TaxTMI Updates e-Newsletter
Jun 05,2023

Right to personal hearing under Section 75(4) of the CGST Act, 2017 - rejection of belated reply and its effect on opportunity of hearing - setting aside order for failure to afford hearing - power to permit additional legal contentions on remand - award of costs for delayed filing of reply

Right to personal hearing under Section 75(4) of the CGST Act, 2017 - rejection of belated reply and its effect on opportunity of hearing - Failure to consider a written request for personal hearing made in the reply and rejection of the reply as belated constituted non-compliance with Section 75(4) of the CGST Act, 2017. - HELD THAT: - The Court found that the petitioner's reply (Form DRC 06) though rejected as belated, contained an explicit written request for personal hearing. Section 75(4) mandates that such a written request from the person chargeable with tax or penalty seeking personal hearing must be considered. The Revenue's approach of treating the request for personal hearing as rejected solely because the reply was filed beyond the statutory period was characterised as a hyper-technical construction which defeats the statutory mandate. Consequently, the impugned order was set aside on the ground of violation of the statutory right to be heard.

Non-compliance with Section 75(4) established; impugned order set aside and the authority directed to afford personal hearing.

Power to permit additional legal contentions on remand - setting aside order for failure to afford hearing - On setting aside the order for failure to afford personal hearing, the authority is to reconsider the matter having regard to the reply already filed and to permit the petitioner to raise additional legal contentions. - HELD THAT: - To meet the ends of justice, the Court directed that upon affording the personal hearing, the authority should look into the petitioner's previously filed reply and allow the petitioner to press additional legal contentions raised in the writ petition. The direction requires fresh consideration of the matter by the authority in light of the hearing and the contentions permitted to be advanced, rather than a mere mechanical reiteration of the earlier order.

Matter remitted for fresh consideration after personal hearing; authority to consider the filed reply and allow additional legal contentions.

Award of costs for delayed filing of reply - Petitioner ordered to pay costs for the lapse in filing a delayed reply. - HELD THAT: - Although the petitioner's request for hearing was upheld, the Court imposed costs on the petitioner for the procedural lapse of filing the reply beyond the prescribed period. The Court regarded this as an appropriate measure while directing fresh consideration, thereby balancing the petitioner's statutory right to be heard with the consequence of delay in filing the reply.

Petitioner liable to pay costs of Rs. 10,000/- to the respondents.

Final Conclusion: Impugned order dated 13.4.2023 is set aside for failure to consider the petitioner's written request for personal hearing under Section 75(4); the petitioner shall appear for personal hearing on 9.6.2023, the authority shall reconsider the matter permitting additional legal contentions and the petitioner is directed to pay costs as ordered.

Rectification under section 161 - audit under section 65 - error apparent on the face of the record - show-cause notice and proceedings under section 73 - proceedings under section 74 - role of the Proper Officer in adjudication - finality of audit observations

Rectification under section 161 - error apparent on the face of the record - Rectification application under section 161 cannot be used to seek re examination or review of an audit report unless the grievance falls within the narrow scope of an error apparent on the face of the record. - HELD THAT: - The audit report issued under section 65(6) was challenged by the petitioner by filing a rectification application under section 161. The Court held that section 161 is confined to correction of errors apparent on the face of the record and does not permit a re examination or review of the audit officer's conclusions. The rectification application in Annexure-4 sought re examination of the audit report and therefore did not fall within the permissible scope of section 161. Consequently, the Assessing/Audit Officer was correct in declining to entertain the rectification as a ground to stay further proceedings.

Rectification under section 161 refused insofar as it seeks review of the audit report; only errors apparent on the face of the record are amenable to rectification.

Audit under section 65 - finality of audit observations - role of the Proper Officer in adjudication - Audit observations under section 65(6) are not final adjudications of tax liability; the Proper Officer/Assessing Officer must independently consider the audit findings and decide on initiation of proceedings under section 73 or 74. - HELD THAT: - The Court noted that an audit under section 65 enables the Proper Officer to proceed but does not itself determine tax liability. The audit report may contain observations and recommendations and some discrepancies may be dropped on examination, as occurred here. It is ultimately for the Proper Officer to verify supporting documents, examine explanations, and form satisfaction before issuing a show cause notice or passing an order under the relevant provisions. Thus, the audit report is an enabling document, not a conclusive adjudication.

Audit report is not final; the Proper Officer must independently consider the audit findings before determining tax liability or initiating proceedings.

Show-cause notice and proceedings under section 73 - error apparent on the face of the record - role of the Proper Officer in adjudication - Issuance and continuation of a show cause notice under section 73 cannot be kept in abeyance merely because a rectification application under section 161 is pending; the Assessing Officer may proceed after recording satisfaction and may consider any submissions filed by the assessee. - HELD THAT: - The Assessing Officer issued the show cause notice after finding no error apparent on the face of the record warranting rectification and after considering the audit report. The Court observed that the Assessing Officer properly recorded satisfaction on the items raised in the audit report and the notice explicitly permits the assessee to raise objections which the Assessing Officer must consider. Therefore, a pending rectification application that does not disclose an error apparent on the face of the record does not estop the Proper Officer from initiating or continuing proceedings under section 73; the assessee retains the right to file objections during those proceedings.

Show cause proceedings under section 73 may proceed notwithstanding a pending rectification application that does not disclose an apparent error; the assessee can still file objections before the Assessing Officer.

Final Conclusion: Writ petition dismissed. The Court declined to interfere with the assesssing/ audit process: rectification under section 161 was not available for review of the audit report, the audit observations are not final and the Proper Officer may proceed under section 73 while entertaining any objections filed by the assessee.

Right to fair hearing - Violation of Article 14 - Principle of audi alteram partem - Exceeding appellate jurisdiction - Deciding appeal on grounds not raised in show-cause notice - Remand for fresh hearing in accordance with law

Right to fair hearing - Violation of Article 14 - Principle of audi alteram partem - Validity of the cancellation order dated 01.12.2020 in the absence of a fixed date and time for hearing - HELD THAT: - The Court found that the show-cause notice did not fix any date or time for hearing and that the registration was cancelled by an order dated 01.12.2020 without affording the petitioner an opportunity to be heard. Having regard to the settled requirement that an affected party must be given a fair opportunity to respond before adverse action is taken, the order of cancellation fell short of the requirements of Article 14 and the principle of audi alteram partem. The absence of a hearing date and time rendered the impugned order invalid for want of compliance with the mandate of natural justice.

The cancellation order dated 01.12.2020 is set aside for violation of the right to fair hearing under Article 14.

Exceeding appellate jurisdiction - Deciding appeal on grounds not raised in show-cause notice - Validity of the appellate order dated 30.12.2021 which dismissed the appeal on grounds alien to the show-cause notice - HELD THAT: - The Court held that the appellate authority, while hearing the appeal against cancellation, proceeded to decide the matter on grounds that were not part of the original show-cause notice and were not considered in the cancellation order. An appellate authority must confine its decision to the scope of the appeal and the grounds on which the original order was made; it cannot travel beyond those grounds to dismiss an appeal on issues alien to the notice. By doing so, the appellate order exceeded the power conferred on it and was unsustainable.

The appellate order dated 30.12.2021 is set aside for exceeding the appellate authority's jurisdiction by deciding on grounds not contained in the show-cause notice.

Remand for fresh hearing - Remand for consideration in accordance with law - Appropriate remedy following setting aside of the impugned orders - HELD THAT: - In view of the invalidation of both the cancellation order and the appellate order, the Court remitted the matter to the concerned authority for passing a fresh order. The remand is for the limited purpose of affording the petitioner an opportunity of hearing and for the authority to decide the matter afresh within the scope of the show-cause notice and in accordance with law. The Court's direction requires the authority to consider any documentary proof already placed on record and any submissions permitted at the fresh hearing.

The matter is remanded to the authority concerned to pass a fresh order after giving the petitioner an opportunity of hearing in accordance with law.

Final Conclusion: Both the cancellation order dated 01.12.2020 and the appellate order dated 30.12.2021 are set aside; the matter is remitted to the concerned authority for fresh consideration after affording the petitioner a hearing in accordance with law, and the writ petition is disposed of on these terms.

