TaxTMI Updates e-Newsletter
May 28,2021

Principles of natural justice - Adoption of Transfer Pricing Officer's determination by Assessing Officer - Application of Section 92CA(4) of the Income Tax Act - Availability of alternate remedy before Dispute Resolution Panel - Interim stay of assessment pending adjudication

Adoption of Transfer Pricing Officer's determination by Assessing Officer - Application of Section 92CA(4) of the Income Tax Act - Principles of natural justice - Validity of the Assessing Officer's addition of the value of the demerged business to the assessee's income by applying the TPO's determinations and Section 92CA(4). - HELD THAT: - The AO adopted the reasoning of the TPO and, applying Section 92CA(4), proposed an addition treating the value of the demerged business as the assessee's income for AY 2017-2018. The petitioner contended that a second order of the TPO left the taxability of the demerged business value open for examination by the AO and that the AO could not, without affording opportunity to the assessee, apply Section 92CA(4) to make the impugned addition. The Court found this grievance prima facie tenable and recorded that the matter requires further examination, issued notice and directed further pleadings. The Court did not finally adjudicate the correctness of the addition on merits but examined the procedural and adjudicatory posture and entertained the petition for adjudication of that controversy. [Paras 3, 5, 6]

The question of the validity of the AO's addition under Section 92CA(4), insofar as it treats the value of the demerged business as income, is not decided on merits and is directed to be examined further after pleadings; notice issued.

Availability of alternate remedy before Dispute Resolution Panel - Interim stay of assessment pending adjudication - Whether the writ petition should be entertained notwithstanding the availability of remedy before the Dispute Resolution Panel and whether interim relief is warranted. - HELD THAT: - Revenue urged non-entertainment of the writ petition on the ground that the petitioner had an alternative remedy before the DRP. The Court, however, proceeded to issue notice and, having found the grievance regarding a substantial addition prima facie arguable, granted interim protection. Pending further adjudication and filing of counter-affidavit, the operation of the impugned draft assessment order dated 24.04.2021 has been stayed by the Court. [Paras 4, 5, 6, 7]

The writ petition was entertained despite the claimed alternate remedy; an interim stay was granted on the operation of the impugned draft assessment order pending further proceedings.

Final Conclusion: Notice issued; counter-affidavit directed; the Court granted an interim stay on the operation of the draft assessment order dated 24.04.2021 and listed the matter for further hearing so that the validity of the disputed addition and related procedural questions may be examined on merits.

Faceless assessment - Principles of natural justice - Personal hearing under Section 144B(7)(vii) - Discretion to approve personal hearing under Section 144B(7)(viii) - Circumstances in sub-clause (h) of clause (xii) of Section 144B(7) - Stay on assessment order and consequential notices

Principles of natural justice - Personal hearing under Section 144B(7)(vii) - Validity of the assessment order dated 22.04.2021 in view of the petitioner's request for personal hearing and alleged breach of natural justice - HELD THAT: - The petitioner challenged the faceless assessment order for AY 2018-2019 on the ground that it was passed in breach of natural justice because a request for personal hearing made pursuant to the show-cause-cum-draft assessment order was not granted. The Court examined the statutory scheme dealing with faceless assessment and observed that where an assessee requests personal hearing under the provision that permits such request, the officer in-charge would ordinarily have to grant the personal hearing. Having noted that the petitioner had sought personal hearing and that no personal hearing was afforded before passing the impugned order, the Court was prima facie inclined to accept the petitioner's contentions regarding breach of natural justice. On that basis the Court issued notice and stayed the operation of the assessment order and the consequential notices pending further proceedings. [Paras 3, 4, 5, 7, 9]

Impugned assessment order stayed; prima facie view that non-grant of requested personal hearing undermines principles of natural justice and requires further adjudication.

Discretion to approve personal hearing under Section 144B(7)(viii) - Circumstances in sub-clause (h) of clause (xii) of Section 144B(7) - Faceless assessment - Whether the respondents have complied with the procedural requirement to frame standard procedures/processes governing approval of personal hearings under the faceless assessment scheme and the need for verification - HELD THAT: - Section 144B(7)(viii) makes the approval of a personal hearing contingent on the officer in-charge being satisfied that the request falls within circumstances described in sub-clause (h) of clause (xii), which in turn depend on standard procedures and processes to be framed by the faceless assessment authority. The respondents were unable at the hearing to inform the Court whether such standard procedures and processes had been framed or followed in the present case. The Court therefore directed the respondents to file a counter-affidavit addressing these aspects within four weeks so that the question of whether the request for personal hearing should have been approved can be examined on the record. [Paras 6, 8]

Directed respondent to file counter-affidavit clarifying whether standard procedures/processes under sub-clause (h) have been framed and followed; matter listed for further hearing.

Final Conclusion: Notice issued; counter-affidavit directed to be filed; interim stay granted on the assessment order dated 22.04.2021 and the consequential demand and penalty notices for AY 2018-2019 pending further adjudication of whether the requested personal hearing ought to have been granted under the faceless assessment scheme.

Reopening of assessment - reason to believe - change of opinion - Explanation 3 to Section 147 - limitation for reassessment - interim stay exclusion under Explanation 1 to Section 153 - scope of writ review

Reopening of assessment - reason to believe - change of opinion - scope of writ review - Validity of initiation of proceedings under Section 147/148 on the grounds relied upon, and whether the reopening amounted to an impermissible change of opinion. - HELD THAT: - The Court examined whether the reasons recorded for reopening had already been considered and decided in the original assessment and on appeal and whether that rendered the initiation invalid as a mere change of opinion. The High Court held that it is not to decide disputed facts or re adjudge accounting or evidentiary matters in writ proceedings where the statutory process of reassessment is in progress. The petitioner must establish that the reasons recorded are legally impermissible; absent such establishment, the Court should allow the revenue to adjudicate the identified issues by affording opportunity to the assessee. Applying these principles, the Court concluded that the material before the assessing authority gave rise to a reason to believe and that the recorded reasons could not be treated as merely a change of opinion so as to invalidate the initiation of proceedings. [Paras 16]

Reopening upheld; initiation of proceedings under Section 147/148 not vitiated as change of opinion and the matter must be adjudicated by the assessing authority.

Explanation 3 to Section 147 - reopening of assessment - Permissibility of adding new grounds or issues during the course of reassessment proceedings which were not specified in the reasons recorded under Section 148. - HELD THAT: - The Court construed Explanation 3 to Section 147 as enabling the Assessing Officer, during proceedings under Section 147, to assess or reassess income in respect of any issue which escaped assessment and comes to notice subsequently, even if that issue was not included in the reasons recorded under Section 148. Given this statutory provision, new material identified in the course of proceedings may be included for further adjudication and it is for the assessee to place explanations and contest such grounds before the assessing authority, not by independent determination in a writ petition. [Paras 15]

Addition of new issues during reassessment proceedings authorised by Explanation 3 to Section 147; petitioner's objection to such inclusion rejected.

Limitation for reassessment - interim stay exclusion under Explanation 1 to Section 153 - Whether the reassessment order passed after the interim stay expired (but before the department received a certified copy of the final order) was time barred under Explanation 1 to Section 153(2). - HELD THAT: - The Court reviewed competing authorities on whether limitation restarts from the date the interim stay is vacated or from the date the departmental office receives communication of the Court's order. Emphasising a pragmatic approach and the practical difficulties in High Court listing and communication, the Court held that where no order extending or vacating the interim order was passed by the High Court on the expiry date and the department had not received any communication, the department acted on the basis of the final order when it was received. In these circumstances the automatic expiry theory urged by the petitioner could not be invoked to defeat the reassessment; the departmental action based on receipt of the final order was reasonable and the reassessment was not held time barred by the High Court. [Paras 26]

Assessment under Section 147/143(3) held not time barred; petitioner's limitation challenge rejected.

Final Conclusion: Both writ petitions challenging the reopening and reassessment for Assessment Year 2007-08 were dismissed: the High Court found reason to believe for reopening, authorised inclusion of subsequently identified issues under Explanation 3 to Section 147, and rejected the contention that the reassessment was time barred; petitioner is permitted to pursue statutory appeals.

Remand for fresh consideration - disallowance of expenses - production of supporting documents - assessment under Section 144 of the Income Tax Act - responsibility of assessee to substantiate claims - reassessment/recomputation - substantial question of law left open

Disallowance of expenses - production of supporting documents - assessment under Section 144 of the Income Tax Act - remand for fresh consideration - responsibility of assessee to substantiate claims - reassessment/recomputation - Whether the disallowance of other expenses (partly allowed by the Assessing Officer) should be reconsidered by the Assessing Officer and whether the assessee may produce documents to substantiate the claimed expenses. - HELD THAT: - The Tribunal had rejected the assessee's claim relating to other expenses of approximately Rs.50.59 lakhs noting absence of detailed statements and supporting material and recorded that the Assessing Officer had granted 50% relief. The assessment was originally completed under Section 144 and the Assessing Officer recorded a prima facie view that, in the absence of evidence, the claim could not be verified but nevertheless allowed 50% considering the company's volume of business. The High Court noted that the assessee failed to substantiate the claims at earlier stages and thereby invited an adverse finding, but observed that the assessee did furnish a paper book before the Tribunal and that two of the three issues had been remanded by the Tribunal for fresh consideration. In view of the interconnected nature of the matters and the remands already ordered, the Court directed that the Assessing Officer shall re-examine the issue of disallowance of other expenses (including consideration of any documents the assessee is able to produce) and redo the assessment along with the other two issues remanded by the Tribunal. The Court's direction contemplates reconsideration on merits by the Assessing Officer and permits fresh production and verification of supporting material. [Paras 5, 6, 7, 8, 9]

The matter of disallowance of other expenses is remanded to the Assessing Officer for fresh consideration; the Assessing Officer shall consider any documents produced by the assessee and redo the assessment along with the other issues remanded by the Tribunal.

Remand for fresh consideration - substantial question of law left open - Whether the substantial questions of law raised by the Revenue are to be decided by the High Court in this petition. - HELD THAT: - The High Court disposed of the tax-case appeal by directing remand for reconsideration on specified factual and documentary aspects and expressly declined to adjudicate the substantial questions of law framed by the Revenue. The Court recorded its directions for reconsideration and computation but left the substantial questions open for future determination as appropriate after the reassessment or further proceedings. [Paras 10]

The substantial questions of law are left open.

Final Conclusion: The appeal is disposed of by directing the Assessing Officer to re-examine the disallowance of other expenses (permitting production and consideration of supporting documents) and to redo the assessment together with the two issues remanded by the Tribunal; the substantial questions of law are left open; no costs.

Reopening assessment under Section 147 - notice under Section 148 - reason to believe - sanction under Section 151 - borrowed satisfaction - affidavit clarification not introducing new grounds - penny stock/accommodation entries and escapement of income

Reopening assessment under Section 147 - reason to believe - penny stock/accommodation entries and escapement of income - Validity of reopening the assessment and sufficiency of 'reason to believe' for issuance of notice under Section 148 read with Section 147. - HELD THAT: - The Court held that Section 147 empowers reassessment if the Assessing Officer has reason to believe income chargeable to tax has escaped assessment and that where the return was processed under Section 143(1) (and not framed under Section 143(3)), the Assessing Officer may form reason to believe by examining the return and accompanying documents without requiring fresh tangible material. The reasons recorded refer to information from the AIMS/ITBA module showing sale of 20,000 shares of Tuni Textile Ltd. and that the scrip was a penny stock used for bogus accommodation entries. The Assessing Officer made enquiries, noted the anomalous price movement not supported by fundamentals and, on the basis of information and enquiries, formed an opinion that the claimed LTCG was suspect and income had escaped assessment. Applying established precedents on the meaning of 'reason to believe', the Court found that the Assessing Officer had cause or justification to form the belief and that adequacy or sufficiency of reasons is not to be investigated at the notice stage. The material before the Assessing Officer thus established a live nexus between information received and the belief of escapement of income, making the reopening valid. [Paras 16, 21, 22, 23, 24]

Reopening under Sections 147/148 was valid; the Assessing Officer had a sufficient 'reason to believe' based on information and enquiries to issue the notice.

