TaxTMI Updates e-Newsletter
Apr 27,2022

Enforceability of administrative spot memos - continuation of administrative proceedings to a logical conclusion - protection against repetitive or fragmented departmental actions - opportunity of personal hearing before administrative decision - remand for fresh consideration on merits

Enforceability of administrative spot memos - protection against repetitive or fragmented departmental actions - The spot memos dated 22nd March, 2021 issued to the appellants cannot be enforced and are quashed. - HELD THAT: - The Court found that multiple proceedings and summonses had been issued by different wings of the department since May 2018 in respect of the same TRAN-1 issue, none having been taken to a logical conclusion. In that factual matrix, issuing fresh spot memos without completing earlier initiated proceedings and without referring to or building upon those earlier proceedings amounted to unfair and fragmented departmental action. The Court declined to adjudicate the broader question whether a CERA audit could be conducted against a private entity as that question was premature given the authorities had not pursued earlier proceedings to their conclusion. For these reasons the spot memos communicated on 22nd March, 2021 were held unenforceable and were quashed. [Paras 4, 5, 6, 8, 9]

Spot memos enclosed with communications dated 22nd March, 2021 quashed for being issued in the context of incomplete and repetitive departmental proceedings.

Opportunity of personal hearing - remand for fresh consideration on merits - continuation of administrative proceedings to a logical conclusion - The matter is remitted to the competent authority to consider earlier replies, afford personal hearing to the appellants and decide the issue on merits in accordance with law. - HELD THAT: - Given that earlier proceedings (including replies dated 15th June, 2018; 24th July, 2018; and 14th January, 2020) had not been taken forward, the Court directed that the Additional Assistant Director, DGGI, Kolkata Zonal Unit, consider those replies and afford the authorised representative of the appellants a personal hearing. The Court required the authority to take a decision on merits and in accordance with law, thereby remanding the matter for fresh consideration rather than adjudicating contested substantive legal questions at this stage. [Paras 7, 9]

Proceedings remitted to the 5th respondent to consider earlier replies, afford personal hearing and decide on merits in accordance with law.

Final Conclusion: Writ appeal allowed in part: spot memos dated 22nd March, 2021 quashed; matter remitted to the competent authority to consider the appellants' earlier replies, afford a personal hearing and decide the issue on merits in accordance with law; no costs.

GST on royalty - royalty distinct from land revenue - interim stay of recovery

GST on royalty - royalty distinct from land revenue - interim stay of recovery - Respondents restrained from recovering GST on royalty paid for excavation of sand for brick and further proceedings pursuant to the notice dated 15.02.2022 stayed pending next date. - HELD THAT: - The Court, having issued notice, granted interim relief by restraining respondents from recovering GST on the royalty paid for excavation of sand for brick. The petitioner relied on the Supreme Court decision in India Cement Ltd. v. State of Tamil Nadu that royalty is separate and distinct from land revenue and not leviable as tax on land; and noted that a Special Leave Petition arising out of this Court's earlier decision in Udaipur Chamber of Commerce and Industry v. Union of India has stayed payment of service tax in relation to grant of mining lease/royalty. On the strength of these submissions and the pending proceedings, the Court stayed further action pursuant to the notice dated 15.02.2022 and issued notice in the petition and the stay application returnable on 5.7.2022.

Interim stay granted: respondents restrained from recovery of GST on royalty for excavation of sand for brick and further proceedings under the notice dated 15.02.2022 stayed until the returnable date.

Final Conclusion: Notice issued and interim stay granted restraining recovery of GST on the royalty paid for excavation of sand for brick; matter listed on 5.7.2022.

Non-speaking order - reasoned and speaking order - opportunity of hearing - reconsideration of request to file revised TRAN-I - judicial review of administrative action

Non-speaking order - reasoned and speaking order - opportunity of hearing - reconsideration of request to file revised TRAN-I - The one-line order rejecting the petitioner's representations was unsatisfactory and the matter was remitted for fresh consideration. - HELD THAT: - The Court found that the respondent's single line rejection of the petitioner's representations did not deal with the contentions raised and therefore amounted to a non speaking order. In the exercise of supervisory jurisdiction the Court directed that the representations concerning the petitioner's request to file/upload a revised TRAN I (filed after inadvertent mistake in the original TRAN I) be considered afresh. The authority is required to pass a reasoned and speaking order dealing with the contentions raised, to take into account the reported decisions relied upon by the petitioner, and to afford the petitioner or its authorised representatives an opportunity of hearing before finalising the decision. The Court prescribed a timeline of eight weeks from communication of the order for disposal of the representations.

The respondent's one line rejection is set aside and the representations are remitted for fresh consideration with a direction to pass a reasoned, speaking order after hearing within eight weeks.

Final Conclusion: Writ petition disposed by setting aside the non speaking rejection and directing the concerned GST authority to reconsider the petitioner's representations on filing a revised TRAN I, to pass a reasoned speaking order after hearing and after considering the cited decisions, within eight weeks.

Provisional attachment to protect Government revenue under Section 83 - pendency of proceedings under Section 74 - strict compliance with statutory pre-conditions for provisional attachment - temporary cessation of provisional attachment after one year

Provisional attachment to protect Government revenue under Section 83 - strict compliance with statutory pre-conditions for provisional attachment - pendency of proceedings under Section 74 - Validity of the provisional attachment dated 30.03.2019 in the absence of established pending proceedings under the statutory heads relied upon - HELD THAT: - The Court considered whether the statutory pre-conditions for invoking Section 83 were satisfied at the time the provisional attachment (Annexure-L) was issued. The learned Single Judge had found, after examining the material relied upon by Revenue (Annexures D and E), that no documentary evidence established pendency of proceedings under Section 74 or the other specified provisions so as to justify invocation of Section 83. This Court agreed that Annexures D and E do not constitute material establishing proceedings under Section 74 and that the requirements in the Act for invoking provisional attachment must be strictly complied with; mere letters or requests to pay bills cannot be treated as satisfying the statutory threshold. The Court emphasised that the conditions for provisional attachment are sine qua non and must be met in letter and spirit, not by conjecture or stretched inferences. [Paras 8, 9]

The provisional attachment could not be sustained because the necessary statutory pre-conditions, specifically the pendency of proceedings under the provisions relied upon, were not established.

Provisional attachment to protect Government revenue under Section 83 - temporary cessation of provisional attachment after one year - Appropriate relief to be granted in view of the defect in invocation of Section 83 - HELD THAT: - While the Single Judge set aside Annexures D and E, this Court clarified the correct relief: Annexure-L, being the provisional attachment notice dated 30.03.2019 issued under Section 83, is the instrument which should be quashed when invocation of Section 83 is shown to be impermissible. The Court also noted the statutory consequence that a provisional attachment ceases to have effect after the expiry of one year from the date of the order under sub section (1) of Section 83, a factor relevant to the temporal operation of such attachments. The Court dismissed the intra Court appeal and left open Revenue's right to proceed in accordance with law, and observed that subsequent adjudications would not be influenced by its observations in this order. [Paras 10]

Annexure-L (provisional attachment dated 30.03.2019) is set aside; the writ appeal is dismissed, without prejudice to Revenue taking action in accordance with law.

Final Conclusion: The High Court's order allowing the writ petition was upheld in substance; Annexures D and E do not establish pendency of proceedings under Section 74 and, accordingly, the provisional attachment notice dated 30.03.2019 issued under Section 83 is set aside, while preserving the Revenue's right to proceed as per law.

Refund of unutilised input tax credit - zero-rated supply - input service distributor - eligibility to claim refund by recipient versus supplier - proviso to Rule 89(1) of the CGST Rules - interaction of Section 16(3) of the IGST Act and Section 54 of the CGST Act - bar by availing drawback or refund by supplier

Refund of unutilised input tax credit - zero-rated supply - input service distributor - eligibility to claim refund by recipient versus supplier - proviso to Rule 89(1) of the CGST Rules - interaction of Section 16(3) of the IGST Act and Section 54 of the CGST Act - Entitlement of the SEZ unit to refund of unutilised input tax credit distributed to it by the taxpayer's Head Office acting as an Input Service Distributor in respect of zero-rated supplies - HELD THAT: - The Court held that the petitioner's exports from its SEZ unit constitute zero-rated supply within the meaning of Section 16 read with Section 2(23) of the IGST Act and that the petitioner had availed input tax credit distributed by its Head Office functioning as an input service distributor. Section 54 of the CGST Act allows refund of unutilised input tax credit for zero-rated supplies made without payment of tax and such refund is complementary to Section 16(3)(a) of the IGST Act. The proviso which prevents refund where the supplier avails drawback or claims refund of integrated tax addresses the prevention of double benefit by the supplier; it does not operate to deny a legitimate refund entitlement of the exporter who has effected zero-rated supplies and has unutilised credit distributed to it by an ISD. The impugned appellate order relied on the second proviso to Rule 89(1) to restrict refund to the supplier; the Court found that reliance misplaced because Rule 89's proviso of itself is not a bar to the petitioner claiming refund of accumulated ITC where the statutory conditions for zero-rated refund under Section 16 and Section 54 are satisfied and where the disqualifying circumstance (supplier availing drawback or refund) does not exist. The Court therefore reversed the conclusion of the appellate authority that the recipient SEZ unit could not claim refund of such unutilised ITC and observed that the object of the refund scheme is to relieve exports of tax burden and not to frustrate legitimate claims. [Paras 44, 45, 46, 50, 51]

Writ allowed: petitioner entitled to refund of unutilised input tax credit in respect of zero-rated supplies received by its SEZ unit which had been allocated by its Head Office as an input service distributor; impugned appellate order set aside.

Final Conclusion: The writ petition was allowed: the High Court set aside the appellate order and held that the SEZ unit is entitled to refund of unutilised input tax credit (for the listed periods) distributed by the Head Office as an input service distributor in respect of zero-rated supplies, since the statutory disqualification (supplier availing drawback or claiming refund) did not apply.

Withdrawal of appeal - advance ruling - rectification of advance ruling - inherent power to permit withdrawal - opportunity of being heard - beneficial provision

Withdrawal of appeal - advance ruling - opportunity of being heard - inherent power to permit withdrawal - Permission to withdraw the appeal under Chapter XVII relating to Advance Ruling was allowed and no adjudication on the merits of the earlier AAR ruling was made. - HELD THAT: - The Appellate Authority considered the appellant's request to withdraw the appeal after being afforded an opportunity of hearing. Chapter XVII provides the statutory scheme for Advance Rulings and the appeal provision empowers the Appellate Authority to pass such order as it thinks fit after hearing the parties. There is no express prohibition in the Act against withdrawal of an appeal. Reliance was placed on the settled principle that procedural steps are permissible unless expressly prohibited, a principle recognised by the Supreme Court. Applying these principles and noting the appellant's expressed intention to pursue rectification under the Advance Ruling provisions, the Appellate Authority exercised its power to permit withdrawal of the appeal. Consequently, the Appellate Authority did not extend any ruling on the substantive question which was the subject matter of the original AAR. [Paras 7]

Appeal permitted to be withdrawn after hearing; no ruling on the merits is extended.

Final Conclusion: The Appellate Authority allowed the appellant to withdraw the appeal after being heard, observing that there is no statutory prohibition on withdrawal under the Advance Ruling provisions, and accordingly declined to pronounce any substantive ruling on the matter.

Input tax credit - plant and machinery - foundation and structural support - pipelines laid outside the factory premises (exclusion in Explanation to Section 17(5)) - works contract services - eligibility of ITC under Section 16/17 regime

Input tax credit - pipelines laid outside the factory premises (exclusion in Explanation to Section 17(5)) - plant and machinery - Input tax credit on goods and services for laying of transfer pipeline and its foundation/structural support - HELD THAT: - The Appellate Authority examined the appellant's contention that transfer pipelines from jetty to terminal form part of the factory precincts or plant and machinery and therefore attract ITC. The Authority held that the Explanation to Section 17(5) expressly excludes "pipelines laid outside the factory premises" from the definition of plant and machinery for the purposes of input tax credit, and that this exclusion applies irrespective of the pipeline's length or whether it is used for inward procurement. Consequently, borrowing definitions of "factory" from other statutes or reliance on precedents under different regimes (Central Excise/MODVAT) could not override the explicit statutory exclusion in the CGST framework. The Authority further noted that the right of way or lease arrangements for pipeline routing are procedural matters and do not alter the statutory exclusion. On this basis the Authority confirmed the Advance Ruling that ITC is not available on the transfer pipelines and on goods and services used for their foundations and structural support. [Paras 8, 12]

Input tax credit is not available in respect of the transfer pipelines laid outside the factory premises, and the foundations and structural support for such pipelines are also not eligible for ITC.

Plant and machinery - foundation and structural support - works contract services - input tax credit - Input tax credit on goods and services for pile foundation claimed as foundation/structural support for refrigerated storage tanks and fire water reservoirs - HELD THAT: - Members differed on whether the pile foundation, constructed to improve ground bearing capacity for heavy refrigerated storage and water tanks, falls within the "foundation and structural supports" included in the definition of plant and machinery for ITC. One Member concluded that pile foundations that directly transmit the load of the tanks to the ground qualify as foundation of plant and machinery and are thus eligible for ITC (relying on the National Building Code definition of foundation and on the functional role of piles in transmitting load). The other Member concluded that the pile foundation in this project is a civil measure to strengthen the project site soil and not the specific foundation by which apparatus is fixed to earth; accordingly, such piling is akin to "any other civil structure" excluded from the definition and not eligible for ITC. Because of this difference of opinion between Members, the Appellate Authority did not pronounce a ruling on this question under Section 101(3). [Paras 10, 11, 12]

No ruling offered due to difference of opinion between Members; the question of eligibility of ITC for pile foundation is left undecided for fresh consideration.

Final Conclusion: The appeal is dismissed insofar as it sought reversal of the Advance Ruling on input tax credit for transfer pipelines and their foundations (ITC denied). On the claim for ITC in respect of pile foundations for the storage and water tanks, no final ruling is recorded by this Appellate Authority because of a difference of opinion between Members; that question remains undecided.

Show cause notice - cancellation of GST registration - vagueness and lack of particulars in notice - right to fair opportunity to reply - requirement that a fresh notice contain necessary information and particulars

Show cause notice - vagueness and lack of particulars in notice - right to fair opportunity to reply - requirement that a fresh notice contain necessary information and particulars - Validity of the impugned show cause notice calling for cancellation of GST registration - HELD THAT: - The Court found the show cause notice dated 28.02.2022 to be deficient because it did not disclose material particulars or details on which the allegation of invalidity/cancellation of the earlier VAT/CST registration rested, rendering it too vague for the writ applicant to meaningfully respond. The absence of necessary information deprived the affected party of a fair opportunity to reply and to attend an effective personal hearing. Consequently, the impugned notice could not stand. The Court permitted the taxing authority, if it considered the registration not valid, to issue a fresh show cause notice in physical form which must contain all necessary information and particulars enabling an effective response and hearing. [Paras 4, 5]

The impugned show cause notice is quashed and set aside; the authority may issue a fresh physical show cause notice containing necessary particulars to enable effective response and hearing.

