TaxTMI Updates e-Newsletter
Jul 26,2025

ISSUES:

Whether the proper officer is mandatorily required to pass a final, reasoned order under Section 129(3) of the CGST Act, 2017 after issuing a notice specifying tax and penalty payable, even if the tax and penalty are paid by the person charged within the stipulated time.Whether the deeming provision under Section 129(5) of the CGST Act, 2017, which states that proceedings shall be deemed concluded upon payment of the amounts, dispenses with the requirement of passing a formal adjudicatory order under Section 129(3).Whether payment of tax and penalty via Form GST DRC-03 can be treated as voluntary payment, thereby waiving the right to contest the demand and obviating the need for passing a reasoned order.Whether failure to pass a reasoned order under Section 129(3) after issuance of notice and receipt of objections violates principles of natural justice and the constitutional mandate under Article 265 of the Constitution of India.Whether the appellant's right to appeal under Section 107 of the CGST Act, 2017 is preserved in the absence of a formal order under Section 129(3).

RULINGS / HOLDINGS:

On the requirement of passing a final order under Section 129(3): The Court held that the proper officer is "duty-bound to pass a formal order in Form GST MOV-09" after issuing a notice specifying tax and penalty payable, regardless of payment, especially where objections have been filed, to enable the taxpayer to exercise the statutory right of appeal.On the effect of Section 129(5): The Court ruled that the deeming fiction in Section 129(5) that proceedings are concluded upon payment "does not absolve the responsibility of the proper officer to pass an order concluding the proceedings," and cannot be interpreted as waiver or abandonment of the right to challenge the levy.On the nature of payment via Form GST DRC-03: The Court found that payment made under business exigencies or protest cannot be treated as voluntary payment; the absence of a mechanism to record protest in Form GST DRC-03 should not prejudice the taxpayer, especially when objections are on record.On violation of natural justice and Article 265: The Court held that failure to pass a reasoned order in response to a show cause notice violates principles of natural justice and Article 265, which mandates that no tax or penalty shall be levied or collected except by authority of law.On the right to appeal under Section 107: The Court emphasized that the right to appeal is predicated on the existence of a formal adjudicatory order; absence of such order renders the right of appeal illusory and deprives the taxpayer of statutory remedies.

RATIONALE:

The Court applied the statutory framework of Section 129 of the CGST Act, 2017, which mandates that after issuing a notice specifying tax and penalty payable under subsection (3), the proper officer shall "thereafter, pass an order," and subsection (4) which requires an opportunity of hearing before determination.Rule 142 of the CGST Rules, 2017, particularly sub-rules (3) and (5), reinforce the procedural requirement that upon payment of tax and penalty, the proper officer shall issue an order in Form GST DRC-05 concluding the proceedings and upload a summary in Form GST DRC-07.The Court relied on Circular No.41/15/2018-GST dated 13.04.2018 issued by the CBIC, which provides binding departmental instructions that a speaking order in Form GST MOV-09 must be passed after objections are filed, even if payment is made, to ensure uniformity and safeguard taxpayer rights.The Court distinguished the deeming provision under Section 129(5) as signifying conclusion of prosecution proceedings but not waiver of adjudication or appeal rights; it held that "there can be no acquiescence in tax" and that payment under protest or compulsion does not constitute waiver or abandonment of rights.Judicial precedents on waiver, acquiescence, and abandonment were examined, emphasizing that waiver or abandonment must be clear, voluntary, and with full knowledge; mere payment or oral withdrawal of objections without written evidence does not satisfy this standard.The Court emphasized the constitutional mandate under Article 265 that tax or penalty can only be levied or collected by authority of law, which requires passing of a reasoned order to justify the demand.Principles of natural justice and fairness require that quasi-judicial authorities record cogent, clear, and succinct reasons for decisions affecting rights, as supported by Supreme Court jurisprudence emphasizing transparency, accountability, and judicial review.The Court rejected the respondents' reliance on strict literal interpretation of Section 129(5) to avoid adjudication, holding that procedural safeguards and taxpayer rights cannot be circumvented by mechanical application of deeming provisions.

The Supreme Court, through Hon'ble Justices Pankaj Mithal and Prasanna B. Varale, condoned a 30-day delay in filing the petitions (I.A. No. 157639/2025 allowed). The core issue was the classification of flavoured milk for GST purposes: whether it falls under Item 403 taxable at 5% or Item 9930 taxable at 12%. The Court noted that this issue has been previously decided, with the Writ Court holding flavoured milk is classifiable under Item 04030000 and taxable at 5%. Furthermore, a special leave petition (SLP(C)(D) No. 17602 of 2025) challenging this classification was dismissed by the Court on 09.05.2025. Consequently, the present petitions were dismissed, and all pending applications disposed of.

The Supreme Court, with Justices J. B. Pardiwala and R. Mahadevan presiding, after hearing counsel for both parties, granted condonation of delay but found "no good ground to entertain these Special Leave Petitions." Consequently, the petitions were dismissed, and any pending applications were disposed of.

Issues: Whether the assessment order passed under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 could be sustained when the show-cause notice was uploaded on the GST portal after the petitioner's registration had been cancelled, and the petitioner had not been served through an alternative mode.

Analysis: After cancellation of registration, the petitioner was not required to keep checking the GST portal. In such circumstances, service of the show-cause notice had to be effected by an alternative mode to ensure effective notice and an opportunity of hearing. The impugned order was passed without such effective service, resulting in breach of natural justice.

Conclusion: The impugned order was quashed and set aside. The department was left free to issue a proper notice and proceed in accordance with law.

Final Conclusion: The writ petition succeeded on the ground of violation of natural justice due to defective service of notice, and the assessment order did not survive.

Ratio Decidendi: Where registration under the GST law stands cancelled, mere upload of a notice on the portal does not constitute effective service, and any order passed without proper notice and hearing is vitiated for breach of natural justice.

Issues: Whether the orders imposing penalty and dismissing the appeal could be sustained when no opportunity of hearing had been granted.

Analysis: The order imposing penalty did not reflect any opportunity of hearing. In the absence of such hearing, the consequential appellate order also could not stand. The challenge to the quantum of penalty was not finally adjudicated on merits; the matter was required to be reconsidered after affording hearing.

Conclusion: The impugned orders were quashed and the matter was remanded for fresh decision after giving an opportunity of hearing.

Final Conclusion: The writ petition succeeded to the extent that the matter was sent back to the authority for a fresh order in accordance with law.

Ratio Decidendi: An order passed without affording opportunity of hearing cannot be sustained, and the matter must be remanded for fresh consideration after compliance with natural justice.

Issues: Whether the revisional order was sustainable when, on the date of its passing, the officer had not been authorized as revisional authority and the order did not record reasons for exercise of suo motu revision.

Analysis: The authority purported to act under the revisional power after the appellate order, but the notification authorizing the concerned officers as revisional authority was issued later and was made effective from a prior date. On the date of the impugned order, the officer who passed it was not shown to be the competent authority. The order also disclosed no cogent reasons for invoking suo motu revision. A revisional order must reflect primary satisfaction and reasons, since recording reasons is part of natural justice and is necessary for judicial scrutiny.

Conclusion: The revisional order was unsustainable and was set aside. The revision proceedings were directed to be dropped, while leaving it open to the competent authority to proceed afresh in accordance with law after giving opportunity of hearing.

ISSUES:

Whether a fresh GST registration can be denied on the ground of non-payment of a demand raised in an Order-in-Original that is under appeal.Whether a petitioner who has filed an appeal under Section 107 of the CGST Act and paid the requisite pre-deposit can be treated as a defaulter during the pendency of the appeal.The legal effect of Section 107(7) of the Central Goods and Service Tax Act, 2017 on recovery proceedings and issuance of No Objection Certificate (NOC) for fresh GST registration.

RULINGS / HOLDINGS:

The Court held that since the Order-in-Original dated 28th December, 2023 is under challenge before the appellate authority and the requisite pre-deposit has been paid, the decision cannot be deemed final and the petitioner cannot be treated as a defaulter during the pendency of the appeal.Emphasizing Section 107(7) of the CGST Act, the Court held that "once an appeal has been filed by the Petitioner and the mandatory pre-deposit has been paid, the impugned Order-in-Original shall stand automatically stayed."Accordingly, the Department cannot withhold the No Objection Certificate (NOC) for fresh GST registration merely on the ground that the demand under challenge has not been paid, and must process the fresh registration application and issue the NOC.

RATIONALE:

The Court applied the statutory framework under the Central Goods and Service Tax Act, 2017, particularly Section 107 governing appeals to the Appellate Authority.Section 107(7) provides that "Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed," thereby automatically staying the impugned order upon payment of the pre-deposit.This interpretation prevents the petitioner from being treated as a defaulter during the pendency of the appeal, ensuring that enforcement actions such as withholding NOC for fresh registration do not undermine the appellate remedy.No dissent or doctrinal shift was indicated in the judgment; the Court reaffirmed the established statutory provisions and their effect on stay of recovery proceedings.

Issues: Whether the impugned assessment order was liable to be quashed on terms, with liberty to the authority to pass fresh orders after receipt of the taxpayer's reply to the show-cause notice.

Analysis: The petitioner had not replied to the notice issued in DRC 01, and the demand had been confirmed in the impugned order for the relevant tax period. The Court nevertheless found that the order could be interfered with on terms and directed that the impugned order be treated as an addendum to the show-cause notice, enabling the petitioner to file a reply. Upon compliance with the stipulated deposit of 25% of the disputed tax in cash within the prescribed time, the authority was to reconsider the matter and pass fresh orders on merits after hearing the petitioner. If the conditions were not complied with, the authority was free to proceed as if the writ petition had been dismissed.

Conclusion: The impugned order was quashed conditionally, with the matter left open for fresh adjudication upon compliance with the directions.

Issues: Whether penalty under Section 122(1A) of the Central Goods and Services Tax Act, 2017 could be applied to transactions alleged to have occurred prior to its commencement, and whether interim protection against coercive action was warranted pending further hearing.

Analysis: The question of the commencement and applicability of the penalty provision was noticed, along with the pending challenge concerning the underlying order and the reliance placed on a similar decision of another High Court. The matter was not finally adjudicated at this stage; instead, notice was issued, a counter affidavit was called for, and interim protection was considered appropriate.

Outcome: No final ruling was rendered on the applicability of Section 122(1A) of the Central Goods and Services Tax Act, 2017. Notice was issued and interim restraint on coercive measures was granted pending further consideration.

Issues: Whether the GST registration could be cancelled with retrospective effect from 1 July 2017 notwithstanding the delayed clarification and the absence of reasons for such retrospective cancellation.

Analysis: The application for cancellation had been made first, and the clarification was sought much beyond the time contemplated under Rule 21A(2A) of the Central Goods and Services Tax Rules, 2017. The order cancelling registration with retrospective effect did not disclose any reason justifying retrospective operation, and the ground in the show cause notice that returns had not been filed for six months could not logically sustain cancellation from a period after the taxpayer had already sought cancellation. The basis for retrospective cancellation was therefore unsustainable.

Conclusion: The retrospective cancellation was not upheld, and the effective date of cancellation was confined to 28 March 2022, the date of the cancellation application, in favour of the assessee.

Final Conclusion: The impugned cancellation order stood modified so that the GST registration was cancelled only from the date of the cancellation application, and the petition was disposed of on that basis.

Ratio Decidendi: Retrospective cancellation of GST registration must be supported by reasons and a legally sustainable basis, and it cannot be imposed where the statutory process was delayed and the stated ground is inconsistent with the taxpayer's prior cancellation request.

Issues: Whether the assessment order and consequential summary order could be sustained when they were passed before the time granted for filing reply had expired and without affording a personal hearing.

Analysis: The petitioner was granted time to submit a reply to the show cause notice, but the impugned assessment order was passed before that time expired. The record also showed that no opportunity of personal hearing was provided before confirming the proposals in the show cause notice. These circumstances disclosed a breach of procedural fairness and denial of a proper opportunity to defend the case.

Conclusion: The impugned orders were set aside and the matter was remanded to the respondent for fresh consideration after receiving the petitioner's reply and granting a clear notice and personal hearing.

ISSUES:

Whether the impugned Order-in-Original passed under the GST Act without granting opportunity of hearing and cross-examination violates principles of natural justice.Whether the petitioner is entitled to quash the show-cause notice issued under Section 74(1) of the CGST Act, 2017 and related provisions on the ground of lack of inquiry or harassment.Whether the petitioner has an alternative efficacious remedy under the GST Act to challenge the impugned order.Whether the petitioner was entitled to cross-examine departmental officers and other persons named in the application for cross-examination.Whether the adjudicating authority's refusal to allow cross-examination of departmental officers and non-appearance of the co-noticee for cross-examination justify interference with the impugned order.Whether the delay and failure of the petitioner or his advocate to appear at hearings justifies passing the impugned order without further adjournment.

RULINGS / HOLDINGS:

The impugned Order-in-Original was not passed in violation of principles of natural justice as sufficient opportunity of hearing was provided, and the petitioner failed to avail the opportunity to cross-examine witnesses despite repeated chances. The Court held that "the respondent-authorities shall not cause any harassment" and the adjudication process must be completed within twelve weeks.The show-cause notice issued under Section 74(1) of the CGST Act, 2017 was not quashed as it was based on an investigation and the petitioner had alternative remedy by way of appeal under Section 107 of the GST Act. The Court dismissed the petition without expressing any opinion on merits.The petitioner has an alternative efficacious remedy under Section 107 of the GST Act to challenge the impugned order, and exercising jurisdiction under Article 227 of the Constitution is not appropriate in absence of exceptions such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute.Cross-examination of departmental officers who issued summons or arrest memos is not required and refusal to allow such cross-examination does not violate natural justice. The only person qualifying for cross-examination was a co-noticee, Shri Vijay Kumar Jani, who failed to appear despite multiple summons and hearing notices.The refusal to grant cross-examination on the basis that the petitioner did not substantiate the request and the co-noticee's non-appearance renders the claim for cross-examination "invalid and baseless," and the adjudicating authority's order cannot be interfered with.The petitioner's failure to appear for hearings on two occasions and seek adjournments without sufficient cause justified the passing of the impugned order without further adjournment.

RATIONALE:

The Court applied the statutory framework under the Central Goods and Services Tax Act, 2017, particularly Sections 74(1), 50, 70, 75(4), and 107, and the corresponding provisions under the GGST and IGST Acts, as well as Rules 142(1A) of the CGST Rules, 2017.The Court relied on precedent from the Hon'ble Apex Court holding that an alternative statutory remedy under Section 107 precludes interference by writ jurisdiction except in exceptional cases involving breach of fundamental rights, natural justice violation, excess of jurisdiction, or vires challenge.The Court referred to binding precedent that the right to cross-examination is not absolute and may be denied on sound logic, particularly when documents are produced under Section 139 of the Evidence Act and witnesses producing such documents are not subject to cross-examination.The Court followed the principle that disclosure of documents and opportunity to rebut them constitutes substantial compliance with natural justice, citing the Apex Court's decision in Telstar Travels Pvt. Ltd. and others.The Court emphasized that non-appearance of the petitioner or co-noticee for cross-examination after repeated notices and opportunities negates any claim of denial of natural justice.The Court recognized the need to balance the petitioner's right to fair hearing with the necessity to avoid undue delay and harassment in the adjudication process.

Issues: Whether the cancellation of GST registration should be revoked and the registration restored, subject to conditions for filing returns and clearing tax dues.

