TaxTMI Updates e-Newsletter
May 09,2015

Disallowance under section 40(c) - professional remuneration versus director's remuneration - manufacture of cinematograph films as 'manufacture' and 'industrial undertaking' - deduction under section 80J - remand for verification of statutory conditions

Disallowance under section 40(c) - professional remuneration versus director's remuneration - Deletion of disallowance under section 40(c) in respect of payments to two directors - HELD THAT: - The Tribunal had deleted the addition made by the ITO which disallowed amounts paid to two directors under section 40(3) (as in force) on the basis that they exceeded statutory ceiling. The Court held that the payments were not made to the recipients in their capacity as members of the Board but were paid as professional charges for directing and producing a film. Consequently the character of the payments was different from director's remuneration attractable to disallowance under section 40(c). The Revenue's disallowance was therefore not justified and the Tribunal was correct in deleting the addition. [Paras 7]

Disallowance under section 40(c) deleted; payments held to be professional charges and allowable.

Manufacture of cinematograph films as 'manufacture' and 'industrial undertaking' - deduction under section 80J - remand for verification of statutory conditions - Whether film production constitutes an industrial undertaking for purpose of section 80J and entitlement to deduction - HELD THAT: - Relying on this Court's earlier decision in Commissioner of Income Tax v. D.K. Kondke, the Court held that production of a cinematograph film amounts to manufacture of an article or goods and, accordingly, such activities fall within the expression 'industrial undertaking' for the purposes of section 80J. The Court, however, qualified this conclusion by stating that satisfaction of the specific statutory conditions required for claiming the deduction under section 80J (as it then stood) was a matter to be ascertained by the authorities below. [Paras 5, 6]

Film production held to be manufacturing and an industrial undertaking for section 80J; entitlement to deduction subject to verification of statutory conditions by the assessing authorities.

Final Conclusion: Both reference questions answered in the affirmative for the assessee: (i) the disallowance under section 40(c) was correctly deleted because the payments were professional charges, and (ii) film production qualifies as manufacture and an industrial undertaking for section 80J, subject to the authorities verifying satisfaction of the statutory conditions. No order as to costs.

Characterisation of payments as fees for technical services versus reimbursement/cost sharing - application of Double Taxation Avoidance Agreement to income from operation of ships / shipping business - preference of DTAA over domestic law where treaty is more beneficial

Characterisation of payments as fees for technical services versus reimbursement/cost sharing - Payments received by the assessee from its Indian agents for use of the MaerskNet communication system are not taxable as fees for technical services in India. - HELD THAT: - The Court accepted the Tribunal's factual finding that the amounts charged to the agents were pro rata recoveries of the cost of an automated, software based global communication system (MaerskNet) used to conduct the shipping business. The Tribunal and this Court found no element of rendering of technical services involving human intervention as envisaged by the taxing provision; instead the receipts were merely cost sharing reimbursements. There was also no finding of any profit element in the amounts recovered. On these bases the Court held that the receipts could not be characterised as "fees for technical services" liable to tax in India. [Paras 9]

The payments are reimbursements/cost sharing for the MaerskNet facility and do not constitute taxable fees for technical services in India.

Application of Double Taxation Avoidance Agreement to income from operation of ships / shipping business - preference of DTAA over domestic law where treaty is more beneficial - The amounts received for MaerskNet usage are attributable to the shipping business and, being covered by the relevant DTAA provision, are not taxable in India; the DTAA governs and prevails where more beneficial. - HELD THAT: - Relying on the Tribunal's conclusions and earlier decisions of this Court (including Safmarine Container Lines NV and Siemens Aktiengesellschaft), the Court held that the MaerskNet receipts were integrally connected to the operation of ships and part of the shipping business. Consequently, they fell within the scope of the DTAA protection and could not be taxed in India under domestic provisions. The Court reiterated that a treaty entered under section 90(1) must be honoured and, where the DTAA is more beneficial than the domestic law, the treaty provisions prevail. The revenue's characterisation of the receipts as technical service fees was therefore held to be misconceived. [Paras 11, 12]

The receipts relate to the shipping business and, being covered by the DTAA, are not taxable in India; DTAA provisions prevail over contrary domestic treatment.

Final Conclusion: The Court found no substantial question of law: the payments by the Indian agents to the assessee for use of MaerskNet are cost sharing reimbursements integral to the shipping business and not taxable as fees for technical services in India; the DTAA governs and the appeals are dismissed.

Penalty under section 271(1)(c) for concealment of income - Voluntary disclosure versus disclosure on query - Perverse finding and scope of appellate interference with findings of fact - Distinction between furnishing wrong particulars and computational/miscalculation error

Penalty under section 271(1)(c) for concealment of income - Voluntary disclosure versus disclosure on query - Whether the penalty under section 271(1)(c) was rightly sustained by the Tribunal on the basis that the assessee disclosed the corrected capital gain only upon a query rather than by a voluntary suo moto disclosure. - HELD THAT: - The High Court examined the factual finding of the Tribunal that the assessee's disclosure of the corrected date of acquisition and revised capital-gain computation arose from a pointed query by the Revenue and was not a voluntary, suo moto disclosure. The Court recalled its earlier direction to the assessee to produce assessment-record material to contradict the Tribunal's finding; no such material was produced by the assessee by a legally acceptable procedure. In the absence of any evidence to show that the correction was volunteered, the Court held that there was no basis to overturn the Tribunal's conclusion that the disclosure was not voluntary. The Court also considered the authorities relied upon by the assessee and found them distinguishable on facts, noting that those decisions dealt with different factual scenarios (such as purely computational mistakes or other peculiar facts) and therefore did not assist the assessee's case. [Paras 9, 10, 11]

The Tribunal's finding that the disclosure was made in response to a query and not voluntarily stands; accordingly the penalty under section 271(1)(c) sustained by the Tribunal calls for no interference.

Perverse finding and scope of appellate interference with findings of fact - Distinction between furnishing wrong particulars and computational/miscalculation error - Whether the High Court should interfere with the Tribunal's and lower authorities' findings of fact and law in the absence of perversity or error apparent on the face of the record. - HELD THAT: - The Court reiterated the limited scope for interference with concurrent findings of fact, observing that to succeed the assessee must establish perversity by showing omission to consider relevant evidence or reliance on irrelevant material having no nexus with the issue. The Court found no such legal basis; the assessee had not pointed to any specific omission or irrelevant material relied upon by the Tribunal. The Court further noted that the jurisprudence cited by the assessee was factually distinguishable and that procedural complaints about opportunity of hearing were not raised before the Tribunal and did not show miscarriage of justice. Consequently, the factual findings were held not to be vitiated by any error of law apparent on the record. [Paras 9, 13, 14]

No interference with the concurrent findings of the Tribunal and lower authority; appeals dismissed as they do not raise any substantial question of law and the findings are not perverse.

Final Conclusion: The High Court dismissed the appeals, upholding the Tribunal's finding that the assessee's correction of capital-gain particulars was not a voluntary suo moto disclosure but made on a query, and refusing to interfere with the concurrent factual findings for want of perversity or error of law apparent on the record.

Mark-to-market valuation - derivative transactions - allowability of loss - SEBI and ICAI accounting guidelines - Minimum Alternate Tax (MAT) - interaction between section 115JB and section 88E - precedence of specific provision

Mark-to-market valuation - derivative transactions - allowability of loss - SEBI and ICAI accounting guidelines - Whether mark-to-market loss on open positions in futures at year end is allowable. - HELD THAT: - The Tribunal examined the assessing officer's disallowance of mark to market loss on open futures positions and noted regulatory directions requiring positions in the F&O segment to be marked to market on the financial year end. The Tribunal relied on SEBI directions and ICAI accounting guidance to treat year end booked mark to market losses on open futures positions as crystallised liabilities and therefore allowable, reversing the lower authorities. The High Court, after perusing the Tribunal's reasoning and the regulatory and accounting materials relied upon, found the Tribunal's view to be supported by the factual materials and not perverse, and declined to interfere with that conclusion. [Paras 5, 6]

Tribunal's allowance of the mark to market loss of the assessee is sustained and the appeal is dismissed insofar as it challenges that finding.

Minimum Alternate Tax (MAT) - interaction between section 115JB and section 88E - precedence of specific provision - Admitted substantial questions of law concerning deletion of MAT and whether section 88E takes precedence over section 115JB. - HELD THAT: - The High Court recorded that the appeal raised substantial questions of law and admitted two questions for consideration: (a) whether the Tribunal was justified in deleting the addition of tax liability under section 115JB by relying on a High Court decision; and (b) whether the Tribunal erred in giving precedence to section 88E over the words of section 115JB dealing with MAT. These questions were noted as substantial and admitted for hearing, but the Court did not decide them in the present order. [Paras 1, 2]

The two substantial questions of law were admitted for determination; they remain to be decided in the appeal.

Final Conclusion: The High Court upheld the Tribunal's allowance of year end mark to market losses on open futures positions, finding the Tribunal's view supported by SEBI and ICAI guidance and not perverse, and dismissed the appeal to that extent; two substantial questions of law concerning MAT (section 115JB) and its interplay with section 88E were admitted for determination and remain pending.

