TaxTMI Updates e-Newsletter
Jun 19,2024

Right to be heard - principles of natural justice - requirement of a reasoned order - remand for fresh consideration

Right to be heard - requirement of a reasoned order - principles of natural justice - remand for fresh consideration - Validity of assessment orders where the assessee's written replies to show cause notices were referred to but not considered and no reasons were recorded for rejecting those replies. - HELD THAT: - The Court found that although the impugned orders refer to the petitioner's replies to the show cause notices, the assessing authority did not record any discussion of or reasons for rejecting those replies. The orders merely state that the reply is "not in order" and confirm the tax proposals without addressing the explanations and documents submitted by the petitioner (illustrated with defect no.1 concerning discrepancies between GSTR-3B and GSTR-1). The absence of considered findings on the petitioner's explanations amounts to failure to comply with the principles of natural justice and the requirement that an order rejecting a representation be reasoned. Consequently, the original orders could not be sustained and the matters were remanded for fresh consideration. The Court directed that the petitioner may file additional documents within two weeks of receipt of the order, the respondent must provide a reasonable opportunity including personal hearing, and fresh orders shall be passed within three months of receipt of any additional documents. [Paras 4, 5]

Impugned orders set aside and remitted for fresh consideration with directions to permit submission of additional documents within two weeks, grant a reasonable opportunity including personal hearing, and pass fresh reasoned orders within three months.

Final Conclusion: Writ petitions allowed in part; original assessment orders quashed for failure to consider the assessee's replies and to record reasons, and the matters are remanded for reconsideration in accordance with the Court's directions; no order as to costs.

Condonation of marginal delay in filing appeal - remand for disposal on merits - pre-deposit requirement under Section 107 of the GST enactments - de-freezing of bank account subject to pre-deposit

Condonation of marginal delay in filing appeal - remand for disposal on merits - Impugned order rejecting the petitioner's belated appeal was set aside and the matter was remitted to the Appellate Commissioner for fresh disposal on merits. - HELD THAT: - The Court found that though the appeal was filed 14 days after the statutory limitation, the delay was marginal. In the circumstances and having regard to the petitioner's contention of a clear case on merits, the Court exercised its jurisdiction to set aside the order rejecting the appeal and remitted the matter to the Appellate Commissioner for adjudication on merits. The remand directs the Appellate Commissioner to decide the appeal afresh and hear the petitioner on merits without reference to limitation.

Impugned order dated 29.02.2024 rejecting the belated appeal quashed; appeal remitted to the Appellate Commissioner for fresh disposal on merits.

Pre-deposit requirement under Section 107 of the GST enactments - The petitioner must make an enhanced pre-deposit as a condition for remand and adjudication of the appeal. - HELD THAT: - The Court conditioned the remand on the petitioner depositing an additional 20% of the disputed tax over and above the 10% pre-deposit already contemplated under Section 107 of the respective GST enactments. This requirement is imposed as a precondition to proceeding with adjudication on the merits before the Appellate Commissioner, who is to decide the appeal in accordance with law after such deposit.

Remand and adjudication permitted subject to deposit of an additional 20% of the disputed tax over and above the 10% pre-deposit.

De-freezing of bank account subject to pre-deposit - pre-deposit requirement under Section 107 of the GST enactments - Direction issued to de-freeze the petitioner's bank account after deducting the specified pre-deposit. - HELD THAT: - Because the impugned order was quashed and the remand was made subject to the deposit condition, the Court directed the third respondent to issue suitable directions to the bank to de-freeze the petitioner's account after deducting the additional 20% pre-deposit. The de-freezing is therefore conditional upon and consequent to the required deposit being effected from the account.

Bank account to be de-frozen after deduction of the stipulated 20% pre-deposit.

Final Conclusion: Writ petition allowed: impugned order rejecting the belated appeal set aside; appeal remitted to the Appellate Commissioner for fresh disposal on merits subject to deposit of an additional 20% over the 10% pre-deposit under Section 107; bank account to be de-frozen after deducting the said pre-deposit; Appellate Commissioner to dispose of the appeal within three months.

Refund claim under Section 77 - refund under Section 54(8)(d) - wrong availment of Input Tax Credit - excess/double payment refund claim - requirement to record reasons for rejection of refund - opportunity of personal hearing on refund claim

Refund claim under Section 77 - refund under Section 54(8)(d) - wrong availment of Input Tax Credit - requirement to record reasons for rejection of refund - Whether the petitioner's refund claim falls within the scope of sub section (1) of Section 77 read with clause (d) of sub section (8) of Section 54 and whether the respondent recorded reasons for rejecting that claim. - HELD THAT: - The impugned order concluded that the petitioner had wrongly availed ITC under CGST and SGST instead of IGST and therefore the case did not fall within Section 54(8). The High Court examined the operative portion of the impugned order and found that although the conclusion was recorded, no reasons were given for holding that the claim did not fall within the ambit of sub section (1) of Section 77 read with clause (d) of sub section (8) of Section 54. In that statutory context the respondent was required to consider the petitioner's submissions and record reasons for rejecting the statutory basis relied upon. Absence of such reasoning rendered the conclusion unsustainable and necessitated reconsideration. [Paras 5, 6, 8]

Conclusion that the claim does not fall within Section 77/Section 54(8)(d) set aside and remanded for fresh consideration with reasons to be recorded.

Excess/double payment refund claim - requirement to record reasons for rejection of refund - opportunity of personal hearing on refund claim - Whether the petitioner was entitled to refund for alleged excess or double payment (including July 2020) and whether the respondent adequately considered the petitioner's reply before rejecting the refund. - HELD THAT: - The respondent concluded there was no excess payment and refused the refund, but the High Court observed that the petitioner had specifically set out details in reply to the show cause notice which were not engaged with by the authority. The Court held that the authority failed to assign proper reasons for the conclusion of 'no excess payment' and accordingly the matter could not be finally decided without fresh consideration. The Court directed that the petitioner be given a reasonable opportunity, including a personal hearing, before a fresh decision is taken. [Paras 6, 7, 8]

Finding of no excess payment set aside and remanded for fresh consideration after affording opportunity to the petitioner, including personal hearing.

Final Conclusion: Impugned order dated 28.12.2023 is set aside and the matters remanded for fresh consideration; respondent to afford the petitioner a reasonable opportunity, including a personal hearing, and pass a fresh reasoned order within two months from receipt of the copy of this order.

Liberty to file statutory appeal - entertainment of appeal despite portal lock - mandatory deposit of 10% of the disputed tax - appeal under Section 107 of the GST Act, 2017 - hearing on merits - direction for expeditious disposal

Liberty to file statutory appeal - entertainment of appeal despite portal lock - mandatory deposit of 10% of the disputed tax - appeal under Section 107 of the GST Act, 2017 - Petitioner permitted to file a statutory appeal against the impugned order within a time extended by the Court subject to conditions - HELD THAT: - The Court found it appropriate to grant the petitioner an opportunity to challenge the impugned order notwithstanding that the GST portal was locked and the order had been uploaded under an erroneous name. The petitioner was given liberty to file the statutory appeal before the Appellate Commissioner within 30 days from receipt of a copy of the order, on condition of depositing the mandatory 10% of the disputed tax within that period. Upon such compliance, the Appellate Commissioner is directed to entertain the appeal under Section 107 of the GST Act, 2017. The Court recorded that the petitioner shall be heard and that the appeal will be disposed of on merits and in accordance with law. [Paras 8]

Liberty granted to file appeal within 30 days on deposit of 10% of disputed tax; appeal to be entertained under Section 107 upon such deposit

Hearing on merits - direction for expeditious disposal - Appellate Commissioner directed to hear the petitioner and decide the appeal expeditiously - HELD THAT: - The Court directed that, subject to the petitioner complying with the deposit and filing conditions, the Appellate Commissioner shall admit and hear the appeal and dispose of it on merits and in accordance with law within a period of three months from the date of admission. The petitioner is entitled to personal hearing before the Appellate Commissioner, and the disposal must be expeditious as mandated by the order. [Paras 8]

Appellate Commissioner to hear the petitioner and decide the appeal on merits within three months of admission

Final Conclusion: Writ petition disposed of by granting the petitioner liberty to file the statutory appeal within 30 days from receipt of this order, subject to depositing 10% of the disputed tax; on such compliance the Appellate Commissioner shall entertain the appeal under Section 107 of the GST Act, 2017, hear the petitioner and dispose of the appeal on merits within three months.

Levy of goods and services tax on transfer of leasehold property - distinction between Schedule - IIA supply of service and sale of land on transfer of leasehold rights - interim restraint on passing final adjudicatory order - requirement of Court's permission before final order - joinder for hearing with allied matters

Levy of goods and services tax on transfer of leasehold property - distinction between Schedule - IIA supply of service and sale of land on transfer of leasehold rights - Challenge to Show Cause Notice dated 04.03.2024 levying GST on transfer of leasehold property and petitioner's contention that the transaction amounts to sale of land, not a supply under ScheduleIIA. - HELD THAT: - The petitioner has challenged the Show Cause Notice dated 04.03.2024 issued by the tax authority seeking levy of GST on transfer of leasehold rights in land allotted by the Gujarat Industrial Development Corporation. The petitioner's primary contention is that ScheduleIIA addresses supply by way of lease, tenancy or licence as a service, whereas the transaction in question is effectively a sale of land on transfer of leasehold rights and therefore outside the impugned supply classification. Having considered the submissions, the Court issued notice and directed that the respondent authority may proceed with adjudication of the Show Cause Notice but restrained the authority from passing any final order during the pendency of the petition without obtaining permission of this Court. The Court also permitted service by email and directed that the petition be heard along with allied Special Civil Applications Nos. 11345 of 2023 and 17792 of 2023. [Paras 5]

Notice issued returnable on 03.07.2024; respondent may adjudicate but shall not pass any final order without this Court's permission; service by email permitted; matter to be heard with Special Civil Application Nos.11345 and 17792 of 2023.

Final Conclusion: Interim relief granted restraining the tax authority from passing any final adjudicatory order on the Show Cause Notice dated 04.03.2024 without the Court's permission; substantive challenge as to classification of the transfer (service under ScheduleIIA v. sale of land) is admitted for adjudication in the writ petition and to be heard with allied matters.

Opportunity to be heard - remand for fresh adjudication - interim deposit condition for relief - attachment of bank account and lifting thereof - GST exemption for packing and labeling services - discrepancy between GSTR-3B returns and Form 26AS

Opportunity to be heard - remand for fresh adjudication - interim deposit condition for relief - discrepancy between GSTR-3B returns and Form 26AS - Impugned assessment orders set aside and remanded for fresh consideration subject to a conditional interim deposit. - HELD THAT: - The Court found that the tax proposals arose from a discrepancy between the petitioner's GSTR-3B returns and Form 26AS and that the proposals were confirmed because the petitioner did not reply to the show cause notices. As the petitioner asserted lack of opportunity to contest the demands on merits, and having regard to the contention that certain services (packing, labelling of fruits and vegetables) attract exemption, the impugned orders were set aside subject to the petitioner remitting 10% of the disputed tax demand for each assessment period. Credit is to be given for the sum already appropriated from the petitioner's bank account. The petitioner is directed to make the remittance within two weeks from receipt of this order and may submit replies to the respective show cause notices within the same period. Upon receipt of the petitioner's replies and being satisfied that the stipulated 10% for each period has been received, the respondent must grant a reasonable opportunity, including personal hearing, and thereafter pass fresh orders on merits within three months from receipt of the replies. [Paras 5, 6]

Impugned orders are set aside and remanded for fresh adjudication after the petitioner remits 10% of the disputed tax demand for each assessment period (with credit for amounts appropriated); remittance and reply to be made within two weeks and fresh orders to be passed within three months upon compliance.

Attachment of bank account and lifting thereof - opportunity to be heard - Bank attachment raised and petitioner permitted to contest by filing reply; writ petitions disposed of on terms. - HELD THAT: - As a consequence of setting aside the impugned orders, the Court ordered that the prior attachment of the petitioner's bank account be lifted. The petitioner was allowed to file responses to the show cause notices within the two week period stipulated for remittance, and the writ petitions were disposed of on the stated terms without costs. [Paras 6, 7]

Bank attachment is lifted; petitioner permitted to submit replies within the stipulated period; writ petitions disposed of on the above terms.

Final Conclusion: Writ petitions allowed in part: original orders set aside and remanded for fresh consideration after compliance with the conditional interim deposit and opportunity to be heard; bank attachment lifted; fresh orders to be passed within three months of receipt of the petitioner's replies.

Setting aside order for failure to participate - remand for fresh consideration - conditional remand on deposit of a percentage of disputed tax - opportunity of personal hearing and to file reply - lifting of bank attachment - consideration of illness as cause for non-participation

Setting aside order for failure to participate - consideration of illness as cause for non-participation - opportunity of personal hearing and to file reply - Impugned order confirming tax liability for non-response was unsustainable and required reconsideration. - HELD THAT: - The court found that the original order confirmed the tax proposal solely because the petitioner did not respond to the show cause notice or attend the personal hearing. Having regard to the petitioner's affidavit and counsel's submissions that the petitioner was unable to participate due to a serious illness, the interest of justice required that the original order be set aside and the matter reconsidered. The petitioner was permitted to submit a reply within the specified timeframe and, once the respondents were satisfied that the conditional deposit had been made, to be afforded a reasonable opportunity including a personal hearing before a fresh decision was taken. The remand was directed to facilitate adjudication on merits after giving the petitioner that opportunity rather than to adjudicate the dispute on the basis of non-participation alone. [Paras 5, 6]

Impugned order set aside; matter remanded for fresh consideration after the petitioner files a reply and is afforded personal hearing.

Conditional remand on deposit of a percentage of disputed tax - Reconsideration was made conditional upon the petitioner depositing 10% of the disputed tax demand within a specified period. - HELD THAT: - Counsel for the petitioner agreed on instructions to remit 10% of the disputed demand as a condition for remand. The court imposed this condition, directing the petitioner to remit the agreed percentage within two weeks of receipt of the order and making the remand and subsequent hearing contingent upon receipt of that payment. The condition was a term of the order remanding the matter for fresh adjudication. [Paras 5, 6]

Remand ordered subject to the petitioner remitting 10% of the disputed tax demand within two weeks.

