TaxTMI Updates e-Newsletter
Jul 09,2022

Anticipatory bail - interim anticipatory bail - non-cooperation in investigation - failure to join investigation / evasion of arrest - serious allegations as a factor in bail jurisdiction - prior dismissal by Special Judge under PMLA

Anticipatory bail - non-cooperation in investigation - serious allegations as a factor in bail jurisdiction - prior dismissal by Special Judge under PMLA - failure to join investigation / evasion of arrest - Whether anticipatory bail should be granted to the petitioner in FIR No. 390 of 2019. - HELD THAT: - The Court, without expressing any opinion on the merits of the allegations, considered the totality of circumstances including that the petitioner had earlier been granted interim anticipatory bail but was reported as not cooperating and not joining the investigation; that serious allegations of large-scale tax fraud and related Directorate of Enforcement proceedings (in which anticipatory bail had been dismissed by the Special Judge, PMLA) were on record; and that the petitioner had been evading arrest for an extended period since the FIR of 2019. In view of these factors, the Court found no ground to exercise its discretion in favour of granting anticipatory bail. The court noted allegations linking the petitioner to mobile numbers, bank accounts and GST applications used in the alleged offence, and relied upon non-cooperation and prior judicial adverse orders as relevant to the exercise of bail jurisdiction. The order declines to examine the merits and is confined to factual and procedural considerations relevant to bail relief.

Petition for anticipatory bail dismissed.

Final Conclusion: Considering the serious allegations, reported non-cooperation and prior dismissal of PMLA relief, the High Court dismissed the petition for anticipatory bail without adjudicating the merits.

Provisional attachment to protect revenue - Requirement of initiation of proceedings under Chapter XII, XIV or XV - Abuse of power

Provisional attachment to protect revenue - Requirement of initiation of proceedings under Chapter XII, XIV or XV - Abuse of power - Validity of the provisional attachment order dated 19.05.2022 in light of amended Section 83 of the CGST Act and whether the respondents must demonstrate pendency of proceedings under Sections 67 and 74 before sustaining the attachment. - HELD THAT: - The Court examined the substituted text of Section 83 which permits provisional attachment only where proceedings under Chapter XII, XIV or XV have been initiated. The impugned attachment order dated 19.05.2022 does not state when proceedings under Section 74 were initiated. In view of the earlier judgment dated 11.05.2022 quashing the prior attachment on the ground that no Section 74 proceeding was pending as on the date of that attachment, the fresh order of 19.05.2022, on its face, appears to be an attempt to circumvent the earlier order and a possible abuse of the authority conferred by Section 83. Given these defects and the absence of a counter by the respondents, the Court directed the respondents to produce proof of pendency of proceedings under Sections 67 and 74 and directed production of records relating to the impugned attachment for verification. The Court granted a limited period of three days for filing the counter affidavit with annexures and listed the matter for further consideration, thereby remanding factual verification to the respondents and reserving substantive adjudication pending production of the records. [Paras 3, 4, 6, 8]

Respondents are directed to file a counter affidavit within three days annexing proof of pendency of proceedings under Sections 67 and 74 and to produce records relating to the impugned attachment order; matter listed for further hearing on 08.07.2022.

Final Conclusion: Interim direction requiring respondents to demonstrate initiation and pendency of proceedings under Sections 67 and 74 before the provisional attachment of the petitioner's bank account is sustained; respondents to file proof and produce records within the limited timeline ordered.

Writ of Mandamus - Section 140(5) of the Central Goods and Services Tax Act, 2017 - direction to consider representation - show cause notice - right to personal hearing - no adjudication on merits

Section 140(5) of the Central Goods and Services Tax Act, 2017 - direction to consider representation - no adjudication on merits - Direction to the Commissioner to consider the petitioner's representation dated 12.05.2022 under Section 140(5) of the CGST Act. - HELD THAT: - The Court declined to adjudicate the merits of the claim for input tax credit and instead disposed of the writ petition by directing the first respondent to consider the representation filed on 12.05.2022. The direction requires fresh consideration within a limited period (three weeks from receipt of the order). The Court recorded that the matter is to be decided by the proper authority on the basis of records and submissions to be placed before it, and did not grant any substantive relief or stay the contested show cause notice. [Paras 5, 6]

The writ petition is disposed with a direction to the first respondent to consider the representation within three weeks; no merits were adjudicated.

Show cause notice - right to personal hearing - Effect of pendency of the representation on the departmental proceedings initiated by the show cause notice. - HELD THAT: - The Court held that pendency of the petitioner's representation before the first respondent shall not impede or stay the second respondent from proceeding further with the show cause notice. The petitioner is to respond to the show cause notice, produce relevant records and seek personal hearing before the authorities; if the contentions are found reasonable on consideration, appropriate acceptance may follow, otherwise further action may be taken by the department. [Paras 4, 6]

Pendency of the representation will not affect the respondent's authority to proceed with the show cause notice; the petitioner may appear and seek to satisfy the authorities during adjudication.

Final Conclusion: Writ petition disposed. The Commissioner is directed to consider the petitioner's representation under Section 140(5) within three weeks and inform the petitioner of the outcome; the departmental show cause proceedings may continue unaffected, and no decision on the merits of the claimed input credit has been made by this Court.

Audi alteram partem - opportunity of personal hearing - remand for fresh consideration - notice to show cause - setting aside of order-in-original

Audi alteram partem - opportunity of personal hearing - Whether the petitioner was denied opportunity of personal hearing and whether the impugned order should be set aside for that reason - HELD THAT: - The High Court noted that the petitioner contended non-receipt of any notice for personal hearing. The order-in-original records that the intimation for personal hearing sent to the petitioner's registered address was returned undelivered by postal authorities (paragraph 5). In the interest of justice, having regard to the procedural requirement of affording an opportunity of hearing before confirming demand and imposing penalty, the Court found it appropriate to set aside the impugned order and remit the matter for fresh decision after granting the petitioner an opportunity of hearing including a personal hearing. [Paras 5, 6, 7]

Impugned order-in-original dated 02.03.2022 set aside and matter remanded for fresh consideration after affording petitioner a personal hearing.

Remand for fresh consideration - notice to show cause - Procedure to be followed on remand including treatment of the set-aside order as notice to show cause and time for filing reply - HELD THAT: - The Court directed that the set-aside order shall be treated as the notice to show cause and afforded the petitioner a period of three weeks from the date of the order to submit a reply. If the petitioner files a reply within that period, respondent No.1 is directed to pass a fresh order in accordance with law after granting due opportunity of hearing, including personal hearing. If no reply is filed, the respondents are at liberty to pass such order as may be deemed fit. The directions thereby prescribe the procedural steps and timeline to be followed on remand. [Paras 7]

Set-aside order to be treated as notice to show cause; petitioner to file reply within three weeks; respondent to decide afresh after granting hearing; if no reply, respondent may pass an appropriate order.

Final Conclusion: Writ petition disposed by setting aside the order-in-original dated 02.03.2022 and remanding the matter for fresh decision after treating the set-aside order as notice to show cause, with directions for the petitioner to file a reply within three weeks and for the respondent to grant a personal hearing before passing a fresh order; no order as to costs.

Transitional Credit under the GST regime - Section 140(5) of the Central Goods and Services Tax Act, 2017 - reverse charge mechanism - condonation of delay in recording invoices - uncalled for observations and jurisdictional overreach in interim/adjunct orders - remedies and statutory proceedings for disallowance or recovery

Transitional Credit under the GST regime - Section 140(5) of the Central Goods and Services Tax Act, 2017 - condonation of delay in recording invoices - uncalled for observations and jurisdictional overreach in interim/adjunct orders - Whether the Commissioner was justified in disallowing a part of the Transitional Credit in the course of deciding an application for condonation of delay relating to recording invoices. - HELD THAT: - The Court held that the Commissioner's observation disallowing part of the claimed Transitional Credit was incidental to the primary exercise of considering condonation of delay for recording invoices up to 31 July 2017. The Commissioner had admitted a portion of the Transitional Credit but, in the absence of any substantive proceeding under the CGST Act for disallowance or recovery, the adverse observation about the remaining amount was uncalled for and beyond the scope of the condonation exercise. Such incidental observations cannot operate to finally disallow credit and do not prejudice the petitioner unless a fresh proceeding is lawfully instituted; the petitioner retains statutory remedies if any formal action is taken subsequently. [Paras 5]

The portion of the Commissioner's order disallowing Transitional Credit of Rs.1,74,469/- was unnecessary in the condonation proceedings and is set aside; the admitted Transitional Credit remains unaffected and any challenge to the remainder must be pursued through appropriate proceedings under the Act.

Remedies and statutory proceedings for disallowance or recovery - proceedings for disallowance or recovery - Whether the petitioner is precluded from pursuing statutory remedies in the event a formal proceeding for disallowance or recovery of Transitional Credit is initiated. - HELD THAT: - The Court observed that the respondent's reference to availability of statutory remedies is correct: no final adjudication on the merits of disallowing the remaining Transitional Credit was made in the condonation order, and the petitioner would be entitled to contest any future proceedings initiated in accordance with law. The incidental observation in the condonation order does not constitute a substantive determination of entitlement and therefore does not extinguish the petitioner's right to defence and appeal under the CGST framework. [Paras 4, 5]

Petitioner's statutory remedies remain available and any contention regarding disallowance or recovery of Transitional Credit must be adjudicated in appropriate proceedings under the Act.

Final Conclusion: Writ petition disposed by quashing the Commissioner's incidental observation disallowing part of the Transitional Credit in the course of condonation proceedings; the admitted Transitional Credit stands and the petitioner may contest any future formal proceedings for disallowance or recovery under the CGST Act.

Detention and release of goods - diversion of goods - human error / bona fide mistake - e-way bill and tax invoice compliance - exercise of power under Section 129 of the Central Goods and Services Tax Act, 2017 - setting aside order under Section 107(11) of the Karnataka Goods and Services Tax Act, 2017

Diversion of goods - human error / bona fide mistake - e-way bill and tax invoice compliance - detention and release of goods - Whether the detention and confiscation order should be set aside on the basis that the vehicle's movement towards Bommasandra was a bona fide human error despite carriage of e-way bills and invoices for delivery at other locations. - HELD THAT: - The petitioner's lorry carried requisite e-way bills and tax invoices showing delivery to Peenya Industrial area, S.P. Road and New Kalasipalyam. The vehicle, however, after passing Hebbal junction turned towards Bommasandra Industrial area and was intercepted. The driver filed an affidavit stating the wrong turn was inadvertent and the intended recipients confirmed they were to receive the consignments. The Revenue contended the diversion was deliberate and the explanations were afterthoughts. The Court accepted that on the peculiar facts-late night movement, presence of proper documents for the declared destinations, the driver's affidavit and confirmations from purchasers-diversion could have occurred by human error and could not be conclusively treated as deliberate. Given these findings and that the circumstances are not suited to be treated as a precedent, the exercise of power to detain/confiscate under the GST provisions was set aside and the detained vehicle and goods ordered released. The Court limited its conclusion to the facts of the case and did not formulate a general rule applicable to other cases. [Paras 4, 5]

Impugned orders under Section 107(11) KGST Act and Section 129(3) CGST Act set aside; respondents directed to release the vehicle and goods.

Final Conclusion: On the material before it-valid e-way bills and tax invoices for the declared destinations, the driver's affidavit and purchasers' confirmations-the High Court found the diversion could be a bona fide human error and, in the exercise of its supervisory jurisdiction, set aside the impugned detention/confiscation orders and directed release of the vehicle and goods, limiting the decision to the peculiar facts of the case.

Attraction of Section 40A(3) of the Income Tax Act - meaning of "payment" in Section 40A(3) - requirement of cash or monetary payment exceeding prescribed limit - scope of disallowance under Section 40A(3) - appellate interference - perversity standard

Attraction of Section 40A(3) of the Income Tax Act - meaning of "payment" in Section 40A(3) - requirement of cash or monetary payment exceeding prescribed limit - scope of disallowance under Section 40A(3) - Section 40A(3) of the Act is not attracted to the transactions entered into by the assessee in the facts of the case. - HELD THAT: - The Tribunal's third member, agreeing with the Administrative Member and the CIT(A), held that Section 40A(3) applies only where expenditure is incurred by payment in cash or in monetary terms exceeding the prescribed limit. The assessee's purchases were effected by account-payee cheques or account-payee bank drafts, and the revenue did not contest that cash payments in excess of the prescribed limit occurred. The third member therefore concluded that the provision could not be invoked where payment was not made in cash or equivalent monetary form. The view of the Judicial Member, which favoured a wider meaning of the word "payment", was examined and the third member read the term "payment" in conjunction with the expression "in a sum exceeding 20,000 rupees" in Section 40A(3). Reliance placed on precedents was considered: the decision in Attar Singh (where cash payments were admittedly made) was found distinguishable on facts, while decisions where disallowance was set aside for want of proof of cash payment (including the Division Bench confirmation noted) supported the approach that actual cash/monetary payment is a factual prerequisite for invoking Section 40A(3). There was no perversity in the Tribunal's conclusion declining to attract Section 40A(3) on the facts of this case.

The Tribunal correctly held that Section 40A(3) does not apply to the assessee's transactions; the appeal is dismissed.

Final Conclusion: The appeal under Section 260A is dismissed; the substantial questions of law are answered against the revenue and the Tribunal's order upholding the CIT(A) is confirmed.

