TaxTMI Updates e-Newsletter
Aug 26,2023

Regular bail under Section 439 Cr.P.C. - pendency of other criminal cases not sole ground for denial of bail - custodial period as a factor in grant of bail - triability by Magistrate and stage of trial as bail considerations - conditions of bail including surrender of passport and periodic reporting to SHO

Regular bail under Section 439 Cr.P.C. - pendency of other criminal cases not sole ground for denial of bail - custodial period as a factor in grant of bail - triability by Magistrate and stage of trial as bail considerations - Grant of regular bail to the petitioner in FIR No. 4 dated 06.01.2019. - HELD THAT: - The Court found that the petitioner was not specifically alleged to be the beneficiary of the fraud but was said to have registered a firm on documents obtained from its proprietor and at the behest of a co-accused. The petitioner had undergone custody for over one year and eleven months and the trial was at an initial stage. Reliance was placed on the principle that pendency of several criminal cases against an accused cannot, by itself, justify denial of bail. All offences are triable by a Magistrate and conclusion of trial may take considerable time; continued custody therefore served no meaningful purpose. Applying these considerations, the Court exercised its jurisdiction under Section 439 Cr.P.C. to enlarge the petitioner on bail while imposing conditions to secure his attendance and prevent interference with the investigation and trial.

Petitioner released on bail subject to furnishing bail/surety bonds and compliance with specified conditions including surrender of passport, periodic reporting to the SHO, prohibition on influencing witnesses, and other such conditions as the trial Court may require.

Final Conclusion: Bail petition allowed; petitioner ordered to be released on furnishing bonds and subject to enumerated conditions, including passport surrender and periodic reporting to the SHO, with liberty to the State to move for cancellation if petitioner violates conditions or engages in further criminality.

Provisional attachment of bank accounts - Section 83(2) of the Central Goods and Services Tax Act, 2017 - petition rendered academic - interdict on operation of bank account

Provisional attachment of bank accounts - Section 83(2) of the Central Goods and Services Tax Act, 2017 - interdict on operation of bank account - The provisional attachment orders (including the last order dated 05.08.2022) have ceased to be operative after one year under Section 83(2) of the CGST Act, rendering the petition academic, and the bank is directed not to interdict operation of the petitioner's accounts on the basis of those provisional attachments. - HELD THAT: - The Court observed that the Commissioner's last provisional attachment order dated 05.08.2022 is more than one year old and therefore, in terms of Section 83(2) of the CGST Act, is no longer operative. Having found that the operative effect of the provisional attachment orders has lapsed, the petition no longer raises a live controversy. In consequence, the Court disposed of the petition by directing the concerned bank not to block or otherwise interdict operation of the petitioner's bank accounts on account of any of the specified provisional attachment orders. The Court clarified that if any fresh provisional attachment order is passed in future, the petitioner would remain at liberty to make an appropriate application. [Paras 4, 5, 6]

Petition rendered academic; bank directed not to interdict operation of the petitioner's accounts on account of the listed provisional attachment orders; liberty reserved to petitioner if further provisional attachment is passed.

Final Conclusion: The petition was disposed of as academic because the last provisional attachment order had lapsed after one year under Section 83(2) of the CGST Act; the bank is directed not to restrict operation of the petitioner's accounts on the basis of those provisional attachment orders, and the petitioner may apply afresh if any new provisional attachment is made.

Requirement of specific reasons in a Show Cause Notice - right to fair opportunity of reply and personal hearing - invalidity of adjudicatory order passed on non specific Show Cause Notice - remand for fresh consideration and reasoned order

Requirement of specific reasons in a Show Cause Notice - invalidity of adjudicatory order passed on non specific Show Cause Notice - The impugned Show Cause Notice dated 10.06.2022 did not disclose specific grounds and the cancellation order dated 22.06.2022 passed pursuant thereto could not be sustained. - HELD THAT: - The Court found that the Show Cause Notice merely stated a generic proposition of "Non compliance of any specified provisions in the GST Act or the Rules made thereunder" without identifying which provisions were alleged to have been violated. A Show Cause Notice must specify the reasons for the proposed action so as to enable the noticee to make a meaningful response. Because the notice failed to indicate the statutory violations relied upon, it was incapable of eliciting any meaningful response and the consequent order cancelling the petitioner's GST registration, which relied solely on the petitioner's non response and non appearance, could not be sustained. For these reasons the impugned Show Cause Notice and the cancellation order made pursuant thereto were set aside. [Paras 4, 5, 6, 7]

The Show Cause Notice dated 10.06.2022 and the cancellation order dated 22.06.2022 are set aside.

