TaxTMI Updates e-Newsletter
Aug 12,2024

Revocation of cancellation of registration - requirement to file application in prescribed form - compliance with appellate order - statutory time limit for reconsideration under Rule 23(2)(a)

Requirement to file application in prescribed form - revocation of cancellation of registration - Application filed by the petitioner did not comply with the requirements of Rule 23 and Form GST Regulation 21 and therefore was not a proper application for revocation of cancellation of registration. - HELD THAT: - The Court examined the application dated 22.05.2024 filed by the petitioner and found that it was not in consonance with the requirements enumerated under Rule 23, including submission in Form GST Regulation 21 as mandated for seeking revocation of cancellation. While the Appellate Commissioner had set aside the cancellation and directed consideration of revocation, the statutory procedure under Rule 23 requires a proper application in the prescribed form accompanied by the relevant documents. For these reasons the impugned application was held to be deficient and the petitioner was permitted to file a proper application within the time directed. [Paras 7, 8]

Petitioner's application was not in conformity with Rule 23 and Form GST Regulation 21; petitioner permitted to file a proper application within 10 days annexing relevant documents and a certified copy of the order.

Compliance with appellate order - statutory time limit for reconsideration under Rule 23(2)(a) - Respondent no.2 is obliged to consider a proper application for revocation and dispose of it within 30 days in accordance with Rule 23(2)(a) after affording opportunity to the parties. - HELD THAT: - The Court recorded that the Appellate Commissioner's order dated 12.03.2024 has attained finality and, subject to the petitioner submitting a proper application as required by Rule 23, respondent no.2 is statutorily bound to consider and decide that application within the stipulated period under Rule 23(2)(a). The Court directed that the respondent shall consider the application strictly in accordance with law, provide opportunity to the parties, and dispose of the matter within 30 days from receipt of the proper application. [Paras 7, 8]

Respondent no.2 shall consider and decide the petitioner's proper application for revocation within 30 days as mandated by Rule 23(2)(a), after providing opportunity to the parties.

Final Conclusion: Writ petition disposed of: petitioner directed to file a proper application under Form GST Regulation 21 within 10 days; respondent no.2 directed to consider and dispose of the application in accordance with Rule 23(2)(a) within 30 days after affording opportunity to the parties.

Principles of natural justice - service by uploading notices on electronic portal - order under Section 73 of the WBGST/CGST Act, 2017 - alternate remedy of appeal - condonation of delay by appellate authority

Principles of natural justice - service by uploading notices on electronic portal - order under Section 73 of the WBGST/CGST Act, 2017 - Petitioner's challenge to the impugned order on the ground of lack of notice/violation of principles of natural justice was not finally adjudicated by this Court but directed to be raised before the appellate authority. - HELD THAT: - The Court noted the petitioner's contention that notices and the order were uploaded under the portal's "additional notices" menu, and that a personal hearing was fixed prior to the expiry of time granted to file a reply, which the petitioner said rendered the hearing meaningless. The Court observed the order was passed on 11th December 2023 and uploaded on the portal, but declined at this stage to determine whether uploading under the "additional notices" menu constituted adequate service under Section 169(1)(d) of the Act. In view of the availability of an alternate remedy by way of appeal, the Court refrained from adjudicating the alleged violation of natural justice and directed the petitioner to pursue the appellate remedy so that the grievance can be examined and decided by the appellate authority on merits. [Paras 5, 6, 7]

Petitioner permitted to prefer an appeal within 30 days; appellate authority to consider the challenge on merits if appeal is filed as directed.

Alternate remedy of appeal - condonation of delay by appellate authority - Appropriateness of writ petition given delay in challenging the order and availability of statutory appellate remedy. - HELD THAT: - The Court recorded that the impugned order was dated 11th December 2023 and the writ petition was filed on 11th June 2024 without explanation for the delay. While observing that no case for interference in exercise of writ jurisdiction had been made out, the Court, in view of the alternate statutory remedy, directed the petitioner to approach the appellate authority. The Court further exercised supervisory discretion to facilitate effective remedy by permitting the appeal filing within a truncated period and directing the appellate authority to condone delay where an appropriate application explaining the delay accompanies the appeal, and to decide the appeal on merits within a specified timeframe. [Paras 4, 5, 6, 7, 8]

Writ petition disposed; petitioner directed to file appeal within 30 days with an application explaining delay; appellate authority to condone delay and hear the appeal on merits within 8 weeks from filing, subject to compliance of formalities.

Final Conclusion: Writ petition disposed of without adjudication on the merits of the alleged breach of natural justice; petitioner granted limited relief to file an appeal within 30 days with an application explaining delay, and the appellate authority directed to condone the delay and decide the appeal on merits within eight weeks if the appeal is so filed.

Input Tax Credit - natural justice - opportunity of hearing - reasoned and speaking order - proceedings under Section 73 of the SGST Act - remand for fresh adjudication

Input Tax Credit - natural justice - opportunity of hearing - reasoned and speaking order - proceedings under Section 73 of the SGST Act - Impugned orders rejecting the petitioner's claim of Input Tax Credit without fixing a date for personal hearing and without assignment of reasons were sustainable in law - HELD THAT: - The Court found on the record that the notice issued did not fix any date for personal hearing and did not assign reasons for initiating proceedings under Section 73 of the SGST Act, and that the assessing authority passed the impugned order without assigning reasons. The appellate order also relied on facts raised for the first time in the appeal, to which the petitioner had not been put to notice and had no opportunity to rebut. For these reasons, the impugned orders suffer from absence of the opportunity of hearing and lack of a reasoned, speaking order, rendering them legally unsustainable. [Paras 7, 8]

Impugned orders quashed for failure to afford hearing and for lack of a reasoned and speaking order

Remand for fresh adjudication - reasoned and speaking order - opportunity of hearing - Whether the matter should be remanded for fresh consideration and in what manner - HELD THAT: - Having quashed the impugned orders on grounds of procedural infirmity and the appellate reliance on new facts not put to the petitioner, the Court directed that the matter be remitted to the assessing authority (respondent no.3) to pass a fresh, reasoned and speaking order after hearing all stakeholders. The fresh adjudication is to be carried out without regard to the observations in the present order and within the timeframe specified by the Court. [Paras 8, 9]

Matter remanded to respondent no.3 to pass a fresh reasoned and speaking order after hearing all stakeholders within two months

Final Conclusion: Writ petition allowed; impugned orders quashed and the matter remitted for fresh adjudication with direction to pass a reasoned and speaking order after hearing stakeholders within two months; any amounts deposited shall await outcome of the fresh order.

Writ of Mandamus - Direction to consider representation and pass orders on merits - Statutory appeal under Section 107 of the GST Act, 2017 - Pre-deposit for prosecuting statutory appeal

Writ of Mandamus - Direction to consider representation and pass orders on merits - Pre-deposit for prosecuting statutory appeal - Petition seeking writ directing withdrawal of bank freezing orders was disposed by issuing a direction to the respondent to consider and decide the petitioner's representation dated 07.02.2024 within a specified time-frame. - HELD THAT: - The Court noted that the petitioner had filed a statutory appeal under Section 107 of the GST Act, 2017 and had made a pre-deposit. Rather than adjudicating the merits of the challenge to the orders and bank freezing, the Court directed the respondent to consider the representation dated 07.02.2024 and to pass appropriate orders on merits and in accordance with law. The direction to decide was to be complied with within two weeks from receipt of a copy of the order. The Court thereby disposed of the writ petition without expressing any view on the substantive entitlement to withdrawal of the impugned forms or on any coercive recovery measures. [Paras 6, 7]

Respondent directed to dispose of the representation dated 07.02.2024 and pass appropriate orders on merits and in accordance with law within two weeks; writ petition disposed of with no costs.

Final Conclusion: Writ petition disposed by directing the respondent to consider and decide the petitioner's representation dated 07.02.2024 on merits and in accordance with law within two weeks; no costs.

Cancellation of GST registration - principle of natural justice - show cause notice - right to personal hearing - supply of documents relied upon - quashing of administrative orders - remand for fresh consideration

Cancellation of GST registration - principle of natural justice - show cause notice - Impugned orders cancelling the petitioner's GST registration were unsustainable and liable to be quashed for failure to afford principles of natural justice. - HELD THAT: - The Court found that the show cause notice and the orders impugned could not be sustained because the adjudicating authority proceeded without furnishing to the petitioner the file or documents relied upon and without granting the personal hearing requested by the petitioner. The omission to provide the material relied upon in the show cause notice and to permit effective representation rendered the petitioner severely handicapped in replying to the allegations. For these reasons the impugned orders were quashed and set aside. The Court expressly refrained from making any observation on the merits of the underlying allegations. [Paras 2, 6, 9, 11]

The orders dated 17th May 2022 and 25th May 2023 cancelling the petitioner's GST registration are quashed and set aside.

Supply of documents relied upon - right to personal hearing - remand for fresh consideration - Matter remitted to the respondent-authorities for fresh consideration after providing the petitioner the relied-upon file, an opportunity to reply and a personal hearing, followed by a reasoned order. - HELD THAT: - Instead of adjudicating the merits, the Court directed that the specific file (F. No. V/CGST/MS/AE/Gr.09/CIU-557/Magic Gold/1913/2022) relied upon in the show cause notice be furnished to the petitioner by a specified date. The petitioner was directed to file its reply within a fixed time, and the adjudicating authority was mandated to grant a personal hearing (with at least five working days' notice) and thereafter pass a reasoned order dealing with all submissions. The Court emphasized that it has not ruled on merits and limited its remit to ensuring compliance with fair procedure before fresh adjudication. [Paras 11]

Respondent shall provide the relied-upon file, petitioner to file reply, a personal hearing shall be granted, and a reasoned order shall be passed on fresh consideration.

