TaxTMI Updates e-Newsletter
Aug 12,2022

Regular bail - Double jeopardy - Delay in trial and prolonged custody as ground for bail - Evidence of recovery and complicity - Distinctness of criminal FIR from statutory GST complaint

Regular bail - Delay in trial and prolonged custody as ground for bail - Evidence of recovery and complicity - Petitioner entitled to grant of regular bail in the criminal case registered by FIR No.571 dated 4.6.2019. - HELD THAT: - The Court observed that although the prosecution has collected some material suggesting the petitioner's possible complicity (recoveries and documentary material linking the petitioner to the alleged bogus firms and transactions), the petitioner had been in custody for over one and a half years and trial progress was slow (22 witnesses cited but none examined). Several co-accused, including the principal accused, had already been granted bail. The petitioner was not shown to be involved in other criminal cases and production warrants in this case were executed on 2.2.2021 while he was already in custody in the related GST complaint. Balancing the existence of some incriminating material against the prolonged pre-trial incarceration, likelihood of further delay in conclusion of trial, and the grant of bail to co-accused, the Court concluded bail should be allowed. The Court recorded the State's contention that the FIR alleges distinct offences from the separate GST complaint, but treated the same as part of factual background and did not find that the existence of the GST complaint outweighed the bail factors in favour of the petitioner. [Paras 7, 8]

Petition allowed; petitioner released on regular bail on furnishing bail/surety bonds to the satisfaction of the Trial Court/Chief Judicial Magistrate/Duty Magistrate.

Final Conclusion: The petition for regular bail is allowed and the petitioner is directed to be released on furnishing bail/surety bonds to the satisfaction of the trial court, the order being founded on prolonged custody, slow progress of trial and fact that co-accused have been granted bail despite some material collected by police.

Vires of the second proviso to Section 16(2) of the CGST Act, 2017 - writ jurisdiction to quash or stay show cause notices - adjudication of tax liability under Section 73(5)/74(5) read with Rule 142(1A) - challenge to constitutional validity not a ground to impede ongoing adjudication

Vires of the second proviso to Section 16(2) of the CGST Act, 2017 - Rule issued on the petitioner's challenge to the constitutional vires of the second proviso to Section 16(2) of the CGST Act, 2017. - HELD THAT: - The petitioner's primary prayer seeking declaration that the second proviso to Section 16(2) is ultra vires and violative of rights under Articles 14, 19(1)(g) and 300A was accepted for issuance of a rule. The Court has directed issuance of rule on that challenge, thereby directing respondents to answer the vires contention. This does not amount to any interim determination on merits; it only admits the question for adjudication by the Court. [Paras 2, 3]

Rule directed on the challenge to vires of the second proviso to Section 16(2).

Writ jurisdiction to quash or stay show cause notices - adjudication of tax liability under Section 73(5)/74(5) read with Rule 142(1A) - challenge to constitutional validity not a ground to impede ongoing adjudication - Whether the show cause notice dated 13.06.2022 and consequent adjudication can be quashed or stayed in writ jurisdiction pending the vires challenge. - HELD THAT: - The impugned show cause notice, being adjudication-bound and intended to ascertain tax liability under the specified provisions, cannot be summarily quashed or stayed in exercise of writ jurisdiction. The Court declined to interfere with the adjudicatory process at this stage and observed that it is open to the petitioner to raise all contentions during the adjudication or in the writ proceedings. Further, the Court expressly clarified that the pendency of the vires challenge and the rule issued thereon shall not be permitted to serve as a ground for the petitioner to resist or delay the adjudication, nor shall the authorities weigh that challenge in determining the merits of the demand while proceeding with adjudication. [Paras 5, 6, 7, 8, 9]

No quashal or stay of the show cause notice; adjudication to proceed and challenge to vires will not be a ground to oppose or stay those proceedings.

Final Conclusion: The High Court issued a rule on the constitutional challenge to the second proviso to Section 16(2) of the CGST Act, 2017, but refused to quash or stay the show cause notice dated 13.06.2022; adjudication under the tax provisions shall proceed and the vires challenge shall not operate as a ground to impede or be weighed by the authorities in the ongoing adjudication.

Transitional input tax credit under GST - filing of TRAN-1 and TRAN-2 for claiming transitional credit - opportunity to file or revise transitional forms irrespective of pending writs or ITGRC decisions - verification of transitional credit claims by tax officers within stipulated period - reflection of allowed transitional credit in Electronic Credit Ledger - GSTN's duty to ensure portal functionality - GST Council guidance to field formations in scrutinising claims

Filing of TRAN-1 and TRAN-2 for claiming transitional credit - transitional input tax credit under GST - Registered taxpayers were entitled to a two month window (01.09.2022 to 31.10.2022) to file concerned forms for availing transitional credit through TRAN 1 and TRAN 2. - HELD THAT: - The Court recorded and applied the directions of the Supreme Court which ordered GSTN to open a common portal for filing the relevant TRAN 1 and TRAN 2 forms for a two month period commencing 01.09.2022. By referring to those directions, the petitioner's grievance was held to be addressed because the prescribed opportunity to file for transitional credit had been provided to all concerned.

The writ petition was disposed of on the basis that the two month filing window for TRAN 1 and TRAN 2 had been opened.

Opportunity to file or revise transitional forms irrespective of pending writs or ITGRC decisions - Aggrieved registered assessees were permitted to file the relevant form or revise an already filed form irrespective of whether they had filed writ petitions or whether their cases had been decided by the ITGRC. - HELD THAT: - Following the Supreme Court's directions, the Court endorsed that the right to file or to revise TRAN 1/TRAN 2 was available to all registered taxpayers without being barred by the existence of prior writ petitions or earlier ITGRC outcomes. This remedial window was intended to be uniformly available to address transitional credit claims.

Taxpayers could file or revise TRAN 1/TRAN 2 regardless of prior litigation or ITGRC decisions.

Verification of transitional credit claims by tax officers within stipulated period - reflection of allowed transitional credit in Electronic Credit Ledger - Concerned officers were directed to verify the veracity of claims within 90 days after the filing period and to pass appropriate orders on merits, and thereafter allowed transitional credit was to be reflected in the Electronic Credit Ledger. - HELD THAT: - The Court adopted the Supreme Court's direction that the claims filed during the prescribed window would be subject to verification by the concerned officers within a 90 day period, with reasonable opportunity to the parties, and that any transitional credit allowed following such verification should be posted to the Electronic Credit Ledger. This sets the procedural timeline and consequence for adjudication of claims.

Officers to verify claims within 90 days and, if allowed, transitional credit to be reflected in the Electronic Credit Ledger.

GSTN's duty to ensure portal functionality - GST Council guidance to field formations - GSTN was required to ensure that there were no technical glitches during the filing period, and the GST Council was authorised to issue appropriate guidelines to field formations for scrutinising claims if required. - HELD THAT: - Applying the Supreme Court's directions, the Court noted the administrative obligations: GSTN must maintain the portal's functionality for the two month window so as to enable claims to be filed effectively, and the GST Council may provide guidance to officers engaged in scrutiny of the claims to ensure uniformity and proper implementation of the process.

GSTN to ensure portal functionality during the window; GST Council may issue guidance to field formations.

Final Conclusion: The writ petition was disposed of as the relief sought was effectively provided by the Supreme Court's directions permitting filing/revision of TRAN 1/TRAN 2 in the specified two month window and prescribing subsequent verification, posting to the Electronic Credit Ledger, and administrative safeguards.

Anticipatory bail - Conditions of bail including surrender of passport, cooperation with investigation and location monitoring - Section 70 of the Central Goods and Services Tax Act, 2017 - recording of statements and their evidentiary effect - Non-cooperation and failure to join investigation as ground for denying bail - Allegation of involvement in bogus input tax credit (ITC) racket and role assessment among co-accused

Anticipatory bail - Non-cooperation and failure to join investigation as ground for denying bail - Allegation of involvement in bogus input tax credit (ITC) racket and role assessment among co-accused - Flight risk - Grant of anticipatory bail to the applicant/accused Gorav Gupta - HELD THAT: - The court considered the rival contentions that the applicant was a mastermind of a bogus ITC racket and had initially not joined the investigation, against the defence that his role was not demonstrably greater than other accused and that he had subsequently joined the investigation and filed an affidavit. Reference to the High Court order in respect of co-accused Tarun Jain did not establish that the present accused was necessarily the principal culprit; the absence of explicit mention of the applicant's company in that factual matrix did not per se exonerate him but also did not prove a superior role. The court found that the material on record did not justify a positive conclusion that the applicant's role was substantially more than other accused. The court further noted that after initial non-appearance the accused filed a sworn affidavit and physically joined the investigation; no specific reason was shown why he was not called after 22.06.2022. Considering these factors and that other alleged masterminds were also on bail, the court exercised its discretion to allow anticipatory bail subject to conditions aimed at allaying flight and interference risks.

Anticipatory bail granted to the applicant/accused Gorav Gupta on furnishing personal bond with sureties and subject to specified conditions.

Section 70 of the Central Goods and Services Tax Act, 2017 - recording of statements and their evidentiary effect - Affidavit as means of participation in investigation - Legal effect of statements recorded under Section 70 CGST Act and the binding nature of a sworn affidavit filed by the accused during investigation - HELD THAT: - The court examined Section 70 of the CGST Act and observed that the provision does not expressly provide that statements recorded thereunder cannot be used against the maker at trial, nor does it preclude retraction. The court further held that a sworn written affidavit filed by the accused in response to summons is a binding declaration and, in practical terms, is more difficult to retract than an oral statement reduced to writing by an investigating officer. These observations informed the court's assessment of the accused's participation in the investigation and the weight to be given to his conduct in the bail exercise.

Section 70 does not itself render statements immune from retraction; a sworn affidavit filed by the accused is a binding instrument relevant to his cooperation in investigation.

Final Conclusion: The application for anticipatory bail is allowed and the accused Gorav Gupta is released in the event of arrest on furnishing personal bond and two solvent sureties, subject to conditions including surrender of passport (or affidavit if none), cooperation with investigation, prohibition on inducement or threat, provision of mobile number and live location PIN, and not committing any offence while on bail; breach may invite cancellation of bail.

Additional depreciation under section 32(1)(iia) - capitalization of exchange rate fluctuation loss under section 43A - allowability of depreciation on capitalized foreign exchange loss

Additional depreciation under section 32(1)(iia) - capitalization of exchange rate fluctuation loss under section 43A - allowability of depreciation on capitalized foreign exchange loss - Whether additional depreciation at 20% under section 32(1)(iia) is allowable in respect of the capitalized exchange rate fluctuation loss added to the cost of plant and machinery acquired in an earlier year. - HELD THAT: - The Tribunal observed that section 32(1)(iia) permits an assessee engaged in manufacture or production to claim additional depreciation of 20% only in respect of new plant and machinery acquired and installed in the year of acquisition. Although section 43A permits capitalization of foreign exchange loss on the cost of assets acquired from outside India, that capitalization increases the written down value of the asset and only entitles the assessee to normal depreciation under the general depreciation provision. The appellate authorities correctly held that additional depreciation under section 32(1)(iia) is confined to the year of acquisition and installation and cannot be claimed in a subsequent year merely because the written down value was increased by capitalized forex loss. Therefore the claim for additional depreciation on the capitalized portion of forex loss relating to plant and machinery acquired in earlier years was not permissible. [Paras 6, 7, 8]

Claim for additional depreciation under section 32(1)(iia) on capitalized foreign exchange loss relating to plant and machinery acquired in earlier years is not allowable; only normal depreciation on such capitalized amount is permissible.

Final Conclusion: Appeal dismissed; the Tribunal upheld the CIT(A)'s disallowance of additional depreciation claimed on the capitalized exchange rate fluctuation loss, confirming that additional depreciation under section 32(1)(iia) is available only in the year of acquisition and installation of new plant and machinery.

Exemption under section 54F - investment in a residential house situated in India - capital gains exemption on reinvestment - amendment to section 54F effective w.e.f. 01.04.2015 - non-retrospective operation of statutory amendment - pre-amendment eligibility for exemption by investment outside India

Exemption under section 54F - pre-amendment eligibility for exemption by investment outside India - amendment to section 54F effective w.e.f. 01.04.2015 - non-retrospective operation of statutory amendment - Assessee entitled to claim exemption under section 54F for investment in a residential house outside India in respect of transfers effected prior to the amendment operative from 01.04.2015. - HELD THAT: - The Tribunal examined whether reinvestment of capital gains in a residential property situated outside India qualified for exemption under section 54F. It noted earlier decisions accepting that acquisition of a house abroad could satisfy conditions of section 54F and observed that the legislature, by Finance Act, 2014, amended section 54F to require that the new residential house be situated in India with effect from 01.04.2015. The explanatory notes and circulars explain the legislative intent to confine the benefit to one residential house in India from the stated effective date. Because the amendment was not made retrospective and applies to assessment years commencing 2015-16 onwards, transactions and reinvestments occurring before the effective date remain governed by the pre-amendment law. Applying that principle, and on the finding that the assessee satisfied the conditions of section 54F as they stood prior to the amendment, the Tribunal allowed the exemption. [Paras 7, 13]

Claim for exemption under section 54F allowed as the reinvestment outside India was made prior to the amendment which is prospective from 01.04.2015.