Lifting of bank attachment - The bank attachment made pursuant to the original order was lifted as a consequence of setting aside that order. - HELD THAT: - Because the original order in which the attachment arose was set aside, the court directed that the bank attachment be raised. The lifting of attachment followed from the decision to set aside the impugned order and remit the matter for reconsideration. [Paras 6]

Bank attachment raised.

Final Conclusion: The writ petition was allowed by setting aside the impugned order and remanding the matter for fresh consideration on terms: the petitioner to remit 10% of the disputed tax demand and file a reply within two weeks, respondents to provide a hearing and pass a fresh order within three months; the bank attachment consequential to the original order is lifted.

Definition of "local authority" under Section 2(69) of the CGST Act, 2017 - Governmental Authority as per Notification No. 31/2017-90% government participation test - reverse charge mechanism for services supplied by Government/Local Authority to a business entity (Notification No. 13/2017) - works contract treated as supply of services (Schedule II and Section 2(119) of CGST Act) - exemption for services by a Governmental Authority related to functions entrusted to municipalities/panchayats (Notification No. 12/2017)

Reverse charge mechanism for services supplied by Government/Local Authority to a business entity (Notification No. 13/2017) - exemption for services by a Governmental Authority related to functions entrusted to municipalities/panchayats (Notification No. 12/2017) - works contract treated as supply of services (Schedule II and Section 2(119) of CGST Act) - Liability of the applicant to pay GST under reverse charge or forward charge in respect of the MOU work - HELD THAT: - The Authority examined whether the supplier (UKPSVEN) qualifies as a 'local authority' under the CGST Act; having found that UKPSVEN does not satisfy the cumulative indicia of 'local authority'-notably absence of appreciable autonomy and lack of control/management of a municipal/local fund-the supplier was held not to be a 'local authority'. UKPSVEN was held to be a 'Governmental Authority' formed by State legislation and entrusted with functions (water supply/construction) akin to those in article 243W/243G. Consequently, the Notification prescribing reverse charge for services supplied by Central/State/Union territory or local authorities to a business entity (Notification No. 13/2017) does not apply. Further, the construction services under the MOU pertain to an activity entrusted to municipality/panchayat (supply of water) and fall within the exemption as Governmental Authority services under Notification No. 12/2017; therefore the supply is exempt and there is no liability on the applicant either under reverse charge or forward charge. [Paras 8, 9]

No applicability of reverse charge or forward charge on the applicant; the supply is exempt as a Governmental Authority service and the supplier is not a 'local authority'.

Definition of "local authority" under Section 2(69) of the CGST Act, 2017 - definition of "local authority" in General Clauses Act and R.C. Jain test for local authority - Governmental Authority as per Notification No. 31/2017-90% government participation test - Whether UKPSVEN can have dual status as 'local authority' for some purposes and not for others - HELD THAT: - Applying the tests laid down in the General Clauses Act and elucidated by the Supreme Court in R.C. Jain, the Authority analysed statutory origin, constitution, autonomy, entrustment of functions and control/management of funds. UKPSVEN, though a body corporate constituted by State legislation and performing governmental functions, lacks the distinctive attributes required to be a 'local authority'-notably appreciable autonomy and an entrusted municipal/local fund. Given these findings and corroborative precedents and rulings, the Authority rejected the proposition of a 'dual status' in the instant context. [Paras 8, 9]

UKPSVEN does not qualify as a 'local authority' and cannot be treated as having dual status for the purposes considered.

Final Conclusion: The Authority holds that M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam is not a 'local authority' but is a 'Governmental Authority'; the works contract under the MOU is a construction service related to supply of water and is exempt under Notification No. 12/2017, and therefore the applicant is neither liable to pay tax under reverse charge nor under forward charge; UKPSVEN cannot be treated as having dual status for the purposes considered.

Notice before attachment under Section 226(3)(iii) of the Income Tax Act - Attachment of joint bank account for recovery of assessee's dues - Liability of joint account holders - Notice to assessee versus notice to joint holders

Notice before attachment under Section 226(3)(iii) of the Income Tax Act - Attachment of joint bank account for recovery of assessee's dues - Liability of joint account holders - Whether separate notice to secondary/joint account holders was required before attachment of the joint savings accounts for recovery of the primary account holder's outstanding tax dues under Section 226(3)(iii) of the Income Tax Act, 1961. - HELD THAT: - The petitioners were shown to be secondary (joint) holders and their uncle the primary holder in the contested joint savings accounts. Section 226(3)(iii) contemplates forwarding a copy of the notice to the assessee at his last address and, in the case of a joint account, to all joint holders at their last addresses known to the Assessing Officer/Tax Recovery Officer. The court construed the provision to require notice to the person from whom money is due (the assessee/defaulter) and not to impose a requirement of separate substantive notice to joint holders who are secondary account holders merely because their names appear on the account. Any grievance of the joint holders as to recovery from the joint account may be pursued by them before the appropriate forum in accordance with law.

The writ petition is not entertained and is disposed of; the attachment and notice issued for recovery of the primary account holder's dues are sustained, and no separate pre attachment notice to the petitioners as secondary account holders was required.

Final Conclusion: Writ petition dismissed; court holds that, in the facts of this case, attachment of the joint savings accounts for recovery of the primary account holder's tax dues did not require a separate notice to the petitioners as secondary/joint holders, who may seek any remedy available in law.

Nil withholding tax certificate under Section 197 - mootness / academic dispute - fresh application and independent examination - entitlement to benefit of CBDT Circular No.E/257 - reservation of liberty to assail impugned and subsequent orders

Nil withholding tax certificate under Section 197 - mootness / academic dispute - Petition challenging the validity of the Section 197 certificate for FY 2023-24 disposed as academic as the year had ended - HELD THAT: - The writ petition sought quashing of the certification issued under Section 197 for FY 2023-24 and the grant of a 'Nil' withholding tax certificate. The Court observed that the financial year 2023-24 had already concluded and, given the passage of the period in respect of which relief was sought, there was no justification to continue adjudication of the challenge on merits. Accordingly, the petition was not decided on its substantive merits but disposed of on the ground that the dispute had become academic. [Paras 3, 5]

Writ petition relating to FY 2023-24 disposed as academic and not adjudicated on merits

Fresh application and independent examination - reservation of liberty to assail impugned and subsequent orders - Liberty granted to the petitioner to file a fresh application under Section 197 for FY 2024-25 and for such application to be examined independently - HELD THAT: - Recognising the petitioner's right to seek relief afresh for the subsequent tax year, the Court granted liberty to apply under Section 197 for FY 2024-25. The Court directed that any fresh application shall be considered and disposed of independently, keeping open all rights and contentions of the parties. The Court also reserved liberty to the petitioner to challenge the impugned order again and any adverse orders that may follow, thereby preserving appellate remedies without deciding the substantive tax-year-linked question. [Paras 6, 8]

Liberty to file fresh Section 197 application for FY 2024-25; fresh application to be independently examined; liberty to assail impugned and subsequent orders reserved

Entitlement to benefit of CBDT Circular No.E/257 - Direction that, if the petitioner succeeds in any fresh Section 197 application, it would be entitled to claim the benefit of CBDT Circular No.E/257 - HELD THAT: - Without adjudicating the underlying merit of the tax liability or the original certification, the Court provided a consequential assurance: in the event the petitioner obtains relief on a fresh application, it may claim the benefit of CBDT Circular No.E/257 (relating to TDS payments through multiple challans in a month). This is a conditional ruling preserving the petitioner's right to that administrative relief if substantive success is achieved on fresh consideration. [Paras 7]

If successful on fresh application, petitioner entitled to claim benefit of CBDT Circular No.E/257

Final Conclusion: The petition challenging the Section 197 certificate for FY 2023-24 was disposed as academic; petitioner granted liberty to file a fresh Section 197 application for FY 2024-25 which must be independently considered, with the Court noting that success on such fresh application would permit claiming the benefit of CBDT Circular No.E/257 and reserving liberty to challenge the impugned and subsequent orders.

Speculative transaction - actual delivery - high seas sale - delivery of documents of title - disallowance under section 36(1)(iii) - availability of interest-free funds - set-off of speculative loss

Speculative transaction - actual delivery - high seas sale - delivery of documents of title - set-off of speculative loss - Transactions in relation to high sea sales of edible oil are not speculative within the meaning of section 43(5) and the business loss may be treated as business loss for set-off purposes. - HELD THAT: - The Tribunal examined whether the contracts were ultimately settled otherwise than by actual delivery. The assessee established a chain of events supported by documentary evidence (invoice, bill of lading, weight/quality certificates, high seas sale agreement, copy of import invoice and delivery reports) accepted by the AO, showing that the goods were purchased by an importer, sold on high seas by transfer of title documents, and ultimately physically delivered to the end user at the port of arrival after customs formalities. The coordinate and High Court authorities relied upon by the parties were considered and distinguished on facts where delivery was not contemplated. Applying the principle that where delivery is in fact effected (including transfer of documents of title and delivery to carrier) the transaction does not fall within the ambit of a speculative transaction, the Tribunal held that the ultimate settlement occurred by actual delivery to the ultimate buyer and therefore the transactions do not fall within section 43(5). All departmental grounds founded on the contention of speculation were rejected. [Paras 12, 14, 15]

Revenue's appeal dismissed; CIT(A)'s deletion of the speculative-treatment (and allowance of the loss) upheld.

Disallowance under section 36(1)(iii) - availability of interest-free funds - Addition under section 36(1)(iii) by disallowing interest on the ground that assessee's own funds were deployed was deleted for want of material to displace audited balance-sheet figures showing sufficient interest-free funds. - HELD THAT: - The Tribunal considered whether the assessee had sufficient interest-free funds at the relevant time to demonstrate that the advance to a third party was made out of such funds. The assessee produced audited balance sheets showing substantial interest-free unsecured loans and other interest-free funds (figures reflected for year-end 31-03-2016 and 31-03-2017) and traced receipts subsequently. The Revenue did not controvert the audited figures. Relying on the factual finding that the audited balance-sheet figures are credible and following the Supreme Court authority that where interest-free funds are shown to be sufficient it is to be presumed investments/advances were made from such funds, the Tribunal found no reason to sustain the proportionate disallowance and deleted the addition. [Paras 25, 26, 28]

Assessee's appeal allowed; addition under section 36(1)(iii) deleted.

Final Conclusion: The Tribunal dismissed the revenue's appeal holding that the high-seas trading transactions involved actual delivery to the ultimate buyer and were not speculative for AY 2017-18, and allowed the assessee's appeal by deleting the disallowance under section 36(1)(iii) on the basis of sufficient interest-free funds shown in audited accounts.

Disallowance under section 14A - Recording satisfaction under section 14A(2) - Rule 8D computation - Application for recomputation under section 155(18) and Rule 132 (Form No.69) - Effect of suo moto disallowance by assessee

Disallowance under section 14A - Recording satisfaction under section 14A(2) - Rule 8D computation - Effect of suo moto disallowance by assessee - Validity of disallowance under section 14A read with Rule 8D for AY 2018-19 where Assessing Officer did not record satisfaction under section 14A(2). - HELD THAT: - The Tribunal examined the assessment record and found that the Assessing Officer applied the mechanical formula in Rule 8D to compute disallowance without recording the requisite dissatisfaction as mandated by section 14A(2). The assessee had made a suo moto disallowance and explained that interest free funds exceeded investments generating exempt income; the AO nonetheless invoked Rule 8D and made an additional disallowance. Relying on the reasoning in the cited Gujarat High Court decisions, the Tribunal held that recording of satisfaction by the Assessing Officer is a condition precedent to invoking Rule 8D and that Rule 8D cannot be applied automatically merely because mixed funds or exempt income exist. As the AO did not record such satisfaction, the disallowance could not be sustained and was deleted. [Paras 10, 11, 12]

Disallowance under section 14A r.w. Rule 8D for AY 2018-19 deleted and the appeal allowed.

Application for recomputation under section 155(18) and Rule 132 (Form No.69) - Effect of the assessee's application in Form No.69 under section 155(18) and Rule 132 and the obligation of the Assessing Officer to act on it for AY 2020-21. - HELD THAT: - The Tribunal noted that section 155(18) and Rule 132 provide for recomputation of income where a previously allowable deduction for surcharge/cess is to be withdrawn if the assessee files the prescribed application and pays the tax within the stipulated time. The assessee produced acknowledgement showing electronic filing of Form No.69 within the prescribed period; however, no action had been taken by the Assessing Officer and the CIT(A) did not adjudicate the application. In these circumstances the Tribunal directed that the Assessing Officer dispose of the application in accordance with law and recompute income if warranted, following the statutory procedure. [Paras 21]

Ground allowed; matter remitted to the Assessing Officer to dispose of the Form No.69 application and act in accordance with section 155(18) and Rule 132.

Disallowance under section 14A - Recording satisfaction under section 14A(2) - Rule 8D computation - Sustainability of disallowance under section 14A r.w. Rule 8D for AY 2020-21 in light of the Assessing Officer not recording satisfaction under section 14A(2). - HELD THAT: - The Tribunal applied the same legal principle decided for AY 2018-19, observing that the Assessing Officer had not recorded the requisite dissatisfaction before invoking Rule 8D. Following that determinative finding and the precedents relied upon, the Tribunal held the disallowance under section 14A r.w. Rule 8D for AY 2020-21 to be unsustainable. [Paras 22]

Disallowance under section 14A r.w. Rule 8D for AY 2020-21 allowed for the assessee (appeal allowed for statistical purposes).

Final Conclusion: Both appeals allowed: the disallowances under section 14A read with Rule 8D are quashed for lack of recorded satisfaction by the Assessing Officer; the AY 2018-19 appeal is allowed on merits; for AY 2020-21 the appeal is allowed for statistical purposes and the Assessing Officer is directed to dispose of the Form No.69 application under section 155(18)/Rule 132 in accordance with law.