Final Conclusion: The writ petition is allowed: the cancellation orders are quashed; the matter is remitted to the respondents to supply the relied-upon file, permit the petitioner to reply and be heard, and thereafter pass a reasoned order; no observations have been made on the merits.

Violation of principles of natural justice - personal hearing under Section 75 (4) of the CGST Act - quashing of orders for breach of natural justice - Writ of Certiorari

Violation of principles of natural justice - personal hearing under Section 75 (4) of the CGST Act - quashing of orders for breach of natural justice - The order dated 29.06.2019 and the appellate order dated 04.08.2020 were quashed for failure to afford a personal hearing as required by Section 75 (4) of the CGST Act, thereby violating principles of natural justice. - HELD THAT: - The Court held that Section 75 (4) mandates that where an adverse decision is contemplated against a person chargeable with tax or penalty, the Department is bound to give a personal hearing even if the person did not request one. In the present case the Department did not afford a personal hearing before passing the order dated 29.06.2019. That omission constitutes a breach of natural justice and renders the order ex facie contrary to the statutory mandate. Consequent appellate action based on the impugned order is vitiated and liable to be set aside. Applying this determinative legal principle, the Court quashed the impugned orders. [Paras 4, 5]

The orders dated 29.06.2019 and 04.08.2020 are quashed for breach of natural justice for failure to grant the statutorily mandated personal hearing.

Personal hearing under Section 75 (4) of the CGST Act - remand for fresh consideration - The matter was remitted for fresh consideration after affording a personal hearing and for the authority to pass an appropriate order in accordance with law. - HELD THAT: - Because the impugned orders were quashed on procedural grounds, the Court directed that the second respondent shall give the petitioner an opportunity of a personal hearing and, after considering all contentions, pass an appropriate order in accordance with law. The authority must undertake this exercise afresh and decide the matter on merits following statutory requirements. The Court specified a timeline of four weeks from the date on which the personal hearing is given for passing the fresh order. [Paras 6]

The matter is remanded to the second respondent to afford a personal hearing and to pass a fresh order in accordance with law within four weeks of the hearing.

Final Conclusion: Writ petition allowed; impugned orders quashed for failure to afford personal hearing under Section 75 (4) of the CGST Act and the matter is remitted for fresh decision after granting a personal hearing within four weeks.

Reasonable opportunity of hearing - reconsideration on merits - remand for fresh decision - conditional setting aside of order - personal hearing - voluntary remittance as condition precedent - treatment of common discrepancy

Reasonable opportunity of hearing - reconsideration on merits - remand for fresh decision - Impugned order dated 30.12.2023 was set aside and the matter remanded for fresh consideration subject to conditions - HELD THAT: - The Court found that the petitioner was not given a reasonable opportunity to contest the tax proposal on merits, having placed on record reconciliation statements and electronic credit ledger entries which prima facie showed that supplies were declared by amendment and that transitional credit had been reversed. In view of these prima facie materials and the petitioner's contention that non-participation resulted from reliance on a consultant who did not inform about the portal notice, the impugned order was set aside and the matter remanded for fresh adjudication. The remand is for reconsideration of the tax proposal on merits after affording the petitioner a reasonable opportunity, including a personal hearing, to contest the show cause notice and produce supporting documentation. [Paras 4, 5]

Matter remanded for fresh decision on merits after petitioner is afforded a reasonable opportunity, including a personal hearing.

Voluntary remittance as condition precedent - treatment of common discrepancy - personal hearing - Conditions for grant of relief on remand were specified and accepted remittance proportions recorded - HELD THAT: - The Court conditioned setting aside of the impugned order on specified voluntary remittances by the petitioner and on treating discrepancy nos.2 and 12 as a common discrepancy. On instructions, the petitioner agreed to remit specified percentages of the disputed tax demands: 5% collectively for discrepancy nos.2 and 12, 5% for discrepancy nos.6 and 9, and 10% for discrepancy no.4. The petitioner was permitted to submit a reply to the show cause notice within two weeks of receipt of the order copy, and upon receipt of that reply and satisfaction of the remittances, the assessing authority (2nd respondent) was directed to provide a reasonable opportunity including personal hearing and to pass a fresh order within three months from receipt of the petitioner's reply. [Paras 4, 5]

Relief granted subject to specified remittances, submission of reply within two weeks, and requirement that the authority provide hearing and pass a fresh order within three months.

Final Conclusion: Writ petition allowed in part: impugned order dated 30.12.2023 set aside on the stated conditions; petitioner to make prescribed remittances and may file a reply within two weeks; upon compliance the authority to afford hearing and pass a fresh order within three months; no order as to costs.

Show cause notice - cancellation of GST registration - natural justice - retrospective cancellation - Rule 86B - Rule 21(g) - GSTI field visit report - restoration of registration - fresh proceedings in accordance with law

Show cause notice - Rule 21(g) - Rule 86B - natural justice - Whether the impugned show cause notice furnished adequate and specific grounds to enable the petitioner to reply to the allegation of issuing invoices without supply of goods and alleged violation of Rule 86B. - HELD THAT: - The Court held that the impugned show cause notice merely recited Rule 21(g) and stated that the person violates Rule 86B without specifying any invoices, transactions, or particulars of the alleged violations. A show cause notice must clearly state the reasons on which adverse action is proposed so as to enable the noticee to respond meaningfully. The grounds as stated in the impugned notice were cryptic and insufficient for the petitioner to frame a proper response. Consequently, the SCN was held to be deficient for violating principles of natural justice by failing to furnish particulars of the alleged misconduct. [Paras 9, 10, 11]

The impugned show cause notice was set aside as being legally inadequate and violative of natural justice.

Cancellation of GST registration - retrospective cancellation - GSTI field visit report - restoration of registration - fresh proceedings in accordance with law - Whether the cancellation order, which relied additionally on a field report (firm found non-functioning) and cancelled registration retrospectively, was within the scope of the SCN and consistent with fair procedure. - HELD THAT: - The Court found that the cancellation order imposed a ground (firm not functioning as per GSTI report dated 24.11.2023) which was not mentioned in the SCN, and no copy of that report was supplied nor was the petitioner afforded an opportunity to reply to that specific allegation. The order therefore travelled beyond the scope of the SCN and breached principles of natural justice. The order also imposed retrospective cancellation with effect from an earlier date though no such relief was foreshadowed in the SCN. Given these infirmities, the cancellation order could not be sustained. The Court directed restoration of the petitioner's GST registration forthwith but clarified that respondents remain free to initiate fresh proceedings in accordance with law. [Paras 12, 13, 14, 21, 22]

The cancellation order was set aside, the registration restored, and the respondents permitted to initiate fresh proceedings lawfully.

Final Conclusion: The petition was allowed: the impugned show cause notice and cancellation order were set aside for being cryptic and for travelling beyond the SCN (including reliance on an unserved field report and retrospective cancellation); the petitioner's GST registration is restored forthwith, without prejudice to fresh proceedings in accordance with law.

Cancellation of GST registration with retrospective effect - failure to file returns for a continuous period of six months - exercise of power to cancel must be informed by reason - modification of retrospective effect to date of death - respondent's right to initiate recovery proceedings for period prior to death

Cancellation of GST registration with retrospective effect - failure to file returns for a continuous period of six months - exercise of power to cancel must be informed by reason - modification of retrospective effect to date of death - Validity of cancelling the deceased taxpayer's GST registration ab initio and the appropriate retrospective date of effect - HELD THAT: - The Show Cause Notice alleged cancellation on the ground that returns were not filed for a continuous period of six months but did not specify any ground for cancellation with retrospective effect nor indicate that retrospective cancellation would be imposed. The proper officer has power under Section 29(2) of the CGST Act to cancel registration, including retrospectively, but such exercise must be informed by reasons and cannot be arbitrary. Where the only ground advanced is non-filing of returns for a continuous six-month period, cancellation ab initio for the entire period from grant of registration is not warranted absent additional justification. Applying these principles to the facts, the court found it appropriate to confine the retrospective effect of the cancellation to the date of the taxpayer's death, since the registration became functionally inoperative thereafter and retrospective cancellation to the grant date was unsupported by the SCN or the impugned order. The court nevertheless clarified that this modification does not bar authorities from pursuing recovery for any dues arising prior to the date of death in accordance with law. [Paras 11, 12, 13, 14, 15]

Impugned order of cancellation is modified so as to be operative from 07.08.2020 (date of death) instead of from 05.04.2018; authorities remain free to initiate recovery proceedings for periods prior to 07.08.2020.

Final Conclusion: Writ petition allowed to the limited extent of modifying the retrospective cancellation: GST registration cancellation is operative from 07.08.2020 (date of death) and not from 05.04.2018; respondent authorities may still pursue recovery for the earlier period in accordance with law.

Show cause notice requirements - reasons to be stated in administrative orders - retrospective cancellation of GST registration - opportunity to be heard / meaningful response

Show cause notice requirements - opportunity to be heard / meaningful response - Validity of the Show Cause Notice dated 29.05.2020 in light of absence of stated reasons. - HELD THAT: - The Court found that the SCN only recited a generic ground-"Non-compliance of any specified provisions in the GST Act or the Rules made thereunder"-but did not identify any specific provision or articulate reasons for the proposed adverse action. The SCN therefore failed to meet the elementary standards required of a show cause notice because it did not enable the noticee to comprehend the case against him or to furnish a meaningful response. For these reasons the SCN was held to be bereft of reasons and defective as a vehicle to take consequential action against the petitioner (see paras 10-11). [Paras 10, 11]

The SCN dated 29.05.2020 was held to be defective for want of reasons and insufficient to afford the petitioner a meaningful opportunity to respond.

