TaxTMI Updates e-Newsletter
Jun 24,2021

Interim anticipatory bail - anticipatory bail - summons under the Central Goods and Services Tax Act, 2017 - cooperation with enquiry - custodial investigation not necessary - personal bond with sureties - conditions of bail - power to move for cancellation of bail

Interim anticipatory bail - cooperation with enquiry - custodial investigation not necessary - personal bond with sureties - conditions of bail - power to move for cancellation of bail - Grant of interim anticipatory bail to the applicant and the conditions governing the same. - HELD THAT: - The Court noted that no criminal antecedents are shown against the applicant and the State has not expressed any real apprehension of the applicant fleeing from justice (paras 5 and 6). The applicant, a registered dealer summoned in the course of an enquiry under the GST law, has expressed willingness to cooperate with the enquiry, produce documents and have his statement recorded; in the light of these facts the Court observed that no custodial investigation was necessary (paras 6 and 9). Without expressing any opinion on the merits, the Court held that the applicant is entitled to interim anticipatory bail at this stage (para 9). The Court directed that in the event of arrest the applicant shall be released on interim anticipatory bail during investigation on furnishing a personal bond with two sureties, and recorded the specific conditions: availability for interrogation, no inducement/threat/promises to witnesses or tampering with evidence, prohibition on leaving India without court permission, and liberty to the investigating officer to move for cancellation of bail in case of default (para 10). The Court also required the applicant to file a supplementary affidavit stating compliance with the summons and to annex documents filed before the opposite party (para 8). [Paras 5, 6, 8, 9, 10]

Applicant granted interim anticipatory bail on furnishing a personal bond with two sureties and subject to specified conditions, with liberty to the investigating officer to apply for cancellation in case of default.

Final Conclusion: Interim anticipatory bail granted to the applicant during investigation subject to a personal bond with two sureties and specified conditions; applicant to file supplementary affidavit regarding compliance with the summons and investigating officer may seek cancellation of bail on default.

Confiscation of goods - show cause notice under GST MOV-10 - infructuousness of interim challenge - availability of appellate remedy - direction to upload orders electronically - raising validity of show cause in appeal

Show cause notice under GST MOV-10 - infructuousness of interim challenge - Challenge to the GST MOV-10 show-cause notice rendered infructuous by subsequent final order - HELD THAT: - The court held that the petitioners' writ petition assailing the GST MOV-10 show-cause notice became infructuous after the authorities passed a final order confiscating the seized goods and imposing tax, penalty and fine. Having been afforded a final adjudication on the subject matter, the preliminary challenge to the show-cause notice did not require separate interim relief. The court therefore declined to entertain the writ insofar as it sought standalone relief against the show-cause notice and directed the petitioners to pursue available appellate remedies against the final order.

The writ petition challenging the show-cause notice is rendered infructuous by the subsequent final order of confiscation and monetary imposition; petitioners must assail the final order before the appropriate appellate forum.

Direction to upload orders electronically - availability of appellate remedy - Obligation of the tax authority to upload the final order electronically to enable appeal - HELD THAT: - The court directed the 1st respondent to upload the final adjudication order in electronic form on its official website forthwith, if not already done, so as to enable the assessee to file statutory appellate remedies. The direction was given as a facilitative measure to ensure the petitioners can seek timely appellate redress, acknowledging the petitioners' assertion that the order had not been uploaded and that this prevented them from filing an appeal.

Respondent directed to upload the final order on the official portal immediately to enable the petitioners to pursue appellate remedies.

Raising validity of show cause in appeal - availability of appellate remedy - Liberty to raise all available issues, including validity of the show-cause notice, in the appeal against the final order - HELD THAT: - The court made clear that the petitioners are at liberty to raise all issues available to them before the appellate forum, expressly including the challenge to the validity of the initial show-cause notice. Although the writ against the interim notice was treated as infructuous, the merits of the contentions concerning procedural defects or validity may be canvassed and adjudicated in the appeal against the final order.

Petitioners permitted to ventilate all contentions, including the validity of the show-cause notice, in the statutory appeal against the final order.

Final Conclusion: The writ petition is disposed of as infructuous in view of the final confiscation order; the tax authority is directed to upload the final order electronically to enable the petitioners to file an appeal, and the petitioners are at liberty to raise all available issues including the validity of the show-cause notice in such appeal.

Opportunity of personal hearing - principles of natural justice - Section 75(4) of the CGST Act - procedural breach - remand for fresh consideration - adjournment restriction under proviso to Section 75(5)

Opportunity of personal hearing - Section 75(4) of the CGST Act - principles of natural justice - procedural breach - remand for fresh consideration - adjournment restriction under proviso to Section 75(5) - Whether the assessment order dated 25.01.2021 is vitiated by denial of an opportunity of personal hearing under Section 75(4) of the CGST Act and whether the order should be set aside and remitted for fresh consideration. - HELD THAT: - The Court found that Section 75(4) mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or where any adverse decision is contemplated. In the present case the petitioner-assessee made a clear and unequivocal written request for personal hearing which was not heeded before passing the impugned assessment order. Denial of that opportunity constituted a procedural breach amounting to infraction of a facet of natural justice and prejudiced the assessee's ability to respond to intricate issues of fact and law. Consequently, the assessment order was liable to be set aside on that ground. The matter is remanded to the assessing authority for fresh consideration after giving the petitioner-assessee an opportunity of personal hearing. The Court directed that such hearing comply with the restriction on adjournments contained in the proviso to Section 75(5) and that no unnecessary adjournments be permitted. The Court expressly did not decide the merits of the assessment or other issues, leaving them open for determination by the assessing authority in accordance with law.

Impugned assessment order set aside and matter remanded to the assessing authority to hear the petitioner-assessee and pass a fresh order within two months, subject to the adjournment restriction in the proviso to Section 75(5); merits left open.

Final Conclusion: Writ petition allowed; assessment order dated 25.01.2021 set aside for failure to grant the petitioner-assessee a personal hearing under Section 75(4) of the CGST Act and remitted for fresh consideration in accordance with the directions given.

Statutory bail under Section 167(2) Cr.P.C. - non-filing of charge sheet within statutory period - effect of prior grant of bail on subsequent Section 167(2) Cr.P.C. application - grant of bail on conditions including security or bank guarantee and bond - input tax credit fraud and loss to revenue

Statutory bail under Section 167(2) Cr.P.C. - non-filing of charge sheet within statutory period - effect of prior grant of bail on subsequent Section 167(2) Cr.P.C. application - Whether the petitioner was entitled to statutory bail under Section 167(2) Cr.P.C. despite a prior order granting bail which the petitioner had not complied with - HELD THAT: - The Court found that the petitioner had been remanded to judicial custody from 29.10.2020 and that the charge sheet had not been filed within the statutory period of 90 days. Although bail had earlier been granted by the Principal District and Sessions Judge on 14.12.2020 subject to certain conditions which the petitioner did not comply with, the petitioner filed a petition under Section 167(2) Cr.P.C. seeking mandatory bail. The learned Chief Judicial Magistrate dismissed the 167(2) petition on the ground that a person already granted bail cannot seek mandatory bail. The High Court, having considered the facts including the non-filing of the charge sheet within statutory time and the gravity of the allegations, nevertheless exercised its discretion to give the petitioner one more opportunity and granted bail subject to strict conditions. The Court therefore treated the statutory entitlement arising from non-compliance with the 90-day limit as a ground for release, while imposing the previously stipulated conditions to protect the investigation and revenue interests. [Paras 5, 6, 7]

Statutory bail was granted despite the earlier conditional bail order remaining uncomplied with, in view of non-filing of the charge sheet within 90 days, subject to conditions.

Grant of bail on conditions including security or bank guarantee and bond - input tax credit fraud and loss to revenue - On what conditions bail should be granted in view of the allegations of fraudulent issuance of invoices and alleged loss to the revenue - HELD THAT: - Balancing the seriousness of the allegations - fraudulent issuance of invoices to enable ineligible input tax credit and an alleged revenue loss - with the petitioner's continued custody and the pandemic context, the Court directed that bail be granted on the same conditions previously imposed by the Principal District and Sessions Judge. Those conditions include production of security or bank guarantee or title deeds of specified value, execution of a bond with sureties to the satisfaction of the Chief Judicial Magistrate, daily police attendance, prohibition on tampering with evidence, cooperation with the investigation and the consequence that violation will invite cancellation of bail. The Court also noted that in the event of violation of specified conditions, the Investigating Officer may seek cancellation of bail before the learned Chief Judicial Magistrate. [Paras 6, 7, 8]

Bail granted on the same conditions earlier imposed by the Principal District and Sessions Judge; violation of conditions to render bail liable to cancellation and enable the Investigating Officer to move for cancellation.

Final Conclusion: Criminal Revision disposed by granting statutory bail to the petitioner because the charge sheet was not filed within the statutory period, subject to specified conditions (security/bank guarantee or title deeds, bond with sureties, daily police attendance, no tampering, cooperation), and with liberty to the Investigating Officer to seek cancellation on breach of conditions.

Violation of principles of natural justice - ex parte assessment - quashing of assessment order - quashing of appellate order for delay - deposit as condition for hearing/relief - de-attachment of bank accounts - fresh adjudication after affording opportunity of hearing

Violation of principles of natural justice - ex parte assessment - quashing of assessment order - Impugned assessment order dated 9th February 2020 under Section 74 of the Bihar Goods and Services Tax Act, 2017 was liable to be quashed on grounds of denial of fair opportunity and absence of sufficient reasons. - HELD THAT: - The Court found that the assessment was rendered ex parte and the assessee was not afforded sufficient time to represent its case, resulting in a breach of the principles of natural justice. The assessment order did not set out decipherable reasons demonstrating how the officer determined the liability. In view of these defects, the order was quashed as bad in law and liable to be set aside without expressing any opinion on the merits.

Impugned assessment order dated 9th February 2020 quashed and set aside.

Quashing of appellate order for delay - deposit as condition for hearing/relief - de-attachment of bank accounts - Appellate order dated 3rd March 2021 rejecting the appeal solely on the ground of delay was quashed; interim relief conditioned on deposit was recognised and bank accounts attached in consequence of the impugned order were ordered to be de-frozen. - HELD THAT: - The appellate rejection on the ground of delay was set aside in consequence of the primary finding that the assessment itself was vitiated by lack of opportunity and inadequate reasons. The Court noted the petitioner's statement that ten per cent of the total amount had already been deposited and directed an additional deposit of ten per cent within a stipulated period as a condition to proceed. Subject to that undertaking and the rights of the parties, the Court directed immediate de-attachment/de-freezing of the petitioner's bank accounts linked to the proceedings. The Court preserved the parties' rights regarding any excess deposit and refund if ultimately found so.

Appellate order dated 3rd March 2021 quashed; deposit conditions accepted and bank accounts ordered to be de-frozen.

Fresh adjudication after affording opportunity of hearing - Matter remitted to the Assessing Officer for fresh adjudication after affording adequate opportunity of hearing and for passing a fresh order on merits. - HELD THAT: - Having quashed the impugned orders for procedural infirmities, the Court remitted the matter to the Assessing Officer with directions that the petitioner be afforded an opportunity to place on record relevant documents and materials, appear (including by digital mode), and that the Assessing Officer decide the matter expeditiously and on merits. The Court expressly refrained from expressing any view on the substantive merits and left all issues open for determination in the fresh proceedings.

Matter remitted to the Assessing Officer for fresh hearing and decision; parties' rights and remedies reserved.

Final Conclusion: Writ petition allowed to the extent indicated: the assessment order dated 9.2.2020 and the appellate order dated 3.3.2021 are quashed; conditional deposit directions accepted; bank accounts de-attached; matter remitted for fresh adjudication after affording opportunity of hearing, with liberty to the parties to pursue other remedies and without any expression on merits.

Quashing of cryptic appellate order for lack of reasons - remand for fresh adjudication on merits - right to be heard and principles of natural justice in appellate proceedings - deposit making appeal mature for hearing - judicial restraint - no expression of opinion on merits

Quashing of cryptic appellate order for lack of reasons - right to be heard and principles of natural justice in appellate proceedings - Impugned appellate order dated 28/01/2021 set aside because it was cryptic and failed to record reasons necessary to make the order self-explainable and comprehensible. - HELD THAT: - The Court found that the Appellate Authority summarily dismissed the appeal without assigning cogent reasons, thereby prejudicing the petitioner. A cryptic order which does not contain the reasons required to make the decision intelligible fails to satisfy the requirement of reasoned decision-making and is liable to be set aside. The High Court accordingly set aside the impugned order and directed that the matter be placed for fresh consideration in compliance with principles of natural justice.

Impugned appellate order dated 28/01/2021 set aside for want of reasons; matter remitted for fresh consideration.

Remand for fresh adjudication on merits - deposit making appeal mature for hearing - right to be heard and principles of natural justice in appellate proceedings - Appeal remitted to the Appellate Authority for decision on merits with directions regarding appearance, opportunity to place evidence, cooperation, and expeditious decision-making. - HELD THAT: - In view of the setting aside of the cryptic order and the petitioner's deposition of the amount, the Court directed the petitioner to appear before the appropriate appellate authority on the fixed date (including by digital mode if possible). Parties were permitted to place on record all essential documents and materials. The petitioner undertook not to seek unnecessary adjournments and to cooperate in the proceedings. The Appellate Authority was directed to decide the appeal on merits expeditiously, preferably within two months from the petitioner's appearance, and to do so in compliance with natural justice. The Court expressly refrained from expressing any opinion on the merits and left all substantive issues open for determination by the Appellate Authority.

Matter remitted to Appellate Authority for fresh merit adjudication with directions as to appearance, filing of documents, cooperation, and a preference for decision within two months; no opinion expressed on merits.

Final Conclusion: Writ petition disposed by setting aside the cryptic appellate order and remitting the appeal to the Appellate Authority for fresh adjudication on merits with directions for hearing, production of documents, cooperation by the petitioner and a preference for expeditious disposal; all substantive issues left open.

Power of seizure under Section 67 - Notice under Section 71 - Prima facie validity of search and seizure - Fact finding on allegations of coercion in Panchnama - Directions for further administrative adjudication and interim procedural relief

Power of seizure under Section 67 - Notice under Section 71 - The legal relationship between the power to conduct search and seizure under Section 67 and the power to issue notice under Section 71. - HELD THAT: - The Court held that the power exercised under Section 67 is distinct, separate and independent from the power exercisable under Section 71. The intent, purpose and scope of the two provisions are different and one is not subject to the other. Although a notice under Section 71 had been issued to the petitioner, the officer authorised to carry out search and seizure under Section 67 acted upon subjective satisfaction and in accordance with law. This distinction was treated as a determinative legal principle underpinning the court's view of the administrative action challenged in the petition.

Power under Section 67 is independent of the power under Section 71; the search and seizure exercise under Section 67 stands on its own legal basis.

Prima facie validity of search and seizure - Whether the search and seizure operations at the petitioner's premises were illegal on the face of the record. - HELD THAT: - On a prima facie reading of the Panchnama and the record, the Court observed that two independent witnesses were associated and that the premises were searched thereafter, with allegedly incriminating material recovered. The Court declined to express any final opinion on factual guilt but recorded that the record does not show the search and seizure operations to be illegal in any manner, subject to the limited observations made in the order. The Court emphasised that this was a prima facie view and left accuracy and merits to the competent authority.

Record does not prima facie disclose illegality in the search and seizure operations.

Fact finding on allegations of coercion in Panchnama - Allegation that the petitioner's accountant was forcibly constrained to sign the Panchnama. - HELD THAT: - The Court observed that the averments made in Paragraph 12 of the petition regarding forcible constraint could not be substantiated by cogent material placed before it. The Court treated this as a question of fact and left it open for adjudication by the appropriate fact finding authority, thereby not deciding the allegation on merits but directing that it may be raised and examined in the proceedings before the competent authority.

Allegation in Paragraph 12 not substantiated on the record before the Court and remitted for determination by the appropriate fact finding authority.

Directions for further administrative adjudication and interim procedural relief - Procedural relief and directions regarding further adjudication, representation, and preservation of appellate rights. - HELD THAT: - The petition was disposed of on mutually agreed terms directing the petitioner to cooperate with proceedings under Section 67, to appear before the Additional Commissioner (respondent no.4) on the specified date (with virtual hearing facilities to be provided), and permitting exchange of pleadings and documents electronically. The authority was directed to pass an appropriate order in accordance with law preferably within three months. The Court also permitted the petitioner to prefer an appeal against the subject order within four weeks, and directed that limitation would not be a bar to the appeal being decided on merits; no opinion was expressed on maintainability. The petitioner was directed not to seek unnecessary adjournments and to cooperate, with pandemic sensitive provisions for digital proceedings.

Petition disposed on terms: cooperation and participation in proceedings under Section 67; appearance before the specified authority with virtual access; authority to pass order expeditiously; appellate remedy preserved with limited protection against limitation objections.

Final Conclusion: The writ petition was disposed of on specified procedural terms: the Court held as a legal proposition that Section 67 powers are independent of Section 71, recorded a prima facie view that the search and seizure was not illegal on the face of the record, remitted factual allegations of coercion for determination by the competent authority, and directed expeditious administrative proceedings while preserving the petitioner's right of appeal subject to the terms stated.

