TaxTMI Updates e-Newsletter
Jun 30,2020

Margin scheme for second-hand goods - applicability of Rule 32(5) of the CGST Rules, 2017 - definition of "second-hand" or "used" goods in common parlance - classification under tariff headings not determinative of valuation method - necessity of no input tax credit on purchase for Rule 32(5) to apply

Applicability of Rule 32(5) of the CGST Rules, 2017 - margin scheme for second-hand goods - Applicability of Rule 32(5) to paintings purchased from individual collectors and connoisseurs - HELD THAT: - The AAAR construing Rule 32(5) concluded that the terms "second-hand" and "used" are to be given their ordinary meaning in common parlance. The Appellant, an auctioneer operating in the secondary market, purchased paintings from individual collectors; the paintings were not newly entering the market and the Appellant did not perform any processing that changes their nature, nor did it claim input tax credit on such purchases. On these facts the conditions of Rule 32(5) were satisfied. The Authority rejected AAR's reasoning that high value alone excludes an item from being "used", observing that value appreciation over time does not preclude an item from being second-hand. Classification under a tariff heading (e.g., 9701) is independent of the applicability of the margin-scheme valuation. Consequently, paintings bought from individual collectors qualify as second-hand goods for the purpose of Rule 32(5) and may be valued under the margin scheme where the other conditions of the Rule are satisfied. [Paras 50, 51, 52, 53]

Paintings purchased from individual collectors are second hand goods and Rule 32(5) applies so value may be the difference between sale and purchase price (subject to no ITC and other conditions).

Applicability of Rule 32(5) of the CGST Rules, 2017 - margin scheme for second-hand goods - classification under tariff headings not determinative of valuation method - Applicability of Rule 32(5) to antique jewellery and antique watches acquired from individual collectors/users - HELD THAT: - The AAAR examined AAR's distinction treating antiques (including jewellery and watches) as a special class because of age or value but found no textual basis in Rule 32(5) excluding antiques from the margin scheme. Where such items are acquired from individual collectors or users, are sold as such without processes changing their nature, and no input tax credit was availed on purchase, they fall within the ordinary meaning of "second hand/used goods." The Authority emphasised that the presence of a tariff entry for "antiques" does not, by itself, preclude application of the valuation method under Rule 32(5). On the facts before it, the AAAR held that the Appellant meets the conditions of Rule 32(5) for the relevant items and is therefore entitled to value them under the margin scheme. [Paras 51, 52, 53]

Antique jewellery and antique watches acquired from individual collectors/users, sold as such without ITC on purchase, qualify as second hand goods and Rule 32(5) applies permitting valuation on margin.

Applicability of Rule 32(5) of the CGST Rules, 2017 - necessity of specification for classification and valuation - Applicability of Rule 32(5) to 'collectibles and memorabilia' and 'collectible books' (items 7 & 8) - HELD THAT: - The AAAR agreed with AAR that the appellant did not furnish sufficiently specific descriptions of the goods falling under 'collectibles and memorabilia' and 'collectible books' to enable a ruling. Because the particulars were general and the Authority could not ascertain whether the conditions of Rule 32(5) (including that goods are second hand/used and that no ITC was availed) were met, no definitive ruling on valuation under Rule 32(5) could be given for these categories. The matter requires specific product details to determine classification and applicability of the margin scheme. [Paras 53, 54]

No ruling on items 7 and 8; applicability of Rule 32(5) withheld for lack of specific description and must be decided on facts when goods are specified.

Final Conclusion: The Appellant is entitled to apply Rule 32(5) (margin scheme) to the categories determined to be second hand/used - in particular paintings and the antique jewellery/watches acquired from individual collectors/users where no ITC was availed and no processing changed the nature of the goods. The Authority declined to rule on 'collectibles and memorabilia' and 'collectible books' for want of specific product details.

Anticipatory bail - Personal bond with sureties - Conditions of bail - availability for interrogation; non-interference with witnesses; restriction on leaving country and deposit of passport - Release on bail pending submission of police report under section 173(2) Cr.P.C. - Power to move for cancellation of bail on breach of conditions - Direction for expeditious conclusion of investigation - No expression on merits

Anticipatory bail - Personal bond with sureties - Conditions of bail - availability for interrogation; non-interference with witnesses; restriction on leaving country and deposit of passport - Release on bail pending submission of police report under section 173(2) Cr.P.C. - Power to move for cancellation of bail on breach of conditions - Direction for expeditious conclusion of investigation - Applicant entitled to anticipatory bail in Case Crime No. 350 of 2020 subject to conditions and directions. - HELD THAT: - Considering the gravity of the accusations and the materials on record, the Court found that absence of criminal antecedents and lack of any realistic likelihood of the applicant fleeing from justice entitled him to protection of anticipatory bail during the pendency of investigation. The Court, without expressing any opinion on the merits, directed that upon arrest the applicant shall be released on anticipatory bail on furnishing a personal bond with two sureties to the satisfaction of the Station House Officer. The bail is subject to specified conditions: making himself available for interrogation as required; not directly or indirectly inducing, threatening or promising any person acquainted with the facts so as to dissuade disclosure to the Court or police; and not leaving India without prior permission of the Court, with deposit of passport if held. The Investigating Officer retains the right to move for cancellation of anticipatory bail in case of breach of conditions. The Court further directed the Investigating Officer to conclude the investigation expeditiously, preferably within three months from production of a copy of the order, and required the applicant to produce the certified copy of the order before the S.S.P./S.P. concerned to ensure compliance.

Anticipatory bail granted to the applicant on furnishing a personal bond with two sureties and subject to the enumerated conditions; investigation directed to be completed expeditiously and Investigating Officer permitted to seek cancellation on default.

Final Conclusion: Anticipatory bail granted to the applicant in the specified case on conditions and subject to the Investigating Officer's right to seek cancellation for breach; investigation directed to be completed expeditiously, and no opinion expressed on the merits of the allegations.

Anti-profiteering - commensurate reduction in prices - benefit of reduction in the rate of tax - input tax credit reversal - methodology for computation of profiteering (average pre-rate base price compared with invoice-wise post-rate base price) - penalty under Section 171(3A) of the CGST Act, 2017 - deposit in Consumer Welfare Fund

Benefit of reduction in the rate of tax - commensurate reduction in prices - anti-profiteering - Respondent did not pass on to recipients the benefit of GST rate reduction on specified frozen vegetables w.e.f. 01.01.2019 and thereby contravened Section 171(1) of the CGST Act, 2017. - HELD THAT: - The Authority found that the Central Government reduced GST on the impacted products to Nil w.e.f. 01.01.2019. The DGAP's investigation, supported by invoice and outward-supply data furnished by the Respondent, showed that instead of reducing prices commensurately the Respondent increased base prices on the eve of rate reduction. The Authority accepted the DGAP's conclusion that the Respondent thereby denied the benefit of tax reduction to each purchaser and committed profiteering in contravention of Section 171(1). [Paras 11, 12, 17, 25, 31]

Contravention of Section 171(1) established; Respondent found to have resorted to profiteering for the period in question.