Reasons to be stated in administrative orders - retrospective cancellation of GST registration - Validity of the cancellation order dated 16.06.2020 and the propriety of retrospective (ab initio) cancellation with effect from 01.07.2017. - HELD THAT: - The cancellation order of 16.06.2020 was found to be devoid of reasons and mechanistically referenced a reply that was not furnished, showing that the order was based on a template rather than on an independent application of mind. Given that the foundational SCN was defective and the cancellation order lacked reasons, the Court held that the retrospective cancellation ab initio could not be sustained. Exercising its discretion, the Court directed that the cancellation would take effect from the date of the SCN (29.05.2020) and not from 01.07.2017. The Court expressly left open the power of authorities to initiate any proceedings for statutory non-compliance or recovery in accordance with law (see paras 12, 13-15). [Paras 12, 13, 14, 15]

The order cancelling the GST registration was set aside to the extent that it operated retrospectively; the cancellation shall take effect from 29.05.2020 instead of ab initio from 01.07.2017, without prejudice to the authorities' right to initiate proceedings in accordance with law.

Final Conclusion: The petition was disposed of by holding the SCN and the cancellation order to be defective for want of reasons; accordingly the retrospective cancellation from 01.07.2017 was set aside and the cancellation was directed to operate from 29.05.2020, while preserving the authorities' statutory remedies.

Cancellation of GST registration - suspension of GST registration for non-filing of returns - right to cancellation notwithstanding pending assessment or recovery proceedings - requirement to furnish address for service and KYC for correspondence

Cancellation of GST registration - right to cancellation notwithstanding pending assessment or recovery proceedings - The petitioner's application for cancellation of GST registration cannot be withheld merely because assessment, recovery or scrutiny of returns may be initiated or pending. - HELD THAT: - The Court held that cessation of business entitles the petitioner to have its cancellation application processed and that the possibility or initiation of assessment or recovery proceedings does not justify withholding cancellation of registration. While cancellation does not bar the Adjudicating Authority from initiating proceedings for recovery of dues or for non-compliance, those potential or future actions are not a ground to deny or delay processing of an otherwise valid cancellation application. Consequently, the Proper Officer was directed not to hold up the cancellation on account of assessment of tax, interest or penalty that may be recoverable. [Paras 5, 6, 7]

Directed that the cancellation application shall not be held up on account of assessment, recovery or scrutiny; cancellation to be processed expeditiously.

Requirement to furnish address for service and KYC for correspondence - suspension of GST registration for non-filing of returns - The petitioner must provide documents confirming address for future correspondence and KYC particulars; suspension for non-filing remains distinct and the Proper Officer may seek outstanding returns or tax liabilities but cannot refuse cancellation solely on that basis. - HELD THAT: - The Court observed that accurate address and KYC are necessary for the Proper Officer to effect service of notices and to, if required, initiate recovery proceedings. The petitioner was therefore required to furnish rent agreement/ownership proof and KYC documents within one week. The Court acknowledged that the petitioner had been suspended for failure to file returns for six continuous months and had filed nil returns thereafter, but emphasised that suspension or outstanding returns do not prevent processing of cancellation once requisite particulars are furnished. The Proper Officer was directed to consider the documents and take requisite steps for cancellation expeditiously. [Paras 4, 6, 7]

Petitioner to furnish address and KYC documents within one week; Proper Officer to consider them and proceed with cancellation without unduly withholding it due to non-filing or potential liabilities.

Final Conclusion: Petition allowed in part: the petitioner's application for cancellation of GST registration shall not be held up on account of assessment, recovery or scrutiny; petitioner to furnish documentary proof of address and KYC within one week and the Proper Officer to consider the same and complete cancellation expeditiously; petition disposed of accordingly.

Service by uploading notice on GST portal - adequacy of portal-based notice under Section 169 of the Central Goods and Services Tax Act, 2017 - notice placement under 'View Additional Notices & Orders' versus 'View Notices and Orders' - remand for fresh adjudication after affording opportunity to be heard

Service by uploading notice on GST portal - notice placement under 'View Additional Notices & Orders' versus 'View Notices and Orders' - adequacy of portal-based notice under Section 169 of the Central Goods and Services Tax Act, 2017 - Validity of service of the show cause notice uploaded under the category 'View Additional Notices & Orders' on the GST portal - HELD THAT: - The Court held that the contention that uploading notices under the heading 'Additional Notices' amounts to sufficient service under Section 169 CGST Act was rejected in earlier decisions relied upon by the Court. The Court noted the distinction identified in precedent between notices placed under 'View Notices and Orders' and those placed under 'View Additional Notices and Orders' on the portal, and that the portal has since been redesigned to place the tabs adjacent under one heading. As the impugned show cause notice had been uploaded prior to the redesign, service by placing the SCN in the 'Additional Notices' category was treated as insufficient for compliant service under the statutory regime and settled authorities. [Paras 3, 4, 5, 6]

Impugned order under Section 73 DGST Act set aside on ground of defective service by uploading the SCN under 'View Additional Notices & Orders'.

Remand for fresh adjudication after affording opportunity to be heard - Relief to be granted following setting aside of the impugned order - HELD THAT: - The Court remanded the matter to the concerned authority for fresh adjudication of the impugned show cause notice. The petitioner was granted liberty to file a response within two weeks from the date of the order. The authority was directed to adjudicate the SCN afresh after considering the petitioner's response and after affording the petitioner an opportunity of being heard, thereby ensuring compliance with principles of natural justice and correct service. [Paras 7, 8, 9]

Matter remanded for fresh adjudication; petitioner permitted to file response within two weeks; authority to consider response and afford hearing before adjudicating afresh.

Final Conclusion: The petition was allowed; the impugned order under Section 73 DGST Act was set aside for defective service of the SCN on the GST portal and the matter remanded to the assessing authority for fresh adjudication after the petitioner files a response and is afforded an opportunity to be heard.

Permission to travel abroad during pending criminal proceedings - Right to personal liberty versus efficient conduct of trial - Conditions to secure presence of accused during inquiry and trial - Risk of abscondence and extradition considerations

Permission to travel abroad during pending criminal proceedings - Right to personal liberty versus efficient conduct of trial - Risk of abscondence and extradition considerations - Petitioner to be permitted to travel to South Africa subject to conditions despite pending prosecution. - HELD THAT: - The Court balanced the petitioner's liberty interest and past travel history against the prosecution's apprehension of abscondence and the need for efficient conduct of the inquiry and trial. It observed that presence of an accused may be dispensed with under appropriate legal principles provided safeguards ensure attendance at the relevant stages; conditions may be imposed to deter abscondence and secure attendance. The petitioner had a history of travel to South Africa, no instance of default during the inquiry, a surety/family connection in India and co-accused had been granted bail, factors which reduced the likelihood of abscondence. The Court found the learned SDJM's refusal to permit travel to be unreasonable in the circumstances and that permission could have been granted with proportionate conditions tailored to the nature of the allegations and the risk posed, having regard to relevant precedents and principles protecting personal liberty while safeguarding the trial process. [Paras 6, 7, 8, 9]

Impugned order refusing permission to travel set aside; petitioner permitted to travel to South Africa subject to stringent conditions to ensure his attendance at trial.

Conditions to secure presence of accused during inquiry and trial - Judicial direction to lower court for verification and imposition of conditions - Lower court to receive petitioner's passport and travel schedule and impose appropriate conditions to secure attendance. - HELD THAT: - The High Court directed that the petitioner shall be allowed to receive and retain his original passport for the period of the proposed travel and shall forthwith submit the schedule of visit with duration and place of stay before the learned SDJM. The learned SDJM was directed to impose such further conditions as deemed just and expedient to ensure the petitioner's presence during inquiry and trial. This constitutes a supervisory direction leaving the quantification and specific content of conditions to the discretion of the trial court, subject to proportionality and the object of securing attendance. [Paras 11]

Petitioner to be given his passport and travel permitted; petitioner to submit itinerary and the learned SDJM to impose appropriate conditions to safeguard the trial process.

Final Conclusion: Revision petition allowed; impugned refusal to permit travel set aside. Petitioner authorized to visit South Africa on production of passport and itinerary, subject to further conditions to be imposed by the learned SDJM to ensure his attendance during the inquiry and trial.

Natural justice - opportunity to be heard - remand for fresh adjudication - conditional set aside of impugned order - personal hearing - tax demand reassessment based on GSTR 3B and GSTR 1 mismatch

Natural justice - opportunity to be heard - tax demand reassessment based on GSTR 3B and GSTR 1 mismatch - Impugned order set aside on ground that petitioner was not afforded a reasonable opportunity to contest the tax demand on merits - HELD THAT: - The Court accepted the petitioner's assertion that she was unaware of the departmental proceedings and therefore could not participate in the process leading to the impugned order. The tax proposal arose from a mismatch between turnover reported in the GSTR 3B return and the GSTR 1 statement. Having regard to the contention of non-participation and in the interest of justice, the Court found that the petitioner should be given an opportunity to contest the demand on merits rather than allowing the impugned order to stand. [Paras 4]

Impugned order dated 23.08.2023 set aside to enable the petitioner to contest the tax demand on merits

Remand for fresh adjudication - conditional set aside of impugned order - personal hearing - Matter remanded to respondents with specified conditions and directions for fresh consideration - HELD THAT: - The Court remanded the matter to the respondents on terms designed to place the petitioner on notice while securing a tangible commitment to the process. The petitioner was directed to remit 10% of the disputed tax demand within two weeks of receipt of the order and permitted to submit a reply to the show cause notice within the same period. Upon receipt of the petitioner's reply and after being satisfied that the 10% remittance was received, the respondents were directed to provide a reasonable opportunity of hearing, including a personal hearing, and thereafter pass a fresh order within three months from receipt of the reply. These directions balance the need for fair adjudication with procedural finality. [Paras 5]

Matter remanded subject to petitioner remitting 10% of disputed demand, filing a reply within two weeks, and respondents holding a personal hearing and passing a fresh order within three months

Final Conclusion: Writ petition allowed by setting aside the impugned order dated 23.08.2023; remand directed on condition that the petitioner remit 10% of the disputed tax demand and file a reply within two weeks, following which the respondents shall afford a personal hearing and pass a fresh order within three months.

