TaxTMI Updates e-Newsletter
Aug 01,2025

Issues: Whether the impugned proceedings and orders under section 74 of the Uttar Pradesh GST Act, 2017 could proceed against the petitioners in view of the approved resolution plans under the Insolvency and Bankruptcy Code, 2016.

Analysis: The petitioners had challenged the show cause notices and the subsequent orders passed under section 74 of the Uttar Pradesh GST Act, 2017 in relation to companies whose resolution plans had already been accepted by the National Company Law Tribunal. The Court recorded a prima facie view that the proceedings were covered by the principles stated in the cited Supreme Court and coordinate Bench decisions, and granted interim protection pending further hearing.

Outcome: The impugned orders under section 74 of the Uttar Pradesh GST Act, 2017 were stayed till further orders insofar as they related to the demand against the petitioners, and counter affidavit and rejoinder timelines were fixed.

ISSUES:

Whether the impugned order under Section 74 of the TNGST / CGST Act, 2017, passed for the Assessment Year 2017-2018, is barred by limitation under Section 74(10) of the GST enactments.Whether tax liability can be fastened on a deceased individual in respect of the proprietary concern operated by the deceased.Whether the petitioner was afforded adequate opportunity to respond to the show cause notice and whether procedural requirements were complied with.Whether the petitioner is entitled to file a statutory appeal under Section 107 of the GST Act against the impugned order.

RULINGS / HOLDINGS:

The contention that the impugned order is barred by limitation under Section 74(10) is rejected because, applying Section 9 of the General Clauses Act, 1897, the limitation period commenced from 06.02.2020, making the order dated 05.02.2025 within the permissible period.The tax liability was validly fastened on the deceased individual's proprietary concern since inward supplies continued post demise, and the business was operated by the manager without formal closure.The petitioner was afforded sufficient opportunity to respond, including service of notice in Form DRC-01 via RPAD and upload on the GST portal, and the reply was duly considered before passing the order.The petitioner is granted liberty to file a statutory appeal under Section 107 of the GST Act within 30 days, which the Appellate Authority shall entertain and dispose of on merits within three months, subject to mandatory pre-deposit.

RATIONALE:

The Court applied Section 74(10) of the GST enactments in conjunction with Section 9 of the General Clauses Act, 1897, to determine the correct commencement of the limitation period for passing assessment orders.The Court relied on the principle that tax liability under GST can extend to proprietary concerns operated by deceased persons if business operations continue post demise without proper closure.Procedural fairness was ensured by adherence to service requirements, including notice issuance through Registered Post Acknowledgement Due (RPAD) and electronic communication via the GST portal.The Court recognized the statutory right of appeal under Section 107 of the GST Act and emphasized the requirement of mandatory pre-deposit for appellate consideration, ensuring compliance with procedural safeguards.

ISSUES:

Whether the applicant is entitled to regular bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 in connection with alleged wrongful availing of Input Tax Credit under the GST Act.Whether the nature and gravity of the offence, including alleged wrongful availing of Input Tax Credit and the amount involved, justify denial of bail.Whether the applicant's custodial presence is necessary for the investigation.What conditions should be imposed upon granting bail in cases involving economic offences under the GST Act.

RULINGS / HOLDINGS:

The application for bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 is allowed as the investigation is complete and "the presence of the applicant in the custody is no more required for the purpose of investigation."Considering the offence alleged is punishable with imprisonment "which may extend to 5 years," and the applicant's willingness to deposit Rs.25 lakhs with the GST authorities, bail is granted subject to stringent conditions.The Court emphasized the three factors from Supreme Court jurisprudence-prima facie case, availability of the accused at trial, and tampering with witnesses-and found that the applicant is not likely to flee and there is no sufficient ground to deny bail.Bail is granted on executing a personal bond of Rs.10,000 with one surety of the like amount, subject to conditions including non-tampering with evidence, monthly police station attendance, surrender of passport, and deposit of Rs.25 lakhs with GST authorities within six weeks.

RATIONALE:

The Court applied the legal framework under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 and relevant provisions of the GST Act, specifically Sections 122 and 132, which prescribe punishment up to 5 years imprisonment for the alleged offences.The Court relied on the Supreme Court precedent in Sanjay Chandra v. C.B.I., which directs consideration of prima facie case, risk of flight, and tampering with evidence when deciding bail applications.The Court recognized that while the alleged wrongful availing of Input Tax Credit involves a substantial amount, the GST authorities retain the right to initiate appropriate recovery proceedings, and that custodial detention was no longer necessary for investigation.The Court imposed comprehensive bail conditions to mitigate risks of tampering with evidence and ensure the applicant's presence at trial, reflecting a balance between individual liberty and safeguarding the investigation and trial process.

ISSUES:

Whether Rule 86A of the Central Goods & Service Tax Rules, 2017 (CGST Rules) and Circular No.04/2021 issued by CBIC are constitutionally valid.Whether the blocking of Input Tax Credit (ITC) under Rule 86A without prior opportunity of hearing violates the principle of natural justice.Whether the procedure prescribed under Rule 86A for blocking and subsequent release of ITC complies with statutory and constitutional safeguards.Whether the authorities acted within the scope of power and reasonableness in blocking ITC under Rule 86A.

RULINGS / HOLDINGS:

The constitutional validity of Rule 86A of the CGST Rules, 2017 is upheld; the provision is not unconstitutional merely because it does not provide for pre-decisional hearing prior to blocking ITC.The blocking of ITC under Rule 86A without prior hearing does not violate the principle of natural justice as the rule provides for a post-decisional opportunity to submit objections under sub-rule (2), and the Commissioner is required to decide such objections expeditiously.The temporary blocking of ITC for a period not exceeding one year under sub-rule (3) is a reasonable and necessary immediate action to prevent recovery difficulties in cases of fraudulent or ineligible ITC claims.The authority must record reasons in writing for blocking ITC and must consider any objections filed by the taxpayer before lifting the restriction, thus ensuring procedural fairness.

RATIONALE:

The Court applied the statutory framework of Rule 86A of the CGST Rules, 2017, which authorizes the Commissioner or an authorized officer to block the debit of electronic credit ledger where there are "reasons to believe" that the ITC has been fraudulently availed or is ineligible, with reasons to be recorded in writing.Reliance was placed on precedent from the Karnataka High Court's decision in K-9 Enterprises, which upheld the validity of Rule 86A and emphasized the necessity of reading the principle of natural justice into the rule by providing a post-decisional hearing opportunity.The Court recognized the practical necessity of immediate blocking of ITC to prevent the potential dissipation of revenue, justifying the absence of pre-decisional hearing, balanced by the statutory provision for post-blocking objections and review.The Court directed the competent authority to exercise its discretion expeditiously and pass a speaking order on any objections filed under Rule 86A(2), reinforcing procedural safeguards without invalidating the rule.

Issues: Whether the detention and levy of tax and penalty were justified on the ground that the consignment was moved without generation of Part B of the e-way bill, rendering the e-way bill invalid under the GST framework.

Analysis: Section 129 of the Madhya Pradesh Goods and Service Tax Act, 2017 permits detention or seizure where goods are transported in contravention of the Act or the rules, and Rule 138 of the M.P. Goods and Service Tax Rules, 2017 requires a registered person causing movement of goods above the prescribed value to furnish Part A before movement and, where the goods are transported by road, to generate the e-way bill after furnishing Part B. The record showed that the Part A slip itself stated that it was not valid for movement until Part B was entered. On that basis, the absence of Part B was treated as a substantive violation and not a mere technical lapse.

Conclusion: The detention, demand of IGST and equal penalty were upheld, and the challenge to the impugned order failed.

Final Conclusion: The writ petition was dismissed because movement of the goods without Part B of the e-way bill amounted to a statutory breach justifying the impugned action.

Ratio Decidendi: Where the GST rules make generation of Part B essential for a valid e-way bill for road transport, movement of goods without Part B constitutes a contravention sufficient to sustain detention and consequential tax and penalty under the detention provision.

ISSUES:

Whether cancellation of GST registration for failure to submit returns within the prescribed time under the Central Goods and Services Tax Act, 2017 is sustainable when the appeal period under Section 107(4) has expired.Whether a writ petition can be entertained to set aside an order of cancellation of GST registration to allow filing of returns and payment of dues despite the lapse of the appeal period.Whether revival of GST registration after cancellation benefits the revenue authorities under the said Act.Whether the adjudicating authority or the Court can grant a grace period for filing returns and payment of tax, interest, fine, and penalty after cancellation of registration.

RULINGS / HOLDINGS:

The Court held that although the appeal period under Section 107(4) of the Central Goods and Services Tax Act, 2017 has expired, the writ petition can be entertained to set aside the cancellation order dated 31st July, 2024, to permit filing of returns within a stipulated time.The order of cancellation of GST registration was set aside subject to the condition that the petitioner files returns for the entire period of default and pays the requisite amount of tax, interest, fine, and penalty within four weeks, failing which the writ petition shall stand dismissed automatically.The Court recognized that cancellation of GST registration effectively puts the petitioner out of the purview of the Act, which is "not beneficial to the respondent authorities in terms of generating revenue."The Court directed the concerned authorities to open the portal for the petitioner to enable filing of returns and payment of dues for the entire period of default as per the Court's order.

