TaxTMI Updates e-Newsletter
May 07,2016

Explanation to section 73 - speculative business - gross total income - income from capital gains - income from other sources

Explanation to section 73 - speculative business - gross total income - income from capital gains - income from other sources - Whether loss on account of purchase and sale of shares of other companies is to be treated as speculative loss under the Explanation to section 73 for the assessment year 2009-10 - HELD THAT: - The Tribunal examined the Explanation to section 73 and held that the Explanation excludes from deeming a company to be carrying on speculation business where the company's gross total income consists mainly of income chargeable under the heads interest on securities, income from house property, capital gains and income from other sources. The assessee had admitted incomes of dividend, interest and profit on sale of long term investments such that its gross total income fell within the exception. Applying that legal principle to the facts, the Tribunal concluded that the loss from purchase and sale of shares could not be treated as speculative loss under the Explanation to section 73 and relied on the precedents cited by the assessee to support this view. [Paras 6]

Loss on purchase and sale of shares is not to be treated as speculative loss under the Explanation to section 73, as the assessee's gross total income mainly comprised incomes falling within the excepted heads.

Final Conclusion: The appeal is partly allowed: the disallowance treating the loss as speculative under the Explanation to section 73 is set aside and the addition is deleted; the ground on section 14A was not pressed and stands dismissed unanswered.

Registration under section 12AA - cancellation of registration under section 12AA(3) - re-registration after cancellation - genuineness of activities - objects of the trust - provisos to section 12A(2) - assessment proceedings pending

Registration under section 12AA - cancellation of registration under section 12AA(3) - re-registration after cancellation - genuineness of activities - objects of the trust - Whether a trust whose registration under section 12AA was validly cancelled can be granted fresh registration on the basis of the same trust deed and unchanged management. - HELD THAT: - The Tribunal held that the satisfaction of the Commissioner regarding the genuineness of activities and conformity with the objects is the common foundation for both grant and cancellation of registration. Where registration has been cancelled on the finding that activities were not genuine or not in accordance with the objects, it would be illogical and self-contradictory for the same authority to thereafter grant registration on the same trust deed and with the same management. The cancellation power (section 12AA(3)) and the scope of inquiry envisaged under section 12AA indicate that the authority's earlier concluded view about non-genuineness precludes re-registration absent material change (for example, change of objects, change of governing persons, or transfer of trust property). Relying on principles that an authority should not reverse its own final decision in effect amounting to a review, and on analogy to precedents concerning changes to memorandum/objects, the Tribunal concluded that re-registration of the same trust on unchanged records cannot be permitted.

Application for fresh registration by a trust whose registration had been validly cancelled was rightly not admitted; re-registration on the same trust deed and unchanged management is not permissible.

Provisos to section 12A(2) - re-registration after cancellation - assessment proceedings pending - Whether the third proviso to section 12A(2) permits a trust whose earlier registration was cancelled to obtain fresh registration and thereby attract retrospective benefits and protection from reopening under section 147 for prior assessment years. - HELD THAT: - The Tribunal interpreted the statutory provisos in context. The first two provisos to section 12A(2) afford relief to genuine trusts by extending the effect of registration to earlier years in certain pending proceedings and by limiting reopening under section 147. The third proviso, however, expressly excludes from those benefits any trust whose registration was refused or previously cancelled. The Tribunal accepted the Revenue's submission that the third proviso is a carve-out and does not create a right to re-registration; rather it prevents trusts whose registration was refused or cancelled from claiming the first two provisos. Allowing re-registration in such cases would render the carve-out meaningless and enable trusts to circumvent the legislative exclusion. Thus, the third proviso does not authorize re-registration or retrospective application of the first two provisos where prior registration has been cancelled.

The third proviso to section 12A(2) does not entitle a trust whose registration was cancelled to re-registration or to the retrospective benefits and protection from reopening conferred by the first and second provisos.

Final Conclusion: Both appeals dismissed: the Appellate Tribunal upheld the refusal to admit fresh applications for registration by the trusts whose earlier registrations had been validly cancelled, holding that re-registration on the same trust deed and unchanged management is not permissible and that the third proviso to section 12A(2) does not authorise re-registration or retrospective benefits in such cases.

Gifts in kind treated as undisclosed sale consideration - Taxation of undisclosed consideration in the year of transfer - Genuineness of gift-surrounding circumstances and human probabilities - Year of chargeability for sale consideration - Reliance on coordinate bench and High Court precedent

Gifts in kind treated as undisclosed sale consideration - Taxation of undisclosed consideration in the year of transfer - Genuineness of gift-surrounding circumstances and human probabilities - Whether the addition of Rs. 46,80,540 as gift (shares) in AY 2008-09 was exigible to tax in that year or was part of undisclosed sale consideration of Gotri land taxable in AY 2009-10. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the shares received in Feb./March 2008, though documented as gifts, were shown by surrounding circumstances to be not voluntary and without consideration but part of the undisclosed sale consideration for the Gotri land sale. The CIT(A) applied the requisites of a valid gift and, applying the test of human probabilities and facts (absence of relationship, occasion, reciprocation and the timing and quantum of transfers), concluded the purported gifts were linked to the land transaction. The Tribunal noted that once such amounts are treated as sale consideration, they are taxable in the year in which the transfer of the land occurred; accordingly any taxability of the undisclosed consideration is to be examined and assessed in AY 2009-10. The Tribunal also followed the view of a coordinate bench and the decision of the jurisdictional High Court (dismissing Revenue's appeal), and therefore found no infirmity in deletion of the addition for AY 2008-09. [Paras 6, 8]

Addition of Rs. 46,80,540 as gift in AY 2008-09 deleted; appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the addition of Rs. 46,80,540 for AY 2008-09 on the ground that the shares gifted were part of undisclosed sale consideration pertaining to the Gotri land transaction and, therefore, any taxability arises in AY 2009-10; the Tribunal followed the coordinate bench and the High Court decision.