Validity of rejection of the declarations filed by petitioner under the DTVSV Act - prosecution u/s. 276C(2) of the Income Tax Act - whether the provisions of DTVSV Act shall apply to petitioner? - HC [2023 (9) TMI 894 - BOMBAY HIGH COURT] decided as u/s 9(a)(ii) of DTVSV Act, the only exclusion visualised is a pendency of prosecution in respect of tax arrear relatable to an assessment year as on the date of filing the declaration and not pendency of a prosecution in respect of an assessment year on any issue.

In the petition before us also prosecution has been instituted against petitioner u/s 276C(2) - Therefore, in our view, Macrotech [2021 (3) TMI 1089 - BOMBAY HIGH COURT] will squarely apply to the facts and circumstances of this case.

The declaration of petitioner filed on 31st January 2021 for Assessment Years 2010-2011 and 2011-2012 would have to be decided by respondent no. 1 in conformity with the provisions of DTVSV Act.

HELD THAT:- We are not inclined to interfere with the impugned judgment, as the criminal prosecution relates to a different subject matters.

Hence, the present special leave petition is dismissed.

We, however, clarify that the impugned judgment and the dismissal of the present special leave petition will not, in any way, affect the criminal prosecution.

Maintainability of departmental appeal under Section 260A - Monetary limits for filing appeal - Circular No.5/2024 - exception under Clause 3.1(f) - orders under Section 263 - quantifiability of tax effect

Maintainability of departmental appeal under Section 260A - Monetary limits for filing appeal - Circular No.5/2024 - exception under Clause 3.1(f) - orders under Section 263 - quantifiability of tax effect - Whether the departmental appeal under Section 260A is maintainable in view of Circular No.5/2024 where the tax liability has been quantified and is below the monetary threshold prescribed by the circular. - HELD THAT: - The Court examined Circular No.5/2024 which prescribes a monetary threshold (tax liability of Rs. 1 crore) for departmental appeals to High Courts, subject to specified exceptions in Clause 3.1. Clause 3.1(f) exempts from the monetary limits cases where the tax effect is not quantifiable or is not involved, citing orders passed under Section 263 by way of illustration. In the present matter the Assessing Officer quantified the tax liability following the Principal Commissioner's order. The quantified tax liability is below the monetary threshold set out in the circular. Consequently the Clause 3.1(f) exception - directed to cases where tax effect cannot be quantified - is inapplicable. As the controversy relates to tax and its quantification has been made, the appeal falls within the monetary limits of the circular and is therefore not maintainable before the High Court under Section 260A. [Paras 4, 5, 6, 8, 9]

The appeal is not maintainable and is dismissed.

Final Conclusion: The departmental appeal under Section 260A was dismissed as not maintainable because Circular No.5/2024 bars filing of appeals where the tax liability (here quantified by the Assessing Officer) is below the prescribed monetary limit and the Clause 3.1(f) exception for unquantifiable tax effect did not apply.

Summary order. Interim orders earlier passed are continued; substantive issues on interpretation of reference to dispute resolution panel under Section 144C vis-a -vis time limits for completion of assessment under Section 153 were noted but not decided; matter reserved for further orders.

Validity of notice under Section 148 in light of Section 151A and the faceless scheme - Faceless assessment mechanism - Issuance of notice by Jurisdictional Assessing Officer vs Faceless Assessing Officer - Applicability of Section 144B exceptions to the faceless scheme - Precedent value of Hexaware Technologies Limited on faceless issuance of notices

Validity of notice under Section 148 in light of Section 151A and the faceless scheme - Issuance of notice by Jurisdictional Assessing Officer vs Faceless Assessing Officer - Precedent value of Hexaware Technologies Limited on faceless issuance of notices - Impugned notices under sections 148A and 148 issued by the Jurisdictional Assessing Officer were invalid because issuance was required to follow the faceless scheme under Section 151A, as interpreted by Hexaware Technologies Limited. - HELD THAT: - The Court proceeded to adjudicate despite non-compliance by respondents with an earlier scheduling order, observing there was no application for extension or intention to file a reply. Applying this Court's decision in Hexaware Technologies Limited, the Court held that Section 151A contemplates a Scheme covering both issuance of notice under Section 148 and subsequent reassessment proceedings, and that the Scheme requires issuance of notices in a faceless manner by the Faceless Assessing Officer rather than by the Jurisdictional Assessing Officer. The revenue's reliance on the CBDT order dated 31 March 2021 under Section 144B(2) to exclude the present proceedings from the faceless mechanism was rejected: that order specifies categories of assessment proceedings to be completed under Section 144B but does not displace the Scheme's requirement that notices under Section 148/148A be issued facelessly where applicable. For these reasons the impugned notices and the consequent assessment proceedings were held to be contrary to the faceless issuance requirement and thus invalid. [Paras 9, 11, 12, 13]

Writ petition allowed; impugned notices/orders under sections 148A and 148 and consequent draft/final assessment set aside in terms of prayer clauses (a) and (b).

Final Conclusion: The petition under Article 226 is allowed: the notices under sections 148A and 148 and the resultant draft and final assessment orders for AY 2019-20, issued without following the faceless mechanism mandated by Section 151A as construed in Hexaware Technologies Limited, are quashed; no costs.

Unexplained cash credits - applicability of section 68 as test for unexplained cash deposits - demonetization period receipts as explanation for bank deposits - evaluation of books of account and corroborative evidence - pro rata adjustment based on turnover increase - deletion of addition where revenue fails to satisfactorily rebut books

Unexplained cash credits - applicability of section 68 as test for unexplained cash deposits - demonetization period receipts as explanation for bank deposits - evaluation of books of account and corroborative evidence - pro rata adjustment based on turnover increase - deletion of addition where revenue fails to satisfactorily rebut books - Validity of addition made as unexplained cash deposits and correctness of appellate adjustment - HELD THAT: - The assessee produced audited financial statements, cash book, sales register and bank statements and explained that cash deposits during the demonetization window represented cash-in-hand and cash sales of an essential commodities retail business which continued to operate and lawfully accepted SBNs. The Assessing Officer's conclusion of abnormality was based on inapt averages and assumptions about denomination and an alleged fabricated opening cash balance; that approach failed to account for the demonetization context and the contemporaneous books and bank records produced. The First Appellate Authority's pro rata reduction, based solely on percentage increase in turnover, likewise omitted consideration of purchases, profit margins and the books' internal consistency and therefore was an inappropriate arithmetic shortcut rather than a reasoned reconciliation of evidence. Because the Revenue did not satisfactorily displace the assessee's explanation or demonstrate that the books were unreliable, the addition under the test embodied in section 68 was unsustainable. Applying these conclusions, the Tribunal found the addition could not be sustained and deleted it. [Paras 7, 8, 9, 10]

Addition on account of unexplained cash deposits held unsustainable and deleted; appeal allowed.

Final Conclusion: The assessee's appeal is allowed: the addition made as unexplained cash credits for AY 2017-18 is deleted because the Assessing Officer's and the CIT(A)'s approaches failed to satisfactorily rebut the books and contemporaneous evidence, and the addition under the section 68 test is therefore unsustainable.

Investment in shares is a capital account transaction and does not constitute income - reasons for reopening under Section 148/148A of the Income Tax Act must be the same as those stated in the notice - addition of fresh or supplementary reasons at the adjudication stage is impermissible - assessment reopenings must comply with principles of natural justice by disclosing grounds so that the assessee can effectively object

Investment in shares is a capital account transaction and does not constitute income - no requirement to file return where no income accrues or arises in India - Investment by the petitioner in subscription of share capital during AY 2019-20 did not amount to income escaping assessment - HELD THAT: - The Court held that the petitioner's subscription to shares using inward remittances constituted a capital account transaction and did not give rise to income in India for AY 2019-20; consequently, the petitioner was not obliged to file a return for that year. The Court followed the reasoning in M/s. Angelantoni Test Technologies SRL and earlier authorities accepting that investment in shares of an Indian concern is a capital transaction, not income, and noted that the Revenue's foundational premise treating the investment as income was flawed and thereby insufficient to sustain reopening proceedings. [Paras 18, 19, 20]

The assessment proceedings could not be sustained on the basis that the share subscription constituted income; the premise for reopening was flawed.

Reasons for reopening under Section 148/148A of the Income Tax Act must be the same as those stated in the notice - addition of fresh or supplementary reasons at the adjudication stage is impermissible - assessment reopenings must comply with principles of natural justice by disclosing grounds so that the assessee can effectively object - Impugned notice under Section 148A(b) and order under Section 148A(d) are invalid insofar as the Assessing Officer relied on a discrepancy in share prices that was not disclosed in the original notice - HELD THAT: - The Court found that the Assessing Officer relied upon an alleged discrepancy between the petitioner's stated share purchase prices and exchange (NSE) prices in the order under Section 148A(d), but this ground was not mentioned in the earlier notice under Section 148A(b). Citing precedent in Banyan Real Estate Fund Mauritius , ATS Infrastructure Limited and related decisions, the Court reiterated that the validity of reopening must be judged by the reasons available at the time the notice is issued and that supplemental or new reasons cannot be interposed later to justify reassessment. Allowing fresh reasons at the adjudication stage would deprive the assessee of a meaningful opportunity to object and would violate principles of natural justice. [Paras 21, 22, 23]

The subsequent reliance on undisclosed discrepancies in share prices rendered the proceedings unsustainable and contrary to the statutory scheme and natural justice.

Final Conclusion: The writ petition is allowed: the notices under Section 148A(b) dated 22.03.2023, the order under Section 148A(d) dated 26.04.2023 and the consequential notice under Section 148 dated 26.04.2023 for AY 2019-20 are quashed; no costs.