Right to fair opportunity of reply and personal hearing - remand for fresh consideration and reasoned order - The order dated 10.06.2022 rejecting the petitioner's own application for cancellation of GST registration with effect from 30.04.2022 was unsustainable and required remand for fresh consideration. - HELD THAT: - The Court observed that the order rejecting the petitioner's cancellation application purported to rely on non response to a notice and non appearance for personal hearing, yet there was no communication of any personal hearing to the petitioner. The rejection order appeared auto generated and was unsigned, and internally inconsistent in stating that the petitioner's reply was both not received and examined. In view of these defects, the order rejecting the cancellation application was set aside and the matter remitted to the concerned officer to consider afresh. The petitioner was permitted to file documents already produced in these proceedings and any further documents in response to the notice dated 17.05.2022 within two weeks, and the Adjudicating Authority was directed to pass a reasoned order after affording an opportunity of hearing. [Paras 8, 9, 10, 11]

The order dated 10.06.2022 rejecting the cancellation application is set aside and the matter is remanded for fresh consideration; petitioner allowed to file documents within two weeks and the authority to pass a reasoned order after hearing.

Final Conclusion: The petition is disposed of by setting aside the impugned Show Cause Notice and the retrospective cancellation order, and by setting aside and remanding the earlier rejection of the petitioner's cancellation application for fresh consideration with liberty to file documents and after affording opportunity of hearing; pending application disposed of.

Stay of recovery on deposit - non-constitution of appellate tribunal - statutory appeal under Section 112 of the B.G.S.T. Act - deposit of 20 percent as condition for interim relief - requirement to file appeal upon constitution of the Tribunal

Stay of recovery on deposit - deposit of 20 percent as condition for interim relief - non-constitution of appellate tribunal - Petitioner entitled to statutory stay of recovery under Sub-Section (9) of Section 112 of the B.G.S.T. Act upon deposit of 20 percent of the remaining disputed tax (in addition to earlier deposit), by reason of non-constitution of the Tribunal. - HELD THAT: - The Court applied the principle that a taxpayer should not be deprived of the statutory benefit of stay merely because the State has not constituted the appellate Tribunal. Observing the State's own notification under Section 172 acknowledging non-constitution, the Court followed the reasoning adopted in Angel Engicon Private Limited and directed that, subject to verification of the deposit, the petitioner be extended the benefit of stay under Sub-Section (9) of Section 112. The stay was held to operate so that recovery of the balance amount and any steps taken for recovery shall be deemed stayed while the condition of deposit is satisfied. The Court also emphasised that the interim relief is granted because the Tribunal's non-constitution is attributable to the respondent-Authorities and cannot be visited upon the petitioner.

Stay of recovery granted subject to deposit of 20 percent of the remaining disputed tax (in addition to earlier deposit); recovery and steps for recovery deemed stayed pending satisfaction/verification of that condition.

Requirement to file appeal upon constitution of the Tribunal - statutory appeal under Section 112 of the B.G.S.T. Act - Petitioner must file the statutory appeal under Section 112 of the B.G.S.T. Act once the Tribunal is constituted and the President or State President enters office; failure to do so will permit the respondent-Authorities to proceed in accordance with law. - HELD THAT: - The Court balanced equities by making the interim stay contingent upon the petitioner pursuing the statutory remedy when the appellate forum becomes available. The stay was characterised as not open-ended; the petitioner was given liberty to present or file the appeal observing statutory requirements after constitution of the Tribunal, and warned that omission to file the appeal within any period to be specified upon constitution would leave the respondents free to resume action.

Petitioner required to file appeal under Section 112 after constitution of the Tribunal; absence of such appeal within the specified period permits respondents to proceed.

