TaxTMI Updates e-Newsletter
May 26,2021

Cancellation of GST registration - Suspension of GST registration - Show cause notice and ex parte decision - Rule 21A of the Central Goods and Services Tax Rules, 2017 - Deposit of court-fee - Issuance of notice in writ petition

CM application for interim directions - Grant of the interim application(s) recorded in CM Nos.16464-65/2021 - HELD THAT: - The Court allowed the interlocutory application(s) represented by CM Nos.16464-65/2021, subject to just exceptions as recorded in the order. No substantive determination on the merits of the underlying writ petition was undertaken in respect of these interim applications.

CM Nos.16464-65/2021 allowed, subject to just exceptions.

Deposit of court-fee - Extension of time for court-fee - Disposition of CM No.16466/2021 seeking extension of time to deposit court-fee - HELD THAT: - The application for extension of time to pay the requisite court-fee was disposed of by directing the petitioner to deposit the court-fee within three days of the resumption of the Court's normal working pattern. The order therefore granted relief limited to payment of court-fee on the stated timeline and did not adjudicate any substantive contention relating to the merits of the writ petition.

CM No.16466/2021 disposed of with direction to deposit requisite court-fee within three days of resumption of normal Court functioning.

Cancellation of GST registration - Suspension of GST registration - Show cause notice and ex parte decision - Issuance of notice in writ petition - Rule 21A of the Central Goods and Services Tax Rules, 2017 - Preliminary judicial response to challenge against order cancelling the petitioner's GST registration - HELD THAT: - The petitioner challenged the respondent's order dated 16.01.2021 cancelling its registration, contending inter alia that the respondent ought first to have suspended registration before cancellation and that suspension with effect from the date of the show cause notice was inexplicable; reliance was placed on Rule 21A of the CGST Rules, 2017. The Court observed internal inconsistency in the show cause notice/impugned order, noting that the impugned order referred to the petitioner's reply dated 14.01.2021 while simultaneously stating no reply had been submitted. Rather than finally adjudicating the merits, the Court issued notice to the respondents by all permissible modes (including email) for response and listed the writ petition for further hearing.

Notice issued to respondents and matter listed for further hearing on 12.07.2021; no final decision on the validity of the cancellation or on the merits was recorded.

Final Conclusion: Interim applications in CMs 16464-65/2021 were allowed subject to exceptions; CM No.16466/2021 was disposed of by directing deposit of court-fee within three days of resumption of normal Court functioning; in the writ petition challenging cancellation of GST registration the Court noted inconsistencies in the impugned record, issued notice to the respondents and listed the matter for hearing on 12.07.2021.

Provisional attachment to protect interest of Government revenue - provisional attachment under Section 83 to protect revenue - delegation of power to designate proper officer under Section 5(3) - initiation of assessment proceedings under Section 67

Provisional attachment to protect interest of Government revenue - provisional attachment under Section 83 to protect revenue - initiation of assessment proceedings under Section 67 - Whether the provisional attachment of the petitioner's bank accounts could be continued or should be lifted in the circumstances and on what terms. - HELD THAT: - Proceedings under Section 67 had been initiated and a provisional attachment of certain bank accounts was made under the impugned order. During the hearing the Government Advocate, on instructions of respondent No.3, stated that assessment proceedings under Section 67 would not be proceeded with on the basis of the material already made available by the assessee, but that the department required security in view of claimed absence of invoices for the input tax credit. In light of that stand and the objective of protecting the revenue, the Court found it appropriate to lift the order of attachment subject to securing the revenue interest. The Court therefore directed that the order of attachment be set aside on the condition that the petitioner maintain a bank balance of Rs. 7,00,000 in his account and not utilize the same, such sum to operate as security until assessment proceedings are concluded. The Court refused to decide the separate legal challenge to the validity of the designation/delegation under Section 5(3) and Section 83 as that question had become academic in view of the Government's statement and the disposal of the petition; those contentions were left open for adjudication in an appropriate case.

Order of attachment set aside on condition that the petitioner maintain Rs. 7,00,000 in his account as security and not utilize it until assessment proceedings conclude; challenge to delegation/designation left undecided and kept open.

Final Conclusion: The petition is disposed of by setting aside the attachment order subject to the petitioner maintaining a bank balance of Rs. 7,00,000 as security (not to be utilized) until assessment proceedings are concluded; the challenge to the validity of the designation/delegation under the Act is not decided and is left open for determination in an appropriate case.

Principles of natural justice - opportunity of personal hearing - show cause notice-cum-draft assessment - variation in returned income - extension of limitation by the Central Board of Direct Taxes - personal hearing in virtual mode - Clauses (vii) to (xii) of Section 144B(7) of the Act

Principles of natural justice - show cause notice-cum-draft assessment - variation in returned income - Validity of the assessment order dated 30.04.2021, the notice of demand and the notice for initiation of penalty proceedings in light of alleged breach of principles of natural justice. - HELD THAT: - The petitioner had applied on 27.04.2021 for accommodation to reply to the show cause notice-cum-draft assessment dated 22.04.2021, citing the CBDT circular of 24.04.2021 extending timelines until 30.06.2021. Respondent no.1 neither granted nor expressly refused the request and proceeded to pass the final assessment order which altered the returned income. The Court held that once a show cause-cum-draft assessment calling for objections is issued and proposes variation in returned income, basic principles of natural justice require that the assessee be afforded a meaningful opportunity to be heard before a final adverse order is passed. The respondent's contention that earlier notices under Section 143(2) and Section 142(1) obviated the need to grant further time was rejected as untenable in the context of the specific draft assessment issued on 22.04.2021. For these reasons the impugned assessment order, the notice of demand and the notice for initiation of penalty proceedings were quashed. [Paras 16, 17]

Impugned assessment order dated 30.04.2021, the notice of demand and the notice for initiation of penalty proceedings quashed for breach of principles of natural justice.

Opportunity of personal hearing - extension of limitation by the Central Board of Direct Taxes - personal hearing in virtual mode - Clauses (vii) to (xii) of Section 144B(7) of the Act - Whether the matter is to be remanded for fresh assessment and the terms on which a fresh assessment may be conducted. - HELD THAT: - The Court granted liberty to respondent no.1 to pass a fresh assessment after giving a personal hearing to the authorised representative of the petitioner in respect of the show cause notice-cum-draft assessment dated 22.04.2021. While granting the hearing, respondent no.1 is directed to have regard to the provisions set out in Clauses (vii) to (xii) of Section 144B(7) of the Act. The hearing shall be preceded by a written notice indicating date and time and may be convened via virtual mode. The petitioner was directed to file its objections, if any, to the draft assessment within seven days of receipt of the court's order; on conclusion of the assessment proceedings, a copy of the fresh assessment order is to be served on the petitioner. The remand is for fresh consideration after affording the mandated opportunity of hearing and not for re-adjudication of the merits already decided by the Court's order of quashing. [Paras 17]

Matter remitted for fresh assessment to be passed only after giving personal hearing (permitted via virtual mode) and observance of Clauses (vii)-(xii) of Section 144B(7); petitioner to file objections within seven days of service of this order.

Final Conclusion: Writ petition allowed: the assessment order dated 30.04.2021, the notice of demand and the notice initiating penalty proceedings are quashed; respondent permitted to pass a fresh assessment after affording a personal hearing in accordance with the directions stated above.

Revisionary power of the Principal Commissioner under section 263 - finalisation of assessment "on the basis of" the draft assessment order under section 144C(3) - Assessing Officer's power to revisit or review a draft assessment order - binding effect of Dispute Resolution Panel directions under section 144C(10) - prejudice to the interests of revenue as test for exercise of section 263

Finalisation of assessment "on the basis of" the draft assessment order under section 144C(3) - Assessing Officer's power to revisit or review a draft assessment order - Assessing Officer is not empowered to revisit or review his draft assessment order and make reductions in proposed disallowances when no directions have been issued by the Dispute Resolution Panel and no further hearing takes place. - HELD THAT: - The Tribunal held that the scheme of section 144C is unambiguous: once a draft assessment order is prepared and served, the Assessing Officer's domain in framing the assessment is confined to giving effect to the draft order and to implementing any directions from the Dispute Resolution Panel. In the absence of any DRP directions, further hearings or any statutory power to review the draft, the Assessing Officer cannot, by an unexplained change of mind, drop or scale down disallowances contained in the draft order at the stage of passing the final assessment. The expression "on the basis of" in section 144C(3) must be read in its statutory context and does not confer an unfettered discretion to deviate from the draft order where no opportunity for further hearing or statutory authority for review exists. The Tribunal rejected reliance on decisions concerned with enhancement of income and distinguished authorities cited by the assessee, holding that those did not support retrospective or opaque variation of draft conclusions in favour of the assessee at finalisation stage. [Paras 8, 9]

Assessing Officer had no power to re-open and reduce the proposed disallowances at final assessment stage absent DRP directions or further statutory authority; such review is impermissible.

