TaxTMI Updates e-Newsletter
Jul 30,2022

Bail pending trial - Non-bailable and cognizable economic offence under the CGST regime - Entitlement to Input Tax Credit where supplier's registration is cancelled after transaction - Seriousness of offence not being sole criterion for refusal of bail - Compounding of offences and abatement of criminal proceedings - Article 21 and right to personal liberty in bail adjudication

Bail pending trial - Seriousness of offence not being sole criterion for refusal of bail - Article 21 and right to personal liberty in bail adjudication - Applicant entitled to be released on bail during pendency of trial - HELD THAT: - The court examined the material on record, including documentary evidence placed by the department and the applicant's recorded statement, and applied established principles that seriousness of the charge alone does not automatically preclude bail. Reliance was placed on the Supreme Court's approach in Sanjay Chandra and related authorities requiring a balance between the right to liberty and societal interest; the court noted absence of material showing likelihood of tampering with evidence or influencing witnesses and the applicant's lack of criminal antecedents. The court also considered the likely protracted duration of trial and the statutory framework permitting compounding and recovery of tax, interest and penalty, which militated in favour of exercising discretion to grant bail. On this basis bail was allowed subject to conditions and verification of sureties prior to release.

Bail allowed subject to specified conditions, including personal bond, two sureties, surrender of passport or affidavit, prohibition on tampering with evidence, furnishing of bank guarantee and other usual conditions

Entitlement to Input Tax Credit where supplier's registration is cancelled after transaction - Non-bailable and cognizable economic offence under the CGST regime - No case under Section 132(1)(c) read with Section 132(5) of the Act was held to be made out at the bail stage - HELD THAT: - The court observed that the prosecution's case was founded on alleged availment of ITC from firms whose registrations were subsequently cancelled, while the applicant maintained that supplies were effected by registered suppliers, supported by invoices, e-way bills and payments through banking channels. The court noted the view in the Calcutta High Court decision cited by the parties that ITC cannot be denied where the supplier's registration is cancelled after the date of transaction and that the recipient is not obliged to check the supplier's genuineness for such purpose; applying that reasoning and having regard to the materials produced, the court found that the case required trial and that no conclusive case under the cited penal provisions was established for denying bail at this stage.

The court held that a case under the specified penal provisions was not made out for the purpose of refusal of bail and proceeded to grant bail

Final Conclusion: Bail application allowed; applicant to be released on furnishing personal bond and two sureties to the satisfaction of the trial court, subject to conditions including surrender of passport (or affidavit), prohibition on tampering with evidence, undertaking not to seek adjournments when witnesses are present, and furnishing a bank guarantee of Rs. 50,00,000 which shall be forfeitable on breach of conditions.

Cancellation of registration under Section 29(2)(C) of the CGST Act - non filing of returns for continuous period of six months - condonation of delay in seeking revocation on account of COVID 19 pandemic - exclusion of the period from 15.03.2020 to 28.02.2022 for computation of limitation - revival of GST registration subject to safeguards and payment of tax, interest, fine and filing of returns - requirement of nil returns where no business was carried on

Cancellation of registration under Section 29(2)(C) of the CGST Act - condonation of delay in seeking revocation on account of COVID 19 pandemic - exclusion of the period from 15.03.2020 to 28.02.2022 for computation of limitation - Challenge to cancellation of GST registration for non filing of returns and the petitioner's entitlement to relief despite delay in seeking revocation due to COVID 19 related circumstances. - HELD THAT: - The petitioner did not file returns during the COVID 19 pandemic because business was shut and the petitioner's accountant alone had access to the GST portal; the petitioner filed nil returns upon learning of cancellation. Having regard to the exceptional pandemic circumstances and following the approach adopted in earlier decisions of this Court in similar cases, the Court held that where no useful purpose is served by keeping such persons out of the GST regime and revival would further the interests of revenue and legitimate trade, relief can be granted despite delay. The Court noted administrative guidance directing exclusion of the period 15.03.2020 to 28.02.2022 for computing limitation and relied on the principle that pandemic related disruptions permit condonation of delay in appropriate cases so as to enable revival of registration subject to safeguards to prevent abuse.

Writ petition challenging cancellation allowed and relief granted by condoning delay in the circumstances described, directing revival subject to conditions.

Revival of GST registration subject to safeguards and payment of tax, interest, fine and filing of returns - prohibition on adjustment from unutilised Input Tax Credit until scrutiny - requirement that post cancellation tax/returns be filed and paid in cash pending scrutiny - restrictions to prevent undue passing of Input Tax Credit and bill trading - Terms on which the cancelled registration will be revived and the safeguards to be imposed to prevent abuse. - HELD THAT: - Following the Court's view that revival is warranted in the exceptional circumstances, revival was made conditional. The petitioner must file all returns for the period prior to cancellation and pay the tax, interest, fine and fee for belated filing within a stipulated period; payments cannot be adjusted against any unutilised Input Tax Credit unless such credit is scrutinised and approved by a competent officer; any Input Tax Credit already utilised shall remain subject to scrutiny; returns and payment for the period after cancellation must be filed and paid in cash; respondents may impose restrictions to prevent misuse, and on compliance registration shall stand revived. The Court directed administrative steps to enable filing on the GST portal within a specified timeframe.

Revival permitted on fulfillment of specified conditions and safeguards; respondents to facilitate technical steps for compliance.

Final Conclusion: The writ petition is allowed: the cancellation of GST registration is set aside and the petitioner is permitted to revive registration subject to filing of past and subsequent returns, payment of tax, interest, fine and fees as directed, non utilisation of unapproved Input Tax Credit until scrutiny, and other safeguards; respondents to enable requisite portal changes; no costs.

Profiteering under Section 171(1) of the CGST Act, 2017 - reduction in GST rate from 28% to 18% w.e.f. 01.01.2019 - computation of profiteering by comparison of pre- and post-rate base prices - channel/segment-wise computation - deposit of profiteered amount in Consumer Welfare Fund - interest at 18% on amounts deposited - non-retroactivity of penalty under Section 171(3A) - application of Rule 133(1) and Rule 133(3) of the CGST Rules, 2017

Profiteering under Section 171(1) of the CGST Act, 2017 - reduction in GST rate from 28% to 18% w.e.f. 01.01.2019 - Whether the respondent violated Section 171(1) of the CGST Act, 2017 by failing to pass on the benefit of the reduction in GST rate on Power Banks to recipients during 01.01.2019 to 31.03.2019. - HELD THAT: - The Authority found as a matter of fact (not contested by the respondent) that the GST rate on Power Bank was reduced from 28% to 18% with effect from 01.01.2019. The DGAP's investigation, including re investigation pursuant to the Authority's interim directions, established that the respondent increased the base price of the Power Bank after the rate reduction so that no commensurate reduction in price was passed on to recipients. The mathematical methodology adopted by the DGAP - comparing invoice wise actual base prices post reduction with the commensurate base price derived from the average base price in the pre reduction period (principally December 2018, and if necessary November 2018) - was held to be correct, appropriate and in consonance with Section 171(1). The respondent did not offer objections that would displace the DGAP's findings and the Authority accepted the DGAP's conclusion that a contravention of Section 171(1) had occurred during the period under investigation. [Paras 14, 15, 16, 17]

The Authority held that the respondent had contravened Section 171(1) of the CGST Act, 2017 by not passing on the benefit of the GST rate reduction to recipients during 01.01.2019 to 31.03.2019.

Computation of profiteering by comparison of pre- and post-rate base prices - channel/segment-wise computation - What is the quantum of profiteering attributable to the respondent for the period 01.01.2019 to 31.03.2019? - HELD THAT: - On re examination and after consideration of channel/segment wise sales data, credit notes and reconciliatory material furnished by the respondent, the DGAP computed the profiteered amount by comparing actual invoice wise base prices of the Power Bank sold during 01.01.2019 to 31.03.2019 with the commensurate selling price based on the average base price of the same model sold in the representative pre reduction period (principally 01.12.2018 to 31.12.2018, or sequentially from November 2018 where December sales were unavailable). The excess GST collected on the increased base price was included in the computation. Adjustments were made for identified credit notes. The Authority accepted the DGAP's channel/segment wise computation and the resulting quantified profiteering. [Paras 4, 8, 9, 17]

The profiteering was quantified at Rs. 96,354 for the period 01.01.2019 to 31.03.2019 and the respondent was directed to commensurately reduce the price of the product in accordance with Section 171(1) read with Rule 133(3)(a).

Deposit of profiteered amount in Consumer Welfare Fund - interest at 18% on amounts deposited - Rule 133(3)(c) of the CGST Rules, 2017 - How is the recovered profiteered amount to be dealt with where customers are not identifiable? - HELD THAT: - The Authority applied Section 171(1) read with Rule 133(3)(c) of the CGST Rules, 2017 and directed that, where recipients are not identifiable, fifty percent of the quantified profiteered amount be deposited in the Central Consumer Welfare Fund and the balance in the concerned State Consumer Welfare Funds in the state wise proportions stated in the order. The Authority further directed deposit of these amounts along with interest at 18% from the date of collection until the date of deposit. Compliance monitoring and recovery, if necessary, were directed to be effected by the concerned Commissioners under the relevant GST laws. [Paras 18, 19]

Fifty percent of the profiteered amount (with interest at 18% from date of collection) to be deposited in the Central Consumer Welfare Fund and the balance in the respective State CWFs in the proportions stated, to be deposited within three months, failing which recovery to be effected by the concerned Commissioners.

Non-retroactivity of penalty under Section 171(3A) - Whether penalty under Section 171(3A) can be imposed for profiteering that occurred during 01.01.2019 to 31.03.2019? - HELD THAT: - Section 171(3A), providing for a penalty equivalent to ten per cent of the amount profiteered, was inserted with effect from 01.01.2020. The profiteering found in this matter occurred during 01.01.2019 to 31.03.2019, i.e., prior to the effective date of Section 171(3A). The Authority therefore held that the penalty in Section 171(3A) could not be imposed retrospectively for the period in question. [Paras 20]

The penalty under Section 171(3A) was not imposed because it was not in force during the period when the contravention occurred.

Final Conclusion: The Authority accepted the DGAP's findings and held that the respondent contravened Section 171(1) by not passing on the benefit of the GST rate reduction on Power Banks for 01.01.2019 to 31.03.2019; profiteering was quantified at Rs. 96,354, the respondent was directed to reduce prices commensurately, and amounts (50% centrally and balance to State CWFs as apportioned) with interest at 18% are to be deposited within three months; statutory penalty under Section 171(3A) was not imposed as it is not retroactive.

Benefit of input tax credit - commensurate reduction in prices - anti-profiteering - methodology and procedure under Rule 126 - pass on benefit at the level of each supply / SKU - penalty under Section 171(3A) - interest under Rule 133(3)(b)

Benefit of input tax credit - commensurate reduction in prices - anti-profiteering - Whether the Respondent profiteered by failing to pass on the additional benefit of ITC to flat buyers for the project 'Shriram Summit' during the investigation period - HELD THAT: - The Authority accepted the DGAP's comparison of ITC-to-turnover ratios in the pre-GST (April 2016-June 2017) and post-GST (July 2017-April 2020) periods and found that the Respondent derived an incremental ITC benefit of 0.08% of turnover (6.96% post-GST v. 6.88% pre-GST). Applying that increase to the Respondent's taxable turnover for the stated period produced a profiteered amount which the DGAP computed as Rs. 20,57,207/-. The Authority held that Section 171(1) requires any benefit of ITC to be passed on to recipients and, on the facts and documents furnished, the benefit in question had not been passed on to 1,061 identifiable recipients (including the Applicants), therefore constituting profiteering. [Paras 9, 11]

Respondent profiteered to the extent of Rs. 20,57,207/- for the period 01.07.2017 to 30.04.2020; amount to be refunded to 1,061 homebuyers including Applicants 1-4.

