TaxTMI Updates e-Newsletter
Jun 15,2022

Detention and seizure under Section 129 of the Central Goods and Services Tax Act, 2017 - service of order of detention/seizure - notice specifying penalty under Section 129(3) - requirement of order within seven days - release of detained vehicle and goods

Detention and seizure under Section 129 of the Central Goods and Services Tax Act, 2017 - service of order of detention/seizure - notice specifying penalty under Section 129(3) - requirement of order within seven days - release of detained vehicle and goods - Validity of continued retention of the vehicle and goods where no order of detention/seizure or notice under Section 129(3) has been issued and served, and appropriate remedy. - HELD THAT: - The Court found that the statutory scheme under Section 129 requires that an order of detention/seizure be passed at the time of detention/seizure and served on the person transporting the goods. Further, Section 129(3) mandates that the proper officer detaining or seizing goods must issue a notice specifying the penalty payable and thereafter pass an order within seven days from service of that notice in relation to the detention/seizure. In the present case the respondents admitted that no order of detention had been issued and that no notice under Section 129(3) had been served, although the seizure was effected on 30.05.2022. In those circumstances the continued insistence on retaining the vehicle and its contents was held to be in gross contravention of the statutory requirements. Having noted that physical verification has been completed and that certiorari was unnecessary, the Court nevertheless directed issuance of mandamus to release the conveyance and goods forthwith and within 24 hours.

The detention/retention was invalid for want of the statutory order and notice; the respondent is directed to release the vehicle and goods immediately and, in any event, within 24 hours.

Final Conclusion: Writ petition allowed; mandamus issued directing release of the detained vehicle and the goods contained therein forthwith and within 24 hours; no costs.

Stay of recovery on deposit under Section 107(6) and (7) of the CGST Act - Garnishee notice under Section 79 - Fresh demand to be raised in Form GST APL-04

Stay of recovery on deposit under Section 107(6) and (7) of the CGST Act - Garnishee notice under Section 79 - Effect of deposit of 10% of disputed tax amount under Section 107(6) and (7) on the operation of an earlier garnishee notice issued under Section 79. - HELD THAT: - The court recorded that the petitioner deposited ten per cent of the amount of demand in terms of Section 107(6) & (7) of the CGST Act while prosecuting two statutory appeals against the adjudication orders (para 4). On this statutory deposit, recovery of the balance amount is deemed to be stayed during the pendency of the appeals. Consequent to such stay, the impugned garnishee proceedings founded on the earlier adjudication could not be given effect to and have become infructuous (paras 6-7). The court accepted the parties' positions that if the appeal outcome results in a demand, a fresh demand must be raised and recovery steps may then follow in accordance with law. [Paras 4, 6, 7]

Deposit of 10% under Section 107(6) and (7) operates to stay recovery; the impugned garnishee notice has become infructuous and cannot be acted upon during the pendency of the appeals.

Fresh demand to be raised in Form GST APL-04 - Procedure to be followed if the appellate process results in an upheld or modified demand. - HELD THAT: - The court noted and recorded that any fresh demand arising from the appellate authority's decision must be raised in the prescribed form (GST APL-04) and, if the assessee then fails to pay within the stipulated time, recovery by special mode may be initiated in accordance with the statute (paras 6-7). This procedural consequence was treated as the appropriate course following disposition of the appeals and is the basis for declaring the existing garnishee infructuous. [Paras 6, 7]

Any fresh demand post-appeal must be raised in Form GST APL-04; recovery under that demand may proceed if statutory conditions are not met.

Final Conclusion: The writ petition is disposed of as infructuous: the deposit of ten per cent under Section 107(6)-(7) stays recovery, rendering the impugned garnishee notice ineffective during the pendency of appeals; any post appeal demand must be raised in Form GST APL-04 and proceeded with as per law.

Detention of goods in transit - release of detained goods on deposit and furnishing of bond - adjudication under section 130 of the CGST Act (show-cause proceedings) - interim relief by application of judicial precedent

Detention of goods in transit - release of detained goods on deposit and furnishing of bond - interim relief by application of judicial precedent - Petitioner entitled to the release of the detained vehicle and goods on specified interim terms without adjudication on the merits. - HELD THAT: - The Court noted that when intercepted the driver produced the documents required under the law and that MOV-06 recorded certain perceived discrepancies and historical transactions. Relying on the earlier Division Bench ratio and the parties' contentions, the Court declined to decide the merits of the detention under the CGST regime and instead directed interim release. The determinative order required the petitioner to deposit the tentative penalty amount reflected in the show-cause notice and to furnish a bond for the amount specified in MOV-10; upon compliance the authority was directed to release the vehicle and goods, without prejudice to the rights and contentions of the parties in the pending adjudication. The direction expressly preserves the authority's ability to continue adjudicatory proceedings under the applicable law. [Paras 12]

Petition partly allowed; on deposit of the specified amount and furnishing of the specified bond the respondent-authority shall release the vehicle and goods, subject to ongoing adjudication.

Adjudication under section 130 of the CGST Act (show-cause proceedings) - interim relief by application of judicial precedent - Proceedings under the show-cause notice (Form GST MOV-10) to continue; the Court did not adjudicate the merits and remanded the matter for further inquiry in accordance with law. - HELD THAT: - The Court recorded that similar reasons were reflected in MOV-10 and, having granted interim release on specified terms, directed that the inquiry and adjudication pursuant to the show-cause notice shall proceed in accordance with law. The decision preserves the authority's jurisdiction to decide the substantive allegations in the pending proceedings and confines the Court's order to interim relief. [Paras 12]

The inquiry under Form GST MOV-10 shall proceed further in accordance with law; the interim release directed is without prejudice to the adjudication.

Final Conclusion: Petition partly allowed: the detained vehicle and goods are to be released on payment of the tentative penalty and furnishing of the specified bond; the pending show-cause adjudication shall continue unimpaired and the Court has not gone into the merits.

Provisional attachment to protect revenue under Section 83 of the Central Goods and Services Tax Act, 2017 - cessation of provisional attachment after expiry of one year - review and extension of provisional attachment by the Commissioner - quashing of provisional attachment for non-compliance with statutory time-limit

Provisional attachment to protect revenue under Section 83 of the Central Goods and Services Tax Act, 2017 - cessation of provisional attachment after expiry of one year - review and extension of provisional attachment by the Commissioner - Validity of continued provisional attachment effected on 09.02.2021 after the one-year period specified in Section 83(2) of the CGST Act - HELD THAT: - The Court noted that the provisional attachment order impugned was dated 09.02.2021 and that, as a matter of law, every provisional attachment made under Section 83(1) ceases to have effect after the expiry of one year from the date of the order under Section 83(2). Although the respondents stated in affidavit that the Commissioner reviewed and approved continuation of the attachment on 11.03.2022, no order evidencing such review or extension was placed on record. In view of the clear statutory provision that provisional attachment shall cease after one year, and in absence of any recorded order extending or re-authorising the attachment, the continuance of the attachment could not be sustained. Applying the statutory mandate in Section 83(2), the Court concluded that the provisional attachment dated 09.02.2021 had lapsed and directed its quashing and immediate de-attachment. [Paras 3, 5, 6, 7, 8]

Provisional attachment dated 09.02.2021 has ceased to have effect by efflux of one year and is quashed; respondents directed to forthwith de-attach the bank account.

Final Conclusion: The writ petition is allowed: the provisional attachment dated 09.02.2021 is quashed for having expired under Section 83(2) of the CGST Act and the respondents are directed to immediately de-attach the petitioners' bank account; no order as to costs.

Validity of notices under unamended section 148 - Applicability of amended section 148A - Effect of date of issuance vis-a -vis date of communication of notice - One-time dispensation of preliminary inquiry under section 148A(a) - Availability of alternative remedy of appeal

Validity of notices under unamended section 148 - Applicability of amended section 148A - Effect of date of issuance vis-a -vis date of communication of notice - Whether notices dated 31.03.2021 issued under unamended section 148 are invalid because they were communicated after 01.04.2021 and therefore required compliance with amended section 148A. - HELD THAT: - The petitioners challenged reassessment proceedings instituted pursuant to notices dated 31.03.2021 contending that, as the notices were communicated after 01.04.2021, they should be treated as issued after the commencement of the Finance Act, 2021 amending section 148 and introducing section 148A, and therefore were liable to be quashed for non-compliance with the mandatory preliminary inquiry. The Court noted the Apex Court's decision in Ashish Agarwal treating, by exercise of Article 142, notices issued after 01.04.2021 in numerous writ petitions as deemed to have been issued under amended section 148A and dispensing with the preliminary inquiry as a one time measure while preserving assessees' other rights. Applying that principle, the Court observed that the impugned notices in the present matters are dated and signed on 31.03.2021 and there is no material on record to show they were in fact issued after that date. On that factual basis the plea that amended section 148A applies could not be sustained before the High Court. The Court therefore declined to strike down the reassessment proceedings on this ground.

The challenge to the notices dated 31.03.2021 on the ground that they were subject to amended section 148A is rejected for want of material showing issuance after 31.03.2021.

Availability of alternative remedy of appeal - Whether petitioners should be permitted to pursue objections to the reassessment before the appellate authority. - HELD THAT: - Having observed that assessment proceedings have been concluded pursuant to the notices dated 31.03.2021, the Court directed that the petitioners avail the statutory remedy of appeal under the Income tax Act. The Court left it open to the petitioners to raise the same plea before the Appellate Authority and directed that the appellate forum shall examine the contention in accordance with law after due inquiry on facts. The writ petitions were accordingly disposed of and the interlocutory applications closed.

Petitioners are relegated to prefer appeal and may press the challenge before the Appellate Authority, which shall consider the plea on merits.

Final Conclusion: Writ petitions dismissed with direction that petitioners may raise their objections, including the contention concerning amended section 148A, before the Appellate Authority by pursuing the alternative remedy of appeal; appellate authority to examine the plea in accordance with law.

Onus under section 68 - unexplained cash credit - identity and creditworthiness of creditor - genuineness of transaction - verification under section 133(6)

Onus under section 68 - identity and creditworthiness of creditor - genuineness of transaction - unexplained cash credit - verification under section 133(6) - Validity of addition of Rs.2,00,00,000 as unexplained cash credit under section 68 where assessee failed to produce the creditor or substantiate identity, creditworthiness and genuineness. - HELD THAT: - The Assessing Officer placed the sum of Rs.2.00 crores to the credit of the assessee, verified the bank receipt and attempted service under section 133(6), but notices returned with remarks 'not available'. The assessee did not produce the principal officer of M/s Innovative Spinning and Knitting Pvt. Ltd. and relied before the CIT(A) on internal book entries and a submission that the director was absconding (supported by newspaper reports). The CIT(A) accepted the assessee's internal adjustments and deleted the addition. The Tribunal examined the statutory onus under section 68 and recorded that mere assertion of the creditor's absconding and internal book entries are insufficient to discharge the onus to prove identity, creditworthiness and genuineness of the receipt. Given failure to produce corroborative evidence (such as the creditor or its audited accounts or returns) and unsuccessful verification under section 133(6), the Tribunal concluded that the assessee did not substantiate the three ingredients required by section 68. The Tribunal therefore set aside the CIT(A)'s deletion and restored the Assessing Officer's addition. [Paras 6]

Order of Assessing Officer adding the sum as unexplained cash credit under section 68 is upheld; deletion by the CIT(A) set aside.

