TaxTMI Updates e-Newsletter
Apr 18,2020

Cancellation of GST registration for non-filing and non-payment - Revocation of cancellation under Section 29(2)(c) of CGST Act - Payment of tax and other amounts in instalments under Section 80 of CGST Act - Keeping impugned order in abeyance pending representation - Restoration of GST registration subject to conditions and public health measures

Cancellation of GST registration for non-filing and non-payment - Revocation of cancellation under Section 29(2)(c) of CGST Act - Payment of tax and other amounts in instalments under Section 80 of CGST Act - Keeping impugned order in abeyance pending representation - Petitioner permitted to seek revocation of cancellation by making a fresh representation and the impugned cancellation order to be kept in abeyance pending decision by the Commissioner. - HELD THAT: - The Court did not adjudicate the substantive correctness of the cancellation for non-filing of returns and alleged non-payment; instead, having noted the parties' positions that the petitioner disputes the character of the admitted liability and relies on the instalment mechanism under Section 80, the Court afforded the petitioner an opportunity to approach the statutory authority. The petitioner was granted four weeks to file a fresh representation to the Commissioner, CGST, accompanied by an upfront payment as directed by the Court. Upon receipt, the Commissioner is directed to consider the request for revocation of the cancellation order in accordance with law and decide the representation within ten days. Until the Commissioner takes that decision, the impugned cancellation order is to remain in abeyance. The Court thereby remitted the question of revocation and any assessment of compliance with statutory preconditions to the Commissioner for fresh consideration under the applicable provisions, including the instalment facility where appropriate.

Writ petition disposed by granting liberty to file a fresh representation within four weeks with the directed upfront payment; Commissioner to decide revocation within ten days; impugned cancellation order kept in abeyance meanwhile.

Final Conclusion: The writ petition is disposed by directing the petitioner to make a fresh representation to the Commissioner within four weeks (with the specified upfront amount); the Commissioner shall consider the request for revocation in accordance with law within ten days of receipt; the cancellation order dated 13.03.2020 is kept in abeyance until the Commissioner decides, and the petitioner's GST registration shall be restored once the nationwide lockdown is over.

Confiscation of goods and conveyance - levy of penalty under Section 130 of the GST Act - notice in form GST MOV-10 - release of detained goods and conveyance on payment and undertaking - writ of mandamus under Article 226

Release of detained goods and conveyance on payment and undertaking - Release of the detained goods and the vehicle subject to conditions stated in the Court's ad-interim order. - HELD THAT: - The Court recorded and applied its ad-interim order dated 23.05.2019 directing release of the detained goods together with the conveyance on payment of the tax and penalty as computed by the authorities and on filing a solemn undertaking to make good any deficit liability finally determined by the authorities. The order required proof of payment, filing of the undertaking in Court, and submission of identity/address documents for release. The writ-application was disposed of having regard to this release direction. [Paras 2]

The detained goods and truck have been released subject to payment of tax and penalty, filing of a solemn undertaking, and production of identity/address proof; the writ-application stands disposed of.

Notice in form GST MOV-10 - confiscation of goods and conveyance - levy of penalty under Section 130 of the GST Act - Whether the notice in GST MOV-10 challenging confiscation and penalty is discharged was left open and the petitioner was directed to appear before the authority to prosecute the challenge. - HELD THAT: - The Court did not adjudicate the merits of the GST MOV-10 notice issued for confiscation and penalty under Section 130. Instead, the petitioner was directed to appear before the concerned authority and make good his case for discharge of the notice. The order thus left the substantive challenge for consideration by the authority while permitting the petitioner to pursue his remedy in accordance with law. [Paras 4]

The challenge to the GST MOV-10 notice was not finally decided; the petitioner must appear before the authority to contest the notice and pursue remedies as available.

Final Conclusion: Writ petition disposed; detained goods and vehicle released subject to payment, undertaking and identity documents as per the Court's ad-interim order; the challenge to the GST MOV-10 notice was not decided on merits and the petitioner was directed to appear before the authority to press his case; direct service permitted.

Detention and seizure - release on payment of tax or furnishing security - confiscation under Section 130 of the GST Act - application of mind in issuing confiscation notice - presumption of intent to evade tax

Release on payment of tax or furnishing security - detention and seizure - confiscation under Section 130 of the GST Act - application of mind in issuing confiscation notice - Whether the vehicle and goods detained in transit were entitled to release pending adjudication and the scope of further proceedings under the confiscation provision. - HELD THAT: - The Court recorded that an interim order had been passed by a Coordinate Bench directing release of the vehicle and goods upon payment of the tax specified in the impugned notice, and that the writ applicant availed of that interim order and obtained release by depositing the tax. The Court observed that the substantive proceedings are at the stage of show cause under Section 130 of the Central Goods and Services Act, 2017, and that those proceedings shall continue in accordance with law. The applicant was permitted to rely on the recent pronouncement in Synergy Fertichem Pvt. Ltd., particularly Paragraphs 99-104, which emphasise that not every contravention at the stage of detention and seizure justifies immediate invocation of the confiscation provision; that authorities must examine the nature of contravention and whether there is material to form a bona fide belief of intent to evade tax; and that invocation of Section 130 at the threshold requires recorded reasons and material upon which the belief is formed. The Court left it open to the applicant to make good his case that the show cause notice deserves to be discharged, rather than deciding the merits of confiscation at this stage. [Paras 4, 5, 6, 7]

The vehicle and goods were released pursuant to the earlier interim direction upon payment of the tax; the show cause proceedings under Section 130 shall proceed in accordance with law, the applicant may invoke the observations in Synergy Fertichem Pvt. Ltd., and the writ is disposed of to that extent.

Final Conclusion: Writ application disposed; rule made absolute to the extent recorded - vehicle and goods released on payment as permitted earlier, and show cause proceedings under Section 130 to continue with liberty to the applicant to urge reliance on the cited observations.

Deemed stay against recovery on filing statutory appeal under Section 107(7) - confiscation of detained goods pending statutory appeal - release of detained goods on furnishing security under Section 129(2) read with Section 67(6) - procedure for security and release under Rule 140 of the Central Goods and Services Tax Rules, 2017

Deemed stay against recovery on filing statutory appeal under Section 107(7) - confiscation of detained goods pending statutory appeal - Whether filing a statutory appeal after depositing the prescribed percentage under Section 107(6)(b) creates a deemed stay of recovery under Section 107(7) that precludes initiation of confiscation proceedings under Section 130. - HELD THAT: - The court held that payment of the stipulated amount under sub-section (6) of Section 107 (10% in the present case) and the institution of the statutory appeal attract the deeming provision in sub-section (7) of Section 107, which stays recovery proceedings for the balance amount. While that stay operates, the contingency in sub section (6) of Section 129 that would permit confiscation does not arise. Consequently, proceedings for confiscation under Section 130 cannot be proceeded with until disposal of the statutory appeal where the requisite deposit and appeal are in place. The court clarified this point to the extent of overriding the Single Judge's view that non-furnishing of security alone would permit confiscation. [Paras 7, 8]

Deemed stay under Section 107(7) prevents confiscation proceedings under Section 130 until disposal of the statutory appeal where the appellant has complied with the pre requisite deposit.

Release of detained goods on furnishing security under Section 129(2) read with Section 67(6) - procedure for security and release under Rule 140 of the Central Goods and Services Tax Rules, 2017 - Whether the detained goods must be released pending disposal of the appeal by reason of the deemed stay of recovery. - HELD THAT: - The court rejected the appellant's contention that the stay of recovery alone mandates release of goods. Section 129, as read with Section 129(2) and the applicability of Section 67(6), conditions release on compliance with those provisions; the specified procedure for furnishing security is provided by Rule 140 of the CGST Rules, 2017. Therefore, absent payment of the full tax and penalty or furnishing the prescribed security as mandated by the statutory scheme and rules, the detained goods cannot be ordered released merely because a deemed stay on recovery exists. [Paras 9]

Goods are not liable to be released pending appeal solely by reason of the deemed stay; release requires compliance with the security/payment conditions prescribed under Section 129(2) read with Section 67(6) and Rule 140.

Final Conclusion: The writ appeal is disposed of by clarifying that (a) a statutory appeal accompanied by the prescribed deposit creates a deemed stay of recovery and precludes confiscation proceedings until the appeal is decided, but (b) release of detained goods pending the appeal is not automatic and is permissible only upon compliance with the statutory/security conditions and rules; liberty is reserved to seek release by the methods indicated.

