TaxTMI Updates e-Newsletter
May 16,2025

The core legal questions considered by the Court were:

• Whether the second respondent was justified in rejecting the appeal filed by the petitioner on the ground of delay, when the appeal was filed beyond the initial 90-day period but within the condonable 30-day period under Section 107 of the GST Act;
• Whether the failure to file a condonation of delay application along with the appeal constituted a valid ground for outright rejection of the appeal;
• Whether the petitioner should be afforded an opportunity to rectify procedural defects in the appeal, particularly by filing the condonation of delay application;
• Whether coercive recovery steps under Section 112 of the GST Act could be initiated against the petitioner pending disposal of the appeal or rectification of defects;
• The applicability of the precedent that procedural irregularities should not defeat substantive rights in the context of GST appeals.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of rejection of appeal due to delay beyond 90 days but within condonable period

The relevant legal framework is Section 107 of the Tamil Nadu Goods and Services Tax (TNGST)/Central Goods and Services Tax (CGST) Act, 2017, which prescribes a limitation period of 90 days for filing appeals from the date of the order against which the appeal is preferred. However, an additional condonable period of 30 days is allowed for filing the appeal with a condonation of delay application.

The petitioner filed the appeal on 07.11.2024, which was beyond the initial 90-day period but within the 30-day condonable period. The second respondent rejected the appeal on 04.04.2025, holding that the appeal was filed belatedly. The petitioner contended that the delay was due to medical reasons and that the appeal was filed within the condonable period, albeit without the condonation application.

The Court noted that the appeal was indeed filed within the condonable period, and the delay was not excessive or unexplained. The petitioner's explanation for delay was accepted as reasonable.

Issue 2: Effect of failure to file condonation of delay application along with the appeal

The second respondent rejected the appeal solely on the ground that the condonation of delay application was not filed along with the appeal. The petitioner argued that this was a mere procedural irregularity and did not justify dismissal of the appeal.

The Court relied on the precedent set in Indian Potash Ltd. vs. Deputy Commissioner (ST) GST Appeal, wherein it was held that appeals should not be rejected on technical grounds or procedural defects that do not go to the root of the matter. The Court emphasized that procedure is the "handmaid of justice" and should not defeat substantive rights.

Accordingly, the Court held that the failure to file the condonation application along with the appeal was a procedural defect that could be rectified, and did not warrant outright rejection of the appeal.

Issue 3: Opportunity to rectify procedural defects

In light of the above, the Court opined that the petitioner should be given an opportunity to rectify the defect by filing the condonation of delay application. The Court directed the petitioner to represent the appeal along with the condonation application, and directed the second respondent to entertain the appeal afresh, calculating limitation from the date of filing the original appeal.

Issue 4: Initiation of coercive recovery proceedings pending disposal of appeal

The petitioner contended that the first respondent proceeded to take coercive steps under Section 112 of the GST Act for recovery of demand after dismissal of the appeal. The petitioner sought a direction restraining such coercive action until the appeal was reconsidered.

The Court granted interim protection by directing that no coercive steps be taken against the petitioner until the appeal is reconsidered on representation along with the condonation application. This ensured that the petitioner's rights were protected pending the adjudication of the appeal.

3. SIGNIFICANT HOLDINGS

The Court set aside the impugned order rejecting the appeal on the ground of delay and procedural defect, holding as follows:

"An appeal cannot be rejected on the ground of technical defects. No doubt there is procedural irregularity in filing the appeal but such procedural irregularity should not defeat the petitioner's right. As it is well settled that procedure is handmaid of justice, I am of the view that the petitioner should be given an opportunity to rectify the defect."

The Court established the core principle that procedural irregularities, such as failure to file a condonation of delay application along with the appeal, should not result in outright dismissal of an appeal if the appeal is otherwise filed within the condonable period and the delay is justifiable.

The final determination was that the petitioner must be allowed to re-present the appeal with the condonation application, and the appellate authority must entertain the appeal afresh, calculating limitation from the original filing date. Further, coercive recovery actions are restrained until the appeal is reconsidered.

Issues: Whether the petitioner was entitled to bail in a GST evasion case despite the alleged non-compliance with mandatory arrest safeguards, and whether the pendency of another case barred grant of bail.

Analysis: The offence alleged under Section 132(1)(c) of the Central Goods and Services Tax Act, 2017 carries a maximum sentence of five years. The record showed that the petitioner had remained in custody for more than three months and that investigation in the present matter had culminated in filing of the charge-sheet. The Court noted that the statutory and judicial mandate requiring compliance with arrest safeguards, including notice before arrest in cases punishable up to seven years, had not been followed. The pendency of another case was noticed, but it was also recorded that charge-sheet had been laid in that matter as well. In light of the settled requirements governing arrest and bail, the Court found that continued custody was not warranted.

Conclusion: Bail was granted to the petitioner.

Ratio Decidendi: Where the offence is punishable up to seven years and the mandatory arrest safeguards are not complied with, non-compliance can justify grant of bail, especially when investigation is complete and charge-sheet has been filed.

- Whether the retrospective cancellation of the Petitioner's GST registration from the date of initial registration (1st July, 2017) is legally sustainable.

- Whether the failure to furnish returns for a continuous period of six months, after the Petitioner had applied for cancellation of GST registration, constitutes valid grounds for cancellation under the GST Act.

- Whether the rejection of the Petitioner's application for cancellation of registration on grounds of non-filing of Profit & Loss account and non-payment of due taxes and interest is justified.

- The legality and propriety of the issuance of Show Cause Notice (SCN) for cancellation of registration after a considerable delay, i.e., almost a year after the Petitioner's application for cancellation.

- The effect of non-response by the Petitioner to the notices issued by the GST Department.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of retrospective cancellation of GST registration from 1st July, 2017

Relevant legal framework and precedents: The GST Act provides for cancellation of registration under specific grounds, including failure to furnish returns for a continuous period of six months. However, retrospective cancellation from the date of registration is an extreme measure that requires clear justification.

Court's interpretation and reasoning: The Court observed that the impugned order cancelled the registration retrospectively from the date of registration, i.e., 1st July, 2017. This was based on the ground that the Petitioner failed to file returns for six continuous months. However, the Petitioner had already applied for cancellation of registration on 15th May, 2023, and thus could not have filed returns for the period after the application.

Key evidence and findings: The SCN dated 14th May, 2024, which was issued a year after the cancellation application, cited failure to furnish returns for six months as the reason for cancellation. The Petitioner did not respond to this SCN. The Court found that the retrospective cancellation was not sustainable because the ground for cancellation was premised on non-filing of returns during a period when the Petitioner had already sought cancellation.

Application of law to facts: Since the Petitioner had applied for cancellation, expecting the registration to cease, penalizing for non-filing returns during this period was not legally tenable. Retrospective cancellation from the date of registration was therefore set aside.

Treatment of competing arguments: The GST Department argued that failure to file returns for six months warranted cancellation. The Petitioner contended that the application for cancellation precluded such failure. The Court sided with the Petitioner, emphasizing procedural fairness and the purpose of cancellation provisions.

Conclusion: Retrospective cancellation from 1st July, 2017 was quashed. Cancellation was to take effect only from the date of SCN issuance, i.e., 14th May, 2024.

Issue 2: Rejection of cancellation application due to non-filing of Profit & Loss account and non-payment of due taxes and interest

Relevant legal framework and precedents: Under GST law, cancellation of registration requires compliance with all statutory obligations, including filing of returns, payment of due taxes, and submission of relevant financial documents such as Profit & Loss accounts to assess liabilities.

Court's interpretation and reasoning: The Department rejected the Petitioner's cancellation application on 30th April, 2024, citing failure to file P/L accounts and non-payment of taxes on mismatch amounts between GSTR-2A/3B and GSTR-1/3B. The Court noted that the Petitioner had not responded to the notice dated 14th June, 2023, which sought these details.

Key evidence and findings: The Petitioner contended unawareness of the notice. The Court did not delve into the merits of whether the Petitioner was duly served but focused on the procedural lapse of non-response.

Application of law to facts: The statutory requirement to file all due returns and pay taxes before cancellation was not fulfilled by the Petitioner. The Department's rejection was in accordance with the provisions of the GST Act.

Treatment of competing arguments: The Petitioner argued lack of knowledge of the notice. The Department maintained that no response was received. The Court did not overturn the rejection on this ground but emphasized that subsequent cancellation could not be retrospective.

Conclusion: The rejection of cancellation application was upheld as per statutory provisions, but it did not justify retrospective cancellation.

Issue 3: Legality and timing of issuance of Show Cause Notice for cancellation

Relevant legal framework and precedents: The GST Act mandates issuance of a Show Cause Notice before cancellation of registration, allowing the taxpayer an opportunity to be heard. The timing and grounds for such notice must be reasonable and in accordance with procedural fairness.

Court's interpretation and reasoning: The SCN dated 14th May, 2024, was issued almost a year after the Petitioner's application for cancellation. The Court found this delay surprising and questioned the validity of initiating cancellation proceedings after such lapse.

Key evidence and findings: The SCN cited failure to file returns for six months as the ground. The Petitioner did not reply or appear for hearing. Registration was suspended effective from the date of SCN.

Application of law to facts: The delay in issuing SCN and the grounds cited were inconsistent with the Petitioner's prior application for cancellation. The Court held that the SCN could not justify retrospective cancellation and must be confined to prospective effect.

Treatment of competing arguments: The Department relied on statutory provisions for cancellation due to non-filing. The Petitioner emphasized the prior application and procedural irregularities. The Court balanced these and ruled against retrospective effect.

Conclusion: The SCN was valid but could not support retrospective cancellation; cancellation was effective only from the date of SCN.

Issue 4: Effect of non-response by the Petitioner to notices and hearings

Relevant legal framework and precedents: Non-response to statutory notices can lead to ex parte decisions under GST law. However, principles of natural justice require that notices be properly served and parties given adequate opportunity.

Court's interpretation and reasoning: The Petitioner did not respond to the notice dated 14th June, 2023, or the SCN dated 14th May, 2024. The Court noted the Petitioner's claim of unawareness of the first notice but did not find sufficient grounds to set aside the rejection of cancellation application.

Key evidence and findings: Non-response led to rejection of cancellation application and eventual cancellation of registration. However, the Court emphasized that despite non-response, retrospective cancellation was not justified.

Application of law to facts: The Court recognized the procedural consequences of non-response but limited the effect of cancellation to prospective dates.

Treatment of competing arguments: The Department relied on non-response as basis for proceeding ex parte. The Petitioner highlighted lack of notice. The Court balanced procedural fairness and statutory compliance.

Conclusion: Non-response justified rejection and cancellation but not retrospective effect.

3. SIGNIFICANT HOLDINGS

"The Petitioner obviously could not have filed returns for six months as the Petitioner had already applied for cancellation of the GST registration. Therefore this ground, in the opinion of the Court, is not a sustainable ground for retrospective cancellation and the retrospective cancellation deserves to be set aside."

"It is directed that the cancellation of the GST registration will take effect from 14th May, 2024. It is also clarified that any other proceedings qua the GST No.

The core legal questions considered by the Court are:

- Whether the show-cause notice dated 29.03.2025 issued for cancellation of the petitioner's GST registration was valid and in compliance with the principles of natural justice, specifically whether it was sufficiently clear and specific in stating the grounds for cancellation.

- Whether the cancellation order dated 17.04.2025, passed without adequate opportunity to the petitioner to respond and without proper application of mind, was lawful and justified under the CGST Act, 2017.

- Whether the absence of supporting documents attached to the show-cause notice or the vagueness of the notice vitiates the cancellation proceedings.

- Whether the retrospective cancellation of GST registration with effect from 29.12.2024 was valid in the circumstances.

- Whether the respondents complied with the statutory and procedural requirements while initiating and concluding the cancellation proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Specificity of the Show-Cause Notice

Legal Framework and Precedents: Under Rule 22(1) of the CGST Rules, a show-cause notice for cancellation of registration must specify the grounds on which cancellation is proposed and provide the registered person an opportunity to respond. The principles of natural justice require that the notice be clear and specific to enable the person to make an effective defense. The Apex Court judgment in Oryx Fisheries Pvt. Ltd. v. Union of India (2010) 13 SCC 427 was heavily relied upon, which mandates that a quasi-judicial authority must act fairly and with an open mind, and the charges in the show-cause notice must be clearly communicated so the person can rebut them.

Court's Interpretation and Reasoning: The Court examined the show-cause notice dated 29.03.2025 and found it vague and lacking specificity. The notice merely stated "Others" as the reason and mentioned that commodities in the e-way bills did not match registrations, without detailing the exact nature of the alleged contravention or specifying the commodities or transactions involved. Importantly, the notice did not mention the significant allegation of "huge e-way bills raised in March 2025 amounting to 12 crore+ within 15 to 20 days," which was the basis for suspicion in the cancellation order.

The Court observed that the absence of clear charges in the notice deprived the petitioner of a fair opportunity to respond. The petitioner could not effectively explain or rebut the allegations because the charges were not sufficiently articulated. The Court held that such vagueness violates the principles of natural justice and renders the show-cause notice invalid.

Key Evidence and Findings: The petitioner's affidavit specifically averred that no supporting documents were attached to the show-cause notice, contrary to the respondents' claim. The Court found this claim credible, noting that even if supporting documents had been sent separately, they cannot be treated as part of the notice if the notice itself fails to specify the charges clearly.

Application of Law to Facts: Applying the Apex Court's principles, the Court concluded that the impugned show-cause notice did not meet the legal requirement of fairness and clarity. It was tantamount to a closed mind and pre-judgment, which vitiates the quasi-judicial process.

Treatment of Competing Arguments: The respondents contended that a supporting document was attached and that the petitioner failed to respond or appear for hearing, which justified cancellation. The Court rejected these contentions on the ground that the petitioner could not respond to an unclear notice and that the absence of specific charges and reasons in the notice invalidated the entire proceeding.

Conclusion: The show-cause notice dated 29.03.2025 was held to be vague, unfair, and violative of natural justice, thus invalid.

Issue 2: Legality of the Cancellation Order dated 17.04.2025

Legal Framework and Precedents: Under Rule 22(3) of the CGST Rules, the cancellation order must be passed after considering the reply to the show-cause notice and after providing a reasonable opportunity of hearing. The order must be based on proper application of mind and supported by valid reasons.

Court's Interpretation and Reasoning: The cancellation order was passed on the premise that the petitioner did not respond to the show-cause notice and did not appear for the hearing. However, since the show-cause notice was vague and did not specify the charges, the petitioner's failure to respond was not a wilful default but a consequence of the defective notice. The Court noted that the order was passed mechanically without proper application of mind or on merits.

Further, the retrospective effect of cancellation from 29.12.2024 was imposed without any explanation or justification, which the Court found arbitrary.

Key Evidence and Findings: The order itself acknowledged that no reply was received and that the petitioner was given seven working days to respond. The order also mentioned suspiciously high e-way bills but this was not part of the show-cause notice, indicating a disconnect between the notice and the order.

Application of Law to Facts: The Court applied the principle that a cancellation order must be preceded by a fair and clear show-cause notice and proper consideration of the petitioner's response. Since these conditions were not met, the cancellation order was held to be invalid.

Treatment of Competing Arguments: The respondents argued that the petitioner's non-appearance and non-response justified cancellation. The Court held that such non-response cannot be treated as default when the notice itself was defective and unclear.

Conclusion: The cancellation order dated 17.04.2025 was set aside as it was passed without due process, fairness, or proper application of mind.

Issue 3: Attachment and Role of Supporting Documents

Legal Framework and Precedents: Supporting documents, if any, must be clearly referenced and form an integral part of the show-cause notice so that the person charged can understand the case against him and respond accordingly.

Court's Interpretation and Reasoning: The Court observed that the respondents claimed to have attached supporting documents, but the petitioner denied receipt or attachment. Even if such documents were sent separately, the Court held that they cannot substitute for a clear and specific show-cause notice. The absence of explicit reference to these documents in the notice and failure to describe the charges in the notice itself rendered the notice ineffective.

Application of Law to Facts: The Court emphasized that the notice itself must be self-contained to the extent of enabling the recipient to understand the allegations and respond. Reliance on separate documents without clear incorporation into the notice is insufficient.

Conclusion: The alleged supporting documents did not cure the vagueness or deficiency of the show-cause notice.

3. SIGNIFICANT HOLDINGS

- "It is well settled that a quasi-judicial authority, while acting in exercise of its Statutory power must act fairly and must act with an open mind while initiating a show-cause proceeding. A show-cause proceeding is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice."

- "At the stage of show-cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. At that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, the entire proceeding initiated by the show-cause notice gets vitiated by unfairness and bias and the subsequent proceedings become an idle ceremony."

- "Justice is rooted in confidence and justice is the goal of a quasi-judicial proceeding also. If the functioning of a quasi-judicial authority has to inspire confidence in the minds of those subjected to its jurisdiction, such authority must act with utmost fairness. Its fairness is obviously to be manifested by the language in which charges are couched and conveyed to the person proceeded against."

- "The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it."

- The Court held that the impugned show-cause notice was vague and failed to specify charges clearly, thereby violating the principles of natural justice and rendering the cancellation order passed pursuant thereto invalid.

- The cancellation order dated 17.04.2025 was passed mechanically, without proper application of mind or on merits, and is consequently set aside.

- The respondents are at liberty to issue a fresh show-cause notice clearly stating specific charges to enable the petitioner to respond effectively, thereby ensuring compliance with statutory requirements and principles of natural justice.

1. Whether the impugned order wrongly taxes the entire amount earmarked for fund expenses by treating such reimbursements as consideration for supply of services by the Petitioner to the fund.

2. Whether the impugned order suffers from lack of jurisdiction due to misinterpretation of the Investment Management Agreement and related agreements, particularly concerning the distinction between management fees and operational or establishment expenses.

3. Whether the impugned order violates principles of natural justice or is otherwise amenable to interference under writ jurisdiction.

4. The correctness of the Petitioner's varying positions in different communications regarding the nature and timing of establishment expenses or one-time setup fees.

Issue-wise detailed analysis:

1. Jurisdiction and Interpretation of the Investment Management Agreement

The legal framework primarily involves the provisions of the Central Goods and Services Tax Act, 2017, and the contractual terms of the Investment Management Agreement dated 19th September 2017. The Petitioner challenged the impugned order under Articles 226 and 227 of the Constitution, invoking the writ jurisdiction of the High Court on grounds of jurisdictional error and misinterpretation.

The Court examined clauses 3 and 4 of the Investment Management Agreement, which distinctly define the management fees payable to the Investment Manager and the operational expenses chargeable to the fund. Clause 3 details the annual investment management fee, specifying rates and payment mechanisms, while Clause 4 addresses operational expenses incurred either directly by the fund or indirectly by the Investment Manager on behalf of the fund, to be charged on an actual basis.

The Petitioner's contention was that the impugned order conflates reimbursable operational expenses with management fees, thereby improperly taxing amounts that are merely pass-through reimbursements. The Court noted the Petitioner's reliance on Annexure K (private placement memorandum) illustrating a clear separation between management fees and establishment or operating expenses, with establishment expenses capped at 3.5% of capital commitments and operating expenses charged on actual basis.

However, the Court observed that determining whether certain expenses constitute management fees or reimbursable operational expenses entails a factual inquiry beyond the scope of writ jurisdiction. This includes scrutiny of the nature of establishment expenses, whether they relate to the Petitioner's own employees or third-party service providers, and the accounting treatment thereof.

2. Consistency of the Petitioner's Stand on Establishment Expenses

The Respondents highlighted contradictory positions taken by the Petitioner in three separate communications dated 20th January 2020, 22nd July 2022, and 1st August 2022. These communications variously described the establishment expenses as a one-time fee to be charged at the closure of the scheme, with differing views on the timing and accrual of the fee.

The Court reproduced these communications, noting the lack of a consistent stance by the Petitioner on whether the establishment expenses are a one-time setup fee or a recurring charge, and the timing of their accrual. This inconsistency undermines the Petitioner's claim of a clear contractual distinction and complicates the question of whether such expenses should be treated as taxable consideration.

3. Scope of Writ Jurisdiction and Principles of Natural Justice

The Court emphasized that the writ petition challenges an administrative order passed under the Central Goods and Services Tax Act, which is appealable under Section 107 of the Act. The scope of writ jurisdiction is limited to examining jurisdictional errors, violation of natural justice, or legal errors apparent on the face of the record.

Given that the dispute involves intricate contractual interpretation and factual determination of accounts, the Court held that these issues are not amenable to adjudication in writ jurisdiction. There was no finding of lack of jurisdiction or violation of natural justice in the impugned order.

4. Availability of Appellate Remedy

The Court noted that the impugned order is appealable and permitted the Petitioner to file an appeal within 45 days along with the requisite pre-deposit. It also clarified that the appeal shall not be dismissed on limitation grounds if filed within the stipulated period and shall be decided on merits. The Court refrained from making any observations that would prejudice the appellate authority's final adjudication.

Significant holdings:

"The interpretation of such agreements which involves a factual analysis are beyond the scope of writ jurisdiction. There is no inherent lack of jurisdiction. Neither is there any violation of principles of natural justice. Under such circumstances there is no ground for interference with the impugned order in writ jurisdiction."

"The question whether any of the expenses incurred either on actuals or as a lumpsum in percentage terms, would have to be construed as Fee or not and whether it has to be taxed or not would require a scrutiny of the records of the Petitioners. The accounts of the Petitioner would need to be gone into to see as to whether the demand is valid or not."

"The Petitioner is permitted to avail of its appellate remedy in accordance with law."

The Court established the principle that contractual interpretation involving factual inquiries and accounting scrutiny is not suitable for determination under writ jurisdiction. It reaffirmed that administrative orders under the GST Act are subject to appeal, and such appellate remedies must be exhausted before judicial interference.

In conclusion, the Court dismissed the writ petition for lack of jurisdiction to entertain the factual and contractual disputes raised, while allowing the Petitioner to pursue its remedy through the statutory appellate process. The impugned order was held not to be vitiated by jurisdictional error or breach of natural justice.

Issues: Whether the impugned assessment and penalty order under the GST enactments warranted interference in writ jurisdiction in view of the grievance regarding personal hearing and the availability of an appellate remedy.

Analysis: The order was found to be an appealable order under the GST law. The record showed issuance of show cause notices and notices of personal hearing, while the petitioner did not file a reply to the later show cause notice and did not take timely steps to place its response or documents before the authority. In these circumstances, the grievance regarding denial of hearing did not justify writ interference, especially when the statutory appellate remedy remained available.

Conclusion: No interference was called for in writ jurisdiction and the impugned order was not set aside.

Final Conclusion: The writ petition was not entertained on merits, and the petitioner was left to pursue the statutory appeal within the time permitted by the Court.

Ratio Decidendi: Where an appealable GST order is preceded by notices of show cause and personal hearing, and the petitioner has not acted diligently to file a reply or place its defence, writ interference is not warranted and the statutory appellate remedy should ordinarily be pursued.

The core legal questions considered by the Court in this matter are:

- Whether the assessing officer's order under Section 74 of the Goods and Services Tax Act, 2017 (GST Act) imposing tax liability, interest, and penalty upon the petitioner was valid given that the show cause notice initiating proceedings was not served or brought to the petitioner's knowledge;

- Whether the petitioner was denied the fundamental right to be heard, including the opportunity for personal hearing, before passing the impugned order;

- Whether the petitioner's statutory appeal was rightly rejected on the ground of delay when the petitioner was unaware of the order due to non-communication of the notice and order;

- The applicability and interpretation of procedural safeguards under the GST Act, particularly the requirement of service of notice and opportunity of hearing;

- The effect of non-availability of the show cause notice and order on the GST Portal under the tab "view notices and orders" on the petitioner's ability to defend itself;

- The relevance and binding nature of precedents laid down by earlier Division Benches of the Court on similar issues regarding notice, opportunity of hearing, and procedural fairness in GST proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the order under Section 74 of the GST Act in absence of service of show cause notice

Relevant legal framework and precedents: Section 74 of the GST Act empowers the assessing officer to determine tax liability in cases of fraud, willful misstatement, or suppression of facts. The procedure mandates issuance of a show cause notice to the concerned party, enabling it to respond before any order is passed. The principle of audi alteram partem (right to be heard) is a fundamental tenet of natural justice embedded in procedural requirements.