Reassessment proceedings - notice under Section 148A(b) of the Income Tax Act, 1961 - survey report as basis for reassessment and duty to furnish - time limit for issuance of notice under Section 148 as amended by Finance Act 2022 - principles of natural justice (right to be furnished material) - stay on reassessment proceedings pending adjudication

Notice under Section 148A(b) of the Income Tax Act, 1961 - survey report as basis for reassessment and duty to furnish - principles of natural justice (right to be furnished material) - Validity of reassessment notices in view of reliance on a survey report which was not furnished in entirety to the petitioner and related natural justice concerns. - HELD THAT: - The petition challenges notices dated 28.03.2023 and 29.03.2023 issued under Section 148A(b) and the consequential notice under Section 148 on the ground that the reassessment was triggered by a survey and the entire survey report, which forms the basis for initiating proceedings, was not furnished to the petitioner. The Court recorded that only the relied-upon portion of the survey report was provided to the petitioner and accepted that the contention that the survey report should have been furnished requires examination. The Court did not determine the merits of the alleged breach of natural justice but treated the contention as a live question necessitating further factual and legal scrutiny by the authorities and the parties. [Paras 3, 4, 8, 11]

Held for consideration by adjudicating authority; issue requires examination and is not finally decided.

Time limit for issuance of notice under Section 148 as amended by Finance Act 2022 - reassessment proceedings - Applicability of the amendment to Section 149 (Finance Act 2022) to the reassessment proceedings relating to AY 2016-17. - HELD THAT: - The petitioner contended that the amended provision of Section 149, effective from 01.04.2022, cannot be applied to expenditure incurred prior to that date and that proceedings are therefore time barred. The revenue relied on the fact that the information emerged from a survey conducted on 07.09.2022 and invoked Explanation 2 to Section 148. The Court found that the question of applicability of the amended Section 149 to the facts of this case requires examination and observed, at least prima facie, that the amended provision may not be applicable. No final adjudication on applicability was made; the matter was left for detailed consideration in the proceedings to follow. [Paras 5, 9, 10, 11]

Left open for adjudication; prima facie view recorded that amended Section 149 may not apply, necessitating further examination.

Stay on reassessment proceedings pending adjudication - reassessment proceedings - Interim relief in the form of stay on the continuation of the reassessment proceedings. - HELD THAT: - Having recorded the contentions regarding non furnishing of the survey report and doubts about application of the amended limitation provision, the Court granted interim relief. Procedural directions were issued: notice to respondents, timelines for filing counter affidavit and rejoinder, listing on a specified date, and a stay on the continuation of the reassessment proceedings until further orders. The Court also allowed the applicant to file legible copies of annexures within a short timeline. [Paras 1, 12, 13, 14, 15]

Interim stay granted on continuation of reassessment proceedings; procedural directions issued for pleadings and listing.

Final Conclusion: The High Court issued notice, directed exchange of pleadings on fixed timelines, and granted an interim stay on continuation of the reassessment proceedings relating to Assessment Year 2016-17 until further orders; substantive questions concerning the furnishing of the survey report and the applicability of the Finance Act 2022 amendment to Section 149 were left for detailed adjudication.

Reopening of assessment under Section 148 - reasons to believe - reasons recorded - unexplained cash credit under Section 68 - onus on assessee to prove identity, capacity and genuineness of creditor - proviso to Section 68 (inserted with effect from 01.04.2013) and prospective operation - taxation of share premium under Section 56(1)(viib) - prospective application

Reopening of assessment under Section 148 - reasons to believe - reasons recorded - Validity of the second reassessment notice and reopening of assessment - HELD THAT: - The Court examined the sequence of two notices under Section 148, the assessee's objections, the AO's reasons and the fact that the first reassessment proceedings were dropped. Having considered the materials and the authorities relied upon, the Court concluded that the view taken by the AO (and upheld below) to reopen the assessment was unsustainable. The Court treated the mandatory requirement of a valid "reasons to believe" as a condition precedent to jurisdiction and found that the authorities below had not sustained the reopening on legally sound foundations; accordingly the reassessment was quashed. [Paras 24, 25]

Reopening under Section 148 held unsustainable; reassessment quashed and the ITAT order set aside.

Unexplained cash credit under Section 68 - onus on assessee to prove identity, capacity and genuineness of creditor - Validity of addition made under Section 68 in respect of share premium credited by M/s. Walden - HELD THAT: - Applying the settled tripartite test, the Court examined whether the assessee had discharged the onus to prove (i) identity of the creditor, (ii) capacity of the creditor to advance the amount, and (iii) genuineness of the transaction. The assessee produced corporate identity documents, bank transfer records, the investor's balance sheet showing loans, reserves and investments, and other documentary material placed before the ITAT. The Court held that these materials prima facie establish identity, capacity and genuineness and that the AO's reliance on differential pricing (shares to director at Rs. 10 and to investor at premium) did not justify treating the entire receipt as unexplained cash credit. Consequently the addition under Section 68 could not be sustained on the facts of this case. [Paras 12, 15, 23, 24]

Addition under Section 68 in respect of the share premium of Rs. 49.50 crores was unsustainable on the facts; addition set aside.

Proviso to Section 68 (inserted with effect from 01.04.2013) and prospective operation - taxation of share premium under Section 56(1)(viib) - prospective application - Applicability of post 2013 amendments (proviso to Section 68 and Section 56(1)(viib)) and reliance on later decisions - HELD THAT: - The Court observed that the proviso to Section 68 and the provision taxing share premium under Section 56(1)(viib) were introduced with effect from 01.04.2013 and are not applicable to the assessment year 2008-09. Consequently, reliance on decisions construing the amended provision (including NRA Iron & Steel) was inapposite. The Court endorsed earlier High Court authority holding that the post amendment regime did not govern pre amendment assessment years and thus could not sustain the addition in this case. [Paras 17, 18, 19, 23]

Amendments/proviso inserted w.e.f. 01.04.2013 and the statutory provision taxing share premium do not apply to AY 2008-09; reliance on post amendment decisions held misplaced.

Final Conclusion: Appeal allowed; the ITAT order upholding the AO and CIT(A) is set aside. The reassessment and the addition under Section 68 in respect of the share premium for AY 2008-09 are quashed and the substantial questions of law are answered in favour of the assessee and against the Revenue.

Maintainability of writ petition - Article 226 jurisdiction - title dispute over seized assets - requisition of assets under Section 132A of the Income Tax Act - statutory remedy by appeal/assessment proceedings

Maintainability of writ petition - Article 226 jurisdiction - statutory remedy by appeal/assessment proceedings - Whether the writ petition challenging requisition and refusal to return seized cash is maintainable in view of subsequent assessment orders against the trustee and pending statutory appeal. - HELD THAT: - The court took judicial notice of subsequent events, namely orders of assessment treating the seized monies as income of the trustee (2nd petitioner) and the pendency of appeal against those assessment orders. Applying established principles that subsequent events may be noticed where they materially affect the issues, the court held that the assessment proceedings and the appellate remedy bear directly on the controversy raised in the writ petition. Allowing the writ would indirectly decide title and interfere with issues already subject to statutory adjudication and challenge before the appellate authority. Consequently, it is inappropriate to continue adjudication under Article 226 when statutory proceedings are in place and the same matter is the subject of appeal; the petitioners must pursue the statutory remedy available to them. The court further observed that if the statutory remedy is availed, time spent in the writ petition shall be excluded for limitation purposes. [Paras 6, 7, 9]

The writ petition is not maintainable in view of subsequent assessment orders and pending statutory remedies; petitioners are directed to avail the statutory remedy and the time spent in the writ petition will be excluded for limitation.

Title dispute over seized assets - requisition of assets under Section 132A of the Income Tax Act - Article 226 jurisdiction - Whether this Court should determine the legality of the seizure/requisition or decide title to the seized monies in the writ petition. - HELD THAT: - The court held that resolving the challenge to the seizure and directing return of the monies would necessarily require adjudication on the question of title - whether the seized cash belonged to the Trust (1st petitioner) or to the trustee in his individual capacity (2nd petitioner). That question is essentially factual and involves evidence and appreciation beyond the limited scope of writ jurisdiction under Article 226. Given the Income Tax Department has already assessed the monies as income of the trustee and that assessment is under challenge by appeal, it would be inappropriate for the court in writ proceedings to determine title or rehear facts that are the subject of ongoing statutory adjudication. [Paras 8]

The court declined to adjudicate the legality of seizure or decide title to the seized assets in the writ petition, recording that such factual determination is beyond the scope of Article 226 in the present circumstances.

Final Conclusion: The writ petition is dismissed as not maintainable in view of intervening assessment orders and pending statutory remedies; petitioners are left to pursue the statutory remedy and the time spent in the writ petition will be excluded for limitation. No costs.