Methodology for computation of profiteering (average pre-rate base price compared with invoice-wise post-rate base price) - commensurate reduction in prices - anti-profiteering - The methodology adopted by the DGAP to compute profiteering - using average pre-rate base prices (pre-reduction period) compared with actual invoice-wise post-rate base prices - is appropriate and may be relied upon. - HELD THAT: - The Authority examined the difficulties in direct pre/post comparison (different customers, discounts, non-identical purchases) and agreed with the DGAP that computing an average base price for the pre-reduction month and comparing it to invoice-wise post-reduction base prices ensures the benefit is measured for each sale. The approach prevents denial of benefit to individual purchasers and aligns with the requirement that tax reduction be passed to each recipient; the Authority also noted consistency with its prior orders and approved the methodology. [Paras 26]

DGAP's methodology approved as reasonable, justifiable and in consonance with Section 171.

Input tax credit reversal - benefit of reduction in the rate of tax - No adjustment was allowed for reversal of Input Tax Credit on closing stock because the Respondent had not reversed ITC as required; therefore denial of ITC was not given as a deduction in computing profiteering. - HELD THAT: - The DGAP noted, and the Respondent admitted, that no reversal of ITC on closing stock as on 31.12.2018 was made. As reversal under Section 17 read with Rules 42 and 43 would have created a cost, absence of such reversal meant the DGAP rightly did not allow any corresponding benefit while computing profiteering. The Authority sustained this treatment. [Paras 13, 27]

No deduction for reversal of ITC; benefit of denial of ITC not given where reversal not done.

Amount of profiteering - deposit in Consumer Welfare Fund - Total profiteered amount for the period 01.01.2019 to 30.06.2019 is determined as Rs. 2,33,515/-, and the Respondent is directed to deposit this amount with interest into the designated Central and State Consumer Welfare Funds. - HELD THAT: - On the basis of the DGAP's computation (comparison of pre-rate average base prices with invoice-wise post-rate base prices) and the outward-supply data submitted by the Respondent, the Authority accepted the computed net higher sales realization as the profiteered amount. The Authority directed reduction of prices in future and ordered deposit of the profiteered amount as per State-wise breakup with interest at 18% from the date of collection until deposit, to be made within three months, failing which recovery shall follow under CGST/SGST law. [Paras 16, 17, 30]

Profiteered amount fixed at Rs. 2,33,515/-; directed deposit with 18% interest into Consumer Welfare Funds and to reduce prices going forward.

Penalty under Section 171(3A) of the CGST Act, 2017 - Respondent is liable for penalty for contravention of Section 171 and a Show Cause Notice is to be issued calling for explanation why the prescribed penalty should not be imposed. - HELD THAT: - Having found contravention of Section 171(1) and that the Respondent has resorted to profiteering, the Authority concluded that the offence contemplated under Section 171(3A) is made out and directed issuance of a Show Cause Notice under the relevant provision read with Rule 133(3)(d) for imposition of penalty. [Paras 31]

Show Cause Notice to be issued to the Respondent for penalty under Section 171(3A).

Final Conclusion: The Authority accepted the DGAP's report, held that the Respondent failed to pass on the GST rate reduction benefit and engaged in profiteering, fixed the profiteered amount at Rs. 2,33,515/- for 01.01.2019 to 30.06.2019, directed deposit of that amount with 18% interest into the designated Consumer Welfare Funds and reduction of prices, and directed issuance of a Show Cause Notice for penalty under Section 171(3A).

Benefit of input tax credit - commensurate reduction in prices - profiteering under Section 171 - methodology for computation of profiteering - remand for further investigation

Benefit of input tax credit - commensurate reduction in prices - profiteering under Section 171 - Whether the Respondent contravened the obligation to pass on the benefit of additional input tax credit by way of commensurate reduction in prices to the recipients in the project 'Devaan' for the period investigated. - HELD THAT: - The Authority accepted the DGAP's finding that the ratio of input tax credit to turnover increased from 1.13% (pre-GST) to 11.72% (post-GST), yielding an additional ITC benefit of 10.59% of turnover which ought to have been passed to buyers. On the basis of the DGAP's examination of returns, ledgers, payment schedules and buyer-wise details, and noting no challenge to the adopted methodology, the Authority held that the Respondent did not reduce base prices or cum-tax prices commensurate with the additional ITC and thus breached the mandate of Section 171(1) of the CGST Act. The Authority recorded that the Respondent admitted issuing interim credit notes in March 2019 but had not passed the full benefit to identified purchasers; accordingly the conduct amounted to profiteering and attracted liability under Section 171(3A). [Paras 22, 23, 27]

Contravention of Section 171 established; Respondent held to have resorted to profiteering by not passing the additional ITC benefit.

Methodology for computation of profiteering - Whether the DGAP's methodology for quantifying the profiteered amount in respect of the project 'Devaan' is appropriate and can be relied upon. - HELD THAT: - The Authority examined the DGAP's computation (comparison of pre- and post-GST ITC to turnover ratios, recalibration of base prices and derivation of excess realization) and observed that the Respondent raised no objection to the method. The Authority noted that the same methodology has been approved in earlier cases concerning passing on of ITC in real estate projects and accordingly found the methodology to be appropriate, justifiable and in consonance with Section 171 and Rule 133 of the CGST Rules. [Paras 23]

DGAP's methodology approved and relied upon for determination of profiteering.

Benefit of input tax credit - commensurate reduction in prices - Quantum and recipient-wise allocation of the profiteered amount for the period 01.07.2017 to 30.06.2019. - HELD THAT: - On the computations presented in Table-C and Table-D of the DGAP report and Annexures, the Authority quantified the total benefit not passed on as Rs. 4,83,04,691/- (inclusive of applicable GST) for the period 01.07.2017 to 30.06.2019, with the breakdown: Rs. 2,29,52,071/- for residential units in 01.07.2017-24.01.2018 (including 12% GST), Rs. 2,21,32,354/- for residential units in 25.01.2018-30.06.2019 (including 8% GST), and Rs. 32,20,266/- for commercial shops (including 12% GST). The Applicant's individual profiteered amount as per Annexure-13 was determined as Rs. 57,488/- (inclusive of GST). The Authority recorded the DGAP's verification of credit notes and ledgers for selected buyers and directed return of the specified amounts to identified buyers along with interest @18% from the date of collection, observing that excess credits already passed to some buyers could not be adjusted against amounts due to others. [Paras 13, 15, 24, 25]

Profiteered amount fixed at Rs. 4,83,04,691/- for 01.07.2017 to 30.06.2019 with buyer-wise distribution as per DGAP Annexures; Respondent directed to return specified amounts with interest.

Remand for further investigation - Whether further investigation is required for the period after 30.06.2019 and the scope and duration of such remand. - HELD THAT: - The Authority observed that the project was still under execution and that exact ITC quantum accruing after 30.06.2019 could not be determined at this stage. Accordingly, while fixing liability for the investigated period up to 30.06.2019, the Authority directed the DGAP to investigate and report the ITC benefit that the Respondent is required to pass on for the subsequent period w.e.f. 01.07.2019 till 30.06.2020 or until issuance of the Completion Certificate, whichever is earlier, under Rule 133(4) and Rule 129(6). That further inquiry is therefore remanded for fresh consideration limited to quantification for the specified future period. [Paras 20, 26]

DGAP directed to investigate and report on ITC benefit for 01.07.2019 to 30.06.2020 (or until Completion Certificate), remanding that limited issue for fresh consideration.

