TaxTMI Updates e-Newsletter
May 19,2021

Retrospective application of a statutory notification - prospective operation of amendment to a rule - date of commencement by publication in the Official Gazette - stay of proceedings pursuant to statutory notices - application of a coordinate Bench decision

Stay of proceedings pursuant to statutory notices - Interim stay of actions under the notice dated 04.02.2021. - HELD THAT: - The Court, after hearing the petitioner and noting the contentions regarding the retrospective effect of Notification No.54/2018, directed that proceedings pursuant to the notice dated 04.02.2021 (Annexure B) shall remain stayed until the next date of hearing. The order records the need to hear the respondents before adjudicating the broader contention on retrospectivity and therefore grants an interim protection limited in time pending further consideration and return of notice. [Paras 7]

Proceedings pursuant to the notice dated 04.02.2021 are stayed until the next date of hearing.

Retrospective application of a statutory notification - prospective operation of amendment to a rule - date of commencement by publication in the Official Gazette - application of a coordinate Bench decision - Requirement that respondents be put on notice to answer the challenge to the retrospective effect claimed to be given to Notification No.54/2018 and the coordinate Bench's treatment of its effective date. - HELD THAT: - The petition challenges the retrospective operation of Notification No.54/2018 and relies on the proposition that the notification itself states it comes into force on publication in the Official Gazette. The Court noted the coordinate Bench's earlier determination addressing the effective date of Notification No.54/2018 (holding it effective w.e.f. 23.10.2017) but observed that the petitioner's contentions merit reconsideration in view of the notification's wording and the Department's actions issuing notices premised on an earlier effective date. Consequently, the Court issued notice to the respondents to explain the position and returnable directions were fixed, without finally deciding the substantive question of retrospectivity. [Paras 3, 4, 5, 6, 7]

Notice issued to respondents to answer the challenge to the retrospective operation of Notification No.54/2018; matter listed for further hearing.

Final Conclusion: Interim relief granted: proceedings pursuant to the notice dated 04.02.2021 are stayed until the next date; respondents are directed to answer the petitioner's challenge to the retrospective application of Notification No.54/2018, and the matter is listed for further hearing.

Authority for Advance Rulings admissibility - pendency before Income-tax authority - proviso to section 245R(2) - bar for pending proceedings - dividend distribution tax (DDT) - characterization for treaty relief - computer aided scrutiny selection (CASS)

Authority for Advance Rulings admissibility - pendency before Income-tax authority - proviso to section 245R(2) - bar for pending proceedings - Whether the questions raised in the applicant's advance ruling application were pending before any Income-tax authority on the date of filing, thereby rendering the application inadmissible under the proviso to section 245R(2). - HELD THAT: - The Authority found that although notices under section 143(2) (CASS selection) and questionnaires under section 142(1) had been issued prior to filing, none of those communications specifically raised the issue whether dividend distribution tax (DDT) payable under section 115-O was in substance a tax on dividends or whether relief at the 10% treaty rate under the India-Japan DTAA applied. The return for assessment year 2016-17 showed DDT paid at the statutory rate and no refund claim; consequently selection for scrutiny by CASS could not reasonably be taken to indicate pendency of the specific question. Questions in the questionnaire related to dividend income and discrepancies in tax credit, outward remittances and refund/TDS ratios, which the Authority held were not connected with the applicant's claim concerning excess DDT or treaty entitlement. The applicant's separate application for refund under section 144A and its letter raising the refund claim were filed after the advance ruling application; pendency must be assessed as of the filing date. The Authority also relied on the principle in Hyosung Corporation v. AAR that a prior general notice under section 143(2) does not, by itself, create a bar if it does not embrace the question raised before the Authority. On these findings the Authority concluded there was no subsisting proceeding on the specific questions at the time of filing and therefore the proviso to section 245R(2) did not bar admission of the application. [Paras 4, 5, 6, 7]

The advance ruling application was admitted because the specific questions regarding DDT and treaty relief were not pending before the Income-tax authority on the date of filing.

Final Conclusion: The Authority admitted the application under section 245R(2) after holding that prior notices and questionnaires did not constitute pendency of the specific questions on DDT and treaty relief as of the filing date; hearing to be scheduled.

Pendency bar under proviso to section 245R(2) - notice under section 142(1) creating pendency - scrutiny selection (CASS) and notice under section 143(2) - verification of receipts vis-a-vis TDS and form 26AS - advance ruling application inadmissibility for pending issue

Pendency bar under proviso to section 245R(2) - notice under section 142(1) creating pendency - scrutiny selection (CASS) and notice under section 143(2) - verification of receipts vis-a-vis TDS and form 26AS - advance ruling application inadmissibility for pending issue - Whether the applications for advance ruling were inadmissible because the questions raised were already pending before the Income-tax authorities. - HELD THAT: - The Authority held that the proviso to section 245R(2) bars admission where the question is already pending before any Income-tax authority. Prior to filing (15-5-2018) the Assessing Officer had issued a scrutiny notice under section 143(2) and, crucially, a notice under section 142(1) with a questionnaire (requiring copies of agreements, section 195 orders, and invoice-wise details of technical services and visiting employees). The record showed mismatch between receipts in form 26AS and amounts declared in the return, with TDS credits claimed for payments reflected in form 26AS though corresponding receipts were not disclosed in the ITR. CASS selection reasons included verification of whether receipts were correctly offered for tax. The section 142(1) questionnaire specifically raised the very factual and legal matters (contracts/agreements, technical services rendered in India, and details of personnel visits) germane to the issues the applicant sought to bring before the Authority. On these facts the Authority found the questions in the applications to be the subject of pending enquiry before the Income-tax authorities and therefore attracted the bar in clause (i) of the proviso to section 245R(2). The Authority distinguished decisions where only a section 143(2) notice had been issued and relied on precedent holding that a prior section 142(1) notice raising the very questions constitutes pendency; accordingly the applications were not admitted. The Authority declined to consider the alternative objection of tax avoidance design since inadmissibility was established under the pendency bar. [Paras 11, 12, 13, 14, 15]

Applications rejected as inadmissible because the issues raised were already pending before the Income-tax authorities, attracting the proviso to section 245R(2).

Final Conclusion: The Authority refused to admit the advance ruling applications for assessment year 2015-16 on the ground that the questions raised were pending before the Income-tax authorities (notice under section 142(1) and scrutiny under CASS), and accordingly both applications were rejected under the proviso to section 245R(2).

Writ jurisdiction under Article 226 - Efficacious statutory remedy - Appeal under the Income Tax Act - Penalty under Section 271(1)(c) - Final assessment under Section 144 - Limitation technicality not to be raised - Principles of natural justice not adjudicated

Writ jurisdiction under Article 226 - Efficacious statutory remedy - Appeal under the Income Tax Act - Penalty under Section 271(1)(c) - Maintainability of a writ petition challenging a penalty order when an efficacious statutory appeal remedy is available under the Income Tax Act. - HELD THAT: - The Court declined to entertain the writ petition under Article 226 attacking the penalty order passed for A.Y. 2016-17 where an efficacious statutory remedy of appeal under the Income Tax Act exists. The assessment had been finally completed ex parte under Section 144 and penalty proceedings under Section 271(1)(c) were concluded; nevertheless the petitioner approached the High Court instead of pursuing the appellate remedy. Relying on the principle that writ jurisdiction should not be exercised when an alternative efficacious statutory remedy is available, the petition was dismissed without expressing any opinion on the merits of the penalty or on issues of natural justice raised by the petitioner. The Court granted liberty to the petitioner to file the statutory appeal and directed that the appellate authority should decide the appeal on merits and not raise a technical plea of limitation. [Paras 5]

Writ petition dismissed as not maintainable; petitioner relegated to file appeal under the Income Tax Act with direction that the appellate authority decide on merits and not raise limitation; no opinion expressed on merits or on natural justice.

Limitation technicality not to be raised - Direction to the appellate authority regarding treatment of limitation when the petitioner files the statutory appeal. - HELD THAT: - While declining to adjudicate the merits, the Court exercised its supervisory power to grant the petitioner a right to approach the appellate forum and forestalled a preliminary objection on limitation. The appellate authority was directed not to raise the technical issue of limitation and to decide the appeal on merits in accordance with law. This direction is procedural, intended to secure effective access to the statutory remedy. [Paras 5]

Liberty granted to file appeal; appellate authority directed not to raise limitation and to decide the appeal on merits.

Interim relief vacated - Status of interim relief pending before the Court. - HELD THAT: - The Court recorded that any interim relief granted earlier stands vacated upon dismissal of the writ petition. No costs were imposed. [Paras 6]

Interim relief, if any, vacated; no order as to costs.

Final Conclusion: Writ petition challenging the penalty order for A.Y. 2016-17 dismissed as not maintainable in view of an efficacious statutory remedy; petitioner granted liberty to file the statutory appeal, which the appellate authority is directed to decide on merits without raising limitation; no adjudication on merits or on natural justice.

Exemption under section 80P(2)(a)(i) - total exclusion for primary agricultural credit societies under section 80P(4) - income of a co-operative society carrying on banking business for members - binding precedent in Mavilayi Service Co-operative Bank Ltd.

Exemption under section 80P(2)(a)(i) - income of a co-operative society carrying on banking business for members - binding precedent in Mavilayi Service Co-operative Bank Ltd. - Claim of exemption under section 80P(2)(a)(i) in respect of income of a primary credit co-operative society for AY 2010-11. - HELD THAT: - The High Court recorded that the appellant is a primary credit society registered under the Kerala Co-operative Societies Act, 1969 and claimed exemption of its income from tax under section 80P(2)(a)(i) as income arising from banking business carried on for its members. Both parties accepted that the issues in the impugned orders are no longer res integra and are covered in favour of the assessee by the decision of the Supreme Court in Mavilayi Service Co-operative Bank Ltd. . On that stated concession and by applying the ratio of the apex court, the High Court set aside the assessment orders impugned in annexures A, B and C and allowed the appeal. [Paras 3, 4, 5]

The appellant's claim of exemption under section 80P(2)(a)(i) for AY 2010-11 is allowed by setting aside the impugned assessment orders, in conformity with the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. .

Final Conclusion: Appeal allowed; impugned assessment orders for AY 2010-11 set aside and the appellant's exemption claim under section 80P(2)(a)(i) accepted in accordance with the Supreme Court precedent.

