TaxTMI Updates e-Newsletter
Aug 25,2022

Interest under Section 50 - Adjudication under Section 73 or 74 - Quantification of interest - Automatic liability versus unilateral quantification - Remand for fresh adjudication and consequent refund adjustment

Interest under Section 50 - Adjudication under Section 73 or 74 - Quantification of interest - Liability to pay interest under Section 50 cannot be unilaterally quantified and enforced without initiating adjudication proceedings under Section 73 or 74 where the assessee disputes the liability or its quantum. - HELD THAT: - The Court applied its earlier reasoning in Mahadeo Construction to hold that while the liability to pay interest under Section 50 arises by operation of law, the quantification of that liability is an arithmetic exercise which cannot be unilaterally determined by the Revenue when the assessee has raised objections. Where an assessee disputes either the leviability or the computation of interest, the proper course is to initiate adjudication under Section 73 or 74 so that objections can be considered and the quantum determined after hearing. The impugned communications demanding payment of interest and the appellate order were set aside because the respondents did not follow the statutory adjudicatory procedure before fixing and adjusting the interest demand against the sanctioned refund. [Paras 8, 9]

Demand for interest and its adjustment quashed for lack of adjudication; quantification to be determined only after proceedings in accordance with Sections 73/74.

Remand for fresh adjudication and consequent refund adjustment - Whether matter should be remitted to the Revenue for fresh proceedings and consequent refund re-determination. - HELD THAT: - Having quashed the letters and the appellate order that purported to demand and adjust interest without following adjudication, the Court remitted the matter to the Revenue to initiate fresh proceedings regarding the interest liability under Section 50 in accordance with law. The Court directed that, after completion of the statutory proceedings and determination of liability (if any), a fresh refund order be issued consistent with those proceedings. The remand contemplates full consideration of the objections raised by the petitioner and arithmetic determination of any admitted or adjudicated liability. [Paras 9]

Matter remitted for fresh adjudication on interest and, depending on the outcome, issuance of a fresh refund order in accordance with law.

Final Conclusion: Letters dated 6.11.2018 and 28.1.2019 and the impugned appellate order are quashed; the matter is remitted to the Revenue to initiate adjudication under Sections 73/74 to determine and quantify any liability of interest under Section 50, and thereafter a fresh refund order shall be passed in accordance with law.

Detention, seizure and release of goods and conveyances in transit - release on furnishing bank guarantee under Section 129(1)(a) - penalty equal to two hundred per cent of tax payable for release - liberty to file appeal without reference to limitation subject to statutory conditions

Liberty to file appeal without reference to limitation subject to statutory conditions - Withdrawal of W.P.No.21525 of 2022 with liberty to file appeal before the first Appellate Authority and treatment of limitation and statutory conditions. - HELD THAT: - Learned counsel for the petitioner sought permission to withdraw W.P.No.21525 of 2022 with liberty to file an appeal before the first Appellate Authority and made an endorsement to that effect. The Court dismissed W.P.No.21525 of 2022 as withdrawn but expressly granted liberty to the petitioner to file the appeal. The Court directed that if the appeal is filed within two weeks from the date of the order it shall be taken on file without reference to limitation; if filed beyond that period it shall nevertheless be entertained subject to compliance with all other statutory conditions, including the requirement of pre-deposit. [Paras 2]

W.P.No.21525 of 2022 dismissed as withdrawn with liberty to file appeal; appeal filed within two weeks to be entertained without reference to limitation, otherwise subject to statutory conditions including pre-deposit.

Detention, seizure and release of goods and conveyances in transit - release on furnishing bank guarantee under Section 129(1)(a) - penalty equal to two hundred per cent of tax payable for release - Challenge to detention order dated 28.06.2022 (MOV-06) and entitlement to release of consignment upon furnishing bank guarantee under Section 129(1)(a) of the Central Goods and Services Tax Act, 2017. - HELD THAT: - The impugned order dated 28.06.2022 detained the vehicle on the ground that it was not covered by valid documents; the petitioner denied those allegations. The Court noted the statutory scheme under Section 129 dealing with detention, seizure and release, which permits release on payment of prescribed penalty or, as agreed by the parties, by furnishing a bank guarantee in terms of Section 129(1)(a). Counsel for the petitioner offered to furnish a bank guarantee and the Government Advocate stated that nothing prevents the respondent from accepting such a bank guarantee. In view of this agreement and the statutory provision, the Court granted liberty to the petitioner to furnish a bank guarantee under Section 129(1)(a); upon furnishing of the bank guarantee the impugned detention order would stand quashed and the consignment would be released within forty eight hours from the time the bank guarantee is furnished. [Paras 3, 4, 5, 6]

Petitioner permitted to furnish bank guarantee under Section 129(1)(a); on furnishing, the detention order dated 28.06.2022 is quashed and the consignment to be released within 48 hours.

Final Conclusion: W.P.No.21525 of 2022 dismissed as withdrawn with liberty to file appeal under the conditions stated; W.P.No.21524 of 2022 disposed by permitting the petitioner to furnish a bank guarantee under Section 129(1)(a), quashing the detention order upon such furnishing and directing release of the consignment within 48 hours; connected petition closed with no costs.

Wrongful availment of Input Tax Credit - jurisdiction of adjudicating authority - interim stay of recovery - repeal and savings clause

Interim stay of recovery - wrongful availment of Input Tax Credit - jurisdiction of adjudicating authority - Pending coercive steps arising from Order in Original dated 30.03.2022 were stayed until the next date of hearing. - HELD THAT: - The Court recorded that the petitioner challenged the jurisdiction of the adjudicating authority to disallow CENVAT credit carried forward under the pre GST regime and sought interim relief against recovery of tax and penalty. Respondent was permitted time to file a counter affidavit and the petitioner to file a reply thereafter. In view of the challenge to jurisdiction and the pending pleadings, the Court directed that no coercive steps in connection with the impugned order dated 30.03.2022 shall be taken against the petitioner until the next date, while reserving the substantive adjudication for further hearing. [Paras 6]

No coercive steps shall be taken against the petitioner in connection with the Order in Original dated 30.03.2022 until the next date of listing; respondents permitted three weeks to file counter and petitioner one week to reply.

Final Conclusion: The writ petition is admitted for consideration of the challenge to the adjudicating authority's actions; meanwhile, recovery proceedings pursuant to the impugned order are stayed till the next listed date with directions for exchange of written submissions.

Non-compliance with procedure under Section 73 and Section 75 of the JGST Act - Violation of principles of natural justice (lack of meaningful show-cause notice and personal hearing) - Invalidity of summary forms (Form GST DRC-01 and Form GST DRC-07) as substitute for a proper show cause notice - Maintainability of writ remedy despite availability of statutory appeal where foundational show cause notice is vitiated - Remand for fresh adjudication after quashing defective proceedings

Non-compliance with procedure under Section 73 and Section 75 of the JGST Act - Violation of principles of natural justice (lack of meaningful show-cause notice and personal hearing) - Invalidity of summary forms (Form GST DRC-01 and Form GST DRC-07) as substitute for a proper show cause notice - Impugned adjudication orders dated 12.09.2019 and consequential summary demand in Form GST DRC-07 were validly challenged and are liable to be quashed for procedural infirmity and denial of natural justice. - HELD THAT: - The court found that the statutory requirements for initiating and adjudicating proceedings under the JGST Act were not complied with. The show cause summary in Form GST DRC-01 was issued but the column for date, time and venue of personal hearing was recorded as 'NA', and there is no material to show that a proper show cause notice with an opportunity of personal hearing was served on the petitioner before passing the adjudication order. The proceedings therefore lacked the foundational ingredients of a proper notice and occasioned a breach of the principles of natural justice. A summary form (DRC-01/DRC-07) cannot substitute for the statutory procedure required under the Act where the show cause notice is vague, non specific or fails to afford a reasonable opportunity to meet the allegations. In consequence, the adjudication and the summary demand were held to be not in accordance with the procedure prescribed by law and were quashed. [Paras 14, 15, 16, 17]

Adjudication orders dated 12.09.2019 and the consequential notice of demand in Form GST DRC-07 dated 18.09.2019 are quashed and set aside for non-compliance with statutory procedure and violation of natural justice; matter remitted for fresh proceedings.

Maintainability of writ petition despite availability of statutory appeal where foundational show cause notice is vitiated - Remand for fresh adjudication after quashing defective proceedings - Writ petitions are maintainable and entertainable in view of the defective and vitiated show cause proceedings; the matter is remitted to the adjudicating authority to issue a fresh show cause notice and to afford the petitioner opportunity to be heard. - HELD THAT: - Relying on settled principles that a writ petition is permissible where the impugned statutory notice itself is vitiated and violates natural justice, the court held that the challenge to the defective show cause and adjudication process is maintainable notwithstanding the existence of an appellate remedy. Given the procedural defects identified, the appropriate course is to quash the orders and remit the matter to the adjudicating authority to initiate fresh proceedings in accordance with law, with clear and specific allegations and after affording the petitioner a meaningful opportunity of hearing. [Paras 16]

Writ petitions allowed; proceedings remitted to the adjudicating authority to issue fresh show cause notice and pass orders after giving due opportunity to the petitioner.

Final Conclusion: Both writ petitions are allowed: the adjudication orders dated 12.09.2019 and consequential demand notices in Form GST DRC-07 are quashed and set aside for procedural infirmity and denial of natural justice; the matters are remitted to the adjudicating authority to issue fresh show cause notices and decide afresh after affording the petitioner a fair opportunity of hearing; any 10% deposit may be claimed for refund or adjusted after the fresh adjudication as appropriate.

Summary order. Status reports to be filed and placed on record; petitioners to formulate suggestions for improving administration of the Central Goods and Services Tax Act, 2017 and the Delhi Goods and Services Tax Act, 2017 and consult with representatives of respondents; Infosys and Tech Mahindra technical teams to participate in deliberations; matter listed on 26.09.2022.

Revocation of cancellation of registration under the Central Goods and Services Tax Act, 2017 - Cancellation of GST registration on grounds of non existence and fraudulent availing/passing of Input Tax Credit - Pending revocation application under Section 30 to be decided within statutory time - Judicial restraint-no adjudication on merits where administrative remedy is pending

Revocation of cancellation of registration under the Central Goods and Services Tax Act, 2017 - Pending revocation application under Section 30 to be decided within statutory time - Judicial restraint-no adjudication on merits where administrative remedy is pending - Direction to the competent authority to decide the petitioner's revocation application under Section 30 of the Central Goods and Services Tax Act, 2017 within six weeks and refusal to adjudicate the merits of the cancellation order. - HELD THAT: - The petition challenges an order cancelling the petitioner's GST registration; the record shows an earlier show cause notice and a subsequent dropped proceeding, followed by a fresh notice leading to the impugned cancellation. The petitioner filed a revocation application dated 4.2.2022 under Section 30 which remains undecided. Given that Section 30 provides the statutory remedy for revocation of cancellation, and the application is pending, the court refrained from deciding the merits of the cancellation and instead directed the competent authority to decide the revocation application in accordance with law, treating it as having been made within time. The court limited its intervention to directing a decision within a specified period and expressly did not express any opinion on the substantive merits of the cancellation order. [Paras 5, 6, 7]

Competent authority directed to decide the revocation application under Section 30 within six weeks; court declined to adjudicate merits and allowed the petition to that limited extent.

Final Conclusion: Petition allowed to the extent that the respondent authority is directed to decide the petitioner's revocation application under Section 30 of the Central Goods and Services Tax Act, 2017 within six weeks; no opinion expressed on the merits of the cancellation order.

Supply includes all forms of supply made or agreed to be made for a consideration - consideration - in the course or furtherance of business - advance ruling under Section 97 - inadmissibility of application under the first proviso to Section 98(2)

Advance ruling under Section 97 - supply includes all forms of supply made or agreed to be made for a consideration - consideration - in the course or furtherance of business - inadmissibility of application under the first proviso to Section 98(2) - Admissibility of the applicant's advance ruling petition seeking determination whether a gratuitous donation received by the society is exigible to GST. - HELD THAT: - Advance ruling under Section 97 is available only in relation to supplies of goods or services being undertaken or proposed to be undertaken by the applicant. 'Supply' under Section 7(1) embraces transactions made or agreed to be made for a consideration and in the course or furtherance of business. The material on record shows the Rs.1 Crore was donated without quid pro quo, there is no supply by the applicant to the donor, and the applicant is not undertaking or proposing any supply to the donor in respect of that receipt. Since the foundational requirement-an actual or proposed supply by the applicant to which the advance ruling would relate-is absent, the application does not fall within the scope of matters for which an advance ruling may be sought. Consequently the petition is not maintainable and must be rejected as inadmissible under the statutory proviso to Section 98(2). [Paras 12, 13, 14]

Application for advance ruling rejected as inadmissible under the first proviso to Section 98(2) of the CGST Act; no advance ruling on taxability issued because no supply by the applicant to the donor was shown.