Final Conclusion: Rule made absolute; the show cause notice dated 28.02.2022 is quashed and set aside, subject to the authority's liberty to issue a fresh physical notice containing requisite particulars.

Reopening of assessment - reason to believe - fresh and tangible information - change of opinion - sanction under section 151 - CASS limited scrutiny

Reopening of assessment - reason to believe - fresh and tangible information - CASS limited scrutiny - Validity of issuance of notice under Section 148 for reopening assessment for Assessment Year 2016-2017 on the basis of information received after completion of the original assessment - HELD THAT: - The Court examined whether the Assessing Officer possessed fresh and specific information after the original assessment which could furnish a reason to believe that income had escaped assessment. The original assessment dated 25th December, 2018 was completed under CASS for a limited purpose and did not involve full adjudication of the derivative transactions. Subsequent information from the Income Tax Officer (I&C), Aurangabad (via the insight portal and DIT(I&CI) material) disclosed patterns of near-instant reversal trades and abnormal price movements indicating non-genuine losses claimed by the assessee. The Assessing Officer recorded reasons linking that information to the conclusion that the losses were sham and could have been used to reduce taxable income; those reasons were placed before and considered by the Joint Commissioner who granted sanction under section 151. Applying the settled test, the Court held that at the Section 148 stage what is required is prima facie material on which a reasonable person could form a belief, not conclusive proof. Here the Assessing Officer had tangible material of a kind unavailable at the time of the limited CASS scrutiny and applied his mind to form a belief; therefore reopening was not a mere change of opinion but based on newly available factual material. The Court accordingly refused to interfere with the issuance of notice and left merits to be examined in the reassessment proceedings. [Paras 53, 55, 62, 68, 69]

The notice under Section 148 for reopening the assessment was validly issued on the basis of fresh and tangible information; writ petition dismissed insofar as it challenged issuance of the notice.

Sanction under section 151 - change of opinion - Whether the sanction by the Joint Commissioner under Section 151 was a mechanical approval lacking application of mind - HELD THAT: - The Court considered the sanction order dated 31st March, 2021 and the material placed before the Joint Commissioner. The Joint Commissioner referred to the reasons recorded by the Assessing Officer and noted the details and quantum of undisclosed transactions, expressing satisfaction that it was a fit case for issuing notice under Section 148. The Court found that the sanctioning authority applied his mind to the material and did not merely record perfunctory approval. The earlier authorities relied upon by the petitioner where sanction was a one-line satisfaction were distinguished on facts. [Paras 38, 48, 66]

Sanction under Section 151 was accorded after application of mind and was not vitiated by mere mechanical approval.

Reopening of assessment - reason to believe - Whether the Court should exercise extraordinary writ jurisdiction to prohibit reassessment proceedings at the stage of Section 148 - HELD THAT: - Relying on Supreme Court and High Court precedents, the Court reiterated that at the Section 148 stage judicial interference is appropriate only if there is no prima facie material or there is demonstrable non-application of mind. Given the existence of subsequent credible information, the Assessing Officer's recorded reasons and the sanctioned approval, the Court concluded that it was not appropriate to pre-empt the enquiry. The assessee retains full opportunity to rebut the material during reassessment. [Paras 51, 54, 55, 68, 69]

Extraordinary writ relief to quash the reassessment notice is refused; the assessee may contest merits before the assessing authority.

Final Conclusion: Writ petition dismissed; the Court declined to interfere with the notice under Section 148 and with the sanction granted under Section 151, holding that reopening was based on fresh and tangible information and that the assessee will have opportunity to contest the merits in the reassessment proceedings.

Disputed questions of fact - allegations of fraud and forgery - writ jurisdiction - denial of fair hearing - reassessment under Section 147 read with faceless assessment framework - penalty proceedings for concealment under the Act - report of the Resolution Professional

Disputed questions of fact - allegations of fraud and forgery - writ jurisdiction - Maintainability of writ petition challenging reassessment, notice of demand and penalty orders. - HELD THAT: - The Court held that the petition raised contested factual matters and allegations of fraud and forgery which are unsuitable for adjudication in writ jurisdiction. The Master Data Record and the petitioner's own reply (asserting appointment as a 'fake manager') demonstrate factual disputes about the petitioner's role. In these circumstances the High Court declined to decide the substantive merits of the assessment and penalty proceedings in the writ petition, as such matters require adjudication in the appropriate fora where evidence and contested factual inquiry can be undertaken. [Paras 5, 6]

Writ petition not maintainable on merits in writ jurisdiction; proceedings impugned must be contested and adjudicated in the appropriate appellate or adjudicatory forums.

Report of the Resolution Professional - denial of fair hearing - Allegation that the Resolution Professional's report was relied upon without providing it to the petitioner or granting opportunity of hearing. - HELD THAT: - The Court noted that the petitioner did not demonstrate that he had sought production of the Resolution Professional's report filed before the NCLT. In absence of a showing that the petitioner asked for the report or was denied an opportunity to be heard before the authority that acted on the report, the High Court did not adjudicate the claim on the merits and instead left it open for the petitioner to raise before the appellate authority or other appropriate forums. [Paras 6]

Claim regarding non-supply of the Resolution Professional's report and denial of hearing not decided on merits; petitioner granted liberty to pursue these contentions before the appropriate authorities or courts.

Final Conclusion: Writ petition dismissed; petitioner's rights and contentions preserved with liberty to raise all defences and submissions before the Appellate Authority and other appropriate forums; decision confined to maintainability given existence of disputed factual and fraud-related issues.

Faceless assessment under the Faceless Assessment Scheme - Issuance of show cause notice and draft assessment order under Section 144B(1)(xvi)(b) of the Income tax Act - Violation of the principle of natural justice - Maintainability of writ petition despite availability of appellate remedy where natural justice is violated - Remand to Assessing Officer for issuance of show cause notice, draft assessment order and passing of a reasoned order

Issuance of show cause notice and draft assessment order under Section 144B(1)(xvi)(b) of the Income tax Act - Faceless assessment under the Faceless Assessment Scheme - Whether the faceless assessment complied with the mandatory procedure of issuing a draft assessment order and a show cause notice before passing the final assessment order. - HELD THAT: - The Court held that the faceless assessment process must follow the statutory procedure prescribed under the Faceless Assessment Scheme and Section 144B. Section 144B(1)(xvi)(b) mandatorily requires that where a proposed variation prejudicial to the assessee is envisaged, the National Faceless Assessment Centre must serve a notice calling upon the assessee to show cause and examine the draft assessment order before finalizing the assessment. In the present case no draft assessment order or show cause notice was issued prior to the final order dated 23rd March, 2022; accordingly the statutory procedure was not followed and the assessment could not stand. [Paras 4, 5, 6]

The impugned assessment order is set aside for non compliance with the mandatory procedure; the matter is remanded for compliance.

Violation of the principle of natural justice - Maintainability of writ petition despite availability of appellate remedy where natural justice is violated - Whether absence of the show cause notice and draft order amounted to a breach of natural justice and whether that breach permitted entertaining the writ petition notwithstanding an alternative appellate remedy. - HELD THAT: - The Court found that failure to issue a show cause notice and draft assessment order resulted in denial of a reasonable opportunity of hearing and therefore violated the principle of natural justice. Relying on settled law, the Court held that where there is such a violation of natural justice, the existence of an alternative effective appellate remedy does not bar the maintainability of a writ petition seeking redress for that violation. Consequently the challenge to the assessment order was maintainable. [Paras 6, 7]

The writ petition is maintainable despite the availability of an appellate remedy because of the breach of natural justice; relief is granted on that ground.

Remand to Assessing Officer for issuance of show cause notice, draft assessment order and passing of a reasoned order - What remedial directions should follow upon finding the procedure and natural justice violations. - HELD THAT: - Having set aside the impugned assessment, demand and penalty notices dated 23rd March, 2022, the Court directed that the matter be remanded to the Assessing Officer. The Assessing Officer is to issue a show cause notice and a draft assessment order to the petitioner and thereafter pass a reasoned order in accordance with law, thereby ensuring compliance with the Faceless Assessment Scheme and the requirements of natural justice. The Court expressly refrained from adjudicating the merits of the underlying tax dispute and left all substantive rights and contentions open. [Paras 8, 9]

The assessment order, demand notice and penalty notice are set aside and the matter is remanded to the Assessing Officer with directions to issue the show cause notice and draft order and then pass a reasoned order.

Final Conclusion: The faceless assessment order, demand notice and penalty notice dated 23rd March, 2022 for Assessment Year 2015 16 are set aside for failure to issue the mandatory draft assessment order and show cause notice and for breach of natural justice; the matter is remanded to the Assessing Officer to issue the required show cause notice and draft assessment order and thereafter pass a reasoned order, with the Court leaving the merits open.

Deduction under Section 80IA(4)(iii) of the Income-tax Act - Industrial Park Scheme, 2002 compliance - Duty of the Tribunal as final fact-finding authority to record reasons - Obligation to follow directions of the High Court - Remand to Assessing Officer versus adjudication by the Tribunal

Deduction under Section 80IA(4)(iii) of the Income-tax Act - Industrial Park Scheme, 2002 compliance - Duty of the Tribunal as final fact-finding authority to record reasons - Whether the Tribunal complied with this Court's directions by recording findings on compliance with the Industrial Park Scheme, 2002 and on entitlement to deduction under Section 80IA(4)(iii) instead of remanding the matter to the Assessing Officer. - HELD THAT: - The Court observed that in its earlier order disposing ITA No.3/2015 it had directed the Tribunal to decide afresh and to record a finding whether the assessee complied with the conditions in the Industrial Park Scheme, 2002 and thus whether the assessee was eligible for deduction under Section 80IA(4)(iii). The coordinate Bench found that the Tribunal, as the final fact-finding authority vested with co-extensive powers, failed to fulfil that obligation and instead remanded the matter to the Assessing Officer without recording the requisite reasons or findings. Such remand in the face of specific directions was held to be inconsistent with the duty of the Tribunal to record determinate findings and amounted to non-compliance with the High Court's directions; remanding to the Assessing Officer would perpetuate further rounds of litigation and cause harassment to the parties. The Court therefore concluded that the Tribunal's approach could not be approved and that the Tribunal should have complied with the earlier directions in letter and spirit. [Paras 7, 8]

The Tribunal's remand to the Assessing Officer was set aside for non-compliance with this Court's earlier direction that the Tribunal itself record findings on compliance with the Industrial Park Scheme and entitlement to deduction under Section 80IA(4)(iii).

Obligation to follow directions of the High Court - Remand to Assessing Officer versus adjudication by the Tribunal - Disposition of the appeal and the further course to be followed by the Tribunal in light of the Court's earlier directions. - HELD THAT: - The Court exercised its supervisory jurisdiction to set aside the Tribunal's order dated 10.08.2021 and remanded the matter back to the Tribunal with a clear mandate to consider and comply with the directions issued by this Court in ITA No.3/2015 dated 09.11.2020 in letter and spirit. The remand is specifically to the Tribunal (not to the Assessing Officer) to perform the adjudicatory function directed earlier, and to do so expeditiously and in accordance with law. All rights and contentions of the parties were left open for determination by the Tribunal on compliance with the directions. [Paras 9]

Order dated 10.08.2021 of the Tribunal is set aside and the matter is remanded to the Tribunal to consider and comply with this Court's directions dated 09.11.2020; rights and contentions of the parties remain open.

Final Conclusion: The order of the Income Tax Appellate Tribunal dated 10.08.2021 in ITA No.923/Bang/2013 (AY 2008-09) is set aside; the matter is remanded to the Tribunal to consider and comply in letter and spirit with this Court's directions dated 09.11.2020 regarding recording of findings on compliance with the Industrial Park Scheme, 2002 and entitlement to deduction under Section 80IA(4)(iii), to be done expeditiously, with all rights and contentions left open.

Computation of book profits under Section 115JB - Explanation 1(f) to Section 115JB(2) - disallowance under Section 14A - rectification under Section 154 (mistake apparent on the record) - miscellaneous petition under Section 254(2) - Chapter XII-B as a complete code

Computation of book profits under Section 115JB - Explanation 1(f) to Section 115JB(2) - disallowance under Section 14A - Chapter XII-B as a complete code - Whether disallowance under Section 14A is to be taken into account while computing book profits under Section 115JB by application of Explanation 1(f) to Section 115JB(2). - HELD THAT: - The Court held that Section 115JB (Chapter XII-B) constitutes a self-contained code prescribing the mode of computation of book profits. Explanation 1(f) does not operate so as to import disallowances made under Section 14A (which relate to computation under the normal provisions) into the MAT/book-profit computation under Section 115JB. The Tribunal's reliance on the Special Bench decision in ACIT v. Vireet Investment Pvt. Ltd. was treated as binding on this point, and the coordinate decisions of this Court interpreting clause (f) and rejecting the inclusion of Section 14A disallowances in book profits were followed. Accordingly, additions computed under Section 14A cannot be read into the computation of book profits under Section 115JB. [Paras 6, 8, 9, 10, 12]

Disallowance under Section 14A is not to be added while computing book profits under Section 115JB; Explanation 1(f) does not compel inclusion of Section 14A disallowances in book profits.

Rectification under Section 154 (mistake apparent on the record) - miscellaneous petition under Section 254(2) - Whether Section 154 could be invoked to amend assessment to incorporate additions relating to exempt-income expenditure and whether the Tribunal erred in dismissing the Miscellaneous Petition under Section 254(2). - HELD THAT: - The Court reiterated that Section 154 permits rectification only of mistakes apparent on the face of the record and cannot be used where the matter raises debatable issues requiring adjudication. Invoking Section 154 to make additions that were not mistakes apparent on record was held untenable. The Tribunal properly dismissed the miscellaneous petition under Section 254(2) because the matter concerned a substantive, debatable question on the scope of Explanation 1(f) and the applicability of Section 14A to MAT computation; the Special Bench precedent and coordinate High Court decisions support that conclusion. [Paras 6, 11, 12]

Section 154 could not be invoked to alter the assessment on the contested issue; the Tribunal did not err in dismissing the Miscellaneous Petition under Section 254(2).

Final Conclusion: Substantial questions raised by the revenue were answered against it: Section 14A disallowances are not to be included in book profits under Section 115JB by virtue of Explanation 1(f), and Section 154 could not be used to amend the assessment on this debatable issue; accordingly the revenue's appeal is dismissed.

Entitlement of cooperative credit societies to deduction under section 80P - eligibility for deduction under section 80P(2)(a)(i) - treatment of section 80P(4) proviso excluding co-operative banks - filing of statutory appeal before the appellate authority as remedy against assessment - entertainment of statutory appeal without raising limitation - application of binding and relevant Supreme Court precedent in appellate adjudication

Filing of statutory appeal before the appellate authority as remedy against assessment - filing of writ petition under Article 226 in place of statutory remedy - Leave to file statutory appeal was granted and the writ relief was not sustained; the impugned order was modified to permit statutory appeal. - HELD THAT: - The Court noted that the respondent had obtained a writ in place of the statutory remedy against the assessment order. Rather than dismissing the matter on maintainability grounds, the Court permitted the respondent to file a statutory appeal before the appellate authority within four weeks from receipt of this judgment. The Court directed that on filing the statutory appeal the appellate authority shall entertain it; the procedural irregularity of approaching the writ forum was remedied by allowing the statutory route to be invoked afresh. This constituted modification of the order impugned in the writ petition and preserved the respondent's right to challenge the assessment through the prescribed appellate mechanism. [Paras 8]

Respondent granted four weeks to file statutory appeal; impugned writ order modified to permit filing and prosecution of the statutory appeal.