Principles of natural justice - Section 148A(b) notice and opportunity to reply - Section 148A(d) order - Notice under section 148 - Technical failure of electronic portal and its effect on opportunity to be heard - Remand for fresh consideration and directions for completion

Principles of natural justice - Section 148A(b) notice and opportunity to reply - Section 148A(d) order - Technical failure of electronic portal and its effect on opportunity to be heard - Impugned order under section 148A(d) and consequent notice under section 148 were set aside for want of opportunity to the assessee to reply to the section 148A(b) notice. - HELD THAT: - The petitioner had filed a return for AY 2018-2019. A notice under section 148A(b) dated 21.03.2022 sought a response by 28.03.2022. The petitioner uploaded a request for adjournment on the department's portal and received an automated acknowledgement stating that the adjournment request was submitted successfully. Due to a technical snag the department's portal did not record the petitioner's response, and the Assessing Officer proceeded to pass an order under section 148A(d) and issue notice under section 148. Section 148A explicitly contemplates giving the assessee an opportunity to reply; observance of principles of natural justice is an essential part of that quasi judicial process. On the materials the court found that the petitioner was deprived of the opportunity to respond because of the portal failure and that the department therefore failed to afford the mandated hearing. The departmental contention regarding time bar and procedural compliance did not cure the absence of an effective opportunity to be heard. [Paras 5, 6]

Order dated 30.03.2022 under section 148A(d) and notice dated 30.03.2022 under section 148 are set aside for breach of the principles of natural justice arising from denial of opportunity to reply to the section 148A(b) notice.

Remand for fresh consideration and directions for completion - Section 148A(b) notice and opportunity to reply - Reasonable opportunity to file reply and prescribed timelines - Proceedings were remanded to the Assessing Officer with directions to grant the assessee opportunity to reply and to conclude proceedings within specified timelines. - HELD THAT: - Instead of finally adjudicating on the merits in the absence of a response, the court remanded the matter to the competent authority. The Assessing Officer is directed to grant the petitioner two weeks' time to file its reply to the section 148A(b) notice and to afford a reasonable opportunity for the petitioner to be heard. After receipt of the reply, the Assessing Officer is to conclude the proceedings, including passing an appropriate order in accordance with law, within a further period of six weeks. These directions are remedial to ensure compliance with statutory hearing requirements and to permit adjudication on merits after the petitioner has had an effective opportunity to present its case. [Paras 6, 7]

Proceedings remanded to the competent authority; petitioner to be given two weeks to file reply and reasonable opportunity to be heard; after reply, proceedings to be concluded within six weeks.

Final Conclusion: Writ petition allowed: the order under section 148A(d) and the notice under section 148 (both dated 30.03.2022) are set aside for want of opportunity to reply to the section 148A(b) notice; proceedings remanded to the Assessing Officer with directions to permit the petitioner two weeks to respond and to conclude the matter within six weeks thereafter.

Assessment proceedings against a deceased person are nullity - notice under section 148 issued to a dead assessee is invalid unless legal representatives submit to jurisdiction or participate - inapplicability of section 292B where notice is issued to a dead person - jurisdictional defect in proceedings commenced against a non-existent person

Assessment proceedings against a deceased person are nullity - notice under section 148 issued to a dead assessee is invalid unless legal representatives submit to jurisdiction or participate - inapplicability of section 292B where notice is issued to a dead person - Validity of notice dated 26.03.2021 under section 148 issued in the name of a deceased assessee and maintainability of assessment proceedings initiated thereon - HELD THAT: - The court found the fact of death of the noticee (Ravji Harji Rabadia) was not in dispute and was intimated to the Income Tax authorities with a death certificate. Relying on earlier Division Bench decisions and reasoning reproduced from Mitesh Goradhandas Somaiya and Urmilaben Anirudhhasinji Jadeja, the court held that initiating assessment or reassessment proceedings by issuing a jurisdictional notice under section 148 to a dead person is a jurisdictional defect and amounts to a nullity. The principles applied include that mere intimation of death by the legal representative does not amount to submission to jurisdiction; the proceedings can only be maintained if legal representatives participate in or submit to the proceedings by taking positive steps. The court further accepted that Section 292B, which saves certain defects in service, does not operate to validate a notice issued to a deceased person because such a proceeding is not in conformity with the intent and purpose of the Act when directed at a non-existent person. Applying these principles to the facts, where the legal heir notified the department of the death and did not participate in or submit to the proceedings, the notice and any consequent proceedings could not be sustained. [Paras 6, 7]

Notice dated 26.03.2021 under section 148 issued to the deceased is set aside and the Income Tax authorities shall not proceed against the deceased assessee.

Final Conclusion: The petition is allowed: the reassessment notice issued in the name of the deceased assessee is invalid and set aside; assessment proceedings against the deceased cannot be continued in the absence of participation or submission to jurisdiction by the legal representatives.

Limitation for Transfer Pricing Officer's order under Section 92CA(3A) of the Income Tax Act - computation of sixty days prior to assessment order for determining limitation - precedential effect of Division Bench judgment - effect of pending Special Leave Petitions on operation of High Court judgment

Limitation for Transfer Pricing Officer's order under Section 92CA(3A) of the Income Tax Act - computation of sixty days prior to assessment order for determining limitation - precedential effect of Division Bench judgment - effect of pending Special Leave Petitions on operation of High Court judgment - The Transfer Pricing Officer's order dated 01.11.2019 in respect of Assessment Year 2016-17 is barred by limitation under Section 92CA(3A) and is quashed. - HELD THAT: - The assessment order for AY 2016-17 was required to be passed on or before 31.12.2019. Section 92CA(3A) requires the Transfer Pricing Officer to pass his order within sixty days prior to the passing of the assessment order by the Assessing Officer. Calculating sixty days prior to 31.12.2019 yields 31.10.2019 as the last permissible date for the Transfer Pricing Officer's order. The impugned order was passed on 01.11.2019 and therefore falls outside the statutory sixty-day period. The Division Bench of this Court has already considered the same question in identical proceedings and held that an order passed on 01.11.2019 is time-barred; that precedent was not disputed before the learned Single Judge. The existence of Special Leave Petitions filed by the Department (including instances where delay in filing was condoned and notice issued by the Supreme Court) did not operate as a stay of the Division Bench judgment and no stay was shown to be in force. In these circumstances the Transfer Pricing Officer's order dated 01.11.2019 is liable to be quashed as barred by limitation under Section 92CA(3A).

Impugned order dated 01.11.2019 is quashed as barred by limitation under Section 92CA(3A); connected miscellaneous petition closed.

Final Conclusion: The writ petition is allowed; the Transfer Pricing Officer's order dated 01.11.2019 for Assessment Year 2016-17 is quashed on the ground of being time-barred under Section 92CA(3A) of the Income Tax Act. No costs.

Natural justice - duty to provide reasonable and effective opportunity of hearing - Registration under section 12AB - procedure for grant or refusal and compliance with proviso to section 12AA(1)(b)(ii) - Remand for fresh consideration for compliance and effective hearing

Natural justice - duty to provide reasonable and effective opportunity of hearing - Registration under section 12AB - procedure for grant or refusal - Remand for fresh consideration - Whether the Commissioner of Income Tax (Exemption) rejected the registration application without affording a reasonable and effective opportunity in breach of the proviso to section 12AA(1)(b)(ii), and whether the matter should be remanded for fresh consideration. - HELD THAT: - The Tribunal recorded that the appellant had e-filed Form No.10AB seeking registration and that the CIT(E) had issued notices requesting additional information which remained unanswered. The CIT(E) then rejected the application citing absence of tangible material to vouch the engagement in activities in line with the objects of the trust, and did so without affording further opportunity. The Tribunal held that the opportunity of being heard must be real, reasonable and effective and not a mere paper formality. Concluding that the CIT(E)'s action suffered for want of sufficiency of reasonable opportunity to refute the rejection or to comply with requirements, the Tribunal refrained from adjudicating the merits of the eligibility for registration and remanded the matter to the file of the CIT(E) for according a reasonable and effective opportunity to the appellant and for fresh consideration in accordance with law. [Paras 4, 5]

The rejection is set aside for want of reasonable and effective opportunity; the matter is remanded to the CIT(E) for fresh consideration after affording a proper hearing.