Methodology and procedure under Rule 126 - pass on benefit at the level of each supply / SKU - Validity of the methodology adopted by DGAP (comparison of ITC to turnover ratios) for computing profiteering in the real estate project - HELD THAT: - The Authority held that the main contours of the procedure are contained in Section 171(1) and that Rule 126 empowers the Authority to determine methodology case-by-case. Given the differing facts of real estate projects (timing of inputs, saleable area, turnover, stage of completion etc.), a single uniform mathematical formula is not feasible. The DGAP's approach-comparing ITC-to-turnover ratios for pre- and post-GST periods and prorating ITC to sold area-was found rational and appropriate on the record and in accordance with Section 171, therefore not arbitrary or unlawful. [Paras 10]

Methodology adopted by the DGAP is valid and the Authority does not interfere with the computation made in the DGAP report.

Benefit of input tax credit - commensurate reduction in prices - Whether the obligation to pass on the additional ITC benefit applies to flats irrespective of whether booked pre- or post-GST (for projects commenced before 01.07.2017) - HELD THAT: - The Authority accepted DGAP's reasoning that projects launched pre-GST but continuing post-GST may yield additional ITC benefits because certain input taxes (e.g., central excise on inputs) became creditable under GST. That incremental ITC pertains to the project and to each unit therein; therefore, all unit/flat buyers of a project commenced before 01.07.2017 are entitled to the benefit regardless of whether their booking was pre- or post-GST. Negotiated prices do not absolve the supplier from separately passing the ITC benefit under Section 171. [Paras 10]

Benefit of additional ITC must be passed to all buyers of units in a project launched before 01.07.2017, irrespective of booking date.

Penalty under Section 171(3A) - Whether the Respondent is liable to penalty under Section 171(3A) for violation during the period 01.01.2020 to 30.04.2020 - HELD THAT: - The Authority noted insertion of Section 171(3A) w.e.f. 01.01.2020 and held that the Respondent's denial of additional ITC to customers during the specified period constituted an offence under that provision. The Respondent's reliance on case law from other tax regimes and arguments about absence of intention or debatable interpretation were held inapplicable to the specific and unambiguous anti-profiteering provisions. Consequently, the Respondent was issued a notice to show cause why penalty should not be imposed for the stated period. [Paras 10, 16]

Respondent is liable to be proceeded against for penalty under Section 171(3A) for 01.01.2020-30.04.2020 and has been issued a notice to explain why penalty should not be imposed.

Interest under Rule 133(3)(b) - commensurate reduction in prices - Reliefs and directions to be granted to remedy the profiteering - HELD THAT: - Pursuant to the finding of profiteering, the Authority directed the Respondent to (i) reduce prices commensurate with the ITC benefit, (ii) refund the profiteered amount of Rs. 20,57,207/- to the identified 1,061 buyers along with interest at 18% from the date the amount was profiteered until payment, (iii) comply within three months failing which recovery procedures under the CGST Act will follow, and (iv) advertise the availability of refunds and co operate with jurisdictional CGST/SGST Commissioners who are tasked to monitor and report compliance. The Authority also directed ongoing monitoring for ITC benefits accruing until issuance of the Completion Certificate and permitted further complaints if remaining benefits are not passed on. [Paras 12, 13, 15, 17, 20]

Respondent ordered to pass/refund Rs. 20,57,207/- to identified buyers with 18% interest, reduce future prices accordingly, advertise the order, and comply with monitoring and recovery directions within prescribed time.

Final Conclusion: The Authority upholds the DGAP computation and finds that M/s. Shriram Properties Pvt. Ltd. profiteered by Rs. 20,57,207/- for the period 01.07.2017 to 30.04.2020 by not passing the additional ITC benefit; the Respondent is directed to refund that amount to 1,061 identified buyers with interest @18%, reduce prices commensurately, is liable to penalty proceedings for 01.01.2020-30.04.2020, and to comply with ancillary reporting, advertising and monitoring directions.

Reopening of assessment u/s 147 - notice u/s 148A(b) - contention raised by petitioner is that there is no escapement of income which can form basis for proceeding against the petitioner also non considering objections submitted by the petitioner in response to notice u/s 148A(b) - HC [2022 (6) TMI 246 - PUNJAB & HARYANA HIGH COURT] held there is no reason to warrant interference by this Court in exercise of the jurisdiction under Article 226/227 of the Constitution of India at this intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority - HELD THAT:- Having heard learned Senior counsel appearing for the petitioner and on carefully perusing the material available on record, we see no reason to interfere at this stage.

However, all contentions of the petitioner are left upon to be urged at the appropriate stage - The Special Leave Petition is, accordingly, disposed of on the aforestated terms.

Collection of tax at source under Section 206C - Forest produce as qualifying trigger for Section 206C - Processed/sawn timber versus forest produce - Proviso and sub section (1A) - declaration/certificate exempting collection - Presumptive taxation to address assessment and recovery difficulties

Collection of tax at source under Section 206C - Forest produce as qualifying trigger for Section 206C - Section 206C applies only where the goods sold qualify as forest produce; liability to collect TCS arises only if the items sold are forest produce. - HELD THAT: - The Court upheld the conclusion of the CIT(A) and the Tribunal that the determinative test under Section 206C is whether the goods sold are forest produce. The legislative purpose of Section 206C (a presumptive collection mechanism enacted to meet assessment and recovery difficulties in specified trades) and the language of the Table attached to sub section (1) show that the provision was intended to operate in respect of forest produce. Authorities dealing with the same issue (including the Division Bench of the Andhra Pradesh High Court) were applied to hold that the provision is not attracted to non forest or agricultural produce. Thus, the department must first establish that the goods are forest produce before invoking Section 206C collection provisions; absent such a finding, the assessing officer's order deeming the assessee an assessee in default was not sustainable.

Assessee entitled to relief: Section 206C not attracted unless the goods are shown to be forest produce; the assessing officer's additions under Section 206C were rightly deleted.

Processed/sawn timber versus forest produce - Proviso and sub section (1A) - declaration/certificate exempting collection - Timber that has been sized, sawn or otherwise processed may cease to be forest produce for the purposes of Section 206C, and where goods have become different commercial produce (or where a buyer furnishes the prescribed declaration/certificate), collection under Section 206C does not apply. - HELD THAT: - On the facts, the assessee traded in sawn/processed timber imported or produced by saw mills, and took the position that such processed timber is not forest produce. The Court accepted that sizing, sawing and conversion into finished commercial articles can result in a new commercial product which falls outside the scope of forest produce as contemplated in Section 206C. The proviso and sub section (1A) (relief by buyer's certificate/declaration that goods are for manufacture/processing and not for trading) further demonstrate that the statute excludes from collection goods that have undergone processing or are covered by the prescribed declaration. The Court distinguished the precedents relied on by the revenue as addressing different legal tests (for example, manufacture under excise law) and therefore not determinative of Section 206C's scope.

Assessee entitled to relief: liability to collect TCS under Section 206C does not automatically arise in respect of sawn/processed timber where the product has ceased to be forest produce or where statutory exemption/declared use applies.

Final Conclusion: The appeal by the revenue is dismissed; the Tribunal's and CIT(A)'s orders deleting the additions under Section 206C in respect of the assessee's transactions are upheld, the substantial questions of law are answered against the revenue, and the connected stay application stands closed.

Condonation of delay - extension of limitation by the Hon'ble Supreme Court - treatment of sundry creditors as unexplained cash credit - genuineness of transactions and evidentiary opportunity before tribunal - remand for fresh consideration

Condonation of delay - extension of limitation by the Hon'ble Supreme Court - Application for condonation of delay in filing the present appeal - HELD THAT: - There was a delay of 737 days in filing the appeal. The Court examined the relevant dates and held that the appellant was entitled to the benefit of the order of the Hon'ble Supreme Court which had extended the period of limitation for filing appeals under various statutes. Applying that extension, the Court found merit in condoning the delay and allowed the application for condonation.

The delay in filing the appeal is condoned and the application for condonation is allowed.

Treatment of sundry creditors as unexplained cash credit - genuineness of transactions and evidentiary opportunity before tribunal - remand for fresh consideration - Validity of the Tribunal's disposal of the assessee's claims regarding sundry creditors and whether the matter requires fresh consideration - HELD THAT: - The assessing officer had disallowed amounts relating to sundry creditors, treated certain liabilities as unexplained cash credits and made disallowances under the relevant provisions, while the CIT(A) considered and dealt with each creditor, granting relief in part. The Tribunal, however, heard the appeal in the absence of the assessee and rejected the assessee's case by reference to the CIT(A)'s order without conducting the requisite fact finding exercise on whether the explanations recorded before the CIT(A) were justified. Given that the assessee was not represented before the Tribunal and sought an opportunity to place records already on file before the Tribunal, the High Court held that the Tribunal should afford the assessee a further opportunity to be heard and to file the paper book containing documents placed before the CIT(A). The High Court therefore set aside the Tribunal's order and remanded the matter for fresh consideration on merits and in accordance with law, leaving the substantial questions of law open for determination after fresh adjudication.

The Tribunal's order is set aside and the matter is remitted to the Tribunal for fresh consideration after affording the assessee an opportunity of hearing and to file documents; substantial questions of law are left open.

Final Conclusion: The High Court allowed condonation of delay by applying the Supreme Court's extension of limitation, set aside the Tribunal's order insofar as it rejected the assessee's claims regarding sundry creditors without appropriate fact finding, and remanded the matter to the Tribunal for fresh consideration after affording the assessee an opportunity to be heard and to tender documents; connected stay application closed.

Unexplained cash credit under Section 68 - duty to record reasons by an appellate fact finding authority - remand for fresh consideration and passing of a reasoned order

Unexplained cash credit under Section 68 - genuineness, creditworthiness, nature and source of share application and loan - Deletion of additions of share application money and unsecured loan set aside by the Tribunal was remanded for fresh consideration on merits. - HELD THAT: - The Tribunal upheld the order of the CIT(A) deleting additions made by the assessing officer in respect of share application money and an unsecured loan but did so without recording independent reasons of its own. The High Court observed that the assessing officer had recorded findings impugning the genuineness and creditworthiness of the source and had narrated a modus operandi; the revenue contested those findings before the Tribunal. Because the Tribunal, as the last fact finding authority in the departmental appellate hierarchy, did not furnish its own reasons explaining why the CIT(A)'s conclusions required no interference and there is no record of any concession by the revenue, the matter cannot stand. The High Court therefore set aside the Tribunal's order and remanded the question of whether the amounts were explainable under the tests of genuineness, creditworthiness and source to the Tribunal for fresh adjudication on merits and in accordance with law, with opportunity of hearing to both parties.

Order of the Tribunal is set aside and the matter remanded to the Tribunal to decide afresh on merits and in accordance with law after affording opportunity of hearing to the revenue and the assessee.

Duty to record reasons by an appellate fact finding authority - remand for fresh consideration and passing of a reasoned order - Requirement that the Tribunal, being the last fact finding authority, must record independent reasons when overturning or affirming lower appellate findings. - HELD THAT: - The Court held that when the revenue actively contests an order and the Tribunal is the ultimate fact finder in the departmental appellate structure, the Tribunal should record its own reasons to demonstrate why it agrees with or departs from the findings of the assessing officer or the lower appellate authority. Absence of such independent reasoning, particularly where adverse factual findings by the assessing officer are on record and contested, warrants interference; accordingly the Tribunal's non speaking affirmation of the deletion could not be sustained and the matter required reconsideration with reasons.

The Tribunal erred in not recording independent reasons; remand ordered so the Tribunal may pass a reasoned order after hearing both parties.

Final Conclusion: The appeal is allowed; the Tribunal's order is set aside and the matter remitted to the Tribunal for fresh consideration and a reasoned decision on the merits after giving both the revenue and the assessee an opportunity of hearing. The substantial questions of law are left open.

Tax Deduction at Source credit - Rectification under Section 154 - Operation of Section 199(1) - Mistake apparent on the record - Debatable question doctrine in Section 154

Operation of Section 199(1) - Tax Deduction at Source credit - Entitlement to credit of TDS of Rs.3,61,059/- under Section 199(1) for the assessment year 2005-06 - HELD THAT: - The Court observed that Section 199(1) treats amounts deducted under Chapter XVII as payment of tax on behalf of the person from whose income the deduction was made and mandates credit for the amount so deducted for the assessment year for which such income is assessable. It was noted that the income in question had been assessed in AY 2005-06 and that the effect of Section 199(1) had not been considered by the authorities below. Although the assessee had not prominently raised the point earlier, the Court held that it amounted to a question of law which ought to be examinable. Given that the lower authorities did not address the application of Section 199(1) to the facts, the Court considered it appropriate to remit the issue to the first appellate authority for fresh consideration on merits after opportunity of hearing.