Infructuous writ petition - expiry of statutory order by operation of law - orders passed under Section 281B of the Income Tax Act - liberty to file fresh proceedings - no expression of opinion on merits

Infructuous writ petition - expiry of statutory order by operation of law - The writ petition challenging orders dated 17th December, 2021 was held to be infructuous as those orders expired by efflux of time on 17th June, 2022. - HELD THAT: - The Court found that the orders impugned in the present petition (dated 17th December, 2021 and issued under Section 132(9B) of the Act) ceased to have effect on 17th June, 2022 by operation of law. In view of that expiry, the petition no longer presented a live controversy and was therefore rendered infructuous. The Court further noted that subsequent orders dated 16th June, 2022 under Section 281B had been passed by the Assessing Officer and had not been challenged in the present proceedings, a circumstance which reinforced the conclusion of non-justiciability of the instant writ petition. [Paras 6]

Petition dismissed as infructuous.

Orders passed under Section 281B of the Income Tax Act - liberty to file fresh proceedings - no expression of opinion on merits - Liberty was granted to the petitioner to initiate fresh proceedings to challenge the subsequent orders dated 16th June, 2022 passed under Section 281B of the Act; the Court did not express any view on the merits. - HELD THAT: - Recognising that the operative orders in issue had been superseded by later orders of the Assessing Officer, the Court disposed of the present petition while expressly permitting the petitioner to file a fresh petition in accordance with law to challenge the 16th June, 2022 orders. The Court clarified that it was not adjudicating the substantive merits of the controversy and left the rights and contentions of the parties open for determination in any fresh proceedings. [Paras 7]

Liberty to file fresh challenge to the orders dated 16th June, 2022; merits left open.

Final Conclusion: The writ petition was disposed of as infructuous because the impugned orders had expired; the petitioner was granted liberty to challenge the subsequent orders dated 16th June, 2022 under Section 281B of the Act by filing fresh proceedings, and the Court declined to express any opinion on the merits.

Notice under Section 148 issued to a dissolved/amalgamated company - Quashing of notice issued to non-existent entity - Show cause notice under Section 148A(b) - Right to raise objections and file supplementary reply before Assessing Officer - Liberty to challenge Assessing Officer's decision in accordance with law

Notice under Section 148 issued to a dissolved/amalgamated company - Quashing of notice issued to non-existent entity - Clarification and treatment of the impugned notice dated 20th April, 2021 which had been previously quashed as being issued against a company dissolved after amalgamation. - HELD THAT: - The Court recorded that by its order dated 19th January, 2022 the impugned notice dated 20th April, 2021 under Section 148 had been quashed insofar as it was issued against a non-existent company which had been dissolved following amalgamation. The petitioner had earlier notified the jurisdictional Assessing Officer of the amalgamation and sought PAN cancellation, and relied on authorities holding that proceedings against a non-existent entity are not maintainable. The present clarification proceeding does not reopen the quashing; instead the Court directed that any remaining objections be taken in reply before the Assessing Officer in the fresh proceedings initiated under Section 148A, and allowed filing of a supplementary reply where time has lapsed. [Paras 1, 2, 3, 5]

The Court affirmed that the earlier order quashing the notice as issued to a dissolved company stands, and directed the petitioner to raise all objections before the Assessing Officer in the Section 148A proceedings, permitting a supplementary reply if necessary.

Show cause notice under Section 148A(b) - Right to raise objections and file supplementary reply before Assessing Officer - Liberty to challenge Assessing Officer's decision in accordance with law - Direction on procedure where Assessing Officer has treated prior notices as show-cause notices under Section 148A(b) and initiated fresh reassessment against the amalgamated entity. - HELD THAT: - The Court noted the Assessing Officer's communication that notices issued between 01 April 2021 and 30 June 2021 had been held by the Supreme Court to be show-cause notices under Section 148A(b) and that fresh proceedings have been initiated against the amalgamated company. Rather than adjudicating the legality of those proceedings, the Court placed the onus on the petitioner to raise all objections in its reply to the Assessing Officer; where time for filing has expired the petitioner is permitted to file a supplementary reply within one week. Any grievance as to the Assessing Officer's decision may be challenged by the petitioner in accordance with law. [Paras 4, 5, 6]

The petitioner's remedy is to press all objections before the Assessing Officer in the Section 148A proceedings (including by supplementary reply if time has lapsed), with liberty to challenge the Assessing Officer's decision by appropriate legal remedy.

Final Conclusion: Application for clarification disposed of by directing the petitioner to raise all objections before the Assessing Officer in the proceedings under Section 148A, permitting a supplementary reply where time has expired, and preserving the petitioner's right to challenge the Assessing Officer's decision in accordance with law.

Composite contract - dominant purpose test - fees for technical services (Explanation 2 to Section 9(1)(vii)) - tax deduction at source under Section 194J - construction, assembly or like projects exclusion from fees for technical services - estoppel from advancing a contrary case after taking an inconsistent stand before the Tribunal

Composite contract - dominant purpose test - tax deduction at source under Section 194J - Whether the contract between BMRCL and the consortium is a composite contract dominated by supply of rolling stock and therefore not amenable to segregation for TDS under Section 194J - HELD THAT: - The Court accepted that both Revenue and assessee had treated the contract as an indivisible/composite contract before the ITAT and noted the Revenue's own pleading to that effect (para 21). Applying the dominant purpose test, the Court found the contract's main object to be supply of passenger rolling stock, with ancillary activities (design, testing, commissioning, training) serving that dominant purpose. The service component (training) was quantitatively negligible relative to total contract value (paras 17, 18, 27). On these factual and legal foundations the Court held that segregation to attract TDS under Section 194J was not warranted in the circumstances. [Paras 17, 18, 21, 27]

The contract is a composite contract dominated by supply of rolling stock and cannot be segregated to attract deduction of tax at source under Section 194J.

Fees for technical services (Explanation 2 to Section 9(1)(vii)) - construction, assembly or like projects exclusion from fees for technical services - Whether the services rendered (design, testing, commissioning, training) fall within 'fees for technical services' under Explanation 2 to Section 9(1)(vii) or are excluded as consideration for construction, assembly or like projects - HELD THAT: - The Court examined Explanation 2 and held it to be plain and covering fee for managerial, technical or consultancy services but expressly excluding consideration for construction, assembly, mining or like projects (para 14). The Court construed the term 'assembly' to encompass manufacture/assembly of rolling stock undertaken by the consortium leader, and concluded that the services in question were incidental to the assembly/supply project rather than independent technical consultancy fees (paras 14, 17, 29). Consequently, the services did not qualify as fee for technical services attracting the provisions relied upon by Revenue. [Paras 14, 17, 29]

The services were ancillary to a construction/assembly type project and did not amount to 'fees for technical services' under Explanation 2 to Section 9(1)(vii).

Estoppel from advancing a contrary case after taking an inconsistent stand before the Tribunal - tax deduction at source under Section 194J - Whether Revenue could adopt a contrary stance before this Court after having taken the composite/indivisible contract position before the ITAT - HELD THAT: - The Court observed that the Revenue had explicitly argued the contract to be composite before the ITAT (para 21) and therefore could not be permitted to advance an inconsistent case at this stage (paras 22-23). Reliance on earlier precedents was applied to refuse Revenue's attempt to improve or change its case on appeal. The factual finding that payments were made to the consortium leader (BEML) and that Revenue had not objected to 90% of payments on TDS grounds further supported the Court's refusal to entertain a new contrary stance (paras 19-20, 29). [Paras 20, 21, 22, 23, 29]

Revenue is estopped from advancing a contrary case on appeal; having taken the composite contract position before the ITAT, it cannot now seek segregation to invoke TDS under Section 194J.

Final Conclusion: The appeals are dismissed. The contract is a composite contract dominated by supply of rolling stock; the ancillary services are excluded from 'fees for technical services' under Explanation 2 and do not attract TDS under Section 194J, and Revenue cannot advance a contrary case after having taken the composite contract stance before the Tribunal.

Reopening under Section 147 read with Section 148 - change of opinion - new tangible material - genuineness of transactions - onus of proof and shifting of onus - tax liability in share transfer transactions

Reopening under Section 147 read with Section 148 - change of opinion - new tangible material - Validity of reassessment proceedings initiated by issue of notice under Section 148 in absence of any new tangible material and whether the reopening amounted to impermissible change of opinion. - HELD THAT: - The Court examined whether the Assessing Officer had jurisdiction to reopen the assessment for the year 2009-10. The record shows that the Assessing Officer, during the original scrutiny assessment, had called for and received explanations and documents relating to the share sale/purchase and had accepted the losses by allowing set off against sale proceeds of land. At the stage of initiation of reassessment no new tangible material had been found; the materials relied upon at reopening were already available on the record of the original assessment. Both the Commissioner (Appeals) and the Appellate Tribunal re-examined the documentary material and concluded that the reassessment was founded on a mere change of opinion and not on any fresh tangible material conferring jurisdiction to reopen. The Court agreed with this approach and held that in these circumstances the Assessing Officer had no jurisdiction to initiate reassessment under Section 147 read with Section 148. [Paras 8, 12]

Reopening was invalid for lack of new tangible material; reassessment was a prohibited change of opinion.

Genuineness of transactions - onus of proof and shifting of onus - tax liability in share transfer transactions - Whether the loss claimed by the assessee on sale and purchase of shares could be disallowed on merits as sham or non-genuine transactions. - HELD THAT: - On merits the Tribunal and Commissioner (Appeals) considered the supporting documents produced by the assessee - applications for shares, share certificates, filings with the Registrar of Companies showing the assessee as shareholder, PAN details, confirmation letters and banking evidence of payments/receipts. The authorities found these documents sufficient to establish the genuineness of the transactions; the Revenue produced no contrary evidence to displace them. The Tribunal correctly observed that once the assessee discharged the primary onus of proof, the burden shifted to the Revenue to rebut the documentary evidence, which it failed to do. The Court also noted that in any event the statutory scheme treats tax liability, if any, arising from such transactions as primarily relevant in the hands of recipients under later amendments, reinforcing that the transferor could not be subjected to tax on that basis in the facts of the case. [Paras 9, 10, 11]

Disallowance of the loss was deleted; the share transactions were held to be genuine and the loss allowable.

Final Conclusion: Both substantial questions of law raised by the Revenue are answered against it; the reassessment was invalid for want of new tangible material and the disallowance of the loss on share transactions was rightly deleted by the lower authorities. The Revenue's appeal is dismissed.

Characterisation of expenditure as revenue or capital - Classification of subsidy as capital receipt - Doctrine of matching principles - Purpose test for determining nature of subsidy - Restriction on including subsidy in actual cost under Explanation 10 to section 43(1)

Characterisation of expenditure as revenue or capital - Doctrine of matching principles - The ISO certification expenditure of the assessee was revenue expenditure and rightly allowed in full by the CIT(A) and the ITAT. - HELD THAT: - The Court agreed with the CIT(A) and the ITAT that payments for obtaining ISO certification do not augment or form part of the fixed capital of the assessee. Applying the settled test that expenditure which facilitates carrying on of business more efficiently without touching fixed capital is revenue in nature, the Court held that ISO certification expenses create a commercial advantage but do not add to the enduring fixed capital of the company. The Tribunal's conclusion treating the amount as revenue expenditure was therefore sustained. [Paras 6, 7]

Addition disallowing ISO certification expense deleted; expenditure treated as revenue.

Classification of subsidy as capital receipt - Purpose test for determining nature of subsidy - Restriction on including subsidy in actual cost under Explanation 10 to section 43(1) - The subsidy of Rs.3.87 crore was correctly held to be capital in nature by the CIT(A) and the ITAT and the addition made by the Assessing Officer was rightly deleted. - HELD THAT: - On the material produced during scrutiny, including the sanction and governmental correspondence, the authorities found that the subsidy related to administrative expenses incurred in execution of a project for upgradation/expansion of infrastructure facilities. Applying the purpose test for characterising receipts, the Court found that such administrative expenditure in the context of expansion of infrastructure falls within capital character. The ITAT examined the components of the sanctioned subsidy and concurred with CIT(A)'s treatment; the High Court found no perversity or error of law in those concurrent findings and no breach of Explanation 10 to section 43(1) requiring interference. [Paras 8, 9]

Addition of the subsidy was deleted; subsidy treated as capital receipt.

Final Conclusion: The concurrent conclusions of the CIT(A) and the ITAT upholding (i) treatment of ISO certification expenditure as revenue and (ii) classification of the contested subsidy as capital are sustained; the Revenue's appeal under Section 260A is dismissed.

Applicability of section 50C to transfer of leasehold rights - Computation of capital gains on transfer of leasehold rights

Applicability of section 50C to transfer of leasehold rights - Computation of capital gains on transfer of leasehold rights - Whether the provisions of section 50C of the Income Tax Act are attracted on transfer of leasehold rights in the assessee's premises, and whether the addition made under section 50C was sustainable. - HELD THAT: - The Tribunal found on facts that the assessee had transferred only leasehold rights in the premises (as evidenced by the Agreement of Ownership and a list of 50 similar transfers in Sitaram building) and therefore could not confer ownership rights upon the buyers. Relying on a consistent line of tribunal decisions, including the Lucknow ITAT in Shri Hari Om Gupta and the Delhi Tribunal in Noida Cyber Park (P.) Ltd., which held that section 50C applies to transfer of land or building ownership and not to mere transfer of leasehold rights, the Tribunal held that the CIT(A) erred in concluding that ownership had been transferred and in applying section 50C. The Tribunal also noted that the Department had accepted the sale value for other similar transfers while contesting only one transaction, and that the assessee had demonstrated that long-term capital gain in respect of such transfers was reflected in the return. In view of the consistent judicial position and the factual finding that only leasehold rights were transferred, the addition made under section 50C could not be sustained. [Paras 6, 7]

The appeal is allowed as section 50C is not attracted to the transfer of the leasehold rights in the facts of this case and the addition under section 50C is deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2009-10, holding that the transfer involved only leasehold rights and that section 50C does not apply to such transfers; the addition made under section 50C was thus set aside.

