TaxTMI Updates e-Newsletter
Jul 26,2022

Availability of alternative appellate remedy under Article 226 - Deemed withdrawal of assessment on filing return under Section 62(2) - Pre-deposit requirement and interim stay under Section 107(6) and (7) - Condonation of delay in filing appeal due to COVID-19 - Maintainability of writ petitions where efficacious alternative remedy exists

Deemed withdrawal of assessment on filing return under Section 62(2) - Effect of non-filing of return within 30 days under Section 62(2) and consequence for the assessment orders dated 10.01.2020. - HELD THAT: - The Court accepted that Section 62(2) affords a dealer a 30-day period to file returns which, if exercised, would deem the assessment under Section 62(1) to be withdrawn and permit processing of the return. The petitioner did not file returns within the 30-day window and therefore lost the statutory opportunity for deemed withdrawal; as a consequence the assessment orders have become final insofar as the assessing authority is concerned and the remedy now available is by way of appeal under Section 107. [Paras 3, 4, 12]

Non-filing of the return within 30 days under Section 62(2) closed the remedy of deemed withdrawal and rendered the assessment orders final against which an appeal under Section 107 remains the available remedy.

Maintainability of writ petitions - Availability of alternative appellate remedy under Article 226 - Whether extraordinary jurisdiction under Article 226 is exercisable to challenge the impugned assessment orders when an efficacious statutory appeal exists. - HELD THAT: - The Court applied the settled proposition that writ jurisdiction under Article 226 is not ordinarily available where an alternative, efficacious statutory remedy exists unless there is a violation of natural justice, breach of statutory provision or want of jurisdiction. The petitioner did not establish any such exceptional circumstance in relation to the impugned assessment orders. Consequently, the writ petitions cannot be maintained and must be rejected while relegating the petitioner to the appellate remedy. [Paras 13, 14, 15]

Writ petitions are not maintainable and are rejected because the petitioner has an alternative efficacious remedy by way of appeal under Section 107.

Condonation of delay in filing appeal due to COVID-19 - Pre-deposit requirement and interim stay under Section 107(6) and (7) - Permissibility of belated filing of appeals and interim relief in view of the COVID-19 pandemic, and the procedure to obtain stay of recovery and release of bank attachments. - HELD THAT: - The Court recognised the COVID-19 pandemic and the Supreme Court's extension of limitation as circumstances that can be relied upon in support of condonation of delay before the Appellate Authority. The petitioner was granted two weeks from receipt of the order to file appeals, subject to compliance with the pre-deposit requirement under Section 107(6). Once the pre-deposit is made, the petitioner may seek interim relief under Section 107(7), which the Appellate Authority is to consider objectively; upon such consideration the recovery proceedings are to be deemed stayed and the Authority may direct lifting of bank attachments to enable the petitioner to operate accounts. [Paras 6, 8, 15, 16, 17]

Petitioner permitted two weeks to file appeals with the liberty to seek condonation relying on COVID-19; on compliance with Section 107(6) the Appellate Authority may consider interim relief under Section 107(7), including lifting of bank attachments and stay of recovery.

Final Conclusion: Writ petitions are rejected as an alternative efficacious remedy by way of appeal under Section 107 is available; the petitioner is granted two weeks from receipt of this order to file appeals, subject to compliance with the pre-deposit requirement, and may seek interim relief under Section 107(7) including consideration of lifting bank attachments in view of the COVID-19 circumstances.

Taxability of interest credited to an escrow account - accrual versus receipt under cash system of accounting - real income vis-a -vis contingent or restricted receipt - condition precedent to withdrawal / restriction on ownership as bar to taxation - remand for verification of cash flow and source of cash deposits

Taxability of interest credited to an escrow account - accrual versus receipt under cash system of accounting - real income vis-a -vis contingent or restricted receipt - condition precedent to withdrawal / restriction on ownership as bar to taxation - Interest credited in the Escrow Account is not taxable in the relevant assessment years where the assessee had no right to withdraw or utilise the amount until removal of the restriction and the assessee followed cash system of accounting; addition made by AO and sustained by CIT(A) is deleted. - HELD THAT: - The Tribunal found that the sale consideration and interest were deposited in an Escrow Account subject to clauses in the Share Purchase Agreement and Escrow Agreement which prohibited withdrawal or adjustment except on satisfaction of specified conditions (clauses 5 and 10 / clause 5.1). The sales-tax liability against the company exceeded the consideration and withdrawal was conditional upon settlement of that liability. Applying the principle accepted by the jurisdictional High Court in Sri H. Shivanna v. ACIT, where amounts received subject to conditions or restrictions do not constitute real income until such conditions are removed, the Tribunal held that mere credit of interest to an escrow or blocked account did not amount to accrual or receipt in the hands of the individual vendors who followed cash system of accounting. The assessees had subsequently disclosed and been assessed for the interest in A.Y.2018-19; in the factual matrix before the Tribunal the interest could not be treated as taxable in the earlier assessment years. Accordingly, the addition was deleted. [Paras 9]

Addition of interest credited in the Escrow Account is deleted for the relevant assessment years; appeals allowed on this issue.

Remand for verification of cash flow and source of cash deposits - Addition of Rs.17,73,900 on account of unexplained cash deposits is remanded to the Assessing Officer for fresh examination of the cash flow summary, cash book and bank statements and for hearing the assessee. - HELD THAT: - The assessee furnished a cash flow summary, cash book and bank statements showing cash withdrawals and deposits. In the interests of justice and equity the Tribunal found it appropriate to restore the matter to the file of the AO to examine the submitted documents and decide afresh in accordance with law after giving the assessee an opportunity of being heard. No final adjudication on merits was made by the Tribunal; the AO is directed to consider the evidence and record reasons in the fresh disposal. [Paras 15]

Issue remanded to the Assessing Officer for fresh adjudication on the source of cash deposits after examination of cash book and bank statements and hearing the assessee.

Final Conclusion: The Tribunal deleted the addition of interest credited in the escrow account for the assessment years in question (appeals allowed on that issue) and restored the issue of unexplained cash deposits (Rs.17,73,900) in ITA No.692/Bang/2019 to the Assessing Officer for fresh consideration; resulting orders: ITA Nos.691, 904 and 905 allowed and ITA No.692 partly allowed (remand).

Treatment of pre-amendment section 148 notices as show-cause notices under section 148A - one-time dispensation of prior approval requirement under section 148A(a) - obligation on assessing officer to furnish information and material and to pass orders under section 148A(d) - preservation of defences including those under section 149 - nationwide applicability of the Supreme Court's directions under Article 142

Treatment of pre-amendment section 148 notices as show-cause notices under section 148A - Impugned notices issued under section 148 of the unamended Act after 01.04.2021 are to be deemed issued under section 148A as substituted and treated as show-cause notices in terms of section 148A(b). - HELD THAT: - Relying on the Supreme Court's decision in Union of India & Ors. v. Ashish Agarwal (dated 4 May 2022), the court holds that notices issued under the unamended section 148 from 01.04.2021 shall be construed as having been issued under section 148A as substituted by the Finance Act, 2021 and treated as show-cause notices under section 148A(b). The High Court applied the directions in paragraphs 10 and 11 of the Supreme Court's order and declined to entertain the challenge to the impugned notice on the ground that the amended procedure governs such notices. The reassessment proceedings are to be governed by those guidelines.

The challenge to the section 148 notice is dismissed; the notice is to be treated as a section 148A show-cause notice and proceedings shall continue accordingly.

One-time dispensation of prior approval requirement under section 148A(a) - Requirement of prior approval for conducting any enquiry under section 148A(a) is dispensed with as a one-time measure for notices issued under section 148 from 01.04.2021 till date. - HELD THAT: - Following the Supreme Court's directions, the court records that the prior approval requirement in section 148A(a) is dispensed with as a one-time measure vis-a -vis notices issued under section 148 between 01.04.2021 and the date of the decision. The court also notes the Supreme Court's observation that such prior approval was not held to be mandatory in any event and that it is for the Assessing Officers to decide whether an enquiry is necessary.

The prior approval requirement under section 148A(a) is dispensed with as a one-time measure for the relevant notices; reassessment may proceed without such prior approval.

Obligation on assessing officer to furnish information and material and to pass orders under section 148A(d) - Assessing officer must provide the assessee with the information and material relied upon, permit a reply within the prescribed time, and thereafter pass orders under section 148A(d) before, if warranted, issuing proceedings under the substituted section 148. - HELD THAT: - The court applies the procedural directions in the Supreme Court's order: the assessing officer shall furnish to the assessee the information and material relied upon so the assessee can reply; thereafter the assessing officer is to pass orders in terms of section 148A(d) and may then issue proceedings under the substituted section 148 after following the required procedure. The High Court directed the assessing officer concerned to proceed with the reassessment in accordance with these guidelines.

Assessing officer to follow the disclosure, reply, and order-passing procedure under section 148A before proceeding under the substituted section 148.

Preservation of defences including those under section 149 - All defences and rights available to the assessee, including those under section 149 and under the Finance Act, 2021, are preserved and remain available in the reassessment proceedings. - HELD THAT: - The court records the Supreme Court's explicit provision that all defences available to assessees, including statutory defences under section 149 and other contentions under the Finance Act, 2021, continue to be available. This preserves the assessee's legal rights to raise any available contentions in the course of reassessment.

Assessee's statutory defences, including under section 149, remain available in the continuation of reassessment proceedings.

Nationwide applicability of the Supreme Court's directions under Article 142 - The Supreme Court's directions modifying High Court orders are to apply pan India to similar notices issued after 01.04.2021 and govern pending writ petitions before various High Courts. - HELD THAT: - The High Court applied the Supreme Court's order passed under Article 142, which declared that the directions shall be applicable PAN INDIA and shall modify/substitute similar High Court orders that had set aside notices issued after 01.04.2021. The High Court declined to entertain the writ petition in view of those universal directions and directed further proceedings to conform with them.

The Supreme Court's directions operate nationwide and similar High Court orders are modified to that extent; the present writ petition is dismissed.

Final Conclusion: Writ petition dismissed. The assessing officer shall continue the reassessment proceedings in accordance with the Supreme Court's guidelines in Union of India & Ors. v. Ashish Agarwal (4 May 2022), treating the impugned notice as governed by section 148A, observing the disclosure, reply and order-passing procedure, with prior-approval dispensed as a one-time measure and all statutory defences preserved; the directions apply pan India.

Deduction under section 80P(2)(d) - Interest income from deposits in co-operative banks - Entitlement of a co-operative housing society to deduction - Requirement of return with schedules for adjudication - Restoration for fresh adjudication by Commissioner of Income-tax (Appeals)

Deduction under section 80P(2)(d) - Interest income from deposits in co-operative banks - Entitlement of a co-operative housing society to deduction - The assessee, a co-operative housing society, is entitled in principle to claim deduction under section 80P(2)(d) in respect of interest earned on deposits with co-operative banks. - HELD THAT: - The Tribunal noted that the assessee is a registered co-operative housing society which earned interest on fixed deposits and savings accounts maintained with co-operative banks. Relying on earlier decisions of the Tribunal (New Ideal Co-operative Housing Society Ltd and M/s Solitaire CHS Ltd) holding that interest earned by a co-operative society on investments held with a co-operative bank is eligible for deduction under section 80P(2)(d), the Tribunal held that the assessee is entitled, in principle, to the claimed deduction. The Tribunal therefore rejected the departmental contention that investments in co-operative societies exclude co-operative banks and treated the earlier bench decisions as determinative of the legal question. [Paras 6]

Assessee entitled in principle to deduction under section 80P(2)(d) for interest from deposits in co-operative banks.