Remitted to the Commissioner of Income Tax (Appeals) for fresh adjudication on the effect of Section 199(1) and the assessee's entitlement to TDS credit for AY 2005-06.

Rectification under Section 154 - Mistake apparent on the record - Debatable question doctrine in Section 154 - Whether the disallowance of TDS credit could be rectified under Section 154 as a 'mistake apparent from the record' - HELD THAT: - The Court reviewed precedent on the scope of Section 154, noting that an erroneous application of a statutory provision may amount to a mistake apparent from the record, but that a mistake apparent must be obvious and not the subject of long-drawn reasoning or genuinely debatable questions. The Tribunal treated the matter as debatable because of conflicting Benches and held it not amenable to Section 154. The High Court found that the effect of Section 199(1) had not been considered by the authorities and, since the legal question remained open, directed that the matter be reconsidered by the first appellate authority. Consequently, the Court did not itself finally decide whether Section 154 rectification was available but required the appellate authority to take a fresh decision in accordance with law.

Not decided on merits by this Court; remitted to the Commissioner of Income Tax (Appeals) to determine, after hearing, whether rectification under Section 154 is permissible in the facts of the case.

Final Conclusion: The appeal is allowed; the orders of the Tribunal and the Commissioner of Income Tax (Appeals) dated 18th November, 2013 are set aside and the matter is remitted to the first Appellate Authority for fresh consideration and decision on merits after affording the assessee an opportunity of hearing. The substantial question of law is left open.

Credit of taxes deposited - minor head mismatch - rectification of statutory forms - software limitations not to defeat legal rights - purpose of DTVSV Act

Credit of taxes deposited - minor head mismatch - rectification of statutory forms - Petitioners are entitled to have credit for taxes actually deposited recorded in Forms 3 under the DTVSV Act notwithstanding that the challans were paid under minor head '200' instead of '400', and Forms 3 must be rectified accordingly. - HELD THAT: - The Court found no dispute that the taxes were deposited by the petitioners; the only error was that payments were made under the minor head '200' instead of '400' (paragraph 6). The order/communication rejecting credit on that hyper-technical ground was held to be unfair, illegal and contrary to the objective of the DTVSV Act (paragraph 7). Consequently, the respondents were directed to correct the payment heads, record the credit of taxes deposited and issue revised Forms 3 within four weeks, permitting petitioners thereafter to file Forms 4 (paragraph 9). [Paras 6, 7, 9]

Respondents must rectify Forms 3 to record credit for taxes actually deposited despite the minor head error and issue revised Forms 3 to enable filing of Forms 4.

Software limitations not to defeat legal rights - rectification of statutory forms - Inability of departmental software to permit correction of challan code cannot defeat the petitioners' legal right to credit; the software must be modified or assistance obtained so statutory relief is given. - HELD THAT: - The Assessing Officer indicated difficulty in correcting the challan code due to software constraints and proposed to seek assistance from CPC/Systems team (paragraph 5). The Court emphasised that technology must facilitate and not defeat legal rights and directed that if software is the impediment it ought to be suitably modified to accept the applications of the petitioners (paragraph 8). Given this, the respondents were directed to take necessary steps to correct payment heads and issue revised Forms 3 (paragraph 9). [Paras 5, 8, 9]

Respondents to take necessary steps, including modifying software or obtaining system assistance, to effect correction of payment heads and issue revised Forms 3 so petitioners' rights are not defeated by technical impediments.

Final Conclusion: Writ petitions disposed by directing respondents to correct the payment heads, record credit of taxes deposited and issue revised Forms 3 within four weeks, after which petitioners may file Forms 4 within two weeks; departmental software constraints must not be permitted to defeat the petitioners' legal rights.

Revision under section 263 - erroneous and prejudicial to the interest of revenue - partnership deed - discretionary clause for interest on capital - deduction under section 80IB(10) - issue raised and considered during assessment - not escaped assessment - legally possible view

Revision under section 263 - erroneous and prejudicial to the interest of revenue - issue raised and considered during assessment - not escaped assessment - partnership deed - discretionary clause for interest on capital - legally possible view - Whether the Principal CIT validly invoked section 263 to quash the assessment and direct fresh assessment on the ground that the Assessing Officer erred in allowing deduction under section 80IB(10) by not verifying payment/charging of interest on partners' capital as per the partnership deed. - HELD THAT: - The Tribunal held that the twin conditions for exercise of power under section 263 - that the assessment order is erroneous and prejudicial to the revenue - were not satisfied. The record shows the Assessing Officer had raised the specific query during assessment proceedings (show cause dated 24-11-2019) and the assessee furnished a detailed reply on 29-11-2019, which was considered by the AO while completing assessment. Precedents relied upon by the Tribunal establish that a clause in the partnership deed enabling interest on capital is not necessarily mandatory where the clause permits variation by mutual consent; conduct of partners and mutual agreement may render the provision discretionary. In light of these authorities, the view taken by the AO - accepting the assessee's position that no interest was payable in the year under consideration - was a legally possible view. Since the matter was not one that had escaped assessment and the AO's approach fell within a permissible conclusion, the Principal CIT's conclusion that the assessment was erroneous and prejudicial was unsustainable. [Paras 5, 6]

The PCIT's revision under section 263 was set aside; the assessment order was upheld and the assessee's appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2017-18, holding that the Principal CIT erred in invoking section 263 as the AO had raised and considered the issue during assessment and had adopted a legally possible view; the direction for fresh assessment was quashed.

Condonation of delay - admission recorded under section 132(4) of the Income tax Act - requirement of corroborative evidence for additions based on search seized material - evidentiary value of seized/dumb documents - peak credit theory for determination of undisclosed income - additions based on loose sheets/handwritten entries

Condonation of delay - Whether the delay of five days in filing the appeals should be condoned - HELD THAT: - The Tribunal considered the petition and affidavit explaining that the appeals were delayed by five days due to the assessee's illness and self quarantine. Having heard parties, the Tribunal held that the reasons furnished constituted a reasonable cause under the Act and exercised its discretion to condone the delay, admitting the appeals for adjudication.

Delay of five days in filing the appeals is condoned and the appeals are admitted for adjudication.

Admission recorded under section 132(4) of the Income tax Act - requirement of corroborative evidence for additions based on search seized material - evidentiary value of seized/dumb documents - peak credit theory for determination of undisclosed income - Whether additions made by the Assessing Officer on account of alleged unaccounted income based on seized diary entries and the assessee's sworn statements are sustainable and, if not, what method should be adopted to quantify undisclosed income - HELD THAT: - The Tribunal examined the seized diary (a 'dumb' document of jottings without party details or narrated transactions) and the sworn statements recorded under section 132(4). While acknowledging that admissions in a sworn statement are important pieces of evidence, the Tribunal applied established legal principles that such admissions are not conclusive and require corroborative material. The seized diary did not disclose particulars of parties, sources of receipts or the nature of payments and therefore lacked the requisite corroborative quality. The Tribunal found it improper to treat all credit entries as taxable income while ignoring corresponding debit entries. Given that both receipts and payments were recorded but not meaningfully described, the Tribunal held that the appropriate method was to apply the peak credit approach to arrive at net undisclosed income. On the facts, the Tribunal accepted the assessee's computations of peak credits and directed the Assessing Officer to restrict additions accordingly.

Additions made solely on the basis of the seized diary and admissions are not sustainable without corroboration; undisclosed income for the years is to be determined by peak credit theory and restricted to the peaks computed by the assessee (directed additions sustained to the extent indicated by the Tribunal).

Additions based on loose sheets/handwritten entries - Whether the Assessing Officer rightly made additions in respect of specified entries in loose sheets totaling the contested amount - HELD THAT: - The loose sheets seized from an associate's premises contained entries in the names of several persons/concerns. The assessee explained one entry as reflected in regular books but failed to satisfactorily explain other entries. The Tribunal observed that the documents pertained to the assessee's business and that the persons named were associates; consequently the burden to explain lay on the assessee. In absence of explanation or corroboration for those entries, the Tribunal found no infirmity in treating them as unexplained receipts liable to tax.

The addition in respect of the entries recorded in the loose sheets (the contested amount) is upheld.

Final Conclusion: The appeals were admitted by condoning five days' delay. On merits, the Tribunal rejected wholesale additions founded solely on a seized 'dumb' diary and admissions without corroboration, directed quantification of undisclosed income by applying peak credit theory (restricting additions to the peak amounts computed by the assessee for each year), and upheld the addition based on the loose sheets in respect of the unexplained entries; appeals are thus partly allowed.

Exemption under section 54F - residential property versus commercial use - treatment of multiple residential units as one residential house - beneficial construction of taxing provision

Exemption under section 54F - residential property versus commercial use - treatment of multiple residential units as one residential house - Assessee entitled to deduction under section 54F for investment in a new residential house despite ownership of other units which were let out for commercial use; alternatively, multiple small units in the same building may be treated as one residential house for section 54F purposes. - HELD THAT: - The Assessing Officer disallowed deduction under section 54F on the ground that the assessee owned more than one residential house on the date of transfer. The assessee's case, accepted by the Tribunal, is that the other properties were being used for commercial purposes (let out as service apartments) and therefore cannot be treated as residential houses for the purpose of the proviso to section 54F(1). The Tribunal, following the decision of the Hon'ble Karnataka High Court in Navin Jolly v. ITO, held that usage of the property is determinative in classifying it as residential or commercial and that properties actually put to commercial use must be excluded when applying the proviso to section 54F. The Tribunal also noted the alternative principle that multiple independent residential units in the same building may be treated as one residential house so as not to defeat the beneficial object of section 54F. Applying these principles to the facts, the Tribunal found the assessee entitled to the exemption and directed deletion of the addition made by the Assessing Officer. [Paras 6, 7]

Deduction under section 54F allowed; additions disallowing the deduction deleted and Assessing Officer directed to give effect.

Final Conclusion: Appeal allowed; deduction under section 54F granted in respect of the investment in the new residential property and the additions made by the Assessing Officer are directed to be deleted.

Penalty under section 271D - Prohibition on acceptance of loans/repayments in cash under section 269SS - Journal entries and bank routing as evidence of non-cash transactions

Penalty under section 271D - Prohibition on acceptance of loans/repayments in cash under section 269SS - Journal entries and bank routing as evidence of non-cash transactions - Whether penalty under section 271D could be sustained for alleged contraventions of section 269SS in respect of loans credited to the assessee's bank account through banking channels and recorded by journal entries - HELD THAT: - The Tribunal upheld the concluding factual finding of the CIT(A) that the amounts reflected in the assessee's books as loans were sourced from bank loans obtained by the director and credited directly to the assessee's bank account. The assessee produced ledger accounts and explained that accounting software constraints required passing journal entries to reflect transfers; those journal entries did not indicate cash transactions. On the basis that the funds were routed through banks (ICICI Bank, Kotak Mahindra Prime Ltd. and others) and not remitted in cash to the assessee, there was no contravention of the prohibition in section 269SS. Since section 269SS was not breached, penalty under section 271D could not be levied in respect of the journal-entry transactions totaling the impugned amount. The Tribunal refused to disturb the CIT(A)'s factual conclusion, finding it to be supported by records and therefore not amenable to interference. [Paras 3, 7]

Penalty under section 271D in respect of the loan amounts recorded by journal entries (the impugned sum) is deleted as there was no contravention of section 269SS.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s deletion of penalty under section 271D for the loan amounts evidenced as bank-originated funds credited to the assessee and recorded by journal entries, finding no violation of section 269SS.

