.

Stock deficiency - Gross profit additionon unreconciled stock shortage -HELD THAT: - The Tribunal noted that in both cases the physical stock was found short as compared to the book stock, and the explanation that some bills had not been entered in the tally data remained unsubstantiated because no supporting details were furnished at any stage. In these circumstances, treating the shortage as out-of-books sales and estimating only the profit element thereon was held to be reasonable and logical. [Paras 15, 32]

The gross profit additions on stock shortage in Smt. Ranjana Kalta's case for AY 2023-24 and in Shri Inder Kalta's case for AY 2023-24 were confirmed.

Protective addition - Correct person assessable - Unaccounted sales - HELD THAT: - The Tribunal found that the material itself showed that the cash summaries and sales information were connected with Shri Munish, who acted as salesman of M/s Kalta Liquors, and that the AO had in fact made substantive additions in the hands of that firm. Once the matter properly pertained to M/s Kalta Liquors, the corresponding protective additions in the individual hands of Shri Inder Kalta could not survive on merits. [Paras 21]

The protective additions made in Shri Inder Kalta's case on account of gross profit element in alleged unaccounted sales of M/s Kalta Liquors were deleted.

Undisclosed rental income - Statement u/s 132(4) - Rental income admitted in search was assessable in Shri Inder Kalta's hands in the absence of evidence that it belonged to an HUF - HELD THAT: - The Tribunal accepted the addition because it was founded on a credible statement recorded under section 132(4), and the assessee's plea that the income belonged to an HUF was unsupported by any material. No evidence of the HUF's existence was produced, and even a PAN for the HUF was absent. The statement, therefore, remained unrebutted. [Paras 23]

The additions for undisclosed rental income in Shri Inder Kalta's case for AYs 2021-22 to 2023-24 were confirmed.

Unexplained investment in bullion - Source of cash explained - HELD THAT: - The Tribunal found that the assessee consistently explained that the cash component came from withdrawals from the capital account in M/s Kalta Liquors, and also furnished the bill and evidence of the balance payment through banking channels. Since the source of the cash payment stood established and the transaction was supported by records, the addition as unexplained money was unwarranted. [Paras 34]

The addition for alleged unexplained investment in bullion in Shri Inder Kalta's case for AY 2023-24 was deleted.

Unexplained expenditure - Loose papers - Lack of corroboration - The addition based on rough jottings relating to alleged cash expenditure - HELD THAT: - The Tribunal held that the loose papers contained only rough jottings without complete transactional details, dates, or acknowledgment by any party, and there was no corroborative material to support them. As the entries were bald notings and there was no admission by the assessee of such expenditure, they could not form the sole basis of addition. [Paras 36]

The addition for alleged unexplained cash expenditure in Shri Inder Kalta's case for AY 2023-24 was deleted.

Unaccounted sales - Gross profit estimation - Telescoping of purchases and sales - HELD THAT: - The Tribunal held that, in M/s Kalta Liquors' case, the digital evidence and admissions justified treating the cash collections as unaccounted sales. However, instead of sustaining the higher additions made by applying average gross profit rates, it considered 3% to be a reasonable profit estimate having regard to the nature of the assessee's retail liquor business. For AYs 2022-23 and 2023-24, it further held that the alleged out-of-books purchases and the unaccounted sales were intrinsically connected, since the purchases would necessarily feed the sales and no stock discrepancy had been found to indicate separate unexplained investment in inventory. In those circumstances, separate additions for the gross amount of unaccounted purchases could not be sustained in addition to profit estimation on unaccounted sales. [Paras 39, 43, 44]

For M/s Kalta Liquors, the additions were restricted to profit at 3% on the unaccounted cash collections, and the separate additions for unaccounted purchases for AYs 2022-23 and 2023-24 were deleted.

Final Conclusion: The Tribunal partly allowed all the appeals. Additions resting on third-party material, unsigned documents, or uncorroborated loose papers were deleted, while the rental income additions and the limited gross profit additions on unreconciled stock shortages were sustained; in the case of M/s Kalta Liquors, profit on unaccounted sales was estimated at 3% and separate additions for gross unaccounted purchases were deleted.

Denial of Foreign Tax Credit - Form 67 was filed belatedly -procedural and directory requirement - HELD THAT: - The Tribunal held that where the claim under section 90 was otherwise available, the benefit could not be denied merely because Form 67 was filed belatedly.

Following Subramanian ShyamSunder [2024 (5) TMI 1693 - ITAT CHENNAI] it accepted that filing of Form 67 is a procedural and directory requirement, and not a mandatory condition whose breach extinguishes the substantive claim to foreign tax credit. Since the facts for all three years were identical, the delay was directed to be condoned and the claim was directed to be allowed. [Paras 10, 11, 12

Final Conclusion: The Tribunal allowed all three appeals and held that foreign tax credit could not be denied merely for belated filing of Form 67. The delay was directed to be condoned and the claim under section 90 was directed to be granted for Assessment Years 2018-19, 2019-20 and 2020-21.

Disallowance of the provision made for the interest payable u/s 43B -Deduction under section 80P on enhanced business profits

Provision for interest payable to members of a co-operative society -Addition u/s 43B(e) - Accrual basis deduction - as contended that in case the disallowance of interest provision is sustained, the same would result in enhancement of the business profits which are eligible for deduction u/s 80P(2)(a)(i) - HELD THAT: - The Tribunal held that section 43B is confined to the liabilities specifically enumerated in that provision and, so far as interest is concerned, clause (e) applies only to interest payable on loans or advances from the institutions named therein. The interest liability in the present case related to deposits received from the assessee's own members, who could not be equated with a scheduled bank, co-operative bank or other specified institution. In the absence of the basic statutory condition for applying section 43B(e), the provision could not be invoked. The liability having accrued during the year and having been accounted for in the books maintained under the governing co-operative law, the expenditure was allowable on accrual basis under section 37(1).

Deduction u/s 80P(2) - Assessee's entitlement to deduction under section 80P(2)(a)(i) had already been affirmed in the assessee's own case and, therefore, even if the disallowance were to enhance business profits, such enhanced profits would also qualify for deduction under section 80P, consistent with CBDT Circular No. 37/2016. [Paras 8]

The addition was directed to be deleted and the assessee's appeal was allowed.