Final Conclusion: The appeal is allowed: exemption under section 54F was available to the assessee for reinvestment in a residential property outside India because the amendment requiring investment in India took effect from 01.04.2015 and is not retrospective.

Notice under section 274 read with section 271(1)(c) - Penalty under section 271(1)(c) - concealment of particulars or furnishing inaccurate particulars - Defect for not striking off irrelevant limb in penalty notice - Vagueness in statutory notice vitiating penalty proceedings - Requirement of recorded satisfaction by assessing officer as condition precedent - Strict construction of penal provisions

Notice under section 274 read with section 271(1)(c) - Defect for not striking off irrelevant limb in penalty notice - Vagueness in statutory notice vitiating penalty proceedings - Requirement of recorded satisfaction by assessing officer as condition precedent - Whether the penalty proceedings and order u/s 271(1)(c) are vitiated by a defective notice which did not strike off the irrelevant limb and thereby failed to specify whether the penalty was for concealment or for furnishing inaccurate particulars of income. - HELD THAT: - The notice dated 13.03.2013 initiating penalty proceedings reproduced both limbs of section 271(1)(c) and did not strike off the inapplicable limb, thereby failing to inform the assessee whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars. The Tribunal examined the notice and found it omnibus and vague. It followed the principle that initiation of penalty proceedings under section 271(1)(c) requires satisfaction recorded by the assessing officer as to the applicable limb and that the statutory notice must clearly convey the grounds on which penalty is sought to be imposed. Applying the strict construction appropriate to penal provisions and following the binding views of the Bombay High Court and the coordinate bench (as well as the authority of the Supreme Court on the necessity of recorded satisfaction), the Tribunal held that a mere defect in the notice of not striking off the irrelevant matter vitiates the penalty proceedings. There was no distinguishing circumstance in the present case to depart from those precedents, and consequently the penalty framed on the basis of the defective notice could not be sustained.

Penalty proceedings and the penalty under section 271(1)(c) were quashed for being founded on a defective notice that did not strike off the irrelevant limb and was thus vague.

Final Conclusion: The assessment-year 2010-11 appeal is allowed; the penalty levied under section 271(1)(c) is quashed because the initiating notice under section 274 read with section 271(1)(c) was defective for not indicating which limb applied, rendering the penalty proceedings invalid.

Treatment of seized jewellery as stock-in-trade - relevance of statement recorded under section 132(4) - acceptance of balance sheet and income-tax returns as evidence of closing stock - assessment under section 153C read with section 143(3)

Treatment of seized jewellery as stock-in-trade - relevance of statement recorded under section 132(4) - acceptance of balance sheet and income-tax returns as evidence of closing stock - Whether the addition of Rs.22,31,445/- representing part of the jewellery found in the locker should be treated as the assessee's income or as stock-in-trade and consequently be deleted from income. - HELD THAT: - The Tribunal found that the jewellery seized from locker No.237 included an amount specifically reflected as the assessee's stock in the accounts. The assessee, a small-scale trader in gold and jewellery, had consistently filed balance sheets and income-tax returns for earlier years showing closing stock; those returns and assessments for the years 2006-07 to 2012-13 were accepted. The statement recorded under section 132(4) acknowledged that part of the jewellery represented stock of business. The absence of a fixed place of business did not, by itself, negate the character of jewellery as stock-in-trade where the capital account, balance sheet and ITRs consistently recorded such stock and the assessee had made contemporaneous disclosures. The Assessing Officer and the Commissioner (Appeals) erred in declining the claim merely because the stock was found in a locker and the assessee had no shop or office. On these facts the Tribunal concluded that the impugned addition relating to Rs.22,31,445/- was not taxable income but represented the assessee's stock and therefore the addition was not sustainable.

The addition of Rs.22,31,445/- is deleted and the appeal is allowed; the CIT(A)'s finding is set aside.

Final Conclusion: The Tribunal allowed the appeal for AY 2013-14, holding that the jewellery valued at Rs.22,31,445/- seized from the locker was stock-in-trade of the assessee supported by his statement, balance sheets and returns, and therefore the addition made by the assessing officer is deleted.

Characterisation of expenditure as revenue or capital - Allowability of research and development expenditure under section 35(1)(i) and 35(1)(iv) - Transfer pricing adjustment and omission of clause (i) of section 92BA - Applicability of section 40A(2) after deletion of section 92BA(i) - Disallowance under section 40A(ia) for failure to deduct tax at source - Nature of government incentive as capital receipt - Computation of carry forward of losses and unabsorbed depreciation

Transfer pricing adjustment and omission of clause (i) of section 92BA - Applicability of section 40A(2) after deletion of section 92BA(i) - Validity of transfer pricing adjustment made under section 92CA(3) by reference to clause (i) of section 92BA and consequential remit to examine allowability under section 40A(2). - HELD THAT: - The Tribunal held that clause (i) of section 92BA, which brought certain specified domestic transactions within Chapter X, was omitted by the Finance Act, 2017 without a saving clause and, following the reasoning in the Karnataka High Court decisions considered, must be treated as never to have existed for the purposes contested. Consequently the transfer pricing adjustment of Rs. 2,196,447,328 made by invoking section 92BA(i)/chapter X is not sustainable. At the same time, because section 40A(2) remains on the statute book and coordinate-bench precedents have directed administrative examination under section 40A(2) where 92BA(i) is held inapplicable, the Tribunal set aside the transfer pricing ground back to the assessing officer for reconsideration of the allowability of the expenditure under section 40A(2) (i.e., remand for examination under section 40A(2) rather than sustaining the TP adjustment). The Tribunal rejected the contention that remand constitutes an impermissible second chance to Revenue given the parties' prior approach and the assessee's own admissions in TP documentation that the transactions fell within section 40A(2). [Paras 17, 18, 19, 20]

Transfer pricing addition under section 92CA(3)/92BA(i) deleted as unsustainable; matter remitted to AO to examine allowability under section 40A(2).

Characterisation of expenditure as revenue or capital - Whether development and R&D expenditure of Rs. 4,78,71,842 was capital in nature or deductible as revenue expenditure under section 37(1). - HELD THAT: - The Tribunal found that the assessee was already engaged in the business of manufacturing commercial vehicles and the expenditure related to setting up an additional assembly line and product development within the same line of business. There was no acquisition of any enduring capital benefit or a new business; the assessing officer's reliance on the matching principle was inappropriate given the assessee's substantial sales in the relevant business. The facts and findings of the DRP and the record showed the expenses were incurred for development in an existing business vertical and were not capital in nature. Accordingly the disallowance was deleted and the depreciation that had been allowed in consequence withdrawn. [Paras 21, 24]

Expenditure of Rs. 4,78,71,842 held to be revenue in nature and allowable; disallowance deleted and consequential depreciation withdrawn.

Disallowance under section 40A(ia) for failure to deduct tax at source - Whether dealer incentives claimed by the assessee required TDS under section 194H such that disallowance under section 40A(ia) was justified. - HELD THAT: - On identical facts the Tribunal followed binding coordinate and High Court authority holding that dealer incentives, where the sale to dealers is on a principal-to-principal basis and the relationship has been found to be such in earlier assessment years, are not commission within the meaning of section 194H and therefore not subject to TDS. The Tribunal noted the High Court decision in Mahindra & Mahindra Ltd and the dismissal of revenue's SLP, observed that subsequent assessments did not feature such disallowance, and concluded the impugned disallowance under section 40A(ia) must be deleted. [Paras 25, 28]

Disallowance of dealer incentives under section 40A(ia) deleted; no TDS under section 194H was required on the dealer incentives.

Allowability of research and development expenditure under section 35(1)(i) and 35(1)(iv) - Characterisation of expenditure as revenue or capital - Allowability of expenditure claimed under section 35(1)(i) and 35(1)(iv) and whether such expenditure was capital in nature. - HELD THAT: - The Tribunal examined the nature of product development activities and the assessee's explanations in its tax audit report and supporting correspondence. Even if some documentary detail was not exhaustive, the activities constituted product development involving extension of applied engineering knowledge related to the assessee's vehicle-manufacturing business. The DRP itself recorded that the expenditures were small and not capital in nature. Consequently the Tribunal allowed the deduction under section 35(1)(i) for Rs. 131,340,403 and under section 35(1)(iv) for Rs. 7,088,075; as a corollary the depreciation earlier allowed was to be withdrawn. [Paras 29, 30, 34, 35]

Expenditure under section 35(1)(i) and 35(1)(iv) allowed; disallowance deleted and prior depreciation to be withdrawn.

Nature of government incentive as capital receipt - Whether the industrial promotion subsidy/incentive received under the Package Scheme of Incentives is a capital receipt or revenue receipt. - HELD THAT: - The Tribunal considered the Scheme's object and the manner in which the subsidy is linked to capital investment in eligible units located in less developed areas. Following coordinate-bench decisions in related group cases on identical scheme facts, the Tribunal concluded that the dominant purpose of the incentive was to promote capital investment and industrial development in backward areas and therefore the receipt is capital in nature. The Tribunal respectfully followed those precedents and directed that the subsidy be treated as a capital receipt (or adjusted against the block of assets as alternative relief). [Paras 36, 39]

Industrial promotion subsidy held to be a capital receipt; claim allowed accordingly.

Computation of carry forward of losses and unabsorbed depreciation - Direction to compute and grant carry forward of unabsorbed losses and unabsorbed depreciation. - HELD THAT: - The Tribunal directed the assessing officer to quantify carry forwards in accordance with law, noting that a speaking order quantifying carry forward had not been passed and that computation must be completed by the AO in conformity with statutory provisions. [Paras 40]

Matter remitted to AO to compute carry forward of losses and unabsorbed depreciation in accordance with law.

Final Conclusion: The appeal is partly allowed: the transfer pricing addition under section 92BA(i)/section 92CA(3) is struck down as unsustainable but the AO is directed to re-examine allowability under section 40A(2); development/R&D expenditure and research deductions under sections 35(1)(i)/(iv) and/or section 37(1) are allowed; dealer incentive disallowance under section 40A(ia) deleted; industrial promotion subsidy held to be capital receipt; and carry forward of losses and unabsorbed depreciation remitted to the AO for computation.

Arm's Length Price - Most Appropriate Method (MAM) - Transactional Net Margin Method (TNMM) - Combined Transaction Approach - Comparability under Rule 10B - Treatment of foreign exchange gains in operating profit - Allocation of expenses between segments - Application of export turnover filter - Provision of corporate guarantee as international transaction - Determination of guarantee fee on utilized amount

Transactional Net Margin Method (TNMM) - Combined Transaction Approach - Comparability under Rule 10B - Whether the profit margin for benchmarking should be taken at entity level or should be limited to the sale to associated enterprises (and corresponding comparable adjustments). - HELD THAT: - The Tribunal held that TNMM is the MAM but rejected the assessee's contention to adopt entity level margins based on a combined transaction approach because the transfer pricing study did not satisfactorily demonstrate how the various international transactions were interlinked or inseparable. The Tribunal noted that the international revenue figure used by the TPO included both AE and non AE sales and, having regard to Form 3CEB, directed that the profit and proportionate expenses relatable to sales to AEs alone must be considered for computing the tested party's margin. The TPO was directed to perform a similar exercise for the comparable companies (including seeking information under section 133(6)) to derive margins relatable to export sales to AEs and then determine ALP in accordance with those results. [Paras 33, 34, 38]

Entity level margin was not accepted; profit margin must be computed with reference to sales to associated enterprises only and the matter remitted to the TPO to determine ALP after deriving comparable margins relatable to export sales to AEs.

Allocation of expenses between segments - Whether the TPO's manner of apportioning expenses between domestic and international segments was correct. - HELD THAT: - The Tribunal examined the TPO's method of apportioning expenses (largely by turnover ratio with certain items on actuals) and observed that the assessee failed to propose any specific alternative allocation basis or justify one with supporting data. In the absence of a better, substantiated apportionment submitted by the assessee, the Tribunal found the TPO's apportionment to be just and fair and not to be interfered with. [Paras 35]

The TPO's apportionment of expenses between domestic and international segments is sustained.