Application of section 41(1) of the Income Tax Act - requirement of prior deduction or allowance for invocation of section 41(1) - waiver of liability treated as receipt in hands of debtor

Application of section 41(1) of the Income Tax Act - requirement of prior deduction or allowance for invocation of section 41(1) - waiver of liability treated as receipt in hands of debtor - Whether the waiver of unsecured interest-free loans received from Matrix Logistics Pvt. Ltd. is taxable under section 41(1) of the Act where no deduction or allowance was earlier claimed in respect of such loans. - HELD THAT: - The Court accepted the finding that the assessee had not claimed any deduction or allowance in respect of the unsecured loans from Matrix Logistics Pvt. Ltd. in any assessment. Citing the settled principle that accounting entries alone cannot determine the nature of a receipt, the Court applied the requirement under subsection (1) of section 41 that an allowance or deduction must have been made earlier in order for a subsequent remission or waiver of the corresponding liability to be brought to tax. The Court relied on the decisions of the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. and CIT v. Mahindra & Mahindra Ltd., which establish that section 41(1) operates only where there was a prior allowance or deduction for the expenditure, loss or trading liability that is later remitted or waived, and that waiver results in a receipt but becomes taxable under section 41(1) only when the prior deduction/allowance pre-existed. Applying that principle to the admitted facts of this case, the Court held that the conditions of section 41(1) were not satisfied and therefore the Tribunal correctly deleted the addition. [Paras 4, 5]

The addition under section 41(1) was not sustainable because no prior deduction or allowance had been claimed in respect of the loan; the Tribunal's deletion of the addition was upheld.

Final Conclusion: The appeal is dismissed; the Tribunal's order deleting the addition under section 41(1) stands affirmed as the statutory precondition of a prior deduction or allowance was not satisfied.

Bogus purchases - reconciliation of purchases with consumption - addition of profit element on undisclosed purchases - estimation of profit percentage (12.5%) - concurrent findings of fact - substantial question of law

Bogus purchases - reconciliation of purchases with consumption - addition of profit element on undisclosed purchases - estimation of profit percentage (12.5%) - concurrent findings of fact - Whether the Tribunal and Commissioner (Appeals) were justified in restricting the addition on account of purchases for which bills were found to be bogus to 12.5% of such purchases where the assessee reconciled purchases with material consumed. - HELD THAT: - The Tribunal concurred with the Commissioner (Appeals) on concurrent findings of fact that, although the assessee had not purchased from the named parties in books, it had in fact purchased goods from the grey market and consumed those materials in construction works for which it issued bills and installation certificates. The Commissioner (Appeals) accepted the reconciliation of quantities purchased and consumed across different sites and found no inflation in purchases; on the facts he treated the issue as one of purchases made from undisclosed sources and applied the jurisdictional High Court precedents which permit adding only the profit element embedded in such purchases. Applying those precedents, a reasonable estimation of profit at 12.5% was made. The High Court found no basis to dislodge the concurrent factual findings, observed that the approach of taxing the profit element approximated the differential between actual price and claimed expenditure, and held there was no legal infirmity in restricting the addition to 12.5%. [Paras 7]

The restriction of the addition to 12.5% of the purchases found to have bogus bills was upheld; no substantial question of law arises from this conclusion.

Applicability of binding precedent - substantial question of law - Whether the Tribunal erred in not following the decision in N.K. Industries Ltd. v. DCIT where it was held that additions on undisclosed income could not be restricted to a percentage when the entire transaction was found to be bogus. - HELD THAT: - The impugned order did not refer to or rely upon N.K. Industries Ltd. v. DCIT; neither party placed that decision before the Commissioner (Appeals) or the Tribunal. The Tribunal relied on other decisions of this High Court concerning purchase from undisclosed sources where only the profit element may be added. Since the question of applicability of N.K. Industries was not argued or relied upon below and does not arise from the Tribunal's order, the High Court held that the proposed question does not arise from the impugned order. [Paras 8]

The question of applicability of N.K. Industries Ltd. v. DCIT does not arise from the Tribunal's order and is not a substantial question of law in these appeals.

Final Conclusion: The appeals are dismissed as no substantial question of law arises: the concurrent findings that purchases were made from the grey market and reconciled with consumption justified taxing the profit element at 12.5%, and the contention regarding non-application of N.K. Industries Ltd. v. DCIT does not arise from the impugned order.

Depreciation on written down value - depreciation on enhanced cost on succession - consequential effect of earlier year's treatment of WDV - precedent of coordinate bench

Depreciation on written down value - depreciation on enhanced cost on succession - consequential effect of earlier year's treatment of WDV - Whether the disallowance of depreciation by the AO and its confirmation by the CIT(A) for AY 2010-11 is sustainable where earlier ITAT decisions in the assessee's own case allowed depreciation on the enhanced cost taken over upon succession. - HELD THAT: - The Tribunal examined the coordinates bench decision in the assessee's own case for AY 2009-10, wherein the ITAT set aside the CIT(A)'s disallowance and held that the assessee was entitled to depreciation on the enhanced cost at which the assets were taken over. The Tribunal also noted that the same view was followed for AY 2011-12 by the D-Bench. Given that the disallowance for AY 2010-11 was consequential to the WDV and depreciation treatment in the earlier year, and that the ITAT has already decided the identical controversy in favour of the assessee, the disallowance by the AO and its confirmation by the CIT(A) is not sustainable. The Tribunal therefore applied the earlier decisions to the present assessment year and directed that depreciation be allowed as claimed by the assessee. [Paras 6, 7]

Set aside the order of the CIT(A) and allow the appeal; depreciation to be allowed as per the treatment adopted in the coordinate-bench ITAT decisions.

Final Conclusion: Following earlier ITAT decisions in the assessee's own case which allowed depreciation on the enhanced cost taken over on succession, the Tribunal set aside the CIT(A)'s order for AY 2010-11 and allowed the assessee's appeal, directing allowance of depreciation in accordance with those precedents.

Bogus/accommodation purchases - burden of proof - estimation of profit element on non-genuine purchases - reopening of assessment on information from Sales Tax authorities - confirmation of addition by appellate authorities

Bogus/accommodation purchases - estimation of profit element on non-genuine purchases - confirmation of addition by appellate authorities - Validity of addition of 12.5% of alleged bogus purchases to assessee's income - HELD THAT: - The Tribunal recorded that the assessing officer reopened the assessment after receiving information from the Sales Tax Department that certain suppliers issued accommodation bills without physical delivery of goods, and on enquiry concluded that the purchases were not genuine. The AO, applying the approach followed in the Gujarat High Court decision in Simit P Sheth, limited the addition to the profit element embedded in such purchases and quantified it at 12.5%. The CIT(A) examined the material, observed that the assessee failed to reconcile purchases with sales and did not produce delivery proofs, transport challans or goods inward registers, and noted the onus on the assessee to substantiate the transactions. Relying on surrounding circumstances and the cited precedent, the CIT(A) held that only the profit element could be added and confirmed the AO's estimation at 12.5%, also recording that the assessee's representative had agreed to that figure before the AO. The Tribunal found no material to justify interference with the concurrent findings of fact and law recorded by the authorities below and sustained the addition. [Paras 4, 5, 7]

Addition of 12.5% on alleged bogus purchases upheld and sustained.

Burden of proof - reopening of assessment on information from Sales Tax authorities - Applicability of onus principles where transactions are alleged non-genuine and assessment is reopened on third party information - HELD THAT: - The appellate authority applied settled principles that once surrounding circumstances and third party information indicate transactions may be sham, the onus shifts to the assessee to prove genuineness. The CIT(A) relied on authorities to the effect that apparent recitals are to be treated as real until sufficient reasons are shown otherwise and that taxing authorities may examine surrounding circumstances; where the assessee produces no corroborative evidence, findings adverse to the assessee are justified. The Tribunal accepted the CIT(A)'s application of these onus principles to the facts, noting the assessee's failure to produce crucial evidence or to counter the Sales Tax Department's information. [Paras 5, 7]

Onus on the assessee to substantiate purchases upheld; failure to discharge onus supports estimation and addition.

Final Conclusion: The appeals are dismissed; the addition of 12.5% of the alleged bogus/accommodation purchases for A.Y.2009-10 is confirmed by the Tribunal, the assessing officer and the CIT(A) having acted within the scope of applicable onus principles and precedent in estimating the profit element.

