TaxTMI Updates e-Newsletter
Jun 21,2022

Quashing of notice - restoration of GST registration - pre deposit as condition for invoking appellate remedy under Section 107(6)(b) of the Central Goods and Services Tax Act - exercise of writ jurisdiction where appellant undertakes statutory pre deposit and pursues appellate remedy

Quashing of notice - restoration of GST registration - Prayer to quash the impugned show cause notice dated 29.12.2021 and to direct restoration of the petitioner's GSTIN by considering the representation dated 02.05.2022. - HELD THAT: - The petitioner sought quashment of the notice issued by the first respondent and restoration of registration on the ground that he was not given an opportunity to explain and that he had failed to file GSTR 3B returns. On hearing, the petitioner offered to make a statutory pre deposit and to pursue the appellate remedy. The High Court did not accede to the petitioner's primary relief; instead, having recorded the petitioner's undertaking and offer to deposit a portion of the tax, the court dismissed the writ petition without quashing the notice or directing restoration of the GSTIN. The dismissal indicates the court's preference for the statutory appellate process where the petitioner undertakes the prescribed pre deposit and approaches the Appellate Authority under the CGST regime rather than obtaining writ relief in the exercise of extraordinary jurisdiction.

Writ petition seeking quashment of the notice and restoration of GSTIN dismissed.

Pre deposit as condition for invoking appellate remedy under Section 107(6)(b) of the Central Goods and Services Tax Act - remedy of appeal before Appellate Authority - Direction to the petitioner to make a pre deposit and pursue appeal before the Appellate Authorities under the statutory scheme. - HELD THAT: - The petitioner undertook to deposit ten percent of the total tax and to file an appeal before the Appellate Authorities in accordance with Section 107(6)(b) of the Central Goods and Services Tax Act. Recording that undertaking, the court directed the petitioner to deposit 10% of the total tax within three weeks from 20.06.2022 and to make submissions before the Appellate Authorities. The direction frames the statutory pre deposit as the appropriate procedural step and channels the dispute to the prescribed appellate forum instead of granting extraordinary writ relief.

Petitioner directed to deposit 10% of the total tax within three weeks from 20.06.2022 and to pursue the appeal before the Appellate Authorities; writ petition dismissed accordingly.

Final Conclusion: The writ petition seeking quashment of the show cause notice and restoration of the GSTIN was dismissed; the petitioner was directed to make a 10% pre deposit within three weeks and to pursue the statutory appellate remedy under Section 107(6)(b) of the Central Goods and Services Tax Act. There shall be no order as to costs.

Interim relief - stay of demand - de-freezing/de-attachment of bank account - vires of Section 16(4) of the GST Act - operation of Section 16(4) - Section 112(8) deposit condition - deposit of entire liability as condition for de-attachment - maintainability of appeal under Section 112

Interim relief - de-freezing/de-attachment of bank account - vires of Section 16(4) of the GST Act - Section 112(8) deposit condition - deposit of entire liability as condition for de-attachment - Whether the petitioner is entitled to interim relief in the form of de-freezing the proprietor's saving bank account pending challenge to the vires of Section 16(4) of the GST Act and the related demand. - HELD THAT: - The petitioner challenged the constitutional validity of Section 16(4) and sought stay of the impugned demand and de-attachment of accounts. Granting the stay of the impugned order would effectively suspend the operation of Section 16(4), which the Court considered inappropriate while adjudicating the vires of a statutory provision. Although the petitioner offered to deposit 20% of the remaining tax under Section 112(8), the Court observed that a prior Division Bench in a comparable petition required full deposit of the liability as the condition for de-attachment. Having regard to those considerations and the consequential nature of the reliefs sought (which depend upon success on the vires challenge), the Court declined to stay the impugned order or to de-attach accounts on the basis of the 20% deposit proposal. Instead, the Court directed that if the petitioner deposits the entire determined liability amount subject to the final result of the writ petition, the proprietor's saving bank account shall be de-attached, following the approach taken by the Division Bench in the cited comparable matter.

Interim relief by way of stay of the impugned demand or de-attachment on a 20% deposit is refused; if the petitioner deposits the entire determined liability (subject to the writ's outcome), the proprietor's saving bank account shall be de-attached.

Final Conclusion: The Court refused to stay the impugned demand or to de-freeze accounts on the basis of a partial (20%) deposit because that would effectively stay Section 16(4); however, the Court ordered that the proprietor's saving bank account will be de-attached if the petitioner deposits the entire determined liability amount subject to the result of the writ petition.

Detention, seizure and release of goods and conveyances in transit - release of seized goods on furnishing security under Section 129(1) - bank guarantee as security for provisional release - provisional release subject to statutory conditions - threat of action under Section 130 (confiscation of goods or conveyances) - adjudicatory procedure for show cause notices and rejection of objections

Release of seized goods on furnishing security under Section 129(1) - bank guarantee as security for provisional release - provisional release subject to statutory conditions - Seized goods are to be released upon furnishing bank guarantees equivalent to the amount quantified in the impugned notices, subject to satisfaction of conditions in Section 129(1). - HELD THAT: - The Court construed Section 129(1) as mandating release of goods after detention or seizure if the conditions in clauses (a) to (c) are satisfied. Clauses (a) and (b) prescribe the amounts payable in different contingencies, while clause (c) permits release upon furnishing security equivalent to the amount payable under clause (a) or (b) in the prescribed form. The petitioners offered to furnish bank guarantees equivalent to the amounts quantified in the impugned notices. In accordance with the statutory scheme, upon receipt of proper bank guarantees, the Officer was directed to release the goods forthwith, subject to the statutory conditions in Section 129(1).

Petitioners may furnish bank guarantees in proper form for the amounts quantified in the impugned notices and, upon such furnishing, the goods shall be released forthwith by the Officer.

Adjudicatory procedure for show cause notices and rejection of objections - threat of action under Section 130 (confiscation of goods or conveyances) - Procedural irregularity in the form of notices that effectively rejected objections was noted but did not warrant setting aside; the challenge to the impugned notices fails. - HELD THAT: - The Court observed that although the impugned communications were styled as 'notices', the assessing officer proceeded to reject the petitioners' objections and pass adverse orders without following the proper adjudicatory procedure. Despite recording that the procedure 'does not appear to be in order', the Court did not antecedently set aside the notices. Given the petitioners' willingness to furnish bank guarantees and the direction for provisional release under Section 129(1), the Court found no further relief appropriate and disposed of the petitions. The notices remain challenged on merits but were not quashed on procedural grounds in these writ petitions.

Notwithstanding the procedural defect recorded, the challenge to the impugned notices fails and no relief is granted on that ground.

Final Conclusion: Writ petitions disposed by directing provisional release of the seized goods on the petitioners furnishing bank guarantees in proper form equivalent to the amounts quantified in the impugned notices; procedural irregularity in the notices was noted but did not result in quashing, and no costs were awarded.

Refund of tax paid - ultra vires - statutory interest on refunds - declaration of invalidity of subordinate legislation - direction to refund

Refund of tax paid - ultra vires - statutory interest on refunds - direction to refund - Respondents to refund IGST paid by the applicants pursuant to Entry No.10 of Notification No.10/2017-IGST (Rate) dated 28.6.2017, together with statutory rate of interest, upon submission of necessary documents. - HELD THAT: - The Division Bench of this Court had earlier declared Entry No.10 of Notification No.10/2017-IGST (Rate) dated 28.6.2017 as ultra vires the Integrated Goods and Services Tax Act, 2017. The decision was thereafter upheld by the Hon'ble Supreme Court by dismissal of Civil Appeal No.1390 of 2022 and allied appeals. In the light of those concluded findings of invalidity, the applicants' claim for refund of IGST paid pursuant to the invalid Entry is sustainable. The Court accordingly allowed the present application and directed the respondents to grant the refund along with the statutory rate of interest, subject to the applicants furnishing the necessary documents. Compliance was ordered within a period of four weeks from such submission.

Application allowed; respondents directed to refund the IGST paid pursuant to Entry No.10 of Notification No.10/2017-IGST (Rate) dated 28.6.2017 with statutory interest within four weeks from submission of necessary documents.

Final Conclusion: The writ application is allowed; respondents are directed to refund the IGST paid under the impugned entry (declared ultra vires) with statutory interest upon production of requisite documents within four weeks.

Time limits under Section 144C - applicability of Section 153 to remand proceedings - continuation of assessment proceedings before the Dispute Resolution Panel - limited scope of the non-obstante clause in Section 144C(13) - doctrine of reasonable time for statutory action - outer time limit for transfer pricing remands

Applicability of Section 153 to remand proceedings - outer time limit for transfer pricing remands - Whether the time limits prescribed by Section 153 apply to proceedings remanded by the Tribunal when the matters are to be re-adjudicated by the Assessing Officer, Transfer Pricing Officer or Dispute Resolution Panel. - HELD THAT: - The Court held that Sections 144C and 153 are not mutually exclusive but mutually inclusive. Where a matter is remanded by the Tribunal, the outer time limits under Section 153 (including the extended periods applicable on reference to the TPO) apply to the remand proceedings irrespective of whether the remand is to the Assessing Officer, the TPO or the DRP. The 33 month/extended outer period relates to completion of the final assessment (not merely to passage of a draft order) and the extension granted on account of a reference to the TPO/DRP is intended to ensure completion of the entire process within the extended period; otherwise the extension would be rendered meaningless. The Assessing Officer retains the duty to give effect to the Tribunal's order within the statutory time-limits applicable on remand. [Paras 21, 27]

Section 153 time-limits apply to remand proceedings; the outer time limit for transfer pricing remands governs completion of the final assessment on remand.

