TaxTMI Updates e-Newsletter
Jun 07,2021

Refund of export benefits - direction to decide pending claim - claim for refund with interest under refund provisions - decision in accordance with law, rules, regulations and Government policies - reference to Union of India v. Mafatlal Industries Ltd.

Refund of export benefits - direction to decide pending claim - claim for refund with interest under refund provisions - decision in accordance with law, rules, regulations and Government policies - reference to Union of India v. Mafatlal Industries Ltd. - Respondents were directed to decide the petitioner's pending claim for refund of export benefits, along with interest, in accordance with law. - HELD THAT: - The Court recorded that the petitioner's claim for refund of export benefits under the applicable GST refund provisions remained pending and no final decision had been taken by the respondents. Exercising supervisory jurisdiction, the Court directed the concerned authorities to decide the claim, as particularised in the writ petition, expeditiously and practicably, and in accordance with applicable law, rules, regulations and Government policies. The Court observed that the authorities should keep in mind the principle in Union of India v. Mafatlal Industries Ltd. while adjudicating the claim. The petitioner was directed to cooperate with the authority by furnishing requisite documents and information necessary for arriving at a final decision. [Paras 6, 7, 8]

The respondents are directed to decide the petitioner's refund claim in accordance with law preferably within 12 weeks; the writ petition is disposed of.

Final Conclusion: Writ petition disposed with a direction to the concerned authorities to decide the petitioner's pending claim for refund of export benefits, with interest, in accordance with law and relevant policies preferably within 12 weeks from receipt of this order; petitioner to cooperate by furnishing required documents.

Blocking of electronic credit ledger - Rule 86-A(3) of the CGST Rules, 2017 - Limitation on duration of restriction - Restoration of credit to electronic credit ledger - Assessment proceedings not precluded

Blocking of electronic credit ledger - Rule 86-A(3) of the CGST Rules, 2017 - Limitation on duration of restriction - Restoration of credit to electronic credit ledger - Continuation of blocking of the petitioner's electronic credit ledger beyond one year from the date of imposition was impermissible and the continuation was set aside with directions for restoration of credit. - HELD THAT: - The electronic credit ledger was blocked on 21.01.2020. Rule 86-A(3) of the CGST Rules, 2017 mandates that a restriction imposed on the electronic credit ledger shall cease to have effect after the expiry of one year from the date of imposing such restriction. The Court declined to enter into the merits of the original blocking order but held that, as a matter of law, the restriction could not be continued beyond the one-year period. The revenue did not contest the legal proposition regarding the illegality of continuing the block beyond one year. Consequently, the respondents' continuation of the block was declared impermissible and the respondents were directed to restore the credit to the electronic credit ledger forthwith, subject to their liberty to take any action permissible in law in connection with assessment proceedings.

The continuation of the blocking of the electronic credit ledger beyond one year is set aside and the credit shall be restored forthwith; respondents remain free to take lawful steps in assessment proceedings.

Final Conclusion: Writ petition allowed to the extent that blocking of the electronic credit ledger beyond one year is declared illegal and the ledger credit is to be restored immediately, while preserving the respondents' right to pursue assessment action as permitted by law.

Recall of order - stay of operation of costs - expunction of judicial observations - liability for harassment due to technical/system error - direction to file response

Recall of order - stay of operation of costs - expunction of judicial observations - Whether the order dated 24.11.2020 directing payment of costs and containing personal observations against the applicant should be recalled, expunged or stayed. - HELD THAT: - The Court recorded that the show-cause notice quoted in the earlier order was issued by the applicant and that an internal inquiry indicated the applicant had uploaded a remark stating that interest due to late filing had not been paid, but that the published show-cause notice did not contain those reasons, apparently due to a technical/service provider error. In absence of the inquiry report on record, the Court could not determine whether the harassment arose from a personal act or from the system/service provider. Pending ascertainment of the person liable for the glitch and the outcome of the respondent's response, the Court considered it appropriate to withhold enforcement of the earlier direction for payment of costs and to defer any expunction decision. Accordingly the direction for payment of costs and the observations in the earlier order were stayed until the next date.

Order dated 24.11.2020 insofar as it directs payment of costs and records personal observations against the applicant is stayed until the next date; the application for recall/expunction is not finally allowed and is deferred for further determination.

Liability for harassment due to technical/system error - direction to file response - Whether the service provider/system or the applicant is liable for the omission in the show-cause notice and what further procedural steps should follow. - HELD THAT: - Given the ambiguity whether the omission resulted from actions of the applicant or from a technical/service provider error, and in absence of the inquiry report, the Court directed respondent no.3 to file a response addressing the applicant's submissions about the upload and the alleged technical error so that the Court may fix liability on the relevant person. The applicant was directed to serve the application and the present order on the Standing Counsel, who must file the response by the next date. The Court indicated that once the person responsible is ascertained, costs will be fixed against that person.

Respondent no.3 directed to file its response on the question of system/service provider error and liability; matter listed for further consideration on the next date to enable fixation of liability and costs.

Final Conclusion: The recall application is deferred: the earlier order's directions for payment of costs and the observations against the applicant are stayed until further consideration; respondent no.3 is directed to file a response on the alleged technical/service provider error so the Court can ascertain liability and thereafter fix costs; matter listed on 03.02.2021.

Bail - cognizable and non-bailable offence under the Central Goods and Services Tax Act - input tax credit fraud / irregular availing of ITC - prima facie case and gravity of offence as factor in bail - failure to produce documentary evidence and evasive conduct during investigation - ongoing investigation as a ground for denial of bail - arrest under Section 69 of the CGST Act

Bail - prima facie case and gravity of offence as factor in bail - input tax credit fraud / irregular availing of ITC - failure to produce documentary evidence and evasive conduct during investigation - ongoing investigation as a ground for denial of bail - Whether the accused Vinod Kumar was entitled to grant of bail in proceedings under the CGST Act. - HELD THAT: - The Court recorded that during investigation the accused admitted irregularly availing input tax credit of Rs. 1.30 crore and did not satisfactorily explain the total ITC availed. Multiple panchnamas and searches were conducted, and the accused failed to produce transport or payment documents despite several summonses and opportunities; at times representatives, not the accused, furnished documents and evasive replies were given. The competent authority noted reasons to believe arrest was necessary for free and fair investigation and the accused was informed of his rights. The Court treated the alleged economic offence causing monetary loss to the State, the accused's admissions, the absence of satisfactory documentary proof and the ongoing nature of the investigation as material factors militating against bail. Without expressing any opinion on merits, the Court concluded that on the facts and circumstances and the gravity of the offence it was not a fit case for release on bail.

Bail application rejected.

Final Conclusion: The application for bail by the accused Vinod Kumar is refused on account of prima facie findings of irregular availing of input tax credit, failure to produce supporting documents, evasive conduct during investigation and the ongoing nature and gravity of the economic offence; no observation is made on the merits of the case.

Benefit of bail under Section 167(2) Cr.P.C - completion of investigation - complaint/final report as culmination of investigation - treatment of proceedings as a complaint case under statutory scheme - insignificance of omission of investigation file number in the complaint

Benefit of bail under Section 167(2) Cr.P.C - completion of investigation - complaint/final report as culmination of investigation - insignificance of omission of investigation file number in the complaint - Whether the applicant was entitled to bail under Section 167(2) Cr.P.C on the ground of incomplete investigation. - HELD THAT: - The court found that the papers/complaint submitted on 11.01.2021 were filed in relation to the earlier investigation file C.No. IV(6)DGGI/RRU/INV/25/2018-19 and represent the culmination of that investigation. The omission of an express averment that the complaint was filed after completion of investigation, and the non-mention of the investigation file number in the complaint, were held to be insignificant since the content of the complaint corresponds to the averments earlier made in the remand application and the department has stated that no other case against the applicant exists. The record shows the applicant was arrested on 12.11.2020, produced on 13.11.2020 and the statutory 60-day period under Section 167(2) Cr.P.C expired on 11.01.2021; the complaint/final report, however, was submitted on 11.01.2021. On these facts the court concluded that the applicant could not claim release under Section 167(2) Cr.P.C because investigation had been completed and the final papers filed before the expiry of the statutory period. The court also distinguished the judgments relied upon by the applicant on the basis that the present complaint was not incomplete and was filed as culmination of the earlier investigation. [Paras 8, 9, 10, 11, 12]

Application under Section 167(2) Cr.P.C dismissed; no entitlement to bail under Section 167(2) Cr.P.C as investigation was completed and complaint/final report was filed on 11.01.2021.

Final Conclusion: The application for bail under Section 167(2) Cr.P.C was rejected on the ground that investigation had been completed and the complaint/final report in the same investigation file was filed on 11.01.2021; omission of the file number in the complaint was held immaterial.

Grant of bail - prima facie satisfaction - apprehension of tampering with evidence - ongoing investigation - issuance of bogus invoices and availing of input tax credit - absconding witness/chartered accountant obstructing investigation - seriousness of offence

Grant of bail - apprehension of tampering with evidence - ongoing investigation - absconding witness/chartered accountant obstructing investigation - issuance of bogus invoices and availing of input tax credit - Bail application of the accused was dismissed. - HELD THAT: - The court applied established principles governing the grant of bail, referring to Dipak Subhash Chandra Mehta Vs CBI for guidance that a court must indicate reasons for prima facie conclusions when granting bail in serious offences. The prosecution's case alleges issuance of bogus invoices and large-scale availing/passing of input tax credit by firms linked to the accused. The accused admitted that relevant accounting documents and records are in the custody of his chartered accountant, Nitin Jain, who is absconding and whose premises were found locked. Investigation remains pending and is at a crucial stage because the records under the control of the absconding CA are necessary for ascertaining the actual liability. In these circumstances the court concluded that releasing the accused would create a reasonable apprehension of tampering with or destruction of evidence and would impede the ongoing investigation. Having regard to the seriousness of the allegations, the incompleteness of the investigation and the specific risk posed by the absconding custodian of records, the court declined to exercise its discretion in favour of bail at this stage.

Application for bail is dismissed.

Final Conclusion: Bail was refused as investigation is ongoing and the accused disclosed that crucial records are with an absconding chartered accountant, creating a real risk of tampering with evidence and impeding the probe.

