TaxTMI Updates e-Newsletter
Apr 16,2020

Special camp detention - public health and safety during pandemic - right to personal liberty under Article 21 - flight risk and custodial supervision - expeditious trial and judicial case management post-pandemic - use of video conferencing/visual inspection for judicial fact-finding

Special camp detention - public health and safety during pandemic - flight risk and custodial supervision - right to personal liberty under Article 21 - Prayer to release petitioners from the Special Camp at Tiruchirapalli and permit them to reside at the address in Kancheepuram during the COVID-19 pandemic was rejected. - HELD THAT: - The Court inspected the Special Camp by live video-link and found the camp to be properly maintained with sufficient accommodation and infection-prevention measures in place (including disinfection, medical visits, provision of masks, and availability of toilets). The photographs relied upon by the petitioners were held to be misleading and clustering in rooms was attributed to the inmates themselves rather than any failure of the authorities. The Court declined to act as an investigative agency to verify the correctness of addresses supplied to authorities. Weighing the public-health risk of relocating detained persons during the pandemic and the possibility that releasing these accused-against whom serious fiscal offences have been investigated and charge-sheeted-could result in wider community transmission or flight from prosecution, the Court held that no special indulgence to allow residence outside the camp could be granted despite the petitioners' assurances. The Court emphasised that Article 21 protections do not permit court substitution for executive decisions on detention in such circumstances and that equal treatment of similarly placed detainees must be maintained to avoid undue precedent and disruption of State machinery. [Paras 17, 18, 21, 22, 27]

Petitions seeking release from the Special Camp and permission to reside at the Kancheepuram address were dismissed.

Expeditious trial and judicial case management post-pandemic - use of video conferencing/visual inspection for judicial fact-finding - Direction to the trial court to take up and expedite trial proceedings in C.C.No.1 of 2020 on a day-to-day basis after normalcy is restored. - HELD THAT: - In light of the pendency of criminal proceedings, the Court, while declining the custodial relief sought by the petitioners, accepted the State's suggestion and directed the learned Additional Chief Metropolitan Magistrate (Economic Offences-I), Egmore, Chennai to proceed with trial of C.C.No.1 of 2020 once normalcy is restored post COVID-19 lockdown and to conduct the trial on a day-to-day basis without adjourning it beyond ten working days at any point. The Court noted advantages of visual inspection via video applications for judicial fact-finding and case management and found justification to order expedited trial to obviate prolonged detention and to protect prosecutorial interests. [Paras 24, 25, 26]

Trial in C.C.No.1 of 2020 to be taken up after lockdown and conducted on a day-to-day basis, with no adjournment beyond ten working days at any stage.

Final Conclusion: Writ petitions praying for release of the petitioners from the Special Camp to reside at their Kancheepuram address during the COVID-19 pandemic were dismissed; the trial already instituted in C.C.No.1 of 2020 is directed to be taken up after lockdown and to proceed on a day-to-day basis to ensure expeditious disposal.

Interest on delayed payment of tax - interest under Section 50 of the Central Goods and Services Act, 2017 - I.T.C. set off - cash set off - stay of recovery - delay in filing GSTR-3B

I.T.C. set off - interest under Section 50 of the Central Goods and Services Act, 2017 - stay of recovery - delay in filing GSTR-3B - Recovery of interest calculated on account of I.T.C. set off was stayed by the High Court on interim application. - HELD THAT: - The court noted that Section 50 of the Central Goods and Services Act, 2017 makes interest payable on delayed payment of tax and that the impugned communication dated 07.02.2020 showed interest had been calculated due to delay in filing GSTR-3B, including interest on both 'cash set off' and 'ITC set off'. In exercise of its interim jurisdiction on admission, the court granted a limited stay of recovery insofar as it related to interest charged on I.T.C. set off, while leaving other aspects of the demand (including interest on cash set off) unaffected. The court directed issuance of notice and listed the matter for further hearing after four weeks alongside an analogous petition.

Interim stay of recovery of interest insofar as it relates to I.T.C. set off; notice issued and matter listed after four weeks.

Final Conclusion: On admission the High Court issued notice and granted an interim stay restraining recovery of interest to the extent it relates to I.T.C. set off (arising from delay in filing GSTR-3B); the petition was listed for further/analogous hearing after four weeks.

Judicial review of Income Tax Settlement Commission order - Interference under Article 226 of the Constitution - Consistency of decisions and reliance on earlier similar judgment - Summary dismissal where no infirmity found in impugned order

Judicial review of Income Tax Settlement Commission order - Interference under Article 226 of the Constitution - Consistency of decisions and reliance on earlier similar judgment - Validity of the Settlement Commission's order dated 17.7.2018 as challenged by the Principal Commissioner of Income Tax-1 under Article 226. - HELD THAT: - All three petitions challenged the Settlement Commission's common order dated 17.7.2018 in respect of the stated assessment years. The court noted that on identical facts in earlier petitions (judgment dated 7.10.2019) it had dismissed similar challenges to the Settlement Commission's orders, finding no infirmity. Given that the facts and contentions in the present petitions are similar to those previously considered, and differing only in the amounts involved, the court found no basis to revisit or interfere with the impugned order. The court therefore applied the earlier reasoning and declined to disturb the Settlement Commission's decision.

Petitions dismissed; no interference with the Settlement Commission's order dated 17.7.2018.

Final Conclusion: The petitions under Article 226 challenging the Settlement Commission's order dated 17.7.2018 (relating to assessment years 2004-2005 and 2005-2006) are dismissed, the High Court finding no infirmity and relying on its earlier decision in similar matters.

Stay of recovery of penalty - balance of convenience - adjustment of tax refund against demand - prima facie debatable issue in quantum proceedings - partial interim relief subject to conditions - out of turn hearing

Stay of recovery of penalty - balance of convenience - prima facie debatable issue in quantum proceedings - Grant of interim stay of recovery of specified portion of the penalty demands pending disposal of the appeals - HELD THAT: - Applying the balance of convenience test the Tribunal found mitigating circumstances favouring interim relief: a substantial portion of the penalty demand had already been discharged by the assessee (20% payment) and the tax department was in control of refunds claimed by the assessee; further, the underlying quantum issue involving allegations of base erosion was held to be debatable and had been admitted by the High Court. On these considerations the Tribunal exercised its discretion to grant a partial stay of recovery pending appellate adjudication, observing that the question on merits remained arguable and that immediate recovery would cause prejudice to the assessee. [Paras 7, 8]

Stay of recovery granted to the assessee to the extent of Rs. 5,27,23,794/- for six months or till disposal of the appeals by the Tribunal, whichever is earlier.

Adjustment of tax refund against demand - Permissibility of adjusting the department held refund towards reduction of the outstanding penalty demand - HELD THAT: - The Tribunal authorised the Assessing Officer to adjust the refund of excess tax under the department's control towards the outstanding penalty demands. This adjustment formed part of the basis for calculating the quantum of relief by reducing the net balance sought to be stayed. [Paras 3, 4, 7]

AO entitled to adjust the refund of Rs. 2,90,79,380/- against the penalty demands.

Partial interim relief subject to conditions - Imposition of conditions governing continuance and vacatur of the stay - HELD THAT: - The Tribunal conditioned the stay on (a) the specified limited duration (six months or till disposal of appeals, whichever earlier), (b) the assessee's cooperation for expeditious disposal including abstention from seeking adjournments except for wholly unavoidable reasons, and (c) the consequence that failure to comply would permit vacatur of the stay and associated benefits. These conditions were imposed to balance the assessee's interim relief with the Revenue's interest in timely adjudication. [Paras 8, 10]

Stay is subject to the stated duration and cooperation conditions and may be vacated for non compliance.

Out of turn hearing - Directions for expedited listing of the penalty appeals - HELD THAT: - To facilitate speedy adjudication the Tribunal directed that the penalty appeals for the specified years be placed for out of turn hearing on the date announced in open court (23/04/2020) and dispensed with separate notices; parties were directed to file records in advance to enable expeditious disposal. [Paras 9]

Penalty appeals to be listed for out of turn hearing on 23/04/2020 with no separate notice; parties to file papers in advance.

Final Conclusion: The Tribunal allowed the stay applications in part: it granted a conditional, time limited stay of recovery of Rs. 5,27,23,794/- (after adjustment of departmental refund) for six months or until disposal of the Tribunal appeals, directed adjustment of the refund under departmental control, ordered out of turn listing of the penalty appeals and imposed cooperation conditions, with the stay liable to be vacated for non compliance.