Time limits under Section 144C - continuation of assessment proceedings before the Dispute Resolution Panel - limited scope of the non-obstante clause in Section 144C(13) - Whether proceedings before the DRP are a continuation of assessment proceedings and whether the non-obstante clause in Section 144C(13) precludes application of Section 153 as a whole. - HELD THAT: - The Court concluded that the DRP process is a continuation/part of assessment proceedings once objections are filed under Section 144C(2). Section 144C(12) prescribes a nine month limit for the DRP to issue directions and Section 144C(13)'s non-obstante provision is of limited effect: it ensures that after receipt of DRP directions the Assessing Officer must complete the assessment within the one month window prescribed by that sub section, but it does not operate to exclude Section 153 entirely or to allow the DRP or Assessing Officer to act outside the statutory outer time-limits on remand. The provisions must be read harmoniously to give effect to both timelines. [Paras 23, 27]

DRP proceedings are part of assessment proceedings; the non-obstante clause in Section 144C(13) is limited and does not negate the applicability of Section 153 time-limits.

Doctrine of reasonable time for statutory action - continuation of assessment proceedings before the Dispute Resolution Panel - Whether, in the absence of adherence to statutory timeline, the remand proceedings or subsequent notices/orders are vitiated for delay and whether a writ on limitation grounds is maintainable. - HELD THAT: - The Court held that where statutory time-limits are not met, or where no specific time is prescribed, the doctrine of reasonable time applies and proceedings must be concluded within a reasonable period (which ordinarily should not exceed three years in the absence of a statute prescribing a shorter period). The Court recognised established exceptions permitting judicial interference at the stage of a show cause notice, including where the notice is time barred. Given the undisputed timelines in these matters and the prolonged inaction, the Court found the remand proceedings and ensuing notices/orders hit by limitation and therefore susceptible to quashing by writ. [Paras 24, 26, 27]

Remand proceedings and subsequent departmental action that exceed applicable statutory limits or an unreasonable period are vitiated; writs challenging time barred show cause notices are maintainable.

Outer time limit for transfer pricing remands - applicability of Section 153 to remand proceedings - Application of the conclusions to the specific assessment years in these appeals and whether the Assessing Officer/DRP's delay justified quashing of proceedings and orders. - HELD THAT: - Applying the statutory timelines and the undisputed factual chronology, the Court found that for the assessment years in question (including AY 2006 07, 2009 10 and 2010 11) the department failed to conclude remand proceedings within the applicable periods. Transfers of files between DRP offices after the lapse of time cannot extend statutory timelines. The Court agreed with the High Court's quashing of the impugned assessment orders and directions for refund where appropriate, concluding that the department's prolonged inaction had vested rights in the assessees. [Paras 16, 21, 25, 27]

On the facts, the departmental delay violated the applicable time-limits; the impugned orders were rightly quashed and relief granted to the assessees.

Final Conclusion: The writ appeals are dismissed. The High Court's conclusions that (i) Section 153 time limits apply to remand proceedings (whether remanded to AO/TPO/DRP), (ii) DRP proceedings form part of assessment proceedings and must comply with Section 144C(12)/(13) and the outer limits of Section 153, and (iii) inordinate delay or time barred remand action may be quashed as a breach of limitation or unreasonable delay, are affirmed; on the facts the department's long delay justified quashing of the contested proceedings and orders, with directions for refund where ordered.

Interest under Section 244A - entitlement to interest up to the date of payment

Interest under Section 244A - entitlement to interest up to the date of payment - Respondents directed to pay applicable interest to the petitioner for the period April 2018 to 28th May, 2021. - HELD THAT: - The Court noted its earlier order dated 18th March, 2021 and the assessment order dated 2nd October, 2019 which determined the refund due. The petitioner received the refund amount determined by the assessment order only on 28th May, 2021, but interest was paid only up to 2nd October, 2019. Applying the principle that interest under Section 244A is payable up to the date of actual payment, the Court found that the petitioner remained entitled to interest for the period from October 2019 until 28th May, 2021. In view of the admitted shortfall, the Court directed the respondents to compute and issue the applicable interest for the stated period within six weeks, treating the petitioner's representation for the balance interest as accepted for time-bound compliance.

Respondents to issue applicable interest for April 2018 to 28th May, 2021 within six weeks and compliance to be listed.

Final Conclusion: Writ petition disposed of with direction that the Revenue shall pay the balance interest under Section 244A due to the petitioner for the period up to actual payment (28th May, 2021) within six weeks; compliance to be placed for listing.

Violation of principles of natural justice - Faceless Assessment Scheme and procedural requirements of section 144B - Validity of assessment order where a variation is made without furnishing draft assessment order and show cause notice - Remand for fresh consideration after compliance with statutory procedure

Validity of assessment order where a variation is made without furnishing draft assessment order and show cause notice - Violation of principles of natural justice - Faceless Assessment Scheme and procedural requirements of section 144B - Assessment order that varied the return without serving the draft assessment order and show cause notice under the Faceless Assessment Scheme (section 144B) is invalid for breach of natural justice. - HELD THAT: - The Faceless Assessment Scheme, as embodied in section 144B, contemplates preparation of a draft assessment and, where a variation prejudicial to the assessee is proposed, service of a show cause notice to elicit explanation before finalisation. The petitioner filed a return for AY 2018 19 claiming exemption but the assessing officer varied the return and made a demand after noting failure to file an audit report. The assessment thus involved a prejudicial variation. The assessment was finalised without furnishing the draft assessment order or issuing the mandated show cause notice, thereby infringing the statutory procedure and the principles of natural justice. The court followed the reasoning in decisions of the Delhi High Court addressing the same scheme and concluded that non compliance with the statutory procedure rendered the assessment order liable to be set aside. [Paras 6, 7, 8]

Impugned assessment order set aside for breach of the procedural requirements of section 144B and violation of principles of natural justice.

Consequential validity of penalty proceedings - Remand for fresh consideration after compliance with statutory procedure - Consequential penalty proceedings founded on the set aside assessment order are also liable to be set aside. - HELD THAT: - Since the assessment order was quashed for failure to comply with the scheme's procedural safeguards, the consequential penalty order under the Act cannot stand. The court set aside the penalty order as consequential relief and directed fresh action in accordance with law following compliance with the statutory procedure. [Paras 8]

Impugned penalty order set aside consequentially.

Remand for fresh consideration after compliance with statutory procedure - Faceless Assessment Scheme and procedural requirements of section 144B - Matter remitted to the assessing authority to serve the draft assessment order and show cause notice and to complete the proceedings in accordance with law. - HELD THAT: - Having set aside the assessment and consequential penalty for non compliance, the court directed that the competent authority shall promptly serve the draft assessment order along with a show cause notice to the petitioner and complete the assessment and any consequential proceedings in a time bound manner in accordance with the statutory scheme and principles of natural justice. [Paras 8]

Proceedings remitted for fresh consideration after furnishing the draft assessment order and show cause notice and for completion in accordance with law.

Final Conclusion: Writ petition allowed: assessment order for AY 2018 19 and consequential penalty order quashed for non compliance with the procedural requirements of the Faceless Assessment Scheme (section 144B) and principles of natural justice; matter remitted with directions to serve draft assessment and show cause notice and complete proceedings expeditiously in accordance with law.

Settlement Commission's duty to record reasons - full and true disclosure under Section 245C - procedure under Section 245D - voidability of settlement obtained by fraud or misrepresentation - scope of judicial review under Article 226 - exclusive jurisdiction of the Settlement Commission after admission

Settlement Commission's duty to record reasons - procedure under Section 245D - Validity of the Settlement Commission's acceptance of the appellants' claim of advances and the consequent refusal to make additions in Ext.P1 - HELD THAT: - The Court examined whether Ext.P1 dealt with the claim of advances with sufficient reasoning in accordance with the statutory scheme under Chapter XIX-A. Applying the principles laid down in Om Prakash Mittal and related authorities, the Court held that the Commission must provide reasons demonstrating examination of materials and the nexus between materials and the conclusion. Ext.P1 merely recorded the submissions and concluded "no addition is called for" without explaining how the deficiencies noted in the CIT's Rule 9 report (notably non-furnishing of creditor details and inability to verify creditworthiness) were addressed. On that basis the Single Judge rightly found that Ext.P1 did not reflect the Commission's reasoning and remitted the matter for fresh consideration of the genuineness of advances in accordance with the Act and the procedure in Section 245D. [Paras 3, 8]

Ext.P1 set aside to the extent it accepts the advances without adequate reasons; matter remanded to the Settlement Commission for reconsideration of the advances claim.