Deduction under section 80IB(10) - sanctioned plan deviation - approval for Floor Area Ratio (FAR) - applicability of accounting standards to real estate projects - precedential effect of prior Division Bench decision

Deduction under section 80IB(10) - sanctioned plan deviation - approval for Floor Area Ratio (FAR) - precedential effect of prior Division Bench decision - Whether the assessee was entitled to claim deduction under section 80IB(10) for Assessment Year 2011-12 despite having constructed a built-up area in excess of the sanctioned plan and without further FAR approval. - HELD THAT: - The Court examined the substantial questions framed on admission and, on consideration of facts and submissions, held that the determinative question was already answered by the Division Bench in Brigade Enterprises Ltd. The earlier Division Bench decision addressed analogous contentions concerning accounting treatment and factual sufficiency to permit deductions and was found applicable to the present case. Having applied that precedent, the Court concluded that the Tribunal and the Commissioner of Income Tax (Appeals) were correctly satisfied to allow the assessee's claim under section 80IB(10) notwithstanding the asserted deviation from the sanctioned plan and absence of further FAR approval. The Court therefore answered the substantial questions against the Revenue and in favour of the assessee, relying on the binding effect of the co-ordinate bench's reasoning. [Paras 9, 10]

The substantial questions of law are answered against the Revenue and in favour of the assessee; the claim of deduction under section 80IB(10) is upheld for Assessment Year 2011-12.

Final Conclusion: Appeal dismissed; the order of the Commissioner of Income Tax (Appeals) and the Tribunal allowing the deduction under section 80IB(10) for Assessment Year 2011-12 is upheld following the precedent of the co-ordinate Division Bench.

Unexplained cash credit - addition to income under Section 69 - burden of proof for gifts - admission of additional evidence before the Tribunal - concurrent findings of fact - no substantial question of law

Unexplained cash credit - addition to income under Section 69 - burden of proof for gifts - concurrent findings of fact - Whether the sum of Rs. 16,00,000 shown as gifts from relatives could be treated as unexplained cash credit and added to the assessee's income. - HELD THAT: - The Assessing Officer added the amount as unexplained cash credit after finding that the assessee had failed to substantiate the claim of receipt of gifts despite opportunities. The CIT(A) sustained the addition noting absence of any explanation or documentary evidence, and the Tribunal affirmed, recording that no confirmation from donors or evidence had been filed before the AO or CIT(A). The High Court agreed with the concurrent factual findings of the two revenue authorities and the Tribunal that the assessee did not produce any evidence to support the gift claim; the matter was one of fact and the addition was sustained on that factual record.

Addition of the sum as unexplained cash credit under Section 69 upheld for want of substantiation of the claimed gifts.

Admission of additional evidence before the Tribunal - Whether the Tribunal should have admitted belatedly produced gift deeds as additional evidence. - HELD THAT: - The Tribunal refused to admit the gift deeds tendered before it because the assessee neither filed a petition seeking admission of additional evidence nor explained why such evidence could not have been produced before the Assessing Officer or the CIT(A). The High Court endorsed the Tribunal's approach that a party seeking to place additional evidence before the Tribunal must demonstrate why it was not produced earlier, and found no justification shown by the assessee for admitting the belated documents.

Refusal to admit the belatedly tendered gift deeds as additional evidence was justified and was affirmed.

Concurrent findings of fact - no substantial question of law - Whether any substantial question of law arises warranting interference with the Tribunal's order. - HELD THAT: - All three adjudicatory levels reached the same factual conclusion that the assessee failed to substantiate receipt of the claimed gifts. The High Court held that the dispute was factual, resting on the absence of evidence, and observed that the Tribunal correctly applied the principle governing admission of additional evidence. Consequently, no substantial question of law was shown to exist that would justify interference with the concurrent factual findings.

No substantial question of law arises; concurrent factual findings are not interfered with.

Final Conclusion: The appeal is dismissed; the addition treating the claimed gifts as unexplained cash credit under Section 69 is sustained, the Tribunal's refusal to admit belated gift deeds is affirmed, and no substantial question of law is found to exist.

Revenue expenditure versus capital expenditure - expenditure wholly and exclusively for business purposes - enduring benefit test - non compete fee / strategic alliance payment - no acquisition of capital asset or source of income

Revenue expenditure versus capital expenditure - expenditure wholly and exclusively for business purposes - non compete fee / strategic alliance payment - no acquisition of capital asset or source of income - enduring benefit test - Whether the payments made to Lakme Ltd. and Lakme Exports Ltd. under the strategic alliance agreement are revenue expenditure deductible under section 37(1) of the Income tax Act or are capital in nature. - HELD THAT: - The Tribunal applied established principles from Empire Jute and Kettlewell Bullen to determine whether the advantage obtained from the arrangement lay in the capital or revenue field. It rejected a mechanical application of the enduring benefit test, holding that an advantage which merely facilitates trading operations or enables the business to be conducted more efficiently may still be revenue in nature. On the facts, Lakme Ltd. and Lakme Exports Ltd. did not give up the basic right to manufacture the products nor did they relinquish their source of income, and the assessee did not acquire any capital asset or exclusive right. The assessee placed year wise material showing reduction in advertisement and promotion expenses as a percentage of sales and increase in personal products sales for the HLL group after the alliance; the Tribunal accepted that these materials demonstrated that the arrangement operated to reduce marketing costs and improve sales and profitability. Applying the legal tests to these factual findings, the Tribunal concluded that the payment facilitated the assessee's trading operations and yielded advantages in the revenue field rather than creating or acquiring a capital asset or enduring proprietary source of income. Consequently, the payment is allowable as revenue expenditure under section 37(1). [Paras 4, 14]

The payments to Lakme Ltd. and Lakme Exports Ltd. are revenue expenditures deductible under section 37(1) of the Act and not capital expenditure.

Final Conclusion: The assessee's appeal is allowed: the strategic alliance payments are held to be revenue in nature and deductible under section 37(1) rather than being capital expenditure.

Validity of assessment under Section 153C - Recording of satisfaction note - Common Assessing Officer - Requirement of twin satisfaction notes - CBDT Circular No. 24/2015 - Quashing of proceedings under Section 153C

Validity of assessment under Section 153C - Recording of satisfaction note - Common Assessing Officer - Requirement of twin satisfaction notes - CBDT Circular No. 24/2015 - Whether Section 153C proceedings are vitiated where the same Assessing Officer conducts search and assesses the third party but records a single satisfaction note, and whether separate/twin satisfaction notes are mandatory in such circumstance. - HELD THAT: - The Tribunal examined the competing contentions and applied the law as settled by the Supreme Court in M/s. Super Malls Pvt. Ltd. v. PCIT (Civil Appeals Nos. 2006-2007 of 2020) and the CBDT Circular No. 24/2015. The Court held that where the Assessing Officer of the searched person and the other person (third party) is the same officer, a single satisfaction note is permissible provided the Assessing Officer consciously records satisfaction that the documents seized from the searched person belong to the other person. Mechanical or carbon-copy notings that do not reflect an independent application of mind may be inadequate, but the statutory requirement does not mandate two separate satisfaction notes from distinct officers when the officer is common to both roles. Applying this principle to the facts before it, the Tribunal found the law on the point settled against the assessee and in favour of the Revenue, and therefore reversed the CIT(A)'s order which had quashed assessments solely on the ground that twin satisfaction notes were not recorded. [Paras 5, 6]

The CIT(A)'s order quashing the assessments under Section 153C on the ground of absence of twin satisfaction notes is reversed; Section 153C proceedings are sustainable where the same AO records a single satisfaction note that demonstrates conscious satisfaction that seized documents belong to the third party.

Remand for fresh adjudication on merits - Direction to the CIT(A) to decide the assessee's remaining grounds on merits afresh. - HELD THAT: - As the Tribunal set aside the CIT(A)'s quashing of the proceedings on the sole legal ground relating to satisfaction notes, it observed that the CIT(A) had not adjudicated the assessee's other grounds on merits. The Tribunal therefore directed the CIT(A) to decide those merits afresh, granting the assessee three effective opportunities of hearing and requiring the assessee or its authorised representative to appear by the specified date with relevant details and evidence. [Paras 5]

The matter is remitted to the CIT(A) to decide the assessee's remaining grounds on merits afresh within three effective hearings; the assessee to appear as directed.

Final Conclusion: Revenue's appeals are allowed insofar as the CIT(A)'s quashing of assessments under Section 153C for want of twin satisfaction notes is reversed; the matters are remitted to the CIT(A) for fresh adjudication on the assessee's remaining grounds with three effective opportunities of hearing.

Allowability of depreciation - commencement of business - ready to use - beneficial ownership for depreciation - site development not eligible for depreciation - income from deposits prior to commencement treated as income from other sources - capitalisation of pre-commencement expenses

Allowability of depreciation - commencement of business - ready to use - beneficial ownership for depreciation - site development not eligible for depreciation - Whether depreciation on the golf-course related assets was allowable to the assessee for AYs.2007-08 and 2008-09 - HELD THAT: - The claim for depreciation was disallowed on multiple grounds and the appellate tribunal confirmed that disallowance. The record and the Assignment Deed show that leasehold rights over the entire 235 acres were assigned to M/s. Emaar MGF Land Pvt. Ltd., which thereby acquired the rights and became the beneficial owner entitled to the revenues; the assessee did not hold leasehold rights nor control over the assets assigned (findings recorded at 7.1 and 7.5). The Assignment Deed's clauses and annexure indicate absence of any admitted constructed area or statutory permissions as of the assignment date, undermining the assessee's contention that substantial development had been completed before March 2007 (7.1, 7.6). The nature of the expenditures claimed related to site preparation and development, which the tribunal noted do not fall within the depreciation schedule under the I.T. Rules (7.4). Reliance on authorities permitting depreciation to a beneficial owner was considered inapplicable because factual material showed M/s. Emaar MGF Land Pvt. Ltd. was the beneficial owner and no evidence was furnished that the assessee had put the assets to use for business (7.5, 7.6, 7.7). The tribunal further observed that precedents require actual use in business (not merely preparation) before depreciation is allowable (7.7). Applying judicial consistency with an earlier tribunal order upholding the revenue view and in absence of contrary evidence, the tribunal confirmed the disallowance of depreciation for both assessment years (tribunal reasoning and conclusion at para 5 and summary at 7.9). [Paras 5, 7]

Depreciation disallowed and the disallowance confirmed for AYs.2007-08 and 2008-09.

Income from deposits prior to commencement treated as income from other sources - capitalisation of pre-commencement expenses - Whether interest income on deposits prior to commencement should be taxed as income from other sources and whether pre-commencement expenses could be deducted against such income - HELD THAT: - The authorities treated interest on deposits received prior to commencement of business as income from other sources and applied the principle that pre-commencement expenses cannot be allowed as deductions against such income but must be capitalised. The tribunal noted that the assessee itself had credited interest to the profit and loss account and that relevant Supreme Court authority had been applied by the CIT to treat such income as income from other sources and to require capitalisation of pre-commencement expenses (7.8). The CIT(A) recorded the amounts of income from other sources for the two assessment years and held they were correctly brought to tax; the tribunal found no contrary material and affirmed the taxation treatment (7.9, and tribunal para 5 confirming the lower authorities). [Paras 5, 7]

Interest on deposits prior to commencement assessed as income from other sources and pre-commencement expenses not allowed as deductions against that income; treatment affirmed for AYs.2007-08 and 2008-09.

