TaxTMI Updates e-Newsletter
May 26,2022

Regular bail - parity in grant of bail - preliminary satisfaction based on investigation and collected evidence - habitual offender - serious economic fraud causing loss to the State exchequer - directions for expeditious trial and liberty to seek bail in case of inordinate delay

Regular bail - parity in grant of bail - preliminary satisfaction based on investigation and collected evidence - habitual offender - serious economic fraud causing loss to the State exchequer - Whether petitioners Kamal, Sant Kumar and Shobhgaya are entitled to grant of regular bail in respect of FIR No.15 dated 9.1.2019/10.1.2019. - HELD THAT: - The Court examined the material collected during investigation and found prima facie evidence of the petitioners' complicity in floating bogus firms, getting firms registered in the names of others, issuing fabricated bills and claiming input tax credit leading to a large loss to the State exchequer. The investigation revealed that petitioner Kamal executed a rent deed to feign letting of premises, obtained identity documents of a co-accused to register firms, and that petitioner Shobhgaya's contact details were used for registration; Sant Kumar and Shobhgaya were involved in multiple identical FIRs. The prosecution had examined a portion of witnesses and the investigation attributed a colossal fraud (about Rs.1.80 crores) to the activities of the accused. In view of the magnitude of the alleged economic offence and the Court's finding that the petitioners are habitual offenders, parity with a co-accused who had been granted bail did not justify granting bail to these petitioners at this stage. On this basis the Court found no ground for bail. [Paras 8, 9, 10]

Petitions for regular bail are dismissed.

Directions for expeditious trial and liberty to seek bail in case of inordinate delay - Directions to the Trial Court regarding examination of witnesses and the petitioners' remedy in case of delay in conclusion of trial. - HELD THAT: - The Court directed the Trial Court to take necessary steps to examine the maximum number of witnesses and to endeavour to examine at least 50% of the cited witnesses within three months, subject to accused persons' cooperation. The Court recognised that if there is inordinate delay in conclusion of the trial the petitioners would be at liberty to approach the Trial Court afresh for grant of bail. [Paras 11]

Trial Court to expedite witness examination; petitioners may move for bail in case of inordinate delay.

Final Conclusion: Bail petitions of the three accused are dismissed on the basis of prima facie material of large-scale bogus GST/input-tax-credit fraud and habitual offending; the Trial Court is directed to expedite examination of witnesses and the accused retain the right to seek bail if the trial is unduly delayed.

Regular bail under Section 439 Cr.P.C. - custodial detention versus trial delay - distinction of role of accused in conspiracy - input tax credit fraud through bogus firms - no tampering risk where material witnesses are police and excise officials - charges framed but prosecution evidence largely unexamined - merits not finally adjudicated

Regular bail under Section 439 Cr.P.C. - custodial detention versus trial delay - charges framed but prosecution evidence largely unexamined - merits not finally adjudicated - Petitioners Ashish Kumar and Sonu Kumar Khuswah entitled to regular bail pending trial. - HELD THAT: - The Court, noting that only two out of thirty-four prosecution witnesses have been examined and that conclusion of trial is likely to consume considerable time, held that continued custody of the petitioners would not serve any useful purpose. The Court recorded that charges have been framed but substantial prosecution evidence remains unproduced. While cognizant of the serious allegations concerning purported input tax credit fraud through bogus firms and the existence of a conspiracy, the Court deliberately refrained from expressing any opinion on the merits of the case. The Court also observed that material witnesses are police and Excise Department officials and, on present materials, there does not appear to be a realistic risk of their being won over. Applying these factors, the Court exercised its discretionary power under Section 439 Cr.P.C. to grant bail, subject to the usual bail/surety conditions to be fixed by the trial Court or Duty Magistrate.

Petitioners released on regular bail subject to furnishing requisite bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate.

Distinction of role of accused in conspiracy - input tax credit fraud through bogus firms - The petitioners' involvement was considered distinguishable from the principal accused who allegedly orchestrated the bogus firms and obtained tax benefits. - HELD THAT: - Counsel for the petitioners argued that Ashish Kumar and Sonu Kumar Khuswah were implicated on the basis of conspiracy and were not direct beneficiaries of the alleged tax fraud; the principal role was attributed to co-accused Rahul Sharma. The Court accepted that, on the material before it, the role of these petitioners is distinguishable from that of the accused alleged to be mainly instrumental in taking tax benefits in the name of nonexistent firms. This distinction contributed to the exercise of the Court's discretion in favour of bail, without adjudicating the veracity of the prosecutorial allegations.

Distinction in roles noted and factored into the grant of regular bail, without adjudication on merits.

Final Conclusion: Bail allowed: petitioners released on regular bail pending trial, subject to furnishing bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate; no expression of opinion on merits.

Classification of paintings under Heading 9701 - Application of Rule 32(5) of the CGST Rules (taxation of margin on second hand goods) - Treatment where input tax credit is not availed on purchase of goods - Advance ruling reliance on prior AAR decision

Classification of paintings under Heading 9701 - Schedule II Entry No. 236 - Classification of second hand or used paintings - HELD THAT: - The Authority examined the nature of the goods sold by the applicant and followed the earlier ruling of this Authority in the Astaguru Auction House matter. Having found that the goods in question are paintings executed entirely by hand and fall within the description for paintings (as identified by the applicant), the Authority concluded that such paintings are classifiable under Heading 9701 of the GST Tariff. The Authority did not find grounds to depart from its prior determination in the similar earlier case and applied the same classification to the instant facts. [Paras 5]

Paintings sold by the applicant are classifiable under Heading 9701.

Application of Rule 32(5) of the CGST Rules (taxation of margin on second hand goods) - Treatment where input tax credit is not availed on purchase of goods - Advance ruling reliance on prior AAR decision - Whether Rule 32(5) of the CGST Rules applies for determination of tax liability on sale of second hand paintings - HELD THAT: - The Authority noted the applicant's factual position that it purchases second hand paintings and does not avail input tax credit on those purchases. Relying on the prior AAR decision involving similar facts, and observing no reason to deviate, the Authority held that Rule 32(5) of the CGST Rules (the margin scheme for second hand goods where no ITC is taken) is applicable. Consequently, tax liability on sale of such second hand paintings is to be determined by applying Rule 32(5), i.e., tax on the difference between selling price and purchase price, with negative value to be ignored as per the rule. [Paras 5]

Rule 32(5) of the CGST Rules is applicable to the applicant in respect of second hand paintings purchased and sold by it, where no input tax credit has been availed.

Final Conclusion: The Authority ruled that the second hand paintings dealt with by the applicant are classifiable under Heading 9701 and that, since no input tax credit is availed on their purchase, the margin scheme in Rule 32(5) of the CGST Rules applies so that tax is leviable on the difference between selling and purchase price.

Bail - economic offence - fraudulent claim of Input Tax Credit - issuance and utilisation of fake invoices - non-bailable offence threshold under Section 132(1)(i) of the CGST Act - investigation at nascent stage - need for stringent approach in economic offences

Bail - economic offence - fraudulent claim of Input Tax Credit - issuance and utilisation of fake invoices - non-bailable offence threshold under Section 132(1)(i) of the CGST Act - investigation at nascent stage - Whether the accused Saurabh Srivastava was entitled to grant of bail in the proceedings arising from alleged procurement and use of fake invoices to claim Input Tax Credit. - HELD THAT: - The Court found allegations that the accused, as proprietor of M/s Saibro Industries, procured and used fake invoices across nearly 56 firms to claim Input Tax Credit aggregating to Rs. 5.65 crore, and that suppliers admitted issuing goods-less invoices. The prosecution alleged non-cooperation and failure to attend investigation despite summons. The court applied the principle that economic offences, particularly those involving deep-rooted conspiracies and substantial evasion of public funds, warrant a stricter approach to bail (referring to the approach in Y.S. Jagan Mohan Reddy v. CBI). The investigation was observed to be at a nascent stage, and the gravity, nature of allegations, and potential impact on the economy were held to outweigh the defence submissions (including the contention that after certain payments the amount falls below the statutory threshold for non-bailability). In view of the amount alleged to have been evaded exceeding the statutory threshold, the attendant seriousness of the accusations, and the risk factors identified, the court declined to exercise its discretion in favour of bail. [Paras 4, 5, 6]

Bail application of accused Saurabh Srivastava dismissed.

Final Conclusion: Considering the alleged claim of Input Tax Credit by use of fake invoices aggregating to Rs. 5.65 crore, the nascent stage of investigation, and the serious economic implications, the Court refused bail to the accused and dismissed the bail application.