Deduction under Section 57(iii) of the Income tax Act - expenditure laid out wholly and exclusively for the purpose of making or earning income from other sources - nexus between borrowed funds and their application for earning interest income - consistency in tax treatment of identical transactions across assessment years - remand for verification of factual nexus and supporting records

Deduction under Section 57(iii) of the Income tax Act - expenditure laid out wholly and exclusively for the purpose of making or earning income from other sources - nexus between borrowed funds and their application for earning interest income - Allowability of interest expenditure attributable to loans raised from M/s Dynasty Tradelink Pvt. Ltd. - HELD THAT: - The Tribunal examined the bank account records and the chart filed by the assessee and found that out of amounts borrowed from M/s Dynasty Tradelink Pvt. Ltd. an amount of Rs.3,22,50,000 was in fact utilized wholly and exclusively for advancing interest bearing loans/deposits to GDR Educational Society during the year; thus an inextricable nexus between the borrowed funds and the interest earning application was established. Applying the test in Section 57(iii) - which requires that the expenditure be laid out wholly and exclusively for the purpose of making or earning income from other sources and not that such income must already have been earned - the Tribunal held that the interest expenditure corresponding to the interest bearing amount so raised falls within the statutory deduction. The Tribunal relied on settled precedents to support that the requirement is one of purpose and not prior realization of income, and accordingly set aside the disallowance so far as it related to the funds traced to Dynasty Tradelink Pvt. Ltd. [Paras 9, 10]

Interest expenditure corresponding to the Rs.3,22,50,000 raised from M/s Dynasty Tradelink Pvt. Ltd. is allowable under Section 57(iii) and the disallowance is set aside.

Deduction under Section 57(iii) of the Income tax Act - expenditure laid out wholly and exclusively for the purpose of making or earning income from other sources - remand for verification of factual nexus and supporting records - Claimed deduction of interest on loans raised from Hill Queen Investment Pvt. Ltd., Sonal Kumar Rungta and Tanishq Export Pvt. Ltd. - HELD THAT: - The Tribunal accepted the legal proposition that interest on funds borrowed wholly and exclusively for the purpose of earning interest income would be allowable under Section 57(iii). However, the record before the Tribunal did not contain a complete set of facts to establish the requisite inextricable nexus between the borrowings from these three parties (allegedly raised prior to 01.04.2009) and their alleged application to interest earning deposits/advances for the year under appeal. Further, the claim had not been raised in the return for the immediately preceding year so as to enable a straightforward application of consistency. In view of the factual gaps, the Tribunal directed that the matter be restored to the file of the assessing officer for fresh adjudication and factual verification; if the assessee substantiates the application of funds, the AO shall allow the deduction under Section 57(iii). [Paras 11, 12]

Matter remitted to the assessing officer for verification and fresh adjudication of the allowability of interest on loans from Hill Queen Investment Pvt. Ltd., Sonal Kumar Rungta and Tanishq Export Pvt. Ltd.; allowance directed if nexus is proved.

Deduction under Section 57(iii) of the Income tax Act - expenditure laid out wholly and exclusively for the purpose of making or earning income from other sources - consistency in tax treatment - Allowability of interest expenditure incurred in repaying old loans (paid out of a temporary bank overdraft) to Mary Mithai, V.K. Satija HUF, Jaya Solanki and Yashwant Rao Kavre. - HELD THAT: - The Tribunal noted that the assessee had, in the immediately preceding assessment year, claimed and had the department accept deduction of interest on loans of these parties while they were being utilized for making interest bearing advances. During the year under appeal the outstanding principals to these parties were squared up by raising a temporary overdraft from a bank and interest was paid. On the facts being the same in substance and in the absence of any contrary material from the Revenue, the Tribunal invoked the principle of consistency and found no reason to adopt a different view; it therefore allowed the deduction of the interest paid on these old loans. [Paras 13, 14]

Interest expenditure in respect of the repayments to Mary Mithai, V.K. Satija HUF, Jaya Solanki and Yashwant Rao Kavre is allowable under Section 57(iii) in view of the factual consistency with the prior year.

Final Conclusion: The appeal is partly allowed: the disallowance is set aside insofar as it relates to funds traced to M/s Dynasty Tradelink Pvt. Ltd. and interest on repayments to four named parties is allowed; claims in respect of three other lenders are remitted to the assessing officer for factual verification and fresh adjudication.

Deduction under section 80P(2)(a)(i) - interest income from deposits as income from banking/providing credit facilities - Attribution of income 'attributable to' business activities - Deduction under section 80P(2)(a)(iii) - profit from marketing of agricultural produce of members (paddy procurement) - Deduction under section 80P(2)(c)(i) - profit from Public Distribution System restricted to net profit after proportionate expenses - Deduction under section 80P(2)(d) - dividend/interest from investments with another co-operative society - Remand for verification of documentary evidence and apportionment

Deduction under section 80P(2)(a)(i) - interest income from deposits as income from banking/providing credit facilities - Attribution of income 'attributable to' business activities - Allowability of deduction under Sec. 80P(2)(a)(i) for interest earned on short term deposits of surplus funds - HELD THAT: - The Tribunal followed its earlier decision in ITA No.114/RPR/2016 & Ors. and the reasoning of the High Court of Karnataka that interest on surplus funds, deposited as short term deposits when those funds were not immediately required for lending, is inextricably interlinked with the business of providing credit and thus is 'income attributable to' that business. Distinguishing cases where deposited amounts were retained sale proceeds/liabilities to members, the Tribunal held that where deposits represent simpliciter surplus/idle funds of the co operative society, the interest thereon is attributable to banking/credit activity and deductible under Sec. 80P(2)(a)(i). Applying that principle to the facts, the Tribunal directed the AO to allow the claimed deduction of interest income. [Paras 9]

Deduction under Sec. 80P(2)(a)(i) allowed (claim of Rs.4,36,196/- directed to be allowed).

Deduction under section 80P(2)(a)(iii) - profit from marketing of agricultural produce of members (paddy procurement) - Remand for verification of documentary evidence and apportionment - Adjudication of deduction under Sec. 80P(2)(a)(iii) for paddy procurement business remanded to the Assessing Officer for fresh consideration - HELD THAT: - The Tribunal admitted additional compilation of paddy purchase details as documentary evidence and, following parity with its earlier order in ITA No.114/RPR/2016 & Ors., concluded that the extent of deduction depends on the proportion of procurement from non members. Because the compilation was not before the lower authorities, the matter requires factual verification and quantification by the AO. The AO is directed to re adjudicate after determining the extent to which the procurement related to non members and to restrict deduction only to the profit relatable to member transactions; the assessee must furnish requisite details during the set aside proceedings. [Paras 13]

Ground allowed for statistical purposes and remitted to the AO for fresh adjudication and apportionment.

Deduction under section 80P(2)(c)(i) - profit from Public Distribution System restricted to net profit after proportionate expenses - Remand for verification of documentary evidence and apportionment - Claim for deduction under Sec. 80P(2)(c)(i) in respect of PDS profit remanded to the Assessing Officer to restrict deduction to net profit after proportionate expenses - HELD THAT: - Relying on the Tribunal's earlier order in ITA No.114/RPR/2016 & Ors., the Tribunal held that the assessee's claim for deduction of PDS profit must be restricted to net profit after apportioning relevant expenses, but such restriction requires factual verification. The AO is directed to reconsider the claim in the set aside proceedings and determine the net profit after proportionate expenses, with the assessee to produce necessary documents for verification. [Paras 16]

Ground allowed for statistical purposes and remitted to the AO to determine deduction limited to net profit after proportionate expenses.

Deduction under section 80P(2)(d) - dividend/interest from investments with another co-operative society - Allowability of deduction under Sec. 80P(2)(d) for dividend received from shares of a co operative bank - HELD THAT: - The Tribunal followed its earlier decision and several High Court and tribunal precedents holding that interest/dividend derived by a co operative society from investments with another co operative society (including a co operative bank, which remains a co operative society under Sec.2(19)) is deductible under Sec.80P(2)(d). Distinguishing the effect of sub section (4) (which restricts co operative banks from claiming Sec.80P benefits), the Tribunal reasoned that the status of a co operative bank as a 'co operative society' suffices for the investing society's entitlement to deduction. On these grounds the disallowance was vacated. [Paras 19]

Deduction under Sec. 80P(2)(d) allowed (disallowance of dividend income vacated).

Final Conclusion: The Tribunal set aside the CIT(A) order and, following its earlier decisions, allowed the assessee's deduction under Sec.80P(2)(a)(i) for interest on deposits and under Sec.80P(2)(d) for dividend from a co operative bank, and remitted the claims relating to paddy procurement (Sec.80P(2)(a)(iii)) and PDS profit (Sec.80P(2)(c)(i)) to the Assessing Officer for fresh adjudication and quantification after verification of additional documentary evidence; the appeals are allowed/allowed for statistical purposes.

Reopening of assessment under section 147 read with section 148 - borrowed satisfaction - estimation of income from bogus purchases at 12.5% - circular trading - addition under section 68 for unexplained credits - requirement to prove identity, genuineness and creditworthiness

Reopening of assessment under section 147 read with section 148 - borrowed satisfaction - Validity of reopening assessment for A.Y. 2009-10 - HELD THAT: - The Tribunal upheld the learned CIT(A)'s conclusion that the reopening was valid. The assessee had not filed a return within the time mandated by section 139(1) and had only filed a return in response to a later notice after a substantial delay; relevant departmental intelligence (a tax evasion petition from CBI/anti-corruption authorities) and absence of audited records and responses provided the AO with a reason to believe escapement of income. The Tribunal accepted that adequacy of reasons for issuing notice under section 148 is not to be tested at the notice stage and that tangible material from investigation constituted material on which the AO could form his reason to believe; consequently the reopening was not treated as based on borrowed satisfaction. [Paras 13]

Reopening of assessment for A.Y. 2009-10 sustained; assessee's ground challenging reopening dismissed.

Estimation of income from bogus purchases at 12.5% - circular trading - Sustenance of disallowance by estimating income at 12.5% of purchases treated as bogus - HELD THAT: - The Tribunal affirmed the learned CIT(A)'s confirmation of a disallowance equal to 12.5% of purchases from related parties held to be circular and unsupported by bank records or evidence of physical movement. The assessing officer's large-scale disallowance was substantially reduced on appeal, but the critical disallowance of Rs.112,959,517 (calculated at 12.5% of identified dubious purchases) was sustained because transactions were effected by journal entries, lacked evidence of transportation, involved repeated circular dealings with sister concerns, and the assessee's reported gross profit ratios and stock positions were unreliable. Given the absence of reliable evidence of actual market transactions and physical movement, the estimation method applied by the CIT(A) was held to be permissible. [Paras 15]

Disallowance of expenditure estimated at 12.5% of the identified bogus purchases upheld; assessee's challenge dismissed.

Addition under section 68 for unexplained credits - requirement to prove identity, genuineness and creditworthiness - Whether credits from Global Paper Impex Pvt. Ltd. and from Mr. Nemchand J. Gala should be assessed under section 68 - HELD THAT: - The Tribunal allowed the AO's appeal insofar as credits during the year from Global Paper Impex Pvt. Ltd. and from Mr. Nemchand J. Gala were concerned. The CIT(A) had deleted additions relating to (a) Global Paper Impex Pvt. Ltd. on the basis of confirmations and circular flow of funds argued to originate from the assessee's cash credit, and (b) Nemchand J. Gala by accepting identity/genuineness on account of his being a promoter. The Tribunal found these deletions unsustainable: mere production of an acknowledgement or accounts of the creditor did not establish genuineness, and promoter status alone did not dispense with the statutory requirement to prove identity, genuineness and creditworthiness. In view of the circular transactions and inadequate proof, the sums credited during the year in these accounts were to be taxed as unexplained credits under section 68. [Paras 18, 23, 24]

Additions under section 68 confirmed in respect of credits from Global Paper Impex Pvt. Ltd. and Mr. Nemchand J. Gala; AO's grounds 3 and 4 allowed.

Final Conclusion: The assessee's appeal dismissed in respect of reopening and the confirmed disallowance of estimated income at 12.5% of identified bogus purchases; the assessing officer's appeal partly allowed by directing addition under section 68 of the Act in respect of credits from Global Paper Impex Pvt. Ltd. and Mr. Nemchand J. Gala.

