TaxTMI Updates e-Newsletter
Aug 10,2020

Anti profiteering under Section 171 of the CGST Act - interim relief - stay of interest, penalty and further investigation - deposit with Central and State Consumer Welfare Boards - investigation into other impacted products

Anti profiteering under Section 171 of the CGST Act - interim relief - deposit with Central and State Consumer Welfare Boards - stay of interest, penalty and further investigation - Interim directions in relation to the Authority's orders including deposit of the profiteered amount and stay of related monetary consequences and further investigation. - HELD THAT: - The High Court, while entertaining the petition challenging the Authority's interim order and final order, directed the petitioner to deposit the profiteered amount of Rs. 4,07,451/- with the Central and State Consumer Welfare Boards within two months. Simultaneously, the court stayed the operation of the Authority's directions insofar as interest, penalty, and further investigation into other impacted products are concerned, and stayed the DGAP letters dated 02nd July, 2020 and 23rd July, 2020, until further orders. These measures were granted as interim relief while awaiting counter affidavits and further adjudication of the petitioner's challenge to the impugned orders.

Petitioner ordered to deposit the profiteered sum with Consumer Welfare Boards within two months; interest, penalty, further investigation and the specified DGAP letters stayed until further orders.

Notice and time for filing counter affidavits - issue of notice to non served respondent - Procedural directions regarding service, filing of counter affidavits and rejoinder. - HELD THAT: - The court issued notice and permitted respondents to file counter affidavits within four weeks, allowed the petitioner to file a rejoinder before the next date, and directed that notice be issued to respondent No. 4 by all modes including e mail returnable on the next listed date. The matter was listed for further hearing on 28th September, 2020. These directions organize the procedural timeline for adjudication of the substantive challenge.

Notice issued; counter affidavits permitted within four weeks; rejoinder timeline fixed; notice directed to respondent No. 4; matter listed for further hearing.

Final Conclusion: Interim relief granted: the profiteered amount to be deposited with Central and State Consumer Welfare Boards within two months; interest, penalty, further investigation into other products and specified DGAP letters stayed pending further orders; procedural directions issued for filing of responses and service, matter listed for further hearing.

Cancellation of registration - service of notice by electronic communication or common portal - revocation of cancellation of registration - extension of period for filing application for revocation (removal of difficulties) - condonation of delay in filing appeal - liberty to approach the Appellate Authority

Extension of period for filing application for revocation (removal of difficulties) - revocation of cancellation of registration - liberty to approach the Appellate Authority - Permission to withdraw the writ petition and grant of liberty to approach the Appellate Authority within the cut-off period prescribed by the Central Goods and Services Tax (Removal of Difficulties) Order, 2020 - HELD THAT: - The Court noted the Central Board of Indirect Taxes and Customs Order No. 01/2020 (Central Goods and Services Tax (Removal of Difficulties) Order, 2020) which clarifies that, for cancellations passed up to 12th June 2020 where notices were served electronically or on the common portal, the later of the date of service or 31st August 2020 shall be treated as the relevant date for calculating the thirty-day period to apply for revocation. The petitioner filed a memo seeking permission to withdraw the writ petition in view of the CBIC Order and the consequential State G.O. The Court permitted withdrawal of the writ petition and, in recognition of the statutory clarification and consequential relief, granted the petitioner liberty to approach the Appellate Authority by the cut-off date provided in the Notification to seek restoration of registration. [Paras 4, 5]

Writ petition permitted to be withdrawn and dismissed as withdrawn; petitioner granted liberty to approach the Appellate Authority within the cut-off date specified in the Notification.

Final Conclusion: The writ petition is dismissed as withdrawn with liberty to the petitioner to seek revocation of cancellation or restoration of registration before the Appellate Authority within the cut-off date prescribed by the Central Goods and Services Tax (Removal of Difficulties) Order, 2020; connected petitions closed, no costs.

Appeal effect orders - determination of consequential refunds - statutory interest on delayed refunds - time limit under Section 153(5) of the Income Tax Act - verification of tax credits / challans for old assessment years

Appeal effect orders - determination of consequential refunds - statutory interest on delayed refunds - time limit under Section 153(5) of the Income Tax Act - verification of tax credits / challans for old assessment years - Direction to respondent to pass appeal effect orders and determine consequential refunds with applicable statutory interest for Assessment Years 1997-98 to 2007-08 within three months. - HELD THAT: - The Court recorded that the Income Tax Appellate Tribunal had passed orders in favour of the petitioner for the relevant assessment years and that those orders were received by the tax authorities on dates which, according to the petitioner, caused the statutory period prescribed under Section 153(5) of the Income Tax Act to lapse. The respondent explained delays on account of offline processing of very old assessment years, non-availability of complete online records, need to verify challans and other payment records, manpower constraints aggravated by the COVID-19 pandemic, and concerns about recovery in the event higher courts reversed the orders. The Department had initiated processing, and refund for AY 2004-05 had been processed; the petitioner assured co-operation in providing documents. Balancing these facts, the Court found that verification steps and departmental concerns did not justify indefinite delay and directed the respondent to complete appeal-effect orders and determine refunds with applicable statutory interest, while permitting the Department to carry out necessary verification and collection procedures, within a fixed three-month period from the date of the order. [Paras 4, 5, 6, 7, 8]

Respondent directed to pass appeal effect orders and determine consequential refunds for AYs 1997-98 to 2007-08, with applicable statutory interest, within three months from the date of the order.

Final Conclusion: Writ petition disposed of with directions that the Income Tax Department shall, after carrying out necessary verification and subject to receipt of requisite documents, pass appeal-effect orders and determine the consequential refunds along with statutory interest for Assessment Years 1997-98 to 2007-08 within three months.

Jurisdiction to reopen assessment - notice under Section 148 of the Income Tax Act, 1961 - service of notice on deceased assessee - substitution/service through legal representative under Section 159 - exercise of writ jurisdiction where alternative statutory remedies / appeals are pending - direction to expedite disposal of pending appeals

Exercise of writ jurisdiction where alternative statutory remedies / appeals are pending - direction to expedite disposal of pending appeals - Maintainability of the writ petition challenging reopening notices and consequential assessment orders when appeals against those assessment orders are pending before statutory appellate authorities. - HELD THAT: - The Court declined to entertain the writ petition which challenged notices issued under Section 148 and consequent assessment orders, observing that the petitioner had filed appeals against the impugned assessment orders which are pending adjudication before the Commissioner (Appeals) and the Income Tax Appellate Tribunal. In these circumstances the High Court considered it inappropriate to exercise writ jurisdiction to decide the substantive controversy and dismissed the petition, while expressly leaving the merits open. As a protective measure of interlocutory relief, the Court directed the appellate fora to expedite disposal of the pending appeals. The Court did not adjudicate the legal question regarding validity of service on a deceased person or the applicability of substitution through the legal representative and therefore recorded no opinion on those merits. [Paras 7]

Writ petition dismissed for want of appropriateness as statutory appeals are pending; appellate authorities directed to expedite disposal; no opinion expressed on merits.