Deemed dividend under Section 2(22)(e) - Explanation 2 to Section 2(22)(e) - accumulated profit - current year profit - whether includible in accumulated profit - profit accrual upon closing of books - rectification under Section 154

Deemed dividend under Section 2(22)(e) - Explanation 2 to Section 2(22)(e) - accumulated profit - current year profit - whether includible in accumulated profit - profit accrual upon closing of books - Inclusion of current year profit in 'accumulated profit' for computing deemed dividend under Section 2(22)(e). - HELD THAT: - The Court examined Explanation 2 to Section 2(22)(e) and the question whether the current year's profit up to the date of distribution must be included in accumulated profit for computing deemed dividend. Applying the settled principle that profit accrues when the books of account are closed, as held by the Supreme Court in Associated Banking Corporation of Ind. Ltd. v. CIT, the Court found that current year profit need not be included as part of accumulated profit for the purposes of Explanation 2. Consequently the Tribunal's direction to the Assessing Officer not to include the current profit in accumulated profit was affirmed. The Court considered, but declined to allow, the Revenue's contention that the Tribunal erred in deciding merits without first addressing the Assessing Officer's rejection of the rectification application under Section 154, instead deciding the substantive issue on its merits and confirming the Tribunal's view.

Tribunal's finding upheld: current year profit is not to be included in accumulated profit for computing deemed dividend under Section 2(22)(e); appeal dismissed.

Final Conclusion: The High Court affirms the Tribunal's decision and dismisses the Revenue's appeal, holding that current year profit need not be included in accumulated profit for computing deemed dividend under Explanation 2 to Section 2(22)(e).

Provision for doubtful debts not being an unascertained liability under clause (c) of the explanation to Section 115JA(2) - deemed book profits under Section 115JA - provision as diminution of asset (debt receivable) and not a liability - liability to interest under Sections 234B and 234C despite computation under Section 115JA - binding precedents in CIT v. HCL Connect Systems and Services Ltd and Rolta India Ltd on scope of clause (c)

Provision for doubtful debts not being an unascertained liability under clause (c) of the explanation to Section 115JA(2) - provision as diminution of asset (debt receivable) and not a liability - deemed book profits under Section 115JA - Whether the provision for doubtful debts of Rs. 20.05 lakhs is includible in book profits as an amount set aside for meeting liabilities under clause (c) of the explanation to Section 115JA(2). - HELD THAT: - Clause (c) of the explanation to Section 115JA(2) applies to amounts set aside as provisions for meeting liabilities other than ascertained liabilities. The sum in question was a provision against an advance made to a sister concern and represents a possible diminution in an amount recoverable by the assessee (a debt receivable), not a liability payable by the assessee. Consequently clause (c) has no application to a provision made for diminution in value of an asset. The court further held that this view is supported and concluded by Apex Court decisions in CIT v. HCL Connect Systems and Services Ltd and in Joint Commissioner of Income Tax v. Rolta India Ltd, which establish that a provision for bad and doubtful debts (debt receivable) is not covered by clause (c) because it does not constitute a liability of the assessee. [Paras 6]

Provision for doubtful debts of Rs. 20.05 lakhs is not includible in book profits under clause (c) of the explanation to Section 115JA(2); question A answered in favour of the assessee.

Liability to interest under Sections 234B and 234C despite computation under Section 115JA - binding precedents in ... Rolta India Ltd on applicability of interest - Whether interest under Sections 234B and 234C is payable by the assessee in respect of default/delay in advance tax despite computation under Section 115JA. - HELD THAT: - Both parties accepted that the question is governed by the Apex Court's decision in Joint Commissioner of Income Tax v. Rolta India Ltd. Applying that precedent, the court concluded that interest under Sections 234B and 234C is payable where advance tax defaults/delays occur, and the reliance on the Tribunal's deletion was misplaced in view of the binding authority. The Court therefore sided with the Revenue on the question of interest. [Paras 7]

Interest under Sections 234B and 234C is payable; question B answered in favour of the Revenue.

Final Conclusion: The appeal is partly allowed: the Tribunal's deletion of the addition for provision for doubtful debts is upheld (in favour of the assessee), while the Tribunal's deletion of interest under Sections 234B and 234C is set aside (in favour of the Revenue); appeal disposed accordingly with no order as to costs.

Deduction under Section 10B - Ratification by the Board of Approval and its retrospective effect - Validity of approval given by Development Commissioner exercising delegated powers - Clarificatory effect of CBDT circular of 09/03/2009

Deduction under Section 10B - Ratification by the Board of Approval and its retrospective effect - Clarificatory effect of CBDT circular of 09/03/2009 - Entitlement to deduction under Section 10B where approval was initially granted by the Development Commissioner and subsequently ratified by the Board of Approval. - HELD THAT: - The Court accepted that the assessee had been granted approval as a 100% Export Oriented Unit by the Development Commissioner and that such approval was subsequently ratified by the Board of Approval. On proper construction of the CBDT instruction dated 09/03/2009, the approval granted by the Development Commissioner, once ratified by the Board of Approval, is to be treated as valid for the purpose of claiming deduction under Section 10B, and the ratification operates retrospectively to the date of the Development Commissioner's approval. The Court further noted the Export Promotion Council circular of 14/05/2009 indicating that from 1990 onward the Board had delegated approval powers to the Development Commissioner, supporting the position that the Development Commissioner was exercising delegated authority. Applying these principles, the Court held that the assessee was entitled to the deduction under Section 10B on the basis of the Development Commissioner's approval which was subsequently ratified by the Board of Approval, and that the authorities below were correct in deleting the disallowance. [Paras 5]

Assessee entitled to deduction under Section 10B as the Development Commissioner's approval, subsequently ratified by the Board of Approval, relates back and validates the claim; order of CIT(A) and Tribunal confirmed.

Final Conclusion: The Tax Appeal is dismissed; the Gujarat High Court confirms the orders below holding that the assessee was entitled to the deduction under Section 10B on the basis of the Development Commissioner's approval as ratified by the Board of Approval.

Deletion of addition as unexplained investment - Source of funds explained as advance through banking channel - Precedent reliance by appellate authority

Deletion of addition as unexplained investment - Source of funds explained as advance through banking channel - The Tribunal was justified in deleting the addition of Rs. 25 lacs as unexplained investment in the assessee's hands. - HELD THAT: - The Tribunal in the related proceeding of M/s. Natural Biocon (India) Ltd. considered the very sum of Rs. 25 lacs and found that the amount represented an advance given by M/s. Natural Biocon (India) Ltd. to the assessee and that the advance was routed through the banking channel. The Assessing Officer himself admitted that the advance was given through banking channels and there was no dispute as to the capacity of the company to make such advance. On that basis the Tribunal held that the source of the Rs. 25 lacs was explained and therefore the amount could not be treated as unexplained investment. The High Court agreed with the Tribunal's factual conclusion and reasoning, holding that the Tribunal committed no error in deleting the addition. [Paras 2]

Tribunal's deletion of the addition of Rs. 25 lacs upheld; addition not treated as unexplained investment.

Precedent reliance by appellate authority - The Tribunal was justified in relying on its earlier observations in the M/s. Natural Biocon (India) Ltd. matter without re-examining facts afresh in the present appeal. - HELD THAT: - The Tribunal's earlier order in the Natural Biocon case had examined the material concerning the same transaction (share application money of Rs. 25 lacs) and recorded that the amount was an advance from the company to the assessee through banking channels. Since the earlier factual examination addressed the source and mode of transaction and there was no dispute about the company's capacity to advance the amount, the Tribunal's reliance on that reasoning in the present appeal was proper. The High Court found no merit in the contention that the Tribunal, as the final fact-finding authority, ought to have re-examined the matter in the present proceedings. [Paras 2]

Tribunal's reliance on its earlier findings in M/s. Natural Biocon (India) Ltd. upheld as justified.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal's deletion of the addition of Rs. 25 lacs and its reliance on the earlier Tribunal finding in the Natural Biocon matter are confirmed.

Penalty under Section 271(1)(c) for concealment of material particulars - characterisation of commodity derivatives losses as speculative loss or business loss - retrospective effect of notification/recognition of a stock exchange in relation to Section 43(5)(b)

Penalty under Section 271(1)(c) for concealment of material particulars - characterisation of commodity derivatives losses as speculative loss or business loss - retrospective effect of notification/recognition of a stock exchange in relation to Section 43(5)(b) - Whether imposition of penalty under Section 271(1)(c) was warranted for the assessee's claimed short term capital loss arising from trade in commodity derivatives - HELD THAT: - The Court found that at the relevant time there was a divergence of authority on whether losses from commodity derivatives traded on exchanges not then notified qualified as speculative losses. Decisions, including the Mumbai ITAT view in Arnav and the Division Bench decision in Auric Investments and Securities Ltd., indicate that subsequent notification or recognition of the exchange may relate back for treatment under Section 43(5)(b), and that mere recharacterisation by the Assessing Officer does not automatically establish concealment of particulars. The assessee had furnished the requisite details in the return and the additions were ultimately accepted; there was no material on record to show that particulars were concealed or that inaccurate particulars were furnished with the requisite mens rea for attracting Section 271(1)(c). Applying the ratio in Auric to these facts, the Court held that imposition of penalty was not justified.

Penalty under Section 271(1)(c) deleted and the impugned order of the ITAT set aside; appeal allowed.

Final Conclusion: Given the contemporaneous divergence of view on the characterisation of commodity derivative losses and the absence of concealment of particulars, the penalty under Section 271(1)(c) was held unwarranted and deleted; the appeal is allowed.