Exemption under section 11-requirement of filing Form 10B - Effect of filing Form 10B before issuance of intimation under section 143(1) - Condonation of delay in filing Form 10B and administrative discretion - Applicability of section 234F-due date for filing return where audit is required under section 139(1)

Exemption under section 11-requirement of filing Form 10B - Effect of filing Form 10B before issuance of intimation under section 143(1) - Condonation of delay in filing Form 10B and administrative discretion - Claim of application of income under section 11 cannot be denied solely because Form 10B was not uploaded with the return when the audit report was signed before the return and the Form 10B was filed on the portal before issuance of the intimation under section 143(1). - HELD THAT: - The Tribunal examined the timeline and found that the auditor had signed the audit report on 21-09-2018 and the return due date was 26-09-2018, but the Form 10B was uploaded on the portal on 20-01-2020. The intimation under section 143(1) denying the exemption was issued on 08-02-2020; therefore, as on the date of the intimation the Form 10B had already been submitted. Having regard to the absence of any deliberate or mala fide intention and to judicial precedents where delays in filing Form 10B were condoned or where submission before completion of assessment was accepted, the Tribunal held that denial of exemption only on account of omission to e-file Form 10B with the return was not justified when the audit report had been submitted to tax authorities before the 143(1) intimation. The Tribunal applied these principles to allow the claim of application of income under section 11. [Paras 7, 8]

Ground of appeal allowing the claim of application of income under section 11 is allowed.

Applicability of section 234F-due date for filing return where audit is required under section 139(1) - Fee under section 234F for delayed filing of return was not leviable because the return was filed on 26-09-2018, within the due date of 30-09-2018 applicable to persons whose accounts are required to be audited. - HELD THAT: - The Tribunal referred to Explanation 2(a)(ii) of section 139(1) to determine the due date for a person whose accounts are required to be audited, finding the due date to be 30th September. The assessee filed the return on 26th September, 2018, which is before the prescribed date. Since section 234F imposes fee only when a person fails to furnish the return within the time prescribed under section 139(1), the Tribunal concluded that section 234F did not apply and the fee was incorrectly levied. [Paras 10]

Additional ground challenging levy under section 234F is allowed.

Final Conclusion: The appeal is allowed: the claim of application of income under section 11 is restored because Form 10B was submitted to tax authorities before issuance of the 143(1) intimation, and the fee under section 234F is quashed as the return was filed within the due date applicable to audited assessees for AY 2018-19.

Validity of assessment under section 153A in absence of incriminating material seized during search - Admissibility and evidentiary value of foreign electronic data received from a Competent Authority (pen drive / USB) - Effect of assessee's post-search admission and filing of revised return on jurisdiction and assessment - Taxability of foreign bank credits under Article 23(3) of the India-UK DTAA ('may be taxed') - Extension of time for completion of assessment by reference to FT&TR Division and applicability of Notification No. 2903(E) dated 27.12.2011 - Notional interest additions based on presumed continuation of foreign bank balance - Levy of penalty under section 271(1)(c) and applicability of Explanation 5A

Validity of assessment under section 153A in absence of incriminating material seized during search - Effect of assessee's post-search admission and filing of revised return on jurisdiction and assessment - Whether the assessments for AY 2006-07 and AY 2007-08 completed under section 153A are invalid because no incriminating material was seized during the search - HELD THAT: - The Tribunal held that although the department had information about the HSBC account prior to the search, the assessee, when confronted with the detailed statement during post-search proceedings, accepted ownership of the account and filed revised returns declaring the amounts. The Bench found that material which existed with the revenue and was confronted to the assessee, and which the assessee accepted and did not retract, could be treated as proper for the purposes of assessment under section 153A. On these facts the Tribunal distinguished authorities where no corroborative material was available and assessed that the assessees' post-search acceptance and revised returns defeated the contention that section 153A jurisdiction could not be exercised. Accordingly the Tribunal sustained the assessments for AY 2006-07 and AY 2007-08.

Assessments for AY 2006-07 and AY 2007-08 under section 153A are valid and appeals on quantum for those years are dismissed.

Admissibility and evidentiary value of foreign electronic data received from a Competent Authority (pen drive / USB) - Effect of assessee's post-search admission and filing of revised return on evidentiary objections - Whether the bank statement data received from foreign authorities on a pen drive was inadmissible and could not form basis of assessment - HELD THAT: - The assessee argued that the pen drive data lacked requisite certification under section 65B of the Indian Evidence Act and therefore had no evidentiary value. The Tribunal noted the line of authorities on inadmissibility where the department failed to comply with section 65B formalities. However, on the facts here the Tribunal observed that the assessee, when confronted with the statement, accepted it and filed revised returns and never retracted that acceptance in assessment or appellate proceedings. Given that acceptance by the assessee confirmed the contents and there was no retraction, the Tribunal declined to adopt the assessee's objection to admissibility and treated the material as sufficient for assessment purposes in respect of the years where the assessee had accepted the contents.

Evidentiary objection to pen drive data rejected on facts where assessee accepted the statement and filed revised returns; data treated as usable for assessment in the relevant years.

Notional interest additions based on presumed continuation of foreign bank balance - Whether notional interest additions for AY 2008-09 to AY 2012-13 could be sustained where the bank statement showed the account as closed - HELD THAT: - The Tribunal found that the departmental information (the bank statement) itself indicated the account was closed in October 2006 and did not show interest credits thereafter. The Assessing Officer had no material evidencing continuation of the account or accrual of interest beyond the period covered by the statement. In absence of any such material or recovery of corroborative evidence during search, the Tribunal held that applying a presumption to tax notional interest was not justified and that additions based on such presumption were unsustainable.

Notional interest additions for AY 2008-09 to AY 2012-13 are deleted and the appeals for those years are allowed.

Taxability of foreign bank credits under Article 23(3) of the India-UK DTAA ('may be taxed') - Interaction of DTAA benefit and domestic assessment where assessee has not established source or foreign taxation - Whether credits in the HSBC London account could not be taxed in India by reason of Article 23(3) of the India-UK DTAA - HELD THAT: - The assessee contended Article 23(3) (items of income arising in the other State may be taxed in that other State) barred taxation in India. The Tribunal accepted the legal propositions on interpretation of 'may be taxed' but concluded that the assessee had not established that the amounts arose in the UK or had been taxed there. The assessee had declared the sums as 'income from other sources' without disclosing or proving the foreign-source nature or foreign tax treatment. Mere declaration in a revised return, accepted by the AO, did not automatically attract Article 23(3) relief. On these facts the DTAA plea was rejected.

Claim of non-taxability in India under Article 23(3) of the Indo-UK DTAA rejected for lack of proof that the income arose in, and was taxable in, the UK.

Extension of time for completion of assessment by reference to FT&TR Division and applicability of Notification No. 2903(E) dated 27.12.2011 - Whether extension of limitation for completion of assessments by reference to FT&TR Division was invalid because Exchange of Information amendments applied only to fiscal years beginning on or after 01.04.2011 - HELD THAT: - The assessee challenged the validity of the reference made to foreign authorities and contended the Exchange of Information protocol (Notification No. 2903(E)) applied only to fiscal years from 01.04.2011 so that waiting for information for earlier years was futile. The Tribunal held that there was no bar on the AO seeking information from FT&TR Division in order to obtain information from the relevant counterpart (here UK) and rejected the contention that the reference was invalid as a ground to invalidate the assessments. The challenge to the extension was therefore not accepted on the facts.

Challenge to the extension of time based on the notification's temporal scope rejected; AO's reference to FT&TR Division held not invalid on these facts.

Levy of penalty under section 271(1)(c) and applicability of Explanation 5A - Whether penalty under section 271(1)(c) (including enhancement by CIT(A)) was sustainable in respect of the assessed amounts - HELD THAT: - The Tribunal analysed Explanation 5A which treats post-search disclosure of assets or income as deemed concealment where incriminating material is found during search. On the facts the Tribunal found no incriminating material was discovered during the search; the department possessed the pen drive information prior to search and the assessee accepted the matters only post-search and filed revised returns to 'buy peace'. Because Explanation 5A applies where assets/income are found in the course of search, it was held inapplicable here. The Tribunal further noted judicial authorities that accept returns filed under section 153A when accepted by AO preclude penalty under section 271(1)(c). Consequently the Tribunal deleted the penalties for all contested years and set aside the CIT(A)'s enhancement where applicable.

Penalties under section 271(1)(c) for AY 2006-07 to AY 2012-13 are deleted; enhancement by CIT(A) is also vacated.

Reliability of loose memorandum/loose sheets found during search as basis for additions - Whether addition of alleged fictitious expenditure (AY 2010-11) based on a loose accountant's note was sustainable - HELD THAT: - The Tribunal observed that a loose accountant's note without direct linkage to the assessee's books or corroborative material does not possess independent evidentiary value to support an addition. The assessee followed cash accounting and produced details of expenses; the AO could not identify any specific expense shown to be fictitious. On these facts the Tribunal upheld the CIT(A)'s deletion of the addition.

Departmental quantum appeal for AY 2010-11 is dismissed; addition based on the loose sheet is deleted.

Final Conclusion: The Tribunal dismissed the assessee's appeals on quantum for AY 2006-07 and AY 2007-08 (assessments under section 153A sustained), allowed the assessee's quantum appeals for AY 2008-09 to AY 2012-13 (deleting notional interest additions), deleted the penalties under section 271(1)(c) for AY 2006-07 to AY 2012-13 (including vacating the CIT(A)'s enhancement), and dismissed the revenue's departmental appeal relating to AY 2010-11; dispositive conclusions rest on the facts that the assessee accepted the foreign bank statement and filed revised returns, absence of material supporting notional interest beyond the statement period, inapplicability of Explanation 5A on these facts, and failure of the assessee to establish entitlement to DTAA relief.

Remand for de novo adjudication - Duty of Assessing Officer to consider fresh claims - Consideration of claims not made in the return (Goetze principle) - Adjournment

Adjournment - Summary disposal - Adjournment petition rejected and appeals heard despite absence of authorised representative - HELD THAT: - The Bench examined the adjournment application filed on behalf of the assessee and concluded that the matters were simple and did not require in-depth factual verification. The request for one month's adjournment based on personal difficulties of the authorised representative was refused and the Bench proceeded to decide the appeals on merits. The Tribunal therefore denied the delay/adjournment prayer and disposed the appeals without granting the requested adjournment. [Paras 4]

Adjournment application rejected and appeals disposed on merits.

Remand for de novo adjudication - Duty of Assessing Officer to consider fresh claims - Consideration of claims not made in the return (Goetze principle) - Cases restored to Assessing Officer for de novo adjudication and all issues left open for fresh claims and consideration - HELD THAT: - On review of records and orders of lower authorities the Tribunal observed that various beneficial claims available to the assessee were not considered. Rather than finally adjudicating on substantive exemptions or registration, the Tribunal restored the matters in their entirety to the file of the Assessing Officer for fresh adjudication. The Tribunal expressly permitted the assessee to advance any fresh claims and directed that the Assessing Officer must consider such claims, including those not originally made in the return, in accordance with the principle laid down in Goetze (India) Ltd. v. CIT. The assessee was directed to make claims in writing to enable consideration by the Assessing Officer. [Paras 10, 11]

All issues remanded to the Assessing Officer for de novo adjudication; assessee permitted to raise fresh claims and AO to consider claims in accordance with the Goetze principle.

Final Conclusion: Adjournment refused and appeals proceeded; the Tribunal did not decide the substantive exemption or registration questions but restored the matters to the Assessing Officer for fresh, de novo consideration, permitting the assessee to raise fresh claims and directing the AO to consider claims not previously made in the return in accordance with the Goetze principle; appeals partly allowed for statistical purposes.

Condonation of delay - protective addition - substantive addition - assessment in the hands of the society - reliance on tribunal precedent

Condonation of delay - bonafide belief - rectification application - Whether the delay in filing the appeals should be condoned - HELD THAT: - The assessee explained that appeals were filed late because, after this Tribunal deleted the substantive addition in the hands of Shri Manish Kothari and directed assessment of the income in the hands of the society, the assessee bonafide believed that the protective additions in its hands would be automatically deleted. The assessee acted on advice of tax consultants and filed a rectification application under section 154 before the AO. The Tribunal found these facts undisputed, noted absence of malafide or deliberate negligence and that the protective additions did not result in tax demand against the assessee. Having regard to these peculiar facts and in the interest of justice, the Tribunal exercised its discretion to condone the delay in filing the appeals. [Paras 4]

Delay in filing the appeals is condoned.

Protective addition - substantive addition - assessment in the hands of the society - reliance on tribunal precedent - peak credit - Whether the protective additions made in the assessee's hands on account of cash deposit entries found in the pocket diary are liable to be deleted - HELD THAT: - The AO made protective additions in the assessee's hands based on pocket diary entries seized during survey at Vardhman Sakh Sahakarita Maryadit Ujjain, while substantive additions were made in the hands of Shri Manish Kothari. This Tribunal, in earlier proceedings concerning the society and Manish Kothari, held that income on account of unexplained cash deposits is to be assessed in the hands of the society (a separately legal entity) and not in the hands of the office bearer, and that any quantification should be by reference to peak bank balance or service charge. Relying on that precedent and on a subsequently decided identical case (Smt. Sonal Chhablani v. ITO), the Tribunal concluded that once the substantive addition in the hands of Manish Kothari was deleted, the corresponding protective additions in the hands of other individuals would not survive. Applying that reasoning to the present appeals, the Tribunal deleted the protective additions in the assessee's hands for the specified assessment years. [Paras 10, 12]

Protective additions in the assessee's hands are deleted by following the Tribunal's earlier decisions that the cash-deposit income is to be assessed in the hands of the society and that protective additions do not survive once substantive additions are deleted.

Final Conclusion: Appeals are partly allowed: delay in filing is condoned and the protective additions made in the assessee's hands for the stated assessment years are deleted, following the Tribunal's earlier decisions that such cash-deposit income is to be assessed in the hands of the society.