Precedents cited include Division Bench decisions in Ola Fleet Technologies Pvt. Ltd. v. State of U.P. and Others, Shyam Roshan Transport v. State of U.P., and Atul Agrwal v. State of U.P., where it was held that non-communication or non-availability of show cause notice on the GST Portal deprives the party of the opportunity to defend itself. These decisions emphasize that an ex parte order without proper notice is unsustainable.

Court's interpretation and reasoning: The Court observed that the petitioner was not served with the show cause notice (GST DRC-01) physically or electronically, nor was it available under the relevant tab on the GST Portal. Consequently, the petitioner was unaware of the proceedings and could not file a reply. The Court reiterated the principle that no person should be condemned unheard and that the legislature's intention in providing for notice and hearing is to ensure fairness.

Key evidence and findings: The petitioner's claim that the notice and order were not communicated, and the order was only discovered upon uploading on the dashboard, was accepted. The Court also noted the absence of any opportunity for personal hearing or submission of documents before passing the order dated 6th October 2021.

Application of law to facts: Applying the established legal principles and precedents, the Court found the impugned order to be ex parte and violative of the petitioner's right to be heard. The Court held that such an order cannot be sustained in law.

Treatment of competing arguments: The respondent's stance was not elaborated in the judgment, but the Court implicitly rejected any contention that mere availability of the order on the dashboard sufficed as notice. The Court emphasized the necessity of actual service or communication.

Conclusion: The order under Section 74 of the GST Act, passed without proper notice and opportunity of hearing, is invalid and unsustainable.

Issue 2: Rejection of statutory appeal on the ground of delay caused by lack of knowledge of the order

Relevant legal framework and precedents: The GST Act provides for statutory appeals against orders passed by assessing officers. Timely filing of appeal is mandatory, but the limitation period runs from the date of knowledge of the order. Precedents recognize that where a party is not served or made aware of the order, the limitation period cannot be held to have commenced.

Court's interpretation and reasoning: The Court recognized that the petitioner only came to know of the order in March 2024 and immediately filed the appeal, which was rejected as time-barred. The Court held that since the petitioner was unaware of the order due to non-service, the rejection of the appeal on delay grounds effectively rendered the petitioner remediless, which is contrary to principles of natural justice.

Key evidence and findings: The petitioner's immediate filing of appeal upon knowledge of the order was noted. The absence of any communication of the order or notice to the petitioner was a critical factor.

Application of law to facts: The Court applied the principle that limitation for filing appeal starts only upon knowledge of the order. Since the petitioner had no knowledge, the delay was excusable.

Treatment of competing arguments: The Court did not accept the respondent's position that delay barred the appeal, given the circumstances of non-service and non-communication.

Conclusion: The rejection of the statutory appeal on the ground of delay was improper and unjust.

Issue 3: Requirement of opportunity of personal hearing before passing the order

Relevant legal framework and precedents: Section 75 of the GST Act provides for the right of the party to participate in oral hearings even if it fails to submit a written reply to the show cause notice. The principle of audi alteram partem mandates that no adverse order be passed without affording the party an opportunity of hearing.

The Court relied on the Division Bench judgment in M/s Sai Dham Residency v. State of U.P., which held that even if the party does not comply with the show cause notice in writing, it retains the right to oral hearing to establish its case.

Court's interpretation and reasoning: The Court found that the petitioner was not afforded any personal hearing and the assessing officer recorded "NA" (not applicable) for hearing, which was impermissible. The Court emphasized that the authority cannot treat personal hearing as a mere formality or dispense with it altogether.

Key evidence and findings: The record showed absence of any hearing opportunity and no consideration of petitioner's documents or objections before passing the final order.

Application of law to facts: The Court held that the failure to provide personal hearing violated the statutory mandate and principles of natural justice.

Treatment of competing arguments: The Court rejected any argument that written submissions alone suffice or that absence of reply justified denial of hearing.

Conclusion: The petitioner was entitled to personal hearing, and the absence thereof vitiates the order.

Issue 4: Interpretation of procedural safeguards under the GST Act and strict construction of taxing statutes

Relevant legal framework and precedents: The Court referred to the Supreme Court's ruling in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company, which mandates strict construction of penal and taxation statutes, emphasizing that the State cannot burden citizens beyond the authority conferred by law.

Court's interpretation and reasoning: The Court reiterated that provisions requiring notice and hearing are mandatory and not mere formalities. The legislature's intention is to ensure fairness and prevent arbitrary imposition of tax liabilities.

Key evidence and findings: The Court relied on the statutory scheme and judicial precedents to underline the mandatory nature of procedural safeguards.

Application of law to facts: The Court applied the strict interpretation principle to invalidate the impugned order passed without compliance with procedural requirements.

Treatment of competing arguments: The Court implicitly rejected any expansive or liberal interpretation that would justify non-service or denial of hearing.

Conclusion: The procedural safeguards under the GST Act must be strictly complied with, and failure to do so renders the order void.

Issue 5: Directions for fresh proceedings and remedy to the petitioner

Court's reasoning and directions: Following the precedents and principles discussed, the Court directed that the impugned order dated 6th October 2021 shall be treated as a notice under Section 74 of the GST Act. The petitioner was granted eight weeks to file objections and submit documents. The assessing officer was directed to consider the submissions, afford opportunity of personal hearing, and pass a fresh order within four weeks thereafter.

This approach aligns with the Division Bench's directions in Ola Fleet Technologies and other cited cases, ensuring the petitioner is not condemned unheard and is provided a fair opportunity to defend itself.

3. SIGNIFICANT HOLDINGS

- "Nobody should be condemned unheard and legislature while incorporating the provision of notice/ show cause notice, intended so."

- "In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocents might become victims of discretionary decision-making. Insofar as taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law."

- "Upon service of notice, the petitioner had been called to file its reply only. Consequently, non-compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate at oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped."

- The Court's final determination was that the impugned order passed without service of notice and opportunity of hearing is unsustainable, and the petitioner must be afforded a fresh opportunity to present its case. The order dated 6th October 2021 shall be treated as notice under Section 74, enabling the petitioner to file objections and documents, followed by a fresh adjudication after hearing.

Issues: Whether provisional release of the detained vehicles could be directed in a writ petition when the confiscation orders were not challenged, and whether the petitioners should instead be relegated to statutory remedies.

Analysis: The prayer was for provisional release of vehicles intercepted for transportation of goods without the necessary documents. Confiscation orders had already been passed, but those orders were not assailed in the writ petition. In the presence of disputed questions regarding production of documents, the proper course was found to lie under the statutory mechanism, including release by the proper officer where permissible under Section 130(7) of the Central Goods and Services Tax Act, 2017, or an appeal under Section 107 of the Central Goods and Services Tax Act, 2017. The writ remedy under Article 226 of the Constitution of India was held to be inappropriate in these circumstances.

Conclusion: Provisional release was declined, and the petitioners were relegated to pursue the statutory remedies available under the Central Goods and Services Tax Act, 2017.

Final Conclusion: The writ petition did not result in judicial release of the vehicles and was disposed of by directing the petitioners to work out their remedies under the statutory framework.

Ratio Decidendi: Where confiscation orders are not challenged and the controversy turns on disputed facts, the High Court will ordinarily decline provisional relief in writ jurisdiction and leave the parties to the statutory remedies provided by the taxing statute.

Outcome: The writ petition was disposed of with liberty to challenge the show cause notice and the adjudication order in original before the appropriate forum in a composite manner in accordance with law.

Issues: Whether the refund application filed under Section 54(1) of the Central Goods and Services Tax Act, 2017 was rejected as time-barred by treating compliance with the deficiency memo as a fresh refund application, and whether the appellate rejection on the same ground required consideration.

Outcome: Notice issued, returnable on 24 April 2025, with direct service through email permitted.

Issues: Whether interim protection should be granted against the assessment and appellate orders concerning denial of input tax credit under the Uttar Pradesh Goods and Services Tax Act, 2017.

Analysis: The petition assailed the assessment under Section 74 and the consequent appellate order on the footing that the goods were purchased from a registered supplier, the purchase consideration including tax was paid through banking channels, and the transaction was supported by invoices, bilties and e-way bills. The challenge also invoked Section 16 of the Uttar Pradesh Goods and Services Tax Act, 2017, including Section 16(2)(c), to contend that denial of input tax credit could not rest merely on alleged non-deposit of tax by the supplier. On this showing, the Court found a prima facie case for interim protection.

Conclusion: Interim stay was granted against operation of the impugned orders, subject to deposit of 30% of the assessed tax after adjustment of tax already deposited.

1. What is the correct classification of the goods described as 'sada tambaku pre-mixed with lime' proposed to be manufactured and supplied by the applicantRs.

2. What is the applicable rate of Goods and Services Tax (GST) and compensation cess on the said goodsRs.

Issue-wise Detailed Analysis

Issue 1: Classification of 'sada tambaku pre-mixed with lime'

Relevant Legal Framework and Precedents: The classification of goods under GST is governed by the Customs Tariff Act, 1975 and relevant notifications issued under the CGST Act, 2017. The Harmonized System of Nomenclature (HSN) chapters 24.01 and 24.03 are pertinent here. Chapter 24.01 covers unmanufactured tobacco and tobacco refuse, while Chapter 24.03 covers other manufactured tobacco and manufactured tobacco substitutes including chewing tobacco.

The definition of 'manufacture' is provided under Section 2(72) of the CGST Act, 2017, which states that manufacture means processing of raw materials or inputs in any manner resulting in the emergence of a new product having a distinct name, character, and use.

Relevant Supreme Court precedents include:

• M/s. Urmin Products P Ltd (2024): Discussed the nature of chewing tobacco and distinguished it from other tobacco products based on preparation, form, flavor, and use.
• Satnam Overseas Ltd (2015): Held that addition of ingredients that do not alter the essential character of raw rice does not amount to manufacture.
• Crane Betel Nut Powder Works (2007): Found that crushing and sweetening betel nuts did not result in manufacture of a new product.
• Pio Food Packers (1980): Held that preparing pineapple slices from pineapple did not amount to manufacture as the product retained its original identity.
• Lalji Godhoo & Company (2007), Technoweld Industries (2003), Meltex (I) P Ltd (2004), and S R Tissues P Ltd (2005): Emphasized that mere processing without change in essential character or use does not constitute manufacture.
• Yogesh Associates (2006): Held that treatment of raw tobacco leaf with tobacco solution and flavors did not cause irreversible change and thus remained unmanufactured tobacco.

Court's Interpretation and Reasoning: The applicant's product involves mixing raw tobacco leaves with lime paste in a mixer, followed by pouch packing for supply. The applicant contended that this product remains unmanufactured tobacco since the tobacco leaves remain in raw state and the addition of lime does not amount to manufacture.

The Revenue, however, argued that the mixing process renders the tobacco ready for direct consumption by the consumer, which constitutes manufacture, and thus the product should be classified as chewing tobacco under HSN 24039910.

The Court examined the HSN explanatory notes for chapters 24.01 and 24.03. It noted that unmanufactured tobacco includes cured or fermented leaves in natural form but not tobacco ready for smoking or chewing, while chewing tobacco is usually highly fermented and liquored tobacco ready for consumption.

The Court emphasized the CGST Act's definition of manufacture and found that the process of mixing tobacco with lime results in a new product with a distinct name, character, and use. The product is now fit for direct consumption, unlike raw tobacco leaves. This transformation aligns the product with the description of chewing tobacco under HSN 24039910.

Relevant precedents cited by the applicant on the non-manufacture of similar products were distinguished on facts. For example, the Yogesh Associates case involved treatment with flavoring solutions that did not make the product marketable as chewing tobacco, unlike the present case where the product is ready for consumption.

The Court also considered the applicant's reliance on earlier advance rulings classifying similar products as unmanufactured tobacco but found those rulings were based on investigations and facts not applicable here.

Key Evidence and Findings: The process flow chart, statutory requirements for packaging, and the nature of the product as ready for consumption were critical. The applicant admitted tobacco leaves are never used directly but only after mixing with lime. The product after processing is fit for chewing, which was decisive.

Application of Law to Facts: The Court applied the definition of manufacture and HSN explanatory notes to conclude that the product is a manufactured tobacco product, specifically chewing tobacco under HSN 24039910.

Treatment of Competing Arguments: The Court acknowledged the applicant's submissions and precedents but distinguished them based on the nature of the product and process. The Revenue's contention that the product is ready for consumption and thus manufactured was accepted.

Conclusion: The product 'sada tambaku pre-mixed with lime' is a manufactured tobacco product classifiable under HSN 24039910 as chewing tobacco.

Issue 2: Applicable GST and Compensation Cess Rates

Relevant Legal Framework: GST rates are prescribed under Notification No. 1/2017-Central Tax (Rate) and corresponding state notifications. Compensation cess rates are notified under Notification No. 1/2017-Compensation Cess (Rate) and subsequent amendments.

HSN 24039910 attracts GST at 28% (14% CGST + 14% SGST/UTGST) and compensation cess as per the applicable schedule. The compensation cess notification distinguishes between goods with declared retail sale price and others, with respective cess rates.

Court's Interpretation and Reasoning: Since the product is classified under HSN 24039910, the GST rate applicable is 28%. The applicant claimed no compensation cess is leviable as the product is unbranded. However, the Court noted that the compensation cess notification does not exempt unbranded products and applies the cess rates irrespective of branding.

Key Evidence and Findings: Notification entries and schedules indicate that chewing tobacco without lime tube attracts compensation cess at 0.56 rupees per unit if the retail sale price is declared, or 160% otherwise.

Application of Law to Facts: The product falls under the relevant tariff item attracting GST at 28% and compensation cess at the specified rates.

Treatment of Competing Arguments: The Court rejected the applicant's argument that absence of brand name exempts compensation cess liability.

Conclusion: GST is leviable at 28%, and compensation cess is leviable at 0.56 rupees per unit or 160% as per the applicable notification.

Significant Holdings

"The moment the tobacco is mixed with lime and subsequently supplied, it does not remain tobacco as such. It is the applicant's own say that tobacco leaves are never chewed/used directly. A new product i.e. tobacco mixed with lime, which can be directly chewed/used, emerges which is a new product having a distinct name, character and use."

"The product 'sada tambaku pre-mixed with lime' will fall under HSN 24039910 and leviable to GST at the rate of 28%."

"Compensation cess at the rate of 0.56 rupees per unit in respect of the product with declared retail sale price or at the rate of 160% in respect of products other than goods covered under serial No. 26 above, is leviable on the said product."

Core principles established include the application of the CGST Act's definition of manufacture to determine classification, the use of HSN explanatory notes to interpret tariff headings, and the principle that addition of lime resulting in a product fit for direct consumption constitutes manufacture.

Final determinations:

• The product 'sada tambaku pre-mixed with lime' is classified under HSN 24039910 (chewing tobacco).
• The GST rate applicable is 28% (14% CGST + 14% SGST/UTGST).
• Compensation cess is leviable at 0.56 rupees per unit or 160% as per the notification, regardless of branding.

Issues: Whether blades cleared as spare parts for chaff cutter machines are classifiable under Heading 8208 40 00 or under Heading 8436 10 00.

Analysis: The goods were found to be cutting blades used in agricultural chaff cutters. Heading 8208 specifically covers knives and cutting blades for agricultural, horticultural or forestry machines, while Section XVI Note 1(k) excludes articles of Chapter 82 from that section. The HSN Explanatory Notes also include blades and knives for straw cutters under Heading 8208 and exclude cutting blades and knives for straw cutters from Heading 8436. Applying the tariff text, the section notes, and the HSN guidance, the more specific classification was held to govern.

Conclusion: The blades are classifiable under Heading 8208 40 00 and are liable to GST at 18%, not under Heading 8436 10 00.

Issues: Whether blades cleared as spare parts for chaff cutter machines are classifiable under heading 8208 40 00 as knives and cutting blades for agricultural, horticultural or forestry machines, or under heading 8436 10 00 / 8436 80 90 as parts or machinery for preparing animal feeding stuffs.

Analysis: The classification had to be determined primarily from the terms of the heading read with the relevant section and chapter notes. Heading 8208 specifically covers knives and cutting blades for agricultural, horticultural or forestry machines, while Heading 8436 covers agricultural machinery and machinery for preparing animal feeding stuffs. The explanatory notes to Heading 8208 expressly include blades and knives for root cutters and straw cutters. The explanatory notes to Heading 8436 specifically exclude cutting blades and knives for straw cutters and similar machines, which reinforces the specific coverage under Heading 8208. Section XVI notes did not displace this result because articles of Chapter 82 are excluded from that section, and the general rules of interpretation cannot override a clear specific heading. Applying these principles, the blades manufactured for chaff cutters are not classifiable as parts under Heading 8436 merely because they are used in agricultural machinery.

Conclusion: The blades are classifiable under Heading 8208 40 00 and are liable to GST at 18%, not under Heading 8436 10 00 or 8436 80 90.

The core legal question formulated for consideration was whether the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal were justified in dismissing the appeals by holding that the Assessing Officer rightly processed the appellant's return under Section 143(1)(a) of the Income Tax Act, 1961, ignoring the fact that due to conflicting judicial opinions on the issue of the due date for deposit of employees' contributions, the Assessing Officer ought to have invoked the provisions under Section 143(3) or Section 147 of the Act by recording a reasoned finding rather than making a prima facie disallowance. This issue arose in the context of disallowance of deduction claimed under Section 36(1)(va) of the Act for delayed deposit of employees' share of contribution towards Employees' State Insurance (ESI) and Employees Provident Fund (EPF).

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Whether the Assessing Officer was justified in processing the return and disallowing the deduction under Section 143(1)(a) of the Act, despite the issue being highly debatable and pending before the Supreme Court at the time of the intimation order.

Relevant Legal Framework and Precedents:

Section 143(1)(a) of the Income Tax Act, 1961, empowers the Assessing Officer to process returns and make adjustments limited to correcting arithmetical errors, incorrect claims apparent from the return, disallowances of losses or deductions where returns are filed late, and certain other specified adjustments. The power is summary and limited to evident errors or incorrect claims apparent on the face of the return and accompanying documents. Deeper scrutiny and adjudication on contentious issues are reserved for proceedings under Sections 143(2) and 143(3).

Supreme Court precedents in Kvaverner John Brown Engineering (India) Pvt. Ltd. and Rajesh Jhaveri Stock Brokers Pvt. Ltd. have held that the Assessing Officer cannot make adjustments or adjudicate on debatable or contentious issues under Section 143(1)(a). Prima facie adjustments are only permissible where the incorrectness or error is apparent from the return and documents without the need for deeper inquiry.

The Supreme Court's judgment in Checkmate Services Pvt. Ltd. settled the contentious issue regarding the claim of deduction under Section 36(1)(va) of the Act. It held that for claiming deduction in respect of employees' contributions (which are amounts deducted from employees' income and held in trust by the employer), the contributions must be deposited on or before the due dates specified under the respective welfare Acts (EPF Act, 1952 and ESI Act, 1948). If deposited after the due date, even if before the return filing date, the deduction is not allowable.

Court's Interpretation and Reasoning:

The Court noted that at the time of passing the intimation order dated 16.12.2021 under Section 143(1)(a), the Supreme Court's authoritative ruling in Checkmate Services Pvt. Ltd. (delivered on 12.10.2022) was not available. There existed conflicting High Court decisions on the interpretation of Section 36(1)(va), rendering the issue highly debatable and unsettled.

The Court emphasized the limited scope of Section 143(1)(a) and reiterated the principle that prima facie adjustments cannot be made on debatable issues. The Assessing Officer's disallowance of the deduction under Section 143(1)(a) was thus held to be a grave legal error, as the issue required deeper scrutiny under Section 143(3) or other appropriate provisions.

The Court also distinguished the reliance placed by the Income Tax Appellate Tribunal (ITAT) on a prior decision involving limitation issues, clarifying that the substantial question of law formulated in the present case was neither involved nor considered in that precedent, rendering such reliance misplaced.

Regarding the retrospective effect of the Supreme Court's decision in Checkmate Services Pvt. Ltd., the Court observed that while retrospective effect of judicial decisions is generally recognized, the present appeal did not involve the question of retrospective application but rather the procedural propriety of invoking Section 143(1)(a) in a debatable matter.

Key Evidence and Findings:

The appellant's return declared income and claimed deduction for delayed deposit of employees' contributions. The audit report disclosed the delayed deposit but did not treat it as disallowance. The Assessing Officer processed the return and disallowed the deduction under Section 143(1)(a) without recording any detailed findings or resorting to Section 143(3). The issue was pending before the Supreme Court at that time.

Application of Law to Facts:

Applying the principles from Supreme Court decisions, the Court found that the Assessing Officer's action of disallowing the deduction under Section 143(1)(a) was impermissible when the issue was unsettled and debatable. The proper course was to invoke Section 143(3) for detailed scrutiny and recording of reasons. The subsequent dismissal of appeals by CIT (Appeals) and ITAT, affirming the processing under Section 143(1)(a), was also held to be erroneous.

Treatment of Competing Arguments:

The Revenue contended that the Assessing Officer's adjustment was within the powers under Section 143(1)(a), relying on the Supreme Court's later decision in Checkmate Services Pvt. Ltd. and the retrospective effect of that ruling. The Court rejected this, emphasizing the timing of the intimation order and the unsettled nature of the issue then. The Revenue's reliance on other judgments was distinguished as not applicable to the procedural question before the Court.

The appellant relied on the principle that highly debatable issues cannot be resolved by summary adjustments under Section 143(1)(a), supported by binding Supreme Court precedents. The Court accepted this position and also noted the Revenue's withdrawal of appeals in related cases where similar issues arose, thereby estopping the Revenue from taking a contrary stand.

Conclusions:

The Court concluded that the Assessing Officer erred in processing the return under Section 143(1)(a) by disallowing the deduction on a debatable issue pending before the Supreme Court. The orders of CIT (Appeals) and ITAT affirming this were also set aside. The matter was remitted with liberty to the Revenue to proceed in accordance with law, presumably under Section 143(3) or other appropriate provisions.

3. SIGNIFICANT HOLDINGS

The Court preserved verbatim the crucial legal reasoning from the Supreme Court's judgment in Checkmate Services Pvt. Ltd., particularly paragraphs 62 and 63, which elucidate the distinction between employer's own liability and employees' contributions held in trust, and the essential condition of timely deposit for claiming deduction under Section 36(1)(va). The Court also cited verbatim the Supreme Court's observations from Kvaverner John Brown Engineering and Rajesh Jhaveri Stock Brokers that the Assessing Officer has no authority under Section 143(1)(a) to adjudicate debatable issues.

Core principles established include:

• Section 143(1)(a) allows only summary adjustments apparent from the return and documents; it does not empower the Assessing Officer to decide contentious or debatable legal issues.
• Where there is a conflicting judicial opinion or unsettled legal question, the Assessing Officer must resort to detailed scrutiny under Section 143(3) or other provisions rather than summary disallowance under Section 143(1)(a).
• The Supreme Court's decision in Checkmate Services Pvt. Ltd. clarified that employees' contributions must be deposited on or before the due date specified under the relevant welfare Acts to claim deduction under Section 36(1)(va).
• The Revenue cannot adopt inconsistent stands in different forums, especially after withdrawing appeals in similar matters.

Final determinations on the issue were that the Assessing Officer's disallowance under Section 143(1)(a) was legally unsustainable, and the impugned orders of CIT (Appeals) and ITAT affirming such disallowance were set aside. The substantial question of law was answered in favor of the appellant/assessee and against the Revenue.

1. Whether the impugned notice issued under Section 148 for reopening the assessment of AY 2014-15 is barred by limitation.

2. The applicability and relevance of Sections 153A and 153C of the Income Tax Act, especially considering the amendments effective from 1 April 2021, and their impact on the limitation period for reopening assessments post-search.