Final Conclusion: Revenue's appeal allowed; the addition of Rs.2.00 crores under section 68 is confirmed for assessment year 2012-13.

Undisclosed/unexplained income - reliance on statements recorded under statutory power of examination - reliability of statements of witnesses dismissed from service - right to opportunity to dispute and cross-examine adverse statements - effect of criminal acquittal and clearance in departmental/anti-corruption enquiry on income-tax additions

Reliance on statements recorded under statutory power of examination - reliability of statements of witnesses dismissed from service - right to opportunity to dispute and cross-examine adverse statements - undisclosed/unexplained income - effect of criminal acquittal and clearance in departmental/anti-corruption enquiry on income-tax additions - Whether additions made as unexplained/un disclosed income on the basis of statements of erstwhile employees and other statements are sustainable where those witnesses were dismissed, their statements were not subjected to cross-examination and criminal/ACB proceedings resulted in acquittal/clearance of the assessee. - HELD THAT: - The Tribunal found that the Assessing Officer made the additions by treating alleged payments to the assessee as unexplained income based primarily on statements recorded under statutory power from persons who had been dismissed from the school's service and who filed Tax Evasion Petitions thereafter. The AO did not afford the assessee an opportunity to dispute or cross-examine those statements. The AO further relied on statements made before police authorities and statements in the criminal trial. The criminal prosecution based on the complaint failed and the assessee was acquitted after trial; the assessee was also found not guilty in the Anti Corruption Bureau enquiry. In these circumstances the Tribunal held that the statements relied upon could not be believed in the facts and that sustaining the additions without providing opportunity to rebut or in face of subsequent acquittal and departmental clearance rendered the additions unsustainable. Applying these considerations to the material on record, the Tribunal concluded that the additions confirmed by the CIT(A) were not tenable in law and deserved to be set aside. [Paras 10, 11, 12]

Additions made by the AO and confirmed by the CIT(A) are set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals for Assessment Years 1999-2000 to 2001-2002, set aside the additions made by the lower authorities as unsustainable in law, and allowed the appeals.

Addition under section 69A in respect of unexplained cash deposits during demonetisation - addition on account of low withdrawals based on surmises and presumptions - use of month-wise cash sales and bank deposit pattern to establish genuineness of cash deposits - reliance on precedent for deletion of additions arising from demonetisation-period deposits

Addition under section 69A in respect of unexplained cash deposits during demonetisation - use of month-wise cash sales and bank deposit pattern to establish genuineness of cash deposits - reliance on precedent for deletion of additions arising from demonetisation-period deposits - Sustained addition of Rs.30.00 lakhs under section 69A on account of cash deposits in old currency notes during demonetisation - HELD THAT: - The Tribunal examined the month-wise cash sales and bank-deposit pattern for the relevant and earlier periods and found the deposits made during November 2016 to be commensurate with the assessee's regular cash sales trend. The lower authorities erred in disbelieving the assessee's explanation without adequate contrary material. The Tribunal also relied on an identical line of authority where similar deposits were accepted as represented by cash sales. In the absence of material to show that the deposits were not represented by business receipts, the addition under section 69A could not be sustained. [Paras 22]

Order of NFAC sustaining the addition of Rs.30.00 lakhs is set aside and the addition is deleted.

Addition on account of low withdrawals based on surmises and presumptions - Sustained addition of Rs.2,40,000 on account of alleged low withdrawals from capital account - HELD THAT: - The Tribunal found that the addition was founded on presumptions and surmises without any material showing unrecorded expenditure, acquisition of assets, or enhanced lifestyle to justify the addition. There was no evidence on record correlating claimed business expenditure with undisclosed withdrawals or demonstrating that the assessee had incurred expenditure beyond the withdrawals shown. In absence of tangible material, the addition could not be sustained. [Paras 23]

Order of NFAC sustaining the addition of Rs.2,40,000 is set aside and the addition is deleted; Assessing Officer directed to delete the addition.

Final Conclusion: The appeal is allowed; the NFAC order is set aside in respect of both the addition under section 69A (Rs.30.00 lakhs) and the addition on account of low withdrawals (Rs.2,40,000), both being deleted.

Disallowance under section 14A read with Rule 8D - nexus between borrowed funds and tax exempt investments - presumption of application of own/interest free funds where reserves exceed borrowings - allowability of aircraft depreciation and interest where aircraft is owned and used for business - ad hoc disallowance of aircraft operating expenses (variable v. fixed costs) - disallowance under section 40A(2) for payments to related party (excessiveness test) - disallowance under section 36(1)(iii) for interest attributable to share application money - reopening of assessment under section 147/notice under section 148 - requirement of fresh tangible material

Disallowance under section 14A read with Rule 8D - nexus between borrowed funds and tax exempt investments - presumption of application of own/interest free funds where reserves exceed borrowings - Deletion of disallowance made under section 14A read with Rule 8D(2)(ii) in assessment for AY 2011-12 - HELD THAT: - The Tribunal examined the AO's computation of disallowance under Rule 8D, the assessee's investment and funding profile and the CIT(A)'s finding that the assessee had sufficient non interest bearing/interest free funds (reserves and surplus) in excess of borrowings. Applying the principle that where investments yielding exempt income are made from a common pool and interest free funds available exceed such investments, the presumption is that exempt yielding investments were financed from own funds, the Tribunal found no material to show diversion of borrowed funds to make tax exempt investments. Reliance was placed on the Karnataka High Court authority cited by the Tribunal and the appellate finding that the AO had no fresh tangible material to attribute the interest to exempt investments. In these circumstances the CIT(A)'s deletion of the interest component of the Rule 8D disallowance was upheld. [Paras 3, 5, 8, 9]

Disallowance under section 14A read with Rule 8D(2)(ii) deleted; Revenue appeal dismissed on this issue.

Allowability of aircraft depreciation and interest where aircraft is owned and used for business - ad hoc disallowance of aircraft operating expenses (variable v. fixed costs) - Challenge to CIT(A)'s allowance of aircraft depreciation and interest and sustainment of an ad hoc disallowance on aircraft operating expenses for AY 2011-12 - HELD THAT: - The AO had disallowed a large portion of aircraft related expenses. The CIT(A) found the aircraft to be owned and used for business/hire and allowed depreciation and interest relating to the aircraft. For aircraft operating expenses, the CIT(A) made an ad hoc disallowance after noting lack of complete supporting details and past history of similar disallowances. The Tribunal, following its earlier decision in the assessee's own case and after distinguishing fixed and variable costs, held that depreciation and interest were allowable (conditions for deduction satisfied) and that an ad hoc disallowance approximating 10% (about Rs.45 lakhs) of operating expenses where supporting particulars were lacking was fair; fixed costs could not be disallowed but variable costs proportionate to non business use could be. [Paras 10, 11, 13, 14]

Order of CIT(A) upheld: depreciation and interest allowed; ad hoc disallowance of aircraft operating expenses sustained.

Disallowance under section 40A(2) for payments to related party (excessiveness test) - Validity and quantification of disallowance under section 40A(2) in respect of management fees paid to related party for AY 2011-12 - HELD THAT: - The AO disallowed the entire management fee paid to the holding company as not substantiated. The CIT(A) examined the agreements and the fact that two separate pre merger agreements existed (one for the assessee and one for ATHPL) and, after merger, both payments continued despite the services being the same. Applying the statutory test that only payments which are excessive or unreasonable are to be disallowed, the CIT(A) allowed payment equivalent to one prior contractual rate (Rs.5 lakhs per month) and disallowed the excess. The Tribunal found no basis for the AO to disallow the entire amount and agreed with the CIT(A)'s approach and quantification. [Paras 15, 18, 20]

CIT(A)'s partial allowance upheld; disallowance reduced accordingly and Revenue appeal dismissed on this issue.

Disallowance under section 36(1)(iii) for interest attributable to share application money - presumption of application of own/interest free funds where reserves exceed borrowings - Deletion of addition under section 36(1)(iii) in respect of interest allegedly attributable to share application money for AY 2011-12 - HELD THAT: - The AO disallowed indirect interest treating borrowings as used for funding share application money; part of the same interest had been subjected to Rule 8D disallowance. The CIT(A) found absence of clear nexus between borrowings and the share application transactions and noted plentiful reserves and surplus versus loan funds. The Tribunal applied the same reasoning adopted for the section 14A issue - availability of own funds precludes attributing borrowings to those investments - and observed that the AO had not established specific diversion of borrowings to capital investments. Consequently the CIT(A)'s deletion was sustained. [Paras 22, 23, 25]

Disallowance under section 36(1)(iii) deleted; Revenue appeal dismissed on this issue.

Reopening of assessment under section 147/notice under section 148 - requirement of fresh tangible material - Validity of reopening assessment under section 147 (notice under section 148) for AY 2007-08 - HELD THAT: - The AO recorded reasons alleging non disclosure and forfeiture/transfer transactions involving share premium and capital reserve, but the Tribunal reviewed the reasons and found that the material relied upon by the AO was already on record at the time of the original assessment under section 143(3). Applying the Supreme Court precedent requiring 'tangible material' coming into the AO's possession after the assessment to justify reopening, and following later authorities reiterating that mere reappraisal of existing material does not permit reopening, the Tribunal held that no fresh tangible material was brought on record to justify initiation of proceedings under section 147. Consequently reopening was invalid. The Tribunal therefore quashed the reassessment and declined to adjudicate further on merits as regards that issue. [Paras 32, 33, 34]

Reopening under section 147/notice under section 148 quashed for AY 2007-08; reassessment annulled and appeals dismissed.

Final Conclusion: Revenue appeals dismissed. For AY 2011-12 the Tribunal upheld deletion of Rule 8D/section 14A disallowance, sustained CIT(A)'s treatment of aircraft expenses (allowing depreciation and interest; upholding a limited ad hoc disallowance of operating expenses), affirmed the partial allowance under section 40A(2) for management fees, and deleted the section 36(1)(iii) interest disallowance. For AY 2007-08 the Tribunal held the reopening under section 147/notice under section 148 invalid for lack of fresh tangible material and quashed the reassessment.