Final Conclusion: The Authority rejected the application as inadmissible under the first proviso to Section 98(2) because the donation was not shown to be consideration for any supply by the applicant and therefore the matter did not fall within the scope of advance ruling under Section 97.

Agricultural extension services - exemption under entry No.57 of Notification No.9/2017-Integrated Tax (Rate) - application of scientific research and knowledge to agricultural practices through farmer education or training - inter-state supply exempted under specified service descriptions

Agricultural extension services - exemption under entry No.57 of Notification No.9/2017-Integrated Tax (Rate) - application of scientific research and knowledge to agricultural practices through farmer education or training - Services provided by the applicant under the service contract with M/s Isha Outreach fall within the scope of agricultural extension services and are exempt under entry No.57 of Notification No.9/2017-Integrated Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority examined the service contract and scope of work (Annexure-I) and found that the applicant appoints and deploys Mara Mitras as Agriculture Extension Workers who are trained in agro-forestry and use an IT platform to disseminate technical and scientific information to farmers (paras 10-13). The activities performed include farmer education and training, enrolment and demand collection, facilitation of sapling pickup, conducting proof-of-planting and proof-of-survival surveys, and post-plantation monitoring, all supervised by managerial staff (paras 12-14). Explanation 2(C) to Notification No.9/2017 defines "agricultural extension" as the application of scientific research and knowledge to agricultural practices through farmer education or training. The Authority concluded that the applicant's services, delivered through Mara Mitras and encompassing education, training and related hand-holding and monitoring activities, amount to the application of scientific research and knowledge to agricultural practices and therefore fall within "agricultural extension services" (para 15). Entry No.57 of Notification No.9/2017 exempts services covered under SAC 9986, including "agricultural extension services"; accordingly the Authority held that the applicant's services are exempt under that entry (para 16). [Paras 15, 16, 17]

The services described in Annexure I to the contract are agricultural extension services and are exempt under entry No.57 of Notification No.9/2017-Integrated Tax (Rate).

Final Conclusion: The Advance Ruling holds that the applicant's services, as set out in the contract with M/s Isha Outreach, constitute agricultural extension services under the definition in the notification and are therefore exempt under entry No.57 of Notification No.9/2017-Integrated Tax (Rate); the second question is rendered redundant.

Classification of goods by reference to tariff headings - Chapter Note 2(a) and 2(b) to Chapter 90 - application of Customs Tariff First Schedule interpretation to GST rate notifications - specificity of exemption entries to descriptions in the Schedule - residual classification and application of Schedule III entry for unspecified goods

Classification of goods by reference to tariff headings - Chapter Note 2(a) and 2(b) to Chapter 90 - application of Customs Tariff First Schedule interpretation to GST rate notifications - Classification of parts and accessories suitable for use solely with hearing aids. - HELD THAT: - The Authority examined the Customs Tariff entries for Chapter 9021 and the Chapter 90 Note 2 rules. The 4- and 6-digit and further sub-headings of 9021 show that parts and accessories of hearing aids are specifically provided for under heading 9021 9010, whereas heading 9021 40 expressly covers hearing aids excluding parts and accessories. Note 2(a) requires parts and accessories that are goods included in any of the headings of the Chapter to be classified in their respective headings; Note 2(b) applies only where Note 2(a) is not applicable. Because parts and accessories of hearing aids are specifically covered by a tariff heading (9021 9010), they must be classified under that heading rather than being absorbed into the 9021 40 hearing-aid heading under Note 2(b). The circular relied upon by the applicant, addressing parts of ophthalmic equipment, was found inapplicable because there was no separate tariff heading for those ophthalmic parts in that context, unlike the present case where a distinct heading exists for hearing-aid parts. [Paras 13, 15, 16]

Parts and accessories of hearing aids are classifiable under heading 9021 9010.

Residual classification and application of Schedule III entry for unspecified goods - classification of goods by reference to tariff headings - Applicable rate of GST on supply of such parts and accessories of hearing aids. - HELD THAT: - Having held that the parts and accessories fall under tariff heading 9021 9010, the Authority examined the GST rate notifications. Hearing aids are excluded from the 12% Schedule II entry (Sl. No. 221) and the only relevant entry covering the parts and accessories is the residual Schedule III entry (Sl. No. 453) for goods not specified in Schedules I, II, IV, V or VI, which attracts 18% GST. Thus, the parts and accessories under heading 9021 9010 do not fall under the 12% list and instead attract the 18% rate prescribed for unspecified goods. [Paras 20]

GST at 18% is applicable on supply of parts and accessories of hearing aids under entry no.453 of Schedule III.

Specificity of exemption entries to descriptions in the Schedule - classification of goods by reference to tariff headings - Whether Entry No.142 of Notification 2/2017-Central Tax (Rate) (exempting 'hearing aids') applies to parts and accessories of hearing aids. - HELD THAT: - The Authority noted that exemption Notification No.2/2017 applies only to the supply of goods described in the Schedule column (3) falling under the tariff item, sub-heading, heading or Chapter specified in column (2). Entry No.142 specifically describes the goods as "hearing aids" and does not describe or include "parts and accessories of hearing aids." Since parts and accessories are separately identified under heading 9021 9010, and the exemption entry's description does not encompass them, the exemption cannot be extended to these parts and accessories. [Paras 18, 19]

Entry No.142 of Notification 2/2017 does not apply to parts and accessories of hearing aids; they are not exempt.

Final Conclusion: The Authority ruled that parts and accessories of hearing aids are classifiable under heading 9021 9010, attract GST at 18% under entry no.453 of Schedule III to Notification No.1/2017-Central Tax (Rate), and are not exempt under Entry No.142 of Notification No.2/2017-Central Tax (Rate).

Characterisation of interest from short-term deposits as capital receipt - Treatment of interest earned from borrowed capital - Allowability of deduction for acquisition of technical know-how under Section 35AB despite non-commencement of manufacture - Meaning of "acquiring" know-how for the purposes of Section 35AB

Characterisation of interest from short-term deposits as capital receipt - Treatment of interest earned from borrowed capital - Interest earned on short-term deposits made out of borrowed capital during the pre-production period is capital in nature and not taxable as income from other sources. - HELD THAT: - The Court noted that the interest in question was earned on short-term deposits created from borrowed funds at a time when commercial production had not commenced. Relying on this Court's earlier decision in M/s. Neelachal Ispat Nigam Limited v. Assistant Commissioner of Income Tax (cited by the Court), and having regard to the precedents considered therein, the interest so earned was held to be capital and not revenue. Consequentially, treating such interest as income from other sources was inappropriate and the Tribunal's taxation of that interest was set aside.

Tribunal's and lower authorities' taxation of the interest as income from other sources set aside; interest held to be capital in nature in AY 1991-92.

Allowability of deduction for acquisition of technical know-how under Section 35AB despite non-commencement of manufacture - Meaning of "acquiring" know-how for the purposes of Section 35AB - Deduction of one-sixth of expenditure on acquiring technical know-how under Section 35AB is allowable in the previous year in which the know-how was acquired and consideration paid, even if commercial manufacture had not commenced in that year. - HELD THAT: - The Court accepted the approach taken by the Madhya Pradesh High Court in Commissioner of Income Tax v. Bright Automotives and Plastics Ltd., that the expression "acquiring" in Section 35AB must be given a liberal meaning. It is sufficient that the assessee has acquired and is able to use the know-how for running the business upon payment of consideration; actual commencement of manufacturing activity in the same previous year is not a condition precedent to claim the one-sixth deduction. Accordingly, the disallowance made solely on the ground that manufacturing had not commenced was held not to be sustainable.

Deduction under Section 35AB allowed for the year in which know-how was acquired and paid for notwithstanding non-commencement of manufacture.

Final Conclusion: Appeal allowed to the extent that interest on short-term deposits from borrowed capital for AY 1991-92 is held to be capital (not taxable as other income) and the one-sixth deduction under Section 35AB for acquisition of technical know-how is permissible even though manufacture had not commenced; impugned orders of the Tribunal, CIT(A) and Assessing Officer set aside to that extent.

Violation of principles of natural justice - disclosure of reason to believe / reason to suspect - retrospective amendment of search provisions - validity of search warrant / authorisation under Section 132(1) - assessment under Section 153A vis-a -vis Section 153C - remand for fresh assessment - weight and consideration of special audit report - use of witness statements not put for cross-examination - prohibition on using same seized material for additions against two assessees

Violation of principles of natural justice - use of witness statements not put for cross-examination - Whether the assessment orders are vitiated by reliance on sworn statements which were not made available for cross-examination and by respondents' prior affidavit that such statements would not be used. - HELD THAT: - The Court found that the Revenue had earlier, by counter-affidavit in W.P.No.16176 of 2021, stated that certain sworn statements would not be used against the petitioner, and the assessing authority nonetheless relied on those statements in the assessment. Reliance on such statements without affording the petitioner an opportunity for cross-examination - particularly when the Revenue had taken a contrary stand before the High Court - amounts to a breach of the principles of natural justice and is contemptuous. A mere claim that the statements were used only for corroboration does not cure the breach where no cross-examination was afforded and the Revenue had given an unequivocal prior undertaking. Consequently the statements relied upon do not qualify as admissible evidence and the assessments require fresh consideration. [Paras 45, 46, 47, 48, 49]

Assessment orders set aside and matter remanded for fresh assessment on account of violation of principles of natural justice.

Maintainability of writ petitions - Article 226 - exceptional grounds - Whether the writ petitions challenging the assessment orders are maintainable despite availability of alternate statutory remedies. - HELD THAT: - Applying the principles in Commercial Steel Ltd. and similar authorities, the Court held that a writ under Article 226 may be entertained in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction or challenge to vires. Since the Court found a violation of principles of natural justice in the assessment process (and other contested jurisdictional issues), the writ petitions are maintainable notwithstanding the existence of appellate remedies. [Paras 50, 51]

Writ petitions held maintainable; court will exercise jurisdiction under Article 226.

Validity of Section 292CC - retrospective amendment of search provisions - Challenge to constitutional validity of Section 292CC (Finance Act, 2012) on the ground of retrospectivity. - HELD THAT: - The Court accepted the Revenue's submission that the retrospective effect of Section 292CC has no bearing on the present case because the searches in issue occurred after the amendment and the provision is clarificatory in nature. On this basis the challenge to Section 292CC was summarily rejected. [Paras 52, 53]

Challenge to Section 292CC rejected; provision upheld as not affecting the present case.

Disclosure of reason to believe / reason to suspect - validity of retrospective Explanations to Sections 132(1), 132(1A) and 132A(1) - Whether the Explanations added (Finance Act, 2017) that prevent disclosure of the recorded "reason to believe" or "reason to suspect" to any person or appellate authority are constitutionally invalid. - HELD THAT: - The Court treated recording of "reason to believe"/"reason to suspect" as an administrative action distinct from assessment on merits. It held that the Explanations were introduced to preserve secrecy and serve the object of the amendment; the limited inability of the CIT(A) and ITAT to examine sufficiency of the reasons does not render the Explanations unconstitutional. The High Court and Supreme Court remain able to examine such reasons. In view of these considerations and the retrospective character being permissible unless otherwise unconstitutional, the challenge to the Explanations was rejected. [Paras 55, 56, 57, 58, 59]

Explanations to Sections 132(1), 132(1A) and 132A(1) upheld as constitutionally valid; challenge dismissed.

Weight and consideration of special audit report - remand for fresh consideration - Whether the assessing authority could summarily ignore the special audit report without recording cogent reasons. - HELD THAT: - The Court recognised that a special audit report is not binding on the assessing authority, but held that it cannot be ignored without cogent, recorded reasons. The assessing officer's orders did not adequately record sound reasons for discarding significant findings of the special auditor (including that seized material did not trace to the assessee). Accordingly, the matter requires fresh consideration of the special audit report on remand; the assessing authority must record and apply cogent reasons if it chooses not to accept parts of the report. [Paras 65, 66, 67, 68, 69]

Special audit report must be properly considered; issue remanded to assessing authority for fresh adjudication.

Validity of search warrant / authorisation under Section 132(1) - competence to issue search authorisation - Whether the search warrant(s) were validly authorised under Section 132(1) and whether lack of specific authorisation vitiates the search. - HELD THAT: - Section 132(1) permits certain senior officers to issue authorisations or to authorise subordinate officers; the provision also requires that Additional Directors (and similar officers) be empowered by the Board to issue authorisations. The Court observed that the record does not show specific authorisation by a competent officer for several warrants (many were signed by officers below the rank authorised in the absence of evidence of delegation). Given this lacuna and its centrality to the legality of the search, the question of authorisation and competence must be examined afresh by the assessing authority on remand; if authorisation is absent, the search may be vitiated. [Paras 77, 78, 79, 80, 81]

Validity of authorisations to be examined on remand; if warrants were not issued by competent authority search may be vitiated.