Deduction under section 80IB(4) - Date of commencement of production - Evidence of commencement (electricity consumption, labour register, purchase records) - Unexplained investment under Section 68 - Remand for verification

Deduction under section 80IB(4) - Date of commencement of production - Evidence of commencement (electricity consumption, labour register, purchase records) - Assessee entitled to deduction under section 80IB(4) for the profit of the industrial undertaking as production commenced on 30.03.2012. - HELD THAT: - The Tribunal examined the certificate of the General Manager, DIC, Kathua recording commencement of production with effect from 30.03.2012 and noted that this certification was not controverted by the Revenue. The assessee produced contemporaneous documentary evidence including purchase of materials, month-wise electricity bills showing consumption (notably 1,536 units in March 2012), labour registers, lorry receipts, trading account showing closing stock and wages shown for the year ending 31.03.2012. The AO's reliance on an analysis of electricity consumption to infer a later commencement date and his emphasis on the date of registration (07.01.2013) were held to be misplaced: the registration date did not displace the documentary and certified evidence of actual commencement. The Tribunal observed that the AO could, if in doubt, have examined labourers but instead relied primarily on the electricity analysis and earlier case law which the Tribunal found inapplicable on the facts. On the totality of the evidence and the DIC certificate, the Tribunal concluded that production began on 30.03.2012 and the assessee satisfied the condition for claiming deduction under section 80IB(4). [Paras 8]

Grounds 1 and 2 allowed; deduction under section 80IB(4) upheld.

Unexplained investment under Section 68 - Remand for verification - Addition made under Section 68 in respect of purchase of land restored to the file of the Assessing Officer for further verification. - HELD THAT: - The Tribunal considered the assessee's submissions and documents including the sale deed and the contention that payment was reflected in the books as unsecured loans to the vendors, and that the apparent receipt shown in the sale deed arose from unawareness. Rather than adjudicating the matter on merits, the Tribunal found it appropriate to remit the issue to the Assessing Officer for detailed verification and directed the assessee to produce necessary documents before the CIT(A) and to cooperate without seeking unnecessary adjournments. The issue was therefore not finally decided on merits but remanded for fresh examination and verification by the AO. [Paras 9]

Grounds 3 and 4 restored to the file of the AO for further verification; allowed for statistical purposes.

Final Conclusion: The appeal is allowed in part: deduction under section 80IB(4) is admitted as production commenced on 30.03.2012; the addition under Section 68 relating to the land purchase is remitted to the Assessing Officer for further verification and is allowed for statistical purposes.

Distribution of profit vs deductible expenditure - remand to Assessing Officer for determination of profit component under Clause 5A of the Sugar Cane (Control) Order, 1966 - application of Section 40A(2) to payments made to non-members - sale of product to members at concessional rate-appropriation of profit and remand for fresh consideration - Section 43B - tax, duty, cess or fee payable only on actual payment - government guarantee fee not constituting tax, duty, cess or fee under Section 43B

Distribution of profit vs deductible expenditure - remand to Assessing Officer for determination of profit component under Clause 5A of the Sugar Cane (Control) Order, 1966 - application of Section 40A(2) to payments made to non-members - Excess cane price paid to sugarcane suppliers restored to Assessing Officer for fresh adjudication in light of the Supreme Court's decision in CIT v. Tasgaon Taluka S.S.K. Ltd. - HELD THAT: - Following the Co-ordinate Bench's exposition of the Supreme Court's judgment, the Tribunal held that only the statutory minimum price paid under Clause 3 is allowable in entirety as expenditure, whereas the difference arising under Clause 5A (SAP/additional purchase price) may contain a component that is an appropriation/distribution of profit and hence not deductible. The matter is therefore set aside and remitted to the Assessing Officer to examine the manner and modalities by which the final price under Clause 5A/SAP is fixed; to call for the assessee's accounts, balance sheet and material furnished to the State Government; to segregate the profit component (to be treated as distribution of profit) from the chargeable expenditure (to be allowed as deduction); and, in respect of payments to non-members, to examine on the material whether the payments are excessive or unreasonable applying Section 40A(2). The AO must afford the assessee a reasonable opportunity of hearing and decide afresh in accordance with law. [Paras 6, 7]

Issue restored to the file of the Assessing Officer for de-novo determination as per the Supreme Court's directions; allowed for statistical purposes.

Sale of product to members at concessional rate-appropriation of profit and remand for fresh consideration - Difference between market price and concessional price of sugar sold to members remitted to the Assessing Officer for fresh consideration in the light of the Supreme Court's directions in CIT v. Krishna Sahakari Sakhar Karkhana Ltd. - HELD THAT: - The Tribunal, following the Co-ordinate Bench, observed that the Supreme Court has directed appraisal of factors such as whether the practice of concessional sales is an established custom in the co-operative sugar industry, whether any State Government resolution supports the practice, and the basis on which quantities allotted to members are fixed. Considering these factors and to avoid splitting the assessment proceedings, the Tribunal set aside the impugned addition and restored the matter to the AO for de-novo adjudication, directing the AO to grant the assessee a reasonable opportunity of hearing. [Paras 10]

Issue restored to the file of the Assessing Officer for fresh adjudication; allowed for statistical purposes.

Section 43B - tax, duty, cess or fee payable only on actual payment - government guarantee fee not constituting tax, duty, cess or fee under Section 43B - Disallowance under Section 43B in respect of unpaid Government Guarantee Fee rejected; fee not held to be tax, duty, cess or fee exigible under statute. - HELD THAT: - The Tribunal examined Section 43B's requirement that sums described as tax, duty, cess or fee must flow from a statutory enactment to attract disallowance until actually paid. The Revenue did not produce material showing any statutory obligation to pay the Government Guarantee Fee. Relying on authoritative exposition that labels alone do not determine character, the Tribunal held that the Guarantee Fee cannot be equated with tax, duty, cess or fee within Section 43B and therefore the disallowance was not sustainable. The issue is decided in favour of the assessee. [Paras 12]

Disallowance under Section 43B on account of Government Guarantee Fee is not sustainable; decided for the assessee.

Reasonableness of ceremony expenses - partial allowance by appellate authority - Addition in respect of ceremony expenses confirmed as reduced by the Commissioner of Income Tax (Appeals); appellate reduction upheld. - HELD THAT: - The Tribunal found no infirmity in the CIT(A)'s approach which allowed one-fourth of the ceremony expenditure by following the Tribunal's earlier decision in Shivamrut Maryadit v. DCIT. The assessment of the allowable portion was treated as reasonable and the limited allowance made by the CIT(A) was sustained. [Paras 13]

Assessee's appeal on ceremony expenses dismissed; the CIT(A)'s restricted allowance upheld.

Final Conclusion: The appeal is partly allowed for statistical purposes: the issues of excess cane price and concessional sale to members are set aside and remitted to the Assessing Officer for fresh determination in accordance with the Supreme Court's directions and with opportunity of hearing; the disallowance under Section 43B for Government Guarantee Fee is reversed in favour of the assessee; the limited allowance for ceremony expenses granted by the CIT(A) is upheld.

Time-bar under section 275(1)(c) - Penalty under section 271D for acceptance of loans otherwise than by account payee cheque or bank draft - Applicability of section 269SS to electronic transfers for AY 2013-14 - Reasonable cause under section 273B

Time-bar under section 275(1)(c) - Validity of the penalty order dated 29.11.2016 vis-a -vis the limitation prescribed by clause (c) of section 275(1). - HELD THAT: - Clause (c) of section 275(1) prescribes that no order imposing penalty shall be passed after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. The Tribunal identified the relevant financial year as 2016-17 and the month of initiation of penalty proceedings as April 2016. Applying the statutory formula, the Tribunal concluded that the Assessing Officer had time up to 31 March 2017 to pass the penalty order. The order dated 29.11.2016 therefore fell within the permissible period and was not time-barred. [Paras 11]

Penalty order dated 29.11.2016 is not time-barred and the ground challenging limitation is dismissed.

Penalty under section 271D for acceptance of loans otherwise than by account payee cheque or bank draft - Applicability of section 269SS to electronic transfers for AY 2013-14 - Reasonable cause under section 273B - Whether penalty under section 271D is sustainable for loans accepted otherwise than by account payee cheque or bank draft, and whether relief is due for amounts received by electronic transfer. - HELD THAT: - The Tribunal analysed the Assessing Officer's finding that the assessee accepted loans not by account payee cheque or bank draft, and that electronic transfers during the relevant period (AY 2013-14) were also covered by section 269SS. The CIT(A) granted relief in respect of loans received by electronic transfer on the basis that such transfers are not to be treated as contravention from AY 2015-16 onwards, and accordingly disallowed penalty for those amounts while confirming penalty in respect of loans received in cash. The Tribunal examined the factual and legal material, observed that the assessee failed to prove genuineness of the cash loans or establish urgency/compulsion amounting to a reasonable cause under section 273B, and found the CIT(A)'s treatment to be fair and reasonable. The Tribunal also noted that case law relied upon by the assessee was distinguishable on facts and that reasons for accepting loans vary by case. [Paras 12, 13, 14]

Tribunal upholds the CIT(A)'s order: relief granted in respect of loans received by electronic transfer; penalty confirmed for loans received in cash for which reasonable cause was not shown.

