TaxTMI Updates e-Newsletter
May 06,2020

Power to levy cess under Section 21 of the Assam Agricultural Produce Market Act, 1972 - Legal fiction in Explanation I of Section 21 regarding deemed sale or purchase in a notified market area - Interim injunction against revenue collection - Balance of convenience and public interest in interim orders against revenue - Refundability of illegally collected cess

Interim injunction against revenue collection - Balance of convenience and public interest in interim orders against revenue - Extension of the interim order restraining the respondent Board from collecting cess was not warranted. - HELD THAT: - The Court undertook a prima facie consideration whether the interim restraint dated 26.02.2020 should be extended beyond the returnable date. Applying the established principles applicable to interim orders affecting revenue - including the need to consider balance of convenience, irreparable injury and public interest rather than mere prima facie case - the Court found that continuation of the restraint was not expedient. The Court noted the operation of an earlier order permitting collection in accordance with the Division Bench judgment dated 12.09.2008 and the Supreme Court order dated 30.03.2010, and observed that prudence and circumspection are required before enjoining revenue collection. On this basis the interim order was not extended and the interlocutory application seeking vacation/modification was closed.

Interim order dated 26.02.2020 shall not be extended; interlocutory application closed.

Power to levy cess under Section 21 of the Assam Agricultural Produce Market Act, 1972 - Legal fiction in Explanation I of Section 21 regarding deemed sale or purchase in a notified market area - Refundability of illegally collected cess - Respondent Board is permitted to collect cess in accordance with the statutory scheme subject to refund if collection is later held to be unlawful. - HELD THAT: - The Court observed the legislative framework under Section 21 and the Division Bench's reasoning in the judgment dated 12.09.2008 concerning the legal fiction in Explanation I and the prerequisites for levy. Having regard to the subsequent proceedings in the Supreme Court and the order dated 30.03.2010 which prima facie permits collection in accordance with the Division Bench judgment, the Court allowed the respondent Board to collect cess pending adjudication. The Court expressly recorded that if the petitioner ultimately succeeds in the writ petition, any cess collected during the pendency of proceedings that is found to be not leviable shall be refundable by the Board, noting that the Rules provide a mechanism for refunds.

Board may collect the cess as per law and earlier orders; any illegally collected cess shall be refunded if the petitioner succeeds.

Final Conclusion: On prima facie consideration the interim restraint on cess collection was not extended; the Assam State Agricultural Marketing Board may continue to collect cess in accordance with the statutory scheme and prior orders, subject to the petitioner's right to refund of any cess later held to have been wrongly collected. The writ petition and interlocutory application are listed for further hearing.

Release of seized goods and conveyance on payment of tax and penalty - scope of Section 129 and Section 130 regarding seizure and confiscation - recording of reasons for invoking confiscation at the threshold - provisional release subject to execution of bond/undertaking and payment of amounts - application of judicial precedent to challenge show-cause notice

Release of seized goods and conveyance on payment of tax and penalty - provisional release subject to execution of bond/undertaking and payment of amounts - Whether the vehicle and goods may be released under the interim order upon payment of tax and related amounts and subject to conditions prescribed by the Court. - HELD THAT: - The Court recorded that a Coordinate Bench had directed provisional release of the detained goods and the conveyance subject to payment of tax and penalty as computed by the authorities and subject to filing of a solemn undertaking and production of identification documents. The writ applicant availed of that interim order and obtained release of the vehicle and goods on payment of the tax amount. The present writ was disposed while noting that the proceedings on the show-cause notice under the Act will continue in accordance with law. [Paras 4, 5]

The vehicle and goods were released in terms of the interim order once the petitioner paid the tax amount; the interim-release direction is recorded and stands complied with.

Scope of Section 129 and Section 130 regarding seizure and confiscation - recording of reasons for invoking confiscation at the threshold - application of judicial precedent to challenge show-cause notice - Whether the petitioner may rely upon the Court's recent observations in Synergy Fertichem regarding the limited circumstances in which Section 130 may be invoked and the need for recorded reasons when confiscation is invoked at the seizure stage. - HELD THAT: - The Court expressly permitted the petitioner to rely upon and place on record the observations made in paragraphs 99 to 104 of Synergy Fertichem Pvt. Ltd., which emphasize that not every contravention justifies immediate invocation of confiscation under Section 130, that authorities must examine the nature of contravention and intention to evade tax, and that invoking confiscation at the threshold requires recorded reasons and material supporting the belief. The present matter was left open for the petitioner to make out that the show-cause notice in GST-MOV-10 deserves discharge in light of those principles; the proceedings on the notice will continue and be adjudicated in accordance with law. [Paras 6, 7]

Petitioner is permitted to rely on the Synergy Fertichem observations in challenging the show-cause notice; the question of discharge of the notice is left to be established by the petitioner in the ongoing proceedings.

Final Conclusion: Writ application disposed; rule made absolute to the limited extent of recording the interim-release direction and permitting the petitioner to rely on the cited judicial observations; the substantive show-cause proceedings remain pending and the petitioner may challenge the notice in accordance with law.

Unaccounted income determined from seized documents of third person - Burden of corroborative evidence for attribution of undisclosed turnover - Attribution of seized entries to the assessee in absence of material from assessee's premises - Use of statements recorded under section 132(4) as evidence - Validity of approval under section 153D for assessments under section 153A/143(3) - Right to cross-examination in assessment proceedings

Unaccounted income determined from seized documents of third person - Burden of corroborative evidence for attribution of undisclosed turnover - Use of statements recorded under section 132(4) as evidence - Deletion of addition made as gross profit on alleged unaccounted metal-trading turnover (A.Y. 2013-14). - HELD THAT: - The Tribunal accepted that the seized Dharam Kanta slips, diaries and notepads showing weights, vehicle numbers and datewise receipts/payments were recovered from premises owned/occupied by Shri Himanshu Kohli and his father. The AO had attributed 70% of the unaccounted turnover to the assessee on the basis of Himanshu Kohli's statement. The Tribunal held that attribution to the assessee requires corroborative material; when no document or other evidence of parallel unaccounted trading was found from the assessee's premises and seized material originated from the Kohli premises (whose proprietors themselves conducted metal trading), the AO/CIT(A) could not sustain the addition of profit in the assessee's hands. On that basis the Tribunal set aside the addition of profit; consequentially the addition for alleged initial unaccounted investment also fell away. The Tribunal therefore directed deletion of the additions made by the AO and sustained by the CIT(A). [Paras 37, 38, 39, 40, 41]

Addition of Rs. 1,70,72,313/- (profit on alleged unaccounted turnover) and consequential addition for initial investment deleted for A.Y. 2013-14.

Unaccounted income determined from seized documents of third person - Burden of corroborative evidence for attribution of undisclosed turnover - Deletion of addition made as gross profit and commission (A.Y. 2014-15) following identical reasoning as for A.Y. 2013-14. - HELD THAT: - The grounds and factual matrix for A.Y. 2014-15 were identical to those decided for A.Y. 2013-14. Applying the same analysis - that the seized material emanated from the Kohli premises and there was no corroborative material linking such unaccounted transactions to the assessee from his own premises - the Tribunal allowed the corresponding grounds and set aside the additions sustained by the CIT(A). [Paras 45]

Additions on account of unaccounted gross profit and related commission for A.Y. 2014-15 deleted.

Attribution of seized entries to the assessee in absence of material from assessee's premises - Use of statements recorded under section 132(4) as evidence - Deletion of additions for gross profit and commission and deletion of addition based on name/ code 'Pawan' in seized Exhibit-4 (A.Y. 2015-16). - HELD THAT: - The AO attributed commission and profit to the assessee for A.Y. 2015-16 including an item based on the name 'Pawan' appearing in seized Exhibit-4. The Tribunal applied the same determinative reasoning as in the earlier years: where seized material originates from third-party premises (the Kohli premises) and the Kohli family themselves conduct similar unaccounted metal trading, mere appearance of a name in seized papers or an uncorroborated confession by that third person is insufficient to fasten undisclosed income on the assessee without independent corroboration. The Tribunal accepted the assessee's plea that relevant transactions for the concern in which he had a formal role (Klaxon Trading (P) Ltd.) were recorded and reflected in banking/TDS, and thus set aside the CIT(A)'s addition based on the seized reference to 'Pawan'. [Paras 53]

Additions sustained by the CIT(A) for A.Y. 2015-16 (including the commission derived from Exhibit-4) set aside and deleted.

Validity of approval under section 153D for assessments under section 153A/143(3) - Rejection of the assessee's contention that approval under section 153D was invalid. - HELD THAT: - The assessee challenged the validity of the higher-authority approval under section 153D, contending that the approval did not record satisfaction. The Tribunal examined the contention and found no material to show that valid approval was not obtained; the additional grounds attacking the approval were therefore dismissed because the assessee failed to substantiate the claim that competent authority had not applied mind or given valid approval. [Paras 16, 17, 19]

Assessee's challenge to the validity of approval under section 153D dismissed; additional grounds not allowed.

Final Conclusion: The Tribunal partly allowed the appeals: additions made by the AO and sustained by the CIT(A) attributing unaccounted profit, investment and commission to the assessee for A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16 were set aside and deleted for lack of corroborative evidence linking the seized third party documents to the assessee; the challenge to the statutory approval under section 153D was dismissed.

Registration under section 12AA - charitable purpose - Rule 17A - verification of instrument with originals - e-filing and procedural fairness - remand for fresh consideration

Registration under section 12AA - Rule 17A - verification of instrument with originals - charitable purpose - e-filing and procedural fairness - remand for fresh consideration - Order of the CIT(E) rejecting the assessee's application for registration under section 12AA is set aside and the matter is remanded for fresh consideration after granting opportunity to the assessee. - HELD THAT: - The Tribunal observed procedural difficulties linked to the e-filing platform and conflicting claims about service and receipt of a questionnaire and related attachments. Given those teething technological problems and the factual-contentious nature of the matters (including verification of the instrument establishing the society under Rule 17A and the characterisation of hostel receipts), the Tribunal considered it appropriate in the interest of justice to require the CIT(E) to re-examine the application afresh. The assessee is directed to appear through its authorised representative, to submit such information and documents as may be called for (including reliance on the certified bye-laws and audited accounts already filed), and to raise contentions (including reliance on decisions of coordinate Benches) before the CIT(E). The CIT(E) is directed to afford appropriate opportunity of hearing, verify documents as required by law, consider the question whether the hostel activities fall within the ambit of charitable/educational purpose, and decide the application in accordance with law on the basis of the material placed on record.

Matter remanded to the file of the CIT(E) for fresh adjudication after granting opportunity and considering submissions and documents; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(E)'s order rejecting registration under section 12AA and remanded the matter to the CIT(E) to examine the application afresh, afford the assessee an opportunity to be heard and to produce documents (including verification under Rule 17A), consider the nature of hostel activities vis-a -vis charitable purpose, and decide the application in accordance with law; the appeal is allowed for statistical purposes.