Entitlement of cooperative credit societies to deduction under section 80P - eligibility for deduction under section 80P(2)(a)(i) - application of binding and relevant Supreme Court precedent in appellate adjudication - entertainment of statutory appeal without raising limitation - The appellate authority was directed to consider the respondent's claims on merits including eligibility under section 80P, to take note of the Supreme Court decision relied upon by the respondent, and to do so without raising limitation as a bar to entertain the appeal. - HELD THAT: - Having referred to the Division Bench decision of this Court and the subsequent proceedings in the Supreme Court (including the later Supreme Court decision relied upon), the High Court directed that the appellate authority, upon receipt of the statutory appeal, shall entertain it without objection on limitation and decide the matter on merits in accordance with law. The Court specifically instructed the appellate authority to consider the respondent's entitlement under section 80P(2)(a)(i) and the implications of the Supreme Court decision cited by the respondent while adjudicating the appeal. The direction effectively remanded the substantive controversy to the appellate authority for fresh consideration on merits, in light of the relevant precedent. [Paras 7, 8]

Appellate authority to hear the statutory appeal on merits, including the question of eligibility under section 80P, and to do so without raising limitation, taking into account the Supreme Court precedent.

Final Conclusion: Writ appeal disposed by modifying the order under challenge: respondent granted four weeks to file statutory appeal which the appellate authority shall entertain and decide on merits (including eligibility under section 80P) without raising limitation, having regard to the Supreme Court precedent; no costs.

Jurisdictional notice - invalidity of proceedings for want of a valid notice - legal representative - distinction between clause (a) and clause (b) of section 159(2) - curative effect of section 292B - waiver / submission to jurisdiction

Jurisdictional notice - Section 148 notice - legal representative - waiver / submission to jurisdiction - curative effect of section 292B - invalidity of proceedings for want of a valid notice - Validity and maintainability of proceedings initiated under a notice issued under Section 148 (and consequential proceedings under Section 142(1)) when the notice was addressed to a person who had died before issuance and the legal representative objected without submitting to jurisdiction. - HELD THAT: - The Court examined whether a notice under Section 148 issued to a deceased person can sustain reassessment proceedings where the deceased had died prior to issuance and the legal representative did not participate by filing a return but instead objected to the proceedings. The Court applied the statutory scheme that makes the legal representative a deemed assessee for the purposes of the Act and drew a mandatory distinction between section 159(2)(a) (proceedings already initiated before death deemed to be taken against legal representative) and section 159(2)(b) (proceedings which could have been taken if the person had survived may be taken against the legal representative). A reopening under Section 147 is triggered by a valid jurisdictional notice under Section 148; where Section 148 was issued after the death to the deceased, clause (a) is inapplicable and clause (b) requires that a fresh, valid notice be issued to the legal representative. The Court held that issuance of the Section 148 notice to the dead person is not in conformity with the intent and purpose of the Act and is therefore invalid in the absence of waiver by the legal representative. The curative provision in Section 292B cannot be invoked to cure such invalidity where the legal representative has expressly objected and has not submitted to the jurisdiction by filing a return; decisions permitting curing by waiver were distinguished on the factual basis that the legal representative there had participated or filed returns and thereby waived objections. Consequently, continuation of proceedings pursuant to the invalid notice is without jurisdiction and the Assessing Officer may issue a fresh notice to the legal representative if not barred by limitation. [Paras 15, 16, 17, 18, 19]

The notices issued to the deceased and consequential proceedings are invalid; the Assessing Officer has no jurisdiction to proceed on the basis of those notices and they are quashed, leaving the department free to issue a fresh notice to the legal representative if permissible by limitation.

Final Conclusion: Writ allowed; impugned notices issued to the deceased and all consequential proceedings are quashed and set aside for want of a valid jurisdictional notice, the Assessing Officer having no authority to proceed thereon.

Faceless assessment procedure - Violation of mandatory procedure under Section 144B - Right to show cause notice and draft assessment order - Principles of natural justice - Non est (assessment rendered non est) - Remand for fresh consideration

Violation of mandatory procedure under Section 144B - Right to show cause notice and draft assessment order - Principles of natural justice - Non est (assessment rendered non est) - Validity of the assessment order dated 07.04.2021 in view of non compliance with the procedure mandated by Section 144B - HELD THAT: - The Court examined Section 144B and the faceless assessment framework introduced to ensure transparency and to protect the assessee's right to be heard. Where the draft assessment proposes a variation prejudicial to the assessee, the scheme mandates service of a show cause notice along with the draft assessment order so that the assessee may respond. The record does not disclose service of any such show cause notice or draft assessment order upon the writ applicant, whereas the final order contains variations adverse to the return. Failure to follow the statutorily prescribed faceless procedure and to afford the opportunity contemplated by Section 144B amounts to breach of the principles of natural justice. The Court accepted that the scheme, as amended and applicable after 1 April 2021, is mandatory and that non observance renders the assessment non est. Relying on the statutory text and prior authority of this Court, the impugned assessment was held invalid for want of compliance with the mandatory steps of Section 144B and for denial of an opportunity to show cause. [Paras 8, 9, 10]

Impugned assessment order dated 07.04.2021 is invalid and non est for non compliance with Section 144B and for denial of the statutorily mandated opportunity to be heard; the assessment and consequential demand notice are quashed and set aside.

Remand for fresh consideration - Faceless assessment procedure - Relief and further course of action after quashing the assessment - HELD THAT: - Having quashed the assessment for failure to follow the procedure in Section 144B, the Court remitted the matter to the Assessing Officer for further proceedings beginning from the stage of issuance of the draft assessment order along with the show cause notice. The Assessing Officer is directed to comply with the procedure prescribed by Section 144B, including serving the draft assessment order and show cause notice, and thereafter proceed in accordance with law. [Paras 11]

Matter remitted to the Assessing Officer to proceed from the stage of issuance of draft assessment order along with show cause notice in conformity with Section 144B; consequential demand notice set aside.

Final Conclusion: Writ petition allowed: the assessment order dated 07.04.2021 and the consequential demand notice are quashed for failure to comply with the mandatory faceless assessment procedure under Section 144B; the matter is remitted to the Assessing Officer to proceed from the stage of issuance of the draft assessment order and show cause notice in accordance with law.

Reopening of assessment - reason to believe - mere change of opinion - reassessment under section 147 read with section 148 - deduction under section 54F - presumption of application of mind in assessment under section 143(3)

Reopening of assessment - reason to believe - mere change of opinion - presumption of application of mind in assessment under section 143(3) - Validity of reopening the completed assessment for AY 2013-14 under section 148/147. - HELD THAT: - The Tribunal found that during the original scrutiny assessment under section 143(3) the Assessing Officer had called for and examined property-related documents, balance sheet and other material, and had applied his mind before concluding the assessment. No new material or information surfaced subsequently to furnish a fresh foundation for a 'reason to believe' that income had escaped assessment. Relying on the principle that a regular assessment under section 143(3) attracts a presumption of application of mind (as explained in Kelvinator and related authorities), the Tribunal held that mere re-appraisal of the same materials by the AO, amounting to a change of opinion, cannot constitute the requisite reason to believe to reopen assessment under section 147. The decision of the Supreme Court in Ess Ess Kay was distinguished on the ground that, unlike that case, no fresh materials emerged during assessment of a subsequent year. Having concluded that the AO had no new information on which to form a reason to believe, the reopening lacked jurisdictional foundation and was therefore invalid.

Reopening of the assessment for AY 2013-14 was held to be invalid as a mere change of opinion; reassessment set aside.

Final Conclusion: The appeal is allowed: the reassessment initiated by reopening the assessment for AY 2013-14 is quashed as based on mere change of opinion; consequential merits issues were left undecided as academic.

Depreciation on computer software - classification of software as tangible asset versus intangible asset - interpretation of New Appendix I - specific entry 'computers including computer software' vis-a -vis general entry for licenses/intangible assets - applicability of 60% depreciation rate to software recorded as 'computer software' - application software license treated as computer software for depreciation where Note 7 applies

Depreciation on computer software - classification of software as tangible asset versus intangible asset - applicability of 60% depreciation rate to software recorded as 'computer software' - interpretation of New Appendix I - specific entry 'computers including computer software' vis-a -vis general entry for licenses/intangible assets - Depreciation at 60% was allowable on the ERP SAP software license claimed by the assessee rather than being restricted to 25% as an intangible asset license. - HELD THAT: - The Tribunal examined New Appendix I to Rule 5 and observed that Entry 5 of Part A expressly grants 60% depreciation to 'computers including computer software' and Note 7 defines 'computer software' as any computer programme recorded on a storage device. The Tribunal held that this specific entry must be given effect to rather than subsuming such software under the more general Part B entry for licenses and other intangible rights attracting 25% depreciation. Reliance was placed on the Madras High Court decision in Computer Age Management Services (P.) Ltd., which held that application software licences can fall within Entry 5 and be eligible for 60% depreciation; the Tribunal respectfully followed that precedent. Applying that principle to the assessee's acquisition of ERP SAP licences, the Tribunal concluded the licences qualified as 'computer software' under Note 7 and were therefore assessable at the 60% rate under Part A rather than as intangible assets under Part B. [Paras 8, 9, 10]

The Assessing Officer was directed to delete the disallowance of depreciation and the appeal was allowed; depreciation on the ERP SAP software licence is allowable at 60%.

Final Conclusion: Following the interpretation of New Appendix I and the Madras High Court precedent, the Tribunal allowed the appeal and held the ERP SAP software licence eligible for depreciation at 60%, directing deletion of the disallowance.

Reliance on documents seized from third party premises - Requirement of independent corroboration before making additions against a third party - Admissibility of electronic evidence and requirement of certificate under Section 65B - Weight of statements recorded under section 132(4) and evidentiary value of statements under section 131 - Municipal rateable value as yardstick for annual letting value

Reliance on documents seized from third party premises - Requirement of independent corroboration before making additions against a third party - Weight of statements recorded under section 132(4) and evidentiary value of statements under section 131 - Addition of undisclosed cash receipts in the hands of the assessee based on documents and data seized from premises of Dalmia Group - HELD THAT: - The Tribunal upheld the conclusion of the Ld. CIT(A) that the Assessing Officer could not sustain the addition in the assessee's hands solely on the basis of seized material recovered from third parties. The record shows the assessee consistently denied any transactions with the Dalmias, including statements recorded under section 131 and an affidavit before the CIT(A), and those denials were not disproved by the AO. The seized data was maintained and recorded by employees distinct from those allegedly instructing the transactions, the MOUs relied upon were draft, unsigned and undated, and there was no contemporaneous documentary link in the assessee's own books (purchase, sale, dividend receipts or shareholdings) to corroborate the seized entries. The Tribunal emphasised that where additions are sought to be made against a third party based on third party seized material, the AO must undertake independent enquiries and produce corroborative evidence linking the seized entries to the assessee; mere reliance on third party notings and statements, or on the AO's inferences and presumptions, is inadequate. The Tribunal further noted that statements recorded under section 132(4) and section 131 have evidentiary value but cannot substitute for absence of direct or corroborative evidence against the assessee. Applying these principles to the seized pen drive and papers, the Tribunal found the AO did not carry out requisite corroboration and thus concluded the CIT(A)'s deletion of the addition was justified. [Paras 21, 22, 23, 25, 26]

Addition made by the AO on the basis of seized documents/pen drive from third parties is deleted and the appeal of the revenue is dismissed for the years under consideration.

Admissibility of electronic evidence and requirement of certificate under Section 65B - Admissibility of data retrieved from the seized pen drive relied upon by the Department - HELD THAT: - The Tribunal noted the applicability of the Supreme Court's decision on Section 65B requiring a certificate as a condition precedent to the admissibility of electronic records. The AO relied on data from a pen drive without producing the requisite certificate under Section 65B(4), and the Dalmias disputed ownership and authenticity of the pen drive contents before the Settlement Commission. In these circumstances the Tribunal observed the electronic data could not be treated as sufficiently admissible or reliable to establish the assessee's receipt of cash absent the mandatory certificate and independent corroboration. [Paras 19, 24, 25]

Pen drive data relied upon by the Department was not treated as admissible or sufficiently corroborative in the absence of the Section 65B certificate and independent enquiry; this supported upholding the CIT(A)'s deletion.

Municipal rateable value as yardstick for annual letting value - Determination of annual letting value of certain vacant flats owned by the assessee - HELD THAT: - The Tribunal accepted the assessee's submissions and the consistent findings in earlier assessment years and coordinate bench decisions that municipal rateable value is the appropriate yardstick for determining annual letting value in the facts of this case. The CIT(A) directed the AO to determine annual ratable value as per the method previously applied by the ITAT in earlier years of the assessee, and Revenue did not press the contrary position before the Tribunal. [Paras 27, 29, 31]

Ground raised by the revenue is dismissed and the CIT(A)'s direction to determine annual ratable value as per earlier ITAT methodology is confirmed.

Final Conclusion: The Tribunal dismissed the revenue appeals: the additions made by the Assessing Officer based on seized documents/pen drive from third parties were deleted for A.Y. 2008 09, 2009 10, 2010 11 and 2011 12 for lack of independent corroboration and admissible electronic proof; the challenge to the municipal ratable value-based annual letting value was also dismissed.

Validity of notice issued under Section 153A where notice does not specify seized or incriminating material - Incriminating material in search proceedings - role of statements recorded under Section 132(4) - Reliance on statements of persons searched or third parties - requirement of corroboration - Ad hoc disallowance of business expenses and requirement of basis for deduction adjustments - Application of seized material limited to the person whose premises were searched

Validity of notice issued under Section 153A where notice does not specify seized or incriminating material - Assessment under section 143(3) r.w.s. 153A held invalid because the notice under Section 153A did not state the incriminating/seized material on which reassessment was premised. - HELD THAT: - The Tribunal followed the reasoning in Underwater Services Co. Ltd. that a notice under Section 153A must indicate the basis (the seized material under Sections 132/132A) so that the assessee can identify what return to file and effectively meet the case. The notice in the present case was silent as to the incriminating material seized and therefore did not enable the assessee to appreciate the basis for reassessment. In those circumstances the assessment framed under 143(3) r.w.s. 153A was held to be bad in law and quashed. [Paras 16, 17]

Notice under Section 153A lacking particulars of seized/incriminating material is invalid; assessment under 143(3) r.w.s. 153A quashed.