Requirement of return with schedules for adjudication - Restoration for fresh adjudication by Commissioner of Income-tax (Appeals) - Rectification under section 154 - The matter was not to be finally adjudicated by the Tribunal on merits because the Commissioner of Income-tax (Appeals) had not examined complete return details; the appeals are restored to the CIT(A) for fresh decision after the assessee furnishes requisite details. - HELD THAT: - The Tribunal observed that the CIT(A) did not decide the appeals on merits, citing absence of copy of return with schedules (the file contained only the ITR acknowledgement). As the lower authority declined rectification under section 154 on the ground that verification of the claim was beyond the scope of rectification, and since requisite details were available before the CIT(A) but overlooked, the Tribunal found it appropriate to remit the matter. The Tribunal directed the assessee to furnish all details required by the CIT(A) and directed the CIT(A) to decide the appeals afresh after giving the assessee an opportunity of being heard. [Paras 6]

Appeals restored to the file of the Commissioner of Income-tax (Appeals) for fresh adjudication after calling for and considering the requisite return schedules and giving the assessee an opportunity of hearing.

Final Conclusion: The Tribunal held that a co-operative housing society is, in principle, entitled to deduction under section 80P(2)(d) for interest on deposits with co-operative banks but remitted the matters to the CIT(A) for fresh decision after the assessee files the required return schedules and is afforded an opportunity of hearing; appeals allowed for statistical purposes.

Tax deduction at source under section 194C for advertising and contracts for work - tax deduction at source under section 194J for fees for professional or technical services - distinction between payments by a client to an advertising agency and payments by the agency to artists/professionals - reimbursement with mark up treated as payment for carrying out work - applicability of CBDT Circulars No.714 and No.715 in determining TDS characterisation of advertising payments

Tax deduction at source under section 194C for advertising and contracts for work - tax deduction at source under section 194J for fees for professional or technical services - applicability of CBDT Circulars No.714 and No.715 in determining TDS characterisation of advertising payments - Whether payments made by the assessee to the advertising agency Social Kinnect are exigible to TDS under the provisions of section 194C (for advertising/works) or under section 194J (fees for professional services). - HELD THAT: - The Tribunal examined the agreement and invoices between the assessee and Social Kinnect and noted that Social Kinnect acted as an advertising/digital media agency which procured and engaged professional artists under contracts with the agency itself. The agency provided consolidated advertisement content to the assessee and raised invoices comprising (i) reimbursement of amounts paid to artists with mark up and (ii) service/management charges. Applying the distinction laid down in CBDT Circulars No.714 and No.715, payment by a client to an advertising agency for carrying out advertising (including production and placement of advertisement) falls within the scope of payments for carrying out work and is chargeable under the provisions applicable to advertising/works (i.e., section 194C), whereas payments made by the advertising agency to individual artistes or professionals are liable to TDS as fees for professional services under section 194J. The Tribunal accepted that Social Kinnect alone dealt with and contracted with the artists and therefore the assessee was not the payor to those professionals. Consequently, the component of the agency invoice representing payment for carrying out the advertising work (including reimbursements with mark up and service charges for execution of the contract) falls within the ambit of payment for work/advertising and not within fees for professional services. Reliance was placed on the Coordinate Bench decision in Perfect Probuild P. Ltd. which follows the same distinction. Applying these principles, the Tribunal held that the Assessing Officer erred in treating the entire payment as professional fees attractable to section 194J and in raising demand for short deduction; the correct characterisation is under section 194C and the assessee's deduction at the rate applicable to advertising/works was appropriate. [Paras 3, 4]

Payments made by the assessee to Social Kinnect are to be treated as payments for carrying out advertising/work and attract tax deduction under the provisions applicable to such work (section 194C) and not as fees for professional services under section 194J; the assessee's challenge succeeds.

Final Conclusion: The appeal is allowed: the Tribunal held that payments to the advertising agency fall within the scope of payment for carrying out advertising/work (and not fees for professional services), and the short deduction demand under the characterisation adopted by the Assessing Officer is set aside.

Limitation and condonation of delay in filing appeal - service of order and date of receipt as triggering limitation - appeal period from date of service of notice of demand under Section 249(2) - opportunity to explain delay and consideration of sufficient cause - remand for fresh consideration where jurisdictional facts of service/delay are disputed

Limitation and condonation of delay in filing appeal - service of order and date of receipt as triggering limitation - appeal period from date of service of notice of demand under Section 249(2) - opportunity to explain delay and consideration of sufficient cause - Whether the CIT(A) was justified in dismissing the appeal as time-barred without examining service/receipt and without affording opportunity to explain delay. - HELD THAT: - The Tribunal found that the order under Section 154 was passed on 9 February 2018 but a copy was provided to the assessee only on 28 February 2019 and the appeal was filed within thirty days from that date. The CIT(A) relied on the date of the order recorded in form 35 and column 14 to hold the appeal delayed by 384 days without perusing columns 2(b) and 2(c) showing date of order and date of service, and without affording the assessee an opportunity to clarify the apparent discrepancy despite contact details being available. The Tribunal held that the date of service/receipt is determinative for computing limitation under the provision governing appeals from notice of demand, that the CIT(A) ought to have examined the mode and date of service and given the assessee a chance to explain the position, and that summary dismissal on the basis of the order-date alone was impermissible. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter for fresh consideration of service, delay and condonation consistent with law, including giving the assessee an opportunity to explain any delay and, if the appeal is found to be in time, to adjudicate the appeal on merits. [Paras 11, 13, 14, 15, 16]

Order of the CIT(A) dismissing the appeal as time-barred is set aside and the matter is remanded to the CIT(A) to examine service of the Section 154 order, decide whether the appeal was filed within time or to consider condonation after affording the assessee an opportunity; if found in time, decide the appeal on merits.

Remand for fresh consideration where jurisdictional facts of service/delay are disputed - Whether the substantive grounds raised against the Section 154 rectification need to be decided by the Tribunal at this stage. - HELD THAT: - The Tribunal did not adjudicate the merits of the substantive grounds (classification of income, disallowance of pre-construction interest, capitalization and depreciation, and TDS credit) because the preliminary question of timeliness remained unresolved. The Tribunal directed that if the CIT(A) finds the appeal to have been filed in time, those grounds should be decided on merits; conversely, if the appeal is found to be delayed, the CIT(A) must consider any explanation for condonation. Thus, the substantive issues are left pending and not finally decided by the Tribunal. [Paras 16]

Substantive grounds are not decided and are remitted to the CIT(A) for adjudication only if the appeal is determined to have been filed in time; accordingly, they remain pending.

Final Conclusion: The Tribunal allowed ground no. 1, set aside the CIT(A)'s order dismissing the appeal as time-barred, and remitted the matter to the CIT(A) to determine mode and date of service, to decide on delay and condonation after affording the assessee an opportunity, and, if the appeal is held to be in time, to decide the appeal on merits; substantive grounds remain pending.

Protective addition - Section 153A assessment - Requirement of incriminating material to reopen completed assessments under Section 153A - Deletion of additions where information from foreign authority does not pertain to relevant assessment years - Penalty under section 271(1)(c) - No penalty where foundational addition is deleted

Protective addition - Section 153A assessment - Requirement of incriminating material to reopen completed assessments under Section 153A - Deletion of additions where information from foreign authority does not pertain to relevant assessment years - Deletion of protective addition made on account of alleged HSBC, Geneva bank balance in the hands of the assessee for the assessment years under appeal. - HELD THAT: - The Tribunal held that the same addition arising from the identical bank deposits in the same HSBC, Geneva account had already been deleted in the appeal of the assessee's husband by the ITAT in its consolidated order dated 01.06.2021. That decision recorded that no incriminating material was found during the search for the relevant assessment years and that information supplied by the Swiss authorities did not cover periods prior to 01.04.2011. Applying the settled principle that completed assessments can be reopened under Section 153A only on the basis of incriminating material discovered during search or requisition, and finding no distinguishing facts in the present case, the Tribunal followed its earlier reasoning and set aside the orders below, deleting the entire protective addition. The Tribunal therefore did not decide the remaining grounds, treating them as academic in view of the deletion. [Paras 8]

Protective addition deleted and the orders of the authorities below set aside for the assessment years 2006-07 to 2011-12.

Penalty under section 271(1)(c) - No penalty where foundational addition is deleted - Levy of penalty under section 271(1)(c) for the assessment years under appeal. - HELD THAT: - The Tribunal held that, having deleted the quantum additions on the principal ground that the requirements for invoking Section 153A were not met, there remained no basis to sustain penalty proceedings under Section 271(1)(c). The show-cause notices and penalty orders therefore lacked requisite foundation once the additions were deleted, and the Tribunal set aside the penalty orders in all the assessment years under appeal. [Paras 13]

Penalty under section 271(1)(c) canceled for the assessment years 2006-07 to 2011-12.

Final Conclusion: All appeals of the assessee are allowed: the protective additions relating to the alleged HSBC, Geneva account are deleted for A.Ys. 2006-07 to 2011-12, and the penalties under section 271(1)(c) for those years are canceled.

Allowability of foreign exchange fluctuation as business income/expense - deduction under 10B for profits derived from exports - deduction under 80IA for industrial undertaking - treatment of foreign exchange fluctuation under section 37(1) - treatment of sale of scrap as income intrinsic to manufacturing/export business

Allowability of foreign exchange fluctuation as business income/expense - deduction under 10B for profits derived from exports - deduction under 80IA for industrial undertaking - treatment of foreign exchange fluctuation under section 37(1) - Whether foreign exchange rate fluctuation (gain/loss) on foreign currency borrowings is attributable to export/business and allowable as deduction under section 10B and section 80IA (and as expenditure under section 37(1)). - HELD THAT: - The Tribunal followed the view of the jurisdictional High Court in the assessee's earlier case and authority relied upon that fluctuation in the rate of foreign exchange arising on export-related receipts retains its character as arising out of the export business and cannot be divested therefrom by mere timing of remittance. The Tribunal also noted supporting authority of the Madras High Court and of the Supreme Court that foreign exchange fluctuation recognised on mercantile basis is an item of expenditure allowable under section 37(1). Applying these precedents to the facts, and respectfully following those decisions, the Tribunal held that foreign exchange fluctuation incurred in relation to export/business is eligible for deduction under section 10B and, where applicable, under section 80IA, and is allowable as an expenditure under section 37(1). [Paras 8]

Foreign exchange fluctuation is attributable to export/business and is allowable for deduction under section 10B and under section 80IA, being an expenditure under section 37(1).

Treatment of sale of scrap as income intrinsic to manufacturing/export business - deduction under 10B for profits derived from exports - Whether income from sale of scrap generated from EOU manufacturing activity is eligible for exemption/deduction under section 10B. - HELD THAT: - On the material placed before it (ledger account, invoice showing quantity, buyer's TIN, transport details and VAT collection), the Tribunal found that the scrap arose from normal wear and tear in the assessee's manufacturing operations and that the Assessing Officer had not made adequate enquiries (such as verifying the buyer reflected on the invoice). The Tribunal concluded that, having regard to the documentary evidence and the nature of the business, the income from sale of scrap is intrinsic to the manufacturing/export activity and directed the Assessing Officer to allow the claim for deduction under section 10B. [Paras 8]

Sale proceeds of scrap generated from manufacturing at the EOU are eligible for deduction under section 10B; the Assessing Officer is directed to allow the claim after verification already reflected in the record.

Final Conclusion: The appeal is allowed: the Tribunal directed that (i) foreign exchange fluctuation relating to export/business be treated as allowable expenditure and eligible for deduction under section 10B and section 80IA, and (ii) income from sale of scrap generated from the EOU manufacturing activity be treated as intrinsic to export/business and the deduction under section 10B be granted, with the Assessing Officer directed to give effect accordingly.