Best judgment assessment under Section 62 of the CGST Act, 2017 - notice to return defaulters under Section 46 of the CGST Act, 2017 - assessment of unregistered persons under Section 63 of the CGST Act, 2017 - Rule 100(2) of the CGST Rules, 2017 - requirement of notice in FORM GST ASMT-14 and opportunity to reply - principles of natural justice and requirement of hearing before adverse decision

Notice to return defaulters under Section 46 of the CGST Act, 2017 - best judgment assessment under Section 62 of the CGST Act, 2017 - principles of natural justice and requirement of hearing before adverse decision - Validity of the impugned best-judgment assessment insofar as it covers months not mentioned in the show-cause notice and whether the assessment was passed after giving the appellant an opportunity to be heard. - HELD THAT: - The adjudicating authority's show-cause notice in Form GSTR-3A dated 19-11-2019 specified the period as October, 2018 to September, 2019, whereas the ASMT-13 best-judgment order dated 30-1-2020 assesses tax for January, 2019 to December, 2019. Paragraph 9 records that three months (October, November and December 2019) were not included in the notice and that the appellant's reply to the notice was not considered. The order therefore identifies a procedural defect in issuing an adverse best-judgment order for periods not covered by the notice and in failing to afford effective opportunity of hearing prior to passing the assessment. Given these deficiencies the matter cannot be allowed to stand without fresh consideration in conformity with the requirement to issue adequate notice and to afford opportunity to be heard. [Paras 9]

The assessment insofar as it proceeds for months not covered by the notice and without considering the appellant's reply is procedurally defective and the matter is remanded for fresh consideration after observing notice and hearing requirements.

Assessment of unregistered persons under Section 63 of the CGST Act, 2017 - Rule 100(2) of the CGST Rules, 2017 - requirement of notice in FORM GST ASMT-14 and opportunity to reply - Effect of cancellation of the appellant's registration prior to passing of the ASMT-13 order and consequent applicability of Section 63 and Rule 100(2) procedural requirements. - HELD THAT: - The record shows registration of the appellant was cancelled with effect from 21-1-2020, while the ASMT-13 order was passed on 30-1-2020. Paragraph 10 notes that in these circumstances Section 63 becomes applicable and, under sub rule (2) of Rule 100, the proper officer is required to issue FORM GST ASMT-14 containing grounds for best judgment assessment, serve a summary, allow fifteen days for reply and thereafter pass the order in FORM GST ASMT-15. The findings record non-compliance with the procedure mandated by Section 63 and Rule 100(2). Accordingly the matter requires fresh adjudication in conformity with those statutory and procedural requirements. [Paras 10, 11]

Because registration was cancelled before the ASMT-13 order, Section 63 and Rule 100(2) procedures apply; on that basis the matter is remanded to the adjudicating authority to follow the statutory procedure and issue fresh speaking orders after affording the prescribed opportunity to reply.

Final Conclusion: The appeal is disposed of by remanding the matter to the adjudicating authority with directions to comply with the applicable statutory procedure (including issuance of appropriate notice and opportunity to reply under Section 63 and Rule 100(2) where relevant), to consider the appellant's replies, and to pass a fresh speaking order observing principles of natural justice.

Bail principles - Prima facie satisfaction - Socio-economic offence is not an automatic bar to bail - Personal liberty versus investigation - Medical condition and age as relevant factor for bail - Threat of tampering with evidence - Conditional bail

Bail principles - Prima facie satisfaction - Medical condition and age as relevant factor for bail - Socio-economic offence is not an automatic bar to bail - Threat of tampering with evidence - Conditional bail - Whether the accused should be released on bail and on what conditions - HELD THAT: - The Court applied the settled guiding principles for grant of bail, requiring only a prima facie look at the facts and reasons where bail is granted, and recorded brief reasons for its conclusion. The Court observed that the accused is 66 years old, has multiple health ailments and required medical attention, joined investigation on first summon and did not evade arrest, and no material was placed to show prior involvement in similar offences. The Court noted that custodial interrogation had been minimal and that the investigating agency already possesses the documentary material collected so far; further enquiries remain pending but there was no material to show that the accused had tampered with or was likely to tamper with evidence. Relying on the proposition that bail is not to be used as a device for pre-conviction punishment and that classification of an offence as socio-economic does not automatically bar bail, the Court held that the accused's personal liberty weighed in favour of release subject to safeguards. Accordingly, the Court found prima facie satisfaction to grant bail while imposing conditions to protect the integrity of the investigation and ensure appearance at trial. The judgment referred to Dipak Subhash Chandra Mehta Vs. CBI for the need to indicate reasons when granting bail and to H.B. Chaturvedi Vs. CBI for the principle that economic offences do not ipso facto justify denial of bail.

Accused enlarged on bail on furnishing personal bond and surety and subject to conditions including cooperation with investigation, non-tampering with evidence, surrender/deposit of passport if any, prohibition on leaving the country without court permission, and appearance on all hearings.

Final Conclusion: Bail granted to the accused on terms and conditions to balance his personal liberty and the interests of the investigation; release is conditional and subject to compliance with enumerated safeguards.

Fixation of special rate - interim restraint on coercive recovery - maintainability of writ challenging show-cause notice - disposal of statutory application within fixed time-frame

Fixation of special rate - disposal of statutory application within fixed time-frame - The Commissioner of CGST, Guwahati was directed to decide the petitioner's application for fixation of special rate within a specified period. - HELD THAT: - Relying on earlier coordinate-bench orders disposing similar petitions subject to consideration of applications for fixation of special rate, the Court directed respondent no.2 to dispose of the application submitted by the petitioner on 05.03.2021. The Court fixed an adinterim timeline, requiring disposal within four weeks from receipt of the certified copy of the order, thereby mandating prompt administrative determination of the statutory claim for fixation of special rate and avoiding protracted inaction on the application. [Paras 8]

Respondent no.2 to decide the petitioner's application for fixation of special rate within four weeks from receipt of certified copy of the order.

Interim restraint on coercive recovery - No coercive action or recovery pursuant to the demand and recovery notices shall be taken against the petitioner until the application is decided. - HELD THAT: - As an interim protective measure and pending disposal of the petitioner's application for fixation of special rate, the Court restrained the respondents from taking any coercive steps pursuant to the demand notice dated 28.12.2020 and the recovery notice dated 27.01.2021. The restraint also extended to preventing the respondents and the HDFC bank from remitting the amount demanded under the bank notice/email until further order, thereby preserving the status quo and preventing irreversible recovery before adjudication of the statutory application. [Paras 8, 9]

Respondents and the HDFC bank restrained from taking coercive measures or remitting the demanded amount until the application is decided and until the next date of listing.

Maintainability of writ challenging show-cause notice - The question of maintainability of the writ petition was left open for decision; notice was issued. - HELD THAT: - The respondents contended that the impugned demand and reminder are in the nature of show-cause notices and accordingly raised maintainability. The Court did not determine maintainability at this stage, kept the issue open for adjudication, and issued notice returnable on the listed date, thereby preserving respondents' plea on jurisdiction/maintainability for consideration on merits. [Paras 5, 6]

Maintainability not decided; notice issued and the question kept open for later determination.

Final Conclusion: Notice issued; respondents directed to decide the petitioner's application for fixation of special rate within four weeks; meanwhile respondents and the bank restrained from taking coercive recovery steps or remitting the demanded amount; maintainability of the writ petition left open for subsequent adjudication.

Amalgamation and cessation of corporate existence - notice under Section 148 of the Income Tax Act, 1961 - proceedings against a merged/dissolved entity - liberty to initiate or continue proceedings against successor/assessee - recording of respondent's statement and disposal of writ petition

Amalgamation and cessation of corporate existence - notice under Section 148 of the Income Tax Act, 1961 - proceedings against a merged/dissolved entity - libording of respondent's concession - Whether the impugned notice dated 27.03.2021 issued under Section 148 to Elegent Real Tech Private Limited could be proceeded with in view of the earlier court-approved amalgamation which, it was contended, had caused Elegent to cease to exist. - HELD THAT: - The Court recorded the respondent's statement that proceedings against the noticee, Elegent Real Tech Private Limited, have been dropped. The petitioner's challenge to the impugned notice was founded on the contention that Elegent had ceased to exist following the amalgamation sanctioned by this Court. In light of the respondent/revenue's concession to drop proceedings against Elegent while reserving liberty to initiate or continue proceedings against the petitioner as per law, the Court accepted that statement and took it on record. No adjudication on the merits of the legal contention was undertaken; disposal was by recording the respondent's position and closing the writ petition accordingly. [Paras 2, 7, 8, 9]

Respondent's statement that proceedings against Elegent Real Tech Private Limited are dropped was recorded; writ petition closed with liberty for the revenue to initiate or continue proceedings against the petitioner as per law.

Final Conclusion: The Court, having recorded the revenue's concession to drop proceedings against Elegent Real Tech Private Limited in respect of the impugned Section 148 notice for Assessment Year 2016-2017, took that statement on record and closed the writ petition, leaving the revenue free to pursue proceedings against the petitioner as permitted by law.

Obligation to furnish reasons and dispose objections by passing a speaking order - reopening assessment under Section 148 - escapement of income - survey under Section 133A - GKN Driveshafts principle

Obligation to furnish reasons and dispose objections by passing a speaking order - reopening assessment under Section 148 - escapement of income - GKN Driveshafts principle - Whether the assessing officer complied with the obligation to consider and dispose of the assessee's objections to reopening by passing a speaking order before proceeding with reassessment. - HELD THAT: - The petitioner had sought reasons for reopening and, upon receipt, filed specific objections contending that the recorded reasons did not disclose any escapement of income but only pointed to verification of transactions and that regular books were maintained. Reliance on the Supreme Court's decision in GKN Driveshafts was justified: when objections are filed after reasons for reopening are furnished, the assessing officer is required to dispose of those objections by a speaking order before proceeding with reassessment. The assessing officer did not address the petitioner's substantive objections and merely stated that the reopening was approved by the Joint Commissioner. That response did not satisfy the legal requirement to deal with and decide the objections on merits by a speaking order. Since the statutory and settled precedent requirement to pass a speaking order was not complied with, the court directed the assessing officer to adjudicate the objections by a speaking order within four weeks, leaving the merits of reopening open for determination thereafter. [Paras 5, 6, 7]

The assessing officer must dispose of the petitioner's objections by passing a speaking order within four weeks; meanwhile the court refrained from interfering with the notices under Section 148.

Final Conclusion: Writ petitions disposed directing the assessing officer to pass a speaking order on the objections to reopening within four weeks; petitioner may approach the Court again if objections are rejected. No costs.