RATIONALE:

The Court relied on the statutory appeal provisions under Section 107 of the Central Goods and Services Tax Act, 2017, noting the prescribed limitation period and the grace period under Section 107(4).The Court applied precedents from the Hon'ble Madras High Court and the Division Bench of the same High Court, specifically referencing judgments that support granting an opportunity to file returns post cancellation to protect revenue interests (Tvl. Suguna Cutpiece Centre and Subhankar Golder cases).The Court emphasized the principle that cancellation of registration should not be allowed to defeat revenue collection, thereby justifying the revival of registration upon compliance with filing and payment obligations.No dissent or doctrinal shift was noted; the decision follows established judicial approach to balancing procedural compliance with substantive revenue protection.

Issues: Whether the delay of 19 days in preferring the statutory appeal under the Central Goods and Services Tax Act, 2017 ought to be condoned and the appellate order dismissing the appeal as time-barred ought to be set aside.

Analysis: The impugned appellate order proceeded on the basis of the date of the adjudication order and treated the appeal as belated without taking into account the explanation for the delay. The order also did not consider the cause shown for the short delay of 19 days. In these circumstances, the basis adopted for computing delay was found inconsistent with the appellate authority's own reasoning, and the delay was held fit to be condoned.

Conclusion: The delay was condoned and the order dismissing the appeal on limitation was set aside.

ISSUES:

Whether the cancellation of a taxpayer's registration under the Central Goods and Services Tax Act, 2017 can be challenged and set aside upon payment of outstanding GST dues.Whether the authorities are required to compute GST dues for specific financial years before restoration of registration.Whether restoration of GST registration can be directed conditionally upon payment of determined dues within a stipulated time frame.

RULINGS / HOLDINGS:

The Court held that the cancellation of registration under the CGST Act can be set aside if the petitioner is ready and willing to pay all GST dues, subject to computation of such dues by the authorities.The Court directed the Respondents to compute the dues payable by the Petitioner for the years 2022-2023 and 2023-2024 and communicate the same within four weeks, emphasizing that the "exercise must be carried out in relation to the years 2022-2023 and 2023-2024."The Court ordered restoration of the Petitioner's registration on the condition that the Petitioner pays the dues of Rs. 21,500/- within two weeks from the date of the order, stating that "if the dues are paid within the timelines now indicated, the impugned order would be deemed to have been set aside."The registration was directed to be restored immediately to facilitate payment, with a clear stipulation that failure to pay within 48 hours of restoration would result in dismissal of the petition without further reference.

RATIONALE:

The Court applied the statutory framework under the Central Goods and Services Tax Act, 2017, emphasizing the principle that registration cancellation can be reconsidered upon payment of dues.The Court relied on precedent orders disposing of similar writ petitions where a course of action involving computation of dues and conditional restoration of registration was adopted, reflecting a consistent judicial approach.The decision reflects a procedural safeguard ensuring that dues are properly quantified before restoration, balancing the taxpayer's right to registration with the revenue's interest in recovery of tax dues.No dissent or doctrinal shift was noted; the Court followed established principles and prior orders to arrive at a reasoned and conditional restoration of registration.

ISSUES:

Whether the timelines stipulated under Section 107(1) and Section 107(4) of the West Bengal Goods and Services Tax Act, 2017 ("WBGST Act") for preferring an appeal are mandatory or directory.Whether the Appellate Authority and the writ court have the power to condone delay beyond the statutory period prescribed under Section 107 of the WBGST Act.Whether the delay in preferring the appeal in the present case ought to have been condoned on the facts, including medical grounds and difficulty in accessing the notice.Whether the communication of the assessment order by uploading it only on the "Additional Tab" of the GST Portal constitutes proper service or communication under Section 73(1) of the WBGST Act and the Rules framed thereunder.Whether the fixing of a personal hearing date prior to the date for filing reply to the Show Cause Notice violates the principles of natural justice and vitiates the assessment order.Whether the Proper Officer failed to comply with the statutory mandate under Sections 73(9) and 75(4) of the WBGST Act to consider the representation and grant an opportunity of hearing when an adverse decision was contemplated.Whether the writ court can interfere with the order of the Appellate Authority dismissing the appeal on limitation grounds where there is a violation of natural justice or patent illegality.

RULINGS / HOLDINGS:

The timelines stipulated in Section 107(1) and Section 107(4) of the WBGST Act are not mandatory but directory, as Section 107(4) does not contain mandatory or negative language debarring appeals beyond the period, unlike Section 107(6). Therefore, the provisions of the Limitation Act apply.The Appellate Authority and the writ court do have the power to condone delay beyond the statutory period if sufficient cause is shown, consistent with the ratio in S.K. Chakraborty and Sons v. Union of India, which remains binding despite a stay order on operation between parties.On the facts, the delay in preferring the appeal was justified by medical grounds affecting both active partners and difficulty in accessing the notice on the GST Portal's Additional Tab, thus the delay ought to have been condoned.Uploading the assessment order only on the Additional Tab of the GST Portal does not constitute proper communication under Section 73(1) of the WBGST Act, as the Additional Tab is less accessible and not clearly explained, leading to a failure in proper service.Fixing the date of personal hearing prior to the date for filing the reply to the Show Cause Notice is an irregularity that vitiates the assessment order, since a hearing must be given on the basis of the representation; a hearing before the representation is illusory and violates the principle of Audi Alteram Partem.The Proper Officer failed to comply with the statutory mandate under Sections 73(9) and 75(4) by not granting an opportunity of hearing on the representation and by proceeding ex parte, thereby violating natural justice and vitiating the assessment order.The writ court may interfere by issuing writs such as certiorari or mandamus where there is a patent miscarriage of justice or violation of natural justice principles, even if the appeal is dismissed on limitation grounds.

RATIONALE:

The Court applied the statutory framework of the WBGST Act, particularly Section 107 (appeal provisions), Section 73 (assessment and notice provisions), and Section 75 (general provisions relating to determination of tax and hearing), alongside the Limitation Act, 1963.Interpretation of Section 107(4) was guided by internal aids, contrasting the language of subsections (4) and (6), and external aids by analogy to the West Bengal Premises Tenancy Act, 1997, establishing that absence of explicit mandatory language means timelines are directory.Section 29(2) of the Limitation Act was invoked to determine that special or local laws exclude the Limitation Act only if expressly stated, which is absent in Section 107(4) of the WBGST Act.The Court emphasized the principle of strict interpretation of taxing statutes but distinguished that while timelines may be interpreted strictly, procedural safeguards such as opportunity of hearing and proper communication are mandatory and must be strictly complied with.The Court relied on the principle of natural justice, Audi Alteram Partem, as embodied in Sections 73(9) and 75(4), requiring that a hearing be given on the basis of the representation, and that an adverse order cannot be passed without such hearing.Precedents from various High Courts were considered regarding accessibility issues of the Additional Tab on the GST Portal and the resulting failure of proper service of notices.The Court noted the inconsistency in the impugned order where strictness was applied to limitation timelines but leniency was shown towards procedural non-compliance in service and hearing, which was held to be erroneous.The judgment reaffirmed the power of the writ court to intervene in cases of violation of natural justice or patent illegality notwithstanding limitation bars, citing established Supreme Court precedent.

ISSUES:

Whether cancellation of GST registration with retrospective effect is valid in absence of proper verification of business premises.Whether failure to file application for amendment of registered address before shifting premises violates provisions of the CGST Act, 2017.Whether restoration of GST registration can be granted based on submission of new rent agreement and supporting documents after cancellation.Whether a fresh inspection is warranted to verify existence of business at new premises for restoration of GST registration.

RULINGS / HOLDINGS:

The cancellation of GST registration with retrospective effect was upheld due to non-compliance with procedural requirements, including failure to file application for amendment of address as per Section 28 of the CGST Act, 2017 read with Rule 19.The mere submission of facts without evidencing the same or complying with provisions of the CGST Act/Rules, 2017 "cannot be considered at face value."Restoration of GST registration is contingent upon verification of the new premises and submission of requisite documents, including complete rent agreement, Aadhaar and PAN cards of witnesses, ownership proof, NOC from owner, and geotagged photographs.A direction for a fresh inspection of the new premises is appropriate, and a decision on restoration shall be taken within one month of such inspection.

RATIONALE:

The Court applied the statutory framework under Section 28 of the Central Goods and Services Tax Act, 2017 and Rule 19 thereof, which mandates filing of an application for amendment of registered particulars prior to shifting business premises.The Appellate Authority's reliance on lack of complete documentation, including incomplete rent agreement and absence of verification documents, was affirmed as valid grounds for dismissal of restoration appeal.The Court emphasized that compliance with procedural safeguards and documentary evidence is essential to establish existence at the declared business address and to prevent misuse of GST registration.No dissent or doctrinal shift was indicated; the judgment reinforces the importance of procedural compliance and evidentiary verification in GST registration matters.