Treatment of foreign exchange gains in operating profit - Whether foreign exchange fluctuation/gain relating to international transactions should be included in operating profit for TNMM benchmarking. - HELD THAT: - The Tribunal agreed with the assessee that foreign exchange fluctuation to the extent it relates to international transactions forms part of operating profit. The Tribunal relied on the cited precedent of the Delhi High Court in Pr. CIT v. Ameriprise India to support the view that such forex gains should be regarded as operating in nature for comparison purposes. [Paras 36]

Foreign exchange gain relatable to international transactions shall be included in operating profit for benchmarking.

Application of export turnover filter - Comparability under Rule 10B - Whether a 75% export turnover filter must be applied to select comparables or whether a lower/ flexible filter is permissible. - HELD THAT: - The Tribunal observed that the statutory rules do not prescribe a fixed export turnover filter and that Rule 10B envisages flexibility to achieve meaningful comparability. Given the facts that the assessee and available comparables did not meet a 75% export threshold, the Tribunal found the TPO's application of a 25% export filter to be reasonable in the factual matrix and held that the two admitted comparables could not be excluded by insisting on a rigid 75% filter. [Paras 37]

The TPO's adoption of a 25% export turnover filter is sustained; a rigid 75% filter is not mandatory in the facts of the case.

Provision of corporate guarantee as international transaction - Determination of guarantee fee on utilized amount - Whether ALP for providing corporate guarantee should be determined and, if so, at what rate and on what base. - HELD THAT: - The Tribunal accepted that providing a corporate guarantee to an associated enterprise is an international transaction. While the TPO had computed ALP using a CRISIL derived rate and applied it on the sanctioned limit, the Tribunal found merit in the assessee's submission (supported by tribunal precedents) to apply a 0.5% rate on the amount actually utilized by the AE rather than on the entire sanctioned limit. The Tribunal therefore directed that the guarantee fee be determined at 0.5% on the credit limit actually utilized. [Paras 39]

ALP for the corporate guarantee is to be computed at 0.5% on the amount actually utilized by the associated enterprise.

Final Conclusion: Appeal is partly allowed. The Tribunal set aside the ALP determination for sale transactions and remitted the matter to the TPO to determine ALP after computing margins attributable to sales to associated enterprises (with comparables adjusted similarly), upheld the TPO's apportionment method and export filter approach, held that forex gains related to international transactions form part of operating profit, and directed that ALP for the corporate guarantee be computed at 0.5% on the amount actually utilized.

Garnishee order under Section 226(3) of the Income tax Act - stay of recovery proceedings arising from an application under Section 220(6) - review/revision by Principal Commissioner as revisional power under departmental office memorandum - interim stay pending disposal of review/revision application

Garnishee order under Section 226(3) of the Income tax Act - stay of recovery proceedings arising from an application under Section 220(6) - interim stay pending disposal of review/revision application - Operation of the garnishee order dated 25.07.2022 was stayed until disposal of the review/revision application pending before the Principal Commissioner of Income Tax; consequential effect of any adverse decision by the Principal Commissioner was temporally limited. - HELD THAT: - The impugned garnishee order issued under Section 226(3) follows an order dated 20.07.2022 by the Assistant Commissioner rejecting the petitioner's application under Section 220(6) for stay of recovery. The petitioner has filed a review/revision application before the Principal Commissioner in terms of the departmental Office Memorandum dated 29.02.2016 (the memorandum being in substance a revisional mechanism where orders of an ACIT are revisited by the Principal Commissioner). Appeals in respect of AY 2019-20 to AY 2021-22 are also pending before the Commissioner of Appeals. In light of these pending departmental remedies, the court exercised its supervisory jurisdiction to grant an interim protection by staying the operation of the garnishee order until the Principal Commissioner disposes of the review/revision application. The court further provided a limited protection period by directing that, if the Principal Commissioner's decision is adverse to the petitioner, it shall not be given effect for one week from the date of service to enable the petitioner to take further steps.

The operation of the garnishee order dated 25.07.2022 is stayed until the Principal Commissioner disposes of the pending review/revision application; any adverse decision of the Principal Commissioner shall not be acted upon for one week from service.

Final Conclusion: Writ petition disposed by granting an interim stay on the garnishee order until disposal of the review/revision application by the Principal Commissioner; limited one week protection against implementation of any adverse departmental decision.

Prosecution under Section 276-CC for delay in filing return versus prosecution for evasion of income-tax - quashing of cognizance for misreading of complaint / manifest error of law - exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash erroneous cognizance - prosecution sanction as administrative/statutory exercise not ordinarily challengeable under Section 482 - remand to trial Court to pass speaking order after considering submissions

Prosecution under Section 276-CC for delay in filing return versus prosecution for evasion of income-tax - quashing of cognizance for misreading of complaint / manifest error of law - Cognizance taken by the trial Court for evasion of income-tax was erroneous where the departmental complaint sought prosecution only for delayed filing under Section 276-CC(ii). - HELD THAT: - The complaint filed by the Income tax Department sought prosecution for a 72 day delay in filing the return under Section 276 CC(ii) and contained no allegation of evasion of income tax. The trial Court, however, recorded cognizance treating the case as one of evasion. That order demonstrates a misreading of the complaint and a manifest error of law. In such circumstances the cognizance taken ex facie exceeds the relief sought by the complainant and is liable to be quashed and set aside. The Court therefore interfered under its supervisory jurisdiction to correct the obvious error and to prevent continuation of proceedings based on the incorrect characterisation of the offence. [Paras 22, 23, 26]

Order of cognizance for evasion set aside as ex facie erroneous for misreading the complaint.

Exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash erroneous cognizance - Invoking Section 482 to quash the cognizance was permissible despite the availability of a revisional remedy under Section 397 Cr.P.C., given multiplicity of identical petitions and palpable error in the impugned order. - HELD THAT: - Although ordinarily the remedy against an order of cognizance lies by way of revision under Section 397 Cr.P.C., the High Court exercised its inherent jurisdiction under Section 482 because the impugned order suffered from a palpable legal and factual error and numerous identical petitions would otherwise multiply litigation and transfer dockets to the revisional court. The preliminary objection that the petitioner should have preferred revision was therefore overruled in the circumstances of the case. [Paras 17, 24, 25]

Preliminary objection rejected; Section 482 jurisdiction properly invoked to quash the cognizance in the circumstances.

Prosecution sanction as administrative/statutory exercise not ordinarily challengeable under Section 482 - Order granting prosecution sanction was not adjudicated upon and cannot be challenged in the present petition under Section 482; challenge to prosecution sanction must be pursued in accordance with law. - HELD THAT: - The Court observed that the act of granting prosecution sanction is an administrative or statutory exercise of power. Since the order granting sanction was not challenged before this Court in the petition, and because such sanctioning exercise is not ordinarily open to collateral attack under Section 482 in the present proceedings, the petition cannot be used to set aside the sanction; petitioners remain free to challenge the sanction order through appropriate proceedings if so advised. [Paras 16, 27, 31]

Prosecution sanction not set aside in these proceedings; petitioners may challenge it separately in accordance with law.

Remand to trial Court to pass speaking order after considering submissions - Proceedings were remitted to the trial Court to consider submissions of both parties and to pass a speaking order, with remedies reserved. - HELD THAT: - The High Court quashed the impugned cognizance orders and directed the petitioners to appear before the trial Court on a specified date. The trial Court was directed to consider the submissions of the Income tax Department and of the petitioners and thereafter pass a reasoned, speaking order; remedies of both parties against that order were kept open and reserved for appropriate challenge. This remand is procedural and for fresh consideration rather than an adjudication on the merits of prosecution sanction. [Paras 28, 29, 30, 31]

Cases remitted to trial Court for fresh consideration and speaking order; remedies reserved.

Final Conclusion: Writ petitions allowed to the extent of quashing the trial Court's cognizance orders taken for evasion where the departmental complaint alleged only delayed filing under Section 276 CC(ii); preliminary objection to exercise of Section 482 jurisdiction overruled; prosecution sanction not set aside in these proceedings and may be challenged separately; matters remitted to trial Court to consider submissions and pass speaking orders with remedies reserved.

Accrual of income - deletion of addition for amount not actually received - Project Completion Method - burden of proof on revenue to rebut assertion of non receipt - substantial question of law - condonation of delay

Accrual of income - deletion of addition for amount not actually received - burden of proof on revenue to rebut assertion of non receipt - Project Completion Method - Whether the Tribunal was correct in deleting the addition made by the Assessing Officer by holding that the amount claimed to have accrued was not received in the relevant previous year and in accepting the Project Completion Method followed by the assessee. - HELD THAT: - The High Court examined the Tribunal's findings that the assessee had furnished details showing the disputed amount was not actually received in the year under consideration and that the Assessing Officer had produced nothing to rebut that assertion. The Tribunal recorded the factual finding of non receipt and relied on the assessee's accounting practice of recognising income on completion of projects. It further observed that income from a separate project had been taxed when that project was completed in the relevant later year, supporting the assessee's contention that accrual in the earlier year had not occurred. In these circumstances the Tribunal concluded that the addition could not be sustained. The High Court found that the Tribunal rightly noted both the factual position and the legal position, and that the revenue had failed to place material to controvert the assessee's claim; accordingly no substantial question of law arises out of those conclusions. [Paras 7]

The Tribunal's deletion of the addition was upheld as justified on the facts and law; the Tribunal properly accepted the Project Completion Method and the absence of evidence from the revenue to rebut non receipt.

Final Conclusion: Application for condonation of delay allowed; appeal under Section 260A dismissed as devoid of any substantial question of law; connected application for stay closed.

Deduction of tax at source on interest component of compensation awarded by Motor Accident Claims Tribunal - Scope and application of Section 194A(1) read with clauses (ix) and (ixa) of subsection (3) - Form 15G/Rule 29C - declaration to relieve payer of TDS obligation - Temporal effect of legislative amendment w.e.f. 01.06.2015 on TDS liability - Distinction between interest as part of compensatory award and taxable interest income

Deduction of tax at source on interest component of compensation awarded by Motor Accident Claims Tribunal - Scope and application of Section 194A(1) read with clauses (ix) and (ixa) of subsection (3) - Distinction between interest as part of compensatory award and taxable interest income - Whether the Insurance Company is liable to deduct TDS on the interest paid on compensation awarded by the Motor Accident Claims Tribunal and on what legal basis such deduction may be made or excluded. - HELD THAT: - The Court examined the character of interest awarded by the Tribunal and the operation of Section 194A read with its exclusion clauses. It noted consistent High Court decisions holding that the interest awarded pendente lite as part of the compensatory exercise is compensatory in nature and, to the extent it is not income of the payee, is not chargeable to tax; section 194A is a machinery provision for deduction and does not itself convert a non-taxable receipt into taxable income. The Court, however, followed the view in earlier Division Bench and other High Court decisions that where the interest component payable to an individual claimant in a financial year exceeds Rs.50,000, the payer (insurance company) must demonstrate the computation to the Tribunal and may be obliged to deduct TDS under Section 194A(1) as read with clauses (ix) and (ixa) of subsection (3). The Court reconciled prior conflicting orders by (a) recognising that interest constituting part of compensation up to the date of the award is not exigible to tax as income, (b) accepting that statutory exclusions in subsection (3) affect applicability of TDS at the time of credit or payment, and (c) adopting the practical requirement that the insurer file calculation before MACT to justify any deduction where aggregate interest exceeds the statutory threshold for that claimant.

Interest paid as part of compensation pendente lite is not ordinarily taxable; nonetheless, where interest paid to a claimant in a financial year exceeds Rs.50,000, the insurer must file calculations before the MACT and comply with TDS provisions unless relieved by declaration or other applicable exclusion.

Form 15G/Rule 29C - declaration to relieve payer of TDS obligation - Whether the Insurance Company may obtain Form 15G (Rule 29C) from claimants to avoid deduction of TDS at source. - HELD THAT: - The Court accepted the position adopted by several High Courts that where a claimant furnishes the appropriate declaration in Form 15G/Rule 29C (in terms of Section 197/197A/197A(1-A) as applicable), the insurer is relieved of its obligation to deduct TDS. The Court directed that the insurer should, at the first instance, apply to the MACT for obtaining the requisite declaration from the claimant at the time of payment of interest so that the MACT may release payment after the form is signed or thumb-marked (or by guardian in case of minors). This procedure is mandated as a practical step to secure relief from TDS liability at the time of payment.

Insurers should obtain Form 15G/Rule 29C declarations from claimants at the time of payment to be relieved of TDS obligation, and MACTs shall release payments after such declarations are produced.