Analysis: The cancellation was based on non-filing of GST returns for six months. The reasons given for the default, namely ill-health and financial constraints, were accepted as genuine. The relief was moulded by directing restoration of registration and requiring filing of pending returns, payment of tax dues, interest, and belated filing fee within the stipulated time. The order also protected the revenue by restricting use of unutilized Input Tax Credit until scrutiny and approval by the competent authority.

Conclusion: The cancellation of GST registration was revoked and the registration directed to be restored, subject to compliance with the specified conditions.

ISSUES:

Whether service of show cause notices and assessment orders by uploading on the GST Portal without tender or sending by RPAD constitutes valid service under the Goods and Services Tax Act, 2017.Whether non-participation in adjudication proceedings due to lack of knowledge of initiated proceedings affects the validity of the assessment order.Whether a remand with conditions, including payment of a portion of disputed taxes, is appropriate in cases where procedural lapses in service occur.The scope and procedure for providing an opportunity of hearing after setting aside an impugned assessment order.

RULINGS / HOLDINGS:

The Court held that service of show cause notices and assessment orders solely by uploading on the GST Portal, without tender or sending by RPAD, does not constitute valid service, resulting in the petitioner being unaware of the proceedings and unable to participate.Due to the lack of valid service and consequent non-participation, the impugned order dated 12-4-2024 was set aside.The Court directed that the petitioner shall deposit 25% of the disputed taxes as a condition precedent to further adjudication, reflecting the principle applied in the precedent judgment cited.Upon compliance with the payment condition, the impugned order shall be treated as a show cause notice, and the petitioner shall be afforded a reasonable opportunity to file objections within four weeks, which the assessing authority must consider before passing fresh orders.Failure to comply with the payment or filing objections within the stipulated periods shall result in restoration of the impugned order.

RATIONALE:

The Court applied the statutory provisions under the Goods and Services Tax Act, 2017, specifically Section 61 relating to scrutiny of returns and procedural requirements for service of notices.The Court relied on its recent precedent emphasizing the necessity of valid service and the principle of audi alteram partem, ensuring the petitioner's right to be heard before passing an adverse order.The conditional remand and requirement of payment of 25% of disputed taxes reflect a doctrinal approach balancing procedural fairness with revenue protection.The Court's directions establish a procedural framework for verification of payments, adjustment of amounts already paid, and timelines for compliance and adjudication, ensuring clarity and finality in the reassessment process.

ISSUES:

Whether the delay in filing an appeal against cancellation of GST registration can be condoned despite the appeal being time-barred.Whether the appellate authority is justified in rejecting an appeal solely on the ground of limitation without considering the merits.Whether a writ petition can be entertained for condonation of delay in filing an appeal under the relevant GST provisions.The scope of judicial discretion in condoning delay in appeals related to GST registration cancellation.

RULINGS / HOLDINGS:

The delay in filing the appeal was condoned considering the petitioner's medical condition and circumstances causing the delay, directing the appellate authority to decide the appeal on merits without delving into limitation.The appellate authority's rejection of the appeal solely on the ground of limitation was not deemed unjustified per se, but judicial precedent allows condonation of delay to ensure the right to a hearing is not deprived.It was held that "the powers to hear the appeal in terms of Section 107 of the Act would not be subject to filing of an appeal within the time prescribed," and a writ petition can be filed for condonation of delay.The appeal must be decided expeditiously with a fair hearing to both parties, preferably within three months from the date of the order.

RATIONALE:

The Court relied on the legal framework under the GST Act, particularly Section 107, which governs appeals against cancellation of registration, and the principle that denial of the right to appeal due to delay could leave the aggrieved party remedy-less.Reference was made to a prior judgment emphasizing that "the provisions of the said Act, 2017 are for the purpose of providing relief to the businessman in an appropriate matter," highlighting the need to balance finality with availability of efficacious remedies.The Court applied the doctrine established in the Supreme Court judgment in M/s Tecnimont Pvt. Ltd. v. State of Punjab, supporting judicial discretion to condone delay in appropriate cases.The decision reflects a doctrinal approach that limitation should not be an absolute bar where substantial justice and fairness require condonation, especially when supported by medical evidence and genuine hardship.

ISSUES:

Whether the Learned Tribunal was justified in law to delete the addition under Section 69C of the Income Tax Act, 1961, made on account of bogus purchases from unverifiable sources based on credible investigation'Whether the Learned Tribunal erred in deciding the application of Section 69C without considering the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals) on merit'Whether the Learned Tribunal was correct in not appreciating that the primary onus of proving the actual source, genuineness of transactions, and creditworthiness of the supplier was on the assessee, who allegedly failed to discharge this onus?

RULINGS / HOLDINGS:

The Tribunal correctly held that Section 69C of the Act will not be attracted where the assessee has "duly disclosed the total purchases in their books of accounts" and the payments were "from and out of the books of accounts with explained sources," thereby negating the addition under Section 69C.The Tribunal was justified in focusing solely on the application of Section 69C, as the substantial questions of law raised pertained only to this provision, and it was not required to revisit the Assessing Officer's or CIT(A)'s findings on merit.The Tribunal rightly found that the assessee discharged the onus by producing cogent evidence such as purchase and stock registers, RG-23A and RG-23C registers, and demonstrating that the purchases were genuine raw materials consumed in production, and that the goods purchased were sold with recorded sales proceeds, thus negating the claim of bogus purchases.

RATIONALE:

The Court applied the legal framework under Section 69C of the Income Tax Act, 1961, which provides that if an assessee incurs expenditure and fails to satisfactorily explain the source, such expenditure may be deemed income.The Tribunal's interpretation emphasized that Section 69C is attracted only when the source of expenditure is not satisfactorily explained; here, the assessee's explanation and documentary evidence were found satisfactory.The Tribunal considered credible investigation reports, including non-compliance with notices under Section 133(6) to the alleged supplier, but found such facts immaterial since the assessee was not informed and the transactions were several years old, with a reasonable possibility of change in address.The Tribunal relied on documentary evidence such as purchase registers, stock registers, and production records verified by auditors to establish the genuineness of transactions, aligning with established principles that the burden of proof lies on the assessee to explain the source and genuineness, which was discharged here.No dissent or doctrinal shift was indicated; the Court affirmed the Tribunal's approach as consistent with statutory provisions and precedents regarding the application of Section 69C.

ISSUES:

Whether delay in filing Form 10-IC for exercising option under Section 115BAA of the Income Tax Act, 1961 can be condoned under Section 119(2)(b) of the Act.Whether Form 10-IC filed for Assessment Year 2021-2022 can be treated as filed for Assessment Year 2020-2021 to enable the assessee to avail concessional tax rate under Section 115BAA.Whether the Circular No. 6/2022 issued by the CBDT exercising power under Section 119(2)(b) can be relied upon to condone delay in filing Form 10-IC beyond the prescribed due date.Whether the decision of the Supreme Court in Principal Commissioner of Income Tax versus Wipro Limited, regarding mandatory filing of option under Section 10B(8) of the Act, applies pari materia to the filing of Form 10-IC under Section 115BAA(5) of the Act.What is the scope of power under Section 119(2)(b) of the Act in condoning delay and providing relief in cases of genuine hardship.

RULINGS / HOLDINGS:

The Court held that the delay in filing Form 10-IC can be condoned under Section 119(2)(b) of the Act where genuine hardship is established and the conditions laid down in Circular No. 6/2022 are satisfied, emphasizing that the power under Section 119(2)(b) is meant for redressal of grievances and hardships.The Court directed that Form 10-IC filed for Assessment Year 2021-2022 may be treated as if filed for Assessment Year 2020-2021 to enable the petitioner to avail the benefit of reduced tax rate under Section 115BAA, subject to fresh application and consideration within twelve weeks.The Court recognized Circular No. 6/2022 as a valid exercise of power under Section 119(2)(b) to condone delay in filing Form 10-IC till 30.06.2022 or three months from the end of the month of issuance of the circular, whichever is later, for Assessment Year 2020-2021.The Court distinguished the Supreme Court's decision in Wipro Limited, holding that the strict mandatory filing requirement under Section 10B(8) does not apply pari materia to Section 115BAA(5), noting that Section 115BAA grants relief to domestic companies to pay tax at a reduced rate upon exercising option in prescribed manner.The Court emphasized that the power under Section 119(2)(b) should be exercised liberally and equitably to avoid hypertechnical denials of relief, citing precedent that "the phrase 'genuine hardship' should have been construed liberally."

RATIONALE:

The Court applied the statutory framework of Section 115BAA of the Income Tax Act, 1961, which mandates that the option for concessional tax rate must be exercised in the prescribed manner by filing Form 10-IC on or before the due date specified under Section 139(1).The Court considered Rule 21AE of the Income Tax Rules prescribing the manner of filing Form 10-IC and acknowledged the CBDT's Circular No. 6/2022 as a valid exercise of power under Section 119(2)(b) to condone delay due to genuine hardship.The Court analyzed the Supreme Court's ruling in Wipro Limited concerning the mandatory nature of filing option under Section 10B(8) and distinguished its applicability, noting the difference in the nature of the provisions and reliefs under Sections 10B and 115BAA.The Court relied on precedent from the Madras High Court and Gujarat High Court emphasizing a liberal and equitable approach in construing "genuine hardship" and the exercise of power under Section 119(2)(b), rejecting hypertechnical and pedantic approaches.The Court recognized that the petitioner's failure was due to bona fide human error by the Chartered Accountant and that the petitioner had otherwise complied with filing the return on time and opting for the concessional tax rate, justifying relief.The Court ordered that the petitioner be permitted to file a fresh Form 10-IC and make a fresh application for condonation of delay, directing the authority to consider the same within twelve weeks, thus molding the relief consistent with the statutory scheme and CBDT circular.

ISSUES:

Whether the amount received as advance against the proposed sale of shares can be treated as unexplained cash credit under section 68 of the Income Tax Act, 1961, when the transaction was disputed and not completed during the relevant assessment year.Whether the identity, creditworthiness, and genuineness of the payer and transaction were established for the purpose of section 68.Whether interest under sections 234A, 234B, 234C, and 234D of the Act was rightly imposed.Whether penalty proceedings under section 271(1)(c) of the Act were rightly initiated.

RULINGS / HOLDINGS:

On the addition under section 68, the Court held that "once the transaction of sale of shares is in dispute and the full amount of consideration ... was neither received nor the dispute was settled in the year under appeal, it could not be hold that the transaction of sale of shares was completed." The amount received as advance was shown as a "current liability" and not as income, and the addition under section 68 was deleted as the identity, creditworthiness, and genuineness of the transaction were not doubted.The Court found no error in the assessee's non-disclosure of income/loss from the sale of shares in the return of income for the year under appeal due to the ongoing dispute and non-finalization of the transaction.Regarding interest under sections 234A/B/C/D, the Court directed the Assessing Officer to charge interest "in accordance with law," indicating that the levy was consequential and subject to proper application.The initiation of penalty proceedings under section 271(1)(c) was held to be premature and therefore dismissed at this stage.

RATIONALE:

The Court applied the statutory framework of section 68 of the Income Tax Act, which requires that for an addition to be made, one of the three ingredients-identity of the payer, genuineness of the transaction, or creditworthiness of the payer-must be unsatisfactory. Here, none of these were doubted by the Revenue.The Court relied on the factual matrix showing that the transaction was incomplete due to disputes and legal proceedings, and the amount received was treated as an advance liability in the financial statements, consistent with accounting principles.The Court noted that other shareholders similarly treated advances without declaring income, and assessments were completed without raising objections, supporting the assessee's treatment.The ruling reflects a strict adherence to the statutory requirements of section 68 and rejects additions based solely on the beneficial ownership of the shares by a third party, absent doubts on identity, creditworthiness, or genuineness.No dissent or doctrinal shift was indicated; the decision follows established principles regarding unexplained credits and evidentiary requirements under section 68.

ISSUES:

Whether depreciation on POS machines is allowable at 40% or 25%.Whether depreciation on SAP License is allowable at 40% or 25%.Whether bad debts claimed under section 36(1)(vii) are allowable when income from such debts is offered in the same financial year or earlier years, in light of section 36(2) of the Income Tax Act.Whether bad debts claimed are allowable when subsidy claims are rejected due to violation of government norms.Whether evidence is required to establish that debts have actually become bad for claiming deduction under section 36(1)(vii).

RULINGS / HOLDINGS:

Depreciation on POS machines is allowable at the higher rate of 40% (or 60% as per precedent), as POS machines qualify as computer equipment or peripherals for depreciation purposes; the lower rate of 25% is not applicable.Depreciation on SAP License, being computer software, is allowable at 40%, consistent with settled judicial precedents; the disallowance of excess depreciation on this ground is not justified.Bad debts written off under section 36(1)(vii) are allowable if the amount of such debt has been taken into account in computing income in the previous year in which the debt is written off or an earlier previous year, per section 36(2); the timing of income recognition (same year or earlier years) does not bar deduction if the debt was included in income.Bad debts claimed on subsidy amounts rejected due to violation of government norms are allowable as deduction if the subsidy was credited as income in earlier years and subsequently found unrecoverable; the disallowance on the basis of subsidy rejection is not sustainable.There is no statutory requirement under section 36(2) to furnish evidence that debts have actually become bad to claim deduction; mere compliance with income recognition and write-off provisions suffices.

RATIONALE:

The Court applied the Income Tax Act, 1961, specifically sections 36(1)(vii) and 36(2), and relied upon authoritative judicial precedents including the decision of the Hon'ble Delhi High Court in Pr. CIT vs. Connaught Plaza Restaurant Pvt Ltd, which held POS machines qualify for higher depreciation rates as computer equipment.The Court emphasized the mercantile system of accounting followed by the assessee, under which subsidies are credited as income on an accrual basis, and bad debts are allowable when such income is not realized, consistent with the statutory language of section 36(2).The Court rejected the Revenue's contention that bad debts claimed in the same year as income recognition are disallowable, interpreting section 36(2) as permitting deduction provided the debt was taken into account in computing income in the year of write-off or earlier.The Court noted no requirement under section 36(2) for proof that debts have "actually become bad" beyond accounting treatment, thus rejecting the Revenue's demand for additional evidence.No dissent or doctrinal shift was indicated; the Court's reasoning aligns with established legal principles and precedent.

ISSUES:

Whether the levy of penalty under section 271DA of the Income-tax Act, 1961 is justified without recording the satisfaction of the Assessing Officer in the quantum assessment order regarding violation of section 269ST of the Act.Whether the requirement of recording satisfaction is a mandatory condition precedent for initiating penalty proceedings under section 271DA of the Act.Whether penalty under section 271DA can be levied automatically irrespective of any additions in the quantum assessment or even in absence of assessment proceedings.Whether the burden lies on the assessee to prove "good and sufficient reasons" for non-levy of penalty under section 271DA of the Act.

RULINGS / HOLDINGS:

The court held that the non-recording of satisfaction by the Assessing Officer in the quantum assessment order is fatal to the levy of penalty under section 271DA of the Act, thus penalty cannot be levied without such satisfaction being recorded.It was ruled that unlike section 271(1)(c) of the Act, section 271DA does not expressly dispense with the need for recording satisfaction; however, by analogy to Supreme Court precedent, recording of satisfaction is a mandatory prerequisite for penalty imposition.The court rejected the submission that penalty under section 271DA is "objective, automatic and mechanical in nature" and can be levied without assessment proceedings or recording of satisfaction.The court directed cancellation of penalty under section 271DA for the relevant assessment years due to absence of recorded satisfaction by the Assessing Officer, thereby allowing the appeals.

