TaxTMI Updates e-Newsletter
Aug 22,2024

Right to prefer appeal after security furnished - security by bank guarantee and execution of bond sufficient to crystallize right to appeal - pre-deposit requirement for preferring appeal - proviso to Section 107(6) - pre-deposit of 25 per cent of penalty - refusal to admit appeal on ground of alleged non-payment

Right to prefer appeal after security furnished - security by bank guarantee and execution of bond sufficient to crystallize right to appeal - pre-deposit requirement for preferring appeal - Petitioner entitled to prefer appeal without making any further pre-deposit once the conditional payment and security directed by the Court were furnished. - HELD THAT: - The Coordinate Bench had permitted the petitioner to challenge the order under Section 129(3) on condition of deposit of Rs.10 lakhs and securing the balance penalty by bank guarantee. The petitioner complied by payment of Rs.10 lakhs, execution of the bank guarantee and bond and obtained release of the goods. The Court held that upon such compliance the petitioner's right to prefer an appeal crystallized into a full-fledged right which cannot be taken away and respondents cannot insist upon any additional payment for maintenance of the appeal. Consequently, the respondents are directed to hear and dispose of any appeal filed by the petitioner on merits without demanding further pre-deposit. [Paras 7, 9]

If the petitioner files an appeal within two weeks, it shall be heard and disposed of on merits without the respondents insisting on any further pre-deposit.

Proviso to Section 107(6) - pre-deposit of 25 per cent of penalty - refusal to admit appeal on ground of alleged non-payment - Respondents cannot withhold admission of the appeal on the ground that the petitioner has not made a further pre-deposit equal to 25 per cent of the penalty determined under Section 129(3). - HELD THAT: - The Court observed that, having secured the penalty by payment and bank guarantee in compliance with the earlier order, the respondents' reliance on the proviso to Section 107(6) to demand an additional pre-deposit cannot be used to deny the petitioner the right to prefer an appeal. The direction is practical and limited: the appeal shall be entertained and adjudicated on merits without insisting on any additional pre-deposit. [Paras 8, 9]

Respondents shall not insist upon further pre-deposit under the proviso to Section 107(6) as a condition for hearing the appeal.

Pre-deposit requirement for preferring appeal - Petitioner may not be entitled to refund of the specific amount claimed from the bank guarantee. - HELD THAT: - While the Court refused to entertain a claim for refund of the amount said to be available for pre-deposit, it separated the question of refund from the petitioner's right to prefer an appeal: the Court stated that the petitioner 'may not be entitled to the refund of Rs.5,22,500/- or any part thereof' but nonetheless directed that the right to prefer appeal shall not be withheld for want of further pre-deposit. [Paras 8]

No order for refund of the claimed amount was granted; the petitioner's appeal rights are preserved notwithstanding the absence of refund.

Final Conclusion: Writ petition disposed: petitioner having complied with the conditional deposit and securities directed earlier is entitled to file an appeal which the respondents must hear and dispose of on merits without insisting on any further pre-deposit; no refund of the claimed sum was directed.

Input Tax Credit - Restriction on availment of ITC where tax has not been deposited by supplier - Retrospective cancellation of GST registration - Reasoned order requirement - Remand for fresh consideration - Genuineness of supplies and verification of documents

Reasoned order requirement - Retrospective cancellation of GST registration - Restriction on availment of ITC where tax has not been deposited by supplier - Genuineness of supplies and verification of documents - Remand for fresh consideration - Validity of the impugned order dated 18.04.2024 and the Show Cause Notice dated 11.12.2023 and the appropriate remedial course - HELD THAT: - The Court found that the impugned order did not deal with the specific contentions and evidence submitted by the petitioner, nor did it address the authorities relied upon by the petitioner. The order merely recorded that suppliers' registrations were cancelled for reasons such as GSTR-3B/suspicious transaction/non-existing/others, without expressly stating whether those suppliers had failed to pay tax in respect of the invoices for which ITC was claimed. Given that the petitioner had produced invoices, bank statements and portal records and had invoked compliance with the conditions for claiming Input Tax Credit, the impugned order cannot be treated as a reasoned order. In these circumstances the Court declined to relegated the petitioner to the appellate remedy and set aside the impugned order, remanding the matter to the Proper Officer for fresh consideration. On remand the Proper Officer is at liberty to call for such further documents as may be necessary to satisfy himself about the genuineness of supplies and the position regarding tax payment by suppliers, and must afford the petitioner an opportunity of hearing. The petitioner was permitted to file additional documents within two weeks from the date of the order. [Paras 13, 14, 15, 16, 17]

Impugned order set aside; matter remanded to the Proper Officer to consider afresh after permitting the petitioner to file documents within two weeks and after affording a hearing; Proper Officer may call for further information to verify genuineness and tax payment by suppliers.

Final Conclusion: The petition is disposed of by setting aside the impugned order for want of reasoned consideration and remanding the matter to the Proper Officer for fresh adjudication after permitting the petitioner to file documents and after affording an opportunity of hearing.

Show-cause notice - relegation to adjudication - import of services under reverse charge - self-invoice under Section 31(3)(f) of CGST Act - open market value under second proviso to Rule 28(1) of CGST Rules - Circular No. 210/4/2024-GST dated 26.06.2024 - treatment of payments to expatriate employees

Show-cause notice - relegation to adjudication - Impugned show-cause notice dated 26.09.2023 was not quashed and the matter was relegated to the stage of reply to the show-cause notice - HELD THAT: - The Court declined to quash the impugned show-cause notice and without entering into merits directed that the petitioner be relegated to file its reply within a stipulated time. The authorities are directed to adjudicate the matter afresh after considering the petitioner's reply within the time prescribed by the Court. No determination was made on the substantive merits of the IGST demand, and all contentions of the parties are kept open for fresh consideration by the adjudicating authority. [Paras 10, 11]

Petition dismissed insofar as quashing is sought; matter relegated to the adjudicating authority for consideration of reply and fresh decision.

Circular No. 210/4/2024-GST dated 26.06.2024 - import of services under reverse charge - self-invoice under Section 31(3)(f) of CGST Act - open market value under second proviso to Rule 28(1) of CGST Rules - treatment of payments to expatriate employees - Applicability of Circular No. 210/4/2024-GST dated 26.06.2024 to the show-cause proceedings and requirement that the authorities take note of the Circular while adjudicating - HELD THAT: - The Court observed that paragraphs 3.6 and 3.7 of the Circular, which address import of services by a registered person from a related person abroad, self-invoicing and the manner of deeming declared invoice value as open market value where full input tax credit is available, may bear on the petitioner's case. The Court directed that the adjudicating authority should take note of the Circular while considering the petitioner's reply to the show-cause notice. The Court expressly refrained from deciding the applicability of the Circular to the facts on merits and left that question open for adjudication by the authority. [Paras 9, 10, 11]

Adjudicating authority to consider Circular No. 210/4/2024-GST dated 26.06.2024 when deciding the show-cause notice; applicability to be decided on merits by the authority.

Final Conclusion: The writ petition seeking quashment of the show-cause notice is refused; the petitioner is directed to file a reply within three weeks and the adjudicating authority shall decide the show-cause notice within eight weeks, taking into account Circular No. 210/4/2024-GST dated 26.06.2024 and without any observation on the substantive merits, all contentions remaining open.

Summary order. Special Leave Petitions dismissed; delay condoned; pending applications disposed of.

Challenge to recovery notice for failure to assign reasons - requirement of stating reasons under Section 78 of the Goods and Services Tax Act, 2017 - judicial direction to consider representation on merits and in accordance with law

Challenge to recovery notice for failure to assign reasons - requirement of stating reasons under Section 78 of the Goods and Services Tax Act, 2017 - judicial direction to consider representation on merits and in accordance with law - The recovery notice dated 27.06.2024 was issued without assigning proper reasons contrary to Section 78 of the GST Act and the 1st respondent is directed to consider and dispose of the petitioner's reply/representation dated 15.07.2024 on merits within two weeks. - HELD THAT: - The Court observed that the impugned recovery notice was issued without assigning proper reasons as required by the statutory scheme under Section 78 of the Goods and Services Tax Act, 2017. The petitioner filed a reply/representation on 15.07.2024 contending that the notice violated the requirements of Section 78, but the representation had not been considered. Rather than adjudicating the petition on merits at admission, the Court confined relief to directing the 1st respondent to consider the representation and dispose of it on its own merits and in accordance with law within a stipulated period. This constitutes a judicial direction for fresh consideration rather than appellate determination of the substantive challenge to the recovery notice. [Paras 6, 7]

The 1st respondent is directed to consider and dispose of the petitioner's representation dated 15.07.2024 on merits and in accordance with law within two weeks from receipt of a copy of the order.

Final Conclusion: Writ petition disposed by directing the respondent to consider and decide the petitioner's representation challenging the recovery notice (dated 27.06.2024) on merits and in accordance with law within two weeks; no costs.

Cancellation of bail - conditions of bail - co-operation with investigation - documentary nature of evidence - custodial interrogation

Cancellation of bail - co-operation with investigation - documentary nature of evidence - conditions of bail - Bail granted to the accused was not amenable to cancellation - HELD THAT: - The Court found that the Department's surprise search did not yield incriminating material or stock discrepancy and that the accused thereafter joined the investigation, was interrogated and arrested. The transactions alleged relate to 2017/2018 and the investigation is largely documentary, which the Investigating Agency can procure without custodial interrogation. The bail had been granted seven months prior and there is no assertion by the Department that the accused failed to co-operate or join the investigation. The accused has complied with the conditions of bail, including the deposit ordered. In these circumstances the Court concluded there was no purpose in cancelling bail at this stage, while preserving the Department's remedy in case of any breach of bail conditions.