Stay of recovery - indemnity bond cum undertaking - prima facie case on jurisdiction and merits - reassessment under deemed notice under Section 148A(b) - limitation of reassessment proceedings - permanent establishment (PE) - presumptive taxation under Section 44BBB

Stay of recovery - indemnity bond cum undertaking - prima facie case on jurisdiction and merits - Stay of recovery of outstanding demands for assessment years 2013-14 to 2018-19 subject to security - HELD THAT: - The Tribunal examined the assessee's plea that reassessment proceedings (initiated under erstwhile section 148 and deemed to be under Section 148A(b)) are time-barred and that the tax treatment with respect to reimbursement of salaries and applicability of presumptive taxation under Section 44BBB are contestable. Having given a preliminary consideration to the contentions and authorities relied upon by the assessee, the Tribunal recorded a prima facie view that the assessee has a good case on jurisdictional issues and on merits. The departmental representative sought deposit; the assessee offered to furnish an indemnity bond cum undertaking equal to 20% of the outstanding demand. Balancing these factors, the Tribunal exercised its discretionary power to stay recovery, conditioning the stay on the assessee furnishing security in the form of an indemnity bond cum undertaking to the satisfaction of the Assessing Officer for 20% of the outstanding demand for each assessment year. Upon such security being furnished, recovery of the balance amount is stayed for 180 days from the order or until disposal of the appeals, whichever is earlier. [Paras 4]

Stay applications allowed; recovery stayed subject to furnishing of indemnity bond cum undertaking equal to 20% of the outstanding demand for each assessment year, and the balance recovery stayed for 180 days from the order or until disposal of the appeals, whichever is earlier.

Final Conclusion: The Tribunal allowed the assessee's applications and granted a conditional stay of recovery for AYs 2013-14 to 2018-19, on the assessee furnishing an indemnity bond cum undertaking equal to 20% of the outstanding demand for each year; the balance recovery is stayed for 180 days from the order or till disposal of the appeals, whichever is earlier.

Receipt of immovable property without consideration - taxability under section 56(2)(vii)(b) - benefit arising to business taxable under section 28(iv) - unexplained cash deposits and additions under section 69/69A - use of cash-withdrawals as source for subsequent cash-deposits - double taxation by separately taxing sale proceeds and cash receipts

Initiation of proceedings under section 148 - Validity of initiation of proceedings under section 148 challenged but not pressed - HELD THAT: - The assessee contested reopening under section 148. At the hearing before the Tribunal no submissions were advanced in support of this ground. The Tribunal therefore treated the ground as not pleaded/not pressed and dismissed it without examining the merits. [Paras 3]

Ground dismissed as non-pressed; challenge to initiation under section 148 not adjudicated on merits.

Receipt of immovable property without consideration - taxability under section 56(2)(vii)(b) - benefit arising to business taxable under section 28(iv) - Whether the assessee received immovable property without consideration attractable to tax under section 56(2)(vii)(b) or whether any benefit arose in business under section 28(iv) - HELD THAT: - The assessee and her son entered a registered sale-deed and specified the consideration and cheque payments therein; part payments were by post-dated cheques that remained unencashed because the property had been earlier taken over by the Bhopal Development Authority (BDA) and development under the scheme had not occurred, leading to litigation. The Tribunal accepted that (i) consideration was agreed and paid by cheques as per the registered deed and (ii) non-clearance of some post-dated cheques arose from legitimate uncertainty/encumbrance due to BDA's prior acquisition and pending litigation. On these facts the Tribunal concluded that the transaction cannot be characterised as a purchase 'without consideration' and that no benefit taxable under section 28(iv) arises merely because payment remained unpaid pending resolution. The Tribunal therefore found the additions under section 56(2)(vii)(b) and section 28(iv) to be unjustified. [Paras 10]

Addition of Rs. 90,75,000 under section 56(2)(vii)(b) / section 28(iv) deleted.

Unexplained cash deposits and additions under section 69/69A - use of cash-withdrawals as source for subsequent cash-deposits - Whether cash-deposits in bank were unexplained and liable to be added as income under section 69/69A despite prior cash-withdrawals from another bank account - HELD THAT: - It was undisputed that the assessee made cash-withdrawals aggregating a larger amount than the deposits at issue and that a cash-book / cash-flow statement recording date-wise withdrawals and deposits was produced. The AO's objections - that the cash-book was insufficient, that amounts did not exactly match, and that there were time-lags - were regarded by the Tribunal as conjectural and not supported by any finding that the withdrawn cash was utilized for other purposes. The Tribunal accepted that cash-withdrawals provided an available source for the deposits, observed that the AO had not pointed to any specific misuse of funds, and noted precedent where withdrawals have been accepted as source for deposits. In these circumstances the Tribunal held the addition to be unsustainable. [Paras 16]

Addition of Rs. 50,25,000 under section 69/69A deleted.

Double taxation by separately taxing sale proceeds and cash receipts - remand for verification of taxation in a subsequent assessment year - Whether various cash-receipts totalling the impugned amount were unexplained and taxable in the year or required different treatment (including remand for verification against AY 2015-16) - HELD THAT: - The Tribunal examined separately the receipts: (i) cash receipts of Rs. 9,00,000 and Rs. 4,00,000 related to sale of specific lands and were reflected in the assessee's profit-and-loss accounts and cash-book; the resulting profits had already been offered and assessed as business income, and treating the receipts again as unexplained would amount to double taxation - these additions were deleted. (ii) a cash advance of Rs. 70,000 was refunded within four days upon cancellation of the deal and evidence of refund appeared in the cash-book and ledger; the addition was deleted. (iii) an advance of Rs. 4,80,000 was alleged to have been forfeited and already taxed in Assessment-Year 2015-16; the Tribunal did not decide the matter on merits but remitted this issue to the AO for verification against the record of AY 2015-16 and directed the assessee to cooperate. [Paras 19]

Additions of Rs. 9,00,000 and Rs. 4,00,000 and Rs. 70,000 deleted; the claim regarding Rs. 4,80,000 remitted to AO for verification against AY 2015-16 records.

Final Conclusion: The Tribunal partly allowed the appeal for Assessment-Year 2012-13: the additions made under section 56(2)(vii)(b) / section 28(iv) and under section 69/69A were deleted; specific cash-receipt additions were deleted except the advance of Rs. 4,80,000 which is remitted to the AO for verification against AY 2015-16 records; the challenge to reopening under section 148 was dismissed as not pressed.

Determination of arm's length price - Transfer Pricing Officer's jurisdiction - Scope of TPO under section 92CA - Examination beyond covered transaction - Remand for fresh determination of ALP

Transfer Pricing Officer's jurisdiction - Scope of TPO under section 92CA - Examination beyond covered transaction - Whether the TPO acted within his statutory jurisdiction in examining the rendition and benefit of services under section 37 and in concluding the arm's length price as NIL without applying prescribed transfer pricing methods. - HELD THAT: - The Tribunal examined the scope of section 92CA and held that the jurisdiction of the TPO is confined to determination of the arm's length price of covered international or specified domestic transactions and does not extend to adjudication under section 37. The TPO's order in the present case contained queries and reasoning framed with reference to section 37 and did not undertake the prescribed transfer pricing analysis or computation of ALP; instead the benchmarking was recorded as NIL. Such an approach exceeds the TPO's statutory mandate and is inconsistent with the scheme which contemplates that the TPO determine ALP by applying appropriate methods after considering the transfer pricing study and relevant materials. For these reasons the Tribunal found merit in the assessee's contentions in Grounds 2.1 and 2.2 and concluded that the matter requires fresh determination by the TPO confined to the scope of section 92CA, after giving the assessee a reasonable opportunity to produce its TP study, documents and comparables. [Paras 6, 9, 10]

Grounds 2.1 and 2.2 allowed and matter restored to the file of the TPO for fresh determination of ALP in accordance with the statutory scheme.

Determination of arm's length price - Remand for fresh determination of ALP - Whether the other contentions challenging the selection of comparables and non-application of prescribed methods (Grounds 2.3 and 2.4) could be adjudicated in the present order. - HELD THAT: - Since the Tribunal has set aside the TPO's order for fresh consideration limited to determination of ALP in accordance with law, the questions relating to the TNMM analysis, selection and comparability of companies, and the computation of ALP raised in Grounds 2.3 and 2.4 became academic at this stage. The Tribunal therefore did not decide those issues on merits and dismissed them as academic in consequence of the remand. [Paras 11]

Grounds 2.3 and 2.4 dismissed as academic in view of remand.

Final Conclusion: Appeal allowed for statistical purposes; the TPO's order is set aside and the matter remanded to the TPO for fresh determination of the arm's length price in accordance with the scheme of section 92CA after affording the assessee a reasonable opportunity to place its transfer pricing study, documents and comparables on record.

Rectification under section 154 - mistake apparent on the face of the record - change of opinion - debatable question of law - deeming provision under section 56(2)(vii)(b) - reference to valuation officer under section 50C proviso

Rectification under section 154 - mistake apparent on the face of the record - change of opinion - deeming provision under section 56(2)(vii)(b) - debatable question of law - Whether the Assessing Officer could invoke section 154 to bring to tax the deemed income under section 56(2)(vii)(b) when that provision was not considered in the original assessment and the matter involved a debatable question or change of opinion. - HELD THAT: - The Tribunal upheld the view of the ld. CIT(A)/NFAC that the deeming provision under section 56(2)(vii)(b) did not feature in the original assessment order passed under section 143(3), and the Assessing Officer could not treat its later invocation as a "mistake apparent on the face of the record" warranting rectification under section 154. The Tribunal accepted that the issue of stamp duty valuation and applicability of the deeming provision was debatable and that the original AO, after inquiry during limited scrutiny, had accepted the returned income on the same set of materials. An alleged error which requires extended reasoning or which admits of two reasonable conclusions cannot be characterised as a mistake apparent on the record. Where the reassessment under section 154 represents a change of opinion on a debatable issue, rectification is impermissible. Applying these principles to the facts, the Tribunal found no infirmity in the ld. CIT(A)/NFAC's quashing of the section 154 order. [Paras 8, 9]

The rectification order passed under section 154 invoking section 56(2)(vii)(b) was quashed as based on a change of opinion/debatable question and not a mistake apparent on the face of the record; the order of the ld. CIT(A)/NFAC was confirmed.

Final Conclusion: The Revenue's appeal is dismissed and the order passed under section 154 quashing the deemed income addition under section 56(2)(vii)(b) is sustained for Assessment Year 2014-15.

Registration under Section 12A/12AB - Invoking Section 13(1)(b) at the registration stage - Applicability of Section 13 at the assessment stage - Registration under Section 80G contingent on valid Section 12A registration - De novo consideration on remand

Registration under Section 12A/12AB - Invoking Section 13(1)(b) at the registration stage - Applicability of Section 13 at the assessment stage - Whether the Commissioner (Exemptions) was justified in rejecting the trust's application for registration under Section 12AB/12A by applying Section 13(1)(b) on the ground that the trust's objects benefit a particular community - HELD THAT: - The Tribunal examined earlier authorities including the Gujarat High Court decision in CIT, Rajkot-II v. Leuva Patel Seva Samaj Trust and other precedents and concluded that the question whether a trust is created for the benefit of a particular religious community or caste is a matter relevant to assessment under Section 11 and the applicability of Section 13(1)(b). For the purpose of registration under Section 12A/12AB the Commissioner is required to decide whether the trust satisfies the statutory criteria for registration, and should not deny registration by invoking Section 13(1)(b), which is to be tested at the time of assessment on available material. Relying on the cited precedents, the Tribunal held that Section 13 is inherently an exemption-from-exemption provision whose applicability is to be determined when exemption is claimed in assessment proceedings, and therefore the Commissioner erred in rejecting the registration application solely on the ground that the objects benefit the Leuva Patel community. The Tribunal accordingly directed de novo consideration by the Commissioner (Exemptions), with opportunity of hearing and without disentitling the assessee on the sole ground relied upon in the rejection order. [Paras 10, 11, 12]

The rejection of registration under Section 12AB/12A on the basis of Section 13(1)(b) was set aside and the matter remitted to the CIT (Exemptions) for de novo consideration; the appeal is allowed for statistical purposes.

Registration under Section 80G contingent on valid Section 12A registration - De novo consideration on remand - Whether refusal of approval under Section 80G was valid because the trust lacked a valid registration under Section 12A - HELD THAT: - The Tribunal noted that the CIT's rejection of the 80G application was based on absence of a valid Section 12A registration, citing judicial authority that Section 12A registration is a pre-requisite for 80G approval. However, because the Tribunal has remitted the issue of Section 12A/12AB registration to the CIT (Exemptions) for fresh decision, the question of 80G approval cannot be finally determined at this stage. The Tribunal therefore restored the 80G application to the file of the CIT (Exemptions) for de novo consideration after the registration issue is reconsidered and appropriate orders are passed in accordance with law. [Paras 13, 14, 15]

The refusal of 80G approval is set aside for statistical purposes and the matter remitted to the CIT (Exemptions) for fresh consideration in light of the remand on the Section 12A/12AB registration issue.

Final Conclusion: Both appeals were allowed for statistical purposes: the order rejecting registration under Section 12AB/12A was set aside and remitted to the CIT (Exemptions) for de novo consideration (with hearing), and the refusal of approval under Section 80G was likewise restored to the file for fresh decision in consequence of the remand on registration.

Denial of exemption under section 11 - Violation of section 13(1)(c)(ii) - Specified person - Admission of documents filed before appellate forum for the first time - Remand for fresh adjudication

Denial of exemption under section 11 - Violation of section 13(1)(c)(ii) - Specified person - Admission of documents filed before appellate forum for the first time - Remand for fresh adjudication - Whether the denial of exemption under section 11 on account of an alleged violation of section 13(1)(c)(ii) in respect of amounts advanced to a specified person warranted disposal by the Tribunal or required remand for fresh adjudication in light of documents produced before the Tribunal for the first time - HELD THAT: - The Tribunal recorded that the core controversy was whether advances/transactions with M/s Divine Real Build Pvt. Ltd., a specified person, attracted section 13(1)(c)(ii) and thereby disqualified the assessee from exemption under section 11. The assessee produced documents before the Tribunal which were not placed before the Assessing Officer or the CIT(A). The Tribunal found those documents necessary for a fair adjudication and noted that the lower authorities had no occasion to examine them. In view of the documents being filed for the first time and their potential relevance to the factual conclusion on whether the payments were for bona fide construction/purchase and not diversion/benefit to a specified person, the Tribunal admitted the documents and considered it appropriate to remit the entire issue to the Assessing Officer for fresh consideration and decision after giving the parties an opportunity to deal with the newly admitted material. The remand was directed to apply to both assessment years under challenge. [Paras 11, 12]

The question whether exemption under section 11 was correctly denied on account of a purported violation of section 13(1)(c)(ii) is remitted to the Assessing Officer for fresh adjudication in both assessment years after considering the documents admitted by the Tribunal.