Mandatory filing of Form No.10B with return as condition for exemption under Section 11 - power of Commissioner under section 119(2)(b) to condone delay in filing Form No.10B - distinguishability of pre 2016 precedents after Finance Act, 2015 amendment

Mandatory filing of Form No.10B with return as condition for exemption under Section 11 - Denial of exemption under Section 11 for failure to file Form 10B with the return. - HELD THAT: - The Tribunal upheld the denial of exemption granted in the intimation under section 143(1) where the assessee filed Form 10B belatedly after the return. In view of the amendments made by the Finance Act, 2015 (effective 01.04.2016) and the consequent Rule changes, filing Form 10B electronically with the return has become mandatory for claiming the Section 11 benefit. The Tribunal noted that the assessee acknowledged the delay and did not seek condonation before the appropriate Commissioner prior to filing the appeal, and therefore the denial of exemption in the CPC intimation was sustained. [Paras 3, 6]

Failure to file Form 10B with the return justified the denial of exemption under Section 11 for the assessment year under consideration.

Power of Commissioner under section 119(2)(b) to condone delay in filing Form No.10B - Whether the Commissioner of Income tax (or PCIT/CIT/DIT) has power to condone belated filing of Form 10B and whether the CIT(A) could exercise such power. - HELD THAT: - Relying on CBDT Circular No.7/2018, the Tribunal recorded that the Board authorized Commissioners to admit belated Form No.10 applications for AY 2016-17 under section 119(2)(b). The Tribunal agreed with the CIT(A)'s conclusion that the CIT(A) does not possess the power under section 119(2)(b) to condone the delay and that the appropriate remedy for the assessee was to apply to the jurisdictional Commissioner for condonation. Consequently, the appellate route under section 250 was not the correct mechanism to seek condonation of the belated Form 10B. [Paras 3, 6]

Condonation of delay in filing Form 10B falls within the powers of the Commissioner (under section 119(2)(b) as authorized by CBDT), and the CIT(A) has no power to condone such delay; assessee must approach the Commissioner for condonation.

Distinguishability of pre 2016 precedents after Finance Act, 2015 amendment - Whether earlier judicial precedents (pre Finance Act, 2015) relied upon by the assessee are applicable. - HELD THAT: - The Tribunal held that the case law relied upon by the assessee was rendered prior to the amendment effected by the Finance Act, 2015 and therefore is distinguishable. The mandatory e filing regime introduced with effect from 01.04.2016 changed the legal landscape regarding Form 10B, making earlier decisions inapplicable to the post amendment regime. Accordingly, the Tribunal rejected the assessee's reliance on those precedents. [Paras 4, 6]

Pre 2016 authorities are distinguishable and not applicable to the post amendment mandatory filing requirements.

Final Conclusion: The Tribunal dismissed the appeal, upholding the disallowance of exemption for A.Y. 2018-19 on account of belated filing of Form 10B; the assessee's remedy is to seek condonation of delay before the appropriate Commissioner under the Board's authorisation rather than by the appellate order.

Disallowance of interest to partners under section 40(b) - capitalization of interest in inventory under percentage completion method - application of section 43CA read with section 50C(2) - valuation adopted by stamp authority and referral to Valuation Officer - principles of natural justice and adequacy of opportunity to be heard in assessment proceedings

Disallowance of interest to partners under section 40(b) - capitalization of interest in inventory under percentage completion method - Whether the addition on account of excess interest paid to partners should be sustained where the assessee has adjusted the excess interest by reducing the cost of construction/closing stock. - HELD THAT: - The Tribunal accepted the factual finding recorded by the CIT(A) that the assessee, following percentage completion method, had reflected the effect of excess interest by reducing the cost of construction/closing stock. That finding was not challenged by the Revenue. The Tribunal held that sustaining a separate disallowance in respect of interest paid to partners, notwithstanding the corresponding reduction in inventory valuation, would result in double disallowance and no loss to revenue had been shown. On this basis the Tribunal held the addition unsustainable and allowed the ground raised by the assessee.

Addition on account of excess interest to partners under section 40(b) deleted.

Application of section 43CA read with section 50C(2) - valuation adopted by stamp authority and referral to Valuation Officer - principles of natural justice and adequacy of opportunity to be heard in assessment proceedings - Whether the addition under section 43CA (by adopting stamp duty valuation) could be sustained where the assessee contends that the valuation exceeds fair market value and alleges denial of opportunity and non-referral to Valuation Officer. - HELD THAT: - The Tribunal examined the assessment record and the show cause issued by the AO. It noted that the proviso to section 50C(2) applies only when the assessee claims before the AO that the stamp valuation exceeds fair market value. The AO had raised a specific query by show cause dated 17.12.2018; the assessee filed a reply but did not assert that the stamp value exceeded fair market value or request reference to a Valuation Officer. The CIT(A) had recorded the same facts and sustained the addition. In the absence of any claim by the assessee before the AO invoking section 50C(2) or evidence that the AO denied a specific and timely opportunity on this point, the Tribunal found no reason to interfere with the concurrent conclusion of the lower authorities and dismissed the ground.

Addition under section 43CA upheld.

Final Conclusion: The appeal is partly allowed: the addition made by disallowing excess interest to partners under section 40(b) is deleted, while the addition under section 43CA (stamp valuation adoption) is sustained.

Tax deduction at source on interest under Section 194A - Exemption for interest paid by a co-operative society to its members - Distinction between a "co-operative bank" and a "co-operative society engaged in carrying on the business of banking" - Prospective effect of statutory amendment (Finance Act, 2015) clarifying applicability of Section 194A - Strict construction of exclusion clauses in a taxing statute

Tax deduction at source on interest under Section 194A - Exemption for interest paid by a co-operative society to its members - Deletion of disallowance under section 40(a)(ia) for failure to deduct TDS on interest paid during AY 2012-13. - HELD THAT: - The Tribunal examined whether interest paid by the assessee (a district central co operative bank registered under the Tamil Nadu Co operative Societies Act, 1983 and licensed by the RBI) attracted obligation to deduct tax at source in the relevant year. Relying on the Madras High Court's reasoning in Coimbatore District Central Co operative Bank Ltd. v. ITO, the Tribunal accepted that, prior to the 1.6.2015 amendment, the statutory scheme of Section 194A and related enactments did not carve out a clear distinction that would deny the general exemption available to co operative societies paying interest to members. On that basis the CIT(A)'s deletion of the AO's disallowance under section 40(a)(ia) was upheld and the disallowance could not be sustained for AY 2012 13. [Paras 5, 6]

Disallowance under section 40(a)(ia) deleted; appeal dismissed.

Distinction between a "co-operative bank" and a "co-operative society engaged in carrying on the business of banking" - Interpretation of exclusion clauses in Section 194A(3) - Whether State and Central enactments make a substantive distinction between a co operative bank and a co operative society engaged in banking for purposes of Section 194A. - HELD THAT: - The Tribunal recorded and adopted the Madras High Court's detailed statutory analysis concluding that neither the Tamil Nadu Co operative Societies Act, 1983, nor the Multi State Co operative Societies Act, 2002, nor the RBI Act, Banking Regulation Act, 1949, nor the NABARD Act, 1981, draw a clear distinction between a co operative society engaged in banking and a co operative bank for the purposes of the exclusions under Section 194A(3), except where specific clauses expressly differentiate limited categories. Consequently, the exemption available to co operative societies in respect of interest paid to members could apply to the assessee for the period before the 2015 amendment. [Paras 6]

No substantive statutory distinction found; co operative societies carrying on banking fall within the same statutory scheme as co operative banks for pre amendment purposes.

Prospective effect of statutory amendment (Finance Act, 2015) clarifying applicability of Section 194A - Strict construction of exclusion clauses in a taxing statute - Whether the Finance Act, 2015 amendment to Section 194A operates retrospectively or prospectively. - HELD THAT: - The Tribunal accepted the Madras High Court's conclusion that the 2015 amendment, which clarified that the general exemption under Section 194A(3)(v) would not apply to co operative banks in respect of time deposits, was prospective in operation. The legislative memorandum expressly indicated prospective effect from 1.6.2015 and there was no express or necessary implication of retrospectivity; accordingly the amendment could not be invoked to impose TDS obligations for periods prior to 1.6.2015. The Tribunal therefore held that liability to deduct TDS on the facts of this case arose only on and after 1.6.2015, not for AY 2012 13. [Paras 6]

Amendment held prospective; cannot be applied to disallowance for AY 2012 13.

Final Conclusion: Relying on the Madras High Court's decision, the Tribunal held that (i) the assessee was not liable to have tax deducted at source on the interest payments in issue for AY 2012 13 and the disallowance under section 40(a)(ia) was rightly deleted, (ii) no clear statutory distinction existed between a co operative bank and a co operative society engaged in banking for pre 2015 purposes, and (iii) the Finance Act, 2015 amendment clarifying the TDS position is prospective with effect from 1.6.2015; the revenue's appeal is dismissed.

Search and seizure material as basis for estimation of undisclosed income - treatment of seized cash as commission/dalali income - estimation of income at 1% of total recorded transactions as fair and reasonable - failure to produce books of account or to explain seized entries justifies estimation

Search and seizure material as basis for estimation of undisclosed income - failure to produce books of account or to explain seized entries justifies estimation - estimation of income at 1% of total recorded transactions as fair and reasonable - Addition of income from cricket betting estimated at 1% of total transactions recorded in seized laptops for AYs 2011-12 and 2012-13 was sustainable - HELD THAT: - The Tribunal found that entries in the laptops seized from the assessee related to cricket betting and that the assessee failed to give any satisfactory explanation, produce books of account or produce the parties named in the entries despite specific opportunities. The Assessing Officer estimated net income at 1% of the total transactions recorded in the seized material; the learned CIT(A) confirmed the estimation and gave reasons rejecting the assessee's contention that winners received all amounts while losers defaulted. The Tribunal, on review of the material and the absence of any evidence from the assessee to show a lower profit, held that the 1% estimation was fair and reasonable in the facts and circumstances and that there was no reason to interfere with the concurrent findings of the authorities below. [Paras 3, 4, 6, 8]

The addition of income from cricket betting computed at 1% of the transactions recorded in the seized laptops is upheld for AYs 2011-12 and 2012-13.

Treatment of seized cash as commission/dalali income - search and seizure material as basis for estimation of undisclosed income - Seized cash found during the raid was correctly treated as commission/dalali income from real estate agency business for assessment purposes - HELD THAT: - Although the assessee offered varying explanations for the seized cash (initially linking it to betting, then attributing it to a relative, and later describing it as dalali income), the Tribunal noted the assessee's own filings during assessment indicating he was engaged in dalali business and observed the change of stands. Having regard to these statements and the material on record, the Tribunal found no infirmity in the authorities below treating the seized cash as commission/dalali income from real estate transactions. [Paras 7]

The treatment of the seized cash as commission/dalali income from real estate agency activity is sustained.

Final Conclusion: Both appeals are dismissed; the additions made by the Assessing Officer and confirmed by the CIT(A) - the estimated income from cricket betting and the treatment of seized cash as commission/dalali income - are upheld.