Penalty under Section 271(1)(c) of the Income Tax Act - trust receipt versus taxable income - brokerial relationship and agency - reliance on findings of criminal proceedings in income tax adjudication

Penalty under Section 271(1)(c) of the Income Tax Act - trust receipt versus taxable income - brokerial relationship and agency - reliance on findings of criminal proceedings in income tax adjudication - Validity of the deletion of penalty under Section 271(1)(c) on the ground that the sums received by the assessee were not his income but were held in trust while acting as a broker for the bank - HELD THAT: - The Court accepted the reasoning of the appellate authorities and the conclusions recorded by the Hon'ble Supreme Court that the transactions showed the assessee acted as a broker engaged by the bank, holding the relevant sums on behalf of the bank to obtain demand drafts for payment of additional interest to PSUs. The Supreme Court's appraisal of the evidence in the criminal proceedings - including admissions by bank officials and documentary acknowledgement - established that the differential amounts were not owned by the assessee. On that basis there was no real income that accrued to the assessee. The Court further endorsed that findings reached in criminal proceedings on the evidence may be taken into account in income tax adjudication, and that such findings supported the conclusion that the amount in question was held in trust and therefore not taxable as the assessee's income. Given the absence of any real income, the penalty for furnishing inaccurate particulars under Section 271(1)(c) could not be sustained and its deletion by the Commissioner (Appeals) and the Tribunal was correct. [Paras 4, 7, 8]

The deletion of the penalty under Section 271(1)(c) was upheld; the amounts were held in trust and not assessable as the assessee's income, and the appeals are dismissed.

Final Conclusion: Appeals dismissed. The tribunal's and Commissioner (Appeals)'s deletion of the penalty under Section 271(1)(c) is affirmed on the basis that the sums were held by the assessee as broker on behalf of the bank and did not constitute the assessee's income.

Reopening of assessment beyond four years under proviso to Section 147 requiring disclosure fully and truly of material facts - Claim of exemption under Section 10B based on STPI approval - Failure to disclose material facts with intention to escape assessment - Requirement of reasoned grounds for reopening as enunciated in GKN Driveshafts - Delegation of approval power to Directors of STPI by IMSC

Reopening of assessment beyond four years under proviso to Section 147 requiring disclosure fully and truly of material facts - Failure to disclose material facts with intention to escape assessment - Validity of reopening assessment proceedings initiated beyond four years from the end of the relevant assessment year. - HELD THAT: - The Court examined the proviso to Section 147 and held that reopening beyond four years is permissible only if it is established that income chargeable to tax has escaped assessment by reason of failure to disclose fully and truly all material facts; such language must be construed to import a requirement of intention or motive on the part of the assessee to suppress material facts. Mere nondisclosure or the existence of an omission or mistake is insufficient in the absence of a finding of intention to evade tax. Applying this principle, the Court found that the assessee had produced a valid approval from STPI before the Assessing Officer and the exemption under Section 10B had been granted in the original assessment; the absence of a separate ratification from the CBDT, in the circumstances, reflected confusion within the Department and omission by the Assessing Officer rather than deliberate suppression by the assessee. Consequently, the statutory condition for reopening after four years was not satisfied and the initiation of proceedings under Section 147 beyond four years was unsustainable. [Paras 12, 14, 15, 16]

Reopening of assessment beyond four years quashed for failure to establish that the assessee did not disclose fully and truly all material facts with an intention to escape assessment.

Requirement of reasoned grounds for reopening as enunciated in GKN Driveshafts - Claim of exemption under Section 10B based on STPI approval - Whether the reasons furnished for reopening complied with the requirement of being reasoned and whether the assessee's conduct amounted to suppression warranting reassessment. - HELD THAT: - The petitioner relied on GKN Driveshafts to contend that the reasons for reopening must be reasoned and not merely a gist. The Court observed that the notice purported to reopen on the ground that the STPI approval lacked ratification by the CBDT, but found that the assessee had produced the STPI approval during original scrutiny and the Assessing Officer had accepted it and granted the exemption. Given the ambiguity within the Department about the need for CBDT ratification and the fact that the Assessing Officer did not require production of any ratification at the time of assessment, the Court treated the reasons as insufficient to demonstrate deliberate non-disclosure by the assessee. While noting the principle that reopening must be supported by adequate reasons, the decisive conclusion was that the materials did not establish suppression or intention to evade tax in this case. [Paras 5, 6, 8, 16]

Reasons for reopening found inadequate to demonstrate suppression or culpable non-disclosure; reassessment could not be sustained on that basis.

Final Conclusion: The impugned order dated 15.11.2016 rejecting the reasons against reopening assessment under Section 147 is quashed and the writ petition is allowed, the Court holding that reopening beyond four years was not permissible as the statutory requirement of nondisclosure with intent to escape assessment was not satisfied and the reasons furnished were insufficient.

Approval for 100% Export Oriented Undertaking - ratification by Board of Approval for Section 10-B exemption - interpretation of Explanation 2(iv) to Section 10-B - delegation of powers to Development Commissioner/Director of STPI - distinction between STP/EHTP approvals and approvals under the Industries (Development and Regulation) Act, 1951

Approval for 100% Export Oriented Undertaking - delegation of powers to Development Commissioner/Director of STPI - distinction between STP/EHTP approvals and approvals under the Industries (Development and Regulation) Act, 1951 - Approval granted by Software Technology Parks of India under STP/EHTP scheme does not by itself qualify as the approval contemplated in Explanation 2(iv) to Section 10-B of the Income Tax Act. - HELD THAT: - The Court found that the approval issued by STPI under delegated powers for setting up a 100% EOU under the Electronic Hardware Technology Park scheme is an approval limited to the STP/EHTP scheme and its attendant conditions, and is not connected with the statutory regime governing exemption under Section 10-B. The approval granted to the petitioner expressly records that it was given by STPI under delegated powers of IMSC and imposes scheme-specific conditions (separate bank account, separate balance sheet, attestation of capital goods list, bonded warehouse formalities). The Court held that Explanation 2(iv) to Section 10-B contemplates an undertaking approved as a 100% EOU by the Board appointed under Section 14 of the Industries (Development and Regulation) Act, 1951; an approval by STPI under scheme delegation cannot be equated to that statutory approval. Consequently, the STPI approval cannot be validated for claiming exemption under Section 10-B without further ratification by the competent Board of Approval. [Paras 14, 15, 16, 18, 19]

STPI's approval is not sufficient for Section 10-B purposes; a ratification by the Board of Approval is required.

Ratification by Board of Approval for Section 10-B exemption - interpretation of Explanation 2(iv) to Section 10-B - The CBDT Instruction and corrigendum requiring that approvals granted to 100% EOUs by Development Commissioners be ratified by the Board of Approval for entitlement to Section 10-B exemption are valid and applicable. - HELD THAT: - Relying on the statutory import of Explanation 2(iv) to Section 10-B and consistent judicial exposition (as noted from the Delhi High Court decision), the Court concluded that the Ministry of Finance's clarification-that the approval contemplated for Section 10-B must be a ratification by the Board of Approval-is not inconsistent with the Income Tax Act. The Court observed that the Exim Policy substitutions and scheme-specific delegations do not, by themselves, authorize treating STP/EHTP approvals as approvals under Section 10-B; therefore the CBDT's instruction to seek Board ratification for Section 10-B claims is a legitimate procedural clarification to ascertain entitlement and verify transactions. [Paras 4, 11, 17, 20]

The impugned CBDT Instruction and corrigendum are valid; ratification by the Board of Approval is necessary for claiming Section 10-B exemption.

Final Conclusion: Writ petition dismissed; the petitioner must obtain ratification from the Board of Approval to claim exemption under Section 10-B for Assessment Year 2006-2007, and the challenged CBDT clarifications are held valid.

Allowability of business expenses - proof of expenditure - work-in-progress treatment - deductibility of taxes paid - composite scheme of tax payment - tax collected from customers - opportunity to produce evidence

Allowability of business expenses - proof of expenditure - work-in-progress treatment - opportunity to produce evidence - Remand for verification of architect fees and brokerage debited to profit and loss account - HELD THAT: - The Assessing Officer disallowed architect fees and brokerage solely because the Sri Perumbakkam project was incomplete for the year and did not call for proof of the expenses; the CIT(A) confirmed the additions on the ground that the assessee did not furnish evidence. The Tribunal observed that the assessee was not given an opportunity by the Assessing Officer to produce necessary evidence and that the correctness of the claim was not adjudicated on merits. Consequently the Tribunal directed that the issue be sent back to the file of the Assessing Officer to afford the assessee an opportunity to produce evidence and for the Assessing Officer to examine and decide the allowability of the expenses having regard to the records and work-in-progress treatment. [Paras 7]

Issue remanded to the Assessing Officer to give the assessee an opportunity to file evidence and to verify and decide the allowability of architect fees and brokerage.

Deductibility of taxes paid - composite scheme of tax payment - tax collected from customers - opportunity to produce evidence - Remand to verify whether sales tax and service tax debited to profit and loss account were paid by the assessee without being collected from customers and thus deductible - HELD THAT: - The Tribunal held that the Assessing Officer and the CIT(A) were in error in treating sales tax and service tax as non-expense simply because they were debited to the profit and loss account. The assessee's case that it had adopted the composite scheme of payment (under which taxes cannot be collected from customers) raised a factual question which did not emerge from the record. The Tribunal therefore set aside the disallowance and directed the Assessing Officer to make necessary enquiries; if it is found that the assessee paid the taxes under the composite scheme without collecting them from customers, those taxes are to be allowed as deductible expenses. [Paras 8]

Issue remanded to the Assessing Officer to verify records and, if satisfied that taxes were paid by the assessee without collection from customers under the composite scheme, allow the sales tax and service tax as deductible expenses.

Final Conclusion: The appeal is treated as allowed for statistical purposes; the Tribunal set aside the additions in respect of architect fees, brokerage and sales/service tax for fresh enquiry and directed the Assessing Officer to give the assessee an opportunity to produce evidence and to verify facts, allowing the items if supported by records and found to have been paid without collection from customers.

Deduction under section 80P(2)(a)(i) - Definition of 'Member' under the Maharashtra Co-operative Societies Act - Nominal member within scope of 'member' - Eligibility of interest income from loans to nominal members - Distinction from Citizen Co-operative Society Ltd. v. ACIT - Application of Mavilayi Service Co-Operative Bank Ltd. v. CIT

Deduction under section 80P(2)(a)(i) - Definition of 'Member' under the Maharashtra Co-operative Societies Act - Nominal member within scope of 'member' - Eligibility of interest income from loans to nominal members - Deduction under section 80P(2)(a)(i) is allowable where loans are advanced to persons who are 'Nominal Members' of a co-operative society governed by the Maharashtra Act because the term 'Member' in that Act includes 'Nominal Member'. - HELD THAT: - The Tribunal accepted that the assessee is a co-operative society engaged in providing credit facilities and claimed deduction under section 80P(2)(a)(i). The Assessing Officer and CIT(A) denied the deduction on the ground that advances were made to 'Nominal Members' who allegedly lacked dividend or voting rights. The Maharashtra Act's definition of 'Member' in section 2(19) explicitly includes 'nominal, associate or sympathizer member'. Where the governing State Act includes 'Nominal Member' within the statutory definition of 'Member', loans to such nominal members fall within the class of advances 'to its members' for the purposes of section 80P(2)(a)(i), and interest thereon is attributable to the exempt business. The Tribunal distinguished the decision in Citizen Co-operative Society Ltd. v. ACIT on the ground that the Andhra Act there did not include 'Nominal Member' within 'Member', and placed reliance on the later Supreme Court decision in Mavilayi Service Co-Operative Bank Ltd. v. CIT which treated loans to nominal members as eligible where the relevant State Act so provides. The Tribunal also noted precedent of the jurisdictional High Court holding that the Maharashtra Act's definition embraces nominal members. Applying these principles, the denial of deduction was overturned and the claimed deduction was directed to be allowed. [Paras 4, 5]

The claim of deduction under section 80P(2)(a)(i) is allowed because the Maharashtra Act's definition of 'Member' includes 'Nominal Member', and loans made to such nominal members qualify for the deduction.

Final Conclusion: The appeal is allowed and deduction under section 80P(2)(a)(i) is granted for the assessment year 2016-17, on the ground that the Maharashtra Co-operative Societies Act treats 'Nominal Member' as a 'Member' and permits inclusion of interest from loans to such members within the exemption.

Assessment under section 153A - concluded assessment / unabated assessment - incriminating material relatable to assessment year - statement under section 132(4) not itself constituting incriminating material - addition as unexplained money under section 69A - protective addition - taxability of foreign income of a non-resident - penalty under section 271(1)(b) for non-cooperation - penalty under section 271(1)(c) for concealment - immunity from penalty under section 271AAA(2) upon substantiation and payment - consent/waiver for obtaining foreign bank statements

Assessment under section 153A - concluded assessment / unabated assessment - incriminating material relatable to assessment year - statement under section 132(4) not itself constituting incriminating material - addition as unexplained money under section 69A - Validity of making addition in a concluded assessment (A.Y.2006-07 and A.Y.2007-08) in absence of incriminating material discovered during search - HELD THAT: - The Tribunal found that as on the date of search the assessments for the relevant years were concluded and unabated. No incriminating material relatable to the HSBC, Geneva account was found during the search; the Department's independent possession of a Base Note from French authorities did not arise from incriminating material discovered in the search. The Tribunal followed the binding principle that additions in a concluded assessment arising from search action require incriminating material relatable to that assessment year, and that statements recorded under section 132(4) do not ipso facto constitute incriminating material. In the absence of such relatable incriminating material, the additions made under section 69A in the assessments were quashed. The Tribunal expressly left open adjudication on merits of the addition, since relief was granted on the preliminary legal ground. [Paras 3, 4]

Assessments under section 153A r.w.s. 143(3) for A.Y.2006-07 and A.Y.2007-08 quashed insofar as additions under section 69A based on the foreign bank Base Note are concerned; appeals allowed.

Penalty under section 271(1)(c) for concealment - cancellation of quantum assessment - Levy of penalty under section 271(1)(c) for A.Y.2006-07 and A.Y.2007-08 where quantum additions have been cancelled - HELD THAT: - Because the quantum additions for the relevant years were quashed on the preliminary ground of absence of incriminating material, the concealment penalties levied under section 271(1)(c) for those years could not be sustained. The Tribunal accordingly directed deletion of those penalties, as they lacked a sustaining basis once the underlying additions were set aside. [Paras 7, 8]

Penalties under section 271(1)(c) for A.Y.2006-07 and A.Y.2007-08 deleted; appeals allowed.

Penalty under section 271(1)(b) for non-cooperation - consent/waiver for obtaining foreign bank statements - assessment concluded under section 143(3) - Sustainability of penalties under section 271(1)(b) (A.Y.2006-07 to A.Y.2012-13) for alleged non-cooperation by not signing consent/waiver forms - HELD THAT: - The Tribunal held that refusal or failure to sign a consent waiver for obtaining foreign bank statements is not automatically equivalent to non-cooperation where the assessee consistently maintained lack of beneficial ownership and furnished replies. The fact that assessments were ultimately completed under section 143(3) demonstrated cooperation sufficient to preclude sustaining the penalties. Reliance was placed on coordinate decisions to support deletion of such penalties where cooperation, in substance, had been provided. [Paras 9, 10]

Penalties under section 271(1)(b) for A.Y.2006-07 to A.Y.2012-13 deleted; appeals allowed.

Penalty under section 271AAA - immunity under section 271AAA(2) - substantiation of manner of derivation - Whether immunity from penalty under section 271AAA(2) applies in respect of disclosed undisclosed income for A.Y.2012-13 - HELD THAT: - The Tribunal examined the three cumulative conditions for immunity under section 271AAA(2): disclosure at the time of search, substantiation of the manner of derivation, and payment of tax with interest. The assessee had disclosed the amounts in the search statement, furnished reconciliation and supporting documents (including valuation and bills for jewellery) showing the diamond business as the source, and had paid taxes; the Tribunal concluded that the manner of derivation was substantiated on the facts. Consequently, immunity under section 271AAA(2) was held to apply and the penalty was deleted. [Paras 12, 13]

Penalty under section 271AAA for A.Y.2012-13 deleted; appeal allowed.

Protective addition - taxability of foreign income of a non-resident - foreign income not taxable in India - Whether a protective addition under section 69A could be sustained in the hands of a non-resident (Shri Nirav S. Gandhi) in respect of foreign bank account balances (A.Y.2006-07 and A.Y.2007-08) - HELD THAT: - The Tribunal observed that Shri Nirav S. Gandhi is a non-resident and the funds in the foreign bank account related to his business abroad and were disclosed in Belgium. Under Indian tax law, foreign income of a non-resident is not taxable in India. Accordingly, protective additions in respect of such foreign bank balances could not be sustained either substantively or protectively in the hands of a non-resident. The Tribunal therefore dismissed the Revenue's appeal against deletion of the protective addition. [Paras 17, 18]

Protective additions in the hands of the non-resident assessee (A.Y.2006-07 and A.Y.2007-08) dismissed; Revenue appeals dismissed.

Penalty under section 271(1)(b) for non-cooperation - assessment concluded under section 143(3) - Deletion of penalties under section 271(1)(b) (A.Y.2006-07 to A.Y.2012-13) in the case of Shri Nirav S. Gandhi - HELD THAT: - The Tribunal found that the non-resident assessee responded in writing to departmental queries and that there was no obligation on him to sign consent waivers for bank statements in Switzerland, particularly since foreign bank transactions of a non-resident are not taxable in India. Completion of assessments under section 143(3) indicated substantive cooperation. On these facts, the penalty could not be sustained and was deleted. [Paras 21, 22]

Penalties under section 271(1)(b) for A.Y.2006-07 to A.Y.2012-13 deleted; appeals allowed.