3. The appropriate date for reckoning the limitation period in cases where reassessment proceedings are initiated based on material found during a search of a third party.

4. Interpretation of the proviso to Section 149(1) of the Act in determining the limitation period for reopening assessments in cases involving searches conducted after 31 March 2021.

Issue-wise detailed analysis:

Issue 1: Whether the impugned notice under Section 148 is barred by limitation

The petitioner challenged the notice dated 30.03.2024 issued under Section 148 for reopening the assessment of AY 2014-15, contending that the notice was issued beyond the prescribed limitation period.

The relevant legal framework includes Section 148 read with Section 149 of the Income Tax Act, which prescribe limitation periods for reopening assessments. The limitation period is generally four years from the end of the relevant assessment year, extendable to six years or ten years in certain cases involving income escaping assessment.

The Court examined whether the reopening complies with these limitation periods, especially in light of the search conducted on 09.06.2022 at premises of a third party and the subsequent issuance of the notice on 30.03.2024.

Key evidence included the date of filing the original return (21.09.2014), the date of search (09.06.2022), and the date of issuance of the impugned notice (30.03.2024).

The Court applied the law to the facts by analyzing the limitation periods relevant to the AY 2014-15 and concluded that the notice was issued beyond the permissible period, rendering it barred by limitation.

Issue 2: Applicability of Sections 153A and 153C and interpretation of limitation periods post-1 April 2021

Sections 153A and 153C of the Income Tax Act govern reassessment proceedings consequent to search and seizure operations. However, amendments effective from 1 April 2021 modified these provisions, including a sunset clause in Section 153C(3) that excludes its applicability to searches conducted after this date.

The Court considered whether a notice under Section 153C could be issued for AY 2014-15 and, more importantly, how limitation is to be computed in such cases, particularly when the search was conducted on a third party and the reassessment notice was issued subsequently.

Precedents relied upon include the Division Bench decision in Dinesh Jindal v. Assistant Commissioner of Income Tax, which clarified that for searches conducted after 1 April 2021, Section 153C ceases to apply, but the proviso to Section 149(1) requires limitation to be considered as per the law prior to amendments.

The Court noted that the date of initiation of reassessment proceedings (date of issuance of notice under Section 148) is the relevant date for reckoning limitation under Section 153C, and that the limitation period must satisfy the timelines prescribed under Sections 149, 153A, and 153C as they stood before the 2021 amendments.

The Court also referred to the decision in Principal Commissioner of Income Tax-Central-1 v. Ojjus Medicare Pvt. Ltd., which elaborated on the computation of six-year and ten-year blocks for limitation purposes, emphasizing that the starting point for limitation in cases involving third-party searches is the date of receipt of seized books of accounts by the jurisdictional Assessing Officer, not the date of search.

This interpretation was applied to the facts, demonstrating that the impugned notice issued on 30.03.2024 for AY 2014-15 falls outside the permissible limitation period.

Issue 3: Appropriate date for reckoning limitation period in cases of reassessment following third-party search

The Court examined whether the limitation period should be reckoned from the date of search or the date when the jurisdictional Assessing Officer receives the seized documents and initiates reassessment proceedings.

The Court held that there is no mandatory requirement for the Assessing Officer to record satisfaction that seized assets or documents belong to a person other than the searched individual for initiating proceedings under Section 153C.

Accordingly, the date of initiation of reassessment proceedings (i.e., issuance of notice under Section 148) is the relevant date for limitation computation.

The Court relied on authoritative precedents including SSP Aviation, RRJ Securities, and the Supreme Court's decision in Jasjit Singh, which established that the limitation period for reassessment of a non-searched person is computed from the date of receipt of seized material by the jurisdictional AO, not the date of search.

Applying these principles, the Court found that the impugned notice issued on 30.03.2024 was outside the permissible limitation period for AY 2014-15.

Issue 4: Interpretation of the proviso to Section 149(1) of the Act

The proviso to Section 149(1) stipulates that where reassessment proceedings are initiated following a search, the limitation period for reopening assessments must be computed with reference to the timelines prescribed under Sections 153A and 153C as they stood prior to the Finance Act, 2021 amendments.

The Court interpreted this proviso as requiring the limitation period to be reckoned by reference to the date of initiation of reassessment proceedings and the applicable timelines existing before 1 April 2021, even if the search occurred after that date.

This interpretation ensures that the limitation period is not arbitrarily curtailed by the sunset clause in Section 153C(3) and maintains consistency in limitation computation.

The Court applied this interpretation to the facts and concluded that the impugned notice is barred by limitation as per the timelines prescribed under the pre-amendment provisions.

Significant holdings:

"The First Proviso to Section 149 (1), however, bids us to go back in a point of time, and to examine whether a reopening would sustain bearing in mind the timeframes as they stood embodied in Section 149 (1) (b) or Section 153A and 153C, as the case may be. The First Proviso essentially requires us to undertake that consideration bearing in mind the timeframes which stood specified in Sections 149, 153A and 153C as they stood prior to the commencement of Finance Act, 2021."

"The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A (1), while defining the point from which the period of the 'relevant assessment year' is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person."

"The reckoning of the six AYs' would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs' would consequently be those which immediately precede the AY relevant to the year of search."

"While the identification and computation of the six AYs' hinges upon the phrase 'immediately preceding the assessment year relevant to the previous year' of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search."

"There is no mandatory requirement for an Assessing Officer of a searched person to record his satisfaction that the assets or documents found during the search belong to a person other than the one searched or contained information regarding such other person."

"The date on which the decision is taken by the Assessing Officer to take steps for initiating re-assessment proceedings is the relevant date for the purposes of considering the limitation under Section 153C of the Act."

Based on the above, the Court concluded that the impugned notice issued under Section 148 for reopening assessment of AY 2014-15 on 30.03.2024 is barred by limitation and accordingly set aside the notice.

The core legal questions considered by the Court in this matter include:

(a) Whether the delay in filing the Income Tax Return (ITR) for the Assessment Year 2017-18, caused due to the Petitioner not being informed timely about the Tax Deducted at Source (TDS) on compensation received for compulsory acquisition of land, can be condoned under Section 119(2)(b) of the Income Tax Act, 1961.

(b) Whether the compensation received by the Petitioner on compulsory acquisition of agricultural land is exempt from income tax under the relevant provisions of the Income Tax Act, specifically Section 54D and Section 10(26AAB).

(c) Whether the Department was justified in deducting TDS on the compensation amount despite the exemption provisions.

(d) Whether the Petitioner is entitled to a refund of the TDS deducted, including statutory interest under Section 244A of the Income Tax Act.

(e) Whether the Respondent was correct in rejecting the application for condonation of delay on the ground that the Petitioner failed to establish "genuine hardship" in filing the return within the prescribed time.

(f) The applicability and interpretation of Circular No. 9 of 2015 dated 09.06.2015 in relation to condonation of delay and payment of interest on refunds.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Condonation of Delay under Section 119(2)(b) of the Income Tax Act

The legal framework governing condonation of delay is Section 119(2)(b) of the Income Tax Act, which empowers the Central Board of Direct Taxes (CBDT) or any authorized income-tax authority to admit an application or claim for exemption, deduction, refund, or other relief after the expiry of the prescribed period, if it considers it desirable to avoid genuine hardship.

The Court examined the facts that the Petitioner was not informed about the TDS deduction until December 2018, well after the due date for filing the return (extended to 05.08.2017). This delay in communication prevented timely filing of the return and claiming the refund.

The Respondent rejected the condonation application on the ground that no documentary evidence of genuine hardship was produced. However, the Court noted that the Assessing Officer and higher authorities failed to consider the factual position that the Petitioner was unaware of the TDS deduction due to lack of timely communication, which constituted sufficient cause for delay.

The Court relied heavily on the precedent set in a recent decision of the same High Court, where similar facts were considered and condonation of delay was granted to enable refund claims arising from TDS wrongly deducted on compensation for compulsory acquisition of land. The Court emphasized that the discretion under Section 119(2)(b) should be exercised liberally to avoid unnecessary hardship to the taxpayer.

(b) Exemption of Compensation under Section 54D and Section 10(26AAB)

The Petitioner contended that the compensation received for compulsory acquisition of agricultural land was exempt from income tax under Section 54D and Section 10(26AAB) of the Income Tax Act. The Respondent's contention that tax was payable on the interest component of the compensation was rejected by the Court, holding that the entire compensation amount was exempt.

The Court referred to authoritative judgments, including the Apex Court's decision in the case of Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF), which clarified the nature of compensation under the Land Acquisition Act and its exemption status.

It was held that since the compensation was exempt, the TDS deducted by the Department was improper and liable to be refunded.

(c) Wrongful Deduction of TDS and Entitlement to Refund

The Department had deducted TDS amounting to Rs. 1,01,16,037/- from the compensation paid to the Petitioner. The Petitioner's claim for refund of this amount was contingent on filing the return of income, which was delayed due to lack of timely knowledge of the deduction.

The Court observed that the Department's initial deduction of TDS was wrongful given the exemption provisions. The Petitioner was therefore entitled to refund of the deducted amount.

(d) Entitlement to Interest on Refund under Section 244A

The Court extensively analyzed the entitlement to interest on the refund amount under Section 244A of the Income Tax Act. It noted that the Petitioner was not at fault for the delay in filing the return since the deductor did not issue the mandatory Form 16A or inform the Petitioner timely.

The Court relied on the Apex Court's ruling in Tata Chemicals Limited, which held that when the Government collects tax illegally or without right, it is obliged to refund the amount with interest as compensation for use and retention of the money.

The Court also distinguished the Department's reliance on Circular No. 9 of 2015, clarifying that it applies to supplementary claims post-assessment and does not bar interest on refunds where the delay is not attributable to the assessee.

Thus, the Petitioner was held entitled to interest on the refund from the date of deposit of TDS till the date of refund payment.

(e) Treatment of Genuine Hardship and Documentary Evidence

The Respondent's rejection of the condonation application was premised on the absence of documentary evidence of genuine hardship. The Court found this reasoning flawed because the Petitioner's inability to file the return within time was due to non-communication of TDS deduction, which itself constituted sufficient cause.

The Court emphasized that the discretion under Section 119(2)(b) is to be exercised to avoid hardship and not to impose technical barriers where the taxpayer is not at fault.

(f) Application of Relevant Precedents and Circulars

The Court extensively relied on the decision in Kalpesh Jayantilal Lakdawala and Ramjibhai Lavabhai Undhad, where condonation of delay was granted in analogous circumstances involving TDS on compensation for land acquisition.

The Court also referred to the Apex Court's directions in Hari Singh and others, which clarified the procedure for refund of TDS deducted on agricultural land compensation.

The Court rejected the Department's reliance on Circular No. 9 of 2015 for denying interest, explaining that the circular's provisions do not apply to the facts of this case where the refund claim was delayed due to reasons not attributable to the Petitioner.

3. SIGNIFICANT HOLDINGS

The Court made the following crucial legal determinations:

"The Respondents-authorities were required to consider the facts of the case more particularly when the Petitioner admittedly has not received the compensation till the due date of filing of return and when the Petitioner received such compensation, the delay in filing the revised return is required to be condoned so that the Petitioner gets the refund of the TDS deposited by the acquiring body in the Government, as such compensation received by the Petitioner is not taxable under the provisions of the Act."

"Section 119 (2) (b) reads as under: (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority... to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law."

"The Hon'ble Apex Court in case of Tata Chemicals Limited... has held that money received and retained without right carries with it right to interest and whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows as a matter of course."

"The Petitioner was not at fault for not filing the return of income to claim the refund as the deductor neither informed the Petitioner about the deduction of tax at source nor issued Form-16A which is mandatory."

"The impugned order dated 17.12.2024 passed by the Respondent under Section 119 (2) (b) of the Act is hereby quashed and set aside. The Respondent is directed to pass a fresh order condoning the delay in filing the Petitioner's return of income for the Assessment Year 2017-18, so as to process the same in accordance with law."

The Court established the principle that where a taxpayer is prevented from timely filing a return due to non-communication of TDS deduction by the deductor, the delay in filing can be condoned under Section 119(2)(b) to avoid genuine hardship. Further, refunds of wrongfully deducted TDS on exempt compensation must be granted with interest under Section 244A, as the Government's retention of such amounts is unauthorized.

The final determination was to allow the petition, quash the impugned order rejecting condonation, and direct the Respondent to condone the delay and process the refund claim with interest within twelve weeks.

The core legal questions considered by the Court in this matter are:

(a) Whether the Assessing Officer was justified in passing the final assessment order under the Income Tax Act, 1961 (hereinafter 'IT Act') for the assessment year 2022-23 without awaiting the conclusion of proceedings before the Dispute Resolution Panel (DRP), despite the petitioner having filed objections to the draft assessment order before the DRP;

(b) Whether the failure of the petitioner to intimate the Assessing Officer about the filing of objections before the DRP, due to technical glitches in the portal/website maintained by the respondents, disentitles the petitioner from the protection under Section 144C of the IT Act;

(c) The interpretation and application of the procedural requirements under Section 144C of the IT Act, particularly the interplay between the filing of objections before the DRP and the role of the Assessing Officer in finalizing the assessment;

(d) The effect of the Assessing Officer proceeding to pass the final assessment order and issuing demand and penalty notices without awaiting directions from the DRP;

(e) The legal consequences of non-compliance with the mandatory procedural safeguards under Section 144C of the IT Act, and the appropriate remedy.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (c): Validity of final assessment order passed without awaiting DRP proceedings and interpretation of Section 144C of the IT Act

Relevant legal framework and precedents: The Court extensively examined Section 144C of the IT Act, which governs the procedure for assessment in cases involving transfer pricing adjustments. Under Section 144C(2), an 'eligible assessee' receiving a draft assessment order may either accept the variations or file objections with the DRP within 30 days. The DRP then issues directions under subsections (5) to (10), which the Assessing Officer is bound to follow. Section 144C(13) mandates that the Assessing Officer shall await the DRP's directions before finalizing the assessment.

Two key precedents were relied upon: LG Soft India (P) Ltd. and Open Silicon Research (P) Ltd., both Karnataka High Court decisions dealing with similar procedural lapses in the context of Section 144C.

Court's interpretation and reasoning: The Court emphasized the mandatory nature of the procedural safeguards under Section 144C. It held that once the petitioner filed objections before the DRP within the prescribed period, the Assessing Officer was obligated to await the DRP's directions before passing the final assessment order. The Court found that the Assessing Officer's action in passing the final order without awaiting the DRP's directions was "arbitrary, illegal and without jurisdiction or authority of law."

The Court further clarified that the statutory scheme contemplates a two-step process: first, the filing of objections and second, the DRP's directions to guide the Assessing Officer. The Assessing Officer's discretion is circumscribed by these directions, making premature finalization of the assessment impermissible.

Key evidence and findings: The petitioner had filed objections to the draft assessment order before the DRP within the stipulated time. However, due to technical glitches in the portal, the petitioner could not intimate the Assessing Officer about the filing of objections. Despite this, the Assessing Officer proceeded to pass the final assessment order and issued demand and penalty notices.

Application of law to facts: The Court applied the principles from the cited precedents to hold that the petitioner's failure to intimate the Assessing Officer, caused by technical glitches, did not justify the Assessing Officer bypassing the DRP process. The petitioner's status as an eligible assessee and the timely filing of objections before the DRP triggered the mandatory procedural safeguards under Section 144C, which the Assessing Officer was bound to respect.

Treatment of competing arguments: The respondents argued that non-intimation to the Assessing Officer disentitled the petitioner from the protections under Section 144C, and that the Assessing Officer was justified in finalizing the assessment. The Court rejected this, holding that the procedural lapse was a bonafide technical glitch and that the Assessing Officer ought to have awaited the DRP's directions. The Court also noted that the statutory scheme should be interpreted harmoniously to prevent arbitrary finalization of assessments.

Conclusions: The final assessment order passed without awaiting the DRP's directions was quashed. The matter was remitted to the DRP to conclude proceedings by considering the petitioner's objections, and thereafter the Assessing Officer was directed to proceed in accordance with law.

Issue (b): Effect of non-intimation to Assessing Officer due to technical glitches

Relevant legal framework and precedents: Section 144C(2)(b)(ii) requires the assessee to file objections before the DRP and also to provide a copy to the Assessing Officer. The Court acknowledged this as a mandatory procedural requirement but recognized the practical difficulties arising from technical glitches in the portal.

Court's interpretation and reasoning: The Court held that the petitioner's inability to intimate the Assessing Officer was a "bonafide lapse" caused by technical glitches beyond the petitioner's control. The Court took a lenient view, consistent with the principles of equity and justice, especially in light of government notifications and judicial precedents extending limitation periods and recognizing pandemic-related difficulties.

Application of law to facts: The petitioner had filed objections before the DRP within the prescribed time, which was the substantive step triggering the procedural safeguards. The failure to intimate the Assessing Officer was not fatal to the petitioner's rights, and the Assessing Officer was required to await the DRP's directions regardless.

Treatment of competing arguments: The respondents contended that non-intimation was a procedural default that justified finalization of the assessment. The Court rejected this strict construction, emphasizing the need for a purposive interpretation that prevents injustice arising from technical or procedural glitches.

Conclusions: Non-intimation due to technical glitches did not disentitle the petitioner from the protections under Section 144C. The Assessing Officer was required to await the DRP's directions notwithstanding the lapse.

Issue (d) & (e): Consequences of Assessing Officer passing final assessment order prematurely and appropriate remedy

Relevant legal framework and precedents: The Court relied on the rulings in LG Soft India and Open Silicon Research, which held that final assessment orders passed without adherence to the procedural safeguards under Section 144C are liable to be quashed. The remedy is to remit the matter to the DRP for consideration of objections and thereafter for the Assessing Officer to pass orders in conformity with the DRP's directions.

Court's interpretation and reasoning: The Court held that the Assessing Officer's premature finalization of the assessment order was without jurisdiction and illegal. The statutory scheme mandates that the Assessing Officer act only after the DRP's directions, and failure to comply vitiates the assessment proceedings.

Application of law to facts: The impugned assessment order and consequential demand and penalty notices were quashed. The Court directed the DRP to conclude proceedings by considering the petitioner's objections and the Assessing Officer to proceed thereafter in accordance with law.

Treatment of competing arguments: The respondents urged dismissal of the petition and upheld the validity of the assessment order. The Court rejected this, emphasizing the mandatory nature of the procedural safeguards and the illegality of the Assessing Officer's action.

Conclusions: The impugned assessment order, demand notice, and penalty notice were quashed. The matter was remitted to the DRP and Assessing Officer for further proceedings in accordance with Section 144C.

3. SIGNIFICANT HOLDINGS

The Court crystallized the following core principles and made key determinations:

"Once objections are filed before the DRP and till directions are issued, the assessing officer cannot proceed further. This is in light of mandate under Section 144C (13). Accordingly, non-intimation to the assessing officer under Section 144C (2)(b)(ii) though is a lapse on the part of the petitioner, the only way of meaningfully and harmoniously interpreting the obligation of filing objections under Section 144C (2)(b)(ii) is to construe the procedure that once such objections are filed before the DRP and till the decision is taken by the DRP regarding directions to be passed, the assessing officer ought not to proceed further."

"The impugned Assessment Order passed by respondent No.1- Assessing Officer without awaiting directions from the DRP, before whom the matter was pending pursuant to the petitioner filing his objections within the prescribed period is clearly arbitrary, illegal and without jurisdiction or authority of law and the same deserves to be quashed."

"Non-intimation due to technical glitches in the portal/website maintained by the respondents does not disentitle the petitioner from the protection under Section 144C of the Income Tax Act."

"The Assessing Officer is required to await the outcome of the DRP proceedings and cannot proceed to pass final assessment order and issue demand or penalty notices in the meanwhile."

"The matter is restored to the stage of Section 144C(13) and the assessing officer shall proceed further in terms of the procedure under Section 144C(13) and the time contemplated under Section 144C(13) is deemed to commence from the date of receipt of certified copy of this order by the assessing officer."

The core legal questions considered by the Court in this matter were:

• Whether the tax demands and penalty notices issued by the Income Tax Department for periods prior to the approval date of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016 ("IBC") are enforceable against the Corporate Debtor once the Resolution Plan has been approved by the National Company Law Tribunal ("NCLT") under Section 31 of the IBC.
• Whether statutory dues, including income tax liabilities and penalties, which are not part of the approved Resolution Plan, stand extinguished and cannot be recovered post-approval of the Resolution Plan.
• The legal effect and binding nature of the Resolution Plan approved under Section 31 of the IBC on the Corporate Debtor, its creditors, including governmental authorities, and other stakeholders.
• Whether any proceedings, reassessments, or demands raised by statutory authorities for periods prior to the date of approval of the Resolution Plan can be initiated or continued against the Corporate Debtor.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Enforceability of Tax Demands and Penalty Notices Issued Prior to Approval of the Resolution Plan

Relevant legal framework and precedents: The primary legal framework governing this issue is the Insolvency and Bankruptcy Code, 2016, specifically Sections 9, 14, 15, 21, and 31. Section 31(1) provides that upon approval of a resolution plan by the adjudicating authority (NCLT), the plan shall be binding on the corporate debtor and all stakeholders, including creditors and governmental authorities. The amendment to Section 31(1) effective from 16th August 2019 explicitly includes statutory authorities as creditors bound by the resolution plan.

Precedents include the Supreme Court decision in Ghanshyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company (2021) 9 SCC 657, which clarified that claims not included in the approved resolution plan stand extinguished and no proceedings can be initiated or continued in respect of such claims. Another significant precedent is the recent Supreme Court judgment in Vaibhav Goel and Anr. Vs. Deputy Commissioner of Income Tax & Anr. (2025 INSC 375), which reaffirmed the binding nature of the resolution plan on statutory dues and the extinguishment of claims not included therein.

Court's interpretation and reasoning: The Court interpreted Section 31(1) in light of the above precedents and the amendment, holding that once the resolution plan is approved, all claims, including statutory dues not part of the plan, are frozen and extinguished. The Court emphasized that the Resolution Plan is binding on the corporate debtor, its employees, members, creditors, guarantors, and other stakeholders, including government authorities.

Key evidence and findings: The Resolution Plan approved by the NCLT on 04.09.2020 explicitly contained provisions extinguishing all claims of governmental authorities in relation to taxes, duties, penalties, interest, fines, and other statutory dues for periods prior to the effective date of the plan. It also provided that all pending assessment or appellate proceedings relating to the pre-effective period stand terminated, and no further proceedings shall be initiated.

Application of law to facts: The tax demands and penalty notices issued by the Income Tax Department for assessment years prior to 04.09.2020 were not included in the Resolution Plan. Therefore, in accordance with Section 31(1) and the binding precedents, these demands stand extinguished and cannot be enforced against the Corporate Debtor.

Treatment of competing arguments: The Respondents did not contest the applicability of the ratio laid down in Ghanshyam Mishra or Vaibhav Goel. The Court noted the absence of any substantive argument disputing the extinguishment of claims not included in the Resolution Plan.

Conclusions: The Court concluded that the impugned demand notices and penalty orders issued for the period prior to 04.09.2020 are invalid and must be quashed and set aside.

Issue 2: Legal Effect and Binding Nature of the Resolution Plan Approved Under Section 31 of the IBC

Relevant legal framework and precedents: Section 31(1) of the IBC and its amendment, along with the Supreme Court judgments in Ghanshyam Mishra and Sons Pvt. Ltd. and Vaibhav Goel, establish the binding effect of the approved Resolution Plan on all stakeholders, including statutory authorities. The Court also relied on the Essar Steel India Ltd. judgment, which emphasized that all claims must be submitted and decided prior to approval, and no belated claims can be entertained thereafter.

Court's interpretation and reasoning: The Court observed that the Resolution Plan's provisions for extinguishment of claims and binding effect on all stakeholders, including governmental authorities, must be given full effect. It reasoned that allowing any claims not part of the plan to be revived or initiated post-approval would undermine the purpose of the insolvency resolution process and the principle of a "clean slate" for the successful resolution applicant.

