TaxTMI Updates e-Newsletter
May 07,2021

Speaking order requirement - challenge to summary order of assessment - uploading of assessment order and summary under Rule 100 of the Central Goods and Services Tax Rules, 2017 - remedy before the proper Assessing Officer where revenue concedes refund in its pleadings

Speaking order requirement - challenge to summary order of assessment - uploading of assessment order and summary under Rule 100 of the Central Goods and Services Tax Rules, 2017 - The maintainability of a challenge to the summary of an assessment order dated 14.03.2020. - HELD THAT: - The Court observed that Rule 100 requires uploading both the order of assessment under Section 62(1) and the summary of that order. A summary by its nature does not contain the reasoning upon which the assessment is based; consequently, the statutory scheme contemplates that it is the speaking assessment order containing reasons which is amenable to challenge. Therefore a challenge directed solely at the summary of order is not appropriate in the absence of the accompanying speaking order, since the summary itself provides no reasoning to be examined or assailed. [Paras 3]

Challenge to the summary order dated 14.03.2020 is not the proper vehicle for relief; the speaking order accompanying the summary is the order liable to be challenged.

Remedy before the proper Assessing Officer where revenue concedes refund in its pleadings - Disposition of the petition in light of the respondent's concession in the counter regarding entitlement to refunds and the non-arraying of the Assessing Officer who passed the consequential orders. - HELD THAT: - The counter filed by the revenue recorded that the refund claims of the petitioner were found correct and that orders to that effect were passed by the State Tax Officer, Thiruvallur Assessment Circle on 12.02.2021, but that Assessing Officer was not arrayed as a respondent in the writ petition; instead the Deputy State Tax Officer, Sriperumbudur Circle was arrayed. The Court recorded the concession in the counter and observed that the petitioner may pursue the relief flowing from that concession before the proper Assessing Officer who has passed the orders. The Court therefore closed the writ petition while leaving the petitioner free to seek the concessioned relief from the appropriate authority. [Paras 4]

The revenue's concession as recorded in the counter is noted; the petitioner may pursue the conceded refund relief before the Assessing Officer who passed the orders. The writ petition is closed accordingly.

Final Conclusion: The writ petition is closed: the Court held that a summary of assessment without the speaking assessment order cannot be independently assailed and recorded the revenue's concession regarding refunds, leaving the petitioner free to pursue the conceded relief before the Assessing Officer; no costs.

Service by e mail as valid mode of service under Section 169, Central Goods and Services Tax Act, 2017 - extension of limitation for filing statutory appeals by reason of pandemic and related Supreme Court orders - appellate authority to admit appeals filed within the extended period without reference to limitation and decide on merits - interim relief against attachment requiring production of bank balance details for quantification

Service by e mail as valid mode of service under Section 169, Central Goods and Services Tax Act, 2017 - extension of limitation for filing statutory appeals by reason of pandemic and related Supreme Court orders - appellate authority to admit appeals filed within the extended period without reference to limitation and decide on merits - Permission to file statutory appeal against assessment and treatment of limitation - HELD THAT: - The Court recorded competing contentions about whether the speaking order of assessment was transmitted by e mail, but declined to adjudicate the disputed factual question of service. Relying on the series of Supreme Court orders extending limitation during the pandemic period, the Court afforded the petitioner four weeks from the date of the order to file the statutory appeal. The Court directed that any appeal filed within that period shall be taken on file by the first appellate authority without reference to limitation and shall be considered on merits and in accordance with law. [Paras 5]

Petitioner permitted to file the statutory appeal within four weeks; appeal so filed to be admitted without reference to limitation and decided on merits.

Interim relief against attachment requiring production of bank balance details for quantification - Consideration of interim relief for lifting attachment of bank account - HELD THAT: - The petition for interim relief to lift the attachment of the bank account was not decided on merits because the petitioner did not place before the Court the details of the balance available in the account. The Court observed that, had such particulars been produced, it might have been possible to direct release of a portion of the funds for the petitioner's use. Consequently, the Court declined to grant interim relief and directed the petitioner to approach the first appellate authority with an application for interim protection, to be considered in accordance with law. [Paras 6]

Interim relief refused for want of bank balance particulars; petitioner directed to seek interim protection from the first appellate authority.

Final Conclusion: Writ petition disposed by permitting the petitioner to file a statutory appeal within four weeks (to be admitted without reference to limitation and decided on merits); interim relief against attachment refused for lack of bank balance particulars and the petitioner directed to apply to the first appellate authority for interim protection.

Grant of bail in economic offences - prima facie or reasonable ground to believe - nature and gravity of the charge - custodial interrogation - severity of punishment - danger of tampering with witnesses - flight risk - documentary evidence - personal bond with surety - conditions of bail (surrender of passport, cooperation with investigation)

Grant of bail in economic offences - prima facie or reasonable ground to believe - custodial interrogation - documentary evidence - personal bond with surety - conditions of bail (surrender of passport, cooperation with investigation) - Application for grant of bail to accused Naveen Bansal in proceedings under the CGST Act was allowed on conditions. - HELD THAT: - The court applied settled criteria for bail, adopting the factors laid down in State of U.P. v. Amar Mani Tripathi to assess (i) whether there is any prima facie or reasonable ground to believe that the accused committed the offence, (ii) nature and gravity of the charge, (iii) severity of punishment, (iv) danger of absconding, (v) character and antecedents, (vi) likelihood of repetition, and (vii) risk of tampering with witnesses. The respondent alleged that the accused admitted causing loss to the exchequer and that documentary and other material indicate fake transactions; investigation is ongoing. The court observed that the accused had been sent to judicial custody straightaway, indicating no requirement for further custodial interrogation, and that more than fifteen days since arrest had elapsed. No past involvement in similar offences was shown and there was no material establishing a flight risk. The fact that a co-accused (the accused's brother) was not cooperating could not, without direct nexus or material showing connivance, justify continued detention of the applicant. Balancing the factors and considering the period of incarceration and that evidence is largely documentary, the court concluded custodial interrogation was unnecessary and granted bail while imposing conditions to secure attendance and protect the investigation and witnesses. [Paras 3]

Accused admitted to bail on personal bond of Rs.1,00,000 with one surety of like amount, subject to conditions including surrender of passport, appearance and cooperation with investigation, attendance at hearings, prohibition on committing similar offences and influencing witnesses.

Final Conclusion: Bail granted to Naveen Bansal on specified bond and conditions after applying the established bail factors and finding no necessity for further custodial interrogation or any present flight risk or antecedent showing habitual offending.

Revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 - requirement to furnish returns and discharge tax, interest, penalty and late fee before filing revocation - effect of CBIC clarification on revocation where cancellation is on account of non-filing of returns - verification of payment particulars and compliance before revocation

Revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 - requirement to furnish returns and discharge tax, interest, penalty and late fee before filing revocation - effect of CBIC clarification on revocation where cancellation is on account of non-filing of returns - Whether the appellant's registration can be considered for revocation after filing pending returns and payment of the outstanding interest liability. - HELD THAT: - The adjudicating authority had rejected the revocation application on the ground that the appellant had not discharged an interest liability and its reply to the show-cause notice was unsatisfactory. The appellant subsequently filed all pending returns up to December 2020 and produced challan/DRC-03 evidencing payment of the interest liability. Rule 23(1) requires that where registration is cancelled for failure to furnish returns, no application for revocation shall be filed unless such returns are furnished and amounts due in terms of such returns are paid. The CBIC circular clarifies that returns and amounts due up to the date of cancellation must be furnished/paid before seeking revocation. Having regard to these requirements and the appellant's production of returns and payment evidence, the Commissioner (Appeals) found that the conditions for filing a revocation application are now satisfied and that the registration may be considered for revocation. [Paras 6, 7, 9, 10]

Registration may be considered for revocation since the appellant has filed the pending returns and shown payment of the outstanding interest; appellant directed to file the revocation application in the prescribed form through the common portal.

Verification of payment particulars and compliance before revocation - administrative remand for consideration of revocation application - Whether the proper officer should be directed to reconsider the revocation application and on what terms. - HELD THAT: - The Commissioner (Appeals) did not itself pass an order revoking registration but directed that the appellant submit the revocation application in the prescribed form. The proper officer is required to consider the revocation application and is to verify the payment particulars, the filing of returns and overall compliance with the CGST Act and rules before passing any order. This direction is based on Rule 23(2) and the procedural safeguards therein which permit the proper officer to revoke or to reject the application after recording reasons; accordingly the matter is left to the proper officer for fresh consideration subject to verification. [Paras 10]

Proper officer to consider the revocation application upon filing, subject to verification of payment particulars, filing of returns and compliance with the CGST Act and Rules.

Final Conclusion: Appeal disposed by directing the appellant to file FORM GST REG-21 (revocation application) through the common portal; the proper officer is directed to consider the revocation application afresh and decide it after verifying payment particulars, returns filing and statutory compliance in accordance with Rule 23 and the CBIC clarification.

Breach of principles of natural justice - personal hearing - failure to consider representation - addition under Section 68 as unexplained unsecured loans - prima facie case - stay on operation of impugned assessment order

Breach of principles of natural justice - personal hearing - failure to consider representation - The impugned assessment order was passed without having regard to the petitioner's reply and without granting the requested personal hearing, giving rise to a prima facie breach of principles of natural justice. - HELD THAT: - The Court found on the material on record that the petitioner filed a reply to the show cause notice on 12.03.2021 and sought a personal hearing, but the Assessing Officer proceeded to finalise the assessment on 13.03.2021. The impugned assessment order records that, since there was no compliance by the assessee to the compliance date of 08/03/2021, it was presumed the assessee had nothing to say and the assessment was passed on available records. The Court observed that the material and explanation placed before the AO along with the reply were not taken into account, and the request for personal hearing was not granted. In these circumstances the petitioner succeeded in establishing, at least at this interlocutory stage, a prima facie case that principles of natural justice were breached, warranting further adjudication by the revenue after opportunity to be heard. [Paras 5, 6]

Notice issued; counter-affidavit directed; interim stay on the operation of the impugned assessment order granted until further orders.

Final Conclusion: On the petitioner's showing that its reply and request for personal hearing were not considered before finalisation of the assessment for AY 2018-2019, the High Court found a prima facie breach of natural justice, issued notice, directed filing of a counter-affidavit and stayed the operation of the impugned assessment order pending further orders.

Full and true disclosure - application for settlement under Section 245C - entertainability of settlement application - judicial review of Settlement Commission's decision-making process - maintainability of writ under Article 226 against Settlement Commission order - absence of proper books of account as affecting disclosure - remittal to Assessing Officer for regular assessment where disclosure inadequate

Full and true disclosure - application for settlement under Section 245C - absence of proper books of account as affecting disclosure - remittal to Assessing Officer for regular assessment where disclosure inadequate - Validity of the Settlement Commission's orders where applicants did not maintain proper books of account and the Department produced evidence of nondisclosure of income - HELD THAT: - Section 245C requires that an application for settlement must contain a full and true disclosure of income not disclosed before the Assessing Officer; this precondition is a determinative ingredient for entertaining a settlement application. The Settlement Commission's own finding that the applicants had not kept proper books of account (noted in the Commission's findings) demonstrates that the prerequisite of full and true disclosure could not be said to have been satisfied. Where the Department adduced materials and established discrepancies and nondisclosure (including cash collections and unaccounted receipts), and the Settlement Commission did not formulate a clear finding that full and true disclosure had been made nor adjudicated those departmental contentions, the matter could not properly be settled under Section 245C. In such circumstances the correct course is to decline settlement and permit the Assessing Officer to proceed with regular assessment so that the Department's evidentiary contentions may be examined in that forum. Applying these principles to the impugned settlements, the Court found the Settlement Commission's orders to be not in consonance with the statutory requirement of full and true disclosure and therefore unsustainable. [Paras 42, 43, 44, 45, 46]

Impugned settlement orders quashed and matters directed to be placed before the Assessing Officer for regular assessment.