Final Conclusion: The High Court dismissed the writ petition challenging notices under Section 148 and the consequential assessment orders because appeals against those orders are pending before the statutory appellate authorities, directed expedited disposal of those appeals, and refrained from expressing any view on the substantive merits.

Classification of rental/lease income as income from business and not income from house property - eligibility for deduction under section 80IA(4) on income taxed as income from business - treatment of interest and other non-operational receipts as income from other sources

Classification of rental/lease income as income from business and not income from house property - Whether income derived from letting out property for running a technological/IT park is to be assessed as income from business and not as income from house property. - HELD THAT: - The Court held that the Tribunal and the lower authorities were correct in treating lease/rental income from the industrial/IT park, provided with all amenities and facilities, as assessable under the head "income from business" rather than as "income from house property." The Tribunal had followed the Madras High Court decision in CIT v. Elnet Technologies Ltd. and a coordinate Tribunal decision (Ticel Bio Park Ltd.), and this Court observed that the issue is covered by its earlier decisions (including Khivraj Motors Pvt. Ltd. and PSTS Heavy Lift and Shift Ltd./CeeDeeYes IT Parks Pvt. Ltd.) which recognised that where the development and letting of specialised software/IT parks with attendant facilities constitutes the assessee's business activity, the receipts are business income. The Court noted absence of material to show that the properties were idle assets yielding merely passive rental income; instead the activity amounted to a business of developing and leasing specialised premises for software/IT companies. Applying those precedents, the classification as business income was upheld. [Paras 4, 5]

Lease and rental receipts from the IT/industrial park are assessable as income from business and not as income from house property.

Eligibility for deduction under section 80IA(4) on income taxed as income from business - treatment of interest and other non-operational receipts as income from other sources - Whether the assessee is entitled to claim deduction under section 80IA(4) on rental, lease rent and allied receipts of the industrial/IT park, and how interest and other non-operational receipts should be treated. - HELD THAT: - Relying on the Tribunal's reasoning and earlier decisions of this Court, the Court held that amounts constituting rental, operation and maintenance income, account charges, electricity charges, revenue sharing income and income from common facilities (e.g., auditorium rent) are part of business income and hence eligible for deduction under section 80IA(4) when so assessed. The Tribunal had, however, distinguished and segregated purely interest receipts and other unrelated receipts, directing that those be treated under the head "income from other sources." The High Court found this approach consistent with precedent and applicable facts of the case, and therefore approved the direction to the assessing officer to treat interest and other income as income from other sources while allowing section 80IA deductions on the remaining business receipts. [Paras 4, 5]

Deduction under section 80IA(4) is allowable on the incomes treated as business receipts (rent, O&M, service charges, etc.); interest and other unrelated receipts are to be assessed under income from other sources.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's classification of the assessee's IT-park receipts as business income (with corresponding entitlement to section 80IA(4) deduction) and the segregation of interest/other receipts as income from other sources is upheld, following earlier decisions of this Court. No costs.

Re-assessment under Section 148 - Duty to file return in response to notice under Section 148 - Principles of re-assessment, objections and furnishing of reasons (GKN Driveshafts) - Misquotation of PAN and procedural prejudice - Right to statutory appeal and interim protection from recovery

Re-assessment under Section 148 - Duty to file return in response to notice under Section 148 - Misquotation of PAN and procedural prejudice - Principles of re-assessment, objections and furnishing of reasons (GKN Driveshafts) - Whether the petitioner's challenge to the reassessment order for A.Y. 2012-13 succeeds on grounds of misquoted PAN, computation errors, and alleged violation of natural justice. - HELD THAT: - The Court considered the notice dated 29.03.2019 and the reassessment order dated 30.12.2019 and noted that the petitioner did not file a return in response to the Section 148 notice nor assert at that stage that an earlier return should be treated as compliance. Reliance was placed on the procedure stated in GKN Driveshafts that a noticee must file a return and may seek reasons for issuance of the notice, after which objections are to be disposed of by a speaking order. The petitioner's present contention that an incorrect PAN in the notice prevented e-filing was not advanced before the Assessing Officer or shown in the record and was treated as an afterthought. The Court observed that multiple PANs existed in the material and that factual determinations and multiplicity of PANs are matters for the tax authorities to resolve rather than for the Court in writ jurisdiction. In these circumstances the Court declined to interfere with the assessment on merits and procedural grounds, while noting that the petitioner remained free to raise all grounds before the appellate authority. [Paras 2, 3, 6, 8, 9]

The challenge to the reassessment order is declined; the petitioner is relegated to the statutory appeal process and the Court will not adjudicate the factual disputes regarding PAN multiplicity or interest computation in writ jurisdiction.

Right to statutory appeal and interim protection from recovery - Whether the petitioner should be granted permission to file the statutory appeal manually and whether recovery should be stayed pending disposal of the appeal. - HELD THAT: - Noting the petitioner's apprehension about technical glitches in e-filing, the Court exercised its discretion to permit manual filing of the appeal before the Commissioner of Income Tax (Appeals) within four weeks from the date of the order. The Court further directed that no recovery of the disputed demand shall be effected until the disposal of the appeal by the first appellate authority, thereby providing interim protection to the petitioner while preserving the appellate remedy. [Paras 10, 11]

Petitioner permitted to file the appeal manually within four weeks; recovery of the disputed demand stayed until disposal of the appeal by the Commissioner of Income Tax (Appeals).

Final Conclusion: Writ petition dismissed insofar as it seeks quashing of the reassessment order for A.Y. 2012-13; petitioner relegated to statutory appeal (permitted to be filed manually within four weeks) and granted interim protection from recovery until the appeal is decided.

Bogus accommodation entries - genuineness of transactions - disallowance of short-term capital loss - burden of proof under Section 68 of the Act - corroborative evidence and surrounding circumstances - opportunity for cross-examination and principle of natural justice - concurrent findings of fact and absence of substantial question of law

Bogus accommodation entries - genuineness of transactions - disallowance of short-term capital loss - corroborative evidence and surrounding circumstances - Whether the short-term capital loss claimed by the assessee arising from sale of shares of three listed companies was correctly disallowed as resulting from bogus transactions. - HELD THAT: - The Tribunal upheld the disallowance on the basis that the Assessing Officer's conclusion-that the transactions formed part of an accommodation entry operation-rested on independent analysis of documents, financial parameters of the scrips, market behaviour, low trading volumes, lack of business substance in the companies, and investigative material which corroborated statements of persons controlling the conduit operations. Although the ITAT observed that Section 68 was not attracted, it sustained the addition on the alternative finding that the claimed STCL was not genuine and was a pre-arranged device to convert unaccounted cash into accounted losses. The High Court found these concurrent findings of fact recorded by the revenue authorities to be supported by material on record (including the Investigation Wing's report and precedents regarding penny stocks used for bogus capital gains/losses) and therefore concluded that no substantial question of law arises warranting interference with the factual conclusion that the loss was bogus. [Paras 4, 5, 7]

Addition disallowing the short-term capital loss as arising from bogus transactions is upheld; concurrent factual findings are not interfered with.