Jurisdictional notice - limitation under Section 149 - deemed show-cause notice under Section 148A - implementation of Supreme Court order under Article 142 - CBDT Instruction No.01/2022

Jurisdictional notice - limitation under Section 149 - CBDT Instruction No.01/2022 - Validity of notice under Section 148 dated 01.04.2021, the notice under Section 144 dated 13.01.2022, and reassessment order dated 13.01.2022 under Section 147 read with Section 144B for A.Y. 2014-15. - HELD THAT: - The court observed that a notice under Section 148 is a jurisdictional prerequisite for initiating proceedings under Section 147 and that time-limits for issuance of such notices are governed by Section 149. The Supreme Court's decision in Union of India v. Ashish Agarwal and the CBDT Instruction No.01/2022 treat extended reassessment notices issued after 01.04.2021 as deemed show-cause notices under substituted Section 148A, while also prescribing the operation of the amended Section 149 to identify cases where fresh notices can be issued. Instruction No.01/2022 expressly provides that for A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16, fresh notices under Section 148 can be issued only if the case falls within clause (b) of sub-section (1) of amended Section 149 (i.e., income escaping assessment represented as an asset is likely to amount to Rs.50 lakh or more), and that cases not meeting that threshold cannot be proceeded with under the amended provisions. The Additional Solicitor General admitted that, applying clause 7.1 of the Board's Instruction, notices under Section 148 for A.Y. 2014-15 do not attract the Ashish Agarwal remedy and that the impugned notice dated 01.04.2021 for A.Y. 2014-15 is barred by limitation and therefore without jurisdiction. In view of the said admission and the statutory scheme as interpreted by the Supreme Court and implemented by the CBDT, the court did not consider other arguments and proceeded to quash the impugned notices and the reassessment order for A.Y. 2014-15. [Paras 7, 10, 11, 12]

Impugned notices dated 01.04.2021 (Section 148) and 13.01.2022 (Section 144) and reassessment order dated 13.01.2022 under Section 147 read with Section 144B for A.Y. 2014-15 are quashed.

Final Conclusion: Writ petition allowed; the reassessment proceedings initiated by the impugned notices and the reassessment order for A.Y. 2014-15 were quashed as barred by limitation in view of the CBDT Instruction implementing the Supreme Court's order and the concession made by the respondents.

Condonation of delay - genuine hardship - exercise of powers under Section 119(2)(b) - justice oriented approach in extension of time - mandatory nature of conditions for exemption

Condonation of delay - genuine hardship - exercise of powers under Section 119(2)(b) - justice oriented approach in extension of time - Validity of the respondent's order dated 17.06.2021 rejecting the petitioner's application for condonation of delay in filing Form No.10B for A.Y.2014-15 and whether the delay ought to be condoned under Section 119(2)(b). - HELD THAT: - The Court examined the scope of Section 119(2)(b) and authoritative decisions which require a liberal, justice oriented approach in condoning delays where genuine hardship would otherwise result. While recognising that exemption provisions and statutory conditions must be construed in their context, the Court relied on precedents holding that authorities should not adopt an unduly pedantic or restrictive approach and that bona fide or non deliberate delays may be condoned to allow substantive adjudication on merits. The respondent's order was found to reflect an unduly restrictive application of discretion by rejecting the condonation solely on the ground that technical difficulties and a long delay (about six years) were not satisfactory, without applying the broad remedial purpose of Section 119(2)(b) and the principles laid down in cited cases. Having applied the governing legal principles, the Court concluded that the condonation application should have been allowed and that the impugned order was liable to be set aside.

The impugned order dated 17.06.2021 rejecting the condonation application is quashed and the delay in filing Form No.10B for A.Y.2014-15 is condoned.

Final Conclusion: Writ petition allowed; the respondent's order dated 17.06.2021 is quashed and the petitioner's application for condonation of delay in filing Form No.10B for A.Y.2014-15 is allowed.

Deduction under section 80P(2)(a)(i) of the Income-tax Act - Interest income from deposits with co-operative banks - Investments made in compliance with the Karnataka Co-operative Societies Act and Rules - Income from business - Deduction under section 80P(2)(d) of the Income-tax Act

Deduction under section 80P(2)(a)(i) of the Income-tax Act - Interest income from deposits with co-operative banks - Investments made in compliance with the Karnataka Co-operative Societies Act and Rules - Income from business - Whether interest income earned on deposits with co-operative banks, where investments are made in compliance with the Karnataka Co-operative Societies Act and Rules, is assessable as income from business and eligible for deduction under section 80P(2)(a)(i) of the Act - HELD THAT: - The Tribunal examined the claim for deduction in respect of interest earned on deposits with Apex Bank, BDCC Bank and other co-operative banks and followed the reasoning of the Bangalore bench in M/s Prathamika Krushi Pattina Sahakari Niyamata v. PCIT. That decision held that where interest income arises from investments made in conformity with the Karnataka Co-operative Societies Act and Rules, such receipts are to be treated as income from business and attract the benefit of deduction under section 80P(2)(a)(i). The Tribunal applied that precedent to the assessee's case, observing that the interest income from investments complying with statutory requirements falls within the scope of the exemption granted to co-operative societies. The Tribunal further noted that interest income received out of investments with co-operative societies is allowable under section 80P(2)(d) as well, and directed restoration of the matter to the Assessing Officer for allowance of the deduction after giving the assessee an opportunity of being heard.

Order of the authorities denying deduction under section 80P was set aside and the matter remitted to the AO with directions to allow deduction under section 80P(2)(a)(i) for interest on investments made in compliance with the Karnataka Co-operative Societies Act and Rules, after affording the assessee an opportunity of hearing.

Final Conclusion: Appeal allowed for statistical purposes; the order of the lower authorities is set aside and the assessment is restored to the file of the Assessing Officer with directions to allow the claim for deduction under section 80P(2)(a)(i) in respect of interest earned on compliant co-operative bank investments, after giving the assessee an opportunity to be heard.

Rectification under section 154 of the Income-tax Act - mistake apparent from record - disallowance under section 40(a)(ia) of the Income-tax Act - reliance on internal audit objections

Rectification under section 154 of the Income-tax Act - mistake apparent from record - reliance on internal audit objections - disallowance under section 40(a)(ia) of the Income-tax Act - The rectification proceedings initiated under section 154 and the consequent addition under section 40(a)(ia) were valid or not where the AO acted on objections of the internal audit party despite relevant details having been furnished during original assessment. - HELD THAT: - The Tribunal found that the AO initiated rectification proceedings on the basis of presumptions drawn by the internal audit party about short deduction of TDS, and not on any mistake apparent from the assessment record. The assessee had furnished, during original assessment proceedings, breakup details of professional and advertisement payments, and had shown that many payments were below the threshold for TDS and therefore not liable to deduction; those facts were accepted by the AO in the original assessment. The internal audit party's mathematical inferences and conjectures did not displace the factual record before the AO. In these circumstances there was no 'mistake apparent from record' in the assessment order that could warrant invoking rectification under section 154, and initiation of such proceedings on the basis of internal audit objections alone was held to be unsustainable.

The initiation of rectification proceedings under section 154 and the resulting addition under section 40(a)(ia) were quashed; the rectification order was set aside.

Final Conclusion: The appeal is allowed: the rectification order passed under section 154 and the consequent addition under section 40(a)(ia) are quashed and the order of the Commissioner (Appeals) upholding the rectification is set aside.

Proportionate deduction under section 80IB(10) - built-up area as defined in section 80IB(14)(a) - inclusion of projections/window boxes in built-up area - allowability of warranty expenses under section 37 - remand for fresh consideration and verification of evidence

Proportionate deduction under section 80IB(10) - CIT(A) rightly allowed proportionate deduction under section 80IB(10) in respect of eligible units. - HELD THAT: - The Tribunal noted that the assessee claimed alternate relief of proportionate deduction for units complying with section 80IB(10). The CIT(A) allowed deduction on eligible units relying on Tribunal and High Court decisions, a position that was not disputed by the Revenue before the Tribunal. Having considered the facts and the authorities placed before it, the Tribunal found no infirmity in CIT(A)'s conclusion and affirmed allowance of proportionate deduction for units which meet the statutory criteria. [Paras 5]

Appeal of the Revenue on this ground is dismissed; CIT(A)'s grant of proportionate deduction on eligible units is upheld.

Built-up area as defined in section 80IB(14)(a) - inclusion of projections/window boxes in built-up area - Assessee's challenge to denial of deduction for 10 flats on the ground that certain projections/window boxes should be excluded from built-up area was rejected. - HELD THAT: - The Tribunal recorded that the assessee raised the contention before the authorities that the cavity-wall box/window projection should not be included in built-up area. The AO obtained a report from the DVO/Registered Valuer which concluded that those projections are includable and that the ten flats thereby exceed the prescribed built-up area. The Tribunal found no dispute by the assessee on this factual finding and agreed with the CIT(A)'s reasoning (paras 6.10-6.12 of the impugned order) that the projections are part of built-up area as defined in section 80IB(14)(a). Consequently the ten flats do not qualify for deduction under section 80IB(10). [Paras 10]

Ground challenging denial of deduction for the ten flats is dismissed; CIT(A)'s confirmation of disallowance is upheld.

Allowability of warranty expenses under section 37 - Assessee's claim that warranty expenses should be allowed was rejected on the facts. - HELD THAT: - The Tribunal noted that a related decision in the assessee's group (Gera Development Pvt. Ltd.) was placed on record, but the CIT(A) found the assessee had not demonstrated that the facts were identical to that sister concern. Applying the principle in Rotork Controls India Pvt. Ltd. as followed by the CIT(A), the Tribunal found no material before it to distinguish the present case and agreed that the warranty expenses could not be allowed. No further material was furnished to justify deviation from the impugned order. [Paras 12]

Ground challenging disallowance of warranty expenses is dismissed; CIT(A)'s confirmation of the disallowance is sustained.