Key evidence and findings: The Resolution Plan explicitly provided for capital reduction to zero, payment schedules to creditors, and extinguishment of all other claims, including statutory dues, prior to the effective date. The plan envisaged the infusion of fresh equity and control by the resolution applicant, indicating a fresh start for the corporate debtor.

Application of law to facts: The Court applied the legal principles to hold that the Resolution Plan, once approved, conclusively determines the liabilities of the corporate debtor and binds all stakeholders. The statutory authorities cannot initiate or continue proceedings for dues not included in the plan.

Treatment of competing arguments: The Respondents did not offer any legal basis to challenge the binding nature of the Resolution Plan or to justify the issuance of demands for pre-effective period dues.

Conclusions: The Court held that the Resolution Plan approved by the NCLT is binding and effective, extinguishing all claims not included therein and precluding any further proceedings in respect of such claims.

Issue 3: Extinguishment of Statutory Claims and Termination of Pending Proceedings

Relevant legal framework and precedents: The language of Clause 9 of Annexure-4 to the Resolution Plan and Section 31(1) of the IBC, as well as the Supreme Court decisions cited above, govern this issue. The Court also referenced the principle that the insolvency resolution process aims to provide certainty and finality by extinguishing claims not included in the approved plan.

Court's interpretation and reasoning: The Court emphasized that all claims of governmental authorities for taxes, penalties, and other statutory dues prior to the effective date are extinguished by the NCLT's order approving the Resolution Plan. It further held that all pending assessment, appellate, or other proceedings relating to the pre-effective period stand terminated, and no new proceedings can be initiated post-approval.

Key evidence and findings: The Resolution Plan's Clause 9 explicitly states that all such claims stand extinguished, and any proceedings pending or proposed for the pre-effective period shall be deleted, waived, and considered non-payable.

Application of law to facts: The tax demands and penalty orders issued after the Resolution Plan's approval date but relating to periods prior to that date fall within the scope of extinguished claims and cannot be enforced.

Treatment of competing arguments: No counter-arguments were advanced by the Respondents to challenge the extinguishment or termination of proceedings.

Conclusions: The Court concluded that the statutory claims and proceedings for the pre-effective period are extinguished and terminated, and the impugned demands and penalties must be quashed.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning is encapsulated in the following verbatim excerpts:

"Once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan."

"All assessment/appellate or other proceedings pending on the Effective Date relating to period prior to the Effective date, shall stand terminated and all consequential liabilities, if any should be deleted and waived off and should be considered to be not payable by the Corporate Debtor by virtue of the order of the NCLT."

"A successful resolution applicant cannot suddenly be faced with 'undecided' claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor."

Core principles established include:

• The binding effect of an approved Resolution Plan under Section 31(1) of the IBC extends to all stakeholders, including statutory authorities.
• Claims, including statutory dues not incorporated in the approved Resolution Plan, stand extinguished and cannot be enforced or pursued post-approval.
• Pending or proposed proceedings relating to pre-effective period dues are terminated and cannot be revived.
• The resolution process aims to provide a clean slate to the successful resolution applicant, ensuring certainty and finality in liabilities.

Final determinations on each issue were:

• The impugned demand notices and penalty orders issued for periods prior to the approval date of the Resolution Plan are quashed and set aside.
• The statutory dues not included in the Resolution Plan stand extinguished by operation of law.
• No proceedings, reassessments, or demands in respect of pre-effective period dues can be initiated or continued against the Corporate Debtor.

Issues: Whether the writ petitions challenging notices issued under Sections 143(2) and 142(1) of the Income-tax Act, 1961 deserved to be entertained despite the delay in approaching the Court.

Analysis: Notices under Sections 143(2) and 142(1) were issued in June 2023, while the writ petitions were filed in January 2024. In view of this delay, the Court declined to exercise its discretion in favour of entertaining the petitions.

Conclusion: The writ petitions were not entertained on the ground of delay and were dismissed, with liberty to pursue the appropriate remedy available under law.

(a) Whether the addition of Rs. 10,94,05,000/- made under section 69A of the Income-tax Act, 1961, on account of alleged bogus transactions with M/s Sheetal Exports, was justified in the absence of cogent evidence from the assessee proving the genuineness of the amount credited in the bank account as business receipts.

(b) Whether M/s Sheetal Exports was engaged in genuine business activities during the relevant Assessment Year (AY) 2014-15, or whether it was a sham entity used to accommodate funds under the guise of diamond trading.

(c) Whether the Assessing Officer (AO) was justified in reopening the assessment proceedings under section 148 and issuing notices under sections 148A(b) and 148A(d) of the Act, including the question of jurisdiction, compliance with procedural requirements such as approval under section 151, and timeliness under section 149.

(d) Whether the Commissioner of Income-tax (Appeals) [CIT(A)] erred in deleting the addition made by the AO and in accepting the genuineness of the transactions between the assessee and M/s Sheetal Exports.

(e) Whether the reassessment proceedings were initiated on the basis of change of opinion, which is impermissible under the law.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Legitimacy of Addition under Section 69A on Transactions with M/s Sheetal Exports

Relevant Legal Framework and Precedents: Section 69A of the Income-tax Act deals with unexplained investments or unexplained money credited in the books of account, allowing the AO to treat such amounts as income of the assessee if the assessee fails to explain the source satisfactorily. The burden lies on the assessee to prove the genuineness of the transactions. The Hon'ble Gujarat High Court's decision in CIT vs. Vishal Exports Overseas Ltd. was relied upon, which held that when sales realization is offered and accepted by the AO, addition under section 68 (similar in principle to section 69A) for the same amount would amount to double taxation.

Court's Interpretation and Reasoning: The AO added Rs. 10,94,05,000/- under section 69A on the premise that M/s Sheetal Exports was not carrying out genuine business activities, and the transactions were sham entries to accommodate funds. The AO's conclusion was supported by a field verification report indicating no business activity at the declared premises of M/s Sheetal Exports.

However, the CIT(A) examined the ledger accounts, audit reports, and assessment orders of both the assessee and M/s Sheetal Exports. The CIT(A) noted that both entities had undergone search and seizure operations under section 132 and subsequent assessments. The additions made in the search assessments of M/s Sheetal Exports were deleted on appeal, and the returned income was accepted in reassessment proceedings under section 147. The CIT(A) concluded that M/s Sheetal Exports was genuinely engaged in diamond trading during AY 2014-15, and the bank transactions between the assessee and M/s Sheetal Exports were reflected in the books of account as normal business transactions.

Key Evidence and Findings: The assessee submitted books of account, ledger accounts, invoices, audit reports, and assessment orders for both itself and M/s Sheetal Exports. The CIT(A) relied heavily on the fact that the returned income of M/s Sheetal Exports was accepted by the AO in parallel proceedings and that no incriminating material was found against the assessee in its own search assessment. The field verification report by the AO was not supported by any further evidence to rebut the findings of the CIT(A).

Application of Law to Facts: The Tribunal upheld the CIT(A)'s findings, emphasizing that once the creditor (M/s Sheetal Exports) is found to be engaged in genuine business, transactions with the assessee cannot be treated as bogus. The Tribunal also noted that the transactions were recorded in the books of account and accepted in the assessment of M/s Sheetal Exports, thereby negating the AO's presumption of accommodation entries.

Treatment of Competing Arguments: The revenue argued that no credible evidence was produced by the assessee to prove the genuineness of the transactions and that M/s Sheetal Exports was not carrying out genuine business. The assessee countered by producing detailed documents and relying on the acceptance of returned income in related assessments. The Tribunal found the assessee's submissions more persuasive and the revenue's contentions unsubstantiated.

Conclusion: The addition under section 69A was rightly deleted by the CIT(A), and the Tribunal found no infirmity in this conclusion. The transactions with M/s Sheetal Exports were held to be genuine business transactions.

(b) Validity and Jurisdiction of Reassessment Proceedings under Sections 148, 148A(b), and 148A(d)

Relevant Legal Framework and Precedents: Sections 148, 148A(b), and 148A(d) of the Income-tax Act prescribe the procedure for reopening assessments and issuing notices. Section 149 lays down the time limits for such proceedings, and section 151 requires prior approval for initiation of reassessment. The Supreme Court judgments cited by the assessee, including Union of India vs. Ashish Agarwal and Union of India vs. Rajeev Bansal, clarify the conditions under which reassessment notices can be issued and the requirement that income chargeable to tax must have escaped assessment.

Court's Interpretation and Reasoning: The assessee challenged the issuance of notices under section 148A(b) and the passing of order under section 148A(d) on grounds of jurisdictional defects, lack of proper approval under section 151, time-barred proceedings under section 149, and initiation based on change of opinion. The CIT(A) did not adjudicate these procedural issues in detail.

Key Evidence and Findings: The AO issued the notice under section 148 on 04.06.2021 and treated it as notice under section 148A(b) on 25.03.2022. The assessee contended that the notice was time-barred and that the reassessment was initiated based on change of opinion rather than escaped income. The Tribunal noted that since the substantive appeal filed by the revenue was dismissed on merits, the cross-objection filed by the assessee challenging procedural aspects became academic and did not require adjudication.

Application of Law to Facts: The Tribunal refrained from examining procedural grounds due to the dismissal of the revenue's substantive appeal. The principle that procedural defects may not be entertained if the substantive claim fails was implicitly applied.

Treatment of Competing Arguments: The assessee argued procedural irregularities and time-barred nature of reassessment; the revenue maintained the validity of reassessment. The Tribunal did not delve into these arguments in light of the dismissal of the revenue's appeal on merits.

Conclusion: The procedural objections raised by the assessee were rendered academic and not adjudicated owing to the dismissal of the revenue's appeal on substantive grounds.

(c) Issue of Change of Opinion in Initiation of Reassessment Proceedings

Relevant Legal Framework and Precedents: It is a well-established principle that reassessment proceedings cannot be initiated merely on the basis of change of opinion. The AO must have tangible material indicating that income chargeable to tax has escaped assessment.

Court's Interpretation and Reasoning: The assessee contended that the reassessment was initiated on a change of opinion without any fresh material. The Tribunal did not explicitly address this issue in the operative part of the order but implicitly rejected it by dismissing the revenue's appeal on merits, indicating that the addition was not justified even on the available material.

Key Evidence and Findings: The AO relied on information received through the Insite portal and field verification reports. The CIT(A) and Tribunal found that the transactions were genuine and that the AO's suspicion was not supported by credible evidence.

Application of Law to Facts: Since the addition itself was not sustained, the basis for reassessment being a change of opinion became irrelevant.

Treatment of Competing Arguments: The revenue did not specifically argue the validity of reassessment on the basis of fresh material beyond the Insite portal information and field verification. The assessee emphasized lack of fresh tangible material.

Conclusion: The issue of change of opinion was not separately adjudicated but was subsumed in the dismissal of the revenue's appeal on merits.

3. SIGNIFICANT HOLDINGS

"Once the creditor is actually engaged in business, the bank transactions with the appellant cannot be treated as bogus."

"The ledger account of M/s Sheetal Exports in the books of the assessee shows regular business transactions and sales."

"The additions made in the search assessment of M/s Sheetal Exports were deleted in the first appeal, and the returned income was accepted in the reassessment proceedings."

"No incriminating material was found against the assessee in its own search assessment, and the bank transactions with M/s Sheetal Exports were incorporated in the books of account."

"When the assessee has already offered the sales realization and such income is accepted by the AO, addition of the same amount once again under section 68 of the Act would amount to double taxation of the same year."

"The finding of the CIT(A) that M/s Sheetal Exports was actually engaged in normal business during the year under consideration has not been rebutted by the revenue by producing any details or evidence."

Core principles established: The genuineness of transactions cannot be doubted merely on suspicion or absence of business activity at a particular premise if the creditor's income is accepted in assessment. The AO must produce credible evidence to justify addition under section 69A. Parallel assessments and search assessments must be considered holistically to determine the genuineness of transactions. Procedural defects in reassessment notices may become academic if the substantive claim fails.

Final determinations: The addition of Rs. 10,94,05,000/- under section 69A was rightly deleted. The reassessment proceedings were not sustained on merits. The procedural objections raised by the assessee were not adjudicated due to dismissal of the revenue's appeal. The appeal filed by the revenue was dismissed, and the cross-objection filed by the assessee was also dismissed as infructuous.

The core legal question considered by the Tribunal was whether the addition of Rs. 1,65,60,806/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] under section 68 of the Income Tax Act, on account of unexplained cash credit relating to share capital and share premium, was justified. Specifically, the Tribunal examined:

• Whether the shares issued at a high premium to existing shareholders or their relatives were genuine and supported by adequate evidence of creditworthiness and genuineness of transactions;
• Whether non-compliance by the directors with summons issued under section 131 of the Act could alone justify addition under section 68 despite the assessee furnishing substantial evidence;
• The evidentiary value of documents furnished under section 133(6) notices and whether these satisfied the requirements to establish the source and genuineness of the share capital and premium;
• The applicability of judicial precedents regarding unexplained cash credits and the burden of proof in share capital cases under section 68.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legitimacy and Explanation of Share Capital and Share Premium under Section 68

Legal Framework and Precedents: Section 68 of the Income Tax Act places the burden on the assessee to explain the nature and source of any cash credits appearing in the books of account. The Supreme Court and various High Courts have held that mere failure to comply with summons does not automatically justify addition if the assessee furnishes credible and verifiable evidence to establish the genuineness of the credit. Relevant precedents cited include CIT Vs. Orissa Corporation Pvt. Ltd., CIT Vs. Orchid Industries Ltd., and Crystal Networks Pvt. Ltd. Vs. CIT, which emphasize that if the assessee produces satisfactory evidence regarding the source of share capital, the addition cannot be sustained.

Court's Interpretation and Reasoning: The Tribunal noted that the assessee had issued shares at a face value of Rs. 10 each with a premium of Rs. 482 to three parties who were existing shareholders or their relatives. The assessee filed audited financial statements showing substantial gross assets and net profits, which indicated sufficient business activity and financial capacity. The Tribunal observed that the AO did not identify any defect or deficiency in the evidences furnished by the assessee regarding the share subscribers.

Key Evidence and Findings: The assessee submitted copies of Income Tax Returns (ITRs), bank statements, profit and loss accounts, balance sheets, and computations of income of the share subscribers. These documents demonstrated that the subscribers had adequate income and financial resources to make the investments. The share subscribers also complied with notices issued under section 133(6) of the Act by furnishing detailed information and proofs of their financial standing.

Application of Law to Facts: The Tribunal applied the principle that where the assessee furnishes credible and verifiable evidence about the source of funds and genuineness of transactions, the AO cannot make additions merely on suspicion or surmises. The facts showed that the investments were made by persons with sufficient financial capacity, and the evidences were not challenged on substantive grounds by the AO.

Treatment of Competing Arguments: The AO and CIT(A) relied heavily on the non-compliance of summons issued under section 131 by the directors of the assessee company to reject the explanation. The Tribunal rejected this approach, emphasizing that non-compliance by directors cannot be a sole ground to disbelieve the genuineness of the share capital when the assessee has otherwise furnished all required evidences and the AO has not pointed out any discrepancies or defects in those evidences. The Tribunal also rejected the Revenue's contention that money credited to the bank accounts of subscribers a day before the investment indicated lack of genuineness, holding that timing alone cannot taint the transaction without other adverse findings.

Conclusions: The Tribunal concluded that the addition under section 68 was not justified as the assessee had discharged the burden of proof by furnishing all relevant evidences, and the AO had not demonstrated any defect or falsehood in those evidences. The non-compliance with summons under section 131 did not warrant addition in the absence of any contrary material.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The addition cannot be made merely on the ground that there was no compliance to the summons u/s 131 of the Act, where the assessee has furnished all the evidences/ details before the ld. AO and there was no verification done by the ld. Assessing Officer to establish or to bring on record any contrary facts."

"Where the assessee has furnished all the evidences qua the share transactions and the AO have not carried out any further verification or pointed out any defects in the evidences filed by the assessee, then it is not open to the AO to make addition on the ground that there was no compliance to the summons issued u/s 131 of the Act."

The core principle established is that the burden under section 68 lies on the assessee to explain the nature and source of the share capital, and if credible evidence is furnished, mere non-compliance with summons by directors cannot sustain an addition. The genuineness and creditworthiness of the share subscribers must be assessed on the basis of submitted evidence, not on presumptions or incomplete procedural compliance.

Accordingly, the Tribunal allowed the appeal and directed deletion of the addition of Rs. 1,65,60,806/- made under section 68 in respect of share capital and share premium.

The core legal questions considered by the Tribunal in these appeals are:

(a) Whether the Commissioner of Income-tax (Exemption) was justified in rejecting the applications filed by the assessee-trusts in Form No.10AB for grant of approval under clause (iii) of the first proviso to section 80G(5) of the Income-tax Act.

(b) Whether the presence of religious objects in the trust deeds precludes the trusts from qualifying as institutions established solely for charitable purposes under section 80G(5).

(c) Whether the assessee-trusts incurred or expended any amount towards religious purposes in contravention of the provisions of section 80G(5B) and Explanation 3 to section 80G.

(d) Whether the CIT(E) complied with the principles of natural justice and conducted adequate inquiry before rejecting the applications and cancelling the provisional registrations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of rejection of applications under section 80G(5)(iii)

Relevant legal framework and precedents: Section 80G(5) of the Income-tax Act provides that donations to institutions or funds established in India for charitable purposes are eligible for deduction if the institution is approved under the section. The first proviso to section 80G(5) and Explanation 3 clarify that the term "charitable purpose" excludes any purpose that is wholly or substantially of a religious nature. Section 80G(5B) allows an institution to incur religious expenditure up to 5% of its total income without losing eligibility.

Rule 11AA(1) and (2) prescribe the procedure for grant and cancellation of approval under section 80G. The judicial approach demands that the CIT(E) should verify the objects and activities of the trust and the actual expenditure incurred to ascertain compliance.

Court's interpretation and reasoning: The CIT(E) rejected the applications on the ground that some objects of the trusts were religious in nature, which allegedly contravened the main condition of section 80G(5). The CIT(E) noted the absence of clarification or details regarding religious expenditure from the trusts and concluded that the trusts were not established solely for charitable purposes.

The Tribunal noted that the CIT(E) did not conduct any substantive inquiry or verification of the trusts' submissions, nor did he consider the contention that no expenditure was incurred on religious purposes. The Tribunal referred to a precedent where a similar issue arose and the matter was restored for fresh verification of whether the trusts had expended less than 5% of their income on religious purposes.

Key evidence and findings: The trusts submitted that the main objects related to education, medical, and social welfare, and that no expenditure was incurred for religious purposes despite the presence of religious terminology in the trust deeds. The CIT(E) did not receive or consider detailed evidence of actual expenditure on religious purposes.

Application of law to facts: The Tribunal held that the mere presence of religious objects in the trust deed does not automatically disqualify the trust from approval under section 80G(5) if the trust's activities are not substantially religious and if expenditure on religious purposes is within the permissible limit under section 80G(5B). The Tribunal emphasized the need for proper verification of actual religious expenditure before arriving at a conclusion.

Treatment of competing arguments: The assessee argued for approval based on the dominant charitable nature of activities and nil religious expenditure. The revenue relied on the presence of religious objects and lack of clarification. The Tribunal found the revenue's approach premature and lacking in procedural fairness.

Conclusions: The Tribunal concluded that the CIT(E)'s rejection was not sustainable without proper inquiry and directed restoration of the matter for fresh adjudication after verification of religious expenditure and hearing the assessee.

Issue (b): Effect of religious objects in trust deeds on eligibility under section 80G(5)

Relevant legal framework and precedents: Explanation 3 to section 80G excludes purposes wholly or substantially religious from "charitable purposes." However, section 80G(5B) permits expenditure on religious purposes up to 5% of total income without disqualification. The courts have held that the presence of religious objects in a trust deed is not determinative if the trust's activities are predominantly charitable.

Court's interpretation and reasoning: The Tribunal analyzed the statutory provisions and held that the term "charitable purpose" excludes only those purposes which are wholly or substantially religious. The Tribunal reiterated that if religious expenditure is within the 5% threshold, the trust remains eligible. The Tribunal emphasized that the statutory scheme contemplates some religious activities within charitable trusts without disqualification.

Key evidence and findings: The trust deeds contained some religious terminology but the trusts asserted no religious expenditure was incurred. The CIT(E) did not verify this assertion.

Application of law to facts: The Tribunal applied the combined reading of section 80G(5), Explanation 3, and section 80G(5B) to hold that the trusts' eligibility cannot be denied solely on the basis of religious objects in the deed if actual expenditure is within permissible limits.

Treatment of competing arguments: The revenue argued that inclusion of religious objects violated the condition. The Tribunal rejected this as an absolute bar and required factual verification of expenditure.

Conclusions: The Tribunal concluded that the presence of religious objects is not fatal and the trusts' eligibility depends on actual expenditure and predominant charitable nature.

Issue (c): Verification of actual religious expenditure under section 80G(5B)

Relevant legal framework and precedents: Section 80G(5B) permits religious expenditure up to 5% of total income without affecting eligibility. The CIT(E) is required to verify actual expenditure to determine compliance.

Court's interpretation and reasoning: The Tribunal found that the CIT(E) failed to seek or consider details of religious expenditure from the trusts before rejecting the applications. The Tribunal referred to a precedent where the matter was remanded for verification of expenditure and fresh adjudication.

Key evidence and findings: The trusts claimed nil religious expenditure but did not furnish detailed accounts to the CIT(E). The CIT(E) rejected the applications without inquiry.

Application of law to facts: The Tribunal directed the CIT(E) to conduct a thorough verification of religious expenditure and allow the trusts opportunity to furnish details and be heard.

Treatment of competing arguments: The revenue's reliance on absence of details was rejected as the CIT(E) did not provide opportunity to the trusts to clarify or submit evidence.

Conclusions: Verification of religious expenditure is mandatory and the trusts should be given a fair opportunity before final decision.

Issue (d): Compliance with principles of natural justice

Relevant legal framework and precedents: Principles of natural justice require that an applicant be given a fair hearing and that the authority consider all submissions before passing an adverse order.

Court's interpretation and reasoning: The Tribunal observed that the CIT(E) rejected the applications without dealing with the trusts' submissions or providing opportunity for clarification on religious expenditure. This was held to be contrary to natural justice.

Key evidence and findings: The trusts had submitted contentions and claimed no religious expenditure, which were not addressed in the orders.

Application of law to facts: The Tribunal held that the CIT(E) must provide opportunity to the trusts to furnish details and be heard before deciding on approval under section 80G.

Treatment of competing arguments: The revenue did not dispute the procedural lapse but supported the substantive rejection.

Conclusions: The Tribunal directed fresh adjudication after compliance with natural justice.

3. SIGNIFICANT HOLDINGS

"In view of the statutory provisions quoted above, we are of the considered view that the application for grant of deduction under Section 80G cannot be denied to the assessee only on the ground that one of the objects contain the term 'religious'. Further, we observe that the applicant / assessee trust had specifically submitted that the trust has not incurred any expenditure towards religious purposes. However, Ld. CIT(E), without carrying out any enquiry into this aspect, summarily rejected the application filed by the assessee / applicant trust. In fact, Ld. CIT(E), while rejecting the application for grant of registration under Section 80G of the Act has not dealt with any of the submissions / contentions of the assessee / applicant trust submitted during the course of hearing, which in our view is against the principles of natural justice."

"The matter is restored to the file of Ld. CIT(E) to consider the grant of registration under Section 80G of the Act afresh and to carry out necessary verification whether the assessee / applicant trust has expended / utilized less than 5% of its total income towards religious purposes. If that be the case, the assessee / applicant trust may be granted registration, in accordance with law."

Core principles established include:

• The presence of religious objects in a trust deed does not per se disqualify the trust from approval under section 80G(5) if the trust's activities are predominantly charitable and religious expenditure is within statutory limits.
• The CIT(E) must conduct a proper inquiry and verify actual expenditure on religious purposes before rejecting an application for approval under section 80G(5).
• Principles of natural justice require that the applicant be given an opportunity to present evidence and be heard before adverse orders are passed.
• Section 80G(5B) provides a statutory threshold of 5% religious expenditure beyond which eligibility may be denied, but below which the trust remains eligible.