Final Conclusion: The Authority upheld the DGAP's findings and methodology, held the Respondent guilty of profiteering for the period 01.07.2017-30.06.2019, fixed the profiteered amount at Rs. 4,83,04,691/- (buyer-wise as per Annexures) and directed return of specified amounts with interest; further investigation was ordered for the period 01.07.2019-30.06.2020 (or till Completion Certificate).

Passage of benefit of input tax credit by way of commensurate reduction in prices - methodology of comparison of ratio of ITC to turnover for computation of profiteering - jurisdiction and investigative mandate of the Director General of Anti Profiteering - liability for profiteering and quantification of profiteered amount - direction to refund profiteered amount with interest - initiation of penalty proceedings for contravention of Section 171 - constitutional validity of Authority without a Judicial Member

Jurisdiction and investigative mandate of the Director General of Anti Profiteering - passage of benefit of input tax credit by way of commensurate reduction in prices - Whether the DGAP could investigate and report on denial of ITC benefit to all affected buyers of the project and was not limited to the applicants named in the complaint. - HELD THAT: - The Authority held that Section 171 read with the Rules and the Office Memorandum assigns to the DGAP the duty to investigate whether benefit of ITC has been passed on; no statutory fetter confines the investigation only to the applicants who filed complaints. The DGAP, as the investigating arm, must bring to the Authority all instances of denial of benefit that come to its notice so that the Authority can examine and provide relief to all affected recipients. Reliance on earlier orders where benefit had already been passed or where the supplier was not the provider of the complained product was distinguished. Accordingly, the DGAP's wider investigation covering other flat buyers of the project was held lawful and within mandate. [Paras 44, 45, 46]

DGAP was entitled to investigate denial of ITC benefit in respect of all buyers of the project and not restrict the probe to only the applicants.

Methodology of comparison of ratio of ITC to turnover for computation of profiteering - passage of benefit of input tax credit by way of commensurate reduction in prices - Whether the methodology adopted by the DGAP - comparing pre GST and post GST ratios of ITC to turnover to compute additional ITC benefit and resultant profiteering - was appropriate. - HELD THAT: - The Authority held that the quantum of additional ITC to be passed on is to be determined by comparing ITC/CENVAT available in the pre GST period with ITC available in the post GST period and expressing it against turnover; the turnover figures are relevant because they relate to stages of construction and corresponding availability of ITC. The Authority observed that no single universal mathematical formula can be prescribed for all sectors; the Methodology & Procedure determined by the Authority allows case specific computation. The DGAP's application of the ratio method to the facts of the project was held to be appropriate, reasonable and in consonance with Section 171, and the respondent's objections on lack of correlation and increase in tax rates were rejected. [Paras 49, 50, 64]

The DGAP's ratio based methodology for computing additional ITC benefit and profiteering was upheld as correct and applicable to the present facts.

Liability for profiteering and quantification of profiteered amount - direction to refund profiteered amount with interest - Whether the respondent had profiteered, and if so, the quantified amount and the relief to be directed. - HELD THAT: - On examination of the DGAP's verified computations, the Authority found that the respondent derived an additional ITC benefit of 8.73% of turnover for the period 01.07.2017 to 31.03.2019. The Authority accepted the DGAP's quantification of the profiteered amount as Rs. 19,23,01,682 (inclusive of 12% GST on the base profiteered amount of Rs. 17,16,97,930) and that specific amounts attributable to the two applicants and other identifiable buyers were set out in Annexure 14. The Authority directed the respondent to pass on the respective amounts to the applicants and other buyers along with interest at 18% per annum from the dates of collection until payment, within three months. The Authority also ordered reduction of future prices of flats commensurate with ITC benefits accruing thereafter for the project. [Paras 20, 23, 65, 66]

Respondent found to have profiteered; directed to refund quantified amounts to applicants and other eligible buyers with 18% interest within three months and to reduce future prices commensurately.

Initiation of penalty proceedings for contravention of Section 171 - Whether show cause proceedings for imposition of penalty under Section 171(3A) should be initiated against the respondent. - HELD THAT: - The Authority concluded that denial of ITC benefit to buyers constituted contravention of Section 171(1) and an offence under Section 171(3A). Consequently, a show cause notice was ordered to be issued to the respondent to explain why penalty under Section 171(3A) read with Rule 133(3)(d) of the CGST Rules should not be imposed. [Paras 67]

Show cause notice directing explanation why penalty under Section 171(3A) should not be imposed to be issued to the respondent.

Constitutional validity of Authority without a Judicial Member - Whether the constitutional validity of the Authority is vitiated by absence of a Judicial Member. - HELD THAT: - The Authority distinguished precedents relied upon by the respondent and noted that the Authority performs specialised fact finding technical work requiring tax administrative expertise. Rule 122 prescribes qualifications for Chairman and Technical Members and Parliament and the GST Council have not required a judicial member. The Authority observed that it does not supplant courts and its orders remain subject to judicial review. Consequently, absence of a judicial member did not render the Authority's constitution unconstitutional. [Paras 60, 61]

Constitution of the Authority without a Judicial Member held not to be unconstitutional or invalid.

Liability for profiteering and quantification of profiteered amount - Whether computation should include GST component of excess collections in the profiteered amount. - HELD THAT: - The Authority accepted the DGAP's approach of including the GST collected on the illegally charged excess prices within the profiteered amount because buyers paid additional GST on prices which should have been reduced; exclusion would deprive buyers of the full benefit intended by Section 171. [Paras 63]

GST charged on excess prices correctly included in the profiteered amount.

Investigation of other projects where respondent admitted ITC availment - Whether DGAP should investigate the respondent's other projects (24 projects) where ITC availment was admitted. - HELD THAT: - Having regard to the respondent's admission of ITC availed across 24 other projects and the Authority's power under Rule 133(5) to direct further investigation where reasons exist to believe contraventions have occurred, the Authority directed the DGAP to investigate passing on of ITC benefits in respect of those twenty four projects and submit a report under Rule 133(5). The Authority treated such direction as initiation of fresh investigations in accordance with the Rules. [Paras 68]

DGAP directed to investigate passing on of ITC in respect of the 24 other projects and submit a report under Rule 133(5).

Final Conclusion: The Authority upheld the DGAP's investigation and methodology, held that the respondent contravened Section 171 by not passing on additional ITC (benefit quantified as Rs. 19,23,01,682 inclusive of GST for the period 01.07.2017 to 31.03.2019), directed refund of specified amounts to applicants and other identifiable buyers with 18% interest within three months, ordered reduction of future prices commensurate with ITC benefits, directed issuance of a show cause notice for penalty under Section 171(3A), and remitted the question of passing on ITC in 24 other projects to the DGAP for fresh investigation.