Comparability - functional comparability - segmental comparability - arms-length price (ALP) - Transfer Pricing Officer's remit to determine ALP - other method - need-benefit-evidence test - remand for de novo adjudication on comparability

Comparability - functional comparability - segmental comparability - remand for de novo adjudication on comparability - Whether Desein Pvt. Ltd. was rightly excluded as a comparable for benchmarking the international transaction of rendering tendering, design & engineering and IT services and whether the matter requires remand. - HELD THAT: - The TPO excluded Desein Pvt. Ltd. on the basis that its association with government statutory bodies and lower margins rendered it not comparable; the DRP upheld that exclusion citing mixed revenue streams (consultancy and operation & maintenance) and purportedly higher employee costs. The Tribunal finds the TPO/DRP erred in assuming Desein's revenue derived only from government projects because the company also serves private and international clients. The Tribunal also holds that the mere difference in aggregate employee costs is not a sufficient basis to reject comparability vis-a -vis the assessee. Importantly, the lower authorities did not examine the functions, assets and risks specifically in relation to the consultancy/relevant segment of Desein's business, nor did they consider segmental data to test whether the consultancy stream is functionally comparable to the assessee. For these reasons the Tribunal directs a remand to the TPO for de novo examination of the comparability of the relevant consultancy segment of Desein Pvt. Ltd., with directions to the assessee to furnish segmental and functional data and for the TPO to follow the DRP's other directions where applicable. The Tribunal cites authority that functional comparability cannot be rejected merely on turnover or aggregate figures, and therefore allows the ground for statistical purposes while remanding the substantive comparability exercise. [Paras 11, 12, 14, 15]

Desein Pvt. Ltd. cannot be excluded outright on the recorded grounds; the issue of comparability of its consultancy segment is remanded to the TPO for fresh adjudication after examination of segmental and functional data.

Arms-length price (ALP) - Transfer Pricing Officer's remit to determine ALP - other method - need-benefit-evidence test - Whether the TPO and DRP were justified in treating the arm's length price of payment for corporate IT support services as nil. - HELD THAT: - The assessee produced the signed agreement setting out services, remuneration model and allocation keys, sample invoices from third parties, email extracts, screenshots and IT tickets demonstrating receipt of services. The TPO applied an 'other method' in the form of a need-benefit-evidence test and concluded ALP was nil without searching for or applying comparable uncontrolled transactions as required by Rule 10AB. The Tribunal observes that Rule 10AB requires the 'other method' to take into account prices charged in same or similar uncontrolled transactions, and the TPO has not identified any comparable non associated transaction to justify treating the value as nil. The Tribunal further reiterates that determining whether services were rendered or whether expenditure is allowable under section 37 is not the TPO's province; the TPO's jurisdiction is limited to determining ALP under Chapter X and the Rules. Having examined the documents evidencing rendition of services, and in view of jurisprudence that the TPO cannot ad hoc disallow ALP dehors section 92C/Rules, the Tribunal finds the TPO/DRP were not justified in declaring the transaction value nil and allows the grounds raised by the assessee. [Paras 21, 22, 23, 24, 25]

The TPO's determination of ALP as nil for corporate IT support services is unsustainable; the adjustment is set aside and the assessee's grounds on this issue are allowed.

Procedural dismissal of unpressed ground - Claim for deduction of amounts paid as Education Cess and Higher and Secondary Education Cess. - HELD THAT: - The assessee did not press this ground at hearing. The Tribunal records the non pressing and accordingly declines to adjudicate the contention on merits. [Paras 26]

Ground not pressed and dismissed as not pressed.

Final Conclusion: The appeal is partly allowed. The exclusion of Desein Pvt. Ltd. as a comparable is set aside and remitted to the TPO for fresh consideration of the comparability of the relevant consultancy segment after the assessee furnishes segmental and functional data; the TPO/DRP's nil valuation of the corporate IT support services is held to be unsustainable and is set aside; the ground on education cess was not pressed and is dismissed.

Penalty under section 271(1)(b) - reasonable cause for non-compliance - failure to furnish copies of impounded material - re-assessment notice under section 148 - notice under section 142(1) - show cause notice under section 274 r.w.s. 271(1)(b)

Penalty under section 271(1)(b) - reasonable cause for non-compliance - failure to furnish copies of impounded material - re-assessment notice under section 148 - notice under section 142(1) - Validity of penalty imposed under section 271(1)(b) for assessment years 2014-15 to 2016-17 where assessee did not comply with notices under section 142(1) after survey materials were impounded. - HELD THAT: - The Tribunal found that the Assessing Officer had issued notice under section 148 allowing 30 days to file return and that the assessee, before expiry of that period, requested copies of documents impounded during the survey to enable compliance. The Assessing Officer thereafter issued notice under section 142(1) and repeated reminders but did not supply the requested impounded-material copies, and proceeded to issue a show cause notice and impose penalty without awaiting the assessee's reply. The bench held that non-supply of impounded records by the Department materially impaired the assessee's ability to comply and constituted a reasonable cause for failure to comply with the statutory notice. On these facts the case fell within the protective ambit of the doctrine of reasonable cause (and section 273B), and the penalty under section 271(1)(b) was not sustainable and was deleted for the said assessment years. [Paras 9]

Penalty under section 271(1)(b) for assessment years 2014-15 to 2016-17 deleted.

Penalty under section 271(1)(b) - reasonable cause for non-compliance - failure to furnish copies of impounded material - notice under section 142(1) - show cause notice under section 274 r.w.s. 271(1)(b) - Validity of penalty imposed under section 271(1)(b) for assessment year 2017-18 where assessment was under section 143(3) but non-compliance arose from non-supply of impounded material. - HELD THAT: - Although the assessment for 2017-18 was framed under section 143(3), the material facts were parallel: the assessee requested copies of impounded materials to comply with the notice under section 142(1), but the Assessing Officer did not supply them until two days before passing the penalty order. The Tribunal held that supplying seized-document copies only immediately prior to levying penalty demonstrated that the assessee had been deprived of necessary records and therefore had a reasonable cause for non-compliance. Consequently, the penalty under section 271(1)(b) for 2017-18 could not be sustained and was deleted. [Paras 12]

Penalty under section 271(1)(b) for assessment year 2017-18 deleted.

Final Conclusion: All four appeals allowed; penalty under section 271(1)(b) deleted for assessment years 2014-15 to 2017-18.

Duties of Resolution Professional - substantiation of claims under Regulation 10 - submission of claims under Regulation 12(1) and 12(2) - verification and classification of financial debt and operational debt - role of Resolution Professional as administrative facilitator not adjudicator - reconsideration of claims and reconstitution of Committee of Creditors

Verification and classification of financial debt and operational debt - duties of Resolution Professional - The Appellant/Resolution Professional failed to undertake adequate and credible efforts to verify and classify the claimant's transactions as financial or operational debt before rejecting the claim. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that, beyond issuing a brief email seeking voluminous account statements spanning 2007-2019, there was no evidence of a 'deep-dive' or credible effort by the Resolution Professional to analyse the account records and distinguish operational from financial transactions. The record showed that the Financial Creditor had furnished supporting documents in good faith when called upon, and the Adjudicating Authority was justified in concluding that the Resolution Professional had not discharged the professional standard of care expected in examining admissibility of claims. The finding emphasises that the Resolution Professional must verify transactions with reasonable and proportionate effort before rejecting claims summarily and should present the factual position to the CoC where necessary. [Paras 13, 14, 15, 21]

Findings of lack of adequate verification and failure to properly classify the claim were affirmed.

Submission of claims under Regulation 12(1) and 12(2) - substantiation of claims under Regulation 10 - A creditor whose claim filed within the public-announcement period under Regulation 12(1) is not precluded from availing the extended filing/ substantiation opportunity under Regulation 12(2) to furnish supporting evidence on or before the ninetieth day. - HELD THAT: - The Tribunal held that Regulation 12(1) is subject to Regulation 12(2) and that there is no express embargo in the CIRP Regulations preventing a creditor who initially filed under Regulation 12(1) but failed to satisfy the Resolution Professional from refiling or furnishing additional proof under Regulation 12(2) within the prescribed ninetieth day. Regulation 10 permits the Resolution Professional to call for further evidence, but rejecting a refiled claim solely on the ground that an earlier in-time claim had been rejected was an unduly narrow and pedantic interpretation that would disincentivize timely filing and impede resolution. Accordingly, the Resolution Professional ought not to have refused to entertain the refiled claim dated 24.05.2019 on that sole basis. [Paras 16, 17, 18, 19]

The Appellant's refusal to accept the refiled claim on the ground that an earlier in-time claim had been rejected was incorrect; Regulation 12(2) may be availed within the ninetieth day.

Role of Resolution Professional as administrative facilitator not adjudicator - reconsideration of claims and reconstitution of Committee of Creditors - The Resolution Professional cannot exercise adjudicatory power to summarily reject or finally determine claims without presenting the complete facts to the CoC; he is an administrative facilitator and must place admissibility issues before the CoC for decision where appropriate. - HELD THAT: - Relying on the statutory scheme and the Supreme Court's exposition that the Resolution Professional's functions are administrative rather than quasi-judicial, the Tribunal held that the RP was obliged to collate, verify and, where necessary, present the factual and legal position on contested claims to the CoC rather than unilaterally excluding claimants from the committee. The Adjudicating Authority's direction to the RP to reconsider the claim, evaluate classification as a financial creditor, and reconstitute the CoC was therefore in consonance with the RP's duties under Sections 18 and 25 of the IBC and the CIRP Regulations. Summary rejection at the RP's level without adequate verification or presentation to the CoC misconstrues the RP's role. [Paras 20, 21]

The Adjudicating Authority was justified in directing reconsideration of the claim and reconstitution of the CoC; the RP's unilateral summary rejection was inconsistent with his administrative role.

Final Conclusion: The Tribunal found no merit in the appeal. The Adjudicating Authority's adverse observations that the Resolution Professional failed to make adequate efforts to verify and classify the claim, misconstrued his role by summarily rejecting the refiled claim, and therefore directed reconsideration and reconstitution of the CoC, are affirmed; the request to expunge those observations is refused and the appeal is dismissed.

Financial debt - disbursement against the consideration for the time value of money - commercial effect of borrowing - classification as other creditors - statement as to how it has dealt with the interests of all stakeholders (Regulation 38(1-A)) - limited judicial review under Section 30(2) - committee of creditors' commercial wisdom

Financial debt - disbursement against the consideration for the time value of money - commercial effect of borrowing - classification as other creditors - Whether the earnest money paid by the appellant to the corporate debtor constituted a 'financial debt' within the meaning of Section 5(8) of the Code. - HELD THAT: - The Tribunal examined the nature and sequence of the transaction: an offer letter dated 14.09.2018, subsequent interest-free advance payments described as earnest money, and absence of any agreement or acceptance by the corporate debtor. The statutory definition of 'financial debt' requires a disbursal that is against consideration for the time value of money; both the principal clause and the sub-clauses must be read so that the essential element of disbursement for time value of money is present. Reliance was placed on Supreme Court authority and earlier NCLAT pronouncements establishing that mere payment does not become 'financial debt' unless it embodies the time-value-of-money element or the commercial effect of borrowing. The payments here were advances/earnest money to be adjusted against sale consideration and were not shown to be disbursed in consideration of the time value of money nor to have the commercial effect of borrowing. Classification of the liability as a 'financial liability' in the corporate annual report does not equate to admission that the claim is a 'financial debt' under Section 5(8). In view of the absence of the essential elements, the Adjudicating Authority was correct in treating the appellant as an other creditor and in rejecting admission of the claim as a financial creditor. [Paras 9, 11, 16, 19, 20]

Appellant's payment of earnest money is not a 'financial debt' under Section 5(8); the Adjudicating Authority rightly admitted the claim as an other creditor and rejected admission as a financial creditor.

Limited judicial review under Section 30(2) - statement as to how it has dealt with the interests of all stakeholders (Regulation 38(1-A)) - committee of creditors' commercial wisdom - classification as other creditors - Whether the Resolution Plan approved by the CoC and sanctioned by the Adjudicating Authority offended Section 30(2) or Regulation 38(1-A) by proposing nil payment to other creditors (including the appellant). - HELD THAT: - The Tribunal applied the limited scope of judicial review under Section 30(2) as explained by the Supreme Court: the Adjudicating Authority must ensure that the CoC has taken into account keeping the corporate debtor as a going concern, maximising asset value and adequately balancing interests of all stakeholders, and that the resolution plan contains a statement as to how stakeholders' interests are dealt with (Regulation 38(1-A)). The approved plan expressly states that other creditors were admitted but that the financial proposal envisages nil payment to such other creditors; the CoC made a commercial decision not to allocate amounts to other creditors. The appellant failed to demonstrate that the CoC or the plan contravened any statutory provision or that the CoC did not have regard to the statutory parameters; there is no statutory requirement that every stakeholder must be paid. Distinguishing precedents where reasons were absent, the Tribunal found no grounds to interfere with the CoC's commercial decision or the Adjudicating Authority's approval of the plan. [Paras 21, 22, 23, 26, 29]

The Resolution Plan does not warrant interference; the CoC's decision and the Adjudicating Authority's approval are sustainable under the limited judicial review mandated by Section 30(2) and Regulation 38(1-A).