Addition under section 68 as unexplained income - burden of proof regarding source of brought forward capital - reliance on cash book and employment certificate to establish source of funds - ad-hoc reduction of addition without controverting evidence - condonation of delay in filing appeal

Condonation of delay in filing appeal - Delay of 215 days in filing the appeal was condoned. - HELD THAT: - The assessee furnished an application supported by an affidavit explaining non-receipt/misplacement of the CIT(A)'s order and reliance on subsequent penalty notice to discover the omission. The delay was attributed to circumstances beyond the assessee's control, including the Covid-19 pandemic, and the Revenue did not oppose condonation. The Tribunal exercised its discretion in the interest of justice and condoned the delay. [Paras 3]

Delay in filing the appeal of 215 days is condoned.

Addition under section 68 as unexplained income - burden of proof regarding source of brought forward capital - reliance on cash book and employment certificate to establish source of funds - ad-hoc reduction of addition without controverting evidence - The addition of the opening capital balance treated as unexplained income was deleted and the CIT(A)'s confirmation of part of the addition set aside. - HELD THAT: - The assessee produced a cash book, a cash flow statement covering prior years and an employment certificate showing long-standing salary receipts. The assessing officer made the addition because no reply was filed; the CIT(A) granted only an ad-hoc relief by allowing part of the claimed amount without disputing the veracity of the documents. The Revenue did not bring forward evidence to controvert the documents or the assessee's statement that the opening balance represented past savings. In these circumstances, and having regard to precedent accepting brought-forward capital where genuineness is not rebutted, the Tribunal found the assessee had placed sufficient evidence to establish the source of the opening balance and therefore the addition could not be sustained. [Paras 6]

The addition of the opening capital balance treated as unexplained income is set aside and the appeal is allowed on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the merits, accepted the assessee's evidence that the opening capital balance represented past savings; the addition treated as unexplained income was set aside and the appeal allowed.

Validity of assessments framed under section 153A read with section 143(3) where incriminating material belongs to a third party - Applicability of section 153C for incriminating material seized from a third party and required procedural route - Reliance on statements and seized documents from third parties for making additions

Validity of assessments framed under section 153A read with section 143(3) where incriminating material belongs to a third party - Applicability of section 153C for incriminating material seized from a third party and required procedural route - Assessments framed under section 153A r.w.s. 143(3) on the basis of incriminating material seized from a third party were invalid where the statutory procedure under section 153C was not followed. - HELD THAT: - The Tribunal found that the impugned assessments were framed under section 153A r.w.s. 143(3) relying on incriminating material and statements seized/recorded in the search of a third person (Shri Pradeep Kumar Jindal). Where such material pertains to a person other than the one searched, the statutory scheme prescribes proceeding under section 153C so that the material is dealt with by the Assessing Officer having jurisdiction over the person to whom the material pertains. Framing assessments under section 153A without invoking section 153C would frustrate the dedicated procedure enacted by the Legislature. The Tribunal followed the view expressed by the Hon'ble High Court of Delhi that reliance on a statement recorded in search against a third party and proceeding under section 153A, without handing over the material and following section 153C, was impermissible. On this basis, and because the facts and basis of additions were identical to those considered by the High Court, the Tribunal quashed the impugned assessment orders and allowed the appeals. [Paras 10, 11, 12, 13, 21]

Impugned assessments framed under section 153A r.w.s. 143(3) relying on material seized from a third party were quashed for non-application of the procedure under section 153C; appeals allowed.

Reliance on statements and seized documents from third parties for making additions - Deletion of additions founded on loose sheet and uncertain evidentiary basis - Addition of Rs. 52.50 lakhs made in the case of Indo Autotech Ltd. on the basis of a loose sheet found at search and subsequent uncertain treatment by the Assessing Officer was deleted. - HELD THAT: - The addition was founded on a loose sheet allegedly showing day-to-day expenditure and an RTGS payment plan which the assessee explained did not materialise and left no entries in bank account records. The Assessing Officer's approach varied during proceedings - first treating entries as unexplained expenditure, then as investments, and finally as accommodation entries - without concrete evidence to support the final addition. Given the absence of decisive material and the inconsistent conduct of the Assessing Officer, the Tribunal found no justification for sustaining the addition and deleted it. Because the assessment orders were quashed, the Tribunal refrained from adjudicating the merits further. [Paras 16, 17, 18, 19, 20]

Addition based on the loose sheet was deleted for lack of concrete evidence and inconsistent approach by the Assessing Officer; assessment quashed.

Final Conclusion: The Tribunal quashed the assessment orders for the listed assessment years and allowed the appeals: assessments framed under section 153A r.w.s. 143(3) relying on material seized from a third party were invalid for failure to follow the procedure under section 153C; the addition based on the loose sheet in Indo Autotech Ltd.'s case was deleted for want of evidentiary basis.

Estimation of income on gross receipts - Estimation of business income by percentage of turnover - Precedential effect of earlier Tribunal order in assessee's own case - Verification of the nature of receipts as business income or other income

Estimation of income on gross receipts - Precedential effect of earlier Tribunal order in assessee's own case - Estimation of business income for AY 2012-13 - HELD THAT: - The Tribunal accepted the assessee's contention that the income estimate applicable in earlier proceedings (Tribunal order for AY 2007-08 estimating income at 5% of gross receipts) should be followed for AY 2012-13. Having examined the nature of the assessee's business and attendant market circumstances (competition, price fluctuations, liquidity constraints) and noting there was no change in the business or expected gross profit percentage, the Tribunal held that an estimation at 5% of gross receipts is reasonable and meets the ends of justice. The Tribunal therefore departed from the 8% estimate upheld by the CIT(A) and directed income for AY 2012-13 be estimated at 5% of gross receipts. [Paras 6, 7]

Income for AY 2012-13 to be estimated at 5% of gross receipts; appeal allowed on this point.

Verification of the nature of receipts as business income or other income - Treatment of alleged other income of Rs. 7,37,935 for AY 2012-13 - HELD THAT: - The CIT(A) directed the Assessing Officer to examine whether the amount shown as other income in the profit and loss account constituted business receipt. If it was found to be a business receipt, it should not be separately added after estimating profit on gross receipts; if not, it should be assessed under the head 'other income'. The Tribunal found no reason to interfere with this direction of the CIT(A). [Paras 8]

CIT(A)'s direction to verify the nature of the amount and treat it either as business receipt or add it under 'other income' is upheld; related grounds dismissed.

Estimation of business income by percentage of turnover - Precedential effect of earlier Tribunal order in assessee's own case - Estimation of business income for AY 2017-18 - HELD THAT: - The Assessing Officer estimated income at 10% of receipts due to absence of books and vouchers; the CIT(A) applied an 8% estimate relying on earlier appellate views. The Tribunal, applying the same reasoning as for AY 2012-13 and having regard to the unchanged nature of the business and attendant adverse market conditions, concluded that an estimate of 5% of gross receipts is appropriate. The Tribunal allowed the assessee's plea to follow the Tribunal's earlier estimate in the assessee's own case (AY 2007-08) and directed that income for AY 2017-18 be estimated at 5% of gross receipts. [Paras 9, 10, 11, 13]

Income for AY 2017-18 to be estimated at 5% of gross receipts; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeals in part by directing that business income for AY 2012-13 and AY 2017-18 be estimated at 5% of gross receipts; the CIT(A)'s direction regarding verification of the nature of the other receipt for AY 2012-13 was upheld.

Penalty under Section 271(1)(c) of the Income Tax Act - Deletion of additions in quantum proceedings - Concealment of income - Furnishing inaccurate particulars of income - Ambiguous penalty notice - Preliminary satisfaction for initiation of penalty proceedings - Penalty void ab initio

Penalty under Section 271(1)(c) of the Income Tax Act - Deletion of additions in quantum proceedings - Whether penalty could be sustained in respect of additions (provision for liquidated damages) which were deleted in the quantum proceedings - HELD THAT: - The Tribunal held that once the addition in respect of provision for liquidated damages was deleted in the quantum appeal, the very foundation for initiation and continuance of penalty proceedings in respect of that addition ceased to exist. The decision follows precedents that where the assessment additions on the basis of which penalty was levied are altered or deleted by the appellate authority, penalty proceedings based on those additions cannot be sustained. Consequently, there is no subsisting basis to uphold the penalty charged in respect of the deleted addition. [Paras 9, 12]

Penalty levied in respect of the addition for provision for liquidated damages is not sustainable and is set aside.

Ambiguous penalty notice - Preliminary satisfaction for initiation of penalty proceedings - Penalty void ab initio - Whether the penalty is vitiated by an ambiguous notice that failed to specify under which limb of Section 271(1)(c) proceedings were initiated (concealment or furnishing inaccurate particulars) - HELD THAT: - The Tribunal observed that the assessment and the penalty notice did not record the AO's satisfaction clearly nor specify whether penalty proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars. The notice and the penalty order were therefore ambiguous, the AO having even used a blended phrase 'concealed income by furnishing inaccurate particulars.' Relying on authoritative decisions, the Tribunal concluded that such ambiguity in the notice and absence of clear satisfaction vitiate the penalty proceedings, rendering the penalty void ab initio. The CIT(A) failed to appreciate this defect in upholding the penalty. [Paras 10, 11, 12]

Penalty is void for want of a clear, unambiguous notice specifying the limb of Section 271(1)(c) and is set aside.

Final Conclusion: The appeal is allowed; the penalty order dated 23.03.2018 and the CIT(A)'s confirmation dated 10.06.2019 are set aside because the addition forming the basis for penalty was deleted in quantum proceedings and the penalty notice was ambiguous as to the limb of Section 271(1)(c) under which proceedings were initiated.

Penalty under section 271C - TDS deduction on contractual/works payments under section 194C - External Development Charges (EDC) - Payment to Government or routed through a Government department - effect on TDS liability - Bonafide belief/reasonable cause as defence to penalty for failure to deduct TDS - CBDT clarification on applicability of TDS to payments to development authorities - Survey under section 133A and consequent proceedings

External Development Charges (EDC) - Payment to Government or routed through a Government department - effect on TDS liability - TDS deduction on contractual/works payments under section 194C - Penalty under section 271C - Bonafide belief/reasonable cause as defence to penalty for failure to deduct TDS - CBDT clarification on applicability of TDS to payments to development authorities - Whether penalty under section 271C is sustainable for non-deduction of TDS on payments of External Development Charges (EDC) where payments were made to HUDA routed through the Department of Town and Country Planning (a Government department) and where governmental directions/clarifications indicated no TDS be deducted. - HELD THAT: - The Tribunal found on the material on record that the EDC receipts were deposited in the Consolidated Fund of the State and payments by the assessee were made in pursuance of directions of the Government/DTCP and routed through DTCP to HUDA. Co ordinate Benches had held on identical facts that such payments were not contractual payments to HUDA for carrying out specific works for the assessee and that the obligation arose by reason of licence/levy by a Governmental authority which engaged HUDA for execution. Prior to the CBDT clarification of 23.12.2017 there was lack of clarity on the applicability of TDS on such payments. In those circumstances the assessee was under a bonafide belief that no TDS was required and therefore had reasonable cause for non deduction. Applying the settled principle that penalty under section 271C requires contumacious conduct and is not leviable where there is a bona fide/legal ambiguity or governmental direction indicating no deduction, the Tribunal held the levy of penalty unsustainable. The Tribunal followed earlier coordinate decisions which cancelled penalties in similar circumstances and concluded that the impugned penalty could not be sustained.

Penalty under section 271C for non deduction of TDS on EDC paid to HUDA (routed through DTCP/Government) is not sustainable and is deleted.

Final Conclusion: Appeals allowed; impugned orders sustaining penalty under section 271C set aside and penalty deleted, having regard to payments being routed through the Government/DTCP, governmental clarification and co ordinate Tribunal precedents establishing bona fide belief that no TDS was deductible.

Jurisdiction under section 153C read with section 153A - requirement of incriminating material/seized material to confer jurisdiction - assessment to be founded on seized material - limitation of seized-document's bearing to the relevant assessment year

Jurisdiction under section 153C read with section 153A - requirement of incriminating material/seized material to confer jurisdiction - limitation of seized-document's bearing to the relevant assessment year - Whether the Assessing Officer had jurisdiction to frame assessment under section 153C read with section 153A for Assessment Year 2006-2007 where no incriminating material/information was found in the search pertaining to that year. - HELD THAT: - The Tribunal examined the notice under section 153C r.w.s.153A and the seized records. The only seized document identified as belonging to the assessee related to a registered sale deed dated 20.12.2010 (pertaining to AY 2011-12). There was no other incriminating material discovered during the search that had a bearing on AY 2006-07. The Tribunal held that mere seizure of a document does not automatically confer jurisdiction under section 153C for assessment years other than that to which the seized material relates. The Assessing Officer must verify seized material and be satisfied that it is incriminating and bears upon determination of total income for the particular assessment year(s) before jurisdiction under section 153C can be exercised. If seized material is not incriminating or has no bearing on the year in question, jurisdiction cannot be assumed. The Tribunal relied on the principle that assessment under section 153A/153C must be founded on the material discovered in the search and noted consistency with earlier High Court decisions, including the decision in Commissioner of Income Tax Vs. Continental Warehousing Corporation (Nhava Sheva) Limited and Commissioner of Income Tax Vs. Kabul Chawla , as cited in the order. Applying this principle to the present facts, the Tribunal found no basis to sustain the assessment for AY 2006-07 since the seized material did not relate to or incriminate the assessee for that year. [Paras 4, 7]

The Tribunal upheld the CIT(A)'s conclusion that the Assessing Officer lacked jurisdiction under section 153C r.w.s.153A to make the assessment for AY 2006-2007 in the absence of incriminating seized material relating to that year; the Revenue's appeal is dismissed.

