TaxTMI Updates e-Newsletter
Apr 29,2021

Taxability of goods put up in unit containers bearing a brand name - actionable claim or enforceable right in a court of law - forgoing actionable claim to avail exemption - assessment based on seized invoices, bill books and stock - imposition of tax, interest and penalty under Section 74 and Section 50

Taxability of goods put up in unit containers bearing a brand name - actionable claim or enforceable right in a court of law - forgoing actionable claim to avail exemption - assessment based on seized invoices, bill books and stock - Whether the petitioner was liable to pay GST on sales of rice packaged in unit containers bearing brand names Aahar Normal, Aahar Gold and Aahar Premium for the period in question - HELD THAT: - The Court upheld the concurrent findings of the adjudicating and appellate authorities that the department's surprise visit yielded invoices, bill books and a sizable quantity of packaged rice bearing the said brand names, and that the taxable supplies were determinable from those records. The amendment effected by Notification dated 22.09.2017 expanded the scope from goods "bearing a registered brand name" to goods "bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right in a court of law is available", subject to waiver of such claim where conditions are met. The petitioner's contention that the brands were unregistered did not absolve liability because an actionable claim could still exist; the petitioner had not validly forgone such claim as required by the Notification. The defence that the seized packaged stock was only for internal use or old stock was rejected because it was unsupported by evidence. The authorities therefore correctly assessed the taxable value from seized records and confirmed the tax demand. [Paras 8, 9, 10, 11]

Petitioner liable to pay GST on the supplies of packaged rice for the period assessed; conclusion of taxability upheld.

Imposition of tax, interest and penalty under Section 74 and Section 50 - assessment based on seized invoices, bill books and stock - Whether invocation of extended period and imposition of interest and penalty were justified - HELD THAT: - The appellate authority found suppression of material facts with intent to evade payment and that the department detected the case through its efforts. The Court found no error in the appellate conclusion that extended period invocation and penalty under the relevant provisions were justified. Interest under the applicable provision was ordered on the confirmed demand. The appellate authority's reasoning that available records and detained goods supported the conclusion that supplies liable to tax had been made was accepted. [Paras 12]

Invocation of extended period and imposition of interest and penalty affirmed.

Final Conclusion: The writ petition is dismissed; the concurrent findings of tax liability, interest and penalty based on seized invoices, records and packaged stock for the stated period are upheld.

Credit for tax deducted - tax deducted at source (TDS) - assessability of income - principal-agent / collection agent relationship - Section 199 of the Income Tax Act - Rule 37BA of the Income Tax Rules - retrospective application of procedural amendment

Credit for tax deducted - tax deducted at source (TDS) - principal-agent / collection agent relationship - assessability of income - Section 199 of the Income Tax Act - Whether the assessee was entitled to claim credit for TDS shown in certificates issued in its name though the corresponding subscription receipts were not offered to tax in its hands because those receipts were collected on behalf of M/s. Sun TV Network Limited - HELD THAT: - The Tribunal and the first appellate authority found, on the basis of the Agreement dated 14.10.2002 and accounting treatment, that the assessee acted as a collection agent for M/s. Sun TV Network Limited and the subscription amounts were not the assessee's income but were routed through a separate "Subscription Charges" account and subsequently remitted to the principal. The Assessing Officer's denial rested on the ground that the subscription income was not offered to tax by the assessee. The Court accepted the factual finding that only commission and interest were assessable in the assessee's hands and that the subscription collections were the principal's income. Given that tax had been deducted by the cable operators and paid to the Government, the assessee was entitled to credit for the TDS while assessing its commission income, and denying credit would result in double taxation when the underlying subscription receipts are taxed in the hands of the principal. The Court held that, on the facts, the Tribunal correctly applied Section 199 and related principles to allow TDS credit to the assessee. [Paras 12, 13, 14]

Allowed the assessee's claim to credit for TDS certificates issued in its name because the subscription receipts were found to be collections on behalf of the principal and not assessable as the assessee's income.

Rule 37BA of the Income Tax Rules - retrospective application of procedural amendment - Section 199 of the Income Tax Act - Whether the amended provisions of Rule 37BA(2)(i) (effective 01.11.2011) were applicable to the assessment years before that date - HELD THAT: - The Court observed that Rule 37BA(2)(i) was amended with effect from 01.11.2011. The disputes in the present appeals related to Assessment Years 2009-10, 2010-11 and 2011-12 and therefore the amended provision did not apply to these years. The Court examined the authorities cited by the Revenue and the assessee, noted distinctions in factual matrices and temporal effect of the rule amendment, and concluded that the post-01.11.2011 amendment could not be invoked to deny credit in the years under consideration. [Paras 15, 16, 18]

Held that the amended Rule 37BA(2)(i) (effective 01.11.2011) is not applicable to the assessment years in dispute.

Credit for tax deducted - precedent and consistency of decisions - Whether the Tribunal was justified in following its earlier decision in the assessee's own case and whether the Tribunal and CIT(A) orders deserved interference - HELD THAT: - The Court reviewed the Assessing Officer's failure to consider the agreement and the accounting treatment, and found no error in the Tribunal's reliance on earlier findings that subscription collections were for the principal and that the assessee was entitled to TDS credit. The Court compared the facts with the case law cited by Revenue and found them distinguishable. Having considered the record and the authorities, the Court found the Tribunal's and CIT(A)'s orders to be just and proper and that there was no substantial question of law warranting interference. [Paras 21, 22]

Upheld the orders of the Tribunal and CIT(A); dismissed the Revenue appeals.

Final Conclusion: The High Court dismissed the Revenue's Tax Case Appeals and upheld the Tribunal's and CIT(A)'s orders: the assessee was held entitled to credit for TDS certificates issued in its name because the subscription collections were factual collections on behalf of the principal and not assessable in the assessee's hands, and the post-01.11.2011 amendment to Rule 37BA(2)(i) was not applicable to the assessment years before that date.

Explanation 3 to Section 271(1)(c) of the Income Tax Act - deemed concealment of income - reasonable cause for delay in furnishing return - notice under Section 148 - survey under Section 133 A - prospective applicability of statutory amendment

Explanation 3 to Section 271(1)(c) of the Income Tax Act - deemed concealment of income - Confirmation of penalty under Section 271(1)(c) by applying Explanation 3 for the assessment years 1999-2000, 2000-2001 and 2001-2002. - HELD THAT: - The court examined whether the three conditions in Explanation 3 - failure to furnish return within the period specified in section 153(1), non issuance of notice under clause (i) of section 142(1) or section 148 until the expiry of that period, and satisfaction of the Assessing Officer that the person had taxable income - were fulfilled. The Tribunal's finding that all three conditions were met was accepted: returns were not filed within the due dates, a survey under section 133 A preceded issuance of notices under section 148, and the Assessing Officer was satisfied of taxable income. The court treated Explanation 3 as the statutory basis for deeming concealment and upheld the Tribunal's application of that Explanation to sustain the penalty under Section 271(1)(c). [Paras 6, 7, 8]

Tribunal correctly confirmed the penalty under Section 271(1)(c) by applying Explanation 3, and that confirmation is upheld.

Reasonable cause for delay in furnishing return - Whether the assessee established reasonable cause for not furnishing returns within the time prescribed under section 153(1). - HELD THAT: - The assessee did not offer any bona fide reason or documentary evidence before the authorities to justify non furnishing of returns on the due dates or within the time allowed under section 153(1). The Tribunal's observation that the assessee failed to demonstrate or elaborate any reasonable cause was accepted. The absence of proof or explanation led to rejection of the contention that there was reasonable cause for the delay. [Paras 6]

Assessee failed to establish reasonable cause for delayed filing; the finding of lack of reasonable cause is upheld.

Prospective applicability of statutory amendment - Explanation 3 to Section 271(1)(c) of the Income Tax Act - Whether the amended Explanation 3 (omitting the words 'who has not previously been assessed under this Act' effective 01.04.2003) could be read as excluding an assessee previously assessed for assessment years 1999-2000 to 2001-2002, or whether the amendment was impermissibly applied retrospectively. - HELD THAT: - The court noted that the assessee had not filed returns before the amendment; returns in the present case were filed after issuance of notices dated 23.12.2004 and only after a survey under section 133 A and subsequent audit. The plea that the post 2003 amendment operates to exclude an existing assessee was considered without merit in the facts of this case because the returns were not filed prior to the amendment and the three conditions of the Explanation were satisfied. The court also distinguished the cited High Court decisions on their facts and reasoned that those authorities did not apply because either filing dates or fulfilment of Explanation 3's conditions differed. [Paras 5, 6, 7]

The contention that the amended Explanation 3 should preclude levy of penalty in these assessment years or that the amendment was being applied retrospectively has no substance on the facts; the Tribunal's application of the Explanation stands.

Final Conclusion: Appeals dismissed; the Tribunal's confirmation of penalty under Section 271(1)(c) based on Explanation 3 is upheld, the assessee failed to establish reasonable cause for delayed filing, and the challenge to the applicability of the post 2003 amendment is rejected.

Deduction under Section 10A - exclusion of expenses incurred in foreign currency from total turnover for computing deduction under Section 10A - allowability of expenses on technical services provided outside as deduction from total turnover - applicability of Clauses (ii) and (iii) of Section 10A/10B regarding splitting/reconstruction and transfer of plant and machinery - stage of computation of deductions under Sections 10A/10B (Chapter IV versus Chapter VI)

Exclusion of expenses incurred in foreign currency from total turnover for computing deduction under Section 10A - allowability of expenses on technical services provided outside as deduction from total turnover - Travelling expenditure incurred in foreign currency is to be reduced from total turnover for the purpose of computing deduction under Section 10A, and similar foreign-currency expenses for technical services are to be excluded from total turnover in proportion. - HELD THAT: - The Court followed the ratio of the Supreme Court in Commissioner of Income-tax, Central - III v. HCL Technologies Ltd., holding that expenses such as freight, telecommunication, insurance or expenses incurred in foreign exchange for providing technical services abroad, which are excluded from export turnover, must in the same proportion be excluded from total turnover to give effect to the legislative scheme and to avoid absurdity or futility in the formula for computing the deduction. Applying those precedents, the Court held that the question posed in this appeal is covered by the said decisions and must be answered against the Revenue and in favour of the assessee. [Paras 3, 7]

The question whether travelling and other foreign-currency expenses must be reduced from total turnover for computing deduction under Section 10A is answered in favour of the assessee; such expenses shall be excluded from total turnover in the same proportion as excluded from export turnover.