Application of Section 69C - Genuineness of purchases and bogus purchases - Reopening of assessment and notice under Section 148 - Obligation of Assessing Officer to verify information from Sales Tax authorities - Estimation of income by applying presumptive percentage on purchases - Substantial question of law

Application of Section 69C - Genuineness of purchases and bogus purchases - Obligation of Assessing Officer to verify information from Sales Tax authorities - Whether the entire disputed purchases could be discarded as bogus and added fully to the assessee's income under Section 69C in the absence of specific and cogent material establishing the transactions to be bogus. - HELD THAT: - The Court held that the Assessing Officer could not wholly reject the assessee's documentary evidence merely on the basis of general information received from the Sales Tax Department. A full addition can be made only upon proper proof establishing that the transactions are unequivocally bogus. Where the department's material consists merely of general returns or information under Section 133(6) without a specific finding that the particular purchases by the assessee are bogus, the AO must undertake a careful, transaction wise enquiry and, where relevant, consult and obtain specific information from the Sales Tax authorities before discarding expenditure. Superficial or generalized treatment by the AO is impermissible; only a well considered conclusion supported by cogent evidence will justify treating purchases as bogus and making additions under Section 69C. [Paras 11, 12, 13, 14]

The AO was not justified in treating all the disputed purchases as wholly bogus on the basis of general information; additions could not be sustained in full without specific and cogent evidence and appropriate coordination with Sales Tax authorities.

Estimation of income by applying presumptive percentage on purchases - Substantial question of law - Whether the Tribunal and CIT(A)'s approach in estimating income at 12.5% of purchases (and directing AO to assess income accordingly) gave rise to a substantial question of law warranting interference by the High Court. - HELD THAT: - The Tribunal found that the CIT(A) was correct in applying a presumptive estimate of 12.5% on purchases and disallowed the CIT(A)'s reduction of that estimate by the gross profit returned on sales. The High Court observed that the Tribunal's direction to assess income at 12.5% on the disputed purchases was within the scope of factual and evaluative exercise by the appellate authorities. Given the factual matrix and the lack of cogent material to treat all purchases as wholly bogus, the Court concluded that the revenue's challenge did not raise any substantial question of law. The Court relied on precedent involving similar facts to note that no arguable legal question arose for interference. [Paras 5, 7, 15, 17]

The Tribunal's direction to estimate income at 12.5% on the purchases was not a matter warranting interference; the appeals did not raise a substantial question of law and are liable to be dismissed.

Final Conclusion: The appeals by the revenue are dismissed. The Court held that in the absence of specific and cogent material establishing purchases to be bogus, the Assessing Officer could not make full additions; the Tribunal's direction to estimate income at 12.5% on the disputed purchases and the resulting disposal did not give rise to a substantial question of law.

Binding nature of an approved resolution plan - extinguishment of pre plan claims by operation of Section 31 IBC - moratorium under the Insolvency and Bankruptcy Code - duty to submit proof of claim by statutory/operational creditors - reassessment proceedings vis a vis claims covered by an approved resolution plan

Binding nature of an approved resolution plan - extinguishment of pre plan claims by operation of Section 31 IBC - duty to submit proof of claim by statutory/operational creditors - Validity of initiation of reassessment proceedings under Section 148 of the Income Tax Act for AY 2014-15 after approval of a Resolution Plan by the NCLT - HELD THAT: - The Court applied the principles laid down by the Supreme Court in Ghanashyam Mishra and Sons and Essar Steel and followed this Court's earlier decisions (M Tech Developers, Sree Metaliks, Rishi Ganga Power Corporation) to hold that an approved resolution plan is binding on all stakeholders and operates to freeze or extinguish pre plan claims which were required to be submitted in the corporate insolvency resolution process. The respondents' contention that they could not submit a claim because assessment proceedings were pending did not provide a basis to disregard the binding effect of the approved plan. The Court noted that the respondents had not moved the NCLT to recall or set aside the approval of the resolution plan nor contended that the plan was invalid for failing to meet the statutory requirements of Section 30(2); in the absence of such a challenge, the consequences of Section 31 follow. Reliance upon decisions (including Rainbow Papers and Greater Noida Industrial Development Authority) which concern review or recall of approval where the plan does not meet statutory requirements was inapposite because no such challenge had been made to the NCLT approval in this case. Applying the settled law, the Court concluded that reassessment in respect of a period prior to approval of the resolution plan could not be sustained where the approved plan operates to bar or extinguish such claims and the statutory authority had not availed the remedy under the IBC to contest the plan's validity. [Paras 22, 23]

The notice under Section 148 dated 31 March 2021 for AY 2014-15 is quashed.

Final Conclusion: The writ petition is allowed; the reassessment notice under Section 148 for Assessment Year 2014-15 is quashed on the ground that the approved resolution plan under the IBC binds stakeholders and precludes initiation of reassessment in respect of pre plan claims which should have been submitted during the CIRP, and no challenge to the plan's approval was made before the NCLT.

Validity of notice under Section 148 of the Income Tax Act - mandatory faceless mechanism under Section 151A and the Scheme dated 29 March 2022 - jurisdiction of Jurisdictional Assessing Officer versus Faceless Assessment Officer for issuance of notice - invalidity of action taken contrary to statutory procedure without requirement of proving prejudice - requirement of sanction by specified authority under Section 151(ii) where reassessment is initiated after three years

Validity of notice under Section 148 of the Income Tax Act - mandatory faceless mechanism under Section 151A and the Scheme dated 29 March 2022 - jurisdiction of Jurisdictional Assessing Officer versus Faceless Assessment Officer for issuance of notice - Impugned notices and order issued by the Jurisdictional Assessing Officer without following the faceless Scheme under Section 151A are invalid. - HELD THAT: - The Court held that the Scheme notified pursuant to Section 151A, as framed on 29 March 2022, mandates automated allocation and faceless issuance of notices, so that jurisdiction is to the exclusion of concurrent exercise by the JAO and the FAO. Relying on the Division Bench decision in Hexaware Technologies Limited, the Court concluded that notices under Section 148 issued otherwise than in compliance with the Scheme are contrary to law. An authority acting contrary to the statutory scheme renders the action invalid and the assessee need not separately prove prejudice where procedure prescribed by statute is not followed. Applying these principles to the present facts, the impugned order dated 29 July 2022 and the notice dated 29 July 2022 issued by the JAO did not comply with the faceless mechanism and are therefore unsustainable. [Paras 3, 4, 5]

The proceedings initiated under Section 148 and the order under Section 148A(d) are quashed as not in compliance with the faceless Scheme required by Section 151A.

Requirement of sanction by specified authority under Section 151(ii) where reassessment is initiated after three years - effect of non-compliance with statutory sanction requirement - Sanction obtained from an authority not specified in Section 151(ii) for reassessment initiated after three years is invalid, rendering the reassessment notice and order liable to be quashed. - HELD THAT: - The Court endorsed the principle in Siemens Financial Services Pvt. Ltd. that where reassessment proceedings are initiated beyond three years from the end of the relevant assessment year, sanction must be obtained from the specified authority enumerated in Section 151(ii). The Assessing Officer cannot rely on earlier subordinate instruments or extensions (such as TOLA) to justify an approval that does not conform to the amended statutory provision. Following the subsequent application of that principle in Vodafone Idea Ltd., the Court held that where the sanction was not obtained in terms of Section 151(ii), the sanction is bad in law and consequent notices and orders are liable to be quashed. [Paras 6, 7, 8, 9]

The impugned proceedings initiated after the three-year period without sanction by the authority specified in Section 151(ii) are invalid and are quashed.

Final Conclusion: Writ petition allowed: the show cause notice dated 27 May 2022 under Section 148A(b), the order dated 29 July 2022 under Section 148A(d), the notice dated 29 July 2022 under Section 148, the assessment order dated 24 May 2023 under Section 147 r.w.s. 144B, and consequential proceedings are quashed for failure to comply with the faceless Scheme under Section 151A and for absence of requisite sanction under Section 151(ii). Other issues are left open.

Reassessment under Section 148 of the Income Tax Act - additions under Section 147 of the Income Tax Act - valuation determined by Customs Adjudicating Officer - CESTAT setting aside customs valuation order - dependency of income-tax proceedings on customs adjudication - liberty to pass fresh order if customs appeal succeeds - absence of independent inquiry by Income Tax Department

Reassessment under Section 148 of the Income Tax Act - additions under Section 147 of the Income Tax Act - valuation determined by Customs Adjudicating Officer - absence of independent inquiry by Income Tax Department - Appellate authorities were justified in not deciding the income-tax additions on merits where such additions rested solely on the customs valuation order which had been set aside by CESTAT. - HELD THAT: - The additions under Section 147 were made exclusively on the basis of the value of imports as determined by the Customs Adjudicating Officer. The Income Tax Department conducted no separate investigation or inquiry and had no material other than the customs valuation. As the customs valuation order was quashed by CESTAT, that development directly affected the foundation of the income-tax additions. In these circumstances the appellate authorities were entitled to refrain from re-adjudicating the merits independently, since the underpinning order no longer stood and there was no alternate material to sustain the additions. [Paras 7, 8]

The Tribunal and lower appellate authority were justified in not deciding the merits of the additions where they were founded solely on a customs valuation order subsequently set aside.

CESTAT setting aside customs valuation order - dependency of income-tax proceedings on customs adjudication - liberty to pass fresh order if customs appeal succeeds - Tribunal did not err in granting liberty to the Revenue to seek fresh adjudication if the Customs Department's appeal against the CESTAT order succeeds. - HELD THAT: - Given that the customs valuation order was central to the income-tax additions and that the customs appellate proceedings were pending, the Tribunal sanctioned a procedural safeguard by allowing the Revenue liberty to obtain a fresh order in the event the Customs Department's challenge to the CESTAT decision before the High Court succeeds. That course preserves the interests of the Revenue without prematurely reinstating additions based on a vacated customs order, and it permits the AO to reconsider and act after the customs position is finally determined, with opportunity of hearing to the assessee. [Paras 9, 10]

Granting liberty to the Revenue to proceed afresh if the customs appeal succeeds was appropriate and did not vitiate the Tribunal's order.