Application of Section 56(2)(vii)(c) to bonus shares - valuation of shares under Rule 11U / Rule 11UA - legislative purpose of clauses (v) to (vii) of Section 56(2) - principle of averaging cost for bonus shares (Dalmia principle)

Application of Section 56(2)(vii)(c) to bonus shares - legislative purpose of clauses (v) to (vii) of Section 56(2) - principle of averaging cost for bonus shares (Dalmia principle) - valuation of shares under Rule 11U / Rule 11UA - Whether bonus shares received by a shareholder are taxable as income under Section 56(2)(vii)(c) as property received without consideration or for inadequate consideration, and whether valuation under Rule 11UA is applicable. - HELD THAT: - The Court examined the legislative history that clauses (v) to (vii) to Section 56(2) were introduced to plug the gap created by repeal of the Gift-tax Act and to target receipts truly received without or for inadequate consideration. Applying the ratio in Dalmia and later authorities, the Court held that a bonus issue is a capitalisation of reserves that produces a pro rata reduction in the per-share value; the shareholder's aggregate economic interest remains unchanged. Consequently, bonus shares are not received 'without consideration' nor for 'inadequate consideration' within sub-clause (c) of clause (vii) of Section 56(2). The Court noted that where bonus shares rank pari passu, cost allocation follows the averaging principle and any theoretical benefit is offset by depression in value of existing shares. Accordingly, valuation provisions in Rule 11U/11UA, which prescribe methods for valuing property received without consideration or for inadequate consideration, are not attracted to bona fide bonus issues. For these reasons the Assessing Officer's invocation of Section 56(2)(vii)(c) and valuation under Rule 11UA to tax the fair market value of the bonus shares was misplaced, and the appellate authority's deletion of the addition was upheld. [Paras 10, 11]

Section 56(2)(vii)(c) does not apply to ordinary bonus shares; Rule 11UA valuation is not attracted and the addition made by the AO was rightly deleted.

Final Conclusion: Revenue appeal dismissed; bonus shares held to be capitalisation not taxable as income under Section 56(2)(vii)(c), and valuation under Rule 11UA in this context is inapplicable.

Limitation for proceedings under section 201(3) of the Income-tax Act - Deemed assessment for failure to deduct tax at source - Statement filing under section 200 of the Income-tax Act - Time-barred orders cannot be sustained

Limitation for proceedings under section 201(3) of the Income-tax Act - Statement filing under section 200 of the Income-tax Act - Time-barred orders cannot be sustained - Proceedings under section 201(1) read with section 201(3) are barred by limitation. - HELD THAT: - Section 201(3) prescribes a two-year limitation from the end of the financial year where the statement under section 200 has been filed and a six-year limitation from the end of the relevant financial year in any other case. The transactions relate to financial year 2002-03 and no statement under section 200 was filed. Consequently the last date for passing an order under section 201 was 31/3/2009. The order under section 201(1) impugned in this appeal was passed on 28/5/2009, which is beyond the statutory period. Orders passed after the expiry of the period of limitation are not sustainable in law. Applying the statutory timetable to the facts, the Tribunal held the impugned order to be time-barred and therefore liable to be set aside. [Paras 7]

The order passed by the DCIT(TDS) under section 201 is barred by limitation and cannot be sustained; the appeal is allowed.

Final Conclusion: The appeal is allowed and the order passed under section 201(1) is set aside as time-barred (proceedings beyond the limitation prescribed by section 201(3)).

Penalty under section 271BA - furnishing of transfer pricing audit report under section 92E - reasonable cause under section 273B - electronic filing of return and annexures - judicial discretion in imposition of penalty

Penalty under section 271BA - furnishing of transfer pricing audit report under section 92E - reasonable cause under section 273B - electronic filing of return and annexures - Whether penalty under section 271BA for failure to furnish the report required by section 92E is sustainable for assessment years 2007-08 to 2010-11 and whether section 273B furnishes reasonable cause to escape penalty. - HELD THAT: - Admittedly the assessee did not furnish Form No.3CEB to the Assessing Officer within the time prescribed by section 92E. The assessee's principal plea was a bona fide belief that electronic filing of the return (with relevant information) obviated separate filing of the audit report; it was contended that the audit reports had been obtained within the specified dates. The Tribunal examined the claim and found no corroborative affidavit or evidence that the reports were obtained before the due date or that they were made available to the AO before processing under section 143(1) or completion under section 143(3). In the absence of such proof, the asserted belief in sufficiency of electronic filing was too general and not shown to be a reasonable cause within the meaning of section 273B. The Tribunal distinguished precedents where contemporaneous affidavits and earlier submission to the AO existed, and noted authorities in which mere clerical error or unexplained delay did not constitute reasonable cause. Applying these principles, the Tribunal held that the failure was attributable to negligence rather than a bona fide reasonable cause, and that imposition of penalty under section 271BA was justified and sustainable. [Paras 6, 7]

Penalty under section 271BA confirmed for AYs 2007-08 to 2010-11; no reasonable cause under section 273B established to warrant deletion of penalty.

Final Conclusion: All four appeals are dismissed and the penalty of Rs.1,00,000 for each of the assessment years 2007-08 to 2010-11 imposed under section 271BA is upheld, the Tribunal finding no reasonable cause under section 273B to interfere.

Exercise of jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the Revenue - assessment passed without application of mind - lack of inquiry versus inadequate inquiry - failure to make further inquiry renders order erroneous - CIT must have material to record satisfaction

Exercise of jurisdiction under section 263 of the Income Tax Act - assessment passed without application of mind - lack of inquiry versus inadequate inquiry - erroneous and prejudicial to the interest of the Revenue - Validity of the Commissioner's exercise of power under section 263 to cancel the assessment and direct de novo assessment. - HELD THAT: - The Tribunal applied settled tests for s.263: the CIT must record satisfaction that the AO's order is both erroneous and prejudicial to Revenue; mere difference of opinion is insufficient; an order passed without application of mind or where the AO failed to make necessary inquiries can be held erroneous. On facts the AO accepted the revised return largely as filed and did not verify material aspects shown in the books and balance sheet - specifically a 'loan given' account (cash receipts), sundry creditors of Rs. 90,94,000/-, and payments of Rs. 85,71,944/- by a third party to vendors which the AO did not verify. The CIT issued show-cause notices, considered auditors' objections only as a source of information and recorded independent satisfaction before invoking s.263. The Tribunal found that the AO had not made the requisite inquiries on these material points and therefore the order was rendered erroneous for lack of inquiry; the Commissioner therefore had material on record and rightly held the order prejudicial to Revenue. The Tribunal rejected the assessee's contention that mere filing of an audit report after return-filing or reliance on auditors' objections precluded action under s.263, noting that where the CIT evaluates information and records satisfaction the proceedings are permissible. [Paras 10, 11, 12, 13]

The Commissioner rightly exercised jurisdiction under section 263; the assessment order was erroneous and prejudicial to Revenue and direction for fresh assessment is upheld.

Final Conclusion: Appeal dismissed; the order of the Commissioner under section 263 setting aside the assessment for de novo assessment is sustained as the AO failed to make necessary inquiries and the CIT had material and recorded satisfaction to invoke section 263.