Petition for cancellation of bail dismissed; accused to continue to abide by existing bail conditions and cooperate with the investigation, and the Department may seek appropriate relief before the Trial Court in case of any breach.

Final Conclusion: The High Court dismissed the petition for cancellation of bail, holding that in view of the documentary nature of the investigation, absence of incriminating material at search, and the accused's compliance with bail conditions, there was no justification to recall bail; the Department remains at liberty to approach the Trial Court upon any breach.

Invoking Section 74 vis-a -vis Section 73 of the CGST Act - Judicial modification granting liberty to department to proceed under the Act - Jurisdiction to issue show cause notice - Prima facie suppression as a question of fact

Invoking Section 74 vis-a -vis Section 73 of the CGST Act - Judicial modification granting liberty to department to proceed under the Act - Jurisdiction to issue show cause notice - Validity of issuance of show cause notice under Section 74 despite earlier order permitting proceedings under Section 73. - HELD THAT: - The Court examined its earlier order dated 25.07.2023 which had permitted respondents to proceed invoking powers under Section 73. The department sought modification of that order to remove the restriction and the Court, by subsequent order dated 24.04.2024, granted liberty to the department to proceed "in accordance with law". Reading both orders together, the Court held that the liberty given was not confined narrowly to Section 73 and that the department was free to proceed under any provision of the Act as permissible under law. Consequently, the challenge to the impugned notice issued under Section 74 on the ground that the earlier order restricted proceedings to Section 73 was rejected. The Court confined itself to the proper construction of its prior orders and the scope of liberty granted to the department to proceed under the Act. [Paras 4, 5, 6, 7]

Challenge to the notice under Section 74 on the ground of prior restriction to Section 73 is dismissed; respondents entitled to proceed under Section 74.

Prima facie suppression as a question of fact - Jurisdiction to issue show cause notice - Whether writ court should adjudicate at pre-adjudicatory stage the factual question of suppression warranting invocation of Section 74. - HELD THAT: - The Court observed that the impugned notice invokes Section 74 on a prima facie finding of suppression. The petitioner disputed that characterization, but the Court held that whether the case involves suppression is a factual question for adjudication by the authority and not appropriate for interlocutory determination by the writ court at the stage when only a show cause notice has been issued. Accordingly, the Court declined to enter into merits and left the factual determination to the competent authority after considering the petitioner's reply. The Court directed that if the petitioner files a reply within 30 days, the authority shall consider it with due application of mind and proceed in accordance with law. [Paras 8, 9, 10]

Merits on suppression are not decided; matter is left to the authority for factual adjudication after considering the petitioner's reply.

Final Conclusion: The petition is dismissed insofar as it seeks to challenge issuance of show cause notice under Section 74 on the ground of prior restriction to Section 73; the factual question whether suppression exists is left to the competent authority to decide after the petitioner files a reply within 30 days, and the writ petition is disposed.

Condonation of delay under Section 107 of the GST enactments - Computation of limitation from communication of order - Condonable period (additional thirty days) - Right to appellate hearing on merits where appeal falls within condonable period - Rejection of appeal for delay without application for condonation

Condonation of delay under Section 107 of the GST enactments - Computation of limitation from communication of order - Condonable period (additional thirty days) - Right to appellate hearing on merits where appeal falls within condonable period - Whether the appeal filed on 29.02.2024 was within the condonable period and whether the appellate authority should be directed to decide the appeal on merits without raising the preliminary objection of limitation. - HELD THAT: - The appellate order recorded that the original order was communicated to the petitioner on 31.10.2023. Computation from that communication date made the three month limitation period expire on 30.01.2024, with an additional condonable period of thirty days available under the applicable GST provision. The appeal was presented on 29.02.2024, which falls within that condonable period. The impugned order rejected the appeal solely because it was presented beyond the three month period and observed that no application for condonation had been filed. Given that the appeal was within the condonable period and the order in original was passed without hearing the petitioner, the interest of justice requires that the appellate authority consider the appeal on its merits rather than foreclose it on the preliminary ground of limitation. The High Court accordingly set aside the impugned order and remanded the matter to the appellate authority with a direction to decide the appeal on merits without going into the question of limitation.

Impugned order dated 02.04.2024 set aside; matter remanded to the appellate authority to consider and dispose of the appeal on merits without going into limitation.

Final Conclusion: The High Court allowed the petition, set aside the appellate order rejecting the appeal for delay, and remanded the appeal for fresh disposal on merits by the appellate authority without considering limitation.

Tax Deduction at Source (TDS) credit - application of Rule 37BA for treating gross sale proceeds as assessee's income - commission agent / kaccha arahtia turnover excludes sales effected on behalf of principals (CBDT Circular No.452) - entitlement to TDS credit where assessee acts only as agent - consistency / follow-the-Bench principle

Tax Deduction at Source (TDS) credit - application of Rule 37BA for treating gross sale proceeds as assessee's income - commission agent / kaccha arahtia turnover excludes sales effected on behalf of principals (CBDT Circular No.452) - entitlement to TDS credit where assessee acts only as agent - consistency / follow-the-Bench principle - Whether the assessee, being a licensed commission agent (kaccha arahtia), is entitled to credit of the entire TDS deducted and the application of Rule 37BA by treating gross sale proceeds as the assessee's income is incorrect. - HELD THAT: - The Tribunal examined the material on record, the CBDT Circular No.452/17-3-1986 which states that for kaccha arahtias turnover comprises only the gross commission and does not include sales effected on behalf of principals, and the Tribunal's earlier decision in Yagneswari General Traders vs. ITO on identical facts. Applying that circular and following the earlier Bench decision by consistency, the Tribunal concluded that the assessee acted only as an agent and thus the gross sale proceeds could not be treated as the assessee's income for the purpose of denying TDS credit. Consequently, the orders of the Revenue treating the gross sale proceeds as the assessee's income and restricting TDS credit were set aside and the Assessing Officer was directed to grant credit of the entire amount of TDS deducted. [Paras 6, 7]

Orders of the revenue authorities set aside; Assessing Officer directed to grant credit of entire TDS deducted to the assessee.

Final Conclusion: Appeal allowed; Tribunal set aside the orders of the Assessing Officer and the CIT(A) and directed the AO to grant credit of the entire amount of tax deducted at source to the assessee for AY 2023-24.

Income Declaration Scheme, 2016 (IDS) - compliance with IDS deposit requirement - reassessment under Section 147 - quashing of assessment order - Form 4 certificate of declaration - mandamus to issue certificate

Income Declaration Scheme, 2016 (IDS) - compliance with IDS deposit requirement - reassessment under Section 147 - quashing of assessment order - Impugned reassessment and related notices premised on non-deposit under IDS were untenable where deposits had in fact been made. - HELD THAT: - The Assessing Officer proceeded on the basis that the petitioner had not deposited the tax liability arising from the declaration under the IDS, which formed the foundation for issuance of notices and passing of reassessment under Section 147 read with Sections 144 and 144B. The petitioner produced challans showing deposits made on specified dates, and the respondents filed a reply affidavit (para 2(x)) recording that seven payments totaling the liability were made by the petitioner. On the respondents' own showing that the petitioner complied with the IDS and deposited the requisite amounts, the Assessing Officer's premise for reopening and assessment was erroneous. Accordingly, the impugned assessment order and consequential notices cannot stand and have been quashed. [Paras 5, 6, 8]

Impugned reassessment order and consequential notices quashed on the respondents' admission that the petitioner deposited the amounts under the IDS.

Form 4 certificate of declaration - mandamus to issue certificate - Direction to issue the Form 4 certificate of deposit under the IDS to the petitioner. - HELD THAT: - Having accepted that the petitioner complied with the IDS deposit requirement, the Court found it incumbent on the respondents to issue the appropriate certificate evidencing the deposit. The Court directed the respondents to issue the Form 4 certificate of declaration to the petitioner within four weeks from presentation of a copy of the order before the competent officer, thereby granting mandamus relief in favour of the petitioner. [Paras 7, 8]

Respondents directed to issue the Form 4 certificate of deposit under the IDS within four weeks.

Final Conclusion: Writ petition allowed: reassessment order and consequential notices quashed on respondents' own admission of compliance with IDS; respondents directed to issue Form 4 certificate within four weeks; appeal before CIT(A) rendered infructuous and disposed of.

Time-bar under Section 153(3) following remand under Section 254 - deemed acceptance of return where fresh assessment barred - right to refund where tax paid exceeds liability after remand lapses

Time-bar under Section 153(3) following remand under Section 254 - Whether the Assessing Officer could pass a fresh assessment following the Tribunal's remand dated 11.10.2019 after expiry of the period prescribed by Section 153(3) of the Act. - HELD THAT: - The Tribunal directed the Assessing Officer to carry out specified enquiries within six months, but no action was taken. Section 153(3) permits a fresh assessment in pursuance of an order under Section 254 only within the period prescribed (nine months, extended to twelve months where applicable) computed from the end of the financial year in which the Section 254 order is received. The court held that the statutory limitation is mandatory and must be strictly adhered to; respondents failed to pass a fresh assessment within the prescribed period which expired on 30.09.2021. Consequently the Assessment Order dated 11.08.2023 is beyond the statutory period and is barred by limitation and therefore unsustainable. [Paras 19, 21, 22, 23]

Assessment proceedings initiated and the Assessment Order dated 11.08.2023 are time barred under Section 153(3) and cannot be sustained.