Final Conclusion: The Tribunal admitted documents filed for the first time before it and remitted the dispute on denial of exemption under section 11 (on the ground of alleged contravention of section 13(1)(c)(ii) in respect of advances to a specified person) to the Assessing Officer for fresh adjudication in A.Y. 2014-15 and 2015-16; the appeals are partly allowed for statistical purposes.

Registration under Section 12AB/12A - invocation of Section 13(1)(b) at registration stage versus assessment stage - characterisation of objects as charitable, religious or composite - remand for de novo consideration with opportunity of hearing

Invocation of Section 13(1)(b) at registration stage versus assessment stage - characterisation of objects as charitable, religious or composite - Whether the Commissioner may invoke Section 13(1)(b) to refuse registration under Section 12AB/12A at the stage of considering Form No.10AB. - HELD THAT: - The Tribunal held that the applicability of Section 13(1)(b) is a matter to be tested when the trust claims exemption under Sections 11/12 in assessment proceedings and not a ground to deny registration under Section 12AB/12A. The Tribunal relied on precedents of the jurisdictional High Court and the coordinate benches which treat Sections 11-13 as provisions to be applied by the Assessing Officer in assessment, and noted that where objects are composite (charitable and religious), the question whether Section 13(1)(b) attracts must be decided on evidence at assessment. Applying those authorities to the facts, the Tribunal concluded that the Commissioner was not justified in rejecting the registration application solely on the ground that certain objects may appear to benefit a particular religious community; such an inquiry is premature at the registration stage. [Paras 6, 7]

Provisions of Section 13(1)(b) cannot be invoked to refuse registration under Section 12AB/12A; the test under Section 13(1)(b) is to be applied at assessment, not at the registration stage.

Registration under Section 12AB/12A - remand for de novo consideration with opportunity of hearing - Whether the application for registration should be restored for fresh consideration and what directions, if any, should be given to the CIT (Exemptions). - HELD THAT: - The Tribunal, having held that Section 13(1)(b) is not a proper ground to deny registration at the stage of Form No.10AB consideration, directed that the matter be restored to the file of the CIT (Exemptions) for de novo consideration. The reassessment is to be undertaken after affording the assessee an opportunity of being heard, and the Commissioner is directed not to disentitle the assessee to registration solely on the grounds stated in the earlier rejection order which were premised on application of Section 13(1)(b) at the registration stage. [Paras 8]

Application for registration restored to CIT (Exemptions) for de novo consideration after hearing; CIT directed not to deny registration solely on the earlier Section 13(1)(b)-based grounds.

Final Conclusion: Appeal allowed for statistical purposes; order rejecting registration set aside and matter remitted to the CIT (Exemptions) for fresh consideration after hearing, with directions not to refuse registration solely on the basis of Section 13(1)(b) at the registration stage.

Jurisdiction to seize - seizure under Section 110 of the Customs Act, 1962 - territorial jurisdiction of Customs officers - interception and custody v. completion of formalities at office - provisional release under Section 110A - burden of proof on ownership in seizure proceedings

Jurisdiction to seize - territorial jurisdiction of Customs officers - interception and custody v. completion of formalities at office - Validity of seizure effected by Superintendent of Customs (Preventive) and Inspector of Customs (Preventive) where goods were intercepted at Haroa Bridge and Haroa Bazar but inventory/seizure formalities were completed at Customs House, Strand Road, Kolkata. - HELD THAT: - The Court found on the material on record, including panchnamas, that the suspected smuggled gold was intercepted and taken into custody at Haroa Bridge and Haroa Bazar (North 24 Parganas) and that the detainees and recovered goods were thereafter brought to the Customs Head Office where the seizure memos were prepared. The High Court distinguished the precedents relied upon by the petitioner as factually different. It accepted the respondents' submission that the power to effect seizure under Section 110 may be exercised where officers have reason to believe confiscation is attracted at the place of interception and that completion of formalities at the office does not oust the officers' jurisdiction when interception and custody occurred within their operational area. On the facts, the officers under the Commissioner of Customs (Preventive), West Bengal had reasons to believe and acted within their territorial competence; therefore the seizure did not suffer from jurisdictional error. [Paras 8]

Seizure memos issued by the Superintendent and Inspector of Customs (Preventive) do not suffer from any jurisdictional error and are valid.

Burden of proof on ownership in seizure proceedings - provisional release under Section 110A - Sufficiency of the petitioner's claim of ownership over the seized goods and entitlement to relief in absence of application for provisional release under Section 110A. - HELD THAT: - The Court observed that the petitioner had not made any application for provisional release under Section 110A. On the material placed before the Court the purported tax invoice and supporting documents were treated as suspicious: bank transfers shown were limited and occurred after the seizure. The High Court declined to adjudicate ownership on merits at this stage but held that the petitioner had failed to establish a credible right of ownership or to avail the statutory provisional release remedy. Consequently no relief was warranted in the writ petition on that basis. [Paras 7, 8]

Petitioner failed to establish ownership or to seek provisional release; no relief granted on ownership challenge.

Final Conclusion: Writ petition challenging the seizures is dismissed for want of merit; the seizure orders are held not to be vitiated by jurisdictional error and the petitioner has not established ownership or availed the provisional release remedy, accordingly no interference is warranted. There shall be no order as to costs.

Bail under Section 439 Cr.P.C. - possession and constructive possession - prima facie complicity - smuggling of gold of foreign origin - compoundability of offence under Section 137 of the Customs Act, 1962 - expeditious trial

Bail under Section 439 Cr.P.C. - possession and constructive possession - prima facie complicity - smuggling of gold of foreign origin - compoundability of offence under Section 137 of the Customs Act, 1962 - Whether the applicant is entitled to bail in DRI Case No.6/2024 under Section 135 of the Customs Act, 1962 - HELD THAT: - The Court found undisputed recoveries of a large quantity of gold, gold ornaments and cash from the applicant's possession and from premises and lockers connected to the matter. The applicant's contention that he was merely an employee entrusted to transport goods and cash on behalf of two firms was not substantiated by adequate supporting documents: no personal residence proof, identity or bank statements of the applicant were filed, and employer account entries did not establish consistent salary payments or the applicant's regular employment. The applicant supplied no reliable records identifying customers or documenting collection of sale proceeds. Distinguishing the case from the co-accused who had earlier been granted bail, the Court noted that the key and combination to a locker (from which a large recovery was made) were known and provided by the applicant, indicating constructive possession. Given these prima facie facts indicating complicity and the absence of satisfactory documentary proof to rebut possession or control over the seized items, the Court declined to enlarge the applicant on bail. The Court observed that whether the recovered items are made from smuggled foreign gold is to be determined at trial and noted that the offence under Section 137 is compoundable, but that circumstance did not alter the bail conclusion at this stage. [Paras 33, 34, 35, 36, 37]

Bail application rejected; trial to be expedited

Final Conclusion: The High Court refused bail to the applicant on the basis of prima facie possession and complicity in recovery of large quantities of gold and cash and inadequate documentary proof of his asserted employment and role; the trial court was directed to proceed expeditiously.

Admissibility of electronic evidence - certification under Section 138C of the Customs Act, 1962 - requirement of certification under Section 65B of the Indian Evidence Act, 1882 - right to cross-examination in quasi-judicial proceedings - duties of Customs Broker under Regulation 10(d) and Regulation 10(e) of Customs Broker Licensing Regulation, 2018 - standard of proof in quasi-judicial proceedings - preponderance of probabilities - proportionality of sanction - revocation versus penalty

Admissibility of electronic evidence - certification under Section 138C of the Customs Act, 1962 - requirement of certification under Section 65B of the Indian Evidence Act, 1882 - Electronic records and computer printouts relied upon by the Adjudicating Authority are inadmissible in the absence of the certificate mandated by Section 138C of the Customs Act, 1962 (pari materia to Section 65B). - HELD THAT: - The Tribunal held that the statutory certification requirement cannot be dispensed with merely because the proceedings are quasi judicial or because the electronic material was retrieved from the appellant's computers. Section 138C(2)'s requirement of a certificate from a responsible person for the operation of the relevant computer is mandatory; in its absence printouts and emails cannot be admitted. The adjudication which treated such material as admissible without the required certification was therefore unsustainable. [Paras 12, 15, 16]

Electronic documents relied on in the show cause notice could not be treated as admissible evidence in the absence of certification as required by Section 138C.

Right to cross-examination in quasi-judicial proceedings - Denial of the appellant's request to cross-examine key employees/witnesses whose statements and document retrievals were relied upon was unjustified and vitiated the impugned findings. - HELD THAT: - The Tribunal applied the settled principles that while cross examination in quasi judicial proceedings may, in exceptional circumstances, be denied, those circumstances must be objectively established and reasons recorded. Here, the authority relied on statements and documents said to be retrieved from the appellant's computers yet refused the appellant's request to cross examine the employees who managed those computers, without adequate reasons. That refusal impaired the appellant's opportunity to meet the case and rendered the reliance on those statements/documents unsafe. [Paras 9, 13, 14, 16]

The refusal to permit cross examination of personnel whose statements and computer retrieved documents were relied upon was unjustified and undermined the impugned order.

Duties of Customs Broker under Regulation 10(d) of Customs Broker Licensing Regulation, 2018 - Findings of breach of Regulation 10(d) (duty to advise clients and report non compliance) against the appellant are unsustainable on the material on record. - HELD THAT: - Regulation 10(d) casts a duty on the broker to advise and to report where non compliance is brought to his notice; it does not impose an obligation to pre emptively inform every client about all provisions of the Act irrespective of circumstances. There was no material to show that the appellant had knowledge of the alleged illegality prior to filing of baggage declarations, and the evidence did not establish that the appellant failed to advise or to report as required. Accordingly, the adjudicatory finding of violation of Regulation 10(d) could not be sustained. [Paras 3, 10, 17]

The finding of contravention of Regulation 10(d) is unsustainable.

Duties of Customs Broker under Regulation 10(e) of Customs Broker Licensing Regulation, 2018 - proportionality of sanction - revocation versus penalty - Omission in supervision (linked to documents in the appellant's email) amounted to failure of due diligence under Regulation 10(e), but such omission did not warrant revocation of the Customs Broker licence or forfeiture of security; a penalty is the appropriate and proportionate sanction. - HELD THAT: - Regulation 10(e) requires a broker to exercise due diligence in ascertaining correctness of information imparted to clients. The Tribunal found that, although the electronic documents retrieved from the appellant's email could not be relied upon without certification, the absence of a categorical denial that such emails existed permitted a permissible inference of supervisory lapse by the appellant's management. That lapse constituted a failure of due diligence but fell short of conduct justifying the extreme remedies of licence revocation and security forfeiture. The Tribunal therefore treated the conduct as a ground for penalty rather than revocation. [Paras 4, 11, 18]

Failure of supervision amounted to non exercise of due diligence under Regulation 10(e), but revocation and forfeiture were disproportionate; penalty is sufficient.

Proportionality of sanction - revocation versus penalty - The revocation of the Customs Broker licence and forfeiture of security deposit under Regulation 14 are set aside; the penalty under Regulation 18(1) is reduced. - HELD THAT: - Balancing the misconduct found (supervisory omission) against the absence of admissible electronic proof and the refusal to allow cross examination, the Tribunal concluded that the extreme sanctions of licence revocation and forfeiture were unsustainable. Considering the period of suspension and facts, the Tribunal exercised discretion to impose a mitigated monetary penalty as the appropriate corrective measure and reduced the penalty amount previously imposed. [Paras 18, 19, 20]

Revocation of licence and forfeiture of security set aside; penalty under Regulation 18(1) reduced to Rs. 40,000.

Final Conclusion: Appeal partially allowed: the revocation of the Customs Broker licence and forfeiture of the security deposit are set aside; the finding of breach of Regulation 10(d) is unsustainable; failure of supervision amounting to lack of due diligence under Regulation 10(e) warrants penalty but not revocation; the penalty is reduced to Rs. 40,000.

Interpretation of the Foreign Trade Policy and applicability of DGFT notifications - binding effect of the Director General of Foreign Trade's clarification on customs authorities - restriction on import of processed tiles/slabs of agglomerated or artificial stones - confiscation and penalty proceedings under Section 111(d) of the Customs Act, 1962

Interpretation of the Foreign Trade Policy and applicability of DGFT notifications - binding effect of the Director General of Foreign Trade's clarification on customs authorities - restriction on import of processed tiles/slabs of agglomerated or artificial stones - confiscation and penalty proceedings under Section 111(d) of the Customs Act, 1962 - Whether the imported Round Ridge Cement Tiles fall within the restriction in DGFT Notification No.77(RE-2008)/2004-2009 dated 09.01.2009 and whether the DGFT's clarification that cement tiles under ITC(HS) 68101990 are freely importable is binding on the Customs Department, thereby affecting confiscation and penalty measures. - HELD THAT: - The Tribunal examined the DGFT letter dated 27.12.2013 which opined that cement tiles under ITC(HS) Code 68101990 are free for import and do not fall within the ambit of Notification No.77(RE-2008)/2004-2009. The Tribunal held that the authority to interpret the scope and application of the Foreign Trade Policy vests with DGFT and that its opinion is binding on the Customs authorities. The Tribunal rejected the Commissioner(Appeals)'s view that, in absence of an amendment to the notification, the DGFT opinion was not binding. Applying the DGFT clarification to the facts, the Tribunal found that the imported Round Ridge Cement Tiles are not restricted as processed tiles/slabs of agglomerated or artificial stones and therefore could not be subjected to enhanced valuation, confiscation or penalties under the impugned orders. The Tribunal accordingly set aside the orders of adjudication and the Commissioner(Appeals) to the extent they held the goods restricted and liable to confiscation and penalty.

Impugned orders holding the goods restricted and directing enhancement of value, confiscation and penalties are set aside; the imported Round Ridge Cement Tiles are free for import as per DGFT clarification and appeals are allowed.

Final Conclusion: The Tribunal accepted the DGFT clarification that cement tiles under ITC(HS) 68101990 are freely importable, held that DGFT's opinion is binding on Customs, set aside the adjudicatory and appellate orders which treated the goods as restricted and liable to confiscation and penalties, and allowed the appeals with consequential reliefs as per law.