ISSUES:

Whether the adjudication order and related summary order under sections 73(10), 73(9), 50 & 122 of the KGST Act, 2017 and CGST Act, 2017 for tax periods April 2019 to March 2020 can be quashed for failure to consider annual returns and reversal of Input Tax Credit (ITC) properly.Whether reliance solely on GSTR-2A and GSTR-3B without considering annual returns and DRC-03 filings leads to erroneous conclusions regarding excess ITC claims.Whether the appellate order under section 107 of the KGST Act, 2017 and CGST Act, 2017 for the same tax periods is sustainable in light of the above issues.

RULINGS / HOLDINGS:

The adjudication order dated 19-07-2024 and the summary order dated 20-07-2024 are set aside as the respondents failed to consider the annual returns and reversal of ITC through DRC-03, relying only on GSTR-2A and GSTR-3B, resulting in a "wrong conclusion and wrong calculation" of excess ITC.The appellate order dated 21-02-2025 is also set aside consequent to the quashing of the impugned orders below.The matter is remitted to the second respondent for fresh consideration at the stage of reply to the show cause notice, directing the petitioner to submit the reply without further notice and the authority to consider the reply in accordance with established directions.

RATIONALE:

The Court applied the statutory provisions under sections 73(10), 73(9), 50 & 122 of the KGST Act, 2017 and CGST Act, 2017, emphasizing that proper factual appreciation requires consideration of all relevant documents, including annual returns and DRC-03 filings, not merely GSTR-2A and GSTR-3B forms.The failure to consider the reversal of ITC and the tabulation of ITC claims over multiple financial years led to an unsustainable order, necessitating remand for reconsideration.The Court referenced directions issued in a prior authoritative case to guide the reconsideration process, ensuring adherence to procedural fairness and comprehensive evaluation of ITC claims.

ISSUES:

Whether the appellate authority erred in rejecting the appeal on the ground of limitation under Section 107 of the WBGST/CGST Act, 2017.Whether the petitioner's claim of unawareness of notices uploaded under "Additional Notices and Orders" on the common portal justifies condonation of delay in filing the appeal.Whether the High Court can interfere and remit the matter to the appellate authority for adjudication on merits in absence of the Appellate Tribunal.The conditions under which delay in filing appeal may be condoned and the appeal heard on merits.

RULINGS / HOLDINGS:

The appellate authority did not err in rejecting the appeal on limitation grounds as the petitioner was served with requisite notices and had responded to the pre-show cause notice; thus, the petitioner's explanation of being unaware due to notices being uploaded under "Additional Notices and Orders" is not accepted.The High Court, considering the multi-tier adjudicating process under the said Act and the non-constitution of the Appellate Tribunal, remanded the matter back to the appellate authority to decide the appeal on merits by condoning the delay.Delay in filing the appeal is condoned subject to the petitioner making a payment of Rs. 5000/- to the Calcutta High Court Legal Services Committee as a condition precedent to the appellate authority hearing the appeal on merits.The consequential demand, if any, in form ALP-04 stands quashed upon compliance with the Court's directions.Failure to comply with the payment condition within two weeks will result in the order not benefiting the petitioner and respondents being free to enforce their demand.

RATIONALE:

The Court applied the statutory framework under the WBGST/CGST Act, 2017, particularly Sections 61, 73(9), and 107, governing notice issuance, adjudication, and appeals.The Court emphasized the availability of records on the common portal facilitating appellate authority's access, making remand for merits consideration appropriate and convenient.The decision reflects a discretionary exercise of power to condone delay in filing appeals where statutory appellate remedy is unavailable due to non-constitution of the Appellate Tribunal, balancing procedural compliance and substantive justice.No dissent or doctrinal shift was indicated; the Court's approach aligns with principles of fairness and judicial discretion in administrative adjudication processes.

Issues: Whether the order cancelling the GST registration could be sustained and whether the cancellation ought to operate from the date of the application for cancellation.

Analysis: The registration had already been cancelled provisionally, and the subsequent show cause notice for non-filing of returns could not stand on the footing that the petitioner remained liable to file returns after such cancellation. The record also showed that the earlier cancellation order was not served at the address and email furnished for future correspondence, depriving the petitioner of effective notice and the opportunity to challenge it in time. In these circumstances, the later cancellation order lacked a sustainable basis.

Conclusion: The cancellation order was set aside, and the GST registration was directed to stand cancelled with effect from the date of the cancellation application.

Ratio Decidendi: Where an earlier cancellation of registration has already taken effect and the affected person was not duly served with the relevant order, a later cancellation based on non-filing of returns after such cancellation cannot be sustained.

ISSUES:

Whether the petitioner furnished the required documents within the stipulated time to the first respondent.Whether the first respondent properly considered the documents submitted by the petitioner.Whether the appellate authority erred in dismissing the appeal on the ground of belated submission of documents and appeal.Whether the petitioner was deprived of the opportunity to be heard and have the documents considered on merits.

RULINGS / HOLDINGS:

The petitioner did not furnish the required documents in the prescribed format within the time allowed, as the order was passed before the documents were submitted on 04.05.2024.The first respondent could not consider the documents submitted belatedly on 04.05.2024 as the order was passed on 30.04.2024.The appellate authority dismissed the appeal on the ground that the documents were not furnished within time and the appeal was belatedly filed, which was held to be improper as the documents were placed on record before the appellate authority and requested to be considered.The petitioner was deprived of a valuable right as the appellate authority ought to have considered the documents placed on record, even if not furnished in the prescribed format initially.The impugned orders dated 30.04.2024 passed by both respondents are set aside, and the matter is remitted to the first respondent for fresh consideration of the documents filed by the petitioner.

RATIONALE:

The legal framework requires that documents in support of the petitioner's case be furnished within the prescribed time and in the prescribed format to enable proper adjudication.However, the Court recognized that the petitioner had submitted reconciliation details, albeit not in the exact format initially required, and subsequently complied with the format after the order was passed.The appellate authority's refusal to consider the belatedly submitted documents and dismissal of the appeal on grounds of delay was found to be a denial of the petitioner's right to be heard on merits.The Court emphasized that procedural technicalities should not override substantive rights, and that the appellate authority should have exercised discretion to consider the documents to avoid injustice.This judgment reflects a balanced approach between procedural compliance and substantive fairness, ensuring that the petitioner is afforded an opportunity to have relevant documents considered before final adjudication.

ISSUES:

Whether appeals filed by the Revenue against orders of the Income Tax Appellate Tribunal can proceed during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016).Whether assessment and penalty proceedings can continue despite the moratorium imposed under the IBC, 2016.The applicability and precedence of the IBC, 2016 over other statutes, specifically the Income Tax Act, 1961, during the insolvency resolution process.

RULINGS / HOLDINGS:

The appeals filed by the Revenue against the orders of the Income Tax Appellate Tribunal cannot proceed while the moratorium under Section 14 of the IBC, 2016, is in operation, as the moratorium prohibits "the institution of suits or continuation of pending suits or proceedings" against the corporate debtor.The moratorium imposed under Section 14 of the IBC, 2016, applies notwithstanding anything inconsistent contained in any other enactment, including the Income Tax Act, 1961, pursuant to Section 238 of the IBC, 2016.Assessment and penalty proceedings cannot be treated as exceptions to the moratorium; thus, appeals relating to such proceedings are also stayed during the moratorium period.The judgment in Sundaresh Bhatt (Liquidator) of ABG Shipyard v. Central Board of Indirect Tax and Customs, which relates to Customs Act proceedings, is not applicable to appeals before the High Court under the Income Tax Act during the moratorium.

RATIONALE:

The Court relied on the statutory framework of the Insolvency and Bankruptcy Code, 2016, particularly Section 14(1)(a) which mandates a moratorium prohibiting "the institution of suits or continuation of pending suits or proceedings" against the corporate debtor from the insolvency commencement date until the completion of the Corporate Insolvency Resolution Process or liquidation.Section 238 of the IBC, 2016 provides that the Code shall have overriding effect over any other law inconsistent therewith, including the Income Tax Act, 1961.The Court followed the precedent set by the Delhi High Court in Principal Commissioner of Income Tax-6 v. Monnet Ispat and Energy Ltd, upheld by the Supreme Court, which held that appeals by the Revenue cannot proceed during the moratorium period.The Supreme Court's dismissal of the Special Leave Petition emphasized that income tax dues, being crown debts, do not take precedence over the moratorium provisions of the IBC, reinforcing the overriding effect of the Code.The Court distinguished the Sundaresh Bhatt (Liquidator) decision as relating to Customs Act proceedings and not applicable to appeals under the Income Tax Act before the High Court during the moratorium.The Court granted liberty to revive the appeals after the moratorium ceases, i.e., after the NCLT either approves a resolution plan or orders liquidation of the corporate debtor.