Deemed acceptance of return where fresh assessment barred - right to refund where tax paid exceeds liability after remand lapses - Consequences of failure to make a fresh assessment within the limitation period and relief available to the assessee. - HELD THAT: - Relying on the principle articulated in Commissioner of Income Tax, Bhopal v. Shelly Products, the court held that if the Assessing Authority is barred from making a fresh assessment, it amounts to deemed acceptance of the return. The Assessing Officer is thereby denuded of authority to seek further tax; any excess tax paid on the basis of the earlier assessment must be refunded. The court observed that the assessee should not be placed in a worse position due to the Revenue's failure to act, and that the assessee may bring to the authority's notice matters relevant to calculation of refund. Applying this principle, the court directed refund of the amount deposited by the petitioner along with applicable interest. [Paras 24, 25, 26]

Income declared in the return stands accepted; respondents must refund the tax paid in excess (amount deposited under protest) with applicable interest; impugned notices and the Assessment Order dated 11.08.2023 are set aside.

Final Conclusion: Writ petition allowed: impugned notices and Assessment Order dated 11.08.2023 set aside; respondents directed to refund the amount deposited under protest with interest within eight weeks, the assessment being time barred under Section 153(3) and the return deemed accepted.

Limitation under Section 153(3) - remand by the Tribunal under Section 254 - deemed acceptance of return where fresh assessment is barred - refund of excess tax where assessment is barred - protective addition under Section 68

Limitation under Section 153(3) - remand by the Tribunal under Section 254 - protective addition under Section 68 - Fresh assessment proceedings initiated after the expiry of the period prescribed by Section 153(3) in consequence of the Tribunal's remand dated 11.10.2019 are time barred and notices issued thereafter are invalid. - HELD THAT: - Sub section (3) of Section 153 prescribes a limited period within which a fresh assessment pursuant to an order under Section 254 must be made (nine months, extended to twelve months by proviso where applicable), calculated from the end of the financial year in which the Tribunal's order is received. The Tribunal had directed compliance within six months by the Assessing Officer by its order dated 11.10.2019. No assessment order was passed within the statutory period; the AO took no action during the stipulated time and subsequently issued notices dated 21.07.2023, 09.08.2023 and 16.08.2023 well beyond the prescribed limitation. The statutory scheme and legislative intent require strict adherence to the time limit for making a fresh assessment after remand; consequently, initiation of fresh assessment beyond that period is impermissible and the impugned notices cannot be sustained. [Paras 21, 22]

Notices dated 21.07.2023, 09.08.2023 and 16.08.2023 are set aside as barred by limitation under Section 153(3).

Deemed acceptance of return where fresh assessment is barred - refund of excess tax where assessment is barred - Failure of the Revenue to make a fresh assessment within the statutory period results in deemed acceptance of the return and requires refund of any tax paid in excess of the liability shown in the return. - HELD THAT: - Following the principle explained by the Supreme Court in Commissioner of Income Tax, Bhopal v. Shelly Products, where the Assessing Authority is precluded from making a fresh assessment after the earlier assessment is set aside and the limitation for fresh assessment has expired, it must accept the income as returned. The AO is thereby divested of authority to raise further demand; any excess tax paid must be refunded. The petitioner having deposited an amount under protest and the Department having failed to complete assessment within the statutory period, the returned income stands accepted and refund of the excess tax payable for AY 2004 05 is consequent upon that acceptance. [Paras 23, 24, 25]

The return is deemed accepted and the respondents are directed to refund Rs. 37,73,012/- (deposited under protest) with applicable interest within eight weeks.

Final Conclusion: Writ petition allowed: departmental notices issued after expiry of the limitation under Section 153(3) are quashed; return for AY 2004-05 is treated as accepted due to failure to pass a fresh assessment in time and the respondents are directed to refund the amount deposited under protest with applicable interest within eight weeks.

Faceless assessment scheme - jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - compliance with Section 151A and Notification dated 29 March 2022 - invalidity and quashing of notices issued contrary to the Scheme - three months notice period under amended Section 148 (Finance Act, 2023) - prejudice not required to be shown where authority acts contrary to law

Compliance with Section 151A and Notification dated 29 March 2022 - jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - invalidity and quashing of notices issued contrary to the Scheme - prejudice not required to be shown where authority acts contrary to law - Validity of notices and proceedings initiated under Section 148/148A where notices and orders were issued by the Jurisdictional Assessing Officer instead of under the faceless mechanism mandated by the Scheme notified pursuant to Section 151A - HELD THAT: - The Court observed that the impugned notice dated 17.04.2024 under Section 148 and the earlier notice and order under Section 148A were issued by the Jurisdictional Assessing Officer and not through the faceless mechanism mandated by the Notification dated 29 March 2022 framed under Section 151A. Relying on the Division Bench decision in Hexaware, the Court recorded that the Scheme requires automated allocation and that jurisdiction is conferred on the officer to whom the case is allocated, to the exclusion of concurrent jurisdiction by the JAO. The Court held that acting contrary to the Scheme and statutory mandate renders the action invalid and prejudicial to the assessee without any requirement for the assessee to prove additional prejudice. Given the admitted non-compliance with Section 151A and the binding precedents of this Court, the impugned order under Section 148A(d) and the notice under Section 148 were found to be unsustainable and liable to be quashed. [Paras 5, 6, 7, 9, 12]

Impugned order dated 17.04.2024 under Section 148A(d) and notice dated 17.04.2024 under Section 148 are quashed for non-compliance with Section 151A and the faceless Scheme.

Three months notice period under amended Section 148 (Finance Act, 2023) - Validity of the time-period specified in the impugned Section 148 notice in light of the amendment by the Finance Act, 2023 prescribing a three months period - HELD THAT: - The petitioner contended that the order under Section 148A(d) was passed after the Finance Act, 2023 amendment (effective 1 April 2023) which prescribes that a notice under Section 148 must require furnishing of a return within three months from the end of the month in which such notice is issued (or such further period as allowed). The Court recorded that there was substance in the contention since the impugned notice sought compliance within 90 days from the issue of the notice in a manner inconsistent with the amended provision. However, having disposed of the petition on the ground of non-compliance with Section 151A, the Court expressly refrained from expressing any final opinion on other issues raised, including the detailed adjudication of compliance with the amended time-limits under Section 148. [Paras 10, 11, 12]

Court noted merit in the contention regarding the three months notice requirement but did not decide the issue on merits and did not express any final opinion on it.

Final Conclusion: Writ petition allowed: the order under Section 148A(d) dated 17.04.2024 and the notice under Section 148 dated 17.04.2024 for Assessment Year 2020-21 are quashed for non-compliance with Section 151A and the faceless Scheme; no costs. The question of compliance with the Finance Act, 2023 amendment to Section 148 (three months notice period) was noted as having substance but left undecided.

Deduction under Section 80HHC - Interest on delayed sale consideration as part of business profits - Inclusion of export turnover of an exempt unit for computing export turnover and total turnover - Interaction between section 10B/10A exemptions and computation under Section 80HHC

Interest on delayed sale consideration as part of business profits - Deduction under Section 80HHC - Whether 90% of interest received from customers on delayed payment (charged/earned for 90 days) is to be excluded while computing eligible profits of business for deduction under Section 80HHC - HELD THAT: - The Court held that the question was conclusively answered by the Gujarat High Court in Principal Commissioner of Income Tax v. Atul Ltd., which followed the Division Bench decision in Nirma Industries Ltd., and that those decisions were upheld by the Supreme Court. The reasoning adopted is that interest earned/charged from purchasers on delayed payment of sale consideration has nexus with the business and is includible in profits of the business for the purpose of computing deduction under Section 80HHC. The mere fact that an assessee has made a special provision in respect of such interest does not sever the nexus with business receipts. The Supreme Court decision in CIT v. K. Ravindranathan Nair was found to be distinguishable on its facts and not applicable to interest on delayed sale consideration. Following these precedents, the Court decided the question in favour of the assessee and rejected the exclusion of the 90% interest from eligible business profits for computation of Section 80HHC deduction. [Paras 9, 10]

90% interest received from customers on delayed payment is not to be excluded and is includible in business profits for computing deduction under Section 80HHC; question answered in favour of the assessee.

Inclusion of export turnover of an exempt unit for computing export turnover and total turnover - Interaction between section 10B/10A exemptions and computation under Section 80HHC - Deduction under Section 80HHC - Whether export turnover and total turnover of a 100% EOU/unit exempt under Section 10B must be excluded while computing eligible export turnover, total turnover and profits for deduction under Section 80HHC - HELD THAT: - The Court followed its earlier decision in M/s Mahavir Spinning Mills Ltd. and the reasoning in the Delhi High Court decision in Commissioner of Income Tax v. M/s Dabur India Ltd. The Court observed that the formula in Section 80HHC(3) refers expressly to three components-export turnover, total turnover and profits of the business-and none of these components makes reference to 'total income'. A literal application of the statutory formula requires inclusion of the export turnover of the exempt unit within the export turnover and total turnover for computing the deduction. The nature and object of Section 80HHC is beneficial and intended to encourage exports; provisions conferring exemption under Section 10A/10B do not operate to exclude such turnover from the computation under Section 80HHC. Following coordinate and other High Court precedents, the Court answered the amended question in favour of the assessee, quashed and set aside the orders below to that extent, and held the assessee entitled to the deduction under Section 80HHC. [Paras 12, 16]

Export turnover and total turnover of the unit exempt under Section 10B are to be included for the purposes of computing deduction under Section 80HHC; question answered in favour of the assessee and orders below quashed to that extent.

