TaxTMI Updates e-Newsletter
Jun 14,2021

Condonation of delay - substantial compliance - certified copy requirement under Rule 108(3) - date of filing and provisional acknowledgment - interpretation of Section 107(4) of the OGST Act - effect of COVID-19 on court and tribunal functioning

Certified copy requirement under Rule 108(3) - date of filing and provisional acknowledgment - condonation of delay - interpretation of Section 107(4) of the OGST Act - substantial compliance - effect of COVID-19 on court and tribunal functioning - Whether the Appellate Authority was justified in dismissing the appeal as time barred for failure to furnish the certified copy of the order within seven days of filing the appeal. - HELD THAT: - The petitioner's appeal was filed electronically within the three month period and was accompanied by a downloaded copy of the impugned order; the certified copy required by Rule 108(3) could not be furnished within seven days because the lawyer who filed the appeal was in self quarantine. Section 107(4) permits the Appellate Authority to condone delay where the appellant was prevented by sufficient cause; the authority is not precluded from condoning a longer delay. Given the restricted functioning of Courts and Tribunals during the COVID 19 pandemic, the explanation for delay in obtaining the certified copy was plausible and not unreasonable. The court held that substantial compliance - filing the appeal within time accompanied by a downloaded copy verified by the advocate - should not be defeated by a hyper technical insistence on submission of the certified copy within seven days. A liberal approach to condonation in the pandemic context is warranted, and the Appellate Authority ought to have accepted the explanation and condoned the delay rather than dismissing the appeal as not preferred in time. The High Court further directed that, while the pandemic persists, printouts of orders available on the High Court website, attested by the advocate, may be treated at par with certified copies as prescribed by the Court's notices. [Paras 11, 12, 13, 14, 16]

Impugned order dismissing the appeal for delay is set aside; the appeal is restored for consideration on merits and the delay in furnishing the certified copy is effectively treated as condoned in the circumstances.

Final Conclusion: The High Court allowed the writ petition, set aside the Appellate Authority's order rejecting the appeal as time barred for delayed submission of the certified copy, restored the appeal for adjudication on merits, and directed a liberal approach to condonation of delay (including acceptance of advocate attested downloads/printouts while restricted court functioning continues).

Summary order. CM Appl. 18106/2021 allowed subject to just exceptions; notice issued in W.P.(C) 5772/2021; respondent to file counter-affidavit within four weeks with liberty for rejoinder; matter listed on 02.08.2021; petitioner directed to file challan to demonstrate remittance of IGST.

Grant of bail under Section 439 CrPC - offences under Section 132(1)(b),(c) and (l) of the Central Goods and Services Tax Act, 2017 - cognizable and non-bailable offences vis-a -vis judicial discretion to grant bail - completion of investigation and filing of charge-sheet as factor in bail - principles in Arnesh Kumar and Sanjay Chandra regarding pre-arrest satisfaction and entitlement to bail - economic offences and approach to bail - compounding of offences under Section 138 of the CGST Act

Offences under Section 132(1)(b),(c) and (l) of the Central Goods and Services Tax Act, 2017 - cognizable and non-bailable offences vis-a -vis judicial discretion to grant bail - completion of investigation and filing of charge-sheet as factor in bail - Whether the petitioners, charged under Section 132(1)(b),(c) and (l) of the CGST Act, 2017, could be enlarged on bail despite the offences being specified as cognizable and non-bailable under the Act. - HELD THAT: - The Court noted that clauses (b) and (c) of Section 132(1) are included within sub-section (5) which makes those offences cognizable and non-bailable. However, the Court applied established bail principles from Arnesh Kumar and Sanjay Chandra balancing them against the special character of economic offences. The Court observed that investigation was complete and the charge-sheet had been filed, that the maximum sentence under the CGST Act in the present case is five years, that the petitioners had remained in custody for over five months, that they had no criminal antecedents, and that one petitioner was an elderly person with a documented health condition. Having regard to these factors and without expressing any opinion on merits, the Court exercised its discretion to grant bail on conditions despite the non-bailable classification in the statute, subject to appearance at trial and furnishing bonds and sureties.

Bail granted to the petitioners on conditions, notwithstanding the non-bailable classification of the offences.

Principles in Arnesh Kumar and Sanjay Chandra regarding pre-arrest satisfaction and entitlement to bail - economic offences and approach to bail - compounding of offences under Section 138 of the CGST Act - Extent to which the court should apply general bail principles in cases of alleged economic offences and the relevance of compounding and prosecution of the company to the bail decision. - HELD THAT: - The Court considered authorities emphasizing both (a) safeguards required before arrest where the punishment may be less than seven years or extend to seven years, and (b) that economic offences are to be viewed seriously. It recognized that compounding under the CGST Act is possible but noted compounding requires payment of tax, interest and penalty and that proceedings against the company were still in process. The Court balanced the gravity of alleged economic offences against the completed stage of investigation, absence of antecedents, length of custody, health and age of the accused, and the pandemic context, and concluded that these circumstances justified interim release on stringent conditions while trial proceeds.

General bail principles applied with balance between gravity of economic offence and individual circumstances; petitioners enlarged on bail subject to conditions.

Final Conclusion: The bail applications were allowed: both accused were directed to be released on bail under Section 439 CrPC on furnishing specified personal bonds and sureties and with the stipulation that they shall appear before the trial court as and when required.

Principles of natural justice - personal hearing via video-conferencing - assessment order set aside for failure to deal with hearing request - consideration of objections in assessment order - power to pass fresh assessment after accord of hearing

Principles of natural justice - personal hearing via video-conferencing - assessment order set aside for failure to deal with hearing request - Failure of the Assessing Officer to deal with the petitioner's request for personal hearing before passing the assessment order. - HELD THAT: - The Court found that the petitioner's communication of 07.05.2021, which explained COVID-19 illness in her household and requested a video-conferencing personal hearing after May 16, 2021, ought to have been dealt with by the Assessing Officer. Given that the statutory timeframe for completing the assessment had been extended to 30.06.2021, the AO should have either granted the hearing or recorded a reasoned rejection of the request and could have sought supporting material if suspicious of mala fides. Instead, respondent no.1 passed the assessment order dated 26.05.2021 without addressing that request, thereby breaching the requirements of fair procedure. On this ground alone the impugned assessment order and the consequential notices were liable to be set aside. [Paras 6, 7]

Impugned assessment order dated 26.05.2021 and consequential notice of demand and notice for initiating penalty proceedings are set aside; respondent no.1 permitted to pass a fresh assessment after according a personal hearing via VC with written notice to the petitioner.

Consideration of objections in assessment order - power to pass fresh assessment after accord of hearing - Whether the assessment order failed to take into account the detailed response/objections filed by the petitioner on 19.04.2021. - HELD THAT: - The Court observed that objections were filed on 19.04.2021 but did not decide the contention of non-consideration on merits because the omission to deal with the 07.05.2021 hearing request was dispositive. The Court recorded that the challenge regarding non-consideration of the detailed objections need not detain it and may not survive once a fresh assessment order is passed; accordingly the matter of considering those objections is left to be addressed in the fresh proceedings. [Paras 6, 7]

The question of whether the detailed objections were considered is left open and remitted to respondent no.1 to consider afresh while passing the fresh assessment, after affording the personal hearing and taking any written submissions on record.