Final Conclusion: The appeal is dismissed: the challenge to limitation is rejected and the CIT(A)'s order granting relief for electronic transfers while confirming penalty for cash loans is upheld.

Penalty under Section 271(1)(c) - revised return - furnishing inaccurate particulars of income - inadvertent error / bona fide mistake - contumacious conduct - reference to DVO for determination of sale consideration

Penalty under Section 271(1)(c) - revised return - inadvertent error / bona fide mistake - furnishing inaccurate particulars of income - contumacious conduct - reference to DVO for determination of sale consideration - Whether the penalty under Section 271(1)(c) is sustainable for the assessment year 2009-10 where the assessee filed a belated revised return declaring capital gains and the impugned amount was shown as unsecured loan, the revised return being filed suo motu and the error being asserted as inadvertent - HELD THAT: - The Tribunal found that the assessee filed a revised return before any detection or query by the revenue and that at the relevant time law did not permit revision of a belated return (a provision which was subsequently amended). The impugned amount was shown as an unsecured loan and the assessee attributed the mistake to its accountant, asserting a bona fide/inadvertent error. The Tribunal relied on jurisdictional and higher court authorities holding that reference to the DVO to determine sale consideration does not, by itself, amount to furnishing inaccurate particulars of income, and that inadvertent or non-contumacious conduct should not attract the rigours of penalty. Applying these principles the Tribunal concluded that the assessee's conduct was not contumacious, the error was technical and venial, and therefore did not warrant levy of penalty under Section 271(1)(c). The Tribunal accordingly set aside the orders of the authorities below and deleted the penalty. [Paras 7, 8, 9]

Penalty under Section 271(1)(c) deleted and appeal allowed.

Final Conclusion: The Tribunal held that the assessee's conduct was not contumacious and the error was inadvertent/technical; in view of authorities and the subsequent amendment permitting revision of belated returns, the penalty under Section 271(1)(c) for AY 2009-10 was deleted and the appeal allowed.

Principles of natural justice - opportunity to rebut material gathered from third parties - adjudication of grounds raised in appeal - remand for fresh consideration after affording opportunity

Principles of natural justice - opportunity to rebut material gathered from third parties - Whether the order of the Commissioner of Income Tax (Appeals) was vitiated for failure to adjudicate the ground that the Assessing Officer relied on material gathered at the back of the assessee without supplying it or affording opportunity to rebut or cross examine. - HELD THAT: - The Tribunal found that the assessee specifically raised before the CIT(A) a ground alleging denial of opportunity to rebut material obtained from third parties and that this ground was reproduced in the appeal records. The CIT(A) did not adjudicate that ground but proceeded to decide other grounds. In these circumstances the Tribunal held that the impugned order is contrary to the principles of natural justice since the assessee was not given adjudication on its contention that material gathered at the back of the assessee was used without confronting it and without affording opportunity for verification or cross examination. Accordingly the CIT(A)'s order was set aside on this ground and remitted for adjudication after giving the assessee adequate opportunity to meet the material and submissions.

Impugned order set aside for failure to adjudicate the ground alleging denial of opportunity; matter remitted to the CIT(A) for decision after affording opportunity to the assessee.

Adjudication of grounds raised in appeal - remand for fresh consideration after affording opportunity - Disposition of the remaining grounds (relating to withholding obligations under section 195, existence of business connection/PE, attribution of profit to agent, applicability of section 195A, and levy of interest) in view of the procedural defect. - HELD THAT: - The Tribunal recorded that Ground Nos.2 to 7 pertain to merits of deductions, agency/PE, attribution of profit and interest. Because the CIT(A)'s order was set aside for not deciding the procedural/natural justice ground, the Tribunal also set aside the CIT(A)'s conclusions on these merit grounds and directed that they be decided afresh by the CIT(A). The CIT(A) is to consider those grounds after giving the assessee sufficient opportunity to respond, including opportunity to confront or cross examine any material obtained from third parties relied upon in the assessment proceedings.

Orders on the merits (Grounds 2-7) set aside and remitted to the CIT(A) for fresh decision after affording the assessee adequate opportunity.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the CIT(A)'s order for non adjudication of the procedural/natural justice ground and remitting the entire matter (including the merit grounds) to the CIT(A) to decide afresh after giving the assessee adequate opportunity to rebut the material relied upon.

Disallowance of interest expenses - diversion of funds - proviso to section 36(1)(iii) of the I.T. Act - capitalisation of interest - put to use for the purpose of business

Disallowance of interest expenses - proviso to section 36(1)(iii) of the I.T. Act - put to use for the purpose of business - capitalisation of interest - Whether the Assessing Officer and the Commissioner (Appeals) were justified in disallowing proportionate interest claimed by the firm on borrowed funds used to purchase land which was not put to use for the purpose of business. - HELD THAT: - The Tribunal applied the proviso to section 36(1)(iii) as inserted by the Finance Act, 2003 w.e.f. 01/04/2004, which provides that interest on borrowed capital for acquisition of an asset shall not be allowed as a deduction until the asset is put to use for the purpose of business. The facts show the firm borrowed funds and utilised them to acquire land which, though registered in the firm's name, was not put to use for business as on the date of assessment and remained an idle investment. Judicial authorities relied on by the assessee pre-dating the proviso are inapplicable to the assessment year in question. Consequently, the correct legal consequence under the proviso is that interest relating to capital borrowed for acquisition of the land must be capitalised and cannot be allowed as a current deduction for the assessment year 2009-10. The Tribunal therefore affirmed the conclusion reached in the assessee's own earlier proceedings for AY 2008-09 and upheld the addition for the interest disallowance for AY 2009-10.

The disallowance of proportionate interest on borrowed funds used to purchase land which was not put to use for business is justified and the interest is to be capitalised; the appeal is dismissed on this ground.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2009-10, holding that interest on borrowed funds used to acquire land that was not put to use for business is not allowable as a deduction under the proviso to section 36(1)(iii) and must be capitalised.

Deduction under section 80JJAA - eligibility of salaries paid to software professionals as wages for deduction purposes - Interaction between deduction under section 80JJAA and deduction claimed by a unit under section 10AA (allocative/factual distinction of units) - Disallowance under section 14A - computation under Rule 8D and exclusion of investments which did not yield exempt income when computing average investment - Marked-to-market valuation of foreign-exchange derivatives - treatability of MTM loss as allowable expenditure subject to revaluation of all related foreign-currency items

Deduction under section 80JJAA - eligibility of salaries paid to software professionals as wages for deduction purposes - Interaction between deduction under section 80JJAA and deduction claimed by a unit under section 10AA (allocative/factual distinction of units) - Claim for deduction under section 80JJAA was not adjudicated on merits by the Tribunal and the matter was restored to the Assessing Officer for fresh examination of factual aspects. - HELD THAT: - The Tribunal accepted the co ordinate Bench view that salaries paid to software engineers can qualify as wages for the purpose of section 80JJAA for the assessment year in question, thereby negating the AO's legal objection that software employees could not be treated as 'workmen'. However, there existed factual confusion as to whether the deduction under section 80JJAA related to the unit claiming deduction under section 10AA or to a separate non 10AA unit. The assessee furnished additional evidence to clarify that the 80JJAA claim related to a non 10AA unit. Given these unresolved factual aspects, the Tribunal found it appropriate to remit the matter to the Assessing Officer for fresh examination of the claim in light of the factual matrix and the coordinate bench precedent. [Paras 6]

Set aside the CIT(A) order on this issue and restore the case to the Assessing Officer for fresh factual examination and adjudication.

Disallowance under section 14A - computation under Rule 8D and exclusion of investments which did not yield exempt income when computing average investment - Computation of disallowance under section 14A must exclude investments which did not yield exempt income (such as investments in foreign subsidiaries whose dividends were not exempt) when calculating average value of investments under Rule 8D. - HELD THAT: - The Tribunal accepted the assessee's submission that certain investments (notably in foreign subsidiaries) did not yield exempt income and therefore ought to be excluded from the average investment base used for computing the section 14A disallowance under Rule 8D. Relying on the Tribunal precedent that only investments yielding exempt income should be considered for the computation, the Tribunal directed the Assessing Officer to recompute the disallowance after excluding investments that did not give rise to exempt income. [Paras 9]

Directed the Assessing Officer to recompute the disallowance under section 14A excluding investments which did not yield exempt income.

