TaxTMI Updates e-Newsletter
Aug 08,2023

Bail - preventive custody - release on bail pending trial - tampering with evidence - influencing witnesses - custodial interrogation - non-violent economic offence - consideration of co-accused's bail

Bail - release on bail pending trial - preventive custody - consideration of co-accused's bail - Petitioner entitled to be released on bail pending trial - HELD THAT: - The Court observed that the petitioner had been in custody since 19.12.2022 and had languished in preventive custody for over seven months. Investigation was stated to be complete and challan filed though charges were not yet framed; trial was proceeding slowly and its conclusion was likely to take a long time. The petitioner is a family man with fixed abode and clean antecedents and therefore not likely to abscond. The co-accused had already been granted bail by a coordinate Bench. Taking the overall circumstances and without adjudicating merits, the Court held that no useful purpose would be served by keeping the petitioner in further preventive custody and directed his release on furnishing bail and surety bonds to the satisfaction of the trial Court or Duty Judge. [Paras 6, 9, 10, 11, 12]

Petitioner released on bail on furnishing bail bonds and surety bonds to the satisfaction of the trial Court or Duty Judge, subject to usual conditions

Tampering with evidence - influencing witnesses - custodial interrogation - non-violent economic offence - Risk of tampering with evidence or influencing witnesses did not justify continued preventive custody - HELD THAT: - The prosecution relied on the possibility that the petitioner, if released, might tamper with evidence or influence witnesses and also relied on the need for further custodial interrogation. The Court recorded that the relevant material had already been seized by the investigating agency, reducing the probability of tampering. Although investigation was said to be complete and challan filed, there was no persuasive material placed before the Court to show that custodial interrogation of the petitioner was necessary or that he posed a real risk to the integrity of the trial. The alleged offence was of a non-violent economic character and the Court found the apprehension of tampering or influencing witnesses to be insufficient to refuse bail in the facts of the case. [Paras 6, 7, 8]

Apprehension of tampering or influencing witnesses held not to be a valid ground to deny bail in the present circumstances

Final Conclusion: Bail allowed; petitioner to be released on furnishing bail and surety as directed, subject to standard condition that prosecution may seek cancellation if petitioner is found to be involved in any offence while on bail; observations are confined to bail proceedings and do not affect trial on merits.

Regularisation of transitional credit pursuant to Supreme Court directions - transitional CENVAT/input tax credit transition under GST regime - interest liability for delayed or erroneous transition of input tax credit under the TNGST Act - recall of earlier adjudication upon subsequent allowance of transitional credit - cancellation of interest where transitional credit is subsequently allowed

Regularisation of transitional credit pursuant to Supreme Court directions - cancellation of interest where transitional credit is subsequently allowed - recall of earlier adjudication upon subsequent allowance of transitional credit - Whether the interest charged on the petitioner for the amount wrongly transitioned as unutilised VAT credit must be set aside in view of subsequent regularisation of the transitional credit by the revenue. - HELD THAT: - The petitioner had erroneously filled Form TRANS-1 resulting in the respondent issuing an order demanding the amount and interest. Subsequent to interim directions of the Hon'ble Supreme Court recognising difficulties in transitional claims, the respondent revisited the claim and, by an order dated 17.02.2023, allowed the petitioner's CGST transitional credit claim after verification. The High Court found that the earlier impugned order dated 14.12.2020 was effectively recalled by the subsequent order regularising the credit. In consequence of the revenue's allowance of the transitional credit, the basis for charging interest under the TNGST Act in respect of that amount no longer subsists. The Court therefore held that the interest charged stands cancelled and directed the respondent not to charge any interest on the petitioner in respect of the credit that has been regularised. [Paras 7, 8]

The interest charged on the petitioner is cancelled and the respondent is directed not to charge any interest in respect of the transitional credit which has been regularised by the order dated 17.02.2023.

Final Conclusion: Writ petition allowed: the impugned demand/order is recalled to the extent that the transitional credit has been regularised and no interest shall be charged on the petitioner; connected petitions closed; no costs.

Natural justice - right to hearing - judicial review by writ of certiorari - availability of alternative statutory remedy - effect of interim stay by statutory authority on writ remedy

Natural justice - right to hearing - judicial review by writ of certiorari - Validity of the impugned blacklisting order in light of absence of prior notice and the appropriateness of entertaining the present writ petition - HELD THAT: - The respondent's affidavit concedes that no notice was served on the petitioner before the impugned blacklisting order was issued. However, the Court declined to adjudicate the substantive validity of the blacklisting order on merits because the petitioner had already invoked the statutory remedy and the statutory authority was considering the grievance. The Court noted that the statutory authority has reportedly stayed the blacklisting order and that the availability and ongoing exercise of the alternative statutory remedy renders the present petition not fit for further adjudication at this stage. In these circumstances the Court did not grant certiorari to quash the order but disposed of the petition without entering into merits. [Paras 2, 3]

The petition is disposed of as not maintainable for present adjudication despite the admitted lack of prior notice; the Court refrained from quashing the blacklisting order and did not decide the substantive challenge.

Availability of alternative statutory remedy - effect of interim stay by statutory authority on writ remedy - Consequences and further course if the statutory authority passes an adverse order while the petition is disposed - HELD THAT: - The Court directed that, in the event the statutory authority ultimately passes any adverse order against the petitioner, the petitioner would be at liberty to approach the Court provided no alternative remedy remains. The direction acknowledges that the pendency of statutory proceedings (and the reported stay) justified withholding judicial interference at this stage, while preserving the petitioner's right to seek relief by writ after exhaustion or denial of the statutory remedy. [Paras 3]

If an adverse order is passed by the statutory authority, the petitioner is free to approach the Court thereafter.

Final Conclusion: Writ petition disposed of without adjudication on merits because the petitioner has an alternative statutory remedy then pending (with the blacklisting reportedly stayed); liberty granted to approach the Court if the statutory authority passes any adverse order.

Obligation to pass on benefit of input tax credit under Section 171(1) of the CGST Act, 2017 - investigation under Rule 133(5) of the CGST Rules, 2017 - determination of profiteering by the Director General of Anti Profiteering - verification of project existence through RERA registration and tax authority records

Obligation to pass on benefit of input tax credit under Section 171(1) of the CGST Act, 2017 - investigation under Rule 133(5) of the CGST Rules, 2017 - verification of project existence through RERA registration and tax authority records - Whether Section 171(1) of the CGST Act, 2017 is attracted in respect of projects other than "Bhagwati Eminence" executed by the Respondent. - HELD THAT: - The DGAP, pursuant to the NAA Order directing investigation of other projects, issued notices and considered the period 01.07.2017 to 31.08.2022. The DGAP verified the Respondent's reply that no project other than "Bhagwati Eminence" had been undertaken by consulting the Maharashtra RERA online records and by seeking confirmation from the jurisdictional CGST Commissionerate. The Additional Commissioner, CGST, Belapur Commissionerate confirmed that no other project was executed by the Respondent. On the basis of these verifications the DGAP concluded that the Respondent had not undertaken any other construction project and therefore there was no occasion to apply the obligation in Section 171(1) to pass on the benefit of input tax credit for any other project. The Commission has considered the DGAP's report and the corroborating material and finds the factual conclusion established; accordingly the statutory obligation in Section 171(1) is not attracted to any other project of the Respondent. [Paras 5, 6, 7, 8, 9]

The Commission accepts the DGAP's finding that no other projects were executed by the Respondent; Section 171(1) does not apply to any other project and the proceedings in respect thereof are dropped.

Final Conclusion: The Commission, after considering the DGAP report and corroborative records (RERA and jurisdictional CGST confirmation), finds no other projects executed by the Respondent; consequently Section 171(1) is not attracted in respect of other projects and the present proceedings are closed.

Anonymous donation - Section 115-BBC(3) - maintenance of record of identity, name and address of donors - Revision under section 263 - erroneous assessment prejudicial to the interests of revenue - Eligibility of donations for exemption under sections 11 and 12 where donation is anonymous

Anonymous donation - Section 115-BBC(3) - maintenance of record of identity, name and address of donors - Revision under section 263 - erroneous assessment prejudicial to the interests of revenue - Whether the assessment was erroneous and prejudicial to the interests of revenue requiring revision under section 263 where the Assessing Officer had not verified relationship, creditworthiness, date and mode of payment and genuineness of donations - HELD THAT: - The Court examined whether the assessee had complied with the requirement in section 115-BBC(3) to maintain records identifying donors by name and address such that the donations could not be treated as anonymous. The record shows the assessee furnished a detailed list of donors with complete addresses and amounts (reproduced in the Commissioner's order) and the assessment order records that books of account, bank statements, audit report and ledgers were examined and the returned income accepted. The Commissioner's revision relied on the absence of verification by the AO of relationship, creditworthiness, date/mode of payment and genuineness; however, the Court found no further statutory prescription requiring additional particulars beyond identity, name and address under section 115-BBC(3). In view of the disclosure made and the AO's recorded verification of documents, the requirement of section 115-BBC(3) was satisfied and the impugned revision under section 263 could not be sustained as the assessment was not shown to be erroneous or prejudicial on the ground of anonymous donation. The Court therefore answered the substantial question of law against the revenue and in favour of the assessee. [Paras 5, 6, 7]

The question is answered in the negative; the assessment is not shown to be erroneous or prejudicial for want of the particulars required by section 115-BBC(3).

Final Conclusion: Appeal allowed. Orders of the Commissioner and the Tribunal are set aside and quashed.