Scope of judicial review under Article 226 - voidability of settlement obtained by fraud or misrepresentation - Extent of writ judicial review against orders of the Settlement Commission under Article 226 - HELD THAT: - The Court reiterated that judicial review under Article 226 is limited but not excluded in respect of Settlement Commission orders. The review is confined to determining whether the Commission's order is contrary to the provisions of the Income tax Act, whether it is vitiated by lack of reasons or absence of nexus between reasons and conclusion, or whether the settlement was obtained by fraud or misrepresentation. The High Court applied these principles to the facts, concluding that the remand by the Single Judge fell within permissible review since Ext.P1 lacked adequate reasoning on a material issue. [Paras 7, 9]

Judicial review under Article 226 is available in limited cases where the Settlement Commission's order is contrary to statute, lacks nexus between reasons and decision, or is tainted by fraud/misrepresentation; on the facts the review justified remand.

Final Conclusion: The intra court appeal is dismissed. The High Court's order setting aside Ext.P1 to the extent indicated and remanding the matter to the Settlement Commission for fresh consideration of the genuineness and proof of advances is upheld; no order as to costs.

Penalty for concealment or inaccurate particulars of income under section 271(1)(c) - incorrect claim of capital gains exemptions under 54B and 54F - voluntary disclosure versus disclosure compelled by assessment proceedings - reliance on legal advice/counsel as defence to penalty - bona fide conduct and mens rea for imposition of penalty

Penalty for concealment or inaccurate particulars of income under section 271(1)(c) - incorrect claim of capital gains exemptions under 54B and 54F - bona fide conduct and mens rea for imposition of penalty - Whether penalty under section 271(1)(c) was justified for the assessee's incorrect claim of exemptions under sections 54B and 54F in respect of LTCG - HELD THAT: - The Tribunal upheld the findings of the assessing officer and the CIT(A) that the assessee's claims for exemptions were not supported by the documents and therefore amounted to an incorrect claim of income/exemption attracting penalty. The authorities found that the assessee, together with his co-owner, sold agricultural land and claimed deductions under sections 54B and 54F; subsequent verification showed purchases and deposits that did not accord with the claimed deductions and the AO reworked the capital gains as taxable. The Tribunal agreed that such a claim, being inconsistent with the record, could be visited by the rigours of penalty under section 271(1)(c) because the conduct was not shown to be bona fide and the explanation offered did not establish innocence or absence of culpability.

Penalty under section 271(1)(c) was rightly imposed for the incorrect claim of exemptions; the imposition is upheld.

Voluntary disclosure versus disclosure compelled by assessment proceedings - reliance on legal advice/counsel as defence to penalty - bona fide conduct and mens rea for imposition of penalty - Whether the assessee's subsequent disclosure and payment were voluntary (negating penalty) or made under compulsion after AO's confrontation, and whether reliance on counsel's advice absolved liability for penalty - HELD THAT: - The Tribunal accepted the factual finding of the lower authorities that the surrender/offering of LTCG was not voluntary but occurred only after the AO confronted the assessee with the correct position. The assessee's plea that the earlier incorrect computation was on advice of counsel was rejected by the CIT(A), a conclusion the Tribunal endorsed; reliance on counsel's advice did not persuade the authorities that the conduct was bona fide or that there was no concealment. Given that the disclosure followed the AO's pointing out, it was not a voluntary correction that would negate penalty, and the defence of legal advice did not absolve the assessee of culpability.

The disclosure was held to be compelled rather than voluntary and counsel's advice did not absolve the assessee; therefore the defence failed and penalty stands.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the penalty under section 271(1)(c) for incorrect claims of exemptions and for disclosure made only after the AO's confrontation; the lower authorities' orders confirming penalty are sustained.

Revision under Section 263 - Deduction under Section 80P(2) - Interest income from co-operative banks - Prejudice to the revenue - Binding effect of jurisdictional High Court decision - Precedent of Coordinate Bench of Tribunal

Revision under Section 263 - Deduction under Section 80P(2) - Interest income from co-operative banks - Binding effect of jurisdictional High Court decision - Whether the Principal Commissioner of Income-tax was justified in invoking Section 263 to set aside the assessment for allowing deduction under Section 80P(2) in respect of interest earned from co-operative banks. - HELD THAT: - The Tribunal found that the Assessing Officer had considered and verified the claim for deduction under Section 80P(2) during assessment proceedings and that the assessee had placed on record the relevant details. The Coordinate Bench had earlier decided an identical controversy in favour of the assessee, relying upon the decision of the jurisdictional High Court which permitted the Section 80P(2) claim in respect of interest from co-operative banks. In those circumstances the PCIT could not exercise the revisional jurisdiction under Section 263 merely by preferring a different view, particularly where the assessment order was not shown to be erroneous and prejudicial to the revenue in law. The Tribunal applied the settled principle that Section 263 cannot be invoked to substitute the view of the Assessing Officer when the issue was considered in assessment and where binding decisions of the jurisdictional High Court and a Coordinate Bench supported the assessee's claim. The Tribunal therefore followed its earlier decision in People Co-op. Credit Society Ltd. and held that the PCIT's order under Section 263 was unsustainable. [Paras 4, 5]

Impugned order passed under Section 263 set aside and assessment order passed under Section 143(3) restored; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the PCIT erred in invoking Section 263 to reopen an assessment in which the Assessing Officer had considered and allowed the claim under Section 80P(2) for interest from co-operative banks in circumstances covered by binding precedent; the revisional order was set aside and the assessment restored.

Onus to prove identity, creditworthiness and genuineness under section 68 - burden shifts to the Revenue after assessee discharges onus under section 68 - adverse inference from non-appearance to departmental notices and summons - requirement to explain source of credit does not extend to source of source - cessation of liability and its effect under section 41(1)

Onus to prove identity, creditworthiness and genuineness under section 68 - adverse inference from non-appearance to departmental notices and summons - burden shifts to the Revenue after assessee discharges onus under section 68 - Deletion of addition under section 68 in respect of loans from 16 creditors held to be nongenuine by lower authorities. - HELD THAT: - The assessee produced names, addresses, PANs, bank statements, confirmation letters and returns for the 16 creditors, thereby discharging the initial onus under section 68. The Assessing Officer and the Jurisdictional AO thereafter issued notices/summons which remained unserved and, on that basis alone, drew an adverse inference that the creditors were fictitious. Applying the authorities (including Orissa Corpn. and Sumati Dayal), once the assessee has placed cogent documentary evidence establishing identity and transactions, the burden shifts to the Department to pursue and prove that the entries are not genuine. In the present facts the Department did no more than issue notices/summons and made no further effort to establish that the creditors were bogus or that the evidence was false. The Tribunal therefore concluded that the Revenue failed to discharge the burden cast upon it and directed deletion of the addition. [Paras 9, 11, 12]

Addition of Rs.3,52,00,150/- under section 68 in respect of the 16 creditors deleted; assessee's appeal allowed.

Onus to prove identity, creditworthiness and genuineness under section 68 - requirement to explain source of credit does not extend to source of source - burden shifts to the Revenue after assessee discharges onus under section 68 - Challenge by Revenue to deletion of addition under section 68 in respect of 41 creditors. - HELD THAT: - The assessee had furnished particulars, confirmations, bank statements and IT returns for the 41 creditors; these creditors responded to departmental notices or appeared pursuant to summons. The Assessing Officer, relying on reports of the Jurisdictional AO, suspected the 'source of the source' on account of low bank balances or low declared income of those creditors, but did not demonstrate non-existence of the creditors or show that the evidence was fabricated. The Tribunal applied binding and persuasive precedents that an assessee need only explain the source of the credit shown in its books and, having discharged that onus, the Revenue must prove otherwise. As the Department had not discharged that burden, there was no infirmity in the CIT(A)'s deletion of the addition. [Paras 13, 16, 17]

Revenue's cross-appeal dismissed; deletion of additions under section 68 in respect of the 41 creditors sustained.

Cessation of liability and its effect under section 41(1) - Validity of additions under section 41(1) in respect of credit balances shown in the names of M/s Arpit Enterprises and M/s V.S.N. Trading Co. - HELD THAT: - The assessee produced credit notes, ledger extracts and bank evidence showing the manner in which credits arose and that payments were made in the subsequent year through banking channels. The CIT(A) found that the sundry creditors were not written off in the books and that the Revenue did not discharge the burden of proving cessation of liability required to invoke section 41(1). There being no material to establish that liabilities had ceased or that the evidence was false, the Tribunal found no reason to disturb the deletion ordered by the CIT(A). [Paras 18]

Additions under section 41(1) in respect of the two creditors deleted; Revenue's ground dismissed.

Final Conclusion: For assessment year 2012-13, the Tribunal allowed the assessee's appeal by deleting the addition made under section 68 in respect of 16 creditors, and dismissed the Revenue's cross-appeal challenging deletion of additions in respect of 41 creditors; additions under section 41(1) in respect of two creditors were also deleted.