Final Conclusion: Both appeals are dismissed: the appellate tribunal confirmed the disallowance of depreciation claimed by the assessee for AYs.2007-08 and 2008-09 on factual and legal grounds (absence of use, beneficial ownership lying with the assignee, and site development not attracting depreciation) and affirmed the treatment of interest on deposits as income from other sources with pre-commencement expenses to be capitalised.

Onus under section 68 of the Act - proof of identity, genuineness and creditworthiness of shareholders - proof of source and "source of the source" - application of the test of human probability - making additions in the hands of the true beneficiaries versus the recipient company

Onus under section 68 of the Act - proof of source and "source of the source" - proof of identity, genuineness and creditworthiness of shareholders - Whether the assessee company discharged the burden cast upon it by the provisions of section 68 in respect of share capital and share premium received during the year. - HELD THAT: - The Tribunal examined the documentary material furnished by the assessee - PAN copies, share applications, share certificates, confirmations of receipt, bank statements, affidavits, ITR acknowledgements and source-of-source documents - and concluded that the assessee had established the identity, genuineness and the immediate source as well as the 'source of the source' of the funds received. The Assessing Officer relied on general observations about alleged entry operators, forfeiture in a subsequent year and similarities in modus operandi, but did not point to specific discrepancies in the documents produced by the assessee. The Tribunal held that general surmises and the test of human probability cannot prevail over concrete documentary evidence where the assessee has discharged the initial onus; if any underlying source remained doubtful, any adverse addition ought to be made in the hands of the person whose source (or source of source) is in doubt and not in the hands of the recipient company which has produced supporting evidence. Applying these principles, the Tribunal found the additions made in the hands of the assessee unsustainable.

Additions made in the hands of the assessee on account of share capital and share premium were deleted; the assessee discharged the burden under section 68.

Making additions in the hands of the true beneficiaries versus the recipient company - application of the test of human probability - Whether the first appellate authority was justified in confirming additions in respect of two share applicants when the material on record indicated that any infirmity in the source of funds ought to be addressed against those applicants. - HELD THAT: - The Tribunal noted that where a share applicant has shown a particular 'source of source' (for example, alleged long-term capital gains from sale of penny stock), and if the Assessing Officer considers that to be a sham, the proper course is to make an addition in the hands of that share applicant after inquiry and not to sustain an addition in the hands of the recipient company which has produced evidence of the transaction. The Tribunal found that the CIT(A) erred in confirming additions qua two share applicants (Shri Anand Gupta, HUF and Shri Sanchit Gupta) on the same set of facts as other share applicants whose additions were deleted, without adequate basis for distinguishing them. Consequently, the confirmations were held to be without basis and were set aside.

Confirmations of additions by the CIT(A) in respect of the two share applicants were annulled; such additions, if warranted, should have been made in the hands of the respective share applicants and not the assessee company.

Final Conclusion: The appeal of the assessee is allowed and the cross-appeal of the revenue is dismissed; additions made by the Assessing Officer in the hands of the assessee in respect of share capital and share premium are deleted and the CIT(A)'s confirmation of two specific additions is set aside.

Speculative transactions - set-off of speculative losses against speculative profits - seized documents as evidentiary basis for additions - dumb documents (rough notings) and requirement of corroboration - composite group disclosure and its effect once books of accounts are admitted - allowability of business expenses v. provision/verification of payment - section 94(1) and section 94(4) - disallowance of loss where interest deemed income of owner - recomputation of interest under sections 234A, 234B, 234C and 220 - admission of additional evidence (books of accounts) and consequences for prior estimates - remand to assessing officer for verification/quantification

Speculative transactions - set-off of speculative losses against speculative profits - Speculative nature of money market transactions and entitlement to set off speculative share trading loss against money market profits. - HELD THAT: - The Tribunal examined contract notes and ledger entries and found that the money market transactions did not involve physical delivery and were settled by payment of the difference. Applying the definition of speculative transactions under section 43(5), the Bench held that profit from the money market transactions is speculative. Consequently, the speculative loss from share trading is eligible to be set off against the speculative money market profit. The coordinate bench authority in Growmore Research & Assets Management Ltd. was followed. The AO was directed to assess net speculative income of Rs. 4,39,395/- (difference between profit and loss as recorded). [Paras 12, 13]

Set off of speculative loss of Rs. 76,76,455/- against money market profit of Rs. 81,15,850/- allowed; net income of Rs. 4,39,395/- to be assessed.

Seized documents as evidentiary basis for additions - dumb documents (rough notings) and requirement of corroboration - Validity of additions made on the basis of loose daily position sheets and seized notings purporting to show share positions - whether additions can be sustained absent corroboration/delivery proof. - HELD THAT: - The Tribunal found that the seized daily position sheets were rough, unsigned notings recovered from the broker's premises and lacked corroborative evidence such as contract notes with distinctive delivery numbers, payments or other material showing concluded transactions in the assessee's hands. The AO had presumed squaring up of positions on 31.03.1992 and computed large speculative profits; however, the Bench accepted the assessee's contention (and related coordinate bench authorities) that dumb rough sheets, without corroboration, cannot be the sole basis for determining income by presuming sales. The Tribunal noted lack of statements from broker employees or other corroborative material and concluded additions based on those sheets were unsustainable. [Paras 21]

Additions of Rs. 1,92,05,630/- and Rs. 97,29,79,373/- based on the seized papers/daily position sheets are deleted.

Composite group disclosure and its effect once books of accounts are admitted - admission of additional evidence (books of accounts) and consequences for prior estimates - Whether a proportionate addition based on a composite group disclosure survives after the assessee's books of accounts are admitted and the actual income assessed from records. - HELD THAT: - The Tribunal noted that the Rs.100 crore composite disclosure by Harshad Mehta was a provisional estimate made when complete books were not available. Since the Tribunal had admitted the assessee's books of accounts as additional evidence and the actual income had been assessed on accounting records and bank statements, a separate proportionate addition based on the earlier composite disclosure could not be sustained. Reliance was placed on a coordinate bench decision in a related group case where an identical addition was deleted. [Paras 26]

Addition of Rs. 33,60,000/- based on the composite disclosure is deleted.

Allowability of business expenses v. provision/verification of payment - remand to assessing officer for verification/quantification - Allowability of various disallowed expenses and need for verification of bonus and ex gratia payments. - HELD THAT: - The Tribunal examined the nature of the disputed items and held that audit fees, professional fees, staff welfare expenses and preliminary expenses are allowable to the extent claimed as they relate to services availed or identifiable business expenditure. Bonus and ex gratia payments depend on the date of payment; their allowability requires verification. Accordingly, the Tribunal directed the AO to allow the identified items and to verify payment dates for bonus and ex gratia; if paid before filing due date they should be allowed, otherwise allowable on payment basis in subsequent years. [Paras 32]

Disallowance partly deleted; AO to allow specified expenses and verify payment dates of bonus/ex gratia - matter restored to AO for verification.

Section 94(1) and section 94(4) - disallowance of loss where interest deemed income of owner - Applicability of section 94(4) to disallow short term capital loss on sale of tax free IRFC bonds. - HELD THAT: - Following a coordinate bench decision in a related group case, the Tribunal held that section 94(4) operates only where the conditions of section 94(1) have been applied to the counterparty (i.e., the interest is deemed to be the income of the original owner). The AO had not established that section 94(1) been applied in the hands of the counterparty from whom the bonds were purchased and to whom they were sold; further, the transaction was not a device to avoid tax on interest which was anyway exempt. Consequently, section 94(4) could not be invoked to disallow the claimed short term capital loss. [Paras 39]

Short term capital loss on sale of 9% IRFC bonds (claimed) allowed to be set off against business income from sale of shares; disallowance deleted.

Recomputation of interest under sections 234A, 234B, 234C and 220 - remand to assessing officer for verification/quantification - Levy of interest under sections 234A, 234B and 234C - quantum to be recomputed in light of tax deducted at source and coordinate bench precedents. - HELD THAT: - The Tribunal held interest under the stated sections is leviable but directed a recomputation of interest by the AO in accordance with a coordinate bench decision in related group cases. The AO is to recompute interest after considering tax deductible at source on the assessed income and afford the assessee a reasonable opportunity of being heard. The issue was therefore remitted for recomputation rather than being finally quantified by the Tribunal. [Paras 41, 42]

Interest under sections 234A, 234B and 234C is leviable; matter remanded to AO to recompute interest after taking into account TDS and to afford opportunity of hearing.

Remand to assessing officer for verification/quantification - explanation 5 to section 32 - allowance of depreciation where use and acquisition undisputed - Allowability of claimed depreciation of assets and scope of AO's examination. - HELD THAT: - The Tribunal found acquisition and business use of assets to be undisputed. In view of Explanation 5 to section 32 and the fact that AO had not examined the computation, the Tribunal allowed the claim subject to verification by the AO. The matter was restored to the AO for limited verification and allowance of depreciation as per the computation filed. [Paras 47]

Claim of depreciation of Rs. 4,72,678/- is allowed in principle and remitted to the AO for verification and consequential allowance.

Final Conclusion: The appeal is allowed for statistical purposes. Key outcomes: speculative character of the money market profits recognised and set off permitted (net income to be assessed); massive additions founded solely on crude seized daily position sheets deleted for lack of corroboration; group composite disclosure addition deleted where books/accounts now admitted; specified business expenses allowed and bonus/ex gratia remitted for verification; short term loss on IRFC bonds allowed (section 94(4) not attracted); interest under sections 234A/234B/234C to be recomputed by AO after accounting for TDS; depreciation claim remitted to AO for verification and allowance.

Mutual Agreement Procedure (MAP) - Implementation of MAP under rule 44G of the Income Tax Rules - Arm's Length Price (ALP) - Transfer pricing - Transactional Net Margin Method (TNMM) as most appropriate method - Operating profit/Operating cost as Profit Level Indicator (OP/OC as PLI) - Applicability of MAP outcome to non MAP international transactions - Section 37(1) - revenue expenditure v. capital expenditure - Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars vis a vis bona fide mistake

Mutual Agreement Procedure (MAP) - Implementation of MAP under rule 44G of the Income Tax Rules - Arm's Length Price (ALP) - Applicability of MAP outcome to non MAP international transactions - Effect of MAP resolution for AYs 2005-06 to 2007-08 on transfer pricing adjustments and on pending appeals; whether MAP margins apply to remaining non USA international transactions. - HELD THAT: - The Competent Authorities of India and USA reached a MAP resolution for AY 2005-06 to AY 2007-08 adopting TNMM with the Indian taxpayer as tested party and OP/OC as the PLI, determining margins of 15.49%, 15.34% and 15.76% respectively. The Tribunal noted that these MAP determinations covered the substantial portion (circa 93-96%) of the assessee's international transactions for the years in question. The Revenue did not dispute that the Transfer Pricing Officer had not drawn any distinction in applying ALP for the remaining international transactions. In these circumstances the Tribunal applied the MAP margins to the residual non USA international transactions and held that the MAP resolution must be implemented by giving effect under rule 44G; consequential appeals raising ALP adjustments thus became infructuous and were dismissed. The Tribunal directed that the Assessing Officer give effect to the MAP in accordance with the rule and applicable procedures. [Paras 2, 3]

MAP margins of 15.49%, 15.34% and 15.76% applied and implemented for AY 2005-06 to 2007-08; appeals on ALP adjustments dismissed as rendered infructuous and MAP to be given effect under rule 44G.