Validly filed revised return substitutes the original return - veracity of figures in a revised return requires factual verification - remand for verification to Assessing Officer

Validly filed revised return substitutes the original return - Whether a revised return, validly filed under law, replaces the original return for assessment purposes. - HELD THAT: - The Tribunal accepted the settled legal position that a validly filed revised return substitutes the original return and the Assessing Officer has no jurisdiction to proceed on the basis of the original return once a valid revised return is filed. However, the Tribunal emphasised that substitution by itself does not obviate the need for factual scrutiny where the Revenue has not examined the genuineness or veracity of the adjustments claimed in the revised return. The Bench noted that in the present case the Assessing Officer neither examined the factual basis of the claimed adjustments nor were those facts scrutinised in the appellate proceedings, and therefore the principle of substitution could not be mechanically applied without verification of the claimed entries. [Paras 6]

The legal principle that a valid revised return substitutes the original return is recognised but, given the absence of factual scrutiny by the Revenue, the matter cannot be finally adjudicated on that basis without verification.

Remand for verification to Assessing Officer - veracity of figures in a revised return requires factual verification - Whether the matter should be remitted for factual verification of the adjustments made in the revised return. - HELD THAT: - Having found that the Revenue did not examine the factual correctness of the adjustments claimed in the revised return and that the CIT(A) directed acceptance of the revised figures without such verification, the Tribunal considered it appropriate in the interests of justice to remit the matter. The Assessing Officer is directed to examine the facts in detail and verify the claim made in the revised return, including scrutiny of accounting entries and supporting material as necessary, before completing the assessment afresh in accordance with law. [Paras 6, 7]

The assessment is set aside and remanded to the Assessing Officer for detailed examination and verification of the revised return; the Revenue's appeal is allowed for statistical purposes.

Final Conclusion: The Tribunal recognised that a valid revised return replaces the original return but, because the Revenue did not examine the factual basis of the claimed adjustments, set aside the assessment and remitted the matter to the Assessing Officer for verification; the Revenue's appeal is allowed for statistical purposes.

Maintainability of Revenue appeal based on tax effect threshold - retrospective applicability of CBDT Circular No.17/2019 - disallowance under section 40(a)(ia) for non-deduction of TDS - second proviso to section 40(a)(ia) - no disallowance where recipient has included receipts in income - remand for verification of auditor's certificate and supporting evidence

Maintainability of Revenue appeal based on tax effect threshold - retrospective applicability of CBDT Circular No.17/2019 - Whether the Revenue's appeal before the Tribunal was maintainable in view of the tax effect being below the threshold specified in CBDT Circular No.17/2019. - HELD THAT: - The Tribunal observed that the tax effect in the Revenue's appeal was Rs. 48,59,097/-, which is below the Rs. 50.00 lakhs threshold. The Tribunal further noted that CBDT Circular No.17/2019 dated 08.08.2019 provides that no appeal should be filed by the Revenue before the Tribunal where the tax effect is Rs. 50.00 lakhs or less and that the circular is applicable retrospectively to pending appeals. Applying that circular, the Tribunal concluded that the Revenue's appeal was not maintainable and dismissed the appeal. [Paras 3]

Revenue's appeal dismissed as not maintainable under CBDT Circular No.17/2019 because the tax effect was below Rs. 50.00 lakhs.

Disallowance under section 40(a)(ia) for non-deduction of TDS - second proviso to section 40(a)(ia) - no disallowance where recipient has included receipts in income - remand for verification of auditor's certificate and supporting evidence - Whether the purchase expenses treated as royalty and disallowed under section 40(a)(ia) should be reconsidered in view of the second proviso to section 40(a)(ia) on production of requisite evidence. - HELD THAT: - The AO disallowed purchase expenses characterized as royalty payments for which TDS under section 194J was not deducted, invoking section 40(a)(ia). The assessee asserted at the hearing that the recipient had included those receipts in its income and offered to furnish the relevant evidence as envisaged by the second proviso to section 40(a)(ia) (including auditor's certificate). The Revenue pointed out absence of such documentary proof before the AO. Given the assessee's statement and its offer to produce the prescribed evidence, the Tribunal did not decide the claim on merits but remitted the matter to the AO to examine and verify the evidence (including the auditor's certificate and return entries of the recipient) and decide the claim in accordance with law. [Paras 6, 7]

Matter remitted to the AO for verification of the recipient's inclusion of receipts and consideration of the assessee's claim under the second proviso to section 40(a)(ia).

Final Conclusion: The Revenue's appeal is dismissed as not maintainable under CBDT Circular No.17/2019 (tax effect below Rs. 50 lakhs); the assessee's appeal is remitted to the assessing officer for verification of documentary evidence under the second proviso to section 40(a)(ia) and for fresh decision thereon.

Exercise of jurisdiction under section 263 of the Income Tax Act - Erroneous and prejudicial to the interest of the revenue - Verification and inquiry by the Assessing Officer in scrutiny assessments - Deduction under section 54B and section 54F - treatment where agricultural land converted into stock-in-trade - Deemed transfer under section 45(2) and computation of fair market value on date of conversion - Consistency of departmental view and precedential effect of Tribunal orders

Exercise of jurisdiction under section 263 of the Income Tax Act - Verification and inquiry by the Assessing Officer in scrutiny assessments - Erroneous and prejudicial to the interest of the revenue - Validity of Pr. CIT's exercise of power under section 263 in setting aside assessment on account of alleged failure to verify substantial increase in capital - HELD THAT: - The Tribunal examined the record of limited/complete scrutiny and the AO's questionnaire, replies and documents called during assessment. The AO had specifically identified increase in capital as an issue, issued notices under section 142(1)/143(2), received bank statements, capital account particulars and sale deed details and recorded that the returned income was accepted after discussion with assessee's counsel. The Pr. CIT later held that various verifications (source of credits, narration mismatches, verification of land ownership from revenue records) were not made and therefore the assessment was erroneous and prejudicial. The Tribunal found that the assessee had furnished the requisite details during assessment, the AO examined those documents on test check and made enquiries as part of scrutiny; specific alleged mismatches were explained from records. On the material before it, the Tribunal concluded that the AO had made inquiries and taken a possible view and that the Pr. CIT was not justified in holding the assessment order erroneous and prejudicial merely because she reached a different view; exercise of jurisdiction under section 263 in respect of the increase in capital was therefore not sustainable.

Pr. CIT's invocation of section 263 insofar as it set aside the assessment for alleged non-verification of substantial increase in capital is quashed and not justified.

Deduction under section 54B and section 54F - treatment where agricultural land converted into stock-in-trade - Deemed transfer under section 45(2) and computation of fair market value on date of conversion - Consistency of departmental view and precedential effect of Tribunal orders - Erroneous and prejudicial to the interest of the revenue - Validity of Pr. CIT's exercise of power under section 263 in cancelling assessment on account of allowance of deductions under sections 54B and 54F - HELD THAT: - Pr. CIT held that the AO erred in allowing deductions under sections 54B/54F because (i) two properties had been converted into stock-in-trade before the claimed investment, making gains short-term; (ii) investments were made beyond periods prescribed; (iii) no verification of agricultural use in two years prior to conversion; (iv) FMV at conversion was not ascertained and collector rates should have been applied. The Tribunal noted that identical factual and legal contentions had arisen in the assessee's own earlier assessment year (A.Y. 2013-14) where the Tribunal allowed the assessee relying on precedents that the year of taxation for deemed transfer under section 45(2) determines the relevant year for investing and other related aspects; subsequent assessments with similar facts were also decided in assessee's favour. Given that the AO had taken a possible view after examining material and that the issue had been adjudicated in identical circumstances by the Tribunal in the assessee's case, the Tribunal held that the Pr. CIT was not justified in invoking section 263 to set aside the assessment merely because she preferred a different view. Consequently the cancellation of assessment on this ground was quashed.

Pr. CIT's invocation of section 263 insofar as it set aside the assessment for alleged erroneous allowance of deductions under sections 54B and 54F is quashed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2015-16, quashed the Pr. CIT's order under section 263 insofar as it set aside the assessment dated 29/12/2017, and held that the Pr. CIT was not justified in treating the assessment order as erroneous and prejudicial to the interest of the revenue on the issues of increase in capital and allowance of deductions under sections 54B and 54F.

Penalty under section 271D - prohibition on receipt of loan or deposit otherwise than by account payee cheque/draft (section 269SS) - specified sum (amendment effective 01-06-2015) - presumption as to contents of seized documents (section 292C / search material) - requirement of independent satisfaction when imposing penalty / borrowed satisfaction

Prohibition on receipt of loan or deposit otherwise than by account payee cheque/draft (section 269SS) - penalty under section 271D - specified sum (amendment effective 01-06-2015) - presumption as to contents of seized documents (section 292C / search material) - Whether the amounts shown on the seized document (page 71A) were loans/deposits falling within section 269SS and thereby attracted penalty under section 271D for AY 2015-16 (and consequentially AY 2016-17), having regard to the amendment introducing 'specified sum' effective 01-06-2015 and the evidentiary value of the seized material. - HELD THAT: - The Tribunal accepted the seized paper (page 71A) as recording advances received in relation to the assessee's agricultural land (Ramgarh), noting that the entries appear on the overleaf of a page (page 71) which records landholdings and that the seized document itself records dates, payors' names and narration indicating land transactions. In absence of any contrary finding by the Department, the contents of the seized document and the assessee's explanation that the amounts were advances for sale of agricultural land were held to be sufficiently cogent. The Tribunal further observed that the amendment which brought 'specified sum' within section 269SS took effect from 01-06-2015; all transactions in issue were dated prior to that cutoff and thus did not fall within the amended definition. The assessing officer and Addl. CIT relied on the assessment order to treat the receipts as cash loans, but the Tribunal found that the penalty order did not contain an independent satisfaction explaining why the penalty should be sustained: the Addl. CIT largely adopted the AO's findings without separate reasoning. In these circumstances, because the receipts were held to be advances in relation to immovable property prior to the effective date of the amendment and there was no independent, contrary evaluation of the seized material, the conditions requisite for invoking section 269SS (and hence section 271D) were not satisfied. [Paras 16, 21, 25]

The receipts recorded on the seized document are advances for sale of agricultural land and, being dated before 01-06-2015, do not fall within the amended scope of section 269SS; therefore penalty under section 271D is not leviable and the Department's appeal is dismissed.