Opportunity for cross-examination and principle of natural justice - burden of proof under Section 68 of the Act - corroborative evidence and surrounding circumstances - Whether failure to grant the assessee opportunity to cross-examine persons whose statements were relied upon vitiated the assessment. - HELD THAT: - The Tribunal and the CIT(A) held that the addition was not founded solely on the statements of third parties; those statements were used as corroborative material alongside independent documentary analysis and investigative findings. The authorities relied on the principle that formal cross-examination is not an indispensable facet of natural justice where the adverse material is collateral and the assessing authority has independent material on record. The High Court agreed that non-grant of formal cross-examination in these circumstances amounted, at most, to a curable irregularity and did not nullify the assessment because the AO's conclusion was based on a broader body of evidence and surrounding circumstances. [Paras 4]

Denial of formal cross-examination did not vitiate the assessment where the impugned additions were supported by independent and corroborative material; no interference is warranted.

Final Conclusion: The appeal is dismissed; concurrent factual findings upholding the disallowance of the claimed short-term capital loss as arising from bogus accommodation-entry transactions are sustained and no substantial question of law is made out for interference.

Condonation of delay - assessment of unexplained receipts - burden of proof for genuineness of loan - effect of earlier tribunal directions on remand

Condonation of delay - Whether the delay of 589 days in filing the appeal should be condoned. - HELD THAT: - The assessee produced an affidavit and a medical certificate establishing that he suffered from carcinoma with recurrence and metastases, underwent palliative chemotherapy, and was on continuous treatment since 2017; further difficulties were occasioned by the lockdown. The Tribunal found these circumstances to constitute sufficient cause and that the delay was not attributable to wilful negligence. Having accepted the medical evidence and reasons given, the Tribunal exercised its discretion to condone the entire delay of 589 days and admitted the appeal for adjudication on merits. [Paras 2]

Delay of 589 days condoned and appeal admitted.

Assessment of unexplained receipts - burden of proof for genuineness of loan - effect of earlier tribunal directions on remand - Whether the addition of the disputed sum to the assessee's income should be sustained in absence of proof that the amount was a loan from the son in law and in view of the earlier ITAT direction on remand. - HELD THAT: - On the earlier remand the ITAT had directed that the assessee be given an opportunity to prove receipt of Rs. 5.75 lakhs from his son in law and expressly stated that the addition would stand sustained if the documents relating to the criminal proceedings did not contain anything corroborating that claim. The assessee failed to produce the criminal complaint or any concrete documentary evidence demonstrating that the sum was advanced by the son in law in the year 2001. The Assessing Officer and the CIT(A) examined the documents placed on record and found no material to establish the loan; the Tribunal noted that mere repayment or internal adjustments between family members cannot substitute for independent evidence of a bona fide loan. As the ITAT's direction on remand had attained finality and its condition for sustaining the addition was met (absence of supporting material in the criminal documents), the Tribunal sustained the addition. [Paras 9, 10]

Addition sustained; appeal on merits dismissed.

Final Conclusion: The Tribunal condoned the delay and after adjudication on merits dismissed the appeal by sustaining the addition, the assessee having failed to discharge the burden to prove that the impugned receipt was a loan from his son in law as required by the earlier ITAT remand directions.

Allowability of interest expenditure - netting off interest income against interest expenses - capitalization of net interest as part of cost of assets - treatment of rental receipts as business income - deduction under section 57(iii) for interest incurred to earn income from other sources - disallowance under section 14A - commencement of business and consequences for expenditure deduction

Allowability of interest expenditure - netting off interest income against interest expenses - treatment of rental receipts as business income - Deletion of addition of interest income by allowing set-off of interest expenses and treating the net interest as capitalized against assets - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had commenced its business (company incorporated in 2007; certificate of commencement of business issued; real estate project development shown in earlier balance sheets; rental income accepted as business income in revised computation and by the CIT(A)), and therefore interest expenditure incurred was for the purpose of business. The authorities below and the Tribunal found that borrowed interest bearing funds were utilized to earn interest by advancing amounts to others and that there was nexus between interest paid and interest received. Applying the principle that interest can be netted against interest income (and the net amount capitalized where funds are used in acquiring or creating assets), the Tribunal held that the AO erred in making the addition and directed deletion of the addition. The Tribunal also relied on precedents treating interest earned during construction or pre production as deductible/reducible from cost where a direct nexus exists between borrowings and advances/investments. The Tribunal therefore confirmed the CIT(A)'s deletion of the addition and accepted capitalization of the net interest in fixed assets. [Paras 2]

Addition of Rs. 2,35,68,701/- on account of interest income deleted; net interest allowed to be set off/ capitalized as held by CIT(A).

Deduction under section 57(iii) for interest incurred to earn income from other sources - netting off interest income against interest expenses - Applicability of deduction under section 57(iii) (i.e., allowance of interest expenditure) where interest income is taxed under the head 'Income from Other Sources' - HELD THAT: - The Tribunal agreed with the CIT(A) that even if the interest receipts were treated as income from other sources, the interest paid on borrowed funds used to earn that interest is allowable as a deduction under section 57(iii). The Tribunal observed that the deduction follows when there is a direct nexus between the borrowed funds and the amounts advanced which generated interest, and therefore the interest expenditure ought to be allowed against interest income when computing income under the head 'Income from Other Sources'. The reasoning draws support from decisions cited by the authorities which permit netting off of interest paid and interest received where such direct nexus is established. [Paras 2]

Even if taxed as income from other sources, the interest paid that funded the interest earning advances is allowable under section 57(iii) against the interest income.

Disallowance under section 14A - Validity of disallowance under section 14A as confirmed by the CIT(A) - HELD THAT: - The Tribunal recorded that the disallowance under section 14A was confirmed by the CIT(A). The assessee did not challenge the confirmation of the section 14A disallowance before the Tribunal. The Tribunal therefore left the CIT(A)'s confirmation undisturbed and proceeded only to decide the interest expenditure issue raised by the Revenue. [Paras 2]

The confirmation of the section 14A disallowance by the CIT(A) is maintained (not agitated before the Tribunal).

Final Conclusion: The Revenue's appeal is dismissed; the addition made by the AO on account of interest income is deleted (net interest allowed to be set off/capitalized), while the CIT(A)'s confirmation of the section 14A disallowance stands unchallenged before the Tribunal.

Deeming provisions of Section 50C - Fair market value as per DLC - Stamp duty enhancement by state circular does not alter fair market value for income-tax purposes - Obligation to refer valuation to DVO - Agricultural land and capital asset status under section 2(14)(iii)

Deeming provisions of Section 50C - Fair market value as per DLC - Stamp duty enhancement by state circular does not alter fair market value for income-tax purposes - Obligation to refer valuation to DVO - Whether the Assessing Officer was justified in substituting the sale consideration by applying a 1.5 multiplier (as adopted by the stamp duty authority for sales to companies) for the purpose of charging capital gains under Section 50C. - HELD THAT: - The Tribunal found on the record that the land was agricultural and that the sale consideration declared in the registered deed (Rs. 4,92,00,000) exceeded the DLC-based fair market value (Rs. 3,66,36,487). The State Government circular applying a 1.5 multiplication for stamp-duty assessment when the purchaser is a company was held to be a mechanism to levy higher stamp duty and not a substitute for fair market value under Section 50C. Section 50C is a deeming provision which substitutes the sale consideration with the DLC (circle) rate only where the declared consideration is lower than the DLC; it does not authorize using a stamp-duty enhancement formula as the income-tax fair market value. The Tribunal observed that where the Assessing Officer is not satisfied with the explanation of consideration he ought to refer the matter to the DVO for valuation, but in any event the AO could not validly replace the declared consideration by a 1.5 times figure derived from the stamp-duty circular. Applying these principles to the facts, since the declared sale consideration exceeded the DLC rate, there was no justification for making any addition under Section 50C by reference to the enhanced stamp-duty valuation. [Paras 2]

Addition made under Section 50C by substituting the sale consideration with a 1.5 times stamp-duty valuation is not justified; appeal allowed and addition deleted.