Assessment under Section 153A vis-a -vis Section 153C - use of material seized in joint searches - Whether proceedings and assessments in respect of the firm were maintainable under Section 153A (rather than Section 153C) when searches were in joint names of individuals and the firm. - HELD THAT: - The Court noted that in some panchanamas the firm was also a person searched and in others only individuals were named. Material seized in a search against one person that is to be used against another ordinarily falls for proceedings under Section 153C. Where searches are jointly against the firm and the individuals, Section 153A can apply. Given the record's mixed character and the legal significance of whether materials were attributable to the firm or to other persons, the assessing authority must examine on remand whether invocation of Section 153A was permissible or whether Section 153C should have been invoked for materials relating to other persons. [Paras 83, 84, 85, 86, 87]

Issue remanded for fresh determination by assessing authority whether Section 153A or Section 153C was correctly invoked.

Prohibition on using same seized material for additions against two assessees - remand for exclusion of material used elsewhere - Whether the assessing officer could make additions in the hands of the petitioner firm based on the same seized material earlier used to assess yard owners. - HELD THAT: - The Court held that the same set of seized documents cannot be permissibly treated as belonging to two different persons for purposes of making identical additions. The assessing authority had earlier completed assessments of certain yard owners under Section 153C using the seized material and then used the same material to make additions in the hands of the petitioner firm. The assessing authority must on remand determine belongingness of the material and exclude material already attributed to others before assessing the petitioner firm; failure to do so renders the additions illegal. [Paras 89, 90, 91, 92, 93]

Assessment remanded with direction to exclude material already used in assessment of yard owners and to reassess accordingly.

Disallowance under Section 40A(3) - computation of income when regular books are not relied upon - Whether Section 40A(3) disallowance applies where assessment proceeds on the basis of seized loose documents rather than regular books of account. - HELD THAT: - The Court observed that Section 40A(3) ordinarily regulates cash payments disallowance when regular books are maintained, and that where income is computed on seized documents with regular books set aside, the application of Section 40A(3) requires careful consideration. The Court did not determine quantum or make a final correctness finding on disallowance but noted merit in the contention that Section 40A(3) may not apply in the circumstances and left the question to be considered during fresh assessment proceedings. [Paras 94]

Issue left open for fresh adjudication on remand; quantum not decided.

Final Conclusion: The Court upheld the constitutional validity of Section 292CC and the Explanations to Sections 132(1), 132(1A) and 132A(1), but set aside the challenged assessment orders on multiple grounds - primarily breach of natural justice in reliance on witness statements not made available for cross-examination, inadequate consideration of the special audit report, doubts as to competence of search authorisations, improper use of the same seized material against multiple assessees, and related procedural defects - and remanded the matters to the assessing authority for fresh assessment in accordance with the directions and findings recorded herein.

Reopening of assessment under Section 147 - bar of limitation for reassessment beyond four years - burden to prove failure to disclose fully and truly - Section 43B - deduction allowable only on actual payment basis - quashing of reassessment where full disclosure made - validity of reassessment proceedings

Reopening of assessment under Section 147 - bar of limitation for reassessment beyond four years - burden to prove failure to disclose fully and truly - Section 43B - deduction allowable only on actual payment basis - quashing of reassessment where full disclosure made - Validity of reassessment proceedings for AY 2012-13 under Section 147 in view of alleged non-disclosure and applicability of Section 43B - HELD THAT: - The reassessment was initiated beyond the four year limitation and therefore required satisfaction of the proviso to Section 147 that income had escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The assessing officer's reasons relied on the contention that certain amounts transferred on demerger could not be allowed as payment under Section 43B and hence should be added back. The assessee's original return was accompanied by the tax audit report (Form 3CD) which, in appendices and ledger summaries, expressly recorded the provisions and identified the amounts transferred on demerger. Further, the assessee replied to detailed queries under Section 142(1), furnished the scheme of demerger and ledger summaries showing the movement of the provisions and the transfers on demerger. On the material on record the Court found that the relevant facts were disclosed to the tax authorities at the first instance and that the revenue had not discharged the burden of establishing failure to make a full, true and complete disclosure as required to extend limitation under the proviso to Section 147. Consequently, the reassessment proceedings were held to be time barred and the impugned orders quashed. The Court observed that there was no impropriety in the procedure adopted by the assessing authority, but that procedural correctness did not cure the substantive bar of limitation where disclosure had been made. [Paras 14, 15, 16, 17, 18]

Reassessment for AY 2012-13 quashed as barred by limitation because the assessee had made full and true disclosure and the revenue failed to satisfy the proviso to Section 147.

Final Conclusion: Writ petitions allowed; reassessment proceedings and impugned assessment orders for AY 2012-13 quashed on the ground that the revenue did not establish failure of full and true disclosure necessary to extend limitation under Section 147; connected petitions closed, no costs.

Incriminating material - Notice under Section 153A - Scope of assessment under Section 153A - Reopening of completed assessment - Disturbing a concluded assessment - Requirement of nexus between seized material and additions - Abatement of pending assessments

Incriminating material - Notice under Section 153A - Requirement of nexus between seized material and additions - Reopening of completed assessment - Whether the Tribunal was justified in law in upholding additions and refusing to quash the assessment made under Section 153A where no incriminating material was found during the search. - HELD THAT: - The Court agreed with the line of authorities including IBC Knowledge Park Pvt. Ltd., Kabul Chawla and Delhi International Airport Pvt. Ltd. that while Section 153A empowers the Assessing Officer to assess or reassess the total income of the specified six years following a search, interference with a previously completed assessment requires the existence of incriminating material or other relevant post-search material which relates to undisclosed income. The Court noted that Section 153A does not permit arbitrary disturbances of concluded assessments; rather, the Assessing Officer must have a nexus between seized/post-search material and the additions sought to be made. In the absence of any incriminating material discovered in the search or other material enabling the reopening of the completed assessment, the completed assessment can be reiterated and the abated or pending assessment likewise treated appropriately. Applying these principles to the facts, the Court found that the Tribunal failed to appreciate the absence of incriminating material and therefore erred in allowing Revenue's appeal. [Paras 9, 10, 11, 12, 13]

The substantial question of law is answered in favour of the assessee; the ITAT order is set aside and the CIT(A)'s order cancelling the assessment under Section 153A is restored.

Final Conclusion: Appeal allowed; the Court held that incriminating material is a necessary condition to disturb a completed assessment under Section 153A and restored the CIT(A) order cancelling the assessment, setting aside the ITAT order.

Rejection of books of account under section 145(3) and consequent estimation of income - addition on account of low gross profit estimated by the Assessing Officer - appreciation of documentary evidence and concurrent findings of fact by appellate authorities - scope of appellate review to admit and rely upon documents produced during appellate proceedings

Rejection of books of account under section 145(3) and consequent estimation of income - addition on account of low gross profit estimated by the Assessing Officer - appreciation of documentary evidence and concurrent findings of fact by appellate authorities - scope of appellate review to admit and rely upon documents produced during appellate proceedings - Whether the invocation of section 145(3) to reject the assessee's books and the consequent addition by estimating gross profit was justified, or whether the CIT(A) and the ITAT were correct in deleting the addition after appreciating documents produced in the appellate proceedings. - HELD THAT: - The Assessing Officer formed an opinion of defective or unmaintained books and, by averaging gross profit rates of prior years, made an addition on account of allegedly low gross profit. The Appellate Authority recorded that the assessee had produced complete books, quantitative records and supporting vouchers (including a letter before the AO asserting production and excise audit records showing no discrepancy), and had reconciled transactions and justified expenses. The ITAT concurred with the CIT(A) that the reasons for invoking section 145(3) were based on incorrect facts and that no defect in maintenance of books or supporting documents was established. Those findings involved appreciation of documentary material and were recorded as concurrent findings of fact. The High Court declined to interfere with the concurrent factual conclusions that the provisions of section 145(3) were not attracted and that the addition made by the AO was not justified.

Concurrent factual findings that section 145(3) was not attracted and that the addition on account of estimated low gross profit was unjustified are upheld; the addition deleted by the CIT(A) and confirmed by the ITAT stands.

Final Conclusion: The Tax Appeal is dismissed; the concurrent factual conclusions of the CIT(A) and the ITAT that invocation of section 145(3) was improper and that the addition on account of low gross profit was not justified are not interfered with.

Re-opening of assessment - Notice under Section 148 of the Income-tax Act - Reason to believe - Tangible material - Change of opinion - Preliminary satisfaction for reopening - Administrative instruction versus statutory mandate

Notice under Section 148 of the Income-tax Act - Reason to believe - Tangible material - Preliminary satisfaction for reopening - Validity of the notice issued under Section 148 for A.Y.2011-12 based on information received during survey proceedings. - HELD THAT: - The Court held that the reopening was founded on tangible information which surfaced during survey proceedings on Rekvina Laboratories and was subsequently forwarded to the Assessing Officer. The material included impounded documents and agreement copies indicating payments and receipts connected to the assessee that were not reflected in the assessee's books. The Court emphasised the settled law that a valid reopening requires tangible material giving the AO reason to believe income has escaped assessment and that at this preliminary stage the Court's role is limited to examining whether there was a rational nexus between the material and the belief recorded, not to re-appreciate sufficiency or decide escapement on merits. Applying that standard, the Court found that the AO had material to form a belief and had applied his mind rather than embarking on a fishing expedition. [Paras 6, 7, 17, 19, 20]

The notice under Section 148 for A.Y.2011-12 was validly issued as it was based on tangible material giving the AO reason to believe that income had escaped assessment.

Change of opinion - Fishing or roving inquiry - Preliminary satisfaction for reopening - Whether the reopening amounted to an impermissible change of opinion or a fishing/roving inquiry. - HELD THAT: - Relying on precedent, the Court reiterated that reopening cannot be sustained on mere change of opinion and must be based on tangible information. After examining the record, the Court concluded that the present case was not a fishing or roving inquiry: the impounded material supplied specific information linking significant cash transactions and receipts to the assessee which were not disclosed in returns or books; the AO did not merely rely on vague or unspecific inputs and there was a live link between the material and the formation of belief. Accordingly, the reopening could not be characterised as a mere change of opinion. [Paras 8, 20]

Reopening was not a case of change of opinion or a fishing/roving inquiry; the AO's action was based on tangible material and a formed belief.

Administrative instruction versus statutory mandate - Instruction No.1/2011 - Section 148 read with Section 151 - Whether Instruction No.1/2011 barred initiation of reassessment proceedings under Section 148 in the present case. - HELD THAT: - The Court observed that the board instruction relied upon pertains to administrative allocation of cases between grades of officers and relates to assessment proceedings; it cannot be read to override or displace the statutory scheme for issuance of notices under Section 148 read with the sanctioning requirement in Section 151. The Court held that reading Instruction No.1/2011 to negate the effect of the statutory provisions would be contrary to legislative intent and noted precedent holding such instructions are not mandatory in the nature of binding circulars for the purpose relied on by the assessee. Accordingly the reliance on Instruction No.1/2011 to quash the reopening was misplaced. [Paras 18]

Instruction No.1/2011 did not bar issuance of notice under Section 148 and could not override the statutory scheme governing reopening.

Final Conclusion: The writ petition is dismissed. The High Court upheld the validity of the reopening notice for A.Y.2011-12, finding the Assessing Officer had tangible material and a reasonable belief to initiate proceedings under Section 148, and rejected the contention that Instruction No.1/2011 precluded such reopening.

Entitlement to refund of seized assets - application of seized assets under integrated scheme of search and seizure - treatment of seized cash as unaccounted income of searched person - appropriation of seized assets towards existing tax liability - principles of interference under Article 226

Entitlement to refund of seized assets - principles of interference under Article 226 - Whether the writ-applicant firm is entitled to refund of the seized cash (and interest) which had been realized/adjusted in proceedings relating to the searched person. - HELD THAT: - The Court examined the factual matrix and the statutory scheme for dealing with seized assets and found that the department had proceeded on the basis that the cash was seized from the searched person Bhuraram and that he had himself admitted ownership in statements recorded and in submissions to the department. The assessment in the case of the searched person had concluded that the seized cash constituted his unaccounted income and penalty proceedings and adjustments followed. The firm had not, at the relevant time, invoked the statutory remedy under the provisions governing release or claim of seized assets and only belatedly sought refund years later. Having regard to the departmental proceedings, the concurrent assessments in the hands of the searched person and the factual finding that the firm failed to substantiate its claim before the assessing officer (while the CIT(A) subsequently accepted certain documents), the Court held that declaring the income of the firm as not taxable would not automatically entitle the firm to a refund of cash which had been realized from the searched person. The Court further emphasised that writ relief under Article 226 is discretionary and will not be exercised as a substitute for appeals except where substantial injustice is shown; no such grave illegality or breach of natural justice was made out that would warrant interference. Accordingly the writ-applicant was not entitled as of right to the relief of refund with interest. [Paras 14, 23, 24, 25]

Writ petition dismissed; no entitlement to refund of the seized cash and interest was made out on the facts, and extraordinary relief under Article 226 was not warranted.