Protective addition - foreign income not taxable in India - beneficial ownership - Sustainability of protective addition in the hands of Shri Pranav S. Gandhi (A.Y.2006-07 and A.Y.2007-08) - HELD THAT: - The Tribunal accepted that the HSBC, Geneva account was not in the name of Shri Pranav Gandhi and that he consistently stated his brother was the beneficial owner and that the funds related to his brother's business abroad. Given the lack of beneficial ownership and the non-taxability of such foreign income in India for the actual beneficial owner (a non-resident), no protective or substantive addition could be sustained in Pranav's hands. The Revenue's grounds were dismissed. [Paras 27, 28]

Protective additions in the hands of Shri Pranav S. Gandhi for A.Y.2006-07 and A.Y.2007-08 dismissed; Revenue appeals dismissed.

Penalty under section 271(1)(b) for non-cooperation - consent/waiver for obtaining foreign bank statements - assessment concluded under section 143(3) - Deletion of penalties under section 271(1)(b) (A.Y.2006-07 to A.Y.2012-13) in the case of Shri Pranav S. Gandhi - HELD THAT: - The Tribunal held that requiring Pranav to sign consent waivers for a bank account not in his name was undue; he consistently denied any connection with the account and there was no obligation on him to provide irrelevant information. Completion of assessments under section 143(3) evidenced cooperation. On these facts, penalties for non-cooperation were not sustainble and were deleted. [Paras 31, 32]

Penalties under section 271(1)(b) for A.Y.2006-07 to A.Y.2012-13 deleted; appeals allowed.

Final Conclusion: The Tribunal allowed the assessee appeals and/or set aside additions where assessments were concluded on the date of search and no incriminating material relatable to those years was found; penalties dependent on those additions or premised on alleged non-cooperation were deleted; protective additions in the hands of non-resident or persons without beneficial ownership were dismissed; immunity under section 271AAA(2) was held available where disclosure, substantiation and tax payment were established.

Deduction under section 35D for preliminary expenses - amortisation of preliminary/pre operative expenditure - principle of consistency in assessment of recurring claims - precedent in assessee's own case

Deduction under section 35D for preliminary expenses - principle of consistency in assessment of recurring claims - precedent in assessee's own case - Entitlement to deduction of claimed preliminary/pre operative expenditure of Rs. 9,00,000 by invoking section 35D as allowed in earlier assessment years. - HELD THAT: - The Assessing Officer disallowed the claim for preliminary expenses on the ground that the nature of expenses did not fall within the category allowable under section 35D and thus denied the amortised claim of Rs. 9,00,000 for the year. The Tribunal examined the report of the Assessing Officer in the assessee's earlier proceedings and noted that identical deduction of Rs. 9,00,000 was first claimed in the return for A.Y.2009-10 (not allowed in assessment but later accepted by the CIT(A) and Revenue's appeal dismissed) and was allowed in A.Y.2010-11 by virtue of no assessment under section 143(3). The Tribunal applying the principle of consistency - and following the Pune Bench's decision in the assessee's own case for A.Y.2011-12 where the same amount was held allowable on the same parity of facts - held that the assessee is entitled to the deduction of Rs. 9,00,000 in the year under consideration as well. The Tribunal expressly followed the earlier Bench decision and overruled the disallowance. [Paras 6, 7]

Assessee entitled to deduction of Rs. 9,00,000 as preliminary/pre operative expenditure; appeal allowed following the assessee's own earlier precedent and the consistency principle.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y.2012-13, restoring the deduction of Rs. 9,00,000 for preliminary/pre operative expenses by applying the principle of consistency and following the Tribunal's earlier decision in the assessee's own case.

Revisional jurisdiction under Section 263 - erroneous and prejudicial to the interests of the Revenue - onus under Section 68 - adequacy of inquiry and verification - application of mind - plausible view versus unsustainable in law

Revisional jurisdiction under Section 263 - erroneous and prejudicial to the interests of the Revenue - adequacy of inquiry and verification - onus under Section 68 - plausible view versus unsustainable in law - Whether the Principal Commissioner of Income Tax satisfied the jurisdictional precondition under Section 263 before setting aside the assessing officer's reassessment order dated 26.12.2017. - HELD THAT: - The Tribunal examined the twin conditions for exercise of suo motu revisional power under Section 263 - that the order of the Assessing Officer must be erroneous and prejudicial to the interests of the Revenue - applying the principles in Malabar Industries and subsequent authorities. The Third AO's reassessment (26.12.2017) was framed pursuant to specific directions issued by the earlier revisional order and records show the AO conducted enquiries: issuance of statutory notices, summons under section 131, field enquiries by departmental inspectors, verification of PAN and bank statements, recording of sworn statements of directors of subscriber companies, inspection of share application/allotment documents, board resolutions, ITR acknowledgements and other documentary evidence. The AO recorded findings that subscriptions were routed through banking channels, that subscriber companies existed and filed returns, and that source, identity and creditworthiness were verified. The Third Principal CIT's sole criticism was that the AO had not obtained Form No.2 and Form No.5 from the Registrar of Companies; the Tribunal held those compliance forms would not have furnished new information capable of overturning the AO's findings and that the PCIT did not demonstrate how their absence made the AO's view unsustainable in law. The PCIT also failed to point to any other deficiency in the AO's enquiry or to record a clear, unambiguous finding that the AO's order was erroneous and prejudicial. As the AO's conclusion was a plausible view supported by material on record and conducted enquiry, it could not be treated as erroneous such as to invoke Section 263. Consequently the revisional exercise by the Third PCIT was without jurisdiction. [Paras 14, 16, 17, 19, 20]

The Third Principal CIT's order dated 11.11.2019 under Section 263 is without jurisdiction and is quashed; the assessee's appeal is allowed.

Final Conclusion: The Tribunal holds that the revisional jurisdiction under Section 263 was not lawfully invoked by the Principal CIT because the assessing officer had carried out adequate enquiries pursuant to earlier directions, taken a plausible view supported by material on record, and the Principal CIT failed to record that the AO's order was erroneous and prejudicial to revenue; the impugned Section 263 order dated 11.11.2019 is quashed and the appeal is allowed.

Revisional jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the revenue - dual role of the Assessing Officer as investigator and adjudicator - no-enquiry/non-enquiry by the Assessing Officer - presumption under Section 114(e) of the Indian Evidence Act - CBDT circulars and guidance on penny stocks - requirement of specific enquiry and supporting material

Revisional jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of the revenue - no-enquiry/non-enquiry by the Assessing Officer - requirement of specific enquiry and supporting material - Whether the Principal Commissioner of Income Tax rightly invoked revisional jurisdiction under section 263 to quash the assessment on the ground that the Assessing Officer had not enquired into the claim of short term capital loss on specified scrips and thus rendered an order erroneous and prejudicial to revenue - HELD THAT: - The Tribunal found that the Assessing Officer had issued a detailed notice under section 142(1) calling for particulars relating to investment in equity shares and specific particulars in respect of short term capital loss (including contract notes, bank statements, mode of payment and broker notes), and that the assessee furnished replies with supporting documents. The assessment order thereafter recorded acceptance of the claim and no adverse view was drawn. On these facts the Tribunal concluded that the Assessing Officer had performed the investigatory function and applied his mind as adjudicator to the claim. The Tribunal also noted that the AO's notice indicated awareness of the CBDT circular on penny stocks and, applying the presumption permitted by Section 114(e) of the Evidence Act, treated the issue of official regularity (issuance of appropriate inquiries) as established in absence of contrary exceptional circumstances. The Principal CIT's interference rested on an assumption of no-enquiry and on conjecture that the scrips were penny stocks without placing cogent material to show the AO omitted necessary steps; such surmise could not substitute for evidence. Applying the twin conditions from Malabar Industries (i.e. order must be both erroneous and prejudicial to revenue), and recognizing that if the AO adopted a view based on materials before him the mere fact that PCIT disagrees does not make the AO's order erroneous and prejudicial, the Tribunal held that the jurisdictional condition precedent for exercise of section 263 was missing. Consequently the revisional order was invalid. [Paras 7, 8, 9]

The invocation of revisional jurisdiction under section 263 was unsustainable; the impugned order of the Principal CIT is quashed and the appeal is allowed.

Final Conclusion: The Tribunal held that the Assessing Officer had called for and considered specific details and supporting documents on the short term capital loss claimed on the three scrips, thereby discharging the investigatory and adjudicatory role; in absence of cogent material to show non-enquiry or that the AO's view was unsustainable, the Principal CIT's exercise of revisional power under section 263 was without the requisite jurisdiction and the revisional order was quashed.

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interest of the revenue - application of presumptive taxation under section 44AD - reopening of assessment based on information - plausibility of Assessing Officer's view and unsustainable-in-law test - determination of net income and allowance of expenditure

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interest of the revenue - plausibility of Assessing Officer's view and unsustainable-in-law test - application of presumptive taxation under section 44AD - Validity of Principal CIT's exercise of revisional jurisdiction under section 263 in setting aside the AO's reassessment order dated 24.12.2018 for AY 2011-12 - HELD THAT: - The Tribunal applied the twin Malabar Industries tests that an order sought to be revised must be both erroneous and prejudicial to the revenue. The AO had reopened assessment on information that the assessee had availed alleged bogus accommodation entries and, after calling for evidence, recorded findings that contractual work was in fact carried out (supported by photographs, completion evidence and payments by reputed contractors) though bills were in the name of a third party. On the basis that the bills appeared to have been used to inflate expenses, the AO applied the presumptive profit rate under section 44AD to the contractual receipts for determining taxable profit. The Tribunal held that the AO's approach was a plausible view founded on material relied upon by him and consistent with judicial approaches to similar facts; such a view could not be characterised as unsustainable in law. Because the AO had investigated the matter, recorded reasons and taken a tenable view on application of section 44AD to plug possible revenue leakage, the Principal CIT's conclusion that the AO's order was erroneous and prejudicial was not established. Consequently, the necessary jurisdictional condition for invoking section 263 was absent and the revisional order was quashed. [Paras 6, 7, 10, 11, 12]

Principal CIT's invocation of revisional jurisdiction under section 263 was without jurisdiction and the revisional order quashed; appeal allowed.

Final Conclusion: The revisional order passed by the Principal CIT under section 263 was quashed because the Assessing Officer had taken a plausible, sustainable view-after reopening on information and on material-by applying section 44AD, and therefore the twin conditions for exercise of revisional jurisdiction were not satisfied; appeal allowed.

Reason to believe - reopening of assessment under section 147 - escapement of income - reasons recorded - borrowed satisfaction - independent application of mind

Reason to believe - reopening of assessment under section 147 - reasons recorded - borrowed satisfaction - independent application of mind - Validity of initiation of reassessment proceedings under section 147/148 on the basis of the reasons recorded by the Assessing Officer - HELD THAT: - The Tribunal examined whether the AO had the requisite "reason to believe" that income chargeable to tax had escaped assessment, as a jurisdictional pre-condition for reopening under section 147. The reasons recorded reproduced information received from the Director of Income Tax (Investigation) alleging bogus transactions in the scrip of M/s Essar India and concluded that income of Rs. 5,55,624/- had escaped assessment; the reassessment order, however, dealt with LTCG of a different amount. The AO did not make or record any independent inquiry, nor did he set out tangible material or explain the nexus between the information and formation of belief; instead he merely adopted the investigation report's conclusion. The Tribunal relied on settled principles that adverse information may only give rise to a "reason to suspect" and, to convert that into a "reason to believe", the AO must make preliminary enquiries and apply his mind to form an independent satisfaction. Borrowed satisfaction-mere reproduction of investigation conclusions without demonstrating the link between material and belief-does not satisfy the statutory requirement. Applying these principles to the reasons on record, the Tribunal found the jurisdictional foundation for reopening absent and the initiation of proceedings under section 147/148 invalid. [Paras 9, 10, 12, 13]

Reasons recorded did not constitute a valid "reason to believe"; reopening under section 147/148 was without jurisdiction and is quashed.

Final Conclusion: The reopening of assessment for financial year 2012-13 (Assessment year 2013-14) under section 147/148 is quashed for lack of jurisdiction as the reasons recorded amount to borrowed satisfaction without independent application of mind; the appeal is allowed.

Validity of assessment in absence of notice under section 143(2) of the Income tax Act - Mandatory nature of notice under section 143(2) - Scope of deeming provision under section 292BB to cure notice defects

Validity of assessment in absence of notice under section 143(2) of the Income tax Act - Mandatory nature of notice under section 143(2) - Whether the reassessment framed under section 143 read with section 147 is valid when no notice under section 143(2) was issued and served. - HELD THAT: - The Tribunal found as a fact that no notice under section 143(2) had been issued or served. Applying settled law of the Supreme Court as expounded in ACIT vs. Hotel Blue Moon and in CIT vs. Laxman Das Khandelwal , the Tribunal held that issuance of a notice under section 143(2) is mandatory for assumption of jurisdiction under section 143(3). The omission to issue such notice is not a mere procedural irregularity but vitiates the assumption of jurisdiction itself; accordingly, an assessment made without issuance and service of the statutory notice is void. The Tribunal examined earlier decisions and the legislative scheme and concluded that the proviso and the requirement of notice cannot be dispensed with when the statute prescribes issuance of notice as a jurisdictional precondition. [Paras 2, 6, 15, 17, 18]

The reassessment dated 30/12/2016 is null and void for want of notice under section 143(2), and the assessment order is quashed.

Scope of deeming provision under section 292BB to cure notice defects - Whether section 292BB can cure the absence of issuance of notice under section 143(2). - HELD THAT: - The Tribunal considered section 292BB, observing that it creates a deeming fiction where an assessee has appeared or cooperated in proceedings so as to preclude objections as to non service, delay or improper service of a notice. However, following the Supreme Court's pronouncement in CIT vs. Laxman Das Khandelwal , the Tribunal held that section 292BB addresses infirmities in the manner of service of a notice that has emanated from the department and is not intended to cure a complete absence of issuance of the notice itself. Consequently, where the jurisdictional requirement of issuance of a notice under section 143(2) is wholly absent, the deeming provision in section 292BB cannot validate the assessment. [Paras 13, 16, 17]

Section 292BB does not cure the complete absence of notice; it cannot validate the reassessment made without issuance of notice under section 143(2).

Final Conclusion: The Department's appeal is dismissed; the reassessment for Assessment Year 2009-10 dated 30/12/2016 is quashed for failure to issue and serve the mandatory notice under section 143(2), and section 292BB cannot cure the absence of such notice. The assessee's cross objection was dismissed as not pressed.

Protective addition - Undisclosed income - Deletion of protective addition on verification - Condonation of delay - Dismissal for non-prosecution - Verification on remand - Voluntary Settlement Scheme (VSV-20)

Condonation of delay - Dismissal for non-prosecution - Whether the delay of 64 days in filing the appeal to the Tribunal should be condoned. - HELD THAT: - The assessee filed the appeal 64 days late and sought condonation supported by an affidavit, explaining that initial advice from previous counsel was that no appeal was required because the addition was made on a protective basis; subsequent advice prompted filing. The Revenue did not press strong opposition. The Tribunal accepted that non-filing was a bona fide consequence of wrong professional advice and was neither deliberate nor intentional. On that basis the Tribunal exercised its discretion in favour of the assessee and condoned the delay. [Paras 4]

Delay of 64 days in filing the appeal is condoned.

Protective addition - Undisclosed income - Deletion of protective addition on verification - Verification on remand - Voluntary Settlement Scheme (VSV-20) - Whether the protective addition of income made at the assessee's hands should be deleted in view of acceptance and settlement of the substantive addition by M/s Saheli Developers under VSV-20. - HELD THAT: - It was undisputed that the assessing officer had made a protective addition of Rs. 1.29 crore in the assessee's assessment and that the substantive addition was made against M/s Saheli Developers, of which the assessee is a partner. The assessee placed on record the assessment order of Saheli Developers and a Form-3 acknowledgement under VSV-20 showing settlement and payment of tax by Saheli Developers. The Revenue invited a remand to enable the Commissioner (Appeals) to consider the assessee's contentions. The Tribunal, after noting that the substantive addition has been accepted and tax paid by Saheli Developers under VSV-20, directed the assessing officer to verify these facts and, if confirmed, delete the protective addition at the assessee's hands. The Tribunal therefore remanded the matter for verification and consequent deletion rather than finally adjudicating the deletion on the record before it. [Paras 5, 6, 7, 8]

Matter is remanded to the assessing officer to verify that the substantive addition against M/s Saheli Developers has been accepted and tax paid under VSV-20; if so, the protective addition in the assessee's assessment shall be deleted.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, allowed the appeal for statistical purposes by remanding the matter to the assessing officer to verify the settlement of substantive addition by M/s Saheli Developers under VSV-20 and, if verified, delete the protective addition recorded against the assessee.

Reopening of assessment under section 147 and notice under section 148 - reasons recorded / sufficiency of prima facie material for reopening - accommodation entries and bogus share transactions - genuineness of long term capital gain on sale of shares - assessment by best judgement under section 144 read with reassessment

Reopening of assessment under section 147 and notice under section 148 - reasons recorded / sufficiency of prima facie material for reopening - Validity of reopening the assessment and service of notice under section 148 - HELD THAT: - The Tribunal found that notice under section 148 was duly served and that the assessee was provided the reasons recorded and an opportunity to object; the objection was disposed of by a speaking order. The Assessing Officer acted on information from the Investigation Wing indicating the assessee was a beneficiary of accommodation entries arising from transactions connected with persons managed by Mukesh Chokshi. Applying the principle that at the reopening stage prima facie material suffices and the correctness or sufficiency of that material is examinable later, and having regard to the precedents of the jurisdictional High Court and Apex Court cited by the Revenue, the Tribunal concluded that the AO possessed sufficient prima facie material to reopen the assessment. Consequently the ground challenging jurisdictional validity of reopening was dismissed. [Paras 7]

Reopening under section 147 and notice under section 148 held valid; ground challenging reopening dismissed.