Applicability of Clauses (ii) and (iii) of Section 10A/10B regarding splitting/reconstruction and transfer of plant and machinery - stage of computation of deductions under Sections 10A/10B (Chapter IV versus Chapter VI) - The conditions in Clauses (ii) and (iii) do not preclude deduction under Section 10A/10B where there is only a transfer of business location (not splitting/reconstruction) and earlier decisions establishing the correct stage of computation were followed; consequently the assessee is entitled to the deduction. - HELD THAT: - Relying on earlier decisions of this Court and the Tribunal (as extracted in the judgment), the Court observed that shifting business to an STPI area without reconstructing or splitting the business and without disqualifying transfer of plant and machinery does not attract Clauses (ii) and (iii) so as to deny deduction. The Court also noted authority holding that deductions under Sections 10A/10B are to be applied at the computation stage under Chapter IV and not deferred by the Revenue's method of first setting off carry forward/unabsorbed depreciation to nullify the deduction. On these bases the Court concluded the impugned contentions in respect of these clauses are answered in favour of the assessee. [Paras 3, 7]

The Tribunal's and the Court's earlier findings on Clauses (ii) and (iii) and on the proper stage of computing deductions apply; the assessee is entitled to deduction and the Revenue's challenge fails.

Final Conclusion: Following binding decisions of the Supreme Court and this Court, the substantial question(s) of law raised by the Revenue are answered against the Revenue and in favour of the assessee; the Tax Case Appeal is dismissed and no costs are awarded.

Notice under Section 274 read with Section 271AAB - Penalty under Section 271AAB - Requirement to specify clause of Section 271AAB - Procedural mandatory nature of penalty proceedings - Validity of penalty notice - Distinction from Sandeep Chandak principle

Notice under Section 274 read with Section 271AAB - Validity of penalty notice - Requirement to specify clause of Section 271AAB - Procedural mandatory nature of penalty proceedings - Penalty under Section 271AAB was rightly vacated because the notice initiating penalty proceedings was defective for failing to specify the particular clause of Section 271AAB(1) under which proceedings were proposed to be initiated. - HELD THAT: - The Court held that penalty proceedings under Section 271AAB are independent and governed by a prescribed procedure which the Assessing Officer must follow. Section 271AAB contains three distinct contingencies and the AO must indicate which limb he proposes to invoke so that the assessee can make an effective reply. The reproduced penalty notice was vague, did not mark or strike out irrelevant portions, and failed to specify the particular clause of Section 271AAB relied upon, thereby denying the assessee a reasonable opportunity to contest the jurisdictional aspect. A defective notice going to the root of the matter vitiates the penalty proceedings and the Tribunal was justified in setting aside the penalty. [Paras 14, 15, 17, 18]

Penalty vacated for want of a valid notice; Tribunal's order confirmed.

Distinction from Sandeep Chandak principle - Penalty under Section 271AAB - The Court distinguished the decision in PCIT v. Sandeep Chandak and held that even where an assessee's statement during search admits undisclosed income, the Assessing Officer must still specify which clause of Section 271AAB(1) is being invoked in the penalty notice. - HELD THAT: - While accepting the principle that an admission in a search statement may attract Section 271AAB, the Court emphasized that attraction of the provision does not dispense with the procedural requirement of the notice. The factual position in Sandeep Chandak differed; in the present case the defect lay in the notice's failure to identify the specific limb of Section 271AAB(1), a requirement necessary for the assessee to address the charge effectively. Hence Sandeep Chandak did not salvage the defective notice here. [Paras 16]

Sandeep Chandak distinguished; absence of clause specification in notice rendered penalty proceedings invalid.

Validity of penalty notice - Procedural mandatory nature of penalty proceedings - The fact that the assessee filed replies and was heard did not cure the defect in a vague notice which failed to disclose the specific clause of Section 271AAB invoked. - HELD THAT: - Revenue's contention that the assessee comprehended the notice and replied was rejected. The Court observed that mere participation in proceedings cannot validate a notice that is substantively defective and which denies a meaningful opportunity to contest the particular statutory limb invoked. The procedure prescribed by the Act for initiating penalty cannot be dispensed with merely because the assessee submitted responses. [Paras 11, 15]

Assessee's replies did not cure the fundamental defect in the notice; penalty could not stand.

Final Conclusion: The appeals are dismissed; the Tribunal's order vacating the penalty imposed under Section 271AAB is confirmed for want of a valid notice which failed to specify the clause of Section 271AAB relied upon, and related contentions are accordingly rejected.

Void ab initio where assessment/reopening is in the name of a non existent (amalgamating) company - doctrine of merger / amalgamation - amalgamating company ceases to exist and cannot be assessed - Section 292B - distinction between curable clerical error and substantive jurisdictional defect - no estoppel by participation where proceedings are initiated against a non existent entity - binding precedent under Article 141 - Maruti Suzuki India Ltd. governing similar facts

Void ab initio where assessment/reopening is in the name of a non existent (amalgamating) company - doctrine of merger / amalgamation - amalgamating company ceases to exist and cannot be assessed - Section 292B - distinction between curable clerical error and substantive jurisdictional defect - no estoppel by participation where proceedings are initiated against a non existent entity - Validity of reopening and reassessment where notice under section 148 and the subsequent assessment were issued and framed in the name of an entity that had ceased to exist on amalgamation - HELD THAT: - The Tribunal upheld the CIT(A)'s quashing of the reopening because the notice under section 148 and the assessment were issued in the name of the amalgamating company which, by operation of the approved scheme of amalgamation, had ceased to exist. The decision follows the binding reasoning of the Hon'ble Supreme Court in Maruti Suzuki India Ltd., which affirmed that where an assessment is initiated or completed against a non existent/amalgamating entity after merger, the proceedings are a substantive illegality and void ab initio. The Tribunal rejected Revenue's contention that the defect was a mere clerical error curable under section 292B, distinguishing the peculiar factual matrix of cases (such as Skylight Hospitality LLP) where substantial material showed the notice was always intended for the successor. Participation by the successor in proceedings or failure to object earlier does not estop the assessee from challenging jurisdiction where the entity assessed no longer exists; the assessing officer's assumption of jurisdiction on a nonexistent legal person is fundamentally at odds with the doctrine of merger and cannot be sustained.

Notice under section 148 and the reassessment framed in the name of the non existent/amalgamating company are quashed; reopening and assessment are void.

Final Conclusion: The Revenue's appeal is dismissed; the reopening under section 147/148 and the reassessment issued in the name of the amalgamating (non existent) company are quashed, in conformity with the governing precedent and legal principles on amalgamation and jurisdiction.

Remand for de-novo consideration - ex-parte assessment - opportunity of hearing - failure to appear before assessing officer - penalty under section 271A - assessment under section 144

Remand for de-novo consideration - ex-parte assessment - opportunity of hearing - failure to appear before assessing officer - assessment under section 144 - Remittance of the quantum assessment to the Assessing Officer for de-novo consideration after recording non-appearance of the assessee. - HELD THAT: - The Tribunal found that the Assessing Officer had posted the case on several occasions and that neither the assessee nor his representative appeared before the AO on the given hearing dates; the assessee also failed to improve his case before the CIT(A). Although the AO and the CIT(A) proceeded to pass orders on the materials available on record, the Tribunal, in the interest of justice and having considered the nature of the issues and the prayer made by the assessee, exercised its discretion to remit the matter to the file of the Assessing Officer for fresh adjudication. The Tribunal cautioned the assessee to cooperate promptly in the proceedings and warned that failure to do so would permit the Revenue to pass appropriate orders on merits based on the record. [Paras 5, 6]

Quantum appeal remitted to the Assessing Officer for de-novo consideration; appeal allowed for statistical purposes and assessee cautioned to cooperate.

Penalty under section 271A - remand for de-novo consideration - Remittance of the penalty appeal under section 271A to the Assessing Officer for fresh adjudication contingent upon the outcome of the remitted quantum proceedings. - HELD THAT: - The Tribunal held that since the quantum matter has been remitted to the Assessing Officer for de-novo consideration, the penalty appeal, which is factually and legally linked to the determination of quantum, must also be remitted to the Assessing Officer to be adjudicated afresh in the light of the outcome of the quantum proceedings. Accordingly, the Tribunal did not decide the levy of penalty on merits but directed fresh adjudication by the AO. [Paras 7]

Penalty appeal remitted to the Assessing Officer for fresh adjudication pursuant to the outcome of the remitted quantum proceedings; appeal allowed for statistical purposes.

Final Conclusion: Both the quantum and penalty appeals are remitted to the Assessing Officer for de-novo consideration-quantum for fresh adjudication after affording hearing to the assessee, and the penalty appeal for fresh adjudication in accordance with the outcome of the quantum proceedings; both appeals are allowed for statistical purposes.

Deduction under section 36(1)(va) for employee's contribution to provident fund - requirement to credit employee's contribution to the employee's account on or before the due date under the Provident Fund Act - distinction between employee's contribution under section 36(1)(va) and employer's contribution under section 43B - non-application of section 43B to employee's contribution - crediting to employees' accounts as condition precedent to deduction

Deduction under section 36(1)(va) for employee's contribution to provident fund - requirement to credit employee's contribution to the employee's account on or before the due date under the Provident Fund Act - non-application of section 43B to employee's contribution - Deduction claimed for employee's contribution to Provident Fund was not allowable where the amounts were not credited to employees' accounts by the due date prescribed under the relevant Provident Fund Act. - HELD THAT: - The Tribunal applied section 36(1)(va) which allows deduction only if the sum received from employees is credited by the assessee to the employees' accounts in the relevant fund on or before the 'due date' as defined in the Explanation to section 36(1)(va). The bench noted that section 43B deals with employer's contributions and does not operate to alter the specific requirement in section 36(1)(va) for employee's contributions. Reliance was placed on decisions of the Hon'ble Gujarat and Kerala High Courts and earlier Tribunal precedent which hold that the employer cannot claim deduction for employees' contributions unless credited to the concerned fund/employee accounts within the statutory due date; the deletion or amendment of provisos to section 43B does not amend or negate the Explanation to section 36(1)(va). Applying these principles to the facts, the Tribunal found no infirmity in the orders of the revenue authorities denying the deduction where the employee contributions were paid after the due date under the Provident Fund Act. [Paras 4, 5, 6, 7]

Orders of the revenue authorities confirmed; deduction disallowed as employee contributions were not credited by the statutory due date.

Final Conclusion: Both appeals dismissed; the Tribunal confirmed the denial of deduction for employee's provident fund contributions for AYs 2017-18 and 2018-19 because the amounts were not credited to employees' accounts within the due date under the Provident Fund Act, and held that section 43B does not override the specific requirement in section 36(1)(va).