Final Conclusion: Writ petition allowed: assessment order dated 26.05.2021 and consequential notices set aside for failure to deal with the petitioner's request for personal hearing; respondent no.1 may pass a fresh assessment after accord of personal hearing via VC (written notice by registered e-mail and provision of VC link) and after considering any written submissions.

Effect of expiry of nine-month period under Section 153(2) leading to deemed assessment - Validity of reassessment notice under Section 148 after earlier proceedings were dropped - Permissibility of issuing a fresh notice under Section 148 based on survey findings - Survey under Section 133A as material to reopen assessment

Effect of expiry of nine-month period under Section 153(2) leading to deemed assessment - Whether the notice dated 04.12.2015 required completion of assessment within nine months and whether expiry of that period resulted in a deemed assessment precluding further action under the same proceeding. - HELD THAT: - The Court found that the notice under Section 148 dated 04.12.2015 was issued before the last date for completing assessment. Once that notice was issued, assessment (if not completed) was required to be concluded within nine months under the applicable provision. The nine month period expired in early September 2016, prior to the outer limit for completion of assessment; consequently the proceeding initiated by the 04.12.2015 notice could not be pursued further after expiry of the nine month period and amounted to a deemed assessment of that reopened proceeding. This factual and legal conclusion meant the earlier reopening proceeding stood concluded for procedural purposes and could not be relied upon thereafter as an ongoing proceeding. [Paras 15, 16, 17, 18]

The earlier proceedings initiated by notice dated 04.12.2015 lapsed on expiry of the nine month period and resulted in a deemed conclusion of that reopening proceeding.

Validity of reassessment notice under Section 148 after earlier proceedings were dropped - Permissibility of issuing a fresh notice under Section 148 based on survey findings - Survey under Section 133A as material to reopen assessment - Whether a fresh notice dated 24.03.2017 under Section 148 could be validly issued after the earlier proceedings were dropped and whether such fresh proceedings could be founded on survey material under Section 133A. - HELD THAT: - The Court held that the communication of 26.12.2016 merely recorded dropping of the earlier proceedings and did not amount to a decision on merits that would bar issuance of a fresh notice. The dropping was treated as procedural/technical to enable a fresh initiation; it did not preclude proper assessment. The respondent had the statutory period after 31.12.2016 to invoke Section 148 afresh, and the survey under Section 133A which disclosed undisclosed jewellery, cash and other unaccounted items furnished material particulars justifying re opening. The Court rejected the petitioner's reliance on the Gujarat High Court authority as distinguishable on facts, and concluded there was no infirmity in issuing the fresh notice on 24.03.2017. The Court also noted the petitioner's opportunity to file representations and the department's obligation to decide on merits thereafter. [Paras 21, 22, 23, 24, 25]

Issuance of the fresh notice dated 24.03.2017 under Section 148 was valid and maintainable; the survey material under Section 133A provided a basis for reassessment and did not preclude fresh proceedings after the earlier proceeding was dropped.

Final Conclusion: Writ petitions dismissed. Petitioner may file a representation/reply within 30 days; respondent to consider it and complete the assessment for AY 2013 14 pursuant to the notice dated 24.03.2017 within 90 days of receipt of this order.

Applicability of Section 171 to a Hindu Undivided Family never previously assessed - Definition of 'partition' under Section 171 - requirement of physical division of property - Validity of notice issued under Section 148 - dispatch date and limitation - Quashing of reassessment notice where foundational statutory fiction is inapplicable

Applicability of Section 171 to a Hindu Undivided Family never previously assessed - Definition of 'partition' under Section 171 - requirement of physical division of property - Section 171 does not apply where the family was never assessed as a HUF and the special meaning of 'partition' in the Explanation to Section 171 is not attracted in such a case. - HELD THAT: - The Court examined the Explanation to Section 171 and the scheme of the provision, as explained in authorities including Govind Das and N. K. Sarada Thampatty, and held that the deeming fiction in Section 171(1) is directed to a Hindu family that had hitherto been assessed as a HUF. The Explanation prescribes a restricted meaning of 'partition' - requiring physical division of property (or such division as the property admits where physical division is impossible) and excluding mere severance of status or mere division of income without physical division of property. Where there was no prior assessment of the family as a HUF during the lifetime of the deceased, the expression 'hitherto assessed' has no application and Section 171 cannot be invoked to treat the income as assessable to the HUF. Applying these principles to the material in the writ petition, the Court found Section 171 inapplicable to the estate of the deceased, notwithstanding the Department's contention based on sharing of sale proceeds without physical division of the land. [Paras 39, 40, 41, 42, 43]

Section 171 and its Explanation do not operate to treat the proceeds as assessable to the HUF where the family was never assessed as a HUF; the definition of partition under Section 171 is not attracted.

Validity of notice issued under Section 148 - dispatch date and limitation - Quashing of reassessment notice where foundational statutory fiction is inapplicable - Whether the notice dated 31.03.2015 was time barred because it was dispatched after 31.03.2015, and whether that vitiated the reassessment process. - HELD THAT: - The Court considered the speed post cover evidence in the writ papers showing booking on 01.04.2015, and noted that prima facie the notice dated 31.03.2015 was despatched after the prescribed period. The respondents' material did not satisfactorily rebut the dispatch date. While acknowledging that the petitioner did not promptly press the limitation objection upon first sending a representation (thereby weakening reliance solely on limitation), the Court treated the dispatch/limitation irregularity as a significant preliminary defect. Ultimately, having concluded that Section 171 was inapplicable and that the statutory basis for reassessment was lacking, the Court interfered with the impugned notice and related communication notwithstanding the mixed posture on the limitation objection. [Paras 28, 29, 30, 31, 43]

Prima facie the notice appears to have been despatched after the limitation period expired; although the petitioner did not press the objection at the earliest opportunity, the notice and consequential communication are quashed in light of the broader legal infirmity.

Reopening of assessment under Section 263 and departmental challenge based on perceived HUF status - Assessing Officer's original allowance of deduction under Section 54F - restoration by Tribunal - Whether the departmental actions under Section 263 and subsequent notices could stand where the Assessing Officer had accepted exemptions under Section 54F and the Tribunal restored the original assessment in related proceedings. - HELD THAT: - The Court noted the factual matrix - earlier assessments allowing deduction under Section 54F for individual assessees, subsequent orders under Section 263 setting aside assessments on the departmental view that income should be assessed to the HUF, and the Tribunal's order in the brother's appeal restoring the Assessing Officer's order. While departmental appeals were pending, the Court observed that where the legal premise (application of Section 171) is absent because the family was never assessed as a HUF, the foundation for reopening and reassessing in the name of the HUF collapses. The Tribunal's decision in the related appeal was relevant and indicative that the Assessing Officer's original conclusions could not be summarily displaced without satisfying the statutory conditions for treating the family as an assessed HUF. [Paras 8, 10, 11, 35, 43]

The orders under Section 263 and the consequent notices premised on treating the income as that of an assessed HUF are unsustainable where Section 171 is inapplicable; the tribunal's favorable decision on a related appeal supports quashing the reassessment action.

Final Conclusion: Writ petition allowed: impugned notice dated 31.03.2015 and the consequential communication dated 16.11.2016 are set aside. The Court held that Section 171 is not attracted where the family was never assessed as a HUF and that the reassessment action premised on the HUF fiction is unsustainable; the dispatch/limitation irregularity was noted but did not preclude relief in view of the fundamental legal infirmity.