Penalty under section 271(1)(c) - concealment of income - furnishing inaccurate particulars of income - deeming fiction in Explanation 1 to section 271(1)(c) - requirement to substantiate explanation / bona fide disclosure - distinction between addition and penalty

Penalty under section 271(1)(c) - deeming fiction in Explanation 1 to section 271(1)(c) - requirement to substantiate explanation / bona fide disclosure - distinction between addition and penalty - Whether imposition of penalty under section 271(1)(c) was justified in respect of additions made for unexplained cash deposits and omission of minor bank interest - HELD THAT: - The Tribunal examined the scope of section 271(1)(c) and Explanation 1 thereto, noting that the statutory deeming fiction operates either where an assessee fails to offer any explanation or offers an explanation which is found to be false, or where the assessee is unable to substantiate an explanation and fails to prove that it was bona fide and that all material facts were disclosed. On the facts the AO made an addition of the cash deposits because the assessee did not produce confirmations from the payees; however the bank statement contemporaneously showed advances given earlier in the year and the assessee's explanation that the advances were returned was plausible. The Tribunal found that the explanation, though unsubstantiated by third party confirmations, was not found to be false by the AO and there was no material on record demonstrating deliberate concealment or furnishing of false particulars. The omission of a small amount of interest was held to be a bona fide oversight. While the inability to substantiate may justify an addition to income, imposition of penalty requires satisfaction that the explanation is false or not bona fide within the meaning of Explanation 1. Absent such a finding or supporting material, the assessee was not liable to penalty despite the addition. [Paras 5, 6]

Penalty under section 271(1)(c) deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2009-10 and deleted the penalty imposed under section 271(1)(c), holding that the assessee's explanation, though not substantiated by third party confirmations, was not found to be false and did not justify levy of penalty.

Disallowance under section 14A read with Rule 8D - net interest income as exclusion from disallowance under section 14A - disallowance of administrative expenses under Rule 8D(2)(iii) - reasonable lump sum disallowance in lieu of adhoc apportionment

Disallowance under section 14A read with Rule 8D - net interest income as exclusion from disallowance under section 14A - Whether disallowance under section 14A read with Rule 8D is exigible where the assessee has net positive interest income and interest free own funds exceed investments made to earn exempt income. - HELD THAT: - The Tribunal upheld the finding that where interest income exceeded interest expense (resulting in net positive interest income) the interest expenditure component cannot be disallowed under section 14A/Rule 8D. The Tribunal applied the jurisdictional ITAT precedent relied upon by the CIT(A) and noted that the assessee's reserve and surplus (own capital / interest free funds) exceeded the investment in shares. No contrary fact or law was shown by Revenue to justify a different conclusion. Accordingly, the disallowance of interest expenditure made by the AO under section 14A read with Rule 8D was deleted. [Paras 8]

Disallowance under section 14A read with Rule 8D insofar as it related to interest expenditure is deleted.

Disallowance of administrative expenses under Rule 8D(2)(iii) - reasonable lump sum disallowance in lieu of adhoc apportionment - Whether the adhoc disallowance of administrative expenses under Rule 8D(2)(iii) should be sustained and in what quantum. - HELD THAT: - The Tribunal accepted that the Assessing Officer applied Rule 8D(2)(iii) to make an ad hoc disallowance of administrative expenses but found that the CIT(A)'s restriction to 0.5% of average investments was itself an adhoc apportionment made without establishing nexus between expenditure incurred and exempt income. To meet the ends of justice the Tribunal reduced the disallowance to a reasonable lump sum amount, holding that a fixed limited disallowance is appropriate in the absence of demonstrable allocation of expenses to exempt income. The Tribunal therefore substituted the AO/CIT(A) approach with a restricted disallowance of Rs. 1,50,000 in each assessment year. [Paras 9]

Ad hoc disallowance of administrative expenses under Rule 8D(2)(iii) is restricted to a lump sum of Rs. 1,50,000 for each assessment year under appeal.

Final Conclusion: Revenue's appeals dismissed; assessee's cross appeals partly allowed by deleting disallowance attributable to interest expenditure under section 14A/Rule 8D and by restricting the administrative expenses disallowance under Rule 8D(2)(iii) to a lump sum amount for each of A.Y.2009 10 and A.Y.2010 11.

Unexplained credit under Section 68 - share premium treated as capital receipt - identity, capacity and creditworthiness of subscribers - genuineness of share subscription transactions - First Proviso to Section 68 concerning valuation and treatment of share premium - remand for fresh consideration by appellate authority

Unexplained credit under Section 68 - share premium treated as capital receipt - identity, capacity and creditworthiness of subscribers - genuineness of share subscription transactions - First Proviso to Section 68 concerning valuation and treatment of share premium - Whether the order of the CIT(A) deleting the addition made under Section 68 in respect of share premium was sustainable or required fresh consideration. - HELD THAT: - The Tribunal found that the Assessing Officer had disbelieved the genuineness of the share premium receipt and had recorded that transaction details and bank statements called for were not furnished before completion of assessment, and had questioned the creditworthiness of the subscriber. The CIT(A)'s order was very short and accepted the assessee's assertion that details were furnished without expressly finding that such details were produced before the assessment order or that the ingredients of Section 68 (including identity, capacity and creditworthiness) were established on the record. The CIT(A) also referred to the introduction of the First Proviso to Section 68 and various authorities on the capital nature of share premium, but did not explain the relevance of those references to the facts where the AO had specifically doubted creditworthiness and non-production of documents. In these circumstances the Tribunal held that the CIT(A)'s order did not exhibit application of mind or contain the necessary findings required to displace the AO's opinion and therefore remitted the matter to the CIT(A) for fresh consideration. The CIT(A) was directed to afford the assessee opportunity of being heard, examine the documents (if any) on record, determine whether the ingredients of Section 68 are satisfied, and pass a reasoned speaking order addressing the significance, if any, of the First Proviso to Section 68 and the precedents relied upon. [Paras 7, 8, 9]

Matter remitted to the CIT(A) for fresh consideration and a speaking order after giving the assessee an opportunity of being heard.

Final Conclusion: The Revenue's appeal is partly allowed inasmuch as the order of the CIT(A) is set aside and the issue regarding deletion of the addition under Section 68 in respect of share premium is remitted to the CIT(A) for fresh, reasoned consideration in accordance with the observations of the Tribunal; appeal disposed of for statistical purposes.

Section 10A(7) read with section 80-IA(10) - ordinary profits - arrangement of the course of business - transfer pricing determinations and comparability - treatment of bad debts as operating or non operating for computation of Profit Level Indicator - remand to Assessing Officer/Transfer Pricing Officer for recomputation

Section 10A(7) read with section 80-IA(10) - ordinary profits - arrangement of the course of business - transfer pricing determinations and comparability - Validity of restricting deduction under section 10A by invoking subsection (7) on the ground that assessee earned more than ordinary profits - HELD THAT: - The Tribunal applied its earlier reasoning in the assessee's own precedents and concluded that mere close connection with associated enterprises and existence of more than ordinary profits do not suffice to invoke section 10A(7) r.w.s. 80-IA(10). The provision targets situations where the course of business has been 'so arranged' to produce excess profits with the intent to abuse the tax concession; therefore the Assessing Officer must point to cogent, corroborative material showing such an arrangement. Transfer pricing outcomes (differences in margins) may trigger investigation but cannot by themselves substitute for evidence that the course of business was arranged to manipulate profits. As the AO's order contained no material demonstrating such an arrangement, the re working of eligible profits by invoking section 10A(7) was held unjustified and the CIT(A) order enhancing income was set aside. [Paras 6]

CIT(A)'s restriction of deduction under section 10A was set aside and ground Nos. 1 to 10 of the assessee's appeal were allowed.

Treatment of bad debts as operating or non operating for computation of Profit Level Indicator - transfer pricing determinations and comparability - remand to Assessing Officer/Transfer Pricing Officer for recomputation - Whether provision for bad debts disallowed in return should be treated as non operating for computing profitability under transfer pricing and whether TPO's filter excluding comparables without bad debts was justified - HELD THAT: - The Tribunal noted that the assessee had disallowed the provision for bad debts in its income-tax return and relied on precedent of the Bench that costs disallowed in the return should be excluded from the cost base for computing the PLI. While both AO/TPO and CIT(A) treated bad debts as operating expenses, the Tribunal held that where such expenditure is disallowed in computing taxable income it should be treated as non operating for transfer pricing purposes. The ad hoc exclusion (filter) of comparables that had no bad debts was held improper. In view of these conclusions the matter was remitted to AO/TPO to treat the provision for bad debts (disallowed in the ITR) as non operating while computing the assessee's profitability and to include comparable companies with bad debts in the final comparable set for recomputation. [Paras 13]

Matter remanded to AO/TPO for recomputation treating disallowed provision for bad debts as non operating and rejecting the ad hoc bad debts filter; appeal partly allowed for statistical purpose.

Procedural dismissal for non prosecution - Grounds 11 to 15 and 17 to 19 of assessee's appeal pressed or not - HELD THAT: - Counsel for the assessee expressly disclaimed interest in prosecuting these grounds and prayed that they be dismissed as not pressed. The Tribunal recorded the concession and dismissed those grounds as not pressed. [Paras 7]

Ground Nos. 11 to 15 and 17 to 19 dismissed as not pressed.

Transfer pricing method selection - infructuous appeal - Revenue's challenge to CIT(A)'s use of RPM instead of TNMM for computing ALP of a business segment - HELD THAT: - Revenue's ground contested the choice of most appropriate method, but the Tribunal observed that the ground did not arise from the impugned order and that the Revenue's counsel conceded the ground was infructuous. In the circumstances no adjudication on the merits was required. [Paras 16, 17]

Revenue's appeal dismissed as infructuous.

Final Conclusion: The Tribunal allowed the assessee's primary challenge to the invocation of section 10A(7) r.w.s. 80 IA(10) and set aside the CIT(A)'s enhancement (grounds 1-10), dismissed several grounds as not pressed, remanded the transfer pricing issue of bad debt treatment to the AO/TPO for recomputation treating disallowed provision as non operating and rejecting the ad hoc comparables filter, and dismissed the Revenue's appeal as infructuous; the assessee's appeal is partly allowed for statistical purposes.