ISSUES:

Whether foreign payments characterized as export commission were correctly held to be such without supporting evidence including services rendered, tax residency certificates, or PE declarations'Whether the Tribunal erred in law by rendering a judgment contrary to the precedent set by this Court in CIT vs. Andaman Sea Food Pvt. Ltd.?Whether market to market (MTM) loss on forward contracts is real and taxable, notwithstanding CBDT Instruction No. 3/2010 and the assessee's reversal of the notional debit'Whether liquidated damages received for delayed installation/construction are capital receipts or business income, without examining contract terms'Whether disallowance under Section 14A read with Rule 8D(2)(ii) of interest paid on investments in tax-free securities was rightly deleted despite interest-bearing borrowings and the Finance Act, 2022 amendment'Whether advances written off constitute admissible business loss or inadmissible estimated provisions'Whether interest paid on income tax is deductible under Section 40(a)(ii) or Section 37(1) of the Income Tax Act'Whether fresh claims for Employee Stock Option Plan (ESOP) raised for the first time before the Tribunal are admissible in light of the Supreme Court decision in Shriram Investments vs. CIT'Whether expenditure incurred for registering patents qualifies as revenue expenditure or capital expenditure under Section 2(11) as intangible assets?

RULINGS / HOLDINGS:

The Tribunal was justified in holding the foreign payments as export commission since the non-resident agents did not carry out any activity in India and services were rendered abroad; the conclusion was supported by the statutory provisions under Section 9(1)(i) and Explanation 1, and the decision in CIT vs. Toshoku Ltd. applies. The decision in CIT vs. Andaman Sea Food Pvt. Ltd. was distinguished and held inapplicable. (Issues 1 and 2)Market to market loss on forward contracts was held to be real and notional loss was reversed by the assessee on the succeeding day; CBDT Instruction No. 3/2010 does not bind the Assessing Officer, and the Tribunal's conclusion was upheld. (Issue 3)Liquidated damages received for delayed installation/construction were held to be capital receipts, not business income, following the Supreme Court's ruling in Commissioner of Income Tax vs. Saurashtra Cement Ltd., as the damages related to sterilization of capital assets. (Issue 4)Disallowance under Section 14A read with Rule 8D was rightly deleted as the assessee had net interest income exceeding interest expenditure; the Tribunal correctly applied the Supreme Court's decision in South Indian Bank Ltd. vs. DCIT and found no nexus for disallowance. The Finance Act, 2022 amendment was held inapplicable to the facts. (Issue 5)Advances written off were held to be in the nature of business loss as trade advances, not inadmissible estimated provisions, and no substantial question of law arose. (Issue 6)Interest paid on income tax was allowed as a deduction following the decision in Director of Income Tax vs. Bank of America NT and SA, where interest paid and received from the same party can be set off. (Issue 7)Fresh claim for ESOP raised before the Tribunal was admitted and allowed for adjudication, distinguishing the Supreme Court's decision in Shriram Investments which concerned jurisdictional limitations on revised returns. (Issue 8)Expenditure on patent registration was held to be revenue expenditure, not capital expenditure, following the Supreme Court's decisions in Commissioner of Income Tax vs. Finlay Mills Ltd. and Dalmia Jain & Co. Ltd. The registration protects business interests and does not create a new capital asset. (Issue 9)

RATIONALE:

The Court applied statutory provisions under Section 9(1)(i) of the Income Tax Act and Explanation 1, emphasizing income attribution to operations in India, and relied on the binding precedent from the Supreme Court in CIT vs. Toshoku Ltd. The Tribunal distinguished conflicting precedent by analyzing the nature of services and applicability of double taxation avoidance agreements.Regarding MTM losses, the Court referred to the independence of the Assessing Officer and the non-binding nature of CBDT instructions, reaffirming that instructions cannot override judicial decisions or statutory provisions.The capital receipt characterization of liquidated damages was grounded in the doctrine that compensation linked to delay in procurement of capital assets sterilizes the profit-making apparatus, supported by Supreme Court precedent.For disallowance under Section 14A, the Court relied on the Supreme Court's guidance that disallowance is impermissible where investments are made from interest-free funds exceeding tax-free investments, and the nexus between expenditure and exempt income is not established. The recent legislative amendment was held prospective and inapplicable.The Court accepted the factual findings of the lower authorities regarding advances written off as trade advances, not estimated provisions, thus no legal error was found.On interest paid on income tax, the Court followed binding precedent allowing set-off where the same party pays and receives interest, recognizing the commercial substance over form.The Tribunal's discretion to admit fresh claims was upheld, distinguishing the Supreme Court's ruling in Shriram Investments which involved jurisdictional constraints and procedural bars on revised returns.Patent registration expenses were held revenue in nature as they protect business goodwill rather than create capital assets, following established Supreme Court jurisprudence defining capital and revenue expenditure distinctions.

Issues: Whether the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the notice under section 274 did not strike off the irrelevant limb or indicate the specific charge.

Analysis: The notice initiating penalty proceedings was issued in a mechanical manner without identifying whether the allegation was concealment of income or furnishing inaccurate particulars of income. Such omission showed non-application of mind and rendered the notice invalid. Since the penalty order was founded on that defective notice, the consequential penalty could not be sustained.

Conclusion: The penalty order was quashed as the notice under section 274 read with section 271(1)(c) was invalid.

Ratio Decidendi: A penalty notice that does not specify the exact charge by striking off the inapplicable limb is invalid, and any penalty order passed on the basis of such notice is unsustainable.

Issues: Whether disallowance under section 14A could be sustained in the absence of recorded satisfaction by the Assessing Officer, and whether the assessee's suo motu disallowance was to be retained.

Analysis: The assessee had earned exempt dividend income and offered a suo motu disallowance. The Assessing Officer enhanced the disallowance by applying Rule 8D, but no satisfaction was recorded to show why the assessee's computation was incorrect or why section 14A read with Rule 8D had to be invoked. In the absence of such satisfaction, the statutory precondition for making the higher disallowance was not met.

Conclusion: The addition made under section 14A read with Rule 8D was deleted, while the assessee's own disallowance of Rs. 1,96,311 was sustained.

ISSUES:

Whether disallowance under Section 14A of the Income Tax Act is justified when no exempt income has accrued, arisen, or been received during the relevant previous year.Whether the Explanation inserted by the Finance Act, 2022 to Section 14A applies retrospectively to assessment years prior to its insertion.Whether reliance on CBDT Circular No. 5 of 2014 and Rule 8D(2)(ii) of the Income Tax Rules, 1962 is appropriate in cases where no exempt income is earned.Whether the Assessing Officer is required to record satisfaction regarding expenditure incurred in relation to exempt income before making disallowance under Section 14A.Whether judicial precedents prior to the Finance Act, 2022 amendment continue to hold relevance for assessment years before the amendment.

RULINGS / HOLDINGS:

The Tribunal held that the Explanation to Section 14A inserted by the Finance Act, 2022 "cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood," and therefore does not apply to the assessment year 2017-18.It was held that in the absence of any exempt income, no disallowance under Section 14A is warranted, as supported by binding judicial precedents including the Hon'ble Delhi High Court in PCIT (Central) vs Era Infrastructure (India) Ltd.The Tribunal found that the lower authorities erred in sustaining disallowance under Section 14A by relying on CBDT Circular No. 5 of 2014 and Rule 8D(2)(ii), which are not applicable where no exempt income has accrued or arisen.The Assessing Officer failed to record satisfaction regarding expenditure incurred in relation to exempt income, a mandatory precondition for disallowance under Section 14A, and thus the disallowance was not justified.The Tribunal directed deletion of the disallowance made under Section 14A for the assessment year 2017-18, following binding precedents and rejecting the applicability of the post-2022 Explanation.

RATIONALE:

The Tribunal applied the legal framework of Section 14A of the Income Tax Act and Rule 8D of the Income Tax Rules, 1962, alongside judicial precedents interpreting the scope of disallowance of expenditure related to exempt income.The Tribunal relied heavily on the principle that retrospective operation of an Explanation that changes the law is not presumed, citing authoritative Supreme Court decisions emphasizing that the law applicable is that in force during the relevant assessment year.The Tribunal followed the binding decision of the Hon'ble Delhi High Court in PCIT (Central) vs Era Infrastructure (India) Ltd, which clarified that no disallowance under Section 14A is called for where no exempt income is earned, and that the Explanation inserted in 2022 does not apply retrospectively.The Tribunal noted that the lower authorities failed to consider binding precedents and did not provide reasons for rejecting them, leading to an erroneous conclusion sustaining disallowance.The Tribunal acknowledged that the Explanation to Section 14A inserted by Finance Act, 2022 is clarificatory but alters the law, and hence cannot be applied retrospectively to the assessment year 2017-18.

ISSUES:

Whether penalty under section 271(1)(c) can be sustained where income is determined on an estimated basis after rejection of books of account.Whether imposition of penalty under section 271(1)(c) is justified when additions are reduced on appeal and the estimation is modified by the Commissioner of Income Tax (Appeals).Whether Explanation 5A to section 271(1)(c) applies to cases where income is assessed on an estimate basis.Whether invoking provisions of Section 106 of the Evidence Act is appropriate in penalty proceedings under the Income Tax Act, which are guided by preponderance of probability.Whether acceptance of additions by the assessee or sustenance of additions by the appellate authority amounts to concealment or furnishing of inaccurate particulars of income.