Final Conclusion: The Tribunal held that section 43B(e) had no application to interest payable by the co-operative society to its members and that the provision was allowable on accrual basis. On that footing, and also in view of the assessee's affirmed entitlement to deduction under section 80P on enhanced business profits, the addition was deleted and the appeal was allowed.

Deduction u/s 36(1)(viii) - Profits derived from long-term finance business - Long-term finance on pre-closure of loans - Remand for verification of double taxation - Disallowance under section 14A - Deduction under section 80G on CSR contribution

Deduction u/s 36(1)(viii) - Profits derived from long-term finance business - Direct nexus test - Processing fees, upfront fees, lead financer fees, security trustee fees and similar charges received in the course of sanctioning and administering eligible long-term loans - HELD THAT: - The Tribunal held that the relevant test is whether the receipts have a direct nexus with the assessee's long-term finance business. The fees in question arose from processing, sanction, structuring and administration of long-term loans and could not be dissociated from that business.

Following Weizmann Homes Ltd. [2013 (5) TMI 123 - KARNATAKA HIGH COURT] and the principle noticed from Meghalaya Steels Ltd. [2016 (3) TMI 375 - SUPREME COURT] the Tribunal held that such receipts are directly derived from the long-term finance activity and are therefore eligible for inclusion while computing deduction under section 36(1)(viii). [Paras 11, 12]

The assessee's claim on inclusion of these fees for deduction under section 36(1)(viii) was allowed.

Long-term finance on pre-closure of loans - Loan tenure at sanction stage - Deduction under section 36(1)(viii) - Loans sanctioned with repayment terms of not less than five years - character of loan - HELD THAT: - The Tribunal accepted that clause (h) to the Explanation requires examination of the terms on which the money was loaned or advanced, and not the subsequent act of premature repayment. Since the character of the loan as sanctioned remained that of a loan repayable over not less than five years, deduction u/s 36(1)(viii) could not be denied on profits from such loans merely because borrowers prepaid them earlier. The Tribunal followed Gruh Finance Ltd. and upheld the first appellate view that eligibility is to be seen at the time of sanction. [Paras 17]

The Revenue's challenge to allowance of deduction on prepaid long-term loans was rejected.

Remand for verification of double taxation - Interest income in hands of cooperative societies - HELD THAT: - The Tribunal found that the matter turned on factual verification as to whether the concerned societies had in fact disclosed the impugned interest income in their own assessments. As that verification was still required and the assessee had not placed the necessary material in a manner enabling final adjudication, the first appellate authority was justified in remitting the matter to the Assessing Officer instead of deleting the addition outright. [Paras 23]

The assessee's objection to the remand was rejected and the verification direction was maintained.

Disallowance u/s 14A - Investments yielding exempt income - Rule 8D computation - HELD THAT: - The Tribunal noted that the assessee had already made a suo motu disallowance based on investments from which exempt income was earned, whereas the Assessing Officer expanded the base to all investments including those not yielding exempt income. Relying on the jurisdictional High Court decisions in Caraf Builders and Constructions P Ltd [2018 (12) TMI 410 - DELHI HIGH COURT], ACB India Ltd [2015 (4) TMI 224 - DELHI HIGH COURT] and Cargo Motors P. Ltd [2022 (10) TMI 571 - DELHI HIGH COURT] the Tribunal held that only tax-exempt investments are to be taken into account for this computation. [Paras 34]

The deletion of the additional disallowance under section 14A for AY 2020-21 was affirmed.

Deduction u/s 80G on CSR contribution - CSR donations - Eligible charitable contribution - HELD THAT: - The Tribunal accepted the view that merely because the contribution was made in discharge of CSR obligations, it did not cease to retain its philanthropic character for section 80G purposes. Since the statute does not generally bar deduction under section 80G for such qualifying donations, and the coordinate benches had consistently taken that view in American Express (India) P Ltd [2024 (9) TMI 284 - ITAT DELHI] and Ericsson India Global Services P Ltd [2024 (3) TMI 306 - ITAT DELHI], the denial made by the Assessing Officer was not sustainable. [Paras 39]

The Revenue's challenge to the allowance of deduction under section 80G for CSR donation in AY 2020-21 was dismissed.

Final Conclusion: The Tribunal partly allowed the assessee's appeals for AYs 2018-19 and 2019-20 by holding that the impugned fee-based receipts were eligible for deduction under section 36(1)(viii), while sustaining the remand on the separate interest-income issue. All Revenue appeals for AYs 2018-19 to 2021-22 were dismissed, including its challenges on pre-closed long-term loans, section 14A disallowance and deduction under section 80G on CSR contribution.

Benami transaction - Provisional attachment - Beneficial Ownership - initiated after a search conducted u/s 132 - Unaccounted cash utilized for making purchase of immovable properties to acquire shell/paper - Use of statements recorded under another statute - erroneous presumption of benami transaction -Denial of cross-examination in benami proceedings.

Use of statements recorded under another statute - HELD THAT: - It is observed that the IO has not relied only on the statements of third persons like Sh. Anil Sanklecha, CA etc. but duly analyzed the shareholding pattern as well as current Directors in these companies and after analyzing all financials, found that Shri Mahaveer Lunia and his family members are now having full control and management of three companies since F.Y. 2016-17. Moreover, during the search conducted on 16.06.2022, detailed list of various immovable properties purchased in names of these three companies were found at the residence premises of Shri Mahaveer Lunia. These facts show that the statements were corroborated and supported by other evidences. Therefore, the contention of the defendants that statements recorded behind their back have no evidentiary value, cannot be accepted. They could not otherwise question truthfullness of the statements. There is no provision to record statement in the presence of the benamidar or beneficial owner.

The Tribunal held that statements recorded under the Income Tax Act could be used in benami proceedings since the two enactments operate in allied fields and section 60 makes the benami law additional to other laws. It further held that cross-examination is not an inbuilt or automatic right under the Act of 1988 and depends on the nature of the proceedings. The impugned order was not founded on statements alone; the statements were treated as corroborated by the shareholding pattern, control of the companies by Mahaveer Lunia and his family, recovery of the property list from his residence, and the failure of the appellants to substantiate the stated sources of funds. Retraction of the chartered accountant's statement after considerable delay was also not accepted. [Paras 21, 23, 24, 25, 26]

Reliance on the statements and allied material was upheld, and the objection based on lack of cross-examination was rejected.