Application of seized assets under integrated scheme of search and seizure - treatment of seized cash as unaccounted income of searched person - appropriation of seized assets towards existing tax liability - Whether the department acted irregularly or illegally in appropriating/adjusting the seized cash towards the tax liabilities of the searched person and in refunding the balance to him. - HELD THAT: - The Court analysed Sections 132 to 132B and noted the integrated statutory scheme for requisition, retention and application of seized assets. The record showed that (a) the cash was seized from Bhuraram; (b) statements and replies recorded by the Revenue showed his acceptance of ownership and that the cash represented unaccounted income; (c) assessments and penalty proceedings against Bhuraram were concluded treating the cash as his income; and (d) adjustments and refund to Bhuraram were carried out under the statutory provisions governing application of seized assets. The Court observed that the department may have committed some mistakes in procedure, but on the core question of propriety the departmental actions were supported by the materials and there was no illegality in treating the cash as the searched person's income or in appropriation under the scheme. The firm's inaction at the relevant time and failure to pursue statutory remedies was relevant. Thus no fault was found in the departmental appropriation and refund to the searched person. [Paras 21, 22, 23, 24]

Department's appropriation/adjustment of the seized cash in the hands of the searched person and consequent refund to him were not shown to be irregular or illegal on the record.

Final Conclusion: The writ petition is rejected. On the facts and in view of the statutory scheme, the firm was not entitled to claim refund (with interest) of the seized cash which had been treated and realised as unaccounted income of the searched person, and no exercise of the Court's extraordinary jurisdiction under Article 226 was warranted.

Limitation - exclusion of period by Supreme Court suo motu order - Admission of additional evidence at appellate stage - Remand for de novo adjudication to first appellate authority - Opportunity to file reply to remand report - Assessment under section 144 read with section 147 - Credits reflected in Form 26AS treated as undisclosed receipts

Limitation - exclusion of period by Supreme Court suo motu order - Whether the appeal was time barred and if delay was excused in view of the Supreme Court's exclusion order. - HELD THAT: - The Tribunal held that the assessee's appeal, though filed beyond the 60 day statutory period, fell within the period excluded by the Hon'ble Supreme Court by its suo motu direction excluding the period from 15/03/2020 to 28/02/2022 for computing limitation in judicial and quasi judicial proceedings. As the due date for filing the present appeal fell within that excluded period, the delay of 248 days was held to be legally inapplicable and the appeal was admitted for adjudication on merits. [Paras 2]

No delay; appeal admitted in view of the Supreme Court's exclusion order.

Admission of additional evidence at appellate stage - Remand for de novo adjudication to first appellate authority - Opportunity to file reply to remand report - Credits reflected in Form 26AS treated as undisclosed receipts - Admission of bank statements as additional evidence and whether the matter should be remanded to the CIT(A) for fresh adjudication after allowing an opportunity to reply to the AO's remand report. - HELD THAT: - The Tribunal examined the record and the assessee's explanation that bank statements and other documents sought to be produced before it were not previously filed because remand proceedings required verification and the appellant was unable to file a rejoinder to the Assessing Officer's remand report before the CIT(A) due to change in jurisdiction. The Tribunal admitted the additional evidence and found that the assessee was not granted adequate opportunity to rebut the AO's remand report. In view of these procedural deficiencies and the relevance of the newly tendered bank statements to the receipts reflected in Form 26AS which were treated by the AO as undisclosed income under the reopened assessment, the Tribunal directed that the appeal be remanded to the learned CIT(A) for de novo adjudication, with directions to grant the assessee a proper hearing and to consider the additional evidence while adjudicating afresh. [Paras 6, 8]

Additional evidence admitted; matter remanded to CIT(A) for de novo adjudication after granting the assessee an opportunity to file reply and for consideration of the newly filed evidence.

Final Conclusion: The delay in filing the appeal was excused under the Supreme Court's exclusion order and the Tribunal admitted additional evidence, set aside the CIT(A)'s order for de novo consideration, and remanded the matter to the CIT(A) with directions to grant opportunity of hearing and to consider the newly filed bank statements and replies to the AO's remand report.

Long Term Capital Gain - Fair market value determined by Registration Authority under section 50C - Valuation report by Departmental Valuation Officer under section 55A/50C - Remand for de novo adjudication - Claim of cost of improvement - requirement of supporting bills and vouchers - Natural justice - consideration of valuation report

Long Term Capital Gain - Fair market value determined by Registration Authority under section 50C - Valuation report by Departmental Valuation Officer under section 55A/50C - Remand for de novo adjudication - Natural justice - consideration of valuation report - Whether the computation of long term capital gain based on the value determined by the Registration Authority should stand without considering the Departmental Valuation Officer's report. - HELD THAT: - The Assessing Officer had adopted the value as recorded by the Registration Authority to determine long term capital gains. During appellate proceedings, a valuation report dated 26/06/2014 from the Assistant Valuation Officer (Valuation Cell) was on record, estimating the fair market value lower than the registration value. The Tribunal found that the learned CIT(A) upheld the addition without taking that departmental valuation report into account. Since the impugned addition was founded on the registration value and the Departmental Valuation Officer's determination materially bore on the correct fair market value, the matter was restored to the file of the Assessing Officer for fresh adjudication. The Assessing Officer was directed to compute capital gains after considering the departmental valuation report, thereby ensuring that the departmental valuation is given due consideration and addressing the natural justice concern arising from non-consideration of that report. [Paras 8]

Grounds no.1, 2 and 3 are allowed for statistical purposes and the issue is remanded to the Assessing Officer for de novo computation of capital gains after considering the Departmental Valuation Officer's report.

Claim of cost of improvement - requirement of supporting bills and vouchers - Whether the claim for cost of improvement of the property can be allowed in absence of supporting bills, vouchers and proof of source of funds. - HELD THAT: - The assessee claimed cost of improvement which was disallowed by the Assessing Officer for want of details. On appeal the assessee relied on photographs but failed to produce bills, vouchers, dates of expenditure or source of funds either before the lower authorities or before the Tribunal. The Tribunal found no infirmity in the concurrent findings of the lower authorities in denying the claim when the requisite documentary proof was not furnished. Photographs alone were held insufficient to substantiate the cost of improvement for allowing the claim. [Paras 14]

Ground no.4 is dismissed and the disallowance of the cost of improvement is sustained for lack of documentary proof.

Final Conclusion: The appeal is partly allowed: the determination of long term capital gain is remanded to the Assessing Officer for de novo computation after taking into account the Departmental Valuation Officer's report; the claim for cost of improvement is rejected for want of supporting bills and vouchers, and that disallowance is upheld.

Deduction under section 54F - Nature of property - residential versus commercial - Intention at the time of construction - Use of municipal records and physical verification - Multi-unit residential building - Co-ownership and eligibility for deduction - Presumption as to continuity of state of affairs

Deduction under section 54F - Nature of property - residential versus commercial - Intention at the time of construction - Use of municipal records and physical verification - Multi-unit residential building - Co-ownership and eligibility for deduction - Presumption as to continuity of state of affairs - Whether the assessee is entitled to deduction under section 54F for the building claimed to be constructed as a residential house - HELD THAT: - The Tribunal accepted the legal position that a dwelling may comprise more than one residential unit and that a building originally constructed for residential purpose retains eligibility even if later put to commercial use, but the determinative question was whether the building was in fact constructed as a residential house. The authorities, on remand, made targeted enquiries (construction permission, approved plan, municipal tax assessment, physical verification) which the assessee failed to satisfy with documentary evidence. Independent inquiries including GHMC records and physical inspection showed features (four floors, large halls and rooms, disproportionate sanitary and water storage facilities, 25 wash basins and lavatory basins) and municipal classification and tax assessment as commercial. The assessee did not reside in the building, there was no demarcation into distinct dwelling units, and the assessee had taken a loan from an educational institution and leased the property to a college/hostel; the lease also restricted lessee from structural alterations. Applying the principle that continuity of a shown state of affairs may be presumed backward absent proof of discontinuity, the Tribunal concluded on the facts that the structure was designed and used for commercial/hostel purposes from inception. Co-ownership and lack of demarcation further undermined the claim. The factual findings of the assessing authority and CIT(A) were held to be supported by material and not warranting interference. [Paras 11, 12, 15, 17, 18]

Assessee not entitled to deduction under section 54F as the building was held to be constructed for commercial/hostel use and the claim was dismissed.

Final Conclusion: On the facts and material (municipal records, physical verification, loan and lease particulars and absence of supporting documentation), the Tribunal upheld the findings that the building was commercial in nature and dismissed the appeals; deduction under section 54F was denied for AY 2008-09.

Revisionary power under section 263 - erroneous order - prejudicial to the interests of the Revenue - requirement of twin conditions for exercise of section 263 - taxation of capital gains where transfer made by power of attorney holder - assessment on the basis of revised return and verification by Assessing Officer - condonation of delay for filing appeal

Condonation of delay for filing appeal - Condonation of delay in filing the appeal before the Tribunal - HELD THAT: - There was a delay of 62 days in filing the appeal and the assessee filed an application supported by material asserting that the delay arose due to lockdown. The Revenue had no objection to condonation. The Tribunal found sufficient cause for the delay and exercised its discretion to condone the delay of 62 days, thereby admitting the appeal for adjudication on merits.

Delay of 62 days in filing the appeal is condoned and the appeal is admitted.

Revisionary power under section 263 - erroneous order - prejudicial to the interests of the Revenue - requirement of twin conditions for exercise of section 263 - taxation of capital gains where transfer made by power of attorney holder - assessment on the basis of revised return and verification by Assessing Officer - Validity of the Principal Commissioner of Income Tax's order under section 263 setting aside the assessment order for AY 2016-17 - HELD THAT: - The Tribunal examined the material on record showing that the assessee filed a revised return, responded to notices and uploaded supporting documents which were test-checked and examined by the Assessing Officer (AO), who accepted the revised return and completed assessment under section 143(3). The PCIT initiated revision proceedings, noted that the sale deed indicated the assessee acted as a Power of Attorney holder and expressed the view that capital gains may belong to the husband; on that basis the PCIT set aside the assessment and directed the AO to examine both the taxability and the claim of deduction under section 54F. The Tribunal found the PCIT's show-cause and ultimate order internally inconsistent (the show-cause suggested protective assessment while the order directed verification of owner and deduction), and observed that section 263 can be invoked only where the order of the AO is both erroneous and prejudicial to the revenue. Where the AO has adopted one of two permissible views or has verified the revised return and supporting documents without any demonstrable failure of inquiry, the mere possibility of loss of revenue or disagreement by the PCIT does not make the order erroneous or prejudicial. Applying these principles and following the legal position stated by the Supreme Court in Malabar Industrial Co. Ltd. and CIT vs. Max India Ltd. , the Tribunal concluded that the PCIT was not legally justified in invoking section 263 on the facts of the case and that the assessment order could not be characterised as erroneous and prejudicial to the revenue requiring revision.

Order passed under section 263 is quashed; the assessment order under section 143(3) is upheld and the assessee's appeal is allowed.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, quashed the order passed by the PCIT under section 263 for AY 2016-17, holding that the twin conditions of an erroneous order and prejudice to the revenue were not satisfied; the assessee's appeal is allowed.

Deduction under section 80P - definition of Primary Cooperative Agricultural and Rural Development Bank - opportunity of being heard - remand for fresh adjudication - assessment framed under section 143(3)

Deduction under section 80P - definition of Primary Cooperative Agricultural and Rural Development Bank - opportunity of being heard - remand for fresh adjudication - Claim for deduction under section 80P by the appellant bank remitted to the CIT(A) for fresh adjudication after affording opportunity of being heard. - HELD THAT: - The Tribunal found that the CIT(A) affirmed the Assessing Officer's disallowance but also recorded fresh factual conclusions (that the bank's activities extended to non-farm sectors and to non-members) without affording the assessee adequate opportunity to meet those findings. The AO had disallowed the claim on the ground that the bank's area of operation exceeded a single taluka, whereas the CIT(A) relied additionally on different factual findings which were not the subject of prior enquiry or hearing. Given that factual determination is prerequisite to application of the Explanation to section 80P(4), the Tribunal held that the matter requires fresh, speaking adjudication: the CIT(A) must examine the activities of the society in light of its objects, laws and byelaws, obtain a remand report from the AO if necessary, and give the assessee an opportunity to rebut adverse factual contentions before concluding on eligibility for deduction under section 80P. [Paras 11, 12]

Matter remanded to the CIT(A) to decide the section 80P claim afresh after granting adequate opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the impugned confirmation and remanded the issue of the assessee's entitlement to deduction under section 80P to the CIT(A) for fresh, speaking consideration after affording opportunity to the assessee; appeal allowed for statistical purposes.

