TaxTMI Updates e-Newsletter
Aug 15,2020

Summary order. Writ petition dismissed as withdrawn; petitioner permitted to invoke arbitration or other available remedies.

Stay of statutory notice - Deposit as condition for interim relief - Competency of issuing officer - Proper officer under Section 79 of CGST Act, 2017

Stay of statutory notice - Deposit as condition for interim relief - Interim stay of the impugned show cause notice dated 25.02.2020 subject to deposit by the petitioner. - HELD THAT: - The High Court granted interim relief by staying the operation of the show cause notice dated 25.02.2020 on the condition that the petitioner shall deposit 75% of the amount demanded within three weeks. The stay was made conditional on such deposit and expressly stated to be subject to the final outcome of the writ petition. Concurrently, the Court disposed of the immediate stay application while providing a timetable for further proceedings between the parties.

Impugned notice stayed pending adjudication upon deposit of 75% of the demand within three weeks; stay application disposed of.

Competency of issuing officer - Proper officer under Section 79 of CGST Act, 2017 - Petitioner's challenge to the competence of the officer who issued the show cause notice remitted for consideration; no final adjudication on competence at this stage. - HELD THAT: - The petitioner contended that the show cause notice was issued by an officer (Superintendent, Central GST, Rudrapur) who lacked competence, relying on Circular No. 3/3/2017-GST dated 05.07.2017 which identifies the Deputy or Assistant Commissioner of Central Tax as the proper officer to exercise powers under the specified provision. The Court did not decide the competence issue on merits; instead it directed respondents to file counter affidavits within four weeks and permitted the petitioner two weeks thereafter to file rejoinder, leaving the contention for adjudication in the writ proceedings.

Question of competence of the issuing officer is left open and is to be considered in the pending writ petition after filing of the respondents' counter and the petitioner's rejoinder.

Final Conclusion: The High Court granted an interim stay of the show cause notice dated 25.02.2020 on condition of depositing 75% of the claimed demand within three weeks, while refraining from finally deciding the challenge to the competence of the issuing officer and directing further pleadings with the matter listed after six weeks.

Detention under Section 129 of the Central Goods and Services Tax Act, 2017 - release of detained goods on furnishing bank guarantee - preliminary adjudication in writ jurisdiction and refusal to entertain merits at interim stage - mandate to complete enquiry and pass order within stipulated time

Detention under Section 129 of the Central Goods and Services Tax Act, 2017 - release of detained goods on furnishing bank guarantee - preliminary adjudication in writ jurisdiction and refusal to entertain merits at interim stage - Writ petition not entertained on merits at preliminary stage; interim release of detained goods directed upon furnishing of bank guarantee. - HELD THAT: - The Court declined to adjudicate the merits of the challenge to the detention and demand orders at the preliminary stage, observing that the scheme of Section 129 contemplates detention and subsequent enquiry and release. Instead of deciding the substantive contentions, the Court disposed of the petition by directing an interim mechanism: the petitioner to furnish a bank guarantee for the tax and penalty shown in the demand order within two days and to apply for release of goods enclosing a copy of the order; on receipt of the bank guarantee the authority to release the detained goods within twelve hours. The Court therefore exercised supervisory jurisdiction to provide interim relief while reserving substantive adjudication to the statutory process under the Act. [Paras 5]

Petition not entertained on merits; interim directions issued for release of goods on bank guarantee submitted within the specified time.

Mandate to complete enquiry and pass order within stipulated time - release of detained goods on furnishing bank guarantee - The enquiry under the Act is remitted to the 2nd respondent to be completed within a stipulated period, with a protective time-limit on the bank guarantee. - HELD THAT: - The Court remitted the matter to the 2nd respondent to proceed with the statutory enquiry, directing that a fair and reasonable opportunity as envisaged under the Act be afforded to the petitioner and that a final order be passed and communicated within four weeks from the date of the Court's order. The bank guarantee furnished for interim release is to be kept valid for six weeks; if the authority fails to pass the order within the time directed, the petitioner is released from the obligation to keep the bank guarantee alive beyond six weeks. The remand requires fresh consideration and final adjudication by the 2nd respondent in accordance with law. [Paras 5]

Enquiry remitted to the 2nd respondent for fresh consideration and final order within four weeks; bank guarantee to remain valid for six weeks with the stated protective consequence if the time-limit is not observed.

Final Conclusion: Writ petition not decided on merits; interim relief granted permitting release of detained goods on submission of a bank guarantee within prescribed short timelines, and the matter remitted to the assessing authority to complete enquiry and pass final order within four weeks, the bank guarantee remaining valid for six weeks with the protective consequence if the authority fails to act.

Review jurisdiction under Order XLVII Rule 1 CPC - Vested right to carry forward unutilized input tax credit on introduction of GST - Protection against forfeiture of credit on procedural or technical grounds - Direction to permit filing of Form TRAN-1 by extended date - Appropriate appellate remedy by way of appeal to the Supreme Court

Review jurisdiction under Order XLVII Rule 1 CPC - Whether the Review Applications filed by the Union of India against this Court's earlier orders permitting filing of Form TRAN-1 merit interference under the limited scope of review. - HELD THAT: - The Court considered the review petitions filed under Order XLVII Rule 1 CPC and found no ground to revisit its earlier decision. The review sought to re-agitate the matter and relied upon the pendency of review proceedings and interim stay in another High Court; such circumstances do not fall within the narrow parameters for review. The Court reiterated that the proper course for the Revenue, if aggrieved, is to seek appellate remedy before the Supreme Court rather than seeking rehearing by review in this Court. Applying these principles, the Court concluded that the review applications were not maintainable and should be dismissed. [Paras 5]

Review Applications dismissed for want of any valid ground to review the earlier orders; Revenue's remedy is by appeal to the Supreme Court.

Vested right to carry forward unutilized input tax credit on introduction of GST - Protection against forfeiture of credit on procedural or technical grounds - Direction to permit filing of Form TRAN-1 by extended date - Whether petitioners are entitled to be permitted to file Form TRAN-1 by the extended date and whether unutilized credit under erstwhile statutes is a vested right not to be lost for procedural/technical errors. - HELD THAT: - The Court reaffirmed the reasoning recorded in its earlier judgment that unutilized credit arising from duties/taxes paid under erstwhile statutes constitutes a vested right which should not be taken away on mere procedural or technical lapses in filing electronic TRAN-1 forms. The Court noted the practical difficulties taxpayers faced with the electronic mechanism and accepted that plausible reasons existed for non-compliance. Relying also on similar views expressed by other High Courts, the Court held that respondents, having records of registered persons, cannot deprive petitioners of their valuable right of credit for such procedural mistakes and thus directed that petitioners be permitted to file Form TRAN-1 by the extended date as ordered earlier. [Paras 4]

Earlier direction allowing filing of Form TRAN-1 by the extended date and protecting the right to carry forward unutilized credit is upheld; denial on mere procedural or technical grounds is not warranted.

Final Conclusion: The review applications filed by the Union of India are dismissed. The Court upholds its earlier orders permitting filing of Form TRAN-1 by the extended date and affirms that unutilized credit under erstwhile statutes is a vested right which cannot be forfeited on procedural or technical grounds; the Revenue's remedy, if any, lies by way of appeal to the Supreme Court.