Benami transaction - Beneficial ownership - HELD THAT: - The Tribunal found that Mahaveer Lunia and his family had acquired controlling shareholding, direct or indirect, in the appellant companies and were in effective management of them since F.Y. 2016-17. Though the companies claimed that the properties were purchased from their own capital, reserves and returned advances, they failed to disclose the legitimate source of the share premium, reserves, advances and loan transactions, or the financial basis on which such funds arose and were repaid. The material on record showed links with shell entities and entry operators, while the chartered accountant admitted routing substantial cash received from Mahaveer Lunia through hawala channels into the companies. The Tribunal held that the companies were used as fronts to conceal the real owner, and the ingredients of section 2(9)(A) stood satisfied notwithstanding the interposition of shareholder companies or the plea that the properties stood in the names of corporate entities. [Paras 33, 34, 35, 36, 42]

The finding of benami transaction was affirmed and the confirmation of provisional attachment was sustained.

Benami transaction independent of income-tax assessment - HELD THAT: - The Tribunal rejected the contention that absence of corresponding action by the Income Tax Department, or subsequent assessment of income, negatived benami proceedings. It held that a benami transaction may exist even where the funds are disclosed or later assessed, because the decisive test is whether the property is held in the name of another for the benefit of the real owner. At the same time, the Tribunal clarified that mere involvement of cash does not automatically constitute a benami transaction; the inference must rest on the proved route, control, and source of funds. Applying that principle, it found the present record sufficient to establish the benami nature of the acquisitions. [Paras 40, 41]

The challenge founded on income-tax treatment and on the plea that cash transactions alone could not support benami action was rejected.

Final Conclusion: The Tribunal upheld the confirmation of the provisional attachment and dismissed the appeals. It held that the material on record established that the appellant companies were used as benamidars for properties acquired for the benefit of Mahaveer Lunia, and the procedural and evidentiary objections raised by the appellants did not merit interference.

Refund of Special Additional Duty - import of coated art board/coated board - compliance with paragraph 2(b) of Notification No. 102/2007-Cus dated 14.09.2007 - invoice-format discrepancies and alleged absence of the prescribed endorsement - Non-passing of duty incidence.

Refund of SAD under Notification No. 102/2007-Cus - HELD THAT: -The dispute essentially revolves around differences in the format or presentation of the invoices rather than the absence of the declaration itself. The Lower Appellate authority has referred to discrepancies between invoice copies retained by the appellant and those obtained from buyers, particularly in terms of layout, typographical arrangement or format. Such differences may arise from the use of different accounting or printing systems and cannot, by themselves, establish that the statutory declaration was omitted. Significantly, the lower authorities have not recorded any categorical finding that the buyers had actually availed credit of SAD or that the endorsement regarding non-admissibility of credit was completely absent in the invoices issued by the appellant.

The Tribunal held that the condition in paragraph 2(b) requiring endorsement regarding non-admissibility of SAD credit is meant to prevent double benefit by the buyer. In the present case, payment of SAD, subsequent domestic sale on payment of VAT, and correlation between imports and sales were not in dispute, and Chartered Accountant certificates also supported non-passing of duty incidence. The objection of the department rested only on differences in layout, typographical presentation, and format between invoice copies, without any finding that the declaration was wholly absent, that buyers had availed credit, or that the duty incidence had been passed on. Such variations were treated as procedural in nature and insufficient to defeat the substantive benefit. Applying the principle recognised in Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner [1991 (8) TMI 83 - SUPREME COURT]. and the line of decisions cited on refund under the notification, the Tribunal concluded that substantial compliance with paragraph 2(b) had been shown and that rejection of refund on hyper-technical discrepancies was unsustainable. [Paras 7, 8]

The appellant was held to have substantially complied with paragraph 2(b) of Notification No. 102/2007-Cus, and the refund claims were allowed.

Final Conclusion: The Tribunal held that minor discrepancies in invoice format did not amount to breach of the substantive condition for SAD refund under Notification No. 102/2007-Cus. Since the essential requirements stood proved, the rejection of both refund claims was set aside and the claims were allowed with consequential relief.

Entitlement to the benefit of Exemption Notification No. 21/2002-Cus - Concessional duty - goods claimed under Serial No. 399 of Chapter/Heading No. 9801 for a power generation project - HELD THAT:- The Court upheld the Tribunal's view [2010 (5) TMI 309 - CESTAT CHENNAI], that the appellant was not entitled to the benefit of Exemption Notification No. 21/2002-Cus in relation to Serial No. 399 of Heading No. 9801, and dismissed the civil appeal.

Power's of the Central Government under the Foreign Trade (Development and Regulation) Act, 1992 - Import restrictions - Notification fixing a Minimum Import Price for import of roasted areca nut - imports claimed under the ASEAN arrangement and Notification No. 46/2011 - Foreign trade policy - Non-tariff measures - Special safeguard for agricultural products.

Import restrictions - Foreign trade policy - Statutory power to regulate imports - HELD THAT: - The Court held that Section 3(2) of the 1992 Act expressly empowers the Central Government to prohibit, restrict or otherwise regulate imports by order published in the Official Gazette, and Section 5 enables formulation and amendment of the foreign trade policy from time to time. On that construction, fixation of MIP through the impugned notification was within the statutory power of the Central Government. The Court also noted that this position stood affirmed in Union of India and others vs. Agricas as LLP and others [2020 (8) TMI 705 - SUPREME COURT] [Paras 6, 8, 9]

The impugned notification was held to be within the competence of the Central Government under the 1992 Act.

Non-tariff measures - Minimum Import Price - Special safeguard for agricultural products - Exemption notification - HELD THAT:- The Court read Article 8 of the ASEAN Agreement as permitting non-tariff measures where they are in accordance with WTO rights and obligations. It then construed Articles 4 and 5 of the WTO Agreement on Agriculture to mean that, while Article 4 deals with market access and conversion into ordinary customs duties, Article 5 preserves safeguard protection in relation to agricultural products. On that basis, the Court accepted that fixation of MIP to protect local agriculture was within the permissible safeguard framework. Since the impugned notification merely fixed a trigger price level and did not impose a quantitative cap on imports, it was held to fall within the scope of the WTO provisions relied on by the respondents. Consequently, the Court held that the MIP condition bound all importers and that the petitioner could not claim exclusion merely because imports were otherwise eligible for nil customs duty under Notification No. 46/2011. [Paras 14, 16, 18, 19, 20]

The MIP restriction was upheld as consistent with the ASEAN and WTO framework and was held applicable to the petitioner's imports notwithstanding Notification No. 46/2011.