Remission or cessation of trading liability under section 41(1) - writing off liability in accounts as a unilateral act attracting section 41(1) - evidence of continued recognition of liability in books of accounts - taxation of written back liabilities in a subsequent year and avoidance of double addition

Remission or cessation of trading liability under section 41(1) - evidence of continued recognition of liability in books of accounts - Whether addition under section 41(1) was rightly made in respect of sundry creditors (notably M/s Sky Gems Ltd. and M/s A.R. Gems) outstanding as on 31.03.2012 - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the liabilities in question continued to exist as on the close of F.Y.2011-12. The assessee had placed on record party accounts, import certificates, confirmations and applications to the banker and RBI permission/requests for remittance (permission dated 04.08.2015 and revalidation application dated 19.08.2016), which demonstrate that payment remained payable and steps were taken to remit the amounts. Mere non payment despite RBI permission does not by itself establish remission or cessation of liability; other financial or procedural constraints may explain delay. In the absence of positive evidence that the liabilities had ceased or were written off in the relevant year, section 41(1) could not be invoked. The AO's addition was therefore deleted. [Paras 12]

Addition under section 41(1) in respect of the specified creditors is deleted; CIT(A)'s finding that liabilities continued to be recognized is affirmed.

Writing off liability in accounts as a unilateral act attracting section 41(1) - taxation of written back liabilities in a subsequent year and avoidance of double addition - Whether addition under section 41(1) was rightly made in respect of sundry creditors of Rs. 1,20,54,761/ which were written back and offered to tax in A.Y.2017-18 - HELD THAT: - The Tribunal agreed with the CIT(A)'s finding that the assessee wrote back the disputed creditors in A.Y.2017-18 and offered the corresponding amount as income in that year. That fact indicates the assessee recognised the liabilities until A.Y.2017-18 and the Revenue produced no material to show cessation of liability in F.Y.2011-12. Since the amounts were taxed when written back in A.Y.2017-18, making the addition again for A.Y.2012-13 would produce double taxation. The AO was directed to reconcile a minor difference between the amount written back in books and the figure shown in the return for A.Y.2017-18. [Paras 13]

Addition in respect of the amounts subsequently written back and taxed in A.Y.2017-18 is deleted; CIT(A)'s deletion is affirmed and AO to examine the minor discrepancy noted.

Final Conclusion: Revenue appeal dismissed; the Tribunal affirms the CIT(A)'s deletions of additions under section 41(1) both for creditors where liabilities continued to be recognized and for amounts subsequently written back and offered to tax in A.Y.2017-18, and directs the AO to examine the small reconciliation between amounts noted in accounts and the return for A.Y.2017-18.

Reopening of assessment for verification of bank cash transactions under section 148/147 - Estimation of income by applying presumptive net profit rate under section 44AF - Accepting audited books under section 44AB and effect on deemed rejection of books - Application of section 144 for assessment by best judgement where books not produced - Comparability of gross profit rates where business model/change of activity

Reopening of assessment for verification of bank cash transactions under section 148/147 - Burden to specify undisclosed material facts - Whether the reassessment initiated on the basis of cash transactions in bank accounts justified the subsequent estimation of income where no discrepancy in declared sales and bank transactions was shown and the addition made was not linked to the reasons recorded. - HELD THAT: - The Assessing Officer recorded reopening because of allegedly heavy cash transactions in the assessee's bank account. The AO, however, did not point to any specific mismatch between the audited sales/purchases and bank entries nor make any addition in respect of unrecorded receipts which formed the basis for reopening. The Tribunal observed that the bank transactions reconciled with the audited financial statements and that the reasons recorded did not identify any particular undisclosed material fact. Where the reassessment is prompted by particularized reasons, any subsequent estimation must relate to those reasons; here the AO's estimation of profits on declared turnover was not shown to flow from or to remedy the particular cause for reopening. [Paras 3, 14, 15]

The addition made is unsustainable insofar as it is not tied to the reasons recorded for reopening; the estimation on that basis cannot be sustained and is set aside.

Estimation of income by applying presumptive net profit rate under section 44AF - Accepting audited books under section 44AB and effect on deemed rejection of books - Comparability of gross profit rates where business model/change of activity - Whether the Assessing Officer was justified in applying a 5% net profit rate (by reference to section 44AF) on the declared turnover where the books were audited under section 44AB, turnover exceeded the limits for section 44AF, the AO did not formally reject the books and there was a change in the assessee's business model from the preceding year. - HELD THAT: - The Tribunal found that the assessee had filed an audited return under section 44AB and the AO had accepted the figures of sales and purchases. The AO estimated net profit at 5% relying on section 44AF despite (i) not formally rejecting the books of account, (ii) the turnover for the year being well beyond the prescribed limits for applicability of section 44AF, and (iii) absence of any comparable third party data to justify the assumed GP/NP rate. Further, the Tribunal noted a demonstrable change in the assessee's business model (explained in the audit report) which explained a lower GP rate in the year under consideration, rendering a comparison with the previous year inappropriate. In these circumstances, estimation by applying section 44AF was legally unsustainable. [Paras 16]

Application of the 5% net profit rate under section 44AF was unjustified; the addition based on that estimation is deleted.

Final Conclusion: The appeal is allowed: the addition of income made by applying a 5% net profit rate on declared turnover is set aside and deleted because the estimation was neither linked to the reasons for reopening nor legally sustainable in view of audited books, accepted turnover beyond the scope of section 44AF and a change in business activity.

Reopening of assessment under section 147 of the Income tax Act - supply of reasons recorded for issuance of notice under section 148 / GKN Driveshafts principle - prima facie reasons to believe v. mere reasons to suspect for reopening - assessment proceedings initiated where return not filed (assessment v. reassessment) - treatment of relinquishment without consideration as gift for capital gains purposes - computation of period of holding and indexation where asset acquired by succession, gift or release (section 49(1) principle) - onus of proof and explanation of unexplained bank deposits - identity, capacity and genuineness of donors

Reopening of assessment under section 147 of the Income tax Act - supply of reasons recorded for issuance of notice under section 148 / GKN Driveshafts principle - prima facie reasons to believe v. mere reasons to suspect for reopening - assessment proceedings initiated where return not filed (assessment v. reassessment) - Validity of reopening assessment by issuance of notice under section 148 and adequacy of supply of reasons recorded - HELD THAT: - The Tribunal found that the Assessing Officer supplied the assessee with the contents of the reasons recorded such that the essence of the GKN requirement - namely, that the assessee have access to the reasons and an opportunity to object - was complied with even though the original signed format was not produced. The assessee received the reasons, chose not to object, and was not prejudiced by the form in which the reasons were supplied. Further, because the assessee had not filed a return for the year and the AO possessed credible information (bank record of time deposit of Rs. 10 lakhs) which was not disputed by the assessee, there existed tangible material furnishing a prima facie nexus to form a belief that income chargeable to tax had escaped assessment. The Tribunal treated the matter as assessment (first assessment) rather than reassessment and held that inquiry into ultimate source, quantum or correctness of material is for the assessment stage and cannot invalidate the issuance of notice under section 148 where prima facie material exists. [Paras 5, 6]

Reopening upheld; ground attacking validity of notice under section 148 dismissed.

Treatment of relinquishment without consideration as gift for capital gains purposes - computation of period of holding and indexation where asset acquired by succession, gift or release (section 49(1) principle) - Whether capital gains on sale of property are long term including the share acquired by relinquishment without consideration, and whether indexation must be allowed with reference to previous owner's period of holding - HELD THAT: - The Tribunal accepted that relinquishment without consideration effected by registered family settlement/release deeds is a transfer by way of gift. Where an asset is acquired by modes covered under section 49(1) (gift, succession, etc.), the cost of acquisition and period of holding are to be deemed to be those of the previous owner for computation of capital gains and indexation. Applying that principle, and having regard to the property's acquisition by the deceased father in 1967 and the relinquishment in January 2010 followed by sale in January 2010, the share received by the assessee by relinquishment must be assessed as long term capital gains with indexation measured from the previous owner's acquisition. The Tribunal relied on analogous decisions and held that indexation cannot be restricted by referring only to the year of relinquishment where that would defeat the legislative scheme. [Paras 17, 18]

Relinquished share treated as received by gift; indexation and long term capital gains treatment allowed for that share; appeal on this point allowed.

Onus of proof and explanation of unexplained bank deposits - identity, capacity and genuineness of donors - Whether additions made as unexplained bank deposits should be sustained where assessee claimed gifts from close relatives and furnished affidavits, family settlement and supporting documents - HELD THAT: - The assessee explained deposits as gifts from brother (an existing taxpayer), sister and mother, furnished affidavits, family settlement/relinquishment deed, brother's ITR and bank statements. The Tribunal held that the assessee discharged the initial onus regarding identity, capacity and genuineness to the extent that the withdrawals/gifts from the brother (Rs. 5.78 lakhs) were satisfactorily explained and should be accepted. Given the amounts and social context, the Tribunal also found the explanations for gifts from mother and sister credible and reasonably discharged. In absence of any contrary material or further inquiry by the AO (such as issuing summons under sections 131/133(6)), the addition was held to be unjustified. [Paras 26, 27]

Addition as unexplained deposits deleted; ground allowed in favour of the assessee.

Final Conclusion: The appeal is allowed: the reopening by notice under section 148 was upheld; capital gains treatment revised to treat the relinquished share as long term with indexation measured from the previous owner's acquisition; and the addition as unexplained bank deposits is deleted.

Section 14A and Rule 8D disallowance - functional test for classification of civil foundation as part of plant - additional depreciation under Section 32(1)(iia) - carry forward of balance 50% by clarificatory amendment - obligation to deduct tax under Section 195 and disallowance under Section 40(a)(ia) - requirement to establish chargeability to tax of payments to non residents

Section 14A and Rule 8D disallowance - Disallowance under section 14A read with Rule 8D restricted where it exceeds exempt dividend income - HELD THAT: - The Tribunal noted that the AO computed a disallowance under Rule 8D(iii) without accepting the assessee's contention that no expenditure was incurred to earn the exempt dividend. However, the disallowance worked out exceeded the dividend income claimed exempt. Applying a proportional limitation, the Tribunal restricted the administrative expenses disallowance under Rule 8D(iii) to the extent of the exempt dividend income of the assessee and thus partly allowed the appeal. [Paras 9]

Disallowance under section 14A read with Rule 8D restricted to the extent of exempt dividend income; ground partly allowed.

Functional test for classification of civil foundation as part of plant - Civil foundation and electrical erection works forming integral and functional part of windmill qualify as plant for depreciation at higher rate - HELD THAT: - The Tribunal applied the functional test: if a civil structure or erection is essential for the functioning of the plant, its cost forms part of the plant. Noting binding decisions of the jurisdictional High Court and the Tribunal favouring classification of such foundations and allied electrical works as part of the plant, the Tribunal found the CIT(A) erred in treating those components as building/ancillary attracting lower rates. Accordingly the disallowance of depreciation was reversed. [Paras 14]

Disallowance of depreciation on windmill components deleted; ground allowed.