Temporal effect of legislative amendment w.e.f. 01.06.2015 on TDS liability - Effect of payments made prior to 01.06.2015 and insurer's liability in respect of TDS deducted before that date. - HELD THAT: - The Court held that the temporal position prior to the amendment (w.e.f. 01.06.2015) treated the matter differently in some precedents: where interest on compensation was paid prior to 01.06.2015, the insurer who had deducted TDS shall pay to the claimants the amount of tax it had deducted (i.e., the insurer cannot saddle the claimant with seeking refund if the deduction resulted from the insurer's error), and the insurer may thereafter seek refund from the Income Tax Authorities by filing a revised return. Conversely, if interest was paid after 01.06.2015 and the amount exceeded Rs.50,000 per claimant in the financial year, the insurer need not reimburse the claimant for TDS already deposited but should follow the procedure of securing Form 15G or file computations before the MACT.

Where interest was paid prior to 01.06.2015 and TDS was deducted by the insurer, the insurer must pay the deducted tax amount to the claimants and may pursue refund from tax authorities; different consequences apply to payments made after 01.06.2015 when statutory thresholds and exclusions operate.

Remand to Motor Accident Claims Tribunal for fresh orders and verification - Whether the matters should be remitted to the respective Motor Accident Claims Tribunals for implementation of the Court's directions and fresh consideration in light of the legal principles laid down. - HELD THAT: - The Court determined that several impugned orders directing insurers to deposit amounts of TDS or to refund same required reconsideration in light of the legal principles stated (treatment of compensatory interest, threshold of Rs.50,000, Form 15G procedure, and temporal effect of the 01.06.2015 amendment). Accordingly, matters where appropriate were remanded to the concerned MACTs with directions: if the interest on compensation was paid prior to 01.06.2015, the insurer shall pay to claimants the tax deducted and may seek refund from the Income Tax Authorities; where interest was paid after 01.06.2015 and exceeds Rs.50,000 per claimant per year, the insurer shall secure Form 15G or produce calculations before the MACT and MACTs shall pass fresh orders within the stipulated time.

Several matters are remanded to the respective MACTs for fresh orders to implement these directions; MACTs to pass appropriate orders after verification and within the time directed by this Court.

Final Conclusion: The Court directed a uniform approach: interest awarded as part of compensation pendente lite is not ordinarily exigible to tax; where aggregate interest payable to a claimant in a financial year exceeds Rs.50,000 the insurer must file computations before the MACT and may deduct TDS unless relieved by production of Form 15G; amounts of TDS deducted on interest paid prior to 01.06.2015 must be paid by insurers to claimants (insurers may seek refund from tax authorities), and affected matters are remanded to the respective MACTs to pass fresh orders implementing these directions within the period specified by the Court.

Accrual basis under the mercantile system of accounting - Revenue recognition as per Accounting Standard (AS) 9 - Accounting Standards not notified under section 145(2) - Adjustment to returned income without rejecting books of account - Percentage completion method for recognition of income from construction - Adverse inference for non production of primary documents - Remand for computation and verification of facts

Accrual basis under the mercantile system of accounting - Revenue recognition as per Accounting Standard (AS) 9 - Adjustment to returned income without rejecting books of account - Whether the Assessing Officer could make an adjustment to the returned income in respect of advances from customers where the assessee follows mercantile accounting and claims to follow AS 9, despite AS 9 not being notified and absence of specific accounting records or stock accounting. - HELD THAT: - The Tribunal held that principles of commercial accounting under the mercantile system govern accrual of income and that AS 9 merely articulates those principles; non notification of AS 9 does not preclude its relevance where the assessee adopts it. The AO was entitled to examine whether the conditions for revenue recognition were satisfied and to make specific adjustments to returned income without formally rejecting the books, where the books and supporting documents were opaque or absent. On the facts, the assessee had no clear accounting policy for recognizing revenue, no stock register or valuation of completed units, no sale agreements produced despite being called for, and lacked allocation of construction costs; these factual deficiencies justified the AO in reassessing accrual. The Tribunal explained that income from sale of constructed units may, depending on the agreement and stage of completion, be recognized proportionately (percentage completion approach) where significant risks and rewards have passed and there is no significant uncertainty; alternatively, where the entire contractual right has passed and consideration received, income may be recognised subject to allowance for estimated expenditure. Given the absence of primary records and explanation, the question of the correct quantum of income could not be finally determined on appeal and therefore the matter was remitted to the AO to compute income of the real estate business in accordance with the principles stated, after affording opportunity to the assessee to produce records and be heard. [Paras 4]

Matter restored to the file of the AO for computation of income from the real estate business on the basis of accrual principles/percentage completion or as per terms of agreements, permitting the AO to make specific adjustments without rejecting books, and directing the assessee to cooperate and produce records.

Adverse inference for non production of primary documents - Remand for computation and verification of facts - Whether the credits shown to accounts of land owners (other liabilities) representing amounts payable to land owners but received by the assessee from customers are genuine and properly characterised. - HELD THAT: - The Tribunal observed that confirmations from creditors/land owners were filed very late, primary land purchase agreements and other materials were not produced despite calls, and the arrangement-whereby land owners purportedly receive a percentage of sale consideration paid to the assessee and land is transferred proportionately-was opaque and raised doubts as to the genuineness and true nature of the credits. The Tribunal found that the AO's tentative finding (that amounts were received which were not refundable) was not rebutted and that independent verification of land owners' conduct, their accounting and tax treatment, and the underlying documents was necessary. Consequently, the issue was not finally adjudicated on merits and was remitted for full verification and definitive findings after affording the assessee and, where relevant, land owners an opportunity to be heard. [Paras 4]

Remitted to the AO for verification of genuineness and correct characterisation of the credits relating to land owners, with directions to examine evidence produced by land owners and issue clear findings.

Adjustment to returned income without rejecting books of account - Whether the addition made by the AO in respect of other liabilities (other than sums credited to land owners) was sustainable. - HELD THAT: - The Tribunal found no adverse finding by the AO with respect to amounts other than those credited to land owners. The parts of the addition that related solely to other liabilities were not shown to be unsupported or doubtful on the record before the Tribunal and therefore there was no basis to sustain those particular additions. The Tribunal confirmed deletion of the addition insofar as it related to sums other than those claimed to be payable to land owners. [Paras 4]

Deletion of the addition in respect of other liabilities (other than the credits to land owners) is confirmed.

Final Conclusion: The Revenue appeal is partly allowed in that the matter is remitted to the Assessing Officer for: (i) determination and computation of income from the assessee's real estate business in accordance with accrual principles and the guidance given (including proportionate recognition where appropriate), and (ii) verification of the genuineness and true character of credits attributed to land owners; the AO is to make definite findings after hearing the assessee and relevant parties. The deletion of additions in respect of other liabilities (excluding the credits to land owners) is confirmed. The assessee's cross objection is dismissed.

Genuineness of purchases - allowability of depreciation - allowability of interest as business expenditure - survey under Section 133A - consistency and finality of appellate orders - disallowance under Section 14A - disallowance under Section 40A(3)

Genuineness of purchases - allowability of depreciation - survey under Section 133A - consistency and finality of appellate orders - Depreciation claimed on computer hardware for AY 1999-2000 was allowable as the purchases were genuine. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the Assessing Officer's disallowance of depreciation. The Assessing Officer had primarily relied on adverse findings recorded in the AY 2000-01 assessment following a survey under Section 133A; however, the Tribunal in AY 2000-01 (paras 24-26 of that order) found those adverse findings untenable because the third-party witnesses had resigned prior to being examined, affidavits of present directors supporting the purchases were on record and were not tested by the AO, bank financing showed no adverse inference, and the survey did not cover all premises. The CIT(A) correctly applied the Tribunal's binding view in the lead year and consistent appellate decisions in adjacent years, noting non-application of mind by the AO who disallowed depreciation for all purchases though only some suppliers were impugned. On this basis the AO's disallowance for AY 1999-2000 was not sustainable and was deleted. [Paras 6, 11, 12]

Deletion of the disallowance of depreciation for AY 1999-2000 upheld; depreciation allowed.

Allowability of interest as business expenditure - genuineness of purchases - Interest disallowed as consequential to disallowance of depreciation was allowable for AY 1999-2000. - HELD THAT: - The Assessing Officer's disallowance of interest was consequential on his view that the computer purchases were not genuine. Having upheld the genuineness of purchases and allowed depreciation, the Tribunal accepted the CIT(A)'s consequential deletion of the interest disallowance because the loans were used for business purposes and interest paid is allowable as business expenditure. [Paras 12]

Deletion of the disallowance of interest for AY 1999-2000 upheld; interest allowed.

Disallowance under Section 40A(3) - Disallowance under Section 40A(3) of Rs.5,000 for AY 1999-2000 was deleted. - HELD THAT: - The payment was an advance not claimed as expenditure; the CIT(A) correctly deleted the AO's disallowance under Section 40A(3). The Tribunal found no reason to interfere with that deletion. [Paras 13]

Deletion of the Section 40A(3) disallowance for AY 1999-2000 upheld.

Genuineness of purchases - allowability of depreciation - allowability of interest as business expenditure - consistency and finality of appellate orders - Depreciation claimed on computer hardware for AY 2001-02 was allowable and the related interest was allowable. - HELD THAT: - Grounds 1 and 2 for AY 2001-02 raised issues identical to AY 1999-2000. Applying the same reasoning-the Tribunal's decision in the lead year and consistent appellate orders in other years-the CIT(A)'s deletion of the AO's disallowances was upheld. The AO's reliance on the base-year findings and wholesale disallowance despite purchases from other parties demonstrated non-application of mind; accordingly depreciation and consequential interest disallowances were not sustainable. [Paras 14, 15, 18]

Deletion of disallowances of depreciation and interest for AY 2001-02 upheld; both allowed.

Disallowance under Section 14A - Disallowance under Section 14A for AY 2001-02 was deleted. - HELD THAT: - The CIT(A) deleted the Section 14A disallowance after applying principles of statutory construction and precedent holding that the Rule 8D mechanism and certain amendments operate prospectively. The Revenue did not contest this position before the Tribunal; therefore the CIT(A)'s deletion was sustained. [Paras 15, 16]

Deletion of the Section 14A disallowance for AY 2001-02 upheld.

Preliminary expenses - consistency and finality of appellate orders - Disallowance of preliminary expenses for AY 2001-02 was deleted. - HELD THAT: - The CIT(A) found no opportunity was afforded to the assessee to explain the addition and no adverse finding that expenditure was not for business; the issue was also decided in the assessee's favour in the lead year by the Tribunal. On these bases the CIT(A) deleted the AO's disallowance and the Tribunal found no infirmity in that conclusion. [Paras 17, 18]

Deletion of the disallowance of preliminary expenses for AY 2001-02 upheld.

Final Conclusion: Both Revenue appeals (AYs 1999-2000 and 2001-02) are dismissed and the CIT(A)'s deletions of disallowances - including depreciation on computers, consequential interest, Section 14A and Section 40A(3) adjustments, and preliminary expenses - are upheld in view of the Tribunal's lead-year findings, material on record, and consistency of appellate decisions.

Unexplained cash credit - onus of proof in respect of share subscription - identity, creditworthiness and genuineness of investors - effect of replies to notices under section 133(6) - evidentiary value of documentary proof furnished before appellate authority - refund of share application money and its bearing on Section 68 inquiry

Unexplained cash credit - identity, creditworthiness and genuineness of investors - effect of replies to notices under section 133(6) - evidentiary value of documentary proof furnished before appellate authority - Validity of the addition of Rs.2,44,00,000 made by the AO under section 68 in respect of share application money received from M/s Neel Kamal Vanijya Pvt. Ltd. and M/s Chandrika Vanijya Pvt. Ltd. - HELD THAT: - The Tribunal found on record that notices under section 133(6) were dispatched by the AO on 28.03.2015 and received by the investor companies on 03.04.2015, and that the investor companies furnished replies immediately thereafter. The assessee had also placed substantial documentary evidence before the CIT(Appeals) (share application forms, audited financial statements, bank statements, confirmations, board resolutions), which were forwarded to the AO for a remand report. The AO failed to rebut or dislodge these documents either during assessment or in the remand proceedings. In addition, the source of funds of M/s Neel Kamal Vanijya Pvt. Ltd. had earlier been accepted by the AO in that company's assessment (acceptance of share capital raised in an earlier year), and no fresh capital was raised thereafter up to the date of subscription to the assessee's shares. The Tribunal held that once the assessee discharged the primary onus by furnishing credible documentary evidence and the AO did not satisfactorily rebut it, adverse inference under section 68 could not be drawn; the fact that replies to AO's queries were delayed due to late dispatch/receipt of notices could not be attributed to the assessee or the investor companies. [Paras 9, 11, 12, 13, 15]

Addition of Rs.2,44,00,000 made under section 68 in respect of share application money from the two investor companies is vacated and the CIT(Appeals) order in that regard is upheld.