Entitlement to exemption under sections 11 and 12 - proviso to section 2(15) - commerciality test and application - registration under section 12A and effect of restoration of registration - reopening of assessment under section 147 in view of withdrawn/ restored registration - application of income - grants to affiliated bodies as revenue application - accumulation/ploughing back of surplus and predominant object test - method of accounting - mercantile (accrual) v. cash system

Registration under section 12A and effect of restoration of registration - reopening of assessment under section 147 in view of withdrawn/ restored registration - Validity of reopening assessment and denial of exemption where registration under section 12A had been withdrawn but subsequently restored by appellate authorities. - HELD THAT: - The Tribunal found that the assessee's registration under section 12A had been restored by the Coordinate Bench of the Tribunal and that restoration was affirmed by the Hon'ble Rajasthan High Court. Since registration is a primary condition for claim of exemption under sections 11 and 12, the foundation for reopening the assessment (which was premised on a prior withdrawal of registration) did not survive. The Tribunal applied the settled principle that where the certificate of registration has been restored by the appellate process and the jurisdictional High Court has affirmed that order, the reopening based solely on an earlier withdrawal cannot be sustained absent fresh, specific material showing change in activities or non-compliance with approved objects and by laws. The Tribunal noted no finding by the AO that activities were not in accordance with approved objects or by laws.

Reopening held unsustainable; additions deleted and exemption under sections 11 and 12 accepted for the impugned year.

Proviso to section 2(15) - commerciality test and application - entitlement to exemption under sections 11 and 12 - accumulation/ploughing back of surplus and predominant object test - Whether the assessee's activities attract the proviso to section 2(15) (i.e., are in the nature of trade, commerce or business or rendering service for consideration) so as to deny exemption under sections 11 and 12. - HELD THAT: - After reviewing the facts and an extensive body of judicial precedent (including Supreme Court and High Court authorities and Coordinate Bench decisions), the Tribunal held that the proviso to section 2(15) does not apply on the facts. The determinative inquiry is the predominant object and the presence of profit making intent: incidental or ancillary receipts that arise from carrying out the charitable object (hosting matches, ticket sales, TV/subvention shares from BCCI, sponsorships etc.) do not convert the assessee's activities into trade or business where the receipts are dependent on and in furtherance of the promotion of cricket. The Tribunal relied on authorities holding that mere generation of surplus, or organized conduct of activities, is not decisive; surplus ploughed back and absence of distribution of profits are material. The Tribunal also emphasised consistency of treatment in earlier years, absence of findings of deviation from approved objects/by laws, and binding effect of the Jurisdictional High Court's earlier decision in the assessee's own case.

Proviso to section 2(15) held not attracted; exemption under sections 11 and 12 allowed.

Application of income - grants to affiliated bodies as revenue application - entitlement to exemption under sections 11 and 12 - Whether grants given by the assessee to District Cricket Associations constitute allowable application of income (revenue expenditure) or are capital/excludable. - HELD THAT: - Following earlier Coordinate Bench decisions in the assessee's own case, the Tribunal held that grants to District Cricket Associations (for infrastructure, equipment, subsidies) have a direct nexus with the assessee's objects of promoting cricket and thus constitute application of income. Although such grants may result in creation/enhancement of assets in the hands of district bodies, they do not create enduring benefit or capital asset for the assessee itself; hence they are not capital in nature as regards the assessee. The Tribunal found no material distinction in facts for the impugned years and applied the precedent accordingly.

Grants to District Cricket Associations allowed as application of income; disallowance set aside.

Method of accounting - mercantile (accrual) v. cash system - provisions for expenses - treatment in accounts - Whether the assessee was impermissibly following the accrual (mercantile) system and whether provisions for expenses shown in the balance sheet were disallowable. - HELD THAT: - The Tribunal observed that the assessee regularly follows the mercantile system of accounting, permissible under section 145(1), and that provisions represent closing balances adjusted year to year. The CIT(A) had directed the AO to verify whether any amount shown as provision was separately claimed as application of income; absent a specific separate claim, the AO's disallowance of provisions was not sustained. The Tribunal endorsed consistent use of the mercantile system and the opportunity for AO to verify any claimed application.

Accrual (mercantile) accounting accepted; disallowance of provisions deleted subject to verification; ground dismissed.

Final Conclusion: Following restoration of registration under section 12A (affirmed by the jurisdictional High Court) and applying settled precedent on the predominant object test and incidental receipts, the Tribunal held that the proviso to section 2(15) was not attracted; exemption under sections 11 and 12 was allowed. Grants to District Cricket Associations were held to be allowable applications of income. The assessee's mercantile accounting and treatment of provisions were accepted subject to verification. All Revenue appeals are dismissed.

Capital receipt - book profit under section 115JB - excise duty exemption as subsidy/incentive - amortisation of leasehold land as revenue expenditure - allowability under section 37 - corporate guarantee - arm's length guarantee fee - transfer pricing adjustment for inter unit transactions - comparability and selection of TNMM/CUP - admission of documents under Rule 46A

Capital receipt - book profit under section 115JB - excise duty exemption as subsidy/incentive - Excise duty exemption claimed by the assessee is a capital receipt and is to be excluded from computation of book profit under section 115JB. - HELD THAT: - The Tribunal found that the excise duty exemption granted to the Rudrapur units was an incentive given to encourage industrialisation in backward areas and to generate employment; it is capital in nature and not chargeable to tax under the normal provisions. Reliance on the Office Memorandum dated 07.01.2003 and precedents treating similar incentives as capital receipts supported exclusion from book profit. Inclusion of such capital receipts in book profit would defeat the object of MAT provisions to reflect real working results; where a receipt is not income it cannot form part of book profit under section 115JB. For these reasons the assessee's ground for exclusion of the excise duty exemption from book profit is allowed. [Paras 10, 11, 12, 22]

Allowed - the excise duty exemption of Rs.87,98,09,432/- is a capital receipt and shall be excluded from book profit under section 115JB.

Amortisation of leasehold land as revenue expenditure - allowability under section 37 - Amortisation of leasehold land expenses amounting to Rs.18,73,242/- is allowable as revenue expenditure under section 37. - HELD THAT: - The Tribunal held that lumpsum lease premiums paid for long term leases (up to 99 years) and spread over the lease term in accordance with Accounting Standard 19 are not preliminary expenses under section 35D and are not capital in the sense of being disallowable. The amortisation, computed as per accepted accounting practice and debited to P&L, was expended wholly and exclusively for business purposes and therefore allowable under section 37. The Tribunal followed coordinate decisions (including NIIT Technologies Ltd. and Adani Gas Ltd./Sun Pharmaceuticals precedents) which treated such amortisation as akin to depreciation and permitted spreading the cost over the lease term; accordingly the CIT(A)'s disallowance was reversed. [Paras 23, 28, 30]

Allowed - amortisation of leasehold land of Rs.18,73,242/- to be allowed as deduction under section 37.

Corporate guarantee - arm's length guarantee fee - comparability and selection of TNMM/CUP - The arm's length corporate guarantee fee is to be restricted to 0.5% of the guaranteed amount; Revenue's challenge to the CIT(A)'s reduction is dismissed. - HELD THAT: - The Tribunal noted the facts of downstream guarantees provided by the assessee and that the TPO had relied on comparables from the USA whereas comparable evidence for the relevant region was lacking. Having considered a series of tribunal precedents which have fixed arm's length guarantee commission in the vicinity of 0.3%-0.5% (and multiple decisions adopting 0.5%), the CIT(A)'s adoption of 0.5% was held to be supported by settled judicial precedent. The Revenue did not produce binding authority to justify higher rates; accordingly the Tribunal confirmed the CIT(A)'s restriction of the guarantee fee to 0.5%. [Paras 34, 39, 40]

Revenue's grounds dismissed - guarantee commission to be benchmarked at 0.5% of the guaranteed amount.

Transfer pricing adjustment for inter unit transactions - comparability and selection of TNMM/CUP - admission of documents under Rule 46A - The downward transfer pricing adjustment in respect of purchases by eligible units from non eligible units is not sustainable and is deleted; Revenue's Rule 46A objections are dismissed. - HELD THAT: - The Tribunal observed that the assessee had initially adopted CUP in its Form 3CEB but the TPO accepted TNMM as most appropriate and there was no dispute before the Tribunal that TNMM had been accepted. The purchases from related non eligible units formed a small proportion of eligible units' total purchases (5.82% and 9.33%), and eligible units would continue to earn high operating margins even after any adjustment. The TPO did not provide an analytical demonstration that the inter unit purchases caused the higher profit margins; other factors (excise exemption, VAT effects, better infrastructure and lower costs) explained the difference. Given these facts and the absence of convincing analysis by the TPO, the CIT(A)'s deletion of the TP adjustment was upheld. Revenue also failed to substantiate its contention that new evidence was admitted in breach of Rule 46A. [Paras 41, 48, 50, 51, 52]

Revenue's appeal on this issue dismissed - the downward TP adjustment of Rs.2,48,39,215/- is deleted and Rule 46A objections are rejected.

Procedural non pressing of ground - dismissal as not pressed - The assessee's ground seeking allowance of education cess was not pressed and is dismissed as not pressed. - HELD THAT: - Counsel for the assessee expressly requested that this ground not be pressed before the Tribunal. The Tribunal recorded that request and dismissed the ground accordingly. [Paras 4]

Dismissed as not pressed.

Final Conclusion: The assessee's appeal is partly allowed: the excise duty exemption is held to be a capital receipt and excluded from book profit under section 115JB; amortisation of leasehold land of Rs.18,73,242/- is allowed under section 37; the Revenue's appeals on corporate guarantee fee and the inter unit transfer pricing adjustment are dismissed. The education cess ground was dismissed as not pressed.

Admissibility and probative value of statements recorded under section 132(4) - Retraction of confessional statements and burden to prove voluntariness - Requirement of independent corroborative evidence for additions based on retracted admissions - Extrapolation of estimated income across assessment years - Disallowance under section 14A read with Rule 8D in absence of exempt income - Prospectivity of statutory explanations and test for retrospective operation

Admissibility and probative value of statements recorded under section 132(4) - Retraction of confessional statements and burden to prove voluntariness - Requirement of independent corroborative evidence for additions based on retracted admissions - Addition under section 69C based on statements recorded under section 132(4) that were subsequently retracted was unsustainable and deleted. - HELD THAT: - The Tribunal held that statements recorded under section 132(4) are relevant evidence but not conclusive; their weight depends on voluntariness and surrounding circumstances. Where a maker of the statement raises reasonable doubt that the admission was obtained by inducement, threat or coercion, the onus shifts to the Revenue to prove voluntariness. If a retraction is supported by circumstances and the persons retracted withstand cross-examination, the Assessing Officer cannot rest an addition solely on the original retracted statements without independent corroboration. On the facts, the four employees' statements were prolonged, inconsistent, vague and not supported by any incriminating material recovered in search; the key persons named denied the allegations; the retractions were sworn and the employees withstood cross-examination. In these circumstances the original testimonies lacked probative value and the AO's addition under section 69C was rightly deleted by the CIT(A). [Paras 17, 20, 23, 24, 25]

Grounds 1-3 (addition under section 69C) dismissed; addition deleted for AYs 2012-13 to 2018-19.

Extrapolation of estimated income across assessment years - The AO's extrapolation of an estimated monthly unaccounted cash outflow across earlier assessment years was unjustified and unsustainable. - HELD THAT: - The Tribunal reiterated that extrapolation requires a proper basis and corroborative material; arbitrary extrapolation on mere assumption or on uncorroborated statements cannot sustain additions for prior years. Absent seized documents, unrecorded sales, or other corroboration showing recurring unaccounted cashflows, the AO could not validly apply the estimated figure across the block of years. Reliance on authority rejecting extrapolation on mere assumption was endorsed. [Paras 21, 33, 34]

Extrapolation disallowed; estimation across AYs 2012-13 to 2017-18 not sustained.