Additional depreciation under Section 32(1)(iia) - carry forward of balance 50% by clarificatory amendment - Balance 50% of additional depreciation (where restricted due to <180 days use) is allowable in the immediately succeeding year; amendment treated as clarificatory and applied retrospectively - HELD THAT: - The Tribunal observed that section 32(1)(iia) permits additional depreciation and that the Finance Act, 2015 inserted a proviso (effective 1.4.2016) allowing carry forward of the balance 50% where use in the year of acquisition was for less than 180 days. Following High Court authority(s) holding the amendment clarificatory and retrospective, the Tribunal allowed the assessee's claim for the remaining additional depreciation in the relevant year, directing deletion of the disallowance. [Paras 21]

Disallowance of additional depreciation deleted; ground allowed.

Obligation to deduct tax under Section 195 and disallowance under Section 40(a)(ia) - requirement to establish chargeability to tax of payments to non residents - Whether commission paid to non residents required TDS under Section 195 and thereby disallowable under Section 40(a)(ia) held open for fresh adjudication - HELD THAT: - The AO and CIT(A) treated the payments as fee for technical services and disallowed them under Section 40(a)(ia) for non deduction of TDS, relying on Explanation 2 to Section 195. The Tribunal observed that neither authority examined the factual nature of services, the taxability of the recipients' income in India, or the applicability of relevant DTAAs/PE determinations. Since chargeability in the hands of recipients is a prerequisite for invoking Section 195, the Tribunal set aside the issue for fresh verification by the CIT(A), directing opportunity of hearing and factual/DTAA examination; the ground is therefore remanded. [Paras 30]

Issue remanded to the file of the CIT(A) for fresh adjudication with opportunity of hearing and examination of chargeability/DTAA/PE facts; ground allowed for statistical purposes.

Final Conclusion: The Tribunal partly allowed the appeal by restricting the Rule 8D disallowance to the exempt dividend amount, deleted the depreciation disallowance on windmill components, allowed the claim for carry forward of additional depreciation, and set aside the disallowance of commission paid to non residents for fresh adjudication by the CIT(A) after factual and DTAA/chargeability verification.

Deduction under section 80-IC - eligibility of undertaking situated in a notified industrial area - CBDT notification No. 177/2004 - Form-10CCB (audit report) as evidence of eligibility - overlapping application of clauses 80-IC(2)(a) and 80-IC(2)(b) - principle of testing eligibility in the first year of claim and continuity of allowance

Deduction under section 80-IC - eligibility of undertaking situated in a notified industrial area - CBDT notification No. 177/2004 - Form-10CCB (audit report) as evidence of eligibility - Assessee entitled to deduction under section 80-IC for assessment year 2014-15 as conditions for 80-IC(2)(a)(ii) are satisfied. - HELD THAT: - The Tribunal examined whether the assessee's unit at Khasra Nos. 687, 689, F-14, SIDC Industrial Area, Bhimtal, Nainital, Uttaranchal satisfies the prerequisites of section 80-IC(2). The CBDT Notification No. 177/2004 dated 28-06-2004 specifically lists the relevant Khasra numbers as notified Industrial Areas under the scheme; the notification expressly takes effect for areas which are subsequently notified by the State Government. The assessee's undertaking is not engaged in manufacture of any article specified in the Thirteenth Schedule, commenced manufacture within the relevant period (first year of operations being financial year 2010-11 as recorded in earlier assessment for AY 2013-14), and is therefore within the temporal and geographic scope of section 80-IC(2)(a)(ii). A revised audit report in Form-10CCB filed during assessment (though not initially considered by the AO because of an auditor's mistake in dating) was accepted by the Commissioner (Appeals) and is not disputed by Revenue. Given that the CBDT notification was not brought to the attention of the CIT(A) and that on the record the assessee substantially complies with statutory conditions, the Tribunal set aside the orders of the lower authorities and directed allowance of the deduction. The Tribunal also noted the overlapping applicability of clauses 80-IC(2)(a) and 80-IC(2)(b) in the facts of the case, but rested the decision on satisfaction of clause (2)(a)(ii) supported by the notification and Form-10CCB. [Paras 16]

Order of lower authorities set aside and Assessing Officer directed to allow deduction under section 80-IC for AY 2014-15 in favour of the assessee.

Final Conclusion: The appeal is allowed: the Tribunal found that the assessee's undertaking satisfies the conditions of section 80-IC(2)(a)(ii) (as supported by CBDT Notification No. 177/2004 and the revised Form-10CCB) and directed the Assessing Officer to allow the deduction for assessment year 2014-15.

Estimation of gross profit rate - use of past years' average gross profit as reliable basis - rejection of books of accounts under section 145(3) - treatment of unverifiable purchases (accommodation entries) - apportionment of common indirect expenses between SEZ and non SEZ units - remand for verification of exclusively incurred expenses

Treatment of unverifiable purchases (accommodation entries) - rejection of books of accounts under section 145(3) - Validity of trading addition in Unit I (Non SEZ) by disallowing 25% of alleged unverifiable purchases. - HELD THAT: - The Tribunal noted that the Assessing Officer had rejected the books of account under section 145(3), a matter which is not under challenge in this appeal, and that the determinative question was the reasonable gross profit rate to be applied once books were rejected. Having regard to the admitted facts, the history of the assessee and the average gross profit of past years, the CIT(A)'s approach in Unit I was examined. The CIT(A) observed that the average GP of past years was 3.72%, the assessee declared 3.12% and after the AO's addition the effective GP became 3.60%, and therefore sustained the AO's addition to the extent that the effective GP would be 3.60%. The Tribunal found no error in relying on past years' gross profit as a basis and in the CIT(A)'s resulting acceptance of the effective gross profit rate close to past experience; accordingly the addition sustained by the CIT(A) for Unit I was upheld. [Paras 13, 14]

Addition in respect of Unit I (Non SEZ) is sustained and ground no. 1 is dismissed.

Estimation of gross profit rate - use of past years' average gross profit as reliable basis - treatment of unverifiable purchases (accommodation entries) - Whether the addition sustained by CIT(A) in respect of Unit II (SEZ) by estimating a higher gross profit rate is justified. - HELD THAT: - The Tribunal accepted the premise that where past years' gross profit rates are a reliable basis and have attained finality, a declared current year gross profit which equals or exceeds the average of past years should ordinarily be accepted and not disturbed by estimating a higher rate on the same basis that led to rejection of books. In the SEZ unit the assessee had declared a GP of 28.85% against a past average of 28.80%; after the AO's addition the effective GP would rise to 29.78%, but the CIT(A) fixed 29.25% and sustained an addition of Rs. 4,26,419/-. The Tribunal held that where the assessee's declared GP is better than past years' average, the declared figure should be accepted and the addition sustained by the CIT(A) was set aside. [Paras 13, 15]

Addition of Rs. 4,26,419/ in respect of Unit II (SEZ) is set aside and ground no. 2 is allowed.

Apportionment of common indirect expenses between SEZ and non SEZ units - remand for verification of exclusively incurred expenses - Appropriateness of AO's apportionment of common indirect expenses between the SEZ and non SEZ units and the claim that certain expenses were exclusively incurred by the SEZ unit. - HELD THAT: - The Tribunal recognised that where common indirect expenditure cannot be specifically identified to a unit, apportionment on the basis of turnover is a reasonable method and saw no basis to disturb the AO's allocation in the absence of an alternative basis highlighted by the assessee. At the same time the Tribunal accepted the assessee's specific claim that certain items totalling Rs. 571,727 were exclusively incurred by the SEZ unit and should be excluded before applying the apportionment. Consequently the matter was remitted to the Assessing Officer to verify the asserted exclusively incurred expenses and, if verified, exclude them from the pool of common indirect expenses and recompute the disallowance accordingly; the remand was for verification and recomputation rather than final adjudication on the apportionment principle. [Paras 22]

Matter remitted to the AO to verify and exclude expenses claimed as exclusively incurred by the SEZ unit (Rs. 571,727) and to recompute the apportionment; ground no. 3 is allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed: the addition in respect of the non SEZ unit is upheld, the addition in respect of the SEZ unit is set aside, and the issue of apportionment of indirect expenses is remitted to the Assessing Officer for verification of the expenses claimed as exclusively incurred by the SEZ unit and recomputation of the disallowance.

Reopening of assessment - Notice under Section 148 - Formation of reasons to believe for reopening - Escapement of income where return has been filed - Impleading of legal heirs in proceedings involving a deceased assessee - Territorial/jurisdictional competence of the Assessing Officer based on PAN/address

Reopening of assessment - Notice under Section 148 - Escapement of income where return has been filed - Formation of reasons to believe for reopening - Validity of reassessment proceedings initiated by issuance of notice under Section 148/147 where the assessee had already filed a return disclosing the transaction relied upon for reopening. - HELD THAT: - The Assessing Officer recorded reasons stating that a sale transaction valued by the sub-Registrar and not disclosed formed the basis for belief that income had escaped assessment. However, the record indisputably showed that the assessee had filed and the Department had acknowledged a return for the assessment year which disclosed the said sale and the cost details claimed. The Tribunal, following the principle that the reasons recorded must correctly reflect the factual premise for reopening, held that the foundational premise of non-filing/non-disclosure was factually incorrect. Where the material on which the Assessing Officer acted shows that the transaction was already reflected in the original return, there was no legal basis for forming the requisite belief that income had escaped assessment and therefore no jurisdiction to reopen. Applying these principles to the material before it, the Tribunal quashed the notice and the consequent reassessment proceedings. [Paras 12, 13, 14, 15]

Notice issued under Section 148 and reassessment under Section 147 quashed for lack of jurisdiction as the return already disclosed the transaction relied upon for reopening.

Impleading of legal heirs in proceedings involving a deceased assessee - Notice under Section 148 - Whether issuance of notice and framing of assessment in the name of the deceased assessee through a single legal heir (who attended proceedings and identified himself as legal heir) rendered proceedings a nullity for non-impleading of other alleged legal heirs. - HELD THAT: - The Tribunal examined whether the notice was a nullity because it was issued in the name of the deceased through one legal heir and other alleged heirs were not impleaded. There was no evidence on record to show that the estate had devolved on other persons or that other legal heirs existed who were entitled and responsible to discharge tax liabilities; no will, testament or court order was produced. The son who attended identified himself as a legal heir, produced the return and joint-account details and participated in proceedings. The Tribunal found no illegality in issuing notice and passing assessment in the name of the deceased represented by that legal heir. Where the attending legal heir later contended that his statement was made under pressure, the Tribunal noted the onus lay on him to retract promptly and to provide verifiable documentation of other heirs, which was not done. Consequently, the contention of nullity failed. [Paras 10]

Issuance of notice and framing of assessment in the name of the deceased represented by the attending legal heir is not a nullity in the absence of proof of other legal heirs or contrary testamentary documentation.

Territorial/jurisdictional competence of the Assessing Officer based on PAN/address - Notice under Section 148 - Whether the Assessing Officer, ITO Ward-2(1) Ajmer, validly exercised jurisdiction to issue notice under Section 148 despite an earlier return having been filed at a different Ward/ITO. - HELD THAT: - The Tribunal accepted the Department's position that jurisdiction for tax proceedings ordinarily follows the PAN/assessed address as recorded in departmental systems unless and until a formal communication requesting migration is made and processed by the Department. There was no evidence that the assessee had requested migration of PAN jurisdiction to the other Assessing Officer, and records continued to show the Ajmer address. On these facts the Tribunal found no infirmity in assumption of jurisdiction by ITO Ajmer to issue the notice under Section 148. [Paras 11]

Proceedings before ITO Ward-2(1), Ajmer were within jurisdiction in the absence of departmental migration of PAN to another Assessing Officer.