Ultra vires challenge to Rule 117 of CGST Rules, 2017 - Interpretation of Section 140 of the CGST Act, 2017 - Mandamus to open portal for FORM TRAN-01

Ultra vires challenge to Rule 117 of CGST Rules, 2017 - Interpretation of Section 140 of the CGST Act, 2017 - Mandamus to open portal for FORM TRAN-01 - Writ petitions seeking declaration that Rule 117 of the CGST Rules, 2017 is ultra vires Section 140 of the CGST Act, 2017 and seeking direction to open the portal for uploading FORM TRAN-01 were disposed of in terms of the Court's decision in M/s Triveni Needles Pvt. Ltd. Vs. Union of India and others dated 28.01.2020. - HELD THAT: - The petitions raised the same legal question as adjudicated by this Court in M/s Triveni Needles Pvt. Ltd. Vs. Union of India and others, and learned counsel for the parties recorded their agreement that the present matters be disposed of in the same terms. No fresh adjudication on merits was undertaken in these petitions; they were therefore disposed by applying the ratio and directions contained in the cited decision of this Court dated 28.01.2020. As a consequence, any relief or directions regarding the validity of Rule 117 and operational measures such as opening of the portal for FORM TRAN-01 follow from the operative order in the cited matter.

Writ petitions disposed of in terms of the decision in M/s Triveni Needles Pvt. Ltd. Vs. Union of India and others dated 28.01.2020; pending applications, if any, stand disposed.

Final Conclusion: The batch of writ petitions was disposed of by the High Court by applying and following its concurrent decision in M/s Triveni Needles Pvt. Ltd. Vs. Union of India and others dated 28.01.2020; no independent adjudication was recorded in these petitions and all pending applications stand disposed.

Input Tax Credit - Form GST TRAN-1 - Transfer of CENVAT ledger balance to Electronic Credit Ledger - Technical error in GST Portal - Nodal Officer appointed under CBIC Circular - Information Technology Grievance Redressal Committee (ITGRC) - Opportunity to file TRAN-1 upon ITGRC approval

Form GST TRAN-1 - Technical error in GST Portal - Information Technology Grievance Redressal Committee (ITGRC) - Opportunity to file TRAN-1 upon ITGRC approval - The respondents' statement that the petitioner's grievance was categorised by the ITGRC as a portal error and that the petitioner is to be given another opportunity to file TRAN-1 was recorded and taken on record, and the respondents/competent authority were directed to act accordingly. - HELD THAT: - The contesting respondents filed a statement dated 10.01.2020 recording that the petitioner, having migrated to GST, sought to file Form GST TRAN-1 but could not do so due to errors on the GST portal. The statement records that pursuant to the petitioner's application to the Nodal Officer and referral to the ITGRC, the committee examined system logs, categorised the grievance under cases where the taxpayer received the error 'Processed with error' (Category a-1), and approved giving the taxpayer another opportunity to file TRAN-1. The High Court recorded and accepted this statement, noted that the petitioner may take benefit of the submissions in that statement, and left it to the competent authority and the respondents to take the necessary steps as undertaken in the statement.

Statement dated 10.01.2020 recorded; respondents/competent authority to enable the petitioner to avail the opportunity to file TRAN-1 as approved by the ITGRC; writ petition disposed.

Final Conclusion: The High Court recorded the respondents' undertaking that the petitioner's TRAN-1 grievance was categorised by the ITGRC as attributable to portal error and that the petitioner would be given another opportunity to file TRAN-1; the court directed that the respondents/competent authority act in terms of that undertaking and disposed of the writ petition.

Bail under Section 439 Cr.P.C. - default in payment of GST - admission of liability in investigation - gravity of offence - compounding of offence

Bail under Section 439 Cr.P.C. - admission of liability in investigation - gravity of offence - Application for bail under Section 439 Cr.P.C. refused. - HELD THAT: - The petitioner sought enlargement on bail after preliminary investigation by DGGI, seizure of documents and CPUs, and examination of material witnesses. The petitioner (and related company) had made admissions in response to investigation questionnaires, acknowledging liabilities arising from the activities and admitting unpaid liability for the period December, 2018 to March, 2019. The court found that the petitioner had defaulted in complying with GST payment procedures and, in view of the admitted liabilities and the gravity of the offence, bail could not be granted. The court therefore declined to enlarge the petitioner on bail.

Bail application dismissed.

Compounding of offence - default in payment of GST - GST authority may consider the petitioner's request for compounding of the offence. - HELD THAT: - While refusing bail, the court noted that the petitioner and the company had already approached the GST authority seeking time for payment and compounding of the alleged offence upon payment of dues. The court left it open for the GST authority, acting on its own jurisdiction and discretion, to deal with that request with a view to compounding the offence, without directing any specific outcome.

Court permitted the GST authority to consider the compounding request.

Final Conclusion: The bail application is dismissed; however, the GST authority is permitted to consider the petitioner's pending request for compounding of the offence on its own merits.

Disallowance due to non-production of subcontractors - Estimation of income by comparison with past profit ratios - Burden of proof and verification of payments - Cessation of liability under Section 41(1) - Limitation Act and effect of acknowledgement in the balance sheet - Requirement of independent enquiry before treating creditor liability as extinguished

Disallowance due to non-production of subcontractors - Estimation of income by comparison with past profit ratios - Burden of proof and verification of payments - Whether the disallowance of payments made to 14 subcontractors could be sustained in full or was properly restricted to 10% by the CIT(A) and confirmed by the Tribunal. - HELD THAT: - The Court accepted the appellate authorities' approach of comparing the assessee's present gross and net profit ratios with historical years and applying an estimated adjustment rather than sustaining the Assessing Officer's blanket disallowance. The record showed confirmations from most subcontractors, TDS compliance, cheque payments and Method Books countersigned by supervisors; only two parties failed to respond. Given the nature of the contractor's business and the contemporaneous books, the Tribunal and CIT(A) were entitled to make a reasonable estimated disallowance (10%) to account for possible inflation, rather than rejecting the entire claimed expenditure. The High Court held that, absent established perversity in the appellate findings, the estimation based on past profit ratios and the assessee's offer was a permissible exercise of fact finding and did not raise a substantial question of law. [Paras 5, 12, 13, 15]

The restriction of the disallowance to 10% of the claimed subcontract expenses, as imposed by the CIT(A) and confirmed by the Tribunal, is sustained and the Revenue's challenge is dismissed.

Cessation of liability under Section 41(1) - Limitation Act and effect of acknowledgement in the balance sheet - Requirement of independent enquiry before treating creditor liability as extinguished - Whether addition under Section 41(1) could be made by treating outstanding creditors (over three years) as liabilities that had ceased, without independent evidence of remission. - HELD THAT: - The Court agreed with the CIT(A) that mere lapse of limitation does not ipso facto establish cessation of liability. The Assessing Officer had not made any enquiry of creditors or produced material to show remission; the amounts continued to be shown in the assessee's balance sheet and were not written back. In such circumstances, and having regard to Explanation 1 to Section 41(1) and relevant authorities, the Assessing Officer could not presume cessation of liability. The Tribunal's confirmation of deletion of the addition was held to be justified. [Paras 8, 11]

The deletion of the addition made under Section 41(1) in respect of the outstanding creditors is upheld and the Revenue's appeal on this ground is dismissed.

Final Conclusion: Both grounds of the Revenue's appeal are dismissed: the Tribunal's confirmation of a 10% estimated disallowance of subcontract expenses is sustained as a permissible factual assessment, and the deletion of the Section 41(1) addition for alleged cessation of creditor liability is confirmed for lack of evidence of remission; no substantial question of law arises.

