TaxTMI Updates e-Newsletter
May 12,2021

Consideration of bail under Article 226 - offences under Section 132(1)(b) and (c) of the CGST Act - power of arrest under Section 69 of the CGST Act - investigation not to be interfered with - factors for grant of bail - compoundability of offences

Consideration of bail under Article 226 - investigation not to be interfered with - factors for grant of bail - Prayer for interim/ad interim bail under Article 226 in respect of arrest under the CGST Act was rejected. - HELD THAT: - The Court, applying the settled factors relevant to bail applications (as summarized from precedent), considered the nature and scale of the alleged fraud, the stage of an active investigation aimed at identifying the alleged mastermind and other key conspirators, the risk of tampering with evidence or influencing witnesses, and public interest. The Court observed that the authorities have recorded reasons to believe that the petitioner played an active role in paper transactions purporting to involve a large revenue figure and that several material premises and records were found to be non-existent or vacant; further investigative steps (including summons to co conspirators) were underway. In these circumstances interference with the ongoing investigation was declined and the exceptional relief of bail under Article 226 was refused. The Court distinguished the earlier Daulat Mehta decision on its facts and noted that compoundability of the offence and ultimate revenue collection objectives did not justify immediate interference with the investigation at the present stage. [Paras 16, 17, 18, 19]

Petitioner's prayer for bail is rejected; petitioner may pursue other remedies in law.

Offences under Section 132(1)(b) and (c) of the CGST Act - power of arrest under Section 69 of the CGST Act - compoundability of offences - Constitutional challenge to the validity of the offence provision and the scope/timing of arrest powers was not adjudicated on the merits at this stage. - HELD THAT: - Although the petition sought declarations on the constitutionality of the provision penalising issuance of invoices without supply and on the manner/timing of exercise of arrest powers, the Court declined to decide these substantive legal questions at this interlocutory stage so as not to foreclose or hamper the ongoing investigation. The Court observed that issues such as constitutional validity of the penal provision and the power of arrest under the statute can be taken up for decision in due course; reference was made to the compoundability of the offence but this was not treated as a ground for immediate relief. [Paras 6, 16]

Constitutional and statutory challenges were not decided; they remain for adjudication at the appropriate stage.

Final Conclusion: Interim relief in the form of bail and other coercive relief prayers are refused at this stage since the Court will not interfere with the ongoing investigation; substantive legal challenges to the penal provisions and arrest powers have been left open for decision at the appropriate stage and the petitioner is at liberty to pursue other available remedies.

Refund of GST - interest on refund - decision in accordance with law, rules, regulations and Government policies - application of Mafatlal principle - expeditious adjudication

Refund of GST - interest on refund - application of Mafatlal principle - expeditious adjudication - Claim for refund of GST (with interest) for the period April, 2020 - May, 2020 remitted to the respondent authorities for fresh decision. - HELD THAT: - The High Court noted that the petitioner has filed a refund application for the stated period which remained undecided. The Court did not adjudicate the merits of the refund claim but directed the concerned respondent authorities to decide the petitioner's refund claim in accordance with applicable law, rules, regulations and Government policies, explicitly taking into account the Supreme Court's decision in Mafatlal Industries Ltd. vs. Union of India. The Court required that the claim be decided as expeditiously as possible and practicable, leaving the determination of entitlement and interest to the competent authority on consideration of the pending refund application and relevant law. [Paras 3]

The refund claim for April, 2020 - May, 2020 is remitted to the respondent authorities for decision in accordance with law (including Mafatlal) and to be disposed of expeditiously; the writ petition is disposed.

Final Conclusion: The writ petition is disposed of by directing the respondent authorities to decide the petitioner's pending refund claim for April, 2020 - May, 2020 (including any interest) in accordance with law, rules, regulations, Government policies and the Mafatlal decision, expeditiously.

Full and true disclosure of income - entertainability of application under Section 245-C - jurisdiction of the Settlement Commission to entertain applications - power of Assessing Officer under Section 153A vis-a -vis Settlement Commission - settlement as an enabling provision requiring mutual consensus - rejection of application where disclosure is incomplete and remand for regular assessment - proviso to Section 245-D regarding concealment or fraud

Full and true disclosure of income - entertainability of application under Section 245-C - proviso to Section 245-D regarding concealment or fraud - Application under Section 245(C) filed by the assessee was not entertainable because it did not contain a full and true disclosure of income and the Settlement Commission ought to have rejected the application. - HELD THAT: - The Court examined the statutory requirement that an application under Section 245(C) must contain a "full and true disclosure" of undisclosed income, the manner of derivation and the tax payable, and held that this is a pre-condition to entertainability. The power to determine whether disclosure is full and true vests in the Settlement Commission, but if material before the Commission (including belated statements filed by the assessee during proceedings) demonstrates that the original application lacked full and true disclosure, the Commission cannot proceed to settle the case. The Court relied on settled precedents emphasizing that revised or belated annexures showing additional undisclosed income demonstrate non-entertainability of the original application and that the Commission must reject such applications rather than permit settlement where concealment is indicated. Applying these principles to the facts, the Court found that the assessee filed additional statements during the proceedings revealing omissions and therefore the original application could not be regarded as containing full and true disclosure; accordingly the Settlement Commission erred in proceeding to settle the matter. [Paras 13, 14, 18, 23, 24]

The Settlement Commission ought to have rejected the application for want of full and true disclosure; its order settling the case is quashed on this ground.

Power of Assessing Officer under Section 153A vis-a -vis Settlement Commission - settlement as an enabling provision requiring mutual consensus - rejection of application where disclosure is incomplete and remand for regular assessment - Settlement Commission exceeded its jurisdiction by effectively usurping assessment functions vested in the Assessing Officer and the matter is to be sent back for regular assessment. - HELD THAT: - The Court emphasised that Chapter XIX-A is an enabling provision permitting settlement where parties approach with clean hands and mutual consensus; it does not authorize the Settlement Commission to exercise the original assessment powers of the Assessing Officer under Section 153A. Where doubts exist as to the completeness or truthfulness of disclosure, the proper course is to permit the Assessing Officer to make regular assessment under Section 153A rather than allow the Settlement Commission to adjudicate de facto assessments. Applying this reasoning to the present case, the Court concluded that by settling the matter after additional disclosures were made in the course of proceedings, the Settlement Commission travelled beyond the scope of its settlement jurisdiction and thereby prejudiced the Revenue; consequently the correct remedy is quashing of the settlement order and remittance for regular assessment by the Assessing Officer. [Paras 20, 21, 24, 25, 26]

The Settlement Commission exceeded its jurisdiction; the impugned order is quashed and the matter is remitted for regular assessment by the Assessing Officer.

Final Conclusion: The Settlement Commission's order dated 14.03.2008 is quashed: the application under Section 245(C) was not entertainable for want of full and true disclosure and the Commission exceeded its jurisdiction by encroaching on assessment functions; the matter is remitted for regular assessment by the Assessing Officer for Assessment Year 2006-07.

Reopening of assessment under Section 147 of the Income Tax Act - Reason to believe - Change of opinion - Under-assessment as ground for reopening - Explanation 1 to Section 147 - production of evidence not amounting to disclosure - Assessing Officer's sufficiency of reasons not examinable in writ jurisdiction - Claim of deduction under Section 80-IA - initial assessment year and choice of ten years - High Court's limited role under Article 226 in adjudicating disputed factual/accounting intricacies

Reopening of assessment under Section 147 of the Income Tax Act - Under-assessment as ground for reopening - Claim of deduction under Section 80-IA - initial assessment year and choice of ten years - Validity of initiation of proceedings under Section 147/148 in respect of the assessments for AY 2006-07, 2007-08 and 2009-10. - HELD THAT: - The Court held that Section 147 encompasses cases where income chargeable to tax has been under-assessed; Explanation 1 clarifies that production of books or evidence before the Assessing Officer does not necessarily constitute disclosure if material could have been discovered with due diligence. The Department recorded reasons stating that the assessee, which commenced operations in AY 1996-97, could not elect a later initial assessment year under the pre-amendment scheme and that the assessee's claims of deduction under Section 80-IA for later years resulted in excess deduction and escapement of income. These findings constituted material from which the Assessing Officer had a reason to believe that income had escaped assessment and thereby justified issuance of notices under Section 148 for the stated assessment years. The Court emphasized that the assessee would have opportunity to defend the claim before the Assessing Officer during reassessment. [Paras 13, 14, 15, 16]

Proceedings to reopen the assessments for AY 2006-07, 2007-08 and 2009-10 under Section 147/148 are lawful and may be proceeded with by the Revenue.

Change of opinion - Reason to believe - Claim of deduction under Section 80-IA - initial assessment year and choice of ten years - Whether the impugned reopening amounted to an impermissible change of opinion. - HELD THAT: - The Court rejected the contention that the reopening constituted merely a change of opinion. It observed that the Department identified specific materials and a legal interpretation - namely, that the assessee's eligibility under the pre-amended Section 80-IA fixed the initial assessment year as AY 1996-97 and limited the deduction - which, in the view of the authorities, demonstrated that excess deduction had been allowed and income escaped assessment. Such identification of materials and the formation of a 'reason to believe' that escapement occurred cannot be equated with mere change of opinion and thus did not render the reopening invalid at the writ stage. [Paras 3, 11, 12, 16]

Reopening was not vitiated as a mere change of opinion; the recorded materials furnished a reason to believe to reopen.

Assessing Officer's sufficiency of reasons not examinable in writ jurisdiction - High Court's limited role under Article 226 in adjudicating disputed factual/accounting intricacies - Extent to which the High Court may examine the sufficiency of reasons for reopening in writ proceedings under Article 226. - HELD THAT: - The Court reiterated that while it can examine whether one of the circumstances contemplated by Section 147 is prima facie attracted, the sufficiency or adequacy of the materials is for the Assessing Officer to investigate during reassessment. The High Court will not adjudicate contested factual or accounting intricacies in writ jurisdiction; if the Revenue has made out a prima facie reason to believe, the reassessment process must be permitted to proceed and the assessee afforded the statutory forums and opportunities to contest the claim. [Paras 13, 17, 18]

High Court will not go into the sufficiency of the reasons at the writ stage; reassessment may proceed and disputed facts are to be decided by the statutory authorities.

Final Conclusion: Writ petitions challenging the initiation of reassessment proceedings for AY 2006-07, 2007-08 and 2009-10 were dismissed; the Court found recorded reasons constituted a prima facie 'reason to believe' under Section 147/148 and declined to examine sufficiency of those reasons in writ jurisdiction, leaving factual and legal adjudication to reassessment proceedings.

Reopening of assessment under Section 147 - reason to believe - borrowed satisfaction - sanction for issuance of notice beyond four years under Section 151 - processing of return under Section 143(1) and applicability of proviso to Section 147 - live nexus between information received and escapement of income - permissibility of affidavit to clarify recorded reasons without introducing new grounds

Reopening of assessment under Section 147 - reason to believe - processing of return under Section 143(1) and applicability of proviso to Section 147 - live nexus between information received and escapement of income - Validity of reopening the assessment by issuance of notice under Section 148/147 on the basis of information that the assessee sold penny-stock shares and claimed LTCG exemption - HELD THAT: - The Court held that where the return has been processed under Section 143(1) and no scrutiny assessment under Section 143(3) was made, the proviso to Section 147 does not apply and the Assessing Officer may form a 'reason to believe' from examination of the return and documents accompanying it; fresh tangible material is not always necessary. The reasons recorded show that information from the investigation module indicated sale of 85,000 shares of Tuni Textiles (penny stock) and that price movement was prima facie not supported by fundamentals, pointing to possible accommodation entries. The Assessing Officer made enquiries, applied his mind to the information and materials, and formed an opinion that income chargeable to tax had escaped assessment. At the stage of issuance of notice the Court will not probe the adequacy or sufficiency of reasons; the test is whether there was a cause or justification for belief which is not so irrational as to be outside administrative discretion. Applying these principles, the Court found a live link between the material gathered and the belief of escapement of income and held there was enough material to initiate proceedings under Section 147. [Paras 15, 16, 21, 22, 23]

Reopening of assessment on the stated grounds was valid and the Assessing Officer had reason to believe that income had escaped assessment.

