TaxTMI Updates e-Newsletter
Jul 31,2020

Summary order. Notice issued on petitions challenging constitutional validity of provisions relating to denial of input tax credit and Circular No.28/2018; counter-affidavits to be filed within four weeks, rejoinders before next date, and matter listed with W.P.(C) No.5457/2019 and W.P.(C) No.11633/2019 on 15th September, 2020.

Interim restraint on coercive action - binding effect of court-accepted assurance by revenue - requirement of demand raised in accordance with law before recovery - investigation not restrained by interim order - no expression on merits for bail matters

Interim restraint on coercive action - Interim protection was granted restraining respondents from taking coercive steps against the petitioner until the next listed date. - HELD THAT: - Having heard the parties and in view of the petitioner's submission about the search and seizure and the asserted projection of artificial liability, the Court, while keeping the matter for further hearing, directed that no coercive action shall be taken against the petitioner until 05.08.2020. The direction is limited to the interim period and was made having regard to the totality of facts and the assurance furnished by the revenue during the hearing. The order is expressly time limited and will cease unless extended on the next date.

No coercive action to be taken against the petitioner until 05.08.2020 subject to extension on that date.

Binding effect of court-accepted assurance by revenue - requirement of demand raised in accordance with law before recovery - The respondents were held bound by their statement that no further recovery shall be effected till any demand is raised in accordance with law. - HELD THAT: - The revenue's categorical statement in court that no further recovery would be effected until a demand is raised in accordance with law was accepted by the Court and made the basis of the interim protection. The Court recorded that respondents shall remain bound by that statement until the next date of hearing. The restraint on recovery is thus derivative of the in court assurance and conditional on statutory compliance for any future recovery.

Respondents bound by their in court assurance; no recovery until a demand is raised in accordance with law.

Investigation not restrained by interim order - no expression on merits for bail matters - The interim protection does not impede continuation of investigation and the order does not express any view on the merits relevant to bail of arrested persons. - HELD THAT: - The Court clarified that the grant of interim protection against coercive steps shall not debar respondents from carrying on the investigation until the next date of hearing. Separately, the Court recorded that the interim order shall not be treated as any expression of opinion on the merits of the controversy for deciding bail matters of the arrested shareholders. These clarifications limit the scope of the interim relief to coercive enforcement actions only and preserve the investigatory process and independent consideration of bail.

Investigation may continue despite interim protection; order is not an expression on merits for bail decisions.

Final Conclusion: The writ petition was admitted for further hearing and, on the respondents' assurance that no further recovery will be effected until a demand is raised in accordance with law, the Court granted limited interim protection restraining coercive action against the petitioner until 05.08.2020; investigation may continue and the order does not express any view on merits for bail matters.

Withholding of Refund - set-off/adjustment of refund against outstanding demands - as per respondents since huge outstanding demand has been pending against the petitioner, the AO has initiated proceedings u/s 241A against the petitioner to withheld the refund after following prescribed procedure laid down in the Act - As per HC [2020 (7) TMI 73 - BOMBAY HIGH COURT] respondents are directed to refund to the petitioner within two weeks from the date of uploading of this order without fail - HELD THAT:- SLP dismissed.

Rectification of assessment under Section 154 of the Income Tax Act, 1961 - statutory time limit for disposal of rectification applications - adjustment of demand against refunds - reasoned order requirement - CBDT Circular No.14/2001 and CBDT Instruction No.1/2016

Rectification of assessment under Section 154 of the Income Tax Act, 1961 - statutory time limit for disposal of rectification applications - reasoned order requirement - Respondent's failure to decide the petitioner's rectification application for AY 2016-17 within the statutory period and the remedy to be granted. - HELD THAT: - The petitioner filed a rectification application dated 27 May 2019 acknowledging an additional tax liability for AY 2016-17. The court noted that the statutory six month period for deciding the rectification application had expired. In view of the limited relief sought and the inaction, the court directed respondent No.2 to dispose of the rectification application by a reasoned order within six weeks. The court did not adjudicate the substantive merits of the rectification but compelled disposal within the stated timeframe, leaving all parties' substantive rights and contentions open. [Paras 4, 9]

Rectification application for AY 2016-17 to be disposed of by respondent No.2 by a reasoned order within six weeks.

Adjustment of demand against refunds - CBDT Circular No.14/2001 and CBDT Instruction No.1/2016 - Entitlement and direction regarding adjustment of the resulting demand arising from the rectification against refunds in other assessment years. - HELD THAT: - The petitioner sought adjustment of the resulting demand against refunds arising from earlier and subsequent assessment years (identified in the petition). The court, while directing disposal of the rectification application, expressly directed respondent No.2 to allow adjustment of the resulting demand against refunds arising to the petitioner for the specified assessment years, if any, in accordance with law. The court did not undertake a final adjudication on the merits of the adjustment but mandated that the adjustment be considered and permitted as per legal provisions and applicable instructions, preserving the parties' rights and contentions. [Paras 9]

Respondent No.2 to allow adjustment of the resulting demand against refunds in the specified assessment years, if any, in accordance with law.

Final Conclusion: Writ petition disposed by directing respondent No.2 to decide the rectification application for AY 2016-17 by a reasoned order within six weeks and to allow adjustment of the resulting demand against refunds in the specified assessment years, if any, in accordance with law; all substantive rights and contentions left open.

Exemption under Section 54 - date of transfer / date of acquisition - agreement to sell as transfer under Section 2(47) - remand for fresh consideration

Date of transfer / date of acquisition - remand for fresh consideration - Whether the Tribunal was correct in holding that 27.02.2002 cannot be treated as the date of acquisition and in confining its remand to a limited purpose. - HELD THAT: - The High Court observed that the Tribunal had remitted the matter to the Commissioner of Income-tax (Appeals) for reconsideration of the assessee's claim for exemption under Section 54, but had expressed a substantive finding that the date of acquisition could not be 27.02.2002. The Court noted subsequent authoritative pronouncements including the Supreme Court's decision in Sanjeev Lal and later High Court decisions dealing with the legal effect of agreements to sell where completion was delayed by court orders. Rather than deciding the effect of those authorities on the facts of the present case, the High Court held it would be appropriate to allow the CIT(A) to decide the matter on merits in its entirety. Accordingly, the Court set aside the Tribunal's observation that 27.02.2002 could not be treated as the date of acquisition and remitted the matter to the CIT(A) for fresh consideration, permitting the assessee to canvass all issues of law and fact afresh. [Paras 11, 12]

Tribunal's observation that 27.02.2002 cannot be the date of acquisition is set aside; matter remitted to the CIT(A) for fresh decision on merits and in accordance with law, with liberty to the assessee to raise all issues.

