TaxTMI Updates e-Newsletter
Apr 15,2022

Exemption under Notification No. 12/2017-C.T. (Rate) (entry at SI. No. 3) - activity in relation to functions entrusted to Panchayats under Article 243G and to Municipalities under Article 243W - pure services (renting of immovable property) - Tax Deducted at Source under Section 51 of the CGST Act

Exemption under Notification No. 12/2017-C.T. (Rate) (entry at SI. No. 3) - activity in relation to functions entrusted to Panchayats under Article 243G and to Municipalities under Article 243W - pure services (renting of immovable property) - Impugned renting services to the Social Justice Department of the State Government are exempt from GST under the entry at SI. No. 3 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. - HELD THAT: - The exemption entry applies to pure services provided to the State Government by way of any activity in relation to functions entrusted to Panchayats under Article 243G or to Municipalities under Article 243W. The terms "any" and the phrase "in relation to" impart wide coverage to the entry. Articles 243G and 243W together with the Eleventh and Twelfth Schedules entrust panchayats and municipalities with responsibilities for planning and implementing schemes for social justice and the welfare of weaker sections, including girls and women of backward classes/Scheduled Tribes. Renting of immovable property to the Social Justice Department for residential accommodation of such girls is a welfare measure that falls within those entrusted functions. The Appellant submitted the agreement evidencing (i) the nature of the recipient as a State Government department and (ii) the nature of the service as renting (a pure service). On these facts and the broad wording of the exemption entry, the renting services qualify for exemption under SI. No. 3 of Notification No. 12/2017-C.T. (Rate). [Paras 11, 12, 13]

The Appellant's renting services to the Social Justice Department are exempt from GST under the specified exemption entry.

Tax Deducted at Source under Section 51 of the CGST Act - consequence of exemption on applicability of TDS - Whether TDS under Section 51 applies to the subject transactions after holding them exempt from GST. - HELD THAT: - Section 51 mandates deduction of tax at source in respect of payments for taxable supplies where the conditions for deduction are met. Once the supply is held to be exempt from GST, it ceases to be a taxable supply attracting GST. Consequently, the statutory scheme for TDS under Section 51, which operates only in relation to payment for taxable supplies, has no application to transactions that are not subject to GST. Therefore, where the rent payment is held to be exempt, no TDS under Section 51 is exigible in respect of those payments. [Paras 14, 15, 17]

TDS under Section 51 is not applicable to the exempt renting services.

Final Conclusion: The Advance Ruling under challenge is set aside: renting of immovable property by the Appellant to the State Social Justice Department for residential accommodation of backward class/Scheduled Tribe girls is exempt under SI. No. 3 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, and therefore TDS under Section 51 of the CGST Act is not leviable on such transactions; the appeal is allowed.

Anti-profiteering under Section 171 of the CGST Act, 2017 - Passing on benefit of input tax credit - Requirement of pre-GST price or input tax credit structure for comparison - Applicability of Section 171 where project launched post-GST - Emails and oral assurances not being legally enforceable evidence for anti-profiteering

Anti-profiteering under Section 171 of the CGST Act, 2017 - Passing on benefit of input tax credit - Requirement of pre-GST price or input tax credit structure for comparison - Applicability of Section 171 where project launched post-GST - Emails and oral assurances not being legally enforceable evidence for anti-profiteering - Whether the respondent contravened the provisions of Section 171 of the CGST Act, 2017 by not passing on the benefit of input tax credit. - HELD THAT: - The Authority accepted the DGAP's finding that the impugned project was launched and bookings commenced only after the introduction of GST and that there was no pre-GST tax rate or ITC structure against which post-GST prices or ITC utilisation could be compared. The respondent continued to charge GST on construction services at the effective rate of 12% with ITC, and therefore there was no demonstrable additional ITC benefit or reduction in tax rate to be passed on. In these facts, the emails and oral representations relied upon by the applicant, absent any legally enforceable document, were not relevant material for anti-profiteering proceedings. On this basis the Authority concurred with the DGAP that Section 171 was not attracted and no profiteering could be computed. [Paras 7, 15, 16, 17, 19]

No contravention of Section 171 of the CGST Act, 2017 was found; the allegation of failure to pass on ITC benefit is not sustainable and the application is dismissed as not maintainable.

Final Conclusion: The Authority accepted the DGAP's conclusion that, because the project was launched and bookings made post-GST with no pre-GST price/ITC baseline and the respondent continued to pay tax at 12% with ITC, there was no occasion under Section 171 to compute or order passing on of any ITC benefit; the complaint is dismissed.

Reopening of assessment under Section 147/148 - reason to believe - information from Investigation Wing as basis for reopening - non-attraction of Section 153C where no seized books or documents of the searched person pertain to the assessee - Explanation 2(b) to Section 147 - return filed but no assessment

Reopening of assessment under Section 147/148 - reason to believe - information from Investigation Wing as basis for reopening - non-attraction of Section 153C where no seized books or documents of the searched person pertain to the assessee - Validity of the notice issued under Section 148 based on information received from the Investigation Wing and whether Section 153C required proceedings instead - HELD THAT: - The assessing officer recorded reasons stating that information received from the DDIT (Inv.) led, after independent verification of the assessee's return and perusal of statements recorded on oath, to a conclusion that substantial cash payments were made by the assessee in the relevant year. The court found that the reason to believe was founded on such information and independent verification rather than on books of account or documents seized in the search of M/s Celebration City Projects (P) Ltd. Consequently, the case did not fall within clause (b) of Section 153C(1), which requires seized books, documents or assets of the searched person to pertain to another person. Reliance on information from the Investigation Wing is a recognised basis for issuance of notice under Section 148 where an assessing officer forms an independent reason to believe escapement of income. The court therefore held that the impugned notice and the order rejecting the objection were not illegal or vitiated for want of jurisdiction. [Paras 9, 10, 12]

Notice under Section 148 and the order rejecting objection sustained; Section 153C not attracted on the facts found.

Explanation 2(b) to Section 147 - return filed but no assessment - reopening of assessment under Section 147/148 - Whether Explanation 2(b) to Section 147 applies where a return was filed but no assessment was made - HELD THAT: - The assessing officer noted that the assessee had filed a return for A.Y. 2016-17 but no assessment under Section 143(3) had been made. Under Explanation 2(b) to Section 147, if a return has been furnished and no assessment made, understatements or excessive claims in that return may render it a case where income has escaped assessment. The court accepted this legal position and observed that the circumstances described in the reasons recorded brought the matter within Explanation 2(b), supporting initiation of reassessment proceedings under Section 148. [Paras 11, 12]

Explanation 2(b) is attracted on the facts; reopening under Section 148 permissible.