Re-opening of assessment beyond four years - assumption of jurisdiction to re-assess - proviso to Section 147 - failure to make full and true disclosure of material facts - classification of royalty - capital versus revenue expenditure - transfer pricing proceedings and consideration by the TPO - finality and repose in tax proceedings

Re-opening of assessment beyond four years - assumption of jurisdiction to re-assess - proviso to Section 147 - failure to make full and true disclosure of material facts - classification of royalty - capital versus revenue expenditure - transfer pricing proceedings and consideration by the TPO - Validity of reopening assessment after four years where the assessee had filed a return with annexures and the issue (classification of royalty) had been considered in transfer pricing and assessment proceedings. - HELD THAT: - The Court found that the royalty payments and supporting materials were disclosed in the return and accompanying annexures, the matter was referred to the Transfer Pricing Officer and specific queries on the capital/revenue character of the royalty were raised and answered, and the TPO and Assessing Officer had considered the issue in framing the transfer pricing order and assessment. The reasons recorded for reopening addressed the merits of classification as capital expenditure but did not allege any failure by the assessee to make full and true disclosure of material facts. Given that the material relevant to the classification was on record and had repeatedly engaged the officers' attention, the alleged escapement of income could not be attributed to nondisclosure by the assessee. Applying the proviso to Section 147, the Court held that the statutory condition for reopening beyond four years - failure to disclose fully and truly - was not satisfied. The Court also invoked the principle of finality in tax proceedings, observing that stale issues ought not be raked up where there is no omission or failure to disclose. [Paras 5, 10, 11, 12, 13]

The order rejecting objections to the assumption of jurisdiction was quashed and the re-assessment proceedings set aside.

Final Conclusion: Writ petition allowed: the reassessment initiation beyond four years was invalid as there was no failure by the assessee to make full and true disclosure of material facts; the order upholding assumption of jurisdiction is quashed.

Deduction under Section 10B for profits derived from export of articles or things - Nexus between management fee and the export business of a 100% Export Oriented Unit - Characterisation of management fee as business income of the export undertaking - Receipt by way of convertible foreign exchange and eligibility for special deduction - Effect of filing a revised return pursuant to reopening under notice

Deduction under Section 10B for profits derived from export of articles or things - Nexus between management fee and the export business of a 100% Export Oriented Unit - Characterisation of management fee as business income of the export undertaking - Management fee received by the assessee from the associate enterprise forms part of the profits of the business of the 100% EOU and is eligible for deduction under Section 10B. - HELD THAT: - The Court applied the statutory test under Section 10B, emphasising that for a 100% Export Oriented Unit the relevant inquiry is whether there is a nexus between the receipt (management fee) and the business of the undertaking. The computation under sub section (4) is a proportional formula by reference to export turnover and total turnover. Where the assessee is undisputedly a 100% EOU and the management fee is incidental to export activities (technical/management support linked to exported valves), the income partakes the character of profits of the business of the undertaking and falls within the ambit of Section 10B. The Court rejected the Assessing Officer and CIT(A)'s approach which treated the fee as other income on the basis of Form 3CEB entries and on an asserted absence of technical need at the AE, holding that the crucial nexus test was not properly applied by the revenue authorities and that precedents distinguishing the differing computation principles for special deductions support the assessee's position. [Paras 7, 8, 9]

Management fee held to be part of business profits of the 100% EOU and eligible for deduction under Section 10B; Tribunal's allowance of the claim upheld.

Receipt by way of convertible foreign exchange and eligibility for special deduction - Receipt of the management fee in Indian rupees as reflected in returns/Form 3CEB did not disentitle the assessee to claim the Section 10B benefit where remittance was by convertible foreign exchange through banking channels within the statutory definition. - HELD THAT: - The Court noted that the Form 3CEB entries alone do not establish that the remittance did not constitute convertible foreign exchange as defined for the purposes of Section 10B. There was no material to show that the remittance fell outside the statutory definition; accordingly, the revenue's reliance on the currency of entry in Form 3CEB and the consequent denial of the claim was unsustainable. Prior decisions cited by the revenue were distinguished on facts and statutory scope. [Paras 11]

Validity of benefit under Section 10B not defeated by contention that receipts were shown in Indian rupees; claim allowed on facts.

Effect of filing a revised return pursuant to reopening under notice - Assessee's change of characterisation in the revised return filed pursuant to notice under reopening was not a bar by way of estoppel to the claim; the assessee could maintain that the management fee was incidental to export business. - HELD THAT: - The Court held that it would be inappropriate to non suit the assessee on the ground of an alleged inconsistent stand where the revised return was filed pursuant to a notice under Section 148. The earlier stand in the original assessment cannot be invoked to estop the assessee once the assessment was validly reopened and a revised return filed; the determinative question remained the nexus between the receipt and the export business which the authorities failed to apply correctly. [Paras 6, 7]

No estoppel arises from the revised return filed after reopening; the revised characterisation is admissible and considered.

Final Conclusion: The tax appeals are dismissed; the Tribunal's allowance of the assessee's claim for deduction under Section 10B in respect of the management fee for assessment years 2009-10 and 2010-11 is upheld and the substantial questions of law are answered against the revenue.

Enquiry report treated as complaint - offence under Section 193 IPC - complaint under Section 195 Cr.P.C. - time bar/limitation of prosecution - No Due Certificate and its effect on pending prosecution - sub judice effect of departmental actions

Offence under Section 193 IPC - complaint under Section 195 Cr.P.C. - enquiry report treated as complaint - Maintainability of charges under Section 193 IPC in the absence of a separate complaint under Section 195 Cr.P.C. - HELD THAT: - The Court held that the enquiry ordered by the Supreme Court and the resulting enquiry report operate as the basis for the prosecution and constitute a complaint for the purposes of initiating proceedings under Section 193 IPC. The Special Leave Petition led to judicially-directed enquiry; the findings of that enquiry culminated in filing the case before the trial court. On that footing, the objection that no complaint as mandated by Section 195 Cr.P.C. was filed is unsustainable and the Court did not go into the wider question of the general necessity of a complaint under Section 195 Cr.P.C. where a judicial enquiry has produced a formal report leading to prosecution. [Paras 10, 11]

The charge under Section 193 IPC is maintainable because the enquiry report arising from the Supreme Court-ordered enquiry supplies the requisite complaint.

Time bar/limitation of prosecution - continuous judicial proceedings - Whether the prosecution was barred by limitation/time. - HELD THAT: - The Court examined the sequence of events: search and prohibitory orders, petition before the Calcutta High Court obtaining stay, and subsequent Special Leave Petition to the Supreme Court which ordered an enquiry. The Court treated these events as a continuous process initiated and pursued (in part) by the petitioner, during which time the enquiry was conducted and led to prosecution. On this factual and procedural basis the Court found that the prosecution could not be held time-barred. [Paras 12]

Prosecution is not time-barred because the judicial proceedings and enquiries formed a continuous process leading to the filing of the case.

No Due Certificate and its effect on pending prosecution - sub judice effect of departmental actions - Whether issuance of a 'No Due Certificate' by the department in 1995 nullifies or compels quashing of the pending criminal prosecution. - HELD THAT: - The Court held that issuance of a departmental 'No Due Certificate' while criminal proceedings are pending is of no sanctity to override or abort the ongoing prosecution. It observed that issuing such a certificate during sub judice proceedings is improper administratively and judicially, and that the certificate does not automatically absolve the accused of criminal liability. The prosecution having been taken cognizance of by the trial court, it is for the prosecution to move to withdraw or for the trial court to accept evidence that dues were paid; until the trial reaches its logical conclusion, the certificate cannot be used to quash the case. [Paras 13]

The 'No Due Certificate' does not nullify the pending prosecution and cannot be pleaded as a ground to quash the case at this stage.