Final Conclusion: The order of the CIT(A) quashing the assessment for Assessment Year 2006-2007 for lack of jurisdiction under section 153C r.w.s.153A is upheld; the Revenue's appeal is dismissed.

Repayment/acceptance of loans by journal entries constituting contravention of section 269SS and 269T - penalty under section 271D and section 271E - reasonable cause under section 273B

Repayment/acceptance of loans by journal entries constituting contravention of section 269SS and 269T - penalty under section 271D and section 271E - Whether repayment of loan by way of general/journal entries and acceptance of loan by way of general/journal entries attract penalty under sections 271D and 271E as contravening sections 269SS and 269T - HELD THAT: - The Tribunal examined the factual matrix that the assessee effected reassignment of an outstanding loan by passing journal/general entries on 31/03/2013 and that the Commissioner (Appeals) had deleted the penalty on the ground that no exchange of money had taken place. The Tribunal held that the CIT(A)'s finding was contrary to the decision of the Hon'ble Bombay High Court in Triumph International Finance India Pvt. Ltd., which construed Section 269T as mandating repayment of loans/deposits by the modes specified therein and held that repayment by debiting accounts through journal entries falls within the mischief of Section 269T and therefore attracts penal consequences under the penalty provisions enacted for non-compliance. The Tribunal observed that the CIT(A) had not reached a conclusion sustaining the High Court's view and that, having regard to the jurisdictional High Court decision pronounced prior to the transactions, the assessee could not rely on earlier contrary decisions as a reasonable cause for non-compliance. Consequently, the Tribunal allowed the Revenue's ground and set aside the CIT(A)'s deletion of penalty as being inconsistent with the binding High Court precedent. [Paras 11, 12]

Finding of the CIT(A) deleting penalty is set aside; repayment/acceptance by journal entries is contrary to Section 269SS/269T as interpreted by the Hon'ble Bombay High Court and the Revenue's appeal is allowed on this ground.

Reasonable cause under section 273B - Existence of reasonable cause for contravention of sections 269SS/269T and consequent exemption from penalty under section 273B - HELD THAT: - The Tribunal noted that the CIT(A) had discussed the assessee's submissions on reasonable cause but had not given a conclusive finding whether a reasonable cause existed so as to relieve the assessee from penalty under Section 273B. The Tribunal further recorded that the assessee had not pressed the matter before the Tribunal (by appeal/cross-objection or under Rule 27) and that the Department's challenge was confined to the CIT(A)'s legal conclusion on journal entries. As a result, the Tribunal did not adjudicate the substantive question of whether reasonable cause existed in the assessee's case and observed that the point remained undecided in the proceedings before it. [Paras 7, 11]

Question of reasonable cause under Section 273B was not finally decided by the Tribunal in these proceedings and remains open for determination by the appropriate forum.

Final Conclusion: The Revenue appeal is allowed on the limited ground that repayment/acceptance of loans by journal/general entries is contrary to sections 269SS/269T as interpreted by the Hon'ble Bombay High Court; the CIT(A)'s deletion of penalty is set aside. The question whether the assessee had a reasonable cause under section 273B to escape penalty was not finally adjudicated and remains open for determination by the competent authority.

Jurisdiction under section 263 - erroneous and prejudicial to the interests of Revenue - Explanation 2 to section 263 - commencement of business - allowability of revenue expenditure versus capitalization - fishing and roving enquiry - two views permissible in law

Jurisdiction under section 263 - Explanation 2 to section 263 - commencement of business - allowability of revenue expenditure versus capitalization - fishing and roving enquiry - two views permissible in law - Ld. Pr.CIT's exercise of jurisdiction under section 263 in setting aside the assessment was not justified and the order of the Pr.CIT is unsustainable. - HELD THAT: - The Tribunal found that the Assessing Officer had issued detailed enquiries (show-cause questionnaire), received comprehensive replies from the assessee and, after considering the explanations and supporting documents including the joint venture and technology agreements, allowed the claimed expenditures and depreciation. The Pr.CIT's conclusion that the AO passed the assessment without making necessary inquiries was factually incorrect because the record demonstrates the AO conducted specific enquiries and sought further particulars before allowing the claim. Explanation 2 to section 263 did not apply: the Pr.CIT did not identify any of the statutory pre-conditions (such as absence of any inquiry, allowance of relief without inquiry, non-compliance with a Board direction, or failure to follow a binding decision) and merely directed unspecified further enquiries. The mere fact that the assessee had not generated revenue by the relevant year did not, by itself, render the AO's view erroneous or justify reopening-where the AO adopted a plausible view after inquiry, the principle that two views permissible in law precludes exercise of jurisdiction under section 263 applies. Reliance on precedents (including Malabar Industrial and the decisions cited concerning post-setup gaps between setting up and commercial operations) supports that expenses incurred after setting up but before commercial revenue may legitimately be allowed as revenue expenditure. The Pr.CIT's direction amounted to an impermissible fishing and roving inquiry without specifying material omissions or incorrect application of law, and therefore the exercise of revisional power was improper. [Paras 11, 14, 16, 17]

Order of the Pr.CIT under section 263 set aside; assessment allowed to stand as concluded by the Assessing Officer.

Final Conclusion: The ITAT allowed the assessee's appeal, set aside the Pr.CIT's order under section 263 as unsustainable, and upheld the Assessing Officer's grant of the claimed deductions and depreciation after noting that the AO had made requisite enquiries and taken a permissible view.

Jurisdiction of DRI to issue show cause notice - proper officer under Section 28 - power to keep matters in call book under Section 28(9A) - Board instruction No.04/2021 directing pending of SCNs - maintainability of writ challenging consequential orders without attacking Board direction

Power to keep matters in call book under Section 28(9A) - Board instruction No.04/2021 directing pending of SCNs - Validity of sending the petitioner's show cause notice to the call book in exercise of power under Section 28(9A) in light of the Board's instruction No.04/2021. - HELD THAT: - The Court held that Section 28(9A) authorises a proper officer to defer determination of the amount of duty where the officer is unable to determine it for specified reasons, including where the Board issues specific directions to keep similar matters pending. The Central Board issued Instruction No.04/2021 directing that certain DRI-issued SCNs be kept pending until further directions, in view of the Supreme Court proceedings concerning the jurisdictional question posed in Canon India. As the petitioner's case was of the same character and the Board's instruction expressly applied to such matters, the respondent's act of placing the petitioner's SCN on the call book was taken to be in exercise of the power contemplated by Section 28(9A) and in accordance with the Board's direction. The Court noted that the petitioner did not impugn the validity of Instruction No.04/2021 and accepted that the instruction provided a relevant basis for keeping the matter pending.

The transfer of the petitioner's SCN to the call book pursuant to the Board's Instruction No.04/2021 and under Section 28(9A) was upheld as a permissible exercise of power.

Jurisdiction of DRI to issue show cause notice - maintainability of writ challenging consequential orders without attacking Board direction - Whether the writ petition seeking quashing of the show cause notice issued by DRI could be maintained when the petitioner did not challenge the Board's instruction which formed the basis for keeping the SCN pending. - HELD THAT: - The petitioner relied on the Supreme Court decision in Canon India to contend that DRI officers lacked jurisdiction to issue the SCN. However, the Court observed that the issue raised in Canon was under reconsideration/review and that the Board had issued Instruction No.04/2021 directing that SCNs of the nature in question be kept pending. The High Court emphasised that the petitioner has not challenged the validity of the Board's instruction. Given that the consequential action (keeping the SCN in the call book) was taken pursuant to that unchallenged instruction, the Court found the writ petition not maintainable to the extent it sought reliefs contrary to the Board direction. The Court therefore declined to quash the show cause notice on that basis.

The writ petition challenging the show cause notice was dismissed as not maintainable insofar as it attacked the respondent's action taken pursuant to the unchallenged Board instruction; no quashing of the SCN was granted.

Final Conclusion: The writ petition was dismissed. The High Court held that the respondent lawfully placed the petitioner's show cause notice in the call book under Section 28(9A) in view of Board Instruction No.04/2021 and that the petition was not maintainable to attack consequential orders taken pursuant to that unchallenged instruction.

Revocation of Custom Broker licence - Forfeiture of security deposit and imposition of penalty - Obligation under Regulation 10(d) of CBLR to advise client and report non compliance - Due diligence obligation under Regulation 10(e) of CBLR in respect of information imparted - Verification obligation under Regulation 10(n) of CBLR in respect of IEC and GSTIN by documentary or online means - Presumption of genuineness of government issued certificates and effect on KYC verification - Reliance on inquiry report without independent findings

Revocation of Custom Broker licence - Reliance on inquiry report without independent findings - Validity of revocation of the appellant's Custom Broker licence based on confirmed violations - HELD THAT: - The Tribunal examined the confirmed charges that led to revocation and found the impugned order repeatedly relied on the inquiry report without articulating independent findings as to how the appellant had assisted exporters in mis declaration. The record shows that certain charges (Regulation 10(a), 10(k), 10(p)) were dropped by the impugned order itself, and for the remaining confirmed charges the adjudicating authority did not demonstrate specific acts by which the broker facilitated mis declaration. In the absence of specific findings and where the broker primarily acted on documents supplied by exporters, the Tribunal found no merit in upholding revocation and set aside the impugned order (paras 4.1, 4.2, 4.3, 4.4). [Paras 4]

Revocation set aside for want of sustainable findings; impugned revocation order quashed.

Obligation under Regulation 10(d) of CBLR to advise client and report non compliance - Whether the appellant breached Regulation 10(d) by failing to advise clients or report non compliance when exports were allegedly mis declared - HELD THAT: - The adjudicating authority confirmed breach of Regulation 10(d) on the basis that goods were mis declared and the broker failed to advise or report. The Tribunal observed that custom brokers normally operate on the basis of documents provided by exporters and do not physically inspect goods prior to their receipt in the customs area. No specific manner in which the broker actively assisted mis declaration was established. Given the absence of factual findings demonstrating active complicity or a document based duty breached in the particular circumstances, the Tribunal found the confirmation unsustainable and dropped the charge under Regulation 10(d) (para 4.2). [Paras 4]

Charge under Regulation 10(d) dropped; no breach established on the available material.

Due diligence obligation under Regulation 10(e) of CBLR in respect of information imparted - Whether the appellant failed to exercise due diligence under Regulation 10(e) in relation to the export documents supplied - HELD THAT: - The Tribunal noted the confirmed charge rested on alleged over valuation and misclassification discovered only after physical examination of cargo. A customs broker acting on exporter supplied documents could not reasonably detect such mis declarations from documents alone without examining goods. The authority's conclusion that the broker failed to scrutinise documents exhaustively was therefore not a sustainable basis to uphold a breach of Regulation 10(e) in the circumstances of this case (para 4.3). [Paras 4]

Charge under Regulation 10(e) dropped; due diligence breach not established from documents alone.

Verification obligation under Regulation 10(n) of CBLR in respect of IEC and GSTIN by documentary or online means - Presumption of genuineness of government issued certificates and effect on KYC verification - Whether the appellant failed Regulation 10(n) by not physically meeting exporters or independently investigating the authenticity of IEC/GSTIN and address - HELD THAT: - The Tribunal applied the reasoning in the cited Tribunal order to hold that Regulation 10(n) requires verification that IEC and GSTIN were indeed issued by the competent authorities, which can be satisfied by documentary checks or online verification; it does not impose on the broker a duty to re investigate or to ensure the correctness of the governmental issuance itself. The appellant had obtained bank signed authorization, IEC and GST certificates, which satisfied the verification obligation; absence of physical contact with exporters was not a valid ground to uphold the charge (para 4.4). [Paras 4]

Charge under Regulation 10(n) dropped; documentary/online verification suffices and physical meeting is not required.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the confirmed charges that formed the basis for revocation, forfeiture and penalty have been found unsustainable on the material and law, consequently the revocation, forfeiture of deposit and penalty are quashed.

Look Out Circular / LOC - restriction on foreign travel pending investigation - powers of SFIO to investigate and supersede other agencies - economic public interest as justification for denying departure - flight risk and necessity of cooperation with investigation - writ under Article 226 challenging travel restriction

Look Out Circular / LOC - restriction on foreign travel pending investigation - flight risk and necessity of cooperation with investigation - economic public interest as justification for denying departure - Validity of the LOC and the travel restriction imposed on the petitioner and whether the writ seeking withdrawal of the LOC ought to be allowed. - HELD THAT: - The Court held that the SFIO, entrusted with investigation into the affairs of Gitanjali Gems Limited and associated entities involving very large alleged defaults and losses to public funds, had material connecting the petitioner to transactions under scrutiny. The investigation under the Companies Act is of a specialised character and may override other investigations; the nature, scale and cross-border aspects of the alleged fraud, together with the petitioner's transactional links and the inadequacy of the information furnished, justified concern that permitting travel would risk evasion and hamper the investigation. The Court treated the relevant Government/BoI Guidelines (including the exceptional clause that departure may be declined where departure is detrimental to economic interests or larger public interest) and held that in the facts of this case clause (L) covered the petitioner's situation. The SEBI order on certain aspects did not obviate the need for the SFIO to elicit full and true information or prevent the SFIO from taking protective measures during an ongoing complex investigation. Having considered these factors, the Court found the issuance of LOC and the travel restriction was not unwarranted. [Paras 12, 13, 14]

The petition challenging the LOC and travel restriction is dismissed.

