TaxTMI Updates e-Newsletter
Jul 13,2020

Advance ruling - classification of goods - maintainability of application seeking advance ruling for proposed manufacture - requirement of existing supply - necessity of sample for classification - interpretation of Section 95 and Section 97 of the CGST Act

Advance ruling - maintainability of application seeking advance ruling for proposed manufacture - requirement of existing supply - necessity of sample for classification - interpretation of Section 95 and Section 97 of the CGST Act - Application for advance ruling in respect of classification of a proposed product which is not yet manufactured and for which no samples were produced is non-maintainable. - HELD THAT: - The Authority examined the scope of advance rulings under the GST law and observed that Section 95 defines advance ruling as a decision on questions specified in Section 97(2) in relation to the supply of goods or services being undertaken or proposed to be undertaken by the applicant. The Authority construed this requirement to mean that the goods in question must be in existence for supply being undertaken or proposed; mere proposal to manufacture goods which do not yet exist does not satisfy the statutory prerequisite for an advance ruling. The applicant had not produced any sample of the proposed Glass Reinforced Gypsum Board and admitted that manufacture was only proposed; the jurisdictional officer similarly noted that without an accredited laboratory test of an existing sample the classification could not be determined. Given these facts and the statutory requirement that the question relate to supply of goods being undertaken or proposed, the Authority found it cannot fairly determine classification in the absence of existing goods or samples. Accordingly the application was held non-maintainable and liable to rejection. [Paras 5]

Application rejected as non-maintainable for advance ruling because the product is proposed and samples were not produced; classification cannot be determined in absence of existing supply or tested samples.

Final Conclusion: The Authority dismissed the advance ruling application and rejected it under Section 98(2) of the CGST Act on the ground that the question related to a product not yet manufactured and no samples were produced, rendering the application non-maintainable under Sections 95 and 97.

Summary order. The application is disposed of as withdrawn voluntarily and unconditionally.

Revocation of cancellation of registration - Goods and Services Tax (Removal of Difficulties) Order, 2020 - time limit for filing application for revocation - section 29(2)(c) of the Goods and Services Tax Act, 2017 - setting aside and remand for fresh decision

Revocation of cancellation of registration - Goods and Services Tax (Removal of Difficulties) Order, 2020 - time limit for filing application for revocation - section 29(2)(c) of the Goods and Services Tax Act, 2017 - Validity of the orders cancelling registration and rejecting the petitioner's application for revocation in light of the Central Goods and Services Tax (Removal of Difficulties) Order, 2020, and consequent relief. - HELD THAT: - The petitioner's registration was cancelled on 16.4.2019 under section 29(2)(c) of the Goods and Services Tax Act, 2017 and the petitioner filed an application for revocation on 10.5.2019 which was rejected on 27.5.2019; first appeal was dismissed on 22.1.2020. The Central Government, by the Goods and Services Tax (Removal of Difficulties) Order, 2020 (Gazette Notification dated 25.6.2020), clarified the method of computing the thirty day period for filing an application for revocation of cancellation where cancellation orders were passed up to 12th June, 2020, directing that the later of the date of service of the cancellation order or 31st August, 2020 shall be considered for calculation. In view of that clarification, the earlier orders rejecting the revocation application cannot be sustained. The court therefore set aside the orders of the assessing authority and the first appellate authority and directed that the application dated 10.5.2019 be decided afresh in accordance with law within fifteen days from production of a copy of this order.

Orders dated 27.5.2019 and 22.1.2020 set aside; the revocation application filed on 10.5.2019 to be decided in accordance with law within 15 days from production of a copy of this order.

Final Conclusion: The writ petition is allowed to the extent that the orders rejecting the revocation of cancellation are set aside and the application is remanded for fresh decision in accordance with the Goods and Services Tax (Removal of Difficulties) Order, 2020, to be disposed of within fifteen days upon production of a copy of this order.

Transitional credit - reopening of GST portal - entertainment of GST TRAN-1 manually - due verification of claimed credits - directions to administrative authorities to provide remedy

Reopening of GST portal - entertainment of GST TRAN-1 manually - transitional credit - due verification of claimed credits - Whether the respondents should be directed to permit the petitioner to file GST TRAN-1 to claim transitional credit despite non-availability of the portal. - HELD THAT: - The Court recorded that the petitioner was unable to file GST TRAN-1 for claiming transitional credit because the GST portal was not opened for that purpose. Noting that earlier petitions raising similar grievances had resulted in directions to the department to reopen the portal or to accept TRAN-1 applications manually after verification, the Court directed the respondents to consider reopening the portal. If reopening the portal is not feasible, the respondents were directed to entertain the petitioner's GST TRAN-1 manually and to pass orders after due verification of the credits claimed. The Court permitted the respondents to obtain instructions and to file a counter-affidavit, and listed the petition for further hearing with reference to records of earlier matters.

Respondents directed to consider reopening the portal or, if not feasible, to accept and decide the petitioner's GST TRAN-1 manually after due verification of claimed transitional credits.

Final Conclusion: Petition listed after six weeks; meanwhile respondents directed to consider reopening the GST portal or to entertain and decide the petitioner's GST TRAN-1 manually following due verification of claimed transitional credits.

Revocation of cancellation of registration - Central Goods and Services Tax (Removal of Difficulties) Order, 2020 - extension of time for filing application - calculation of period for filing under section 30(1) - setting aside administrative and appellate orders

Central Goods and Services Tax (Removal of Difficulties) Order, 2020 - calculation of period for filing under section 30(1) - extension of time for filing application - Application of the Removal of Difficulties Order, 2020 to the period for filing the revocation of cancellation of registration and its effect on the petitioner's revocation application. - HELD THAT: - The Court recorded and relied upon the Gazette Notification dated 25.6.2020 issued under section 172, which clarified that for cancellation orders passed up to 12th June, 2020 the later of the date of service of the cancellation order or 31st August, 2020 shall be taken for calculating the thirty-day period for filing an application for revocation under section 30(1). The respondent did not dispute the notification. In view of the notification's retrospective clarification of the period for filing revocation applications, the orders rejecting the petitioner's revocation application could not be sustained without fresh consideration in light of the extended/clarified timeline provided by the Removal of Difficulties Order.

The Removal of Difficulties Order, 2020 governs the calculation of the thirty-day period for filing the revocation application and requires fresh consideration of the petitioner's application.

Setting aside administrative and appellate orders - revocation of cancellation of registration - Validity of the Assessing Authority's cancellation and the First Appellate Authority's dismissal of the revocation application, and the appropriate remedial direction. - HELD THAT: - Having accepted the relevance and applicability of the Gazette Notification, the Court set aside the orders dated 22.1.2020 and 14.2.2020 which rejected the petitioner's revocation application. The petitioner's application dated 7.1.2020 for revocation of the cancellation dated 10.10.2018 was remitted for decision in accordance with law. The Court directed that the application be decided afresh within a limited timeframe and permitted the Authority to verify the order from the Court's official website if a certified copy was not produced.

The orders rejecting the revocation application are set aside and the revocation application is remanded for fresh decision in accordance with law within 15 days of production of this order.

Final Conclusion: The High Court set aside the orders rejecting the petitioner's revocation application in view of the Central Goods and Services Tax (Removal of Difficulties) Order, 2020, and directed that the petitioner's application for revocation of cancellation be decided afresh in accordance with law within 15 days; the writ petition is disposed of.

Meaning of "Per Unit" in relation to accommodation - declared tariff of a unit of accommodation - pattern of renting as determinative of unit - indivisible unit of accommodation - HSN 9963 - classification of accommodation services

Meaning of "Per Unit" in relation to accommodation - declared tariff of a unit of accommodation - pattern of renting as determinative of unit - indivisible unit of accommodation - Whether the expression "per unit" under Entry No. 7 (HSN 9963) of Notification No. 11/2017-C.T. (Rate) shall be the entire villa or each room within the villa for the applicant's proposed supply. - HELD THAT: - The Authority examined the applicant's factual position that luxurious villas, each comprising multiple rooms, will be let out only as an indivisible whole on a per day basis and that at any given time only one customer can occupy a villa. The Authority observed that the rate in Entry No. 7 is applied with reference to the declared tariff of the unit of accommodation and that the "pattern of renting" provides the contextual perspective for identifying what constitutes a "unit" - e.g., a hotel room where rooms are separately let, a bed in a hostel where beds are separately let. The applicant has no intention to let individual rooms or beds and will declare and charge tariff for the villa as a whole. Prior orders cited by the parties were distinguished on facts (a hotel rooms case under Expenditure Tax Act and a hostel-beds ruling) and found not to be apposite. Applying the contextual test, and on the undisputed factual premise that the villa is rented only as an indivisible unit with a declared tariff for the whole villa, the Authority concluded that the expression "per unit" in the applicant's case means the entire villa. [Paras 5]

For the applicant's supply of accommodation the entire villa shall be treated as the "per unit" under Entry No. 7 (HSN 9963) of Notification No. 11/2017-C.T. (Rate).

Final Conclusion: The Advance Ruling holds that, on the facts presented, each villa (let only as an indivisible whole with a declared tariff) constitutes the "per unit" of accommodation for the purpose of Entry No. 7 (HSN 9963) of Notification No. 11/2017-C.T. (Rate).

Retrospective operation of a curative amendment - Amendment to Section 40(a)(ia) by Finance Act, 2010 - Proviso supplying an obvious omission and to be read into the section - Effect of a curative proviso on prior assessments

Retrospective operation of a curative amendment - Amendment to Section 40(a)(ia) by Finance Act, 2010 - Proviso supplying an obvious omission and to be read into the section - Amendment made by the Finance Act, 2010 to Section 40(a)(ia) is curative in nature and has retrospective operation. - HELD THAT: - The Court applied the Supreme Court's ruling in CALCUTTA EXPORT COMPANY which held that the 2010 amendment and its proviso were inserted to cure anomalies and to remedy unintended consequences, thereby supplying an obvious omission that must be read into the section to make it workable. Following that enunciation, and the subsequent decision of a Division Bench of this Court, the impugned amendment is to be given retrospective effect so as to afford a reasonable interpretation to Section 40(a)(ia). Consequently, the Tribunal's reliance on a contrary view and its reversal of the Commissioner (Appeals) were not sustainable in law. [Paras 6, 7]

The first substantial question is answered in favour of the assessee; the amendment is retrospective and the Tribunal's order is quashed.