RULINGS / HOLDINGS:

The penalty under section 271(1)(c) based on estimated income cannot be sustained where the addition is made on an estimate basis and is subsequently reduced by the Commissioner of Income Tax (Appeals), as the estimated rate of profit applied on turnover "does not amount to concealment or furnishing of inaccurate particulars."The imposition of penalty by the Assessing Officer and its affirmation by the Commissioner of Income Tax (Appeals) without due application of mind and relying solely on Explanation 5A is erroneous and not in accordance with law.Explanation 5A to section 271(1)(c) is not applicable in cases where income has been determined on an estimate basis rather than on concrete incriminating evidence.The provisions of Section 106 of the Evidence Act are not strictly applicable in fiscal proceedings, which are governed by the "preponderance of probability" standard.The mere sustenance of additions by the appellate authority and acceptance by the assessee does not constitute concealment of income or furnishing of inaccurate particulars to justify penalty under section 271(1)(c).

RATIONALE:

The legal framework involves the interpretation of section 271(1)(c) of the Income Tax Act, which penalizes concealment of income or furnishing of inaccurate particulars.Judicial precedents from the Hon'ble High Courts and Coordinate Benches of the Tribunal emphasize that penalty under section 271(1)(c) is not sustainable solely on the basis of estimation of income or profit, particularly when additions are reduced on appeal.The Court relied on authoritative decisions holding that estimated profit rates applied to turnover do not amount to concealment or furnishing inaccurate particulars, reinforcing that penalty requires a higher threshold of proof than mere estimation.The Court rejected the application of Explanation 5A in estimation cases, noting that this Explanation is intended for cases where income is determined based on incriminating documents or evidence discovered during search and seizure operations.The Court recognized that fiscal proceedings are governed by the preponderance of probability, not the strict rules of evidence under the Evidence Act, and thus reliance on Section 106 of the Evidence Act was misplaced.Accordingly, the Court directed deletion of the penalty under section 271(1)(c), aligning with the principle that penalty cannot be levied for differences arising purely from estimation without concrete evidence of concealment or inaccuracy.

Issues: Whether dividend distribution tax paid by a domestic company under section 115-O could be restricted by the rate prescribed in the applicable Double Taxation Avoidance Agreement in respect of dividend paid to a non-resident shareholder.

Analysis: The dispute concerned the character of dividend distribution tax and whether treaty provisions governing taxation of dividend income could control the tax payable by the domestic company. The Tribunal followed the view that the levy under section 115-O is a tax on the company and not on the shareholder, and therefore the DTAA provisions applicable to the non-resident shareholder do not govern the domestic company's liability. On that reasoning, the treaty rate could not be invoked to reduce the tax payable under the domestic law.

Conclusion: The claim for applying the DTAA rate to dividend distribution tax was rejected and the assessee's appeal was dismissed.

Final Conclusion: The levy under section 115-O was held to be outside the scope of DTAA protection, and the orders below were affirmed.

Ratio Decidendi: Dividend distribution tax under section 115-O is a tax on the domestic company's income and not on the shareholder, so the DTAA applicable to the shareholder does not control the company's liability under domestic law.

ISSUES:

Whether the application of Gross Profit (GP) rate @ 20% on bogus purchases is justified.Whether the GP rate of 12.5% or a different rate should be applied to determine taxable income from accommodation entries.Whether the entire amount of bogus purchases should be disallowed or only the profit element should be added to income.

RULINGS / HOLDINGS:

The application of GP @ 20% on bogus purchases is justified as a reasonable estimate of profit embedded in accommodation entries, considering the high GST rate of 28% on cement and additional costs such as commissions and logistics.The entire amount of bogus purchases cannot be disallowed; only the profit element should be taxed, consistent with the principle that additions must reflect a "fair estimate of the profit element."The GP rate of 18% is more appropriate than 20% or 12.5% in the present case, balancing the evidence and industry norms, and thus the addition is restricted to 18% of the bogus purchases.

RATIONALE:

The legal framework involves the disallowance of accommodation entries under the Income Tax Act, 1961, supported by evidence from search and seizure operations under section 132.Precedent in CIT vs. Simit P. Sheth upheld a 12.5% GP addition; however, the court recognized that higher GST rates and industry-specific factors justify a higher GP rate.The approach aligns with the principle that additions for bogus purchases must reflect a reasonable and fair estimate of the profit element rather than the entire purchase amount.The tribunal exercised discretion to modify the GP rate to 18% to reflect the cost of accommodation entries and the income derived, ensuring equitable treatment in the interest of justice.

ISSUES:

Whether the order passed by the Assessing Officer under Section 147 read with Section 144 of the Income Tax Act, 1961 was erroneous and prejudicial to the interest of revenue for not including contract income as per Form 26AS.Whether the Principal Commissioner of Income Tax (PCIT) correctly exercised revisional jurisdiction under Section 263 of the Act by directing modification of the assessment order to add contract income not offered for taxation.Whether the Assessing Officer was obligated to independently verify the denial of contract receipt from a third party (Social Forestry Division, Jaunpur) when such receipt appeared in Form 26AS but was denied by the assessee.Whether acceptance by the Assessing Officer of the assessee's explanation without third-party verification constitutes an erroneous order prejudicial to the revenue under Explanation 2 to Section 263 of the Act.

RULINGS / HOLDINGS:

The order of the Assessing Officer was held to be "erroneous and prejudicial to the interest of revenue" only in respect of the contract receipt of Rs. 49,76,868/- from Social Forestry Division, Jaunpur, which was denied by the assessee but accepted by the AO without requisite verification.The revisional jurisdiction under Section 263 was validly invoked by the PCIT to the extent that the AO failed to make necessary enquiries or verifications regarding the disputed contract receipt, as per Explanation 2 to Section 263 of the Act.The direction to the AO to add the entire contract income of Rs. 66,22,032/- as per Form 26AS was modified; only the disputed portion relating to Social Forestry Division, Jaunpur requires verification and re-adjudication.The Assessing Officer's acceptance of the assessee's denial without independent third-party verification was insufficient and rendered the assessment order erroneous and prejudicial to revenue in that respect.

RATIONALE:

The Court applied the framework under Section 263 of the Income Tax Act, 1961, particularly Explanation 2, which states that if an assessment order is passed without making inquiries or verifications which should have been made, the order shall be deemed erroneous and prejudicial to the interests of the revenue.The Court emphasized the necessity of independent verification when the assessee denies a transaction that appears in Form 26AS, to safeguard revenue interests and ensure correctness of assessment.The Court recognized that the Assessing Officer had duly examined and accounted for other contract receipts (tyre retreading and tanker rent income), and thus the error was confined to the unverified denial of receipt from Social Forestry Division, Jaunpur.No doctrinal shift or dissent was noted; the judgment aligns with established principles requiring proper verification before acceptance of explanations in tax assessments.

ISSUES:

Whether the brought forward unabsorbed depreciation can be set off against the current year's total income despite no business activity being carried out during the relevant assessment year.Whether the absence of business activity disentitles the assessee from claiming set-off of unabsorbed depreciation under section 32(2) of the Income-tax Act, 1961.Interpretation and application of sections 32(2) and 72(2) concerning carry forward and set-off of unabsorbed depreciation and business losses.

RULINGS / HOLDINGS:

The Court held that unabsorbed depreciation "becomes part of the current year's depreciation" by virtue of the statutory fiction under section 32(2), and its set-off is not conditional upon carrying on business during the year of set-off.The Court rejected the view that the absence of business activity disentitles the assessee from claiming set-off of unabsorbed depreciation, holding such interpretation as "contrary to the scheme of the Act and judicially settled law."Section 72(2) mandates that business loss shall be set off first against business income, but does not restrict the operation of section 32(2) which allows unabsorbed depreciation to be set off against income under any head, including "income from other sources."The order denying set-off of brought forward unabsorbed depreciation was set aside, and the Assessing Officer was directed to allow the set-off of Rs. 2,46,533/- against the total income assessed for the year under appeal.

RATIONALE:

The Court applied the statutory framework of sections 32(2) and 72(2) of the Income-tax Act, 1961, which respectively govern the carry forward and set-off of unabsorbed depreciation and business losses.Section 32(2) creates a legal fiction that unabsorbed depreciation from an earlier year "shall be added to the depreciation allowance of the following year and deemed to be part of that year's depreciation."The Court relied on binding Supreme Court precedents, including CIT v. Virmani Industries Pvt. Ltd. and CIT v. Jaipuria China Clay Mines (P) Ltd., which unequivocally held that unabsorbed depreciation can be set off against total income regardless of business activity in the year of set-off.The Court also referred to the Madras High Court decision in CIT v. SPEL Semiconductor Ltd., which affirmed that unabsorbed depreciation assumes the character of current year's depreciation and can be set off against income under any head, even in the absence of business activity, and clarified the interplay between sections 32(2) and 72(2).The Court rejected the Revenue's contention that section 72(2) restricts the set-off of unabsorbed depreciation against income from other sources, emphasizing that section 72(2) applies only to the sequence of set-off between business loss and unabsorbed depreciation against business income.