Search and seizure - presumption of truth of seized material u/s. 132(4) r.w.s. 292C - addition on account of unexplained cash credits - burden of proof to explain bank deposits / past savings - treatment of promissory notes as belonging to third parties - distinction between repayment of principal and interest for assessment - telescoping benefit against unaccounted receipts

Presumption of truth of seized material u/s. 132(4) r.w.s. 292C - search and seizure - addition on account of unexplained receipts - Addition of alleged unaccounted receipt of Rs. 30 lakhs qua distribution rights upheld for AY 2005-06. - HELD THAT: - The Tribunal affirmed the CIT(A)'s confirmation of the addition because the lower authorities relied on incriminating material found and seized during search (Annexure-A/DSPR/01) and applied the statutory presumption in relation to the seized documents. The authorised representative did not rebut the seized material or the findings on assessee's modus operandi and search statement; consequently the addition on account of unaccounted receipt was sustained. [Paras 2]

Addition of Rs. 30 lakhs confirmed.

Search and seizure - presumption of truth of seized material u/s. 132(4) r.w.s. 292C - addition on account of sundry creditors - Addition of sundry creditors amounting to Rs. 14,01,000/- upheld for AY 2006-07. - HELD THAT: - The CIT(A)'s findings were in line with the detailed discussion in earlier assessment years and were based on material seized during the search. The Tribunal applied principles of judicial consistency in affirming the CIT(A)'s conclusion, noting that the assessee did not successfully challenge the seized material relied upon to make the addition. [Paras 3]

Addition of Rs. 14,01,000/- confirmed.

Treatment of promissory notes as belonging to third parties - search and seizure - addition on account of unexplained liability - Addition of Rs. 12 lakhs representing three promissory notes deleted for AY 2009-10. - HELD THAT: - The Tribunal observed that original promissory notes were found and seized, indicating the documents belonged to the named third parties and that the loan transactions had not been completed or paid by the assessee. Revenue failed to show any payment by the assessee in respect of these notes. On this basis the Tribunal held the sums could not be treated as the assessee's unexplained income and directed deletion of the addition. [Paras 4]

Addition of Rs. 12 lakhs deleted.

Distinction between repayment of principal and interest for assessment - telescoping benefit - Addition relating to borrowals from Shri G. Shoban Babu partly deleted and restricted to interest component for AY 2010-11; telescoping benefit directed. - HELD THAT: - The lower authorities had identified the source of the impugned sum as repayment to Shri G. Shoban Babu. The Tribunal held that repayment of principal does not constitute diversion of the assessee's unexplained income; however the interest component attributable to the assessee could be treated as income and added. The Tribunal further directed that the assessee be given telescoping benefit of earlier confirmed unaccounted receipts (the Rs. 30 lakhs and sundry creditors) against the unaccounted interest addition, and ordered necessary computation. [Paras 5]

Addition restricted to interest component; principal repayment not treated as unexplained income; telescoping benefit to be given.

Addition on account of unexplained cash credits - burden of proof to explain bank deposits / past savings - Addition of Rs. 9,43,703/- as unexplained bank deposits confirmed for AY 2010-11 in the case of the wife-assessee. - HELD THAT: - The assessee claimed the deposits were out of past savings and produced written submissions but did not furnish evidentiary proof such as a cash flow statement to substantiate the claim. The Assessing Officer granted credit for a small portion and treated the remainder as unexplained credits. The CIT(A) upheld the addition, and the Tribunal found no basis to interfere given the lack of documentary evidence to discharge the burden of proof. [Paras 6]

Addition of Rs. 9,43,703/- confirmed.

Final Conclusion: The Tribunal dismissed the appeals challenging the additions of Rs. 30 lakhs (AY 2005-06) and Rs. 14,01,000/- (AY 2006-07), allowed deletion of Rs. 12 lakhs (AY 2009-10), partly allowed the appeal in AY 2010-11 by restricting the addition to interest and directing telescoping benefit, and dismissed the wife-assessee's appeal for AY 2010-11 upholding the unexplained deposits addition.

Income from house property - Income from other sources - ownership of building for taxation under head house property - inseparability test under section 56(2)(iii) - separable letting of building and plant/equipment

Income from house property - Income from other sources - separable letting of building and plant/equipment - inseparability test under section 56(2)(iii) - ownership of building for taxation under head house property - Classification of rental receipts from letting of factory building and letting of plant/equipment as taxable under the head "Income from house property" or as "Income from other sources". - HELD THAT: - The Tribunal found that the assessee, having taken land on lease for 99 years and having constructed the factory building, was the owner of the building for the purposes of charging rent to tax under the head Income from house property. The lease agreements delineated the property portion and the equipment portion separately, and the rent receipts for each were separately ascertainable; the receipts from letting of plant and machinery were minor and incidental while the major receipts arose from leasing the factory premises. Applying the statutory test embodied in the inseparability test under section 56(2)(iii), the Tribunal held that section 56 applies only where the letting of building is inseparable from the letting of machinery, plant or furniture. As the facts showed separable transactions, the rent for the building is taxable under Income from house property, while rent for equipment would be assessable under the appropriate head as applicable. The Tribunal relied on the judicial approach recognising that income from letting of buildings ordinarily falls under the head Income from house property except where letting is inseparable from machinery or equipment, as noted in CIT v. Chennai Properties and Investments Ltd. (referring to Sultan Brothers ) and other precedents including D.R. Puttanna Sons Private Limited and Shambhu Investment Private Limited , and applied those principles to the lease documents and rent breakup before it. Consequently, the Assessing Officer's reclassification of the property rent as Income from other sources on the ground of inseparability was reversed because the factual matrix established separability. [Paras 9]

The rental income from letting of the factory building is taxable under the head Income from house property; the letting of equipment is separable and not to be merged under section 56(2)(iii). Accordingly, the appeals are allowed.

Final Conclusion: The Tribunal allowed the assessee's appeals for A.Ys. 2005-2006 to 2007-2008, 2012-2013 and 2013-2014, holding that the rent for the factory building is assessable under the head Income from house property because the assessee was the owner of the building and the letting of building and equipment were separable, so section 56(2)(iii) is not attracted.

Reopening of assessment on information from investigation u/s 147 - Client code modification - evidentiary requirement for treating modifications as tax-evasion device - Need for independent verification and corroborative evidence before making additions

Reopening of assessment on information from investigation u/s 147 - Validity of reassessment proceedings initiated under section 147 on the basis of information received from the investigation wing. - HELD THAT: - The Tribunal examined rival contentions on whether reopening under section 147 was justified where the AO acted on information from the investigation wing alleging client code modification by the broker. The Tribunal noted precedent supporting reassessment on such investigation reports and observed that the AO received information indicating diversion of profits by client code modification. Having considered the submissions and the authorities relied upon by the parties, the Tribunal found no merit in the assessee's challenge to initiation of reassessment and upheld the reopening made by the AO under section 147. [Paras 6]

Reopening under section 147 on the basis of information from the investigation wing was upheld; ground of appeal against reopening dismissed.

Client code modification - evidentiary requirement for treating modifications as tax-evasion device - Need for independent verification and corroborative evidence before making additions - Validity of the addition of income on account of alleged client code modifications by the broker and whether such additions could be sustained without further verification. - HELD THAT: - The Tribunal analysed the nature of client code modifications, recognising they are permitted to rectify genuine punching errors subject to exchange guidelines and time limits, and are meant to be an exception rather than routine. The Tribunal found that mere occurrence of client code modifications does not, by itself, justify drawing an adverse inference against the assessee. It emphasised that where a broker's records show modification to another client's code, the other party and the chain of transactions require investigation and corroborative evidence (such as evidence of cash transfer or other corroboration) to establish diversion of profits. The authorities below had not conducted or recorded any such independent verification of the other party or produced corroborative material showing transfer of funds; accordingly the Tribunal was not inclined to sustain the addition. Applying these reasons to the material on record, the Tribunal set aside the addition made by the AO and confirmed that the factual matrix did not support treating the modifications as a systematic tax-evasion device. [Paras 15, 16]

Addition on account of alleged client code modification deleted; appeal on this ground allowed.

Final Conclusion: Reopening of assessment under section 147 on the basis of information from the investigation wing was upheld, but the substantive addition made for alleged client code modifications was set aside for lack of independent verification and corroborative evidence; appeal therefore partly allowed.

Condonation of delay - approval under section 10(23C)(vi) - existence solely for educational purposes and not for purposes of profit - predominant object test - monitoring conditions and withdrawal of approval - reopening of assessment under section 147 - jurisdictional requirement of escapement of income and disposal of objections - GKN Driveshafts principle - duty to furnish reasons and to decide objections by a speaking order before proceeding with reassessment - limitation and time-bar for completion of reassessment

Condonation of delay - Impugned delay in filing certain appeals is condoned and the appeals admitted for adjudication on merits. - HELD THAT: - The assessee filed condonation petitions explaining delay due to consultation with senior counsel after CCIT rejected approval under section 10(23C). Applying established principles that delay supported by cogent reasons deserves to be condoned in the interest of substantial justice, the Tribunal found the delay to be neither intentional nor deliberate but due to circumstances beyond assessee's control and admitted the appeals for adjudication on merits. [Paras 3]

Delay in filing the listed appeals is condoned; cases taken up on merits.

Approval under section 10(23C)(vi) - existence solely for educational purposes and not for purposes of profit - predominant object test - monitoring conditions and withdrawal of approval - Applications for approval under section 10(23C)(vi) of the Act are to be allowed where the institution in the relevant years existed solely for educational purposes (predominant object), and the CCIT exceeded jurisdiction by invalidating the amended trust deed and denying approval. - HELD THAT: - The Tribunal reviewed the amended registered trust deed (26-03-2012), the audited accounts showing expenditure exceeding income for relevant years, registration under section 12AA, Tribunal's earlier findings in the assessee's own case and applicable Supreme Court and High Court precedents (including American Hotel, Queen's Educational Society and other authorities). It held that the threshold precondition for grant of approval is actual existence as an educational institution solely for educational purposes and not for profit; compliance with monitoring conditions may be dealt with subsequently and approvals may be granted subject to such monitoring. The CCIT erred by treating the amended deed as invalid and by acting as a civil court to determine validity instead of applying the legal tests for section 10(23C)(vi). Evidence of application of receipts to educational purposes, nature of fixed assets and 12AA registration supported the assessee's claim. Revenue's contentions regarding non educational objects, alleged unbridled powers of trustees, collections of certain fees and payments to trustees were found insufficient to rebut that the institution's predominant object and actual activities were educational and not for profit. [Paras 20, 23, 26, 31, 32]

Appeals seeking section 10(23C)(vi) approval in the listed ITA numbers are allowed; CCIT's orders denying approval set aside and approval to be granted / applications decided in accordance with observations (approvals allowed for the appeals specified).