Section 263 revisional jurisdiction - twin conditions for exercise of jurisdiction under section 263 - erroneous and prejudicial to the interest of the revenue - Section 14A disallowance - Rule 8D - exemption under section 10(38) - doctrine of merger

Section 14A disallowance - Rule 8D - exemption under section 10(38) - Section 263 revisional jurisdiction - doctrine of merger - Validity of the Principal Commissioner of Income Tax's exercise of jurisdiction under section 263 to reopen the assessment on account of alleged incorrect computation under section 14A/Rule 8D and incorrect allowance of exemption under section 10(38). - HELD THAT: - The Tribunal found that the Assessing Officer dealt with and applied his mind to the issues of disallowance under section 14A read with Rule 8D and the claim of exemption under section 10(38) in the assessment order dated 29.12.2017 (paras 3-3.6 of the assessment order). The assessing officer made a specific disallowance under section 14A (Rs. 34,52,937) after giving opportunity and recording reasons, and the assessee appealed to the Commissioner (Appeals), who deleted that disallowance following binding precedents. Where the order of the AO has been the subject-matter of an appeal and the matter has been considered and decided in that appeal, the AO's order stands merged with the appellate order. Clause (c) of the Explanation to section 263(1) bars revisional interference in respect of matters already considered and decided in appeal. Applying the Malabar twin-conditions test, the Tribunal held that the Principal CIT could not exercise section 263 revisional power over the disallowance which had been adjudicated and set aside by the Commissioner (Appeals); the correct course for the revenue, if aggrieved by the appellate order, was to challenge it before a higher forum. Because the subject issues were examined by the AO and thereafter disposed of by the Commissioner (Appeals), the Principal CIT's order dated 24.04.2020 was without jurisdiction to the extent it sought recomputation on these grounds. [Paras 13, 15, 16, 17, 18]

Order of the Principal Commissioner of Income Tax dated 24.04.2020 under section 263 is quashed insofar as it reopens computation relating to disallowance under section 14A/Rule 8D and the related examination of exemption under section 10(38); appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the Principal Commissioner of Income Tax had no jurisdiction under section 263 to revise the assessment on issues (section 14A/Rule 8D disallowance and related section 10(38) claim) that had been examined by the AO and thereafter adjudicated by the Commissioner (Appeals), and accordingly quashed the order dated 24.04.2020.

Revisional jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the revenue - business income declared in survey - claim of expenditure against income disclosed in survey - where two views are possible the AO's view is sustainable unless unsustainable in law - assessment not vitiated where AO applied his mind and conducted enquiry

Revisional jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the revenue - where two views are possible the AO's view is sustainable unless unsustainable in law - assessment not vitiated where AO applied his mind and conducted enquiry - Validity of the Principal Commissioner of Income Tax's exercise of revisional jurisdiction under section 263 to set aside the assessment framed under section 143(3) for AY 2015-16. - HELD THAT: - The Tribunal applied the twin conditions from Malabar Industries that an assessing officer's order can be revised under section 263 only if it is both erroneous and prejudicial to the revenue. The record showed that the assessee disclosed 'on-money' of Rs. 8,20,00,000 in the profit and loss account as income disclosed in survey and the Assessing Officer examined books, returns, tax audit report, vouchers and survey statements during scrutiny assessment. The Assessing Officer accepted the assessee's treatment (including allowance of certain expenses and set-offs) after enquiry and application of mind. The Principal CIT merely took a different view on whether expenses could be claimed against the survey-disclosed amount; however where two views are possible, the AO's view cannot be held erroneous and prejudicial unless it is unsustainable in law. The Tribunal found no failure of enquiry or lack of application of mind by the AO; the AO had considered the survey statements and supporting documents and reached a permissible conclusion. Mere possibility of obtaining further material did not render the concluded assessment erroneous. On these grounds the Tribunal held the Pr. CIT's exercise of revisional jurisdiction to set aside the assessment to be unjustified and quashed the section 263 order. [Paras 11, 12, 13, 14, 15]

The order under section 263 setting aside the assessment for AY 2015-16 was quashed; the AO's assessment was not held to be erroneous and prejudicial to the interest of the revenue.

Final Conclusion: The ITAT allowed the appeals, quashed the Pr. CIT's order under section 263, and held that the assessment order for AY 2015-16 was a permissible view by the Assessing Officer after applying his mind and conducting enquiry and thus was not erroneous or prejudicial to the revenue.

Deduction under Section 80P - Interest income from parking of surplus funds - Co-operative society - Distinction between nationalised and private banks - Precedent binding of jurisdictional High Court

Deduction under Section 80P - Interest income from parking of surplus funds - Precedent binding of jurisdictional High Court - Entitlement of the co-operative society to deduction under Section 80P in respect of interest income earned on surplus funds parked in nationalised banks. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of Section 80P deduction for interest income arising from the assessee's deposits in nationalised banks. The decision rests on the jurisdictional High Court's ruling in The Vavveru Co-operative Rural Bank Ltd. v. CIT, which recognised that a co-operative society is entitled to Section 80P relief qua interest earned on parking of surplus funds in nationalised banks. Applying that binding precedent, the Tribunal found no error in the CIT(A)'s reasoning and rejected the Revenue's challenge to the allowance. [Paras 4]

Allowance of Section 80P deduction upheld for interest on surplus funds parked in nationalised banks; Revenue's appeals dismissed on this point.

Deduction under Section 80P - Distinction between nationalised and private banks - Co-operative society - Whether the assessee is entitled to Section 80P deduction in respect of interest earned on deposits with private banks and LIC deposits. - HELD THAT: - The Tribunal affirmed the CIT(A)'s rejection of the assessee's claim for Section 80P deduction in respect of interest from deposits with private banks and from LIC deposits. Although counsel for the assessee argued that Banking Regulation law does not distinguish between public and private banks and sought to extend the High Court's reasoning, the Tribunal recorded that the cited High Court decision was confined to interest income from nationalised banks. Consequently, the Tribunal found no merit in extending Section 80P relief to deposits with private banks or to LIC deposits and dismissed the assessee's cross-objections. [Paras 5]

Section 80P deduction denied for interest on deposits with private banks and LIC; assessee's cross-objections dismissed.

Final Conclusion: All three Revenue appeals are dismissed insofar as the CIT(A)'s allowance of Section 80P deduction for interest on surplus funds parked in nationalised banks is upheld; the assessee's cross-objections seeking Section 80P relief for deposits in private banks and LIC are dismissed.

Arm's length price - transfer pricing adjustment - benefit test for management services - aggregation and benchmarking under Transactional Net Margin Method (TNMM) - determination under section 92C and prescribed transfer pricing methods - most appropriate method (MAM) - imputation of notional interest on inter company receivables - benchmarking interest rate - use of domestic prime lending rate versus LIBOR - limits of the Transfer Pricing Officer (TPO) in assessing commercial benefit - maintenance and rejection of transfer pricing documentation under Rules 10B/10D

Arm's length price - benefit test for management services - aggregation and benchmarking under Transactional Net Margin Method (TNMM) - limits of the Transfer Pricing Officer (TPO) in assessing commercial benefit - maintenance and rejection of transfer pricing documentation under Rules 10B/10D - ALP adjustment of payment for management services determined at nil by TPO/AO and confirmed by CIT(A). - HELD THAT: - The Tribunal examined whether the lower authorities were justified in treating the management services receipt as a separate transaction and determining its ALP at nil after rejecting the assessee's TP documentation and benefit analysis. The Tribunal observed that the assessee had filed detailed supporting material demonstrating receipt of services and the absence of any challenge by Revenue to the genuineness of those supporting details. It noted authorities establishing that it is not within the TPO's domain to independently assess benefits in a manner contrary to the assessee's demonstrated commercial prudence. Applying these principles, and having regard to the documentation and the aggregation of the management services with manufacturing transactions under TNMM in the assessee's contemporaneous analysis, the Tribunal held that the impugned ALP adjustment was unsustainable and directed deletion of the addition.

The ALP adjustment of Rs. 2,84,58,356/ in respect of management services is deleted and the assessee's grievance on this issue is allowed.

Imputation of notional interest on inter company receivables - benchmarking interest rate - use of domestic prime lending rate versus LIBOR - most appropriate method (MAM) - transfer pricing adjustment - Notional interest imputed on overdue receivables from AEs using SBI prime lending rate and resulting TP adjustment. - HELD THAT: - The Tribunal considered the methodology adopted by the lower authorities which imputed interest on receivables using a domestic prime lending rate (SBI PLR) and without applying the MAM and appropriate comparable selection required under Chapter X. The Tribunal found that adoption of SBI PLR lacked relevance to the international transaction and that the TPO/CIT(A) had not applied the MAM or selected comparables in the relevant segment; reliance on a domestic PLR instead of an appropriate international benchmark (such as LIBOR) was therefore inappropriate. For these reasons the Tribunal directed deletion of the notional interest adjustment.

The impugned interest addition of Rs. 2,26,05,726/ on receivables is deleted and the assessee succeeds on this issue.

Final Conclusion: Both substantive transfer pricing adjustments - (i) ALP adjustment in respect of management services and (ii) imputed interest on inter company receivables - are deleted; the assessee's appeal is allowed.

Estimation of additions on suspicious/bogus purchases - assessment of income by applying a percentage estimation in absence of suppliers' confirmation - application of precedent/identical earlier adjudication - use of documentary invoices and banking evidence as basis for limited estimation

Estimation of additions on suspicious/bogus purchases - assessment of income by applying a percentage estimation in absence of suppliers' confirmation - Whether the restriction of the addition to 12.5% of the alleged bogus purchases for A.Y. 2009-10 was justified and whether the assessee's appeal against that restriction should be allowed. - HELD THAT: - The Tribunal recorded that the identical controversy for the relevant year had already been adjudicated in the revenue's appeal by an earlier ITAT order dated 03.02.2021 which confirmed the CIT(A)'s restriction of the addition to 12.5% of the suspicious purchases. The earlier decision found that the assessee was in civil construction business requiring material consumption, that purchase transactions were evidenced by invoices and payments through banking channels and PANs and account confirmations were furnished, but the suppliers were not produced and notices under section 133(6) did not elicit satisfactory response, making the case fit for estimation. Applying that adjudication to the present appeal, the Tribunal found no justification to interfere with the 12.5% estimation and thus dismissed the assessee's appeal for A.Y. 2009-10. [Paras 6]

Appeal dismissed; addition restricted to 12.5% of the alleged bogus purchases confirmed for A.Y. 2009-10.