Definition of "scrap" under Explanation (b) to section 206C - nexus with manufacture or mechanical working for "waste and scrap" - liability to collect TCS under section 206C by traders in scrap - remand to Assessing Officer for item-wise relief where factual determination required

Definition of "scrap" under Explanation (b) to section 206C - nexus with manufacture or mechanical working for "waste and scrap" - Whether the sales made by the assessee (a trader, not a manufacturer) fall within the definition of "scrap" so as to attract liability to collect TCS under section 206C. - HELD THAT: - The Tribunal found as an undisputed fact that the assessee is a dealer in scrap and not a manufacturer and that the items sold included unburned transformer coils and other products not generated by the assessee's manufacturing activity. By following the reasoning in Navine Fluorine and the subsequent decision of the Hon'ble Gujarat High Court in CIT(TDS) vs. Priya Blue Industries Pvt. Ltd., the Tribunal accepted the construction that the phrase "waste and scrap" in Explanation (b) must have a nexus with manufacture or mechanical working and denotes material which is definitely not usable as such. Materials that are usable as such or which do not arise from the seller's manufacture/mechanical working do not fall within that definition. Applying that legal principle to the facts, the Tribunal concluded that the assessee's sales do not constitute "scrap" as envisaged in Explanation (b) and therefore do not attract the TCS obligation under section 206C. [Paras 4, 11, 15]

Sales by the assessee, being a trader and not arising from manufacture or mechanical working so as to be unusable as such, do not fall within the definition of "scrap" in Explanation (b) and thus are not liable to TCS under section 206C.

Liability to collect TCS under section 206C by traders in scrap - remand to Assessing Officer for item-wise relief where factual determination required - Whether the Special Bench decision holding traders in scrap liable to collect TCS was effectively negatived or inapplicable in the present factual matrix and whether any matter required remand. - HELD THAT: - The Tribunal considered the Special Bench decision in M/s Bharti Auto Products and the distinction drawn by the Hon'ble Gujarat High Court in Priya Blue. The High Court treated the Tribunal's factual finding - that certain items obtained from ship breaking were usable as such and therefore not "scrap" - as a factual conclusion not giving rise to a question of law. The present facts were held to be materially similar (assessee a trader, items not generated by manufacture and reusable). The Tribunal therefore concluded that the High Court did not overlook Bharti Auto Products and that the High Court's approach has been followed by coordinate Bench decisions which have not been disturbed. Where earlier tribunals remitted issues to the Assessing Officer for item wise determination after recording factual findings, that approach is permissible; however, in the present appeals the Tribunal decided the appeals on merits in favour of the assessee without requiring remand. [Paras 12, 13, 14, 15]

The Special Bench ruling does not operate to impose TCS in the present factual matrix; the Tribunal follows the High Court approach and decides the appeals in favour of the assessee without remanding the matter for further adjudication.

Final Conclusion: Appeals allowed: following the construction that "scrap" under Explanation (b) to section 206C must arise from manufacture or mechanical working and be unusable as such, the Tribunal held the assessee (a trader, not a manufacturer) not liable to collect TCS on the sales in question and allowed the appeals.

Disallowance under section 40(a)(ia) - Short deduction of tax at source - Liability to deduct TDS under section 194C - Effect of lower rate deduction on applicability of section 40(a)(ia)

Disallowance under section 40(a)(ia) - Short deduction of tax at source - Liability to deduct TDS under section 194C - Disallowance under section 40(a)(ia) deleted where only short deduction of TDS occurred. - HELD THAT: - The Assessing Officer disallowed certain expenditures under section 40(a)(ia) on the ground that the assessee failed to deduct TDS under section 194C in full. The record before the authorities showed that TDS was in fact deducted, albeit at a lower rate, under section 194C (and that other heads involved nil deduction). Relying on the reasoning in the jurisdictional High Court decision in Commissioner of Income Tax v. S.K. Tekriwal, which holds that a mere short deduction of TDS does not attract disallowance under section 40(a)(ia), the Tribunal found that the statutory disallowance was not warranted. In these circumstances the Assessing Officer's disallowance was set aside and deleted.

Impugned disallowance under section 40(a)(ia) deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2009-10 and directed deletion of the disallowance under section 40(a)(ia) because only short deduction of TDS had occurred, rendering section 40(a)(ia) inapplicable.

Penalty under Section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - deeming fiction under Explanation 1 to section 271(1)(c) - requirement of categorical finding by assessing authority - show-cause notice ambiguity regarding "and/or"

Penalty under Section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - deeming fiction under Explanation 1 to section 271(1)(c) - requirement of categorical finding by assessing authority - show-cause notice ambiguity regarding "and/or" - Whether penalty under section 271(1)(c) could be sustained against the assessee for Assessment Year 2010-11. - HELD THAT: - The Tribunal examined section 271(1)(c) and Explanation 1 which create a deeming fiction where an assessee either fails to offer an explanation, offers an explanation found false, or is unable to substantiate an explanation material to computation of total income. The record shows the assessee informed the department of errors before issuance of the notice under section 148 and offered explanations. The Assessing Officer initiated penalty proceedings using both heads (concealment and furnishing inaccurate particulars) and the ultimate penalty order failed to record a clear, conclusive finding as to which limb of section 271(1)(c) applied. Reliance was placed on the view in the jurisdictional High Court decision referred to in the order that while a notice may use "and/or," the authority must reach a positive finding whether there was concealment or furnishing of inaccurate particulars before imposing penalty. Given the pre-notice disclosure by the assessee, the ad-hoc nature of several disallowances confirmed on appeal, and the absence of a categorical finding by the Assessing Officer or the CIT(A) that the assessee had concealed particulars or furnished inaccurate particulars, the Tribunal concluded the statutory pre-conditions for sustaining penalty were not satisfied and the penalty did not survive. [Paras 8, 9, 10]

Penalty under section 271(1)(c) deleted and the assessee's appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2010-11 and deleted the penalty imposed under section 271(1)(c) on grounds that the assessee had informed the department of errors before reassessment proceedings and the assessing authority failed to record the mandatory categorical finding required to sustain penalty.

Deductibility under section 80P(2)(a)(i) - Interest from investments with non-cooperative banks not eligible for section 80P deduction - Interest income attributable to business of providing credit to members - Section 80P(2)(d) exemption limited to investments with cooperative societies

Deductibility under section 80P(2)(a)(i) - Interest from investments with non-cooperative banks not eligible for section 80P deduction - Interest income attributable to business of providing credit to members - Section 80P(2)(d) exemption limited to investments with cooperative societies - Whether interest income of Rs.35,103/-(interest from Axis Bank savings account and interest on loan to staff) is deductible under section 80P(2) of the Act - HELD THAT: - The Tribunal examined the claim for deduction under section 80P(2) in light of the jurisdictional High Court decision in State Bank of India Employees Co-op Credit Society Ltd (as analysed from Totgars Co-operative Sale Society (SC)). The Court's principle is that section 80P(2) permits deduction only for income that constitutes the operational profits and gains attributable to the society's activities of providing credit to members or marketing members' produce; interest earned on funds not immediately required for business purposes or on investments with non-cooperative banks does not fall within that operational income and therefore cannot be allowed as deduction under section 80P(2)(a)(i). Section 80P(2)(d) permits exemption only for interest earned from investments in cooperative societies and does not extend to interest from banks which are not cooperative societies. Applying those authorities, interest earned on the Axis Bank savings account is not within the categories eligible for deduction, and the interest on loans to staff similarly does not qualify as income attributable to the core business of providing credit to members. The Tribunal found the ld.CIT(A)'s reliance on the jurisdictional High Court decision to be correct and affirmed the exclusion of the stated interest from the deduction claimed under section 80P(2). [Paras 6, 7]

The disallowance of the exemption claimed under section 80P(2) in respect of the interest income of Rs.35,103/- is confirmed and the appeal is dismissed.

Final Conclusion: The Tribunal confirmed the ld.CIT(A)'s order disallowing exemption under section 80P(2) in respect of interest from Axis Bank and interest on staff loan for Asstt.Year 2014-15; the assessee's appeal is dismissed.

Condonation of delay in filing appeal - Estimation of income without independent verification - Remand for fresh adjudication on merits - Reliance on Form 26AS and TDS data as basis for assessment - Rectification under Section 154 of the Income tax Act

General ground of appeal - Ground No.3 being a general ground which did not call for specific findings was rejected. - HELD THAT: - The Tribunal recorded that ground No.3 of appeal was a general contention not requiring specific adjudication and accordingly dismissed that ground without further findings. No substantive relief was granted on this ground. [Paras 2]

Ground No.3 rejected.

Condonation of delay in filing appeal - Rectification under Section 154 of the Income tax Act - Delay of 157 days in filing the appeal before the CIT(A) was condoned. - HELD THAT: - The assessee had applied for rectification of the assessment order under Section 154 and, on rejection of that application, filed the appeal which became time barred by 157 days. The Tribunal found the course adopted by the assessee - seeking rectification first because it required a factual finding from the Assessing Officer about alleged misuse of PAN and non receipt of payments - to be a plausible explanation for the delay. Given that the assessee pursued a remedy available to it and the Assessing Officer did not verify the TDS information before estimating income, the Tribunal exercised its discretion to condone the delay. [Paras 5]

Delay of 157 days condoned and appeal admitted for adjudication on merits.