Reopening of assessment under section 147 - jurisdictional requirement of escapement of income and disposal of objections - GKN Driveshafts principle - duty to furnish reasons and to decide objections by a speaking order before proceeding with reassessment - limitation and time-bar for completion of reassessment - Assessments completed under section 143(3)/147 for AYs 2005-06 to 2007-08 are quashed because the AO failed to comply with the duty to furnish and decide objections by a speaking order as required by GKN Driveshafts and the orders were time barred as per directions of the High Court. - HELD THAT: - The assessee challenged reopening on grounds of absence of escapement of income (having 12AA registration and applying receipts to charitable purposes) and non compliance with the High Court direction to complete assessment within a specified period. The Tribunal found that reasons recorded and material relied upon (non-grant of 10(23C)(vi)) did not establish escapement of income, and the AO did not dispose of objections filed by the assessee; remand records confirmed the AO had not passed a speaking order on those objections. Applying GKN Driveshafts, the AO was required to furnish reasons and decide objections by a speaking order before proceeding; failure to do so rendered reopening unsustainable. Additionally, the AO did not follow the High Court's timeline, rendering the assessments time barred. Consequently, reassessments and additions founded thereon could not stand. [Paras 15, 16]

Reassessment orders for AYs 2005-06, 2006-07 and 2007-08 passed under section 143(3)/147 are quashed; consequential additions become academic.

Final Conclusion: The Tribunal condoned the filing delays and on merits allowed the appeals for multiple assessment years by directing grant/recognition of approval under section 10(23C)(vi) for the specified appeals after applying the predominant object test and related precedents; separately, reassessment orders for AYs 2005-06 to 2007-08 were quashed for failure to furnish/dispose objections and for being time barred, rendering related additions unsustainable.

Reopening of assessment under section 147 - reason to believe - understated income / excessive deduction deemed escapement under Explanation 2(b) to section 147 - no fresh tangible material - initial assessment year - deduction under section 80-IC - application of section 80-IC(7) read with section 80-IA(5) - treatment of eligible business as only source of income

Reopening of assessment under section 147 - reason to believe - no fresh tangible material - understated income / excessive deduction deemed escapement under Explanation 2(b) to section 147 - Validity of reopening the assessment for AY 2008-09 under section 147 in the absence of fresh tangible material after intimation under section 143(1). - HELD THAT: - The Tribunal found that the reasons recorded for reopening relied solely on material already on record (details gathered while framing assessment for AY 2012-13 and the return/intimation under section 143(1) for AY 2008-09) and did not disclose any fresh tangible material coming to the Assessing Officer's possession after the intimation. While Explanation 2(b) to section 147 treats understated income or excessive claims in a furnished return as escapement, the Tribunal held that an Assessing Officer cannot validly convert post-intimation review of the accepted return into reassessment by invoking section 147 without any new tangible material. Applying the reasoning in Orient Craft Ltd. and related authorities, the Tribunal concluded that permitting reopening in such circumstances would render time limits and safeguards illusory and amount to an arbitrary exercise of power; accordingly jurisdiction to reopen was absent. The ground challenging reopening was therefore allowed in part and the assessment framed under section 143(3) read with section 147 was quashed for want of jurisdiction. [Paras 11, 12, 13]

Reopening under section 147 was invalid for want of fresh tangible material; assessment under section 143(3) read with section 147 is quashed for lack of jurisdiction.

Initial assessment year - deduction under section 80-IC - Whether assessment year 2007-08 is the initial assessment year for the eligible unit for computing deduction under section 80-IC. - HELD THAT: - The Tribunal examined the statutory definition of 'initial assessment year' in the context of section 80-IC(8)(v) and noted that the initial assessment year is the year relevant to the previous year in which the undertaking begins manufacture, commences operations or completes substantial expansion. There is no provision in section 80-IC analogous to the option available under section 80-IA(2); subsection (3) of section 80-IC mandates that the deduction commences with the initial assessment year. As the eligible unit commenced business on December 28, 2006 (relevant to AY 2007-08), the Tribunal upheld the Assessing Officer's conclusion that AY 2007-08 is the initial assessment year for section 80-IC purposes. [Paras 15]

AY 2007-08 is the initial assessment year for the eligible unit under section 80-IC.

Application of section 80-IC(7) read with section 80-IA(5) - treatment of eligible business as only source of income - deduction under section 80-IC - Whether losses of the eligible unit in the initial assessment year (AY 2007-08) must be set off against its profits in AY 2008-09 when computing deduction under section 80-IC(7) read with section 80-IA(5). - HELD THAT: - Subsection (7) of section 80-IC incorporates the non obstante provision of section 80-IA(5), which requires that profits and gains of an eligible business be computed 'as if such eligible business were the only source of income' for the previous year relevant to the initial assessment year and every subsequent year for quantifying the deduction. On a conjoint reading, the Tribunal held that the losses of the eligible unit in the initial assessment year must be set off against profits of that eligible unit in the succeeding year for the purpose of determining the permissible deduction under section 80-IC. Accordingly, the Assessing Officer correctly restricted the assessee's deduction by setting off the initial year loss against the AY 2008-09 profit. [Paras 16]

Loss of the eligible unit in AY 2007-08 must be set off against its AY 2008-09 profit for computing the section 80-IC deduction; the Assessing Officer's restriction of the deduction is upheld.

Final Conclusion: The Tribunal quashed the reassessment framed under section 143(3) read with section 147 for want of jurisdiction because no fresh tangible material was recorded after the intimation under section 143(1); however, on the merits it upheld that AY 2007-08 is the initial assessment year and that losses of the eligible unit in that year are to be set off against AY 2008-09 profits in computing the deduction under section 80-IC (thus restricting the allowable deduction as determined by the Assessing Officer).

International transaction - Marketing, Advertisement and Promotion (AMP) expenses as international transaction - Bright Line Test (BLT) - Burden on Revenue to prove existence of an international transaction - Separate entity concept - Segregated approach excluding routine selling and distribution expenses - Transfer pricing adjustment

International transaction - Marketing, Advertisement and Promotion (AMP) expenses as international transaction - Bright Line Test (BLT) - Burden on Revenue to prove existence of an international transaction - Transfer pricing adjustment - Whether AMP expenditure incurred by the assessee constituted an international transaction and whether the transfer pricing adjustment on account of AMP was sustainable - HELD THAT: - The Tribunal held that the TPO/DRP had failed to discharge the initial burden of demonstrating by tangible material that the assessee and its AEs had any arrangement, understanding or conduct showing they acted in concert such that AMP expenditure could be treated as an international transaction. The adjustment rested principally on the Bright Line Test (BLT) and on the claim that the assessee's AMP ratios were higher than comparables. Relying on precedent of the Jurisdictional High Court and the Tribunal's own earlier findings in the assessee's cases for AY 2008-09 and AY 2010-11, the Tribunal observed that BLT has been rejected as a valid basis for determining the existence of an international transaction or for computing ALP of AMP-related transactions. In the absence of objective, case-specific evidence demonstrating an agreement/arrangement or that benefits of AMP accrued to the AE, mere excess AMP spend or the use of a foreign brand/logo cannot alone establish an international transaction. Applying these principles and following its prior decisions in the assessee's favour, the Tribunal concluded there was no international transaction of AMP in the year under consideration and the transfer pricing adjustment therefore could not be sustained. [Paras 6, 7]

Adjustment on account of AMP transactions deleted and appeal of the assessee allowed; Revenue's appeal dismissed as infructuous.

Final Conclusion: Following earlier Tribunal and binding High Court precedents that reject BLT as a valid basis to infer international transactions from excess AMP spend and affirm the Revenue's initial burden to prove any arrangement or concerted conduct, the Tribunal deleted the AMP-related transfer pricing adjustment and allowed the assessee's appeal; the Revenue's cross-appeal was dismissed as infructuous.

Interlocutory nature of provisional release orders - compulsory registration under Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012 - classification of Multi Function Devices as Printers/Plotters - clarification by circular/office memorandum as interpretation of existing notification - provisional release remedy under the Customs regime - role of implementing authority vis a vis policy making Ministry (MeitY)

Interlocutory nature of provisional release orders - provisional release remedy under the Customs regime - Provisional release orders granted by Courts are interlocutory and cannot be treated as binding precedents to secure final relief by writ. - HELD THAT: - The Court held that orders of provisional release are interlocutory in nature and do not finally adjudicate liability; accordingly such orders cannot be invoked as precedent to obtain a writ directing release of goods. The Court relied upon the settled principle that provisional-release directions amount to an exercise of discretion and are subject to judicial review only on limited grounds (e.g., arbitrariness, irrationality), but are not conclusive on classification or statutory obligations. Consequently, prior interim releases do not bar the Department from applying changed statutory notifications or policy for subsequent consignments. [Paras 19, 34]

Provisional release orders are interlocutory and cannot be pressed into service as precedent to compel release of goods.

Compulsory registration under Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012 - classification of Multi Function Devices as Printers/Plotters - clarification by circular/office memorandum as interpretation of existing notification - Multi Function Devices (MFDs) fall within the category of Printers/Plotters notified under the Compulsory Registration Order and the office memoranda/circulars operate as clarifications of that existing position; inclusion effected by subsequent notification is applicable. - HELD THAT: - The Court examined the Registration Order and its Schedule which lists Printers/Plotters under the compulsory registration regime and noted that MeitY, by office memorandum and clarification circulars, consistently treated MFDs as covered by the Printers/Plotters entry. A clarification issued by MeitY (and subsequent notification of 01.04.2020) was held to be an elucidation of the pre existing scope rather than a novel inclusion by administrative fiat; circulars serve to clarify the original notification's scope and therefore apply to the imported goods. The Court rejected the contention that such clarification could not be relied upon by the Department or that the classification could only operate prospectively, observing that the changed legal position as reflected in the 01.04.2020 notification was of particular significance to consignments examined thereafter. [Paras 29, 30, 31, 32, 35]

MFDs are within the scope of Printers/Plotters under the Registration Order; MeitY's circulars/clarifications and the subsequent notification are operative and not merely prospective.