RATIONALE:

The court relied on the legal framework established by the Income-tax Act, 1961, specifically sections 269ST and 271DA, and the proviso to section 271DA which requires the assessee to prove "good and sufficient reasons" for non-levy of penalty.The court applied the Supreme Court's decision in CIT vs Jai Laxmi Rice Mills, which held that penalty cannot be levied without recording satisfaction by the Assessing Officer, even though that decision concerned section 271E and section 269T, the court found the analogy applicable to section 271DA and section 269ST violations.The court rejected the Revenue's argument that penalty under section 271DA is automatic and does not require assessment proceedings or recorded satisfaction, emphasizing the necessity of procedural safeguards before penalty imposition.No dissent or doctrinal shift was noted; the judgment adhered to established precedent requiring satisfaction recording as a condition precedent to penalty levy under analogous provisions.

ISSUES:

Whether maturity proceeds received on surrender of a life insurance policy issued before 01.04.2012 are exempt under section 10(10D) of the Income Tax Act, 1961 despite the premium payable exceeding 20% of the actual capital sum assured.Whether an upward adjustment made by the Central Processing Centre (CPC) under section 143(1) based on TDS reflected in Form 26AS is valid when it involves legal interpretation and factual verification.Whether the CPC's adjustment without providing reasons or opportunity of hearing violates principles of natural justice.Whether wrongful deduction of TDS under section 194DA by the insurance company on exempt maturity proceeds affects the taxability of such income.Whether the provisions of section 80C(5) apply to the surrendered insurance policy in question.Whether delay in filing the appeal against the intimation under section 143(1) can be condoned.

RULINGS / HOLDINGS:

The maturity proceeds received on surrender of the life insurance policy issued on 31.03.2011 are exempt under section 10(10D) of the Act because the restrictive provisions of section 10(10D)(c) do not apply to surrendered policies; the policy was surrendered after more than five years, and the premium payable exceeding 20% is irrelevant in such surrender cases.The CPC exceeded its jurisdiction in making an upward adjustment under section 143(1) based solely on TDS information in Form 26AS, as such adjustments involving "legal interpretation and factual clarification" fall beyond the scope of prima facie adjustments permissible under sub-clauses (0) to (vi) of section 143(1)(a) and require scrutiny assessment under section 143(3).The adjustment made by CPC without providing detailed reasons or opportunity of hearing violates the principles of natural justice and is procedurally defective.Wrongful deduction of TDS by the insurance company under section 194DA on exempt maturity proceeds is a mistake by the deductor and cannot be used to penalize the assessee; Form 26AS is not conclusive proof of taxable income.The provisions of section 80C(5) do not apply as the policy was surrendered after more than two years from commencement, and thus no premium is deemed as income under this section.The delay in filing the appeal against the intimation under section 143(1) is condoned on grounds found genuine and acceptable.Accordingly, the addition of Rs. 7,41,718/- made by CPC under section 143(1) is held to be erroneous, arbitrary, and liable to be deleted; the appeal is allowed.

RATIONALE:

The court applied the statutory provisions of section 10(10D) of the Income Tax Act, 1961, emphasizing the distinction between policies issued before and after 01.04.2012 and the applicability of premium thresholds only to policies not surrendered.The court relied on the principle that CPC's powers under section 143(1) are limited to prima facie adjustments and cannot extend to issues requiring legal interpretation or factual adjudication, which must be addressed through scrutiny assessments under section 143(3) or reassessment under section 147.Precedents were cited, including decisions of coordinate benches and the High Court, reinforcing that additions made beyond the scope of the appeal or without proper jurisdiction are invalid and that procedural fairness demands reasoned orders and opportunity to be heard.The court recognized that TDS deduction errors by third parties (insurance companies) do not translate into taxable income for the assessee and that Form 26AS is only a reconciliation tool, not determinative of taxability.The constitutional principle under Article 265, that no tax shall be levied or collected except by authority of law, was invoked to underscore the illegality of taxing exempt income.The court noted the absence of any rectification or regular assessment order under section 143(3), confirming that the CPC's adjustment was unilateral and beyond its jurisdiction.The decision reflects a doctrinal affirmation that surrender of policies and related maturity proceeds must be assessed in light of the specific statutory provisions applicable to such cases, avoiding mechanical application of premium percentage tests designed for other circumstances.

ISSUES:

Validity of notice issued under Section 148A(b) of the Income Tax Act, 1961, specifically whether the minimum statutory period of 7 clear days for compliance was provided.Whether an ex-parte order passed under Section 147 read with Section 144 of the Income Tax Act, 1961, without considering the assessee's reply, is sustainable.Applicability of exemption under Section 10(23C)(iiiad) of the Income Tax Act, 1961, to surplus/profit of a charitable institution running an educational institution.Whether the Assessing Officer (AO) was justified in making additions on estimated business income and bank interest without proper verification and consideration of documents.

RULINGS / HOLDINGS:

Notice issued under Section 148A(b) of the Act dated 20.03.2022, requiring compliance by 26.03.2022, did not provide the mandatory "clear 7 days" for filing a reply excluding the date of issuance and the date of compliance sought, and is therefore held to be "invalid and void ab initio" and quashed.The ex-parte order passed under Section 147 read with Section 144 without considering the assessee's reply and without affording a reasonable opportunity of hearing is not sustainable in law.The surplus/profit from the educational activities of the charitable institution is exempt under Section 10(23C)(iiiad) of the Income Tax Act, 1961.The Assessing Officer's additions on estimated business income and bank interest without proper enquiry and verification of documents furnished at the appellate stage are not justified; the matter requires fresh assessment after verification and opportunity to the assessee.

RATIONALE:

The Court applied the provisions of Section 148A(b) of the Income Tax Act, 1961, which mandates that the assessee must be given a notice to show cause with a time period "not less than seven days" excluding the date of issuance and the date on which compliance is sought, to ensure adherence to principles of natural justice.Judicial precedents from the jurisdictional High Courts and ITAT were relied upon, including rulings that interpret "not less than seven days" as requiring "clear seven days" excluding terminal days, citing the Apex Court's decision in Pioneer Motors (Private) Ltd. vs. Municipal Council, Nagercoil.The Court recognized that failure to provide the mandatory period violates the principles of natural justice and renders the notice and consequent proceedings null and void.The Court referred to the amendment by the Finance (No.2) Act, 2024, effective from 01.10.2024, which emphasizes procedural safeguards in reassessment proceedings under Sections 147 and 148A.The exemption under Section 10(23C)(iiiad) was acknowledged as applicable to the charitable institution's educational activities, supported by audit reports and documentary evidence submitted during appellate proceedings.On the issue of additions without enquiry, the Court emphasized the requirement of verifying documents and allowing the assessee to explain before making additions, consistent with principles of fair assessment and natural justice.Since the notice under Section 148A(b) was quashed, all subsequent proceedings based on such notice were held to be non est in the eyes of law, rendering other grounds academic.

ISSUES:

Whether an assessment framed under section 143(3) of the Income Tax Act, 1961 by an Assessing Officer (A.O.) different from the one who issued the notice under section 143(2), without a valid order of transfer under section 127, is valid.Whether absence of a mandatory order of transfer under section 127 of the Act renders the assessment order void ab initio.Whether the assessee is precluded from challenging the jurisdiction of the Assessing Officer if the objection was not raised within 30 days of receipt of notice under section 142(1) or 143(2), as per section 124(3)(a) of the Act.What constitutes adequate and valid notice under principles of natural justice in the context of income tax proceedings.Whether subsequent proceedings following an assessment order without valid jurisdiction are non-est in law.

RULINGS / HOLDINGS:

The assessment framed by an Assessing Officer under section 143(3) without a valid order of transfer under section 127 from the competent authority is held to be "without jurisdiction, invalid and bad in law" and is therefore quashed.Absence of the mandatory order of transfer under section 127 "goes to the root of the jurisdiction of assessment" and such an order cannot be waived; thus, any consequential assessment order is a nullity.The assessee is not precluded from raising jurisdictional objections before an appellate forum even if not raised before subordinate authorities, following the principle in National Thermal Power Company Ltd. Ltd. Vs. CIT (1998), thereby allowing the jurisdictional issue to be raised at any stage.The judgment in DCIT (Exemption) & Ors. Vs. Kalinga Institute of Industrial Technology (2023) is distinguished on facts, as the present case involves ambiguity in issuance of notices and lack of opportunity to the assessee, rather than mere non-compliance.A valid notice must be "precise and unambiguous," containing the "time, place and nature of hearing," the "legal authority under which hearing has to be held," and the "specific charges, grounds and proposed actions" to be met, as mandated by principles of natural justice and Supreme Court precedents.Any ambiguity or confusion in the issuance of notice that prevents the assessee from defending himself renders the notice and subsequent proceedings arbitrary and bad in law.Once the assessment is quashed for want of valid jurisdiction, all subsequent proceedings become "non-est in the eyes of law."

RATIONALE:

The Court applied statutory provisions of the Income Tax Act, 1961, specifically sections 127 (transfer of cases), 143(2) (notice for assessment), 143(3) (assessment order), 142(1) (notice for information), and 124(3)(a) (jurisdictional objections).Precedents relied upon include the Supreme Court decision in National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) affirming the right to raise legal issues affecting jurisdiction at any stage, and Union of India Vs. Rajeev Bansal (2024) emphasizing that "an order passed without jurisdiction is nullity" and statutory powers must be exercised by the authority prescribed by law.The Court distinguished the Supreme Court's ruling in DCIT (Exemption) & Ors. Vs. Kalinga Institute of Industrial Technology (2023) on the ground that it deals with waiver of jurisdictional objections by participation, whereas the present case involves fundamental ambiguity in jurisdiction and notice issuance.The Court underscored the fundamental principle of natural justice requiring clear, specific, and unambiguous notice to enable the assessee to prepare a defense, citing Supreme Court rulings in Umanath Pandey v. State of UP and Biecco Lawrie Ltd v. State of West Bengal.The Court recognized that failure to issue a valid order of transfer under section 127 is a jurisdictional defect that cannot be cured and invalidates all subsequent actions, thus quashing the assessment order and rendering further proceedings invalid.

ISSUES:

Whether an assessment framed by an Assessing Officer different from the one who issued the notice under section 148 of the Income Tax Act, 1961, without a valid order of transfer under section 127, is valid.Whether the absence of a valid order of transfer under section 127 of the Act renders the assessment order void ab initio and without jurisdiction.Whether the assessee's failure to challenge jurisdiction within 30 days of receipt of notice under section 142(1) precludes raising jurisdictional objections at later stages.Whether ambiguity in issuance of notices by different Assessing Officers, without clarity on jurisdiction, violates principles of natural justice and renders proceedings invalid.The scope and effect of statutory requirements relating to jurisdiction and transfer of cases under the Income Tax Act, including the impact of Supreme Court precedents on jurisdictional challenges.

RULINGS / HOLDINGS:

The assessment framed by an Assessing Officer who did not issue the notice under section 148 and without a valid order of transfer under section 127 is held to be "without inherent valid jurisdiction" and "void ab initio."Absence of an order of transfer under section 127 by the competent authority is a fundamental jurisdictional defect that cannot be waived or cured by subsequent proceedings.The principle established by the Supreme Court in DCIT (Exemption) & Ors. Vs. Kalinga Institute of Industrial Technology (2023) regarding the assessee's participation and failure to challenge jurisdiction within 30 days does not preclude raising jurisdictional objections before appellate authorities, especially where jurisdiction goes to the root of the matter.Ambiguity in the issuance of notices by different Assessing Officers without clear jurisdictional authority violates the principle of natural justice, as the assessee is denied a proper opportunity to prepare and defend, rendering such notices and subsequent proceedings "arbitrary" and "bad in law."Following the binding precedent of the Supreme Court in National Thermal Power Company Ltd. Vs. CIT and Union of India Vs. Rajeev Bansal (2024), any order passed without jurisdiction is a "nullity," and any consequential order or action is invalid and without jurisdiction.

RATIONALE:

The Court applied statutory provisions of the Income Tax Act, 1961, specifically sections 127 (transfer of cases), 142(1) (notice to assessee), 143(2), 143(3) (assessment orders), 147 (reassessment), and 148 (notice for reassessment), emphasizing the mandatory nature of jurisdictional requirements.The Court relied on Supreme Court precedents including DCIT (Exemption) & Ors. Vs. Kalinga Institute of Industrial Technology (2023), National Thermal Power Company Ltd. Vs. CIT (1998), and Union of India Vs. Rajeev Bansal (2024) to interpret jurisdictional principles and the non-waiver of jurisdictional defects.The Court distinguished between procedural compliance and fundamental jurisdictional defects, holding that participation in proceedings cannot be construed as waiver of jurisdictional objections that go to the root of the matter.The Court underscored the principle of natural justice requiring clear, unambiguous, and specific notices to enable the assessee to prepare an effective defense, citing Supreme Court rulings on adequacy and clarity of notice (Umanath Pandey v. State of UP; Biecco Lawrie Ltd v. State of West Bengal).The Court reaffirmed that jurisdictional defects, such as absence of a valid order of transfer under section 127, render all subsequent proceedings and assessment orders invalid and non-est in the eyes of law.

ISSUES:

Whether the issuance of notice under section 148 of the Income-tax Act, 1961 was valid and not illegal or void-ab-initio due to lack of jurisdiction or failure to obtain approval under section 151.Whether the assessment orders passed without issuing notice under section 143(2) or without affording adequate opportunity of hearing violate the principles of natural justice.Whether additions made on account of unexplained cash credits under section 68 and disallowance of interest paid on unsecured loans are justified, considering the evidence furnished by the assessee.Whether the rejection of books of accounts under section 145(3) and consequent estimation of income is appropriate in the absence of proper documentary evidence.Whether additions made on account of alleged bogus purchases and application of gross profit rate are justified.Whether the levy of interest under sections 234A, 234B, 234C, and 234D and initiation of penalty proceedings under sections 271(1)(C), 271B, 271(F), and 272A(1)(c) are valid.Whether the appellate authority erred in not remanding matters to the Assessing Officer for further inquiry regarding unsecured loans and related transactions.Whether disallowance of depreciation claimed on additions to fixed assets is justified given the circumstances of forceful acquisition of business premises and loss of records.

RULINGS / HOLDINGS:

The court confirmed the validity of the jurisdiction exercised by the Assessing Officer (AO) in issuing notices under section 148, rejecting claims that such notices were "wholly without jurisdiction and null and void" despite absence of specific designation of the approving authority under section 151.The court held that assessment orders passed without notice under section 143(2) and without affording "reasonable and adequate opportunity of hearing" do not comply with the principle of natural justice, but found no sufficient ground to invalidate the orders on this basis alone where procedural opportunities were provided.Additions under section 68 relating to unexplained cash credits and disallowance of interest on unsecured loans were upheld where the assessee failed to provide satisfactory evidence such as confirmations from loan parties, PAN details, or adequate documentary proof, notwithstanding claims of repayments and TDS compliance.The rejection of books of accounts under section 145(3) was upheld due to failure of the assessee to produce evidence regarding transportation and genuineness of purchases, leading to application of estimated gross profit rate for income computation.The court accepted that additions on account of alleged bogus purchases were not justified separately when gross profit rate was applied on total sales, thereby negating the need for separate addition.The imposition of interest under sections 234A, 234B, 234C, and 234D and initiation of penalty proceedings under relevant sections were upheld, dismissing the appellant's grounds challenging these levies.The appellate authority did not err in declining to remand the matter for further inquiry on unsecured loans, holding that the powers of the appellate tribunal are co-terminus with those of the AO and that adequate opportunity was provided to the assessee to produce evidence.The disallowance of depreciation on additions to fixed assets was upheld due to lack of documentary evidence, despite the appellant's claim of hardship caused by forceful acquisition of business premises and loss of records.