Final Conclusion: Writ petition dismissed; impugned notice under Section 148 and the order rejecting the objection are upheld and the assessing authority may proceed with reassessment in accordance with law.

Reopening of assessment after four years - Proviso to Section 147 - failure to disclose truly and fully material facts - Primary facts disclosure (balance-sheet and computation) - Reasoned basis for notice to reopen - Crompton Greaves principle - cogent indication of non-disclosure in reasons

Proviso to Section 147 - failure to disclose truly and fully material facts - Reopening of assessment after four years - Validity of the notice dated 25 March 2014 under Section 148/147 insofar as it was issued after the four year period and rested on an alleged failure to disclose material facts. - HELD THAT: - Since the notice to reopen was issued after expiry of four years from the end of the relevant assessment year, the onus was on the Revenue to demonstrate that income had escaped assessment due to the assessee's failure to disclose truly and fully material facts. The reasons relied upon by the Revenue were drawn from the assessee's own balance-sheet and computation of income and did not, on their face, demonstrate any omission or non disclosure of primary facts by the assessee. A bald statement that the assessee "failed to disclose fully and truly" material facts, without cogent indication in the reasons, cannot satisfy the jurisdictional requirement in the proviso to Section 147. Following the principle that where no case of failure to disclose can be culled from the reasons the assumption of jurisdiction is ultra vires, the Court found that the requirements for reopening after four years were not met. [Paras 3, 4, 5, 6, 8]

Notice under Section 148/147 quashed as the reasons do not show failure to disclose truly and fully material facts necessary to justify reopening after four years.

Primary facts disclosure (balance-sheet and computation) - Reasoned basis for notice to reopen - Whether production of audited balance-sheet and computation of income amounted to non disclosure or whether they constituted full disclosure of primary facts preventing reopening. - HELD THAT: - The assessee filed its return along with the audited profit and loss account and balance-sheet as required under Section 139. The reasons for reopening expressly relied upon entries in the balance-sheet (capital work in progress) and Profit & Loss / computation (ground rent). Where all primary facts are before the Assessing Officer by virtue of documents filed with the return, the duty to disclose does not extend to communicating the legal or factual inferences that the Revenue may draw therefrom. The reasons did not indicate that any material primary fact was concealed or omitted; they merely noted items visible on the filed accounts. Consequently, the Court held that the production of these documents did not amount to omission or failure to disclose that would warrant reopening. [Paras 3, 4, 8]

Reopening unsustainable because the balance sheet and computation filed with the return constituted disclosure of the primary facts relied upon by the Revenue, and no non disclosure was shown.

Final Conclusion: Writ petition allowed; the notice dated 25 March 2014 under Section 148 and the order rejecting objections are quashed insofar as they seek to reopen assessment for AY 2007-08, the reasons not establishing the statutory requirement of failure to disclose material facts necessary to justify reopening after four years.

Discretion to grant stay of tax demand - Pre-condition of deposit for grant of stay - Remand for fresh consideration - Consequences of non-compliance with conditional stay order - Extension of time to comply with conditional order - Power of High Court under Article 226

Discretion to grant stay of tax demand - Pre-condition of deposit for grant of stay - The Assessing Officer and the Commissioner of Income Tax were justified in imposing 20% of the tax demand as a pre-condition for grant of stay and in refusing unconditional stay. - HELD THAT: - The Division Bench's earlier order remanded the matter because the Assessing Officer had not dealt with the petitioner's case before imposing the 20% deposit condition. On remand the Assessing Officer considered the petitioner's submissions and again directed deposit of 20% of the demand. The Commissioner of Income Tax, on review, recorded detailed reasons for upholding the Assessing Officer's order. The High Court found that the Assessing Officer and the Commissioner exercised their discretion after recording reasons and that there was no infirmity in refusing unconditional stay or in refusing to reduce the pre-condition of 20% in the facts of this case. [Paras 9, 10, 11]

Order directing deposit of 20% as pre-condition for stay is upheld; no interference with Assessing Officer's and Commissioner's orders.

Expeditious disposal of appeal - Pre-condition of deposit for grant of stay - Remand for fresh consideration - The Appellate Authority will not be directed to decide the petitioner's appeal without compliance with the conditional deposit order. - HELD THAT: - The petitioner sought a direction that the appellate authority decide the pending appeal without insisting on the 20% deposit. The Court observed that the appellate authority had not fixed the matter for hearing because the petitioner had not complied with the conditional order. Earlier authority relied upon by the petitioner was fact-specific and did not lay down a general rule dispensing with the deposit condition. In these circumstances, the High Court declined to direct the Commissioner (Appeals) to proceed while ignoring the conditional order of deposit. [Paras 6, 12, 13, 14]

No direction to the Appellate Authority to decide the appeal without petitioner first complying with the conditional deposit order.

Extension of time to comply with conditional order - Consequences of non-compliance with conditional stay order - Time to deposit 20% of the tax demand was extended by four weeks and failure to deposit will result in dismissal of the appeal by the Commissioner (Appeals) without further reference to the High Court. - HELD THAT: - Although the petition was dismissed on merits, the Court granted a limited extension of four weeks for compliance with the deposit direction. The Court expressly provided that if the amount is not deposited within four weeks the appeal pending before the Commissioner (Appeals) shall stand dismissed for default without further reference to the High Court and no further extension would be granted. [Paras 15, 16]

Four-week extension granted for deposit; failure to deposit will lead to automatic dismissal of the appeal by the Commissioner (Appeals).

Final Conclusion: The writ petition is dismissed. The Assessing Officer's and Commissioner of Income Tax's orders directing deposit of 20% as a pre-condition for stay are upheld; four weeks' time is granted for deposit, failing which the appeal before the Commissioner (Appeals) shall stand dismissed without further reference to this Court.