Verification of deposit - stay of recovery on deposit - Verification of the petitioner's deposit of the 20 percent sum was directed before conferring the stay benefit. - HELD THAT: - The Court recorded the petitioner's assertion of having deposited the 20 percent sum and directed that the fact of such deposit be verified. The grant of the statutory stay was made explicitly 'subject to verification' of the additional deposit (or its deposit if not already made), thereby remanding the limited factual question of payment/verification to the competent authority for confirmation before the stay operates.

Verification of the 20 percent deposit to be carried out; stay benefit to be extended only upon such verification (or upon deposit if not already made).

Final Conclusion: Writ petition disposed of by granting interim stay of recovery (subject to verification/deposit of 20 percent in addition to earlier deposit), with direction that the petitioner must file the statutory appeal under Section 112 once the Tribunal is constituted; if no appeal is filed within the period to be specified upon constitution, respondents may proceed in accordance with law.

Violation of principles of natural justice - faceless assessment procedure - opportunity of personal hearing by video-conferencing - remand for fresh assessment after opportunity of hearing - administrative guidance to tax officers to assist taxpayers

Violation of principles of natural justice - faceless assessment procedure - Validity of the assessment order dated 18.03.2023 and the notice of penalty dated 18.03.2023 in light of alleged denial of opportunity of hearing under the faceless assessment regime. - HELD THAT: - The Court found that the assessment and penalty notices were prejudicial to the petitioner because the opportunity of personal hearing by video-conferencing, sought repeatedly and uploaded on the e-portal, was not effectively provided. The petitioner, a government-aided college not conversant with e-proceedings, suffered from a technical failure which prevented availing the hearing; the assessing authority did not produce incontestable evidence that the petitioner's request for hearing was considered or that the defect was remedied. In these circumstances the assessment proceeded in breach of the principles of natural justice and did not comply with the procedural protections required under the faceless assessment framework. The Court further noted the relevance of administrative guidance that officers should assist taxpayers in claiming reliefs and in securing hearings where procedural difficulty is evident. [Paras 13, 14, 15]

Impugned assessment order and penalty notice set aside for violation of natural justice and non-compliance with faceless assessment procedure.

Opportunity of personal hearing by video-conferencing - remand for fresh assessment after opportunity of hearing - Whether the matter should be remitted for fresh consideration and the scope of directions to be given on remand. - HELD THAT: - The Court remanded the matter to the assessing officer with a clear directive to afford the petitioner an opportunity of hearing through video-conferencing by providing a proper link and to pass a fresh assessment order in accordance with law. The remand is intended to cure the procedural defect identified - failure to provide an effective hearing - and to permit the assessing officer to reconsider the issues on merits after hearing the petitioner. The Court directed compliance with the statutory and administrative procedures, taking into account the petitioner's difficulty with e-proceeding facilities. [Paras 15]

Matter remanded to the assessing officer to pass fresh assessment after giving opportunity of hearing via video-conferencing.

Final Conclusion: The writ petition is allowed: the assessment order dated 18.03.2023 and the penalty notice dated 18.03.2023 are set aside and the matter is remanded to the assessing officer to pass a fresh assessment in accordance with law after providing the petitioner an opportunity of hearing by video-conferencing; no order as to costs.

Non-application of mind - reassessment proceedings under Section 148 of the Income-tax Act, 1961 - proceedings under Section 148A(b) - show-cause and corrigendum - order under Section 148A(d) - failure to consider documentary evidence - quashing of notice and order for lack of due consideration