Final Conclusion: Appeal allowed; the Tribunal's order is quashed in view of the Supreme Court's ruling that the Finance Act, 2010 amendment to Section 40(a)(ia) is curative and retrospective, rendering the remaining substantial questions academic.

Proceedings under Section 147 - revision under Section 263 - Assessing Officer's decision to drop reassessment - one of the possible views - consolidation of accounts - corpus fund exemption - reasoned order

Proceedings under Section 147 - Assessing Officer's decision to drop reassessment - revision under Section 263 - one of the possible views - consolidation of accounts - corpus fund exemption - The Tribunal correctly quashed the order under Section 263 and upheld the Assessing Officer's decision to drop proceedings under Section 147 for Assessment year 1997-98. - HELD THAT: - The assessee, a society registered under Section 12A, filed a return in response to notice under Section 148 and supplied requested documents. The Deputy Director, Income Tax (Exemptions), Mumbai confirmed that the assessee's Bangalore branch accounts were consolidated with ISKCON Mumbai and that assessment and exemption under Section 11 had been completed there. On examining the record the Assessing Officer had conducted enquiries, sought confirmations, and concluded that no income had escaped assessment for AY 1997-98. The Director's order under Section 263 proceeded on the basis that the proceedings were dropped without proper enquiry, but the material shows enquiries were made and external confirmation obtained. The view adopted by the Assessing Officer was a plausible one; applying the principle that where a decision is one of two possible views it cannot be reopened under Section 263, the Tribunal correctly set aside the Director's order. The tribunal's reasoned conclusions that accounts were consolidated at Mumbai and that corpus fund treatment was not found objectionable by the Director were upheld. [Paras 8, 9]

Order under Section 263 quashed; Assessing Officer's dropping of proceedings under Section 147 sustained.

Final Conclusion: The substantial question of law posed was answered against the revenue; the appeal is dismissed and the Tribunal's order quashing the revision under Section 263 is upheld.

Jurisdiction of Assessing Officer - prohibition on questioning jurisdiction after prescribed period - proceedings under section 148 pari materia with section 139 - recording satisfaction under section 124(4) - affording opportunity and passing speaking order

Proceedings under section 148 pari materia with section 139 - jurisdiction of Assessing Officer - prohibition on questioning jurisdiction after prescribed period - Whether proceedings initiated under Section 148 are to be treated at par with proceedings under Section 139 for purposes of jurisdictional objections under Section 124. - HELD THAT: - The Court examined Sections 124 and 148 and held that proceedings initiated under Section 148 operate at the stage of filing a return under Section 139. Consequently, the bar in sub-section (3) of Section 124 - which prevents a person from disputing the assessing officer's jurisdiction after the time limits linked to notices and return-filing - is engaged by the nature of the Section 148 proceedings. The Court noted the necessity for the assessing officer to consider any jurisdictional objection in the manner prescribed by Section 124 before finalising assessment, but affirmed that Section 148 proceedings are akin to proceedings under Section 139 for these purposes. [Paras 6, 7]

Proceedings under Section 148 are to be treated as proceedings at the stage of filing a return under Section 139, bringing into play the jurisdictional framework of Section 124.

Recording satisfaction under section 124(4) - affording opportunity and passing speaking order - jurisdiction of Assessing Officer - Whether the assessing officer should consider the petitioner's request for transfer/objection to jurisdiction (Ext.P6/Ext.P4) and the manner in which such consideration must be carried out. - HELD THAT: - The Court observed that when an assessee raises a jurisdictional objection, Section 124(4) obliges the assessing officer to record reasons and a satisfaction regarding referral for determination under Section 124(2) before the assessment is made. Exercising supervisory jurisdiction, the Court directed the 3rd respondent to take a decision on the petitioner's transfer/jurisdictional request (Ext.P6, made shortly after receipt of the reassessment notice) by affording the petitioner an opportunity of hearing and by passing a speaking order. The Court clarified that the assessing officer may continue procedural steps but shall not finalise the proceedings until the request is decided, and that the officer should consider whether the petitioner's claim falls within the ambit of sub-section (2) when the original assessment under Section 139 was made or otherwise. [Paras 9, 10]

The 3rd respondent is directed to consider Ext.P6/Ext.P4 under Section 124(4) (or other applicable provisions), afford hearing and pass a speaking order within one month; proceedings may continue but not be finalised until the request is decided.

Final Conclusion: Writ petition disposed by directing the assessing officer to decide the petitioner's jurisdiction/transfer request (Ext.P6/Ext.P4) under Section 124(4) or other applicable provisions after hearing and by recording satisfaction in a speaking order within one month; Section 148 proceedings are treated as being at the stage of filing a return under Section 139 for jurisdictional purposes.

Taxability under section 56(2)(viib) of the Income tax Act - residence in India - valuation of shares by DCF method - remand for fresh examination and adjudication

Residence in India - Whether the subscriber from whom consideration was received was resident in India in the relevant previous year - HELD THAT: - The Tribunal observed that clause (viib) of section 56(2) applies only where consideration for issue of shares is received from a person who is a resident in India. The Assessment Order did not record any finding on the residential status of the subscriber (Smt. Vijayalakshmi). The passport extract produced before the Tribunal was not placed before the AO or the CIT(A). The assessee's representative subsequently filed a statement that the subscriber's stay in India in the relevant Financial Year 2014 15 was 42 days. Because the AO and CIT(A) made no finding on residence, the Tribunal held that the question of whether the subscriber was resident in the relevant previous year must be examined and a categorical finding recorded by the AO in accordance with the statutory tests of residence in section 6. [Paras 3, 6]

Matter restored to the file of the AO to determine and record whether the subscriber was a resident in India in the relevant previous year.

Taxability under section 56(2)(viib) of the Income tax Act - valuation of shares by DCF method - If the subscriber is found to be a resident, whether the excess consideration is taxable under section 56(2)(viib) and whether the AO may re open the valuation method chosen by the assessee - HELD THAT: - The Tribunal directed that, upon a finding of residence, the AO should re examine applicability of section 56(2)(viib) to the amount received and decide the matter afresh. The AO was instructed to decide the issue in the light of relevant judicial pronouncements cited by the Tribunal (including tribunal and High Court decisions) which have held that the AO cannot simply change the valuation method chosen by the assessee (such as DCF) without proper application of law. The Tribunal therefore required the AO to consider these authorities and adjudicate the valuation and taxability issues on merits if residence is established. [Paras 6]

If the subscriber is held to be resident, the AO shall re adjudge the applicability of section 56(2)(viib) and the correctness of the share valuation, taking into account the cited judicial precedents.

Final Conclusion: Appeal allowed for statistical purposes and order restored to the AO for fresh examination: AO to first determine the residential status of the subscriber in the relevant previous year, and if resident, to decide afresh the applicability of section 56(2)(viib) and the valuation issue in accordance with law and the judicial decisions noted by the Tribunal.

Ad-hoc addition to income - estimation of income without rejection of books - burden of explanation for fall in gross profit - related-party transactions and transfer pricing implications - reliance on exchange rate fluctuation to justify cost increase - precedential limits of tribunal and High Court decisions on estimation

Ad-hoc addition to income - burden of explanation for fall in gross profit - reliance on exchange rate fluctuation to justify cost increase - related-party transactions and transfer pricing implications - Whether the ad-hoc addition of Rs. 25,00,000 made by the Assessing Officer and upheld by the Commissioner (Appeals) on account of unexplained fall in gross profit rate was justified - HELD THAT: - The Tribunal examined the Assessing Officer's finding that the dip in gross profit margin (44%) and net increase in material cost (29%-34%) could not be satisfactorily explained by the assessee. The AO had made the addition to plug an apparent leakage in gross profit after noting that 95% of sales were to a sister concern and that no documentary evidence was produced to show any agreed advance sale price which constrained passing on increased costs. The assessee's explanation that the increase in cost arose from exchange rate variation and expected stabilisation of rates was not supported by evidence of pre-agreed prices; month-wise data showed that purchase prices had risen both in US$ terms and in rupee conversion. The Tribunal distinguished the relied-upon decisions where books were wholly rejected and income was assessed by ignoring books: here the AO did not reject books nor wholly disregard book results but made a limited estimated addition (about 1% of sales) because the assessee failed to explain the anomalous fall in GP rate given dominant related-party sales. On these facts the Tribunal held that the small ad-hoc addition was neither excessive nor unreasonable and that the cited authorities were inapplicable to the present factual matrix. [Paras 6, 7]

The ad-hoc addition of Rs. 25,00,000 was justified and the order of the Commissioner (Appeals) upholding the addition is not interfered with.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the assessing authorities' limited estimated addition for AY 2009-10 because the assessee failed to satisfactorily explain the substantial fall in gross profit, particularly in view of predominant sales to a related party and absence of evidence of pre-agreed selling prices, and the case differs from precedents where books were rejected and income was wholly estimated.

Business connection / permanent establishment - agency permanent establishment - attribution of income to permanent establishment - estimate of income as percentage of gross receipts - treatment of reimbursements as taxable income - set-off of marketing/commission fees against attributable income - transfer pricing adjustment on interest free loan - arm's length interest - LIBOR based benchmarking - remand for quantification and verification

Business connection / permanent establishment - agency permanent establishment - Whether the assessee had a business connection / permanent establishment in India. - HELD THAT: - The Tribunal followed earlier coordinate-bench orders in the assessee's own cases for preceding and subsequent years which had examined identical facts and concluded that the assessee had a business connection and a PE in India. The assessee did not press any substantive contrary contention at hearing. In view of consistency of facts and binding precedent of the Tribunal's prior decisions, the DRP's finding that the assessee had a PE in India is upheld.