Final Conclusion: The tax appeal is allowed; the Tribunal's conclusion that the date of acquisition could not be 27.02.2002 is set aside and the matter is remitted to the Commissioner of Income-tax (Appeals) to decide the exemption claim on merits in accordance with law; the substantial question of law is answered in favour of the assessee.

Deduction under Section 10AA - manufacture as defined under the Special Economic Zone Act, 2005 - appreciation of factual findings by CIT(A) and Tribunal - question of law versus question of fact

Deduction under Section 10AA - manufacture as defined under the Special Economic Zone Act, 2005 - appreciation of factual findings by CIT(A) and Tribunal - Whether the assessee was eligible for deduction under Section 10AA by virtue of manufacturing activity carried out in the SEZ unit, and whether any substantial question of law arose for adjudication. - HELD THAT: - The Assessing Officer disallowed the claim on the factual premise that the imported raw material and exported product were the same and only minor sieving was done. The CIT(A) examined the process flow chart, the export invoice and a certificate from the Assistant Development Officer, concluded that the processes effected in the SEZ unit produced a product of different name, character or use within the meaning of "manufacture" under the SEZ Act, and allowed the deduction. The Tribunal re-appreciated the evidence, noted removal of 10-20% impurities, referred to cost comparisons and the inability of the revenue to demonstrate suppression of purchase cost or to impugn the departmental certificate, and sustained the factual findings of the CIT(A). The High Court held that these determinations are essentially factual, involved appreciation and reappreciation of evidence by the authorities below, and therefore did not give rise to any substantial question of law warranting interference. Consequently the appellate Court declined to re-open the factual conclusions recorded by the lower authorities. [Paras 7, 11, 12]

Factual findings that the SEZ unit carried out manufacturing as defined under the SEZ Act are sustained; no substantial question of law arises, and the revenue appeal is dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal, holding that the question whether the SEZ unit carried out manufacturing for claiming deduction under Section 10AA was a factual matter already examined and upheld by CIT(A) and the Tribunal, and therefore no substantial question of law arose for adjudication.

Summary order. Writ petition dismissed as withdrawn on petitioner s prayer; liberty to approach appropriate forum granted.

Rule of consistency - non-speaking order - certificate under Section 197 of the Income Tax Act - direction to furnish reasons - right to seek further proceedings in accordance with law

Certificate under Section 197 of the Income Tax Act - non-speaking order - rule of consistency - Respondent to furnish the reasons recorded in support of the Certificate dated 30th June, 2020 refusing deduction at source at NIL rate - HELD THAT: - The Court noted the petitioner's contention that the impugned certificate was non-speaking and inconsistent with the immediately preceding year's determination. The respondent informed the Court that detailed reasons had been placed on record. Rather than adjudicating the merits of the challenge, the Court directed the respondent to furnish a copy of the reasons to the petitioner within one week so that the petitioner may, if aggrieved, pursue appropriate proceedings in accordance with law. All parties' rights and contentions were left open.

Writ petition disposed of with a direction to the respondent to supply the reasoned order within one week; liberty granted to the petitioner to challenge that reasoned order by appropriate proceedings.

Final Conclusion: The petition was disposed of by directing the respondent to furnish the reasons for the impugned Certificate dated 30th June, 2020 within one week; the petitioner retains the right to seek further remedy if aggrieved, and all rights and contentions are left open.

Capital expenditure v. revenue expenditure - Test of enduring benefit - Repairs and renovation as preservation and maintenance of existing asset - Creation of a new asset or increase of capacity - Deduction under Section 37 of the Income Tax Act - Current repairs

Capital expenditure v. revenue expenditure - Test of enduring benefit - Repairs and renovation as preservation and maintenance of existing asset - Creation of a new asset or increase of capacity - Deduction under Section 37 of the Income Tax Act - Expenditure on renovation and redecoration of hotel rooms is revenue expenditure and allowable under Section 37, not capital expenditure. - HELD THAT: - The Court applied the established principle that the question whether an outlay is capital or revenue depends on the commercial nature of the advantage obtained and not merely on its duration. Relying on Empire Jute, the Court observed that enduring benefit alone does not render expenditure capital; if the work merely facilitates the carrying on of the business and leaves the fixed capital essentially untouched, the expenditure may be revenue in nature. The Court noted binding and persuasive High Court authorities holding that expenses incurred to repair, modernise or replace components of a hotel to create a conducive atmosphere for running the business are revenue expenditures. On the facts, the number of rooms remained 57 and only 18 rooms were renovated; there was no addition of room capacity, no creation of a new asset, and the assessee could not unilaterally revise tariffs under its franchise arrangement. Further, materials used (granite and marble) were not shown to yield an enduring capital advantage. The Tribunal erred in treating the claim as akin to current repairs and failing to apply the correct test; remand was unnecessary because facts were not in dispute and the issue was an application of law to established facts. Applying these principles to the admitted facts, the Court held the expenditure to be revenue expenditure and restored the CIT(A) order allowing the claim. [Paras 10, 13, 18, 21]

The expenditure on renovation and redecoration of the specified hotel rooms is revenue expenditure and allowable under Section 37; the Tribunal's order treating it as capital expenditure is set aside.

Final Conclusion: The tax case appeal is allowed; the Tribunal's order is set aside, the CIT(A) order restored, and the substantial question of law is answered in favour of the assessee. No costs.

Disallowance under Section 14A - Rule 8D(2)(iii) - 0.5% of average investments - Computation of disallowance on investments yielding exempt income - Remand for recomputation - Pronouncement of orders under Rule 34(5) - exclusion of lockdown period - Appellate Tribunal Rules - Rule 34(4) pronouncement

Disallowance under Section 14A - Rule 8D(2)(iii) - 0.5% of average investments - Computation of disallowance on investments yielding exempt income - Remand for recomputation - Disallowance under Section 14A computed by invoking Rule 8D(2)(iii) requires recomputation limited to investments yielding exempt income in the year. - HELD THAT: - The AO applied Rule 8D(2)(iii) by taking 0.5% of the entire average investment, without limiting the base to only those investments which actually yielded exempt income in the year. The Tribunal observed that the approach adopted by the AO did not follow the true spirit of the judicial exposition relied upon by the assessee and that the disallowance ought to be computed with reference to the investments which generated exempt income in the relevant year. In consequence, the matter is restored to the file of the AO for recomputation of the disallowance under Section 14A on the basis of investments which yielded exempt income during the year under consideration. [Paras 3]

Issue remitted to the AO for recomputation of the Section 14A disallowance on the basis of investments that yielded exempt income in AY 2014-15.