Deduction under section 35D - amortisation at 1/10th over ten years - Outer limit of deduction under subsection 3 of section 35D - Finality of assessment year determinations and res judicata/estoppel - Separate jurisdiction of assessment years and non-fettering of statutory powers

Deduction under section 35D - amortisation at 1/10th over ten years - Outer limit of deduction under subsection 3 of section 35D - Whether the quantum of deduction under section 35D fixed at 1/10th in the initial year can be varied in a subsequent year by application of subsection (3) which prescribes an outer limit. - HELD THAT: - The Court held that the entitlement under sub section (1) to amortise share issue expenses at the rate of one tenth over ten successive assessment years is subject to the provisos contained in sub section (3). Sub section (3) prescribes an outer limit (2.5% of total capital employed) and therefore operates to restrict the amount allowable in any year. Consequently, the amount claimed in a later year can be adjusted to conform to the outer limit fixed by sub section (3), and deduction in a subsequent assessment year cannot exceed that statutory cap even if a larger pro rata amount was earlier indicated.

Deduction under section 35D is subject to the outer limit in sub section (3); the annual 1/10th allocation may be varied in a subsequent year to ensure compliance with the 2.5% cap.

Finality of assessment year determinations and res judicata/estoppel - Separate jurisdiction of assessment years and non-fettering of statutory powers - Whether the assessee can invoke estoppel/res judicata based on the earlier CIT(A) order for assessment year 1995-96 to prevent application of sub section (3) in assessment year 1996-97. - HELD THAT: - The Court rejected the contention of estoppel/res judicata. It observed that the earlier CIT(A) order pertained only to assessment year 1995 96 and the jurisdiction of that order did not extend to a separate assessment year. Public law principles prevent fettering of statutory powers and duties; therefore a determination in one assessment year cannot bind the revenue or the assessing authority in a different assessment year where the law requires a fresh determination in accordance with statute.

Res judicata/estoppel based on the CIT(A)'s order for 1995 96 does not preclude application of sub section (3) in assessment year 1996 97; the earlier order cannot bind the separate assessment.

Final Conclusion: The question was answered in favour of the Revenue: deductions under section 35D remain subject to the outer limit in sub section (3) and may be adjusted in later years; an earlier order confined to a different assessment year does not estop application of the statutory limit. The appeal is dismissed.

Charitable purpose including medical relief - exemption under section 11 of the Income Tax Act - application to income from trust activities - exemption under section 10(23C)(vi-A) - hospitals existing solely for philanthropic purposes - effect of directions of the Charity Commissioner under the Bombay Public Trust Act on characterisation of trust receipts

Exemption under section 11 of the Income Tax Act - application to income from trust activities - precedent effect of Tribunal's earlier orders on identical facts - Tribunal was justified in applying its earlier orders and granting exemption under section 11 for assessment year 2005-06. - HELD THAT: - The Tribunal applied its earlier consistent conclusions on identical facts for prior assessment years when adjudicating the claim under section 11 for AY 2005-06. The revenue conceded that earlier Tribunal orders on the same facts had not been challenged; in that factual matrix the Tribunal and the Commissioner were entitled to follow the earlier view. The court found no perversity or error of law apparent on the face of the record in the Tribunal's reliance on its prior decisions and in allowing the exemption under section 11 for the year in question. [Paras 5, 10]

The Tribunal's order granting exemption under section 11, insofar as it followed earlier identical Tribunal conclusions, is sustained.

Charitable purpose including medical relief - effect of directions of the Charity Commissioner under the Bombay Public Trust Act on characterisation of trust receipts - Amounts levied as surcharges on patients and recoveries from doctors are to be treated as income of the trust; directions of the Charity Commissioner do not alter the character of such receipts for income-tax purposes. - HELD THAT: - The assessing officer treated the surcharges and recoveries as corpus donations; the Tribunal and Commissioner treated them as income from trust activities. The Court held that the Charity Commissioner, under the Bombay Public Trust Act, has power to issue directions regarding administration and accounting of trust income, but those directions do not change the legal character of receipts. Sectional provisions of the Public Trust Act empower directions and compliance, and therefore the revenue cannot disregard those directions to recharacterise the receipts. Consequently, the concurrent conclusion that the amounts constituted income of the trust was not vitiated. [Paras 4, 11]

The levy of surcharges and recoveries constitutes income of the trust for the purposes of exemption under section 11; the Charity Commissioner's directions do not alter that characterisation.

Exemption under section 10(23C)(vi-A) - hospitals existing solely for philanthropic purposes - The Tribunal's order does not depend on, nor did it decide, the question of exemption under section 10(23C)(vi-A); the pending rejection of that application by the CCIT is not a basis to fault the Tribunal's order in this appeal. - HELD THAT: - The record shows that the Commissioner had denied registration under section 10(23C)(vi-A) and that denial was the subject of a separate writ petition pending in the High Court. The Tribunal and Commissioner in the assessment before them did not base their conclusions on the section 10(23C)(vi-A) issue; therefore the revenue's contention that the Tribunal ignored the CCIT's rejection was misplaced. The court accordingly held that question C does not arise from the Tribunal's order under challenge. [Paras 8, 9]

The issue of exemption under section 10(23C)(vi-A) was not decided by the Tribunal in the impugned order and does not affect the present appeal.

Final Conclusion: The appeal is dismissed. The Tribunal's concurrent conclusions - applying its earlier orders to allow exemption under section 11 for AY 2005-06 and treating the surcharges and recoveries as trust income notwithstanding directions of the Charity Commissioner - do not raise any substantial question of law requiring interference.

Classification of income as short term capital gain versus business income - conversion of stock-in-trade into investment - reliance on prior year's conversion and its conclusiveness - finality of assessment once long term capital gains accepted - disallowance under Section 14A in light of Maxopp principle

Classification of income as short term capital gain versus business income - conversion of stock-in-trade into investment - finality of assessment once long term capital gains accepted - Whether the sum of Rs. 41,46,235/- realized by the assessee for AY 2007-08 is business income or short term capital gain - HELD THAT: - The Court held that the mere fact of prior conversion of part of stock-in-trade into investments is not conclusive to classify subsequent realizations as business income. The Assessing Officer had accepted the assessee's claim of long term capital gains in the assessment and, having done so, could not retrospectively rely on facts of the earlier year to treat the realized amount for the year under consideration as business income. The ITAT examined the applicable law, including the decision relied upon by the parties, and concluded that the income was short term capital gain; the High Court found no error in that conclusion and declined to disturb the ITAT's factual and legal appraisal. [Paras 5]

The ITAT's conclusion that the sum is short term capital gain is upheld and the revenue's challenge on this point fails.

Disallowance under Section 14A in light of Maxopp principle - remand for re-adjudication - Whether the matter relating to disallowance under Section 14A required interference by this Court - HELD THAT: - The Court noted that the ITAT remanded the Section 14A issue for fresh adjudication in the light of the directions in Maxopp Investment Ltd. v. CIT. The High Court found no ground to interfere with that remand and left the issue to be decided afresh by the authority in accordance with the applicable precedent. [Paras 6]

The ITAT's order remanding the Section 14A matter for re-adjudication in view of Maxopp is left undisturbed.

Final Conclusion: The appeal is dismissed: the ITAT's finding that the disputed receipts for AY 2007-08 constitute short term capital gains is upheld, while the matter relating to disallowance under Section 14A is remanded for fresh consideration in accordance with Maxopp.

Addition as unexplained expenditure under Section 69/69C - applicability of Section 69C where expenditure is incurred but not explained - deletion of addition in absence of claim or offer of expenditure

Addition as unexplained expenditure under Section 69/69C - applicability of Section 69C where expenditure is incurred but not explained - deletion of addition in absence of claim or offer of expenditure - Validity of addition of Rs. 43,07,179/- as unexplained expenditure under Section 69/69C in A.Y. 2004-2005 - HELD THAT: - The Court agreed with the Tribunal that Section 69C applies where an assessee has incurred expenditure in a financial year and either offers no explanation about the source of such expenditure or the explanation is, in the opinion of the Assessing Officer, unsatisfactory; the amount covered by such expenditure may then be deemed income. In the present case the Assessing Officer invoked Section 69/69C to add Rs. 43,07,179/-, but the assessee had neither offered that amount as expenditure nor claimed a deduction for it. Since the statutory scheme requires incurrence of expenditure (and absence or unsatisfactoriness of explanation thereof) for Section 69C to be attracted, there was no basis to invoke Section 69/69C where no expenditure had been claimed or offered. The Tribunal therefore rightly deleted the addition, and the High Court found no error in that conclusion. [Paras 4, 5]

Addition of Rs. 43,07,179/- under Section 69/69C for A.Y. 2004-2005 was not sustainable and was deleted.

Final Conclusion: The tax appeal is dismissed; the Tribunal's deletion of the addition under Section 69/69C in relation to A.Y. 2004-2005 is upheld.

Addition under section 68 treated as income from other sources - set-off of brought forward unabsorbed depreciation against income assessable as "income from other sources" - binding precedent of the Hon'ble Supreme Court - classification of income under recognized heads for computation of total income

Addition under section 68 treated as income from other sources - set-off of brought forward unabsorbed depreciation against income assessable as "income from other sources" - binding precedent of the Hon'ble Supreme Court - Whether additions made and assessed under section 68 can be set off against brought forward unabsorbed depreciation. - HELD THAT: - The Tribunal relied on the decision of the Hon'ble Supreme Court in CIT v. D.P. Sandu Bros. Chembur (P) Ltd., holding that amounts deemed to be income under section 68 are assessable as "income from other sources" and thus form part of the assessee's total income. Since brought forward unabsorbed depreciation is available for set-off against income assessable under the head "income from other sources," the Tribunal and the Commissioner (Appeals) were correct in permitting the set-off. A conflicting Division Bench decision of this Court was noted, but the High Court applied the binding principle that it is bound by the Supreme Court's decision and therefore upheld the orders allowing the set-off. The Court found no error in the Tribunal's reasoning and conclusion. [Paras 6, 7, 8]

The addition made under section 68 is assessable as income from other sources and may be set off against brought forward unabsorbed depreciation; the Revenue's appeal is dismissed.