Accommodation entries and bogus share transactions - genuineness of long term capital gain on sale of shares - assessment by best judgement under section 144 read with reassessment - Whether the long term capital gain claimed on sale of shares could be treated as bogus and added to income - HELD THAT: - On merits the Tribunal examined the material and procedural facts: the assessee purchased shares through a broker, consideration was paid through banking channels, shares were transferred to the assessee and subsequently dematerialised and sold through the stock exchange. The AO made the addition of the full sale consideration relying solely on information from the Investigation Wing without independent inquiry from the stock exchange or confronting documentary evidence. Following coordinate Tribunal precedents on similar facts, the Tribunal held that a mere statement or information pointing to accommodation entries cannot, by itself, justify treating a transaction as bogus when the assessee's transactions were supported by evidence of purchase, demat transfer and sale through the exchange. The Tribunal therefore concluded that the AO was not justified in treating the entire long term capital gain as bogus and accepted the assessee's claimed sale consideration to the extent allowed by the CIT(A). [Paras 10, 11, 12]

Addition treating entire sale proceeds as unaccounted income disallowed; ground allowing reduction in addition in favour of assessee upheld.

Final Conclusion: Reopening of assessment for AY 2007-08 sustained as supported by prima facie material; on merits the addition treating the long term capital gain as wholly bogus was not justified and the appeal is allowed by reducing/disallowing the addition as recorded.

Onus to prove identity, genuineness and creditworthiness under section 68 - treatment of receipts through NRE account as evidence of genuineness - treatment of gift received by a director in his individual capacity - proof of relationship between donor and recipient as relevant to genuineness - reliance on exchange of information under Indo UAE DTAA

Onus to prove identity, genuineness and creditworthiness under section 68 - treatment of receipts through NRE account as evidence of genuineness - reliance on exchange of information under Indo UAE DTAA - Deletion of addition made under section 68 in respect of share application money and share premium received from a non resident investor. - HELD THAT: - The assessing officer treated the amounts as unexplained credit under section 68 because no confirming information was received from UAE authorities after a reference under the exchange of information mechanism and considered the assessee's replies unconvincing. The assessee, however, produced documentary evidence before the assessing officer and appellate authority establishing the identity of the investor (passport, trade licence), genuineness of the transactions (funds routed through NRE account, bank statements, allotment of shares) and creditworthiness (net worth certificate and bank statements). The Commissioner (Appeals) independently examined these documents, directed verification as to whether any report was received from UAE (none was), and concluded that the assessee had discharged the onus under section 68. The Tribunal, after considering the material on record and that no discrepancy was pointed out in the documentary evidence, concurred with the Commissioner (Appeals) that the addition was not sustainable and affirmed deletion of the addition. [Paras 6, 7]

Addition under section 68 in respect of share application and share premium deleted; assessing officer's addition reversed.

Treatment of gift received by a director in his individual capacity - proof of relationship between donor and recipient as relevant to genuineness - Deletion of addition treating the alleged gift as income of the assessee-company when the gift was shown to have been received by a director in his personal capacity. - HELD THAT: - The assessing officer included the gift amount in the hands of the assessee-company despite records showing that the gift of the specified sum was received by a director personally. The assessee produced the gift deed, bank statements of both donor and recipient and the director's return of income evidencing receipt and disclosure in his individual return. The Commissioner (Appeals) found no discrepancy in the documents and accepted that the donor was a real brother of the recipient, that the gift pertained to the director personally and not to the company, and therefore deleted the addition. The Tribunal affirmed that on the material before the authorities the assessee had discharged the necessary onus and the addition could not be sustained. [Paras 7]

Addition treating the gift as income of the assessee deleted; assessing officer's addition reversed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) finding that the assessee discharged the onus to prove identity, genuineness and creditworthiness of the investor and that the gift was received by a director in his individual capacity; the additions made by the assessing officer were deleted and the revenue's appeal dismissed.

Exercise of discretion under Section 125 of the Customs Act - confiscation under Section 111(d) of the Customs Act - deeming of goods as prohibited under Sub-section (3) of Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 - restricted goods versus prohibited goods - option of re export subject to recovery of redemption fine - jurisdiction of High Court to grant mandamus when alternative statutory remedy is available

Jurisdiction of High Court to grant mandamus when alternative statutory remedy is available - exercise of discretion under Section 125 of the Customs Act - Legality and validity of the High Court orders directing release of imported goods and staying the departmental appellate orders - HELD THAT: - The High Court erred in issuing directions for forthwith release of the goods while contemporaneously acknowledging that the questions raised in the Commissioner's orders would have to be examined in appeal. By directing execution of the orders in original (thereby tending to make the appeals a fait accompli) the High Court created inherent contradictions in its reasoning and failed to weigh relevant considerations, including the policy/object of the notifications and this Court's findings in Agricas. The High Court's observations on the propriety of the Commissioner's suo motu orders under the departmental provision did not amount to a final adjudication and, notwithstanding prima facie comments, the Court ought not to have ordered release so as to preclude meaningful appellate review. For these reasons the impugned High Court orders are set aside. (See paras 36, 54.3, 56-61, 96-97.) [Paras 54, 56, 57, 60, 61]

The orders dated 15.10.2020 (with modification 09.12.2020) and 05.01.2021 of the High Court are set aside and the writ petitions dismissed.

Deeming of goods as prohibited under Sub-section (3) of Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 - restricted goods versus prohibited goods - confiscation under Section 111(d) of the Customs Act - Whether the imported peas/pulses are to be treated as 'prohibited goods' or merely 'restricted goods' - HELD THAT: - This Court, applying its Agricas reasoning and the statutory scheme, holds that where an Order under Sub section (2) of Section 3 of the FTDR Act prescribes quantitative restrictions to be complied with only upon licence, imports made without requisite licence or in excess of the prescribed cap lose the character of permissible 'restricted' imports and become 'prohibited goods' by operation of the deeming provision. Restrictions framed as quantitative caps are a form of prohibition for the purposes of Section 111(d) of the Customs Act; therefore the consignments imported contrary to the notifications and trade notice are 'prohibited goods'. (See paras 18, 63-68.) [Paras 63, 66, 68]

The goods imported in contravention of the notifications and trade notice are 'prohibited goods' for the purpose of the Customs Act.

Exercise of discretion under Section 125 of the Customs Act - option of re export subject to recovery of redemption fine - confiscation under Section 111(d) of the Customs Act - Whether the prohibited goods ought to have been released on payment of redemption fine or confiscated absolutely; consequences as to penalty and further remedy - HELD THAT: - Where goods are 'prohibited', Section 125(1) vests a discretion in the adjudicating officer to permit payment of a fine in lieu of confiscation but does not compel release. That discretion must be exercised reasonably, guided by law and by relevant considerations, including the purpose of the restriction and public interest. On the facts - excessive imports under interim orders, absence of bona fide and the adverse effect on domestic agricultural economy as emphasised in Agricas - the adjudicating authority's mechanical grant of redemption option did not constitute a proper exercise of discretion. The Appellate Authority's conclusion that absolute confiscation (with enhanced penalties) was the appropriate and lawful exercise of discretion is upheld. As a continuing, limited accommodation, importers may within two weeks opt for re export on payment of redemption fine and discharge of statutory obligations; absent such option, the goods shall be confiscated absolutely. Given these outcomes, further statutory challenge in respect of release or confiscation is rendered futile and the prayer to keep appeals open is rejected except that intervenors are left room to contest quantum (amount payable). (See paras 69-85, 96-99.) [Paras 80, 82, 96, 97, 98]

The orders in original are quashed; the orders in appeal ordering absolute confiscation and enhancing penalty are approved. Importers may opt for re export within two weeks on payment of redemption fine and discharge of statutory obligations; if not exercised the goods stand absolutely confiscated. Further appeals on the core question are refused; limited appellate recourse on quantum for interveners is preserved.

Final Conclusion: Appeals allowed. The High Court orders directing release are set aside; the Commissioner(Appeals) orders of absolute confiscation with enhanced penalties are approved. The imported consignments contravening the FTDR notifications are held to be 'prohibited goods' and, absent an opt in for re export (subject to redemption fine and statutory compliance within two weeks), shall stand absolutely confiscated; limited challenge on quantum preserved only for intervenors. Costs awarded against the respondent importers.

Refund of excess customs duty - double payment due to ICEGATE/EDI system error - wrong authority filing not barring refund where original claim was filed within time - jurisdictional defect and requirement of Deficiency Memo under Customs Refund Application (Form) Regulations, 1995 - limitation computed from date of final assessment where duty paid provisionally (Section 27(1B)(c) of the Customs Act, 1962) - provisional assessment and adjustment of duty on closure of provisional duty bond - unjust enrichment test in cases of involuntary double payment due to departmental/system error

Refund of excess customs duty - wrong authority filing not barring refund where original claim was filed within time - jurisdictional defect and requirement of Deficiency Memo under Customs Refund Application (Form) Regulations, 1995 - Whether the refund claim rejected as time barred was unsustainable where the original refund application had been filed in time before the Assistant Commissioner, ICD, Bangalore and no Deficiency Memo was issued to redirect the claim to the competent authority. - HELD THAT: - The Tribunal found it undisputed that the appellant made double payments due to an ICEGATE/EDI technical problem and that the initial refund application was filed in time before the Assistant Commissioner, ICD, Bangalore. Under the Customs Refund Application (Form) Regulations, 1995 a jurisdictional defect should have been communicated by issuing a Deficiency Memo and the application returned or forwarded so the claimant could file before the proper officer; no such Deficiency Memo was issued. Relying on the Tribunal's precedent in Singh International, the fact that the original application was filed within time before a wrong authority does not render it barred by limitation when the competent authority could and should have acted to rectify the jurisdictional defect. Both the original authority and subsequent adjudicating authority failed to appreciate these aspects, and therefore the rejection of the refund on the ground of time bar was incorrect. [Paras 6]

Impugned rejection of the refund as time barred set aside and appeal allowed on this ground.

Limitation computed from date of final assessment where duty paid provisionally (Section 27(1B)(c) of the Customs Act, 1962) - provisional assessment and adjustment of duty on closure of provisional duty bond - Whether, if the double payment is treated as duty paid provisionally, the one year limitation under Section 27(1B)(c) runs from the date of adjustment after final assessment, and whether the appellant's claim was therefore within time. - HELD THAT: - The appellant established that the relevant bills of entry were provisionally assessed because of pending SVB proceedings and that final assessment occurred on closure of the provisional duty bond by ACC, Bangalore, communicated to the appellant on 04.01.2019. Section 27(1B)(c) provides that where duty is paid provisionally under Section 18, the one year limitation is computed from the date of adjustment after final assessment. Applying this principle, even if the excess payment were to be regarded as duty, the period of limitation would commence from the date of final assessment communicated on 04.01.2019, and the refund claim filed by the appellant falls within that period. [Paras 4, 6]

Limitation runs from the date of final assessment; the refund claim is within time on this computation.

Double payment due to ICEGATE/EDI system error - unjust enrichment test in cases of involuntary double payment due to departmental/system error - Whether the Department should refund amounts paid twice due to system error and whether the concept of unjust enrichment should be applied to deny refund in such circumstances. - HELD THAT: - The Tribunal accepted that the double payments were caused by an ICEGATE/EDI technical problem and were confirmed by PAO, New Delhi. Citing the reasoning of CESTAT, Bangalore in Bangalore Metro Rail Corporation Ltd., the Tribunal observed that where a second payment is made on advice of or because of the department's inability to connect earlier payment to the bill of entry, it would be inappropriate to require the importer to disprove unjust enrichment beyond doubt. The departmental/system error and the consequent involuntary payment militates against denying refund on the ground of unjust enrichment, and such cases call for refund rather than protracted litigation. [Paras 6]

Double payments caused by system error warrant refund; denial on the basis of unjust enrichment was not justified.

Final Conclusion: The appeal is allowed; the impugned order rejecting the refund on the ground of time bar is set aside. The Tribunal directed grant of the refund with consequential relief, having held that the original claim was filed in time (and should have been regularised by issuing a Deficiency Memo), that limitation in provisional assessment cases runs from final assessment, and that involuntary double payments due to system error merit refund rather than denial on unjust enrichment grounds.

Power of Registrar to remove name of a company from the Register of Companies - appeal to Tribunal for restoration of struck off company - striking off for non-filing of statutory returns vis-a -vis carrying on business - restoration of company where company was in operation despite non-filing - imposition of penalty and interest for default in statutory filings

Restoration of company where company was in operation despite non-filing - appeal to Tribunal for restoration of struck off company - The NCLAT allowed the appeal and directed restoration of the company's name where the company was shown to be carrying on business despite having failed to file statutory returns for the specified years. - HELD THAT: - The Tribunal found on the record - including financial statements, income tax acknowledgements and pleadings regarding employees and assets - that the company was operational and carrying on business. Although the company admitted defaults in filing statutory returns for the preceding years, non-filing alone, when the company is otherwise operational, does not justify removal from the register without affording appropriate relief. Under Section 252 the Tribunal has power to restore a struck off company if satisfied that the company was carrying on business or in operation at the time of striking off. Applying that principle, the NCLAT held that the NCLT ought to have restored the company's name and accordingly set aside the NCLT order and directed restoration subject to filing of outstanding documents and leaving ROC liberty to impose penalties and interest in accordance with law. [Paras 25, 26, 27]

Allowed the appeal; directed restoration of the company's name and ordered filing of outstanding statutory documents, with ROC permitted to impose penalty/interest as per law.

Power of Registrar to remove name of a company from the Register of Companies - striking off for non-filing of statutory returns vis-a -vis carrying on business - The Tribunal affirmed that the Registrar possesses statutory power to strike off a company's name under the Companies Act where prescribed grounds exist, but clarified that striking off for non-filing cannot be sustained where the company was in operation and restoration is appropriate under Section 252. - HELD THAT: - The judgment recognises the Registrar's power under Section 248 to remove names from the register for reasons including non commencement or non operation, and acknowledges procedural compliance (STK notices and publication) by the ROC. However, the Tribunal emphasised that the statutory scheme also provides a remedy of appeal/restoration under Section 252. Where the facts establish that the company was carrying on business despite defaults in statutory filings, removal is not justified and the Tribunal may order restoration while permitting the ROC to impose appropriate penalties and interest for rectification of defaults. [Paras 21, 22, 23, 24]

ROC's power to strike off recognised, but removal set aside in the facts of this case; restoration ordered with direction to comply with filing obligations and subject to penalty/interest.

Final Conclusion: The appeal was allowed: the impugned NCLT order dismissing restoration was set aside, the ROC was directed to restore the company's name to the Register of Companies; the company must file all outstanding financial statements and annual returns, and the ROC may impose penalty and interest in accordance with law.

Oppression and mismanagement jurisdiction - exercise of discretionary reliefs in the interest of the company - requirement to decide merits before passing specific dispositive directions - remand for fresh adjudication and disposal of interlocutory applications

Requirement to decide merits before passing specific dispositive directions - The NCLT did not decide the Company Petition on its merits before directing an exit of parties and appointing a valuer; that approach was incorrect and the impugned order is liable to be set aside. - HELD THAT: - The Tribunal found that the learned NCLT disposed of the petition by directing a sequence of exits and appointing a chartered accountant to value shares without adjudicating the allegations of oppression and mismanagement or resolving competing pleadings and counter-allegations. The NCLT itself recorded (paras 24-25) that it had not gone into merits and had not considered case law relied upon by the parties. Relying on established authorities, the Appellate Tribunal held that although tribunals possess wide discretionary powers to make orders in the interest of the company, they must not pass specific dispositive directions where the case has not been decided on merits and where there is no consensus between parties. In the facts of this case the absence of findings on contested allegations and interlocutory applications rendered the NCLT's course of directing exits without adjudication improper. [Paras 24, 25, 35, 52, 54]

Impugned NCLT order set aside insofar as it directed exit and appointed a valuer without deciding the petition on merits.

Remand for fresh adjudication and disposal of interlocutory applications - The matter is remitted to the NCLT for fresh consideration on merits, with directions to frame issues, consider pleadings and evidence, and dispose of all interlocutory applications on their merits. - HELD THAT: - Having held that the NCLT failed to adjudicate the contested allegations and did not deal with several interlocutory applications or cited authorities, the Appellate Tribunal directed a remand. The Tribunal instructed the NCLT to (i) consider and decide the company petition on merits by examining the allegations of the petitioners and the respondents' counter allegations together with the supporting documents; (ii) frame issues based on those allegations and decide them sequentially; and (iii) dispose of all interlocutory applications on their merits. The stay previously granted was continued until disposal on merits. These directions were issued to ensure that the petition is finally and properly adjudicated rather than being resolved by procedural exit orders without factual or legal determination. [Paras 35, 37, 43, 45, 55]

Matter remitted to the NCLT with directions to decide the petition and all interlocutory applications on merits and to frame and decide issues accordingly; earlier stay to continue until such disposal.

Final Conclusion: The NCLT order dated 05.03.2019 directing exits and appointing a valuer without adjudicating the allegations and interlocutory applications is set aside; the Company Petition is remitted to the NCLT for fresh, merits based adjudication, framing of issues and disposal of pending IAs, with the Tribunal's interim stay to continue until final disposal.