ISSUES:

Whether the reopening of assessment under Section 148 of the Income-tax Act, 1961 was justified based on the material available.Whether the Assessing Officer was justified in rejecting the books of accounts under Section 145(3) of the Act without identifying specific defects.Whether the estimation of commission income at 2% of alleged bogus transactions is legally sustainable.Whether principles of natural justice were violated by not allowing cross-examination of the Commercial Tax Officer and Income Tax Officer despite specific requests.

RULINGS / HOLDINGS:

The reopening of assessment was based solely on third-party information without independent verification and thus was not fully justified.The rejection of books of accounts under Section 145(3) was unwarranted as the Assessing Officer failed to point out any specific defects or inconsistencies in the accounting method consistently followed by the assessee.The estimation of income at 2% of the total alleged purchases and sales was excessive; a reduced estimation of 1% was considered "fair and reasonable" in the circumstances.The failure to allow cross-examination of the Commercial Tax Officer and Investigation Wing officer amounted to a violation of the "principles of natural justice".

RATIONALE:

The Court applied the provisions of the Income-tax Act, 1961, particularly Sections 145(3) and 148, examining the statutory requirements for reopening assessments and rejecting books of accounts.The Court emphasized the necessity of independent verification beyond third-party information before reopening an assessment.The Court recognized that estimation of income is permissible when books are rejected but must be reasonable and based on material; here, the Court reduced the estimation from 2% to 1% to balance the absence of direct evidence and the presence of suspicious transactions.The Court underscored the importance of "principles of natural justice," requiring that the assessee be given an opportunity to cross-examine witnesses whose statements form the basis of adverse findings.No dissent or doctrinal shift was noted; the decision reflects a balanced approach to estimation and procedural fairness in tax assessments.

ISSUES:

Whether the reassessment notice issued under Section 148 of the Income Tax Act, 1961 during the pendency of original assessment proceedings and before expiry of the time limit for issuance of notice under Section 143(2) is valid.Whether the jurisdictional aspect and legality of the reassessment order passed under Section 143(3) read with Section 147 can be examined in proceedings under Section 263 of the Act.Whether an order passed under Section 263 can set aside a reassessment order that is itself void or nullity in law.Whether the reassessment proceedings initiated without complying with mandatory conditions under Sections 147 to 151 of the Act are valid.

RULINGS / HOLDINGS:

The issuance of notice under Section 148 during the pendency of original assessment proceedings and before expiry of the time limit for issuance of notice under Section 143(2) is invalid, as it amounts to an impermissible attempt to enlarge the time available for framing the assessment and is therefore "void-ab-initio".The jurisdictional validity of the reassessment order passed under Section 143(3) r.w.s 147 can be examined in collateral proceedings under Section 263, especially when legal grounds challenging the reassessment order go "to the root of the matter".Where the reassessment order is found to be illegal and a nullity in the eyes of law, the order passed under Section 263 to revise such non-est assessment order lacks valid jurisdiction and is liable to be quashed.Non-compliance with mandatory conditions under Sections 147 to 151 of the Act renders the reassessment proceedings invalid.

RATIONALE:

The Court applied the statutory framework of the Income Tax Act, 1961, particularly Sections 143(2), 143(3), 147, 148, 151, and 263, and relied on binding precedents including the Supreme Court judgment in National Thermal Power Company Ltd. Vs. CIT.The Court referred to authoritative judicial pronouncements from various High Courts and Tribunals, including the Madras High Court decisions in CIT Vs. Qatalys Software Technologies Ltd. and CIT Vs. TCP Ltd., which held that reassessment cannot be initiated while original assessment proceedings are pending.The Court emphasized that the reassessment notice issued before expiry of the original assessment period is an attempt to circumvent the statutory time limits, which is impermissible and renders the reassessment proceedings void ab initio.The Court recognized that when the reassessment order is void, any revision under Section 263 is without jurisdiction, as it cannot revise a non-est order, thereby protecting the assessee's accrued rights.

ISSUES:

Whether the Assessing Officer (AO) exceeded jurisdiction by extending scrutiny beyond limited scope without mandatory approvals.Whether the valuation of unquoted shares for capital gains computation should be based on book value or fair market value (FMV) as per Section 50CA read with Rule 11UA of the Income Tax Rules, 1962.Whether the AO and Commissioner of Income Tax (Appeals) [CIT(A)] erred in rejecting the merchant banker's valuation report and treating declared capital losses as capital gains by adopting book value instead of FMV.Whether the AO's addition based on deemed sale price under Section 50CA is sustainable when it contradicts the valuation method prescribed under Rule 11UA(1)(c)(b).Whether the valuation of immovable property for FMV calculation of unquoted shares must be based on stamp duty value (circle rate) rather than book value.Whether the AO and CIT(A) failed to appreciate the discretion of the assessee in choosing the method of valuation under Rule 11UA(2).Whether interest under Sections 234A and 234B was correctly levied by the AO.

RULINGS / HOLDINGS:

The AO did not exceed jurisdiction in limited scrutiny by examining capital gains and losses, as the issue fell within the reasons for limited scrutiny; thus, no mandatory approval was required for scope extension.The valuation of unquoted shares for capital gains under Section 50CA must follow Rule 11UA of the Income Tax Rules, 1962, which mandates that the FMV of immovable property be taken as "the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty."The merchant banker's valuation report, which adopted the stamp duty value for immovable property and computed FMV accordingly, is lawful and must be accepted; the AO's rejection of this report as a "colourable device" is unsustainable.The AO's valuation based on book value of immovable assets to compute deemed sale price under Section 50CA is "not in accordance with law" and the consequent addition is deleted.The CIT(A)'s confirmation of AO's addition without proper reasoning and dismissal of the valuation report is a "non-speaking and un-reasoned order" and is set aside.The assessee has the discretion to choose the method of valuation of unquoted shares under Rule 11UA(2), and the AO cannot challenge the method adopted if it complies with statutory provisions.Interest under Sections 234A and 234B is mandatory and shall be charged by the AO after giving effect to the Tribunal's order.

RATIONALE:

The Court applied the provisions of Section 50CA of the Income Tax Act, 1961, read with Rule 11UA and Rule 11UAA of the Income Tax Rules, 1962, which govern the determination of FMV for unquoted shares.Rule 11UA(1)(c)(b) explicitly requires that for immovable property forming part of the company's assets, the FMV is to be taken as the stamp duty value assessed by government authorities, not the book value.Precedent from the Hon'ble Delhi High Court in PCIT v. Minda SM Technocast Pvt. Ltd. was relied upon to affirm that circle rate or stamp duty value must be used for valuation of immovable property in FMV computation.The discretion to select the valuation method under Rule 11UA(2) lies with the assessee, and the AO cannot substitute the method with his own opinion, as upheld by the jurisdictional High Court in PCIT v. Cinestaan Entertainment Pvt. Ltd.The AO's approach of equating FMV at sale with book value to maintain parity with purchase valuation lacks legal basis and contradicts the statutory scheme.The rejection of the merchant banker's valuation report as a "colourable device" was found to be based on conjecture and surmises rather than evidence.The AO's jurisdiction in limited scrutiny was upheld as the scrutiny related to declared capital gains and losses, which was within the scope of the limited scrutiny reasons.Regarding interest, the Court noted the mandatory nature of levy under Sections 234A and 234B, directing the AO to comply accordingly.

Issues: Whether the assessee was entitled to press an additional claim for restriction of dividend distribution tax on dividends paid to non-resident shareholders under the applicable tax treaty, and whether section 115-O of the Income-tax Act, 1961 applied to such distribution.

Analysis: The additional claim was entertained as a valid appellate claim even though it had not been made in the return of income, but the substantive contention failed on merits. The controlling principle applied was that dividend distribution tax is a levy on the distributing company's profits under section 115-O and not a tax on the shareholder's dividend income. On that basis, treaty relief was held not to be attracted in the absence of a treaty provision specifically extending protection to the company paying such tax.

Conclusion: The claim for restriction of dividend distribution tax under the tax treaty was rejected and the applicability of section 115-O was upheld against the assessee.

Final Conclusion: The assessee's appeal failed on the principal tax issue, and the remaining grounds were not pursued.

Ratio Decidendi: Dividend distribution tax under section 115-O is a tax on the distributing company's profits and not on the non-resident shareholder's dividend income, so treaty protection does not apply unless the treaty expressly extends it to the company.

ISSUES:

Whether the addition of Rs. 1,00,55,208/- made by estimating net profit at 2.24% of turnover is justified despite discrepancies and alleged manipulation in books of accounts.Whether surrendered income of Rs. 1,30,00,000/- disclosed under the head "Income from Other Sources" can be taxed under section 115BBE of the Income Tax Act, 1961.