Final Conclusion: Both amended questions of law were answered in favour of the assessee: (i) interest on delayed sale consideration (90%) is includible in business profits for computing deduction under Section 80HHC, and (ii) export turnover and total turnover of a unit exempt under Section 10B are to be included when computing deduction under Section 80HHC. The appeals are allowed to that extent and the orders of the ITAT and CIT(A) are quashed and set aside accordingly.

Faceless assessment scheme - Section 151A compliance - jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Section 148A proceedings - reassessment under Section 148 - invalidity of action for non-compliance with statutory procedure

Section 151A compliance - Faceless assessment scheme - jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - invalidity of action for non-compliance with statutory procedure - reassessment under Section 148 - Section 148A proceedings - Notice under Section 148 and antecedent proceedings under Section 148A issued by the Jurisdictional Assessing Officer without following the faceless scheme are invalid and vitiate the reassessment proceedings. - HELD THAT: - The Court held that the Scheme notified by the Central Government on 29 March 2022 implementing a faceless mechanism is mandatory for proceedings under Section 148A and for issuance of notice under Section 148, pursuant to Section 151A of the Act. Citing the Division Bench decision in Hexaware Technologies Ltd., the Court accepted that jurisdiction is allocated by automated allocation to the Faceless Assessing Officer and is not concurrently exercisable by the Jurisdictional Assessing Officer. The impugned notice dated 16 March 2023 (Section 148A(b)), the order under Section 148A(d) dated 4 May 2023 and the consequent notice under Section 148 dated 4 May 2023 were all issued by the JAO and not by the FAO, contrary to the Scheme. Acting contrary to the mandated procedure renders the actions invalid; prejudice need not be proved where an authority acts contrary to statutory procedure. In view of the binding interpretation of Section 151A and the Scheme, the proceedings initiated in respect of Assessment Year 2016-17 were held to be vitiated and were quashed. [Paras 3, 5, 8]

Impugned notices and order issued by the Jurisdictional Assessing Officer without compliance with the faceless scheme under Section 151A are quashed and set aside; reassessment proceedings in respect of AY 2016-17 are consequently unsustainable.

Final Conclusion: Writ petition allowed: notices under Section 148 and the related Section 148A order issued by the Jurisdictional Assessing Officer without compliance with the faceless scheme are quashed; no opinion expressed on other grounds raised in the petition.

Non-application of mind - reassessment under Section 148 and initiation under Section 148A - binding effect of appellate order - mechanical sanction under Section 151 - non-compliance with Section 151A and faceless mechanism - judicial discipline of following appellate orders

Non-application of mind - reassessment under Section 148 and initiation under Section 148A - binding effect of appellate order - mechanical sanction under Section 151 - non-compliance with Section 151A and faceless mechanism - Impugned notices under Section 148A(b)/148A(d) and notice under Section 148 were issued despite prior assessment considering the same deposit and subsequent deletion of that addition by the CIT(A), and the sanction under Section 151 was granted mechanically contrary to law. - HELD THAT: - The Court found that the Jurisdictional Assessing Officer issued the Section 148A(b) notice and proceeded to pass order under Section 148A(d) without confronting or recording any consideration of the assessment order dated 20 December, 2019 which had specifically dealt with the cash deposit during FY 2016-17 and had added the amount to income. The appellate order dated 26 February, 2024 by the CIT(A) deleting that addition was on the record and known to the JAO (who was a party to the appeal) by the time the order under Section 148A(d) was passed, yet the order is conspicuously silent about that adjudication. The Chief Commissioner's sanction under Section 151 was also granted mechanically and without application of mind, and the issuance of the Section 148 notice proceeded outside the mandated faceless mechanism under Section 151A. The Court emphasised the binding effect of appellate orders and judicial discipline, noting that subordinate revenue officers cannot ignore appellate decisions merely because they regard them as "not acceptable." Reliance on the principles in the coordinate-bench decision in Hexaware Technologies Limited was treated as determinative of coverage of the impugned proceedings. The cumulative effect of the JAO's failure to consider the assessment order and the CIT(A) dismissal, together with a mechanical sanction, amounted to gross non-application of mind and prejudice to the assessee. [Paras 8, 11, 13, 14, 15]

Writ petition allowed; impugned notices/orders quashed insofar as they relate to the challenged proceedings, the conduct of the JAO and the mechanical sanction by the Chief Commissioner deprecated, and the petition allowed in terms of prayer (a).

Final Conclusion: The petition is allowed: the reassessment proceedings initiated by issuance of notices under Section 148A and Section 148 (premised on the deposit already considered in assessment and subsequently deleted on appeal) are quashed for gross non-application of mind and mechanical sanction; the JAO and the Chief Commissioner are reprimanded and directed to pay personal costs of Rs.25,000/- each to the National Association for the Blind within two weeks.

Chargeability under Section 164(1) - maximum marginal rate and proviso for trust declared by will - Deeming fiction of taxation as an Association of Persons (AOP) - Allowability of deductions under Chapter VI-A despite deeming fiction - Credit for tax deducted at source as per Form 26AS

Chargeability under Section 164(1) - maximum marginal rate and proviso for trust declared by will - Deeming fiction of taxation as an Association of Persons (AOP) - Whether the trust is liable to be taxed at the maximum marginal rate under Section 164(1) read with the second proviso (trust declared by will being the only trust) as if its relevant income were the total income of an AOP - HELD THAT: - The trust was created by the testatrix' will and is not disputed to be the only trust declared by her. The will names the two sons and their families as beneficiaries but does not expressly state or ascertain the individual shares of beneficiaries; distribution of income and corpus is left to the absolute discretion of the trustees. Under Explanation 1 and the language of Section 164(1), where individual shares are indeterminate or unknown the relevant income is to be charged at the maximum marginal rate. The Tribunal found that the trustees' absolute discretion and the absence of specifically ascertainable shares render the beneficiaries' shares indeterminate and therefore the second proviso to Section 164(1) read with Section 167B is attracted. Accordingly, the relevant income is chargeable as if it were the total income of an AOP and taxable at the maximum marginal rate. [Paras 5, 6]

The trust's income is chargeable under Section 164(1) read with proviso (ii) as if it were the total income of an AOP; taxation at the maximum marginal rate stands.

Allowability of deductions under Chapter VI-A despite deeming fiction - Whether the deeming fiction under Section 164(1) can be extended to deny deductions under Chapter VI-A (such as Section 80C) and similar individual reliefs - HELD THAT: - While Section 164(1) effects a deeming that relevant income be treated as the total income of an AOP for charging tax, that fiction does not alter substantive entitlement to deductions available to individual beneficiaries. The trustees are representative assessees and the beneficiaries are individuals; the Tribunal held that the deeming cannot be extended to deny otherwise available deductions under Chapter VI-A and 80TTA. The AO is directed to consider the assessee's claim for deductions after due verification and grant them if warranted. [Paras 6]

Deductions under Chapter VI-A and 80TTA cannot be denied merely by application of the deeming fiction; AO to verify and allow such deductions if substantiated.

Credit for tax deducted at source as per Form 26AS - Whether the assessee is entitled to TDS credit shown in Form 26AS which was not given by the assessing authority - HELD THAT: - The Tribunal noted that there is no justification to deny the credit of TDS merely on account of filing the return in an incorrect ITR form so long as the correct income and tax liability are brought to tax. The Tribunal directed the Assessing Officer to consider the grievance regarding non-credit of TDS and to grant the credit after due verification if the claim is genuine and supported by Form 26AS and other documents. [Paras 6]

TDS credit as per Form 26AS is to be considered and granted by the AO after due verification.

Final Conclusion: Appeal partly allowed: the Tribunal upholds that the trust's relevant income is chargeable under Section 164(1) as if it were the total income of an AOP (taxable at maximum marginal rate) because beneficiaries' shares are indeterminate, but directs the Assessing Officer to verify and allow, if warranted, the assessee's claims for TDS credit and deductions under Chapter VI-A/80TTA; assessment otherwise stands corrected in accordance with these directions.

Addition under section 68 for unexplained share application money - proof of identity and creditworthiness of share applicants - protective addition in search cases - treatment of paper/shell company in search-based assessments - determination of income by way of commission as business income

Addition under section 68 for unexplained share application money - proof of identity and creditworthiness of share applicants - treatment of paper/shell company in search-based assessments - Validity of addition of share application money to assessee's income under section 68 for AY 2009-10 - HELD THAT: - The Tribunal upheld the order of the CIT(A) confirming the addition under section 68 as the assessee failed to establish the identity and creditworthiness of the share applicants or the genuineness of transactions. The finding rests on materials arising from search and seizure operations and post-search enquiries which showed that the assessee received share premium from group entities and functioned as a paper/conduit company used to rotate funds of the group. In absence of any representation or evidence from the assessee to rebut these findings, the Tribunal found no reason to disturb the appellate authority's conclusion that addition under section 68 was justified. [Paras 9]

Appeal dismissed; addition of share application money of the assessee under section 68 upheld.

