TaxTMI Updates e-Newsletter
Jul 14,2021

Classification under Customs Tariff Heading 2008 - preparations of vegetables, fruits or other parts of plants (Chapter 20) - residuary entry for miscellaneous edible preparations / food preparations not elsewhere specified - application of the General Rules for Interpretation of the First Schedule to the Customs Tariff Act - distinction between sweetmeats and preparations merely coated with jaggery - GST leviability at 12% under Schedule II (Entry No. 40) of Notification No. 01/2017 Central Tax (Rate)

Classification under Customs Tariff Heading 2008 - application of the General Rules for Interpretation of the First Schedule to the Customs Tariff Act - GST leviability at 12% under Schedule II (Entry No. 40) of Notification No. 01/2017 Central Tax (Rate) - Banana Chips are classifiable and the rate of GST applicable to their supply. - HELD THAT: - The Authority applied the General Rules for Interpretation to determine that products prepared by frying of fruits or parts of plants are classifiable under Chapter 20, Heading 2008. Chapter notes and tariff interpretation rules require specific headings for fried vegetable/fruit preparations; where so classifiable they cannot be placed under residuary food-preparation entries. Banana chips therefore fall within Tariff Heading 2008.19.40. Entry at Sl. No. 40 of Schedule II to Notification No. 01/2017 prescribes GST at 12% for goods falling under Chapter 2008. Accordingly banana chips attract GST at 12%. [Paras 7]

Banana Chips are classifiable under Customs Tariff Heading 2008.19.40 and liable to GST at 12%.

Classification under Customs Tariff Heading 2008 - residuary entry for miscellaneous edible preparations / food preparations not elsewhere specified - GST leviability at 12% under Schedule II (Entry No. 40) of Notification No. 01/2017 Central Tax (Rate) - Jackfruit Chips are classifiable and the rate of GST applicable to their supply. - HELD THAT: - Applying the same interpretive framework, jackfruit chips - being fried preparations of a fruit - fall within Chapter 20 and are classifiable under Tariff Heading 2008.19.40. As goods under Chapter 2008 attract the rate specified at Sl. No. 40 of Schedule II to Notification No. 01/2017, jackfruit chips are liable to GST at 12%. [Paras 7]

Jackfruit Chips are classifiable under Customs Tariff Heading 2008.19.40 and liable to GST at 12%.

Exclusion of tapioca products from Heading 1903 when in fried chip form - classification under Customs Tariff Heading 2008 - GST leviability at 12% under Schedule II (Entry No. 40) of Notification No. 01/2017 Central Tax (Rate) - Tapioca Chips are classifiable and the rate of GST applicable to their supply. - HELD THAT: - The Authority observed that Tariff Item 1903 covers tapioca prepared from starch in forms such as flakes, grains or pearls and does not extend to fried products. Consequently tapioca chips cannot be classed under 1903 but fall to be classified as fried preparations of parts of plants under Chapter 20, Heading 2008.19.40. As such they attract the rate specified at Sl. No. 40 of Schedule II to Notification No. 01/2017, namely 12% GST. [Paras 7]

Tapioca Chips are classifiable under Customs Tariff Heading 2008.19.40 and liable to GST at 12%.

Distinction between sweetmeats and products without sugar - classification under Customs Tariff Heading 2008 - GST leviability at 12% under Schedule II (Entry No. 40) of Notification No. 01/2017 Central Tax (Rate) - Jaggery Coated Banana Chips (sarkaraupperi) are classifiable and the rate of GST applicable to their supply. - HELD THAT: - The Authority examined whether jaggery-coated banana chips qualify as 'sweetmeats'. It held that 'sweetmeat' denotes preparations rich in sugar or prepared with sugar; the mere use of jaggery (a distinct commercial product) without substantive sugar content does not convert the product into a sweetmeat. The product remains a fried fruit preparation and is therefore classifiable under Tariff Heading 2008.19.40. Consequently it attracts GST at 12% as per Sl. No. 40 of Schedule II to Notification No. 01/2017. [Paras 7]

Jaggery Coated Banana Chips are classifiable under Customs Tariff Heading 2008.19.40 and liable to GST at 12%.

Final Conclusion: The Authority ruled that banana chips, jackfruit chips, tapioca chips and jaggery coated banana chips manufactured and supplied by the applicant are classifiable under Customs Tariff Heading 2008.19.40 and are liable to GST at 12% (6% CGST + 6% SGST) as per Entry No. 40 of Schedule II to Notification No. 01/2017 Central Tax (Rate).

Supply of service - supply of goods - Para 3 of Schedule II - any treatment or process applied to another person's goods is supply of service - job work - Classification under Heading 9988 - manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 998881 - GST at 18% for manufacturing services on physical inputs owned by others

Para 3 of Schedule II - any treatment or process applied to another person's goods is supply of service - job work - supply of service - Activity of tanker body building on chassis supplied by the customer is supply of service and not supply of goods. - HELD THAT: - The applicant fabricates and mounts tanker bodies on chassis belonging to the customer, without transfer of title in the chassis at any stage. Paragraph 3 of Schedule II treats any treatment or process applied to another person's goods as a supply of service. The applicant charges a lump-sum for fabrication including cost of materials used and labour, and the output remains owned by the customer. Applying the statutory provision and the facts that ownership of the chassis is retained by the customer and the activity constitutes treatment of another's goods, the Authority concluded the activity is a supply of service. [Paras 7]

The activity is a supply of service.

Classification under Heading 9988 - manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 998881 - GST at 18% for manufacturing services on physical inputs owned by others - The correct service classification is SAC 998881 and the applicable rate of GST is 18% (9% CGST + 9% SGST). - HELD THAT: - Having held the activity to be a supply of service, the Authority referred to the Scheme of Classification of Services (Annexure to Notification No.11/2017 - Rate). Heading 9988 covers manufacturing services performed on physical inputs owned by others and is characterised as outsourced manufacturing where the output is not owned by the service provider and the fee basis is the service charge. Sub headings identify transport equipment manufacturing services and motor vehicle and trailer manufacturing services under SAC 998881. Entry at SI No.26(iv) of the Notification prescribes 18% GST for such services. On this basis the Authority held the applicant's activity classifiable under SAC 998881 and taxable at 18%. [Paras 7]

Classifiable under SAC 998881 and taxable at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled that tanker body building on chassis supplied by the customer is a supply of service, classifiable under Service Accounting Code 998881 (manufacturing services on physical inputs owned by others), and liable to GST at 18% (9% CGST + 9% SGST).

Services relating to cultivation of plants and rearing of all life forms of animals - renting or leasing of vacant land with or without a structure incidental to its use - renting in relation to immovable property - GST exemption under Notification No. 12/2017 - Heading 9986

Services relating to cultivation of plants and rearing of all life forms of animals - renting or leasing of vacant land with or without a structure incidental to its use - renting in relation to immovable property - Lease rent charged by the Panchayat for a water channel allotted for fish and crab farming is covered by the exemption at SI No.54 of Notification No.12/2017 - Central Tax (Rate). - HELD THAT: - The entry at SI No.54 exempts services relating to cultivation of plants and rearing of all life forms of animals by way of, inter alia, renting or leasing of vacant land with or without a structure incidental to its use. The Authority found that the water channel (paruthithodu chaal) constitutes land for the purposes of the entry, that the Panchayat grants the channel on lease (falling within the definition of renting in relation to immovable property), and that the lessee uses the leased wet land for rearing fish and crabs. All three conditions specified by the entry - provision of vacant land with or without structures, lease/rent of the land, and use of the land for cultivation or rearing of animals - are therefore satisfied. The fact that the consideration is determined through auction does not change the character of the transaction as renting or leasing. On these conclusions the activity falls squarely within the exemption under Heading 9986 of Notification No.12/2017 and is not liable to GST under that entry. [Paras 7]

The lease rent charged by the Panchayat for the water channel used for fish farming is eligible for exemption under SI No.54 of Notification No.12/2017 - Central Tax (Rate).

Final Conclusion: The Authority rules that lease of the water channel by the Panchayat for rearing fish and crabs qualifies as exempt services under SI No.54 of Notification No.12/2017 (Heading 9986) and the lease rent is therefore not subject to GST under that notification.

Advance ruling - tax deduction at source under Section 51 - jurisdiction of Authority for Advance Ruling - matters specified in Section 97(2) - binding nature of advance ruling under Section 103

Advance ruling - tax deduction at source under Section 51 - matters specified in Section 97(2) - Whether the applicant can obtain an advance ruling on the applicability of Section 51 to a third party (Kerala Agro Machinery Corporation Ltd). - HELD THAT: - The Authority examined the statutory scope of advance rulings under Sections 95, 97 and 103. An advance ruling is permissible only in respect of questions specified in Section 97(2) and must relate to supplies being undertaken or proposed to be undertaken by the applicant. Section 51 prescribes the classes of persons who may be mandated to deduct tax at source and thus operates in relation to specified payers (awarders) and not in relation to suppliers as a class. The applicant sought a ruling on the applicability of Section 51 to a third party (KAMCO); such a request does not concern a question arising out of supplies made or proposed to be made by the applicant within the meaning of Section 97(2). Consequently the Authority lacks jurisdiction to pronounce on the applicability of Section 51 to KAMCO. [Paras 7]

The Authority has no jurisdiction to answer the question on applicability of Section 51 to the third party; the request is not a matter specified in Section 97(2).

Advance ruling - matters specified in Section 97(2) - jurisdiction of Authority for Advance Ruling - Whether the applicant's additional questions (relating to exemption from TDS, transfer of refundable input tax to TDS account, and refund of excess TDS in the same month) fall within the matters on which an advance ruling can be sought. - HELD THAT: - The Authority analysed the scope of permissible questions for advance ruling under Section 97(2) and found that the applicant's queries (questions 2, 3 and 4) do not pertain to any of the specified matters such as classification, applicability of notifications, time/value of supply, admissibility of input tax credit, liability to pay tax, registration requirement, or whether an activity amounts to a supply. Those questions seek guidance on procedural or administrative mechanisms relating to TDS implementation and refunds vis-a -vis third party payers and reconciliation of excess input credit, which are not matters falling within Section 97(2) in relation to supplies undertaken or proposed by the applicant. Therefore the Authority concluded it has no jurisdiction to rule on those questions. [Paras 7]

Questions 2, 3 and 4 do not fall within the scope of Section 97(2) and the Authority has no jurisdiction to issue a ruling on them.

Final Conclusion: The Authority for Advance Ruling declines to answer the questions: the matters raised are not questions specified in Section 97(2) of the CGST Act in relation to supplies by the applicant, and therefore the Authority has no jurisdiction to pronounce upon them.

Scope of supply - consideration - monetary value of any act or forbearance - Schedule I activities treated as supply - transfer of right to use goods - supply of services by transfer of right in goods

Scope of supply - consideration - monetary value of any act or forbearance - Placement of medical instruments at customers' premises in pursuance of the Agreement constitutes a 'supply' under the CGST Act, 2017. - HELD THAT: - The Authority analysed Section 7 and Section 2(31) of the CGST Act and applied the statutory ingredients of supply: (i) involvement of goods or services, (ii) transaction in the course or furtherance of business, and (iii) made for a consideration. The instruments are movable property (goods) and the grant of a right to use them falls within the scope of 'transfer' in clause (a) of Section 7(1). The contractual model shows that the applicant placed instruments to induce and secure an exclusive and minimum purchase obligation for reagents and related products by the customer. Section 2(31) includes within 'consideration' the monetary value of any act or forbearance in respect of, in response to, or for the inducement of a supply. The minimum purchase obligation, together with the right to raise a debit note for any shortfall, constitutes a monetary act/forbearance in inducement of the right to use the instrument and therefore qualifies as consideration under the CGST Act. Neither Schedule I nor other clauses relied upon by the applicant bring the transaction outside the scope of supply. The Authority rejected the applicant's contention that contractual obligations lacking separate independent identity cannot constitute consideration, holding that the plain statutory definition governs and no external authorities are needed where the statute is unambiguous. [Paras 13, 14, 15, 16]

Yes - the placement of specified medical instruments as per the Agreement constitutes a 'supply' under Section 7 of the CGST Act, 2017.