Final Conclusion: The reassessment proceedings initiated by notice under Section 148/147 were quashed as the foundational premise of escapement was factually incorrect (the return for AY 2008-09 disclosed the transaction). The Tribunal upheld the validity of issuing notice and assessing the deceased through the attending legal heir and found no jurisdictional defect in proceedings before ITO Ajmer. The appeal is allowed; consequential grounds on merits were treated as infructuous.

Exemption under section 10(37) - interpretation of statutory phrase "such land" in context of agricultural use - mistake apparent on record under section 254(2) - reliance on revenue records (Khasra Girdawari) as primary evidence of agricultural use - appreciation of evidence versus reappreciation barred in miscellaneous application

Exemption under section 10(37) - interpretation of statutory phrase "such land" in context of agricultural use - mistake apparent on record under section 254(2) - Tribunal's interpretation that the phrase "such land" in section 10(37) requires the whole land to be used for agricultural purposes was not a mistake apparent on record and could not be corrected under section 254(2). - HELD THAT: - The Bench adopted a view on the interpretation and applicability of section 10(37) on appreciation of facts before it. Such a view, being a substantive interpretation arrived at after considering the parties' arguments (see para 15 as noted by the Bench), falls outside the narrow scope of rectification under section 254(2) which does not permit re appreciation or modification of merits. The Coordinate Bench decision relied on by the assessee (Rajendra Bastimal Chordiya relating to section 54B) was not placed before the Tribunal and, in any event, does not persuade a different outcome on the present facts. Accordingly, the contention that the Tribunal misconstrued the statutory phrase as requiring entire Khasra cultivation is rejected as not being a clerical or manifest error amenable to correction (para 6). [Paras 6]

Interpretation of section 10(37) by the Tribunal is not a mistake apparent on record and is not rectifiable under section 254(2).

Reliance on revenue records (Khasra Girdawari) as primary evidence of agricultural use - mistake apparent on record under section 254(2) - The Tribunal's factual error regarding the area description (that the assessee held 0.26 ha instead of 1.01 ha for Khasra nos.) was a mistake and has been rectified, but the correction does not affect the Tribunal's ultimate conclusion. - HELD THAT: - The Bench accepted that a clerical mistake had occurred in recording the area and Khasra particulars and this specific factual error is corrected. However, even after rectification, the presence of 50 Amla trees on the 1.01 hectare plot does not alter the Tribunal's conclusion on agricultural use for exemption purposes. The rectification was limited to the incorrect area notation and did not extend to reopening the substantive finding (para 6). [Paras 6]

The area/Khasra description error is rectified, but the rectification does not change the Tribunal's substantive conclusion.

Reliance on revenue records (Khasra Girdawari) as primary evidence of agricultural use - appreciation of evidence versus reappreciation barred in miscellaneous application - The finding that the land stood transferred in the name of JDA in Vikram samvat 2065 (2008) on the basis of Khasra Girdawari is a correct factual conclusion and not a mistake apparent on record. - HELD THAT: - The assessee's assertion that he continued to own and use the land until receipt of compensation on 20.11.2009 was unsupported by the record relied upon by the Tribunal. The Coordinate Bench in AY 2009-10 treated chargeability on the basis of compensation receipt date, but that decision does not establish continuous ownership or use by the assessee up to that date. The Tribunal's reliance on the Khasra Girdawari showing JDA as owner for 2008 is supported by record and not shown to be erroneous (para 8). [Paras 8]

The Tribunal's factual finding regarding transfer to JDA in 2008 stands and is not a mistake apparent on record.

Distinguishing precedent on its facts - appreciation of evidence versus reappreciation barred in miscellaneous application - The Tribunal correctly distinguished the Coordinate Bench decision in Smt. G.S. Lekha on the basis of material factual differences; there is no mistake apparent on record in doing so. - HELD THAT: - The Tribunal noted that in G.S. Lekha the agricultural officer had certified the land and specific compensation for trees had been determined, whereas no such material existed in the present record. The Tribunal's factual comparison and consequent distinction of that precedent were explained in the order and do not amount to an apparent error warranting rectification (para 11 and para 22 as reproduced in the order). [Paras 11]

Distinguishing the precedent was justified on factual differences; no rectification is warranted.

Reliance on revenue records (Khasra Girdawari) as primary evidence of agricultural use - appreciation of evidence versus reappreciation barred in miscellaneous application - The Tribunal's rejection of affidavits and other documents in favour of Khasra Girdawari and its conclusion that no agricultural activity was carried out prior to transfer is a factual finding not amenable to correction under section 254(2). - HELD THAT: - The Tribunal treated Khasra Girdawari as the critical government land record and found the affidavits and other documents to be self serving and unconvincing, noting that the Sub Tehsildar's confirmations were not disputed. Reassessment of the weight of this evidence would require reappreciation of facts, which cannot be undertaken in a miscellaneous application seeking rectification of apparent error. Therefore, the contention that other evidence (electricity bills, photographs, statements under section 131) was ignored does not establish a mistake apparent on record (paras 21-14). [Paras 14, 21]

Tribunal's factual finding favouring Khasra Girdawari over affidavits and other evidence is sustained; no rectification is permissible.

Final Conclusion: The miscellaneous application is dismissed. The sole clerical error in recording the area/Khasra particulars is rectified, but the Tribunal's substantive findings on interpretation of section 10(37), ownership transfer to JDA, distinction of precedent, and evaluation of evidence remain intact and are not amenable to correction under section 254(2).

Registration under section 12AA - condonation of delay in filing Form 10A - retrospective application of sections 11 and 12 - requirement of recording reasons in writing - effect of appellate directions on relief beyond their terms

Registration under section 12AA - condonation of delay in filing Form 10A - requirement of recording reasons in writing - retrospective application of sections 11 and 12 - Whether the CIT(E) ought to have granted registration with retrospective effect to the date of creation of the trust by condoning the delay in filing the application, and whether the CIT(E) recorded reasons for acceptance or rejection of the condonation plea. - HELD THAT: - The Tribunal noted that registration under section 12AA has been granted but limited to the first day of the financial year in which the application was filed (01.04.2007). Section 12A(1)(a) and its proviso permit the Principal Commissioner/Commissioner to apply sections 11 and 12 from the date of creation of the trust if, for reasons recorded in writing, he is satisfied that the applicant was prevented from applying within the prescribed period; otherwise, those sections apply from the first day of the financial year in which the application is made. The Coordinate Bench had directed grant of registration but its direction was confined to allowing registration and was silent on condonation of delay. The CIT(E)'s order grants registration from 01.04.2007 but the record does not show any considered, written findings on the condonation application filed with Form 10A; the only office communication cited is a conclusory letter stating retrospective application is not possible, which does not disclose examination of the condonation plea or reasons for its rejection. Because the statute requires recorded reasons for condonation or rejection and the Tribunal's direction did not adjudicate condonation, the matter of condonation and consequent retrospective applicability of sections 11 and 12 was not finally determined on merits by the CIT(E). In these circumstances the Tribunal remanded the specific question of delay/condonation to the file of the CIT(E) for fresh, reasoned adjudication after affording the assessee an opportunity of being heard. [Paras 11, 12, 13, 14]

Matter remanded to the CIT(E) to examine the condonation application, record precise reasons in writing accepting or rejecting the explanation for delay, and thereafter decide whether registration should operate from the date of creation of the trust or from the first day of the financial year in which the application was filed.

Final Conclusion: Registration under section 12AA was granted by the CIT(E) from 01.04.2007; since the CIT(E) did not record reasoned findings on the assessee's condonation plea and the Tribunal's direction was silent on condonation, the question whether registration should be retrospective to the trust's inception is remanded to the CIT(E) for fresh, speaking adjudication after giving the assessee an opportunity of being heard. The appeal is allowed for statistical purposes.

Classification as a co-operative society within the meaning of section 2(19) of the Income-tax Act - eligibility for deduction under section 80P(2)(a)(i) of the Income-tax Act - remand to Assessing Officer for fresh consideration of subsidiary conditions

Classification as a co-operative society within the meaning of section 2(19) of the Income-tax Act - Souharda cooperatives registered under the Karnataka Souharda Sahakari Act, 1997 are co-operative societies for the purposes of section 2(19). - HELD THAT: - The Tribunal examined the definition of "co-operative society" in section 2(19) which includes societies registered under any law in force in a State for registration of co-operative societies. Having considered the nature, origin and objectives of the Karnataka Souharda Sahakari Act, 1997 and the cooperative principles on which Souharda entities operate, the Tribunal concluded that Souharda cooperatives fall within the statutory concept of co-operative societies. The revenue's distinction between "co-operative societies" and "co-operatives" registered under the KSSA, 1997 was held to be unsustainable and the ground on which deduction was denied was therefore incorrect.

Assessee's status as a co-operative society under section 2(19) is accepted; the denial of deduction on that ground is set aside.

Eligibility for deduction under section 80P(2)(a)(i) of the Income-tax Act - remand to Assessing Officer for fresh consideration of subsidiary conditions - Whether the assessee is entitled to deduction under section 80P(2)(a)(i) was not finally adjudicated on merits and was remitted to the Assessing Officer for verification of other conditions. - HELD THAT: - Although the Tribunal accepted that Souharda cooperatives qualify as co-operative societies for the purposes of section 2(19), it did not finally allow the claimed deduction under section 80P(2)(a)(i) on all aspects. The Tribunal followed a precedent of the Bench and held that the question of satisfaction of the remaining statutory conditions for grant of deduction must be examined by the Assessing Officer. Accordingly, the matter was remitted to the AO for fresh adjudication after affording the assessee a reasonable opportunity of being heard.

Claim for deduction under section 80P(2)(a)(i) remitted to the Assessing Officer for fresh consideration of other conditions; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal held that Souharda cooperatives registered under the Karnataka Souharda Sahakari Act, 1997 qualify as co-operative societies under section 2(19), set aside the denial of deduction on that ground, but remitted the claim under section 80P(2)(a)(i) to the Assessing Officer for fresh examination of the remaining conditions; appeal allowed for statistical purposes.

Netting off interest receipts against interest payments - deductibility of interest under Section 57(iii) - expenditure laid out wholly and exclusively for earning income from other sources - requirement of nexus between expenditure and the earning of income - income from other sources accrues sui generis - precedential effect of CIT v. V.P. Gopinathan on set off of interest on loans secured by fixed deposits

Netting off interest receipts against interest payments - deductibility of interest under Section 57(iii) - expenditure laid out wholly and exclusively for earning income from other sources - requirement of nexus between expenditure and the earning of income - precedential effect of CIT v. V.P. Gopinathan on set off of interest on loans secured by fixed deposits - Allowability of interest paid on loans secured by fixed deposits as deduction or set off against interest received from fixed deposits for the assessment years 2012-2013 and 2013-2014. - HELD THAT: - The Tribunal examined rival authorities and the factual matrix where the assessee had placed substantial funds in fixed deposits and simultaneously availed a loan secured by those deposits, claiming interest paid on the loan to be set off against interest earned on the deposits. The Tribunal noted precedents holding that deductions under Section 57(iii) are permissible only where the expenditure is laid out wholly and exclusively for making or earning the income from other sources and there is a sufficient nexus between the expenditure and the earning of that income. Having considered conflicting decisions, the Tribunal found the facts of the present case to be akin to the decision in CIT v. V.P. Gopinathan, where the Supreme Court disallowed reduction of interest on loans secured by fixed deposits from interest earned on those deposits. The Tribunal rejected the assessee's submission that borrowing to avoid encashment and thereby protect the source of interest income established the requisite nexus, holding that the payment of interest in the present case lacked the necessary connection to earning the interest income and therefore could not be allowed as a deduction or by netting. On this basis the Tribunal upheld the findings of the Assessing Officer and the CIT(A). [Paras 7]

Assessee's claim to set off interest paid on loans secured by fixed deposits against interest earned on those deposits is disallowed; the orders of the lower authorities are upheld.