Marked-to-market valuation of foreign-exchange derivatives - treatability of MTM loss as allowable expenditure subject to revaluation of all related foreign-currency items - Allowability of provision for marked-to-market loss on derivatives was not finally decided; matter remitted to the Assessing Officer for examination of whether all related foreign-currency items were revalued so that net loss, if any, could be claimed. - HELD THAT: - The AO treated MTM loss on foreign-exchange derivatives as notional and disallowed it following CBDT Circular No.3/2010. The assessee relied on a coordinate-bench decision that provisions for losses on derivative contracts may be allowable. The Tribunal observed that to claim a net loss on MTM valuation legitimately, the assessee must have revalued all outstanding foreign-currency forward contracts and corresponding trade receivables and payables arising from import and export activities at year end; this aspect had not been examined by the Assessing Officer. Consequently, the Tribunal considered it appropriate to remit the matter to the Assessing Officer for fresh scrutiny and determination on the factual matrix. [Paras 12]

Set aside the CIT(A) order on this issue and restore the matter to the Assessing Officer for fresh examination of year end revaluations and admissibility of the MTM loss.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: the question of deduction under section 80JJAA was remitted to the Assessing Officer for fresh factual examination after noting that software engineers' salaries can qualify under section 80JJAA; the section 14A disallowance was directed to be recomputed excluding investments that did not yield exempt income; and the claim for marked to market loss on derivatives was remitted to the Assessing Officer for verification of year end revaluations before adjudicating allowability.

Higher TDS rate under Sec.206AA for non-furnishing of PAN - preference of Double Taxation Avoidance Agreement under section 90(2) - rectification under section 154 and its limits

Higher TDS rate under Sec.206AA for non-furnishing of PAN - preference of Double Taxation Avoidance Agreement under section 90(2) - Application of the higher TDS rate under Sec.206AA vis-a -vis rates under the DTAA for payments to non-residents. - HELD THAT: - The Tribunal accepted the assessee's contention that tax was deducted at the rates prescribed by the applicable DTAA and that the provisions prescribing a higher withholding rate where PAN is not furnished cannot be applied so as to override the DTAA rate. The Tribunal relied on the Special Bench decision in Nagarjuna Fertilizers and Chemicals Ltd. and the decision of the Hon'ble Delhi High Court in Danisco India (P) Ltd. , which hold that DTAA benefits prevail over Sec.206AA in the circumstances of TDS on payments to non-residents. Applying that precedent, the TDS deducted by the assessee in accordance with the DTAA was held to be correct and the imposition of higher rate under Sec.206AA could not be sustained. [Paras 13]

The demands raised by applying the higher rate under Sec.206AA were held unsustainable and the TDS at DTAA rates was upheld.

Rectification under section 154 and its limits - Sustainability of orders passed by ACIT, CPC-TDS under section 154 raising demands for short deduction and the correctness of CIT(A)'s dismissal of the assessee's appeals. - HELD THAT: - The Tribunal found that the intimations under section 154 were issued by the ACIT, CPC-TDS and that, having regard to the legal position crystallised by judicial decisions prior to issuance of those intimations, the revenue's action could not be sustained. The Tribunal observed that CIT(A) erred in merely treating the question as 'debatable' and dismissing the appeals instead of cancelling the rectification orders; further, the question of limitation also militated against the revenue because the rectification/intimation was initiated by the revenue authority itself. In these circumstances the Tribunal directed cancellation of the section 154 orders raising demands and interest thereon. [Paras 13]

Orders issued under section 154 by ACIT, CPC-TDS raising demands for short deduction (and interest) were cancelled; CIT(A)'s dismissal of the appeals was set aside.

Final Conclusion: All appeals were allowed and the intimations/orders issued under section 154 raising demands for short deduction of TDS and interest were set aside, the TDS deducted in accordance with the DTAA being held to be correct.

Reopening of assessment under section 147 read with section 148 - limitation under section 149(1)(b) - quantification of income escaping assessment - reason to believe - vagueness and inadequacy of reasons for reassessment - reopening beyond four years

Reopening of assessment under section 147 read with section 148 - limitation under section 149(1)(b) - quantification of income escaping assessment - vagueness and inadequacy of reasons for reassessment - reason to believe - Reopening of assessment was invalid and the reassessment order was quashed. - HELD THAT: - The AO issued notice under section 148 after four years but within six years and recorded reasons alleging bogus transactions and unentitled benefits without quantifying any income said to have escaped assessment. The reasons reproduced to the assessee identified incorrect or unverified counter-parties and did not coherently connect the information available with formation of a reason to believe that income exceeding the statutory threshold had escaped assessment. In absence of any finding or material quantifying escaped income, the requirement under the limitation proviso in section 149(1)(b) was not satisfied. Applying the approach of the jurisdictional High Court in Bakulbhai Ramanlal Patel (as discussed in the order), vague and inconclusive reasons which do not record the amount or a finding that escaped income exceeds the prescribed limit render the assumption of jurisdiction under section 147/148 invalid. Consequently the reassessment framed on those reasons could not be sustained and was quashed. [Paras 7, 8, 9]

Reassessment order quashed; appeal allowed.

Final Conclusion: The Tribunal quashed the reassessment order for Asstt.Year 2006-07 on the ground that the reasons for reopening were vague, failed to quantify escaped income and did not satisfy the limitation requirement under section 149(1)(b), and accordingly allowed the assessee's appeal.

Levy of fee under section 234E through intimation issued under section 200A - Power of Assessing Officer to levy late fee while processing TDS statements under section 200A - Prospective effect of amendment inserting clause (c) to section 200A(1) - Retrospectivity principle in taxation statutes

Levy of fee under section 234E through intimation issued under section 200A - Power of Assessing Officer to levy late fee while processing TDS statements under section 200A - Prospective effect of amendment inserting clause (c) to section 200A(1) - Levy of fee under section 234E by issuing intimation under section 200A for defaults prior to 01.06.2015 is not permissible; the amendment inserting clause (c) to section 200A(1) is prospective and creates the enabling power. - HELD THAT: - The Tribunal examined the legislative scheme and precedents and followed coordinate-bench decisions holding that although section 234E imposed liability for late furnishing of TDS statements, when section 234E was inserted there was no enabling provision in section 200A for the Assessing Officer to compute or charge that fee while processing returns. The Finance Act, 2015 inserted clause (c) to section 200A(1) with effect from 01.06.2015 to empower the Assessing Officer to determine fees under section 234E at the time of processing statements. The amendment is procedural/enabling and prospective, not clarificatory or retrospective; absent such enabling provision the Assessing Officer could not validly levy section 234E fees by issuing intimations under section 200A for periods before 01.06.2015. The Tribunal relied on the principle that legislation is presumed not retrospective unless a contrary intention appears and on earlier decisions of coordinate Benches and High Courts reaching the same conclusion, and therefore deleted the fees charged by intimation for the periods prior to 01.06.2015. [Paras 4, 8, 9]

The late fee levied under section 234E by issuance of intimations under section 200A for defaults prior to 01.06.2015 is deleted; the appeals are allowed.

Final Conclusion: Following coordinate-bench and Third Member precedents, the Tribunal held that the Assessing Officer lacked power to charge section 234E fees by intimations under section 200A for defaults before 01.06.2015; the amendment inserting clause (c) to section 200A(1) is prospective and therefore the late fee levied for the relevant period is set aside and the appeal is allowed.

MAT credit under section 115JAA - inclusion of surcharge and cess in 'tax' - ITR-6 auto-computation and CBDT-prescribed format - interpretation of 'tax' as including surcharge

MAT credit under section 115JAA - inclusion of surcharge and cess in 'tax' - ITR-6 auto-computation and CBDT-prescribed format - Whether surcharge and cess are to be included in the computation of MAT credit under section 115JAA and whether the assessee is entitled to the MAT credit short granted by CPC. - HELD THAT: - The Tribunal followed the coordinate-bench reasoning in Virtusa (ITA No.146 of 2015) that the statutory term 'tax' for the purposes of section 115JAA embraces surcharge (and consequently cess as part of aggregate tax), relying on the principle in K. Srinivasan that 'tax' includes surcharge. The ITR-6 format (as prescribed by CBDT and auto-calculated in Part B) computes both the normal tax liability and the MAT liability inclusive of surcharge and cess and treats the MAT credit as the balancing figure between those two computed liabilities. The assessing authority/CPC cannot apply a different method of calculation in processing returns under section 143(1) that is inconsistent with the prescribed ITR-6 algorithm. Applying these principles, the Tribunal held that the MAT credit must be computed including surcharge and cess, and that the short grant by CPC must be corrected in favour of the assessee. The Tribunal therefore allowed the assessee's grounds and granted the relief sought. [Paras 9, 10, 11]

Appeal allowed; surcharge and cess are to be included in computing MAT credit under section 115JAA and the MAT credit short granted by CPC is to be rectified in favour of the assessee.