Assessee had a business connection / permanent establishment in India; ground dismissed.

Attribution of income to permanent establishment - estimate of income as percentage of gross receipts - Quantum of income attributable to the PE and the method of estimation. - HELD THAT: - Following the Tribunal's consolidated reasoning in the assessee's own earlier years, the Tribunal concluded that 15% of gross receipts pertaining to India bookings is the income attributable to the India operations. The Tribunal applied the principle of consistency with its prior orders (which had been judicially considered) and noted that commission paid to the NMC (25% of gross receipts) exceeded the attributable income, resulting in no taxable income in the assessee's hands. The Tribunal rejected the Revenue's contention that post TP provisions a FAR analysis should automatically displace the established estimation, since the prior determinations already reflected a FAR approach and facts remained unchanged.

15% of gross receipts attributable to India operations; since commission to NMC exceeds that amount, no part of such attributable income remains taxable in assessee's hands; ground allowed.

Treatment of reimbursements as taxable income - set-off of marketing/commission fees against attributable income - Whether reimbursements received from the NMC are taxable and whether such income can be set off against commission/marketing fees. - HELD THAT: - Relying on the Tribunal's prior decisions in the assessee's own case, 10% of the reimbursement receipts from ADSIL is to be treated as business income. However, the Tribunal directed that this amount is entitled to be set off against the commission/marketing fees paid to the NMC; the commission quantification is to be that determined by the assessing officer. The Tribunal accepted the assessee's contention that the reimbursement component so taxed should be capable of absorption by the marketing fees paid.

10% of reimbursements to be treated as business income but allowed to be set off against commission/marketing fees paid to the NMC; ground partly allowed.

Transfer pricing adjustment on interest free loan - arm's length interest - LIBOR based benchmarking - Validity and benchmarking of transfer pricing adjustment in respect of notional interest on interest free loan to AE. - HELD THAT: - The Tribunal held the interest free loan to ADSIL is an international transaction within the transfer pricing provisions. For dollar denominated cross border loans, international (LIBOR based) rates are the appropriate benchmark rather than domestic PLR. The Tribunal directed the AO/TPO to adopt LIBOR plus 2% for determining the ALP interest for the loan in issue (in line with earlier Tribunal and High Court reasoning). The Tribunal therefore modified the TPO/AO approach and remitted the matter for ALP computation on LIBOR+2%.

Transfer pricing adjustment to be recomputed by AO/TPO using LIBOR plus 2% as the ALP benchmark; ground partly allowed and remitted for computation.

Set-off of marketing/commission fees against attributable income - remand for quantification and verification - Whether notional interest income (if imputed) and 10% reimbursement can be absorbed by marketing fees and the need for verification of quantification. - HELD THAT: - The Tribunal accepted the alternative contention that notional interest income on the interest free loan and the 10% reimbursement component, if treated as income, would be entitled to be adjusted against marketing service fees paid to the NMC. However, the Tribunal found the assessee's aggregated quantifications could not be accepted without verification and therefore restored the matter to the AO/TPO for limited verification of the claimed set off/quantification, directing appropriate enquiry and opportunity to the assessee.

Notional interest income (if assessed) and 10% reimbursement may be set off against marketing fees; matter remanded to AO/TPO for verification and quantification.

Short credit of tax deducted at source - remand for quantification and verification - Allowance of claimed TDS credit shown in revised return / Form 26AS. - HELD THAT: - The assessee claimed a higher TDS credit in its revised return than the credit allowed by the AO. The Tribunal restored the issue to the AO to verify the factual position by reference to records (Form 26AS and submissions) and directed that, if the claim is found in order, the AO shall give credit for the shortfall without delay.

Issue remitted to AO for verification of TDS credit; if established, AO to grant short/deficit credit.

Interest on refund - remand for quantification and verification - Computation of interest under section 244A on refund up to actual date of grant. - HELD THAT: - Assessee contended interest under section 244A was not computed up to the actual date of refund. The Tribunal remitted the issue to the AO to verify the claim and compute interest in accordance with section 244A, affording the assessee an opportunity to substantiate its claim.

Issue remitted to AO for verification and recomputation of interest under section 244A.

Initiation of penalty proceedings - Legitimacy of assailing initiation of penalty proceedings under section 271(1)(c) at this stage. - HELD THAT: - The Tribunal found the challenge to initiation of penalty proceedings to be premature and not ripe for adjudication at the appellate stage.

Assessee's plea against initiation of penalty proceedings dismissed as premature.

Rate of surcharge and education cess - Rate of surcharge and education cess levied by AO. - HELD THAT: - No substantive contention was pressed before the Tribunal on this point and the matter is consequential to other determinations; the Tribunal left the issue open for adjudication at appropriate stage.

Issue left open / not adjudicated.

Final Conclusion: Appeal partly allowed. Existence of PE in India upheld; income attributable to PE fixed at 15% of India gross receipts and, because commission to the NMC exceeds that amount, no taxable income remains in assessee's hands; 10% of reimbursements to be treated as income but allowed to be set off against commission/marketing fees; TP addition on interest free loan to be recomputed using LIBOR+2% and not domestic PLR; notional interest and reimbursements may be set off against marketing fees subject to verification and quantification by AO/TPO; issues of TDS credit and interest on refund remitted to AO for verification; penalty initiation dismissed as premature; other consequential matters left open as directed.

Deduction under section 80P(2)(a)(i) - Primary agricultural credit society - Assessing Officer's factual inquiry into nature of loan disbursements - Section 80P(4) limiting deduction for societies carrying on banking business - Eligibility to deduction to be determined year-wise - Remand for fresh adjudication in light of the Full Bench decision in The Mavilayi Service Co-operative Bank Ltd. v. CIT

Deduction under section 80P(2)(a)(i) - Primary agricultural credit society - Assessing Officer's factual inquiry into nature of loan disbursements - Section 80P(4) limiting deduction for societies carrying on banking business - Whether the CIT(A) was justified in confirming the Assessing Officer's disallowance of deduction under section 80P(2)(a)(i) on the ground that the assessees were carrying on banking business and only minuscule disbursements were for agricultural purposes - HELD THAT: - The Tribunal noted that the Full Bench of the Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT held that, after introduction of sub-section (4), the Assessing Officer must inquire into the factual activities of the society and determine eligibility for deduction year-wise, and is not bound by the registration certificate alone. In the present cases the Assessing Officer concluded that agricultural credit disbursements were only minuscule and that the societies were effectively carrying on banking business, but did not conduct the detailed enquiry into the purpose of individual loan disbursements required by the Full Bench precedent. The Tribunal held that loan book entries or audit narration by themselves may not conclusively establish the purpose of each loan (for example, gold loans may or may not be for agricultural purposes) and therefore the Assessing Officer must examine particulars of each disbursement, identify instances of non-agricultural advances and then determine whether the society's activities fall outside the class entitled to deduction under section 80P. Applying the High Court's ratio that eligibility is to be verified for each assessment year and on the basis of factual inquiry, the Tribunal restored the issue to the Assessing Officer for fresh examination in accordance with the Full Bench direction, with a requirement that the assessee cooperate and furnish details without seeking unnecessary adjournments. [Paras 7]

The matter is remanded to the Assessing Officer for fresh factual examination of loan disbursements and determination of entitlement to deduction under section 80P for the assessment year(s) in question; the appeals are allowed for statistical purposes.

Final Conclusion: The Tribunal, applying the Full Bench principle in The Mavilayi Service Co-operative Bank Ltd. v. CIT that the Assessing Officer must enquire year-wise into the factual nature of a society's activities, set aside the appellate confirmation to the extent of restoring the issue to the Assessing Officer for fresh adjudication; the appeals are disposed of accordingly and the stay applications are dismissed as infructuous.

Speculative transaction - forward contract as hedging of foreign exchange not speculative under section 43(5)(a) - deduction under section 43B for payment made in the year of actual payment - ad hoc disallowance for unsupported expenses - assessment under section 143(3) and evaluation of supporting vouchers

Speculative transaction - forward contract as hedging of foreign exchange not speculative under section 43(5)(a) - Allowability of loss on forward booking of foreign exchange treated by AO as speculative loss and disallowed. - HELD THAT: - The assessee, an importer, entered into forward contracts with banks to hedge foreign currency exposure and, on partial cancellation for want of funds, incurred a loss debited as 'loss on forward cancellation'. The AO treated the loss as speculative on the ground that the forward contract was not ultimately performed. The Tribunal applied the exclusion in clause (a) of sub-section (5) of section 43 which treats contracts in respect of raw material or merchandise entered into to guard against loss through future price fluctuations as not speculative. The Tribunal accepted the factual position that the forward contracts were entered as hedging transactions incidental to the assessee's trading/importing business and relied on precedent to hold such forward foreign exchange contracts are not speculative but part of regular business operations. Consequently, the disallowance as speculative was not justified.

Disallowance of Rs. 1,45,374/- as speculative loss deleted and the loss on forward booking allowed as business loss.

Deduction under section 43B for payment made in the year of actual payment - Allowability of prior period ESI payment debited in the accounts for an earlier year but paid during the assessment year. - HELD THAT: - The assessee deposited ESI amounts during the assessment year 2014-15 which related to liability for AY 2013-14, having become aware of applicability only thereafter. Applying the statutory principle that certain payments are deductible only in the year of actual payment, the Tribunal held that payment made in the year under consideration is allowable under the provision governing such payments. On the facts that the payments were made during the relevant assessment year, the disallowance by the AO was set aside.

Disallowance of Rs. 1,12,214/- on account of prior period ESI payment deleted and amount allowed in AY 2014-15.