Incriminating material in search proceedings - role of statements recorded under Section 132(4) - Reliance on statements of persons searched or third parties - requirement of corroboration - Statements recorded under Section 132(4) alone do not necessarily constitute incriminating material to sustain additions in proceedings under Section 153A; such statements require corroboration. - HELD THAT: - Relying on the decision in CIT v. Late Raj Pal Bhatia, the Tribunal accepted that statements created during search (recorded under Section 132(4)) are not ipso facto 'seized documents' and cannot, without corroboration or connection to seized material, form the sole basis for additions. In the present case the Assessing Officer primarily relied on statements of contractors/related persons; the Tribunal found that reliance solely on such statements without corroborative documentary evidence was insufficient to sustain additions. [Paras 18, 19]

Statements recorded during search cannot, without corroboration, be treated as incriminating material to justify additions under 153A.

Burden on assessee to prove genuineness of expenses - Ad hoc disallowance of business expenses and requirement of basis for deduction adjustments - Addition of labour contractor payments was deleted; CIT(A)'s deletion on merits was upheld by the Tribunal. - HELD THAT: - The Assessing Officer disallowed payments to four labour contractors relying on investigation findings and statements suggesting accommodation entries. The CIT(A) examined the statements and documentary records produced by the assessee (ledgers, TDS certificates, returns of the contractors, affidavits of persons actually running the concerns, biometric attendance) and found that the contractors admitted supplying labour and had filed returns; absence of written contracts or non attendance at factory premises was explained by delegation to family members. The Tribunal found that the AO's additions were premised on presumptions and surmises without concrete evidence and accordingly confirmed the deletion made by the CIT(A). [Paras 23, 24]

Addition in respect of labour contractor payments deleted; revenue's ground dismissed.

Ad hoc disallowance of business expenses and requirement of basis for deduction adjustments - Ad hoc disallowance of credit card expenses was not sustained; Tribunal directed AO to allow the claimed expenses in full. - HELD THAT: - The AO made an ad hoc disallowance of credit card incurred expenses without detailed verification. The Tribunal observed that adhoc disallowances cannot be made absent a factual basis, and that credit cards may be issued to directors/employees for business payments. Relying on authorities against adhoc adjustments, the Tribunal directed the AO to allow the total expenses claimed by the assessee. [Paras 25]

Ad hoc 10% disallowance of credit card expenses deleted; entire credit card expenses to be allowed.

Application of seized material limited to the person whose premises were searched - Reliance on statements of persons searched or third parties - requirement of corroboration - Additions made in respect of alleged cash receipts on sale of looms (and related brokerage) were deleted; AO could not rely on statements/documents seized from other group entities without nexus to the assessee. - HELD THAT: - The AO based the addition on investigation findings and a statement of an employee of a related group company (D'Decor Home Fabrics) that pertained to receipts in that other entity. The CIT(A) and the Tribunal found no incriminating material seized from the assessee's premises nor any direct connection showing the assessee received cash on loom sales. The Tribunal held that findings or seized documents in respect of another group company cannot be transposed to the assessee without corroborative nexus and accordingly upheld deletion of the addition and the consequential brokerage addition. [Paras 26]

Additions relating to alleged cash receipt on sale of looms and related brokerage deleted; revenue's grounds dismissed.

Final Conclusion: The Tribunal quashed the reassessments framed under Section 143(3) r.w.s. 153A for want of a notice specifying the seized/incriminating material, and on merits upheld the deletion of additions/disallowances made by the AO - deleting the labour contractor payment addition, deleting the loom sale and brokerage additions, and directing that ad hoc disallowance of credit card expenses be withdrawn; appeals in all other assessment years were disposed of mutatis mutandis in the same manner.

Salary received in advance - Compensation on termination of employment - Relief under section 89(1) - Rule 21A of the Income-tax Rules, 1962 - Profits in lieu of salary under Section 17(3) - Substance over form in characterisation of receipts

Salary received in advance - Compensation on termination of employment - Relief under section 89(1) - Rule 21A of the Income-tax Rules, 1962 - Profits in lieu of salary under Section 17(3) - Substance over form in characterisation of receipts - Characterisation of the one time lump sum ex gratia payment - whether it is salary received in advance or compensation on termination of employment, and the consequent mode of computation of relief under section 89(1) (sub rule (2) or sub rule (4) of Rule 21A). - HELD THAT: - The Tribunal examined the contractual matrix, the Labour Commissioner's order, supplementary agreement dated 25/11/2016, the company's computation and Form 16, and the fact that the company treated the payment as salary in advance and deducted TDS. Although the textile unit closed in 2008 and services had effectively terminated, the substance of the arrangement - including the agreed computation of future dues as remuneration until age 63, the company's contemporaneous classification and tax treatment, and the agreements providing for payment as part of what the worker would have earned - points to the payment being salary in advance rather than compensation for loss of employment. The Tribunal applied the principle of substance over form and relied on the reasoning in V.D. Talwar (as discussed in the order) which treats such payments, where they represent remuneration due under the contract (or in lieu of notice/future salary), as part of salary. On that basis the Tribunal held that the claim for relief under section 89(1) is to be computed in accordance with the rule applicable to salary received in advance (sub rule (2) of Rule 21A) and not under the provision for compensation on termination (sub rule (4)). The Tribunal therefore directed recomputation and allowance of the assessee's relief under section 89 read with Rule 21A accordingly. [Paras 16, 17, 18, 19, 20]

The lump sum ex gratia payment is to be treated as salary received in advance and relief under section 89(1) is to be computed as per Rule 21A(2); the Assessing Officer is directed to allow the assessee's claim accordingly.

Final Conclusion: Appeal allowed; payment characterised as salary received in advance and relief under section 89(1) to be recomputed and allowed in accordance with Rule 21A(2) for A.Y.2017-18.

Reopening of assessment on information and failure to explain - unexplained cash credits under section 68 - burden to prove identity, genuineness and creditworthiness of creditors - no obligation to prove source of source - alternative addition under section 56 as income from other sources - taxability of interest income below taxable limit

Reopening of assessment on information and failure to explain - Validity of reopening assessment under section 147/148 - HELD THAT: - The Assessing Officer reopened assessment after receiving AIR information of substantial cash deposits and after giving the assessee an opportunity to explain; the assessee did not file a return and failed to cooperate. The Tribunal held that the information coupled with non-compliance raised a reasonable doubt that income chargeable to tax had escaped assessment and, on the totality of facts and precedents cited, the reopening was justified and initiated after due process. [Paras 7, 8]

Reopening of assessment upheld.

Unexplained cash credits under section 68 - burden to prove identity, genuineness and creditworthiness of creditors - no obligation to prove source of source - Whether cash deposits in assessee's bank account could be treated as unexplained cash credits under section 68 - HELD THAT: - The assessee produced confirmations from donors, identity proofs (Aadhar), evidence of donors' landholdings and sample sale bills, and explained the purpose for deposits (funds for higher studies). The Revenue did not produce cogent material to rebut the existence, identity or creditworthiness of the donors. Applying the settled principle that once identity, genuineness and creditworthiness of the creditors are established the assessee is not required to prove the 'source of source', the Tribunal found that the initial burden under section 68 was discharged and that the CIT(A) erred in sustaining the addition. [Paras 9, 10]

Addition under section 68 deleted; Ground No. 3 allowed.

Alternative addition under section 56 as income from other sources - Validity of making an alternative addition under section 56 where section 68 addition was sustained by lower authority - HELD THAT: - Having held that the source of the deposits was satisfactorily explained and that section 68 addition could not be sustained, the Tribunal held that taxing the same receipts as 'Income from Other Sources' under section 56 in the alternative was not permissible. Once the primary contention on section 68 succeeded, the alternative treatment could not be imposed. [Paras 11, 12]

Alternative addition under section 56 deleted; Grounds Nos. 4 and 5 allowed.

Taxability of interest income below taxable limit - Taxability of interest income credited to the bank account - HELD THAT: - Since the principal deposits were held to be non-taxable in the hands of the assessee and the interest amount was small and falls below the taxable threshold on standalone basis, the Tribunal found no justification to sustain the addition of interest income made by the Assessing Officer. [Paras 13, 14]

Addition of interest income deleted; Ground No. 6 allowed.

Final Conclusion: The appeal is partly allowed: the reopening of assessment was sustained, but the additions of cash deposits under section 68, the alternative addition under section 56, and the addition of interest income were set aside.

Classification of capital gains on surrender of rights - determinative effect of written agreement and payments on ownership - representative capacity of individuals vis-a -vis closely held company - rectification under section 154 rendered infructuous by quashal of block assessment - deletion of penalty under section 271(1)(c) consequent to reclassification of income

Classification of capital gains on surrender of rights - determinative effect of written agreement and payments on ownership - representative capacity of individuals vis-a -vis closely held company - Whether the surplus realised on surrender of rights to purchase Flat Nos. 601 and 602 is taxable as long-term capital gain or short-term capital gain. - HELD THAT: - The Tribunal found that the assessee entered into stamped purchase agreements dated 10.07.1997 for the flats and made substantial payments thereunder (both directly and through third parties on its behalf) prior to the search. Documents recovered during search that recorded names of individual directors in the developers' internal papers were held to reflect the developers' practice of using representatives' names and did not displace the written agreements. The Tribunal accepted the assessee's explanation that certain payments were made by related parties on its behalf and were accounted for in the company's books; the existence of the executed agreements and substantial payments by the assessee were determinative of ownership of the rights. Accordingly, the period of holding was measured from the agreement date in 1997 and the gain on cancellation/surrender was held to be long-term in nature. [Paras 9, 10]

The surplus on surrender of rights is long-term capital gain; the assessee's grounds are allowed.

Rectification under section 154 rendered infructuous by quashal of block assessment - Whether the rectification application under section 154 (seeking adjustment in computation of capital gains by reference to a quashed block assessment) required adjudication following the ITAT's quashal of the block assessment. - HELD THAT: - The Tribunal noted that the underlying block assessment under section 158BD, which formed the basis for the rectification claim, had itself been quashed by the ITAT. As the block assessment outcome that purportedly affected the rectification claim no longer subsisted, the appeal against the rejection of the rectification application became infructuous. No substantive adjudication on the section 154 merits was necessary in view of the quashal. [Paras 12, 13]

The appeal against rejection of rectification is dismissed as infructuous.

Deletion of penalty under section 271(1)(c) consequent to reclassification of income - Whether the Commissioner (Appeals) erred in deleting penalty under section 271(1)(c) imposed after unearthing documents in search which led to addition for short-term capital gains. - HELD THAT: - The Tribunal observed that its decision to classify the compensation as long-term capital gain (for the reasons recorded above) directly affected the correctness of the quantum on which penalty was levied. Since the Tribunal allowed the assessee's appeal on classification and treated the addition as unsustainable, the appellate deletion of penalty was upheld. The Revenue's contention that the penalty should stand because the addition arose from search records was not sustained in view of the Tribunal's factual and legal findings on ownership and the nature of the gain. [Paras 16]

The deletion of penalty under section 271(1)(c) is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeal holding the gain on surrender of rights as long-term capital gain, treated the rectification appeal as infructuous given the quashal of the block assessment, and upheld deletion of the penalty; the assessee's appeals succeed and the Revenue's appeal fails.

Release of auctioned goods - regulatory clearance and No Objection Certificate (NOC) for auctioned consignments - estoppel against raising regulatory objections after auction - prohibition on withdrawal of lots after conclusion of sale

Release of auctioned goods - regulatory clearance and No Objection Certificate (NOC) for auctioned consignments - estoppel against raising regulatory objections after auction - Whether the authority could withhold release of items sold in an e-auction on the ground that BIS certification was required or that items were liable for destruction. - HELD THAT: - The Court examined the disposal procedure in Circular No. 49/2018 - Customs and the Disposal Manual, finding that consignments taken up for auction are either those not requiring regulatory clearances or those for which the required clearances/chemical analysis reports have been obtained and NOC issued by Customs. Once consignments are put to auction, customs and custodians are estopped from later asserting that regulatory clearances (such as BIS) or chemical analysis are required as a ground to withhold release. In the present case the petitioner complied with auction formalities, payments were accepted and delivery orders issued; subsequent objections that certain items required BIS certification or were liable to destruction were therefore held to be frivolous and contrary to the prescribed procedure and thus set aside. [Paras 8, 10, 13]

Objections based on absence of BIS certificate or on purported destruction orders were quashed and the authorities directed to release the balance items of the auctioned lots.

Prohibition on withdrawal of lots after conclusion of sale - release of auctioned goods - Whether a lot or items in a lot can be withdrawn after the sale has been concluded and delivery orders issued. - HELD THAT: - The Court relied on the principle that withdrawal of any lot after conclusion of sale is impermissible. Treating withholding of release after confirmed sale as equivalent to withdrawal, the Court held that once the goods have been put up for auction and the sale concluded with the buyer complying with formalities, the custodian/authority cannot withdraw the lots or refuse delivery. Applying this principle to the facts, where the petitioner had complied with payments and delivery orders had been issued, the respondents were obliged to release the remaining items without withholding them on the stated grounds. [Paras 11, 12, 13]

A lot or part thereof cannot be withdrawn after sale is concluded; respondents must release the remaining auctioned items to the petitioner.

Final Conclusion: Writ petition allowed; objections to withholding release of balance items of lot no. 2 and 5 of the delivery order dated June 11, 2021 were quashed and respondents directed to deliver the remaining items to the petitioner within two weeks; no order as to costs.

Limitation for refund of Special Additional Customs Duty - binding precedent of a co-ordinate bench - effect of Supreme Court proceedings on subordinate precedent

Limitation for refund of Special Additional Customs Duty - binding precedent of a co-ordinate bench - Whether any limitation is prescribed in respect of a refund claim of Special Additional Customs Duty and the effect of existing co-ordinate bench decisions on the appeal. - HELD THAT: - The Court considered competing decisions of co-ordinate benches on the question whether refund claims of Special Additional Customs Duty are subject to any limitation. Counsel for the respondent relied on Sony India Private Limited v. Commissioner of Customs and Commissioner of Customs (Import) v. Wilhelm Textiles India Private Limited, decisions of co-ordinate benches favouring the respondent, noting that the Supreme Court dismissed the SLP in Sony India on the ground of delay and has admitted the SLP in Wilhelm Textiles but has not stayed the operative effect of the High Court decision. The Court observed that a contrary view has been taken by a division bench of another High Court, but emphasised that it is bound by the decisions of its own co-ordinate bench. Applying the doctrine of stare decisis within the High Court, the bench declined to revisit the question and followed the co-ordinate bench precedent which supports the respondent's position. [Paras 6, 7]

Appeal dismissed; the impugned CESTAT order is sustained, the bench following the co-ordinate bench precedent on limitation for refund of Special Additional Customs Duty.

Final Conclusion: The High Court, being bound by its co-ordinate bench decisions on the question of limitation for refund of Special Additional Customs Duty, dismissed the revenue's appeal and sustained the CESTAT order; any ultimate change in law will await the Supreme Court's final decision.