Unexplained cash credit - identity, creditworthiness and genuineness of investors - evidentiary value of documentary proof furnished before appellate authority - Validity of the addition of Rs.26,00,000 made by the AO under section 68 in respect of share application money received from the directors and their close relatives. - HELD THAT: - The assessee produced before the CIT(Appeals) copies of returns of income, computations, bank details and other documents to substantiate the identity, creditworthiness and genuineness of transactions with the directors and their relatives. The AO made no verifiable attempt in the remand report to dislodge these documents or to place material contradicting them. The Tribunal held that the assessee discharged the primary onus; in absence of any effective rebuttal by the AO, the adverse inference drawn by the AO could not be sustained. [Paras 6, 16, 17]

Addition of Rs.26,00,000 made under section 68 in respect of share application money from directors and their relatives is vacated and the CIT(Appeals) order in that regard is upheld.

Unexplained cash credit - opening balance and prior receipt of share premium - Whether the share premium/opening balance amounting to Rs.92,62,500 could be treated as unexplained cash credit in A.Y.2012-13. - HELD THAT: - The CIT(Appeals) observed that the amount represented opening balances received by way of cheques in the period relevant to A.Y.2010-11. As such, the AO erred in treating that opening balance as an unexplained cash credit in the year under consideration. The Tribunal accepted this view, noting that amounts received in earlier years and reflected as opening balances could not be added as unexplained cash credits for the later assessment year. [Paras 6, 8]

The addition of the share premium/opening balance is not sustainable as an unexplained cash credit in A.Y.2012-13; the CIT(Appeals) finding on this point is upheld.

Final Conclusion: The departmental appeal is dismissed. The Tribunal upholds the CIT(Appeals) deletion of the additions made under section 68 in respect of (i) share application money of Rs.2,44,00,000 from the two investor companies, (ii) Rs.26,00,000 from directors and relatives, and (iii) the opening balance/share premium treated as unexplained cash credit for A.Y.2012-13.

Scope of revision in limited scrutiny assessment - claim of deduction under Section 54 of the Income Tax Act, 1961 - revision under Section 263 of the Income Tax Act, 1961 - limited scrutiny / Computer Aided Scrutiny Selection (CASS) - condonation of delay due to COVID-19

Scope of revision in limited scrutiny assessment - revision under Section 263 of the Income Tax Act, 1961 - Whether the Principal Commissioner could revise the assessment under Section 263 by examining rental income which was not part of the limited scrutiny issues selected by CASS. - HELD THAT: - The Tribunal found on perusal of the notice under Section 143(2) that the computerized selection (CASS) identified only the correctness of the deduction from capital gains for limited scrutiny. The issue of rental income admitted by the assessee was not before the Assessing Officer during that limited scrutiny assessment. Having regard to the confined scope of the original assessment scrutiny, the Principal Commissioner could not in revision proceedings under Section 263 expand the scope to examine rental income which was never placed for examination by the AO. The revision in respect of rental income was therefore unsustainable and was quashed. [Paras 9, 10, 11]

Revision order quashed insofar as it seeks to re-open or re-examine the admitted rental income because that issue was not within the limited scrutiny before the Assessing Officer.

Claim of deduction under Section 54 of the Income Tax Act, 1961 - revision under Section 263 of the Income Tax Act, 1961 - Whether the revision under Section 263 was justified in relation to the assessee's claim of deduction under Section 54. - HELD THAT: - The Tribunal recorded that the Assessing Officer conducted verification in the limited scrutiny and examined the claim of deduction under Section 54, including consideration of valuation/evaluation material, and accepted the assessee's claim in the assessment order. Given that the AO had already considered and adjudicated the claim and the subsequent compliance giving effect to revision also accepted the assessee's position, the Tribunal treated the revision on this aspect as academic. No prejudicial error was shown in the original assessment requiring corrective exercise under Section 263 on this ground. [Paras 4, 8, 12]

Revision in relation to the Section 54 deduction was held to be academic because the Assessing Officer had examined and accepted the claim in the limited scrutiny assessment.

Final Conclusion: Delay in filing the appeal is condoned having regard to the COVID-19 directions of the Supreme Court; the appeal is partly allowed - the revision order under Section 263 is quashed insofar as it reopens the rental income not selected in limited scrutiny, while the challenge to the Section 54 deduction is treated as academic since it was examined and accepted by the Assessing Officer.

Deduction under section 36(1)(viia) - Penalty under section 271(1)(c) of the Income Tax Act - Inaccurate particulars and concealment - Claim not sustainable in law does not ipso facto amount to furnishing inaccurate particulars - Mens rea requirement for imposition of penalty

Deduction under section 36(1)(viia) - Penalty under section 271(1)(c) of the Income Tax Act - Claim not sustainable in law does not ipso facto amount to furnishing inaccurate particulars - Inaccurate particulars and concealment - Mens rea requirement for imposition of penalty - Whether penalty under section 271(1)(c) can be levied for the assessee's incorrect claim of deduction under section 36(1)(viia). - HELD THAT: - The Tribunal examined the assessment and penalty records and observed that the Assessing Officer disallowed the deduction claimed under section 36(1)(viia) as not being in accordance with law and the CIT(A) confirmed that disallowance. However, the penalty order did not record any specific finding that income was concealed or that inaccurate particulars were furnished with the requisite element of culpability. Relying on the Supreme Court authority that an incorrect claim which is not sustainable in law does not, by itself, constitute furnishing inaccurate particulars or concealment, and that mens rea (or contumacious conduct) is relevant to attract penalty under section 271(1)(c), the Tribunal held that mere unsuccessfulness of the claim in assessment cannot justify penalty. In the absence of a finding that the assessee knowingly concealed income or furnished inaccurate particulars, the imposition of penalty was not sustainable and had to be set aside. [Paras 5, 6]

Penalty under section 271(1)(c) deleted as the incorrect claim of deduction did not amount to furnishing inaccurate particulars or concealment for AY 2008-09.

Final Conclusion: Appeal allowed; penalty imposed under section 271(1)(c) set aside for Assessment Year 2008-09.

Previous sanction necessary for prosecution - cognizance of offences - sanction under the Prevention of Corruption Act - distinction between absence of sanction and invalidity of sanction - order on an application under Section 227 Cr.P.C.

Cognizance of offences - previous sanction necessary for prosecution - Whether sanction under Section 137 of the Customs Act was necessary for taking cognizance of the offences alleged against the petitioner. - HELD THAT: - The Court noted that Section 137(1) of the Customs Act requires previous sanction of the Principal Commissioner of Customs or Commissioner of Customs only for offences under Sections 132, 133, 134, 135 or 135-A of the Customs Act. The offences charged against the petitioner are under the IPC and under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act and do not fall within the specified Customs Act offences. Consequently, sanction under Section 137 of the Customs Act was not a precondition for the Special Court to take cognizance of the present offences. The Special Court therefore did not err in declining discharge on the ground that Section 137 sanction was absent. [Paras 14]

Sanction under Section 137 of the Customs Act was not required for the offences charged; cognizance could be taken without such sanction.

Sanction under the Prevention of Corruption Act - distinction between absence of sanction and invalidity of sanction - order on an application under Section 227 Cr.P.C. - Whether the sanction accorded by the Commissioner of Central Excise under Section 19(1)(c) of the Prevention of Corruption Act was valid despite the petitioner having served in Customs at the time of the alleged offence. - HELD THAT: - The Court examined the sanction at Ex.P-11, which is under Section 19(1)(c) of the Prevention of Corruption Act, and the service records placed before it. The records show the petitioner was appointed in Central Excise, was transferred to Customs during his service, and as on the date of the sanction he was serving in the Department of Excise; the Commissioner of Central Excise was the authority empowered to remove him. The Court relied on the legal distinction that absence of any sanction can be challenged at the threshold, whereas alleged irregularity or invalidity in the manner of granting sanction (non-application of mind or other defects) is a matter for trial. In the facts of this case there was a sanction; challenges to its alleged irregularity are to be raised and considered during trial rather than on an application under Section 227 Cr.P.C. [Paras 15, 18, 19]

The sanction by the Commissioner of Central Excise under Section 19(1)(c) is not vitiated; any alleged irregularity in grant of sanction is for determination at trial, and does not warrant discharge under Section 227 Cr.P.C.

Final Conclusion: Criminal Revision Petition dismissed; the Special Court's order rejecting the petitioner's Section 227 Cr.P.C. application is upheld. The Special Court is directed to proceed with early disposal of the trial as indicated by this Court.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act after institution of winding up petition - effect of appointment of Provisional Liquidator on continuation of criminal proceedings - consequence of subsequent winding up order on earlier-filed criminal complaint - leave of Tribunal and operation of stay on proceedings against a company in liquidation

Maintainability of complaint under Section 138 of the Negotiable Instruments Act after institution of winding up petition - consequence of subsequent winding up order on earlier-filed criminal complaint - The summoning order in the complaint under Section 138 NI Act could not be quashed on the ground that a winding up petition/provisional liquidator had been appointed prior to institution of the complaint. - HELD THAT: - The Court found that mere institution of a winding up petition and appointment of a Provisional Liquidator does not amount to a winding up order. The authorities relied upon establish that a complaint under Section 138 would be maintainable where the complaint is filed before a winding up order is made, and that a pending winding up petition (without a final winding up order) does not automatically bar continuation of the complaint. The record showed that the complaint in question was instituted on 12.08.2013 and the final winding up order in Co.Pet. 36/2013 was rendered on 27.03.2014; consequently the complaint preceded the winding up order. The court also had regard to the order dated 10.07.2017 in CA No.52/2017 in Co.Pet. 36/2013 which had expressly permitted continuation of the specific complaint subject to conditions. Applying these facts to the legal principle that filing of a winding up petition or appointment of a provisional liquidator does not by itself render a subsequently instituted complaint automatically non-maintainable, the petition for quashing was not tenable. [Paras 11, 14, 15]

Petition to quash the summoning order dismissed; the complaint under Section 138 is not rendered non-maintainable by the prior appointment of a Provisional Liquidator where the final winding up order was made after institution of the complaint and continuation had been permitted by this Court.

Effect of appointment of Provisional Liquidator on continuation of criminal proceedings - leave of Tribunal and operation of stay on proceedings against a company in liquidation - Appointment of a Provisional Liquidator under the Companies Act does not automatically stay or preclude criminal proceedings against the company or its directors unless the Tribunal has made an order to that effect or granted leave restricting such proceedings. - HELD THAT: - The Court examined the statutory scheme under the Companies Act and noted that Section 273 permits appointment of a provisional liquidator but that Section 279 provides for stay of suits or other legal proceedings only when a winding-up order has been passed or a provisional liquidator has been appointed, subject to leave of the Tribunal. The record disclosed that (a) the earlier order of 28.02.2013 had appointed a provisional liquidator but was subsequently the subject of interlocutory orders, and (b) this Court later, in specific applications (CA Nos.51-53/2017), permitted continuation of identified complaints before the Magistrate subject to conditions. In that context, the mere earlier appointment of a provisional liquidator did not operate as an absolute bar to the criminal complaint; any restriction would depend on the Tribunal's leave or specific orders which were not shown to preclude continuation here. [Paras 6, 8, 9, 10]

Continuation of the criminal complaint was not automatically barred by the appointment of a Provisional Liquidator; continuation permitted by this Court and absence of a Tribunal order refusing leave meant the proceedings could continue.

Final Conclusion: The petition for quashing the summoning order was dismissed. The Court declined to interfere with the Magistrate's proceedings under Section 138 NI Act on the present grounds, while expressly leaving open all questions of merit to be decided in the pending criminal trial.

Binding effect of an approved resolution plan under the Insolvency and Bankruptcy Code - liability of a personal guarantor not discharged by approval of a resolution plan - jurisdictional bar on writ relief where efficacious statutory remedies under the SARFAESI/DRT regime are available - right of a secured creditor to proceed against collateral and guarantors despite an approved resolution plan - remedy for contravention of an approved resolution plan under Section 33(3) of the Insolvency and Bankruptcy Code

Jurisdictional bar on writ relief where efficacious statutory remedies under the SARFAESI/DRT regime are available - Maintainability of a writ petition under Article 226 in a dispute where statutory remedies under the SARFAESI Act and before the DRT are available. - HELD THAT: - The Court held that writ jurisdiction should not be invoked to obtain reliefs which the aggrieved party can pursue under the SARFAESI/DRT scheme. Reliance was placed on Supreme Court and High Court precedents including Phoenix ARC (2022), and the principle that where an effective statutory remedy exists under the SARFAESI Act (and related forums such as the DRT), the High Court will ordinarily decline to entertain a writ petition. The petitioner already had proceedings pending before the DRT challenging the SARFAESI action; therefore the writ was not maintainable in this Court. [Paras 7]

Writ petition not maintainable in view of available and pending statutory remedies before the DRT; petition cannot be entertained on that ground.