Ad hoc disallowance for unsupported expenses - assessment under section 143(3) and evaluation of supporting vouchers - Validity and quantum of ad hoc disallowance of travelling and conveyance expenses where some vouchers were not produced before the AO. - HELD THAT: - The AO, while completing assessment under section 143(3), made an ad hoc disallowance because the assessee failed to produce certain bills and vouchers for travelling and conveyance expenses. The Tribunal recognised the procedural position of assessment under section 143(3) but, on appellate scrutiny of the materials, found that complete disallowance was not warranted. Exercising its discretion, the Tribunal sustained a limited disallowance to meet the shortfall in supporting evidence and directed deletion of the balance. The Tribunal clarified this adjudication should not be treated as precedent for other years.

Ad hoc disallowance of Rs. 1,78,912/- reduced: Rs. 50,000/- sustained as disallowance and the balance Rs. 1,28,912/- deleted.

Final Conclusion: The appeal is partly allowed: the speculative loss disallowance of Rs. 1,45,374/- and the prior period ESI disallowance of Rs. 1,12,214/- are deleted, while an ad hoc disallowance of Rs. 50,000/- towards travelling and conveyance expenses is sustained and the remaining disallowed amount is deleted.

First proviso to section 2(15) - dominant purpose test - charitable purpose - advancement of any other object of general public utility - application of income for benefit of persons referred to in section 13(3) - registration under section 12AA

First proviso to section 2(15) - dominant purpose test - charitable purpose - advancement of any other object of general public utility - Whether the assessee's activities are excluded from charitable purpose by the first proviso to section 2(15) and hence not entitled to exemption under sections 11 and 12. - HELD THAT: - The Tribunal applied the dominant purpose test and examined the factual matrix in which the assessee (NPCI) was formed, including its incorporation as a Section 25 company, the PSS Act framework, RBI authorisation to operate national retail payment systems, the objects in its Memorandum & Articles prohibiting distribution of profits, and the progressive reduction in fees charged. The Bench held that charging a fee to meet operational costs and provision of national payment infrastructure does not, by itself, convert the assessee's primary objective into trade, commerce or business. Reliance on precedent was noted to the effect that the proviso targets entities whose dominant object is profit-making; incidental or ancillary receipts do not defeat charitable character. The Tribunal also observed that payment of service tax under a separate enactment does not change the assessee's primary objective. On these findings the Tribunal concluded that the proviso to section 2(15) was not attracted and exemption under sections 11 and 12 was allowable. [Paras 8]

Proviso to section 2(15) does not apply; the assessee's dominant purpose is charitable and it is entitled to exemption under sections 11 and 12.

Application of income for benefit of persons referred to in section 13(3) - registration under section 12AA - Whether the provisions of section 13(1)(c)(ii) apply by reason of alleged benefit to promoter banks and whether registration under section 12AA conclusively entitles the assessee to exemption. - HELD THAT: - The Tribunal found that the services and facilities provided by the assessee were uniformly available to all users at the same fee and no preferential concession to promoter banks was shown. It noted the legal distinction between subscribers to share capital and contributors for purposes of section 13(3). Accordingly, the Tribunal held that section 13(1)(c)(ii) was not attracted. Separately, the Bench observed that registration under section 12AA is not an automatic guarantor of exemption; the taxability question must be examined at assessment. However, on the facts (including the nature of objects, statutory framework and conduct), registration did not preclude the assessee from obtaining exemption and did not override the dominant purpose conclusion. [Paras 8]

Section 13(1)(c)(ii) is not attracted; registration under section 12AA does not automatically confer exemption but does not preclude allowability of exemption where facts show charitable dominant purpose.

Final Conclusion: Applying the dominant purpose test to the facts, the Tribunal held that NPCI's primary objective is charitable and the first proviso to section 2(15) and section 13(1)(c)(ii) do not apply; the appeals for AY 2010-11 and AY 2012-13 are allowed and exemption under sections 11 and 12 is to be granted.

Penalty under Section 271(1)(c) - Furnishing inaccurate particulars of income - Withdrawal of claim upon reopening notice - Unproved but not disproved explanation - no penalty - Rule 34(5) - pronouncement period and exclusion for lockdown

Penalty under Section 271(1)(c) - Furnishing inaccurate particulars of income - Withdrawal of claim upon reopening notice - Unproved but not disproved explanation - no penalty - Whether penalty under Section 271(1)(c) could be sustained for raising a claimed deduction which was withdrawn on receipt of reopening notice where the assessee's explanation was unproved but not disproved. - HELD THAT: - The Tribunal found that the assessee, having originally claimed a deduction under Section 35(1)(ii) in the return for A.Y.2013-14, withdrew that claim in the return filed in response to the notice under Section 148 after receiving information that the donee institute was under scrutiny. Although serious irregularities in the institute's activities were noted by investigation, the record did not furnish conclusive evidence proving that the assessee had not made a genuine contribution. In these circumstances the Tribunal applied the principle that where an assessee's explanation is unproved but not disproved - so that facts are equally consistent with the hypothesis of genuineness as with concealment - penalty under Section 271(1)(c) cannot be imposed. The assessee's bona fide conduct in withdrawing the claim upon learning of irregularities reinforced confidence in the genuineness of the claim and precluded a positive inference of deliberate furnishing of inaccurate particulars. Relying on Tribunal and High Court authority to the same effect, the Tribunal set aside the lower authorities' view and quashed the penalty. [Paras 6, 7]

Penalty under Section 271(1)(c) imposed for the claimed deduction was quashed as the assessee's explanation was unproved but not disproved and there was no conclusive evidence of furnishing inaccurate particulars.

Rule 34(5) - pronouncement period and exclusion for lockdown - Whether the Tribunal's delay in pronouncing the order beyond ninety days was contrary to Rule 34(5) of the ITAT Rules. - HELD THAT: - The Tribunal considered precedent and the exceptional circumstances caused by the COVID-19 lockdown. It held that the period of lockdown should be excluded for computing the 90-day period envisaged by Rule 34(5), since the rule itself contemplates exclusion in extraordinary circumstances and higher courts had extended limitations during the lockdown. On that basis the belated pronouncement was held to be justifiable. [Paras 8, 9, 10]

Delay in pronouncement beyond ninety days was permissible by excluding the lockdown period for the purpose of Rule 34(5).

Final Conclusion: The Tribunal set aside the CIT(A)'s order and quashed the penalty under Section 271(1)(c) for A.Y.2013-14, holding that the assessee's explanation was unproved but not disproved and therefore did not warrant penalty; the Tribunal's belated pronouncement was held justified by excluding the COVID-19 lockdown period from the Rule 34(5) timeline.

Allowability of deduction under Section 35(1)(ii) - Explanation to Section 35(1)(ii) - subsequent withdrawal of approval not to deny deduction - accommodation entries / bogus donation - abuse of Section 35(1)(ii) - reliance on contemporaneous valid approval - pronouncement of orders within 90 days - Rule 34(5) - exclusion of lockdown period

Allowability of deduction under Section 35(1)(ii) - Explanation to Section 35(1)(ii) - subsequent withdrawal of approval not to deny deduction - accommodation entries / bogus donation - abuse of Section 35(1)(ii) - reliance on contemporaneous valid approval - Deduction under Section 35(1)(ii) claimed by the assessee in respect of a donation made to SHG&PH is allowable despite subsequent retrospective withdrawal of the institution's approval. - HELD THAT: - The Tribunal found as an admitted fact that at the time the assessee made the donation the donee institution had a valid approval under the Act. The statutory "Explanation" to Section 35(1)(ii) provides that deduction shall not be denied merely because the approval was withdrawn subsequent to the payment. Applying that provision and following binding and persuasive coordinate-bench precedents, the Tribunal held that a retrospective cancellation of approval does not invalidate a donor's claim where the donation was made acting upon a registration/approval which was valid and operative at the time of payment. Although the assessment records and survey statements alleged that the institution had admitted to providing accommodation entries, the Tribunal accepted the legal consequence of the Explanation and the consistent view taken by several coordinate benches in identical factual matrices and therefore set aside the disallowance and vacated the addition made by the AO/CIT(A). [Paras 6, 7]

Grounds challenging the disallowance of weighted deduction under Section 35(1)(ii) are allowed and the disallowance of Rs. 1,75,00,000 is vacated.

Pronouncement of orders within 90 days - Rule 34(5) - exclusion of lockdown period - Delay in pronouncement of the Tribunal's order beyond 90 days was justified by extraordinary circumstances arising from the COVID-19 lockdown and the lockdown period is to be excluded for computation of the 90-day limit under Rule 34(5). - HELD THAT: - The Tribunal considered Rule 34(5)'s use of the word "ordinarily" and followed a coordinate-bench reasoning that the nationwide lockdown and attendant unprecedented disruption of judicial work constituted "extraordinary and exceptional circumstances." In light of Supreme Court and High Court directions extending limitation during the lockdown and governmental recognition of COVID-19 as a calamity, the Tribunal excluded the lockdown period when computing the 90-day pronouncement period and therefore treated the delayed pronouncement as permissible. [Paras 8, 9, 10]

The delay in pronouncement is excused by extraordinary circumstances; the order is valid notwithstanding its pronouncement beyond 90 days.

Final Conclusion: Appeal allowed: the Tribunal set aside the CIT(A)'s disallowance and vacated the addition disallowing the assessee's claim of weighted deduction under Section 35(1)(ii) for A.Y. 2014-15; the Tribunal also held that the delay in pronouncement beyond 90 days is justified by the COVID-19 lockdown and the lockdown period is excluded for computing the 90-day limit.

Notice under section 148 issued to a deceased assessee - jurisdictional requirement for reassessment notice - effect of invalid notice on reassessment proceedings - assessment under section 147 framed against a dead person - application of section 292B as a curative provision

Notice under section 148 issued to a deceased assessee - jurisdictional requirement for reassessment notice - application of section 292B as a curative provision - Validity of the notice under section 148 issued in the name of a deceased assessee and consequence for the reassessment framed thereon. - HELD THAT: - The Assessing Officer issued a notice purportedly under section 148 dated 14.03.2016 in the name of the assessee who had died on 25.04.2015, and there is no record of valid service of that notice on the legal representative. A notice under section 148 is a jurisdictional precondition for exercise of power under section 147; issuance of such notice to a dead person is therefore not a mere procedural defect but vitiates the jurisdiction to proceed. Where the legal representative does not submit to the jurisdiction or waive the requirement of a valid notice, the curative provision embodied in section 292B cannot be invoked to validate a notice addressed to a deceased assessee. The Tribunal relied on the reasoning of the Gujarat High Court (as set out in the reproduced paragraphs) and noted that the revenue's challenge to that principle was dismissed by the Supreme Court in SLP. In the present facts the AO neither established valid notice to the legal representative nor followed up by issuing a fresh notice under the legal representative's name; accordingly the assessment proceedings founded on the impugned notice and the assessment framed in the name of the deceased assessee are without jurisdiction and must be quashed.