Section 37(1) - revenue expenditure v. capital expenditure - Whether the expenditure on improvements to leasehold premises is capital and thereby disallowable, or is revenue expenditure deductible under section 37(1). - HELD THAT: - The Tribunal examined the nature of the claimed expenditure for improvements to leasehold premises and relied on precedents treating such improvements as revenue in nature. Finding that the improvements constituted revenue expenditure and that Revenue's disallowance lacked merit, the Tribunal deleted the disallowance under section 37(1). [Paras 4]

Disallowance of the expenditure on leasehold improvements deleted; assessee's appeal partly allowed.

Penalty under section 271(1)(c) - concealment or furnishing inaccurate particulars vis a vis bona fide mistake - Whether penalty under section 271(1)(c) is sustainable where the error in reported figures arose from a mistake attributable to the Transfer Pricing Officer/TPO rather than concealment by the assessee. - HELD THAT: - The Tribunal noted the lower appellate record admitting that the incorrect figures in the assessee's Form 3CEB had been omitted on account of a mistake at the TPO's end. The revenue did not rebut this factual position. On that basis the Tribunal found no prima facie concealment or furnishing of inaccurate particulars by the assessee and concluded that the statutory requirement for imposing penalty under section 271(1)(c) was not satisfied. Accordingly, the penalty was directed to be deleted. [Paras 6]

Penalty imposed under section 271(1)(c) quashed and deleted; assessee's penalty appeal allowed.

Final Conclusion: The MAP resolution between India and the USA for AYs 2005-06 to 2007-08 is to be implemented under rule 44G with the determined TNMM margins applied (appeals on ALP adjustments dismissed as rendered infructuous); the disallowance under section 37(1) in respect of leasehold improvements is deleted; and the penalty under section 271(1)(c) is quashed as the error was attributable to the TPO and not concealment by the assessee.

Advertisement, Marketing and Promotion (AMP) expenditure as an international transaction - Bright line test for segregating non-routine AMP expenditure - Substance over form in transfer pricing - Requirement of an agreement, arrangement or understanding for an international transaction - Separate entity concept under Chapter X - Disallowance under section 14A where no exempt income is earned

Advertisement, Marketing and Promotion (AMP) expenditure as an international transaction - Bright line test for segregating non-routine AMP expenditure - Requirement of an agreement, arrangement or understanding for an international transaction - Separate entity concept under Chapter X - Deletion of transfer pricing adjustments (protective and substantive) made in respect of AMP expenditure - HELD THAT: - The Tribunal held that Chapter X adjustment presupposes the existence of an international transaction between associated enterprises with an ascertainable disclosed price, and the Revenue bears the onus of establishing an agreement, arrangement or understanding obliging the assessee to incur AMP expenditure for the associated enterprise. The Tribunal, following coordinate Bench decisions and the decisions of the Delhi High Court (including Bausch & Lomb, Maruti Suzuki, Whirlpool and the assessee's own earlier years), found no material to demonstrate such an arrangement in the year under consideration and that AMP spend could not be recharacterised into an international transaction merely because the foreign AE incidentally benefited. The Tribunal accordingly held that the bright line quantitative approach cannot, by itself, create an international transaction and that invoking Chapter X in the absence of requisite agreement/arrangement was incorrect. Applying those precedents, the Tribunal directed deletion of both the protective and substantive AMP additions. [Paras 22]

Additions made on account of AMP expenditure (protective and substantive) deleted.

Disallowance under section 14A where no exempt income is earned - Deletion of disallowance under section 14A of the Act - HELD THAT: - The Tribunal noted that the assessee had earned no exempt income in the year under consideration and, applying the ratio of the Special Bench in Cheminvest Ltd. as affirmed by the Delhi High Court (and consistent decisions of other High Courts), held that no disallowance under section 14A was warranted where there is no exempt income. On that basis the section 14A addition was directed to be deleted. [Paras 24]

Disallowance made under section 14A deleted.

Final Conclusion: Following binding precedents of the coordinate Bench and the Delhi High Court, the Tribunal allowed the appeal for AY 2014-15: the transfer pricing additions (protective and substantive) on AMP expenditure and the section 14A disallowance were deleted; consequences as to interest were to follow.

Bogus purchases - seized material as basis for assessment addition - binding effect of excise findings on Income Tax assessment - deduction under section 80HHC - AO's power to recompute / give effect after Tribunal order

Bogus purchases - seized material as basis for assessment addition - binding effect of excise findings on Income Tax assessment - Deletion of addition made by AO treating purchases as bogus - HELD THAT: - The AO disallowed purchases totaling the amount shown to have been made from three suppliers on the basis of an Excise Department order recovered during a search, treating those purchases as bogus. The Tribunal found that the AO had not conducted any independent investigation, had not rejected the assessee's books, had not compared gross profit ratios of other years, and had placed no adverse material on record other than the Excise order. The ld. CIT(A) obtained and considered the AO's remand report and held that the seized material related to calculation of excise rebate and that circulars/orders of the Excise Department are not binding on the Income Tax Department; moreover, lapse of time and payments by account payee cheques were relevant to the assessee's defence. On the facts and in the absence of independent corroborative material linking the seized excise files to fake purchases for Income Tax purposes, the Tribunal affirmed the ld. CIT(A)'s reasoned order deleting the addition. [Paras 9, 10]

The addition on account of alleged bogus purchases is deleted and Ground No.1 of the Revenue is dismissed.

Deduction under section 80HHC - seized material as basis for assessment addition - AO's power to recompute / give effect after Tribunal order - Validity of AO's restriction of deduction under section 80HHC after Tribunal's order and whether it was based on seized material - HELD THAT: - The issue of deduction under section 80HHC had been litigated earlier; on implementation of the Tribunal's direction the AO had allowed a larger deduction but subsequently reworked and restricted the deduction. The Bench directed the ld. CIT(A) to obtain a report from the AO on whether the recomputation was founded on seized material. The AO's report stated that the disallowance under section 80HHC had no relevance to seized material, whereas the bogus purchase addition did. The Tribunal applied the settled principle that no addition can be made in a completed assessment in the absence of incriminating material unearthed by search and, in view of the AO's own report and the ld. CIT(A)'s finding that the AO exceeded his jurisdiction in sitting over the Tribunal's finding, upheld the ld. CIT(A)'s deletion of the disallowance and dismissed Revenue's Ground No.2. [Paras 13, 14]

The AO's restriction of the deduction under section 80HHC is not sustained; the ld. CIT(A)'s order deleting the disallowance is upheld and Ground No.2 is dismissed.

Final Conclusion: The Revenue's appeal is dismissed in entirety; the Tribunal affirms the ld. CIT(A)'s deletion of the addition for alleged bogus purchases and the deletion of the restriction on deduction under section 80HHC for AY 2004 05.

Section 50C of the Income-tax Act - stamp duty valuation - finality of stamp duty authority order - effect of order of Rajasthan Tax Board setting aside Collector (Stamps) enhancement on income-tax valuation

Section 50C of the Income-tax Act - stamp duty valuation - finality of stamp duty authority order - Whether the Assessing Officer and Commissioner (Appeals) were justified in adopting the enhanced stamp-duty valuation for computing capital gains under Section 50C when that enhancement was set aside by the Rajasthan Tax Board and the stamp authorities subsequently gave effect to that order. - HELD THAT: - The Tribunal found on the material on record that the order of the Collector (Stamps) enhancing the value was set aside by the Rajasthan Tax Board by order dated 14.08.2012. Once the appellate authority (Rajasthan Tax Board) quashed the enhancement, the basis for using the enhanced valuation under Section 50C ceased to exist. The Tribunal rejected the lower authorities' approach that a fresh order by the Collector (Stamps) was necessary before the income-tax authorities could act, observing that where the Rajasthan Tax Board has set aside the enhancement and the stamp authorities have given effect to that order (including directing refund of stamp duty deposited on the enhanced value), there is no justification for continuing to apply the enhanced figure for Section 50C purposes. In view of the subsequent action (refund directed and reflected in bank records), the Tribunal directed the Assessing Officer to adopt the original value recorded in the registered sale deed for computation of capital gains under Section 50C and to recompute the capital gains accordingly. [Paras 14]

The enhanced stamp-duty valuation could not be applied; the Assessing Officer was directed to adopt the sale deed value for computing capital gains under Section 50C and recompute the assessment.

Final Conclusion: The assessee's appeal is allowed; the Assessing Officer is directed to compute long-term capital gains for assessment year 2009-10 by adopting the value of the property as per the registered sale deed and give effect to the Rajasthan Tax Board's order setting aside the enhanced stamp-duty valuation.

Liberty to avail statutory remedy of appeal - appeal to Commissioner (Appeals) - direction to decide appeal on merits within specified period - petition dismissed as withdrawn - status quo

Petition dismissed as withdrawn - liberty to avail statutory remedy of appeal - Writ petition challenging the order withdrawing permission for job work and rejecting export was dismissed as withdrawn while granting liberty to pursue the statutory appeal. - HELD THAT: - The Court permitted the petitioner to withdraw the writ petition filed against the order dated 6.1.2020 and granted liberty to avail the statutory remedy of appeal before the appropriate appellate authority. The Court noted the petitioner had bona fide pursued remedy before the High Court and, with no opposition from respondents to the limited prayer, concluded that indulgence should be granted. The dismissal is therefore on the basis of withdrawal coupled with express leave to prefer the statutory appeal. [Paras 5, 6]

Writ petition dismissed as withdrawn with liberty to file the statutory appeal.

Appeal to Commissioner (Appeals) - direction to decide appeal on merits within specified period - If the petitioner files the statutory appeal within three weeks, the appellate authority is directed to decide the appeal on merits after hearing the petitioner. - HELD THAT: - Addressing the petitioner's submission that a fresh appeal might be time-barred, the Court granted a limited direction that an appeal filed within three weeks shall be decided on merits and after affording an opportunity of hearing. This direction was issued to safeguard the petitioner's right to effective adjudication while leaving the statutory appellate forum intact to consider the matter on merits. [Paras 6]

If filed within three weeks, the appeal shall be heard and decided on merits after hearing the petitioner.

Status quo - finished goods seized - Continuation of interim direction maintaining status quo in respect of the finished goods seized during pendency of the writ petition was ordered for a further period of three weeks. - HELD THAT: - The petitioner informed the Court that finished goods (marble slabs) had been seized while the petition was pending and that an interim order dated 5.3.2020 had been passed to maintain status quo. The Court extended that interim relief, directing that the status quo be maintained for an additional period of three weeks to protect the petitioner's position during the short window permitted for filing the statutory appeal. [Paras 7]

Status quo in respect of the seized finished goods to be maintained for three weeks.