Scheme of Arrangement sanction under Sections 230-232 of the Companies Act, 2013 - Transfer and vesting of demerged undertaking - Continuity of employment and transfer of employees - Transfer of liabilities and continuation of legal proceedings - Share entitlement ratio determined by valuer - Compliance with statutory notices and reports of Regional Director, Registrar of Companies, Official Liquidator and Income Tax Department - Approval subject to statutory liabilities, taxes and regulatory action

Taking on record of statutory reports and additional information - Affidavits, RD & RoC reports and additional documents filed in CA Nos.116/2020, 117/2020 and 431/2020 were taken on record and those applications disposed of. - HELD THAT: - The Tribunal recorded receipt of the Regional Director's report, Registrar of Companies report and the additional information supplied by the petitioner companies. The documents and affidavits filed in the listed Company Applications were accepted and formally placed on record. Consequently, the respective Company Applications were disposed of as recorded in the order. [Paras 1]

CA Nos.116/2020, 117/2020 and 431/2020: documents taken on record and the applications disposed of.

Maintainability of joint petition under Rule 3(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Dispensing with meetings of equity shareholders and unsecured creditors - The joint second motion petition was held maintainable and earlier directions dispensing with meetings of equity shareholders and unsecured creditors were recorded as complied with. - HELD THAT: - The Tribunal found the joint petition to be maintainable in terms of the Rules. It recorded that the First Motion Application had previously procured consent affidavits from equity shareholders and unsecured creditors, which had justified dispensation of their meetings; there were no secured creditors requiring meeting. The Tribunal relied on those facts in proceeding with the Second Motion Petition. [Paras 1, 2, 3]

The joint petition is maintainable and meetings of equity shareholders and unsecured creditors were properly dispensed with.

Compliance with statutory publication and service requirements - Consideration of RD, RoC, Official Liquidator and Income Tax Department reports - No objections received - Statutory notices/publications were complied with, the registry reported no objections, and the statutory reports did not raise impediments to sanctioning the Scheme. - HELD THAT: - Affidavits and copies of newspaper publications and service on specified authorities were filed. The Registry reported that no objections were received. The Regional Director reiterated petition contents and recorded no inspection/investigation; the Registrar of Companies reported no adverse observations under Section 230(5); the Official Liquidator reported no pending litigation or transfers to IEPF affecting the companies; the Income Tax Department furnished pending demand details which were noted. On this basis the Tribunal found no impediment to sanctioning the Scheme. [Paras 7, 10, 11, 19]

Compliance with publication and service requirements established; statutory reports do not prevent sanction of the Scheme.

Transfer of properties, rights and liabilities to resulting company - Continuation of proceedings by or against resulting company - Allotment of shares to demerged company's members - On sanction, the demerged undertaking's properties, rights, liabilities, duties, pending proceedings and employees shall transfer to and vest in the Resulting Company and shares shall be allotted to the members of the Demerged Company in terms of the Scheme. - HELD THAT: - The Tribunal sanctioned the Scheme and ordered that, without further act or deed, all assets and estate of the demerged undertaking shall transfer and vest in the Resulting Company, subject to existing charges; all liabilities and duties shall become those of the Resulting Company; pending or future proceedings relating to the demerged undertaking shall be continued by or against the Resulting Company (with parties added where necessary); employees exclusively engaged in the demerged business shall transfer with continuity of service on not less favourable terms; and the Resulting Company shall allot shares to existing members as per the Scheme. The order also preserved the right of authorities to take action for any statutory violations. [Paras 19]

The demerged undertaking is transferred and vested in the Resulting Company, with liabilities, proceedings and employees transferring accordingly and share allotment to follow as per the Scheme.

Share entitlement ratio determined by valuer - The share entitlement ratio between the Demerged Company and the Resulting Company was recorded as one equity share of BSSPL for every one equity share of BSIPL, based on the valuer's report. - HELD THAT: - The Tribunal noted that the Share Entitlement Ratio was determined in accordance with the valuer's report dated 20.05.2019 (Price Waterhouse & Co. LLP) and recorded the proposed one-for-one exchange ratio in the Scheme. This valuation determination formed part of the sanctioned Scheme. [Paras 17]

The share entitlement ratio as stated in the valuer's report is accepted and forms part of the sanctioned Scheme.

Income tax demands noted and corporate undertaking to pursue appeals and to pay any amounts found payable - Income Tax Department's report of outstanding demands for specified Assessment Years was noted and the Demerged Company filed an affidavit stating that appeals have been filed and undertaking to pay any amounts ultimately found payable. - HELD THAT: - The Tribunal considered the Income Tax Department's report listing outstanding demands for several Assessment Years and the Demerged Company's affidavit disclosing that appeals have been filed and reserving statutory and constitutional rights to file further appeals. The company also undertook to pay any outstanding demands found due/payable after completion of those proceedings/appeals. The Tribunal recorded these facts while approving the Scheme but did not adjudicate the tax demands in substance. [Paras 13, 14]

Income-tax demands were recorded and the Demerged Company's appeals and undertaking to pay any amounts finally adjudicated were noted.

Final Conclusion: The Tribunal approved and sanctioned the Scheme of Arrangement between the petitioner companies under Sections 230-232 of the Companies Act, 2013, after recording compliance with notice and publication requirements and consideration of statutory reports; the demerged undertaking is ordered to transfer and vest in the Resulting Company (with assets, liabilities, proceedings and employees transferring accordingly), subject to preservation of rights of regulatory or tax authorities; specified deposits and filing of certified copies with the Registrar of Companies were directed.

Oppression and mismanagement - Amendment of company petition - Subsequent events in pleadings - Companies Fresh Start Scheme 2020 - Maintainability under Section 241-242 of the Companies Act, 2013

Amendment of company petition - Subsequent events in pleadings - Application to amend the company petition to incorporate alleged acts occurring after filing (AGM proceedings held under the Fresh Start Scheme) was permissible only in the limited manner indicated and the instant amendment application was dismissed. - HELD THAT: - The Tribunal examined whether the proposed amendment merely elucidated pre-existing facts in the original petition or sought to introduce subsequent events as fresh grounds for relief. The original petition, filed 03.07.2019, alleged absence of AGMs for certain years; later AGM proceedings convened under the Companies Fresh Start Scheme 2020 occurred after filing. The Tribunal held that subsequent events may be placed on record but their consideration for granting substantive relief is contingent upon the petition succeeding on its primary merits. In the present case the pleading process on the main petition was complete and the matter was fixed for final hearing; permitting the amendment at that stage to delay final hearing was not justified. Having regard to the foregoing, and to the direction in the earlier order that decisions/resolutions from the AGMs be kept in abeyance, the Tribunal dismissed the amendment application. [Paras 13, 16, 17]

Application to amend the company petition was dismissed.

Oppression and mismanagement - Subsequent events in pleadings - Companies Fresh Start Scheme 2020 - Whether subsequent events (post-filing AGM approvals and accounts) alone can entitle the petitioner to relief for oppression and mismanagement. - HELD THAT: - Relying on the principle that subsequent events brought on record cannot, by themselves, confer a right to relief if the main petition fails on merits, the Tribunal observed (with reference to the cited decision) that such events may be considered only for moulding appropriate relief after the primary allegations are established. The Tribunal noted its prior order directing that AGM decisions remain in abeyance and emphasised that consideration of the AGMs held under the Companies Fresh Start Scheme 2020 would therefore be limited to shaping relief if the petitioner succeeds on the main petition, and not as independent grounds to defeat maintainability or to forestall final hearing. [Paras 15, 16]

Subsequent events cannot independently entitle the petitioner to relief; they are relevant only for moulding relief if the main petition is upheld.

Final Conclusion: The application to amend the company petition to incorporate events occurring after filing (AGM proceedings and approvals under the Fresh Start Scheme) is dismissed; subsequent events may be placed on record but can be considered only for moulding relief if the main petition is found maintainable and succeeds on its merits.

Scheme of Amalgamation - Dispensing with convening, holding and conducting meetings of shareholders and creditors - Reduction of share capital consequent to amalgamation - Appointment of Chairperson and conduct of meetings under the Scheme - Notice and publication requirements under Section 230(5) for approval of scheme - Objections/representations by statutory authorities and Official Liquidator report

Dispensing with convening, holding and conducting meetings of shareholders and creditors - Whether meetings of the equity shareholders and creditors of the Transferor Company and certain creditors of the Transferee Company could be dispensed with. - HELD THAT: - The Tribunal accepted the applicants' evidence that the Transferor Company had five equity shareholders who had given affidavits consenting to dispense with the meeting, that there were no secured creditors and that the sole unsecured creditor had filed consent. On that foundation the Tribunal dispensed with convening meetings of the Transferor Company's equity shareholders, secured creditors and unsecured creditors. For the Transferee Company the Tribunal recorded that the two secured creditors had furnished their affidavits of consent and accordingly dispensed with convening a meeting of secured creditors of the Transferee Company, while directing that meetings be convened for the Transferee Company's equity shareholders and its unsecured creditors. [Paras 3, 8]

Meetings dispensed with for the Transferor Company's equity shareholders, secured creditors and unsecured creditor; meetings of Transferee Company's secured creditors dispensed with, but meetings of Transferee Company's equity shareholders and unsecured creditors ordered to be convened.

Appointment of Chairperson and conduct of meetings under the Scheme - The procedure for conduct of the meetings to consider the Scheme and appointment of Chairperson(s). - HELD THAT: - The Tribunal fixed the date, time and venue for the Transferee Company's meetings (equity shareholders and unsecured creditors) and prescribed quorum rules. It appointed a named director as Chairperson (with an alternate) to preside over the meetings, directed the Chairperson to file reports of the meetings within specified time, empowered the Chairperson to issue notices, decide procedural questions and report results of voting, and provided for adjournment rules and treatment of valid proxies consistent with the Companies Act and the Rules. [Paras 9, 10, 11, 12, 15]

Meetings to be held as directed; Chairperson appointed with specified powers and obligations; quorum, adjournment and proxy rules prescribed; report and voting requirements fixed.

Notice and publication requirements under Section 230(5) - The form and timing of notices, service, and publication to be issued in relation to the meetings and the Scheme. - HELD THAT: - The Tribunal directed that individual notices be sent to entitled members and unsecured creditors at least 30 days in advance together with specified documents including the Scheme and explanatory statement, and that advertisement be published in specified newspapers at least 30 clear days before the meetings. The authorised representatives were directed to file affidavits of service and compliance at least one week before the meetings, and the Registry was directed to display the notice on the NCLT Chennai notice board. [Paras 13, 14, 19, 20]

Notices and publications to be issued in the manner and within the timeframes directed; affidavits of compliance to be filed prior to the meetings.

Objections/representations by statutory authorities and Official Liquidator report - Whether statutory authorities should be served and afforded an opportunity to object and whether the Official Liquidator should report in respect of the Transferor Company. - HELD THAT: - In terms of the statutory scheme the Tribunal directed notices to the Regional Director, Ministry of Corporate Affairs, ROC, Official Liquidator, Income Tax Authorities and other sectoral regulators as necessary, with a 30 day period for objections or representations. The Tribunal observed that if the scheme is not exempt under the Competition Act an affidavit to that effect should be filed or notice to the Competition Commission issued. The Registry was directed to issue notice to the Official Liquidator in relation to the Transferor Company and the Official Liquidator was asked to appoint chartered accountants and submit a report within four weeks. [Paras 16, 17]

Statutory authorities to be served and given 30 days to object; Official Liquidator to submit report on the Transferor Company within four weeks.

Compliance with Companies Act and Rules and subsequent presentation of petition - The conditions for compliance with statutory forms, filing of meeting reports and presentation of the petition for sanction. - HELD THAT: - The Tribunal required strict compliance with the Companies Act, 2013 and the Companies (Compromises, Arrangements, Amalgamations) Rules, 2016 including applicable forms and formats. It directed that the Chairperson(s) file report(s) of the meetings within specified periods and permitted presentation of the petition(s) after two weeks from the date of filing those reports. [Paras 6, 15, 20, 21]

Applicants must comply with statutory requirements; petition(s) may be presented after the Chairperson(s) file meeting reports and after the lapse of the stipulated two week period.

Final Conclusion: The Company Applications CA/807/CAA/2020 and CA/858/CAA/2020 were allowed on the terms directed: meetings of certain classes were dispensed with where consent was on record, meetings of the Transferee Company's equity shareholders and unsecured creditors were ordered to be convened with prescribed procedures, notices and publications were directed to be issued, statutory authorities and the Official Liquidator were to be served and permitted time to respond, and compliance with the Companies Act and Rules was mandated before presentation of the petitions.

Extension of contract by conduct - pre existing dispute under Section 8(2) of the IBC - maintainability of Section 9 application - threshold unpaid operational debt - applicability of arbitration clause to initiation of IBC proceedings - no requirement for a roving inquiry into disputed interest/quantification at the admission stage

Extension of contract by conduct - Agreements dated 4.12.2015, though expiring on 3.12.2017, were effectively extended by the parties' subsequent conduct and email-based mutual consent so as to cover printing jobs performed after expiry. - HELD THAT: - The parties continued to exchange written orders by e mail and the Operational Creditor complied with those orders, raised invoices and received payments after 3.12.2017. This continuous course of dealings and acceptance of invoices amounted to written mutual consent equivalent to an extension of the contractual relationship, and therefore the post expiry printing jobs fell within the terms of the agreements. [Paras 14, 23]

The contracts were treated as continuing by conduct and the printing jobs after 3.12.2017 were governed by the terms of the agreements.

Pre existing dispute under Section 8(2) of the IBC - treatment of disputed wastage claims - The contention of a pre existing dispute regarding high percentage of newsprint wastage and minimum chargeable copies does not constitute a bona fide dispute preventing admission under Section 9. - HELD THAT: - The respondent's earlier emails about wastage (2016-2017) related to invoices not included in the demand notice, and many invoices prior to 22.2.2018 (which raised similar issues) were settled. The respondent repeatedly promised payment in emails while only raising the dispute when the Section 9 application was filed, suggesting the dispute was spurious or raised as an afterthought. Moreover, the agreements fixed minimum chargeable copies at 10,000 and wastage at less than 4% relative to that quantity; the actual print orders were well below 10,000, logically producing higher wastage which cannot be ascribed to the Operational Creditor. Accordingly the claimed dispute is not a pre existing dispute within Section 8(2). [Paras 17, 18, 21]

The alleged pre existing dispute about wastage does not bar admission of the Section 9 application.

Maintainability of Section 9 application - threshold unpaid operational debt - no requirement for a roving inquiry into disputed interest/quantification at the admission stage - The Section 9 application was maintainable because the unpaid operational debt exceeded the statutory threshold and the Adjudicating Authority was not required to undertake a detailed roving inquiry into precise quantification or disputed rate of interest at the admission stage. - HELD THAT: - It is sufficient for admission that the unpaid debt, as per Section 4 and Section 9, exceeds the threshold (Rs. One Lakh). Although there was a dispute about the applicable rate of interest, such a difference did not materially affect the fact that the unpaid debt remained above the threshold. The Adjudicating Authority erred in dismissing the application on the ground that it would need to calculate exact amounts via a roving enquiry; admission does not require such granular adjudication. [Paras 19, 24]

The application satisfied the statutory threshold and should not have been dismissed for lack of precise quantification; it was maintainable and deserving of admission.

Applicability of arbitration clause to initiation of IBC proceedings - Existence of an arbitration clause in the contract did not preclude the Tribunal from admitting the Section 9 application where no party had referred the dispute to arbitration prior to the IBC proceedings. - HELD THAT: - Clause 24 provided for arbitration in case of dispute, but neither party had invoked arbitration before the appeal. The question of directing parties to arbitration was not appropriate at this appellate stage. The arbitration clause therefore did not operate to bar admission of the Section 9 application in the circumstances of this case. [Paras 22]

The arbitration clause did not oust the Tribunal's power to admit the Section 9 application where arbitration had not been pursued by the parties.

Remand for admission and consequential directions under the IBC - The impugned order dismissing the Section 9 application was set aside and the matter remitted to the Adjudicating Authority with directions to admit the application unless the parties settle. - HELD THAT: - Having found that the agreements continued by conduct, that the alleged pre existing dispute was not bona fide, and that the unpaid debt exceeded the threshold, the appellate forum concluded that the Adjudicating Authority should have admitted the Section 9 application. Consequently the appeal succeeds and the matter is remitted for admission and further consequential directions under the IBC. [Paras 24]

Impugned order set aside; matter remitted to Adjudicating Authority to admit the application and pass consequential orders in accordance with the IBC.

Final Conclusion: Appeal allowed. The NCLT order dismissing the Section 9 application is set aside; the contracts were held to continue by conduct, the alleged pre existing dispute was not bona fide, the Section 9 application was maintainable (debt above threshold), and the matter is remitted to the Adjudicating Authority to admit the application and pass consequential directions under the IBC unless the parties settle.

Submission of proof of claims - condonation of delay - time-lines under the Insolvency and Bankruptcy Code and CIRP Regulations - Regulation 12(2) - ninety day period for admission of claims - Regulation 40C - exclusion for activities affected by lockdown - time bound completion of CIRP and sanctity of approved/received resolution plans - prejudice to resolution process by belated admission of claims

Submission of proof of claims - Regulation 12(2) - ninety day period for admission of claims - condonation of delay - Regulation 40C - exclusion for activities affected by lockdown - time bound completion of CIRP and sanctity of approved/received resolution plans - Whether the operational creditor's belated submission of claim after the ninety day period and after the CIRP had proceeded to receipt/approval stage of resolution plans should be condoned on account of COVID 19/lockdown and/or Supreme Court orders excluding limitation. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the claim was filed well beyond the ninety day period prescribed by Regulation 12(2) (the ninetieth day being 17th March 2020 for CIRP commencing 19th December 2019) and that mere inability to submit a claim before that date could not be equated with filing of applications covered by the Supreme Court's exclusion of limitation. Regulation 40C (relating to lockdown) was considered, but the lockdown declared from 25th March 2020 post dated the expiry of the ninety day period and therefore did not entitle the applicant to advantage for a claim already time barred before the lockdown. The Tribunal accepted the Adjudicating Authority's reasoning that permitting belated claims at a stage when resolution applicants had already submitted plans would prejudice the resolution process, require reworking of information memoranda, plans and CoC calculations, and jeopardize the time bound object of the Code. In view of these consequences and the RP's compliance with the applicable regulations, the Adjudicating Authority rightly refused condonation and its order required no interference. [Paras 8, 10, 11, 12, 13]

Belated claim was rightly rejected; condonation of delay was refused and the Adjudicating Authority's order was upheld.