Limited Scrutiny - Complete Scrutiny - CBDT Circular binding on the Department under section 119 - Procedure for expansion of scope of scrutiny - Validity of additions under section 68 where scrutiny scope exceeded

Limited Scrutiny - Complete Scrutiny - Procedure for expansion of scope of scrutiny - CBDT Circular binding on the Department under section 119 - Validity of additions under section 68 where scrutiny scope exceeded - Whether the Assessing Officer could expand the assessment from Limited Scrutiny to Complete Scrutiny and make an addition under section 68 without obtaining written approval of the Pr. CIT/CIT in terms of the CBDT instructions. - HELD THAT: - The Tribunal noted that the assessee's case was selected by CASS for Limited Scrutiny and the notice under section 143(2) specified only the issue of valuation of stock. The AO relied on information from third party surveys to raise inquiries on receipt of funds and ultimately made an addition under section 68. The CBDT instructions (issued under section 119) restrict the questionnaire and scope in Limited Scrutiny cases to the specific issue communicated and permit expansion to Complete Scrutiny only where potential escapement exceeding the prescribed monetary limits is detected and only after written approval of the Pr. CIT/CIT. The order sheet did not show any written approval by the Pr. CIT/CIT to expand scrutiny. The Revenue conceded absence of such approval. As the CBDT circular is binding on the Department and the AO failed to follow the mandated procedure, the AO acted without jurisdiction in enquiring beyond the limited issue and in making the addition under section 68; consequently the addition is untenable and liable to be deleted. [Paras 6]

The expansion of scrutiny without the required written approval was without jurisdiction; the addition made under section 68 is null and is deleted.

Final Conclusion: The appeal is partly allowed: the addition made by the AO under section 68 is deleted because the AO expanded the scope of scrutiny from Limited Scrutiny to Complete Scrutiny without the written approval of the Pr. CIT/CIT as required by the binding CBDT instructions.

Failure to provide reasonable opportunity of hearing - right to be heard / audi alteram partem - rectification under section 154 of the Income-tax Act - remand for fresh adjudication - setting aside ex parte appellate order

Failure to provide reasonable opportunity of hearing - rectification under section 154 of the Income-tax Act - remand for fresh adjudication - Whether the assessment/order made by the Assessing Officer under section 154 and the ex parte appellate order of the CIT(A) should be set aside and remanded where the assessee was not afforded a reasonable opportunity of being heard. - HELD THAT: - The Tribunal found that the Assessing Officer issued a single notice, recorded non-appearance and passed an order under section 154 without affording the assessee a proper opportunity of being heard; the CIT(A) thereafter dismissed the appeal ex parte without addressing the merits of the grounds raised. Relying on the principle in Tin Box Company v. CIT that an assessment/order made without giving the assessee a reasonable opportunity of being heard must be set aside, the Tribunal held that the correct course is to remit the matter to the Assessing Officer for fresh adjudication after affording the assessee a reasonable opportunity to be heard. The Tribunal therefore set aside the orders of the CIT(A) and restored the matter to the file of the Assessing Officer for fresh consideration on merits following such opportunity of hearing. The appeals were allowed for statutory (statistical) purposes accordingly.

Orders of the CIT(A) are set aside and the matters are remanded to the Assessing Officer for fresh adjudication after affording the assessee a reasonable opportunity of being heard; appeals allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the ex parte appellate orders and remanded the matters to the Assessing Officer for fresh adjudication after providing the assessee a reasonable opportunity of hearing; appeals allowed for statistical purposes for AY 2013-14 and AY 2014-15.

Deduction under section 80P(2)(a)(i) of the Income Tax Act - eligibility of primary agricultural credit society for deduction - primacy of factual inquiry over registration certificate - assessment-year-wise enquiry - remand for fresh verification of loan disbursements - separate assessment years doctrine

Deduction under section 80P(2)(a)(i) of the Income Tax Act - primacy of factual inquiry over registration certificate - remand for fresh verification of loan disbursements - Whether the denial of deduction claimed under section 80P(2)(a)(i) was justified and whether the matter required fresh factual examination by the Assessing Officer. - HELD THAT: - The Tribunal analysed the competing authorities and held that the Full Bench of the Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. directs that, after the insertion of sub section (4), an Assessing Officer must conduct an enquiry into the factual activities of a society to determine eligibility for deduction under section 80P. A registration certificate classifying an entity as a primary agricultural credit society is not conclusive of entitlement to deduction. In the present case the AO had recorded that agricultural credit disbursements were only minuscule and made a broad finding that the assessee was essentially engaged in banking; however, the AO did not undertake a detailed loan by loan examination to determine the purpose of each disbursement or the extent of loans to non members. Given that the Assessing Officer did not apply the factual inquiry mandated by the Full Bench, the Tribunal concluded that the matter must be remitted to the Assessing Officer for fresh consideration in accordance with the dictum of the Full Bench. The Tribunal directed the AO to examine the nature and purpose of each loan disbursement, list instances of loans to non members or for non agricultural purposes, and then decide entitlement to deduction for the assessment year in question; the assessee was directed to cooperate and avoid unnecessary adjournments. [Paras 7]

Issue remitted to the Assessing Officer for fresh factual examination and decision in accordance with the Full Bench of the Kerala High Court; assessee to furnish details and cooperate.

Final Conclusion: The Tribunal set aside the confirmation of denial for adjudication purposes and restored the issue to the Assessing Officer for fresh inquiry and decision in accordance with the Full Bench precedent; the appeal is allowed for statistical purposes and the stay application is dismissed as infructuous.

Deduction under Section 80P(2)(a)(i) of the Income tax Act - Primacy of factual enquiry for eligibility after insertion of sub section (4) of Section 80P - Non conclusive character of registration certificate classifying a society as Primary Agricultural Credit Society - Separate assessment years doctrine - Remand for fresh adjudication in light of the Full Bench decision in The Mavilayi Service Co operative Bank Ltd. v. CIT

Deduction under Section 80P(2)(a)(i) of the Income tax Act - Primacy of factual enquiry for eligibility after insertion of sub section (4) of Section 80P - Non conclusive character of registration certificate classifying a society as Primary Agricultural Credit Society - Whether the claim of deduction under Section 80P(2)(a)(i) for assessment years 2013 2014 to 2017 2018 can be sustained on the record before the Tribunal or requires fresh examination by the Assessing Officer. - HELD THAT: - The Tribunal examined the Assessing Officer's conclusions that the assessee was essentially carrying on banking business and that agricultural credit disbursements were only minuscule. Reliance was placed on the Full Bench decision in The Mavilayi Service Co operative Bank Ltd. v. CIT which holds that after the insertion of sub section (4) of Section 80P the Assessing Officer must conduct an enquiry into the factual activities of the society for each assessment year and is not bound to accept the registration certificate classifying the society as a Primary Agricultural Credit Society. The Tribunal found that the AO's examination was not sufficiently detailed: the AO did not determine the purpose of individual loan disbursements, did not verify the extent of loans to non members, and relied on loan extracts/audit narration which by themselves were not conclusive. In view of the Full Bench precedent and the separate year principle, the Tribunal held that a fresh, year wise factual enquiry is necessary to ascertain whether the society's activities conform to those of a primary agricultural credit society and thereby justify deduction under Section 80P(2)(a)(i). The assessee was directed to cooperate and furnish particulars; unnecessary adjournments were discouraged. [Paras 7]

The issue is remitted to the Assessing Officer for fresh adjudication in accordance with the Full Bench dictum in The Mavilayi case; the AO shall examine purpose of each loan disbursement, extent of advances to non members and other relevant facts before deciding entitlement to deduction under Section 80P(2)(a)(i).