Borrowed satisfaction - independent application of mind - Whether the reasons recorded were a mere borrowed satisfaction or reflected independent application of mind by the Assessing Officer - HELD THAT: - The Court examined the recorded reasons and the enquiries made by the Assessing Officer and concluded that the AO did not merely adopt a blind, borrowed satisfaction. The AO referred to specific information from the investigation wing, observed characteristics of the transactions (penny stock, abnormal price rise not supported by fundamentals) and undertook enquiries before forming belief. Given that the AO applied his mind to the information and was satisfied that escapement was indicated, the objection of borrowed satisfaction was rejected. [Paras 16, 20, 23, 24]

The reopening was not based on borrowed satisfaction; the Assessing Officer applied independent mind.

Sanction for issuance of notice beyond four years under Section 151 - permissibility of affidavit to clarify recorded reasons without introducing new grounds - Validity of sanction obtained for issuing notice beyond four years and admissibility of revenue affidavit supplementing recorded reasons - HELD THAT: - The Court noted that sanction required for reopening beyond four years had been obtained and a copy of the approval was supplied to the assessee during disposal of objections; the authorities had applied their mind and expressed satisfaction with recorded reasons. Regarding the affidavit filed by the revenue, the Court held that explanatory clarification of the reasons recorded is permissible so long as it does not introduce new grounds or materials not found in the recorded reasons; the fuller particulars in the affidavit were treated as clarificatory and not as impermissible supplementation that would vitiate the reopening. [Paras 18, 19, 25]

Sanction was validly obtained and the revenue's affidavit merely clarified recorded reasons without introducing new grounds; it did not invalidate the notice.

Final Conclusion: The writ petition challenging the notice for reopening assessment for A.Y. 2012-13 is without merit and is dismissed; the Assessing Officer had jurisdiction to reopen and the statutory sanction and recorded reasons were adequate for initiation of proceedings.

Disallowance of expenditure under section 14A read with Rule 8D - limitation of disallowance by exempt income

Disallowance of expenditure under section 14A read with Rule 8D - limitation of disallowance by exempt income - Extent of disallowance under section 14A read with Rule 8D in the assessment years 2013-14 and 2014-15 - HELD THAT: - The Tribunal held that the disallowance computed under section 14A read with Rule 8D cannot exceed the amount of exempt income earned in the relevant year. Reliance was placed on the settled position in preceding decisions to the effect that Rule 8D disallowance is to be restricted by the quantum of exempt income. Applying this principle to the assessee's computations, the Tribunal directed the Assessing Officer to restrict the disallowance to the exempt income shown in the respective assessments for the years in question.

Disallowance under section 14A read with Rule 8D restricted to the exempt income of the assessee for A.Y. 2013-14 and A.Y. 2014-15; appeals partly allowed to that extent.

Final Conclusion: Both appeals are partly allowed by restricting the disallowance under section 14A read with Rule 8D to the exempt income declared for A.Y. 2013-14 and A.Y. 2014-15, and the Assessing Officer is directed to give effect to this limitation.

Characterisation of agricultural land as capital asset under section 2(14) of the Income Tax Act - application of stamp duty valuation for deeming value under section 50C - deduction for reinvestment in agricultural land under section 54B - relevance of revenue records and contemporaneous official certificate in land classification

Characterisation of agricultural land as capital asset under section 2(14) of the Income Tax Act - relevance of population threshold and distance from municipal limits - weight of revenue records and Dy. Collector's certificate - Whether the land sold by the assessee is to be treated as agricultural land and not a capital asset for AY 2012-13. - HELD THAT: - The Tribunal found on the material on record that the land was shown as agricultural in revenue records, was actually used for agriculture up to the date of sale (standing crops, borewell, trees) and the Dy. Collector's certificate corroborated these facts. The village population was under 10,000 and the land lay outside the municipal limits in the relevant sense relied upon by the Revenue, so that the condition in section 2(14) treating certain lands as capital assets was not satisfied. The Tribunal also relied on consistent treatment in the case of the co owner and on coordinate bench decisions which give primacy to revenue classification, actual use and absence of steps to convert the land for non agricultural use. On these determinative facts the Tribunal concluded that the land was agricultural and not a capital asset for the assessment year in question. [Paras 19]

Land to be treated as agricultural land and not as a capital asset for AY 2012-13.

Deduction for reinvestment in agricultural land under section 54B - proof of purchase by agreements (satakhat), possession and verifiable payments - partial acceptance by AO and appellate correction - Whether the assessee is entitled to deduction under section 54B for reinvestment in agricultural land. - HELD THAT: - The Tribunal observed that having held the transferred property to be agricultural, the assessee met the essential conditions for deduction under section 54B. Although the AO had restricted the deduction because certain payments were supported by cash transactions and not registered deeds, the assessee produced agreements (satakhat), affidavits of sellers, evidence of possession and other supporting material. On balance and in view of the factual findings on classification and reinvestment, the Tribunal directed that the deduction under section 54B be allowed and the assessing officer was directed to give effect to that entitlement. [Paras 23]

Deduction under section 54B to be allowed to the assessee; assessing officer directed to give effect.

Final Conclusion: Both appeals for Assessment Year (AY) 2012-13 are allowed: the impugned land is held to be agricultural (not a capital asset) and the deduction under section 54B is directed to be allowed; the assessing officer shall give effect to these directions.

Capital receipt not chargeable to tax - exemption under section 10(2A) - taxability of amount received on retirement of a partner - transfer within the meaning of section 2(47) - book profits under section 115JB and Explanation 1 thereto - revaluation reserve and devaluation - capital nature of entries - income from house property versus business income for leased commercial premises - notional interest on interest-free deposit and determination of annual value/fair rent - assessment of partnership firm capital gains vis-a -vis taxability in hands of partners

Taxability of amount received on retirement of a partner - capital receipt not chargeable to tax - exemption under section 10(2A) - transfer within the meaning of section 2(47) - assessment of partnership firm capital gains vis-a -vis taxability in hands of partners - Whether the amount claimed by the assessee as share of surplus on revaluation received from the partnership firm on retirement is taxable as capital gains or is a capital receipt exempt under section 10(2A). - HELD THAT: - The Tribunal found that the firm had itself revalued and later devalued the asset and realised profits on sale which were offered to tax and taxed in the hands of the firm. The assessee only received amounts standing to its credit in the firm's books on retirement (actual payment being much lower than the notional revaluation amount). Following binding precedents that where a retiring partner does not transfer or relinquish interest in favour of continuing partners there is no transfer liable to capital gains and that tax liability, if any, is of the firm, the Tribunal held that the sums received by the assessee were capital receipts and eligible for exemption under section 10(2A). The Tribunal therefore rejected the Revenue's contention that the notional revaluation surplus constituted a transfer under section 2(47) attracting capital gains in the hands of the retiring partner, and directed deletion of the capital gains assessed in the assessee's hands. [Paras 4, 10]

Amount received on retirement from the partnership firm is a capital receipt, exempt under section 10(2A), not taxable as capital gains in the hands of the retiring partner; revenue appeal on this point dismissed and assessee appeal allowed.

Book profits under section 115JB and Explanation 1 thereto - revaluation reserve and devaluation - capital nature of entries - capital receipt not chargeable to tax - Whether the notional revaluation surplus (and the amounts received consequent thereto) are includible in book profits under section 115JB. - HELD THAT: - The Tribunal accepted that the revaluation and subsequent devaluation were unilateral notional accounting adjustments recorded in the firm's books and that the amounts received by the assessee did not constitute income within the meaning of section 2(24). Relying on authorities and reasoning that section 115JB requires inclusion only of receipts that are income in nature, the Tribunal held that a capital receipt which is not income from inception cannot be brought into book profits. Consequently, the deduction claimed on account of the capital receipt was to be allowed and the addition made for computing book profit deleted. [Paras 4, 10, 13]

Revaluation surplus being a capital receipt not within section 2(24) is not includible in book profits under section 115JB; addition deleted.

Revaluation reserve and devaluation - capital nature of entries - assessment of partnership firm capital gains vis-a -vis taxability in hands of partners - Whether the devaluation entry in the firm's books giving rise to a notional reduction could be treated as undisclosed/unaccounted income or investment in the hands of the assessee. - HELD THAT: - The Tribunal observed that the devaluation recorded by the firm was reflected in audited accounts and produced a net effect in the assessee's books only when the firm realised profits on sale. The firm had paid tax on the capital gains arising on sale. There was no evidence that any unaccounted money flowed to the assessee; the devaluation produced a capital loss in the books. The AO's allegations of restructuring to evade tax were not substantiated. Accordingly, the addition treating the devaluation amount as undisclosed income/investment was deleted. [Paras 4, 5]

Addition held to be untenable and deleted; devaluation is a capital accounting entry and not undisclosed income in the hands of the assessee.

Income from house property versus business income for leased commercial premises - rule of consistency in assessment treatment - Whether rent/lease receipts from letting factory premises and plant & machinery to Lupin Ltd. are taxable as income from house property or as business income. - HELD THAT: - The Tribunal found that the assessee had leased the manufacturing facility along with plant and machinery under a Business Conducting Agreement for exploitation of commercial assets and had consistently offered such receipts as business income in earlier years. Applying precedent that rental income from letting commercial factory and plant for business exploitation is business income, and noting absence of any change in facts, the Tribunal sustained the CIT(A)'s view that the receipts are business income and not income from house property. [Paras 6]

Receipts from letting factory premises and plant & machinery are business income; AO's recharacterisation to income from house property set aside.

Notional interest on interest-free deposit and determination of annual value/fair rent - requirement to determine fair rent/annual value before imputing notional interest - Whether notional interest on interest-free security deposits can be treated as annual value and added as income from house property without determining municipal/market/fair rent. - HELD THAT: - The Tribunal held that the AO is obliged to bring on record or determine reasonable/fair/standard rent or municipal value and compare it with actual rent to compute annual value. Reliance was placed on authoritative precedent holding that notional interest on interest-free deposits cannot be used alone to arrive at fair rent. In absence of any such inquiry or material, the imputation of notional interest was unsustainable and correctly deleted by the CIT(A). [Paras 7]

Notional interest on interest-free deposits cannot be added in absence of determination of fair/annual rent; addition deleted.

Final Conclusion: For A.Y. 2010-11 the Tribunal dismissed the Revenue's appeals and allowed the assessee's appeal: the sums received on retirement from the partnership firm were held to be capital receipts exempt under section 10(2A) and not taxable as capital gains in the hands of the retiring partner; related additions for book profits, undisclosed income and notional interest were deleted; receipts from letting the factory and plant were held to be business income.

Unexplained cash credit - burden of proof under section 68 - genuineness of transactions - identity and creditworthiness of lenders - reliance on search statement without independent enquiry - affidavit evidence and its probative value - allowability of interest deduction on accepted loans

Unexplained cash credit - burden of proof under section 68 - genuineness of transactions - identity and creditworthiness of lenders - reliance on search statement without independent enquiry - affidavit evidence and its probative value - Deletion of addition of Rs. 2,86,00,000 treated as unexplained cash credit under section 68. - HELD THAT: - The Tribunal held that the assessee had furnished confirmations, ITR acknowledgements, bank statements, notarised affidavits and repayment evidence for the seven lenders called in question. Once such primary documents were placed on record, the onus shifted to the revenue to show that the documents or transactions were not genuine. The Assessing Officer had relied primarily on a statement recorded during a search operation and had not conducted any independent or corroborative enquiry or pointed out defects in the documents produced by the assessee. In those circumstances, and having regard to judicial authorities relied upon by the CITA and the Tribunal, the addition treating the loans as accommodation entries could not be sustained and was correctly deleted by the CITA. [Paras 4, 5, 6]

Addition of Rs. 2,86,00,000 as unexplained cash credit under section 68 was deleted.