Final Conclusion: The Tribunal allowed the appeal for A.Y. 2015-2016, holding that Section 50C could not be invoked to substitute the declared sale consideration where that consideration exceeded the DLC rate and that the stamp-duty circular increasing valuation for levy of duty on sales to companies does not alter the fair market value for income-tax purposes.

Mistake apparent from the record - rectification under section 254(2) of the Income-tax Act - no power of the Tribunal to review its own order - profit element embedded in bogus purchases - determination of profit rate as yardstick for addition

Rectification under section 254(2) of the Income-tax Act - mistake apparent from the record - no power of the Tribunal to review its own order - Whether the Tribunal's order dated 14.12.2018 contains a mistake apparent from the record warranting rectification under section 254(2) of the Act by adjudicating an alleged omission in respect of ground No. 4 of the memorandum of appeal. - HELD THAT: - The Tribunal examined whether it had failed to consider ground No. 4 (which sought reduction of the addition by gross profit already shown and assessed) and reviewed the impugned order and the record. The Tribunal's order indicates that the bogus-purchases issue was taken up and the assessee's contentions, including gross and net profit rates and reconciliation arguments, were recorded and considered (see para 13 and the discussion at paras 15-19). The Tribunal modified the CIT(A)'s approach by reducing the profit-element addition to 5% after evaluating the factual matrix and legal precedent. A mistake apparent from the record must be a patent, self-evident error not requiring extended argument or re-appraisal of facts or debatable points of law. The applicant did not identify any such obvious error; instead, the application sought reconsideration of the Tribunal's factual and evaluative conclusions. As the power under section 254(2) is limited to rectifying manifest errors and does not confer a general review jurisdiction, the MA could not be used to re-open or review the Tribunal's decision. [Paras 4]

The Tribunal has considered ground No. 4 and there is no mistake apparent from the record; rectification under section 254(2) cannot be invoked to review or re decide the order, and the MA is not maintainable on this ground.

Profit element embedded in bogus purchases - determination of profit rate as yardstick for addition - mistake apparent from the record - Whether the Tribunal's reduction of the addition to 5% of the value of alleged bogus purchases (as the profit element) was erroneous in a manner that could be corrected by rectification so as to direct the Assessing Officer to further reduce that 5% by the gross profit already assessed. - HELD THAT: - The Tribunal recorded the facts that the AO accepted sales, the assessee correlated aggregate purchases with sales, suppliers were identified as hawala dealers and transport and bill to bill reconciliation were not furnished. Applying relevant precedents, the Tribunal found the 12.5% estimate high and, on appraisal of VAT rates, discounts and likely savings/expenses, fixed the profit element at 5% and directed AO to restrict the addition accordingly. The applicant sought an express direction that the 5% be reduced by the gross profit already shown and assessed (1.59% in the appellant's working). The Tribunal held that these contentions and explanations were considered in arriving at its conclusion and that no patent or self-evident error was pointed out which would permit rectification. The applicant's submission amounted to a request for re evaluation of the Tribunal's factual and consequential computations, which cannot be achieved under the limited corrective power in section 254(2). [Paras 15, 16, 17, 18, 19]

The Tribunal's determination of 5% as the profit element and its failure to give the specific consequential direction sought by the assessee do not constitute a mistake apparent on the record; the MA seeking rectification to direct further reduction is not maintainable and is dismissed.

Final Conclusion: The miscellaneous applications for rectification are dismissed. The Tribunal held that it had considered the contention embodied in ground No. 4 and that no patent error apparent on the face of the record existed which would justify correction under section 254(2); the Tribunal's decision reducing the addition to 5% of alleged bogus purchases stands and the MA is rejected for both AY 2011-12 and AY 2012-13.

Disallowance under section 14A read with Rule 8D - Assessing Officer's recording of satisfaction before invoking Rule 8D - Suo-moto disallowance offered by assessee as ceiling for section 14A disallowance - Ad-hoc disallowance of license/royalty fee - Depreciation classification of UPS as integral part of computer for higher rate - Depreciation claim for pollution control equipment and energy saving devices: 'put to use' requirement - Binding precedents in assessee's own case

Disallowance under section 14A read with Rule 8D - Assessing Officer's recording of satisfaction before invoking Rule 8D - Suo-moto disallowance offered by assessee as ceiling for section 14A disallowance - Extent of disallowance under section 14A read with Rule 8D in each assessment year - HELD THAT: - The Tribunal examined whether AO could make a disallowance in excess of the assessee's suo moto disallowance without recording the statutory satisfaction required prior to invoking Rule 8D. The Bench found that the AO's orders for the assessment years under consideration contained no record of the required satisfaction and that the Assessing Officer also did not comment on the computations submitted by the assessee showing a lower disallowance. The finding in the immediately preceding assessment year (2009-10) - where a co ordinate Bench had recorded absence of the required satisfaction and had limited disallowance to the assessee's alternate computation - was held to be squarely applicable on identical facts. In view of the identical observations in the assessment orders and absence of the satisfaction mandated by the authorities relied upon, the Tribunal limited the disallowance in each year to the amount suo motu offered by the assessee. [Paras 6]

Disallowance under section 14A limited to the suo moto amounts offered by the assessee for AYs 2010-11 to 2014-15; departmental grounds on 14A dismissed and assessee's grounds partly allowed.

Ad-hoc disallowance of license/royalty fee - Binding precedents in assessee's own case - Validity of ad-hoc 40% disallowance of general licence (royalty) fee - HELD THAT: - The AO had made an ad-hoc 40% disallowance of general licence fees paid to the foreign parent on the ground that such payments were excessive and not wholly for business purposes. The Tribunal found that the issue was covered in favour of the assessee by a series of binding decisions of the Tribunal and the Hon'ble Delhi High Court in the assessee's own case for earlier assessment years. Relying on those precedents and on the coordinate Bench's decision in AY 2009 10, the Tribunal saw no reason to interfere with the CIT(A)'s deletion of the ad hoc disallowance. [Paras 3, 6]

Department's grounds challenging deletion of the ad-hoc 40% license fee disallowance dismissed for AYs 2010-11 to 2014-15; CIT(A)'s deletion upheld.