Estimation of income without independent verification - Reliance on Form 26AS and TDS data as basis for assessment - Remand for fresh adjudication on merits - Assessment order estimating income on the basis of Form 26AS/TDS data without verification was set aside and the matter remitted to the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal noted that the Assessing Officer accepted the Form 26AS information as conclusive despite the assessee's contention that it had not carried out the alleged business and that its PAN might have been misused. The Assessing Officer failed to make basic enquiries, such as verifying with the purported payer whether payments were actually made through banking channels to the assessee, before estimating income. Remitting the matter was necessary to avoid multiplicity of litigation and to enable the Assessing Officer to verify the factual stance taken by the assessee; only upon verification and recording of findings as to whether payments were made and TDS correctly deducted could any estimation be justified. Accordingly, both the assessment order and the appellate order were set aside and the issue restored to the file of the Assessing Officer for re adjudication. [Paras 6]

Assessment and appellate orders set aside; matter remitted to Assessing Officer for verification and fresh adjudication on merits.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: ground No.3 rejected; delay of 157 days in preferring the appeal to the CIT(A) was condoned; the assessment order (and the appellate order) were set aside and the issue remitted to the Assessing Officer for verification of the alleged payments/TDS and fresh adjudication on merits in respect of Assessment Year 2008 09.

Reopening of assessment based on valuation report obtained from a Valuation Officer - validity of reference to a District Valuation Officer under summons during assessment proceedings - admissibility of additional grounds in appeal - project completion method for taxation of construction projects - application of a net profit rate to determine taxable income in construction business where books/returns are not produced - consequences of non-cooperation with tax authorities and a Valuation Officer

Admissibility of additional grounds in appeal - Additional ground challenging reopening (reference to DVO when no proceedings were pending) is not admissible and is dismissed. - HELD THAT: - The Tribunal held that the assessee failed to explain why the additional legal ground was not raised earlier or to file an affidavit justifying its late admission. On the merits the Tribunal found the factual premise of the additional ground to be incorrect: the Valuation Officer's report originated from proceedings in the related Deep Laxmi Apartment matter where summons under section 131(1)(d) were issued during pending assessment proceedings. As the assessee did not justify the belated ground and the record did not support its factual contention, the additional ground was held neither maintainable procedurally nor sustainable on merits. [Paras 5]

Additional ground dismissed.

Validity of reference to a District Valuation Officer under summons during assessment proceedings - reopening of assessment based on valuation report obtained from a Valuation Officer - consequences of non-cooperation with tax authorities and a Valuation Officer - Reopening of the assessment and use of the DVO valuation report to make additions was valid in the facts of this case. - HELD THAT: - The Tribunal examined the record and accepted the Revenue's case that the DVO report (dated 29.11.2000) arose from valuation proceedings in the related Deep Laxmi Apartment assessment where a summons was issued on 06.08.1999 during pending proceedings. The Tribunal found that the assessee had not cooperated with the AO or the DVO, failed to produce books or required details, and had in earlier proceedings furnished a lower construction cost figure which was relied upon by the authorities. Given these facts, the Tribunal held that the AO was entitled to reopen the assessment and rely on the DVO report; objections to the validity of the referral and to the DVO process were rejected as the assessee had ample opportunity but did not cooperate. [Paras 5, 13]

Reopening and reliance on DVO report sustained.

Project completion method for taxation of construction projects - application of a net profit rate to determine taxable income in construction business - The addition based on the DVO figure was modified: entire addition was not sustained; taxable income was determined by applying a 5% net profit rate to net receipts, yielding a reduced addition which was sustained while the balance addition was deleted. - HELD THAT: - Noting that the assessee had not filed returns or produced year-wise supporting books and that the AO's cost figure of Rs. 36 lakh was itself not supported by books, the Tribunal took a pragmatic approach. Recognising that in construction projects only net profit is ordinarily taxable and that the assessee had not substantiated year-wise figures, the Tribunal applied a net profit rate of 5% to gross receipts after deducting land cost to arrive at the taxable income. This resulted in a taxable income of Rs. 3,36,561, which the Tribunal sustained, and it deleted the remaining addition that had been computed by reference to the DVO figure. [Paras 13]

Addition sustained to the extent of taxable income computed at 5% of net receipts (Rs. 3,36,561); remaining addition deleted; appeal partly allowed.

Final Conclusion: The Tribunal dismissed the late additional ground and upheld the reopening and use of the DVO valuation in the factual matrix; on the quantum issue it allowed the appeal partly by computing taxable income at 5% of net receipts (after deducting land cost), sustaining a reduced addition and deleting the balance, and consequently the appeal was partly allowed.

Unexplained cash credit under section 68 - deemed income under section 68 - onus of assessee to prove genuineness of cash credits - discharge of onus by furnishing identity and banking evidence - requirement of further enquiry under section 133(6)

Unexplained cash credit under section 68 - onus of assessee to prove genuineness of cash credits - discharge of onus by furnishing identity and banking evidence - Deletion of part of addition made under section 68 in respect of loans from specified persons. - HELD THAT: - The Tribunal found that in respect of the loan of Rs. 1,00,000 from Shri Parth Kumar Ghediya the assessee produced the acknowledgement of return of income and a bank passbook entry reflecting the transaction, and in respect of the loan of Rs. 3,00,000 taken from a non-resident the amount was routed through banking channel. On these materials the assessee discharged the primary onus under section 68 to prove the genuineness of these credits. Having found the onus discharged, the Tribunal held that the genuineness of these loans could not be doubted and deleted the corresponding part of the addition, while leaving the remaining addition intact. [Paras 7]

Part of the addition under section 68 deleted: loans of Rs. 1,00,000 and Rs. 3,00,000 accepted as genuine; remaining addition sustained.

Deemed income under section 68 - onus of assessee to prove genuineness of cash credits - discharge of onus by furnishing identity and banking evidence - requirement of further enquiry under section 133(6) - Whether cash deposits in bank account held to be unexplained income under section 68 should be added where assessee produced identity documents, confirmations and evidence of repayment. - HELD THAT: - The Tribunal observed that the cash deposits were small (below Rs. 19,000), many were repaid during the year and the assessee furnished identity and capacity documents (PAN, voter ID, electricity bill, 7/12 extract) and confirmations before the first appellate authority. The AO, who had disbelieved the transactions, did not effect further enquiries such as examining the depositors under the powers available (see section 133(6)); the appellate record included a remand and the documents were placed before the AO. Relying on the principle that once the assessee furnishes credible identity and proof, the AO ought to make further enquiries before treating receipts as unexplained cash credits, the Tribunal held that the assessee discharged the primary onus and deleted the addition relating to these cash deposits. [Paras 13]

Addition of alleged unexplained cash deposits deleted insofar as the assessee furnished identity, confirmations and evidence of repayment; ground allowed.

Final Conclusion: The appeal is partly allowed: specified loans (Rs. 1,00,000 and Rs. 3,00,000) treated as genuine and corresponding addition deleted; the addition based on the cash deposits challenged under section 68 is also deleted after the assessee discharged the onus by producing identity and banking evidence and in absence of requisite further enquiries by the AO.

Exemption under section 10(37) - compulsory acquisition - sale deed versus compulsory acquisition - reservation of land under town planning/development for public purpose - negotiated compensation does not alter character of compulsory acquisition

Exemption under section 10(37) - compulsory acquisition - reservation of land under town planning/development for public purpose - Assessee entitled to exemption under section 10(37) as the land was compulsorily acquired by Surat Municipal Corporation under direction of Government of Gujarat. - HELD THAT: - The Tribunal examined documentary material including the Government reservation notification and communications from the Surat Municipal Corporation that described the transaction as 'compulsory acquisition' and placed the land under reservation for erection of a Sewage Treatment Plant. The Tribunal applied its coordinate-bench precedents (ITO v. Dipak Kalidas Pauwala) and decisions of the Gujarat High Court and the Supreme Court (Balakrishnan v. Union of India) holding that where statutory steps for acquisition and reservation for public purpose have been taken under relevant town-planning and municipal enactments and acquisition is by/at the instance of the government authority, a subsequent negotiated sale or agreement on compensation does not change the character of the transaction from compulsory acquisition to voluntary sale. On that basis the conditions of section 10(37) were held to be satisfied and the exemption allowed. [Paras 7, 10, 11]

Claim for exemption under section 10(37) allowed; land held to be compulsorily acquired by SMC under government direction.

Cost of acquisition - infructuous grounds - Ground relating to cost of acquisition rendered infructuous and treated as dismissed in view of the Tribunal's acceptance of exemption under section 10(37). - HELD THAT: - Having held that the transaction qualified as compulsory acquisition and the assessee was entitled to exemption under section 10(37), the question of cost of acquisition no longer affected the taxability for the assessment year under dispute. Consequently the ground on cost was not adjudicated on merits and was treated as dismissed as infructuous. [Paras 8]

Ground on cost of acquisition treated as dismissed/infructuous.

Final Conclusion: Following coordinate-bench and higher-court authorities and on the materials showing reservation and acquisition for a public purpose, the Tribunal allowed the claim of exemption under section 10(37) for AY 2009-10 and accordingly the appeal was partly allowed; the related ground on cost of acquisition was rendered infructuous.