Substantial question of law - CESTAT setting aside customs valuation order - No substantial question of law arises from the Tribunal's order; the appeals are dismissible on that basis. - HELD THAT: - The Court examined the nature of the dispute and the basis of the income-tax additions and concluded that the determinative facts - namely, that the additions flowed from the customs valuation order which had been set aside - left no substantial question of law warranting interference. The Tribunal's approach and the liberty afforded to the Revenue were procedural responses to the pendency and result of the customs proceedings rather than questions of law requiring the High Court's intervention. [Paras 11]

The appeals raise no substantial question of law and are dismissed.

Final Conclusion: The appeals are dismissed: the Tribunal was justified in refraining from deciding the merits of income-tax additions grounded solely on a customs valuation order that CESTAT quashed, and in granting liberty to the Revenue to seek fresh adjudication if the Customs Department's challenge to CESTAT succeeds; no substantial question of law is made out.

Requirement of compliance with Section 151A - jurisdiction to issue notice under Section 148 - faceless assessment scheme and automated allocation - invalidity of action taken contrary to statutory scheme - quashing of notice for non-compliance with procedure

Requirement of compliance with Section 151A - jurisdiction to issue notice under Section 148 - faceless assessment scheme and automated allocation - invalidity of action taken contrary to statutory scheme - Notice under Section 148 issued by the Jurisdictional Assessing Officer was invalid for non-compliance with the Scheme framed under Section 151A and therefore the reassessment proceedings were vitiated. - HELD THAT: - The Court found on the record that the impugned notice dated 06 April, 2023 and the underlying order under Section 148A(d) were issued by the Jurisdictional Assessing Officer and not by a Faceless Assessing Officer as required by the Scheme notified pursuant to Section 151A(2). Relying on the Division Bench decision in Hexaware Technologies Ltd., the Court accepted that the Scheme contemplates automated allocation and vests jurisdiction to issue notices under Section 148 in the officer allocated under that Scheme, to the exclusion of concurrent exercise of jurisdiction by the JAO. The Scheme, having been framed under Section 151A and tabled in Parliament, governs issuance of notice under Section 148; an act done contrary to that statutory scheme is invalid. The Court held that where an authority acts contrary to the statutory scheme, the action is liable to be quashed without the assessee having to demonstrate separate prejudice. [Paras 3, 5, 7]

Impugned notice and underlying order quashed for non-compliance with Section 151A and the Scheme; consequential demand and penalty notices also quashed.

Final Conclusion: Writ petition allowed: reassessment notice and related order dated 06 April, 2023 issued by the JAO set aside for non-compliance with the Scheme under Section 151A; other grounds not decided.

Faceless assessment - automated allocation - issuance of notice under Section 148 - conduct of enquiry and issuance of notice under Section 148A - Scheme under Section 151A - exclusive jurisdiction of Faceless Assessing Officer - invalidity for non-compliance with subordinate legislation

Faceless assessment - automated allocation - issuance of notice under Section 148 - exclusive jurisdiction of Faceless Assessing Officer - Notice under Section 148 issued by the Jurisdictional Assessing Officer without following the faceless Scheme is invalid. - HELD THAT: - The Court found that the Notification dated 29 March 2022 implementing the faceless mechanism pursuant to Section 151A requires issuance of notice under Section 148 through automated allocation and by the Faceless Assessing Officer (FAO). Relying on the Division Bench decision in Hexaware, the Court held there is no concurrent jurisdiction between the JAO and the FAO for issuing notice under Section 148; the Scheme's mandatory automated allocation confers exclusive jurisdiction on the officer to whom the case is allocated. An act done contrary to that statutory scheme is invalid and causes prejudice to the assessee without need for further proof of prejudice. Applying these principles, the impugned notice dated 25 April 2024 issued by the JAO was quashed as not in conformity with Section 151A and the Scheme. [Paras 3, 5, 6, 17]

Impugned notice under Section 148 issued by the JAO is quashed for non-compliance with Section 151A and the notified faceless Scheme.

Conduct of enquiry and issuance of notice under Section 148A - Scheme under Section 151A - invalidity for non-compliance with subordinate legislation - faceless assessment - Proceedings under Section 148A (notice under Section 148A(b) and order under Section 148A(d)) undertaken by the JAO outside the faceless Scheme are also incompatible with the Scheme and liable to be quashed. - HELD THAT: - The Court examined paragraph 3 of the Scheme and the amending provisions of Section 151A, noting the Scheme was made to give effect to assessment, reassessment or recomputation under Section 147 and issuance of notice under Section 148, and to eliminate interface and introduce team-based assessment. Section 148A, which mandates conducting inquiry and providing opportunity before issuing a notice under Section 148, is integrally connected to the reassessment process and cannot be read out of the Scheme's scope. The Central Government did not exclude Section 148A under Section 151A(2) in the notification; therefore the faceless procedure applies to the initial steps under Section 148A that culminate in issuance of a Section 148 notice. Consequently, the initial notice under Section 148A(b) and the order under Section 148A(d) made by the JAO as a prelude to the impugned Section 148 notice were quashed. [Paras 12, 13, 14, 15, 16]

The Section 148A(b) notice and Section 148A(d) order issued by the JAO are set aside as outside the faceless Scheme and in breach of Section 151A and the Notification.

Final Conclusion: Writ petition allowed: the impugned initial notice dated 30 March 2024, the order dated 25 April 2024 under Section 148A(d), and the consequent notice dated 25 April 2024 under Section 148, all issued by the JAO outside the faceless Scheme, are quashed for non-compliance with Section 151A and the Notification; other issues left open.

Exemption under Section 11 - charitable purpose - statutory authorities performing public functions - nominal mark-up versus commercial receipts - application of precedent in Assistant Commissioner of Income Tax (Exemption) v. Ahmedabad Urban Development Authority

Exemption under Section 11 - charitable purpose - statutory authorities performing public functions - nominal mark-up versus commercial receipts - Whether the respondent's activities qualify as charitable and are eligible for exemption under Section 11 having regard to its statutory public functions and the principles laid down by the Supreme Court in Ahmedabad Urban Development Authority. - HELD THAT: - The Court applied the ratio of the Supreme Court in Assistant Commissioner of Income Tax (Exemption) v. Ahmedabad Urban Development Authority and observed that bodies established by statute to perform essential public functions (such as development and town planning) are prima facie to be treated as engaged in public/charitable purposes and their receipts are to be excluded from being treated as commercial, subject to scrutiny whether amounts charged are significantly higher than cost with only a nominal mark-up. As the respondent's activities fell within that principle and the appellant could not distinguish the precedent, the Tribunal's conclusion permitting exemption under Section 11 was upheld. The Court treated the decision in Ahmedabad Urban Development Authority as determinative and answered the substantial question against the Department.

Substantial question answered against the Department; exemption under Section 11 upheld and the Tribunal's order allowing the exemption is sustained.

Final Conclusion: The appeal is dismissed. The substantial question framed is answered against the Department by applying the Supreme Court's decision in Ahmedabad Urban Development Authority, resulting in upholding the respondent's entitlement to exemption under Section 11; the consequential question need not be adjudicated.

Ownership of property vis-a -vis partnership asset - Unexplained investment treated as income under characterisation (u/s 69) - Unexplained capital expenditure and additions (u/s 69C) - Revision under Section 264 - Deemed service of notice and preclusion of objection - Section 292BB - Validity and limitation of notice under Section 143(2) - Onus of proof on the assessee to establish identity, genuineness and creditworthiness of transactions

Ownership of property vis-a -vis partnership asset - Onus of proof on the assessee to establish identity, genuineness and creditworthiness of transactions - Property purchased from V. Muthukrishnan is to be treated as asset of the firm - HELD THAT: - The Court upheld the revisional authority's conclusion that the property is attributable to the firm. The firm and partners failed to produce books of account, bank statements or credible evidence to show the funds were of the individual partners; the firm had admitted rental income from the property in its returns. Given the absence of documentary proof of individual investment and the firm having raised and repaid a bank loan in the firm's name, the onus placed on the assessee to demonstrate the property was not a firm asset was not discharged. Accordingly, the finding that the property belongs to the firm and that the investment can be treated in the hands of the firm is sustained. [Paras 34, 35, 36]

Finding that the property is a firm asset is confirmed and the assessee failed to discharge onus to show otherwise.

Unexplained investment treated as income under characterisation (u/s 69) - Unexplained capital expenditure and additions (u/s 69C) - Additions on account of unexplained investment and unexplained capital expenditure are justified and confirmed - HELD THAT: - The Court endorsed the assessing officer's additions under the heads of unexplained investment (difference between purchase cost and bank loan) and unexplained capital expenditure. The assessee accepted acquisition of assets but failed to explain their source with credible evidence. The revisional authority also noted inconsistencies in claimed sources and absence of corroborative accounting records. While the revisional authority observed a minor variance in assessed figures, it declined to enhance the additions and nevertheless confirmed the assessing officer's decision to treat the amounts as unexplained and taxable. [Paras 34, 36]

Additions under sections 69 and 69C affirmed; no interference with assessment on these grounds.

Validity and limitation of notice under Section 143(2) - Deemed service of notice and preclusion of objection - Section 292BB - Objection to alleged late service of notice under Section 143(2) is not maintainable as it was not raised before completion of assessment and the assessee participated in proceedings - HELD THAT: - The Court held that the plea regarding delay in issuance/service of the Section 143(2) notice was not raised before the assessing authority and therefore cannot now be entertained. Section 292BB (legal fiction of deemed service where the assessee has participated in proceedings) applies to cure infirmities in service provided the notice emanated from the department; it does not cure complete absence of notice. In the present case the assessee participated in reassessment proceedings and did not raise the limitation objection during assessment, so the objection is precluded and the assessment stands. [Paras 37, 38, 39]

Limitation objection to the Section 143(2) notice is precluded by the assessee's conduct and Section 292BB; it cannot vitiate the assessment.