Pronouncement of orders under Rule 34(5) - exclusion of lockdown period - Appellate Tribunal Rules - Rule 34(4) pronouncement - Pronouncement of the order beyond 90 days is permissible by excluding the lockdown period when computing the time-limit under Rule 34(5). - HELD THAT: - Relying on the Coordinate Bench's discussion in DCIT vs. JSW Ltd. and on the extraordinary disruption caused by the COVID-19 lockdown (including orders of the High Court and Supreme Court extending or excluding limitation periods), the Tribunal held that the period of lockdown should be excluded while computing the 90-day time-limit for pronouncement under Rule 34(5). The Tribunal therefore treated the delay as falling within the exception contemplated by the rule and pronounced the order under Rule 34(4) after placing the details on the notice board. [Paras 5, 6]

Delay in pronouncement is excused by excluding the lockdown period; order pronounced under Rule 34(4).

Final Conclusion: Assessee's appeal is allowed for statistical purposes: the Section 14A disallowance under Rule 8D(2)(iii) is remitted to the AO for recomputation limited to investments yielding exempt income for AY 2014-15; the Tribunal's delayed pronouncement is upheld by excluding the lockdown period under Rule 34(5), and the order is pronounced under Rule 34(4).

Exemption under section 54EC - six months period for reinvestment of long term capital gains - date of transfer for computation of capital gains - registration of sale-deed as completion of transfer of immovable property - operation of registered instrument from date of execution (relation back) vis-a -vis passing of title - requirement of registered instrument for sale of immovable property under Transfer of Property Act

Exemption under section 54EC - six months period for reinvestment of long term capital gains - date of transfer for computation of capital gains - registration of sale-deed as completion of transfer of immovable property - Whether the transfer of immovable property was completed on 8.10.2012 or on 16.01.2013 for the purpose of computing the six month period within which investment in specified bonds under section 54EC must be made, and whether the assessee is therefore entitled to the claimed exemption. - HELD THAT: - The Tribunal examined the conveyance/sale deed with its English translation and the registration receipt. The instrument was executed and presented for registration on 08.10.2012 but the registration was completed only on 16.01.2013. Under the Transfer of Property Act a sale of immovable property of value above the statutory threshold must be effected by a registered instrument; accordingly the transfer of the immovable property is complete only when registration of the sale deed is effected. Although a registered document may operate from the date of its execution by virtue of the Registration Act, that doctrine of operation from an earlier date does not equate to the passing of title or to completion of the sale prior to actual registration. The Assessing Officer did not undertake any independent investigation to displace the assessee's case that the transaction was finally completed only upon registration on 16.01.2013. Applying these principles, and having regard to the timings of the assessee's investments in NHAI bonds (within six months from 16.01.2013), the Tribunal concluded that the investments were made within the statutory six month period and the exemption under section 54EC is allowable. The Tribunal relied on the ratio in Amarchand J. Aggarwal vs. Union of India and the Supreme Court decision in Alapati Venkataramaiah as discussed in the order, and noted relevant authority of a Special Bench in Alka Ben Patel vs. ITO on the computation of the six month period. [Paras 6, 7, 8, 10, 11]

The transfer was completed on 16.01.2013 (date of registration); the assessee's investments fell within six months of that transfer and the exemption under section 54EC is to be allowed.

Final Conclusion: The Tribunal allowed the appeal, held that the sale was completed on registration (16.01.2013) for the purpose of computing the six month reinvestment period, and directed the Assessing Officer to grant the exemption under section 54EC for Assessment Year 2013-14.

Rejection of books of accounts under section 145(3) - trading addition by applying notional gross profit rate - comparative annual shortage/evaporation losses as basis for assessment - verifiability of business expenses and 10% discretionary disallowance - remand for verification of salary payments

Rejection of books of accounts under section 145(3) - trading addition by applying notional gross profit rate - comparative annual shortage/evaporation losses as basis for assessment - Validity of rejection of books of accounts under section 145(3) and consequential trading addition - HELD THAT: - The Tribunal examined the Assessing Officer's reasons for invoking section 145(3), namely a fall in gross profit rate and an allegedly erratic/higher evaporation shortage based on comparison of two months. On review of year-on-year data the assessee's net profit rate for the year under consideration (0.48%) was higher than the two preceding years (0.43% and 0.44%). Annual shortage percentages for petrol and diesel in the year under consideration (0.55% and 0.18% respectively) were comparable to or better than the prior two years (0.60%/0.60% and 0.20%/0.18%). Monthly comparison of two months alone was held to be an insufficient and irrational basis to reject books; if monthly comparisons were to be made they should be month-to-month across years, which was not done. Given that sales, purchases and stock records were maintained, computerized and subject to periodic checks, and that the claimed annual shortages were not higher than earlier years, the Tribunal found no rational basis for rejecting the books and replacing the declared gross profit by a notional higher rate. The Tribunal therefore set aside the rejection and deleted the trading addition confirmed by the authorities below. [Paras 12]

Rejection of books under section 145(3) set aside and the consequential trading addition deleted.

Verifiability of business expenses and 10% discretionary disallowance - Validity of disallowance of various profit & loss expenses restricted to 10% by CIT(A) - HELD THAT: - The CIT(A) had reduced disallowances to 10%, consistent with past practice and accepted by the assessee. The Tribunal found this approach to be in line with earlier years and not vitiated, noting that the assessee had accepted similar adjustments previously. In these circumstances the Tribunal declined to interfere with the appellate authority's exercise of discretion to restrict disallowances to 10%. [Paras 13]

The 10% disallowance of various expenses as fixed by the CIT(A) is confirmed.

Remand for verification of salary payments - Disallowance of salary payments of Rs. 1,55,880/- remitted to Assessing Officer for verification - HELD THAT: - The assessee claimed that the salary payments were supported by ESI, PF and labour records and had been included in the recipients' tax returns. The Tribunal found that these assertions warranted verification rather than summary confirmation of disallowance. Therefore the matter was remitted to the Assessing Officer to examine the documentary evidence and employee records and to allow relief if the payments are found in order. [Paras 14]

Disallowance of salary payments remitted to the Assessing Officer for verification and appropriate relief if supported by records.

Final Conclusion: The Tribunal set aside the rejection of books under section 145(3) and deleted the trading addition; it confirmed the CIT(A)'s limitation of other expense disallowances to 10%; and remitted the salary disallowance for verification by the Assessing Officer with direction to grant relief if records are in order.

Condonation of delay - levy of penalty under section 271(1)(b) - service of notice under section 142(1) - reasonable cause for non-compliance - deletion of penalty where explanation accepted in assessment proceedings

Condonation of delay - reasonable cause for non-compliance - Whether the delay in filing the appeal should be condoned. - HELD THAT: - The assessee, a resident of Germany who left India in 2010, filed an affidavit explaining that he became aware of the appellate order only after returning to India in February 2020 and there was no mala fide or inaction thereafter. The Tribunal examined the affidavit and submissions of both parties and found the absence from India to be a reasonable cause for the delay. On these facts the Tribunal exercised its discretion to condone the delay and admit the appeal for adjudication on merits. [Paras 4]

Delay in filing the appeal is condoned and the appeal is admitted for adjudication.