Judicial review of Settlement Commission's decision-making process - maintainability of writ under Article 226 against Settlement Commission order - entertainability of settlement application - Whether the High Court can entertain writ petitions challenging a Settlement Commission order to examine compliance with Section 245C - HELD THAT: - The Court held that writ jurisdiction under Article 226 is not excluded merely because the order challenged is that of the Settlement Commission. Judicial review by the High Court is focused on the decision-making process and on whether the Settlement Commission acted in contravention of statutory provisions. The maintainability of a writ petition challenging a settlement order depends on whether the requisite terms and conditions for filing an application under Section 245C were complied with; where the question involves mixed questions of law and fact (for example, whether full and true disclosure was made), the High Court is empowered to examine the decision-making process to form an opinion on entertainability. Accordingly, blanket non-maintainability of writ petitions against Settlement Commission orders was rejected and the petitions before the Court were held maintainable for the limited purpose of reviewing whether Section 245C's requirements were satisfied. [Paras 20, 23, 24, 25, 27]

Writ petitions are maintainable to the extent necessary to examine whether the Settlement Commission complied with Section 245C and followed a lawful decision making process.

Final Conclusion: Writ petitions allowed; the Settlement Commission's orders dated 23.01.2014 in the listed settlement applications were quashed for failure to satisfy the statutory requirement of full and true disclosure and for not adjudicating departmental contentions, and the matters are to be placed before the Assessing Officer for regular assessment; no order as to costs.

Open terrace not includible in built up area for deduction under section 80IB(10) - date of approval for computation of time-limit for completion of housing project - completion certificate of local authority sufficient notwithstanding CMDA approval - developer status and ownership not prerequisite for deduction under section 80IB(10) - where building-plan approvals obtained for individual units, last unit approval may determine project approval date

Open terrace not includible in built up area for deduction under section 80IB(10) - Open terrace area is not to be included in computation of built up area for the purpose of deduction under section 80IB(10). - HELD THAT: - The Court followed the decisions of the Madras High Court and other High Courts which have held that open terrace, being an open space, cannot be treated as built up area for denying benefit under section 80IB(10). The Tribunal's conclusion rejecting the Assessing Officer's inclusion of private/open terrace area in built up area was affirmed as consistent with binding precedents and the appellate authority's factual calculation of built up area. [Paras 3, 5]

The Tribunal was correct in holding that open terrace should not be included in built up area and the finding in favour of the assessee is upheld.

Date of approval for computation of time-limit for completion of housing project - where building-plan approvals obtained for individual units, last unit approval may determine project approval date - The time limit for completion of the eligible project is to be computed from the date on which building plan approval for the project (as manifested by approvals for individual units culminating in the last unit approval) was obtained, not from an earlier layout approval date unconnected with the assessee's project commencement. - HELD THAT: - The Court accepted the reasoning that a layout approval alone (dated prior to the assessee's conception of the project) cannot be treated as approval of the assessee's housing project. Where approvals were obtained incrementally-prototype approvals followed by approvals for remaining independent units-the appropriate date for reckoning approval for the purposes of section 80IB(10) is the effective approval date for the project as a whole, which in the present facts was the date of last unit approval. Applying that date, the project was completed within the statutory five-year period. [Paras 3, 5]

The Tribunal rightly computed the limitation from the date of the final building-plan approval (29.03.2007 in the facts) and held completion was within time; that conclusion is affirmed.

Completion certificate of local authority sufficient notwithstanding CMDA approval - The Tribunal permissibly relied on the completion certificate issued by the Pallikaranai Panchayat without insisting on a separate completion certificate from the CMDA. - HELD THAT: - The Court accepted the factual and legal position, supported by communications from CMDA, that where a housing project is undertaken in a CMDA-approved layout, the competent authority to grant planning permission and building permits for ordinary independent buildings may be the local authority (Pallikaranai Town Panchayat). Thus reliance on the local authority's completion certificate was proper and did not defeat eligibility under section 80IB(10). [Paras 3, 5]

The Tribunal was correct in accepting the Pallikaranai Panchayat's completion certificate and in not requiring separate CMDA completion certification.

Developer status and ownership not prerequisite for deduction under section 80IB(10) - Being developer/builder and having taken possession and carried out development work satisfies eligibility for deduction under section 80IB(10); formal registration of sale deeds or absolute ownership is not an essential precondition. - HELD THAT: - The Court, following authoritative decisions, held that section 80IB(10) permits deduction to undertakings engaged in developing and constructing housing projects and does not mandate formal ownership of land. Where the assessee had entered into development agreements, paid advances, taken possession, developed infrastructure and carried out construction, he undertook investment risk characteristic of a developer and was entitled to the deduction. The Tribunal's acceptance of the assessee's status as developer was endorsed. [Paras 3, 5]

The Tribunal correctly held that absence of registered title in the assessee's name did not preclude deduction; the assessee qualified as developer and is eligible under section 80IB(10).

Final Conclusion: The questions of law raised by the Revenue were decided against the Revenue and in favour of the assessee by applying relevant High Court precedents; the Tax Case Appeal is dismissed.

Territorial jurisdiction - forum conveniens - maintainability of writ petition under Article 226 - cause of action - discretionary jurisdiction of the High Court

Territorial jurisdiction - forum conveniens - maintainability of writ petition under Article 226 - cause of action - Whether the Madras High Court ought to entertain the writ petitions challenging the Settlement Commission's order or whether they are to be dismissed on grounds of forum conveniens and lack of territorial jurisdiction. - HELD THAT: - The Court considered earlier decisions including the Supreme Court's decision in Commissioner of Customs and Central Excise v. Gao Ispat Ltd and the principle in Kusum Ingot's and Alloy v. Union of India that, while a writ petition may be maintainable where part of the cause of action arises within the territorial jurisdiction, the presence of a small part of cause of action within the forum does not necessarily oblige the High Court to exercise its discretionary jurisdiction. Given that the contesting respondents are located within the jurisdiction of the Karnataka High Court and the objection as to jurisdiction was raised at the time of admission, the Court exercised its discretion and applied the doctrine of forum conveniens. The Court noted that the Supreme Court's decision in Gao Ispat Ltd did not address the territorial-jurisdiction issues under Article 226 and relied upon the principle that in appropriate cases the High Court may decline to entertain a matter despite tenuous territorial links. In the circumstances of these petitions, the Court found it appropriate to dismiss the petitions without adjudicating on the merits and granted liberty to the petitioner to pursue remedies before the jurisdictional High Court in Karnataka.

Writ petitions dismissed on ground of forum conveniens/territorial jurisdiction with liberty to approach the jurisdictional High Court in Karnataka; no costs.

Final Conclusion: The writ petitions challenging the Settlement Commission's order are dismissed on grounds of forum conveniens and lack of proper territorial jurisdiction of this Court; petitioner is at liberty to seek remedy before the Karnataka High Court.

Deductibility of overseas taxes - Double taxation relief under section 90/91 - Taxation of foreign dividend and foreign interest on net versus gross basis - Revenue versus capital characterisation of software purchases and applicability of depreciation - Computation of deduction under section 10A and section 80HHE - Exclusion of unrealized/uncollected export debtors from export turnover and total turnover - Appropriate formula for apportioning profits/turnover between 10A and non 10A units - Allocation of interest expenditure between business income and exempt/deductible income and applicability of section 14A - Allowability of interest under section 36(1)(iii) for a promoter/holding investment company - Relevance of CBDT Circular No.1/2005 in claims under section 10A

Deductibility of overseas taxes - Double taxation relief under section 90/91 - Whether foreign/state/local taxes debited by the assessee are deductible or eligible for relief under the DTAA / sections 90/91 and whether any part has been rightly allowed - HELD THAT: - The Tribunal recorded that state and local taxes of USA/Canada which had been disallowed at assessment were subsequently granted by the giving effect order; the CIT(A)'s direction to rework disallowance under Explanation 1 to section 40(a)(ii) and to allow deduction only if not eligible for relief under section 90/91 was affirmed in part and computational issues were remitted for verification. As the giving effect order had already granted relief in respect of state and local taxes to the extent shown, no further directions were required. Grounds seeking further relief were not pressed or rendered infructuous. [Paras 3]

Grounds on overseas taxes and DIT relief dismissed as not pressed or infructuous; AO to verify and grant relief only to the extent not covered by section 90/91, with computational corrections made in the giving effect order.

Taxation of foreign dividend and foreign interest on net versus gross basis - Binding precedent effect of Ambalal Kilachand - Whether foreign dividend (and by analogy foreign interest) offered net of foreign tax can be taxed on net basis or must be taxed on gross basis - HELD THAT: - The Tribunal held that the CIT(A)'s direction to tax the foreign dividend on net basis was in accordance with binding precedent of the Tribunal and the Bombay High Court in CIT v. Ambalal Kilachand, which had been followed in the assessee's earlier years; the Bench found the facts in the year before it identical to earlier years and, respectfully following those binding precedents, declined to interfere with the CIT(A)'s direction. The analogous treatment of foreign interest (offered net) was also upheld as dependent on the same reasoning. [Paras 4]

Revenue's challenge dismissed; foreign dividend and comparable foreign interest may be taxed on net basis in accordance with binding precedents followed by the Tribunal and Bombay High Court.

Revenue versus capital characterisation of software purchases and applicability of depreciation - Whether software purchases for resale and software purchased for internal use are revenue expenditure or capital in nature - HELD THAT: - It was undisputed before the Tribunal that software costing Rs. 80.44 crores was purchased for resale and akin to raw material purchases; the CIT(A)'s allowance of that expenditure as revenue was affirmed. Software acquired for internal use was held to be capital in nature and depreciation was allowable; there was no interference with the CIT(A)'s classification. [Paras 5]

Revenue's appeal on software expenditure dismissed; resale software allowable as revenue expenditure and internal use software to be treated as capital asset with depreciation.

Computation of deduction under section 10A and section 80HHE - Exclusion of unrealized/uncollected export debtors from export turnover and total turnover - Appropriate formula for apportioning profits/turnover between 10A and non 10A units - Application of CBDT Circular No.1/2005 - How deductions under section 10A and section 80HHE are to be computed: (a) whether old units previously claiming 80HHE can claim 10A; (b) whether unrealized/uncollected export debtors must be excluded from export turnover and corresponding total turnover; and (c) whether profits/turnover of 10A units should be included in the total for computing 80HHE - HELD THAT: - The Tribunal held (a) that earlier claim of deduction under section 80HHE in previous years does not preclude claiming deduction under section 10A in the relevant year, following Bombay and Delhi High Court precedents and CBDT Circular No.1/2005; (b) relying on the ratio of the Supreme Court in HCL Technologies and subsequent High Court decisions, the Tribunal directed that unrealized export debtors excluded from export turnover must also be excluded from total turnover (denominator) when applying the statutory formula; and (c) following the decision in Sasken Communication Technologies and related authorities, the Tribunal directed that profits and turnover of section 10A units must be excluded from the profits and total turnover of the software business for purposes of computing deduction under section 80HHE (and corresponding adjustment for section 10A), and remitted computation to the AO accordingly. [Paras 7, 8]

Assessee entitled to claim section 10A for old units where conditions met; unrealized export debtors to be excluded from both numerator and denominator; profits/turnover of 10A units to be excluded from computation for 80HHE; AO directed to recompute deductions under sections 10A and 80HHE in terms of these directions.