Final Conclusion: Both appeals are dismissed: the Adjudicating Authority correctly held that the earnest money paid by the appellant is not a 'financial debt' and rightly classified the claim as an other creditor; the approval of the Resolution Plan is not vitiated and does not call for interference under the limited judicial review available under Section 30(2) and Regulation 38(1-A).

Voluntary liquidation - Declaration of solvency - Liquidator's preliminary and final reports - Public announcement and claims process - Extinguishment of liabilities - Closure of liquidation bank account - Dissolution of corporate person under section 59(7) of the IBC

Voluntary liquidation - Declaration of solvency - Liquidator's preliminary and final reports - Public announcement and claims process - Extinguishment of liabilities - Closure of liquidation bank account - Whether the Corporate Person's affairs have been wound up and it is fit to be dissolved under section 59(7) of the Code - HELD THAT: - The Tribunal examined the statutory and regulatory compliances for a voluntary liquidation: board resolution and special resolution for voluntary liquidation, filing of MGT-14 and GNL-2, directors' Declaration of Solvency after inquiry into affairs, the Liquidator's Preliminary Report and Final Report, public announcement inviting claims and the absence of any claims, intimation to IBBI and Income Tax Authority, opening and subsequent closure of a liquidation bank account, audited financial statements and an auditor's certificate showing receipts and payments. The documents on record demonstrate that the company had no assets beyond cash and security deposits, that liabilities were extinguished, no creditors came forward, and the liquidation account was closed. The Tribunal was satisfied that the voluntary liquidation was not a device to defraud any person and that the affairs of the Corporate Person have been completely wound up, warranting dissolution. [Paras 14, 15]

The petition is allowed and the Corporate Person is ordered to be dissolved; the Liquidator to serve a copy of the order on the Registrar of Companies, Mumbai within fourteen days.

Final Conclusion: The Tribunal, being satisfied with the compliance of the voluntary liquidation process, the liquidation reports, the absence of claims and the extinguishment of liabilities, ordered dissolution of the Corporate Person and directed service of the order on the Registrar of Companies for necessary action.

Admission of Section 7 application - Corporate Insolvency Resolution Process (CIRP) - Default and financial debt - Appointment of Interim Resolution Professional - Moratorium under Section 14 - Public announcement by Interim Resolution Professional - Deposit towards resolution costs - Obligation of management to cooperate with the Interim Resolution Professional - Territorial jurisdiction of Adjudicating Authority

Territorial jurisdiction of Adjudicating Authority - Adjudicating Authority had territorial jurisdiction to admit the Section 7 application. - HELD THAT: - The Tribunal noted that the registered office of the corporate debtor is situated in New Delhi and therefore the National Company Law Tribunal, New Delhi Bench is the Adjudicating Authority competent to adjudicate the application under the Code in terms of Section 60(1). The point of territorial competence was addressed as a preliminary factual determination tied to the corporate debtor's registered office location and the adjudicatory competence of the Tribunal. [Paras 3]

Tribunal has territorial jurisdiction over the NCT of Delhi and is the Adjudicating Authority in relation to the application.

Default and financial debt - Admission of Section 7 application - Whether the financial creditor proved existence of financial debt and default such as to maintain the Section 7 application. - HELD THAT: - The financial creditor produced the loan agreement, bank statements, reminder and recovery letters, ledger entries and record of debt with NeSL. The corporate debtor, in its reply, admitted inability to pay and thereby acknowledged liability. The Tribunal applied the statutory threshold that once default of the requisite amount (Rs. one hundred lakhs or more) is established under Section 4, an application under Section 7 is maintainable. The Form I was found complete and there was no infirmity in the application; the proposed Interim Resolution Professional had furnished the required disclosures and no disciplinary proceedings were shown to be pending against him. On these findings the Tribunal concluded that the respondent had outstanding financial debt and had committed default. [Paras 8, 9, 10, 11, 12]

The Section 7 application is maintainable; debt and default are established and the application is admitted.

Appointment of Interim Resolution Professional - Appointment of the named Interim Resolution Professional. - HELD THAT: - In compliance with Section 7(3)(b) the financial creditor proposed Mr. Prabhat Kumar as Interim Resolution Professional. He executed Form 2, made requisite disclosures and declared no disciplinary proceedings pending. The Tribunal found that statutory requirements regarding appointment were satisfied and accordingly appointed Mr. Prabhat Kumar as Interim Resolution Professional for the corporate debtor. [Paras 7, 11, 14]

Mr. Prabhat Kumar is appointed as Interim Resolution Professional.

Public announcement by Interim Resolution Professional - Direction regarding public announcement following admission of the Section 7 application. - HELD THAT: - Pursuant to Section 13(2) of the Code and the Explanation to Regulation 6(1) of the IBBI Regulations, 2016, the Tribunal directed the Interim Resolution Professional to make the public announcement immediately, prescribing the three-day timeline as per the Regulations for effecting that announcement. [Paras 15]

Interim Resolution Professional to make the public announcement immediately (within three days as prescribed).

Deposit towards resolution costs - Direction to the financial creditor to deposit interim funds to meet IRP expenses. - HELD THAT: - The Tribunal directed the financial creditor to deposit a sum with the Interim Resolution Professional to meet expenses for performing functions under the Regulations. The deposit was ordered within three days and was made subject to adjustment towards resolution process costs as per applicable rules, thereby ensuring funding for the IRP to discharge statutory duties. [Paras 16]

Financial creditor directed to deposit the specified sum with the Interim Resolution Professional within three days, subject to adjustment towards resolution process costs.

Moratorium under Section 14 - Declaration of moratorium and its stated consequences following admission of the Section 7 application. - HELD THAT: - On admission under Section 7(5)(a), the Tribunal declared the moratorium in terms of Section 14. It set out the prohibitions that apply during CIRP-including institution or continuation of suits or proceedings, transfer or disposal of assets by the corporate debtor, actions to enforce security interests, and recovery of property from the corporate debtor-while also noting statutory exceptions such as supplies and transactions notified by Central Government and the exclusion of contract sureties under the Amendment Act, 2018. [Paras 13, 17, 18]

Moratorium is declared; the statutory prohibitions and exceptions during CIRP shall apply.

Obligation of management to cooperate with the Interim Resolution Professional - Functions and duties of Interim Resolution Professional - Duties of the Interim Resolution Professional and the obligation of the corporate debtor's management to cooperate. - HELD THAT: - The Tribunal directed that the Interim Resolution Professional perform functions under the Code, Rules and Regulations (including Sections 15, 17-21) and to protect and preserve the corporate debtor's property. It emphasised that the promoters, management and persons associated with the corporate debtor are legally bound under Section 19 to extend cooperation to the IRP, and that the IRP is entitled to approach the Tribunal if there are violations or tainted/illegal transactions requiring appropriate orders. [Paras 19, 20]

IRP shall perform statutory functions and the corporate debtor's management must extend full assistance; IRP may seek Tribunal relief in case of violations.

Final Conclusion: The Tribunal admitted the Section 7 petition against the corporate debtor, appointed the proposed Interim Resolution Professional, directed immediate public announcement and interim funding by the financial creditor, declared the moratorium with its statutory consequences, and directed that the IRP discharge statutory duties while the corporate debtor's management cooperates with the IRP.

Admissibility of Section 9 petition under IBC - operational debt - pre-existing dispute - limited jurisdiction of adjudicating authority - application of Mobilox Innovations test

Admissibility of Section 9 petition under IBC - pre-existing dispute - limited jurisdiction of adjudicating authority - application of Mobilox Innovations test - Whether the Section 9 application by the Operational Creditor was maintainable in view of a dispute as to the amount payable. - HELD THAT: - The Corporate Debtor filed an affidavit asserting that the entire claimed debt had been paid and produced a ledger and bank statements supporting payment and an alleged excess of payment; the Operational Creditor maintained a contrary account and produced correspondence showing differing calculations of amounts allegedly due. The record shows a dispute over the exact amount payable which existed prior to issuance of the demand notice. The Adjudicating Authority, exercising its limited jurisdiction under Section 9, cannot resolve competing account statements and detailed factual controversy on the correctness of ledgers and payments; such matters require detailed inquiry by an appropriate forum. Applying the test in Mobilox Innovations, where a pre-existing dispute as to debt is established on the record, the Section 9 petition is not maintainable. For these reasons the petition fails on the ground of a pre-existing dispute and the Authority declined to adjudicate the competing accounts in an IBC summary proceeding. [Paras 3, 5, 8, 9, 10]

The Section 9 application is not maintainable and is rejected.

Final Conclusion: The Tribunal rejected the Section 9 petition because a pre-existing dispute as to the amount payable was shown on the record and, applying Mobilox Innovations, the adjudicating authority could not proceed with the CIRP initiation in the face of that dispute.

Operational Creditor - Corporate Insolvency Resolution Process (CIRP) - default in payment / operational debt - delivery of demand notice under Section 8 - person / juristic status under the Insolvency and Bankruptcy Code - insufficient and disputed evidence

Default in payment / operational debt - insufficient and disputed evidence - Whether the Operational Creditor proved that the Corporate Debtor committed a default in payment of the claimed operational debt such as to warrant initiation of CIRP under Section 9. - HELD THAT: - The Tribunal found that the Operational Creditor asserted it had prepared documents to enable the Corporate Debtor to obtain a bank loan and raised an invoice. However, it was not in dispute that the Corporate Debtor did not obtain the loan and the Operational Creditor itself had sent an e-mail indicating the proposal was not being pursued and that fees were waived in part. There was no evidence that the Corporate Debtor had engaged the Operational Creditor for the bank proposal or that the claimed services were actually availed. The email correspondence and other documents on record showed disputes between the parties predating the demand notice. In view of the insufficient and contested evidence as to the rendering and acceptance of services and the existence of an undisputed debt, the Tribunal concluded that default was not established for the purpose of admitting a Section 9 application. [Paras 4, 5, 6]

The claim of default was not established on the record and the application under Section 9 could not be admitted on that basis.

Delivery of demand notice under Section 8 - Whether the Operational Creditor proved delivery of the demand notice under Section 8 to the Corporate Debtor as required for initiating proceedings under Section 9. - HELD THAT: - The Operational Creditor produced a demand notice and a postal receipt, but did not produce evidence that the notice was delivered to and received by the Corporate Debtor at its correct registered address. The Tribunal emphasised that both Section 8 and Section 9 require proof of delivery of the demand notice, and mere production of a postal receipt, without proof of actual delivery to the addressee, is inadequate to show compliance with the statutory requirement. [Paras 8]

Proof of delivery of the demand notice was lacking; the requirement under Section 8 was not satisfied.

Operational Creditor - person / juristic status under the Insolvency and Bankruptcy Code - Whether a proprietary firm (non-juristic entity) could be treated as an Operational Creditor for the purpose of initiating CIRP. - HELD THAT: - The Tribunal observed that the statutory definition of 'person' under the Code does not expressly include a proprietary firm and noted that a proprietary firm is omitted from the enumerated juristic forms. The Bench, however, did not undertake detailed adjudication on this point and recorded that it would not go into the aspect in more detail since the application had been verified by the proprietor of the firm. Thus, while the juristic-status issue was noted, it was not finally decided on merits and did not form the basis of the Tribunal's rejection of the petition. [Paras 7]

The question of a proprietary firm's status as an Operational Creditor was noted but not finally adjudicated; the application was rejected on other grounds.

Final Conclusion: The Section 9 petition was rejected because the Operational Creditor failed to establish an undisputed debt and did not prove delivery of the demand notice; the question of the proprietary firm's juristic status was observed but not finally decided. CP (IB) No. 667/9/NCLT/AHM/2019 is dismissed and disposed of with no costs.