Condonation of delay - sufficient cause - liberal construction of limitation provisions to secure substantial justice - absence of mala fide or gross negligence - remand for de novo adjudication on merits

Condonation of delay - sufficient cause - absence of mala fide or gross negligence - liberal construction of limitation provisions to secure substantial justice - Whether the delay in filing appeals by the assessee-bank in respect of Assessment Years 2013-14 to 2015-16 ought to be condoned - HELD THAT: - The Tribunal applied settled principles that the expression "sufficient cause" should be construed liberally to secure substantial justice and that acceptability of the explanation, not merely length of delay, is the determinative test. The assessee, a public sector bank, explained that notices were received at branch level and that statutory/tax litigation matters required onward transmission through prescribed internal channels (branch to Regional Banking Office to Local Head Office) and appointment/approval of legal advisers, processes which consumed considerable time and which are beyond the control of the local branch. The CIT(A) rejected the explanation for want of corroborative evidence; the Tribunal found the explanation credible in context of the bank's organisational constraints and the absence of any imputation of mala fide or deliberate delay. Relying on the principle that appeals should ordinarily be decided on merits unless gross negligence or mala fide is shown, the Tribunal held that the delay (ranging between 101 and 702 days) constituted sufficient cause to be condoned and that the appeals should be admitted for adjudication on merits. [Paras 8, 9, 12]

Delay in filing the appeals for Assessment Years 2013-14 to 2015-16 is condoned and the appeals are admitted; matters are remitted to the CIT(A) for fresh adjudication on merits.

Remand for de novo adjudication on merits - Whether the admitted appeals should be remitted to the CIT(A) for fresh adjudication - HELD THAT: - Having condoned the delay and admitted the appeals, the Tribunal directed that the CIT(A) admit the appeals and decide them de novo on merits. The Tribunal emphasised that where delay is condoned in absence of mala fide or gross negligence, the appropriate course is to remit the matters for substantive adjudication rather than dismissing on technical grounds. [Paras 11, 12]

Appeals are set aside to the file of the CIT(A) for fresh adjudication on merits after admitting the appeals.

Final Conclusion: The Tribunal condoned the delay in filing appeals for AYs 2013-14 to 2015-16 (Vyara and Ahwa branches), admitted the appeals and remitted the matters to the CIT(A) for de novo adjudication on merits.

Audi alteram partem - reconsideration and remand for fresh hearing - registration under section 12AA of the Income Tax Act - Form No.10A and Rule 17A(1) compliance - genuineness of trust activities

Registration under section 12AA of the Income Tax Act - Form No.10A and Rule 17A(1) compliance - genuineness of trust activities - audi alteram partem - reconsideration and remand for fresh hearing - Validity of rejection of the assessee's application for registration under section 12AA and whether the matter required fresh consideration by the CIT(Exemption). - HELD THAT: - The Tribunal recorded that the CIT(Exemption) rejected the application because the assessee had not produced documentary evidence - including self certified registration copy as envisaged by the procedure for filing Form No.10A - to enable satisfaction about the genuineness of the trust's activities. The AR stated that the required details had been filed online and compiled in response to letters, but the rejection order was passed before such compilation could be considered. Applying the elementary principle of audi alteram partem, the Tribunal held that the assessee should be afforded another opportunity to file the documents and be heard; the matter therefore warranted reconsideration rather than upholding the rejection. The Tribunal directed the learned CIT(Exemption) to receive the called for documents, grant a hearing, and pass a fresh reasoned order on the registration application, restoring the matter to the CIT(Exemption) for that purpose. [Paras 6]

The order rejecting registration under section 12AA is set aside and the application is remitted to the CIT(Exemption) for fresh consideration after giving the assessee an opportunity to file documents and be heard; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the assessee's application for registration under section 12AA to the CIT(Exemption) for fresh consideration, directing that the assessee be given an opportunity to produce the required documents and be heard; the appeal is allowed for statistical purposes.

Credit of TDS - percentage of completion method - recognition of income for allowance of TDS credit - mandatory accounting standard - remand for verification

Credit of TDS - percentage of completion method - recognition of income for allowance of TDS credit - remand for verification - Whether the claim for credit of TDS on progressive invoicing and mobilization advances could be allowed where such receipts were not recognized as income in the year under consideration due to application of Percentage of Completion Method (POCM). - HELD THAT: - The Assessing Officer denied TDS credit on the basis that the amounts on which TDS was deducted were not reflected as income in the year under consideration. The AO, however, accepted that the assessee consistently follows POCM in accordance with the mandatory accounting standard and did not dispute the accounting method. The assessee contended that the amounts on which TDS was claimed were offered to tax in subsequent assessment years in accordance with POCM. The Tribunal observed that there was no record on the file showing verification by the Assessing Officer that such amounts were in fact recognized as income in subsequent years. In the interest of justice, the Tribunal did not decide the claim on merits but restored the matter to the Assessing Officer with a direction to verify whether the income corresponding to the TDS claimed was recognized in subsequent assessment years, and if so, to allow the credit of TDS accordingly. [Paras 10, 11, 12]

Matter remanded to the Assessing Officer to verify recognition of the disputed income in subsequent assessment years and, if confirmed, to allow the claimed TDS credit; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal has restored the issue to the Assessing Officer for verification of whether the amounts on which TDS was deducted were recognized as income in subsequent assessment years under POCM and directed that, if so verified, credit of TDS be granted; the appeal is treated as allowed for statistical purposes.

Penalty under Section 271(1)(c) - twin charges of concealment of income and furnishing inaccurate particulars - requirement that show cause notice specify the limb of Section 271(1)(c) - invalidity/cancellation of penalty for defective show cause notice

Penalty under Section 271(1)(c) - requirement that show cause notice specify the limb of Section 271(1)(c) - twin charges of concealment of income and furnishing inaccurate particulars - Validity of the penalty confirmed by lower authorities where the show cause notice did not specify which limb of Section 271(1)(c) was invoked - HELD THAT: - The Assessing Officer initiated penalty proceedings treating both limbs of Section 271(1)(c) - concealment of income and furnishing inaccurate particulars - without striking off either charge in the show cause notice. The penalty order likewise proceeded on both limbs. The tribunal examined the notice and the penalty order and found that the notice did not specify on which limb the penalty was being initiated. Reliance was placed on the principle, as applied by the jurisdictional High Court, that a penalty cannot be sustained where the show cause notice fails to indicate the specific limb of Section 271(1)(c) relied upon. Because the defect in the show cause notice went to the validity of the penalty proceedings and the lower authorities had confirmed the penalty despite the omission, the tribunal held that the penalty could not be sustained and directed cancellation of the penalty levied under Section 271(1)(c).

Penalty levied under Section 271(1)(c) quashed for want of specification in the show cause notice; orders of lower authorities reversed and appeal allowed.

Final Conclusion: The penalty of Rs. 2,12,130 imposed under Section 271(1)(c) is set aside because the show cause notice did not specify which limb of Section 271(1)(c) was invoked; the orders confirming the penalty are reversed and the appeal is allowed.

Disallowance under section 14A read with Rule 8D - limitation of section 14A disallowance to amount of exempt income - application of Maxopp principle regarding purpose of investment - restriction by Joint Investments principle that disallowance cannot exceed exempt dividend - deduction under section 36(1)(va) r.w.s. 2(24)(x) for delayed PF/ESIC deposits - notional interest disallowance on interest-free advances - presumption of application of own funds where own funds exceed investments and loans

Disallowance under section 14A read with Rule 8D - limitation of section 14A disallowance to amount of exempt income - application of Maxopp principle regarding purpose of investment - restriction by Joint Investments principle that disallowance cannot exceed exempt dividend - Extent of disallowance under section 14A read with Rule 8D in respect of investments and whether AO's computation could exceed the exempt income earned during the year - HELD THAT: - The Tribunal examined competing authorities including the Supreme Court's Maxopp decision holding that purpose of investment does not exclude operation of section 14A, and the Delhi High Court's Joint Investments decision holding that disallowance under section 14A cannot exceed the exempt income. Applying these precedents to the facts of the assessee's appeals for the years under consideration, the Tribunal concluded that although expenditure attributable to exempt income is liable to be apportioned, the disallowance computed under Rule 8D ought to be restricted to the quantum of exempt income actually earned in the relevant previous year. The Tribunal therefore found the CIT(A)'s allowance of the assessee's suo moto disallowance reasonable only insofar as the ultimate disallowance did not exceed the exempt dividend earned by the assessee in each year, and modified the orders to limit the disallowance to the exempt income for the respective years. [Paras 6, 7]

Dismissing revenue's broader challenge, the Tribunal partly allowed the appeals and modified the CIT(A)'s orders to restrict the section 14A disallowance to the amount of exempt income earned by the assessee in each relevant year.

Deduction under section 36(1)(va) r.w.s. 2(24)(x) for delayed PF/ESIC deposits - reliance on jurisdictional High Court precedents - Whether employers'/employees' contributions to PF and ESIC deposited after statutory due dates but before filing the return are liable to disallowance under section 36(1)(va) - HELD THAT: - The Tribunal reviewed the AO's disallowance and the CIT(A)'s deletion which relied on the Bombay High Court precedents holding deposits made before the due date of filing the return are not liable to disallowance. Finding the CIT(A)'s conclusion consonant with binding decisions of the jurisdictional High Court, the Tribunal found no infirmity in deleting the addition made by the AO in respect of delayed PF/ESIC deposits where such deposits were made before the return filing due date. [Paras 10, 11]

Revenue's appeal against deletion of the PF/ESIC addition was dismissed and the CIT(A)'s deletion was upheld.