Revisionary power of the Principal Commissioner under section 263 - prejudice to the interests of revenue as test for exercise of section 263 - Principal Commissioner was justified in exercising powers under section 263 to cancel the final assessment order where the Assessing Officer had unreasonably and without authority deleted additions from the draft assessment order, rendering the final order erroneous and prejudicial to the interests of revenue. - HELD THAT: - Applying the statutory test for exercise of section 263, the Tribunal found that the Assessing Officer's unexplained omission to give effect to the draft assessment order (and absence of any DRP direction) amounted to an error and resulted in a final order prejudicial to revenue. The change of position by the Assessing Officer, made without reasons and without mandated procedure, amounted to a serious procedural breach in transfer-pricing-linked assessments. In those circumstances the Principal Commissioner correctly concluded that the first limb (erroneous order) and second limb (prejudicial to revenue) of section 263 were satisfied and was entitled to cancel the final assessment and direct recomputation on the basis of the draft assessment order. [Paras 5, 9]

PCIT validly invoked section 263 and cancelled the final assessment order; direction to the Assessing Officer to pass fresh assessment on the basis of the draft assessment order was lawful.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the PCIT's exercise of revisionary jurisdiction under section 263 because the Assessing Officer impermissibly revisited and reduced draft disallowances without DRP directions or reasons; an Assessing Officer cannot, at the stage of finalising under section 144C(3), deviate from the draft assessment order in the absence of statutory authority or DRP directions.

Penalty under Section 271(1)(c) for concealment of income - burden of proof to substantiate claim - mere inability to substantiate claim not sufficient for levy of penalty - requirement of positive evidence to justify penalty - genuineness of commission payments

Penalty under Section 271(1)(c) for concealment of income - mere inability to substantiate claim not sufficient for levy of penalty - requirement of positive evidence to justify penalty - Whether the penalty under Section 271(1)(c) for concealment of income could be sustained in respect of the disallowance of commission of Rs. 6,06,720/- - HELD THAT: - The tribunal examined the facts and the assessment order and found that the addition arose because the assessee was unable to substantiate that services were rendered by the alleged commission agent in connection with purchases. There was no positive evidence on record establishing that the commission agent had not rendered services, nor was there any statutory requirement that the name of the commission agent appear on purchase bills. The tribunal applied the settled principle that mere inability to substantiate a claim does not, by itself, attract penalty under Section 271(1)(c); levy of penalty requires positive evidence of concealment or furnishing of inaccurate particulars. The tribunal referred to the principle laid down in CIT vs. Reliance Petroproducts Pvt. Ltd. to support the proposition that penalty cannot be imposed in the absence of positive evidence contradicting the assessee's claim. On this basis the tribunal concluded that the penalty could not be sustained and directed deletion of the penalty levied. [Paras 10, 11]

Penalty levied under Section 271(1)(c) in respect of the addition of commission of Rs. 6,06,720/- set aside and deleted.

Final Conclusion: The appeal is allowed: the penalty under Section 271(1)(c) levied in respect of the disallowance of commission is deleted for want of positive evidence to justify penalty.

Disallowance under section 14A - Rule 8D apportionment of expenditure relating to exempt income - restriction of disallowance to the amount of exempt income - dominant purpose test versus apportionment principle - disallowance under section 40A(2)(b) and excessiveness under section 40A(2)(a) - allowability of brokerage and cost of improvement as deductible capital/ revenue items

Disallowance under section 40A(2)(b) and excessiveness under section 40A(2)(a) - Validity of deletion of disallowance made under section 40A(2)(b) in respect of commission paid to a related party. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance. The AO disallowed the last bill while allowing two earlier bills for identical services without explaining the difference; no comparative proof was produced to show the payment was excessive or unreasonable. The record showed commission to the related party was lower than market/comparable rates paid to unrelated brokers, and the CIT(A) examined the facts and found no applicability of section 40A(2). In absence of any material to suggest excessiveness, the deletion was proper. [Paras 10]

Order of the CIT(A) deleting the disallowance under section 40A(2)(b) is confirmed; AO's ground dismissed.

Allowability of brokerage and cost of improvement as deductible capital/ revenue items - Sustenance of deletion of additions: (a) cost of improvement paid to Associated Infrastructure Company, and (b) brokerage paid to Totem Infrastructure Ltd. - HELD THAT: - (a) The cost of development/improvement was supported by a tripartite agreement dated 29.04.2008 and reflected consistently in books and the purchase agreement; the CIT(A) rightly treated it as integral to the development and allowable. (b) The brokerage claim was supported by invoices, PAN and address of the broker and demonstration that similar brokerage was paid on other sales; the AO made no specific enquiry or contrary proof. The CIT(A)'s factual findings were not controverted before the Tribunal and therefore the deletions were warranted. [Paras 12, 14]

Order of the CIT(A) deleting the additions for cost of improvement and brokerage is confirmed; AO's grounds dismissed.

Disallowance under section 14A - Rule 8D apportionment of expenditure relating to exempt income - restriction of disallowance to the amount of exempt income - dominant purpose test versus apportionment principle - Extent and correctness of disallowance under section 14A and Rule 8D in respect of dividend income from investments. - HELD THAT: - The AO applied Rule 8D after the assessee voluntarily surrendered a portion of salary expenditure, disallowing directly and indirectly attributable interest and other administrative expenditure. The Tribunal found no infirmity in applying Rule 8D to the extent the AO was satisfied that expenditure was incurred for earning exempt dividend income. However, the Tribunal accepted the assessee's position (and supporting authority) that interest-bearing funds were not shown to have financed the investments, so interest disallowances were deleted. The CIT(A)'s exclusion of a portion of investments (approx. Rs. 22.67 crores) as strategic/subsidiary investments was held not to be sustainable in view of the Supreme Court's rejection of the dominant-purpose test in favour of apportionment; investments in subsidiaries could not be excluded merely because made for strategic purposes. Consequently, the Tribunal held that the disallowance under section 14A could not exceed the exempt dividend amount and directed restriction accordingly. [Paras 15, 16, 18, 19]

Interest-related disallowances deleted; other expenditure disallowance under section 14A to be confirmed but limited so that total disallowance does not exceed the exempt dividend amount; assessee's appeal dismissed on this issue and AO's appeal partly allowed.

Final Conclusion: Appeal of the assessee dismissed; appeal of the Revenue partly allowed. Deletions made by the CIT(A) in respect of disallowances under section 40A(2)(b), cost of improvement and brokerage are upheld. Disallowance under section 14A is sustained in principle but interest-related disallowances are deleted and the total section 14A disallowance is directed to be restricted to the amount of exempt dividend income.

Profit element in bogus/accommodation entries - Estimation of unexplained income/expenditure - Determination of permissible gross profit rate for disallowance - Disallowance for unverifiable or personal element in business expenses

Profit element in bogus/accommodation entries - Determination of permissible gross profit rate for disallowance - Estimation of unexplained income/expenditure - Extent of profit element to be added on purchases alleged to be bogus/accommodation entries - HELD THAT: - The AO had treated purchases from two parties linked to the Bhanwarlal Jain group as accommodation entries and, while accepting corresponding sales, estimated a 9% profit element on the alleged ingenuine purchases and made an addition u/s.69C. Before the CIT(A) the assessee produced evidence that one seller had responded to the inquiry, that the assessee's stock and sales records corresponded with purchases, and that the statement of the group did not expressly name the assessee (and was later retracted). The CIT(A) restricted the addition to 3% relying on Gujarat High Court authority. The Tribunal, however, followed an earlier decision in the assessee's own case (ITA Nos.135-137 of 2019 dated 23/02/2021) adopting a 1% profit element based on the assessee's gross profit pattern in earlier years and held that 1% on the value of the ingenuine purchases would meet the ends of justice. The Tribunal therefore reduced the addition to the 1% rate notwithstanding the AO's 9% estimate and the CIT(A)'s 3% determination. [Paras 3, 5]

Addition on alleged bogus purchases reduced to a 1% profit element on the value of such purchases.