Final Conclusion: The Tribunal dismissed the appeals for assessment years 2012-2013 and 2013-2014, upholding the disallowance of interest claimed by the assessee and the orders of the lower authorities.

Full value of consideration under section 48 - stamp valuation under section 50C not to substitute actual consideration under section 48 - rebuttable presumption under section 292C for documents seized during search - loose/seized papers require independent corroboration before forming basis of addition - statement recorded under section 132(4) is not conclusive and is retractable - colourable device doctrine not to be invoked without supporting material

Full value of consideration under section 48 - stamp valuation under section 50C not to substitute actual consideration under section 48 - loose/seized papers require independent corroboration before forming basis of addition - Whether the sale consideration for computing long-term capital gain should be taken at Rs.4.65 crores (as per seized 'satakhat') or at Rs.12.61 lakhs as per registered document and DVO valuation - HELD THAT: - The Tribunal held that section 48 requires adoption of the actual consideration received under the registered document and does not permit substitution by a higher notional or fair market value under section 50C. Although 'satakhat' documents showing an agreement at Rs.4.65 crores were found, there was no material on record demonstrating that the assessee actually received consideration over and above the registered consideration. The part payment of Rs.2.65 crores relied upon by the AO was shown to have been returned by banking channels and was not established as consideration for the transfer. The DVO valuation also supported a much lower value. In these circumstances the Tribunal found the AO's treatment unsustainable and rejected the AO's inference of a colourable device in the absence of corroborative evidence. [Paras 6]

Addition treating sale consideration at Rs.4.65 crores deleted; Revenue appeal dismissed.

Rebuttable presumption under section 292C for documents seized during search - loose/seized papers require independent corroboration before forming basis of addition - statement recorded under section 132(4) is not conclusive and is retractable - Whether the sum of Rs.2.10 crores (disclosed in a statement during search) could be treated as the assessee's income for A.Y. 2009-10 - HELD THAT: - The Tribunal accepted that while documents found during search attract a rebuttable presumption of belonging to the assessee, such presumption can be rebutted. The seized receipt was a loose document and there was no corroborative material to establish that the cash represented income of the assessee. The party allegedly paying the cash denied having returned any money to the assessee and the Assessing Officer could not produce independent evidence of receipt as income. The assessee had also retracted the adhoc disclosure made under section 132(4) and explained the entries as not being supported by incriminating material. Consistent with the principle that loose sheets lack probative value without supporting evidence, the Tribunal sustained the deletion of the addition. [Paras 13]

Addition of Rs.2.10 crores deleted; Revenue appeal dismissed and assessee's cross-objection partly allowed.

Rebuttable presumption under section 292C for documents seized during search - loose/seized papers require independent corroboration before forming basis of addition - Whether the addition of Rs.40 lakhs (admitted during search) should be sustained for the relevant assessment year - HELD THAT: - The Tribunal applied the reasoning adopted in the decision on the closely related assessment year, observing that the identical issue had been decided in favour of the assessee. Following the findings that seized loose papers and retracted statements, absent corroboration, do not justify additions, the Tribunal directed deletion of the addition. [Paras 16]

Addition of Rs.40 lakhs deleted; Revenue appeal dismissed and assessee's cross-objection allowed consistent with earlier findings.

Final Conclusion: All appeals filed by the Revenue are dismissed. Additions based on seized loose papers and retracted statements were deleted for lack of independent corroboration; the capital gain was computed on the basis of the registered sale consideration and supporting DVO valuation, and the assessments challenged were directed to be revised accordingly. Cross objections by the assessee are partly allowed.

Deduction of tax at source (TDS) and consequences of non-deduction - validity and scope of certificate under section 197 for nil deduction - applicability of section 172(8) to terminal handling and allied charges - interaction of section 172 with provisions on TDS (ss. 194C/195) - cessation of liability and deeming fiction under section 41(1) - allowability of business expenses and disallowance for personal use

Deduction of tax at source (TDS) and consequences of non-deduction - validity and scope of certificate under section 197 for nil deduction - Whether processing charges paid without TDS were disallowable where TDS certificates under section 197 were produced and payment was made to a partner on instructions of the processor - HELD THAT: - The Tribunal accepted the facts that the processor's premises were duly registered, the processor's name appeared on the assessee's export invoices and similar payments in earlier years had been accepted. The statement under section 131 admitted receipt of plant hiring charges, and there was no coherent finding by the AO denying the plant-hiring charges. The assessee produced a nil-deduction certificate up to the relevant limit and there was no evidence that the earlier certificate for a lesser amount had been substituted or cancelled so as to render the certificate ineffective for the payments made. Payments made to a partner of the processor pursuant to directions of the processor could not be a ground for disallowance. On these facts the Tribunal held that the payments did not exceed the certificate limit and the AO's contradictory findings could not sustain the addition. [Paras 8]

Addition in respect of processing charges disallowed by the AO is deleted; revenue's ground dismissed.

Applicability of section 172(8) to terminal handling and allied charges - interaction of section 172 with provisions on TDS (ss. 194C/195) - Whether terminal handling charges paid to agents are subject to TDS under section 194C/195 or fall within section 172(8) and are therefore not liable to TDS - HELD THAT: - The Tribunal noted invoices showing handling charges were billed by agents of non-resident ship owners and relied on CBDT Circular No. 723 (19-9-1995) clarifying that where s. 172 applies, provisions of ss. 194C and 195 do not apply because the Indian agent steps into the shoes of the non-resident principal. Section 172(8) explicitly includes handling charges within amounts connected with operation of ships in international traffic. Co-ordinate tribunal decisions support that handling charges linked to freight under a single composite contract are covered by s. 172. There was no material on record to show the handling charges were not paid to agents of non-resident shipping companies. Accordingly the Tribunal held no TDS was required. [Paras 11, 13]

Addition on account of terminal handling charges deleted; revenue's ground dismissed.

Cessation of liability and deeming fiction under section 41(1) - Whether sundry creditors reflected in the balance sheet could be treated as income under section 41(1) on the ground that liabilities were old or time-barred - HELD THAT: - The Tribunal observed that the liabilities continued to appear in the assessee's books and there was no write back or treatment as non-payable in the accounts. Section 41(1) is a deeming provision and must be construed strictly; mere age or limitation does not itself constitute cessation of liability. The authorities cited (including tribunal and High Court decisions) establish that addition under s.41(1) cannot be made where the liability remains on books and has not been written off. On these facts the Tribunal found no basis to treat the sundry creditors as having ceased to exist and upheld deletion of the addition. [Paras 15, 16, 18]

Addition for unpaid liabilities under section 41(1) deleted; revenue's ground dismissed.

Allowability of business expenses and disallowance for personal use - Whether estimated disallowance of travel, telephone/postage and motor bike expenses should be sustained or limited - HELD THAT: - Having regard to the nature of the assessee's business, its past history and the material on record, the Tribunal found the CIT(A)'s restriction of disallowance to 5% to be reasonable. The Revenue did not adduce contrary material to justify a higher disallowance. In absence of positive evidence showing greater personal use, the Tribunal declined to disturb the lower appellate finding. [Paras 20, 21, 23]

Disallowance restricted to 5% as directed by the CIT(A) is sustained; revenue's ground dismissed.

Final Conclusion: All grounds of the Revenue's appeal against the CIT(A)'s deletions and adjustments are dismissed; the order of the CIT(A) is affirmed.

Specific performance - Certainty of agreement / Uncertainty of contract - Benami transaction under section 2(a) and prohibition under section 3 of the Benami Transactions (Prohibition) Act, 1988 - Readiness and willingness to perform - Privity of contract - Joinder and costs for unjustified impleading

Fictitious / benami identity - Privity of contract - The plaintiff used a different name and address in the agreement and acted as a front man; his bona fides and identity are doubtful. - HELD THAT: - The Court accepted the trial Court's factual conclusion that the person who executed and relied upon the agreement was not shown to be the bona fide proprietor using the name and address stated in the agreement. Documentary evidence on record (bank entries, signatures in other documents, non-production of identity documents despite notice, and the opening of a bank account under the disputed name only after institution of proceedings) supported the inference that the plaintiff had described himself differently for the purpose of the transaction. The unexplained source and flow of funds, and non-examination of persons/accounts from which pay-orders/drafts originated, reinforced the finding that the plaintiff acted as a front man/name-lender. In that factual backdrop the trial Court's finding that the plaintiff's identity and bona fides were doubtful cannot be faulted. [Paras 11]

Finding that the plaintiff used a fictitious name/address and his bona fides are suspect; adverse inference against the plaintiff.

Certainty of agreement / Uncertainty of contract - Specific performance - Order 7 Rule 3 CPC - description of property - The agreement to sell was vague and uncertain and therefore not enforceable for specific performance. - HELD THAT: - The agreement did not describe with requisite certainty the portions of land said to be sold - survey numbers, area, dimensions, boundaries and a map were absent or inadequate; parts of the lands were in joint names and there was no evidence of partition or authority to deal with such joint ownership. Amendments to pleadings could not cure the want of a definite written description where the agreement itself was ambiguous. Reliance on authority established that specific performance requires a contract with certain stipulations and consensus ad idem; an uncertain agreement cannot be specifically enforced. The trial Court's finding of uncertainty and incapacity for execution of the agreement was upheld on these legal and factual bases. [Paras 12]

Agreement held vague and uncertain; not capable of being specifically enforced.

Benami transaction under section 2(a) and prohibition under section 3 of the Benami Transactions (Prohibition) Act, 1988 - Object unlawful under section 23 Indian Contract Act - The transaction, on the facts, amounted to a benami transaction and was therefore prohibited and unenforceable. - HELD THAT: - While recognising the principle that 'paid' and 'provided' in section 2(a) must be read disjunctively and that bona fide transactions funded by third parties (e.g., loans) should not be equated with benami dealings, the Court examined the facts: the plaintiff's meagre admitted earning, unexplained cash flows, pay-orders and drafts drawn from accounts of unrelated companies and persons (who were not examined), and absence of any written arrangement between the plaintiff and those sources. The source of consideration was not shown to originate from the plaintiff; drafts/pay-orders were made out in favour of defendants directly. Applying authorities and the test of who provided the consideration, the Court found the transaction to be benami within the meaning of section 2(a), prohibited by section 3, and consequently the agreement offended section 23 of the Contract Act and could not be enforced. [Paras 13]

Transaction held to be benami and therefore prohibited and unenforceable.