Penalty under Section 271C - demand notice under Section 156 - assessee-in-default under Section 201/201(1A) - withholding obligation in respect of External Development Charges (EDC) - application of a coordinate bench precedent to like facts

Penalty under Section 271C - demand notice under Section 156 - assessee-in-default under Section 201/201(1A) - application of a coordinate bench precedent to like facts - Validity of the penalty imposed under Section 271C and the demand notice issued under Section 156 where a coordinate bench has held that the petitioner was not an assessee-in-default under Section 201/201(1A) for failure to deduct tax on EDC. - HELD THAT: - The court recorded that the merits question-whether the petitioner was an assessee-in-default under Section 201/201(1A) for non-deduction of tax on External Development Charges-had been decided in favour of the petitioner by a coordinate bench (reference to DLF Homes Panchkula Pvt. Ltd. v. JCIT (OSD), 2023:DHC:2401-DB). Given that the underlying liability finding (assessee-in-default) was resolved against the departmental position by that bench on analogous facts, the court held that the penalty under Section 271C and the consequential demand under Section 156 could not be sustained. Applying the coordinate-bench ruling to the present petitions, the court quashed the impugned penalty order and the demand notice and disposed of the writ petitions accordingly. [Paras 3, 4, 5]

The penalty order under Section 271C and the demand notice under Section 156 are quashed in view of the coordinate bench's favourable decision on the assessee-in-default issue.

Final Conclusion: Writ petitions disposed of by quashing the penalty under Section 271C and the demand notice under Section 156 for FY 2013-14, following the coordinate bench's decision that the petitioner was not an assessee-in-default under Section 201/201(1A); interim orders vacated and pending interlocutory applications closed.

Genuineness of share transactions - addition under section 68 - proof by documentary evidence (contract notes, demat records, bank cheques) - transactions executed through recognised stock exchange - reliance on investigation reports and preponderance of probabilities - audi alteram partem - opportunity to confront enquiries and statements relied upon - holding period and tranche-wise sale as indicia of bona fides

Genuineness of share transactions - addition under section 68 - transactions executed through recognised stock exchange - proof by documentary evidence (contract notes, demat records, bank cheques) - holding period and tranche-wise sale as indicia of bona fides - Capital gains declared on sale of shares of KCL Infra Projects Ltd. for AY 2011-12 and AY 2012-13 are genuine and addition under section 68 is not justified. - HELD THAT: - The Tribunal found that the assessee produced uncontested contemporaneous documents including contract notes of purchase and sale, demat account records showing credit of shares, and bank passbooks evidencing payments and receipts by account-payee cheques. The purchases and sales were effected on the recognised stock exchange, sales were in tranches across multiple assessment years and the shares were held in demat for approximately ten years. These factors - exchange-based trades, banking channel payments, dematerialisation soon after purchase, tranche-wise disposals and long holding period - cumulatively demonstrate the bona fides of the transactions. The revenue's case rested on suspicion, investigation inputs and preponderance of probabilities regarding price manipulation; but where documentary evidence of genuine market transactions is not disputed, mere suspicion or departmental reports are insufficient to sustain an addition under section 68. Applying these determinative considerations, the Tribunal accepted the capital gains as genuine and deleted the additions. [Paras 9, 11, 12]

Additions made by the revenue under section 68 in AY 2011-12 and AY 2012-13 deleted; declared capital gains accepted as genuine.

Audi alteram partem - opportunity to confront enquiries and statements relied upon - reliance on investigation reports and preponderance of probabilities - Reliance by the Assessing Officer on third party enquiries and statements without providing the assessee an opportunity to confront them was impermissible and undermined the AO's conclusions. - HELD THAT: - The Tribunal observed that the AO heavily relied on enquiries under section 133(6) and on statements of the company's director recorded by the investigation wing, but did not confront or furnish these materials to the assessee nor afford opportunity to rebut them. Such assessee specific enquiries and statements, if to be used as a basis for adverse findings, required that the assessee be given a chance to meet the same in accordance with the principle of audi alteram partem. The Tribunal therefore rejected conclusions founded on those uncommunicated enquiries/statements and treated the AO's reliance on them as legally untenable. [Paras 10]

Findings based on uncommunicated enquiries and statements could not sustain the additions; procedural lapse weighed against the revenue.

Final Conclusion: On the facts and documents produced, and having regard to procedural infirmity in relying on undisclosed enquiries and statements, the Tribunal allowed the appeals, held the declared capital gains for AY 2011-12 and 2012-13 to be genuine and deleted the additions made by the revenue.

Income from house property - business income - treatment of lease / sub licence rental income - consistency of assessment across years - principle of res judicata in income tax proceedings - precedential application of Raj Dadarkar & Associates

Income from house property - business income - treatment of lease / sub licence rental income - precedential application of Raj Dadarkar & Associates - Whether the rental income derived from letting out licensed area/commercial complex is to be assessed as income from house property or as business income. - HELD THAT: - The Tribunal accepted the conclusion of the First Appellate Authority that the assessee's receipts from letting/licensing of constructed stalls and shops fall to be assessed as income from house property. The Tribunal observed that the assessee's balance sheet treated the building as given on operating lease and that the department had consistently accepted the assessee's claim of taxation of such receipts under the head "income from house property" in earlier and subsequent assessments. The Tribunal held that the ratio of the Supreme Court decision in Raj Dadarkar & Associates and relevant ITAT authority on sub licence/lease receipts applied to the facts of the case, distinguishing the Revenue's reliance on Chennai Properties which concerned a different factual matrix where letting formed the assessee's business. On this basis the Tribunal found no error in the CIT(A)'s deletion of the addition made by the AO. [Paras 6, 7]

Rental income from letting/licensing of the assessed premises is to be treated as income from house property; the addition made by the AO is deleted.

Consistency of assessment across years - principle of res judicata in income tax proceedings - Whether the Revenue could lawfully adopt a different head of income in the assessment under appeal notwithstanding consistent acceptance of the assessee's treatment in other years. - HELD THAT: - The Tribunal noted that while the doctrine of res judicata does not strictly apply to income tax proceedings, consistent acceptance by the Revenue of the assessee's treatment of receipts as income from house property in preceding and subsequent assessment years militated against a solitary or "stray" recharacterisation to business income. The Tribunal therefore upheld the CIT(A)'s approach of following earlier acceptances and applicable precedent rather than permitting a different classification in the single year under appeal. [Paras 7]

Although res judicata is not strictly applicable to income tax proceedings, the Revenue's consistent earlier and later acceptance of the assessee's head of income precludes a one off reclassification; the Revenue's appeal is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s deletion of the addition treating the receipts as income from house property is upheld, the Tribunal applying consistency of prior assessments and relevant precedent in favour of the assessee.

Taxability of royalty on receipt basis under a Double Taxation Avoidance Agreement (DTAA) - Doctrine of treaty override of conflicting domestic income tax provisions - Condonation of delay for filing appeal on account of change of forum following Supreme Court decision

Condonation of delay for filing appeal - Change of forum following Apex Court ruling - Delay in filing the appeal before the Tribunal was condoned - HELD THAT: - The assessee filed an appeal initially before the Mumbai Bench and, on learning of the Supreme Court decision in PCIT v. ABC Papers Ltd., withdrew that appeal and filed afresh before the Bangalore Bench. The Tribunal, applying the principles in Collector, Land Acquisition v. Mst. Katiji and having considered the explanation for delay (including inadvertence and change of consultant and the change of forum required by the Apex Court ruling), held that there was reasonable cause for the delay and therefore condoned the delay in filing the appeal before the Bangalore Tribunal. [Paras 5]

Delay in filing the appeal is condoned.

Taxability of royalty on receipt basis under a Double Taxation Avoidance Agreement (DTAA) - Conflict between DTAA and domestic accrual-based taxation and treaty prevailing - Impugned addition of royalty income was not sustainable as royalty payable to the non-resident is taxable on receipt basis under the DTAA and the addition was deleted - HELD THAT: - The Tribunal accepted the assessee's submission that it is a Swiss resident entitled to invoke the India Switzerland DTAA and that Article 12 of the DTAA must be applied where it is more beneficial. Relying on the coordinate bench decision in M/s. ABB AG and consistent decisions (including the reasoning of the Bombay High Court in Siemens Aktiengesellschaft), the Tribunal held that where the treaty provision defines taxability in terms of payments to the non-resident, such royalty/fees for technical services are taxable in India in the year of receipt and not on accrual as per domestic charging provisions. Applying that principle to the undisputed facts - the assessee had offered the amount actually received in Form 26AS and the additional amount shown in Form 3CEB was not received by the assessee and not substantiated as offered in another year - the Tribunal followed the treaty override principle and allowed the appeal. [Paras 15, 16]

The addition of the differential royalty amount is deleted and the appeal is allowed.

Final Conclusion: Delay in filing the appeal is condoned and, on the merits, the Tribunal allowed the appeal by applying the DTAA principle that royalty payable to a non-resident is taxable in India on receipt basis, resulting in deletion of the impugned addition for AY 2014-15.

Penalty under section 272A(2)(k) - Delay in filing TDS statements/Form No.26Q - Deposit of TDS to Central Government account - Reasonable cause under section 273B - Technical default versus loss to Revenue

Penalty under section 272A(2)(k) - Delay in filing TDS statements/Form No.26Q - Deposit of TDS to Central Government account - Technical default versus loss to Revenue - Reasonable cause under section 273B - Whether the CIT(A) was justified in confirming the penalty imposed under section 272A(2)(k) for delay in filing quarterly TDS statements - HELD THAT: - The Tribunal found that the assessee had deposited the TDS to the Central Government account in time and that the only default was delay in furnishing the TDS statements. Relying on the reasoning in the co-ordinate Bench decision referenced in the order, the Tribunal treated the failure to file the statements as a technical delay where there was no loss to Revenue and where practical difficulties in e filing and requirements of newly introduced procedures warranted liberal construction. Applying the principle of reasonable cause under section 273B, the Tribunal held that mere non-filing of TDS statements in these circumstances did not justify imposition of penalty under section 272A(2)(k), and consequently concluded that the CIT(A) erred in confirming the penalty. [Paras 5, 6]

Penalty imposed under section 272A(2)(k) for delay in filing TDS statements is not justified and the grounds of the assessee are allowed.

Final Conclusion: The penalty imposed by the Addl. CIT (TDS) and confirmed by the CIT(A) under section 272A(2)(k) for delay in filing quarterly TDS statements is deleted; the assessee's appeal is allowed for Assessment Year 2009-10.