Disallowance under section 14A read with Rule 8D in absence of exempt income - Prospectivity of statutory explanations and test for retrospective operation - Disallowance under section 14A read with Rule 8D, when no exempt income was earned in the year, was not permissible; the Explanation inserted by Finance Act, 2022 is prospective and does not apply to the assessment years under consideration. - HELD THAT: - The Tribunal followed the view that Rule 8D and CBDT Circular cannot override the parent provision, and that section 14A operates in relation to actual exempt income; where exempt income is nil, disallowance under section 14A is impermissible. The Tribunal further applied the legislative-intent test for retrospectivity: the Finance Act, 2022's Explanation expressly takes effect from 1 April 2022 and the Notes on Clauses confirm prospectivity. Relying on Supreme Court authorities, the amendment was held not to be retrospective so it does not apply to AYs before 2022-23. [Paras 45, 50, 51, 52, 53]

Ground No.4 dismissed; disallowance under section 14A/Rule 8D deleted for AYs 2012-13 to 2018-19 and the 2022 Explanation held prospective.

Final Conclusion: The appeals filed by the Revenue are dismissed. The Tribunal upheld the CIT(A)'s deletion of the additions made under section 69C (grounds 1-3) for AYs 2012-13 to 2018-19, held the AO's extrapolation across years unsustainable, and confirmed deletion of the section 14A/Rule 8D disallowance (ground 4) because no exempt income was earned and the 2022 Explanation is prospective.

Cancellation of registration under section 12A/12AA - Evidentiary value of seized loose papers and digital data - Necessity of cross examination of third party witnesses relied upon by Revenue - Extrapolation of incriminating material across assessment years - Effect of subsequent search material on earlier adjudication and remand - Entitlement to exemption under section 11 - Claim of depreciation under section 32 when exemption denied

Cancellation of registration under section 12A/12AA - Entitlement to exemption under section 11 - Validity of the Principal CIT's cancellation of the trust's registration and denial of exemption under section 11 - HELD THAT: - The Tribunal held that the cancellation of registration founded on additions and findings derived from uncorroborated seized loose papers, digital printouts and third party statements could not be sustained. The seized material lacked signatures, attestation, corroborative documents and did not establish diversion of trust funds or creation of undisclosed assets; the statements relied upon were evasive and were not made the subject of cross examination. In the absence of cogent admissible evidence showing that the trust deviated from its objects or applied income otherwise than for charitable purposes, denial of exemption under section 11 was incorrect. Applying these conclusions, the Tribunal set aside the cancellation and restored the registration granted w.e.f. 20.1.1992. [Paras 4, 5, 7, 8]

Order cancelling registration quashed; registration restored w.e.f. 20.1.1992 and exemption under section 11 upheld for the years under adjudication

Evidentiary value of seized loose papers and digital data - Necessity of cross examination of third party witnesses relied upon by Revenue - Whether additions and adverse conclusions could be sustained on the basis of loose sheets, computer printouts and third party statements without cross examination or corroboration - HELD THAT: - The Tribunal analysed the seized material and found it to be non speaking: loose sheets, unsigned notebooks, obscure notings and digital printouts lacked provenance, authentication and corroborative links to the trust. The Revenue failed to examine or place beneficiaries/recipients before the assessee for cross examination; key departmental witnesses gave inconsistent or evasive answers. Reliance on such material without independent corroboration or opportunity for cross examination was held legally impermissible; suspicion or conjecture cannot substitute for evidence. Consequently, additions and findings based solely on such material were deleted. [Paras 195, 201, 209, 232, 240]

Seized loose papers, digital data and uncorroborated third party statements held inadmissible as sole basis for additions or for cancelling registration; additions based on them deleted

Extrapolation of incriminating material across assessment years - Effect of subsequent search material on earlier adjudication and remand - Permissibility of extrapolating findings from seized material of one year to quantify alleged undisclosed receipts in other assessment years, and use of material from a subsequent search to justify cancellation after a remand - HELD THAT: - The Tribunal held that quantification for a particular assessment year must be founded on incriminating material pertaining to that year; the Revenue cannot legitimately extrapolate from material belonging to other years without direct supporting evidence. Material seized in a later search (10.10.2019) could not be imported to sustain or revive an earlier cancellation when the matter had been remitted to the Principal CIT after the Tribunal's order-subsequent proceedings are distinct and cannot be retroactively used to justify an earlier cancellation. On these bases, extrapolated additions were rejected and the Principal CIT was held not to be entitled to rely on the second search material for the earlier cancellation. [Paras 7, 9, 318, 330]

Extrapolation across years rejected; subsequent search material could not be used to uphold earlier cancellation following remand

Claim of depreciation under section 32 when exemption denied - Entitlement to claim depreciation for AY 2010-11 in computation where exemption under section 11 was contested - HELD THAT: - The Tribunal directed that depreciation under section 32 is allowable where capital expenditure has been laid out as application of income for charitable purposes; even where exemption was initially denied, the assessing officer must grant depreciation in computing income, consistent with Explanation 5 to section 32 and relevant judicial precedent. Applying the law and authorities, the Tribunal held the assessee entitled to depreciation for AY 2010 11. [Paras 303, 304]

Depreciation for AY 2010-11 to be allowed in accordance with law

Hierarchy of fora and effect of pendency of appeals - Whether pendency of Revenue's appeals before the High Court justified the Principal CIT in refusing to follow the Tribunal's favorable findings - HELD THAT: - The Tribunal observed that pendency of appeal before the High Court did not entitle the Principal CIT to disregard the Tribunal's findings or to sit in judgment over them; a subordinate officer must give effect to the Tribunal's order unless and until it is stayed or reversed by a higher forum through due process. The Principal CIT's reliance on non finality of the Tribunal's orders to uphold cancellation was therefore unwarranted. [Paras 6, 7]

Pending appeal against Tribunal orders in the High Court did not justify ignoring the Tribunal's findings; Principal CIT's reliance on pendency was unwarranted

Final Conclusion: The Tribunal allowed the appeal, set aside the Principal CIT's order cancelling the trust's registration, restored the registration granted w.e.f. 20.1.1992, deleted additions based on uncorroborated seized material for the assessment years in issue (2010-11 to 2016-17), rejected extrapolation and reliance on subsequent search material for the earlier cancellation, and directed allowance of depreciation for AY 2010-11 in accordance with law.

Application of successor regulation to licence granted under prior regime - mandatory reporting of change in constitution of firm/LLP - temporal scope of regulatory proviso - forfeiture of security and imposition of penalty for breach of licensing regulation - principle that mis reference to statutory provision does not vitiate substantive charges - limited judicial leniency in imposition of fiscal penalties

Application of successor regulation to licence granted under prior regime - temporal scope of regulatory proviso - Whether the second proviso to Regulation 7(2) of the Customs Broker Licensing Regulations, 2018 applies to a licensee who was granted licence under CBLR, 2013. - HELD THAT: - The second proviso to Regulation 7(2) CBLR, 2018 requires that where a company or firm granted a licence under 'this regulation' undergoes any change in directors or partners, such change shall be communicated within one month. The Tribunal held that the language confines the proviso to entities granted licence under CBLR, 2018 itself. Since the appellant's licence was granted under CBLR, 2013, the specific one month reporting obligation in the 2018 proviso does not apply to it. Consequently the allegation framed solely under Regulation 7(2) of CBLR, 2018 cannot be sustained against the appellant on that textual basis. [Paras 10]

The second proviso to Regulation 7(2) CBLR, 2018 does not apply to the appellant, whose licence was granted under CBLR, 2013, and therefore the charge under that specific proviso cannot be sustained.

Mandatory reporting of change in constitution of firm/LLP - principle that mis reference to statutory provision does not vitiate substantive charges - forfeiture of security and imposition of penalty for breach of licensing regulation - limited judicial leniency in imposition of fiscal penalties - Whether the appellant violated the reporting requirement under CBLR, 2013 and, if so, whether the forfeiture of security and penalty imposed were justified. - HELD THAT: - Regulation 13 of CBLR, 2013 required firms or companies holding a licence to report any change in constitution and make a fresh application within sixty days from the date of such change. The Tribunal found that the change (partnership deed) occurred on 11.12.2017 but was reported to Customs only on 10.10.2018, well beyond the sixty day period, thereby constituting a breach of CBLR, 2013. The Tribunal accepted the departmental submission that incorrect citation of the later regulation in the show cause notice does not nullify the substantive charge of delayed reporting. However, on facts the Tribunal observed mitigating circumstances (death of a partner, no business carried on during the period) and noted that the adjudicating authority already took a lenient view by not revoking the licence. Considering proportionality, the Tribunal held that forfeiture of the security deposit was excessive while maintaining that some penalty was warranted for the lapse; accordingly the forfeiture was set aside and the monetary penalty was sustained. [Paras 12, 13, 14, 15]

There was a violation of CBLR, 2013 for delayed reporting; mis reference to CBLR, 2018 does not vitiate the charge. Taking a lenient and proportionate view, the forfeiture of security is set aside but the penalty is sustained.

Final Conclusion: Appeal partly allowed: finding of breach of CBLR, 2013 for delayed intimation sustained, but, on grounds of proportionality and mitigating circumstances, forfeiture of the security deposit is set aside while the penalty is upheld.

Rectification of the register of members under Section 59 - appointment of an independent valuer - powers of the Tribunal under Rule 11 of the NCLT Rules - valuation under Section 247 and interaction with SEBI-mandated exit offer valuation - protection of non-promoter/minority shareholders

Rectification of the register of members under Section 59 - protection of non-promoter/minority shareholders - Maintainability of the petition under Section 59 to seek reliefs contingent on a fresh valuation and rectification of the register of members. - HELD THAT: - The Tribunal examined whether the petition falls within Section 59, noting that rectification is a consequential remedy contingent upon a finding that entries in the register are incorrect. The petition showed sufficient cause to entertain the grievance: the applicant had repeatedly sought information, the company belatedly issued an exit offer, allegedly withheld the valuation report and financial documents, and there were facts (earlier higher offer and a much lower exit price) creating doubt about the veracity of the earlier valuation. The Tribunal held that these facts furnished a concrete cause of action rather than mere apprehensions, and that rectification would follow only if a fresh independent valuation establishes that the earlier valuation was incorrect. Consequently the petition is maintainable to the extent of seeking revaluation and consequential reliefs under Section 59. [Paras 9, 10, 11]

The petition is maintainable under Section 59 to the extent of directing a fresh valuation; rectification of the register is a consequential relief contingent upon the valuation report.

Appointment of an independent valuer - powers of the Tribunal under Rule 11 of the NCLT Rules - valuation under Section 247 and interaction with SEBI-mandated exit offer valuation - Whether the Tribunal has power to direct appointment of an independent valuer to re-assess the exit-offer valuation (including valuation carried out pursuant to SEBI guidance). - HELD THAT: - Respondents contended that valuation pursuant to a SEBI circular falls outside Section 247 and that the Tribunal lacks power to order revaluation. The Tribunal observed that where entries in the register arise from valuation possibly done in contravention of SEBI requirements, Section 59(4) permits rectification arising from such contraventions. The Tribunal further relied on the principle that reference to an incorrect provision in pleadings does not oust jurisdiction if the power exists and can be traced to law. In the facts - a suspect earlier valuation, withholding of documents and bona fides concerns - it was appropriate in the interest of justice to invoke Rule 11 (inherent powers) of the NCLT Rules to direct the company to appoint an independent valuer from IBBI-approved list. The Tribunal concluded that resort to Rule 11 and the Companies Act/Rules to secure a fair valuation is legally tenable and necessary to protect minority shareholders. [Paras 13, 14, 15, 16]

The Tribunal may, and in the present case shall, direct appointment of an independent IBBI-registered valuer to revalue the company's shares; the company is directed to appoint such valuer and cooperate with him.