Readiness and willingness to perform - Condition precedent and automatic rescission for default - The plaintiff was not continuously ready and willing to perform his part of the agreement and defaulted the payment schedule, causing automatic rescission of the agreement. - HELD THAT: - The agreement fixed dates and amounts for payment, and contained a default/automatic rescission clause. The plaintiff paid amounts short of the stipulated schedule and failed to prove that he tendered the remaining required cash in the prescribed manner and time. Documentary and oral evidence (including bank testimony about cancellation/crediting of drafts) contradicted the plaintiff's claim of tendering cash before the extended date. The plaintiff also failed to produce stamp papers or draft sale deed as required. Established law requires continuous readiness and willingness from date of agreement to decree; on the facts the Court concluded the plaintiff defaulted and the agreement stood rescinded. [Paras 14]

Plaintiff not ready and willing to perform; agreement rescinded by default.

Joinder and costs for unjustified impleading - Defendants No.4 and 5 were unjustifiably impleaded and are entitled to costs. - HELD THAT: - The agreement did not create privity between the plaintiff and defendants No.4 and 5; the contingency for acquisition of their land by defendants No.1 and 2 on payment by the plaintiff was never fulfilled. The amendment bringing defendants No.4 and 5 as parties was allowed late and, in view of the plaintiff's failure to pay the condition-precedent amount, they were unnecessarily dragged into litigation. On these grounds the trial Court's award of costs in their favour was affirmed. [Paras 15]

Defendants No.4 and 5 entitled to costs for unjustified impleading.

Final Conclusion: The first appeal is dismissed. The trial Court's findings that the agreement was uncertain, the transaction was benami and prohibited, and that the plaintiff was not ready and willing to perform are affirmed; defendants No.4 and 5 are entitled to the costs awarded by the trial Court. No other relief is granted.

Abetment of concealment - Liability of Customs Broker for mis-declaration - Due diligence / KYC obligations of customs broker - Standard of proof in penalty proceedings - Reliance on statements under Section 108 of the Customs Act, 1962 - Penalty under Section 112(a) and Section 114AA of the Customs Act, 1962

Liability of Customs Broker for mis-declaration - Due diligence / KYC obligations of customs broker - Abetment of concealment - Standard of proof in penalty proceedings - Reliance on statements under Section 108 of the Customs Act, 1962 - Whether the appellant, a customs broker, abetted concealment/non-declaration of imported goods and was liable to penalties imposed under the Customs Act. - HELD THAT: - The Tribunal examined whether the conduct of the appellant's employees in filing the Bill of Entry without meeting the importer or conducting further inquiries amounted to intentional connivance or abetment in the non-declaration of goods. The record shows that IEC/KYC details were verified from the DGFT website and that the DGFT portal displayed the importer details; acceptance of those publicly available details by the broker weighs against a finding of deliberate collusion. The department relied on statements attributed to the broker's employees suggesting prior mis-declaration, but those statements were retracted and no cross-examination was allowed; apart from those statements there was no independent evidence to establish that earlier consignments were misdeclared or that the broker had knowledge of concealment. In these circumstances the Tribunal held that mere failure to meet the importer face-to-face or to take additional steps, when the broker had verified IEC details on the DGFT website, did not establish the requisite intentionality or abetment. The Tribunal therefore applied the standard of proof appropriate in penalty proceedings and concluded that the evidence was insufficient to sustain penalties against the appellant. [Paras 5, 6]

Penalties imposed on the appellant for abetment/non-declaration are set aside; no finding of intentional connivance or abetment is sustained.

Final Conclusion: The impugned order is quashed insofar as it imposes penalties on the customs broker; the appeal is allowed and the penalties set aside with consequential benefits, if any, as per law.

Sanction of scheme of compromise and arrangement under Section 391-393 - Bona fides and commercial wisdom of majority creditors and members - Non-compounding of criminal proceedings by sanction of a scheme - Power of the court to refuse clauses seeking stay/vacation of criminal or statutory proceedings - Appointment of court commissioner/supervisor to prevent dissipation of assets and supervise implementation - Limits on objections that amount to bargaining for better commercial terms - Custodia legis and supervisory role of Official Liquidator during revival in liquidation

Sanction of scheme of compromise and arrangement under Section 391-393 - Bona fides and commercial wisdom of majority creditors and members - Whether the proposed scheme of compromise and arrangement should be sanctioned by the Court. - HELD THAT: - The Court examined the statutory prerequisites for sanctioning a scheme under Section 391 read with Section 393, including that requisite meetings were convened, requisite majorities were obtained and relevant material was placed before voters. The voting returns show that the necessary majorities (well above 75% in each relevant class) approved the scheme, many with modifications. Reliance was placed on authoritative principles that the court must ensure statutory formalities, bona fides, fairness to classes affected and that the court should not sit as an appellate body on commercial wisdom of the majority. The Court found no basis to overturn the commercial choice of the majority and held that the objections raised did not demonstrate that the scheme was unfair, mala fide or a sham to dispose of assets. [Paras 7, 21, 22]

The scheme is sanctioned subject to conditions; the majority approval and statutory formalities justify sanction and the principal objections are dismissed.

Non-compounding of criminal proceedings by sanction of a scheme - Power of the court to refuse clauses seeking stay/vacation of criminal or statutory proceedings - Whether clauses in the scheme that seek stay, vacatur or waiver of criminal or other statutory proceedings can be approved. - HELD THAT: - The Court considered authorities establishing that offences already committed do not get automatically compounded by sanctioning a scheme and that provisions in a scheme cannot be employed to bring criminal prosecutions to an end. The scheme contained express clauses seeking directions to stay or vacate civil as well as criminal proceedings and to direct statutory authorities not to initiate proceedings or to waive penalties. The Court held that insofar as the scheme attempts to secure waiver or extinguishment of criminal proceedings or to bar statutory actions, those clauses cannot be approved. The Court observed that implementation of the scheme will not preclude appropriate consequences in pending criminal matters according to law. [Paras 16, 17, 18]

Clauses seeking waiver, stay or vacatur of criminal or statutory proceedings are not approved; the scheme otherwise remains sanctionable and implementation will not preclude legal consequences in pending criminal proceedings.

Appointment of court commissioner/supervisor to prevent dissipation of assets and supervise implementation - Custodia legis and supervisory role of Official Liquidator during revival in liquidation - Whether additional supervisory safeguards should be imposed to allay apprehension that the propounders may siphon off funds or dissipate assets. - HELD THAT: - Having noted objectors' apprehensions about siphoning of assets and the fact that the Official Liquidator was provisional liquidator, the Court held that close supervision was necessary to ensure funds are not dissipated. The Court therefore appointed a Court Appointed Commissioner to supervise implementation, required creation of an escrow account for receipts and contributions, empowered the commissioner to issue directions, fixed the commissioner's fees, directed monthly reports and provided that the Court will review functioning after three months and may pass further directions including recalling approval if required. [Paras 19, 23]

A Court Appointed Commissioner is appointed with supervisory powers; an escrow account and monthly reporting are directed and the Court will review the scheme's functioning after three months.

Limits on objections that amount to bargaining for better commercial terms - Whether objections that merely seek improved commercial terms (bargaining) justify withholding sanction of the scheme. - HELD THAT: - The Court analysed objections by SELFC and others and characterized many demands as attempts to renegotiate or improve the commercial terms offered by the scheme rather than bona fide legal objections. The Court held such bargaining demands do not amount to valid legal objections to the scheme; relief by way of improved terms cannot be forced as an objection to sanction when the statutory majorities have accepted the scheme. [Paras 14, 22]

Objections that only seek better commercial terms are rejected and do not preclude sanction of the scheme.

Final Conclusion: The Court sanctioned the proposed scheme of compromise and arrangement under Sections 391-393 subject to deletion/non-approval of clauses seeking waiver or stay of criminal/statutory proceedings, and imposed supervisory safeguards - appointment of a Court Appointed Commissioner, escrow arrangements, monthly reporting and a three-month review - to ensure implementation and to prevent dissipation of assets; other objections were dismissed.

Maintainability of a petition under section 241 by a non-member - scope of remedy for oppression and mismanagement in respect of a Section 8 company - proviso to section 244 - waiver of threshold qualifications - jurisdictional threshold for invocation of section 241 - prerequisites for requisitioning a general meeting and validity of meeting/election - prima facie/interim relief - three-step test (jurisdiction, cause of action, prima facie case) - requirement of particularised allegations for unfairly prejudicial conduct

Maintainability of a petition under section 241 by a non-member - jurisdictional threshold for invocation of section 241 - proviso to section 244 - waiver of threshold qualifications - Petition filed under section 241 by a person who is not a member of the Section 8 company is not maintainable and the Tribunal lacks jurisdiction to entertain it absent compliance with the statutory membership threshold. - HELD THAT: - The Tribunal held that the statutory threshold of being "a member" is a jurisdictional requirement for invoking section 241 and cannot be circumvented by treating a non-member as a member. The proviso to section 244 permits waiver of shortfalls in the qualifying percentage or number where appropriate, but it does not permit entertaining petitions by a person who is not a member at all. The Bench articulated a three-step approach for interim relief based on prima facie material: (1) jurisdiction (membership threshold), (2) whether the petition complains against proper/necessary respondents and alleges prejudicial conduct, and (3) whether a prima facie case exists to grant interim relief. Because the petitioner failed Rule-1 (membership), the Tribunal lacked jurisdiction and the petition was not maintainable; an earlier interim order holding the petition maintainable did not preclude full examination at the final hearing and did not operate as res judicata. [Paras 56, 57, 60, 61, 62]

The petition is not maintainable insofar as it is filed by a non-member and the Tribunal has no jurisdiction to entertain it on that basis.

Scope of remedy for oppression and mismanagement in respect of a Section 8 company - requirement of particularised allegations for unfairly prejudicial conduct - The remedy under section 241 is of limited application to Section 8 companies and actions alleged must be particularised to show unfair prejudice to members or to the company; sweeping or omnibus allegations are inadequate. - HELD THAT: - The Tribunal observed that Section 8 (formerly section 25) companies, formed for charitable purposes, present a narrower field for claims of prejudice to personal economic interests. The object of section 241 is to prevent management acting unfairly to the prejudice of members' legitimate expectations; however, where a company is a charitable/trust association with multi-layered representative membership, allegations must specify which actions by which persons caused prejudice and how. The petition contained general and omnibus allegations without particulars tying any alleged mismanagement to prejudice of the petitioner or the company; therefore the claim under section 241 was unsustainable on merits. [Paras 64, 65, 66, 74, 75]

Allegations of mismanagement against a Section 8 company must be particularised; the petition's sweeping allegations fail to make out a case under section 241.