Final Conclusion: Appeal allowed for statistical purposes; matter remanded to the Commissioner of Income Tax (Exemption), Pune for fresh consideration after affording the appellant a reasonable and effective opportunity of hearing; no decision on merits of eligibility for registration.

Cost of acquisition - fair market value - full value of consideration - capital gains on transfer - transfer by compulsory acquisition - remand for determination of fair market value

Cost of acquisition - fair market value - full value of consideration - capital gains on transfer - Admissible basis for computing cost of acquisition in the assessee's sale of plots allotted in lieu of compulsory acquisition and correctness of AO's adoption of amounts paid to CIDCO as cost of acquisition. - HELD THAT: - The Tribunal held that there are two distinct transfers: (i) compulsory acquisition of the assessee's agricultural land (for which plots were later allotted) and (ii) the subsequent sale of the allotted plots. Once plots were allotted as quid pro quo for compulsory acquisition, the fair market value of those plots on the date of allotment, less the net outflow paid by the assessee to obtain the allotment (net refund adjustment), constituted the full value of consideration in the first transfer and, correspondingly, constituted the cost of acquisition for the second transfer. The AO's treatment of the amount paid/refunded to CIDCO (Rs. 8,58,250/- or the refund component standing alone) as the cost of acquisition in the sale to the developer was incorrect. The original compensation received earlier and its later refund with additions cannot, in isolation, be equated with the fair market value that determines the first transfer and the cost of acquisition in the second transfer. Because the determinative figure - the fair market value of the allotted plots on the date of allotment (26-08-2011) - was not on record, the Tribunal set aside the impugned computation and remanded the matter to the AO to determine afresh the fair market value on 26-08-2011 and recompute the capital gain, allowing the assessee a reasonable opportunity of being heard. [Paras 5, 6]

Cost of acquisition for the sale of the allotted plots is their fair market value on the date of allotment (26-08-2011) adjusted by the net outflow; the assessment order is set aside and the matter remitted to the AO for fresh determination and recomputation.

Final Conclusion: The appeal is allowed for statistical purposes; the impugned order is set aside and the matter is remitted to the Assessing Officer to determine the fair market value of the allotted plots on 26-08-2011, recompute the capital gain accordingly and afford the assessee a reasonable opportunity of hearing.

Admissibility of additional evidence and reconciliation statements - Evidentiary value of responses to notices issued under section 133(6) - Acceptance of reconciliations with public sector undertakings - Deletion of additions based on reconciled sundry creditors

Admissibility of additional evidence and reconciliation statements - Evidentiary value of responses to notices issued under section 133(6) - Acceptance of reconciliations with public sector undertakings - Whether additions made by the Assessing Officer on account of sundry creditors could be sustained where the assessee produced reconciliation statements and responses from creditors (STC, MMTC and PEC) which were admitted by the CIT(A) and the Assessing Officer in remand report recorded no adverse comments. - HELD THAT: - The CIT(A) admitted the additional evidence filed by the assessee consisting of reconciliation statements and supporting documents in respect of the three creditors (STC, MMTC and PEC) whose responses to notices under section 133(6) showed variance with the assessee's books. A remand report was obtained from the Assessing Officer, who did not record any adverse comments regarding the reconciliations. The three creditors are public sector undertakings. In light of the reconciliations being on record, their acceptance by the CIT(A), and the absence of adverse observation in the remand report, the Tribunal found no justification to interfere with the deletion of additions effected by the CIT(A). [Paras 6]

Deletion of the additions relating to sundry creditors upheld; the Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue appeal and upheld the CIT(A)'s deletion of additions after admitting the assessee's reconciliation statements and noting that the Assessing Officer made no adverse comments on remand; the reconciliations with the three public sector undertakings were accepted.

Deduction under section 80P(2)(d) - Revision under section 263 - Eligibility of a co-operative society for exemption on interest income from deposits with co-operative banks - Definition of 'co-operative society' under section 2(19) - Exclusion of certain co-operative banks by operation of section 80P(4)

Deduction under section 80P(2)(d) - Revision under section 263 - Eligibility of a co-operative society for exemption on interest income from deposits with co-operative banks - Definition of 'co-operative society' under section 2(19) - Exclusion of certain co-operative banks by operation of section 80P(4) - Whether the Principal CIT was justified in invoking jurisdiction under section 263 to treat as erroneous and prejudicial the assessment order which allowed deduction under section 80P in respect of interest income from deposits with co-operative banks. - HELD THAT: - The PCIT held the assessment order to be erroneous and prejudicial solely on the ground that the claim of deduction under section 80P on interest income was not in order. The Tribunal examined the statutory scheme and observed that, although section 80P(4) excludes certain co-operative banks (with effect from 1-4-2007) from eligibility, that exclusion does not negate the entitlement of a co-operative society to claim deduction under section 80P(2)(d) in respect of interest earned on investments/deposits placed with a co-operative bank. The Tribunal relied on the definition of 'co-operative society' in section 2(19) - i.e. a society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force - to conclude that a registered co-operative society remains eligible for the deduction on such interest. The Tribunal also noted consistent precedents from the Pune Bench taking a similar view. On this basis the Tribunal found the exercise of revision under section 263 unsustainable and set aside the impugned order. [Paras 4, 5]

The impugned order under section 263 is overturned and the appeal is allowed; the deduction under section 80P(2)(d) in respect of the interest income is upheld.

Final Conclusion: The Tribunal held that the Principal CIT's revision under section 263 could not be sustained because the assessee, being a registered co operative society, was entitled to claim deduction under section 80P(2)(d) on interest income from deposits with co operative banks; the impugned order is set aside and the appeal is allowed.

Assessee in default - second proviso to section 201(1) - retrospective operation of statutory amendment - TDS liability and discharge under Chapter XVII-B - reconciliation with Form No.26A - remand for de novo adjudication

Second proviso to section 201(1) - retrospective operation of statutory amendment - assessee in default - The effect of the second proviso to section 201(1) insofar as its retrospective operation and its applicability to the facts of the case. - HELD THAT: - The Tribunal held that the second proviso to section 201(1) of the Act, though introduced w.e.f. 01.07.2012, has been held retrospective in operation by the jurisdictional High Court in CIT vs. Ansal Landmark Township Pvt. Ltd. Consequently, the CIT(A)'s rejection of the assessee's reliance upon the payee's Chartered Accountant certificate (Form No.26A) on the ground of the proviso's prospective operation was incorrect. The Tribunal therefore dismissed the CIT(A)'s contention that the proviso could not be invoked for the year in question and directed that the proviso be applied by the Assessing Officer in further proceedings. [Paras 4]

The second proviso to section 201(1) is retrospective and the CIT(A)'s view that it could not be applied for the year under consideration is dismissed; the proviso is to be applied by the Assessing Officer.

Reconciliation with Form No.26A - TDS liability and discharge under Chapter XVII-B - remand for de novo adjudication - Whether the assessee is an 'assessee in default' for non-deposit of TDS in respect of payments to SREI Infrastructure Finance Ltd. and the requirement of reconciliation and verification of evidence. - HELD THAT: - The Tribunal observed that the Assessing Officer had treated the assessee as an 'assessee in default' in respect of payments covered under sections 194C, 194A, 194I and 194J. On perusal of the Form No.26A placed on record, the Tribunal found that it covered only payments under sections 194A and 194J and was silent on payments under sections 194I and 194C; further, the figures in Form No.26A did not exactly match the figures relied upon by the Assessing Officer. In the interest of justice, the Tribunal restored the matter to the file of the Assessing Officer for fresh adjudication: the AO is directed to apply the second proviso to section 201(1) (as held retrospective), require the assessee to furnish complete reconciliation of payments with corresponding TDS elements and reconciliation with Form No.26A, and permit the assessee to produce further evidence, if any. [Paras 4]

The question of default is remanded to the Assessing Officer for de novo adjudication with directions to apply the second proviso, obtain complete reconciliation with Form No.26A, and permit additional evidence.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: it held the second proviso to section 201(1) to be retrospective and remanded the question of whether the assessee is an 'assessee in default' in respect of payments to SREI to the Assessing Officer for fresh adjudication and reconciliation in accordance with law.