Allocation of interest expenditure between business income and exempt/deductible income and applicability of section 14A - Allowability of interest under section 36(1)(iii) for a promoter/holding investment company - Effect of Maxopp on dominant purpose test and its limited application - Whether interest expenditure is fully allowable as business expenditure under section 36(1)(iii), whether section 14A applies to deny part of the interest, and whether interest income may be set off against interest expense - HELD THAT: - The Tribunal rejected the CIT(A)'s invocation of section 14A in the facts of this year because dividend was not exempt but deductible under section 80M; the court distinguished exemption and deduction and held section 14A applies to incomes that are exempt under Chapter III. The Tribunal found on the facts that the assessee, as a promoter/holding investment company engaged in organized investment activity and brand/subscription arrangements, carried on investment as business and that interest on borrowed funds employed for that business is deductible under section 36(1)(iii). Consequently, the interest expenditure (as recomputed and reflected in the giving effect order) is fully deductible under section 36(1)(iii) and the AO was directed to rework the allowable deduction and section 80M computations. The Tribunal held that the Supreme Court decision in Maxopp (rejecting a dominant purpose test under section 14A) does not disturb the conclusion that interest is allowable under section 36(1)(iii) where investment activity constitutes business and where section 14A is inapplicable. [Paras 9, 10]

Assessee's appeal allowed in part: interest expenditure is deductible under section 36(1)(iii); section 14A held not attracted in the year; AO directed to rework deductions and consequent section 80M implications.

Final Conclusion: Both the assessee's and the revenue's appeals are partly allowed. The Tribunal confirmed several favourable precedents for the assessee (net taxation of certain foreign receipts, allowability of resale software expenditure, entitlement to section 10A for old units), directed exclusion of unrealized export debtors from both numerator and denominator when computing deductions, directed exclusion of 10A units' profits/turnover for 80HHE computations, upheld limited relief on overseas taxes subject to DTAA and computational correction, and held that interest is allowable under section 36(1)(iii) with section 14A inapplicable in the facts; the Assessing Officer is directed to recompute deductions and give effect to these directions.

Reopening of assessment proceedings - unexplained cash credit under Section 68 - primary onus to prove identity, creditworthiness and genuineness under Section 68 - evidentiary value of statements recorded during survey proceedings - set-off of business losses consequential to deletion of additions

Reopening of assessment proceedings - Validity of reassessment notices issued under section 148 and related proceedings (ground nos. 1 to 3). - HELD THAT: - The Tribunal upheld the action of the Assessing Officer in reopening the assessment. It noted that the AO had tangible information from the investigation wing and had recorded reasons to believe that income had escaped assessment. Following the coordinate-bench reasoning reproduced in the order, the Tribunal held that such information was sufficient at the stage of forming belief to trigger proceedings under section 147/148 and therefore found no infirmity in the reopening. Accordingly, the legal grounds challenging reassessment were dismissed. [Paras 9]

Ground Nos. 1 to 3 dismissed; reopening held valid.

Unexplained cash credit under Section 68 - primary onus to prove identity, creditworthiness and genuineness under Section 68 - evidentiary value of statements recorded during survey proceedings - set-off of business losses - Sustainability of addition as unexplained cash credit under Section 68 and consequential availability of set-off of business losses (ground nos. 4 and 5). - HELD THAT: - On the merits the Tribunal, applying its earlier decision in the assessee's own case for other years and following a coordinate-bench precedent, concluded that the assessee had discharged the primary onus under Section 68 by producing documentary evidence establishing identity, creditworthiness and genuineness of the investor entities (share application forms, cheques and bank statements, share certificates, financial statements/ITR acknowledgements, certificate of incorporation, board resolutions etc.). The Tribunal found that the survey-stage statement relied upon by revenue had been retracted and, absent corroborative incriminating material, carried little evidentiary value. The Tribunal further observed that revenue did not bring forward evidence to rebut the documents produced or to show that unaccounted money was routed as share capital. Consequently the addition was deleted and set-off of losses, as permissible under law, was allowed. [Paras 8]

Ground No. 4 allowed (addition under Section 68 deleted); Ground No. 5 allowed for statistical purposes (set-off of business losses permitted).

Final Conclusion: The appeal is partly allowed: the reassessment under section 148 was held valid (grounds 1-3 dismissed), but the addition made as unexplained cash credit under Section 68 was deleted and consequential set-off of losses allowed; consequential grounds were not separately adjudicated.

Condonation of delay - liberal approach to condonation where explanation is bonafide and not mala fide - admission of appeal despite inordinate delay on bona fide explanation - remand for fresh adjudication where appellate order is non-speaking/ex-parte without considering grounds of appeal - duty to afford opportunity and consider statement of facts and grounds before passing ex parte order

Condonation of delay - liberal approach to condonation where explanation is bonafide and not mala fide - Delay in filing the appeal (632 days) was condoned and the appeal admitted. - HELD THAT: - The assessee established that the delay resulted from reliance on its Authorized Representative who had died and that the appeal was not in fact filed by him; this explanation was not controverted by the Department. The Tribunal applied the principle that courts should show indulgence in condoning delay when the explanation does not smack of mala fides or form part of a dilatory strategy, relying on relevant precedents where substantial delays were condoned where the appellant had no knowledge of the order or had a bona fide explanation. On these facts, and in the interest of justice, the Tribunal found it justifiable to condone the delay and admit the appeal. [Paras 2, 3]

Delay of 632 days condoned and appeal admitted.

Remand for fresh adjudication due to non-speaking/ex-parte order - duty to afford opportunity and consider statement of facts and grounds before passing ex parte order - Whether the matter should be remitted to the CIT(A) for fresh disposal because the CIT(A) did not consider the statement of facts and grounds and passed a non speaking order. - HELD THAT: - The Tribunal noted that although the CIT(A) had issued opportunities and the assessee had not complied with some notices, the CIT(A)'s order did not address the facts and explanations presented in the statement of facts and the grounds of appeal but proceeded to confirm additions. While an appellate authority may pass an ex parte order, it must still consider the merits and the explanations on record. Given the absence of a detailed speaking decision addressing the contentions in the statement of facts and grounds, and in the interest of justice, the Tribunal directed remand to the CIT(A) to decide the appeal afresh after affording the assessee an opportunity and after the assessee complies with notices and furnishes necessary details. [Paras 5, 7]

Matter remitted to the file of the CIT(A) for fresh adjudication on merits after granting opportunity to the assessee.

Final Conclusion: The Tribunal condoned the delay of 632 days and admitted the appeal for A.Y. 2012-13; however, finding the CIT(A)'s order to be non speaking and not to have considered the statement of facts and grounds, the Tribunal remitted the matter to the CIT(A) for fresh decision on merits after affording opportunity to the assessee.

Cost of acquisition - cost of improvement - allowability under section 54F - habitable house repairs

Cost of acquisition - allowability under section 54F - Whether the amount claimed towards purchase of movables, furnitures and fixtures as part of the consideration for the house can be included in the cost of acquisition for computing exemption under section 54/54F. - HELD THAT: - The Tribunal held that the cost of acquisition for the purpose of exemption under section 54/54F is the price paid for purchase of the house. Expenditure that relates to movables, furnitures and fixtures which are separate from acquiring the immovable property are not to be allowed as part of the cost of acquisition. The authorities below correctly disallowed the claimed amount towards movables and interior fittings which were not required to make the house habitable and thus cannot be treated as cost of acquisition or cost of improvement under the exemption provision.

Claim of Rs.55,00,000 (assessee's share) towards movables, furnitures and fixtures is not allowable as cost of acquisition for exemption and is disallowed.

Cost of improvement - habitable house repairs - allowability under section 54F - Whether the expenditure of Rs.14,85,000 claimed as additional works/repairs can be allowed as cost of improvement for computing exemption, and if so, which components are allowable. - HELD THAT: - The Tribunal accepted that expenditure incurred to make the residential house habitable - specifically electrical work, remedying water leakage and plumbing work - qualifies as cost of improvement and should be allowed for the purpose of computing the exemption under section 54/54F. The Tribunal found that other components of the claimed expenditure were not necessary for making the house habitable and hence not allowable. The Assessing Officer was directed to allow the expenditure relating to electrical, water leakage and plumbing work if found to be in order on verification.

The claim of Rs.14,85,000 is partly allowed: expenditure towards electrical, water leakage and plumbing work to be allowed as cost of improvement subject to verification; remaining components disallowed.

Final Conclusion: Appeal partly allowed: disallowance of amount paid for movables, furnitures and fixtures sustained; the claim for additional works is partly allowed to the extent of necessary repairs (electrical, water leakage and plumbing) to make the house habitable, subject to verification by the Assessing Officer. The remainder of the claimed expenditures are disallowed.

Ad hoc disallowance - Estimation of disallowance without evidence - Qualitative eligibility of expenditure - Verifiability of expenditure supported by self-made vouchers - Deletion of additions made on estimate basis - Precedent value of jurisdictional decisions in similar factual matrix

Ad hoc disallowance - Estimation of disallowance without evidence - Verifiability of expenditure supported by self-made vouchers - Deletion of ad hoc disallowance of claim charges made by the Assessing Officer and confirmed by the Commissioner (Appeals). - HELD THAT: - The Tribunal examined the AO's 1% ad hoc disallowance from claim charges which had been made on the basis that the claim was supported largely by self-made vouchers and that, given the volume of transactions, there was scope for inflation. The assessee pointed to consistent treatment in other assessment years and to an appellate deletion of a similar ad hoc addition in its own case for assessment year 2014-15. Applying the principle that additions cannot be sustained on mere estimation without supporting material, and having regard to the jurisdictional authority that expenditure which is qualitatively eligible should not be reduced quantitatively absent specific verifiable defects, the Tribunal held that the ad hoc disallowance was not sustainable. The Tribunal therefore deleted the disallowance following the ratio of the cited jurisdictional decisions and the facts of the case. [Paras 6]

Ad hoc disallowance of claim charges deleted; ground no. 1 allowed.

Ad hoc disallowance - Qualitative eligibility of expenditure - Verifiability of expenditure supported by self-made vouchers - Deletion of ad hoc disallowance of 10% made out of repairs and maintenance expenses by the AO and confirmed by the CIT(A). - HELD THAT: - The AO disallowed 10% of repairs and maintenance on an ad hoc basis on the ground that the expenses comprised petty amounts supported largely by self-made vouchers and that certain disallowance had been conceded by the assessee's representative. The Tribunal noted that the assessee maintained offices at multiple locations, furnished details of repairs and maintenance, and that the AO had not pointed to any specific unverifiable item. Relying on the jurisdictional principle that eligible expenditure should not be reduced quantitatively in absence of concrete evidence of non-genuineness or unverifiability, the Tribunal held that the ad hoc 10% disallowance was unsustainable and deleted it. [Paras 9]

Ad hoc disallowance of repairs and maintenance deleted; ground no. 2 allowed.