Quashing for non-application of mind - cryptic order - remand for fresh consideration - assignment of reasons on substantial question of law - substantial question of law

Unaccounted interest income - deletion of addition - assignment of reasons on appeal - Remand to the Tribunal to reconsider deletion of addition made on account of unaccounted interest income on FDs by assigning reasons. - HELD THAT: - The High Court found that the Tribunal's earlier order deleting the addition was cryptic and demonstrated non-application of mind. For this reason the Tribunal's order insofar as it deals with the deletion of addition for unaccounted interest income cannot stand and the matter is remitted for fresh consideration. The Tribunal is directed to examine the material placed by the Revenue and the assessee's admissions, and to articulate coherent reasons while determining whether the additions should be sustained or deleted. [Paras 2, 3]

Tribunal's order on this issue quashed and remitted for fresh adjudication with reasons.

Unaccounted income in gold - deletion of addition - remand for fresh consideration - Remand to the Tribunal to reconsider deletion of addition relating to unaccounted purchases of gold by assigning reasons. - HELD THAT: - The Court concluded that the Tribunal's treatment of the addition in respect of unaccounted gold was cryptic and reflected non-application of mind. Consequently, the matter is remitted to the Tribunal to consider afresh whether the additions in respect of unaccounted gold should be sustained, requiring the Tribunal to assess the Revenue's material and the assessee's explanation and to record reasoned findings. [Paras 2, 3]

Tribunal's order on this issue quashed and remitted for fresh adjudication with reasons.

Final Conclusion: The Tribunal's order dated 09.12.2016 is quashed for being cryptic and demonstrating non-application of mind; the matters concerning unaccounted interest income and unaccounted gold are remitted to the Tribunal for fresh consideration and decision with reasoned findings. The appeal is disposed of.

Arm's Length Price - Specified Domestic Transaction - Comparable Uncontrolled Price method - Other method under Rule 10AB - Principles of natural justice (confrontation) - Onus of proof on Revenue to show non-occupation

Principles of natural justice (confrontation) - Admissibility of photographs taken by an Inspector and relied upon by the TPO without having been confronted to the assessee. - HELD THAT: - The Tribunal found that the photographs procured through discreet enquiries by the Income-tax Inspector and relied upon by the TPO to draw an adverse inference were never confronted to the assessee. In view of the failure to afford an opportunity to the assessee to meet or explain that material, those photographs could not be taken into account. Consequently, the photographs relied upon by the TPO were excluded from consideration in deciding the dispute. [Paras 9]

Photographs not confronted to the assessee excluded from evidence; they cannot be used to draw adverse inference.

Onus of proof on Revenue to show non-occupation - Specified Domestic Transaction - Whether the assessee was in occupation and use of the leased premises (Sawant Corner) for the year under consideration and whether the rent paid constituted a genuine SDT. - HELD THAT: - Having excluded the Inspector's photographs, the Tribunal examined the contemporaneous and other evidence placed by the assessee: certificate of change of registered office (2009) showing shift to Sawant Corner, public notices of the shift, board minutes recording meetings at Sawant Corner, bank and credit-rating correspondence addressed to the assessee at floors within Sawant Corner, property tax receipts in the landlord's name, and telephone billing evidence corroborating occupation. The Tribunal rejected the Revenue's contention that mere use of shop nos.11 & 12 as an address (which were in possession of JSPM) disproved occupation of the floors leased under the Agreement, observing that property tax is payable in the owner's name and that the Chairman's dual role did not displace the assessee's occupation. The Revenue failed to discharge the burden of proving that the apparent occupation was not real, and no reliable contrary evidence was produced to rebut the assessee's evidence. [Paras 17, 18, 19, 20, 21]

The premises was in the assessee's occupation and use during the year; the rent payment constituted a genuine SDT and the Revenue failed to prove non-occupation.

Other method under Rule 10AB - Comparable Uncontrolled Price method - Arm's Length Price - Appropriateness of the TPO's rejection of the assessee's CUP benchmarking and adoption of the Other method (Rule 10AB) to determine ALP at Nil. - HELD THAT: - Rule 10AB permits use of price actually charged or the price which would have been charged in comparable uncontrolled transactions. The TPO applied the Other method and set ALP at Nil on the premise that no independent party would have paid rent for premises not occupied by the assessee. Since the Tribunal held that the premises were indeed occupied and the Revenue produced no reliable evidence to establish otherwise, the foundational premise for the TPO's Nil-ALP conclusion failed. The assessee's adoption of the CUP method was examined: a nearby comparable rent at a higher per sq.ft. rate was placed on record (ICICI bank at Rs.112 per sq.ft.) while the assessee paid a lower rate (Rs.75.28 per sq.ft.), demonstrating that the assessee's rent was not excessive. On this basis the Tribunal found the CUP benchmarking acceptable and held that the TPO's Nil-ALP determination was unsustainable. [Paras 6, 22]

TPO's adoption of Other method and Nil ALP rejected; CUP method accepted as most appropriate and ALP upheld, leading to deletion of the transfer pricing adjustment.

Final Conclusion: The Tribunal excluded the un-confronted Inspector photographs, held that the assessee occupied and used the leased premises during the year, found that the Revenue failed to rebut the assessee's evidence, rejected the TPO's Nil-ALP under the Other method, accepted the CUP benchmarking offered by the assessee, and upheld the deletion of the transfer-pricing addition; appeal dismissed.

Existing solely for educational purposes - permissibility of surplus by educational institutions - application of surplus for educational purposes - applicability of section 13(1)(c) to registration under section 10(23C)(vi) - arm's length / fair market rent test for related party lease

Existing solely for educational purposes - The assessee society is existing solely for the purpose of education for the year under consideration. - HELD THAT: - On examination of the Memorandum of Association and the audited income and expenditure statements for the years up to 31/03/2019 the Tribunal found the predominant objects (paras a-e) are educational and the other objects (paras f-k) are incidental or enabling for attainment of the educational objects. The Tribunal noted that the incidental objects were not even carried out in the year under consideration and that the society's activities and receipts related only to education. Reliance placed on the jurisdictional High Court authority supported the conclusion that the presence of incidental enabling objects does not defeat the requirement of existing solely for education. The first ground of rejection by the CIT(E) was therefore dismissed. [Paras 2]

First ground of rejection dismissed; assessee held to exist solely for educational purposes.

Permissibility of surplus by educational institutions - application of surplus for educational purposes - The generation of surplus by the educational institution does not, by itself, disqualify it from registration under section 10(23C)(vi) and, on the facts, no distributable surplus was found for the relevant year. - HELD THAT: - The Tribunal observed that the mere excess of income over expenditure is not decisive of profit motive in the context of charitable educational institutions; what is relevant is whether surplus is applied for the objects and not distributed to private individuals. The Tribunal relied on binding precedents and a CBDT circular clarifying that educational institutions may generate surplus if applied for educational purposes. Additionally, on computation applicable to charitable trusts (including application to fixed assets), the assessee showed a deficit for the year relevant to A.Y.2019-20, rendering the CIT(E)'s conclusion of profit factually incorrect. The Tribunal therefore rejected the second ground of rejection. [Paras 3]

Second ground of rejection dismissed; surplus (even if appearing) not disqualifying and, on relevant computation, no distributable surplus for the year.