Final Conclusion: The writ petition was dismissed. The Court held that the impugned notification fixing MIP for roasted areca nut was validly issued under the 1992 Act and was binding on the petitioner notwithstanding the claimed benefit under Notification No. 46/2011.

Classification of goods - gas compressors manufactured for use in air-conditioning units of motor vehicles - classifiable under Heading 8414 Or under Heading 8708 for GST rate purposes - General Rules of Interpretation - Sole or principal use test - Predominant use test - Most specific description - determining the correct classification of goods for the purpose of payment of tax under the respective GST Enactments - fraud or wilful statement or suppression of facts for invoking Section 74 of the respective GST Enactments - knowingly suppressed the facts to pay tax at lower rate - liable to 100% penalty of the differential tax.

Classification of goods - Specific heading versus residuary heading - HELD THAT:- The Court held that although Heading 8414 generally covers gas compressors and sub-heading 8414 80 11 refers to gas compressors of a kind used in air-conditioning equipment, that entry cannot govern gas compressors meant solely for incorporation in motor-vehicle air-conditioning units. On a conjoint reading of the tariff structure, Section Note 2(e) and Section Note 3 to Section XVII, goods meant solely or principally for use with vehicles in Chapter 87 must be treated as vehicle parts, while machines and apparatus of Headings 8401 to 8479, or parts thereof, stand excluded from the expression parts and accessories in Section XVII except in the limited situations noted therein. The Court reasoned that air-conditioning machines used for persons in motor vehicles are separately recognised under Heading 8415, and if gas compressors of that class were intended to remain within Heading 8414, a specific provision would have existed therefor. Therefore, the petitioner's gas compressors, having no use other than use in automotive vehicles, fall only under the rival Heading 8708 as parts and accessories of motor vehicles. [Paras 116, 117, 118, 125, 127]

The classification adopted by the respondent under Heading 8708 was upheld.

Extended period of limitation - Suppression of facts - Bona fide classification dispute - Penalty - HELD THAT:- The Hon’ble Supreme Court in Cosmic Dye Chemical Vs. Collector of Central Excise [1994 (9) TMI 86 - SUPREME COURT], held as under:-“6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’ preceding the words “misstatement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or rules” are again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful.”

Since the Petitioner entertained a bona fide view both under the previous regime and the new regime in determining the classification for the subject item, the penalty under Section 74 of the respective GST Enactments is also not justifiable. The only change that arose in the classification of the subject item under the Heading 8414 was on account of change in the taxable rate of classification, when the Heading 8414 moved from Schedule IV to Schedule III to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 in the light of amendment vide Notification No.41/2017-Central Tax (Rate) dated 14.11.2017.

The Court held that a settled classification accepted over time cannot be reopened through the extended period merely because the Department later forms a different view, unless there are cogent reasons such as fresh facts, change in law, or non-consideration of material facts. Here, the petitioner had adopted Heading 8414 both in the pre-GST and GST periods on a bona fide understanding, and that position had earlier been accepted. In such circumstances, mere adoption of an incorrect classification did not establish suppression of facts or wilful misstatement with intent to evade tax. Consequently, invocation of Section 74 and the penalty founded on fraud or suppression were held unjustified. Since the classification on merits was upheld against the petitioner, the matter was remitted only for requantification of differential tax and for determination under Section 73 instead of Section 74. [Paras 122, 124, 125, 126, 127]

The impugned orders insofar as they invoked Section 74 were set aside, and the matter was remanded for quantification of tax and penalty under Section 73.

Final Conclusion: The Court upheld the classification of the petitioner's gas compressors under Heading 8708 as parts and accessories of motor vehicles. However, since the petitioner had followed the earlier accepted classification on a bona fide basis, invocation of Section 74 and the consequential penalty on the footing of suppression were set aside, and the matters were remanded only for requantification and fresh determination under Section 73.

Denial for benefit of exemption under Notification No. 50/2017-Customs - non-compliance with the procedure prescribed - Substantial compliance with end-use condition - Procedural non-compliance and substantive exemption -​​​​​​​ Confiscation and penalty.

Whether the benefit of exemption under Notification No. 50/2017-Cus as amended by Notification No. 09/2021-Cus dated 01.02.2021 can be denied to the Appellant for not following the procedure set out in Rule 5 of CIGCRD. - HELD THAT:- The dispute in this case primarily relates to interpretation of the amendments made in Notification No. 50/2017-Customs dated 30.06.2017 vide Notification Nos. 02/2021-Customs (NT) dated 01.02.2021 and 07/2022-Customs (NT) dated 01.02.2022. While the department’s case is entirely dependent on notification Nos. 02/2021-Customs (NT) dated 01.02.2021 which amended notification No. 50/2017Customs dated 30.06.2017 by way of introducing a new condition to be fulfilled by the Appellant, viz. complying with the procedure prescribed under Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR Rules, 2017, in short), the Appellant has placed reliance on the subsequent amendment Notification No. 07/2022-Customs (NT) dated 01.02.2022 which restored the conditions of notification No. 50/2017-Customs dated 30.06.2017 to the position as existing prior to the amendment brought in vide notification No. 02/2021-Customs (NT) dated 01.02.2021 and argued that the amendment made vide Notification No. 07/2022-Customs (NT) dated 01.02.2022 should be applied retrospectively to nullify the effect of Notification No. 02/2021-Customs (NT) dated 01.02.2021.

This apart, Appellant has also pressed into service Doctrine of Substantial compliance and argued that substantial benefit cannot be denied for procedural lapse. Another argument of Appellant is that courts have applied a purposive interpretation to extend the benefits of exemption notifications despite procedural lapses.