The notice under section 148 issued in the name of the deceased assessee is invalid and the reassessment/assessment framed pursuant thereto is quashed.

Final Conclusion: The Tribunal allowed the appeal, quashed the reassessment/assessment framed pursuant to the notice under section 148 issued in the name of the deceased assessee for AY 2009-10, and did not adjudicate other grounds as they became infructuous.

Treatment of unexplained cash credit under section 68 - exemption of long-term capital gains under section 10(38) and requirement of securities transaction tax - evidentiary burden to prove genuineness of share transactions including demat delivery and broker contract notes - inadmissibility of additions based on suspicion, conjecture or third party statements not confronted with assessee (principle of natural justice) - treatment of sale proceeds of jewellery as Streedhan and proof of possession and receipt through banking channels

Treatment of unexplained cash credit under section 68 - exemption of long-term capital gains under section 10(38) and requirement of securities transaction tax - evidentiary burden to prove genuineness of share transactions including demat delivery and broker contract notes - inadmissibility of additions based on suspicion, conjecture or third party statements not confronted with assessee (principle of natural justice) - Deletion of addition treated as unexplained cash credit of Rs. 33.37 lacs arising from sale of shares - HELD THAT: - The Tribunal held that on the facts the assessee discharged the primary onus of proving the share transactions by production of purchase contract notes, holding letter, broker sale contract notes, demat delivery records and evidence of receipt of sale consideration through banking channels. The Tribunal accepted that sale was effected through an independent broker and that the shares had been credited and debited in the assessee's demat account. It placed weight on the coordinate bench's decision in the closely analogous case of the assessee's husband, where identical facts led to deletion of additions; the earlier proceedings relating to the purchase transactions had attained finality in favour of the assessee. The Tribunal further held that additions cannot be sustained merely on the basis of doubts, conjectures or third party statements (including statements recorded during search) which were not confronted to the assessee, and therefore confirmed additions were to be deleted. [Paras 3, 4]

Impugned addition of Rs. 33.37 lacs on account of sale of shares deleted and grounds allowed.

Treatment of unexplained cash credit under section 68 - treatment of sale proceeds of jewellery as Streedhan and proof of possession and receipt through banking channels - evidentiary burden to establish ownership where purchase bills are absent - Deletion of addition treated as unexplained cash credit of Rs. 17.40 lacs arising from sale of jewellery - HELD THAT: - The Tribunal accepted the assessee's explanation that the jewellery was acquired as customary gifts (Streedhan) prior to the relevant period and that purchase bills need not exist for streedhan. The assessee produced evidence of banking receipts for the sale consideration, account confirmations and financial statements of the purchasers which recognized the purchase transactions. The Tribunal observed that nothing on record showed that the receipts were returned to purchasers and that in the factual matrix, and having regard to customs and CBDT instruction recognising possession of ornaments by married women, the claim deserved acceptance. Accordingly the Tribunal deleted the addition. [Paras 5, 6, 7, 8]

Impugned addition of Rs. 17.40 lacs on account of sale of jewellery deleted and grounds allowed.

Final Conclusion: The appeal is allowed: additions of Rs. 33.37 lacs (sale of shares) and Rs. 17.40 lacs (sale of jewellery) treated as unexplained cash credits are deleted.

Taxation of unexplained income under Section 115BBE - Income deemed under Section 68, Section 69, Section 69A, Section 69B, Section 69C and Section 69D - Aggregation of income and head of income - Requirement of satisfactory explanation about nature and source

Income deemed under Section 68, Section 69, Section 69A, Section 69B, Section 69C and Section 69D - Requirement of satisfactory explanation about nature and source - Taxation of unexplained income under Section 115BBE - Undisclosed amounts surrendered during survey can be treated as income referred to in Section 68 to Section 69D and taxed under Section 115BBE where the assessee offers no satisfactory explanation of their nature or source. - HELD THAT: - The Tribunal examined the statutory scheme and observed that Chapters IV and VI of the Act provide for computation and aggregation of income respectively, and that the term "income" in Section 2(24) includes profits and gains of business. The provisions in Section 68 to Section 69D operate by deeming sums, investments, unrecorded money, unexplained expenditure or hundi transactions to be income where the assessee offers no satisfactory explanation as to nature or source. The assessee, in replies recorded during survey, admitted inability to explain excess stock, excess cash and unrecorded sundry receivables and produced no evidence to demonstrate nexus with declared business receipts. Given the absence of any satisfactory explanation and the legislative purpose of Section 115BBE (introduced w.e.f. 1.4.2013) to deal with undeclared income revealed in survey, the Tribunal held that the surrendered amounts fall within the scope of income referred to in Sections 68-69D and accordingly may be subjected to the special tax computation under Section 115BBE. [Paras 11, 12, 14, 16, 18]

Findings of the Assessing Officer and the Commissioner (Appeals) treating the surrendered sums as income falling within Sections 68 to 69D and applying Section 115BBE are confirmed.

Aggregation of income and head of income - Taxation of unexplained income under Section 115BBE - It is not necessary to first classify such unexplained sums under the head "Income from other sources"; the deeming provisions operate irrespective of the head and Section 115BBE applies when total income includes amounts referred to in Sections 68-69D. - HELD THAT: - The Tribunal noted that the Act distinguishes computation (Chapter IV) and aggregation (Chapter VI) but does not confine the deeming operation to a particular head of income. The word "income" employed in the aggregation provisions is of general import and covers various heads defined in Section 2(24). Consequently, the Assessing Officer need not first reclassify the surrendered amounts as "income from other sources" before invoking Sections 68-69D and applying Section 115BBE; the statutory scheme allows treating unexplained amounts as income for aggregation and taxation under the special rate prescribed in Section 115BBE. [Paras 11, 16]

The contention that the Assessing Officer should have recomputed income by treating the surrendered amounts only as "income from other sources" is rejected.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Assessing Officer's and CIT(A)'s orders; the surrendered/unexplained sums are taxable as amounts covered by Sections 68 to 69D and liable to tax under Section 115BBE for Assessment Year 2015-16.

Classification of instruments as "Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases" - Classification as "Automatic regulating or controlling instruments and apparatus" requiring measurement, comparison and automatic actuation - Interpretation of HSN Explanatory Notes/Note 7(a) to Chapter 90 regarding automatic control - Onus on Revenue to displace importer's declared classification

Classification of instruments as "Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases" - Classification as "Automatic regulating or controlling instruments and apparatus" requiring measurement, comparison and automatic actuation - Interpretation of HSN Explanatory Notes/Note 7(a) to Chapter 90 regarding automatic control - Imported sensors (including water-in-fuel "water signal", pressure sensors, hot-film air mass meters and temperature sensors) are classifiable under Chapter Heading 9026 and not under Chapter Heading 9032. - HELD THAT: - The Tribunal examined rival entries 9026 and 9032 and the HSN Explanatory Notes/Note 7(a) to Chapter 90. Note 7(a) and the HSN notes require that items classifiable under 9032 be instruments or apparatus that automatically control variables of liquids or gases by (a) constantly or periodically measuring the actual value, (b) comparing it with the desired value, and (c) actuating a device to bring and maintain the factor at the desired value. The product literature relied on by Revenue described accurate measurement and contribution to improved engine performance but did not categorically show that the imported items autonomously effected start/stop or other automatic actuation to bring variables to a desired value. The appellants demonstrated that the water signal merely detects/indicates water level and requires manual intervention by the user to drain water; similarly the other sensors measure parameters but do not, on the record, automatically actuate control to maintain the variables. In the absence of cogent evidence that the instruments perform the threefold automatic control function, they fall within 9026 as measuring/checking instruments rather than within 9032 as automatic regulating apparatus. The Tribunal also noted precedents and external tariff rulings relied upon by the parties but grounded the decision on the absence of evidence of automatic control in the record and the correct application of HSN Note 7(a). [Paras 13, 14]

Appeal allowed on classification: the imported sensors are classifiable under Heading 9026 and not under Heading 9032.

Onus on Revenue to displace importer's declared classification - Revenue failed to discharge the burden of proving that the imported goods were classifiable under Heading 9032 and thereby displace the appellants' declared classification under Heading 9026. - HELD THAT: - The Tribunal reiterated the settled rule that where the importer declares a classification and the Department proposes a different classification, the burden lies on Revenue to establish the correctness of its proposed classification. Revenue did not produce cogent evidence (for example, technical opinion or material establishing automatic actuation/control) to contradict the appellants' case that the items are measuring/checking instruments. The literature placed on record did not categorically establish automatic control capability required for 9032. Consequently, Revenue did not meet its evidentiary burden to justify reclassification and demand. [Paras 13]

Demand based on reclassification could not be sustained because Revenue failed to prove the items fall under Heading 9032.

Final Conclusion: The appeal is allowed: the imported sensors are to be classified under Chapter Heading 9026 (measuring/checking instruments) and the Department's demand based on classification under Chapter Heading 9032 is set aside for want of evidence; consequential relief, if any, to follow as per law.