Triable issues - quashment of criminal prosecution - Whether the criminal original petition for quashment of the case should be allowed. - HELD THAT: - Having considered the enquiry report, the sequence of judicial proceedings, and the contentions raised, the Court found that the matters disclosed by the enquiry give rise to triable issues requiring testing at trial. The Court noted that prematurely stopping the prosecution would be contrary to the Supreme Court's direction that prompted the enquiry and to the need for trial to adjudicate culpability. In view of these considerations the Court concluded that the petition for quashment does not merit interference. [Paras 14, 15, 16]

The petition for quashment is dismissed; the case will proceed to trial.

Final Conclusion: The petition to quash the criminal proceedings is dismissed. The Court declined to interfere with the prosecution: the enquiry report supplies the basis for complaint, the prosecution is not time-barred on the facts, the departmental 'No Due Certificate' does not nullify pending criminal proceedings, and the matters disclosed are triable issues to be determined at trial.

Unexplained cash credits under section 68 - Proof of identity and creditworthiness of creditors - Year of receipt of loan and assessability in the relevant year - Remand for fresh verification and adjudication by Assessing Officer

Unexplained cash credits under section 68 - Year of receipt of loan and assessability in the relevant year - Whether the unsecured loan balance shown from Atul Mittal (HUF) could be held as unexplained cash credit in assessment year 2015-16 or required fresh enquiry to determine the year of receipt. - HELD THAT: - The Tribunal recorded that the contention that the unsecured loan from Atul Mittal (HUF) was brought forward from earlier year and not received in the year under consideration was first taken before the Tribunal and therefore was not examined by lower authorities. In the interest of substantial justice the Tribunal considered it appropriate to restore the issue to the file of the Assessing Officer for deciding the year in which the loan was actually received on the basis of documentary evidence to be filed by the assessee. The Tribunal observed that if it is established that the loan was not received in the year under consideration, no addition under section 68 could be sustained for 2015-16. [Paras 4]

Issue restored to Assessing Officer for determination of the year of receipt and fresh adjudication; remanded for verification rather than finally deciding the addition for 2015-16.

Unexplained cash credits under section 68 - Proof of identity and creditworthiness of creditors - Whether the unsecured loan purportedly from MD Shaukat Ali could be added as unexplained cash credit in assessment year 2015-16, given that the name and documentary basis for this creditor were not placed before the lower authorities. - HELD THAT: - The Tribunal noted that the name of MD Shaukat Ali as a creditor was not submitted to the Assessing Officer or CIT(A) and the claim was made for the first time before the Tribunal despite the audited balance sheet showing the entry. While observing that it was the assessee's duty to place the claim and supporting documents before the lower authorities, the Tribunal, in the interest of substantial justice, restored the issue to the Assessing Officer to decide the year in which the loan was received on the basis of documentary evidence to be furnished by the assessee. If the AO finds the loan was not received in the year under consideration, no addition under section 68 for 2015-16 would be warranted. [Paras 4]

Issue remanded to Assessing Officer for fresh enquiry and determination of year/source; no final addition sustained by the Tribunal for 2015-16.

Unexplained cash credits under section 68 - Proof of identity and creditworthiness of creditors - Remand for fresh verification and adjudication by Assessing Officer - Whether the credits appearing in the books in the name of Mrs. Sunita Mittal were genuine and her creditworthiness and the source of funds were satisfactorily established for assessment year 2015-16. - HELD THAT: - The Tribunal recorded the facts that the CIT(A) had noted discrepancies in confirmations and inconsistencies in documentary material regarding Mrs. Sunita Mittal (including repayment dates, outstanding balances and undeclared interest). Before the Tribunal the assessee furnished a ledger, confirmations and source documents (including bank statements, confirmations and ITRs of alleged sources) and explained the entries as returns of earlier loans, receipts from specified persons and salary. Considering these submissions and in the interest of substantial justice, the Tribunal held that the matter should be restored to the Assessing Officer for examination of the nature and source of the credits in terms of section 68 and on production of all supporting documents by the assessee, rather than deciding the addition at the Tribunal stage. [Paras 4]

Credits from Mrs. Sunita Mittal restored to Assessing Officer for fresh verification of genuineness and source under section 68; remanded for enquiry rather than finally upholding the addition for 2015-16.

Final Conclusion: The Tribunal did not adjudicate the additions on merits for assessment year 2015-16 but, in the interest of substantial justice, restored the issues relating to unsecured loans from Atul Mittal (HUF), MD Shaukat Ali and Mrs. Sunita Mittal to the file of the Assessing Officer for fresh examination of year of receipt, identity, creditworthiness and source of funds; appeal allowed for statistical purposes.

Mandatory compliance of the section 144C procedure - Validity of assessment where draft order is issued together with demand and penalty notice - Effect of bypassing mandatory statutory steps on jurisdiction of assessment - Approbate and reprobate / estoppel in tax proceedings - Finality of proceedings upon issuance of demand notice

Mandatory compliance of the section 144C procedure - Validity of assessment where draft order is issued together with demand and penalty notice - Effect of bypassing mandatory statutory steps on jurisdiction of assessment - Finality of proceedings upon issuance of demand notice - Approbate and reprobate / estoppel in tax proceedings - Whether issuance of demand notice and penalty notice along with the draft assessment order dated 27.12.2018 culminated the assessment proceedings under section 144C so as to render subsequent DRP directions and final assessment orders void ab initio. - HELD THAT: - The Tribunal held that section 144C prescribes a mandatory sequence of steps - issuance of a draft assessment order, opportunity to object and DRP directions, and completion of assessment under the applicable sub sections - and that the Assessing Officer cannot bypass those mandatory steps. The Assessing Officer, on 27.12.2018, not only quantified taxable income but also issued and served a demand notice under section 156 and initiated penalty proceedings; that action brought the proceedings to an end. The Tribunal relied on the principle that where a statute requires a thing to be done in a particular manner it must be done in that manner and that bypassing mandatory statutory procedure vitiates the resulting action. The Tribunal treated the issuance of demand together with the draft as effectively completing the assessment process and observed that internal administrative formalities (such as entries in Demand and Collection Register or uploading orders) are irrelevant to the legal question whether the proceedings had culminated. The Tribunal rejected the Revenue's contention that subsequent participation by the assessee in further proceedings estops it from challenging the validity of the draft, observing that estoppel (approbate and reprobate) cannot be permitted to override a statutory requirement and cannot confer jurisdiction where statute does not permit. The Tribunal considered contrary decisions of a co ordinate bench distinguishable or per incuriam for not having applied the binding principles relied upon, and referred to a series of authorities treating non compliance with section 144C as an incurable illegality leading to invalidation of final assessment orders and consequential demand and penalty notices. On these grounds the Tribunal concluded that the proceedings had culminated on 27.12.2018 and that subsequent DRP and final assessment orders were non est. [Paras 16, 23, 25, 34]

The additional ground was allowed; the DRP and final assessment orders subsequent to the draft dated 27.12.2018 were held to be void ab initio and the appeal was allowed.