Company dissolution under Section 497(6) of the Companies Act, 1956 - Final meeting and winding up in members' voluntary liquidation - Preservation of books of account for five years - Liability of directors for subsequent liabilities - Payment of Official Liquidator's costs

Company dissolution under Section 497(6) of the Companies Act, 1956 - Final meeting and winding up in members' voluntary liquidation - Order for dissolution of M/s. Bharat Bobbins Limited under Section 497(6) of the Companies Act, 1956 from the date of submission of the Official Liquidator's report. - HELD THAT: - The court examined the documents submitted by the Voluntary Liquidator, including the Declaration of Solvency, publication of the special resolution, convening of the final general meeting on 31.07.2020, and the filing of the final statements of account in Forms No.156 and No.157 for the winding up period. Having scrutinized the Official Liquidator's report and the Voluntary Liquidator's compliance with the procedural requirements for a members' voluntary winding up, the court concluded that the company may be finally wound up and ordered dissolution in terms of Section 497(6) of the Companies Act, 1956 from the date of submission of the report. [Paras 5]

M/s. Bharat Bobbins Limited is ordered to be dissolved in terms of Section 497(6) of the Companies Act, 1956 from the date of submission of the Official Liquidator's report.

Preservation of books of account for five years - Final meeting and winding up in members' voluntary liquidation - Direction to the Voluntary Liquidator to preserve the company's books of account for five years from the date of dissolution in accordance with the resolution passed at the final meeting. - HELD THAT: - The Voluntary Liquidator held the final meeting on 31.07.2020 and filed the requisite forms; the Official Liquidator recommended preservation of records. The court directed that the Voluntary Liquidator preserve the books of account of the company for a period of five years from the date of dissolution, in line with the resolution passed at the final meeting and the statutory regime governing members' voluntary liquidation. [Paras 5]

The Voluntary Liquidator is directed to preserve the books of account of the company for five years from the date of dissolution.

Payment of Official Liquidator's costs - Order that the Voluntary Liquidator pay costs of the Official Liquidator for submission of the report. - HELD THAT: - The Official Liquidator claimed approximate office expenses for preparing and submitting the report. Having considered the claim and the submission, the court directed payment by the Voluntary Liquidator towards the Official Liquidator's costs for submitting the report. [Paras 5]

The Voluntary Liquidator is directed to pay Rs. 7,500 towards the Official Liquidator's costs for submitting the report.

Final Conclusion: The Official Liquidator's report is taken on record; M/s. Bharat Bobbins Limited is dissolved under Section 497(6) of the Companies Act, 1956 from the date of report submission; the Voluntary Liquidator must preserve the books for five years from dissolution and pay the Official Liquidator's costs as directed; the report is disposed of.

Application for dissolution under Section 54(1) of the Insolvency and Bankruptcy Code, 2016 - Early dissolution where realizable assets insufficient to cover liquidation costs - Liquidator's power to apply for early dissolution under Regulation 14 of IBBI (Liquidation Process) Regulations, 2016 - Requirement of public announcement and verification of claims in liquidation - No statutory power to direct the Insolvency and Bankruptcy Board of India to pay liquidator's fees

Application for dissolution under Section 54(1) of the Insolvency and Bankruptcy Code, 2016 - Early dissolution where realizable assets insufficient to cover liquidation costs - Liquidator's power to apply for early dissolution under Regulation 14 of IBBI (Liquidation Process) Regulations, 2016 - Dissolution of the corporate debtor on the liquidator's application - HELD THAT: - The liquidator applied under Section 54(1) of the Code, read with Regulation 45(3), seeking dissolution because the corporate debtor has effectively no realizable assets and insufficient funds to meet liquidation costs. Regulation 14 of the IBBI (Liquidation Process) Regulations, 2016 permits the liquidator, after preparation of the preliminary report, to apply for early dissolution where realizable properties are insufficient to cover liquidation costs and no further investigation of the debtor's affairs is required. The record shows public announcements were made, claims were called and verified, an asset memorandum and preliminary report were filed, and the affairs did not require further inquiry. Stakeholders' committee could not be constituted and the realisable value of assets was nil; thus the Tribunal found it just and equitable to dissolve the corporate debtor. The application for dissolution was therefore admitted and the corporate debtor was ordered dissolved from the date of the order. [Paras 9, 11]

Application for dissolution admitted; corporate debtor dissolved from the date of this order.

No statutory power to direct the Insolvency and Bankruptcy Board of India to pay liquidator's fees - Prayer for directions to IBBI to pay the liquidator's fees - HELD THAT: - The liquidator sought a direction to the IBBI for payment of fees. The Tribunal observed there is no specific provision in law empowering it to issue directions to the IBBI to make such payments. In absence of any statutory basis for that relief, the prayer seeking directions to IBBI to pay fees was declined. [Paras 10]

Prayer for directions to IBBI to pay fees declined for lack of statutory basis.

Final Conclusion: The liquidator's application for dissolution under Section 54(1) of the Code, read with the liquidation regulations, is allowed and the corporate debtor stands dissolved from the date of the order; the request for directions to IBBI to pay liquidator's fees is refused for want of statutory authority.

Admission of Section 7 petition - Corporate Insolvency Resolution Process - Financial debt and default - Moratorium under Section 14 - Interim Resolution Professional appointment - Public announcement of CIRP - Registry communication and Registrar of Companies update

Admission of Section 7 petition - Financial debt and default - The Section 7 application filed by the financial creditor is admissible and is to be admitted initiating CIRP against the corporate debtor. - HELD THAT: - The Tribunal examined the records and found that the corporate debtor had admitted its inability to pay the financial creditor and had itself filed a Section 10 petition. The material on record, including bank statements and ledger accounts, establishes that a financial debt exceeding the threshold of Rupees One Lakh is due and payable and that default exists. In view of the admission by the corporate debtor and the documentary material, there was no reason to deny the Section 7 petition and the application is complete and properly filed in form. [Paras 8, 9, 10, 11]

Section 7 petition admitted and CIRP initiated against the corporate debtor.

Moratorium under Section 14 - A moratorium under Section 14 of the I&B Code is declared with the statutory consequential prohibitions and protections. - HELD THAT: - Upon admission of the Section 7 application, the Tribunal declared the moratorium operative from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. The moratorium prohibits institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of assets by the corporate debtor, actions to enforce security interests (including under SARFAESI Act), and recovery of property by owners or lessors; it also protects supply of essential goods or services from termination during the moratorium, subject to statutory exceptions.

Moratorium under Section 14 declared with specified prohibitions and protections.

Interim Resolution Professional appointment - Public announcement of CIRP - An Interim Resolution Professional is appointed and directions issued for public announcement and related compliance, including security for IRP expenses. - HELD THAT: - The Applicant's proposed insolvency professional, a registered IRP, was accepted and appointed to carry out duties under the Code; the Tribunal directed immediate public announcement of the CIRP as specified under the statute. The financial creditor was directed to deposit a specified sum with the IRP to meet expenses of public notice and claims invitation, subject to CoC approval of such expenses; IRP fees are to comply with IBBI regulations and directions. [Paras 12]

Mr. Kairav Anil Trivedi appointed as Interim Resolution Professional; public announcement and deposit for IRP expenses directed.

Registry communication and Registrar of Companies update - Directions issued for communication of the order to parties and for updating the Registrar of Companies' master data. - HELD THAT: - The Tribunal directed the registry to immediately communicate the order to the financial creditor, corporate debtor and the IRP (including by email or WhatsApp) and required a compliance report by the Designated Registrar the same day. A copy of the order was directed to be sent to the Registrar of Companies, Mumbai for updating the corporate debtor's master data.

Registry to communicate the order immediately and ROC to be informed for updating master data.

Final Conclusion: The Section 7 application is admitted; CIRP is initiated against the corporate debtor, moratorium under Section 14 is declared, an Interim Resolution Professional is appointed with directions for public announcement and deposit for IRP expenses, and the Registry/ROC are directed to update and communicate the order.

Financial Debt - Default - Admission of petition under section 7 - Corporate Insolvency Resolution Process (CIRP) - Assignment of financial debt - Evidence of default - Maintainability - authority to sign / stamping / Banker's Book of Evidence Act objections - Interim Resolution Professional appointment - Moratorium

Financial Debt - Default - Admission of petition under section 7 - Evidence of default - Whether the financial creditor established existence of financial debt and default so as to merit admission of the petition under section 7 and initiation of CIRP. - HELD THAT: - The Tribunal found on the record that credit facilities were sanctioned and disbursed to the corporate debtor and that the account was classified as NPA. The corporate debtor admitted liability during hearings and in its balance sheet, and documentary material including account statements and a CRILC report supported the claim of outstanding dues. Applying the Code's requirements, the Bench held that the nature of the claim is a "Financial Debt" and that a "Default" as defined in the Code has occurred. Having found both existence of debt and default, the Tribunal concluded that the statutory prerequisites for admission under section 7 were satisfied and that the petition deserved admission. [Paras 16, 17, 18, 19]

Petition admitted as the financial creditor has established existence of financial debt and default; CIRP ordered to be initiated.

Maintainability - authority to sign / stamping / Banker's Book of Evidence Act objections - Admission of petition under section 7 - Whether objections as to authorization of the signatory, insufficiency of stamp duty and non-certification of bank records under the Banker's Book of Evidence Act defeated maintainability of the petition. - HELD THAT: - The Tribunal considered the corporate debtor's contentions that the petition was filed by an unauthorized signatory, that documents were insufficiently stamped, and that statements of account were not certified as per the Banker's Book of Evidence Act. The Bench noted that the corporate debtor had been granted opportunities to file replies and that subsequent affidavits raised these objections while simultaneously asserting an ongoing settlement/OTS, which the Tribunal treated as delaying tactics. The record also contained admissions by the debtor of outstanding liability. On that basis the Tribunal rejected these objections as not preventing admission under section 7. [Paras 14, 15, 16]

Maintainability objections rejected; they do not preclude admission of the petition.

Interim Resolution Professional appointment - CIRP - Moratorium - Appointment of Interim Resolution Professional and consequential directions upon admission of the petition. - HELD THAT: - The financial creditor proposed an IRP and the proposed IRP submitted consent in the prescribed form. The Tribunal appointed the nominated IRP and directed the financial creditor to deposit initial CIRP costs. The Bench issued the statutory moratorium directions prohibiting institution or continuation of suits or execution against the corporate debtor, preserving supply of essential goods and services, and ordered immediate public announcement and registry communication, specifying that management vests in the IRP who must perform functions under the Code. [Paras 20, 21]

Mr. Dushyant C. Dave appointed as Interim Resolution Professional; directions issued for CIRP administration and moratorium.

Final Conclusion: The Company Petition under section 7 is admitted: the Tribunal found that the financial creditor (by assignment) proved existence of financial debt and default, maintainability objections were rejected, an IRP was appointed with related CIRP and moratorium directions, and the Registry was directed to communicate the order and update records.

Initiation of corporate insolvency resolution process under Section 9 of the Code - existence of a plausible dispute - principle of estoppel - effect of an addendum on continuing liability where payment is to be made "on behalf of" the corporate debtor - admission of application under Section 9(5) of the Code - appointment of Interim Resolution Professional - moratorium under Section 14(1) of the Code

Initiation of corporate insolvency resolution process under Section 9 of the Code - existence of a plausible dispute - principle of estoppel - effect of an addendum on continuing liability where payment is to be made "on behalf of" the corporate debtor - Whether the application under Section 9 of the Code by the operational creditor is maintainable and the corporate debtor is in default such that CIRP should be admitted. - HELD THAT: - The Tribunal examined the addendum relied upon by the corporate debtor and found that it only recorded that Shri Vaibhavi Logistics would make remittances to Eurotainer S.A. on behalf of Panoli Products Private Limited; it did not show that the corporate debtor was absolved of ultimate liability. The ledger produced did not establish that payments appearing therein were made specifically to discharge amounts due to the operational creditor on behalf of the corporate debtor. Additionally, subsequent direct payments made by the corporate debtor to the operational creditor were held to invoke the principle of estoppel, precluding the corporate debtor from contending it had no liability. Applying the standard articulated in Mobilox (as cited in the order), the Tribunal considered whether the dispute was a plausible contention requiring further investigation; it found the defence to be vague and not supported by convincing evidence. On that basis the Tribunal concluded there was default by the corporate debtor and the Section 9 application was otherwise complete, warranting admission under Section 9(5). [Paras 4, 5, 6, 7]

The petition under Section 9 is admitted and CIRP is commenced against the corporate debtor.

Appointment of Interim Resolution Professional - deposit to meet interim resolution professional's expenses - moratorium under Section 14(1) of the Code - Appointment of an Interim Resolution Professional and incidental directions following admission of the Section 9 application. - HELD THAT: - The applicant had not proposed an IRP; the Tribunal appointed Mr. Vikram Sharma as Interim Resolution Professional subject to his consent and required disclosures. The operational creditor was directed to deposit a sum with the IRP to enable performance of functions in accordance with the Insolvency Regulations, with the amount to be adjusted by the Committee of Creditors as accounted for by the IRP. Consequent upon admission, the moratorium under Section 14(1) of the Code was declared to apply, with the other provisions of Section 14 (2)-(4) operating during the moratorium. The Registry was directed to communicate the order to relevant parties and to forward a copy to IBBI and the ROC for updating records. [Paras 8, 9, 10, 11]

Mr. Vikram Sharma is appointed as Interim Resolution Professional; the operational creditor must deposit the directed amount with the IRP; moratorium under Section 14(1) is in effect and consequential procedural directions are issued.

Final Conclusion: The Tribunal admitted the Section 9 petition against Panoli Products Private Limited, holding that the addendum and ledger did not establish discharge of the corporate debtor's liability and that payments by the corporate debtor estopped it from denying liability; an Interim Resolution Professional was appointed, a deposit mandated, and the moratorium under the Code was declared operative.

Maintainability of Section 9 application by a sole proprietor and succession by legal heirs - validity of demand notice and requirement of annexing invoices - pre-existing dispute - applicability of the Mobilox plausible-dispute test - admission of Section 9 petition and appointment of Interim Resolution Professional - moratorium under Section 14 consequent to admission - deposit to IRP for meeting CIRP expenses under regulation 6

Maintainability of Section 9 application by a sole proprietor and succession by legal heirs - Maintainability of the Section 9 petition filed by the deceased sole proprietor and continued by his legal heirs. - HELD THAT: - The Tribunal observed that the petition was filed by Shri Rajesh Gupta in his name as sole proprietor and not in the name of the proprietorship concern; therefore, the petition is maintainable. The substitution application filed by the legal heirs (IA No. 3227/ND/2021) was allowed by the Tribunal on 29.07.2021 and that order was not challenged. The Tribunal rejected the respondent's contention that non-transfer of GST registration or non-takeover of the proprietorship by heirs rendered the application non-maintainable, noting succession laws confer the right of claim to heirs and that proprietorship is not a separate legal entity for this purpose. [Paras 7]

Objection on maintainability by reason of sole proprietorship and continuation by legal heirs is rejected; petition is maintainable and substitution order stands unchallenged.