Final Conclusion: The High Court dismissed the petition under Article 226 seeking withdrawal of the Look Out Circular and travel restrictions, holding that the SFIO's measures were justified in the ongoing investigation into large-scale alleged fraud and the risk of evasion.

Transfer of pending winding-up proceedings to NCLT under amended Section 434(1)(c) - test of an irreversible situation as bar to transfer - party-status of a secured creditor in winding-up proceedings - discretion of the Company Court to retain or transfer pending winding-up proceedings - mandatory transfer in absence of irreversible or exceptional circumstances - competence of NCLT to consider schemes of compromise and arrangement under Section 230 read with IBBI regulations - no pre-condition of a pending proceeding under the Insolvency and Bankruptcy Code before NCLT for transfer

Party-status of a secured creditor in winding-up proceedings - transfer of pending winding-up proceedings to NCLT under amended Section 434(1)(c) - A secured creditor who has stood outside the winding-up proceeding is nevertheless a "party" within the meaning of amended Section 434(1)(c) and is entitled to apply for transfer of the winding-up proceedings to the NCLT. - HELD THAT: - The Court held that a winding-up proceeding is in rem and benefits all creditors, and that a secured creditor may lawfully choose to enforce its security dehors the winding-up. That choice does not disentitle the secured creditor from being a "party" for the purposes of the amended provision enabling transfer. The Court relied on established authorities recognizing a secured creditor's right to stand outside the winding up and enforced that principle to conclude that the petitioner, though having stood outside the winding-up, could apply for transfer under Section 434(1)(c). [Paras 10]

The petitioner, though a secured creditor who stood outside the winding-up, is a party under Section 434(1)(c) and entitled to seek transfer.

Test of an irreversible situation as bar to transfer - mandatory transfer in absence of irreversible or exceptional circumstances - discretion of the Company Court to retain or transfer pending winding-up proceedings - The Company Court must transfer pending winding-up proceedings to the NCLT unless an irreversible or exceptional situation has arisen which makes it impossible to set the clock back. - HELD THAT: - Adopting the ratio in Action Ispat and subsequent authorities, the Court reiterated that post-amendment there is a strong legislative intent to transfer proceedings to the NCLT and that the Company Court's discretion to retain jurisdiction is limited to cases where irreversible steps have been taken. Applying that test to the present facts, the Court found no irreversible acts: the Official Liquidator had not sold assets, no scheme for repayment had been framed, and assets remained largely under contributory control without irreversible disposals. The inaction of the Official Liquidator and the contributory's conduct strengthened the applicant's case for transfer. Accordingly, no exceptional circumstance existed to justify retention by this Court. [Paras 6, 9, 11]

No irreversible or exceptional situation exists; the obligation is to transfer the winding-up proceedings to the NCLT.

No pre-condition of a pending proceeding under the Insolvency and Bankruptcy Code before NCLT for transfer - competence of NCLT to consider schemes of compromise and arrangement under Section 230 read with IBBI regulations - There is no requirement that an application under the Insolvency and Bankruptcy Code be pending before the NCLT as a pre-condition for transfer; the NCLT is competent to consider schemes of compromise or arrangement under Section 230 read with the IBBI regulations. - HELD THAT: - The Court rejected the contributory's contention that a pending petition under the Code before the NCLT is a pre-condition to transfer, observing that such a requirement does not arise from the language of amended Section 434(1)(c). The Court further held that schemes of compromise and arrangement may be submitted under Section 230 and governed by Rule 2B of the IBBI (Liquidation Process) Regulations, and that Section 29A of the Code addresses eligibility for framing schemes. Thus, objections based on absence of a prior IBC proceeding or on the NCLT's competence to deal with a scheme were repelled. [Paras 11]

No such pre-condition exists and the NCLT can consider schemes under Section 230 read with applicable IBBI regulations.

Final Conclusion: The Company Petition CP No. 387 of 2014 and all applications therein are ordered transferred forthwith to the National Company Law Tribunal, Kolkata; CA No. 12 of 2022 is allowed and the records of this Court are disposed of insofar as those proceedings are concerned.

5th proviso to Section 434(1)(c) of the Companies Act, 2013 - transfer of pending winding-up proceedings to the Tribunal - transfer of winding-up proceedings to the National Company Law Tribunal (NCLT) - irreversible stage of winding-up - court's discretion to retain or transfer pending proceedings - custodia legis and possession by the Official Liquidator

5th proviso to Section 434(1)(c) of the Companies Act, 2013 - transfer of pending winding-up proceedings to the Tribunal - transfer of winding-up proceedings to the National Company Law Tribunal (NCLT) - irreversible stage of winding-up - custodia legis and possession by the Official Liquidator - court's discretion to retain or transfer pending proceedings - Whether the High Court should retain jurisdiction over the winding-up proceedings or transfer the petition to the National Company Law Tribunal under the 5th proviso to Section 434(1)(c) of the Companies Act, 2013. - HELD THAT: - The Court held that the proviso does not automatically oust the High Court's jurisdiction; the Company Court retains discretion to transfer pending winding-up proceedings to the Tribunal depending upon whether an irreversible stage in the winding-up has been reached. The determinative test is factual: if irreversible steps have been taken such that it is impossible to set the clock back, the court should refrain from transfer; otherwise the presumption favouring transfer under the legislative scheme prevails. Applying this test, the Court found that although the Official Liquidator had taken possession of assets, no irreversible steps (such as any sale of assets) had been taken and nothing in the Official Liquidator's status report or the material before the Court showed that it would now be impossible to revert the position. Consequently, there was no justification for the Court to retain jurisdiction and the proceedings were fit for transfer to the NCLT. [Paras 5, 6, 8]

CP/560/2011 together with connected petitions and pending applications stands transferred to the National Company Law Tribunal, Kolkata.

Court's discretion to retain or transfer pending proceedings - transfer of winding-up proceedings to the National Company Law Tribunal (NCLT) - Whether a formal application by a party is a precondition to transfer proceedings to the Tribunal under the proviso, or whether the Court may suo moto transfer. - HELD THAT: - The Court rejected the contention that transfer could occur only upon a party's formal application. The making of an application is a formality and not imperative; the Company Court must examine the facts and, if satisfied that the conditions for transfer are met, may transfer proceedings to the Tribunal even in the absence of a formal transfer application. To insist on a filed application where the facts show transfer is warranted would amount to a manifest jurisdictional error. [Paras 7, 8]

The Court may suo moto transfer winding-up proceedings to the Tribunal; a formal application by a party is not a necessary precondition.

Final Conclusion: The High Court, applying the test of whether an irreversible stage of winding-up has been reached, found no such stage on the facts and therefore transferred the winding-up petition and connected proceedings to the National Company Law Tribunal, Kolkata; the petition stands disposed of in the records of this Court with liberty to raise grievances before the Tribunal.

Distribution of termination proceeds - Revised Resolution Framework - pro rata interim distribution - finality of CAG determination for deposit of 80% debt - arbitral forum for disputes arising from the audit report - obligation to refund excess amounts received pending final resolution

Revised Resolution Framework - distribution of termination proceeds - Interim distribution of the amounts (80% of debt due) deposited in the escrow accounts of RMGL and RMGSL shall follow the Tribunal's 'Revised Resolution Framework' as approved by the Tribunal on 12th March, 2020. - HELD THAT: - The Tribunal held that the Hon'ble Supreme Court's order fixed the obligation of HSVP/HMRTC to deposit 80% of the debt due as determined by CAG, but left the question of distribution of those deposited amounts to the appropriate distribution mechanism. Having regard to this Tribunal's earlier directions (12 March 2020, paras. 64-66) and the public interest considerations underlying that order, the deposited 80% shall be distributed on a pro rata basis in accordance with the 'Revised Resolution Framework' approved by this Tribunal. The Tribunal rejected attempts to permit unilateral appropriation outside that framework and observed that distribution must also remain subject to the ultimate resolution process for the IL&FS companies. [Paras 20, 21, 64]

Interim distribution of the 80% deposited amount shall be made in accordance with the 'Revised Resolution Framework' approved by this Tribunal.

Pro rata interim distribution - obligation to refund excess amounts received pending final resolution - Interim pro rata distribution among financial creditors is permitted subject to an undertaking to refund any amounts received in excess of final entitlement. - HELD THAT: - The Tribunal authorised an interim pro rata distribution to the financial creditors of the two projects, observing that such distribution is interim and must abide by the outcome of the final resolution process. To protect the final resolution, the Tribunal directed that each financial creditor executing interim withdrawals must give an undertaking to refund any excess amount that is later found to exceed its entitlement in the final resolution of the IL&FS companies. [Paras 21]

Interim pro rata distribution is permitted, conditioned on an undertaking by recipients to refund any excess upon final resolution.

Finality of CAG determination for deposit of 80% debt - arbitral forum for disputes arising from the audit report - Objections to the CAG audit report or challenges to the determination of debt due are not maintainable before this Tribunal and are to be pursued in arbitration as provided in the Concession Agreements. - HELD THAT: - The Tribunal held that the Hon'ble Supreme Court has determined the role of the CAG and mandated deposit of 80% of the debt due; objections to the audit report and related disputes were expressly left to arbitration by that judgment. Consequently, the applicants' contentions seeking to reopen the CAG determination before this Tribunal were held not permissible here. All parties remain at liberty to agitate objections and other inter se claims in the arbitral proceedings envisaged by the Concession Agreements. [Paras 15, 16, 17, 21]

Disputes arising out of the CAG report and related issues shall be raised and decided in arbitration; the CAG determination for the purpose of deposit is final for these applications.

Distribution of termination proceeds - subject to final resolution - The interim distribution authorised is subject to the final resolution of the concerned IL&FS companies and to any arbitration award, which must be given due consideration in the final accounting. - HELD THAT: - While permitting interim distribution under the Revised Resolution Framework, the Tribunal made clear that such distribution is provisional and contingent on the outcomes of the ongoing resolution process for the IL&FS companies. Any arbitration award or final resolution must be accommodated in the final distribution, and mechanisms must be in place to ensure compliance with any such awards or adjustments. [Paras 21]

Interim distribution is subject to the final resolution of the IL&FS companies and to any arbitral awards; appropriate provisions must be made for compliance.

Final Conclusion: The applications are disposed of by permitting interim pro rata distribution of the amounts (80% of debt due) deposited in the escrow accounts of RMGL and RMGSL in accordance with the Tribunal's 'Revised Resolution Framework' (12 March 2020), subject to final resolution of the IL&FS companies; recipients must undertake to refund any excess, and all disputes arising from the CAG audit report are to be resolved in arbitration.

Admission of corporate insolvency application under Section 9 - operational debt and demand notice compliance - existence of debt acknowledged by the corporate debtor - absence of a bona fide dispute under Section 8(2) - maintainability of application by an unregistered partnership through its partner/constituted attorney - effect of prior High Court consent order on limitation - declaration of moratorium and appointment of Interim Resolution Professional

Operational debt and demand notice compliance - absence of a bona fide dispute under Section 8(2) - Operational Creditor proved existence of an operational debt, issuance and service of statutory demand notice and absence of any bona fide dispute preventing admission under Section 9. - HELD THAT: - The Tribunal found that the Operational Creditor had furnished evidence of invoices, prior proceedings recording the Corporate Debtor's admission of liability and the statutory demand notices dated 15.09.2018 which were duly served. The Corporate Debtor's replies did not raise any notice of a pre-existing suit or arbitration or a bona fide dispute as envisaged in Section 8(2); its communications were treated as denials or frivolous allegations rather than substantiated disputes. On the facts, the admitted liability recorded before the High Court and the lack of a substantive contested claim after service of the demand notice established default and rendered the petition maintainable for admission under Section 9. [Paras 44, 45, 47]

Application under Section 9 admitted as the Operational Creditor proved operational debt, compliance with demand notice requirement and absence of a bonafide dispute.

Existence of debt acknowledged by the corporate debtor - effect of prior High Court consent order on limitation - Prior proceedings before the High Court (consent order recording payment schedule and subsequent order extending time) constituted acknowledgement of debt and the petition filed on 19.07.2019 was held within time. - HELD THAT: - The Tribunal relied on the High Court order dated 28.01.2014 which recorded settlement terms and subsequent orders including the order dated 21.11.2016 granting further time on the Corporate Debtor's own admission that funds were forthcoming. Those recorded admissions and the extension furnished by the High Court were treated as operative for the purpose of computing limitation. In view of those recorded admissions and the chronology, the Tribunal concluded the Section 9 petition was not barred by limitation. [Paras 45, 46, 47]

The petition is within time as the High Court orders recording the Corporate Debtor's admission and extension impacted the limitation analysis.

Maintainability of application by an unregistered partnership through its partner/constituted attorney - Application by the Operational Creditor (an unregistered partnership) represented through its partner/constituted attorney was held maintainable before the Adjudicating Authority. - HELD THAT: - Although the Corporate Debtor challenged maintainability on the ground that the partnership was unregistered and that not all partners were impleaded, the Tribunal examined the affidavits and power of attorney filed on behalf of the partnership and the authority of the partner (Hanuman Prasad Chharia) to institute proceedings. The Tribunal accepted the Operational Creditor's representation and rejected the objection to maintainability raised by the Corporate Debtor, treating the statutory requirements for filing under Section 9 as satisfied on the material before it. [Paras 47, 48]

Objection to maintainability on account of the Operational Creditor being an unregistered partnership and representation through a partner/POA rejected; petition held maintainable.