Remand for fresh consideration and verification of evidence - Issue of disallowance on account of alleged hawala bills is remanded to the AO for fresh consideration in light of evidence now tendered. - HELD THAT: - The Tribunal observed that no details were placed before the lower authorities, whereas the assessee produced documents (pages 43-71 of the paper book) before the Tribunal and expressed readiness to furnish further evidence. The Revenue raised no objection to remand. In the interests of justice, the Tribunal directed that the matter be remitted to the file of the AO for fresh adjudication and permitted the assessee to file supporting evidence. [Paras 14]

Ground relating to hawala bills is allowed for statistical purposes and remanded to the AO for fresh consideration.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and, in the assessee's appeal, upheld denial of deduction for the ten flats and the disallowance of warranty expenses, while remanding the issue regarding hawala bills to the AO for fresh consideration; the CIT(A)'s allowance of proportionate deduction on eligible units under section 80IB(10) was affirmed.

Relief under section 89(1) of the Income tax Act - mode of computation under Rule 21A of the Income tax Rules - salary received in advance versus compensation on termination of employment - substance over form in characterisation of payment - Form 10E as supporting document for section 89 relief

Relief under section 89(1) of the Income tax Act - mode of computation under Rule 21A(2) and Rule 21A(4) - salary received in advance versus compensation on termination of employment - Form 10E as supporting document for section 89 relief - Whether the one time lump sum ex gratia payment received by the assessee ought to be treated as salary received in advance (entitling to relief under section 89(1) computed as per Rule 21A(2)) or as compensation on termination of employment (governed by Rule 21A(4)). - HELD THAT: - The Tribunal examined the material facts: the textile unit closed in 2008; the assessee was among employees who did not opt for VRS; individual and supplementary agreements fixed a one time lump sum ex gratia amount payable in lieu of payments up to age 63; the employer issued Form 16, deducted TDS under section 192 and described the payment as salary in advance; the assessee filed Form 10E and claimed relief under section 89(1). The Assessing Officer treated the payment as compensation on termination and allowed limited relief under Rule 21A(1)(c)/(4). The Tribunal, applying the principle of substance over form and following a coordinate bench decision on identical facts, held that the factual matrix and employer's treatment indicate the payment was in essence salary receivable in future years paid in advance rather than compensation for termination. Consequently the mode of computation under Rule 21A(2) (spread of advance/arrears of salary) applies and the assessee is entitled to relief under section 89(1) as computed in Form 10E. The Tribunal disagreed with the view that the lump sum represented termination compensation, noting that payments characterized and treated as salary by the employer (Form 16, TDS under section 192) and the contractual arrangements support the characterisation as salary in advance. [Paras 3, 4]

The lump sum ex gratia payment is to be treated as salary received in advance; relief under section 89(1) computed as per Rule 21A(2) is allowable and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, following a coordinate bench on identical facts, holding that the lump sum payment was salary in advance and directing that relief under section 89(1) be granted computed in accordance with Rule 21A(2).

Unrecorded/unexplained payments to employees and addition under section 69C - addition on account of concealed net profit - assessments framed under section 153A of the Income Tax Act - mechanical approval under section 153D - use of seized ledgers/diaries as basis for additions - set off of proceeds from shortage in stock against undisclosed payments - deletion of addition for alleged undisclosed investment in property - estimate/rough note based additions and the prohibition on additions founded on conjecture or surmise

Unrecorded/unexplained payments to employees and addition under section 69C - use of seized ledgers/diaries as basis for additions - set off of proceeds from shortage in stock against undisclosed payments - Quantum of addition on account of unrecorded payments to employees for AYs 2016-17, 2017-18 and 2018-19 and entitlement to benefit of salaries recorded in books of related concerns and offset against shortage in stock. - HELD THAT: - Seized manual ledgers containing employee wise cash payments formed the AO's basis for additions. The assessee explained that the seized ledgers contained consolidated entries for three family concerns managed by a single person (Shri Satpal Sachdeva), who was not further examined by the AO. The CIT(A) allowed benefit only to the extent of salaries debited in the assessee's books. Having considered the record, the Tribunal accepted the assessee's plausible explanation and the supporting profit & loss extracts of the sister concerns; in consequence the benefit of salaries debited in all three family concerns was directed to be allowed prior to making any addition. The Tribunal further held that the shortage in stock discovered on the date of survey could not be presumed to have existed in earlier years absent evidence; therefore no set off against the updated undisclosed salary additions was allowed for AYs 2016 17 and 2017 18. For AY 2018 19 (the year in which the shortage was unearthed and the assessee did not press challenge to the gross profit addition), the Tribunal allowed adjustment so that the undisclosed salary addition for that year was restricted after giving effect to the gross profit addition on shortage of stock. [Paras 14]

Allowing in part the assessee's appeals: unrecorded payments to employees recalculated as Rs.11,82,418 for AY 2016 17, Rs.10,71,106 for AY 2017 18 and Rs.9,73,447 for AY 2018 19, with the AY 2018 19 figure being adjusted by the confirmed gross profit on shortage of stock as directed.

Addition on account of concealed net profit - estimate/rough note based additions and the prohibition on additions founded on conjecture or surmise - Validity of additions made as concealed net profit for AYs 2016 17, 2017 18 and 2018 19. - HELD THAT: - AO estimated concealed net profits by applying the ratio of salary (as per seized documents) to salary as per books against net profit, on the premise of an alleged parallel turnover. The Tribunal accepted the assessee's submission that it is a trading concern where salary quantum does not bear a direct proportion to profit and that no incriminating material was found to demonstrate out of books sales generating undisclosed profit. The Tribunal held that additions of the nature made by the AO were founded on conjecture and the AO had not led evidence to establish concealed profit; consequently such additions could not be sustained. [Paras 14]

Set aside the additions made as concealed net profit for all three years and direct the AO to delete those additions.

Deletion of addition for alleged undisclosed investment in property - Whether addition for alleged undisclosed investment in property 'Kothi Tehal Singh' could be sustained in the hands of the partnership concern. - HELD THAT: - CIT(A) found, and the Tribunal agreed, that the impugned investment related to property held by individuals in their personal capacities and not by the firm; there was no link establishing that the partnership concern had made the investment during the block period. The Bench noted that the same conclusion had been arrived at in an earlier order in a related appeal (ITA 247/Chd/2021). Department failed to demonstrate perversity in CIT(A)'s factual finding. [Paras 15]

Uphold deletion of the addition in respect of the alleged undisclosed investment in property; the Department's appeal on this point is dismissed.

Estimate/rough note based additions and the prohibition on additions founded on conjecture or surmise - unaccounted purchases - Validity and quantum of addition on account of alleged unaccounted purchases (documents labelled 'Estimate'). - HELD THAT: - The CIT(A) examined the documentary record and found that the slips marked 'ROUGH ESTIMATES' bore serial/continuous numbering, item descriptions, quantities and amounts; parties' accounts were credited by bill amounts indicating purchases rather than mere approval slips. The assessee failed to demonstrate accounting for these transactions. On that factual matrix the Tribunal found no error in CIT(A)'s conclusion to sustain the addition to the extent upheld by the CIT(A). [Paras 17]

CIT(A)'s conclusion is upheld; the addition is sustained to the extent confirmed by CIT(A) and the assessee's ground is dismissed.

Assessments framed under section 153A of the Income Tax Act - mechanical approval under section 153D - Challenges to the validity of assumption of jurisdiction under section 153A and to alleged mechanical approval under section 153D. - HELD THAT: - Assessee challenged framing of assessments under section 153A (contending there was only a survey and no search/Panchnama at the partnership premises) and alleged that approvals under section 153D were mechanical. The Tribunal observed these contentions but declined to adjudicate them because it had decided the appeals on merits (substantive additions). Consequently these legal/contentionary grounds were treated as academic. [Paras 18]

Challenges to the validity of assessment proceedings under section 153A and to the alleged mechanical nature of approval under section 153D are not adjudicated as they have become academic in view of the substantive disposal; they are dismissed as academic.

Final Conclusion: For AYs 2016 17, 2017 18 and 2018 19 the Tribunal partly allowed the assessee's appeals by recalculating and restricting the additions for unrecorded payments to employees (allowing benefit of salaries of related family concerns and, for 2018 19, giving effect to the gross profit addition on shortage of stock), deleted all additions made as concealed net profit, upheld deletion of the investment related addition in respect of 'Kothi Tehal Singh', and sustained the CIT(A)'s partial confirmation of unaccounted purchases; the Department's cross appeal was dismissed and the remaining legal challenges to jurisdiction under section 153A and to approval under section 153D were held academic and not decided on merits.