Sufficiency of service tax return as basis for income addition - mens rea requirement for disallowance/addition - exchange rate fluctuation and accounting reconciliation - revisability of statutory returns and limitation

Sufficiency of service tax return as basis for income addition - exchange rate fluctuation and accounting reconciliation - mens rea requirement for disallowance/addition - revisability of statutory returns and limitation - Whether the assessing officer was justified in making an addition by treating the difference between revenue as per service tax return and as per financial statements as suppressed income. - HELD THAT: - The Tribunal examined the material on record and the assessee's explanation that the shortfall arose from use of an incorrect exchange rate while filing the service tax return and was subsequently corrected in the books by a reversal entry during audit. The assessee attempted to revise the service tax return but could not do so within the statutory/technical limitation period and also attempted manual correction which was not accepted. There is no finding or allegation by the Department of any deliberate suppression or mens rea on the part of the assessee. The Tribunal held that a mere mistake in the service tax return due to an erroneous exchange rate, corrected in the accounts and not shown to be deliberate, does not amount to suppression of income warranting an addition under the Income-tax Act. The Tribunal therefore found that the AO/CIT(A) were not justified in sustaining the addition based solely on the discrepancy between the service tax return and the financial statements without proof of deliberate concealment. [Paras 6, 8]

Addition of Rs.10,52,645 made by the assessing officer on account of discrepancy between service tax return and financial statements is set aside; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the difference between amounts reported in the service tax return and the financial statements resulted from a bona fide exchange-rate error corrected in the books, that no mens rea was shown, and therefore the addition based on the mismatch was not justified; the assessment order under challenge was set aside.

Penalty under section 271F - Reasonable cause for delay in filing return - Non-imposition of penalty where reasonable cause under section 273B - Discretionary levy of penalty - Ignorantia juris non excusat (ignorance of law no excuse) - Reassessment under section 147/148

Penalty under section 271F - Reasonable cause for delay in filing return - Discretionary levy of penalty - Non-imposition of penalty where reasonable cause under section 273B - Ignorantia juris non excusat (ignorance of law no excuse) - Validity of levy of penalty under section 271F for failure to file return for A.Y. 2012-13 - HELD THAT: - The assessee, an advocate and partner in a law firm, failed to file the return for A.Y. 2012-13 and was assessed after reopening under section 147/148. The Assessing Officer levied penalty under section 271F which was confirmed by the Commissioner (Appeals). The assessee relied on reasons including financial difficulty, departure of his accountant and an asserted bona fide belief that partnership income was exempt. The Tribunal examined whether these reasons constituted a 'reasonable cause' so as to attract the exception under section 273B. Applying the discretion recognised in Hindustan Steel Ltd., the Tribunal found that the asserted financial crunch and the accountant's resignation were not supported by cogent evidence and did not amount to a reasonable cause for non-filing. The contention that partnership income was exempt was held to be unacceptable from a person professionally engaged in law; the principle Ignorantia juris non excusat was applied to reject ignorance of law as a defence. Having considered the facts and authorities, the Tribunal concluded that the discretion to impose penalty was exercised judiciously by the lower authorities and there was no infirmity in confirming the penalty. [Paras 8, 9]

Penalty under section 271F upheld as the assessee failed to establish reasonable cause for non-filing of return and the discretion to levy penalty was rightly exercised.

Final Conclusion: Appeal dismissed; penalty under section 271F confirmed for A.Y. 2012-13 as no reasonable cause was shown for failure to file the return and ignorance of law was not accepted as a defence.

Estimation of income from clandestine removal - reliance on excise proceedings for income-tax additions - application of subsequent judicial precedents under Rule 27 of the ITAT Rules - remand for fresh consideration in light of later decisions

Estimation of income from clandestine removal - reliance on excise proceedings for income-tax additions - Addition made by the Assessing Officer by estimating gross profit on alleged unaccounted sales was not finally adjudicated and was remitted for fresh consideration. - HELD THAT: - The Tribunal noted that the Assessing Officer had estimated gross profit at 54.73% and made an addition on account of alleged clandestine removal of goods, relying on material originating from Central Excise. The Assessing Officer's computation was opposed by the assessee and reduced to 1% by the Commissioner (Appeals). Subsequent to that appellate order the excise adjudication proceeded and the assessee settled the excise demand under the Sabka Vishwas Scheme, and later judicial decisions of the jurisdictional High Court and a coordinate bench of the Tribunal on similar facts were rendered. Given these subsequent developments and the existence of conflicting findings in later authoritative decisions, the Tribunal considered it appropriate not to finally decide the correctness of the addition on merits in this appeal. Instead, following the principle that later binding or persuasive judicial pronouncements and the outcome of excise proceedings materially affect the basis for income-tax additions, the matter was set aside to the Assessing Officer for fresh consideration in accordance with law and after taking into account the cited decisions and the excise outcome. [Paras 8, 9]

Matter remitted to the Assessing Officer to consider the excise adjudication outcome and subsequent judicial decisions and determine the income in accordance with law; Revenue appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the appeal to the file of the Assessing Officer for fresh consideration in light of the excise adjudication outcome and subsequent judicial decisions; the Revenue appeal was allowed for statistical purposes.

Registration under section 12AA/12AB - provisional registration - requirement to furnish documents called for by tax authority - opportunity to furnish evidence before rejection - remand for fresh examination - CBDT Circular No. 6 of 2023 - extension of time for filing Form No.10AB

Registration under section 12AA/12AB - provisional registration - requirement to furnish documents called for by tax authority - CBDT Circular No. 6 of 2023 - extension of time for filing Form No.10AB - remand for fresh examination - Validity of CIT(Exemption)'s rejection of the application for registration filed electronically by the trust and the appropriate remedy. - HELD THAT: - The assessee filed Form No.10AB on 28-09-2022 seeking registration under section 12AA/12AB and was later called upon by the CIT(Exemption) to furnish specified documents and clarifications. The CIT(Exemption) recorded non-compliance with the requests and rejected the application. The Tribunal noted that the assessee's Form No.10AB was filed before 30-09-2022 and that CBDT Circular No. 6 of 2023 extended the time for filing applications (and further extended that timeline) thereby mitigating hardship for provisionally registered entities. In view of the Circular and in the interest of justice, the Tribunal held that the rejection was not justified without giving the assessee an opportunity to tender the documents called for; accordingly the matter is remanded to the CIT(Exemption) for fresh examination with liberty to the assessee to file evidence in support of its claim. The Tribunal allowed the grounds for statistical purposes and applied the same reasoning mutatis mutandis to the second, identical appeal. [Paras 6, 7, 8, 9, 10]

The order of CIT(Exemption) rejecting the registration application is set aside and the matter is remanded to the CIT(Exemption) for fresh examination; the assessee may file supporting evidence.

Final Conclusion: Both appeals are allowed for statistical purposes and the appeals are remitted to the CIT(Exemption) for fresh consideration of the registration application in light of CBDT Circular No. 6 of 2023, with liberty to the assessee to furnish the required documents.

Restoration of company name under Section 252(3) - carrying on business or in operation - just or otherwise - removal of name under Section 248 - restoration subject to payment of costs

Restoration of company name under Section 252(3) - carrying on business or in operation - just or otherwise - removal of name under Section 248 - restoration subject to payment of costs - Whether the Tribunal erred in declining restoration of the appellant's name to the register under Section 252(3) when material indicated linkage with a development project and the company's existence for project implementation, and whether restoration should be granted despite statutory default. - HELD THAT: - The Court noted the statutory scheme permitting removal of a company's name under Section 248 and the remedial power of the Tribunal under Section 252(3) to restore the name if the company was carrying on business or in operation or if it was otherwise just to restore the name (paragraph 12). The record showed the appellant's asserted role as a land owning company linked to a larger development project by tripartite collaboration and assignment arrangements and that the appellant's land was used in the corporate debtor's project (paragraphs 7, 8, 13). While the Tribunal had reasoned that books reflected 'inventories' which were not shown to exist physically and emphasised the appellant's default in filing financial statements (paragraph 5), this Court held that those defaults did not preclude restoration where, on the peculiar facts, equity and justice favoured restoration (paragraph 14). Consequently, the Court exercised the discretionary power under Section 252(3) to restore the name but imposed a monetary condition to reflect the appellant's statutory remissness and to meet the ends of justice (paragraphs 14-15). [Paras 8, 12, 13, 14, 15]

Appeal allowed; the name of the company is restored to the register under Section 252(3) but subject to payment of costs of Rs. 2 lakh to the RoC within 30 days.

Final Conclusion: The appeal is allowed and the appellant's name is restored to the register under Section 252(3) of the Act, conditioned on payment of costs to the Registrar to balance the company's statutory defaults with the ends of justice.