Protective addition in search cases - treatment of paper/shell company in search-based assessments - Validity of deletion of protective addition in the hands of the assessee for AY 2013-14 - HELD THAT: - The AO had made substantive addition in the hands of the ultimate beneficiary (Surya Processed Food Pvt. Ltd.) and a protective addition in the hands of the assessee, treating the assessee as a paper company used to channel unaccounted funds. The CIT(A) deleted the protective addition, observing that substantive addition was already made in the hands of the beneficiary. Having examined the record and the search-based material, the Tribunal found no reason to disturb the CIT(A)'s deletion of the protective addition and dismissed the Revenue's appeal. [Paras 14]

Revenue's appeal dismissed; deletion of protective addition in assessee's hands sustained.

Determination of income by way of commission as business income - treatment of paper/shell company in search-based assessments - Sustenance of commission income determined at 2.5% for AY 2013-14 - HELD THAT: - The AO, noting the assessee's role as a paper company used to channel funds, determined commission income @2.5% on the value routed through the assessee. The CIT(A) sustained this determination. As no representative appeared for the assessee to controvert the finding or place material to contest the factual basis, and having regard to the departmental material, the Tribunal saw no reason to interfere with the CIT(A)'s conclusion sustaining the commission as the assessee's income. [Paras 15]

Assessee's appeal dismissed; commission of 2.5% sustained as income of the assessee.

Final Conclusion: Appeals dismissed: for AY 2009-10 the addition under section 68 of unexplained share application money was upheld; for AY 2013-14 the deletion of the protective addition in the assessee's hands was sustained and the commission determined at 2.5% was upheld.

Classification of software license expense as revenue or capital expenditure - ownership test - enduring benefit test - functionality test - application of coordinate bench precedent - disallowance under section 40(a)(ia) for failure to deduct or deposit TDS

Classification of software license expense as revenue or capital expenditure - ownership test - enduring benefit test - functionality test - application of coordinate bench precedent - Deletion of disallowance of software license expenditure of the assessee and its treatment as revenue expenditure. - HELD THAT: - The Tribunal examined whether software license payments constituted capital expenditure by reference to established tests (ownership, enduring benefit, functionality). The assessee acquired licences to use software (no ownership transfer), the software required periodic updates and was subject to rapid obsolescence, and the software aided routine operations without altering fixed capital. The coordinate bench of the Tribunal in the assessee's own earlier proceedings for assessment years including 2010-11 had applied these tests and held similar software licence payments to be revenue in nature, while capitalising only a distinct one-time indexing software cost. No change in facts or law for the year under consideration was shown by the Department. In view of the recurring nature of the licence fees, absence of enduring benefit, and persuasive precedent in the assessee's own case, the impugned deletion of the AO's addition was upheld. [Paras 4, 5, 6, 7]

The disallowance treating software license expenditure as capital is deleted and the expenditure is held to be revenue in nature.

Disallowance under section 40(a)(ia) for failure to deduct or deposit TDS - Validity of deletion of 30% disallowance under section 40(a)(ia) in respect of payments to contractors and professionals. - HELD THAT: - The Tribunal considered whether the AO was justified in disallowing 30% of the total payments on the ground of non/short deduction of TDS. The assessee established that TDS under the relevant provisions had been deducted and deposited for the major part of payments, and that only nominal short deductions (specified small amounts) remained. The shortfalls were disclosed in the tax audit report and the assessee had, in its return, suo motu disallowed the corresponding 30% amount in computation. The learned CIT(A) directed deletion of the AO's broad 30% disallowance of the total payments; the Tribunal found no material to justify a 30% disallowance of aggregate payments where short deduction was limited to the small identified amounts and the rest complied with TDS obligations, and accordingly affirmed the CIT(A)'s deletion of the addition. [Paras 9, 11, 12]

The disallowance of 30% of the payments under section 40(a)(ia) is unjustified and is deleted.

Final Conclusion: Both grounds of the Revenue's appeal are dismissed; the Tribunal affirms the CIT(A)'s deletion of the disallowance of software licence fees as capital expenditure and the deletion of the 30% disallowance under section 40(a)(ia), resulting in dismissal of the appeal.

Condonation of delay and preference for substantial justice over technicalities - Reopening of assessment under Section 147/148 - formation of prima-facie reason to believe and requirement of live link/nexus with tangible material - Ex-parte assessment under Section 144 - Onus to prove source of bank deposits (unexplained cash credit) - Principles of natural justice - opportunity to be heard - Admission of additional evidence and remand for verification - Peak cash credit principle

Condonation of delay and preference for substantial justice over technicalities - Whether the delay of 38 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The Tribunal examined the affidavit filed by the assessee explaining non-awareness of the appellate order on the ITBA portal, observed absence of mala fides, noted the Revenue's lack of objection, and considered the switchover to faceless/ITBA processes which may cause initial glitches. Applying the principle that technicalities should yield to substantial justice and relying on established precedent, the Tribunal found the assessee's explanation plausible and not mala fide and therefore exercised discretion to condone the 38-day delay. [Paras 2]

Delay of 38 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

Reopening of assessment under Section 147/148 - formation of prima-facie reason to believe and requirement of live link/nexus with tangible material - Ex-parte assessment under Section 144 - Principles of natural justice - opportunity to be heard - Whether the reopening of the concluded assessment was validly made under Section 147/148. - HELD THAT: - The Tribunal reviewed the material relied upon by the AO: non-filing of return under section 139, recorded cash deposits in two bank accounts during the relevant year, share and extensive commodities transactions through MCX, recording of reasons on 21.02.2018 and issuance of notice dated 20.03.2018. It held that at the stage of reopening the AO is not required to have conclusive proof but a prima-facie formation of belief based on tangible material having a live link/nexus with escaped income. Given the facts that the assessee had not filed returns, had substantial bank deposits and trading transactions, and did not participate in reassessment/appellate proceedings, the Tribunal found the AO had sufficient tangible material and rightly invoked Section 147/148; the reopening was accordingly upheld (reasoning referencing Rajesh Jhaveri principle). [Paras 7]

Reopening of assessment under Section 147/148 is upheld.

Onus to prove source of bank deposits (unexplained cash credit) - Peak cash credit principle - Admission of additional evidence and remand for verification - Principles of natural justice - opportunity to be heard - Disposition of additions made by the AO in respect of unexplained cash deposits and the admissibility/effect of additional evidence (working of peak cash credit) filed before the Tribunal. - HELD THAT: - The Tribunal noted that the AO framed an ex-parte assessment under section 144 due to the assessee's non-compliance and made additions in respect of unexplained cash deposits. The assessee for the first time before the Tribunal sought, without prejudice, to rely on a computation of peak cash credit and filed bank statements and a working of peak credits. Recognising that these additional materials require verification by the authorities below and that both assessment and appellate proceedings had been conducted ex-parte without the assessee's participation, the Tribunal admitted the additional evidence and considered it appropriate in the interest of justice to restore the matter to the file of the CIT(A) for re-adjudication on merits after giving the assessee and the AO proper opportunity to be heard. The Tribunal expressly refrained from commenting on the merits of the additions. [Paras 7]

Additional evidence admitted; additions in respect of unexplained cash deposits not decided on merits and remanded to the CIT(A) for fresh adjudication after affording opportunity to parties.

Final Conclusion: Delay in filing the appeal is condoned; reopening of assessment under Section 147/148 is upheld; additional evidence (including peak credit computation) is admitted and the question of additions arising from unexplained bank deposits is remitted to the CIT(A) for fresh adjudication after affording proper opportunity to the assessee and the AO; the Tribunal has not adjudicated the merits of the additions.

Condonation of delay - extension of limitation due to COVID-19 pandemic - reliance on Supreme Court decisions on extension of limitation - remand for fresh adjudication - addition based on seized loose papers - reopening and reassessment procedure

Condonation of delay - extension of limitation due to COVID-19 pandemic - reliance on Supreme Court decisions on extension of limitation - Whether the delay in filing the appeal before the CIT(A)/NFAC should have been condoned - HELD THAT: - The Tribunal found that the period between the AO's order dated 09.12.2019 and the filing of the appeal on 19.01.2021 is covered by the COVID-19 pandemic and therefore cannot be reckoned for computing limitation. The Tribunal applied the principles laid down by the Hon'ble Supreme Court in the cognizance proceedings extending limitation during the pandemic, concluding that the Addl./JCIT(A) ought to have condoned the delay despite absence of a separate condonation petition or detailed reasons in Form No.35. [Paras 6]

Delay is to be condoned and the appellate authority directed to entertain and decide the appeal on merits

Remand for fresh adjudication - addition based on seized loose papers - reopening and reassessment procedure - Disposition of the merit of the addition on account of sale of land to City Corporation and consequent assessment proceedings - HELD THAT: - The Tribunal did not decide the substantive correctness of the addition but observed the relevant facts: assessment for AY 2006-07 was reopened following search and material seized included loose papers alleged to reveal land transactions, and an addition was made of an amount on account of sale of land. Having directed condonation of delay, the Tribunal remitted the matter to the Addl./JCIT(A) for fresh adjudication on merits after affording the assessee a hearing, thereby requiring the appellate authority to examine the addition and evidentiary basis afresh. [Paras 7]

Matter remitted to the Addl./JCIT(A) for adjudication on merits after condoning the delay

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal directed that the delay in preferring the appeal be condoned in view of the COVID-19 extension of limitation and remitted the matter to the Addl./JCIT(A) for fresh adjudication of the addition on merits after giving the assessee an opportunity of hearing.