Requirement of independent satisfaction when imposing penalty / borrowed satisfaction - presumption as to contents of seized documents (section 292C / search material) - Whether the Addl. Commissioner had formed independent satisfaction to impose penalty under section 271D or merely relied on the assessing officer's findings (borrowed satisfaction), and the effect of seized-document evidence under section 292C on the departmental case. - HELD THAT: - The Tribunal noted that the Addl. CIT's penalty order substantially relied upon the assessment-record findings without articulating a separate satisfaction as to why penalty should be imposed. The court held that the penalty order lacked independent reasoning and did not address why the AO's conclusions should prevail over the seized-document entries and the assessee's explanations. Concurrently, the Tribunal treated the seized material as reliable evidence (in line with statutory presumptions regarding search-recovered documents) and observed that in absence of any contrary finding the Department could not ignore those entries. On these bases the Tribunal concluded that the Addl. CIT's reliance on the AO's view, without independent application of mind and in the face of seized documents supporting the assessee's explanation, was insufficient to sustain the penalty. [Paras 25]

The penalty order was founded on borrowed satisfaction from the AO and lacked independent reasoning; combined with the evidentiary weight of the seized documents, this deficiency contributed to deletion of the penalty.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the penalty(s): the amounts recorded on the seized document were advances for sale of agricultural land, the transactions pre-dated the 01-06-2015 amendment bringing 'specified sum' within section 269SS, and the Addl. CIT's penalty order lacked independent satisfaction beyond the AO's findings; consequently the Department's appeal is dismissed.

Deductibility of employees' contribution to PF and ESI under Section 36(1)(va) read with Section 2(24)(x) - Deposit of employees' contribution before due date of filing return under section 139(1) - Applicability of Explanation 5 to section 43B and its non retroactivity - Remand for verification of TDS credit and speaking order by AO

Deductibility of employees' contribution to PF and ESI under Section 36(1)(va) read with Section 2(24)(x) - Deposit of employees' contribution before due date of filing return under section 139(1) - Applicability of Explanation 5 to section 43B and its non retroactivity - Addition for delayed deposit of employees' share of PF and ESI is not warranted where the contributions were deposited before the due date of filing the return. - HELD THAT: - The Tribunal found that although the employees' and employers' contributions to EPF/ESI were deposited after the statutory due dates under the respective labour enactments, the amounts were paid before the due date for filing the return under section 139(1). The Tribunal applied the binding jurisprudence of the Calcutta High Court in CIT v. Vijayshree Ltd., which, having regard to the Supreme Court's decision in Alom Extrusion Ltd., supports deletion of disallowance where employees' contributions are deposited before filing the return. The Tribunal further observed that Explanation 5 to section 43B inserted by the Finance Act, 2021 is prospective w.e.f. 01.04.2021 and thus not applicable to the assessment year before it (AY 2019 20). In view of these authorities and the non applicability of Explanation 5 to the year under appeal, the Tribunal held the assessee's claim was maintainable and the CIT(A)'s disallowance was unsustainable. [Paras 4, 5, 6]

Impugned order of the CIT(A) disallowing the employees' contribution is set aside and the assessee's claim is allowed for this issue.

Remand for verification of TDS credit and speaking order by AO - Claim for credit of TDS relevant to the year under appeal is remanded to the assessing officer for adjudication by a speaking order. - HELD THAT: - The Tribunal observed that there was no material on record before it to decide the assessee's claim for TDS credit. In the interest of justice, the matter was remitted to the AO with directions to examine the claim, afford the assessee an opportunity of hearing, and pass a reasoned (speaking) order. The Tribunal also directed the assessee to remain vigilant in proceedings before the AO and to furnish necessary documents so as to facilitate disposal without unnecessary adjournments. [Paras 7]

TDS credit issue is remanded to the file of the AO for fresh decision by a speaking order after providing the assessee opportunity of hearing.

Final Conclusion: The appeal is partly allowed: the disallowance of employees' contribution to PF/ESI is set aside in favour of the assessee for AY 2019 20, while the claim for TDS credit is remitted to the assessing officer for a speaking decision after affording opportunity of hearing.

Rejection of books of account - estimation of gross profit on rejection of books - requirement of show cause notice before enhancement by appellate authority under Section 251(2) - valid transfer of assessment proceedings under Section 127 - service and validity of notice under Section 143(2)

Requirement of show cause notice before enhancement by appellate authority under Section 251(2) - Enhancement of estimated gross profit by the Commissioner (Appeals) without issuing a show cause notice under Section 251(2). - HELD THAT: - The Commissioner (Appeals) increased the gross profit rate from 3% (adopted by the Assessing Officer) to 7.88% by reference to earlier year figures without issuing any show cause notice proposing such enhancement. The Tribunal held that enhancement by an appellate authority altering the quantum of estimated income attracts the mandate of Section 251(2) and, in the absence of the required show cause notice, the enhancement is not in accordance with that mandate. Consequently the enhanced addition was quashed and deleted while addressing procedural non-compliance even though the underlying estimation issue was considered on merits elsewhere in the order. [Paras 15]

Enhancement by the Commissioner (Appeals) from 3% to 7.88% quashed for non compliance with Section 251(2).

Estimation of gross profit on rejection of books - rejection of books of account - Validity of the Assessing Officer's rejection of books of account and estimation of gross profit at 3%. - HELD THAT: - The Assessing Officer issued show cause notices seeking corroborative records (bank statements, transport documents, octroi receipts, books of account) and, on no compliance from the assessee during assessment proceedings, rejected the books and estimated gross profit at 3% of turnover. The assessee failed to furnish documentary evidence to substantiate recorded profit or to substantiate its plea of loss of records by fire. The Tribunal found no material to disturb the AO's exercise of estimation in view of the assessee's non cooperation and absence of evidence and therefore affirmed the estimation by the Assessing Officer while giving relief only by deleting the later enhancement made by the Commissioner (Appeals). [Paras 5, 6, 15]

Estimation of gross profit at 3% by the Assessing Officer upheld; assessment addition on that basis affirmed (subject to deletion of the CIT(A)'s enhancement).

Rejection of books of account - Challenge to the rejection of books of account by the Assessing Officer as pressed before the Tribunal. - HELD THAT: - The assessee did not press the ground contesting rejection of books before the Tribunal and made no substantive submissions to overturn the AO's finding. The Tribunal therefore treated this ground as not pressed and dismissed it. [Paras 16]

Ground contesting rejection of books treated as not pressed and dismissed.

Valid transfer of assessment proceedings under Section 127 - service and validity of notice under Section 143(2) - Validity of jurisdiction of the Assessing Officer (ITO, Ward 1) after transfer under Section 127 and whether a fresh notice under Section 143(2) was required after transfer. - HELD THAT: - The Tribunal examined the transfer order issued by the CCIT (under Section 127) which transferred the case from ACIT, Circle Vapi to ITO, Ward 1 within the monetary limits communicated by Board instructions. The AO who completed assessment acted pursuant to that valid transfer order and the original notice under Section 143(2) had been served on the assessee. The Tribunal distinguished the line of authorities cited by the assessee on their facts (where transfer orders were absent) and held that no fresh notice was required after a valid transfer; accordingly the challenges to jurisdiction and to the issuance/service of notice under Section 143(2) were rejected. [Paras 9, 17, 18]

Transfer under Section 127 held valid; no infirmity in jurisdiction or in the notice under Section 143(2); additional grounds raising jurisdictional challenge dismissed.

Final Conclusion: The appeal is partly allowed: the Tribunal upholds the Assessing Officer's rejection of books and estimation of gross profit at 3% (assessing addition affirmed), but quashes the Commissioner (Appeals)'s enhancement to 7.88% for failure to issue the show cause notice required by Section 251(2); challenges to jurisdiction and validity of notice under Section 143(2) are dismissed.

Valuation by DVO - reliance on registered valuer report - addition under section 69B - estimation of unexplained investment - opportunity to be heard - remand for fresh consideration - competence of technical officers

Valuation by DVO - estimation of unexplained investment - addition under section 69B - Whether the addition sustained by the appellate authority based on the DVO's valuation and estimates was sustainable without addressing the assessee's contentions and without proper technical verification. - HELD THAT: - The Tribunal examined the course of proceedings where the Assessing Officer relied on the DVO's report to make an addition as unexplained investment under the relevant provisions and the ld. CIT(A) reduced but nonetheless sustained part of that addition by making technical adjustments to the valuation. The assessee had raised specific objections before the AO and pointed to a registered valuer's report and factual particulars (quality of construction, procurement sources, supervision, material consumption and market rates). The Tribunal observed that the ld. CIT(A), not being a technical expert, made his own technical computations and adjustments to the DVO's and registered valuer's figures instead of obtaining fresh technical verification or directing the AO/DVO to examine the assessee's contentions. Given the technical nature of valuation and the existence of conflicting valuation material, the Tribunal found that the matter required further fact finding and technical consideration by the AO/DVO after affording the assessee an effective opportunity to ventilate its objections. Accordingly, rather than finally adjudicating the technical valuation on the record before it, the Tribunal remitted the issue to the file of the Assessing Officer for fresh consideration in a time bound manner and with opportunity to the assessee to present its contentions to the technical valuers.

The matter relating to valuation and the addition made on account of unexplained investment is remitted to the Assessing Officer for fresh, time bound consideration after affording the assessee opportunity to raise objections and for technical verification; the appeal is allowed for statistical purposes.

Reliance on registered valuer report - competence of technical officers - opportunity to be heard - Whether the ld. CIT(A) was justified in substituting his own technical findings on valuation rather than directing reassessment or fresh technical examination by the AO/DVO and/or giving the assessee a further opportunity before finalising the addition. - HELD THAT: - The Tribunal noted that the ld. CIT(A) undertook technical adjustments (contractor's profit, supervision charges and pro rata application by stage of completion) to the valuation reports despite not being a technical authority and without directing the assessing authority to obtain further technical inputs or to re examine the registered valuer's computations. The Tribunal emphasised that where technical valuation is in issue and competing valuation reports exist, the proper course is to obtain technical verification or to remit to the assessing authority to secure a fresh report after giving the assessee a chance to be heard by the technical officer. In the circumstances, the Tribunal concluded that it was appropriate to restore the matter to the AO to permit that exercise rather than endorse the appellate authority's independent technical determinations.

The CIT(A)'s substitution of technical findings is not upheld; the issue is remitted so the AO/DVO may reconsider the valuation after affording the assessee an opportunity and obtaining appropriate technical input.

Final Conclusion: The appeal is allowed for statistical purposes; the valuation based addition is remitted to the Assessing Officer for fresh, time bound consideration after affording the assessee an opportunity to present its objections and for technical re examination, and the Assessing Officer shall decide the issue in accordance with law.