RATIONALE:

The court applied provisions of the Income-tax Act, 1961, particularly sections 143(2), 145(3), 147, 148, 151, 68, 40(a)(ia), 234A-D, and penalty provisions under sections 271(1)(C), 271B, 271F, and 272A(1)(c).The decision reflects adherence to procedural requirements regarding issuance of notices and the principle that jurisdictional approvals under section 151 must be obtained but need not always be explicitly stated, provided the authority is valid.The court emphasized the requirement of "reasonable and adequate opportunity of hearing" in assessment proceedings, consistent with principles of natural justice, but balanced this against the assessee's failure to substantively engage or produce evidence.The rejection of books under section 145(3) was justified on the basis of the assessee's failure to discharge the burden of proof regarding genuineness of transactions, supported by non-cooperation in producing witnesses or documents.The court recognized that once books are rejected and income estimated, separate additions for the same items (e.g., bogus purchases) are not warranted, reflecting a doctrinal approach to avoid double addition.The appellate tribunal's powers are held to be co-terminus with those of the AO, limiting its ability to independently investigate beyond the record and evidence before the AO, thereby justifying refusal to remand for further inquiry.The court noted the assessee's repeated non-cooperation and failure to furnish evidence or attend hearings, leading to dismissal of appeals ex parte, reinforcing procedural discipline in tax proceedings.

ISSUES:

Whether the assessment order passed under section 143(3) read with section 144B of the Income Tax Act, 1961, allowing deduction for "cost of improvement" without making proper inquiries or verification, is erroneous and prejudicial to the interest of Revenue under section 263 of the Act.Whether the Principal Commissioner of Income Tax (PCIT) can invoke revision jurisdiction under section 263 on an issue (cost of improvement) beyond the scope of the limited scrutiny conducted by the Assessing Officer (AO) focused on capital gains deduction claims.Whether invocation of revision proceedings under section 263 is barred or precluded by the assessee having filed an application under the Direct Tax Vivad Se Vishwas Scheme (DTVSVS), 2024.Whether the AO fulfilled the statutory obligation to conduct necessary inquiries and verification before allowing the deduction claimed as cost of improvement for the purpose of computing capital gains.Whether the PCIT's order partly setting aside the assessment order for limited reassessment on the issue of cost of improvement is justified.

RULINGS / HOLDINGS:

The assessment order allowing deduction claimed as "cost of improvement" without making proper inquiries or verification is held to be "erroneous and prejudicial to the interest of Revenue" within the meaning of Explanation 2 to section 263 of the Act, as the AO failed to make inquiries which should have been made and allowed relief without inquiring into the claim.The PCIT is empowered to invoke revision jurisdiction under section 263 on the issue of cost of improvement even though the case was selected for limited scrutiny on capital gains deduction claims, as cost of improvement is integrally connected to the computation of capital gains and falls within the scope of scrutiny.The filing of an application under the Direct Tax Vivad Se Vishwas Scheme, 2024, does not bar or preclude the PCIT from invoking section 263 jurisdiction on a different subject matter (cost of improvement) which is not the subject of the appeal or settlement under the scheme.The AO did not discharge the statutory obligation to demand complete documentary evidence or conduct a thorough examination of the nature, genuineness, and capital nature of the cost of improvement claimed, and accepted the claim without necessary inquiries, rendering the assessment order liable to revision.The PCIT's order partly setting aside the assessment order for the limited purpose of examining the cost of improvement and directing the AO to pass a fresh assessment order after due inquiry is upheld as valid and justified.

RATIONALE:

The Court applied the statutory framework of section 263 of the Income Tax Act, 1961, particularly Explanation 2 effective from 01.06.2015, which clarifies that an assessment order is "erroneous in so far as it is prejudicial to the interests of the revenue" if it is passed "without making inquiries or verification which should have been made" or "allowing any relief without inquiring into the claim".Judicial precedents were relied upon, including decisions holding that revision under section 263 is valid where the AO's order is passed without application of mind or proper inquiry, and that failure to make inquiry satisfies the requirement of the order being erroneous and prejudicial to revenue.The Court rejected the contention that the PCIT cannot travel beyond the scope of limited scrutiny since the cost of improvement forms part of the capital gains computation, which was the subject of scrutiny.The Court distinguished the subject matter of the appeal and settlement under the Vivad Se Vishwas Scheme (disallowance under section 54B) from the issue under section 263 (cost of improvement), holding that the scheme does not cover the latter and thus does not bar revision proceedings.The Court emphasized the AO's failure to seek documentary proof such as invoices, work orders, or payment evidence, and failure to verify bank statements or financial records, as a breach of the statutory duty to verify claims before allowing deductions.

ISSUES:

Whether an institution or fund with objects that are partly religious and partly charitable can obtain approval under clause (iii) of the first proviso to Section 80G(5) of the Income-tax Act, 1961.Whether expenditure on religious activities exceeding or within 5% of total income affects eligibility for approval under Section 80G(5)(iii).Interpretation and applicability of sub-section (5B) of Section 80G in relation to Section 80G(5) and Explanation 3 regarding religious versus charitable objects.Whether the presence of religious objects in the trust deed automatically disqualifies the trust from approval under Section 80G(5)(iii).Whether the matter should be remitted for fresh consideration on the question of religious expenditure threshold.

RULINGS / HOLDINGS:

The Court held that Section 80G(5) applies only to institutions or funds established in India for a "Charitable purpose only" and "even not a single object can be religious in nature" as per Explanation 3 to Section 80G.Sub-section (5B) of Section 80G clarifies that an institution or fund incurring religious expenditure not exceeding 5% of its total income shall be deemed to be an institution or fund to which Section 80G applies; however, it does not permit religious objects in the trust deed.The Court rejected the argument that sub-section (5B) overrides or negates the main provisions of Section 80G(5) and Explanation 3, emphasizing that the exception cannot nullify the main enactment.The Court found that the assessee-trust's religious expenditure was below 5% of total income for the relevant years, thus meeting the threshold prescribed under Section 80G(5B).The Court directed the tax authority to examine whether the religious expenditure is within the 5% limit and if so, to grant approval under Section 80G(5)(iii), notwithstanding the presence of some religious objects in the trust deed.The appeal was allowed for statistical purposes with directions for fresh consideration of approval under Section 80G(5)(iii) based on expenditure limits.

RATIONALE:

The Court applied the statutory framework of Section 80G(5), its Explanation 3, and sub-section (5B) of Section 80G of the Income-tax Act, 1961.Explanation 3 to Section 80G(5) excludes trusts whose objects are "wholly or substantially of a religious nature" from approval under Section 80G(5).Sub-section (5B) was interpreted as a clarificatory provision allowing trusts to incur religious expenditure up to 5% of total income without losing eligibility, but it does not permit religious objects in the trust deed.The Court relied on precedent decisions holding that trusts with some religious objects but religious expenditure within 5% are eligible for Section 80G approval.The Court referred to the principle that an exception (Section 80G(5B)) cannot be interpreted to nullify the main enactment (Section 80G(5)) as upheld by the Supreme Court in Director of Secondary Education v. Pushpendra Kumar.The Court emphasized the need to balance the statutory prohibition on religious objects with the practical allowance for incidental religious expenditure within prescribed limits.The Court noted that the assessee-trust's main activities were charitable and that religious expenditure was incidental and within the statutory threshold, justifying approval under Section 80G(5)(iii).

ISSUES:

Whether reopening of assessment under section 147 read with section 144 of the Income Tax Act, 1961 was valid.Whether the Assessing Officer had jurisdiction to refer the draft assessment order to the Dispute Resolution Panel under section 144C(1) of the Act when no return of income was filed and no transfer pricing order was passed.Whether addition under section 69 of the Act of Rs. 5,17,67,531/- as unexplained investment was justified without proper inquiry, application of mind, and opportunity to the non-resident assessee.Whether the best judgment assessment under section 144 of the Act was correctly made.Whether the entire purchase consideration of immovable property could be added back without considering the assessee's submissions and without giving reasons in the assessment order.Whether additional evidence filed after assessment proceedings can be admitted under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.

RULINGS / HOLDINGS:

Reopening of assessment under section 147 read with section 144 was upheld as the Assessing Officer acted on information received through AIR and issued notice under section 148; no specific ruling on invalidity of reopening was made as other grounds were disposed of.The Assessing Officer's reference of draft assessment to the Dispute Resolution Panel under section 144C(1) was held to be without jurisdiction and void-ab-initio since the assessee had not filed any return of income and was not an "eligible assessee" under section 144C(15), and no transfer pricing order was passed under section 92CA(3).The addition under section 69 of the Act of Rs. 5,17,67,531/- was deleted as the assessee satisfactorily demonstrated that the source of investment was from outside India and through housing loan, supported by documentary evidence including bank statements, loan sanction letters, and tax returns of related persons; the Assessing Officer's rejection of evidence was found unsustainable.The best judgment assessment under section 144 was not upheld as the addition under section 69 was deleted, rendering the basis of best judgment assessment unsustainable.The addition of the entire purchase consideration without considering the assessee's submissions and without giving reasons was held to be erroneous and disallowed.The Tribunal admitted additional evidence filed by the assessee under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, as the documents were relevant, went to the root of the matter, and were not in possession of the assessee during reassessment proceedings due to foreign law requirements.

RATIONALE:

The assessment was reopened under section 147 based on information from AIR indicating unexplained investment, which is a recognized ground for reopening.Jurisdictional provisions under section 144C require the assessee to have filed a return and be an "eligible assessee" as defined in section 144C(15); absence of transfer pricing order under section 92CA(3) and non-filing of return excluded the assessee from DRP proceedings, rendering the reference void-ab-initio.Additions under section 69 require that unexplained investments be established after proper inquiry and opportunity; here, the assessee provided detailed documentary evidence showing that funds originated from foreign sources and housing loan, consistent with non-resident status and supported by bank statements and tax returns of related persons.The Tribunal relied on verification of payments matching builder's receipts and cross-checked with information obtained under section 133(6), applying the principle that addition cannot be sustained if the source of investment is satisfactorily explained.The admission of additional evidence was justified as per Rule 29, considering that the documents were not available during reassessment due to compliance with foreign laws on record retention and were essential for fair adjudication.The Tribunal declined to decide on other grounds as the deletion of addition under section 69 rendered them academic.

ISSUES:

Whether the order passed under Section 263 of the Income-Tax Act, 1961 was validly invoked in setting aside the original assessment orders.Whether depreciation on intangible assets (rights under BOT road construction projects) is allowable under Section 32(1)(ii) of the Income-Tax Act.Whether the CBDT Circular No. 09/2014 dated 23.04.2014 has retrospective effect and applies to assessment years prior to 2014-15.Whether the negative grant amounting to Rs. 595 crore payable to the National Highway Authority of India (NHAI) forms part of the cost of the asset for depreciation purposes.Whether the issuance of notice under Section 143(2) and consequential assessments under Sections 143(3)/263 were valid when the assessment order was not set aside under Section 263.Whether penalty proceedings under Section 271(1)(c) can be sustained when no direction under Section 263 was issued for penalty.Whether interest under Sections 234B and 234C of the Income-Tax Act was correctly charged in the reassessment orders.

RULINGS / HOLDINGS:

The order under Section 263 was invalid as the Principal Commissioner of Income Tax (PCIT) did not hold that the assessment order was "erroneous in so far as it is prejudicial to the interest of revenue," a mandatory condition for invoking Section 263. Invocation of Section 263 is impermissible where two views are possible, and the AO's view was supported by a Special Bench judgment.Depreciation on the intangible asset consisting of rights under the BOT road construction project is allowable under Section 32(1)(ii) read with Explanation 3(b), as the assessee is the "deemed owner" of the intangible asset and entitled to claim depreciation @ 25% on written down value.CBDT Circular No. 09/2014 dated 23.04.2014 does not have retrospective effect and applies only from the date of issuance (Assessment Year 2014-15 onwards); it does not apply to earlier years.The negative grant of Rs. 595 crore payable to NHAI is an ascertained liability accruing on completion of the project and forms part of the cost of the asset under the mercantile system of accounting; therefore, it cannot be excluded from the asset cost for depreciation purposes.Notwithstanding the PCIT's directions, the issue of notice under Section 143(2) and consequential assessments under Sections 143(3)/263 without setting aside the assessment order under Section 263 is invalid and without jurisdiction.Penalty under Section 271(1)(c) cannot be sustained where there was no direction under Section 263 for penalty imposition.Interest charged under Sections 234B and 234C in the reassessment orders was not upheld in the impugned orders.

RATIONALE:

The legal framework for invoking Section 263 requires that the PCIT must hold the assessment order to be "erroneous in so far as it is prejudicial to the interest of revenue." The Supreme Court and High Court precedents clarify that where two views are possible, Section 263 cannot be invoked. The AO's view, supported by a Special Bench judgment (ACIT vs. M/s Progressive Constructions Ltd.), was a possible and sustainable view.Section 32(1)(ii) of the Income-Tax Act allows depreciation on intangible assets owned by the assessee. The Special Bench of the ITAT Hyderabad and other coordinate benches have held that rights under BOT contracts constitute intangible assets eligible for depreciation. The Supreme Court's interpretation in Techno Shares and Stocks Ltd. supports this position.CBDT Circular No. 09/2014 clarifies amortization of BOT project costs but is prospective in nature, applicable from its date of issue; it does not override settled law or apply retrospectively to prior assessment years.The mercantile system of accounting requires recognition of liabilities when they accrue, not when payment is made. The negative grant payable to NHAI is an ascertained liability under the concession agreement and thus forms part of the cost of the asset, consistent with accounting principles and judicial precedent (Ratnagiri Gas and Power Pvt. Ltd. vs DCIT).Issuance of notices and assessments beyond the scope of directions under Section 263 violates principles of natural justice and statutory mandate, rendering such actions without jurisdiction.Penalty proceedings require explicit direction under Section 263; absence of such direction invalidates penalty notices.The court relied on various judicial precedents including CIT (Central) vs Max India Ltd., CIT-LTU vs Power Finance Corporation Ltd., and decisions of coordinate benches to uphold these principles and reject retrospective application of circulars or invalid invocation of Section 263.

ISSUES:

Whether the omission of the phrase "or in the year immediately following the expiry thereof" from clause (c) of subsection (3) of section 11 of the Income-tax Act, 1961 amounts to a substantive amendment and thus cannot be applied retrospectively.Whether unspent accumulated funds set apart under section 11(2) of the Act for a previous year can be utilized beyond the prescribed five-year period, specifically including the year immediately following the expiry of such period.Whether the addition of unspent accumulated funds as income under section 11(3) of the Act in the assessment year following the expiry of the five-year accumulation period is justified when the funds were utilized within the extended period.Whether a prima facie adjustment under section 143(1) of the Act can be made on a debatable legal issue regarding retrospective application of amendments to section 11(3).

RULINGS / HOLDINGS:

The omission of the phrase "or in the year immediately following the expiry thereof" from clause (c) of subsection (3) of section 11 is a substantive amendment and "cannot be applied retrospectively."Accumulated funds under section 11(2) of the Act for a financial year can be applied "within five years plus the year immediately following the expiry period," allowing utilization beyond the strict five-year term.The addition of unspent accumulated funds as income under section 11(3) is not justified where the funds were utilized before the end of the extended period, i.e., before 31.03.2023 in the case of accumulation during FY 2016-17.A debatable legal issue about retrospective application of the amendment to section 11(3) cannot be considered as a prima facie adjustment under section 143(1) of the Act.