Declaration of final dividend by shareholders in general meeting - recommendation of dividend by the board of directors - distinction between provision for dividend in accounts and declaration of dividend - levy of interest under section 115P of the Income-tax Act - time limit for payment of dividend tax under section 115 O

Declaration of final dividend by shareholders in general meeting - distinction between provision for dividend in accounts and declaration of dividend - levy of interest under section 115P of the Income-tax Act - time limit for payment of dividend tax under section 115 O - Whether making a provision for payment of dividend in the balance sheet amounts to declaration of final dividend for the purposes of levy of interest under section 115P, and whether interest was rightly levied where tax was paid within 14 days of shareholders' declaration. - HELD THAT: - The Court held that provision for proposed dividend in the accounts or finalisation of accounts cannot be equated with declaration of final dividend. Under company law the board may recommend or declare interim dividend, but final dividend is declared only by the company in general meeting; this principle is reflected in the Companies Act provisions (including Table A/Articles) and was recognised in CIT v. Express Newspapers Ltd. with reference to J. Dalmia v. CIT . The board's recommendation or a balance sheet entry making a provision does not automatically result in a declaration or payment of dividend; the shareholders' approval in the general meeting is the operative act of declaration. Since dividend tax under the Income tax Act was paid by the assessee within the statutory period measured from the date on which dividend was actually declared by the shareholders, the Assessing Officer's view that the earlier provision amounted to declaration (thereby making the tax payment belated and attracting interest under section 115P) was incorrect. The Tribunal's concurrent conclusion that declaration occurred on the date recorded in the minutes and that tax was paid within the time prescribed under section 115 O was held to be unimpeachable, and no substantial question of law arose for interference under section 260A. [Paras 6, 7, 8]

Provision for dividend in the balance sheet is not declaration of final dividend; dividend is declared only when shareholders approve it in general meeting, and as tax was paid within 14 days of such declaration interest under section 115P could not be levied; appeals dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeals, upholding the Tribunal's findings that a provision for dividend is not a declaration and that the dividend tax was paid within the statutory period following the shareholders' declaration, so interest under section 115P was not leviable.

Distinction between technical services and export of computer software - export turnover excludes expenses incurred in foreign exchange for technical services - on-site development deemed as export of computer software - requirement of material evidence to characterise activities as technical services or software export - remand for fresh consideration where appellate finding is not based on relevant material

Distinction between technical services and export of computer software - on-site development deemed as export of computer software - Whether pre-execution and post-execution activities connected with software projects constitute 'technical services' to be excluded from 'export turnover', or form part of 'computer software' eligible for deduction under section 10A. - HELD THAT: - The court expounded the statutory scheme of section 10A and its Explanations, noting that Explanation 3 deems profits from on-site development (including services for development of software) outside India to be profits from export of computer software, whereas Explanation 2(iv) excludes from 'export turnover' expenses incurred in foreign exchange for providing technical services outside India. Relying on this distinction and the precedent in Motor Industries Company Limited and Mphasis Limited, the court held that services such as testing, installation and monitoring carried out by software engineers deputed abroad may be technical in nature but are not necessarily 'technical services' excluded from export turnover if they are integral to the development or export of computer software. The determinative characterisation depends on the factual materials (agreements, transactions, remand reports and other records) showing whether the activity was integral to software development/export or constituted separable technical services rendered outside India. [Paras 7, 8, 9, 10, 11]

The legal principle is affirmed that a distinction exists between technical services (which are excluded from export turnover) and on-site or integral development of computer software (which is deemed export of computer software under Explanation 3 and included in export turnover), and the characterisation depends on the relevant factual material.

Requirement of material evidence to characterise activities as technical services or software export - remand for fresh consideration due to lack of material - Whether the Tribunal's confirmation of the appellate order was sustainable where it did not examine relevant material and accepted a shifted stance of the assessee. - HELD THAT: - The court found that the Tribunal's conclusion was not based upon examination of available and relevant material - including assessment records, remand reports and agreements - and that the assessee had originally excluded the foreign currency expenses from turnover in its return but later altered its stance before the appellate authority. Given that the factual characterisation is determinative for application of section 10A and its Explanations, the court held that the Tribunal should re-examine the record and decide whether the activities constituted technical services to be excluded or formed part of export of computer software. The court therefore remitted the matter to the Tribunal for fresh consideration in light of the legal position established by this court and permitted parties to produce additional evidence, subject to hearing. [Paras 12, 13, 14, 15]

The Tribunal's order is set aside insofar as it was not based on relevant material; the matter is remitted to the Tribunal for fresh consideration after examination of the record and giving parties an opportunity to be heard.

Final Conclusion: Appeal disposed of by remitting the matter to the Tribunal for fresh consideration: the court clarified the legal distinction between technical services (excluded from export turnover) and on-site or integral development of computer software (deemed export turnover) and directed the Tribunal to re-examine the relevant material and decide in accordance with that legal position, permitting production of additional evidence and requiring an opportunity of hearing.

Contingent sales tax collected and refunded - validity of agreement enhancing lease rent (not a sham) - entertainment and disposal of special leave petitions - remedies available to Revenue - condonation of delay

Contingent sales tax collected and refunded - The factual finding that amounts realised to meet the contingent sales tax liability were refunded to the persons from whom they were collected. - HELD THAT: - The Court accepted the High Court's factual determination that the amounts collected by the assessee to meet a contingent sales tax liability have since been returned to the persons from whom they were collected. Having recorded this factual conclusion, the Court found no ground to continue interference by special leave petition with that factual finding.

The finding that the collected amounts were refunded is upheld and not open to challenge in the special leave petitions.

Validity of agreement enhancing lease rent (not a sham) - The High Court's finding that the agreement enhancing the lease rent was not a sham document. - HELD THAT: - The Supreme Court accepted the High Court's conclusion on the character and genuineness of the agreement increasing lease rent, treating the matter as one of fact and credibility which did not warrant interference in exercise of special leave jurisdiction. The Court observed that, in view of that factual finding, continuation of the special leave petitions was not justified.

The High Court's finding that the lease rent enhancing agreement is not a sham is sustained and the SLPs are not to be entertained on that basis.

Final Conclusion: Delay in filing condoned; special leave petitions dismissed in view of the High Court's factual findings that the contingent sales tax collections were refunded and the lease rent enhancement agreement was not a sham, and the Revenue is left free to pursue any remedies available in law.