Unexplained cash credit u/s 68 - conversion of fully convertible debentures into equity as book adjustment - burden of proof regarding identity and creditworthiness of investors - allowability of business expenses under section 37(1) - disallowance of expenditure for lack of business activity - remand for verification of genuineness and corroboration of expenses

Unexplained cash credit u/s 68 - conversion of fully convertible debentures into equity as book adjustment - burden of proof regarding identity and creditworthiness of investors - Addition of share capital and share premium amounting to Rs.6,72,04,400/- made as unexplained credit in Assessment Year 2014-15 under section 68. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition because the credited amounts were not received as cash in the previous year relevant to AY 2014-15 but represented conversion of earlier receipts (debentures issued in prior years) into equity. The AO's invocation of section 68 requires that an amount be credited during the previous year; where the company only converted pre-existing liabilities into share capital without any fresh infusion of cash in the year under consideration, section 68 cannot be applied to treat the conversion as unexplained cash credit. The Tribunal noted precedents treating such conversions as book adjustments where no cash was actually received and accepted the view that the AO may, if appropriate, invoke section 68 in the specific earlier year(s) in which the amounts were actually received, but there was no sustaining of the addition for AY 2014-15. [Paras 6, 11]

Addition under section 68 for AY 2014-15 deleted; AO may examine invocation of section 68 in the relevant earlier year(s) if warranted.

Allowability of business expenses under section 37(1) - disallowance of expenditure for lack of business activity - remand for verification of genuineness and corroboration of expenses - Sustained disallowance of business expenses was set aside and the matter remanded for verification of genuineness and supporting evidence. - HELD THAT: - The Tribunal held that absence of active business operations in a year is not, by itself, an automatic bar to the allowance of expenditures that relate to the accounting period or to maintaining corporate status. Overriding non-allowance provisions must be considered first, but dormant operations may still give rise to deductible expenses under section 37(1) if genuine and substantiated. As there was no material on record showing that the expenses were examined and corroborated by evidence, the Tribunal restored the issue to the file of the AO with directions to verify the genuineness of the claimed expenditures on the basis of actual supporting documentation and then pass a fresh assessment order. [Paras 13, 15]

Disallowance set aside; matter remanded to the AO to evaluate genuineness of expenses on actual-expenditure basis and recompute assessment accordingly.

Final Conclusion: The revenue appeal is dismissed insofar as the addition under section 68 for AY 2014-15 is deleted; the assessee's appeal is allowed in part by setting aside the disallowance of business expenses and remanding that issue to the AO for verification and fresh computation. Appeals disposed of as above.

Deduction under section 80P(2)(a)(i) - Primary agricultural co-operative society - Banking business exclusion under section 80P(4) - Membership - shareholding members versus associate/B class members - Application of binding precedents

Deduction under section 80P(2)(a)(i) - Primary agricultural co-operative society - Banking business exclusion under section 80P(4) - Membership - shareholding members versus associate/B class members - Application of binding precedents - Whether the assessee, a registered primary agricultural co operative society, is entitled to deduction under section 80P(2)(a)(i) for interest income arising from loans to members including associate/B class members despite findings of predominant banking activity and the AO's view that only share holding members qualify. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) allowed the claim following a coordinate bench decision and consequent High Court dismissal of departmental appeals in analogous cases. The assessing officer had denied the deduction on two counts: (i) that 'member' for the purpose of section 80P(2)(a)(i) meant only share holding members and not associate/B class members, and (ii) that as per the amended provision in section 80P(4) the society, being in substance engaged in banking business, was disentitled to the deduction. The Tribunal observed that the issue is covered by an earlier coordinate bench decision in ITA Nos.31 to 33/CHNY/2021 (order dated 29.04.2022) which applied the Supreme Court's reasoning in The Mavilayi Service Co operative Bank Ltd. v. CIT. Respectfully following those decisions, the Tribunal accepted the view adopted by the lower authorities that the assessee is entitled to the deduction under section 80P(2) and rejected the AO's restrictive interpretation of 'member' and the contention that section 80P(4) operated to deny the deduction in the facts of the case.

Claim of deduction under section 80P(2)(a)(i) allowed; the Revenue's appeal dismissed.

Final Conclusion: The Tribunal, applying coordinate and higher precedents, upheld the allowance of deduction to the primary agricultural co operative society under section 80P(2)(a)(i) for the assessment year 2016 17 and dismissed the Revenue's appeal.

Deduction under Section 80IB(9) - scope of "mineral oil" to include natural gas - classification of interest income as business income - transfer pricing imputation of interest on outstanding receivables - benchmarking of interest rate - LIBOR plus margin versus SBI prime lending rate

Classification of interest income as business income - deduction under Section 80IB(9) - Interest earned on temporary deposits of unutilised business funds held by the assessee is business income and eligible to be treated accordingly for purposes of the claim under section 80IB(9). - HELD THAT: - The assessee deposited unutilised operational funds in a designated bank account pending utilisation by the joint venture operator and earned interest thereon. The Tribunal noted that earlier Tribunal decisions in the assessee's own case for earlier assessment years treated such interest as taxable as business income, applying the principle that temporary application of business funds to interest-bearing deposits retains business character. The Assessing Officer's view treating the interest as income from other sources was therefore held to be inconsistent with prior Tribunal findings in the assessee's own case and relevant jurisprudence relied upon by the assessee. Respectfully following those precedents, the Tribunal dismissed the Revenue's challenge to the CIT(A)'s deletion of the addition and accepted the interest as business income for the purpose of the section 80IB(9) claim.

Revenue's ground disputing treatment of interest as business income is dismissed.

Scope of "mineral oil" to include natural gas - deduction under Section 80IB(9) - Profits from commercial production of natural gas fall within the expression "mineral oil" for the purposes of deduction under section 80IB(9) and are eligible for the deduction where other conditions of the provision are met. - HELD THAT: - The Tribunal examined the statutory scheme, legislative history and authoritative judicial pronouncements relied upon by the assessee. It followed the reasoning that in the absence of a specific restrictive definition of 'mineral oil' within section 80IB(9), the expression must be read in its natural, commercial and technical sense and in harmony with allied enactments and constitutional jurisprudence which treat natural gas as part of petroleum/mineral oil resources. The Tribunal relied on the decision of the Hon'ble Gujarat High Court in Niko Resources Ltd., vs. Union of India which, after considering the Constitutional Bench pronouncement on the subject, concluded that 'mineral oil' includes natural gas and that subsequent amendments did not alter that meaning so as to exclude natural gas prior to the specific sub-clause additions. In view of those conclusions and the Tribunal's own decisions in the companion case of the joint-venture partner, the CIT(A)'s allowance of deduction under section 80IB(9) on profits from natural gas production was upheld and the Revenue's challenge dismissed.

Revenue's ground challenging grant of deduction under section 80IB(9) in respect of natural gas profits is dismissed.

Transfer pricing imputation of interest on outstanding receivables - benchmarking of interest rate - LIBOR plus margin versus SBI prime lending rate - Imputation of interest on long outstanding receivables from an associated enterprise is required for transfer pricing purposes, but the rate adopted by the TPO (SBI prime lending rate at 14.45%) is excessive; a benchmarking rate of LIBOR plus a reasonable margin is to be used. - HELD THAT: - For AY 2013-14 the assessee reported receivables from an associated enterprise which remained outstanding for more than two years and did not charge interest. The Transfer Pricing Officer treated the position as indirect funding and imputed interest using SBI prime lending rate at 14.45%. The Tribunal held the adopted SBI prime lending rate to be excessive for benchmarking the international transaction and concluded that applying LIBOR rates plus an appropriate margin (described as 'plus two basis points' by the Tribunal) would be reasonable. The Tribunal accordingly directed the TPO/AO to re-compute the transfer pricing adjustment applying LIBOR plus the indicated margin and allowed the Revenue's grounds for statistical purposes to give effect to that direction.

Transfer pricing adjustment sustained in principle but directed to be re-computed using LIBOR plus margin instead of SBI prime lending rate; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal dismissed the Revenue appeals for A.Y.2011-12 and A.Y.2012-13, holding that interest on temporary deployment of business funds is business income and that 'mineral oil' includes natural gas for the purposes of section 80IB(9); for A.Y.2013-14 the Tribunal directed the transfer pricing adjustment for imputed interest to be re-computed using LIBOR plus a reasonable margin instead of the SBI prime lending rate and allowed the appeal for statistical purposes.

Prior period expenses - crystallization of liability upon receipt of invoice - transfer of assets and liabilities on demerger - current repairs versus capital expenditure - notional accounting entries (AS-15) are not taxable income - provision for defined benefit obligation certified by actuary - mercantile system of accounting and timing of deduction (Bharat Earth Movers principle) - limitation on CIT(A)'s appellate powers and remand under section 251(1)(a) of the Act

Crystallization of liability upon receipt of invoice - transfer of assets and liabilities on demerger - Deductibility of legal and professional charges of Rs.8.80 lakhs debited in P&L in assessment year 2010-11. - HELD THAT: - The Tribunal accepted that following demerger the assessee succeeded to liabilities of the erstwhile MSEB and that the professional fees invoices were raised on 31/03/2010 after appellate orders were passed. The liability therefore crystallized in the year when the invoices were raised and became payable to the tax consultant. Given the general commercial practice of consultants raising bills on conclusion of matters, the expenditure was held to have crystallized in the year under consideration and was allowable. The Tribunal found no infirmity in the CIT(A)'s deletion of the addition. [Paras 9]

Addition of Rs.8.80 lakhs deleted; ground dismissed.