Turnover determination and enhancement - eligibility for deduction under section 80P(2)(a)(vi) - conversion of deduction to section 80P(2)(c) - scope of remit on de novo assessment and obligation to follow ITAT directions

Turnover determination and enhancement - Enhancement of gross contract receipts by the revenue from Rs.69,02,988/- to Rs.85,89,152/- was not sustainable. - HELD THAT: - The Tribunal examined the account of deductions legitimately deductible from the contract receipts (TDS, VAT, security, labour cess and other items) and accepted the assessee's computation which reduced the gross contract receipts to the amount originally declared. The Bench held that the Assessing Officer and the Commissioner (Appeals) could not exceed the scope of the ITAT's direction on de novo assessment by reworking turnover contrary to the material submitted and the deductions shown to be allowable. Applying that approach, the enhancement to Rs.85,89,152/- was set aside and the gross receipt was fixed at Rs.69,02,988/-. [Paras 5, 6]

Enhancement of turnover by revenue disallowed; turnover fixed at Rs.69,02,988/-.

Eligibility for deduction under section 80P(2)(a)(vi) - The assessee-society was held entitled to deduction under section 80P(2)(a)(vi). - HELD THAT: - On facts and on the basis of the assessee's records and the nature of the society (collective disposal of labour of its members), the Tribunal followed the principle that once it is found as a fact that the society's purpose and activities fall within the scope of section 80P(2)(a)(vi), the deduction must be allowed. The Bench relied on precedent emphasising that factual finding on the character of the society and auditors' report support the claim, and therefore held that deduction under section 80P(2)(a)(vi) was properly claimable. [Paras 5, 6]

Deduction under section 80P(2)(a)(vi) allowed to the assessee.

Conversion of deduction to section 80P(2)(c) - scope of remit on de novo assessment and obligation to follow ITAT directions - Ld. CIT(A)'s conversion of the deduction to section 80P(2)(c) and any departure from ITAT's direction on remand were not sustained. - HELD THAT: - The Tribunal observed that a direction for de novo assessment by the ITAT does not permit the revenue authorities to ignore the essence of the Tribunal's findings or to exceed its mandate. The CIT(A)'s action in converting the claimed deduction to another sub-clause was set aside because the factual and legal basis supported allowance under section 80P(2)(a)(vi) and the authorities below could not lawfully traverse beyond the scope of the ITAT's remit or recharacterise the deduction contrary to the Tribunal's findings. [Paras 2, 5]

CIT(A)'s conversion to section 80P(2)(c) and departure from ITAT direction disallowed; assessment to conform to ITAT findings.

Final Conclusion: The appeal is allowed: the gross contract receipts are fixed at the assessee's declared amount for AY 2010-11 and the deduction under section 80P(2)(a)(vi) is permitted; consequential enhancement and recharacterisation by revenue authorities are set aside and the assessment shall conform to the ITAT's directions.

Reopening of assessment under Section 147/148 - Reasonable belief / formation of belief for escapement of income - Change of opinion - Duty to consider objections and to pass a speaking order (GKN Driveshafts principle) - Classification of provision for doubtful debts as not an unascertained liability - Ascertainment of retirement benefit provision (actuarial valuation) for book profit computation - Adjustment of prior period income against prior period expenses - Computation of book profit under Section 115JB

Reopening of assessment under Section 147/148 - Reasonable belief / formation of belief for escapement of income - Change of opinion - Duty to consider objections and to pass a speaking order (GKN Driveshafts principle) - Validity of notice under Section 148 and assumption of jurisdiction under Section 147 for Assessment Year 2007-08. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the objections filed by the assessee. The recorded reasons relied on three alleged escapements: claim of additional depreciation already alleged to have been claimed in AY 2006-07; failure to adjust provisions (doubtful debts and retirement benefits) for computation of book profit; and understatement of prior period income. The assessee's objection explained factual and legal bases for each claim and relied on precedents. The Assessing Officer disposed of the objections by a brief, non-speaking disposal, failing to engage with the factual matrix or to give conclusive findings as required by the Supreme Court in GKN Driveshafts. On scrutiny the Tribunal found that the reasons did not prima facie indicate escapement: (i) the additional depreciation claim related to bifurcated entitlement across two years and was not an impermissible extra claim; (ii) provision for doubtful debts is consequential to an asset impairment and is not an unascertained liability for book profit computation; (iii) the assessee properly adjusted prior period expenses against prior period income as permitted by precedent, so no escapement arose. The Assessing Officer therefore proceeded on incorrect factual premises and changed opinion without adequate material or a speaking record addressing the objections. In that factual and legal backdrop the pre requisites for invoking Section 147 were not satisfied and the notice under Section 148 was without legal foundation. [Paras 10]

Notice under Section 148 and consequent reassessment under Section 147 are quashed; reassessment order set aside for AY 2007-08.

Classification of provision for doubtful debts as not an unascertained liability - Computation of book profit under Section 115JB - Whether provision for doubtful debts qualified as an unascertained liability requiring adjustment in computing book profit under Section 115JB. - HELD THAT: - The Tribunal accepted the assessee's contention, supported by Supreme Court authority, that a debt is an asset and consequential provision for doubtful recovery is not an unascertained liability. The reasons recorded did not invoke the relevant Explanation to Section 115JB and rested solely on the allegation that the provisions were unascertained liabilities. On the facts and law the provision for doubtful debts could not be treated as an unascertained liability mandating an add-back for computation of book profit. [Paras 10]

No addition required for provision for doubtful debts in computation of book profit; the ground cannot support reopening for AY 2007-08.

Ascertainment of retirement benefit provision (actuarial valuation) for book profit computation - Computation of book profit under Section 115JB - Whether provision for retirement benefits was an unascertained liability requiring add-back while computing book profit under Section 115JB. - HELD THAT: - The assessee demonstrated that the provision for retirement benefits arose from leave encashment computed on the basis of actuarial valuation and therefore constituted an ascertained liability. The Assessing Officer's conclusion to treat it as an unascertained liability was factually and legally unsustainable. Having regard to the factual matrix and the nature of the provision, the Tribunal found merit in the assessee's plea and held that the provision did not justify an add-back in computing book profit. [Paras 10]

Provision for retirement benefits cannot be added back as an unascertained liability for computing book profit; it does not support escapement for AY 2007-08.

Adjustment of prior period income against prior period expenses - Whether understatement of prior period income amounted to escapement of income justifying reopening of assessment. - HELD THAT: - The assessee showed that the amounts in question were prior period items relating to earlier years and that prior period expenses had been adjusted against prior period income in accordance with judicial precedents. The Assessing Officer's allegation of understatement amounted to a review or change of opinion rather than a bona fide belief in escapement. On the material before it, the Tribunal concluded there was no basis to treat the reporting as escapement of income. [Paras 10]

Allegation of lower reporting of prior period income does not warrant reopening; it fails to establish escapement for AY 2007-08.

Final Conclusion: The reassessment proceedings and order for Assessment Year 2007-08 were initiated and framed without satisfying the statutory pre requisites; the notice under Section 148 and the consequent reassessment under Section 147 are quashed and set aside. The assessee's appeal is allowed and the Revenue's cross appeal is dismissed.

Addition as unexplained expenditure under Section 69C - books of account and audit report as explanation for source of expenditure - disallowance for unvouched or unverifiable expenses - burden of proof on assessee for genuineness of expenses - proportional disallowance to cover possible leakage in revenue

Addition as unexplained expenditure under Section 69C - books of account and audit report as explanation for source of expenditure - Whether the addition of Rs. 5,01,20,544 as unexplained expenditure under Section 69C was justified. - HELD THAT: - The Tribunal examined the ledger copies, day to day sales account and the auditor's report produced by the assessee which showed gross sales of Rs. 15,60,33,500 with License Fee of Rs. 5,10,48,700 reduced to arrive at net sales of Rs. 10,49,84,800 which was taken to the trading and P&L account. Although the AO and the CIT(A) suspected an afterthought and noted certain ledger extracts, the AO had accepted the sales ledgers on record and had not pointed out any discrepancy in the sales and license fee ledgers produced by the assessee. The Tribunal observed that the accountant/auditor had certified maintenance of books under section 44AA and that the effect of reducing License Fee from gross sales instead of debiting it separately did not alter the profitability; if License Fee were shown gross and debited separately the net profit would be the same. In view of acceptance of the ledger sales figures and the license fee entries and absence of any positive contradiction of those records by the Department, the Tribunal found no justification for treating the unexplained balance as income under Section 69C and deleted the addition. [Paras 10]

Addition of Rs. 5,01,20,544 under Section 69C deleted.

Disallowance for unvouched or unverifiable expenses - burden of proof on assessee for genuineness of expenses - proportional disallowance to cover possible leakage in revenue - Extent and justification of disallowance made out of various expenses claimed by the assessee. - HELD THAT: - The AO disallowed one fifth of aggregate expenses claimed because the assessee failed to produce supporting bills/vouchers despite opportunities. The CIT(A) sustained a part of that disallowance by reference to previous assessment history. The Tribunal noted that no specific instance of diversion to non business use was pointed out, but some heads contained unvouched items (travelling, telephone, welfare and miscellaneous) which could permit personal use. To reasonably cover potential leakage while affording relief to the assessee, the Tribunal reduced the sustained disallowance: rather than uphold the full disallowance, it sustained a limited disallowance of Rs. 50,000 out of the contested expenses. [Paras 17]

Disallowance reduced and sustained at Rs. 50,000; remainder of AO's disallowance deleted.

Final Conclusion: Appeal partly allowed: the addition under Section 69C of Rs. 5,01,20,544 deleted; disallowance of expenses reduced so that a disallowance of Rs. 50,000 is sustained and the balance disallowance is deleted.

Classification of imported goods (Chapter-8 Areca nuts v. Chapter-21 supari) - Provisional release of seized consignments under Section 110A of the Customs Act, 1962 - Discretion to offer fine in lieu of confiscation in case of prohibited goods under Section 125 - Prompt exercise of authority in respect of perishable consignments - Principle of provisional assessment and release in classification disputes as per Circular No.22/2004-Cus.

Provisional release of seized consignments under Section 110A of the Customs Act, 1962 - Principle of provisional assessment and release in classification disputes as per Circular No.22/2004-Cus. - Application for provisional release for purpose of re-export to be considered and disposed by the adjudicating authority after hearing the petitioner, simultaneous with prima facie classification determination. - HELD THAT: - The Court directed that the petitioner may seek provisional release under Section 110A and that the adjudicating authority shall consider and dispose of such application after hearing the petitioner. The authority is to undertake a prima facie determination of the classification of the commodity at the time of disposal to facilitate a decision on provisional release. The Court emphasised the Board's guidance in Circular No.22/2004-Cus. that, in classification disputes, provisional assessment and release should ordinarily be resorted to (subject to safeguards such as adequate security) unless the import/clearance is totally prohibited or prosecution is contemplated. The direction in this case adopts those principles and requires the authority to decide the application within the time specified by the Court. [Paras 6]

R4 is directed to dispose the petitioner's application dated 25.06.2022 for provisional release for re-export after hearing the petitioner and making a simultaneous prima facie classification determination, within the time prescribed by the Court.

Classification of imported goods (Chapter-8 Areca nuts v. Chapter-21 supari) - Discretion to offer fine in lieu of confiscation in case of prohibited goods under Section 125 - Prompt exercise of authority in respect of perishable consignments - Authorities must promptly determine classification and exercise discretion under Section 125, with particular urgency for perishable consignments; where classification is disputed, testing and reconsideration may be required. - HELD THAT: - The Court recorded that the core adjudicatory question is classification - whether the goods fall within Chapter-8 as Areca nuts or within Chapter-21 as supari - and that this classification must be determined by the assessing authority. The Court explained that, under Section 125, where goods are prohibited the officer's power to accept a fine in lieu of confiscation is discretionary, whereas for other goods the officer 'shall' offer the option to pay a fine; accordingly, the authority must exercise its discretion thoughtfully and without undue delay. Given the perishable nature of the consignments and their prolonged detention since February 2022, the Court stressed the incumbent duty on the authority to act promptly, including retesting where lab reports conflict, so as to protect both revenue and the interests of the importer. The Court noted prior appellate directions for retesting and provisional release subject to outcome of testing, and required the authority to engage with the assessee and DRI in classification proceedings. [Paras 17]

Adjudicating authority to engage with the assessee and DRI to determine classification promptly, exercising any discretion under Section 125 expeditiously and in particular taking urgent steps in respect of perishable consignments.

Final Conclusion: Writ petition disposed by directing R4 to consider and dispose the petitioner's application dated 25.06.2022 for provisional release for re-export after hearing and simultaneous prima facie classification, and by directing prompt engagement between the adjudicating authority, the assessee and DRI to determine classification and to exercise discretions (including under Section 125) without undue delay; matter so ordered and disposed.