Final Conclusion: The writ petition challenging the revisional order under Section 264 and the consequential assessment is dismissed. The High Court finds no infirmity in confirmation of the assessing officer's additions on ownership, unexplained investment and unexplained capital expenditure, and rejects the late-raised objection to service/limitation of the Section 143(2) notice.

Remand for de novo assessment - availability of deduction under Section 80P(2)(d) - judicial limitation of writ jurisdiction in tax disputes - quashing of assessment orders and treatment as addendum to show cause notice - direction to participate in reassessment proceedings - costs/compensation for neglect in complying with statutory requirements

Judicial limitation of writ jurisdiction in tax disputes - availability of deduction under Section 80P(2)(d) - Final question of entitlement to deduction under Section 80P(2)(d) was not decided on merits under Article 226 and is not amenable to determination in these writ petitions. - HELD THAT: - The Court held that the ultimate question whether the petitioners are entitled to the exemption under Section 80P(2)(d) cannot be finally adjudicated under Article 226 in the facts of these cases. Given the petitioners' failure to file returns under Section 139(4) and their non-participation in proceedings following notices under Section 148, the Court declined to entertain a conclusive appellate determination of the substantive tax claim in the writ jurisdiction and instead refrained from pronouncing on the entitlement on merits. [Paras 13]

The Court refused to decide the entitlement to deduction under Section 80P(2)(d) in the writ petitions.

Remand for de novo assessment - quashing of assessment orders and treatment as addendum to show cause notice - Impugned assessment orders were quashed and the matters were remitted for fresh consideration from the stage of the show cause notice following issuance of Section 148 notices. - HELD THAT: - Observing procedural neglect by the petitioners but recognizing that they deserve an opportunity to ventilate grievances in reassessment, the Court set aside the impugned orders and directed the respondent to proceed afresh on merits in accordance with law. The remand is to commence from the stage of the show cause notice that followed the Section 148 notices; the quashed orders are to be treated as addenda to those show cause notices and the petitioners allowed to file consolidated replies within the time framed by the Court. [Paras 14, 17, 18]

Impugned orders quashed and cases remitted to the assessing authority to pass fresh orders on merits from the show cause notice stage; petitioners to file consolidated replies within 30 days.

Direction to participate in reassessment proceedings - costs/compensation for neglect in complying with statutory requirements - Petitioners were directed to participate in the de novo proceedings and to pay a judicially directed sum as a consequence of their neglect to comply with statutory filing requirements. - HELD THAT: - Because the petitioners failed to file returns under Section 139(4) and did not participate in assessment proceedings despite service of notices, the Court required each petitioner to deposit a specified sum to the credit of the Court's designated fund within a limited period. The Court further directed that petitioners must cooperate and participate in the reassessment; failure to do so would permit the assessing authority to proceed on the basis of available material. [Paras 15, 16]

Each petitioner directed to pay the specified sum within the time ordered and to participate and cooperate in the de novo reassessment proceedings, failing which the assessing authority may proceed on available records.

Final Conclusion: The writ petitions are disposed of by quashing the impugned assessment orders and remitting the matters for de novo consideration from the show cause stage after Section 148 notices; petitioners must file consolidated replies and participate in reassessment and comply with the payment direction, failing which the assessing authority may act on available material.

Exclusion of time of proceeding bona fide in court without jurisdiction - Section 14 of the Limitation Act - prosecuting with due diligence - defect of jurisdiction or other cause of like nature - bona fide prosecution - recall under Rule 49 of the NCLT Rules - proceeding decided on merits

Section 14 of the Limitation Act - Exclusion of time of proceeding bona fide in court without jurisdiction - defect of jurisdiction or other cause of like nature - prosecuting with due diligence - recall under Rule 49 of the NCLT Rules - proceeding decided on merits - Whether the period from 08.06.2023 to 03.01.2024 is to be excluded under Section 14 of the Limitation Act for computing limitation for filing the present appeal. - HELD THAT: - The Tribunal applied the tests laid down by the Supreme Court in Consolidated Engineering and subsequent authorities: both prior and subsequent proceedings must be bona fide and prosecuted with due diligence, they must relate to the same matter, and the failure of the prior proceeding must be due to a defect of jurisdiction or other cause of like nature such that the court was unable to entertain it. The Adjudicating Authority's order rejecting IA No.3216/2023 under Rule 49 was examined and held to have been decided on merits because the sole cause for non-appearance (noting a wrong date in diary) was not regarded as sufficient cause to exercise the power to recall the ex-parte order. The Tribunal further noted that the prior application was not dismissed for want of jurisdiction nor for any similar cause rendering the court unable to entertain it. Consistent with this reasoning and earlier Tribunal precedent, the essential condition under Section 14 that the earlier proceeding failed due to defect of jurisdiction or like cause is absent; hence the period cannot be excluded under Section 14 and the delay remains unexcused. [Paras 14, 25]

The period from 08.06.2023 to 03.01.2024 is not excluded under Section 14; the prerequisite that the earlier proceeding failed for want of jurisdiction or a like cause is not satisfied, and Section 14 does not apply.

Final Conclusion: The application for condonation of 209 days' delay is rejected; the appeal filed with such delay (beyond the 15-day condonable limit) is dismissed and the memorandum of appeal is accordingly dismissed, with no order as to costs.

Proceeds of crime - provisional attachment under Section 5 of the Prevention of Money Laundering Act - confirmation of attachment within 180 days and exclusion of period under In Re: Limitation - money laundering - possession, acquisition, use, projecting as untainted property

Proceeds of crime - provisional attachment under Section 5 of the Prevention of Money Laundering Act - Whether property of a person not named as accused can be provisionally attached as "proceeds of crime" under the PMLA - HELD THAT: - The Tribunal held that Section 5(1)(a) and (b) contemplates attachment of property in the possession of "any person" and is not confined to persons named as accused in the underlying FIR or ECIR. Reliance was placed on the Apex Court's reasoning in Vijay Madanlal Choudhary that the sweep of Section 5(1) extends to any person involved in processes or activities connected with proceeds of crime. If a person is found to be in possession of property derived or obtained directly or indirectly from criminal activity, or is involved in activities such as layering or projecting proceeds as untainted, attachment is permissible even though that person is not an accused in the scheduled offence proceedings. [Paras 13, 14]

Property held by a person not named as accused can be provisionally attached under the PMLA if material shows possession or involvement with proceeds of crime.

Proceeds of crime - equivalent value property - money laundering - layering and projecting as untainted property - Whether the appellant's land/property (or property of equivalent value) constituted proceeds of crime or was liable to be attached as equivalent value - HELD THAT: - The Tribunal observed that the definition of "proceeds of crime" includes property directly or indirectly derived from scheduled offences and also property of equivalent value where proceeds are siphoned off or not available. The factual findings recorded by the Adjudicating Authority - receipt by the appellant of amounts directly from students, bank records showing transactions, inability to satisfactorily explain receipt, and the role in circular transactions to project proceeds as untainted - supported the conclusion that the appellant possessed and facilitated layering of proceeds. Consequently, the land (or property of equivalent value) was rightly treated as involved in money laundering and liable to attachment. [Paras 15, 16, 26]

The appellant's property was correctly held to be involved in proceeds of crime (or of equivalent value) and therefore liable to attachment.

Confirmation of attachment within 180 days and exclusion of period under In Re: Limitation - termination of proceedings / computation of statutory period - Whether the provisional attachment lapsed because the confirmation order was passed beyond 180 days - HELD THAT: - Section 5(3) of the PMLA provides that a provisional attachment ceases after 180 days unless confirmed. The Tribunal noted that the confirmation was recorded after the period which, on its face, exceeded 180 days, but applied the Supreme Court's orders in the Suo Motu petitions (In re: Limitation and its extensions) excluding the period from 15.03.2020 to 28.02.2022 for computation of limitation and termination of proceedings. The Tribunal examined High Court decisions and authoritative Supreme Court pronouncements (including Prakash Corporates) and concluded that the exclusion applies to statutory time limits that prescribe an outer limit for termination of proceedings. After excluding the specified pandemic period, the confirmation fell within 180 days; therefore the contention of lapse was negatived. [Paras 19, 20, 21, 22, 25]

The provisional attachment did not lapse; the period from 15.03.2020 to 28.02.2022 is excluded in computing the 180 days and the confirmation was within the adjusted period.

Final Conclusion: The Adjudicating Authority's confirmation of the provisional attachment is upheld: the appellant's property was correctly treated as proceeds of crime (or equivalent value) and the confirmation did not lapse because the pandemic exclusion was applied in computing the 180 day period; the appeal is dismissed.

Limitation under Section 73(4B)(d) of the Service Tax Act is directory and not mandatory - extension of limitation where compliance is not possible due to exceptional circumstances (pandemic) - justification of delay arising from inability to appear for personal hearing during COVID-19 - exclusion of time spent in writ proceedings for computing limitation for preferring an appeal

Limitation under Section 73(4B)(d) of the Service Tax Act is directory and not mandatory - Whether the one-year period prescribed by clause (d) of Section 73(4B) is mandatory or directory and whether it can be extended where it is not possible to conclude proceedings within one year. - HELD THAT: - The Court accepted the Department's submission that clause (d) of sub-section (4B) contemplates that the one-year period from the date of notice is not mandatory but directory, and that the provision itself envisages cases where it may not be possible to complete proceedings within one year. Consequently, where it is not possible to conclude proceedings within the one-year period and justifiable reasons exist, the limitation can extend beyond one year. This conclusion is premised on the language and scheme of clause (d) as explained by the Department and accepted by the Court. [Paras 4]

The one-year limitation under Section 73(4B)(d) is directory and may be extended where it is not possible to comply with that period.