The Tribunal held that the central requirement for availing the concessional rate was authorization of the imports for the specified purpose under Conditions 53 and 54, and the procedural requirement introduced through Condition No. 9 was intended only to ensure that the imported goods were actually used for that purpose. Since there was no dispute that the imported goods qualified under the notification and were in fact used for the intended end use, failure to follow the amended bond-filing procedure at the place of use, instead of at the port of import, remained a procedural lapse and did not affect substantive eligibility. The Tribunal found that the appellant had continued to follow the earlier procedure, that the customs officers at the port of import had also accepted such compliance, and that the change in procedure did not alter the underlying safeguard of securing differential duty through bond. Relying on the principle that once eligibility to an exemption is established, procedural requirements meant to regulate its implementation should not defeat its beneficial object, the Tribunal held that the adjudicating authority had wrongly applied decisions concerning disputed eligibility to cases where eligibility itself was not in doubt, had selectively read authorities on strict interpretation, and had ignored the beneficial purpose of the notification despite material proving end use. End-use certificates and Chartered Engineer certificates having established fulfillment of the object of the notification, denial of exemption on procedural grounds was unsustainable. [Paras 22, 23, 24, 26, 28]

The exemption benefit was held admissible, and the demand founded solely on procedural non-compliance was set aside.

Confiscation and penalty - Misdeclaration - HELD THAT: - The Tribunal found that the appellant had not made any misdeclaration so as to attract confiscation under Section 111(m). It further held that, once the goods were found entitled to the exemption notification, Section 111(o) also had no application. The very basis for confiscation thus failed, and the redemption fine and penalty imposed as consequential measures could not survive. [Paras 29]

The confiscation, redemption fine and penalty were set aside.

Final Conclusion: The Tribunal held that the appellant's entitlement to the concessional rate under Notification No. 50/2017-Cus. could not be defeated by procedural non-compliance under the IGCR procedure once specified end use stood established. The demand, confiscation, redemption fine and penalty were therefore set aside, and the appeal was allowed with consequential reliefs.

MEIS scrips - Jurisdiction of customs authorities - Extended period of limitation - Suppression of Facts - Wilful Misstatement - Validity of Scrip - demand when an earlier show cause notice on the same products and same period had already been issued and the relevant facts were within the department's knowledge.

Extended period of limitation - Suppression of facts - HELD THAT: - The Tribunal held that the present appeal was governed by its earlier decision in the appellants' own case [2025 (8) TMI 728 - CESTAT MUMBAI], where it was found that the department already had knowledge of the exports and the availment of MEIS benefits when the earlier show cause notice was issued. In such circumstances, suppression or wilful misstatement could not be alleged again so as to justify invocation of the extended period. The Tribunal further accepted the earlier reasoning that different wings of the same department could not, for the same controversy, sustain proceedings by invoking the extended period once the facts were already within departmental knowledge. [Paras 5, 7, 8]

The impugned demand failed on limitation and could not be upheld on the basis of the extended period.

MEIS scrips - Jurisdiction of customs authorities - DGFT cancellation - HELD THAT: - Following its earlier order in the appellants' own case [2025 (8) TMI 728 - CESTAT MUMBAI], the Tribunal held that the MEIS scrips admittedly remained valid, as the show cause notice issued by DGFT had not culminated in cancellation of the licences. The determinative principle applied was that, in the absence of adjudication by DGFT against the scrips, customs authorities cannot go behind the benefit granted under the Foreign Trade regime and take punitive action by reclassifying the exported goods for recovery of the alleged excess MEIS benefit. On that basis, the impugned order was found unsustainable on merits as well. [Paras 5, 7, 8]

The denial and recovery of MEIS benefit by customs was not maintainable so long as the MEIS scrips remained uncancelled by DGFT.

Final Conclusion: Applying its earlier decision in the appellants' own case, the Tribunal held that the impugned order was unsustainable both on limitation and on merits. The appeal was accordingly allowed with consequential relief.

Effect Of initiating Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor (“CD”) - Discretion in admission of financial creditor's insolvency application - Award in favour of corporate debtor and insolvency admission - Overall financial health and viability of corporate debtor - Financial Debt And Default.

Discretion in admission of financial creditor's insolvency application - HELD THAT: - Applying the principle in Vidarbha Industries Power Ltd. vs. Axis Bank Ltd.[2022 (7) TMI 581 - SUPREME COURT], the Appellate Tribunal held that the discretion under Section 7 is to be exercised on consideration of all relevant facts, including whether the awarded amount exceeds the debt and the overall financial health and viability of the corporate debtor. In the present case, the debt owed was not confined to the respondent bank but extended to the consortium lenders, and the amount claimed in execution was far below the total admitted consortium debt. Further, the corporate debtor was only a special purpose vehicle for the project, had no independent business or other source of income, and, after takeover of the project, was neither carrying on business nor financially viable. On these facts, the case did not fall within the category where admission ought to be deferred or declined. [Paras 17, 18]

The plea founded on the arbitral award and on Vidarbha Industries Power Ltd. was rejected, and admission of the Section 7 application was upheld.

Final Conclusion: The Appellate Tribunal held that, despite the arbitral award in favour of the corporate debtor, the admitted consortium debt being substantially higher and the corporate debtor lacking financial viability, no case was made out to defer or refuse admission under Section 7. The appeal was accordingly dismissed.

Maintainability of application under Section 9 of the Insolvency and Bankruptcy Code - pre-existing dispute between the parties prior to issuance of the demand notice - defective supplies, debit notes, reconciliation of accounts - Plausible contention.

Plausible pre-existing dispute - Reconciliation of accounts - Operational debt - HELD THAT: - In Sabarmati Gas Limited vs. Shah Alloys Limited [2023 (1) TMI 195 - SUPREME COURT] this Court considered the scope of the word ‘reconciliation’ and applying the definition in Black’s Law Dictionary, 10th edition, this Court opined that the apt meaning suitable to the situation in relation to accounting would mean an adjustment of amounts so that they agree, especially by allowing for outstanding items. This Court referred to the observations in Mobilox [2017 (9) TMI 1270 - SUPREME COURT] that it is not necessary that the Court should be satisfied that the defence of a pre-existing dispute is likely to succeed and it is enough if such a dispute exists between the parties. Per this Court, what is to be seen is whether there is a plausible contention requiring investigation for the purpose of adjudication for it to satisfy the requirement of a pre-existing dispute.

The Court held that the material on record disclosed a genuine and plausible dispute requiring further investigation, and not a sham or illusory defence. The appellant's earlier written complaint regarding defective supplies, its repeated demand for reconciliation of accounts, the police complaint lodged prior to the demand notice, the discrepancies in the parties' ledger accounts, and the respondent's shifting stands as to the amount allegedly due together showed absence of consensus as to liability and quantum. The belated reply to the earlier complaint and the subsequent raising of multiple interest debit notes were treated as circumstances supporting the appellant's stand that the accounts were disputed. Applying the principle in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited and the later decisions following it, the Court held that at the Section 9 stage the adjudicating authority is only to see whether a plausible dispute exists and not to adjudicate upon its ultimate merits. [Paras 15, 16, 17, 18, 21]

The NCLT had rightly rejected the Section 9 application on the ground of pre-existing disputes, and the NCLAT was not justified in reversing that conclusion.