Final Conclusion: The tax appeal is dismissed; the High Court upheld the Tribunal and Commissioner (Appeals) in holding that additions under section 68 are assessable as income from other sources and are eligible for set-off against brought forward unabsorbed depreciation, the Court following the binding Supreme Court precedent.

Reopening of assessment beyond four years - Failure to disclose truly and fully all material facts - Change of opinion - Assessing Officer's power under section 147 read with section 148 - First proviso to section 147 - reopening beyond four years requires failure to disclose - Inclusive method of accounting under section 145A

Reopening of assessment beyond four years - Failure to disclose truly and fully all material facts - Change of opinion - Assessing Officer's power under section 147 read with section 148 - First proviso to section 147 - reopening beyond four years requires failure to disclose - Inclusive method of accounting under section 145A - Validity of reassessment proceedings initiated under section 147 read with section 148 for A.Y. 2009-2010, initiated beyond four years - HELD THAT: - The Court examined whether the condition precedent for reopening beyond four years - namely failure by the assessee to disclose truly and fully all material facts - was satisfied. The assessee had filed return and undergone scrutiny u/s. 143(3), during which the Assessing Officer called for details including treatment of unutilized CENVAT (MODVAT) and the assessee furnished explanations, relied upon the ICAI Guidance Note and the accounting method adopted. The original assessment accepted the assessee's exclusive method of accounting. In these circumstances the Court held that all primary facts were before the Assessing Officer and there was no omission or failure to disclose by the assessee; reopening on the same issue therefore amounted to a mere change of opinion by the revenue. Applying the precedents of this Court (including decisions cited concerning re-openings beyond four years and treatment of unutilised CENVAT), the Court concluded that initiation of reassessment beyond four years without tangible material showing non-disclosure was without jurisdiction and unsustainable. [Paras 5, 6]

Impugned notice under section 148 for A.Y. 2009-2010 quashed and reassessment proceedings terminated as reopening beyond four years was without jurisdiction because there was no failure to disclose truly and fully all material facts.

Final Conclusion: The petition is allowed; the notice under section 148 for A.Y. 2009-2010 is quashed and the reassessment proceedings are terminated on the ground that reopening beyond four years was without jurisdiction. No order as to costs.

Reward policy for informers - ex gratia payment - legitimate expectation of reward - discretion of Reward Committee - compliance with policy guidelines - mandamus to pay reward - informer's entitlement not absolute

Reward policy for informers - informer's entitlement not absolute - legitimate expectation of reward - Whether the petitioner was entitled to the balance reward for specific information that led to seizure and auction of goods. - HELD THAT: - The Court found that the petitioner on 19th July, 2010 provided specific information about five containers which directly led to raids, seizure and subsequent auction realisation by the Department. The show cause notice and the departmental affidavit acknowledge that the information supplied by the petitioner tallied with the container details and that action was taken on the basis of that information. The Court rejected the departmental contention that prior information in January 2010 precluded the petitioner's claim, characterising that stance as an afterthought and noting the department's failure to explain why earlier information was not acted upon while the petitioner's information did prompt decisive action. Given that the petitioner's information resulted in recovery by auction, the Court held that the petitioner had a legitimate expectation of reward under the policy and was entitled to consideration for the balance amount in accordance with the policy. [Paras 8, 9]

Petitioner entitled to reward consideration for the specific information that led to seizure and auction; departmental afterthought rejected.

Ex gratia payment - discretion of Reward Committee - compliance with policy guidelines - Whether the ex gratia nature of the reward and the stated discretion of the Reward Committee permits denial of payment contrary to the policy guidelines and the petitioner's legitimate expectation. - HELD THAT: - Although paragraph 5 of the reward policy describes the payment as ex gratia and subject to the authority's discretion, the Court held that such discretion is not unfettered. The reward must be granted in consonance with the guidelines and scheme framed by the Government of India; the informer cannot be left to whims and caprices of the authorities. The Court emphasised that adherence to the policy's guidelines is essential to preserve the policy's purpose of eliciting information and protecting the public interest, and that denial of reward on hyper-technical or afterthought grounds would frustrate that purpose. [Paras 9, 11]

Discretion under the policy is not unfettered; reward must be governed by and paid in accordance with the policy guidelines and legitimate expectation.

Mandamus to pay reward - compliance with policy guidelines - Relief to be granted where entitlement and policy compliance require payment. - HELD THAT: - Having found that the petitioner provided specific information that led to recoveries and that the committee's discretion must operate within the policy's guidelines, the Court directed the respondents to pay the petitioner's reward as applicable under the Policy of Reward for Informers & Officers dated 16th April, 2004. The payment was to be made after adjusting amounts already disbursed, and within a specified time frame to prevent frustration of the policy and to give effect to the petitioner's legitimate expectation. [Paras 12, 13]

Respondents directed to pay the petitioner's reward under the policy, after adjusting amounts already paid, within three months.

Final Conclusion: Writ petition allowed; respondents directed to compute and pay the petitioner's reward under the Reward Policy dated 16th April, 2004, after adjusting earlier payment, within three months.

Classification of goods - classification under Chapter Heading 9013.80 versus Chapter Heading 9028.90 - interpretation of Chapter Notes to Chapter 90 (Note 2(a) and Note 2(b)) - parts and accessories classification principle - primacy of headings and Chapter/Section Notes (Rule 1 of the General Rules for Interpretation) - application of General Rules for the Interpretation - Rule 3

Classification under Chapter Heading 9013.80 - Note 2(a) of Chapter 90 - Note 2(b) of Chapter 90 - Rule 1 of the General Rules for the Interpretation - Rule 3 of the General Rules for the Interpretation - LCDs imported by the appellant are classifiable under Chapter Heading 9013.80 and not under Chapter Heading 9028.90. - HELD THAT: - The Court applied the hierarchy established by the General Rules: classification is to be determined first by the terms of the headings and any relevant Section or Chapter Notes (Rule 1). Chapter 90's Note 2 governs parts and accessories. Note 2(a) provides that parts and accessories which are goods included in any of the headings of Chapter 90 are in all cases to be classified in their respective headings. The imported goods are LCDs, which are specifically provided for by tariff item 9013.80, and they do not constitute an 'article' more specifically provided in another heading. Note 2(b) applies only to 'other parts and accessories' - i.e., those not covered by Note 2(a) - and therefore cannot displace Note 2(a) where the latter is applicable. The Chapter's Part-III notes and the World Customs Organization Explanatory Notes confirm that liquid crystal devices of the kind imported fall within 9013.80. Rule 3, relied upon by the revenue, is subsidiary and becomes relevant only if headings and notes do not resolve classification; it therefore cannot be invoked to override the clear application of Note 2(a) and the specific coverage of 9013.80. For these reasons the Tribunal's conclusion that the LCDs should be classified as parts of electricity meters under 9028.90.10 was held unsustainable.

Appeal allowed; LCDs classifiable under Chapter Heading 9013.80.

Final Conclusion: The orders of the authorities below are set aside and the LCDs imported by the appellant are held to be classifiable under Chapter Heading 9013.80.

Transaction value rejected under Rule 10A of the Customs Valuation Rules, 1988 - application of similar goods comparables under Rule 6 for valuation - non-availability of identical goods and inapplicability of Rule 5 - requirement of contemporaneous comparable imports under Section 14 of the Customs Act, 1962 - confiscation, redemption fine and penalty - judicial moderation of monetary sanctions

Transaction value rejected under Rule 10A of the Customs Valuation Rules, 1988 - application of similar goods comparables under Rule 6 for valuation - non-availability of identical goods and inapplicability of Rule 5 - requirement of contemporaneous comparable imports under Section 14 of the Customs Act, 1962 - Validity of the Commissioner's rejection of declared transaction value and fixation of value under Rule 6 based on similar goods - HELD THAT: - The Commissioner rejected the respondent's declared transaction value under Rule 10A and, finding no evidence of identical goods, proceeded sequentially from Rule 5 to Rule 6 and fixed value using instances of similar goods. The Tribunal's contrary conclusion rested on a mistaken premise that the Commissioner had relied on identical goods and on an incorrect view that the comparables were not contemporaneous. The import under challenge occurred on 13.5.2003; the comparables relied upon by the Commissioner were from May 2003 and thus satisfied the contemporaneity requirement under Section 14. Instances produced by the respondent showing lower prices were either under departmental scrutiny or otherwise did not displace the comparables relied upon; the Commissioner reasonably relied on the range of prices of similar goods and selected the minimum available comparable to determine transaction value. The Tribunal's conclusions were founded on misconception of law and facts and are unsustainable.

The Commissioner's valuation fixing the transaction value at Rs. 73.94 per piece under Rule 6 is affirmed and the Tribunal's order setting aside that valuation is set aside.

Confiscation, redemption fine and penalty - judicial moderation of monetary sanctions - Appropriateness and quantum of redemption fine and penalty imposed on the respondent - HELD THAT: - While the Commissioner's substantive valuation and demand for differential duty are sustained, the Court found the redemption fine and penalty excessive on the facts. The redemption fine was reduced to an amount equivalent to the differential duty (thereby moderating the financial burden to a proportionate sum), and the penalty imposed under Section 112 was set aside in full. The Court exercised its supervisory power to moderate monetary sanctions while leaving the primary duty demand intact.