Re-opening of assessment - notice under Section 148 - reasons to believe - assessment reopened under Section 147 - verification of authenticity of information - disposal of objections - quash and set aside - Right to Information Act

Notice under Section 148 - reasons to believe - verification of authenticity of information - disposal of objections - quash and set aside - Validity of the notice dated 31st March, 2019 under Section 148 and the order dated 12th November, 2019 disposing objections to re-opening. - HELD THAT: - The reopening was founded solely on an original Maharashtra RERA complaint which recorded a higher purchase consideration than that reflected in departmental documents. The assessee produced an amended RERA complaint showing lower payments before the order on objections was passed. The Assessing Officer, despite having had sufficient time, did not and could not satisfactorily verify the authenticity of the amended complaint but nonetheless treated the original complaint as the basis for reasons to believe. The court found that the material relied upon for forming the reasons to believe was not properly verified and that the order disposing objections merely recorded non-ascertainability of authenticity without explaining why verification was not carried out. In these circumstances the court concluded that the notice and the order on objections were unsustainable and interfered with them. [Paras 4, 5, 8, 9]

Notice dated 31st March, 2019 and the order dated 12th November, 2019 disposing objections were quashed and set aside.

Re-opening of assessment - assessment reopened under Section 147 - reasons to believe - verification of authenticity of information - Whether Revenue may seek to reopen the assessment afresh after quashing the defective notice. - HELD THAT: - The court did not preclude the Revenue from initiating a fresh reopening provided it acts in accordance with law and within the limitation period. Any fresh notice must be founded on reasons to believe properly recorded by the Assessing Officer and follow the procedural requirements under the amended Act; the court declined to advise on what those reasons should be or to supplement the reasons which the Assessing Officer failed to record. [Paras 10]

Revenue may, if permissible in law and within limitation, re-open the assessment afresh by following the statutory procedure.

Final Conclusion: The notice under Section 148 and the order disposing objections were set aside for lack of proper verification of the material forming the reasons to believe; Revenue remains free to re-open the assessment afresh in accordance with law and within limitation.

Re-opening of assessment after four years - proviso to Section 147 - failure to disclose truly and fully material facts - change of opinion - duty to disclose primary facts - reasons recorded under Section 148

Re-opening of assessment after four years - proviso to Section 147 - failure to disclose truly and fully material facts - change of opinion - duty to disclose primary facts - Validity of the notice under Section 148 read with proviso to Section 147 for A.Y. 2013-14, insofar as re-opening was premised on alleged non-disclosure of material facts and alleged incorrect claim of depreciation. - HELD THAT: - The Court held that the proviso to Section 147 bars re-opening after four years unless the Revenue proves failure by the assessee to disclose truly and fully material facts. The Assessing Officer's reasons show that the re-opening was founded on a change of opinion regarding allowance of depreciation on software, rather than any non-disclosure of primary facts. The software was disclosed in the note to the balance sheet and invoices and details were furnished during the original assessment proceedings; the Assessing Officer had allowed depreciation in the original assessment. Reliance on the principle in Calcutta Discount Co. was noted: the assessee's duty is to disclose primary facts, not to draw legal inferences which are for the officer to decide. The reasons recorded therefore did not disclose any failure by the assessee to truly and fully disclose material facts and amounted to an impermissible change of opinion by the Department. Consequently, the notice under Section 148 and the order rejecting objections were unsustainable. [Paras 6, 7, 8, 9, 10]

Notice under Section 148 dated 31st March, 2021 and the order rejecting objections dated 20th December, 2021 quashed for being based on change of opinion and not on any failure to disclose material facts.

Final Conclusion: Writ petition allowed; records leading to the notice under Section 148 and the order rejecting objections quashed and set aside, petitioner relieved from the impugned re-opening of assessment.

Accumulation of income under section 11(2) - timing of filing Form No.10 and requirement of furnishing particulars before completion of assessment - set-off of excess application/deficit of earlier year against income of subsequent year as application of income under section 11(1)(a) - assessing authority's obligation to have necessary information at the time of completion of assessment

Accumulation of income under section 11(2) - timing of filing Form No.10 and requirement of furnishing particulars before completion of assessment - assessing authority's obligation to have necessary information at the time of completion of assessment - Form No.10 filed before completion of assessment entitles the assessee to claim accumulation under section 11(2); the Assessing Officer erred in disallowing accumulation where Form No.10 was electronically filed prior to completion of assessment. - HELD THAT: - The Tribunal applied the principle that the benefit of excluding income under section 11 arises only if the assessing authority has the requisite information at the time it completes assessment. Reliance was placed on the reasoning in CIT vs Nagpur Hotel Owner's Association , which holds that information required for claiming exemption under section 11 must be furnished before completion of the assessment because, absent such information, the assessing authority cannot entertain the claim and a post-completion supply of particulars would render reopening necessary. The Tribunal found that Form No.10 was electronically filed before completion of assessment and that the AO and the CIT(A) failed to consider or apply the binding principle from the cited decision. For these reasons the disallowance of accumulation on the ground of delayed filing of Form No.10 was held to be erroneous and the claim for accumulation was directed to be allowed. [Paras 9]

Claim for accumulation under section 11(2) is allowed as Form No.10 was filed before completion of assessment and AO's disallowance on timing grounds was erroneous.

Set-off of excess application/deficit of earlier year against income of subsequent year as application of income under section 11(1)(a) - application of commercial principles to computation of income of charitable trusts - Excess utilization (deficit) of earlier years can be set off against surplus of the subsequent year and such adjustment amounts to application of income for charitable purposes, and therefore is to be excluded under section 11(1)(a). - HELD THAT: - The Tribunal followed precedents of High Courts, including the reasoning reproduced from Director of Income Tax vs Raghuvanshi Charitable Trust and related High Court decisions, which held that adjustment of expenditure incurred for charitable purposes in earlier years against income of a subsequent year constitutes application of income in that subsequent year and must be excluded under section 11(1)(a). The Tribunal treated these decisions as binding on the facts and directed the Assessing Officer to allow the set-off of earlier year excess utilization against the current year surplus. The Tribunal rejected the AO's refusal to give effect to such set-off and held that there is no bar in computing the subsequent year's income after allowing the adjustment. [Paras 11]

AO directed to allow set-off of earlier year excess utilization against current year surplus as application of income under section 11(1)(a).

Final Conclusion: Appeal partly allowed: the Tribunal set aside the disallowance of accumulation under section 11(2) insofar as Form No.10 was filed before completion of assessment, and directed the Assessing Officer to allow set-off of earlier year excess utilization against the current year surplus as application of income under section 11(1)(a).