Transfer of assets and liabilities on demerger - prior period liabilities reflected as opening balances - Deletion of addition of Rs.1530.50 lakhs alleged to be overstatement of interest and finance charges. - HELD THAT: - On facts the interest-accrued items formed part of opening balances received under the transfer scheme from the erstwhile MSEB and represented liabilities transferred on demerger rather than fresh unexplained credits of the assessee. The Tribunal followed a coordinate-bench decision in the assessee's own case which reached the same conclusion and held that section 68 additions were not warranted where liabilities related to earlier years appear as opening balances. [Paras 15, 16]

Deletion of the addition of Rs.1530.50 lakhs upheld; ground dismissed.

Prior period expenses - mercantile system of accounting - Deletion of disallowance of prior period expenses of Rs.28,71,38,221. - HELD THAT: - The Tribunal applied the established approach that where an entity following the prescribed accounting framework (including statutory rules for electricity undertakings) discloses prior period items and such items crystallized in the year under consideration (and had been consistently accounted for), they are allowable. Reliance was placed on coordinate-bench decisions and the jurisdictional High Court's approach accepting that liabilities crystallized upon recognition under the mercantile system should be allowed. The CIT(A)'s factual findings that the prior period expenses had crystallized were not rebutted. [Paras 22, 23]

Disallowance deleted; ground dismissed.

Notional accounting entries (AS-15) are not taxable income - current accounting treatment of actuarial surplus/deficit - Deletion of addition of Rs.12.86 crores representing surplus in CPF trust reflected in employee cost. - HELD THAT: - The surplus arose from an actuarial valuation performed to comply with Accounting Standard-15 and represented a notional entry reflecting fair value of trust investments as at year end. The Tribunal agreed with the CIT(A) that such notional surplus was not realized and did not constitute the assessee's income for tax purposes; consequently the AO's addition was unwarranted. [Paras 30]

Addition deleted; ground dismissed.

Provision for defined benefit obligation certified by actuary - mercantile system of accounting and timing of deduction (Bharat Earth Movers principle) - Deletion of disallowance of provision of Rs.5,54,08,761 for interest shortfall on Provident Fund liability. - HELD THAT: - An actuary certified a quantified shortfall and the assessee, following mercantile accounting, made a provision. The Tribunal held that such a business liability arising in the accounting year is deductible when it has arisen even if payable in a later year; the claim is not governed by the payment-based restriction of section 43B(b). The decision in Bharat Earth Movers was applied to allow the deduction. [Paras 36]

Disallowance deleted; ground dismissed.

Transfer of assets and liabilities on demerger - limitation on CIT(A)'s appellate powers and remand under section 251(1)(a) of the Act - Addition of Rs.40 crores relating to advances paid for lease finance project - whether deletion by CIT(A) and direction to AO for verification was permissible. - HELD THAT: - The CIT(A) had directed the AO to verify MSEB accounts and remitted the matter for verification before deleting/partly allowing the ground. The Tribunal observed that since, with effect from 01/06/2001, the CIT(A)'s appellate powers do not include setting aside for de novo consideration, the order restoring the matter to the AO for fresh verification was beyond the CIT(A)'s powers under section 251(1)(a). The Tribunal directed the CIT(A) to adjudicate the issue afresh (with liberty to seek a remand report from the AO) and to afford the assessee an opportunity of hearing. [Paras 42]

Impugned disposition that remitted matter to AO set aside; issue remanded to CIT(A) for de novo adjudication (grounds allowed for statistical purpose).

Current repairs versus capital expenditure - Repairs and insurance of machinery, plant and furniture (section 31) - Assessee's appeal against disallowance of repairs to plant and machinery (claimed as revenue expenditure Rs.2,67,94,708) - whether capital in nature. - HELD THAT: - The Tribunal accepted that the expenditure related to fixation/replacement of vibration dampers and spacers required for maintenance of transmission lines and fell within the scope of current repairs under section 31(i). There was no material to show that a new asset or advantage of enduring nature was created; the assessee's accounting policy and sample invoices supported revenue treatment. C&AG had not adverse-commented on this aspect. Applying the Saravana Spinning Mills test, the disallowance as capital expenditure was directed to be deleted. [Paras 52]

Assessee's appeal allowed; disallowance deleted and expenditure treated as revenue repairs.

Final Conclusion: For A.Y. 2010-11 the Tribunal dismissed the Revenue's grounds 1-5 (upholding CIT(A)'s deletions/additions in favour of the assessee), upheld the assessee's appeal on repairs to plant and machinery, and set aside the portion of the CIT(A)'s order relating to advances for lease finance (Rs.40 crores) as exceeding appellate powers - directing the CIT(A) to decide that issue de novo (with liberty to obtain a remand report).

Retrospective effect of the second proviso to Section 40(a)(ia) - declaratory/curative character of a beneficial proviso - deemed deduction on the date of furnishing of return by the payee - deletion of additions made under Section 40(a)(ia)

Retrospective effect of the second proviso to Section 40(a)(ia) - declaratory/curative character of a beneficial proviso - deletion of additions made under Section 40(a)(ia) - deemed deduction on the date of furnishing of return by the payee - Second proviso to Section 40(a)(ia) has retrospective effect and additions under Section 40(a)(ia) for AY 2011-12 and AY 2012-13 are not sustainable. - HELD THAT: - The Tribunal found the question to be no longer res integra and, following the jurisdictional High Court decision cited and the Division Bench view in CIT v. Ansal Land Mark Township, held that the second proviso is a beneficial, declaratory/curative provision which must be given retrospective effect from 01.04.2005 (the date from which sub clause (ia) was originally inserted). The proviso deems that where tax was not deducted but the payee has furnished the return and paid tax, the payer is to be treated as having deducted and paid tax on that date for the purposes of clause 40(a)(ia). Applying this legal principle to the facts of the appeals, the Tribunal concluded that the additions made by the Assessing Officer under Section 40(a)(ia) for the stated assessment years were unsustainable and correctly deleted by the Commissioner (Appeals). The Tribunal therefore dismissed the Revenue's appeals. [Paras 4, 5]

Revenue's appeals dismissed; additions under Section 40(a)(ia) deleted for AY 2011-12 and AY 2012-13.

Final Conclusion: Following binding jurisdictional precedent that the second proviso to Section 40(a)(ia) is curative and operates retrospectively from 01.04.2005, the Tribunal dismissed the Revenue appeals and upheld deletion of the additions made under Section 40(a)(ia) for AY 2011-12 and AY 2012-13.

Adjustment of refund between interest and tax components - computation of interest under section 244A - prohibition on payment of interest on interest - principle of parity in adjustment (equal treatment in collection and refund) - precedential effect of coordinate Bench decisions

Adjustment of refund between interest and tax components - computation of interest under section 244A - prohibition on payment of interest on interest - precedential effect of coordinate Bench decisions - Validity of the CIT(A)'s direction to adjust refunds already granted first against the interest component and thereafter, if any, against the tax component when recomputing interest under section 244A. - HELD THAT: - The Tribunal accepted the CIT(A)'s approach that, for determining correct interest payable under section 244A when a part-refund has already been granted, the earlier refund should be first appropriated towards the interest component and the balance, if any, towards the tax component. The Bench distinguished the Supreme Court decision in Gujarat Fluoro Chemicals, noting that that case dealt with the impermissibility of charging interest on interest and did not govern the present question of methodology for adjustment of an earlier refund against interest and tax components. The Tribunal observed that the statute does not prescribe a specific rule for adjusting earlier refunds while computing interest and, applying the principle of parity - that adjustments on refund should follow the same method as adjustments on collection - found no impropriety in the CIT(A)'s direction. The decision relied on and followed coordinate Bench precedents (Union Bank of India; Grasim Industries and others) which held that appropriating earlier refunds first to interest and then to tax does not amount to awarding interest on interest and is the correct method for computing the interest payable to the assessee. Having regard to those precedents and the reasoning deployed, the Revenue's grounds were held to be without merit. [Paras 8, 10, 11]

Revenue's common grounds challenging the CIT(A)'s direction were dismissed and the appeals were dismissed.

Final Conclusion: Following and applying coordinate Bench precedents, the Tribunal upheld the CIT(A)'s direction that previously granted refunds be first appropriated towards the interest component and thereafter towards the tax component while recomputing interest under section 244A, and dismissed the Revenue's appeals.

Penalty under section 271(1)(c) of the Income-tax Act - Validity of notice under section 274 - Failure to strike out inapplicable limb in penalty notice - Vitiation of penalty order for defective notice - Survey under section 133A

Penalty under section 271(1)(c) of the Income-tax Act - Validity of notice under section 274 - Failure to strike out inapplicable limb in penalty notice - Vitiation of penalty order for defective notice - Whether the penalty imposed under section 271(1)(c) is sustainable where the notice under section 274 retains both limbs of the provision without striking out the inapplicable limb - HELD THAT: - The Tribunal found that the sole addition on which penalty was imposed related to excess silver stock discovered during a survey under section 133A. The assessing officer issued notices under section 274 r.w.s. 271(1)(c) that retained both limbs - 'concealing the particulars of income' and 'furnishing inaccurate particulars of income' - without striking off the inapplicable limb, although penalty was ultimately imposed with reference to only one limb. Relying on the binding jurisprudence of the jurisdictional High Court, as explained in Mohd. Farhan A. Shaikh Vs. Dy. CIT and Pr. CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. , the Tribunal held that such a defect in the penalty notice vitiates the penalty order. The Tribunal therefore applied the principle that a notice which does not properly set out and limit the charge by striking out inapplicable portions renders the subsequent penalty unsustainable, and directed deletion of the penalty imposed by the assessing officer. [Paras 3, 5]

Penalty under section 271(1)(c) quashed as the notice under section 274 was defective for not striking out the inapplicable limb; penalty deleted.