Depreciation classification of UPS as integral part of computer for higher rate - Binding precedents in assessee's own case - Appropriate rate of depreciation for UPS (60% vs 15%) - HELD THAT: - The AO treated UPS as part of plant and machinery attractable to 15% depreciation, while the assessee contended UPS is integral to computers and eligible for 60%. The Tribunal noted that the question is settled by earlier decisions of the Hon'ble Delhi High Court and the Tribunal in the assessee's own case holding UPS to be integral to computers and eligible for the higher rate. The Tribunal further observed that the depreciation schedule itself now provides for UPS at 60%, removing any doubt as to rate. [Paras 3, 6]

For AY 2010-11 the Department's ground is dismissed; for AY 2011-12 the assessee's appeal is allowed and depreciation on UPS to be allowed at 60%.

Depreciation claim for pollution control equipment and energy saving devices: 'put to use' requirement - Binding precedents in assessee's own case - Allowability of depreciation claimed for pollution control and energy saving equipment where AO alleged assets were not put to use - HELD THAT: - The AO disallowed depreciation on the ground that the assessee had only demonstrated purchase and installation but had not proven use or submitted comparative results. The Tribunal relied on the CIT(A)'s findings and the coordinate Bench's decision in AY 2009 10 which accepted certificates from chartered engineers and held that Section 32 does not mandate monitoring of outcomes; installation and availability for use satisfy the 'use' requirement. The Tribunal found the AO's objection to be surmise unsupported by the record and upheld deletion of the disallowance. [Paras 3, 6]

Disallowance of depreciation on pollution control and energy saving devices deleted for AYs 2010-11 to 2014-15; departmental grounds dismissed.

Final Conclusion: The Tribunal, following binding precedents in the assessee's own case and on the facts of these years, restricted section 14A disallowances to the suo moto amounts offered by the assessee for AYs 2010 11 to 2014 15; upheld deletion of the ad hoc 40% licence fee disallowance; allowed depreciation on UPS at 60% (granting the assessee relief in AY 2011 12 and dismissing the Department's challenge in AY 2010 11); and upheld deletion of disallowances on depreciation for pollution control and energy saving equipment. In result, the assessee's appeals and cross objection are partly allowed and all departmental appeals are dismissed.

Prior approval under section 153D for assessments in search/requisition cases - Nullity of assessment for lack of jurisdiction where prior approval is not obtained - Application of mind by approving authority in granting statutory approval - Limitation - communication/dispatch required to complete an "order of assessment"

Prior approval under section 153D for assessments in search/requisition cases - Application of mind by approving authority in granting statutory approval - Nullity of assessment for lack of jurisdiction - Impugned assessment framed without prior approval of the Joint Commissioner under section 153D is invalid and void. - HELD THAT: - The Tribunal held that section 153D, enacted under the heading "Prior approval necessary for assessment in cases of search or requisition", uses mandatory language and requires prior approval by the Joint Commissioner before an Assessing Officer below that rank can pass the assessment. The approving authority must apply its mind to the materials placed before it so as to ensure proper enquiry and to guard against undue or irrelevant additions. Where the draft assessment and records were not placed before the JCIT for meaningful appraisal and the approval was accorded mechanically (admitted by the approving officer), such approval does not satisfy the statutory requirement. On the facts of the present case, the Assessing Officer did not obtain valid prior approval in the sense contemplated by section 153D; the purported approval was mechanical, lacked application of mind and did not encompass subsequent enquiries directed by the JCIT. Following the coordinate-bench precedents relied upon, the Tribunal concluded that the assessment was without jurisdiction and therefore null and void, and quashed the assessment order dated 29.03.2016. [Paras 8, 26]

Assessment framed without valid prior approval under section 153D is void; impugned assessment quashed.

Limitation - communication/dispatch required to complete an "order of assessment" - Completion of assessment vs. communication of assessment order - Impugned assessment did not attain the character of an "order of assessment" within the prescribed period because communication/dispatch was not initiated within the limitation period, rendering the assessment time-barred. - HELD THAT: - The Tribunal examined whether an assessment dated within the prescribed period but communicated (served/ dispatched) after the expiry of the statutory period qualifies as a valid "order of assessment". Relying on precedents and analytical reasoning, the Tribunal held that to become a legally effective "order of assessment" the determination must be communicated beyond the control of the authority within the prescribed time; mere signing without initiating timely communication does not suffice. On the undisputed facts, the last authorisation in the search occurred in the relevant period and the statutory window expired before the Assessing Officer initiated dispatch/communication of the assessment; therefore the assessment did not become an effective order within the limitation period and was liable to be set aside as time-barred. [Paras 22]

Impugned assessment was barred by limitation because communication/dispatch was not initiated within the statutory period.

Final Conclusion: The Tribunal allowed the assessee's cross objections and quashed the assessment order dated 29.03.2016 for assessment year 2014 15 as void for want of valid prior approval under section 153D; the Tribunal also held the assessment time barred on the ground that communication/dispatch did not occur within the statutory period. Consequentially, the Revenue's appeal was dismissed as infructuous.

Validity of reopening of assessment under the proviso to section 147 when original assessment was completed under section 143(3) - Obligation to disclose fully and truly all material facts necessary for assessment as pre-condition for reopening after four years - Rule 27 of the ITAT Rules - right of respondent to support the order appealed against on grounds decided against him - Insufficiency and vagueness of reasons recorded - requirement that reasons disclose the Assessing Officer's mind and link to evidence - Change of opinion versus jurisdictional failure and remedy under section 263

Rule 27 of the ITAT Rules - right of respondent to support the order appealed against on grounds decided against him - Respondent raising a new ground in defence without filing cross-objection - Assessee entitled to invoke Rule 27 of the ITAT Rules to defend the Commissioner (Appeals) order on a ground decided against it without filing a cross-objection. - HELD THAT: - The Tribunal held that Rule 27 permits a respondent, though not having appealed, to support the order appealed against on any grounds decided against him. Reliance was placed on precedents of High Courts and on the settled principle that a respondent may urge a legal ground of defence (including one decided against him below) to render the revenue's appeal infructuous. The Tribunal clarified that Rule 27 is a defensive provision - it enables the respondent to defend the impugned order on grounds decided against him and, if successful, cause the revenue's appeal to fail, but it does not empower the respondent to obtain relief beyond that granted by the first appellate order. Applying these principles, the assessee was permitted to raise before the Tribunal the previously rejected challenge to the validity of reopening without having filed a cross-objection. [Paras 4]

Assessee entitled to raise and have decided the plea under Rule 27; the plea may be adjudicated even though no cross-objection was filed.