Violation of principles of natural justice - Admissibility of additional evidence under Rule 29 ITAT Rules, 1963 - Remand for fresh consideration - Verification of cash-flow statements - Burden of proof in unexplained cash deposits - Assessment of unexplained cash deposits under section 69A

Violation of principles of natural justice - Remand for fresh consideration - Whether reliance on statements recorded in remand proceedings without furnishing them to the assessee and without permitting cross-examination violated principles of natural justice and required setting aside of the order. - HELD THAT: - The Tribunal found that the CIT(A) took cognisance of the remand report and relied on statements recorded from customers without providing the assessee copies of those statements or an opportunity to cross-examine the deponents. The recorded statements were contradictory to the assessee's case and formed the basis for rejecting the source explanation for bank deposits. Because the assessee was not given a chance to test that adverse material, the Tribunal held that the principles of natural justice were not satisfied and that the matter warranted reconsideration. The Tribunal therefore set aside the appellate order and directed that the issue be re-examined de novo by the CIT(A) with a reasonable opportunity to the assessee to confront and cross-examine the witnesses whose statements were relied upon. [Paras 7]

Findings based on remand statements admitted without furnishing copies or permitting cross-examination breached natural justice; matter set aside for fresh consideration by the CIT(A) with opportunity for cross-examination.

Admissibility of additional evidence under Rule 29 ITAT Rules, 1963 - Verification of cash-flow statements - Whether the cash-flow statement produced as additional evidence could be admitted and required verification by revenue authorities. - HELD THAT: - The Tribunal accepted the cash-flow summary produced by the assessee under Rule 29 and treated it as relevant to the issue of source of cash deposits. The Tribunal directed that the cash-flow statement and related documents filed by the assessee be verified by the revenue authorities during the fresh adjudication, recognising that the material could bear on whether the deposits arose from the accepted milk business and related receipts. [Paras 7]

Additional evidence (cash-flow statement) admitted prima facie; directed to be verified by the revenue authorities on remand.

Assessment of unexplained cash deposits under section 69A - Burden of proof in unexplained cash deposits - Whether the addition of cash deposits to the assessee's income should be maintained without further verification and opportunity to test the evidence linking deposits to the milk business. - HELD THAT: - While the AO and CIT(A) had concluded that the assessee failed to satisfactorily explain the source of substantial cash deposits and confirmed the addition, the Tribunal accepted the existence of the milk business and held that the sole issue was whether cash generation sufficient to justify the deposits had been established. Given the admitted additional evidence and the denial of an opportunity to test adverse statements, the Tribunal concluded that the assessment could not be finally sustained without fresh verification. The Tribunal therefore remitted the matter to the CIT(A) to re-examine the link between receipts and bank deposits, allow cross-examination of witnesses relied upon by the AO, and decide the matter afresh. [Paras 7, 8]

Addition confirmed by lower authorities set aside for fresh adjudication; CIT(A) directed to verify documents, permit cross-examination and decide the question of unexplained cash deposits under section 69A de novo.

Final Conclusion: The Tribunal admitted the additional cash-flow evidence, found a breach of natural justice in reliance on remand statements without furnishing them or permitting cross-examination, and accordingly set aside the appellate order. The matter is remitted to the CIT(A) for fresh consideration-with verification of the cash-flow statements and a reasonable opportunity for the assessee to cross-examine witnesses-and the appeal is allowed for statistical purposes.

Deductibility of employees' contribution to PF and ESI - payment before due date of filing return under section 139(1) - section 36(1)(va) and section 43B interpretation - application of amendment by Finance Act, 2021 - prospective operation of tax amendments - retrospective vs clarificatory amendment in taxing statute

Deductibility of employees' contribution to PF and ESI - payment before due date of filing return under section 139(1) - section 36(1)(va) and section 43B interpretation - Assessee entitled to deduction of employees' contribution to PF and ESI for A.Y.2019-20 where payment was made before the due date for filing return under section 139(1) despite delay under the Provident Fund/ESI enactments. - HELD THAT: - The Tribunal found that although the assessee did not deposit employees' contribution within the time prescribed under the PF/ESI enactments, the contributions were paid before the due date for filing the return under section 139(1). Following the reasoning and authorities cited (including the jurisdictional High Court decision in Essae Teraoka and coordinate Tribunal decisions such as KLR Industries and decisions of various Benches), the Tribunal held that payment made before the due date of filing the return satisfies the condition for allowability under the described statutory scheme. The Tribunal therefore set aside the disallowance made by the Assessing Officer and directed that deduction be granted in respect of the employees' contribution to PF and ESI for the assessment year in question. [Paras 5, 8]

Disallowance deleted and deduction in respect of employees' contribution to PF and ESI allowed for A.Y.2019-20.

Application of amendment by Finance Act, 2021 - prospective operation of tax amendments - retrospective vs clarificatory amendment in taxing statute - Amendment to section 36(1)(va) and section 43B by Finance Act, 2021 does not apply to A.Y.2019-20 and is to be treated as prospective w.e.f. 01.04.2021. - HELD THAT: - The Tribunal examined whether the Finance Act, 2021 amendment should be construed as clarificatory/retrospective or as a prospective change of law. Relying on the principle that a provision said to be enacted "to remove doubts" cannot be read as retrospective if it alters the existing legal position (as indicated by the Supreme Court in M.M. Aqua Technologies and as applied by coordinate Tribunals and High Courts cited in the order), the Tribunal concluded the amendment altered the law adversely to the assessee and therefore could not be treated as retrospective. The amendment's effective date (w.e.f. 01.04.2021) was noted, and earlier assessment years including A.Y.2019-20 were held not to be governed by the amended provision. Consequently the amendment was held inapplicable to the relevant assessment year. [Paras 6, 8]

Amendment by Finance Act, 2021 held prospective and not applicable to A.Y.2019-20; therefore it does not affect the allowability of the deduction for that year.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y.2019-20: the employees' contribution to PF and ESI paid before the due date for filing the return under section 139(1) is deductible, and the Finance Act, 2021 amendment to section 36(1)(va) and section 43B is prospective (w.e.f. 01.04.2021) and does not apply to the assessment year under appeal.

Notional rent - vacancy allowance - Section 23(1)(c) and scope of 'receivable' rent - legal disability preventing letting - affidavit corroborated by contemporaneous minutes as admissible evidence

Section 23(1)(c) and scope of 'receivable' rent - notional rent - legal disability preventing letting - Whether addition of notional rent under Section 23(1)(c) can be made where commercial property remained vacant because municipal demolition/sealing action and allied disputes made the property not available to be let out - HELD THAT: - Tribunal found two undisputed facts: the property was commercial and remained vacant during FY 2012-13. The assessee's case, supported by an affidavit and minutes of a meeting of MG Road building owners with the Lieutenant Governor, established that a demolition/sealing drive and disputes about compliance with building byelaws in the locality rendered the property effectively not rentable. The Court held that Section 23(1)(c) contemplates taxation of notional rent only where rent is 'received or receivable' - i.e., where the property is available such that rent can realistically become payable. Where a legal disability or physical impossibility prevents creation of a tenancy so that rent cannot be said to be 'receivable', notional rent cannot be brought to tax. The Assessing Officer's reliance on decisions where properties were otherwise available to be let was misplaced; those precedents were factually distinguishable. On these grounds the additions made on account of notional rent were held unsustainable and were deleted. [Paras 5, 6, 8, 9]

Addition of notional rent under Section 23(1)(c) quashed as property was not rentable due to demolition/sealing dispute and rent was not 'receivable'.

Affidavit corroborated by contemporaneous minutes as admissible evidence - Whether the affidavit filed as additional evidence could be disregarded as 'self serving' when corroborated by contemporaneous minutes of meeting - HELD THAT: - The Tribunal observed that the affidavit, admitted under Rule 46A, was corroborated by the minutes of the 28.11.2011 meeting which showed the delegation (including the assessee's family) raising demolition/sealing issues in the locality. Once the affidavit was admitted and a remand report sought, it could not be dismissed as merely self serving unless the Revenue produced contrary evidence or an on oath denial. The minutes were held to be verifiable evidence supporting the affidavit; the Assessing Officer's narrow view that the assessee's building was not specifically listed among partly demolished structures ignored the broader dispute reflected in the minutes and was therefore inadequate to displace the affidavit. [Paras 5, 6]

Affidavit, corroborated by contemporaneous minutes, is admissible and cannot be rejected as merely self serving in absence of contrary evidence.

Final Conclusion: The Tribunal allowed the appeal, holding that the notional rent addition could not be sustained because the property was not available to be let due to municipal demolition/sealing disputes, and that the affidavit corroborated by the minutes constituted admissible evidence; impugned orders set aside.

Exceeded jurisdiction by adopting a new classification without notice - classification under chapter 31 as fertilizers - note 6 of chapter 31 (use and essentiality of fertilizing elements) - vicarious re-classification at appellate stage - General Rules for Interpretation of the Import Tariff - second proviso of section 128A of the Customs Act, 1962

Exceeded jurisdiction by adopting a new classification without notice - vicarious re-classification at appellate stage - second proviso of section 128A of the Customs Act, 1962 - The first appellate authority exceeded its jurisdiction by adopting a classification not proposed below and without following the procedure for notice under the statutory provision. - HELD THAT: - The Tribunal held that the first appellate authority, having rejected the classification claimed by the importer, proceeded to determine an alternative classification which had not been proposed in assessment and did so without compliance with the procedure required by the second proviso of section 128A of the Customs Act, 1962. Such exercise amounts to vicarious classification at the appellate stage and, in the circumstances of this case, the appellate authority thereby acted beyond the bounds of its jurisdiction. The court observed that an alternative fitment must arise from proper application of the chapter notes and the General Rules for Interpretation of the Import Tariff rather than from a need to deny the claimed classification; absence of procedural compliance and failure to give notice of intent to re-classify rendered the impugned order unsustainable.

Impugned order set aside for having exceeded jurisdiction; first issue upheld in favour of the appellant.

Classification under chapter 31 as fertilizers - note 6 of chapter 31 (use and essentiality of fertilizing elements) - General Rules for Interpretation of the Import Tariff - Whether the original authority's rejection of the declared classification (as 'other fertilizer' under the relevant heading of chapter 31) was correct is remanded for fresh consideration. - HELD THAT: - The Tribunal explained that the scheme of chapter 31 and the role of note 6 (focusing on use and essentiality of fertilizing elements) are central to determining fitment. It noted that the importer had import permissions under the Fertilizer (Control) Order, 1985 and emphasised that classification should be driven by appropriateness under chapter notes and the General Rules for Interpretation, not merely by the quantum of a constituent in a sample. Because the first appellate authority's order was set aside on jurisdictional grounds, the Tribunal restored the appeal before that authority for a fresh decision confined to the correctness of the original authority's classification, to be decided in accordance with the principles stated by the Tribunal and after following proper procedure.

Matter remanded to the first appellate authority for fresh decision on the correctness of the original authority's order in light of the Tribunal's enunciation.

Final Conclusion: The impugned order of the first appellate authority is set aside for having exceeded jurisdiction; the appeal is restored before that authority for a fresh adjudication on the correctness of the original authority's classification in accordance with chapter 31, relevant chapter notes and the General Rules for Interpretation, with appropriate procedural compliance.