Oppression and mismanagement - continuing cause of action / continuous acts - limitation and laches in company petitions - validity of board resolutions - notice and quorum requirements - nullity of share allotment and statutory filings with ROC - unilateral alienation of company asset without notice to co owner/director - forum shopping and res judicata

Limitation and laches in company petitions - continuing cause of action / continuous acts - Whether the Company Petition under Sections 397/398 of the Companies Act, 1956 was barred by limitation. - HELD THAT: - The Tribunal held that the petition was not barred by limitation. It relied on the chronology showing that relevant events (filing of Forms 32 for co-option and removal on 01/12/2005, disputed sale deed dated 14/11/2005, and legal notice of 15/03/2007) fell within a continuous course of conduct and that knowledge of the sale was only attained later. The Tribunal applied the principle that acts forming part of a continuous process or the same transaction constituting oppression/mismanagement can be looked into even if some acts occurred earlier, and noted the High Court and City Civil Court orders bearing on forum and maintainability, concluding the petition filed in April 2008 was within limitation. [Paras 19, 20, 21, 22, 23]

The petition is not barred by limitation.

Forum shopping and res judicata - Whether the petitioner was guilty of forum shopping or barred by prior proceedings (res judicata). - HELD THAT: - The Tribunal found that the earlier proceedings (C.P. No. 117/1995, O.S. No. 17254/2005, O.S. No. 708/2008) involved different parties and different reliefs and that no competent court had rendered a specific finding on the issues raised in the Company Petition. Applying the functional test for forum shopping, the Tribunal concluded there was no bar to the present petition on grounds of forum shopping or res judicata. [Paras 24]

No forum shopping or res judicata bar was established.

Validity of board resolutions - notice and quorum requirements - validity of board resolutions - notice and quorum requirements - Whether the Board meetings and the Resolution dated 05/02/1996 (allotting shares) and earlier board proceedings were validly held with proper notice and quorum. - HELD THAT: - The Tribunal recorded that there was no proof of service of notices for the Board meetings of 1995 and that the petitioner held 50% of the paid up capital and was one of only two directors, making his presence necessary for quorum and majority. In absence of proof of service (no registered post acknowledgements), the Tribunal held the notices were not shown to have been served, the requisite quorum/majority was absent, and therefore the Resolution dated 05/02/1996 and the consequent board proceedings were null and void. [Paras 25, 26, 27]

The challenged board meetings and the Resolution of 05/02/1996 are null and void for want of proper notice and quorum.

Nullity of share allotment and statutory filings with ROC - unilateral alienation of company asset without notice to co owner/director - oppression and mismanagement - Whether the allotment of 620 shares, the Forms filed with the Registrar of Companies, and the sale of the company land constituted acts of oppression and mismanagement and ought to be set aside. - HELD THAT: - The Tribunal found that the only significant asset of the company was the land and that its sale by appellants without notice to the petitioner (who was a co director and substantial shareholder) and while contentious company proceedings were pending amounted to a unilateral sale. It relied on the prior statement in C.P. No.117/1995 that the land would be divided and not sold, together with lack of proper procedure for increasing share capital or allotment in the absence of the petitioner. On these bases the Tribunal upheld the NCLT's setting aside of the allotment of 620 shares, declaration of specified Forms as null and void, and treatment of the sale and related acts as falling within the definition of oppression and mismanagement. [Paras 7, 28]

The allotment of 620 shares, the impugned statutory filings, and the unilateral sale without notice constituted oppression and mismanagement and were set aside.

Oppression and mismanagement - Whether the Impugned Order of the NCLT dated 11/10/2018 suffers from any illegality or infirmity warranting interference. - HELD THAT: - After considering limitation, forum shopping, validity of board proceedings, notice/quorum defects, the alleged unilateral sale of company land and the factual matrix including prior proceedings, the Tribunal found no illegality or infirmity in the NCLT's findings and directions. The Tribunal therefore upheld the NCLT order. [Paras 29]

The appeal is dismissed; the NCLT order is upheld.

Final Conclusion: The Tribunal held that the Company Petition was within limitation and not barred by forum shopping; the challenged board meetings and the allotment/allied filings were void for want of proper notice, quorum and lawful procedure; the unilateral sale of the company land without notice to the co director/shareholder constituted oppression and mismanagement; consequently the NCLT order setting aside the allotment, declaring the specified Forms null and void and related directions was upheld and the appeal dismissed.

Restoration of name - suo moto striking off under Section 248 of the Companies Act, 2013 - non-filing of statutory returns - not carrying on business or operations - declaration as a dormant company under Section 455 - costs on restoration

Non-filing of statutory returns - not carrying on business or operations - suo moto striking off under Section 248 of the Companies Act, 2013 - Validity of striking off the company from the Register of Companies on the basis of alleged non-filing and non-operation for two preceding financial years. - HELD THAT: - The Tribunal found that the company had failed to file Financial Statements and Annual Returns for the financial years 2015-16 and 2016-17. However, the Appellate Tribunal accepted the appellants' evidence that the non-filing arose from change of circumstances and inadvertence, and that audited accounts for subsequent years demonstrated that the company remained active and carrying on day-to-day business. The Appellate Tribunal concluded that the Registrar's formation of an opinion that the company was not carrying on business and hence liable for suo moto striking off under the statutory scheme was not sustainable in law on the material before it. [Paras 7]

Order of striking off was set aside and the NCLT order dismissing restoration was held unsustainable.

Restoration of name - costs on restoration - Relief to be granted on restoration and conditions to be imposed. - HELD THAT: - The Tribunal ordered restoration of the company's name to the Register of Companies but made the relief conditional. The company was directed to pay costs to the Registrar within the time stipulated, to file all outstanding annual returns and balance sheets and pay requisite fees and late charges, and it was clarified that the Registrar remained free to initiate any other punitive or statutory proceedings for non-filing or late filing of documents under the Companies Act. [Paras 8]

Company's name to be restored subject to payment of costs and compliance with filing and fee requirements; Registrar retains power to take further action.

Final Conclusion: The appeal is allowed to the extent that the impugned NCLT order is set aside and the company's name is restored to the Register of Companies subject to payment of costs and compliance with filing and fee conditions; the Registrar remains free to pursue statutory action for non-filing or late filing.

Dissolution of corporate debtor - time bound CIRP and finality of timeline for submission of resolution plan - commercial wisdom of the Committee of Creditors and limited judicial interference - no nexus between an individual's No Objection Certificate and the corporate debtor's assets; lapsed Air Operator Permit irrelevant to corporate estate - power of the adjudicating authority to dissolve a corporate debtor after winding up/liquidation

Dissolution of corporate debtor - power of the adjudicating authority to dissolve a corporate debtor after winding up/liquidation - Validity of the Adjudicating Authority's order dated 24.06.2020 dissolving M/s. Air Pegasus Private Limited - HELD THAT: - The Tribunal held that the Resolution Professional filed IA No. 198 of 2020 seeking dissolution after winding up and liquidation of the corporate debtor, and that the Adjudicating Authority was entitled to pass an order of dissolution where affairs had been wound up and assets liquidated. The factual finding that there were no realisable assets and that CoC had approved dissolution with 100% voting made the impugned dissolution order free from legal infirmity. The Tribunal also noted there is no bar on dissolving a corporate debtor without further liquidation proceedings once the requisite conditions are met, and affirmed the Adjudicating Authority's exercise of its powers in the circumstances recorded. [Paras 44, 45, 55]

The dissolution order dated 24.06.2020 is upheld as legally valid.

Time bound CIRP and finality of timeline for submission of resolution plan - commercial wisdom of the Committee of Creditors and limited judicial interference - Whether the appellant/promoter could be permitted to submit a resolution plan or seek revival after expiry of the prescribed period - HELD THAT: - The Tribunal emphasised that the Insolvency Resolution Process is time bound and the appellant failed to submit a resolution plan within the stipulated timeframe. In the absence of any resolution plan or saleable assets, the Resolution Professional was constrained to move for dissolution. The Tribunal repeatedly referenced the principle that judicial fora should not substitute their view for the commercial wisdom of the CoC, especially where the CoC had unanimously approved dissolution, and therefore declined to allow revival or late submission of a plan. [Paras 50, 52]

No entitlement to late submission of a resolution plan; time bound process precludes permitting revival after the prescribed period.