RATIONALE:

The Court relied on the statutory framework of sections 11(2) and 11(3) of the Income-tax Act, 1961, which originally allowed accumulation of income for charitable or religious purposes for a period "not exceeding five years" and permitted utilization "or in the year immediately following the expiry thereof."The Finance Act, 2022 amended section 11(3) by omitting the phrase "or in the year immediately following the expiry thereof" effective from 1st April 2023, making the amendment prospective and applicable only to assessment years commencing after that date.The Court applied the principle of statutory interpretation as explained by the Supreme Court, emphasizing the presumption against retrospective operation of substantive amendments unless expressly stated, citing the principle of "lex prospicit non respicit: law looks forward not backward."The Court considered prior Tribunal decisions holding that accumulated income can be utilized within five years plus one additional year, and that the amendment removing the additional year applies prospectively only.The Court noted that the amendment imposes a burden and is not conferring a benefit; hence, the presumption against retrospective application applies.The Court remanded the matter for fresh consideration where necessary, emphasizing the need for the Assessing Officer to consider utilization within the extended period before making additions under section 11(3).No dissenting or concurring opinions were recorded.

The Supreme Court, with Hon'ble Justices Surya Kant and Joymalya Bagchi presiding, heard an appeal against the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai's order dated 18.11.2024. After considering submissions from the Additional Solicitor General of India for the appellant and counsel for the respondent, the Court found "no ground to interfere with the impugned order." Consequently, the appeal was dismissed, delay was condoned, and all pending interlocutory applications were disposed of.

ISSUES:

Whether off-road tyres imported without BIS marking are exempt from BIS clearance under the Pneumatic Tyre and Tubes for Automatic Vehicle (Quality Control Order), 2009 and related exemption memorandum.Whether the classification of imported tyres under a particular HSN code is correct and its impact on applicable customs duty and import authorization requirements.Whether goods can be detained/seized for an extended period pending investigation when test reports and clarifications are available.The relevance of predominant or primary use of tyres in determining their regulatory classification and applicability of exemption.Whether the importer can be penalized for wrongful use of tyres by end-users when the tyres are imported for exempted off-road purposes.The procedural requirements for issuance of demurrage waiver certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulation, 2009.

RULINGS / HOLDINGS:

The imported off-road tyres are exempt from BIS clearance as per the exemption memorandum dated 30th January, 2002, since they are "meant for mining purpose" and do not require BIS marking under the Control Order.The classification of the tyres under HSN Code 40118000 (used on construction, mining or industrial handling vehicles) attracting 10% BCD is appropriate given their predominant use, notwithstanding potential incidental use on commercial vehicles.Prolonged detention of goods for over eight months without further testing or investigation is unjustified; the authorities must conclude the investigation expeditiously and either release the goods or issue a show cause notice within two weeks of conclusion.The predominant or primary use of tyres is the decisive factor in regulatory classification, as held in the Supreme Court precedent: "The use of the heavy mover on the road may only be ancillary or incidental to the main use" and emphasis is on "principal or dominant use".The importer cannot be penalized for wrongful use of tyres by end-users under the Motor Vehicles Act, 1988, as such misuse does not alter the nature of the imported goods or justify withholding them.The petitioner is entitled to apply for provisional release of goods if show cause notice is issued or goods are not released post-investigation, subject to undertaking to pay highest duty and penalty and restricting use to off-road purposes.The appropriate authority should act in accordance with the direction issued by the Deputy Commissioner of Customs for issuance of demurrage waiver certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Area Regulation, 2009.

RATIONALE:

The Court applied the Pneumatic Tyre and Tubes for Automatic Vehicle (Quality Control Order), 2009 and the exemption memorandum issued by CBEC dated 30th January, 2002, which exempts certain off-road tyres from BIS clearance requirements.The Supreme Court precedent in Goodyear India Ltd. Vs. Union of India was relied upon to determine the relevance of predominant use over incidental use in classifying tyres under customs and excise law, emphasizing that "the striking ingredient" is that a motor vehicle must be "adapted for the use upon roads".The Customs Act, 1962 provisions relating to seizure under Section 110(1) and confiscation under Section 111 were considered, with the Court stressing that seizure cannot be prolonged indefinitely without concluding investigation.The Court recognized the principle that importers cannot be penalized for end-user misuse, consistent with the Motor Vehicles Act, 1988, and that such misuse does not justify withholding goods.The Court endorsed the procedural framework under the Handling of Cargo in Customs Area Regulation, 2009, particularly Regulation 6(1)(l) for demurrage waiver certificates, directing authorities to follow the Deputy Commissioner's guidance.No doctrinal shift or dissent was noted; the judgment follows established legal principles and statutory interpretation regarding classification, exemption, and procedural fairness in customs detention and release of goods.

ISSUES:

Whether anti-dumping duty is payable on aluminum alloy wheels imported from Taiwan when the goods are alleged to be of Chinese origin or routed through China.Whether mis-declaration of country of origin justifies invocation of extended period of limitation under Sub-section (4) of Section 28 of the Customs Act, 1962 for demand of anti-dumping duty.Whether provisional anti-dumping duty imposed for six months can be demanded for the period after expiry and before definitive imposition.Whether the assessment of imported goods cleared after payment of appropriate duty can be reopened without valid reassessment under Section 17(4) of the Customs Act, 1962.Whether penalty under Sections 112(a) and 114AA of the Customs Act, 1962 is imposable in absence of proven mis-declaration or evasion.Whether confiscation of goods is tenable in law in the circumstances of the case.

RULINGS / HOLDINGS:

The goods under consideration, aluminum alloy wheels imported from Taiwan, did not attract anti-dumping duty as there was no evidence that they were manufactured or supplied from China or routed through China; the allegation of mis-declaration of country of origin was not established.The extended period of limitation under Sub-section (4) of Section 28 of the Customs Act, 1962 cannot be invoked without evidence of mis-declaration; here, all certificates of origin were valid and accepted at the time of import and assessment.The provisional anti-dumping duty imposed for six months ended on 11.10.2014 and no demand can be made for the period between expiry of provisional duty and definitive imposition on 21.05.2015; no proceedings can be taken post expiry of provisional period.The assessments of all bills of entry, including the one dated 05.02.2017, were completed and no reassessment or speaking order under Section 17(4) of the Customs Act was passed within the prescribed time; hence, assessments became final and cannot be reopened.Penalties under Sections 112(a) and 114AA of the Customs Act, 1962 were not sustainable due to lack of evidence of evasion or mis-declaration by the appellants.Confiscation of goods was untenable in law as the goods were cleared after proper assessment and payment of applicable duties.

RATIONALE:

The Court applied the statutory provisions of the Customs Act, 1962, including Section 108 (recording of statements), Section 17 (self-assessment and reassessment of duty), Section 28 (limitation for demand of duty), and penalty provisions under Sections 112(a) and 114AA.The Court relied on documentary evidence including certificates of origin, commercial invoices, and correspondence from the Consulate General of India, Hong Kong, which confirmed that except one company (Futek Alloy Company Limited), no Taiwanese company imported aluminum alloy wheels from China, and the appellant did not import from that company.The Court noted that suspicion of forgery of one certificate of origin was unsubstantiated and related to a different importer not involved in the appeals, emphasizing the settled legal principle that "suspicion cannot take place of proof."The Court distinguished the present facts from precedent cases cited by Revenue, including the Supreme Court ruling in Commissioner Vs. Bhoormull, finding them inapplicable.The Court emphasized that proper officer's acceptance of certificates of origin and final assessment without reassessment within statutory time barred reopening of the assessments.There was no doctrinal shift or dissent; the decision reaffirmed established principles on limitation, self-assessment, and evidentiary standards for invoking anti-dumping duties and penalties.

Issues: Whether the imported raw petroleum coke was covered by the licence and permissible for import despite the sulphur-content objection raised by the Revenue.

Analysis: The licence issued by DGFT permitted import of raw petroleum coke for the stated end use, and DGFT was the competent authority to clarify the scope of that permission. DGFT had clarified that the respondent was entitled to use the raw petroleum coke as feedstock for conversion into calcined petroleum coke and that the sulphur content standard was not directly relatable to the respondent at the import stage. In the light of that clarification, the imported goods were treated as falling within the permitted licence conditions.

Conclusion: The imported goods were held to be covered by the licence and the Revenue's objection was rejected.

Ratio Decidendi: Where the licensing authority clarifies the scope of an import licence, that clarification governs the permitted use of the goods and the import cannot be denied on a basis inconsistent with that clarification.

ISSUES:

Whether the Director of Revenue Intelligence (DRI) officers are "proper officers" authorized to issue show cause notices under the Customs Act, 1962 in export-related investigations.Whether penalty under Section 114(iii) of the Customs Act, 1962 is leviable on a Custom House Agent (CHA) and its employee for acts or omissions that render goods liable to confiscation under Section 113.Whether failure by a CHA to obtain explicit authorization from exporters or to exercise due diligence in verifying exporter identity constitutes an offence attracting penalty under Section 114(iii) of the Customs Act, 1962.Whether penalty under Section 114(iii) can be imposed on an employee of a CHA who is alleged to have abetted fraudulent export practices without direct evidence of his involvement in the export transactions.Whether violations of Custom House Agent Licensing Regulations (CHALR), 2004 should be proceeded against under those regulations independently or under Section 114(iii) of the Customs Act, 1962.The appropriate quantum of penalty under Section 114(iii) of the Customs Act, 1962 in cases involving fraudulent export declarations and duty drawback claims.

RULINGS / HOLDINGS:

The DRI officer is a "proper officer" authorized to issue show cause notices under the Customs Act, 1962, as held by the Hon'ble Apex Court in its review order; thus, the objection to the DRI's authority is rejected.Penalty under Section 114(iii) of the Customs Act, 1962 is leviable only on a person who "does or omits to do any act which act or omission would render such goods liable to such confiscation under Section 113, or abets the doing or omission of such act."The CHA firm was exonerated from penalty under Section 114(iii) as the adjudicating authority found no sustainable charge of abetment or failure to comply with regulations that would render goods liable to confiscation; penalty under Section 114(iii) cannot be imposed for violations of CHALR without separate proceedings under those regulations.Penalty under Section 114(iii) was upheld against the employee of the CHA who admitted receiving amounts over and above CHA fees and involvement in facilitating fraudulent export declarations, thereby abetting acts rendering goods liable to confiscation under Section 113.The penalty imposed on the CHA employee was reduced from Rs. 75 Lakhs to Rs. 15 Lakhs, considering the quantum of undue benefit and proportionality of penalty.

RATIONALE:

The Court applied the statutory framework of the Customs Act, 1962, particularly Sections 50, 113, and 114(iii), and relevant Custom House Agent Licensing Regulations, 2004.The Court relied on authoritative precedent including the Supreme Court's review order affirming the DRI's authority as a proper officer for issuing show cause notices in export cases.The Court distinguished between violations of CHALR and offences attracting penalty under Section 114(iii), holding that regulatory breaches should be dealt with under the CHALR independently and not by invoking Section 114(iii) absent acts rendering goods liable to confiscation.The Court emphasized that penalty under Section 114(iii) requires proof of act or omission rendering goods liable to confiscation or abetment thereof, and mere knowledge or association without evidence is insufficient.The Court accepted admissions made in statements recorded during investigation as sufficient evidence of abetment in fraudulent export declarations, thus justifying penalty against the CHA employee.The Court exercised discretion to reduce the penalty amount to ensure proportionality and fairness, reflecting the scale of undue benefit derived from the offence.

ISSUES:

Whether the Commissioner or any customs officer has the power to re-determine the FOB value of exported goods under the Customs Act, 1962.Whether the FOB value, being the transaction value agreed between buyer and seller, can be altered by any person other than the contracting parties.Whether the assessable value determined under Section 14 of the Customs Act and Customs Valuation (Determination of Value of Export Goods) Rules, 2007 affects the FOB value used for export benefits such as drawback and DEPB.Whether export incentives based on FOB value can be recalculated by Customs officers on the basis of any value other than the FOB value.Whether confiscation, recovery of excess drawback/DEPB benefits, and penalties imposed based on re-determined FOB value are sustainable in law.

RULINGS / HOLDINGS:

The Commissioner or any customs officer does not have the power to re-determine the FOB value of exported goods; the FOB value is the transaction value agreed between the buyer and seller and cannot be altered by any stranger to the contract, including customs officers.Section 14 of the Customs Act and the Valuation Rules empower the proper officer to reject the declared transaction value for assessment of customs duty and determine an assessable value by alternative methods, but this does not change the FOB value itself.Export incentives such as drawback and DEPB, which are notified as a percentage of the FOB value, must be paid based on the actual FOB value; no Customs officer has the authority to compute these benefits on any other value determined by them.Confiscation of goods, recovery of excess drawback or DEPB benefits, and imposition of penalties premised on re-determination of FOB value lack legal basis and are unsustainable.

RATIONALE:

The Court applied the statutory framework of the Customs Act, 1962, particularly Sections 2(2), 14, 75, 75A, 113, and 114, and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, to distinguish between transaction value (FOB value) and assessable value for customs duty purposes.It emphasized that FOB value is a term derived from INCOTERMS and represents the price agreed between exporter and overseas buyer, ending the seller's responsibility once goods are loaded on board the vessel or aircraft.The Court relied on precedent that Customs officers cannot interfere with or modify the contractually agreed FOB value, as it is outside their jurisdiction and not subject to reassessment under the Customs Act.The decision reaffirmed that export incentives are linked to FOB value as notified by the Central Government, and Customs officers must adhere to these notifications and the Foreign Trade Policy framed under the Foreign Trade (Development and Regulation) Act, 1992.The Court rejected the departmental practice of using market surveys or officer assessments to re-determine FOB value for the purpose of recalculating export benefits, marking a doctrinal clarification that the valuation for duty assessment and valuation for export incentives are distinct and governed differently.

ISSUES:

Whether interest is payable on amounts deposited during the course of investigation and subsequently refunded under the Customs Act, 1962.Whether the provisions of Sections 129E and 129EE of the Customs Act, 1962, mandate payment of interest on delayed refunds of pre-deposited amounts.Whether the limitation period under Section 11B of the Central Excise Act, 1944 (applicable to service tax claims) applies to refunds of amounts paid under mistaken belief or without authority of law.The applicable rate of interest on delayed refund of amounts deposited during investigation.Whether reliance on circulars or instructions issued by the Central Board of Indirect Taxes and Customs is binding on the department regarding interest on refunds.

RULINGS / HOLDINGS:

Interest is payable on amounts deposited during the course of investigation and subsequently refunded, from the date of deposit till the date of refund, under the Customs Act, 1962, as the issue is "no longer res integra".Sections 129E and 129EE of the Customs Act, 1962, provide for payment of interest on delayed refunds of pre-deposited amounts, and the rate fixed by notification under Section 129EE applies from the date the provision came into force.The limitation period under Section 11B of the Central Excise Act, 1944, does not apply to refunds of amounts paid under mistake of law or without authority, as such payments do not constitute "duty of excise" or "service tax" payable in law.The appropriate rate of interest on delayed refunds of such amounts is 12% per annum, as supported by binding Supreme Court decisions and consistent tribunal and High Court rulings.Circulars or instructions issued by the Central Board of Indirect Taxes and Customs are binding on the department and cannot be disregarded in denying interest on refunds.