Non-joinder of necessary parties - maintainability of company petition - remedy under Section 169 of the Companies Act, 2013 - power of the Tribunal to grant effective relief - lack of documentary evidence

Non-joinder of necessary parties - maintainability of company petition - power of the Tribunal to grant effective relief - Maintainability of the Company Petition in view of non-joinder of the company and other directors and the Tribunal's inability to pass an effective order without necessary parties. - HELD THAT: - The Tribunal examined Section 169 of the Companies Act, 2013, and in particular the scheme under sub-section (4)(b) which contemplates actions against the company or other directors. The petition had named only the Registrar of Companies as respondent and did not implead the company or the other directors against whom allegations were made. The presence of those parties was held necessary for the Tribunal to adjudicate and pass an effective and complete order under the statutory remedy relied upon. Non-joinder of such necessary parties thus rendered the petition not maintainable, since the Tribunal could not grant the reliefs sought in their absence. [Paras 10]

Petition not maintainable for non-joinder of necessary parties.

Lack of documentary evidence - remedy under Section 169 of the Companies Act, 2013 - Disposition of the petition on the basis of evidentiary insufficiency. - HELD THAT: - Alongside non-joinder, the Tribunal noted that the petition lacked documentary evidence necessary to support the allegations and the reliefs sought. The Tribunal observed that the prayer sought would oust powers vested in the Tribunal and, absent sufficient documentary material and the joinder of necessary parties, it could not be allowed to proceed to adjudicate the merits. [Paras 10, 11]

Petition dismissed for want of evidence.

Final Conclusion: The Company Petition was dismissed for non-joinder of necessary parties and for lack of documentary evidence; the Tribunal did not decide the merits of the allegations under Section 169, Companies Act, 2013.

Look Out Circular (LOC) - travel ban and right to travel under Article 21 - personal guarantor liability unaffected by corporate resolution plan - power of banks to request LOC to protect public money - office memorandum dated 12.10.2018 widening grounds for issuance of LOC

Travel ban and right to travel under Article 21 - Look Out Circular (LOC) - office memorandum dated 12.10.2018 widening grounds for issuance of LOC - Validity of the issuance of a Look Out Circular and consequent prevention of foreign travel vis-a -vis the petitioner's fundamental right under Article 21. - HELD THAT: - The Court recognised that the right to travel abroad is part of personal liberty under Article 21 but observed that deprivation of that right must be according to law. The Office Memorandum dated 12.10.2018 broadened the class of persons against whom LOCs may be issued to include economic offenders and those whose foreign travel may impede recovery of public money. Applying that administrative framework, the Court found that the bank had apprehensions of the petitioner fleeing the jurisdiction to frustrate recovery, and that issuance of an LOC at the bank's request was within the administrative scheme designed to protect public funds. The Court distinguished authorities relied upon by the petitioner on their facts and held that, in the present factual matrix, protective action to prevent the petitioner from leaving the country did not amount to an impermissible violation of Article 21. [Paras 11, 16, 17]

LOC preventing the petitioner from travelling was permissible and did not constitute a violative deprivation of Article 21 in the facts of this case.

Personal guarantor liability unaffected by corporate resolution plan - power of banks to request LOC to protect public money - Whether the petitioner's personal liability as guarantor was extinguished by the corporate insolvency resolution plan and whether that affected the bank's entitlement to seek an LOC against him. - HELD THAT: - The Court found on the record that the petitioner had executed a personal guarantee in favour of the bank and that insolvency resolution of the borrower did not, by itself, relieve personal guarantors of their co-extensive liability under the terms of the guarantee. The bank continued recovery action against the guarantors and had outstanding claims post-resolution; accordingly the bank's request for opening of an LOC against the petitioner was founded on apprehension that the petitioner might abscond and thereby frustrate recovery of public money. Given these findings, the Court accepted the bank's contention that liability remained and that protective measures could be sought to safeguard economic interests. [Paras 9, 10, 13]

Petitioner's liability as a personal guarantor survived the corporate resolution and the bank was entitled to take steps, including requesting an LOC, to protect its recovery prospects.

Final Conclusion: The writ petition challenging the travel restriction/LOC was dismissed: the Court held that the bank could request an LOC to protect public funds and that the petitioner's personal guarantor liability subsisted despite the corporate resolution, making the preventive action in the circumstances permissible.

Moratorium under Insolvency and Bankruptcy Code - de facto attachment - No Objection Certificate for registration - as is where is basis and caveat emptor - liability for past electricity dues on purchaser - priority of IBC over inconsistent recovery actions

No Objection Certificate for registration - de facto attachment - moratorium under Insolvency and Bankruptcy Code - Validity of the Sub-Registrar's demand for a No Objection Certificate and refusal to register the sale deed on account of an alleged de facto attachment - HELD THAT: - The Tribunal found that the Sub-Registrar's demand for a No Objection Certificate from the Tahsildar, premised on an alleged de facto attachment dated 23.12.2020, was unjustifiable at the liquidation stage. The letters and correspondence showed that the claimed attachment related to dues from July 2011 to March 2014, a period prior to the commencement of CIRP (01.09.2017) and liquidation (16.07.2018), and no proof of claim or charge had been submitted by the respondents during CIRP or liquidation. In view of the liquidation order and the statutory moratorium, the Sub-Registrar's refusal to register the sale deed on the stated ground could not be sustained. The Tribunal therefore directed registration of the sale deed dated 12.02.2021 between the Liquidator and Sri Gomathi Energy (P) Ltd. [Paras 5, 7, 9]

The Sub-Registrar, Uthumalai is directed to register the sale deed dated 12.02.2021.

As is where is basis and caveat emptor - liability for past electricity dues on purchaser - Whether the purchaser's liability in respect of pre-existing electricity dues is extinguished by the liquidation sale - HELD THAT: - The sale deed expressly recorded that the property was sold on an 'As is where is, whatever there is' basis. Applying the principle of caveat emptor and relying on authoritative precedent concerning liability for past electricity dues, the Tribunal held that the purchaser takes the property with its existing liabilities insofar as they are cast upon the purchaser by the terms of sale. Consequently, while the sale deed must be registered, the Tribunal made clear that liabilities in respect of the property are not extinguished by the sale and that the purchaser may be liable for arrears of electricity dues attributable to prior periods. [Paras 8, 9]

Liability in respect of the property is not extinguished; the purchaser remains subject to existing liabilities as per the sale terms.

Restraining recovery proceedings against property purchased at liquidation sale - as is where is basis and caveat emptor - Propriety of granting interlocutory directions restraining the electricity and revenue authorities from pursuing recovery or hindering reconnection in favour of the purchaser - HELD THAT: - The Tribunal declined to grant the broad restraining relief sought by the purchaser against the electricity and revenue authorities. Given the explicit 'as is where is' clause in the sale deed and the settled principle that a purchaser at such an auction takes the property subject to disclosed liabilities, the Tribunal could not entertain a blanket restraint preventing the respondents from pursuing recovery or affecting electricity connection. The order permitting registration was therefore limited and did not amount to extinguishment of liabilities or an injunction against statutory recovery measures in appropriate proceedings. [Paras 8, 9]

Prayer to restrain and restrict the respondents from taking recovery steps or hindering electricity connection is not granted; registration ordered but liabilities preserved.

Final Conclusion: The Tribunal ordered registration of the sale deed dated 12.02.2021 between the Liquidator and Sri Gomathi Energy (P) Ltd., refused to extinguish or discharge pre-existing liabilities in respect of the property (including electricity dues for July 2011 to March 2014), and declined to grant a general injunction restraining recovery proceedings by the statutory authorities; the applications are disposed of accordingly.

Disqualification of related party from Committee of Creditors under the proviso to Section 21(2) of the Insolvency and Bankruptcy Code, 2016 - definition and scope of 'related party' in Section 5(24) of the Insolvency and Bankruptcy Code, 2016 - duty of the (Interim) Resolution Professional to verify claims and declarations and to exercise due diligence before constituting the Committee of Creditors - form and effect of declaration in Form C under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - limitation of Adjudicating Authority's power to recall or declare the CIRP void where an appeal is pending

Definition and scope of 'related party' in Section 5(24) of the Insolvency and Bankruptcy Code, 2016 - disqualification of related party from Committee of Creditors under the proviso to Section 21(2) of the Insolvency and Bankruptcy Code, 2016 - 1st Respondent's status as a 'related party' of the Corporate Debtor and consequent ineligibility to be part of the Committee of Creditors. - HELD THAT: - The Tribunal examined the familial relationship between the 1st Respondent and a 49% shareholder of the corporate debtor and considered the statutory definitions and judicial precedents interpreting 'related party'. Joint reading of Section 5(24), the Explanation to Section 5(24A) and relevant authority led the Tribunal to conclude that the uncle-niece relationship brought the 1st Respondent within the expression 'related party' in the proviso to Section 21(2). Because the proviso bars representation, participation or voting by a financial creditor who is a related party, the 1st Respondent was held to be ineligible to be part of the CoC. [Paras 15, 16, 18]

The 1st Respondent is a related party of the corporate debtor and is prevented from being part of the Committee of Creditors.

Duty of the (Interim) Resolution Professional to verify claims and declarations and to exercise due diligence before constituting the Committee of Creditors - form and effect of declaration in Form C under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Whether the Resolution Professional performed due diligence in constituting the Committee of Creditors and the consequence of any failure. - HELD THAT: - The Tribunal referred to statutory duties of the (Interim) Resolution Professional to collect information and to verify claims before constituting the CoC, and to the declaration fields in Form C requiring a financial creditor to state whether it is a related party. Having found that the CoC included a financial creditor who was a related party, the Tribunal concluded there was negligence on the part of the Resolution Professional in identifying and excluding the related party. In consequence, corrective direction was warranted to give effect to the statutory bar in the proviso to Section 21(2). [Paras 19, 20, 21]

The Resolution Professional was directed to remove the 1st Respondent from the Committee of Creditors and the Registry was directed to send a copy of the order to the IBBI.

Limitation of Adjudicating Authority's power to recall or declare the CIRP void where an appeal is pending - Applicant's prayer to declare the CIRP initiated against the corporate debtor void. - HELD THAT: - The Tribunal noted that the CIRP initiation order is the subject of a pending appeal before the NCLAT and that no stay has been granted. The Adjudicating Authority observed that, in the absence of express recall or review power in the Authority to set aside the CIRP initiation order, the prayer to declare the CIRP void could not be granted at this stage and must be rejected. [Paras 14]

The prayer to declare the CIRP void was rejected for want of power in the Adjudicating Authority in the circumstances.

Final Conclusion: Application IA/1322/2021 was partially allowed: the Tribunal held that the 1st Respondent is a related party and ineligible to be on the CoC, directed the Resolution Professional to remove the 1st Respondent from the CoC and marked the order to the IBBI; the prayer to declare the CIRP void was refused as beyond the Adjudicating Authority's power while an appeal is pending.