Final determinations on each issue were that the CIT(E)'s orders rejecting the applications and cancelling provisional registrations were set aside and the matters remanded for fresh adjudication after verification of religious expenditure and compliance with natural justice. The appeals were allowed for statistical purposes.

1. Whether an addition to income can be made in an unabated assessment year under section 153A of the Income Tax Act, 1961, in the absence of any incriminating material found during the course of search under section 132 of the ActRs.

2. Whether the addition of commission income estimated at 1% of sales from alleged accommodation entries, based primarily on third-party statements without corroborative evidence, is justified and sustainable in lawRs.

3. Whether the failure of the Assessing Officer to provide the assessee with a copy of the statement of a key witness relied upon, and consequently denying the opportunity of cross-examination, violates principles of natural justice and affects the validity of the additionRs.

Issue 1: Validity of Addition in Absence of Incriminating Material in Unabated Assessment

The legal framework revolves around the provisions of the Income Tax Act, particularly sections 132 (search and seizure), 132(4) (recording of statements during search), and 153A (assessment following search). The principle issue is whether additions can be made in an unabated assessment year when no incriminating material is discovered during search.

The Tribunal examined the Supreme Court decision in PCIT vs. Abhisar Buildwell (P.) Ltd. (2023) 454 ITR 212, which held that no addition can be made in a completed or unabated assessment in the absence of incriminating material found during search or requisition under section 132 or 132A. The Tribunal further relied on the Delhi High Court ruling in PCIT vs. Harjeev Agarwal (290 CTR 263), which clarified that statements recorded under section 132(4) cannot be treated as incriminating material unless corroborated by other evidence found during search.

The Tribunal also referred to the Mumbai Bench's decision in Chandrika Mansukhlal Dodhia vs. DCIT (IT(SS)A No.199/MUM/2025), which upheld the above principles and set aside additions made solely on third-party statements without incriminating material.

In the instant case, the assessee had filed the original return for assessment year 2018-19 before the search conducted on 06.11.2019, and the time limit for issuing notice under section 143(2) had expired. No incriminating material was found during the search at the assessee's premises. The addition of commission income was made solely on the basis of statements of Shri Madhuchnadra Kalaskar, AGM Finance of M/s BVG India Ltd., without any corroborative documentary evidence.

Applying the above legal precedents, the Tribunal held that the addition in the unabated assessment could not be sustained in the absence of incriminating material found during the search. The addition was therefore held to be not in accordance with law and was set aside.

Issue 2: Merits of Addition of Commission Income Based on Third-Party Statements and Estimation

The Assessing Officer estimated commission income at 1% of sales amounting to Rs. 11,36,79,121/- on the basis that the assessee provided accommodation entries to M/s BVG India Ltd. The AO relied on statements of third parties and the general practice of charging commission on bogus entries.

The assessee submitted various documents during assessment proceedings, including ledger accounts, sales and purchase invoices, GST returns, and bank statements, to demonstrate genuine trading activities. However, the AO and CIT(A) found that none of the submitted documents pertained to the alleged sales to M/s BVG India Ltd. and that the purchases claimed to have been made by BVG India Ltd. from the assessee were held to be bogus in BVG India Ltd.'s own assessment proceedings.

The CIT(A) upheld the AO's findings, noting that the assessee failed to provide details of entities from whom purchases were made and that the bank account of the assessee was used as a conduit for cash transactions. The CIT(A) also noted that the assessee did not request cross-examination of the key witness, which was a settled procedural requirement.

However, since the Tribunal allowed the appeal on the legal ground that no incriminating material was found during search, it did not adjudicate the merits of the addition, rendering the issue academic.

Issue 3: Violation of Natural Justice Due to Denial of Cross-Examination Opportunity

The assessee contended that the Assessing Officer failed to provide a copy of the statement of Shri Madhuchnadra Kalaskar and denied the opportunity to cross-examine him, thereby violating principles of natural justice.

The CIT(A) rejected this plea, observing that the assessee did not make any formal request for cross-examination during assessment proceedings. The Tribunal referred to settled legal principles, including the decision of the Calcutta High Court in Hindustan Tobacco Company vs. CIT (211 Taxman 11), which held that failure to seek cross-examination at the appropriate stage precludes raising such a plea at the appellate stage. The plea was thus held to be belated and an afterthought.

Given the Tribunal's decision on the primary legal issue, it did not further adjudicate on this ground.

Significant Holdings and Core Principles

The Tribunal crystallized the following principles:

"In respect of completed assessment / unabated assessment, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search u/s 132 of the Act or requisition u/s 132A of the Act."

"Statements recorded under section 132(4) of the Act cannot be considered as incriminating material unless corroborated by any incriminating evidence found during the search."

"Failure to request cross-examination of witnesses at the assessment stage precludes raising such plea at the appellate stage."

Applying these principles, the Tribunal held that the addition of Rs. 11,36,791/- as commission income estimated at 1% of sales, made solely on the basis of third-party statements without incriminating material discovered during search, was not sustainable in law.

The Tribunal accordingly set aside the addition upheld by the CIT(A) and directed the Assessing Officer to delete the addition. Since the appeal succeeded on this legal ground, the Tribunal refrained from adjudicating the merits of the addition or the natural justice plea.

The core legal questions considered by the Tribunal in these appeals are:

• Whether the penalty under section 271(1)(c) of the Income Tax Act, 1961, was validly imposed by the Assessing Officer (AO) without recording the mandatory satisfaction as required by law at the time of framing the assessment order.
• Whether the penalty levied for furnishing inaccurate particulars of income is justified when the claim disallowed by the AO was made in bona fide belief and was subject to judicial scrutiny.
• Whether the quantum of penalty imposed is excessive and erroneous.
• Whether the notices issued under section 274 read with section 271(1)(c) adequately specify the grounds and the limb under which penalty proceedings were initiated.
• Whether the rectification order under section 154 relating to the penalty order was correctly passed and whether the appeal against such rectification order is maintainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of penalty initiation and levy under section 271(1)(c) without recording mandatory satisfaction

Legal framework and precedents: Section 271(1)(c) imposes penalty for furnishing inaccurate particulars of income, but the AO must record satisfaction before initiating penalty proceedings. The mandatory recording of satisfaction is a condition precedent to levy of penalty. The Hon'ble Apex Court in CIT vs. Emerald Meadows (73 taxmann.com 248 and 241) emphasized that failure to specify the limb under which penalty is imposed and failure to record satisfaction vitiates the penalty proceedings.

Court's interpretation and reasoning: The Tribunal noted that the notice issued under section 274 read with section 271(1)(c) dated 20-10-2016 did not specify under which limb of section 271(1)(c) the penalty was imposed. This omission was fatal to the penalty proceedings. The Tribunal relied on the Apex Court's decision in Emerald Meadows to hold that such non-specification invalidates the penalty.

Key evidence and findings: The AO initiated penalty proceedings based on disallowance of deduction under section 32AC. The satisfaction recorded by the AO was not properly reflected, and the notice did not specify the exact limb of section 271(1)(c). The assessee did not reply to the show cause notice, but the Tribunal focused on procedural lapses by the AO.

Application of law to facts: Since the notice was defective and the AO failed to comply with the mandatory requirement of satisfaction recording and clear specification of penalty grounds, the penalty proceedings were held to be invalid.

Treatment of competing arguments: The Revenue relied on the assessment order and penalty order to justify the penalty. The assessee argued that the penalty was not sustainable due to procedural defects and that the claim was bona fide. The Tribunal favored the assessee's submissions based on legal precedents.

Conclusion: The penalty imposed under section 271(1)(c) was not validly initiated and hence does not survive.

Issue 2: Whether disallowance of deduction under section 32AC amounts to furnishing inaccurate particulars of income warranting penalty

Legal framework and precedents: The Hon'ble Apex Court in CIT vs. Reliance Petro Products Pvt. Ltd. (322 ITR 158) held that mere rejection of a claim made in bona fide belief does not amount to furnishing inaccurate particulars of income attracting penalty under section 271(1)(c).

Court's interpretation and reasoning: The assessee claimed deduction under section 32AC for acquisition of pollution control equipment, which was disallowed by the AO on the ground that such assets acquired after 30-09-2013 are not eligible. The assessee's claim was admitted to be pending before the Hon'ble High Court. The Tribunal observed that since the claim was made in bona fide belief and was subject to judicial scrutiny, mere disallowance cannot be a ground for penalty.

Key evidence and findings: The assessee's return disclosed the deduction claimed, and the AO disallowed it. The assessee did not respond to the show cause notice, but the Tribunal focused on the nature of the claim and the legal position pending in higher courts.

Application of law to facts: The Tribunal applied the Reliance Petro Products principle to hold that the penalty cannot be levied merely because the claim was disallowed.

Treatment of competing arguments: Revenue contended that furnishing inaccurate particulars was established by disallowance. The assessee argued bona fide claim and judicial admission. The Tribunal accepted the assessee's argument.

Conclusion: Disallowance of the deduction under section 32AC does not amount to furnishing inaccurate particulars of income for penalty purposes.

Issue 3: Quantum of penalty imposed

Legal framework and precedents: Penalty quantum must be reasonable and commensurate with the nature of default. Excessive penalty without proper justification is not sustainable.

Court's interpretation and reasoning: The Tribunal noted that the penalty amount of Rs. 5,46,79,979/- (rectified to Rs. 4,92,24,537/-) was excessive considering the book profit under section 115JB and the nature of the claim. Since the penalty itself was held invalid on procedural and substantive grounds, the quantum issue became moot.

Key evidence and findings: The penalty was computed on the disallowed deduction amount. The assessee contended excessiveness.

Application of law to facts: Since penalty was invalid, quantum determination was unnecessary.

Treatment of competing arguments: Revenue justified penalty quantum based on disallowance. Assessee challenged excessiveness. Tribunal dismissed penalty altogether.

Conclusion: Quantum of penalty issue did not survive as penalty itself was quashed.

Issue 4: Adequacy and validity of notice under section 274 read with section 271(1)(c)

Legal framework and precedents: Notice under section 274 must clearly specify the grounds and the limb of section 271(1)(c) invoked. Failure to do so renders penalty proceedings invalid as per Apex Court rulings.

Court's interpretation and reasoning: The Tribunal found the notice issued did not specify the limb under which penalty was imposed, violating mandatory requirements.

Key evidence and findings: The notice dated 20-10-2016 was silent on the limb of section 271(1)(c).

Application of law to facts: Non-specification invalidated the penalty proceedings.

Treatment of competing arguments: Revenue did not specifically address this defect. Assessee relied on case law to highlight the defect.

Conclusion: Notice was defective and penalty proceedings were invalid.

Issue 5: Maintainability and correctness of rectification order under section 154 relating to penalty order

Legal framework and precedents: Rectification under section 154 is permissible to correct mistakes apparent on record. However, if the rectification is consequential to an invalid order, the appeal against rectification may be dismissed as infructuous.

Court's interpretation and reasoning: The rectification order dated 25-04-2019 was passed in consonance with the assessee's rectification application regarding the penalty order. Since the penalty order itself was quashed, the appeal against rectification was held to be infructuous.

Key evidence and findings: The rectification related directly to penalty order.

Application of law to facts: Since penalty order was invalidated, rectification order lost relevance.

Treatment of competing arguments: Assessee challenged rectification. Revenue defended it. Tribunal dismissed appeal against rectification as infructuous.

Conclusion: Appeal against rectification order dismissed as infructuous.

3. SIGNIFICANT HOLDINGS

"The notice u/s. 274 r.w.s 274(1)(c) of the Income Tax Act, 1961 dated 20-10-2016 has not at all specified under which limb section 271(1)(c) has been invoked. Thus, the decision of Hon'ble Apex Court in case of CIT vs. Emerald Meadows 73 taxmann.com 248 and 73 taxmann.com 241 is squarely applicable in the present case."

"Mere rejection of claim cannot be the ground for levying penalty u/s. 271(1)(c) as held by the Hon'ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158."

"The penalty imposed u/s. 271(1)(c) of the Act does not survive."

Core principles established include:

• Mandatory requirements for penalty proceedings under section 271(1)(c) include recording of satisfaction and clear specification of the limb of penalty invoked in the notice.
• Penalty cannot be levied merely on disallowance of a claim made in bona fide belief and pending judicial adjudication.
• Procedural lapses in penalty initiation render the penalty invalid.
• Appeals against rectification orders consequential to invalid penalty orders may be dismissed as infructuous.

Final determinations:

• Penalty under section 271(1)(c) imposed for furnishing inaccurate particulars of income was quashed due to procedural defects and substantive merits.
• Appeal against rectification order under section 154 was dismissed as infructuous.

Issues: (i) Whether Foreign Tax Credit could be denied merely because Form No. 67 was filed after the due date; (ii) Whether dividend income from a U.S. company could be taxed at 30% instead of the treaty rate of 25%.

Issue (i): Whether Foreign Tax Credit could be denied merely because Form No. 67 was filed after the due date.

Analysis: The claim for Foreign Tax Credit was supported by Form No. 67, though the form was filed belatedly. The governing provision in Rule 128 of the Income-tax Rules, 1962, as applied by judicial precedent, was treated as directory and not mandatory. On that basis, the delayed filing of Form No. 67 could not by itself defeat the substantive claim for credit where the form was available for verification.

Conclusion: The denial of Foreign Tax Credit on the ground of delayed filing of Form No. 67 was unsustainable, and the issue was decided in favour of the assessee.

Issue (ii): Whether dividend income from a U.S. company could be taxed at 30% instead of the treaty rate of 25%.

Analysis: Article 10 of the India-USA Double Taxation Avoidance Agreement prescribes a capped rate of tax on dividends. The applicable clause for the facts of the case was the residual category, under which the dividend income could be taxed only at 25% of the gross amount. Since the treaty rate was specifically provided, it prevailed over the domestic rate applied in processing the return.

Conclusion: Taxation of the dividend income at 30% was incorrect, and the issue was decided in favour of the assessee.

Final Conclusion: The assessee succeeded on both substantive issues, namely Foreign Tax Credit and the correct treaty rate applicable to dividend income, resulting in complete relief in the appeal.

Ratio Decidendi: A procedural requirement relating to filing of Form No. 67 cannot defeat Foreign Tax Credit when it is directory in nature, and where a tax treaty prescribes a lower ceiling rate on dividend income, that treaty rate governs over the domestic rate.

• Whether the order passed by the Principal Commissioner of Income Tax (PCIT) revising the assessment framed under Section 143(3) of the Act was valid and within the prescribed limitation period under Section 263(2) of the Act;
• Whether the assessment order dated 06.03.2023, framed under Section 143(3) read with Section 263, was erroneous and prejudicial to the interest of the Revenue on account of non-disallowance of cash payments exceeding Rs. 35,000/- to transporters in contravention of Section 40A(3) of the Act;
• Whether the provisions of Section 194C relating to deduction of tax at source (TDS) were applicable on carriage inward expenses and whether non-deduction of TDS rendered the original assessment erroneous and prejudicial;
• The applicability of limitation under Section 263(2) of the Act in invoking revisionary jurisdiction on the original assessment order dated 05.12.2019 and subsequent orders.

Issue-wise Detailed Analysis

1. Validity and Limitation of Revisionary Jurisdiction under Section 263

The legal framework governing revisionary jurisdiction under Section 263(1) of the Income-tax Act empowers the Commissioner to revise any order passed by an Assessing Officer if it is found to be erroneous and prejudicial to the interests of the Revenue. However, Section 263(2) imposes a strict limitation period, mandating that no order under Section 263(1) shall be passed after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.

Precedents cited include the Supreme Court decision in CIT vs. Alagendran Finance Limited (2007) and the Bombay High Court decision in CIT vs. ICICI Bank Limited (2012), which reinforce the inviolability of this limitation period.

The Court observed that the original assessment order was passed on 05.12.2019. The PCIT's revisionary order dated 27.12.2024 was thus beyond the two-year limitation period prescribed under Section 263(2) when seeking to revise the original assessment. Consequently, the exercise of jurisdiction was invalid and barred by limitation.

2. Applicability of Section 194C on Carriage Inward Expenses and Non-deduction of TDS

The PCIT initially invoked revisionary jurisdiction on the ground that the assessee had debited Rs. 1,23,45,237/- as carriage inward expenses without deducting TDS under Section 194C. The PCIT contended this non-deduction resulted in underassessment of income by Rs. 37,03,571/-.

During reassessment proceedings, the Assessing Officer (AO) conducted a detailed inquiry, including verification of PAN details of the transporters and the number of goods carriers owned by them. The AO found that none of the transporters owned more than 10 goods carriers, thereby rendering Section 194C(6) inapplicable. Consequently, the AO accepted the returned income and held that TDS provisions under Section 194C did not apply.

The Court noted that the order dated 06.03.2023, framed under Section 143(3) read with Section 263, was not erroneous or prejudicial to Revenue's interest as it was based on detailed factual findings and proper application of law by the AO. The PCIT's attempt to revise this order was therefore without legal basis.

3. Disallowance of Cash Payments under Section 40A(3)

The PCIT further observed that Rs. 5,70,386/- was paid in cash to transporters in amounts exceeding Rs. 35,000/- in a single day, contravening Section 40A(3) of the Act, which restricts cash payments beyond specified limits to claim expenses as deductible.

On this basis, the PCIT held the order dated 06.03.2023 erroneous and prejudicial and passed a revisionary order directing the AO to disallow such expenses.

The Court found that this issue was not raised in the original assessment or in the first revisionary order but was introduced only in the subsequent revisionary order dated 27.12.2024. Since the PCIT's jurisdiction to revise the assessment is limited to orders passed within the prescribed limitation period, and since the original assessment was framed on 05.12.2019, the revisionary order on this new ground was barred by limitation.

Moreover, the AO had accepted the returned income after verifying the facts and applying the provisions of the Act appropriately. The Court held that the PCIT could not validly invoke revisionary jurisdiction on the fresh order dated 06.03.2023, which was itself a revision under Section 263.

4. Treatment of Competing Arguments

The assessee's representative argued vehemently that the PCIT's order dated 27.12.2024 was hopelessly barred by limitation under Section 263(2) and was invalid as it sought to revise an order passed beyond the two-year period. The assessee further contended that the issue of cash payments exceeding Rs. 35,000/- was not part of the original assessment or the first revision, and hence could not be introduced in a belated revision.

The Revenue's representative contended that the PCIT revised the assessment framed on 06.03.2023 and therefore the limitation under Section 263(2) did not apply.

The Court rejected the Revenue's contention, holding that the order dated 06.03.2023 was itself a revisionary order passed under Section 263 and not a fresh assessment. The limitation period for revision under Section 263 runs from the date of the original assessment order, not from subsequent revisionary orders.

Conclusions

The Court concluded that the PCIT's order dated 27.12.2024 revising the assessment under Section 263 was barred by limitation and hence invalid. The revisionary jurisdiction could not be exercised beyond two years from the end of the financial year in which the original assessment order was passed. The order dated 06.03.2023 was neither erroneous nor prejudicial to the interest of Revenue, and the issues raised therein were properly adjudicated by the AO.

Significant Holdings

The Court held:

"The exercise of jurisdiction u/s 263 of the Act by the ld. PCIT vide order dated 27.12.2024 is bad in law. At the most, the ld. PCIT could have revised the assessment framed u/s 143(3) of the Act dated 05.12.2019, but the same is barred by limitation and therefore, no revision could have been made of the original assessment also."

This establishes the core principle that the limitation period under Section 263(2) is strictly applicable and cannot be circumvented by revising subsequent orders passed under the same provision.

Further, the Court emphasized that detailed factual findings by the AO, including verification of PAN details and applicability of Section 194C, are binding unless shown to be erroneous and prejudicial, which was not established in this case.

The final determination was to quash the revisionary order dated 27.12.2024 and allow the assessee's appeal, thereby upholding the assessment order dated 06.03.2023 and the original assessment dated 05.12.2019.

The core legal questions considered by the Tribunal include:

(a) Whether the reopening of assessment under section 147 read with section 148 of the Income Tax Act was justified in the facts of the case;

(b) Whether the addition of Rs. 7,22,90,000/- as unexplained cash credit under section 68 of the Act, on account of unsecured loan from Ratio Distributors Pvt. Ltd., was justified;

(c) Whether the assessee satisfactorily proved the identity, creditworthiness, and genuineness of the loan transactions;

(d) Whether non-compliance by the loan creditor to the notice issued under section 133(6) of the Act could be a valid ground for making the addition;

(e) The applicability and binding effect of a coordinate bench decision in the assessee's own case for AY 2017-18, which dealt with similar facts and issues;

(f) The relevance and application of judicial precedents concerning the burden of proof and evidentiary requirements under section 68 of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Justification for reopening assessment and addition of unsecured loan as unexplained cash credit

The reopening of assessment was initiated under section 147 read with section 148 based on information that the assessee was a beneficiary of accommodation entries in the form of unsecured loans amounting to Rs. 8,42,26,643/-. The Assessing Officer (AO) treated the loan of Rs. 7,22,90,000/- from Ratio Distributors Pvt. Ltd. as unexplained cash credit under section 68, relying on the fact that the lender showed nil income and minimal share capital and expenses, indicating lack of creditworthiness to advance such a large loan.

The AO also noted that the lender did not respond to the notice issued under section 133(6) for verification of transactions. The AO concluded that the loan was an accommodation entry, with funds routed from other entities, and thus added the amount to the assessee's income.

Relevant legal framework and precedents: Section 68 of the Income Tax Act requires the assessee to prove the identity, genuineness, and creditworthiness of the lender and the genuineness of the loan transaction when unexplained cash credits are detected. Non-compliance with notices under section 133(6) can be a factor but is not conclusive.

Court's interpretation and reasoning: The Tribunal examined the facts and noted that the assessee had furnished extensive documentary evidence including loan confirmations, audited financial statements, Income Tax Returns (ITR) of the lender, assessment orders of the lender, bank statements, and other relevant documents. Neither the AO nor the Commissioner of Income Tax (Appeals) [CIT(A)] had commented on the evidences filed by the assessee but made the addition solely on the ground of non-compliance by the lender to the section 133(6) notice.

The Tribunal emphasized that addition cannot be made merely because the lender did not respond to the notice when the assessee had furnished all requisite evidence to establish the genuineness of the loan.

Key evidence and findings: The assessee's evidence included confirmation of loans, audited financials, ITR, bank statements, and assessment orders of the lender. Partial repayment of the loan during the year and full repayment in subsequent years was also noted. The Tribunal also referred to the coordinate bench decision for AY 2017-18 where loans from the same lender were similarly challenged and additions were deleted.

Application of law to facts: The Tribunal applied the principles under section 68 and relevant judicial precedents to hold that the assessee had discharged the burden of proof. The AO's reliance on non-compliance by the lender to the notice under section 133(6) was held insufficient to justify addition.

Treatment of competing arguments: The Revenue relied on the AO and CIT(A) findings that the assessee was a beneficiary of accommodation entries and the lender lacked creditworthiness. The Tribunal rejected this reliance in the absence of any adverse comment on the evidences filed and in light of the coordinate bench decision.

Conclusions: The addition of Rs. 7,22,90,000/- as unexplained cash credit was not justified and was set aside.

Issue (c) & (d): Proof of identity, creditworthiness, genuineness and effect of non-compliance to section 133(6) notice

Relevant legal framework and precedents: The Tribunal relied on the coordinate bench decision in the assessee's own case for AY 2017-18 and judicial precedents including:

• CIT vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC);
• CIT vs. Orchid Industries Ltd. 397 ITR 136 (Bom);
• Crystal Networks Pvt. Ltd. vs. CIT 353 ITR 171 (Kol);
• ITO vs. Cygnus Developers India Pvt. Ltd.;
• Joy Consolidated Pvt. Ltd. vs. ITO.