Final Conclusion: The Tribunal allowed the appeal in full, deleting the ad hoc disallowances made by the Assessing Officer and confirmed by the Commissioner (Appeals) in respect of claim charges and repairs and maintenance, holding that additions made on estimate basis without specific supporting evidence are not sustainable.

Penalty under section 271D - reasonable cause and waiver under section 273B - characterisation of transactions as current account versus loan - introduction of unexplained cash / black money into business - condonation of delay in filing appeal

Condonation of delay in filing appeal - Whether the delay of 435 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The Tribunal examined the affidavit explaining that the CIT(A)'s order was received by an employee who left employment without bringing the order to the notice of responsible officials, which prevented timely filing. The Tribunal found this to be a reasonable cause preventing timely filing and, in the interest of justice, exercised its discretion to condone the delay and admit the appeal for adjudication on merits. [Paras 3, 4]

Delay of 435 days condoned and appeal admitted for adjudication on merits.

Penalty under section 271D - reasonable cause and waiver under section 273B - characterisation of transactions as current account versus loan - introduction of unexplained cash / black money into business - Whether penalty under section 271D is sustainable for cash receipts from the Managing Director, and whether relief under section 273B is available; and whether the matter requires remand for verification of source of funds. - HELD THAT: - The Tribunal noted that the assessee contended the cash received from the Managing Director represented current account advances for day-to-day and emergency expenses at remote worksites, relying on precedents distinguishing current account transactions from deposits/loans. The Revenue authorities treated the receipts as unaccounted income introduced into the business and imposed penalty under section 271D, while the CIT(A) sustained the penalty on the ground that the source of funds was unexplained. The Tribunal observed that if the source of the funds from the Managing Director is satisfactorily explained, the assessee would be entitled to relief under section 273B. Because the CIT(A) record indicated lack of satisfactory explanation regarding the source of the Managing Director's funds, the Tribunal did not decide the penalty on merits but remitted the matter to the assessing officer for examination of whether unexplained funds were introduced; if the AO finds the source explained, the penalty is to be deleted, otherwise appropriate orders to follow in accordance with law. [Paras 5, 6, 9]

Matter remitted to the Assessing Officer to verify the source of funds given by the Managing Director; if source is satisfactorily explained, delete the penalty under section 271D pursuant to section 273B; if not, the AO to pass appropriate order in accordance with law.

Final Conclusion: Delay in filing the appeal is condoned and the appeal is admitted; the Tribunal remits the penalty matter to the Assessing Officer for verification of the source of cash receipts from the Managing Director and directs deletion of the penalty if the source is satisfactorily explained, otherwise appropriate orders are to be passed by the AO.

Undisclosed income - dumb document and evidentiary value of electronic mail printouts - presumption under section 132(4A) of the Income tax Act, 1961 - onus and standard of proof in tax assessments - cash credits - identity, creditworthiness and genuineness of creditors - examination of source of sources not permissible - deduction under section 24 - taxation as income from house property - disallowance under section 14A where no exempt income is earned

Undisclosed income - dumb document and evidentiary value of electronic mail printouts - presumption under section 132(4A) of the Income tax Act, 1961 - onus and standard of proof in tax assessments - Deletion of addition of Rs. 28,00,00,000/- treated as undisclosed income allegedly received (USD 7,000,000) pursuant to e mail printouts. - HELD THAT: - The Tribunal (following the CIT(A)) analysed the e mail relied upon by the AO and found that the printout did not establish that any specific amount was received by the assessee. The e mail itself recorded a denial by the assessee of receipt of payment and did not specify the ''full amount''. The material seized from a third party (Sikkim Vigilance Police) and forwarded to Revenue was held unreliable when considered with the Sikkim Vigilance report suggesting possible fraud by the third party. In these circumstances there was no cogent money trail, no corroboration and no evidence that the amounts, if sent, were received by the assessee or his concerns. The Tribunal concluded that the AO had acted on suspicion, conjecture and an unestablished presumption; the onus lay on Revenue to establish receipt or accrual and it had failed to do so. Accordingly the addition was deleted.

Addition of Rs. 28,00,00,000/- as undisclosed income deleted.

Cash credits - identity, creditworthiness and genuineness of creditors - examination of source of sources not permissible - onus and standard of proof in tax assessments - Deletion of additions treating unsecured loans (aggregate additions contested) as unexplained/ bogus and charged under the provisions applicable to cash credits. - HELD THAT: - The Tribunal upheld the CIT(A)'s detailed appreciation of evidences creditor wise: confirmations, PAN/ITR acknowledgements, bank statements, balance sheets and repayment entries. The authorities below had treated the loans as suspect by probing the creditors' own sources (the 'source of sources') and by drawing adverse inferences from creditors having borrowings or share application money. The Tribunal reiterated that once the assessee proves the identity of creditors and the genuineness of the transactions and receipt through banking channels, Revenue cannot displace the explanation by simply investigating source of the creditors; suspicion alone is insufficient for addition. On evaluation of the documents and repayments, the CIT(A)'s deletions were sustained for each creditor.

Additions made by the AO treating unsecured loans as unexplained/ bogus deleted in respect of the contested creditors.

Deduction under section 24 - taxation as income from house property - Allowability of deduction under section 24 (interest/standard deduction) in respect of rental receipts recharacterised as income from house property. - HELD THAT: - The Tribunal accepted that amounts disclosed as miscellaneous receipts included rental receipts from M/s HHG Global Pte. Ltd. and that such receipts fall to be taxed as income from house property. Having recharacterised the receipts accordingly, the deduction allowable under section 24 was properly claimed by the assessee and entertained by the appellate authorities. The Tribunal relied on the principle that appellate authorities can entertain additional claims and that once the receipts are rent, the corresponding deduction must follow.

Deduction under section 24 of Rs. 37,59,156/- allowed (upheld deletion of AO's disallowance).

Disallowance under section 14A where no exempt income is earned - Disallowance under section 14A r.w. Rule 8D disallowed where no exempt income is earned/receivable. - HELD THAT: - The Tribunal noted that the assessee had not earned any exempt income in the relevant previous year; section 14A and Rule 8D disallowance is inapplicable where there is no exempt income. On that basis the CIT(A)'s deletion of the 14A disallowance was upheld.

Disallowance under section 14A directed to be deleted; no disallowance called for.

Final Conclusion: The Tribunal dismissed the revenue appeals: the addition of Rs. 28,00,00,000/- as undisclosed income was deleted; additions treating unsecured loans as unexplained were deleted after creditor wise appreciation of evidence; the section 24 deduction was upheld and the section 14A disallowance deleted. Appeals of the Revenue are therefore dismissed.

Colourable device - income from other sources - business income versus income from other sources - section 40(a)(ia) disallowance - section 44AB audit applicability - test of human probabilities - burden of proof on assessee to establish genuineness

Section 40(a)(ia) disallowance - income from other sources - colourable device - burden of proof on assessee to establish genuineness - Whether interest receipts of Rs.79,00,000/- are to be treated as business income or as income from other sources and whether disallowance under section 40(a)(ia) is exigible in respect of Rs.67,60,138/- claimed as paid to HUF. - HELD THAT: - Tribunal upheld the finding of the first appellate authority that the assessee failed to establish that the interest receipts belonged to the HUF or that the alleged payment of Rs.67,60,138/- was actually made. The authorities relied on (i) TDS credits and refunds claimed by the assessee in his own PAN, (ii) absence of corresponding disclosures in the HUF's return and in the assessee's balance sheet/liabilities, (iii) conceded admissions that the payment was not made (notional entry), and (iv) unreliable handwritten records. Applying the test of human probabilities and the principle that the assessee bears the onus of proving genuineness, the appellate authority concluded the arrangement to be a colourable device and held the entire interest of Rs.79,00,000/- to be taxable as "income from other sources". Consequently, the addition of Rs.67,60,138/- could not be sustained as a disallowance under section 40(a)(ia); instead the amount forms part of total income under the head "other sources". The Tribunal accepted these conclusions as supported by the material on record and the reasoning in the appellate order. [Paras 9, 10, 16, 17, 18]

Entire interest of Rs.79,00,000/- is taxable as income from other sources; disallowance under section 40(a)(ia) qua Rs.67,60,138/- is not sustained and the amount is to be taxed under other sources.

Information under section 133(6) - test of human probabilities - Sustainability of addition of Rs.97,200/- made on account of unreconciled difference in interest receipts identified from information obtained u/s 133(6). - HELD THAT: - AO obtained confirmations under section 133(6) showing a reconciliation difference of Rs.2,05,112/-, accepted explanation for Rs.1,07,328/- and added Rs.97,200/-. On appeal the assessee failed to produce any satisfactory reconciliation or evidence before the first appellate authority or before the Tribunal to explain the remaining shortfall. The Tribunal found that the AO and CIT(A) had legitimately applied the facts and that the assessee did not discharge the burden of explanation; accordingly the addition was confirmed. [Paras 19, 20]

Addition of Rs.97,200/- confirmed.

Income from other sources - prohibition of double taxation of same receipt - Whether the addition of Rs.11,39,862/- as undisclosed interest can be sustained in addition to treating the total interest as income from other sources. - HELD THAT: - Having held that the aggregate interest of Rs.79,00,000/- represents the assessee's income from other sources and that the claimed payment to the HUF was not established, the Tribunal held that the separate addition of Rs.11,39,862/- would amount to double taxation of the same receipts. Therefore the separate addition could not be sustained; the amount is to be treated as part of the total interest aggregated under other sources. [Paras 21, 22, 23]

Addition of Rs.11,39,862/- as a separate undisclosed income is not sustainable; it forms part of the total interest taxed under other sources.

Final Conclusion: Appeal partly allowed. Tribunal upheld the CIT(A)'s finding that the interest receipts are taxable as income from other sources and directed taxation of the aggregated interest (including the reconciliation addition) under that head; the specific disallowance under section 40(a)(ia) was not sustained, the reconciliation addition of Rs.97,200/- was confirmed, and the separate addition of Rs.11,39,862/- was not maintained as it is part of the total interest so taxed.

Penalty u/s.271(1)(b) of the Income tax Act, 1961 - Reasonable cause for non compliance - Section 273B - waiver/deletion of penalty where reasonable cause exists - Reassessment proceedings initiated consequent to exercise of power u/s.263

Penalty u/s.271(1)(b) of the Income tax Act, 1961 - Reasonable cause for non compliance - Section 273B - waiver/deletion of penalty where reasonable cause exists - Deletion of penalty imposed under section 271(1)(b) on account of non appearance/non compliance with notice. - HELD THAT: - The Tribunal examined the factual matrix and held that although the assessee failed to comply with the notice issued u/s.142(1), there existed a reasonable cause for such non compliance. Assessments had been reopened after exercise of jurisdiction u/s.263 and consequent notices were issued; records and representation were being moved between Nashik, Nagpur and Pune because the proceedings under section 263 were represented from Nagpur and appeals were being prepared in Pune. The notice sought compliance within a period which, after accounting for three intervening holidays, left only four working days to respond and to assemble records scattered across different locations. Applying the statutory scheme, the Tribunal found these circumstances constituted a reasonable cause within the meaning of section 273B, thereby attracting its mandate to delete penalties that would otherwise be leviable under section 271(1)(b). The Tribunal therefore set aside the penalty confirmed by the CIT(A). [Paras 3, 4]

Penalty imposed u/s.271(1)(b) deleted for all three assessment years on the ground of reasonable cause under section 273B.