Addition under section 69 - addition under section 69A - reopening under section 148 - rule of consistency - acceptance of balance sheet as evidence of opening cash

Addition under section 69 - acceptance of balance sheet as evidence of opening cash - rule of consistency - Whether cash deposits in the assessee's bank accounts were rightly added to income as unexplained cash under section 69 for the relevant assessment years. - HELD THAT: - The Tribunal found that the assessee had filed and the Department had earlier accepted balance sheets showing substantial closing cash balances in the immediately preceding years (closing cash as on 31.03.2010 and 31.03.2012 respectively). Those accepted balance sheets constituted evidence explaining the source of the bank cash deposits in the subsequent years. The authorities below rejected the explanation without assigning cogent reasons. Applying the principle of consistency and having regard to the accepted closing cash balances, the Tribunal held that the Assessing Officer had no justifiable reason to disbelieve the explanation and therefore the additions made under section 69 could not be sustained for AY 2011-12 and AY 2013-14. [Paras 5, 6]

Additions under section 69 in both assessment years set aside on merits; assessee succeeds on this ground.

Addition under section 69A - rule of consistency - Whether tuition fee income declared by the assessee could be disbelieved and added as income from undisclosed sources under section 69A for the relevant assessment years. - HELD THAT: - The Tribunal noted that the Department had accepted tuition income in earlier and subsequent assessment years and the assessee regularly filed income and expenditure accounts and balance sheets. There was no material shift in facts to justify disbelieving the assessee's claim of tuition income for the years under appeal. Relying on the rule of consistency as applied to earlier accepted assessments, the Tribunal held that the lower authorities had no reason to reject the claim and that the additions under section 69A were unjustified. [Paras 5, 7]

Additions under section 69A in both assessment years set aside on merits; assessee succeeds on this ground.

Final Conclusion: Both appeals are partly allowed: the additions treating bank cash deposits as unexplained income under section 69 and treating tuition receipts as income from undisclosed sources under section 69A are set aside on merits for AY 2011-12 and AY 2013-14. The validity of reopening under section 148 for AY 2013-14 was not adjudicated as relief was granted on merits; the challenge to reopening for AY 2011-12 was not pressed.

Deductibility of employees' contribution to PF/ESI paid before filing of return - disallowance under section 36(1)(va) read with definition in section 2(24)(x) - prospective operation of Finance Act, 2021 amendment (Explanation 2 to Section 36(1)(va)) - applicability of Section 43B to belated payment of employees' contribution - precedential effect of jurisdictional High Court decisions

Deductibility of employees' contribution to PF/ESI paid before filing of return - disallowance under section 36(1)(va) read with definition in section 2(24)(x) - prospective operation of Finance Act, 2021 amendment (Explanation 2 to Section 36(1)(va)) - precedential effect of jurisdictional High Court decisions - Deletion of the disallowance of employees' contribution to PF/ESI where payment was made after the statutory due date but before filing of return - HELD THAT: - The Tribunal examined whether payments of employees' contribution to PF/ESI made after the statutory due date but before the due date for filing return under section 139(1) are deductible or require disallowance under section 36(1)(va) read with the relevant definition. The Tribunal followed its recent coordinate-bench decision in Lumino Industries, which held that the amendment introduced by Finance Act, 2021 (Explanation 2 to Section 36(1)(va)) is prospective in operation with effect from 1 April 2021 (AY 2021-22 onwards). Until that effective date, the binding decisions of the jurisdictional Calcutta High Court - which permit deduction where the employees' contribution is paid before the due date for filing the return - continue to apply. Applying that principle, and noting that the assessees' payments were made before filing the return under section 139(1), the Tribunal concluded that the disallowance made by the AO and confirmed by the CIT(A) was not warranted for the assessment year before the amendment's operative date.

Disallowance deleted and appeal allowed on this ground

Final Conclusion: Following the Tribunal's precedent and the binding view of the jurisdictional High Court that payments of employees' contribution to PF/ESI made before the due date for filing the return are deductible, and holding that the Finance Act, 2021 amendment is prospective from AY 2021-22, the disallowance was set aside and the appeal allowed.

Double Taxation Avoidance Agreement - Article 16 (Dependent personal services) - Resident and ordinarily resident - Scope of total income - Section 90 - Agreement with foreign countries - Taxation of salary income earned abroad

Article 16 (Dependent personal services) - Section 90 - Agreement with foreign countries - Resident and ordinarily resident - Scope of total income - Whether salary income earned by the assessee in USA during Financial year 2015-16 was taxable in India or covered by the DTAA and thereby taxable only in USA. - HELD THAT: - The Tribunal examined Section 90 and Article 16 of the DTAA between India and the USA. Section 90 permits the Central Government to enter into agreements for avoidance of double taxation and provides that where such an agreement applies the provisions more beneficial to the assessee shall prevail. Article 16 provides that remuneration derived by a resident of a Contracting State in respect of employment exercised in the other State may be taxed in that other State, and paragraph 2 limits taxation in the other State where the recipient is present therein for not more than 183 days in the relevant taxable year, among other conditions. The assessee contended, and the record showed, that his stay in the USA during the year did not exceed 183 days (165 days) and he thus relied on Article 16 to contend that the salary was taxable only in the USA. The lower authorities confined themselves to Section 5 and the fact that the assessee was a resident and ordinarily resident of India and concluded that DTAA did not apply. The Tribunal held that Section 90 does not bar operation of the DTAA and that where the DTAA condition (Article 16) is satisfied the DTAA provision governs the taxation of the salary; consequently the addition made by the Assessing Officer in respect of the salary was not sustainable. [Paras 2]

Addition of salary income made by the Assessing Officer is deleted and the CIT(A)'s confirmation on this issue is set aside; DTAA (Article 16) applies and salary is taxable in USA.

Ground not pressed - Whether the addition in respect of dividend income earned in USA should be sustained. - HELD THAT: - The assessee's counsel expressly informed the Tribunal that Ground No.3 (relating to dividend income) was not pressed. In view of that concession the Tribunal did not examine the merits of the dividend addition. [Paras 3]

Ground No.3 dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: the addition in respect of salary income is deleted as the DTAA (Article 16) applies to Financial year 2015-16; the challenge to the dividend addition is dismissed as not pressed.