Validity of demand notice and requirement of annexing invoices - Whether the demand notice under Section 8 was defective for non annexure of invoices. - HELD THAT: - The Tribunal found that copies of invoices had been received by the respondent, as evidenced by the respondent's sign and seal on invoice copies. Given the respondent's knowledge of the invoices, the objection that the demand notice was defective for not annexing invoices was held to be not tenable. The Tribunal further noted there is no mandatory compulsion on the operational creditor to attach unpaid invoices to the demand notice under the Rules as relied upon by the applicant. [Paras 6]

Objection to demand notice for non annexure of invoices is rejected; demand notice held valid in the factual matrix.

Pre-existing dispute - applicability of the Mobilox plausible-dispute test - Existence of a pre existing dispute which would bar admission of the Section 9 petition. - HELD THAT: - Applying the Mobilox standard, the Tribunal examined the respondent's claim of defects in goods intimated on 25.12.2018. The Tribunal found that the alleged defect related to a consignment prior to 26.02.2019 and that the issue was resolved between the parties; subsequent orders were placed and goods received thereafter, with part payment made on 10.05.2019. The Tribunal held the respondent's allegations to be vague and not a plausible dispute that required rejection of the application under Section 9(5)(2)(d). The Tribunal distinguished earlier communications as not constituting a continuing pre existing dispute in relation to the unpaid invoices. [Paras 8, 9]

Objection of pre existing dispute is rejected; no bona fide dispute established to bar admission.

Admission of Section 9 petition and appointment of Interim Resolution Professional - deposit to IRP for meeting CIRP expenses under regulation 6 - Admission of the Section 9 petition, appointment of the proposed Insolvency Resolution Professional (IRP), and deposit to be made to the IRP. - HELD THAT: - Having found the petition maintainable, demand notice valid, and no pre existing dispute, the Tribunal admitted the Section 9 petition under Section 9(5) of the Code. The Tribunal appointed the proposed IRP, Mr. Dharm Vir Gupta, whose consent in Form 2 was on record. The Tribunal directed the operational creditor to deposit a specified sum with the IRP within one week to meet expenses as per regulation 6 of the Insolvency Regulations, noting that such amount would be subject to adjustment by the Committee of Creditors and returned/adjusted as accounted by the IRP. [Paras 10, 11, 12]

Section 9 petition admitted; Mr. Dharm Vir Gupta appointed as IRP; operational creditor directed to deposit amount to IRP for CIRP expenses.

Moratorium under Section 14 consequent to admission - Consequences of admission - operation of moratorium under Section 14. - HELD THAT: - The Tribunal recorded that, as a consequence of admission in terms of Section 9(5), the moratorium under Section 14(1) of the Code shall follow in relation to the corporate debtor, with the prohibitions in provisos (a) to (d) applying. The Tribunal also noted that the provisions of Sections 14(2) to 14(4) will operate during the moratorium period. [Paras 13]

Moratorium under Section 14 is declared to apply upon admission; attendant provisions of Sections 14(2) to 14(4) to operate during moratorium.

Final Conclusion: The Tribunal admitted the Section 9 petition: objections on maintainability by reason of sole proprietorship and substitution, defect in demand notice, and pre existing dispute were rejected; the proposed IRP was appointed and the operational creditor directed to deposit funds for CIRP expenses; moratorium under Section 14 was declared to follow upon admission.

Extension of corporate insolvency resolution process - Committee of Creditors' approval of resolution plan - assignment of third-party property in resolution plan - exclusion of time due to lockdown - power to extend beyond 330 days - inadmissibility of extension in absence of a concrete resolution plan

Extension of corporate insolvency resolution process - power to extend beyond 330 days - inadmissibility of extension in absence of a concrete resolution plan - Application for extension of the CIRP period by 30 days beyond 330 days was considered and refused. - HELD THAT: - The Resolution Professional sought a further 30-day extension to complete the corporate insolvency resolution process, asserting that the Committee of Creditors (CoC) required time to obtain mandates from higher authorities and to resolve technical issues concerning assignment of third-party property in the resolution plan. The Tribunal examined the chronology of earlier extensions and exclusions granted, the timing of receipt of the resolution plan (only days before expiry), and the CoC's resolution explaining outstanding technical queries and the request to consider a plain-vanilla variant. While acknowledging the jurisprudence that time may be extended where only a short period remains, the Tribunal found that the CoC did not have a concrete resolution plan ready for approval and was unable to take a specific decision; earlier extensions and exclusions had already been granted and the proceedings were not completed in those periods. The late filing of the lone resolution plan and the absence of a definitive CoC decision indicated that a further short extension would not achieve completion of the CIRP. For these reasons the request to extend the CIRP by 30 days was declined. [Paras 6, 7, 8]

Application for extension of the CIRP by 30 days beyond 330 days is dismissed; IA No. 1215/ND/2022 stands dismissed with no order as to costs.

Final Conclusion: The Tribunal refused the request to extend the CIRP period by 30 days beyond 330 days because the CoC had no concrete, approvable resolution plan and prior extensions and exclusions had not led to completion of the insolvency process; the application was dismissed.

Corporate insolvency resolution process - admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - operational creditor's debt and default - date of default and limitation - jurisdiction of the Adjudicating Authority - moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and vesting of management

Jurisdiction of the Adjudicating Authority - This Bench has jurisdiction to adjudicate the company petition. - HELD THAT: - The Corporate Debtor is a company incorporated in Maharashtra with its registered office at the address within the territorial jurisdiction of this Bench. On that basis the Tribunal records that it has jurisdiction to deal with the petition filed under the Insolvency & Bankruptcy Code, 2016. [Paras 2]

Jurisdiction of this Bench is established and accepted.

Date of default and limitation - The petition was filed within limitation and the date of default is recorded as 20.10.2016. - HELD THAT: - The last invoice date and the mode of payment in the last invoice fix the date of default as 20.10.2016. The Tribunal notes that the company petition was filed within the statutory period and therefore the petition is not barred by limitation. [Paras 12]

Limitation plea is rejected; filing is within time and date of default is 20.10.2016.

Operational creditor's debt and default - admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - The debt and default stand established for the claimed amount and the petition is admitted under section 9 of the IBC. - HELD THAT: - On consideration of the pleadings and records the Tribunal finds that the Operational Creditor has demonstrated a debt due and payable by the Corporate Debtor. The petition is complete as required by law and the debt satisfies the minimum threshold under the Code. Despite the Corporate Debtor's contentions disputing invoices and alleging excess payments, the Tribunal records the amount due and concludes that debt and default are established for the purposes of admission of the section 9 petition. [Paras 13, 14, 16]

The petition is admitted; Corporate Insolvency Resolution Process is ordered to be initiated against the Corporate Debtor.

Moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and vesting of management - Consequential reliefs on admission are ordered: moratorium, public announcement, appointment of IRP, vesting of management in IRP, operational creditor's deposit, and statutory compliance directions. - HELD THAT: - Following admission of the petition the Tribunal directed the statutory moratorium to operate in the terms specified, restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of property occupied by the Corporate Debtor. The Tribunal ordered immediate public announcement of CIRP, appointed an Interim Resolution Professional, directed vesting of management in the IRP and required officers of the Corporate Debtor to cooperate and furnish documents. The Operational Creditor was directed to deposit a specified amount for CIRP expenses and the Registry was directed to communicate the order; a copy was also to be sent to the Registrar of Companies for updating records.

Moratorium imposed; IRP appointed; public announcement, deposit for CIRP expenses and compliance directions issued as part of initiation of CIRP.

Final Conclusion: The Company Petition under section 9 of the IBC filed by the Operational Creditor is admitted; the Corporate Insolvency Resolution Process is initiated against the Corporate Debtor, a moratorium is imposed, an Interim Resolution Professional is appointed, and ancillary directions for public announcement, cooperation, deposit for CIRP expenses and Registrar of Companies compliance are issued.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Effect of non-registration of a partnership firm - proceedings under the Insolvency and Bankruptcy Code as summary or petitionary in nature - inapplicability of Section 69 of the Indian Partnership Act, 1932 to IBC Section 9 applications - appointment of Interim Resolution Professional and related deposit for costs - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Effect of non-registration of a partnership firm - inapplicability of Section 69 of the Indian Partnership Act, 1932 to IBC Section 9 applications - proceedings under the Insolvency and Bankruptcy Code as summary or petitionary in nature - Whether an unregistered partnership firm is barred by Section 69 of the Indian Partnership Act, 1932 from filing an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal examined Section 69 of the Indian Partnership Act, 1932 and held that its bar attaches to 'suits' to enforce contractual rights; proceedings under Section 9 of the IBC are not 'suits' but summary, petitionary proceedings before the Adjudicating Authority. Reliance was placed on the distinction drawn by higher fora that IBC applications are not civil suits and are summary in nature, so the disqualification arising from non-registration under Section 69 does not apply to initiation of CIRP by an operational creditor under Section 9. A comparative reference to proceedings before fora like NCDRC was made to emphasise that those proceedings are contested on merits unlike the summary IBC process, and thus authorities such as Patel Roadways (before NCDRC) are not apposite. Accordingly, the objection that the unregistered partnership firm cannot maintain the Section 9 application was rejected. [Paras 5, 6, 7]

The application filed by the unregistered partnership firm is maintainable; Section 69 of the Partnership Act does not bar a Section 9 IBC petition.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice and absence of disputed payment after notice - admission of Section 9 petition and consequential appointment of IRP - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Whether the Section 9 petition should be admitted on the basis of the invoices, alleged outstanding debt, service of demand notice and absence of a pre-existing dispute. - HELD THAT: - The Tribunal found that the applicant supplied cement as per purchase orders and raised invoices between 17.05.2018 and 15.12.2018, that part payments had been made and the corporate debtor's ledger acknowledged the outstanding liability. The applicant served a demand notice under Section 8 and filed the requisite affidavit under Section 9(3)(b) averring no receipt of payment or notice of dispute after the demand. With only a vague dispute about quality of one consignment which stood resolved, the Tribunal concluded there existed a continuing default on the admitted invoices. Consequentially, the petition was admitted, the nominated Insolvency Resolution Professional was appointed (consent in Form 2 being on record), the applicant was directed to deposit a specified amount with the IRP for meeting expenses, and the moratorium under Section 14 was declared to follow in terms of the Code. [Paras 4, 8, 9, 10, 11]

The Section 9 petition is admitted; Mr. Aditya Kumar is appointed as IRP, the applicant to deposit the directed amount with the IRP, and moratorium under Section 14 shall follow.

Final Conclusion: The Tribunal held that an unregistered partnership firm may maintain a Section 9 IBC petition because Section 69 of the Partnership Act bars only 'suits' and not summary IBC applications; on the merits the petition was admitted for default on admitted invoices, an IRP was appointed with directions for deposit to meet IRP expenses, and the moratorium under the Code was declared to operate.

Challenge under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - challenge to administrative circular - declaration regarding powers of Designated Committee - infructuous writ petition - liberty to revive proceedings

Infructuous writ petition - liberty to revive proceedings - The writ petition challenging the rejection of benefits under the Scheme and paragraph 10(i) of CBIC Circular No. 1071/4/2019-CX.8 is rendered infructuous and disposed of, with liberty to revive in specified circumstances. - HELD THAT: - The petitioner had filed appeals before the Tribunal against the Order-in-Original. The petitioner informed the Court that the Tribunal has allowed its appeal (and co-noticees' appeals were allowed as well). In view of the appellate success, the challenge to the communication of the Designated Committee under the Scheme, the challenge to paragraph 10(i) of the CBIC circular, and the claim for a declaration on the limits of the Designated Committee's power stand rendered infructuous and require no adjudication on merits. The Court recorded that if the revenue takes the matter further and the Tribunal's order in favour of the petitioner is subsequently reversed, the petitioner will have liberty to revive the writ petition. The petition is therefore disposed of on that basis. [Paras 5, 6]

Writ petition disposed of as infructuous; petitioner granted liberty to revive the petition if the Tribunal's favorable order is reversed.

Final Conclusion: The petition challenging the rejection under the Scheme and the CBIC circular was disposed of as infructuous because the petitioner succeeded before the Tribunal; liberty granted to seek revival if the appellate decision is overturned.

Cenvat Credit admissibility - Admissibility of credit based on proforma invoices - Documentary compliance under Rule 9 of Cenvat Credit Rules, 2004 - Invoices issued in the name of head office as procedural irregularity - Typographical / clerical errors in invoice particulars and PAN mismatch - Excess availment alleged due to clerical entry error - Extended period of limitation and proviso to section 73 of the Finance Act - Imposition of penalty where no suppression or mala fide is found

Admissibility of credit based on proforma invoices - Documentary compliance under Rule 9 of Cenvat Credit Rules, 2004 - Cenvat Credit claimed on proforma invoices is admissible where the documents contain all particulars required under Rule 9. - HELD THAT: - The Tribunal held that Rule 3 entitles a manufacturer or provider of output service to Cenvat Credit of duty/tax paid and Rule 9 prescribes the particulars required in documents for such credit. A document need not be the specific form enumerated in sub rule (1) if it contains the statutory particulars; bills, challans or documents under Rule 4(2)A may qualify. The record showed that the proforma invoices contained all particulars required under Rule 9; therefore denial of credit on the ground that they were proforma invoices was incorrect. [Paras 10]

Credit on the proforma invoices was wrongly denied and is allowable.

Invoices issued in the name of head office as procedural irregularity - Cenvat Credit admissibility - Issuance of invoices in the name of the head office (instead of the factory/unit) is a procedural irregularity which does not disentitle the manufacturer to Cenvat Credit where documents are genuine and not fraudulent. - HELD THAT: - The Tribunal applied the principle that Cenvat Credit is a statutory benefit and cannot be denied for mere procedural non compliance. Reliance was placed on precedents treating procedural defects (even xerox copies) as insufficient to deny credit where genuineness is established. The invoices in question were held to be genuine and the form of issuance (head office name) did not negate entitlement to credit. [Paras 10]

Credit based on invoices issued in the name of the head office is allowable; the findings denying such credit are set aside.

Typographical / clerical errors in invoice particulars and PAN mismatch - Cenvat Credit admissibility - Credit cannot be denied where the invoices in substance record hiring of crane services and an alleged PAN typographical error is a clerical mistake not vitiating the transaction. - HELD THAT: - The Tribunal examined the annexed invoices and found they recorded hiring of cranes rather than food facility. The adjudicating authority was silent on any specific invoice showing otherwise. The appellant produced corroborative documents including PAN copy and TDS certificate; the PAN discrepancy was a single letter typographical error. The Tribunal held non consideration of these submissions despite documents on record to be irrational and unjustified, and therefore denial of credit on this ground was incorrect. [Paras 10]

Credit relating to the invoices of Rampal Sahu was wrongly denied and is allowable.

Excess availment alleged due to clerical entry error - Cenvat Credit admissibility - Allegation of excess availment on Sandvik Asia invoices was incorrect where the variation arose from a clerical mistake in reporting invoice number/date and separate supporting invoices establish proper credit. - HELD THAT: - The Tribunal noted two distinct invoices with corresponding admitted admissible credits and found that the audit statement contained a clerical transposition of invoice number/date for one serial entry. The appellant submitted self declaration and supporting invoices showing no excess availment; the tribunal accepted that the variation was a reporting clerical error and that credit was correctly taken against the two separate invoices. [Paras 10, 11]

There was no excess availment; the denial of credit on this ground was erroneous.