Disallowance for unverifiable or personal element in business expenses - Estimation of unexplained income/expenditure - Validity of 10% disallowance on conveyance, telephone and travelling expenses as containing personal/unverifiable element - HELD THAT: - The AO disallowed 10% of claimed conveyance, telephone and travelling expenses on the basis that many entries were not verifiable and a personal element could not be ruled out; the CIT(A) confirmed that finding. The assessee was unable to produce concrete evidence before the CIT(A) or the Tribunal to show absence of personal element or to justify the claims, and no substantive arguments were advanced before the Tribunal on this ground. Having regard to the lack of proof and the finding of unverifiability and possible personal element, the Tribunal upheld the 10% disallowance. [Paras 6]

10% disallowance on conveyance, telephone and travelling expenses confirmed.

Final Conclusion: Appeal partly allowed: addition on alleged bogus purchases reduced to 1% of their value; 10% disallowance on conveyance, telephone and travelling expenses upheld.

Revisionary jurisdiction under section 263 - prejudicial to the interests of revenue - disallowance of interest on borrowed funds for non-business use - valuation of plant and machinery by DVO - availability of interest-free funds - disallowance under section 40(a)(ia) - academic ground

Revisionary jurisdiction under section 263 - prejudicial to the interests of revenue - valuation of plant and machinery by DVO - Validity of the Principal Commissioner of Income Tax's exercise of revisionary jurisdiction under section 263 in respect of the assessment for A.Y.2013-14 - HELD THAT: - The Tribunal accepted that the PCIT invoked section 263 on the basis that the AO, after treating plant and machinery at the DVO valuation, did not examine whether interest-bearing borrowings corresponding to the differential between book cost and DVO value were utilised for business purposes; on that premise the PCIT held the assessment to be erroneous and prejudicial to the revenue. The Tribunal observed that the AO had received details of loans and interest but that there was no finding by the lower authorities on whether the assessee had sufficient interest-free funds to account for the investment. Because the factual question of availability and utilisation of interest-free funds had not been examined by the AO, the PCIT's intervention could not be sustained in toto; the PCIT's order was therefore modified to direct the AO to verify the factual position and decide afresh. The Tribunal thus partly allowed the assessee's challenge to the exercise of jurisdiction under section 263 by directing limited factual verification rather than quashing the revision outright. [Paras 3, 4]

PCIT validly invoked section 263 on the identified omission, but the order is modified: the AO is directed to examine and record a factual finding on availability/utilisation of interest-free funds and then decide on disallowance of interest.

Availability of interest-free funds - disallowance of interest on borrowed funds for non-business use - Scope of remand: factual verification required as to whether assessee had sufficient interest-free funds to finance investment in plant and machinery (A.Y.2013-14) - HELD THAT: - The Tribunal found no finding of fact in the record that the assessee possessed sufficient interest-free funds to justify the claimed investment at book value. Because the PCIT's conclusion assumed borrowings funded the excess without factual support, the matter requires fresh factual enquiry by the AO limited to verifying availability and utilisation of interest-free funds and then applying the law on disallowance of interest if called for. This issue was therefore remitted for fresh consideration rather than being finally adjudicated on merits. [Paras 3]

Remitted to the AO for factual verification and fresh decision on whether interest-bearing borrowings were utilised for non-business purposes and consequent disallowance of interest.

Disallowance of interest on borrowed funds for non-business use - valuation of plant and machinery by DVO - Application of the A.Y.2013-14 decision to A.Y.2014-15 on the question of disallowance of interest on borrowings where asset valuation by DVO was lower than book cost - HELD THAT: - The Tribunal held that the reasoning and directions given in respect of A.Y.2013-14 apply with equal force to A.Y.2014-15. The AO must examine the factual matrix for the later year in the same manner-specifically whether borrowed funds correspond to the excess investment and whether interest should be disallowed-subject to the factual findings to be recorded by the AO for that year. [Paras 8, 10]

The earlier decision is held applicable to A.Y.2014-15; the AO is to examine/decide the matter in accordance with the directions given in the A.Y.2013-14 disposal.

Disallowance under section 40(a)(ia) - revisionary jurisdiction under section 263 - Validity of PCIT's assumption of jurisdiction under section 263 in respect of production expenses and alleged non-deduction of tax at source for A.Y.2014-15 - HELD THAT: - The Tribunal recorded that the PCIT directed the AO to examine applicability of section 40(a)(ia) to production expenses. The assessee furnished details of payees, PANs, service tax components, TDS remittances and challans; however, it was not clear whether such details were before the AO originally. The Tribunal considered this a matter requiring factual verification and held that the PCIT had validly assumed jurisdiction to direct such verification. The AO, on giving effect to section 263, subsequently verified the particulars and found a sum to be disallowable under section 40(a)(ia); that outcome was noted by the Tribunal. [Paras 9, 10]

PCIT rightly invoked section 263 to direct enquiry into TDS compliance on production expenses; the matter required factual verification and the AO's subsequent verification resulting in a limited disallowance was accepted.

Academic ground - Claim for deduction of loan processing charges for A.Y.2014-15 - HELD THAT: - The assessee's ground challenging treatment of loan processing charges was rendered academic because the AO, while giving effect to the section 263 directions, conceded the assessee's plea and allowed the deduction in the order giving effect. The Tribunal accordingly treated that ground as allowed on an academic basis. [Paras 7]

Ground treated as academic and allowed because deduction was conceded by the AO in the order giving effect to section 263.

Final Conclusion: Both appeals for A.Y.2013-14 and A.Y.2014-15 are partly allowed: the Tribunal upholds PCIT's invocation of section 263 on identified omissions but modifies the relief by directing the AO to make limited factual enquiries (notably availability/utilisation of interest-free funds) and decide afresh; one ground was treated as academic and allowed, and the PCIT's direction to examine TDS compliance on production expenses was sustained, with the AO's subsequent limited disallowance accepted.

Deductibility of sugarcane purchase price - distinction between Statutory Minimum Price (SMP) and State Additional Price (SAP) / final price under Clause 5A - distribution of profit as appropriation of income (non-deductible) - assessment officer to determine profit component by examining accounts/schedules supplied to State Government - application of Section 40A(2) to payments made to non-members - binding effect of Supreme Court precedent unless altered by review

Deductibility of sugarcane purchase price - distinction between Statutory Minimum Price (SMP) and State Additional Price (SAP) / final price under Clause 5A - distribution of profit as appropriation of income (non-deductible) - assessment officer to determine profit component by examining accounts/schedules supplied to State Government - Extent to which payments in excess of SMP (difference between SMP and SAP/final price determined under Clause 5A) are deductible and the method for segregating profit component from deductible expenditure. - HELD THAT: - Following the Supreme Court's decision in CIT v. Tasgaon SSK Ltd., the Tribunal held that payment of price under Clause 3 (SMP) is allowable in entirety as expenditure. The difference between SMP and the SAP/additional purchase price/final price fixed under Clause 5A cannot be treated wholly as distribution of profit; only that component which, on an examination of the manner in which SAP/final price is decided and on consideration of the assessee's statements of accounts, balance sheet and material supplied to the State Government, represents appropriation of profit would be non-deductible. The assessing officer is directed to undertake that exercise afresh: examine the accounts and materials on which the State fixed the SAP/final price, determine the component attributable to sharing/appropriation of profit (not allowable) and the remaining component as deductible expenditure.

Matter remitted to the AO to determine, by examining accounts and material supplied to the State, the profit component in the SAP/final price under Clause 5A (non-deductible) and to allow the remainder as deductible expenditure.

Application of Section 40A(2) to payments made to non-members - assessment officer to determine whether payments to non-members are excessive or unreasonable - Treatment of payments made to non-members in excess of SMP. - HELD THAT: - The Tribunal, following the Supreme Court, held that payments to non-members cannot be treated as distribution of profits in the same manner as payments to members. Such payments are to be examined under the test of reasonableness in Section 40A(2) of the Income-tax Act; the assessing officer must determine on the material on record whether the payments to non-members are excessive or unreasonable and disallow accordingly.

AO to consider payments to non-members afresh applying Section 40A(2) and disallow only to the extent found excessive or unreasonable.

Binding effect of Supreme Court precedent unless altered by review - Whether proceedings should await outcome of review petition filed against the Supreme Court decision in CIT v. Tasgaon SSK Ltd. - HELD THAT: - The Tribunal rejected the assessee's contention that determination should await the result of a review petition. It held that the filing of a review petition does not negate the binding force of the Supreme Court's judgment; until the review is disposed and the ratio is altered, the decision remains binding on subordinate authorities. Consequently, reliance on the existing Supreme Court ratio is appropriate.