Applicability of section 13(1)(c) to registration under section 10(23C)(vi) - arm's length / fair market rent test for related party lease - Payment of lease rent to trustees did not disqualify the assessee under section 10(23C)(vi); section 13(1)(c) was not the relevant provision for the claim under section 10(23C)(vi), and in any event the rent was not shown to be excessive. - HELD THAT: - The Tribunal recorded the factual background of ownership and the registered lease deed and noted the lease rent was paid only from 01/04/2018 though possession dated earlier. It held that section 13(1)(c) pertains to claims under sections 11/12 and is not directly applicable to registration under section 10(23C)(vi); reliance on that provision by the CIT(E) was therefore misplaced. Even assuming section 13(1)(c) applied, the CIT(E) failed to adduce comparative evidence to show the rent was excessive. The assessee produced the lease documentation showing market valuation and the Tribunal found the rent payable to trustees was not unreasonable or excessive and thus the third ground failed. [Paras 4]

Third ground of rejection dismissed; lease payments to trustees did not invalidate claim under section 10(23C)(vi).

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y.2019-20 (F.Y.2018-19), setting aside the CIT(E)'s rejection and holding that the society exists solely for educational purposes, that generation of surplus does not per se disqualify it (and no distributable surplus was found on relevant computation), and that the lease payments to trustees did not defeat entitlement to registration under section 10(23C)(vi).

Unexplained cash credit u/s 68 - onus of proof for creditworthiness and genuineness of transactions - allowability of interest as business expenditure u/s 36(1)(iii) - reliance on third party confession and its retraction - verification of documentary evidence and duty to issue notice to third parties under section 133(6)

Unexplained cash credit u/s 68 - onus of proof for creditworthiness and genuineness of transactions - reliance on third party confession and its retraction - verification of documentary evidence and duty to issue notice to third parties under section 133(6) - allowability of interest as business expenditure u/s 36(1)(iii) - Whether unsecured loans received by the assessee from five specified parties are to be treated as unexplained cash credits and whether interest paid thereon is disallowable. - HELD THAT: - The tribunal found that the Assessing Officer treated the loans as unexplained cash credits principally on account of a statement made by a third party (Shri Praveen Kumar Jain) unearthed during a search, notwithstanding that (a) the third party's statement did not mention the assessee and was subsequently retracted by affidavit, and (b) the assessee had furnished contemporaneous documentary evidence establishing identity, creditworthiness and genuineness of the lenders (confirmations, ROC master data, financial statements, ITR acknowledgements, bank statements and declarations). The tribunal held that a general confession by a third party, standing alone, cannot justify an addition in the absence of any specific material linking the assessee to bogus transactions. Further, when the assessee places documentary evidence on record, the AO is obliged to test the veracity of such documents by appropriate enquiries (including issuing notice to the third parties under section 133(6)), and adverse inference cannot be drawn without such verification. Applying these principles and following relevant jurisdictional precedents cited by the tribunal, the loans were held to be genuine on merits; correspondingly, the interest paid on those loans was held to be allowable as business expenditure under the relevant provision. The tribunal also noted that the loans were repaid with interest and TDS where applicable, facts not controverted by the revenue. [Paras 3]

Addition made u/s 68 deleted and interest paid on those loans allowed as deductible business expenditure.

Final Conclusion: The appeal is partly allowed: Ground No.1 is dismissed as not pressed; Grounds 2 to 4 are allowed by directing deletion of additions made treating the loans as unexplained cash credits and permitting the corresponding interest as deduction.

Determination of indexed cost of acquisition - proof of construction and admissibility of cost of improvement - allowability of transfer expenses as part of cost of acquisition - evaluation of credibility of post-sale valuation - remand for fresh fact-finding including examination of buyer and valuer

Determination of indexed cost of acquisition - proof of construction and admissibility of cost of improvement - allowability of transfer expenses as part of cost of acquisition - evaluation of credibility of post-sale valuation - remand for fresh fact-finding including examination of buyer and valuer - Whether the assessee was entitled to indexed cost of construction for first and second floors and deduction of claimed transfer expenses, and whether the matter required further enquiry - HELD THAT: - The Tribunal noted material contradictions and concerns: the sale deed and accompanying map recorded only ground-floor construction, the approved valuer's report was prepared after the sale and on information provided by the assessee, and the assessee's own statements about when construction occurred were inconsistent. The lower authorities had disallowed the claimed indexed construction cost for the upper floors and the transfer expenses for want of credible evidence. Given these disputed facts and the absence of examination of the buyer and the registered valuer, the Tribunal considered that the issue could not be finally resolved on the record before it. In the interest of justice and to arrive at the true character of the property and admissibility of claimed costs, the Tribunal directed that the file be restored to the Assessing Officer who shall give the assessee a final opportunity to substantiate the claim by producing the buyer and the registered valuer for examination; the AO was directed to decide the issue afresh in accordance with facts and law after affording the opportunity of hearing. [Paras 13, 14]

Issue remanded to the Assessing Officer for fresh consideration after examination of the buyer and the registered valuer; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the appellate confirmation of the addition and restored the matter to the Assessing Officer for fresh factual and legal adjudication (including examination of the buyer and the valuer); the appeal is allowed for statistical purposes.

Unexplained cash credit under section 68 - genuineness, identity and creditworthiness of investor - assessment under search and seizure proceedings - reliance on statement of third party and cross examination / principles of natural justice - admission of additional evidence under Rule 29 of ITAT Rules - remand for fresh adjudication with direction to pass a speaking order

Unexplained cash credit under section 68 - genuineness, identity and creditworthiness of investor - reliance on statement of third party and cross examination / principles of natural justice - remand for fresh adjudication with direction to pass a speaking order - admission of additional evidence under Rule 29 of ITAT Rules - Whether the receipts of share application money treated as unexplained cash credit should be sustained or remitted for fresh examination - HELD THAT: - The Tribunal admitted the additional grounds (challenging reliance on a third party statement without opportunity to cross examine) and also admitted the affidavit produced under Rule 29. The Assessing Officer and CIT(A) had treated the share application money as unexplained cash credit relying on statements recorded during search/seizure which alleged that the investor companies were used to provide accommodation entries. Following a sister concern decision on identical facts, the Tribunal observed that the three ingredients for addition under unexplained cash credit under section 68 - genuineness of the transaction, identity of the payer and creditworthiness - had not been satisfactorily examined by the authorities below. The Tribunal further noted that the assessee had furnished various documents in support of the transactions which the AO had disregarded, and that the identity/creditworthiness/genuineness were not made out on the record. In these circumstances, and in view of the admitted additional evidence and the need to afford adequate opportunity of hearing, the Tribunal refrained from deciding the merits and remitted the matter to the Assessing Officer to issue necessary notices, properly examine the documents and financial statements, allow the assessee opportunity to produce representatives of the investor companies if required, and pass a speaking order after fresh adjudication on identity, creditworthiness and genuineness.

The issue is remitted to the file of the Assessing Officer for fresh examination of identity, creditworthiness and genuineness of the share application money; additional grounds and evidence admitted; appeals allowed for statistical purposes.