Persons acting in concert - inter se transfer exemption - disclosure under Chapter V - two working days rule - obligation to make public announcement on acquisition exceeding five per cent - quantification of penalty for technical breach

Persons acting in concert - Promoters who transferred shares to the appellant were not persons acting in concert with the appellant for the purpose of the SAST Regulations, 2011. - HELD THAT: - The definition of persons acting in concert requires a common objective or purpose of acquisition of shares or exercising control. The factual finding records that the two transferor promoters intended to dispose of their shares while the appellant intended to acquire them. This absence of a common objective or common purpose meant there was no concerted action between the transferors and the appellant; the mere continuity of promoter-group aggregate holding was irrelevant to establishing concerted intent. The Tribunal sustained the Adjudicating Officer's conclusion that the transferors could not be treated as persons acting in concert with the appellant. [Paras 11]

No persons acting in concert existed between the appellant and the two transferor promoters; the AO's finding on this point is upheld.

Inter se transfer exemption - disclosure under Chapter V - two working days rule - The appellants were not entitled to the inter se transfer exemption because the statutory disclosure requirement under Regulation 29(3) was not complied with within two working days. - HELD THAT: - Regulation 10 provides an exemption for certain inter se transfers subject to fulfillment of conditions, including compliance with disclosure requirements in Chapter V. Regulation 29(3) mandates disclosures to stock exchanges and the target company within two working days of acquisition. The appellants admitted that disclosures were made on the seventh day (i.e., after five days), and therefore the condition precedent for claiming the inter se transfer exemption was not satisfied. This constituted a technical breach of the regulations, and the Adjudicating Officer's conclusion that the exemption could not be availed of was affirmed. [Paras 12, 13]

Because disclosures were not made within two working days, the inter se transfer exemption under Regulation 10 is inapplicable and the appellants were in breach of the disclosure requirements.

Quantification of penalty for technical breach - The penalty imposed for the disclosure breach was excessive and was reduced on account of the breach being technical and mitigatory factors. - HELD THAT: - While the AO imposed a penalty of Rs. 15 lacs having regard to Section 15J factors, the Tribunal noted that the appellants had in fact made the requisite disclosures belatedly (after five days) and that shareholders' interests were not jeopardized. Treating the failure as a technical breach, the Tribunal exercised its revisional jurisdiction to moderate the quantum, observing that a lesser penalty would be just and sufficient in the circumstances. [Paras 14, 15, 16]

The AO's quantum of penalty is set aside and substituted: the appellants are directed to pay a reduced penalty of Rs. 5 lacs.

Final Conclusion: The Tribunal upheld the AO's finding that the transferors were not persons acting in concert with the appellant and that the inter se transfer exemption was unavailable because disclosures under Regulation 29(3) were not made within two working days; however, treating the breach as technical and having regard to mitigating circumstances, the Tribunal reduced the penalty from Rs. 15 lacs to Rs. 5 lacs.

Binding nature of approved resolution plan under Section 31(1) of the I&B Code - Functus officio of Adjudicating Authority after approval of resolution plan - Maintainability of intervention by an operational creditor post approval of resolution plan - Finality of resolution plan where no appeal under Section 61 is filed within limitation

Binding nature of approved resolution plan under Section 31(1) of the I&B Code - Maintainability of intervention by an operational creditor post approval of resolution plan - Finality of resolution plan where no appeal under Section 61 is filed within limitation - Functus officio of Adjudicating Authority after approval of resolution plan - Whether the appellant (an operational creditor) could seek intervention or challenge matters relating to the Resolution Plan after the Adjudicating Authority had approved the Resolution Plan on 8-4-2019. - HELD THAT: - The Tribunal held that once the Resolution Plan was approved by the Adjudicating Authority on 8-4-2019, the approved plan became binding on all stakeholders in terms of the provision embodied in Section 31(1) of the I&B Code. The Appellant did not file an appeal under Section 61 within the statutory limitation, and therefore the approved Resolution Plan had attained finality and was beyond challenge by the Appellant. Consequently, an operational creditor cannot seek intervention after approval of the Resolution Plan; the Adjudicating Authority had no jurisdiction to re-open or review its approval in the present proceedings. The Tribunal also noted that the Appellant had been represented throughout the Corporate Insolvency Resolution Process and could not contend that matters such as the permitted User Agreement were decided behind its back. The Adjudicating Authority's observation that the report of the Resolution Professional/Forensic Consultant on undervaluation did not affect the future applicability of the User Agreement was treated as resolving any apprehensions of the Appellant, and was not a basis for permitting post-approval intervention. [Paras 4, 5]

The appeal is without merit and is dismissed.

Final Conclusion: The appeal is dismissed; the approved Resolution Plan is binding and final as against the appellant, and post approval intervention by the operational creditor was not maintainable.

Pre-existing dispute - debt and default - maintainability of a Section 9 petition under the Insolvency and Bankruptcy Code - initiation of corporate insolvency resolution process (CIRP) - abuse of process and invocation of multiple remedies - IBC not a substitute for a recovery forum (Mobilox principle)

Pre-existing dispute - debt and default - The claim of the Operational Creditor is hit by a pre-existing and substantial dispute as to debt and default. - HELD THAT: - The Tribunal found that the Corporate Debtor had specifically raised defects in the work, produced a contemporaneous communication (letter dated 19.06.2019) detailing quality defects, and had replied to the statutory demand notice pointing out the reasons for withholding payment. The Petitioner had not placed the full contractual terms before the Tribunal to dispel those disputes. On these facts the Tribunal held that the amount claimed is in substantial dispute which pre-existed the Section 9 petition and therefore the statutory pre-condition for admission under the Code was not satisfied. [Paras 7, 8, 9]

There exists a pre-existing dispute regarding the claim; the debt and default are not admitted and are substantially disputed.

Maintainability of a Section 9 petition under the Insolvency and Bankruptcy Code - initiation of corporate insolvency resolution process (CIRP) - IBC not a substitute for a recovery forum (Mobilox principle) - The Section 9 petition for initiation of CIRP is not maintainable and is liable to be dismissed in view of the pre-existing dispute and settled law. - HELD THAT: - Applying the established legal principle that the Code cannot be used as a substitute for ordinary recovery proceedings, the Tribunal relied on the Mobilox principle to conclude that where a dispute is pre-existing and bona fide, the IBC remedy cannot be invoked. The Tribunal observed that multiple fora (criminal complaint and MSEFC proceedings) had been approached by the parties and that the existence of those proceedings and the dispute over quality of work precluded admission of the Section 9 petition. Consequently, the petition did not meet the threshold for commencing CIRP. [Paras 9, 11, 12]

The Company Petition under Section 9 is not maintainable and is dismissed.

Abuse of process and invocation of multiple remedies - The Tribunal noted the parties had invoked multiple fora for the same cause of action and treated such multiplicity as material to the maintainability decision. - HELD THAT: - The Tribunal recorded that the Operational Creditor had pursued other remedies, including a criminal complaint for cheque dishonour and reference to the MSEFC, and that the Corporate Debtor had also invoked remedies and defenses in those proceedings. The existence of concurrent proceedings and the reliance on disputed contractual defaults were treated as indicia that the relief under the Code was inappropriate in the circumstances. The Tribunal therefore declined to permit the IBC route where parallel remedies and disputes were already alive. [Paras 9, 10]

The invocation of multiple remedies for the same cause of action weighed against admission of the Section 9 petition and supported dismissal.

Final Conclusion: The Company Petition under Section 9 is dismissed on the ground of a pre-existing substantial dispute as to debt and default and because the IBC remedy cannot replace ordinary recovery forums; the dismissal is without prejudice to the parties prosecuting their pending proceedings before the criminal court and MSEFC.

Limitation Act Article 137 - Section 9 Insolvency and Bankruptcy Code, 2016 - pre-existing dispute - acknowledgement of debt - debt appearing in books of account - service of demand notice - burden of proof

Limitation Act Article 137 - Section 9 Insolvency and Bankruptcy Code, 2016 - Whether the Section 9 petition is barred by limitation - HELD THAT: - The Tribunal held that limitation for the claim runs from the date of the last invoice, last payment or from the date of acknowledgement, and Article 137 of the Limitation Act applies to applications under the I&B Code. The last invoice and last payment occurred in 2012 and the Operational Creditor filed the petition on 16-11-2018, beyond the three-year period. Even if the letter dated 3-6-2014 is treated as an acknowledgement, the petition filed on 16-11-2018 was still beyond three years from that date. Accordingly, the claim is time-barred and the petition cannot be admitted on limitation grounds. [Paras 9, 11, 12]

The petition is barred by limitation and cannot be admitted.

Pre-existing dispute - acknowledgement of debt - service of demand notice - Whether a pre-existing dispute exists such as to defeat the Section 9 petition - HELD THAT: - The Corporate Debtor relied on a letter dated 3-6-2014 asserting incomplete work and conditioning payment on completion. The Tribunal noted that the letter acknowledged the project was not commissioned due to the Corporate Debtor's difficulties and simultaneously asked the Operational Creditor to complete pending work. There was no reply from the Operational Creditor denying pending work. Nevertheless, even assuming the letter could constitute an acknowledgement or a dispute, the Tribunal found that the limitation bar applied and the letter did not save the claim. Further, there was no reply to the statutory demand notice, which undermined the existence of a contemporaneous, substantive pre-existing dispute sufficient to defeat the petition on that ground. [Paras 10, 11, 13]

No pre-existing dispute was established in a manner that would save the petition from rejection; in any event the claim is time-barred.

Debt appearing in books of account - burden of proof - Whether the Operational Creditor proved that the alleged debt appears in the books of account of the Corporate Debtor so as to affect limitation - HELD THAT: - The Operational Creditor contended that the debt was not written off in the Corporate Debtor's accounts and therefore limitation is saved. The Tribunal observed that the burden lies on the Operational Creditor to prove that the alleged debt appears in the Corporate Debtor's books; no balance sheet or cogent material was produced to establish that the debt remained recorded. In absence of such evidence, the Tribunal could not conclude that limitation was saved by entries in the debtor's accounts. [Paras 12]

No evidence was produced that the debt appears in the Corporate Debtor's books; limitation is not saved on this ground.

Final Conclusion: The Section 9 petition was rejected as the claim is time barred under Article 137 of the Limitation Act; the asserted pre existing dispute and alleged accounting entries did not overcome the limitation bar.