Borrowed satisfaction - reopening assessment under Section 147 - Whether the reasons were a mere borrowed satisfaction without independent application of mind by the Assessing Officer. - HELD THAT: - The Court examined the reasons and enquiries conducted after receipt of information from the investigation wing. It concluded that the Assessing Officer applied independent mind by making enquiries, scrutinising the information that the scrip was a penny stock, and forming an opinion about price manipulation and accommodation entries. The Court rejected the contention that the reasons amounted to borrowed satisfaction, holding there was independent satisfaction and sufficient material before the Assessing Officer to initiate proceedings under Section 147. [Paras 16, 20, 23, 24]

The reopening was not based on borrowed satisfaction; the Assessing Officer recorded independent reasons after enquiries.

Sanction under Section 151 - notice under Section 148 - Validity of the sanction obtained under Section 151 for issuance of notice beyond four years. - HELD THAT: - The record shows that approval/sanction was obtained from the competent authority and a copy of the approval was furnished to the assessee at the stage of disposal of objections. The Court noted that the approving authority had applied its mind and was satisfied with the reasons recorded for reopening. On that basis, the challenge to the validity of sanction under Section 151 was rejected. [Paras 4, 25]

Sanction under Section 151 was validly obtained and does not vitiate the notice.

Affidavit clarification not introducing new grounds - reopening assessment under Section 147 - Permissibility of the revenue's affidavit clarifying or supplementing the reasons recorded and whether it introduced new grounds. - HELD THAT: - The Court applied the principle that an assessing officer's affidavit may explain or clarify recorded reasons but cannot introduce new grounds absent from the recorded reasons. Having examined the reasons and the affidavit, the Court held that the affidavit did not introduce new grounds or reasons but only clarified the information received and the enquiry-particularly that the scrip was used for bogus accommodation entries-so as to support the reasons recorded. Consequently, the effort to clarify by affidavit did not render the reopening invalid. [Paras 18, 19]

The affidavit served only to clarify and did not introduce new grounds; such clarification is permissible and does not invalidate the reopening.

Final Conclusion: The writ petition challenging the notice for reopening the assessment for A.Y. 2013-14 was dismissed: the Assessing Officer had sufficient reason to believe based on information and enquiries, the reopening was not a product of borrowed satisfaction, sanction under Section 151 was validly obtained, and the revenue's affidavit only clarified existing reasons rather than introducing new grounds.

Order erroneous and prejudicial to the interest of revenue - revision under section 263 - failure to make enquiries which the Assessing Officer ought to have made - requirements of section 68 of proof of identity, creditworthiness and genuineness - opportunity of being heard / principles of natural justice - no mandatory requirement of a prior show cause notice under section 263

Order erroneous and prejudicial to the interest of revenue - failure to make enquiries which the Assessing Officer ought to have made - Assessment order was erroneous and prejudicial to revenue for not examining the booking advance claimed from Shamco/Swan Tripaulin and related discrepancies - HELD THAT: - The Tribunal found that the Assessing Officer did not examine or verify the booking advance claimed to have been received from Shamco/Swan Tripaulin, nor reconciled the confirmations which showed a lesser sum acknowledged by the counterparty. The Principal CIT recorded specific defects and directed inquiry into the source of the advance and verification of supporting documents. The appellate bench held that because these inquiries were not undertaken by the AO in the assessment order, the order became erroneous and prejudicial to revenue, validating exercise of revisional jurisdiction under section 263 and directing fresh consideration by the AO. [Paras 8, 9, 15]

PCIT's invocation of revisional jurisdiction and direction to the AO to verify the booking advance from Shamco is upheld and the assessment is set aside for fresh enquiry on this issue.

Requirements of section 68 of proof of identity, creditworthiness and genuineness - failure to make enquiries which the Assessing Officer ought to have made - Loan claimed from Shri Pratapchandra P. Naik was not properly examined by the Assessing Officer and required further verification under the tests applicable to unexplained credits - HELD THAT: - The Tribunal recorded that the loan confirmation lacked PAN particulars and that the AO did not verify the creditworthiness or genuineness of the lender as required by the principles applicable to unexplained credits (section 68 tests). The Principal CIT's direction to the AO to examine the deficiency and verify the requirements of identity and source was found to be justified because the AO had not performed the necessary enquiries in the assessment proceedings. [Paras 8, 9, 15]

PCIT's conclusion that the assessment was erroneous for failure to verify the loan from Shri Pratapchandra P. Naik is upheld and the matter is remitted for fresh enquiry by the AO.

Requirements of section 68 of proof of identity, creditworthiness and genuineness - failure to make enquiries which the Assessing Officer ought to have made - Other unsecured loans and their confirmations were not adequately verified by the Assessing Officer and the assessment is therefore erroneous and prejudicial to revenue - HELD THAT: - The Tribunal noted systemic deficiencies in loan confirmations (absence of cheque numbers, account numbers, branch details) and that the AO did not obtain source documents or call lenders for verification. The Principal CIT directed examination of bank statements and preceding credits to establish sources of funds and creditworthiness. The appellate bench agreed that absence of such enquiries rendered the assessment defective and that revisional action under section 263 to direct further verification was valid. [Paras 8, 9, 15]

PCIT's direction to the AO to verify other unsecured loans and their sources is sustained and the assessment is set aside for fresh enquiry on these loans.

Failure to make enquiries which the Assessing Officer ought to have made - order erroneous and prejudicial to the interest of revenue - Claims of expenses and sundry creditors were not examined by the Assessing Officer and required further inquiry - HELD THAT: - The Tribunal observed that the AO did not make reasonable inquiries into expenses debited to profit and loss or sundry creditors, despite their material bearing on returned income. The Principal CIT recorded that minimum verification was lacking and directed the AO to obtain relevant details from the assessee and examine those items. The Bench held that the failure to make such inquiries rendered the assessment order erroneous and prejudicial to revenue. [Paras 8, 9, 15]

PCIT's direction to the AO to examine expenses and sundry creditors is upheld and the assessment is remanded for fresh inquiry on these aspects.

Failure to make enquiries which the Assessing Officer ought to have made - order erroneous and prejudicial to the interest of revenue - Declared agricultural income was not verified by the Assessing Officer and the assessment is erroneous for lack of inquiry into agricultural operations and receipts - HELD THAT: - The Tribunal noted that mere ownership of land does not establish receipt of agricultural income; the AO did not verify cultivation operations, purchase of inputs or sale proceeds. Principal CIT directed verification of agricultural activities and supporting documents. The Bench accepted that in the facts of the case the AO's omission to verify the agricultural income claim made the assessment order erroneous and supported remand for appropriate verification. [Paras 8, 9, 15]

PCIT's direction to the AO to verify the agricultural income claim is sustained and the assessment is remitted for fresh enquiry on this issue.

No mandatory requirement of a prior show cause notice under section 263 - opportunity of being heard / principles of natural justice - Principal CIT was not limited to the precise words of the initial notice and validly exercised revisional jurisdiction without a formal prior show cause notice so long as the assessee was afforded opportunity to be heard - HELD THAT: - The Tribunal reviewed the law that section 263 does not mandate a specific prior show cause notice; what is required is that the assessee be given an opportunity of hearing. The Bench found that the assessee was afforded repeated opportunities and that the PCIT's consideration of issues (including some not in the initial communication) did not vitiate the order. Accordingly, the revisional exercise was valid and within jurisdiction. [Paras 18, 19, 22]

PCIT validly exercised revisional jurisdiction under section 263 and was not confined to the literal scope of any single prior notice so long as opportunity of hearing was provided; the revisional order is therefore sustainable.

Final Conclusion: The Tribunal upheld the Principal CIT's revision under section 263, holding that the assessing officer had failed to make enquiries which he ought to have made in respect of advances/loans, unsecured loans, expenses/sundry creditors and agricultural income; the matter is remitted to the AO for fresh enquiries and assessment in accordance with the directions, and the assessee's appeal is dismissed.

Rectification under Section 154 - mistake apparent from record - reopening of assessment under Section 147 - unexplained cash credit under Section 68 - book profit under Section 115JB - set-off of brought forward unabsorbed depreciation - doctrine of merger and effect of quashing reassessment

Rectification under Section 154 - mistake apparent from record - unexplained cash credit under Section 68 - book profit under Section 115JB - Validity of the Assessing Officer's rectification under Section 154 to treat share premium (held as unexplained cash credit u/s 68 in reassessment) as income under the normal provisions instead of having been wrongly included in book profit under Section 115JB. - HELD THAT: - The Assessing Officer had, in the reassessment order, treated the share premium as an unexplained cash credit u/s 68 but erroneously added it to book profit under Section 115JB instead of to income under the normal provisions. That error - adding to book profit instead of to normal income - was a glaring, apparent and patent mistake on the face of the record and therefore amenable to rectification under rectification under Section 154. The Tribunal agreed with the CIT(A) that rectification to correct the head of addition was within the scope of Section 154 because the correction did not involve a debatable question of law requiring long-drawn reasoning but merely corrected an obvious clerical/clerical-cum-arithmetical error in classifying the addition. [Paras 10, 11]

Rectification under Section 154 to transfer the addition from book profit under Section 115JB to income under the normal provisions was, in principle, valid as a mistake apparent from record; however, its sustainment depended on the existence of the reassessment order which founded that addition.

Rectification under Section 154 - reopening of assessment under Section 147 - doctrine of merger and effect of quashing reassessment - unexplained cash credit under Section 68 - Whether the part of the rectification order under Section 154 that added the share premium (treated as unexplained cash credit u/s 68 in the reassessment) to income under the normal provisions could survive after the reassessment itself was quashed by the CIT(A). - HELD THAT: - The rectification invoked the reassessment order as its genesis because the unexplained cash credit under Section 68 was first treated as such in the reassessment. The reassessment order was subsequently quashed by the CIT(A) for invalid reopening under reopening of assessment under Section 147. Once the reassessment order which gave rise to the addition was effaced by the appellate order, the related rectification that sought to import that addition into the original assessment could not stand independently. Allowing the rectification to survive would amount to supplementing and enhancing the original assessment by an addition that the Assessing Officer had not originally made in the original assessment, which is impermissible. The Tribunal therefore vacated the portion of the rectification relatable to the addition under unexplained cash credit under Section 68, while noting that if the quashing is reversed on appeal by the Revenue the addition would be restored. [Paras 13, 14]

The rectification insofar as it added the share premium (treated u/s 68 in the reassessment) to income under the normal provisions cannot be sustained after the reassessment was quashed and is vacated; restoration is contingent upon any successful challenge to the CIT(A)'s quashing of the reassessment.