Final Conclusion: The appeal is allowed: the MAT credit under section 115JAA is to be computed inclusive of surcharge and cess in accordance with the ITR 6 computation, and the short grant of MAT credit by CPC is directed to be corrected in favour of the assessee.

Advancement/backdating of effective date of administrative approval - import clearances under a customs notification dependent on prior permission - distinction between Letter of Intent and Letter of Permission - administrative discretion to refuse retrospective effect to approvals - judicial interference with administrative decisions

Advancement/backdating of effective date of administrative approval - import clearances under a customs notification dependent on prior permission - distinction between Letter of Intent and Letter of Permission - Validity of the Ministry's refusal to amend the effective date of approval so as to benefit imports that arrived before issuance of Letter of Permission - HELD THAT: - The Court accepted the factual finding that the petitioner had only a Letter of Intent and had not received a Letter of Permission when the goods were imported in October-November 2005. The Ministry declined to advance the effective date of approval to an earlier date on the ground that the petitioner had imported goods without waiting for the required permission and therefore could not be allowed retrospective benefit under the customs notification. The Court found no illegality in refusing to backdate the approval where the imports occurred before any communicated approval/LOP, observing that the petitioner "jumped the gun" by importing without the requisite document and cannot now seek retrospective alteration of the effective date merely to secure customs benefits. [Paras 11, 12]

Ministry's refusal to advance/backdate the effective date was validly founded on the undisputed fact that imports were made prior to issuance of LOP; relief denied.

Administrative discretion to refuse retrospective effect to approvals - judicial interference with administrative decisions - Scope of judicial review and whether the High Court should interfere with the Ministry's decision declining to amend the effective date - HELD THAT: - The Court reviewed the petitioner's submissions and concluded that there were no tenable grounds to disturb the administrative decision. Given the factual matrix-imports having preceded any communicated approval-and the reasoned administrative refusal, the Court held that interference was not warranted. The Court applied standard judicial restraint in review of administrative discretion in the absence of illegality, perversity or breach of statutory mandate. [Paras 13, 14]

Writ petition dismissed; no interference with the impugned administrative order refusing to backdate the effective date.

Final Conclusion: Petition dismissed. The High Court upheld the Ministry's refusal to advance the effective date of approval because the petitioner imported goods prior to issuance of the requisite Letter of Permission; there was no ground for judicial interference with the administrative decision.

Stay of consequences - inoperability of order dropping proceedings - certificates of origin - protection of revenue / exchequer - powers of appellate forum vs administrative measures - expedited listing of appeal / early hearing

Stay of consequences - inoperability of order dropping proceedings - certificates of origin - protection of revenue / exchequer - powers of appellate forum vs administrative measures - Application by Revenue for stay of the consequences of the order dropping proceedings was refused. - HELD THAT: - The Tribunal examined the Revenue's contention that continued withholding of the imported consignment was necessary to protect recovery of revenue, noting that the adjudicating authority had dropped proceedings after doubting provenance but accepting the importer's claim. Intervening on the merits at the stay stage would require a critique of those findings and effectively decide the appeal, which the Tribunal declined to do. The Tribunal considered precedents relied upon by Revenue but observed that the mechanisms governing acceptance of certificates of origin vary with the underlying agreements and notifications and that those authorities did not establish that the impugned order was ex facie perverse. The investigating material questioned provenance based on past consignments and not the goods under detention; moreover, confiscation under the show cause notice did not render sale under section 142 a viable means to secure the disputed revenue and the value of goods under custody was a small fraction of the amount in dispute. Administrative steps to prevent non-availability of the importer were matters for executive action, not a substitute for adjudicatory powers. For these reasons, no irreparable harm to the exchequer was shown that would justify rendering the dropping order inoperative pending appeal, and the stay application was rejected. [Paras 3, 6, 7, 8, 9]

Application for stay of the consequences of the order dropping proceedings is rejected.

Expedited listing of appeal / early hearing - powers of appellate forum vs administrative measures - Application for early hearing / out of turn disposal of the appeal was allowed and the appeal directed to be listed for disposal on 30th March 2020. - HELD THAT: - Although the stay application was refused, the Tribunal recognized the substantial revenue involved and the parties' request for early hearing. The Tribunal declined to substitute appellate or adjudicatory intervention for executive measures but, in view of the significance of the dispute, directed expedited listing of the appeal for final disposal on a specified date. [Paras 2, 10]

Registry directed to list the appeal for disposal on 30th March 2020.

Final Conclusion: The application for stay of the consequences of the order dropping proceedings was refused for lack of case showing irreparable harm or an ex facie perverse order; however, having regard to the substantial revenue involved, the Tribunal ordered expedited listing of the appeal for disposal on 30th March 2020.

Continuing offence - admissibility of electronic records maintained by Registrar - competency of public official to prove records on behalf of Registrar - director's obligation to file resignation in Form DIR-11 - criminal liability for contravention of statutory limit on directorships

Admissibility of electronic records maintained by Registrar - The documents downloaded from the MCA portal and certified by the Registrar are admissible under the Companies Act as evidence. - HELD THAT: - The computer printout of DIN details and the certified list of directorships (Ex. CW-1/1 and Ex. CW-1/2), bearing the Registrar's stamp and signatures, satisfy the statutory requirement for admissibility of documents derived from returns and records maintained by the Registrar. The material therefore meets the criteria of the Act for being receivable in evidence without production of originals. [Paras 13]

Ex. CW-1/1 and Ex. CW-1/2 are admissible evidence under the Companies Act.

Competency of public official to prove records on behalf of Registrar - The Assistant Registrar of Companies who gave evidence on the basis of official records is competent to depose for the complainant. - HELD THAT: - Section 2(75) includes Assistant/Deputy Registrars within the definition of Registrar; the witness, Ms. Shefali Gupta (CW-1), was posted as Assistant Registrar and deposed from official records. The argument that she was incompetent because she had not filed the complaint was rejected as she derived knowledge from the institutional records and was authorised to testify on behalf of the Registrar. [Paras 14]

CW-1 is competent to prove the records and depose in the prosecution.

Continuing offence - Offence under Section 165 of the Companies Act is a continuing offence and the complaint is within limitation. - HELD THAT: - Applying authorities on continuing offences, the court held that where statutory liability is of a nature that it continues until the default is removed and the penal provision contemplates daily fine for continuance, the offence remains ongoing until cessation. The evidence (Ex. CW-1/2) showed the accused was recorded as director in excess of the permissible limit as recently as the date the records were downloaded, and the prosecution therefore falls within the period of limitation for a continuing offence. Accordingly, the limitation objection was rejected. [Paras 16, 21]

The offence is continuing; the complaint filed is not barred by limitation.

Director's obligation to file resignation in Form DIR-11 - criminal liability for contravention of statutory limit on directorships - The accused was a director in more than the permissible number of companies after commencement of the Act, failed to file the required Form DIR-11 within the prescribed period, and was therefore guilty of contravention of Section 165(3), punishable under Section 165(6). - HELD THAT: - The onus to prove excess directorship rested on the complainant and was met by Ex. CW-1/1 and Ex. CW-1/2 showing the accused's DIN and list of directorships. The Rules (Rule 16) require a director who resigns to file Form DIR-11 within thirty days; the accused admitted no filing of DIR-11 and offered no explanation for non-filing. The prosecution's evidence and the absence of proof that resignations were duly filed with the Registrar before the relevant date established that the accused continued to hold directorships in excess of the statutory limit, attracting penal liability under Section 165(6). [Paras 24, 25, 26, 27, 28]

Accused convicted for contravention of Section 165(3) and punished under Section 165(6) of the Companies Act, 2013.

Final Conclusion: The court admitted the Registrar's electronic records, found the Assistant Registrar competent to prove them, held the offence under Section 165 to be continuing (thereby rejecting the limitation plea), and convicted the accused for contravening the statutory limit on directorships under Section 165(3), punishable under Section 165(6).