Final Conclusion: All three appeals are allowed and the penalties of Rs.10,000 imposed for each assessment year are deleted as the Tribunal found reasonable cause for non compliance, bringing the cases within section 273B.

Oppression and Mismanagement - Tribunal's power to grant reliefs in the interest of the company under sections 241 and 242 - Mediation as an alternative dispute resolution mechanism in pending company proceedings - Bar against subsequent proceedings / Order 23 Rule 1 principles - Observer's role in committee disputes and duties to resolve differences of opinion - Power of the Tribunal to fix ERP rates to protect the company's interests

Oppression and Mismanagement - Tribunal's power to grant reliefs in the interest of the company under sections 241 and 242 - Mediation as an alternative dispute resolution mechanism in pending company proceedings - Bar against subsequent proceedings / Order 23 Rule 1 principles - Whether the Appellate Tribunal should have granted interim protective relief restraining sales and urgently advanced the hearing of the company petition, or whether the Tribunal's course of directing mediation and requiring the National Company Law Tribunal to take up and decide the main petition (including maintainability) was appropriate. - HELD THAT: - The Appellate Tribunal declined to grant the interim reliefs sought by the appellants to restrain sales of company properties at this interlocutory stage. The Tribunal observed that allegations of oppression and mismanagement under Sections 241-242 involve mixed questions of fact and law which ordinarily cannot be finally resolved at the interim stage and that mediation had been consensually ordered earlier and was underway. While recognising the appellants' grievance about alleged undervalued sales, the Tribunal emphasised the sanctity of the consent/committee mechanism already established by the interim order and the role of mediation as an alternative dispute resolution, and noted pending challenges (including objections to an arbitral award) before other fora. Rather than interfere by ad hoc protective orders, the Appellate Tribunal directed the National Company Law Tribunal to list the main Company Petition (filed 14.03.2019) for full hearing at an early date, to require respondents to file their counters, and to adjudicate all issues on merits including maintainability after giving parties adequate opportunity and observing principles of natural justice. The Tribunal granted liberty to the parties to raise all factual and legal contentions before the Tribunal. The decision treats the appellants' application for interim restraint as unsuitable where a comprehensive adjudication or consensual resolution (mediation) is appropriate.

The Appellate Tribunal refused interlocutory protective relief and directed the National Company Law Tribunal to list the main Company Petition for hearing, require filing of counters and decide maintainability and merits on the record after affording opportunity to the parties.

Observer's role in committee disputes and duties to resolve differences of opinion - Power of the Tribunal to fix ERP rates to protect the company's interests - Whether the Appellate Tribunal should intervene in respect of complaints against the observer and whether it should prescribe direction for fixing ERP rates to protect the company's interests. - HELD THAT: - The Tribunal declined to express any opinion on allegations against the observer because he was not made a party in his individual capacity. However, recognising the practical consequence if the observer fails to amicably resolve differences of opinion under the interim consent mechanism, the Appellate Tribunal made a clear supervisory direction: if the observer does not resolve disputes regarding fixation of ERP (minimum/base) rates as mandated by the interim order, the National Company Law Tribunal shall, without hesitation, fix ERP rates in accordance with prevailing market value for future sales so as to safeguard the paramount interests of the company. This direction preserves the consent-mechanism while ensuring the Tribunal retains residual power to protect the company where the observer-mechanism breaks down.

No finding against the observer (not a party personally); directed that if the observer fails to resolve ERP disputes, the NCLT shall fix ERP rates as per market value to protect the 1st respondent company's interests.

Final Conclusion: The Appellate Tribunal disposed of the appeal by refusing interim interdictions and directing the National Company Law Tribunal to list Company Petition No.393 of 2019 for full hearing at the earliest, to require respondents to file counters and to decide maintainability and merits after affording parties adequate opportunity; it further directed that, if the appointed observer fails to resolve ERP rate disputes, the NCLT shall itself fix ERP rates in accordance with prevailing market value to protect the company's interests.

Sanction of scheme of arrangement - Appointed Date - accounting treatment under Ind AS 103 for common control combinations (pooling of interests method) - compliance with procedural requirements under sections 230-232 of the Companies Act, 2013

Sanction of scheme of arrangement - compliance with procedural requirements under sections 230-232 of the Companies Act, 2013 - The Tribunal sanctioned the Scheme of Arrangement for demerger between the Demerged Company and the Resulting Company, subject to the modification of the Appointed Date. - HELD THAT: - The Tribunal examined statutory compliances, convening and results of meetings of stakeholders, board approvals, the absence of pending investigations, and the report of the Regional Director. Finding the Scheme to be fair, reasonable, not contrary to public policy and not violative of law, and that all statutory requirements under sections 230-232 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 have been complied with, the petition was allowed and the Scheme sanctioned. The order expressly clarifies that sanctioning does not operate as exemption from stamp duty, taxes or other statutory permissions or compliances. [Paras 21, 22]

The Scheme of Arrangement is sanctioned and the company petitions stand disposed of, subject to the modification fixing the Appointed Date.

Appointed Date - effect of event based Appointed Date and MCA circular F. No. 7/12/2019/CL I dated 21.08.2019 - The Tribunal fixed the Appointed Date for the demerger as 27.04.2021 despite the Scheme defining the Appointed Date as the "Effective Date" tied to occurrence of specified events. - HELD THAT: - The Tribunal considered the Regional Director's objection that the Scheme tied the Appointed Date to the Effective Date, and examined judicial precedents and the MCA circular clarifying that an Appointed Date may be event based. While acknowledging that fixation of the Appointed Date is a commercial prerogative of shareholders, the Tribunal exercised its powers under sections 230-232 to set the Appointed Date for this sanctioned Scheme and fixed it as the date on which the Tribunal would approve the Scheme, namely 27.04.2021. [Paras 16, 17]

Appointed Date for the demerger is fixed as 27.04.2021.

Accounting treatment under Ind AS 103 for common control combinations (pooling of interests method) - The Tribunal directed that the Resulting Company shall record assets and liabilities of the Demerged Undertaking in conformity with Ind AS 103 (pooling of interests method) for common control combinations. - HELD THAT: - Having considered the Scheme's clause on accounting treatment and the Regional Director's observations, the Tribunal noted that accounting treatment envisaged in the Scheme aligns with Ind AS 103 Appendix C for business combinations under common control. The Tribunal therefore directed the Resulting Company to comply with the prescriptions of Ind AS 103, including reflecting assets and liabilities at carrying amounts and harmonising accounting policies, with restatement of prior periods as required by the standard. [Paras 10, 18]

Resulting Company must comply with Ind AS 103 (pooling of interests method) for accounting the demerged undertaking.

Final Conclusion: The Tribunal, after considering the RD's report and submissions, sanctioned the demerger Scheme between Severn Glocon India Private Limited and Severn Glocon Valves Private Limited; fixed the Appointed Date as 27.04.2021; and directed adherence to Ind AS 103 accounting treatment for the transfer, subject to statutory compliances and applicable duties or permissions.

Attachment of property under the West Bengal Protection of Interest of Depositors in Financial Establishment Act, 2013 - Effect of declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Overriding operation and interplay between WBPIDFE Act and the IBC (including Section 33(5) and Section 32A / protection of property) - Binding effect of findings and confiscation by a Designated Court under WBPIDFE Act - Doctrine of concurrent remedies and availability of statutory remedies under a self-contained Act

Attachment of property under the West Bengal Protection of Interest of Depositors in Financial Establishment Act, 2013 - Scope of Section 5 and Section 14 of the WBPIDFE Act - Properties of the corporate debtor can be attached under the WBPIDFE Act where the Designated Court finds connection with fraudulent deposits and the requirements of the Act are met. - HELD THAT: - The Tribunal examined the sequence of events and statutory scheme of the WBPIDFE Act. Section 5 empowers the State Government to attach money or other property believed to have been acquired out of deposits of a financial establishment; Section 14 prescribes the Designated Court procedure for making an ad interim attachment absolute and permits objections under Section 14(3). The Designated Court in the criminal proceedings recorded findings connecting the corporate debtor (through its director and group-company transactions) with the alleged fraud and confiscated attached properties. The corporate debtor had not availed itself of the remedy under Section 14(3) to object to the attachments before the Designated Court. In those circumstances the Tribunal held that the properties of the corporate debtor could validly be attached under the WBPIDFE Act and that the Designated Court's findings and confiscation were operative for the purposes of the dispute before the Adjudicating Authority. [Paras 29, 30, 31, 32, 33]

Held that the properties of M/s Pincon Spirits Ltd. could be attached under the WBPIDFE Act and the Designated Court's findings support such attachment.

Effect of orders of the High Court of Calcutta - Scope of interlocutory directions and misquotation of judicial orders - The order of the High Court of Calcutta dated 23.04.2019 did not direct de-attachment of the corporate debtor's assets or state that such assets must be kept outside the purview of sale. - HELD THAT: - The Tribunal scrutinised the High Court's direction which required the DEO to submit an affidavit disclosing particulars of assets attached "except those of M/s Pincon Spirits Ltd. and M/s Greenage Food Products Ltd." A plain reading shows no direction to de-attach or to keep assets outside sale; earlier orders referred to by parties (including an order of 13.12.2018) involved other directions in the presence of the corporate debtor. The Adjudicating Authority had therefore misquoted or overstated the High Court's order in the impugned order. [Paras 34, 35, 36, 37, 38]

Held that the High Court's order of 23.04.2019 was not a direction to de-attach or to exclude the corporate debtor's assets from sale.

Effect of moratorium under Section 14 of the IBC on prior attachments - Operation and limits of Section 33(5) of the IBC and Section 32A framework - Interplay between criminal/penal statutes and insolvency code - Section 14 of the IBC does not have overriding effect over prior attachments made under the WBPIDFE Act where attachments and seizure occurred before the commencement of CIRP; and protections under Section 32A (and the bar against action under Section 33(5) as argued) are inapplicable where no resolution plan was approved and the statutory preconditions for protection of property were not satisfied. Further, where the Designated Court has confiscated the property, DEO cannot de-attach and hand over possession to the liquidator. - HELD THAT: - The Tribunal contrasted the moratorium under Section 14 with the WBPIDFE Act regime and noted the timing: attachments, seizure and sealing of the registered office occurred before initiation of CIRP and declaration of moratorium. Section 14 prohibits certain actions from the insolvency commencement date but cannot retrospectively nullify valid prior attachments already produced before the Designated Court. As to Section 32A/Section 33(5) protections, the Tribunal relied on the Supreme Court's exposition that immunity for the corporate debtor's property arises only upon satisfaction of statutory conditions (approval of a resolution plan resulting in change of management not favouring promoters/related parties, and other safeguards). In the present case no resolution plan was approved; CIRP resulted in liquidation recommendation and there was no change of control by an approved plan. Hence the statutory bar against action on the corporate debtor's property did not apply. The Tribunal also observed that the property stood confiscated by the Designated Court and thus was not in the possession or control of the DEO for the purpose of de-attachment. [Paras 51, 52, 53, 54, 55]

Held that Section 14 of the IBC does not override prior valid attachments under the WBPIDFE Act; protections under Section 32A/Section 33(5) were not attracted due to absence of an approved resolution plan and related conditions, and consequently the impugned order directing de-attachment was unsustainable; appeal allowed.