Demurrer under Order VII Rule 11 of the Code of Civil Procedure, 1908 - cause of action - partition of joint family property - nucleus of joint family fund - jurisdiction of civil court vis-a -vis National Company Law Tribunal - bar under Section 430 of the Companies Act, 2013 - bar under the Benami Transactions (Prohibition) Act, 1988

Demurrer under Order VII Rule 11 of the Code of Civil Procedure, 1908 - cause of action - Whether the plaint discloses a cause of action and is liable to be rejected under Order VII Rule 11 CPC - HELD THAT: - The plaint averred existence of joint family property comprising immovable properties (Schedule 'B'), movable properties and family related business entities said to have been constituted out of a joint family corpus. Whether the alleged properties were purchased out of a joint family fund and whether a nucleus of joint family exists are disputed questions of fact which require evidence. It is premature at the demurrer stage to hold that the plaint fails to disclose a cause of action. Similarly, it is inappropriate at this stage to conclude that the suit is barred by company law or the Benami law without evidence. The National Company Law Tribunal does not have jurisdiction to adjudicate a partition suit in respect of immovable property which falls within the civil court's domain. Therefore the demurrer rejecting the plaint under Order VII Rule 11 is not tenable and must be dismissed.

Demurrer dismissed; plaint held to disclose cause of action requiring evidence and trial.

Partition of joint family property - nucleus of joint family fund - bar under Section 430 of the Companies Act, 2013 - bar under the Benami Transactions (Prohibition) Act, 1988 - jurisdiction of civil court vis-a -vis National Company Law Tribunal - Whether the question of jointness of properties, characterization of companies as joint family assets, and applicability of Companies Act or Benami law can be adjudicated at the demurrer stage - HELD THAT: - The Court found these to be factual and mixed questions-existence of joint fund, genesis of assets, timing of company incorporations and ownership-which cannot be determined without evidence. The applicability of Section 430 of the Companies Act, 2013 or the Benami Transactions (Prohibition) Act, 1988 to bar the suit cannot be decided on the pleadings alone. Issues concerning whether corporate assets form part of joint family property, and whether any statutory bar applies, require trial and appropriate appreciation of evidence; the Court refrained from adjudicating these matters at the present stage.

Questions regarding characterization of assets, and applicability of company or benami law, to be considered on evidence at trial; not decided on demurrer.

Final Conclusion: The application under Order VII Rule 11 CPC filed by Defendant No. 9 is dismissed; the plaint is held to disclose a cause of action and factual issues relating to joint family corpus, characterization of corporate and other assets, and the applicability of company and benami law are left for trial and evidence; further hearing fixed.

Fraudulent concealment of company property - misappropriation of company funds - setting aside disposition of property in winding up under Section 531-A - prosecution under Section 538 of the Companies Act - liability to repay sale consideration with penal interest

Fraudulent concealment of company property - misappropriation of company funds - prosecution under Section 538 of the Companies Act - liability to repay sale consideration with penal interest - Ex-Directors' failure to disclose sale consideration and consequent liability - HELD THAT: - The Official Liquidator's inquiries revealed that the company property was sold and the sale consideration was not disclosed to the Liquidator; the amount was later shown to have been credited to a bank account which was not disclosed by the Ex-Directors. The Court finds that respondent Nos.1 to 4 (the Ex-Directors) are guilty of fraudulent concealment and misappropriation of the sale proceeds, thereby depriving the company and its creditors of the funds. In view of those findings and having regard to the offences enumerated in Section 538, the Court held the Ex-Directors accountable and directed them to repay the sale consideration jointly and severally with penal interest at the rate specified by the Court from the date of the sale deed. The Court further directed that failure to comply would entitle the Official Liquidator to initiate complaints for prosecution under Section 538. [Paras 8, 10, 11]

Respondent Nos.1 to 4 are held liable to pay the sale consideration with penal interest and, if they fail to pay, the Official Liquidator may initiate prosecution under Section 538.

Setting aside disposition of property in winding up under Section 531-A - third party bona fides in transfers prior to initiation of winding up - Status of purchasers and whether sale should be set aside - HELD THAT: - The record shows that third-party rights in respect of the subject property were created before the initiation of winding up proceedings. The Official Liquidator did not allege any collusion between the Ex-Directors and respondent No.5, or between respondent No.5 and respondent Nos.6 and 7. Given the absence of any charge of collusion and that the purchasers bonafidely acquired the property when no winding up petition was pending, the Court declined to set aside the sale transfers in favour of respondent Nos.5, 6 and 7 under the winding up proceedings. The Court's finding preserves the purchasers' rights while addressing the Ex-Directors' liability to the company. [Paras 9]

Third-party purchasers' rights, created prior to the winding up petition, are not set aside; no finding of collusion against respondents 5-7.

Final Conclusion: The Court found that the Ex-Directors fraudulently concealed and misappropriated the sale proceeds and ordered them jointly and severally to repay the sale consideration with penal interest within 30 days, failing which the Official Liquidator may proceed to prosecute them under Section 538; the sales to third-party purchasers executed before initiation of winding up are not set aside for want of any allegation of collusion.

Release of auction bid amount where sale has been set aside - Moratorium under the Insolvency and Bankruptcy Code, 2016 - Jurisdiction to direct release of funds during moratorium - Effect of unchallenged Recovery Officer order setting aside sale - Position of corporate debtor's beneficial interest in deposited bid amount

Release of auction bid amount where sale has been set aside - Jurisdiction to direct release of funds during moratorium - Position of corporate debtor's beneficial interest in deposited bid amount - Respondent No. 9 is entitled to refund of the bid amount deposited in the auction that has been set aside and this Court may direct its release despite the moratorium declared under IBC 2016. - HELD THAT: - The court noted that the auction held on 05.11.2021 was set aside by the Recovery Officer by order dated 24.04.2023, that the Recovery Officer directed refund and that the order stands unchallenged. The moratorium under Section 14 of the IBC prohibits actions that would affect assets that are for the benefit of the corporate debtor. The court held, however, that the deposited bid amount cannot be regarded as an asset in which the corporate debtor has any legal right or beneficial interest because the sale in favour of the bidder had been set aside and possession was never handed over. Consequently, the fact of pendency of insolvency proceedings and the moratorium does not preclude this Court from directing release of funds which are not for the benefit of the corporate debtor. The IRP's objection that only the NCLT could order release was rejected as unsustainable on the facts, and it was held to be unjust to compel the bidder to approach the NCLT when the Recovery Officer has already ordered refund and that order remains unchallenged. [Paras 19, 21, 22, 23]

Amount deposited by respondent No. 9 shall be released by the Recovery Officer expeditiously in terms of the Recovery Officer's order dated 24.04.2023.

Effect of unchallenged Recovery Officer order setting aside sale - Moratorium under the Insolvency and Bankruptcy Code, 2016 - Both writ petitions are rendered infructuous on account of admission of the Section 7 application and declaration of moratorium by the NCLT; petitions are disposed of as infructuous without expressing any opinion on merits. - HELD THAT: - The court recorded that Punjab National Bank's Section 7 application was admitted by the NCLT on 14.05.2024 and a moratorium declared under Section 14(1) of the IBC. In view of that order, the writ petitions concerning SARFAESI/DRT proceedings were treated as rendered infructuous. The court accordingly disposed of the writ petitions as infructuous while explicitly refraining from expressing any view on the substantive merits or maintainability of the underlying claims, and preserving parties' rights to avail remedies in accordance with law. [Paras 5, 18, 23]

Both writ petitions are disposed of as infructuous in view of the NCLT order admitting the insolvency application and declaring the moratorium; parties remain at liberty to pursue remedies available in law.

Final Conclusion: The court ordered release of the bid amount deposited by respondent No. 9 by the Recovery Officer in accordance with the Recovery Officer's unchallenged order of 24.04.2023, and disposed of the writ petitions as infructuous following admission of the insolvency application and declaration of moratorium by the NCLT, reserving parties' rights to seek appropriate remedies in law.

Service Tax registration exemption - Threshold exemption for registration under Notification No.8/2008 ST (amending Notification No.6/2005 ST) - Deposit as condition for entertainment of statutory appeal - Maintainability of appeal before Appellate Commissioner - Laches and delay as a bar to writ relief - Applicability of Section 35(f) of the Central Excise Act to appeals under Section 86 of the Finance Act, 1994

Service Tax registration exemption - Threshold exemption for registration under Notification No.8/2008 ST (amending Notification No.6/2005 ST) - Maintainability of appeal before Appellate Commissioner - Deposit as condition for entertainment of statutory appeal - Permission to file statutory appeal subject to deposit and liberty to raise merits including exemption claim - HELD THAT: - The Court considered the petitioner's contention that the activity attracted exemption from Service Tax registration by reason of the amending notification and that the petitioner's turnover was below the relevant threshold for the periods in dispute. Having noted that the petitioner is a small entity and that the exemption contention may have merit, the Court did not adjudicate the exemption on merits but afforded the petitioner an opportunity to pursue the statutory remedy. As a condition for entertaining the appeal before the Appellate Commissioner, the Court required deposit of 25% of the disputed amount (noting the petitioner's submission regarding a lower statutory percentage under Section 35(f) as applied to appeals under Section 86). The Court made clear that the deposit is without prejudice to the petitioner's rights and that the appeal must be heard on merits. [Paras 6, 7, 8]

Petitioner permitted to file statutory appeal within 30 days with deposit of 25% of the disputed amount; merits to be heard and adjudicated by the Appellate Commissioner.

Laches and delay as a bar to writ relief - Maintainability of writ petition in light of precedent - Respondent's contention of latches and reliance on Supreme Court decisions not accepted as a ground to refuse relief in this case - HELD THAT: - The respondent urged dismissal of the writ petition on grounds of laches and cited precedents dismissing similar claims. The Court considered these submissions but, having regard to the petitioner's factual position and the petitioner's entitlement to pursue the statutory appeal, declined to dispose of the petition on the basis of latches or the authorities cited. The Court therefore proceeded to grant the limited relief of permitting prosecution of the statutory appeal subject to the deposit condition rather than rejecting the petition outright. [Paras 5, 6]

Contention of laches and cited precedents did not lead to dismissal; petition disposed by permitting statutory appeal instead.

Final Conclusion: Writ petition disposed by permitting the petitioner to file statutory appeal before the Appellate Commissioner within 30 days subject to deposit of 25% of the disputed amount; the deposit is without prejudice to the petitioner's rights and the Appellate Commissioner is directed to endeavour to decide the appeal on merits within six months.

Refund of service tax - levisability of service tax on chitty subscriptions - processing of refund applications - claim by service provider versus service recipient - binding effect of prior judicial determination

Refund of service tax - levisability of service tax on chitty subscriptions - claim by service provider versus service recipient - processing of refund applications - Validity of rejection of petitioners' individual refund applications where the service provider (KSFE) had also filed a refund claim for the same amounts - HELD THAT: - The petitioners filed individual refund applications within the one year period prescribed by this Court's judgment dated 14.03.2018, which held that no service tax was leviable on chitty subscriptions for the period 01.07.2012 to 14.06.2015. The authority rejected the petitioners' applications on the ground that the service provider (KSFE) had also applied for refund and that simultaneous claims could not be entertained. The Court held that where petitioners have filed timely individual applications pursuant to the Court's directive, those applications should not be summarily rejected on a technical ground of concurrent filing by the service provider. The authorities are directed to examine the petitioners' applications on merits in the light of the prior judicial determination and, if eligible, to credit the refunds to the petitioners' accounts. Further, where KSFE's claim purports to include amounts on behalf of individual subscribers, the Original Authority should discard or not prefer the KSFE claim insofar as it seeks refund on behalf of those subscribers and proceed to consider the individual applications. [Paras 6, 7]

Petitioners' individual refund applications are to be processed afresh in accordance with the Court's earlier judgment; technical objection of concurrent KSFE claim is inappropriate and, if KSFE claimed on behalf of subscribers, that portion should be discarded by the Original Authority.

Final Conclusion: Writ petitions allowed; matter remanded to the Original Authorities to process the petitioners' refund applications in pursuance of this Court's judgment dated 14.03.2018 and to pass fresh orders expeditiously, preferably within two months, discarding any KSFE claim made on behalf of the petitioners.

Reverse charge mechanism - Burden of proof on the Department to establish taxability - Verification of service tax payments against bank remittances - Place of Provision of Service Rules, 2012

Reverse charge mechanism - Verification of service tax payments against bank remittances - Burden of proof on the Department to establish taxability - Whether the demand confirmed by the Commissioner should be sustained without verifying appellant's claim of service tax payments shown in its returns and supporting challans, including payments by different units - HELD THAT: - The Tribunal found that the appellant had consistently paid service tax on foreign remittances for services from providers outside India and reflected these payments in ST-3 returns. The Commissioner accepted payment of a portion of the demand but confirmed a residual demand on the ground that invoice-wise correlation with the IDBI Bank list was not furnished and by observing that some challans included payments by other units of the appellant. The Tribunal observed that the appellant produced a summary and challans indicating amounts recorded under an accounting code for consulting engineers and that the list supplied by the bank included remittances relating to different units. Given these facts, the Tribunal concluded that the Commissioner ought not to have confirmed the demand without examining whether the payments (including those shown by other units) corresponded to the bank remittances and whether taxability had been established by the Department. The Tribunal therefore remitted the matter to the Commissioner to examine the appellant's contentions, permit the appellant to file detailed submissions, verify invoice-wise correlation of payments with the bank data, and pass a fresh order in light of these observations. [Paras 11, 12, 13, 14]

Matter remitted to the Commissioner for fresh examination of the appellant's claim of service tax payment and invoice-wise correlation with bank remittances; liberty granted to the appellant to file detailed submissions; appeal disposed.

Final Conclusion: The Tribunal did not uphold the confirmed demand but remitted the issue to the Commissioner for verification of the appellant's service tax payments (including those reflected by other units) against the bank-provided remittance list and for passing a fresh order after permitting detailed submissions; the appeal is disposed accordingly.