Transfer of right to use goods - supply of services by transfer of right in goods - Schedule I activities treated as supply - Nature of the supply - whether the placement is supply of goods or supply of services. - HELD THAT: - Having held the transaction to be a supply, the Authority applied sub-section (1A) of Section 7 and Schedule II. Paragraph 1(b) of Schedule II treats transfer of right in goods without transfer of title as a supply of services. The Agreement grants a non-transferable right to use the instruments while ownership/title remains with the applicant. Consequently, the placement qualifies as a supply of services rather than a supply of goods. The Authority noted that the transaction does not fall within Schedule I exceptions (permanent transfer, related/distinct persons, principal-agent, or import of services). [Paras 13, 17]

The placement of instruments is a supply of services (transfer of right to use goods without transfer of title).

Schedule I activities treated as supply - delivery challan - Whether movement of instruments qualifies as movement of goods otherwise than by way of supply and may be effected by delivery challan. - HELD THAT: - The Authority observed that because the placement constitutes a supply, the movement is not 'otherwise than by way of supply' for all transactions; however, where movement is for reasons other than by way of supply, Rule 55 permits issuance of a delivery challan. The Authority recorded that, on the facts, movement could be effected under delivery challan where legitimately for reasons other than supply, but the primary finding remains that the placement transaction itself is a taxable supply. [Paras 11, 18]

No - the placement does not constitute movement otherwise than by way of supply; movement may be covered by delivery challan only where genuinely for reasons other than supply.

Final Conclusion: The Authority rules that the placement of specified medical instruments at unrelated hospitals/laboratories pursuant to the Agreement constitutes a 'supply' under Section 7 of the CGST Act, 2017 and is to be treated as a supply of services (transfer of right to use goods without transfer of title); movement of instruments is not treated as movement otherwise than by way of supply, save that bona fide movements for reasons other than supply may be documented by delivery challan in accordance with the Rules.

Export of services - place of supply - recipient of service - location of supplier - Explanation 1 to Section 8 (legal fiction treating establishments as distinct persons) - zero-rated supply - advance ruling jurisdiction under Section 97(2)(e) - exemption under Notification entry 10F

Export of services - recipient of service - Explanation 1 to Section 8 (legal fiction treating establishments as distinct persons) - place of supply - Whether the services supplied by the India branch constitute export of services as defined in Section 2(6) of the IGST Act. - HELD THAT: - Section 2(6) prescribes five conditions for export of services. Clauses (i) to (iv) were admitted to be satisfied. The determinative question was clause (v) which requires that the supplier and recipient are not merely establishments of a distinct person. Explanations to Section 8 create a legal fiction for GST purposes that establishments of the same person in different jurisdictions are to be treated as distinct persons. The Inter Company Agreement between the applicant and SMSI, USA provides that the Company (SMSI, USA) purchases services from the Service Provider (the India branch), establishes billing and payment obligations to Company, and sets out fees and reimbursement mechanics. On a plain reading of the contract, the recipient of the services under the agreement is SMSI, USA and not the end customers. Given the deeming in Explanation 1, the India branch and SMSI, USA must be treated as distinct persons for GST purposes; consequently clause (v) is not satisfied. Even if services are physically performed for overseas customers, the contractual recipient under the agreement is SMSI, USA and the branch can at best be seen as providing services on behalf of SMSI, USA. Therefore the supply does not qualify as export of services under Section 2(6). [Paras 10, 12, 14, 16]

The services supplied by the India branch do not constitute export of services because the recipient under the agreement is SMSI, USA and, under Explanation 1 to Section 8, the establishments are to be treated as distinct persons; hence IGST is payable for the relevant period.

Exemption under Notification entry 10F - zero-rated supply - Whether any exemption applies to the supplies after notification amendment. - HELD THAT: - Notification No. 09/2017 (Integrated Tax (Rate)) as amended by Notification No. 15/2018 inserted an entry (SI No.10F) exempting services supplied by an establishment in India to an establishment of that person outside India where such establishments are treated as distinct persons under Explanation 1 to Section 8, provided the place of supply is outside India. The Authority found that, although the supplies do not qualify as export of services for the period from 01.07.2017 to 26.07.2018, the insertion of entry 10F operates from 27.07.2018 and exempts such supplies thereafter subject to the proviso concerning place of supply. [Paras 16, 17]

Supplies are liable to IGST for the period 01.07.2017 to 26.07.2018; with effect from 27.07.2018 the supplies are exempt under entry 10F of Notification No. 09/2017 as inserted by Notification No. 15/2018, subject to the place of supply being outside India.

Final Conclusion: The Authority rules that the India branch's supplies under the inter company agreement do not qualify as export of services (clause (v) of Section 2(6) not fulfilled) and are therefore liable to IGST for 01.07.2017 to 26.07.2018; from 27.07.2018 the same supplies are exempt under entry 10F of Notification No. 09/2017 (as amended).

Suspension of registration - cancellation of registration - time-bound mandate to decide cancellation within thirty days under Rule 22(3) - principles of natural justice and opportunity of hearing before suspension - speaking order obligation of the proper officer - provisional restraint on trade under suspension and Article 19(1)(g)

Time-bound mandate to decide cancellation within thirty days under Rule 22(3) - cancellation of registration - Whether the proper officer is required to pass an order of cancellation within thirty days of receipt of the reply to the show cause notice in terms of Rule 22(3) - HELD THAT: - The Court examined sub rule (3) of Rule 22 and held that it mandates that, where cancellation is warranted, the proper officer shall issue an order in FORM GST REG 19 within thirty days from the date of the reply to the show cause notice. The provision imposes a statutory time limit for decision on cancellation once a reply has been received. The Court observed that suspension has severe consequences for the business and that proceedings of cancellation cannot be left pending indefinitely; therefore the authority is statutorily bound to act in terms of sub rule (3). The Court noted that the notice requiring seven days' reply was contrary to the statutory scheme which contemplates a thirty day opportunity under sub rule (2A), but proceeded on the basis that a reply has since been filed and the thirty day decision period is applicable. [Paras 10, 11, 13, 14]

The proper officer must pass the decision on cancellation in accordance with the thirty day mandate of Rule 22(3) after receipt of the reply.

Suspension of registration - principles of natural justice and opportunity of hearing before suspension - speaking order obligation of the proper officer - provisional restraint on trade under suspension and Article 19(1)(g) - Whether the petitioner must be afforded an opportunity of hearing and whether the matter should be remitted for fresh consideration and a speaking order - HELD THAT: - The Court recognised that suspension effectively paralyses the business of an assessee and observed that principles of natural justice require that a reasonable opportunity of hearing be afforded before suspension (and in any event before final action). Although the Court did not pronounce on the ultimate merits of cancellation, it held that the assessing authority cannot keep proceedings 'hanging fire' and must proceed to decide the matter. Having noted the petitioner filed a reply belatedly, the Court disposed the writ by directing that the petitioner may place all submissions (including supplementary reply) and appear personally before the proper officer. The Court directed respondent No.4 to provide an opportunity of hearing and to pass a speaking order in accordance with law by the specified date, while preserving the petitioner's right to challenge any adverse order. [Paras 5, 12, 15, 16, 17]

Proceedings remitted for fresh consideration: petitioner to file submissions and may appear personally; respondent to afford hearing and pass a speaking order by the date directed, with the petitioner's rights to challenge any prejudicial order reserved.

Final Conclusion: Writ petition disposed directing the petitioner to file all submissions (including supplementary reply) and to appear before the proper officer; respondent to afford hearing and pass a reasoned order on cancellation in accordance with Rule 22(3) within the time fixed; liberty to challenge any adverse order reserved.

Deduction under Section 10B - formation by splitting or reconstruction of an existing business - transfer of plant and machinery previously used - concurrent findings of fact and perversity - revised claim made during assessment proceedings - accumulated profits for the purpose of deemed dividend - allegation of colorable device for tax evasion - HC [2020 (10) TMI 1165 - KARNATAKA HIGH COURT] decided all the questions in favour of assessee - HELD THAT:- SLP dismissed.

Withholding refund under Section 241A - processing of return and refund under Section 143(1) and Section 143(1D) - discretion of the Assessing Officer to process refunds where notice under Section 143(2) has been issued - requirement of recorded reasons and approval by Principal Commissioner for withholding refund - payment of interest on delayed refund under Section 244A - quashing of departmental instructions that fetter AO's discretion

As per HC [2020 (3) TMI 606 - DELHI HIGH COURT] Revenue directed to pay refund (with interest) for AY 2011-12 within 30 days; AO directed to process return and decide refund for AY 2016-17 within six weeks; orders withholding refunds for AY 2017-18 and AY 2018-19 under Section 241A set aside and remitted for fresh, reasoned consideration with Principal Commissioner's approval within six weeks, failing which specified refunds shall be released with interest.

HELD THAT:- SLP dismissed. We are not inclined to exercise jurisdiction under Article 136 of the Constitution of India.

Reasoned order requirement - Validity of cryptic orders - Requirement to follow Rule 28AA - Nil rate certificate under Section 197 - TDS on interest under Section 194A

Validity of cryptic orders - Reasoned order requirement - Nil rate certificate under Section 197 - Impugned orders rejecting applications for Nil rate TDS certificate were invalid for being cryptic and lacking reasons; the orders did not record that the information supplied by the petitioners was erroneous. - HELD THAT: - The Court found that the orders under challenge give no reasons for rejection of the applications for Nil rate deduction certificates under Section 197 and are therefore cryptic. The orders do not state, as a basis for rejection, that the information furnished by the petitioners was incorrect or erroneous. A decision refusing a certificate under Section 197 must contain reasons; absence of such reasoning renders the orders unsustainable. The Court relied on established precedent that administrative action must comply with prescribed standards of reasoned decision-making. [Paras 6]

The impugned orders were set aside as cryptic and lacking reasons.

Requirement to follow Rule 28AA - Reasoned order requirement - TDS on interest under Section 194A - Matter remanded for de novo consideration with direction to the Assessing Officer to decide afresh in accordance with Rule 28AA and to pass a reasoned order within a stipulated time. - HELD THAT: - The Court emphasised that the Assessing Officer must follow Rule 28AA and the standards prescribed therein when considering applications for certificate of deduction at nil or lower rate; the Government and its officers are bound to follow rules and standards they have prescribed. In view of the deficiency in the impugned orders, the Court remanded the matters for fresh hearing and directed the Assessing Officer to decide the petitions by a reasoned order within four weeks, permitting the petitioners' authorised representative to appear on the specified date. The remand was for de novo consideration rather than limited verification, to ensure compliance with the rule and requirement of reasoned decision-making. [Paras 7, 8]

Matters remanded for de novo hearing; Assessing Officer directed to decide applications by reasoned order within four weeks in accordance with Rule 28AA.

Final Conclusion: The writ petitions were allowed to the extent the impugned orders were quashed for being cryptic; the matters are remanded for fresh, reasoned consideration by the Assessing Officer in conformity with Rule 28AA, with directions to decide within four weeks.

Principles of natural justice - opportunity of hearing in response to notices under Section 142(1) of the Income-tax Act, 1961 - assessment proceedings under Section 153A and 143(3) of the Income-tax Act, 1961 - remand for fresh assessment and decision after affording hearing

Principles of natural justice - opportunity of hearing in response to notices under Section 142(1) of the Income-tax Act, 1961 - remand for fresh assessment and decision after affording hearing - Impugned assessment and penalty orders were set aside for failure to afford an adequate opportunity of hearing before passing assessments based on notices dated 21st April, 2021. - HELD THAT: - The Court found that the principles of natural justice were not adequately complied with because the petitioner did not have sufficient opportunity to reply to the notices dated 21st April, 2021 under Section 142(1) of the Act, in light of the lockdown in Delhi between 19th April, 2021 and 7th June, 2021. The petitioner had identified in his petition the documents he would have placed on record to clarify issues raised by the Assessing Officer. Given the lack of an effective hearing, the Court concluded that the impugned assessment orders dated 9th and 10th June, 2021 could not stand and must be set aside. The matter was remitted to the Assessing Officer to decide the notices under Section 142(1) by a reasoned order in accordance with law after giving the petitioner an opportunity to be heard; directions were given for the petitioner to file responses within two weeks and to appear on the specified date.