Validity of reopening of assessment under the proviso to section 147 when original assessment was completed under section 143(3) - Obligation to disclose fully and truly all material facts necessary for assessment as pre-condition for reopening after four years - Insufficiency and vagueness of reasons recorded - requirement that reasons disclose the Assessing Officer's mind and link to evidence - Change of opinion versus jurisdictional failure and remedy under section 263 - Reopening of the assessment under section 147/148 was invalid because the notice was issued after four years from the end of the assessment year and the reasons did not allege failure by the assessee to disclose fully and truly all material facts necessary for assessment. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and found them to be vague, reflecting mere reproduction of information received from the Investigation Wing without particulars of the alleged nondisclosure or independent verification by the AO. As the original assessment had been completed under section 143(3) and the notice under section 148 was issued after the four-year period, the proviso to section 147 applied. The proviso conditions were not satisfied because the AO did not record any specific allegation that the assessee had failed to disclose material facts fully and truly; instead the AO relied on subsequent information which, where the primary facts (sales, books, audited accounts) had been produced and examined earlier, amounts to a change of opinion. The Tribunal reiterated that reasons must disclose the AO's mind and a vital link to evidence; absent such recorded failure the jurisdiction to reopen was lacking and the correct remedy for any defect in the earlier scrutiny assessment was by revision under section 263, not reassessment under section 147. Applying these legal principles and precedents, the Tribunal concluded that the reassessment was without jurisdiction and quashed it. [Paras 5]

Reopening under section 147/148 quashed as invalid; reassessment set aside for AY 2011-12.

Final Conclusion: The plea under Rule 27 was allowed and the reopening of assessment for AY 2011-12 was held invalid as the proviso to section 147 was not satisfied; reassessment was quashed and the revenue's appeal dismissed, thereby upholding the CIT(A)'s order.

Allowability of business loss on write-off of receivable - treatment of unrecovered contractual interest - director's remuneration - reasonableness test for deduction - condonation of delay in filing appeal

Allowability of business loss on write-off of receivable - treatment of unrecovered contractual interest - Addition of Rs. 3,92,479 made by A.O. on account of alleged non-charge/ write-off of interest and deduction from running bill was deleted. - HELD THAT: - The Tribunal examined the agreement between the parties and the ledger/ documents on record and accepted the assessee's explanation that the contract was terminated, disputes arose, and the parties mutually agreed adjustments reflected by a debit note and part payment; the impugned amount remained unrecovered and was written off. The A.O.'s view that the explanation was an afterthought was rejected because the documents supported that the amount could not be recovered and was adjusted/settled between the parties. Since the Ld. CIT(A) had deleted the addition and the material shows final settlement leaving the amount unpaid, the write-off constituted a business loss/deduction and the addition was set aside. [Paras 7]

Addition deleted; Ground A allowed.

Director's remuneration - reasonableness test for deduction - Addition of Rs. 2,26,550 on account of disallowance of excess director's remuneration was deleted. - HELD THAT: - The Tribunal considered the assessee's turnover, declared income and overall salary outgo. Noting that total staff remuneration and turnover had substantially increased and that the Director's remuneration translated to Rs. 50,000 per month, the Tribunal held that the payment was not unreasonable or exorbitant. The A.O. failed to produce evidence to show non-payment or lack of entitlement. Applying a reasonableness assessment to the facts, the Tribunal found the remuneration allowable and set aside the disallowance confirmed below. [Paras 11]

Addition deleted; Ground B allowed.

Final Conclusion: Delay in filing the appeal condoned; on merits the Tribunal allowed the appeal by deleting the additions relating to the written-off amount and director's remuneration and set aside the orders of the authorities below.

Exemption under section 54F - interpretation of "a residential house" - prospective effect of legislative amendment - rollover relief in respect of investment in residential house

Exemption under section 54F - interpretation of "a residential house" - prospective effect of legislative amendment - Whether, for the assessment year 2014-15, the expression 'a residential house' in section 54F restricted the exemption to a single residential unit or permitted investment in more than one residential unit. - HELD THAT: - The Tribunal considered the plain language of section 54F as applicable for the year under consideration and noted conflicting judicial views on whether 'a residential house' denotes a single residential unit. Reference was made to precedents holding that the indefinite article 'a' in the context of section 54/54F does not necessarily denote singularity and may permit plural construction. The Tribunal also examined the Finance Act, 2014 amendment which replaced 'a residential house' with 'one residential house' and which, by its explanatory memorandum, clarified legislative intent that the benefit was intended for investment in one residential house; however, that amendment took effect from 1 April 2015 and applied to A.Y. 2015-16 onwards. As the present case relates to A.Y. 2014-15 (prior to the amendment), the Tribunal held that the pre-amendment language must be applied. In view of the above, the Tribunal concluded that prior to the effective date of the amendment an assessee could claim exemption under section 54F for investment spread over more than one residential unit, and therefore directed the Assessing Officer to allow the exemption in respect of both adjacent flats purchased by the assessee. The Tribunal also noted that no argument was advanced before it on the procedural grounds raised in ground No. 1 and rejected that ground accordingly. [Paras 8]

For A.Y. 2014-15 the expression 'a residential house' in section 54F is not to be read as limiting the exemption to a single residential unit; exemption under section 54F was allowed in respect of both residential units and the A.O. was directed to give the benefit.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the denial of exemption under section 54F for the second flat and directed the Assessing Officer to allow the exemption for both residential units for A.Y. 2014-15; the procedural ground not pressed was rejected.

Taxability of share premium as income under capital vs. revenue distinction - application of section 56(1) and alternate reliance on section 68 for unexplained credits - non-retrospective operation of newly inserted charging provision (section 56(2)(viib)) - burden of proof under section 68 - identity, genuineness and creditworthiness of investor - judicial restraint where no express legislative sanction to tax share premium - treatment of legal/professional expenditure - capitalisation vs. revenue deduction - limited remand for factual verification of accounting accruals

Taxability of share premium as income under capital vs. revenue distinction - application of section 56(1) and alternate reliance on section 68 for unexplained credits - burden of proof under section 68 - identity, genuineness and creditworthiness of investor - judicial restraint where no express legislative sanction to tax share premium - Deletion of addition of share premium credited to reserve and surplus - challenged as taxable under section 56(1) or alternatively as unexplained credit under section 68. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the addition of the share premium was not sustainable. The AO had invoked section 56(1) treating the premium as revenue and alternatively section 68 for unexplained cash credit. The appellate authority found that references made under section 90 produced no adverse material against the assessee and that the AO had not established any statutory basis to treat share premium as income in the absence of explicit legislative sanction. On section 68, the assessee produced documents (investor's audited accounts, certificate of incorporation, business licence, tax residency certificate, FC-GPR and bank records) sufficient to establish the investor's identity, genuineness and creditworthiness; the quantum of investment was small relative to investor's net assets. Prior judicial authority was held to favour the view that amounts received as share capital including premium are of capital nature and not exigible as revenue absent express provision. Applying these principles the Tribunal found no infirmity in the CIT(A)'s order setting aside the additions under section 56(1) and alternatively under section 68 and affirmed deletion of the addition. [Paras 3, 5]

Addition of the share premium was set aside; the additions under section 56(1) and alternately under section 68 were deleted.