Extended period of limitation and proviso to section 73 of the Finance Act - Imposition of penalty where no suppression or mala fide is found - Extended period of limitation and consequential penalty were not invocable where there was no evasion, suppression or mala fide and the credit was disclosed in returns. - HELD THAT: - The Show Cause Notice pertained to March 2016 to June 2017. The Tribunal found no evidence of suppression or mala fide on the part of the appellant and noted that the appellant had disclosed the credit in ER I returns. Relying on authority that extended limitation and penalty require evasion or suppression, the Tribunal held invocation of the extended period under the proviso to section 73 and imposition of penalty to be unjustified. [Paras 12]

Extended limitation was wrongly invoked and penalty was wrongly imposed; both are set aside.

Final Conclusion: The impugned Order in Original and Order in Appeal are set aside; the Cenvat Credit disallowances, invocation of extended limitation and penalty are held to be unjustified and the appeal is allowed.

Exemption notification - non-conventional energy devices or systems specified in List 8 - solar power generating system - parts consumed within the factory of production - condition for concessional removal / compliance with Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 - strict construction of exemption

Non-conventional energy devices or systems specified in List 8 - solar power generating system - parts consumed within the factory of production - exemption notification - strict construction of exemption - Whether module mounting structures manufactured by the appellant are exempt from central excise duty under the notification dated 17.03.2012 (serial no. 332 and List 8) - HELD THAT: - The notification exempts "non-conventional energy devices or systems specified in List 8" and List 8 expressly includes "solar power generating system" at serial number (10); the List does not name "module mounting structures". Entry (21) of List 8 referred only to "parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20", and therefore, prior to the amendment of 11.07.2014 only parts consumed captively within the factory for manufacture of the listed goods were eligible for exemption. The amendment of 11.07.2014 inserted a separate serial (332A) to cover parts when used elsewhere than in the factory, subject to compliance with the procedure in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The appellant's argument that the notification should be read to exempt each component of a listed "system" irrespective of the List's language is contrary to the plain text of the notification. The Madhya Pradesh High Court decision relied upon concerned a different State policy and is distinguishable. Exemption notifications must be strictly construed; the parts manufactured by the appellant (module mounting structures) are not separately specified in List 8 and do not qualify for exemption under serial no. 332 absent compliance with the conditions applicable to parts, as explained above. For these reasons the Principal Commissioner's conclusion that the appellant's goods were not entitled to exemption under serial no. 332 is upheld. [Paras 16, 17, 20, 21, 22]

The claim for exemption of module mounting structures under the notification dated 17.03.2012 (Sl. No. 332 / List 8) is rejected; the impugned order upholding demand is correct.

Final Conclusion: The appeal is dismissed and the order dated 15.07.2019 passed by the Principal Commissioner confirming the excise demand is upheld.

Admission of appeal under Section 31(1) of the TVAT Act subject to 121/2% deposit - payment of 121/2% as condition precedent for admission of appeal - power to grant stay of recovery is discretionary and ancillary to appellate jurisdiction - appellate authority may require furnishing of security or payment of part of disputed tax for grant of stay - stay of collection of demand pending disposal of appeal

Admission of appeal under Section 31(1) of the TVAT Act subject to 121/2% deposit - payment of 121/2% as condition precedent for admission of appeal - Legal effect of the proviso to Section 31(1) of the TVAT Act and the requirement of deposit for admission of appeal. - HELD THAT: - The Court held that, for the purpose of admission of an appeal under Section 31(1) of the TVAT Act, the appellant must produce proof of payment to the extent of 121/2% of the disputed tax, penalty, interest or any other amount; such payment is a condition precedent for admission. Separately, the appellate authority's power to grant stay under Clause (a) of Sub Section (3) may entail requiring furnishing of security or payment of such part of the disputed tax as it specifies, which is additional to the deposit necessary for admission of the appeal. The Court therefore distinguished the distinct statutory roles of the admission deposit and any further security or payment that may be imposed for stay. [Paras 7, 8, 9, 10]

Payment of 121/2% is a condition precedent for admission of the appeal; the appellate authority may, in addition, require security or payment of a part of the disputed tax for granting stay.

Power to grant stay of recovery is discretionary and ancillary to appellate jurisdiction - stay of collection of demand pending disposal of appeal - appellate authority may require furnishing of security or payment of part of disputed tax for grant of stay - Whether the appellate and revisional authorities were justified in outrightly rejecting the petitioner's prayer for stay and appropriate relief to secure the petitioner's appeal. - HELD THAT: - The Court found that the power to grant a stay is incidental and ancillary to the power to hear an appeal or revision and is a discretionary power to be exercised fairly balancing interests of both sides. Having noted that the petitioner had already deposited 121/2% for admission, the Court held that outright refusal of stay was not justified. As a measured exercise of discretion, the Court directed that if the petitioner deposits a further 121/2% of the disputed tax within 30 days, respondents shall not take coercive steps for recovery of the outstanding dues and the demand under the assessment order shall remain stayed until disposal of the pending appeal. [Paras 11, 12]

Outright rejection of stay was not justified; conditional stay granted on deposit of an additional 121/2% of the disputed tax within 30 days, with prohibition on coercive recovery until disposal of the appeal.

Final Conclusion: Writ petition disposed by directing conditional stay of the assessment demand dated 26.03.2021: on deposit by the petitioner of an additional 121/2% of the disputed tax within 30 days (having already deposited 121/2% for admission), respondents shall refrain from coercive recovery and the demand shall remain stayed pending disposal of the appeal; no order as to costs.

Moratorium under the Insolvency and Bankruptcy Code - proceedings under Section 138 of the Negotiable Instruments Act against a corporate debtor - exception permitting continuation where natural persons in-charge are prosecuted - quashing of criminal proceedings under Section 482 CrPC

Moratorium under the Insolvency and Bankruptcy Code - proceedings under Section 138 of the Negotiable Instruments Act against a corporate debtor - Whether criminal proceedings under Section 138 of the Negotiable Instruments Act could be continued against the corporate debtor after the issuance of a moratorium. - HELD THAT: - The Court applied the legal conclusions in P. Mohanraj and subsequent authority in Gimpex Private Ltd., holding that a moratorium under the Insolvency and Bankruptcy Code covers proceedings under Section 138 of the Negotiable Instruments Act against a corporate debtor. Having regard to those precedents and the fact that the complaint in the present case was instituted only against the corporate entity, continuation of Section 138 proceedings against the corporate debtor is barred by the moratorium and therefore impermissible. Consequently, the proceedings against the appellant corporate debtor had to be quashed.

Proceedings under Section 138 against the corporate debtor are barred by the moratorium and are quashed.

Exception permitting continuation where natural persons in-charge are prosecuted - proceedings under Section 138 of the Negotiable Instruments Act against a corporate debtor - Whether the exception permitting continuation of Section 138 proceedings where natural persons in-charge are accused applied in this case. - HELD THAT: - The Court noted that P. Mohanraj permits continuation of Section 138/141 proceedings against natural persons who are in-charge of and responsible for the affairs of the corporate debtor. In the instant matter no natural persons were arraigned as accused; therefore the exception recognised in P. Mohanraj did not arise and could not sustain continuation of the proceedings.

The exception is inapplicable as no natural persons were accused; the proceedings could not be continued on that ground.

Final Conclusion: The appeal is allowed; the High Court order is set aside, the Criminal Original Petition under Section 482 CrPC is allowed and the Section 138 proceedings initiated against the corporate appellant are quashed.

Power of Court to try cases summarily under Section 143 of the Negotiable Instruments Act - Commencement of trial and "in the course of" trial - Mandatory versus directory nature of provisos - Inherent jurisdiction of High Court under Section 482 CrPC to prevent abuse of process - Remedy of de novo trial and grounds for remand

Power of Court to try cases summarily under Section 143 of the Negotiable Instruments Act - Commencement of trial and "in the course of" trial - Mandatory versus directory nature of provisos - Validity of an order directing a case under Section 138 NI Act to be tried as a summons case without recording a hearing as envisaged by the second proviso to Section 143(1). - HELD THAT: - The Court interpreted the second proviso to Section 143(1) by distinguishing the phrases "at the commencement" and "in the course of" a summary trial, holding that the latter expression has a wider import and may attract application even prior to service of notice of accusation. However, non-compliance with the proviso insofar as hearing the parties prior to directing trial as a summons case does not ipso facto vitiate the proceedings. The proviso contemplates recalling witnesses and rehearing where trial has commenced and witnesses have been examined; where the order is passed before commencement of trial and no recalling or rehearing of examined witnesses is necessitated, failure to afford the hearing does not amount to an irregularity that vitiates the trial. The court relied on precedent which cautions that de novo trial or remand should be ordered sparingly and only where illegality, irregularity or defect cannot be cured on appeal. Consequently, mere non-observance of the directive to record reasons after hearing the parties is not necessarily fatal to the trial, and the statutory scheme aimed at expeditious disposal must be given effect without converting every procedural lapse into grounds for overturning proceedings. [Paras 12, 15, 16, 17]

Non-compliance with the second proviso to Section 143(1) by not affording a hearing before treating the case as a summons case does not automatically vitiate the proceedings; the proviso is to be applied in its context and non-observance is not necessarily fatal.

Inherent jurisdiction of High Court under Section 482 CrPC to prevent abuse of process - Remedy of de novo trial and grounds for remand - Whether the petition under Section 482 CrPC challenging the mode of trial should be entertained at a belated stage after trial has advanced and statement under Section 313 CrPC has been recorded. - HELD THAT: - The Court observed that inherent powers under Section 482 CrPC are to be exercised sparingly to prevent abuse of process and to secure ends of justice. Given the significant delay in approaching the High Court, the fact that evidence had been largely recorded and the accused's statement under Section 313 CrPC had been recorded, interference at that belated stage would amount to an attempt to delay conclusion of trial. The petitioner failed to satisfactorily explain the delay and did not demonstrate any substantial prejudice caused by the impugned order; an apprehension of possible higher sentence is not a present prejudice warranting extraordinary interference. In light of precedents that remand or de novo trial is a last resort, the Court concluded that dismissal of the belated petition was appropriate and that the trial should be concluded expeditiously. [Paras 18, 19]

Petition under Section 482 CrPC dismissed as an abuse of process and belated, given trial had reached advanced stage (Section 313 statement recorded); High Court will not ordinarily intervene at such stage.

Final Conclusion: The petition under Section 482 CrPC seeking quashing of proceedings on the ground that the trial was directed to be a summons case without hearing was dismissed: the proviso to Section 143(1) is not per se fatal if not strictly complied with before commencement of trial, and interference was declined because the challenge was belated, trial was at an advanced stage and inherent jurisdiction should be exercised sparingly; the trial court was directed to decide the main case expeditiously.

Section 20 of the Negotiable Instruments Act, 1881 - inchoate stamped instruments and liability of drawer - Inchoate stamped instruments - Prima facie authority of holder to complete a blank or incomplete negotiable instrument - Liability of drawer of incomplete instrument to holder in due course - Blank signed cheque misused - Handwriting comparison / expert evidence - Right to fair trial versus needless delay

Section 20 of the Negotiable Instruments Act, 1881 - inchoate stamped instruments and liability of drawer - Blank signed cheque misused - Prima facie authority of holder to complete a blank or incomplete negotiable instrument - Whether permission ought to have been granted to the petitioners to compare the handwriting on the cheques with the handwriting of the complainant and his son, where the petitioners pleaded that blank signed cheques were misused. - HELD THAT: - The Court examined Section 20 which treats a wholly blank or incomplete stamped negotiable instrument signed and delivered by one person as prima facie authority for the holder to complete it, and subjects the signer to liability to a holder in due course. The petitioners in their application expressly averred that blank signed cheques had been handed over and misused; the complainant did not contend that duly filled cheques in the hand of the petitioners were delivered. Given that the signature itself was not denied, and there was no affirmative plea by the complainant of interpolation or unauthorised filling that would require contradiction, permitting handwriting expert comparison to prove a fact not pleaded by the complainant would not materially advance the complainant's case. The Court held that allowing such examination in these circumstances would likely cause delay without serving the interests of justice. The trial court considered these aspects and rejected the application; there is no perversity or illegality in that exercise of discretion. [Paras 7, 8, 9, 10, 11]

The order refusing permission for handwriting comparison was upheld; the application for such comparison was properly dismissed as unnecessary and likely to delay justice.

Handwriting comparison / expert evidence - Right to fair trial versus needless delay - Whether denial of the petitioners' request for handwriting expert examination occasioned prejudice or denial of fair trial. - HELD THAT: - The Court found that the petitioners' own pleadings admitted delivery of blank signed cheques; there was no contention by the complainant that completed cheques in the petitioners' handwriting were handed over. On that factual foundation, examination by a handwriting expert would not be directed at refuting a pleaded case of the complainant but would rather attempt to prove an unpled contention, and therefore would be unlikely to advance justice. The trial court's discretion to refuse the request was exercised after considering the contentions, and the High Court found no miscarriage of justice, illegality or perversity in that refusal. [Paras 9, 10, 11]

Denial of the handwriting comparison did not amount to prejudice or denial of fair trial; the petitioners were not entitled to the relief sought.

Final Conclusion: The petitions are dismissed. The High Court upheld the trial court's refusal to permit handwriting comparison on the facts that blank signed cheques were admitted to have been delivered and that allowing expert examination would not advance the complainant's pleaded case but would only delay adjudication; no illegality or miscarriage of justice was found.

Proof of delivery of goods - Proof of signature and handwriting - Onus and burden of proof - Section 67 Indian Evidence Act, 1872

Proof of delivery of goods - Proof of signature and handwriting - Onus and burden of proof - Section 67 Indian Evidence Act, 1872 - Whether the plaintiff proved supply of material and entitlement to decree based on the challans and cheques relied upon, and whether the trial Court's decree directing payment should be sustained. - HELD THAT: - The Court examined whether the plaintiff discharged the initial onus of proving that goods were supplied to the defendants and that payment was due. The plaintiff produced challans (Ex.P-8 to Ex.P-28), a letter (Ex.P-4) and cheques, but did not produce the person(s) who received the goods or otherwise prove the genuineness of the signatures on the challans. The Court applied the principle that where a document is alleged to be signed by a person, the signature or handwriting must be proved as that person's (Section 67, Indian Evidence Act). The judgment explains the recognised modes of proving signature (calling the signer, a witness to the signing, handwriting expert, person acquainted with the handwriting, comparison with admitted signatures, or an admission by the signer). The plaintiff did not adopt any of these modes nor call witnesses to establish receipt of goods; cross-examination did not clarify who signed the receipts. As a result, the plaintiff failed to discharge the initial burden under Section 101/102 CPC and Section 67 Evidence Act; the burden did not shift to the defendants. Reliance on the cheques without proving that they were issued in respect of the supplied goods was inadequate, particularly where Ex.P-4's value did not match the claimed cheques. Applying earlier Supreme Court authorities on burden and onus, the High Court found the trial Court's conclusion that the plaintiff had proved supply and was entitled to payment to be perverse and contrary to the record, warranting interference and reversal of the decree. [Paras 13, 14, 16, 19]

Plaintiff failed to prove supply of material or genuineness of signatures on challans; the trial Court's decree directing payment is set aside and the appeal is allowed.