Impugned orders dated 9th and 10th June, 2021 set aside; matters remanded to the Assessing Officer for fresh assessment and decision on the Section 142(1) notices after affording an opportunity of hearing to the petitioner.

Final Conclusion: Writ petitions allowed to the extent that the assessment and penalty orders dated 9th and 10th June, 2021 are set aside and the matters remanded to the Assessing Officer for fresh adjudication after affording the petitioner a hearing; directions issued for filing responses and appearance before the Assessing Officer.

Faceless assessment and right to personal hearing - principle of natural justice - construction of 'may' in a statutory provision - standards and procedures for approving requests for personal hearing

Faceless assessment and right to personal hearing - principle of natural justice - construction of 'may' in a statutory provision - Whether denial of a request for personal hearing by way of Video Conferencing in faceless assessment violated the principle of natural justice and whether Section 144B(7) entitles the assessee to seek such personal hearing. - HELD THAT: - The Court held that Section 144B(7) contemplates a mechanism for personal hearing in faceless assessments where a variation is proposed and that an assessee who requests personal hearing may have a right to have that request considered; the use of the word 'may' in clause (vii) does not absolve the revenue from the obligation to consider and deal with a request for personal hearing. The Division Bench in Sanjay Aggarwal v. National Faceless Assessment Centre was followed, which recorded that, in the absence of framed standards, procedures and processes for dealing with such requests, the revenue was nevertheless obliged to accord personal hearing where requests were made and remained undecided. Given that no Video Conferencing/oral hearing opportunity was provided despite specific requests, the failure amounted to a breach of the principles of natural justice warranting interference. [Paras 7, 8]

The impugned assessment order is set aside insofar as it was finalized without according the petitioner an opportunity of personal hearing by Video Conferencing; the request for hearing ought to have been considered.

Standards and procedures for approving requests for personal hearing - faceless assessment and right to personal hearing - Remand for fresh consideration to afford personal hearing and to pass a fresh assessment order in accordance with law. - HELD THAT: - In view of the absence of an opportunity of personal hearing and following the rationale that requests for personal hearing under Section 144B(7)(vii) must be considered, the matter is remitted to the Assessing Officer. The Assessing Officer is directed to grant the petitioner an opportunity of hearing by way of Video Conferencing, consider the petitioner's oral submissions, and thereafter pass a fresh order in accordance with law, applying any standards, procedures or processes that may be in force. [Paras 9]

Matter remanded to the Assessing Officer to grant Video Conferencing hearing to the petitioner and thereafter pass an order in accordance with law.

Final Conclusion: Impugned assessment order dated 21st April 2021 set aside for non provision of personal hearing; matter remitted to the Assessing Officer to grant Video Conferencing/oral hearing to the petitioner and to pass a fresh assessment order in accordance with law.

Faceless assessment procedure under Section 144B - opportunity to show cause before proposed variation prejudicial to the assessee - assessment rendered non est if not made in accordance with the prescribed procedure - violation of principles of natural justice by omission of mandatory draft assessment/show cause stage - setting aside of assessment for failure to follow statutory procedure with liberty to fresh assessment

Faceless assessment procedure under Section 144B - opportunity to show cause before proposed variation prejudicial to the assessee - assessment rendered non est if not made in accordance with the prescribed procedure - violation of principles of natural justice by omission of mandatory draft assessment/show cause stage - Whether the assessment dated 2 April 2021 was validly completed in accordance with the faceless assessment procedure prescribed under Section 144B so as not to offend principles of natural justice. - HELD THAT: - The Court found that the statutory procedure under Section 144B, which requires examination of the draft assessment and, where a variation prejudicial to the assessee is proposed, service of a notice calling upon the assessee to show cause, was not followed. The revenue's contention that multiple opportunities were granted did not cure the statutory omission of the mandatory draft assessment/notice stage. In view of Section 144B(9), an assessment made on or after 1 April 2021 which is not made in accordance with the procedure under Section 144B is non est. The Court held that the impugned assessment was completed in breach of the prescribed faceless procedure and the principles of natural justice, and therefore could not stand.

Impugned assessment order dated 2 April 2021 and the consequential demand notice were set aside; respondents permitted to pass a fresh assessment in accordance with law and the petitioner granted liberty to challenge any future action.

Final Conclusion: The writ petition is allowed insofar as the assessment order dated 2 April 2021 and the demand notice are set aside for failure to comply with the faceless assessment procedure under Section 144B; the revenue may re-assess in accordance with law and the petitioner retains the right to contest any such fresh proceedings.

Validity of tax deduction at source on cash withdrawals - Interim injunction against operation of fiscal provision - Legislative competence under Entry 82 of List I of Schedule VII of the Constitution

Interim injunction against operation of fiscal provision - Validity of tax deduction at source on cash withdrawals - Whether respondents should be restrained from deducting tax at source under Section 194N of the Income-tax Act, 1961 as an interim measure. - HELD THAT: - Petitioner challenged the constitutional validity and legislative competence for Section 194N which mandates TDS on cash withdrawals above a specified threshold. The Court noted existing interim orders of the Kerala High Court on the same question and that those orders have not been further challenged. Having regard to the admitted challenge to the validity of the provision, the pendency of similar orders elsewhere and the necessity to preserve the rights of the parties pending final adjudication, the Court found it appropriate to grant interim relief. The order is provisional and confined in time, without any determination on the substantive constitutional question.

Respondents are restrained from deducting tax at source under Section 194N of the Income-tax Act, 1961 until 30th September, 2021.

Validity of tax deduction at source on cash withdrawals - Legislative competence under Entry 82 of List I of Schedule VII of the Constitution - Whether the constitutional validity and legislative competence of Section 194N should be finally adjudicated by this Court. - HELD THAT: - The petition raising the question of whether Parliament could enact a provision requiring deduction of tax at source from amounts that are not 'income' falls within the Court's jurisdiction for constitutional review. The Court observed that the challenge raises substantial questions of law meriting full consideration on merits. Consequently the writ petition was admitted for final adjudication and the parties were directed to file affidavits and replies for hearing, so that the substantive issue may be decided after full hearing.

The writ petition is admitted for final hearing; respondents to file affidavit-in-opposition within four weeks and petitioner to file reply within two weeks; matter listed for final hearing after eight weeks.

Final Conclusion: Interim relief granted restraining operation of Section 194N (TDS on specified cash withdrawals) until 30th September, 2021; the constitutional challenge to the legislative competence and validity of Section 194N is admitted for final adjudication with directions for filing affidavits and listing for hearing.

Reopening of assessment under Section 148/147 of the Income Tax Act - first proviso to Section 147 - disclosure and due diligence - deeming fiction and its inapplicability to confer benefit under a beneficial provision - scope of judicial review under Article 226 in relation to disputed factual enquiries

Reopening of assessment under Section 148/147 of the Income Tax Act - reliance on precedents in forming "reasons to believe" - Validity of the notice under Section 148 and the order disposing objections to reopening of assessment. - HELD THAT: - The Court examined the reasons communicated for reopening the assessment for AY 2009-10 and considered the contention that reliance on a Tribunal judgment (despite a contrary High Court decision on the point) vitiated the formation of a reason to believe. The Court held that determination of whether the Assessing Officer had material and applicable principles to form a reason to believe involves scrutiny of documents and facts which is the domain of the reassessment process and not for adjudication in writ proceedings. The Court observed that the reasons, as communicated, purportedly show that certain expenditures were disallowed under the deeming provisions, and by the add-back the eligible profits were increased; those factual and evidentiary questions require detailed examination by the Competent Authority during reassessment. [Paras 4, 6, 8, 11]

The reopening notice and disposal of objections were held to be matters requiring factual adjudication in reassessment; the High Court declined to quash the proceedings on the ground relied upon and did not interfere with the reopening.

Scope of judicial review under Article 226 in relation to disputed factual enquiries - Whether the High Court can adjudicate disputed facts and documentary intricacies relied upon by the Assessing Officer in writ proceedings. - HELD THAT: - The Court reiterated that disputed facts and the exercise of scrutinising documents and evidence fall outside the proper scope of judicial review under Article 226 when the statutory process of reassessment is available. The High Court emphasised that factual controversies as to the applicability of principles to the material on record must be gone into by the Competent Authority in the reassessment proceedings rather than in a writ petition. [Paras 9, 10]

The writ petition cannot be used to decide disputed factual matters; such matters must be examined during reassessment.

Deeming fiction and its inapplicability to confer benefit under a beneficial provision - Whether a deeming fiction under penal provisions of the Income Tax Act can be imported to defeat or be applied to a beneficial provision such as the deduction claimed. - HELD THAT: - The Court applied the settled principle that deeming fictions created by penal or other provisions of the Income Tax Act cannot be imported into a beneficial provision to confer advantage. Relying on the principle as stated in the authority referred to in the order, the Court held that where expenditures are disallowed by virtue of a deeming fiction, the consequence is an add-back which increases taxable business profits and may affect the eligibility for the claimed deduction; this legal principle supports the approach of the revenue and is a matter to be examined in reassessment. [Paras 9]

The Court held that the deeming fiction cannot be read into a beneficial provision to afford a benefit, and disallowances under deeming provisions must be added back for computing taxable income.

First proviso to Section 147 - disclosure and due diligence - Whether mere production of account books or evidence by the assessee necessarily amounts to a disclosure within the meaning of the first proviso to Section 147. - HELD THAT: - The Court noted that mere production of account books or other evidence from which material could have been discovered with due diligence does not necessarily constitute a disclosure under the first proviso to Section 147. The Court referred to the established view that even if the Assessing Officer could possibly have ascertained a fact at original assessment, it does not preclude action under Section 147 where explanation (1) applies, and the assessee cannot take shelter under the exception if there was default in disclosure. [Paras 11]

Production of documents does not ipso facto amount to disclosure within the first proviso to Section 147; the Assessing Officer may proceed with reassessment where appropriate.

Final Conclusion: The writ petition challenging the notice under Section 148 and the order disposing of objections was dismissed; the High Court declined to adjudicate disputed factual issues in writ proceedings and left the matters to be examined in reassessment, while recording the legal principles regarding deeming fictions and the first proviso to Section 147.

Enhancement of income by appellate authority - penalty under section 271(1)(c) - levy of penalty requires finding of concealment or furnishing inaccurate particulars - estimate of income not sufficient to fasten penalty - requirement to record reasons for refusing withdrawal of appeal - appellate authority cannot direct Assessing Officer to levy penalty / no power to remit for penalty levy

Enhancement of income by appellate authority - estimate of income not sufficient to fasten penalty - Validity of the CIT(A)'s enhancement of income on the basis of low gross profit and percentage-completion comparison - HELD THAT: - The Tribunal found that learned CIT(A) enhanced the assessment by estimating net profit for certain wings on the basis that the gross profit in the year under consideration was low compared to earlier years. The appellate authority did not record reasons why it refused the assessee's request to withdraw the appeal nor explain why the assessee's explanations for low GP were rejected. A lower GP, the Tribunal held, may justify investigation but is not by itself a conclusive basis for enhancement of assessment. The CIT(A)'s reasoning for enhancement was therefore held to be devoid of cogency and unsustainable. [Paras 7]

Enhancement of income by the CIT(A) on the stated facts is quashed as lacking cogent reasoning and not sustainable.