Rectification under Section 154 - set-off of brought forward unabsorbed depreciation - doctrine of merger and effect of quashing reassessment - Validity of the Assessing Officer's withdrawal by rectification of the set-off of brought forward unabsorbed depreciation originally allowed in the assessment framed under the original assessment order. - HELD THAT: - The allowance of set-off of brought forward unabsorbed depreciation in the original assessment order was not an issue on which the case was reopened; it therefore did not merge into the reassessment. The Assessing Officer identified, on the face of the original assessment record, that the set-off had been wrongly allowed because no unabsorbed depreciation was available for set-off for the relevant earlier year. That omission was a mistake apparent from the record and therefore amenable to rectification under Section 154. The Tribunal upheld the AO's power to rectify that mistake and sustained the AO's withdrawal of the erroneously allowed set-off, subject to the CIT(A)'s directions that the AO ascertain the assessee's claim and give reasons if the claim is found inadmissible. [Paras 11, 13]

Rectification under Section 154 to withdraw the wrongly allowed set-off of brought forward unabsorbed depreciation is sustained; the matter is subject to the AO's verification of the assessee's claim and recording of reasons if disallowed.

Set-off of brought forward unabsorbed depreciation - rectification under Section 154 - Directions to the Assessing Officer to verify the assessee's claim of brought forward unabsorbed depreciation and to record reasons if disallowed. - HELD THAT: - While upholding the AO's rectification concerning the withdrawal of the set-off, the CIT(A) directed the AO to ascertain the assessee's claim of brought forward unabsorbed depreciation and to allow the set-off if admissible; if not admissible, the AO was directed to record reasons. Those directions amount to remand for factual verification and quantification and do not disturb the exercise of rectification power. [Paras 6, 11, 13]

Remanded to the Assessing Officer to verify the claim of brought forward unabsorbed depreciation and to record reasons if the claim is disallowed; the CIT(A)'s directions stand.

Final Conclusion: The appeal is partly allowed. The Tribunal upheld the Assessing Officer's exercise of rectification under Section 154 to correct obvious mistakes in classification of the share premium and in allowing brought forward depreciation, sustained the withdrawal of the erroneously allowed set-off subject to verification, but vacated the portion of the rectification that sought to import into the original assessment an addition (share premium treated u/s 68) founded only on a reassessment order which was subsequently quashed; that addition may be restored if the quashing of the reassessment is overturned on appeal.

Disallowance for non-deduction of tax at source - remand for fresh adjudication to comply with principles of natural justice - condonation of delay in preferring appeal

Disallowance for non-deduction of tax at source - remand for fresh adjudication to comply with principles of natural justice - Whether the order of the Commissioner of Income Tax (Appeals) confirming the disallowance should be sustained where the assessee's written submissions before the CIT(A) were misplaced and no further opportunity was given. - HELD THAT: - The Tribunal found that the written submissions placed before the CIT(A) related to a different appeal (the consequential order under section 263) and were therefore irrelevant to the assessment order under consideration. Despite the irrelevance, the CIT(A) should have afforded the assessee an opportunity to file correct and relevant submissions rather than dismissing the appeal on that ground. In the interest of justice and to secure compliance with the principles of natural justice, the matter requires fresh consideration by the CIT(A) after permitting the assessee to present appropriate submissions on the merits of the disallowance alleged to arise from non-deduction of tax at source. Accordingly, the CIT(A)'s order is set aside and the issue is remanded for fresh adjudication by the CIT(A) in accordance with law and natural justice. [Paras 4, 6]

Order of the CIT(A) confirming the disallowance is set aside and the matter is remanded to the CIT(A) for fresh adjudication after giving the assessee an opportunity to file relevant submissions.

Condonation of delay in preferring appeal - Whether the delay in preferring the appeal before the Tribunal should be condoned. - HELD THAT: - The assessee filed a petition explaining the delay of 75 days and the reasons were examined. The delay was found not attributable to the deliberate conduct of the assessee and was not intentional. The Revenue's representative did not contest the explanation. On these facts, the Tribunal exercised its discretion to condone the delay and proceeded to hear the appeal on merits. [Paras 2]

Delay of 75 days in filing the appeal is condoned and the appeal is admitted for hearing on merits.

Final Conclusion: The Tribunal condoned the delay and, finding that the CIT(A) should have afforded the assessee an opportunity to file relevant submissions, set aside the CIT(A)'s order confirming the disallowance and remanded the matter to the CIT(A) for fresh adjudication in accordance with law and principles of natural justice; appeal allowed for statistical purposes.

Reopening of assessment - reason to believe (not reason to suspect) - failure to disclose fully and truly all material facts - proviso to section 147 of the Income-tax Act: limitation for reopening after four years unless failure to disclose - change of opinion - quashment of reassessment initiated without new material

Reopening of assessment - reason to believe (not reason to suspect) - failure to disclose fully and truly all material facts - change of opinion - proviso to section 147 of the Income-tax Act: limitation for reopening after four years unless failure to disclose - Validity of reopening assessment for AY 2010-11 under section 147/148 - HELD THAT: - The Tribunal held that reassessment may be initiated only on 'reason to believe' and not on mere 'reason to suspect', and that one of the twin pre-conditions for invoking section 147 is a reason to believe that escapement of income was caused by the assessee's failure to disclose fully and truly all material facts. In the present case the materials relating to depreciation on investments were already on record at the time of original assessment; no new material was said to have come to the Assessing Officer's notice after completion of the original assessment. The reasons recorded by the AO therefore reflect a mere change of opinion and do not satisfy the statutory test for reopening. Further, the reopening notice was issued beyond the four-year period contemplated by the proviso to section 147 and there was no allegation of failure to disclose which would bring the case within the proviso. In these circumstances the initiation of reassessment was unsustainable and the reassessment order consequent thereto was quashed. [Paras 9]

Reopening of assessment for AY 2010-11 quashed as unsustainable: no new material and amounted to change of opinion; reopening also beyond the four-year proviso without requisite failure to disclose.

Quashment of reassessment initiated without new material - infructuousness of revenue appeal arising from quashed reassessment - Consequences of quashing reassessment on the pending revenue appeal - HELD THAT: - Because the reassessment under section 143(3)/147 was quashed on legal grounds, the order of the Commissioner (Appeals) which was predicated on that reassessment stands rendered infructuous so far as the revenue's appeal is concerned. The Tribunal therefore dismissed the revenue's appeal as infructuous. [Paras 10, 11]

Revenue's appeal is dismissed as infructuous; assessee's appeal is allowed.

Final Conclusion: The Tribunal quashed the reassessment for AY 2010-11 on the ground that no new material justified reopening and the action amounted to a mere change of opinion, and that the reopening was also beyond the four-year proviso without any failure to disclose; consequently the assessee's appeal is allowed and the revenue's appeal is dismissed as infructuous.

Condonation of delay - Unexplained credit - Onus under section 68 - Proof of identity, creditworthiness and genuineness - Remand for de novo adjudication

Condonation of delay - Whether the delay of five days in filing the appeal by the Revenue should be condoned. - HELD THAT: - The Tribunal examined the Revenue's petition for condonation of a five day delay, accepted the explanation that the case records were mixed up and not traceable immediately, and applied the principle that delay supported by cogent reasons should be condoned in the interest of substantial justice. The Tribunal held the delay to be neither intentional nor deliberate and accordingly condoned it, permitting the appeal to be taken up on merits. [Paras 2]

Five day delay in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

Unexplained credit - Onus under section 68 - Proof of identity, creditworthiness and genuineness - Remand for de novo adjudication - Whether the addition made by the Assessing Officer under section 68 is sustainable or whether the matter requires fresh adjudication. - HELD THAT: - The Tribunal reviewed the assessment order, the CIT(A)'s order allowing the appeal in part, and the materials on record. It found that although amounts were routed through banking channels, the CIT(A) did not verify or record satisfaction regarding other essential facets of the onus under section 68 - namely, the identity of depositors/creditors and their capacity/creditworthiness - and failed to deal with discrepancies between bank balances and the financial statements. The Tribunal observed that the assessee's books showed the entire sum as capital and that documentary proof to discharge the statutory onus had not been adequately established before the authorities. In view of these lapses and conflicting findings, the Tribunal concluded that the issue was not finally adjudicated on merits and that a remand to the Assessing Officer for de novo adjudication, with opportunity to the assessee to substantiate claims by documentary evidence, was necessary. [Paras 8, 9]

Matter remitted to the Assessing Officer for de novo adjudication on the question of unexplained credit under section 68 after affording the assessee a reasonable opportunity to substantiate the claim; revenue's grounds allowed for statistical purposes.

Final Conclusion: The Tribunal condoned the five day delay in filing the appeal and remitted the substantive dispute regarding unexplained credit under section 68 to the Assessing Officer for fresh adjudication, directing the assessee to produce documentary evidence and treating the Revenue's appeal as allowed for statistical purposes.

Penalty under section 271(1)(b) of the Income Tax Act - non-compliance of notice - conflicting dates in assessment and penalty orders - bonafide compliance - adjudication on merits versus dismissal for non-prosecution

Penalty under section 271(1)(b) of the Income Tax Act - non-compliance of notice - conflicting dates in assessment and penalty orders - bonafide compliance - Validity of the penalty levied under section 271(1)(b) for alleged non-compliance with notices. - HELD THAT: - The Tribunal found that the assessing officer's penalty order referred to non-compliance of a notice dated 13.06.2016, whereas the assessment order made no reference to that notice and recorded that a notice under section 142(1) was issued on 11.08.2016. The assessment accepted the assessee's suo moto offer of income debited as interest on TDS and made no other additions for non-compliance. Given the inconsistency in dates between the penalty order and the assessment order, and the fact that the assessee ultimately furnished the information and offered the income which was accepted by the AO, the Tribunal held that either the penalty order was invalid on account of the conflicting record or, alternatively, any earlier non-compliance was rendered immaterial by the subsequent bonafide compliance. Consequently, the imposition of penalty under section 271(1)(b) was not justified and was set aside. [Paras 7, 9]

Penalty under section 271(1)(b) set aside as invalid; assessee's appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding the penalty under section 271(1)(b) to be invalid on the facts - having regard to conflicting dates in the records and the assessee's subsequent bonafide compliance - and set aside the penalty.

Reference to Valuation Officer under section 55A - retrospective applicability of amendment to section 55A(a) - fair market value as on 1.4.1981 - assessing officer's opinion formation during assessment proceedings - substitution of cost of acquisition by fair market value for capital gains

Retrospective applicability of amendment to section 55A(a) - assessing officer's opinion formation during assessment proceedings - Applicability of the 2012 amendment to section 55A(a) for a sale effected in financial year 2011-12 (relevant to AY 2012-13) and the consequence for the Assessing Officer's power to refer valuation to the Valuation Officer. - HELD THAT: - The Tribunal held that the amendment to section 55A(a) effected by the Finance Act, 2012 (substituting the words "is at variance with its fair market value") is not retrospective and applies only to transactions and assessments to which the amendment is expressly applicable from 1.07.2012. For a transfer occurring in financial year 2011-12 (relevant to AY 2012-13) the unamended provision governs. Under the unamended clause (a) the AO could refer to the Valuation Officer only where the value claimed by the assessee (based on a registered valuer's estimate) is, in the AO's opinion, less than its fair market value. The formation of that opinion must occur in the course of assessment proceedings. Consequently, the amended broader power cannot be invoked for the assessment year in question and the AO's reference must be assessed against the unamended test prevailing for the transaction period. [Paras 6]

Amendment to section 55A(a) is prospective; unamended provision applies to the transaction in financial year 2011-12 (AY 2012-13).