Levy of penalty under section 271(1)(b) - service of notice under section 142(1) - deletion of penalty where explanation accepted in assessment proceedings - Whether the penalty under section 271(1)(b) for non-compliance with notice should be sustained. - HELD THAT: - The Tribunal found that penalty proceedings were initiated during assessment for non-compliance with a notice dated 19.07.2017 and that the penalty order was passed without giving opportunity to the assessee. The assessee had been out of India since 2010, the service of the notice at the last known address was doubtful, and the Assessing Officer in his remand report accepted the assessee's explanation and payment proofs which led to deletion of the additions in the assessment. In these circumstances, and having regard to the lack of evidence of proper service and the fact that the assessee's explanation was ultimately accepted, the Tribunal held that the assessee had a reasonable cause for non-compliance and directed deletion of the penalty. [Paras 5, 6, 7, 9]

Penalty under section 271(1)(b) is deleted and the appeal is allowed on merits.

Final Conclusion: Delay in filing the appeal was condoned and, on the merits, the penalty imposed under section 271(1)(b) for A.Y. 2010-11 was deleted because the notice was not shown to have been duly served and the assessee's explanation - given his absence from India and subsequently accepted by the authorities - constituted a reasonable cause for non-compliance.

Deduction under section 54 for reinvestment in residential property - Investment made in name of spouse and its effect on deduction - Proof of cost of construction for section 54 - Penalty under section 271(1)(c) consequential to allowance of deduction - Penalty under section 271F for failure to file return when total income exceeds threshold (without giving effect to section 54)

Deduction under section 54 for reinvestment in residential property - Investment made in name of spouse and its effect on deduction - Proof of cost of construction for section 54 - Deduction under section 54 was allowable despite the new residential property being registered in the name of the assessee's wife and construction cost supported by valuation report. - HELD THAT: - The Bench examined the statutory requirement that the assessee must purchase or construct a residential house within the prescribed time-frame and that the capital gain arise from transfer of a long term residential house. The sold original residential house and the subsequent purchase of the plot and construction (as per the valuation report) fell within the temporal limits. Reliance was placed on the decision of the Hon'ble Rajasthan High Court (Mahadev Balai) and coordinate decisions holding that the statute requires that the investment be made by the assessee but does not mandate that the new property be registered in the assessee's name; where funds for the investment flowed from the assessee (and no separate source by the spouse was shown), registration in the wife's name is not a ground for denial. The Tribunal accepted the valuation report evidence for construction cost. Applying these principles, the Tribunal held the deduction under section 54 was to be allowed. [Paras 11, 12]

Deduction under section 54 directed to be allowed.

Penalty under section 271(1)(c) consequential to allowance of deduction - Penalty under section 271(1)(c) levied for the denial of section 54 deduction was deleted as consequential to allowing the deduction. - HELD THAT: - The Assessing Officer had levied penalty under section 271(1)(c) in relation to the denial of the section 54 deduction. Having directed that the section 54 claim be allowed, the Tribunal treated the penalty as consequential and ordered its deletion. [Paras 15]

Penalty under section 271(1)(c) deleted.

Penalty under section 271F for failure to file return when total income exceeds threshold (without giving effect to section 54) - Penalty under section 271F for failure to furnish return was upheld because the assessee's total income, computed without giving effect to section 54, exceeded the maximum amount not chargeable to income tax and no reasonable cause for non filing was shown. - HELD THAT: - Section 139(1) (as read with the proviso excluding the effect of section 54) requires filing where total income, without giving effect to specified exemptions including section 54, exceeds the basic exemption limit. The Tribunal computed the assessee's total income without giving effect to section 54 as exceeding that limit. In absence of a reasonable cause shown for non furnishing of the return within the relevant assessment year, the statutory penalty under section 271F was held to be correctly imposed by the Assessing Officer and was therefore confirmed. [Paras 21, 22]

Penalty under section 271F confirmed.

Final Conclusion: The Tribunal allowed the section 54 deduction (despite the new property being in the wife's name and on the basis of the valuation evidence for construction), deleted the consequential penalty under section 271(1)(c), and confirmed the penalty under section 271F for failure to file the return as the assessee's income (without giving effect to section 54) exceeded the threshold and no reasonable cause was shown.

Condonation of delay - sufficient cause - ex parte appellate order - service of notice and change of address - preference for substantial justice over technical objections - remand for fresh hearing after setting aside ex parte order - penalty under section 271(1)(c)

Condonation of delay - sufficient cause - service of notice and change of address - preference for substantial justice over technical objections - Whether the delay of 349 days in filing the appeal should be condoned. - HELD THAT: - The Tribunal found as a factual matter that the assessee had shifted premises and the appellate notices and impugned ex parte order were sent to the old address because the change of address had not been intimated to the learned CIT(A). Although the non receipt flowed from the assessee's omission to inform the appellate authority, that lapse was held to be a bona fide mistake and not a deliberate or willful default. Applying the settled approach that where factual explanation is shown the cause of substantial justice must be preferred to technical non compliance, the Tribunal accepted the assessee's explanation as a sufficient cause and exercised discretion to condone the delay in the interest of justice (subject to a cost). [Paras 5]

Delay of 349 days condoned in the interest of justice subject to cost.

Ex parte appellate order - service of notice and change of address - remand for fresh hearing after setting aside ex parte order - Whether the ex parte order of the learned CIT(A) should be set aside and the matter remitted for fresh hearing. - HELD THAT: - The Tribunal recorded that the appeal before the CIT(A) had been decided ex parte after multiple hearing dates on which nobody appeared. The non appearance was traceable to the assessee's failure to notify the new address to the CIT(A), leading to non receipt of notices. Bearing in mind the factual correctness of the assessee's explanation and the policy of a justice oriented, liberal approach, the Tribunal concluded that the impugned ex parte appellate order ought to be set aside and the matter remitted to the CIT(A) for fresh adjudication after giving the assessee another opportunity of hearing. [Paras 7]

Impugned ex parte order set aside and matter remitted to the learned CIT(A) for fresh hearing; appeal treated as allowed for statistical purposes.

Final Conclusion: The Tribunal condoned the delay of 349 days (subject to a cost) on the basis that non receipt of appellate notices resulted from the assessee's change of address which was not intimated to the CIT(A) and, in the interest of substantial justice, set aside the ex parte order and remitted the matter to the CIT(A) for fresh hearing.