Role of implementing authority vis a vis policy making Ministry (MeitY) - provisional release remedy under the Customs regime - The writ court erred in directing release; matters of classification and enforcement of statutory notifications are to be addressed by the Department (with MeitY as necessary party), and applications for provisional release must be decided on merits by the authority. - HELD THAT: - The Court observed that classification issues and implementation of notifications under the Registration Order fall within the competence of the implementing authority and that MeitY is a proper and necessary party because it frames the policy/notification. The High Court should not, by writ, undertake classification or substitute its view for the Department's adjudicatory process. Accordingly, the earlier writ court directions for release were set aside; the Court directed the Customs Department to consider pending applications for provisional release afresh and decide them on merits in accordance with law and the prevailing notifications, within a fixed short timeline. [Paras 36, 37, 38, 40]

Impugned writ orders directing release set aside; Department to decide provisional release applications on merits (MeitY being necessary party where appropriate).

Final Conclusion: Writ appeals allowed; the impugned orders granting release are set aside. The Customs Department is directed to consider and decide the applicants' requests for provisional release on merits and in accordance with law (having regard to MeitY notifications and clarifications) within four weeks of receipt of the judgment. No costs.

Revision under section 129DD of the Customs Act - requirement of notice to show cause within one year under section 129DD(5)(b) - continuity of proceedings and no fresh show cause notice required at revisional stage - enhancement of penalty by revisional authority - penalty under section 112(a) and 112(b) of the Customs Act - statements recorded under section 108 of the Customs Act as evidence - principles of natural justice - opportunity of hearing

Revision under section 129DD of the Customs Act - requirement of notice to show cause within one year under section 129DD(5)(b) - continuity of proceedings and no fresh show cause notice required at revisional stage - Validity of revision-enhancement of penalty where no separate show cause notice was issued by the revisional authority within one year of the appellate order. - HELD THAT: - The Court construed sub section (5) of section 129DD to require that, where the appellate order has not itself enhanced penalty (or confiscated goods of greater value), the revisional process must give the affected person notice to show cause within one year from the date of the order sought to be modified. However, the Court held that revision is in continuity with the original proceedings and a literal requirement of issuing a fresh formal show cause notice at the revisional stage is not invariably necessary. In the present case the revisional authority issued hearing notices (including one dated within the statutory one year period) and the department's challenge to the appellate order amounted to continuation of the original proceedings; accordingly the absence of a separately titled show cause notice did not invalidate the revisional enhancement of penalty. [Paras 13, 14]

Enhancement of penalty by the revisional authority was not vitiated for want of a separate show cause notice where revision proceeded in continuance of original proceedings and the affected person received notice within the statutory period.

Principles of natural justice - opportunity of hearing - requirement of notice to show cause within one year under section 129DD(5)(b) - Whether there was breach of principles of natural justice by the revisional authority in hearing the matter in absence of the petitioner. - HELD THAT: - The Court examined the service and hearing opportunities afforded by the revisional authority. While the petitioner did not attend several listed hearing dates, he admitted receipt of at least one hearing notice within the prescribed period. The revisional authority had recorded that notices were issued on multiple dates and the petitioner had opportunities to attend. The Court found no demonstration of a lapse in affording an opportunity to the petitioner such as would amount to a denial of natural justice. [Paras 5, 13, 14]

No breach of principles of natural justice was made out; the petitioner was given notice and opportunity to be heard.

Statements recorded under section 108 of the Customs Act as evidence - penalty under section 112(a) and 112(b) of the Customs Act - enhancement of penalty by revisional authority - Whether the material on record including admissions and statements under section 108 justified imposition and restoration of the enhanced penalty. - HELD THAT: - The Court reviewed the evidentiary material relied upon by the three authorities: interception and trap details, statements recorded under section 108, contemporaneous panchnama, admissions by co accused and the petitioner concerning instructions to receive packets, phone call records and the recovery of bags containing currency and gold from an airport staff residence. The revisional authority considered these materials and concluded that the petitioner, by virtue of his position and conduct, facilitated smuggling and misused access to airport areas. The High Court found that the concurrent findings of the adjudicating, appellate and revisional authorities were supported by documentary and oral evidence and there was no justification to interfere on merits. [Paras 7, 8, 10, 15]

The evidence and recorded statements justified the revisional authority's restoration of the higher penalty; concurrent findings were sustained and interfered with no further.

Final Conclusion: Writ petition dismissed. The revisional authority validly enhanced and restored the penalty after due continuance of proceedings and on the basis of admissible evidence; no infirmity of notice or denial of hearing was shown to warrant interference.

Tribunal's power to wind up a company whose name has been struck off under Section 248 - Winding up on ground of failure to file financial statements or annual returns for five consecutive financial years - Preferential purchase right and reimbursement of expenses incurred by managing director during dormancy - Appointment and duties of Provisional Liquidator in winding up

Tribunal's power to wind up a company whose name has been struck off under Section 248 - NCLT can proceed with a petition for winding up even though the company's name has been struck off from the register of companies. - HELD THAT: - The Tribunal examined Section 248 and its sub-section (8) and held that removal of a company's name from the register under Section 248 does not affect the Tribunal's power to wind up that company. Relying on the clear language of sub-section (8), the Tribunal concluded that a struck-off company may still be subject to winding up proceedings before this forum and therefore the petition could be entertained despite the company's dissolution by strike-off. [Paras 11]

The Tribunal has jurisdiction to entertain and proceed with the winding up petition notwithstanding the company's name being struck off.

Winding up on ground of failure to file financial statements or annual returns for five consecutive financial years - The statutory ground under Section 271(d) for winding up, viz. failure to file financial statements or annual returns for five consecutive financial years, was satisfied. - HELD THAT: - On the record and the Registrar of Companies' report, the company had not filed statutory returns after the financial year ended 31.03.2000 and was struck off on 29.08.2018. The Tribunal found that the factual criterion required by Section 271(d)-non-filing of financial statements or annual returns for immediately preceding five consecutive financial years-was met, permitting winding up proceedings to be ordered on that ground. [Paras 12]

The Tribunal found the ground under Section 271(d) to be fulfilled and proceeded accordingly.

Preferential purchase right and reimbursement of expenses incurred by managing director during dormancy - The managing director's claim for reimbursement of expenses incurred in securing and maintaining the company's property and his request for preference to purchase the property were recognised and directions were given. - HELD THAT: - The Tribunal accepted that the managing director had incurred expenses for security, upkeep and record maintenance during the company's dormancy. While permitting disposal of the company's property, the Tribunal acknowledged the managing director's contribution and directed that he be given preference to purchase the property at a value mutually agreed between the petitioners and the managing director, thereby providing a mechanism to address his claim for expenses in the course of winding up. [Paras 13]

Respondent No.1 to be given preference to purchase the property at a mutually agreed value, and his spent expenses are to be recognised in that context.

Appointment and duties of Provisional Liquidator in winding up - A Provisional Liquidator was appointed and directed to take custody of assets, preserve the company's property, submit declarations and periodical reports, and file a final winding up report. - HELD THAT: - Exercising powers under Section 273 and other provisions, the Tribunal appointed a provisional liquidator from the panel for Kerala for the specified period, directed him to file a declaration regarding conflict or independence, required cooperation from existing management, authorised steps to take custody and protect assets, and mandated quarterly progress reports and a final winding up report within two months so that the Tribunal may pass the final winding up order. [Paras 14]

Provisional Liquidator appointed with specified duties and reporting obligations to carry forward the winding up process.

Final Conclusion: The Tribunal held that it has jurisdiction to wind up a company even after its name has been struck off; found the statutory non-filing ground under Section 271(d) satisfied; recognised the managing director's expenditure and granted him a preferential opportunity to purchase the property on mutually agreed terms; and appointed a provisional liquidator with directions to take custody of assets and report for completion of winding up.

Criminal breach of trust - cheating - issuance of process/summons - mens rea and corporate criminal liability - alter ego principle - effect of arbitration on criminal proceedings - limitation and delay in criminal complaints - exercise of inherent jurisdiction under Section 482 Cr.P.C.

Issuance of process/summons - criminal breach of trust - cheating - Validity of the Magistrate's order issuing process under Sections 406 and 420 read with Section 34 IPC and Section 15-HA of the SEBI Act - HELD THAT: - The Court examined the complaint, verification, the Section 202 inquiry report and the material placed before the Magistrate and held that the allegations disclose a prima facie case of criminal breach of trust and cheating. The police inquiry report recorded that the pledged shares were sold to a sister concern at minimal rates and later sold at higher prices, supporting the complaint's case. The High Court emphasised that at the stage of issuance of process the court should take the complaint and documentary material at face value without critically testing defenses, and found no infirmity in the Magistrate's order of 22nd March, 2017. However, in view of the complainant's renunciation in the present proceedings, the Court dropped Section 15-HA of the SEBI Act from that order and modified it to that extent. [Paras 14, 15, 20]

The Magistrate's issuance of process under Sections 406 and 420 read with 34 IPC is upheld and restored; Section 15-HA of the SEBI Act is dropped from the order.

Mens rea and corporate criminal liability - alter ego principle - Whether the company (accused No.1) is a necessary party and liable to criminal prosecution and whether directors can be proceeded against - HELD THAT: - Relying on the principles in Iridium India Telecom Ltd., the Court held that a corporation can be criminally liable where the acts are committed by persons in control of its affairs and that mens rea may be attributed on the alter ego principle. The Letter of Pledge was executed in favour of the company and, on the material, the company is a necessary and relevant party for proper adjudication; the contention that the company is being foisted with vicarious liability was characterised as a defence to be tested at trial. The Court rejected the argument that directors cannot be proceeded against merely because the accused is a company, observing that a corporate entity acts through its officers and directors and liability may follow if proved. [Paras 17, 18, 19]

Accused No.1-company is a necessary party and may be proceeded against; directors may be summoned and tried if the allegations are proved.

Effect of arbitration on criminal proceedings - exercise of inherent jurisdiction under Section 482 Cr.P.C. - Whether initiation of arbitral proceedings or an arbitration award precludes criminal proceedings or warranted quashing of the complaint at the stage of issuance of process - HELD THAT: - The Court applied the Supreme Court's reasoning (Priti Saraf) that arbitrability or existence of civil or arbitral remedies does not automatically oust criminal proceedings; the High Court need not examine correctness of the complaint at the pre-trial stage and should not quash prosecutions lightly under inherent jurisdiction. The fact that an arbitration award exists or is challenged under Section 34 does not stay its binding effect automatically in a manner that bars criminal prosecution; therefore invocation of arbitration by the accused has no bearing to defeat the criminal complaint at this stage. [Paras 12, 13]

Arbitral proceedings or an arbitration award do not oust or bar the criminal proceedings and do not justify quashing the complaint at the issuance-of-process stage.