Taxability of cloud computing services - royalty under Article 12(3) of the India-USA DTAA - fees for included services / fee for technical services under Article 12(4)(b) of the India-USA DTAA - "make available" clause - use or right to use industrial, commercial or scientific equipment - interpretation of standard and automated services versus transfer of intellectual property or technology

Taxability of cloud computing services - royalty under Article 12(3) of the India-USA DTAA - use or right to use industrial, commercial or scientific equipment - interpretation of standard and automated services versus transfer of intellectual property or technology - Payments received for standard and automated cloud computing services do not qualify as "royalty" under Article 12(3) of the India-USA DTAA and are not taxable in India. - HELD THAT: - The Tribunal examined the sample Customer Agreement, Trademark Guidelines and Support Services Guidelines and found that customers are granted only a non exclusive, non transferable right to access standardized AWS services, do not receive source code or any exclusive/right to commercially exploit the IP, and have no possession, control or dedicated use of the supplier's hardware or infrastructure. The terms show only limited trademark permission and incidental support; support does not include code development or transfer of the underlying technology. The Tribunal also considered and followed coordinate decisions of various benches of the Tribunal and the Delhi High Court in MOL Corporation which held that subscription/cloud services do not constitute royalty. Applying these factual and legal findings to Article 12(3), the prerequisites for royalty (use/right to use copyrights or equipment or information concerning industrial, commercial or scientific experience) are not satisfied, including on the 'equipment' limb, and the receipts therefore do not fall within Article 12(3). [Paras 13, 14, 18]

Allowed - impugned receipts from AWS Services are not royalty under Article 12(3) of the India-USA DTAA.

Fees for included services / fee for technical services under Article 12(4)(b) of the India-USA DTAA - "make available" clause - interpretation of standard and automated services versus transfer of intellectual property or technology - Payments for the standard and automated cloud computing services do not constitute "fees for included services" under Article 12(4)(b) because the services do not "make available" technical knowledge, experience, skill, know how or processes enabling the recipient to apply the technology independently. - HELD THAT: - Article 12(4)(b) requires that technical or consultancy services make available technical knowledge/skill/processes or consist of development/transfer of technical plans/designs. The Tribunal applied the Protocol's guidance that 'make available' means enabling the recipient to apply the technology. On the facts, AWS provides standardized online access, documentation akin to user manuals, optional support tiers limited to troubleshooting and guidance, and expressly excludes code development and administrative tasks. These support and documentation services do not enable customers to recreate or independently provide the cloud services; they do not transfer technical plans/designs or otherwise 'make available' technology. The Tribunal relied on Supreme Court and Tribunal precedents holding that provision of a standard facility or incidental support does not amount to technical services that make available technology. Consequently, Article 12(4)(b) is not attracted. [Paras 22, 23, 29, 31]

Allowed - impugned receipts are not FIS/FTS under Article 12(4)(b) of the India-USA DTAA.

Final Conclusion: The Tribunal allowed the appeals for AY 2014 15 and AY 2016 17, holding that the amounts received by the assessee from Indian customers for AWS/cloud computing services are neither taxable as "royalty" under Article 12(3) nor as "fees for included services" under Article 12(4)(b) of the India-USA DTAA; consequential grounds (rate, interest, penalty) need not be adjudicated.

Addition as unexplained money - charging under section 69A versus taxation under section 56 - unexplained expenditure treated as deemed income - treatment of bogus purchases and reduction of closing work-in-progress - remand for fresh adjudication and verification of source of payments

Addition as unexplained money - charging under section 69A versus taxation under section 56 - income from other sources - Whether cash receipts found on search, subsequently reflected in books as advances from customers, could be taxed under section 56 as income from other sources or required to be treated as unexplained money and charged under section 69A. - HELD THAT: - The Tribunal accepted the factual findings of the AO and CIT(A) that cash receipts discovered during search were not recorded in the books at the time of search and were thereafter entered as advances from customers to explain the cash. The court held that those cash receipts were in reality receipts against sale of flats which the assessee had deliberately not included in turnover at the time of finalisation, and subsequent book entries were an after the event device. While the CIT(A) treated the amounts as income from other sources and directed taxation under section 56, the Tribunal disagreed with changing the charging section. On the material and conclusions recorded, the Tribunal held that the assessing officer was justified in treating the impugned receipts as unexplained money and confirming the addition under section 69A rather than section 56. [Paras 7, 8, 9, 10, 12]

Addition confirmed as unexplained money and taxed under section 69A; assessee's appeal dismissed on this ground.

Unexplained expenditure treated as deemed income - remand for fresh adjudication and verification of source of payments - Whether additions on account of alleged unexplained payments/expenditures (treated as unexplained expenditure by AO) were rightly deleted by the CIT(A). - HELD THAT: - The AO relied on seized material and receipt/payment records to treat certain payments as unexplained expenditure and made additions under the relevant provisions. The CIT(A) deleted those additions on the basis that the source of payments was traceable to disclosed bank accounts and that the expenses were not claimed in the profit & loss account. The Tribunal disagreed with the CIT(A)'s deletion insofar as the CIT(A) did not examine books and bank accounts to verify the source and flow of cash and accepted the need for closer verification. Consequently, the Tribunal set aside the CIT(A)'s deletion and directed that the issue be examined afresh by the first appellate authority with opportunity to the assessee to explain and produce records. The treatment thus was remanded for fresh adjudication and verification of source. [Paras 15, 16]

Deletion by CIT(A) set aside; matter remanded to the CIT(A) for fresh adjudication and verification of the source and flow of payments.

Treatment of bogus purchases and reduction of closing work-in-progress - bogus purchases - Whether purchases shown from certain parties were bogus and whether the AO was justified in reducing closing work in progress by the amount of such bogus purchases. - HELD THAT: - The AO conducted inquiries, issued summons and relied on survey findings and seized documents to conclude that a group of vendors were entry providers and that the alleged purchases were not genuine; detailed findings recorded the unverifiable existence and operation of those parties and the routing of funds back to the assessee. The CIT(A) briefly concluded that the matter could be examined at later assessment years when work in progress would be taxed on project completion method and therefore excluded the impugned expenditure from reduction. The Tribunal held that allowing bogus purchases to remain in work in progress would permit enhancement of construction cost and artificial suppression of income; since the AO had made detailed enquiries and recorded cogent findings deeming the purchases bogus, the CIT(A)'s approach was not sustainable. The Tribunal restored the AO's action of reducing work in progress by the amount of bogus purchases. [Paras 17, 18, 19, 20, 21]

AO's disallowance upheld; reduction of closing work in progress on account of bogus purchases restored.

Final Conclusion: The assessee's appeal is dismissed. Revenue's appeal is partly allowed: the Tribunal confirmed the addition of cash receipts as unexplained money taxed under section 69A and restored the AO's reduction of work in progress on account of bogus purchases; the deletion of additions for unexplained expenditure by the CIT(A) is set aside and remitted for fresh adjudication and verification.

Condonation of delay - abatement of pending assessment on initiation of search under section 132 - merger of pending reassessment with block assessment under section 153A - scope of block assessment to assess total income for six assessment years - invalidity / void-ab-initio of reassessment order when pending reassessment abates by operation of the second proviso to section 153A(1)

Condonation of delay - Whether the delay of 30 days in filing the appeal before the Tribunal is liable to be condoned. - HELD THAT: - The assessee explained by affidavit that multiple proceedings (regular assessment, reassessment and block assessment) were pending at different jurisdictions and that relevant documents and coordination with different authorised representatives were time-consuming. The Revenue raised no objection to condonation. Having considered the explanation and record the Tribunal found the cause reasonable and, in the interest of justice, exercised its discretion to condone the delay of 30 days. [Paras 4]

Delay of 30 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

Abatement of pending assessment on initiation of search under section 132 - merger of pending reassessment with block assessment under section 153A - invalidity / void-ab-initio of reassessment order when pending reassessment abates by operation of the second proviso to section 153A(1) - scope of block assessment to assess total income for six assessment years - Whether the reassessment order passed under section 147 r.w.s. 143(3) on 19.02.2014 is valid when reassessment proceedings were pending on the date of search (16.05.2013). - HELD THAT: - The undisputed facts show that notice under section 148 was issued on 22.03.2013 and reassessment proceedings were pending on 16.05.2013 when a search under section 132 was conducted. The Tribunal analysed the effect of the second proviso to section 153A(1), which provides that assessment or reassessment relating to any assessment year pending on the date of initiation of search shall abate and that the Assessing Officer shall assess or reassess total income for the six-year block under section 153A. As a consequence, the jurisdiction exercisable under the pending reassessment merges into the block assessment under section 153A and any assessment or reassessment pending on the date of search cannot validly be concluded independently thereafter. Applying this principle to the facts, the Tribunal held that the reassessment order dated 19.02.2014, being passed after the search in respect of proceedings that had abated, was illegal and void-ab-initio. The Tribunal therefore quashed the reassessment order without going into the remaining grounds which thereby became infructuous. [Paras 7, 9, 10]

Reassessment order dated 19.02.2014 under section 147 r.w.s. 143(3) is quashed as illegal and void-ab-initio because the reassessment proceedings had abated on initiation of the search and merged with proceedings under section 153A.

Final Conclusion: The Tribunal condoned the delay of 30 days in filing the appeal and allowed the appeal on merits by quashing the reassessment order dated 19.02.2014 as illegal and void ab initio since the reassessment proceedings had abated on initiation of the search and merged with the block assessment under section 153A.