Binding precedent - Application of prior decision in CIT v. Baby Marine Exports - Allowance of appeal and setting aside of High Court order

Binding precedent - Application of prior decision in CIT v. Baby Marine Exports - Appeal allowed by applying the Court's earlier decision in CIT v. Baby Marine Exports and consequent setting aside of the High Court's order. - HELD THAT: - The Court granted leave and, relying on its earlier decision in CIT v. Baby Marine Exports (as followed in subsequent decisions including CIT v. Dalbir Singh), applied that precedent to the facts of this case. For that reason the appeal was allowed and the High Court's order was set aside. The Court directed that all consequential reliefs be granted to the appellant in accordance with the precedent.

Appeal allowed; High Court order set aside and consequential reliefs granted to the appellant.

Final Conclusion: The Supreme Court allowed the appeal, applying its earlier decision in CIT v. Baby Marine Exports, set aside the High Court's order and directed that consequential reliefs be granted to the appellant.

Binding precedent - matter covered by earlier decision - Taparia Tools Limited v. Joint CIT - dismissal of appeal on precedent

Binding precedent - dismissal of appeal on precedent - Whether the appeal could be maintained where the matter was covered by this Court's earlier decision in Taparia Tools Limited v. Joint CIT . - HELD THAT: - The Court held that the present matter is answered by the earlier decision in Taparia Tools Limited v. Joint CIT and, having found the issue squarely covered against the Revenue by that precedent, declined to entertain the contrary contention. No further adjudication on the merits was undertaken because the binding precedent disposed of the controversy.

Appeal dismissed as the matter is covered by the earlier decision.

Final Conclusion: The appeal was dismissed by the Supreme Court because the controversy was squarely covered against the Revenue by the Court's earlier decision in Taparia Tools Limited v. Joint CIT .

Precedent reliance on ACG Associated Capsules - answer in favour of the assessee - allowance of appeal - setting aside High Court order - remand for fresh consideration to the Assessing Officer

Precedent reliance on ACG Associated Capsules - answer in favour of the assessee - allowance of appeal - setting aside High Court order - Application of the court's earlier decision in ACG Associated Capsules to the present appeals resulting in a decision for the assessee and against the Revenue. - HELD THAT: - The Court held that these cases are governed by the decision in ACG Associated Capsules Private Ltd. and, applying that precedent, answered the contested question in favour of the assessee and against the Revenue. Consequently, the appeals were allowed and the judgment of the High Court was set aside. The Court adopted the earlier ratio without further independent factual or legal re-examination in the present judgment.

Appeals allowed; issue decided in favour of the assessee pursuant to the ACG Associated Capsules precedent and the High Court order set aside.

Remand for fresh consideration to the Assessing Officer - Remand of the matter to the Assessing Officer for fresh consideration. - HELD THAT: - Having allowed the appeals and set aside the High Court order, the Court directed that the matter be remanded to the Assessing Officer for fresh consideration. The remand contemplates re-examination by the Assessing Officer in light of the dispositive precedent and the Court's decision, without further directions in the judgment.

Matter remanded to the Assessing Officer for fresh consideration.

Final Conclusion: The appeals are allowed by applying the Court's decision in ACG Associated Capsules in favour of the assessee; the High Court order is set aside and the matter is remanded to the Assessing Officer for fresh consideration.

Requirement of reasoned orders - remand for fresh consideration - hearing of parties before fresh decision - setting aside of non-speaking orders

Requirement of reasoned orders - remand for fresh consideration - hearing of parties before fresh decision - setting aside of non-speaking orders - Impugned High Court orders, which contained no reasons, were set aside and the matters were remitted for fresh consideration. - HELD THAT: - The Court noted that the High Court's impugned orders did not contain reasons. In view of the absence of reasons, and on the respondent's counsel offering no objection to a remand, the Supreme Court set aside the impugned orders and remitted the matters to the High Court. The High Court has been directed to decide the issue afresh, giving detailed reasons and after hearing counsel for the parties.

Impugned orders set aside and matters remitted to the High Court for fresh decision with detailed reasons after hearing the parties.

Final Conclusion: The appeals are disposed of by setting aside the impugned High Court orders and remitting the matters to the High Court for fresh consideration, to be decided with detailed reasons after hearing counsel for the parties.

Reopening of assessment under Section 147/148 of the Income Tax Act, 1961 - reason to believe - change of opinion - tangible material - live link between material and formation of belief - disclosure to the Assessing Officer / first proviso to Section 147(1) and Explanation 1

Change of opinion - disclosure to the Assessing Officer / first proviso to Section 147(1) and Explanation 1 - Validity of the notice under Section 148 where the Assessing Officer had previously enquired into and accepted the transaction disclosed by the assessee - HELD THAT: - The Court found that the transactions relating to purchase of shares were specifically enquired into by the Assessing Officer during the original assessment proceedings and that ledger accounts and details of the transfers were furnished by the assessee (see the AO's questionnaire, the assessee's response dated 20 February 2013 and Annexure 3). The material produced showed that the transfers and the consideration were placed before the AO and that the AO had, after application of mind, accepted that the shares were acquired at cost and were held as investments. Because the impugned notice was issued within four years of the end of the relevant assessment year, the first proviso to Section 147(1) and Explanation 1 were not attracted. On the factual conclusion that the AO had already examined and accepted the transaction, the Court held that the re opening was occasioned by a mere change of opinion, which is not a permissible basis for reassessment; reliance on Kelvinator and subsequent authority requires that reopening not be founded on mere change of opinion. The Court therefore held the impugned notice to be invalid on this ground (paras. 17-21). [Paras 17, 18, 20, 21]

Impugned notice and reassessment proceedings quashed as being occasioned by a mere change of opinion.

Tangible material - reason to believe - live link between material and formation of belief - Whether the Assessing Officer had sufficient tangible material to form a reasonable belief that the assessee's income had escaped assessment - HELD THAT: - The Court reiterated that although the Assessing Officer's belief is subjective, the material on which it is formed must reasonably lead to such belief and must have a live link with the conclusion sought (Lakhmani Mewal Das, Rajesh Jhaveri principles). Applying those principles, the Court held that the mere fact that Unitech Ltd. sold shares at cost (lower than book value) and that the assessee acquired those shares as investments did not furnish a logical nexus to infer income under Section 28(iv) in the hands of the assessee. The Court contrasted the present facts with Selected Dalurband Coal Co. where specific material plainly indicated escapement of income; no comparable nexus existed here. Consequently, the material available did not reasonably lead to a belief that the assessee's income had escaped assessment (paras. 22-26). [Paras 22, 23, 24, 25, 26]

Material relied upon by the AO was insufficient to constitute tangible material from which a reasonable belief of escapement of income could be formed; reassessment initiation thus unsustainable.