Redemption fine reduced to an amount equivalent to the differential duty; the penalty is set aside.

Final Conclusion: The appeal is allowed in part: the Commissioner's valuation under the Valuation Rules (fixing value at Rs. 73.94 per piece and demand of differential duty) is affirmed and the Tribunal's contrary order is set aside; the redemption fine is reduced to the amount equivalent to the differential duty and the penalty is set aside; appeal disposed accordingly.

Unjust enrichment - refund of duty paid - provisional assessment - passing on of duty - presumption under Section 28D of the Customs Act - evidentiary value of Chartered Accountant's certificate

Provisional assessment - refund of duty paid - unjust enrichment - Whether the amount paid pursuant to the High Court's direction during provisional assessment is to be treated as duty for purposes of refund and the test of unjust enrichment applies. - HELD THAT: - The Court noted that although the Bill of Entry had been provisionally assessed, the appellant paid Rs. 6,13,139 pursuant to the High Court's direction and the goods were released. The Tribunal held that payment made as duty even under provisional assessment must be treated as duty for the purpose of claiming refund, and consequently the test of unjust enrichment applies. The precedent relied on by the appellant (Veekay Products Ltd.) was held inapplicable because the payment in the present case was made as duty following the High Court's order and the matter was subsequently finally assessed by the Commissioner. [Paras 5]

Payment made under the High Court's direction during provisional assessment is treated as duty and the unjust enrichment test applies to the refund claim.

Presumption under Section 28D of the Customs Act - passing on of duty - evidentiary value of Chartered Accountant's certificate - Whether the appellant cleared the statutory presumption of passing on of duty under Section 28D and was therefore entitled to refund rather than transfer to the Consumer Welfare Fund. - HELD THAT: - The Tribunal observed that the adjudicating authority and the Commissioner (Appeals) found that the appellant failed to discharge the burden cast by Section 28D to prove that the incidence of duty was not passed on to buyers. Mere assertions that goods were sold at a loss were insufficient. The Tribunal gave weight to the Chartered Accountant's certificate dated 19.11.2010 which, in the view of the authority, indicated that import duty had been added to the cost of materials in the balance-sheet, supporting the inference that duty incidence was passed on. On these findings the bar of unjust enrichment was not cleared, justifying crediting the sanctioned refund to the Consumer Welfare Fund. [Paras 5]

The statutory presumption under Section 28D was not rebutted; the evidence indicated the duty incidence was passed on and the refund was rightly credited to the Consumer Welfare Fund.

Final Conclusion: Appeal dismissed: payment made under the High Court's direction during provisional assessment qualifies as duty for refund purposes and the appellant failed to rebut the presumption under Section 28D that the duty had been passed on; accordingly the sanctioned refund was correctly credited to the Consumer Welfare Fund.

Reduction of share capital under companies law - Setting off accumulated losses against share capital - Court confirmation of capital reduction - Corporate authority of shareholders by special resolution - Registrar filing and publication obligations on confirmation of reduction

Reduction of share capital under companies law - Setting off accumulated losses against share capital - Court confirmation of capital reduction - Corporate authority of shareholders by special resolution - Confirmation of the petitioner company's reduction of equity share capital by setting off accumulated losses as approved by the shareholders' special resolution of 30th December 2014. - HELD THAT: - The Court considered the petition for confirmation of reduction of share capital effected by cancelling a proportion of paid-up equity shares to set off accumulated losses. The petition records that the company incurred substantial accumulated losses reflected in its financial statements for the year ended 31st March 2014; the Board approved the proposal and a special resolution was passed on 30th December 2014. The Articles permit reduction of capital. The Regional Director filed an affidavit recording that statutory returns are regular and that no objection would be made to the scheme; the company's secured creditor furnished a letter of no-objection. The Court noted publication of the statutory advertisement. In view of these materials and the statutory scheme for confirmation of capital reduction, the Court found it appropriate to confirm the proposed reduction by setting off the accumulated losses in the manner approved by the shareholders. [Paras 4, 5, 6, 8, 9]

The reduction of the petitioner's equity share capital by setting off accumulated losses, as approved by the special resolution dated 30th December 2014, is confirmed.

Approval of minutes consequent to confirmed capital reduction - Registrar filing and publication obligations on confirmation of reduction - Approval of the proposed form of minute, dispensation of specified minute-words, and directions for filing, registration, publication and ancillary compliance consequent to the confirmed reduction. - HELD THAT: - The Court approved the proposed minute (as set out in the petition) to record the reduction and dispensed with the words sought to be omitted. The Court directed that a certified copy of the order, including the approved minutes, be delivered to the Registrar of Companies within twenty-one days and that notice of registration and the said minutes be published in the named English and Tamil newspapers within four weeks of receipt of the order. Ancillary powers were confirmed insofar as necessary to give effect to the resolution. The Court also directed the petitioner to pay the fee to the Additional Central Government Standing Counsel. [Paras 6, 7, 9, 10, 11]

The proposed minute is approved, the specified words are dispensed with, the Registrar filing and publication directions are issued, and the petitioner is directed to pay the prescribed fee.

Final Conclusion: The High Court confirmed the company's reduction of share capital by setting off accumulated losses as per the special resolution of 30th December 2014; approved the form of minute and dispensed with specified words; directed requisite filing with the Registrar of Companies and publication of the registration and minutes; and ordered payment of a fee to the Central Government Standing Counsel.

Reduction of share capital - confirmation of reduction by court - registration of minute of reduction - exemption from adding "and reduced" to company name - protection of creditors' interests in capital reduction - filing of certified copy with Registrar of Companies - publication of notice of order and minutes

Reduction of share capital - confirmation of reduction by court - registration of minute of reduction - protection of creditors' interests in capital reduction - exemption from adding "and reduced" to company name - Reduction of the paid-up equity share capital of the petitioner company as approved by the shareholders and approval of the form of minute, together with dispensation from adding the words "and reduced" to the company name. - HELD THAT: - The Court noted that the company's Board and shareholders passed the requisite special resolution for reduction of paid-up equity capital by cancelling specified equity shares and writing off the debit balance in profit & loss, and that the Memorandum & Articles permit such reduction. The Regional Director filed an affidavit of no objection and a chartered accountant certified that there are no secured creditors. Notices/advertisements for the proposal were published. On these materials the Court was satisfied that the proposal did not prejudice creditors and complied with the statutory scheme for reduction. Exercising its power under the Companies Act and the Companies (Court) Rules, the Court confirmed the reduction, approved the proposed minute to be registered, and declined to require the petitioner to add the words "and reduced" to its name as the last words thereof. [Paras 8]

Reduction of the paid-up equity share capital confirmed; proposed minute approved; petitioner not required to add "and reduced" to its name.

Filing of certified copy with Registrar of Companies - publication of notice of order and minutes - Directions for filing the certified copy of the order with the Registrar of Companies and for publication of notice of the registration order and approved minutes in specified newspapers. - HELD THAT: - The Court directed that a certified copy of its order, including the approved minutes, be delivered to the Registrar of Companies within twenty-one days. The Court further directed that the Registrar's notice of registration and the minutes approved by the Court be published in one issue each of the specified English and Tamil newspapers within four weeks from receipt of the copy of the order. These directions implement the procedural requirements for effecting the reduction and giving public notice thereof. [Paras 6, 9]

Certified copy of the order to be delivered to the Registrar of Companies within twenty-one days; notice of registration and minutes to be published in the specified newspapers within four weeks of receipt.

Final Conclusion: The High Court granted the petition: it confirmed the shareholders' special resolution for reduction of the paid-up equity share capital, approved the form of minute for registration, dispensed with adding "and reduced" to the company name, and directed filing of a certified copy with the Registrar of Companies and publication of the Registrar's notice and the approved minutes in the specified newspapers.

Refund of service tax - correlation between services and export of goods - requirement of documentary proof for refund claims - interpretation of 'wherever applicable' in Notification No. 41/2007-ST - role of corroborative documents in establishing eligibility for refund - appellate interference with concurrent findings of fact

Appellate interference with concurrent findings of fact - role of corroborative documents in establishing eligibility for refund - Validity of Commissioner (Appeals) setting aside the adjudicating authority's partly allowing orders when the adjudicating authority found correlation between services and exports on the basis of corroborative documents. - HELD THAT: - The Tribunal held that the adjudicating authority had carefully scrutinised the refund claims, given elaborate findings service wise, and sanctioned part refunds where correlation could be established from available corroborative documents. The Commissioner (Appeals) reversed those findings on the sole ground of non compliance with certain conditions in the Notifications without appreciating the adjudicating authority's concurrent fact finding that other documents established correlation. Such appellate interference was not justified where the adjudicating authority had applied its mind and validated the nexus between the services and export by reference to documentary evidence. The Tribunal therefore set aside the Commissioner (Appeals) order and restored the adjudicating authority's conclusions. [Paras 6, 8]

The Commissioner (Appeals) order setting aside the adjudicating authority's partial sanctions of refund is set aside; the adjudicating authority's determinations are upheld.

Interpretation of 'wherever applicable' in Notification No. 41/2007-ST - requirement of documentary proof for refund claims - Whether absence of a written agreement between the exporter and the foreign buyer for technical testing and analysis services is fatal to refund where no such agreement was entered into. - HELD THAT: - The Tribunal noted that para 2(f)(iii) of Notification No. 41/2007 ST requires production of a written agreement only 'wherever applicable'. The adjudicating authority found that no such agreement existed or was necessary in the facts of the case and relied on other corroborative particulars (type of fabric, style code, buyer name/code, airway/shipping references) to establish correlation. The Tribunal held that failure to produce a written agreement, when none was in existence or applicable, cannot defeat a refund claim if the requisite nexus is otherwise established by appropriate documents. [Paras 7]

Non production of a written agreement in respect of technical testing and analysis services was not fatal to the refund claim where the agreement was not applicable and correlation was established by other documents.