Limited remand for factual verification of accounting accruals - accrual accounting versus invoice-based recognition of income - Whether the addition of Rs. 1,58,333 labelled as consulting fees should stand or requires re-examination in light of accrual accounting and contract terms. - HELD THAT: - The Tribunal noted that the assessee asserted accrual-based recognition (one-time activation and customisation fees for the year plus proportionate monthly licence fee), whereas the AO treated the entire invoiced amount as current income. Although agreements were not initially before the authorities, the assessee produced invoices and the product licence agreement during hearing. Given the factual nature of whether the amount pertains to the relevant year or the next year under accrual accounting, the Tribunal directed a limited remand to the AO to examine whether the amount was accounted for in the next year and, if so, to delete the addition. The remand is confined to verifying the accounting year to which the income pertains; the AO is directed to act accordingly. [Paras 12]

Matter restored to the AO for limited purpose of examining accrual treatment; if offered in the next year the addition of Rs. 1,58,333 is to be deleted.

Treatment of legal/professional expenditure - capitalisation vs. revenue deduction - Whether professional fees of Rs. 6,48,859 were capital in nature and rightly disallowed by the AO and CIT(A), or revenue in nature and allowable as deduction. - HELD THAT: - The Tribunal reviewed the nature of the legal and professional charges (legal consultancy, vetting of documents, architect fees, compliance-related fees) and the manner in which these were incurred. The AO had capitalised part of product-development related costs and disallowed the remainder pro rata; the CIT(A) sustained the AO's approach. On appellate scrutiny the Tribunal concluded these payments did not directly pertain to product development nor confer enduring benefit of capital nature; they were routine business expenditures of revenue character. Having examined the supporting break-up and nature of services, the Tribunal held the CIT(A)'s conclusion upholding capitalisation to be unsustainable and allowed the cross-objection on this ground. [Paras 5, 16]

Legal and professional fees held to be revenue in nature; the addition is deleted and the cross-objection allowed on this ground.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the addition of share premium (deleting additions under section 56(1) and alternatively section 68) for AY 2012-13; it directed a limited remand to the AO to verify accrual treatment of consulting fees and ordered deletion if the amount is offered in the next year; and it allowed the assessee's cross-objection by holding the professional/legal fees to be revenue in nature and allowable as deduction.

Provisional assessment - imported goods - bill of entry - direction to authorities to act in accordance with law, rules, regulations and Government policies

Provisional assessment - imported goods - bill of entry - Respondents directed to conduct provisional assessment of the goods described as "Dry Dates" imported against Bill of Entry No.8025279 dated 29th June, 2020. - HELD THAT: - The petitioner sought a writ of mandamus for provisional or final assessment and provisional release of the imported consignment. The Court held that directing the respondents to undertake provisional assessment would suffice for disposal of the petition. The respondents are commanded to carry out the provisional assessment of the goods in question in accordance with applicable law, rules, regulations and Government policies and to do so within a specified short time frame. The order confines the relief to a direction to act, leaving the assessment subject to statutory and regulatory requirements. [Paras 4]

Respondent authorities directed to conduct provisional assessment of the imported "Dry Dates" against Bill of Entry No.8025279 dated 29th June, 2020 in accordance with law, rules, regulations and Government policies within two weeks.

Final Conclusion: Writ petition disposed of by directing the respondents to complete provisional assessment of the consignment described as "Dry Dates" imported against Bill of Entry No.8025279 dated 29th June, 2020 in accordance with applicable law, rules, regulations and Government policies within two weeks.

One year from the relevant date for refund - relevant date as date of receipt of payment in convertible foreign exchange - substitution of a notification and its retrospective effect - refund of input service tax/CENVAT credit under Rule 5 and Notification No.27/2012

Substitution of a notification and its retrospective effect - relevant date as date of receipt of payment in convertible foreign exchange - one year from the relevant date for refund - Whether the substitution effected by Notification No.14/2016 (01.03.2016) operates retrospectively so that the relevant date for filing refund claims is the date of receipt of payment in convertible foreign exchange and the refund applications filed for the periods in question are time barred. - HELD THAT: - The court held that a 'substitution' replaces the earlier text and must be read as having put the new words in place of the old; it is not a mere prospective procedural change. Accordingly, the substituted clause in Notification No.14/2016, which fixes the relevant date for service providers as the date of receipt of payment in convertible foreign exchange (for services completed prior to such receipt), must be read in place of the earlier provision. On that construction the relevant date for the petitioner's refund claims is the date of receipt of convertible foreign exchange and, since the FIRCs/receipt dates fell beyond the one year period measured from that relevant date, the claims were time barred. The court rejected the petitioner's contention that the substitution should be given only prospective effect so as to preserve any vested rights, observing that the decisions relied upon by the petitioner did not deal with the specific question of substitution and that established authorities support reading a substituted provision as operative for the same period as the original provision.

Substitution in Notification No.14/2016 is to be read as replacing the earlier provision; the relevant date is the date of receipt of payment in convertible foreign exchange and the refund applications for the stated periods are time barred.

Final Conclusion: Both writ petitions are dismissed on the ground that the substituted provision fixing the relevant date as the date of receipt of payment in convertible foreign exchange applies, and the refund claims for the periods relied upon by the petitioner are barred by the one year limitation.

Availability of Cenvat credit of service tax on dealer tour packages - dealer commission treated as input service - classification of tour packages as sales promotion or commission - input service credit to manufacturer

Availability of Cenvat credit of service tax on dealer tour packages - dealer commission treated as input service - Cenvat credit of service tax paid on tour packages provided to dealers is admissible to the manufacturer as input service in the nature of dealer's commission. - HELD THAT: - The Tribunal examined the nature of the payments and compared the present facts with earlier decisions. The Gujarat High Court ruling relied upon by the Revenue concerned credit of service tax paid to sales agents under a specific agency agreement and therefore was not factually apposite. The Tribunal followed its earlier decision in M/s Simbhaoli Sugar Ltd. holding that where commission is paid to sales commission agents for effecting sale of goods, service tax paid on such commission is available as input service credit to the manufacturer. In the present case the assessee provided tour packages to dealers (not sales agents) in lieu of paying expenses in cash; such tour packages amounted to dealer's commission or an input service connected with sales promotion. On that basis the service tax paid on those tour packages was held to be admissible as Cenvat credit to the appellant. [Paras 5]

Impugned order set aside and Cenvat credit of service tax on tour packages to dealers allowed.

Final Conclusion: The appeal is allowed; the Tribunal set aside the orders of the lower authorities and held that service tax paid on tour packages provided to dealers is admissible as Cenvat credit to the manufacturer.

Territorial situs of sale - state's jurisdiction to tax sale of goods located outside the State - DEPB as specified/ascertained goods - turnover exigible to tax only in State where sale and delivery are completed

Territorial situs of sale - state's jurisdiction to tax sale of goods located outside the State - DEPB as specified/ascertained goods - turnover exigible to tax only in State where sale and delivery are completed - Whether Tamil Nadu could levy tax on the sale of a Duty Entitlement Pass Book (DEPB) where the pass book was issued, delivered and the sale completed in Maharashtra. - HELD THAT: - The Court held that DEPB, once issued and delivered as a pass book, constituted specified/ascertained goods for the purpose of sales tax. Applying the territorial principle embodied in the relevant provisions, the situs of the sale is the place where the goods were located and the contract was finalised. The pass book in the present case was issued and delivered in Mumbai and the sale and delivery were completed in Maharashtra; the only nexus to Tamil Nadu was the port specified in the DEPB scheme, which the Court found insufficient to bring the transaction within the taxing jurisdiction of Tamil Nadu. Reliance was placed on the reasoning in the earlier decision holding that where goods and the parties were located in another State when the transaction was finalised, the turnover is taxable only in that State. Consequently, the re-opening of assessment and levy of tax by Tamil Nadu in respect of the said sale were without jurisdiction and unsustainable. [Paras 5, 6, 7, 8]

Levy of tax by Tamil Nadu on the turnover arising from sale of the DEPB (sale and delivery completed in Maharashtra) quashed and the assessment insofar as it related to that levy set aside.