Reopening of assessment under Section 148/Section 147 - reason to believe - prima facie material for reopening - failure to disclose fully and truly all material facts - first proviso to Section 147 - limitation after four years unless failure to disclose - Explanation 1 to Section 147 regarding production of account books not amounting to disclosure - change of opinion

Reopening of assessment under Section 148/Section 147 - prima facie material for reopening - reason to believe - Validity of the notice dated 31-03-2021 under Section 148 proposing reassessment for Assessment Year 2013-14 - HELD THAT: - The Court applied the settled test that at the stage of challenge to a notice under Section 148 the judicial inquiry is limited to whether there was prima facie some material on the basis of which the Department could form a reason to believe that income had escaped assessment. Relying on the material recorded by the Assessing Officer - information from investigative units, departmental databases identifying certain counter-parties as shell/accommodation-entry providers, and post-assessment year findings that funds had been routed as share application money and premium - the Court found that the AO had tangible material linking the petitioner's transactions with those shell concerns. The sufficiency or correctness of that material was not gone into; it was held that a prima facie material for reopening existed and, therefore, the notice and the order rejecting objections did not warrant interference in writ jurisdiction. [Paras 15, 16, 19, 20, 30]

Notice under Section 148 and the order rejecting objections are valid; prima facie material existed to reopen assessment.

Failure to disclose fully and truly all material facts - first proviso to Section 147 - limitation after four years unless failure to disclose - Explanation 1 to Section 147 regarding production of account books not amounting to disclosure - change of opinion - Whether reassessment after more than four years was barred by the first proviso to Section 147 - HELD THAT: - The Court examined whether the reopening amounted to an impermissible change of opinion or whether it fell within the proviso exception where reopening is permissible if income escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The Court held that the facts concerning routing of undisclosed funds through shell companies had not been truly and fully disclosed at the original assessment; the information relied on by the AO came to the Department subsequently from investigative units and departmental databases. Production of records which only embedded such information did not amount to full and true disclosure in view of Explanation 1 to Section 147. Consequently the bar of the four year proviso did not apply and the reassessment could be validly initiated. [Paras 23, 24, 25, 28, 29]

Reassessment after more than four years is not barred because the exception in the first proviso applies - there was failure to disclose fully and truly all material facts.

Final Conclusion: Writ petition dismissed. The Court found prima facie material and a recorded reason to believe for reopening Assessment Year 2013-14, and held that the four year limitation proviso did not apply because of failure to disclose fully and truly all material facts; no interference with the notice or the order rejecting objections was warranted.

Reopening of assessment - change of opinion - revision under Section 263 - sanction under Section 151

Reopening of assessment - change of opinion - Validity of reopening the assessment where the assessing officer had dealt with and recorded conclusions on the same issue in the original assessment order. - HELD THAT: - The Court found that the assessing officer, in the assessment order dated 28th December, 2010, had specifically recorded that the assessee had shown profit on sale of investment in the profit and loss account and had considered the matter, disallowing certain expenses and making consequential additions under the Act. Since the very issue relied upon to form the reasons for reopening was actively considered and concluded in the original assessment, the reopening amounted to a mere change of opinion. Reopening an assessment on the basis of a change of opinion is impermissible. The Court relied on this finding to conclude that the notice under Section 148 could not be sustained on that ground. [Paras 5]

Reopening quashed as being founded on an impermissible change of opinion.

Revision under Section 263 - sanction under Section 151 - Whether the same issue being the subject matter of revision proceedings under Section 263, which were subsequently dropped, could validly constitute reasons to reopen the assessment. - HELD THAT: - The Court recorded that the Commissioner had initiated revision proceedings under Section 263 on the identical issue of profit on sale of investment and thereafter dropped the revision by order dated 6th March, 2013. The Court held that an issue which has been the subject of revision proceedings that were considered and then dropped cannot thereafter form a legitimate reason to believe for reopening by the assessing officer. The Court further observed that if the fact of prior revision proceedings (and their disposal) had been placed before the authority who accorded sanction under Section 151, such sanction would not have been granted, undermining the validity of the reopening process. [Paras 6]

Reopening quashed as unsustainable because the same issue had been the subject of and disposed in revision proceedings, and sanction would not have been accorded had that been disclosed.

Final Conclusion: Writ petition allowed; notice dated 28th March, 2013 under Section 148 quashed and set aside on the grounds that reopening was founded on a change of opinion and relied upon an issue already subjected to and disposed in revision proceedings.

Treatment of broken period interest as revenue expenditure - treatment of broken period interest as capital expenditure - reopening of assessment under Section 148/147 - proviso - failure to disclose material facts - consideration of assessee's response during assessment proceedings - deemed consideration where query answered - precedential weight of conflicting judicial decisions in reopening reasons

Reopening of assessment under Section 148/147 - proviso - failure to disclose material facts - consideration of assessee's response during assessment proceedings - deemed consideration where query answered - Validity of the notice issued under Section 148 (read with proviso to Section 147) for AY 2008-09 in the absence of failure to disclose material facts. - HELD THAT: - Notice under Section 148 issued after four years engages the proviso to Section 147 and therefore requires that the revenue demonstrate a failure by the assessee to fully and truly disclose material facts. The reasons recorded relied on judicial authority and a CBDT circular and on a disallowance in a later assessment year; they did not show non-disclosure by the petitioner. The petitioner had been specifically queried during assessment and had furnished a response stating consistent treatment of broken period interest as revenue expenditure and prior outcomes in its favour. Where a query is raised and an answer is given, absence of express discussion in the assessment order does not mean the matter was not considered by the Assessing Officer. On these facts the requisite statutory threshold for reopening under the proviso - viz., failure to disclose material facts - was not established.

Notice and reassessment proceedings quashed for want of any pleaded or demonstrated failure to disclose material facts necessary to invoke the proviso to Section 147.

Treatment of broken period interest as revenue expenditure - treatment of broken period interest as capital expenditure - precedential weight of conflicting judicial decisions in reopening reasons - Whether the reasons recorded provide a bona fide basis for belief that income had escaped assessment because broken period interest should be treated as capital expenditure. - HELD THAT: - The recorded reasons relied primarily on the decision in Vijaya Bank Ltd. and on CBDT Circular No.665/1993 and on a disallowance made in AY 2010-11. However, this Court had earlier in American Express International Banking Corporation distinguished Vijaya Bank and held broken period interest to be revenue expenditure; that decision was accepted by the Supreme Court by dismissal of SLP. Further, the ITAT in proceedings relating to the petitioner applied the American Express view and held broken period interest to be revenue expenditure. Reliance on a later inconsistent disallowance elsewhere and on a conflicting precedent does not furnish fresh material showing escapement of income where binding or persuasive decisions favour the assessee and the assessee had consistently treated the item as revenue expenditure and had put the position before the assessing officer. Consequently, the basis for forming a bona fide belief of escapement on this ground fails.