Limitation for refund of Special Additional Duty (SAD) - validity of prescribing period of limitation by notification/subordinate legislation - application of Section 27 of the Customs Act to SAD refunds - refund of Special Additional Duty under section 3(5) of the Customs Tariff Act, 1975 - precedential effect of coordinate bench decisions and finality pending Supreme Court decision

Limitation for refund of Special Additional Duty (SAD) - validity of prescribing period of limitation by notification/subordinate legislation - application of Section 27 of the Customs Act to SAD refunds - Whether a one year period of limitation for claiming refund of Special Additional Duty (SAD) could be imposed by a notification and applied to the respondent's refund claim. - HELD THAT: - The Court applied the reasoning in Sony India Pvt. Ltd., holding that Section 27 of the Customs Act was not understood to apply to SAD refunds and that the imposition of a period of limitation by subordinate instrument (circular/notification) could not override the statutory scheme. The court observed that essential legislative policy matters such as limitation cannot be prescribed by subordinate legislation and that Notification No.93/2008 which first introduced the one year limit could not, by itself, create a substantive limitation that the parent enactment did not prescribe. In consequence, the view in Sony India was followed and applied to the facts of the present appeal; the Tribunal's order was therefore upheld insofar as the respondent's refund claim was to be processed in accordance with law, subject to any ultimate determination by the Supreme Court in the Wilhelm Textiles appeal if pursued. [Paras 5, 6, 7]

The revenue's appeal is dismissed; the Tribunal's order dated 24.11.2021 is sustained and the respondent's refund application shall be processed in accordance with law.

Final Conclusion: The High Court, following Sony India Pvt. Ltd., held that a one year limitation for SAD refunds could not be imposed by notification alone; the revenue's appeal is dismissed, the Tribunal's order is sustained, and the refund application shall be processed in accordance with law, subject to any final decision of the Supreme Court in related proceedings.

Directory nature of the time-prescription in Section 212(3) - Power to order investigation under Section 212 and to investigate related entities under Section 219 - Scope of clause (c) of Section 219: Boards comprising nominees or acting on directions - High Court's power under Article 226 to grant interim relief against investigations - Prohibition on blanket interim no-coercive orders that hamper investigation (Neeharika principle) - Requirement of reasons for forming opinion to order investigation

Directory nature of the time-prescription in Section 212(3) - Validity of the High Court's interim stay on the ground that the stipulated period in the order under Section 212(3) had expired - HELD THAT: - The Court held that the High Court's reliance on the expiry of the period specified in the order under Section 212(3) was contrary to binding precedent. This Court in SFIO vs. Rahul Modi has construed the prescription of a period under Section 212(3) as directory and not mandating termination of SFIO's mandate on expiry of the stipulated period. The statutory scheme, including transfer of records under Section 212(2), the absence of any fixed period for submission of the final investigation report under Section 212(12), and the possibility of interim reports under Section 212(11), supports a directory construction. Consequently, the expiry of a stipulated period did not, prima facie at interlocutory stage, justify staying the investigation. [Paras 12]

The High Court erred in staying the investigation on the ground of expiry of the period under Section 212(3).

Power to order investigation under Section 212 and to investigate related entities under Section 219 - Scope of clause (c) of Section 219: Boards comprising nominees or acting on directions - Whether the High Court was justified in staying the investigation of six companies ordered on 27 October 2020 on the basis that they were not subsidiaries, holding companies or managed by the same Managing Director - HELD THAT: - The Court observed that the High Court's finding relied on clauses (a) and (b) of Section 219 but ignored that the Union Government's order expressly invoked clause (c). Clause (c) empowers investigation into any body corporate whose Board comprises nominees of the company or is accustomed to act in accordance with its directions or those of its directors. The impugned order contains factual averments and a specific invocation of clause (c) and, on the material on record at the interlocutory stage, the High Court was not justified in staying the investigation on the limited basis suggested by reliance on clauses (a) and (b). [Paras 14]

The High Court was not warranted in staying the investigation of the six companies on the ground that they were not covered by clauses (a) or (b) of Section 219, where clause (c) had been specifically invoked by the Government.

Requirement of reasons for forming opinion to order investigation - Whether the absence of elaborate reasons in the orders dated 31 October 2018 and 27 October 2020 justified an interim stay of the investigations - HELD THAT: - The Court held that at the stage of ordering an investigation the Government was not required to record elaborate reasons, since the object of investigation is to elicit the material which may emerge only in the course of investigation. Having regard to the material placed on record, it could not be said that the Government had failed to indicate reasons for exercising jurisdiction under Sections 212 and 219. Therefore, the High Court's conclusion that the orders did not furnish reasons or circumstances warranting investigation was specious and insufficient to justify a stay at the interlocutory stage. [Paras 15]

The absence of elaborate reasons in the impugned orders did not, on the material before the High Court, warrant an interlocutory stay of the investigations.

High Court's power under Article 226 to grant interim relief against investigations - Prohibition on blanket interim no-coercive orders that hamper investigation (Neeharika principle) - Whether the High Court was justified in passing broad interim directions staying operation of the investigation and restraining all consequential actions including look-out notices - HELD THAT: - Relying on the caution expressed in Neeharika Infrastructure Pvt. Ltd. regarding blanket interim injunctions that prevent coercive steps and may hamper investigation, the Court found that the Division Bench's wide-ranging freeze on enforcement steps, including look-out notices, was not justified on the material before it. The High Court has wide powers under Article 226, but such powers must be exercised with regard to the impact on an investigation; in the present facts the interlocutory stay and ancillary directions were unwarranted. [Paras 11, 16]

The High Court should not have issued the broad interim injunctions restraining the investigation and ancillary coercive measures; those directions were set aside.

Final Conclusion: The appeals are allowed; the impugned interim orders of the High Court dated 13 December 2021 and 5 January 2022 staying the investigations and restraining consequential actions are set aside. The observations are confined to the correctness of the interlocutory injunction and do not affect the merits of the writ petitions, which the High Court is requested to dispose of expeditiously.

Commercial wisdom of the Committee of Creditors - approval of resolution plan under Section 31 - limited judicial review under the I&B Code - evaluation matrix and scoring of resolution plans - material irregularity in exercise of powers of the resolution professional - feasibility and viability assessment by the CoC - adjudicating authority's satisfaction as to implementation of the resolution plan

Commercial wisdom of the Committee of Creditors - limited judicial review under the I&B Code - approval of resolution plan under Section 31 - Whether the Tribunal or the Adjudicating Authority can substitute its view for the commercial decision of the CoC in approving a resolution plan. - HELD THAT: - The Tribunal held that the commercial wisdom of the CoC in approving or rejecting a resolution plan is a collective business decision and is largely non justiciable. Absent any contravention of statutory provisions or public interest, neither the Adjudicating Authority nor the Appellate Tribunal is empowered to re weigh commercial considerations or substitute its judgment for that of the CoC. The order approving the resolution plan was passed after the CoC, which is the sole creditor holding 100% voting share, evaluated feasibility and viability and approved the plan unanimously; therefore the Tribunal will not interfere with that commercial decision. [Paras 27, 33, 35, 36, 38]

The commercial wisdom of the CoC cannot be interfered with by the Adjudicating Authority or this Tribunal in absence of contravention of law.

Evaluation matrix and scoring of resolution plans - material irregularity in exercise of powers of the resolution professional - Whether there was material irregularity in the evaluation matrix or its application such as to vitiate the CoC's approval. - HELD THAT: - The Tribunal examined the minutes, the evaluation matrix and the scoring placed on record. The CoC considered the revised submission of the appellant and recorded reasons for not considering it; the scoring placed the appellant as H2 and the successful applicant as H1. The appellant failed to point to any contravention of the RFRP or statutory provision or to show material irregularity in the RP's exercise of powers during CIRP. In absence of such contravention or perverse action, technical scrutiny of the scoring by the Tribunal is impermissible. [Paras 28, 29, 30, 33, 39]

No material irregularity was found in the evaluation or scoring that would invalidate the CoC's approval.

Adjudicating authority's satisfaction as to implementation of the resolution plan - feasibility and viability assessment by the CoC - approval of resolution plan under Section 31 - Whether the Adjudicating Authority erred in approving the resolution plan under Section 31(1) of the Code. - HELD THAT: - Section 31(1) requires the Adjudicating Authority to be satisfied that the plan meets the requirements of Section 30(2) and contains provisions for its effective implementation. The Adjudicating Authority recorded that the requirements were complied with and that the plan had been unanimously approved by the sole member of the CoC. The Tribunal found no contravention of law in the Adjudicating Authority's satisfaction and noted that the CoC's recorded deliberations addressed feasibility, viability and implementation aspects; consequently the approval was in accordance with law. [Paras 31, 32, 34, 40]

The Adjudicating Authority did not err in approving the resolution plan; the approval complied with statutory requirements.

Final Conclusion: The appeal is without merit: the Tribunal found no contravention of law or material irregularity in the evaluation or approval of the resolution plan, affirmed that the commercial wisdom of the sole-member CoC is paramount and non interference by the Adjudicating Authority or Appellate Tribunal is warranted, and accordingly dismissed the appeal.

Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 - provisional attachment under The Benami Transactions (Prohibition) Act, 1988 (as amended) - conflict between IBC and special statutes - maintainability of IBC applications to challenge attachments under special statutes - jurisdictional competence to challenge attachment orders under the Benami Act - supremacy of Section 238 of the Insolvency & Bankruptcy Code, 2016

Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 - provisional attachment under The Benami Transactions (Prohibition) Act, 1988 (as amended) - conflict between IBC and special statutes - Whether provisional attachment of immovable property under the Benami Act is barred by the moratorium under Section 14 of the IBC - HELD THAT: - The Tribunal examined whether the IBC moratorium prevents authorities from proceeding under a special statute to effect provisional attachment. Having considered submissions and relevant precedents relied upon by the parties, the Tribunal accepted that laws operating in different fields (special statutes) permitting attachment or forfeiture are not necessarily rendered inoperative by the IBC moratorium. The Tribunal also noted that where a statute contains its own procedure and remedies for attachment, challenge to such attachment must ordinarily follow the procedural code of that statute rather than be subsumed into IBC proceedings. On that basis, the impugned provisional attachment under the Benami Act was not held to be automatically barred by Section 14 of the IBC.

Attachment under the Benami Act is not per se prohibited by the moratorium under Section 14 of the IBC in the facts of this case.

Maintainability of IBC applications to challenge attachments under special statutes - jurisdictional competence to challenge attachment orders under the Benami Act - procedural hierarchy under special statutes - Whether the Resolution Professional / Liquidator could maintain MA(IBC)/05(CHE)/2020 and MA(IBC)/543(CHE)/2022 before the Adjudicating Authority (NCLT) to challenge Benami Act attachments - HELD THAT: - The Tribunal held that the challenge to provisional attachment effected under the Benami Act must be attempted under the Benami Act's inbuilt procedure and remedies. The Appellate Tribunal observed that the NCLT is not the appropriate forum to adjudicate the correctness of attachments effected under the Benami Act and that invoking IBC provisions (such as Section 32A or Section 60(5)) to circumvent the special statute's procedural code was impermissible. The Tribunal emphasised that the Applicant cannot supplant or avoid the procedural hierarchy prescribed by the Benami Act and that an application before the Adjudicating Authority was therefore misconceived and not maintainable.

The miscellaneous applications filed before the Adjudicating Authority to challenge the Benami Act attachment were not maintainable and are dismissed.

Supremacy of Section 238 of the Insolvency & Bankruptcy Code, 2016 - interaction of competing non obstante clauses - Whether the IBC (by virtue of Section 238) overrides the Benami Act so as to permit the Resolution Professional to ignore or vacate attachments effected under the Benami Act within the liquidation process - HELD THAT: - While submissions were made invoking the overriding effect of Section 238 of the IBC, the Tribunal analysed the matter in light of the nature and scope of the Benami Act and the procedural remedies it provides. The Tribunal concluded that mere invocation of Section 238 does not authorize the Resolution Professional to bypass the specific procedure for challenging Benami attachments under the Benami Act. The Tribunal treated the Benami Act as a self contained special statute for attachment and remedy and held that the IBC does not enable the Adjudicating Authority to assume jurisdiction to decide upon the correctness of such attachments outside the Benami Act's framework.

Section 238 of the IBC does not operate so as to render the Benami Act's attachment procedure inapplicable or to confer jurisdiction on the Adjudicating Authority to entertain challenges that must be decided under the Benami Act.

Final Conclusion: The Company Appeal (AT)(INS) No.292/2022 is dismissed as devoid of merit. The miscellaneous applications MA(IBC)/05(CHE)/2020 and MA(IBC)/543(CHE)/2022 before the Adjudicating Authority were held not maintainable and are dismissed; the Tribunal declined to entertain substantive challenges to provisional attachment under the Benami Act in IBC proceedings.