Extension of limitation where compliance is not possible due to exceptional circumstances (pandemic) - justification of delay arising from inability to appear for personal hearing during COVID-19 - Whether the delay in concluding proceedings in the present case was satisfactorily explained in view of the COVID-19 pandemic and the series of notices for personal hearing. - HELD THAT: - The Court noted that the show cause notice was issued during the pandemic and that multiple notices for personal hearings were issued thereafter, with dates spanning the pandemic period. The petitioner contended inability to appear during peak COVID-19, and the Court observed that the same difficulties affected the Department's ability to conclude proceedings within the one-year period. On these facts the Court found that the period of limitation has been satisfactorily explained by the Department and that pandemic-related inability to appear furnished justifiable grounds for the delay in completing proceedings. [Paras 4, 5]

The delay caused during the pandemic period was satisfactorily explained, and constitutes a valid ground for extending the limitation in the present proceedings.

Exclusion of time spent in writ proceedings for computing limitation for preferring an appeal - Whether the writ petition should be entertained on merits and what effect the filing of the writ would have on limitation for filing an appeal. - HELD THAT: - The Court declined to entertain the writ petition on merits, observing that the Department's explanation regarding limitation was satisfactory. The Court preserved and protected the petitioner's right to challenge the order by way of appeal and directed that, if an appeal is preferred, the period spent before the High Court in litigating the writ petition shall be excluded by the authorities when computing limitation. This preserves the petitioner's appellate remedy while rejecting the writ. [Paras 6]

Writ petition rejected; petitioner retains right to prefer an appeal and the time spent in the writ petition will be excluded for the purpose of computing limitation for that appeal.

Final Conclusion: Writ petition challenging the order dated 20-9-2023 rejected. The Court held that clause (d) of Section 73(4B) is directory and may be extended where it was not possible to conclude proceedings (accepted pandemic-related delay as satisfactory). The petitioner's right to appeal is preserved and the time spent in the writ petition shall be excluded when computing limitation for any appeal.

Mining services classification versus manufacture/excisability - Supply of tangible goods for use - Transfer of right of possession and effective control - Deemed sale under Article 366(29A)(d) of the Constitution - Extended period of limitation and suppression / wilful misstatement

Mining services classification versus manufacture/excisability - Demand of service tax under the category of mining services - HELD THAT: - The Tribunal accepted that the appellants extracted and supplied sized stones/boulders but held the demand under the taxable category of mining services unsustainable. It relied on coordinate authority reasoning that sizing/crushing can amount to a process integral to manufacture and thus fall outside the service-tax net, and on precedent treating sizing as incidental/ancillary to manufacture or as liable to excise in appropriate factual settings. Applying those principles to the material before it, the Tribunal held that the activity could not be treated as taxable 'mining services' for service tax purposes and set aside the demand under that head. [Paras 4]

Demand under mining services set aside as not sustainable

Supply of tangible goods for use - Transfer of right of possession and effective control - Deemed sale under Article 366(29A)(d) of the Constitution - Demand of service tax under the category of supply of tangible goods for use - HELD THAT: - The Tribunal examined the definition of 'supply of tangible goods for use' and the statutory and judicial tests for when a transfer amounts to transfer of right to use (including possession and effective control). On the facts and on analogous decisions, it concluded that where the terms and effect of the contract show transfer of possession and effective control of equipment to the customer, the transaction is to be treated as a deemed sale under Article 366(29A)(d) and not as a taxable service. The adjudicating authority had not properly examined the work orders and contractual terms; applying settled tests and precedents, the Tribunal held the demand unsustainable and set it aside. [Paras 4]

Demand under supply of tangible goods for use set aside

Extended period of limitation and suppression / wilful misstatement - VCES acceptance and knowledge of revenue - Applicability of extended period and allegation of suppression or wilful misstatement - HELD THAT: - The Tribunal noted that the appellants had declared the liability under VCES which was accepted by the revenue and that the authorities were aware of the appellants' activities. On that basis it found that suppression or wilful misstatement could not be alleged and that the extended period of limitation was not properly invokable. Consequently the appeals succeeded on limitation grounds as well. [Paras 4, 5]

Extended period not applicable; no suppression established; appeals succeed on limitation grounds

Final Conclusion: Both appeals are allowed: demands of service tax under the heads of mining services and supply of tangible goods for use are set aside, and the extended period/charges based on alleged suppression are rejected in view of the VCES disclosure and the revenue's knowledge; consequential relief, if any, to follow.

Requirement of cross-examination for statements relied upon in adjudication - Relevancy of statements under Section 9D of the Central Excise Act, 1944 - Evidentiary value of loose papers and dispatch chits in proving clandestine removal - Burden of proof for clandestine removal of excisable goods - Insufficiency of investigation to sustain demand - Liability and penalty on partners of a partnership firm

Requirement of cross-examination for statements relied upon in adjudication - Relevancy of statements under Section 9D of the Central Excise Act, 1944 - Statements recorded during investigation could not be relied upon in adjudication in the absence of opportunity for cross examination under Section 9D. - HELD THAT: - The Tribunal held that Section 9D makes provision for the relevancy of statements recorded by excise officers subject to circumstances and expressly contemplates application to adjudication proceedings. Where the adjudicating authority declined the appellant's request for cross examination of witnesses whose statements were relied upon, that amounted to denial of a testing of veracity and thus violated principles of natural justice. The Tribunal followed authoritative decisions holding that untested statements recorded under investigation cannot be used as conclusive evidence to sustain a demand for clandestine removal. [Paras 4]

Statements relied upon without affording cross examination are inadmissible for sustaining the departmental demand and cannot form the basis of the adjudication.

Evidentiary value of loose papers and dispatch chits in proving clandestine removal - Burden of proof for clandestine removal of excisable goods - Loose papers, handwritten sheets and dispatch chits recovered during search cannot, in isolation and where their authenticity rests on untested statements, sustain a finding of clandestine removal. - HELD THAT: - The Tribunal found multiple discrepancies in the recovered loose papers and observed contradictions in the departmental pleadings about authorship and contents of the production/dispatch sheets. Because the evidentiary value of those documents was supported primarily by statements which the appellants were not permitted to cross examine, the documents lost probative value. The Tribunal reiterated that standing alone, loose papers/diaries/dispatch chits are insufficient to establish clandestine removal unless corroborated by reliable, verifiable evidence. [Paras 2, 4]

The loose papers/dispatch chits did not constitute conclusive evidence of clandestine removal and could not support the duty demand.

Insufficiency of investigation to sustain demand - Burden of proof for clandestine removal of excisable goods - Departmental investigation was incomplete and failed to produce cogent corroborative evidence (transporters, raw material procurement, production capacity, power consumption, manpower) necessary to prove clandestine removals. - HELD THAT: - The Tribunal noted that, apart from untested statements and loose papers, the investigating officers did not trace transporters alleged to have moved the goods, nor did they establish procurement and consumption of raw material, manufacture of the alleged goods, or verify production capacity and related metrics. In the absence of such tangible and corroborative material, the department did not discharge the burden of proof required to establish clandestine clearances beyond reasonable doubt. [Paras 4]

The incomplete investigation and absence of corroborative evidence rendered the departmental demand unsustainable.

Liability and penalty on partners of a partnership firm - Penalty imposed on the partners could not survive where the substantive demand was set aside and, in any event, separate penalty on partners of the partnership firm is not maintainable. - HELD THAT: - Having held that the demand for duty was not sustainable, the Tribunal concluded that the consequential penalties imposed on the partners also could not survive. The Tribunal additionally referred to settled position of law of the Gujarat High Court that separate penalty on partners of a partnership firm cannot be imposed, and therefore the penalties were set aside. [Paras 4]

Penalties on the partners are not sustainable and are set aside.

Final Conclusion: The appeals are allowed: the adjudication confirming demand for clandestine removal for October, 2015 to December, 2015 (upto 20.12.2015) is set aside because statements relied upon were not tested by cross examination, the loose papers/dispatch chits lacked independent probative value, the investigation failed to produce corroborative evidence, and the consequential penalties (including those imposed on partners) are quashed.

Reopening under Section 21(2) of the Trade Tax Act - Finality of assessment - Change of law by subsequent judicial pronouncement - Colourable exercise of reassessment power

Reopening under Section 21(2) of the Trade Tax Act - Finality of assessment - Change of law by subsequent judicial pronouncement - Colourable exercise of reassessment power - Validity of reopening a completed assessment (Assessment Year 1999-2000) on the basis of a subsequent Supreme Court judgment holding a particular transaction to be taxable - HELD THAT: - The original assessment in respect of AY 1999-2000 was concluded on 04.01.2002 after considering that replacement of spare parts during warranty attracted exemption. Thereafter a Supreme Court decision (delivered on 21.07.2004) took a contrary view that credit notes received for replacement of spare parts during warranty amount to a 'sale' amenable to tax. The Court held that a subsequent change in law as declared by a later judgment cannot, by itself, be used to reopen a completed assessment which had been closed in accordance with the law as it stood at the relevant time. Reopening the assessment on the sole ground of the later judicial pronouncement amounted to a colourable exercise of power and a change of opinion by the department. Reliance was placed on earlier authorities (as discussed in the judgment) establishing the principle that finalised assessments ought not to be reopened merely because the law was subsequently altered by judicial decision. Applying that principle to the facts, the reassessment initiated under Section 21(2) on the basis of the later decision was held to be without jurisdiction and invalid. [Paras 12, 13, 15, 16]

Reopening of the assessment for AY 1999-2000 on the basis of the subsequent Supreme Court judgment was invalid; the reassessment orders are set aside.

Final Conclusion: Writ petition allowed; impugned order dated 20.09.2012 set aside on the ground that reassessment of the concluded AY 1999-2000, initiated solely because of a subsequent judicial decision, was a colourable exercise of power and without jurisdiction.