Reassessment proceedings under section 147/148 of the I.T. Act - rectification of typographical mistake under section 292B of the I.T. Act - addition as unexplained investment and invocation of section 69 of the I.T. Act - valuation report as evidence of cost of construction - requirement of source and documentary proof for claimed construction expenditure

Reassessment proceedings under section 147/148 of the I.T. Act - rectification of typographical mistake under section 292B of the I.T. Act - Validity of reassessment proceedings where reasons recorded referred to the assessee's husband by name and whether that typographical error rendered proceedings void. - HELD THAT: - The Tribunal examined the notice under section 148 and the reasons recorded which identified the transaction, return dates and PAN of the assessee while mistakenly mentioning the name of her husband. The Court accepted the view of the lower authorities that the incorrect naming was a typographical error susceptible of rectification and did not vitiate the reassessment proceedings. Further, the Tribunal observed that the substantive basis recorded for reopening related to alleged unexplained investment; that factual foundation remained the focus of reassessment rather than the typographical naming error, and therefore the proceedings were not rendered invalid on that ground. [Paras 5, 9, 10]

Typographical error in the name did not invalidate the reassessment proceedings and could be corrected; the initiation of reassessment was not quashed on that ground.

Addition as unexplained investment and invocation of section 69 of the I.T. Act - valuation report as evidence of cost of construction - requirement of source and documentary proof for claimed construction expenditure - Sustainability of the addition by disallowing claimed cost of construction and treating it as unexplained investment under section 69 where valuation report and explanations regarding sources were on record. - HELD THAT: - On merits the Tribunal found that the property construction pre-dated the impugned assessment year (construction shown as in 2008) and no construction expenditure was incurred during the financial year relevant to the assessment; consequently the premise of unexplained investment during the year did not survive. The valuer's report, which applied PWD rates for 2008, supported the assessee's claim for cost of construction and showed an amount comparable to or exceeding the amount claimed. The assessee had also placed on record explanations and bank documents indicating a bank loan and receipts from family members as sources. In these circumstances the AO's denial of the construction cost and the resulting addition under section 69 were not sustainable. The Tribunal therefore accepted the valuation evidence and explanations and deleted the addition. [Paras 4, 6, 7, 8, 10]

Addition disallowing cost of construction and treated as unexplained investment was deleted; appeal allowed on merits.

Final Conclusion: The reassessment was not invalidated by the typographical naming error, but on merits the addition disallowing the cost of construction was deleted as the construction related to an earlier year and the valuation report together with source explanations satisfactorily supported the claimed cost; the assessee's appeal is allowed.

Revision under section 263: erroneous insofar as prejudicial to the interests of revenue - Verification of discrepancies between books of account and Form 26AS - Application of mind in assessment proceedings - Limits on exercise of revisional jurisdiction where AO failed to make enquiries

Verification of discrepancies between books of account and Form 26AS - Revision under section 263: erroneous insofar as prejudicial to the interests of revenue - Application of mind in assessment proceedings - Whether the order passed by the Assessing Officer under section 143(3) could be held erroneous and prejudicial to the interests of revenue on account of non-verification of the difference between gross receipts shown in books and gross receipts reflected in Form 26AS, thereby justifying revision under section 263. - HELD THAT: - The Tribunal examined the assessment record and the queries raised by the Assessing Officer under section 142(1), noting that the AO had specifically asked for a reconciliation of TDS credit and for work orders and completion certificates. The assessee furnished a reconciliation of TDS credit and copies of work orders/work completion certificates during the assessment proceedings. The Tribunal found, however, that no enquiry was made by the AO into the mismatch in the amount of gross receipts as reflected in the books vis-a -vis Form 26AS, a difference of record not verified during assessment. Relying on the settled principle that the revisional jurisdiction under section 263 can be exercised only if the original order is both erroneous and prejudicial to revenue, and that an order passed without application of mind or without conducting required enquiries may be held erroneous, the Tribunal concluded that the Principal Commissioner was justified in holding the assessment order erroneous insofar as prejudicial to the interests of revenue and in directing fresh assessment proceedings. The Tribunal found no infirmity in the exercise of revisional power on these facts. [Paras 10, 11, 12, 13, 14]

Order of the Principal Commissioner under section 263 is upheld and the assessee's appeal is dismissed.

Final Conclusion: The Tribunal upholds the revisional order of the Principal Commissioner under section 263 for A.Y. 2011-12 on the ground that the Assessing Officer failed to verify the mismatch between gross receipts in the books and those in Form 26AS; the assessee's appeal is dismissed.

Commercial wisdom of the Committee of Creditors - limited judicial review of resolution plan approval - powers of the Adjudicating Authority under Section 31 of the I&B Code - material irregularity in the Corporate Insolvency Resolution Process - evaluation matrix applied by the Committee of Creditors

Commercial wisdom of the Committee of Creditors - limited judicial review of resolution plan approval - powers of the Adjudicating Authority under Section 31 of the I&B Code - evaluation matrix applied by the Committee of Creditors - Whether the Adjudicating Authority erred in dismissing the Appellant's application seeking reconsideration of its resolution plan on the ground that the CoC's evaluation matrix and exercise of commercial wisdom were irregular or unfair. - HELD THAT: - The Tribunal held that the assessment and selection of a resolution plan lie within the commercial wisdom of the Committee of Creditors and that such business decisions, when taken by the requisite voting majority, are non justiciable. The remit of the Adjudicating Authority under Section 31 is circumscribed and confined to the limited grounds of review prescribed by Section 30(2) (and the corresponding appellate limitations). Evaluation criteria and the scoring of competing plans fall within the CoC's domain of commercial judgment and cannot be reopened merely because a dissenting applicant alleges unfairness in application of the matrix. Prior decisions of superior courts (as cited in the judgment) establish that the Adjudicating Authority and the Appellate Tribunal cannot substitute judicial scrutiny for the CoC's business decision. Applying these principles to the facts, the Tribunal found that the CoC had considered the plans, recorded deliberations and voted with requisite majority in favour of the successful resolution applicant, and that the Adjudicating Authority's dismissal of the Appellant's challenge conformed to law. [Paras 6, 7, 11, 12, 13]

The Adjudicating Authority did not err in rejecting the application seeking reconsideration; the CoC's evaluation and approval of the successful resolution plan are matters of commercial wisdom not susceptible to judicial interference in this case.

Material irregularity in the Corporate Insolvency Resolution Process - evaluation matrix applied by the Committee of Creditors - Whether any material irregularity in the Corporate Insolvency Resolution Process was demonstrated against the Resolution Professional or the CoC that would warrant interference with the approved resolution plan. - HELD THAT: - The Tribunal examined the contentions that the Resolution Professional and the CoC applied the evaluation matrix inconsistently (for example, by treating certain cash items differently between bidders) and that reasons were not furnished for rejecting the Appellant's plan. The Tribunal observed that the RP entertained the late expression of interest with CoC consent to maximize asset value, that the CoC recorded deliberations and voted (95.15% in favour of the selected plan), and that mere absence of detailed reasons for a dissenting decision does not, by itself, constitute a material irregularity under the Code. On the material placed before it, the Tribunal found no demonstrable material irregularity in the CIRP that would fall within the limited grounds to set aside or revisit the approved plan. [Paras 8, 9, 10, 12]

No material irregularity in the Corporate Insolvency Resolution Process was shown; no interference with the approved resolution plan was warranted on that ground.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's refusal to direct reconsideration of the Appellant's resolution plan, concluding that the CoC's evaluation and approval were exercises of commercial wisdom beyond the limited judicial review available under the Code, and that no material irregularity in the CIRP was demonstrated to justify interference.