Estimation of additions on suspicious/bogus purchases - application of precedent/identical earlier adjudication - Whether the restriction of the addition to 12.5% of the alleged bogus purchases for A.Y. 2010-11 was justified and whether the assessee's appeal against that restriction should be allowed. - HELD THAT: - The Tribunal observed that the facts and issues for A.Y. 2010-11 are pari materia to those adjudicated in the earlier ITAT order dated 03.02.2021 (in the revenue's appeals) which upheld the CIT(A)'s estimation at 12.5%. Relying on that identical adjudication and applying the same reasoning-namely, documentary invoices and banking payments existed but suppliers were not produced and statutory notices did not yield satisfactory responses-the Tribunal concluded that the 12.5% estimation was fair and did not warrant interference. Consequently, the assessee's appeal for A.Y. 2010-11 was dismissed. [Paras 11]

Appeal dismissed; addition restricted to 12.5% of the alleged bogus purchases confirmed for A.Y. 2010-11.

Final Conclusion: Both appeals dismissed by applying the Tribunal's earlier adjudication which upheld the CIT(A)'s restriction of additions to 12.5% of the alleged suspicious/bogus purchases for A.Y. 2009-10 and A.Y. 2010-11.

Assessment and verification under Section 17 of the Customs Act, 1962 - regulation of imports under the Foreign Trade (Development and Regulation) Act, 1992 - requirement to obtain DGFT clarification for classification of restricted/prohibited imports - jurisdictional exercise of judicial review under Article 226 of the Constitution - parameters for exercise of writ jurisdiction: unfairness, unreasonableness, perversity, lack of jurisdiction, violation of principles of natural justice - quashing of administrative order and remand for fresh consideration

Assessment and verification under Section 17 of the Customs Act, 1962 - regulation of imports under the Foreign Trade (Development and Regulation) Act, 1992 - requirement to obtain DGFT clarification for classification of restricted/prohibited imports - parameters for exercise of writ jurisdiction: unfairness, unreasonableness, perversity, lack of jurisdiction, violation of principles of natural justice - Whether the customs authority acted lawfully in treating the imported refractory bricks as restricted items and passing the impugned order without obtaining DGFT clarification or following the verification process under Section 17 of the Customs Act. - HELD THAT: - The court found that determination whether the goods are freely importable or restricted depends on the policy issued under the Foreign Trade (Development and Regulation) Act and not on the unilateral interpretation by the customs authority. Section 17 envisages self-assessment by the importer with verification by the proper officer; where a question of policy or classification under DGFT arises, the proper officer should seek clarification from DGFT or require the importer to obtain an authoritative decision rather than apply his own understanding. The respondent did not approach the competent DGFT authority, seek clarification, or follow the cooperative verification steps illustrated by subsequent practice (as with DGFT clarifications in other matters), and therefore acted contrary to the procedure envisaged by Section 17. The conduct was held to be unfair and in breach of the statutory verification procedure, bringing the case within recognised parameters for interference under Article 226. [Paras 10, 11, 12]

Respondent acted illegally by applying its own interpretation instead of obtaining DGFT clarification or following Section 17 verification procedures; impugned order set aside on this ground.

Quashing of administrative order and remand for fresh consideration - jurisdictional exercise of judicial review under Article 226 of the Constitution - Remedial consequence: whether the impugned order should be quashed and the matter remitted for fresh decision. - HELD THAT: - Having concluded that the respondent breached the statutory procedure and acted unfairly, the court interfered under its writ jurisdiction, quashed the order-in-original and remitted the matter to the respondent for fresh consideration in accordance with law. The court directed the respondent to take appropriate steps - including obtaining DGFT clarification or directing the importer to obtain it - and to pass a fresh final order within eight weeks. The court expressly left open the substantive contention of the petitioner as to the nature of the goods for fresh adjudication. [Paras 14]

Impugned order quashed; matter remitted to respondent to decide afresh in accordance with law within eight weeks; petition allowed.

Final Conclusion: The writ petition is allowed: the Court quashed the impugned order for failure to follow the verification and clarification process under Section 17 of the Customs Act and for not seeking DGFT clarification on the restricted-imports question, and remitted the matter to the respondent to pass fresh orders in accordance with law within eight weeks; the petitioner's substantive claim as to the nature of the goods is left open.

Illegality for failure to follow Section 17 verification procedure under the Customs Act, 1962 - Violation of the requirement to issue a show cause notice and afford hearing under Section 124 of the Customs Act, 1962 - Duty of customs authority to seek clarification from DGFT under the Foreign Trade (Development and Regulation) Act, 1992 before treating imports as restricted - Service on customs broker treated as service on the importer consequent to amendment of Section 152 of the Customs Act, 1962 - Exercise of writ jurisdiction under Article 226 where action of statutory authority is unfair, unreasonable, perverse, without jurisdiction or violative of principles of natural justice

Illegality for failure to follow Section 17 verification procedure under the Customs Act, 1962 - Duty of customs authority to seek clarification from DGFT under the Foreign Trade (Development and Regulation) Act, 1992 before treating imports as restricted - Impugned confiscation and penalty were not sustainable because the customs authority applied its own interpretation of DGFT policy instead of following statutory verification and seeking clarification from DGFT. - HELD THAT: - The customs authority should not have independently construed the DGFT policy notification to treat the imported refractory bricks as restricted. Section 17 envisages self-assessment by the importer and a verification function for the proper officer; where the characterisation of goods depends on trade policy, the proper course is to obtain clarification from DGFT or require the importer to seek the competent authority's view. The respondent's failure to do so and applying its own understanding amounted to non-compliance with the verification scheme and was unfair and contrary to Section 17, attracting review under writ jurisdiction. [Paras 10, 11, 12]

Findings on restriction were set aside; the respondent acted illegally in treating the goods as restricted without seeking DGFT clarification and without following the verification process under Section 17.

Violation of the requirement to issue a show cause notice and afford hearing under Section 124 of the Customs Act, 1962 - Principles of natural justice - The confiscation order was bad for want of compliance with Section 124 and for violating principles of natural justice by not issuing a show cause notice and providing opportunity to be heard. - HELD THAT: - Section 124 prescribes mandatory preconditions before any order of confiscation or penalty is passed, including a notice with prior approval of a specified rank of officer, opportunity to make written representations and a reasonable opportunity of being heard. Even though the importer sought early finalisation without show cause notice, there was a fundamental divergence between the parties' positions; consequently the mandatory steps under Section 124 could not be bypassed. The impugned order therefore breached statutory procedure and natural justice. [Paras 13, 14]

Confiscation and penalty set aside for failure to follow the mandatory show cause and hearing procedure under Section 124.

Service on customs broker treated as service on the importer consequent to amendment of Section 152 of the Customs Act, 1962 - Service of the order on the customs broker is to be treated as service on the importer in view of the amendment to Section 152; prior decisions to the contrary are inapplicable. - HELD THAT: - The Court noted that the amendment to Section 152 effected a change in the law such that service on the customs house agent equates to service on the assessee. While disputes were raised about timing and acknowledgement, the Court declined to probe the broker's motives and observed that pre-amendment precedents cannot be relied upon to resist the effect of the legislative amendment. [Paras 15]

Service on the customs broker shall be treated as service on the importer pursuant to the amended statutory provision.

Exercise of writ jurisdiction under Article 226 where action of statutory authority is unfair, unreasonable, perverse, without jurisdiction or violative of principles of natural justice - Writ jurisdiction was appropriately exercised to quash the impugned order because the authority's action was unfair, violative of statutory procedure and natural justice. - HELD THAT: - Having found non-compliance with the statutory verification process, failure to seek policy clarification from DGFT, and breach of Section 124's mandatory procedure, the Court concluded that the action fell within recognised parameters permitting judicial review under Article 226. The Court therefore interfered with the administrative order and directed fresh consideration in accordance with law. [Paras 8, 12, 16]

Writ petition allowed; administrative order quashed and matter remitted for fresh decision in accordance with law.

Remand for fresh decision in accordance with law - The impugned order was quashed and the matter remitted for fresh adjudication; the question of whether the goods are restricted or freely importable was left open for fresh consideration. - HELD THAT: - Because the impugned order was set aside on procedural and legal grounds, the Court did not decide the substantive characterisation of the goods. The respondent was directed to take steps (including seeking DGFT clarification or verifying practices at other ports) and pass a fresh final order within eight weeks, applying the proper statutory procedures and principles of natural justice. [Paras 16]

Order quashed; matter remitted to respondent to pass fresh orders within eight weeks; substantive contentions on nature of goods left open.

Final Conclusion: The confiscation and penalty order was quashed for failure to follow the verification procedure under Section 17, for not seeking requisite DGFT clarification, and for breach of the mandatory show cause and hearing requirements of Section 124; service on the customs broker is effective post-amendment to Section 152; the matter is remitted for fresh decision in accordance with law within eight weeks.

Transaction value - rejection of declared value and burden of proof on Revenue - Customs Valuation Rules, 2007 - redetermination of value - admissibility of confessional statements and computer-generated documents - confession of one accused not admissible against co-accused without corroboration - voluntary payment as corroboration of admission of undervaluation - double jeopardy in imposition of penalty on proprietorship firm and proprietor

Transaction value - rejection of declared value and burden of proof on Revenue - Customs Valuation Rules, 2007 - redetermination of value - Whether the declared transaction value could be rejected and the demand for differential duty sustained. - HELD THAT: - The Tribunal applied section 14 read with the Customs Valuation Rules, 2007 and reiterated that ordinarily the declared transaction value is to be accepted and may be rejected only on cogent reasons after following the procedure prescribed in the Valuation Rules. Although the Department did not produce contemporaneous import data or conduct market enquiries under Rules 4-6, the importer (Shri Sunny Gujral) repeatedly admitted manipulation of invoices and that original invoices recorded higher prices than declared in Bills of Entry. Those admissions, consistently made on multiple dates and acknowledged in subsequent statements, together with voluntary payment of differential duty, constituted sufficient corroboration to uphold re-determination of value in his case; in such circumstances Revenue was not obliged to produce contemporaneous import data or NIDB evidence. Consequently the demand for differential duty was sustained against the admitting importer but not against other importers lacking independent evidence or admissions. [Paras 11, 12, 13, 14, 19]

Declared transaction value rejected as against Shri Sunny Gujral on the basis of his repeated admissions and voluntary payment; re-determination upheld for him but not for others.