Reference to Valuation Officer under section 55A - fair market value as on 1.4.1981 - substitution of cost of acquisition by fair market value for capital gains - Whether the Assessing Officer was empowered under the unamended section 55A(a) to refer the assessee's higher claimed 1.4.1981 value (based on a registered valuer) to the Valuation Officer, and the consequence of any invalid reference on the addition made to long term capital gains. - HELD THAT: - Applying the unamended clause (a) of section 55A, the Tribunal observed that clause (a) permits a reference to the Valuation Officer only when the assessee's claimed value (backed by a registered valuer) is, in the AO's opinion, less than the fair market value. Where the claimed value is higher than the fair market value, clause (a) does not permit such a reference and clause (b) cannot be invoked because clause (b) applies "in any other case" only where clause (a) does not apply. In the present facts the assessee's FMV as claimed for 1.4.1981 (based on a registered valuer) was higher than the value later determined by the Valuation Officer; hence, no valid reference lay under the unamended clause (a). As the reference was therefore without jurisdiction, the consequential addition to long term capital gains made on the basis of the DVO report could not be sustained. [Paras 7, 8]

Reference to DVO was not competent under the unamended section 55A(a); additions to long term capital gains based on that reference are to be deleted.

Final Conclusion: The Tribunal, following the jurisdictional High Court and coordinate decisions, held that the 2012 amendment to section 55A(a) is prospective and not applicable to the sale in financial year 2011-12 (AY 2012-13); since the unamended provision did not permit a reference where the assessee's claimed 1.4.1981 value (supported by a registered valuer) exceeded fair market value, the reference to the Valuation Officer was invalid and the addition to long term capital gains is deleted; the assessee's appeal is allowed.

Charitable purpose - proviso to section 2(15) regarding activities in the nature of trade, commerce or business or rendering services for a fee - registration under section 12A/12AA and its relationship to entitlement to exemption - predominant object test for determining charitable character - regulatory/statutory authority performing state functions as an instrumentality of the State - diversion of income by overriding title - exemption under section 11 of the Income-tax Act

Charitable purpose - proviso to section 2(15) regarding activities in the nature of trade, commerce or business or rendering services for a fee - predominant object test for determining charitable character - regulatory/statutory authority performing state functions as an instrumentality of the State - Whether the activities of Agra Development Authority fall within the definition of 'charitable purpose' and are excluded from the proviso to section 2(15), thereby attracting exemption. - HELD THAT: - The Tribunal examined the nature and statutory origin of the Authority's functions under the Uttar Pradesh Urban Planning and Development Act, 1973 and applied the dominant-object tests in the jurisprudence cited. It found that acquisition, development and disposal of land, levy/collection of development charges, conversion charges, sanctioning of building plans, sale of master plans, parking/licence charges, rents and related receipts arose from statutory powers and duties conferred by the Development Act and were undertaken as part of the Authority's regulatory and state-delegated development functions. The Tribunal concluded that those activities were not commercial in the sense contemplated by the proviso to section 2(15) - they were carried out as instruments of State policy for general public utility, and the predominant character of the Authority's activities remained public welfare oriented. The Tribunal relied on and followed coordinate decisions treating development authorities with similar statutory mandates as engaged in charitable activities and rejected the AO/CIT(A)'s characterisation of the Authority's activities as trade or business for profit. [Paras 13, 14, 16, 19]

The Authority's activities, being statutory/regulatory and for general public utility, are charitable and not hit by the proviso to section 2(15) for the year under consideration.

Exemption under section 11 of the Income-tax Act - registration under section 12A/12AA and its relationship to entitlement to exemption - diversion of income by overriding title - Whether the specific heads of receipts and the resultant income of the Authority are eligible for exemption under section 11 for A.Y. 2011-12. - HELD THAT: - Having held that the receipts arose from statutory functions and were charitable in nature, the Tribunal addressed the assessability of listed receipts (sale of plots/lands, freehold conversion income, interest on instalments, development charges, building plan sanction fees, lease/building rent, interest on FDRs/savings, sale of master plan/tender forms, parking/stand charges, stamp duty-related receipts and miscellaneous income). It observed that these inflows were connected to duties conferred by the Development Act and were realizations flowing from execution of public utility functions; accordingly they were not to be treated as commercial business income for the relevant year. The Tribunal further noted authorities on diversion of income by overriding title and the role of state directives (government order directing transfer to infrastructure fund) in assessing the character of receipts, and it observed that registration under section 12A was not conclusive but, on facts, the Authority's registration and activities supported allowance of exemption. On that basis the Tribunal allowed the assessee's appeals and dismissed the revenue's cross appeal. [Paras 16, 19, 20]

Receipts from the specified heads were treated as arising from charitable/state functions and the Authority was held entitled to deduction under section 11 for A.Y. 2011-12; the revenue appeal was dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeals and dismissed the revenue's appeal for A.Y. 2011-12, holding that the Agra Development Authority's activities and the receipts from the specified heads arose from statutory, regulatory and state delegated functions amounting to advancement of objects of general public utility and, on the facts, were charitable for the relevant year and eligible for exemption under section 11.

Admission of additional evidence under Rule 46A - allowability of depreciation on acquisition of fixed assets - deductibility of employees' provident fund under section 36(1)(va) and timing of payment - disallowance under section 40(a)(ia) for failure to deduct TDS and effect of proviso linked to section 201(1) - eligibility of donations under section 80G and admissibility of evidence

Admission of additional evidence under Rule 46A - allowability of depreciation on acquisition of fixed assets - Whether the CIT(A) erred in deleting the disallowance of depreciation by admitting additional evidence under Rule 46A. - HELD THAT: - The Tribunal found no admission of additional evidence in breach of Rule 46A(1)-(3). Documents relied upon by the assessee fall within the scope of clause (4) of Rule 46A, enabling the CIT(A) to act on or direct production of documents. The assessee's primary factual claim as to acquisition of the fixed assets underlying the depreciation claim was not challenged on merits by Revenue. On these bases the CIT(A)'s deletion of the depreciation disallowance was affirmed. [Paras 3]

Deletion of the depreciation disallowance of Rs. 2,08,73,301/- affirmed.

Deductibility of employees' provident fund under section 36(1)(va) and timing of payment - Whether the CIT(A) erred in deleting the disallowance of employees' provident fund for delayed payment on the ground that compliance was made before the return filing due date. - HELD THAT: - The Tribunal held that the substantive contention raised by Revenue does not assist because the parliamentary Explanatory Memorandum to the Finance Bill, 2021 clarifies that amendments concerning employees' provident fund under section 36(1)(va) apply prospectively from 01-04-2021 and do not have retrospective effect. Given that the assessee's compliance was before the return filing due date and the amendment is not applicable to the assessment year in question, the CIT(A)'s deletion of the disallowance was sustained. [Paras 4]

Deletion of the employees' provident fund disallowance of Rs. 10,06,303/- upheld.

Disallowance under section 40(a)(ia) for failure to deduct TDS and effect of proviso linked to section 201(1) - Whether the CIT(A) erred in deleting the disallowance under section 40(a)(ia) where TDS was not deducted. - HELD THAT: - The Tribunal held that the legal position in light of Palam Gas Service (Supreme Court) is that section 40(a)(ia) applies to both paid and payable expenses; consequently the CIT(A)'s deletion on the basis that payments were made does not survive. However, the Tribunal noted the statutory second proviso to section 40(a)(ia) (inserted by Finance Act, 2012) operates in conjunction with section 201(1) first proviso and, as interpreted by courts, can have retrospective effect as a curative proviso. Therefore the matter was restored to the Assessing Officer for fresh examination in accordance with law, directing the assessee to file requisite details and granting three effective opportunities of hearing. [Paras 5]

CIT(A)'s deletion reversed on legality; issue remitted to Assessing Officer to determine applicability of section 40(a)(ia) in light of the second proviso and section 201(1) first proviso.

Eligibility of donations under section 80G and admissibility of evidence - admission of additional evidence under Rule 46A - Whether the CIT(A) erred in deleting the disallowance of donations by admitting additional evidence contrary to Rule 46A. - HELD THAT: - The Tribunal applied the same reasoning adopted on the depreciation issue: there was no record of the CIT(A) admitting additional evidence in breach of Rule 46A(1)-(3). Consequently, the CIT(A) was entitled to entertain or direct production of documents under Rule 46A(4). In absence of any challenge to the substantive entitlement on merits, the deletion of the donations disallowance was upheld. [Paras 6]

Deletion of the donation disallowance of Rs. 6,60,916/- affirmed.

Final Conclusion: The appeal is partly allowed: the Tribunal affirms the CIT(A)'s deletions of depreciation, employees' provident fund and donation disallowances, but reverses the deletion under section 40(a)(ia) and remands that issue to the Assessing Officer for fresh adjudication in light of the second proviso to section 40(a)(ia) and section 201(1) first proviso, with directions for filing of details and three opportunities of hearing.

Disallowance of management charges under section 40A(2)(b) of the Income-tax Act - disallowance under section 14A of the Income-tax Act read with Rule 8D - disallowance limited to the amount of exempt income (Corrtech principle) - decisions by parity and consistency with earlier appellate orders

Disallowance of management charges under section 40A(2)(b) of the Income-tax Act - decisions by parity and consistency with earlier appellate orders - Whether management charges paid to Adarsh Foundation were disallowable under section 40A(2)(b) and liable to be added back to the assessee's income - HELD THAT: - The Tribunal examined the addition made by the AO on the ground that payments to Adarsh Foundation (a charitable trust connected to a director) were colourable devices to encash goodwill and thus not allowable as business expenditure under section 40A(2)(b). The CIT(A) had deleted the addition on the basis that similar payments/issues in the assessee's own earlier assessment years had not been sustained, and were decided in favour of the assessee by the ITAT. Applying the principle of parity and consistency with those earlier ITAT decisions (as relied upon by the CIT(A)), the Tribunal found no reason to interfere with the deletion and upheld the CIT(A)'s order. The Tribunal therefore dismissed the Revenue's grounds challenging the deletion in the present appeals on the same facts and circumstances. [Paras 7, 12, 16]

The additions made by the AO disallowing management charges under section 40A(2)(b) were deleted by the CIT(A) and the Tribunal, following parity with earlier ITAT orders, dismissed the Revenue's appeals.

Disallowance under section 14A of the Income-tax Act read with Rule 8D - disallowance limited to the amount of exempt income (Corrtech principle) - Whether the disallowance computed under section 14A read with Rule 8D could exceed the exempt income earned and whether the AO's computed disallowance was sustainable - HELD THAT: - The AO made a disallowance under section 14A r.w. Rule 8D by applying the formulae in the Rule. The assessee contended that (i) there were interest-free funds and no nexus with borrowings so interest disallowance was not warranted, and (ii) in any event the total exempt income for the year was limited and disallowance could not exceed that amount. The CIT(A) relied on the jurisdictional High Court decision in CIT v. Corrtech Energy P. Ltd., recording the principle that disallowance under section 14A cannot exceed the exempt income actually earned. Applying that principle, the CIT(A) restricted the disallowance to the amount of exempt income for the year. The Tribunal agreed with the CIT(A)'s approach and reasoning, held that no interference was called for, and dismissed the Revenue's appeals; in the connected appeal for A.Y. 2014-15 the disallowance was restricted to the assessee's exempt income of Rs. 20,34,550. [Paras 10, 14]

The disallowance under section 14A read with Rule 8D was restricted to the amount of exempt income; the CIT(A)'s orders so limiting/deleting the additions were upheld and the Revenue's appeals were dismissed.