Final Conclusion: The writ petition challenging the order dated 6.1.2020 is dismissed as withdrawn with liberty to file the statutory appeal; any appeal lodged within three weeks must be heard and decided on merits after hearing the petitioner, and the interim direction maintaining status quo as to the seized finished goods is extended for three weeks.

Waiver of threshold requirement under Section 244 - Oppression and mismanagement petition under Section 241 - Validity of majority decision and corporate democracy - Vacancy of directorship by non-attendance under Section 167 - Binding effect of resolutions passed at EOGM/AGM

Waiver of threshold requirement under Section 244 - Granting of waiver under Section 244 to enable petitioner holding four equity shares to file an application under Section 241. - HELD THAT: - Section 244 permits the Tribunal to waive the numerical/member/ shareholding thresholds in exceptional cases to enable an application under Section 241. The Tribunal examined whether the petitioner, who holds four equity shares (a negligible percentage of issued share capital), has made out such exceptional circumstances. The record shows that the petitioner and his late father actively participated in, and at times initiated, the process to acquire the reversionary rights; meetings called to meet a short statutory window for payment were attended by a majority of members; and alternative remedies and proceedings (civil suit, complaints to ROC, police complaints) have been invoked by the petitioner. On the facts, no exceptional or equitable ground was shown to justify waiving the statutory thresholds. Accordingly, the petition for waiver is refused and the application under Section 241 is not permitted to proceed on the basis urged by the petitioner. [Paras 32, 33, 34, 36]

Waiver under Section 244 refused; petitioner failed to establish exceptional circumstances to invoke Section 241.

Validity of majority decision and corporate democracy - Binding effect of resolutions passed at EOGM/AGM - Whether the acquisition of reversionary rights by the company was invalid or constituted oppression allowing relief under Section 241. - HELD THAT: - The Tribunal considered whether the resolution and transaction to acquire the reversionary rights were irregular, mala fide or oppressive. The material shows that the acquisition was an objective within the company's purposes, negotiations commenced during the tenure of the petitioner's father, and the lessors required rapid payment (short window). An EOGM called on 28.07.2014 was attended by a majority (33 of 50) and the deed was circulated at a later Board meeting which the petitioner failed to attend. No other member has challenged the acquisition post-2014 before this Tribunal. Given the majority approval and the petitioner's prior involvement in and support for the acquisition process, the Tribunal held that the majority decision binds the company and its members and that the petitioner's objections on the acquisition are not sufficient to found a claim of oppression or mismanagement under Section 241. [Paras 23, 31, 33, 34]

The acquisition of reversionary rights was upheld as validly adopted by the majority; no oppression or mismanagement found on this ground.

Vacancy of directorship by non-attendance under Section 167 - Whether the petitioner's cessation as director was wrongful and amounted to oppression. - HELD THAT: - The Tribunal reviewed the allegation that the petitioner was removed as a director without notice and in breach of natural justice. The respondents contended the petitioner had been absent from multiple board meetings since August 2014, had been warned that continued non-attendance would render his office vacant, and that the board resolved on 10.09.2014 that his office had fallen vacant under the statutory provision governing vacation of office. The record supports that the petitioner did not attend the relevant meetings despite notice and that the vacancy arose by operation of the company's governance in light of the petitioner's prolonged non-attendance. Consequently, the Tribunal found no wrongful removal or actionable oppression in respect of the directorship. [Paras 18, 24, 34]

Petitioner's directorship stood vacated by non-attendance in accordance with law; no wrongful removal or oppression established.

Final Conclusion: The petition is dismissed. The Tribunal refused to waive the Section 244 thresholds, upheld the validity of the majority decision to acquire the reversionary rights, and found no wrongful removal of the petitioner as director; no case of oppression or mismanagement under Section 241 was made out.

Restoration of company name in the Register of Companies - striking off of name and dissolution under Section 248 of the Companies Act, 2013 - filing of pending statutory documents including financial statements and annual returns - conditions precedent to revival including payment of fees, additional fees and costs - power of Registrar of Companies to take further action for other violations

Restoration of company name in the Register of Companies - striking off of name and dissolution under Section 248 of the Companies Act, 2013 - Petition for restoration of the Company's name was admitted and the ROC was directed to restore the Company on the register as if its name had not been struck off. - HELD THAT: - The Tribunal noted that although the Company had defaulted in filing statutory returns and its name had been struck off and the Company dissolved under the process initiated under Section 248, the petitioners produced documents (income tax acknowledgements, audited financial statements for certain years and bank statements) and the Tribunal was inclined to admit the Company Petition. On that basis the Tribunal directed the Registrar of Companies, Chennai to restore the Company's original status and change its status from "strike off" to "Active".

Company Petition CP/40(CHE)/2021 admitted and ROC directed to restore the Company's name on the Register of Companies.

Filing of pending statutory documents including financial statements and annual returns - conditions precedent to revival including payment of fees, additional fees and costs - publication of restoration order in Official Gazette - Restoration was ordered subject to specified conditions: filing all pending statutory documents with prescribed fees/additional fees/fine, payment of costs, delivery of certified copy of the order and publication in the Official Gazette. - HELD THAT: - The Tribunal expressly made restoration conditional. The Company is required to file all outstanding statutory documents including financial statements and annual returns from the date of incorporation with prescribed fees/additional fees/fine within 30 days from the date of restoration. The Tribunal directed payment of costs through online payment in the MCA portal as a condition of revival and permitted delivery of a certified copy of the order to the ROC for effecting restoration and Gazette publication. The order also directed the company's representative to ensure compliance personally.

Restoration granted subject to compliance with filing obligations, payment of prescribed fees/late fees and costs, delivery of certified copy and Gazette publication.

Power of Registrar of Companies to take further action for other violations - Restoration order was confined to the violations leading to striking off and did not preclude ROC from taking appropriate action in relation to any other violations or offences. - HELD THAT: - The Tribunal clarified that its order relates only to the violations which resulted in the striking off and that the ROC, Chennai remains free to initiate or continue appropriate proceedings in accordance with law for any other violations or offences committed by the Company prior to or during the striking off period. This preserves ROC's regulatory powers beyond the limited revival directed by the Tribunal.

Restoration does not bar ROC from taking further action in relation to other violations/offences.

Final Conclusion: The Tribunal admitted the petition and ordered restoration of the Company's name on the Register of Companies, subject to filing all outstanding statutory documents with prescribed fees/late fees, payment of costs and compliance steps (delivery of certified copy and Gazette publication); the ROC remains free to take any other lawful action for other violations.

Doctrine of merger - recall of order - power to review - jurisdiction of Tribunal - inherent powers

Recall of order - doctrine of merger - jurisdiction of Tribunal - Application for recall of the Tribunal's order dated 23.11.2017 is maintainable and can be entertained by the Adjudicating Authority. - HELD THAT: - The Adjudicating Authority held that the order dated 23.11.2017 passed in CP 68 of 2017 has been finally disposed of on appeal by higher fora and stands merged into the order of the Hon'ble Supreme Court dated 10.08.2018. Applying the doctrine of merger, the original order of this Bench ceases to be an operative order and is subsumed into the appellate order. Consequently, an attempt to recall the original order is ineffective as there is no longer an independent operative order of this Tribunal to be recalled. The Tribunal therefore found the recall application to be bad in law and not maintainable for this reason (see para 5 and the discussion at paras 6-8). [Paras 5, 6, 8]

Application for recall is not maintainable because the order dated 23.11.2017 has merged into the appellate orders and thus there is no operative Tribunal order to recall.

Power to review - inherent powers - jurisdiction of Tribunal - Whether the Tribunal has jurisdiction or statutory/inherent power to review or recall its own order under the circumstances. - HELD THAT: - The Tribunal held that it is not vested with power to review or recall its own orders in the manner sought by the Applicant. The Bench noted that the power to review is a creature of statute and cannot be assumed as an inherent power; Rule 11 of the NCLT Rules, 2016 and the provisions relied upon do not confer such review power in the present context. The decision relied upon of the Hon'ble NCLAT was noted to the effect that review is not an inherent power and cannot be equated to appellate jurisdiction. On these grounds the recall/application was held beyond the Tribunal's jurisdiction and therefore not maintainable (see paras 9-10). [Paras 9, 10]

Tribunal lacks jurisdiction and statutory or inherent power to grant the recall/review sought; the application is therefore not maintainable.

Final Conclusion: The application for recall of the order dated 23.11.2017 is rejected as not maintainable: the Tribunal's order has merged into the appellate order of the Hon'ble Supreme Court and, in any event, the Tribunal lacks the statutory or inherent power to review/recall its order in the circumstances.

Condonation of delay - judicial review of approval of resolution plan - finality of claims on approval of resolution plan - scope of NCLT's observations when approving a resolution plan - claims of statutory authorities vis-a -vis approved resolution plan - Section 79(2)(c) of the Income Tax Act - carry forward of losses on resolution

Condonation of delay - Whether the delay of 15 days in filing the Company Appeal should be condoned. - HELD THAT: - The Tribunal, being subjectively satisfied with the explanation that the impugned order was uploaded later and that the delay was due to the COVID-19 pandemic, exercised its discretion to condone the 15-day delay to secure the ends of justice and allowed the application for condonation. No costs were imposed. [Paras 1]

Delay of 15 days is condoned and I.A.No.20/2021 is allowed.

Scope of NCLT's observations when approving a resolution plan - finality of claims on approval of resolution plan - claims of statutory authorities vis-a -vis approved resolution plan - judicial review of approval of resolution plan - Whether paragraph 22 of the impugned NCLT order amounted to an impermissible imposition of an additional condition opening the approved resolution plan to undecided claims and thereby exceeded the Adjudicating Authority's jurisdiction. - HELD THAT: - The Tribunal examined the clauses of the approved resolution plan, the objections and communications from the Income Tax Department, and the jurisprudence on finality of claims upon approval of a resolution plan. Noting that the NCLT recorded observations in paragraph 22 that waivers from statutory obligations would be subject to approval by the concerned authorities and that such observations reflected the Adjudicating Authority expressing its views, the Tribunal held that those observations did not operate as an imposed additional condition that re-opened the plan to undecided claims. The Tribunal concluded that the NCLT was within its limits to express views or opinions and that paragraph 22 did not amount to traveling beyond jurisdiction or to opening the plan to undecided claims. [Paras 35]

Paragraph 22 of the impugned order is not an imposition of an additional condition that opens the plan to undecided claims; the Adjudicating Authority remained within its limits in making those observations. The appeal is without merit on this ground.

Final Conclusion: The application for condonation of delay is allowed; on merits the Tribunal finds no jurisdictional overreach in the Adjudicating Authority's observations (paragraph 22) and dismisses the Company Appeal (AT)(INS) No.07 of 2021. No costs.