Admissibility of confessional statements and computer-generated documents - voluntary payment as corroboration of admission of undervaluation - Whether the statements recorded from the principal accused and the computer-generated invoices/documents seized from his premises were admissible and sufficient to prove undervaluation. - HELD THAT: - The Tribunal held that where the maker of the computer-generated documents admits ownership of the devices and acknowledges the entries as his own, compliance with the formalities concerning computer evidence under section 138C (as contended by the appellants) did not become a prerequisite for admissibility in that factual matrix. The multiple, consistent admissions by the maker regarding manipulation of invoices, together with his voluntary payment towards duty liability, provided adequate corroboration for the Department to sustain the finding of undervaluation against him. The Tribunal relied on authorities holding that un-retracted admissions need not be further proved by Revenue. [Paras 12, 13, 14]

Statements of the admitting importer and the computer-generated documents acknowledged by him were admissible and sufficient to support the re-determination of value against him.

Confession of one accused not admissible against co-accused without corroboration - Whether the admissions of the principal accused could be treated as binding proof against other importers and their proprietors. - HELD THAT: - The Tribunal applied settled evidentiary principles that a confession by one accused is not evidence against another absent cogent corroboration under Section 30 of the Evidence Act. The record did not disclose admissions by the other importers or independent documentary proof establishing their culpability; the Department relied primarily on the statements of the principal accused. In absence of corroborative material (such as bills of entry, supplier invoices, or other documents) linking those importers to the admitted manipulation, the admissions could not be read against them. Therefore demands and penalties imposed on importers other than the admitting proprietor could not be sustained. [Paras 15, 16, 17, 18]

Admissions of Shri Sunny Gujral cannot be read against other importers/proprietors; demands and penalties against them are set aside for lack of independent corroborative evidence.

Double jeopardy in imposition of penalty on proprietorship firm and proprietor - Whether imposition of penalty both on a proprietorship firm and on its proprietor amounts to double punishment. - HELD THAT: - The Tribunal observed that imposing penalty on a proprietorship firm as well as on the proprietor effectively results in two sets of punishment for the same act. Relying on precedent, the Tribunal held that only one set of penalty can be imposed - either on the firm or on the proprietor - and that the adjudicating authority's imposition of penalties in both capacities amounted to impermissible double jeopardy. Consequently such penalties were set aside insofar as they were imposed concurrently on both the firm and its proprietor. [Paras 18, 19]

Penalty imposed both on the proprietorship firms and on their proprietors is unsustainable; one set of penalty only is permissible and concurrent penalties were quashed.

Final Conclusion: The adjudication order is upheld only in respect of Shri Sunny Gujral (proprietor of M/s Jaskaran Enterprise) for whom admissions and voluntary payment justify re-determination of value and demand; the demands and penalties imposed on the other importers and their proprietors are set aside for lack of independent corroborative evidence, and concurrent penalties on a proprietorship and its proprietor are quashed. Amounts already deposited by the admitting importer are to be set off and no further recovery is directed.

Right to appeal under Section 128 - prohibition on reopening or recovering a sanctioned refund without preferring statutory appeal - finality of an unchallenged refund order - requirement of invoking appellate remedy before initiating recovery proceedings

Right to appeal under Section 128 - finality of an unchallenged refund order - prohibition on reopening or recovering a sanctioned refund without preferring statutory appeal - Whether the Revenue could recover a refund already sanctioned by an earlier order without first challenging that order by filing an appeal under the statutory remedy provided in Section 128 of the Customs Act. - HELD THAT: - The Tribunal observed that the refund of 4% SAD was sanctioned by an earlier order dated 26.9.2014 and that the Department had not challenged or sought review of that order by invoking the appellate remedy available under Section 128. Proceedings for recovery were instituted by issuance of a show cause notice under Section 28 on the premise that the refund had been erroneously granted. The Tribunal held that the correctness of the earlier refund order could only be examined by the procedure provided in law, and that Section 128 confers on "Any Person" the right to prefer an appeal against any decision or order under the Act. Reliance was placed on the legal principle stated in ITC Ltd vs. CCE, Kolkata to the effect that the expression "Any person" includes both the Revenue and the assessee and that any order under the Act (including self-assessment or assessment orders) is appealable. Applying that principle, the Tribunal concluded that the Revenue could not bypass the statutory appeal route and proceed to recover the sanctioned refund by initiating recovery proceedings. The impugned order confirming demand, interest and penalty on the basis of the show cause notice was therefore unsustainable and was set aside. [Paras 8]

Impugned order set aside; demand of duty, interest and penalty quashed; appeal allowed.

Final Conclusion: The appeal is allowed: since the Department did not challenge the earlier refund order by preferring the statutory appeal, it could not initiate recovery proceedings; the impugned order is set aside and the demand, interest and penalty are quashed.

Dissolution of company in liquidation under Section 481 of the Companies Act, 1956 - Insufficiency of assets or funds as ground for dissolution - Notice to secured creditors and ex-directors and opportunity to object before dissolution - Discharge and relief of the Official Liquidator on dissolution - Transfer of residual funds to the Official Liquidator's Common Pool Account - Availability of two-year period for raising objections/review under Section 559 of the Companies Act, 1956 - Reliance on Supreme Court precedent Meghal Homes Pvt. Ltd. for dissolution

Dissolution of company in liquidation under Section 481 of the Companies Act, 1956 - Insufficiency of assets or funds as ground for dissolution - Notice to secured creditors and ex-directors and opportunity to object before dissolution - Reliance on Supreme Court precedent Meghal Homes Pvt. Ltd. for dissolution - Acceptance of the Official Liquidator's report and dissolution of M/s. Mangal Rasayan Limited (in liquidation). - HELD THAT: - The Official Liquidator reported that following inspection of records and sales of company properties there were no remaining assets save a small bank balance and that no claims remained pending. The Official Liquidator had given notice to ex-directors and secured creditors inviting objections and received none; the Registrar of Companies communicated no objection. Relying on the insufficiency of assets/funds and the ratio in Meghal Homes Pvt. Ltd., the Court found it not possible to further proceed with the winding up and that dissolution under the statutory power is appropriate. The Court accepted the report and directed dissolution of the company. [Paras 6, 7, 8, 9]

Report accepted; M/s. Mangal Rasayan Limited (In Liqn.) dissolved under Section 481 and the Official Liquidator discharged.

Discharge and relief of the Official Liquidator on dissolution - Transfer of residual funds to the Official Liquidator's Common Pool Account - Availability of two-year period for raising objections/review under Section 559 of the Companies Act, 1956 - Consequential directions on discharge of the Official Liquidator, treatment of residual funds, and procedure for post-dissolution objections. - HELD THAT: - Upon dissolution the Official Liquidator stood discharged and was relieved of his duties. The Court permitted transfer of the remaining bank balance to the Common Pool Account maintained by the office of the Official Liquidator. The Court recorded that any aggrieved party may apply for review or raise objections within the statutory two-year period under the provision governing post-dissolution applications, thus preserving the statutory remedy for interested parties. [Paras 9, 10]

Official Liquidator discharged; residual funds may be transferred to the Common Pool Account; parties retain right to seek review/raise objections within the two-year period under the statute.

Final Conclusion: The High Court accepted the Official Liquidator's report, dissolved M/s. Mangal Rasayan Limited (In Liqn.) under the statutory power due to insufficiency of assets, discharged the Official Liquidator, authorised transfer of the remaining bank balance to the Common Pool Account, and left open the statutory two-year window for any aggrieved party to apply for review or to raise objections.

Oppression and mismanagement - locus standi of a shareholder to seek relief in respect of contractual rights of the company - privity of contract - arbitration clause and arbitration invoked - set off under Order VIII Rule 6 CPC - breach of service facility agreement and contractual remedy of revocation/eviction - interim duty to ensure unobstructed functioning of the company

Locus standi of a shareholder to seek relief in respect of contractual rights of the company - privity of contract - The petition by the majority shareholder seeking directions in relation to access to premises held under a Service Facility Agreement between the company and the licensor is not maintainable as a contractual dispute between the licensee and the licensor cannot be adjudicated by this Tribunal by the shareholder in place of the company. - HELD THAT: - The Tribunal found as an admitted fact that the premises belong to Respondent No.4 and were licensed to Respondent No.1 under the Service Facility Agreement; the agreement is between Respondent Nos.1 and 4 and the Petitioner is not a party to it. Applying the principle of privity, the Tribunal held that disputes arising under that contract are contractual rights of the licensee (Respondent No.1) and not rights of the Petitioner as a shareholder to be litigated before this Tribunal. The Tribunal relied on the distinction between company affairs jurisdiction under Sections 241 242 and purely contractual disputes between the company and third parties and concluded the aggrieved party in respect of the rent dispute is Respondent No.1 and not the Petitioner. The Tribunal therefore held that the Petitioner lacks locus to seek reliefs that are essentially contractual in nature between Respondent Nos.1 and 4. [Paras 23, 25, 30, 61, 62]

Petition not maintainable insofar as it seeks adjudication of contractual disputes between Respondent No.1 and Respondent No.4; the Petitioner lacks locus to raise those contract claims before this Tribunal.

Arbitration clause and arbitration invoked - breach of service facility agreement and contractual remedy of revocation/eviction - The dispute regarding non payment of service charges, set off claims and entitlement to revoke the licence falls within the arbitration/contractual forum and not within the Tribunal's jurisdiction under Sections 241 242. - HELD THAT: - The Service Facility Agreement contains an arbitration clause and the respondents have invoked arbitration. The Tribunal examined the agreement's term that non payment for more than one month constitutes breach enabling the licensor to revoke the licence subject to the one month cure/notice provision. The Tribunal concluded the rent/service charge dispute is essentially civil and contractual and must be determined as per the contract and the arbitration invoked; it is not amenable to being decided by this Tribunal under the company oppression/mismanagement provisions. Consequently, claims of set off raised by the applicant were held not maintainable before the Tribunal since the first pre condition in Order VIII Rule 6 (suit for recovery of money) was absent in the present proceedings and the contractual forum/arbitration is the appropriate remedy. [Paras 54, 55, 56, 57, 61]

Disputes as to payment of service charges, alleged set off and rights of revocation/eviction under the Service Facility Agreement are contractual/arbitral matters to be pursued in accordance with the agreement and invoked arbitration; they are not to be adjudicated by this Tribunal in these proceedings.