Final Conclusion: In all the appeals filed by the Revenue (A.Ys. 2013-14, 2014-15 and 2015-16) the Tribunal dismissed the appeals: additions disallowing management charges under section 40A(2)(b) were deleted following parity with earlier ITAT decisions, and disallowances under section 14A r.w. Rule 8D were restricted to the amount of exempt income as applied by the CIT(A).

Burden of proof under Section 123 - Reasonable belief for seizure - Confiscation under Section 111(d) - Confiscation under Section 111(i) - Section 120 - confiscation notwithstanding change in form - Section 121 - confiscation of sale proceeds - Penalty under Section 112 - Notified goods under Chapter IVA / Section 11B

Burden of proof under Section 123 - Reasonable belief for seizure - Whether the burden under Section 123 shifted to the appellants in respect of the seized gold - HELD THAT: - Section 123 applies where (i) the goods to which it applies are seized and (ii) the seizure is made under a reasonable belief that they are smuggled. Gold and manufactures thereof are covered by Section 123. The Tribunal found that officers, acting on specific information, discovered foreign marked high purity gold bars, coins and cut pieces secreted in shoes and specially made pockets; the appellants denied carrying gold and could not produce documentary proof of legitimate import. On this factual matrix the officers had a reasonable belief that the gold was smuggled, so the burden to prove non smuggled character shifted to the persons from whose possession the gold was seized. The appellants failed to discharge that burden in respect of the foreign marked gold bars, coins and cut pieces. [Paras 23, 24, 27, 28, 42]

Section 123 applied to the seized foreign marked gold and the burden to prove non smuggled nature shifted to the appellants; they failed to discharge it.

Section 120 - confiscation notwithstanding change in form - Burden of proof under Section 123 - Whether the seized gold jewellery was covered by Section 123 or liable under Section 120 as jewellery made from smuggled gold - HELD THAT: - The revenue's case was that the jewellery was manufactured domestically from imported gold. Section 120 permits confiscation notwithstanding change in form if the goods are established as smuggled or made from smuggled goods. However, the officers did not establish that the jewellery had been made out of smuggled gold; there were no foreign markings on the ornaments and the claim that they were manufactured from imported gold was uncorroborated by invoices or vendor statements. Mere co location with smuggled primary gold is insufficient. Absent evidence that the jewellery was derived from smuggled gold, Section 123 does not apply to the jewellery and Section 120 cannot be invoked to confiscate it. [Paras 23, 34, 35, 36, 42]

The confiscation of the jewellery is not sustainable; jewellery was not shown to be smuggled nor proved to have been manufactured from smuggled gold.

Section 121 - confiscation of sale proceeds - Goods as including currency - Whether the seized Indian currency was covered by Section 123 and whether confiscation under Section 121 was sustainable - HELD THAT: - Although 'goods' under the Act includes currency, Section 123 explicitly applies to gold and manufactures thereof (and other notified classes) but does not extend to sale proceeds in currency. Section 121 permits confiscation of sale proceeds only if the revenue proves (i) that the seized cash is sale proceeds, (ii) that the goods sold were smuggled, and (iii) that the seller had knowledge or reason to believe they were smuggled. The Tribunal found the Revenue did not establish these elements or identify which smuggled goods were sold to generate the cash. Consequently, the burden did not shift to the appellants in respect of currency and confiscation under Section 121 was not proved. [Paras 22, 38, 42]

Section 123 does not cover the seized currency; confiscation of the cash under Section 121 is unsustainable and is set aside.

Confiscation under Section 111(d) - Confiscation under Section 111(i) - Notified goods under Chapter IVA / Section 11B - Whether confiscation of the foreign marked gold (bars, coins, cut pieces) was sustainable under Sections 111(d) and 111(i), and whether Section 111(p) applied - HELD THAT: - Section 111(d) applies to goods imported contrary to any prohibition under this Act or any other law. During the relevant period import of gold in any form was restricted to designated agencies; there was no evidence the seized gold had been imported by an authorized agency. The seized gold was also found concealed in shoes and secret pockets; Section 111(i) applies to dutiable or prohibited goods found concealed 'before or after the unloading thereof' and the Tribunal rejected the narrow construction urged by the appellants. However, Section 111(p) requires the goods to be notified under Chapter IVA (section 11B), and gold was not so notified; confiscation under 111(p) therefore could not be sustained. On the facts, confiscation under 111(d) and 111(i) was upheld, and 111(p) was set aside. [Paras 30, 31, 32, 33, 42]

Confiscation of foreign marked gold upheld under Sections 111(d) and 111(i); confiscation under Section 111(p) set aside as gold was not notified under Chapter IVA.

Reasonable belief for seizure - Burden of proof under Section 123 - Whether officers had a reasonable belief that the seized goods were smuggled so as to shift the burden under Section 123 - HELD THAT: - The Tribunal evaluated the totality of circumstances: specific information received by DRI, the appellants' denial when asked if they carried gold, recovery of foreign marked high purity gold bars and coins secreted in shoes and specially made backpack pockets, and absence of documentary proof of legitimate import. Given these facts, the officers possessed a reasonable belief that the foreign marked gold was smuggled. The condition for invoking Section 123 was thus satisfied for the primary foreign marked gold items. [Paras 24, 25, 27, 42]

Officers had a reasonable belief that the foreign marked gold was smuggled; the burden under Section 123 shifted accordingly.

Penalty under Section 112 - Whether penalties under Section 112 were correctly imposed and whether quantum required modification - HELD THAT: - Possession and carriage of smuggled gold render a person liable to penalty under Section 112. Having upheld confiscation of the foreign marked gold items recovered from Deepak and the foreign marked coins recovered from the Jammu premises managed by Ravi, the Tribunal held both appellants liable to penalty. In view of setting aside confiscation of the jewellery and the cash, the Tribunal exercised its discretion to reduce the penalties from the amounts imposed in the original order to a lesser specified sum for each appellant. [Paras 40, 41, 42, 43]

Penalties under Section 112 sustained in principle but reduced in quantum (penalty on Deepak reduced; penalty on Ravi reduced).

Final Conclusion: The Tribunal upheld confiscation of foreign marked gold bars, coins and cut pieces under Sections 111(d) and 111(i) after finding officers had a reasonable belief and Section 123 applied; it set aside confiscation of the jewellery (not shown to be made from smuggled gold) and of the seized cash (sale proceeds not proved), disallowed confiscation under Section 111(p) (gold not notified under Chapter IVA), and sustained penalties under Section 112 subject to reduction in quantum.

Obligations of Authorised Courier - Due diligence in verification of KYC and accompanying documents - Revocation and forfeiture under courier regulations (Regulation 13) - Imposition of penalty for contravention of courier regulations (Regulation 14) - Role parity with Customs House Agent in discharge of statutory obligations

Obligations of Authorised Courier - Due diligence in verification of KYC and accompanying documents - Revocation and forfeiture under courier regulations (Regulation 13) - Imposition of penalty for contravention of courier regulations (Regulation 14) - Whether the appellant contravened Regulation 12(1)(v) by failing to exercise due diligence in ascertaining the correctness and completeness of information submitted to the proper officer, thereby justifying revocation of registration, forfeiture of security and imposition of penalty - HELD THAT: - The Tribunal examined the role and obligations of an authorised courier which includes verification of importer identity through KYC and exercising due diligence before filing declarations. The appellant had received KYC documents and covering letters (supplied via a third party) and verified the KYC, and filed Bills of Entry in accordance with the invoices received from overseas exporters. The counterfeit nature of the goods was established only after customs opened the consignments and brand-owner experts examined their contents - an action which the authorised courier was prohibited from undertaking. There was no evidence that the KYC documents were fake, that the declared importers did not exist, or that the appellant was aware of the counterfeit nature of the consignments or had participated in a scheme to mis-declare them. The Tribunal held that mere receipt of KYC and related documents through a third party, where the documents were verified and importers were genuine, did not amount to a failure to exercise due diligence under Regulation 12(1)(v). On the facts, the adjudicating authority's conclusion that the appellant had contravened the regulation and therefore warranted revocation, forfeiture and penalty was not sustainable. [Paras 21, 22, 23, 24]

The appellant did not violate Regulation 12(1)(v); revocation of registration, forfeiture of security and imposition of penalty set aside.

Final Conclusion: The appeal is allowed. The impugned order dated 22/05/2019 revoking registration, forfeiting the security deposit and imposing a penalty is set aside, with consequential relief, if any.

Amendment of Company Petition - Leave to amend - New cause of action and limitation - Representative general body - Binding effect of registered Articles - Notice and voting rights in general meeting

Amendment of Company Petition - Leave to amend - Application for amendment of the Company Petition to incorporate additional facts and reliefs was allowed. - HELD THAT: - The applicants sought to add paragraphs and supplementary reliefs to the pending Company Petitions on the ground that certain facts not previously known had come to light and were essential to adjudication. The respondents opposed on the ground that the proposed amendments introduced a new cause of action and were time barred. Having considered the rival contentions, the Tribunal exercised its discretion in the interests of justice and permitted the applicants to amend the Company Petitions. The Tribunal did not determine the merits of the newly pleaded contentions, but allowed the amendments so that the respondents may meet them in pleadings and the matters can be adjudicated on merits in due course. [Paras 9, 10]

Amendments permitted; applicants directed to file amended Company Petitions and serve respondents within two weeks.

New cause of action and limitation - Notice and voting rights in general meeting - Binding effect of registered Articles - Respondents permitted to file detailed counter affidavits including pleas of limitation and other objections to the amended petitions. - HELD THAT: - While allowing the amendments the Tribunal expressly recorded that respondents are at liberty to raise all available defences, including that the proposed reliefs constitute a new cause of action and are barred by limitation. The Tribunal directed respondents to file counter affidavits to the amended petitions within a specified period so that those contentions, including issues relating to notice, voting rights, representative general body provisions and the binding character of registered Articles, can be considered at final disposal. [Paras 9]

Respondents may file counter affidavits to the amended Company Petitions within four weeks of receipt; objections including limitation to be considered at final hearing.

Final Conclusion: Both applications for amendment (CA/04/KOB/2021 and CA/05/KOB/2021) are allowed; applicants to file amended Company Petitions within two weeks and respondents permitted to file counter affidavits within four weeks so that issues including limitation and the merits of the pleaded amendments may be adjudicated.

Maintainability of applications under section 60(5) of the Code after approval of the resolution plan - jurisdiction to adjudicate disputed claims post-approval of resolution plan - duty of the resolution professional to communicate acceptance or rejection of claims - constructive notice from publication of list of creditors - Actus Curiae Neminem Gravabit - finality of resolution plan vis-a -vis undecided claims (Essar principle)

Maintainability of applications under section 60(5) of the Code after approval of the resolution plan - jurisdiction to adjudicate disputed claims post-approval of resolution plan - finality of resolution plan vis-a -vis undecided claims (Essar principle) - Whether the applications filed by the applicants under the Code are maintainable notwithstanding the approval of the resolution plan by the Adjudicating Authority. - HELD THAT: - The Tribunal distinguished the Essar judgment as principally addressing claims raised after approval of a resolution plan by parties approaching the erstwhile RP or the successful resolution applicant, and emphasised that judicial statements are to be read in light of the facts before the Court. Having regard to the chronology and conduct in these proceedings - one applicant filing immediately after express rejection by the RP and the other having pursued its claim diligently but not given formal communication of rejection - the Tribunal held that approval of the resolution plan did not ipso facto divest the Adjudicating Authority of jurisdiction to entertain applications under section 60(5). The Court relied on equitable principles, including Actus Curiae Neminem Gravabit and the need to neutralise any undeserved advantage arising from procedural vacillation, to conclude that technicalities should not defeat substantive justice. Consequently, the objection that the applications are infructuous solely because the resolution plan has been approved was overruled and the applications were held maintainable for adjudication on merits. [Paras 7]

The objections to maintainability raised by the answering respondent are overruled; the applications are maintainable and must be considered on their merits.