Final Conclusion: The Tribunal admitted the additional grounds and the affidavit filed under Rule 29, and-following a sister concern decision-remitted the disputes in respect of receipts of share application money for A.Y.2011 12 and A.Y.2012 13 to the Assessing Officer for fresh, speaking adjudication on identity, creditworthiness and genuineness, granting the assessee adequate opportunity of hearing; appeals disposed of for statistical purposes.

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - concealment of income - furnishing inaccurate particulars of income - requirement of specific finding in the final penalty order - permissible use of 'or'/'and/or' in show-cause notice but not in adjudication

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - concealment of income - furnishing inaccurate particulars of income - requirement of specific finding in the final penalty order - Penalty imposed under section 271(1)(c) was unsustainable because the Assessing Officer did not record a specific finding whether penalty was being imposed for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Assessing Officer initiated penalty proceedings under section 271(1)(c) and in the final penalty order used both expressions - concealment of income and furnishing inaccurate particulars of income - without arriving at a conclusive finding as to which of the two breaches warranted imposition of penalty. The Tribunal noted the settled principle in the jurisdiction that, while a show-cause notice may use conjunctive or disjunctive language, the adjudicating authority must, in the final penalty order, record a positive and specific conclusion whether the penalty is being levied for concealment of income or for furnishing inaccurate particulars. Reliance was placed on the decision of the Gujarat High Court in Sunita Transport Pvt. Ltd. and on earlier decisions of this Bench and the Surat Bench which applied that principle. Applying that precedent to the facts, the Tribunal found the penalty order to be deficient because it did not disclose formation of opinion on the specific charge and therefore could not be sustained. [Paras 5, 6]

Penalty deleted and the ground of appeal allowed as the penalty order did not record the specific finding required to sustain levy under section 271(1)(c).

Final Conclusion: The penalty imposed under section 271(1)(c) for A.Y. 2012-13 is set aside because the Assessing Officer failed to record a specific finding whether the penalty was for concealment of income or for furnishing inaccurate particulars; the appeal is allowed.

Set-off of carried forward speculative losses - Explanation to section 73 - deeming of business as speculative business - valuation of closing stock as trading loss - section 14A read with Rule 8D - disallowance for exempt income - requirement of recording satisfaction before invoking section 14A - disallowance under section 14A limited to amount of tax-exempt income

Set-off of carried forward speculative losses - Explanation to section 73 - deeming of business as speculative business - valuation of closing stock as trading loss - Entitlement of the assessee to set off carried forward speculative losses from its shares and derivatives businesses against speculative profits of assessment year 2010-11. - HELD THAT: - The Tribunal held that where a taxpayer's business consists to an extent of purchase and sale of shares, the Explanation to section 73 deems that part of the business to be speculative. Loss or profit arising from valuation of closing stock of shares, evaluated on net realisable value, is part of trading results and therefore falls within the ambit of profits/losses of such speculative business. The assessee had consistently followed this accounting treatment in earlier years; Revenues' acceptance of such valuation in earlier assessments and the coordinate Bench decision in Paharpur Cooling Towers supported this position. The Assessing Officer's objection that no actual purchase or sale occurred in the year did not alter the character of the notional profit on valuation as speculative profit available for set-off against carried forward speculative losses. Consequently the addition made by disallowing set-off was deleted. [Paras 7, 8, 9, 10, 11]

Set-off of carried forward speculative losses allowed; addition on account of disallowing such set-off deleted.

Section 14A read with Rule 8D - disallowance for exempt income - requirement of recording satisfaction before invoking section 14A - disallowance under section 14A limited to amount of tax-exempt income - Validity and quantum of disallowance under section 14A read with Rule 8D in respect of dividend income for the year. - HELD THAT: - The Tribunal found that the Assessing Officer had recorded adequate satisfaction to proceed with computation under section 14A read with Rule 8D, observing that substantial funds remained invested and that no separate records of expenditure relating to exempt income were furnished by the assessee. Accordingly, the computation could not be struck down for want of satisfaction. However, applying the principle recognised by the jurisdictional High Court, the Tribunal held that the disallowance under section 14A cannot exceed the amount of tax-exempt income; therefore the Assessing Officer was directed to restrict the disallowance to the dividend income actually received during the year. [Paras 12, 13, 14, 15]

Disallowance under section 14A read with Rule 8D sustained in principle but limited to the amount of dividend income received for the year.

Final Conclusion: Appeal allowed in part: the Tribunal deleted the addition refusing set-off of carried forward speculative losses and upheld the section 14A disallowance only to the extent of the dividend income received, directing revision of the assessment accordingly.

Disallowance under section 40(a)(ia) of the Act - treatment of secondment charges for tax deduction at source - accrual accounting versus estimation of compensation receivable - binding effect of coordinate-bench decisions / precedent in assessee's own case - remand to the Assessing Officer for fresh adjudication in terms of earlier Tribunal ratio

Disallowance under section 40(a)(ia) of the Act - treatment of secondment charges for tax deduction at source - binding effect of coordinate-bench decisions / precedent in assessee's own case - Deletion of addition made by AO under section 40(a)(ia) in respect of secondment/secondment-related charges - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition disallowing secondment charges under the provisions contended to attract section 40(a)(ia). The Bench recorded that identical issues had been earlier considered and decided in favour of the assessee by coordinate Benches in the assessee's own cases for earlier assessment years and by the 'D' Bench in the immediately preceding year. Those decisions examined the nature of secondment arrangements, the factual control and reimbursement structure, and applied the principle that where on facts the assessee effectively controlled and benefited from the services and where coordinate-bench precedent had found no culpable failure to deduct TDS (including cases where there was a bona fide belief or longstanding practice), invocation of section 40(a)(ia) was not justified. In view of no material change of facts and the consistent Tribunal precedent in the assessee's own case, this Bench found no reason to take a different view and followed the coordinate-bench decisions in allowing the deletion.

Ground of revenue's appeal disallowing the secondment charges under section 40(a)(ia) dismissed; addition deleted.

Accrual accounting versus estimation of compensation receivable - remand to the Assessing Officer for fresh adjudication in terms of earlier Tribunal ratio - binding effect of coordinate-bench decisions / precedent in assessee's own case - Treatment of estimated addition made by AO on account of compensation receivable from customers and disposition of that addition - HELD THAT: - The Tribunal noted that identical challenge had earlier arisen in the assessee's own appeals and that coordinate Benches had dealt with the matter, including directing remand to the AO for re-adjudication in accordance with principles laid down in an earlier Tribunal order (referred to in the record). This Bench observed that the coordinate Bench had either remitted the issue for fresh consideration in terms of that ratio or had deleted the addition in the assessee's favour in analogous years. Having regard to those precedents and the lack of material change in facts, the Bench followed the coordinate decisions. It referred the matter back to the AO to decide afresh in accordance with the ratio laid down in the earlier Tribunal order where remand had been directed, while also recording that the CIT(A)'s approach was in consonance with the Tribunal's decisions.

Ground as to estimated compensation receivable either remitted to the AO for fresh adjudication in terms of the earlier Tribunal ratio (as directed by coordinate Benches) and, on the basis of precedent, no interference with the CIT(A)'s findings was warranted.

Final Conclusion: The revenue's appeal is dismissed. The addition under section 40(a)(ia) in respect of secondment charges was deleted following coordinate-bench precedent; the challenge to the estimated compensation receivable is to be considered in accordance with the earlier Tribunal ratio, with the Bench finding no reason to disturb the CIT(A)'s conclusions.