Failure to consider documentary evidence - order under Section 148A(d) - reassessment proceedings under Section 148 of the Income-tax Act, 1961 - quashing of notice and order for lack of due consideration - Validity of the notice under Section 148A(b) (and its corrigendum), the consequent order under Section 148A(d) and the notice under Section 148 issued for Assessment Year 2018-19 in respect of alleged undisclosed capital gain. - HELD THAT: - The Assessing Officer had issued a show-cause notice under Section 148A(b) alleging non-disclosure of sale consideration and lack of details regarding reinvestment; the petitioner responded with her return and attached copies of the registered sale deed and evidence of investment in bonds. The record demonstrates that these documents were part of the e-proceedings attachments and that the return itself disclosed the sale consideration and claimed deductions. Despite this, the Assessing Officer proceeded to issue a corrigendum to extend the compliance date and thereafter passed an order under Section 148A(d) and issued a notice under Section 148 rejecting the petitioner's contentions on grounds contrary to the record - namely, that the sale deed and bank statements were not provided. The Court found that the Assessing Officer failed to notice and consider the documents available on record, amounting to non-application of mind. Because the rejection of the petitioner's response and issuance of the reassessment notice were founded on an erroneous factual premise contrary to the material on record, the impugned show-cause notice, corrigendum, order under Section 148A(d) and notice under Section 148 could not be sustained and were set aside. The Court granted liberty to the Assessing Officer to take further action in accordance with law, thereby leaving open the AO's right to proceed if proper consideration is given to the record. [Paras 3, 4, 5, 6, 7]

The show-cause notice dated 25.03.2022, its corrigendum dated 01.04.2022, the order dated 08.04.2022 under Section 148A(d) and the notice dated 08.04.2022 under Section 148 are set aside for non-application of mind and failure to consider documentary evidence; liberty granted to the Assessing Officer to proceed in accordance with law.

Final Conclusion: Writ petition allowed; impugned notices, corrigendum and order in relation to Assessment Year 2018-19 quashed for non-application of mind, subject to the Assessing Officer's liberty to act afresh in accordance with law.

Condonation of delay - sufficient cause - liberal construction of limitation in favour of the State - administrative/official delay and bureaucratic laxity - accrual of substantive right on expiry of limitation

Condonation of delay - sufficient cause - administrative/official delay and bureaucratic laxity - accrual of substantive right on expiry of limitation - Application under Section 260A(2A) for condonation of delay of 498 days in filing appeal by the revenue was not established to show sufficient cause. - HELD THAT: - The court examined the condonation application and found it to be a cyclostyled proforma devoid of any particularised factual matrix explaining the 498-day delay. The averments - that there was bona fide delay, that earnest efforts were made, that official channeling and compliance requirements caused inadvertent delay, and that copies had to be obtained - were held to be nebulous, unparticularised and insufficient to show circumstances beyond the control of the revenue. While acknowledging that courts may give some leeway to governmental bodies, the court reiterated that liberal construction of limitation cannot be extended into routine condonation where no plausible explanation is furnished and where a substantive right accrues to the other party on expiry of the limitation period. Given the prolonged delay, the absence of any disclosure of file movement or time taken in obtaining records, and the apparent habitual laxity in some government departments, the court concluded that the revenue had failed to demonstrate "sufficient cause" for condonation. Application dismissed and the appeal held time barred. [Paras 9, 10, 11, 14, 15]

Delay condonation application dismissed for want of sufficient cause; appeal dismissed as time barred.

Final Conclusion: The High Court dismissed the revenue's application for condonation of 498 days' delay under Section 260A(2A) for lack of sufficient cause and consequently dismissed the appeal as barred by limitation.

TP adjustment - reject AMP adjustment using BLT method - adjustment for advertising, marketing and promotion (AMP) - Bright Line Test - Arm's Length Price (ALP) determination - disallowance of depreciation on de-capitalized assets

TP adjustment for advertising, marketing and promotion (AMP) - Bright Line Test - Arm's Length Price (ALP) determination - Whether ITAT was justified in holding that the Bright Line Test was not mandated in law and hence impermissible ? - whether AMP cannot be inferred to be international transaction in the absence of any agreement, arrangement or understanding between the taxpayer and its AE ? - HELD THAT: - The Court observed that questions A to F - challenging the Tribunal's treatment of AMP, the use of the Bright Line Test, characterization of AMP as an "international transaction", reliance on Sony Ericsson and other authorities, and related contentions - are covered against the revenue by the decision of a coordinate bench in Bausch & Lomb Eyecare (India) Pvt. Ltd. [2015 (12) TMI 1332 - DELHI HIGH COURT] and a subsequent coordinate-bench decision in the respondent's own matter. In view of these binding coordinate-bench precedents on the same points, the Court held that no substantial question of law arises for its consideration and declined to entertain those questions. [Paras 9, 10, 11, 12, 14]

Questions A to F are covered by existing coordinate-bench decisions and do not raise any substantial question of law; they are not entertained.