Final Conclusion: The impugned order directing the Directorate of Economic Offences to de-attach properties and restore possession to the liquidator is set aside. The Tribunal held that the corporate debtor's properties could validly be attached under the WBPIDFE Act; the High Court's order of 23.04.2019 did not direct de-attachment; and the moratorium and statutory protections under the IBC were not available because attachments pre-dated CIRP and no resolution plan meeting the conditions of Section 32A was approved. The liquidator remains at liberty to pursue available legal remedies.

Corporate insolvency resolution process under Section 7 - date of default and computation of limitation - computation of limitation under Limitation Act as applied 'as far as may be' to proceedings under the IBC - formality of date of default in Part-IV and rectification of procedural omission - exclusion of period during SARFAESI proceedings for limitation calculation - appointment of Interim Resolution Professional and moratorium under Section 14

Formality of date of default in Part-IV - rectification of procedural omission - Admission of the Section 7 application despite omission of the date of default in the Part IV column of the application form. - HELD THAT: - The Adjudicating Authority noted that the application did not specify the date of default in the designated column of Part IV and observed the omission amounted to a breach of the prescribed format. The Authority found the date of default was, however, pleaded elsewhere in the application and supported by documentary material. Although the omission raised concerns and could have warranted correction, the Bench, after hearing parties and affording opportunity for submissions, exercised its discretion to admit the application and permitted rectification, recording that the date of default appears in the pleadings and documents accompanying the application. [Paras 8]

Application under Section 7 admitted despite the omission; omission treated as curable and application allowed to proceed.

Date of default and computation of limitation - computation of limitation under Limitation Act as applied 'as far as may be' to proceedings under the IBC - exclusion of period during SARFAESI proceedings for limitation calculation - Whether the Section 7 petition was barred by limitation in view of competing contentions as to the date of default. - HELD THAT: - The Corporate Debtor contended earlier dates of default (including a date when another consortium bank declared NPA) which, if taken as the accrual date, would render the petition time barred. The Bench considered the Supreme Court's guidance in Sesh Nath Singh regarding the application of the Limitation Act to IBC proceedings and the possibility of excluding periods during which proceedings under SARFAESI or related litigation were pending. Applying that ratio, the Adjudicating Authority held that the limitation question did not mandate rejection at this stage and that the application could be admitted. The decision reflects that limitation in IBC matters is to be computed in harmony with the object of the Code and that periods spent in proceedings under SARFAESI or where remedies were pursued may be excluded as appropriate, such that the petition remained within time on the materials before the Bench. [Paras 10, 11]

Limitation objection rejected on the material before the Tribunal; petition held admissible in view of the relevant principles governing computation of limitation for IBC proceedings.

Appointment of Interim Resolution Professional - moratorium under Section 14 - Reliefs to be granted on admission of the Section 7 application. - HELD THAT: - On admitting the Section 7 application, the Bench appointed the proposed Interim Resolution Professional named by the Financial Creditor and directed him to take charge and make the public announcement and call for claims as per the Code. The Tribunal declared the moratorium operative from the date of the order till completion of the CIRP (or until approval of a resolution plan or order of liquidation), and specified the standard prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security interests (including under SARFAESI), and recovery of property occupied by the corporate debtor. Directions were given for communication of the order to the IRP, Financial Creditor and Corporate Debtor, and for fee compliance with IBBI regulations. [Paras 11]

IRP appointed and moratorium declared; the corporate insolvency resolution process directed to proceed in accordance with the IBC.

Final Conclusion: The Section 7 petition filed by the financial creditor was admitted despite a procedural omission in the application (absence of the date of default in Part IV), the limitation objection was rejected in light of the principles governing computation of limitation for IBC proceedings, and the Interim Resolution Professional was appointed with a moratorium imposed and directions to proceed with the CIRP.

Initiation under Section 7 of the Insolvency and Bankruptcy Code - financial creditor - existence of debt and default - admission of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - public announcement under Section 15 of the I&B Code - moratorium under Section 14 of the I&B Code - continuity of supply of essential goods or services during moratorium

Financial creditor - existence of debt and default - initiation under Section 7 of the Insolvency and Bankruptcy Code - admission of Corporate Insolvency Resolution Process - Whether the financial creditor proved existence of debt and default and the Section 7 application should be admitted. - HELD THAT: - The Financial Creditor produced the loan agreement, ledger statements and bank records evidencing the transaction and non-payment. The Corporate Debtor did not dispute the existence of the business transaction or the outstanding dues, instead requesting time to repay. On the material placed before the Adjudicating Authority the Financial Creditor proved the existence of a financial debt and default. In view of these findings the Bench was inclined to admit the Section 7 application and proceed with initiation of the Corporate Insolvency Resolution Process. [Paras 4, 5, 6]

The Section 7 application was admitted and CIRP was initiated against the corporate debtor.

Appointment of Interim Resolution Professional - public announcement under Section 15 of the I&B Code - Appointment of the Interim Resolution Professional and directions regarding public announcement and claim submissions. - HELD THAT: - The Financial Creditor filed a consent letter proposing an Interim Resolution Professional. The Bench appointed the proposed IRP, directed him to take charge immediately, and to make the public announcement and call for submission of claims as prescribed under the Code. The IRP was also directed to comply with statutory duties and to be paid fees in accordance with IBBI regulations and relevant circulars. [Paras 5]

Mr. Pankaj Rai was appointed as Interim Resolution Professional and directed to cause the statutory public announcement and call for claims.

Moratorium under Section 14 of the I&B Code - continuity of supply of essential goods or services during moratorium - Imposition and scope of the moratorium upon admission of the Section 7 application. - HELD THAT: - Upon admission of the Section 7 petition the Bench declared the statutory moratorium which restrains institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of its assets, enforcement of security interests and recovery of leased property, until completion of the CIRP or approval of a resolution plan or order of liquidation. The Bench clarified that supply of essential goods or services, if continuing, shall not be terminated, suspended or interrupted during the moratorium and that specified exceptions under the Code and any notifications by the Central Government will apply. [Paras 5]

A moratorium as contemplated by the Code was declared with protections for continuing supply of essential goods or services.

Final Conclusion: The Tribunal admitted the Section 7 application, initiated the Corporate Insolvency Resolution Process against the corporate debtor, appointed the nominated Interim Resolution Professional to take charge and make the statutory public announcement, and declared the moratorium with the attendant protections and directions for compliance.

Admission of Section 7 application - existence of debt and default - curable procedural irregularity in affidavit under NCLT Rules - proviso to Section 7(5) of the Insolvency and Bankruptcy Code - opportunity to rectify defects - declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional

Existence of debt and default - Financial Creditor proved existence of debt and default against the Corporate Debtor. - HELD THAT: - The Tribunal noted that the Corporate Debtor had admitted sanction of credit facilities and the outstanding under the loan accounts in its counter; further admission of default was made in the Additional Counter. On perusal of the documents, the Tribunal concluded that both 'debt' and 'default' were established on the material placed before it, supporting the Section 7 application. [Paras 12]

Debt and default established; the Section 7 application is maintainable on the ground of default.

Curable procedural irregularity in affidavit under NCLT Rules - proviso to Section 7(5) of the Insolvency and Bankruptcy Code - opportunity to rectify defects - Non-compliance with Rule 127 (affidavit notarisation) and related NCLT Rules is a procedural irregularity which is curable and does not warrant rejection of the Section 7 application. - HELD THAT: - The Tribunal observed that the affidavit deficiencies (not being notarised or sworn before an authorised person) are procedural and curable. The proviso to Section 7(5) IBC requires that the Adjudicating Authority give notice to the applicant to rectify defects before rejecting an application under section 7(5)(b). Rules under the NCLT cannot override the Code; therefore noncompliance with Rule 127 would not justify dismissal of the insolvency petition where debt and default are otherwise proved. [Paras 9, 13]

Procedural defects in affidavits are curable; they do not defeat admission of the Section 7 application.

Admission of Section 7 application - appointment of Interim Resolution Professional - declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code - The Section 7 application was admitted; an Interim Resolution Professional was appointed and moratorium declared; the interlocutory applications seeking to eschew documents and dismissal of the main application were dismissed. - HELD THAT: - Having found debt and default and having treated the affidavit irregularities as curable, the Tribunal admitted the insolvency petition and appointed an Interim Resolution Professional to carry out functions under the Code. A moratorium was declared effective from the order until completion of the CIRP or other terminal orders under the Code. The two interlocutory applications filed by the Corporate Debtor under Rule 11 seeking exclusion of certain documents and dismissal of the main application were dismissed as without merit in light of the findings. [Paras 14, 15, 16]

IBA/43/2020 admitted; Mr. Nagalingam Muthiah appointed as Interim Resolution Professional; moratorium imposed; IA/167(CHE)/2021 and IA/168(CHE)/2021 dismissed.

Final Conclusion: The Tribunal admitted the Section 7 petition upon finding debt and default, treated procedural affidavit defects as curable under the proviso to Section 7(5) IBC, appointed an Interim Resolution Professional, declared the moratorium, and dismissed the interlocutory applications seeking exclusion of documents and dismissal of the petition.

Power to review or recall orders under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - maintainability of application to quash CIRP and set aside Committee of Creditors' decisions after approval of resolution plan - finality of admission order where no appeal was preferred - inherent powers under Rule 11 of the NCLT Rules, 2016

Power to review or recall orders under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - inherent powers under Rule 11 of the NCLT Rules, 2016 - Application under Section 60(5) seeking recall/quashing of the admission order commencing CIRP was not maintainable as the Adjudicating Authority lacks jurisdiction to review or recall its admission order. - HELD THAT: - The applicant sought to quash the admission order initiating CIRP and set aside actions of the Committee of Creditors after the resolution plan had been approved. The Tribunal noted that the corporate debtor did not challenge the admission order by preferring the available appellate remedy, so the admission order attained finality. The Adjudicating Authority is not vested with power to review or recall its own order under Section 60(5) of the Code or Rule 11 of the NCLT Rules. Reliance was placed on NCLAT precedents which hold that review is a statutory creation and cannot be read into inherent powers; review jurisdiction cannot be used as appellate jurisdiction. Under these principles and the facts that the resolution plan was approved and finalised, the application to recall/quash the admission order was beyond the Authority's jurisdiction and therefore not maintainable. [Paras 5, 8, 9, 10]

Application to recall/quash the admission order and related reliefs rejected as beyond jurisdiction and not maintainable.

Maintainability of application to quash CIRP and set aside Committee of Creditors' decisions after approval of resolution plan - finality of admission order where no appeal was preferred - Reliefs seeking invalidation of the Committee of Creditors' constitution, set-aside of its decisions and restoration of pre-CIRP status were not permissible after approval and finality of the resolution plan. - HELD THAT: - The application sought broad reliefs including declaring the CoC constitution invalid and restoring status quo as if no CIRP had commenced. The Tribunal observed that the CoC had accepted a resolution plan which was later approved by the Adjudicating Authority and has reached finality. Where the admission order and subsequent resolution process have attained finality and no appellate challenge was instituted in the available forum, collateral attempts to undo the CIRP through Section 60(5) are impermissible. Consequently, the prayers to invalidate CoC decisions and restore pre-CIRP status could not be granted. [Paras 3, 5, 10]

Prayers to declare CoC constitution and decisions illegal and to restore pre-CIRP status rejected as not maintainable.