Final Conclusion: The Tribunal held that the Assessing Officer's issuance of the demand notice and penalty notice along with the draft assessment on 27.12.2018 culminated the assessment proceedings under section 144C; consequent non compliance with the mandatory procedure rendered the subsequent DRP and final assessment orders void, and the assessee's appeal was allowed.

Revision under section 263 - principles of natural justice - audi alteram partem - service of notice - limitation under section 263(2) - erroneous and prejudicial to the interest of revenue (twin conditions) - quashing of revisional order

Service of notice - revision under section 263 - Validity of service of the show-cause notice dated 20.03.2015 and related contradiction in the assessee's pleadings. - HELD THAT: - The Tribunal examined departmental dispatch records and the grounds of appeal filed by the assessee. The assessee's original ground No.3 in Form 36 admitted receipt of the show-cause notice on 23.03.2015; an inconsistent additional ground later asserting non-service was held to be an afterthought. Documentary entries in the department's dispatch register and the assessee's own pleadings furnished before the Tribunal established that the notice was despatched on 20.03.2015 and served on 23.03.2015. In view of this, the challenge to service was rejected as untenable. [Paras 8]

The objection to service is dismissed; the show-cause notice was validly served on 23.03.2015.

Limitation under section 263(2) - revision under section 263 - Whether the revisional order dated 30.03.2015 was time-barred under section 263(2). - HELD THAT: - Section 263(2) prescribes a two-year period from the end of the financial year in which the order sought to be revised was passed; it speaks of when an order may be made, not when it must be served. The assessment order under section 143(3) was passed on 22.03.2013 and the revisional order was made on 30.03.2015, which falls within two years from the relevant date. Thus the revisional order was held to be within the statutory limitation for being made. [Paras 10]

The revisional order was not barred by limitation under section 263(2).

Principles of natural justice - audi alteram partem - revision under section 263 - quashing of revisional order - Whether the Pr. CIT afforded the assessee adequate and effective opportunity of hearing before exercising revisionary jurisdiction under section 263. - HELD THAT: - The Pr. CIT issued a show-cause notice dated 20.03.2015 requiring clarification by 27.03.2015 and proceeded to pass the revisional order on 30.03.2015 after finding no compliance. The Tribunal found that the opportunity afforded (hearing fixed on 27.03.2015, notice served on 23.03.2015) did not constitute a real, reasonable and effective opportunity given the geographic distance of the assessee and the time required to obtain representation. Fundamental principles of natural justice require that an affected party be given an effective chance to be heard before a revision under section 263 is concluded. The revisional order was passed in a hurried manner without affording such effective opportunity and thereby violated audi alteram partem. [Paras 13]

Revisional proceedings under section 263 are quashed for violation of principles of natural justice; grounds 2, 3 and 4 of the appeal are allowed.

Erroneous and prejudicial to the interest of revenue (twin conditions) - revision under section 263 - Consequences for other grounds (valuation and alleged jurisdictional defects) after quashing of the revisional order. - HELD THAT: - Because the Tribunal quashed the revisional order on the procedural ground of denial of effective hearing, the Tribunal treated the remaining substantive grounds raised against the revisional order (including challenges to jurisdiction, valuation of closing stock and allegations of error/prejudice) as infructuous. Those grounds were not adjudicated on merits in view of the order quashing the revision. [Paras 14]

Grounds 5, 6 and 7 (and other consequential contentions) stand dismissed as infructuous following quashal of the revisional proceedings.

Final Conclusion: Partly allowing the appeal, the Tribunal upholds that the show-cause notice was served and that the revisional order fell within the two-year period under section 263(2), but quashes the revisional order under section 263 for failure to afford the assessee an effective opportunity of hearing in breach of the principles of natural justice; remaining substantive grounds become infructuous.

Penalty under section 271(1)(c) for concealment of income or for furnishing inaccurate particulars of income - Requirement that notice under section 274 must specify the particular limb (concealment or inaccurate particulars) on which penalty is proposed - Initiation and imposition of penalty must be confined to the same stated ground - Principles of natural justice in penalty proceedings

Penalty under section 271(1)(c) for concealment of income or for furnishing inaccurate particulars of income - Requirement that notice under section 274 must specify the particular limb (concealment or inaccurate particulars) on which penalty is proposed - Initiation and imposition of penalty must be confined to the same stated ground - Validity of penalty imposed u/s 271(1)(c) where the show-cause notice did not specify whether penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal held that the show-cause notice dated 15.12.2016 was defective because the Assessing Officer did not indicate whether the penalty proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. Reliance was placed on the coordinate-bench decision in Nishith Kumar Jain which in turn applied the principles laid down by the Karnataka High Court in Manjunatha Cotton and Ginning Factory. Those authorities require that a notice under section 274 must specifically state the ground under section 271(1)(c) so that the assessee knows the precise case to be met; a printed proforma listing all possible grounds without striking out the inapplicable ones does not satisfy this requirement. The Tribunal observed that initiation of proceedings on one limb and imposing penalty on another offends natural justice and is unsustainable. Applying these principles to the facts, the Tribunal concluded that the penalty could not be sustained where the notice failed to specify the limb on which penalty was proposed.

Penalty imposed under section 271(1)(c) set aside and deleted as the show-cause notice failed to specify the particular ground; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2014-15 and directed deletion of the penalty imposed under section 271(1)(c) because the show-cause notice under section 274 did not specify whether the penalty was for concealment or for furnishing inaccurate particulars of income, thereby rendering the penalty proceedings defective.

Deduction under section 80P(2)(a)(i) - Requirement of factual inquiry into activities of a co-operative society - Registrar's registration certificate not conclusive for 80P claims - Each assessment year is a separate unit for eligibility - Remand to Assessing Officer for fresh examination of loan purpose and membership

Deduction under section 80P(2)(a)(i) - Requirement of factual inquiry into activities of a co-operative society - Registrar's registration certificate not conclusive for 80P claims - Each assessment year is a separate unit for eligibility - Whether the denial of deduction under section 80P(2)(a)(i) for assessment year 2017-2018 was justified and whether the matter required fresh examination by the Assessing Officer - HELD THAT: - The Tribunal noted that the Assessing Officer disallowed the claim on the basis that the assessee was essentially carrying on banking activities and that agricultural credit disbursements were only minuscule. Relying on the Full Bench decision in The Mavilayi Service Co-operative Bank Ltd. v. CIT, the Tribunal observed that after the insertion of sub-section (4) the Assessing Officer is not bound by a registration certificate and must conduct an enquiry into the factual activities of the society for each assessment year, since eligibility under section 80P must be verified year-wise. The Tribunal found that the AO had not undertaken the necessary detailed examination of each loan disbursement to determine its purpose (agricultural or non agricultural), nor had he properly examined loans to non members. In view of these omissions and the governing principles laid down by the Full Bench, the Tribunal concluded that the matter required fresh consideration by the Assessing Officer who should list and examine instances of non member loans, non agricultural disbursements and other relevant indicators before denying the deduction. The assessee was directed to cooperate and furnish required details, and avoid unnecessary adjournments. [Paras 7]

The issue is remanded to the Assessing Officer for fresh examination of the assessee's activities and the nature and purpose of each loan disbursement in accordance with the Full Bench ruling; the Assessing Officer shall decide afresh and the assessee shall cooperate.

Final Conclusion: The appeal is allowed for statistical purposes and the question of entitlement to deduction under section 80P(2)(a)(i) for AY 2017-2018 is remanded to the Assessing Officer for fresh enquiry and decision in accordance with the Full Bench of the Kerala High Court; the stay application is dismissed as infructuous.