Reopening cannot be sustained on the ground that broken period interest is capital expenditure; the reasons recorded lack a valid legal or factual foundation in view of contrary judicial treatment relied upon by the assessee.

Final Conclusion: Writ petition allowed; the notice dated 4.12.2013 under Section 148 and the consequent order for AY 2008-09 are quashed and set aside for want of a valid foundation to invoke the proviso to Section 147 and because the recorded reasons fail to show that broken period interest caused escapement of income.

Reopening beyond four years - Change of opinion - Failure to disclose fully and truly all material facts

Reopening beyond four years - Change of opinion - Failure to disclose fully and truly all material facts - Reassessment initiated after expiry of four years from the end of the relevant assessment year was invalid where the original assessment had been completed under section 143(3), all material facts were already before the Assessing Officer, and the recorded reasons did not state any failure by the assessee to make a full and true disclosure. - HELD THAT: - The Court found from the recorded reasons that the Assessing Officer had all material facts before him at the time of the original assessment. The reasons for reopening did not indicate, even in brief, what material fact had not been disclosed by the assessee. The petition specifically pleaded full and true disclosure during the original assessment, and that assertion was not traversed in the revenue's affidavit. In such circumstances, once four years had elapsed from the end of the relevant assessment year, the proviso to section 147 barred reopening unless escapement of income was attributable to failure on the part of the assessee to disclose fully and truly all material facts. Since that jurisdictional requirement was absent, the reopening was held to be founded only on a change of opinion, which is impermissible. [Paras 13, 15]

The impugned notice under section 148 and the order rejecting objections were quashed.

Final Conclusion: The petition was allowed. The Court held that the reassessment for A.Y. 2015-16, initiated after four years, was barred by the proviso to section 147 since there was no failure by the assessee to disclose fully and truly all material facts and the reopening was merely on a change of opinion.

Reopening of assessment - change of opinion - failure to disclose material facts - proviso to section 147 - reasons to believe - assumption of jurisdiction under sections 147 and 148

Reopening of assessment - change of opinion - failure to disclose material facts - proviso to section 147 - assumption of jurisdiction under sections 147 and 148 - Validity of notice dated 31.03.2021 under section 148 and order dated 22.12.2021 rejecting objections to reopening for A.Y. 2014-15. - HELD THAT: - The Court held that reopening an assessment completed under section 143(3) cannot be sustained if it rests on a mere change of opinion. Since more than four years had elapsed from the end of the relevant assessment year, the proviso to section 147 applies and bars reopening unless there was a failure to disclose truly and fully material facts necessary for assessment. Although previous decisions permit inferring failure to disclose from the reasons recorded where cogent indication exists (see Crompton Greaves Ltd. ), the reasons supplied in this case do not disclose any failure to disclose by the assessee. The reasons merely assert that a notional foreign exchange loss was inadmissible because funds were used for non-business purposes; they do not show that the assessee concealed material facts. Further, the record demonstrates that the Assessing Officer raised queries on the foreign exchange loss during assessment and the assessee replied through letters dated 16.12.2016 and 19.12.2016, indicating that the issue was considered in the original assessment (see Aroni Commercials Ltd. ). Consequently, the reopening rests on a change of opinion and cannot constitute a valid basis to assume jurisdiction under sections 147 and 148. [Paras 7, 10, 11]

Notice dated 31.03.2021 under section 148 and the order dated 22.12.2021 rejecting objections are quashed as the reopening is based on change of opinion and there is no demonstrated failure to disclose material facts.

Final Conclusion: The writ petition is allowed; the notice under section 148 dated 31.03.2021 and the order dated 22.12.2021 are quashed for being founded on a change of opinion and for failing to establish that the assessee did not truly and fully disclose material facts.

Penalty under Section 221(1) - stay under Section 220(6) - principles of natural justice - initiation of penalty proceedings during pendency of appeal - conditional stay by Assessing Officer

Penalty under Section 221(1) - initiation of penalty proceedings during pendency of appeal - principles of natural justice - stay under Section 220(6) - conditional stay by Assessing Officer - Validity of the notice initiating penalty proceedings under Section 221(1) issued during the pendency of appeal and after consideration of an application for stay under Section 220(6). - HELD THAT: - The Court examined whether the Assessing Officer was precluded from initiating penalty proceedings under Section 221(1) merely because an appeal against the Section 147 assessment was pending and an application for stay under Section 220(6) had been made. The Court noted that filing an appeal does not bar the Assessing Officer from making a demand or initiating penalty proceedings. The Assessing Officer had considered the stay application and rejected a blanket stay while offering a conditional stay on payment of 20% of the demand and indicating that installment requests could be considered upon application. Section 221(1) permits the Assessing Officer to direct penalty for continuing default subject to the proviso that the assessee is given a reasonable opportunity of being heard. The impugned notice was issued to comply with that proviso and was therefore not shown to be without jurisdiction or in breach of natural justice. The Supreme Court authority relied on by the petitioner was held inapposite on the facts. The petitioner was also left free to pursue the pending application before the Principal Commissioner. [Paras 11, 12, 15, 16, 17]

The notice under Section 221(1) is valid and does not require interference; the writ petition challenging the notice is dismissed.

Final Conclusion: The writ petition challenging the notice initiating penalty proceedings under Section 221(1) is dismissed; the petitioner remains at liberty to pursue the pending stay application before the Principal Commissioner.