Disallowance under section 14A of the Income-tax Act - computation mechanism under Rule 8D of the Income-tax Rules - requirement of objective satisfaction before rejecting assessee's suo moto disallowance (section 14A(2) read with Rule 8D(1)) - application of Rule 8D(2) computational limbs - suo moto disallowance made by the assessee - Maxopp Investment Ltd. principle on section 14A

Disallowance under section 14A of the Income-tax Act - requirement of objective satisfaction before rejecting assessee's suo moto disallowance (section 14A(2) read with Rule 8D(1)) - computation mechanism under Rule 8D of the Income-tax Rules - suo moto disallowance made by the assessee - Whether the disallowance made by the Assessing Officer under section 14A read with Rule 8D should be sustained where the AO applied Rule 8D(2) without recording objective satisfaction rejecting the assessee's suo moto disallowance and explanations. - HELD THAT: - The Tribunal found on the record that the assessee had furnished detailed particulars of investments, the exempt dividend received, break-up of the suo moto disallowance and particulars of borrowings together with an explanation that investments yielding exempt income were made out of own funds. The Assessing Officer, however, disregarded these explanations and proceeded to apply the computation mechanism in Rule 8D(2) without recording any objective satisfaction with cogent reasons for rejecting the assessee's claim. The Tribunal held that rejection of the assessee's suo moto disallowance and substitution by a Rule 8D computation requires the AO to record objective satisfaction with supporting reasons as mandated by section 14A(2) read with Rule 8D(1). In the absence of such recorded satisfaction and for the reasons relied upon by the Tribunal, the disallowance could not be sustained. The Tribunal further relied on the legal principle in Maxopp Investment Ltd. regarding the requirement of objective satisfaction before invoking the Rule 8D computation, and directed deletion of the disallowance made under section 14A of the Act.

The disallowance made under section 14A read with Rule 8D in the assessment is deleted and the grounds raised by the assessee are allowed.

Final Conclusion: The appeal is allowed: the Assessing Officer's disallowance under section 14A read with Rule 8D is set aside for want of recorded objective satisfaction rejecting the assessee's suo moto disallowance, and the assessment is to be revised accordingly.

Applicability of registration under section 12AA to earlier assessment years - Entitlement to exemption under Sections 11 and 12 where registration is granted while earlier-year assessment is pending - Binding force of CBDT Circular No. 01/2015 as a benevolent/relief circular - Pre-condition that assessment proceedings for the earlier year must be pending on date of registration - Exception where registration was earlier refused under section 12AA - Duty of assessing officers to assist taxpayers in claiming reliefs

Applicability of registration under section 12AA to earlier assessment years - Entitlement to exemption under Sections 11 and 12 where registration is granted while earlier-year assessment is pending - Binding force of CBDT Circular No. 01/2015 as a benevolent/relief circular - Assessee entitled to benefit of Sections 11 and 12 for A.Y.2015-16 where registration under section 12AA was granted on 20.04.2017 and the assessment for A.Y.2015-16 was pending on that date - HELD THAT: - The tribunal found as a fact that Form 10A for registration under section 12AA was filed and the CIT(Exemption), Bhopal granted registration on 20.04.2017, though the registration order recited that Sections 11/12 would apply from A.Y.2017-18. Reliance on CBDT Circular No. 01/2015 (paras 8.1-8.6) establishes that where registration is granted and assessment proceedings for an earlier assessment year are pending on the date of such registration, the benefit of Sections 11 and 12 shall be available for such earlier year provided the objects and activities are the same; the circular is a benevolent instruction binding on the department. The circular also carves out only those cases where registration under section 12AA was earlier refused or subsequently cancelled. The assessing officer erred in summarily rejecting the claim without giving effect to the circular and without examining whether the assessment for A.Y.2015-16 was pending on the date of registration; the record shows the assessment was initiated by notice under section 143(2) and concluded by order dated 21.12.2017, thus pending on 20.04.2017. The tribunal further observed that departmental officers are obliged to assist taxpayers in claiming reliefs and could not take advantage of the assessee's ignorance. While upholding the legal entitlement under the circular, the tribunal directed restoration of the matter to the file of the assessing officer for framing a fresh assessment and for carrying out necessary verifications as to the assessee's entitlement to exemption under Sections 11/12 in light of the circular. [Paras 10, 11, 12, 13]

Appeal allowed for statistical purposes; assessee entitled to the benefit of Sections 11/12 for A.Y.2015-16 under CBDT Circular No. 01/2015; matter restored to the assessing officer to frame a fresh assessment and carry out verifications.

Entitlement to exemption under Sections 11 and 12 where registration is granted while earlier-year assessment is pending - Binding force of CBDT Circular No. 01/2015 as a benevolent/relief circular - Same entitlement and treatment applied to A.Y.2016-17; the tribunal applied its A.Y.2015-16 reasoning mutatis mutandis to A.Y.2016-17 - HELD THAT: - The tribunal recorded that the facts and legal issue for A.Y.2016-17 are the same as for A.Y.2015-16, save that the assessee had specifically claimed exemption in the return for A.Y.2016-17. Consequently, the findings and observations made with respect to the applicability of CBDT Circular No. 01/2015 and the effect of registration granted on 20.04.2017 were applied mutatis mutandis. The tribunal allowed the appeal for statistical purposes in terms of the observations recorded earlier and thereby afforded the assessee the benefit indicated subject to the assessing officer's verifications. [Paras 15, 16]

Appeal allowed for statistical purposes in terms of the observations recorded for A.Y.2015-16; A.Y.2016-17 to be treated accordingly with liberty to the assessing officer to make necessary verifications.

Final Conclusion: Both appeals for A.Y.2015-16 and A.Y.2016-17 are allowed for statistical purposes: the assessee is entitled to seek benefit of Sections 11 and 12 in light of CBDT Circular No. 01/2015 where registration under section 12AA was granted while assessment proceedings were pending; the matters are restored to the assessing officer to frame fresh assessment(s) and carry out necessary verifications.

Revenue v. capital expenditure - commencement of business - pre-operative expenses - work-in-progress (WIP) and capitalization - selling expenses as revenue in nature - borrowing cost capitalization - allowability under section 37

Commencement of business - selling expenses as revenue in nature - allowability under section 37 - Advertisement and brokerage claimed by the assessee are revenue in nature and allowable as deduction. - HELD THAT: - The Tribunal found that construction activity had commenced and substantial costs had already been capitalized, so the business was set up and activities essential to carrying on the business had begun. Applying the guidance distinguishing project-specific capital costs from general selling and operating costs, advertisement and brokerage incurred for booking and sale are of revenue character and do not form part of the cost of the project or WIP. The Tribunal also relied on the co ordinate-bench decision in the assessee's own case for an earlier year where identical facts led to treating advertising and brokerage as revenue expenses. Absent any distinguishable factual or legal point raised by Revenue, the Tribunal upheld the deletion of the disallowance of these items. [Paras 10, 12]

The disallowance of advertisement and brokerage is deleted and these expenses are allowed as revenue expenditure.

Work-in-progress (WIP) and capitalization - borrowing cost capitalization - revenue v. capital expenditure - Interest and related charges payable to Noida Authority are capital in nature and are to be capitalized as part of project cost; therefore, the disallowance thereof is sustained. - HELD THAT: - The Tribunal accepted the view that interest and late-payment charges arising from acquisition of land and defaults on scheduled instalments are attributable to the cost of acquiring the land/project and therefore form part of capital cost or project cost/WIP. Such borrowing-related and acquisition-related charges cannot be allowed as revenue deduction but must be capitalized. The Tribunal noted consistent treatment in group companies and prior adjudications in the assessee's own matters, and found no reason to interfere with the confirmation of the AO's treatment in respect of these interest charges. [Paras 10, 12]

Interest and related Noida Authority charges are capitalized as project cost and the disallowance is confirmed.

Final Conclusion: The Revenue's appeal is dismissed. Advertisement and brokerage expenses are allowed as revenue deductions; interest and related charges payable to Noida Authority are held to be capital in nature and are to be capitalized, and the AO's disallowance in respect of those charges is sustained.

Deduction of tax at source under section 194D - Disallowance under section 40(a)(ia) - Reimbursement of expenses versus remuneration or reward for soliciting or procuring insurance business - Precedential effect of coordinate-bench and High Court decisions

Deduction of tax at source under section 194D - Disallowance under section 40(a)(ia) - Reimbursement of expenses versus remuneration or reward for soliciting or procuring insurance business - Precedential effect of coordinate-bench and High Court decisions - Deletion of disallowance under section 40(a)(ia) made for alleged failure to deduct tax under section 194D on ceding commission. - HELD THAT: - The Tribunal, following its Coordinate Bench decision in the assessee's own case for AY 2018-19, held that the ceding commission debited by the non-resident reinsurer represented reimbursement of the assessee's share of costs (manpower, third party administration, administration etc.) and not remuneration or reward for soliciting or procuring insurance business. Relying on decisions of the Madras and Bombay High Courts and consistent ITAT precedents, the Tribunal concluded that section 194D applies only where the payment is remuneration/reward for soliciting or procuring insurance business, and does not extend to reimbursements or discounts on reinsurance premium which compensate for expenses. As there were no contrary High Court decisions in the jurisdiction and the factual position in the impugned year coincided with the earlier decided year, the Tribunal found the Dispute Resolution Panel erred in upholding the disallowance and therefore deleted the addition under section 40(a)(ia). [Paras 5, 6]

The disallowance under section 40(a)(ia) is deleted and the appeal is allowed.

Final Conclusion: Following the Coordinate Bench and relevant High Court and ITAT precedents, the Tribunal held that the ceding commission constituted reimbursement of expenses and not taxable remuneration under section 194D; accordingly the disallowance under section 40(a)(ia) for AY 2020-21 was deleted and the appeal allowed.