Disallowance under section 14A of the Income-tax Act - computation of disallowance under Rule 8D - book profit computation under section 115JB - no exempt income - effect on section 14A disallowance - CBDT Circular No. 5 of 2014 - binding High Court precedents

Disallowance under section 14A of the Income-tax Act - computation of disallowance under Rule 8D - no exempt income - effect on section 14A disallowance - book profit computation under section 115JB - Whether disallowance under section 14A (and its computation under Rule 8D) can be made where the assessee has not earned any exempt income during the year, and the consequent effect on computation of book profits under section 115JB. - HELD THAT: - The Tribunal found it to be an undisputed fact that the assessee did not earn any exempt income in the year under consideration. The Assessing Officer nonetheless applied Rule 8D to compute and make an additional disallowance which was carried into the normal computation and into book profits under section 115JB. The Commissioner (Appeals) deleted the disallowance relying on High Court decisions. The Tribunal examined binding judicial authority, including decisions relied upon by the assessee and noted that where no exempt income is earned by the assessee in the relevant year, no disallowance under section 14A can be sustained. The Tribunal referred to the decisions of the High Courts (including the Bombay High Court in Pr. CIT v. Huntsman International (India) Pvt. Ltd. which refused admission against the Tribunal's reliance on the Delhi High Court in CIT v. Holcim India Pvt. Ltd.) and noted the Supreme Court's dismissal of SLP in Chettinad Logistics, confirming the position that absence of exempt income precludes a section 14A disallowance. In view of these binding precedents, the Tribunal found no infirmity in the CIT(A)'s deletion of the additional disallowance and that the question of adjustment to book profits under section 115JB accordingly did not arise. [Paras 8, 9]

The additional disallowance under section 14A (computed under Rule 8D) is not sustainable where no exempt income was earned in the year; consequently the deletion by the CIT(A) is upheld and no adjustment under section 115JB arises.

Final Conclusion: Revenue's appeal and the assessee's cross-objection are dismissed; the Tribunal upholds the CIT(A)'s deletion of the section 14A disallowance (and there is no adjustment to book profits under section 115JB) for Assessment Year (AY) 2013-14.

Validity of reopening assessment for mere verification - Requirement of tangible material to record satisfaction for reopening - Prohibition on roving or fishing inquiry - Inadmissibility of supplying or supplementing reasons after issuance of notice

Validity of reopening assessment for mere verification - Requirement of tangible material to record satisfaction for reopening - Prohibition on roving or fishing inquiry - Reopening of a completed assessment by issuance of notice under section 148 was invalid where reopening was motivated solely for verification without any tangible material indicating escapement of income. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and extracted the express statement that the case was reopened "to verify the genuineness of the loan transaction." The Bench applied the principle that mere verification requests, unaccompanied by tangible material establishing satisfaction of escapement of income, do not justify exercise of reopening power. Reliance was placed on judicial precedent distinguishing legitimate reopening (where reasons disclose requisite satisfaction) from cases where reopening is used as a means to undertake a roving or fishing inquiry. The Tribunal also noted the settled rule that reasons recorded on the date of issuance must disclose the requisite satisfaction and cannot be supplemented later to validate reopening. In the absence of any tangible material and given the stated purpose of mere verification, the jurisdiction assumed by the AO to reopen the assessment was held invalid and the challenge to reopening was allowed; consequentially, the Tribunal did not decide the merits of substantive additions. [Paras 7, 8, 9, 10]

Jurisdiction of the AO to reopen the assessment was invalidated; the grounds challenging reopening (including the additional legal ground) were allowed and other grounds on merits were rendered academic and dismissed.

Final Conclusion: The Tribunal set aside the reassessment proceedings insofar as they rested on the reopening made for mere verification in the absence of tangible material; the appeal was partly allowed by permitting the challenge to reopening and dismissing merits as academic.

Treatment of alleged bogus purchases - accommodation entries - estimation of taxable profit element on suspicious purchases - reliance on third party/departmental investigation reports - onus of proof to establish genuineness of transactions - circumstantial evidence versus payment by banking channel

Treatment of alleged bogus purchases - estimation of taxable profit element on suspicious purchases - accommodation entries - Validity of 100% addition made by the Assessing Officer on alleged bogus purchases and correctness of CIT(A)'s reduction to an 8% taxable profit on such purchases. - HELD THAT: - The Assessing Officer made a 100% addition treating the assessee as a beneficiary of accommodation entries based on information from DGIT/Investigation and the Maharashtra Sales Tax Department; the assessee produced basic evidences including books, stock details and bank statements but did not furnish further corroborative material. The AO relied on investigational material and returned service of notices to suppliers but did not carry the enquiries to a logical conclusion nor pointed out discrepancies in the assessee's books or undisclosed sales. The Tribunal noted established line of authority of High Courts and Tribunals that where purchases are shown to be from suspicious/hawala dealers, the taxable consequence ordinarily is limited to the profit element embedded in such purchases rather than entire purchase amounts, with the exact rate to be fixed on facts of each case. Both AO and CIT(A) adopted different rates (100% and 8% respectively) without empirical evidence to justify their specific rates; the CIT(A)'s adoption of 8% was consistent with coordinate decisions including the assessee's own earlier year and fell within the range of estimation applied by benches in comparable facts. Given the absence of conclusive proof either way and the AO's failure to complete necessary enquiries, the Tribunal found the CIT(A)'s approach of taxing the profit element at 8% to be reasonable and sustainable. [Paras 5, 6, 7]

The 100% disallowance by the AO is not sustained; the CIT(A)'s determination to assess 8% profit on the alleged bogus purchases is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Appellate Tribunal dismissed the Revenue's appeal for AY 2010-11 and upheld the CIT(A)'s direction to treat only an 8% profit element as taxable on the alleged bogus purchases rather than disallowing the entire purchase amounts.

Powers of appellate authority under section 251(1) to confirm, reduce, enhance or annul assessment - Enhancement of assessment limited to sources considered by the Assessing Officer - Appellate authority cannot introduce or assess a new source of income in an appeal filed by the assessee - Escaped income and appropriate remedy under reassessment provisions (section 147/148/section 263) - Requirement that the Assessing Officer must have 'considered' the source from the point of view of taxability

Powers of appellate authority under section 251(1) to confirm, reduce, enhance or annul assessment - Enhancement of assessment limited to sources considered by the Assessing Officer - Appellate authority cannot introduce or assess a new source of income in an appeal filed by the assessee - Whether the Commissioner of Income Tax (Appeals) had jurisdiction to enhance the assessment by disallowing salary payments which were not considered by the Assessing Officer - HELD THAT: - The Assessing Officer in the assessment order had confined himself to making a disallowance under section 14A read with Rule 8D; no consideration was recorded by the AO on the taxability of the salary claims. The Tribunal applied settled authoritative dicta that the appellate authority's power to enhance is circumscribed by the subject-matter of the assessment-there must be something in the assessment order to show that the AO applied his mind to the particular source from the point of view of taxability. Where a purported enhancement seeks to bring to tax a new source or matter not considered by the AO, the proper course is reassessment under the provisions dealing with escaped income and not enhancement in an appeal by the assessee. On the facts, disallowance of the salary claim amounted to an assessment of a new source not considered by the AO; consequently the CIT(A)'s enhancement exceeded his jurisdiction and was liable to be quashed. [Paras 9, 10, 11]

Enhancement by disallowing salary payments quashed; CIT(A) had no jurisdiction to enhance by assessing a new source not considered by the AO.