Dispute in respect of debt - entitlement to interest on delayed payment - validity of invoice as evidence of debt - acceptance of payment and settlement of debt - summary adjudication under Section 9 of IBC, 2016

Dispute in respect of debt - summary adjudication under Section 9 of IBC, 2016 - Existence of a pre existing dispute between the parties precludes admission of the Section 9 application. - HELD THAT: - The Corporate Debtor had communicated a dispute over the claimed principal amount prior to initiation of proceedings and raised objections to the claim (see communication dated 08.11.2019). The Tribunal observed that the application isolates one invoice and ignores other transactions between the parties, indicating suppression of material facts. Where a bona fide dispute exists on the claimed debt, the Adjudicating Authority cannot proceed by summary adjudication under Section 9; the matter requires trial and evidence to resolve the dispute. [Paras 5, 9, 11]

Section 9 application cannot be admitted in presence of a pre-existing dispute; application dismissed.

Validity of invoice as evidence of debt - entitlement to interest on delayed payment - Whether the Operational Creditor is entitled to interest at the contractually claimed rate based on the unstamped/unsigned invoice cannot be decided in summary proceedings. - HELD THAT: - The invoice relied upon by the Applicant lacks the Corporate Debtor's seal/signature as token of acceptance and the Applicant has produced only one invoice while multiple transactions existed. The Tribunal held that entitlement to interest, its rate and the period from which it is payable are matters requiring evidence and adjudication at trial; such issues cannot be resolved on a summary application under Section 9. [Paras 2, 3, 9, 10]

Claim for interest at 24% per annum based on the presented invoice is not determinable in the summary Section 9 proceedings.

Acceptance of payment and settlement of debt - dispute in respect of debt - Payments made by the Corporate Debtor during pendency of proceedings and accepted by the Operational Creditor affect the claim and indicate that no undisputed outstanding amount remained. - HELD THAT: - The Corporate Debtor had paid substantial sums towards the invoices, including payments made during the pendency of these proceedings which the Applicant accepted 'without protest', and a residual amount was adjusted against another invoice. The Tribunal recorded that the Applicant admitted receipt of payments and that the contention as to outstanding dues was therefore not free from controversy, reinforcing that the claim could not be summarily admitted. [Paras 7, 8, 11]

Payments made and accepted by the Operational Creditor preclude summary admission of the claim; dispute as to outstanding dues remains.

Final Conclusion: The Section 9 application is dismissed: a pre existing dispute, insufficiency of the invoice relied upon and payments accepted by the Operational Creditor render the claim unsuitable for summary adjudication under Section 9 of the IBC; no costs.

Initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt - quantification of debt and date of default - existence of dispute / disputed debt - onus of proof of debt and default - reconciliation between parties and perishable goods/packing material - failure to prove debt and default

Operational debt - quantification of debt and date of default - onus of proof of debt and default - existence of dispute / disputed debt - Whether the Operational Creditor proved the existence, quantification of the operational debt and the date of default so as to sustain initiation of CIRP under Section 9 of the IBC, 2016. - HELD THAT: - The Tribunal found that the parties had business dealings and had conducted reconciliations by exchange of emails, and that the goods and packing materials involved were perishable. The Corporate Debtor raised a counterclaim (supported by an auditor's statement) and contended that stocks remained with it because the Operational Creditor did not procure goods as agreed. The Tribunal observed that the onus lay on the applicant to clearly quantify the alleged debt and establish the date of default. The applicant failed to provide a satisfactory explanation in rejoinder to meet the counterclaim and did not conclusively establish who was liable for unused packing materials or whether adjustments had been agreed. In consequence, neither the existence of a clearly quantifiable operational debt nor the date of default stood proved on the record. [Paras 8, 9, 10]

The Operational Creditor failed to prove the debt and the date of default; initiation of CIRP under Section 9 is not justified.

Final Conclusion: Company Petition CP/862/2018 is dismissed for failure of the applicant to prove and quantify the alleged operational debt and the date of default, in the presence of a bona fide dispute and counterclaim.

Operational debt - pre-existing bona fide dispute - plausible contention test for admission (Mobilox doctrine) - admission of Corporate Insolvency Resolution Process and moratorium

Operational debt - pre-existing bona fide dispute - plausible contention test for admission (Mobilox doctrine) - Existence of an operational debt due from the Corporate Debtor and absence of a pre-existing bona fide dispute, permitting admission of the section 9 petition - HELD THAT: - The Adjudicating Authority examined whether the claim alleged by the Operational Creditor constituted an operational debt and whether the Respondent had a pre existing bona fide dispute sufficient to defeat admission. Reliance was placed on the Mobilox principle that the authority need only be satisfied that a plausible contention requiring further investigation exists and that a dispute is not patently feeble or a mere assertion unsupported by evidence. The Respondent relied on alleged NOC communications from IREDA and cancellation/forfeiture of the advance, but failed to produce documentary evidence proving communication of the NOC to the Petitioner or proof of service/acknowledgement of the purported cancellation letter. The Respondent also did not produce audited financial statements or other evidence to substantiate its plea of solvency. The Petitioner produced demand drafts evidencing payment of the initial instalment and a NESL certificate recording the debt. On the material on record the Bench found no credible documentary basis for the Respondent's contention of a pre existing dispute or forfeiture; the defence appeared bald and unsupported and therefore did not meet the threshold of a genuine pre existing dispute under the Mobilox test. Consequently, the claim was held to be an operational debt that had fallen due and the petition was admitted. [Paras 8, 9, 10, 11]

The petition under Section 9 is admitted: the claim is an operational debt and the Respondent has not shown a pre existing bona fide dispute to bar admission.

Final Conclusion: The Tribunal admitted the Company Petition C.P. (IB) No. 181/BB/2020 under Section 9 of the IBC, 2016, appointed an Interim Resolution Professional and declared the moratorium, having held that the Operational Creditor established an operational debt and the Respondent failed to demonstrate a pre existing bona fide dispute.

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - applicability of Sections 18 and 19 of the Limitation Act, 1963 to proceedings under the IBC - acknowledgment in writing and payment on account of debt as fresh commencement of limitation - maintainability of petition by a co operative credit society as financial creditor - effect of deficient stamping of ancillary instrument where principal instrument is duly stamped - admission of CIRP, appointment of Interim Resolution Professional and imposition of moratorium

Applicability of Sections 18 and 19 of the Limitation Act, 1963 to proceedings under the IBC - acknowledgment in writing and payment on account of debt as fresh commencement of limitation - Whether the Petition under Section 7 of the IBC was time barred and whether acknowledgments/payments reset the period of limitation - HELD THAT: - The Bench held that Sections 18 and 19 of the Limitation Act, 1963 apply to applications under Section 7 of the IBC. A written acknowledgment by the debtor (even if not specifying all particulars) operates to compute a fresh period of limitation under Section 18. Likewise, a payment on account of the debt made within the prescribed period and acknowledged in writing by the payer attracts Section 19 and restarts the limitation period from the date of such payment. The letter dated 23.07.2019 by the Corporate Debtor to the Commissioner constituted an acknowledgment of the debt for purposes of Section 18, and the payment of Rs. 12.43 lakhs on 31.03.2017-supported by a bank debit and a pay slip signed by a director-satisfied the requirement of written acknowledgment under Section 19. Computation from 31.03.2017 therefore gave a fresh three year period ending on 30.03.2020, and the petition filed on 09.03.2020 was within that period. [Paras 24, 25, 26, 27, 28]

Petition is not time barred; Sections 18 and 19 of the Limitation Act apply and the acknowledgment/payment reset the limitation, rendering the Section 7 petition within limitation.

Maintainability of petition by a co operative credit society as financial creditor - Whether the petition was maintainable despite contentions regarding appointment/authority of an administrator of the cooperative society and allegations of misappropriation by directors - HELD THAT: - The Bench observed that the dispute about internal authority (reference to an Administrator) was an inadvertent error corrected by a board resolution authorising filing. Such procedural/formal defects do not defeat the core inquiry under the Code, which is whether a financial debt exists and a default has occurred. Allegations that amounts were misappropriated by individual directors relate to separate transactions between individuals and do not negate the debt due to the financial creditor. The petitioner produced evidence of debt, default and procedural compliance required under the Code. [Paras 29, 30]

Maintainability challenge on grounds of authority and alleged misappropriation rejected; petition is maintainable.

Effect of deficient stamping of ancillary instrument where principal instrument is duly stamped - Whether the loan agreement executed on a low denomination non judicial stamp paper rendered the agreement inadmissible or the transaction invalid for the purposes of the petition - HELD THAT: - Relying on Section 4 of the Maharashtra Stamp Act, 1958, the Bench noted that where several instruments effect a transaction, the principal instrument (here the mortgage deed) attracts the duty prescribed in Schedule I and other ancillary instruments are liable only to a nominal duty. The mortgage deed had been duly stamped by payment of the appropriate stamp duty; therefore the loan agreement being ancillary was properly stamped with the nominal duty and there was no deficiency in stamp duty to impinge on its evidentiary value for the present proceedings. [Paras 31, 32]

Stamping objection rejected; ancillary loan agreement is admissible given the principal instrument was duly stamped.

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - admission of CIRP, appointment of Interim Resolution Professional and imposition of moratorium - Whether the Section 7 petition should be admitted and the consequential reliefs (appointment of IRP and moratorium) granted - HELD THAT: - Having found that a financial debt existed, default had occurred and the petition was within limitation and otherwise maintainable, the Bench concluded that formal requirements under the Code were satisfied. The written consent (Form 2) of the proposed Interim Resolution Professional was on record and there was no material to show disciplinary proceedings against him. The Bench therefore admitted the Company Petition, appointed the proposed Interim Resolution Professional as IRP, and declared the moratorium operative from the date of the order, with attendant duties and public announcement obligations cast on the IRP. [Paras 35, 36, 37, 38, 39]

Company Petition admitted; proposed IRP appointed and moratorium imposed; IA challenging maintainability dismissed.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by the cooperative financial creditor against the corporate debtor, holding the petition within limitation by reason of written acknowledgment and a payment in March 2017, rejecting maintainability and stamping objections, appointed the Interim Resolution Professional and imposed the statutory moratorium.

Effect of acknowledgement under Section 18 of the Limitation Act on IBC proceedings - Maintainability of multiple CIRP applications against principal borrower and corporate guarantor - Co-extensive liability of guarantor under Section 128 of the Indian Contract Act - Binding effect and scope of an approved resolution plan - Treatment of subsidiaries' assets and investments in a resolution plan

Effect of acknowledgement under Section 18 of the Limitation Act on IBC proceedings - Application under Section 7 of the IBC barred by limitation - Application under Section 7 was within limitation as the Debt Repayment and Settlement Agreement constituted an acknowledgement in writing and restarted the period of limitation under Section 18 of the Limitation Act. - HELD THAT: - The Tribunal held that the question is no longer res integra and Section 18 of the Limitation Act applies to proceedings under Section 7 of the IBC. An acknowledgement in writing signed by the debtor before the expiration of the prescribed period gives rise to a fresh period of limitation. Here the date of default was 15.04.2012; the parties executed the Debt Repayment and Settlement Agreement on 24.03.2015 which contained an express acknowledgement of debt; the subsequent cancellation on 29.05.2017 did not negate that acknowledgement for the purpose of limitation; the Section 7 application filed on 10.02.2020 therefore fell within the extended period of limitation and was held not time-barred. [Paras 15, 16, 17]

The impugned admission under Section 7 is affirmed as within limitation.