Final Conclusion: Appeal allowed: penalty imposed under section 271(1)(c) for assessment year 2011-12 deleted on the ground of defective notice under section 274 which retained inapplicable limb.

Validity of assessment passed consequent to quashed revisionary order - quashing of revisionary power exercised under section 263 - maintainability of revenue appeal against assessment reopened pursuant to a quashed revision

Quashing of revisionary order - assessment passed consequent to quashed order is null and void - maintainability of appeal by the Revenue - Whether the appeal filed by the Revenue is maintainable where the revisionary order under section 263, which gave rise to the subsequent assessment, has been quashed by the Tribunal. - HELD THAT: - The Tribunal had earlier quashed the revisionary order passed under section 263 by its order dated 18.09.2019. The assessment order impugned in the present appeal was completed under section 143(3) read with section 263 consequent to that revision. Once the revisionary order has been quashed, the consequential assessment founded upon it cannot survive. The subsequent proceedings and the assessment order passed in pursuance of the quashed revision stand null and void. Consequently, an appeal by the Revenue against such an assessment is not maintainable. [Paras 5]

The appeal filed by the Revenue is not maintainable and is dismissed.

Final Conclusion: The Revenue's appeal is dismissed as the assessment completed under section 143(3) r.w.s. 263, being founded on a revisionary order which was quashed by the Tribunal, has no legs to stand and the consequential proceedings are null and void.

Confiscation of goods - Redemption fine - Penalty under Section 112(a)(ii) - Penalty under Section 114AA - Clerical mistake / bona fide error in Bill of Entry - Voluntary disclosure and offer to pay differential duty - No Objection Certificate requirement under the Drugs and Cosmetics Act

Confiscation of goods - Penalty under Section 112(a)(ii) - Penalty under Section 114AA - Clerical mistake / bona fide error in Bill of Entry - Voluntary disclosure and offer to pay differential duty - Whether the goods were rightly held liable to confiscation and whether redemption fine and penalties under the Customs Act were rightly imposed where the importer had filed Bills of Entry with an incorrect description but made a suo motu disclosure and offered to pay the differential duty. - HELD THAT: - The Tribunal found on the material on record that the incorrect description/classification in the Bills of Entry resulted from a clerical error by the appellant's clerk, and that the appellant promptly and suo motu approached the Department seeking rectification and offering to pay the differential customs duty before any inspection, notice or adverse action by Revenue. Although Revenue suspected deliberate mis-declaration (including to evade a statutory NOC requirement under the Drugs and Cosmetics Act) and proceeded to seize the goods and impose confiscation, redemption fine and penalties, the Tribunal held that the appellant's voluntary disclosure and immediate offer to pay the differential duty, coupled with the appellant's status as a regular importer who had obtained the requisite NOC, negated any finding of contumacious or deliberate misconduct. On these findings the Tribunal treated the mistake as a simple clerical error and not a case warranting confiscation or the imposition of the challenged penalties. [Paras 9, 10, 11]

Impugned order of confiscation and the penalties under Section 112(a)(ii) and Section 114AA are set aside; appeal allowed and consequential benefits granted to the appellant.

Final Conclusion: The Tribunal allowed the appeal, holding the mis-description to be a clerical error disclosed suo motu with an offer to pay differential duty; accordingly the orders of confiscation, redemption fine and penalties under the Customs Act were set aside and the appellant granted consequential benefits.

Maintainability of petition under section 7 of the Insolvency and Bankruptcy Code - limitation and restart by acknowledgement in balance sheets - effect of concurrent SARFAESI proceedings on initiation of CIRP - right of an individual financial creditor to initiate CIRP notwithstanding consortium/lead bank arrangements - appointment of Interim Resolution Professional and operation of moratorium

Limitation and restart by acknowledgement in balance sheets - Acknowledgement of debt in the corporate debtor's balance sheets restarts the period of limitation for filing a section 7 petition. - HELD THAT: - The Tribunal found that although the date of default was 30 June 2016, the corporate debtor had made clear acknowledgements of its debt in the balance sheets for the years ending 31 March 2018 and 31 March 2019 and in the accompanying auditors' reports. Those acknowledgements operate to revive the cause of action and start fresh limitation periods in accordance with established law, thereby rendering the petition filed on 24 October 2019 within time. [Paras 16]

Acknowledgement in the balance sheets restarts limitation; the petition is not barred by limitation.

Effect of concurrent SARFAESI proceedings on initiation of CIRP - Pendency of proceedings under the SARFAESI Act does not bar a financial creditor from filing a petition under section 7 of the IBC. - HELD THAT: - The Tribunal held that the SARFAESI Act and the IBC operate in different legislative fields - recovery and insolvency/resolution respectively - and that pursuing one remedy does not preclude invoking the other. The corporate debtor's contention that SARFAESI proceedings pending against it would prevent initiation of CIRP was therefore rejected. [Paras 17]

Concurrent SARFAESI proceedings do not preclude filing of a section 7 petition under the IBC.

Right of an individual financial creditor to initiate CIRP notwithstanding consortium/lead bank arrangements - A member bank of a consortium may, subject to meeting statutory criteria, file a section 7 petition without joining the lead bank. - HELD THAT: - The Tribunal rejected the corporate debtor's submission that UCO Bank could not maintain the petition without joining the lead bank (SBI). It observed there is no legal embargo preventing one financial creditor from proceeding individually under the Code provided the financial creditor satisfies the minimum requirements to file a section 7 application. [Paras 13, 18]

The petition by the individual financial creditor is maintainable despite consortium/lead bank arrangements.

Maintainability of petition under section 7 of the Insolvency and Bankruptcy Code - The petition under section 7 is complete and maintainable in all respects. - HELD THAT: - Having considered submissions on limitation, acknowledgement, the effect of SARFAESI proceedings and the competence of the financial creditor to file, the Tribunal concluded that a default had occurred and had been acknowledged, and that statutory requirements for initiating CIRP were satisfied. Challenges to maintainability were therefore repelled and the petition treated as complete. [Paras 18]

The section 7 petition is complete and maintainable; admission was appropriate.

Appointment of Interim Resolution Professional and operation of moratorium - On admission of the section 7 petition, CIRP is to be initiated by ordering moratorium and appointing an Interim Resolution Professional, with attendant directions for public announcement, IRP functions, and compliance. - HELD THAT: - The Tribunal admitted the petition and directed immediate initiation of CIRP. It ordered a moratorium under the Code, directed public announcement in accordance with the Regulations, appointed an Interim Resolution Professional to perform statutory functions (subject to production of required authorisation), directed cooperation by the corporate debtor's officers, required deposit of funds by the financial creditor for notice expenses, and gave ancillary directions concerning communication of the order and updating of Registrar records. [Paras 19]

Petition admitted; moratorium ordered; IRP appointed; directions issued to give effect to CIRP.

Final Conclusion: The Tribunal admitted the section 7 petition filed by the financial creditor, holding that limitation was revived by acknowledgements in the corporate debtor's balance sheets, that concurrent SARFAESI proceedings and consortium arrangements did not bar the petition, and that the petition was otherwise complete; accordingly CIRP was ordered, moratorium imposed and an Interim Resolution Professional appointed with directions to proceed.

Maintainability of insolvency petition under section 9 after completion of CIRP - requirement to file claim during CIRP - extinguishment of pre CIRP claims on approval of resolution plan - binding effect of approved resolution plan on creditors and stakeholders

Maintainability of insolvency petition under section 9 after completion of CIRP - requirement to file claim during CIRP - Whether an operational creditor can institute a fresh Section 9 petition after approval of a resolution plan where the claim arose prior to initiation of CIRP and the creditor did not file its claim during the CIRP. - HELD THAT: - The Tribunal found that the undisputed date of default was 24 July 2013 and that the Corporate Debtor had been admitted into CIRP on 20 April 2017 with a resolution plan approved on 17 October 2017. The Operational Creditor did not present its claim to the Resolution Professional during the CIRP and filed the present Section 9 petition only after approval of the resolution plan. Reliance was placed on the decision of the National Company Law Appellate Tribunal in Sanjay Chemicals (India) Pvt. Ltd. v. Sharon Bio Medicine Ltd., which held that claims arising prior to initiation of CIRP and not filed during CIRP cannot be entertained by way of a Section 9 application after completion of CIRP. The Tribunal further applied the legal principle declared by the Hon'ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., that on approval of a resolution plan the claims provided for in the plan stand frozen and all other claims not part of the plan stand extinguished and cannot be initiated or continued. Applying these authorities to the facts, the Tribunal concluded that the Operational Creditor's right to seek remedy under Section 9 had been extinguished by the approved resolution plan and that the petition was therefore not maintainable. [Paras 25, 26, 27, 28]

Section 9 petition dismissed as not maintainable because the claim arose prior to CIRP, was not filed during CIRP, and was extinguished on approval of the resolution plan.