Classification of service as "renting of immovable property" versus "construction services" - entitlement to refund of service tax paid by the service recipient - burden of proof on claimant to establish non-availment of Cenvat credit and deposit of tax by service provider - preclusion of a service recipient from re classifying supplier's service or seeking reassessment of supplier's returns - condition subject to Notification benefit and necessity of statutory compliance for abatement/refund - refusal to remit matter for verification to supplier's jurisdictional authority

Entitlement to refund of service tax paid by the service recipient - burden of proof on claimant to establish non-availment of Cenvat credit and deposit of tax by service provider - condition subject to Notification benefit and necessity of statutory compliance for abatement/refund - Refund claim by the service recipient was not maintainable in absence of documentary proof that the service provider did not avail Cenvat credit, had deposited the tax collected, or had included land cost in taxable consideration. - HELD THAT: - The Tribunal upheld the findings of the adjudicating authority and Commissioner (Appeals) that the appellant failed to produce assessment details, ST-3 returns, challans or any evidence showing that the builder had not availed Cenvat credit or had deposited excess Service Tax to the Government account. The exemption/abatement under the Notification is conditional and available only upon fulfilment of statutory conditions. In the absence of documents enabling verification of tax liability or payment by the service provider, the refund claim by a non assessee customer could not be allowed. The Tribunal relied on the record and earlier identical order and rejected the refund claim for want of requisite proof. [Paras 4, 5, 8, 9, 12]

Refund claims dismissed for lack of necessary documentary proof and non fulfilment of conditions for abatement/refund.

Classification of service as "renting of immovable property" versus "construction services" - preclusion of a service recipient from re classifying supplier's service or seeking reassessment of supplier's returns - refusal to remit matter for verification to supplier's jurisdictional authority - A service recipient cannot challenge or re classify the service as provided by the supplier nor seek remand to the supplier's jurisdictional authorities to reassess the supplier's returns; the Tribunal refused to remand the matter. - HELD THAT: - The Lease Agreement and the receipts showed that the supplier had treated the supply as "renting of immovable property" and filed ST 3 returns accordingly. The Tribunal held that the recipient is precluded from agitating the supplier's chosen classification or from asking that the supplier's returns be reclassified or verified by the supplier's jurisdictional officers. There was no material to show that the supplier itself had questioned the classification with its revenue authorities or that it had filed corrected returns. Consequently, the request to remit the matter for verification at the supplier's jurisdiction was rejected as impermissible in law. [Paras 5, 6, 10, 11]

Claimant precluded from disputing supplier's classification; remand refused.

Final Conclusion: Appeals dismissed; refund claims rejected for failure to prove statutory conditions for abatement/refund and because the service recipient cannot impugn or seek reassessment of the service provider's classification or returns.

Leviability of service tax on services received from non-resident - Reverse Charge Mechanism - Adjudication on the basis of documentary evidence and contracts - Remand for de novo adjudication

Leviability of service tax on services received from non-resident - Reverse Charge Mechanism - Adjudication on the basis of documentary evidence and contracts - Whether the service tax demand under Reverse Charge Mechanism in respect of services paid to overseas technicians for repair and overhauling should be sustained without examination of contracts and other documentary evidence - HELD THAT: - The Tribunal found that the Original Authority confirmed service tax demand without a proper examination of documentary evidence, including the contracts with overseas entities, to determine whether taxable services were in fact received and liable under the Reverse Charge Mechanism. The adjudicating authority recorded contradictory statements of the appellants' representatives and did not scrutinise the available documents despite the appellants' contention and precedents relied upon indicating that assessment of contractual terms and execution is material to leviability. In view of these deficiencies, the Tribunal concluded that the matter requires fresh consideration of documentary and other evidence and an opportunity of personal hearing before arriving at any conclusion on levy. [Paras 5, 6, 7]

Impugned order set aside and matter remanded to the Original Authority for de novo adjudication after proper examination of contracts and documentary evidence and after granting reasonable opportunity of personal hearing.

Final Conclusion: Appeal allowed by way of remand; the Original Authority is directed to adjudicate afresh on the question of leviability of service tax under RCM for 2012-13 to 2014-15 after considering contractual and other documentary evidence and after affording the appellants a reasonable opportunity of personal hearing.

Suspension from service - Continuation in service pending disciplinary proceedings - Effect of interim orders on suspension - Quashing of FIRs for non-compliance of prior sanction under Section 17-A of the Prevention of Corruption Act, 1988 - Scope of administrative power to extend or revive suspension where suspension was kept in abeyance

Suspension from service - Continuation in service pending disciplinary proceedings - Effect of interim orders on suspension - Whether the orders of suspension challenged before the Tribunal should be given effect to or the petitioners should be permitted to continue in service subject to disciplinary proceedings. - HELD THAT: - The Court noted that the orders of suspension had repeatedly been kept in abeyance by interim orders of this Court and that more than eight months had elapsed since the date of suspension without the suspension being given effect to (paras 12-14). It was also recorded that charge memos have been issued and disciplinary proceedings initiated against the petitioners and that, except for two officers, petitioners have been moved out of the posts they held at the time of suspension (paras 12-13). In this factual matrix the Court held that there was no purpose in enforcing the suspension at present and that petitioners who had not suffered the consequence of suspension should be permitted to continue in service; respondents remain free to consider posting changes for any petitioner still working in the post from which suspended (paras 14-15). The Court expressly refrained from expressing any opinion on the merits of the disciplinary proceedings pending against the petitioners (para 15). [Paras 12, 13, 14, 15]

Suspension orders under challenge shall not be given effect to; petitioners permitted to continue in service subject to posting orders and continuation of disciplinary proceedings, with no expression of opinion on merits of those proceedings.

Final Conclusion: Writ petitions disposed of by directing that the suspension orders shall not be given effect to and that the petitioners may continue in service subject to appropriate posting orders and the disciplinary proceedings already initiated; no adjudication on the merits of disciplinary proceedings.

Summary judgment - leave to defend in summary suit - triable issue - sham or moonshine defence - admission by defendant - decree for recovery with interest - deposit or security as condition for leave

Leave to defend in summary suit - triable issue - sham or moonshine defence - Whether the defendant was entitled to leave to defend the plaintiff's summary suit. - HELD THAT: - The Court applied the established principles governing leave to defend in summary proceedings, requiring that a defendant must establish a substantial or at least bona fide triable issue to obtain unconditional leave. The defendant's pleaded case was that the cheques were given as security and that the plaintiff was wrongfully withholding original title deeds, causing loss; however, the defendant did not file any counterclaim for return of the deeds or particularise any loss, nor did it deny receipt of the principal amount or the issuance and dishonour of the cheques. The defendant's averments were held to be illusory and sham, lacking particulars or supporting pleadings that would raise a triable issue. Consequently, the Court concluded that the defendant had no defence warranting leave to defend and that the exceptional rule of denying leave applied. [Paras 5, 19, 25]

Prayer for leave to defend dismissed; defendant not granted leave to defend.

Summary judgment - admission by defendant - decree for recovery with interest - Whether the plaintiff was entitled to summary judgment and a decree for the claimed amount with interest. - HELD THAT: - The Court treated the defendant's contemporaneous admission (recorded in the defendant's letter of 29th December, 2014) as establishing liability for the principal sum and admitted interest, and noted repeated issuance and dishonour of post-dated cheques. The defendant did not contest receipt of funds and had not instituted any proceeding or counterclaim for return of documents or damages with particulars. Having found no genuine triable issue and relying on the defendant's admission, the Court held that the plaintiff was entitled to judgment. The Court therefore granted a decree for the claimed sum and awarded further interest as stated in the order. [Paras 23, 26, 27]

Summary judgment allowed; decree for recovery entered in favour of the plaintiff with interest as ordered.

Final Conclusion: The defendant's application for leave to defend is dismissed as the defence is held to be sham; the plaintiff's application for summary judgment is allowed and a decree for recovery is directed in favour of the plaintiff with interest as awarded by the Court.

Quashing of criminal proceedings - Abuse of process and frivolous litigation - Malicious prosecution - Role of the Magistrate in preventing abuse of court process - Proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Cheque issued as security and its liability on presentation - Ingredients of the offence of cheating and forgery

Quashing of criminal proceedings - Abuse of process and frivolous litigation - Malicious prosecution - Role of the Magistrate in preventing abuse of court process - Criminal proceedings arising out of Complaint Case No. 379 of 2019 including the order taking cognizance dated 24.07.2019 were to be quashed as a malicious and frivolous prosecution which amounted to abuse of court process. - HELD THAT: - The Court examined the materials on record and the order taking cognizance and found the dispute to arise out of an agreement dated 31.05.2012 and consequent stock verification showing a shortfall which was acknowledged and partly paid by the C&F agent. A complaint under the Negotiable Instruments Act had already been filed by the company in Chhattisgarh relating to the cheque presented by the opposite party; the present criminal complaint in Bokaro was filed after knowledge of that proceeding. Applying the principle that trial courts must guard against abuse of process and nip frivolous litigation in the bud, and having regard to the admitted contractual nature of the dispute and the sequence of filings, the Court concluded that the Bokaro complaint was a malicious prosecution instituted to frustrate or pre-empt civil/other proceedings and therefore an abuse of the criminal process. The High Court invoked the duty of the Magistrate to prevent vexatious litigation and to exercise judicial mind before allowing criminal proceedings to proceed where the matter is essentially civil in character and the complaint appears to be mala fide. [Paras 8, 9, 13, 14]

The criminal proceedings arising out of Complaint Case No. 379 of 2019 including the order taking cognizance dated 24.07.2019 are quashed.

Ingredients of the offence of cheating and forgery - Proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Cheque issued as security and its liability on presentation - Whether offences of cheating and forgery were made out against the petitioners and the legal character of a cheque issued as security were such as to sustain criminal proceedings. - HELD THAT: - The Court considered the established legal tests for forgery and cheating and observed that the essential ingredients required for offences of cheating and making false documents were not made out on the facts of the case. It further noted precedent that a cheque issued as security pursuant to a financial transaction is not a worthless paper per se and may be presented; where a case under Section 138 NI Act has been instituted, the accused has the forum to defend that complaint. Given that a separate NI Act complaint was already pending in Chhattisgarh and that the cheque was issued as security and partly acknowledged/paid for, the facts pointed to contractual/civil dispute rather than satisfaction of the ingredients of cheating or forgery warranting criminal prosecution in Bokaro. [Paras 10, 11]

Cheating and forgery offences were not made out on the materials before the Court; the cheque was a security instrument susceptible of being presented under the NI Act and did not justify criminal proceedings for cheating/forgery in the present complaint.

Final Conclusion: The petitions are allowed; the criminal proceedings in Complaint Case No. 379 of 2019 and the order taking cognizance dated 24.07.2019 before the Judicial Magistrate, First Class, Bokaro, are quashed as being malicious and an abuse of the court process, with findings that offences of cheating and forgery are not made out on the record and that the dispute is essentially civil in nature.

Public authority - Right to Information Act, 2005 - co-operative societies not public authority - ownership, control or substantial financing by the State

Public authority - co-operative societies not public authority - ownership, control or substantial financing by the State - Whether the petitioner society is a public authority under the Right to Information Act, 2005 and liable to furnish the information sought - HELD THAT: - The Court accepted the petitioner's contention that a co-operative society registered under the Tamil Nadu Co-operative Societies Act is not a public authority within the meaning of Section 2(h) of the RTI Act in the absence of material showing ownership, control or substantial financing by the appropriate Government. Reliance was placed on the decision in Thalappalam Service Cooperative Bank Ltd. and Others and the Division Bench decision in Public Information Officer v. The Registrar, Tamil Nadu Information Commission and Others , which were held to be squarely applicable. Applying those precedents, and noting that the society is managed by an elected board and is autonomous, the Court concluded that the RTI Act does not extend to the petitioner society and therefore the order of the State Information Commissioner directing disclosure could not be sustained. [Paras 11]

The petitioner's society is not a public authority under the RTI Act; the Information Commission's order directing disclosure is quashed.

Final Conclusion: Impugned order dated 04.05.2022 of the State Information Commissioner is quashed and the writ petition is allowed; no costs.

Power to receive additional evidence under Section 391 Cr.P.C. - statutory presumption under Section 138 Negotiable Instruments Act - necessity of cross-examination to complete evidence - exercise of appellate discretion to secure ends of justice

Power to receive additional evidence under Section 391 Cr.P.C. - necessity of cross-examination to complete evidence - Admissibility of additional evidence by examining the respondent's mother and recalling PW1 for cross-examination at the appellate stage - HELD THAT: - The Court found that the complaint and proof affidavit contained reference to a transaction between the petitioner and the respondent's mother and that the respondent/complainant was not cross-examined at trial. Given the existence of a cheque drawn by the respondent's mother and an RTGS transfer admitted in the record, the petitioner's defence required testing by cross-examination and by adducing the mother's evidence. Reliance on precedents elucidating the scope of Section 391 Cr.P.C. establishes that the appellate power to receive additional evidence is unconstrained by form so long as its admission is necessary to avoid failure of justice; the power is to be exercised sparingly but to secure the ends of justice. In cases under Section 138 NI Act, the statutory presumption against the accused must be rebutted by materials and, importantly, by cross-examination; therefore, additional evidence and recall of the witness were necessary to probabilize the petitioner's defence and to enable a fair adjudication on appeal. [Paras 8, 9]

Petitioner is permitted to recall PW1 for cross-examination and to examine the respondent's mother as an additional witness.

Exercise of appellate discretion to secure ends of justice - power to receive additional evidence under Section 391 Cr.P.C. - Validity of the impugned order dismissing the petition for additional evidence and consequential directions for further proceedings - HELD THAT: - The Lower Appellate Court dismissed the petition under Section 391 Cr.P.C. on the ground that the petitioner failed to cross-examine the complainant at trial and for other reasons. This Court held those reasons insufficient: non-participation in cross-examination at trial does not preclude the appellate court from permitting additional evidence where omission has led to incompleteness of the evidence and potential failure of justice. Applying the principle that additional evidence must be admitted when necessary to decide the appeal justly (as explained in relevant precedents), the Court set aside the impugned order and directed that the additional evidence process be completed and the appeal disposed of within a fixed timeframe. [Paras 9, 10]

Impugned order dated 09.11.2023 is set aside; the petition for additional evidence is allowed and further proceedings directed to be completed within three months.

Final Conclusion: Criminal revision petition allowed; impugned order set aside. Petitioner permitted to recall PW1 for cross-examination and to examine the respondent's mother as an additional witness under Section 391 Cr.P.C.; the exercise to be completed within three months and thereafter the appeal disposed.