The principles established in these cases include that the assessee must prove the identity, genuineness, and creditworthiness of the lender and genuineness of the loan transaction. Mere non-compliance by the lender to notices under section 133(6) or 131 cannot be a sole ground for making additions. The AO must independently verify and bring material to disprove the genuineness of the transaction.

Court's interpretation and reasoning: The Tribunal found that the assessee had furnished all relevant documents and that the AO had not brought any material to disprove the genuineness of the loan. The Tribunal also noted that the coordinate bench decision had held that all ingredients of section 68 were proved and that additions cannot be made merely because of non-compliance to notices issued under section 133(6) or 131.

Key evidence and findings: The assessee's submission of loan confirmations, audited accounts, ITRs, and bank statements, along with repayment of the loan, were considered sufficient to establish the genuineness of the transactions. The AO's failure to comment on these evidences was significant.

Application of law to facts: The Tribunal applied the legal principles to find that the assessee had met the burden of proof under section 68. The AO's reliance on the lender's non-response to the section 133(6) notice was held to be insufficient.

Treatment of competing arguments: The Revenue's argument that the assessee was a beneficiary of accommodation entries was rejected due to lack of material and adverse findings on the evidence submitted by the assessee.

Conclusions: The assessee proved the identity, creditworthiness, and genuineness of the loan transactions, and non-compliance by the lender to the notice was not a valid ground for addition.

Issue (e): Binding effect of coordinate bench decision in assessee's own case for AY 2017-18

The Tribunal relied heavily on the coordinate bench decision for AY 2017-18, where unsecured loans from the same lender and other parties aggregating Rs. 3,49,00,000/- were challenged. The coordinate bench had deleted the additions after detailed examination of evidence, including responses to section 133(6) notices by the lenders and creditworthiness analysis.

The Tribunal noted that since the facts and evidence in the present year were substantially similar, the principle of consistency and judicial discipline required adherence to the coordinate bench decision.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The addition cannot be made merely on the ground that there was no compliance to the letter issued u/s 133(6) of the Act when assessee has filed all the details/ evidences before the ld. Assessing Officer."

"Considering these facts of the assessee in the light of the above decisions, we are inclined to hold that the assessee has duly proved the identity and creditworthiness of the loan creditors and the genuineness of the transactions and the AO has not brought any material on record to prove to the contrary."

"So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established."

Core principles established include:

• The burden to prove identity, creditworthiness, and genuineness of loan transactions under section 68 lies on the assessee, who can discharge it by furnishing appropriate documents.
• Non-compliance by the lender to notices under section 133(6) or 131 is not a conclusive ground for making additions if the assessee has furnished sufficient evidence.
• Assessing Officers must verify the genuineness of transactions through independent inquiry and cannot reject evidence solely on suspicion or on the basis of non-response by third parties.
• Consistency in judicial decisions requires adherence to coordinate bench rulings on similar facts.

Final determinations:

The Tribunal set aside the orders of the CIT(A) and directed the AO to delete the addition of Rs. 7,22,90,000/- made under section 68 as unexplained cash credit, thereby allowing the appeal of the assessee.

Issues: Whether the Court should interfere with the impugned judgment in relation to the duty demand and the questions raised by the petitioner.

Analysis: The order records that the petitioner had not challenged the earlier appellate order, leaving open only the limited scope noted in the prior judgment. It further records a prima facie view that the High Court had not examined the questions raised by the petitioner.

Outcome: Notice was issued returnable after six weeks, with liberty to serve the respondent through the Central Agency and to correct or replace the pages.

The core legal questions considered by the Court are:

1. Whether the action of the Regional Authority in issuing the Rejection Letter dated 05.02.2025 and Deficiency Letter dated 15.01.2025 refusing to grant Advance Authorisation for import of Raw Petroleum Coke (RPC) for manufacture and supply of Calcined Petroleum Coke (CPC) to SEZ units is arbitrary, illegal, and violative of the Petitioners' rights under Articles 14, 19, and 300 of the Constitution of India, the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), Foreign Trade Policy (FTP), 2023, DGFT Notification No.68/2023, CAQM Order dated 15.02.2024, and Supreme Court orders.

2. Whether the import of RPC by calciners for manufacture of CPC to supply to SEZ units qualifies as "deemed exports" under the FTP, entitling the Petitioners to Advance Authorisation.

3. Whether the DGFT Notification No.68/2023 dated 07.03.2024, particularly the clause prohibiting transfer of imported RPC to SEZ units and export of CPC by calciners, is consistent with the CAQM Order and the FTP.

4. Whether the Regional Authority had jurisdiction and authority to interpret the term "deemed exports" contrary to the CAQM Order and FTP provisions.

5. Whether the Petitioners have an efficacious alternative remedy under Section 16 of the FTDR Act and Paragraph 2.58 of FTP, and if the writ petition is maintainable.

6. Whether the rejection order was a reasoned order and complied with principles of natural justice.

7. Whether the Petitioners are entitled to interim relief to supply CPC to SEZ units pending final adjudication.

Issue-wise Detailed Analysis

1. Legality and Validity of Rejection and Deficiency Letters Refusing Advance Authorisation

The legal framework includes the FTDR Act, 1992, FTP 2023, DGFT Notification No.68/2023, CAQM Order dated 15.02.2024, and relevant Supreme Court orders, particularly in the M.C. Mehta case (W.P. (C) No.13029/1985).

The Petitioners' case is that the Rejection and Deficiency Letters are arbitrary and illegal because they contradict the CAQM Order which permits "deemed exports" of CPC to SEZ units. The Petitioners argue that under Clause 4.05(c)(i) and Clause 7.02(A)(a) of the FTP, imports incorporated in goods supplied to SEZ units qualify for Advance Authorisation as "deemed exports." They emphasize that earlier Advance Authorisations were granted for the same purpose without objection.

The respondents contend that the DGFT Notification No.68/2023 restricts import of RPC to actual user basis and prohibits transfer to SEZ units or export of CPC by calciners. They submit that supplies to SEZ units are physical exports, not deemed exports, as per FTP and SEZ Act, 2005. They rely on the statutory powers of DGFT under Sections 3(2), 5, and 16 of the FTDR Act to regulate imports and exports and maintain that authorization is not a right but a privilege subject to conditions and review.

The Court notes that the CAQM Order expressly permits "deemed exports" to SEZ units, but the DGFT Notification's clause prohibiting transfer to SEZ units and export of CPC by calciners contradicts this. The Court finds that the Rejection Letter failed to consider the Petitioners' explanation referencing the CAQM Order and the relevant FTP provisions and thus is not a reasoned order. The Court also observes that the earlier Advance Authorisations granted to the Petitioners to supply CPC to SEZ units create an expectation and reliance, and a sudden reversal without adequate reasoning causes hardship and is unsustainable.

2. Interpretation of "Deemed Exports" and Eligibility for Advance Authorisation

The FTP 2023 defines "deemed exports" in Chapter 7, Paragraph 7.02(A)(a) as supply of goods against Advance Authorisation, and Paragraph 4.05(c)(i) includes physical exports, including exports to SEZ units, as eligible for Advance Authorisation.

The respondents argue that supplies to SEZ units are physical exports under the SEZ Act, 2005, and not deemed exports under the FTP. They rely on the statutory definitions and the classification of SEZ as a "foreign territory" for trade and customs purposes, which supports their position that supplies to SEZ units are physical exports requiring Bill of Exports, not deemed exports. They further contend that the Petitioners' application was for physical exports and not for deemed exports, and hence the rejection was justified.

The Petitioners counter that the CAQM Order permits deemed exports to SEZ units and that the FTP provisions support their entitlement to Advance Authorisation for such supplies. They argue that the Petitioners' supplies to SEZ units qualify as deemed exports because the goods do not leave the country in the conventional sense, and payment is received in Indian currency or free foreign exchange, aligning with the FTP's definition.

The Court recognizes the tension between the statutory definition of exports under the SEZ Act and the CAQM Order's allowance of deemed exports to SEZ units. The Court notes that the CAQM Order was issued pursuant to Supreme Court directions and intended to balance environmental concerns with industrial requirements. The Court finds that the Petitioners' interpretation that supplies to SEZ units under Advance Authorisation qualify as deemed exports is reasonable in the context of the CAQM Order and FTP provisions, particularly since the CAQM Order explicitly permits deemed exports to SEZ units.

3. Validity and Consistency of DGFT Notification No.68/2023 with CAQM Order and FTP

The DGFT Notification No.68/2023 amended import policy conditions for RPC and CPC, imposing restrictions that import of RPC by calciners shall be on actual user basis and shall not be transferred to SEZ units, and export of CPC by calciners shall not be permitted.

The Petitioners argue that this Notification contradicts the CAQM Order which permits deemed exports to SEZ units and that the Notification's clause prohibiting transfer to SEZ units is inconsistent with the Minutes of Meeting dated 27.03.2024 allocating RPC import quota including for supply to Vedanta SEZ.

The respondents submit that the Notification was issued under statutory powers to regulate imports and exports and reflects environmental concerns about pollution from pet coke processing. They maintain that the Notification is valid and binding, and the Petitioners' interpretation is incorrect.

The Court finds that the DGFT Notification's restrictive clause is not fully consonant with the CAQM Order and the Minutes of Meeting which specifically contemplate supply of CPC to SEZ units. The Court holds that the Notification cannot be interpreted to nullify the CAQM Order's express permission for deemed exports to SEZ units. The Court also notes that the Notification itself states compliance with all conditions in the CAQM Order, indicating an intention to harmonize the two.

4. Jurisdiction and Authority of Regional Authority to Interpret "Deemed Exports" Contrary to CAQM Order and FTP

The Petitioners contend that the Regional Authority lacked jurisdiction to interpret "deemed exports" in a manner contrary to the CAQM Order and FTP provisions and that such interpretation is ultra vires and arbitrary.

The respondents argue that the DGFT has exclusive authority to interpret the FTP under Paragraph 2.58, and that the Regional Authority acted within its powers and issued a reasoned order based on the policy and statutory provisions.

The Court notes that while DGFT's decisions on policy interpretation are generally final and binding, the Regional Authority is required to consider the entire legal framework including the CAQM Order and relevant statutory provisions. The Court finds that the Regional Authority failed to adequately consider the CAQM Order and the Petitioners' explanation, thus acting beyond its jurisdiction in issuing the rejection without proper reasoning.

5. Maintainability of Writ Petition and Availability of Alternative Remedies

The respondents contend that the writ petition under Article 226 is not maintainable as efficacious alternative remedies exist under Section 16 of the FTDR Act for review and under Paragraph 2.58 of FTP for policy interpretation.

The Petitioners argue that no notice or show cause was issued under Section 16 before rejection, and that the writ petition is maintainable especially since fundamental rights under Articles 14 and 19 are involved and principles of natural justice were violated.

The Court refers to established principles that alternative remedies do not bar writ jurisdiction where fundamental rights are at stake, or where orders are without jurisdiction or violate natural justice. The Court finds that the rejection order was not a reasoned order and violated principles of natural justice, justifying exercise of writ jurisdiction. The Court also notes that the Petitioners have already paid import duty for the disputed quantity, increasing the urgency and hardship.

6. Compliance with Principles of Natural Justice and Reasoned Order Requirement

The Court refers to the Supreme Court precedent that administrative/quasi-judicial authorities are required to record reasons for their decisions unless expressly dispensed with. The Petitioners submitted that the rejection order did not consider their explanations and was not reasoned.

The Court agrees that the rejection letter failed to address the Petitioners' detailed response and explanations, and did not reconcile the conflicting provisions of the DGFT Notification and CAQM Order. Thus, the order is not reasoned and violates principles of natural justice.

7. Interim Relief to Permit Supply of CPC to SEZ Units Pending Final Decision

The Petitioners sought interim relief to supply CPC to Vedanta SEZ unit pending the writ petition, emphasizing the approaching deadline for import and the risk of heavy losses and plant shutdown if supplies are not permitted.

The respondents did not oppose interim relief but submitted that the earlier authorisations are under review.

The Court, considering the hardship and the Petitioners' payment of import duty, directs the respondents to permit supply of CPC to Vedanta SEZ pending final decision on review, subject to compliance with conditions.

Significant Holdings

"The Deficiency Letter dated 15.01.2025 and the Rejection Letter dated 05.02.2025 issued by the Regional Authority are contrary to the CAQM Order dated 15.02.2024 and the DGFT Notification No.68/2023 dated 07.03.2024 which implements the CAQM Order. The rejection order fails to consider the Petitioners' explanation and is not a reasoned order, thus violating principles of natural justice."

"Supplies of Calcined Petroleum Coke manufactured from imported Raw Petroleum Coke to SEZ units qualify as 'deemed exports' under the Foreign Trade Policy, 2023, entitling the Petitioners to Advance Authorisation. The DGFT Notification's restrictive clause prohibiting transfer to SEZ units and export of CPC by calciners is not in consonance with the CAQM Order and the Minutes of Meeting dated 27.03.2024."

"The Regional Authority exceeded its jurisdiction by interpreting 'deemed exports' contrary to the CAQM Order and FTP provisions without proper reasoning."

"Though alternative remedies exist under Section 16 of the FTDR Act and Paragraph 2.58 of FTP, the writ petition under Article 226 is maintainable in view of violation of fundamental rights and principles of natural justice."

"The Petitioners are entitled to interim relief permitting supply of CPC to Vedanta SEZ pending final decision on review, considering the hardship and payment of import duties."

"The matter is remitted to the respondents for fresh consideration of the Petitioners' entitlement to Advance Authorisation under the Foreign Trade Policy, 2023, with personal hearing to the Petitioners."

Issues: Whether criminal complaints against a partner of an audit firm, without arraigning the firm as an accused and without specific allegations of personal role or fraudulent conduct, disclose a prosecutable offence under the Companies Act, 2013; whether the alleged non-disclosure in the audit report concerning related party transactions, viewed in light of Accounting Standard 18, warrants criminal prosecution under Sections 143 and 147 of the Companies Act, 2013.

Analysis: The complaint and the show-cause material showed alleged non-compliance in the audit reporting of related party transactions, but the proceedings were initiated against the partner in his individual capacity and not against the audit firm. Liability of a partner of an audit firm under the Companies Act requires the statutory basis for fastening such liability and the complaint must contain specific allegations showing the partner's personal involvement, fraudulent conduct, abetment, or collusion. In the absence of arraignment of the firm and in the absence of particularised averments against the petitioner, the complaint could not sustain vicarious criminal liability. The court also noted that the relevant accounting standard defined the expression relating to relatives, and the audit disclosure did not require separate articulation of the degree of relationship in the manner suggested by the prosecution.

Conclusion: The complaint against the petitioner was not maintainable and was liable to be quashed.

1. Whether the Petitioner is entitled to an investigation under Section 213 of the Companies Act, 2013 into the affairs of the Respondent No. 1 Company based on alleged fraudulent, oppressive, or unlawful conduct.

2. Whether the Respondents have committed acts of oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013, including unauthorized changes in directorship, improper buy-back of shares, and misuse of company funds.

3. Whether the Petitioner is entitled to payment of outstanding Director's remuneration and other monetary claims alleged to be due from the Respondent No. 1 Company.

4. Whether the Respondent Nos. 2 to 6 should be removed as directors and an administrator appointed under Section 242(2)(h) of the Companies Act.

5. Whether the Respondent No. 2 is obligated to transfer back the balance equity shares to the Petitioner, restoring his original shareholding.

6. Whether the Company Secretary and Statutory Auditor acted negligently or in conspiracy with the Respondents, thereby justifying an investigation.

7. Whether the advances and loans granted by the Respondent No. 1 Company to its Associate Company, Dishti Vishal Private Limited, were improper or oppressive.

8. Whether the Petitioner's rights as a shareholder, including access to company premises, documents, and benefits, have been violated.

9. Whether the use of company funds for personal benefits by Respondents constitutes oppression or mismanagement.

10. Whether the alleged creation of benami property using company funds amounts to mismanagement or fraudulent conduct.

Issue-wise Detailed Analysis

1. Investigation under Section 213 of the Companies Act, 2013

Legal Framework and Precedents: Section 213 empowers the Tribunal to order an investigation if the company's affairs are conducted fraudulently, oppressively, or for unlawful purposes. The Supreme Court in the cited case elucidated that oppression involves conduct that is harsh, burdensome, mala fide, or against probity and good conduct.

Court's Interpretation and Reasoning: The Tribunal examined the Petitioner's allegations of fraudulent accounting, misappropriation of funds, and irregularities in shareholding and director appointments. The Respondents provided documentary evidence, including bank certificates and audited accounts, to rebut claims of fraud or mismanagement.

Key Evidence and Findings: The Respondent No. 8 (Auditor) produced bank certificates evidencing partial payment of the Petitioner's remuneration. Audited financials of Dishti Vishal Private Limited and Respondent No. 1 Company were scrutinized, showing proper accounting of advances and investments. The Tribunal found no substantive material to support claims of fraudulent financial reporting or procedural violations warranting investigation.

Application of Law to Facts: The Tribunal held that mere allegations without corroborative evidence do not satisfy the threshold for ordering an investigation under Section 213. The Petitioner's claims appeared to be family disputes and shareholder disagreements rather than company affairs conducted oppressively or fraudulently.

Treatment of Competing Arguments: The Respondents' explanations regarding the buy-back, remuneration payments, and loans were accepted as compliant with statutory provisions and company policies. The Petitioner's assertions were often contradicted by documentary evidence or found to be matters of civil dispute rather than corporate mismanagement.

Conclusions: No grounds for investigation under Section 213 were established.

2. Allegations of Oppression and Mismanagement under Sections 241 and 242

Legal Framework and Precedents: Sections 241 and 242 provide relief against oppression and mismanagement. The Supreme Court's criteria for oppression include harsh, burdensome, mala fide conduct, even if legally permissible.

Court's Interpretation and Reasoning: The Tribunal analyzed allegations such as unauthorized director appointments, non-payment of remuneration, failure to transfer shares, misuse of company funds, and denial of shareholder benefits.

Key Evidence and Findings: The Tribunal noted that the Petitioner was a director during the relevant meetings approving director appointments and financial statements, thus estopping him from raising those issues later. The buy-back was conducted at face value with Board approval, consistent with Articles of Association and statutory provisions. The Petitioner's share transfer was a voluntary gift, and the company's affairs are distinct from shareholder agreements. The alleged misuse of funds for personal benefits was explained as legitimate employee perks. The Petitioner was no longer a director or employee, thus not entitled to such benefits.

Application of Law to Facts: The Tribunal held that shareholder disputes over share transfers and benefits do not constitute oppression of company affairs. The buy-back and director appointments were lawful and ratified. Non-payment of dividends is a commercial decision and not oppressive.

Treatment of Competing Arguments: The Petitioner's claims were often based on verbal agreements or family arrangements, which cannot be enforced as company affairs. The Respondents' compliance with statutory procedures and company policies was accepted.

Conclusions: No acts of oppression or mismanagement were proven.

3. Payment of Director's Remuneration and Other Monetary Claims

Legal Framework: Directors are entitled to remuneration as per company policy and statutory approvals. Non-payment may constitute oppression if deliberate and unjustified.

Court's Reasoning and Findings: The Auditor's bank certificate showed substantial payment to the Petitioner. The balance amount was reflected as payable in the company's books. The Tribunal found no evidence of deliberate withholding or fraudulent accounting. The Petitioner's claim for interest was not substantiated.

Conclusions: No entitlement to additional payments beyond those evidenced was established.

4. Removal of Directors and Appointment of Administrator under Section 242(2)(h)

Legal Framework: Section 242(2)(h) permits removal of directors and appointment of an administrator if company affairs are conducted oppressively or prejudicially.

Findings: Since no oppression or mismanagement was established, removal of directors or appointment of an administrator was unwarranted.

5. Restoration of Shareholding by Transfer of Shares

Legal Framework: Share transfers between shareholders are private arrangements and do not affect company affairs unless fraudulent or oppressive conduct is involved.

Court's Reasoning: The Petitioner's transfer of shares was voluntary and unconditional as per records. The Tribunal held that enforcement of verbal arrangements between shareholders is beyond the Tribunal's jurisdiction under Sections 241/242, which address company affairs, not private contracts.

Conclusion: No direction to restore shareholding was issued.

6. Allegations against Company Secretary and Auditor

Legal Framework: Auditors and Company Secretaries are bound by professional codes and must act independently.

Findings: No material was found to demonstrate negligence, conspiracy, or breach of duties by these professionals. The Tribunal observed that family disputes were improperly extended to implicate these independent officers.

7. Advances and Loans to Associate Company

Legal Framework: Loans to associate companies must comply with Section 186 of the Companies Act, 2013. Interest-free loans may attract penalties but do not necessarily constitute oppression.

Findings: The loan was approved by the Board and shareholders where required. No permanent alienation of funds occurred, and the advances were reflected in audited accounts. The Petitioner's claim of oppression on this ground was rejected.

8. Shareholder Rights and Access to Company Premises and Benefits

Findings: The Petitioner was denied access to premises after ceasing to be a director and employee. The Tribunal found no violation of shareholder rights requiring intervention. The dispute over occupation of residential premises was sub judice before civil courts.

9. Misuse of Company Funds for Personal Benefits

Findings: The Respondents explained that vehicles and credit cards were provided as employee benefits. The Petitioner, no longer employed, was not entitled to such benefits. No evidence of siphoning or misappropriation was found.

10. Allegations of Benami Property Creation

Findings: The advances to the Associate Company and its investments were transparent and recorded. The allegation of land purchased in the name of a laborer was unsubstantiated by financial records and dismissed.

Significant Holdings

"The Tribunal held that the Petitioner has failed to make out a case of oppression as alleged in the Petition."

"An understanding between two shareholders of the Respondent No. 1 Company does not have any relationship with the conduct of company's affairs as the company and its shareholders are two distinct entities and any breach in the promise, even if there was one, by one shareholder to another shareholder in relation to shares of the Company cannot concern the company."

"The mere non-payment of the money lying to the credit of the Petitioners in the books of the Respondent No. 1 Company cannot be held to be an act of oppression and the Petitioner has remedies available under the civil law in relation to recovery of those amounts."

"The buy-back was carried out at face value, while the intrinsic value of its shares was much higher than the face value. Accordingly, such buy-back cannot be said to be an act of oppression prejudicial to the interest of its members or of the Respondent No. 1 Company."

"No substantive material on record to demonstrate any mis-statement in the financial statements or non-observance of disclosure or procedural requirements by the Auditor or Company Secretary."

"Non-payment of dividend to shareholders does not constitute an act of oppression."

Final determinations included dismissal of the Petition under Sections 241, 242, and 213 of the Companies Act, 2013. The application for vacation of company property by the Respondents was partly allowed with directions to refund rental proceeds collected unlawfully by the Petitioner. The Tribunal refrained from ordering vacation of premises as the matter was sub judice before the civil courts.

The core legal questions considered by the Tribunal include:

- Whether the Appellants (Suspended Directors) and the Corporate Debtor were borrowers or merely guarantors under the loan agreements executed with the Financial Creditor;

- Whether the Financial Creditor had a valid financial debt due from the Corporate Debtor to initiate proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code);

- Whether the loan agreements were valid and enforceable, considering allegations of fraud, coercion, and misrepresentation by the Financial Creditor;

- Whether the Appellants' contention that the loan amounts were disbursed to individual accounts and not to the Corporate Debtor negates the existence of financial debt against the Corporate Debtor;

- The impact of criminal proceedings (FIRs) filed by and against the parties on the insolvency application;

- Whether the Adjudicating Authority erred in admitting the application under Section 7 of the Code and initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Borrower vs. Guarantor Status of Appellants and Corporate Debtor

Relevant Legal Framework and Precedents: Under the Code, the existence of a financial debt owed by the Corporate Debtor to the Financial Creditor is a prerequisite for initiating insolvency proceedings. The contractual terms defining parties' roles as borrowers or guarantors are critical. The Supreme Court has held that the terms of loan agreements and the conduct of parties are determinative.