Appointment of an independent valuer - Disposition of ancillary and consequential reliefs pending the outcome of the independent valuer's report. - HELD THAT: - The Tribunal ordered a fresh valuation and expressly refrained from adjudicating other reliefs (including allegations under Sections 447 and 448 and requests for rectification or cancellation of share transfers) because those reliefs are dependent on the independent valuer's findings. The Tribunal directed the valuer to submit his report within three months, to provide copies to the parties, and left the applicant free to approach appropriate forums based on that report. [Paras 16, 17]

All other reliefs are not considered at this stage and remain subject to the findings of the independent valuer; parties may pursue appropriate remedies post-report.

Final Conclusion: The Tribunal held the petition maintainable to the extent of directing a fresh independent valuation to test the veracity of the earlier exit-offer valuation; it ordered the respondent company to appoint an IBBI-registered valuer, to cooperate and bear the valuer's costs, and deferred all consequential reliefs pending the valuer's report.

Section 7 of the Insolvency and Bankruptcy Code - Section 18 of the Limitation Act - acknowledgement in writing in balance sheet - date of default - extension of limitation by acknowledgment - remand for fresh adjudication

Section 18 of the Limitation Act - Section 7 of the Insolvency and Bankruptcy Code - The applicability of Section 18 of the Limitation Act to proceedings under Section 7 of the IBC. - HELD THAT: - The Court held that the provisions of Section 18 of the Limitation Act are applicable to proceedings under the Code. The three-Judge Bench decisions in Laxmi Pat Surana and Asset Reconstruction Company, taken together with Sesh Nath Singh, establish that the Limitation Act applies 'as far as may be' to proceedings under the IBC and that Section 18 operates to extend limitation where there is an acknowledgment in writing within the prescribed period. The Court concluded that earlier contrary NCLAT authority could not be followed in view of these binding precedents and that the NCLT/NCLAT had not adjudicated the factual allegations in the light of these principles. [Paras 10, 13]

Section 18 of the Limitation Act applies to applications under Section 7 of the IBC and must be considered by the adjudicating authority.

Acknowledgement in writing in balance sheet - extension of limitation by acknowledgment - date of default - Whether an unqualified acknowledgement in a balance sheet can extend the limitation period for initiating proceedings under Section 7 IBC. - HELD THAT: - The Court affirmed that an acknowledgement in a balance sheet, if unqualified and unequivocal, can constitute an acknowledgement in writing for the purposes of Section 18 and thereby extend the limitation period, provided such acknowledgement occurs within three years of the original date of default. The Court referred to the reasoning in Asset Reconstruction Company and Laxmi Pat Surana that entries in financial statements and accompanying notes must be examined on facts to determine whether they amount to an acknowledgement of liability capable of extending limitation. [Paras 11, 13]

An unqualified entry in the balance sheet can furnish a basis for extending limitation under Section 18, subject to factual examination whether it amounts to an acknowledgment within three years of the date of default.

Remand for fresh adjudication - Section 7 of the Insolvency and Bankruptcy Code - date of default - Whether the appellant's Section 7 application was time-barred and the appropriate remedy in view of the applicable law. - HELD THAT: - The Court declined to decide the factual question whether the application under Section 7 would result in initiation of CIRP, noting that the NCLT and NCLAT had not adjudicated the factual disputes in the light of the binding precedents on Section 18 and acknowledgements. Considering documentary material placed before it concerning alleged acknowledgements and revival/OTS communications, the Court set aside the concurrent orders and restored the matter to the NCLT for fresh adjudication on merits, keeping all rights and contentions open. The Court directed expeditious disposal within three months. [Paras 15, 16, 17]

Impugned orders set aside and proceedings restored to the NCLT for fresh adjudication of limitation and merits in the light of applicable law; NCLT to decide expeditiously within three months.

Final Conclusion: The appeal is allowed; the Supreme Court held that Section 18 of the Limitation Act applies to applications under Section 7 IBC and that unqualified acknowledgements in balance sheets can extend limitation if within three years of default. The NCLT and NCLAT orders are set aside and the matter is remanded to the NCLT for fresh adjudication on limitation and merits, with directions for expeditious disposal within three months.

Approval of resolution plan under section 30(6) of the IBC, 2016 - Payment of CIRP costs in priority to other debts - Compliance of resolution plan with the IBBI (CIRP) Regulations, 2016 - Compliance with payment hierarchy and waterfall mechanism under the Code - Management and control of corporate debtor under an approved resolution plan - Extinguishment of pre-CIRP claims including contingent and statutory claims

Approval of resolution plan under section 30(6) of the IBC, 2016 - Payment of CIRP costs in priority to other debts - Whether the Resolution Plan of M/s. Agarwal Coal Corporation Private Limited is approvable under section 30(6) of the IBC, 2016 and complies with the requirement to provide for CIRP costs in priority. - HELD THAT: - The Tribunal examined the Resolution Plan under the mandate of section 30(2) of the Code and specifically noted provision of Rs. 47,25,000/- for CIRP costs. The plan was found to provide for CIRP costs in priority to other debts and thereby satisfy the requirement of section 30(2)(a). Having regard to the RP's certification and the plan's contents, the Tribunal found no ground to reject the plan under the statutory scheme and Regulations applicable to CIRP. [Paras 11, 12, 15]

The Resolution Plan complies with the requirement to provide for priority payment of CIRP costs and is approvable under section 30(6) of the IBC, 2016.

Compliance with payment hierarchy and waterfall mechanism under the Code - Extinguishment of pre-CIRP claims including contingent and statutory claims - Whether the payments proposed under the Resolution Plan satisfy the payment hierarchy under section 30(2)(b) and whether the plan illegally omits payment to operational creditors or statutory authorities. - HELD THAT: - The Tribunal analysed the distribution proposed: secured financial creditors, unsecured financial creditors, workmen and employees, and noted that operational creditors were proposed to receive nil. It observed that even on liquidation the operational creditors would receive nothing under the statutory waterfall in section 53, and therefore omission in the plan did not render it illegal under section 30(2)(b). The Tribunal also recorded the Resolution Applicant's statement that some amount would be paid to operational creditors and accepted that statutory or government claims are dealt with by the statutory scheme. Consequently, the Tribunal held that all pre-CIRP liabilities (including contingent and statutory claims) stand extinguished upon approval of the plan, subject to directions that the Resolution Applicant may approach concerned authorities for any statutory reliefs. [Paras 13, 15, 16, 17]

The proposed payment structure does not contravene section 30(2)(b); approval of the plan extinguishes pre-CIRP claims (including contingent and statutory claims) as provided in the order, subject to statutory authorities' prerogatives.

Management and control of corporate debtor under an approved resolution plan - Reconstitution of board and procedural compliances - Whether the Resolution Plan adequately provides for management and control of the Corporate Debtor post-approval and satisfies the requirement of section 30(2)(c) (and related provisions). - HELD THAT: - The plan envisages a Management Committee assisted by the employees and managerial personnel of the Resolution Applicant, with day-to-day operations planned and executed in collaboration with corporate departments under supervision of the Resolution Applicant's managerial personnel. The Tribunal found that these arrangements satisfy the requirements of section 30(2)(c) and section 32(2)(d), and directed reconstitution of the board and completion of procedural formalities for handing over management. [Paras 14, 18]

The Resolution Plan provides for management and control consistent with statutory requirements; the board shall be reconstituted and management handed over in accordance with the plan.

Compliance of resolution plan with the IBBI (CIRP) Regulations, 2016 - Non-contravention of law - Whether the Resolution Plan contravenes any law or the IBBI regulations such that it ought to be rejected. - HELD THAT: - The RP certified non-contravention and the Tribunal, on its examination, found no provision of law that the plan contravenes. The plan was held to be in compliance with Regulations 38 and 39 of the IBBI (CIRP of the Corporate Person) Regulations, 2016 and to address interests of stakeholders. Consequently, there was no legal infirmity warranting rejection. [Paras 15]

The Resolution Plan does not contravene applicable law or the IBBI regulations and is therefore acceptable.

Extinguishment of pre-CIRP claims including contingent and statutory claims - Permits, licences and statutory rights to be pursued before competent authorities - What is the legal effect of approval on statutory rights, permits, licences and claims of government or statutory authorities? - HELD THAT: - Relying on the legislative intent articulated in Ghanashyam Mishra and Sons (as noted in the judgment), the Tribunal held that approval of the resolution plan freezes pre-CIRP claims and the Resolution Applicant cannot be saddled with prior claims. Permits, licences, leases and statutory rights remain vested in the corporate debtor; for continuation or transfer of such statutory rights the Resolution Applicant must approach concerned authorities. The Tribunal directed that reliefs or concessions from statutory authorities be obtained by the Resolution Applicant through the statutory processes, and that Income Tax related reliefs be sought from Income Tax Authorities under applicable law. [Paras 16, 17]

Approval extinguishes pre-CIRP claims against the corporate debtor; statutory permits and rights remain subject to applicable law and must be pursued by the Resolution Applicant with the respective authorities.

Final Conclusion: The Tribunal allowed the application under section 30(6) and approved the Resolution Plan of M/s. Agarwal Coal Corporation Private Limited for Surya Exim Limited, finding the plan compliant with statutory requirements and IBBI Regulations, directing extinguishment of pre-CIRP claims upon approval, reconstitution of management and board as per the plan, and requiring the Resolution Applicant to obtain any statutory reliefs or approvals from competent authorities in accordance with law.

Operational debt - default - dispute as defined in Section 5(6) of the Code - admission under Section 9 of Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Code - appointment of Interim Resolution Professional - public announcement under Section 13 of the Code - Regulation 7A of IBBI (Insolvency Professionals) Regulations, 2016 - Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Person) Regulations, 2016

Operational debt - default - dispute as defined in Section 5(6) of the Code - Existence of the operational debt was not disputed and default in payment stood established. - HELD THAT: - The corporate debtor did not contest the existence of the debt but only disputed the quantum. Under the definition of "dispute" in Section 5(6) of the Code, a dispute must relate to existence of the amount of debt, quality of goods or services, or breach of representation or warranty. Because the corporate debtor admitted the debt's existence and did not plead discharge of the debt, the Tribunal held the operational debt to be undisputed and that default was established. [Paras 6, 7]

The operational debt is admitted as undisputed and the corporate debtor is in default.

Admission under Section 9 of Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Code - appointment of Interim Resolution Professional - public announcement under Section 13 of the Code - Regulation 7A of IBBI (Insolvency Professionals) Regulations, 2016 - Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Person) Regulations, 2016 - Petition under Section 9 is admitted; moratorium declared, IRP appointed and ancillary directions issued. - HELD THAT: - Having found the operational debt and default established, the Tribunal admitted the petition under Section 9 of the Code and declared the moratorium for the period prescribed by Section 14. The Tribunal appointed the named Interim Resolution Professional after noting compliance with Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016 and the availability of Form-B. Directions issued include prohibition on institution or continuation of proceedings against the corporate debtor, protection of supplies of essential goods or services, non-suspension of licenses (subject to payment of current dues), requirement for immediate public announcement under Section 13, and payment by the petitioner to the IRP for initial expenses subject to adjustment by the Committee of Creditors under Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Person) Regulations, 2016. [Paras 8, 9]

The petition is admitted under Section 9; moratorium is declared; IRP is appointed; and the Tribunal ordered the specified procedural directions including public announcement and interim payment to the IRP.

Final Conclusion: The Tribunal admitted the Section 9 petition against the corporate debtor, held the operational debt and default to be established (the dispute raised was limited to quantum), declared the moratorium under Section 14, appointed an Interim Resolution Professional after verifying regulatory compliance, directed immediate public announcement and interim payment to the IRP (subject to adjustment), and communicated the order to the IBBI and the IRP.