Final Conclusion: The appeal was allowed. The judgment of the NCLAT directing admission of the Section 9 application was set aside and the NCLT's order rejecting the application on the ground of pre-existing disputes was restored.

Provisional Attachment - Coram Non Judice - Validity of composition of the Adjudicating Authority under the Prevention of Money-Laundering Act, 2002 - impugned order was passed by a single-member Bench - Limitation for retention and attachment proceedings - Proceeds of crime - Reverse Burden of Proof - provisional attachment was barred by limitation under Section 5(1).

Single-member Bench - Composition of Adjudicating Authority - Coram non judice - HELD THAT: - On a plain reading of Section 6(2) and Section 6(5)(b) of the PMLA, the Court held that while the Adjudicating Authority as an institution consists of a Chairperson and two Members, the Chairperson is empowered to constitute a Bench of one or two Members for actual adjudication. The expression conferring power to constitute such Benches was treated as directory, intended to secure functional flexibility and administrative efficiency. The Court followed the view taken in Naresh Bansal and Othres vs. Adjudicating Authority and Another [2025 (11) TMI 1711 - DELHI HIGH COURT] J. Sekar vs. Union of India & Ors. [2018 (1) TMI 535 - DELHI HIGH COURT] and Shri. B. Sreenivasa Gandhi vs. Adjudicating Authority and Another [2026 (1) TMI 1594 - TELANGANA HIGH COURT]., and held that a single-member Bench does not render the proceedings coram non judice. As the Chairperson was duly appointed and qualified, and no prejudice or lack of competence was shown, the objection to the Bench composition was rejected. [Paras 25, 26, 27, 28, 29]

The challenge founded on alleged invalid composition of the Adjudicating Authority failed.

Exclusion of limitation during COVID-19 - Retention of seized materials - Procedural irregularity - HELD THAT: - The Court held that the period covered by the Supreme Court's extension of limitation during the COVID pandemic had to be excluded while computing the statutory period. It accepted the computation recorded by the Adjudicating Authority and found no demonstrated error in it. The Court further held that, in any event, when the petitioners had been afforded repeated opportunities of hearing, a procedural irregularity in computation, absent demonstrated prejudice or miscarriage of justice, would not by itself invalidate the order. [Paras 33, 34, 35]

The plea of limitation against the retention order was rejected.

Prima facie satisfaction - Proceeds of crime - Confirmation of provisional attachment - HELD THAT: - The Court held that at the stage of confirmation of provisional attachment under the PMLA, proof beyond reasonable doubt is not required; what is required is prima facie satisfaction on the basis of available material. Applying that standard, it found that the circumstances relied on by the authorities, including the change in the proposed purchaser of the properties, the telephonic links with the main accused, the absence of credible proof of source of funds, and non-cooperation in furnishing supporting material, cumulatively furnished adequate basis to infer prima facie involvement of the properties in money laundering. Relying on Vijay Madanlal Choudhary vs. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)] the Court reiterated that only property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be treated as proceeds of crime, and held that the material before the Adjudicating Authority was sufficient for that prima facie conclusion at this stage. [Paras 38, 39, 40, 41, 42]

The confirmation of attachment and the retention of seized material were upheld on merits.

Final Conclusion: All three writ petitions were dismissed. The Court upheld both the order permitting retention of seized materials and the order confirming the provisional attachment, holding that the objections on Bench composition, limitation and lack of material were without merit.

Reverse burden of proof- Continuation of freezing of the appellant's bank accounts and retention of seized material - Presumption of proceeds of crime - Director's liability under special legislation - Burden to disclose source of funds.

Reverse burden of proof - HELD THAT:- The appellant found involved of which reference has been given in the impugned order. He was not simply a Director of the Company but active and therefore only the relevant documents for extension of the loan and its utilization to self- help groups and joint liabilities groups of BISWA were found with the appellant. It is, otherwise, settled law of the land that the allegations have to be defended by the accused by submitting sufficient evidence.

The Tribunal held that the appellant's case could not be tested on principles governing directors' liability under other statutes, since the matter arose under the Act of 2002, which contains its own statutory scheme. On the material noticed in the impugned order, the appellant was not treated as a mere nominal Director; he was alleged to be actively connected with companies through which the funds were layered, and relevant documents relating to loans and their utilisation were found in his possession. Once such foundational facts were disclosed, Section 24 attracted a reverse burden, requiring the appellant to displace the statutory presumption concerning involvement of proceeds of crime. Further, under Section 8(1), the appellant was required to show the source of the amounts lying in the frozen accounts. His plea that the money came from a gym business and LIC commission remained unsupported, and even the bank accounts said to evidence such income were not produced. In that situation, mere assertion of lawful source or reliance on his status as the son of the main accused or as a Director was insufficient to warrant interference. [Paras 20, 21, 22, 23, 25]

The challenge to retention of seized documents and devices and to continuance of freezing of the bank accounts was rejected, and the appeal was dismissed.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's order permitting retention of the seized documents and digital devices and continuance of freezing of the bank accounts. It held that the appellant had failed to rebut the statutory presumption or establish the claimed lawful source of the funds.

Attachment of property of third parties - benefit of proceeds of crime - received by the education society and no material showed receipt or personal benefit - Personal liability - forged records/accounts of the company.

Attachment of property of third parties - HELD THAT:- In the instant case, the allegation against the appellants is for receipt of Rs. 10.95 Crores from M/s SVIL. It is towards the donation for the school at Greater Noida and for an Education Institution to be established at Mumbai. The main limb of argument of counsel for the appellants is that so far as appellants Abhay Shukla and Sudhir Shukla are concerned, they have not received any part of the proceeds of crime so as to attach their shares in different companies.

No part of proceeds of crime remained with M/s Bag Films Education Society. The action of the respondents could have been justified even if they would have provisionally attached the property of the society aforesaid instead of the individuals though no part of proceed remained with it.