Final Conclusion: Appeal dismissed; the Tribunal declined to interfere with the Adjudicating Authority's refusal to admit the belated claim as condonation would have prejudiced the time bound CIRP and the integrity of resolution plans.

Admission of application under Section 7(5) of the Insolvency and Bankruptcy Code - default in payment of financial debt - corporate insolvency resolution process - moratorium under Section 14 - prohibitions during moratorium - appointment of Interim Resolution Professional

Admission of application under Section 7(5) of the Insolvency and Bankruptcy Code - default in payment of financial debt - The petition under Section 7 of the IBC filed by the financial creditor was admitted on the ground that default in payment of financial debt was established and the default amount exceeded the statutory threshold. - HELD THAT: - The Tribunal examined the loan documents, including the Loan-cum-Hypothecation agreement, Demand Promissory Note, and the SARFAESI notices, and noted the account classification as NPA and the computation of outstanding as furnished by the financial creditor. The petitioner also relied on the recovery order of the Debt Recovery Tribunal which issued a recovery certificate reflecting the outstanding liability. In view of these records demonstrating default and the default being above the minimum amount requisite for triggering CIRP, the Tribunal found the application complete and fit for admission under Section 7(5). [Paras 6, 10, 11]

The Section 7 petition is admitted and the existence of default for an amount above the statutory threshold is recorded.

Moratorium under Section 14 - prohibitions during moratorium - corporate insolvency resolution process - A moratorium was declared under Section 14 of the IBC and the statutory prohibitions applicable during the moratorium were imposed. - HELD THAT: - Consequent to admission of the Section 7 petition, the Tribunal applied Section 14 and declared a moratorium effective from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. The order expressly recorded the statutory prohibitions: stay on institution or continuation of suits and execution of decrees, prohibition on transfer or disposal of assets by the corporate debtor, bar on enforcement of security interests (including actions under SARFAESI), restrictions on recovery by owners or lessors where property is with the corporate debtor, and protection against termination of supply of essential goods or services, subject to exceptions prescribed by law. These prohibitions were directed to be observed by all concerned. [Paras 11]

Moratorium under Section 14 is declared and the specified prohibitions shall operate from the date of the order until completion of CIRP or other terminal orders.

Appointment of Interim Resolution Professional - corporate insolvency resolution process - An Interim Resolution Professional (IRP) was appointed and directed to perform the statutory functions entrusted to an IRP under the IBC. - HELD THAT: - The financial creditor proposed an IRP in Form 5 and the proposed IRP filed consent in Form 2 confirming no disciplinary proceedings and availability. Subject to required disclosures and absence of pending disciplinary proceedings, the Tribunal appointed the named individual as IRP and directed him to undertake obligations under the Code, including collation of claims, determination of the corporate debtor's financial position, constitution of the Committee of Creditors within the prescribed timelines, convening of the first CoC meeting, and submission of fortnightly progress reports to the Tribunal. The Registry and petitioner were directed to supply the IRP with a copy of the order forthwith. [Paras 12, 13]

Mr. Rajender Kumar Jain is appointed as Interim Resolution Professional with directions to perform the statutory duties and to file constitution and progress reports within the prescribed periods.

Final Conclusion: The petition under Section 7 is admitted; moratorium under Section 14 is declared with the statutory prohibitions; and an Interim Resolution Professional is appointed with directions to collate claims, constitute the Committee of Creditors, convene the first meeting and to file regular progress reports.

Operational creditor - operational debt - debt and default - ascertained and established debt - proof of debt by invoices and computation - Bailor-bailee relationship versus sale

Operational creditor - operational debt - debt and default - ascertained and established debt - proof of debt by invoices and computation - Petitioner has not established that it is an operational creditor entitled to initiate CIRP nor proved any ascertained debt and default by the corporate debtor. - HELD THAT: - The Tribunal examined the contractual matrix and the materials placed on record including the Technology Transfer and Manufacturing Agreement, the extension agreement, physical verification report and the documents in Form 1/Form 5. Although the agreement contemplates supply of raw materials by the petitioner and contains clauses regarding ownership, indemnity and security, the petitioner failed to demonstrate how the claimed amount of Rs. 4,50,40,493.98/- was computed or that it constituted an ascertained operational debt payable by the respondent. The invoices relied upon were raised by third party vendors in favour of the petitioner and no invoice was raised by the petitioner to the respondent; there was no running account or clear quantification in the pleadings showing that each transaction formed a crystallised debt within limitation. On that basis the Tribunal found that the petitioner did not establish the necessary relationship of operational creditor and corporate debtor for purposes of the Code, nor did it prove non payment of an ascertained debt, and accordingly the substantive requirement for admission of a Section 9 petition stood unfulfilled. [Paras 29, 31]

CP (IB) No. 173/Chd/CHD/2018 dismissed as the petitioner failed to establish operational creditor status and any ascertained debt and default.

Final Conclusion: The petition under Section 9 of the Code is dismissed because the petitioner did not prove an operational debt or default; other contentions were not adjudicated in view of this finding.

Mandatory referral to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 - arbitrability of contractual disputes arising from invoices - primacy of a valid arbitration agreement over parallel insolvency proceedings - application of amended proviso in Section 8 requiring prima facie existence of arbitration agreement

Mandatory referral to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 - application of the condition regarding first statement on the substance of dispute - Tribunal must refer the parties to arbitration where the subject-matter dispute falls within an arbitration clause and the application to refer is made before the respondent files its first statement on the substance of the dispute. - HELD THAT: - The Tribunal found that each invoice contained an arbitration clause referring 'any dispute' regarding the bill to arbitration and that correspondence and meetings between the parties had acknowledged a dispute concerning the invoices. Applying the principles in the amendments to Section 8 and the settled law cited, the Tribunal held that where an arbitration clause exists and an application under Section 8 is made not later than the submission of the first statement on the substance of the dispute, the judicial authority is required to refer the parties to arbitration unless it finds prima facie that no valid arbitration agreement exists. The Tribunal concluded that the dispute was contractual and arbitrable, the application to refer was timely, and no basis was shown to hold that no valid arbitration agreement prima facie existed; accordingly the parties were to be referred to arbitration. [Paras 6, 7, 8, 9, 10]

Application under Section 8 allowed and parties referred to arbitration.

Primacy of a valid arbitration agreement over parallel insolvency proceedings - infructuosity of Section 9 insolvency application upon valid referral to arbitration - Effect of referring the dispute to arbitration on the pending Section 9 Insolvency and Bankruptcy Code application filed by the operational creditor. - HELD THAT: - The Tribunal held that because the dispute between the parties is contractual and to be decided by arbitration, the pending Section 9 insolvency application could not be allowed to proceed on its merits while the arbitrable dispute remained to be decided by the arbitral forum. Once referred to arbitration, the rights and liabilities arising from the invoices would be determined by the arbitral tribunal, rendering the insolvency petition infructuous at that stage. Consequently, the Section 9 application was disposed of as infructuous. [Paras 10, 11]

The Section 9 insolvency application (IB 782/ND/2020) was held to be infructuous and disposed of.

Final Conclusion: The application under Section 8 of the Arbitration and Conciliation Act was allowed; parties were referred to arbitration and the pending Section 9 insolvency petition was held to be infructuous and disposed of.

Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code - Commercial wisdom of the Committee of Creditors - Appointment of Liquidator - Public announcement under the Liquidation Process Regulations - Ceasing of moratorium under Section 14 and commencement of moratorium under Section 33(5) - Notice of discharge to officers, employees and workmen under Section 33(7) - Liquidator's duty to proceed under Chapter III and to submit Preliminary Report under Regulation 13

Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code - Commercial wisdom of the Committee of Creditors - Validity of the Committee of Creditors' resolution to liquidate the corporate debtor and interference by the Tribunal. - HELD THAT: - The Tribunal found that the Corporate Insolvency Resolution Process had failed due to non-receipt of any resolution plan or expression of interest within the CIRP period and that the Committee of Creditors, in its commercial wisdom, resolved to liquidate the corporate debtor. The Tribunal recorded that such a commercial decision of the CoC did not warrant interference and was appropriate on the record and submissions before it. [Paras 11]

CoC's resolution to liquidate Ajit Automotive Service Private Limited is upheld and not interfered with.

Appointment of Liquidator - Public announcement under the Liquidation Process Regulations - Communication to Registrar of Companies and Insolvency and Bankruptcy Board of India - Appointment of the Resolution Professional as Liquidator and directions relating to formalities consequent to liquidation. - HELD THAT: - The Tribunal appointed Mr. Rohit Sehgal, the incumbent Resolution Professional who consented to act, as Liquidator in terms of the Code. The Tribunal directed the Liquidator to issue the statutory public announcement in accordance with the Liquidation Process Regulations and directed the Registry to communicate the order to the Registrar of Companies and the Insolvency and Bankruptcy Board of India, thereby giving effect to procedural requirements attendant to commencement of liquidation. [Paras 12]

Mr. Rohit Sehgal is appointed as Liquidator and is directed to comply with statutory public announcement and communication formalities.

Ceasing of moratorium under Section 14 and commencement of moratorium under Section 33(5) - Notice of discharge to officers, employees and workmen under Section 33(7) - Liquidator's duty to proceed under Chapter III and to submit Preliminary Report under Regulation 13 - Consequences of liquidation including moratorium transition, discharge notice to employees, and duties of the Liquidator in conducting the liquidation process. - HELD THAT: - The Tribunal ordered that the earlier moratorium under Section 14 would cease and a fresh moratorium under Section 33(5) would commence. The order operates as the statutory notice of discharge to the corporate debtor's officers, employees and workmen under Section 33(7). The Liquidator was directed to carry out the liquidation in accordance with Chapter III of the Code and relevant regulations and to submit a Preliminary Report within seventy five days from the liquidation commencement date as prescribed by the Liquidation Process Regulations. [Paras 12]

Transition to the liquidation-stage moratorium is ordered, employees are deemed discharged by the order, and the Liquidator must proceed with the statutory liquidation process and file the Preliminary Report within the prescribed time.

Final Conclusion: The Tribunal allowed the application and ordered that Ajit Automotive Service Private Limited be liquidated; Mr. Rohit Sehgal is appointed as Liquidator and directed to take statutory steps (public announcement, communications to authorities, intimations to fiscal/regulatory bodies), to effect the moratorium transition and employee discharge, and to conduct the liquidation in accordance with the Code and regulations including filing the Preliminary Report within seventy five days.

Moratorium - lien/attachment on bank accounts - powers of the Resolution Professional to take control of assets - restraint on authorities and bankers from giving effect to attachment without leave of the Adjudicating Authority - use of corporate debtor's funds for the conduct of CIRP and payment of employees/wages - priority disputes under section 60(5)(c) of the Insolvency and Bankruptcy Code

Lien/attachment on bank accounts - moratorium - restraint on authorities and bankers from giving effect to attachment without leave of the Adjudicating Authority - priority disputes under section 60(5)(c) of the Insolvency and Bankruptcy Code - Release or removal of existing liens/attachments on the corporate debtor's bank accounts and restraint on further attachments without leave of the Adjudicating Authority. - HELD THAT: - The Tribunal found that liens or attachments on the corporate debtor's bank accounts had been imposed pursuant to notices from statutory authorities, and that freezing those accounts hindered the CIRP and the ability to keep the corporate debtor as a going concern. In order to enable the Resolution Professional to take control of assets and perform CIRP duties, the Adjudicating Authority directed removal of all existing liens/attachments on the accounts identified and extended that direction to any other accounts subsequently discovered in the present company petition. The Tribunal further restrained authorities from directing any further attachment or lien on the corporate debtor's accounts and restrained bankers from giving effect to any attachment order without the leave of the Adjudicating Authority for the duration of the CIRP. The Tribunal grounded this interference in the need to protect the CIRP process and by reference to the NCLAT view that attachments creating hindrance raise questions of priority under section 60(5)(c) of the IBC which are to be decided by the insolvency forum. The directions were made to avoid multiplicity of proceedings and to ensure the assets, including bank balances, remain available to the Resolution Professional during CIRP. [Paras 25, 26, 27, 28, 29]

All existing liens/attachments on the corporate debtor's bank accounts are released; authorities are restrained from further attachments and bankers are restrained from giving effect to attachment orders without leave of the Adjudicating Authority, extended to accounts discovered later.

Powers of the Resolution Professional to take control of assets - use of corporate debtor's funds for the conduct of CIRP and payment of employees/wages - Availability and authorised utilisation of amounts standing to credit in the corporate debtor's bank accounts by the Resolution Professional for CIRP purposes, including payment of workers and employees. - HELD THAT: - The Tribunal directed that the balances at credit in the corporate debtor's bank accounts shall be available in full to the Resolution Professional to carry out his duties during the CIRP. The RP was specifically directed to utilise the amounts lying in the bank accounts towards the conduct of the CIRP and to make payment of outstanding dues to workers and employees so as to maintain the corporate debtor as a going concern; such wage payments are to conform to applicable Central and State Government directions applicable during lockdown periods and remain consistent with contractual terms for other periods. The Tribunal made this direction to ensure continuity of operations and to address immediate working capital and wage obligations which would otherwise be frustrated by bank attachments. [Paras 30]

Amounts standing to credit in the corporate debtor's bank accounts are to be made available to and may be utilised by the Resolution Professional for CIRP purposes, including payment of employees' wages in accordance with applicable directions and contracts.

Final Conclusion: The applications are disposed of by directing release of existing bank-account liens/attachments and restraining further attachments without leave of the Adjudicating Authority; all bank balances are to be made available to the Resolution Professional for carrying out the CIRP, including payment of workers and employees in accordance with applicable directions.

Consideration of claim where claim documents were already on record at initiation of CIRP - admission of claim post-approval of resolution plan - duty of resolution professional to consider known claims despite procedural time bar - treatment of homebuyer/real estate allottee as financial creditor - obligation to disclose creditors in the information memorandum

Consideration of claim where claim documents were already on record at initiation of CIRP - duty of resolution professional to consider known claims despite procedural time bar - treatment of homebuyer/real estate allottee as financial creditor - Whether the Resolution Professional is required to consider and admit the financial creditor's claim notwithstanding the expiration of the statutory period for submission because the claimant's documents were already filed with the initiating Section 7 application and the RP and Resolution Applicant were aware of the claim. - HELD THAT: - The Tribunal found that the applicant had filed the Section 7 application which led to initiation of CIRP and had furnished the same documents (builder-buyer agreements, receipts, bank statements and statements from the corporate debtor) at that stage as were later submitted with the claim form (paragraphs 10-12). The applicant's name and claim were reflected in the list of allottees/creditors prepared and uploaded by the RP, a fact not disputed by the RP (paragraphs 11, 15). Given that the RP had actual knowledge of the claim and the requisite documents were already available on record, the Bench distinguished the Supreme Court decisions cited by the parties as factually different (paragraphs 13-18). The Tribunal observed that where the claim and supporting documents were on the record from the outset and known to the RP, the equities and the statutory scheme require the RP to consider such a claim despite delay in formal claim submission, particularly in the context of a homebuyer/allottee who is a financial creditor (paragraphs 16-19). Applying these conclusions to the peculiar facts, the Tribunal directed the RP to consider the applicant's claim and communicate it to the Resolution Applicant (paragraphs 19-20). [Paras 16, 17, 18, 19, 20]

The RP is directed to consider the applicant's claim and thereafter inform the Resolution Applicant of the claim.

Final Conclusion: The application is disposed of with a direction to the Resolution Professional to consider the financial creditor's claim (documents having been on record and the creditor known to the RP) and to inform the Resolution Applicant accordingly.

Moratorium under section 14 of the Code - role of the Resolution Professional in management and custody of assets - bank's obligation to act on instructions of the Resolution Professional - attachment order in contravention of moratorium - refund of amounts debited during moratorium

Moratorium under section 14 of the Code - attachment order in contravention of moratorium - Order of attachment dated 21.11.2020 issued by Respondent No.2 attaching the Corporate Debtor's bank account after commencement of CIRP is in contravention of the moratorium and interferes with the RP's statutory role. - HELD THAT: - The Tribunal found that CIRP was admitted on 25.09.2019 and the moratorium under section 14 of the Code operated instantaneously. The attachment/recovery notice dated 21.11.2020 was issued subsequent to admission of CIRP and directed freeze and payment from the Corporate Debtor's account in exercise of powers under the Uttar Pradesh Revenue Code. Such action, being a post-admission attachment and directed payment, is inconsistent with the moratorium and with the statutory scheme which vests control of the corporate debtor's assets and management functions in the Resolution Professional. Having regard to settled judicial authority and the facts before it, the Tribunal held the attachment order to be impermissible. [Paras 13, 15]

The order of attachment dated 21.11.2020 passed by Respondent No.2 is set aside.