Dishonour of cheque under Section 138 - Legally enforceable debt or liability - Presumption under Section 139 - Burden of proof to establish debt - Cheque given as security - Availability of remedy under the Chit Funds Act

Dishonour of cheque under Section 138 - Legally enforceable debt or liability - Presumption under Section 139 - Burden of proof to establish debt - Complaint under Section 138 of the Negotiable Instruments Act not maintainable unless the cheque is shown to have been issued for the discharge of a legally enforceable debt or liability. - HELD THAT: - The court analysed Sections 138 and 139 and the Explanation to Section 138 to conclude that Section 138 applies only where the dishonoured cheque was given for the discharge, in whole or in part, of a legally enforceable debt or liability. While Section 139 creates a presumption in favour of the holder that the cheque was for discharge of debt, the presumption cannot be invoked unless the complainant first adduces material establishing existence of a legally enforceable debt. The appellant failed to place requisite materials such as detailed statements of account, calculations of default, demand particulars or other documents proving the enforceable nature of the claim arising from the chit transactions. The trial courts therefore correctly rejected the complaints on the ground that the appellant did not prove that the dishonoured cheques represented legally enforceable debts. The court further noted that cheques given merely as security, without proof of an underlying enforceable liability, do not attract Section 138. The High Court distinguished precedents relied upon by the appellant where facts showed clear enforceable obligations or proper enforcement under the Chit Funds Act, and emphasised that remedies available under the Chit Funds Act remain available to the foreman where appropriate. The court granted liberty to the appellant to place full account statements, receipts/payments and materials to establish the debt and the purpose of the cheques, in which event courts below may reconsider Section 138 claims. [Paras 25, 29, 30, 34, 35]

Complaints under Section 138 dismissed for want of proof of a legally enforceable debt; presumption under Section 139 cannot be invoked in absence of foundational proof; appellant granted liberty to adduce necessary account and proof.

Cheque given as security - Availability of remedy under the Chit Funds Act - Where alleged defaults arise from chit transactions, the claimant must also consider remedies under the Chit Funds Act and cannot invoke Section 138 without establishing an enforceable debt. - HELD THAT: - The court observed that the claimed debt arose from monthly chit subscriptions and that the Chit Funds Act provides statutory avenues for recovery of such defaults. The courts below correctly noted that the appellant did not first establish the enforceability of the claimed sums under the chit arrangements or show that the cheque was issued to discharge such enforceable liability. The judgment distinguishes cases where cheques issued as security in loan agreements were treated within Section 138 because the underlying enforceable obligation was established. Here, absent account particulars and demand details, the remedy under Section 138 could not be invoked. The High Court did not bar future prosecution under Section 138 provided the appellant adduces full details to establish the debt and show that the cheques were issued towards its discharge. [Paras 26, 31, 33, 34]

Chit-related defaults must be supported by material showing enforceable liability before Section 138 can be invoked; claimant may resort to Chit Funds Act procedure and may reframe Section 138 complaints after adducing necessary proof.

Final Conclusion: Impugned orders dismissing the complaints under Section 138 are affirmed and all appeals are dismissed; criminal original petitions for leave to appeal are rejected; liberty granted to the appellant to produce complete account statements and other materials to plead and prove a legally enforceable debt and the purpose of the cheques, whereupon courts below may reconsider Section 138 claims.

Section 143A of the Negotiable Instruments Act - discretionary power to direct interim compensation - presumption under Section 139 of the Negotiable Instruments Act is rebuttable and not, by itself, a ground for interim compensation - factors to be considered while exercising discretion under Section 143A - judicial interference with discretionary order only on ground of perversity or unreasonableness

Section 143A of the Negotiable Instruments Act - discretionary power to direct interim compensation - factors to be considered while exercising discretion under Section 143A - Validity of the Trial Court's refusal to direct interim compensation under Section 143A of the NI Act - HELD THAT: - The High Court held that the power under Section 143A(1) is discretionary and must be exercised after a prima facie evaluation of the complainant's case and the accused's defence. Applying the parameters laid down by the Supreme Court, the Court noted that the petitioner had not produced any document evidencing payment except the cheques and that the respondent had given a plausible explanation that the cheques were handed over signed in blank to the petitioner's son. On the material before the Trial Court, the petitioner had not made out a strong prima facie case to direct interim compensation. Given the discretionary nature of the power, interference was unwarranted absent perversity or unreasonableness in the Trial Court's exercise of discretion. [Paras 16, 17, 18, 21, 23]

The Trial Court's dismissal of the Section 143A application is maintained; no interference warranted.

Presumption under Section 139 of the Negotiable Instruments Act is rebuttable and not, by itself, a ground for interim compensation - Whether the presumption under Section 139 of the NI Act alone suffices to direct interim compensation under Section 143A - HELD THAT: - Relying on the Supreme Court's exposition, the Court held that the presumption under Section 139 is rebuttable and its application arises at trial; it cannot, by itself, furnish the requisite prima facie foundation for awarding interim compensation under Section 143A. Consequently, the petitioner's heavy reliance on Section 139 did not warrant directing interim compensation at the interlocutory stage. [Paras 14, 19, 22]

Section 139 presumption alone is insufficient to direct interim compensation under Section 143A.

Judicial interference with discretionary order only on ground of perversity or unreasonableness - Scope of High Court interference with the Trial Court's exercise of discretion under Section 143A - HELD THAT: - The High Court observed that its jurisdiction to interfere with a Trial Court's exercise of discretion under Section 143A is limited and confined to cases where the exercise of discretion is perverse or so unreasonable that no reasonable court could have so acted. Absent such a threshold showing, the High Court will not substitute its view for that of the Trial Court. [Paras 21]

Interference permissible only if the Trial Court's exercise of discretion is perverse or unreasonable; no such interference here.

Factors to be considered while exercising discretion under Section 143A - Whether the respondent deliberately protracted the trial so as to disentitle him from relief - HELD THAT: - On the record, the Court found that delays and adjournments occurred largely during the COVID-19 pandemic, bailable warrants were either cancelled or returned unexecuted with subsequent appearances by the respondent (including by VC), and the respondent advanced medical reasons for defaults. The Court concluded that there was no satisfactory material to hold deliberate attempt to protract trial by the respondent. [Paras 20, 22]

Allegation of deliberate protraction not established; it did not justify directing interim compensation.

Final Conclusion: The petition challenging the Trial Court's refusal to direct interim compensation under Section 143A of the Negotiable Instruments Act is dismissed; the High Court declines to interfere with the discretionary order and makes no order as to costs.

Endorsement for part of sum due under Section 56 of the Negotiable Instruments Act - Part-payment endorsement requirement - Legally enforceable debt - Presentation of cheque and offence under Section 138 NI Act - Effect of unendorsed part-payment on maintainability of proceedings under Section 138 - Abuse of process of law

Endorsement for part of sum due under Section 56 of the Negotiable Instruments Act - Legally enforceable debt - Presentation of cheque and offence under Section 138 NI Act - Whether proceedings under Section 138 NI Act are maintainable where the drawer made part-payment after drawing the cheque but no endorsement of that part-payment was made on the cheque before presentation. - HELD THAT: - The Court applied Section 56 of the Negotiable Instruments Act and the principles laid down in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel and Shree Corporation v. Anilbhai Puranbhai Bansal. Section 56 permits endorsement of a note on the instrument to record part-payment so that the instrument may be negotiated for the balance. If a part-payment is made after the cheque is drawn but before its presentation, that payment must be endorsed on the cheque; otherwise the amount represented by the cheque does not constitute the legally enforceable debt on the date of presentation. The Court found that the fact of part-payment (admitted Rs.7,50,000) was undisputed, but the presented cheque reflected the full original amount and there was no endorsement of the part-payment. In consequence, the cheque as presented did not represent a legally enforceable debt and its dishonour could not attract criminal liability under Section 138. The respondent's contention that the demand notice related only to the balance did not cure the absence of the mandatory endorsement on the cheque itself. Having reached this legal conclusion, the Court held that continuation of proceedings would be an abuse of process and quashed the complaint and the summoning order. [Paras 8, 10, 11, 12, 13]

Proceedings under Section 138 NI Act were not maintainable in absence of endorsement of the part-payment on the cheque; the complaint is quashed and the summoning order set aside.

Final Conclusion: Petition allowed; complaint No.310/2021 quashed and summoning order dated 19.02.2021 set aside as continuation of proceedings would be an abuse of process of law.

Compounding of offences under the Negotiable Instruments Act - Section 138 NI Act as a quasi criminal provision with primarily compensatory object - Section 147 NI Act permitting compounding of cheque dishonour offences at any stage - Payment of cheque amount/compensation as ground for discharge and closure of proceedings - High Court's inherent power under Section 482 CrPC to quash proceedings to secure ends of justice - Exercise of summary/summary procedure principles (Section 143 read with Section 258 CrPC) in cheque cases

Compounding of offences under the Negotiable Instruments Act - Section 147 NI Act permitting compounding of cheque dishonour offences at any stage - Section 138 NI Act as a quasi criminal provision with primarily compensatory object - Impugned convictions under Section 138 of the Negotiable Instruments Act can be quashed where the accused has discharged the liability and the complainant has received compensation, permitting compounding of the offence. - HELD THAT: - The Court applied the established principle that proceedings under Section 138, though cast in criminal form, are primarily compensatory and amenable to compounding. Having regard to the statutory compounding provision in Section 147 and the consistent precedents of the Supreme Court (including the propositions in Meters and Instruments, Madan Tiwari, P. Mohanraj and Damodar S. Prabhu), compounding is permissible even at later stages where the complainant has been duly compensated. The compromise deed and the complainant's sworn statement that he has received the compensation satisfy the requirement that the victim's interest has been met; continuation of prosecution in such circumstances would not further the object of the statute and would cause unnecessary hardship and abuse of process. The Court therefore held that the impugned convictions and sentences relating to the cheque in dispute should be quashed and rendered inoperative so far as they relate to that cheque. [Paras 11, 14, 15]

Impugned judgments of conviction and sentence under Section 138 NI Act quashed and accused acquitted in view of bona fide settlement and compounding under Section 147.

High Court's inherent power under Section 482 CrPC to quash proceedings to secure ends of justice - Payment of cheque amount/compensation as ground for discharge and closure of proceedings - Exercise of summary/summary procedure principles (Section 143 read with Section 258 CrPC) in cheque cases - The High Court may, in exercise of its inherent power under Section 482 CrPC, quash convictions and direct release of the accused where compounding has effectively discharged the complainant's grievance and continuing prosecution would serve no useful purpose. - HELD THAT: - Invoking Section 482 CrPC, the Court observed that the inherent power is available to prevent abuse of process and to secure the ends of justice. In cheque dishonour cases the courts are empowered to close proceedings where the cheque amount with assessed costs/interest has been paid and there is no reason to proceed with punitive measures. Given the materials on record-a compromise deed showing payment of the compensation and the complainant's affidavit before the Court-the High Court exercised its inherent jurisdiction to quash the convictions and directed release of the accused if not required in any other case. The direction for release and preparation of release warrants was issued as ancillary relief flowing from the quashing order. [Paras 5, 11, 15, 16]

Section 482 CrPC invoked to quash the convictions and to direct release of the petitioner, with consequential action to be taken expeditiously.

Final Conclusion: On the material showing a bona fide settlement (compromise deed and the complainant's sworn statement of receipt), the High Court, applying the compounding scheme under Section 147 NI Act and its inherent powers under Section 482 CrPC, quashed the convictions and sentences under Section 138 NI Act in relation to the cheque in dispute, acquitted the accused and directed his release if not required in any other case.

Recall of witness under Section 311 Cr.P.C. - compulsory production of documents under Section 91 Cr.P.C. - power to summon witnesses under Section 254(2) Cr.P.C. - reverse burden and statutory presumption in proceedings under Section 138 of the Negotiable Instruments Act - fair trial and right to adequate cross-examination

Recall of witness under Section 311 Cr.P.C. - compulsory production of documents under Section 91 Cr.P.C. - reverse burden and statutory presumption in proceedings under Section 138 of the Negotiable Instruments Act - fair trial and right to adequate cross-examination - Petitions under Section 311 Cr.P.C. to recall complainants and under Section 91 Cr.P.C. to compel production of complainants' income tax returns and bank statements were allowed. - HELD THAT: - The Court found that the complaints lacked particulars as to the manner and timing of advances and did not disclose which amounts were paid by bank transfer and which by cash, while the complainants admitted during cross-examination that they were income-tax assesses and possessed income tax returns and bank statements. Given the accused's need to rebut the statutory presumption in a Section 138 complaint, and in view of the accused's reply to the statutory notice and a deed of settlement placed on record by the complainants only later, the Court held that depriving the accused of further cross-examination and access to documents in the complainants' possession would be unfair and prejudicial to a fair trial. Recalling the complainants for further cross-examination and compelling production of the documents sought was therefore necessary for proper appreciation of foundational facts and to enable the accused to discharge the reverse burden. The trial court's orders dismissing those petitions were set aside and the petitions were allowed for the listed matters. [Paras 18, 19]

Impugned orders dated 27/09/2023 dismissing petitions under Sections 311 and 91 Cr.P.C. were set aside and those petitions were allowed.

Power to summon witnesses under Section 254(2) Cr.P.C. - compulsory production of documents under Section 91 Cr.P.C. - Petitions under Section 254(2) Cr.P.C. seeking summons to bank managers were dismissed and that dismissal was affirmed. - HELD THAT: - The Court observed that the trial court had not denied the accused the ability to rely upon his bank statements; the accused could obtain and mark his bank statements through his own witness. The trial court's reasoning that summoning bank managers was unnecessary in the absence of any indication that the bank had refused to provide statements was found to be in consonance with law and precedents. Further, Section 254(2) Cr.P.C. may be invoked by the Magistrate suo motu or on petition at any stage, and dismissal of the petition would not preclude the Magistrate from summoning bank officials later if facts during trial justify it. Accordingly, the challenge to the trial court's order dismissing the Section 254(2) petitions was rejected. [Paras 20, 21, 22]

Orders dated 03/02/2024 dismissing petitions under Section 254(2) Cr.P.C. were confirmed and the challenges thereto were dismissed.

Final Conclusion: The High Court set aside the trial court's refusal to recall complainants and to compel production of their income tax returns and bank statements (petitions under Sections 311 and 91 Cr.P.C.), allowing those petitions; but it affirmed the trial court's dismissal of petitions seeking summons to bank managers under Section 254(2) Cr.P.C., dismissing the challenges to those orders.