Adjudicatory remedy versus collateral challenge - Application for repayment of advance paid to the corporate debtor in the form of quashing CIRP was not sustained in the present forum because the primary challenge to admission was not pursued by the corporate debtor and the applicant's earlier intra CIRP claim had been dismissed. - HELD THAT: - The applicant had earlier filed an application during CIRP for recognition of his claim which was dismissed by the Adjudicating Authority, and parallel applications of similar nature were dismissed for lack of supporting documents; one such dismissal was upheld by the High Court. Given these antecedents and the absence of an appeal by the corporate debtor against admission, the present collateral route seeking return of the advance by quashing the CIRP was untenable. The Tribunal therefore declined the monetary and consequential reliefs sought in the application. [Paras 6, 7, 10]

Prayer for return of amount paid and other consequential reliefs refused as not maintainable in the present proceedings.

Final Conclusion: The application under Section 60(5) of the IBC seeking recall/quashment of the admission order, invalidation of the CoC's constitution and decisions, restoration of pre CIRP status and refund of monies was held to be beyond the Adjudicating Authority's jurisdiction and not maintainable; the application is rejected and no costs ordered.

Specific performance of an agreement for sale - dismissal of plaint under Order VII Rule 11(d) CPC where suit appears barred by law - requirement of prior permission under Section 31(1) of FERA for transfer/disposal of immovable property - timing of RBI permission - requirement before execution and registration of conveyance, not at agreement stage - effect of repeal and the "sunset clause" under Section 49(3) of FEMA limiting judicial cognizance of FERA contraventions - Section 54 of the Transfer of Property Act - transfer of immovable property by registered instrument - implied term under Section 47(2) of FERA making contracts conditional on subsequent permission - meaning of "to take cognizance" (judicial notice) for offences under repealed statute

Dismissal of plaint under Order VII Rule 11(d) CPC where suit appears barred by law - specific performance of an agreement for sale - requirement of prior permission under Section 31(1) of FERA for transfer/disposal of immovable property - Whether the plaint must be rejected and the suit dismissed under Order VII Rule 11(d) CPC on the ground that the agreement for sale dated 2nd January, 1989 is barred by Section 31(1) of FERA. - HELD THAT: - The court confined its examination to the plaint and documents therewith. The plaint and an annexed letter of 14th December, 1989 disclosed that the vendor was a foreign national and that, as at that date, no communication of RBI permission to alienate had been made. However, the court accepted the settled legal position that permission under Section 31(1) of FERA is required before the alienation is effected by execution and registration of a conveyance, not at the mere stage of entering into an agreement for sale. In view of Section 54 of the Transfer of Property Act, a vendee acquires no proprietary interest until a registered sale deed is executed; accordingly the absence of prior registered transfer on the date of institution of the suit did not establish, on the face of the plaint, that a transfer in contravention of Section 31(1) had occurred. Further, the plaint sought specific performance (i.e., decree directing execution and registration), and the factual averments showed that registration had not taken place. Thus the alleged contravention was not clear and unambiguous from the plaint so as to attract rejection under Order VII Rule 11(d). The application for dismissal was therefore not maintainable on that ground. [Paras 9, 13, 15]

The plaint is not barred on the face of it by Section 31(1) of FERA and the application for rejection of the plaint under Order VII Rule 11(d) is dismissed.

Effect of repeal and the "sunset clause" under Section 49(3) of FEMA limiting judicial cognizance of FERA contraventions - meaning of "to take cognizance" (judicial notice) for offences under repealed statute - Whether this Court can now (in September 2020) take judicial notice of an alleged contravention of Section 31(1) of FERA committed in 1989, or whether Section 49(3) of FEMA bars such cognizance after the statutory two year period. - HELD THAT: - Section 49(3) of FEMA operates as a temporal limitation (a "sunset clause") precluding courts from taking cognizance of offences under specified provisions of the repealed FERA after two years from FEMA's commencement. The court adopted the construction of "to take cognizance" as judicial notice sufficient to initiate proceedings and accepted that the statutory window for taking cognizance under FERA closed on 30 May 2002. Consequently, an application founded on taking judicial notice of a FERA contravention in 2020 is beyond the statutory competence conferred by Section 49(3) of FEMA, and the General Clauses Act could not be invoked to negate that express limitation. [Paras 12]

Section 49(3) of FEMA bars the Court from taking cognizance of alleged FERA contraventions after the two year period; the Court cannot, therefore, entertain a belated challenge founded on judicial notice of such contravention.

Timing of RBI permission - requirement before execution and registration of conveyance, not at agreement stage - Section 54 of the Transfer of Property Act - transfer of immovable property by registered instrument - implied term under Section 47(2) of FERA making contracts conditional on subsequent permission - Whether Section 31(1) of FERA requires that RBI permission be obtained at the stage of entering into an agreement for sale or only prior to the execution and registration of a sale deed, and the legal consequence of an agreement framed subject to permission. - HELD THAT: - Having regard to the statutory scheme and the Forms prescribed by RBI, the court held that the material point for grant of RBI approval is before the vendor takes steps to alienate the property by executing a registered conveyance. This construction aligns with Section 54 TP Act, which recognizes that ownership passes by registered instrument, and with the understanding that Section 47(2) of FERA imports an implied term that prohibited acts shall not be done unless permission is obtained. Thus, an agreement for sale may be conditional on obtaining permission and is not rendered void per se merely because permission was not obtained at the agreement stage; the requirement is for permission prior to transfer by registered deed. [Paras 9, 10, 15]

Permission under Section 31(1) of FERA is required before execution and registration of the conveyance; absence of prior permission at the agreement stage does not, by itself, render the agreement void.

Final Conclusion: The application by defendant no.3 under Order VII Rule 11 CPC to reject the plaint and dismiss the suit on the ground that the agreement was barred by Section 31(1) of FERA is dismissed. The court held that RBI permission is required prior to execution and registration of the sale deed (not at the mere agreement stage) and that Section 49(3) of FEMA precludes taking judicial cognizance of FERA contraventions after the statutory two year period; the suit shall proceed to listing for hearing.

Seizure of stock-in-trade and release on proof - FEMA search and seizure - Article 226(2) - jurisdiction where cause partly arose - Right to legal representation during summons at an inaudible distance

Article 226(2) - jurisdiction where cause partly arose - Maintainability of writ petition - High Court's jurisdiction to entertain the writ petition despite the coordinating authority being situated outside the State. - HELD THAT: - The Court held that because part of the cause of action arose in West Bengal - the search and seizure occurred there and the petitioner is situated there - the writ petition is maintainable before this High Court. Clause (2) of Article 226 permits exercise of jurisdiction where the cause of action has partly arisen within the territorial jurisdiction even though the seat of the authority dealing with the issue is outside the jurisdiction. [Paras 8, 9]

Writ petition is maintainable in the Calcutta High Court.

Seizure of stock-in-trade and release on proof - FEMA search and seizure - Whether the seized excess gold jewellery is stock-in-trade and entitled to release. - HELD THAT: - The Court did not decide the merits but directed the Enforcement Directorate to examine the documents placed by the petitioner which purportedly show that the seized jewellery was duly accounted for and sent for job work. The authorities were directed to pass a reasoned order within eight weeks determining whether the goods are stock-in-trade; if found to be duly accounted for, they are to be released in accordance with law. The Court expressly refrained from adjudicating the substantive merits and required a fresh, reasoned consideration by the investigating authority. [Paras 10, 11, 13]

Matter remanded to the Enforcement Directorate to pass a reasoned order within eight weeks on whether the seized goods are stock-in-trade and to release them if duly accounted for.

Right to legal representation during summons at an inaudible distance - Permissibility of presence of the petitioner's lawyer during summons and inquiries. - HELD THAT: - Relying on the guidelines of the Supreme Court, the Court directed that the authorized representative of the petitioner-company be allowed to have a lawyer of his choice present during the summons at an inaudible distance. This direction is procedural and protective of the petitioner's right to legal assistance during the ongoing inquiry. [Paras 12]

Authorized representative shall be allowed a lawyer to be present during summons at an inaudible distance as per Supreme Court guidelines.

Final Conclusion: Writ petition entertained by the Calcutta High Court; maintainability upheld. The question whether the seized jewellery is stock-in-trade is remitted to the Enforcement Directorate for a reasoned decision within eight weeks, with release if duly accounted for. The petitioner is permitted legal representation during summons at an inaudible distance; the Court has not gone into merits and directed cooperation by the petitioner.

Requirement to inform and furnish grounds of arrest in writing under Section 19 PMLA - standard of "reason to believe" as objective satisfaction of arresting officer - distinction between oral information and written communication of grounds of arrest - role of grounds of arrest in enabling exercise of bail rights under Section 45 PMLA - scope of recording reasons for arrest in the arrest memo/grounds of arrest - application of D.K. Basu safeguards to arrests under special statutes

Requirement to inform and furnish grounds of arrest in writing under Section 19 PMLA - distinction between oral information and written communication of grounds of arrest - application of D.K. Basu safeguards to arrests under special statutes - Whether the arresting officer under Section 19 PMLA must only inform the arrestee of grounds orally or must furnish a physical written copy of the arrest order and grounds of arrest. - HELD THAT: - The Court held that the expression in Section 19 PMLA to "inform him of the grounds for such arrest" must be read in the statutory context, including Section 45 PMLA, and in light of safeguards under D.K. Basu. Mere oral information may cause loss of communication and prejudice the arrestee's ability to prepare and demonstrate he is not guilty for bail purposes. Accordingly, the arresting officer is required to inform and provide a physical copy of the arrest order and grounds of arrest to the person being arrested (in a language known to him); mere oral information is insufficient. The Court also recommended practical steps (acknowledgement, email to counsel/relations, and judicial enquiry and recording) to establish delivery. On the facts the Court found the petitioner had been provided the grounds (signatures and contemporaneous court entries) and there was compliance with Section 19. [Paras 9]

The arresting officer must provide and serve a physical written copy of the arrest order and grounds of arrest under Section 19 PMLA; on the facts the requirement was satisfied.

Standard of "reason to believe" as objective satisfaction of arresting officer - guilt standard versus reason-to-believe standard under special statutes - limitations on investigative officer's role-no adjudication of guilt - Whether the phrase "reason to believe that any person has been guilty of an offence" in Section 19 PMLA requires the investigating officer to undertake a preliminary adjudication of guilt before effecting arrest. - HELD THAT: - The Court held that Section 19 requires an objective "reason to believe" on the basis of material in possession and does not empower or require the investigating officer to adjudicate guilt as a judge. The phrase denotes the arresting officer's objective satisfaction, based on available material, that there are reasons to believe the person has committed an offence under the Act. While the provision uses the word "guilty," it operates as a reason-to-believe standard in the investigation context; it does not mandate a detailed adjudicatory order holding the person guilty prior to arrest. The Court further observed that the purpose invoked for arrest (e.g., safeguarding proceeds, preventing tampering) is relevant to remand and bail consideration but does not displace the requirement of objective satisfaction at arrest. On the facts, the material then available was sufficient for the arresting officer's objective satisfaction. [Paras 10]

The phrase means objective satisfaction of the arresting officer on available material; it does not require a preliminary adjudication of guilt by the investigating officer, and on the facts the requisite objective satisfaction existed.