Final Conclusion: The notice dated 11 December 2014 under Section 148 and the reassessment proceedings initiated thereunder are quashed; the petition is allowed and the parties shall bear their own costs.

Settlement by the Settlement Commission binding on co-noticees - mis-declaration of imported goods - penalty reduction on basis of settlement order - knowledge of actual importer and involvement through handling of documents

Settlement by the Settlement Commission binding on co-noticees - penalty reduction on basis of settlement order - Whether the appeal for waiver of penalty could be allowed on the ground that the main parties' case had been settled by the Settlement Commission and thus the appellant's case should have been treated as settled. - HELD THAT: - The Tribunal held that the principle in S.K. Colombowala, that treatment accorded by the Settlement Commission to principal parties should be extended to co-noticees, applies. The Commissioner (Appeals) applied the Settlement Commission's treatment in reducing the original penalty substantially and followed the settlement order in its entirety. Consequently, the reduction to a modest penalty of Rs. 10,000/- was proper and did not call for interference.

Appeal dismissed; penalty reduction effected by the Commissioner (Appeals) upheld.

Mis-declaration of imported goods - knowledge of actual importer and involvement through handling of documents - Whether the appellant was aware of and involved in the mis-declaration such that penalty was maintainable against him. - HELD THAT: - On the facts and the appellant's statement, the Tribunal found that the appellant knew the actual importer and knowingly handled documents using the IEC of another party. Even if he may not have known the exact contents of the consignment, his conscious involvement in using another's IEC and facilitating clearance amounted to participation in the illegal import and mis-declaration. That finding supports imposition of a reduced penalty rather than complete waiver.

Findings of involvement and awareness upheld; penalty maintainable (as already reduced by Commissioner (Appeals)).

Final Conclusion: The Commissioner (Appeals) rightly applied the Settlement Commission's treatment to the appellant and appropriately reduced the penalty; the Tribunal upholds the reduction and dismisses the appeal seeking complete waiver.

Loading of assessable value by inclusion of commission - Related-party relationship and mutuality of interest under Rule 2(2) of the Customs Valuation Rules, 1988 - Transaction value and requirement of proof to displace declared invoice price - Comparability of contemporaneous invoices and standard of proof for declaring non-arm's-length price

Loading of assessable value by inclusion of commission - Transaction value and requirement of proof to displace declared invoice price - Whether the commission payable to the respondent (buyer) is required to be added to the transaction value of imported goods. - HELD THAT: - The appellate authority found that the lower authority had not established that the declared invoice prices were not at arm's length or that the transaction value was influenced so as to be displaced. The assessee had produced contemporaneous invoices and other material to justify the declared prices and had explained the price differences by reference to indenting/commission arrangements. The lower authority neither demanded further evidence nor adduced independent material to controvert the evidence furnished by the assessee. In that factual matrix the Tribunal accepted the first appellate authority's conclusion that commission payable to the assessee did not constitute additional consideration to be loaded on the invoice price and that the transaction value as declared should be accepted.

Commission payable to the respondent is not required to be added to the transaction value; the declared invoice prices are to be accepted.

Related-party relationship and mutuality of interest under Rule 2(2) of the Customs Valuation Rules, 1988 - Comparability of contemporaneous invoices and standard of proof for declaring non-arm's-length price - Whether the supplier and the importer were related in a manner or had mutuality of interest so as to displace the transaction value under Rule 2(2). - HELD THAT: - The first appellate authority analysed the agency agreement and the factual material and concluded that although a relationship existed, mutuality of interest sufficient to show that the supplier controlled or influenced the appellant's declared price was not established. Reliance was placed on precedent that mere agency or appointment does not automatically render parties related for the purpose of rejecting transaction value; mutuality that affects the transaction value must be demonstrated. The Revenue failed to dislodge these findings or to produce evidence showing control or influence over pricing, and therefore the finding of no mutuality affecting transaction value was upheld.

Relationship under Rule 2(2) was not shown to have influenced the transaction value; no mutuality established to justify rejecting the declared price.

Final Conclusion: The Tribunal affirms the first appellate authority's order setting aside the original assessment: the commission need not be loaded on the assessable value and the declared transaction value is to be accepted, accordingly the Revenue's appeal is rejected.

Refund of amounts paid under protest - liability for storage rent during seizure - adjudication order as determinant of liabilities - release of goods on payment of amounts confirmed in adjudication - consequential relief on successful appeal

Refund of amounts paid under protest - adjudication order as determinant of liabilities - liability for storage rent during seizure - Whether the appellant is entitled to refund of rent paid under protest where the adjudication order did not impose liability to pay rent for the period of seizure. - HELD THAT: - The adjudication order directed payment of redemption fine, penalties and duty and required release of the goods on payment of those amounts; it did not direct the appellant to pay rent for the period of seizure. Payment subsequently made to the Commissioner of Customs (Preventive) was made under protest at the time of release. Because the adjudicating authority did not adjudicate any liability of the appellant to pay storage rent, there is no legal basis to fasten that liability on the appellant. The only obligation recorded in the adjudication was payment of the confirmed amounts; consequently the rent paid under protest is without requisite adjudicatory foundation and must be refunded. The impugned orders rejecting the refund claim on the grounds of limitation or because the adjudication order was not challenged are unsustainable where no order imposing rent was passed and the payment was made under protest to obtain release of goods. [Paras 6]

The amount paid on account of rent under protest is refundable; the impugned order is set aside and the appeal is allowed with consequential relief.

Final Conclusion: Refund claim upheld: where an adjudication order did not impose rent liability, an amount paid under protest for release of goods as storage rent is refundable; impugned orders rejecting refund are set aside and appeal allowed with consequential relief.

Penalty under Section 117 of the Customs Act, 1962 - Liability of courier for declarations based on importer's proforma invoice - Requirement of contravention or abetment to attract a penal provision - Invocation of alternate penal provisions by issuance of show cause notice

Penalty under Section 117 of the Customs Act, 1962 - Liability of courier for declarations based on importer's proforma invoice - Requirement of contravention or abetment to attract a penal provision - Invocation of alternate penal provisions by issuance of show cause notice - Validity of imposition of penalty on the appellant under Section 117 of the Customs Act, 1962 for filing courier bill of entry based on proforma invoice furnished by the importer. - HELD THAT: - The appellant, a courier, filed a courier bill of entry pursuant to the declaration and authorization given by the importer and based on the proforma invoice provided by the importer. The Tribunal found that such conduct did not amount to contravention of the Customs Act, 1962 by the courier and therefore did not attract penalty under Section 117. Section 117 applies where a person has contravened the provisions of the Act, abetted such contravention, or failed to comply with provisions which were his duty to comply with; those preconditions were not established against the courier. The Tribunal also noted that if the Revenue had a stronger case against the courier, it could have invoked other penal provisions by issuing an appropriate show cause notice, which it did not do; absence of such action disentitled the Revenue from invoking Section 117 in the present case. Applying these legal principles to the record, the penalty imposed by the lower authorities under Section 117 was held to be unsustainable.