Penalty under Section 112(a) of the Customs Act for improper importation of goods - duty of a customs broker to exercise due diligence by obtaining KYC and IEC documents - liability of a broker for undeclared or excess goods where the importer holds a valid IEC - confiscation under section 111 as the predicate for imposing penalty under Section 112(a) - reliance on statements recorded under section 108 for attributing beneficiary status

Penalty under Section 112(a) of the Customs Act for improper importation of goods - duty of a customs broker to exercise due diligence by obtaining KYC and IEC documents - liability of a broker for undeclared or excess goods where the importer holds a valid IEC - Whether the penalty of Rs. 50,000/- under Section 112(a) of the Customs Act was rightly imposed on the customs broker. - HELD THAT: - The Tribunal examined the material and the statutory scheme for imposing penalty under Section 112(a), which requires an act or omission rendering goods liable to confiscation under section 111 or knowledge/reason to believe that the goods are liable to confiscation. The record showed that M/s. Vaaraahi Traders possessed a valid IEC and that the appellant had obtained IEC, KYC and import documents directly from that importer. There was no finding that the IEC or import documents were forged or invalid, nor evidence that the broker had actual knowledge of excess weight or undeclared items. The departmental case rested largely on statements implicating a third party as the beneficiary; however, the Act does not prohibit an importer from selling imported goods to another person, and the fact that goods may ultimately benefit a third party does not, by itself, satisfy the ingredient of culpability required under Section 112(a) as applied to the broker. On these facts the adjudicating authority's conclusion that the broker dealt with an unauthorized person and failed to exercise due diligence was not sustainable, and the penalty was therefore unwarranted. [Paras 11, 12]

Penalty of Rs. 50,000/- imposed under Section 112(a) set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the penalty under Section 112(a) was unwarranted because the broker had obtained the importer's IEC and KYC, there was no evidence of forged documents or broker's knowledge of undeclared/excess goods, and mere use of the importer's IEC by another person does not, by itself, attract broker liability; the penalty imposed by the original authority and affirmed on appeal was set aside with consequential relief.

Territorial jurisdiction - proviso to Section 16 of the Code of Civil Procedure - Section 17 of the Code of Civil Procedure - personal obedience - bar under Section 430 of the Companies Act, 2013 - jurisdiction of the National Company Law Tribunal - Order VII Rule 10 CPC - return of plaint for want of territorial jurisdiction - Order VII Rule 11 CPC - rejection of plaint - partial rejection of plaint - derivative suit - valuation of suit / court-fees on rendition of accounts

Territorial jurisdiction - proviso to Section 16 of the Code of Civil Procedure - Section 17 of the Code of Civil Procedure - personal obedience - Order VII Rule 10 CPC - return of plaint for want of territorial jurisdiction - Whether the plaint is liable to be returned for want of territorial jurisdiction of this Court. - HELD THAT: - The Court found that two of the reliefs claimed (declaration and possession) relate to immovable properties, but the proviso to Section 16 CPC applies where the relief sought as to immovable property can be entirely obtained through the personal obedience of the defendant. The plaintiffs seek a specific direction (prayer B) to the defendant no.1 to hand over possession and the defendant no.1 admittedly resides and works for gain within this Court's territorial jurisdiction; accordingly the proviso to Section 16 is attracted. Further, one of the properties is situate in Greater Kailash, Delhi, thus Section 17 CPC permits institution of the suit in this Court where properties are situate in different jurisdictions provided the suit is based on the same cause of action. The Court rejected the contention that Section 17 cannot apply to suits for possession and observed that execution issues can be addressed under Section 39(1)(c) CPC by transfer to the competent forum if required. On the averments of the plaint read holistically, the requirements for entertaining the suit before this Court are satisfied and the plaint cannot be returned under Order VII Rule 10 CPC. [Paras 28, 29, 30, 31, 32]

Application under Order VII Rule 10 CPC dismissed; this Court has territorial jurisdiction to try the suit.

Bar under Section 430 of the Companies Act, 2013 - jurisdiction of the National Company Law Tribunal - Order VII Rule 11 CPC - rejection of plaint - right, title and interest - Sections 241 and 242 of the Companies Act - Whether the plaint is barred by Section 430 of the Companies Act because similar reliefs are the subject-matter of proceedings before the NCLT and therefore liable to be rejected under Order VII Rule 11 CPC. - HELD THAT: - The Court examined the reliefs sought in the civil suit and the reliefs claimed in CP No.227/2017 before the NCLT. It held that declaratory reliefs and possession in respect of immovable properties and questions of right, title and interest are essentially civil rights that require detailed evidence and fall outside the remedial scope of proceedings under Sections 241/242; such reliefs were not sought in the company petition. The Court observed that some reliefs (intellectual property/infringement and passing off) plainly lie within civil jurisdiction. The Court further noted that even if certain reliefs overlap, the presence of defendants who were not parties before the NCLT and the nature of the reliefs precluded a bar under Section 430. The Court relied on Aruna Oswal to hold that matters of title cannot be conclusively determined in NCLT proceedings and was unpersuaded by authorities invoked by the defendants. The Court also emphasised that partial rejection of the plaint under Order VII Rule 11 is impermissible and, in any event, the defendants had not made out a case for complete rejection on this ground. [Paras 40, 41, 42, 43, 44]

Application under Order VII Rule 11 CPC seeking rejection of the plaint on the ground of bar under Section 430 of the Companies Act is rejected; the plaint is not barred by Section 430.

Order VII Rule 11 CPC - rejection of plaint - no cause of action - concealment/suppression - partial rejection of plaint - derivative suit - valuation of suit / court-fees on rendition of accounts - Whether the plaint is liable to be rejected under Order VII Rule 11 CPC for want of cause of action, on account of alleged concealment of proceedings before the NCLT, because it is a derivative suit filed by majority shareholders, or for undervaluation / non-payment of court fees. - HELD THAT: - The Court held that (a) allegations that the suit is a derivative suit filed by majority shareholders did not render it non-maintainable - derivative actions may be filed to vindicate company rights when those in control prevent the company from suing; (b) concealment of the NCLT petition or related applications was not established as to warrant rejection under Order VII Rule 11 and, in any event, the plaintiffs had disclosed the company petition and its order in the plaint; (c) the defendants could not seek partial rejection of the plaint - Order VII Rule 11 permits rejection of the plaint as a whole or not at all; (d) valuation for the purposes of court-fees in suits for rendition of accounts can be estimated and plaintiffs undertook to deposit further court-fees upon final determination; the plaintiffs had paid an initial court-fee and had filed an interlocutory application for payment from company funds. Applying the authorities (including Surinder Kaur), the Court found no deliberate under-valuation and concluded that deficiency of court-fees was not a ground for rejection at this stage and that the related interlocutory application needed adjudication first. [Paras 49, 50, 51, 52, 53]

Application under Order VII Rule 11 CPC seeking rejection of the plaint on the aforesaid grounds is dismissed.

Final Conclusion: Both I.A. No.2352/2021 (Order VII Rule 10) and I.A. No.4637/2021 (Order VII Rule 11) are dismissed; the plaint is neither returned for want of territorial jurisdiction nor rejected on the pleaded grounds, and the suit is listed for further proceedings.