Limitation and delay in criminal complaints - Whether delay in lodging the complaint / limitation bars the prosecution for offences of cheating under Section 420 IPC - HELD THAT: - The Court found that delay was explained by the complainant's witnesses in their verification and evidence and, further, held that where cheating under Section 420 IPC is alleged, limitation is not a bar as contended by the accused. Given the material and explanations furnished, the High Court found no ground at the issuance-of-process stage to hold the complaint barred by delay. [Paras 11, 14]

Delay does not bar the prosecution in the present complaint and the explanation furnished is acceptable for proceeding.

Final Conclusion: The impugned revisional orders are quashed and set aside; the Magistrate's order dated 22nd March, 2017 is restored insofar as it issued process under Sections 406 and 420 read with 34 IPC against the accused and accused No.1-company is retained as a necessary party; Section 15-HA of the SEBI Act is dropped from the order per the complainant's statement. The writ petitions filed by the complainant are allowed and those filed by the accused are dismissed. The Magistrate is directed to expeditiously dispose of the complaint within one year, subject to exclusions for pandemic disruption.

Approval of resolution plan under Section 31 of the Insolvency and Bankruptcy Code - Scrutiny of resolution plan for compliance with Section 30(2) of the Code - Compliance with Regulations 37 and 38 of the CIRP Regulations - Eligibility of promoter-successful resolution applicant under Section 240A and non-application of Section 29A - Priority of payment to operational creditors vis-a -vis financial creditors - Binding effect of approved resolution plan and cessation of moratorium

Scrutiny of resolution plan for compliance with Section 30(2) of the Code - Compliance with Regulations 37 and 38 of the CIRP Regulations - Approval of resolution plan under Section 31 of the Insolvency and Bankruptcy Code - The Tribunal satisfied that the resolution plan, as approved by the Committee of Creditors, meets the requirements of Section 30(2) of the Code and Regulations 37 and 38 and is liable to be approved under Section 31. - HELD THAT: - The Tribunal examined whether the plan provides for payment of CIRP costs, sets out payments to creditors, provides for management, implementation and supervision, and contains the declarations mandated by the Regulations. Having regard to the plan's provisions-payment schedules, implementation term, supervisory mechanism, and the declarations under Regulation 38-the Tribunal found that the plan conforms to the statutory criteria enumerated in Section 30(2) and the Regulations. Reliance was placed on settled authorities delineating the limited scope of the adjudicating authority's review of a CoC approved plan, and the Tribunal refrained from altering the commercial decision of the CoC, performing only the statutory scrutiny required by Section 30(2). [Paras 9, 11, 17]

Resolution Plan approved as meeting Section 30(2) and Regulations 37 and 38; to be sanctioned under Section 31.

Eligibility of promoter-successful resolution applicant under Section 240A and non-application of Section 29A - The Tribunal held that Section 29A does not render the successful resolution applicant ineligible and that the SRA is eligible under Section 240A as promoter of an MSME corporate debtor. - HELD THAT: - The Tribunal noted the SRA's status as the promoter and founder of the corporate debtor and that the corporate debtor is registered as an MSME. On that basis, and on the applicant's submissions and Form H, the Tribunal concluded that the disqualification under Section 29A does not apply and the SRA is eligible to submit and have its plan approved under the statutory framework. [Paras 9, 17]

SRA held eligible; Section 29A not attracted and does not bar approval of the plan.

Priority of payment to operational creditors vis-a -vis financial creditors - Binding effect of approved resolution plan and cessation of moratorium - The Tribunal confirmed that the plan provides payment priority to operational creditors as specified and that, upon approval, the plan is binding on all stakeholders and the moratorium under Section 14 ceases to have effect. - HELD THAT: - The Tribunal recorded that the resolution plan expressly provides for prioritized payments to operational creditors over the financial creditor and observed that the plan, having been approved by the CoC and found compliant with statutory requirements, will bind the corporate debtor, its creditors, employees, guarantors and other stakeholders. The Tribunal further directed that no creditors can claim beyond the liabilities provided in the plan and declared that the moratorium under Section 14 will cease from the date of the order. Supervisory and reporting obligations on the Resolution Professional for implementation were also imposed. [Paras 10, 11, 14, 18]

Plan's payment priorities accepted; approved plan binding on all stakeholders; moratorium ends; RP to supervise implementation and file periodic status reports.

Final Conclusion: The Tribunal allowed the application and approved the Resolution Plan submitted by Mr. Ashok Atre; the plan becomes effective immediately, is binding on the corporate debtor and all stakeholders, the moratorium under Section 14 ceases, and the Resolution Professional is directed to supervise implementation and file periodic status reports.

Condonation of delay in filing appeal under Section 61 - limitation ceiling of thirty days with a further extension of fifteen days - inapplicability of subsequent extension of limitation where cause of action and knowledge pre date the excluded period - obligation of Registry to furnish certified copy to non party - reliance on Mobilox principle for computing appellate limitation

Condonation of delay in filing appeal under Section 61 - limitation ceiling of thirty days with a further extension of fifteen days - reliance on Mobilox principle for computing appellate limitation - inapplicability of subsequent extension of limitation where cause of action and knowledge pre date the excluded period - Application to condone 15 days' delay beyond 30 days for filing appeal under Section 61 was not maintainable and was dismissed. - HELD THAT: - The Tribunal applied the settled rule that an appeal under Section 61 must be filed within 30 days of the Adjudicating Authority's order with a further extension of 15 days and no more, as reiterated in Mobilox and followed by this Tribunal. The applicant's plea that the Supreme Court's suo motu extension of limitation (from 15.03.2020) would assist him was rejected because the impugned order was passed on 22.11.2019 and the applicant became aware of the order well before the period excluded by the Supreme Court's order; therefore that extension could not be invoked to save the present delay. Having regard to the applicant's own chronology (including earlier communications indicating knowledge of the insolvency proceedings), the delay beyond the permissible 45 day period could not be condoned. The Tribunal, relying on the cited precedents and its earlier view on the outer limit of 45 days, concluded that the condonation application fails. [Paras 21, 22, 23]

I A No. 72 of 2021 is dismissed and the appeal is not entertained as time barred.

Obligation of Registry to furnish certified copy to non party - The Registry of the Adjudicating Authority was not obliged to send a certified copy of the impugned order to the Applicant/Appellant because the Applicant/Appellant was not a party to the relevant IA. - HELD THAT: - The Tribunal referred to Rule 50 of the NCLT Rules, 2016 which requires the Registry to send certified copies of final orders to the parties concerned free of cost. Since the Applicant/Appellant was not a party to IA No. 543 of 2019 in CP (IB) No. 03/BB/2017, the Registry's statutory obligation to send the certified copy to the Applicant/Appellant did not arise. Consequently, the non receipt of a certified copy from the Registry could not excuse the delay in preferring the appeal. [Paras 19, 20]

The plea of non service of the impugned order by the Registry is unsustainable because the Applicant/Appellant was not a party to the proceedings.

Final Conclusion: The application for condonation of delay is dismissed and the company appeal is not entertained as time barred; incidental applications are closed.

Corporate Insolvency Resolution Process - default for the purposes of Section 7 of the Insolvency and Bankruptcy Code - limitation under Article 137 of the Limitation Act - admission of Section 7 application where default is established - moratorium on proceedings and actions against the corporate debtor - appointment of Interim Resolution Professional

Limitation under Article 137 of the Limitation Act - application barred by limitation - Whether the Section 7 application was barred by limitation because the loan account was classified as NPA on different dates. - HELD THAT: - The Tribunal examined conflicting dates of classification of the account as NPA (05.12.2017 and 04.04.2018) and applied the principle in B. K. Educational Services that the right to sue accrues when a default occurs and Article 137 governs limitation for Section 7 filings. Considering either date as the date of default, the application filed on 04.12.2020 fell within three years of the later NPA date. Consequently, the contention that the application is time-barred was rejected. [Paras 13, 14]

The application is not barred by limitation and the plea of time-bar is dismissed.

Default for the purposes of Section 7 of the Insolvency and Bankruptcy Code - admission of Section 7 application where default is established - Whether there was a default and the Section 7 application was complete and liable to be admitted. - HELD THAT: - Relying on documentary record and settled law (including Innoventive Industries), the Tribunal held that once the adjudicating authority is satisfied that a default has occurred the application must be admitted unless incomplete. The record showed the existence of credit facilities, security by equitable mortgage and classification of the account as NPA; the application was complete. The Tribunal therefore found that default existed and admission was warranted under Section 7(5)(a). [Paras 15, 16]

The Section 7 application is admitted as a default stood established and the application was complete.

Moratorium on proceedings and actions against the corporate debtor - appointment of Interim Resolution Professional - Grant of moratorium and appointment of an Interim Resolution Professional and related directions. - HELD THAT: - On admission of the Section 7 application the Tribunal imposed the statutory moratorium prohibiting institution or continuation of suits, transfer or disposition of assets, enforcement of security and recovery of leased property for the currency of the CIRP. The Tribunal directed public announcement of CIRP, appointed the proposed IRP who had filed the requisite declaration, and directed the financial creditor to deposit an initial amount with the IRP. The moratorium is to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. [Paras 18, 20, 22, 23]

Moratorium imposed; public announcement directed; Mr. Jasin Jose appointed as Interim Resolution Professional and the financial creditor directed to deposit the specified initial amount.

Final Conclusion: The Tribunal admitted the Section 7 application against the corporate debtor, holding it not barred by limitation and finding default; statutory moratorium was imposed, public announcement of CIRP directed, Mr. Jasin Jose was appointed as Interim Resolution Professional and the financial creditor was directed to deposit the initial amount with the IRP.

Admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) commencement - Proof of default by operational creditor - Consent terms and failure to comply - Appointment of Interim Resolution Professional (IRP) - Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Advance payment for IRP's fees to be ratified by the Committee of Creditors

Proof of default by operational creditor - Operational Creditor established existence of operational debt and default by the Corporate Debtor. - HELD THAT: - The Adjudicating Authority examined the documents filed by the Operational Creditor, including the purchase order, commercial invoice, acknowledgement of debt by the Corporate Debtor, demand notice and the letter of assignment from the insured to the Operational Creditor. The record shows that the Corporate Debtor acknowledged the debt and failed to make payment or to raise a notice of dispute within the statutory period following the demand notice. On this basis the Authority was satisfied that default had occurred and that the Operational Creditor had discharged the requirements for initiating proceedings under the IB Code. [Paras 8]

Default established in favour of the Operational Creditor.

Admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) commencement - Consent terms and failure to comply - The Section 9 application was admitted and CIRP ordered to commence as the Corporate Debtor failed to honour earlier consent terms and remained unable to pay the debt. - HELD THAT: - Although the parties had filed consent terms earlier, the Corporate Debtor did not honour those terms and expressed inability to pay. Having been satisfied that the statutory prerequisites for admission under section 9 were met and that no valid dispute or payment had been made within the prescribed time, the Adjudicating Authority admitted the Company Application and ordered commencement of the CIRP to be completed within timelines prescribed by the Code. [Paras 7, 9]

Application admitted and CIRP ordered to commence.

Appointment of Interim Resolution Professional (IRP) - Advance payment for IRP's fees to be ratified by the Committee of Creditors - An IRP was appointed and directions given regarding his written consent, assumption of charge, public announcement and an advance fee to be paid by the Operational Creditor subject to ratification by the CoC. - HELD THAT: - Pursuant to admission, the Authority appointed the named professional as Interim Resolution Professional and directed him to file written consent and authorization within three days and to take charge of management. The IRP was directed to make the public announcement and call for claims as per the Code. The Operational Creditor was directed to pay an advance fee to the IRP, with the explicit direction that such advance shall be ratified later by the Committee of Creditors. [Paras 10, 11, 15]

IRP appointed with directions to assume charge, publish notice and the Operational Creditor directed to pay advance fee to be ratified by CoC.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium was declared from the date of the order until completion of CIRP, with the statutory prohibitions and safeguards specified. - HELD THAT: - On commencement of CIRP the Authority declared the moratorium and specified that, during its operation, suits or proceedings against the Corporate Debtor are prohibited, alienation or encumbrance of assets is restrained, actions to enforce security interests are barred and recovery of property occupied by the Corporate Debtor is stayed. The order further clarified protection for continuation of licences and supply of essential goods or services subject to payment of current dues and compliance with statutory exceptions. [Paras 12, 13, 14]

Moratorium declared with specified prohibitions and safeguards.

Final Conclusion: The Company Application under section 9 was admitted: the Adjudicating Authority found that default had occurred, ordered commencement of CIRP, appointed the named Interim Resolution Professional with directions for taking charge and public announcement, directed an advance fee from the Operational Creditor to be ratified by the CoC, and declared the moratorium effective from the date of the order until completion of the CIRP.

Moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - orders of attachment or execution issued during CIRP are void ab initio - binding effect of Supreme Court precedents on subordinate authorities

Moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 - orders of attachment or execution issued during CIRP are void ab initio - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - Validity of the orders of the Court of Ld. ADJ-1 dated 28.05.2018 and 06.12.2019 directing payment and attachment in view of the moratorium and Section 238 of the IBC. - HELD THAT: - The Adjudicating Authority held that once CIRP was admitted and moratorium under Section 14(1)(a) came into effect, institution or continuation of suits, proceedings or execution against the Corporate Debtor stood interdicted. An execution order passed during the moratorium by Ld. ADJ-1 was therefore contrary to the moratorium and the overriding mandate of Section 238 and was declared void ab initio. The Authority relied on binding precedents of the Supreme Court (as recorded in the earlier restraining order) to the effect that proceedings initiated or continued after imposition of the moratorium are non est in law, and concluded that the execution orders could not stand. [Paras 5, 7]

Order dated 06.12.2019 (and related execution directions) is a nullity in law as it was passed during the moratorium and is void ab initio.

Orders of attachment or execution issued during CIRP are void ab initio - binding effect of Supreme Court precedents on subordinate authorities - Relief to be granted in consequence of the invalidity of the execution orders. - HELD THAT: - In consequence of the finding that the execution orders were void, the Adjudicating Authority directed that the court of Ld. ADJ-1 shall not take any coercive steps and shall refrain from acting contrary to the IBC. The execution proceedings ordered during the CIRP are to hibernate and be restrained from enforcement so that steps under the Insolvency Code proceed unimpeded, and the native court officer was directed not to execute coercive measures but to cooperate with the Resolution Professional. [Paras 8, 9]

Coercive steps pursuant to the execution orders are restrained; execution proceedings shall hibernate and not be enforced during CIRP, and the matter stands disposed with the stated directions.

Final Conclusion: IA No. 74/JPR/2020 is allowed: execution and attachment orders issued during the CIRP are declared void ab initio; the Court of Ld. ADJ-1 is directed not to take coercive steps and execution proceedings shall hibernate, with the application disposed accordingly.

Admission of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice in Form 4 and absence of dispute on record - jurisdiction of the Adjudicating Authority - limitation and date of first default - appointment of Interim Resolution Professional by reference to the IBBI panel - invocation of moratorium under Section 14 of the Code

Admission of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice in Form 4 and absence of dispute on record - Application by Operational Creditor under Section 9 of the Code was admitted and CIRP was ordered against the Corporate Debtor. - HELD THAT: - The Tribunal found that the Form 5 application was complete, a demand notice in Form 4 was served on the Corporate Debtor and no reply disputing the unpaid operational debt was placed on record. The Operational Creditor filed an affidavit under Section 9(3)(b) asserting absence of any notice of dispute. In view of satisfaction of the conditions under Section 9(5)(i) of the Code, and absence of documentary evidence from the Corporate Debtor to establish payment or a legitimate dispute, the application was admitted and CIRP was directed to be initiated. [Paras 10]

Application under Section 9 admitted and CIRP of the Corporate Debtor ordered.

Jurisdiction of the Adjudicating Authority - This Adjudicating Authority had jurisdiction to entertain the Section 9 application. - HELD THAT: - The registered office of the Corporate Debtor being situated within the territorial jurisdiction of this Bench was noted and relied upon to conclude that the Tribunal had competence to try the application. [Paras 8]

Adjudicating Authority has jurisdiction to entertain and try the Section 9 application.

Limitation and date of first default - The application was within the period of limitation as the first default was on 14.09.2016 and the last payment occurred on 17.08.2019. - HELD THAT: - The Tribunal recorded the date of first default and the date of last payment, observing that the claimed debt was not time-barred and that the Section 9 application was filed within the limitation period. [Paras 9]

Application is not barred by limitation and was filed within the permissible period.

Appointment of Interim Resolution Professional by reference to the IBBI panel - An Interim Resolution Professional was appointed from the IBBI-recommended panel as no IRP was proposed by the Operational Creditor. - HELD THAT: - Noting that the Operational Creditor did not propose a name under Section 9(4), the Tribunal referred to the mechanism whereby the Adjudicating Authority may seek the Board's recommendation and rely on the panel forwarded for the Bench. The Tribunal selected a nominee from the panel, verified credentials on the IBBI website and appointed her to perform duties under the Code. The headnote omits disclosure of contact particulars recorded in the order. [Paras 11, 12, 13, 14]

Ms. Garima Diggiwal (from the IBBI panel) appointed as Interim Resolution Professional.

Invocation of moratorium under Section 14 of the Code - Moratorium under Section 14 was invoked on admission of the Section 9 application. - HELD THAT: - On admission of the application and appointment of the IRP, the Tribunal directed that the moratorium contemplated by Section 14 of the Code shall operate in relation to the Corporate Debtor for the duration of the CIRP. Incidental directions were given for the IRP to take over management, publish requisite notices and call for and collate claims. The Operational Creditor was directed to deposit initial funds for IRP's expenses as ordered. [Paras 15]

Moratorium under Section 14 invoked and consequential directions to the IRP issued.

Final Conclusion: The Section 9 application filed by the Operational Creditor was admitted; CIRP of the Corporate Debtor was initiated, an Interim Resolution Professional from the IBBI panel was appointed, the moratorium under Section 14 was invoked and consequential directions for conduct of CIRP were issued.

Rebate of duty under Rule 18 of the Central Excise Rules, 2002 - Limitation under Section 11B of the Central Excise Act - CBEC Manual paragraph 2.4 - admission where Central Excise/Customs Department is solely accountable - Shipment certificate as substitute proof where export promotion copy (shipping bill) unavailable - Procedural requirement cannot defeat substantive right

Limitation under Section 11B of the Central Excise Act - CBEC Manual paragraph 2.4 - admission where Central Excise/Customs Department is solely accountable - Shipment certificate as substitute proof where export promotion copy (shipping bill) unavailable - Rebate claim was not barred by limitation where delay in filing arose from non-availability of the export promotion copy and the Customs Department issued a shipment certificate later - HELD THAT: - The Court held that the statutory one year limitation in Section 11B must be read in light of procedural instructions in the CBEC Manual. Paragraph 2.4 of the Manual permits admission of a claim (with respect to limitation) where requisite documents are unavailable for reasons attributable solely to the Central Excise or Customs Department. Where a shipping bill (export promotion copy) could not be generated because of short shipment, the issuance of a shipment certificate by Customs constituted proof of export and removed the claimant's disability to file. The petitioner applied promptly for the shipment certificate and filed the rebate claim soon after receipt. Insistence on the procedural document (export promotion copy) when it is within the control of the department would defeat the substantive right to rebate; accordingly the claim could not be rejected as time barred in these circumstances. The Court relied on the reasoning in Cosmonaut Chemicals and applied the principle that procedural requirements must not be construed to frustrate the scheme of rebate where the department's omission caused the delay. [Paras 13, 30, 37, 38, 39]

The order rejecting the rebate claim as time barred was quashed and the claim was to be processed and sanctioned in accordance with law.

Rebate of duty under Rule 18 of the Central Excise Rules, 2002 - Notification No.18/2016 - temporal applicability of amendment - Notification No.18/2016 (inserting requirement to file within period specified in Section 11B) is prospective and not applicable to rebate claims arising in 2010-2011 - HELD THAT: - The Court observed that the amendment by Notification No.18/2016 (effective 01.03.2016) added an express requirement that rebate claims be lodged within the period specified in Section 11B. That amendment post dates the petitioner's transactions and claim (2010-2011) and therefore cannot be invoked to defeat the petitioner's claim. The Court treated the pre 2016 regime together with the CBEC Manual instructions as determinative of the petitioner's entitlement. [Paras 10, 27, 30, 39]

The 2016 amendment does not apply to the petitioner's rebate claim; the authorities must process the pre 2016 claim in accordance with law and the Manual.

Final Conclusion: The revisional order dated 30.08.2019 rejecting the rebate claim as barred by limitation is quashed and set aside; the respondent authority is directed to process and sanction the petitioner's rebate claim in accordance with law (taking into account the CBEC Manual position where documents were unavailable due to departmental fault) within twelve weeks from receipt of this order.