Final Conclusion: The Company Petition under Section 9 is dismissed as the operational creditor's pre CIRP claim, not submitted during the CIRP, stood extinguished on approval of the resolution plan; registry directed to communicate the order and usual formalities followed.

Admission of application under section 9 of the Insolvency and Bankruptcy Code - debt and default - operational creditor's entitlement to initiate Corporate Insolvency Resolution Process - moratorium under the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional - public announcement of CIRP

Admission of application under section 9 of the Insolvency and Bankruptcy Code - debt and default - operational creditor's entitlement to initiate Corporate Insolvency Resolution Process - The petition filed under section 9 of the Code by the operational creditor was maintainable and liable to be admitted for initiation of CIRP against the corporate debtor on the ground of debt and default. - HELD THAT: - The Tribunal found that the corporate debtor had, by its own reply, accepted that a sum of Rs.6,09,299/- was due and payable, which satisfied the check-box test for existence of debt and default. The operational creditor filed the petition with the requisite affidavit within the threshold applicable at the relevant time and issued the statutory notice under section 8; the record did not show any bona fide dispute on existence of the debt or the services rendered. On these facts the Tribunal concluded that the statutory pre-conditions for admission under section 9 were met and that the petition should be admitted. [Paras 10, 11]

Petition under section 9 admitted and CIRP initiated against the corporate debtor.

Moratorium under the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional - public announcement of CIRP - Consequential reliefs flowing from admission of the section 9 petition were ordered, including imposition of moratorium, public announcement of CIRP and appointment of an Interim Resolution Professional with directions for administration of the process. - HELD THAT: - Upon admission, the Tribunal directed a moratorium to operate from the date of the order until completion of the CIRP or further orders; it ordered immediate public announcement of the CIRP as per the relevant regulations. The Tribunal appointed an Interim Resolution Professional subject to submission of required authorisation, directed the IRP/RP to perform functions under the Code, required cooperation of the corporate debtor's officers and managers, called for periodical reports, and directed the operational creditor to deposit funds for initial expenses. Ancillary directions were given for communication of the order to the parties and for Registrar of Companies to update records. [Paras 12]

Moratorium imposed; public announcement directed; Interim Resolution Professional appointed; ancillary directions issued to give effect to CIRP.

Final Conclusion: The section 9 petition by the operational creditor was admitted as the corporate debtor had accepted that an amount was due and payable; CIRP was ordered to commence with a moratorium, public announcement and appointment of an Interim Resolution Professional together with ancillary directions to implement the insolvency process.

Extinguishment of pre-sale statutory dues - issuance of no-objection certificate for mortgage purposes - protection of successful purchaser buying a corporate debtor as a going concern - as is where is / no recourse sale - estoppel for local authorities failing to lodge claims in liquidation

Extinguishment of pre-sale statutory dues - issuance of no-objection certificate for mortgage purposes - protection of successful purchaser buying a corporate debtor as a going concern - Claims of the Municipal and Land Revenue authorities (Respondents No.2 and No.3) in respect of dues relating to periods prior to 11.08.2021 are extinguished and those authorities are directed to issue necessary NOCs to the successful purchaser. - HELD THAT: - The corporate debtor was sold as a going concern pursuant to the MoU approved on 13.08.2021 and a sale certificate issued thereafter. The sale certificate and MoU envisaged that liabilities relating to periods prior to 11.08.2021 would stand extinguished, enabling the purchaser to take over the business with a fresh slate. The Tribunal observed that allowing R2 and R3 to raise past statutory claims at this stage would burden the revived enterprise and risk its relapse into insolvency. Further, R2 and R3 had not lodged claims during the liquidation process nor approached the Adjudicating Authority in time; therefore they are estopped from asserting such prior dues now. Considering the urgency to enable the purchaser to procure bank guarantees (which require latest tax/land revenue receipts) and to protect the objective of the Code to revive the corporate debtor as a functioning concern, the Tribunal directed that claims for the period prior to 11.08.2021 stand extinguished and ordered R2 and R3 to issue the necessary NOCs to the applicant so that mortgage/financial formalities can proceed. [Paras 15, 16, 17, 18]

Respondents No.2 and No.3 are barred from claiming statutory dues for periods prior to 11.08.2021; they must issue the requisite NOCs to the successful purchaser.

As is where is / no recourse sale - liquidator functus officio - no liability on liquidator for expired licences and NOCs post liquidation - Reliefs seeking directions against the liquidator to procure factory licence/fire NOC, to bear liabilities under the sale certificate, or other ancillary reliefs are declined. - HELD THAT: - The liquidator averred that the sale was effected on an 'as is where is' and 'no recourse' basis and that he has discharged his duties under the liquidation process, having handed over documents to the purchaser and become functus officio. The Tribunal found no basis to saddle the liquidator with obligations to procure renewed licences or bear liabilities under the sale certificate, and refused the remaining prayers in the application. The Tribunal limited relief to extinguishment of pre-sale dues and issuance of NOCs by R2 and R3, and did not grant the other reliefs sought against the liquidator. [Paras 11, 12, 13, 19]

Prayers directing the liquidator to procure licences, bear liabilities, or provide further ancillary reliefs are rejected.

Final Conclusion: The application is disposed of by directing Respondents No.2 and No.3 to extinguish their claims for periods prior to 11.08.2021 and issue necessary NOCs to the successful purchaser; all other prayers, including directions against the liquidator to procure licences or bear liabilities, are declined.

Refund of unutilized CENVAT credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess - vested right in CENVAT credit - effect of amendment to Section 140 of the CGST Act on carry forward of cess credit

Refund of unutilized CENVAT credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess - vested right in CENVAT credit - effect of amendment to Section 140 of the CGST Act on carry forward of cess credit - Entitlement to refund of unutilized CENVAT credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess lying in the CENVAT account as they could not be carried forward into the GST regime. - HELD THAT: - The Tribunal examined earlier decisions holding that CENVAT credit once validly availed is a vested right and that, where cess was phased out and credit could not be utilised post-change of law, the assessee is entitled to refund of the unutilized cess balances. Reliance was placed on consistent Tribunal authorities which held that the disappearance of the cess levy (and subsequent amendment to the carry forward provisions) did not, by itself, extinguish the vested entitlement to the accumulated cess credit. The Tribunal rejected the Board's policy pronouncement that prevented utilisation or refund of accumulated cess credit where such pronouncements conflicted with judicial precedents. Having regard to these authorities, and to the position that the credit stood unutilized as on 30.06.2017/01.07.2017 because cess levy had been withdrawn and could not be carried forward, the Tribunal held that the refund claim could not be refused. The grant of refund is subject to the usual verification of records, as indicated in precedent.

The impugned order rejecting the refund claim is set aside and the refund of the unutilized cess credit is allowed, subject to verification of records and with consequential reliefs, if any.

Final Conclusion: The appeal is allowed: the appellant is entitled to refund of the unutilized balances of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess lying in the CENVAT account as on 30.06.2017/01.07.2017; the rejection is set aside and refund is permitted subject to verification of records.

Entitlement to refund under Notification No. 12/13 ST dated 01.07.2013 read with Section 11B of the Central Excise Act, 1944 - classification of services as Business Support Service vis-a -vis marketing services - inclusion of service in the approved list of the approval committee for SEZ and procedural lapse doctrine - distinct identity of SEZ unit and DTA unit under Sub rule (7) of Rule 19 of the Special Economic Zone Rules, 2006

Entitlement to refund under Notification No. 12/13 ST dated 01.07 2013 read with Section 11B of the Central Excise Act, 1944 - classification of services as Business Support Service vis a vis marketing services - inclusion of service in the approved list of the approval committee for SEZ and procedural lapse doctrine - Appellant entitled to refund claimed for the period January 2017 to March 2017 under the said Notification and Section 11B. - HELD THAT: - The invoices issued by the service provider describe the supply as Business Support Service and the approved list of the approval committee includes Business Support Service. Even if the services were characterised as marketing services and thus not specifically listed, the Tribunal applied the established precedent that omission from the approved list is a procedural lapse which, by itself, cannot defeat a bona fide refund claim under the SEZ regime. The Tribunal relied on prior decisions to hold that the SEZ Act and its fiscal concessions operate to prevent denial of refund on purely procedural grounds. On these bases the claim for refund under Notification No. 12/13 ST read with Section 11B was held to be sustainable. [Paras 4]

Refund claim allowed on the ground that the service is Business Support Service (included in the approved list) and, in any event, omission from the approved list is only a procedural lapse and not a ground to deny refund.

Distinct identity of SEZ unit and DTA unit under Sub rule (7) of Rule 19 of the Special Economic Zone Rules, 2006 - Denial of refund on the ground that the service provider and service recipient are the same entity is not tenable. - HELD THAT: - Sub rule (7) of Rule 19 of the SEZ Rules, 2006 provides that where an enterprise operates both as a DTA unit and an SEZ unit it shall have two distinct identities with separate books of account; the SEZ unit need not be a separate legal entity. The service provider was a DTA unit located in Kolkata while the appellant was an SEZ unit at Dahej; therefore, despite corporate identity, the units are to be treated as distinct identities for the purposes of the SEZ Rules. Consequently, the ground of rejection premised on identity of provider and recipient was rejected and found not to sustain refusal of refund. [Paras 4, 5]

Refund cannot be denied on the basis that the service provider and recipient are the same entity because the SEZ unit and the DTA unit constitute distinct identities under the SEZ Rules.