Restriction of deduction under 80-IB(11C) on mere suspicion without concrete evidence - comparative profitability analysis inadmissible where entities operate under different legal and commercial conditions (charitable trust versus commercial hospital) - findings of Income Tax Settlement Commission as evidentiary material to rebut allegations of siphoning and accommodation entries - addition based on differences between two accounting softwares is not sustainable where the total difference has been reconciled and offered to tax

Restriction of deduction under 80-IB(11C) on mere suspicion without concrete evidence - comparative profitability analysis inadmissible where entities operate under different legal and commercial conditions (charitable trust versus commercial hospital) - findings of Income Tax Settlement Commission as evidentiary material to rebut allegations of siphoning and accommodation entries - Whether the Assessing Officer was justified in restricting the deduction claimed under 80-IB(11C) by treating part of the profits of Meenakshi Hospital as unaccounted income on the basis that funds of the charitable trust were siphoned off and reintroduced into the hospital receipts. - HELD THAT: - The Assessing Officer restricted the 80-IB(11C) deduction on the basis that receipts of the hospital were inflated by re-introduction of cash allegedly siphoned from the charitable trust through a supplier (Monica Group), and relied on a comparative profitability analysis between the charitable trust (MMHRC) and the commercial hospital (MH). The Tribunal accepted the CIT(A)'s finding that, apart from the admitted difference between two accounting softwares (which amount was offered to tax), there was no material or direct evidence-confessions, seized material proving return of cash, or other corroboration-showing that monies withdrawn by Monica Group were returned to and introduced by the assessee into MH receipts. The Tribunal noted the ITSC proceedings in which the supplier admitted additional income but the ITSC observed absence of evidence showing return of cash to MMHRC; that outcome undermined the AO's siphoning hypothesis. The Tribunal also held that comparing profitability of a registered charitable trust and a commercial super-specialty hospital operating under different conditions was not a valid basis to infer inflation of receipts. In view of the absence of concrete evidence and the reconciliation/offering of the software-difference to tax, the restriction of deduction was unsustainable. [Paras 5, 6, 7, 9]

The restriction of deduction under 80-IB(11C) was unjustified and the Assessing Officer was directed to allow the full deduction; revenue appeals dismissed on this point.

Addition based on differences between two accounting softwares is not sustainable where the total difference has been reconciled and offered to tax - Whether the separate addition made in AY 2015-16 on account of the difference in cash collections for a particular day (as contrasted with the total reconciled software difference) was maintainable. - HELD THAT: - The AO made a specific addition for a single day's difference notwithstanding that the assessee reconciled the aggregate difference between the two softwares for the entire period and offered the reconciled amount in the return of income. The CIT(A) partly sustained an addition after detailed analysis of dates, but the Tribunal held that a discrete addition for one date cannot be severed from the total reconciled difference which had been offered to tax. Given that the total discrepancy for the period was reconciled and declared, the separate addition for the particular day was not justified and required deletion. [Paras 4, 5, 10]

The separate addition in AY 2015-16 was deleted and the assessee's cross-objection allowed.

Final Conclusion: For AY 2014-15 and AY 2015-16 the Tribunal dismissed the revenue's appeals and allowed the assessee's cross-objection: full deduction under 80-IB(11C) was to be allowed and the specific addition based on a single-day software difference was deleted.

Revision under section 263 - assessment order not erroneous and not prejudicial to the interest of Revenue - plausible view of the Assessing Officer - entries in revenue records as prima facie evidence of agricultural character of land - verification and rectification proceedings under section 154 - characterisation of land as agricultural for capital gains exemption

Revision under section 263 - assessment order not erroneous and not prejudicial to the interest of Revenue - plausible view of the Assessing Officer - verification and rectification proceedings under section 154 - characterisation of land as agricultural for capital gains exemption - entries in revenue records as prima facie evidence of agricultural character of land - Validity of the Pr. CIT's order under section 263 setting aside the assessment for A.Y. 2015-16 - HELD THAT: - The Tribunal held that the Assessing Officer had called for and considered the assessee's explanations and documentary evidence under notice u/s 142(1) and thereafter allowed the claim that the profit on sale arose from agricultural land. The assessee furnished purchase and sale deeds, Jamabandi, Khasra/Khatauni, a Tehsildar certificate on distance, crop inspection (Khasra/Girdawari) showing cultivation, and other location/population material; the AO examined these documents and, when a rectification u/s 154 was proposed to include the gain in book profits u/s 115JB, the AO after considering the assessee's response dropped the proposed rectification. The Pr. CIT's objections - reliance on a line in the sale deed, the earlier disallowance of a small agricultural receipt for A.Y. 2014-15, and the purchaser's commercial status - were found by the Tribunal to be either based on a misreading of the sale deed or irrelevant: the sale deed line merely stated no oral contract for cultivation; non-acceptance of an agricultural receipt in an earlier year did not conclusively establish non-agricultural use of the land; and the possible future non-agricultural use or purchaser's business motive does not, by itself, negate agricultural character. The Tribunal relied on settled principle that entries in revenue records and evidence of cultivation constitute good prima facie proof of agricultural character unless rebutted by the Revenue. Given that the AO had twice verified and taken a plausible view supported by materials, the assessment order could not be said to be erroneous or prejudicial to the Revenue and therefore did not warrant interference under section 263. [Paras 4, 5, 6, 7]

The order passed by the Pr. CIT u/s 263 setting aside the assessment is quashed and the appeal is allowed.

Final Conclusion: The Tribunal held that the Assessing Officer had examined and accepted sufficient evidence to treat the land as agricultural, had taken a plausible view (including dropping proposed rectification u/s 154), and consequently the Pr. CIT's revision under section 263 was not justified; the revision order was quashed and the assessee's appeal allowed.

Deductibility of employees' contribution to PF/ESI under Section 36(1)(va) read with Section 2(24)(x) - applicability of Section 43B to employees' contribution - effect of judicial precedent: reliance on Sagun Foundry (P.) Ltd. and CIT vs. Alom Extrusions Ltd. - prospective operation of Finance Act, 2021 amendment to Section 36(1)(va) and Section 43B

Deductibility of employees' contribution to PF/ESI under Section 36(1)(va) read with Section 2(24)(x) - applicability of Section 43B to employees' contribution - effect of judicial precedent: reliance on Sagun Foundry (P.) Ltd. and CIT vs. Alom Extrusions Ltd. - prospective operation of Finance Act, 2021 amendment to Section 36(1)(va) and Section 43B - Assessee entitled to deduction of employees' contributions to PF/ESI deposited after statutory due date but before filing of return; Section 43B does not defeat deduction in the facts of this case and the Finance Act, 2021 amendment is prospective. - HELD THAT: - The Tribunal accepted that the employees' contributions were deposited after the statutory due date under the relevant welfare statutes but before filing of the return for the relevant assessment year. The Tribunal followed the reasoning of the Hon'ble Allahabad High Court in Sagun Foundry (P.) Ltd., which, after considering the Supreme Court decision in CIT v. Alom Extrusions Ltd., applied Section 43B to both employer and employee contributions and held that payment before filing of return gives entitlement to deduction. The Tribunal noted divergent high court decisions but observed that the jurisdictional High Court's decision favours the assessee. The Tribunal further considered the amendment effected by Finance Act, 2021 inserting clarificatory explanations to Section 36(1)(va) and Section 43B and found that those amendments are expressly made effective from 01.04.2021 (assessment year 2021 22) and are therefore prospective; they do not affect earlier assessment years. Having regard to the binding precedential position relied upon and the prospective nature of the 2021 amendment, the Tribunal held that the addition disallowing employees' contribution must be deleted. [Paras 6, 8, 10, 12]

Addition disallowing employees' contribution to PF/ESI deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, deleted the disallowance of employees' contributions to PF/ESI (deposited after statutory due date but before filing return) and held that the Finance Act, 2021 amendment applies prospectively from 01.04.2021.

Deduction under section 80IB(10) - proportionate allowance for eligible units - Deduction under section 80IA(4)(iii) - notification requirement by CBDT - Section 14A - disallowance for expenditure in relation to exempt income - Section 68 - unexplained cash credits: proof of identity, creditworthiness and genuineness - Compensatory v. penal interest - treatment of interest on service tax and VAT - Allowability of bad debts and stock written off as business loss

Compensatory v. penal interest - treatment of interest on service tax and VAT - Whether interest and penalties disallowed by the AO (interest on service tax, interest on VAT, interest on TDS/TCS and penalty on sales tax) are allowable expenditure. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of interest on service tax and interest on VAT as compensatory in nature following the Supreme Court authorities cited, and confirmed that such amounts are allowable under section 37(1). The Tribunal refused the assessee's challenge to the residual disallowance: it sustained the disallowance of interest on TDS/TCS and confirmed the assessee's non-pressing of the challenge to penalty on sales tax. The effective disallowance confirmed by the Tribunal was the small balance sustained by the CIT(A). [Paras 5]

Interest on service tax and VAT allowed; disallowance of interest on TDS/TCS and penalty on sales tax sustained to the extent confirmed by the lower authorities; assessee's ground dismissed.

Deduction under section 80IA(4)(iii) - notification requirement by CBDT - Entitlement to deduction claimed under section 80IA(4)(iii) for profits of the industrial park 'Salarpuria Touchstone'. - HELD THAT: - The CIT(A) denied the claim because the industrial park had not been brought within the required notification by the CBDT at the relevant time. The Tribunal agreed that, as on the date of the order, the claim was not allowable for want of the CBDT notification, but recorded that the High Court was seised of related proceedings and that if a later court decision favours the assessee the revenue authorities may reconsider the claim. [Paras 5]

Claim under section 80IA(4)(iii) denied by the Tribunal; dismissal of assessee's ground subject to any subsequent favourable judicial decision which may allow reconsideration by revenue.