RATIONALE:

The Court relied on the legal framework established by Sections 129E and 129EE of the Customs Act, 1962, which govern the payment of interest on delayed refunds of pre-deposited amounts.Precedents from the Hon'ble Karnataka High Court and the Supreme Court affirm that amounts paid under mistake of law or without authority do not attract the limitation under Section 11B of the Central Excise Act, 1944, and are refundable with interest.Decisions of this Tribunal and various High Courts (including Calcutta, Delhi, and Telangana High Courts) consistently hold that interest at 12% per annum is payable on delayed refunds of amounts deposited during investigation or paid under mistake.The Court emphasized that the department lacks authority to retain amounts paid without lawful obligation and that withholding such amounts without compensation is unjustifiable and contrary to principles of equity and restitution.The Court further noted that the binding nature of circulars or instructions from the Central Board of Indirect Taxes and Customs requires the department to comply with prescribed procedures and grant interest where applicable.The judgment in Sandvik Asia Ltd. v. Commissioner of Income Tax was cited to support the principle that interest is payable as compensation for wrongful withholding of amounts due, reinforcing the statutory and judicial consensus on the matter.

ISSUES:

Whether failure to forthwith inform the Securities and Exchange Board of India (SEBI) of a material change, specifically change of address, by a registered Investment Adviser (IA) constitutes a violation of regulation 13(b) read with regulation 13(a) of SEBI (Investment Advisers) Regulations, 2013 (IA Regulations) and clauses 1 and 8 of the Code of Conduct under the Third Schedule to IA Regulations read with regulation 15(9) of IA Regulations.Whether providing investment advisory services through an unregistered entity (F3 Financials), without updating SEBI during pendency of registration application or after grant of registration, amounts to unregistered investment advisory activity in contravention of IA Regulations and related Code of Conduct.Whether providing investment advisory services through a partnership firm (Garuda Finance) without the firm itself being registered with SEBI, despite the individual IA's registration, constitutes unregistered investment advisory activity violating IA Regulations and related Code of Conduct.Whether the conduct of the IA in providing investment advisory services prior to obtaining SEBI registration and through unregistered entities justifies cancellation or suspension of registration under SEBI (Intermediaries) Regulations, 2008.Whether mitigating factors such as technical nature of violations, filing of police complaints, cessation of unregistered activities, refund of fees, and resolution of investor complaints justify leniency in imposing penalties.

RULINGS / HOLDINGS:

Failure to forthwith inform SEBI of a material change such as change of address is a violation of regulation 13(b) read with regulation 13(a) of IA Regulations and clauses 1 and 8 of the Code of Conduct, as the change of address is a "material change" that "goes to the root of the business" and must be informed "forthwith", meaning "immediately" or "without unnecessary delay."Providing investment advisory services through F3 Financials, an unregistered entity, without disclosure to SEBI during or after registration application, constitutes unregistered investment advisory activity in violation of regulation 13(b) read with regulation 13(a) of IA Regulations and clauses 1, 5 and 8 of the Code of Conduct.Providing investment advisory services through Garuda Finance, a partnership firm not registered with SEBI, despite the IA's individual registration, constitutes unregistered investment advisory activity violating regulation 13(b) read with regulation 13(a) of IA Regulations and clauses 1, 5 and 8 of the Code of Conduct; an individual IA cannot provide advisory services through an unregistered non-individual entity circumventing distinct eligibility criteria.The IA's engagement in investment advisory activities prior to obtaining SEBI registration and through unregistered entities demonstrates disregard for applicable regulations and aggravates the violations committed.Although some violations are "technical in nature" and mitigating factors exist, the overall violations are "grave enough to not be condoned lightly," warranting suspension of registration for six months rather than cancellation.

RATIONALE:

The Court applied the statutory framework comprising the SEBI Act, SEBI (Intermediaries) Regulations, 2008, and SEBI (Investment Advisers) Regulations, 2013. The IA Regulations impose a duty under regulation 13(b) to "forthwith inform the Board in writing" of any "material change" in information submitted, with "forthwith" interpreted in light of Supreme Court precedent as "immediately" or "without unnecessary delay."The distinction between individual and non-individual Investment Advisers under IA Regulations, including differing certification, net worth, and 'fit and proper' criteria, precludes an individual IA from providing advisory services through an unregistered partnership firm, as this would circumvent regulatory requirements and render the statutory scheme redundant.The Court rejected the IA's contention of being a victim of fraud regarding unregistered activities through F3 Financials, noting delayed police complaints and failure to respond timely to SEBI's inquiries, indicating afterthoughts to evade regulatory scrutiny.The Court considered mitigating factors such as the technical nature of the non-updation of address, cessation of unregistered activities, refund of fees, and resolution of complaints, but found the prior unregistered activities and failure to disclose to SEBI as aggravating circumstances requiring a proportionate disciplinary response.The Court adhered to principles of natural justice by granting multiple opportunities for hearing and considering all submissions, including those related to settlement proceedings, which were ultimately withdrawn, reviving the enforcement process.The decision marks no doctrinal shift but reinforces strict compliance with registration and disclosure requirements under IA Regulations, emphasizing the importance of prompt disclosure of material changes and prohibition of unregistered advisory activities through entities not registered with SEBI.

ISSUES:

Whether the Adjudicating Authority was correct in rejecting the Section 9 application on the ground of existence of a pre-existing dispute under Sections 8 and 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016 (IBC).Whether the termination of the contract dated 01.04.2020 qualifies as a pre-existing dispute for the purposes of Section 9 application under the IBC.Whether the Corporate Debtor had performed its contractual obligations by manufacturing and making the contracted goods ready for dispatch before the scheduled date.Whether the ban notification dated 19.03.2020 issued by the Government of India prohibiting export of the contracted materials affects the performance and obligations under the FOB contract.Whether the Operational Creditor was entitled to recover the advance payment as unpaid operational debt under the IBC.Whether the Section 9 application filed by the Operational Creditor was an abuse of process and contrary to the objectives of the IBC.

RULINGS / HOLDINGS:

The Adjudicating Authority rightly held that there was a "pre-existing dispute" arising from the termination of the contract by the Operational Creditor, which falls within the ambit of Sections 8 and 9(5)(ii)(d) of the IBC, justifying rejection of the Section 9 application.The termination of the contract dated 01.04.2020 was held to be a genuine pre-existing dispute since it was raised in the Notice of Dispute dated 20.05.2020, which was within a reasonable time (about 45 days) from the termination date and prior to the filing of the Section 9 application.The Corporate Debtor had "already produced the contracted material" and kept it ready for dispatch, as evidenced by communications including emails and WhatsApp messages, and the Adjudicating Authority correctly relied on these to conclude performance of contractual obligations.The Government of India notification dated 19.03.2020 imposing export ban constituted a supervening impossibility affecting performance under the FOB contract, and the ban was a valid reason for non-delivery beyond the Corporate Debtor's control.The Operational Creditor was not entitled to recover the advance payment under the IBC as the dispute regarding contract termination and performance was genuine and pre-existing, and the matter involved a commercial dispute unsuitable for insolvency proceedings.The Section 9 application was not an abuse of process but was correctly dismissed on grounds of pre-existing dispute; the IBC is not intended for recovery of disputed contractual claims or to penalize solvent companies.

RATIONALE:

The Court applied the statutory framework of the IBC, particularly Sections 8 and 9, which require that a demand notice be issued on default, and that the Corporate Debtor may raise a pre-existing dispute within 10 days of receipt of such notice; if a dispute exists, the Section 9 application must be rejected.The Court relied on the precedent set by the Supreme Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which mandates that a dispute must be real, pre-existing, and supported by evidence to reject a Section 9 application.The Court distinguished the facts from the cited FOB contract precedent, noting that the supervening Government ban created a situation of impossibility, thus excusing performance and negating breach by the Corporate Debtor.The Court emphasized that the Adjudicating Authority's role in Section 9 proceedings is limited to ascertaining the existence of a dispute, not adjudicating its merits, and found the dispute raised was neither "orchestrated" nor "moonshine".The Court acknowledged the applicability of Section 65 of the Indian Contract Act, 1872 regarding restitution for benefits under void agreements, but found that the dispute over contract termination and performance precluded summary recovery under IBC.The Court reaffirmed that the IBC is a remedy of last resort for insolvency resolution, not a substitute for civil remedies for contractual disputes, and that the matter should be resolved by appropriate civil courts if necessary.

1. ISSUES:

1.1. Whether initiation of liquidation proceedings under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 (I&B Code) can be challenged on grounds of non-receipt of communication regarding the initiation of Corporate Insolvency Resolution Process (CIRP).

1.2. Whether liquidation can be ordered during the pendency of SARFAESI proceedings and while a civil appeal against CIRP initiation is pending before the Supreme Court.

1.3. Whether the Committee of Creditors' (CoC) commercial wisdom in rejecting resolution plans and deciding liquidation can be judicially interfered with.

1.4. Whether failure to submit upfront payment as part of a One Time Settlement (OTS) proposal affects the consideration of such proposal during CIRP.

1.5. Whether the order of liquidation suffers from any legal vices or perversity warranting interference by the Appellate Tribunal.

2. RULINGS / HOLDINGS:

2.1. The initiation of liquidation proceedings under Section 33(1)(a) of the I&B Code was proper despite the appellant's claim of non-receipt of communication, as the order initiating CIRP had attained finality following dismissal of the civil appeal by the Supreme Court.

2.2. The pendency of SARFAESI proceedings and civil appeal did not preclude the initiation of liquidation proceedings once the CIRP process was concluded and resolution plans were rejected.

2.3. The CoC's decision to reject resolution plans and resolve for liquidation by a 96.50% majority, including representatives of home buyers, was based on its "commercial wisdom" and is not subject to judicial interference.

2.4. The OTS proposal submitted by the appellant failed to mature as the appellant did not deposit the required 25% upfront payment, thus it was not considered by the CoC.

2.5. There was no demonstrated legal infirmity or perversity in the liquidation order; subsequent developments, including completion of asset distribution and payments to home buyers, rendered the appeal meritless and liable to be dismissed.

3. RATIONALE:

3.1. The Court applied the statutory framework of the Insolvency and Bankruptcy Code, 2016, particularly Sections 7, 33(1)(a), and the provisions governing CIRP and liquidation.

3.2. The principle that the order initiating CIRP attains finality once the Supreme Court dismisses the appeal was emphasized, precluding re-litigation of the same grounds in liquidation proceedings.

3.3. The Court recognized the binding effect of the CoC's commercial wisdom under the I&B Code, which cannot be questioned unless there is manifest perversity or illegality.

3.4. The requirement of upfront payment as a condition to consider OTS proposals was upheld as a legitimate procedural safeguard to establish bonafides.

3.5. The judgment did not record any dissent or doctrinal shift but reaffirmed established principles that liquidation orders following rejection of resolution plans and finality of CIRP initiation are not ordinarily subject to interference.

ISSUES:

Whether the application for withdrawal of proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) complies with the procedural requirements prescribed under Section 12A of the I&B Code read with Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.Whether an application under Section 12A filed through Form FA by the Interim Resolution Professional (IRP) on behalf of the applicant satisfies the mandatory timelines and procedural mandates under Regulation 30A.Whether allegations of "threat," "coercion," and "fraud" in obtaining the settlement agreement and Form FA can vitiate the withdrawal application under Section 12A of the I&B Code.Whether the filing of a criminal complaint after the submission of the withdrawal application impacts the validity of the Section 12A application.Whether failure to register an FIR and non-invocation of statutory remedies under Section 173(4) of Bharatiya Nyaya Sanhita (2023) or Section 156(3) of the Code of Criminal Procedure affects the consideration of allegations of criminal intimidation, threat, and coercion.Whether additional documents filed for the first time before the appellate authority, not placed before the adjudicating authority, can be admitted for consideration in the appeal against the Section 12A order.

RULINGS / HOLDINGS:

The application for withdrawal under Section 12A of the I&B Code, 2016, read with Regulation 30A of the IBBI Regulations, was validly filed through Form FA by the IRP on behalf of the applicant within the prescribed timeframe, satisfying the procedural requirements.The contention that the appellant was never an applicant to the Section 12A application is rejected as the settlement agreement and Form FA were placed on record and considered by the Hon'ble Apex Court, which left the matter open for adjudication under the I&B Code.Allegations of "threat," "coercion," and "fraud" in obtaining the settlement agreement and Form FA cannot invalidate the withdrawal application unless established through a criminal investigation and adjudication; mere averments or belated complaints are insufficient.The criminal complaint filed after the withdrawal application does not affect the validity of the Section 12A application, particularly when the complaint was submitted subsequent to the application and no FIR was registered.Failure to invoke statutory remedies under Section 173(4) of Bharatiya Nyaya Sanhita (2023) or Section 156(3) of Cr.P.C. for non-registration of FIR precludes acceptance of allegations of criminal intimidation and coercion in the absence of appropriate legal proceedings.Additional documents not placed before the adjudicating authority and filed for the first time before the appellate tribunal cannot be admitted or considered in the appeal against the Section 12A order.The appeal challenging the order permitting withdrawal under Section 12A of the I&B Code lacks merit and is dismissed.

RATIONALE:

The Court applied the statutory framework under Section 12A of the Insolvency and Bankruptcy Code, 2016, which confers a right to withdraw admitted applications under Sections 7, 9, or 10, subject to compliance with procedural safeguards prescribed in Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.Regulation 30A mandates that an application for withdrawal made before the constitution of the committee must be submitted by the IRP on behalf of the applicant within three days of receipt, accompanied by Form FA and a bank guarantee towards estimated expenses.The Court recognized the Hon'ble Apex Court's prior observations that the existence of a settlement agreement and Form FA was undisputed and that allegations of coercion or fraud must be adjudicated under the I&B Code framework.The Court emphasized that allegations of criminal acts such as threat and coercion require prima facie establishment through criminal investigation and adjudication; mere complaints or averments are insufficient to vitiate the withdrawal application.The Court noted the appellant's failure to pursue statutory remedies available under Section 173(4) of Bharatiya Nyaya Sanhita (2023) or Section 156(3) of Cr.P.C. for non-registration of FIR, which undermines the credibility of the allegations.The Court declined to admit additional documents filed for the first time at the appellate stage, adhering to the principle that evidence must be placed and tested before the adjudicating authority to maintain procedural fairness and judicial discipline.No dissent or doctrinal shift was indicated; the decision aligns with established principles governing withdrawal applications under the I&B Code and procedural compliance under IBBI regulations.

ISSUES:

Whether any amount exceeding Rs.22,56,833/- was due and payable by the Corporate Debtor to the Operational Creditor'Whether there existed a pre-existing dispute between the parties sufficient to reject the Section 9 application under the principles laid down in Mobilox Innovations Private Limited (2018) 1 SCC 353?

RULINGS / HOLDINGS:

On the quantum of debt, the Tribunal held that "no amount above Rs.22,56,833/- was due" as per the ledger accounts maintained by the Corporate Debtor, which were supported by admitted credit notes reflecting special quantity discounts; thus, the larger claim of Rs.1,81,45,943/- was not established.Regarding the dispute, the Tribunal found that the reply to the demand notice dated 11.01.2019 constituted a "notice of dispute" raising a "plausible contention" supported by evidence, particularly concerning the issuance and denial of credit notes for special quantity discounts; therefore, the Section 9 application was rightly rejected on the ground of pre-existing dispute as per the Mobilox principles.