Court's Interpretation and Reasoning: The Tribunal examined the three loan agreements and accompanying schedules. The agreements explicitly state in their opening clauses that the "Borrowers" approached the lender for loans, and the loan amount was granted to the "Borrowers." The names of the Appellants, Corporate Debtor, and other family members appear jointly as borrowers in Schedule 1. The Appellants and Corporate Debtor signed the agreements as borrowers, with respective seals and signatures.

The Tribunal noted that the printed term "guarantor" was struck off from the agreements, indicating no guarantors were involved. The Appellants' claim that they were only guarantors was rejected because the agreements consistently and unequivocally identified them as borrowers.

Key Evidence and Findings: The signed loan agreements, mortgage application forms, and the fact that the Corporate Debtor's director signed on its behalf as borrower all support the classification as borrowers. The Tribunal also highlighted that the loan agreements were standard forms used by the Financial Creditor, with the guarantor clause removed by mutual arrangement.

Application of Law to Facts: The contractual language and parties' conduct establish borrower status, which is legally binding. The Appellants' attempt to recast themselves as guarantors was unsupported by documentary evidence.

Treatment of Competing Arguments: The Appellants' argument that the term "guarantor" was struck off and that they were misled was considered but found unsubstantiated. The Tribunal found no credible evidence of coercion or misrepresentation affecting the borrowers' status.

Conclusion: The Appellants and Corporate Debtor are borrowers under the loan agreements, not guarantors.

Issue 2: Existence of Financial Debt and Validity of Loan Agreements

Relevant Legal Framework and Precedents: Section 7 of the Code allows a financial creditor to initiate insolvency proceedings if there is a default in repayment of financial debt. The Supreme Court has emphasized that the debt and default must be established on record.

Court's Interpretation and Reasoning: The Tribunal noted that the total loan amount of Rs. 5.85 Crores was disbursed to the borrowers as per the loan agreements. The Corporate Debtor and other borrowers mortgaged properties as security. The repayment schedule was breached, and the loans were classified as Non-Performing Assets (NPA) on 19.04.2022. The Financial Creditor issued a demand notice dated 10.11.2022, which remained unpaid.

The Appellants contended that the loan amounts were disbursed to individual accounts and not to the Corporate Debtor, and that no financial debt existed between the Corporate Debtor and Financial Creditor. The Tribunal rejected this contention, noting that the borrowers had authorized disbursal into individual accounts and that the Corporate Debtor was an explicit borrower under the loan agreements.

Key Evidence and Findings: The loan agreements, demand notices, mortgaged properties, and classification of loans as NPA demonstrate the existence of financial debt and default. The Tribunal also observed that the Appellants' claim of siphoning off Rs. 1.60 Crores to a third party's account was denied by the Financial Creditor and not substantiated with credible proof.

Application of Law to Facts: The admitted disbursal of loans and default on repayment satisfy the statutory requirements under Section 7 of the Code for initiating insolvency proceedings.

Treatment of Competing Arguments: The Appellants' allegations of fraud, coercion, and misappropriation were considered but found lacking in evidentiary support. The Tribunal also held that the FIRs filed by and against the parties do not affect the validity of the insolvency application.

Conclusion: A valid financial debt and default exist between the Corporate Debtor and Financial Creditor, justifying initiation of CIRP under Section 7.

Issue 3: Impact of FIRs and Criminal Proceedings on Insolvency Application

Relevant Legal Framework and Precedents: Criminal proceedings and insolvency proceedings are independent. The existence of FIRs or criminal complaints does not preclude the Financial Creditor from initiating insolvency proceedings if statutory conditions are met.

Court's Interpretation and Reasoning: The Tribunal observed that FIR No. 125/2022 was filed by the Financial Creditor against the Appellants for offenses under Sections 420 and 406 IPC related to non-payment of dues. The Appellants filed a counter FIR against the Financial Creditor's representatives. The Tribunal held that these FIRs have no bearing on the application under Section 7 of the Code.

Key Evidence and Findings: The FIRs and related criminal proceedings are separate legal processes and do not affect the contractual and financial relationship under the loan agreements.

Application of Law to Facts: The Tribunal applied settled principles distinguishing criminal liability from insolvency proceedings.

Treatment of Competing Arguments: The Appellants argued that the FIRs demonstrate malafide conduct by the Financial Creditor. The Tribunal rejected this, emphasizing the independence of insolvency jurisdiction.

Conclusion: The criminal proceedings do not impact the maintainability of the insolvency application.

Issue 4: Allegation of Coercion and Excess Loan Amount

Relevant Legal Framework and Precedents: Allegations of coercion or misrepresentation must be supported by cogent evidence to invalidate loan agreements.

Court's Interpretation and Reasoning: The Appellants alleged that they were coerced to accept loans amounting to Rs. 5.85 Crores instead of Rs. 4.25 Crores, and that part of the loan was siphoned off to the Financial Creditor's director's son. The Tribunal found no credible evidence to support these allegations. It was held illogical that the borrowers would sign multiple loan agreements under coercion for such substantial amounts.

Key Evidence and Findings: The loan agreements, application forms, and conduct of the parties indicate voluntary execution. The alleged siphoning of Rs. 1.60 Crores was denied by the Financial Creditor and not substantiated.

Application of Law to Facts: Without credible evidence, allegations of coercion and misappropriation cannot invalidate the loan agreements.

Treatment of Competing Arguments: The Tribunal gave due consideration to the Appellants' allegations but found them speculative and unsubstantiated.

Conclusion: The allegations of coercion and excess loan amount lack merit and do not vitiate the loan agreements.

Issue 5: Validity of Demand Notices and Mortgage Security

Relevant Legal Framework and Precedents: Demand notices under Section 7 must be properly addressed and served. Security interests such as mortgages support the creditor's claim.

Court's Interpretation and Reasoning: The Tribunal noted that the demand notices dated 10.11.2022 were addressed to all borrowers including the Corporate Debtor and Appellants as co-borrowers. The mortgage deeds were executed with the names of all borrowers, including the Corporate Debtor, securing the loans.

Key Evidence and Findings: The demand notices and mortgage documents corroborate the Financial Creditor's claim and the borrowers' liability.

Application of Law to Facts: Proper issuance of demand notices and existence of mortgage security fulfill the procedural and substantive requirements under the Code.

Treatment of Competing Arguments: The Appellants' claim that the demand notices were illegally issued and that no mortgage existed with respect to the Corporate Debtor was rejected based on documentary evidence.

Conclusion: The demand notices and mortgage securities are valid and enforceable.

Issue 6: Maintainability of Insolvency Application Against Corporate Debtor

Relevant Legal Framework and Precedents: The Code permits insolvency proceedings against a Corporate Debtor if a financial debt is due and defaulted. Co-borrowers are jointly and severally liable.

Court's Interpretation and Reasoning: The Tribunal found that the Corporate Debtor was a party to the loan agreements as borrower, had mortgaged properties as security, and defaulted on repayment. The Financial Creditor is entitled to proceed against the Corporate Debtor and co-borrowers jointly.

Key Evidence and Findings: Loan agreements, mortgage deeds, demand notices, and default status establish the Corporate Debtor's liability.

Application of Law to Facts: The application under Section 7 is maintainable against the Corporate Debtor.

Treatment of Competing Arguments: The Appellants' contention that no money was disbursed to the Corporate Debtor and therefore no debt exists was rejected.

Conclusion: The insolvency application against the Corporate Debtor is maintainable and valid.

3. SIGNIFICANT HOLDINGS

- "The Appellants and Corporate Debtor jointly approached the Respondent No.1 seeking financial loan facilities in the form of secure term loans, and also offered for mortgaging their personal properties and submitted three Mortgage Loan Application Forms to the Respondent No.1 seeking loans."

- "At all places in the loan agreements, the Appellants have been categorically stated to be borrowers and have signed accordingly. The printed term 'guarantor' was struck off as there was no guarantors."

- "The admitted disbursal of loans and default on repayment satisfy the statutory requirements under Section 7 of the Code for initiating insolvency proceedings."

- "The FIRs filed by and against the parties do not have any bearing on the application initiated by the Respondent No. 1 under Section 7 of the Code."

- "The demand notices dated 10.11.2022 were addressed to all borrowers including the Corporate Debtor and Appellants as co-borrowers and are valid."

- "The application under Section 7 of the Code is maintainable against the Corporate Debtor and co-borrowers jointly and the Adjudicating Authority rightly admitted the application and initiated CIRP."

- "The allegations of coercion, misappropriation, and siphoning off funds are unsubstantiated and rejected."

The Tribunal concluded that the Impugned Order admitting the application under Section 7 of the Code and initiating Corporate Insolvency Resolution Process against the Corporate Debtor was correct and did not suffer from any error warranting interference. The appeal was dismissed accordingly.

- Whether the Committee of Creditors (CoC) was justified in rejecting the Resolution Plan submitted by the appellant and deciding to liquidate the Corporate Debtor (CD) under Section 33(2) of the Insolvency and Bankruptcy Code (IBC).

- Whether the Adjudicating Authority erred in not considering the addendums submitted by the appellant to improve the financial proposal.

- Whether the appellant, being a Micro, Small and Medium Enterprise (MSME), is entitled to submit a scheme of compromise or arrangement under Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, despite the liquidation order.

- The scope and extent of judicial review over the CoC's commercial wisdom in deciding liquidation versus approval of a resolution plan.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the CoC's decision to reject the appellant's Resolution Plan and order liquidation

Relevant legal framework and precedents: Section 33(2) of the IBC empowers the CoC to decide on liquidation of the Corporate Debtor if the resolution plans are not approved. The decision requires at least 66% voting share. Judicial review of CoC decisions is limited to checking arbitrariness or non-application of mind.

Court's interpretation and reasoning: The Tribunal noted that the CoC convened multiple meetings (17th and 19th) where the appellant's plan, including the addendum dated 08.12.2023, was discussed and put to vote. The total admitted claims were Rs. 137.60 Crore and liquidation value Rs. 105.35 Crore. After due deliberation, the CoC rejected the appellant's plan and voted for liquidation on 12.12.2023.

Key evidence and findings: The CoC's commercial wisdom was exercised after considering the financial proposals and addendums. The Adjudicating Authority recorded these deliberations and the voting outcome. There was no indication of arbitrariness or procedural irregularity.

Application of law to facts: The Tribunal emphasized that the CoC's decision to liquidate is amenable only to limited judicial review and found no error or arbitrariness in the CoC's resolution.

Treatment of competing arguments: The appellant contended that the plan was improved and addendums submitted, but the CoC rejected it. The liquidator and CBI argued that the CoC's decision was based on commercial wisdom and was rightly accepted by the Adjudicating Authority.

Conclusions: The Tribunal upheld the CoC's decision to liquidate, finding it neither arbitrary nor illegal.

Issue 2: Whether the Adjudicating Authority erred in not considering the appellant's addendums submitted after the liquidation decision

Relevant legal framework and precedents: The Insolvency and Bankruptcy Code and Regulations require that resolution plans and any addendums be considered by the Adjudicating Authority. However, once liquidation is ordered, the scope for reconsideration is limited.

Court's interpretation and reasoning: The Adjudicating Authority had directed consideration of the addendums. However, the Central Bank of India filed an application opposing acceptance of the addendum submitted in February 2024, which was allowed and became final.

Key evidence and findings: The appellant submitted addendums on 08.12.2023 and 16.02.2024. The CoC considered the first addendum but rejected the plan. The second addendum was not considered due to the Central Bank's successful application.

Application of law to facts: The Tribunal found no error in the Adjudicating Authority's refusal to consider the second addendum after the liquidation order and the final order on the Central Bank's application.

Treatment of competing arguments: The appellant argued for consideration of all addendums to revive the CD. The liquidator and CBI maintained that the process had concluded with the liquidation decision and rejection of the plan.

Conclusions: The Tribunal held that the Adjudicating Authority acted within its discretion and in accordance with law in not considering the second addendum post-liquidation order.

Issue 3: Entitlement of the appellant, as an MSME, to submit a scheme of compromise or arrangement under Regulation 2B of the Liquidation Process Regulations, 2016

Relevant legal framework and precedents: Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, permits submission of a compromise or arrangement under Section 230 of the Companies Act, 2013, within 90 days of the liquidation order. The regulation includes provisos restricting eligibility and requiring recommendation by the CoC under Regulation 39-BA of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Court's interpretation and reasoning: The liquidator relied on the second proviso to Regulation 2B, which requires a CoC recommendation under Regulation 39-BA for the liquidator to file a compromise proposal within 30 days of liquidation commencement. The Tribunal observed that no such recommendation was made in this case.

However, the Tribunal held that the second proviso cannot override the primary provision in Regulation 2B(1), which allows submission of a scheme of compromise or arrangement under Section 230 of the Companies Act. Therefore, the appellant, as an MSME, remains entitled to submit such a scheme.

Key evidence and findings: The appellant's status as MSME and the absence of CoC recommendation under Regulation 39-BA were noted. The Tribunal found that the appellant should be given an opportunity to submit a scheme by 20.05.2025.

Application of law to facts: The Tribunal balanced the regulatory provisions and held that the appellant's right to submit a compromise or arrangement should be preserved despite the liquidation order and absence of CoC recommendation.

Treatment of competing arguments: The appellant urged entitlement under Regulation 2B. The liquidator contended the second proviso barred such submission without CoC recommendation. The Tribunal reconciled these views by distinguishing the proviso's scope.

Conclusions: The appellant is entitled to submit a scheme of compromise or arrangement under Regulation 2B within the stipulated timeframe, and the liquidator must act accordingly upon receipt.

Issue 4: Scope of judicial review over CoC's commercial wisdom

Relevant legal framework and precedents: The IBC and judicial precedents establish that CoC decisions on resolution plans and liquidation are primarily commercial decisions, subject only to limited judicial review for arbitrariness or non-application of mind.

Court's interpretation and reasoning: The Tribunal reiterated that the CoC's decision to liquidate was the exercise of commercial wisdom after due consideration of all aspects. No arbitrariness or procedural infirmity was found.

Key evidence and findings: The CoC meetings, voting records, and deliberations were duly recorded and reviewed.

Application of law to facts: The Tribunal applied the principle that courts should not interfere with CoC decisions unless there is manifest arbitrariness or illegality.

Treatment of competing arguments: The appellant challenged the CoC's rejection of the plan, but the Tribunal found no basis to disturb the CoC's decision.

Conclusions: The limited scope of judicial review was affirmed, and the CoC's decision was upheld.

3. SIGNIFICANT HOLDINGS

"The CoC under Section 33(2) of IBC has a power to take a decision with not less than 66% of the voting share to liquidate the CD. Of course the decision taken by the CoC to liquidate is amenable to judicial review but only on the limited ground that the decision of the CoC is arbitrary."

"Present is not a case where it can be said that the decision of the CoC to liquidate is arbitrary, the CoC after considering all aspects of the matter has passed a resolution for liquidation of the CD in which we do not find any error warranting any interference."

"We however are of the view that second proviso of Regulation cannot control the provision of Section 2B (1) which is a provision giving a opportunity for submitting a compromise or arrangement under Section 230 of the Companies Act, 2013."

"We thus are of the view that the appellant is fully entitled to submit a scheme compromise or arrangement under Regulation 2 B."

"The liquidator shall after receiving any compromise or arrangements take such further steps as required by law."

The Tribunal dismissed the appeals challenging the liquidation order but granted liberty to the appellant to submit a compromise or arrangement scheme under Regulation 2B by 20.05.2025.

Issues: Whether the petitioner was entitled to the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for the textile cess demand, notwithstanding that the appeal before the Textiles Committee Appellate Tribunal was not an appeal before the appellate forum defined in the Scheme.

Analysis: The Scheme applied to the Textiles Committee Act, 1963 by virtue of Section 122(b)(x) of the Finance (No. 2) Act, 2019. Although the petitioner's pending appeal could not be treated as an appeal before the "appellate forum" under Section 121(f), the demand arose from a show-cause notice issued long before 30 June 2019 and therefore the relevant "tax dues" fell within Section 123(b). The Court held that the Designated Committee had erred in rejecting the declaration merely because the matter was not pending before the appellate forum under Section 123(a), since the Scheme had to be applied in a manner consistent with its object of resolving old indirect tax disputes and granting relief under Section 124(1)(a).

Conclusion: The petitioner was entitled to the benefit of the Scheme, and the rejection of Form SVLDRS-1 was unsustainable.

Final Conclusion: The declaration was directed to be considered under Section 123(b) for quantification of tax dues and the consequential relief under Section 124(1)(a), with issuance of the discharge certificate upon payment in accordance with the Scheme.

Ratio Decidendi: Where an indirect tax enactment is covered by the Scheme and the liability arises from a pre-30 June 2019 show-cause notice, relief cannot be denied merely because the connected appeal does not fall within the Scheme's definition of appellate forum; the Scheme must be construed to advance its remedial object.

- Whether the Tribunal erred in rejecting the appellant's appeal by holding that the Commissioner (Appeals) upheld the demand for service tax for the normal period only, when in fact the show cause notice (SCN) was issued invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994.

- Whether the extended period of limitation under the proviso to Section 73(1) could be invoked for issuing the SCN dated 19.06.2014 for the period 01.04.2012 to 30.06.2012, given the limitation timeline.

- Whether the Order-in-Appeal dated 30.11.2018 is sustainable in law in light of the limitation period and the Tribunal's earlier order dated 25.05.2017 restricting demands to the normal period only.

- Whether there is any apparent error on the face of the record in the impugned order dated 26.07.2024 passed by the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the Tribunal erred in holding that the Commissioner (Appeals) upheld the demand for the normal period only, ignoring the invocation of extended period in the SCN.

The appellant contended that the Tribunal failed to consider that the Commissioner (Appeals) upheld the demand under the extended period of limitation and not the normal period. The appellant relied on the Tribunal's earlier order dated 25.05.2017, which held that the extended period under the proviso to Section 73(1) could not be invoked for the appellant's case, thereby restricting demands to the normal period only.

The appellant demonstrated that the SCN was issued on 19.06.2014, which was beyond the 18-month normal limitation period ending on 25.04.2014 (18 months from the last date of filing return on 25.10.2012). Therefore, the demand raised for the period 01.04.2012 to 30.06.2012 was time barred if the extended period could not be invoked.

The appellant's counsel emphasized that the power to issue SCN is conferred by Section 73(1) of the Finance Act, 1994, which allows issuance within eighteen months from the relevant date, except where the extended period under the proviso applies.

The Tribunal noted that the SCN explicitly invoked the extended period under the proviso to Section 73(1), as reflected in the SCN's paragraph 8(i), demanding service tax for the period 01.04.2012 to 31.03.2013 under the extended period.

Thus, the Tribunal recognized that the SCN was issued invoking the extended period, contrary to the appellant's submission that the Commissioner (Appeals) upheld the demand only for the normal period.

Issue 2: Whether the extended period of limitation under the proviso to Section 73(1) could be invoked for issuing the SCN dated 19.06.2014 for the period 01.04.2012 to 30.06.2012.

Section 73(1) of the Finance Act, 1994, provides that the Central Excise Officer may issue a notice within eighteen months from the relevant date for recovery of service tax not levied or paid. The proviso extends this period to five years where the tax was not paid due to fraud, collusion, willful misstatement, suppression of facts, or contravention with intent to evade tax.

The relevant date in this case was the last date for filing the return for the disputed period, i.e., 25.10.2012. Therefore, the normal limitation period expired on 25.04.2014. The SCN was issued on 19.06.2014, beyond this date.

The Department argued that the SCN was rightly issued invoking the extended period due to suppression of facts by the appellant, as recorded in the SCN.

The Tribunal examined the SCN and found that it explicitly invoked the extended period under the proviso to Section 73(1), alleging suppression of facts and demanding service tax accordingly.

Thus, the issuance of the SCN beyond the normal period was legally permissible if the conditions for invoking the extended period were satisfied.

Issue 3: Whether the Order-in-Appeal dated 30.11.2018 is sustainable in law in light of limitation and the Tribunal's earlier order dated 25.05.2017.

The appellant relied on the Tribunal's earlier order dated 25.05.2017, which held that the extended period could not be invoked for the appellant's case and restricted the demand to the normal period only.

The appellant argued that the Order-in-Appeal, which upheld the demand, was unsustainable because it ignored this binding precedent and allowed demand under the extended period.

However, the Tribunal in the impugned order dated 26.07.2024 rejected the appeal, holding that the Commissioner (Appeals) had upheld the demand for the normal period only, which the appellant disputed.

On examination, the Tribunal found no error apparent on the record in the impugned order and noted that the demand was upheld for the normal period following the Supreme Court decision (though the specific Supreme Court decision is not detailed in the text).

Therefore, the Tribunal concluded that the Order-in-Appeal was sustainable and that the extended period invocation was justified.

Issue 4: Whether there is any apparent error on the face of the record in the impugned order dated 26.07.2024 passed by the Tribunal.

The appellant claimed an error apparent on the face of the record because the impugned order failed to consider that the SCN was issued beyond the normal period and was time barred.

The Tribunal analyzed the SCN, the limitation provisions, and the submissions of both parties.

It found that the SCN was issued invoking the extended period under the proviso to Section 73(1) due to suppression of facts, which legally extended the limitation period to five years.

Therefore, the Tribunal held that there was no error apparent on the record in the impugned order and dismissed the application for rectification.

3. SIGNIFICANT HOLDINGS

"Therefore M/s Krishi Upaj Mandi Samiti, Sawai Madhopur (Raj.) were called to show cause as to why:-

(i) Service Tax amounting Rs.5,74,245/- during the period from 01.04.2012 to 31.03.2013 under the category of "Renting of Immovable Property Service' should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994;

(ii) Interest at the appropriate rate should not be recovered from them under Section 75 of the Act ibid on the Service Tax & Education Cess not paid which will be computed till the actual payment of Service Tax:

(iii) Penalty should not be imposed upon them under the provisions of Section, 76, 77 and 78 of the Finance Act, 1994 for contravention of provisions of Section 66, 67, 68 and 70 of the Finance Act, 1994 and Rule 4,5,6 & 7 of the Service Tax Rules, 1994."

Core principles established include:

• The extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 can be invoked where there is suppression of facts or other specified conditions, extending the limitation period from 18 months to 5 years.
• The relevant date for limitation calculation is the last date of filing the return for the disputed period.
• The Tribunal will not interfere with the invocation of the extended period if the SCN explicitly records the grounds for such invocation and the conditions are met.
• An application for rectification under Section 86(6A) requires the presence of an apparent error on the face of the record, which was not found in this case.

Final determinations:

• The Tribunal dismissed the application for rectification, holding there was no error apparent on the record.
• The extended period of limitation was rightly invoked for issuance of the SCN dated 19.06.2014 for the period 01.04.2012 to 30.06.2012.
• The demand for service tax was sustainable and upheld for the normal period following the Supreme Court decision.

The core legal questions considered by the Tribunal revolve around the interpretation and application of limitation periods in filing appeals before the Commissioner (Appeals) under the Finance Act, 1994. Specifically, the issues are:

• Whether the date of receipt of the order or the date of filing the appeal (dispatch date) is to be reckoned for computing limitation.
• Whether either the date of receipt or the date of filing the appeal should be excluded while calculating the limitation period.
• The applicability of the General Clauses Act in determining delay and limitation.
• The relevance and interpretation of the term "presented" in the context of filing appeals by post.
• The extent to which limitation can be extended or condoned by the Commissioner (Appeals).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Computation of Limitation - Date of Receipt vs. Date of Filing (Dispatch)

Relevant legal framework and precedents: The limitation period for filing appeals under the Finance Act, 1994 is governed by Section 85. The General Clauses Act provides interpretative guidance on reckoning time periods. Several precedents were cited by both parties, including decisions from various High Courts and Tribunals, notably the Hon'ble Bombay High Court's ruling in a writ petition addressing the meaning of "presented" in the context of appeal filing.

Court's interpretation and reasoning: The Tribunal noted that the expression "presented" used in the relevant provision is critical. The Hon'ble Bombay High Court had held that when the statute uses "presented" rather than "received," the date of dispatch (filing by post) is the relevant date for limitation purposes. This interpretation favors the appellant's position that the appeal is deemed to have been filed on the date it was sent, not the date it was received by the authority.