Allowability of interest deduction on accepted loans - burden of proof under section 68 - affidavit evidence and its probative value - Allowance of interest deduction of Rs. 2,80,828 corresponding to the unsecured loans. - HELD THAT: - Because the Tribunal upheld the genuineness of the unsecured loans after finding that the assessee discharged the onus under section 68 and the Assessing Officer failed to rebut the documentary evidence, the corresponding interest paid on those loans was also allowable. The CITA had therefore correctly directed allowance of the interest and the Tribunal found no infirmity in that conclusion. [Paras 4, 6]

Interest paid on the accepted unsecured loans was allowed.

Final Conclusion: The Tribunal dismissed the revenue's appeal, upholding the deletion of the addition treated as unexplained cash credit under section 68 and confirming allowance of the corresponding interest, the Assessing Officer having failed to discharge the onus of rebutting the documentary evidence produced by the assessee.

Adjudication limited to grounds filed and signed by the Assessing Officer - rectification/recall of Tribunal order under section 254(2) of the Income-tax Act - internal departmental authorisation does not expand grounds before the Tribunal - no error on part of the Tribunal where only filed grounds were adjudicated

Adjudication limited to grounds filed and signed by the Assessing Officer - internal departmental authorisation does not expand grounds before the Tribunal - no error on part of the Tribunal where only filed grounds were adjudicated - rectification/recall of Tribunal order under section 254(2) of the Income-tax Act - Whether the Tribunal's order disposing ITA No.5841/Mum/2017 requires recall/rectification under section 254(2) because the Pr. Commissioner had authorised additional grounds not filed by the Assessing Officer - HELD THAT: - The Tribunal examined whether the omission of grounds approved in the Principal Commissioner's authorisation memo but not filed and signed by the Assessing Officer vitiated the earlier order. The Tribunal held that it is bound to adjudicate only those grounds which are actually filed and duly signed by the Assessing Officer alongwith Form No.36. The fact that the Pr. Commissioner had approved additional grounds is an internal departmental matter between the Assessing Officer and the Principal Commissioner and cannot be treated as expanding the scope of appeal before the Tribunal. The Tribunal had dealt with and adjudicated the ground that was filed - the transfer pricing adjustment relating to comfort guarantee - and there was no error attributable to the Tribunal's adjudication warranting recall or rectification under section 254(2). The Revenue's omission to file written submissions despite being granted time was noted and the Miscellaneous Application was accordingly dismissed. [Paras 2, 3]

Miscellaneous Application seeking recall/rectification of the Tribunal's order is dismissed; Tribunal correctly adjudicated only the ground filed and signed by the Assessing Officer.

Final Conclusion: The Tribunal refused to recall or rectify its earlier order for A.Y.2013-14, holding that it had correctly adjudicated the ground actually filed and signed by the Assessing Officer and that omission of other authorised grounds was an internal revenue department matter; the Miscellaneous Application is dismissed.

Bad debts deduction under Section 36(1)(vii) - Conditions for allowance under Section 36(2)(i) - Writing off in accounts as irrecoverable - Debt arising in the course of business and money lending test

Bad debts deduction under Section 36(1)(vii) - Conditions for allowance under Section 36(2)(i) - Debt arising in the course of business and money lending test - Writing off in accounts as irrecoverable - Whether the claim of deduction for sundry balances written off and loans shown as bad debts could be allowed under Section 36(1)(vii) read with Section 36(2)(i). - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee failed to satisfy the statutory conditions for allowing a bad debt deduction. The provisions require that a debt written off as irrecoverable must have been taken into account in computing the assessee's income in the year of write off or an earlier year, or must represent money lent in the ordinary course of a banking or money lending business. The assessee did not prove that the amounts written off had been taken into account in computing income in any earlier year nor that the assessee was engaged in banking or money lending. Amounts of Rs. 36,35,000 advanced to employees (of associate companies) and the loan to Mega Meditex Ltd. were not shown to have the character of trade debts arising in the course of the assessee's business; documentary evidence produced did not establish that these advances had been offered to tax in prior years or that they arose as an incident of the assessee's consultancy/managerial services business. The Tribunal also relied on precedent authorities which require that a bad debt must be a debt in the proper sense and must satisfy the conditions enumerated in the case law and section 36; in the absence of those conditions the disallowance stands. Applying these principles to the material on record, the Tribunal found no justification to interfere with the appellate authority's finding and confirmed the addition. [Paras 5, 6]

The addition disallowing the sundry balances and loans as bad debts under Section 36(1)(vii)/36(2)(i) is upheld and the appeal is dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s decision for A.Y. 2014-15, holding that the assessee failed to satisfy the statutory and jurisprudential tests for allowing the claimed bad debt deduction; the appeal is dismissed.

Deduction under section 80P(2)(d) in respect of interest from deposits with co-operative banks - Definition of "co-operative society" under section 2(19) and its application to co-operative banks - Availability of deduction where recipient society deposits funds with another co-operative society (mutuality between co-operative entities)

Deduction under section 80P(2)(d) in respect of interest from deposits with co-operative banks - Definition of "co-operative society" under section 2(19) - Claim of deduction under section 80P(2)(d) for interest income earned on deposits with co-operative banks was allowable and the CIT(A)'s deletion of the addition was to be upheld. - HELD THAT: - The Tribunal considered the construction of section 80P(2)(d) read with the definition of "co-operative society" under section 2(19) and the judicial precedents relied upon by the parties. The CIT(A) concluded that a co-operative bank is a species of co-operative society (notwithstanding regulatory licensing by the RBI) and that interest earned by a co-operative society from investments placed with another co-operative society (including co-operative banks) falls within the scope of section 80P(2)(d). The Tribunal noted that the CIT(A) had examined relevant decisions, including the assessee's own earlier matter for A.Y. 2013-14, and found no reason to disturb the CIT(A)'s conclusion at the appellate stage. On that basis the Tribunal affirmed the allowance of the claimed deduction and rejected the revenue's contention to the contrary. [Paras 6, 7]

The CIT(A)'s order allowing deduction under section 80P(2)(d) in respect of the interest income is affirmed; the addition is deleted.

Premature grounds not adjudicated - An additional ground raised by the appellant was held to be premature and was dismissed without adjudication. - HELD THAT: - The Tribunal recorded that the third issue was premature in nature and did not require adjudication at this stage, and accordingly declined to decide that ground. [Paras 7, 8]

The premature issue is dismissed.

Final Conclusion: Revenue's appeal is dismissed; the CIT(A)'s order for A.Y. 2015-16 allowing deduction under section 80P(2)(d) in respect of interest from deposits with co-operative banks is upheld.

Taxability of profit element embedded in purchases from bogus/entry operators - estimation of unexplained income by applying a deemed profit percentage (12.5%) with set off of book gross profit - disallowance under section 14A read with Rule 8D - applicability and computation where no exempt income is shown - onus on assessee to prove genuineness of transactions and corresponding sales - judicial deference to concurrent factual findings of appellate authorities

Taxability of profit element embedded in purchases from bogus/entry operators - estimation of unexplained income by applying a deemed profit percentage (12.5%) with set off of book gross profit - onus on assessee to prove genuineness of transactions and corresponding sales - Addition in respect of purchases from M/s Ragini Trading & Investment Pvt. Ltd. restricted to profit element computed at 12.5% with allowance of set off of gross profit shown in books. - HELD THAT: - The Tribunal upheld the approach of the CIT(A) that where purchases recorded in the books correspond to one to one sales and the assessee's business model (procure after receipt of orders and book back to back sales) is not disproved, the entire purchase amount cannot be treated as income. Taxation is limited to the profit embedded in such transactions. Having regard to factual findings about the supplier being used as an entry operator and the industry precedents, a deemed rate of 12.5% was applied to compute additional profit, subject to credit for the gross profit already declared in the regular books. The Tribunal found the CIT(A)'s reliance on coordinate decisions and the factual matrix to be a reasonable view and declined to interfere. [Paras 4, 5]

Ground allowing restriction of addition to 12.5% of disputed purchases (with set off of book GP) affirmed in favour of the assessee.

Disallowance under section 14A read with Rule 8D - applicability and computation where no exempt income is shown - application of Rule 8D only when AO is not satisfied with assessee's computation - distinction between expenditures actually incurred for earning exempt income and general business expenses - Disallowance under section 14A read with Rule 8D restricted to the voluntarily disallowed amount as computed by the CIT(A) (Rs. 2,17,682/-) and deletions/modifications of AO's further additions. - HELD THAT: - The Tribunal agreed with CIT(A)'s conclusion that the assessee had shown no exempt income for the year and that the AO's invocation of Rule 8D required satisfaction regarding correctness of the assessee's own computation. On examination, certain expenses (demat charges) were found to have nexus with exempt income to the extent accepted by CIT(A), interest expenditures were held to be business related and deleted, and one component under Rule 8D(2)(iii) was restricted to the amount upheld by the CIT(A). Consequently the total disallowance was confined to the amount voluntarily offered by the assessee as determined by the CIT(A). The Tribunal found no infirmity in this conclusion. [Paras 6, 7]

Addition under section 14A read with Rule 8D restricted to the sum determined by CIT(A) and affirmed in favour of the assessee.

Final Conclusion: The revenue's appeal is dismissed; the Tribunal affirms the CIT(A)'s restriction of the addition on disputed purchases to a deemed profit of 12.5% (with set off of book GP) and upholds the CIT(A)'s computation/restriction of disallowance under section 14A read with Rule 8D for A.Y.2010-11.

Exemption under section 10(34) of the Income-tax Act - computation of profits and gains of insurance business under section 44 and First Schedule - treatment of negative reserves (mathematical reserve / actuarial valuation) - applicability of section 14A to insurance companies - binding precedents and stare decisis of coordinate benches and High Court decisions

Exemption under section 10(34) of the Income-tax Act - computation of profits and gains of insurance business under section 44 and First Schedule - applicability of section 14A to insurance companies - binding precedents and stare decisis of coordinate benches and High Court decisions - Dividend income of the assessee for A.Y.2013-14 is exempt under section 10(34) and could not be taxed by applying section 44 or treating it as part of insurance business income. - HELD THAT: - The appellate bench upheld the CIT(A)'s allowance of exemption, noting that the assessee had earned dividend on which dividend distribution tax was paid and that such dividend does not form part of total income under section 10(34). The CIT(A)'s conclusion was based on and supported by precedents of the coordinate Bench and the High Court which held that the non obstante provision in section 44 does not have the effect of excluding exemptions like those under section 10 unless the statute expressly does so; earlier decisions dealing both with life and non life insurers were held to support the availability of clause based exemptions. The tribunal found no contrary binding decision and observed that reopening or reassessment to overturn the earlier position would amount to change of opinion. The bench therefore found no infirmity in the CIT(A)'s reliance on those precedents and affirmed deletion of the addition.

Ground raised by Revenue disallowed; exemption under section 10(34) upheld in favour of the assessee.

Treatment of negative reserves (mathematical reserve / actuarial valuation) - computation of profits and gains of insurance business under section 44 and First Schedule - binding precedents and stare decisis of coordinate benches and High Court decisions - Addition on account of negative reserves disclosed by actuarial valuation was not taxable and was deleted. - HELD THAT: - The bench concurred with the CIT(A) that negative reserve, arising from actuarial valuation (where present value of future premium exceeds present value of benefits and expenses), reflects premium receivable or an asset-like item and its treatment is governed by actuarial valuation and Insurance Act/IRDA regulations. The tribunal relied on coordinate decisions which held that the Assessing Officer has no power to disturb actuarial determinations made under the First Schedule / section 44 framework and that negative reserves cannot be treated as taxable income merely by AO adjustment. In absence of any contrary binding decision, the appellate authority's deletion of the addition was affirmed.

Addition on account of negative reserves deleted; decision in favour of the assessee.

Final Conclusion: Both grounds of the Revenue are dismissed; the CIT(A)'s deletions of the additions for dividend income and negative reserves are affirmed and the appeal is dismissed.