Section 14A - disallowance for expenditure in relation to exempt income - Validity of the disallowance under section 14A and Rule 8D where the assessee had not earned exempt income in the year and had sufficient interest-free funds. - HELD THAT: - The CIT(A) deleted the disallowance on the basis that no exempt income was earned during the year. The Tribunal found that the assessee had substantial interest-free funds (share capital and reserves) sufficient to cover investments and that the AO had not made specific findings that interest-bearing funds were applied to earn exempt income nor complied with the requirement in subsection (2) to show dissatisfaction with the assessee's claim. Applying judicial precedent, the Tribunal held the interest disallowance to be uncalled for and upheld deletion. [Paras 7]

Disallowance under section 14A deleted; revenue's ground dismissed.

Apportionment of interest expenditure where interest-free advances exist - Sustainability of AO's disallowance of part of interest expense on the basis that interest-free advances were made to group subsidiaries. - HELD THAT: - The AO's computation disallowing interest was not supported by a specific finding as to the quantum of interest-bearing funds applied to interest-free advances. The Tribunal accepted the CIT(A)'s finding that the assessee possessed sufficient interest-free funds (share capital and reserves) to cover the advances to subsidiaries and that the AO had not demonstrated application of interest-bearing funds to those advances. Consequently, the Tribunal found no infirmity in the deletion of the disallowance. [Paras 7]

Disallowance of interest of Rs.1,00,89,940/- deleted; revenue's ground dismissed.

Section 68 - unexplained cash credits: proof of identity, creditworthiness and genuineness - Whether share application money received from four group companies could be added as unexplained cash credit under section 68. - HELD THAT: - The assessee furnished incorporation documents, IT returns, assessed orders, audited financial statements, bank statements and ROC filings for each applicant company, and the CIT(A) also considered the AO's remand report. The CIT(A) concluded that the three ingredients of section 68 (identity, creditworthiness and genuineness) were established and observed that the AO made no attempt to disprove the material. The Tribunal found these materials sufficient, noted the companies were group concerns with demonstrated net worth and business operations, and held that the AO's addition could not be sustained in these circumstances. [Paras 7]

Addition under section 68 deleted; revenue's ground dismissed.

Compensatory v. penal interest - treatment of interest on service tax and VAT - Revenue's challenge to CIT(A)'s deletion of disallowance of interest on delayed deposit of service tax and VAT. - HELD THAT: - Having already examined this issue in the assessee's appeal and following the Supreme Court authority that such interest is compensatory and not penal, the Tribunal confirmed the CIT(A)'s deletion of the disallowance and held the amounts allowable under section 37(1). [Paras 7]

Deletion of disallowance for interest on service tax and VAT confirmed; revenue's ground dismissed.

Allowability of bad debts and stock written off as business loss - Allowability of amounts written off as stock and sundry debtors. - HELD THAT: - The CIT(A) accepted documentary evidence filed on appeal: the stock written off related to assets of an SEZ project abandoned due to change in government policy and was held to be a business loss; sundry debtors were sales/rental incomes offered earlier and thereafter found irrecoverable and thus allowable as bad debts, applying the Supreme Court precedent in TRF Ltd and relevant High Court decisions. The Tribunal found no infirmity in these conclusions. [Paras 7]

Write-offs allowed (stock as business loss; sundry debts as bad debts); revenue's ground dismissed.

Deduction under section 80IB(10) - proportionate allowance for eligible units - Entitlement to deduction under section 80IB(10) for projects 'Salarpuria Serenity' and 'Salarpuria Sanctity', including whether failure on limited units vitiates the whole project claim. - HELD THAT: - For 'Salarpuria Serenity' the assessee produced project approval and completion certificates (commencement certificate 31.12.2007; completion 08.12.2009) and the Tribunal rejected the AO's disbelief as insufficient where the local authority had issued certificates and the AO had accepted sales and profits for taxation. For 'Salarpuria Sanctity' the AO found two flats sold to husband and wife in breach of clauses (e) and (f); the CIT(A) (and Tribunal) followed judicial precedents permitting a liberal and purposive construction of the incentive provision to allow proportionate deduction for units complying with the statutory criteria while denying deduction only for the non-complying units. The Tribunal applied relevant High Court and Supreme Court authority endorsing proportionate allowance and liberal construction of incentive provisions. [Paras 7]

Deduction under section 80IB(10) allowed in full for Salarpuria Serenity and allowed proportionately for Salarpuria Sanctity (excluding profit attributable to the two non-complying units); revenue's ground dismissed.

Final Conclusion: Both cross appeals are dismissed: the assessee's appeals are dismissed; the Revenue's appeals are dismissed. The Tribunal confirmed deletion of several AO additions (section 14A, part of interest disallowance, section 68 addition, bad debts/stock write-offs) and upheld allowance of interest on service tax/VAT as compensatory; it allowed the deduction under section 80IB(10) for the specified projects (full for Salarpuria Serenity and proportionate for Salarpuria Sanctity) while denying the section 80IA(4)(iii) claim for lack of CBDT notification as on the date of decision.

Validity of reassessment under section 147 - Reopening notice vitiated for lack of independent reasons - Information received from another assessing officer insufficient to form belief for reopening - Sanction of Joint Commissioner under section 151(2) - Application of time limit provisions under section 153 where income of one person is to be assessed as income of another

Validity of reassessment under section 147 - Reopening notice vitiated for lack of independent reasons - Information received from another assessing officer insufficient to form belief for reopening - Sanction of Joint Commissioner under section 151(2) - Application of time limit provisions under section 153 where income of one person is to be assessed as income of another - Reopening of assessment for A.Y. 2007-08 under section 147 was invalid and the reassessment order was quashed. - HELD THAT: - The Assessing Officer issued the section 148 notice for A.Y.2007-08 after recording reasons that relied principally on observations made by the ITAT in the assessment of another taxpayer. The Tribunal held that the AO had not made an independent enquiry or recorded independent material linking the information on record to a belief that income had escaped assessment in respect of the assessee; reliance solely on another AO's or another case's findings is insufficient to form such belief. Although the question of prior sanction under section 151(2) was raised and the revenue referred to difficulty in producing sanction records, the Tribunal's determinative finding was that the reopening itself was founded on a wrong assumption of fact and on information from another assessing officer which could not, by itself, establish the requisite belief. Given that the assessee thereafter filed the return and the shares of income of the joint lessees were determinate and not disputed by the revenue, the Tribunal found reasonableness in the assessee's submissions and authorities relied upon, concluded that the reassessment was bad in law and quashed the assessment order. Because the legal issue on validity was decided in favour of the assessee, the Tribunal left adjudication on merits as academic and did not decide them. [Paras 13, 14, 15, 16]

Reassessment proceedings for A.Y.2007-08 are quashed as invalid for want of independent reasons justifying reopening; merits left open.

Final Conclusion: The reassessment for A.Y.2007-08 is quashed; the assessee's appeal is allowed and the revenue's cross-appeal is dismissed as infructuous.

Right to adequate time to reply to a show cause notice under Section 148A(b) - extension of time and adjournment requests - exclusion of the period granted under Section 148A(b) from limitation under the third proviso to Section 149 - quashing and remand for a fresh reasoned order under Section 148A(d)

Right to adequate time to reply to a show cause notice under Section 148A(b) - extension of time and adjournment requests - Whether the Assessing Officer was justified in treating a one day delay in seeking adjournment as a bar to the assessee filing a reply to the show cause notice and in passing the order under Section 148A(d) and issuing notice under Section 148 dated 13th April, 2022. - HELD THAT: - The Court held that an assessee is entitled to adequate time to submit its reply in terms of Section 148A(b), which permits the Assessing Officer to provide up to thirty days and to further extend that period on application. The period so granted is excluded while computing limitation for issuance of a notice under Section 148 by operation of the third proviso to Section 149. Having regard to those statutory protections and the fact that the assessee is a resident of the United States of America, the Court found that a one day delay in seeking adjournment should not have resulted in closure of the right to file a reply. Accordingly the impugned order and notice, which proceeded on the basis that no reply had been filed, were unsustainable. [Paras 5, 6]

Impugned order under Section 148A(d) and notice under Section 148 dated 13th April, 2022 are quashed insofar as they proceed without considering the assessee's reply; the assessee's right to file and have its reply considered was vindicated.

Quashing and remand for a fresh reasoned order under Section 148A(d) - What remedial direction should follow from quashing the impugned order and notice. - HELD THAT: - The Court directed that Respondent No.1 shall pass a fresh reasoned order under Section 148A(d) after considering the reply dated 13th/14th April, 2022 filed by the petitioner. The fresh order is to be rendered in accordance with law and within a specified timeframe so as to secure the assessee's statutory right to have its submissions examined before any decision to proceed under Section 148 is taken. [Paras 7]

Respondent No.1 to pass a fresh reasoned order under Section 148A(d) after considering the petitioner's reply, within eight weeks.