Liability of a personal guarantor not discharged by approval of a resolution plan - binding effect of an approved resolution plan under the Insolvency and Bankruptcy Code - Whether approval of a resolution plan by the Adjudicating Authority operates to ipso facto discharge a personal guarantor of the corporate debtor. - HELD THAT: - The Court followed the Supreme Court's exposition that sanctioning a resolution plan and finality under Section 31 does not automatically discharge a personal guarantor. Discharge of the corporate debtor by an involuntary process (such as insolvency proceedings) does not absolve the guarantor because the guarantor's liability arises from an independent contract. The extent and nature of the guarantor's liability depends on the guarantee's terms and is a matter for the appropriate forum; the High Court refrained from adjudicating those inter se claims. [Paras 9]

Approval of the resolution plan does not per se discharge the personal guarantor; guarantor's liability continues and must be determined in the appropriate forum.

Right of a secured creditor to proceed against collateral and guarantors despite an approved resolution plan - remedy for contravention of an approved resolution plan under Section 33(3) of the Insolvency and Bankruptcy Code - Whether the financial creditor could initiate recovery action against collateral and guarantors, and what remedy exists for non-implementation or contravention of the resolution plan. - HELD THAT: - The Court observed that a secured creditor retains the right to proceed against collateral securities and guarantors independent of the resolution plan. Where the resolution plan is contravened by the corporate debtor or resolution applicant, Section 33(3) provides for an application to the Adjudicating Authority for liquidation; that statutory scheme is the remedy prescribed by Parliament. The Court declined to create additional remedies and left the creditor free to pursue available remedies against the resolution applicant or proceed against collateral and guarantors in accordance with law. The court did not examine merits of the inter se claims. [Paras 11, 12]

Creditor may proceed against collateral and guarantors; contravention of the resolution plan is remediable under Section 33(3) IBC and the creditor must pursue statutory remedies rather than seek relief in this Court.

Final Conclusion: The petition is dismissed for want of merit and on account of availability of efficacious statutory remedies; the court has not adjudicated the merits of competing claims and leaves open the parties' rights to pursue remedies before the appropriate fora.

Interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 - application under Section 94 initiating personal insolvency resolution process - personal guarantor to a corporate debtor - stay of proceedings under Section 138 of the Negotiable Instruments Act, 1881 - scope of the expressions "all the debts" and "any legal action or proceedings pending in respect of any debt" in Section 96 - distinction between Part II and Part III of the IBC in relation to corporate persons and individuals - effect of interim moratorium on pending legal proceedings irrespective of their inception date

Interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 - personal guarantor to a corporate debtor - stay of proceedings under Section 138 of the Negotiable Instruments Act, 1881 - scope of the expressions "all the debts" and "any legal action or proceedings pending in respect of any debt" in Section 96 - Whether an interim moratorium under Section 96 of the IBC, triggered by an application under Section 94 by a personal guarantor to a corporate debtor, covers a complaint under Section 138 NI Act arising from a debt incurred in the guarantor's personal capacity and unrelated to the corporate debtor. - HELD THAT: - The court examined the Code's scheme distinguishing Part II (corporate persons) and Part III (individuals and firms), the definition of "personal guarantor" in Part II, and the moratorium provisions. Noting Rule 6 and Section 60(2) (which requires a personal guarantor's application to be filed before the NCLT where the corporate debtor's process is pending) and authoritative observations in Lalit Kumar Jain and P. Mohanraj, the Court held that Section 96's language (covering "all the debts" and "any legal action or proceedings pending in respect of any debt") must be given its plain and wide meaning. Because a "debt" is defined generically and proceedings under Section 138 are not prescribed as "excluded debt", the interim moratorium in Section 96 applies to legal proceedings in respect of any debt of the applicant, even if the debt is personal and not directly connected to the corporate debtor for whom the applicant is a personal guarantor. The Court further observed that personal guarantors are treated as a distinct category and that the NCLT may consider the overall picture of assets and liabilities of the guarantor when adjudicating such applications. [Paras 35, 36, 37, 38]

Section 96's interim moratorium, once an application under Section 94 is filed by a personal guarantor, covers proceedings under Section 138 NI Act in respect of the guarantor's debts, even if those debts are incurred in a personal capacity and are unrelated to the corporate debtor.

Effect of interim moratorium on pending legal proceedings irrespective of their inception date - interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 - stay of proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Whether the interim moratorium under Section 96 operates to stay Section 138 NI Act proceedings that were instituted prior to the filing of the Section 94 application. - HELD THAT: - The Court considered competing interpretations and prior Supreme Court dicta distinguishing moratoria under Part II and Part III. It concluded that the plain language of Section 96, which deems "any legal action or proceedings pending in respect of any debt" to be stayed during the interim moratorium, operates irrespective of when the proceedings were initiated. The Court distinguished cases where Section 14 moratorium and corporate-debtor-specific considerations led to different results, noting that Section 96 contemplates an interim moratorium commencing on the date of the Section 94/95 application and staying pending proceedings in respect of the applicant's debts. Accordingly, a Section 138 complaint filed years earlier falls within the stay effected by Section 96 upon filing of the Section 94 application. [Paras 39, 40]

Proceedings under Section 138 NI Act that predate the Section 94 application are stayed by the interim moratorium under Section 96 from the date of filing of that application, until the Adjudicating Authority decides under Sections 100/101.

Final Conclusion: The petition is allowed: the impugned order refusing a stay is set aside and, by operation of the interim moratorium under Section 96 of the IBC, the trial-court proceedings under Section 138 of the Negotiable Instruments Act shall remain stayed until the Adjudicating Authority decides the petition filed under Section 94 (and any consequent orders under Sections 100/101), the Adjudicating Authority being requested to expedite its decision.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process (CIRP) - Stay/Deferment of proceedings during CIRP - Determination of CIRP costs and challenge under Section 60(5) - Finality of an approved resolution plan - Judicial propriety, comity and avoidance of conflicting adjudications

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process (CIRP) - Stay/Deferment of proceedings during CIRP - Whether proceedings before the Appellate Tribunal against the corporate debtor SREI can continue after initiation of CIRP and declaration of moratorium. - HELD THAT: - The Tribunal recorded that the Adjudicating Authority admitted the RBI petition and declared CIRP and a moratorium in respect of the 1st Respondent (SREI). Applying the statutory mandate and the object of Section 14 to protect the corporate debtor's assets and provide breathing space during CIRP, and having regard to the jurisprudence cited (including Alchemist and P. Mohanraj), the Tribunal held that main proceedings in the two pending Company Appeals which are directed against SREI cannot proceed until completion of the CIRP. The Tribunal noted that the moratorium operates irrespective of whether there is an actual risk of asset dissipation and that continuation of proceedings against the corporate debtor during an operative moratorium would be inconsistent with the statutory scheme. The Tribunal therefore concluded that the appeals insofar as they proceed against the 1st Respondent must be deferred pending completion of CIRP. [Paras 78, 80, 84]

Proceedings in the appeals against the 1st Respondent (SREI) cannot proceed until completion of the corporate insolvency resolution process.

Determination of CIRP costs and challenge under Section 60(5) - Finality of an approved resolution plan - Judicial propriety, comity and avoidance of conflicting adjudications - Whether the pendency of Civil Appeals before the Supreme Court (raising overlapping questions on CIRP costs and reopening of a resolution plan) and the need to avoid conflicting adjudications justify deferring the Tribunal's proceedings. - HELD THAT: - The Tribunal found there is substantive commonality between questions raised in the Civil Appeals pending before the Supreme Court (including whether a resolution professional's determination of CIRP costs can be challenged later and whether proceedings may upset an approved resolution plan) and the issues in the present appeals. In the interests of judicial propriety, comity, fair play and to avoid potentially conflicting outcomes, the Tribunal exercised judicial discretion to defer the hearing of the two Company Appeals for a limited period. The deferment was directed as an interim, pragmatic measure to enable related proceedings before the Supreme Court to progress and to prevent adjudications that might render the Supreme Court proceedings infructuous. [Paras 11, 76, 84]

On grounds of commonality and judicial propriety, the Tribunal deferred the proceedings for a limited period to await adjudication in related Supreme Court proceedings.

Stay/Deferment of proceedings during CIRP - Judicial propriety, comity and avoidance of conflicting adjudications - Scope and duration of the Tribunal's interim direction in light of the moratorium and parallel Supreme Court proceedings. - HELD THAT: - Balancing the statutory moratorium and the pendency of related Civil Appeals before the Supreme Court, the Tribunal did not grant an indefinite stay but directed deferment of the hearing of the two Company Appeals for a period of 12 weeks from receipt of the order's copy. The Tribunal recorded that parties remain free to pursue remedies before the Supreme Court and that the limited deferment is without costs. The direction was framed as a time bound measure in furtherance of substantial justice and judicial discipline. [Paras 84, 85]

The Tribunal ordered deferment of the proceedings in both appeals for 12 weeks from the date of receipt of the order; I.A. Nos. 682 of 2022 and 673 of 2022 stand disposed of with no costs.

Final Conclusion: The Appellate Tribunal, having recorded admission of CIRP and declaration of moratorium in respect of SREI and noting substantive commonality with Civil Appeals pending before the Supreme Court on related questions (including challenge to CIRP costs and effects on an approved resolution plan), directed a limited deferment of the two Company Appeals against SREI for 12 weeks; the interim applications for stay/deferment are disposed of with no costs and parties remain at liberty to pursue remedies before the Supreme Court.

Service of demand notice under Section 8/9 - existence of operational debt and default - dispute on debt - limitation for filing Section 9 petition - admission of Section 9 petition and initiation of CIRP - moratorium under Section 14 - appointment of Interim Resolution Professional and vesting of management

Service of demand notice under Section 8/9 - Demand notice in Form 3 dated 29.04.2019 was duly served on the corporate debtor. - HELD THAT: - The petitioner produced the postal receipt and tracking report showing delivery of the speed post containing the demand notice. The operational creditor also filed an affidavit under Section 9(3)(b) stating there was no reply to the demand notice. On the basis of the tracking report and affidavit, the Tribunal is satisfied that the demand notice was properly served. [Paras 5, 9]

Service of the demand notice was held to be proper and effective.

Existence of operational debt and default - dispute on debt - The operational debt of the corporate debtor stood proved and was not shown to be disputed; default was established. - HELD THAT: - The petitioner supplied goods and produced invoices and ledger entries, and relied upon a bounced cheque as part of the record. The corporate debtor did not appear or file any reply despite service and was proceeded against ex parte. The petitioner also filed the requisite affidavit confirming non-payment. On these materials the Tribunal found the liability and default to be undisputed and established for the claimed amount, meeting the threshold applicable at the time. [Paras 3, 4, 10, 12, 13]

Operational debt and default were held to be proved and undisputed.

Limitation for filing Section 9 petition - The Section 9 petition was filed within the prescribed limitation period. - HELD THAT: - The date of default is recorded as 06.11.2018 and the petition was filed on 05.07.2019. The Tribunal examined these dates and concluded that the petition was filed within limitation. [Paras 11]

The petition was held to be within limitation.

Admission of Section 9 petition and initiation of CIRP - moratorium under Section 14 - appointment of Interim Resolution Professional and vesting of management - On satisfaction of statutory conditions under Section 9, the petition was admitted, CIRP was initiated, moratorium was declared, and an Interim Resolution Professional was appointed. - HELD THAT: - Having found proper service, proof of debt and default, absence of dispute, and timely filing, the Tribunal held that the conditions of Section 9(5)(i) were satisfied. Consequential directions were issued: admission of the petition and initiation of the Corporate Insolvency Resolution Process; moratorium under Section 14 with its statutory prohibitions and exceptions; appointment of Mr. Sanjay Arora as Interim Resolution Professional with directions regarding his duties, public announcement, constitution of Committee of Creditors, reporting and cooperation by the corporate debtor's management; and a direction to the petitioner to deposit an amount for immediate CIRP expenses. [Paras 14, 15, 16, 17, 18]

The petition was admitted; CIRP was ordered to commence, moratorium declared, and an Interim Resolution Professional appointed with ancillary directions.

Final Conclusion: The Tribunal admitted the Section 9 petition filed by the operational creditor, initiated the Corporate Insolvency Resolution Process against M/s. Hoshiar Nirvair Tractors Private Limited, declared the moratorium, and appointed an Interim Resolution Professional after finding proper service, established default and debt, absence of dispute, and that the petition was within limitation.