Stay of demand - disputed outstanding demand under section 201(1) - disputed outstanding demand of interest under section 201(1A) - interim payment as condition for stay - adjournment affecting stay

Stay of demand - disputed outstanding demand under section 201(1) - disputed outstanding demand of interest under section 201(1A) - interim payment as condition for stay - adjournment affecting stay - Grant of interim stay of the disputed outstanding demand of tax under section 201(1) and interest under section 201(1A) for the years in question and whether further interim payment should be directed as a condition for stay. - HELD THAT: - The Tribunal noted that the assessee had already made payments amounting to about 52% of the total outstanding disputed demand of tax and interest and about 80% of the demand when interest is excluded. The Revenue urged that at least 55% of the total demand should be paid since the demand was confirmed by the CIT(A). Having regard to the payments already made and the pendency of appeals, the Tribunal exercised its discretion to grant an interim stay of the outstanding demand for a limited period. The stay was granted for six months from the date of the order or until disposal of the appeals, whichever was earlier. The Tribunal recorded a condition that the assessee should not seek adjournments without justifiable reasons and that any unjustified adjournment by the assessee would result in automatic vacation of the stay; the Revenue was similarly directed not to seek adjournments without justifiable reasons. [Paras 5]

Stay petitions allowed; interim stay of the outstanding demand granted for six months from the date of the order or until disposal of the appeals, whichever is earlier, subject to conditions regarding adjournment and conduct at the hearing.

Final Conclusion: The eight stay petitions filed by the assessee were allowed and an interim stay of the disputed demands under section 201(1) and interest under section 201(1A) was granted for six months or until disposal of the appeals, whichever is earlier, subject to conditions limiting adjournments.

Cash credit u/s 68 - genuineness, identity and creditworthiness of creditors - statements recorded under section 131 - interest under Sections 234A and 234B

Cash credit u/s 68 - genuineness, identity and creditworthiness of creditors - statements recorded under section 131 - Whether additions made as unexplained cash credits in respect of amounts received from various clients and a repayment by a debtor can be sustained. - HELD THAT: - The Tribunal found that the assessee produced evidence and that the Assessing Officer recorded statements of the individual clients under section 131, each of whom confirmed the MCX trading transactions and the relevant account entries. The Tribunal accepted that these materials established the three limbs required to attract an addition under cash credit u/s 68 - identity, genuineness and creditworthiness of the creditors - and held that both the AO and the CIT(A) had ignored these facts. The Tribunal therefore concluded that the additions treated as cash credits (including the advanced sums and the amount received back from a debtor) were not sustainable. [Paras 7]

Additions made as cash credits in respect of advances from clients and repayment by a debtor are quashed.

Interest under Sections 234A and 234B - Whether interest under Sections 234A and 234B charged consequent to the disallowed/confirmed additions requires adjustment. - HELD THAT: - The Tribunal treated the question of interest as consequential to its decision on the additions. Having allowed the assessee's challenge to the additions, the Tribunal directed the Assessing Officer to give appropriate consequential relief in respect of interest under the relevant provisions in accordance with law. [Paras 7]

Directed the Assessing Officer to adjust interest under Sections 234A and 234B consequentially as per law.

Final Conclusion: The appeal is partly allowed: the additions treated as unexplained cash credits are set aside for Assessment Year 2010-11; consequential relief in respect of interest under Sections 234A and 234B is to be given by the Assessing Officer.

100% disallowance for bogus purchases when sales are undisputed - genuineness of purchases linked to undisputed sales - disallowance for purchases from the grey market - judicial reduction of additions to a proportion of purchases - distinction of precedent authority relied upon by Revenue

100% disallowance for bogus purchases when sales are undisputed - genuineness of purchases linked to undisputed sales - Validity of making a 100% disallowance of purchases held to be bogus where the assessee's sales are not doubted - HELD THAT: - The Tribunal held that where the sales of the assessee are not doubted, a blanket 100% disallowance of purchases alleged to be bogus is not sustainable because sales ordinarily presuppose corresponding purchases. The decision relied on the principle upheld by the jurisdictional High Court in Nickunj Eximp Enterprises and applied it to the present facts, concluding that complete disallowance is inappropriate when the turnover is accepted. [Paras 4]

100% disallowance set aside; reduction of the addition made by the lower authority is justified where sales are not doubted.

Disallowance for purchases from the grey market - judicial reduction of additions to a proportion of purchases - Appropriateness of sustaining a 12.5% disallowance where purchases were made from the grey market - HELD THAT: - The Tribunal found that the assessee's purchases involved the grey market, which produces tax savings at the expense of the exchequer. On the facts and circumstances of the case the Tribunal considered that sustaining a proportionate disallowance of 12.5% out of the purchases meets the ends of justice. The Tribunal therefore upheld the Commissioner (Appeals)'s exercise of reducing the Assessing Officer's 100% addition to 12.5% in light of the accepted sales and the grey-market finding. [Paras 4]

The 12.5% disallowance sustained by the CIT(A) is upheld.

Distinction of precedent authority relied upon by Revenue - Applicability of N.K. Proteins authority relied upon by the Revenue - HELD THAT: - The Tribunal observed that the decision in N.K. Proteins, relied upon by the Revenue, concerned dismissal of SLP by the Supreme Court and has been explained and distinguished by the Bombay High Court in Adam H. Kazi. On that basis the Tribunal rejected the Revenue's reliance on N.K. Proteins as not being determinative of the present controversy. [Paras 5]

Reliance on N.K. Proteins by the Revenue is not accepted; the authority is distinguished.

Final Conclusion: Revenue's appeal is dismissed and the addition for bogus purchases made by the Assessing Officer is reduced in accordance with the CIT(A)'s order; the Tribunal upholds a 12.5% disallowance for Assessment Year 2010-11, distinguishing the precedent relied upon by Revenue.

Application of the Limitation Act, 1963 to claims during CIRP - time barred debts and inadmissibility of time barred claims in CIRP - admissibility of claim founded on unregistered lease affecting immovable property - requirement of acknowledgment or judicial adjudication to revive barred debt - rejection of proof of claim by the IRP under Regulation 9A of the IBBI (CIRP) Regulations - jurisdiction under Section 60(5) of the IBC to challenge IRP's rejection of claim

Application of the Limitation Act, 1963 to claims during CIRP - time barred debts and inadmissibility of time barred claims in CIRP - requirement of acknowledgment or judicial adjudication to revive barred debt - rejection of proof of claim by the IRP under Regulation 9A of the IBBI (CIRP) Regulations - Validity of the IRP's rejection of the Applicant's proof of claim on the ground that the claim related to rent arrears for April 2013-July 2014 and was time barred and unsupported by post 2014 acknowledgment or adjudication. - HELD THAT: - The Tribunal noted that the claim related to arrears for the period April 2013 to July 2014 and the claim documents placed before the IRP comprised the lease deed (2007), an acknowledgement dated 21.08.2014, a calculation sheet and an e mail of 08.07.2014, with no further document or acknowledgement after 2014. Applying the principle affirmed in B.K. Educational Services (as to the applicability of the Limitation Act to proceedings under the Code) and considering the object and time bound nature of CIRP, the Tribunal held that a debt barred by limitation on the date of initiation of CIRP could not be revived in the CIRP in the absence of a valid acknowledgment or a judicial order. The Tribunal accepted the IRP's reasoning that, in absence of an acknowledgment after 2014 or an adjudication as to satisfaction of debt, the claim was hopelessly time barred under the Limitation Act as applied to the Code (see paras. 13, 14, 15, 18 and 19). Consequently, the IRP's rejection of the claim did not call for interference. [Paras 14, 15, 18, 19, 20]

The rejection of the claim by the IRP is affirmed as the claim was time barred and unsupported by post 2014 acknowledgment or judicial adjudication; the application under Section 60(5) to set aside the rejection is dismissed.