Financial debt - time value of money - commercial effect of borrowing - section 5(8) of the IBC, 2016 - maintainability of application under section 7 - conflict between IBC and the Tea Act, 1953 - authorisation to file application - admission under section 7 - moratorium under section 14 - appointment of interim resolution professional

Financial debt - time value of money - commercial effect of borrowing - section 5(8) of the IBC, 2016 - The advances/temporary finance provided to the corporate debtor are financial debt within the meaning of section 5(8) of the IBC, 2016. - HELD THAT: - The Tribunal found that the written agreements defined the transactions as "finance" and "finance account", showed interest payable, and were granted against present/future stock of tea with disbursements in instalments, while the lenders were not in the business of buying and selling tea. The presence of an interest element, and alternatively the commercial effect of borrowing (including advances with commercial effect under section 5(8)(f)), bring the transactions within the definition of financial debt. The Tribunal observed that even absent express interest, the time value of money constitutes consideration for disbursement. Reliance placed by the corporate debtor on earlier NCLAT authority was held to be not binding in view of a subsequent NCLAT order and the Supreme Court's interpretation of time value of money in Pioneer Urban Land and Infrastructure Ltd. was held to support the view that return need not be strictly monetary to constitute time value. On the available documentary record and absence of material showing extension of tenure, the Tribunal concluded the loans were due and in default and constitute financial debt. [Paras 18, 19, 20, 21, 22]

Transaction held to be financial debt; contention that it was sale/purchase of tea or not financial debt rejected.

Authorisation to file application - rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - The applicants were properly authorised to file the joint section 7 application on behalf of the financial creditors. - HELD THAT: - The Tribunal examined the board resolutions and other authorising documents filed with the petition and held that authorisation to sign and file the application on behalf of the financial creditors was established. It noted that rule 4 permits such authorisation and that technical deficiencies (such as absence of a prescribed format or a company seal) should not defeat the efficacy of an economic legislation when documents appear genuine. Consequently, the plea that the application was defective for want of authorisation was rejected. [Paras 7, 23]

Authorisation objection rejected; application not defective for want of proper authorisation.

Maintainability of application under section 7 - conflict between IBC and the Tea Act, 1953 - The preliminary challenge to maintainability based on alleged conflict between the IBC and the Tea Act was rendered infructuous. - HELD THAT: - The Tribunal observed that the issue concerning conflict between the IBC and the Tea Act had been addressed by the Supreme Court in Duncans Industries Ltd. v. A. J. Agrochem , which held that the provisions of the IBC prevail and section 7/9 applications may be filed without Central Government permission. In view of that ruling, the maintainability challenge was treated as infructuous. [Paras 2]

Maintainability objection on Tea Act conflict dismissed as infructuous.

Premature adjudication of utilisation of compensation - The contention concerning recording/utilisation of compensation for acquisition of part of the tea estate was premature and dismissed. - HELD THAT: - An interlocutory application raising the issue of how compensation, if received on acquisition of part of the corporate debtor's land, would be utilised was considered premature by the Tribunal. No substantive determination on utilisation was undertaken and the application on that point was dismissed accordingly. [Paras 3]

Issue regarding utilisation of compensation dismissed as premature.

Admission under section 7 - moratorium under section 14 - appointment of interim resolution professional - The section 7 petition was admitted; moratorium declared; and the named IRP was appointed as interim resolution professional. - HELD THAT: - Having found debt and default, and that the petition was complete and free of defects, the Tribunal admitted the corporate insolvency resolution process under section 7. It declared moratorium in terms of the Code (prohibiting suits, asset transfers, enforcement actions, and certain recoveries) and directed public announcement and claims submission. The proposed interim resolution professional had given consent and no disciplinary proceedings were pending against him; his appointment as IRP was approved. Directions were given for payment of advance fees to the IRP and for time-bound conduct of the CIRP. [Paras 24, 25]

Section 7 petition admitted; moratorium imposed; IRP appointed and directed to take necessary steps.

Final Conclusion: The Tribunal admitted the joint section 7 petition against Duncans Industries Ltd., holding the advances to be financial debt (including on the ground of time value of money and commercial effect), rejected objections as to maintainability under the Tea Act and as to authorisation, declared the moratorium, and appointed the proposed interim resolution professional.

Commercial wisdom of the committee of creditors - limited judicial review under section 30(2) - approval of a resolution plan by requisite voting share - treatment and priority of operational creditors in a resolution plan - maintainability of intervening application by unsuccessful resolution applicant

Commercial wisdom of the committee of creditors - limited judicial review under section 30(2) - approval of a resolution plan by requisite voting share - Scope of judicial review by the Adjudicating Authority of the Committee of Creditors' approval of a resolution plan. - HELD THAT: - The Tribunal applied the settled principle that the commercial decision of the Committee of Creditors (CoC) in approving a resolution plan is paramount and not amenable to merits-based interference by the Adjudicating Authority. The jurisdiction of the Adjudicating Authority under section 31 is circumscribed by the requirements of section 30(2); judicial review is therefore limited to whether the approved plan complies with specified statutory parameters (including payment of insolvency resolution costs, provision for operational creditors, management and implementation mechanisms, conformity with law and other Board-specified requirements). The Tribunal relied on the Supreme Court precedents cited by the parties to hold that it cannot reassess the commercial evaluation or substitute its view for that of the CoC where the requisite voting majority has approved the plan. [Paras 7]

The Adjudicating Authority will not interfere with the CoC's commercial decision approving the resolution plan except on the limited grounds enumerated in section 30(2); the CoC's approval of SPTL's plan is not subject to deeper merits scrutiny by this Tribunal.

Maintainability of intervening application by unsuccessful resolution applicant - treatment and priority of operational creditors in a resolution plan - Allegation of unfair evaluation, discrimination and the applicant's claim for reconsideration of the CoC's approval. - HELD THAT: - The Tribunal examined the record of opportunities afforded to both resolution applicants to submit and revise plans, noting that the unsuccessful applicant was permitted to participate even after the deadline and multiple revised submissions were considered. The evaluation matrix applied by the CoC was recorded as uniform for both applicants and the successful applicant scored higher. Relying on the statutory scheme and judicial authorities, the Tribunal found no demonstrable discrimination or error in scoring warranting interference. The precedents invoked by the applicant were examined but did not alter the conclusion that limited judicial review cannot be used to retry commercial evaluations made by the CoC. [Paras 1, 2, 7]

The intervening application lacks merit; the CoC treated both applicants equally, and its decision approving SPTL's resolution plan is upheld.