Pre-existing dispute - Certificate of Fact (CoF) - indemnity and limitation of liability by contractual addendum - doctrine in Mobilox - rejection of section 9 application where dispute truly exists - inability to adjudicate conflict between contractual terms and statutory liability in a section 9 proceeding

Pre-existing dispute - Certificate of Fact (CoF) - indemnity and limitation of liability by contractual addendum - doctrine in Mobilox - rejection of section 9 application where dispute truly exists - Existence of a pre-existing dispute raised by the Corporate Debtor in response to the demand notice and its effect on the maintainability of the Section 9 application. - HELD THAT: - The Tribunal found that the Corporate Debtor had raised a substantive dispute prior to the issuance of the demand notice by adducing a history of deficiencies in services, multiple communications about damaged/lost consignments, and production of Certificates of Fact issued by the Operational Creditor. The parties had amended their Principal Agreement by an Addendum which addressed issuance of CoFs and limited liability for lost shipments; factual material on record showed issuance of numerous CoFs and prior communications about losses/damages before the demand notice. Applying the principle in Mobilox, which requires rejection of a Section 9 application where a real dispute exists, the Tribunal concluded that the Corporate Debtor's contentions constitute a bona fide pre-existing dispute that defeats the Operational Creditor's petition under Section 9. [Paras 5, 8, 10]

The Section 9 application is rejected on the ground that a pre-existing dispute exists.

Inability to adjudicate conflict between contractual terms and statutory liability in a section 9 proceeding - Carriage by Road Act - adjudication under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the Tribunal could decide in the Section 9 proceeding if the contractual terms (including the Addendum) supersede or displace the statutory liability under the Carriage by Road Act, 2007. - HELD THAT: - The Tribunal observed that the question whether the Logistics Agreement and its Addendum operate to relieve the Operational Creditor of liability under the Carriage by Road Act involves substantive adjudication of competing legal rights and statutory interpretation which is not appropriate to decide in a summary proceeding under Section 9. Accordingly, such contested legal questions cannot be resolved in the Section 9 petition and would require appropriate proceedings where evidence and legal issues can be fully examined. [Paras 10]

The question of whether contractual terms supersede statutory liability under the Carriage by Road Act is not adjudicated in this Section 9 application and must be considered in appropriate proceedings; it cannot be decided in the present summary Section 9 process.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is dismissed because a pre-existing dispute exists; substantive disputes about contractual limits of liability and their relation to statutory liability under the Carriage by Road Act are not adjudicated in this summary proceeding and must be addressed in appropriate forums.

Jurisdiction under section 60(5)(c) of the Insolvency and Bankruptcy Code - residuary jurisdiction of the NCLT - investigative and attachment actions by the Enforcement Directorate under the PMLA - liquidator's power to institute legal proceedings under section 35(1)(k) of the IBC - recoveries from pre-CIRP debtors not falling within sections 43 and 66 of the IBC

Jurisdiction under section 60(5)(c) of the Insolvency and Bankruptcy Code - residuary jurisdiction of the NCLT - investigative and attachment actions by the Enforcement Directorate under the PMLA - NCLT does not have jurisdiction under section 60(5)(c) of the IBC to entertain challenges to investigative or attachment orders issued by the Enforcement Directorate under the PMLA that relate to pre-CIRP investigations. - HELD THAT: - The Tribunal applied the legal principles laid down by the Supreme Court in Embassy Property Developments Pvt. Ltd. and Gujarat Urja Vikas Nigam Ltd., holding that clause (c) of Section 60(5) is confined to questions of law or fact arising out of or in relation to the insolvency resolution process. Actions in the realm of public law and pre-CIRP investigative steps by statutory authorities do not, by themselves, fall within that phrase. Allowing the NCLT to entertain such challenges would expand its residuary jurisdiction beyond the textual limits of the IBC and produce results inconsistent with the statutory scheme. Since the Enforcement Directorate's summons/orders relate to investigation of affairs prior to CIRP and have no nexus with the corporate debtor's insolvency or liquidation process, the prayers seeking to quash or set aside those orders are not maintainable before this Adjudicating Authority. [Paras 6, 7, 8]

Prayers to quash or set aside the Enforcement Directorate's investigative/attachment orders are rejected for want of jurisdiction under section 60(5)(c) of the IBC.

Investigative and attachment actions by the Enforcement Directorate under the PMLA - The request for remission/return of funds seized or transferred to the Enforcement Directorate during the PMLA investigation is not maintainable before the NCLT under section 60(5)(c) and is rejected. - HELD THAT: - The Tribunal found that the second prayer in IA No. 453 of 2019 seeking remission of the amount transferred to the Enforcement Directorate pertains to the same pre-CIRP investigative domain and therefore does not fall within the NCLT's jurisdiction under the IBC. The relief sought is connected to enforcement action under the PMLA and not to the insolvency or liquidation process of the corporate debtor; accordingly, the claim for return of the funds cannot be adjudicated by this Adjudicating Authority. [Paras 9]

Prayer for return/remission of the seized/transferred amount is rejected as not maintainable before this Adjudicating Authority.

Liquidator's power to institute legal proceedings under section 35(1)(k) of the IBC - recoveries from pre-CIRP debtors not falling within sections 43 and 66 of the IBC - The liquidator's prayer for directions to debtors to pay admitted outstanding amounts does not fall within sections 43 or 66 of the IBC; the liquidator is permitted to pursue recovery by instituting suits in the name of the corporate debtor under section 35(1)(k). - HELD THAT: - The Tribunal observed that the amounts claimed by the liquidator arose from pre-CIRP debts and are not matters falling within the avoidance provisions (sections 43/66) relied upon. Section 35(1)(k) expressly empowers the liquidator, subject to directions of the Adjudicating Authority, to institute or defend suits in the name of the corporate debtor. Rather than issuing directions against the debtors in the present proceedings, the appropriate course is for the liquidator to file recovery suits to realise admitted outstanding dues. The Tribunal therefore declined to grant the directed-payment relief but authorised the liquidator to pursue ordinary legal remedies for recovery. [Paras 10, 11]

Prayer for directions to Respondents No. 2 to 5 to pay/clear outstanding amounts is not maintainable under sections 43 or 66; liquidator is permitted to file recovery suits under section 35(1)(k).

Final Conclusion: Both applications are rejected insofar as they seek to challenge Enforcement Directorate's PMLA investigative or attachment actions or to compel remission of seized funds, for lack of jurisdiction under section 60(5)(c) of the IBC; the liquidator's claim for directed payment is not maintainable under sections 43/66 but the liquidator is permitted to pursue recovery suits under section 35(1)(k).

Condonation of delay in filing claim - admission of claims in CIRP - directory nature of time limit for submission of claims under CIRP Regulations - power of Resolution Professional to reject or admit claims - acceptance of Form C by Resolution Professional

Condonation of delay in filing claim - admission of claims in CIRP - directory nature of time limit for submission of claims under CIRP Regulations - acceptance of Form C by Resolution Professional - Delay in submission of the applicant's claim was condoned and the Resolution Professional was directed to accept the Form C dated 12.05.2022 and take appropriate decision thereon. - HELD THAT: - The Tribunal examined the fact that the applicant became aware of the insolvency proceedings only in late April 2022 and that the soft copy of the claim was received on 12.05.2022, after the timelines specified in the CIRP regulations. Relying on co ordinate Bench decisions which treated the time limit for submitting claims as directory where the CIRP remains pending, the Tribunal held that delay in filing could be condoned when the Corporate Insolvency Resolution Process is not concluded. Given that the CIRP against the corporate debtor had not been completed, the Tribunal found it appropriate to condone the delay and directed the Resolution Professional to accept the Form C submitted on 12.05.2022 and decide the claim on merits rather than reject it solely on grounds of delay. [Paras 9, 10]

Application allowed; delay in filing Form C is condoned and the Resolution Professional is directed to accept the Form C dated 12.05.2022 and take appropriate decision thereon.

Final Conclusion: The application is allowed: delay in filing the claim is condoned and the Resolution Professional is directed to admit the Form C filed on 12.05.2022 and decide the claim; IA disposed of.

Condonation under Section 35 of the Central Excise Act - power to condone delay - statutory limitation on condonation - exclusion of Section 5 of the Limitation Act - Commissioner (Appeals) and Tribunal as creatures of statute - per incuriam

Condonation under Section 35 of the Central Excise Act - power to condone delay - statutory limitation on condonation - Commissioner (Appeals) and Tribunal as creatures of statute - Whether the Commissioner (Appeals) or the Tribunal can condone delay in filing an appeal beyond the additional thirty days permitted by the proviso to Section 35. - HELD THAT: - The Court applied the legal position as laid down by the Supreme Court in Singh Enterprises and held that Section 35 prescribes the maximum period for condonation: an appeal must be filed within the primary period (sixty days) and, if satisfied of sufficient cause, the appellate authority may allow a further thirty days. The proviso expressly limits the extent of condonation and thereby excludes any broader power to extend time. Because the Commissioner (Appeals) and the Tribunal derive their jurisdiction from the statute, they are confined to the period expressly provided by the legislature and cannot grant condonation beyond that statutory cap. The Tribunal examined distinguishing decisions relied on by the appellant and found that those decisions either involved different statutory provisions or were not applicable to the limits imposed by Section 35. [Paras 6, 7, 8, 10, 11]

Delay beyond the thirty days permitted by the proviso to Section 35 cannot be condoned by the Commissioner (Appeals) or the Tribunal; the impugned rejection of the appeal as time-barred is upheld.

Exclusion of Section 5 of the Limitation Act - Whether Section 5 of the Limitation Act can be invoked to condone delay beyond the statutory period prescribed in Section 35. - HELD THAT: - Relying on the Supreme Court's reasoning, the Tribunal held that the specific limitation scheme in Section 35, including the proviso allowing only a further thirty days, operates to exclude the application of Section 5 of the Limitation Act for extending time. The legislative prescription of precise periods for appeal and the proviso's language demonstrate the legislature's intention to circumscribe condonation to the statutory limits, thereby precluding reliance on the general power under Section 5. [Paras 6, 7]

Section 5 of the Limitation Act does not apply to extend the period for filing appeals governed by Section 35; it is excluded by the specific statutory scheme.

Per incuriam - Whether the Tribunal should follow the Western Bench order in M/s Rosa Impex Private Limited that condoned delay beyond the statutory limit. - HELD THAT: - The Tribunal considered the Rosa Impex order and concluded that it is contrary to the statutory provisions of Section 35 and the Supreme Court decision in Singh Enterprises. Because Rosa Impex permitted condonation inconsistent with the statutory cap, the Tribunal treated that order as per incuriam and declined to follow it. [Paras 9]

The Rosa Impex order is per incuriam and cannot be followed where it conflicts with the specific statutory limitation and Supreme Court precedent.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the Commissioner (Appeals) order rejecting the appellant's appeal as time-barred because neither the Commissioner (Appeals) nor the Tribunal can condone delay beyond the additional thirty days permitted by the proviso to Section 35, and the Limitation Act's Section 5 is inapplicable to extend that period.

Dismissal for default - adjournments not to be granted mechanically - sufficient cause for non-appearance - power to dismiss or decide on merits - limitation on repeated adjournments

Dismissal for default - sufficient cause for non-appearance - power to dismiss or decide on merits - limitation on repeated adjournments - adjournments not to be granted mechanically - Whether the appeal should be dismissed for non-prosecution due to repeated non-appearance of the appellant and repeated adjournments. - HELD THAT: - The appellants failed to appear on the scheduled hearing dates and on multiple earlier adjourned dates. Section 35C(1A) restricts adjournments and the CESTAT Procedure Rule 20 empowers the Tribunal to dismiss an appeal for default or to hear and decide it on merits, subject to restoration where sufficient cause is later shown. The Tribunal noted the Apex Court's condemnation of routine and repeated adjournments in Ishwarlal Mali Rathod, and observed that the matter had been adjourned more than three times and the appellants demonstrated no interest in prosecuting the appeal. Applying Rule 20 and the principle against mechanical adjournments, and finding no sufficient cause shown for continued non-appearance, the Tribunal exercised its discretion to dismiss the appeal for non-prosecution.

Appeal dismissed for non-prosecution.

Final Conclusion: The appeal was dismissed for non-prosecution in view of repeated non-appearance of the appellants, the statutory and procedural limits on adjournments, and the Apex Court's insistence against routine adjournments.