RATIONALE:

The Tribunal applied the statutory framework under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, and the Supreme Court's guidance in Mobilox Innovations Private Limited, which requires the adjudicating authority to reject a Section 9 application if a "plausible dispute" exists prior to the receipt of the demand notice.The Tribunal analyzed the ledger accounts, credit notes, and correspondence, noting that the Operational Creditor admitted issuance of eight credit notes for special quantity discounts, thereby acknowledging a business practice contrary to its denial of any agreement on such discounts.The Tribunal gave weight to the Corporate Debtor's ledger accounts and documentary evidence, including credit and debit notes, and found the Operational Creditor's claim of a larger outstanding amount to be inconsistent and unsupported.The Tribunal emphasized that the mere fact that the admitted outstanding amount exceeded Rs.1 Lakh did not mandate admission of the Section 9 application, especially where the Corporate Debtor had offered to pay the admitted amount and a dispute existed over the balance.The Tribunal followed the Supreme Court's direction to assess whether any amount beyond Rs.22,56,833/- was due and to consider the existence of a pre-existing dispute, holding that the dispute was neither spurious nor hypothetical but a genuine commercial disagreement warranting rejection of the application.

Issues: (i) Whether non-payment of the balance sale consideration within 90 days automatically vitiated the auction and required cancellation; (ii) Whether the Adjudicating Authority could extend time for payment beyond the 90-day period in the circumstances of the case; (iii) Whether the Liquidator's conduct in pursuing the conversion process amounted to gross irregularity or illegality in the auction process.

Issue (i): Whether non-payment of the balance sale consideration within 90 days automatically vitiated the auction and required cancellation.

Analysis: The governing liquidation framework required the highest bidder to pay the balance sale consideration within 90 days, and the auction documents and letter of intent reflected the same timeline. However, the record showed repeated correspondence from the successful bidder expressing readiness and willingness to pay, along with proof of funds, before expiry of the period. The non-payment was not found to be a wilful default in the facts of the case.

Conclusion: The auction did not stand vitiated merely because the balance consideration was not paid within 90 days.

Issue (ii): Whether the Adjudicating Authority could extend time for payment beyond the 90-day period in the circumstances of the case.

Analysis: Although the 90-day period under the liquidation regulations is ordinarily to be followed, the decision recognised that the Adjudicating Authority may exercise inherent powers to extend time where extraordinary circumstances impede completion of the sale. Here, the conversion dispute, stay order, continuing proceedings before the revenue authorities, and pending applications before the Adjudicating Authority were treated as external circumstances justifying limited relaxation, with interest imposed to balance equities.

Conclusion: The Adjudicating Authority was competent to grant further time, and the extension was upheld.

Issue (iii): Whether the Liquidator's conduct in pursuing the conversion process amounted to gross irregularity or illegality in the auction process.

Analysis: The auction itself was not shown to be tainted by fraud or collusion. The Liquidator's involvement in the conversion process was found to be linked to the successful bidder's request and to the need to obtain lawful permissions for transfer of the land. No deliberate irregularity, gross illegality, or subversion of the liquidation process was established.

Conclusion: No gross irregularity or illegality in the Liquidator's conduct was established.

Final Conclusion: The auction sale was allowed to stand, the challenge to the liquidation orders failed, and the connected proceedings arising from the same cause became infructuous after payment and issuance of the sale certificate.

Ratio Decidendi: While liquidation timelines are ordinarily mandatory, the Adjudicating Authority may, in exercise of inherent powers, grant limited extension of time for payment where extraordinary circumstances have impeded completion of a valid auction and equitable adjustment is secured by interest or similar conditions.

ISSUES:

Whether two instalments (19th and 20th) of lease premium that fell due after commencement of CIRP can be treated as CIRP cost and whether the direction for their payment as CIRP cost can be sustained.Whether amounts payable towards water and sewer charges during CIRP constitute CIRP cost.Whether time extension charges claimed by the lessor under lease deeds are CIRP cost payable in the resolution plan.Whether the Adjudicating Authority could leave to the discretion of the Committee of Creditors (CoC) the stage from which the CIRP should resume after remitting the resolution plan for reconsideration, including whether it should resume from the stage of preparation of Information Memorandum or any other stage.Whether the Authorized Representative had authority to file the appeal on behalf of the Financial Creditors in a class.

RULINGS / HOLDINGS:

Two instalments of lease premium falling due after commencement of CIRP are not automatically CIRP cost under Regulation 31(b) of the CIRP Regulations, 2016, as the lessor's rights were not prejudicially affected by the moratorium due to prior default in payment; the direction to treat these instalments as CIRP cost is modified to be conditional upon the Supreme Court's decision in Civil Appeal No.901 of 2023. The Tribunal is bound by the coordinate bench judgment in Sunil Kumar Agrawal which held that lease premium is not CIRP cost, but protection is granted to the lessor pending Supreme Court's decision.Amounts payable towards water and sewer charges during the CIRP period are held to be CIRP cost and are payable accordingly.Time extension charges under the lease deeds for a maximum period of three years after expiry of the stipulated construction period are held to be CIRP cost, as they relate to keeping the project as a going concern; extension charges beyond three years are not payable as CIRP cost.The Adjudicating Authority's direction to remit the resolution plan back to the CoC is modified to require the CoC to direct the Resolution Professional to issue a Request for Resolution Plan (RFRP) to the existing Resolution Applicants within 30 days, with the CoC to decide within 90 days; the discretion to decide the stage from which CIRP should resume is replaced by a fixed timeline to avoid uncertainty and delay.The Authorized Representative duly appointed by the Adjudicating Authority has authority to file the appeal on behalf of the Financial Creditors in a class; objections to the authority are rejected.

RATIONALE:

The legal framework includes Section 5(13) of the Insolvency and Bankruptcy Code (IBC) defining insolvency resolution process costs and Regulation 31 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, particularly Regulation 31(b) relating to amounts due to persons prejudicially affected by the moratorium under Section 14(1)(d) of the IBC. The Tribunal applied the coordinate bench judgment in Sunil Kumar Agrawal which held that lease premium is not covered by the explanation to Section 14(1)(d) and thus not CIRP cost. The Supreme Court's pending decision in Civil Appeal No.901 of 2023 is recognized as potentially altering this position, and protection is granted accordingly.Water and sewer charges are undisputedly costs incurred in running the corporate debtor as a going concern and hence fall within CIRP cost as per Section 5(13)(c) and Regulation 31.The lease deeds' specific clauses limiting time extension to a maximum of three years with prescribed penalties were interpreted as allowing time extension charges only up to this maximum period as CIRP cost; beyond this period, no extension or charges are permitted. This interpretation aligns with the principle that CIRP cost includes costs necessary for maintaining the corporate debtor as a going concern.Regulation 35 of the CIRP Regulations, 2016 (as amended) governs valuation and confidentiality. The Tribunal distinguished the Supreme Court's judgment in Karad Urban Cooperative Bank Ltd. v. Swwapnil Bhingardevay & Ors., noting that the Supreme Court upheld the resolution plan despite breach of confidentiality and did not mandate restarting the CIRP from the Information Memorandum stage. Considering the elapsed time and the need for timely resolution, the Tribunal directed a fresh RFRP to existing Resolution Applicants with fixed timelines, rejecting the Adjudicating Authority's discretion-based approach to resumption stage.The Tribunal relied on the Adjudicating Authority's prior approval of the Authorized Representative and absence of objections from other parties to affirm the Representative's authority to file the appeal, reinforcing the procedural propriety under the IBC framework for representation of Financial Creditors in a class.

ISSUES:

Whether violation of the first proviso to Section 223(1) of the Bhartiya Nagarik Suraksha Sanhita, 2023 (BNSS) vitiates the order of taking cognizance and consequential proceedings.Whether the absence of the words "including any complaint filed by a person authorised under Special Law" in Section 223, BNSS excludes the operation of the first proviso to Section 223 to cognizance in respect of such complaints.Whether the accused bears the burden to show "prejudice" and "miscarriage of justice" to vitiate an order taking cognizance on the ground of depriving the accused of a pre-cognizance opportunity of hearing.Whether complaints under the Prevention of Money-Laundering Act, 2002 (PMLA) are in the nature of charge sheets and not "complaints" under Sections 210 and 223 of the BNSS.Whether concessions given by the Enforcement Directorate (ED) and divergent stands taken by it in previous cases can be taken note of while deciding the issues involved.

RULINGS / HOLDINGS:

The denial of opportunity of hearing to the accused prior to taking cognizance under Section 210, BNSS, in violation of the first proviso to Section 223(1), BNSS, is fatal and vitiates the order of cognizance as well as subsequent proceedings; such non-compliance is not a mere irregularity but an incurable illegality.The absence of the phrase "including any complaint filed by a person authorised under Special Law" in Section 223, BNSS does not exclude the operation of the first proviso to Section 223(1) in respect of complaints under Special Laws; the first proviso applies to such complaints.The accused is not required to demonstrate "prejudice" or "miscarriage of justice" to vitiate cognizance taken without affording the pre-cognizance opportunity of hearing; the right to hearing is a substantive right and its denial itself constitutes prejudice and miscarriage of justice.Complaints under the PMLA are to be treated as "complaints" within the meaning of Sections 210 and 223 of the BNSS and not as charge sheets; the PMLA does not treat such complaints as charge sheets, and the procedural provisions of BNSS apply accordingly.Concessions made by the ED or divergent stands taken by it before different courts, including consent orders, are not binding precedents and are immaterial for statutory interpretation; counsel's concessions cannot override legal interpretation.

RATIONALE:

The Court applied the statutory framework of the BNSS, particularly Sections 210 and 223, which govern the power and procedure for taking cognizance of offences, emphasizing that Section 223 circumscribes Section 210 and mandates a pre-cognizance hearing as a mandatory procedural safeguard.The Court relied on constitutional principles under Article 21, holding that deprivation of personal liberty must be "according to procedure established by law," which includes the right to be heard before cognizance is taken, reflecting the principle of audi alteram partem embedded in natural justice.Precedents from the Supreme Court, including Kushal Kumar Agarwal v. Directorate of Enforcement and related judgments, were applied to affirm that complaints under the PMLA are subject to procedural safeguards under the BNSS and that non-compliance with mandatory provisions vitiates cognizance.The Court distinguished between "empowerment" of Magistrates under Section 210 and procedural requirements under Section 223, clarifying that Section 506(e) BNSS, which mitigates irregularities relating to lack of authority, does not apply to non-compliance with the first proviso to Section 223.The Court rejected the ED's argument that prejudice must be shown, holding that the right to pre-cognizance hearing is substantive and mandatory, and that denial of such right itself constitutes prejudice and miscarriage of justice.The Court noted the legislative intent to balance the authority to take cognizance under special laws with safeguards against abuse by introducing the first proviso to Section 223 simultaneously with amendments to Section 210, thereby applying the hearing requirement to complaints under special laws like the PMLA.Regarding conflicting stands by the ED, the Court referenced the principle that consent orders and counsel's concessions are not binding precedents and cannot alter statutory interpretation or constitutional mandates.The Court emphasized the severity of PMLA offences and the reverse burden on the accused, underscoring the necessity of strict compliance with procedural safeguards to protect fundamental rights.

ISSUES:

Whether failure to carry forward service tax credit in statutory returns for over four years results in extinguishment of such credit under section 73(2) of Finance Act, 1994 and rule 14 of CENVAT Credit Rules, 2004.Whether suo motu restoration of previously unreported but validly taken and retained CENVAT credit is permissible without prior sanction of tax authorities.Whether demand of tax, interest under section 75 of Finance Act, 1994, and penalty under rule 15 of CENVAT Credit Rules, 2004 can be sustained for non-reporting of eligible credit in returns.Whether the non-reporting of credit in statutory returns amounts to ineligibility under rule 3(1) or breach of retention provisions under rule 6 of CENVAT Credit Rules, 2004.The legal significance of 'reasonable period' for restoration of credit as interpreted by Tribunal and High Courts in related precedents.

RULINGS / HOLDINGS:

The failure to carry forward the credit in returns does not extinguish the credit where there is no allegation of ineligibility under rule 3(1) or breach under rule 6 of CENVAT Credit Rules, 2004; "there is no reason for us to suppose or presume a reasonable period" for restoration in such circumstances.Suo motu restoration of credit that was validly taken and properly retained is permissible and does not require prior sanction of tax authorities, as the credit was never utilized or merged into duty paid; the impugned demand based on non-reporting alone cannot be sustained.Demand of tax, interest under section 75, and penalty under rule 15 for non-reporting of eligible credit in returns is not tenable in absence of any statutory bar or allegation of wrongful availment or utilization of credit.Non-reporting of credit in returns is a procedural lapse and does not affect the substantive right to credit where eligibility is undisputed; "credit cannot be denied only on the ground that the credit was not taken in the particular Cenvat account, which is not the prescribed record."Precedents imposing a "reasonable period" limitation for restoration of credit relate to different factual matrices involving higher or notional credit or credit once extinguished; such limitation is inapplicable to the present facts.

RATIONALE:

The Court applied the framework of the Finance Act, 1994, and CENVAT Credit Rules, 2004, emphasizing that the essential conditions for estopping credit utilization or recovery under rule 14 are ineligibility under rule 3(1) or breach of retention under rule 6.The Court relied on authoritative circulars clarifying entitlement to carry forward credit, and on Tribunal precedents which held that procedural errors in reporting do not extinguish substantive credit rights.The Court distinguished the present case from precedents involving restoration of credit after utilization or extinguishment, noting that here the credit was never utilized or merged into duty payments, and therefore restoration is not constrained by "reasonable period" limitations.The Court recognized the evolving nature of the tax credit scheme from set off, MODVAT to CENVAT, underscoring the purpose to avoid cascading tax effect and preserve the integrity of the tax credit scheme.The Court noted that returns serve primarily as procedural tools and archival records, and non-reporting in returns does not ipso facto extinguish credit when eligibility and retention are not disputed.The Court rejected reliance on decisions of Larger Benches and High Courts that do not directly apply to the facts here, particularly where those decisions involved credit once utilized or extinguished, or higher/notional credit claims.

ISSUES:

Whether the activity in question constitutes "scientific and technical consultancy service" under section 65(105)(za) of the Finance Act, 1994.Whether the tax liability under section 73 of the Finance Act, 1994, and interest under section 75 are correctly imposed on the appellant for the period 2007-08 to 2011-12.Whether penalties under sections 75, 76, and 78 of the Finance Act, 1994, are lawfully imposed, particularly in light of the proviso to section 78 rendering sections 75 and 76 mutually exclusive after 10th May 2008.Whether the extended period of limitation can be invoked in the facts of the case.Whether the consortium partners qualify as "person" under section 65(105)(za) for the purpose of service tax liability.Whether the deployment of personnel and supply of equipment constitute taxable "scientific and technical consultancy service" or are outside the scope of service tax.

RULINGS / HOLDINGS:

The Court held that the "scientific and technical consultancy service" tax entry under section 65(105)(za) is "restricted to such providers alone" (scientist, technocrat or any science or technology institution or organisation), and the coverage of the appellant's activity under this entry requires proper determination.The tax liability and interest imposed under sections 73 and 75 were upheld by the lower authorities but were found to lack sufficient findings on the nature of service and recipient, necessitating remand for fresh adjudication.The penalty imposed under section 76 of the Finance Act, 1994, after 10th May 2008 is "without authority of law" due to the proviso in section 78 making sections 75 and 76 mutually exclusive; thus, simultaneous imposition of penalty under these sections is impermissible post that date.The extended period of limitation was contested but not conclusively addressed; the Court emphasized the need for proper examination of facts relating to the joint venture and contributory recoveries before invoking extended limitation.The finding that the consortium is an "independent entity" and thus a "person" under section 65(105)(za) was made without adequate examination of the nature of the relationship among consortium partners and the recipient of the service, which is critical for taxability.The deployment of personnel and supply of equipment were held to be presumed as part of "scientific and technical consultancy" service based on billings, but the Court found this presumption insufficient without detailed analysis of invoices and the actual nature of services rendered.