Review petition pending does not affect applicability of the Supreme Court's ratio; the AO must proceed in conformity with that precedent.

Final Conclusion: Impugned orders set aside and appeals allowed for statistical purposes; all matters remitted to the respective assessing officers for fresh determination in accordance with the Supreme Court's articulation in CIT v. Tasgaon SSK Ltd.: SMP to be allowed, profit component in SAP/final price to be identified and disallowed as appropriation, payments to non-members to be examined under Section 40A(2), and the assessee to be afforded opportunity of hearing.

Entitlement to exemption under sections 11 and 12 - application of proviso to s. 2(15) - re-examination of consequential issues on giving effect to appellate order - academic or redundant cross-objection - apparent error review of tribunal order

Apparent error review of tribunal order - entitlement to exemption under sections 11 and 12 - Miscellaneous Application by the Revenue seeking correction of an alleged apparent error in the Tribunal's order dated 10-11-2017 (and related proceedings) is without merit and is to be dismissed. - HELD THAT: - The Tribunal record shows that on appeal it concluded that the assessee is a charitable institution entitled to exemption under sections 11 and 12, having applied the proviso to s.2(15) and followed coordinate decisions upheld by the High Court. That change in character of the assessee fundamentally altered the basis on which income had earlier been computed. Once the Tribunal directed that the character be treated as charitable, all consequential issues including the quantification and application of s.11(5) and s.13(1)(d) became matters for the Assessing Officer to re-examine while giving effect to the Tribunal's decision. The Revenue's MA conflated stages by pointing to an alleged non-adjudication while, in substance, the Tribunal had relegated the consequential questions to fresh assessment. The Bench correctly analysed the record and held there was no apparent error in the Tribunal's order; the application accordingly fails. [Paras 3, 4, 5]

Miscellaneous Application dismissed; no apparent error in the Tribunal's order and consequential issues to be re-examined by the Assessing Officer while giving effect to the Tribunal's directions.

Academic or redundant cross-objection - re-examination of consequential issues on giving effect to appellate order - Cross Objection No.55/Ahd/2017 filed by the Revenue was correctly treated as redundant/academic by the Tribunal and dismissal of the cross-objection did not amount to non-adjudication on merits. - HELD THAT: - The Tribunal explicitly considered that, in view of its primary finding accepting the assessee's charitable character and entitlement to exemption, the specific grounds raised in the cross-objection became academic in the present proceedings. The Tribunal recorded that all consequential matters, including the effect of s.11(5) and s.13(1)(d), should be examined afresh by the Assessing Officer while giving effect to the Tribunal's order. Given this disposition, the Tribunal's dismissal of the cross-objection was a conscious, reasoned outcome and not a failure to adjudicate; hence there was no ground for interference by way of an apparent error application. [Paras 3, 4, 5]

Cross Objection dismissed as academic/redundant; consequential issues to be addressed in fresh assessment proceedings.

Final Conclusion: The Miscellaneous Application by the Revenue is dismissed. The Tribunal's conclusion that the assessee is entitled to exemption under sections 11 and 12 stands, the cross-objection was properly treated as academic, and all consequential matters (including application of s.11(5) and s.13(1)(d)) are to be re-examined by the Assessing Officer while giving effect to the Tribunal's directions.

Penalty under Section 271(1)(c) read with Explanation 1 - Bona fide explanation - Reliance on professional advice as defence to penalty - Requirement of truthfulness of explanation to avoid penalty

Penalty under Section 271(1)(c) read with Explanation 1 - Bona fide explanation - Reliance on professional advice as defence to penalty - Whether penalty under Section 271(1)(c) could be sustained where the assessee withdrew an inadmissible claim after relying on professional advice and the explanation was bona fide. - HELD THAT: - The Tribunal found that the assessee had sold a flat and initially claimed a deduction which was later withdrawn on discovery that the asset was a short-term capital asset. The assessee produced documentary evidence of purchase of a new residential flat and placed on record a letter from the professional (purchaser) admitting the mistake, together with an affidavit. The assessee demonstrated that the return was filed based on advice of the professional who had prepared the return and had even provided his contact details in the ITR. Applying the principle in Price Waterhouse Coopers Pvt. Ltd. that a bona fide explanation negates imposition of penalty, the Tribunal held that the assessee had offered a plausible, truthful explanation and had not concealed or proffered a false explanation. In those circumstances, imposition and confirmation of penalty could not be sustained. The Tribunal further observed that legal contentions about framing of charge were rendered academic by the finding of bona fides. [Paras 6]

Impugned penalty deleted as the assessee's mistake was bona fide and attributable to reliance on professional advice; therefore penalty under Section 271(1)(c) read with Explanation 1 was not sustainable.

Final Conclusion: Appeal partly allowed: penalty confirmed by the CIT(A) set aside and deleted because the assessee's explanation was bona fide, founded on professional advice and supported by documentary evidence; consequential legal contentions rendered academic.

Nullity of reassessment proceedings - failure to dispose objections by speaking order - reopening of assessment under section 147/148 - sufficiency and specificity of reasons for belief - borrowed satisfaction and mechanical approval - GKN Driveshaft principle on disposal of objections

Failure to dispose objections by speaking order - GKN Driveshaft principle on disposal of objections - nullity of reassessment proceedings - Whether reassessment proceedings initiated under section 147/148 are null and void for failure of the Assessing Officer to dispose of objections by a separate speaking order as required by law. - HELD THAT: - The Assessing Officer issued notice under section 148 and the assessee filed objections seeking reasons and disposal. The reasons for reopening were furnished but the Assessing Officer did not pass a separate speaking order disposing of the objections; instead the objections were dealt with generally in the assessment order. Relying on the principle in GKN Driveshaft that a noticee is entitled to reasons and that objections filed against initiation must be disposed of by a speaking order before proceeding with reassessment, the Tribunal found that the statutory procedure was not followed. The absence of a distinct, reasoned disposal of the objections rendered the reassessment proceedings procedurally infirm and amounted to a nullity, removing the need to examine the merits of the additions. [Paras 7]

Grounds challenging initiation and non-disposal of objections are allowed; reassessment is held to be void-ab-initio.

Sufficiency and specificity of reasons for belief - borrowed satisfaction and mechanical approval - nullity of reassessment proceedings - Whether the reasons recorded for reopening were specific and coherent, or were vague/contradictory and based on borrowed satisfaction/ mechanical approval such that reassessment is void-ab-initio. - HELD THAT: - The recorded reasons described the assessee inconsistently - alternately as a provider of accommodation entries and as a recipient of share application money - without elaborating the basis for the Assessing Officer's 'reason to believe'. The reasons therefore lacked specificity and contained internal contradictions. Further, the record showed that the approval by higher authority did not reflect an independent, non-mechanical satisfaction. Because the statutory requirement of cogent, specific reasons was not met and the reopening appeared founded on borrowed/ mechanical satisfactions, the Tribunal concluded that the reassessment proceedings were invalid. Having reached this conclusion on jurisdictional grounds, the Tribunal refrained from adjudicating the substantive additions. [Paras 7]

Grounds challenging the adequacy of reasons and the nature of approval are accepted; reassessment is quashed as void-ab-initio.

Final Conclusion: Both appeals are allowed; the reassessment proceedings and consequent assessment orders for Assessment Year 2009-10 are quashed as null and void for failure to furnish a reasoned, separate disposal of objections and for inadequacy/contradiction in the reasons and mechanical approval, and no adjudication on the merits of additions was undertaken.

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - deletion of assessment addition by appellate authority extinguishes basis for penalty - penalty cannot survive where the assessment addition on which it is based is deleted

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - deletion of assessment addition by appellate authority extinguishes basis for penalty - penalty cannot survive where the assessment addition on which it is based is deleted - Validity of the penalty levied under section 271(1)(c) where the quantum addition on which the penalty was based has been deleted by the ITAT. - HELD THAT: - The Tribunal found that the quantum addition, which formed the foundation for the penalty under section 271(1)(c), was deleted by the ITAT in ITA No. 652/Chd/2017 for A.Y. 2008-09. In consequence, the factual and legal basis for the concealment penalty no longer existed. The Tribunal applied the principle laid down by the Apex Court in K.C. Builders and Anr. vs. ACIT , which holds that where additions made in the assessment order on the basis of which penalty for concealment is levied are deleted, there remains no basis for levying such penalty and the penalty must be cancelled. Having regard to the deletion of the addition by the appellate authority and following the cited ratio, the Tribunal upheld the CIT(A)'s deletion of the penalty.