Bank's obligation to act on instructions of the Resolution Professional - defreezing bank account - Respondent No.1 (the bank) was directed to defreeze the Corporate Debtor's bank account and permit banking operations under the control of the Resolution Professional. - HELD THAT: - The Tribunal noted that the Resolution Professional had taken over management after admission of CIRP and that financial institutions holding the corporate debtor's accounts are required to act pursuant to the RP's instructions so as to enable exercise of functions under the Code. Respondent No.1 indicated no objection to defreezing. In view of the finding that the attachment was contrary to the moratorium and that the RP must be able to take control of assets, the Tribunal directed immediate defreezing of the specified account. [Paras 15, 16, 18]

HDFC Bank is directed to defreeze bank account No. 00600310002807 of the Corporate Debtor immediately.

Refund of amounts debited during moratorium - claims to be filed with Resolution Professional - Amount debited from the Corporate Debtor's account pursuant to the attachment during the moratorium was ordered to be refunded and Respondent No.2 was directed to file its claim with the Resolution Professional. - HELD THAT: - The Tribunal recorded that Rs. 16,28,000 was debited from the Corporate Debtor's account in execution of the attachment dated 21.11.2020. Since the attachment was held to be void insofar as it conflicted with the moratorium, the debited amount could not stand and Respondent No.2, which failed to appear before the Tribunal, was directed to refund the sum forthwith. The Tribunal further directed Respondent No.2 to file its claim with the Resolution Professional in accordance with the Code. [Paras 13, 17, 18]

Respondent No.2 is directed to refund the amount debited and to file its claim with the Resolution Professional.

Final Conclusion: IA No. 309/MB/2021 in CP(IB)-3025/MB/2019 is allowed: the attachment order dated 21.11.2020 is set aside; the bank account is to be defrozen immediately; the amount debited is to be refunded by Respondent No.2, which must file its claim with the Resolution Professional.

Remand for fresh consideration - opportunity of hearing - judicial review of administrative attachment - attachment notice under Section 87(b) of the Finance Act, 1994

Remand for fresh consideration - opportunity of hearing - attachment notice under Section 87(b) of the Finance Act, 1994 - challenge to administrative order - Disposition of writ petition challenging the attachment notice by directing statutory authority to consider objections and permitting challenge to any subsequent order. - HELD THAT: - At the admission stage the Court had directed the petitioner to file written objections before the first respondent within a prescribed time and directed the respondent to consider those objections and pass appropriate orders on merits after hearing the petitioner. Pursuant to that interim direction the respondents have considered the objections and passed an order dated 18.08.2017. The High Court has not adjudicated the merits of the original attachment notice dated 23.02.2016; instead the petition is disposed of by leaving the petitioner free to seek redress, if any, against the subsequent order in the manner known to law. The disposal therefore effectuates a remand-like outcome in which the administrative authority's subsequent decision is the operative order open to challenge.

Writ petition disposed of after recording that objections were considered and an order has been passed; petitioner is at liberty to challenge the subsequent order in the appropriate forum.

Final Conclusion: The writ petition challenging the attachment notice is disposed of on the ground that the petitioner was given the opportunity to raise objections before the authority, which has since passed orders; the petitioner may pursue remedies against the subsequent order as available in law.

Refund of unutilised CENVAT credit - transition to GST and TRAN I - Section 11B of the Central Excise Act, 1944 - Section 142(5) of the CGST Act - Section 142(3) of the CGST Act - effect of rejection and lapse - restriction of refund amount versus rejection of refund

Refund of unutilised CENVAT credit - Section 11B of the Central Excise Act, 1944 - Section 142(5) of the CGST Act - Section 142(3) of the CGST Act - effect of rejection and lapse - restriction of refund amount versus rejection of refund - transition to GST and TRAN I - Appellant entitled to refund of the excess CENVAT credit debited prior to the appointed day and filed after the appointed day under Section 11B read with Section 142(5); invocation of Section 142(3) to reject the fresh claim was unsustainable where the earlier order had only restricted the refund and not rejected it. - HELD THAT: - The appellant mistakenly debited a larger amount of CENVAT credit for the quarter ending October 2016-December 2016 and, after introduction of GST, could not re credit the excess in TRAN I or transition it. The fresh claim was filed after the appointed day under Section 11B of the Central Excise Act and dealt with by operation of Section 142(5) of the CGST Act, which mandates disposal in accordance with existing law and payment in cash. The earlier Order in Original dated 26.12.2017 restricted the sanctioned refund and did not reject the claim; therefore the proviso to Section 142(3) (which provides that a refund amount so rejected shall lapse) was inapplicable. The Tribunal found that the adjudicating authority and Commissioner (Appeals) erred in invoking Section 142(3) to deny the fresh refund. Given that the excess debit was not disallowed on merits and the change of regime prevented re credit, the appellants' right to refund should not be extinguished by the operation of Section 142(3) where no prior rejection had occurred; accordingly the impugned denial was set aside and the appeal allowed with consequential relief. [Paras 6, 7]

Impugned order denying refund by invoking Section 142(3) set aside; appeal allowed and appellant entitled to refund of the excess CENVAT credit with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant was entitled to refund of the excess CENVAT credit debited prior to the appointed day and filed after the appointed day under Section 11B read with Section 142(5); the invocation of Section 142(3) to reject the fresh claim was incorrect where the earlier order had merely restricted (and not rejected) the refund, and the impugned order was set aside with consequential relief.

Revenue neutrality - reverse charge mechanism - availment of Cenvat credit / input service - invocation of extended period of limitation - refund under Section 142(6) of the CGST Act, 2017 - binding precedent of Jet Airways (India) Ltd. upheld by the Supreme Court

Revenue neutrality - reverse charge mechanism - availment of Cenvat credit / input service - binding precedent of Jet Airways (India) Ltd. upheld by the Supreme Court - Whether the demand of service tax payable under reverse charge could be sustained when the tax paid was eligible to be taken as Cenvat credit leading to a revenue neutral position. - HELD THAT: - The Tribunal found it undisputed that the appellant received back end services from a related overseas entity and had discharged service tax under the reverse charge mechanism. Applying the ratio of Jet Airways (India) Ltd. (as affirmed by the Supreme Court) and the CBEC clarification that service tax paid on reverse charge qualifies as input for Cenvat credit, the Tribunal held that a revenue neutral situation arises where tax paid under reverse charge is eligible for credit against the appellant's output service tax liability. The Assistant Commissioner's acceptance of revenue neutrality in dropping interest and penalty was extended to the tax demand itself; authorities below had erred in relying on cases with distinguishable facts. On that basis the Tribunal set aside the impugned order and allowed the appeal on the question of revenue neutrality. [Paras 6, 7]

The demand of service tax could not be sustained in view of revenue neutrality; the appeal is allowed on this ground.

Invocation of extended period of limitation - Whether the extended period of limitation could be invoked against the appellant. - HELD THAT: - The Tribunal recorded that the demand was raised by invoking the extended period. On the material before it, including the appellant's regular filing of returns, payment under reverse charge and cooperation with authorities, the Tribunal concluded that there was no concealment of material facts or intention to evade tax. Reliance was placed on the jurisprudence cited by the appellant and the factual matrix led to the conclusion that invocation of the extended period was not sustainable. [Paras 6]

Invocation of the extended period of limitation was not sustainable and could not be upheld.

Refund under Section 142(6) of the CGST Act, 2017 - Claim for refund of service tax remitted after 01.07.2017. - HELD THAT: - The Tribunal noted that the appellant sought refund of amounts paid post 01.07.2017 and that both the original authority and the Commissioner(Appeals) had not examined the refund claim on merits. The Tribunal declined to adjudicate the refund in the present appeal and indicated that the appellant must pursue a refund claim as provided by law; no substantive finding on the refund entitlement was recorded. [Paras 7]

Refund claim not decided by the Tribunal; appellant directed to file refund claim as per law.

Final Conclusion: The appeal is allowed insofar as the service tax demand (including reliance on extended limitation) is concerned by applying the doctrine of revenue neutrality and relevant precedents; the refund claim for amounts paid post 01.07.2017 was not adjudicated and must be pursued separately under the statutory refund procedure.

Liability of successor for predecessor's tax dues - liability of legal heirs for pre-death tax liabilities - continuation of tax assessment after death - construction of machinery provisions in taxing statutes - successor's liability on transfer or disposal of business

Liability of successor for predecessor's tax dues - liability of legal heirs for pre-death tax liabilities - continuation of tax assessment after death - Whether the son/successor is liable to pay service tax for the period October 2009 to February 2014 being the lifetime of the deceased proprietor. - HELD THAT: - The Tribunal applied the principle that taxing statutes and their machinery provisions cannot be stretched to continue assessment or fasten liability on persons who are not chargeable under the statute. Reliance was placed on the decision of the Apex Court in Shabina Abraham, which held that there is no provision to continue assessment proceedings against a deceased person so as to fasten liability on legal heirs for dues incurred during the lifetime of the deceased. The Tribunal noted that while a statutory provision exists making a successor liable where a business is transferred or otherwise disposed of, there is no corresponding provision that makes legal heirs liable by reason of the proprietor's death. The decision in Dhiren Gandhi was recognised as supporting the proposition that legal heirs cannot be brought within the statute by stretching its provisions. Applying these principles, the Tribunal held that the son cannot be held liable for service tax for the period up to 28.02.2014, the date of death of the proprietor. [Paras 6, 8, 9]

No demand for service tax for October 2009 to February 2014 can be fastened on the son of the deceased proprietor; issue answered in favour of the appellant.

Successor's liability on transfer or disposal of business - liability of successor for predecessor's tax dues - Determination of the appellant firm's service tax liability with effect from 01.03.2014. - HELD THAT: - The Tribunal modified the impugned order to the extent that the revenue is to determine the liability of the appellant firm from 01.03.2014 onwards in conformity with this Tribunal's earlier decision in Blue Star Communication. That determination is to be made by the adjudicating authority in light of the cited Tribunal decision and not by imposing pre-death liabilities on the successor. [Paras 10]

Matter remitted/modified so that liability w.e.f. 01.03.2014 is determined by the adjudicating authority in terms of the Tribunal's decision in Blue Star Communication.

Final Conclusion: The appeal is allowed to the extent that the son of the deceased proprietor is not liable for service tax for October 2009 to February 2014; the revenue is directed to determine the appellant firm's liability from 01.03.2014 in accordance with the Tribunal's decision in Blue Star Communication, and the appeal is disposed of accordingly.

Supply of Tangible Goods Service - transfer of possession and effective control - deemed sale - acceptance of departmental stand by subsequent orders - extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - interest under Section 75 of the Finance Act, 1994 - penalties under Section 77 and Section 78 of the Finance Act, 1994

Supply of Tangible Goods Service - transfer of possession and effective control - deemed sale - acceptance of departmental stand by subsequent orders - Lease rentals received for the installed SGS manifold system were not liable to service tax as Supply of Tangible Goods Service for the period in dispute. - HELD THAT: - The appellant contended that the transactions involved transfer of possession and effective control of the SGS system to customers and therefore amounted to sale (deemed sale) liable to VAT and not to service tax under the definition of Supply of Tangible Goods Service. The Tribunal noted that for subsequent periods the department, by order of the Commissioner (Appeals) and by a later order of the Joint Commissioner, accepted that effective possession and control were transferred to customers and either set aside or dropped similar demands, and these departmental orders were not appealed. On this factual and legal position the Tribunal held that the department cannot adopt a different stance for the earlier period in the same transactions. In view of the departmental acceptance that there was transfer of possession and effective control, the lease rentals do not fall within the taxable category of Supply of Tangible Goods Service and are not exigible to service tax for the period under challenge.

The demand of service tax on lease rentals as Supply of Tangible Goods Service is set aside and the appeals on this point are allowed.

Extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - Extended period of limitation under the proviso to Section 73(1) was not applied to sustain the tax demand once the transactions were held not to be taxable as service. - HELD THAT: - The Tribunal's determination that the lease rentals did not constitute a taxable service rendered irrelevant any invocation of the proviso to Section 73(1) to extend the period of limitation. Since there was no exigible service tax liability on the transactions as adjudicated, the question of applying the extended period did not survive.

Extended limitation was not relied upon to uphold the demand and no extended-period levy stands.

Interest under Section 75 of the Finance Act, 1994 - Interest under Section 75 was not maintainable where the underlying service tax demand was set aside. - HELD THAT: - Because the Tribunal held that the lease rentals were not exigible to service tax, any consequential claim for interest under Section 75, which is predicated on an existing tax liability, could not be sustained. The interest charge therefore fell with the principal demand.

Interest under Section 75 is not leviable in respect of the set-aside demand.

Penalties under Section 77 and Section 78 of the Finance Act, 1994 - Penalties under Sections 77 and 78 could not be imposed once the service tax demand was disallowed. - HELD THAT: - Penalties under Sections 77 and 78 are consequential to a validly imposed tax demand. The Tribunal's decision that the lease rentals did not attract service tax necessarily negated the basis for imposing penalties. Accordingly, the penalties confirmed by the original order could not stand.

Penalties under Sections 77 and 78 are set aside as they are predicated on the disallowed tax demand.

Final Conclusion: The appeals are allowed; the impugned order confirming service tax, interest and penalties on lease rentals for the SGS system is set aside because the department, by subsequent unappealed orders, accepted that effective possession and control passed to customers, rendering the transactions non-taxable as Supply of Tangible Goods Service, with consequential relief.

Mandatory pre-deposit under Section 35F of the Finance Act, 1994 - appropriation of cenvat credit against central excise liability - transitional credit of cesses under Section 140 of the CGST Act, 2017 - CBIC Circular No.87/06/2019-GST dated 02.01.2019 - remand for fresh adjudication after consideration of transitional provisions and principles of natural justice

Mandatory pre-deposit under Section 35F of the Finance Act, 1994 - appropriation of cenvat credit against central excise liability - Dismissal of the appeal by the Commissioner (Appeals) for non-compliance of the mandatory pre-deposit where the appellant had debited cenvat credit for the demanded duty and paid interest in cash. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) dismissed the appeal for non-compliance with Section 35F without considering that the appellant had already discharged the demanded duty by debiting its cenvat credit account and had paid interest in cash. Having heard the matter on merits, the Commissioner (Appeals) should not have rejected the appeal on the procedural ground of pre-deposit when the department had not taken objection at the personal hearing and when the appellant had, on the record, made payment by appropriating cenvat credit and paying interest. In these circumstances the dismissal for non-compliance of Section 35F was held unsustainable and the impugned order was set aside. [Paras 6]

Impugned order set aside and appeal allowed to the extent of remanding the matter to the Commissioner (Appeals) for adjudication on merits.

Transitional credit of cesses under Section 140 of the CGST Act, 2017 - CBIC Circular No.87/06/2019-GST dated 02.01.2019 - remand for fresh adjudication after consideration of transitional provisions and principles of natural justice - Whether education cess and secondary higher education cess qualify as transitional cenvat credit and the requirement to consider Section 140 of the CGST Act, 2017 and the CBIC circular in adjudicating the demand. - HELD THAT: - The Tribunal observed that Section 140(1) read with Explanation 1 to Section 140(10) of the CGST Act, 2017, and the CBIC Circular No.87/06/2019-GST dated 02.01.2019 indicate that credit of cesses is not allowable as transitional credit into GST. The Tribunal noted that if cesses are not admissible as transitional credit they retain their character under the earlier law and their utilization/appropriation needs correct legal examination under Rule 3 of the Cenvat Credit Rules, 2004. However, because the Commissioner (Appeals) had not reached any finding on the merits and both authorities failed to consider Section 140 and the CBIC circular, the Tribunal declined to decide the substantive merits itself and remanded the issue to the Commissioner (Appeals) for fresh consideration of these provisions and the circular, and for disposal after following principles of natural justice. [Paras 6]

Issue remitted to the Commissioner (Appeals) for fresh adjudication on merits after considering Section 140 of the CGST Act, 2017 and CBIC Circular dated 02.01.2019, and after complying with principles of natural justice.

Final Conclusion: The impugned order dismissing the appeal for non-compliance of the mandatory pre-deposit is set aside; the matter is remanded to the Commissioner (Appeals) for fresh adjudication on merits, including application of Section 140 of the CGST Act, 2017 and CBIC Circular No.87/06/2019-GST (02.01.2019), and after affording the parties an opportunity in accordance with natural justice.

Refund of unutilised CENVAT credit post-GST transition - compliance with paragraph 2(h) of Notification No.27/2012-CE - debit in GSTR-3B as substitute for ER-2 reversal - effect of carrying forward credit under TRAN-1 and proviso to Section 142(3) of the CGST Act, 2017 - inapplicability of exemption-notification jurisprudence to refund claims under Rule 5 of CCR

Refund of unutilised CENVAT credit post-GST transition - compliance with paragraph 2(h) of Notification No.27/2012-CE - debit in GSTR-3B as substitute for ER-2 reversal - Whether debiting the refund amount in GSTR-3B filed after introduction of GST constitutes sufficient compliance with paragraph 2(h) of Notification No.27/2012-CE to claim refund of unutilised CENVAT credit for the periods in dispute. - HELD THAT: - The Tribunal found that after the commencement of GST there was no facility to file ER-2 (or ST-3) returns or to debit the refund value in the erstwhile ACES system, making literal compliance with paragraph 2(h) effectively impossible. The appellant had transferred the closing credit as on 30.06.2017 via TRAN-1 and subsequently reversed/debited the refund amount in GSTR-3B returned after GST was introduced. Relying on earlier Tribunal decisions on identical facts, the Court held that voluntary reversal/debit of the refund amount in GSTR-3B post-GST satisfies the objective of paragraph 2(h) in the changed filing regime and constitutes sufficient compliance for permitting refund under Rule 5 of CCR read with Notification No.27/2012. [Paras 6]

Debiting the refund amount in GSTR-3B after the introduction of GST is sufficient compliance with paragraph 2(h) of Notification No.27/2012, and entitlement to refund cannot be denied on that ground.