Final Conclusion: The Tribunal allowed the appeals for statistical purposes by remanding the question of entitlement to deduction under Section 80P(2)(a)(i) for assessment years 2013 2014 to 2017 2018 to the Assessing Officer for fresh, year wise factual enquiry in accordance with the Full Bench decision in The Mavilayi case; the stay applications were dismissed as infructuous.

Applicability of section 206AA - Conflict between domestic TDS provisions and DTAA - Doctrine of treaty override over domestic law - Interpretation of a non-obstante clause - Rate of tax deduction under DTAA versus section 206AA

Applicability of section 206AA - Conflict between domestic TDS provisions and DTAA - Doctrine of treaty override over domestic law - Interpretation of a non-obstante clause - Rate of tax deduction under DTAA versus section 206AA - Whether section 206AA requires deduction of tax at the higher rate when payees are non-residents without PAN even where the income is taxable under the DTAA. - HELD THAT: - The Tribunal accepted the view of the Special Bench of the ITAT, Hyderabad, and relevant High Court authority that where a Double Taxation Avoidance Agreement prescribes a rate of tax, that treaty provision prevails over inconsistent machinery provisions of the domestic law. Although section 206AA contains a non-obstante clause and prescribes a higher rate of TDS for failure to furnish PAN, the tribunal construed DTAAs as international agreements entered into in good faith which cannot be nullified by routine domestic machinery provisions. Reliance was placed on the Special Bench decision which held that DTAA overrides the Act even if inconsistent, and on the Delhi High Court decision which read down section 206AA so as to give effect to treaty rates where applicable. Applying these principles, the Tribunal concluded that the rate under the DTAA (and not the higher rate under section 206AA) governs deduction of tax in the facts of this case. [Paras 5, 7, 9, 10]

Section 206AA does not supplant the DTAA in this case; the treaty rate governs deduction and the revenue's appeal is without merit.

Final Conclusion: The revenue's appeal is dismissed; the DTAA rate governs TDS in respect of the payments to non-resident payees for assessment year 2011-12 and the higher rate under section 206AA is not applied in these circumstances.

Registration under section 12AA - Recognition under section 80G - Reasonable opportunity of hearing - Time limit for passing order under section 12AA - Remand for fresh decision

Registration under section 12AA - Reasonable opportunity of hearing - Time limit for passing order under section 12AA - Remand for fresh decision - Validity of the order refusing registration under section 12AA on account of alleged insufficiency of opportunity and timing of notices. - HELD THAT: - The assessee applied for registration under section 12AA on 21.05.2019. CIT(E) issued a single notice dated 29.10.2019 fixing the hearing on 08.11.2019 and passed the order on 28.11.2019. Section 12AA(2) required the CIT(E) to pass the order within six months from the end of the month in which the application was filed (last date 30.11.2019). The Tribunal noted that the only notice was issued after more than five months and that the assessee, for various reasons, could not comply with the short notice. Under these facts the Tribunal found that the assessee was not afforded a reasonable opportunity of being heard before the order was passed. Having reached this conclusion, the Tribunal did not decide the merits of the registration request but set aside the CIT(E)'s order and remanded the matter to the file of CIT(E) for fresh decision after providing reasonable opportunity to the assessee. [Paras 4, 5]

Order under section 12AA set aside; matter restored to CIT(E) for fresh decision after affording reasonable opportunity.

Recognition under section 80G - Reasonable opportunity of hearing - Remand for fresh decision - Validity of the order refusing recognition under section 80G for lack of adequate opportunity of hearing. - HELD THAT: - The assessee's application for recognition under section 80G was filed on 21.05.2019. CIT(E) issued a notice dated 05.11.2019 fixing hearing on 08.11.2019 and passed the impugned order on 28.11.2019. The Tribunal treated the facts as analogous to the section 12AA proceedings and held that, given the late issuance of the notice and the single short hearing opportunity, the assessee was not afforded a reasonable opportunity of hearing. The Tribunal therefore set aside the CIT(E)'s order on section 80G and remanded the matter for fresh consideration after affording the assessee a proper opportunity to be heard, without pronouncing on the merits. [Paras 4, 5]

Order under section 80G set aside; matter restored to CIT(E) for fresh decision after affording reasonable opportunity.

Final Conclusion: Both appeals allowed; both orders of the CIT(E) are set aside and the matters remitted to the CIT(E) for fresh decision after providing the assessee a reasonable opportunity of hearing; appeals disposed of for statistical purposes.

Section 50C - special provision for full value of consideration where stamp valuation exceeds agreement consideration - Reference to Valuation Officer under section 50C(2) - condition precedent that stamp valuation must not have been disputed in appeal or revision - Section 50C(3) - where valuation under reference is less than stamp valuation, Valuation Officer's value to be adopted as full value of consideration

Reference to Valuation Officer under section 50C(2) - condition precedent that stamp valuation must not have been disputed in appeal or revision - Validity of the Assessing Officer's reference to the District Valuation Officer when the purchaser subsequently disputed the stamp valuation by letter - HELD THAT: - The Tribunal examined whether the letter dated 26-02-2019 from the purchaser to the Inspector General of Registration and Controller of Stamps constituted a dispute 'in any appeal or revision or reference' so as to prohibit a reference under section 50C(2)(b). It noted that the AO had made the reference to the DVO before the assessment was concluded on 28-12-2018 and that the purchaser's letter was dated later. The mere filing of a letter after the AO's reference could not be treated as an existing appeal or revision at the time of reference. Therefore, as on the date the AO referred valuation to the DVO there was no bar under section 50C(2)(b) to make the reference. [Paras 8]

The reference by the AO to the DVO was valid because, at the time of reference, the stamp valuation had not been disputed in appeal or revision as envisaged by section 50C(2)(b).

Section 50C(3) - where valuation under reference is less than stamp valuation, Valuation Officer's value to be adopted as full value of consideration - Adoption of Valuation Officer's report for computation of full value of consideration for long term capital gains - Whether the DVO's valuation should be adopted as the full value of consideration for computing long term capital gains - HELD THAT: - The Tribunal considered the DVO's report valuing the property at a figure lower than the value adopted for stamp duty. Section 50C(3) provides that where the value ascertained under the reference exceeds the stamp valuation, the stamp valuation shall be taken; conversely, where the Valuation Officer's determination is less than the stamp valuation, that determination is to be applied for computing full value of consideration. The DVO's valuation being lower than the registering authority's stamp valuation, the Tribunal held that the DVO's value must be adopted for computing the capital gains. [Paras 8, 9]

The DVO's valuation is to be adopted as the full value of consideration for the purpose of computing long term capital gains.

Final Conclusion: The appeal is partly allowed: the Tribunal upheld the validity of the AO's reference to the DVO and directed that the DVO's valuation (being lower than the stamp valuation) be adopted as the full value of consideration for computing long term capital gains for Assessment Year 2016-17.