Admissibility of claim founded on unregistered lease affecting immovable property - rejection of proof of claim by the IRP under Regulation 9A of the IBBI (CIRP) Regulations - Effect of the lease deed being unregistered on the admissibility of the claim advanced by the Applicant. - HELD THAT: - The IRP noted that the lease deed dated 07/08/2007 was not registered and placed reliance on the principle that instruments purportedly creating or affecting rights in immovable property require registration. The Tribunal recorded that the unregistered lease was one of the grounds relied upon by the IRP in rejecting the claim (see para. 13). However, the primary determinative reason affirmed by the Tribunal for rejection was limitation; the unregistered nature of the lease contributed to the IRP's observations but the Tribunal's conclusion focused on the time barred character of the claim and absence of acknowledgment or adjudication. [Paras 13, 14, 20]

The unregistered lease was a material infirmity noted by the IRP; taken together with the claim being time barred and unsupported by subsequent acknowledgment, the rejection stands affirmed.

Jurisdiction under Section 60(5) of the IBC to challenge IRP's rejection of claim - Maintainability of the application under Section 60(5) IBC challenging the IRP's rejection of the proof of claim. - HELD THAT: - The Applicant sought relief under Section 60(5) of the IBC to set aside the IRP's rejection. The Tribunal proceeded to examine the merits of the challenge and, after finding the claim to be time barred and inadequately supported, held that there was no ground to interfere with the IRP's rejection. Thus the application under Section 60(5) was dismissed on merits. [Paras 1, 20, 21]

Application under Section 60(5) IBC to set aside the IRP's rejection is not maintainable on merits and is dismissed.

Final Conclusion: The Tribunal affirmed the IRP's rejection of the Applicant's proof of claim as the claim related to the period April 2013-July 2014 and was time barred with no subsequent acknowledgment or judicial adjudication to revive it; the application under Section 60(5) is dismissed, without cost.

Initiation of Corporate Insolvency Resolution Process - personal guarantor to a corporate debtor - invocation of guarantee and remaining unpaid in full or part - service of demand notice under Section 95(4)(b) of the Insolvency and Bankruptcy Code, 2016 - requirement to file application in Form C after expiry of 14 days from service of demand notice

Personal guarantor to a corporate debtor - invocation of guarantee and remaining unpaid in full or part - service of demand notice under Section 95(4)(b) of the Insolvency and Bankruptcy Code, 2016 - requirement to file application in Form C after expiry of 14 days from service of demand notice - Maintainability of a petition filed under Section 7 of the IBC against a personal guarantor where the creditor has not complied with the demand notice and procedural requirements under Section 95 read with the Personal Guarantors Rules. - HELD THAT: - The Tribunal examined the definition of 'guarantor' in the Personal Guarantors Rules and the procedural requirements under Rule 7 and Section 95 of the IBC. Those provisions require that a demand notice in Form B be served on the guarantor under Section 95(4)(b) and that an application under Section 95(1) be filed in Form C only after the guarantor fails to pay the debt within 14 days of service of the demand notice. The applicant had instituted proceedings under Section 7 and sought initiation of CIRP against the personal guarantor without producing any document showing service of the demand notice as required under Section 95(4)(b) read with Rule 7, and without filing under Section 95 in Form C after the 14 day period. On a conjoint reading of Section 95 and Rule 7, an application against a personal guarantor is maintainable only after compliance with the statutory demand and the lapse of the prescribed 14 day period; non compliance renders the present petition not maintainable. The Tribunal therefore dismissed the Section 7 petition while permitting the creditor to file a fresh application in accordance with law. [Paras 21, 22, 23, 24]

The petition is not maintainable for want of compliance with the demand notice and procedural requirements under Section 95 read with the Personal Guarantors Rules; the application is dismissed with liberty to file afresh in accordance with law.

Final Conclusion: The petition under Section 7 seeking CIRP against the personal guarantor was dismissed for failure to comply with the demand notice and procedural mandates of Section 95 and the Personal Guarantors Rules; the creditor may file a fresh application after fulfilling those statutory requirements.

Appeal under Section 26 of the Prevention of Money Laundering Act - locus standi of the Enforcement Directorate - inclusive definition of "person" in statutory interpretation - authorities under the PML Act and representation by officers mentioned in Section 48 - pragmatism against technical objections in proceedings under the PML Act - requirement that a statutory mode must ordinarily be followed

Appeal under Section 26 of the Prevention of Money Laundering Act - locus standi of the Enforcement Directorate - inclusive definition of "person" in statutory interpretation - authorities under the PML Act and representation by officers mentioned in Section 48 - pragmatism against technical objections in proceedings under the PML Act - Whether the Enforcement Directorate could prefer an appeal under Section 26 of the PML Act through its Assistant Director. - HELD THAT: - The Court held that Section 26(1) permits the Director or any aggrieved person to prefer an appeal and that the Enforcement Directorate - as the specialised investigating agency under the Department of Revenue - cannot be excluded from that entitlement merely because the statute names the Director. The Court observed that the Directorate may sensibly be aggrieved by an exoneration order and that when the Directorate itself files an appeal it may be represented by one of the authorities specified under the Act, notably those enumerated in Section 48. The definition of "person" in Section 2(s) is inclusive and does not operate as an exhaustive bar to treating the Directorate or its authorities as falling within the class of those who may be aggrieved. The Court further relied on the statutory scheme which discourages defeating actions under the PML Act on technical grounds, invoking the purposive and pragmatic spirit of Section 68. Contrasting precedents relied upon by the appellant, the Court found them factually distinguishable and inapplicable to the present statutory context (including the principle that a statutory mode must be followed, which was acknowledged but found not to bar the Directorate's appeal where the Directorate, and not an individual officer in his personal capacity, instituted the proceeding through an authorised officer). Applying these principles, the Court concluded there was no bar to the Enforcement Directorate filing the appeal through the Assistant Director. [Paras 13, 16, 20, 23, 24]

The Court held that the Enforcement Directorate was competent to file the appeal under Section 26 of the PML Act through the Assistant Director and dismissed the appeal; the interim order was vacated and there was no order as to costs.

Final Conclusion: The High Court dismissed the challenge, holding that the Enforcement Directorate may prefer an appeal under Section 26 of the PML Act through an authorised officer such as the Assistant Director; the interim order was vacated and no costs were awarded.