Duty of the resolution professional to communicate acceptance or rejection of claims - constructive notice from publication of list of creditors - Actus Curiae Neminem Gravabit - Whether the RP's conduct in not communicating rejection/acceptance and relying on publication of the creditors' list precludes judicial intervention. - HELD THAT: - The Tribunal found that in one case the RP had expressly rejected the claim and the applicant approached the Adjudicating Authority within a week; in the other case the RP had sought clarifications but had not conveyed formal rejection while the claim was shown as 'pending for information' on the uploaded list. The Tribunal held that mere publication on the corporate debtor's website did not supply adequate individual notice to preclude the applicant's right to seek adjudication, and that the RP could not be permitted to take advantage of judicial vacillation or procedural delay. Applying equitable maxims, the Tribunal concluded that failure to communicate a decision by the RP disentitles reliance on constructive notice and permits judicial scrutiny to prevent prejudice to the applicants. [Paras 4, 5, 6, 7]

RP's failure to communicate rejection/acceptance and reliance on website publication does not bar judicial intervention; applicants are entitled to have their claims adjudicated.

Direction to list for adjudication on merits - What consequential order should follow the finding on maintainability? - HELD THAT: - Having held the applications maintainable and that applicants were prejudiced by the RP's conduct or by timing of hearings, the Tribunal directed that the matters proceed to full hearing on merits without undue delay so as to prevent frustration of rights during implementation of the resolution plan. The Tribunal fixed a date for hearing and required the applications to be taken up expeditiously. [Paras 7]

Both applications are directed to be listed for arguments on merits on 09.06.2021.

Final Conclusion: The Tribunal overruled objections to maintainability based solely on approval of the resolution plan, held that the RP's failure to communicate decisions did not preclude judicial remedy, and directed that both applications proceed to merits hearing on 09.06.2021.

Defective demand notice under Section 8 of the IBC - requirement to annex invoice with demand notice - date of default for computation of limitation - Tribunal's lack of discretion to select or cut-short invoices to fix date of default

Defective demand notice under Section 8 of the IBC - requirement to annex invoice with demand notice - Demand notice held defective for failure to annex the invoices relied upon in the petition and demand notice. - HELD THAT: - The Tribunal examined whether the demand notice under Section 8 was valid when the Operational Creditor did not annex invoices numbered 1056 to 1059 nor send those invoices with the demand notice. Relying on the principle that Section 8 requires delivery of a copy of the invoice appropriate to the nature of the transaction, the Bench observed that where the nature of the transaction necessitates invoices to prove existence and amount of default, omission to annex them renders the demand notice defective. The defect was held to be of a nature that could not be cured at this stage under the Proviso to Section 9(5)(ii). [Paras 26, 35]

Demand notice defective; proceedings cannot be sustained on that basis.

Date of default for computation of limitation - Tribunal's lack of discretion to select or cut-short invoices to fix date of default - Tribunal cannot selectively confine or cut-short invoices relied upon by the Operational Creditor to derive a later date of default for limitation purposes. - HELD THAT: - The Bench considered whether a different (later) date of default could be adopted by ignoring earlier invoices. Citing the reasoning in Next Education (NCLAT), the Tribunal held that when an Operational Creditor relies on multiple invoices in the demand notice to arrive at the claimed operational debt, the Adjudicating Authority has no jurisdiction to truncate the series of invoices or choose one invoice to fix the date of default. The date of default is a crucial fixed date and the Tribunal is not at liberty to pick and choose among recurring dates of cause of action. [Paras 32, 33, 34]

Invoices relied upon cannot be cut short to derive a date of default; the Adjudicating Authority lacks discretion to do so.

Final Conclusion: The petition under Section 9 was dismissed because the demand notice was defective for non annexure of relevant invoices and the Tribunal could not, in any event, select or truncate invoices to derive a date of default for limitation; therefore the application could not be admitted.

Taxation of preferential location charges as part of Construction of Residential Complex Service - Natural bundling of services under Section 66F(3) of the Finance Act, 1994 - Bundled service valuation and eligibility for abatement - Levy of service tax on renting of immovable property - residential use v. commercial use - Entitlement to refund under Section 11B of the Central Excise Act, 1944

Taxation of preferential location charges as part of Construction of Residential Complex Service - Natural bundling of services under Section 66F(3) of the Finance Act, 1994 - Bundled service valuation and eligibility for abatement - Preferential location charges are naturally bundled with and taxable as part of Construction of Residential Complex Service and the differential demand is unsustainable. - HELD THAT: - The Tribunal held that the question is no longer res integra and, applying Section 66F(3), concluded that preferential location and similar charges are services naturally associated with the construction of a residential complex and give the package its essential character. Reliance was placed on earlier tribunal decisions which found that where the sale deed or contract does not separately identify such charges and the elements cannot be independently provided, the bundle must be treated as the single predominant service. The decision in Torrent Power (Gujarat High Court) was cited for the principle that sub section (3) determines taxability of bundled services and that where services are naturally bundled they are to be treated as the single service which imparts the bundle its essential character. Consequentially, such charges qualify for treatment (and abatement) applicable to Construction of Residential Complex Service, and demands raised for differential tax, interest and penalty were quashed. The Tribunal further held that appellants who had paid the differential tax during audit are entitled to refund in accordance with Section 11B of the Central Excise Act, 1944. [Paras 5]

Differential demand on preferential location charges quashed; preferential location charges to be taxed as part of Construction of Residential Complex Service and appellants entitled to consequential refund under Section 11B.

Levy of service tax on renting of immovable property - residential use v. commercial use - Entitlement to refund under Section 11B of the Central Excise Act, 1944 - Demand of service tax on Renting of Immovable Property Service was not sustainable on facts; tax and interest paid are refundable. - HELD THAT: - The Tribunal examined the material relied upon by revenue and the evidentiary material produced by the appellant (electricity bills and certificate from the co operative housing society). It found that the leased premises were used as residential dwelling by a director and there was no material to show commercial use. The SCN's assertion of commercial use was held insufficient to sustain the demand. On that factual basis the levy was quashed and, since tax and interest had been paid during audit, the appellants were held entitled to consequential refund under Section 11B of the Central Excise Act, 1944. [Paras 5]

Demand on account of Renting of Immovable Property Service set aside; amount paid with interest to be refunded under Section 11B.

Final Conclusion: The appeals are allowed. Demands of service tax (including interest and penalty) in respect of preferential location charges and the demand in respect of renting of immovable property are quashed; amounts paid during audit are refundable and consequential reliefs are granted in terms of Section 11B of the Central Excise Act, 1944.

Eligibility to avail CENVAT credit on towers, tower material and pre-fabricated shelters - determination of entitlement at the time of receipt of goods - movability versus immovability - permanence test and effect of subsequent fixation to earth - functional utility / nexus test for inputs - goods received in CKD/SKD condition as inputs or capital goods - binding effect of the jurisdictional High Court's decision on the Tribunal

Eligibility to avail CENVAT credit on towers, tower material and pre-fabricated shelters - functional utility / nexus test for inputs - goods received in CKD/SKD condition as inputs or capital goods - Eligibility of the assessee to claim CENVAT credit on towers, tower materials (including MS angles and channels) and pre-fabricated shelters used in provision of telecommunication and business support services. - HELD THAT: - The Tribunal applied the reasoning of the Delhi High Court in Vodafone Mobile Services and held that towers and pre-fabricated shelters, received in CKD/SKD condition and assembled for use, form an integral part of the system that supplies the telecom service. The court accepted the functional utility approach: if goods are required for providing the output service on a commercial scale and are used (actively or passively) in conjunction with other equipment (antenna, BTS), they qualify as inputs within the CENVAT framework. The Tribunal rejected the view that an intermediate or eventual fixation to earth converts such received goods into non-excisable immovable property for the purpose of denying credit, and accordingly held that duty-paid inputs used to make towers and shelters are eligible for CENVAT credit.

CENVAT credit on the claimed towers, tower materials and pre-fabricated shelters is allowable as inputs; the denial by the Commissioner was erroneous.

Determination of entitlement at the time of receipt of goods - movability versus immovability - permanence test and effect of subsequent fixation to earth - binding effect of the jurisdictional High Court's decision on the Tribunal - Whether entitlement to CENVAT credit is to be determined at the time of receipt of goods and whether subsequent erection/fixation on site that results in an immovable structure disentitles the assessee from credit. - HELD THAT: - Relying on the Delhi High Court's conclusions, the Tribunal held that entitlement to credit is to be determined at the time the goods are received. Goods received in CKD/SKD condition that are movable on receipt and used for providing the taxable service cannot be denied credit merely because they are later assembled and fastened for operational stability. The Tribunal further noted that the decision of the jurisdictional High Court on the legal proposition is binding on the Tribunal and must be followed. Consequently, emergence of an immovable structure at an intermediate stage does not, in the facts of this case, operate to deny CENVAT credit.

Entitlement is assessed at receipt; later fixation does not deny credit, and the Commissioner's contrary conclusion was set aside.

Final Conclusion: The Commissioner's order confirming recovery of CENVAT credit on towers, tower materials and pre-fabricated shelters is set aside; the appeal is allowed and CENVAT credit is held allowable in respect of the periods covered by the show cause notices.

Cenvat credit - Commercial and Industrial Construction Service - Renting of Immovable Property Service - Input service - Admissibility of credit - Temporal eligibility of credit (pre- and post- levy) - Remand for fresh consideration

Cenvat credit - Commercial and Industrial Construction Service - Renting of Immovable Property Service - Temporal eligibility of credit (pre- and post- levy) - Admissibility of Cenvat credit of Commercial and Industrial Construction Service for providing Renting of Immovable Property Service and temporal limitation of such admissibility. - HELD THAT: - The Tribunal followed the decision in DYMOS INDIA AUTOMOTIVE PVT LTD and related precedents to hold that construction services are an eligible input service for providing the output service of renting of immovable property because renting cannot be provided without construction of the building. Consequently, Cenvat credit of Commercial and Industrial Construction Service used for construction of premises to be let is admissible where the output service (renting of immovable property) was chargeable to service tax. However, renting of immovable property became taxable only from 01.06.2007, and therefore credit in respect of construction services availed prior to that date cannot be allowed; credit for construction services availed after 01.06.2007 is admissible for the renting activity. [Paras 5]

Credit of Commercial and Industrial Construction Service for providing Renting of Immovable Property Service is admissible for services availed after 01.06.2007; credit for periods prior to 01.06.2007 is not allowable.