Arm's Length Principle - Comparable Uncontrolled Price (CUP) method - Most Appropriate Method (MAM) - Reliability of customs transaction data as CUP benchmark - Comparability adjustments for differences in contract terms, quality, delivery and volume - Price setting/valuation date for commodity transactions - Application of OECD guidance on pricing date for commodities - Transfer pricing adjustment by TPO/DRP

Comparable Uncontrolled Price (CUP) method - Reliability of customs transaction data as CUP benchmark - Most Appropriate Method (MAM) - Comparability adjustments for differences in contract terms, quality, delivery and volume - Whether customs transaction data could be relied upon as the CUP benchmark for benchmarking the assessee's import/export agri commodity transactions instead of industry reports and third party broker quotations - HELD THAT: - Both the assessee and revenue accepted CUP as the MAM; the determinative question was which public data constituted a more reliable CUP benchmark. The Tribunal upheld the TPO/DRP's conclusion that customs data - being transaction values of identical or similar goods at or around the same time and recorded at the port of shipment/delivery - is a more reliable indicator of uncontrolled arm's length prices than industry averages or broker quotations. The Tribunal accepted the Revenue's position that customs values reflect shipment level prices inclusive of incidental costs (insurance, freight, handling, foreign currency terms etc.), are prepared on a systematic basis and therefore provide a reasonable basis for CUP comparisons in the absence of complete contractual detail from the assessee. The Tribunal noted that raw quotations or average published prices, without appropriate adjustments for material differences (quality, incoterms, volume discounts, delivery terms), do not necessarily reflect actual uncontrolled transactions and so cannot be accepted as CUP in isolation. The Tribunal applied established principles that comparability adjustments are required where differences in terms materially affect price, and found that the TPO/DRP had properly considered such issues and given reasons for rejecting the assessee's broker/industry data. [Paras 13, 15, 16, 19, 25]

The objections to use of customs data under CUP were rightly rejected and the TPO/DRP's reliance on customs transaction data as the CUP benchmark was upheld; the grounds of appeal on this point are dismissed.

Price setting/valuation date for commodity transactions - Application of OECD guidance on pricing date for commodities - Whether the pricing/valuation date for commodity transactions may be taken other than the contract date (for example, shipment date) when determining CUP - HELD THAT: - The Tribunal relied on the OECD commentary permitting the tax administration to deem the pricing date on available evidence such as bill of lading or shipment date where the taxpayer does not provide reliable evidence of the agreed pricing date. The Tribunal observed that customs data records values on invoice/shipment dates and that such dates may better reflect the effective price taking into account incidental costs and timing differences between contract and realization. This approach supports use of customs transaction values recorded at or about shipment/delivery as a reliable basis for CUP in commodity transactions. [Paras 14, 15]

OECD guidance permitting use of shipment/date of shipment as pricing date where appropriate was applied; customs data at shipment/delivery was held to be an acceptable basis for determining CUP.

Final Conclusion: The Tribunal dismissed the assessee's appeal challenging the transfer pricing adjustment, holding that the TPO/DRP were justified in rejecting the assessee's broker/industry CUP data in favour of customs transaction data as the more reliable CUP benchmark for the AY 2016 17, and that the direction and resulting adjustment therefore required no interference.

Determination of transaction value for export duty on the basis of contractually agreed dry weight - Inapplicability of Gangadhar Narsingdas Agarwal where duty is ad valorem based on transaction value - Binding effect of Tribunal orders in absence of a stay by the Supreme Court - Effect of admission of Special Leave Petition without grant of stay on the operative force of Tribunal decisions

Determination of transaction value for export duty on the basis of contractually agreed dry weight - Inapplicability of Gangadhar Narsingdas Agarwal where duty is ad valorem based on transaction value - Value of exported iron ore fines must be determined on the dry weight as agreed in the contract and the Supreme Court decision in Gangadhar Narsingdas Agarwal is inapplicable where duty is leviable on ad valorem/transaction value basis. - HELD THAT: - The Tribunal accepted that the assessee furnished the export Agreement which fixed the sale price on a dry metric ton basis. It followed earlier decisions of this Tribunal (Sesa Goa Ltd. and Essel Mining & Industries Ltd.) holding that where duty is computed on the transaction value agreed between seller and overseas purchaser, the question of adopting wet or dry weight as in Gangadhar Narsingdas Agarwal (which dealt with levy on a specific weight basis) is not material. The Tribunal reasoned that Gangadhar Narsingdas Agarwal addressed the quantification of export duty when the charge was a specific rate per metric ton, making dry or wet weight relevant to the quantum; but where duty is ad valorem and computed on the contract price based on dry weight, the Supreme Court precedent does not control the present valuation question. Applying those consistent Tribunal decisions, the Tribunal held the value must be determined on the dry weight as per the parties' contract and upheld the Commissioner (Appeals') conclusion in that regard. [Paras 10, 11, 12]

The value of the exported iron ore fines is to be determined on the dry-weight basis as per the contract; the Gangadhar Narsingdas Agarwal decision is not applicable to valuation for ad valorem duty computed on transaction value.

Binding effect of Tribunal orders in absence of a stay by the Supreme Court - Effect of admission of Special Leave Petition without grant of stay on the operative force of Tribunal decisions - Tribunal precedents favourable to the assessee remain operative where departmental appeals or SLPs are pending before the Supreme Court but no stay has been granted. - HELD THAT: - The Tribunal considered the Revenue's reliance on the principle that admission of a SLP casts doubt on the correctness of a Tribunal order, but noted authorities holding that where no stay has been granted by the higher forum, the Tribunal's order continues to operate. The Tribunal observed that in the cited Sesa Goa Ltd. matter no departmental appeal had been filed in the Supreme Court, and in Essel Mining the SLP was admitted but no stay issued. The Tribunal relied on precedents (including a decision affirmed by the Supreme Court) to hold that pending departmental appeals or admitted SLPs do not automatically nullify or stay the effect of Tribunal decisions unless a specific stay is granted. Consequently, the Tribunal applied its prior decisions which were not stayed and upheld their applicability to the present appeals. [Paras 13, 14, 16]

Tribunal decisions favourable to the assessee remain binding and applicable in the present case in the absence of any stay from the Supreme Court; pending SLPs without stay do not oust the operative effect of those Tribunal orders.

Final Conclusion: The appeals are allowed: the value of exports is to be determined on the contractually agreed dry-weight basis and earlier Tribunal decisions supporting that approach are applicable in the absence of any stay by the Supreme Court.

Professional misconduct - acceptance of audit appointment without ascertaining validity - failure to ascertain compliance with appointment provisions - non compliance with Standards on Auditing - deficient audit documentation - forming an opinion without sufficient appropriate audit evidence - sanctions under Section 132(4) of the Companies Act, 2013

Acceptance of audit appointment without ascertaining validity - failure to ascertain compliance with appointment provisions - professional misconduct - Acceptance of the branch audit appointment without ascertaining its validity and related statutory non compliance amounted to professional misconduct. - HELD THAT: - NFRA found that the engagement as branch statutory auditor was not validly appointed by the competent authority (members/shareholders) and that the Engagement Partner (EP) did not verify compliance with the Companies Act appointment provisions before accepting the engagement. The EP accepted an appointment letter issued by an authorised signatory without evidence of Board or shareholder approval and failed to comply with the duty under the Chartered Accountants Act, 1949 (Clause 9 of Part I of the First Schedule) and the ICAI Code of Ethics to 'ascertain' compliance with the statutory appointment requirements. The EP's contention that the defect lay solely with company management was rejected because the EP was required to exercise due diligence and professional scepticism; his failure to do so constituted gross negligence and professional misconduct under Section 132(4)(c) of the Companies Act, 2013. [Paras 16, 17, 18, 19, 43]

Finding of professional misconduct for having accepted and acted upon an invalid appointment as branch statutory auditor.

Non compliance with Standards on Auditing - SA 210 - Agreeing the Terms of Audit Engagements - SA 200 - professional scepticism and judgment - Failure to comply with SA 210 and resultant absence of professional scepticism under SA 200 was established. - HELD THAT: - The EP's appointment letter did not contain the matters required by Paras 9-11 of SA 210 (objective and scope, responsibilities of auditor and management, applicable financial reporting framework, and expected form of reports). The EP's assertion that the appointment letter sufficed was rejected on examination of the audit file. The lack of an appropriate engagement letter showed flawed understanding of the audit scope and objective and demonstrated absence of professional scepticism and judgment, thereby breaching SA 210 and SA 200. [Paras 22, 23, 24, 25]

Charges of non compliance with SA 210 (and related failure under SA 200) are proven.

Deficient audit documentation - SA 230 - Audit Documentation - The EP failed to prepare sufficient and appropriate audit documentation in breach of SA 230. - HELD THAT: - The audit file lacked contemporaneous documentation evidencing the nature, timing and extent of audit procedures, results obtained and conclusions reached. Essential working papers and records (including understanding of branch operations, audit plan, materiality determinations, IT control understanding, lists of documents verified, substantive verifications and procedures for loans and KYC/AML checks) were absent. Oral explanations were insufficient to discharge the burden; therefore the documentary requirements of SA 230 were not met and the charge of non compliance stands established. [Paras 31, 32, 33, 34, 35]

Finding of non compliance with SA 230; audit documentation was inadequate.

Forming an opinion without sufficient appropriate audit evidence - SA 700 - Forming an Opinion and Reporting on Financial Statements - The EP issued an unmodified audit opinion without obtaining sufficient appropriate audit evidence, contrary to SA 700. - HELD THAT: - Although the EP recorded in annexures that required loan files and other documents were missing and admitted not receiving around half the material requisitioned, he nevertheless issued an unmodified opinion asserting the trial balance and branch details presented a true and fair view. There was no documented evaluation of materiality, assessment of risk of misstatement, or testing of controls to justify an unmodified opinion. In these circumstances the EP did not comply with SA 700 and the charge is established. [Paras 36, 37, 38]

Finding that the unmodified opinion was issued without sufficient appropriate audit evidence; non compliance with SA 700 is proven.

Non compliance with other Standards on Auditing - SA 300 - SA 315 - SA 320 - SA 330 - SA 450 - SA 500 - SA 510 - SA 520 - SA 530 - SA 580 - Failures to comply with multiple specified SAs (planning, risk assessment, materiality, responses to assessed risks, evaluation of misstatements, audit evidence, opening balances, analytical procedures, sampling, and written representations) were established. - HELD THAT: - The audit file lacked documentation and evidence required by SA 300 (overall audit strategy and planning), SA 315 and SA 330 (risk assessment procedures and responses to risks), SA 320 (materiality determinations), SA 450 (evaluation of identified misstatements), SA 500 (design and performance of procedures to obtain sufficient appropriate audit evidence), SA 510 (procedures on opening balances), SA 520 (analytical procedures), SA 530 (sampling) and SA 580 (written representations). The EP's general denials did not overcome the absence of required working papers and procedures; consequently the specified SA breaches are proved. [Paras 40, 41, 42, 43]

Finding of non compliance with the listed Standards on Auditing.