Correlation between services and export of goods - requirement of documentary proof for refund claims - Whether absence of shipping bill reference in invoices for Custom House Agent (CHA) and clearing & forwarding services, and the documentary particulars in courier invoices, precluded refund. - HELD THAT: - The Tribunal accepted the adjudicating authority's approach that, although some CHA and C&F invoices did not expressly reference the shipping bill, other documents (bill of lading, export invoice, airway bill, particulars in invoices such as type of fabric, style code, buyer identity) established the necessary correlation with exports. Similarly, courier service invoices containing airway bill numbers, recipient details, destination, weight/number of pieces and amount charged were found sufficient to demonstrate the nexus. Where correlation was thus established by corroborative evidence, refund could not be denied merely for non reference to a specific document. [Paras 7, 8]

Absence of explicit shipping bill reference in some CHA/C&F invoices and reliance on comprehensive particulars in courier invoices did not disentitle the appellant to refund where correlation was otherwise established by corroborative documents.

Final Conclusion: The appeals are allowed: the Tribunal restores the adjudicating authority's partial sanctions of the refund claims, holding that non compliance with specific documentary conditions in the Notifications is not decisive where the requisite correlation between services and exports is established by other corroborative documents; the Commissioner (Appeals) order is set aside.

Penalty under Section 78 of the Finance Act, 1994 - payment of service tax and interest before issuance of show cause notice - bonafide belief regarding non liability - reconciliation of accounts as basis for tax demand - interest under Section 75 and its effect on delayed payment - imposition of penalty where tax is paid prior to adjudication

Penalty under Section 78 of the Finance Act, 1994 - payment of service tax and interest before issuance of show cause notice - bonafide belief regarding non liability - reconciliation of accounts as basis for tax demand - Penalty under Section 78 was not imposable where the appellant had paid the admitted service tax and interest before issuance of the show cause notice and a bonafide belief of non liability was found. - HELD THAT: - The Tribunal examined whether penal liability under Section 78 could be sustained when the assessee had discharged the confirmed tax liability along with interest prior to issuance of the show cause notice and where the Commissioner (Appeals) recorded that the assessee entertained a bonafide belief that the tax was not payable. The duty originally alleged arose from a reconciliation of the assessee's books; the adjudication confirmed a lesser amount than originally intimated. The first appellate authority found that the assessee acted under a bona fide belief and that interest under the statute compensated for delayed payment. In those circumstances the Tribunal concluded that the facts did not justify invocation of the penal provision under Section 78, as mere failure to pay at the stipulated time - especially where tax and interest were paid before adjudication and the shortfall arose from reconciliation - did not attract penalty. The Tribunal accepted the approach of relevant precedents relied upon by the assessee and allowed the appeal, setting aside the penalty. [Paras 4]

Penalty under Section 78 set aside and appeal allowed.

Final Conclusion: The appeal is allowed: having paid the confirmed service tax and interest before issuance of the show cause notice, and in view of the recorded bonafide belief and the reconciliation basis of the demand, the penalty under Section 78 is not imposable and is set aside.

Remand for a speaking order - pre-deposit requirement - opportunity of hearing - non-consideration of merits

Remand for a speaking order - pre-deposit requirement - opportunity of hearing - non-consideration of merits - Whether the appeal should be remanded to the Commissioner (A) for passing a reasoned speaking order without insisting on pre-deposit and after affording a hearing. - HELD THAT: - The Commissioner (A) dismissed the appellant's appeal solely for non-compliance with the pre-deposit direction and did not examine or record reasons on the merits. In view of the absence of a reasoned decision on merits and considering the appellant's reliance on tribunal decisions, the matter requires fresh consideration. The Tribunal is prima facie satisfied that the appropriate course is to remit the matter to the Commissioner (A) to pass a reasonable and speaking order on the merits after giving the appellant a reasonable opportunity of hearing, and without insisting on any pre-deposit as a pre-condition to deciding the appeal. [Paras 3]

Appeal allowed by way of remand to the Commissioner (A) with directions to pass a speaking order after affording a reasonable opportunity of hearing and without insisting on pre-deposit.

Final Conclusion: The appeal is disposed by remitting the matter to the Commissioner (A) for a reasoned decision on merits after hearing the appellant, and the Tribunal has directed that no pre-deposit be insisted upon as a condition for such reconsideration.

Definition of "clearing and forwarding agent" under Section 65(25) of the Finance Act, 1994 - scope of "clearing and forwarding operations" and its essential character - distinction between commission/ order procurement agents and clearing & forwarding agents - application of taxing head based on most specific description / essential character of service

Definition of "clearing and forwarding agent" under Section 65(25) of the Finance Act, 1994 - scope of "clearing and forwarding operations" and its essential character - Whether the services rendered by the appellant (liaisoning/supervising placement/loading of coal rakes, sampling, freight formalities and sending rail receipts) amount to services of a clearing and forwarding agent within the meaning of Section 65(25) and are exigible to service tax. - HELD THAT: - The Court examined the statutory definition and common law/commercial understanding of forwarding/clearing agents and identified the essential activities that constitute clearing and forwarding operations - clearing goods from supplier, warehousing, receipt of dispatch orders, arranging dispatch/transport to destination, maintaining receipt/dispatch/stock records and preparing invoices on behalf of the principal. The determinative inquiry is whether the agent performs services connected with such clearing and forwarding operations so that, whether direct or indirect, the services fall within the statutory definition. On the facts, the appellant did not obtain custody of coal, did not clear coal from the collieries, did not arrange transportation or dispatch to destination (destinations and rake placement were fixed under the coal company's contract), and did not perform warehousing, receipt/despatch ordering or related forwarding functions. The appellant's role was limited to supervising/liaisoning with the coal company and Railways to ensure loading as per schedule; it neither undertook loading nor arranged carriage nor took charge of goods. Consequently, the services rendered lacked the essential character of clearing and forwarding operations and therefore did not fall within Section 65(25). [Paras 11, 12, 13]

Services rendered by the appellant do not qualify as services of a clearing and forwarding agent under Section 65(25); demand of service tax quashed.

Distinction between commission/ order procurement agents and clearing & forwarding agents - application of taxing head based on most specific description / essential character of service - Whether the ratio in Prabhat Zarda (which took a wide view that 'any service, either directly or indirectly' could be covered) remains good law, and whether the Full Bench decision in Larsen & Toubro (Tri.-LB) altering that ratio governs the present appeals. - HELD THAT: - The Court noted that a Full Bench of the Tribunal in Larsen & Toubro analysed the definition in context and held that mere procurement of orders or commission agency does not engage in clearing and forwarding operations, because the latter has a specific connotation relating to movement and dispatch of goods and attendant documentary/arrangement functions. The Full Bench thus limited and effectively overruled the earlier ratio in Prabhat Zarda to the extent it equated order procurement/commission activities with C&F operations. The Revenue accepted the Full Bench decision and did not appeal. Applying that binding interpretation, the Court held that agents engaged only in supervision/liaison and order/coordination functions which do not amount to undertaking clearing and forwarding operations cannot be taxed as C&F agents; the test is the essential character of the service and not the mere use of words like "directly" or "indirectly". [Paras 7, 8, 9, 10]

Larsen & Toubro (Full Bench) correctly interpreted Section 65(25) and narrowed the earlier Prabhat Zarda ratio; that interpretation governs these appeals and supports the conclusion that the appellant is not a C&F agent.

Final Conclusion: The appeals by the assessees are allowed; the Tribunal's orders holding them liable as C&F agents and the consequent demand of service tax are set aside. The Revenue's appeal (Civil Appeal No. 9967 of 2014) is dismissed as consequential.

Strict construction of exemption notifications - onus on the assessee to establish entitlement to exemption - scope of exemption limited to "D.C. Defibrillators for internal use" excluding external defibrillators and accessories - capability for internal use versus actual internal implantability

Scope of exemption limited to "D.C. Defibrillators for internal use" excluding external defibrillators and accessories - strict construction of exemption notifications - capability for internal use versus actual internal implantability - Whether the appellant's D.C. Defibrillators qualify for exemption under Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated 01.03.1997 - HELD THAT: - The Court examined the evolution of earlier notifications which had included defibrillators for both internal and external use and accessories, and contrasted those with Notification Nos.8/96 and 4/97 which confined exemption to "D.C. Defibrillators for internal use" and to pacemakers while omitting accessories. The appellant's product was admitted to be primarily for external use and not implantable; internal use required separate paddles that were optional accessories sold separately and in practice predominantly the goods were cleared without paddles. The Tribunal's reasoning - accepted by the Court - was that exclusion of external defibrillators and accessories from the later notifications cannot be circumvented by the fact that the same apparatus may be adapted for internal use only when optional internal paddles are fitted. Applying the principle that exemption notifications are to be strictly construed and the assessee must establish entitlement, the Court held that the appellant did not fulfill the conditions of the notifications and therefore the goods did not qualify for exemption. [Paras 16, 17, 18, 20, 21]

The defibrillators manufactured and cleared by the appellant do not qualify for exemption under Notification No.8/96 and Notification No.4/97.