Penalty under section 271(1)(c) - levy of penalty requires finding of concealment or furnishing inaccurate particulars - estimate of income not sufficient to fasten penalty - Whether the CIT(A) validly initiated and directed levy of penalty under section 271(1)(c) without specific findings of concealment or inaccurate particulars - HELD THAT: - The Tribunal observed that in the portion of the CIT(A)'s order where enhancement was made there were no findings that the assessee had furnished inaccurate particulars or concealed income. The notice for penalty and direction to levy penalty followed an enhancement founded on estimation without any recorded finding of concealment. Reliance on mere disallowance or estimate was held insufficient to fasten penalty under section 271(1)(c). Consequently, the penalty proceedings and the direction to levy penalty were found to have no legal basis. [Paras 6, 7]

Penalty notice and direction to levy penalty under section 271(1)(c) are quashed for want of any recorded finding of concealment or furnishing of inaccurate particulars; estimation alone cannot sustain penalty.

Appellate authority cannot direct Assessing Officer to levy penalty / no power to remit for penalty levy - Whether the CIT(A) had power to direct the Assessing Officer to levy penalty and remit the matter for levy as ordered - HELD THAT: - The Tribunal held that the CIT(A) has no power to remit the matter to the Assessing Officer with a direction to levy penalty and that such a direction is beyond the statutory appellate jurisdiction. The order of the CIT(A) in directing the AO to levy penalty was therefore held to be perverse and without legal basis. [Paras 8]

CIT(A) lacked power to direct the AO to levy penalty; that limb of the order is quashed.

Final Conclusion: The entire order of the CIT(A) is quashed as perverse and without legal basis; the appellate enhancements and penalty directions are set aside and the assessee's appeal is allowed; the Assessing Officer is directed not to give effect to the CIT(A)'s findings or directions.

Credit for tax deducted at source (TDS) - requirement of correspondence between TDS certificate and income assessed in the relevant Assessment Year - interpretation and application of section 199 of the Income tax Act - Rule 37BA - allocation of TDS credit to the Assessment Year in which income is assessable - remedy of refund to the deductor under TDS procedure and CBDT circulars - distinction between deductor's remedy and deductee's claim to credit

Credit for tax deducted at source (TDS) - requirement of correspondence between TDS certificate and income assessed in the relevant Assessment Year - interpretation and application of section 199 of the Income tax Act - Credit for TDS cannot be allowed to the assessee for Assessment Year 2007-08 where the corresponding income shown in the TDS certificate was not offered to tax in that Assessment Year. - HELD THAT: - The Tribunal examined the facts and found that amounts shown in the TDS certificates were not accounted for as income by the assessee for AY 2007-08 and that the assessee did not satisfactorily explain when or how those amounts were accounted for. Prior to substitution, section 199 required that credit for TDS be given in the Assessment Year in which the income in respect of which tax was deducted is assessable; the Third Member decision in Pradeep Kumar Dhir was held to lay down that (i) the assessee must produce TDS certificates and (ii) the income subjected to TDS must be disclosed as assessable in the relevant return. Following the substitution of section 199 and Rule 37BA, credit is to be allowed in the Assessment Year for which such income is assessable (and, if assessable over years, proportionately across those years). Applying these principles to the material on record, the Tribunal concluded that the conditions for claiming TDS credit for AY 2007-08 were not satisfied and that the CIT(A)'s allowance of credit could not be sustained. [Paras 13, 14, 15, 16]

The assessee is not entitled to TDS credit for AY 2007-08 because the corresponding income was not disclosed or shown to be assessable in that year.

Remedy of refund to the deductor under TDS procedure and CBDT circulars - distinction between deductor's remedy and deductee's claim to credit - The CIT(A)'s ground that credit should be allowed because the deductor could not obtain refund was not a sustainable basis for granting credit to the assessee. - HELD THAT: - The Tribunal noted that the CIT(A) allowed credit on the premise that since a refund to the deductor was not possible for the year in question the only fair alternative was to give credit to the deductee. The Tribunal rejected this rationale because CBDT circulars (including Circular No.2/2011 and related instructions) prescribe a procedure by which a deductor may claim refund for excess TDS for the relevant periods; thus the absence of a direct refund remedy to the deductee is not conclusive. Consequently, the inability (or alleged inability) of the deductor to obtain refund does not override the statutory requirement that TDS credit be given in the Assessment Year in which the income is assessable. [Paras 16]

CIT(A)'s allowance of credit based on the perceived impossibility of refund to the deductor is unsustainable; the appeal of the Revenue is allowed on this ground.

Final Conclusion: The Tribunal allowed the Revenue's appeal: TDS credit of Rs. 1,13,86,500 was not to be allowed to the assessee for Assessment Year 2007-08 because the corresponding income shown in the TDS certificates was not offered to tax in that year and the CIT(A)'s reasoning premised on non availability of refund to the deductor was held to be untenable.

Employer-employee relationship - treatment of payments as professional fees - tax deduction at source u/s 194J - tax deduction at source u/s 192 - control and supervision test - precedential effect of earlier tribunal decision

Employer-employee relationship - treatment of payments as professional fees - tax deduction at source u/s 194J - tax deduction at source u/s 192 - control and supervision test - precedential effect of earlier tribunal decision - Whether payments made by the hospital to consultant doctors were professional fees attracting deduction of tax at source under Section 194J and not salaries attracting deduction under Section 192, and whether the assessee was an assessee in default for short deduction under Section 192. - HELD THAT: - The Tribunal examined the contractual and factual matrix and found that consultant doctors were remunerated on the basis of services rendered and fees collected from patients, with payments varying month to month and no fixed remuneration. There were no attendance records, no entitlement to employee benefits (such as leave, provident fund, gratuity, bonus, medical reimbursement or insurance), and no exclusivity or restriction on private practice. These features indicated absence of an employer employee relationship and supported characterization of the payments as professional fees. The Tribunal applied the control and supervision test and observed a lack of control or supervision as to how the doctors performed their professional services. The adjudication also relied on the Tribunal's earlier decision in the assessee's own case for AY 2008 09 and on parallel decisions of coordinate benches, none of which had been shown to have been reversed by a higher authority. On these facts and precedents the Tribunal concluded that tax was rightly deducted under Section 194J and that the assessee was not an assessee in default for failure to deduct under Section 192. [Paras 2, 4, 5, 6]

Payments to consultant doctors were professional fees subject to TDS under Section 194J, not salary under Section 192, and the assessee was not an assessee in default; the revenue's appeal is dismissed.

Final Conclusion: The appeal is dismissed: the Tribunal upheld the CIT(A)'s finding that payments to consultant doctors were professional fees attracting TDS under Section 194J (not salaries under Section 192), relying on the factual indicia of independence and the tribunal's earlier decision in the assessee's favour.

Furnishing inaccurate particulars of income - penalty under section 271(1)(c) - carry forward depreciation - reworking of depreciation by assessing officer - absence of mens rea/intention to conceal

Furnishing inaccurate particulars of income - penalty under section 271(1)(c) - carry forward depreciation - reworking of depreciation by assessing officer - absence of mens rea/intention to conceal - Whether the assessee furnished inaccurate particulars of income attracting penalty under section 271(1)(c) for AY 2002-03 or the difference arose from AO's reworking of carry forward depreciation. - HELD THAT: - The Tribunal examined the computation placed before the AO which showed the assessee claimed depreciation of Rs. 6,35,84,390 in the return and working of income under normal provisions as well as MAT. The AO in assessment recomputed allowable depreciation at Rs. 7,14,24,272 and treated the resulting excess as furnishing inaccurate particulars, leading to penalty. The CIT(A) found that the assessee had furnished full particulars and working; the AO's adjustments represented a suo moto reworking of carry forward depreciation rather than concealment by the assessee. The CIT(A) relied on the jurisdictional High Court decision in First Data India Ltd. holding that showing a loss in return which is reflected by software as carried forward loss does not amount to furnishing inaccurate particulars where there is no intent to misstate. The Tribunal noted that coordinate-bench decisions in the assessee's own case on related years supported the treatment of depreciation and that the discrepancy was attributable to the AO allowing higher depreciation than claimed. On these facts the AO's conclusion of concealment was not borne out and deletion of penalty was justified. [Paras 8, 9, 11]

The Tribunal upheld the CIT(A)'s finding that the assessee did not furnish inaccurate particulars and that the difference resulted from the AO's reworking; the penalty under section 271(1)(c) was rightly deleted.

Final Conclusion: Appeal dismissed; the order of the CIT(A) deleting the penalty imposed under section 271(1)(c) for AY 2002-03 is affirmed as the discrepancy in depreciation arose from the AO's reworking and not from concealment or furnishing of inaccurate particulars by the assessee.

Deduction under section 80P(2) of the Income Tax Act - exemption of profits and gains attributable to banking or credit activities of a cooperative society - investment of surplus funds/deposits as part of banking business - claim of tax deduction/credit of TDS affected by erroneous registration category - opportunity to cure bona fide registration defects and remand for verification

Deduction under section 80P(2) of the Income Tax Act - investment of surplus funds/deposits as part of banking business - exemption of profits and gains attributable to banking or credit activities of a cooperative society - Whether dividend income earned from investment of surplus funds in SBI mutual fund is eligible for deduction under section 80P(2) as income attributable to the cooperative society's banking/credit business. - HELD THAT: - The Tribunal examined section 80P(2) and noted that a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled to deduction of profits and gains of business attributable to such activities. The assessee was a primary agricultural credit society accepting deposits and providing credit facilities to members. The Tribunal held that investing deposits or surplus funds is an integral part of the banking/credit business of such a society, and income (interest/dividend) arising from those investments is business income attributable to the banking/credit activity. Applying this principle, the Tribunal concluded that the dividend income from the SBI mutual fund arose from investment of surplus funds in the course of the assessee's banking/credit business and therefore was allowable under section 80P(2). The impugned findings of the CIT(A) and the Assessing Officer to the contrary were set aside and the Assessing Officer was directed to allow the deduction in respect of that income. [Paras 9]

Dividend income from investment of surplus funds in SBI mutual fund is deductible under section 80P(2); the CIT(A)'s order is set aside and the AO is directed to allow the deduction.

Claim of tax deduction/credit of TDS affected by erroneous registration category - opportunity to cure bona fide registration defects and remand for verification - Whether the assessee should be given an opportunity to rectify its mistaken registration category and have the TDS claim / refund verified and allowed by the Assessing Officer. - HELD THAT: - The Tribunal noted that the assessee had mistakenly registered under an incorrect category (recorded as 'local authority' instead of the correct category) and that the assessment order contained no discussion on denial of the TDS claim. The CIT(A) declined to interfere on the ground that the matter was not raised in the assessment order. The Tribunal disagreed, observing that a bona fide mistake in registration is curable and should not bar substantive relief. Accordingly, the Tribunal restored the issue to the file of the Assessing Officer, directing that the assessee be given an opportunity to cure any defects in registration and thereafter the AO should verify and allow the eligible TDS claims or refunds if admissible under the Income Tax Act. [Paras 13]

Issue remanded to the Assessing Officer with directions to permit the assessee to cure registration defects and to verify and allow eligible TDS claims/refund if otherwise admissible.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes: it directed allowance under section 80P(2) of the dividend income arising from investment of surplus funds in mutual fund, and remanded the TDS claim issue to the Assessing Officer for opportunity to cure registration defects and verification of eligible TDS/refund.

Rectification of mistaken entries - treatment of prior-year income - disallowance of entries not relatable to the assessment year - remand for verification by assessing officer - ground not pressed

Rectification of mistaken entries - treatment of prior-year income - remand for verification by assessing officer - Whether the debit of the amount in the profit and loss account represented rectification of a wrong credit in an earlier year and therefore required verification by the Assessing Officer. - HELD THAT: - The assessee explained that an amount previously credited to interest income in earlier year(s) was, on discovery by the audit party, rectified in the current year by passing a debit entry; the entry was not an expenditure of the current year. The Departmental Representative accepted that if the entry was a rectification of a mistaken earlier credit, the matter ought to be examined by the AO. In view of these facts and the parties' submissions, the Tribunal did not decide the matter on merits but restored the issue to the file of the AO for the limited purpose of verifying whether the debit arose from a wrong credit in the earlier year. The Tribunal directed that if the assessee proves that contention, no disallowance shall follow. [Paras 5]

Issue remanded to the Assessing Officer for limited verification of whether the debit was a rectification of a mistaken earlier-year credit; if proved, no disallowance to be made.