Final Conclusion: The assessee's appeal is allowed; the enhancement made by the Commissioner (Appeals) by disallowing the salary claim (a new source not considered by the Assessing Officer) is quashed.

Applicability of revised return filed under section 139(5) to a return of loss originally filed under section 139(3) treated as return under section 139(1) - Entitlement to carry forward loss declared in a revised return filed under section 139(5) - Conversion of limited scrutiny to complete scrutiny

Applicability of revised return filed under section 139(5) to a return of loss originally filed under section 139(3) treated as return under section 139(1) - Entitlement to carry forward loss declared in a revised return filed under section 139(5) - The revised return filed under section 139(5) for the assessment year 2015-16 is valid despite the original return being a return of loss filed under section 139(3), and the loss claimed in the revised return is entitled to be carried forward subject to computation in accordance with law. - HELD THAT: - The Tribunal accepted the assessee's submission and followed the Cochin Bench decision in M/s. Kerala State Electronics Development Corporation Ltd. v. DCIT and the Madras High Court's reasoning in CIT v. Periyar District Co-operative Milk Producers Union Ltd., which holds that a return filed under section 139(3) is to be treated as a return under section 139(1) for all purposes and, therefore, the provisions of section 139(5) are applicable to such a return. On the facts, the assessee filed a return of loss within the time permitted under section 139(3) and subsequently filed a revised return under section 139(5) within the statutory period. Applying the cited precedents, the Tribunal held that the revised return is in accordance with law and directed the Assessing Officer to process the revised return and quantify the loss in accordance with the provisions of the Act, thereby allowing the assessee to carry forward the loss claimed in the revised return subject to correct computation. [Paras 5, 6]

Revised return under section 139(5) is valid; the loss declared in the revised return is eligible for carry forward provided it is computed in accordance with law; Assessing Officer directed to process and quantify the loss.

Conversion of limited scrutiny to complete scrutiny - The plea that the Assessing Officer erred in converting limited scrutiny into complete scrutiny was not established and does not survive. - HELD THAT: - The assessee did not advance any arguments or produce cogent material before the Tribunal to substantiate the claim that limited scrutiny was converted into complete scrutiny in violation of applicable instructions. In the absence of any substantiation, the Tribunal declined to entertain the ground and treated it as not surviving. [Paras 7]

Ground alleging improper conversion of limited scrutiny to complete scrutiny fails for want of substantiation.

Final Conclusion: The appeal is partly allowed: the revised return filed under section 139(5) is held valid and the loss claimed therein is directed to be processed and quantified by the Assessing Officer for carry forward in accordance with law; the challenge to conversion of limited scrutiny to complete scrutiny is dismissed for lack of substantiation.

Bogus purchases - accommodation entries - estimation of profit element on suspicious purchases - onus to prove genuineness of transactions - reliance on third party/sales tax investigation - deletion of adhoc disallowance for lack of specific reasons

Bogus purchases - accommodation entries - estimation of profit element on suspicious purchases - onus to prove genuineness of transactions - reliance on third party/sales tax investigation - Whether the addition of the full value of alleged bogus purchases could be sustained or whether only the profit element should be taxed, and if so at what rate - HELD THAT: - The Tribunal examined the assessment addition of 100% of purchases alleged to be bogus, the assessee's production of books, stock details and bank payments, and the AO's reliance on sales tax/investigation material and unserved notices. It found that neither party established the matter conclusively: the assessee produced basic evidence but not conclusive proof of genuineness, while the AO did not complete independent enquiries or point to discrepancies in the books and relied largely on third party/sales tax information. Having regard to precedents where only the profit element embedded in purchases from suspected hawala dealers is taxed and to coordinate bench practice, the Tribunal held that a uniform 12.5% gross profit estimate adopted by the CIT(A) was reasonable on the facts of this case and that the AO's 100% addition was excessive. The Tribunal therefore upheld the CIT(A)'s scaling down of the addition to 12.5% of the alleged purchases. [Paras 6]

Addition reduced to taxation of profit element at 12.5% of the alleged bogus purchases; AO's 100% addition set aside and CIT(A)'s order upheld.

Deletion of adhoc disallowance for lack of specific reasons - Whether the adhoc disallowance of various expenses should stand where the AO did not record specific reasons - HELD THAT: - The CIT(A) deleted an adhoc disallowance of expenses on the ground that the AO had not given specific reasons for such disallowance and the assessee had placed requisite details before the AO. The Revenue failed to produce evidence to challenge the factual finding of the CIT(A). In absence of specific reasons or contrary material, the Tribunal found no error in the CIT(A)'s conclusion and declined to reinstate the adhoc disallowance. [Paras 7]

Deletion of the adhoc disallowance of expenses upheld and the Revenue's challenge rejected.

Final Conclusion: Both appeals by the Revenue for AY 2009-10 and AY 2010-11 are dismissed: the Tribunal upheld the CIT(A)'s reduction of the bogus purchase addition to a 12.5% profit estimate and sustained deletion of the adhoc disallowance for lack of specific reasons.

Quashing of bank account freeze under the Prevention of Money Laundering Act - provisional attachment under Section 5(1) of the PMLA - bona fide caution by a bank in presence of attachment and third party liens - interplay between provisional attachment and Income tax lien

Quashing of bank account freeze under the Prevention of Money Laundering Act - bona fide caution by a bank in presence of attachment and third party liens - Whether the respondent bank wilfully disobeyed the court's order quashing the debit freeze and thereby justified initiation of contempt proceedings - HELD THAT: - The Court examined the chronology: earlier quashing of the debit freeze by its order dated 14.11.2019, concurrent provisional attachment(s) by the Enforcement Directorate (including the Provisional Attachment Order dated 07.10.2019 and a subsequent order dated 05.08.2020), and a lien asserted earlier by the Income tax Department which was only released on 15.07.2020. The bank sought clarifications and NOC from the Enforcement Directorate and the petitioner, and refrained from permitting operations pending responses. The Court found that the bank's conduct was protective and cautious in view of existing provisional attachments and the Income tax lien, and that there was no evidence of wilful disobedience of the 14.11.2019 order. The Court recorded that the bank acted by way of abundant caution in seeking clarifications before enabling operations and that its cautious approach was justified by subsequent action of the Enforcement Directorate attaching the credited refund amount. [Paras 21, 22]

No wilful default by the bank; petition for contempt dismissed.

Provisional attachment under Section 5(1) of the PMLA - interplay between provisional attachment and Income tax lien - Whether the present order affects the petitioner's rights to challenge subsequent provisional attachment orders - HELD THAT: - The Court expressly clarified that its dismissal of the contempt petition is without prejudice to the petitioner's statutory right to impugn the provisional attachment order dated 05.08.2020. The order does not express any opinion on the merits of that provisional attachment and leaves open the remedy of the petitioner to challenge it before the appropriate forum in accordance with law. [Paras 23]

Petition dismissed without prejudice to the petitioner's right to challenge the provisional attachment dated 05.08.2020.

Final Conclusion: The contempt petition against the bank is dismissed: the bank did not wilfully disobey the court's order quashing the debit freeze, having acted bona fide and cautiously in the face of provisional attachments and an Income tax lien; the petitioner remains free to challenge the provisional attachment dated 05.08.2020 in accordance with law.

Summary order. Notice issued; caveator accepted notice. Status quo as to release from jail to be maintained until further orders and the impugned judgment shall not be treated as a precedent in other cases; liberty to file reply; matter listed for hearing next week.