Bogus purchases - suppressed profit - estimation of profit element embedded in purchases - burden of proof - surrounding circumstances and human probabilities - reliance on investigation by Sales Tax authorities - piercing the corporate veil to test reality of transactions

Bogus purchases - suppressed profit - estimation of profit element embedded in purchases - burden of proof - surrounding circumstances and human probabilities - reliance on investigation by Sales Tax authorities - Whether the addition disallowing purchases alleged to be from bogus parties should have been sustained in full or restricted to an estimated profit element (12.5%) of such purchases, and whether the CIT(A)'s restriction to 12.5% was justified. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that, on the materials before the authorities and the Sales Tax investigation, the apparent suppliers were non-existent and the purchases recorded against those parties were suspect. However, the Assessing Officer did not dispute the genuineness of the assessee's sales or consumption of goods; in those circumstances it would be unreasonable to add the entire purchase amounts as income since that would produce absurd profits. Applying settled principles that the burden lies on the party asserting a claim to prove genuineness and that taxing authorities may examine surrounding circumstances and human probabilities, the CIT(A) estimated the suppressed profit embedded in the impugned purchases at 12.5% and added that element to income. The Tribunal found this approach consistent with precedent where, if goods were in substance purchased and sold though not necessarily from the parties shown in books, only the profit margin embedded in fictitious purchases should be taxed. The Tribunal further held that reliance on the Sales Tax Department's findings and other investigative material was permissible and that the assessee had failed to discharge the onus to prove the suppliers and deliveries. On these grounds the restriction of the addition to 12.5% of the purchases was sustained and the revenue's appeals were dismissed. [Paras 5, 6, 8]

The CIT(A)'s estimate of suppressed profit at 12.5% of the purchases from the bogus entities is upheld and the revenue's appeals are dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeals and upheld the Commissioner (Appeals)'s decision to restrict the addition in respect of purchases alleged to be from bogus parties to an estimated suppressed profit of 12.5% of such purchases for the assessment years in dispute.

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealment - Estimation of income/additions and its effect on levy of penalty - Genuineness of purchases and burden of proof for proving bogus entries

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealment - Estimation of income/additions and its effect on levy of penalty - Genuineness of purchases and burden of proof for proving bogus entries - Whether the penalty of Rs. 43,922/- levied under section 271(1)(c) against the assessee for alleged bogus purchases was rightly imposed - HELD THAT: - The Tribunal upheld the view of the CIT(A) that the Assessing Officer made additions by estimating profit on disputed purchases and did not conclusively establish that the purchases were bogus or that the particulars furnished in the return were inaccurate or false. The CIT(A) applied the settled principle that where additions are made on an estimated basis, penalty under section 271(1)(c) is not leviable in the absence of a finding that the assessee had concealed particulars or furnished inaccurate particulars of income. The appellate authority relied on decisions holding that estimation of income and rejection of books does not, by itself, justify a penalty unless there is independent evidence of concealment or inaccuracy. On the facts, the AO added the alleged purchases to income on estimate and did not record a conclusive finding that corresponding sales were nonexistent or that the entries were proved to be bogus; accordingly the CIT(A) was justified in deleting the penalty. [Paras 6]

Penalty under section 271(1)(c) deleted as additions were made on estimation basis and there was no finding of concealment or furnishing of inaccurate particulars.

Final Conclusion: The appeal filed by the revenue is dismissed; the deletion of the penalty by the CIT(A) in respect of A.Y.2011-12 is upheld.

Disallowance under section 14A read with Rule 8D - Limits on disallowance where exempt income is lesser than expenses claimed - Computation of book profit under section 115JB - treatment of amounts disallowed under section 14A - Provision for redemption of preference shares as an ascertained liability for computing book profit under section 115JB

Disallowance under section 14A read with Rule 8D - Limits on disallowance where exempt income is lesser than expenses claimed - Deletion of addition of Rs. 78,73,864 made by the AO under section 14A read with Rule 8D and restriction of disallowance to the suo moto disallowance made by the assessee. - HELD THAT: - The Tribunal examined the CIT(A)'s conclusion that the assessee had declared exempt dividend income of Rs. 6,300 but had itself made a suo moto disallowance of Rs. 2,03,136. Noting judicial precedent that disallowance under section 14A should not ordinarily exceed the exempt income, the CIT(A) directed the AO to restrict the disallowance to the amount the assessee admitted as expenditure incurred to earn exempt income (Rs. 2,03,136). The Tribunal found that the assessee's own admission of incurred expenditure justified restricting the disallowance to that suo moto amount and that the CIT(A)'s approach, relying on earlier decisions (including Vireet Investment), was judicious and not open to interference on appeal. [Paras 4, 5]

The deletion by the CIT(A) is sustained and the disallowance under section 14A is restricted to the suo moto disallowance of Rs. 2,03,136 in favour of the assessee.

Provision for redemption of preference shares as an ascertained liability for computing book profit under section 115JB - Computation of book profit under section 115JB - treatment of amounts disallowed under section 14A - Deletion of addition of the provision for redemption of preference shares (treated as a reserve by AO) while computing book profit under section 115JB. - HELD THAT: - The CIT(A) allowed the assessee's claim on the basis of the assessee's own co ordinate ITAT precedent for adjacent assessment years, which had held that the provision for premium payable on redemption of preference shares constituted an "ascertained liability" within clause (c) of Explanation 1 to section 115JB and not a mere reserve. The Tribunal noted that the facts were identical, the earlier ITAT decision in the assessee's own case was binding on the issue, and no distinguishing circumstances were shown. Following that precedent, the addition made by the AO was held not to be chargeable to book profit computation under section 115JB. [Paras 6, 7]

The CIT(A)'s deletion of the addition is upheld; the provision for redemption of preference shares is treated as an ascertained liability and is not to be added back in computing book profit under section 115JB.

Final Conclusion: Both grounds of the revenue appeal are dismissed: the section 14A disallowance is restricted to the assessee's suo moto disallowance and the provision for redemption of preference shares is not to be added to book profit under section 115JB, following the assessee's own co ordinate ITAT precedents.

Detention and seizure under Section 110 of the Customs Act - Reasonable belief for confiscation under Section 111 - Proper officer doctrine (Section 2(34) and the Cannon India principle) - Provisional release mechanism under Section 110A of the Customs Act - Availability of alternative remedy and writ jurisdiction under Article 226 - Classification and concessional Basic Customs Duty claimed under Notification No.50/2017

Detention and seizure under Section 110 of the Customs Act - Proper officer doctrine (Section 2(34) and the Cannon India principle) - Reasonable belief for confiscation under Section 111 - Validity of the detention and seizure of imported motor scrap effected by the DRI - HELD THAT: - Applying the legal principle laid down in M/s. Cannon India Pvt. Ltd., the Court held that the action of the DRI in detaining and subsequently seizing the goods was not sustainable because the DRI officer who formed the subjective 'reasonable belief' was not the proper officer authorised under the statute to reassess or reopen the assessment. The Court noted that the assessing/customs officer, on available documents including certificate of analysis and Form 9, had permitted clearance; an intelligence-led re-opening by the DRI (an officer who was not the officer who made the original assessment or duly authorised under Section 6/Section 2(34)) cannot validly supplant the assessing officer's function. Having regard to the invalidity of the DRI's exercise of powers in these circumstances, the orders of detention and seizure were quashed and set aside. The Court did not undertake final adjudication on classification; its conclusion was confined to the unsustainability of detention/seizure by the DRI in view of the proper officer doctrine. [Paras 36, 38]

Detention and seizure dated 29.07.2020, 03.08.2020 and 11.08.2020 quashed and set aside; seized/detained goods to be returned to petitioner within two weeks.

Classification and concessional Basic Customs Duty claimed under Notification No.50/2017 - Provisional release mechanism under Section 110A of the Customs Act - Availability of alternative remedy and writ jurisdiction under Article 226 - Whether the Court would finally determine classification and validity of claim to concessional duty or instead leave that to the proper statutory authority - HELD THAT: - The Court declined to pronounce on the substantive question of classification or on the correctness of the petitioner's claim to concessional duty under Notification No.50/2017. While noting the materials (certificate of analysis, Form 9 and other documents) placed before the assessing officer, the Court observed that classification and assessment are matters for the proper officer to decide following due procedure. The provisional-release regime under Section 110A was considered in the context of protecting revenue, but the Court's interference was limited to quashing the DRI's seizure because the DRI was not the proper officer to effect reassessment/seizure. The Court explicitly recorded that returning the goods would have no bearing on the pending classification issue, which shall be determined on its own merits by the appropriate authority. [Paras 38]

Classification and entitlement to concessional duty left open for determination by the proper officer; provisional-release conditions and assessment to be addressed by the statutory authorities in accordance with law.

Final Conclusion: Writ petition allowed: the High Court quashed and set aside the DRI's detention and seizure orders dated 29.07.2020, 03.08.2020 and 11.08.2020 and directed return of the detained/raw materials to the petitioner within two weeks; the Court did not decide the classification or admissibility of concessional duty, leaving those issues to be determined by the proper statutory authority in accordance with law; no order as to costs.

Withdrawal of writ petitions - mandamus premature - adjudication after opportunity to respond - reference to competent authority for determination of hazardous nature - Hazardous Waste Management Rules 2016 - assessing authority's duty to refer under Hazardous Substance Management Division

Withdrawal of writ petitions - Both writ petitions were dismissed as withdrawn by the petitioner. - HELD THAT: - The petitioner informed the Court that the prayers were not pressed and sought withdrawal of WP.No.14317 of 2020 and WP.No.14321 of 2020. The Court acceded to the request and recorded the dismissal of both writ petitions as withdrawn, and closed connected miscellaneous petitions.

Both writ petitions dismissed as withdrawn; connected miscellaneous petitions closed; no costs.

Adjudication after opportunity to respond - Petitioner granted time to respond to the show cause notice and adjudication directed to be completed within a specified period. - HELD THAT: - The Court permitted the petitioner to respond to the show cause notice dated 07.07.2020 within two weeks. Thereafter the adjudicating authority is directed to hear the petitioner and pass orders of adjudication within twelve weeks from today, thereby prescribing a procedural timetable for final disposal of the adjudicatory proceedings.

Petitioner to respond within two weeks; adjudication to be completed within twelve weeks.

Mandamus premature - reference to competent authority for determination of hazardous nature - Hazardous Waste Management Rules 2016 - assessing authority's duty to refer under Hazardous Substance Management Division - The prayer for mandamus to release the goods was rejected as premature and the Court directed that the assessing authority must refer the question of whether the imported used ventilators constitute hazardous material to the competent authority for determination under the Hazardous Waste Management Rules 2016. - HELD THAT: - The Court found that the certificate of a chartered engineer relied upon by the petitioner was not the appropriate means to determine whether the imported used ventilators are hazardous. The Court held that the proper course during adjudication is for the assessing authority to make a reference to the competent authority (for example, the Hazardous Substance Management Division or any other authority competent for this purpose) to determine whether the goods fall within the definition of hazardous material under the Hazardous Waste Management Rules 2016. The mandamus seeking release without such determination was therefore premature.

Mandamus premature; assessing authority to refer the question of hazardous nature to the competent authority and decide adjudication after such determination.

Final Conclusion: The petitions were dismissed as withdrawn; the petitioner was allowed two weeks to reply to the show cause notice and adjudication must be completed within twelve weeks; the assessing authority is directed to refer the question whether the imported used ventilators are hazardous to the competent authority under the Hazardous Waste Management Rules 2016 before concluding adjudication.

Summary order. Matter adjourned and posted to 05.05.2021; mediation between parties to continue; noting non-appearance of the petitioner and request for adjournment by counsel for Respondents due to COVID-related office closure; further noting Company Appeal (AT) No. 3/2020 before the NCLAT listed on 25.03.2021.