Ground not pressed - Disposition of the ground relating to provision for gratuity which the assessee did not press. - HELD THAT: - The assessee elected not to press ground no. 2 at the hearing. The Tribunal recorded that the ground was not pressed and therefore did not entertain it for adjudication. [Paras 6]

Ground no. 2 dismissed as not pressed.

Issues repetitive consolidation - Treatment of grounds that repeat earlier grounds and whether separate adjudication is required. - HELD THAT: - Ground no. 3 merely repeats the contentions raised in grounds no. 1 and 2. The Tribunal accordingly held that no separate adjudication was necessary in respect of a repetitive ground. [Paras 7]

No separate adjudication required for the repetitive ground.

General ground - Characterisation of a general ground of appeal and its effect on adjudication. - HELD THAT: - Ground no. 4 was recorded as being general in nature. The Tribunal treated it accordingly and did not make a separate decision beyond noting its general character. [Paras 8]

Ground no. 4 noted as general; no separate adjudication undertaken.

Final Conclusion: The appeal is treated as partly allowed for statistical purposes: the addition relating to interest on investment is remanded to the Assessing Officer for limited verification of whether it was a rectification of a mistaken earlier-year credit (with no disallowance if so proved); the ground on provision for gratuity is dismissed as not pressed; repetitive and general grounds require no separate adjudication.

Allowability of business expenditure under section 37(1) - disallowance for purchases from an unverifiable supplier - estimation of unexplained purchases and making a percentage addition - reassessment framed under section 143(3) read with section 147

Allowability of business expenditure under section 37(1) - disallowance for purchases from an unverifiable supplier - estimation of unexplained purchases and making a percentage addition - Whether the disallowance of claimed business expenditure on purchases of promotional wrist watches could be sustained where the assessee produced ledger extracts, bills and bank evidence but the supplier could not be traced, and whether an estimated addition of 12.5% against such purchases was reasonable. - HELD THAT: - The assessee produced documentary evidence including ledger extracts, bills and bank statements evidencing payment to the supplier and furnished confirmations and details of the wrist watches and related sales. The Assessing Officer disallowed the expenditure because the supplier could not be traced, but did not undertake further inquiry. The Commissioner (Appeals) accepted that receipt and utilization of the wrist watches could not be ignored and, treating the possibility that the assessee purchased from the open market while procuring bills from the supplier, made a reasonable estimated adjustment of 12.5% against the purchases. The Tribunal concurred with the CIT(A)'s approach, observing that in the factual matrix-documentary evidence of payments and utilization on the one hand and absence of supplier traceability on the other-an estimated addition of 12.5% was a reasonable and proportionate measure and that there was no infirmity in the appellate order. The Tribunal therefore dismissed the revenue's appeal.

Assessee's documentary evidence established receipt and use of promotional watches; a limited estimated addition of 12.5% to the purchases was reasonable and the CIT(A) order was upheld.

Final Conclusion: The appeal by Revenue is dismissed; the order of the Commissioner (Appeals) granting partial relief and making an estimated 12.5% addition against the disputed purchases for A.Y. 2011-12 is upheld.

Condonation of delay - limitation/period of limitation - dismissal as time-barred - public authorities' duty to comply with limitation - refusal to entertain 'certificate cases' - imposition of costs for inordinate delay - recovery of costs from responsible officers - direction for administrative inquiry into delay

Condonation of delay - limitation/period of limitation - dismissal as time-barred - Application for condonation of delay rejected and appeal dismissed as time-barred. - HELD THAT: - The Court found a substantial unexplained delay (350 days out of 1134 days) in instituting the appeal, noting that part of the time was spent in the High Court but the decision whether to file the appeal was taken much later without plausible explanation. The Court emphasised that Government and public authorities cannot claim indulgence from limitation statutes as a matter of course and deprecated the practice of seeking belated intervention of this Court merely to obtain a formal certificate that nothing further could be done. In view of the unexplained and casual approach to limitation, the statutory period was held to be forfeited and the appeal dismissed as time-barred.

Condonation refused and Civil Appeal dismissed as barred by limitation.

Imposition of costs for inordinate delay - recovery of costs from responsible officers - direction for administrative inquiry into delay - refusal to entertain 'certificate cases' - Costs imposed on the petitioner and directions issued for recovery and administrative action against responsible officers. - HELD THAT: - The Court observed that filing of belated petitions by public authorities wastes judicial time and amounts to procedural complacency or deliberate dereliction. To deter such conduct, the Court imposed costs on the petitioner payable to the Supreme Court Advocates on Record Welfare Fund and directed that the amount be recovered from the officers responsible for the delay. The Court further required that the order be placed before the concerned Secretary/Officer and directed an appropriate inquiry to identify those responsible and to take action, emphasising that mere benign warnings are inadequate.

Costs of Rs. 25,000 imposed on the petitioner to be deposited with the SC Advocates on Record Welfare Fund; recovery to be effected from responsible officers and a certificate of recovery and inquiry to be filed within four weeks.

Final Conclusion: The application for condonation of delay is refused and the Civil Appeal is dismissed as time-barred; costs are imposed on the petitioner, with directions for recovery from the officers responsible and for an administrative inquiry to be conducted and reported to the Court.

Article 12 - "other authority" - State instrumentality test - Maintainability of writ under Article 226 against private bodies discharging public duty - Deep and pervasive State control - financial, functional and administrative domination - Public duty versus private character - limits of mandamus - Ajay Hasia / Pradeep Kumar Biswas cumulative-test for State character - Government grants and conditional scheme-specific funding not amounting to pervasive control - Clause empowering Central Government to give directions - public interest safeguard, not automatic State control

Article 12 - "other authority" - State instrumentality test - Ajay Hasia / Pradeep Kumar Biswas cumulative-test for State character - Deep and pervasive State control - financial, functional and administrative domination - Public duty versus private character - limits of mandamus - Whether the Gem and Jewellery Export Promotion Council (GJEPC) is an "other authority" within Article 12 of the Constitution so as to render the petition under Article 226 maintainable. - HELD THAT: - The Court applied the settled cumulative tests drawn from Ajay Hasia and Pradeep Kumar Biswas, asking whether GJEPC is financially, functionally and administratively dominated by the State so that State character is established. The court examined the Memorandum and Articles of Association, the scheme-specific grants, composition and powers of the Committee of Administration, membership and funding pattern, the limited government nomination (not exceeding three, non-voting), the scheme-tied nature of grants (MAI/MDA etc.), and the clause empowering the Central Government to issue directions in specified public interest situations. The Court held that (a) GJEPC is an incorporated autonomous company (Section 25) with voluntary membership and was formed by private individuals; (b) primary funding is from membership subscriptions and the maximum proportion of government grants shown in the record did not exceed a minority share (chart evidence); (c) government funding is conditional and scheme-specific and used only for sanctioned projects, with routine functioning not dependent on such grants; (d) the limited right of government to nominate members (who lack voting rights) and the power to give directions in narrowly defined public interest or national security/national economy matters do not demonstrate deep and pervasive control; and (e) the functions of GJEPC-promotion and facilitation of exports by its members-do not amount to sovereign State functions such as would convert it into an instrumentality of the State. Relying on the distinction between mere regulatory/scheme-related oversight and pervasive control, and on authorities limiting mandamus to bodies discharging public/state functions or being pervasively controlled by the State, the Court concluded that GJEPC is not an "other authority" under Article 12 and that the petition under Article 226 is not maintainable against it. The Court accordingly did not decide the merits of the termination; the petitioner was granted liberty to pursue alternate remedies. [Paras 27, 36, 49]

GJEPC is not an "other authority" within Article 12; the writ petition under Article 226 against it is not maintainable and is dismissed for want of maintainability, without deciding merits.

Final Conclusion: The petition was dismissed on the ground that GJEPC is not a State instrumentality within Article 12 and the writ under Article 226 against it is not maintainable; liberty was granted to the petitioner to pursue other appropriate remedies.

Pre-show cause consultation - stay on operation of notice - compliance with CBIC Master Circular - adequate time for representation during lockdown

Pre-show cause consultation - compliance with CBIC Master Circular - adequate time for representation during lockdown - Validity of the demand-cum-show cause notice dated 31.05.2021 in view of alleged non-compliance with CBIC guidance on pre-show cause consultation and the short timeframe given during a COVID-19 lockdown - HELD THAT: - The petitioner contended that the impugned demand-cum-show cause notice contravened CBIC guidance on pre-show cause consultation and that respondent no.3 failed to grant a viable timeframe for the consultation, having summoned the petitioner to appear within three days while the city was under lockdown. The Court observed that these contentions, particularly the asserted inadequacy of the timeframe in the lockdown context and the requirement under the CBIC Master Circular to afford a reasonable opportunity for pre-show cause consultation, warranted further examination. In view of these considerations the Court issued notice and directed the respondents to file a counter-affidavit; rejoinder, if any, was permitted. The Court did not decide the merit of the challenge to the notice on the merits but treated the procedural compliance and adequacy of opportunity as matters requiring adjudication on the pleadings and affidavits to be filed. [Paras 2, 3, 5, 7]

Notice issued to respondents; matter listed for further hearing; interim stay granted on operation of the demand-cum-show cause notice dated 31.05.2021 pending adjudication.

Final Conclusion: The Court issued notice, directed filing of counter-affidavit and rejoinder, listed the matter for further hearing, and granted an interim stay on the operation of the demand-cum-show cause notice dated 31.05.2021 to permit further adjudication of whether procedural requirements for pre-show cause consultation and adequate opportunity in the lockdown period were complied with.

Binding effect of an approved resolution plan - resolution plan and treatment of operational and contingent creditors - res judicata/merger of the approval order - clarificatory/retrospective operation of amendment to Section 31(1) - distinguishability and non-application of Electrosteel decision on facts

Binding effect of an approved resolution plan - resolution plan and treatment of operational and contingent creditors - res judicata/merger of the approval order - Whether Tax Appeal No.754 of 2007 survives in light of the sanctioning of the Final Resolution Plan dated 25.05.2018. - HELD THAT: - The Court held that an approved resolution plan binds all stakeholders and deal with all claims against the corporate debtor so that the successful resolution applicant takes over the business on a 'fresh slate'. Relying on the Supreme Court's observations in Committee of Creditors of Essar Steel India Ltd., the Court accepted that claims which ought to have been submitted to and decided by the resolution professional cannot later be permitted to emerge and unsettle the accepted plan. The Department's claim was held to fall within the scheme of the approved plan as a contingent claim/liability under the plan's definitions and clauses discharging contingent liabilities; the Approval Order having been upheld on challenge in the Supreme Court operated as merger/res judicata of the approval. Consequently the Tax Appeal could not be permitted to survive and be pressed so as to upset the finality of the approved plan. [Paras 11, 13, 14]

Tax Appeal No.754 of 2007 does not survive and is disposed of as barred by the approved Final Resolution Plan which binds the Department and subsumes the claim.

Clarificatory/retrospective operation of amendment to Section 31(1) - distinguishability and non-application of Electrosteel decision on facts - Whether the Department's contention that the amendment to Section 31(1) (making explicit that resolution plans bind government authorities) is prospective and therefore does not bind the Department in this case, and whether the decision in Electrosteel steers the result. - HELD THAT: - The Court rejected the Department's contention that the amendment has only prospective effect. It observed that the amendment merely made explicit what was already implicit in Section 31(1) and treated the amendment as clarificatory/retrospective in operation, consistent with authority recognizing retrospective effect of clarificatory amendments. Further, the Court distinguished the Jharkhand (Electrosteel) decision on its facts: Electrosteel involved different facts including failures in publication and specifics of recovered amounts and misappropriation, whereas in the present case public announcements and requisite disclosures under the CIRP Regulations were made and claims were available to the resolution applicant. Thus Electrosteel was not applicable to permit the Department to revive its claim. [Paras 11, 12]

The amendment to Section 31(1) is clarificatory and does not permit the Department to avoid the binding effect of the approved plan; Electrosteel is distinguishable and does not save the Department's claim.