Deemed dividend under the deeming provision of section 2(22)(e) - beneficial ownership / substantial shareholding - conclusive presumption created by a deeming provision and requirement of proof of foundational facts - documentary evidence filed with the Registrar of Companies as legally enforceable proof of share transfer - commercial expediency and inter group advances outside the ambit of section 2(22)(e) - consideration by way of interest negating gratuitous advance and excluding deemed dividend - legal validity of belated ROC filing regularised by payment of late fee

Deemed dividend under the deeming provision of section 2(22)(e) - beneficial ownership / substantial shareholding - documentary evidence filed with the Registrar of Companies as legally enforceable proof of share transfer - legal validity of belated ROC filing regularised by payment of late fee - Whether the addition as deemed dividend under section 2(22)(e) could be sustained when the assessee had transferred his shares before the advances and the transfer was evidenced by ROC annual return and share transfer deed - HELD THAT: - The Tribunal accepted the CIT(A)'s findings that the assessee had transferred his shares w.e.f. 8 May 2012 as evidenced by the annual return filed with the Registrar of Companies and by the original share transfer deed. The ROC filing, although belated, was regularised by payment of late fee and is a legally enforceable document; its acceptance by ROC establishes the effective date of transfer. The deeming fiction in section 2(22)(e) operates only when the foundational fact - that the loan/advance was made to a concern in which the shareholder has substantial interest on the relevant date - is proved beyond reasonable doubt. Mere suspicion or an afterthought allegation by the AO is insufficient to rebut documentary proof. The CIT(A) also noted that on identical facts the AO in subsequent scrutiny assessments for later years accepted the share transfer. On these bases the Tribunal upheld the CIT(A)'s conclusion that the Revenue failed to establish that the assessee was a substantial shareholder on the date of the advances and therefore the deeming provision could not be invoked. [Paras 7, 8, 10]

Addition under section 2(22)(e) cannot be sustained because the ROC annual return and share transfer deed establish that the assessee ceased to be a substantial shareholder before the advances; the deeming fiction was not attracted.

Commercial expediency and inter group advances outside the ambit of section 2(22)(e) - consideration by way of interest negating gratuitous advance and excluding deemed dividend - deemed dividend under the deeming provision of section 2(22)(e) - Whether advances made within the group, used for business requirements of a group company, and on which interest was paid, are excluded from being treated as deemed dividend under section 2(22)(e) - HELD THAT: - The Tribunal endorsed the CIT(A)'s conclusion that the funds advanced by the subsidiary to the group (ultimately used by the group company for a construction project) constituted inter group commercial transactions necessitated by business exigencies. The presence of consideration - interest received by the lending company - and the commercial purpose of funding the group project were held to rebut the characterization of the transfers as gratuitous advances for the individual benefit of the shareholder. The CIT(A) relied on coordinate judicial authorities and the CBDT Circular recognising that trade advances between group entities for commercial expediency may fall outside section 2(22)(e). On the facts, no personal benefit accrued to the assessee and interest was charged; therefore the transactions were not taxable as deemed dividend. [Paras 7, 8, 10]

Inter group advances made for commercial expediency and for which consideration in the form of interest was paid do not attract taxation as deemed dividend under section 2(22)(e) on the facts of this case.

Final Conclusion: The Tribunal upheld the order of the CIT(A) deleting the addition made as deemed dividend under section 2(22)(e) for Assessment Year 2013-14, holding that the Revenue failed to prove substantive shareholding on the date of advances and that the advances were inter group commercial transactions (with interest) not attracting the deeming provision; Revenue's appeal is dismissed.

Validity of reassessment proceedings and notice under Section 148 - Admission of additional evidence on appeal - Right to fair opportunity to explain transactions / audi alteram partem - Remand for fresh adjudication to the Assessing Officer - Condition precedent of deposit / contribution as consequence of non-cooperation - Use of third party information from stock exchange for reopening and addition

Validity of reassessment proceedings and notice under Section 148 - Use of third party information from stock exchange for reopening and addition - Reopening of assessment and objections thereto were not finally adjudicated and were directed to be considered afresh by the Assessing Officer. - HELD THAT: - The Tribunal recorded that the Assessing Officer reopened the assessment on information about share transactions traced through the National Stock Exchange. The CIT(A) dismissed the assessee's objections to reopening and upheld the reassessment without addressing the merits. The Tribunal found that the assessee had not been given a full opportunity to explain the transactions before the lower authorities and that the matter required fresh consideration. Consequently, the Tribunal restored the appeal to the file of the Assessing Officer and directed the AO to consider the objections of the assessee against reopening and decide the matter afresh after hearing the assessee. [Paras 7]

Objections to reopening were not finally decided; the matter is remanded to the Assessing Officer for fresh adjudication after affording the assessee opportunity to be heard.

Admission of additional evidence on appeal - Right to fair opportunity to explain transactions / audi alteram partem - Refusal by the CIT(A) to admit additional evidence was set aside and the assessee was permitted to place relevant material before the Assessing Officer. - HELD THAT: - The assessee sought to admit additional evidence before the CIT(A), including documents relating to a fire at the assessee's business premises and transaction records. The CIT(A) refused admission based on a remand report and did not deal with the merits. The Tribunal observed that in the circumstances - particularly given the contention of a fire affecting the assessee's ability to respond - the assessee had not been afforded a proper opportunity to explain the transactions. The Tribunal offered the assessee an opportunity to produce broker accounts, bank statements and other relevant information before the Assessing Officer and remanded the file for fresh consideration. [Paras 7]

Direction that additional evidence may be filed before the Assessing Officer and the matter be reconsidered; CIT(A)'s refusal to admit evidence set aside by remanding the matter to the AO.

Remand for fresh adjudication to the Assessing Officer - Admission of additional evidence on appeal - Additions made by the Assessing Officer for short term capital gain and unexplained investment were not sustained by the Tribunal and are to be reconsidered by the Assessing Officer on merits. - HELD THAT: - The Assessing Officer made additions on account of short term capital gain and alleged capital investment after issuing notices and obtaining stock exchange information. The CIT(A) upheld those additions without addressing the assessee's explanations or admitting additional evidence. The Tribunal concluded that the AO must reconsider the additions after affording the assessee an opportunity to file and rely upon relevant documents before the AO, and after considering objections to reopening. The merits of the addition were therefore not decided by the Tribunal but remanded for fresh adjudication. [Paras 7]

Additions are set aside for fresh adjudication by the Assessing Officer; merits remitted to AO for de novo consideration after hearing the assessee.

Condition precedent of deposit / contribution as consequence of non-cooperation - Tribunal imposed a direction that the assessee deposit a contribution to the Prime Minister's National Relief Fund as a consequence of prior non-cooperation, as a condition before proceeding. - HELD THAT: - Having found that the assessee had not cooperated before the lower authorities by failing to respond to multiple notices, the Tribunal observed that public resources had been expended in the inquiry and that non compliance by the assessee warranted a consequential direction. With the assessee's authorised representative consenting and no objection from the Department, the Tribunal directed the assessee to deposit Rs. 5,000 to the Prime Minister's National Relief Fund by a specified date, and conditioned further proceedings on compliance with that direction. [Paras 7]

Assessee directed to make the specified contribution as a condition precedent to pursuing the remanded proceedings before the Assessing Officer.

Final Conclusion: The Tribunal restored the appeal to the file of the Assessing Officer for de novo consideration of objections to reopening and the additions, allowed the assessee an opportunity to file relevant evidence before the AO, and directed the assessee to make a contribution to the Prime Minister's National Relief Fund as a consequence of prior non cooperation; appeal disposed for statistical purposes.