Final Conclusion: The writ petition is allowed by quashing the order under Section 148A(d) and the notice under Section 148 dated 13th April, 2022; the Assessing Officer is directed to consider the reply filed by the petitioner and pass a fresh reasoned order under Section 148A(d) within eight weeks.

Adjustment of refunds under Section 245 - statutory requirement of notice under Section 245 - refund of excess recovery beyond 10% of disputed tax demand - stay of demand until disposal of the first appeal - principles of natural justice in tax set-off - statutory interest on refund

Stay of demand until disposal of the first appeal - CBDT directions on grant of stay - Validity of a restrictive stay order limiting stay only till 30th September, 2020 instead of till disposal of the first appeal. - HELD THAT: - The Court held that the restrictive stay order dated 11th March, 2020 which granted stay only till 30th September, 2020 was contrary to the directions of the CBDT and prior orders of this Court. The Assessing Officer is required to grant stay till the disposal of the first appeal; a time-limited stay in the circumstances was therefore impermissible and inconsistent with settled administrative directions and judicial precedent. [Paras 5]

The restrictive time-limited stay was held to be in violation of applicable directions and prior orders; stay should extend till disposal of the first appeal.

Statutory requirement of notice under Section 245 - adjustment of refunds under Section 245 - principles of natural justice in tax set-off - Whether adjustment of the petitioner's refund was valid when no prior notice under Section 245 was issued and no opportunity of hearing was afforded. - HELD THAT: - The Court recorded that no notice under Section 245 had been issued to the petitioner prior to adjustment of refunds, which is a mandatory requirement. Adjustment of refund without issuance of the requisite notice and without affording an opportunity to be heard violated the principles of natural justice. Further, the actual set-off took place on 7th September, 2021 prior to the later dated order said to be passed under Section 245 on 28th January, 2022, reinforcing that the adjustment procedure was not properly followed. [Paras 3, 6]

Adjustment without the mandatory Section 245 notice and without opportunity to be heard was invalid and contrary to natural justice.

Refund of excess recovery beyond 10% of disputed tax demand - statutory interest on refund - set-off of refunds - Entitlement to refund of amount adjusted in excess of 10% of the disputed tax demand and the relief to be granted. - HELD THAT: - Having found the time-limited stay improper and the adjustment process defective, the Court concluded that the petitioner was entitled to the refund of the portion adjusted in excess of 10% of the total disputed tax demand for Assessment Year 2017-18. The Court directed respondents to refund the excess amount within four weeks and to pay statutory interest thereon, thereby restoring the petitioner to the position compelled by the applicable stay and procedural safeguards. [Paras 6, 7]

Respondents directed to refund the amount adjusted in excess of 10% of the disputed demand for AY 2017-18 within four weeks with statutory interest.

Final Conclusion: Writ petition allowed in part: the restrictive time-limited stay was held inconsistent with CBDT directions; adjustment of refunds without the mandatory Section 245 notice and opportunity to be heard was invalid; respondents directed to refund the amount adjusted in excess of 10% of the disputed demand for AY 2017-18 within four weeks along with statutory interest.

Opportunity of hearing - validity of order under Section 263 of the Income Tax Act, 1961 - assessment order under Section 143(3) read with Section 263 and Section 144B - availability of alternative statutory remedy of appeal - appealability of reassessment and departmental order

Opportunity of hearing - validity of order under Section 263 of the Income Tax Act, 1961 - Impugned order passed under Section 263 was not vitiated for want of opportunity of hearing. - HELD THAT: - The show cause notice dated 02.11.2020 fixed compliance on 09.11.2020; the petitioner sought adjournment and subsequently filed a written reply on 22.12.2020. Having considered this chronology, the Court found that it cannot be said that the Section 263 order was passed without affording the petitioner an opportunity of being heard. The petition seeking quashing of the Section 263 order on the ground of denial of hearing was therefore not sustainable.

Order under Section 263 does not stand vitiated for want of opportunity of hearing.

Assessment order under Section 143(3) read with Section 263 and Section 144B - availability of alternative statutory remedy of appeal - appealability of reassessment and departmental order - Writ petition was not entertained in respect of the impugned tax orders because alternative statutory remedies were available and a subsequent assessment order had been passed. - HELD THAT: - After the Section 263 order, the Assessing Authority issued notices and an assessment order under Section 143(3) read with Section 263 and Section 144B for Assessment Year 2016-17 was passed on 29.03.2022. The impugned Section 263 order is appealable under the statutory appeal provision and the assessment order is appealable under the appropriate appeal provision. In view of the availability of these statutory remedies and the subsequent assessment proceedings, the High Court declined to entertain the writ petition and left the petitioner free to pursue the statutory appellate remedies if so advised.

Writ petition dismissed; petitioner permitted to pursue statutory appeals against the departmental orders.

Final Conclusion: Writ petition dismissed: the Section 263 order was held not vitiated for lack of hearing and, in view of the subsequent assessment order and availability of statutory appeals, the petitioner was relegated to avail the statutory remedy of appeal.

Right to livelihood - fundamental right to work - suspension of customs broker licence - early hearing - separation of interlocutory relief from merits

Early hearing - suspension of customs broker licence - right to livelihood - fundamental right to work - separation of interlocutory relief from merits - Application for early hearing of the appeal against suspension of customs broker licence was allowed and the appeal directed to be listed at the next available Division Bench. - HELD THAT: - The Tribunal examined only whether sufficient grounds existed for early hearing of the appeal against the suspension order dated 05.02.2021. Relying on the fact that continuance of the suspension rendered the customs broker and its employees jobless and thereby affected the applicant's ability to earn livelihood, the Tribunal observed that continuation of the suspension without examining its necessity impinged upon the applicant's fundamental right to work. The Tribunal expressly refrained from adjudicating the merits of the underlying suspension or the seriousness of the alleged offences, noting that those matters must be examined when the appeal itself is heard. Applying the principle that interlocutory relief directed to prevent deprivation of livelihood may warrant expedited consideration, the Tribunal directed that the appeal be placed before the next available Division Bench for hearing. [Paras 4]

Application for early hearing allowed; appeal to be listed in the next available Division Bench in Chandigarh.

Final Conclusion: The Tribunal allowed the application for early hearing of the appeal against suspension of the customs broker licence, holding that continuation of the suspension impinged the applicant's right to livelihood, and directed that the appeal be listed before the next available Division Bench; the merits of suspension were left open for the hearing of the appeal.

Scheme of Amalgamation sanctioned under Sections 230-232 of the Companies Act, 2013 - Vesting of assets, rights, liabilities and proceedings of transferor company in transferee company - Dispensing with meetings of preference shareholders and convening of meetings of equity shareholders and creditors - Requirement of notice to statutory authorities and consideration of Regional Director/ROC/Income tax reports - Compliance with SEBI listing obligations and applicable FEMA/FDI requirements in merger - Registrar of Companies filings, e form INC 28 and stamp duty adjudication on sanctioned scheme - Quantification and payment of Regional Director's legal fees

Scheme of Amalgamation sanctioned under Sections 230-232 of the Companies Act, 2013 - Dispensing with meetings of preference shareholders and convening of meetings of equity shareholders and creditors - Sanction of the proposed Scheme of Amalgamation between M/s. Commercial Engineers & Body Builders Co. Ltd. (Transferee Company) and M/s. Jupiter Wagons Limited (Transferor Company). - HELD THAT: - The Tribunal examined the petition, the Scheme, statutory notices, the report of the Chairman of meetings and filings evidencing service and publication. The requirements of Sections 230 and 232 were held to be satisfied: meetings were dispensed or convened as directed, the requisite notices to statutory authorities were issued and published, and the reports of shareholders and creditors showed approval (equity shareholders 98.04%; secured and unsecured creditors 100%). The petition was admitted and the Tribunal found the Scheme to be bona fide and in the interest of shareholders and creditors, also noting connected proceedings in the NCLT, Kolkata Bench in respect of the transferor company. On this basis the Company Petition CP(CAA) No. 08 of 2021 was allowed and the Scheme was sanctioned.

The Scheme envisaging amalgamation is sanctioned and is declared binding on the companies, their shareholders, creditors and all concerned.

Requirement of notice to statutory authorities and consideration of Regional Director/ROC/Income tax reports - Compliance with SEBI listing obligations and applicable FEMA/FDI requirements in merger - Consideration of representations by the Regional Director, Registrar of Companies and Income tax authorities and the petitioner's responses regarding SEBI, FEMA/FDI and other regulatory compliance. - HELD THAT: - The Tribunal recorded the Regional Director's observations concerning fees on enhanced authorised capital, applicability of SEBI circulars, foreign/NRI/FB shareholding compliance under FEMA/RBI, and charge entries on MCA portal. The petitioner filed a detailed affidavit addressing each point: stating post merger paid up capital was within post merger authorised capital and undertaking compliance with directions; confirming compliance with SEBI Listing Regulations and circulars and undertaking to adhere to stock exchange and SEBI requirements; asserting regular FLA filings and applicability of automatic route for mergers; and explaining the charge structure including satisfaction and filing of CHG 4. The Income tax report recorded no demand due for recovery. The Tribunal, after considering these responses, found no adverse observations preventing sanction and accepted the undertakings.