Approval of resolution plan under Section 31 of the Insolvency and Bankruptcy Code - binding effect and extinction of claims on approval of a resolution plan - declaratory effect of the 2019 amendment to Section 31

Approval of resolution plan under Section 31 of the Insolvency and Bankruptcy Code - binding effect and extinction of claims on approval of a resolution plan - declaratory effect of the 2019 amendment to Section 31 - Validity of the Adjudicating Authority's approval of the resolution plan and the legal consequence of such approval for claims not included in the plan. - HELD THAT: - The Appellate Tribunal considered the challenge to the Adjudicating Authority's order approving the resolution plan. The Tribunal relied on the decision of the Hon'ble Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. & Ors., which holds that once a resolution plan is approved under Section 31(1), the claims provided in the resolution plan stand frozen and binding on the corporate debtor and all stakeholders, and claims not part of the approved plan stand extinguished. The Supreme Court further held that the 2019 amendment to Section 31 is clarificatory and declaratory, and that statutory dues and other claims not included in the plan prior to approval are extinguished. Applying that legal principle, the Tribunal found the appeal was covered by Ghanashyam Mishra and Sons and that there was no merit in upsetting the Adjudicating Authority's approval of the resolution plan. [Paras 8, 9]

The Adjudicating Authority's order approving the resolution plan is affirmed and the appeal is dismissed.

Final Conclusion: Appeal dismissed; the NCLT order approving the resolution plan is affirmed in view of the Supreme Court precedent that an approved resolution plan binds stakeholders and extinguishes claims not incorporated in the plan.

Liquidator's fee as part of liquidation cost - payment of liquidator's fee upon occurrence of receipts and disbursements - application of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016 - effect of sanction of scheme of compromise and arrangement on liquidation process - duty to hand over books, assets and management on scheme implementation - judicial review of adjudicating authority's order for perversity or illegality

Payment of liquidator's fee upon occurrence of receipts and disbursements - liquidator's fee as part of liquidation cost - application of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016 - Whether the liquidator's fees were immediately payable on sanction of the scheme or only payable upon occurrence of the events of actual receipts and disbursals at specified percentages. - HELD THAT: - The Tribunal examined the Adjudicating Authority's interpretation of Regulation 4 read with Regulation 2(ea) of the IBBI (Liquidation Process) Regulations, 2016 and the orders sanctioning the scheme. The Adjudicating Authority had earlier quantified the liquidator's fee (by applying Regulation 4 as it stood prior to amendment) but recorded in the impugned order that payment of the liquidator's fees becomes due only upon occurrence of the events of actual receipts and disbursals and not otherwise. Having considered the scheme, the Regulation and the Adjudicating Authority's orders (including directions that the liquidator act as an independent observer), the Tribunal found no infirmity or illegality in the Adjudicating Authority's conclusion that fees are payable on the basis of actual receipts/disbursals at the specified percentages and not payable immediately merely because the scheme was sanctioned. The Tribunal therefore declined to interfere with the Adjudicating Authority's determination on the manner and timing of payment of fees. [Paras 45, 46, 47, 52]

The Adjudicating Authority's conclusion that the liquidator's fees are payable only upon occurrence of the events of actual receipts and disbursals at the specified percentages is upheld and not interfered with.

Duty to hand over books, assets and management on scheme implementation - effect of sanction of scheme of compromise and arrangement on liquidation process - Whether the liquidator had to hand over the reins of management and relevant books and records to the scheme proponents following sanction of the scheme, and what relief (if any) should be granted for non handover. - HELD THAT: - The Tribunal noted the Adjudicating Authority's observations that the liquidator had failed to hand over the management and specified books and records after sanction of the scheme and that withholding such handover was improper. Taking into account the paramount interest of the corporate debtor and the Adjudicating Authority's directions, the Tribunal directed the liquidator to hand over the books of accounts and other records listed in the impugned order within one week from receipt of the judgment copy, reiterating that the liquidator should not withhold possession on account of disputed fees. The direction flows from the finding that management and possession ought to have been handed over upon implementation of the sanctioned scheme and that continued retention by the liquidator was impermissible. [Paras 46, 47, 48, 53]

The liquidator is directed to hand over the specified books of accounts and related records to the scheme proponents within one week; withholding possession on account of the claimed fees is not permitted.

Judicial review of adjudicating authority's order for perversity or illegality - Whether the present appeal discloses any arguable case warranting interference with the Adjudicating Authority's order dated 20.07.2020. - HELD THAT: - After considering the pleadings, the orders of the Adjudicating Authority, and the parties' submissions, the Tribunal concluded that the appellant had not made out any case on law or facts to warrant interference. The Tribunal observed the appellant's failure to comply with the Adjudicating Authority's directions and found the appeal to be frivolous and vexatious. Accordingly, the Tribunal dismissed the appeal while noting no order as to costs. [Paras 28, 52, 54]

The appeal is dismissed as frivolous and vexatious for want of merit; no costs awarded.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's determination that liquidator's fees are payable only upon actual receipts and disbursals at the specified percentages, directed the liquidator to hand over the specified books and records within one week, and dismissed the appeal as frivolous and vexatious without costs.

Corporate Insolvency Resolution Process - Operational debt and default - Admission under Section 9(5) of IBC, 2016 - Service of demand notice under Section 8 - Absence of dispute and compliance with Section 9(3)(b) - Jurisdiction of Adjudicating Authority - Appointment of Interim Resolution Professional - Deposit to meet IRP expenses - Moratorium under Section 14

Operational debt and default - Admission under Section 9(5) of IBC, 2016 - The application under Section 9 was admissible on the basis that an operational debt existed and default had occurred. - HELD THAT: - The Tribunal examined the work order, invoice and Form 5 to ascertain the existence and quantum of operational debt. The invoice dated 13.04.2021 and particulars in Part IV, Form 5 established the principal claim and contractual interest. The Tribunal found that the payment deadline elapsed (default occurred) and noted the corporate debtor's correspondence acknowledging receipt of the bill and inability to pay. Having regard to the documentary record and the admitted position in the corporate debtor's email, the Tribunal concluded that the debt was due and payable and that default had occurred, warranting admission of the Section 9 application under Section 9(5) of the Code. [Paras 11, 12, 15, 16]

Application under Section 9 admitted as debt is established and default has occurred.

Service of demand notice under Section 8 - Absence of dispute and compliance with Section 9(3)(b) - Sufficient service of the Section 8 demand notice and absence of any notice of dispute by the corporate debtor were established for the purposes of Section 9. - HELD THAT: - The record included the statutory demand notice in Form 3 dated 20.09.2021, postal receipts, tracking report and MCA master data indicating receipt by the corporate debtor. The applicant filed the requisite affidavit under Section 9(3)(b) stating that no notice of dispute had been given by the corporate debtor. The corporate debtor's email did not constitute a protest or a formal disputed claim but an acknowledgement with a request for time. On this basis, the Tribunal was satisfied that the procedural prerequisites for filing under Section 9 were met and that no bona fide dispute barred admission. [Paras 7, 14, 15]

Service and compliance with Section 9(3)(b) established; no notice of dispute preventing admission.

Jurisdiction of Adjudicating Authority - The Tribunal had jurisdiction to entertain the application. - HELD THAT: - The corporate debtor's registered office was shown to be located in Ahmedabad, Gujarat State as per the Master Data on record. The Tribunal being situated at Ahmedabad was therefore the appropriate forum to try the Section 9 application, and no challenge to territorial competence was raised or established. [Paras 13]

Tribunal has jurisdiction to entertain and try the application.

Appointment of Interim Resolution Professional - The proposed Interim Resolution Professional was appointed subject to the stated condition. - HELD THAT: - The applicant nominated Mr. Arpan Maheshkumar Shah as IRP and filed his specific consent in Form 2 together with the disclosures required under the Insolvency Regulations. The Tribunal appointed the nominee as IRP on the condition that no disciplinary proceedings are pending against him, relying on the consent and disclosures on record as satisfying the requirements for appointment. [Paras 17]

Nominee Mr. Arpan Maheshkumar Shah appointed as Interim Resolution Professional, subject to absence of disciplinary proceedings.

Deposit to meet IRP expenses - Moratorium under Section 14 - Operational Creditor directed to deposit funds for IRP expenses and moratorium under Section 14 was declared upon admission. - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a sum to meet the IRP's expenses in accordance with the Insolvency Regulations, specifying timeframe and that the amount would be adjusted by the Committee of Creditors as accounted by the IRP. Consequent to admission of the Section 9 application, the statutory moratorium envisaged under Section 14(1) was declared to apply, with the Tribunal noting that the provisions of Sections 14(2) to 14(4) would remain in force during the moratorium. [Paras 18, 19]

Operational Creditor to deposit the directed sum for IRP expenses; moratorium under Section 14 declared operative on the corporate debtor.

Final Conclusion: The Section 9 application was admitted: the Tribunal found the operational debt and default established, service and procedural prerequisites satisfied, and there being no disputing notice, appointed the nominated IRP subject to verification, directed a deposit to meet IRP expenses and declared the statutory moratorium under Section 14.

Condonation of delay - binding nature of government circulars - threshold for revenue impact governing appellate forum - refund with statutory interest

Condonation of delay - Delay in filing the appeals was condoned. - HELD THAT: - The Court accepted the appellant/revenue's reliance on orders of the Supreme Court in In Re: Cognizance for Extension of Limitation to explain the period from 15.03.2020 to 02.10.2021. Having regard to the substantial portion of the delay falling within the timeframe affected by COVID restrictions, the Court exercised its discretion to condone the delay and permit the appeals to proceed. [Paras 5]

Delay condoned.

Binding nature of government circulars - threshold for revenue impact governing appellate forum - Appeals were dismissed because the revenue involved in each appeal was below the threshold prescribed in binding circulars, making the appeals non-maintainable before the Tribunal. - HELD THAT: - The Court observed that the instructions/circulars dated 17.08.2011, 26.12.2014 and 22.08.2019 are binding on the appellant/revenue. It accepted the respondent's contention that the revenue impact in each appeal falls below the prescribed threshold in those circulars. In view of the binding effect of those circulars and the admittedly sub-threshold revenue, the Court found it unnecessary to examine the preliminary contention that appeals under the exclusionary part of Section 35G might lie with the Supreme Court, and directed dismissal of the appeals. [Paras 6, 7]

Appeals dismissed as the revenue involved is below the threshold prescribed in binding circulars.

Refund with statutory interest - Refund claimed by the respondent/assessee was directed to be expedited by the revenue, with statutory interest. - HELD THAT: - Noting that the refund sought by the respondent had been pending for a long time, the Court directed the appellant/revenue to expedite remittance of the monies claimed as refund together with statutory interest, thereby requiring immediate administrative action to give effect to the dismissal and the respondent's entitlement. [Paras 8]

Revenue directed to expedite payment of the refund with statutory interest.

Final Conclusion: Delay in filing the appeals was condoned for the COVID-affected period; because the revenue impact in each appeal is below the threshold specified in binding government circulars, the appeals were dismissed; the revenue is directed to promptly pay the respondent's refund along with statutory interest.

Demand based solely on Form 26AS and third party information - onus on Revenue to prove evasion with reliable evidence - pre show cause consultation under Master Circular No.1053/02/2017 CX - failure to comply with departmental instructions vitiates proceedings - taxability of works contract services and applicability of exemption notification

Demand based solely on Form 26AS and third party information - onus on Revenue to prove evasion with reliable evidence - taxability of works contract services and applicability of exemption notification - Sustainability of the service tax demand confirmed on the basis of amounts reflected in Form 26AS and ledger/financial statements without independent investigation or examination of relevant records - HELD THAT: - The Tribunal held that the Department relied predominantly on entries in Form 26AS, ledger, profit and loss account and balance sheet to frame and confirm the demand, and did not undertake independent investigation to establish that taxable services were rendered or to collect corroborative documents from the governmental recipients of the works. The Commissioner confirmed demand on the ground that invoices/bills correlating receipts with the nature of work were not produced. The Tribunal concluded that the Department failed to discharge the burden of proving evasion with reliable evidence and that a clear analysis of the assessee's activity was necessary before confirming service tax demand. Because the impugned order did not examine the nature and taxability of the works or consider the exemption claimed under the relevant notification, the demand confirmed in the impugned order was held to be legally unsustainable. [Paras 7]

Demand based solely on Form 26AS and related financial entries without adequate investigation or proof does not sustain confirmation of service tax; impugned demand set aside on merits.

Pre show cause consultation under Master Circular No.1053/02/2017 CX - failure to comply with departmental instructions vitiates proceedings - Validity of the show cause notice issued without undertaking the mandatory pre SCN consultation required by the Board's instructions and Master Circular - HELD THAT: - The Tribunal examined the Master Circular and related instructions which mandate pre show cause consultation by the adjudicating authority in cases involving demands above the specified threshold, as a mechanism of consultation and trade facilitation. Having found that the instruction was not complied with in the present case, and relying on precedents where non adherence led to setting aside of SCNs, the Tribunal held that departmental instructions are binding on officers and that issuance of SCN in violation of these instructions renders the proceedings non est. Consequently, the show cause notice and orders based thereon could not survive. [Paras 8, 9]

Show cause notice issued in breach of the mandatory pre SCN consultation requirement is vitiated and cannot be sustained; SCN and consequential order set aside.