Final Conclusion: Writ petition allowed; impugned order quashed insofar as it levies tax on the sale of the Duty Entitlement Pass Book whose sale and delivery were completed in Maharashtra.

Dismissal of appeal in default - principles of natural justice - reinstatement and restoration of appeals - hearing afresh by the first appellate authority - interim stay revival upon restoration - limitation as per Section 25(1) of the Act - appellate authority's power to pass appropriate orders

Dismissal of appeal in default - principles of natural justice - appellate authority's power to pass appropriate orders - Impugned orders dismissing the appeals in default were set aside and the matters remitted to the first appellate authority for fresh hearing after affording opportunity to the petitioner. - HELD THAT: - The Court found that the appeals filed against the assessment orders had been dismissed in default by orders which do not reflect observance of the principles of natural justice; the appellate officer, although arguably empowered to pass appropriate orders, was not precluded from affording an opportunity to the appellant. The impugned orders merely record two opportunities but lack the requisite compliance with natural justice. The Court also noted the contemporaneous threat of the COVID-19 pandemic at the time the appeals were dismissed, which is a relevant contextual factor. In view of these defects the Court held it was appropriate to set aside the dismissals and remit the appeals for fresh adjudication by the first appellate authority after giving the petitioner an opportunity of hearing. [Paras 4, 5]

Impugned orders Exts.P9 to P11 set aside; matters remitted for fresh hearing by the first appellate authority and parties directed to appear on 15.07.2020 at 11 a.m.

Reinstatement and restoration of appeals - interim stay revival upon restoration - Upon restoration of the appeals, the interim orders previously granted in favour of the petitioner shall automatically come into operation. - HELD THAT: - The petitioner informed the Court that an interim stay had been in effect while the appeals were pending. Relying on that representation, the Court ordered that once the appeals are restored pursuant to the remand, the interim orders will be revived automatically, thereby ensuring the status quo preserved during the pendency of the restored proceedings. [Paras 6]

Once the appeals are restored, the interim orders will automatically come into operation.

Final Conclusion: The writ petition is allowed to the extent that the orders dismissing the appeals in default are set aside; the matters are remitted to the first appellate authority for fresh hearing after affording an opportunity to the petitioner, with an automatic revival of the earlier interim orders upon restoration.

Definition of cheque as a bill of exchange - certainty of amount in a negotiable instrument - application of section 18 of the Negotiable Instruments Act - offence under section 138 of the Negotiable Instruments Act - scope of Laxmi Dyechem principle regarding dishonour of otherwise valid cheques - requirement of a valid cheque for initiation of proceedings under section 138

Definition of cheque as a bill of exchange - bill of exchange - certainty of amount in a negotiable instrument - Whether the instrument presented was a valid cheque within the meaning of the Negotiable Instruments Act - HELD THAT: - The Court examined the definitions of "bill of exchange" and "cheque" and the five requisites for a bill of exchange, including that it must direct payment of a "certain sum of money." The instrument satisfied being in writing, bearing an unconditional order, being directed to a specified banker and naming the payee, but failed on the requirement of certainty of amount because the amount in words was incoherent and unquantifiable ("Forty four lacs eighteen lacs eight hundred and ninety six only"). Section 18, which gives primacy to the amount stated in words where figures and words differ, could not rescue the instrument because the words themselves did not yield a definite amount. Consequently, the instrument lacked the essential certainty required by sections 5 and 6 and was not a valid cheque when presented to the bank. [Paras 19, 22, 23, 27, 28]

The instrument was not a valid cheque within the meaning of sections 5 and 6 of the Negotiable Instruments Act because the amount stated in words was absurd and failed the requirement of certainty.

Application of section 18 of the Negotiable Instruments Act - certainty of amount in a negotiable instrument - Whether section 18 could be applied to cure the discrepancy between figures and words so as to render the instrument a valid cheque - HELD THAT: - Section 18 mandates that where figures and words differ, the amount in words shall govern. The Court considered precedent applying section 18 but held that the provision presumes the amount in words to be ascertainable. Where the words are themselves unintelligible or absurd and do not permit ascertainment of a definite sum, section 18 cannot operate to confer certainty. In the present case the words were incapable of producing a definite amount, so resort to section 18 was not available. [Paras 20, 22, 23, 27, 28]

Section 18 could not be applied because the amount stated in words was unintelligible and therefore did not establish the certainty required; the discrepancy could not be cured.

Offence under section 138 of the Negotiable Instruments Act - requirement of a valid cheque for initiation of proceedings under section 138 - scope of Laxmi Dyechem principle regarding dishonour of otherwise valid cheques - Whether prosecution under section 138 could be sustained where the instrument presented was not a valid cheque - HELD THAT: - Section 138 contemplates dishonour of a cheque as defined by section 6. The Court held that the offence under section 138 arises only when a valid cheque is drawn and dishonoured for reasons such as insufficiency of funds or related causes. The Supreme Court's decision in Laxmi Dyechem extends protection to payees of otherwise valid cheques dishonoured for reasons not apparent on receipt, but it presupposes that the instrument is a valid cheque. Where the instrument is invalid on its face for lack of certainty, Laxmi Dyechem does not apply. Further, a legal notice under section 138 presupposes that the presented instrument was a cheque; if it was not, non-compliance with notice cannot impose liability under section 138. Applying these principles, the Court found that proceedings under section 138 could not be sustained on the basis of the invalid instrument. [Paras 34, 36, 37, 38, 39]

Proceedings under section 138 could not be sustained because the instrument was not a cheque within section 6; Laxmi Dyechem is inapplicable to an instrument invalid on its face and a notice under section 138 could not impose liability in these circumstances.

Requirement of a valid cheque for initiation of proceedings under section 138 - Whether the trial court's order dismissing the discharge application and directing framing of notice under section 251 Cr.P.C. could be sustained - HELD THAT: - Given the finding that the instrument was not a cheque and that section 138 could not be invoked, the material before the trial court did not suffice to proceed to frame a notice under the criminal process. The trial court's reliance on Laxmi Dyechem was misplaced because that authority addresses dishonour of otherwise valid cheques. Consequently, the impugned order could not stand. [Paras 4, 34, 36, 40]

The order dismissing the discharge application and directing framing of notice was unsustainable and is set aside; the accused/revisionists are discharged.

Final Conclusion: The revision succeeds. The instrument presented was not a valid cheque because the amount in words was unintelligible and failed the certainty requirement; section 18 could not cure the defect, section 138 could not be invoked, Laxmi Dyechem is inapplicable, the trial court's order is set aside and the revisionists are discharged.