The representations of statutory authorities were considered; petitioner's explanations and undertakings were accepted and did not preclude sanction of the Scheme.

Vesting of assets, rights, liabilities and proceedings of transferor company in transferee company - Registrar of Companies filings, e form INC 28 and stamp duty adjudication on sanctioned scheme - Quantification and payment of Regional Director's legal fees - Directions consequential to sanction: transfer and vesting of assets, liabilities and proceedings; registration with ROC and stamping; and payment of Regional Director's fees. - HELD THAT: - Pursuant to sanction, the Tribunal ordered that all properties, rights and powers and all liabilities and duties of the transferor company stand transferred to and vested in the transferee company without further act or deed, subject to existing charges. Proceedings pending against the transferor company shall continue against the transferee company. The petitioner companies were directed to deliver certified copy of the order to the Registrar of Companies for registration, to lodge authenticated copy of the order and Scheme with the Superintendent of Stamps for adjudication within sixty days, and to file the order and Scheme with the ROC electronically (including e form INC 28) and physically within prescribed timelines. The legal fees and expenses of the office of the Regional Director were quantified at Rs. 10,000/ for both petitioner companies and ordered to be paid by the transferee company.

Assets, liabilities and proceedings of the transferor company are vested in the transferee company; statutory filings, stamping and ROC formalities are directed; Regional Director's fees quantified and payable by transferee company.

Final Conclusion: The Tribunal allowed CP(CAA) No. 08 of 2021, sanctioned the Scheme of Amalgamation between the stated companies as being bona fide and in the interest of shareholders and creditors, directed consequential vesting, statutory filings and stamp adjudication, and quantified payment of the Regional Director's fees; the petition is disposed of with no order as to costs.

Extinguishment of claims upon approval of a resolution plan - Binding effect of an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - Resolution Plan operates in rem and bars initiation or continuation of proceedings in respect of pre approval claims - Full and final payment under a resolution plan - Effect of Supreme Court approval of a resolution plan

Extinguishment of claims upon approval of a resolution plan - Binding effect of an approved resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - Full and final payment under a resolution plan - Resolution Plan operates in rem and bars initiation or continuation of proceedings in respect of pre approval claims - Claims and liabilities of Essar Steel India Ltd. (now ArcelorMittal Nippon Steel India Ltd.) in respect of dues prior to 16.12.2019, including the water charges claimed by the respondents, stand extinguished and discharged insofar as ESIL/AMNS is concerned. - HELD THAT: - The Corporate Insolvency Resolution Process in respect of ESIL culminated in a Resolution Plan approved by the Committee of Creditors on 25.10.2018 and thereafter by the Supreme Court on 15.11.2019. Section 31(1) of the Code renders an approved resolution plan binding on the corporate debtor and all stakeholders, including government creditors. The Resolution Plan expressly provides that all claims and related proceedings in respect of the corporate debtor up to the Plan Approval Date shall stand irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity and that no person shall be entitled to initiate or continue proceedings to enforce any such claim. The Supreme Court's judgment endorses this consequence and rejects the continuation of "undecided" claims that would undermine the finality intended by Section 31. The court records that the operational creditor's claim was dealt with under the Plan and a payment, accepted by the respondent, was made and treated as full and final settlement of outstanding dues. Applying these legal principles and factual findings, the impugned demands/ notices relating to pre approval dues (including the water charges) stand extinguished as against ESIL/AMNS. [Paras 6, 11, 12]

Special Civil Application No.8741 of 2008 filed by Essar Steel India Ltd. (now ArcelorMittal Nippon Steel India Ltd.) is allowed to the extent that all claims and liabilities of ESIL/AMNS prior to 16.12.2019, including the water charges claimed by the respondents, stand extinguished.

Final Conclusion: The writ petition is allowed insofar as it seeks a declaration that claims and proceedings relating to dues of the corporate debtor prior to 16.12.2019 (including the water charges) have been extinguished by the approved Resolution Plan and the Supreme Court's approval thereof under Section 31 of the Insolvency and Bankruptcy Code, 2016; accordingly the impugned notices stand discharged insofar as ESIL/AMNS is concerned.

Renewal of passport pending criminal investigation - obligation to comply with summons and personal appearance under the Prevention of Money Laundering Act - presumption under Section 23 of the Prevention of Money Laundering Act - cooperation with investigation as condition for relief - supervisory jurisdiction under Section 482 CrPC and duty to come with clean hands

Renewal of passport pending criminal investigation - obligation to comply with summons and personal appearance under the Prevention of Money Laundering Act - cooperation with investigation as condition for relief - Validity of the Special Court's refusal to permit renewal of the petitioner's passport where further investigation by the Enforcement Directorate is pending and the petitioner did not personally comply with summons requiring his appearance. - HELD THAT: - The Special Court's dismissal of the petition for renewal of the passport was grounded on the Enforcement Directorate's ongoing further investigation into large scale alleged money laundering and the petitioner's failure to comply with summons calling for his personal appearance. Although the petitioner had earlier been granted limited passport renewals and had produced documents through an authorised representative, the summons issued under the Act expressly required his personal attendance. The court accepted the Enforcement Directorate's position that personal interrogation of the petitioner was necessary for completion of the further investigation and that reliance solely on documents or a representative was inadequate. Given the scale of the alleged laundering, the possibility that proceeds might be abroad, and the statutory presumption under Section 23 of the Act operating against the petitioner during further investigation, the court held that renewal could be considered only after the petitioner made himself available for interrogation and cooperated with the investigating agency. The petitioner's invocation of supervisory jurisdiction under Section 482 CrPC did not entitle him to passport relief when he had not come with clean hands or complied with investigatory summons; accordingly, there was no basis to interfere with the Special Court's order. The court noted that the petitioner remains free to apply afresh after appearing before the Investigating Officer and cooperating with the investigation. [Paras 7, 8, 9, 10]

The Special Court's order refusing renewal of the passport is upheld; the petitioner may apply again after personally appearing before and cooperating with the Investigating Officer.

Final Conclusion: Crl. M.C. dismissed; the order refusing passport renewal is not interfered with, and the petitioner is at liberty to approach the trial court again after personally appearing before the Enforcement Directorate and cooperating with the ongoing investigation.

Adjudication under Section 73 of the Finance Act, 1994 - Extended period of limitation under proviso to Section 73 - Section 174 of the Central Goods and Services Tax Act, 2017 and its saving effect - Availability of alternative remedy and maintainability of writ under Article 226/227

Adjudication under Section 73 of the Finance Act, 1994 - Extended period of limitation under proviso to Section 73 - Whether the adjudicating authority was justified in initiating proceedings under Section 73 and in invoking the proviso to attract extended period of limitation. - HELD THAT: - The Court held that determination of whether the petitioner's conduct (failure to obtain registration and non-payment of service tax) justifies invocation of jurisdiction under Section 73, and whether the factual matrix attracts the proviso for extended limitation, requires adjudication on the evidence and materials on record. These are mixed questions of fact and law which cannot be resolved on the writ petition record; the appellate/ adjudicating authority is vested to examine both fact and law and to decide on the existence of circumstances attracting the extended period. [Paras 8]

Such questions require factual adjudication by the appropriate authority and cannot be decided in the writ; they must be considered on appeal or in the adjudication process.

Section 174 of the Central Goods and Services Tax Act, 2017 and its saving effect - Whether Section 174 of the CGST Act, 2017 precludes initiation of proceedings under Section 73 of the Finance Act, 1994. - HELD THAT: - The Court noted that the contention regarding the saving provision in Section 174 was not raised before the adjudicating authority despite opportunities for production of documents and personal hearing. The Court observed that this is a matter that can be raised before the appellate authority and that it involves questions requiring consideration of pleadings and materials; therefore the Court declined to adjudicate the merit of the contention in the writ petition. [Paras 8]

The plea under Section 174 may be raised and considered by the appellate/competent authority; the High Court declined to decide the issue on the writ.

Availability of alternative remedy and maintainability of writ under Article 226/227 - Whether the writ petition should proceed or be withdrawn to enable the petitioner to pursue the alternative remedy of appeal under the relevant scheme. - HELD THAT: - The petitioner sought permission to withdraw the writ to avail the alternative appellate remedy under Chapter V of the Finance Act, 1994. The Court, while declining to express any view on the merits, allowed the petitioner to withdraw the writ and to prefer the statutory appeal. The Court observed that limitation and other pleas not raised before the adjudicating authority can be raised before the appellate authority. [Paras 9, 10]

The writ petition is disposed of by permitting withdrawal; the petitioner is at liberty to file the statutory appeal.

Final Conclusion: The writ petition is disposed of on the petitioner's request to withdraw; the High Court declined to decide merits, held that factual questions regarding invocation of Section 73 and the proviso require adjudication by the appropriate authority, that the contention under Section 174 CGST may be raised before the appellate authority, and granted liberty to prefer the statutory appeal.