Sanctions under Section 132(4) of the Companies Act, 2013 - professional misconduct - Monetary penalty and debarment were imposed as proportionate sanctions for the proved professional misconduct. - HELD THAT: - Having concluded that professional misconduct and gross negligence were established in accepting an invalid appointment and in conducting the branch audits in breach of multiple SAs, NFRA exercised its powers under Section 132(4) to impose sanctions. Considering deterrence, proportionality and the need for remediation of knowledge gaps, NFRA imposed a monetary penalty and a time bound debarment and recommended training in SAs to address deficiencies in audit quality. [Paras 46, 47, 48, 49, 50]

Penalty of Rs. 100,000 imposed and debarment for one year from appointment as auditor/internal auditor or from undertaking audits; order effective after 30 days; training on SAs recommended.

Final Conclusion: NFRA found that CA Akash Goel committed professional misconduct by accepting an invalid branch audit appointment and by materially breaching multiple Standards on Auditing; accordingly a monetary penalty of Rs. 100,000 and a one year debarment from auditor/internal auditor appointments were imposed, the order to take effect after 30 days, and the EP was recommended to undertake training in Standards on Auditing.

Summary order. Civil appeal dismissed; order of the National Company Law Appellate Tribunal dated 21.12.2022 upheld.

Applicability of Section 10A of the Insolvency and Bankruptcy Code, 2016 to claims arising prior to 25/03/2020 - interest stipulated in invoice forms part of the operational debt for maintainability and threshold reckoning - pre-existing dispute and the Mobilox test for identifying a prima facie dispute - barter transaction and reciprocal rights/liabilities in running accounts

Applicability of Section 10A of the Insolvency and Bankruptcy Code, 2016 to claims arising prior to 25/03/2020 - interest stipulated in invoice forms part of the operational debt for maintainability and threshold reckoning - barter transaction and reciprocal rights/liabilities in running accounts - Whether the Section 9 application is barred by Section 10A because the amounts and date of default relate to the period prior to 25/03/2020 and whether the debt for threshold purposes includes contractually stipulated interest. - HELD THAT: - The Tribunal examined the invoices and due dates and recorded that the principal amounts and the stipulated contractual interest related to invoices dated between December 2019 and February 2020, with the net principal amount noted as due on 23/03/2020 and the date of default in the Section 9 application as 22/02/2020. Applying the precedent that contractual interest stipulated in invoices forms part of the claim/debt for maintainability, the Tribunal held that the total claim (principal plus interest) exceeded the statutory threshold. Since the amounts claimed fell due and payable prior to 25/03/2020, Section 10A could not be invoked to bar the application. The contention that payment credit periods varied (11 to 42 days) was rejected on account of the invoice term providing 30 days and a clear contractual default clause attracting interest at 24% p.a. [Paras 5, 8]

Section 10A is not applicable to the amounts in dispute which were due prior to 25/03/2020; contractual interest stipulated in invoices is includible in the debt for threshold reckoning and the claim exceeds the statutory threshold.

Pre-existing dispute and the Mobilox test for identifying a prima facie dispute - barter transaction and reciprocal rights/liabilities in running accounts - Whether there existed a pre-existing dispute or pending arbitration/proceeding such as would require rejection of the Section 9 application. - HELD THAT: - The Tribunal considered the MSME Council proceedings, which had been dismissed on the ground that it could not adjudicate the complex reciprocal barter trading claims and record showed no pending suit, arbitration or adjudicatory proceeding when the Section 8 notice was issued. The Tribunal applied the Mobilox principle that the Adjudicating Authority should reject a Section 9 application only if a plausible, non-spurious dispute exists that requires further investigation. The record before the Tribunal included admissions by the corporate debtor in its reply to the MSME Council acknowledging delay and an intention to settle, and subsequent part-payments. On that basis the Tribunal concluded the purported dispute was illusory and spurious and did not bar admission under Section 9. [Paras 9, 10]

There was no pre-existing dispute in the sense required to reject the Section 9 application; the dispute was held to be spurious/illusory and the application was rightly admitted.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's admission of the Section 9 application is upheld because the claim (including contractual interest) exceeded the threshold and was not barred by Section 10A, and the alleged pre-existing dispute was found to be spurious.

Auctioneer's service - GTA service - business support service - penalty for suppression and mis-statement - penalty for non-registration and non-filing of ST-3 - extended period demand - bona fide belief in interpretation of law

Auctioneer's service - precedent binding within same Bench - Demand of Service Tax under auctioneer's service set aside. - HELD THAT: - The Tribunal noted that this Bench in the appellant's own earlier Final Order had set aside demands insofar as auctioneer's service. No contrary or distinguishing circumstances were placed on record by Revenue in the present appeal. Applying the earlier decision, the impugned order was set aside insofar as auctioneer's service is concerned. [Paras 12]

Demand under auctioneer's service is set aside.

GTA service - extended period demand - bona fide belief in interpretation of law - Demand of Service Tax under GTA service sustained for the normal period but extended period demand is set aside. - HELD THAT: - Referring to the earlier Final Order in the appellant's own case, the Tribunal observed that while transportation of PDS food items had later been exempted by notification amendments and there were interpretational disputes about levy on individual truck owners, these circumstances precluded invocation of the extended period in the absence of positive evidence of suppression. Consequently, the appellant remains liable to pay service tax with interest for the normal assessment period, but the demand for the extended period was not sustained. [Paras 12]

GTA service demand sustained for the normal period; extended period demand set aside.

Penalty for suppression and mis-statement - penalty for non-registration and non-filing of ST-3 - bona fide belief in interpretation of law - Penalty under Section 76 set aside; penalties under Sections 77(1)(a) and 77(2) sustained insofar as they relate to GTA service. - HELD THAT: - The appellant contended that non-payment arose from an arguable interpretation of law and thus there was no willful suppression to invite penalty. Following the ratio of the earlier Bench order and the finding that extended period and suppression were not made out, the Tribunal set aside the penalty under Section 76. However, breaches relating to statutory obligations-non-obtaining of service tax registration and non-furnishing of ST-3 returns-were found to merit proportionate penalties under Sections 77(1)(a) and 77(2) in respect of the GTA service liability for the normal period, and those penalties were upheld. [Paras 13]

Penalty under Section 76 set aside; penalties under Sections 77(1)(a) and 77(2) sustained for GTA service.

Final Conclusion: The appeal is allowed in part: the demand under auctioneer's service is set aside; GTA service demand is sustained only for the normal period (extended period demand set aside); penalty under Section 76 is set aside while penalties under Sections 77(1)(a) and 77(2) are sustained in relation to GTA service. Appeal disposed accordingly.

Admissibility of CENVAT credit on inputs used in construction of immovable property by a service provider - Retrospective applicability of Explanation II to the definition of "input" (Notification No.16/2009) and its inapplicability to service providers - Invoice/address formalities and ISD registration not a pre condition for availment of CENVAT credit where service was actually received - Taxability of renting of immovable property determined by invoiced/collected value and not by higher contractual rent

Admissibility of CENVAT credit on inputs used in construction of immovable property by a service provider - Retrospective applicability of Explanation II to the definition of "input" (Notification No.16/2009) and its inapplicability to service providers - CENVAT credit availed on inputs like cement and steel used in construction of the mall by the appellant-service provider is admissible for the periods claimed. - HELD THAT: - The Tribunal examined the effect of Explanation II inserted by Notification No.16/2009 and the Larger Bench decision in Vandana Global which had held the insertion to be clarificatory and retrospective. Having regard to contrary High Court precedent and subsequent Tribunal Bench decisions, the Tribunal held that Explanation II is directed at manufacturers and does not exclude service providers from claiming credit on inputs used for providing output services. On the facts, the appellant had availed the bulk of the credit prior to 07.07.2009 when no restriction existed; credits availed prior to that date (as quantified in the record) are admissible. For the small portion taken after 07.07.2009, the Tribunal followed its Bench precedents endorsing that the exclusion in Explanation II does not apply to service providers and accordingly sustained the admissibility of those credits as well. [Paras 6, 7]

Credit on construction materials and related inputs availed by the appellant (service provider) is admissible and the recovery on this count is not sustainable.

Invoice/address formalities and ISD registration not a pre condition for availment of CENVAT credit where service was actually received - Denial of CENVAT credit solely because invoices were addressed to the appellant's head office and not to the place of service is unsustainable where the services were actually availed. - HELD THAT: - The Tribunal relied on the settled position that ISD registration or invoice address formalities cannot be made a prerequisite for taking credit if the assessee has in fact received and utilized the services. The reason given in the original order - that differing addresses in invoices defeated credit - was held to be a procedural irregularity curable in nature and insufficient to deny credit absent proof that the services were not availed. [Paras 7]

The rejection of credit on the ground of invoice address and absence of ISD registration is set aside.

Taxability of renting of immovable property determined by invoiced/collected value and not by higher contractual rent - Service tax demand based on the higher rent stated in lease agreements cannot be sustained where invoices and actual collections reflect a lower amount. - HELD THAT: - The Tribunal observed that parties to a contract may orally or by mutual conduct alter the consideration and that tax liability is determined by the invoiced/collected value. In the present case, although the written lease provided for a higher guaranteed rent, the appellant accepted and invoiced lower amounts (based on turnover) which governed taxability. The mere absence of an addendum or written amendment to the lease does not empower tax authorities to treat the contractual figure as the taxable value when the invoice and collection reflect a lower amount; civil remedies for breach remain available to contracting parties but cannot be transposed into a tax demand by third parties. [Paras 8]

Service tax demand computed on the basis of the higher contractual rent is unsustainable; tax is to be determined by the invoiced/collected rent.