Input service - Admissibility of credit - Remand for fresh consideration - Admissibility of Cenvat credit of Commercial and Industrial Construction Service for other output services claimed by the appellant (Banking and Financial Services, Goods Transport Agency Service, Management and Maintenance and Repair Service and Sponsorship Service). - HELD THAT: - The Tribunal observed that the lower adjudicating authority did not consider whether construction services used to build the complex were attributable to the provision of the other claimed output services. The record did not establish if those services were provided from the same premises or whether the construction was used for those activities; moreover these aspects were not raised below and there are no findings. As admissibility is a question of law which can be raised at first appellate level, and because the facts and findings on nexus between the construction and the other output services are absent, the matter requires fresh consideration by the original adjudicating authority. [Paras 5, 6]

Impugned order set aside insofar as it relates to admissibility of credit for the other output services; the matter is remanded to the original adjudicating authority for fresh consideration in light of the observations.

Final Conclusion: The appeal is disposed by holding that Cenvat credit of Commercial and Industrial Construction Service is admissible for Renting of Immovable Property Service only for services availed after 01.06.2007; issues of admissibility of such credit for the other claimed output services were not decided below and the impugned order is set aside and remitted to the original adjudicating authority for fresh consideration.

Service tax on directors' remuneration - Salary versus directors' remuneration - Employment relationship and terms and conditions - Self-declaration in income-tax return not conclusive - Remand for de-novo adjudication - Principles of natural justice - Consideration of pending higher court decision

Service tax on directors' remuneration - Salary versus directors' remuneration - Employment relationship and terms and conditions - Self-declaration in income-tax return not conclusive - Consideration of pending higher court decision - Remand for fresh adjudication to determine whether remuneration paid to the Managing Director and whole-time Executive Director is 'salary' (outside definition of 'service') or is taxable as directors' remuneration/service. - HELD THAT: - The Tribunal noted that although the remuneration was declared as 'salary' in Form-16 and TDS was deducted under salary head, such declaration is a self-declaration and is not conclusive for the purpose of characterising the payment under service tax law. The determinative question depends on whether the directors were 'employees' of the company which requires examination of the terms and conditions of employment, appointment orders and related records; those documents were not produced by the appellants before the adjudicating authority. In view of absence of material on employment terms and the pendency of identical issues before the Supreme Court (as in the PCM Cement Concrete Pvt Ltd matter), the Tribunal held that the adjudicating authority must reassess the issue afresh, taking into account the terms and conditions of engagement of the directors and any relevant pronouncement of the Supreme Court, and apply the principles of natural justice while passing the de-novo order. The Tribunal expressly left other issues open for determination by the adjudicating authority.

Appeals allowed by remand; matter restored to the adjudicating authority for de-novo consideration and decision after giving parties opportunity under principles of natural justice and after taking into account terms and conditions of employment and relevant higher court law.

Final Conclusion: The Tribunal did not decide on the chargeability of service tax on the directors' remuneration on merits; instead the appeals were allowed by remanding the matter to the adjudicating authority for a fresh de-novo adjudication after considering the terms and conditions of employment, giving parties opportunity under principles of natural justice, and having regard to relevant pending Supreme Court pronouncements.

Definition of "input" under Cenvat Credit Rules, 2004 - goods used in the factory as qualifying inputs - CENVAT credit admissibility for inputs used in repair and maintenance - imposition of penalty for wrongful availment of CENVAT credit - consequential relief on successful challenge to denial of credit

Definition of "input" under Cenvat Credit Rules, 2004 - goods used in the factory as qualifying inputs - CENVAT credit admissibility for inputs used in repair and maintenance - imposition of penalty for wrongful availment of CENVAT credit - Welding electrodes used for repair and maintenance in the assessee's factory qualify as "input" for the purposes of CENVAT credit for the period April 2013 to March 2014, and denial of credit and penalty therefor cannot be sustained. - HELD THAT: - The amended definition of "input" in Rule 2(k) of the Cenvat Credit Rules, 2004 (effective 1.3.2011) includes all goods used in the factory by the manufacturer of the final product. Unlike the pre-amendment position, an item need not be used in or in relation to the manufacture of the final product; it suffices that it is used within the factory. The welding electrodes were used in the factory for maintenance of plant and machinery and therefore fall squarely within the amended definition of "input". Consequently, denial of CENVAT credit for such electrodes is contrary to law. As the credit was wrongly denied on that basis, the penalty imposed for alleged wrongful availment cannot stand. The Tribunal also noted earlier decisions and a co-ordinate Bench order in a related appeal deciding the same question in favour of the assessee, but the determinative reasoning rests on the statutory amendment to Rule 2(k) and the admitted fact of use within the factory. On these grounds the impugned order was set aside and the appeal allowed with consequential relief. [Paras 7, 8, 9, 10, 11]

Impugned order denying CENVAT credit and upholding penalty is set aside; appeal allowed with consequential relief.

Final Conclusion: For the period April 2013 to March 2014 the welding electrodes used in the factory for repair and maintenance qualify as "input" under the amended Rule 2(k); the denial of CENVAT credit and the penalty imposed were contrary to law and the impugned order is set aside with consequential relief.

Entitlement to declaration "C" forms for inter state purchases - concessional rate of tax for purchase of High Speed Diesel by way of inter state sale - registration of purchasing dealers under the Central Sales Tax regime despite amendment narrowing scope of "goods" - continuing operation of concessional benefit under the Central Sales Tax Act for specified goods - binding in rem effect of a High Court judgment and its application to all similarly placed dealers - obligation on tax authorities to permit online issuance/download of statutory declaration forms - preservation of freedom of inter state trade under Article 301 read with Article 304(b)

Entitlement to declaration "C" forms for inter state purchases - concessional rate of tax for purchase of High Speed Diesel by way of inter state sale - Petitioner entitled to declaration 'C' forms to avail concessional rate for purchases of High Speed Diesel from suppliers in other States. - HELD THAT: - Applying the reasoning in M/s Ramco Cements Ltd. and following other High Court decisions (and the Supreme Court dismissal of Special Leave Petitions challenging those views), the Court held that dealers purchasing High Speed Diesel by way of inter state sale are entitled to the concessional benefit by way of declaration in 'C' forms. The Court accepted that the liability to pay tax under the CST Act on inter state sale lies on the seller but that purchasing dealers retain an independent entitlement to obtain concessional treatment by producing valid declaration forms. The petitioner's difficulty in obtaining 'C' forms for inter state purchases of High Speed Diesel is therefore met by the settled view in the cited authorities, and the writ petition is allowed on this score.

Entitlement to 'C' forms for inter state purchases of High Speed Diesel upheld; writ petition allowed on this point.

Binding in rem effect of a High Court judgment and its application to all similarly placed dealers - obligation on tax authorities to permit online issuance/download of statutory declaration forms - Tax authorities cannot restrict the benefit of the High Court's decision to only those dealers who were parties to that decision; they must apply it generally and enable online issuance/download of 'C' forms. - HELD THAT: - The Court held that the decision in M/s Ramco Cements Ltd. and the consistent decisions of other High Courts operate in rem and are applicable to all dealers who seek the benefit under law. The departmental practice of limiting the concession to parties to the litigation or blocking online access to 'C' forms was declared impermissible. The State and its Assessing Authorities were directed to apply the rationale of the decision to all pending assessments, permit online downloading of 'C' forms, and to withdraw or cease reliance on departmental circulars and proceedings inconsistent with the judgments.

Department directed to extend the benefit to all eligible dealers and to permit online downloading of 'C' forms; restrictive circulars and related proceedings set aside.

Registration of purchasing dealers under the Central Sales Tax regime despite amendment narrowing scope of "goods" - continuing operation of concessional benefit under the Central Sales Tax Act for specified goods - preservation of freedom of inter state trade under Article 301 read with Article 304(b) - Amendment narrowing the definition of 'goods' did not extinguish the right of purchasing dealers to registration under the CST Act or their entitlement to concessional purchases under the Act for the specified commodities. - HELD THAT: - The Court, following the Division Bench reasoning in the Ramco Cements appeals, observed that Section 7(2) of the CST Act grants an independent right of dealers to obtain registration and that the 2017 amendment restricting the definition of 'goods' to specified commodities did not abrogate the operation of other provisions (notably the concessional scheme under Section 8(3)(b)). The consequence that purchasers would lose the right to concessional purchases merely because they are not sellers of the restricted items was rejected as unsustainable and discriminatory. The Court stressed that the limited scope of CST post GST does not eliminate the seamless flow of inter state trade rights preserved for the specified commodities.

Registration rights and entitlement to concessional rate for the specified commodities under the CST Act remain intact for purchasing dealers despite the amendment; revenue contentions to the contrary rejected.

Final Conclusion: Writ petition allowed; petitioner entitled to obtain 'C' forms for inter state purchases of High Speed Diesel and the State/authorities are directed to apply the ratio of the cited High Court decisions generally, permit online issuance/download of 'C' forms and cease reliance on departmental circulars and proceedings inconsistent with those decisions. No costs.

Exemption as property used for business purpose under section 2(ea)(i)(3) of the Wealth Tax Act - inapplicability of Rule 3 of Schedule III where unbuilt area exceeds specified area and valuation under Rule 20 - use of Sub-Registrar's declared consideration as market value for wealth-tax valuation - attraction of charge under section 5(1)(vi) where property is not house with appurtenant land

Exemption as property used for business purpose under section 2(ea)(i)(3) of the Wealth Tax Act - Claim for exemption as business-used property under section 2(ea)(i)(3) was not established and disallowed. - HELD THAT: - The authorities below examined the materials relied upon by the assessee (Form No. 23AC, annual report, MCA master data and photographs) and found that the relevant records did not show that the property was used for the company's business during the assessment years in dispute. The evidence furnished either related to a different address or to a later period, and the assessee failed to prove utilisation of the small dilapidated structure for business. The Tribunal, after considering the findings of the AO and the ld. Commissioner, concurred with the conclusion that the exemption claim was not substantiated and therefore could not be allowed. [Paras 6, 8]

Exemption claim under section 2(ea)(i)(3) rejected for lack of proof of business use.

Inapplicability of Rule 3 of Schedule III where unbuilt area exceeds specified area and valuation under Rule 20 - use of Sub-Registrar's declared consideration as market value for wealth-tax valuation - attraction of charge under section 5(1)(vi) where property is not house with appurtenant land - Rule 3 did not apply because unbuilt area exceeded specified area; valuation was therefore to be under Rule 20 using the Sub-Registrar's declared value and section 5(1)(vi) applies as the property was not a house with appurtenant land. - HELD THAT: - The AO computed the aggregate and unbuilt areas and found (with calculations reproduced in the order) that unbuilt area exceed the specified area threshold, rendering Rule 3 inapplicable. Thereupon valuation proceeded under Rule 20, and the Sub-Registrar's comprehensive consideration recorded at registration was treated as the market value of the asset. Photographs and the condition of the small structure supported the conclusion that the property was neither a house with appurtenant land nor usable for residential or business purposes; accordingly the ld. Commissioner and the Tribunal held that section 5(1)(vi) was attracted. No specific error was shown in the valuation once section 5(1)(vi) was applied, and the Tribunal found no perversity, impropriety or illegality in the concurrent findings of the authorities below. [Paras 6, 8]

Valuation under Rule 20 adopting the Sub-Registrar's declared value upheld and wealth-tax charge under section 5(1)(vi) sustained.