Penalty under section 271(1)(c) was rightly deleted as the addition on which it was based had been removed by the ITAT.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) deleting the penalty under section 271(1)(c) is upheld.

Explanation to section 37(1) of the Income-tax Act - deduction under section 37(1) - public policy - CBDT Circular No. 772 dated 23.12.1998 - substance over form - quantification of disallowance

Explanation to section 37(1) of the Income-tax Act - public policy - CBDT Circular No. 772 dated 23.12.1998 - deduction under section 37(1) - substance over form - quantification of disallowance - Allowability of payments described as referral fees/revenue share paid to eye clinics/ophthalmologists as deduction under section 37(1) in view of the Explanation to section 37(1) and CBDT Circular No.772 and, if disallowable in principle, the manner of quantifying the disallowance. - HELD THAT: - The Tribunal examined whether the payments, though described in agreements as consideration for use of premises and recorded as revenue-share/rent, fall foul of the Explanation to section 37(1) because they are opposed to public policy as elucidated by CBDT Circular No.772. Applying the substance-over-form principle, the Tribunal found on the facts that the assessee shared revenue with eye clinics and ophthalmologists in return for locational advantage and rent-free use of premises, and that this business model compromises the interest of general public patients. The arrangement was therefore treated as akin to commission/referral fees that are opposed to public policy within the meaning of the Explanation to section 37(1) as interpreted in light of the CBDT Circular. While holding the payments not allowable in principle, the Tribunal observed absence of market rent evidence and no quantification by lower authorities; accordingly, instead of denying the entire claim, it apportioned the impugned claim and directed a lump-sum disallowance of one-third of the claimed amount, allowing two-thirds as deductible, with computations to follow. [Paras 11, 12, 14]

Payments characterised as referral fees/revenue share are disallowable in principle under the Explanation to section 37(1) as opposed to public policy; however, in quantification a lump-sum disallowance of one-third of the claimed amount is directed and two-thirds is allowed.

Final Conclusion: Appeal partly allowed: the Tribunal upheld disallowance of the referral-fee/revenue-share payments in principle as being opposed to public policy under the Explanation to section 37(1) read with CBDT Circular No.772, but reduced the disallowance to one-third of the claimed amount, allowing the remainder; necessary computations to follow.

Condonation of delay - principles of substantial justice - rejection of books of account under section 145(3) - adhoc disallowance for lack of vouchers - computation of taxable income by adopting deemed net profit percentage

Condonation of delay - principles of substantial justice - Delay in filing the appeal to the Tribunal was condoned and the appeal was admitted for hearing. - HELD THAT: - The Tribunal accepted the assessee's explanation that a change in the constitution of the partnership and intra-partner dispute prevented timely representation, and noted the assessee's bona fides. On consideration of the circumstances and in the interest of substantial justice the Tribunal held that the 45-day delay in filing the appeal be condoned and admitted the appeal for hearing. [Paras 5]

Delay condoned and appeal admitted for hearing.

Rejection of books of account under section 145(3) - adhoc disallowance for lack of vouchers - computation of taxable income by adopting deemed net profit percentage - Whether the Assessing Officer rightly rejected the books of account for want of vouchers and whether the adhoc disallowance should be sustained or the matter remanded for recomputation. - HELD THAT: - The Tribunal found as an undisputed fact that the assessee failed to produce bills and vouchers for expenses amounting to the stated sum either before the Assessing Officer or the CIT(A). Given repeated opportunities and production only of ledger copies, the Tribunal agreed with the AO that complete and correct profit could not be deduced from such books and upheld rejection of the books of account. However, noting the practical difficulty and the history of partner disputes which made restoration for fresh evidence unlikely, and observing the comparative profit percentages for preceding years, the Tribunal declined to remit the matter for fresh evidentiary verification. In lieu of restoration, the Tribunal directed the Assessing Officer to recompute the firm's income by adopting a net profit rate of 4% on sales (before deduction of depreciation, interest and partner remuneration) for the year under consideration, and thereafter allow deduction of depreciation, interest and remuneration from that computed net profit for tax computation. This direction was given as a measure to protect revenue interest while dispensing with a futile remand for vouchers unlikely to be produced. [Paras 8]

Rejection of books of account upheld; appeal partly allowed by directing reassessment computation - AO to compute net profit at 4% of sales and permit deductions for depreciation, interest and partner remuneration accordingly.

Final Conclusion: The Tribunal condoned the delay and admitted the appeal; it upheld the AO's rejection of the books for want of vouchers but, rather than remitting for fresh evidence, directed recomputation of income by adopting a net profit rate of 4% on sales with permitted deductions, and disposed of the appeal as partly allowed.

Validity of reassessment notice under section 148 - Satisfaction under section 151 for reopening - Jurisdiction of Assessing Officer for recording reasons and passing assessment - Requirement of notice under section 143(2) - Sufficiency of reasons for reopening assessment - Determination of annual value of unlet property-municipal valuation as yardstick - Remand to Assessing Officer for quantification - Mandatory interest under sections 234A, 234B and 234C

Validity of reassessment notice under section 148 - Satisfaction under section 151 for reopening - Validity of notice under section 148 where satisfaction was recorded by Additional Commissioner prior to amendment of section 151 - HELD THAT: - Reopening proceedings for AY 2007-08 were initiated in 2014, i.e., prior to the Finance Act, 2015 amendment. At the relevant time the statutory scheme required satisfaction of the Joint Commissioner (which, by definition, included an Additional Commissioner). The notice on record shows satisfaction recorded by the Additional CIT. Consequently the notice under section 148 was not vitiated for want of proper authority to record satisfaction. The case law cited by the assessee was found inapplicable on the facts. [Paras 6]

Assessee's challenge to the notice on the ground of absence of proper satisfaction is rejected.

Jurisdiction of Assessing Officer for recording reasons and passing assessment - Whether reopening and assessment are invalid because the officer who recorded reasons/issued notice and the officer who passed assessment did not have jurisdiction - HELD THAT: - The notice under section 148 was issued by ITO Ward-9(1)(2) and the assessment order was passed by ITO Ward-12(1)(3). Revenue explained that the reasons and notice were recorded/issued when the officer who acted then had jurisdiction and that subsequent departmental restructuring changed jurisdiction by the time assessment was completed. The assessee bore the onus to demonstrate lack of jurisdiction by cogent evidence, which it failed to discharge; mere bald assertions were held insufficient. Relevant authorities cited by the assessee were distinguishable on facts. [Paras 7]

Assessee's objection on jurisdictional grounds is rejected for want of substantiation.

Requirement of notice under section 143(2) - Effect of absence of a statutory notice under section 143(2) where assessee failed to comply with time-limit in notice under section 148 - HELD THAT: - Issuance of notice under section 143(2) is ordinarily mandatory before making an assessment. Here notice under section 148 required the assessee to file return within 30 days; the assessee responded after significant delay by asking the AO to treat an earlier time-barred return as response. The Tribunal found that failure to comply with the time conditions in the notice under section 148 disentitled the assessee to object to service of notice under section 143(2). The authorities relied upon by the assessee were held inapplicable to these facts. [Paras 8]

Ground challenging assessment for want of section 143(2) notice is rejected.

Sufficiency of reasons for reopening assessment - Validity and sufficiency of reasons recorded for reopening the assessment - HELD THAT: - The Assessing Officer initiated proceedings on tangible material, recorded satisfaction and specifically mentioned the person to whom premises were given for use. Although the assessee contended lack of quantification and reliance on a tax evasion petition, no persuasive material was produced to show the reasons were non-est. The Tribunal found the case law relied upon by the assessee distinguishable and concluded that the recorded reasons constituted a valid basis for reopening in the facts of the case. [Paras 9]

Assessee's plea that reasons are non-reasons is rejected.