Operational debt / operational creditor status of tax authorities under the IBC - Moratorium under the Insolvency and Bankruptcy Code, 2016 prohibiting set off of post CIRP refunds against pre CIRP demands - doctrine of set off in the insolvency context

Moratorium under the Insolvency and Bankruptcy Code, 2016 prohibiting set off of post CIRP refunds against pre CIRP demands - operational debt / operational creditor status of tax authorities under the IBC - doctrine of set off in the insolvency context - Whether the Income Tax Department could adjust a refund crystallized after the insolvency commencement date against a pre CIRP demand during the moratorium period - HELD THAT: - The Tribunal applied the NCLAT authorities holding that statutory tax dues constitute operational debt and that the moratorium under Section 14 of the IBC operates from the insolvency commencement date. A refund for Assessment Year 2018 19 was determined on 18.09.2019, after the CIRP commenced on 28.02.2019, and was adjusted by the Department on 29.10.2019 against a demand relating to Assessment Year 2016 17. Such unilateral adjustment of a refund arising during the moratorium was held to be contrary to the protective scope of the moratorium and to settled law recognising that post CIRP rights of the corporate debtor (including receipt of refunds) cannot be set off against pre CIRP demands during the moratorium. The Tribunal rejected the Department's reliance on selective precedents and the argument that set off was permissible because the demand pre dated CIRP, noting that the Department itself treated an identical situation differently in Assessment Year 2019 20 by releasing the refund. In these circumstances the adjustment was unjustified and the Department was directed to release the refund with interest. [Paras 15, 16]

The refund of Rs.43,49,040/ determined for Assessment Year 2018 19 (crystallised after the insolvency commencement date) was wrongly adjusted against a pre CIRP demand during the moratorium; the respondent is directed to release the refund with interest.

Final Conclusion: The application is allowed; the Income Tax Department is directed to release the refund for Assessment Year 2018 19 with interest, because adjustment of a refund crystallised post CIRP against a pre CIRP demand during the moratorium was held to be impermissible.

Financial Creditor - authority of the investment manager to institute proceedings - event of default - default in payment of interest - acceleration of obligations and enforcement of securities on default - moratorium under Section 10A of the IBC - initiation of Corporate Insolvency Resolution Process (CIRP)

Financial Creditor - authority of the investment manager to institute proceedings - The petitioner is a financial creditor and was authorised to present the Section 7 petition through its investment manager. - HELD THAT: - The Tribunal found that the petition was filed by ICICI Prudential Real Estate AIF-I (the Financial Creditor) acting through its Investment Manager under the Investment Management Agreement dated July 31, 2014, which expressly empowered the Investment Manager to institute legal proceedings on behalf of the AIF. The Petition was therefore properly presented by the Financial Creditor and not by the debenture trustee; moreover the Financial Creditor held the majority of the debentures issued under the DSA, negating the objection based on lack of consent of majority debenture holders. [Paras 8]

The objection that the petitioner was not a financial creditor or not authorised to file the petition was rejected.

Event of default - default in payment of interest - acceleration of obligations and enforcement of securities on default - Non-payment of interest under the Debenture Subscription Agreement (DSA) constitutes an event of default and amounts to default of a financial debt. - HELD THAT: - On construing the DSA, the Tribunal observed that clause 2 obliges the Corporate Debtor to pay interest at the stipulated rate on specified quarterly dates, and Article 17.1.2 expressly treats failure to meet payment obligations (including interest) as an event of default. Article 17.2 permits acceleration of obligations and enforcement of security upon such default. The Corporate Debtor had admitted non-payment of interest for the quarters ending September 2019 and December 2019, thereby establishing default in repayment of a financial debt. Having regard to the admitted default, the petition filed within three years of the date of default met the statutory requirements for admission under Section 7. [Paras 8, 9]

The Tribunal held that failure to pay interest under the DSA qualified as default of a financial debt and sustained the Section 7 petition on that ground.

Moratorium under Section 10A of the IBC - The COVID-19 moratorium under Section 10A did not bar the petition because the defaults predated the period covered by Section 10A. - HELD THAT: - The Tribunal noted that the period of protection under Section 10A extends from March 25, 2020 to March 25, 2021, whereas the admitted defaults occurred on September 30, 2019 and December 31, 2019. Since the defaults arose prior to the statutory moratorium period, Section 10A was inapplicable to bar initiation of CIRP based on those defaults. [Paras 8]

The objection that the petition is barred by Section 10A was repelled; Section 10A did not apply to the defaults in issue.

Final Conclusion: The Company Petition under Section 7 was admitted: the Tribunal held that the petitioner was a financial creditor duly authorised to file the petition, the Corporate Debtor had committed a default in payment of interest which qualifies as a default of a financial debt under the DSA, and the COVID-19 moratorium under Section 10A did not apply. Consequentially, CIRP was ordered against the Corporate Debtor, an interim resolution professional was appointed and moratorium relief was directed.

Extended period of limitation under proviso to Section 73(1) - suppression of facts / wilful mis statement for invoking extended limitation - waiver of penalty under Section 80 and its effect on recovery under Section 73 - independent operation of penalty provisions and recovery provisions - centralised registration and subsequent non payment as material suppression

Extended period of limitation under proviso to Section 73(1) - suppression of facts / wilful mis statement for invoking extended limitation - Whether the extended five year limitation under the proviso to Section 73(1) could be invoked by the department in respect of the demand. - HELD THAT: - The Court examined the facts and the statutory scheme and held that the proviso to Section 73(1) confers an extended period of limitation where any of the specified conditions - fraud, collusion, wilful mis statement, suppression of facts, or contravention with intent to evade - are satisfied. The adjudicating authority's waiver of penalty under Section 80 does not of itself negate the existence of the statutory conditions entitling the department to invoke the extended period. On facts, the Bank adopted centralised registration from 1.4.2007 and failed to account for and pay service tax thereafter until the department's action; the non disclosure in ST 3 returns and the sequence of events (intelligence report, departmental summons, payment only after notice) permitted the conclusion that suppression of facts within clause (d) of the proviso was made out for the period in question. Consequently, the extended period of limitation was properly invoked by the department in respect of the relevant period.

Extended limitation under the proviso to Section 73(1) is available and was rightly invoked in respect of the non payment arising after centralised registration.

Waiver of penalty under Section 80 and its effect on recovery under Section 73 - independent operation of penalty provisions and recovery provisions - Whether acceptance of reasonable cause under Section 80 (and waiver of penalty under Section 78) precludes the department from invoking extended limitation to recover service tax. - HELD THAT: - The Court analysed the non obstante clause in Section 80 and the separate roles of penalty provisions and recovery provisions. It held that Section 80, which may relieve an assessee from penalty upon proof of reasonable cause, does not automatically extinguish the department's statutory right of recovery under Section 73 when the factual threshold in the proviso to Section 73(1) is satisfied. To treat waiver of penalty as conclusive proof of absence of suppression or intent to evade would render the independent recovery provision ineffective. On the facts, even though penalty under Section 78 was waived, that did not preclude invocation of extended limitation where suppression was found.

Waiver of penalty under Section 80 does not operate to bar invocation of the extended period of limitation under Section 73 where the facts satisfy the proviso.

Centralised registration and subsequent non payment as material suppression - independent operation of penalty provisions and recovery provisions - Whether the Tribunal erred in setting aside the adjudicating authority's demand as wholly time barred for the period 10.9.2004 to 31.7.2007. - HELD THAT: - The Tribunal had concluded that because penalty under Section 78 was waived the extended period could not be invoked and thus the entire demand up to 31.3.2007 was barred. The High Court found that conclusion erroneous. On the material before it the Court recorded that non payment arose particularly after centralised registration on 1.4.2007 and that material non disclosure occurred in ST 3 returns, justifying invocation of extended limitation for the relevant period. Consequently the Tribunal's broad conclusion that the entire demand from 10.9.2004 to 31.7.2007 was time barred was incorrect and was set aside.

The Tribunal erred in holding the entire demand time barred; the adjudicating authority's invocation of extended limitation cannot be negated solely by waiver of penalty and the demand cannot be set aside in entirety.

Final Conclusion: The appeal is allowed. The High Court held that waiver of penalty under Section 80 does not preclude the department from invoking the extended five year limitation under the proviso to Section 73(1) where suppression of facts is established (notably after centralised registration), and accordingly set aside the Tribunal's order that had declared the entire demand time barred.

Classification of composite contracts as Commercial or Industrial Construction Service - Taxability of Works Contract Service prior to 1st June, 2007 - Invoking correct taxable entry in show cause notice - Allowance of abatement excluding value of goods

Classification of composite contracts as Commercial or Industrial Construction Service - Taxability of Works Contract Service prior to 1st June, 2007 - Allowance of abatement excluding value of goods - Invoking correct taxable entry in show cause notice - Whether the demand of service tax sustained as 'Commercial or Industrial Construction Service' can be maintained in respect of composite contracts inclusive of supply of goods. - HELD THAT: - The Tribunal examined the contracts and accepted that they were composite in nature involving supply of goods and construction services, which was further reflected by the allowance of abatement to exclude the value of goods. Applying the law laid down by the Hon'ble Supreme Court in Commissioner of C. Ex. & Cus., Kerala v. Larsen & Toubro Ltd., composite works contracts are not taxable as service contracts simpliciter and, consequently, 'works contract service' is the relevant taxable entry rather than 'commercial or industrial construction service'. The Supreme Court's decision establishes that works contract services are not liable to service tax as construction simpliciter prior to 1st June, 2007. The Tribunal followed its earlier reasoning in URC Construction (P) Ltd. and related decisions that where contracts are composite the SCN must invoke the correct taxable entry; a demand framed only under 'commercial or industrial construction service' cannot be sustained for contracts that are composite and involve works contract considerations for the periods in question. Applying these principles, the demand confirmed as 'Commercial or Industrial Construction Service' was held unsustainable and set aside. The Tribunal, having decided the appeal on merits, declined to express any view on limitation.

The demand of service tax confirmed as 'Commercial or Industrial Construction Service' in respect of the composite contracts is set aside; the appeals are allowed.

Final Conclusion: Appeals allowed on merits; demand of service tax confirmed as 'Commercial or Industrial Construction Service' in the impugned order quashed and set aside, with consequential relief as per law; no observation made on limitation.

Cargo handling service - Goods transport agency service - Transport of goods by road - Composite supply and dominant element test - classification based on essential features under Section 65A(2b)

Cargo handling service - Transport of goods by road - Composite supply and dominant element test - Whether loading, transportation and unloading of coal within the mining area falls within the definition of "cargo handling service" or is to be classified as transport service. - HELD THAT: - The Tribunal applied the principle that a composite transaction must be classified according to its predominant or essential character rather than by artificially splitting incidental activities. The adjudicating authority had held that transportation of coal was the predominant service and that loading/unloading were incidental to that principal service; accordingly the proceedings were originally dropped as falling under transport service. The Commissioner (Appeals) reversed that finding, treating the activities as "cargo handling service". The Tribunal in the present appeal relied on its earlier Division Bench decision in Singh Transporters, which held that movement of material within a mining area for further processing does not fall within the definition of "cargo handling service", and noted that the Supreme Court refused admission in the Department's appeal against that decision. Applying the dominant-element approach and the precedent, the Tribunal concluded that the activity of loading, transporting and unloading coal within the mining area is essentially transport and not cargo handling.

The activity is not "cargo handling service" but is to be classified as transport of goods; the Commissioner (Appeals)'s order holding it to be cargo handling is unsustainable.

Final Conclusion: The impugned order of the Commissioner (Appeals) holding the appellant's services to be "cargo handling service" is set aside; the appeal is allowed and the services are to be regarded as transport of goods rather than cargo handling, consistent with the Tribunal's earlier decision affirmed by the Supreme Court's refusal to admit the Department's appeal.

Admissibility of input credit on Goods Transport Agency services prior to 1.4.2008 - distribution of CENVAT/credit by head office without Input Service Distributor registration - proportionate distribution under Rule 7 of Cenvat Credit Rules prior to 1.4.2016 - invocation of extended period of limitation for recovery

Admissibility of input credit on Goods Transport Agency services prior to 1.4.2008 - Credit for GTA services received was admissible up to 1.4.2008. - HELD THAT: - The Tribunal followed the binding precedent of the Hon'ble Supreme Court in CCE vs. Ultratech Cement Ltd. and the Tribunal's subsequent decision in Ultratech Cement Ltd. which held that input credit on GTA services was admissible up to the place of removal for the period prior to 1.4.2008. Applying that settled law to the facts, the Tribunal held that the appellant was rightly allowed credit on GTA services for the period in dispute. [Paras 5]

Credit on GTA services up to 1.4.2008 was admissible and was rightly allowed to the appellant.