Consideration of bail in economic offences - economic offences constitute a class apart - bail in money-laundering cases - need for freedom of investigation in money laundering matters - flight risk and likelihood of tampering with witnesses - nature and gravity of accusation as determinative in bail

Consideration of bail in economic offences - flight risk and likelihood of tampering with witnesses - need for freedom of investigation in money laundering matters - Petition for grant of bail under Section 439 Cr.P.C. rejected. - HELD THAT: - The Court applied the established principle that economic offences are to be treated as a class apart and that the nature and gravity of accusations, the character of evidence, the severity of punishment and the risk of flight or interference with investigation are material in exercise of bail jurisdiction. The Court relied on the observations in State of Gujarat v. Mohanlal Jitamalji Porwal and Y.S. Jagan Mohan Reddy v. CBI regarding the special approach to economic offences, and on the need to afford the investigating agency sufficient freedom in complex money laundering investigations as explained in P. Chidambaram v. Directorate of Enforcement . Although the petitioner's involvement was pleaded to be limited to withdrawing funds and he had cooperated with authorities, the Court found that the prosecution had placed material suggesting deeper links in a multi stage laundering scheme and that the petitioner, being a resident of another jurisdiction, posed a real risk of flight and potential prejudice to the trial. In view of these factors the exercise of judicial discretion to grant bail was declined. The Court, however, directed the trial court to expedite proceedings and endeavour to complete the trial preferably within six months. [Paras 10, 11, 12]

Bail petition dismissed; trial court directed to expedite trial preferably within six months.

Final Conclusion: The application for bail under Section 439 Cr.P.C. is dismissed on account of the nature and gravity of the alleged economic offences, risk of flight and to preserve the integrity of the ongoing money laundering investigation; the trial court is directed to endeavour to conclude trial preferably within six months.

Offence of money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002 - jurisdiction of the Special Court for offences under the Prevention of Money Laundering Act - protection against double jeopardy under Article 20(2) of the Constitution - prosecution under multiple enactments and Section 26 of the General Clauses Act, 1897 - continuing activity principle under Section 3(ii) of the Prevention of Money Laundering Act - exemption from examination under Sections 200 and 202 of the Code of Criminal Procedure when complaint is filed by a public servant

Jurisdiction of the Special Court for offences under the Prevention of Money Laundering Act - Offence of money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002 - The Special Court at Roorkee/Dehradun has jurisdiction to try the complaint under the Act. - HELD THAT: - The complaint alleges that the loan was taken from the Roorkee branch of the Bank and forged documents were produced there; the offence of money-laundering is alleged to have been committed within the area of Roorkee. Section 44(1) makes the Special Court constituted for the area in which the offence is committed competent to try offences under the Act. On the material placed in the complaint, the court which took cognizance is competent and no jurisdictional error is shown. [Paras 20, 21, 32]

Jurisdiction of the Special Court is upheld and the cognizance taken by the court is not vitiated.

Protection against double jeopardy under Article 20(2) of the Constitution - prosecution under multiple enactments and Section 26 of the General Clauses Act, 1897 - Section 300 of the Code of Criminal Procedure - Article 20(2), Section 300 CrPC and Section 26 of the General Clauses Act do not bar prosecution under the Act in the facts of this case. - HELD THAT: - The court held that the FIR and the present complaint relate to distinct offences: the FIR concerned offences under the IPC while the complaint alleges money-laundering under the Act, which is a different statutory offence involving processes connected with proceeds of crime. Article 20(2) (no person to be prosecuted and punished for the same offence more than once) and Section 300 CrPC (bar on retrial after conviction or acquittal) are not attracted because the petitioners have not been previously tried for the same offence. Section 26 of the General Clauses Act permits prosecution under more than one enactment for acts which constitute offences under different statutes but bars double punishment for the same offence; given the distinct nature of the Act's offence, that bar is not engaged. [Paras 23, 24, 25, 26, 29]

Double jeopardy and related provisions do not preclude the present prosecution under the Prevention of Money Laundering Act.

Exemption from examination under Sections 200 and 202 of the Code of Criminal Procedure when complaint is filed by a public servant - No prior inquiry under Sections 200 and 202 CrPC was necessary before issuance of process because the complaint was filed by a public servant in discharge of official duties. - HELD THAT: - Section 200 allows the Magistrate not to examine the complainant and witnesses where the complaint is made in writing by a public servant acting in discharge of official duties. The complaint in this case was filed by a public servant and therefore the proviso to Section 200 applies, obviating the need for examination under Sections 200 and 202 prior to issuance of process. [Paras 13, 14]

Non-compliance with inquiry under Sections 200/202 CrPC is not a ground to quash the complaint in the present facts.

Continuing activity principle under Section 3(ii) of the Prevention of Money Laundering Act - effect of repayment on liability under the Prevention of Money Laundering Act - Repayment of the loan does not bar prosecution under the Act where prosecution alleges continuing activities of concealment, layering and integration of proceeds of crime. - HELD THAT: - Section 3(ii) treats activity connected with proceeds of crime as continuing so long as a person is enjoying proceeds by concealment, possession, acquisition, use or by projecting/claiming it as untainted. The allegation is that the petitioners layered and integrated the proceeds and sought to project them as untainted; mere repayment in execution proceedings does not negate the alleged earlier or continuing money laundering activities and therefore does not absolve the petitioners of liability under the Act. [Paras 30, 31]

Repayment of loan does not extinguish or bar prosecution under the Act on the pleaded allegations of money-laundering.

Distinctness of offences under IPC and the Prevention of Money Laundering Act - requirement of systematic investigation for money-laundering - Pendency of criminal trial on FIR/IPC offences does not preclude initiation of proceedings under the Prevention of Money Laundering Act because money laundering is a distinct offence requiring separate investigation. - HELD THAT: - The court noted the Supreme Court's recognition that money-laundering involves stages like placement, layering and integration and requires systematic investigation. Since the PMLA offence involves processes connected with proceeds of crime that are not coextensive with the IPC offences in the FIR, the mere pendency of the criminal trial does not by itself render the PMLA complaint unsustainable. [Paras 27, 28, 29]

Proceedings under the Prevention of Money Laundering Act may continue notwithstanding pendency of the FIR based criminal trial.

Final Conclusion: The petition under Section 482 CrPC challenging Complaint Case No.3 of 2022 (PMLA) is dismissed in limine: the Special Court has jurisdiction, the complaint need not be quashed on double jeopardy or for non-examination under Sections 200/202 CrPC, repayment of the loan does not bar prosecution under Section 3(ii) of the Act, and pendency of FIR/IPC proceedings does not preclude distinct money laundering proceedings.

Section 45 PMLA - twin conditions for bail - Non-bailable provision under the Prevention of Money-Laundering Act, 2002 - Prima facie material for continuation of prosecution - Effect of post-judgment legislative amendment curing defect - Continuing offence - money laundering

Section 45 PMLA - twin conditions for bail - Non-bailable provision under the Prevention of Money-Laundering Act, 2002 - Prima facie material for continuation of prosecution - Petitioner is not entitled to bail because the conditions prescribed by Section 45 of the PMLA are not satisfied. - HELD THAT: - The court found that notice was given to the Public Prosecutor and the Public Prosecutor opposed the bail application. On the material placed on record the Enforcement Directorate had prima facie evidence indicating diversion of funds advanced by the consortium of banks to benami entities and subsequent investments in immovable properties, and implicated the petitioner as the managing director and principal actor. The court held that it was not satisfied that there were reasonable grounds for believing that the petitioner was not guilty of the alleged offences or that he would not commit an offence while on bail. The petitioner's reliance on the Supreme Court decision in Nikesh Tarachand Shah (which had declared Section 45(1) unconstitutional) was considered, but the court observed that Parliament subsequently amended Section 45. The court accepted the view in the Division Bench decision of the Madras High Court (and noted that related Special Leave Petitions were dismissed), treating the post-judgment amendment as curing the defect identified in Nikesh Tarachand Shah. Given the material collected in the investigation and the application of the amended provision, the court declined to exercise its discretion to grant bail, observing that a conclusive finding on guilt is a matter for trial.

Criminal petition dismissed; bail refused as Section 45 conditions are not fulfilled on the material before the court.

Final Conclusion: The petition for enlargement on bail is dismissed; the court is not satisfied that the twin conditions of Section 45 PMLA have been met in light of the investigation material and the post-Nikesh Tarachand Shah amendment to Section 45.

Exemption for educational services - allied services of education - renting of immovable property as part of educational activity - precedential effect of a High Court order pending intra court appeal without interim stay

Exemption for educational services - allied services of education - Whether fees charged by State universities for affiliation, conduct of examinations and award of degrees/diplomas are exempt from service tax as educational services. - HELD THAT: - The Court accepted the view taken in Madurai Kamaraj University that the activities of affiliating universities - including fixation and collection of fees for affiliation, conduct of examinations, and award of degrees/diplomas - fall within the ambit of educational services and allied services of education. After considering the submissions and the earlier exhaustive order, the Court held that the assessment and demand of service tax on such affiliating and allied academic activities cannot be sustained. The determinative reasoning adopts the prior decision which construed the exemption expansively to include services provided to students, faculty and staff as part of the institution's educational functions. [Paras 14, 17]

Fees for affiliation and allied academic activities are exempt from service tax as educational services.

Renting of immovable property as part of educational activity - allied services of education - Whether rental income derived by the universities from letting out immovable property on campus (to banks, post office, canteens, etc.) is taxable or constitutes allied educational services exempt from service tax. - HELD THAT: - Relying on the earlier decision in Madurai Kamaraj University, the Court concluded that rental services for premises on university campuses used to house facilities such as banks, post offices, staff and student canteens are allied to the educational activity and fall within the expanded meaning of educational services. The Court observed that such services contribute to the benefit of students, faculty and staff and were therefore properly regarded as part of educational services exempt from service tax; accordingly, the impugned show cause notice and order demanding service tax on such rental income were held unsustainable. [Paras 16]

Rental income from letting campus immovable property to entities providing services for students/staff is exempt as allied educational services.

Precedential effect of a High Court order pending intra court appeal without interim stay - Whether the earlier High Court decision (Madurai Kamaraj University) can be applied despite an intra court appeal having been entertained by a Division Bench where no interim stay was granted. - HELD THAT: - The Court noted that the earlier judgment was an exhaustive consideration of the controversy and that an intra court appeal having been entertained without grant of interim stay did not render the earlier view inconclusive for present purposes. The Court therefore applied the reasoning and result of the earlier order to the present petitions and declined the respondents' contention that the benefit of that decision could not be extended merely because an appeal was pending. [Paras 14]

The prior High Court order governs the present petitions despite an intra court appeal being pending without interim stay; its reasoning and result are applied.