Determination of annual value of unlet property-municipal valuation as yardstick - Remand to Assessing Officer for quantification - Proper basis for determining annual value of shops given for use without rent and need to re-determine area and annual value - HELD THAT: - The assessee's case was that the shops were not let and municipal valuation (as per Municipal Corporation certificate giving area and fair rental rates) should be the yardstick under section 23(1)(a). The Assessing Officer relied on an Inspector's report and adopted much larger areas and a higher net annual value. The Tribunal referred to precedent holding that municipal valuation is the proper yardstick for properties not actually let out, observed variance between municipal records and the AO's adopted areas, and noted that the Inspector's report relied upon by the AO was not placed on record. In view of these discrepancies and the need for precise quantification of area and computation, the Tribunal directed a remand to the Assessing Officer to determine exact area, compute annual rental value in accordance with municipal valuation principles and allow any municipal taxes actually paid as deduction. [Paras 11, 12]

Matter remitted to Assessing Officer to determine exact shop areas and compute annual value applying municipal valuation; municipal taxes paid to be allowed as deduction.

Mandatory interest under sections 234A, 234B and 234C - Challenge to levy of interest under sections 234A, 234B and 234C - HELD THAT: - Charging of interest under the cited provisions is statutory and consequential upon assessment; no circumstances were shown to warrant interference. Accordingly the Tribunal declined to disturb the levy of interest. [Paras 13]

Ground challenging imposition of interest under sections 234A, 234B and 234C is rejected.

Final Conclusion: All additional legal grounds raised by the assessee were rejected. On merits the Tribunal directed remand to the Assessing Officer to ascertain the exact area of the shops and to compute annual value in accordance with municipal valuation principles, allowing municipal taxes actually paid as deduction; the appeals for AY 2007-08 and AY 2008-09 are otherwise dismissed and are partly allowed for statistical purposes to the extent of the remand.

Validity of reopening of assessment and service of notice under section 148 - Filing of return under section 139(4) and validity of Form 2D for A.Y. 2006-07 - Assessment framed ex parte under section 144 read with section 147 - Addition as unexplained money / unexplained cash credit under section 69A and application of peak-credit doctrine - Remand for verification and opportunity of hearing

Validity of reopening of assessment and service of notice under section 148 - Assessment framed ex parte under section 144 read with section 147 - Remand for verification and opportunity of hearing - Whether proceedings under section 147/148 were validly initiated and completed having regard to service of notice, and whether these questions were properly adjudicated below. - HELD THAT: - The Tribunal found that both the Assessing Officer and the CIT(A) did not verify the assessee's claim of having filed a return on 09.03.2007 and the CIT(A) did not decide the appellant's specific objections regarding service of notice under section 148. The AO's reasons for reopening proceeded on the premise that no return had been filed and the assessment was completed ex parte under section 144. These factual and jurisdictional questions require examination of records and evidence (service, actual filing and departmental receipt of the alleged return) which are not presently before the Tribunal. Consequently the Tribunal held that the issues touching validity of reopening and service of notice were not finally adjudicated below and are fit to be remanded to the AO for fresh decision after affording the assessee appropriate opportunity of hearing. [Paras 6]

These questions are remanded to the file of the Assessing Officer for verification and fresh adjudication after opportunity of hearing.

Filing of return under section 139(4) and validity of Form 2D for A.Y. 2006-07 - Remand for verification and opportunity of hearing - Whether the CIT(A) was justified in rejecting the assessee's claim of having filed a return in Form 2D for A.Y. 2006-07. - HELD THAT: - The Tribunal observed that the CIT(A)'s rejection rested on the incorrect premise that Form 2D had been discontinued for A.Y. 2006-07 (it was introduced for A.Y. 2007-08). Given that the assessee produced an acknowledgement evidencing manual filing on 09.03.2007, the CIT(A)'s ground for rejection was not justified. Nevertheless, the Tribunal did not decide the ultimate question on merits but recorded that the veracity of the filing and departmental knowledge must be verified by the AO. Accordingly the matter as to the existence and effect of the alleged return is sent back for examination and fresh decision. [Paras 6]

CIT(A)'s rejection of the claim on the stated ground was not justified; the matter is remanded to the AO for verification and decision after hearing.

Addition as unexplained money / unexplained cash credit under section 69A and application of peak-credit doctrine - Remand for verification and opportunity of hearing - Whether the cash deposits in the assessee's bank account qualify as unexplained money under section 69A and the correct quantum of any addition (including application of peak-credit or recycling/peak-of-credits approach). - HELD THAT: - The assessee claimed the deposits were contract receipts offered to tax and relied on cash-flow particulars to show recycling of funds; he argued that, if any unexplained money is to be added, it should be limited to peak credits. The Tribunal noted that these factual contentions and the assessee's claim of filing the return were not verified by the AO or adjudicated by the CIT(A). Given the need to examine records, supporting documents and to afford the assessee an opportunity to prove source, the Tribunal refrained from expressing a view on merits and directed the AO to re-examine the issue and determine the quantum (including consideration of peak credit) after giving opportunity of hearing. [Paras 9]

Merits and quantum of any addition under section 69A are remanded to the Assessing Officer for fresh adjudication after verification and hearing; no appellate adjudication on merits by the Tribunal.

Final Conclusion: The Tribunal set aside the impugned decision for statistical purposes and remanded factual and jurisdictional issues-validity of reopening/service of notice, the question of filing and validity of the Form 2D return for A.Y. 2006-07, and the merits/quantum of additions under section 69A-to the Assessing Officer for fresh verification and decision after affording the assessee appropriate opportunity of hearing.

Restoration of name to Register under Section 252(1) of the Companies Act, 2013 - striking off of name under Section 248(1) of the Companies Act, 2013 - discretionary power of the Tribunal to restore where company was in operation - condition precedent of filing outstanding statutory documents and payment of late fees - requirement to pay to Prime Minister's Relief Fund as condition for restoration

Restoration of name to Register under Section 252(1) of the Companies Act, 2013 - discretionary power of the Tribunal to restore where company was in operation - Whether the company's name should be restored on the Register because it was in operation at the time of striking off and restoration is just. - HELD THAT: - The Tribunal examined the materials placed on record by the appellant, including audited financial statements for the period from F.Y. 2016 onwards, income-tax returns for specified assessment years, property sale agreements and court orders concerning the company's assets. Having regard to these documents, the Tribunal concluded that the company was not a defunct entity and had been in operation during the period preceding the strike off. Section 252(1) confers a discretionary power on the Tribunal to restore a company's name where it is established that restoration is just; the appellant satisfied this threshold by demonstrative evidence of continuing operations and transactions. The Registrar's action under Section 248(1) for striking off on account of non-filing was therefore amenable to restoration in the exercise of the Tribunal's discretion. [Paras 11]

The appeal is allowed insofar as the company's name is to be restored on the Register because restoration is just and the company was in operation when struck off.

Condition precedent of filing outstanding statutory documents and payment of late fees - requirement to pay to Prime Minister's Relief Fund as condition for restoration - What conditions, if any, should be imposed for restoration of the company's name. - HELD THAT: - The Tribunal accepted the Registrar's stance that restoration should be subject to compliance with statutory filing requirements. It directed that restoration is conditional upon the appellant filing all outstanding statutory documents with the Registrar of Companies up to date, paying the requisite late filing fees and any other charges leviable for late filing, and completing all formalities as required by law. Additionally, the Tribunal imposed the payment of a specified contribution to the Prime Minister's Relief Fund as a condition precedent to restoration. These conditions are imposed to regularise the company's compliance position and to balance the interest of stakeholders. [Paras 12]

Restoration is ordered subject to the filing of all outstanding documents with payment of prescribed late fees and other charges, and subject to payment to the Prime Minister's Relief Fund as directed.

Final Conclusion: The appeal is allowed; the public notice striking off the company's name is set aside and the company's name shall be restored to the Register of Companies on compliance with the Tribunal's stated conditions.

Initiation of Corporate Insolvency Resolution Process - Section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of debt and default - limitation - moratorium - appointment of Interim Resolution Professional

Initiation of Corporate Insolvency Resolution Process - Section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of debt and default - The Section 7 petition filed by the Financial Creditor is complete and is admitted for initiation of CIRP against the Corporate Debtor. - HELD THAT: - The Adjudicating Authority examined the loan documents, statements of account certified under the Bankers' Books Evidence Act, and CIBIL/CRILIC reports annexed to the petition. The Bench recorded that the Corporate Debtor availed the consortium credit facilities, the Financial Creditor proved the loans and the charge registrations, and that the debt is due, payable and in default. Having found that the petition was filed by a duly authorised official and the application was complete for the purpose of initiation of CIRP, the petition under Section 7 was admitted. [Paras 46, 47]

Section 7 petition admitted and CIRP initiated against the Corporate Debtor.