Key evidence and findings: The appellant relied on several case laws emphasizing the dispatch date as the relevant date, including Vanivilas Co-operative Sugar Factory Ltd., Hyundai Motor India Ltd., and others. The respondent relied on more recent decisions concerning refund claims and limitation which focused on the date of filing but were distinguished by the Tribunal as not applicable to the present issue.

Application of law to facts: Since the appeal was filed by post within the prescribed limitation period, considering the date of dispatch as the date of filing, the appeal was not time-barred. The Tribunal found that excluding either the date of receipt or the date of filing would affect the limitation calculation, but the correct approach, consistent with the Hon'ble Bombay High Court's decision, is to consider the dispatch date.

Treatment of competing arguments: The Tribunal rejected the respondent's reliance on cases related to refund claims and limitation that emphasized the date of receipt, noting that those cases were not relevant to the appeal filing context under Section 85. The appellant's reliance on the interpretation of "presented" was accepted as authoritative and applicable.

Conclusions: The limitation period for filing the appeal commenced from the date of dispatch of the appeal by post, not the date of receipt by the Commissioner (Appeals). Therefore, the appeal was filed within time and no delay could be attributed.

Issue 2: Condonation and Extension of Limitation Period

Relevant legal framework and precedents: The power of the Commissioner (Appeals) to condone delay in filing appeals is circumscribed by the limitation provisions under the Finance Act, 1994 and interpreted in various judicial pronouncements.

Court's interpretation and reasoning: The Tribunal referred to the Hon'ble Bombay High Court decision which held that the Commissioner (Appeals) has no jurisdiction to condone delay beyond the extended limitation period of one month. However, since the appeal was dispatched within the extended period, the question of condonation did not arise.

Key evidence and findings: The appellant's appeal was dispatched within the extended limitation period, and the Tribunal found that the Commissioner (Appeals) erred in rejecting the appeal as time barred on the ground of limitation.

Application of law to facts: Since the appeal was timely dispatched, the appeal should not have been rejected on limitation grounds, and the Commissioner (Appeals) should have considered the merits of the appeal rather than limitation.

Treatment of competing arguments: The respondent argued for strict adherence to limitation rules and the non-extendability of limitation beyond prescribed periods. The Tribunal acknowledged this but emphasized that since the appeal was filed within time (dispatch date), the limitation objection was misplaced.

Conclusions: The appeal was not barred by limitation, and the Commissioner (Appeals) should consider the appeal on merits. The Tribunal remanded the matter back for fresh consideration.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"Thus upon thorough consideration of the matter, we hold that dispatch of the appeal by the petitioner on 02.12.2019 was within the extended period of limitation of one month and, therefore, without considering the prayer for condonation of delay of the petitioner, respondent No.1 ought not to have rejected the appeal as being time barred by taking the ground that he had no jurisdiction to condone the delay beyond the extended limitation period of one month."

The Tribunal established the core principle that for appeals filed under the Finance Act, 1994, where the statute uses the term "presented," the date of dispatch of the appeal (such as by post) is the relevant date for limitation purposes, not the date of receipt by the authority.

It further clarified that limitation cannot be extended beyond the prescribed period, but if the appeal is dispatched within the limitation period, it should not be rejected on the ground of delay.

The final determination was to set aside the impugned order rejecting the appeal on limitation grounds and remit the matter back to the Commissioner (Appeals) for fresh consideration on merits.

Issues: Whether the High Court had jurisdiction under section 35G(1) of the Central Excise Act, 1944 to entertain an appeal arising from an order relating to the determination of a question having a relation to the rate of duty of excise or the value of goods for the purposes of assessment.

Analysis: Section 35G(1) permits an appeal to the High Court from orders of the Appellate Tribunal, but expressly excludes orders relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for assessment. The dispute before the Court was held to concern valuation, bringing it within the statutory exclusion from the High Court's appellate jurisdiction.

Conclusion: The High Court had no jurisdiction to entertain the appeal, and the challenge could not be examined on merits before that forum.

Issues: (i) Whether gym and fitness equipment such as weight lifting equipment, dumbbells, treadmill, rotators and fit-kit exercisers fall within Entry-60 of Schedule-IV to the A.P. Value Added Tax Act as sports goods. (ii) Whether the assessments based on denial of the concessional rate and classification of the goods as unspecified goods under Schedule-V could be sustained.

Issue (i): Whether gym and fitness equipment such as weight lifting equipment, dumbbells, treadmill, rotators and fit-kit exercisers fall within Entry-60 of Schedule-IV to the A.P. Value Added Tax Act as sports goods.

Analysis: Entry-60 covers sports goods excluding apparels and footwear. The earlier reliance on HSN-based classification was held unavailable after the repeal of the Government Order that had adopted such classification. The goods were therefore required to be examined on their own description and use. Weight lifting equipment was found to be connected with the sport of weight lifting and to qualify as sports goods. The remaining items, though not linked to a single specific sport, were held to be used for maintaining physical fitness necessary for sports persons to participate in sports, and thus also answered the description of sports goods.

Conclusion: The goods in question were held to fall within Entry-60 of Schedule-IV as sports goods.

Issue (ii): Whether the assessments based on denial of the concessional rate and classification of the goods as unspecified goods under Schedule-V could be sustained.

Analysis: Once the goods were held to be sports goods under Entry-60, the basis on which the assessments treated them as ineligible for the concessional rate and as unspecified goods under Schedule-V could not survive. The assessments were therefore liable to be set aside and the matters required fresh consideration on the correct classification.

Conclusion: The assessment orders were set aside and the matters were remanded for fresh orders treating the goods as falling under Entry-60.

Final Conclusion: The writ petitions succeeded, the impugned assessments were annulled, and the assessing authority was directed to reassess the goods on the footing that they are sports goods under Entry-60 of Schedule-IV.

Issues: Whether the High Court, in exercise of inherent jurisdiction under Section 482 CrPC, could direct release of the sale proceeds of shares in favour of the respondent while investigation into the alleged fraud was still pending.

Analysis: The sale proceeds arose from a transaction under investigation for cheating and conspiracy. The charge-sheet indicated that the main accused was absconding and that the role of the respondent could be determined only after further investigation. In these circumstances, the High Court could not record a finding that the respondent had no role in the alleged fraud or direct release of the money as that would amount to a mini trial and would prejudice the ongoing investigation. The earlier courts had rightly refused release at that stage.

Conclusion: The High Court exceeded the permissible limits of Section 482 CrPC. The direction releasing the sale value of the shares was unsustainable and was set aside. The funds were ordered to remain with the BSE during the pendency of the trial.

Issues: Whether, in the circumstances of delayed performance and disputed dues concerning the allotted flat, the respondent was liable to pay the quantified balance amount claimed by the appellant and to complete execution of the agreement to sell and sale deed.

Analysis: The dispute concerned final quantification of monetary liability after the respondent had already taken possession and the appellant had earlier defaulted in providing complete documents and had wrongly alienated the original flat despite the subsisting restraint. The Court balanced the equities between the parties, took note of the respondent's admitted liability for certain charges, the taxes on consideration, the prolonged withholding of possession, and the appellant's upkeep and carrying costs during the intervening period. In these peculiar facts, the Court fixed a consolidated amount to bring finality to the controversy and directed completion of the conveyancing formalities after payment.

Conclusion: The respondent was held liable to pay the quantified sum fixed by the Court, and the parties were directed to execute the agreement to sell and sale deed after such payment.

Issues: Whether a witness could be recalled under Order 18 Rule 17 of the Code of Civil Procedure, 1908 at the instance of a party for further examination, cross-examination or re-examination, and whether such relief could nevertheless be considered under the Court's inherent powers under Section 151 of the Code of Civil Procedure, 1908.

Analysis: Order 18 Rule 17 is a limited procedural power meant for the Court to recall a witness for clarification, removal of ambiguities, or to enable the Court to put questions for proper adjudication. It is not a provision intended to permit a party to reopen evidence, fill up lacunae, or secure a fresh opportunity for examination, cross-examination, or re-examination as a matter of course. The power is to be exercised sparingly and in exceptional cases. If circumstances justify it, a party may seek recall of a witness under the Court's inherent jurisdiction, but even then the request must be bona fide, necessary for clarification, and not a delaying or protracting tactic.

Conclusion: The request to recall the witness did not merit interference under Order 18 Rule 17, and no ground for relief was made out.

Final Conclusion: The challenge to the impugned orders failed, and the proceedings were brought to an end by dismissal.

Ratio Decidendi: Order 18 Rule 17 of the Code of Civil Procedure, 1908 is a narrow clarificatory provision for the Court's use and cannot be employed by a party as a routine means to reopen evidence or fill gaps in its case; any exceptional recall must rest on bona fide necessity and the Court's discretion, including under its inherent powers.

Issues: (i) Whether the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881 stood unrebutted so as to sustain conviction under Section 138 of the Negotiable Instruments Act, 1881; (ii) Whether the High Court was justified in upsetting the concurrent findings of the trial court and appellate court by reappreciating the evidence and acquitting the accused.

Issue (i): Whether the presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881 stood unrebutted so as to sustain conviction under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The cheque bore the admitted signatures of the accused, the cheque was dishonoured for insufficiency of funds, and the statutory notice under Section 138 of the Negotiable Instruments Act, 1881 remained unanswered. The complainant's testimony that the cheque was issued towards repayment of a loan was not shaken in cross-examination. The defence that the cheque was a blank cheque or that the particulars were filled by someone else was raised belatedly and was not proved. In these circumstances, the statutory presumptions under Sections 118 and 139 operated in favour of the complainant and were not displaced by the accused.

Conclusion: The presumption remained unrebutted and the conviction under Section 138 of the Negotiable Instruments Act, 1881 was sustainable.

Issue (ii): Whether the High Court was justified in upsetting the concurrent findings of the trial court and appellate court by reappreciating the evidence and acquitting the accused.

Analysis: The evidence showed advancement of money through valid sources, including cheques, and the complainant explained the transaction consistently. The High Court's view that the case lacked corroboration and that the complainant's omission to prove money-lending business was decisive was held to be based on conjectures and surmises. The High Court had substituted its own factual findings for concurrent findings without a valid basis and ignored material evidence supporting the prosecution case.

Conclusion: The High Court's acquittal was unsustainable and the concurrent conviction recorded by the courts below was restored.

Final Conclusion: The complaint under Section 138 of the Negotiable Instruments Act, 1881 was held proved, the acquittal was set aside, and the conviction and sentence were restored.

Ratio Decidendi: Where the cheque is admitted, dishonour is proved, notice remains unanswered, and the accused fails to rebut the statutory presumptions, conviction under Section 138 of the Negotiable Instruments Act, 1881 must follow, and an appellate court cannot displace concurrent findings by conjectural reassessment of evidence.

Issues: (i) Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 was liable to fail because the business was described as a sole proprietorship and the firm was not separately summoned. (ii) Whether the pleas that the cheques were security cheques, that there was no legally enforceable debt, and that the underlying contract had been terminated warranted quashing of the summoning order at the threshold.

Issue (i): Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 was liable to fail because the business was described as a sole proprietorship and the firm was not separately summoned.

Analysis: The description of the concern showed that it was a sole proprietorship, not a partnership or company. A sole proprietorship does not have a separate juristic identity distinct from its proprietor in the manner contemplated for offences by companies and firms under Section 141 of the Negotiable Instruments Act, 1881. The complaint and summoning order therefore could not be faulted merely because the firm name was not separately arrayed as an accused.

Conclusion: The objection based on non-summoning of the firm failed and was against the applicant.

Issue (ii): Whether the pleas that the cheques were security cheques, that there was no legally enforceable debt, and that the underlying contract had been terminated warranted quashing of the summoning order at the threshold.

Analysis: The record disclosed issuance of cheques, dishonour, statutory notice, and complaint within the prescribed sequence, showing compliance with the requirements of Sections 138 and 142 of the Negotiable Instruments Act, 1881. The defence that the cheques were issued as security, or that they were not supported by an enforceable liability, raised matters of defence and trial. The effect of termination of the underlying contract, the actual adjustment of accounts, and the nature of the cheques could not be conclusively examined in proceedings under Section 482 of the Code of Criminal Procedure, 1973 at the summoning stage. The statutory presumption under Section 139 of the Negotiable Instruments Act, 1881 operated in favour of the cheque holder unless rebutted in trial.

Conclusion: The challenge to the summoning order on these grounds failed and was against the applicant.

Final Conclusion: The application seeking quashing of the complaint and summoning order was found to be untenable, and the criminal proceedings were allowed to continue.

Ratio Decidendi: In a complaint under Section 138 of the Negotiable Instruments Act, 1881, objections based on the cheque being a security cheque, absence of liability, or disputes arising from termination of the underlying contract are ordinarily matters for trial, and the inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 is not meant to be used to short-circuit such disputed factual defences at the summoning stage.

1. Whether the learned Magistrate erred in issuing a pre-cognizance notice and subsequently a non-bailable warrant of arrest in a complaint filed under Section 138 of the Negotiable Instruments Act, 1881 ("the Act"), contrary to the procedural requirements established under the Act and the Bharatiya Nagrik Suraksha Sanhita 2023 ("BNSS").

2. The scope and applicability of Section 142 of the Act, particularly the effect of its non-obstante clause on the procedure for taking cognizance of offences under Section 138.

3. Whether the procedural safeguards such as issuance of pre-cognizance notice and examination on oath of the complainant and witnesses under Section 223 BNSS apply to complaints under Section 138 of the Act.

4. The permissibility and procedural correctness of conducting summary trials under Section 143 of the Act and the extent to which trial procedure under BNSS applies.

5. The appropriateness of issuance of a non-bailable warrant as opposed to summons or bailable warrant in the context of complaints under Section 138 of the Act.

6. The broader legislative intent behind Chapter XVII of the Act concerning expeditious trial and resolution of cheque dishonour cases.

Issue-wise Detailed Analysis

1. Legality of Issuance of Pre-Cognizance Notice and Non-Bailable Warrant under Section 138 of the Act

The Court examined the procedural framework governing complaints under Section 138 of the Act, emphasizing Section 142 which begins with a non-obstante clause. This clause explicitly bars any court from taking cognizance of an offence under Section 138 except upon a written complaint by the payee or holder in due course, filed within one month of the cause of action arising. The Court noted that this provision excludes the possibility of cognizance based on police reports or FIRs, thus restricting initiation of proceedings to written complaints only.

However, the Court clarified that the non-obstante clause does not exclude the application of procedural safeguards under BNSS, specifically Section 223 which mandates issuance of a pre-cognizance notice and examination on oath of the complainant and witnesses. The Court held that these safeguards are not barred but are desirable and justice-oriented, ensuring the accused's legitimate defence is considered at the earliest stage.

In the instant case, the Magistrate issued a pre-cognizance notice and later a non-bailable warrant. The Court found that while issuance of the pre-cognizance notice was appropriate and within the procedural framework, issuance of a non-bailable warrant at the pre-cognizance stage was unwarranted. The Court reasoned that the pre-cognizance hearing itself was meant to afford the accused an opportunity to be heard, and the accused's failure to appear did not justify immediate issuance of a non-bailable warrant. Instead, summons or a bailable warrant would have been the correct procedural step, reserving non-bailable warrants as a last resort.

2. Interpretation and Application of Section 142 of the Negotiable Instruments Act

The Court reproduced Section 142 in extenso and analyzed its provisions. The non-obstante clause was interpreted as a legislative intent to streamline the initiation of proceedings under Section 138 by limiting cognizance to written complaints by the payee or holder in due course, filed within a prescribed time frame.

The Court emphasized that Section 142 also delineates the jurisdiction of courts competent to try such offences, restricting it to Judicial Magistrates of the first class or Metropolitan Magistrates. The Court further noted that the Act's provisions do not preclude the Magistrate from applying procedural safeguards under BNSS to ensure fairness.

Thus, the Court held that the Magistrate must satisfy himself that the conditions precedent to filing the complaint, including the limitation period and cause of action, are met before taking cognizance. This inquiry phase precedes formal cognizance and may involve issuance of pre-cognizance notice and examination of witnesses.

3. Applicability of Procedural Safeguards under BNSS Section 223 to Complaints under Section 138

The Court observed that Section 223 BNSS, which mandates issuance of pre-cognizance notice and examination on oath, was not available under the corresponding provisions of the repealed Code of Criminal Procedure. The new procedural requirement was described as justice-oriented, allowing early appreciation of any legitimate defence of the accused.

The Court held that these procedural safeguards are not barred by the provisions of the Act and may be applied to complaints under Section 138. However, non-observance of these requirements would not render the proceedings invalid. They are desirable but not mandatory to the extent of vitiating the complaint.

4. Trial Procedure under Section 143 of the Act and Interaction with BNSS

Section 143 of the Act mandates summary trials for offences under Chapter XVII, applying provisions of Sections 262 to 265 of BNSS (corresponding to the repealed Code). The Court highlighted the provisos allowing the Magistrate to convert a summary trial into a regular trial if the sentence may exceed one year or for other reasons, after hearing parties and recalling witnesses.

The Court interpreted this to mean that a Magistrate has the discretion at the outset to proceed with trial as a summons case under BNSS rather than commence summary trial. The choice of procedure is within the court's powers, and the summons trial procedure is often more convenient and desired.

5. Appropriateness of Issuance of Non-Bailable Warrants

The Court stressed that the issuance of a non-bailable warrant should be a measure of last resort. After taking cognizance and issuance of summons, if the accused fails to appear, the Magistrate may issue a bailable warrant and only thereafter a non-bailable warrant if necessary.

In the present case, the Court found that the Magistrate erred in issuing a non-bailable warrant at the pre-cognizance stage, as the accused had the right to be heard at that stage. The Court set aside the non-bailable warrant and directed the accused to appear before the trial Magistrate for participation in the proceedings.

6. Legislative Intent and Expeditious Trial of Cheque Bounce Cases

The Court underscored the legislative purpose behind Chapter XVII of the Act, which is to facilitate smooth business transactions and curb fraudulent issuance of cheques. Dishonour of cheques causes significant loss and undermines commercial credibility.

The Court emphasized that offences under Section 138 are civil wrongs made compoundable to promote speedy resolution. The Act mandates expeditious trial and encourages the use of Alternate Dispute Resolution mechanisms such as Lok Adalats and Mediation, provided they do not cause undue delay.

Significant Holdings

"The non-obstante clause of Section 142 of the Negotiable Instruments Act bars taking cognizance of an offence under Section 138 except upon a written complaint by the payee or holder in due course, thereby excluding police reports or FIRs as a basis for cognizance."

"The procedural safeguards under Section 223 BNSS, including issuance of pre-cognizance notice and examination on oath of complainant and witnesses, are not barred by the Negotiable Instruments Act and are desirable to ensure early appreciation of the accused's legitimate defence."

"Issuance of a non-bailable warrant at the pre-cognizance stage in a complaint under Section 138 of the Act is unwarranted; summons or bailable warrant should precede such extreme measures."

"A Magistrate has the discretion to choose to proceed with trial under the summons case procedure rather than commence a summary trial under Section 143 of the Act, provided the reasons are recorded."

"The offence under Section 138 is a civil wrong made compoundable and requires expeditious trial to safeguard the interests of business transactions and prevent misuse of cheque instruments."

"Non-observance of procedural requirements under Section 223 BNSS shall not invalidate the complaint but their observance is encouraged as a justice-oriented measure."

In conclusion, the Court set aside the impugned order issuing the non-bailable warrant, directed the accused to appear for the next hearing, and reaffirmed the procedural framework for complaints under Section 138 of the Negotiable Instruments Act, emphasizing adherence to procedural safeguards and expeditious disposal of cheque bounce cases.

Issues: (i) Whether the cheque was vitiated by a material alteration in the name of the payee and, if so, whether such alteration affected enforceability of the instrument. (ii) Whether the accused could be convicted under Section 138 of the Negotiable Instruments Act on a theory of vicarious liability when the Society, whose liability was said to have been discharged, was not arraigned as an accused.

Issue (i): Whether the cheque was vitiated by a material alteration in the name of the payee and, if so, whether such alteration affected enforceability of the instrument.

Analysis: The cheque bore the name of the Society as the payee, while the words referring to the bank in the loan account were inserted in a different ink and handwriting. The alteration was not explained by the complainant witness. The governing principle applied was that a material alteration in a negotiable instrument, particularly one affecting the payee's name and legal effect, renders the instrument void unless the alteration is duly explained and shown to be authorised or made with consent.

Conclusion: The alteration was material and the cheque could not be treated as enforceable on the basis of the altered endorsement.

Issue (ii): Whether the accused could be convicted under Section 138 of the Negotiable Instruments Act on a theory of vicarious liability when the Society, whose liability was said to have been discharged, was not arraigned as an accused.

Analysis: The complaint pleaded an individual loan, but the evidence was advanced on the footing that the Society had borrowed the amount and that the accused, as its office-bearer, issued the cheque. The Society, though treated as the real debtor and a juristic person, was not made an accused. The controlling rule applied was that vicarious liability under the cheque dishonour law cannot be fastened on directors or office-bearers unless the principal offender, namely the company or equivalent juristic entity, is prosecuted as required by law.

Conclusion: The conviction could not be sustained because the Society was not impleaded, and the accused could not be held vicariously liable.

Final Conclusion: The concurrent findings of the courts below were set aside, and the accused was acquitted in revision, with consequential directions regarding refund of any deposited amount and compliance with the bond requirement.

Ratio Decidendi: In prosecutions for cheque dishonour based on a juristic entity's liability, vicarious liability of an office-bearer cannot be sustained unless the principal juristic person is arraigned as an accused, and a cheque bearing an unexplained material alteration in the payee's name is not enforceable.

Issues: Whether the petitioner was entitled to payment of the admitted contractual dues and whether the disputed claims could be pursued before the Micro and Small Enterprises Facilitation Council.

Analysis: The petitioner had executed the works under four agreements and the respondents, after reconciliation, accepted that a substantial amount remained payable. The State also informed the Court that a Micro and Small Enterprises Facilitation Council had been constituted in Tripura. In view of the admitted position, the Court directed payment of the undisputed amount within a fixed time. As the remaining claims were disputed, the petitioner was left at liberty to pursue them before the Facilitation Council under the statutory mechanism available to an MSME.

Conclusion: The petitioner was held entitled to payment of the admitted dues of about Rs.7.88 crores within 45 days, and the disputed claims were left open to be raised before the Facilitation Council.

Issues: (i) whether the bank could be directed under writ jurisdiction to reconsider or extend the time for a One Time Settlement; (ii) whether the bank could be directed to renew overdraft facilities; and (iii) whether notice issued for taking possession under the SARFAESI framework could be quashed on the ground that it prevented the borrower from pursuing statutory remedies.

Issue (i): whether the bank could be directed under writ jurisdiction to reconsider or extend the time for a One Time Settlement.

Analysis: The proposal for settlement had already been considered and the petitioners were permitted to clear the liability within the time fixed by the bank. The amount was not remitted within that period. In writ jurisdiction, the Court cannot compel the bank to extend the time fixed under a settlement arrangement or alter the terms of the settlement.

Conclusion: The relief was declined and the issue was decided against the petitioners.

Issue (ii): whether the bank could be directed to renew overdraft facilities.

Analysis: The record showed that the concerned overdraft facilities had already been renewed, leaving no subsisting cause for a further direction.

Conclusion: The relief was not granted and the issue was decided against the petitioners.

Issue (iii): whether notice issued for taking possession under the SARFAESI framework could be quashed on the ground that it prevented the borrower from pursuing statutory remedies.

Analysis: A notice for taking possession under the SARFAESI procedure does not, by itself, take away the borrower's right to approach the Debts Recovery Tribunal by way of a securitization application. The existence of that statutory remedy negatives the challenge based on alleged denial of access to remedies.

Conclusion: The notice was not quashed and the issue was decided against the petitioners.

Final Conclusion: The writ petition did not disclose any ground for interference, and the petitioners were left to work out any available statutory remedies in accordance with law.