Final Conclusion: The Tribunal upheld the findings of the AO and the ld. Commissioner: the assessee failed to prove business use for exemption under section 2(ea)(i)(3); Rule 3 was inapplicable and valuation under Rule 20 by reference to the Sub-Registrar's declared consideration was correct; section 5(1)(vi) was attracted. All appeals are dismissed.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - ingredients of offence under Section 138 (dishonour of cheque - presentation, return, notice and default) - taking of cognizance upon presentation of complaint and its distinction from preliminary examination under Section 200 Cr.P.C. - magistrate's duty to scrutinise complaint and issue of process - separability of cheque-amount demand from additional claims in demand notice - defence of prior payment not a ground for quashing complaint under Section 482 Cr.P.C.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - ingredients of offence under Section 138 (dishonour of cheque - presentation, return, notice and default) - Complaint under Section 138 NI Act is maintainable as the averments and documentary evidence satisfy the ingredients of the offence. - HELD THAT: - The Court found that three cheques were presented within time and were dishonoured for insufficiency of funds, a demand notice was duly served and replied to, and the complaint was filed within the stipulated period. The complaint was supported by original dishonoured cheques, bank memo indicating dishonour, demand notice and proof of service. In view of these materials the ingredients required for prosecution under Section 138 were held to be made out and the complaint could not be quashed at the threshold. [Paras 8, 26, 28]

Complaint under Section 138 held maintainable; impugned summoning order not vitiated on maintainability ground.

Taking of cognizance upon presentation of complaint and its distinction from preliminary examination under Section 200 Cr.P.C. - magistrate's duty to scrutinise complaint and issue of process - Cognizance is taken on presentation of the complaint; preliminary examination under Section 200 is subsequent and omission to discuss preliminary statements does not automatically vitiate a summoning order when documentary evidence supports the complaint. - HELD THAT: - The Court explained that cognizance occurs when the Magistrate's mind is engaged on the alleged commission of an offence upon receiving the complaint, and recording of preliminary statements under Section 200 follows that stage to determine further steps. Although the earlier order issuing process was set aside as cryptic, on rehearing the trial court considered available preliminary statements and the documentary evidence. Where the complaint is corroborated by documentary proof (dishonoured cheques, bank memo, demand notice, proof of service), failure to discuss the preliminary statements in detail may be irregular but does not vitiate proceedings unless failure of justice is shown. The Court emphasised the Magistrate's duty to scrutinise complaints to filter frivolous cases but found that adequate material existed to put the accused on notice. [Paras 17, 18, 19, 20, 27]

Cognizance and subsequent issuance of process upheld; omission to elaborate on preliminary statements not fatal in presence of supporting documentary evidence.

Separability of cheque-amount demand from additional claims in demand notice - Demand notice which specifies the cheque-amount separately from additional claims is valid and not vitiated by seeking additional sums. - HELD THAT: - Relying upon the principle that a notice must be read as a whole, the Court held that where the cheque amount is separately specified and additional claims (interest, costs, etc.) are shown distinctly, such additional claims are severable and do not invalidate the notice. The demand for Rs. 22 lacs represented by three cheques was found to be clearly separable from the separate claim for additional amount, and the notice therefore complied with legal requirements. [Paras 21, 22, 23]

Demand notice held valid; objection to notice on account of additional claimed amount rejected.

Defence of prior payment not a ground for quashing complaint under Section 482 Cr.P.C. - Allegation that the drawer paid more than received (and thus cheques lacked consideration) is a defence to be contested at trial and is not a ground for quashing the complaint at the threshold. - HELD THAT: - The Court observed that assertions of payment or set-off raise factual disputes which the accused must establish at trial. Even if such a defence is ultimately sustainable, it does not justify pre-emptive quashing of proceedings where the complaint prima facie discloses ingredients of the offence and is supported by documentary evidence. Accordingly, the plea of prior payment was held to be a triable issue and not a bar to continuation of criminal proceedings. [Paras 24]

Plea of having paid the amount held to be a matter for trial; not a ground for quashment.

Final Conclusion: The High Court dismissed the quashment petition and upheld the trial court's summoning order: the complaint under Section 138 NI Act was found prima facie sustainable on documentary evidence, cognizance and issuance of process were properly taken on rehearing, the demand notice was validly framed, and factual defences raised by the petitioner are matters for trial rather than for summary quashing.

Burden to prove possession for grant of interlocutory injunction - Village pahani entries as evidence of possession - Interim injunctions and balance of convenience - Revenue adjudicatory order treating existence of civil dispute

Burden to prove possession for grant of interlocutory injunction - Village pahani entries as evidence of possession - Whether the appellant established continuing possession of the suit schedule property so as to merit grant of ad interim injunction. - HELD THAT: - The Court held that the burden lay on the appellant to establish that he continues to be in possession of the agricultural land when seeking a temporary injunction restraining respondents from interference. Possession of agricultural land is normally reflected in the Village pahanis. The Village pahani dated 25.06.2019 shows the respondents' names in the possession column and not the appellant's. Given that the revenue record does not support the appellant's claimed possession, and that the appellant filed the suit after respondents had obtained interim relief in their suit, the Court concluded that the appellant failed to discharge the initial burden to show he is in possession. Accordingly, the balance of convenience did not favour granting interim relief to the appellant. [Paras 30, 31, 37, 38]

The appellant failed to establish continuing possession; interim injunction refused.

Revenue adjudicatory order treating existence of civil dispute - Village pahani entries as evidence of possession - What is the legal significance of the entries in the revenue records and the RDO order impugned by the appellant. - HELD THAT: - The Court accepted the finding of the Revenue Divisional Officer (Ex.P7) that the matter between the parties was a civil dispute to be adjudicated by a competent Civil Court following a factual ground check, and that the respondents were shown in possession in the village records. The Court observed that the appellant had sought revision under the statutory remedy which was pending before the Joint Collector, and therefore the correctness of the revenue orders could not be re-opened in the present civil appeal. On this basis the trial court's conclusion disbelieving the appellant's claim of possession (which relied on negating the value of the revenue entries) was held to be sustainable. [Paras 25, 26, 32, 34]

Entries in the village pahani and the RDO order indicating respondents' possession were entitled to probative value for the purposes of the interim application; the revenue orders could not be re examined in this appeal.

Interim injunctions and balance of convenience - Burden to prove possession for grant of interlocutory injunction - Whether the existence of an earlier interim injunction in respondents' suit and the chronology of proceedings affected the grant of relief to the appellant. - HELD THAT: - The Court noted that respondents had obtained an interim injunction in O.S.No.108 of 2019 (I.A.No.682) on 06.09.2019 restraining the appellant from alienating the suit property. The instant suit for injunction was filed on 06.07.2020, after respondents had secured interim relief. The chronology, together with the respondents' pleaded and evidenced possession, weighed against the appellant on the question of balance of convenience. The trial court therefore did not err in refusing the interim injunction. [Paras 35, 36, 38]

Prior interim injunction in respondents' suit and chronology of filings supported refusal of the appellant's interim injunction application.

Final Conclusion: The High Court dismissed the appeal, upholding the trial court's refusal to grant ad interim injunction to the appellant because he failed to prove continuing possession (which was reflected in village revenue records in favour of the respondents), the revenue adjudicatory order treated the matter as a civil dispute, and respondents had earlier obtained interim relief; appeal dismissed, no costs.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - proof of execution of cheque - burden of proof in prosecution for cheque dishonour - reliability and consistency of oral testimony - non-examination of material witness and adverse inference - acquittal under Section 255(1) of the Cr.P.C.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - proof of execution of cheque - burden of proof in prosecution for cheque dishonour - Whether the presumptions under Sections 118 and 139 of the Negotiable Instruments Act could be drawn in favour of the complainant on the basis of the material on record. - HELD THAT: - The Court held that drawing the statutory presumptions depends on proof of execution of the cheque and that once execution is admitted or proved the presumptions follow and the accused must rebut them. Here the trial court found that the complainant failed to prove that the cheque was issued in discharge of a legally enforceable liability. The only direct evidence of execution and transaction was the oral testimony of PW1 which contained inconsistencies as to when the amount was handed over and whether the cheque and transaction occurred on the same date. DW3's evidence was hearsay and did not supply direct knowledge of the transaction. The non-examination of the independent witness Ajimon, who PW1 said was present, was material and justified an adverse view against the complainant. Although there were lapses in the defence (such as non-response to the lawyer's notice), such lapses do not relieve the prosecution of its obligation to prove execution and the transaction. In these circumstances the Court agreed with the trial court that the complainant had not established execution in the manner required to attract the statutory presumptions, and therefore the presumptions under Sections 118 and 139 could not be drawn in his favour.

Presumptions under Sections 118 and 139 N.I. Act cannot be invoked because the complainant failed to prove execution of the cheque and a legally enforceable liability.

Reliability and consistency of oral testimony - non-examination of material witness and adverse inference - acquittal under Section 255(1) of the Cr.P.C. - Whether the trial court rightly exercised its fact finding function in disbelieving the prosecution and acquitting the accused under Section 255(1) Cr.P.C. - HELD THAT: - The Court reviewed the evidence and concluded that the trial court had legitimately assessed credibility and consistency of testimony. PW1's contradictory statements on material points (dates of transaction and cheque issuance) and the omission to produce Ajimon, an independent witness alleged to have been present, weakened the prosecution case. DW3's testimony being hearsay did not bolster the complainant's case. The existence of some lacunae in the defence (for example, no reply to the lawyer's notice) did not fill the gaps in the prosecution's case or shift the burden of proof. Having regard to the evidentiary record and the trial court's analysis, the High Court found no error in the acquittal recorded under Section 255(1) Cr.P.C. and declined to interfere with the finding of the trial court.

The trial court correctly disbelieved the prosecution evidence on the material issues and its acquittal of the accused under Section 255(1) Cr.P.C. is maintained.

Final Conclusion: The appeal is dismissed; the High Court found no infirmity in the trial court's conclusion that the prosecution did not prove execution of the cheque or a legally enforceable liability and therefore the statutory presumptions under the N.I. Act did not arise, warranting dismissal of the complaint and upholding the acquittal.

Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque due to insufficiency of funds - Production and marking of cheque return memo as evidence - Remand for fresh evidence - Conviction and appeal against acquittal

Production and marking of cheque return memo as evidence - Dishonour of cheque due to insufficiency of funds - Remand for fresh evidence - Whether the matter should be remanded to the trial court to permit the appellant to produce the cheque return memo and adduce further evidence to establish that the cheque was dishonoured for insufficiency of funds. - HELD THAT: - The High Court observed that the trial court had accepted the complainant's evidence on execution and issuance of the cheque, while the appellate court overturned conviction for want of reliable evidence proving dishonour due to insufficiency of funds. The original cheque return memo issued by the Bank of India was not produced below through a competent witness, and Ext.P2 was only a covering communication. The appellant attributed the omission to inadvertence and produced the original cheque return memo before this Court, offering to examine the bank manager. Given that both lower courts had accepted issuance of the cheque and that the reason for dishonour is material to the offence under Section 138, the High Court held that interests of justice require affording the appellant an opportunity to tender and prove the cheque return memo and to lead further evidence in continuation of the record. Consequently, the appellate court's interference with the conviction was set aside and the matter remanded for further evidence and fresh disposal. [Paras 6, 7, 8]

The High Court set aside the appellate court's order and remanded the case to the trial court to permit production and marking of the cheque return memo and to take further evidence, allowing the appellant to examine the bank manager and the accused to adduce any defence evidence.

Final Conclusion: The appeal is allowed by setting aside the judgment of the appellate court and remanding the matter to the trial court for continuation of evidence and fresh disposal after permitting production and proof of the cheque return memo and any additional evidence.