Prerequisites for requisitioning a general meeting and validity of meeting/election - indoor management - entitlement of members to convene EGM - A person or group not shown to be members of the company cannot validly requisition a meeting or hold an EGM and cannot be recognised as having conducted valid elections for the company's management. - HELD THAT: - The Tribunal applied the statutory requisition framework: a valid requisition for an EGM must come from members possessing the necessary voting power (one-tenth where applicable). The petitioner and his supporters were not established as members of CSITA and thus lacked standing to call an EGM or to constitute a committee purporting to be the company's management. The purported meeting of 16-1-2016, attended by some 200 persons who were not shown to be members, could not found a valid change in company management; moreover procedural prerequisites (showing membership on the company register and the requisite numerical threshold) were not complied with. [Paras 69, 70, 71, 72, 73]

The meeting/election held by the petitioner and his supporters is invalid because they were not established members and did not satisfy requisition requirements.

Prima facie/interim relief - three-step test (jurisdiction, cause of action, prima facie case) - requirement of particularised allegations for unfairly prejudicial conduct - Even assuming arguendo maintainability, the petition failed at the cause-of-action and prima facie stages because it lacked particularised allegations showing unfair prejudice or material demonstrating a prima facie entitlement to relief. - HELD THAT: - The Tribunal proceeded for completeness to examine merits and reiterated the three-step test: jurisdiction (membership), cause of action (proper respondents and specific complained acts), and prima facie evidence to grant interim relief. The petition did not identify specific acts by identified management persons that caused prejudice to the petitioner or the company, and relied on general references to investigations and criminal cases without connecting them to the statutory standard for relief under section 241/242 (including just and equitable grounds for winding up). Consequently, no prima facie entitlement to relief under section 241 or an order under section 213 was shown. [Paras 60, 63, 74, 76, 77]

On the merits, the petition fails for lack of particularised cause of action and absence of prima facie material to grant interim or substantive relief.

Final Conclusion: The Company Petition and related application for investigation are dismissed as misconceived. The Tribunal finds the petitioner, being a non-member, lacked jurisdictional standing under section 241; alternatively, the petition fails on merits for want of particularised allegations and prima facie material to show unfair prejudice or to justify the reliefs sought. Documents filed in IA/252/2019 were taken on record and that application disposed of accordingly.

Transfer of shares by registration despite delay and signature mismatch - requirement of indemnity bond as condition for registration - failure of transferor to object or lodge complaint as permitting registration - competent direction to registrar/transfer agent to register transfer

Transfer of shares by registration despite delay and signature mismatch - failure of transferor to object or lodge complaint as permitting registration - competent direction to registrar/transfer agent to register transfer - requirement of indemnity bond as condition for registration - Whether the Tribunal should direct the respondents to register and transfer the impugned share certificate in favour of the petitioner despite a long delay and a signature mismatch, and on what conditions such transfer may be permitted. - HELD THAT: - The Tribunal found that the petitioner produced the original share certificate and transfer deed for registration though the transfer was sought after a long lapse of time and the first respondent pointed to a signature mismatch. Notices were issued to the original holders and were returned unserved and, critically, there has been no complaint by the original shareholders about loss of the share certificate. In these circumstances, and having considered earlier Company Law Board decisions with similar facts, the Tribunal held that registration in favour of the petitioner can be directed to avoid future dispute provided appropriate safeguards are imposed. The Tribunal therefore accepted that, notwithstanding the signature mismatch and delay, the absence of any objection or complaint by the transferors permits an order directing the registrar/transfer agent to effect the transfer, but subject to the transferee furnishing an indemnity bond in the amount to be fixed by the first respondent as a condition precedent to registration. [Paras 14, 17, 19]

The petition is allowed and the first respondent is directed to transfer the impugned 100 shares in favour of the petitioner on his furnishing the requisite indemnity bond within 30 days.

Final Conclusion: The Tribunal directed respondents to register the transfer of the specified share certificate in favour of the petitioner despite delay and a signature mismatch, conditioning registration on the petitioner furnishing the indemnity bond as fixed by the first respondent; the petition is allowed.

Existence of pre-existing dispute - plausible contention requiring further investigation - related party transactions and applicability of section 188 - ordinary course of business defence to related party transaction

Existence of pre-existing dispute - plausible contention requiring further investigation - demand notice under section 8 - There existed a pre existing dispute between the Operational Creditor and the Corporate Debtor prior to issuance of the demand notice, rendering the Section 9 petition not maintainable. - HELD THAT: - The Tribunal examined the pleadings and documents and found documentary material - including correspondence, the company petition CP No. 4 of 2016 filed by the Managing Partner in his personal capacity, and extracts from the Corporate Debtor's financial statements - demonstrating that a dispute between the parties existed before the demand notice dated 09.09.2018. Applying the test in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., the Tribunal held that the adjudicating authority at this stage need only be satisfied that there is a plausible contention requiring investigation and that the dispute is not a patently feeble or spurious assertion. The material on record met that threshold and established a genuine, pre existing dispute touching the liability alleged by the Operational Creditor. [Paras 16, 17, 18, 21, 22]

Petition under Section 9 dismissed for existence of a pre existing dispute; dispute held genuine and not spurious.

Related party transactions and applicability of section 188 - ordinary course of business defence to related party transaction - Transactions between the parties were shown in the Corporate Debtor's financial statements as related party transactions, and the Operational Creditor's plea that the transactions fell within the ordinary course of business (and thus were exempt from section 188 requirements) was rejected. - HELD THAT: - The Tribunal noted that the Corporate Debtor's financial statements and auditor's report expressly classified transactions involving the Operational Creditor as related party transactions. Consequently, the Operational Creditor could not successfully contend that the third proviso to sub section (1) of section 188 applied to exclude the transactions from the statutory regime for related party dealings. The classification in the financial statements was a fact on record which could not be ignored, and therefore the contention that the transactions were ordinary course dealings and outside the scope of section 188 was held unsustainable. [Paras 17, 19, 20]

Operational Creditor's defence based on ordinary course of business rejected; transactions treated as related party transactions under section 188.

Final Conclusion: On the facts and documents on record the Tribunal found a genuine pre existing dispute and, having rejected the Operational Creditor's contention that the transactions were ordinary course dealings exempt from section 188, dismissed the Section 9 petition without costs.

Existence of debt and corporate debtor's default as sine qua non for initiation of Corporate Insolvency Resolution Process - adjudicating authority's limited role under the Insolvency & Bankruptcy Code - not a forum to try disputed money claims - summary admission under Section 7 barred where a real and triable dispute exists - duty to disclose material facts including relatedness of parties while seeking CIRP

Summary admission under Section 7 barred where a real and triable dispute exists - adjudicating authority's limited role under the Insolvency & Bankruptcy Code - not a forum to try disputed money claims - The Adjudicating Authority rightly dismissed the Section 7 application on the ground that a real dispute existed which could not be resolved in summary CIRP admission proceedings. - HELD THAT: - The Tribunal held that admission under Section 7 requires satisfaction of only limited prerequisites, but where the existence of debt and occurrence of default are seriously disputed the Adjudicating Authority is not the appropriate forum to decide contested money claims. The record showed absence of an agreement or clear allotment letter, allegations that the project had been cancelled earlier, competing averments about the nature of payments, and family/related-party contentions that rendered the claim disputed. These matters necessitate documentary and oral evidence and cannot be resolved in the summary process mandated for CIRP admission. Consequently, the Adjudicating Authority did not err in dismissing the application on that basis. [Paras 26, 27, 30, 31]

Dismissal of the Section 7 application was justified because a real and triable dispute existed which could not be resolved in summary CIRP admission proceedings.

Existence of debt and corporate debtor's default as sine qua non for initiation of Corporate Insolvency Resolution Process - duty to disclose material facts including relatedness of parties while seeking CIRP - The Appellant failed to establish an undisputed debt and the occurrence of default recoverable from the Corporate Debtor. - HELD THAT: - The Tribunal noted that the Appellant did not produce an agreement or allotment letter establishing a binding obligation, and that the project was alleged to have been cancelled earlier. The Corporate Debtor disputed both the nature and ownership of the payments, pleaded related-party transactions and ledger entries, and denied any allotment. The Appellant also omitted disclosure of material facts (notably the familial relationship and directorship connections) which undermined the clarity of his claim. On the material before the Adjudicating Authority, the existence of a recoverable debt and an act of default were not established to the requisite degree for admission of CIRP under Section 7. [Paras 23, 24, 28, 29, 31]

The claim of an undisputed debt and corresponding default was not established; therefore Section 7 admission could not be sustained on the material presented.

Final Conclusion: The appeal is dismissed; the impugned order dated 17th September, 2019 refusing admission of the Section 7 application is upheld as free from legal infirmity.

Maintainability of Section 9 application - same cause of action - res judicata - initiation of the Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - copy of certificate from the Financial Institution defined under Section 3(14) of the I&B Code

Maintainability of Section 9 application - same cause of action - res judicata - initiation of the Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether a second petition under Section 9 for initiation of CIRP is maintainable where an earlier Section 9 petition in respect of the same cause of action was dismissed by the Adjudicating Authority and the dismissal was affirmed on appeal. - HELD THAT: - The Adjudicating Authority had earlier rejected the first Section 9 petition because the Operational Creditor failed to produce a copy of the certificate from the financial institution as contemplated by the Code. That rejection was contested, but the appellate process culminated in dismissal of the appeal by this Tribunal and affirmation by the Supreme Court. The Appellate Tribunal accepted the Adjudicating Authority's conclusion that a subsequent Section 9 petition founded on the same cause of action is not maintainable after the earlier petition has been finally adjudicated and the order of dismissal upheld on appeal. The Tribunal treated the prior final adjudication as a bar to relitigation and refused to permit a fresh petition which seeks the same remedy in respect of the same cause of action. [Paras 6]

The second Section 9 petition was not maintainable as it related to the same cause of action previously dismissed and affirmed on appeal; the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal upheld that a subsequent Section 9 petition based on the same cause of action - where an earlier petition was dismissed and that dismissal affirmed on appeal - is not maintainable.

Penalty under Section 78 for deliberate default - Payment of service tax and interest after audit - Maintenance of records and serially numbered invoices

Penalty under Section 78 for deliberate default - Payment of service tax and interest after audit - Maintenance of records and serially numbered invoices - Whether penalty under Section 78 could be sustained for alleged deliberate default in payment of service tax for the audit period March, 2007 to June, 2010. - HELD THAT: - The Tribunal found that a substantial amount of service tax had been paid by the appellant on being pointed out in the audit, along with interest. The remaining shortfall was also paid by challan dated 28 February, 2013, which was before the passing of the order in original. The appellant offered a cogent explanation that deficiencies arose from lack of competent staff and omissions were not deliberate; this explanation was not shown to be untrue. In these circumstances the facts did not establish deliberate default necessary to sustain a penalty under Section 78. The Tribunal therefore concluded that imposition of penalty was not justified under the material on record.

Penalty imposed under Section 78 set aside.

Final Conclusion: The appeal is allowed; the penalty under Section 78 imposed by the Commissioner (Appeals) is set aside as no deliberate default was established and the service tax and interest for the period March, 2007 to June, 2010 were paid.