RATIONALE:

The Court applied the statutory framework of the Finance Act, 1994, particularly sections 65(105)(za), 73, 75, 76, and 78, governing service tax liability, interest, and penalties.It emphasized the importance of correctly identifying the "person" liable to pay service tax and the precise nature of the service rendered, relying on the definitions of "scientific and technical consultancy" as "any service consultancy or scientific or technical assistance, rendered in any manner, either directly or indirectly by a scientist or technocrat or any science or technology institution or organisation."The Court noted a doctrinal shift with the insertion of the proviso to section 78, which made penalties under sections 75 and 76 mutually exclusive from 10th May 2008 onward, thereby invalidating the simultaneous imposition of penalties under both sections for the same period.The decision underscored the necessity of examining judicial precedents on contributory recoveries in joint ventures, especially in contracts involving extraction of natural resources, to determine correct tax liability and the identity of the recipient of services.The lack of factual findings on the nature of the consortium relationship, the recipient of the services, and detailed invoice analysis led to the remand for fresh adjudication, illustrating the Court's insistence on thorough fact-finding before confirming tax and penalty liabilities.

ISSUES:

Whether incidental expenses reimbursed by the service provider can be included in the taxable value under Rule 5 of the Service Tax (Determination of Value) Rules, 2006 read with Section 67 of the Finance Act, 1994.Whether interest for delayed payment of service tax on renting of immovable property service is payable where the levy was under judicial challenge and subsequently made retrospective by amendment.Whether extended period of limitation can be invoked in absence of fraud, collusion, or willful misstatement to evade tax.Whether penalty under Section 77 of the Finance Act, 1994 is sustainable for non-registration for renting of immovable property service.Whether interest under Section 75 of the Finance Act, 1994 is payable for delayed payment of service tax on Maintenance or Repair Services.

RULINGS / HOLDINGS:

Incidental reimbursements such as 'Other Expenses' and 'Extra Hour Service Charges' are not includable in the taxable value of service under Rule 5 and Section 67, as held by the Hon'ble Supreme Court in Union of India vs Intercontinental Consultants and Technocrats Pvt. Ltd., 2018 (10) G.S.T.L. 401 (S.C.), since "the value of taxable service shall be the gross amount charged by the service provider 'for such service'" and reimbursements on actual basis are excluded.Interest for delayed payment of service tax on renting of immovable property service is not sustainable where the levy was under judicial challenge and subsequently validated retrospectively by amendment, as per the principle that "liability to pay interest would only arise on default and is really in the nature of a quasi-punishment" and retrospective imposition of interest is impermissible, following the judgment in Star India Pvt. Ltd. and related precedents.Extended period of limitation cannot be invoked in absence of fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax; thus, penalties based on such grounds are unsustainable.Penalty under Section 77 of the Finance Act, 1994 for failure to obtain registration for renting of immovable property service is upheld.Interest under Section 75 of the Finance Act, 1994 for delayed payment of service tax on Maintenance or Repair Services is upheld due to absence of any contrary submission.

RATIONALE:

The valuation of taxable services is governed by Section 67 of the Finance Act, 1994 and Rule 5 of the Service Tax (Determination of Value) Rules, 2006. The Supreme Court clarified that only consideration charged "for such service" is includable, excluding actual reimbursed expenses. The Finance Act, 2015 amended Section 67 prospectively to include reimbursable expenditure, confirming the prior exclusion.The retrospective amendment to the definition of 'Renting of Immovable Property Service' was enacted to overcome judicial decisions striking down the levy, notably the Delhi High Court judgment in Home Solutions Retail India Ltd. & Others v. UOI. The validation clause in the Finance Bill, 2010 deems prior actions as valid but expressly prohibits punishment for acts not punishable before the amendment. The principle from Star India Pvt. Ltd. prohibits retrospective imposition of interest as it constitutes a quasi-punishment.Precedents from CESTAT Hyderabad and Chennai corroborate that interest and penalty demands based on retrospective amendments are not sustainable if payment is made within reasonable time post-amendment, and no provision for retrospective interest payment exists.Penalties require establishment of fraud, collusion, or willful misstatement; absent such findings, imposition is improper. However, failure to register as required under Section 69 justifies penalty under Section 77.

1. Whether excess payment of service tax can be adjusted against subsequent service tax liability despite non-compliance with procedural conditions under sub-rule (4B) of Rule 6 of Service Tax Rules, 1994.

2. Whether the demand for recovery of excess adjusted service tax is barred by limitation, particularly regarding invocation of extended period under proviso to Section 73(1) of the Finance Act, 1994.

3. Whether failure to intimate adjustment details to the jurisdictional Superintendent within prescribed time constitutes suppression attracting extended limitation and penalties under Sections 75, 76, 77, and 78 of the Finance Act, 1994.

1. The Court held that adjustment of excess service tax paid is permissible even if procedural conditions under Rule 6(4B) are not complied with, as the excess payment itself is undisputed; non-compliance constitutes only a procedural lapse.

2. The Court ruled that the demand for recovery of excess adjusted service tax is time barred because there was no malafide intention or suppression of facts by the appellant, and hence extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 cannot be invoked.

3. The Court concluded that mere failure to intimate the adjustment details within fifteen days is a procedural lapse and does not amount to suppression of facts; therefore, penalties under Sections 75, 76, 77, and 78 are not justified.

The Court applied the provisions of sub-rules (4A) and (4B) of Rule 6 of Service Tax Rules, 1994, which allow adjustment of excess service tax paid against succeeding month or quarter liabilities subject to certain conditions, including monetary limits and intimation requirements.

The Court relied on precedent establishing that extended period of limitation applies only where there is "conscious or deliberate withholding of information" or suppression, not mere procedural lapses or absence of malafide intent.

The Court referenced the principle that adjustment of excess payment without intimation is a procedural lapse and that the department cannot retain excess tax paid where there is no dispute over the payment itself.

The Court noted that the limitation period under Section 43(1) of the Finance Act, 1994 (normal period of 18 months) had expired before issuance of the show cause notice, and extended period could not be invoked due to lack of suppression.

No dissenting or concurring opinions were recorded.

ISSUES:

Whether refund claims of service tax paid by mistake on construction of individual/independent houses are governed by Section 11B of the Central Excise Act.Whether interest on delayed refund of such mistaken service tax payment should be payable at 6% or 12% per annum.Whether provisions of Section 11BB and Notification No. 67/2003 - CE (NT) dated 12.09.2003 apply to refunds of service tax paid by mistake.Whether writ jurisdiction under Article 226 is maintainable for refund claims outside the scope of Section 11B of the Central Excise Act.

RULINGS / HOLDINGS:

The refund claims of service tax paid by mistake do not fall within the purview of Section 11B of the Central Excise Act as the amount paid was not a "duty of excise" payable in law but a "revenue deposit".Since Section 11B is not applicable, the rate of interest prescribed under Section 11BB and Notification No. 67/2003 - CE (NT) dated 12.09.2003 are also not applicable.The appellant is entitled to interest on delayed refunds at the rate of 12% per annum, as held by this Tribunal and affirmed by the Hon'ble Apex Court in relevant precedents.Writ petitions under Article 226 are maintainable for refund claims where the tax was paid by mistake and not under a valid demand, as the provisions of Section 11B do not bar such jurisdiction.

RATIONALE:

The Court applied the legal framework under the Central Excise Act, particularly Sections 11B and 11BB, and relevant judicial precedents including the decisions in KVR Constructions Ltd. and Mafatlal Industries Ltd.It was held that Section 11B applies only to refund claims of duty of excise lawfully payable and collected, and not to amounts paid under mistake of law or without authority.The Court distinguished cases where exemption was granted retrospectively or where refund claims arose under valid demands, clarifying that those precedents are not applicable to mistaken payments.The decision recognized the principle that mere payment of an amount does not validate it as a duty if it was not exigible in law, and thus such payments are outside the statutory refund regime under Section 11B.The Court relied on the classification of refund claims into categories including unconstitutional levy, mistake of law, and erroneous interpretation, recognizing that claims based on mistake of law fall outside Section 11B and may be pursued through writ jurisdiction.This represents a doctrinal clarification that refund claims for mistaken payments of service tax are treated as revenue deposits refundable with interest at a higher rate, not governed by the lower interest provisions applicable to lawful duty refunds.

ISSUES:

Whether the amount received as deposit incentives from airlines/main agents is taxable as Business Auxiliary Service (BAS) or exempt as interest/discount under the Finance Act.Whether cancellation charges collected by an air travel agent constitute taxable Business Auxiliary Service under service tax law.Whether the alleged irregular availment of Cenvat credit without proof of payment is sustainable.

RULINGS / HOLDINGS:

The demand of service tax on deposit incentives received from airlines/main agents is not sustainable as these incentives are "essentially in the nature of interest/discount," exempt under Section 66D(n)(i) of the Finance Act; the Chartered Accountant's certificate confirming the nature of such incentives was accepted.Service tax demand on cancellation charges is not sustainable since such charges "do not fall within the scope of any of the sub-clauses of BAS" and are not consideration for any taxable service; judicial precedents and Board Circular No. B43/3/97 dated 26-06-1997 support that cancellation charges are not taxable.The demand for recovery of Cenvat credit amounting to Rs. 2,34,618/- is not sustainable where the appellant produced invoices and bank statements evidencing payment, fulfilling the conditions for availing credit.

RATIONALE:

The Court applied the statutory framework under the Finance Act, 1994, specifically Sections 66D(e) and 66D(n)(i), which exempt services by way of extending deposits or advances insofar as the consideration is interest or discount; acceptance of certified documentary evidence was pivotal in recognizing the nature of deposit incentives.In interpreting the scope of Business Auxiliary Service under service tax law, the Court relied on settled judicial precedents holding that cancellation charges are not consideration for any taxable service; the Board Circular clarifies that amounts received in excess of commission, such as cancellation charges, are exempt from service tax.Regarding Cenvat credit, the Court emphasized compliance with documentary proof requirements for credit availed, rejecting disallowance where bank statements and invoices demonstrated payment, consistent with the conditions prescribed under the Cenvat Credit Rules.

Issues: (i) Whether CENVAT credit on insurance service and authorized service station service used for vehicles deployed in the assessee's business was admissible for the period prior to 01.04.2011 and whether the denial could be sustained on the basis of the post-amendment exclusion under Rule 2(l) of the Cenvat Credit Rules, 2004; (ii) Whether the invocation of the extended period and the imposition of penalty could be sustained.

Issue (i): Whether CENVAT credit on insurance service and authorized service station service used for vehicles deployed in the assessee's business was admissible for the period prior to 01.04.2011 and whether the denial could be sustained on the basis of the post-amendment exclusion under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis: The services were availed in relation to vehicles used in the course of the assessee's manufacturing and business activities. The pre-01.04.2011 definition of input service had a wide ambit and included services used directly or indirectly in relation to manufacture and activities relating to business. The amendment effective from 01.04.2011 could not be applied retrospectively to deny credit already earned, and the contemporaneous circular also supported this position. The record did not show exclusive personal use so as to bring the services within the exclusion.

Conclusion: The credit was admissible in principle for services availed before 01.04.2011, and the denial could not be sustained on the basis of the later amendment.

Issue (ii): Whether the invocation of the extended period and the imposition of penalty could be sustained.

Analysis: The assessee was a regular assessee, returns were filed routinely, audits were conducted, and the department had information well before issuance of the show cause notice. In these circumstances, the record did not justify an allegation of suppression or intent to evade duty. The matter nevertheless required verification of the factual position regarding the date of availment and utilization of the impugned services.

Conclusion: The extended period and penalty were not sustainable on the facts recorded, but the matter was remanded for limited verification of whether the impugned services were availed before 01.04.2011.

Final Conclusion: The appeals were allowed by way of remand for limited factual verification, with credit after 01.04.2011 not to be allowed if the services were not availed before that date.

Ratio Decidendi: For input services used in business vehicles, the pre-amendment wide definition of input service applies to credits earned before 01.04.2011, and the 01.04.2011 exclusion cannot operate retrospectively; absence of suppression also bars invocation of the extended period.

Issues: Whether a notice terminating tenancy sent by registered post under Section 106 of the Transfer of Property Act, 1882 was validly served when the postal cover was returned with the endorsement "ND", and whether the High Court was justified in setting aside the ejectment decree on that basis.

Analysis: Section 27 of the General Clauses Act, 1887 creates a statutory presumption of service where a document is properly addressed, prepaid and sent by registered post, unless the contrary is proved. The notice in the present case was admittedly sent by registered post. The endorsement "ND" did not displace the statutory presumption merely because the postal article was not actually delivered. The Court reaffirmed that service by registered post, in the absence of rebuttal, is treated as deemed service. The High Court proceeded without giving effect to this statutory position and treated non-delivery as if it automatically negatived service. The revisional interference was also unwarranted, as none of the limited grounds justifying interference in revision, such as want of jurisdiction or denial of a proper trial, was made out.

Conclusion: The notice was deemed to have been served, and the High Court erred in setting aside the ejectment decree. The finding is in favour of the appellant.

Issues: Whether the petitioner, apprehended while collecting a courier parcel containing LSD blots, was entitled to bail under the rigours of Section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985, in light of the allegations of conscious possession, the Section 67 statement, and the absence of corroborative material.

Analysis: The parcel attributed to the petitioner contained 100 LSD blots weighing about 3.5 grams, which exceeded the prescribed threshold for LSD and attracted the statutory restrictions on bail. The material on record, however, showed that the petitioner was not the consignee, the parcel was not addressed to his residence, and no contraband was recovered from his person or premises. The Court noted ambiguity regarding the phone number said to have been used to trace the parcel and found no conclusive forensic material linking the petitioner to the calls. It further observed that there were no incriminating call records, financial transactions, or digital communications connecting the petitioner with the alleged trafficking network. The Section 67 disclosure, standing alone and without independent corroboration, was held insufficient at this stage to displace the petitioner's version or establish conscious possession. On a prima facie assessment, the Court held that the twin requirements under Section 37(1)(b) stood satisfied.

Conclusion: The petitioner was held entitled to bail.

Issues: Whether the acquittal under Section 138 of the Negotiable Instruments Act was sustainable when the complainant proved issuance and execution of the cheque, the signature on the cheque was admitted, the cheque was said to be filled by another person, and the accused failed to rebut the statutory presumption or establish a probable defence.

Analysis: Once the complainant proved the transaction and execution of the cheque, the presumptions under Sections 118 and 139 of the Negotiable Instruments Act arose in his favour. A cheque does not become invalid merely because it was filled by a person other than the drawer, if the drawer voluntarily signed and handed it over. The accused's plea that the cheque was issued only as security in a chitty transaction was unsupported by convincing evidence, and the relevant diary was not proved in evidence. The objection that the complainant had not proved the source of the amount advanced could not defeat the claim after the presumption had arisen, since the burden then shifted to the accused to rebut it by a probable defence. The accused failed to discharge that burden.

Conclusion: The acquittal was unsustainable. The accused was guilty of the offence under Section 138 of the Negotiable Instruments Act and the complainant succeeded.