Final Conclusion: The application by the unsuccessful resolution applicant is dismissed; the Committee of Creditors' approval of the resolution plan of M/s. Sterlite Power Transmission Ltd. is upheld and the Adjudicating Authority will not interfere beyond the limited review permitted under section 30(2).

Power to withhold refund in certain cases - Commissioner's discretion to withhold refund (exclusive competence) - Sales Tax Officer lacking authority to withhold refund - Entitlement to interest on withheld refund - Pre-deposit made under statutory provision for filing appeal

Power to withhold refund in certain cases - Commissioner's discretion to withhold refund (exclusive competence) - Sales Tax Officer lacking authority to withhold refund - Validity of the Sales Tax Officer's order withholding the pre-deposit/refund on the ground that the State contemplated filing an SLP - HELD THAT: - The Court observed that Section 39 vests the power to withhold a refund in the Commissioner, who must record an opinion that grant of the refund is likely to adversely affect the revenue and must afford the dealer an opportunity of being heard. In the present case no order or recorded satisfaction by the Commissioner exists and consequently no opportunity was afforded. The Sales Tax Officer has no authority under Section 39 to withhold the refund; at best he could have referred the matter to the Commissioner. Because the statutory preconditions and the requisite exercise of power by the Commissioner are absent, the impugned order of the Sales Tax Officer cannot be sustained and is liable to be quashed. [Paras 6, 7]

Impugned order dated 18.10.2019 passed by the Sales Tax Officer withholding the pre-deposit is quashed.

Entitlement to interest on withheld refund - Pre-deposit made under statutory provision for filing appeal - Whether the petitioner is entitled to immediate refund of the pre-deposit with statutory interest - HELD THAT: - Having found that no exercise of the Commissioner's power occurred for a prolonged period and noting the litigation history-success before the Tribunal, dismissal of the State's High Court appeals, delay in prosecuting the Supreme Court appeal-the Court concluded that the circumstances do not justify further withholding. The Court directed refund of the pre-deposit forthwith together with admissible statutory interest from the date of deposit until actual payment, and declined to afford the Commissioner fresh opportunity given the lapse of time and inaction for about five years. [Paras 8, 9, 10]

Respondents directed to refund the pre-deposit along with statutory interest within two weeks on production of certified copy of the order.

Final Conclusion: Writ petition allowed: the Sales Tax Officer's order withholding the pre-deposit is quashed; respondents directed to refund the pre-deposit with admissible interest within two weeks on production of certified copy of the order.

Principles of natural justice - personal hearing - valid service of notice - remand for fresh consideration - assessment under CST Act - COVID-19 lockdown and inability to avail hearing

Principles of natural justice - personal hearing - valid service of notice - COVID-19 lockdown and inability to avail hearing - remand for fresh consideration - Impugned assessment order set aside on grounds of violation of natural justice and matter remitted for fresh consideration with directions for hearing and disposal. - HELD THAT: - The personal hearing notice was served by e-mail on 30.03.2020 at 7.15 p.m. and the assessment order was passed on 31.03.2020. A COVID-19 lockdown was in force from 23.03.2020, during which the petitioner's business was closed and the petitioner was unable to avail the personal hearing. The court found that issuing a late-evening notice during the lockdown and passing the assessment the very next day resulted in a grave violation of the principles of natural justice. The respondents did not dispute the petitioner's inability to appear and indicated willingness to grant a hearing if the order were set aside. In view of these facts and the concession, the court set aside the assessment order and remitted the matter to the assessing authority for fresh consideration. The petitioner was permitted to file fresh objections to the show-cause notice within three weeks of receipt of the order; thereafter the assessing officer is to afford a personal hearing and pass a reasoned order in accordance with law and communicate it to the petitioner. [Paras 7, 8]

Impugned assessment order No.53886 dated 31.03.2020 is set aside; matter remitted for fresh consideration with liberty to file objections within three weeks and directions to afford personal hearing and pass a reasoned order.

Final Conclusion: Writ petition allowed; assessment annulled for breach of natural justice and remitted for fresh adjudication with opportunity of hearing and reasoned decision; no order as to costs.

Turnover characterisation as inter-state sale versus service receipt - failure to consider objections in assessment proceedings - assessment order set aside and remitted for fresh consideration - personal hearing before passing a reasoned order - requirement of a reasoned order

Failure to consider objections in assessment proceedings - assessment order set aside and remitted for fresh consideration - requirement of a reasoned order - Impugned assessment order set aside for failure to advert to and decide the objections raised by the assessee and remitted for fresh adjudication. - HELD THAT: - The Court found that the assessing authority did not advert to or deal with the specific objections raised by the petitioner to the show cause notice, namely that no inter state sales or branch transfers had taken place and that the declared turnover comprised service receipts on which service tax had been paid. In view of the omission to consider those contentions and the absence of a reasoned decision on the points raised, the assessment order could not be sustained. The appropriate remedy is to set aside the impugned order and remit the matter to the assessing authority for fresh consideration, requiring that the objections be addressed and a reasoned order be passed. [Paras 9, 10]

Impugned assessment order set aside; matter remitted for fresh consideration with direction to pass a reasoned order after affording personal hearing.

Turnover characterisation as inter-state sale versus service receipt - personal hearing before passing a reasoned order - Substantive question whether the turnover is taxable under the CST Act as inter state sales or is service receipts subject to service tax is to be considered afresh by the assessing authority. - HELD THAT: - The petitioner had specifically contended that the amounts declared in VAT returns were rentals/service charges received within the State for tower facilities and were subject to service tax under the Finance Act, 1994, and that there were no inter state sales or branch transfers. The Court did not decide the substantive question on merits but directed that the assessing authority must consider this contention on remand, afford the petitioner a personal hearing and then pass a reasoned order determining whether the receipts constitute taxable inter state sales under the CST Act or taxable services under the Finance Act. [Paras 5, 9, 10]

Substantive characterisation remitted for fresh consideration by the assessing authority after personal hearing and for issuance of a reasoned order.

Final Conclusion: Writ petition allowed; assessment order AO.No.55782 dated 31.03.2020 set aside and the matter remitted to the assessing authority to consider the petitioner's objections, afford a personal hearing and pass a reasoned order in accordance with law for the assessment year 2015-16.