No nexus between an individual's No Objection Certificate and the corporate debtor's assets; lapsed Air Operator Permit irrelevant to corporate estate - Relevance of the appellant's personal No Objection Certificate and the Air Operator Permit to the corporate insolvency proceedings - HELD THAT: - The Tribunal found that the No Objection Certificate was issued to the appellant in his personal capacity and thus had no nexus with the corporate debtor's estate. Further, the Air Operator Permit had lapsed on 23.03.2020 and therefore could not be treated as a realisable asset of the company at the relevant time. Consequently, these documents did not invalidate or render unsustainable the dissolution order based on absence of assets. [Paras 47, 54]

The personal NOC and the lapsed Air Operator Permit are irrelevant to the corporate debtor's insolvency and do not vitiate the dissolution.

Commercial wisdom of the Committee of Creditors and limited judicial interference - Whether the Tribunal should interfere with the Committee of Creditors' unanimous decision to approve dissolution - HELD THAT: - Relying on established precedent cited in the judgment and on the record that the Committee of Creditors approved dissolution with 100% voting, the Tribunal reiterated that courts and adjudicatory authorities must give due weight to the commercial wisdom of the CoC and should interfere only where the CoC's decision is wholly capricious, arbitrary or beyond the statute. No such impermissible conduct was shown; hence interference was unwarranted. [Paras 44, 46, 51]

No interference with the CoC's unanimous decision to dissolve the corporate debtor.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's order of dissolution dated 24.06.2020 is affirmed as free from legal infirmity and no costs are awarded.

Commercial wisdom of the Committee of Creditors - Swiss Challenge Method - evaluation matrix and marks allocation - reconstitution of the Committee of Creditors and effect on prior decisions (Regulation 12(3)) - judicial review of commercial decisions of CoC

Commercial wisdom of the Committee of Creditors - Swiss Challenge Method - evaluation matrix and marks allocation - Whether the approval of the Resolution Plan and the Swiss Challenge process, including the Evaluation Matrix and marks allocation, was vitiated by procedural irregularity or manipulation so as to warrant setting aside the Plan. - HELD THAT: - The Tribunal held that challenges to the commercial assessment and selection process fall within the domain of the CoC and are ordinarily non-justiciable. The minutes of the CoC meetings recorded the rationale for distribution and selection and the Tribunal found prima facie detailed reasoning by the CoC which had been examined by the Adjudicating Authority. The Tribunal distinguished the Supreme Court decision relied upon by the appellant (MK Rajagopalan) on the ground that, in that case, a revised plan was taken directly to the Adjudicating Authority without placing it before the CoC; whereas in the present case there was no change in the overall plan size or the inter-class distribution between secured and unsecured creditors as approved by the CoC. On the material before it the Tribunal found no irregularity or illegality in the conduct of the Swiss Challenge process or in the marks allocation that would justify upsetting the CoC's commercial decision. [Paras 23, 24, 25, 26, 31]

The approval of the Resolution Plan, including the Swiss Challenge process and the Evaluation Matrix, was not vitiated and does not merit being set aside.

Reconstitution of the Committee of Creditors and effect on prior decisions (Regulation 12(3)) - judicial review of commercial decisions of CoC - Whether the reconstitution of the CoC (exclusion of one unsecured creditor and inclusion of the appellant) invalidated the CoC's prior approval or required fresh consideration of the Resolution Plan. - HELD THAT: - The Tribunal observed that the Adjudicating Authority's judicial orders led to exclusion of one unsecured creditor and inclusion of the appellant, which produced only arithmetical changes in inter-se distribution among unsecured creditors while leaving the overall plan amount and the distribution between secured and unsecured classes unchanged. Regulation 12(3) was invoked to note that inclusion of a creditor after a decision does not affect the validity of decisions taken prior to such inclusion. The Tribunal found that the reconstitution did not alter the substance of the approved plan, and that unsecured creditors in fact benefited in absolute terms; accordingly there was no requirement to revisit the CoC's prior approval. [Paras 26, 27, 28, 29, 30]

Reconstitution of the CoC did not vitiate the CoC's approval and the distribution adjustments between unsecured creditors were valid and did not require set aside of the Resolution Plan.

Final Conclusion: The appeals are dismissed. The Tribunal found no infirmity in the Adjudicating Authority's orders approving the Resolution Plan and dismissing the plan-objection application; the CoC's commercial decision and the post-reconstitution distribution among unsecured creditors were held to be valid in law.

Assessable value - Inclusion of surplus freight collected in assessable value - Excise duty is a tax on manufacture and not a tax on profits on transportation - Factory-gate price principle - Loading charges within factory included; transportation/delivery charges outside factory excluded - Application of Indian Oxygen Ltd. and Baroda Electric Meters Ltd. precedents

Assessable value - Inclusion of surplus freight collected in assessable value - Excise duty is a tax on manufacture and not a tax on profits on transportation - Factory-gate price principle - Surplus freight collected by the manufacturer (difference between freight charged to customers and freight actually paid to transporters) is not required to be included in the assessable value for levy of excise duty. - HELD THAT: - The Tribunal examined whether the excess freight collected and retained by the appellant must be added to the assessable value. Applying the principle that where the wholesale price at the factory gate is ascertainable the assessable value is to be determined on that basis, the cost of transportation from the factory gate to the place of delivery and transit/delivery charges are ordinarily irrelevant to computation of assessable value. Excise duty is a tax on manufacture and not a tax on profits made by a dealer on transportation. The Tribunal followed the reasoning of Indian Oxygen Ltd. and the subsequent application in Baroda Electric Meters Ltd., holding that surplus retained as profit on transportation cannot be treated as part of the value of the manufactured goods for excise purposes. On the facts, the appellant had included in assessable value the freight actually paid to transporters; the excess collected and retained therefore did not form part of the assessable value. For these reasons the demand could not be sustained. [Paras 7, 8, 9]

Demand of excise duty on the surplus freight collected by the appellant is set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand for excise duty on surplus freight collected (and thereby refusing to include such surplus in the assessable value), and granted consequential reliefs as per law.

Assessable value under Rule 6 of the Central Excise Valuation Rules - Inclusion of value of dies and moulds supplied free as additional consideration - Amortisation of capital goods for valuation - CENVAT credit and elective reliefs are subject to conditions - Double taxation and Article 265 - Limitation/extended period for issuance of show cause notice

Assessable value under Rule 6 of the Central Excise Valuation Rules - Inclusion of value of dies and moulds supplied free as additional consideration - Amortisation of capital goods for valuation - CENVAT credit and elective reliefs are subject to conditions - Double taxation and Article 265 - Amortised cum-duty cost of dies and moulds supplied free by buyer-customers must be included in the assessable value of aluminium die-castings. - HELD THAT: - Applying Rule 6 of the Valuation Rules and the Board's Circular No.170/4/96-CX, the value of goods is the transaction value plus the money value of any additional consideration flowing directly or indirectly from the buyer, which expressly includes tools, dies and moulds supplied free or at reduced cost. Amortisation spreads the total monetary value (transaction value plus duties paid) of such capital goods over their useful life and thus forms part of the assessable value of the finished castings. Payment of excise on the dies/moulds at the time of their manufacture does not exclude inclusion of their amortised value in the assessable value of the finished product; the two are distinct excisable goods and inclusion does not amount to impermissible double taxation. The appellant's election not to avail CENVAT credit or to rely on notifications does not negate Rule 6 liability; exemptions and credit mechanisms are concessional and must be strictly complied with, and inconvenience in bookkeeping is not a ground to depart from plain statutory language. Reliance on contrary tribunal decisions which did not consider the Larger Bench decision in Mutual Industries Ltd. is misplaced; the Larger Bench reasoning supporting inclusion is followed. [Paras 7]

The appeal is rejected on the merits as the amortised cum-duty cost of dies/moulds supplied free must be included in the assessable value; no deduction for excise duty paid on such free-supplied goods is permissible.

Limitation/extended period for issuance of show cause notice - Whether the demand is time-barred was not finally decided and is remanded for fresh consideration. - HELD THAT: - The appellant asserted that objections on non-amortisation were previously raised by CERA and internal audit (June 2004 and September 2006) and that responses had been filed, contending knowledge of the matter by the department and a bar by limitation. The Tribunal found that the lower authority had not examined these specific submissions and documentary replies, and that the question of limitation/time-bar affects duty, interest and penalty. Therefore the Tribunal directed that the appellant place the audit objections and replies before the Commissioner (Appeals) who shall examine the limitation issue and pass a reasoned order in accordance with law. [Paras 8, 9]

The question of time-bar is remitted to the Commissioner (Appeals) for fresh examination and a reasoned decision on limitation after considering the appellant's audit records and replies.