Admission of corporate insolvency application under Section 9 - declaration of moratorium and appointment of Interim Resolution Professional - Relief granted on admission: initiation of CIRP with declaration of moratorium, public announcement and appointment of an Interim Resolution Professional. - HELD THAT: - Having admitted the Section 9 petition, the Tribunal directed the statutory consequences to follow: declaration of moratorium with the scope specified in the order, requirement for public announcement and claim submission, and appointment of an Interim Resolution Professional in the absence of a nominated IRP by the Operational Creditor. The Tribunal also directed deposit of an initial amount with the IRP for preliminary expenses and fixed timelines for constitution of the Committee of Creditors and further steps in the CIRP. [Paras 49]

CIRP initiated; moratorium declared and Interim Resolution Professional appointed with directions for public announcement, claim submission and progression of insolvency process.

Final Conclusion: The Adjudicating Authority admitted the Section 9 petition, holding that the Operational Creditor proved existence of operational debt, complied with the statutory demand procedure and that no bonafide dispute or limitation bar prevented admission; accordingly CIRP was initiated, moratorium declared and an Interim Resolution Professional appointed.

Setting aside of undervalued and fraudulent transaction under Section 45 and restoration under Section 49 of the Insolvency and Bankruptcy Code, 2016 - avoidance and recovery of related party preferential transfer under Section 43 of the Insolvency and Bankruptcy Code, 2016 - fraudulent trading / wrongful trading and proceedings under Section 66 of the Insolvency and Bankruptcy Code, 2016 - jurisdiction of Adjudicating Authority over assets and acts during corporate insolvency resolution process - restraint on use of corporate trademark in absence of valid assignment

Setting aside of undervalued and fraudulent transaction under Section 45 and restoration under Section 49 of the Insolvency and Bankruptcy Code, 2016 - fraudulent trading / wrongful trading and proceedings under Section 66 of the Insolvency and Bankruptcy Code, 2016 - The lease deed dated 30th November 2016 executed in favour of Respondent No.3 is fraudulent, grossly undervalued and is set aside under the provisions of the IBC. - HELD THAT: - On the material placed before it the Adjudicating Authority found that the lease deed was executed after notice under Section 13(2) of SARFAESI Act and was a sham transaction effected with related parties to transfer the business and assets of the corporate debtor at a throwaway consideration. The Tribunal accepted the Resolution Professional's case that the transaction transferred the corporate debtor's business to a related party, was contrary to the interests of creditors, and amounted to a fraudulent and undervalued dealing. Applying the powers available under the Code, and having regard to the Appellate Tribunal's directions that timelines under Section 46 may not apply in cases of fraud, the Authority concluded that the transaction is voidable and liable to be set aside and that the acts are liable to consequences under Sections 45, 49 and 66 of the IBC. [Paras 39, 40, 41]

Lease deed dated 30th November 2016 is set aside as fraudulent and grossly undervalued; respondents' acts are liable to be prosecuted under Sections 45, 49 and 66 of the IBC.

Avoidance and recovery of related party preferential transfer under Section 43 of the Insolvency and Bankruptcy Code, 2016 - Transactions with Respondent Nos. 6 and 7 during the look back period are preferential related party transactions and respondents are directed to make restitution. - HELD THAT: - The Resolution Professional demonstrated, and the respondents failed to justify, that certain transfers to Respondent Nos. 6 and 7 were related party preferential transactions within the look back period. The respondents did not appear or produce documents to rebut the Transaction Audit Report or to show that the transactions were legitimate. In absence of any justification, the Authority held the transactions to fall within Section 43 and directed restoration of the identified amounts to the corporate debtor. [Paras 20, 21, 22, 42]

Respondent No.6 and Respondent No.7 are directed to pay the sums found to be preferential related party transactions to the corporate debtor.

Jurisdiction of Adjudicating Authority over assets and acts during corporate insolvency resolution process - restraint on use of corporate trademark in absence of valid assignment - The Adjudicating Authority refused to adjudicate substantive IPR disputes but restrained Respondent No.3 from using the corporate debtor's trademark in absence of any valid assignment in its favour. - HELD THAT: - While the Authority declined to decide the underlying intellectual property controversy as such disputes were not interfered with, it accepted that the trademark is an asset of the corporate debtor and, in absence of any valid agreement assigning the mark to Respondent No.3, restrained Respondent No.3 from using the corporate debtor's property. The decision was framed by reference to the Code's vesting and single window jurisdiction over assets during CIRP, but without adjudicating the final merits of trademark ownership. [Paras 25, 26, 43]

Substantive IPR dispute not decided; Respondent No.3 restrained from using the corporate debtor's trademark/property in absence of valid assignment.

Jurisdiction of Adjudicating Authority over assets and acts during corporate insolvency resolution process - Respondent Nos. 3 to 5 are directed to deliver peaceful, vacant, undisturbed and unhindered possession and access to the plant, factory and premises to the Resolution Professional. - HELD THAT: - Having found that the lease and related transfers effectively transferred the corporate debtor's business and assets to a related party and were voidable, and noting the non cooperation of suspended directors and other respondents, the Authority directed restoration of possession and access to the corporate debtor's plant, factory, land and related premises within the 17.25 acres to the Resolution Professional so that assets of the corporate debtor can be put to appropriate use in CIRP. [Paras 41, 44, 45]

Respondent Nos. 3 to 5 directed to hand over peaceful, vacant and unhindered possession and access of the specified 17.25 acre premises to the Resolution Professional.

Final Conclusion: The application is allowed: the lease deed of 30th November 2016 is set aside as fraudulent and undervalued and respondents are exposed to consequences under Sections 45, 49 and 66 of the IBC; specified related party transfers are declared preferential and ordered restored; Respondent No.3 is restrained from using the corporate debtor's trademark in absence of assignment; and Respondent Nos.3-5 are directed to deliver vacant and peaceful possession of the 17.25 acre plant and premises to the Resolution Professional.

Validity of Committee of Creditors' decision - commercial wisdom of the Committee of Creditors - eligibility of related party to submit a resolution plan - requirement to submit revised resolution plan within the time stipulated by CoC - extinguishment of personal guarantee in a resolution plan - maximisation of value of assets under the Insolvency and Bankruptcy Code

Validity of Committee of Creditors' decision - commercial wisdom of the Committee of Creditors - maximisation of value of assets under the Insolvency and Bankruptcy Code - Whether the approval of the Successful Resolution Applicant's plan at the 7th CoC meeting contravened the Insolvency and Bankruptcy Code and required quashing. - HELD THAT: - The Tribunal found that the CoC considered all plans in the 7th meeting and exercised its commercial judgment in assessing feasibility and viability, which is a material factor alongside the offered consideration. The CoC found the Successful Resolution Applicant's plan more feasible and viable; this exercise of commercial wisdom by the CoC was held to be valid and not contrary to the IB Code. The Tribunal rejected the Applicants' submission that a higher monetary offer alone must prevail, noting that maximisation of value is an important object but is to be balanced with feasibility and viability as assessed by the CoC. The record shows the CoC considered plans and approved the Successful Resolution Applicant's plan after such consideration.

The approval of the Successful Resolution Applicant's plan was valid and not in violation of the IB Code; the challenge to the 7th CoC meeting on this ground fails.

Requirement to submit revised resolution plan within the time stipulated by CoC - eligibility of related party to submit a resolution plan - Whether the Applicants' revised resolution plan was disregarded unlawfully because of unfair timing or differential treatment, and whether the Applicants were eligible to have their plan considered. - HELD THAT: - The Tribunal recorded that the Applicants were informed to revise their plan and were given a deadline (3:30 PM) during the meeting; they did not submit the revised plan by the stipulated time. The Applicants' contention that they were allotted less time or treated differently was not accepted on the facts: minutes indicate other applicants attended in an earlier slot and the Applicants attended later and failed to meet the CoC's deadline. The Tribunal also noted that the Applicants were not ineligible to submit a plan as related parties and had been held eligible; nevertheless, non-submission within the time and unresolved concerns (such as source of funds and unconditional extinguishment of guarantees) justified the CoC's refusal to approve their plan.

The Applicants' revised plan was not unlawfully disregarded; failure to submit within the time given and concerns about the plan's terms justified the CoC's decision; the Applicants were eligible but their plan was not accepted.

Extinguishment of personal guarantee in a resolution plan - commercial wisdom of the Committee of Creditors - Whether the proposed extinguishment of the personal guarantee by the Applicants rendered their resolution plan unacceptable as a matter of law or procedure. - HELD THAT: - The Tribunal observed that the Applicants' plan proposed extinguishment of guarantees given by the suspended management, a term which the CoC found unacceptable. The CoC's consideration of such a materially different term formed part of its assessment of feasibility and acceptability. The Tribunal accepted the CoC's view that a plan proposing extinguishment of personal guarantees could be rejected in the exercise of commercial judgment, and that such rejection did not amount to a contravention of the IB Code.

The CoC was entitled to reject a plan that proposed extinguishment of personal guarantees; this ground does not vitiate the CoC's decision.

Final Conclusion: The application under Section 60(5) was dismissed. The Tribunal found no violation of the Insolvency and Bankruptcy Code in the conduct or outcome of the 7th CoC meeting; the CoC validly exercised commercial wisdom in approving the Successful Resolution Applicant's plan, and the Applicants' challenge failed because they did not submit the revised plan within the time and the terms of their plan (including extinguishment of guarantees and extended payment tenure) justified non-approval.

Initiation of CIRP under section 9 of the Insolvency and Bankruptcy Code, 2016 - Operational Debt - default - demand notice under section 8 of the Code - pre-existing dispute - proprietorships covered under the Code - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional

Operational Debt - default - demand notice under section 8 of the Code - Existence of an operational debt and default and the completeness of the Section 9 petition for initiating CIRP. - HELD THAT: - The Tribunal examined the documents, the demand notice dated 15 July 2019 and its service by registered post and subsequent email, the ledger/computation annexed to the petition and the averment that invoices fell due on their respective dates. Although the date of first default was not explicitly stated in the petition, the computation table indicates 04 December 2018 as the first date of default. The Operational Creditor furnished affidavit under section 9(3)(b) and evidence of supply and non-payment. The Corporate Debtor's contentions about third party non payment did not undermine the documentary evidence of debt and default before this Adjudicating Authority. On the record the petition was found complete and the Authority was satisfied that an operational debt was due and the Corporate Debtor had defaulted. [Paras 26, 29, 30]

The Section 9 petition is admitted; there exists an operational debt and default by the Corporate Debtor.

Pre-existing dispute - Validity of the Corporate Debtor's plea of a pre-existing dispute. - HELD THAT: - The Corporate Debtor alleged an understanding that payment would follow receipt of funds from the Government of Bihar and produced documents many of which were in Bhojpuri without translation. The Tribunal directed translations, which were not furnished, and found no admissible proof of the asserted pre existing dispute. The Corporate Debtor did not explain the nature of the dispute in its reply affidavit. In these circumstances, the plea of a pre existing dispute was held to be untenable and not maintainable for defeating the petition under the Code. [Paras 25, 28]

The plea of a pre-existing dispute is rejected as not proved or explained; it does not bar admission of the petition.

Proprietorships covered under the Code - Maintainability of the petition filed by a proprietorship under the Code. - HELD THAT: - The Tribunal considered whether a proprietorship can invoke the Code and observed that the definition of 'person' is inclusive. Although section 3(23) does not explicitly enumerate proprietorships, the inclusive definition under the Code and section 2(f) permit application of the Code to proprietorships. Accordingly, the petition by the proprietorship entity was held to be maintainable. [Paras 27]

A petition filed by a proprietorship is maintainable under the Code.

Final Conclusion: The petition under section 9 is admitted; CIRP is initiated against the Corporate Debtor, moratorium under the IBC is imposed, an Interim Resolution Professional is appointed and directions are given for public announcement, reporting and deposit for CIRP expenses.

Replacement of Resolution Professional under Section 27(2) of the IBC, 2016 - Mandate for notice to suspended board under Section 24(3)(b) of the IBC, 2016 - Rights of suspended directors to inspect claims under Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Remedy against professional misconduct under Sections 217 and 218 of the IBC, 2016

Replacement of Resolution Professional under Section 27(2) of the IBC, 2016 - Maintainability of an application under Section 60(5)(c) seeking substitution of the Resolution Professional in the absence of a CoC resolution under Section 27(2). - HELD THAT: - The Tribunal held that Section 27(2) of the Code prescribes the exclusive procedure for replacing a Resolution Professional: such replacement must be proposed at a meeting of the Committee of Creditors and approved by not less than sixty-six per cent of voting share, together with written consent of the proposed professional. Where the Code contains an explicit provision for replacement, that provision must be followed and admits no exception. The application filed by the State-holding a small voting share and without any CoC resolution-was therefore not maintainable and liable to be dismissed. The Tribunal relied on the principle that an explicit statutory mechanism for replacement under Section 27(2) cannot be circumvented by invoking Section 60(5)(c).

Application dismissed as not maintainable for seeking change of Resolution Professional without following the procedure under Section 27(2).