Valuation of closing stock - valuation of opening stock consistent with valuation of closing stock - method of valuation adopted consistently - application of average gross profit rate for stock valuation - computation of income under section 145(3) of the Act - addition to income on re valuation of stock

Valuation of closing stock - method of valuation adopted consistently - application of average gross profit rate for stock valuation - computation of income under section 145(3) of the Act - valuation of opening stock consistent with valuation of closing stock - Whether the value of closing stock declared by the assessee on the basis of sale price less 25% is acceptable, and whether the Assessing Officer's re valuation using average gross profit rate of 9.22% is to be adopted, with consequential revision of opening stock. - HELD THAT: - The assessee declared finished and semi finished goods at sale price less 25% and relied on long standing practice, while raw material was valued at cost. The Assessing Officer rejected the unexplained 25% benchmark as having no basis and, invoking computation principles under section 145(3), applied the average gross profit rate of the two preceding years (9.22%) to determine stock value. The Tribunal found the assessee unable to justify the 25% discount though it was applied historically, and therefore upheld the Assessing Officer's methodology of valuing stock at sale price less 9.22%. The Tribunal further held that the same rate must be applied consistently to re determine the opening stock of the succeeding year, since closing stock as at year end becomes opening stock for the next assessment year. Consequently the Assessing Officer's computation of closing stock (and the resultant addition) is accepted, subject to revising opening stock by applying the same 9.22% reduction. [Paras 8]

Assessee's sale price less 25% method rejected; Assessing Officer's valuation using 9.22% GP rate accepted and to be applied equally to re determine opening stock of the next year; grounds allowed.

Final Conclusion: Appeal allowed: the Assessing Officer's re valuation of closing stock by applying the average gross profit rate of 9.22% is upheld and the opening stock of the succeeding year is to be re determined on the same basis.

Criminal breach of trust by banker/merchant/agent/public servant - cheating and dishonest inducement - ingredients of offence under Section 420 IPC - forgery and conspiracy in sale/registration documents - cognizance by Magistrate and duty to apply mind before summoning - abuse of process of Court and quashing of criminal proceedings under inherent jurisdiction - exercise of High Court s powers under Section 482 CrPC vis- e0-vis Section 397 CrPC

Criminal breach of trust by banker/merchant/agent/public servant - cheating and dishonest inducement - ingredients of offence under Section 420 IPC - forgery and conspiracy in sale/registration documents - Whether the averments in the complaint, read on their face, disclose the essential ingredients of the offences alleged under the Penal Code (including Sections 409/418/420/465/468/120B). - HELD THAT: - The Court examined the statutory ingredients of criminal breach of trust and cheating, and the requirement that dishonest or fraudulent intention must exist at the time of inducement. On the materials before the Magistrate (complaint, statement under Section 200 CrPC, job-cards, invoices, sale certificates, registration and servicing records), there is no averment showing entrustment followed by dishonest misappropriation, nor any clear allegation of fraudulent intention at the time of the transaction. Documentary evidence showed the complainant took delivery, signed sale/registration papers, availed free and paid servicing for over a year, and ran the vehicle on road - facts inconsistent with a deliberate intention to deceive at the time of sale. The complaint did not, on its face, make out forgery or conspiracy by the manufacturer or demonstrate the necessary mens rea for cheating or Section 420 offences; mere breach of contractual obligation or subsequent failure to service does not elevate the dispute to criminal cheating. Applying settled precedents that distinguish breach of contract from cheating, the Court found the essential ingredients of the alleged offences absent on the face of the complaint. [Paras 31, 32, 33, 34, 37]

The averments do not disclose the ingredients of the offences alleged; no prima facie case for offences under the cited sections is made out.

Cognizance by Magistrate and duty to apply mind before summoning - abuse of process of Court and quashing of criminal proceedings under inherent jurisdiction - exercise of High Court s powers under Section 482 CrPC vis- e0-vis Section 397 CrPC - Whether the learned Magistrate erred in taking cognizance and issuing summons despite (a) direction for limited investigation and subsequent registration of a police case on the same complaint, and (b) absence of material disclosing criminal ingredients, thereby warranting quashing of the criminal proceedings as an abuse of process under the High Court's inherent jurisdiction. - HELD THAT: - The Court noted the Magistrate had directed a limited investigation under Section 202 CrPC, the IO lodged a formal police case thereafter, but the Magistrate proceeded to take cognizance under the same sections without properly applying judicial mind to the police report, complaint and preliminary evidence. Summoning is a serious step and the Magistrate must scrutinise documentary and oral evidence to satisfy whether there are sufficient grounds to proceed. Given the absence of allegations disclosing the necessary criminal ingredients and the fact that the complaint raises essentially a civil/consumer grievance already pending, continuation of criminal proceedings would amount to abuse of process. The High Court recapitulated the scope of its powers under Section 482 CrPC (and limited reach of Section 397), held that inherent jurisdiction can be exercised to prevent abuse where the Magistrate erred, and concluded that the trial Court failed to examine whether cognizance was justified. In those circumstances the criminal proceeding was quashed to prevent misuse of criminal process. [Paras 24, 25, 35, 36, 38]

The Magistrate s taking of cognizance and continuation of the criminal proceeding was unlawful and amounted to abuse of process; the Court exercised its inherent jurisdiction to quash the entire criminal proceeding.

Final Conclusion: The High Court found that the complaint, on its face, did not disclose the ingredients of the criminal offences alleged and that the Magistrate erred in taking cognizance and allowing criminal proceedings to continue, thereby amounting to abuse of process. Exercising its inherent jurisdiction, the Court quashed and set aside the entire criminal proceeding in Complaint Case No. 2974c of 2014.

Operational debt - corporate insolvency resolution process - Demand notice and compliance under Section 8 of the Insolvency and Bankruptcy Code, 2016 - default as prerequisite for initiation of CIRP - pre-existing dispute - proof of payment by electronic transfer or demonstrable encashment of cheque - dishonour of cheques and related proceedings under the Negotiable Instruments Act, 1881 - offer of part payment with condition and its insufficiency to avert default

Operational debt - Demand notice and compliance under Section 8 of the Insolvency and Bankruptcy Code, 2016 - default as prerequisite for initiation of CIRP - proof of payment by electronic transfer or demonstrable encashment of cheque - pre-existing dispute - offer of part payment with condition and its insufficiency to avert default - dishonour of cheques and related proceedings under the Negotiable Instruments Act, 1881 - Whether the Adjudicating Authority rightly admitted the Company Petition under the I&B Code for initiation of CIRP against the Corporate Debtor despite contentions of disputed invoices and a conditional offer of part payment. - HELD THAT: - The Tribunal found that the supply of medical goods by the Operational Creditor to the Corporate Debtor and the raising of invoices therefor were not in controversy and the claim constituted operational debt. The Corporate Debtor first raised objections to certain invoices only in its reply to the Demand Notice and did not place cogent or credible evidence of any recoverable amounts on account of reverse sales. The Corporate Debtor had issued multiple cheques in discharge of the debt which were dishonoured on presentation; seven complaint proceedings under the NI Act were instituted. An unconditional payment compliant with Section 8(2)(b) requires demonstration by electronic transfer or demonstrable encashment of a cheque; an offer of part payment proffered as conditional and as full-and-final settlement does not amount to receipt of payment for the purposes of averting initiation of CIRP. Since the Operational Creditor had not received the payment and default exceeding the statutory threshold existed, the Adjudicating Authority correctly held that the statutory pre-conditions for admission under Section 9 were satisfied and that the conditional offer did not negate default. [Paras 6, 7, 8]

The Adjudicating Authority correctly admitted the petition; initiation of CIRP was justified as default in payment was established and the conditional part-payment did not amount to compliance with the statutory requirement of receipt of unpaid operational debt.