RULINGS / HOLDINGS:

The addition of Rs. 1,00,55,208/- by estimating net profit at 2.24% is deleted as the Assessing Officer did not reject the books of accounts and failed to provide any instance of manipulation; hence, the decision to estimate net profit without rejecting books of accounts was "premature" and "cannot be sustained".The surrendered income of Rs. 1,30,00,000/- disclosed as "income from other sources" cannot be taxed under section 115BBE since it was not assessed as deemed income under sections 68/69/69A/69B/69C/69D; therefore, invoking section 115BBE is "not sustained" and relief is allowed.

RATIONALE:

The legal framework applied includes provisions of the Income Tax Act, 1961, particularly sections 133A (survey), 115BBE (taxation of unexplained income), and the deeming provisions under sections 68, 69, 69A, 69B, 69C, and 69D. The Assessing Officer relied on discrepancies found during survey and differences in financial ratios to estimate net profit; however, the appellate authority found the explanations for variations in turnover, gross profit, and net profit satisfactory and noted absence of cogent evidence of manipulation.The appellate authority emphasized that since the books of accounts were not rejected and the surrendered income was disclosed in the return (albeit under an incorrect head), without any addition under the deeming provisions, section 115BBE could not be invoked. This reflects a doctrinal position that section 115BBE applies only when income is assessed under the specified deeming sections.No dissenting or concurring opinions were recorded. The appellate authority's approach underscores the principle that estimation of income must be based on sound reasons and evidence, and taxation under section 115BBE requires fulfillment of statutory preconditions.

The Supreme Court, with Hon'ble Justices Manoj Misra and Ujjal Bhuyan presiding, heard the appeal and after perusing the record and the impugned judgment of the Customs, Excise & Service Tax Appellate Tribunal Chennai, found "no such error giving rise to a question of law calling for our interference." Accordingly, the appeal was dismissed and any pending applications were disposed of. Delay in filing was condoned.

ISSUES:

Whether the impugned show cause notice issued by the Directorate of Revenue Intelligence is wholly without jurisdiction and liable to be quashed at the pre-adjudication stage.Whether the seized gold can be sold or disposed of by the authorities before disposal of the show cause notice and any subsequent period.Whether delay in disposal of the show cause notice justifies judicial interference or directions for expeditious adjudication.

RULINGS / HOLDINGS:

The court held that the impugned show cause notice is not "wholly without jurisdiction" and does not warrant interference at this stage, as the notice contains allegations which require adjudication and the petitioner's denial will be examined during the proceedings.The court directed that the seized gold "must not be sold" by the respondents until the show cause notice is disposed of and for a period of six weeks thereafter in case of any adverse order against the petitioner.The court found that the delay in disposal of the show cause notice is unacceptable and accordingly directed the respondents to adjudicate and dispose of the notice "as expeditiously as possible and in any event within three months" from the date of the order.

RATIONALE:

The court applied the legal framework established in Whirlpool Corporation vs Registrar Of Trade Marks, Mumbai & Ors., emphasizing that none of the tests for pre-adjudication interference were satisfied.The court recognized the importance of adhering to "principles of natural justice" by requiring the petitioner to be heard before disposal of the show cause notice.The court balanced the need to protect the petitioner's interests by restraining disposal of seized gold pending final adjudication and any remedies post adverse orders, while also upholding the authority of the investigating agency to proceed with adjudication.No dissent or doctrinal shift was noted; the judgment follows established principles regarding jurisdictional challenges to show cause notices and interim relief concerning seized property.

Issues: Whether penalty under Section 117 of the Customs Act, 1962 was sustainable where the alleged incorrect declaration was in the airway bills, the shipping bills and allied export documents carried the correct description, and no contravention of the Customs Act itself was specifically alleged or established.

Analysis: Section 117 applies only to contravention of a provision of the Customs Act, abetment of such contravention, or failure to comply with a duty imposed by that Act where no express penalty is otherwise provided. The allegation in the notice and the order rested on breach of Foreign Trade Policy requirements and not on a proved violation of the Customs Act. The export documents were found to contain the correct description, and the invocation of Section 50(3)(b) did not cure the absence of a specific allegation of the exact contravention for which penalty was imposed. In penalty proceedings, the person proceeded against must be clearly put to notice of the precise breach.

Conclusion: The penalty under Section 117 was not sustainable and the appeal succeeded.

Ratio Decidendi: Penalty cannot be imposed under Section 117 of the Customs Act, 1962 unless a contravention of the Customs Act is specifically alleged and established, with clear notice of the exact breach.

ISSUES:

Whether the imported goods described as 'PVC Resin SP 660 Suspension Grade' are classifiable under Customs Tariff Heading (CTH) 3904 2110 or under CTH 3904 1090.Whether the benefit under Notification No. 46/2011-Cus dated 1.6.2011 is applicable to the imported goods.Whether classification should be determined primarily based on test reports describing the goods as compound or prime material.Application and interpretation of General Rules for the Interpretation (GRI) of the Customs Tariff Schedule, specifically Rule 1 and Rule 3(a), in classifying the goods.Whether a specific tariff heading should be preferred over a residual or general heading in classification disputes.Whether the presence or absence of additives such as plasticizers affects the classification of PVC resin under the relevant tariff headings.Whether prior decisions and test reports on similar goods are binding or persuasive in the present classification dispute.Whether delay and procedural lapses in reassessment affect the validity of classification and demand of duty.

RULINGS / HOLDINGS:

The imported goods 'PVC Resin SP 660 Suspension Grade' are correctly classifiable under CTH 3904 2110, which is a specific heading for Poly (vinyl chloride) resins, rather than under CTH 3904 1090, a residual heading for other Poly (vinyl chloride) not mixed with any other substances.The benefit under Notification No. 46/2011-Cus dated 1.6.2011 applies to the goods when classified under CTH 3904 2110.Test reports from CIPET stating that the goods "may be considered as polyvinyl chloride (PVC) resin, which is a single thermoplastic material in powder form" and "may not be considered as compound since it is not mixed with any other substances" support classification under CTH 3904 2110.Rule 3(a) of the General Rules for the Interpretation of Import Tariff mandates that "the heading which provides the more specific description shall be preferred to headings providing a more general description," thereby ruling out the residual entry CTH 3904 1090 in favor of the specific entry CTH 3904 2110.The presence or absence of additives such as plasticizers is material; goods without plasticizers fall under CTH 3904 2110 (non-plasticized PVC resins), whereas plasticized PVC resins fall under a different heading (CTH 3904 2210).Prior decisions and test reports on identical or similar goods, including those by coordinate benches and the same tribunal, are persuasive and support classification under CTH 3904 2110.Procedural irregularities such as delay in reassessment and failure to issue a speaking order under Section 17(5) of the Customs Act, 1962, were noted but did not override the substantive classification ruling.

RATIONALE:

The Court applied the Customs Tariff Act, 1975, and the General Rules for the Interpretation of the First Schedule to the Customs Tariff Act, 1975, particularly Rules 1 and 3(a), which require classification according to the terms of headings and preference for the most specific description.The Court relied heavily on expert technical evidence from CIPET, which clarified that the goods are prime PVC resin not mixed with additives or plasticizers, thus not constituting a compound.The Court noted that the tariff schedule contains specific eight-digit subheadings distinguishing non-plasticized and plasticized PVC resins, supporting classification under the more specific heading 3904 2110.The Court emphasized settled legal principles from Supreme Court precedents that a specific tariff entry prevails over a general or residual one, and that classification should not be disturbed without sufficient justification.The Court rejected semantic distinctions made by the Commissioner (Appeals) that altered classification based on the phrase "may not be considered as compound" versus "not containing any other substances like plasticizer," holding that such nuances should not override the established classification principles.The Court also referred to prior coordinate bench decisions and consistent application of tariff headings to identical goods, reinforcing the principle of consistency and predictability in classification.The Court acknowledged the inherent limitations of language in conveying technical product descriptions and endorsed interpreting legislative intent by examining the subject and object of the law when ambiguity exists.The Court noted procedural lapses but focused on substantive correctness of classification, setting aside the impugned order and allowing the appeal accordingly.

The Supreme Court, with Justices J. B. Pardiwala and R. Mahadevan presiding, allowed the exemption application but declined to interfere with the impugned order of the National Company Law Appellate Tribunal, New Delhi. The Civil Appeal was dismissed accordingly. The Court expressly stated that the "question of law is kept open," and all pending applications were disposed of.

ISSUES:

Whether the adjudicating authority under the Insolvency and Bankruptcy Code (IBC) has the power to direct relisting of equity shares of a corporate debtor in insolvency proceedings, overriding SEBI Delisting Regulations.Whether Section 238 of the IBC provides an overriding effect over SEBI Act and Regulations in matters of relisting shares pursuant to a resolution plan.Whether the 10-year bar under Regulation 40(1)(b) of SEBI Delisting Regulations, 2021, can be set aside in the context of insolvency resolution and relisting.Whether fines, penalties, fees, or charges arising from acts or omissions prior to the insolvency commencement date can be demanded from the new management upon relisting.Whether relisting pursuant to a resolution plan should be treated as a fresh listing for all purposes, exempting compliance attributable to the period prior to insolvency commencement.What procedural steps and timelines are applicable for relisting shares under insolvency proceedings.Whether the SEBI Act, being a self-contained statute, is unaffected by the overriding provisions of the IBC.Whether the appellate tribunal's interim directions on relisting and status changes of the corporate debtor's shares are appropriate pending final adjudication.