Maintainability of multiple CIRP applications against principal borrower and corporate guarantor - Co-extensive liability of guarantor under Section 128 of the Indian Contract Act - A second Section 7 application against the principal borrower for the same debt and default is maintainable even after CIRP has been initiated and a resolution plan approved in respect of the corporate guarantor. - HELD THAT: - Relying on statutory scheme including Section 60(2)-(3), relevant precedents, and the Insolvency Law Committee's analysis, the Tribunal concluded that the Code does not preclude concurrent or successive proceedings against a principal borrower and its guarantor. The liability of a guarantor is co-extensive with that of the principal debtor; partial recovery from a guarantor does not extinguish the principal debtor's liability except to the extent recovered. The Tribunal further held that approval of a resolution plan in the guarantor's CIRP which extinguishes the guarantor's liability does not ipso facto prevent the creditor from seeking the balance from the principal borrower; adjustments, if any, are to be made at the stage of recovery/claims quantification. [Paras 20, 21, 25]

The Section 7 application against the Corporate Debtor is maintainable and the Financial Creditor can pursue recovery of remaining dues from the Corporate Debtor.

Binding effect and scope of an approved resolution plan - Treatment of claims and extinguishment of guarantees in a resolution plan - The resolution plan approved in the CIRP of the corporate guarantor did not operate as an unequivocal full and final settlement by the Financial Creditor of its claim against the Corporate Debtor. - HELD THAT: - The Tribunal examined clauses of the approved resolution plan for ACIL and found that while the plan extinguished ACIL's liabilities and corporate guarantees in respect of certain claims, it did not amount to the Financial Creditor accepting the stated recovery as a full and final settlement of all its dues against the principal borrower. The plan extinguished the guarantor's right of recovery but did not, by itself, extinguish the principal borrower's independent and co-extensive liability; therefore the creditor's right to claim the balance from the Corporate Debtor survives subject to adjustment for amounts recovered from the guarantor. [Paras 22, 23, 24, 25]

The approved resolution plan does not bar the Financial Creditor from claiming remaining amounts from the Corporate Debtor.

Treatment of subsidiaries' assets and investments in a resolution plan - RP's power to deal with investments in subsidiaries versus assets of subsidiaries - The SEZ business (assets of the subsidiary Corporate Debtor) was not included in the resolution plan of ACIL; the RP can deal with investments in subsidiaries but cannot include subsidiaries' assets in the guarantor's resolution plan absent evidence (e.g., forensic audit) of avoidance or fraudulent transfer. - HELD THAT: - The Tribunal reviewed the Information Memorandum, CoC minutes and legal opinion obtained by the RP. CoC resolutions and the legal opinion indicated that the RP could manage investments in subsidiaries and, where established, pursue avoidance actions for transfers to subsidiaries, but could not fold subsidiaries' assets into the guarantor's CIRP without supporting findings (no forensic audit or valuation of subsidiary assets/shares was placed on record). The resolution plan described the SEZ as a separate company and recorded that financial obligations of the SEZ were on ACIL, but did not purport to include the SEZ's assets within ACIL's CIRP. The facts differ from precedents where shares/valuation of subsidiaries were expressly valued and included. [Paras 38, 39, 40, 41, 42]

SEZ business of the Corporate Debtor is not included in ACIL's approved resolution plan; the RP cannot exercise control over subsidiary assets on that basis.

Final Conclusion: The appeals are dismissed. The Tribunal upheld the admission of the Section 7 application as within limitation (acknowledgement under Section 18 applies), confirmed that a creditor may maintain a Section 7 proceeding against a principal borrower notwithstanding a prior CIRP against its corporate guarantor (subject to adjustment of recoveries), and held that the approved resolution plan of the guarantor did not include or extinguish claims on the subsidiary's assets or operate as a full and final settlement of the creditor's dues against the principal borrower.

Works contract service - exemption for services provided to Government by way of construction of a civil structure - re introduction of exemption and retrospective gap filling by Section 102 of the Finance Act, 2016 - binding effect of an appellate authority's order on the original adjudicating authority in absence of a stay - judicial review where an order suffers from patent illegality

Works contract service - exemption for services provided to Government by way of construction of a civil structure - re introduction of exemption and retrospective gap filling by Section 102 of the Finance Act, 2016 - Whether service tax was leviable on the work contract services rendered by contractors for construction of scientific storage godowns of the State owned Corporation for the relevant period - HELD THAT: - The appellate authority found that the contractors' activities in constructing the corporation's scientific storage godowns fell within the Mega Exemption Notification (Serial No.12(a) of Notification No.25/2012 ST) as services provided to a governmental authority by way of construction of a civil structure. Although clause 12(a) had been withdrawn and later reintroduced, the hiatus was bridged by the legislative measure in Section 102 of the Finance Act, 2016 which disallowed levy of service tax for taxable services provided to Government or a governmental authority by way of construction of a civil structure for the period 1 April 2015 to 29 February 2016. Applying that statutory position and the exemption framework, the Court concluded that the petitioner (a Government funded public sector undertaking) was entitled to benefit of the exemption for the construction works in question and that the assessing authority's demand could not stand. [Paras 7, 8, 10]

The construction services in issue were covered by the exemption and service tax was not leviable for the relevant period.

Binding effect of an appellate authority's order on the original adjudicating authority in absence of a stay - judicial review where an order suffers from patent illegality - Whether the original adjudicating authority could pass an order adverse to the petitioner contrary to the appellate authority's order which remained un stayed and was the subject of a pending appeal - HELD THAT: - The Court observed that the appellate order in Order in Appeal No.16/2019 had set aside the original adjudicating order and granted the petitioner the benefit of exemption; the respondents had preferred an appeal to the Tribunal but had not obtained any interim stay. In those circumstances the original adjudicating authority erred in issuing a fresh demand inconsistent with the appellate order. Because the impugned order proceeded on an erroneous premise (that the exemption no longer applied) and thereby suffered patent illegality, the High Court's writ jurisdiction was properly invoked to quash the order rather than require initial exhaustion of the appellate remedy. [Paras 8, 9]

The impugned order, being contrary to the appellate order and tainted by patent illegality, was liable to be quashed.

Final Conclusion: The writ petition is allowed; the impugned order demanding service tax is quashed for being contrary to the applicable exemption and to the appellate authority's order; no costs and connected miscellaneous petition closed.

Maintainability of departmental appeal - monetary threshold in departmental appeals - administrative circular limiting appeals where tax effect is below threshold - exception for questions of constitutional validity - application of precedent regarding Rule 8(3A) of the Central Excise Rules, 2002

Maintainability of departmental appeal - monetary threshold in departmental appeals - administrative circular limiting appeals where tax effect is below threshold - exception for questions of constitutional validity - application of precedent regarding Rule 8(3A) of the Central Excise Rules, 2002 - Whether the Revenue's appeal is maintainable where the tax effect is below the threshold fixed by the Board's circular and no question of constitutional validity is raised - HELD THAT: - The Court examined the Board's administrative instructions (the circular dated 17.08.2011 and its later extension) which restrict filing departmental appeals before the High Court where the tax effect is below the prescribed monetary limit. The Court found that the monetary effect in the present matter is below Rs. 1 crore and that there is no challenge to the constitutional validity of any provision of the Act or Rules; accordingly the statutory exception for cases involving constitutional validity is not attracted. The Tribunal's decision rested upon application of a Gujarat High Court judgment concerning the permissibility of utilizing CENVAT credit while discharging excise duty under Rule 8(3A) of the Central Excise Rules, 2002; the Division Bench decision in a related Gujarat case was relied upon by the Court and the Supreme Court had declined special leave in that context. Applying the Board's circular and the precedent considered, the Court concluded that the appeal is not maintainable and must be dismissed. The other connected appeal was dismissed for the same reason. [Paras 3, 6, 7]

Revenue's appeal dismissed as not maintainable since the tax effect falls below the monetary threshold and no question of constitutional validity is raised; connected appeal also dismissed.

Final Conclusion: The appeals are dismissed as not maintainable under the Board's circular limiting departmental appeals where the tax effect is below the prescribed threshold and no constitutional question is raised; the connected appeal is disposed of likewise.

Reopening/revision of assessment on mere change of opinion - penalty under Section 27 to form part of assessment order and not by separate order - web report as only a starting point of departmental enquiry - procedure under Circular No.5 of 2021 for mismatch/mis match issues - works contractors and non levy of purchase tax where tax is already levied as deemed sale

Penalty under Section 27 to form part of assessment order and not by separate order - Validity of penalty levied by separate orders when penalty under Section 27 is required to form part of the assessment order. - HELD THAT: - The Court applied the settled principle that where penalty is leviable under the revision provision, it must form part of the assessment/revision order and cannot be imposed by an independent, separate order. Following earlier decisions of this Court and appellate precedent, the imposition of penalty through separate orders in these cases was held to be legally impermissible and therefore set aside. [Paras 7]

Penalty imposed by separate orders is bad in law and set aside.

Reopening/revision of assessment on mere change of opinion - web report as only a starting point of departmental enquiry - procedure under Circular No.5 of 2021 for mismatch/mis match issues - Whether the revision of assessment was barred as a mere change of opinion or was justified by fresh material and, if not, the consequential course to be followed. - HELD THAT: - The Court recognised the general rule that reassessment or reopening of an assessment is impermissible if it amounts to a mere change of opinion. However, where the assessing officer relied upon a web report indicating purchase omission/mismatch, the Court observed that a web report alone cannot be the basis for final assessment without following the prescribed intra departmental enquiry and procedure. In the present cases the revision could not be characterised as solely change of opinion because the assessing officer acted on a web report indicating mismatch; nevertheless, the assessing officer erred in making adhoc additions without following the procedural safeguards. The Court directed that the revisional exercise be re done strictly in accordance with the procedure set out in Circular No.5 of 2021 and applicable legal principles, thereby remitting the matter to the assessing authority for fresh decision in accordance with law. [Paras 6, 7, 8]

Proceedings remitted to the assessing authority to pass fresh orders after following the required enquiry and the procedure prescribed in Circular No.5 of 2021; reopening cannot proceed on mere change of opinion.

Works contractors and non levy of purchase tax where tax is already levied as deemed sale - Whether works contractors engaged in civil construction can be separately saddled with purchase tax where tax has already been levied as deemed sale. - HELD THAT: - Relying on precedents concerning the characterisation of transactions by works contractors, the Court held that where goods used in construction have already attracted tax as deemed sales, the same transactions cannot be subjected to an additional levy of purchase tax. Applying that principle to the present facts, the Court concluded that the levy of purchase tax on the petitioners (works contractors) was unsustainable. [Paras 6, 7]

Levy of purchase tax on the petitioners is set aside.