Pre-existing dispute - notice of dispute - operational creditor - summary procedure - Section 8(2)(a) obligation to communicate dispute - Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016 - existence of a plausible contention requiring further investigation - FIR as indicium of prior dispute

Pre-existing dispute - notice of dispute - FIR as indicium of prior dispute - Section 8(2)(a) obligation to communicate dispute - Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016 - existence of a plausible contention requiring further investigation - Existence of a pre-existing dispute between the parties which warranted rejection of the Section 9 application under the IBC. - HELD THAT: - The Tribunal held that the Adjudicating Authority correctly found a pre-existing and serious dispute between the appellant (operational creditor) and the respondent (corporate debtor). The record shows an FIR lodged by the appellant on 7-9-2016 alleging cheating by the respondent's directors in respect of the same amount later claimed in the Section 9 demand, and the respondent had, prior to receipt of the demand notice, replied denying any payable debt and asserting payments and adjustments. Under Section 8(2)(a) the corporate debtor must communicate existence of a dispute within ten days of the demand notice; sub section 5(ii)(d) of Section 9 mandates rejection where a notice of dispute has been received or a record of dispute exists in the information utility. Applying the Supreme Court's test in Mobilox, the Tribunal confined itself to whether there was a plausible contention requiring further investigation and found that the contentions and documentary material (reply to the demand notice, prior FIR and payments claimed by respondent) established such a dispute. The Tribunal emphasised that the IBC procedure is summary and time bound and that matters which require regular trial or detailed adjudication cannot be ventilated in Section 9 proceedings; therefore, the Adjudicating Authority was right to reject the application on the ground of the prior dispute. [Paras 15, 16, 17, 18, 19]

There was a pre-existing dispute between the parties prior to the demand notice; consequently the Section 9 application was rightly rejected under Section 9(5)(ii)(d) of the IBC.

Final Conclusion: The appeal is dismissed. The order of the Adjudicating Authority rejecting the Section 9 application on the ground of a pre-existing dispute is affirmed; no costs.

Exemption for services consumed within a Special Economic Zone - reverse charge liability for services provided from outside India - External Commercial Borrowing as banking and other financial services - extended limitation by reason of suppression of facts with intent to evade - payment of tax before service of notice under section 73(3) and inapplicability of section 73(4)

Exemption for services consumed within a Special Economic Zone - External Commercial Borrowing as banking and other financial services - Whether the Appellant was liable to service tax on the upfront/agency fee paid in relation to the US$ 500 million ECB from the London Bank - HELD THAT: - The Tribunal held that the notification dated 31 March, 2004 exempts taxable services provided to a developer of an SEZ where such services are for consumption within the SEZ. The location of the assessee's registered office outside the SEZ is not decisive; what matters is whether the services were to be consumed within the SEZ. The Commissioner erred in denying the benefit of the notification on the ground that the registered office was outside the SEZ and in treating the Appellant's subsequent deposit-and-refund practice in respect of a different ECB as indicative that services were not wholly consumed within the SEZ. Applying the explanatory Circular and the textual scheme of the notifications, the Tribunal concluded that the services relating to the US$ 500 million ECB were to be consumed within the SEZ and thus exempt under the notification. [Paras 45, 46]

Demand of service tax in respect of the US$ 500 million ECB was not sustainable and the Appellant was entitled to exemption.

Reverse charge liability for services provided from outside India - payment of tax before service of notice under section 73(3) and inapplicability of section 73(4) - Whether the show cause notice in respect of the US$ 99 million ECB could be issued where the Appellant had deposited service tax with interest before service of notice and had informed the Department - HELD THAT: - Section 73(3) permits a person to pay tax before service of a notice and thereby preclude issuance of a notice under section 73(1). The Commissioner relied on section 73(4) and the invocation of extended limitation, alleging suppression of facts; however, the Tribunal examined the facts and relevant authorities and accepted that suppression, for invocation of the extended period, must be wilful with intent to evade. The Appellant acted under a bona fide belief regarding the tax liability (mistaken view about the service provider's establishment), sought legal advice upon receipt of summons, paid the tax with interest and notified the Department before issuance of the show cause notice. On these findings the Tribunal held that the conditions in section 73(4) were not made out and that section 73(3) operated to preclude the issuance of the notice. [Paras 65, 66, 67]

Show cause notice in respect of the US$ 99 million ECB was not maintainable because the Appellant had paid the tax with interest before service of the notice and section 73(4) did not apply.

Extended limitation by reason of suppression of facts with intent to evade - exemption for services consumed within a Special Economic Zone - Whether the extended period of limitation and penalties could be invoked against the Appellant - HELD THAT: - The Tribunal applied settled precedent that 'suppression of facts' in provisos permitting extended limitation must be deliberate and with intent to evade tax. It found no evidence of wilful misstatement or deliberate suppression by the Appellant: the Appellant had a bona fide belief about liability, paid tax with interest once advised, and in respect of the ECB from Hong Kong the tax paid was later refunded under the SEZ notification. The Commissioner failed to engage with the Appellant's explanations and wrongly treated Departmental investigation as determinative of deliberate suppression. Since the prerequisites for invoking extended limitation and imposing penalties were not satisfied, the impugned levy of extended period demand and penalties could not be sustained. [Paras 63, 64, 68]

Invocation of the extended period and imposition of penalties were unjustified; the impugned order is set aside.

Final Conclusion: The impugned order confirming demand of service tax, interest and penalties was set aside: the Appellant was held entitled to exemption for the US$ 500 million ECB; the show cause notice and extended-period demand in respect of the US$ 99 million ECB were not maintainable because tax with interest had been paid before service of the notice and there was no wilful suppression; accordingly the appeal was allowed.

Exclusion of educational courses recognised by law from Commercial Training or Coaching Services - recognition under the Merchant Shipping Act, 1958 as determining taxability - applicability of pre-negative list and negative list regimes to training services - res judicata effect of earlier undisputed tribunal and appellate orders - remand for limited computation where newly produced material relates to non-approved courses

Exclusion of educational courses recognised by law from Commercial Training or Coaching Services - recognition under the Merchant Shipping Act, 1958 as determining taxability - res judicata effect of earlier undisputed tribunal and appellate orders - Services consisting of DG Shipping-approved marine training courses, mandated by the Merchant Shipping Act, 1958, are excluded from taxable Commercial Training or Coaching Services in both pre-negative list and negative list regimes. - HELD THAT: - The Tribunal examined the statutory definitions applicable in the pre-negative list and negative list periods and observed that courses awarding a certificate, diploma or qualification "recognized by law" fall outside the taxable definition of commercial training. The courses run by the assessee were approved by the Director General of Shipping and conducted in conformity with the Merchant Shipping Act, 1958; an earlier final Tribunal order in the assessee's favour for the prior period and an unchallenged Commissioner (Appeals) order for the interim period establish that these courses are "recognised by law." The Tribunal held that the lower authority's conclusion-that the courses were not statutory or recognized-was factually incorrect and that, on the statutory scheme and on the basis of earlier final orders accepted by the Revenue, the fees for the approved courses are not leviable to service tax. [Paras 8, 9]

Demand of service tax on fee from DG Shipping-approved courses is set aside.

Remand for limited computation where newly produced material relates to non-approved courses - limitation and extended period not available in absence of fraud or suppression - penalty not imposable where extended limitation not invoked and no fraud or suppression found - Portion of fee income from courses not approved by the Directorate General of Shipping, newly documented before the Tribunal, is remanded to the original authority for limited computation within the normal period of limitation; consequential penalty set aside. - HELD THAT: - The Tribunal noted that detailed break up of fees for approved and non approved courses was produced for the first time before it and was not available to the lower authorities. In the absence of material establishing fraud or suppression by the assessee, the extended period of limitation cannot be invoked. For the sake of justice the matter was remitted to the original authority solely to compute service tax liability on the non approved courses restricted to the normal limitation period. As the extended period could not be applied, the Tribunal held that penalty is not imposable and directed it to be set aside. [Paras 10]

Matter remanded for limited computation on non approved courses within the normal limitation period; penalty set aside.

Final Conclusion: The appeals are allowed in part: service tax demand on DG Shipping-approved merchant shipping training courses is quashed; computation of tax (if any) on non approved courses is remitted to the original authority limited to the normal period of limitation, and penalty is vacated.

Commercial Construction or Industrial Service - Works Contract Service - composite supply involving supply of goods and services - abatement of value - no service tax demand prior to introduction of Works Contract Service - interest and penalties under the Finance Act, 1994

Commercial Construction or Industrial Service - no service tax demand prior to introduction of Works Contract Service - Larsen & Toubro precedent - Validity of demand of service tax under the category of Commercial Construction or Industrial Service for the period prior to and up to June 2007 - HELD THAT: - The Tribunal applied the Apex Court's decision in Larsen & Toubro, holding that service tax could not be demanded on construction services prior to the introduction of the Works Contract Service in June 2007 where there is a supply of both goods and services. On the facts, the Tribunal found that the services constituted a composite supply involving supply of materials; however, the legal position established by Larsen & Toubro precludes sustaining a demand under the Commercial Construction or Industrial Service category for the period before the Works Contract levy was introduced. The Tribunal therefore concluded that the demand under Commercial Construction or Industrial Service could not be maintained for the relevant period. [Paras 7, 8]

Demand raised under Commercial Construction or Industrial Service for the period September 2004 to June 2007 (within September 2004 to September 2007 contested period) is not sustainable and is set aside.

Works Contract Service - composite supply involving supply of goods and services - abatement of value - Whether the assessee rightly classified and paid service tax as Works Contract Service effective from June 2007 and whether such payment obviates further demand - HELD THAT: - The Tribunal noted the Commissioner had observed that the assessee supplied materials while providing the service and had applied the abatement to determine taxable value. Accepting that the services were composite (supply of goods with services), the Tribunal held that classification as Works Contract Service from June 2007 was legally tenable. The payments made under the Works Contract category were appropriated in the impugned order, and the Revenue's contention that existing contracts prior to June 2007 could not be taxed as Works Contract was rejected as not tenable in view of the composite nature of the supply and the applicable law post-June 2007. [Paras 7, 8]

Classification and payment of service tax as Works Contract Service effective from June 2007 upheld; no further demand sustainable.