Final Conclusion: The First Appeal is allowed; the trial Court's judgment and decree directing the defendants to pay the claimed amount with interest are set aside and a decree be drawn accordingly.

Presumption under Section 139 of the Negotiable Instruments Act - Onus on the accused to rebut presumption - Signed/filled blank cheque attracts liability - Security cheque as acknowledgment of liability - Revisional court not to interfere in absence of jurisdictional error

Presumption under Section 139 of the Negotiable Instruments Act - Onus on the accused to rebut presumption - Signed/filled blank cheque attracts liability - Conviction under Section 138 of the Negotiable Instruments Act upheld on the ground that the cheque was signed by the petitioner, a loan was advanced, and the accused failed to discharge the onus. - HELD THAT: - Both Courts below found on evidence that the complainant had advanced a friendly loan of Rs. 1,00,000 and that the cheque was signed by the petitioner; these findings are supported by testimony and were not credibly rebutted. Applying the presumption under Section 139, the onus shifted to the petitioner to adducing evidence showing a reasonable possibility that the cheque was not issued for discharge of a debt or liability. The petitioner admitted signing and filling the cheque and produced no material to remotely discharge the statutory onus. The courts therefore rightly concluded that the presumption stood unrebutted and that the penal consequences of Section 138 followed.

Conviction under Section 138 affirmed; onus under Section 139 not discharged by petitioner.

Security cheque as acknowledgment of liability - Signed/filled blank cheque attracts liability - Defence that the cheque was given only as a security/was misused by the complainant is rejected and held insufficient to absolve criminal liability under Section 138. - HELD THAT: - The Court relied on precedent that a security cheque is part of the commercial process and constitutes an acknowledgment of liability which can be legally utilised towards discharging a debt. Even if a cheque leaf is blank when handed over, once signed and filled and in the absence of cogent evidence to the contrary, the presumption under Section 139 applies. The petitioner produced no cogent evidence to establish that the cheque was merely a security not intended to discharge any liability, so the defence failed.

Argument that the cheque was a security or was misused by the complainant is rejected; liability under Section 138 attracted.

Revisional court not to interfere in absence of jurisdictional error - Revision petition dismissed; no jurisdictional error shown to warrant interference with concurrent findings of the Courts below. - HELD THAT: - The High Court applied the settled principle that a revisional court will not normally interfere with concurrent findings of fact of trial and appellate courts in the absence of jurisdictional error. As the lower courts' findings on loan, financial capacity of the complainant and signatures were supported by evidence and the petitioner failed to demonstrate any fundamental error of approach or illegality, interference was unwarranted.

Revision dismissed; concurrent judgments of trial and appellate courts sustained.

Final Conclusion: Concurrent findings that the complainant advanced a loan, that the cheque was signed by the petitioner, and that the petitioner failed to rebut the statutory presumption were affirmed; the conviction and sentence under Section 138 are upheld and the revision is dismissed.

Compensation under Section 357(1)(b) of Cr.P.C. - conversion of fine into compensation under Section 357(3) of Cr.P.C. - power of criminal courts to levy fine up to twice the cheque amount under Section 138 of the Negotiable Instruments Act - effect of amendment to Section 143 of the Negotiable Instruments Act and R. Vijayan jurisprudence

Compensation under Section 357(1)(b) of Cr.P.C. - conversion of fine into compensation under Section 357(3) of Cr.P.C. - Whether, in a conviction under Section 138 of the Negotiable Instruments Act, compensation can be ordered under Section 357(3) Cr.P.C. or must be ordered under Section 357(1)(b) Cr.P.C. - HELD THAT: - The trial court imposed only a fine on conviction and did not pass any other sentence; therefore Section 357(1)(b) of the Cr.P.C., which permits the court to apply part or whole of a fine towards compensation to a person who has suffered loss by reason of the offence, is the provision applicable. Section 357(3) Cr.P.C. applies only when a court imposes a sentence of which fine does not form part and authorises an order of compensation where no fine is imposed as part of the sentence. The appellate court's conversion of the fine into compensation under Section 357(3) was founded on an incorrect application of Section 357(3) and is therefore legally impermissible. The High Court accordingly held that compensation in cheque-dishonour cases must be granted under Section 357(1)(b) and not under Section 357(3). [Paras 5, 6, 9]

Compensation in cases under Section 138 of the Negotiable Instruments Act must be ordered under Section 357(1)(b) Cr.P.C.; conversion of an imposed fine into compensation under Section 357(3) Cr.P.C. is illegal.

Power of criminal courts to levy fine up to twice the cheque amount under Section 138 of the Negotiable Instruments Act - effect of amendment to Section 143 of the Negotiable Instruments Act and R. Vijayan jurisprudence - Whether a Magistrate (including where trial was conducted as summons trial) can impose a fine commensurate with Section 138 (up to twice the cheque amount) and direct payment as compensation in view of the amendment to the Act and Supreme Court jurisprudence. - HELD THAT: - Section 138 of the Negotiable Instruments Act authorises punishment by imprisonment, fine up to twice the cheque amount, or both. While Section 29 of the Cr.P.C. prescribes a monetary ceiling for fines by a Judicial Magistrate First Class, the statutory scheme in Chapter XVII of the Negotiable Instruments Act and the amendment to Section 143 (together with the ratio in R. Vijayan and followed in later Supreme Court decisions) recognise the special remedial-compensatory character of cheque-dishonour proceedings. The Supreme Court has held that Chapter XVII leans towards granting compensation linked to the cheque amount and that courts should, unless special circumstances exist, direct payment of compensation by levying a fine commensurate with the cheque amount. The fact that a trial was conducted in summons mode does not operate as a bar to imposing a fine linked to the cheque amount and directing it to be paid as compensation. Consequently, the criminal courts are competent to levy a fine up to twice the cheque amount and to direct payment as compensation under Section 357(1)(b) Cr.P.C. [Paras 7, 8]

The Magistrate (even where trial is conducted in summons manner) may impose a fine commensurate with Section 138 and direct payment as compensation under Section 357(1)(b) Cr.P.C., in accordance with the legislative amendment and Supreme Court precedents.

Final Conclusion: The appellate court's order converting the fine into compensation under Section 357(3) Cr.P.C. was set aside as beyond jurisdiction; the trial court's conviction and imposition of fine are restored, with the legal position clarified that compensation in cheque-dishonour cases is to be ordered under Section 357(1)(b) Cr.P.C. and that criminal courts may levy a fine linked to the cheque amount in accordance with Chapter XVII of the Negotiable Instruments Act and binding Supreme Court decisions.

Compounding of offence - Section 147 of the Negotiable Instruments Act - Section 138 of the Negotiable Instruments Act - Power to compound at any stage of proceedings (trial, appeal, revision) - Effect of compounding - setting aside conviction and acquittal - Non-obstante clause and overriding effect over the Code of Criminal Procedure - Article 142 of the Constitution - power to pass appropriate orders - Compensatory nature of cheque-dishonour offence

Compounding of offence - Section 147 of the Negotiable Instruments Act - Power to compound at any stage of proceedings (trial, appeal, revision) - Effect of compounding - setting aside conviction and acquittal - Compounding under Section 147 of the Negotiable Instruments Act was permissible at the appellate stage where the parties have settled and payment has been made, and compounding entails setting aside the conviction under Section 138 and acquittal of the accused. - HELD THAT: - The Court applied settled precedent that Section 147, inserted by amendment, makes offences under the Act compoundable and may be invoked at trial, on appeal or in revision; courts are to exercise this power liberally where the parties have effected settlement and the complainant accepts payment. The decisions summarized in the judgment establish the principle that once a case is allowed to be compounded under Section 147, the conviction under Section 138 should be set aside and the accused acquitted. On the facts, the petitioner had deposited the amounts, the complainant acknowledged receipt and consented to compounding; accordingly the court allowed compounding and set aside the orders of conviction and sentence of the courts below. [Paras 8, 12]

Compounding under Section 147 permitted; convictions under Section 138 set aside and petitioner acquitted.

Non-obstante clause and overriding effect over the Code of Criminal Procedure - Article 142 of the Constitution - power to pass appropriate orders - Compensatory nature of cheque-dishonour offence - Section 147's non-obstante clause gives the special statute overriding effect over the Cr.P.C.; the Court may, consistent with that provision and Article 142, pass orders to do complete justice in compounding matters, having regard to the compensatory character of cheque-dishonour offences. - HELD THAT: - The Court noted that Section 147, as a special provision with a non-obstante clause, has overriding effect over the Code's compounding provisions; analogy to Section 320(8) Cr.P.C. explains the legislature's intention though Section 147 itself is the operative provision. The Court observed that Article 142 empowers it to pass appropriate orders in aid of the statutory scheme to achieve justice in compounding applications. The compensatory profile of dishonour-of-cheque offences supports preference for settlement and compounding where parties have reconciled and dues paid. [Paras 9, 10, 11]

Section 147 overrides Cr.P.C. compounding provisions and, together with Article 142, supports the grant of appropriate reliefs when offences under the Act are compounded, especially given the compensatory nature of the offence.

Final Conclusion: Petition allowed: in view of the settlement and deposit of the amounts and consent of the complainant, the court invoked Section 147 of the Negotiable Instruments Act, set aside the convictions and sentences recorded by the courts below, acquitted the petitioner and directed release if he is confined.

Presumption under Section 139 of the Negotiable Instruments Act - reverse onus - rebuttal of presumption by the accused - dishonour of cheque - offence under Section 138 - appreciation of evidence in NI Act cases - stop payment instruction not sufficient without evidential support - sentencing - regulatory nature of NI Act offences and preference for fine over imprisonment

Presumption under Section 139 of the Negotiable Instruments Act - reverse onus - rebuttal of presumption by the accused - dishonour of cheque - offence under Section 138 - appreciation of evidence in NI Act cases - stop payment instruction not sufficient without evidential support - Whether the appellate Court (Sessions Judge) was justified in acquitting the accused by holding that the complainant failed to prove the financial transaction and the cheque was stopped on account of loss/theft. - HELD THAT: - The Court held that the complainant proved the essential ingredients of an offence under Section 138 by producing the cheque (Ex.P.1), admission of the signature by the accused, evidence of dishonour and service of statutory notice (paras 9, 15). Once execution/admission of the cheque is established, the statutory presumptions under Sections 118 and 139 operate and the burden shifts to the accused to rebut that presumption on preponderance of probabilities. The accused's defence - that the cheque was lost/ stolen and that a third party misused it after years - rested only on his reply and was not supported by oral or documentary evidence (paras 13-19). No bank officials or other witnesses were examined to show intimation to the bank, stop payment instructions, or any intervening misuse; no bank statements or corroboration were produced (paras 18-21). The Sessions Judge erred in placing the burden on the complainant to prove the source of funds or to produce bank statements when the statutory presumption had not been rebutted. On this appreciation the trial Court's finding of guilt was held to be legally sound and the acquittal by the First Appellate Court was set aside (paras 21-22). [Paras 15, 18, 19, 21, 22]

The appellate acquittal was set aside and the conviction under Section 138 of the Negotiable Instruments Act was confirmed.

Sentencing - regulatory nature of NI Act offences and preference for fine over imprisonment - Whether the sentence of imprisonment imposed by the trial Court should be maintained or modified having regard to the nature of the transaction between relatives. - HELD THAT: - Although the conviction was confirmed, the Court observed that cheque bounce offences are regulatory in character and, in the factual matrix - a loan between relatives for domestic/financial needs - imprisonment was not appropriate. Relying on the principle that enhanced fine and compensation may meet the ends of justice in such cases, the Court held that the custodial sentence imposed by the trial Court should be set aside and substituted by a monetary penalty (paras 26-28). The order of compensation to the complainant was upheld and a limited fine was imposed with default imprisonment as a consequential contingency (paras 26-28). [Paras 26, 28]

The sentence of six months' imprisonment was set aside; the accused was sentenced to pay a fine of Rs. 5,000 (with default simple imprisonment for one month) and the trial Court's order of payment of compensation to the complainant was upheld.

Final Conclusion: The revision is allowed in part: the Sessions Court's acquittal is set aside; the conviction under Section 138 of the Negotiable Instruments Act is restored; the custodial sentence is modified to a fine of Rs. 5,000 (default one month) while the order for payment of compensation to the complainant is confirmed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Compensatory aspect to be given priority over punitive aspect in cheque dishonour cases - Judicial discretion in sentencing under Section 138 - Modification of sentence and fine in criminal conviction

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Conviction under Section 138 of the Negotiable Instruments Act is sustainable on the evidence produced - HELD THAT: - The High Court found that the complainant proved the essential ingredients of Section 138 by oral and documentary evidence including the cheque, bank endorsements and proof of service of notice. The court applied the statutory presumption under Section 139 which shifted the onus to the accused. The accused led defence evidence and denied the transaction but failed to rebut the presumption by preponderance of probabilities; assertions of a prior transaction with the complainant's brother and of a blank cheque were not supported by legally admissible evidence or contemporaneous steps (such as issuing notice or civil steps) that would make the defence probable. Relying on the reasoning of the trial and appellate courts and precedent cited by them, the conviction was held to be based on legally acceptable evidence and was therefore upheld. [Paras 11]

Conviction for the offence punishable under Section 138 of the Negotiable Instruments Act is confirmed and upheld.

Compensatory aspect to be given priority over punitive aspect in cheque dishonour cases - Judicial discretion in sentencing under Section 138 - Modification of sentence and fine in criminal conviction - Sentence of fine and imposition of imprisonment were excessive and required modification; compensation to complainant is to be maintained with reduction in overall fine and abolition of appellate court cost - HELD THAT: - The Court examined sentencing principles in cheque dishonour cases, emphasising the compensatory object of Section 138 as articulated by the Supreme Court and the scope for judicial discretion to impose only fine in appropriate cases. Considering the nature of transaction (domestic/monetary loss), pendency, relationship between parties and precedents (including Damodar S. Prabhu, Somnath Sarkar, Bir Singh and other cited authorities), the Court held that the sentence confirmed by the trial and appellate courts - namely a fine of Rs. 3,00,000/- with default imprisonment of six months and an appellate cost - was disproportionate. The trial court's award of compensation to the complainant was reasonable and retained, but the portion directed to the State as fine and the overall quantum were reduced so as to align punishment with the compensatory object and exercise of sentencing discretion. [Paras 13, 18, 19, 20]

Sentence modified: fine reduced and reallocated so that compensation awarded to complainant is upheld, overall fine curtailed and default imprisonment limited; appellate court's order imposing costs is set aside.

Final Conclusion: Revision petition allowed in part: conviction under Section 138 is affirmed; sentence is modified to reduce the fine and limit default imprisonment while upholding compensation to the complainant and setting aside the appellate court's cost order; records to be returned to the trial court.