The Tribunal held that, though the education society had received funds from the principal accused entity, the respondents' own case showed that those amounts were either used for servicing the society's loan or transferred to other entities and recipients. There was no material showing that the two individual appellants had personally received any part of the alleged proceeds of crime or that the funds had been routed for their direct or indirect benefit. Their mere status as President and Secretary of the society could not, without more, justify attachment of their personal shares. [Paras 11, 12]

The attachment of the shares of Abhinav Shukla and Sudhir Shukla was set aside, as the necessary nexus between those assets and any receipt or benefit of proceeds of crime by them was not established.

Final Conclusion: The Tribunal allowed the appeals and set aside both the Provisional Attachment Order and its confirmation, holding that the personal shares of the individual appellants could not be attached merely because they were office-bearers of the society, in the absence of material showing receipt or benefit of the alleged proceeds of crime.

Condonation of Delay - irregular availment of credit by the petitioners and imposed consequential penalties - barred by limitation - invocation of Section 73 of the Finance Act, 1994 - Efficacious alternative statutory remedy - Adequate opportunity of hearing - Erroneous assumption of jurisdiction - Scope for interference under Article 226 of the Constitution of India - breach of natural justice.

Alternative statutory remedy - HELD THAT: - The Court found from the impugned order itself that adequate opportunity of hearing had been afforded and therefore no breach of natural justice was made out. It further noted that the authority had invoked Section 73 of the Finance Act, 1994 by assigning reasons, and therefore it could not be concluded in writ jurisdiction that the order was barred by limitation. The Court held that an alleged erroneous assumption of jurisdiction, by itself, is not a ground for interference under Article 226 when an efficacious statutory appeal is available, and the questions relating to justification for invoking Section 73, jurisdiction, limitation and the effect of the discharge certificate were left open for the appellate forum. [Paras 5, 6, 7, 8, 9]

The writ petition was disposed of with liberty to the petitioners to file an appeal before the Tribunal within the time granted, with a direction that the delay be condoned, and all merits issues were left open for adjudication by the appellate authority.

Final Conclusion: The Court declined to examine the adjudication order on merits in writ jurisdiction and relegated the petitioners to the statutory appellate remedy. It held that no violation of natural justice was established and left the questions of jurisdiction, limitation and other merits issues to be decided by the Tribunal.

Service tax liability on venture capital trust - Juridical person - Pass-through entity - Applicability of Doctrine of mutuality - contributors and the trust.

Service tax liability of trust - Juridical person - Pass-through entity - Doctrine of mutuality - HELD THAT: - The Tribunal held that the controversy stood concluded by the Karnataka High Court decision in India Advantage Fund-III vs. Commissioner of Central Tax [2024 (2) TMI 1086 - KARNATAKA HIGH COURT], which had been affirmed by the Supreme Court in Commissioner of Central Tax, Bangalore vs. India Advantage Fund [2024 (10) TMI 290 - SC ORDER] Following that binding precedent, it was held that a trust is not a juridical person for the purpose of levy under the Finance Act, 1994, and that the fund operated as a pass-through vehicle holding contributors' monies for investment. Consequently, no service tax could be levied on the assessees, and on the same footing the Revenue's appeal against dropping of demand on provisions towards investment loss and doubtful receivables also could not survive. [Paras 7, 8, 9]

The assessees' appeals were allowed and the Revenue's appeal was rejected.

Final Conclusion: Applying the binding High Court judgment affirmed by the Supreme Court, the Tribunal held that the assessees, being trusts, were not liable to service tax under the Finance Act, 1994. All appeals filed by the assessees were allowed, and the Revenue's appeal was rejected.

Inclusion of the value of bought-out items supplied by the head office and installed along with the modular kitchen systems in the assessable value -Essential parts of manufactured goods - Excisability of installed modular kitchen systems- invocation of the extended period of limitation - Suppression Of Facts - Manufacture - Immovable Property - manufacture of articles of stainless steel such as utensils, stainless steel modular kitchens etc.

Inclusion of bought-out items in assessable value - HELD THAT: - The Tribunal held that the Revenue had neither alleged nor established that the bought-out items were manufactured by the appellant or that they were essential parts of the modular kitchen systems manufactured by it. Items such as kitchen hoods, chimneys, ovens, microwaves and fittings could not, merely because they were supplied and installed along with the manufactured items, be treated as integral components whose value must be added to the assessable value. The Tribunal further held that, if the Revenue sought to levy duty on the installed kitchen system at the customer's premises, it was first necessary to establish that the installed system was excisable and to determine its classification. In the absence of any such exercise, the demand could not be sustained. The reliance on Frick India Ltd. [2007 (9) TMI 6 - SUPREME COURT] was held to be misplaced because the bought-out items in that case were essential parts of the compressor, unlike the goods involved here; and MIL (India) Ltd. [2007 (3) TMI 8 - SUPREME COURT] was understood as laying down that inclusion of bought-out items depends on the facts of each case. [Paras 7, 8, 9, 10]

The demand based on inclusion of the value of the bought-out items failed on merits.

Extended period of limitation - Suppression of facts - Audit-based detection - Interpretational dispute - HELD THAT: - The Tribunal held that the appellant was a registered unit regularly paying duty and filing returns, and the dispute had arisen out of an audit. In those circumstances, the case did not justify invocation of the extended period. The Tribunal also treated the controversy regarding includability of bought-out items as an interpretational dispute on which there were several decisions, and therefore not a case warranting the allegation necessary for extended limitation. [Paras 10]

The demand was also unsustainable on limitation.

Final Conclusion: The Tribunal held that the value of the bought-out items supplied directly to the customer site could not be added to the assessable value in the absence of any finding that they were essential parts of the manufactured goods or that the installed system itself was classifiable and excisable. The appeal was accordingly allowed both on merits and on limitation, with consequential relief as per law.

Maintainability of appeal against order purportedly passed under Section 17 - application for joinder of a party to the arbitration agreement -Trustee capacity vis-a-vis partnership rights in LLP - Without prejudice basis - Beneficial ownership - Legal estate - Natural justice - Fair play and good conscience - Appellate jurisdiction.

Maintainability of appeal against order purportedly passed under Section 17 - Right of appeal determined by exercise of power - HELD THAT: - The application for joinder is not really an application for joinder of a non-signatory party to the arbitration agreement. The application was necessitated in the context of the peculiar position adopted by Mayank years into the arbitration, based on a declaration of the Trust made by Raju in 2019. Under Section 5 of the Limited Liability Partnership Act, 2008 (“LLP Act”), an individual or a body corporate may be a partner of the LLP. Therefore, natural persons or artificial legal persons alone can be partners. This is quite similar to the position in law for being a member of a company – indeed, the LLP itself is a body corporate and an artificial legal person under Section 3 of the LLP Act.