Scope of recording reasons for arrest in the arrest memo/grounds of arrest - necessity for grounds of arrest to set out material linking person to offence - role of grounds of arrest in subsequent judicial scrutiny and bail proceedings - Whether the arresting officer must reduce the objective satisfaction of the accused's guilt into a detailed written adjudication in the grounds of arrest, and what level of detail is required in the grounds. - HELD THAT: - The Court held that the investigating officer need not produce a detailed adjudicatory order recording guilt; however, the grounds of arrest must be in writing and sufficiently detailed to state briefly why the person is being arrested and what material links the person to the alleged offence. Such grounds must be provided to the arrestee at or immediately after arrest. This enables meaningful judicial scrutiny and preserves the arrestee's ability to contest custody and seek bail under Section 45. Applying this standard, the Court found the grounds in the present case complied with the requirement. [Paras 11]

Objective satisfaction need not be a detailed adjudication, but must be recorded in writing in the grounds of arrest with sufficient particulars; on the facts the grounds complied with this requirement.

Final Conclusion: Writ petition dismissed. The Court held that (i) Section 19 PMLA requires the arresting officer to provide a physical written copy of the arrest order and grounds of arrest to the arrestee (mere oral information is insufficient), (ii) the phrase "reason to believe that any person has been guilty of an offence" denotes the arresting officer's objective satisfaction based on material in possession and does not require a prior adjudication of guilt, and (iii) the grounds must record in writing sufficient particulars linking the person to the alleged offence; applying these principles the Court found the arrest and grounds in this case compliant and dismissed the petition.

Setting aside sketchy order for inadequate reasons - remand for fresh consideration - application of precedent - opportunity of personal hearing - SVLDRS scheme - ground of ineligibility

Setting aside sketchy order for inadequate reasons - ground of ineligibility - Validity of the impugned order rejecting the petitioner's SVLDRS application on a cryptic ground of ineligibility. - HELD THAT: - The Court found that the impugned order was sketchy and assigned a vague reason-merely 'ground of ineligibility'-without adequate explanation. For that reason the order did not meet the requirement of being a reasoned decision and could not stand. The court therefore set aside the impugned order while expressly refraining from any decision on the merits of the underlying claim under the SVLDRS scheme.

Impugned order set aside for inadequate reasons; matter remitted for fresh consideration.

Remand for fresh consideration - application of precedent - SVLDRS scheme - Whether the respondent-department should reconsider the petitioner's SVLDRS application in light of the Gujarat High Court decision in Messrs Synpol Products Pvt. Ltd. - HELD THAT: - The Court directed that the department re-examine the petitioner's application afresh, taking into account the Gujarat High Court judgment relied upon by the petitioner. The respondents did not dispute the applicability of that precedent nor could they point to distinguishing features; accordingly the Court ordered reconsideration by the competent committee and mandated that a fresh decision be taken expeditiously, without expressing any view on the substantive merits.

Case remitted to the department to reconsider the application in light of the cited precedent; fresh decision to be taken expeditiously.

Opportunity of personal hearing - remand for fresh consideration - Whether the petitioner is entitled to a personal hearing during the departmental reconsideration. - HELD THAT: - The Court recorded the parties' positions that the petitioner should be granted a personal hearing if any enabling provision of law permits it. The respondents undertook to provide a personal hearing in the event the petitioner identifies an enabling provision. The Court confined its direction to permitting the department to afford a personal hearing where lawful, without directing that a hearing be granted as a matter of course.

Department may provide a personal hearing if the petitioner shows an enabling provision or law permitting such hearing.

Final Conclusion: Impugned rejection set aside for being sketchy and inadequately reasoned; matter remitted to the department for fresh consideration in light of the Gujarat High Court judgment relied upon by the petitioner, with liberty to seek a personal hearing if an enabling provision of law is shown; disposal without expressing any opinion on merits.

Cenvat credit - Input services - Direct or indirect relation to manufacturing activity - Entitlement to credit on travel and real estate agent services - Production of invoices as evidence for availment of credit

Cenvat credit - Input services - Direct or indirect relation to manufacturing activity - Entitlement to credit on travel services - Production of invoices as evidence for availment of credit - Cenvat credit on Air Travel Agent Service / Rail Travel Agent Service taken by the appellant. - HELD THAT: - The appellant, a manufacturer, produced sample invoices showing payment of service tax on air/rail travel availed by its officials for procurement of raw material and for selling activities. The adjudicating authority denied credit on the ground that these services had no direct or indirect relation to manufacturing. The Tribunal found that sample invoices were available and the case was not one where no documentary evidence was furnished; having regard to the purpose of the travels (procurement and sale in course of business), the services were held to have a direct relation to the manufacturing activity and thus eligible for cenvat credit. The impugned conclusion of no relation was set aside and credit allowed. [Paras 6]

Cenvat credit on air/rail travel agent services allowed and the denial set aside.

Cenvat credit - Input services - Direct or indirect relation to manufacturing activity - Entitlement to credit on real estate agent services - Production of invoices as evidence for availment of credit - Cenvat credit on Real Estate Agent Service (brokerage for renting warehouses) taken by the appellant. - HELD THAT: - The appellant produced invoices showing payment of brokerage to arrange warehouses taken on rent for storage of manufactured goods and for distribution from depots. The adjudicating authority and Commissioner (Appeals) rejected credit as lacking relation to manufacturing. The Tribunal noted the documentary evidence was placed on record and that arranging rented warehouses for storage and sale of manufactured goods bears a direct relation to the manufacturing activity. On that basis the Tribunal allowed cenvat credit in respect of the real estate agent service and set aside the impugned order. [Paras 6]

Cenvat credit on real estate agent service allowed and the denial set aside.

Final Conclusion: The appeal is allowed; the impugned order denying cenvat credit on the specified input services is set aside and credit is permitted, with consequential relief if any.

Market value of seized assets in computation of net wealth - valuation "if sold in the open market" - seizure versus confiscation and effect on ownership - exemption by investment in Gold Bond Scheme and substantial compliance - application of equitable principles in taxation assessment - adequacy of notice of recovery and release of seized property upon proof of title

Market value of seized assets in computation of net wealth - valuation "if sold in the open market" - seizure versus confiscation and effect on ownership - net wealth computation - Inclusion of the market value of the seized gold and gold coins in the computation of the appellant's net wealth was erroneous. - HELD THAT: - The court held that mere legal ownership of gold that was under lawful seizure does not by itself permit ascription of an open-market price on the valuation dates. Where the right of the owner was in jeopardy because the articles were under seizure (and liable to confiscation proceedings), the hypothetical market value envisaged by Section 7(1) must be tempered by the practical inability to possess, enjoy or sell the asset on the valuation date. Applying the reasoning in Murari Mohan Dutta, and having regard to the facts that the seized gold remained in official custody notwithstanding the adjudication order directing release, the Court concluded that the Tribunal erred in treating the full market value as an asset of the assessee for wealth-tax computation. [Paras 15, 16, 19, 21, 22]

Value of the seized gold and gold coins is not to be included as market value in computation of net wealth for the relevant assessment years; the Tribunal erred in including such value.

Exemption by investment in Gold Bond Scheme and substantial compliance - doctrine of substantial compliance - conversion to exempt asset - The claim that the gold should be treated (or valued) on the footing that it had been invested in the Gold Bond Scheme and thereby exempt cannot be rejected where the department's actions prevented the assessee from effecting the investment. - HELD THAT: - The Collector of Central Excise's adjudication (order dated 03.01.1970) accepted the assessee's intention and steps to invest in the Gold Bond Scheme and directed release for investment subject to penalty. Although appeals ensued and further proceedings took place, the Court observed that the department's actions deprived the assessee of the opportunity to obtain the exempt character of gold by conversion into bonds. Considering the statutory scheme, the Court accepted that in the circumstances the Tribunal should not have rejected the assessee's claim to the benefit flowing from the Gold Bond Scheme, nor have proceeded to value the seized gold as if freely sellable on the valuation dates. [Paras 18, 19, 22]

Tribunal erred in rejecting the claim that the matter had to be considered on the footing of investment in Gold Bonds; the assessee is entitled to the consequence that arises from the prevention of such investment.

Application of equitable principles in taxation assessment - seizure versus confiscation and effect on ownership - The Tribunal was wrong in holding that rules and principles of equity had no application; equity was relevant in assessing the consequence of departmental actions which deprived the assessee of the opportunity to obtain exemption. - HELD THAT: - The Tribunal had noted that, despite recognising that the situation was caused by department's actions, it could not invoke equity. The High Court disagreed: where departmental action extinguished the assessee's practical ability to convert the asset into an exempt form, equitable considerations bear on whether the asset should be treated as having market value for wealth-tax purposes. The Court therefore held that equity principles were applicable to the facts and that the Tribunal erred in excluding them. [Paras 20, 21, 22]

Tribunal erred in holding that equitable principles had no application; equity supports the conclusion reached by the High Court.

Valuation "if sold in the open market" - notional sale versus enforceable transfer - consideration for agreement to purchase subject to delivery condition - Valuing the gold on the basis of a notional national sale when the assessee could not lawfully possess or sell the gold on the valuation dates was incorrect; no consideration should be included for the seized gold. - HELD THAT: - The Court reiterated that the statutory phrase 'if sold in the open market' contemplates a hypothetical market only to the extent it is consistent with the legal and factual position on the valuation date. Where possession and the ability to effect a sale were precluded by lawful seizure, the correct approach is not to assume an unfettered national sale; instead, valuation must reflect the practical impediments to transfer. Given that the gold remained seized and unreleased, the Court held that no notional-sale consideration ought to have been included by the Tribunal. [Paras 16, 21, 22]

Tribunal erred in valuing the gold by assuming a notional open-market sale; no consideration should be included for the seized gold for wealth-tax computation.

Adequacy of notice of recovery and release of seized property upon proof of title - release of seized property subject to production of probate / proof of heirship - The notice of recovery dated 22.09.2004 was set aside for inadequacy; the petitioners may seek release of the seized articles on production of the required certified orders / probate or proof of heirship and the respondents shall release the seized items on compliance. - HELD THAT: - The Court found the recovery notice deficient in particulars and set it aside, permitting the Revenue to issue a fresh notice in accordance with law. On the amended prayer for release, the Court noted there were prior Supreme Court and probate/arbitration proceedings bearing on heirs; certified copies were not on record before the High Court. The Court directed that upon production of certified copies of the probate/orders or documentary proof of heirship to the satisfaction of the Income Tax authorities, the respondents must release the seized gold, jewellery and other articles within six weeks; release is subject to the heirs' liability to wealth-tax in accordance with law. [Paras 27, 29, 30, 31]

Recovery notice set aside with liberty to issue fresh notice; seized articles to be released to petitioners on production of satisfactory certified orders/proof of heirship within six weeks, subject to tax liabilities.

Final Conclusion: The High Court answered the framed questions by holding that the Tribunal erred in including the market value of the seized gold in the assessee's net wealth and in rejecting claims based on prevention from investing in the Gold Bond Scheme and on equitable grounds; valuation on a notional open-market sale was inappropriate where the gold remained seized and unreleased, and therefore no consideration for the seized gold is to be included for the relevant assessment years. The recovery notice dated 22.09.2004 is set aside as inadequate; the seized items shall be released to those establishing heirship by certified orders/probate to the satisfaction of the authorities, subject to lawful tax assessment and liabilities.