Avoidable transaction - Preferential transaction - Undervalued transaction - Fraudulent transaction - Lookback period for avoidance transactions - Regulation 35A timeline and independent determination by the Resolution Professional - Prohibition on filing avoidance applications after approval of the resolution plan - Limited role of the Committee of Creditors in avoidance determinations

Lookback period for avoidance transactions - Regulation 35A timeline and independent determination by the Resolution Professional - Whether the Resolution Professional complied with the temporal and procedural requirements for filing avoidance applications under the Code and regulation 35A of the CIRP Regulations. - HELD THAT: - The Tribunal held that the applicant failed to specify dates of the alleged avoidable transactions and therefore the court could not determine whether the transactions fell within the statutory lookback periods applicable to related and non-related parties. The Tribunal noted the temporal sequence required by regulation 35A: the RP must form an opinion within 75 days of CIRP commencement, make a determination within 115 days of forming that opinion, and file an application within 135 days of the opinion. In this case CIRP commenced on 04.10.2019, the RP was required to form an opinion on or before 18.12.2019 and make the determination by 27.01.2020, with the application due by 16.02.2020. The present application dated 05.11.2020 was filed 398 days after CIRP initiation without explanation; further, the RP had not recorded any independent opinion or determination under regulation 35A and impermissibly relied on the transactional auditor's report without making the requisite determination himself. For these reasons the application did not comply with the statutory timelines and procedural mandate and could not be entertained. [Paras 14, 15, 16, 23]

Application failed for non-compliance with lookback requirements and the timelines and independent-determination procedure mandated by regulation 35A; the RP's reliance on the auditor's report without forming the prescribed opinion and determination invalidated the application.

Prohibition on filing avoidance applications after approval of the resolution plan - Whether an RP may file and maintain an avoidance application after the approval of the resolution plan and completion of the CIRP. - HELD THAT: - Relying on the reasoning in Venus Recruiters Private Limited v. Union of India & others, the Tribunal observed that the statutory scheme and regulation 35A envisage a finite timeframe for detection and prosecution of avoidance transactions during the CIRP. The Tribunal accepted that the purpose of avoidance applications is to benefit creditors during the resolution process and that this purpose is not served once the resolution plan is approved. The role of the RP ends with the order approving the resolution plan and cannot be resurrected to prosecute avoidance claims thereafter. Given that the present application was filed after the resolution plan had been considered and the order approving the plan was reserved, the Tribunal held that the application could not be maintained. [Paras 18, 19, 20, 21, 25]

Filing and prosecution of the avoidance application after approval (or after the resolution plan had been placed for orders) is impermissible; the application filed post-approval does not survive the CIRP and is not maintainable.

Limited role of the Committee of Creditors in avoidance determinations - Regulation 35A timeline and independent determination by the Resolution Professional - Whether the Committee of Creditors can analyze transactional-auditor reports and influence the RP's independent determination under regulation 35A. - HELD THAT: - The Tribunal held that regulation 35A(2) requires the RP to make an independent determination on the basis of the transactional auditor's report and that the CoC has no role in analyzing or deciding whether transactions are avoidable. The CoC's role is confined to approving the appointment of the auditor and fixing the fee; permitting the CoC to analyse transactional findings would amount to allowing an interested creditor to influence the RP's independent statutory function. Consequently, placing the transactional auditor's report for discussion before the CoC and relying on such discussion in lieu of the RP's own determination was improper. [Paras 14, 24]

The CoC cannot substitute for or influence the RP's independent determination under regulation 35A; the RP must form and record his own opinion and determination based on the auditor's report.

Final Conclusion: The Tribunal dismissed IA (IB) No. 1221/KB/2020 as devoid of merits on grounds of failure to specify transaction dates and comply with statutory lookback and regulation 35A timelines, absence of the RP's independent opinion and determination, and impermissible filing after the resolution plan was approved; additionally, the CoC was held to have no role in making the RP's statutory determination.

Operational debt - operational creditor - claim - default - admission under Section 9 of the Insolvency and Bankruptcy Code - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium

Operational debt - operational creditor - claim - Arrears of license fee / lease rent payable for use and occupation of premises constitute an "operational debt" and the lessor/licensor qualifies as an "operational creditor" under the Code. - HELD THAT: - The Tribunal examined the statutory definitions of "claim", "debt", "default" and "operational debt" as set out in the Code and concluded that consideration receivable for letting out premises by way of lease rent or license fee falls within the ambit of providing services and therefore constitutes an "operational debt" under section 5(21). The Tribunal relied on earlier decisions of this Bench and the NCLAT to the like effect, including the decision in Anup Sushil Dubey vs National Agriculture Co-operative Marketing Federation of India Ltd. and the Bench's own reasoning in Indiabulls Real Estate Company Private Limited v. Crest Steel & Power Private Limited , to hold that subject lease rentals/arrears of rent are operational debts. On this basis, the creditors who rented out premises were held to be operational creditors for the purposes of proceedings under the Code. [Paras 8, 9, 10]

Arrears of license fees for occupation of premises are "operational debt" and the claimants are "operational creditors" under the Code.

Default - admission under Section 9 of the Insolvency and Bankruptcy Code - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium - The petition under Section 9 is maintainable and is admitted because debt and default have been established on the material on record; consequent initiation of CIRP, appointment of IRP and imposition of moratorium were ordered. - HELD THAT: - On the admitted facts and documentary record the Tribunal found that the corporate debtor had defaulted in payment of license fees and related liquidated damages claimed by the operational creditors; cheques issued were returned marked "Funds Insufficient" and the demand notice was acknowledged without reply. The Tribunal held that the documents filed by the operational creditors sufficiently established the existence of a claim and a default exceeding the monetary threshold, thereby satisfying the statutory conditions for admission under Section 9. Accordingly the Company Petition was admitted, the Corporate Insolvency Resolution Process was ordered, Mr. S. Gopalkrishnan was appointed as Interim Resolution Professional as proposed in Form 2, and statutorily mandated consequences including moratorium and public announcement were directed to follow. [Paras 7, 11, 12]

The Section 9 petition is admitted; CIRP is initiated, an Interim Resolution Professional is appointed and the moratorium and ancillary directions follow from admission.

Final Conclusion: The Tribunal admitted the Company Petition under Section 9, holding that arrears of license fee/lease rent constitute operational debt and that default stood established on the material; consequently CIRP was initiated, an Interim Resolution Professional appointed and moratorium and other statutory directions were imposed.

Conversion of operational debt into financial debt by subsequent agreement - maintainability of Section 7 petition - requirement of record of default / information utility evidence - admission of petition under Section 7 and commencement of CIRP - declaration of moratorium and its consequences - appointment of Interim Resolution Professional

Conversion of operational debt into financial debt by subsequent agreement - The contractual conversion of amounts due for supply of goods into a loan by mutual agreement resulted in the operational debt becoming a financial debt. - HELD THAT: - The Tribunal found as a matter of fact that goods were supplied pursuant to a purchase order and payment remained unpaid. The parties thereafter entered into a Loan Agreement dated 05.03.2018 to repay the due amount in twelve instalments commencing April 2018. Having regard to this subsequent consensual agreement to convert the outstanding sum into a repayable loan, the Tribunal held that the earlier operational debt was transformed into a financial debt in consequence of the Loan Agreement. The Tribunal rejected the Corporate Debtor's contention that the amount remained only an operational debt and was therefore not a permissible basis for a Section 7 petition, noting that the subsequent agreement effected the change in the nature of the debt. [Paras 11, 14]

The outstanding amount was a financial debt by virtue of the Loan Agreement and not merely an operational debt.

Maintainability of Section 7 petition - requirement of record of default / information utility evidence - The petition under Section 7 was maintainable despite the Corporate Debtor's contention regarding absence of information-utility record. - HELD THAT: - The Corporate Debtor argued non-maintainability on the ground that the Financial Creditor had not furnished record of default from an information utility as required by Section 7(3). The Tribunal, however, observed that the Financial Creditor had produced evidence of supply, non-payment and the Loan Agreement evidencing the debt and default. The Tribunal treated the Corporate Debtor's objection as not sufficiently substantiated to negate the Financial Creditor's claim and held that the petition could be admitted on the established facts of default under the Loan Agreement. The Tribunal therefore did not accept the submission that failure to file an information utility record alone warranted dismissal. [Paras 12, 14]

The Section 7 petition was maintainable and the objection based on absence of information-utility record did not bar admission.

Admission of petition under Section 7 and commencement of CIRP - declaration of moratorium and its consequences - appointment of Interim Resolution Professional - The petition was admitted under Section 7, moratorium declared, and an Interim Resolution Professional appointed. - HELD THAT: - On finding that a financial debt was due and the Corporate Debtor had defaulted, the Tribunal admitted the petition under Section 7 of the IBC. Consequential directions were issued declaring the moratorium in terms of Section 14, including prohibition on institution or continuation of suits, transfer or disposal of assets, and protection of supplies of essential goods and services. The Tribunal directed immediate public announcement of the CIRP and appointed the proposed individual as Interim Resolution Professional upon satisfaction of the requisite consent and authorization formalities. [Paras 15, 16]

The petition was admitted, moratorium declared, public announcement directed and the named Interim Resolution Professional appointed.

Final Conclusion: The Tribunal held that the debt arising from supply of goods was converted into a financial debt by the Loan Agreement dated 05.03.2018, admitted the Section 7 petition on finding of default, declared moratorium under Section 14, directed public announcement of the CIRP and appointed the named Interim Resolution Professional.

Classification of claims in liquidation as secured or unsecured - duty to register charges and effect of non-registration under Section 77(3) of the Companies Act, 2013 - obligation of creditors to appeal liquidator's decision within the limitation prescribed under Section 42 of the Insolvency and Bankruptcy Code, 2016 - discretion and duties of the liquidator under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (including Regulation 21) - effect of failure to furnish ROC/CERSAI evidence of charge

Classification of claims in liquidation as secured or unsecured - duty to register charges and effect of non-registration under Section 77(3) of the Companies Act, 2013 - effect of failure to furnish ROC/CERSAI evidence of charge - Whether the liquidator rightly classified the Applicant as an unsecured financial creditor in the liquidation process in absence of registered charge documentation. - HELD THAT: - The Tribunal found that the liquidator requested documentary proof of registration of the alleged charge (ROC charge registration certificate or CERSAI search reports) and the Applicant failed to furnish such documents despite repeated opportunities. Section 77(3) of the Companies Act, 2013 provides that no charge created by a company shall be taken into account by a liquidator unless it is duly registered and a certificate of registration is issued. Regulation 21 of the Liquidation Regulations and the statutory scheme were held to support the liquidator's approach of not recognising an unregistered charge for classification as a secured claim. Reliance was placed on authoritative precedent that unregistered charges cannot be enforced against the liquidator/creditors. In these circumstances, and given absence of the mandatory registration evidence, the liquidator acted in accordance with law in classifying the claim as unsecured. [Paras 31, 34, 35, 36]

The claim was correctly classified as unsecured in the liquidation process because the Applicant did not produce evidence of registration of the charge as required by law; the liquidator was justified in refusing to treat the claim as secured.

Obligation of creditors to appeal liquidator's decision within the limitation prescribed under Section 42 of the Insolvency and Bankruptcy Code, 2016 - discretion and duties of the liquidator under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (including Regulation 21) - Whether the Applicant's belated challenge to classification (filed after substantial delay) could be entertained despite the statutory 14-day appeal period under Section 42 of the IB Code. - HELD THAT: - The Tribunal recorded that the liquidator's classification decision was communicated in July 2019 and Section 42 permits a creditor to appeal to the Adjudicating Authority within fourteen days of receipt of such decision. The present application was filed after a delay of around 551 days and the Applicant did not seek condonation of delay or furnish any sufficient cause for the inaction. The Applicant had participated in CoC meetings after classification and did not object earlier, which the Tribunal considered relevant to the question of delay. In view of the statutory time-limit and absence of any justification to excuse the delay, the Tribunal treated the application as time-barred and declined to exercise jurisdiction to reopen the classification. [Paras 34, 37, 39]

The belated application challenging the liquidator's classification is barred by limitation under Section 42 and is not maintainable; the Tribunal rejected the application on that ground.

Final Conclusion: The application filed by the Applicant to reclassify its claim as secured was rejected: the liquidator lawfully classified the claim as unsecured because the mandatory registration evidence for the charge was not produced, and the Applicant's challenge was time-barred under Section 42 of the Insolvency and Bankruptcy Code, 2016.