Violation of principles of natural justice - Double taxation - Ultra vires challenge to State taxation power under Entry 54, List II - Constitutional challenge under Articles 14 and 19(1)(g) - Remand for fresh consideration and opportunity of hearing

Violation of principles of natural justice - Remand for fresh consideration and opportunity of hearing - Assessment proceedings dated 13.03.2020 for the tax period 2013-14 to 2016-17 were violative of principles of natural justice and require setting aside and remand for fresh consideration. - HELD THAT: - The Court found that the petitioner sought to file additional objections on 12.03.2020 and was told to return on 16.03.2020, but the impugned assessment order was passed on 13.03.2020 without receiving those objections or completing the promised hearing. The conduct of the assessing authority in passing the order while asking the petitioner's representative to return on a later date amounted to denial of the opportunity to be heard. The State's counsel undertook that the assessing authority would reconsider the matter if remitted. In these circumstances the assessment order was set aside and the matter was remitted for fresh consideration, with directions to permit filing of additional objections, afford personal hearing, and pass a reasoned order in accordance with law. [Paras 12, 13, 14]

Impugned assessment order dated 13.03.2020 for 2013-14 to 2016-17 set aside; matter remitted for fresh consideration, petitioner to be permitted to file additional objections, be afforded personal hearing, and a reasoned order to be passed.

Double taxation - Constitutional challenge under Articles 14 and 19(1)(g) - Ultra vires challenge to State taxation power under Entry 54, List II - Substantive and constitutional challenges including alleged double taxation and vires of relevant provisions were not adjudicated and are left open for separate proceedings. - HELD THAT: - Although the petitioner raised contentions that levy under the State statute resulted in double taxation and challenged the vires of provisions as violative of Articles 14 and 19(1)(g) and Entry 54 of List II, the Court did not decide these substantive or constitutional questions. The Court explicitly left all other questions raised by the petitioner open for consideration in any separate proceeding the petitioner may choose to institute, thereby remitting those controversies from the present adjudication. [Paras 14]

All other substantive and constitutional questions raised were left open to be considered in a separate proceeding if the petitioner elects to pursue them.

Final Conclusion: Writ petition allowed to the extent that the assessment order dated 13.03.2020 for the tax period 2013-14 to 2016-17 is quashed and the matter is remitted to the assessing authority to permit additional objections, afford personal hearing and pass a reasoned order; other substantive and constitutional challenges are left open.

Reversal of Input Tax Credit on account of mismatch - keeping assessments involving mismatch in abeyance - central mechanism for verification of mismatch - pre-assessment notices to keep issue alive - directive of the Commissioner binding on Assessing Officer

Reversal of Input Tax Credit on account of mismatch - directive of the Commissioner binding on Assessing Officer - Validity of assessments finalised by the Assessing Officer which reversed ITC on the ground of mismatch despite departmental directive to keep mismatch issues in abeyance. - HELD THAT: - The assessments for the tax periods 2010-11 to 2015-16 impugned in these petitions involved reversal of Input Tax Credit purportedly on the basis of a mismatch between particulars furnished by the petitioner and those appearing in purchaser/seller returns. This Court had previously directed evolution of a central mechanism to examine mismatch issues and, following that direction, the Commissioner issued Circular No.3 of 2019 which expressly directed that matters involving mismatch of ITC should be kept in abeyance while issuing pre-assessment notices so the issues remain alive until resolution by the envisaged mechanism. The Assessing Officer's finalisation of the assessments in the face of that directive was contrary to the Commissioner's circular and to the earlier judicial direction; therefore those assessment orders could not be sustained and have been set aside. [Paras 3, 4, 5]

Impugned assessment orders reversing ITC on the ground of mismatch are set aside as being contrary to the Commissioner's directive and the Court's earlier direction.

Keeping assessments involving mismatch in abeyance - central mechanism for verification of mismatch - pre-assessment notices to keep issue alive - Procedure to be followed pending formulation of the central mechanism and the status of pre-assessment notices in petitioners' cases. - HELD THAT: - Pursuant to the Commissioner's circular, the show-cause/pre-assessment notices already issued are to keep the mismatch issue alive while assessments involving mismatch remain in abeyance until the central mechanism is established. The Court directed that the existing show-cause notice dated 26.08.2019 will continue to preserve the departmental claim; thereafter, once the mechanism is formulated, proceedings may be proceeded with and finalised in accordance with law. The Court therefore set aside the final assessments but retained the pre-assessment process so that the matter may be revisited in future proceedings consistent with the circular and law. [Paras 4, 5]

Show-cause/pre-assessment notices shall keep the issue alive; assessments to remain in abeyance until the central mechanism is formulated and proceedings thereafter shall be conducted and finalised in accordance with law.

Final Conclusion: Writ petitions allowed: assessments set aside as contrary to the Commissioner's directive; pre-assessment notices to keep the mismatch issue alive until a central mechanism is evolved, after which proceedings may be taken and finalised in accordance with law; no costs.

Input Tax Credit - reversal of Input Tax Credit on discounts - Section 19(20) prospective operation - penalty under Section 27(4) - Input Tax Credit on packing materials - remand for fresh consideration

Input Tax Credit - reversal of Input Tax Credit on discounts - Section 19(20) prospective operation - penalty under Section 27(4) - Validity of invoking Section 19(20) to deny ITC in respect of discounts received for the tax period 2008-09 and consequential levy of penalty under Section 27(4). - HELD THAT: - Section 19(20) was inserted with effect from 19.08.2010. The Supreme Court in Jayam and Co. held that Section 19(20) operates prospectively from the date of its insertion and cannot be given retrospective effect to affect vested rights arising before 19.08.2010. For the tax period 2008-09 the provision therefore could not be invoked to deny ITC. Although the assessment order was dated 11.12.2013 (when the provision was on the statute book), the retrospective applicability was negatived by the Supreme Court's decision; accordingly the reversal of ITC insofar as it was founded on Section 19(20) is not maintainable and the penalty under Section 27(4) imposed on that basis also cannot stand. [Paras 5]

Invocation of Section 19(20) to reverse ITC for 2008-09 quashed and penalty under Section 27(4) levied to that extent quashed.

Input Tax Credit on packing materials - remand for fresh consideration - Reversal of ITC claimed on packing materials purchased from local registered dealers and used for export packing and whether that ground was properly adjudicated by the Appellate Authority. - HELD THAT: - The petitioner relied on the provision permitting input tax credit on packing materials, containers, labels and other materials used for packing goods. The Appellate Authority did not advert to or decide this ground. Since the first appellate order failed to consider the assessee's contention under the relevant provision allowing ITC on packing materials, the Court quashed the appellate order and remitted the matter to the Assessing Officer for de novo adjudication. The Assessing Officer is to take into account the submissions of the assessee and decide in accordance with law. [Paras 6]

Order of the Appellate Authority set aside and matter remitted to the Assessing Officer for fresh adjudication on the claim of ITC on packing materials.

Final Conclusion: The assessment is quashed to the extent ITC was reversed by reference to Section 19(20) for 2008-09 and the related penalty under Section 27(4) is set aside; the challenge to reversal of ITC on packing materials is remitted to the Assessing Officer for fresh consideration in accordance with law.