Cenvat credit on capital goods - retrospective operation of amendment to Rule 6(4) of Cenvat Credit Rules - entitlement to credit where dutiable goods are manufactured and cleared on payment of duty within two years - verification of clearance on payment of duty as precondition for allowance of credit

Cenvat credit on capital goods - entitlement to credit where dutiable goods are manufactured and cleared on payment of duty within two years - retrospective operation of amendment to Rule 6(4) of Cenvat Credit Rules - verification of clearance on payment of duty as precondition for allowance of credit - Whether the appellant is entitled to Cenvat credit on capital goods where capital goods were used, at times, in manufacture of exempted goods but dutiable goods were purportedly manufactured and cleared on payment of duty within two years from taking credit - HELD THAT: - The Tribunal noted that the lower authorities denied credit primarily on the ground that the amendment to Rule 6(4) did not have retrospective effect and that no verification was carried out to ascertain whether dutiable goods had in fact been cleared on payment of duty within two years. Relying on the view taken by this Tribunal in Welspun India Limited (supra), the Tribunal observed that if, from the date of taking Cenvat credit, dutiable goods are manufactured and cleared on payment of duty within two years, credit on capital goods is admissible even though the capital goods were also used in the manufacture of exempted goods during that period. Because the Adjudicating Authority had not verified the factual claim of clearance on payment of duty (the appellant claimed such clearances in April and June 2017), the Tribunal could not finally allow the credit on the record before it and therefore directed a fresh decision after factual verification. The entitlement is thus contingent upon verification that dutiable goods were cleared on payment of duty within two years from commencement of production or installation of the capital goods, as applicable. [Paras 5, 6]

Matter remanded to the Adjudicating Authority for fresh decision after verification whether dutiable goods were cleared on payment of duty within two years from the date of taking credit; appeal allowed by way of remand.

Final Conclusion: The appeal is allowed by way of remand: the tribunal applied its earlier view that credit on capital goods is admissible if dutiable goods were manufactured and cleared on payment of duty within two years from taking credit, and directed the Adjudicating Authority to verify the appellant's claim of such clearances and decide afresh.

Withholding of pension - ascertainable Government dues - departmental enquiry - opportunity of hearing - recovery and adjustment of Government dues - Madhya Pradesh Civil Services Pension Rules

Withholding of pension - departmental enquiry - ascertainable Government dues - Madhya Pradesh Civil Services Pension Rules - opportunity of hearing - Validity of withholding the petitioner's pensionary benefits where no departmental enquiry was held and the alleged Government dues were not shown to be ascertainable. - HELD THAT: - The Court noted that the Madhya Pradesh Civil Services Pension Rules contain enabling provisions permitting withholding or withdrawal of pension, but observed that in the present case no departmental enquiry was conducted nor was any punishment imposed upon the petitioner. The respondents relied on entries of miscellaneous advances said to be payable by the petitioner, but did not demonstrate that such amounts constituted "ascertainable Government dues" within the meaning of the Rules. The Court further recorded that the record does not show imposition of any disciplinary penalty or that the petitioner was deprived of an opportunity of hearing in respect of a determination that would justify withholding pension. In the absence of a departmental finding of liability or a clear showing that the claimed sums are ascertainable Government dues recoverable by adjustment, the respondents are not entitled to continue withholding the petitioner's pensionary benefits.

Petitioner's writ petition allowed; respondents directed to clear the petitioner's pensionary dues within 45 days.

Final Conclusion: Pensionary benefits withheld without a departmental enquiry or proof that the amounts claimed are ascertainable Government dues cannot be retained; respondents ordered to release the petitioner's pensionary dues within 45 days.

Constitutional power of the Supreme Court to punish for contempt under Article 129 - Scope of Article 142(2) and its relationship with statutory regulation - Contempt of Courts Act, 1971 as procedural guidance not a substantive fetter on Article 129 powers - Suo motu initiation of contempt proceedings - Requirement of consent of Attorney General/Solicitor General for private petitions in criminal contempt - Procedure and Form I under the Rules to Regulate Proceedings for Contempt of the Supreme Court, 1975 - Distinction between fair criticism and scandalous/scurrilous allegations amounting to contempt - Duty to disclose source of information in contempt initiation - Principle that a Bench does not act as judge in its own cause where notice is issued and matter referred to roster/chief justice

Constitutional power of the Supreme Court to punish for contempt under Article 129 - Contempt of Courts Act, 1971 as procedural guidance not a substantive fetter on Article 129 powers - Whether the power of the Supreme Court to initiate and punish for contempt is circumscribed by the Contempt of Courts Act, 1971 or whether Article 129 confers an independent constitutional power. - HELD THAT: - The Court held that Article 129 vests the Supreme Court with an inherent constitutional power to punish for contempt of itself which cannot be abridged or taken away by statute. Section 15 of the Contempt of Courts Act, 1971 prescribes modes of taking cognizance and otherwise supplies procedural guidance, but it is not the source of the Supreme Court's contempt jurisdiction. The Act and the Rules framed under Section 23 serve as procedural guidance; in particular suo motu proceedings fall outside the procedural preconditions that apply to petitions by private individuals requiring consent. The Court relied on its precedents and constitutional text to conclude that the essential requirement is that the procedure adopted be just and fair in accordance with natural justice and the Rules framed by the Court. [Paras 7, 23, 24, 29, 31]

The Supreme Court's power under Article 129 to punish for contempt is a constitutional power not abrogated by the Contempt of Courts Act, 1971; the Act supplies procedural modes but does not oust the Court's inherent jurisdiction.

Suo motu initiation of contempt proceedings - Requirement of consent of Attorney General/Solicitor General for private petitions in criminal contempt - Whether the present proceedings were suo motu and whether consent of the Attorney General or Solicitor General was required. - HELD THAT: - The Court found that it had itself taken cognizance of the letter and attached complaints, noted the allegations and issued notice; the absence of the literal word 'suo motu' in the order does not alter its character. The letters addressed to the President and Chief Justice and placed in the Court's office were taken on record and the Court initiated notice on that basis. Consequently, these proceedings were suo motu and did not require consent of the Attorney General or Solicitor General that would be necessary where a private party formally files a criminal contempt petition without the Court initiating proceedings. [Paras 34, 35]

Proceedings are suo motu; no consent of the Attorney General/Solicitor General was required for initiation in the circumstances.

Procedure and Form I under the Rules to Regulate Proceedings for Contempt of the Supreme Court, 1975 - Validity of notice and principles of natural justice - Whether the notice issued to the alleged contemnors complied with the Rules/Form I and the requirements of fair procedure. - HELD THAT: - The Court examined Rule 6 and Form I and held that the Form requires only a brief statement of the nature of contempt. The order initiating contempt, which identified the complaints and their allegations, was attached to the notice and thereby satisfied the Rule. Non-supply of all documents with the Form was held to be at most an irregularity that did not vitiate proceedings, particularly because all annexures were subsequently supplied and additional replies permitted. The Court therefore rejected the discharge applications premised on defective notice. [Paras 18, 19, 32]

The notice complied with the Court's Rules and principles of fair procedure; the discharge applications on the ground of defective notice were dismissed.

Principle that a Bench does not act as judge in its own cause where notice is issued and matter referred to roster/chief justice - Master of the roster and judicial powers of individual judges - Whether the Bench that took cognizance and issued notice acted as judge in its own cause or otherwise breached roster conventions. - HELD THAT: - The Court held that a judge of the Supreme Court may take cognizance of material brought to his/her attention under Article 129 and issue notice where prima facie contempt appears; because the Bench was already seised of the suo motu contempt petition and after issuing notice directed that the matter be placed before the Chief Justice for listing before an appropriate Bench, there was no impermissible exercise of adjudicatory power by judges in their own cause. The master of the roster principle was respected by directing placement before the Chief Justice; individual judges retain constitutional powers to act on information indicating contempt. [Paras 38, 39, 40]

Issuing notice and placing the matter before the Chief Justice for appropriate listing did not amount to the Bench acting as judge in its own cause; the procedure was valid.

Duty to disclose source of information in contempt initiation - Acceptability of reliance on attached documents as source - Whether the Bench was required to disclose the source of information on which it acted. - HELD THAT: - The Court noted precedent that when documents are annexed and form part of the petition/order, additional disclosure of source is not always necessary. Here the initiating order itself recorded that the action was taken on the letter of the Presidents of the Bombay Bar Association and Bombay Incorporated Law Society together with the attached complaints by the alleged contemnors; therefore the source was adequately disclosed. The plea that source was not disclosed was rejected. [Paras 41, 43]

Source of information was disclosed in the initiating order; no obligation to disclose further sources arose and the plea failed.

Distinction between fair criticism and scandalous/scurrilous allegations amounting to contempt - Truth as a defence in contempt - Whether the letters/complaints constituted fair criticism or scandalous allegations amounting to criminal contempt, and whether the defence of truth succeeded. - HELD THAT: - The Court explained the protective ambit of fair criticism but emphasised that allegations which scandalise the Court, impugn integrity, impartiality or competence without supporting material, or attribute mala fides to judges, undermine public confidence and amount to contempt. On examination of the two lengthy complaints, the Court found multiple scurrilous and scandalous imputations against the two judges (including allegations of malafide, corruption, incompetence and conspiracies) that went beyond fair criticism. The contemnors failed to substantiate a defence of truth; the complaints were held to be sent in a context (pending punishment hearing of Nedumpara) that indicated an intention to intimidate the Bench. Having considered submissions and materials, the Court concluded that the three alleged contemnors were guilty of contempt. [Paras 47, 48, 86, 95, 96]

The two letters contained scandalous and scurrilous allegations that amounted to criminal contempt; the defence of truth was not made out and the three alleged contemnors were held guilty of contempt.

Discharge of an alleged contemnor where no involvement is shown - Whether Shri Mathews Nedumpara should be discharged from the contempt proceedings. - HELD THAT: - On application and material before the Court, Shri Nedumpara stated he barely knew the other alleged contemnors and denied involvement in sending the complaints; he subsequently tendered an affidavit of apology in the earlier contempt conviction proceedings. The Court discharged Shri Nedumpara but made clear he could be summoned again if future evidence implicated him. [Paras 2]

Mathews Nedumpara was discharged from the present contempt proceedings with liberty to be summoned again if evidence against him later emerges.

Connivance and responsibility of heads of professional bodies for communications issued in official capacity - Whether Shri Nilesh Ojha (as President of the Indian Bar Association) was connected with and responsible for the complaint sent by the State President and for coordinated dissemination. - HELD THAT: - The Court evaluated conduct and pleadings, noting that the State President's complaint bore institutional imprimatur and that the President did not disassociate himself; the timing, cross-references between complaints and dissemination indicated coordination. The Court concluded there was connivance and coordination between the three contemnors and that the President could not shirk responsibility for an institutional communication made in that context. [Paras 91, 93, 94]

Shri Nilesh Ojha was found to have acted in coordination with the other alleged contemnors and therefore was guilty of contempt along with them.

Final Conclusion: The Supreme Court held that its constitutional jurisdiction under Article 129 to punish for contempt is not abrogated by the Contempt of Courts Act, 1971, and that it may initiate suo motu contempt proceedings consistent with just and fair procedure. The Court found the notice valid, rejected procedural objections, discharged Mathews Nedumpara, and after examining the two lengthy complaints held that the allegations therein were scandalous and amounted to criminal contempt; Shri Vijay Kurle, Shri Rashid Khan Pathan and Shri Nilesh Ojha were held guilty of contempt and listed for sentencing.