Mandate for notice to suspended board under Section 24(3)(b) of the IBC, 2016 - Rights of suspended directors to inspect claims under Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Remedy against professional misconduct under Sections 217 and 218 of the IBC, 2016 - Allegations of non-service of CoC notices on suspended directors, denial of inspection of claims and mala fides/collusion by the Resolution Professional. - HELD THAT: - The Tribunal considered the contentions that notices of CoC meetings were not sent to all suspended directors and that the Resolution Professional had acted with bias or collusion with a financial creditor and prospective resolution applicants. The Tribunal noted the respondent's explanation that notices were sent to available addresses and email ids, that the State's claim was only provisionally admitted after rectification, and that no CoC resolution seeking replacement had been passed. On the record, the Tribunal found that the core allegation of failure to serve notices was unproven and that the statutory procedure for replacement was not followed by the applicant. Rather than adjudicating the professional conduct allegations on merits, the Tribunal observed that complaints concerning misconduct or professional defaults are within the remit of the authorities under Sections 217 and 218 of the Code and left the applicant free to approach those authorities. Consequently, the allegations did not provide a basis to grant the relief sought in the present application.

Allegations of non-notice, denial of inspection and mala fides were not accepted as a basis for substitution of the Resolution Professional; applicant may pursue complaints under Sections 217-218.

Replacement of Resolution Professional under Section 27(2) of the IBC, 2016 - Maintainability of IA No. 46/JPR/2019 (application by workmen) seeking substitution of the Resolution Professional. - HELD THAT: - The Tribunal applied the same statutory rule-Section 27(2)-to the separate application filed by the workmen seeking replacement of the Resolution Professional. The Tribunal recorded that the CoC had earlier approved the appointment and that no CoC resolution to replace the professional had been placed; therefore the application was liable to be dismissed for the same reasons as IA No. 301/JPR/2019.

IA No. 46/JPR/2019 dismissed for noncompliance with the procedure under Section 27(2).

Final Conclusion: Both applications seeking substitution of the Resolution Professional were dismissed as not maintainable because the statutory procedure for replacement under Section 27(2) of the IBC, 2016 had not been followed; grievances as to notices, inspection of claims or alleged misconduct were not upheld as a ground for substitution and the applicants were directed to seek appropriate remedy before the authorities under Sections 217-218 of the Code.

Existence of financial debt and default - debt being "due" for purposes of admission as per Mobilox/Innoventive - Demand notice under SARFAESI Act - admission to Corporate Insolvency Resolution Process and imposition of moratorium - appointment of Interim Resolution Professional

Existence of financial debt and default - debt being "due" for purposes of admission as per Mobilox/Innoventive - Demand notice under SARFAESI Act - effect of admitted OTS not being honoured - Financial debt due and payable by the corporate debtor and default in repayment established, warranting initiation of CIRP. - HELD THAT: - The Tribunal applied the principle in Mobilox Innovations (as reiterated from Innoventive) that the adjudicating authority need only be satisfied from records that a financial debt is "due" and that default has occurred. The Financial Creditor placed undisputed loan and security documents (sanction letters, term loan agreements, common agreements and board resolutions) showing availing of credit facilities, and reliance was placed on the Demand Notice issued under the SARFAESI Act which remained uncomplied. The corporate debtor's balance sheet for 2016-17 and admissions in its financial statements were also noted. The Financial Creditor further demonstrated that an OTS accepted by the Financial Creditor was not honoured by the corporate debtor. On these records the Tribunal found both the existence of a financial debt payable to the applicant and that the corporate debtor had defaulted in payment, and therefore the statutory threshold for admission under Section 7 was satisfied. [Paras 13]

A financial debt due and payable by the corporate debtor and its default were held established, and the petition was admitted initiating CIRP.

Final Conclusion: The Company Petition under Section 7 is admitted; the Corporate Debtor is placed under Corporate Insolvency Resolution Process, moratorium is declared and an Interim Resolution Professional is appointed.

Approval of resolution plan - viability and feasibility of a resolution plan - binding effect of an approved resolution plan on stakeholders including guarantors - transfer of assets included in the Information Memorandum as part of a resolution plan - right of way / easement for access to corporate debtor's premises - compliance with mandatory contents under regulation 38 and 39 of the CIRP Regulations - implementation timeline under section 31(4) of the IBC - performance bank guarantee for enforcement of non-compliance - cessation of moratorium upon approval of resolution plan

Approval of resolution plan - viability and feasibility of a resolution plan - Approval of the resolution plan of M/s. Swadeshi Marketing Private Limited in respect of Sri Balaji Forest Products Private Limited. - HELD THAT: - The Tribunal found that the Resolution Plan received 93.46% approval of the Committee of Creditors and, on perusal of the record, concluded that the plan meets the requirements of viability and feasibility for revival of the Corporate Debtor. The bench was satisfied that the procedural and substantive compliances required under Sections 30 and 31 of the Insolvency and Bankruptcy Code, 2016 had been met and that the plan could be made effective upon approval by this Tribunal. Consequently, subject to observations in the order, the Resolution Plan was approved and directed to form part of the order. [Paras 16, 17, 45, 46, 49]

The Resolution Plan is approved by the Tribunal and ordered to form part of the record.

Compliance with mandatory contents under regulation 38 and 39 of the CIRP Regulations - contents of resolution plan - Compliance of the approved resolution plan with regulations 38 and 39 of the CIRP Regulations and with requirements of Section 30(2). - HELD THAT: - The Tribunal examined the resolution plan against the mandatory contents prescribed by Regulation 38 (including treatment of operational creditors, feasibility, implementation schedule and management control) and Regulation 39 (including affidavit of eligibility under Section 29A and undertakings). The RP filed the prescribed certificates and Form 'H' as required. On review, the Tribunal was satisfied that the plan complies with Regulations 38 and 39 and with the requirements of Section 30(2) of the Code. [Paras 21, 22, 23, 46]

The plan complies with Regulations 38 and 39 and the requirements of Section 30(2) and is fit for approval.

Binding effect of an approved resolution plan on stakeholders including guarantors - transfer of assets included in the Information Memorandum as part of a resolution plan - Whether the resolution plan may include transfer of land belonging to personal guarantors/suspended directors (as assets in the IM) and whether such transfer is binding on those guarantors upon approval. - HELD THAT: - The Tribunal noted that the land on which the corporate debtor's plant is established was included as assets of the corporate debtor in the Information Memorandum and that those lands had been mortgaged to financial creditors. It observed that an approved resolution plan binds all stakeholders, including guarantors, under Section 31(1) of the Code. Relying on the principles and the decision of the Appellate Tribunal in Vanguard (as referred to in the record), the bench held that the relief sought in the plan for transfer of the personal guarantors' land to the corporate debtor is permissible and that the objections raised by the suspended board of directors and guarantors were not sustainable. The Tribunal therefore granted the reliefs relating to inclusion and transfer of such land in terms of the plan. [Paras 39, 40, 41, 43, 44]

The relief in the resolution plan for transfer of the personal guarantors' land (as included in the IM) is granted and is binding on the guarantors upon approval of the plan.

Right of way / easement - Whether an unfettered right of way/ingress and egress to the corporate debtor's plant should be granted to the Successful Resolution Applicant. - HELD THAT: - The Tribunal considered submissions that access to the corporate debtor's plant was dependent on an approach road owned by a related company and that no formal agreement for right of way existed. Applying the principles of easement (as discussed in the submissions) and having regard to the essentiality of access to the plant for the revival and value maximisation of the corporate debtor, the bench concluded that obstruction to such access could not be permitted to frustrate the resolution. The relief for an unfettered right of way was found to be integral to the implementation of the plan and was accordingly granted. [Paras 30, 31, 32, 34, 43]

An unfettered and unhindered right of way/ingress and egress to the plant is granted to the Successful Resolution Applicant as part of the approved plan.

Implementation timeline under section 31(4) - performance bank guarantee - Temporal and enforcement conditions for implementation of the resolution plan, including the period for obtaining statutory approvals and invocation of the Performance Bank Guarantee for non-compliance. - HELD THAT: - The Tribunal directed that the Resolution Applicant shall obtain necessary statutory sanctions and comply with obligations within one year as prescribed under Section 31(4) of the Code. The bench further directed that in the event of non-compliance of the order or withdrawal of the Resolution Plan, the Committee of Creditors is entitled to invoke the Performance Bank Guarantee furnished by the Resolution Applicant. These directions were issued to secure implementation and provide a remedy for default. [Paras 47, 48]

The Resolution Applicant is allowed one year to obtain statutory approvals and comply with obligations under Section 31(4); non-compliance or withdrawal permits invocation of the Performance Bank Guarantee by the CoC.

Cessation of moratorium - discharge of resolution professional - Consequential orders following approval: cessation of moratorium and discharge/handing over duties of the Resolution Professional. - HELD THAT: - Upon approval of the resolution plan, the Tribunal ordered that the moratorium under Section 14 shall cease to have effect from the date of the order. The bench also directed handover of records, premises and documents to the Resolution Applicant, discharge of the Resolution Professional from his duties with effect from the date of the order, and submission of records to the Insolvency & Bankruptcy Board of India and the Resolution Applicant/new promoters. These directions implement the practical consequences of plan approval. [Paras 50, 51, 52, 56, 57]

The moratorium ceases with effect from the date of the order; the Resolution Professional is discharged and directed to hand over records and assets as specified.

Final Conclusion: The Tribunal approved the Resolution Plan of M/s. Swadeshi Marketing Private Limited (approved by the CoC), holding it viable and compliant with the Code and CIRP Regulations; accordingly the plan is binding on the corporate debtor and stakeholders (including guarantors), grants the reliefs and concessions claimed (including transfer of specified guarantor land and right of way), prescribes one year for statutory compliances under section 31(4), permits invocation of the Performance Bank Guarantee for default, terminates the moratorium from the date of the order, and directs consequential handing over of records and discharge of the Resolution Professional.

Contempt of court - stay order - release of amounts in compliance with court order - constitution of Tribunal - Search-cum-Selection Committee - administrative continuity of tribunal - automatic stay on filing of appeal - interim relief in absence of the Tribunal

Contempt of court - stay order - release of amounts in compliance with court order - Prima facie contempt for non-release of amounts despite a stay order and the Court's recording of the respondents' undertaking. - HELD THAT: - The Court observed that notwithstanding the stay order dated 29.4.2022, the amounts ordered by the Single Judge have not been released. On a specific query the learned Additional Solicitor General accepted non-compliance and, prima facie, the conduct amounted to contempt of this Court's orders. The respondents, through the learned ASG, gave an undertaking on the record that the amounts would be released within three days and requested that the Court hold its hand on issuing notice of contempt. The Court recorded that undertaking and took it on record.

Court recorded the respondents' undertaking to release the amounts within three days and, on that basis, refrained from issuing a contempt notice at that stage.

Constitution of Tribunal - Search-cum-Selection Committee - administrative continuity of tribunal - Status report on constitution of the Tribunal is incomplete and further documentary particulars are directed to be produced. - HELD THAT: - The affidavit states that a Search cum Selection Committee was appointed by an order dated 26.10.2001 and that the process thereafter is ongoing. The Court noted that the Chairman demitted office on 21.9.2019 and that subsequently a Single Member Tribunal and later occupants functioned only on interim/extension terms, leaving a gap in adjudicatory continuity. The Court held that the status report did not present a complete picture and required detailed particulars and supporting documents showing steps taken from at least six months prior to 21.9.2019 up to the department order dated 26.10.2021 to fill the post of Chairman.

Respondents directed to file detailed steps and supporting documents relating to the process of constituting/filling the post of Chairman for the period specified.

Automatic stay on filing of appeal - interim relief in absence of the Tribunal - Question whether filing of an appeal should operate as an automatic stay is deferred for further consideration. - HELD THAT: - The Court declined at this stage to decide the broader legal question of whether the mere filing of an appeal ought to produce an automatic stay, observing that the issue is of larger import particularly in the context of litigants seeking interim relief in the absence of a functioning Tribunal. The matter was adjourned for fuller hearing.

Consideration of whether filing an appeal should amount to automatic stay is deferred; matter listed for further hearing on 19th July, 2022.

Final Conclusion: The Court recorded the respondents' undertaking to release the amounts within three days and, on that basis, has not issued contempt notice at this stage; it directed production of detailed documentary steps concerning constitution/filling of the Tribunal's Chairman post for the period specified and deferred determination of whether filing an appeal should automatically operate as a stay, listing the matter on 19 July 2022.

Provisional attachment under the Foreign Exchange Management Act - legitimacy or quantum of expense not constituting ground for penal or coercive action - scope of prohibition under the Foreign Exchange Management (Current Account Transactions) Rules, 2000 - deletion of Entry 8 from Schedule II and requirement of prior Central Government approval - distinction between RBI action under the Banking Regulation Act and attachment under FEMA - interim release of attached funds subject to conditions

Provisional attachment under the Foreign Exchange Management Act - legitimacy or quantum of expense not constituting ground for penal or coercive action - scope of prohibition under the Foreign Exchange Management (Current Account Transactions) Rules, 2000 - deletion of Entry 8 from Schedule II and requirement of prior Central Government approval - Prima facie validity of the order confirming seizure of the petitioner's bank accounts under FEMA and the Rules. - HELD THAT: - The Court recorded a prima facie view that the impugned order confirming seizure of the petitioner's bank accounts under the Act read with the Rules would not sustain. The Court accepted the submission that neither the alleged quantum or legitimacy of an expense nor a contention that similar services could have been obtained domestically at a lower price, by itself, furnishes a ground for penal or coercive action under the Act. It was observed that the prohibition in the Current Account Transactions Rules is limited to transactions falling in Schedule I and that the transactions forming the basis for seizure do not fall within that Schedule. The Court also noted that Entry 8 in Schedule II, which had earlier required prior Central Government approval for specified technical collaboration payments, was deleted in 2010, and that there was no statutory obligation shown to exist requiring the petitioner to seek respondents' approval. The Court further noted that respondents had not initiated adjudication or penalty proceedings under Section 13 of the Act. These observations were recorded as prima facie findings requiring consideration in the writ petition and do not constitute final adjudication on merits.