Final Conclusion: The appeal is allowed. The Order in Original dated 21.01.2015 is set aside and the departmental demands (recovery of CENVAT credits and service tax on the stated bases) are vacated with consequential relief, if any.

Works contract service - abatement applicable to works contract service - classification of composite supply as works contract in light of CCE & C, Kerala v. Larsen & Toubro Ltd. - exemption for services to Government, Port, SEZ, Hospital and Public Utility Service - Water Supply (Circular No.80/10/2004-ST)

Works contract service - classification of composite supply as works contract in light of CCE & C, Kerala v. Larsen & Toubro Ltd. - abatement applicable to works contract service - Appellant's composite supply of materials and services is liable to be treated as works contract service and taxable accordingly with entitlement to the abatement applicable to works contract services. - HELD THAT: - The Tribunal found that the appellant provided services together with materials and therefore falls within the classification of works contract service. Applying the ratio in CCE & C, Kerala v. Larsen & Toubro Ltd., the Tribunal held that the correct taxability is on 33% of the gross contract value (with 67% abatement) for works contract services; the Revenue's attempt to tax the remaining 67% was held unsustainable. The Tribunal accordingly set aside the demand insofar as it sought to tax the abated portion and confirmed liability only to the extent consistent with the works contract abatement. [Paras 7]

Demand insofar as it seeks to tax the abated portion is set aside; appellant liable to pay service tax only on 33% of the contract value as works contract service.

Exemption for services to Government, Port, SEZ, Hospital and Public Utility Service - Water Supply (Circular No.80/10/2004-ST) - Services rendered by the appellant to Government College, Port, SEZ, Hospital and Public Utility Service - Water Supply are exempt from service tax. - HELD THAT: - The Tribunal examined the services rendered to the Government College, Port, SEZ, Hospital and Public Utility Service - Water Supply and applied Circular No.80/10/2004-ST. It held that those services fall within the exemption notified by the Circular and therefore no service tax is leviable on such supplies. Consequently, the demand in the show cause notice insofar as it related to these exempt services was disallowed. [Paras 8]

No service tax payable in respect of services to Government College, Port, SEZ, Hospital and Public Utility Service - Water Supply; related demand set aside.

Final Conclusion: The appeal is allowed: the demand for service tax is set aside insofar as it seeks to tax the 67% abated portion and insofar as it relates to services exempt by Circular No.80/10/2004-ST; the appellant remains liable to service tax only on 33% of the contract value as works contract service. Stay petition disposed of.

Inclusion of freight in assessable value - FOR destination sale and point of sale - place of removal versus place of sale - erroneous refund under Section 11A - application of Rule 5 and Rule 7 of Valuation Rules, 2000 - CBEC Circular No.1065/4/2018-CX exception for FOR contracts

Inclusion of freight in assessable value - FOR destination sale and point of sale - application of Rule 5 and Rule 7 of Valuation Rules, 2000 - CBEC Circular No.1065/4/2018-CX exception for FOR contracts - erroneous refund under Section 11A - Whether freight charges included in the FOR sale price formed part of the assessable value and whether the refund already sanctioned was an "erroneous refund" recoverable from the appellant. - HELD THAT: - The Tribunal found as undisputed fact that the appellant sold on FOR basis and did not show freight separately in invoices so that price charged was all inclusive and the contracts contemplated delivery and transfer of property at the buyer's premises. Relying on later decisions of this Bench and the Board's clarificatory circular, the Tribunal held that where the contract is a FOR destination contract in which the seller retains risk and ownership until acceptance at buyer's premises, charges up to the place of sale (including freight) are includible for valuation under the Valuation Rules and the Notification governing refund. The Tribunal further reasoned that refunds sanctioned in accordance with the law and clarifications prevailing at the time cannot be treated as "erroneous refunds" for recovery merely because subsequent judicial developments altered the legal position. In view of CBEC Circular No.1065/4/2018 CX and the Tribunal's precedent in RNB Carbides & Ferro Alloys Pvt. Ltd., the invocation of Rule 5 by the Revenue was misplaced and the refund granted to the appellant was not an erroneous refund recoverable under Section 11A. [Paras 6, 8, 9]

The impugned demand and penalty were set aside; the appellant's assessment and refund were held to be correct and not an "erroneous refund".

Final Conclusion: Appeal allowed: refund upheld and demand/penalty set aside, the revenue's claim of erroneous refund rejected in view of FOR destination character of sales, applicable Valuation Rules and CBEC Circular clarifying exceptions.

Conditional exemption - investment linked exemption scheme - proviso to Notification No. 52/2002 CE (bar where final product is "exempted") - captively used intermediate goods exemption - merger of identity of intermediate with final product - time bar / limitation and extended period

Conditional exemption - proviso to Notification No. 52/2002 CE (bar where final product is "exempted") - captively used intermediate goods exemption - investment linked exemption scheme - merger of identity of intermediate with final product - Whether Notification No. 8/2004 CE is a conditional exemption and, if so, whether the proviso to Notification No. 52/2002 CE operates to deny exemption to the intermediate product 'Compound' captively used in manufacture of chewing tobacco - HELD THAT: - The Tribunal held that Notification No. 8/2004 CE is not an absolute waiver of excise duties but an investment linked, conditional exemption requiring deposit and investment of an amount equal to duties (and satisfaction by a Committee) and that failure to comply renders duties recoverable. Therefore the finished product (chewing tobacco) was not "wholly exempted" for the purpose of the proviso to Notification No. 52/2002 CE. Given that the exemption under 8/2004 CE is conditional and that the intermediate 'Compound' was manufactured and consumed captively (its identity merging with the final product), the bar in the proviso to Notification No. 52/2002 CE does not apply to deny exemption to the captively used intermediate. The Tribunal relied on (a) the text and scheme of Notification No. 8/2004 CE, (b) prior Tribunal and High Court reasoning that "exempted goods" must mean exemption from the whole of duty, and (c) the practical result that the duty payable on the captively consumed intermediate, "but for the exemption", would be nil when calculated on the proper basis. Applying these principles, the adjudicating authority erred in treating the 8/2004 exemption as absolute and in denying Notification No. 52/2002 CE to the intermediate product. [Paras 11]

Notification No. 8/2004 CE is a conditional, investment linked exemption; consequently the proviso to Notification No. 52/2002 CE does not attract so as to deny exemption to the captively used intermediate 'Compound'.

Time bar / limitation and extended period - knowledge of department and audit history - Whether the duty demands on the intermediate product are barred by limitation / extended period of limitation - HELD THAT: - The Tribunal found that the appellants had declared the manufacturing process and the existence of the intermediate 'Compound' to the department; records were maintained and audits for relevant years had occurred without objection. In these circumstances suppression with intent to evade could not be held out and the extended period could not be invoked. Relying on earlier Tribunal decisions to the same effect, the adjudicating authority's invoking of extended limitation was held unsustainable. As the substantive demands were barred by limitation, the consequential claims for interest and penalty also fell away. [Paras 12]

Demands are barred by limitation / extended period cannot be invoked; consequently interest and penalty are not sustainable.

Final Conclusion: Impugned adjudication confirming duty, interest and penalty was set aside; all three appeals allowed with consequential relief.

Input in terms of Rule 2(k) of the Cenvat Credit Rules, 2004 - consumable - capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004 - Cenvat credit

Input in terms of Rule 2(k) of the Cenvat Credit Rules, 2004 - consumable - capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004 - Cenvat credit - Electrode Carbon Paste used in the manufacture of ferro alloys is an input/consumable eligible for Cenvat credit and not a capital good requiring restricted credit. - HELD THAT: - The Tribunal applied earlier decisions, including its own order in the appellant's subsequent period, and authoritative precedents holding that materials which are actually used and consumed in the manufacturing process and which become part of the finished goods qualify as inputs. The Tribunal noted that Electrode Carbon Paste is essential to the induction furnace process, is consumed during manufacture, and is contained in the finished ferro alloys; consequently it is a consumable and falls within the definition of input under Rule 2(k). The decision relied on prior findings distinguishing cases on different facts and rejecting the revenue's contention that the paste should be treated as capital goods under Rule 2(a) requiring phased credit. Applying those ratios to the facts, the Tribunal found no infirmity in availing Cenvat credit on the product and held that the demand (and interest) could not be sustained. [Paras 7, 8]

The appellant was correctly allowed Cenvat credit on Electrode Carbon Paste as an input; the impugned order is set aside and the appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed; the impugned order directing reversal of Cenvat credit on Electrode Carbon Paste is set aside and Cenvat credit upheld for the period December 2005-06 to 2009-10, with consequential relief, if any.

Penalty under Rule 209A of the Central Excise Rules, 1944 - Imposability of penalty on corporate body/firm under Rule 209A - Voluntary payment of differential duty and interest prior to issuance of show-cause notice - Absence of evidence of abetment of excise duty evasion

Penalty under Rule 209A of the Central Excise Rules, 1944 - Imposability of penalty on corporate body/firm under Rule 209A - Voluntary payment of differential duty and interest prior to issuance of show-cause notice - Absence of evidence of abetment of excise duty evasion - Whether the penalty imposed on the appellant under Rule 209A of the Central Excise Rules, 1944 is sustainable where the appellant (a corporate body) inadvertently short-paid duty and subsequently paid the differential duty with interest before issuance of the show-cause notice and where there is no evidence of abetment. - HELD THAT: - The Tribunal found that the appellant inadvertently under-declared the capacity of an induction furnace and rectified the mistake by paying the differential duty along with interest before issuance of the show-cause notice and informing the Range Superintendent. Rule 209A penalises a person who deals with excisable goods which he knows or has reason to believe are liable to confiscation; Tribunal noted precedent that the rule (erstwhile Rule 26) permits imposition of penalty on a person and not on a firm or corporate entity, and relied on prior decisions including Woodmen Industries and Aditya Steel Industries to the effect that penalty under Rule 209A/Rule 26 is not imposable on a partnership or firm and ordinarily attaches to the individual(s) concerned. The adjudicating authority had not placed on record evidence to substantiate an allegation that the appellant abetted the evasion; given the voluntary regularisation before initiation of proceedings and absence of proof of culpable abetment, the imposition of penalty under Rule 209A was held unsustainable and was set aside. [Paras 11]

Penalty imposed under Rule 209A of the Central Excise Rules, 1944 on the appellant is not sustainable and is set aside.