Set off under Order VIII Rule 6 CPC - interim duty to ensure unobstructed functioning of the company - Although the substantive contractual and set off disputes were not to be decided by the Tribunal, an interim direction was issued requiring both parties to refrain from creating hindrance to the company's smooth functioning pending resolution by appropriate forums. - HELD THAT: - While holding that the contract dispute and set off claim must be pursued in arbitration or other appropriate civil forums, the Tribunal emphasised that until eviction is carried out in accordance with law (including any contractual notice/cure requirement and legal process), Respondent Nos.2-4 have no right to obstruct access to the premises. Citing prior appellate directions to ensure no hindrance, the Tribunal directed both parties and their officers/employees to ensure no obstruction is caused to the company's functioning in the meantime, while leaving Respondent Nos.2-4 free to take legal recourse for breach of the agreement. [Paras 64, 65, 66, 67]

Interim direction: parties shall not create hindrance to the smooth functioning of the company; respondents remain at liberty to pursue contractual remedies in accordance with law.

Final Conclusion: The Tribunal held that the dispute over payment of service charges and alleged set off arises out of the Service Facility Agreement between the company and the licensor and, being a contractual/arbitral controversy, is not maintainable before the Tribunal by the shareholder; however, for the interim and without adjudicating the contractual claims, the Tribunal directed that no party or its officers/employees shall hinder the company's functioning pending resolution of the contractual/arbitral proceedings, and observed that respondents remain at liberty to pursue eviction or other contractual remedies in accordance with the agreement and law.

Liquidation upon CoC recommendation under Section 33(2) of IBC, 2016 - Publication of Form G and absence of resolution applicants - Validity of Committee of Creditors' resolution adopted through voting - Appointment of Resolution Professional as Liquidator under Section 34(1) of IBC, 2016 - Commencement of moratorium under Section 33(5) of IBC, 2016 - Liquidator's duties: public announcement and submission of Preliminary Report under the Liquidation Process Regulations

Liquidation upon CoC recommendation under Section 33(2) of IBC, 2016 - Order for liquidation of the Corporate Debtor was passed on the basis of the CoC resolution recommending liquidation under Section 33(2) of the IBC, 2016. - HELD THAT: - The Tribunal accepted the CoC's finding that no resolution applicant had come forward despite publication of Form G and, in the absence of any feasible resolution plan, was inclined to and accordingly ordered liquidation of the Corporate Debtor in terms of Chapter III of Part II of the IBC, 2016. The Tribunal considered the CoC resolution passed in the 4th meeting dated 31.03.2021 and the circumstances that led to the recommendation for liquidation, and found no alternative but to allow the IA and direct commencement of liquidation proceedings. [Paras 16, 17]

IA allowed and Corporate Debtor ordered to be liquidated in terms of the IBC, 2016.

Appointment of Resolution Professional as Liquidator under Section 34(1) of IBC, 2016 - The Resolution Professional was appointed as Liquidator having given written consent in Form 2 under Section 34(1). - HELD THAT: - The Applicant/RP furnished his written communication consenting to act as Liquidator in Form 2. In view of the CoC resolution recommending liquidation and the RP's consent, the Tribunal appointed Mr. Shyam Arora as Liquidator and directed him to perform the functions mandated by the Code and Regulations. [Paras 15, 17]

Mr. Shyam Arora is appointed as Liquidator.

Publication of Form G and absence of resolution applicants - Validity of Committee of Creditors' resolution adopted through voting - The Tribunal recorded that Form G was published twice, no expression of interest was received, and the CoC resolution recommending liquidation was validly passed by requisite voting share. - HELD THAT: - The RP placed on record publications of Form G (twice) and Form A, statements and signed voting sheets of CoC members, and valuation figures. The 4th CoC meeting considered the absence of any resolution applicant and passed the agenda recommending liquidation which obtained 87.82% voting share; supporting affidavits and voting sheets were on record. On these facts the Tribunal accepted that the preconditions for considering liquidation under Section 33(2) were satisfied. [Paras 9, 11, 12, 13, 14]

Findings that Form G was published twice, no resolution applicant emerged, and the CoC validly recommended liquidation were accepted.

Commencement of moratorium under Section 33(5) of IBC, 2016 - Liquidator's duties: public announcement and submission of Preliminary Report under the Liquidation Process Regulations - On liquidation, the earlier moratorium under Section 14 ceased and a fresh moratorium under Section 33(5) commenced; the Liquidator was directed to make public announcement and to investigate affairs and submit a preliminary report within the stipulated time. - HELD THAT: - The Tribunal directed that the earlier CIRP moratorium would cease and a fresh moratorium under Section 33(5) of the Code would commence. It further directed the appointed Liquidator to issue the public announcement in terms of the Liquidation Process Regulations, to continue investigations into the corporate debtor's financial affairs for undervalued or preferential transactions, and to submit a Preliminary Report to the Adjudicating Authority within seventy five days from the commencement of liquidation, along with statutory communications to RoC and IBBI. [Paras 17]

Moratorium under Section 33(5) to commence; Liquidator to issue public announcement, investigate affairs and submit Preliminary Report within 75 days; other directions as recorded.

Final Conclusion: The IA filed by the Resolution Professional was allowed: the Corporate Debtor was ordered to be liquidated following the CoC's valid recommendation, the RP was appointed Liquidator with statutory directions (public announcement, investigation, preliminary report, and communications to RoC and IBBI), and the moratorium under Section 33(5) was directed to commence.

Default - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - date of default and authentication by the information utility - effect of quashing of NPA declaration on date of default - limitation for initiation of corporate insolvency resolution process - interaction between SARFAESI Act proceedings and IBC proceedings - jurisdiction of the Adjudicating Authority - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Default - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The application under Section 7 of IBC, 2016 was admissible and is to be admitted on the ground that a financial debt is due and default has occurred. - HELD THAT: - The Tribunal found that the corporate debtor had availed credit facilities and that a debt remained unpaid. The corporate debtor's confirmation letter dated 01.12.2016 and authentication of default by the information utility established the existence of debt and default. Reliance was placed on precedents holding that once the adjudicating authority is satisfied that a default has occurred, the Section 7 application must be admitted if complete. The Tribunal noted that proceedings under the SARFAESI Act are of a different nature (recovery) and do not preclude initiation of CIRP under the IBC where default is established. Applying these principles, the Tribunal concluded the applicant had established default and that the Section 7 application was complete and admissible. [Paras 13, 16]

Application under Section 7 admitted.

Date of default and authentication by the information utility - effect of quashing of NPA declaration on date of default - limitation for initiation of corporate insolvency resolution process - The date of default is taken as 03.09.2016 (as recorded by the information utility) and the Section 7 application filed on 12.03.2019 is within the period of limitation. - HELD THAT: - The Tribunal observed that although the bank had recorded the date of NPA as 02.12.2016, the Debt Recovery Tribunal quashed the NPA declaration. Consequently, the Tribunal accepted the information utility's authenticated record which records the date of default as 03.09.2016. On that basis the application filed on 12.03.2019 was held not time-barred. The reasoning follows the view that Section 7 is triggered by occurrence of default (as defined) and the authenticated IU record is a valid mode to establish the date of default for the purpose of limitation. [Paras 14]

Date of default taken as 03.09.2016; application within limitation.

Interaction between SARFAESI Act proceedings and IBC proceedings - Proceedings under the SARFAESI Act (including quashing of NPA by DRT) do not preclude admission of a Section 7 application where default is established. - HELD THAT: - The Tribunal noted that the DRT quashed the declaration of NPA but that the underlying debt remained unpaid. Citing authority and observing the distinct objectives of SARFAESI (recovery) and IBC (resolution), the Tribunal held that the corporate debtor's challenge to NPA classification before DRT does not operate as a bar to admission of a Section 7 petition where default is otherwise proved. [Paras 13]

DRT's quashing of NPA does not defeat a properly established claim of default under Section 7.

Jurisdiction of the Adjudicating Authority - This Tribunal has jurisdiction to entertain the Section 7 application. - HELD THAT: - The Tribunal recorded that the registered office of the corporate debtor is situated in Delhi, and on that basis held that the Tribunal has territorial jurisdiction to hear and decide the application. [Paras 15]

Adjudicating Authority (NCLT, New Delhi Bench) has jurisdiction.

Appointment of Interim Resolution Professional - An Interim Resolution Professional is appointed subject to specified conditions and disclosures. - HELD THAT: - The financial creditor proposed an IRP; the Tribunal appointed the named professional as Interim Resolution Professional on condition that no disciplinary proceedings are pending against him, that he files specific consent in Form 2, and makes the disclosures required under the IBBI regulations within one week of the order. [Paras 17]

Named IRP appointed subject to consent and disclosures.

Appointment of Interim Resolution Professional - The financial creditor is directed to deposit funds with the IRP to meet initial expenses. - HELD THAT: - In exercise of its powers the Tribunal directed the financial creditor to deposit a specified initial sum with the IRP within three days of receipt of the order to meet expenses in terms of the IBBI regulations, with provision for adjustment by the Committee of Creditors and repayment as accounted for by the IRP. [Paras 18]

Financial creditor to deposit initial expenses with IRP.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14 of the IBC is to follow consequent to admission under Section 7(5). - HELD THAT: - The Tribunal directed that upon admission of the Section 7 application, the moratorium as envisaged under Section 14(1) shall operate in relation to the corporate debtor, subject to the exceptions and provisions of Sections 14(2) to 14(4). [Paras 19]

Moratorium under Section 14 to operate.

Final Conclusion: The Section 7 application filed by the financial creditor was admitted: default was established (date of default recorded as 03.09.2016 by the information utility), the petition was within limitation, the Tribunal had jurisdiction, an IRP was appointed subject to conditions and initial expenses were ordered to be deposited, and the statutory moratorium under Section 14 shall follow.