The Court found prima facie merit in the petitioner's legal contentions challenging the confirmation of seizure and recorded that the matter requires consideration.

Interim release of attached funds subject to conditions - Whether interim release of funds should be permitted pending final disposal of the writ petition and on what conditions. - HELD THAT: - Balancing the issues raised and the need to meet day-to-day expenses, the Court directed an interim release of funds. The Court noted that an earlier interim release of Rs. 15.5 crores had been ordered by another High Court and that that amount was on record as released, although the petitioner stated it had not been utilised. To enable the petitioner to meet essential expenditure and salaries pending final adjudication, the Court ordered release of a further sum on conditions. The petitioner was directed to file an affidavit disclosing utilisation details of the released sum and gave an undertaking that no part of the monies released would be remitted overseas. The release ordered was stated to be in addition to the previously released amount.

A sum of Rs. 25 crores was ordered to be released in the interim, subject to utilisation only for day-to-day essential expenditure and salaries, filing of an affidavit of utilisation, and an undertaking against overseas remittance; this release is in addition to the earlier released amount.

Distinction between RBI action under the Banking Regulation Act and attachment under FEMA - Whether cancellation of the petitioner's Certificate of Registration by the RBI is determinative of the challenge to the seizures under FEMA. - HELD THAT: - The Court observed that the cancellation of the Certificate of Registration by the Reserve Bank of India is an action taken under the Banking Regulation Act, 1949, and pertains to the petitioner's right to carry on the business permitted under that regime. The Court held that such cancellation would have no bearing on the issues raised in the present writ petition challenging seizure orders passed under FEMA, as the two actions arise under distinct statutory provisions and deal with different rights and consequences.

The Court held that RBI's cancellation of the Certificate of Registration does not bear on the writ challenge to the FEMA-based attachment orders.

Final Conclusion: On the prima facie materials the High Court recorded doubts about the sustainability of the confirmation of seizure under FEMA and related Rules, observed that the RBI's cancellation of registration is not determinative of the FEMA challenge, and directed an interim release of funds (Rs. 25 crores) subject to strict utilisation and disclosure conditions, while keeping the writ petition for further consideration.

Adjustment of pre-deposit against tax liability under the Sabka Vishwas (Legal Disputes Resolution) Scheme - voluntary disclosure - definition of "tax dues" in the context of voluntary disclosure - proviso to section 126(1) - no verification of amount disclosed under voluntary disclosure - interpretation of taxing statute to avoid absurdity and protect constitutional guarantees - prohibition on collection of tax without authority of law (Article 265) and equal protection (Article 14)

Adjustment of pre-deposit against tax liability under the Sabka Vishwas (Legal Disputes Resolution) Scheme - definition of "tax dues" in the context of voluntary disclosure - proviso to section 126(1) - no verification of amount disclosed under voluntary disclosure - prohibition on collection of tax without authority of law (Article 265) and equal protection (Article 14) - The impugned estimated tax liability statement (SVLDRS-3) must be set aside and a fresh statement issued after taking into account amounts already paid by the declarant towards the tax liability for the relevant period. - HELD THAT: - The Court held that the phrase "total amount of duty stated in the declaration" in clause (d) of section 123, when read as "tax dues", must be understood as the outstanding duty payable after adjusting amounts already discharged by the declarant. The words "tax" and "dues" read conjunctively connote an obligation that remains unpaid and payable, and cannot reasonably be read to permit collection of taxes already paid. Although the scheme exempts voluntary disclosure declarations from verification under the proviso to section 126(1), that exemption does not authorize the designated committee to ignore pre-deposits and treat gross declared figures as recoverable without adjustment. A literal construction that would force a declarant to pay amounts already discharged would lead to an absurd, unjust and arbitrary result, contrary to the object of the scheme and inimical to Articles 14 and 265. The Court relied on established principles of statutory interpretation that reject constructions producing manifestly unreasonable consequences and favour an interpretation that gives effect to legislative purpose. Accordingly, clause (d) of section 123 is to be read as referring to outstanding duty after adjustment of amounts already paid, and the impugned statement which failed to make that adjustment was quashed and set aside. [Paras 11, 12, 13, 18]

Impugned SVLDRS-3 statement dated 12.02.2020 quashed; respondent no.4 directed to issue fresh statement after taking into account the pre-deposit made by the petitioner for the period 01.10.2016 to 30.06.2017.

Final Conclusion: Writ petition allowed; the impugned estimated tax liability statement is quashed and respondent no.4 directed to issue a fresh SVLDRS-3 statement after adjusting amounts already paid by the petitioner for the relevant period. Parties to bear their own costs.

Export of services and entitlement to refund - place of provision of services and Rule 5/Rule 6A analysis - refund of erroneously collected tax notwithstanding limitation - principle in Shiv Shanker Dal Mills obliging public bodies to refund erroneous levies - interest on refund under Section 11B of the Central Excise Act, 1944

Export of services and entitlement to refund - refund of erroneously collected tax notwithstanding limitation - principle in Shiv Shanker Dal Mills obliging public bodies to refund erroneous levies - interest on refund under Section 11B of the Central Excise Act, 1944 - Whether the assessee, having paid service tax on export services mistakenly, is entitled to refund of the tax paid for the period April 2016 to December 2016 despite the claim being time-barred under Section 11B of the Central Excise Act, 1944. - HELD THAT: - The Court recorded that the Assessing Authority had found the appellant's services to fall within the place of provision rules and to satisfy the conditions of export of services (Rule 6A), and had allowed part of the refund while rejecting the portion relating to April 2016 to December 2016 as barred by limitation. The Court held that, where tax has been paid under a mistaken liability and the services satisfy the conditions for export, the assessee is entitled to refund. Applying the principle in Shiv Shanker Dal Mills, the Court observed that public authorities (or revenue) who have recovered moneys under colour of law which are later found to be erroneous must refund such amounts and that limitation cannot be invoked to deny restitution in such circumstances. Consequently, the bar of limitation could not be applied to defeat the refund claim for the erroneously paid tax. The Court directed refund of the disputed amount with interest as provided under Section 11B within the statutory time limit imposed by the order. [Paras 8, 9, 11, 12]

The refund previously rejected as time barred for April 2016 to December 2016 is allowable; the impugned orders are set aside insofar as that refund is concerned and the revenue is directed to refund the amount with interest under Section 11B within three months.

Final Conclusion: Appeal allowed. The order rejecting refund for the tax paid between April 2016 and December 2016 is set aside; revenue to refund the disputed amount with interest under Section 11B of the Central Excise Act, 1944 within three months.

Valuation of taxable services - reimbursable expenses not forming part of taxable value - Rule 5 of the Service Tax Rules, 1994 held ultra vires - prospectivity of legislative amendment to valuation provision - relief from penalty where demand unsustainable

Valuation of taxable services - reimbursable expenses not forming part of taxable value - Rule 5 of the Service Tax Rules, 1994 held ultra vires - prospectivity of legislative amendment to valuation provision - Whether reimbursable expenses claimed by the appellant form part of the value of taxable 'Customs House Agent' services for the period April 2003 to March 2007. - HELD THAT: - The Tribunal held that the contention of the appellant succeeds in view of the decision of the Hon'ble Supreme Court in Intercontinental Consultants & Technocrats Pvt Ltd, which interpreted Section 67 to confine valuation to the gross amount charged "for such" taxable service and found that Rule 5 exceeded that mandate. The Supreme Court further held that the subsequent amendment to Section 67 by Finance Act, 2015 to include reimbursable expenditure is a substantive change and therefore prospective. Applying that ratio, the Tribunal concluded that the impugned demand based on inclusion of reimbursable expenses under Rule 5 for the period April 2003 to March 2007 cannot be sustained. [Paras 7]

Demand of service tax raised by including reimbursable expenses quashed for the period April 2003 to March 2007 (except insofar as short payment already deposited by the appellant).

Relief from penalty where demand unsustainable - Whether penalty imposed by the Commissioner should be sustained. - HELD THAT: - Since the substantive demand (to the extent it rested on including reimbursable expenses in valuation) could not be sustained in law, the Tribunal found no justification for the penalty and set it aside. [Paras 7]

Penalty imposed by the Commissioner set aside.

Final Conclusion: The appeal is allowed: the service-tax demand premised on inclusion of reimbursable expenses for April 2003 to March 2007 is quashed except for the short payment already deposited by the appellant; the penalty is set aside.

Ownership of urban land - joint development agreement - possession and transfer under JDA/MDA - assets under section 2(ea) of the Wealth Tax Act, 1957 - No Objection under Chapter XX-C of the Income-tax Act - power to alienate - remand for fresh consideration

Ownership of urban land - joint development agreement - possession and transfer under JDA/MDA - assets under section 2(ea) of the Wealth Tax Act, 1957 - No Objection under Chapter XX-C of the Income-tax Act - power to alienate - Whether the appellants continued to be owners of the urban land for wealth tax purposes despite entering into the MDA/JDA and the developer's asserted possession and powers under the agreement - HELD THAT: - The court examined the Master Development Agreement, ancillary documents including the Chapter XX C 'No Objection' and correspondence relied upon by the appellants and noted clauses in the MDA (including covenants to convey undivided interests, powers of attorney in favour of the developer and provisions for the developer to enter upon and carry out development). The High Court found that a combined reading of these contractual provisions together with the NOC and the letter asserting possession prima facie indicates that the developer had the power to alienate and had entered upon the property, and that mere failure of the project does not necessarily negate those acts. As the ITAT's reasoning did not adequately address these materials, the court held that the question of whether the appellants ceased to be owners for wealth tax purposes requires fresh consideration by the Tribunal in the light of the MDA, the Chapter XX C NOC and the possession evidence. [Paras 22, 23]

ITAT's orders set aside and the matters remitted to the ITAT for fresh consideration in accordance with law, in the light of the observations in this judgment.

Joint development agreement - remand for fresh consideration - Whether additional grounds and miscellaneous petitions filed by the appellants were considered and whether the appeals should be heard afresh by a different Bench - HELD THAT: - The appellants had filed additional grounds before the ITAT and miscellaneous petitions which were dismissed with adverse observations. The High Court noted the tenor of the ITAT orders on the miscellaneous petitions and, in the interest of impartial re examination, directed that the appeals on remand be heard by a Bench different from the Members who heard the miscellaneous petitions. [Paras 6, 23]

Directed that on remand the appeals be heard by a different ITAT Bench; miscellaneous petition orders referenced as basis for bench transfer.

Final Conclusion: Appeals allowed; common ITAT orders dated 12.02.2016 are set aside and the matters are referred back to the ITAT for fresh consideration in accordance with law in light of the MDA, the Chapter XX C NOC and related correspondence; appeals to be heard by a different Bench of the ITAT. No costs.

Quashing of criminal proceedings under Section 482 CrPC - Exercise of inherent jurisdiction to quash FIR - Prima facie satisfaction to refuse quashing - Mens rea requirement for Section 420 IPC - Concurrent proceedings under Section 138 N.I. Act and IPC - Dishonour of cheque on account of drawer's signature differs

Quashing of criminal proceedings under Section 482 CrPC - Exercise of inherent jurisdiction to quash FIR - Prima facie satisfaction to refuse quashing - Dishonour of cheque on account of drawer's signature differs - Whether the FIR under Sections 420/406 IPC arising out of the alleged cheque dishonour ought to be quashed under the inherent powers of the High Court. - HELD THAT: - The Court examined the materials on record and found that the available material discloses a prima facie case against the petitioner such that it would not be appropriate to invoke Section 482 CrPC to quash the proceeding at the threshold. The judge noted that dishonour on the ground that the "drawer's signature differs" coupled with allegations that the petitioner avoided contact and failed to make payment after service of notice raises questions of mens rea and tampering which require trial. Reliance was placed upon the established categories for exercise of inherent jurisdiction (Bhajan Lal) and the caution that quashing powers must be exercised sparingly. The court observed that explanations for differing signatures and any claim of innocence are matters to be tested at trial; the accused bears the onus of explaining how a cheque bearing an inconsistent signature came to be in complainant's possession. Having regard to these factors and the absence of a clear demonstration that allegations, even taken at face value, do not constitute an offence, the petition to quash was rejected. [Paras 18, 19, 20, 21, 23]

Prayer to quash G.R. Case No.448 of 2019 (Jorasanko PS Case No.89 of 2019) under Sections 420/406 IPC dismissed; prosecution may proceed.

Concurrent proceedings under Section 138 N.I. Act and IPC - Mens rea requirement for Section 420 IPC - Whether initiation or continuance of the FIR is barred by the pendency of a complaint under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court held that there is no bar to simultaneous or concurrent proceedings under Section 138 N.I. Act and offences under the IPC where the ingredients and legal consequences differ. While the N.I. Act inquiry proceeds on a statutory presumption regarding issuance of cheque to discharge antecedent liability, prosecution under Section 420 IPC requires proof of guilty mind at the relevant time. The two fora involve different legal tests and remedies; overlap of facts does not preclude criminal investigation or trial under IPC where mens rea and other ingredients must be examined at trial. [Paras 14, 15, 16, 21]

Pending proceedings under Section 138 N.I. Act do not bar investigation or prosecution under Sections 420/406 IPC; both sets of proceedings may coexist.

Final Conclusion: The revisional petition seeking quashing of the FIR under Sections 420/406 IPC is dismissed: the High Court finds prima facie material necessitating trial and records that concurrent proceedings under Section 138 N.I. Act do not preclude prosecution under the IPC; no order as to costs.