Deemed income under section 56(2)(x) for undervalued immovable property - valuation substitution for immovable property purchased at bank auction - trustworthiness of auction sale consideration as fair market value - inapplicability of section 50C deeming fiction to auction sales where sale consideration represents highest certified auction price

Deemed income under section 56(2)(x) for undervalued immovable property - valuation substitution for immovable property purchased at bank auction - inapplicability of section 50C deeming fiction to auction sales where sale consideration represents highest certified auction price - Whether the Assessing Officer was justified in making addition under section 56(2)(x) by substituting departmental Valuation Officer's value over the bank-auction sale consideration - HELD THAT: - The Tribunal held that where an immovable property is acquired through a statutory bank auction and the sale consideration represents the highest certified auction price, the auction consideration must be accepted as the fair market value for the purpose of valuation and cannot be supplanted by a higher stamp valuation or departmental valuation. The Coordinate Bench decision relied upon establishes that the proviso in the relevant stamp rules and the Government Circular treating the highest price certified in an auction as fair market value precludes invocation of the deeming fiction embodied in section 50C (and, by extension, precludes substitution for purposes of deeming under section 56(2)(x)) merely because stamp authorities adopted ready-reckoner rates or a departmental Valuation Officer estimated a higher value. The Tribunal noted that auction sales conducted by a statutory process are not susceptible to being treated as understated consideration and, following the Coordinate Bench, held that substitution of fair market value by the Departmental Valuation Officer was not permissible in the facts of the case; accordingly the addition of Rs. 3,56,100 made as 50% share of the difference was not justified and was set aside. [Paras 8]

Addition under section 56(2)(x) confirmed by the CIT(A) is set aside and the appeal on this issue is allowed

Consequential nature of interest charged under sections 234A, 234B and 234C - Whether levy of interest under sections 234A, 234B and 234C required separate adjudication - HELD THAT: - The Tribunal observed that any levy of interest under sections 234A, 234B and 234C is consequential upon the tax determination. Since the primary addition under section 56(2)(x) was set aside, the question of interest follows from that outcome and did not require independent adjudication in the appeal. [Paras 10]

No separate adjudication on interest; interest is consequential

Final Conclusion: The Tribunal allowed the appeal: the addition under section 56(2)(x) based on substituted valuation was set aside as not permissible in respect of a statutory bank auction sale, and the question of interest is consequential.

Treatment of unaccounted cash as income - additions in search proceedings - assessments under search and seizure scheme (153A/153C) - onus of proof on the assessee to establish non-incidence of income - admission in recorded statement as evidentiary basis - incriminating material seized during search and its bearing on assessment

Treatment of unaccounted cash as income - onus of proof on the assessee to establish non-incidence of income - admission in recorded statement as evidentiary basis - Addition of the impugned cash amounts in the hands of the assessee as unaccounted business income upheld. - HELD THAT: - The Tribunal found on the record that cash of Rs.1.25 crores had passed between the seized entity and the assessee and that the assessee admitted receipt of cash in his recorded statement but failed to produce vouchers or any documentary evidence to demonstrate disbursal to the alleged 2,500 shareholders. The assessee placed only a bald list of shareholders and did not establish even minor details of payments; receipts placed related to cheque transactions and did not corroborate the claimed cash disbursal. The Tribunal held that, in these circumstances, the onus rested on the assessee to prove that the impugned sums were not his income but were paid to shareholders, and that this onus was not discharged. For these reasons the additions made by the AO and upheld by the CIT(A) were sustained. [Paras 4, 6]

Grounds challenging the additions on the basis that the cash represented payments to shareholders are dismissed and the additions are upheld.

Additions in search proceedings - incriminating material seized during search and its bearing on assessment - assessments under search and seizure scheme (153A/153C) - Validity of framing assessment on the basis of incriminating material seized during search and recorded statements upheld; no jurisdictional infirmity found. - HELD THAT: - The Tribunal rejected the contention that the assessment was not founded on incriminating material. It observed that register entries seized during the search and the statement of an official of the seized entity constituted incriminating material having a direct bearing on the assessee's total income. Coupled with the assessee's own admissions in recorded statements regarding receipt of cash, the Tribunal concluded that the AO had competent material to proceed under the search and seizure scheme and that the assessments were validly framed. [Paras 7]

The legal challenge to the assessments on the ground of absence of incriminating material is dismissed; the assessments stand sustained.

Final Conclusion: Both appeals are dismissed: the Tribunal upheld the additions treating the impugned cash as unaccounted income of the assessee for AY 2015-16 and AY 2016-17, and found no infirmity in framing assessments based on incriminating material seized during the search together with the assessee's recorded admissions.

Bill of Export as mandatory document - deemed export to SEZ - proof of discharge of export obligation - Policy relaxations under FTP - corroborative evidence in lieu of Bill of Export - judicial precedent on non-submission of Bill of Export

Bill of Export as mandatory document - proof of discharge of export obligation - judicial precedent on non-submission of Bill of Export - Policy relaxations under FTP - Validity of Policy Relaxation Committee minutes rejecting redemption of Advance Authorisation for supplies to SEZ solely for non-submission of Bills of Export - HELD THAT: - The Court held that the Policy Relaxation Committee's refusal to accept supplies to SEZ as discharge of export obligation merely because assessed copies of Bills of Export were not produced was not sustainable. Having regard to established precedent of this Court that supplies to SEZ constituted deemed export and that copies of ARE-1 and other corroborative documentation could establish discharge of export obligation, the Committee's insistence on absolute procedural compliance with Bills of Export was arbitrary. Further, DGFT Policy Circular No. 04/2024 relaxed the requirement of submission of Bill of Export for supplies made to SEZ units under Advance Authorisation/DFIA prior to 01.07.2017 and listed specified corroborative evidence to be accepted in lieu thereof. Applying the circular and precedent, the Court directed issuance of Export Obligation Discharge Certificates in respect of those supplies covered by the circular and quashed the impugned minutes insofar as they denied redemption on the ground of non-submission of Bills of Export. [Paras 8, 9, 13, 16]

Both impugned minutes of meetings quashed; Respondent authorities must issue EODC in respect of supplies covered by the DGFT circular and judicial precedent accepting ARE-1 and corroborative documents as proof of discharge.

Corroborative evidence in lieu of Bill of Export - deemed export to SEZ - Policy relaxations under FTP - Procedure for consideration of remaining supplies not covered by the circular - HELD THAT: - For the supplies not falling within the circular's cut-off (eight supplies in this case), the Court directed that the petitioner be permitted to submit specified corroborative evidence listed in the Policy Circular dated 3 June 2024 - namely, ARE-1 showing the Advance Authorisation/DFIA details duly attested by the jurisdictional Central Excise/GST authorities, evidence of receipt by the SEZ recipient, and evidence of payment by the SEZ unit. The respondents are to examine the submissions and, if in order, issue the EODC within four weeks; if any query arises, a personal hearing shall be given with at least three working days' notice. This constitutes judicially supervised remand for verification and compliance with the circular's requirements. [Paras 14, 15]

Petitioner to submit the specified corroborative documents within two weeks; respondents to examine and issue EODC within four weeks or call for hearing if queries arise.

Final Conclusion: Writ petition allowed; the Policy Relaxation Committee minutes dated 21.06.2022 and 26.06.2023 are quashed insofar as they rejected redemption of the Advance Authorisation for non-submission of Bills of Export; EODCs to be issued for supplies covered by the DGFT circular dated 03.06.2024 and the remaining supplies to be considered upon the petitioner's submission of the prescribed corroborative documents, with respondents to act within the timelines directed by the Court.

Forfeiture of security deposit - misdeclaration and misclassification of imported goods - customs broker's duty to advise importer on compliance - revocation of customs broker licence - substantial question of law

Forfeiture of security deposit - misdeclaration and misclassification of imported goods - customs broker's duty to advise importer on compliance - revocation of customs broker licence - Whether the Tribunal erred in upholding forfeiture of the security deposit and in its factual acceptance regarding the appellant's role in misdeclaration and failure to advise, thereby raising substantial questions of law. - HELD THAT: - The High Court examined the Tribunal's order which accepted factual findings that the appellant, a customs broker, had knowledge of and suggested mis-declaration/mis-classification of the imported goods and failed to advise the importer to comply with applicable import and Arms Rules requirements. The Tribunal observed that, although revocation of licence would be harsh, forfeiture of the security deposit was adequate given the nature of the goods and the factual findings. The High Court found that these were findings of fact accepted by the Tribunal and that no substantial question of law arises from those factual conclusions. Consequently, the appellant's challenge to the Tribunal's acceptance of forfeiture and the underlying factual findings did not disclose any substantial question of law for the High Court to entertain. [Paras 6, 7]

Factual findings accepted by the Tribunal; no substantial question of law arises - appeal dismissed.

Final Conclusion: The appeal is dismissed. The Tribunal's acceptance of the factual findings and its view that forfeiture of the security deposit was adequate stand; no substantial question of law has been made out.