Disallowance of depreciationon de-capitalized assets - HELD THAT: - The Court noted that the specific contention regarding deletion of the disallowance of depreciation is covered by a coordinate-bench decision in M/s Xerox India Ltd.[2022 (11) TMI 1391 - DELHI HIGH COURT] Relying on that precedent, the Court concluded that question G does not present any new or substantial question warranting High Court adjudication. [Paras 13, 14]

Question G is covered by existing coordinate-bench precedent and does not raise a substantial question of law.

Final Conclusion: The Court condoned the delays in filing and re-filing the appeal; having found that all substantive questions raised (A-G) are governed by coordinate bench precedents adverse to the revenue, it held that no substantial question of law arises and accordingly closed the appeal.

Determination of fair market value of unquoted equity shares under Rule 11UA - Applicability of amended Rule 11UA formula to the valuation date/assessment year - Inclusion of immovable property value (adopted/assessed for stamp duty/circle rate) in FMV computation - Addition to income under section 56 on account of difference between declared consideration and FMV

Determination of fair market value of unquoted equity shares under Rule 11UA - Applicability of amended Rule 11UA formula to the valuation date/assessment year - Inclusion of immovable property value (adopted/assessed for stamp duty/circle rate) in FMV computation - Whether the Assessing Officer erred in applying the amended formula of Rule 11UA (effective from 01.04.2018) - which brings into computation the value of immovable property adopted for stamp duty - to determine the fair market value of unquoted shares for AY 2014-15 and consequent addition under section 56. - HELD THAT: - The Tribunal found, and this Court concurs, that the AO applied the version of Rule 11UA in force w.e.f. 01.04.2018 - which expressly adds components such as the value adopted/assessed by a government authority for stamp duty (circle rate) to compute the fair market value of unquoted shares - to the valuation for AY 2014-15. For the year under consideration the formula then operative required computation based on the book value of assets shown in the balance-sheet and did not mandate inclusion of immovable property value as adopted for stamp duty. By applying the post 2018 formula, the AO (and the CIT(A) up to the point the error persisted) erroneously enhanced the per share value to Rs.45.72 and made an addition representing the difference between that figure and the consideration paid. The Tribunal corrected that error by setting aside the CIT(A)'s order which had refused deletion of the addition. The High Court finds no infirmity in the Tribunal's conclusion that the amended Rule 11UA was not applicable to AY 2014-15 and therefore the addition based on that formula could not be sustained. [Paras 14, 15, 16, 17]

The Tribunal's order setting aside the CIT(A)'s refusal to delete the addition is upheld; the AO's application of the post 2018 formula of Rule 11UA to AY 2014-15 was erroneous and the addition based on that misapplication cannot stand.

Final Conclusion: The revenue's appeal is dismissed; no substantial question of law arises and the Tribunal's order correcting the misapplication of Rule 11UA for AY 2014-15 is maintained.

Interest on refund under section 244(1A) - Exclusion of period of delay attributable to the taxpayer from interest under section 244A(2) - Rectification under section 154 and consequential computation of refund and interest

Interest on refund under section 244(1A) - Exclusion of period of delay attributable to the taxpayer from interest under section 244A(2) - Rectification under section 154 and consequential computation of refund and interest - Whether the assessee was entitled to interest on the refund determined by the rectification order and whether any period could be excluded as delay attributable to the assessee for denying interest. - HELD THAT: - The Tribunal noted that the rectification order under section 154 had determined a refund in favour of the assessee and that, as a consequence, the interest component was required to be calculated and paid in accordance with section 244(1A). The NFAC refused interest relying on the principle in section 244A(2) that periods of delay attributable to the taxpayer may be excluded from the interest period. The Bench found that the Department's attribution of delay to the assessee (on account of the assessee obtaining a new PAN instead of correcting status) did not justify withholding interest where the rectification order had already quantified the refund. The determinative reasoning was that once the refund was determined by the section 154 order, the interest payable as per law should have been computed and paid; there was no material establishing a failure by the assessee that would justify excluding any period under section 244A(2). Accordingly, the NFAC's dismissal of the appeal on that ground was set aside and the AO was directed to compute and remit interest as per law. [Paras 3, 5]

The NFAC order refusing interest was set aside and the AO directed to calculate and pay the interest on the refund in accordance with law.