Personal Insolvency Resolution Process - continuing personal guarantee - default threshold for initiation of IRP - moratorium under Section 101 - appointment of Resolution Professional

Personal Insolvency Resolution Process - appointment of Resolution Professional - Application under section 95 of the IBC seeking initiation of Personal Insolvency Resolution Process against the Personal Guarantor is admitted. - HELD THAT: - The Bench considered the petition filed by the Financial Creditor, the report of the Resolution Professional and the documents on record. The RP had issued statutory intimation, the Personal Guarantor's responses were on record, and the RP recommended admission. The Deed of Guarantee was on record and not denied by the Personal Guarantor. On this basis the Tribunal found the application complete and fit for admission and admitted the application initiating the Personal Insolvency Resolution Process against the Personal Guarantor. [Paras 12, 13, 14, 15]

Application under section 95 is admitted and Personal Insolvency Resolution Process is initiated against the Personal Guarantor.

Continuing personal guarantee - The Deed of Guarantee executed by the Personal Guarantor is continuing in nature and subsists. - HELD THAT: - The Tribunal examined the Deed of Guarantee on record and the RP's report which relied on specific clauses of the guarantee. The Personal Guarantor did not dispute execution of the deed and the Bench held that, in absence of any discharge or communication from the lender releasing the guarantee, the guarantee continues to subsist and is enforceable. [Paras 10, 12]

The guarantee is continuing in nature and remains subsisting and enforceable.

Default threshold for initiation of IRP - The default and the quantum of debt required for initiation of the IRP are established for the purposes of admission. - HELD THAT: - On perusal of the records, including the CRILIC report and the invoked documents (recall, revival and notice), the Bench found that there was a default by the Corporate Debtor secured by the Personal Guarantor and that the amount of default exceeded the statutory threshold. The application was held to be complete and correctly presented in the prescribed form. [Paras 11, 13, 14]

Default and requisite debt threshold for initiation of IRP are established and the application is complete.

Moratorium under Section 101 - Moratorium under Section 101 of the IBC commences from the date of this order and shall continue until completion of the Insolvency Resolution Process. - HELD THAT: - On admission of the application initiating the Personal Insolvency Resolution Process, the Tribunal directed that the statutory moratorium under Section 101 shall operate from the date of the order. The moratorium provisions specified include stay of pending legal proceedings, prohibition on initiation of fresh legal actions by creditors, and restrictions on transfer or encumbrance of the Personal Guarantor's assets. [Paras 17]

Moratorium under Section 101 is declared from the date of the order till completion of the IRP.

Appointment of Resolution Professional - Mr. Surya Pratap Gupta shall carry out the Insolvency Resolution Process of the Personal Guarantor as Resolution Professional. - HELD THAT: - The record shows that a Resolution Professional was appointed to conduct the IRP of the Personal Guarantor and the Tribunal directed that the named Resolution Professional shall carry out the process as required under the Code. The Registry was also directed to circulate the order and related documents to concerned parties and authorities to effectuate the process. [Paras 5, 16, 18]

Mr. Surya Pratap Gupta is to act as Resolution Professional and to conduct the Insolvency Resolution Process of the Personal Guarantor.

Final Conclusion: The Tribunal admitted the section 95 application and instituted the Personal Insolvency Resolution Process against the Personal Guarantor, holding the guarantee to be continuing and the default/threshold established; the moratorium under Section 101 is declared from the date of the order and the named Resolution Professional is directed to conduct the process.

Inclusion of profit in assessable value - burden of proof on revenue to establish under-valuation - evidentiary weight of Chartered Accountant certificate - revenue neutrality and availability of Cenvat/Modvat credit - invocation of extended period of limitation in revenue neutral cases

Inclusion of profit in assessable value - burden of proof on revenue to establish under-valuation - evidentiary weight of Chartered Accountant certificate - Whether the assessable value for stock transfers of Ethyl Alcohol to the sister unit included a margin of profit, and whether the Revenue proved under-valuation. - HELD THAT: - The Tribunal found no dispute that Ethyl Alcohol was transferred to the sister unit on payment of duty and that the sister unit availed the credit. Revenue alleged assessable value omitted profit and adopted a uniform value of Rs. 17 per litre based on assumed profit margins from earlier balance sheets, but did not produce positive, clinching evidence or demonstrate the data relied upon to arrive at that value. The Appellant produced a Chartered Accountant's certificate (dated 10-10-2014) based on verification of accounting records, returns and audited financial statements indicating that profit was included in cost of production. The adjudicating authority rejected the certificate without adducing reliable contra-evidence. Absent reliable evidence from Revenue, the burden to establish under-valuation was not discharged and the CA certificate could not be lightly disregarded. [Paras 5]

Assessable value was not held to be conclusively under-valued; Revenue failed to prove omission of profit and the CA certificate could not be rejected without reliable contra-evidence.

Revenue neutrality and availability of Cenvat/Modvat credit - invocation of extended period of limitation in revenue neutral cases - Whether the extended period of limitation could be invoked for demanding duty when the case involved revenue neutrality and availment/availability of Cenvat credit. - HELD THAT: - The Tribunal noted that the case involved transfers to a sister unit where duty paid was creditable and usable by the transferee, constituting a revenue neutral situation. There was no material to show suppression, wilful misstatement or mala fide intention by the Appellant to evade duty; periodical returns were filed and invoices were disclosed. In such revenue neutral circumstances, the Tribunal held that invoking the extended period of limitation is not justified since the assessee lacked intent to evade payment and could utilize the disputed Cenvat credit for its own duty liabilities. The adjudicating authority did not give sound reasons for rejecting the limitation plea. [Paras 5]

Extended period of limitation is not invocable in the facts of this revenue-neutral case; the demand invoking extended limitation was unsustainable.

Penalty under Section 11AC - consequential interest and penalty - Whether interest and penalty imposed consequential to the duty demand survive after setting aside the demand. - HELD THAT: - Having held that the duty demand was not sustainable for want of proof of under-valuation and that extended limitation could not be invoked, the Tribunal found no basis to sustain consequential interest and penalty. The appellate relief in favour of the Appellant required annulling the interest and penalty both because they stemmed from the impugned demand and because the foundational findings supporting them were set aside. [Paras 6]

Consequential interest and penalty do not survive and are set aside along with the demand.

Final Conclusion: Impugned Order-in-Original No. BH-EXCUS-BHARUCH-COM-O11-2014-15 dated 09-01-2015 is set aside; the appeal is allowed and the duty demand, interest and penalty are quashed, with consequential reliefs to be given in accordance with law.