Notional interest disallowance on interest-free advances - presumption of application of own funds where own funds exceed investments and loans - commercial expediency of inter-company advances - Whether proportionate interest is to be disallowed where interest-free loans were advanced to subsidiaries and the assessee had surplus own funds exceeding investments and loans - HELD THAT: - The Tribunal considered the facts as found by the CIT(A): the advances were carried forward from prior years, there was no fresh outflow in the relevant year, the loans had reduced net of receipts, and the assessee's own funds exceeded its investments and loans. Applying the principle that where own funds suffice it may be presumed investments/advances were made from such funds (as per the Bombay High Court authority relied on), and having regard to commercial expediency for advances to subsidiaries, the Tribunal found the CIT(A)'s deletion of the notional interest addition to be justified. [Paras 13, 14]

Revenue's challenge to the deletion of the notional interest addition was dismissed and the CIT(A)'s deletion was affirmed.

Final Conclusion: For each assessment year 2011-12 to 2014-15 the Tribunal partly allowed the revenue appeals by modifying the section 14A disallowance to the extent of exempt income actually earned in the relevant year, and dismissed the revenue's appeals on (i) disallowance under section 36(1)(va) for delayed PF/ESIC deposits and (ii) notional interest on interest-free advances, thereby upholding the CIT(A)'s deletions on those issues.

Principles of natural justice and requirement of opportunity of hearing before suspension or cancellation under the Foreign Trade (Development and Regulation) Act - Judicial review - setting aside administrative order for breach of natural justice - Extension/renewal of EPCG licence and fulfillment of export obligations

Principles of natural justice and requirement of opportunity of hearing before suspension or cancellation under the Foreign Trade (Development and Regulation) Act - Judicial review - setting aside administrative order for breach of natural justice - Impugned order passed by the respondent was set aside for having been passed in breach of the principles of natural justice by not affording a reasonable opportunity of hearing. - HELD THAT: - The Court examined the statutory safeguard that suspension or cancellation under the Act must not be made except after giving the holder a reasonable opportunity of being heard. The petitioner contended that no personal hearing was granted in respect of its representation dated 27.06.2019 and that the impugned order was passed in violation of that mandate. Without adjudicating the substantive merits of the licence-extension claim, the Court found the procedure prescribed by law was not followed and therefore the impugned order could not stand. The Court confined its conclusion to the procedural defect and did not decide the merits of the export-obligation or licence-renewal contentions. [Paras 8, 9]

Impugned order set aside for breach of natural justice; matter remitted for fresh consideration.

Extension/renewal of EPCG licence and fulfillment of export obligations - Judicial review - setting aside administrative order for breach of natural justice - Respondents directed to issue notice, grant personal hearing, examine records filed by the petitioner and decide the representation on merits within a specified time. - HELD THAT: - Having set aside the impugned order for procedural infirmity, the Court directed that the petitioner's representation dated 27.06.2019 be considered afresh. The respondents are to give notice to the petitioner, afford personal hearing, permit production and examination of any records relied upon by the petitioner and thereafter pass a reasoned order on the merits of the licence-extension/renewal and related export-obligation issues. The Court imposed a timeline for completing this exercise to ensure expeditious disposal and confined its intervention to requiring compliance with the statutory hearing requirement and fresh decision-making. [Paras 9]

Respondents to issue notice, grant personal hearing and decide the representation on merits by 28.02.2020.

Final Conclusion: Writ petition allowed; impugned order set aside for failure to afford a hearing and the matter remitted to the respondents for fresh consideration after notice and personal hearing, to be completed by 28.02.2020.

Revocation of approval of a Customs Cargo Service provider - custodian under Section 45 of the Customs Act, 1962 - auction of goods in custody without permission of the proper officer - liability of custodian for duty under Section 45(3) of the Customs Act, 1962 - prohibition on charging rent/demurrage on seized or detained goods under Regulation 6(1) of HCCAR - procedure for suspension, revocation and imposition of penalty under Regulations 11 and 12 of HCCAR - principles of natural justice - requirement to consider correspondences and record findings - remand for de novo adjudication

Custodian under Section 45 of the Customs Act, 1962 - auction of goods in custody without permission of the proper officer - prohibition on charging rent/demurrage on seized or detained goods under Regulation 6(1) of HCCAR - Whether the appellant, as custodian, acted contrary to the Customs Act and HCCAR by auctioning goods in its custody without informing or obtaining permission of the proper officer and by charging rent/demurrage on seized/detained goods, thereby attracting liability under the Act and Regulations. - HELD THAT: - The Tribunal found that a custodian appointed under Section 45 holds goods only as custodian and does not acquire title; the custodian must observe statutory limits and HCCAR obligations. The appellant auctioned consignments without putting the importer to notice and without written authorization from the proper officer, contrary to the procedure in Section 48. Regulation 6(1) prohibits charging rent/demurrage on goods seized or detained; the correspondence and certificates indicating litigation/detention placed the consignments within that prohibition. Consequently the conduct amounted to contravention of Section 48 and the responsibilities under Regulation 6(1), and Section 45(3) creates custodian liability where goods are not handled as prescribed. [Paras 4]

Appellant had contravened the Customs Act and HCCAR by auctioning the goods without authorization and by acting inconsistent with Regulation 6(1); custodian liability for the goods as contemplated by Section 45(3) is engaged.

Revocation of approval of a Customs Cargo Service provider - procedure for suspension, revocation and imposition of penalty under Regulations 11 and 12 of HCCAR - principles of natural justice - requirement to consider correspondences and record findings - remand for de novo adjudication - Whether revocation of the appellant's approval and the characterization of the appellant as a habitual offender were justified on the record and whether the adjudicating authority complied with the statutory procedure and principles of natural justice. - HELD THAT: - The Tribunal acknowledged the misconduct finding against the appellant, but held the adjudicating authority failed to consider and record findings on various correspondences relied upon by the appellant in defence. The Commissioner did not address material communications and thereby violated principles of natural justice. The Tribunal also noted a possible tension between the Commissioner's finding of habitual offending and the appellant's asserted AEO status (and related treatment of security/bond), which required fresh consideration. Given these deficiencies the Tribunal concluded that the impugned order could not stand and the matter required de novo adjudication by the Commissioner following the procedure in Regulation 12 and observance of natural justice. [Paras 4, 5]

Impugned order revoking approval and findings of habitual offending set aside; matter remitted to the Commissioner for de novo adjudication with directions to afford hearing, consider the correspondences and record reasons, and decide preferably within six months.

Liability of custodian for duty under Section 45(3) of the Customs Act, 1962 - escrow deposit pending final adjudication - Whether the amount deposited in escrow by the appellant should be kept intact pending final adjudication of liability. - HELD THAT: - The Tribunal held that, since custodian liability for duty may arise where goods in custody are not handled as prescribed, the escrow deposit already made by the appellant should remain with the Customs Authority until finalization of the remanded proceedings. The continuance of the escrow preserves the fund while the Commissioner re-examines liability in the de novo adjudication. [Paras 4, 5]

The Rs. 25 lakhs deposited in escrow shall continue to remain in deposit with the Customs Authority pending finalization of the remanded proceedings.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the matter remanded to the Commissioner for de novo adjudication of all issues with observance of Regulation 12 and principles of natural justice (to be decided preferably within six months). The Tribunal upheld that the appellant's auctioning of goods without authorization contravened the Customs Act and HCCAR and engaged custodian liability, and directed that the existing escrow deposit shall remain intact pending the fresh adjudication.

Classification of imported multifunction devices as "other wastes" not "hazardous waste" - distinction between prohibited and restricted imports - redemption under Section 125 of the Customs Act, 1962 - inapplicability of Form 6 and Form 7 and Schedule VIII(8)(j) conditions to the impugned goods - non-requirement of Bureau of Indian Standards certification for composite multifunction devices - re-adjudication for quantification of redemption fine and penalties by the original authority

Classification of imported multifunction devices as "other wastes" not "hazardous waste" - distinction between prohibited and restricted imports - Imported multifunction devices (MFDs) are to be treated as 'other wastes' and not as 'hazardous waste', and the prohibition applicable to hazardous waste does not apply to these goods. - HELD THAT: - The Tribunal, applying the ratio in the decisions culminating in re Atul Automations Pvt Ltd and the Kerala High Court, held that the impugned MFDs fall within the category of 'other wastes' and not within the prohibition meant for hazardous waste. The Court accepted that the policy focus is on capability to print on sizes larger than A3 and that incidental capability to print smaller sizes does not exclude the goods from the diluted conditions for 'other wastes'. Consequently, the absolute prohibition regime for hazardous waste is not attracted to these imported MFDs. [Paras 9, 10]

MFDs are 'other wastes' and not subject to the prohibition regime for hazardous waste.