Final Conclusion: The appeal is allowed: the penalty imposed under Rule 209A is quashed in view of voluntary payment of differential duty with interest prior to issue of show-cause notice, absence of evidence of abetment, and the principle that Rule 209A is not imposable on the corporate body in the facts of this case.

Limitation of show cause notice - proceedings cannot travel beyond grounds stated - scope of deduction under Rule 58(1) of the MVAT Rules - proviso to Rule 58(1) - applicability of table rates only where accounts are not maintained or are not clear or intelligible - jurisdiction to review under Section 25 of the MVAT Act - entertainment of writ where action is wholly without jurisdiction or contrary to principles of natural justice

Limitation of show cause notice - proceedings cannot travel beyond grounds stated - scope of deduction under Rule 58(1) of the MVAT Rules - Whether the review order disallowing all deductions under Rule 58(1)(a) to (h) was beyond the scope of the show cause notice which only challenged the deduction under Rule 58(1)(h). - HELD THAT: - The show cause notice dated 22nd October 2018 (and the subsequent notice of 23rd November 2020) specifically challenged the deduction claimed as profit on supply of labour and services corresponding to Rule 58(1)(h) and identified the figure sought to be disallowed. A complete reading of the notices shows they did not put the petitioner on notice that all items under Rule 58(1)(a) to (h) would be disallowed. The revisional order of 8th March 2021, however, rejected deductions under all clauses (a) to (h) amounting to a much larger sum. Applying settled precedent, an adjudicatory order cannot validly impose liability on grounds which were not the subject of the show cause notice; travel beyond the notice renders the order bad in law. The court therefore held that the review order was passed beyond the show cause notice and is legally infirm. [Paras 10, 11]

The review order disallowing all deductions under Rule 58(1)(a)-(h) was beyond the scope of the show cause notice and is bad in law.

Proviso to Rule 58(1) - applicability of table rates only where accounts are not maintained or are not clear or intelligible - jurisdiction to review under Section 25 of the MVAT Act - Whether the Commissioner could apply the Table rates (20% for laying of pipes) in lieu of actual deductions without recording satisfaction of the proviso pre-condition that accounts were not maintained or were not sufficiently clear or intelligible. - HELD THAT: - Rule 58(1) permits application of the Table rates only where the contractor has not maintained accounts enabling proper evaluation of the specified deductions or where the Commissioner finds the accounts not sufficiently clear or intelligible. Neither the show cause notices nor the review order record or confront the petitioner with any finding that these pre-conditions were satisfied. Moreover, the earlier assessment order of 11th December 2015 and the audit under Section 22 recorded verification and acceptance of the petitioner's books for arriving at deductions on actual basis. Absent invocation of the proviso in the show cause and without satisfaction of its condition, application of the Table rates in the review order was without jurisdiction. Consequently the application of the 20% rate in the review order was unjustified. [Paras 12, 13, 14]

The application of the Table rates under the proviso to Rule 58(1) without satisfying the statutory pre-condition and without appropriate notice was without jurisdiction and invalid.

Entertainment of writ where action is wholly without jurisdiction or contrary to principles of natural justice - jurisdiction to review under Section 25 of the MVAT Act - Whether the writ petition under Article 226 was maintainable despite the existence of an alternative statutory appeal remedy. - HELD THAT: - The court examined whether it should decline jurisdiction because of an alternative remedy. Where an authority's action is wholly without jurisdiction or in patent breach of principles of natural justice, superior courts may entertain writ petitions notwithstanding statutory appeals. Given the findings that the review order travelled beyond the show cause notice, proceeded on a misconceived premise as to the nature of works contract, and applied the proviso to Rule 58(1) without satisfying its pre-conditions, the impugned orders were held to be in patent breach of jurisdiction and natural justice. In those circumstances the writ was properly entertained. [Paras 16, 17]

The writ petition was maintainable despite availability of an alternate remedy because the impugned orders were without jurisdiction and violated principles of natural justice.

Final Conclusion: For the reasons stated, the impugned review order dated 8th March 2021 and the rectification rejection dated 6th July 2021 were quashed as being passed beyond the show cause notice and without satisfying the statutory pre-conditions for applying the Table rates under Rule 58(1); the petition is allowed and the orders set aside.

Pre-deposit requirement under Section 62(5) of the Punjab VAT Act, 2005 - Adjustment of earlier deposit towards statutory pre-deposit - Right to have appeal adjudicated on merits after compliance with pre-deposit - Judicial direction for expeditious disposal where proceedings are protracted

Pre-deposit requirement under Section 62(5) of the Punjab VAT Act, 2005 - Adjustment of earlier deposit towards statutory pre-deposit - Right to have appeal adjudicated on merits after compliance with pre-deposit - Judicial direction for expeditious disposal where proceedings are protracted - Whether the Appellate Authority was justified in dismissing the appeal for non-compliance of the statutory pre-deposit when the petitioner had already deposited part of the required amount, was ready to deposit the balance, and the proceedings had been pending for several years. - HELD THAT: - Petitioner had deposited an amount equivalent to 15% of the tax due as an earlier pre-deposit and remained willing to deposit the balance required to make up 25% of the tax due under the statutory pre-deposit regime. The tax liability itself was not shown to have increased materially; only penalty and interest had been varied by later orders. Given the prolonged pendency of proceedings relating to the 2010-2011 assessment year since 2016 and the petitioner's readiness to comply by paying the remaining pre-deposit, the impugned dismissal for non-compliance was set aside. The court directed the Appellate Authority to accept the 25% pre-deposit after adjusting the sum already deposited by the petitioner and to decide the appeal on merits within a specified short period, thereby balancing the statutory requirement of pre-deposit with the need to prevent undue delay in adjudication. [Paras 5, 6]

Impugned order dismissing the appeal was set aside; Appellate Authority directed to accept 25% of the tax due after adjusting the earlier deposit and to decide the appeal on merits expeditiously within two months.

Final Conclusion: Petitioner's challenge to the dismissal of its appeal for alleged non-compliance with the statutory pre-deposit was allowed; the Court ordered acceptance of the required pre-deposit after adjustment of the amount already deposited and directed the Appellate Authority to decide the appeal on merits within two months.

Inter-state sale - Stock transfer - Section 6A of the Central Sales Tax Act - Reassessment under Section 27 - Jurisdictional error - Form F - Burden of proof - Assessment by sampling - Reopening/revision on discovery of new facts or contrary to law

Reassessment under Section 27 - Section 6A of the Central Sales Tax Act - Jurisdictional error - Form F - Reopening/revision on discovery of new facts or contrary to law - Validity of reopening the assessment for Assessment Year 2017-2019 under Section 27/CST Act in the absence of jurisdictional facts or fraud, and the applicability of Section 6A/Form F jurisprudence - HELD THAT: - The Court examined the scope of Section 6A and the law laid down by the Supreme Court in Ashok Leyland decisions, noting the subsequent statutory amendments which permit reassessment or revision on discovery of new facts or where findings are contrary to law. The assessing authority's notice proceeded on assumptions and conjectures regarding pre-confirmed orders and financing arrangements and did not identify jurisdictional facts or fraud that would render the earlier order void ab initio. The notice itself sought documentary evidence (purchase orders/stock transfer notes) from the petitioner, indicating absence of material at the time of issuance. In the absence of jurisdictional error or vitiating factors such as fraud, collusion or suppression of material facts, the power to reopen under Section 27/CST Act could not be validly exercised. The Court held that mere change of opinion or reliance on assumptions does not justify reopening; reassessment is permissible only where statutory grounds (discovery of new facts or findings contrary to law) or jurisdictional invalidity are established. [Paras 15, 16, 18, 21, 27]

Impugned reopening/revision and related orders for Assessment Year 2017-2019 quashed for lack of jurisdictional basis to reopen; reassessment could not be sustained in absence of jurisdictional error or vitiating conduct.

Stock transfer - Inter-state sale - Burden of proof - Assessment by sampling - Whether the assessing authority could determine that stock transfers were inter-state sales by relying on a sample transaction and presumption drawn from that sample - HELD THAT: - The Court applied settled tests for inter-state sale: (a) movement of goods from one State to another occasions the sale, or (b) transfer of documents of title during movement. It reiterated that if movement arises from a covenant or incident of the contract of sale, it is an inter-state sale. However, the assessing authority cannot base findings for multiple transactions on a single sample; each transaction must be examined individually. The petitioner demonstrated that ten vehicles were used by employees and later transferred on written down value, undermining the presumption that all stock transfers were interstate sales. Thus, reliance on one sample to tax the remainder was impermissible. [Paras 8, 22, 23, 24, 25]

Assessment based on sampling and extrapolation from a single transaction set aside; each stock transfer must be individually examined before concluding an inter-state sale.

Procedural fairness - Reassessment under Section 27 - Procedural requirement that the assessing authority should first call for details and examine replies before issuing a notice to reopen assessment - HELD THAT: - The Court observed that before proceeding to reopen an assessment, the assessing authority should first request the taxpayer to furnish details and only if the response is unsatisfactory issue a notice under the statutory provision. In the present case the sequence was inadequate: the notice assumed facts and called for non-existent purchase orders, rather than proceeding only after a considered examination of the petitioner's submissions. [Paras 16, 18, 19, 26]

Reopening was procedurally infirm for failure to follow the requirement of calling for and examining details before invoking reassessment; impugned action quashed.

Final Conclusion: Writ petitions allowed; impugned notices and orders reopening assessment for Assessment Year 2017-2019 quashed for want of jurisdictional basis and procedural infirmity, and for impermissible reliance on sampling; liberty to the revenue to proceed only in accordance with law (including reassessment upon establishment of statutory grounds) is preserved.