Suspension of Lookout Circular - Conditional grant of permission to travel abroad - Maintenance of fixed deposit as security for compliance - Obligation to furnish itinerary and contact details - Prohibition on contacting witnesses and tampering with evidence - Obligation to appear before the investigating agency on demand - Forfeiture of security on violation of conditions

Suspension of Lookout Circular - Conditional grant of permission to travel abroad - Maintenance of fixed deposit as security for compliance - Obligation to furnish itinerary and contact details - Prohibition on contacting witnesses and tampering with evidence - Obligation to appear before the investigating agency on demand - Forfeiture of security on violation of conditions - Whether the Lookout Circular issued against the petitioner should be suspended to permit travel to specified countries until 30.06.2021 subject to conditions - HELD THAT: - The Court noted that a prior order had permitted travel for a specified period and that the factual position now was not materially different, save for the respondents' claim that the investigation was at a crucial stage. The Court accepted the petitioner's explanation that earlier overstaying abroad was due to COVID-19 related travel restrictions and observed that documents said to be requisite for investigation had been placed before the Adjudicating Authority. The Special Court (PC Act) had earlier suspended the LOC till 30.06.2021 on similar terms. In view of these factors, and without expressing a view on other contentions, the Court found it appropriate to suspend the LOC issued by the Enforcement Directorate until 30.06.2021 to enable travel to Singapore, Malaysia and the United Kingdom, subject to enumerated conditions: keeping the fixed deposit receipt alive, furnishing itinerary and arrival intimations, providing a working mobile number and details of stay, refraining from contacting witnesses or tampering with evidence, and appearing before the Enforcement Directorate when directed. The Court further directed that breach of conditions would entail forfeiture of the FDR and cautioned that extensions of the suspension would not be entertained except for COVID-19 related reasons. [Paras 6, 7, 8, 9]

The Lookout Circular issued by the Enforcement Directorate is suspended until 30.06.2021 and the petitioner is permitted to travel to Singapore, Malaysia and the United Kingdom from 27.04.2021 to 30.06.2021 on the stated conditions; breach will lead to forfeiture of the FDR and extensions will not be granted except for COVID-19 reasons.

Final Conclusion: Writ petition disposed by suspending the LOC till 30.06.2021 permitting the petitioner to travel abroad on specified conditions, with forfeiture of the security on violation and a prohibition on seeking further extensions except for COVID-19 contingencies.

Refusal of bail under the Prevention of Money Laundering Act, 2002 - Seriousness of the offence and risk of tampering with evidence - Transfer of proceeds abroad as indicia of international trade based money laundering - Nikesh Tara Chand Shah principle on sentencing classification and its bearing on bail under PMLA

Refusal of bail under the Prevention of Money Laundering Act, 2002 - Seriousness of the offence and risk of tampering with evidence - Bail to the petitioner accused under Sections 3 and 4 of the PMLA was refused and the petition for bail dismissed. - HELD THAT: - The Court considered the materials and submissions including the allegation that the petitioner, using a forged identity document and an assumed name, integrated large sums into a bank account and caused substantial outward remittances without corresponding imports, thereby constituting international trade based money laundering. Reliance was placed on the seriousness of the alleged offences, the fact that significant amounts were alleged to have been transferred outside India and parked abroad, and the resulting real risk of tampering with evidence or evasion of trial if bail were granted. The Court noted the Supreme Court's observations in Nikesh Tara Chand Shah regarding classification of predicate offences by sentencing but treated those observations in the context of the present allegations and the established risk factors. The Court also recorded earlier dismissals of the petitioner's previous bail applications and the trial court proceedings, finding no change in circumstances sufficient to justify release. Applying these considerations, the Court concluded that bail should be denied. [Paras 8, 9, 10, 11]

Petition for bail dismissed; bail refused.

Final Conclusion: The High Court dismissed the criminal original petition and declined to enlarge the petitioner on bail in C.C. No. 26 of 2019 under the PMLA, holding that the seriousness of the alleged international trade based money laundering, the transfer of funds abroad and the risk of tampering and evasion warranted refusal of bail.

Issuance of non-bailable warrant - conversion of non-bailable warrant into bailable warrant - progressive process of summons, bailable warrant and then non-bailable warrant - personal liberty as paramount consideration - judicial discretion exercised with care and caution in issuing warrants - serving of summons along with copy of complaint before resorting to non-bailable warrant

Issuance of non-bailable warrant - conversion of non-bailable warrant into bailable warrant - progressive process of summons, bailable warrant and then non-bailable warrant - personal liberty as paramount consideration - Non-bailable warrants issued against accused nos. 3 and 4 were converted into bailable warrants - HELD THAT: - The Court applied the principle that non-bailable warrants should be issued only after a progressive approach-first serving summons with a copy of the complaint, then issuing bailable warrants if the accused appear to be avoiding summons, and only thereafter resorting to non-bailable warrants when the court is fully satisfied that the accused are intentionally avoiding proceedings. Emphasising that personal liberty is paramount and that the power to issue warrants must be exercised with extreme care and caution, the Court relied on the stated guidance and, having regard to the submissions and the joint request of the parties, directed that the non-bailable warrants issued by the Designated Judge on 21.01.2021 be converted into bailable warrants. The remainder of the trial court's order was left undisturbed.

Non-bailable warrants against accused nos. 3 and 4 are converted into bailable warrants; rest of the order to remain as is.

Final Conclusion: On application and applying the established judicial principle favouring a graduated process before issuing non-bailable warrants and protecting personal liberty, the High Court converted the non-bailable warrants against accused nos. 3 and 4 into bailable warrants and disposed of the petition to that extent.

CENVAT credit - double benefit - depreciation under section 32 of the Income Tax Act - Rule 4(4) of CENVAT Credit Rules, 2004 - reversion/surrender of benefit - subsequent year rectification does not cure prior irregular availment

CENVAT credit - double benefit - depreciation under section 32 of the Income Tax Act - Rule 4(4) of CENVAT Credit Rules, 2004 - reversion/surrender of benefit - subsequent year rectification does not cure prior irregular availment - Whether availment of 100% CENVAT credit on capital goods together with claiming full depreciation on the invoice value (inclusive of duty) amounted to impermissible double benefit under Rule 4(4) and whether subsequent adjustment in the balance sheet for 2015-16 cured the irregularity. - HELD THAT: - The Tribunal accepted the admitted facts that capital goods were purchased in 2013-14 and 2014-15; the assessee claimed depreciation on the entire invoice value inclusive of excise duty; and 100% CENVAT credit on those capital goods was availed on 31.07.2014. Rule 4(4) of the CENVAT Credit Rules, 2004 does not permit CENVAT credit in respect of that part of the value of capital goods which the manufacturer claims as depreciation under section 32 of the Income Tax Act. The appellant failed to produce revised balance sheets or evidence showing that the double benefit (CENVAT credit plus depreciation) had been surrendered for the relevant years; the mere rectification or adjustment made in a subsequent financial year (2015-16) was held insufficient to negate the prior irregular availment. Accordingly, the Tribunal held that there was definite violation of Rule 4(4) and that corrective measures taken in a later year do not validate the earlier impermissible availment of credit. [Paras 5, 6, 7, 8, 9]

The adjudicating authority's disallowance of the CENVAT credit (for the period in question) was upheld and the appeal dismissed.

Final Conclusion: On the admitted facts the Tribunal found that the assessee impermissibly availed CENVAT credit while also claiming full depreciation on the same capital goods in the relevant years; absence of evidence of surrender for those years and a subsequent-year adjustment did not cure the breach of Rule 4(4), and the appeal was dismissed.