Final Conclusion: The Tribunal upholds the demand on merits that the amortised cum-duty value of dies and moulds supplied free by buyer-customers is includible in the assessable value of aluminium die-castings; however, the limited question whether the show cause notice/demand is time-barred is remanded to the Commissioner (Appeals) for fresh, reasoned consideration.

Penalty under Rule 26 of Central Excise Rules, 2002 - confiscation of excisable goods - dealing in goods to evade SSI exemption - evidentiary sufficiency for imposition of penalty - judicial discretion in reduction of penalty

Penalty under Rule 26 of Central Excise Rules, 2002 - confiscation of excisable goods - Validity of imposing penalty under Rule 26 where confiscation was not actually ordered but the goods were alleged to be liable for confiscation - HELD THAT: - The Tribunal accepted the respondent's case that the show cause notice and the Order in Original alleged dealing in goods which were liable for confiscation; penalty under Rule 26 was therefore imposed on the co noticee. The appellant's contention that penalty could not be imposed because there was no proposal for confiscation was rejected on the basis that the allegation was that the goods dealt with were liable for confiscation, and Rule 26 penalty could be imposed in those circumstances. [Paras 4]

Penalty under Rule 26 was validly imposed notwithstanding that confiscation had not been separately proposed, because the goods were alleged to be liable for confiscation.

Dealing in goods to evade SSI exemption - evidentiary sufficiency for imposition of penalty - Whether the material on record sufficed to establish that the appellant dealt in BOPP bags manufactured by M/s. Shubham Polymers with intent to enable SSI exemption - HELD THAT: - The Tribunal noted that the main manufacturer admitted duty liability and settled under SVLDRS, and that the appellant, as co noticee, failed to produce evidence of purchase of the goods from sources other than M/s. Shubham Polymers. Statements of seven buyers were considered: four buyers accepted receipt of BOPP bags, supporting the conclusion that the appellant dealt in the manufacturers' BOPP bags aiming to facilitate SSI exemption. While some buyers gave exculpatory statements, the preponderance of admissions led the Tribunal to conclude that the goods were indeed liable for confiscation and that the appellant's conduct supported imposing penalty. [Paras 4]

On the evidence, the appellant was dealing in the manufacturer's BOPP bags with the effect alleged by the department; material sufficed to uphold imposition of penalty.

Judicial discretion in reduction of penalty - Appropriateness of the quantum of penalty imposed - HELD THAT: - Although the Tribunal upheld the liability for penalty, it exercised judicial discretion as to quantum. Having regard to the purchasers' statements indicating that not all goods were exclusively manufactured by M/s. Shubham Polymers, the Tribunal found the originally imposed penalty excessive and reduced the penalty from the amount imposed in the Order in Original to a lower sum as a proportionate measure. [Paras 4, 5]

Penalty reduced as excessive; appeal partly allowed by moderating the penalty payable by the appellant.

Final Conclusion: The Tribunal upheld imposition of penalty under Rule 26 on the basis that the goods dealt with were liable for confiscation and the evidence supported the departmental case, but in exercise of judicial discretion the penalty was reduced as excessive and the appeal was partly allowed.

Assessable value - transaction value - sales tax incentive - retained sales tax - effect of amendment to valuation law (1-7-2000) - limitation

Assessable value - transaction value - sales tax incentive - retained sales tax - effect of amendment to valuation law (1-7-2000) - Whether the component of sales tax retained by the assessee under a sales-tax incentive scheme is includible in the assessable value for central excise for the period in question. - HELD THAT: - The Tribunal accepted that the determinative law is supplied by the Hon'ble Supreme Court's decision in Shree Rajasthan Syntex Ltd., which distinguished valuation before and after the amendment to Section 4 effective 1-7-2000. Applying that principle, the court recorded that retained sales-tax incentive up to 30-6-2000 is not exigible to excise duty, whereas retained sales tax after 1-7-2000 is required to be included in arriving at the transaction value/assessable value. The parties agreed that the entire issue in the present case relates to the period prior to 01.07.2012 and that the cited Supreme Court decisions which dealt with amended law govern the question of valuation. In view of the Supreme Court's observations, the Tribunal found no merit in the impugned order and allowed the appeal. [Paras 4, 5, 6]

Retained sales-tax incentive up to 30-6-2000 not includible in assessable value; retained sales-tax component after 1-7-2000 is includible; appeal allowed.

Limitation - Whether the demand in the show-cause notice was barred by limitation. - HELD THAT: - The Tribunal recorded the factual finding that the additional consideration (the benefit of retained sales tax) accrued to the assessee when the State Government permitted retention upon premature payment of the balance sales tax, and that the assessee had made a material payment on 29.03.2004 in respect of deferred sales tax for the years 1999-2000. The show-cause notice issued in October 2006 was held to be within five years of that date of payment; accordingly the contention that the demand was time-barred was rejected. [Paras 8]

Limitation plea rejected; show-cause notice held within limitation.

Final Conclusion: Applying the Supreme Court's guidance in Shree Rajasthan Syntex Ltd., the Tribunal allowed the appeal: retained sales-tax incentive prior to 1-7-2000 is not exigible to excise duty while retained sales-tax after that date is includible in transaction value; the limitation defence was rejected.

Classification of embroidered fabrics after bleaching, dyeing and printing - Continuing classifiability under Heading 58.05 versus classification under base-fabric Chapters - Applicability of exemption notifications to processes on embroidered fabrics - Remand for de novo consideration to original authority - Verification whether embroidery was performed by vertical type automatic shuttle embroidery machine operated with power

Classification of embroidered fabrics after bleaching, dyeing and printing - Continuing classifiability under Heading 58.05 versus classification under base-fabric Chapters - Verification whether embroidery was performed by vertical type automatic shuttle embroidery machine operated with power - Whether unprocessed embroidered fabrics falling under Heading 58.05, after undergoing bleaching, dyeing, printing etc., continue to be classifiable under Heading 58.05 or become classifiable under the Chapters of the base fabrics, and related factual verification regarding the machinery used for embroidery. - HELD THAT: - The Tribunal observed that the issue in the present appeals is identical to an earlier matter in which this Tribunal had remanded the case to the original authority for de novo consideration with directions to verify the specific fact whether the embroidery was carried out with the aid of a vertical type automatic shuttle embroidery machine operated with power. The Tribunal noted that the lower authorities had not considered this particular factual question and that the Supreme Court in earlier proceedings (Dore Processors and Amar Fabrics) had remanded for verification of the same fact. In view of the identity of the legal and factual controversy, the Tribunal did not decide the classification issue on merits but followed the earlier precedent and remanded the matters to the original authority for fresh adjudication and verification of the machinery/fact situation; all other issues were left open for determination in the remand proceedings.

Appeals allowed by way of remand to the original authority for de novo consideration, including specific verification whether embroidery was effected by the vertical type automatic shuttle embroidery machine operated with power; other issues left open.

Applicability of exemption notifications to processes on embroidered fabrics - Remand for de novo consideration to original authority - Whether duty is payable on the processes applied to embroidered fabrics where exemption notifications are claimed. - HELD THAT: - The Tribunal recorded that the question of entitlement to exemption under various notifications (for example, notifications invoked by the appellant) is intertwined with the classification and factual findings to be made by the original authority. As the identical question was earlier remanded for fresh consideration and the factual predicate (machine used for embroidery) had not been examined by the lower authorities, the Tribunal refrained from adjudicating entitlement to exemption on merits and remanded the issue for decision by the original authority in the de novo proceedings.

Entitlement to exemption and liability for duty on the processes remanded to the original authority for fresh adjudication; no substantive decision on exemption was rendered by the Tribunal.

Remand for de novo consideration to original authority - Timeframe for completion of proceedings in the remand to the original authority. - HELD THAT: - Having directed remand following the earlier precedent, the Tribunal noted the age of the matters and imposed a timeline to ensure expeditious disposal. The adjudicating authority was directed to determine the issues in the remand proceedings within a fixed period.

Original authority directed to conclude the remand proceedings and determine the issues within three months from the date of the Tribunal's order.

Final Conclusion: Following an earlier precedent and on account of identical disputed questions, the appeals are allowed by way of remand to the original authority for de novo consideration (including factual verification of whether embroidery was performed by vertical type automatic shuttle embroidery machine operated with power); entitlement to exemptions and classification are to be decided afresh by the original authority within three months from the date of this order.