Classification of services between Cargo Handling Service and Storage and Warehousing Service - composite/package charges and incidence of tax on amounts separately charged for storage beyond free/packaged period - exclusion of handling of export cargo from Cargo Handling Service - incidental/ancillary nature of storage vis-a -vis cargo handling in Container Freight Stations - use of Board circulars in construing taxable character of CFS activities

Classification of services between Cargo Handling Service and Storage and Warehousing Service - exclusion of handling of export cargo from Cargo Handling Service - use of Board circulars in construing taxable character of CFS activities - Whether activities carried out by Container Freight Stations (carting, stuffing/destuffing, loading/unloading, internal movement and allied handling) are correctly classifiable as Cargo Handling Service or as Storage and Warehousing Service. - HELD THAT: - The Tribunal examined the statutory definitions, CBEC circulars and the nature of operations at CFSs. It held that CFSs are established primarily to handle import/export cargo for clearance and temporary processing and that handling activities are integral to that primary object. The Board's clarifications of 01.08.2002 and subsequent circulars recognise services provided by container freight stations as falling within Cargo Handling Service, and also exclude handling of export cargo from the tax net under that entry. The tribunals and courts cited show that where a composite package rate is charged for the full range of CFS operations (receipt, handling, stuffing/destuffing, short-term holding incidental to processing and movement to/from port), those activities can be treated as cargo handling. The impugned orders which characterised the handling activities at CFS as primarily incidental to storage and warehousing were rejected as contrary to the function of CFSs and to the Board's guidance. The Tribunal also accepted the clarification that transportation need not be the essential character of cargo handling and that those activities may still fall under cargo handling where they form part of the cargo-processing function of a CFS. The adjudicating authorities' findings that appellants had artificially split charges to evade tax on exports were not sustained where records showed separate storage charges and where handling formed part of the composite cargo-handling package.

Handling activities undertaken by the appellants at Container Freight Stations are not to be indiscriminately re-characterised as Storage and Warehousing Services; such activities fall within Cargo Handling Service when they form part of the CFS's cargo-processing function and where export-handling exclusion applies, the appellants' classification as cargo handling is sustainable.

Composite/package charges and incidence of tax on amounts separately charged for storage beyond free/packaged period - incidental/ancillary nature of storage vis-a -vis cargo handling in Container Freight Stations - Whether service tax on Storage and Warehousing Service is leviable on amounts collected by CFSs as part of package rates, or only on separate/extra charges specifically attributable to storage beyond the period included in package rates. - HELD THAT: - Drawing on the Board circular and precedents, the Tribunal held that where a composite package rate covers handling and a specified short period of custody incidental to processing, no separate tax on storage arises for that included period. However, if the CFS collects separate charges specifically attributable to storage beyond the free/packaged period (i.e., amounts distinctively billed as storage/warehousing), such amounts are chargeable to service tax under Storage and Warehousing Service. The Tribunal accepted that appellants paid service tax on storage charges when levied separately and noted authorities which confined tax to sums separately collected as warehousing. Consequently, demands which treated all handling and bundled charges as storage without examining whether storage charges were separately levied or the package covered the period were unsustainable.

Service tax under Storage and Warehousing Service is payable only on amounts separately charged/attributable to storage beyond the period included in the composite/package rate; package charges covering handling and incidental short-term custody are not to be reclassified as storage for taxability.

Final Conclusion: The impugned orders are set aside and the appeals are allowed: activities at the Container Freight Stations are to be regarded, in their primary character, as Cargo Handling Service (with the export-handling exclusion where applicable), and service tax under Storage and Warehousing Service is leviable only on amounts separately charged for storage beyond the free or packaged period.

Admissibility of electronic evidence under Section 36B - Validity of Panchnama under Section 100 CrPC - Reliability and corroboration in clandestine removal cases - Standard of proof in taxation - preponderance of probabilities - Quantification of duty evaded requires corroborative evidence

Validity of Panchnama under Section 100 CrPC - Procedural irregularities in Panchnama proceedings were present but do not automatically render seized evidence inadmissible; such evidence must be weighed with caution and in conjunction with corroborative material. - HELD THAT: - The Tribunal found multiple infirmities in the conduct of searches and Panchnama - repeated use of the same panch witnesses, lack of clear identification of premises occupants or owners at the so called secret office, absence of explanation about how panchas recognised individuals, and apparent pre typed documents and procedural lapses. While recognising that illegal or irregular searches do not per se invalidate relevant evidence (citing constitutional and precedent principles), the Bench held that such evidence must be scrutinised more carefully and evaluated in conjunction with corroborative material before adverse conclusions are drawn. The presence of procedural infractions therefore weakened the probative value of the seized material and required careful weighing rather than automatic exclusion. [Paras 8, 9, 17]

Panchnama proceedings suffered procedural infirmities; seized evidence is not ipso facto invalid but must be weighed with caution and corroboration.

Admissibility of electronic evidence under Section 36B - Printouts taken from the external hard disc were subject to the rigours of Section 36B and procedural non compliance undermined their evidentiary value; the investigating agency failed to follow safeguards required for electronic evidence. - HELD THAT: - The Tribunal held that data stored on an external hard disc constitutes electronic evidence and the safeguards and procedures embodied in Section 36B must be observed. The hard disc seized was external, its ownership and connection to any computer regularly used by the assessee were not established, no certificate as envisaged by sub section (4) was produced, and no forensic or sealing and certification steps were properly recorded. Although the Commissioner relied on contemporaneous printouts signed in presence of witnesses, the Bench concluded that the spirit and rigour of Section 36B were violated and that procedural infirmities in retrieval and certification of electronic data diminished the reliability of the printouts; therefore the printouts could not be treated as having unimpeachable evidentiary value without independent corroboration. [Paras 10, 11, 12, 13]

Printouts from the seized external hard disc were procured in breach of the procedural requirements of Section 36B and thereby suffered from diminished evidentiary reliability absent proper certification and corroboration.

Reliability and corroboration in clandestine removal cases - Quantification of duty evaded requires corroborative evidence - Statements and seized documentary material did not provide the positive, corroborative evidence necessary to prove clandestine manufacture and removal or to sustain the quantification of duty evaded for the period 01.04.2011 to 30.11.2015. - HELD THAT: - The Tribunal emphasised established criteria for proving clandestine manufacture and removal - tangible evidence such as excess raw material purchase/consumption, discovery of finished goods, identified instances of unaccounted removals, receipts of sale proceeds, transport and buyer confirmations, and links between recovered documents and factory activities. In the present case the material evidence was either procedurally tainted, limited to a short period (diaries and loose sheets), or unsupported (external hard disc printouts lacking ownership/certification). Oral statements (notably of the data entry operator) were sketchy, inconsistent and retracted in part; authors of private records were not identified or examined; enquiries of alleged buyers and transporters were not made; and no sample transaction establishing clandestine removal was proved. Consequently, the record did not furnish reliable corroboration to sustain the massive quantification extrapolated by the Commissioner, and the demand based on such extrapolation was unsustainable. [Paras 17, 18, 20, 23, 24]

Available statements and documents failed to furnish sufficient corroborative evidence to prove clandestine removal or to support the impugned quantification of duty for 01.04.2011 to 30.11.2015.

Standard of proof in taxation - preponderance of probabilities - While departmental proceedings proceed on the preponderance of probabilities standard rather than criminal proof beyond reasonable doubt, that standard does not permit demands to be based on mere assumptions or uncorroborated inferences; quantification must rest on concrete documentary support. - HELD THAT: - The Tribunal reiterated that tax adjudication operates on preponderance of probabilities, permitting inference from circumstantial material. However, it cautioned that this standard cannot licence tax demands founded on speculative extrapolation. Even accepting that clandestine operators may destroy hard evidence, the authority must still produce dependable documentary or corroborative material to arrive at a reliable quantification. In the present case the Tribunal found that while there may be reasons to suspect evasion, the evidentiary material available did not permit a logical, rational and legally appropriate computation of duty - reliance on conjecture or gross extrapolation was impermissible. [Paras 21, 22, 23]

Preponderance of probability governs taxation proceedings but does not allow demands based on assumptions; quantification must be supported by concrete, corroborative evidence.

Reliability and corroboration in clandestine removal cases - The cumulative defects in investigation, absence of corroborative enquiries (buyers, transporters, suppliers), and lack of sample proved transactions rendered the adjudicating authority's confirmation of demand and imposition of penalties unsustainable. - HELD THAT: - The Tribunal reviewed the entirety of the investigation and adjudication and found the revenue did not pursue available lines of inquiry necessary to corroborate alleged clandestine removals - such as supplier invoices, raw material consumption analysis, electricity/labour usage, transport confirmations, buyer statements or financial realisations. Several relied upon documents were not provided to the appellants, and some relied upon third party material was not proved or served. Given the absence of even a single sample transaction conclusively proved and the procedural and evidentiary infirmities noted, the Tribunal concluded that both demand and penalties could not be sustained. [Paras 19, 24, 25]

Demand and penalties confirmed by the adjudicating authority were unsustainable due to investigative and evidentiary lacunae and lack of corroboration.

Final Conclusion: The impugned Order in Original confirming duty, interest and penalties was set aside. The Tribunal allowed the appeals and quashed the demand and penalties insofar as they were predicated on the procedurally irregular seizure, uncertified electronic printouts and uncorroborated documentary and oral material for the period 01.04.2011 to 30.11.2015.