Final Conclusion: Impugned order set aside; appeal allowed and appellant held entitled to refund for the period January 2017 to March 2017 under the cited Notification and Section 11B, the rejection on grounds of non inclusion in the approved list and alleged identity of provider and recipient being unsustainable.

Cenvat credit on challan evidencing payment under Reverse Charge Mechanism - Applicability of Rule 9(1)(e) of Cenvat Credit Rules, 2004 - Inapplicability of Rule 9(1)(bb) to service recipient - Eligibility of credit where service tax is paid on pointing out by audit

Cenvat credit on challan evidencing payment under Reverse Charge Mechanism - Applicability of Rule 9(1)(e) of Cenvat Credit Rules, 2004 - Inapplicability of Rule 9(1)(bb) to service recipient - The appellant is entitled to avail Cenvat credit on the basis of challans evidencing payment of service tax under the Reverse Charge Mechanism even though the tax was paid on pointing out by audit. - HELD THAT: - The Tribunal found that Rule 9 prescribes documents on which Cenvat credit can be availed and that Rule 9(1)(bb) applies to a supplementary invoice, bill or challan issued by the provider of output service. In the present case the tax was paid by the appellant in the capacity of recipient of service under the Reverse Charge Mechanism, and therefore Rule 9(1)(bb) is not attracted. Credit in such circumstances falls squarely under Rule 9(1)(e), which permits Cenvat credit on a challan evidencing payment of service tax by the service recipient. The Tribunal relied on its earlier decisions, including INEOS STYROLUTION INDIA LTD., and the reasoning in Polygenta Technologies Ltd., to hold that invocation of Rule 9(1)(bb) by the Revenue was misplaced and that denial of credit on that basis was unsustainable. [Paras 4, 5]

Credit allowed: the appellant may avail Cenvat credit on the challans evidencing payment of service tax under the Reverse Charge Mechanism; the impugned order denying credit on the basis of Rule 9(1)(bb) is set aside.

Final Conclusion: The appeal is allowed and the impugned order is set aside: the appellant is entitled to Cenvat credit on the challans evidencing payment of service tax under the Reverse Charge Mechanism, the reliance on Rule 9(1)(bb) by the department being incorrect; Rule 9(1)(e) governs entitlement.

Admissibility of cenvat credit - input service - nexus with manufacturing activity - services received up to the place of removal - services received outside the factory premises but used in manufacture - cleaning and forwarding agency services - repair and maintenance services - housekeeping, garden maintenance and pest control services

Cleaning and forwarding agency services - services received up to the place of removal - input service - Cenvat credit on Clearing & Forwarding (C&F) agency services - HELD THAT: - The Tribunal held that services rendered by the C&F agent at its premises constitute services received up to the place of removal and, therefore, fall within the definition of input service. The fact that the C&F agent's premises lie beyond the factory boundary does not preclude credit where the services are for clearance of goods up to the place of removal. The conclusion is supported by earlier decisions cited in the order which treat clearance-related services as admissible input services. [Paras 4]

Cenvat credit on Clearing & Forwarding agency services is admissible.

Services received outside the factory premises but used in manufacture - nexus with manufacturing activity - repair and maintenance services - Cenvat credit on services (maintenance, repair, operation) received at the Thermal Power Station for generation of electricity used in manufacture - HELD THAT: - The Tribunal found that services rendered at the Thermal Power Station were availed for generation of electricity which is consumed in the appellant's manufacturing process. There is a direct nexus between those services and the manufacture of the final product; hence the mere fact that such services were performed outside the factory premises does not disentitle the appellant from taking credit. The order applies the principle that input services used in manufacture, even if located or performed outside factory premises, can be admissible where nexus with production is established. [Paras 4]

Cenvat credit on services used for generation of electricity at the Thermal Power Station is admissible.

Repair and maintenance services - services received outside the factory premises but used in manufacture - nexus with manufacturing activity - Cenvat credit on repair and maintenance and related services for windmill operations located outside factory premises - HELD THAT: - The Tribunal held that repair, maintenance and related services rendered for windmills, though located outside the factory, are admissible as input services because they are used in generation of power consumed in manufacturing. The presence of exemption on windmill machinery from excise duty does not negate entitlement to credit for service tax paid on such services where nexus with manufacture is established. Reliance was placed on earlier authorities to that effect. [Paras 4]

Cenvat credit on repair and maintenance and related services for windmill operations is admissible.

Housekeeping, garden maintenance and pest control services - input service - nexus with manufacturing activity - Cenvat credit on housekeeping, garden maintenance, pest control, rodent and termite control services used in the factory and on ships - HELD THAT: - The Tribunal found that services such as housekeeping (cleaning of toilets and offices), garden maintenance and pest/rodent/termite control are integrally connected with the overall operation of the manufacturing activity and are availed within the factory premises (and in relation to ships used for carrying cement). Such services have been held in cited authorities to be admissible as input services and, therefore, service tax paid on them qualifies for credit. [Paras 4]

Cenvat credit on housekeeping, garden maintenance and pest/rodent/termite control services is admissible.

Final Conclusion: The impugned orders denying cenvat credit on the services in dispute are set aside and the appeals are allowed; the Tribunal holds that the listed services qualify as admissible input services because they have the requisite nexus with the appellant's manufacturing activity or are services received up to the place of removal.

Cenvat credit admissibility - nexus with manufacturing activity - input service - services used in or in relation to manufacture - admissibility of credit for air travel services - admissibility of credit for authorised service station and vehicle repair services - admissibility of credit for clearing, forwarding and custom house agent services - admissibility of credit for construction services for factory/office - admissibility of credit for GTA and insurance services - precedential value of tribunal decisions

Cenvat credit admissibility - nexus with manufacturing activity - input service - precedential value of tribunal decisions - Whether the appellant is entitled to Cenvat credit in respect of the listed services on account of their nexus with the manufacturing activity and classification as input services. - HELD THAT: - The adjudicating authority had accepted the documentary propriety but denied credit on the ground that the services lacked nexus with manufacture; the Commissioner (Appeals) upheld that denial. The Tribunal examined earlier decisions dealing with the same categories of services and found that those decisions consistently treated the services in question as admissible input services when used in relation to the manufacturer's operations. Applying those precedents, and on the basis that the documents were not disputed, the Tribunal concluded that the services (including air travel, authorised service station and vehicle repair, clearing & forwarding and custom house agent services, construction services for factory/office, GTA and insurance services) had sufficient nexus with the appellant's manufacturing activity to qualify as input services for Cenvat credit. The Tribunal therefore set aside the impugned order which had disallowed credit.

Impugned order set aside; appeal allowed and Cenvat credit permitted for the listed services.

Final Conclusion: The Tribunal allowed the appeal, holding that the services in question qualify as input services with requisite nexus to the manufacturing activity and directing that Cenvat credit be permitted; the order denying credit was set aside.

Presumption of service under Section 27 of the General Clauses Act - service of notice by registered post presumed in ordinary course of business - proviso (b) to Section 138 of the Negotiable Instruments Act: requirement of issuance of notice - disputed service is a matter of evidence for the trial court - quashing of criminal proceedings under Section 482 Cr.P.C. - prima facie satisfaction at cognizance/summoning stage

Presumption of service under Section 27 of the General Clauses Act - service of notice by registered post presumed in ordinary course of business - proviso (b) to Section 138 of the Negotiable Instruments Act: requirement of issuance of notice - disputed service is a matter of evidence for the trial court - quashing of criminal proceedings under Section 482 Cr.P.C. - Validity of quashing the summoning order on the ground that the complaint did not specify the date of service of the demand notice and whether service was deemed ineffective notwithstanding postal endorsement of non-delivery. - HELD THAT: - The Court applied the principles laid down by the Apex Court in C.C. Alavi Haji and Ajeet Seeds Ltd., holding that where a demand notice is sent by registered post to the correct address and the postal record/returned envelope bears an endorsement of non-delivery, the presumption under Section 27 of the General Clauses Act arises and it is unnecessary for the complainant to aver that service was evaded. Service is deemed to have been effected at the time the letter would have been delivered in the ordinary course of business unless the addressee rebuts that presumption. The requirement in proviso (b) to Section 138 of the Negotiable Instruments Act is satisfied by averments and documents showing dispatch to the correct address; details of actual receipt or an express averment of deemed service are not mandatory at the cognizance stage. Disputed questions as to actual service and the effect of the postal endorsement are matters of evidence to be adjudicated by the trial court; they cannot be resolved by quashing the complaint under Section 482 Cr.P.C. on the basis that the complaint omitted the date of service. Applying these principles to the present record, which included the returned registered letter with postal endorsement, the Sessions Judge erred in setting aside the summoning order merely because the complaint did not state the date on which the notice was served.

The revisional order quashing the summoning order was set aside and the summoning order of the trial court restored; the trial court is directed to proceed in accordance with law.

Final Conclusion: The application under Section 482 Cr.P.C. is allowed; the order of the Sessions Judge dated 03.11.2020 is set aside and the summoning order passed by the Additional Chief Judicial Magistrate stands restored for trial, leaving disputed questions of service to be decided on evidence by the trial court.