Final Conclusion: The civil application is allowed: the Final Resolution Plan approved on 25.05.2018 binds the Department and subsumes the claim, and accordingly Tax Appeal No.754 of 2007 is disposed of.

Disqualification of directors - Proviso to Section 167(1)(a) of the Companies Act, 2013 (effect of disqualification qua all companies) - Non-retrospective effect of statutory amendment effective 07.05.2018 - Company Fresh Start Scheme (CFSS-2020) - Reactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC) - Fresh cause of action and bar of limitation in light of CFSS-2020

Proviso to Section 167(1)(a) of the Companies Act, 2013 (effect of disqualification qua all companies) - Non-retrospective effect of statutory amendment effective 07.05.2018 - Effect of the proviso to Section 167(1)(a) on directors disqualified prior to 7th May 2018 - HELD THAT: - Relying on Mukut Pathak, the Court held that the proviso to Section 167(1)(a) (which causes a director disqualified in respect of one company to vacate office in all companies) came into effect only on 7th May 2018 and does not operate retrospectively. Consequently, directors whose disqualification arose prior to 7th May 2018 did not demit office in other companies by operation of that proviso and continue to remain directors of companies other than the defaulting company. The absence of any stay on Mukut Pathak means that its reasoning continues to bind. Therefore the legal effect of disqualification must be assessed with reference to the date on which disqualification occurred. [Paras 4]

For disqualifications incurred prior to 07.05.2018, the proviso to Section 167(1)(a) does not apply and such disqualifications qua active companies are liable to be set aside with reactivation of DIN/DSC where appropriate.

Company Fresh Start Scheme (CFSS-2020) - Fresh cause of action and bar of limitation in light of CFSS-2020 - Reactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC) - Availability and effect of CFSS-2020 for directors disqualified post 07.05.2018 or for directors who are also directors of active companies - HELD THAT: - The Court analysed CFSS-2020 and observed that the Scheme was designed to provide a 'fresh start' for companies and their directors by permitting belated filings, granting immunity from certain prosecutions/penalties, and allowing defaulting companies to regularise their affairs. The Scheme creates a fresh and continuing cause of action enabling directors of active companies (including those who are directors of both struck-off and active companies) to challenge disqualification and to seek reactivation of DIN/DSC so as to avail the benefits of the Scheme. In such circumstances the Court found that delay or limitation would not bar relief because the launch of the Scheme itself constitutes a fresh cause of action. [Paras 4]

Directors of active companies, and directors who are common to a struck-off company and an active company, may have their DINs/DSCs reactivated to enable them to avail CFSS-2020; the Scheme affords a fresh cause of action and limitation need not be an obstacle.

Company Fresh Start Scheme (CFSS-2020) - Reactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC) - Entitlement of directors of active companies who have been disqualified to avail CFSS-2020 and seek reactivation of DIN/DSC - HELD THAT: - Applying the reasoning in Radhika Byrn and Sandeep Agarwal, the Court held that directors of active companies who have been disqualified are entitled to avail the CFSS-2020 to file requisite documents and obtain immunity where available. Reactivation of DIN/DSC is necessary to permit such directors to regularise filings under the Scheme and to obtain its benefits. [Paras 4]

Directors of active companies who are disqualified may be permitted to have their DINs/DSCs reactivated so as to avail the CFSS-2020 and regularise compliance.

Company Fresh Start Scheme (CFSS-2020) - Reactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC) - Whether disqualified directors of struck-off companies seeking appointment in other/new companies should be given an opportunity under CFSS-2020 - HELD THAT: - The Court noted the CFSS-2020's objective to provide a fresh start in view of the pandemic and observed that continuing disqualification would defeat the Scheme's purpose, particularly where a substantial portion of the disqualification period has elapsed. Consequently, directors of struck-off companies who seek appointment in other or new companies and who have undergone a substantial period of disqualification should be given an opportunity to avail the Scheme and have their DIN/DSC reactivated, subject to compliance with applicable conditions and laws. [Paras 5, 6]

Disqualified directors of struck-off companies seeking appointment in other/new companies, who have undergone a substantial period of disqualification, ought to be permitted to avail CFSS-2020 and have their DIN/DSC reactivated.

Reactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC) - Relief granted to the petitioners in the present case - HELD THAT: - The petitioners, being directors of a struck-off company and seeking to start a new business, fell within the category of persons entitled to relief under the Court's interpretation of CFSS-2020 and the surrounding principles. The Court considered that reactivation of DIN/DSC was necessary to enable them to commence a fresh business and to file requisite documents for the struck-off company if they so choose. [Paras 7, 8]

The petitioners' DINs/DSCs are ordered to be reactivated within one week; they are permitted to file documents for the struck-off company and seek condonation of delay as permissible under law.

Final Conclusion: The Court reaffirmed that the proviso to Section 167(1)(a) does not operate retrospectively (pre 07.05.2018 disqualifications), upheld the availability and remedial purpose of CFSS-2020 for directors of active and certain struck off companies, and directed reactivation of the petitioners' DINs/DSCs within one week to enable them to commence their fresh business and to regularise affairs in accordance with law.

Scheme of Amalgamation - Sanction under Sections 230-232 of the Companies Act, 2013 - Binding effect on shareholders, creditors and employees - Appointed date - Dissolution without winding up - Filing of certified copy and consequential statutory filings - Compliance with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016

Scheme of Amalgamation - Sanction under Sections 230-232 of the Companies Act, 2013 - Binding effect on shareholders, creditors and employees - Whether the Scheme of Amalgamation between Cochin Surfactants Private Limited (Transferor Company) and Active Char Products Private Ltd. (Transferee Company) could be sanctioned by the Tribunal. - HELD THAT: - The Tribunal found that the petitioner companies had complied with the statutory requirements under Sections 230 and 232 of the Companies Act, 2013 and the Rules framed thereunder. The Chairperson appointed to conduct meetings filed his report which, together with certificates placed on record, indicated absence of secured and unsecured creditors for the Transferor Company. The petition was duly notified in newspapers and statutory authorities were served; no objections or representations were filed by the Regional Director, Registrar of Companies, Official Liquidator or Income Tax authorities, and no other objections were raised on the record. On the materials before it the Tribunal recorded that the Scheme appears fair and reasonable, does not violate any law and is not contrary to public policy. For these reasons the Tribunal held the statutory conditions for sanction were satisfied and the Scheme could be sanctioned. [Paras 12, 13, 14]

The Scheme of Amalgamation is sanctioned and declared binding on the shareholders, creditors and employees of the petitioner companies.

Appointed date - Dissolution without winding up - Filing of certified copy and consequential statutory filings - Compliance with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 - Ancillary directions consequent to sanction: fixation of appointed date, dissolution of Transferor Company, and statutory filings to be undertaken by the parties. - HELD THAT: - The Tribunal fixed the appointed date of the Scheme as the opening hours of 1st April, 2019 for both companies. It directed that upon filing the certified copy of the order with the Registrar of Companies the Transferor Company shall be dissolved without winding up and the Registrar shall consolidate the Transferor Company's records with those of the Transferee Company. The Transferee Company was directed to file amended Memorandum and Articles of Association and to comply with Section 232(3)(i) of the Companies Act, 2013. The petitioners were ordered to file a copy of the order and Scheme electronically in E Form INC 28 and to lodge the certified copy with the Superintendent of Stamps for adjudication; the Deputy Registrar was directed to draw up the Order in Form CAA 7 and the Transferor Company was to furnish the schedule of properties within four weeks. Regulatory authorities were directed to act on receipt of the certified order and interested parties were left at liberty to apply for further directions or clarifications. [Paras 19, 20, 21, 22, 23]

Appointed date fixed as opening hours of 1st April, 2019; Transferor Company to be dissolved without winding up upon filing certified copy; specified statutory filings and compliance directions issued to the petitioner companies and authorities.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Cochin Surfactants Private Limited and Active Char Products Private Ltd., fixed the appointed date as 1st April, 2019, directed requisite filings and compliance under the Companies Act and Rules, and ordered dissolution of the Transferor Company without winding up upon filing the certified copy of the order.

Ineligibility under Section 29A of the Insolvency and Bankruptcy Code - MSME status during corporate insolvency resolution process - Back door entries and suppression during CIRP - Adjudicating Authority's duty to decide pending proceedings before concluding eligibility - Averments against Resolution Professional and sufficiency of pleadings

Ineligibility under Section 29A of the Insolvency and Bankruptcy Code - Back door entries and suppression during CIRP - MSME status during corporate insolvency resolution process - Whether the observations in paragraph 4 of the impugned order (that the appellant is hit by Section 29A) and the appellant's claim of MSME status should be treated as determinative of the appellant's eligibility to submit a resolution plan. - HELD THAT: - The Tribunal found that the Adjudicating Authority's para 4 observations recorded concerns about fraudulent transactions, earlier failed promises to pay and the appellant being hit by Section 29A, and also noted the appellant had obtained an MSME certificate after initiation of CIRP. The Tribunal held that obtaining an MSME certificate during CIRP without the IRP/RP's authority could not be permitted to circumvent ineligibility under Section 29A and that back door entries or suppression during CIRP are impermissible. However, the Tribunal considered the observations in para 4 as contextual and susceptible to misinterpretation if treated as final findings of ineligibility. For these reasons the Tribunal elected to ignore the operative effect of para 4's observations for present purposes, declined to accept the appellant's MSME claim made during CIRP, and emphasised that such matters must be determined on proper adjudication rather than by peripheral observations. [Paras 12, 14, 16]

Observations in para 4 are ignored for present purposes; appellant's claim to MSME status obtained during CIRP is not accepted and cannot be used to avoid Section 29A ineligibility without proper adjudication.

Adjudicating Authority's duty to decide pending proceedings before concluding eligibility - Whether the pending M.A. No. 3020/2019 (alleging preferential/undervalued/fraudulent transactions) should be finally decided by the Adjudicating Authority. - HELD THAT: - The Tribunal observed that the pendency of M.A. No. 3020/2019 under Sections 43, 66 and 65 of the Code bears upon the factual matrix relevant to ineligibility under Section 29A. The Tribunal noted that an order under Clause (g) of Section 29A would follow only after the Adjudicating Authority makes a finding in that regard. Accordingly, the Tribunal requested and directed that the Adjudicating Authority should expeditiously decide the pending M.A. No. 3020/2019 so that the question of the appellant's eligibility can be determined on a concluded record. [Paras 11, 15, 16]

Adjudicating Authority is requested to decide M.A. No. 3020/2019 at the earliest so that eligibility issues are finally resolved.

Averments against Resolution Professional and sufficiency of pleadings - Whether the averments made by the appellant against the Resolution Professional warrant acceptance or further action. - HELD THAT: - The Tribunal examined the appellant's allegations that the IRP/RP colluded with creditors and competitors and found no foundation for those averments. The Tribunal characterised those allegations as surmises unsupported by the record and directed that they be ignored. [Paras 6, 16]

Averments against the Resolution Professional are to be ignored as they lack foundation.

Adjudicatory consequence of delayed CIRP leading to liquidation - Whether any further direction should be given to the Liquidator or whether the impugned liquidation order should be set aside. - HELD THAT: - The Tribunal noted that CIRP commenced on 19th July 2018 and that, as more than the prescribed time under Section 12 elapsed without a resolution, liquidation followed as the statutory consequence. The Tribunal declined to direct the Liquidator to accept the appellant's bid or to give other relief sought by the appellant, and declined to set aside the Adjudicating Authority's order of liquidation. The appeal was disposed of explaining the context of the observations in para 4 but without disturbing the liquidation order. [Paras 12, 16]

No direction to the Liquidator; impugned order of liquidation is not set aside and the appeal is disposed of.

Final Conclusion: The Tribunal declined to set aside the liquidation order, ignored the para 4 observations for present purposes while rejecting the appellant's MSME claim obtained during CIRP, directed that the pending M.A. No. 3020/2019 be expeditiously decided by the Adjudicating Authority, rejected unsupported averments against the Resolution Professional, and disposed of the appeal without any direction to the Liquidator or orders as to costs.