Inapplicability of Form 6 and Form 7 and Schedule VIII(8)(j) conditions to the impugned goods - The requirements of Forms 6 and 7 and the five specific conditions in Schedule VIII (8)(j) for hazardous waste imports are not mandated for the impugned MFDs. - HELD THAT: - Relying on the same line of authority, the Tribunal found that the five conditions in Schedule VIII are complied with in the present case and that the provisions (including Forms 6 and 7) framed for hazardous waste imports do not apply to these MFDs. The adjudicating authorities' conclusion that printing capacity on smaller paper sizes disqualified the machines from the diluted schedule conditions was not accepted. [Paras 10]

Forms 6 and 7 and the Schedule VIII(8)(j) preconditions for hazardous waste imports are not applicable to the impugned MFDs.

Redemption under Section 125 of the Customs Act, 1962 - distinction between prohibited and restricted imports - Confiscation without offering the option of redemption under Section 125 of the Customs Act, 1962 was not permissible where the goods are restricted (not prohibited); the goods must be offered for redemption. - HELD THAT: - The Tribunal observed that restricted imports (as opposed to prohibited ones) attract the discretion under Section 125 to permit redemption upon payment of market value and appropriate fines. The adjudicating and first appellate authorities' absolute confiscation was held to be contrary to the settled legal position that restricted items imported without authorization are entitled to be redeemed on payment of market price and fines. The Tribunal therefore set aside the finding of absolute confiscation and directed that the goods be mandatorily offered for redemption. [Paras 3, 4, 12]

Absolute confiscation set aside; restricted goods must be offered for redemption under Section 125.

Non-requirement of Bureau of Indian Standards certification for composite multifunction devices - Certification under the Bureau of Indian Standards is not mandated for composite multifunction devices merely because the constituent functions, when considered separately, have prescribed standards. - HELD THAT: - The Tribunal held that exclusive categorization of the impugned goods as composite 'multifunctional devices' means that standards applicable to constituent machines functioning separately do not automatically apply. Thus, the requirement of BIS certification for each constituent function was not mandated for these composite MFDs. [Paras 11]

BIS certification is not required for the impugned composite multifunction devices.

Re-adjudication for quantification of redemption fine and penalties by the original authority - Quantum of redemption fine and penalties is to be determined afresh by the adjudicating authority; matter remanded for re-adjudication limited to quantification. - HELD THAT: - While the Tribunal set aside the absolute confiscation and held that redemption must be offered, it declined to fix the redemption fine and penalties itself. The Tribunal explained that the economic advantage of import without licence must be neutralized by determining the market value and appropriate redemption fine. Accordingly, the matter was remitted to the adjudicating authority to decide the redemption fine and penalties in accordance with the principles stated, and to complete re-adjudication within two weeks from receipt of the order. [Paras 13]

Remitted to the adjudicating authority to determine the redemption fine and penalties; re-adjudication to be completed within two weeks.

Final Conclusion: The Tribunal set aside the orders of absolute confiscation, held that the imported multifunction devices are 'other wastes' (not 'hazardous waste'), that the hazardous waste preconditions and BIS certification are not applicable, and directed that the goods be offered for redemption under Section 125 of the Customs Act; quantification of redemption fine and penalties is remitted to the adjudicating authority for determination within two weeks.

Power of Adjudicating Authority under the Insolvency and Bankruptcy Code - investigation into affairs of a company under Section 210(2) of the Companies Act, 2013 - procedure under Section 213 of the Companies Act, 2013 - referral to Central Government for appointment of Inspector(s) - competence to direct investigation by the Serious Fraud Investigation Office - principles of natural justice applicable to the Tribunal

Power of Adjudicating Authority under the Insolvency and Bankruptcy Code - investigation into affairs of a company under Section 210(2) of the Companies Act, 2013 - procedure under Section 213 of the Companies Act, 2013 - competence to direct investigation by the Serious Fraud Investigation Office - principles of natural justice applicable to the Tribunal - Whether the Adjudicating Authority (NCLT acting under the I&B Code) was competent to directly order an investigation by the Central Government under Section 210(2) of the Companies Act, 2013 and the proper procedure to be followed. - HELD THAT: - The Tribunal held that while the NCLT, as Adjudicating Authority under the I&B Code, has concurrent jurisdiction under the Companies Act and may address allegations of fraudulent or wrongful trading, it is not empowered to straightaway direct an investigation to be carried out by the Central Government or to directly send the matter to the SFIO without following the statutory procedure. The Companies Act contemplates the procedure in Section 213 whereby the Tribunal, upon being satisfied of circumstances suggesting fraud or misconduct, must give notice and a reasonable opportunity of being heard to the persons concerned and, if a prima facie case is made out, may refer the matter to the Central Government for investigation by Inspector(s). Only upon such investigation, and if the Central Government considers it necessary, may the matter be referred to the SFIO. The Tribunal reiterated that orders for investigation cannot be based on mere suspicion and must conform to principles of natural justice; therefore the Adjudicating Authority should issue notice under the Companies Act procedure before referring the matter for investigation. Applying these principles to the impugned order, the Tribunal concluded that the Adjudicating Authority's mode of directing investigation required modification and that the matter ought to be referred to the Central Government for investigation by Inspector(s) following Section 213 procedure, with power for the Central Government thereafter to involve SFIO if warranted. [Paras 43, 44]

Impugned order modified: matter referred to the Secretary, Ministry of Corporate Affairs/ Central Government to cause investigation by Inspector(s) in accordance with Section 213 of the Companies Act, 2013; Central Government may thereafter involve SFIO if actionable material is found.

Final Conclusion: The appeal is disposed of by varying the impugned order: the Tribunal directs referral of the matter to the Secretary, Ministry of Corporate Affairs/ Central Government for investigation by Inspector(s) in accordance with Section 213 of the Companies Act, 2013; if the Central Government considers further probe by the SFIO necessary after such investigation, it may proceed in accordance with law. No costs.

Incorporation vitiated by fraud - false or incorrect particulars in incorporation documents - professional certification and statutory duty of certifying professional - liability of promoter for acts of company formed by fraud - jurisdiction of Tribunal to set aside certificate of incorporation

Incorporation vitiated by fraud - false or incorrect particulars in incorporation documents - jurisdiction of Tribunal to set aside certificate of incorporation - Incorporation of M/s. Colour Books Associates Private Limited was effected without the petitioner's consent and is vitiated by fraud; the certificate of incorporation is invalid. - HELD THAT: - The Tribunal examined the incorporation records and the admissions in the pleadings. The process was initiated by Respondent No.2 who engaged the professional (Respondent No.3). The certifying professional's own statements and the incorporation documents show that the professional certified that both subscribers had signed before him while also admitting the petitioner was not physically present before him. Comparison of the signatures on incorporation documents with other known signatures of the petitioner showed obvious discrepancies. The Registrar of Companies' role is ministerial and it does not have the technical means to verify the veracity of declarations; the statutory scheme places reliance on the professional certification. Where documents filed for registration contain false particulars or omit material information, Section 7(5) and related provisions empower the Tribunal to act. On the materials and admissions, the Tribunal found the incorporation to have been procured by submission of false/forged particulars and therefore the certificate of incorporation cannot stand. [Paras 10, 12, 13, 14, 15]

Certificate of Incorporation dated 14th May, 2018 is declared invalid and the incorporation of the company is set aside.

Professional certification and statutory duty of certifying professional - false or incorrect particulars in incorporation documents - liability of promoter for acts of company formed by fraud - The certifying professional failed in statutory duties by certifying incorporation formalities despite the petitioner's non-presence and gave a false declaration; the promoter (Respondent No.2) is responsible for transactions undertaken on behalf of the company. - HELD THAT: - The professional (Respondent No.3) had to verify by physical inspection and certify compliance in the mandated declaration. His declaration (Form INC-32/INC-9 material) asserted verification and that documents were true and signed by required persons. However, he admitted that the petitioner had not signed before him and relied on the second respondent's assurance. That conduct breaches the professional's statutory duty to verify and renders his certification false. The Tribunal concluded that the professional failed to fulfil statutory obligations and that the promoter who procured incorporation by fraud is liable for consequences of transactions undertaken in the company's name. Notwithstanding findings of criminal culpability, the Tribunal declined to direct criminal prosecution through this order and granted liberty to the petitioner to pursue other remedies. [Paras 8, 11, 12, 14, 15]

Respondent No.3's certification was erroneous and the incorporation effected through such certification is vitiated; Respondent No.2 is held responsible for liabilities of the company arising from transactions he caused, while criminal action was not directed by the Tribunal in this order and the petitioner is left free to pursue other remedies.

Final Conclusion: The Company Petition is allowed in part: the incorporation of M/s. Colour Books Associates Private Limited is declared void for fraud and its certificate of incorporation is invalidated; Respondent No.2 is directed to discharge liabilities arising from transactions he caused and the petitioner is granted liberty to pursue other available remedies; no order as to costs.