Final Conclusion: Writ petitions allowed: penalties imposed by separate orders set aside; levy of purchase tax on the works contractors set aside; matters remitted to the assessing authority (second respondent) to pass fresh orders in accordance with law and the procedure in Circular No.5 of 2021; no costs.

Rectification of order - power to rectify under Section 84 of the TNVAT Act, 2006 - verification of Form-WW - inclusion of other income and discounts as taxable turnover and reversal of input tax credit - status quo as to recovery - opportunity of hearing and disposal on merits

Rectification of order - power to rectify under Section 84 of the TNVAT Act, 2006 - opportunity of hearing and disposal on merits - Direction to the respondent to entertain and decide the rectification application filed under Section 84 of the TNVAT Act, 2006 on merits within a fixed time and after hearing the petitioner. - HELD THAT: - The writ petition challenged the respondent's order dated 28.03.2016 which determined taxable turnover and tax liability after verification of Form-WW. The petitioner filed an application for rectification under Section 84 of the TNVAT Act, 2006. The High Court found it unnecessary to keep the writ petition pending and, in view of the pending rectification application, directed the respondent to dispose of that application on merits in accordance with law. The court required that appropriate orders be passed after hearing the petitioner and fixed a timeframe of three months for disposal from receipt of a copy of the order. The petitioner was permitted to file additional grounds and supporting documents in the rectification proceedings. [Paras 6, 7, 8]

Respondent directed to decide the rectification application on merits after hearing within three months; petitioner permitted to file additional grounds/documents.

Verification of Form-WW - inclusion of other income and discounts as taxable turnover and reversal of input tax credit - status quo as to recovery - Matters concerning the proposed inclusion of 'other income' and 'discount received' (and corresponding tax/ITC reversal) were not adjudicated on merits by the High Court but remitted to the respondent for fresh consideration in the rectification proceedings; recovery is to be stayed pending that disposal. - HELD THAT: - The impugned order arose from a notice following verification of Form-WW proposing to treat certain receipts as taxable other income and to reverse ITC on discounts. The petitioner responded denying applicability. The High Court did not decide the substantive taxability or correctness of the impugned additions; instead, it directed that the rectification application be decided on merits, thereby remitting those issues for fresh consideration. Meanwhile, the respondent was ordered to maintain the status quo with regard to recovery pending disposal of the rectification application. [Paras 3, 4, 5, 6, 8]

Substantive questions on inclusion of other income and discount and reversal of ITC remitted for fresh consideration in the rectification proceedings; recovery stayed pending that disposal.

Final Conclusion: Writ petition disposed by directing the respondent to decide the petitioner's rectification application under Section 84 of the TNVAT Act, 2006 on merits after hearing within three months; meanwhile recovery shall remain stayed and the petitioner may file additional grounds and documents.

Extension of period of limitation - exclusion of period in computation of limitation - application to Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996; Section 12A of the Commercial Courts Act, 2015; provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 - suo motu cognizance - exercise of powers under Article 142 read with Article 141 of the Constitution

Extension of period of limitation - suo motu cognizance - Restoration and continuation of the extension of limitation periods for all judicial and quasi judicial proceedings in view of the COVID 19 pandemic. - HELD THAT: - The Court took suo motu cognizance of the difficulties caused by the COVID 19 pandemic and, having noted the renewed nationwide surge in infections, restored the operative directions of the order dated 23 March 2020. Consequently, the periods of limitation prescribed under any general or special laws for instituting proceedings, whether condonable or not, are extended and shall stand excluded till further orders. The restoration is directed as a nation wide measure to minimise hardship to litigants and practitioners in the extraordinary situation caused by the pandemic.

The order dated 23 March 2020 restoring extension of limitation periods is revived and continued till further orders.

Exclusion of period in computation of limitation - application to Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996; Section 12A of the Commercial Courts Act, 2015; provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 - Whether the excluded period extends to statutory outer limits and termination provisions in specified statutes and other laws prescribing limitation periods. - HELD THAT: - The Court clarified that the period from 14 March 2021 until further orders shall be excluded in computing limitation for the specified provisions and generally for any law prescribing periods for instituting proceedings, outer limits within which courts/tribunals can condone delay, and termination of proceedings. This extension therefore operates also in relation to the statutory provisions identified in the order and any similar statutory prescription, ensuring that outer limits and termination periods are likewise not run during the excluded period.

The excluded period is declared applicable to the named statutory provisions and to other laws prescribing limitation, outer limits for condonation and termination of proceedings.

Exercise of powers under Article 142 read with Article 141 of the Constitution - Whether the order is binding on all courts, tribunals and authorities and the source of the Court's power to pass the directions. - HELD THAT: - The Court invoked its plenary power under Article 142 read with Article 141 to pass the directions and expressly declared the order to be binding within the meaning of Article 141 on all courts, tribunals and authorities. The order is therefore to be implemented nationwide and communicated by High Courts to subordinate courts and tribunals within their jurisdictions.

The directions are issued under Article 142 read with Article 141 and are binding on all courts, tribunals and authorities; High Courts are to communicate the order to subordinate fora.

Final Conclusion: In view of the resurgence of COVID 19, the Supreme Court has restored and continued the nationwide extension of limitation by excluding the relevant period until further orders, clarified that the exclusion applies to the specified statutory provisions and similar limitation/outer limit rules, and has made the directions binding under Article 142 read with Article 141, directing communication of the order to all subordinate courts and registrars general of the High Courts.

Presumption under Section 139 of the Negotiable Instruments Act - maintainability of complaint under Section 138 of the Negotiable Instruments Act - omission of list of prosecution witnesses under Section 204 Cr.P.C. as a curable irregularity - inherent jurisdiction under Section 482 Cr.P.C. - curative power of Section 465 Cr.P.C.

Presumption under Section 139 of the Negotiable Instruments Act - maintainability of complaint under Section 138 of the Negotiable Instruments Act - The omission in the complaint of an averment that the cheque was received in discharge of a legally enforceable debt or liability does not render the complaint under Section 138 NI Act non maintainable. - HELD THAT: - The Court held that Section 139 of the NI Act raises a statutory presumption that a holder received the cheque for discharge, in whole or in part, of any debt or other liability, and therefore absence of an express averment in the complaint that the cheque was received in discharge of a debt does not vitiate the complaint. The petitioner cannot rely on such omission to contend non maintainability. The court relied on the reasoning of the Supreme Court in Rohitbhai Jivan Lal Patel which explains that when the basic ingredients (signature, presentation within validity, return for insufficiency/closure) are apparent, the presumption under Sections 118 and 139 arises and the onus shifts to the accused to raise a probable defence. Applying that principle, the High Court found no illegality in issuance of process in the present case. [Paras 5, 6, 7]

Complaint was maintainable despite omission; issuance of process did not suffer illegality on this ground.

Omission of list of prosecution witnesses under Section 204 Cr.P.C. as a curable irregularity - curative power of Section 465 Cr.P.C. - inherent jurisdiction under Section 482 Cr.P.C. - Failure to file the list of prosecution witnesses along with the complaint is an irregularity and not a jurisdictional defect; it is curable and does not vitiate proceedings unless prejudice to the accused is shown. - HELD THAT: - The Court noted that while Section 204 Cr.P.C. requires supply of the prosecution witnesses list before issuance of summons or warrant, omission to furnish the list is an irregularity which does not go to the root of jurisdiction. Reliance was placed on the Full Bench decision in Abdullah Bhat , which treats non supply as a curable irregularity to be judged on whether prejudice resulted and which permits supplementation or modification of the list in subsequent proceedings. The High Court observed that no prejudice has been pleaded by the petitioner, the petitioner has not yet appeared, and the respondent can file the list before recording evidence. Section 465 Cr.P.C. was noted as enabling cure of the defect and the Trial Court can permit the list to be submitted before proceeding further. Consequently, the issuance of process was not rendered invalid by the omission. [Paras 8, 9, 10, 11]

Omission to file the list of witnesses is a curable irregularity; process issuance is not vitiated and the defect can be remedied.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the Trial Court's order issuing process in the complaint under Section 138 NI Act is dismissed; the complaint is maintainable despite omission of an express averment of discharge of debt (Section 139 presumption applies) and the failure to furnish the list of prosecution witnesses is an irregularity curable under the Cr.P.C.

Grant of bail under Section 439 Cr.P.C. - pre release deposit as condition for bail - compliance with Section 437(3) Cr.P.C. - placement of deposited amount in FDR by trial Court - medical examination before release and non release if COVID 19 positive

Grant of bail under Section 439 Cr.P.C. - pre release deposit as condition for bail - compliance with Section 437(3) Cr.P.C. - placement of deposited amount in FDR by trial Court - Whether the applicant should be enlarged on bail and on what conditions. - HELD THAT: - The Court considered the material on record including charge sheet and statements, prima facie bank credits of Rs. 17,00,000 into the applicant's account, the fact that co accused has already been released on bail, completion of investigation and filing of charge sheet, absence of criminal antecedents, the alleged offences carrying maximum punishment not exceeding seven years, and the likelihood of prolonged trial in view of the COVID 19 pandemic. Applying these factors, the Court concluded that custodial detention was not necessary and bail was appropriate subject to protective and procedural conditions. The applicant was directed to deposit the prima facie credited amount of Rs. 17,00,000 in three instalments (an initial sum at the time of furnishing bond and the balance in two equal instalments within six months), to furnish bail bond with solvent sureties, and to comply with the requirements of Section 437(3) Cr.P.C. The trial Court was directed to keep the deposited amount in an FDR in a nationalized bank until further orders.

Bail allowed on condition that the applicant deposits Rs. 17,00,000 in three instalments, furnishes bond and sureties as directed, and complies with Section 437(3) Cr.P.C.; deposited amount to be placed in FDR by the trial Court.

Medical examination before release and non release if COVID 19 positive - Whether the applicant's release should be subject to medical examination and COVID 19 related safeguards. - HELD THAT: - In view of the pandemic and following the terms of the Supreme Court's suo motu direction, the High Court directed that the jail authority must ensure a medical examination by the jail doctor before release, that appropriate tests be carried out and that the applicant must not be released if found suffering from COVID 19; if infection is detected, the applicant is to be placed in an appropriate quarantine facility and relevant steps taken by the authority. These directions are imposed as conditions precedent to release.

Release directed to be preceded by medical examination; no release if COVID 19 positive and, if so, placement in appropriate quarantine facility.

Final Conclusion: The first bail application under Section 439 Cr.P.C. is allowed; the applicant Manish Sharma is directed to be released on bail subject to deposit of Rs. 17,00,000 in three instalments, furnishing bond and sureties, compliance with Section 437(3) Cr.P.C., placement of the deposited amount in FDR by the trial Court, and fulfillment of the prescribed medical/COVID 19 conditions before release.