Onus on the assessee to establish entitlement to exemption - strict construction of exemption notifications - Whether the department was entitled to invoke the extended period of limitation under Section 11A of the Excise Act in respect of the demand - HELD THAT: - The Third Member did not adjudicate the question of extended limitation and directed that the regular Bench consider the matter. The Court affirmed the majority decision on entitlement to exemption and observed that, since the Tribunal will now have to consider the question of limitation in the light of the affirmed view, the issue of extended period was not decided by this Court and remains for the Tribunal's consideration. [Paras 22]

The question of extended limitation under Section 11A is left open for consideration by the Tribunal.

Final Conclusion: The majority view of the Tribunal disallowing exemption under Notification No.8/96 and Notification No.4/97 is upheld and the appeals are dismissed; the question of extended limitation is left to the Tribunal for decision.

Classification of goods - product of milling industry - classification as gum - conflicting decisions of coordinate Benches - reference to a Larger Bench - question whether a process amounts to manufacture - remand for fresh consideration

Conflicting decisions of coordinate Benches - reference to a Larger Bench - Whether, in presence of conflicting decisions by two coordinate Benches of the Tribunal, the matter ought to have been referred to a Larger Bench - HELD THAT: - The Court found that two coordinate Benches had taken opposite views on the classification question - one treating the product as a gum and another treating a similar product as a product of the milling industry. Having identified this conflict of opinion, the Tribunal was obliged to refer the question to a Larger Bench for authoritative resolution. The Tribunal's choice to follow one decision and to treat the other as not binding, without referring the matter for a larger Bench decision, was impermissible. In view of this, the impugned order could not stand and required setting aside and remand for consideration by a Larger Bench.

Impugned order set aside; Tribunal's failure to refer conflicting Bench decisions to a Larger Bench held impermissible and remitted for reference to a Larger Bench.

Classification of goods - product of milling industry - classification as gum - question whether a process amounts to manufacture - remand for fresh consideration - Reference of the classification and manufacturing issue to a Larger Bench for fresh decision - HELD THAT: - The Court did not decide on the substantive question whether the Guar Dal Powder is classifiable under the Chapter Heading for milling products or under the Heading for gums, nor definitively resolve whether the conversion process amounts to 'manufacture' for excise purposes. Noting that the Tribunal in the impugned order had held the process to constitute manufacture, and that the identical issue was left open in earlier proceedings remitted to the Tribunal, the Court remitted the matter to the Tribunal to be heard by a Larger Bench which is directed to take a fresh look at both classification and the manufacture question. The Court also directed expedition given the age of the matter, requiring decision within six months.

Classification and the question whether the process amounts to manufacture remitted to the Tribunal to be decided by a Larger Bench within six months.

Final Conclusion: Impugned Tribunal order set aside and the matter remitted to the Tribunal for consideration by a Larger Bench on the classification (milling product versus gum) and whether the process constitutes manufacture; Tribunal directed to decide the matter within six months.

Invocation of proviso to Section 11AC of the Central Excise Act - suppression of facts with intent to evade duty - assessable value - inclusion of other works overhead in conversion cost - bona fide reliance on third party cost audit report

Invocation of proviso to Section 11AC of the Central Excise Act - suppression of facts with intent to evade duty - bona fide reliance on third party cost audit report - Whether the Department could invoke the extended period of limitation by relying on the proviso to Section 11AC in respect of alleged understatement of assessable value by omission of 'other works overhead'. - HELD THAT: - The Court accepted the Department's finding that the appellant had not included the 'other works overhead' element when arriving at assessable value although that element formed part of the conversion cost disclosed in the costing report. The appellant's plea of bona fide reliance on P&G's cost audit report was examined and rejected on the ground that, notwithstanding supply of the audit report by P&G, it was the appellant which finalised the costing, prepared the cost sheet through its chartered accountant and submitted the same to the Department. The adjudicating authority's conclusion that the omission was a suppression of facts with intent to evade duty was found to be supported by documentary material on record and the authority's reasoning. On that basis the Court held that invocation of the proviso to Section 11AC for extending the period of limitation was justified.

Invocation of the proviso to Section 11AC was justified because the omission to include 'other works overhead' constituted suppression of facts with intent to evade duty; the plea of bona fide reliance on the cost audit report was rejected.

Final Conclusion: Appeal dismissed; the extended period under the proviso to Section 11AC was rightly invoked and the demand confirmed on the ground of suppression of material costing particulars by the appellant.

Mandatory imposition of penalty under Section 11AC - imposition of interest under Section 11AB - no discretion to waive interest or penalty where provisions apply - effect of payment of duty prior to issuance of show cause notice on liability for interest and penalty

Mandatory imposition of penalty under Section 11AC - effect of payment of duty prior to issuance of show cause notice on liability for penalty - Penalty under Section 11AC is mandatorily imposable where the statutory conditions are satisfied, and prior payment of duty before issuance of show cause notice does not entitle the assessee to avoidance of the penalty. - HELD THAT: - The Court followed the Larger Bench decision in Union of India v. Dharamendra Textile Processors and subsequent authority in Union of India v. Rajasthan Spinning & Weaving Mills to hold that Section 11AC prescribes a mandatory penalty once the statutory conditions are met. The judgments indicate that there is no scope for discretion to decline or reduce the penalty where the section applies; the fact that duty was paid prior to issuance of the show cause notice does not negate the applicability of the mandatory penalty provision. Consequently the Tribunal's deletion of the penalty on the grounds relied upon by the lower authorities was unsustainable. [Paras 5]

Penalty under Section 11AC must be imposed as mandatory where the section applies; deletion of penalty by lower authorities set aside.

Imposition of interest under Section 11AB - no discretion to waive interest or penalty where provisions apply - effect of payment of duty prior to issuance of show cause notice on liability for interest - Interest under Section 11AB is payable even where duty has been paid prior to the issuance of the show cause notice; authorities lack discretion to waive such interest once the provision is applicable. - HELD THAT: - Section 11AB came into effect from 28.9.1996 and prescribes interest for delayed payment of duty. The Court rejected the department's contention that Section 11AB was inapplicable for periods prior to 2001 and observed that changes in interest rates in 2001 are irrelevant to the fundamental applicability of the provision. The Tribunal erred in deleting interest on the basis that duty had been paid before issuance of the show cause notice; there is no escapement from payment of interest under Section 11AB where the statutory conditions for charging interest are satisfied. [Paras 7]

Interest under Section 11AB is payable despite pre-show-cause notice payment of duty; deletion of interest by the Tribunal is set aside.

Final Conclusion: Appeal allowed; the Tribunal's order dated 16.6.08 is set aside insofar as it deleted interest under Section 11AB and penalty under Section 11AC, which are held to be imposable where the statutory conditions obtain; no order as to costs.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Personal liability of company officers for excise defaults - Claim of exemption under Notification No. 50/2003-C.E.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Personal liability of company officers - Claim of exemption under Notification No. 50/2003-C.E. - Whether personal penalties under Rule 26 could be imposed on the petitioners for claiming exemption under Notification No. 50/2003-C.E. - HELD THAT: - Rule 26(1) penalises persons who deal with excisable goods which they know or have reason to believe are liable to confiscation; Rule 26(2) penalises issuance or abetment of excise duty invoices or documents used to obtain ineligible benefits. The petitioners were neither found to have transported, removed, deposited, kept, concealed, sold or purchased excisable goods liable to confiscation nor to have issued or abetted issuance of excise duty invoices or other documents used to obtain ineligible benefits. They had advanced a legal claim for exemption under Notification No. 50/2003-C.E. and the subsequent finding that the legal ground was not available to the unit does not transform that claim into conduct falling within the specific mischiefs enumerated in Rule 26. Invocation of Rule 26 requires factual findings that the statutory acts proscribed by its sub-rules were committed; mere unsuccessful assertion of an exemption cannot sustain personal penalties under Rule 26.

Personal penalties imposed under Rule 26 against the petitioners for claiming the exemption are beyond the scope of Rule 26 and are quashed.

Final Conclusion: Writ petitions allowed; impugned orders insofar as they impose personal penalties on the petitioners under Rule 26 are quashed, the challenge to imposition of excise duty on the unit not addressed.

CESTAT's reliance on precedential reasoning - appreciation of evidence and factual findings - cross-examination and evidentiary sufficiency of statements - substantial question of law - kar vivad samadhan scheme

CESTAT's reliance on precedential reasoning - appreciation of evidence and factual findings - substantial question of law - Validity of CESTAT's decision to adopt reasoning from the D.P. Industries decision and allow the assessee's appeal based on common evidence and factual appreciation. - HELD THAT: - The Court held that the Tribunal's reliance upon and adoption of its reasoning in the decision in D.P. Industries was a matter of appreciation of evidence common to both matters. The challenge raised by the Revenue essentially disputed factual findings reached by the Tribunal concerning sufficiency of seized documents and recorded statements to establish clandestine clearances. Given that the evidence and the basis for demand were common, and that the Tribunal had examined the statements and documents in D.P. Industries and found them insufficient to sustain the clandestine-clearance charge, the High Court found no substantial question of law warranting interference. The Court emphasised that contesting the Tribunal's factual appreciation does not, without more, raise a substantial question of law justifying reversal of the CESTAT order. [Paras 8]

The Revenue's challenge to the Tribunal's adoption of D.P. Industries reasoning and the resulting allowance of the assessee's appeal is dismissed for lack of any substantial question of law.