Non-compliance of procedural rules - directory versus mandatory nature of rules - pronouncement of orders - preparation and publication of daily cause list - prejudice requirement for vitiation of proceedings - Rules 89, 150 to 153 of the NCLT Rules, 2016

Rules 89, 150 to 153 of the NCLT Rules, 2016 - preparation and publication of daily cause list - pronouncement of orders - prejudice requirement for vitiation of proceedings - directory versus mandatory nature of rules - Whether non-adherence to Rules 89 and 150 to 153 of the NCLT Rules, 2016 vitiates the common order passed by the NCLT. - HELD THAT: - The Court held that the relevant rules concern public administrative procedure for listing and pronouncement of orders and, in the absence of any statutory consequence prescribed for non-compliance, the timelines and publication requirements are to be treated as directory rather than mandatory. The Registry's failure to pre-publish or fully populate the cause list for pronouncement of the impugned common order was found to be a lapse, but the petitioner obtained the certified copy within seven days of pronouncement and therefore was not shown to have suffered serious prejudice. Given availability of an efficacious alternative remedy of appeal under the IBC (appeal to NCLAT within the statutory period), and the lack of demonstrable prejudice from non-publication, the procedural lapses did not render the impugned order a nullity. The Court distinguished decisions where non-compliance caused substantive prejudice or where mandatory consequences were specified, and noted that where a rule prescribes a public duty without specifying consequences of breach, substantial compliance and absence of prejudice are decisive. [Paras 52, 54, 55, 56, 58]

Non-adherence to Rules 89 and 150 to 153 did not vitiate the impugned common order; the writ petition challenging the order was dismissed.

Final Conclusion: The writ petition was dismissed: the procedural lapses in cause-list publication and delayed pronouncement amounted to directory non-compliance which did not cause serious prejudice to the petitioner (who received certified copy within seven days and had the remedy of appeal), and therefore the impugned NCLT common order is not set aside.

Contravention of Section 18(2) and Section 18(3) of FERA - requirement of prior permission from the Reserve Bank of India - proviso to Section 61(2)(ii) - issuance of opportunity notice before prosecution - presumption under Section 18(3) of FERA - appellate interference with acquittal - perversity test

Proviso to Section 61(2)(ii) - issuance of opportunity notice before prosecution - Existence and effect of opportunity notice as contemplated under the proviso to Section 61(2)(ii) of FERA. - HELD THAT: - The trial court recorded that no opportunity notice had been issued to A-1 to A-3, but the record contains Ex.P-41 which is the opportunity notice issued by the Enforcement Directorate. The Court applied its earlier decisions and authorities holding that where adjudication proceedings (with show cause notices) have afforded the accused an opportunity, a second show cause immediately prior to prosecution is not invariably required; nevertheless, here the formal opportunity notice was in fact on record. Consequently the trial court's finding that no opportunity notice was issued is factually incorrect and contrary to settled law, and that finding is liable to be interfered with. [Paras 17, 18]

Ex.P-41 constitutes the opportunity notice contemplated by the proviso to Section 61(2)(ii) and the trial court's contrary finding is set aside.

Requirement of prior permission from the Reserve Bank of India - contravention of Section 18(2) of FERA - Whether A-1 to A-3 obtained prior permission from the Reserve Bank of India as required by Section 18(2) of FERA. - HELD THAT: - P.W.1 (the investigating officer) deposed that extensions to realise export proceeds beyond prescribed time must be sought from, and can only be granted by, the Reserve Bank of India, and that RBI had stated they had not granted any extension to A-1 to A-3. No document was produced by the defence to show that time extension or permission had been sought or granted. In the absence of any evidence from the defence to the contrary, the Court accepted the prosecution evidence and held that A-1 to A-3 had not obtained the requisite permission under Section 18(2). [Paras 16]

A-1 to A-3 did not obtain prior permission from the Reserve Bank of India as mandated by Section 18(2) of FERA.

Presumption under Section 18(3) of FERA - contravention of Section 18(3) of FERA - Whether A-4 to A-6 contravened Section 18(3) of FERA by permitting their export quotas to be used and facilitating realization of proceeds to A-1. - HELD THAT: - The evidence on record established that the quotas of A-4 to A-6 were given to A-1 to A-3 for use; A-6 jointly signed GR forms as a declarant; and A-4 and A-5 gave letters to their bankers authorising credit of export realisations to A-1. Given these undisputed facts, the court held that A-4 to A-6 had duties to take reasonable steps to receive or recover payment and could not avoid responsibility merely because they were not the selling exporters. The statutory presumption under Section 18(3) therefore applies where the quota holder has facilitated the export and realisation arrangement but did not ensure compliance with the permission requirement or recovery of proceeds. [Paras 19, 20]

A-4 to A-6 are taken to have contravened Section 18(3) of FERA.

Appellate interference with acquittal - perversity test - Whether the trial court's acquittal required interference by the High Court. - HELD THAT: - The Court reviewed the settled principle that an appellate court should not disturb an acquittal unless it is perverse or unsustainable, and applied that standard to the trial court's findings. Having found that critical findings of the trial court (non-issuance of opportunity notice; absence of RBI permission; and the conclusion that A-4 to A-6 had not contravened Section 18(3)) were contrary to the materials on record or the law, the High Court concluded that the trial court's conclusions were perverse and liable to be set aside. In consequence, the Court held that interference with the acquittal was justified and proceeded to convict. [Paras 11, 12, 14, 21]

The acquittal is interfered with as being perverse on the material and the accused are convicted.

Final Conclusion: The High Court set aside the trial court's acquittal, holding that A-1 to A-3 did not obtain prior RBI permission and that A-4 to A-6 had contravened Section 18(3) of FERA; Ex.P-41 was held to be the opportunity notice required under the proviso to Section 61(2)(ii); the trial court's contrary findings were found perverse, the accused were convicted and sentenced as stated in the order.

Allowance of additional grounds in appeal - remand for fresh consideration - opportunity to original authority to record findings - set aside impugned order - penalty under section 78 of the Finance Act, 1994 - taxability of manpower recruitment or supply agency service - definition of 'service' in section 65B(44)(b) - negative list

Allowance of additional grounds in appeal - procedural fairness - Miscellaneous application for incorporation of additional grounds in the appeal was allowed. - HELD THAT: - The Tribunal considered that the grounds proposed to be added arose from statutory provisions and settled judicial disputes. Since those grounds had not been raised before the original authority but were material to the dispute, the Tribunal held it was appropriate to permit their inclusion at the appellate stage. Allowing the additional grounds was necessary in order to secure a fair adjudication of matters that bear on taxability and related defences.

Miscellaneous application for additional grounds allowed.

Remand for fresh consideration - opportunity to original authority to record findings - set aside impugned order - Impugned order was set aside and the matter remanded to the original authority for fresh adjudication after taking the noticee's submissions into account. - HELD THAT: - The Tribunal found that the additional grounds raised issues on which the original authority had not recorded findings. As recording of findings by the original authority is a necessary pre-requisite for disposal of the appeal, the Tribunal set aside the impugned order and directed that the original authority decide the matter afresh, giving due consideration to the submissions of the noticee. The remand was for fresh consideration and decision on the merits by the original authority rather than for limited computation or quantification.

Impugned order set aside and matter remanded to the original authority for fresh decision after taking the noticee's submissions into account.

Final Conclusion: The Tribunal allowed the application to add grounds, set aside the impugned order, and remanded the matter to the original authority to decide afresh on the issues (including those relating to taxability and penalty) for the period October 2010 to 28th February 2016 after hearing the noticee.

Eligibility for cenvat credit - inputs - capital goods - fabrication of capital goods - Rule 2(k) of Cenvat Credit Rules, 2004

Inputs - capital goods - fabrication of capital goods - eligibility for cenvat credit - Rule 2(k) of Cenvat Credit Rules, 2004 - Whether the steel items (channels, sheets, etc.) used by the appellant for fabrication of capital goods qualify as inputs and are eligible for cenvat credit under Rule 2(k) of the Cenvat Credit Rules, 2004. - HELD THAT: - The facts were not in dispute that the impugned steel items were used by the appellant in the fabrication of capital goods. The Tribunal held that goods used in the fabrication process for capital goods constitute inputs for the manufacturer. Applying Rule 2(k) of the Cenvat Credit Rules, 2004, the Tribunal concluded that such items are eligible for cenvat credit. The view is reinforced by the Tribunal's earlier Final Order Nos. 50385-50387/2020 dated 27.01.2020 in the appellant's own case, and no contrary factual or legal finding was recorded that would disentitle the appellant from credit. [Paras 5, 6]

The steel items used in fabrication of capital goods are inputs and the appellant is entitled to avail cenvat credit under Rule 2(k); the impugned orders are set aside and the appeals are allowed with consequential relief.

Final Conclusion: Appeals allowed; impugned orders denying cenvat credit set aside as the steel items used in fabrication of capital goods qualify as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004, and cenvat credit is permitted with consequential relief.