Parallel insolvency proceedings against principal borrower and corporate guarantor - maintainability of an application for CIRP where CIRP against a corporate guarantor is pending - interpretation of Section 60(2) of the Insolvency and Bankruptcy Code, 2016 - doctrine of binding precedent and the concept of per incuriam

Parallel insolvency proceedings against principal borrower and corporate guarantor - interpretation of Section 60(2) of the Insolvency and Bankruptcy Code, 2016 - doctrine of binding precedent and the concept of per incuriam - Whether a Section 7 application against the principal borrower is maintainable where a CIRP against the corporate guarantor is pending and the creditor's claim has been admitted in the guarantor's CIRP. - HELD THAT: - The Tribunal examined competing authorities which held contrary views on whether two CIRPs can operate in respect of the same debt. It accepted the reasoning in State Bank of India v. Athena Energy Ventures Pvt. Ltd. and held that that decision was not per incuriam and consciously distinguished the earlier coordinate bench view in Dr. Vishnu Kumar Agarwal v. M/s. Piramal Enterprises Ltd. More fundamentally, the Tribunal relied upon the current statutory text of Section 60(2) of the I&B Code which provides that where a CIRP or liquidation proceeding of a corporate debtor is pending before a NCLT, an application relating to insolvency resolution of a corporate guarantor or personal guarantor shall be filed before such NCLT. On the proper construction of Section 60(2), parallel proceedings against borrower and guarantor are maintainable and the existence of an admitted claim in the guarantor's CIRP did not render the Section 7 petition against the borrower impermissible. Although it would have been preferable for the Adjudicating Authority to expressly deal with the conflicting precedents, the Tribunal found no substance in the appellant's challenge to the maintainability of the petition and declined to admit the appeal. [Paras 6, 7, 8]

Appeal dismissed at admission stage; no merit in contention that parallel CIRP could not be maintained and no remand ordered.

Final Conclusion: The appeal is declined admission and disposed of; the Tribunal holds that Section 60(2) permits proceedings in relation to a corporate guarantor and does not render a separate Section 7 petition against the principal borrower impermissible, and the challenge based on earlier contrary decisions is without substance.

Exclusion of period of lockdown - extension of liquidation period - computation of period for liquidation process - application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - reliance on Supreme Court suo motu order extending/excluding limitation

Exclusion of period of lockdown - computation of period for liquidation process - reliance on Supreme Court suo motu order extending/excluding limitation - Exclusion of the lockdown period from computation of the period prescribed for completing the liquidation process and consequential extension of the liquidation period. - HELD THAT: - The Tribunal considered the applicant's plea under Section 60(5) of the IBC, 2016 read with the relevant regulations and NCLT Rules to exclude the lockdown period caused by the COVID-19 pandemic from the time reckoning for completion of liquidation. Having reviewed the factual position including the actions taken by the liquidator and the national and state lockdown orders, the Tribunal accepted that various functions required for liquidation remained to be performed due to the extraordinary situation. The Tribunal applied and followed the suo motu direction of the Hon'ble Supreme Court which restored and extended orders excluding periods of limitation tied to the pandemic, and held that the period consumed during the lockdown should be excluded from counting the period prescribed for completing the liquidation process. On that basis the Tribunal allowed the application in part and extended the liquidation period by six months from the date of the order, and excluded the lockdown period in accordance with the Supreme Court's order which extended/exempted periods from 15 March 2020 onwards until further orders. [Paras 11, 12]

IA No. 2121 of 2020 is allowed in part: the lockdown period is excluded from computation of the liquidation timeline in accordance with the Supreme Court's suo motu order, and the liquidation period is extended by six months; the application is disposed of.

Final Conclusion: The application under Section 60(5) IBC is partly allowed: the period consumed during the COVID-19 lockdown is excluded from computation of the liquidation timeline by applying the Supreme Court's suo motu directions, the liquidation period is extended by six months, and the IA is disposed of accordingly.

Commercial wisdom of the Committee of Creditors - limited jurisdiction of the Adjudicating Authority to interfere with commercial decisions of the CoC - approval of a resolution plan despite pending avoidance applications - benefit of recoveries from avoidance transactions under sections 43 to 51 and section 66 of the Code

Commercial wisdom of the Committee of Creditors - limited jurisdiction of the Adjudicating Authority to interfere with commercial decisions of the CoC - benefit of recoveries from avoidance transactions under sections 43 to 51 and section 66 of the Code - approval of a resolution plan despite pending avoidance applications - Application IA No. 623 of 2021 seeking dismissal of IA 449/2021, rejection or modification of the approved resolution plan, or remand to the CoC for reconsideration was dismissed. - HELD THAT: - The Adjudicating Authority found that the Committee of Creditors, comprising 77 financial creditors, consciously and collectively exercised its commercial wisdom in negotiating and approving the resolution plan, including the valuation and allocation of any monies recoverable from avoidance/fraudulent transaction proceedings (the CoC ascribed nominal value for recoveries under Section 66 and provided for allocation of any positive recovery to the resolution applicant/future corporate debtor). The Authority observed that it has limited jurisdiction to substitute its own view for the commercial decision of the CoC and, following judicial precedents, declined to interfere with the CoC's considered commercial determination. Arguments that the matter should be remitted to the CoC were rejected because the CoC had already deliberated and arrived at a conscious decision based on commercial considerations such as NPV and risk transfer. The Authority also noted competing precedents and accepted the respondents' reliance on NCLAT authority distinguishing the Delhi High Court decision relied upon by the applicant. For these reasons the application praying for interference with or remand of the approved plan was dismissed. [Paras 2, 3, 4, 7]

IA No. 623 of 2021 is dismissed; the Adjudicating Authority will not interfere with the CoC's commercial decision regarding the resolution plan and allocation of recoveries from avoidance transactions; no order as to costs.

Final Conclusion: The Tribunal dismissed IA No. 623/2021, refusing to disturb or remit the resolution plan approved by the Committee of Creditors and declining to interfere with the CoC's commercial determination on allocation/valuation of recoveries from avoidance or fraudulent transaction proceedings.

Reserved judgment. Hearing concluded; judgment reserved. Written submissions, if any, to be filed on or before 09-07-2021.

Proceeds of crime under PMLA - reason to believe for provisional attachment - provisional attachment under Section 5 of the PMLA - interpretation of 'value of such property' limb of 'proceeds of crime' - property equivalent in value held in India or abroad - natural justice in attachment proceedings - priority to secured creditors under SARFAESI/Recovery law - overriding effect of the PMLA

Proceeds of crime under PMLA - interpretation of 'value of such property' limb of 'proceeds of crime' - property equivalent in value held in India or abroad - Whether the immovable properties acquired and mortgaged prior to the alleged scheduled offences fall within the definition of 'proceeds of crime'. - HELD THAT: - The Court analysed the three limbs of the definition of 'proceeds of crime' and held that the first limb covers property derived or obtained as a result of criminal activity and therefore cannot include property acquired prior to commission of the scheduled offence. The second limb - 'value of such property' - was interpreted as referring to property which is a conversion or substitute of the tainted property (i.e., property directly or indirectly derived from the scheduled offence), and not any unrelated property of the accused. The third limb permits attachment of property equivalent in value in India where the tainted property is held or taken outside the country, but it is inapplicable where no such foreign-held tainted property exists. The Court adopted the reasoning of the Division Bench of the Punjab & Haryana High Court and rejected the contention that any property of a person who has obtained proceeds of crime can be treated as proceeds of crime merely because the person has some tainted proceeds. Consequently, the immovable properties acquired prior to the alleged offences did not qualify as 'proceeds of crime'. [Paras 12, 13, 14, 15, 16]

Properties acquired prior to the alleged scheduled offences are not 'proceeds of crime' within the meaning of the PMLA and therefore do not fall within the first or second limb; the third limb is inapplicable in absence of tainted property held abroad.

Reason to believe for provisional attachment - provisional attachment under Section 5 of the PMLA - natural justice in attachment proceedings - Whether the provisional attachment order was validly passed under Section 5 of the PMLA, having due material and complying with principles of natural justice. - HELD THAT: - Section 5(1) requires that an officer have 'reason to believe' on the basis of material in possession that property is proceeds of crime and likely to be concealed or dealt with in a manner frustrating confiscation; that reason must be recorded and founded on material gathered in investigation. The Court found that the authority had no evident material establishing a direct nexus between the impugned immovable properties and tainted proceeds, and that the order contained only perfunctory recital of 'reason to believe' without inquiry or material. Further, the authority failed to follow the procedural requirement of issuing a meaningful show-cause notice and affording opportunity before provisional attachment, contrary to principles of natural justice and precedents treating 'reason to believe' as condition precedent. Given these defects, the provisional attachment of the subject immovable properties was arbitrary and in violation of Section 5 and natural justice. [Paras 24, 25, 26]

Impugned provisional attachment was invalid for want of material to constitute 'reason to believe' and for failure to observe principles of natural justice; the attachment of the impugned properties cannot be sustained.

Priority to secured creditors under SARFAESI/Recovery law - overriding effect of the PMLA - Whether the petitioner's claim as a secured creditor under SARFAESI/Recovery law prevents attachment of the properties under the PMLA or entitles the petitioner to preferential protection against provisional attachment. - HELD THAT: - The Court observed that SARFAESI/Recovery law and the PMLA operate in different fields: SARFAESI/Recovery law confers priority to secured creditors in realization of debts, whereas the PMLA deals with attachment and confiscation of 'proceeds of crime'. The PMLA contains an overriding clause, but that does not render the SARFAESI priority irrelevant for ordinary debt recovery; rather the statutes address distinct objects and do not overlap so as to render SARFAESI a constraint on the PMLA's power to attach proceeds of crime. However, in the present case the Court's quashing of attachment was founded on the absence of 'proceeds of crime' nexus and procedural infirmity, not on primacy of secured-creditor rights. [Paras 17, 18, 19]

Priority of secured creditors under SARFAESI/Recovery law does not by itself nullify PMLA attachment powers; nonetheless, where attachment is invalid for lack of nexus and procedural defects, secured creditor rights need not be tested further in this writ.

Jurisdictional exercise of writ jurisdiction despite alternative remedies - natural justice in attachment proceedings - Whether the High Court should exercise writ jurisdiction under Article 226 notwithstanding availability of statutory remedies under the PMLA in view of the alleged illegality in the attachment order. - HELD THAT: - While the Court recognised the general principle that writ jurisdiction is ordinarily declined where effective alternative statutory remedies exist, it held that exceptions apply when the statutory authority has acted not in accordance with the statute or in breach of fundamental rules of natural justice. The Court found the attachment authority had acted in flagrant violation of statutory mandate and natural justice by attaching properties without material or proper notice; relegating the petitioner to the statutory forum would be futile akin to sending 'Caesar to Caesar's wife'. On that basis the High Court exercised its discretionary writ jurisdiction to quash the attachment and related show-cause to the extent of the subject immovable properties. [Paras 21, 22, 23, 26, 27]

High Court exercised writ jurisdiction as the impugned actions of the authority were in defiance of statutory requirements and natural justice; the writ petition was maintainable despite available statutory remedies.

Final Conclusion: The provisional attachment order was quashed insofar as the three specified immovable properties were concerned for lack of nexus to 'proceeds of crime' and for procedural infirmity (absence of material to constitute 'reason to believe' and breach of natural justice); the related show-cause notice was also quashed to that extent and the writ petition was allowed.

Absence of a speaking order - eligibility under the Subka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - meaning of "quantified" in the context of SVLDRS including admissions during investigation and audit reports as clarified by Circular No.1071/4/2019-CX dated 27.08.2019 - determination of SSI status for quantification of duty - procedure under Section 127 of the Subka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Absence of a speaking order - eligibility under the Subka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - The one line rejection of the petitioner's SVLDRS application without reasons was unsatisfactory and required reconsideration. - HELD THAT: - The designated committee's order merely stated that the SVLDRS form was rejected without setting out any reasons. The Court observed that no explanation was provided as to why the application was unsuitable for the Scheme and that proper opportunity under the Scheme had not been afforded. In these circumstances the impugned non speaking order could not stand and the matter was set aside for fresh consideration limited to the determinative factual aspect identified by the Court. The Court recorded that had the designated committee complied with the requirement of hearing in terms of the Scheme and furnished reasons, the litigation might have been avoided. [Paras 1, 6]

Impugned one line rejection set aside and matter remitted for fresh decision with opportunity to be heard.