Cross-examination and evidentiary sufficiency of statements - kar vivad samadhan scheme - appreciation of evidence and factual findings - Whether failure to cross-examine the witness Sanjay Jain and related evidentiary defects vitiated the Tribunal's decision or raised a substantial question of law. - HELD THAT: - The Court noted that the question whether a witness was cross-examined and the inferences drawn by the Tribunal were essentially matters of factual appreciation. Further, the initial inspection irregularity that triggered the show cause notice had been dealt with by the assessee under the 'kar vivad samadhan scheme', which the Revenue accepted; this circumstance undercuts the contention that the absence of cross-examination of a single witness created a legal defect sufficient to disturb the Tribunal's conclusion. Thus, the Court concluded that the Revenue's complaint about non-cross-examination did not amount to a substantial question of law requiring adjudication. [Paras 8]

The objection based on absence of cross-examination of Sanjay Jain and related evidentiary complaints do not constitute a substantial question of law; the appeal is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the High Court finds no substantial question of law in the Tribunal's fact based adoption of its reasoning in D.P. Industries and in the evidentiary complaints, having regard also to the acceptance under the kar vivad samadhan scheme.

Directing expeditious disposal of appeal - mandamus for disposal within reasonable time - registration under the Karnataka Value Added Tax Act, 2003 - appearance before appellate authority without separate notice - writ of certiorari

Directing expeditious disposal of appeal - mandamus for disposal within reasonable time - registration under the Karnataka Value Added Tax Act, 2003 - appearance before appellate authority without separate notice - Direction issued to the appellate authority to consider and dispose the appeal filed by the petitioner expeditiously in the context of registration under the Karnataka Value Added Tax Act, 2003. - HELD THAT: - The petitioner sought quashing of the impugned order and an early hearing and disposal of the appeal against the order at Annexure-D. The petitioner's counsel did not press the prayer for quashing and limited relief to a direction for early disposal. The Court found that the appeal before the Joint Commissioner of Commercial Taxes (respondent no.1) had not been taken up and that the appropriate relief was a direction to consider and dispose the pending appeal in an expeditious manner, specifically in the context of the petitioner's registration under the Karnataka Value Added Tax Act, 2003. To implement this, the Court directed the petitioner to appear before the first respondent on a specified date without insisting on separate notice and fixed a calendar date by which the first respondent must dispose the appeal. [Paras 4, 5]

Petitioner directed to appear before the first respondent on 3.12.2014 without requiring separate notice; first respondent directed to consider and dispose the appeal by 7.1.2015.

Final Conclusion: Writ petition disposed by directing the appellate authority to consider and finally dispose the petitioner's pending appeal concerning registration under the Karnataka Value Added Tax Act, 2003 within the time fixed by the Court, with the petitioner required to appear on the specified date.

Compounding of offence - show cause notice for composition of offence - detention and release of vehicle subject to conditions - burden to substantiate movement of goods by production of documents - offence under Section 71(5)(a) of the Tamil Nadu Value Added Tax Act, 2006 - consideration of objections on merits by assessing authority

Show cause notice for composition of offence - burden to substantiate movement of goods by production of documents - The petitioner cannot obtain pre-emptive quashing of the show cause and draft compounding notices without first submitting written objections and documentary evidence to the assessing authority. - HELD THAT: - The Court observed that the impugned proceedings consist only of a show cause notice and draft compounding notice and that the petitioner has an available remedy to submit objections and satisfy the respondent that the goods were accompanied by proper documents. The mere fact that the vehicle's driver entered Sidco Sundarapuram en route does not ipso facto render the transportation illegal; correctness of the movement and genuineness of documents is a matter for the respondent to examine on receipt of the petitioner's objections. Since the petitioner approached the Court without first availing the departmental remedy, the Court declined to quash the notices at the admission stage and directed the petitioner to submit objections in writing with supporting documents. [Paras 6]

Petition for quashing dismissed without prejudice; petitioner directed to submit written objections and supporting documents to the show cause notice.

Detention and release of vehicle subject to conditions - departmental compounding - The vehicle detained for verification shall be released on conditions imposed by the Court to prevent irreparable hardship and deterioration of goods. - HELD THAT: - Having regard to the petitioner's submission of irreparable financial hardship and risk to the quality of the lubricants, the Court exercised its discretionary supervisory jurisdiction to order release of the vehicle on fulfilment of specified conditions. The conditions imposed were (i) payment by the petitioner of the tax component demanded in the draft compounding notice and (ii) filing of written objections with supporting documents. Compliance with these conditions was made a precondition for immediate release, balancing the departmental interest in recovery and investigation with the hardship and perishable nature of the consignment. [Paras 7, 8]

Vehicle ordered released forthwith upon petitioner paying the tax demanded in the draft compounding notice and submitting written objections with supporting documents.

Consideration of objections on merits by assessing authority - The assessing authority is directed to consider the petitioner's objections on merits and in accordance with law within a specified timeframe. - HELD THAT: - The Court directed that once the petitioner files the reply/objection and supporting documents and complies with the conditions for release, the respondent shall consider the petitioner's objection/explanation and pass an order on merits and in accordance with law. The time stipulated for disposal of the petitioner's objection is three weeks from the date of filing of the reply/objection, thereby remitting the substantive adjudication to the departmental authority for fresh consideration. [Paras 8]

Matter remitted to the respondent to consider and decide the objection on merits within three weeks of filing the petitioner's reply/objection.

Final Conclusion: The writ petition is disposed of by directing the petitioner to submit written objections with supporting documents; the detained vehicle is ordered released conditionally on payment of the tax demanded and filing of objections; and the assessing authority is directed to consider and decide the objections on merits within three weeks.

Violation of principles of natural justice - absence of show cause notice - assessment order quashed for lack of notice - enhancement of rate of tax without opportunity of hearing - revision of assessment

Revision of assessment - absence of show cause notice - enhancement of rate of tax without opportunity of hearing - Impugned revision of assessment dated 31.07.2014 for Assessment Year 2011-12 is invalid for having increased the rate of tax without issuance of a show cause notice and without recording any notice in the assessment order. - HELD THAT: - The original assessment order dated 07.10.2013 had levied tax at concessional rates. The impugned revision dated 31.07.2014 increases the rate to 12.5%/14.5% but the revision order contains no reference to any show cause notice having been issued or to any objections of the dealer. The court finds that if a show cause notice had been issued it ought to have been recorded in the reference column and the body of the assessment order indicating service, objections and responses. The absence of any such reference and the enhancement of tax rate without affording the dealer an opportunity of being heard renders the impugned order illegal. [Paras 6]

Impugned revision order for Assessment Year 2011-12 is quashed for want of notice; respondent directed to issue show cause notice, receive objections and pass a reasoned order after personal hearing.

Violation of principles of natural justice - absence of show cause notice - enhancement of rate of tax without opportunity of hearing - Original assessment dated 31.07.2014 for Assessment Year 2010-11 is bad in law because the assessing authority enhanced the tax rate from the concessional rate to 12.5% without issuing notice or affording opportunity to the dealer. - HELD THAT: - The dealer had filed returns declaring turnover and had remitted tax at concessional rate. The assessment enhances the tax rate on the ground that concessional rate is not applicable, yet no show cause notice is recorded or appears to have been issued. Such enhancement of tax liability without notice and without hearing is a breach of the principles of natural justice. Consequently the assessment cannot be sustained. [Paras 7]

Impugned assessment for Assessment Year 2010-11 is quashed for violation of natural justice; respondent directed to issue show cause notice, receive objections and pass a reasoned order after personal hearing.

Final Conclusion: Writ petitions allowed; impugned assessment and revision orders dated 31.07.2014 quashed. Respondent directed to issue show cause notices for both Assessment Years, receive objections, afford personal hearing and thereafter pass reasoned orders on merits and in accordance with law, expeditiously.

Principles of natural justice - opportunity of personal hearing - remand for fresh consideration - validity of assessment orders - enforcement wing proposal

Principles of natural justice - validity of assessment orders - enforcement wing proposal - Whether the impugned assessment orders are vitiated for non-consideration of the petitioner's objection and thereby violate principles of natural justice. - HELD THAT: - The Court found that the petitioner submitted an objection dated 03.09.2013 (received in the respondent's office on 04.09.2013) challenging the proposal of the Deputy Commissioner (Enforcement) dated 10.07.2013 and requesting documents. The respondent's counter-affidavit did not specifically deny receipt of that communication and proceeded on merits instead. The impugned orders dated 31.10.2013 were passed without considering the petitioner's objection. On these facts the Court held that the procedure adopted resulted in a breach of the principles of natural justice, inasmuch as a duly submitted objection was not considered before confirming the enforcement proposal and passing the assessments. The Court confined its interference to this procedural defect and did not adjudicate the merits of the assessments themselves.

Impugned assessment orders set aside as violative of principles of natural justice for failure to consider the petitioner's objection.

Remand for fresh consideration - opportunity of personal hearing - Relief to be granted and the manner of disposal on remand. - HELD THAT: - Having found procedural infirmity, the Court remitted the matters to the respondent for fresh consideration. The respondent was directed to afford the petitioner an opportunity of personal hearing, consider the petitioner's objections and documents, and pass fresh orders on merits and in accordance with law. The Court imposed a time limit for completing the exercise to ensure effective redress, directing completion within three months from receipt of a copy of the order. The Court expressly refrained from deciding the substantive correctness of the assessments, leaving those issues to be determined on reconsideration.

Matters remitted for fresh consideration; respondent to grant personal hearing and decide objections on merits within three months.

Final Conclusion: Writ petitions allowed: impugned assessment orders dated 31.10.2013 for Assessment Years 2009-10 and 2010-11 set aside for violation of principles of natural justice and remitted to the respondent for fresh consideration with a personal hearing within three months.