Pronouncement of reserved judgments - effect of national lockdown on pronouncement of orders - timeframe for pronouncement of judgments - remedy where reserved judgment not pronounced within three months - directions for court record and administrative oversight of reserved judgments

Effect of national lockdown on pronouncement of orders - pronouncement of reserved judgments - Lockdown does not justify adjournment of matters already heard and reserved for pronouncement; courts must pronounce reserved orders notwithstanding office orders or lockdown-related adjournments. - HELD THAT: - The Court held that once arguments have concluded and an order/judgment is reserved, no further hearing is required and the national lockdown cannot operate as an impediment to pronouncement. Reliance was placed on this Court's earlier clarification in Puneet Kumar that administrative directions relating to suspension of court functioning do not prohibit trial courts from pronouncing reserved judgments. The Court observed that repeated adjournments of matters 'FOR ORDERS' or 'for Pronouncement of judgment' during lockdown are impermissible and directed circulation of this position to District Judges and Judicial Officers so that pending reserved orders are pronounced and not merely adjourned. [Paras 4, 6, 7, 8, 9]

Reserved judgments must be pronounced despite the national lockdown; mere adjournment 'for order' on account of lockdown is not permissible and the Trial Court should pronounce the order.

Timeframe for pronouncement of judgments - remedy where reserved judgment not pronounced within three months - directions for court record and administrative oversight of reserved judgments - Pronouncement of reserved judgments should ordinarily occur within two months; where not pronounced within three months a party may approach the High Court; Chief Justices and court officers should take administrative steps to monitor and record reserved judgments. - HELD THAT: - Relying on the Supreme Court's decision in Anil Rai, the Court reiterated the settled position that civil judgments should ordinarily be pronounced within two months of conclusion of hearing and that delays beyond three months entitle a party to seek early pronouncement from the High Court. The Court reproduced the administrative guidelines from Anil Rai directing appropriate entries in cause-titles recording date of reservation and pronouncement, monthly returns of pending reserved matters, Bench-level oversight where judgments remain unpronounced, and the power to transfer cases not pronounced for six months. The Court directed that order-sheets reflect when arguments are part-heard or reserved and, where possible, fix and record the date for pronouncement. [Paras 5, 6, 9]

Orders reserved must be pronounced within the time schedule laid down by precedent (ordinarily within two months); administrative measures must be adopted to monitor and prevent unreasonable delay, and statutory/remedial routes are available where delays exceed the prescribed periods.

Final Conclusion: The petition was disposed of as infructuous because the trial court pronounced the reserved order; the High Court directed that reserved judgments must be pronounced notwithstanding the lockdown, reiterated the timelines and administrative measures prescribed by precedent, and ordered circulation of this directive to subordinate judicial officers and the Registrar General.

Condonation of delay under Section 5 of the Limitation Act - prima facie case - Section 138 of the Negotiable Instruments Act - absence at pronouncement of judgment - no valid explanation for inordinate delay

Condonation of delay under Section 5 of the Limitation Act - no valid explanation for inordinate delay - prima facie case - absence at pronouncement of judgment - Section 138 of the Negotiable Instruments Act - Whether the delay of 966 days in filing the revision is liable to be condoned and the revision admitted for final hearing. - HELD THAT: - The applicant sought condonation of 966 days' delay on grounds of being the sole bread earner, his wife's inability to manage documents and fees, and his incarceration from 29.08.2019. The Court observed that there is no explanation for the period between the impugned judgment dated 24.03.2017 and the applicant's surrender on 29.08.2019. The applicant was not present at the pronouncement of the appellate judgment and did not surrender at that time, which defeats the contention of continuous inability to file the revision. On merits the Court examined the underlying criminal conviction under Section 138 of the Negotiable Instruments Act and noted that the applicant did not lead rebuttal evidence at trial, his signature and issuance of the cheque were not denied, and the appellate dismissal dated 24.03.2017 remained unavailing. The Court further considered equitable and pragmatic factors: the applicant has already undergone a major part of the sentence, has no funds to satisfy the fine, has applied for a declaration of bankruptcy, and attachment proceedings have been initiated against his property for recovery of fines in multiple cases. Given the absence of a satisfactory explanation for the inordinate delay, the lack of a compelling prima facie case that would render condonation productive, and the applicant's present incapacity to offer meaningful relief to the complainant, the Court concluded that condoning the delay would serve no useful purpose.

Application for condonation of delay is refused; the revision is dismissed and connected applications are disposed of.

Final Conclusion: The application under Section 5 of the Limitation Act for condonation of 966 days' delay is rejected for lack of a valid explanation and absence of a convincing prima facie case; the revision is dismissed and all pending applications are disposed of.

Grant of bail - conditions of bail - deposit of passport as bail condition - effect of appellate court's factual findings on trial - non-precedential nature of interim orders for co-accused

Grant of bail - conditions of bail - Whether interference with the High Court's order granting bail to respondent No.2 was warranted. - HELD THAT: - The Court, while acknowledging that the petitioner had placed material suggesting certain factual findings in the High Court's judgment were incorrect or contrary to record, took an overall view and declined to interfere with the High Court's order granting bail to respondent No.2. The appellate jurisdiction was exercised to review whether the High Court's conclusion on bail required upset; on assessment, the Supreme Court found no basis to set aside the grant of bail and therefore left the High Court's decision intact subject to additional conditions imposed by this Court.

The challenge to the High Court's grant of bail to respondent No.2 is dismissed and the bail is not disturbed.

Deposit of passport as bail condition - conditions of bail - Whether additional conditions should be imposed on respondent No.2's bail. - HELD THAT: - The Court agreed with the State's submission that two additional conditions were necessary. First, respondent No.2 is required to deposit his passport with the Investigating Officer forthwith and in any event within one week from the date of the order. This condition was imposed as a measure to ensure attendance and to address concerns relating to flight risk. The imposition of such a condition modifies the bail regime granted by the High Court but does not alter the grant of bail itself.

Respondent No.2 shall deposit his passport with the Investigating Officer within one week; this is an additional condition of bail.

Effect of appellate court's factual findings on trial - Whether the factual findings recorded by the High Court in the impugned bail order can influence the Trial Court at the time of trial. - HELD THAT: - The Court clarified that any factual observations or findings recorded by the High Court in the bail order shall not impede the prosecution or influence the Trial Court during trial. The Trial Court is directed to decide the matter solely on the basis of evidence adduced before it by the parties. This preserves the Trial Court's exclusive function to evaluate evidence and prevents interim appellate observations in a bail order from prejudicing the trial process.

High Court's factual findings in the bail order shall not bind or influence the Trial Court; trial to be decided on evidence before it.

Non-precedential nature of interim orders for co-accused - Whether the observations in the impugned bail order can be used as precedent or parity for other accused. - HELD THAT: - The Court restricted the scope of the High Court's observations to respondent No.2 alone and expressly held that those observations cannot be invoked as precedent or parity for other accused persons. The Court directed that cases of other accused (co-accused) must be considered independently on their own merits, thereby preventing collateral reliance on the present bail order to secure similar relief for others.

Observations in the bail order are confined to respondent No.2 and shall not serve as precedent or parity for co-accused; each co-accused's case to be considered on its merits.

Final Conclusion: Special Leave Petition dismissed insofar as interference with the High Court's grant of bail to respondent No.2 is sought; bail upheld subject to deposit of passport within one week and directions that the High Court's factual observations shall not influence the trial and shall not operate as precedent for co-accused.