Impleadment of parties under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 - necessary and proper party - approval of resolution plan - locus to challenge Committee of Creditors' decision before the Adjudicating Authority or Appellate Tribunal - liberal approach to impleadment - role of an Asset Reconstruction Company as a resolution applicant

Impleadment of parties under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 - necessary and proper party - approval of resolution plan - locus to challenge Committee of Creditors' decision before the Adjudicating Authority or Appellate Tribunal - liberal approach to impleadment - The unsuccessful resolution applicant (Applicant in IA No.189/2021) may be impleaded as a proper and necessary party in IA No.537/2020. - HELD THAT: - The Bench held that there is no bar to impleading the unsuccessful resolution applicant into IA No.537/2020 because such applicant would be affected by the Adjudicating Authority's order and its presence would enable the Bench to enlighten itself on merits. The Adjudicating Authority construed the Hon'ble Appellate Tribunal's observations as permitting dissatisfied parties to move the NCLT at the time of approval or rejection of a resolution plan to challenge the manner in which the CoC approved the plan. In view of that interpretation and in line with the Supreme Court's direction to adopt a liberal approach, the unsuccessful resolution applicant was found to have locus to be heard and to raise issues regarding the CoC's approval and any addendum to the plan. Consequently, impleadment was allowed to ensure that relevant objections and materials (including CoC minutes) may be brought on record for consideration when IA No.537/2020 is taken up. [Paras 4, 5, 7]

IA No.189/2021 is allowed and the Applicant is impleaded as a proper and necessary party in IA No.537/2020.

Role of an Asset Reconstruction Company as a resolution applicant - approval of resolution plan - Whether an Asset Reconstruction Company can act as a resolution applicant was not finally decided and remains open for determination upon impleadment. - HELD THAT: - The Bench recorded a doubt on the legal question of whether an Asset Reconstruction Company can be a resolution applicant. That question was not adjudicated on merits in this order; the Bench indicated that the point of law can be addressed and clarified once the unsuccessful resolution applicant or any other person is impleaded and relevant issues and records (including CoC minutes) are placed before the Adjudicating Authority during consideration of the resolution plan. [Paras 6]

The legal question as to whether an Asset Reconstruction Company can be a resolution applicant is left open for consideration when the impleaded parties and relevant materials are before the Adjudicating Authority.

Final Conclusion: The application for impleadment (IA No.189/2021) is allowed and the Applicant is impleaded as a proper and necessary party in IA No.537/2020; IA No.537/2020 is listed on 05.05.2021. A separate question whether an Asset Reconstruction Company can be a resolution applicant is left open for determination when the matter is taken up with the impleaded parties and records.

Condonation of delay in filing claim - claim submission within 30 days from liquidation - verification and admission or rejection of claims by Liquidator - liquidation process is time-bound - liquidator's duty to complete liquidation within one year - no equity about limitation

Condonation of delay in filing claim - claim submission within 30 days from liquidation - liquidation process is time-bound - no equity about limitation - Application to condone delay of 796 days in preferring claim before the Liquidator of the Corporate Debtor was dismissed. - HELD THAT: - The Tribunal recorded that claims in a liquidation are to be submitted within the 30 day period fixed by the liquidation public announcement and that the Liquidator must verify claims in accordance with the Regulations. The applicant, acting as Liquidator of a separate corporate debtor, sought condonation for a 796 day delay but did not disclose whether the claim had been filed during the CIRP period nor furnish any plausible explanation for the prolonged delay. The Tribunal emphasised that liquidation is a time bound process and that the Liquidator is accountable to complete liquidation within one year unless extended in accordance with the Regulations. Relying on the settled principle that there is "no equity about limitation," the Tribunal found no basis to excuse the delay and declined to extend the time for filing the claim. [Paras 11, 12, 13]

IA/791/IB/2020 dismissed for failure to justify condonation of 796 day delay in filing the claim; no costs.

Final Conclusion: The application for condonation of delay in filing the claim was dismissed because the claimant failed to show any plausible reason for the 796 day delay, and the time bound nature of the liquidation process (including the 30 day claim period and the one year liquidation timeline) precluded extending the limitation in the circumstances.

Financial debt - Financial creditor - High Seas Sale Agreement - Arbitral award as record of default - Corporate Insolvency Resolution Process

Financial debt - Financial creditor - High Seas Sale Agreement - Arbitral award as record of default - Whether the claim arising from the High Seas Sale Agreement and related loan documents constituted a 'financial debt' entitling the applicant to invoke CIRP under Section 7 of the IBC. - HELD THAT: - The Tribunal analysed the nature and characteristics of the High Seas Sale (HSS) transaction and concluded that an HSS is a sale effected while goods are in transit (purchase in the course of import) where title and documents of title are transferred prior to arrival in India. The source document relied upon by the applicant was the HSS agreement, supplemented by loan and renewal agreements and an arbitral award. On that factual and documentary foundation the Tribunal held that the underlying transaction was a commercial sale in the course of import and not a financial transaction which could be re-characterised as a financial debt. Although an arbitral award had been passed and an appeal was dismissed, and despite correspondence and other contentions about payment (including a Letter of Credit), the Tribunal emphasised that the legal character of the source transaction governed by the HSS agreement could not be converted into a financial debt. For these reasons the applicant could not be treated as a financial creditor for the claim made under Section 7 and the petition did not disclose a financial debt constituting a record of default actionable under the IBC. [Paras 12, 13, 14, 16]

The application under Section 7 was dismissed on the ground that the claim did not constitute a financial debt and the applicant was not a financial creditor.

Final Conclusion: The Insolvency Petition under Section 7 was dismissed as the Tribunal found that the claimed dues arose from a High Seas Sale transaction which could not be treated as a financial debt, and therefore the applicant was not a financial creditor entitled to initiate CIRP; order dismissed without costs.

Debt and default - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14 - service by publication and ex-parte proceeding - operational creditor's demand notice under Section 8

Debt and default - operational creditor's demand notice under Section 8 - The Operational Creditor has proved existence of an operational debt and a default by the Corporate Debtor. - HELD THAT: - On scrutiny of the pleadings and the documents filed by the Operational Creditor - including work orders, invoices, statement of account, balance sheet of the Corporate Debtor and accounts confirming non-payment - the Adjudicating Authority concluded that the claimed operational debt and the default were established. The record shows invoices acknowledged by the Corporate Debtor, certification of works, and issuance of a demand notice under Form-3 which the Operational Creditor served prior to filing the Section 9 application. Having regard to these materials, the Tribunal found the statutory threshold for admission under Section 9 satisfied and proceeded to admit the application. [Paras 3, 4, 6]

Debt and default established; statutory threshold for admission under Section 9 satisfied.

Initiation of Corporate Insolvency Resolution Process - service by publication and ex-parte proceeding - The IBA under Section 9 is admitted and Corporate Insolvency Resolution Process is initiated against the Corporate Debtor. - HELD THAT: - Having found debt and default, the Tribunal admitted IBA/1429/2019 and ordered initiation of CIRP. The Corporate Debtor was called and, after absence despite substituted service by publication, was proceeded against ex parte. The admission order was passed in terms of Section 9(5), with directions to communicate the order to the parties and to IBBI. The admission also triggered the statutory consequences that follow admission under the Code. [Paras 5, 7, 12, 13]

IBA admitted and CIRP initiated; Corporate Debtor proceeded against ex parte after substituted service by publication.

Appointment of Interim Resolution Professional - An Interim Resolution Professional is appointed from the IBBI list in the absence of a name proposed by the Operational Creditor. - HELD THAT: - The Operational Creditor did not nominate an Insolvency Resolution Professional in its application. The Tribunal, relying on the list furnished by the Insolvency and Bankruptcy Board of India, appointed Mr. R. Velu (registration particulars recorded in the order) as Interim Resolution Professional, subject to there being no pending disciplinary proceedings and required disclosures under the applicable IBBI regulations being made within one week. This appointment is made in exercise of the Tribunal's power to ensure an IRP is in place immediately after admission. [Paras 8]

Mr. R. Velu appointed as Interim Resolution Professional, subject to disclosures and absence of disciplinary proceedings.

Moratorium under Section 14 - The moratorium contemplated by the Code comes into effect from the date of the admission order. - HELD THAT: - Consequent to admission under Section 9(5), the Tribunal declared that the moratorium as provided in Section 14 shall apply from the date of the order until completion of the CIRP or earlier cessation as provided by the Code. The order sets out the prohibitions during the moratorium, and notes the exceptions relating to supply of essential goods or services and transactions excluded by central notification. The duration and effect of the moratorium were stated in accordance with the statutory provisions reproduced in the order. [Paras 8, 9, 10]

Statutory moratorium under Section 14 imposed from the date of the admission order until completion of CIRP (subject to statutory exceptions).

Appointment of Interim Resolution Professional - Operational Creditor directed to deposit an amount to meet the IRP's initial costs. - HELD THAT: - In accordance with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and to enable the Interim Resolution Professional to perform assigned functions, the Operational Creditor was directed to pay a sum to the IRP on his filing the requisite declaration. This order fixes the immediate financial obligation upon the Operational Creditor to fund initial IRP expenses. [Paras 11]

Operational Creditor directed to pay the specified sum to the Interim Resolution Professional to meet initial expenses.

Final Conclusion: The Tribunal admitted the Section 9 application, held that the Operational Creditor established debt and default, initiated CIRP against the Corporate Debtor, appointed an Interim Resolution Professional from the IBBI list subject to conditions, imposed the moratorium under Section 14 with statutory exceptions, and directed the Operational Creditor to furnish initial funds for the IRP; the Corporate Debtor was proceeded against ex parte after substituted service by publication.

Corporate Insolvency Resolution Process - Operational Creditor application under Section 9 - Admission of Section 9 application - Appointment of Interim Resolution Professional - Moratorium under Section 14(1) - Consent Terms and Memorandum of Compromise

Operational Creditor application under Section 9 - Admission of Section 9 application - Corporate Insolvency Resolution Process - The Section 9 application filed by the operational creditor for initiation of CIRP against the corporate debtor was admitted. - HELD THAT: - The Tribunal considered the pleadings and supporting documents, including earlier decree and demand notices, and found the operational creditor's claim and default established on the material before it. Having heard both parties and on the basis of invoices and correspondence, the Adjudicating Authority proceeded to admit the application and initiate the Corporate Insolvency Resolution Process. [Paras 5, 8]

IBA/1115/2019 stands admitted and CIRP is initiated against the corporate debtor.

Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed to manage the CIRP and initial expenses were fixed. - HELD THAT: - The applicant had not proposed a name for the Interim Resolution Professional; therefore, relying on the list furnished by the IBBI the Adjudicating Authority appointed Mr. B. Sathrukkannan (registration details recorded in the order) to act as Interim Resolution Professional. The Tribunal directed that the Interim Resolution Professional be paid an initial expense from the applicant. [Paras 5, 6]

Mr. B. Sathrukkannan is appointed as Interim Resolution Professional and shall be paid initial expenses of Rs. 1,00,000/- by the applicant.

Moratorium under Section 14(1) - The moratorium under Section 14(1) was declared to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. - HELD THAT: - Upon admission of the Section 9 application the Tribunal applied the statutory moratorium provisions prohibiting institution or continuation of suits or proceedings, transfer or disposition of assets, enforcement of security, and recovery of property, subject to exceptions and notified transactions. The order also directed public announcement of the CIRP as specified under the Code. [Paras 6]

The moratorium envisaged under Section 14(1) is declared and shall have effect from this order until completion of the CIRP or until further order as specified.

Consent Terms and Memorandum of Compromise - The interlocutory application filed by the corporate debtor seeking time based on the Memorandum of Compromise was closed. - HELD THAT: - The Tribunal noted the parties' earlier consent terms and subsequent memorandum of compromise and payments made, but recorded that no further payments had been made by the corporate debtor. In view of admission of the Section 9 application and appointment of the IRP, the interlocutory application filed by the corporate debtor for time was closed. [Paras 4, 7]

IA/1141/IB/2020 is closed.

Final Conclusion: The Tribunal admitted the operational creditor's Section 9 petition and initiated CIRP against the corporate debtor, appointed an Interim Resolution Professional from the IBBI panel with specified initial payment, declared the statutory moratorium to operate from the order, and closed the corporate debtor's interlocutory application seeking time under the memorandum of compromise.

Maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation under Article 137 of the Limitation Act - application of Section 5 of the Limitation Act for condonation of delay

Maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation under Article 137 of the Limitation Act - application of Section 5 of the Limitation Act for condonation of delay - Whether the Section 9 application filed by the operational creditor is maintainable in view of the period of limitation. - HELD THAT: - The Tribunal examined the dates of the debit notes, the last payment received and the filing date of the Section 9 application. The period of limitation for applications under Sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016 is governed by Article 137 of the Limitation Act, and the right to sue accrues on the date of default. Where the default occurred more than three years prior to filing, the application is time-barred unless delay is condoned under Section 5 of the Limitation Act. In the present case the debit notes and last payment predate the filing by more than three years and the operational creditor did not seek condonation of delay under Section 5; accordingly the application is barred by limitation. The Tribunal applied the principle laid down by the Hon'ble Supreme Court in B.K. Educational Services Private Limited v. Parag Gupta & Associates regarding applicability of Article 137 to applications under the Code and the necessity to invoke Section 5 where delay is to be condoned. [Paras 10, 11, 12, 13]

The Section 9 application is barred by limitation and is therefore dismissed as not maintainable.

Final Conclusion: The application under Section 9 is dismissed as time barred under Article 137 of the Limitation Act; no condonation under Section 5 was sought, and hence the application is not maintainable.

Pre-existing dispute - Operational Creditor application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - adjudicating authority's power to reject an application under Section 9(5)(2)(d) - Mobilox test for existence of a dispute - requirement of debt and default

Pre-existing dispute - Mobilox test for existence of a dispute - requirement of debt and default - Whether the Section 9 application by the Operational Creditor is maintainable in view of a pre-existing dispute between the parties. - HELD THAT: - The Tribunal examined the purchase order, invoices, ledger entries and correspondence and found material showing an unresolved dispute as to quantity and adjustment of excess materials. The purchase order expressly provided for quantity tolerance (plus or minus 5%) and the respondent had communicated that excess materials were lying and asked the applicant to take them back. The applicant claimed a specific sum as debt but failed to satisfactorily quantify the debt and the default in light of the admitted scope for post-supply adjustments. Applying the principle in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the Tribunal held that where there is a plausible pre-existing dispute (not a patently feeble or spurious defence) the Adjudicating Authority must reject the Section 9 application under the provision permitting rejection on account of a pre-existing dispute. The Tribunal concluded that the dispute disclosed on the record required further investigation and was sufficient to bar initiation of CIRP on the present application. [Paras 5, 6, 7]

The Section 9 application is dismissed because a pre-existing dispute exists and the debt/default have not been shown to be undisputed and due.

Final Conclusion: The application under Section 9 by the Operational Creditor seeking initiation of CIRP is dismissed on the ground that a plausible pre-existing dispute exists between the parties, rendering the claim of undisputed debt and default untenable.

Maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - validity of demand notice issued under Section 8 of the IBC - authority letter / authorization to initiate CIRP - requirement of date and particularities in authorization - only an authorised person can issue demand notice and file application under the Code - applicability of Rule 23 of the NCLT Rules, 2016 to applications under Sections 7, 9 and 10

Authority letter / authorization to initiate CIRP - requirement of date and particularities in authorization - validity of demand notice issued under Section 8 of the IBC - maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Application under Section 9 of the IBC dismissed for want of valid authorization and invalid demand notice. - HELD THAT: - The Tribunal examined the authorisation letter relied upon by the applicant and found it did not bear the date of issuance and lacked necessary particulars to establish that the authorised signatory was empowered to issue the demand notice prior to issuing it. The Tribunal applied the settled principle that only an authorised person can issue the demand notice and file an application under the Code, noting the applicability of Rule 23 of the NCLT Rules, 2016 and the requirement of specific authorisation to initiate CIRP. In the absence of the date and requisite particulars on the authority letter, the demand notice dated 29.04.2019-which is a prerequisite under the Code-was held to be invalid, and consequently the Section 9 petition was vitiated and not maintainable. The Tribunal therefore dismissed the petition without adjudicating the merits of the claim, while leaving open the applicant's right to seek relief in an appropriate forum. [Paras 10, 11, 12, 13]

Company Petition CP(IB) 658 of 2019 dismissed for want of maintainability for invalid authorization and demand notice; disposed of without cost.

Final Conclusion: The petition under Section 9 was dismissed as not maintainable because the authorisation relied upon to issue the Section 8 demand notice was defective (undated and lacking requisite particulars), rendering the demand notice invalid; the applicant remains free to pursue its claim in an appropriate forum.

Release of title deeds and issuance of No Objection Certificate (NOC) under an approved resolution plan - custody of title documents by charge holders versus entitlement of successful resolution applicant - implementation of an approved resolution plan and obligations of Committee of Creditors - assignment of security interest and stepping into shoes of assignor - prohibition on disposal/alienation of assets without prior tribunal order to protect stakeholders - release of pledge of shares upon payment under the resolution plan

Release of title deeds and issuance of No Objection Certificate (NOC) under an approved resolution plan - custody of title documents by charge holders versus entitlement of successful resolution applicant - implementation of an approved resolution plan and obligations of Committee of Creditors - Financial Creditors holding original title deeds must hand over the original title deeds of the lands at Bhoothpur and Vadodara and issue NOC in favour of the successful Resolution Applicant as provided in the approved Resolution Plan. - HELD THAT: - The Tribunal noted prior orders directing Financial Creditors to release security and provide NOC for transfer of leasehold rights in implementation of the approved Resolution Plan. Although the CoC of the holding company reiterated its stand of not parting with custody of the original lease documents, the Tribunal observed that repeated directions had been issued and, to give effect to the Resolution Plan, directed the Financial Creditors to hand over the original title deeds and give NOC in favour of the successful Resolution Applicant as provided by the Plan. This direction implements the obligations flowing from the approved Resolution Plan and earlier orders of the Tribunal. [Paras 29, 32]

Financial Creditors to hand over the original title deeds and issue NOC to the successful Resolution Applicant as provided in the Resolution Plan.

Prohibition on disposal/alienation of assets without prior tribunal order to protect stakeholders - custody of title documents by charge holders versus entitlement of successful resolution applicant - The successful Resolution Applicant is restrained from disposing of or alienating the properties of the Corporate Debtor without prior and specific order of the Tribunal. - HELD THAT: - Recognising the apprehensions of Financial Creditors-particularly that handing over documents might enable the Resolution Applicant to dispose of properties that are subject to existing charges and CIRP proceedings-the Tribunal balanced the need to implement the Resolution Plan with protection of stakeholder interests. Consequently, while directing handover and NOC, the Tribunal expressly prohibited the successful Resolution Applicant from disposing of or alienating the Corporate Debtor's properties unless and until the Tribunal gives a prior and specific order permitting such action. [Paras 31, 32]

Successful Resolution Applicant shall not dispose of or alienate the Corporate Debtor's properties without prior and specific order of the Tribunal.

Release of pledge of shares upon payment under the resolution plan - implementation of an approved resolution plan and obligations of Committee of Creditors - Banks are directed to release the pledge of shares in favour of the successful Resolution Applicant after being paid the amounts as provided in the Resolution Plan. - HELD THAT: - Consistent with earlier directions and the terms of the approved Resolution Plan, the Tribunal reiterated that the release of pledge of shares is contingent upon payment under the Plan. The direction aligns the security release mechanism with the Plan's implementation, ensuring that share pledge will be released only after receipt of the stipulated payment by the Financial Creditors. [Paras 32]

Banks to release the pledge of shares in favour of the successful Resolution Applicant after being paid sums as indicated in the Resolution Plan.

Final Conclusion: IA No. 117 of 2020 is disposed of by directing Financial Creditors to hand over original title deeds and issue NOC to the successful Resolution Applicant as per the approved Resolution Plan, subject to a prohibition on the Resolution Applicant disposing of the properties without prior Tribunal order, and directing release of pledged shares upon payment under the Plan.

CCCDs as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - financial creditor under Section 5(7) of the Insolvency and Bankruptcy Code, 2016 - debenture as an instrument evidencing a debt - secured debenture / creation of charge over assets - conversion option not exercised - continuation as debt in books

CCCDs as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - financial creditor under Section 5(7) of the Insolvency and Bankruptcy Code, 2016 - debenture as an instrument evidencing a debt - secured debenture / creation of charge over assets - conversion option not exercised - continuation as debt in books - Holder of the Cumulative Compulsorily Convertible Debentures (CCCDs) is a financial creditor because the CCCDs constitute a financial debt under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal examined the terms of the CCCD certificate and the contemporaneous accounting treatment and concluded that, on the facts of this case, the instrument bears the essential characteristics of financial debt. The certificate provided for an IRR (9% p.a.) on face value till conversion, a security by way of mortgage, a specified conversion window which was not acted upon before commencement of CIRP, and continued reflection of the instrument as long term borrowings in the balance sheet. The Code's definition of financial debt expressly includes amounts raised by issue of debentures and similar instruments; the definition of financial creditor covers persons to whom such financial debt is owed. Although authorities recognise that compulsorily convertible instruments may, in some contexts, be treated as equity, the Tribunal held that such legal characterisation depends on the contractual terms and factual matrix. On the present facts - absence of conversion into equity, presence of an agreed return capturing time value of money, security by mortgage and continued accounting as debt - the CCCDs fall within the scope of financial debt and the CCCD holder is accordingly a financial creditor. The Tribunal relied on the Companies Act definition of debenture and precedent acknowledging that classification depends on substance and terms, and applied the statutory inclusions in Section 5(8) to the instrument before it. [Paras 12, 13, 14, 15, 17]

The claim of the CCCD holder is a financial debt and the holder is a financial creditor; the application is allowed.

Final Conclusion: The Tribunal held that, on the facts and terms of the instrument and its treatment in the corporate debtor's books, the CCCDs qualify as financial debt under the Insolvency and Bankruptcy Code, 2016, and the CCCD holder is a financial creditor; the application is allowed and disposed of accordingly.

Condonation of delay - requirement to specify the period of delay in applications seeking condonation - limitation and 'no equity about limitation' - time bound liquidation process and the liquidator's accountability to conclude liquidation within one year - liquidator's duty to verify claims within the prescribed time and to record reasons for rejection

Condonation of delay - requirement to specify the period of delay in applications seeking condonation - limitation and 'no equity about limitation' - time bound liquidation process and the liquidator's accountability to conclude liquidation within one year - liquidator's duty to verify claims within the prescribed time and to record reasons for rejection - Whether the application under Section 42 of the I&B Code for condonation of delay and direction to the Liquidator to admit the claim could be allowed where the claimant failed to state the number of days of delay and filed the claim long after the public announcement of liquidation - HELD THAT: - The Tribunal held that an application for condonation of delay of this nature must expressly state and explain each day of delay; omission to mention the number of days is a fundamental defect. The claimant became aware of the liquidation on the date of the public announcement and therefore could not claim subsequent ignorance. The IBC and the Liquidation Regulations require claims to be submitted in the prescribed form and the Liquidator to verify and either admit or reject claims within the stipulated time, recording reasons for rejection and communicating the same, with a statutory appeal window under Section 42. Liquidation is a time bound process with a one year target for completion, rendering the Liquidator accountable for progress; this framework militates against permitting belated claims that impede the process. The Tribunal applied the settled principle that 'there is no equity about limitation' and, having regard to the inordinate delay and procedural requirements, refused to grant condonation and to direct admission of the claim. [Paras 3, 12, 13, 16, 17]

Application under Section 42 seeking condonation of delay and direction to the Liquidator to admit the claim dismissed (without costs).

Final Conclusion: The application for condonation of delay and for direction to the Liquidator to accept the claim was dismissed; the Tribunal emphasised the necessity to state and explain the period of delay, the time bound nature of liquidation, and the applicability of limitation.