Interest on duty - Committee of Disputes (CoD) permission for PSU litigations - Obsolescence of CoD clearance mechanism post-Electronics Corporation of India Ltd. - Remand for limited consideration

Interest on duty - Committee of Disputes (CoD) permission for PSU litigations - Remand for limited consideration - The question of liability to pay interest on the duty deposited was not considered by any authority and was remitted to the CESTAT for fresh consideration limited to that aspect. - HELD THAT: - The appellant, a PSU, had earlier obtained CoD clearance only to contest the penalty; the duty aspect was treated as non maintainable and the appeal on duty was dismissed for want of CoD clearance. A subsequent application for CoD permission filed on 11th February 2011 could not be considered because this Court, by its judgment in Electronics Corporation of India Limited delivered on 17th February 2011, rendered the CoD clearance mechanism obsolete. Consequently, the issue of interest on the duty (which the appellant had deposited under protest) remained unaddressed by any authority. Given that the determinative question of law regarding CoD clearance had changed and the interest point was not decided on merits below, the Court allowed the appeal, set aside the High Court order, and remitted the matter to the CESTAT to consider only the limited aspect of interest on duty. [Paras 12, 13]

Appeal allowed; impugned High Court order quashed and set aside; matter remitted to the CESTAT to decide the limited question of interest on the duty.

Final Conclusion: The appeal is allowed: the High Court order is quashed and set aside and the matter is remitted to the CESTAT for consideration of the limited issue of interest on the duty; no order as to costs.

Duty collected from buyer to be deposited with Central Government under Section 11D - Rule 6(3)(i) payment recovered from buyer as excise reversal and its characterisation - Cenvat credit on rent-a-cab services as an input service - Place of removal for assessable value and inclusion of freight in assessable value

Duty collected from buyer to be deposited with Central Government under Section 11D - Rule 6(3)(i) payment recovered from buyer as excise reversal and its characterisation - Whether amount recovered from the buyer described as "excise duty reversal" (equal to 7%) was an amount collected as representing central excise duty and therefore exigible to deposit under Section 11D. - HELD THAT: - The Tribunal found on the agreement and invoices that the goods supplied were exempt under Notification No. 3/2004-CE and that the buyer agreed to reimburse an amount equal to 7% pursuant to Rule 6(3)(i) of the Cenvat Credit Rules. Although the invoices inaccurately described the reimbursement as "excise duty reversal", the contractual terms and invoice particulars show the parties understood this was payment under Rule 6(3)(i) and not a recovery of central excise duty. Applying the Larger Bench decision in Unison Metals and the CBEC Circular accepting that decision, the Tribunal held Section 11D applies only where an amount is collected by representing it to be excise duty; where the amount is paid to Government under Rule 6(3)(i) and merely recovered as reimbursement, Section 11D does not apply. The factual matrix here distinguished G.S. Pharmabutor where invoices expressly showed collection as central excise duty. Accordingly the demand under Section 11D was unsustainable. [Paras 11, 12, 13, 14, 15]

Demand under Section 11D set aside; amount recovered as reimbursement under Rule 6(3)(i) not required to be deposited as excise duty.

Cenvat credit on rent-a-cab services as an input service - Whether Cenvat credit is admissible on rent-a-cab services used by employees and customers. - HELD THAT: - Following the decision of the Gujarat High Court in Transpek Industries (and consistent authorities considered), the Tribunal held that rent-a-cab services utilized for business travel by employees/customers qualify as an input service and Cenvat credit of service tax paid on such rent-a-cab services is admissible. The Tribunal respectfully followed that precedent in the facts of the present case and allowed the claimed credit. [Paras 16, 17, 19]

Denial of Cenvat credit on rent-a-cab services set aside; Cenvat credit allowed.

Place of removal for assessable value and inclusion of freight in assessable value - Whether freight charges for delivery to buyer's premises (FOR contracts) are includible in assessable value for central excise duty. - HELD THAT: - Relying on the Supreme Court's exposition in Ispat Industries and related authorities, the Tribunal applied the principle that 'place of removal' must be referable to the seller's premises (factory, depot or other premises referable to the manufacturer) and cannot be the buyer's premises for the purpose of determining assessable value. Consequently, freight from the seller's place of removal to the buyer's premises is not includible in assessable value except in exceptional factual situations governed by the Emco/Roofit line of decisions where ownership/risk remained with the seller until delivery. On the facts before it, the Tribunal held the general rule applied and the demand for duty on freight could not be sustained. The Tribunal also noted CBEC guidance summarising these authorities. [Paras 20, 21, 23]

Demand for central excise on freight in FOR sales set aside; freight not includible in assessable value in the present facts.

Final Conclusion: All three demands and the consequential penalties were found unsustainable on merits; the impugned order dated 19.03.2019 is set aside and the appeal is allowed with consequential relief, if any, to the appellant.

Assessable value includes all components forming the price fixed by the principal - valuation of clearances on principal's invoice in job-work arrangements - retention of wastage by job-worker as additional consideration - reliance on precedential decision in Surindra Steel Rolling Mills - hearing of appeal ex parte under procedural rule

Assessable value includes all components forming the price fixed by the principal - valuation of clearances on principal's invoice in job-work arrangements - retention of wastage by job-worker as additional consideration - Whether the value of waste and scrap retained by the job-worker must be added to assessable value where finished goods were cleared on the price fixed by the principal - HELD THAT: - The Tribunal found that the wire rods were cleared on the value fixed by the principal (TISCO) for its customers. Where the principal's fixed price for clearance is adopted, that price is taken to have taken into account all components of value, including wastages and scrap arising in conversion. There was no finding that job-work charges had been suppressed or that the value fixed by the principal excluded such components. The Tribunal therefore held that additional addition for retention of waste by the job-worker was not warranted. The Tribunal further noted and applied the reasoning in Surindra Steel Rolling Mills, which treated assessable value as inclusive of costs incurred up to the final sale, and declined to depart from that view.

Demand disallowing inclusion of retained wastage is not sustainable where clearances were made on the principal's fixed value; impugned show cause notices dropped.

Final Conclusion: The Tribunal upheld the Commissioner's order dropping the show cause notices, dismissing the Revenue's appeals; clearances made on the principal's fixed price were held to include wastage and scrap, and no separate addition was warranted.

Appointment under Section 11(6) of the Arbitration and Conciliation Act, 1996 - forfeiture of right to appoint arbitrator - effect of failure to appoint arbitrator as per agreed procedure - validity and applicability of General Conditions of Contract (GCC) - power of the Chief Justice to appoint an arbitrator

Appointment under Section 11(6) of the Arbitration and Conciliation Act, 1996 - forfeiture of right to appoint arbitrator - effect of failure to appoint arbitrator as per agreed procedure - Whether failure of the authority to appoint an arbitrator as per the agreed arbitration clause resulted in forfeiture of its right and required appointment of a sole arbitrator under Section 11(6) of the Act. - HELD THAT: - The Court held that the parties had an arbitration agreement providing for appointment of a sole arbitrator by the General Manager. The respondent failed to appoint an arbitrator despite invocation of the clause. Applying the principle in Deep Trading Company (as explained in the judgment), where failure to appoint within the agreed procedure results in forfeiture of the appointing authority's right, the Chief Justice (or his nominee) was required to appoint an arbitrator under Section 11(6). The High Court correctly proceeded under Section 11(6) by allowing the application but erred in not exercising the appointing power to name the sole arbitrator as required once forfeiture occurred. [Paras 6, 8]

Respondent forfeited its right to appoint an arbitrator and a sole arbitrator ought to be appointed under Section 11(6) of the Act.

Validity and applicability of General Conditions of Contract (GCC) - effect of failure to appoint arbitrator as per agreed procedure - Whether the High Court could direct constitution of the Arbitral Tribunal in terms of clause 64(3)(b) of the GCC which was not part of, signed to, or referred to in the original agreement and was prospective. - HELD THAT: - The Court found that the GCC (July 2020) was neither signed by the parties nor incorporated in the original agreement, and a communication showed the GCC was prospectively applicable to future works contracts. Consequently, the High Court erred in directing constitution of the Arbitral Tribunal under clause 64(3)(b) of the GCC because those provisions were not binding on the parties to the existing contract. The direction to apply the GCC was therefore unsustainable and was quashed. [Paras 7, 8]

Direction to constitute the Arbitral Tribunal in terms of clause 64(3)(b) of the GCC was quashed as the GCC did not apply to the parties or the contract.

Power of the Chief Justice to appoint an arbitrator - appointment under Section 11(6) of the Arbitration and Conciliation Act, 1996 - Appropriate relief to be granted once the High Court's direction to apply the GCC was set aside. - HELD THAT: - Having quashed the High Court's direction to apply the inapplicable GCC and holding that the appointing authority had forfeited its right, the Court determined that the matter should be remanded for appointment of a sole arbitrator by the High Court. To avoid further delay and with parties' consent, the Court exercised its discretion and directly appointed Smt. Justice R. Banumathi, Former Judge of this Court, as sole arbitrator to adjudicate the dispute. [Paras 8]

The appeal is allowed; Smt. Justice R. Banumathi is appointed as sole arbitrator to resolve the dispute.

Final Conclusion: The High Court's direction to constitute an Arbitral Tribunal under clause 64(3)(b) of the GCC was quashed because the GCC did not bind the parties; the respondent forfeited its right to appoint an arbitrator and a sole arbitrator was required to be appointed under Section 11(6) of the Act. The Supreme Court allowed the appeal and, to avoid delay, appointed Smt. Justice R. Banumathi as sole arbitrator.

Persona designata - ministerial function under Section 14 - inclusion of Additional District Magistrate and Additional Chief Metropolitan Magistrate - purposive interpretation to achieve statutory timelines

Persona designata - ministerial function under Section 14 - Whether the District Magistrate and the Chief Metropolitan Magistrate are persona designata for the purposes of Section 14 of the SARFAESI Act. - HELD THAT: - The Court held that the powers exercised under Section 14 are ministerial in nature and do not involve adjudicatory or quasi judicial functions; the CMM/DM is required only to verify compliance of the affidavit and take steps to effect possession within the statutory timeframe. Given this ministerial character and the statutory scheme (including Section 14(1A) and the provisos prescribing time limits), the Court concluded that the office holders are not vested with powers in a personal capacity as persona designata. The interpretation that Section 14 imposes a strict personal exercise of power by only the named officer would frustrate the object of expeditious disposal mandated by the Act. [Paras 9, 12]

District Magistrate and Chief Metropolitan Magistrate are not persona designata under Section 14 of the SARFAESI Act.

Inclusion of Additional District Magistrate and Additional Chief Metropolitan Magistrate - purposive interpretation to achieve statutory timelines - Whether the expressions "District Magistrate" and "Chief Metropolitan Magistrate" in Section 14 of the SARFAESI Act shall be deemed to include Additional District Magistrate and Additional Chief Metropolitan Magistrate. - HELD THAT: - Relying on Cr.P.C. provisions (notably Sections 17(2) and 19) and the scheme of subordinate judicial appointments, the Court observed that Additional Chief Metropolitan Magistrates and Additional District Magistrates exercise the same judicial powers as the Chief Metropolitan Magistrate and District Magistrate respectively. Since Section 14 concerns ministerial steps amenable to delegation or exercise through subordinate officers (reinforced by Section 14(1A) and precedent permitting appointment of advocate commissioners), treating Additional CMMs/ADMs as excluded would hinder timely compliance with the statutory deadlines. Applying a purposive construction to effectuate the object of the SARFAESI Act, the Court held that the expressions include the Additional posts and, by analogy, Additional District Magistrates exercising powers at par with the District Magistrate. [Paras 10, 12]

The expressions "District Magistrate" and "Chief Metropolitan Magistrate" in Section 14 include Additional District Magistrate and Additional Chief Metropolitan Magistrate for the purposes of that provision.

Final Conclusion: The appeal is dismissed. The High Court was right in holding that the DM/CMM are not persona designata for Section 14 and that the terms "District Magistrate" and "Chief Metropolitan Magistrate" include their Additional officers, enabling them (or subordinate officers authorised under Section 14(1A)) to exercise the powers under Section 14 to secure timely possession of secured assets.