Final Conclusion: The writ petitions are allowed: the impugned show cause notice and Order in Original are set aside because affiliating activities, allied academic services (including examinations and award of degrees) and rental income from campus premises used for student/staff facilities are held to be covered by the exemption for educational services; no order as to costs.

Remand for de novo adjudication - ex parte adjudication - opportunity of personal hearing - verification of exemptions and deductions - service tax on value of materials supplied - exemption for cleaning services in respect of non-commercial building - VCES declaration - rejection and verification

Ex parte adjudication - remand for de novo adjudication - opportunity of personal hearing - Whether the impugned ex-parte Order-in-Original should be sustained or set aside and the matter remanded for fresh adjudication - HELD THAT: - The Tribunal recorded that the appellants did not represent their case before the adjudicating authority and that the Commissioner consequently passed an ex parte order. In the interest of justice and because the appellants had asserted substantive defences and claims for exemptions and deductions which were not examined on merits, the Tribunal found it appropriate to set aside the impugned order and remand the matter for de novo adjudication. The adjudicating authority is directed to afford the appellants a full opportunity of personal hearing, permit production of documents and submissions, and decide the matter afresh within three months from the date of the Tribunal's order. All issues were kept open for determination by the adjudicating authority on merit.

Impugned order set aside and matter remanded for de novo adjudication with direction to afford personal hearing and decide within three months.

Verification of exemptions and deductions - exemption for cleaning services in respect of non-commercial building - service tax on value of materials supplied - Claims of exemption/deduction (including claimed non taxability of cleaning services for non commercial buildings and non levy on value of materials supplied) are to be considered and verified by the adjudicating authority - HELD THAT: - The appellants contended that cleaning services in respect of non commercial buildings are not taxable and that service tax is not leviable on the value of materials supplied to clients, relying on departmental instructions and notifications. Because these contentions were not addressed in the ex parte adjudication, the Tribunal directed that the adjudicating authority must verify the exemptions and deductions claimed, examine supporting documents, and rule on these contentions in the de novo proceeding after giving the appellants an opportunity to be heard. The Tribunal did not decide the merits of these contentions but remanded them for fresh consideration.

Claims of exemption and non levy on material value remanded to the adjudicating authority for verification and fresh decision after hearing the appellants.

VCES declaration - rejection and verification - remand for de novo adjudication - The issue relating to the VCES declaration (alleged substantially false declaration and proposed rejection) is to be examined afresh by the adjudicating authority - HELD THAT: - Revenue had issued a show cause notice proposing rejection of the VCES declaration on the ground that the declaration was substantially false. The Tribunal did not adjudicate on the correctness of that finding. Instead, consistent with its direction to remand the entire matter for de novo adjudication, the Tribunal left the question of the validity or rejection of the VCES declaration to be examined and decided by the adjudicating authority in the fresh proceedings after affording the appellants an opportunity to produce documents and be heard.

VCES declaration dispute remanded for fresh consideration and decision by the adjudicating authority in the de novo adjudication.

Final Conclusion: The Tribunal set aside the impugned Order in Original and remanded the matters to the adjudicating authority for de novo adjudication; the authority is directed to verify all claimed exemptions, deductions and the VCES declaration, afford the appellants personal hearing and decide the matters afresh within three months.

Input service - Cenvat Credit - for providing an output service - inclusion clause of Rule 2(l) of the Cenvat Credit Rules, 2004 - extended period of limitation - penalty under section 76 of the Finance Act, 1994

Input service - for providing an output service - inclusion clause of Rule 2(l) of the Cenvat Credit Rules, 2004 - Whether expenditure on corporate social responsibility (CSR) qualifies as an input service for the appellant's output services and is eligible for Cenvat Credit - HELD THAT: - The Tribunal held that Rule 2(l) distinguishes services 'used by a provider of output service for providing an output service' from services merely used in running the business. CSR obligations arise after rendering output services when profits or other criteria are met under the Companies Act and do not have the requisite nexus of being used 'for providing an output service'. The inclusion clause in Rule 2(l) expressly lists certain services as admissible even if not directly used for providing output services; CSR expenses were not included. The Tribunal reviewed authorities relied upon by the appellant and concluded those decisions either dealt with services expressly within the inclusion clause or did not decide CSR as an input service; it declined to read into Rule 2(l) the broader phrase 'activities relating to business'. Consequently CSR expenditures do not qualify as input service and Cenvat Credit on such expenses was not allowable on merits. [Paras 13, 14, 15, 16, 17]

Denial of Cenvat Credit on CSR expenditure is upheld (not an input service)

Extended period of limitation - penalty under section 76 of the Finance Act, 1994 - Whether demand can be raised beyond the normal period of limitation and whether penalties can be imposed in respect of the Cenvat Credit denied on CSR expenditure - HELD THAT: - The Tribunal found no evidence of fraud, collusion, wilful misstatement or suppression of facts. In absence of such aggravating factors, the department cannot invoke the extended period of limitation or impose penalties. Accordingly, demands are confined to the normal period of limitation and penalties/extended period invocation are set aside. The matter was remanded to the original authority only for computation of the amount to be denied within the normal limitation period. [Paras 18, 19, 20]

Invocation of extended limitation and imposition of penalties set aside; demand limited to normal period and remand for computation

Final Conclusion: Appeal partly allowed: Cenvat Credit on CSR expenses disallowed on merits; extended period and penalties set aside for lack of fraud or collusion; matter remitted to adjudicating authority for computation of the amount to be denied within the normal period of limitation.

Remand by appellate authority - recovery of refunded amount pending adjudication - interim protection from recovery

Remand by appellate authority - recovery of refunded amount pending adjudication - interim protection from recovery - A remand by the Appellate Authority to the adjudicating authority does not, at the interlocutory stage, justify triggering recovery of the amount already refunded to the petitioner. - HELD THAT: - The Court observed that the impugned show-cause notice dated 03.03.2022, which seeks recovery of the refunded amount, was issued after the Appellate Authority remanded the matter for fresh examination. The High Court took the prima facie view that a remand of the kind recorded by the Appellate Authority cannot, at this stage, be a ground for initiating recovery. The observation furnishes interim protection against immediate recovery while the matter is remitted for fresh adjudication, and the respondent was directed to obtain instructions for further proceedings.

Prima facie, recovery cannot be triggered on the basis of the remand order; interim protection granted against recovery pending further consideration.

Interim filing of record - Application for enabling filing of legible copies of annexures was allowed subject to conditions. - HELD THAT: - The Court permitted the petitioner to file legible copies of dim annexures, directing that the same be filed at least three days before the next date of hearing. This order was interlocutory and procedural, aimed at ensuring the record before the Court is legible for effective adjudication.

Application allowed subject to the petitioner filing legible copies of annexures within the time specified.

Final Conclusion: The High Court granted interim protection against recovery of the refunded amount in view of the appellate remand and allowed the petitioner to file legible annexures; the matter is listed for further hearing with respondents to obtain instructions.

Section 391 Cr.P.C. - appellate court taking further evidence - Additional evidence at appellate stage - sparing exercise in exceptional cases - Failure of justice as test for admitting additional evidence - Discretion of appellate court - necessity and reasons must be recorded - Photostat copy as secondary evidence - vulnerability to manipulation - Doctrine of finality - not a retrial

Section 391 Cr.P.C. - appellate court taking further evidence - Additional evidence at appellate stage - sparing exercise in exceptional cases - Failure of justice as test for admitting additional evidence - Photostat copy as secondary evidence - vulnerability to manipulation - Discretion of appellate court - necessity and reasons must be recorded - Whether the Appellate Court erred in refusing permission under section 391 Cr.P.C. to lead a photostat copy of the cheque as additional (secondary) evidence discovered in June 2017 - HELD THAT: - The Court held that the learned Additional Sessions Judge did not err in refusing the application. The power under section 391 is wide but must be exercised sparingly and only where additional evidence is necessary to prevent a failure of justice; reasons must be recorded. The petitioner's sole ground was discovery of a photostat copy of the cheque nearly nine years after the cheque was drawn and subsequent to trial; the petitioner itself stated the photostat was found while dealing with case documents, without alleging lack of prior possession or explaining the long delay. A photostat copy, by its nature, is susceptible to manipulation and, absent contemporaneous corroborative material, cannot be admitted lightly at the appellate stage so as to avoid transforming the appeal into a de novo trial. Given these circumstances and the existence of prior expert evidence on interpolation, admitting the impeachable secondary evidence would likely reopen the trial and prejudice the course of justice. The exercise of discretion by the Additional Sessions Judge was not perverse or unreasonable and therefore did not warrant interference by writ jurisdiction. [Paras 16, 17, 18, 21, 22]

Application to lead the photostat copy as additional evidence under section 391 Cr.P.C. refused and the refusal is upheld.

Final Conclusion: The writ petition is dismissed; the appellate court's refusal to permit the petitioner to lead the photostat copy of the cheque as additional evidence under section 391 Cr.P.C. was a proper exercise of discretion and does not call for interference.

Writ jurisdiction - maintainability of writ petition - refund claim where burden passed to third party or ultimate consumer - necessity of joinder of interested parties for adjudication of contractual and pricing disputes - jurisdictional limitation of writ courts to decide complex factual/contractual questions - leave to approach civil court - intra-court mandamus appeal - interference only for palpable infirmity or perversity

Writ jurisdiction - maintainability of writ petition - necessity of joinder of interested parties for adjudication of contractual and pricing disputes - jurisdictional limitation of writ courts to decide complex factual/contractual questions - refund claim where burden passed to third party or ultimate consumer - Whether the learned Single Judge was justified in dismissing the writ petition and leaving the petitioner free to seek remedy before the civil court. - HELD THAT: - The Single Judge examined the matter and concluded that the writ forum was unsuitable to adjudicate the dispute because neither the Organising States nor the distributor/selling agents were parties before the Court, and the petitioner (sole stockist) had limited or no role in the pricing structure under the statutory scheme. Determination of the entitlement to refund required examination of whether the burden of draw charges, paid by the petitioner on behalf of Organising States, had been passed on to a third party or the ultimate consumer - a question involving complex pricing and contractual arrangements. The Single Judge also noted that the petitioner relied on agreements to which necessary parties were not before the Court and that the respondents had raised limitation as a serious defence. Given these factual and evidentiary complexities and the absence of key parties, the learned Single Judge correctly held that the matters could not appropriately be decided in writ jurisdiction and therefore dismissed the petition while granting liberty to pursue civil remedies. The Division Bench, on intra Court review, found no palpable infirmity or perversity in that reasoning and held that interference was not warranted. [Paras 28, 29]

Impugned judgment dismissing the writ petition is upheld; petitioners left at liberty to approach the civil court.

Final Conclusion: The intra Court appeal is dismissed. The Single Judge's conclusion that the writ forum was inappropriate for resolving the contractual, pricing and limitation issues is sustained, and the petitioners are left free to pursue their claims in the civil court.