RULINGS / HOLDINGS:

The adjudicating authority under the IBC can direct relisting of equity shares of the corporate debtor as part of the approved resolution plan, overriding the 10-year bar under Regulation 40(1)(b) of SEBI Delisting Regulations, 2021, based on the "overriding effect of Section 238 of the IBC."Section 238 of the IBC has an overriding effect over SEBI Act and Regulations in the context of insolvency resolution, permitting the relisting of shares without insisting on compliances attributable to the period prior to the Insolvency Commencement Date, except as expressly provided in the resolution plan.The respondents shall not insist upon payment of "fines, penalties, fees, or any other charges arising out of acts or omissions committed by the erstwhile management of the CD prior to the Insolvency Commencement Date."Relisting of shares shall be treated as a "part of fresh listing for all purposes," but without imposing additional burdens relating to past defaults.The entire relisting process must be completed within 30 days from the date of the order, with the respondents facilitating any necessary procedural compliance without imposing additional burdens.The appellate tribunal directed that the relisting be stayed pending final adjudication of the main appeal, subject to the final order, to avoid "grave prejudice" to the stock exchange.The appellate tribunal held that the order passed is "only under the facts and circumstances of the instant company appeal" and "will not create a precedent for other proceedings."

RATIONALE:

The Court applied the statutory framework of the Insolvency and Bankruptcy Code, 2016, particularly Section 238, which provides that the provisions of the IBC shall have an overriding effect over other laws inconsistent with it.The Court relied on the principle that the resolution plan approved by the adjudicating authority under the IBC is binding and must be implemented, including directions for relisting shares as part of the resolution process.The Court acknowledged the interplay between SEBI Delisting Regulations (2021) and earlier regulations, noting the existence of a savings clause preserving actions validly taken under prior regulations applicable at the time of delisting.The Court recognized the SEBI Act as a self-contained statute but held that Section 238 of the IBC can override SEBI regulations in the insolvency context to facilitate resolution and revival of the corporate debtor.The appellate tribunal emphasized the need to balance regulatory compliance with the insolvency framework, ordering a stay on relisting until the main appeal is heard to prevent administrative difficulties and prejudice to the stock exchange.No dissent or doctrinal shift was indicated; the Court refrained from detailed observations pending final hearing of the main appeal.

The Supreme Court, through Hon'ble Justices Dipankar Datta and Augustine George Masih, dismissed the civil appeals challenging the National Company Law Appellate Tribunal's (NCLAT) order dated 19th March 2025. The NCLAT had rejected the appellant's application for condonation of delay (I.A. No.1093/2025) in re-filing Company Appeal (AT) (Insolvency) No. 319 of 2025, holding the appeal time-barred. Upon hearing the appellant's counsel, the Court found "no reason to interfere" with the NCLAT's decision and accordingly dismissed the appeals, disposing of any pending applications.

The Supreme Court, with Justices J. B. Pardiwala and R. Mahadevan presiding, condoned the delay and declined to interfere with the impugned order dated 28.02.2025 of the National Company Law Appellate Tribunal, Chennai. The Civil Appeals were dismissed. However, the Court explicitly stated that the "question of law, if any, is kept open." Pending applications were disposed of.

The Supreme Court, through Hon'ble Justices J. B. Pardiwala and R. Mahadevan, after hearing Senior Counsel Mr. R. P. Bhatt and reviewing the record, declined to interfere with the impugned order of the National Company Law Appellate Tribunal, New Delhi. The Court held: "no good reason to interfere" and accordingly dismissed the Civil Appeal. The Court noted that the appellant remains free to pursue "any other legal remedy... in accordance with law." Pending applications were also disposed of.

Issues: Whether the accused was entitled to an opportunity of hearing under the proviso to Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 before cognizance was taken on the prosecution complaint filed under the Prevention of Money Laundering Act, 2002.

Analysis: The complaint had been presented before the Sessions Court before the Bharatiya Nagarik Suraksha Sanhita, 2023 came into force, but no judicial application of mind had then taken place because the matter was only being processed administratively for transfer to the competent Special Judge. A mere presentation or registration of the complaint did not amount to the commencement of an inquiry within the meaning of the savings provision. Cognizance was in fact taken only after the new Code came into force. The provision in Section 223, which introduces a prior hearing before cognizance, was held to be a beneficial procedural safeguard flowing from natural justice and fair trial principles, and was therefore applied to the pending complaint.

Conclusion: The accused was entitled to a hearing before cognizance, and the impugned orders were unsustainable.

Final Conclusion: The complaint proceedings had to be reconsidered afresh after affording the accused an opportunity of hearing under the new procedural regime.

Ratio Decidendi: Where cognizance is taken after the commencement of the Bharatiya Nagarik Suraksha Sanhita, 2023, the accused must be afforded the prior hearing mandated by the proviso to Section 223, and a mere administrative presentation of the complaint before the change in law does not attract the savings clause.

Issues: Whether cognizance taken on a complaint under the Prevention of Money-Laundering Act, 2002 could be sustained without giving the accused an opportunity of being heard under the first proviso to Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023, and without considering the question of sanction before taking cognizance.

Analysis: Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 requires the Magistrate, while taking cognizance on a complaint, to give the accused an opportunity of being heard before cognizance is taken. The proviso is mandatory and operates as an embargo on the power to take cognizance. The materials showed that cognizance had been taken and summons issued without complying with that requirement. The Court also noted that, in prosecutions of this nature, the question of sanction under Section 218 of the Bharatiya Nagarik Suraksha Sanhita, 2023 or the corresponding provision under the Code of Criminal Procedure, 1973 had to be examined before cognizance.

Conclusion: The cognizance order was unsustainable and was set aside. The proceedings were returned to the pre-cognizance stage with a direction to comply with the first proviso to Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 and to consider the question of sanction before taking cognizance again.

Ratio Decidendi: Where a complaint is governed by Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023, cognizance cannot be taken unless the accused is first given an opportunity of being heard, and non-compliance vitiates the cognizance order.

ISSUES:

Whether provisional attachment of properties under Section 5 of the Prevention of Money Laundering Act, 2002 ("the Act of 2002") can be sustained against a person not named as an accused in the FIR, ECIR, or Prosecution Complaint.Whether continuation of provisional attachment beyond 180 days without filing a Prosecution Complaint against the person in whose hands the property is attached is permissible under Sections 5 and 8 of the Act of 2002.Whether the absence of an order of confiscation affects the validity or duration of the provisional attachment of property under the Act of 2002.Whether the provisional attachment of properties matching the value of proceeds of crime transferred to companies controlled by the appellant is justified under the Act of 2002.

RULINGS / HOLDINGS:

The Court held that Section 5(1)(a) of the Act of 2002 permits provisional attachment of property in the possession of "any person," not limited to an accused, if such property is proceeds of crime. The attachment in the hands of a person not named as an accused is sustainable.The continuation of provisional attachment beyond 180 days is governed by Section 8(3)(a), which allows attachment during investigation for up to 365 days or pendency of proceedings relating to the offence under the Act, regardless of whether a Prosecution Complaint has been filed against the person whose property is attached.The absence of an order of confiscation does not invalidate the provisional attachment; confiscation occurs only upon conclusion of trial under Section 8(5), and until then, attachment remains subject to the trial's outcome.The provisional attachment of properties to the extent of Rs.11.35 Crores, corresponding to proceeds of crime transferred to companies controlled by the appellant, is justified and lawful under the Act of 2002.

RATIONALE:

The Court applied the statutory framework of Sections 5 and 8 of the Prevention of Money Laundering Act, 2002, emphasizing that the term "any person" in Section 5(1)(a) extends the scope of attachment beyond those formally accused, to prevent frustration of confiscation proceedings.The Court relied on the authoritative interpretation from the Apex Court in Vijay Madanlal Choudhary v. Union of India, which rejected the argument that attachment must be limited to accused persons, clarifying that attachment can be made against third parties involved in the process or activity connected with proceeds of crime.The Court clarified that the continuation of attachment under Section 8(3)(a) is linked to the pendency of proceedings relating to the offence under the Act, not necessarily against the person whose property is attached, thereby allowing attachment to continue without a Prosecution Complaint against that person.The Court noted that confiscation under Section 8(5) occurs only after trial conclusion, and provisional attachment pending trial is consistent with the legislative intent to protect the proceeds of crime from dissipation.The Court rejected the appellant's interpretation that attachment without naming the person as accused or filing a Prosecution Complaint within 365 days is impermissible, as such an interpretation would frustrate the object of the Act by allowing easy diversion of proceeds of crime to third parties.