The Court accepted that the right of appeal is determined by what the adjudicatory forumdid or purported to do, and not by what it ought to have done. Since the application for joinder had been moved under Section 17 and the arbitral tribunal had also dealt with it as one under Section 17, the challenge could be examined under Section 37(2)(b). At the same time, the Court clarified that the matter could not be viewed as a routine joinder order in the ordinary sense. [Paras 11, 15, 16]

The preliminary objection to maintainability did not bar consideration of the petition under Section 37(2)(b).

Joinder in arbitral proceedings - Trustee capacity vis-a-vis partnership rights in LLP - Beneficial interest and legal ownership - HELD THAT: - The Court held that, under the LLP framework, only an individual or body corporate can be a partner, and on the material noticed, Raju continued to be the owner of the partnership interest even after declaring that the benefits of that interest would flow through a trust. The Court distinguished between legal ownership and beneficial enjoyment, and found that this was not truly a case of bringing in an independent third party, but of permitting the same person already party to the arbitration agreement to participate additionally as trustee because of the contention raised about cessation of his partnership. The trust itself was not a legal entity capable of suing or being sued. In that setting, the tribunal's course, adopted without prejudging the reserved issue on whether Raju had ceased to be a partner, was neither perverse nor erroneous in law and was consistent with preserving the parties' positions pending final adjudication. [Paras 16, 22, 24, 25, 29]

The challenge to the impugned order failed on merits, and no interference with the tribunal's protective direction was warranted.

Final Conclusion: The petition was rejected. The Court held that, even if the challenge were treated as maintainable under Section 37 because the tribunal had purported to act under Section 17, the impugned order permitting Raju also to participate as trustee was only a protective arrangement and disclosed no perversity or error of law warranting interference.

Constitutional validity of sanctioned amalgamation scheme for the co-operative bank - ultra vires inter alia Article 14, 19(1)(g) and 300A of the Constitution of India and also being violative of provisions of the Banking Regulation Act, 1949 - Judicial review of economic policy - Reasonable classification of depositors - Reduction of depositors' rights and interest - failed to fulfill its statutory duty to protect the interest of the shareholders - challenged to the Notification dated 25/01/2022, issued by the Ministry of Finance, thereby granting its approval to the scheme formulated by the Reserve Bank of India (‘RBI’) under Section 45 of the Banking Regulation Act, 1949 (‘BR Act’) in form of “Punjab and Maharashtra Co-Operative Bank Ltd. (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022”, which came into force w.e.f. 25/01/2022 - supersession of the Board of Directors of the Bank and appointment of Administrator in exercise of the powers conferred under sub-section (1) and (2) of Section 36AAA read with Section 56 of the BR Act.

Banking amalgamation scheme - Judicial review of economic policy - Public interest - HELD THAT: - The Court held that the inspection disclosed a catastrophic erosion of net worth, large unreported exposure, and a condition requiring immediate regulatory intervention to protect depositors and preserve confidence in the banking system. RBI explored alternatives including capital infusion, recovery, merger with stronger banks and other resolution measures, and proceeded with amalgamation only after those options did not yield a viable result. In matters of financial and economic policy, the Court's role is limited to examining illegality, irrationality, procedural impropriety or mala fides; it cannot substitute its own view for that of the expert regulator. Tested on that standard, the scheme was found to be a measure adopted in public interest and in the interest of depositors, and not arbitrary or extraneous. [Paras 66, 67, 68, 80, 81]

The challenge to the RBI's decision to frame and secure approval of the amalgamation scheme failed.

Reasonable classification of depositors - Staggered repayment - Reduction of depositors' rights and interest - Deposit insurance - HELD THAT: - The Court found that the scheme did not create an impermissible classification based on small and large deposits, but distinguished between retail depositors holding deposits in individual capacity and institutional depositors comprising non-individual entities. That distinction was held to be founded on intelligible differentia and to bear a rational nexus to the object of securing the larger public interest and protecting the greatest number of depositors. The prioritisation of retail depositors and the staggered payout mechanism were therefore not discriminatory, nor was the absence of pro rata distribution under winding-up principles relevant, since Section 43A governing liquidation could not control a scheme framed under Section 45. The Court also held that Section 45 expressly permits reduction of interest or rights of depositors and creditors, and therefore the stoppage of accrual of interest for the specified period and payment thereafter at 2.75% did not suffer from legal infirmity in the circumstances of the bank's negative net worth. The objections founded on DICGC liability, the ceiling of insured deposits, and demands for release of CRR/SLR were also rejected, the Court holding that the scheme operated consistently with the DICGC Act and that the deposit insurance liability remained governed by the statutory cap and repayment structure applicable to amalgamation. [Paras 77, 78, 79, 81, 82]

The substantive challenge to the payout, interest and depositor-classification features of the scheme was rejected.

Natural justice - Statutory override - Consultation on draft scheme - Supersession of board of directors - The procedural and statutory objections to the scheme, including want of hearing, alleged non-compliance with Section 44A, and the objection to continued supersession of the board - HELD THAT: - The Court held that Section 45(6) requires circulation of the draft scheme for suggestions and objections, and that written representations constitute sufficient compliance; an individual hearing to each depositor was not required. The material placed by RBI showed that objections were considered and modifications were made before the scheme was forwarded for approval. The contention based on Section 44A was rejected because the impugned scheme was framed under Section 45 read with Section 56, which the Court treated as a complete code having overriding effect under Section 45(14). The objection based on the period of supersession also failed because PMC Bank, being a co-operative bank, was governed by Section 36AAA read with Section 56, and not by Section 36ACA. As regards the grievance of co-operative societies or federations not being separately treated, the Court held that societies fell within institutional depositors under the scheme and any further legislative classification was not for the Court to create. [Paras 73, 74, 81, 82]

No procedural impropriety or statutory violation was made out in the formulation or approval of the scheme.

Final Conclusion: The Court upheld the Punjab and Maharashtra Co-Operative Bank Ltd. (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022 and found no constitutional, statutory or procedural infirmity in its formulation or approval. All the writ petitions were dismissed.