Time limit for completion of corporate insolvency resolution process - extension of corporate insolvency resolution process under the third proviso to Section 12 - mandatory completion within the period prescribed by provisos to Section 12 - power of Adjudicating Authority to extend CIRP where process cannot be completed within 180 days

Extension of corporate insolvency resolution process under the third proviso to Section 12 - mandatory completion within the period prescribed by provisos to Section 12 - Application of the third proviso to sub section (3) of Section 12 to extend the corporate insolvency resolution process by 90 days from 16th August, 2019. - HELD THAT: - The Tribunal found that the amended Section 12, with the third proviso (w.e.f. 16th August, 2019), mandates that where a CIRP is pending and has not been completed within the period referred to in the second proviso, the resolution process shall be completed within ninety days from the commencement of the Amendment Act. Applying that proviso to the facts, the Tribunal held that the CIRP of the corporate debtor falls within this category and therefore the process is to be completed within a further period of 90 days commencing 16th August, 2019. This conclusion follows the statutory prescription in the third proviso and does not require separate factual adjudication of the 180 day extension under the earlier sub section in the present order.

The CIRP is extended by 90 days from 16th August, 2019 in terms of the third proviso to Section 12 and must be completed within that period.

Power of Adjudicating Authority to extend CIRP where process cannot be completed within 180 days - committee of creditors' consideration of resolution plans and placement before Adjudicating Authority under Section 31 - Setting aside of the Adjudicating Authority's order refusing the exclusion and direction to permit submission and consideration of resolution plans within the extended period. - HELD THAT: - In light of the statutory extension under the third proviso, the Tribunal set aside the impugned order dated 28th August, 2019 which had refused the exclusion of the claimed period. The Tribunal directed that the resolution applicant may place its plan before the Committee of Creditors and the resolution professional, and that the Committee, while considering any resolution plan, may pass orders in accordance with law preferably within 30 days and thereafter place the matter before the Adjudicating Authority for orders under Section 31 of the I&B Code. The direction is consequential to the statutory extension and aims to facilitate completion of the CIRP within the newly prescribed timeline.

Impugned order refusing the exclusion is set aside; the resolution applicant is permitted to submit its plan and the Committee of Creditors is directed to consider plans preferably within 30 days and place the matter before the Adjudicating Authority under Section 31.

Final Conclusion: The appeal is allowed: the CIRP is extended for 90 days from 16th August, 2019 under the third proviso to Section 12; the impugned order refusing exclusion is set aside; the resolution applicant may submit its plan and the Committee of Creditors is directed to consider any plan preferably within 30 days and place the matter before the Adjudicating Authority for orders under Section 31.

Cenvat credit reversal - payment versus reversal in cenvat account - refund under Section 11B of the Central Excise Act, 1944 - limitation under Section 11B - unjust enrichment

Cenvat credit reversal - payment versus reversal in cenvat account - refund under Section 11B of the Central Excise Act, 1944 - limitation under Section 11B - Whether a reversal made by the assessee in its cenvat credit account amounts to payment of duty such that the refund claim is governed by the limitation in Section 11B. - HELD THAT: - The Tribunal examined whether amounts reversed in the appellant's cenvat credit account constitute excise duty attracting the time bar under Section 11B. The Tribunal followed earlier decisions holding that an amount reversed under Rule 6 (3)/(3A) as an accounting entry is an 'amount' and not duty, and therefore Section 11B does not apply to such refunds. The Tribunal also noted and respectfully followed the view of the jurisdictional High Court that rejecting a refund of a mistakenly paid tax on limitation grounds would be contrary to Article 265 of the Constitution. Applying these principles, the Tribunal held that the Commissioner (Appeals) was not justified in rejecting part of the refund solely on the ground of limitation once it was found that the reversal was erroneous and did not amount to duty.

Reversal in the cenvat credit account does not amount to payment of duty; the limitation under Section 11B is not attracted and the refund cannot be rejected on that ground.

Unjust enrichment - Whether unjust enrichment needs to be examined before allowing refund of the amount erroneously reversed. - HELD THAT: - Although the Tribunal held that limitation does not bar the refund, it affirmed that the question of unjust enrichment remains a live issue. The Tribunal remitted the matter to the Commissioner (Appeals) to determine, in accordance with law, whether the appellant has passed on the duty burden to any other party and thereby been unjustly enriched. The remand is for verification and adjudication of unjust enrichment only, not for relitigation of the finding that the reversal was erroneous and not a duty payment.

Issue of unjust enrichment remanded to the Commissioner (Appeals) for fresh consideration and determination.

Final Conclusion: Part of the refund previously disallowed on limitation grounds is allowed: the Tribunal holds that reversal in the cenvat account is not payment of duty and Section 11B limitation does not apply; the question whether the assessee was unjustly enriched is remanded to the Commissioner (Appeals) for determination.

Extended period of limitation - availability of input tax credit - effect of exemption notification on input credit entitlement - equally placed assessees and divergent Revenue views

Extended period of limitation - equally placed assessees and divergent Revenue views - availability of input tax credit - Denial of input credit was barred by limitation because the extended period of limitation was not invokable for the tax period in question. - HELD THAT: - The Tribunal applied its earlier finding in the appellant's own case for the same period, where similarly placed assessees had been allowed credit and the Revenue had taken divergent views by filing appeals before the Commissioner (Appeals). In that circumstance the Tribunal held that the extended period of limitation could not be invoked. Relying on that precedent and without entering into the merits of entitlement under the exemption notifications, the Tribunal concluded that issuance of the show cause notice by invoking the extended period was improper and therefore the denial of credit was time-barred. [Paras 6, 7]

Impugned order set aside; appeal allowed and credit denial held barred by limitation with consequential relief, if any.

Final Conclusion: The impugned order denying input credit is set aside on the ground that the extended period of limitation was not invokable for the period 01.06.2012 to 19.01.2014; the appeal is allowed with consequential relief, if any.

Deduction of trade/turnover discounts from transaction value - Provisional assessment where discounts are known but quantified later - Transaction value (assessable value) inclusive of permissible deductions for discounts - Requirement to disclose intention and seek provisional assessment when discount quantification is deferred - Board clarification on non-inclusion of discounts in transaction value and provisional assessment procedure

Deduction of trade/turnover discounts from transaction value - Transaction value (assessable value) inclusive of permissible deductions for discounts - Respondent entitled to deduct discounts known at the time of clearance from depots though quantified later, when finalizing provisional assessment (Appeal No. E/52691/2018). - HELD THAT: - The Tribunal held that the principle established by the Apex Court in Bombay Tyres and followed in Union of India v. Madras Rubber Factory applies: discounts or turnover discounts which are known and understood at the time of removal may be deducted even if quantified subsequently. Although the present provisions define assessable value in terms of transaction value, the concept intrinsically permits deduction of trade discounts. This view is supported by the Board's Circular which states that discounts actually passed on to the buyer do not form part of transaction value and that where such discounts are not readily known assessment may be made on a provisional basis provided the assessee discloses the intention and requests provisional assessment. The Department's contention that discounts quantified later cannot be deducted was rejected. [Paras 9, 10, 11]

Deduction of discounts known at time of clearance but quantified later is permissible and the respondent's claim was upheld.

Provisional assessment where discounts are known but quantified later - Requirement to disclose intention and seek provisional assessment when discount quantification is deferred - Board clarification on provisional assessment procedure - Rejection of the request for provisional assessment was incorrect and unsustainable; the Commissioner (Appeals) rightly allowed the provisional assessment request (Appeal No. E/52692/2018). - HELD THAT: - Given that the availability of discounts was known at the time of clearance though their quantum was ascertainable only later, the proper course is provisional assessment. The Board's Circular expressly contemplates provisional assessment where discounts will be known subsequently and requires disclosure of the intention to the Department. The Tribunal concluded that the order rejecting provisional assessment was contrary to this settled principle and to the judicial authority recognising deduction of such discounts, and therefore the Commissioner (Appeals) properly set aside the rejection. [Paras 11, 12]

Rejection of provisional assessment request set aside; provisional assessment was permissible and the Commissioner (Appeals) order was upheld.

Final Conclusion: Both issues were adjudicated in favour of the assessee: discounts known at the time of depot clearances though quantified later are deductible from transaction value, and rejection of provisional assessment was unsustainable. Consequently, the Department's appeals are dismissed and the impugned orders in favour of the respondent are upheld.

Constitutional validity of Section 174 of the Kerala State Goods and Services Tax Act, 2017 - limitation under Section 25(1) of the Kerala Value Added Tax Act, 2003 - remand for fresh consideration - revival of interim stay

Constitutional validity of Section 174 of the Kerala State Goods and Services Tax Act, 2017 - limitation under Section 25(1) of the Kerala Value Added Tax Act, 2003 - remand for fresh consideration - Writ petition to be remanded for fresh consideration of grounds other than the challenge to the constitutional validity of Section 174 of the KSGST Act - HELD THAT: - The Single Judge had dismissed the writ petition relying on a separate judgment that addressed only the constitutional validity of Section 174 of the KSGST Act. The Court found that other grounds raised in the writ petition, including the contention that assessment proceedings were initiated beyond the time limit under Section 25(1) of the KVAT Act, were not considered by the Single Judge. In view of that omission and the concession by the respondents that the cited precedent dealt solely with the constitutional question, the High Court held that remand for fresh consideration and disposal of the unexamined grounds is necessary to meet the ends of justice. The writ petition was therefore restored to the file for fresh hearing on those grounds.