Exclusion of time for computation of Corporate Insolvency Resolution Process - extension of CIRP period beyond statutory 180 days under section 12(2) and section 60(5) of the Insolvency and Bankruptcy Code, 2016 - application of Supreme Court direction on exclusion of limitation period (15.03.2020 till 14.03.2021) and availability of 90 days from 15.03.2021

Exclusion of time for computation of Corporate Insolvency Resolution Process - extension of CIRP period beyond statutory 180 days under section 12(2) and section 60(5) of the Insolvency and Bankruptcy Code, 2016 - application of Supreme Court direction on exclusion of limitation period (15.03.2020 till 14.03.2021) and availability of 90 days from 15.03.2021 - Prayer to exclude the period 01.06.2020 till 31.07.2020 for computing the CIRP and to grant extension of the CIRP period beyond 180 days was allowed, applying the Supreme Court's directions on exclusion of limitation. - HELD THAT: - The Resolution Professional filed IAs seeking exclusion of 01.06.2020 to 31.07.2020 from the CIRP computation and a 90-day extension beyond the statutory 180-day CIRP on the ground that progress was stalled during the Covid-19 lockdown and requisite information from the suspended management could not be obtained. The Tribunal found the reasons for exclusion and extension to be reasonable and bona fide and noted subsequent pronouncement of the Hon'ble Supreme Court in Suo Motu Writ Petition (Civil) No. 3 of 2020 which directed exclusion of the period from 15.03.2020 till 14.03.2021 for computing limitation and provided that persons shall have a limitation period of 90 days from 15.03.2021 (or the longer residual period, if applicable). Applying that ruling, the Tribunal held that the applicant's grievance is redressed by the Supreme Court's order, that the relevant period is to be excluded for counting the CIRP, and that where the CIRP completion fell within the excluded period the CIRP stands extended by the further period granted by the Supreme Court or, if a longer residual period remains, that longer period applies. On these bases the IAs were allowed. [Paras 6, 7, 8, 10, 11]

IA No. 1350 of 2020 and IA No. 1365 of 2020 in CP No. 2979 of 2018 are allowed; the specified period(s) are excluded for CIRP computation and the CIRP period is extended in accordance with the Supreme Court's directions.

Final Conclusion: The Tribunal allowed the applications of the Resolution Professional to exclude the stated lockdown period(s) from computation of the CIRP and granted extension of the CIRP period, applying and giving effect to the Supreme Court's directions on exclusion of limitation and the additional 90-day period (or the longer residual period where applicable).

Condonation of delay - Restoration of dismissed application - Benevolent nature of limitation statute

Condonation of delay - Benevolent nature of limitation statute - Delay of 326 days in filing the restoration application (IA No. 131 of 2021) was condoned. - HELD THAT: - The Tribunal found the cause of delay to be genuine and bona fide, attributing it to administrative formalities arising from transfer of the concerned officer and time taken to obtain approvals and engage counsel. Applying the settled principle that condonation applications should be approached liberally to advance substantial justice because the statute of limitation is benevolent, the Tribunal concluded there was no inaction or negligence by the Applicant and that the delay was excusable. On these findings the delay of 326 days was condoned and the restoration application allowed. [Paras 1]

Delay of 326 days is condoned and IA 131 of 2021 is allowed.

Restoration of dismissed application - IA No. 140 of 2020, which was dismissed for non-prosecution, was restored to the Tribunal's file. - HELD THAT: - Following the condonation of the delay in filing the restoration application, the Registry was directed to restore IA No. 140 of 2020 and list it for further consideration. The Tribunal therefore reinstated the dismissed main application for adjudication. [Paras 1]

IA No. 140 of 2020 is restored and listed for hearing on 15.03.2021.

Condonation of delay - The short delay of 3 days in filing IA No. 140 of 2020 was not decided and is left for consideration at the time of adjudication of IA No. 140 of 2020. - HELD THAT: - The Tribunal noted that the Applicant had sought condonation of a 3-day delay in filing IA No. 140 of 2020 but expressly recorded that this aspect would be considered when IA No. 140 of 2020 itself is adjudicated on merits. No adjudication on that condonation prayer was undertaken in the present order. [Paras 1]

Condonation of the 3-day delay in filing IA No. 140 of 2020 is reserved for adjudication of IA No. 140 of 2020.

Final Conclusion: The application for restoration (IA 131 of 2021) is allowed: the 326-day delay in filing the restoration application is condoned, IA 140 of 2020 is restored to the file and listed for hearing, while the separate prayer for condonation of 3 days in filing IA 140 of 2020 is left to be decided at the hearing of IA 140 of 2020.

Extension of corporate insolvency resolution process under section 12(2) of the Insolvency and Bankruptcy Code, 2016 - computation of the mandatory 330 days CIRP period including exclusion/extension on account of COVID-19 lockdown - application of regulation 40C of the Insolvency Resolution Process for Corporate Persons Regulations, 2016 for exclusion of lockdown period - consequence of failure to complete CIRP within the mandatory period leading to liquidation

Application of regulation 40C of the Insolvency Resolution Process for Corporate Persons Regulations, 2016 for exclusion of lockdown period - computation of the mandatory 330 days CIRP period including exclusion/extension on account of COVID-19 lockdown - Exclusion of the period July 1, 2020 to August 31, 2020 from computation of the 330 days CIRP period - HELD THAT: - The resolution professional sought exclusion of 62 days (July 1, 2020 to August 31, 2020) on account of lockdown in Telangana, relying on the earlier exclusion of March 25, 2020 to June 30, 2020 under regulation 40C. The Tribunal recorded the history of the earlier exclusion and the RP's contentions about COVID-19 related disruptions, site access, and delays in receipt of resolution plans. Rather than granting a discrete further exclusion of the July-August period, the Tribunal considered the overall statutory scheme post-amendment (mandating completion within 330 days) and the steps already taken in the CIRP, and proceeded to deal with the relief sought by allowing a time extension to complete the process within the statutory limit. [Paras 6, 7]

No independent order was made excluding the period July 1, 2020 to August 31, 2020; the Tribunal addressed the request by granting a limited extension to enable completion within the 330 days statutory framework.

Extension of corporate insolvency resolution process under section 12(2) of the Insolvency and Bankruptcy Code, 2016 - consequence of failure to complete CIRP within the mandatory period leading to liquidation - Grant of a further extension of the CIRP period for 60 days beyond 270 days to complete the corporate insolvency resolution process - HELD THAT: - Noting the amendment to section 12 making 330 days the mandatory outer limit, the Tribunal observed that the initial 180 days had been extended by 90 days earlier and that the 270-day period expired on November 10, 2020. Having considered the steps already taken by the resolution professional, the stage of the CIRP, and the Committee of Creditors' unanimous approval for a 60-day extension, the Tribunal allowed an extension of 60 days from the date of the order. The Tribunal expressly directed the resolution professional to take all necessary steps to complete the CIRP within the mandated 330 days and warned that failure to do so would invite commencement of liquidation proceedings. [Paras 5, 7, 8]

Application for extension granted; CIRP to be completed within a further 60 days from the date of the order, failing which liquidation will commence.

Final Conclusion: The Tribunal disposed of the application by permitting a further 60-day extension for completion of the CIRP (to remain within the mandatory 330-day limit), directed the resolution professional to complete the process within that period, and warned that failure to do so will result in commencement of liquidation; no separate exclusion of July 1 to August 31, 2020 was recorded.

Grant of regular bail under Section 439 Cr.P.C. - Criminal prosecution under the Prevention of Money Laundering Act, 2002 - Validity and non-application of the twin conditions in Section 45(1) of the PMLA - Exoneration by Adjudicating Authority and its bearing on criminal prosecution - Reverse burden of proof under the PMLA and its operation at trial - Relevance of nature of offence and maximum sentence in bail consideration

Grant of regular bail under Section 439 Cr.P.C. - Relevance of gravity of offence and maximum sentence in bail consideration - Applicant's entitlement to regular bail - HELD THAT: - Applying the settled principles on grant of pre-trial bail, and having regard to the decision of the Supreme Court in Nikesh Tarachand Shah which removed the twin conditions of Section 45(1) PMLA, the High Court proceeded to consider the matter under the normal bail jurisprudence. The court noted that the maximum sentence attractable for the alleged offences bears on the bail question and observed that the maximum punishment in the present case is up to seven years. The court further recorded that the applicant had been in custody since 09.11.2020, that custodial interrogation or further detention for investigation did not appear necessary, there was no material before the court showing tampering with the investigation or attempts to influence witnesses while on liberty, and there was no reason to believe the applicant would abscond. On these facts and in view of the Adjudicating Authority's favourable reports (not set aside by the Appellate Authority), the court concluded that bail was appropriate at this stage and granted regular bail subject to conditions. [Paras 21, 22, 24, 25, 26]

Bail application allowed; applicant released on furnishing bond and sureties as directed.

Validity and non-application of the twin conditions in Section 45(1) of the PMLA - Criminal prosecution under the Prevention of Money Laundering Act, 2002 - Applicability of the twin conditions in Section 45(1) PMLA to the grant of bail in this case - HELD THAT: - The court applied the binding ratio of the Supreme Court in Nikesh Tarachand Shah, which declared the twin conditions in Section 45(1) unconstitutional and directed that matters be considered afresh without applying those conditions. Consequently, the High Court rejected the submission that Section 45(1) should operate to deny bail in the present proceedings and determined the bail application by reference to ordinary pre-trial bail principles rather than the disapplied twin conditions. [Paras 21, 22]

Section 45(1)'s twin conditions do not operate to deny bail; bail to be considered by ordinary principles.

Exoneration by Adjudicating Authority and its bearing on criminal prosecution - Reverse burden of proof under the PMLA and its operation at trial - Weight to be accorded to the Adjudicating Authority's reports exonerating the applicant - HELD THAT: - The court recognised the legal position from Radheshyam Kejriwal that findings in adjudication proceedings are not ipso facto binding in criminal prosecution, but emphasised the principle that where an adjudication exoneration is on merits and shows the allegation to be unsustainable, continuing criminal prosecution may amount to abuse of process. The Court observed that in the present case the Adjudicating Authority had returned reports dated 14.05.2018 and 27.06.2018 favourable to the applicant and that there was no order of the Appellate Authority setting aside or varying those findings. Given those unvaried findings, and the absence of material showing tampering, the Adjudicating Authority's exoneration supported the conclusion that continued detention was not necessary at this stage; the court also noted that statutory reverse burden under Section 24 of the PMLA would operate at trial and was not a bar to considering bail. [Paras 18, 19, 20, 24]

Adjudicating Authority's unvaried exoneration on merits weighed in favour of bail; reverse burden operates at trial and does not preclude grant of bail.

Final Conclusion: The High Court allowed the second bail application and directed release of the applicant on furnishing the specified personal bond and sureties, having applied ordinary bail principles in view of the Supreme Court's decision nullifying the twin conditions in Section 45(1) PMLA and having given weight to the Adjudicating Authority's unvaried exoneration and the absence of material suggesting tampering, absconding risk or necessity of further custody.

Summary order. Special Leave Petition dismissed; pending applications, if any, disposed of.