Impugned order imposing penalty under Section 117 set aside; appeal allowed and consequential relief granted in accordance with law.

Final Conclusion: The penalty imposed on the courier under Section 117 of the Customs Act, 1962 was held unsustainable as the courier acted on the importer's authorization and proforma invoice and no contravention or abetment by the courier was established; the impugned order is set aside and the appeal is allowed.

Classification of goods - interpretation of exemption notification - scope of "prawn feed" vis-a -vis feed supplements - reconsideration of precedent

Classification of goods - scope of "prawn feed" vis-a -vis feed supplements - interpretation of exemption notification - Whether Vitamin E-50 is classifiable as "Prawn Feed" under Chapter 2309 and eligible for exemption under Notification No.20/99 - HELD THAT: - The Court did not adjudicate the substantive question on the merits. It noted competing treatments of analogous notifications in Sun Export Corporation v. Collector of Customs and the distinction drawn in Collector of Central Excise, Guntur v. Surendra Cotton Oil Mills & Fert. Co., observed that paragraph 13 of Sun's case on interpretation of exemption notifications may require reconsideration, and expressed a tentative view that the earlier precedent may need re-examination. As a co-ordinate Bench, the Court refrained from deciding the matter and considered it appropriate to place the matter before the Chief Justice for constitution of an appropriate Bench to examine the question further.

Substantive classification and exemption question reserved for consideration by a larger Bench; papers to be placed before the Chief Justice for appropriate orders.

Final Conclusion: The Bench declined to decide whether Vitamin E-50 qualifies as "Prawn Feed" for exemption under Notification No.20/99, expressed a tentative view that the precedent may require reconsideration, and directed that the papers be placed before the Chief Justice for constitution of an appropriate larger Bench.

Summary order. Civil Appeals disposed of as withdrawn with liberty to file appropriate petition(s) before the High Court within one month from today.

Principles of natural justice - duty to afford effective opportunity of hearing - adjournment on medical grounds - ex parte adjudication - judicial review under Article 226 - remand for fresh adjudication - direction for expeditious disposal

Principles of natural justice - duty to afford effective opportunity of hearing - adjournment on medical grounds - ex parte adjudication - Whether the impugned ex parte adjudication order dated 30th November 2015 suffered from violation of principles of natural justice by refusing a reasonable adjournment and thereby warranted interference under Article 226. - HELD THAT: - The Court found that after protracted inaction on a Show Cause Notice dated 21st October 2009, only one effective hearing had occurred on 25th May 2015 before the Adjudicating Authority. The petitioner sought adjournment on medical grounds for its authorised representative, supported by a medical certificate dated 14th November 2015. The Adjudicating Authority proceeded to pass an ex parte final adjudication order on 30th November 2015. Given the long pendency of the SCN, the medical certificate in support of the adjournment request, and the limited prior hearing opportunities, refusal to grant the adjournment resulted in depriving the petitioner of an effective opportunity to participate in the adjudication. In these extraordinary circumstances the Court held that interference under Article 226 was justified as the principles of natural justice had been violated. [Paras 11, 13, 14, 15]

The adjudication order dated 30th November 2015 was set aside for violation of principles of natural justice.

Remand for fresh adjudication - judicial review under Article 226 - direction for expeditious disposal - The procedural consequence to be ordered after setting aside the impugned order, including designation of a fresh Adjudicating Authority and directions governing further proceedings. - HELD THAT: - The Court directed that the adjudication proceedings arising from the SCN dated 21st October 2009 shall resume before an Adjudicating Authority to be designated by the Central Board of Excise and Customs. The Board was directed to issue the designation within two weeks. The newly designated Adjudicating Authority was to communicate the nomination and the date, place and time of proceedings to the petitioner and its Chartered Accountant by Registered Speed Post at least ten days before the hearing. The petitioner was directed to participate on the fixed dates, and the Adjudicating Authority must record at the end of every hearing the proceedings and the next date. Considering the prolonged pendency, the Court directed conclusion of the adjudication and passing of an order within six months from the date of the order of the High Court. The Court clarified that it has not adjudicated the merits and all contentions on merits remain open for the Adjudicating Authority. [Paras 15, 16, 17, 19]

Proceedings remitted to a newly designated Adjudicating Authority with specified directions for notice, conduct of hearings and completion within six months; merits left open.

Final Conclusion: The High Court set aside the ex parte adjudication order dated 30th November 2015 for breach of natural justice, remitted the matter to a newly designated Adjudicating Authority with directions for fresh hearings, notice and expeditious disposal within six months, and left all merits open for determination by the Adjudicating Authority.

Technical Testing & Analysis Services - Technical Inspection and Certification Services - exemption where testing relates to human beings or animals - limitation under Section 11B of the Central Excise Act, 1994 - refund for services supplied to a person situated abroad

Technical Testing & Analysis Services - Technical Inspection and Certification Services - exemption where testing relates to human beings or animals - Whether the appellant's seafood inspection, sampling and analysis services fall under Technical Testing & Analysis Services (and thus attract the exemption applicable where testing relates to human beings or animals) or under Technical Inspection and Certification Services. - HELD THAT: - The agreement between the appellant and the foreign principal encompassed seafood inspection at various locations, testing of seafood, factory audits for quality compliance and submission of reports. The Tribunal found that the appellant's activity was not limited to facility inspection and certification but included sampling and analysis of seafood and reporting of test results. Since seafood are animals, testing and analysis of seafood fall within the scope of Technical Testing & Analysis Services and thereby attract the exemption applicable to testing related to human beings or animals. The first appellate authority and the adjudicating authority misconstrued the purpose and scope of the agreement by treating the services solely as Technical Inspection and Certification Services. The impugned finding classifying the services as Technical Inspection and Certification Services is therefore incorrect and is set aside. [Paras 7]

Services rendered by the appellant are Technical Testing & Analysis Services (covered by the exemption for testing related to human beings or animals); the classification as Technical Inspection and Certification Services is set aside.