Cenvat credit on supplementary invoices - Exclusion under Rule 9(1)(b) of the Cenvat Credit Rules for fraud, collusion, willful mis-statement or suppression of facts - Availability of credit where supplier's liability is sub judice before Higher Courts - Admissibility of input credit where duty has been paid under protest

Cenvat credit on supplementary invoices - Exclusion under Rule 9(1)(b) of the Cenvat Credit Rules for fraud, collusion, willful mis-statement or suppression of facts - Availability of credit where supplier's liability is sub judice before Higher Courts - Entitlement of the appellant to avail Cenvat credit on the basis of supplementary invoices issued by the coal suppliers - HELD THAT: - The Tribunal held that the appellant was entitled to take Cenvat credit on supplementary invoices issued by the coal suppliers because the additional duty components (royalty, SED, Niryat Tax, Development Tax, Environment Tax etc.) in dispute had been paid by the supplier under protest and the question of liability at the supplier's end was sub judice before the Hon'ble Supreme Court. Applying Rule 9(1)(b) of the Cenvat Credit Rules, the Tribunal found that the exclusion in Rule 9(1)(b) - which denies credit where additional duty became recoverable due to non-levy or short-levy by reason of fraud, collusion or willful mis-statement or suppression of facts - was not attracted because the supplier's liability was a debatable question pending adjudication. The Tribunal relied on a series of its consistent precedents involving identical facts holding that where demand against the supplier is under challenge, there is no element of fraud or suppression on the part of the buyer, and therefore credit on supplementary invoices is admissible. On that basis the impugned orders confirming demand and denying credit were set aside and the appeals allowed.

Set aside the impugned order-in-appeal and allow the appeals; appellant entitled to take Cenvat credit on the supplementary invoices.

Final Conclusion: Appeals allowed; appellant entitled to avail Cenvat credit on the supplementary invoices for the periods stated, the impugned order-in-appeal is set aside.

Drugs and Medicines - Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 - Entry 88 of Schedule IV (classification of goods) - Schedule V (residuary taxable goods) - Indian Pharmacopoeia / standards of identity, purity and strength - user test - functional test

Drugs and Medicines - Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 - Entry 88 of Schedule IV (classification of goods) - Indian Pharmacopoeia / standards of identity, purity and strength - user test - functional test - Whether Medical Oxygen IP and Nitrous Oxide IP fall within the definition of 'drug' under Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 and thereby within Entry 88 of Schedule IV of the Andhra Pradesh Value Added Tax Act, 2005 - HELD THAT: - The Court examined the statutory definition in Section 3(b)(i), holding that it includes both medicines and substances intended to be used "for or in" diagnosis, treatment, mitigation or prevention of disease, and that the conjunctive reading of the clause must be read disjunctively as established by precedent. The ordinary meaning of "medicine" was applied alongside the established "user" and "functional" tests to determine whether an item is used as a medicament. The Court noted that Medical Oxygen IP is specified in the Indian Pharmacopoeia (thereby subject to standards of identity, purity and strength under Section 16 and the Second Schedule), and that both Oxygen and Nitrous Oxide appear in the National List of Essential Medicines as anesthesia agents. The Court also relied on authoritative medical literature and prior High Court decisions recognising the medicinal and surgical-aid uses of Medical Oxygen IP and Nitrous Oxide IP. Applying these principles, the Court concluded that the products in question are used for or in the diagnosis, treatment, mitigation or prevention of disease or disorder and thus fall within Section 3(b)(i). Consequently, they are encompassed by the language of Entry 88 of Schedule IV and are not to be treated as residuary goods under Schedule V. [Paras 31, 32]

Medical Oxygen IP and Nitrous Oxide IP are drugs within Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 and consequently fall under Entry 88 of Schedule IV of the Andhra Pradesh VAT Act, 2005.

Final Conclusion: The High Court judgment holding that Medical Oxygen IP and Nitrous Oxide IP fall within Entry 88 of Schedule IV is upheld; the appeals are dismissed and the products are taxable as drugs under Entry 88 rather than as unclassified goods under Schedule V.

Giving notice - service by registered post deemed served (Section 27 of the General Clauses Act) - presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - legally enforceable debt or liability - perverse finding (against the weight of evidence) - conviction under Section 138 of the Negotiable Instruments Act

Giving notice - service by registered post deemed served (Section 27 of the General Clauses Act) - Notices sent by registered post to the address given in the admitted agreement were duly served and satisfied the requirement of "giving notice" under the proviso to Section 138 of the N.I. Act. - HELD THAT: - The Court examined the statutory requirement of giving a written demand notice under the proviso to Section 138 and applied the principles in K. Bhaskaran and C.C. Alavi Haji to hold that where a notice is dispatched by post to the correct address recorded in the instrument, service is to be presumed unless the drawer proves non-service. The respondent had furnished the address in the executed Agreement and denied residence at that address only later; he also failed to produce his family members to rebut acknowledgment cards. The trial court's reliance on M.D. Thomas was held to be per incuriam in view of the three-Judge precedent in C.C. Alavi Haji, and the High Court concluded that the notices, supported by postal receipts and acknowledgment cards, fulfilled the statutory mode of service and the trial court was erroneous in holding otherwise. [Paras 12, 13]

Requirement of service of notice was satisfied; the trial court's finding to the contrary was erroneous.

Legally enforceable debt or liability - conviction under Section 138 of the Negotiable Instruments Act - The agreement executed by the respondent and the issuance of three post-dated cheques constituted a legally enforceable liability; the complainant proved existence of debt or liability. - HELD THAT: - The Court construed the admission in the executed Agreement as an explicit acceptance of liability which, together with issuance of post-dated cheques, established a legally enforceable liability within the meaning of the explanation to Section 138. The trial court's skepticism-grounded on absence of independent money receipts or witnesses for the complainant and on an unchallenged allegation of coercion-was rejected because coercion was not proved and the respondent admitted execution of the document and signatures on the cheques. The Court also distinguished authorities relied on by the respondent where financial capacity or evidentiary issues had been squarely raised at trial, holding that raising such points first on appeal was impermissible. [Paras 15, 16, 17]

The appellant established a legally enforceable debt or liability; the trial court's finding that no such liability existed was unsustainable.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - The presumption under Section 139 arose and the respondent failed to rebut it; the trial court's conclusion that the presumption was rebutted was perverse. - HELD THAT: - The Court recapitulated that Sections 118 and 139 raise a legal presumption of consideration and that, upon proof of cheque issuance and dishonour, the onus shifts to the accused to rebut the presumption by adducing evidence showing a probable defence. Given the respondent's admission of execution of the agreement and the cheques and the evidence of dishonour (certified return memos or originals as produced in the respective complaints), no evidence was brought by the respondent to discharge the onus on a preponderance of probabilities. The Court found the trial court's acceptance that the presumption was rebutted to be contrary to the weight of evidence. [Paras 20, 21]

Presumption under Section 139 stood un-rebutted; the respondent failed to discharge the onus.

Final Conclusion: The appeals were allowed; the trial court judgments of acquittal were set aside, the respondent convicted under Section 138 of the Negotiable Instruments Act, sentenced to concurrent terms of imprisonment, and directed to pay compensation to the complainant with statutory consequences for default; the High Court found the trial court's findings to be perverse and interfered accordingly.

Dismissal of complaint as consequence of rejection of condonation of delay - condonation of delay under Section 142(1)(b) of the Negotiable Instruments Act - cognizance - acquittal - special leave to appeal under Section 378(4) CrPC - dismissal of complaint under Section 203 CrPC - summons-case procedure

Dismissal of complaint as consequence of rejection of condonation of delay - acquittal - special leave to appeal under Section 378(4) CrPC - cognizance - Whether dismissal of a complaint consequent upon rejection of an application for condonation of delay amounts to an acquittal permitting an application for special leave to appeal under Section 378(4) CrPC. - HELD THAT: - The Court examined the nature of 'cognizance' and the stages of criminal proceedings in summons-cases. Taking cognizance occurs when the Magistrate applies his mind to initiate proceedings; here the Magistrate rejected the applications for condonation of delay and therefore did not take cognizance or issue process. Dismissal of a complaint at a stage prior to issuance of process (including dismissal under Section 203 CrPC) does not automatically result in acquittal, as a dismissed complaint may, in exceptional circumstances, be the subject of a subsequent complaint. The decisions holding that orders of discharge in summons-cases amount to acquittal were considered in their contexts, but where criminal proceedings have not commenced because cognizance was not taken, the accused cannot be said to be acquitted. Consequently, dismissal of the complaints for failure to show sufficient cause for the delay did not amount to an order of acquittal and therefore did not confer a statutory right on the complainant to seek special leave to appeal under Section 378(4) CrPC. [Paras 17, 32, 33]

Dismissal of the complaints for non-satisfaction of sufficient cause for condonation of delay does not amount to acquittal of the accused; leave to appeal under Section 378(4) CrPC is not maintainable in these circumstances.

Final Conclusion: Criminal Leave Petitions dismissed; the Court held that rejection of condonation of delay resulting in dismissal of the complaints does not amount to acquittal and therefore does not sustain an application for special leave to appeal under Section 378(4) CrPC, while liberty was reserved to pursue remedies in accordance with law.