Interest and penalties under the Finance Act, 1994 - Sustenance of interest and penalties imposed along with the demand - HELD THAT: - Having set aside the demand itself on the principal and classification grounds, the Tribunal consequentially found that interest under Section 75 and penalties under the relevant provisions could not be sustained. The impugned imposition of interest and penalties was therefore set aside. [Paras 8]

Interest and penalties imposed along with the demand are set aside.

Final Conclusion: The appeal is allowed: the demand of service tax under Commercial Construction or Industrial Service for the period September 2004 to September 2007 is set aside; classification and payment as Works Contract Service from June 2007 are accepted; interest and penalties are also set aside.

Stay application - revenue recovery - interim abeyance of recovery - time bound adjudication of stay - automatic stay under amended Section 55(4) of KVAT Act, 2003

Stay application - time bound adjudication of stay - Appellate authority directed to consider and decide the stay application within a specified period. - HELD THAT: - The Court observed that multiple writ petitions raised the grievance of non hearing of appeals and pending stay applications. In the circumstances, and noting that the petitioner had not availed of the automatic stay under the amended provision, the Court directed the appellate authority to consider the stay application and dispose of it within two months from receipt of a copy of the judgment. The direction requires a time bound adjudication of the stay application but does not preclude the appellate authority from deciding the merits of the appeal while considering the stay.

Appellate authority shall consider and dispose of the stay application within two months from receipt of this judgment.

Revenue recovery - interim abeyance of recovery - stay application - Steps for recovery stayed temporarily until the stay application is disposed of. - HELD THAT: - Because the appellate authority was directed to decide the stay application within a prescribed period, the Court ordered that steps for recovery in respect of the demand notice identified as Ext.P4 be kept in abeyance until the stay application is finally disposed of. The Court made clear that this interim arrangement is limited to the period until adjudication of the stay application and does not prevent the appellate authority from hearing and deciding the appeal on merits simultaneously with the stay application.

Recovery proceedings in respect of Ext.P4 shall be kept in abeyance until the stay application is disposed of.

Final Conclusion: Writ petition disposed by directing the appellate authority to decide the stay application within two months and by directing temporary abeyance of recovery steps pertaining to Ext.P4 until disposal of the stay application; appellate authority remains free to decide the appeal along with the stay application.

Grant of 'C' forms - inter-State purchases at concessional rate of tax - online downloading of declaration in 'C' Forms - quashing of circular and consequential notices and proceedings - application of earlier Division Bench precedent

Grant of 'C' forms - inter-State purchases at concessional rate of tax - application of earlier Division Bench precedent - Entitlement of the petitioner to be issued 'C' forms for purchase of High Speed Diesel from out-of-State suppliers at concessional rate. - HELD THAT: - The petitioner sought issuance of 'C' forms for interstate purchases of High Speed Diesel. The petitioner relied on the order in W.P.Nos.19458 of 2018 etc. batch (M/s.The Ramco Cements Ltd & Others v. The Commissioner of Commercial Taxes and Another), which the learned Judge found squarely covers the present petition. The court noted that the Division Bench had addressed the same controversy and had directed that assessees and registered dealers shall not be restricted from using 'C' forms for specified inter-State purchases at concessional rates. Applying that precedent, and in the absence of any distinction in facts or law warranting a different conclusion, the writ petition was allowed and the petitioner was held entitled to the relief claimed. [Paras 3, 6]

Writ petition allowed and petitioner entitled to issuance of 'C' forms for the claimed inter State purchases; connected miscellaneous petition closed.

Online downloading of declaration in 'C' Forms - quashing of circular and consequential notices and proceedings - application of earlier Division Bench precedent - Applicability of the Division Bench directions that authorities shall permit online downloading of 'C' forms and that the circular dated 31.05.2018 and consequential notices/proceedings be quashed. - HELD THAT: - The court recorded that the Division Bench had specifically directed the State and Revenue Authorities not to restrict use of 'C' forms for inter State purchases of specified commodities and had directed that online downloading of such declarations be permitted. The Division Bench had also quashed the circular of the Commissioner dated 31.05.2018 and set aside consequential notices and proceedings initiated against assessees across the State. As the present petition was governed by those directions, the court applied them and granted relief accordingly. [Paras 5, 6]

Directions of the Division Bench (permitting online downloading and quashing the circular and consequential notices/proceedings) held applicable; relief granted in accordance with that order.

Final Conclusion: The writ petition was allowed as being covered by the earlier Division Bench order; the petitioner is entitled to issuance of 'C' forms for the claimed inter State purchases and relief was granted in accordance with the Division Bench directions; no costs and connected miscellaneous petition closed.

Natural justice - opportunity to be heard - return of documents for verification and rectification - personal hearing and its effectiveness during lockdown - remand for fresh consideration

Return of documents for verification and rectification - natural justice - opportunity to be heard - Whether the revisional authority erred in refusing to return original C Declaration Forms and thereby denying the petitioner an opportunity to verify and rectify those documents before passing the revisional order. - HELD THAT: - The Court found that the 2nd respondent, having identified defects in the C Declaration Forms, ought to have returned the original forms to the petitioner so that the petitioner could obtain clarification or rectification from the vendors who issued them. Denial of the originals prevented the petitioner from explaining or correcting any alleged defects and caused grave prejudice. The respondents did not offer any justification for withholding the originals. In light of the principle of natural justice and the requirement that an assessee be given a fair opportunity to place on record explanations and supporting documents, the revisional order passed without returning the originals was vulnerable to interference. [Paras 11, 14]

The revisional order was set aside insofar as it was premised on cancellation/defects in the C Declaration Forms; the 2nd respondent was directed to return the original forms to the petitioner for verification and rectification and to permit filing of a reply thereafter.

Personal hearing and its effectiveness during lockdown - opportunity to be heard - remand for fresh consideration - Whether the revisional authority could proceed to pass the revisional order when the petitioner was unable to attend the scheduled personal hearing due to the COVID 19 lockdown. - HELD THAT: - The Court noted that the personal hearing notice was served after the date fixed for hearing and that the petitioner was unable to attend the rescheduled date on account of the lockdown declared by the Central and State Governments. The 2nd respondent did not adjourn or await the lifting of lockdown restrictions but passed the revisional order on the ground that the petitioner did not avail the hearing. The Special Counsel for Commercial Taxes did not dispute the existence of the lockdown and agreed that the matter should be remitted. Applying principles of fairness and effective opportunity to be heard in exceptional circumstances, the Court concluded that the matter required fresh consideration and remitted it to the 2nd respondent for a reasoned hearing after affording the petitioner a proper opportunity. [Paras 5, 7, 12, 13, 14]

The revisional order was set aside; the matter was remitted to the 2nd respondent to afford a personal hearing after return of the originals and filing of the petitioner's reply, and thereafter to pass a reasoned order in accordance with law.

Final Conclusion: Writ petition allowed; the revisional order dated 28.03.2020 for tax period 2012-13 (CST) is set aside and the matter is remitted to the 2nd respondent with directions to return the original C Declaration Forms, permit the petitioner to file a reply within a stipulated time, afford a personal hearing and thereafter pass a reasoned order in accordance with law.

Principles of natural justice - right to personal hearing - adjournment/extension owing to COVID-19 lockdown - failure to consider representation/adjournment request - rectification of assessment order - remand for fresh consideration and compliance with audi alteram partem - assessment under the Telangana Tax on Entry of Goods into Local Areas Act, 2001

Principles of natural justice - right to personal hearing - failure to consider representation/adjournment request - adjournment/extension owing to COVID-19 lockdown - rectification of assessment order - Impugned assessment and rectification orders were vitiated for denial of opportunity of hearing and for passing the assessment without considering the petitioner's adjournment request made during COVID-19 lockdown. - HELD THAT: - The Court found on the material placed before it, including the respondent's admission in the rectification order that the petitioner had sent an adjournment e-mail dated 24.03.2020 and that the petitioner's authorised representative had informed the Assessing Authority by phone of inability to file a reply due to the lockdown, that the Assessing Authority proceeded to pass the assessment order without considering that request and without granting the personal hearing sought. Having regard to the severe restrictions imposed by the State on account of the pandemic, it was unreasonable to require a response within seven days and to deny the specific request for adjournment and personal hearing. Reliance of the parties on precedents holding that an assessing authority cannot deny a personal hearing when specifically requested was noted. In these circumstances the assessment order (and consequential rectification) was held to be vitiated for breach of principles of natural justice and set aside. [Paras 6, 9, 14, 16]

Impugned Assessment Order No.51310 dt.30.03.2020 and Rectification Order A.O.No.53991 dt.07.04.2020 set aside as violative of principles of natural justice.

Remand for fresh consideration and compliance with audi alteram partem - right to personal hearing - adjournment/extension owing to COVID-19 lockdown - Matter remitted to the Assessing Authority for fresh consideration with directions to afford opportunity to file reply and to grant personal hearing within specified timelines. - HELD THAT: - The Court directed that the matter be remitted to the 1st respondent to pass a fresh order in accordance with law within three months. The petitioner was granted six weeks from receipt of the copy of the order to file a reply with supporting documents, which the Assessing Authority is to consider. The Court expressly directed that a personal hearing be provided before passing the final order, thereby requiring the Assessing Authority to comply with the audi alteram partem principle in the fresh proceedings. [Paras 16, 17]

Matter remitted for fresh adjudication within three months; petitioner given six weeks to file reply and to be afforded personal hearing before final order.

Final Conclusion: Writ petition allowed; impugned assessment and rectification orders set aside and matter remitted for fresh consideration in accordance with law with specified timelines and directions to afford the petitioner an opportunity to file reply and to be heard personally; no order as to costs.