Limitation under Section 11B of the Central Excise Act, 1994 - refund for services supplied to a person situated abroad - Whether the appellant's refund claim is allowable in full, partly, or rejected on limitation grounds, and whether any refundable service tax remains given that services were rendered to a person situated abroad. - HELD THAT: - Following the Tribunal's classification in the connected appeal, the demand confirmed in respect of the erroneously sanctioned refund of a portion of the claim is set aside. The Tribunal held that the appellant's claim in respect of part of the refund was time-barred under Section 11B of the Central Excise Act, 1994 and therefore cannot be allowed. However, looking from another angle, the Tribunal accepted that where inspection/testing services are supplied to a person situated abroad, the service tax liability is refundable; relying on the ratio cited from the Bombay High Court (M/s SGS India Pvt. Ltd.), the appellant is entitled to refund of the portion of service tax that falls within the limitation period. The claim for the amount beyond the limitation period is rejected. [Paras 8]

The confirmed demand relating to the erroneously sanctioned refund is set aside; refund claim is allowed only to the extent within the limitation period, while the portion beyond limitation under Section 11B is rejected.

Final Conclusion: The classification of the appellant's services is held to be Technical Testing & Analysis Services (exemptible where testing relates to animals), not Technical Inspection and Certification Services; the appeal on demand is set aside, and refund is permitted only for the part within the limitation period while the balance claim is rejected as time-barred.

Refund of service tax under Notification No.41/2007-ST - specified services and classification of CHA service - proviso excluding refund where drawback has been availed under the Drawback Rules - effect of amending notification is prospective unless expressly made retrospective

Specified services and classification of CHA service - refund of service tax under Notification No.41/2007-ST - Refund in respect of CHA (Customs House Agent) service during January, 2008 to March, 2008 is inadmissible as CHA service was not specified under Notification No.41/2007-ST for the relevant period. - HELD THAT: - The Tribunal examined the text of Notification No.41/2007-ST as it stood in the relevant period and found that CHA service was not included among the specified services. Since the entitlement to refund under the notification depends upon the service being a specified service at the relevant time, refund of service tax paid on CHA service is clearly inadmissible for January, 2008 to March, 2008. [Paras 5]

Refund claim qua CHA service rejected as inadmissible during the relevant period.

Proviso excluding refund where drawback has been availed under the Drawback Rules - refund of service tax under Notification No.41/2007-ST - effect of amending notification is prospective unless expressly made retrospective - Refund in respect of other services (terminal handling charges, documentation charges, goods transport by road, etc.) is barred by proviso (e) to Notification No.41/2007-ST for the relevant period because exports claimed drawback under All Industry rates; the subsequent deletion of the proviso by Notification No.33/08-ST (07.12.2008) is not retrospective and does not assist the appellant. - HELD THAT: - The Tribunal accepted that the remaining services would otherwise fall within the scope of decisions cited by the appellant. However, Notification No.41/2007-ST then contained proviso (e) excluding refunds where the goods were exported after availing drawback of service tax under the Drawback Rules. The exports in question were made claiming drawback under All Industry rates, and such rates take into account inputs and input services; hence the services claimed by the appellant qualify as input services and the refund is hit by the proviso. The proviso was deleted later by Notification No.33/08-ST dated 07.12.2008, but in the absence of any express or implied provision for retrospective effect, the amending notification operates prospectively only and cannot be given retrospective operation to validate the refund for the earlier period. [Paras 5]

Refund claim qua the remaining services disallowed for the relevant period on account of proviso (e); deletion of the proviso later is prospective and does not entitle the appellant to refund for January-March 2008.

Final Conclusion: No infirmity found in the impugned order; appeal dismissed.

Taxable value/gross consideration for service tax - inclusion of employer's Provident Fund contribution in taxable value - inclusion of bonus payments in taxable value - statutory liability of employer as part of consideration - amendment to gross consideration under Section 67 - waiver of penalty under Section 80 of the Finance Act, 1994

Taxable value/gross consideration for service tax - inclusion of employer's Provident Fund contribution in taxable value - statutory liability of employer as part of consideration - Employer's contribution to Provident Fund paid in respect of manpower supplied is includable in the gross consideration for service tax. - HELD THAT: - The Tribunal upheld the view that where the consideration remitted by the service recipient to the service provider includes amounts towards Provident Fund which the provider is statutorily obliged to pay, those amounts form part of the gross amount charged for the taxable manpower supply service. The appellate order relied on the earlier Tribunal decision in M/s Neelav Jaiswal & Brothers which treated the employer's PF contribution paid by the client as part of the consideration since the service was provided for consideration in money, and noted that the Allahabad High Court has also referred to that view. The Board's subsequent amendment to the definition of gross consideration does not justify applying that change retrospectively to exclude such amounts prior to amendment; the Tribunal therefore affirmed inclusion of the PF contribution in taxable value. [Paras 5, 6]

Inclusion of the employer's Provident Fund contribution in the gross consideration for service tax is upheld.

Taxable value/gross consideration for service tax - inclusion of bonus payments in taxable value - Bonus paid to personnel deployed by the service provider is includable in the total consideration for service tax purposes. - HELD THAT: - The Tribunal held that bonus payments, although not of fixed periodicity or quantum, constitute additional remuneration to the deployed personnel and therefore form part of the consideration received for the taxable manpower supply service. The Commissioner (Appeals) and the Tribunal treated such incentives as includable in the gross amount charged and the appeal on this point was dismissed. [Paras 7]

Bonus payments to deployed personnel are includable in the taxable value.

Final Conclusion: The appeal is dismissed; the Tribunal affirms that both the employer's Provident Fund contribution and bonus paid to personnel are includable in the gross consideration for service tax, while noting that penalties had already been waived by the Commissioner (Appeals).

Legislative competence to levy service tax vis-a -vis state entertainment tax - Levy of service tax on sale of tickets for sporting events - Double taxation - concurrent levy by Union and State on same taxable event - Obligation to deposit collected service tax pending adjudication

Obligation to deposit collected service tax pending adjudication - Levy of service tax on sale of tickets for sporting events - Service Tax collected by the petitioner on sale of IPL tickets during the pendency of the writ petition shall be deposited with the Central Government but will remain subject to the final outcome of the petition. - HELD THAT: - The Court noted that the petitioner had collected Service Tax on tickets sold for the current IPL season (sample tickets at Annexure P 8) pursuant to the impugned amendments and notifications. Having collected the tax, the petitioner is under an obligation to deposit the Service Tax with the Central Government. Whilst the parties' substantive contentions, including the challenge to the legislative competence to levy Service Tax vis a vis State entertainment tax and the question of liability for 'free' tickets under the Agreement with BCCI, are reserved for final adjudication, the Court directed an interim arrangement: the Service Tax collected and deposited during the pendency of the writ petition shall be held subject to the final determination of the petition. [Paras 6, 7]

Directed that Service Tax collected and deposited by the petitioner during the pendency of the writ petition shall be subject to the final outcome of the petition; application disposed of.