Entertainment of writ despite availability of alternate statutory remedy - exception to exhaustion rule where writ petition is pending for prolonged period - relegation to appellate forum and effect of delay/limitation - stock reconciliation discrepancy as a factual issue - defective Form C declarations and departmental verification of inter-State movement - invocation of powers to summon documents under Section 81 of the Act - conditional remand on payment of a portion of disputed tax for fresh consideration

Entertainment of writ despite availability of alternate statutory remedy - exception to exhaustion rule where writ petition is pending for prolonged period - Whether the High Court could entertain the writ petition despite the availability of an alternate statutory remedy under the Tamil Nadu Value Added Tax Act, 2006. - HELD THAT: - The Court held that although ordinarily a petitioner should not bypass the statutory appellate remedy, established exceptions permit entertaining writ petitions, including where the petition has been pending for a considerable length of time and interim relief has been in operation. Applying these principles, the Court found the writ petition had been pending for over four and a half years with an interim stay and that the respondent had filed a counter; consequently the petition fell within the recognised exception and could be heard on merits. The Court therefore interfered with the learned Single Judge's refusal to entertain the petition and proceeded to consider the merits. [Paras 3, 4, 5, 6]

Writ petition could be entertained despite the availability of an alternate statutory remedy because it fell within the exception of prolonged pendency and interim relief; the Court proceeded to decide on merits.

Stock reconciliation discrepancy as a factual issue - relegation to appellate forum and effect of delay/limitation - Availability of remedy in respect of the tax levied on difference noticed on stock reconciliation and the manner of its adjudication. - HELD THAT: - The Court treated the stock-difference issue as essentially factual. On the appellant's submission that sufficient materials existed to contest the Assessing Officer's finding, the Court granted liberty to the appellant to prefer an appeal before the Appellate Deputy Commissioner (CT) (North), Chennai-6. The Court directed that if the appellant filed the appeal within 30 days from receipt of the judgment, the First Appellate Authority shall entertain the appeal and shall not reject it on the ground of limitation, thereby enabling the matter to be decided on merits by the statutory appellate forum. [Paras 9, 10, 11, 16]

Liberty granted to file appeal within 30 days against the assessment for 2014-15 relating to the stock reconciliation difference; First Appellate Authority to entertain the appeal notwithstanding limitation.

Defective Form C declarations and departmental verification of inter-State movement - invocation of powers under Section 81 of the Act - conditional remand on payment of a portion of disputed tax for fresh consideration - Procedure for adjudicating disputes relating to (a) production of Form C declarations lacking check-post seal and (b) reversal of input tax credit where Form C was not produced but movement indicated by check-post seal. - HELD THAT: - The Court observed these issues to be factual and remediable by departmental processes. For Forms C that are available but alleged to be defective (missing check-post seal), the Assessing Officer may return the Forms and permit the assessee an opportunity to establish genuineness of transactions or produce other contemporaneous records. Where no Form C is produced but a check-post seal exists, the Assessing Officer can undertake departmental verification (including computerized records) and require the assessee to produce relevant documents. The Court placed the appellant on terms: to obtain the benefit of such reconsideration, the appellant was directed to pay 10% of the disputed tax within 30 days; upon such payment the appellant could make a representation treating that portion of the assessment as a show cause notice, and the Assessing Officer was to consider invoking Section 81, call for documents, and decide on merits in accordance with law. [Paras 12, 13, 14, 15, 16]

Issues relating to defective or absent Form C and reversal of input tax credit remitted to the Assessing Officer for fresh consideration on the appellant producing documents and after payment of 10% of the disputed tax within 30 days; Assessing Officer to consider invoking Section 81 and decide on merits.

Final Conclusion: The writ appeal was partly allowed: the Court entertained the writ despite alternate remedy due to prolonged pendency; liberty was granted to appeal the stock-reconciliation assessment for 2014-15 within 30 days and the appeal must be entertained despite limitation; the remaining issues concerning Form C declarations and reversal of input tax credit were directed to be reconsidered by the Assessing Officer upon payment of 10% of the disputed tax and production of supporting documents, with the Assessing Officer to invoke Section 81 and decide on merits.

Prospective operation of statutory amendment - limitation for reassessment under a taxation statute - distinction between notice under requisition for particulars and notice for escaped assessment - binding effect of departmental clarifications and consistent administrative practice

Prospective operation of statutory amendment - Amendment to Entry No.5 effected by notification dated 01.10.2013 operates prospectively from 02.10.2013 and is not retrospective. - HELD THAT: - The notification substituting Sl.No.5 expressly stated that it would come into effect from 02.10.2013. In a taxation statute, an amendment which itself specifies a future date for coming into force must be treated as prospective; the court rejected the Revenue's contention that the amendment could be treated as back-dated to the date of enactment. Given the need for predictability so that dealers can plan business on the basis of existing taxes, the amendment cannot be applied to periods prior to its stated effective date. [Paras 7]

The 01.10.2013 amendment is prospective and applies only from 02.10.2013.

Distinction between notice under requisition for particulars and notice for escaped assessment - A notice issued under Section 5(4) (calling for particulars to complete assessment) cannot be treated as a notice under Section 6 (escaped assessment); Section 6 was not attracted in the present facts. - HELD THAT: - Section 5(4) operates to seek clarification or additional particulars to complete an assessment that exists, whereas Section 6 addresses cases of escaped assessment where no assessment was made. The authorities in this case had called for further details and issued proposition notices based on returns filed; they did not demonstrate that there had been no assessment at all such as would invoke the escaped-assessment provision. Consequently, the attempt to construe the Section 5(4) notice as a Section 6 notice was rejected. [Paras 8]

The Section 5(4) notice issued in this case could not be treated as a Section 6 notice and Section 6 is not attracted.

Limitation for reassessment under a taxation statute - Notices issued on 02.01.2017 seeking reassessment for assessment years prior to 2013-14 were barred by the three-year limitation under Section 5(6) and the consequential reassessments were quashed. - HELD THAT: - Section 5(6) prescribes a three-year period within which assessment may be reopened. The notice dated 02.01.2017 could lawfully pertain only to matters within the preceding three years (approximately 03.01.2014 to 02.01.2017). Reopening assessments for the years 2008-09 to 2011-12 and for 2012-13 (to the extent prior to the three-year window) fell beyond the statutory three-year period and therefore the authorities had no jurisdiction to reopen those assessments. The court therefore held the reassessments for the specified earlier years to be bad in law. [Paras 9]

The notices and consequent reassessments for assessment years prior to the permissible three-year window were time-barred and are invalid.

Binding effect of departmental clarifications and consistent administrative practice - The department cannot take inconsistent positions in respect of identical products; if a clarification is held to be generally applicable, earlier consistent clarifications cannot be disregarded without material change, and the court accepted the petitioners' contention on this point and granted relief accordingly. - HELD THAT: - The Revenue took mutually contradictory stances: on the one hand treating one advance ruling as applicable only to a specific product, and on the other treating a later departmental clarification as applicable to all dealers. The court observed that such contradictory positions cannot be maintained by taxation authorities. If a departmental clarification is to be applied generally, earlier similar clarifications must also stand unless there is material change in circumstances or law. Having accepted the petitioners' case on the limitation and prospective amendment points, the court did not further adjudicate other ancillary contentions, leaving them open for future adjudication in appropriate proceedings. [Paras 10]

The Revenue cannot adopt inconsistent departmental positions; the petitioners succeed on this point and other contentions were left open for future consideration.

Final Conclusion: Writ petitions allowed. The High Court held the 01.10.2013 amendment prospective (effective 02.10.2013), found the Section 5(4) notice could not be treated as a Section 6 notice, held reassessments for assessment years prior to the three-year limitation unlawful, and quashed the assessment and rectification orders for 2008-09 to 2011-12 and for 2012-13 accordingly; other points were left open for future adjudication.

Inherent jurisdiction under Section 482 CrPC - quashing of criminal proceedings - cognizability and sufficiency of allegations in FIR/charge-sheet - abuse of process of court - separation of civil remedy/arbitration from criminal liability - exercise of extraordinary jurisdiction with circumspection - dismissal of frivolous applications under Section 340/195 CrPC

Inherent jurisdiction under Section 482 CrPC - quashing of criminal proceedings - cognizability and sufficiency of allegations in FIR/charge-sheet - Whether the High Court was justified in quashing the FIR/charge-sheet and criminal proceedings against the second respondent in exercise of its inherent jurisdiction under Section 482 CrPC. - HELD THAT: - The Court held that the High Court erred in quashing the criminal proceedings. Exercise of inherent powers under Section 482 CrPC is extraordinary and must be approached with great care; however, the complaint/FIR/charge-sheet must prima facie disclose no offence before proceedings are quashed. On examination of the record, including the charge-sheet placed on record, the ingredients of offences under Sections 406 and 420 IPC could not be said to be absent. The existence of a commercial transaction, termination of an agreement to sell, or initiation of arbitration does not per se preclude criminal liability where the allegations, taken at face value, disclose criminal ingredients. Accordingly, the High Court's conclusion that the matter was purely civil and therefore an abuse of process was unsustainable; the criminal trial should not have been short circuited at that stage and the High Court should not have declined to consider the charge sheet before quashing the proceedings. [Paras 32, 33, 34, 35, 36]

The High Court's order quashing the criminal proceedings is set aside and the trial Court may proceed expeditiously.

Separation of civil remedy/arbitration from criminal liability - abuse of process of court - Whether the pendency of arbitration or existence of civil remedy rendered the criminal proceedings an abuse of process justifying quashment. - HELD THAT: - The Court reaffirmed that availability of civil remedies or initiation of arbitral proceedings is not an effective substitute for criminal prosecution where the disputed act prima facie constitutes an offence. Arbitration provides remedies for breach of contract but an arbitrator cannot try criminality. The High Court's reliance on the pendency of arbitration and the civil character of the dispute to quash criminal proceedings was therefore legally unsustainable; such matters are open to be raised as defences at trial but do not justify pre emptive quashing. [Paras 33, 34, 35]

Pendency of arbitration or civil remedies does not, by itself, justify quashing the criminal proceedings.

Dismissal of frivolous applications under Section 340/195 CrPC - abuse of process of court - Whether the interlocutory application for initiation of proceedings under Section 340 read with Section 195 CrPC against the appellants should be entertained. - HELD THAT: - The Court noted that applications under Section 340/195 CrPC are sometimes filed for ulterior purposes and, having considered the conduct and the stage of the proceedings, found the present IA to be filed for ulterior motives. The Court therefore declined to permit initiation of such proceedings and dismissed the IA. [Paras 37]

The IA under Section 340 read with Section 195 CrPC is dismissed as being filed for ulterior reasons.

Final Conclusion: The appeal is allowed; the High Court judgment dated 15 March 2019 quashing the criminal proceedings is set aside and the trial Court is directed to proceed expeditiously; the IA under Section 340/195 CrPC is dismissed.