Proportionate distribution under Rule 7 of Cenvat Credit Rules prior to 1.4.2016 - There was no mandatory requirement to distribute credit proportionately to all units under Rule 7 of CCR prior to the 2016 amendment. - HELD THAT: - The Tribunal observed that Rule 7 provided a mechanism for distribution and that the specific mandatory requirement for proportionate distribution was introduced only by the 2016 amendment. Relying on the Tribunal's decision in Piramal Glass P. Ltd., the Tribunal concluded that for the period before 1.4.2016 the head office was not obliged to distribute credit proportionately to all units, and therefore the distribution made by the appellant's head office was permissible. [Paras 6]

Distribution of credit by the head office without proportionate apportionment prior to 1.4.2016 was permissible.

Distribution of CENVAT/credit by head office without Input Service Distributor registration - Denial of credit on the ground that the head office had not obtained ISD registration was not sustainable. - HELD THAT: - The Tribunal applied the principle established by earlier High Court and Tribunal decisions (including Doshin Ltd., CCE vs. Pricol Ltd., HICAL Technologies, and Rajendra Kumar & Associates) holding that denial of credit solely because the head office had not obtained ISD registration was not warranted. Finding those authorities squarely applicable to the facts, the Tribunal held that the impugned orders denying credit on this ground could not be sustained. [Paras 7]

Impugned denial of credit on account of non-registration of the head office as an ISD is not sustainable.

Invocation of extended period of limitation for recovery - Extended period was not to be invoked where the claims were allowed on merits and the department had information; therefore limitation did not sustain denial of credit. - HELD THAT: - Although the Tribunal primarily disposed the appeals on merits, it noted the procedural history - entries in statutory records, head office registration with Service Tax authorities, and delayed issuance of show-cause notices (first in 2010 despite enquiries in 2008, and a later notice in 2014). Referring to the Supreme Court decision in Nizam Sugar Factory, the Tribunal held that once the claim is allowed on merits and the requisite information was available to the department, there was no scope to sustain denial by invoking the extended period. Consequently, the impugned orders were unsustainable on limitation grounds as well. [Paras 8, 9]

There was no justification for invoking the extended period to deny credit where the claim was admissible on merits and requisite information was available to the department.

Final Conclusion: The appeals are allowed: credit on GTA services up to 1.4.2008 is admissible; distribution by the head office without proportionate apportionment prior to 1.4.2016 and without ISD registration is not a ground to deny credit; and invocation of the extended period is unwarranted in view of the merits decision and facts. Consequential relief shall follow in accordance with law.

Input service - works contract service - modernisation, renovation or repairs of a factory - exclusion clause - Cenvat credit admissibility - imposition of interest and penalty

Input service - works contract service - modernisation, renovation or repairs of a factory - exclusion clause - Cenvat credit admissibility - Whether service tax paid on services used for the Coke Oven Project forming part of modernization/renovation of the existing factory was admissible as Cenvat credit despite the exclusion relating to works contract and construction services. - HELD THAT: - The Tribunal examined the inclusive and exclusionary limbs of the definition of input service as it stood both before and after 01.07.2012 and held that services used in relation to "modernisation, renovation or repairs of a factory" fall within the inclusive part of the definition. The court reasoned that the legislative intent could not have been to include services in the inclusion clause and simultaneously disallow identical services under the exclusion clause. Reliance was placed on earlier decisions applying the inclusion for renovation/modernisation and on Board Circular No. 943/4/2011-CX which clarifies that credit for services used in repair or renovation of factory or office is allowed. The Tribunal noted that it was not disputed that the Coke Oven Project constituted modernization/renovation of the existing plant and that sample invoices described the services as part of the Coke Oven Project. On that basis, even where services involved erection, installation or incidental civil work, if they were used for modernization/renovation of the existing factory they remained admissible as input service, and therefore the Cenvat credit taken was correctly claimed by the appellants. [Paras 16, 17, 18, 21, 22]

The Tribunal set aside the adjudicating authority's demand and held that the service tax paid on services used for the Coke Oven Project as part of modernization/renovation of the existing plant was admissible as Cenvat credit.

Imposition of interest and penalty - Cenvat credit - Whether interest and equivalent penalty as imposed by the adjudicating authority in respect of the alleged ineligible Cenvat credit were sustainable. - HELD THAT: - The adjudicating authority confirmed demand with interest and imposed equivalent penalty. Having held that the services in dispute were admissible as input service, the Tribunal concluded that the foundational demand for ineligible credit failed. Consequently, the concomitant imposition of interest and penalty, which flowed from that demand, could not be sustained. The Tribunal also noted the legal position and clarifications relied upon by the appellants that supported admissibility of the credit; in light of the substantive allowance of credit, the ancillary monetary consequences were set aside. [Paras 16, 21, 22, 23]

The Tribunal annulled the adjudicating authority's imposition of interest and equivalent penalty in respect of the disputed Cenvat credit.

Final Conclusion: The appeal is allowed; the impugned order confirming demand of ineligible Cenvat credit, with interest and equivalent penalty, is set aside as the services used in the Coke Oven Project constituted admissible input service being for modernization/renovation of the existing factory.

Remand for fresh consideration - reconciliation of ER-1 returns - captive use exemption - recalculation of duty liability based on consumption and clearances - assessment founded on accounting errors versus clandestine removal

Remand for fresh consideration - reconciliation of ER-1 returns - captive use exemption - recalculation of duty liability based on consumption and clearances - Whether the matter should be remanded to the original adjudicating authority for re-examination of ER-1 returns, reconciliation of captive-use figures and fresh calculation of the quantity of PU Foam/PU Foam SST captively used and duty liability. - HELD THAT: - The Tribunal found that the demand arose from examination of figures in the appellant's ER-1 returns, particularly the column recording "captive use", and that the dispute may have arisen from bad accounting practice rather than clandestine removal or intentional duty evasion. The adjudicating authority must meticulously examine the ER-1 returns and the figures of "captive use", consider any reconciliation chart filed by the appellant based on documents already on record, and recalculate the ratio of material consumed to final product cleared. The original authority is directed to determine the quantity of PU Foam/PU Foam SST actually captively used and the portion thereof reflected in cleared final products, and to decide the matter afresh independent of earlier orders. The Tribunal permitted reconsideration strictly on the basis of documents on record and the reconciliation chart prepared from those returns. [Paras 6]

Appeal allowed by remanding the matter to the original adjudicating authority to re-examine ER-1 returns, consider the reconciliation chart, recalculate captive-use quantities and resultant duty liability, and decide afresh independent of earlier decisions.

Final Conclusion: The appeal is allowed by way of remand: the original adjudicating authority is directed to re-consider the case on the documents on record (including any reconciliation chart submitted), re-calculate the quantity of PU Foam/PU Foam SST captively used and the corresponding duty liability, and decide the matter afresh.

Vicarious liability under Section 141 of the Negotiable Instruments Act - specific averment of being in-charge and responsible for conduct of company's business - distinction between civil liability and criminal liability under Section 138 read with Section 141 of the Negotiable Instruments Act - onus on accused seeking quashing to produce sterling and incontrovertible material - signatory liability under Section 141(2) of the Negotiable Instruments Act

Vicarious liability under Section 141 of the Negotiable Instruments Act - specific averment of being in-charge and responsible for conduct of company's business - distinction between civil liability and criminal liability under Section 138 read with Section 141 of the Negotiable Instruments Act - Complaint under Sections 138 and 141 N.I. Act must contain specific averments that the accused director was in-charge of and responsible for the conduct of the company's business before vicarious criminal liability can be attached. - HELD THAT: - The Court applied established precedent that Section 141 creates a legal fiction of vicarious liability and therefore requires strict compliance with its statutory requirements. Following S.M.S. Pharmaceuticals Ltd. and Ramrajsingh, mere designation as a Director or a joint civil liability to pay a debt is insufficient to fasten criminal liability under Section 141. The complaint must specifically aver that at the time of the alleged offence the accused was in-charge of and responsible for the conduct of the business of the company; absent such averments the ingredients of Section 141 are not satisfied. The Court emphasised that civil obligations cannot be conflated with the criminal liability contemplated by Sections 138 and 141. [Paras 5, 6, 7]

The complaint must contain the specific averment that the director was in-charge of and responsible for the conduct of the company's business to attract vicarious liability under Section 141.

Onus on accused seeking quashing to produce sterling and incontrovertible material - specific averment of being in-charge and responsible for conduct of company's business - When a director seeks quashing of a complaint for lack of averments under Section 141, there is an onus on the director to place sterling and incontrovertible material or demonstrate reasonable circumstances to substantiate non-involvement; nonetheless the complaint must be read as a whole to ascertain whether the averments suffice. - HELD THAT: - The Court recognised the principle in Gunmala Sales that an accused seeking quashing cannot rest on mere omission in the complaint if the overall averments suffice; accordingly the petitioner bears an evidentiary onus to produce convincing material showing non-involvement. However, the Court also held that the sufficiency of the complaint is to be judged on its complete averments and the documents it relies upon; a quashing petition is not to be defeated by formalistic reliance on isolated lines when the complaint as a whole makes out the case. [Paras 8, 10]

A director seeking quashing must produce sterling material to demonstrate non-involvement, but sufficiency of the complaint is to be assessed holistically against the averments and annexed documents.

Vicarious liability under Section 141 of the Negotiable Instruments Act - signatory liability under Section 141(2) of the Negotiable Instruments Act - On the facts, the complaint as drafted and the documents placed on record do not establish that the petitioner was in-charge of or responsible for the conduct of the accused company's business; therefore the essential ingredient of Section 141 is missing and the complaints against the petitioner are liable to be quashed. - HELD THAT: - The Court examined the complaint and the annexed documents. Although the DIR-12 showed the petitioner was appointed Additional Director on 3 April 2019, the MoU and Tripartite Agreements (relied upon by the complainant) were signed by others and did not reflect participation by the petitioner in conducting the company's business. The complaints did not allege that the petitioner had signed the disputed cheques. The documentary record thus failed to support an averment that the petitioner was in-charge of and responsible for the company's business at the relevant time. Consequently the statutory prerequisite for imposing vicarious criminal liability under Section 141 was absent as regards the petitioner. [Paras 11, 12, 13, 14, 15]

The complaints qua the petitioner are quashed because the essential averment of being in-charge and responsible for the company's business is not borne out by the complaint or its annexed documents.

Final Conclusion: The petitions are allowed; the complaint proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act stand quashed as against the petitioner Javahar Lal.

Section 138 Negotiable Instruments Act - criminal liability for dishonour of cheque - absence of drawer or debt - privity of contract - abuse of process - quashing of complaint and summoning order - inherent jurisdiction under Section 482 Cr.P.C.

Section 138 Negotiable Instruments Act - absence of drawer or debt - criminal liability for dishonour of cheque - abuse of process - Proceedings under Section 138 NI Act against the petitioner-company where it did not issue the cheques and no debt or liability was averred were liable to be quashed. - HELD THAT: - The mandate of Section 138 NI Act imposes criminal liability only where a cheque is drawn by a person in discharge of a debt or liability and is dishonoured. The petitioner-company neither issued the cheques nor received any consideration from the sale transaction; there is no averment in the complaint of any debt or liability owed by the petitioner to the complainant. Because the first statutory ingredient-issuance of the cheque by the accused-is not made out, and no debt or liability is shown against the petitioner, the ingredients of Section 138 are not fulfilled. Allowing continuation of proceedings against a party against whom the statutory ingredients are absent would amount to an abuse of the process of court. Applying the principles permitting exercise of extraordinary powers to prevent misuse of process, the complaint and the impugned summoning order as against the petitioner were quashed. [Paras 12, 13, 16, 18]

Complaint No. 3033/2020 and the summoning order dated 28.10.2020, insofar as they relate to the petitioner, are set aside.

Inherent jurisdiction under Section 482 Cr.P.C. - quashing of complaint and summoning order - Prior withdrawal of a revision petition does not preclude exercise of the High Court's inherent jurisdiction under Section 482 Cr.P.C. to quash proceedings which fail to disclose the ingredients of an offence. - HELD THAT: - Although a revision petition challenging the summoning order had been filed by the petitioner and subsequently withdrawn, that fact does not prevent the High Court from invoking its inherent jurisdiction under Section 482 Cr.P.C. where the complaint itself fails to disclose the essential ingredients of Section 138 NI Act against the petitioner. The court may exercise extraordinary powers to prevent abuse of process and to secure the ends of justice notwithstanding previous procedural steps taken in other fora. [Paras 11, 19]

Withdrawal of the earlier revision petition does not bar the High Court from entertaining and allowing the present petition under Section 482 Cr.P.C.

Final Conclusion: The petition is allowed: the complaint and the impugned summoning order dated 28.10.2020 are set aside insofar as they relate to the petitioner-company on the ground that the ingredients of Section 138 NI Act are not made out against it; the order is without prejudice to proceedings, if any, against other accused or to the FIR against the petitioner and/or its officers.