Final Conclusion: The appeal is dismissed; the admission order initiating the Corporate Insolvency Resolution Process against the Corporate Debtor is upheld.

Extension of limitation by acknowledgement under Section 18 of the Limitation Act - application under section 7 of the Insolvency and Bankruptcy Code governed by Article 137 of the Limitation Act - effect of acknowledgement in writing on computation of fresh period of limitation - time-barred debt not revived except by modes recognised in the Limitation Act

Extension of limitation by acknowledgement under Section 18 of the Limitation Act - application under section 7 of the Insolvency and Bankruptcy Code governed by Article 137 of the Limitation Act - effect of acknowledgement in writing on computation of fresh period of limitation - Whether the section 7 application was barred by limitation or saved by subsequent acknowledgements and thus maintainable. - HELD THAT: - The Tribunal examined the date of default and the acknowledgements produced by the Financial Creditor. The Corporate Debtor's loan account was classified as NPA on 15 December 2012 (date of default 16 September 2012), so Article 137 (three years) governed limitation for a section 7 application. The Bank and Corporate Debtor executed an agreement on 4 March 2015 which constituted an acknowledgement in writing within the Limitation Act, thereby enabling a fresh period of limitation to be computed from that date. Further, the Corporate Debtor's acknowledgement and balance confirmation dated 1 August 2017 constituted a further written acknowledgement, from which a fresh three-year limitation period ran. The petition filed on 8 December 2018 therefore fell within the period made available by the written acknowledgements. The Tribunal applied the principles in the cited Supreme Court decisions that Article 137 applies to section 7 applications and that limitation may be extended only by modes recognised in the Limitation Act (not by extraneous revival), and that an acknowledgement in writing renews the debt for the purpose of computing limitation. On these findings the Tribunal held that the section 7 petition was not time-barred. [Paras 7, 22, 25, 29, 30]

The section 7 petition was not barred by limitation as the written acknowledgements renewed the period of limitation and the petition was filed within the renewed limitation period; appeals dismissed.

Final Conclusion: The Tribunal dismissed the appeals and held that the financial creditor's section 7 application was within limitation because written acknowledgements (including the agreement of 4 March 2015 and the balance confirmation of 1 August 2017) revived the limitation period under Section 18 of the Limitation Act; the IRP was directed to proceed with the CIRP.

Admissibility of application under Section 7 of the Insolvency and Bankruptcy Code - parallel proceedings under SARFAESI Act and the Insolvency and Bankruptcy Code - non-obstante clause of the Insolvency and Bankruptcy Code (Section 238) - forum shopping - penal action under Section 65 of the Insolvency and Bankruptcy Code, 2016

Admissibility of application under Section 7 of the Insolvency and Bankruptcy Code - parallel proceedings under SARFAESI Act and the Insolvency and Bankruptcy Code - non-obstante clause of the Insolvency and Bankruptcy Code (Section 238) - Financial Creditor may simultaneously initiate proceedings under the SARFAESI Act and file an application under Section 7 of the I&B Code; such parallel proceedings do not ipso facto render the Section 7 application inadmissible. - HELD THAT: - The Tribunal relying on precedents and on the effect of the Code's non-obstante provision held that the I&B Code operates notwithstanding inconsistencies in other laws and that the Code permits a financial creditor to file under Section 7 even if SARFAESI proceedings are pending. The mere pendency of recovery proceedings under the SARFAESI Act does not bar the Adjudicating Authority from admitting and deciding an application under Section 7 where the requirements of debt and default are satisfied. Consequently, the Adjudicating Authority erred in treating the institution of SARFAESI proceedings as a ground to preclude initiation or continuation of proceedings under the I&B Code. [Paras 5, 6, 9]

The Tribunal set aside the finding that initiation of SARFAESI proceedings precludes filing or adjudication of an application under Section 7; the Financial Creditor is entitled to proceed under both laws and the Section 7 application must be considered on its merits.

Forum shopping - penal action under Section 65 of the Insolvency and Bankruptcy Code, 2016 - Filing parallel proceedings under SARFAESI Act and the I&B Code, without more, does not justify a conclusion of fraudulent or malicious prosecution attracting penal consequences under Section 65 of the I&B Code. - HELD THAT: - The Adjudicating Authority concluded that parallel proceedings amounted to forum shopping and directed the Bank's authorised signatory to show cause why penal action under Section 65 should not follow. The Tribunal found no suppression of material facts in the Section 7 application and held that initiation of parallel proceedings alone cannot be inferred to be fraudulent or malicious so as to invoke Section 65. Therefore the direction to initiate show-cause proceedings under Section 65 was unjustified and the impugned order was set aside. [Paras 10, 11, 12]

The Tribunal held that the Adjudicating Authority's conclusion of fraud/malice based solely on parallel proceedings was incorrect and set aside the show-cause direction under Section 65.

Final Conclusion: Impugned order set aside; the Adjudicating Authority erred in holding that parallel SARFAESI and Section 7 proceedings amounted to forum shopping or warranted penal action under Section 65. The Section 7 application remains to be decided expeditiously on merits by the Adjudicating Authority.

Clandestine removal - unverified loose documents and weighment slips - requirement of corroborative evidence for demand - burden of proof for suppression of production - statements recorded under coercion and duress - suspicion is not proof - necessity of investigation at consignor/consignee/transporters' end

Clandestine removal - unverified loose documents and weighment slips - requirement of corroborative evidence for demand - suspicion is not proof - Whether the demand for excise duty and penalties based on handwritten loose sheets, recovered documents and recorded statements without independent corroborative investigation is sustainable - HELD THAT: - The Tribunal found that the Department's case rested primarily on handwritten loose sheets, weighment slips and statements seized during a search which alleged unreported production and dispatches. The entries in those loose papers could only give rise to suspicion and could not be treated as conclusive evidence by themselves. No independent or corroborative evidence was produced by the Revenue to establish procurement of raw materials, clandestine manufacture, dispatch to purchasers or receipt of sale proceeds; nor was there evidence of enquiries made at the consignor/consignee/transporters' end. The Tribunal applied the established principle that mere suspicion cannot substitute for proof and relied on precedents holding that demands based on unverified weighment slips or recovered slips are not sustainable. Allegations of coerced statements were noted but the determinative point was the absence of affirmative and cogent corroborative evidence to substantiate suppression of production and clandestine removal. In that factual matrix the demand and penalties could not be sustained. [Paras 10, 11, 12]

Demand for excise duty and imposition of penalties was not sustainable in the absence of corroborative evidence and was set aside; appeal allowed with consequential relief.

Final Conclusion: The appeal was allowed and the orders confirming demand and penalties were set aside because the Department failed to establish clandestine removal by affirmative, corroborative evidence; reliance solely on unverified loose papers and statements did not meet the burden of proof.