Final Conclusion: The appeal is allowed; the show cause notice and the impugned order are set aside as unsustainable both on merits (demand premised solely on Form 26AS/third party data without adequate proof) and for procedural infirmity (non compliance with mandatory pre SCN consultation); consequential relief, if any, to follow as per law.

Intellectual property service - transfer of right to use trade mark / brand name - contract manufacturing / job work model - economic surplus / business profits not taxable as service - CENVAT credit admissibility and nexus under Rule 6 - extended period of limitation and penalties

Intellectual property service - transfer of right to use trade mark / brand name - contract manufacturing / job work model - economic surplus / business profits not taxable as service - Whether the appellants rendered intellectual property service by permitting CBUs/TMUs to affix their brand names and by deputing personnel, thereby attracting service tax under Section 65(105)(zzr) for the period in dispute - HELD THAT: - The Tribunal examined the contractual scheme governing tie-up manufacture, licensing and usership and held that the effective control, risk and rewards of the IMFL manufactured at CBUs/TMUs remained with the brand owners. On a holistic reading of the agreements the CBUs/TMUs were restricted to manufacture on behalf of the brand owners, could not exploit the marks commercially and received fixed bottling/retention charges; the surplus accrues to the brand owner. Applying the principle that substance prevails over form and following relevant precedents, the Tribunal concluded that there was no transfer or temporary leasing of intellectual property nor any grant of effective control to the CBUs/TMUs which would amount to rendering of an intellectual property service. The economic surplus retained by the brand owner was held to be business profit (not taxable as intellectual property service), and the Department's claim was based on an incorrect surmise. Consequently the demand for service tax on the alleged intellectual property service was not sustained. [Paras 16, 17, 18, 19, 20]

Demand of service tax on alleged intellectual property service set aside; appellants not liable for service tax on the disputed amounts.

Valuation of taxable service - economic surplus / business profits not taxable as service - If intellectual property service had been held taxable, what should be the value of the taxable service (2% of Net Sale Realization v. entire amount paid by CBUs/TMUs) - HELD THAT: - The Tribunal observed that since it has concluded that no intellectual property service was rendered by the appellants, the question of valuation does not survive and becomes redundant. The Revenue's contention that entire amounts should be taxed was not examined on merits because the foundational finding on taxability was adverse to the Department. [Paras 12, 20]

Valuation issue rendered academic and no demand to be sustained on that basis.

CENVAT credit admissibility and nexus under Rule 6 - Admissibility of CENVAT credit availed by the appellants and correctness of recovery of CENVAT credit claimed - HELD THAT: - The Tribunal noted that the Commissioner found absence of evidence establishing nexus between inputs/input services and any dutiable output service, and deficiencies in records and compliance with procedural requirements under Rule 6. Given the factual and documentary nature of the enquiry-whether particular inputs/input services were used for the (alleged) output service and whether proper records and procedure under the CENVAT Credit Rules were followed-the Tribunal found it appropriate to remit the matter to the original authority. The remand is for fresh consideration of eligibility, nexus and procedural compliance based on evidence and records; the Tribunal directed completion of remand proceedings within twelve weeks. [Paras 21, 22, 23]

Demand of CENVAT credit recovery remanded to original authority for fresh consideration on evidence and records within 12 weeks.

Extended period of limitation and penalties - Whether extended period of limitation and penalties under the Finance Act are applicable in the present cases - HELD THAT: - The Tribunal, having held that no intellectual property service liability was made out, found that the demand and penalty consequences flowing from that demand could not be sustained. The appellants also pointed to prior ambiguities and earlier departmental notices and judicial proceedings bearing on notice and knowledge; in view of the primary decision on taxability being against the Department, the imposition of penalties and invocation of extended limitation were set aside. [Paras 2, 10, 23]

Extended period and penalties set aside along with the service tax demand.

Final Conclusion: Appeals by the appellants are partly allowed by setting aside the service tax demand and corresponding penalties; revenue appeals dismissed; the question of CENVAT credit is remanded to the original authority for fresh adjudication within twelve weeks; valuation issue is rendered academic.

Entitlement to interest under Section 35FF of the Central Excise Act - interest payable from date of deposit until date of refund - applicable rate of interest at 12% per annum - precedential application of Sandvik Asia Ltd. - refund of pre-deposit with consequential interest

Entitlement to interest under Section 35FF of the Central Excise Act - interest payable from date of deposit until date of refund - refund of pre-deposit with consequential interest - Claim for interest on pre-deposit under Section 35FF awarded from date of deposit until date of refund. - HELD THAT: - The Tribunal examined applications for refund of amounts pre-deposited pursuant to stay directions and subsequent successful appeals setting aside adjudication. Relying on earlier Division Bench and Single Member Bench decisions of this Tribunal, and applying the principle in Sandvik Asia Ltd. as followed by those benches, the Tribunal held that when an assessee succeeds in appeal the statutory scheme under Section 35FF entitles the assessee to interest on the pre-deposit from the date the amount was deposited until the date the refund is granted. The Tribunal rejected the view that interest should be confined to a later period and found that interest is payable for the entire period beginning with the deposit made under the stay order through to refund, as the successful outcome gives rise to the claim for consequential interest. [Paras 7, 8]

Allowed; appellants entitled to interest under Section 35FF from date of deposit until date of grant of refund.

Applicable rate of interest at 12% per annum - precedential application of Sandvik Asia Ltd. - Rate of interest payable on refunded pre-deposit fixed at 12% per annum. - HELD THAT: - The Tribunal applied its earlier precedents which followed the Supreme Court principle in Sandvik Asia Ltd. and the subsequent High Court affirmation in the challenge to a Tribunal order, concluding that the correct rate for interest under Section 35FF in these circumstances is 12% per annum. The Tribunal noted that some authorities or adjudicating orders had applied a lower rate, but directed that the balance interest be calculated and paid at 12% p.a. from deposit to refund. [Paras 7, 8]

Allowed; interest to be calculated and paid at 12% per annum.

Refund of pre-deposit with consequential interest - Direction to adjudicating authority to pay the balance interest within a specified period. - HELD THAT: - Having determined entitlement and rate, the Tribunal directed the Adjudicating Authority to grant the balance amount of interest as modified by the Tribunal's order. The authority was given a time-bound direction to make the payment of the recalculated interest on the refunded pre-deposit amount. [Paras 8, 9]

Directed; Adjudicating Authority to grant balance interest within 45 days of receipt/service of order.

Final Conclusion: Appeals allowed; appellants entitled to interest under Section 35FF from date of deposit till date of refund at 12% p.a.; Adjudicating Authority directed to pay the balance interest within 45 days.

Breach of principles of natural justice - quashing and remand for de novo consideration - requirement to furnish material relied upon - right to personal hearing before adjudication/rectification - duty to pass reasoned orders addressing submissions - imposition of personal costs on erring officer - administrative accountability and departmental action

Breach of principles of natural justice - quashing and remand for de novo consideration - Assessment and rectification orders were passed without affording principles of natural justice and therefore are vitiated and liable to be set aside and remanded. - HELD THAT: - The Court found that the assessing officer relied upon an investigation report and railway records which were not furnished to the petitioner despite requests and that the rectification application was rejected without granting the personal hearing mandated by law. The assessment order contains cryptic reasons and does not explain why the documents sought were not supplied; the rectification order likewise fails to record any opportunity of hearing or to address the judgment relied upon by the petitioner. For these failures, the orders under the Central Sales Tax Act, 1956 and the Maharashtra Value Added Tax Act, 2002 dated 30th March 2019 and the rectification order dated 26th August 2019 are set aside and the matters remitted for de novo consideration to an officer other than the original adjudicating officer. [Paras 6, 8, 10]

Impugned assessment and rectification orders quashed and remanded for de novo consideration to a different officer for the tax period 2014-2015.

Requirement to furnish material relied upon - right to personal hearing before adjudication/rectification - duty to pass reasoned orders addressing submissions - On remand, the assessing authority must furnish all documents relied upon, afford personal hearing with advance notice, permit written submissions, and pass a reasoned order within specified timelines. - HELD THAT: - The Court directed that all documents relied upon in the show cause notice, including the investigation report, be provided to the petitioner within two weeks of upload of this order; the petitioner then has two weeks to file further reply/submissions. A fresh assessment under both CST and MVAT Acts shall be completed within twelve weeks thereafter. Before passing any order, the authority must give personal hearing with at least seven working days' advance notice; the petitioner may thereafter file written submissions within three days. Any order passed must deal with every submission made and be reasoned. The Court expressly refrained from expressing any view on the merits. [Paras 5, 11, 12]

Mandatory disclosure of documents, prescribed hearing procedure and timelines ordered; merits left open for fresh adjudication.

Imposition of personal costs on erring officer - administrative accountability and departmental action - Costs are imposed personally on the adjudicating officer for failure to observe rule of law and the Registry/AGP are directed to forward the order for possible departmental action. - HELD THAT: - Applying the principle that officers who act arbitrarily or breach principles of natural justice may be held accountable, the Court ordered the officer who passed the impugned orders to pay costs of Rs.25,000 to the PM CARES Fund within two weeks and to file a compliance affidavit. The Court further directed that a copy of the order be forwarded by the AGP to the Commissioner of Sales Tax for consideration of departmental action and by the Registry to the CBIC, Department of Revenue, Ministry of Finance, for information and necessary action. [Paras 13, 14, 15, 16]

Officer to pay personal costs to PM CARES and compliance/forwarding of the order for departmental consideration directed.

Final Conclusion: Impugned assessment and rectification orders for the tax period 2014-2015 are quashed for breach of the principles of natural justice and remitted for de novo consideration to a different officer; the adjudicating authority must furnish relied-upon documents, afford personal hearing with specified timelines, pass a reasoned order, and the officer responsible is directed to pay personal costs and the matter is referred for possible departmental action.

Power to direct interim compensation under Section 143A - Recovery of interim compensation as if it were a fine - Right to cross-examination of prosecution/complainant witness - Statutory exclusivity of prescribed method of exercise of power

Right to cross-examination of prosecution/complainant witness - Power to direct interim compensation under Section 143A - Denial of the accused's right to cross-examine the complainant on account of non-deposit of interim compensation directed under Section 143A. - HELD THAT: - The Court examined Section 143A as a scheme which empowers a trial court to direct interim compensation and prescribes the manner and period for payment. While Sub section (5) provides a remedy for recovery of unpaid interim compensation by treating it as a fine, the provision does not confer any power to impose other disabilities such as foreclosing the accused's statutory right to cross-examine a witness. The Court held that an order denying the accused the opportunity to cross-examine because of non-payment of interim compensation goes beyond the powers conferred by Section 143A and is therefore impermissible. Having found that the right to cross-examine was closed, the courts below committed an illegality requiring interference. [Paras 12, 14, 15]

Orders depriving the accused of the right to cross-examine the complainant for non-deposit of interim compensation are illegal; the conviction orders premised on such denial were set aside and the complaint restored for fresh proceedings allowing cross-examination.

Recovery of interim compensation as if it were a fine - Statutory exclusivity of prescribed method of exercise of power - Whether failure to pay interim compensation permits imposition of alternate disabilities or remedies beyond those provided in Section 143A. - HELD THAT: - Relying on established principles that where a statute prescribes a method for exercise of power that method is exclusive, the Court held that the Legislature has provided a specific mode of dealing with non-payment - recovery as if it were a fine under Sub section (5). Consequently, courts cannot invent or apply other sanctions not contemplated by the provision. The statutory scheme contemplates payment, recovery as fine, and adjustment at final disposal; it does not authorize closure of defence rights as an alternative penal or coercive measure. [Paras 12, 13, 14]

The remedy stated in Section 143A(5) is the permissible mode for dealing with non-payment; other disabilities not contemplated by the statute cannot be imposed.

Power to direct interim compensation under Section 143A - Interim directions as to deposit and disposition of amounts in the Registry of this Court and remand for trial after permitting cross-examination. - HELD THAT: - In exercise of appellate supervisory jurisdiction the Court restored the complaint to the Trial Court, directed that the accused be permitted to cross-examine the complainant and directed deposit of the interim compensation in accordance with Section 143A. The Registry was ordered to transfer the specified interim amount to the Trial Court to be kept in deposit and to make over any residual sum deposited in this Court to the accused, subject to such orders as the Trial Court may pass in the proceedings thereafter. The Court clarified that no adjudication on merits had been made and that the matter was to proceed afresh on the reopened opportunity to cross-examine. [Paras 9, 15, 16, 17]

Complaint restored to Trial Court; accused to be allowed to cross-examine complainant; direction given for deposit and transmission of interim compensation to the Trial Court; merits to be decided afresh.

Final Conclusion: The convictions and orders passed by the courts below were set aside because the accused was wrongly deprived of the right to cross-examine; the complaint is restored to the Trial Court for permitting cross-examination and fresh disposal, with directions for deposit and transmission of interim compensation in accordance with Section 143A.