Corporate Insolvency Resolution Process - Inability to pay debts / default - Admission under Section 10 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Public announcement of initiation of CIRP - No objection by Operational Creditor

Inability to pay debts / default - Admission under Section 10 of the Insolvency and Bankruptcy Code, 2016 - No objection by Operational Creditor - Application under Section 10 of the IBC, 2016 filed by the corporate applicant for initiation of Corporate Insolvency Resolution Process is admissible and is to be admitted. - HELD THAT: - The Adjudicating Authority examined the corporate applicant's financial statements showing losses, long term borrowings and limited asset base, and the special resolution authorising filing of the Section 10 application and appointment of an interim resolution professional. The Operational Creditor filed an affidavit conveying no objection to initiation of CIRP. Having considered the financial statements which depict poor financial health and the corporate applicant's inability to meet its obligations, the Authority was satisfied that the statutory preconditions for admission under Section 10 were met and that the corporate applicant is unable to pay its debt, warranting admission of the application and initiation of CIRP. [Paras 6]

The application under Section 10 is admitted and the Corporate Insolvency Resolution Process is ordered to be initiated.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Public announcement of initiation of CIRP - Consequential orders on moratorium, appointment of Interim Resolution Professional, public announcement and registry directions are to be implemented. - HELD THAT: - On admission of the Section 10 application the Authority declared the moratorium for purposes specified in Section 14, prohibiting institution or continuation of suits or execution against the corporate applicant and restraining transfer, encumbrance or disposal of assets, as set out in the order. The Authority directed continued supply of essential goods or services during the moratorium, noted specified statutory exceptions, ordered the public announcement of initiation of CIRP as prescribed, appointed the nominated Interim Resolution Professional to perform the functions under the Code, and directed the Registry to inform the Registrar of Companies to update the corporate status on MCA 21. These directions flow from admission and are ancillary to and requisite for the conduct of CIRP. [Paras 6, 7]

Moratorium declared; public announcement to be made; Mr. Pavan Kankani appointed as Interim Resolution Professional; Registry to notify Registrar of Companies.

Final Conclusion: The Adjudicating Authority admitted the Section 10 petition of M/s Enaar Steel and Alloy Pvt. Ltd., initiated the Corporate Insolvency Resolution Process, declared the statutory moratorium, appointed the nominated Interim Resolution Professional, directed public announcement of CIRP and ordered registry action to update the company's status on MCA 21.

Removal and replacement of liquidator - Failure to exercise due care and diligence in performance of powers and functions - Regulation 7A - Authorisation for assignment - Irregularity in appointment and effect on validity of liquidation order - Power to appoint includes power to suspend or dismiss - Grounds for removal under Section 276 of the Companies Act, 2013

Failure to exercise due care and diligence in performance of powers and functions - Removal and replacement of liquidator - The liquidator was removed for failure to exercise due care and diligence in performance of his powers and functions arising from sharing the valuation report with prospective scheme proponents. - HELD THAT: - The Tribunal found on the material before it that the Liquidator had shared the valuation report of the Corporate Debtor with prospective scheme proponents, which resulted in proponents quoting values on par with that report. The Tribunal held that such conduct amounted to a failure to exercise due care and diligence in the performance of his functions as Liquidator and constituted a ground for removal. Applying the powers available to the Adjudicating Authority under the Code read with ancillary statutory provisions, the Tribunal directed replacement of the outgoing Liquidator and appointed a successor from the IBBI list for the period specified, with a direction to hand over charges within seven days. [Paras 18, 22]

The application to replace the Liquidator is allowed on the ground of failure to exercise due care and diligence; the outgoing Liquidator is directed to hand over charge to the newly appointed Liquidator.

Regulation 7A - Authorisation for assignment - Irregularity in appointment and effect on validity of liquidation order - Non-possession of a valid authorisation for assignment (AFA) at the time of acceptance did not, by itself, render the liquidation order illegal or invalid, although the appointment could be revisited by the Adjudicating Authority. - HELD THAT: - The Tribunal recorded that the Respondent accepted the assignment without a valid AFA as required by Regulation 7A. It relied on the NCLAT observation that such irregularity does not automatically invalidate the order of liquidation, while leaving the Appellant free to bring the matter to the Adjudicating Authority for reconsideration of the appointment. The Tribunal noted that IIIPI and IBBI had issued show-cause notices and imposed a penalty, confirming the absence of a valid AFA, but treated that irregularity as not being fatal to the liquidation order. [Paras 5, 8, 19, 20, 21]

The absence of a valid AFA at the time of acceptance is an irregularity but does not invalidate the liquidation order; the Adjudicating Authority may re-examine the appointment if so moved.

Power to appoint includes power to suspend or dismiss - Grounds for removal under Section 276 of the Companies Act, 2013 - Removal and replacement of liquidator - The Tribunal has jurisdiction and power to remove a liquidator and the applicable grounds for removal include misconduct, fraud or misfeasance, professional incompetence or failure to exercise due care and diligence, inability to act, and conflict of interest or lack of independence. - HELD THAT: - The Tribunal construed Section 33 of the Code together with Section 16 of the General Clauses Act, 1897 to hold that the authority empowered to appoint also has power to suspend or dismiss in the absence of a contrary intention. In the absence of explicit grounds for removal under the Code, the Tribunal applied Section 276 of the Companies Act, 2013 as a guiding statutory source to identify permissible grounds for removal and the requirement of reasoned recording and opportunity to be heard before removal. [Paras 13, 15, 16]

The Adjudicating Authority has the power to remove a liquidator and may do so for the specified grounds; the Tribunal applied those principles in ordering replacement.

Final Conclusion: IA/815/IB/2020 is allowed: the Respondent Liquidator is removed for failure to exercise due care and diligence and a new Liquidator is appointed from the IBBI list for the period July 2022 to December 2022; the outgoing Liquidator is directed to hand over charge and the Registry is to send a copy of the order to IBBI.

Reverse charge liability for services - voluntary payment under Section 73(3) - extended limitation and exclusion of voluntary payment by reason of fraud, collusion, willful misstatement or suppression under Section 73(4) - penalty under Section 78 - penalty waiver under Section 80 - Cenvat credit availability - revenue neutrality as a factor in inferring intention

Voluntary payment under Section 73(3) - extended limitation and exclusion of voluntary payment by reason of fraud, collusion, willful misstatement or suppression under Section 73(4) - revenue neutrality as a factor in inferring intention - Whether the appellant's late payment and intimation attracted the protection of Section 73(3) or fell within the exclusion in Section 73(4). - HELD THAT: - The Tribunal found it undisputed that the appellant did not pay service tax for the period August 2012 to March 2014 but, on being pointed out by DGCEI, immediately paid the tax with interest and informed the assessing officer before issue of the show cause notice. Section 73(3) bars issuance of a notice where the person pays the tax and informs the officer before a notice is served, unless the case falls within the exceptions in Section 73(4) which apply where non-payment is by reason of fraud, collusion, willful misstatement, suppression of facts or contravention with intent to evade. The elements in Section 73(4) require proof of intention. The Tribunal accepted the Revenue's submission that taxability is unaffected by revenue neutrality but held that revenue neutrality may be relevant in determining intention. Applying the facts, the Tribunal found no evidence that the appellant gained by non-payment (indeed it lost interest) and there was no material to infer fraud, collusion, willful misstatement or suppression with intent to evade. Consequently the appellant's payment and intimation attracted Section 73(3) and the exclusion in Section 73(4) did not apply. [Paras 12, 19, 20]

The appellant is covered by Section 73(3); the show cause notice under Section 73(1) should not have been issued.

Penalty under Section 78 - penalty waiver under Section 80 - extended limitation and exclusion of voluntary payment by reason of fraud, collusion, willful misstatement or suppression under Section 73(4) - Whether penalties under Sections 77 and 78 were correctly imposed on the appellant. - HELD THAT: - The Tribunal observed that the elements necessary to attract penalties under Section 78 are identical to those which invoke Section 73(4). Having found no evidence of fraud, collusion, willful misstatement or suppression with intent to evade, the Tribunal held that the statutory prerequisites for imposing penalty under Section 78 were not satisfied. The Tribunal also noted that Section 80 (providing relief from penalties for reasonable cause) was available at the time the lis began (issue of the show cause notice) and that the adjudication must be governed by law as it stood when the dispute commenced. In these circumstances the imposition of penalties could not be sustained. [Paras 21, 22]

Penalties under Sections 77 and 78 were not sustainable and are set aside; the appellant remains entitled to consequential relief and to avail any relief under Section 80 as applicable when the lis began.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order, held that the appellant's payment and intimation fell under Section 73(3) (and not Section 73(4)), and quashed the penalties; consequential relief was granted to the appellant.

Refund under Section 11B - limitation for refund claims - classification of service - self-assessment - assessable value of free supply material - pre-deposit treated in stay order

Refund under Section 11B - limitation for refund claims - classification of service - self-assessment - Claim for refund of service tax paid under the head of 'Erection, Commissioning & Installation' is barred by limitation and therefore not admissible. - HELD THAT: - The appellant had self-assessed and paid service tax under the head of 'Erection, Commissioning & Installation'. Revenue subsequently issued proceedings seeking to reclassify the activity as 'Commercial and Industrial Construction Service' and to include the value of free-supply material in the assessable value. The original adjudicating authority set aside the demand on limitation grounds. Revenue's appeal before the Commissioner (Appeals) related only to the addition for free-supply material and not to the re-classification or adjustment of the appellant's original payment. The Tribunal ultimately set aside the demand in respect of free-supply material, leaving the appellant's original self-assessment under 'Erection, Commissioning & Installation' undisturbed. Because the refund claim relates to the original assessment under 'Erection, Commissioning & Installation', the limitation provisions applicable to refund claims under Section 11B govern admissibility. The refund application was filed after the period of limitation prescribed by Section 11B and is therefore not maintainable. [Paras 5, 6]

Refund claim in respect of the original assessment under 'Erection, Commissioning & Installation' is time-barred under Section 11B and is not admissible; appeal dismissed.

Final Conclusion: The appeal is dismissed; the refund claim is barred by limitation under Section 11B because the appellant's original self-assessment under 'Erection, Commissioning & Installation' remained undisturbed and the refund application was filed after the prescribed period.

Applicability of service tax on refundable security deposits - Reimbursements and determination of value of taxable service - Notional interest and inclusion in value of taxable supply - Service tax on termination charges as compensation/penalty - Eligibility of Cenvat credit on input services used in construction of immovable property - Eligibility of Cenvat credit on business promotion/event management services - Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006-ultra vires (as applied)

Applicability of service tax on refundable security deposits - Notional interest and inclusion in value of taxable supply - Refundable security deposits collected by the assessee are not liable to service tax as consideration for renting of immovable property services. - HELD THAT: - The Tribunal found the amounts in question were admitted refundable security deposits returned at the end of the lease without interest and not collected as consideration for any service. Relying on relevant precedents of the Tribunal and reasoning that security deposits serve as a separate purpose (security against default or damage) and lack nexus with the lease consideration, the deposits cannot form part of the gross value of renting services. Consequently, the service tax demand premised on inclusion of security deposits (or notional interest thereon) in taxable value was quashed. [Paras 16, 17, 18]

Demand of service tax on refundable security deposits set aside.

Reimbursements and determination of value of taxable service - Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006-ultra vires (as applied) - Amounts reimbursed by tenants towards diesel, water and electricity (cross charged on actuals) are not includible in the value of taxable service and are not liable to service tax. - HELD THAT: - The Tribunal applied the Supreme Court's ruling that struck down Rule 5(2) and held that reimbursements which are mere pass-through of actual costs with no profit element and no nexus as consideration for the taxable service cannot be taxed as part of the service value. The record showed reimbursements were on actuals apportioned by floor area/sub metering and that demand in respect of water and electricity had already been dropped in one impugned order which was not appealed, further supporting finality. Therefore the service tax demand on such reimbursements was quashed. [Paras 19, 20, 21]

Demand of service tax on reimbursements for diesel, water and electricity quashed.