Limitation - acknowledgement of debt - The petition was held to be within the period of limitation. - HELD THAT: - The Authority noted the dates of default and the lodgement/amendment timeline of the petition, and relied upon execution of balance/acknowledgement letters and the last payment dates recorded in the accounts. On that basis the Bench concluded the application was filed within the prescriptive period and the amended petition was actionable. [Paras 16, 24, 46, 47]

Limitation objection repelled; petition treated as filed within the limitation period.

Moratorium - prohibition on enforcement actions - A moratorium under the Code was declared from the date of the order until completion of CIRP. - HELD THAT: - Relying on Sections 13 and 14 and having admitted the Section 7 petition, the Adjudicating Authority directed the moratorium which prohibits institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interests including actions under SARFAESI, and recovery of property occupied by the Corporate Debtor, subject to statutory exceptions. The moratorium duration was fixed to run until completion of the CIRP. [Paras 48, 54]

Moratorium declared with immediate effect and to continue for the CIRP period.

Appointment of Interim Resolution Professional - duties of IRP - An Interim Resolution Professional was appointed and directed to perform statutory duties. - HELD THAT: - The Bench accepted the Financial Creditor's proposed IRP and appointed him as Interim Resolution Professional. The IRP was directed to make the public announcement of moratorium, submit the assignment declaration, adhere to time-limits for CIRP and perform obligations under the Code, including protection and preservation of the Corporate Debtor's assets and obtaining assistance from personnel connected with the Corporate Debtor. [Paras 45, 49, 50]

Mr. Sandep Khaitan appointed as Interim Resolution Professional with directions to carry out statutory functions.

Effect of concurrent remedy - remedy in rem - Pending SARFAESI or recovery proceedings does not preclude initiation of CIRP by a Financial Creditor. - HELD THAT: - The Authority observed that pendency of SARFAESI proceedings or other disputes does not bar a Financial Creditor from invoking CIRP because the remedy under the Code is in rem in respect of the Corporate Debtor. Accordingly, such parallel proceedings were not a bar to admission of the Section 7 petition. [Paras 46]

Existence of parallel SARFAESI/recovery proceedings does not prevent initiation of CIRP.

Final Conclusion: The Adjudicating Authority admitted the Section 7 petition on 05.05.2021, declared moratorium under the Code with immediate effect, and appointed the named Interim Resolution Professional to conduct the Corporate Insolvency Resolution Process for the Corporate Debtor.

Quashing of show cause notices for inordinate delay - delay in adjudication - Section 11A time-limits - where it is possible to do so - call book / cold storage not a valid justification for prolonged delay

Quashing of show cause notices for inordinate delay - delay in adjudication - Section 11A time-limits - Impugned show cause notices issued in 2010 were liable to be quashed on account of inordinate delay in adjudication exceeding a decade. - HELD THAT: - The Court held that proceedings instituted by show cause notices dated 02.03.2010 and 06.05.2010 remained undecided for over ten years without any plausible or sufficient explanation attributable to the petitioners. Section 11A prescribes that, as far as possible, the amount of duty should be determined within six months in ordinary cases and within one year in cases involving fraud, collusion or similar misconduct. The statutory phrase "where it is possible to do so" does not permit the authority to consign matters to call book or otherwise keep them in cold storage for years on end. Following the reasoning in M/s GPI Textiles Limited and the line of authority cited therein, long unexplained delay in concluding adjudicatory proceedings vitiates the proceedings and renders revival after such delay unlawful and arbitrary. The Court noted there was no effective adjudication or meaningful reason shown for the protracted inaction and, accordingly, applied these legal principles to set aside the notices.

Impugned show cause notices issued in 2010 quashed and proceedings set aside for being barred by inordinate and unexplained delay.

Call book / cold storage not a valid justification for prolonged delay - where it is possible to do so - The administrative practice of consigning cases to a call book or awaiting unrelated decisions cannot, without lawful authority or explanation, justify delay extending to decades. - HELD THAT: - The Court endorsed the view that the concept of transferring matters to a call book to await decisions in other cases or otherwise storing matters for years is inconsistent with the statutory mandate that adjudication be carried out within the time-frame prescribed by Section 11A insofar as it is possible to do so. Absent statutory power to extend or abrogate the statutory time-limits, such administrative practices cannot operate to validate prolonged inaction; revival of proceedings after such long intervals, without adequate reason, vitiates the process.

Administrative consigning of matters to call book or similar storage does not validate prolonged non-adjudication and cannot be a plausible explanation for delay; such justification rejected.

Final Conclusion: The writ petition was allowed: show cause notices issued in 2010 were quashed on the ground of inordinate and unexplained delay in adjudication, the statutory time-limits in Section 11A and the principle that matters should be decided "where it is possible to do so" preclude consigning cases to call book for years.

Presumption under Section 139 of the Negotiable Instruments Act - maintainability of complaint under Section 138 of the Negotiable Instruments Act - requirement of list of prosecution witnesses under Section 204 Cr.P.C. as a curable irregularity - failure of justice / prejudice test under Section 537 Cr.P.C. - inherent powers of the High Court under Section 482 Cr.P.C. - curative provision under 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 - Whether omission in the complaint to aver that the cheque was received in discharge of a legally enforceable debt or liability renders the complaint under Section 138 NI Act non maintainable - HELD THAT: - The Court held that the absence in the complaint of an explicit averment that the cheque was received in discharge of a legally enforceable debt or liability does not vitiate the complaint because Section 139 of the Negotiable Instruments Act raises a statutory presumption that a cheque covered by Section 138 was given for the discharge, in whole or in part, of any debt or other liability. Consequently the petitioner cannot rely upon the absence of that specific averment to challenge maintainability. The reasoning is supported by the Supreme Court's exposition of the presumptions under Sections 118 and 139 and the shifting of onus to the accused to establish a probable defence to rebut the presumption. [Paras 5, 6, 7]

The complaint is maintainable despite not expressly averring receipt of the cheque in discharge of debt, by virtue of the presumption under Section 139 NI Act.

Requirement of list of prosecution witnesses under Section 204 Cr.P.C. as a curable irregularity - failure of justice / prejudice test under Section 537 Cr.P.C. - curative provision under Section 465 Cr.P.C. - Whether non filing of the list of prosecution witnesses with the complaint invalidates issuance of process and vitiates proceedings - HELD THAT: - The Court found that, although Section 204 Cr.P.C. contemplates filing a list of prosecution witnesses, omission to furnish that list prior to issuance of process constitutes an irregularity rather than a jurisdictional defect. Relying on precedent and the statutory safeguard in Section 537 Cr.P.C., the test is whether prejudice or a failure of justice has occurred; absent any pleaded or shown prejudice, the defect does not invalidate proceedings. Moreover, the defect is curable - the respondent may furnish the list and the Court may permit such cure under Section 465 Cr.P.C. before recording evidence - and therefore no interference under Section 482 Cr.P.C. is warranted. [Paras 8, 9, 11]

The omission to file the list of prosecution witnesses is a curable irregularity and does not vitiate the issuance of process in the absence of shown prejudice.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the Trial Court's order issuing process is upheld because the complaint is maintainable in view of the statutory presumption under Section 139 NI Act and the omission of the witness list is a curable irregularity not causing prejudice.

Compounding of offence under Section 138 N.I. Act - Compromise between parties - Waiver or reduction of costs under Damodar S. Prabhu - Judicial discretion to deviate from costs guidelines in special circumstances - Acquittal consequent to settlement/compounding

Compounding of offence under Section 138 N.I. Act - Compromise between parties - Acquittal consequent to settlement/compounding - Permission to compound the offence and setting aside of conviction and sentence in view of the compromise reached between the parties. - HELD THAT: - The Court recorded that the parties had effected a compromise dated 23.01.2019 and both sides were ad idem that the matter stood settled and the complainant did not dispute the compromise. Applying the principle that offences under Section 138 N.I. Act may be compounded where the parties settle and requisite permission is granted, the Court, having regard to the settlement and the parties' concurrence, granted permission to compound the offence, set aside the convictions and sentences recorded by the trial and appellate courts, dismissed the complaint and directed acquittal. The petitioner, if in custody in this case, was ordered to be released forthwith, subject to other cases, reflecting that the compounding resulted in final disposal on merits as between these parties. [Paras 10, 16]

Permission granted to compound the offence under Section 138 N.I. Act; impugned judgments and orders set aside; complaint dismissed and petitioner acquitted; custody (if any) to be terminated in this case.