Writ petition restored and remanded to the Single Judge for fresh consideration and disposal of grounds other than the challenge to Section 174 of the KSGST Act.

Revival of interim stay - Effect of the remand on any interim order previously granted - HELD THAT: - The Court directed that any interim order of stay that was in existence at the time of the dismissal of the writ petition shall stand revived upon restoration of the petition and shall continue in force pending fresh consideration. This ensures preservation of the status quo until the Single Judge disposes of the remanded petition.

Any interim stay existing as on the date of dismissal is revived and to continue in force.

Final Conclusion: The appeal is allowed; the impugned judgment is set aside, the writ petition is restored for fresh consideration of grounds other than the constitutional challenge to Section 174 of the KSGST Act, and any interim stay in existence at the time of dismissal is revived and shall continue in force.

Natural justice - opportunity of being heard - rectification of mistake apparent on the face of record - communication of administrative orders - liberty to pursue remedies in law

Natural justice - opportunity of being heard - Whether the petitioner was afforded a reasonable and personal opportunity of being heard before the impugned assessment order (Ext.P-5) and before the order passed on the rectification application (Ext.P-7). - HELD THAT: - The Court did not adjudicate on the merits of the alleged denial of hearing. Instead, on the material before it the Court recorded that the 1st respondent has passed orders on Ext.P-7 and directed factual verification of whether the petitioner was given reasonable and personal opportunity to be heard before passing Ext.P-5 and before passing the order on Ext.P-7. The 1st respondent was directed to give precise written instructions to the Government Pleader stating whether such opportunities were granted and whether the petitioner was allowed to place relevant documents before the authority. The Court thereby required the administrative respondent to supply contemporaneous facts and to communicate the order on Ext.P-7 to the petitioner and to the Government Pleader, so that the petitioner may, if aggrieved, pursue available legal remedies. [Paras 3, 4]

Issue remanded for factual verification and communication: the 1st respondent to forward the order on Ext.P-7 to the petitioner and to furnish written instructions about opportunities of hearing granted prior to Ext.P-5 and Ext.P-7.

Rectification of mistake apparent on the face of record - communication of administrative orders - liberty to pursue remedies in law - Remedial consequences and final disposition of the writ petition in light of the 1st respondent having passed orders on Ext.P-7. - HELD THAT: - The Court observed that by reason of the 1st respondent having already passed orders on Ext.P-7, the principal relief sought by the petitioner had become practically infructuous. Consequently the Court directed immediate communication of the order on Ext.P-7 to the petitioner by registered post with acknowledgment, directed the Government Pleader to ensure the petitioner's counsel also receives a copy, and recorded that after receipt of the impugned order the petitioner is at liberty to avail of remedies known to law if legally justiciable grievances exist. The Court further directed that the Secretary to the Advocate General forward a copy of the judgment to the 1st respondent for compliance. [Paras 4, 5]

Writ petition finally disposed of with directions for communication of the Ext.P-7 order, factual instructions to be furnished by the 1st respondent, and liberty granted to the petitioner to pursue statutory or judicial remedies.

Final Conclusion: The petition is disposed of: the 1st respondent shall immediately forward the order on Ext.P-7 to the petitioner and to the Government Pleader, furnish precise written instructions regarding whether the petitioner was given opportunities of hearing before Ext.P-5 and Ext.P-7, and the petitioner is at liberty to pursue available legal remedies against the orders communicated.

Principles of natural justice - service of notice - proof of service and presumption of non-service - validity of assessment in absence of proper service - remand for fresh assessment - personal hearing

Service of notice - principles of natural justice - proof of service and presumption of non-service - Whether the impugned assessment could be sustained where the Assessing Officer relied on notices which were not proved to have been served on the petitioner. - HELD THAT: - The Court found that the impugned order proceeded on the ground that the petitioner did not respond to notices dated 01.03.2019 and 22.04.2019. Receipt of the first notice dated 04.01.2019 was not disputed, but the petitioner denied service of the other two notices. The Director of the petitioner-company was in custody from 01.03.2019 to 22.03.2019, and accordingly the notice dated 01.03.2019 could not be treated as served on the petitioner. As to the notice dated 22.04.2019, the respondent could not produce acknowledgement or returned post to prove service. In the absence of proof of service, the impugned assessment order was held to have been passed without affording the petitioner a proper notice and without complying with the requirements of natural justice. [Paras 5, 6]

Impugned assessment set aside for want of proper service and breach of principles of natural justice.

Remand for fresh assessment - personal hearing - validity of assessment in absence of proper service - Procedure to be followed on remand and whether the Court has adjudicated the merits of the claim for exemption. - HELD THAT: - The Court remitted the matter to the Assessing Officer with directions that the petitioner treat the impugned order as a notice of proposal and file objections with supporting documents within two weeks of receipt of the order; that the Assessing Officer fix a date for personal hearing on receipt of objections; and that a fresh assessment on merits be completed within four weeks after hearing. The Court made clear that it was not expressing any view on the merits of the exemption claim and left consideration and decision on merits to the Assessing Officer. The Court further directed that if the petitioner failed to file the reply within the stipulated time or to appear for the personal hearing, the impugned assessment would stand restored automatically. [Paras 7, 8]

Matter remitted to the Assessing Officer to redo the assessment in accordance with the specified timelines and procedure; merits not decided by the Court.

Final Conclusion: Writ petition allowed; impugned assessment order for assessment year 2017-2018 set aside for lack of proved service and breach of natural justice, and the matter is remitted to the Assessing Officer to afford opportunity of filing objections, to hold personal hearing and to pass fresh assessment on merits within stipulated timelines; Court refrained from expressing any view on the merits.

Violation of principles of natural justice - non-service / defective service of notice for personal hearing - assessment set aside for failure to afford opportunity of hearing - stock transfer of plant and machinery between sites not amounting to sale - non-application of tax to intra-company transfer of goods - Form F not strictly mandatory to establish non-sale of goods - reliance on contemporaneous evidence other than Form F

Violation of principles of natural justice - non-service / defective service of notice for personal hearing - assessment set aside for failure to afford opportunity of hearing - Impugned assessment orders were passed without complying with the earlier direction to furnish relied-upon details and to afford an effective personal hearing, and therefore are liable to be set aside on grounds of denial of natural justice. - HELD THAT: - The Court found that, despite its earlier order remanding the matter for fresh hearing and calling for particulars, the assessing authority fixed a date for personal hearing but the notice was received by the petitioner only after the time fixed for hearing. The petitioner informed the authority of non-receipt in time and requested postponement, but the authority proceeded to pass the assessment orders. The failure to furnish the materials relied upon and to afford a real opportunity of personal hearing amounted to non-compliance with the principles of natural justice as directed by the High Court, rendering the impugned orders unsustainable. [Paras 6]

Impugned orders set aside on the ground of non-compliance with principles of natural justice.

Stock transfer of plant and machinery between sites not amounting to sale - non-application of tax to intra-company transfer of goods - Form F not strictly mandatory to establish non-sale of goods - reliance on contemporaneous evidence other than Form F - Transfer of equipments and machineries by the contractor from one worksite to another (where transferor and consignee are the same) does not constitute sale and is not taxable; absence of Form F is not fatal if the petitioner can otherwise establish the non-sale nature of the movement. - HELD THAT: - The Court observed that movement of machinery between sites by the same owner in the course of executing projects is a transfer of goods without transfer of property to another person and thus lacks the element of sale or purchase. Reliance on the earlier decision in Simplex Infrastructure was placed for the proposition that while Form F would assist in establishing stock transfers under the CST regime, its non-filing is not necessarily determinative in a State tax assessment where other materials can demonstrate the true purpose of the movement. On these grounds, the Court held that the assessment confirming turnover as interstate sales and taxing it was unsustainable. [Paras 8]

Assessment confirming tax on transfers of machinery between sites set aside; Form F non-filing not fatal where non-sale can be otherwise established.

Final Conclusion: Writ petitions allowed; impugned assessment orders set aside for failure to afford an effective personal hearing and on the substantive finding that intra-company transfer of machinery between sites does not amount to taxable sale; no costs.