Service tax on termination charges as compensation/penalty - Applicability of service tax on amounts characterised as liquidated damages - Termination charges collected for premature termination of lease are not consideration for renting service and are not liable to service tax. - HELD THAT: - The Tribunal held that termination charges were compensatory/penal in nature and not payment for provision of renting services. There was no service rendered corresponding to those receipts and taxing them as rent would amount to double taxation in view of adjustments already made against security deposits. The adjudicating authority's linkage of termination charges to rental consideration was rejected and the demand sustained on this ground was set aside. [Paras 22]

Service tax demand on termination charges quashed.

Eligibility of Cenvat credit on input services used in construction of immovable property - Eligibility of Cenvat credit on business promotion/event management services - Cenvat credit on input services used for construction of immovable property subsequently let out is admissible; Cenvat credit on event management/business promotion services is also admissible. - HELD THAT: - For the period under dispute (noting June 2007 to March 2011 and amendment to Rules w.e.f. 01.04.2011), the Tribunal followed binding precedents of High Courts and the CESTAT which held that inputs and input services used in construction that is ultimately used to provide an output service (renting) qualify for Cenvat credit. The Tribunal observed that construction services were integral to enable renting, and therefore credit could not be denied. Further, Rule 2(l) does not exclude event management or promotion services; such business promotion expenses incurred in the course of business were held eligible for Cenvat credit. [Paras 23, 24, 25]

Cenvat credit availed on construction-related input services and on event management/business promotion services allowed.

Final Conclusion: All four appeals allowed: demands of service tax on refundable security deposits, reimbursements for diesel/water/electricity and on termination charges quashed; Cenvat credit availed on input services used in construction of immovable property and on event management/business promotion services held eligible, with consequential relief to the appellant.

Penalty under rule 26 of the Central Excise Rules, 2002 - Area-based exemption - Liability of directors for wrongful claim of exemption - Precedential effect of a Tribunal decision

Penalty under rule 26 of the Central Excise Rules, 2002 - Area-based exemption - Liability of directors for wrongful claim of exemption - Precedential effect of a Tribunal decision - Validity of the penalty of Rs.5 lakhs imposed on the appellant (former director) under rule 26 in consequence of denial of area-based exemption to the company - HELD THAT: - The Tribunal recorded that the penalty was imposed on the appellant solely because the Company was found not entitled to claim the area-based exemption. The appellant relied upon an earlier decision of the Tribunal dated September 27, 2016 in which a set of appeals were allowed and the Department's contention that the Company was not entitled to claim the area-based exemption was rejected. The Department did not dispute the factual position that the earlier Tribunal decision covered the entitlement to the exemption. In view of the earlier Tribunal decision and the absence of any independent or disputed personal liability of the appellant distinct from the Company's entitlement, the penalty imposed on the appellant under rule 26 could not be sustained.

The penalty of Rs.5 lakhs imposed on the appellant under rule 26 is set aside; appeal allowed.

Final Conclusion: The impugned order insofar as it imposed penalty on the appellant is set aside and the appeal is allowed, relying on the earlier Tribunal decision that the company was entitled to the area-based exemption.

Maintainability of writ when statutory appellate remedy exists - entertaining writ under Article 226 of the Constitution - violation of principles of natural justice - pre-condition of pre-deposit for filing statutory appeal - relegation to the statutory appellate forum

Maintainability of writ when statutory appellate remedy exists - entertaining writ under Article 226 of the Constitution - Whether the High Court should entertain a writ under Article 226 when the statute provides a specific appeal to the Commissioner (Appeals). - HELD THAT: - The Court held that Section 85 of the Finance Act confers a specific statutory remedy by way of appeal to the Commissioner of Central Excise (Appeals) against orders of subordinate adjudicating authorities. In view of the existence of this statutory appellate mechanism, the High Court was not justified in entertaining the writ petition under Article 226. The availability of an efficacious statutory appeal is a sufficient ground for declining writ relief and for relegating the aggrieved party to the prescribed appellate forum. [Paras 3, 6]

The writ was not maintainable in the presence of the statutory appeal; the appellant must pursue the remedy under Section 85.

Violation of principles of natural justice - pre-condition of pre-deposit for filing statutory appeal - relegation to the statutory appellate forum - Whether alleged violation of principles of natural justice or the pre-deposit requirement for filing the statutory appeal justified interference by the High Court. - HELD THAT: - The Court noted the appellant's contention that principles of natural justice were violated and that the requirement of pre-deposit would cause hardship. The Single Judge had accepted the respondent's submission that there was no violation of natural justice and therefore the impugned order need not be interdicted. The High Court reiterated that an allegation of hardship because of a statutory pre-condition for filing an appeal does not provide a ground to bypass the statutory appellate procedure. When a statute prescribes a precondition for entertaining an appeal, the judicial forum should not circumvent that requirement absent exceptional circumstances; none were found on the record. [Paras 3, 5]

No interference was warranted on grounds of breach of natural justice or pre-deposit requirement; the appellant must proceed by filing the statutory appeal.

Final Conclusion: The judgment of the Single Judge was affirmed; the Writ Appeal is dismissed and the appellant is relegated to the statutory appellate remedy (subject to the usual rights to seek stay or comply with pre-deposit requirements).

Double jeopardy / autrefois acquit - Distinctness of offences - Offence under Section 138 of the Negotiable Instruments Act vis-a -vis offence under Section 420 IPC - Ingredients test for determining "same offence" - Forum shopping - Limitation - exclusion of period by Supreme Court's order in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION

Double jeopardy / autrefois acquit - Distinctness of offences - Offence under Section 138 of the Negotiable Instruments Act vis-a -vis offence under Section 420 IPC - Ingredients test for determining "same offence" - Forum shopping - Continuation of simultaneous prosecutions under Section 138 NI Act and Section 420 IPC on the same set of facts does not amount to double jeopardy or forum shopping. - HELD THAT: - The Court applied the established test that Article 20(2) / the rule against double jeopardy bars a second prosecution only if the subsequent prosecution is for the "same offence", which requires comparison of the ingredients of the offences and not merely the factual allegations. The judgments cited establish that offences under Section 138 NI Act and Section 420 IPC have different ingredients: Section 138 requires proof that a cheque was issued to discharge a legally enforceable debt, its dishonour and failure to make payment after notice, and does not require proof of dishonest intention at the time of issuance; Section 420 IPC requires proof of dishonest or fraudulent intention at the inception. Because the mens rea element and the legal ingredients differ, the two offences are distinct and separate even if there is factual overlap. Consequently, prosecution under both provisions arising from the same transaction is not barred by double jeopardy or by Section 26/Section 300 type bars, and does not per se amount to forum shopping. [Paras 10, 11, 13, 15, 16]

Proceedings under Section 138 NI Act and Section 420 IPC may be continued simultaneously; the contention of double jeopardy and forum shopping is rejected.

Limitation - exclusion of period by Supreme Court's order in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION - Whether the impugned complaints were barred by delay. - HELD THAT: - The Court observed that the complaints were filed within the period covered by the Supreme Court's order in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION, whereby the period from 15.03.2020 to 28.02.2022 is excluded for computation of time-limits under the provisos to Section 138. Having regard to that exclusion, the complaints cannot be treated as belated, and the trial Magistrate's order taking cognizance and issuing process does not warrant interference. [Paras 17, 18]

The complaints are not time-barred in view of the Supreme Court's exclusion order; the plea of belated filing is rejected.

Final Conclusion: Both petitions under Section 482 Cr.P.C. are dismissed; the trial court's order taking cognizance and issuing process in the Section 138 complaints is upheld.

Presumption under Section 139 of Negotiable Instruments Act - presumption under Section 118 of Negotiable Instruments Act - rebuttal of statutory presumption by surrounding circumstances - proof of existence of a legally enforceable debt for offence under Section 138 of Negotiable Instruments Act - onus to rebut presumption - standard of proof in criminal trial

Presumption under Section 139 of Negotiable Instruments Act - presumption under Section 118 of Negotiable Instruments Act - proof of existence of a legally enforceable debt for offence under Section 138 of Negotiable Instruments Act - rebuttal of statutory presumption by surrounding circumstances - standard of proof in criminal trial - Whether the prosecution proved the essential ingredient that the cheque was issued for discharge of a legally enforceable debt, and whether the statutory presumption under Sections 118 and 139 of the NI Act stood rebutted. - HELD THAT: - The complainant proved presentation and dishonour of the cheque and service of notice (paras 9). The accused admitted his signature on the cheque, which ordinarily attracts the presumptions under Sections 118 and 139 that the instrument was made for consideration and to discharge a legally enforceable debt (paras 10-11). However, the Court examined whether the complainant's evidence could be accepted as cogent proof of a debt. The complainant was the sole witness and did not plead or allege in the complaint or notice that the amount was advanced as a loan; his solitary statement in cross-examination that money was given as a loan lacked particulars such as time, date and place of transaction (para 12). The complainant also failed to prove financial capacity to have advanced the alleged amount or produce supporting documents (para 13). In view of these circumstances the Court found that the presumption of existence of a legally enforceable debt was rebutted by the materials on record (paras 14-17). The decision applied the principle that statutory presumptions have evidentiary value and may be displaced by surrounding facts and materials, bearing in mind the differing standards of proof applicable in criminal trials (paras 15-16). [Paras 13, 14, 15, 16, 17]

The presumption under Sections 118 and 139 was rebutted by the surrounding circumstances and materials on record; the essential ingredient of a legally enforceable debt was not proved and conviction under Section 138 could not be sustained.

Final Conclusion: The appeal is dismissed and the acquittal of the accused under Section 138 of the Negotiable Instruments Act is upheld.

Presentation of complaint and date of presentation for limitation - mistake of Court not to be imputed to complainant - appeal against acquittal - interference only if view taken by appellate court is not a possible view - prosecution's burden to prove legally enforceable debt and existence of probable defence - presumption under Section 139 of the Negotiable Instruments Act, 1881

Presentation of complaint and date of presentation for limitation - mistake of Court not to be imputed to complainant - Whether the complaint was barred by limitation on account of presentation and representation defects - HELD THAT: - The Court held that the date of presentation of the complaint alone governs limitation and not a subsequent representation. The absence of initials or seal on the endorsement of presentation and return by the wrong Court is a procedural mistake of the Court which cannot be visited upon the complainant. Relying on earlier authority, the Court concluded that the lower Appellate Court's finding that the complaint was time-barred was legally erroneous and not a possible view. [Paras 12]

The finding that the complaint is barred by limitation is unsustainable and cannot be upheld.

Appeal against acquittal - interference only if view taken by appellate court is not a possible view - prosecution's burden to prove legally enforceable debt and existence of probable defence - presumption under Section 139 of the Negotiable Instruments Act, 1881 - Whether the acquittal on merits should be disturbed despite the limitation finding being incorrect - HELD THAT: - On re-appreciation of evidence, the Appellate Court found material discrepancies in the complainant's case - inconsistent statements about how long the parties were known to each other, contradictions about the circumstances of the cheque, evidence of earlier stop-payment instructions, and absence of independent proof of a legally enforceable debt. These factors furnished a plausible or probable defence for the accused. Applying the limited scope of interference in appeals against acquittal, this Court held that the Appellate Court's conclusion on the merits was a possible view based on the evidence and could not be displaced merely because another view (conviction) was open. [Paras 13]

The acquittal on merits is upheld; interference is not warranted.

Final Conclusion: The challenge to the acquittal on the ground of limitation succeeds but the conviction cannot be restored because the lower Appellate Court's acquittal on merits - founded on discrepancies in the prosecution's case and the existence of a probable defence - is a possible view; the appeal is dismissed.