Meaning of "quantified" in the context of SVLDRS including admissions during investigation and audit reports as clarified by Circular No.1071/4/2019-CX dated 27.08.2019 - determination of SSI status for quantification of duty - procedure under Section 127 of the Subka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether the duty had been 'quantified' for the purpose of SVLDRS and whether the petitioner's status as an SSI unit (affecting the quantified amount) required determination; remand directed for limited adjudication. - HELD THAT: - The Court examined the definition of "quantified" under the Scheme (Section 121(r)) and noted the Board's Circular No.1071/4/2019 CX dated 27.08.2019 which clarifies that written communication includes a letter intimating duty demand, or duty liability admitted during enquiry, investigation or audit, or an audit report. The petitioner's statement recorded on 02.05.2017 contained admissions indicating duty liability (referenced to year 2016 17) and produced two alternative quantified figures depending on SSI status. The Court observed a doubt in the statement as to whether the liability is the higher figure or the lower figure stated on the basis of SSI exemption. Because the question of SSI status directly affects which quantified amount applies, the Court remanded the matter to R1 for determination of the petitioner's SSI status alone and consequent quantification, directing that the designated committee follow the procedural steps laid down under Section 127 (issue of estimate/statement, opportunity of hearing, issuance of electronic statement and receipt of payment) and pass an appropriate reasoned order within the stipulated period. [Paras 3, 4, 5, 6, 8]

Matter remanded to the designated committee to determine SSI status and quantify duty accordingly, and to follow Section 127 procedure and pass a speaking order within six weeks.

Final Conclusion: The non speaking rejection of the SVLDRS application was set aside. The designated committee is directed to determine, solely for purposes of quantification, whether the petitioner qualifies as an SSI unit (affecting the admitted duty figure), to follow the procedure prescribed by Section 127 of the Scheme, and to pass a reasoned order and complete the process within six weeks.

Revenue neutrality - input service distributor (ISD) non-distribution of CENVAT credit - scope of Rule 7 of CENVAT Credit Rules, 2004 prior to amendment - transition of unutilised CENVAT credit to GST electronic credit ledger - penalty and extended period of limitation where there is no suppression

Revenue neutrality - input service distributor (ISD) non-distribution of CENVAT credit - transition of unutilised CENVAT credit to GST electronic credit ledger - Whether demand for reversal of CENVAT credit and related interest/penalty for non-distribution by the ISD is sustainable where the credit was carried forward into GST under a single registration, resulting in revenue neutrality. - HELD THAT: - The Tribunal found that the appellant had taken a single GST registration for all units in the State and had carried forward unutilised CENVAT credit into Form GST TRAN-1, which flowed into the electronic credit ledger under GST. The Department did not dispute the admissibility or entitlement to the credit. Given that the credit, if distributed pro rata before GST, would nevertheless have remained within the same corporate entity under a single registration post-GST, there was no loss to revenue and no additional benefit to the appellant. The Tribunal relied on precedents holding that non-distribution by an ISD, in a situation that is revenue neutral, is a procedural lapse that does not justify denial of substantive credit or confirmation of demand. Applying that principle to the facts, the Tribunal concluded the demand confirmed by the authorities was not sustainable and set it aside. [Paras 6, 7]

Demand for reversal of CENVAT credit and related interest/penalty was set aside on the ground of revenue neutrality.

Scope of Rule 7 of CENVAT Credit Rules, 2004 prior to amendment - Whether Rule 7 of the CENVAT Credit Rules, 2004 obliged mandatory pro-rata distribution of input service credit prior to 01.04.2016. - HELD THAT: - The Tribunal noted that Rule 7, before the amendment effective 01.04.2016, used the phrase "may distribute" and therefore did not impose a mandatory obligation to distribute input service credit pro rata among recipient units. Relying on judicial decisions which construed the pre-amendment Rule 7 as permitting optional distribution, the Tribunal held that the authorities erred in confirming demands for the period prior to 01.04.2016 on the ground of non-distribution. Consequently, the demand for the period April 2014 to March 2016 could not be sustained. [Paras 6]

Demand for the period prior to 01.04.2016 (April 2014 to March 2016) set aside because Rule 7 was not mandatory before the amendment.

Penalty and extended period of limitation where there is no suppression - Whether extended period of limitation and penalty could be invoked where there was no concealment and the matter was revenue neutral. - HELD THAT: - The Tribunal observed that the appellant did not conceal facts and had provided documents to the audit team; the show-cause notice arose from the audit verification. Given the absence of suppression or intent to evade duty, and the finding of revenue neutrality, invoking extended limitation and imposing penalty was not justified. The Tribunal held that substantive credit rights cannot be defeated on account of procedural lapses and that extended period/penalty are not sustainable under the facts. [Paras 6]

Extended period of limitation and penalty not sustainable and consequently not to be imposed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand, interest and penalty: non-distribution by the ISD was a procedural lapse rendered revenue neutral by transition to GST under a single registration, Rule 7 did not mandatorily require pro-rata distribution prior to 01.04.2016, and extended period/penalty were not sustainable in absence of suppression.

Section 138 of the Negotiable Instruments Act - legally enforceable debt or liability - presumption as to issuance of cheque against debt under Section 138 - vicarious liability under Section 141 of the Negotiable Instruments Act

Section 138 of the Negotiable Instruments Act - legally enforceable debt or liability - presumption as to issuance of cheque against debt under Section 138 - vicarious liability under Section 141 of the Negotiable Instruments Act - Whether the petitioner could be convicted under Section 138 of the Negotiable Instruments Act for issue of a cheque from his personal account where the underlying debt was said to be the liability of his employer-company. - HELD THAT: - The Court held that Section 138 requires that the cheque be issued against a legally enforceable debt or liability, but does not mandate that the cheque must be issued by the person against whom the debt is enforceable; the expression "any debt or liability" includes a cheque issued by a person in discharge of another's legally enforceable debt. The trial and appellate courts' findings - that the cheque was presented within the stipulated period, the statutory notice was sent in time, and that the petitioner issued the cheque from his personal account and failed to make payment after dishonour - were not disputed. The letter written by the petitioner requesting the complainant to hold the cheque pending the company's payment evidenced that the cheque was issued in discharge of the legally enforceable debt and that the petitioner intended it to be encashed if the company did not pay. The petitioner failed to rebut the statutory presumption arising under Section 138. The Supreme Court decision in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) relating to vicarious liability of company officials under Section 141 was distinguished as it concerns cheques issued by companies and persons held vicariously liable; it was held not to apply where the cheque is issued personally by an individual who later seeks to contend the debt was only against the company. Having applied these principles, the Court found no illegality, perversity or infirmity in the conviction under Section 138. [Paras 12, 13, 14, 15, 16]

Conviction under Section 138 of the Negotiable Instruments Act upheld and revision petition dismissed.

Final Conclusion: The High Court dismissed the revision petition, holding that a person who issues a personal cheque in discharge of a legally enforceable debt (even if the underlying debt related to his company) may be convicted under Section 138; the statutory presumption was not rebutted and the decision in S.M.S. Pharmaceuticals was distinguished as inapplicable.

Presumption under Section 139 of the Negotiable Instruments Act - requirement of legally enforceable debt for offence under Section 138 of the Negotiable Instruments Act - standard of proof - prosecution to prove guilt beyond reasonable doubt and accused to rebut presumption on preponderance of probabilities - rebuttal of presumption by evidence on preponderance of probabilities - financial capacity of the complainant to advance the alleged loan

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption by evidence on preponderance of probabilities - financial capacity of the complainant to advance the alleged loan - requirement of legally enforceable debt for offence under Section 138 of the Negotiable Instruments Act - Whether the trial Court's acquittal calls for interference where the cheque and signature were admitted but the complainant's financial capacity to have advanced the alleged loan was disputed. - HELD THAT: - The cheque and the signature thereon were not disputed by the accused, thereby giving rise to the statutory presumption under Section 139 that the cheque was issued for discharge of a debt or other liability. That presumption, however, is rebuttable and the accused may discharge the statutory onus on the basis of materials on record and by showing a probable defence on the preponderance of probabilities, while the prosecution must still prove guilt beyond reasonable doubt. The accused, by cross-examining the complainant, elicited material that substantially dented the complainant's claim of financial capacity - the complainant admitted a modest monthly income and failed to produce documentary evidence of ownership or sale of land or other receipts to show mobilisation of the large sum alleged to have been advanced. The document relied on by the complainant's counsel (Ex. D1) showed the complainant as a guarantor in 2009 and did not establish cash capacity to advance the loan in 2011; being a guarantee letter it is distinguishable from proof of liquidity or transfer of funds. In these circumstances the presumption under Section 139 was successfully rebutted on the basis of preponderance of probabilities and the primary burden returned to the complainant, who failed to discharge it by adducing necessary proof of his financial capacity or contemporaneous evidence of the alleged loan. Consequently the requirement that the cheque have been issued in discharge of a legally enforceable debt - a prerequisite for conviction under Section 138 - was not established, and interference with the trial Court's conclusion was not warranted. [Paras 11, 14, 16, 18]

The trial Court's acquittal is confirmed because the presumption under Section 139 was rebutted and the complainant failed to establish his financial capacity and that the cheque was issued for discharge of a legally enforceable debt.

Final Conclusion: The appeal is dismissed and the judgment of acquittal dated 19.11.2015 is confirmed; the trial court records are to be returned with a certified copy of this judgment.

Non-prosecution / dismissal for default - restoration of criminal complaint subject to terms - appellate discretion to set aside dismissal in the interest of justice - notice to accused dispensed with where accused is absconding and NBW unexecuted - offence under Section 138 of the Negotiable Instruments Act

Non-prosecution / dismissal for default - appellate discretion to set aside dismissal in the interest of justice - restoration of criminal complaint subject to terms - Impugned order dismissing the complaint for default is liable to be set aside and the criminal case restored - HELD THAT: - The trial Court dismissed the complaint for non-prosecution after noting lack of representation for the complainant over several dates. The High Court found that the complainant had prosecuted the matter diligently until the stage of defence evidence and that the accused had subsequently absented himself and remained untraceable despite repeated NBWs and notices to sureties. The absence of the complainant before the trial Court was attributed to the illness and subsequent death of his counsel and was not held to be intentional or deliberative conduct amounting to abandonment of the prosecution. In the circumstances, and to avoid extinguishing the complainant's accrued right, the appellate jurisdiction to set aside the dismissal was exercised in the interest of justice, subject to appropriate terms (a monetary condition) to ensure diligence on restoration. [Paras 8, 10, 11, 12, 13]

Impugned order dated 03.02.2020 is set aside and Criminal Case No. 502/2015 is restored to file subject to the complainant depositing a fine within the stipulated time, failing which the benefit will be forfeited.

Notice to accused dispensed with where accused is absconding and NBW unexecuted - offence under Section 138 of the Negotiable Instruments Act - Notice to the respondent/accused was dispensed with for purposes of the appeal given that the accused was absconding and NBWs remained unexecuted - HELD THAT: - The record (order sheet) showed that after full examination of the complainant and recording of the accused's statement under Section 313 Cr.P.C., the accused absented himself and NBWs issued repeatedly could not be executed. On that factual basis the High Court accepted the appellant's submission and dispensed with notice to the respondent for the purpose of hearing the appeal, permitting final disposal without further notice given the practical impossibility of securing the accused's presence. [Paras 8]

Notice to the respondent/accused in the appeal is dispensed with due to his persistent absence and unexecuted NBWs.

Final Conclusion: The Criminal Appeal is allowed; the trial Court's order dismissing the complaint for non-prosecution is set aside and Criminal Case No. 502/2015 is restored on file subject to the complainant depositing the directed fine within the stated period, with a direction that the complainant prosecute the matter diligently henceforth.