Jurisdiction to adjudicate claims for interest - Adjudicating Authority - penalty and confiscation under the Foreign Trade (Development and Regulation) Act - availability of alternative statutory remedy/exhaustion of remedies rule - doctrine of restitution / unjust enrichment - powers of adjudicating authority as a Civil Court (Section 17) - forfeiture of bank guarantee - Denial of Entities List (DEL) sanctions

Jurisdiction to adjudicate claims for interest - Adjudicating Authority - penalty and confiscation under the Foreign Trade (Development and Regulation) Act - powers of adjudicating authority as a Civil Court (Section 17) - Adjudicating authority under the FT Act has no jurisdiction to adjudicate and enforce a claim for payment of interest on sums paid to an assessee under a court order. - HELD THAT: - The Court examined the scheme of the FT Act and concluded that Chapter IV and Section 11 deal with imposition of penalties and confiscation, while Section 13 identifies the adjudicating authority for such penalties. A claim for interest on money paid to the petitioner pursuant to the Supreme Court's interim order does not fall within the FT Act's concept of penalty or confiscation and therefore cannot be adjudicated under the Act. The argument that Section 17 (and the deeming provision making the authority a Civil Court for certain purposes) empowers the adjudicating authority to award interest was rejected: once it is held that the authority lacks jurisdiction to adjudicate interest claims under the FT Act, the civil-court powers under Section 17 do not confer jurisdiction to decide such claims. The Court noted that statutory levy of interest requires a substantive provision in the statute and relied on the principle that interest on delayed payment is leviable only if the charging statute provides therefor. While acknowledging the doctrine of restitution/unjust enrichment (and authorities that permit interest to place parties in the position they would have been absent an interlocutory order), the Court held that enforcement of any such restitutionary claim must be pursued before a forum competent to award interest and not by the adjudicating authority under the FT Act. [Paras 17, 26, 32]

The JDGFT / adjudicating authority has no authority to adjudicate or enforce the demand for interest; the claim for interest must be enforced, if at all, before a forum competent to award interest.

Availability of alternative statutory remedy/exhaustion of remedies rule - Denial of Entities List (DEL) sanctions - forfeiture of bank guarantee - Writ petition under Article 226 is maintainable because there is no efficacious alternative statutory remedy under the FT Act to challenge a demand for interest. - HELD THAT: - The respondents contended that the petitioner should have availed the appeal remedy under Section 15 of the FT Act. The Court analysed Section 13 (adjudicating authority), Section 11 (penalties and related recovery mechanisms) and Section 15 (appeal) and held that those provisions permit appeal only against penalties or confiscations adjudicated under the Act. Because a claim for interest is not a penalty within the meaning of the FT Act and no provision provides an alternate efficacious remedy to contest a demand for interest, the rule of exhaustion of statutory remedies does not bar the High Court from entertaining the petition. Consequently the preliminary objection based on availability of appeal under Section 15 was rejected and the writ petition was heard on merits. [Paras 19]

No effective alternative remedy under the FT Act exists in respect of the demand for interest; the writ petition is maintainable and may be entertained.

Final Conclusion: Writ petition allowed: the JDGFT is restrained from adjudicating or enforcing the demand for interest (and from putting the petitioner's IEC on the DEL); the petitioner's bank guarantee is to be returned (or petitioner to be removed from DEL if already listed). No costs awarded.

Refund of Special Additional Duty (SAD) - exemption from SAD for goods imported for subsequent sale under Notification No. 102/2007 - reliance on Chartered Accountant's certificate and reconciliation statement - curability of minor discrepancies in description between Bill of Entry and sales invoice - mismatch between SAD and VAT/CST not fatal where VAT/CST paid - onus on revenue to discredit supporting documents before rejecting refund

Reliance on Chartered Accountant's certificate and reconciliation statement - curability of minor discrepancies in description between Bill of Entry and sales invoice - onus on revenue to discredit supporting documents before rejecting refund - Whether the refund claim of SAD could be rejected on the ground of mismatch in description between Bills of Entry and sales invoices despite production of a Chartered Accountant's certificate and reconciliation statement. - HELD THAT: - The Tribunal held that where the appellant produced the Chartered Accountant's certificate together with the reconciliation statement as prescribed by Board's Circular No. 6/2008, the certificate should ordinarily be accepted and the claim should not be discarded unless there exist incriminating and reliable documents discrediting it and reasons for disbelieving the certificate are clearly spelt out. Minor discrepancies in product description between the bill of entry and sales invoices do not go to the root of the refund claim and are curable; the adjudicating authority must undertake positive steps (for example, inquiry with buyers or other verification) if it seeks to discredit the certification before rejecting the claim. In the present case the impugned order did not point to any material justifying rejection of the CA's certificate or demonstrate serious evasion, and hence rejection on the ground of description mismatch was not sustainable. [Paras 4, 5, 7]

Impugned rejection of refund on account of alleged mismatch in description is set aside and the claim cannot be rejected in the absence of credible material discrediting the CA's certificate.

Mismatch between SAD and VAT/CST not fatal where VAT/CST paid - exemption from SAD for goods imported for subsequent sale under Notification No. 102/2007 - Whether a discrepancy between the quantum of SAD paid and the VAT/CST evidenced in sales documents justifies rejection of the SAD refund claim. - HELD THAT: - The Tribunal accepted the appellant's submission, supported by precedent, that SAD and VAT/CST are administered differently and may operate at different rates; a mere numerical mismatch between SAD paid on import and VAT/CST shown in sales paperwork does not warrant rejection provided the applicable VAT/CST has been paid on the subsequent sale. The object of Notification No. 102/2007-to neutralise double levy where imported goods are sold domestically bearing local taxes-must guide interpretation, and where there is no allegation that VAT/CST was not paid at the effective rate, the refund cannot be denied solely for such mismatch. [Paras 5, 7]

Refund cannot be rejected merely because the VAT/CST amount reflected is different from the SAD amount, where VAT/CST has been paid; the impugned order is set aside on this ground as well.

Final Conclusion: The order rejecting the SAD refund claims is set aside; the appeal is allowed and the claims are to be granted consequences assessed in accordance with law, since the CA's certificate and reconciliation, together with evidence of VAT/CST payment, were not rebutted by reliable material.

Interpretation of exemption condition "shall not be used for commercial purpose" - Violation of conditions of ad hoc customs exemption and consequences (confiscation, redemption fine, penalty, duty demand) - Limitation under proviso to Section 28(1) of the Customs Act, 1962 (extended period) - Continuing nature of alleged violation for invoking extended limitation - Use of imported fixtures embedded in stadium not constituting separate commercial import use

Interpretation of exemption condition "shall not be used for commercial purpose" - Violation of conditions of ad hoc customs exemption and consequences (confiscation, redemption fine, penalty, duty demand) - Use of imported fixtures embedded in stadium not constituting separate commercial import use - Whether the imported floodlighting equipment was used in breach of the ad hoc exemption condition prohibiting use for "commercial purpose", thereby justifying confiscation, redemption fine, penalty and duty demand - HELD THAT: - The adhoc exemption did not qualify use to be restricted to World Cup matches and contains no distinction treating World Cup matches as non-commercial and other one day internationals as commercial. The appellant imported and installed the floodlighting to upgrade stadium infrastructure for international-standard play; once erected the fixtures became a functional part of the stadium and their use for matches held at the stadium is within the purpose for which exemption was granted. The show cause notice and impugned order rest on assumptions and an impermissible narrow construction of the exemption condition. There is no factual or legal basis to hold that use in the cited one day matches amounted to a prohibited commercial use under the exemption order. On these merits the confiscation, levy of redemption fine, penalty and duty demand founded on alleged breach of condition (ii) cannot be sustained. [Paras 11]

Findings of violation of condition (ii) and consequential confiscation, redemption fine, penalty and duty demand set aside; issue decided for the appellant.

Limitation under proviso to Section 28(1) of the Customs Act, 1962 (extended period) - Continuing nature of alleged violation for invoking extended limitation - Whether the demand raised in the show cause notice is barred by limitation or is saved by the proviso to Section 28(1) on the ground of continuing or suppressed transaction - HELD THAT: - The show cause notice, though invoking the proviso to Section 28(1), contains no allegation or material establishing suppression of facts with intent to evade duty. The Department itself obtained documents from the appellant showing use in the cited matches and proceeded after a lapse of over seven years without any evidence of concealment or fraud. The ingredients required to invoke the extended period under the proviso to Section 28(1) are absent. Consequently, the demand is time barred and cannot be sustained. [Paras 12]

Demand under the proviso to Section 28(1) is time barred; limitation answer favours the appellant.

Final Conclusion: The appellate order setting aside the impugned findings is allowed: the Revenue's findings of breach of the ad hoc exemption condition and the consequential confiscation, redemption fine, penalty and duty demand are set aside on merits, and the demand is also held time barred; appeal allowed with consequential relief.

Requirement of a speaking order for valuation enhancement - binding effect of precedent and its applicability to facts - effect of importer's written consent to enhanced value - remand for fresh adjudication in light of authoritative guidance

Requirement of a speaking order for valuation enhancement - binding effect of precedent and its applicability to facts - Whether the adjudicating authority's one line reliance on the Supreme Court judgment (Sanjivani Non Ferrous Trading) without stating facts and reasons satisfied the remand direction to pass a speaking order on enhancement of declared value. - HELD THAT: - The Bench found that the Deputy Commissioner's remand order consisted only of a brief paragraph stating that, after perusal, the issue had attained finality in view of the Supreme Court judgment in Sanjivani Non Ferrous Trading and therefore assessment at declared value was ordered. The Tribunal held that the Assessing Officer was obliged to record the facts of the individual cases and articulate reasons why the Supreme Court decision applied to the particular imports rather than merely reproducing the precedent. The adjudicating authority must examine factual materials, consider whether corroborative evidence existed to justify loading and demonstrate, by reasoned findings, that the precedent governs the specific transactions. Absent those reasons the remand direction to pass a speaking order was not complied with. [Paras 8, 13]

The Deputy Commissioner's one paragraph order was inadequate and did not satisfy the requirement to pass a speaking order setting out facts and reasons for accepting declared value in reliance on precedent.