Final Conclusion: Interim direction: Service Tax already collected on IPL tickets must be deposited with the Central Government but will be kept subject to the final decision in the writ petition; substantive issues, including competence to levy and liability in respect of free tickets, are reserved for final hearing.

Waiver of penalty under Section 80 of the Finance Act, 1994 - reasonable cause defence for waiver of penalty - minimum penalty thresholds under Sections 76 and 78 of the Finance Act, 1994 - scope of judicial power to reduce penalty below statutory minima - precedential application of Union of India v. Dharamendra Textile Processors

Waiver of penalty under Section 80 of the Finance Act, 1994 - reasonable cause defence for waiver of penalty - minimum penalty thresholds under Sections 76 and 78 of the Finance Act, 1994 - Section 80 of the Finance Act, 1994 does not permit reduction of penalty to a level below the minimum penalties prescribed under Sections 76 and 78; it permits only complete waiver where reasonable cause is established. - HELD THAT: - The High Court held that Section 80 could be applied to reduce penalties below the minima prescribed under Sections 76 and 78 once reasonable cause was shown. This Court disagreed, concluding that Section 80 envisages only a complete waiver of penalty upon establishment of reasonable cause and does not authorize reduction to below the statutory minimums. The Court applied the principle and reasoning in Union of India and Others v. Dharamendra Textile Processors , treating that precedent as determinative on the permissible scope of Section 80 and thereby overruling the contrary view taken below.

The High Court's view that Section 80 permits reduction below statutory minimum penalties is incorrect and is set aside.

Final Conclusion: Following the decision in Union of India and Others v. Dharamendra Textile Processors , the appeal is allowed and the impugned High Court order is set aside.

Classification of goods - Edible Oil - unscheduled goods - interpretation of entry in a statutory schedule - precedential application of Aluva Sugar Agency

Classification of goods - Edible Oil - unscheduled goods - interpretation of entry in a statutory schedule - precedential application of Aluva Sugar Agency - Product 'Nutralite' is classifiable as 'Edible Oil' under Entry 31 of Schedule III of the KVAT Act and not as 'unscheduled goods'. - HELD THAT: - The court examined the composition and use of Nutralite (70% edible oil, 26% water and 4% other ingredients) and accepted that, in composition and utility, margarine/fat spread is essentially an edible oil product. Reliance on the Supreme Court's reasoning in Aluva Sugar Agency (that margarine may be regarded as edible oil having regard to composition and usage) was held to be germane. The Commissioner's conclusion that Aluva Sugar Agency was inapplicable and that classification must be read narrowly only against an entry not mentioning margarine was rejected. Given Nutralite's predominant edible oil content and similar usage, the product falls within the scope of 'Edible Oils' as contemplated by Entry 31 of Schedule III; consequently the Commissioner's opinion classifying it as 'unscheduled goods' was erroneous and liable to be quashed.

The Commissioner's opinion is quashed and Nutralite is held to fall under Entry 31 of Schedule III as 'Edible Oil' and subject to the tax rate prescribed for edible oils.

Final Conclusion: Writ petition allowed; the Commissioner's classification is quashed and Nutralite shall be treated as 'Edible Oil' for taxation under Entry 31 of Schedule III of the KVAT Act.

Settlement under Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010 - Certificate issued under Section 8 - discharge of further liability - Effect of acceptance under Section 7 - Penalty under Section 12(3)(b) and its extinguishment by settlement

Settlement under Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010 - Certificate issued under Section 8 - discharge of further liability - Penalty under Section 12(3)(b) and its extinguishment by settlement - Whether the settlement accepted under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010 and the certificate issued under Section 8 operate to discharge the assessee from liability for the penalty in addition to tax arrears and interest. - HELD THAT: - The Court found that the assessee's application was accepted under a clause of Section 7 after payment of the entire arrears of tax together with 25% of the interest computed at 6% per annum (paragraph 7). Once a certificate is issued in terms of Section 8, Sub section (1) discharges the assessee of any further obligations arising from the settled arrears. The Tribunal's view that the settlement related only to arrears of tax and not to penalty was held to be a misconception (paragraph 8). On this basis the Tribunal's consequent dismissal of the assessee's appeal and allowance of the Department's appeal in respect of penalty was erroneous. [Paras 7, 8, 9]

The settlement under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010, followed by issuance of a certificate under Section 8, extinguished further obligations including the penalty; the Tribunal's contrary conclusion is set aside.

Final Conclusion: Revision allowed; the Tribunal's order is set aside for misconstruing the scope of the settlement certificate and the matter is disposed accordingly. No costs.

Remand for fresh consideration - decision vitiated for non-application of mind - treatment of alleged admission before inspecting officer - affording opportunity of personal hearing - verification of books of accounts

Decision vitiated for non-application of mind - treatment of alleged admission before inspecting officer - remand for fresh consideration - affording opportunity of personal hearing - verification of books of accounts - Impugned order of the first respondent held to be passed without applying mind by treating that the petitioner had admitted reversal of ITC, and the order was set aside and remitted for fresh consideration with directions to afford hearing and verify books. - HELD THAT: - The High Court examined the impugned order dated 31.03.2015 and found that the first respondent had proceeded on the erroneous premise that the petitioner had admitted the reversal of Input Tax Credit before the Inspecting Officer, notwithstanding that the petitioner had raised specific objections in reply. The Court concluded that such treatment demonstrated a lack of application of mind. In view of this defect, the appropriate remedy was to set aside the impugned order and remit the matter to the first respondent for de novo consideration. The Court directed that the first respondent shall consider the objections raised by the petitioner, verify the books of accounts as necessary, afford a personal hearing, and decide the matter on merits uninfluenced by the observations in the quashed order. The Court also permitted the petitioner to file additional objections within two weeks from receipt of the order. [Paras 5, 6]

Impugned order dated 31.03.2015 set aside; matter remitted to the first respondent for fresh consideration, verification of books, and affording personal hearing; petitioner may file additional objections within two weeks; first respondent to decide on merits uninfluenced by earlier observations.

Final Conclusion: Writ petitions disposed by quashing the impugned order and remitting the matter for fresh consideration with directions to verify accounts, hear the petitioner, and decide on merits; no costs.