Exhaustion of statutory remedies - writ jurisdiction under Article 226 - efficacious alternative remedy - separation of powers - institutional respect - remand for fresh adjudication - appellate adjudication of mixed questions of fact and law - principles of natural justice

Exhaustion of statutory remedies - efficacious alternative remedy - writ jurisdiction under Article 226 - Whether the writ petition is maintainable in the High Court without exhausting the statutory appeal remedy. - HELD THAT: - The Court held that where an efficacious alternative remedy exists under the statute, the High Court should ordinarily refuse to entertain a writ petition and require exhaustion of the appellate remedy. The High Court emphasised institutional respect and the doctrine of separation of powers, noting that mixed questions of fact and law and matters requiring adjudication on documents and evidence are for the statutory appellate forum. Exceptions permitting direct writ relief are narrow (e.g., violation of natural justice, ultra vires action or abuse of process) and must be shown by the petitioner. Applying these principles to the present case, the Court found that an appellate remedy under the statute is available and efficacious, and therefore the petitioner must pursue that remedy before the Appellate Authority/Tribunal; the writ is not maintainable as a substitute for the statutory appeal. [Paras 11, 12, 13, 14]

The writ petition is not maintainable without exhausting the statutory appellate remedy; the petitioner must file the prescribed appeal.

Remand for fresh adjudication - appellate adjudication of mixed questions of fact and law - institutional respect - Whether the High Court should remand the matter to the original adjudicating authority for fresh adjudication because alleged vital grounds were not considered and no laboratory report was obtained. - HELD THAT: - The Court acknowledged that remand is permissible where vital issues were not considered. However, given that the statutory appellate forum has the power to examine factual and technical aspects, and to receive and adjudicate on original documents and evidence, the High Court should not itself enter into trial of facts or re-decide technical questions. The absence or non-receipt of a research institute's report does not, in the circumstances, justify bypassing the appellate remedy; the Appellate Tribunal is the appropriate forum to consider factual contentions, technical evidence and the relevance of any laboratory reports or their absence. Consequently, rather than remanding for fresh adjudication by the original authority in writ proceedings, the Court directed that the petitioner may approach the Appellate Authority for adjudication on merits. [Paras 6, 7, 8, 11, 14]

No remand by the High Court; petitioner directed to avail the appellate remedy so the issues (including contention regarding non-receipt of samples/reports) can be adjudicated by the competent appellate authority.

Final Conclusion: The writ petition is dismissed for failure to exhaust the statutory appeal remedy; the petitioner is granted liberty to file the prescribed appeal before the Appellate Authority/Tribunal within 30 days from receipt of this order, and the appellate authority shall adjudicate the matter on merits in accordance with law.

Determination of Annual Production Capacity under Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - Validity and operation of Rule 5 of the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - Remand for decision after disposal of pending Civil Appeal - Levy of interest on excise duty liability where statutory scheme does not provide for interest

Determination of Annual Production Capacity under Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - Validity and operation of Rule 5 of the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - Remand for decision after disposal of pending Civil Appeal - Determination of APC and consequential demand of duty remanded for fresh consideration after the Supreme Court decides Civil Appeal No. 7823/2014 - HELD THAT: - The tribunal noted that Rule 5 of the 1997 Rules provides that where the formulaic annual capacity is less than actual production in financial year 1996-97, the annual capacity shall be deemed to equal the 1996-97 production. Because the vires and operation of Rule 5 are pending before the Hon'ble Supreme Court in Civil Appeal No. 7823/2014, the tribunal concluded that the question of fixation of APC and the resulting demand of duty should not be finally adjudicated at this stage. In the interest of justice the matter relating to determination of APC and the demand of duty is therefore remanded to the adjudicating authority for decision after the Supreme Court renders its judgment in the said appeal. [Paras 4]

Issue of APC determination and consequential duty demand remanded to the adjudicating authority for decision after disposal of Civil Appeal No. 7823/2014.

Levy of interest on excise duty liability where statutory scheme does not provide for interest - Liability to pay interest on the duty demand set aside - HELD THAT: - Relying on the Supreme Court's reasoning in Shree Bhagwati Steel Rolling Mills, the tribunal held that interest cannot be levied under the specified Central Excise Rules when the statutory provision under which the compounded levy scheme was introduced (section 3A) does not stipulate levy of interest. Applying that principle, the tribunal found the imposition of interest by the adjudicating authority to be unsustainable and quashed the interest liability. [Paras 5, 6]

Liability to pay interest is set aside and the appeal is partly allowed on this ground.

Final Conclusion: The appeal is partly allowed: the issue of fixation of Annual Production Capacity and the consequential duty demand is remanded to the adjudicating authority for fresh decision after the Hon'ble Supreme Court decides Civil Appeal No. 7823/2014, while the demand of interest is quashed and set aside.

Maintainability of writ petition in presence of statutory revision remedy - Availability and exercise of revision under Section 54 of the TNVAT Act, 2006 - Limitation for refund claims and requirement of filing for refund within 180 days under Section 18(3) - Adjudication of disputed factual issues by the revisional authority on merits

Maintainability of writ petition in presence of statutory revision remedy - Availability and exercise of revision under Section 54 of the TNVAT Act, 2006 - Writ petition is premature and not maintainable without exhaustion of the revisional remedy provided under the Act. - HELD THAT: - The Court held that since a statutory revisionary remedy is expressly provided under Section 54 of the TNVAT Act, 2006, the petitioner must first avail that remedy before approaching the High Court by way of writ. The judgment emphasises the settled principle that an aggrieved person is required to exhaust available statutory remedies and that the High Court should not undertake a roving enquiry into disputed facts which are to be adjudicated by the competent authority. Given the disputed factual matrix relating to the claim for refund, the Court declined to decide the merits and directed the petitioner to approach the Revisional Authority for redressal. [Paras 6, 9]

Writ petition dismissed as premature; petitioner directed to file revision under Section 54 and to exhaust the statutory remedy.

Limitation for refund claims and requirement of filing for refund within 180 days under Section 18(3) - Adjudication of disputed factual issues by the revisional authority on merits - Disputed questions regarding limitation (filing beyond 180 days) and the correctness of the refund rejection are to be adjudicated by the Revisional Authority on merits. - HELD THAT: - The Court noted the respondent's contention that the refund application should have been filed within 180 days under the statutory provision governing refunds, and the petitioner's contrary contention that there were valid reasons for delay. Rather than resolving these factual and evidentiary disputes, the Court directed that such contentions be considered and decided by the Revisional Authority in the revision proceedings. The Revisional Authority is required to consider the challenge on merits, afford opportunity to the petitioner, and decide in accordance with law, including determination of any limitation defence. [Paras 7, 9]

Matter remanded to the Revisional Authority to consider limitation and merits of the refund claim afresh and in accordance with law.

Final Conclusion: The writ petition is disposed of as premature; the petitioner is permitted to approach the Revisional Authority under Section 54 of the TNVAT Act, 2006, which must decide the revision petition on merits and in accordance with law after affording an opportunity to the petitioner; no order as to costs.

Principles of natural justice - personal hearing - statutory mandate under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 - works contract - application of 30% : 70% formula - de novo assessment

Principles of natural justice - personal hearing - statutory mandate under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 - Impugned assessment order was passed without affording a personal hearing in violation of principles of natural justice and the statutory requirement under Section 27. - HELD THAT: - The Court noted that the question whether the transaction is a works contract ordinarily involves factual examination not to be undertaken under Article 226. However, the Assessing Authority did not afford the petitioner a personal hearing after receipt of the petitioner's reply and documentary evidence. This omission amounted to a breach of the statutory mandate to afford an effective hearing prior to finalisation of assessment and of the principles of natural justice. In consequence, the assessment order could not stand without an opportunity being given to the petitioner to be heard and for the authority to consider the material produced. [Paras 4, 7, 8]

Impugned order set aside and matter remitted for fresh hearing; petitioner to be heard and assessment to be framed de novo.

Personal hearing - Notice dated 27.05.2019 was not in proper form insofar as it granted an open-ended opportunity to appear and did not fix an effective date and time for hearing. - HELD THAT: - The Court observed that an open-ended notice calling upon the petitioner to appear within a range of days may not secure an effective opportunity of hearing because the officer may not be available throughout the stipulated range. An effective opportunity should be by a fixed date and time or otherwise communicated so that the hearing is meaningful. The form of the notice therefore left much to be decided and contributed to the failure to afford an effective hearing. [Paras 5, 6]

Notice found not to be in proper form; petitioner to be afforded an effective hearing on a fixed date/time (or by video-conference) when remitted.

Works contract - application of 30% : 70% formula - de novo assessment - Whether the contract is a works contract (and hence the applicability of the 30% : 70% formula) was not decided on merits and must be reconsidered after affording the petitioner a hearing. - HELD THAT: - The Court refrained from entering into the factual determination of whether the transaction constituted a works contract, noting that such questions ordinarily require factual examination. Because the petitioner was not heard before finalisation of the assessment, the Assessing Authority must, after hearing the petitioner and considering all materials produced, decide afresh whether the contract is a works contract and whether the formula applies, and pass assessment orders de novo within the timeline directed. [Paras 2, 3, 8]

Issue remitted to the Assessing Authority for fresh consideration and decision after hearing; assessment to be passed de novo.

Final Conclusion: Impugned assessment for 2016-17 set aside for want of an effective personal hearing; matter remitted to the Assessing Authority to afford the petitioner a hearing (physical or by video-conference) and to pass assessment orders de novo within four weeks from the first hearing; no costs.

Assessment of legal representatives - Service of notice on legal heirs - Quashing and remand for fresh decision - Interim order compliance and discretionary relief under Article 226 - Limitation not available as defence on remand

Interim order compliance and discretionary relief under Article 226 - Whether non-compliance with the condition of an interim order warranted summary dismissal of the writ petition. - HELD THAT: - The Court observed that the interim order expressly provided that failure to pay 25% of the demand would automatically vacate the interim stay and dismiss the interim application. The consequence of non-compliance was therefore limited to the interim application and did not automatically disentitle the petitioners from pursuing final relief under Article 226. In view of the explicit terms of the interim order, the Court declined to non-suit the petitioners for failing to comply with the interim condition and proceeded to examine the merits. [Paras 4, 5]

Non-compliance with the interim payment condition did not warrant dismissal of the writ petition; only the interim protection and application would be affected.

Assessment of legal representatives - Service of notice on legal heirs - Validity of assessment finalized against the deceased dealer where notice was served only on one purported legal representative while multiple legal representatives existed. - HELD THAT: - The Court considered the scope of the legal representative concept applicable where a dealer dies and noted that plural legal representatives must be treated as such when more than one heir exists. The assessing authority served notice only on the dealer's wife and did not take steps to ascertain or serve the other legal heirs who were the daughters. Reliance on the principle of substantial representation requires material to show acceptance by other representatives; no such material existed here. Given absence of service on all legal representatives or evidence of their acceptance of representation, the assessment could not be sustained in respect of the deceased's estate without fresh adjudication. [Paras 6, 9, 10, 12]

Assessment set aside insofar as it proceeded without adequate notice to or representation of all legal heirs; interference warranted and assessment quashed on that score.

Quashing and remand for fresh decision - Limitation not available as defence on remand - Relief to be granted and consequential directions where the assessment is quashed for procedural infirmity. - HELD THAT: - The Court accepted the petitioners' undertaking to pay a specified sum to the authority within a time stipulated and placed that undertaking on record. Subject to that payment, the impugned orders were quashed and the matter was remitted to the respondent to pass fresh orders in accordance with law. The respondent was directed to issue a fresh hearing notice to the petitioner. The Court expressly foreclosed reliance on limitation by the revenue as a defence on remand and required the petitioners to place all relevant materials to contest the matter on merits. Other contentions were left open for fresh consideration. [Paras 8, 11, 12]

Orders quashed and matter remitted for fresh hearing and decision in accordance with law; petitioners to make the stated payment and limitation cannot be taken as a defence on remand.

Final Conclusion: The writ petition is allowed: the assessment(order dated 30.09.2003) in respect of 1997-98 is quashed for failure to properly serve or establish representation of all legal heirs; subject to the petitioners' payment undertaking the matter is remitted to the respondent for fresh hearing and decision in accordance with law, with liberty to file material and with limitation foreclosed as a defence on remand.