Effect of importer's written consent to enhanced value - remand for fresh adjudication in light of authoritative guidance - Whether the Commissioner (Appeals) was right in dismissing the department's appeal upholding the adjudicating authority's order, and what further steps should be taken. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) upheld the remand order without independently examining whether the Deputy Commissioner had complied with the earlier remand direction to pass a speaking order. The Bench referred to its detailed guidance in Customs Appeal No. 51976 of 2019 (Commissioner of Customs (Preventive) vs. Century Metal Recycling Pvt. Ltd.) concerning cases where importers give written consent to enhanced valuation and emphasised that the Assessing Officer must apply those principles when passing a fresh order. In consequence, the Commissioner (Appeals) order could not be sustained because the remand adjudication itself lacked the necessary reasoning and application of the Tribunal's principles. [Paras 14, 15, 16, 17]

The Commissioner (Appeals) order is set aside; the matter is remanded to the Assessing Officer to pass a fresh speaking order applying the Tribunal's principles (Century Metal Recycling) within the stipulated time.

Final Conclusion: The Commissioner (Appeals) order dated 31.01.2020 is set aside; the matter is remanded to the Assessing Officer to pass a fresh, reasoned speaking order applying the Tribunal's guidance in Century Metal Recycling and demonstrating the applicability (or otherwise) of the Sanjivani precedent to the individual imports, preferably within three months.

Export of services - Business Auxiliary Services - indent commission - Export of Service Rules, 2005 - used outside India - benefit accruing outside India - receipt of consideration in convertible foreign exchange

Export of services - Business Auxiliary Services - indent commission - used outside India - receipt of consideration in convertible foreign exchange - Indent commission received from the overseas holding company qualifies as export of services and is not liable to service tax. - HELD THAT: - The appellants, Indian subsidiaries, procured orders in India for their overseas holding company and received a pre-determined percentage of sales as 'indent commission' in convertible foreign exchange. Applying the principle of the Larger Bench in Arcelor Mittal Stainless (I) Pvt. Ltd. , the Tribunal held that where (i) the service provider in India renders Business Auxiliary Services to a foreign service recipient, (ii) the recipient is situated outside India and receives the benefit of the service, and (iii) consideration is received in convertible foreign exchange, the service falls within the scope of "export of services" under the 2005 Export Rules and is thereby delivered and used outside India. On these facts the indent commission paid by the foreign holding company met the conditions of the Export Rules and could not be subjected to service tax. The Larger Bench's analysis - that a subsidiary acting as sub-agent and procuring customer details for the foreign principal provides exportable BAS when consideration is in convertible foreign exchange and benefit accrues outside India - was applied squarely to the present facts, leading to the conclusion that the demand could not be sustained. [Paras 7, 8, 9]

Demand for service tax on the indent commission was disallowed as the amount qualified as export of services under the Export of Service Rules, 2005.

Final Conclusion: Impugned orders confirming demands and imposing penalties set aside; appeals allowed with consequential relief as per law.

CENVAT credit transfer - admissibility of CENVAT credit despite cessation of manufacturing - absence of statutory time limit for availing CENVAT credit - procedural irregularity (belated ER1 filing) not a ground to deny substantive relief - no one-to-one correlation between inputs and final product

CENVAT credit transfer - admissibility of CENVAT credit despite cessation of manufacturing - absence of statutory time limit for availing CENVAT credit - procedural irregularity (belated ER1 filing) not a ground to deny substantive relief - Transfer of CENVAT credit taken in November 2007 from the Chrompet unit (which had ceased manufacturing) to the Appur unit was allowable and the departmental refusal was set aside. - HELD THAT: - The Tribunal found that under the CENVAT scheme there was no one to one correlation between inputs and the final product and, during the impugned period, no statutory time limit existed for taking credit on duty paid documents. In the absence of any allegation of fraud, impropriety of documents, or non use of inputs in manufacture, the credit could not be denied. Procedural defects such as belated filing of ER1 returns should not defeat substantive rights when the law does not bar relief. Applying these principles, the Tribunal concluded that the departmental communication refusing transfer of part of the accumulated credit on the ground that credits were availed after cessation of production and that ER1 returns were belated was unsustainable, and directed that the appellant be permitted the consequential reliefs as per law. [Paras 4, 5]

Impugned order rejecting transfer of the specified CENVAT credit is set aside and the appellant's request for transfer is allowed; consequential relief to follow as per law.

Final Conclusion: The appeal is allowed: refusal to transfer CENVAT credit availed in November 2007 from the closed Chrompet unit to the Appur unit was set aside, and the appellant granted consequential relief in accordance with law.

Deemed inter-State sale in the course of execution of works contract - incidental movement of goods to contractual performance - non-standard goods conforming to contract specifications - break in chain of movement not converting transaction into intra State sale

Deemed inter-State sale in the course of execution of works contract - incidental movement of goods to contractual performance - non-standard goods conforming to contract specifications - break in chain of movement not converting transaction into intra State sale - Liability to pay tax under the Kerala General Sales Tax Act on goods sourced from outside the State and incorporated in a works contract executed in Kerala - HELD THAT: - The Tribunal erred in treating the inter State movement of goods as irrelevant because the original formal contract was not produced; having examined the tender documents (which it accepted as forming part of the contract), the court held that those clauses show the contractor's obligation to source specified items from approved vendors or its own units outside the State for incorporation into the works contract. The goods were non standard and had to conform to purchaser prescribed designs and specifications; their movement from outside Kerala into the State and thereafter to incorporation in the works was incidental to performance of the contract. The contractor's Kerala office merely acted as a conduit in the chain of movement. Consequently, an intervening event or an initial acquisition of possession/title in Kerala does not convert such transactions into intra State sales; they must be characterised as inter State sales in the course of execution of the works contract. The court applied this reasoning to allow the petitioner's claim for exemption from tax under the KGST Act in respect of those goods sourced from outside the State and incorporated in the works contract. [Paras 7, 8, 9, 10, 11]

The appeals are allowed; the impugned orders of the Appellate Tribunal are set aside and the questions of law are answered in favour of the petitioner.

Final Conclusion: S.T. Revisions allowed; supplies of non standard goods sourced from outside the State and incorporated in the works contract executed in Kerala are to be treated as inter State sales incidental to contractual performance, and the impugned tribunal orders are set aside in favour of the petitioner.

Doctrine of prospective overruling - Legislative competence to levy taxes on minerals under Entries 49 and 50 of List II - Article 142 power to mould relief - Presumption of constitutionality of legislation - Prospective application and retrospective effect in tax adjudication - Waiver of interest and penalty on past tax demands - Staggered payment of revived tax demands

Doctrine of prospective overruling - Presumption of constitutionality of legislation - Legislative competence to levy taxes on minerals under Entries 49 and 50 of List II - Whether the judgment in Mineral Area Development Authority v. Steel Authority of India (MADA) should be given prospective effect - HELD THAT: - The Court reviewed the doctrine of prospective overruling and its application in Indian jurisprudence, including its purpose to avert injustice or hardship where a new rule overrules long-settled precedent. It weighed competing equities: the reliance of States and third parties on the earlier law, the presumption of constitutionality of statutes, the consequences of invalidating taxes (including refunds and disruption to state finances), and the reliance of assessees on the earlier rulings. Given the conflicting precedents (India Cement and Kesoram) which had left the law unsettled, and the substantial fiscal and commercial consequences of retrospective application in the taxation context, the Court concluded that overruling should not be given purely prospective operation. On balance, the Court rejected an overall prospective overruling of MADA but fashioned remedial, transitional measures to reconcile the interests of the States and the assessees. [Paras 17, 24]

Rejected; MADA is not to be given wholly prospective effect

Staggered payment of revived tax demands - Waiver of interest and penalty on past tax demands - Prospective application and retrospective effect in tax adjudication - Modulation of consequences arising from the MADA decision and directions for handling past tax demands under Entries 49 and 50 of List II - HELD THAT: - Recognising the heavy fiscal and commercial consequences of applying MADA to past transactions, the Court directed a pragmatic scheme to balance competing interests. The State governments are permitted to levy or renew demands in accordance with MADA, subject to limits: such demands shall not operate on transactions made prior to 1 April 2005; the time for payment of any revived demands shall be staggered in instalments over twelve years commencing 1 April 2026; and levy of interest and penalty on demands for the period before 25 July 2024 is waived for all assessees. The Court recorded that these conditions are intended to mitigate hardship, protect settled commercial expectations to an extent, and preserve State revenues without imposing retroactive punitive burdens on assessees. [Paras 25]

States may levy or renew demands in terms of MADA subject to: (a) no operation on transactions prior to 1 April 2005; (b) payment staggered over 12 years from 1 April 2026; and (c) waiver of interest and penalty for demands before 25 July 2024

Final Conclusion: The prayer to give MADA wholly prospective effect is declined. The Court permits States to enforce tax demands in accordance with MADA but with transitional safeguards: no liability for transactions prior to 1 April 2005, staggered payment over twelve years from 1 April 2026, and waiver of interest and penalty for amounts attributable to the period before 25 July 2024.