Effect of carrying forward credit under TRAN-1 and proviso to Section 142(3) of the CGST Act, 2017 - Whether the carry forward of CENVAT credit into GST via TRAN-1 and the proviso to Section 142(3) of the CGST Act, 2017 precludes grant of refund of the same credit claimed under pre-GST provisions. - HELD THAT: - The Department relied on the proviso to Section 142(3) to contend that no refund is permissible where the balance as on the appointed day has been carried forward under the CGST Act. The Tribunal noted that on the facts the appellant had reversed the refund amount in GSTR-3B and that the changed procedural regime and earlier Tribunal precedents permitted refund where reversal was effected via GSTR-3B. The Court held that the mere fact of having carried forward closing balance via TRAN-1 did not automatically disentitle the appellant to refund where the functional reversal required by the pre-GST notification was effectively accomplished in the post-GST returns. [Paras 6]

Carry forward under TRAN-1 and the proviso to Section 142(3) do not automatically bar the refund where the appellant has effectively reversed the credit in GSTR-3B in the changed GST regime.

Inapplicability of exemption-notification jurisprudence to refund claims under Rule 5 of CCR - Whether decisions construing exemption notifications strictly are applicable to denial of refund claims under Rule 5 of CCR read with Notification No.27/2012. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) relied on authorities concerning strict construction of exemption notifications. The Court found those decisions inapposite because the present controversy concerns a refund claim under Rule 5 of the CCR and Notification No.27/2012, not a claim of exemption. Consequently, the strict-exemption jurisprudence cited by the Commissioner (Appeals) was not relevant to the determination of compliance with paragraph 2(h) or entitlement to refund in the post-GST filing context. [Paras 6]

Authorities on strict construction of exemption notifications are not applicable to refund claims under Rule 5 of CCR; reliance on such authorities to deny the refund is misplaced.

Final Conclusion: Following precedents addressing identical post-GST filing difficulties, the Tribunal set aside the impugned orders and allowed the three appeals, holding that reversal/debit of the refund amount in GSTR-3B after GST satisfies the requirements of paragraph 2(h) of Notification No.27/2012 and that the refund claims must be allowed.

Entitlement to interest on delayed refund under Section 11BB - Deeming fiction in Explanation to proviso to Section 11BB and its non-effect on commencement of interest - Payment of interest commences three months from receipt of refund application - Separate Section 11BB claim does not amount to reopening or review of earlier adjudication - Binding effect of Board Circular on timely disposal and payment of interest

Entitlement to interest on delayed refund under Section 11BB - Payment of interest commences three months from receipt of refund application - Binding effect of Board Circular on timely disposal and payment of interest - Appellants are entitled to interest for delayed refund under Section 11BB and such interest is payable from expiry of three months from receipt of the refund application. - HELD THAT: - The Tribunal found that the refund claim had been finally allowed by the Tribunal and that subsequent dismissal of the Revenue's appeal rendered that decision final. The claim for interest submitted separately under Section 11BB was held to be a distinct statutory claim for delayed refund and not a re-opening of the adjudicated refund. The reasoning of the Apex Court in Ranbaxy Laboratories Ltd. was applied: interest under Section 11BB becomes payable on expiry of three months from the date of receipt of the application for refund and the Explanation to the proviso does not postpone the date from which interest runs. The Board's circular stressing automatic attraction of Section 11BB where refund is sanctioned beyond three months and requiring officers to follow the legal provision for payment of interest was held to support grant of interest. The Tribunal's earlier and this Tribunal's precedents (including Microsoft Global Service Centre India Pvt. Ltd.) were followed to conclude entitlement to interest as a matter of law. [Paras 5]

Interest under Section 11BB is payable to the appellants for delayed refund, computed from three months after receipt of the refund application.

Separate Section 11BB claim does not amount to reopening or review of earlier adjudication - Remand for computation and grant of interest - Filing a separate application under Section 11BB for interest does not constitute reopening or review of a completed adjudication; the matter is remanded for computation and grant of interest. - HELD THAT: - The authorities below treated the Section 11BB claim as a prohibited reopening of the adjudicated refund matter and refused interest on that ground. The Tribunal held that a claim for interest is a distinct statutory right and its consideration does not amount to review or reopening of the earlier orders which had attained finality. Consequently, the Tribunal set aside the impugned orders and remanded the matter to the original authority to compute and grant the interest in accordance with law within a specified timeframe. [Paras 5, 6]

The impugned orders are set aside and the matter is remanded to the original authority to compute and grant interest under Section 11BB; the remand is for computation and implementation, not fresh adjudication on the merits of the refund claim.

Final Conclusion: All three appeals are allowed; the impugned orders are set aside and the matters are remanded to the original authority with a direction to compute and grant interest under Section 11BB in accordance with law within three months from receipt of the certified copy of this order.

Exhaustion of statutory appellate remedies - Scope of judicial review under Article 226 - Mixed questions of fact and law - Institutional respect for statutory appellate forums - Condonation of delay by appellate forum - Input Tax Credit for zero rated transactions

Exhaustion of statutory appellate remedies - Mixed questions of fact and law - Scope of judicial review under Article 226 - Institutional respect for statutory appellate forums - Condonation of delay by appellate forum - Writ petitions filed without exhausting the statutory appellate remedies under the PVAT Act are not maintainable and are to be dismissed with liberty to pursue the prescribed appeals. - HELD THAT: - The High Court held that where the controversy raises mixed questions of fact and law, factual findings are essential and must be adjudicated by the statutory appellate hierarchy created by the PVAT Act; Article 226 is confined to judicial review of the decision-making process and not to re adjudication or trial of disputed facts on affidavits. The Court emphasised institutional respect for the multi-tier appeal scheme and observed that permitting routine bypass of appellate remedies (often to evade pre-deposit conditions) is impermissible. In the circumstances, petitioners challenging original assessments or first appellate orders must first avail the appeals under Sections 47 and 49 and then the remedy under Section 51; the High Court will not ordinarily entertain writs in lieu of those remedies. The Court, however, directed that if the petitioners file the appropriate appeals within the prescribed short period, the appellate authorities shall condone delay and entertain the appeals, decide the merits after affording opportunity to parties, and dispose of them expeditiously. [Paras 4, 6, 7]

Writ petitions dismissed; petitioners permitted to file statutory appeals within the specified time and appellate forums directed to condone delay and decide the appeals on merits.

Input Tax Credit for zero rated transactions - Claim for Input Tax Credit in respect of zero rated transactions was not adjudicated on merits by the High Court and must be raised before the statutory appellate authorities. - HELD THAT: - Although the petitioners contended entitlement to input tax credit for zero rated transactions under the PVAT Act (and provisions referenced under the Central Sales Tax Act), the Court declined to decide the substantive entitlement because such questions involve examination of documents and evidences and thus constitute mixed questions of fact and law. The Court held that merits of the claim must be adjudicated by the appellate authorities in the statutory hierarchy rather than in writ proceedings under Article 226.

Substantive claim for input tax credit left open for determination by the appellate authorities in the prescribed appeals.

Final Conclusion: The writ petitions are dismissed for non exhaustion of the statutory appellate remedies; petitioners are permitted to file the prescribed appeals within the time directed and the appellate authorities are directed to condone delay, entertain and decide the appeals on merits after affording opportunity to the parties.

Limitation for assessment proceedings - period of limitation applicable to proceedings consequent to order on appeal/revision/remand - penalty under Section 20 as a distinct liability from assessment - revisional jurisdiction versus appellate jurisdiction - doctrine of merger where subject matter differs

Period of limitation applicable to proceedings consequent to order on appeal/revision/remand - limitation for assessment proceedings - Whether the order imposing penalty under Section 20(1)(a) passed pursuant to a remand is barred by the period of limitation prescribed by Section 24 of the Bihar Finance Act, 1981. - HELD THAT: - The Court examined Section 24, which prescribes a general four-year limitation for assessment proceedings but contains a proviso requiring reassessment proceedings in pursuance of an order on appeal, revision, reference or review to be initiated and completed within two years from the date of communication of such order to the assessing authority. The Court observed that Section 20 does not itself specify a limitation period, but, on the facts, the reassessment/penalty proceedings impugned here were taken up following a revisional/tribunal order remitting the matter for fresh consideration. The petitioner had itself challenged the remand order before the Tribunal and did not obtain any interdiction or expeditious disposal; thus the period consumed in pursuing revision could not be invoked to impugn the limitation defence. Applying principles distinguishing appellate and revisional jurisdiction and recognising that the proviso to Section 24 expressly covers orders in revision, the Court held that the two-year period from communication of the revisional order governs completion of reassessment arising from that order. The petitioner's reliance on the Voltas decision was held distinguishable on facts because there the remanding authority took no steps to complete proceedings and no higher authority was separately seised; those circumstances are absent here. The Court therefore concluded that the reassessment/penalty order was not vitiated by limitation in the present facts. [Paras 23, 24, 25, 39, 43]

The penalty order under Section 20(1)(a) is not illegal or invalid on the ground of limitation under Section 24 in the facts of this case.

Final Conclusion: Writ petition dismissed; the order imposing penalty under Section 20(1)(a) is not held to be time barred under Section 24 of the Bihar Finance Act, 1981 in the circumstances of this case.

Maintainability of writ petition under Article 226 challenging criminal revision - admissibility of photocopy as secondary evidence under Section 65 of the Indian Evidence Act - requirement of foundation for secondary evidence (non-production accounted for / due diligence) - exercise of constitutional jurisdiction where complete code of criminal procedure exists

Maintainability of writ petition under Article 226 challenging criminal revision - exercise of constitutional jurisdiction where complete code of criminal procedure exists - Writ petition (criminal) under Article 226 assailing the order passed by the Revisional Court is maintainable. - HELD THAT: - The Court considered the scope of constitutional writ jurisdiction vis-a -vis remedies under the Cr.P.C., noting that although the Cr.P.C. is a complete code and extraordinary remedies under Section 482 are to be sparingly used, Articles 226 and 227 remain available in exceptional cases. Applying the ratio of the cited Supreme Court authority (Girish Kumar Suneja), the Court found that the petitioner was entitled to invoke writ jurisdiction to assail the revisional order and that the present petition was maintainable. The Court therefore rejected the respondent's objection on grounds of alternative remedy under the Cr.P.C. [Paras 8]

Writ petition (criminal) is maintainable.

Admissibility of photocopy as secondary evidence under Section 65 of the Indian Evidence Act - requirement of foundation for secondary evidence (non-production accounted for / due diligence) - Photocopy of the cheque cannot be admitted as secondary evidence in the absence of necessary foundation and compliance with Section 65. - HELD THAT: - The Court examined Sections 63 and 65 of the Evidence Act and authoritative precedents relied upon in the judgment. The Court identified the categories of secondary evidence recognised by law and emphasised that where secondary evidence is sought to be admitted the party must account for non-production of the original and lay a proper foundation showing the original is lost, destroyed, in possession of the opposite party, or falls within other contingencies in Section 65. The petitioner did not aver that the photocopy was produced by a mechanical process ensuring accuracy, did not compare it with the original, and failed to explain the circumstances in which the photocopy was prepared or who possessed the original at that time. In those circumstances the Court held that the requisite foundation for admitting the photocopy as secondary evidence was not established and that the trial Court and Revisional Court did not err in rejecting the application to take the photocopy on record. [Paras 11, 14, 15, 16]

Application to admit photocopy as secondary evidence was rightly rejected; photocopy not admissible on the record before the Court.

Final Conclusion: The writ petition is dismissed on merits: the petition is maintainable but the photocopy of the cheque was not admissible as secondary evidence for want of requisite foundation, and there is no warrant for interference with the orders of the trial and revisional courts.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Material alteration under Section 87 of the Negotiable Instruments Act - Dishonour of cheque for funds insufficient - Service of legal notice by Registered Post Acknowledgement Due (RPAD) - Sentencing proportionality

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Dishonour of cheque for funds insufficient - Service of legal notice by Registered Post Acknowledgement Due (RPAD) - Conviction under Section 138 of the Negotiable Instruments Act was sustainable. - HELD THAT: - The courts found that the accused was the drawer of the cheque and that the cheque was presented and returned unpaid with the banker's endorsement 'funds insufficient'. The complainant proved service of the statutory notice by RPAD and no reply or payment was made. The statutory presumption under Section 139 arose in favour of the complainant and was sought to be rebutted by the accused, but the accused failed to prove non-passing of consideration or that the cheque was issued merely as security. Admissions in the accused's evidence and the denial of suggested defences by the complainant defeated the attempts to rebut the presumption. The accused also did not lead evidence (for example, from the banker) to substantiate the pleaded defence of material alteration or to show lack of consent for filling the date. The Trial Court and the Sessions Judge applied these findings and convicted the accused which the High Court found to be neither perverse nor illegal. [Paras 12, 15, 19, 22, 23]

The conviction under Section 138 of the Negotiable Instruments Act is confirmed.

Material alteration under Section 87 of the Negotiable Instruments Act - Dishonour of cheque for funds insufficient - Defence of material alteration was not established and did not vitiate the cheque's enforceability. - HELD THAT: - The accused contended that the pre-printed year on the cheque had been altered. The Court noted that the accused did not raise a specific plea of material alteration at the earliest opportunity nor adduce supporting evidence such as banker testimony. The cheque return memo recorded only 'funds insufficient' and did not record 'alteration require drawer's authentication', indicating the banker did not treat the instrument as materially altered. Precedents and reasoning were applied to hold that filling or completing the year/dates on a cheque given with an implied consent does not necessarily amount to material alteration rendering it void. In the absence of proof that the alteration was made without drawer's consent and that it changed parties' legal positions, the defence failed. [Paras 17, 18, 19, 21, 22]

The plea of material alteration is rejected and does not invalidate the cheque.

Sentencing proportionality - The sentence required modification on the ground of disproportionality; fine reduced while conviction and default imprisonment were left intact. - HELD THAT: - The Court recognised that sentence must be proportionate to proven guilt. Considering the parties' respective backgrounds and that the agreement did not quantify liquidated damages, the additional fine imposed by the Trial Court was held to be excessive. For that limited reason the Court allowed the revision in part and reduced the fine and the compensation component payable to the complainant, while leaving the conviction and the default sentence of imprisonment unaltered. The modification was therefore confined to reducing the monetary component of the sentence to bring it into proportion with the circumstances of the case. [Paras 23, 24, 25]

Sentence modified by reducing the fine/compensation; default imprisonment remains unaltered.

Final Conclusion: The High Court confirmed the conviction under Section 138 of the Negotiable Instruments Act, rejected the material-alteration defence, but in exercise of its sentencing review reduced the fine/compensation to make the sentence proportionate; the default term of imprisonment was left intact.

Compounding of offence - suspension and cancellation of excise licence - continuation of proceedings after compounding - interpretation of Section 44 of the Puducherry Excise Act, 1970 - non-compoundability of violations of orders under the Disaster Management Act, 2005 - requirement of fresh show cause notice and disclosure of materials

Compounding of offence - continuation of proceedings after compounding - requirement of fresh show cause notice and disclosure of materials - suspension and cancellation of excise licence - Validity of continuing suspension/cancellation proceedings after the licence-holder compounded part of the alleged violations and adequacy of the impugned orders. - HELD THAT: - The court found that the compounding of the offence in respect of the alleged illegal sale during the curfew period conclusively closed proceedings insofar as those specific allegations were concerned and therefore continuation of the original suspension proceedings (notice dated 31.05.2020 and onward) in relation to those allegations was misconceived. The original and appellate orders were held to be bereft of requisite factual particulars and independent application of material: the appellate authority's observations were largely theoretical and did not demonstrate reliance on or disclosure of the materials said to show discrepancies. The court set aside both the original and appellate orders and granted liberty to the respondents to issue a fresh show cause notice specifying the violations and furnishing the materials relied upon; after receipt of the petitioner's response and hearing, the officer is directed to pass a fresh order within eight weeks, and renewal application to be considered thereafter. [Paras 4, 8, 9]

Impugned suspension/cancellation orders set aside; proceedings insofar as they proceeded after compounding are quashed and remitted for fresh show cause and decision on the basis of disclosed materials within eight weeks.

Interpretation of Section 44 of the Puducherry Excise Act, 1970 - non-compoundability of violations of orders under the Disaster Management Act, 2005 - compounding of offence - Whether an offence consisting of violation of orders issued under the Disaster Management Act, 2005 can be validly compounded under Section 44 of the Puducherry Excise Act, 1970. - HELD THAT: - The court held that although Section 44 of the Excise Act permits compounding of certain offences under that Act, the compounding of an offence that amounts to violation of orders issued under the Disaster Management Act is improper because the DM Act contains no provision for compounding and is enacted to secure measures in public interest during a disaster. The control exercised under the DM Act and restrictions imposed thereunder are public-interest measures not amenable to compounding; permitting compounding in respect of violations of DM Act orders would be contrary to the object and intendment of that enactment. Accordingly, compounding claimed in respect of the curfew/DM Act violation was held to be impermissible. [Paras 13, 14, 15]

Violation of orders under the Disaster Management Act, 2005 cannot be validly compounded under Section 44 of the Puducherry Excise Act; compounding in respect of such violations is improper.

Final Conclusion: The writ petition is allowed: the original and appellate orders of suspension/cancellation are set aside; respondents may issue a fresh show cause notice with disclosure of materials and decide the matter within eight weeks; compounding cannot be invoked for violations of orders under the Disaster Management Act, 2005.