Waiver or reduction of costs under Damodar S. Prabhu - Judicial discretion to deviate from costs guidelines in special circumstances - Whether the costs normally mandated by Damodar S. Prabhu may be waived in the present case. - HELD THAT: - The Court considered the appellant's submission that he had exhausted all resources to satisfy the compromise and that the complainant was willing to forego costs. Relying on the Apex Court's guidance in Madhya Pradesh State Legal Services Authority v. Prateek Jain that courts retain discretion to reduce or waive costs in appropriate cases and must record reasons, the High Court found special and specific reasons to deviate from the Damodar S. Prabhu costs regime. The complainant's concurrence and the peculiar financial position of the petitioner justified waiving the costs in this case, and the Court accordingly refrained from imposing the costs that would otherwise follow under Damodar S. Prabhu. [Paras 11, 13, 16]

Costs mandated by Damodar S. Prabhu dispensed with on the stated facts; Court exercised discretion to waive costs having recorded reasons and noting complainant's non-objection.

Final Conclusion: On the basis of the parties' compromise and the complainant's consent to forego costs, the High Court permitted compounding of the offence under Section 138 N.I. Act, set aside the convictions and sentences of the trial and appellate courts, dismissed the complaint and acquitted the petitioner, and in exercise of judicial discretion (recording reasons) waived the costs which would otherwise have been imposed under the Damodar S. Prabhu guidance.

Liability under lease to pay municipal taxes and charges - Article 285 exemption of property of the Union from State taxation - acquisition under Section 269-UD(1) of the Income Tax Act, 1961 and nature of interest acquired - bar against splitting of claims under Order II Rule 2 of the Code of Civil Procedure, 1908 - interim direction to pay municipal dues pending final adjudication - power of municipal authority to levy and collect taxes not amenable to routine interlocutory restraint

Liability under lease to pay municipal taxes and charges - Whether the defendants are liable to discharge municipal taxes, cess and charges in terms of the indenture of sub-lease and its modification and whether an interim direction for payment of arrears and future taxes can be issued pending final adjudication. - HELD THAT: - The lease and its subsequent modification expressly covenant that the lessee shall pay municipal rates, cess, assessments, dues, duties, charges and outgoings allocable in respect of the demised premises. The defendants, who have conceded that they have stepped into the shoes of the original sub-lessee and are in possession of the premises, cannot be absolved from contractual liability to pay such municipal taxes and charges. While the Court will not at this interlocutory stage adjudicate entitlement to possession or damages (which are matters for trial), there is no impediment to granting a limited interim direction in respect of the municipal dues. Accordingly, the Court directed that defendants may first pursue a claim for exemption with the Municipal Corporation and, failing a favourable order within two months, shall pay the municipal dues accumulated till 31st March 2021 and continue to pay taxes and charges as they fall due until disposal of the suit. Costs and consequences of any coercive action by the Municipal Corporation in the interim are to be borne by the defendants. [Paras 30, 31, 32, 42, 46]

Defendants must pursue any claim of exemption with the Municipal Corporation within two months; if unsuccessful, defendants shall pay municipal dues accumulated till 31st March 2021 and continue payment of taxes as they fall due; costs/consequences of any interim coercive action to be borne by defendants; other prayers rejected.

Article 285 exemption of property of the Union from State taxation - acquisition under Section 269-UD(1) of the Income Tax Act, 1961 and nature of interest acquired - Whether the suit premises qualify for exemption from municipal taxation under Article 285 by virtue of acquisition under Section 269-UD(1), and the appropriate forum to decide that question in the present proceeding. - HELD THAT: - Article 285 provides that property of the Union is, save as Parliament otherwise provides, exempt from State or local taxation. The Court recognized that the term 'property' is wide and may include interests short of absolute ownership. However, the question whether the leasehold interest acquired by the Union under Section 269-UD(1) is property of the Union for the purposes of Article 285 cannot be resolved in this interlocutory proceeding in the absence of the Municipal Corporation, which levied the demand. The defendants asserting exemption must pursue that claim before the Municipal Corporation; they cannot rely on a bare assertion of immunity in these proceedings while allowing the Municipal authority to proceed with recovery. [Paras 37, 38, 40, 41, 42]

The question of exemption under Article 285 is not determined in this proceeding; defendants are directed to pursue their claim of exemption with the Mumbai Municipal Corporation within two months, failing which the interim payment direction applies.

Bar against splitting of claims under Order II Rule 2 of the Code of Civil Procedure, 1908 - Whether the instant suit and the Notice of Motion are barred by Order II Rule 2 / Rule 3 (splitting of cause of action) because related reliefs are pending in Suit No. L-164/2014. - HELD THAT: - Order II Rule 2 aims to prevent multiplicity of litigation and splitting of claims. The correct test is whether the subsequent suit is founded upon the same cause of action as the former suit and whether the plaintiff was entitled to more than one relief in the earlier suit and omitted without leave to sue for the omitted relief. The Court held that the applicability of the bar requires a detailed examination and opportunity of hearing and cannot be finally decided at this interlocutory stage in relation to the main suit remedies (possession and damages). However, the challenge under Order II Rule 2 does not preclude interim adjudication of the specific prayer for municipal dues, as that claim rests on the contractual instruments and is distinguishable for present interim relief purposes. [Paras 27, 28, 29, 30, 31]

Order II Rule 2 objection requires fuller hearing and is not determinative of the present interim prayer for municipal dues; entitlement to possession and damages to be decided in Suit No. L-164/2014 and the main trial.

Power of municipal authority to levy and collect taxes not amenable to routine interlocutory restraint - interim direction to pay municipal dues pending final adjudication - Whether the Court can restrain the Municipal Corporation from proceeding with coercive recovery and what protective measures, if any, are appropriate pending resolution of the dispute. - HELD THAT: - The Court reiterated that a municipal authority cannot be lightly restrained from levying and collecting taxes; interim orders which block a municipality's revenue are to be avoided. The proper balancing exercise is to ensure that ratepayers are not prejudiced if ultimately successful while not paralysing municipal functions. Given the Municipal Corporation is not a party, the Court declined to grant a restraint on the Corporation. Instead, the Court afforded liberty to the plaintiff to place the order before the competent municipal officer and directed that if coercive action is taken within the two-month window, the defendants will bear costs and consequences. The Court thus provided a limited protective regime without enjoining the Municipal Corporation from recovery. [Paras 43, 44, 45, 46]

No restraint against the Municipal Corporation; plaintiff may place this order before the competent officer; defendants to bear costs/consequences of any coercive action during the two-month period; limited interim regime ordered.

Final Conclusion: Notice of Motion partly allowed: defendants permitted two months to obtain from the Mumbai Municipal Corporation a declaration/order that the suit premises are exempt from payment of municipal taxes, cess and charges; failing that, defendants shall pay municipal dues accumulated till 31st March 2021 and continue to pay taxes as they fall due until disposal of the suit; defendants to bear costs and consequences of any coercive action by the Municipal Corporation during the two-month period; rest of the prayers rejected; no costs.

Judicial review of tribunal order - infructuousness of proceedings - second stage vigilance advice - disciplinary proceedings involving common inquiry - finality of administrative action pending higher authority's decision

Judicial review of tribunal order - infructuousness of proceedings - Validity of the Central Administrative Tribunal's direction to the respondents to take final decision in the departmental proceedings by 31.03.2019 - HELD THAT: - The writ petition challenged the CAT order directing the authorities to complete the departmental proceedings against the respondent-employee without delay. Subsequent administrative developments - notably the communication of 20.09.2019 from the Joint Commissioner (Vigilance) recording that the CVO/DG(Vig) had advised dropping of charges and that the proposal had been forwarded to the appropriate disciplinary authority (with the senior-most authority being the President in light of common inquiry involving multiple officers) - rendered the relief sought before this Court unnecessary. The Court noted that the Directorate General of Vigilance had earlier directed that second-stage advice be kept pending till final decision of the appeal, and that the Joint Commissioner's communication indicated steps taken to implement the disciplinary authority's recommendation. In view of these interregnum developments and the fact that no further direction from this Court was required, the petition was held to be moot/infructuous and not meritorious on its substantive challenge to the CAT direction.

The petition is dismissed as infructuous and disposed of; rule discharged.

Final Conclusion: The High Court dismissed the challenge to the CAT order as infructuous in view of subsequent administrative action (CVO second-stage advice to drop charges and forwarding of the proposal to the competent disciplinary authority), and disposed of the petition with the rule discharged.