Final Conclusion: Appeal allowed; NFAC's disallowance of interest set aside and matter remitted to the AO for computation and remittance of interest in terms of the rectification order.

Revaluation of stock-in-trade does not give rise to capital gains - section 45 applies only to transfer of a capital asset - no distribution/transfer of assets on conversion of firm into company under Part IX - conditions of section 47(xiii) not attracted where there is no distribution of capital assets - taxation of income accrual must be in the hands of the taxable entity (avoidance of double taxation)

Revaluation of stock-in-trade does not give rise to capital gains - section 45 applies only to transfer of a capital asset - Deletion of addition made as Short Term Capital Gain on account of revaluation surplus of land held as stock-in-trade - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the land in question was held as stock-in-trade by the partnership and continued to be so held by successor companies; revaluation of such inventory merely increased book values and did not constitute a transfer of a capital asset capable of attracting section 45. Reliance was placed on precedents holding that revaluation does not amount to a sale to oneself and that section 45(3) and section 45 generally apply only to capital assets. The Tribunal also noted that any income, if at all, arising from such revaluation would be a matter for assessment of the firm (the separate taxable entity) and not the partners individually, and deleted the addition made by the AO. [Paras 7, 9, 10]

Addition treated as Short Term Capital Gain on account of revaluation surplus of land held as stock-in-trade deleted.

No distribution/transfer of assets on conversion of firm into company under Part IX - conditions of section 47(xiii) not attracted where there is no distribution of capital assets - Whether conversion of the partnership firm into a company and crediting of revaluation reserve resulted in a transfer/distribution attracting section 45/section 47(xiii) - HELD THAT: - The Tribunal accepted the factual finding that there was no tangible physical transfer of the land to partners nor any extinguishment of rights in their favour; the revaluation reserve was reflected and later adjusted in corporate books (including conversion into unsecured loan) but did not amount to distribution of capital assets. Following a line of High Court and Tribunal decisions, the Tribunal held that absent distribution or other legal correlatives constituting a transfer, section 45(4) and the conditionalities in section 47(xiii) do not get attracted on mere conversion of a firm into a company under Part IX. [Paras 7, 9]

Conversion of firm into company did not amount to distribution/transfer attracting section 45 or section 47(xiii); consequential additions deleted.

Taxation of income accrual must be in the hands of the taxable entity (avoidance of double taxation) - Whether partners could be separately assessed for capital gain when the firm (separate taxable entity) was the appropriate entity for any taxability arising from revaluation - HELD THAT: - The Tribunal observed that if any income accrued by reason of revaluation, that issue pertains to the firm as a separate taxable entity. Imposing tax in the hands of partners in addition to the firm would amount to double taxation. The Tribunal followed precedents and factual findings that no withdrawal from capital accounts occurred and that the books showed no taxable distribution to partners, therefore partners could not be taxed on the revaluation surplus. [Paras 7, 9]

Partners cannot be separately assessed for capital gains in respect of the revaluation surplus when the firm is the appropriate taxable entity; addition in partners' hands set aside.

Final Conclusion: The Tribunal, following its factual findings and several higher court and tribunal precedents, confirmed the CIT(A)'s order deleting the additions made by the Assessing Officer as Short Term Capital Gains arising from revaluation of land held as stock-in-trade and dismissed the Revenue appeals.

Reopening of assessment-validity of notice under section 148/147 (borrowed satisfaction and non-application of mind) - Borrowed satisfaction - Quashing of reassessment proceedings for non-application of mind - Penalty under section 271(1)(c) - consequential deletion upon quashing of reopening

Reopening of assessment-validity of notice under section 148/147 (borrowed satisfaction and non-application of mind) - Borrowed satisfaction - Quashing of reassessment proceedings for non-application of mind - Reopening of assessment for AY 2010-11 was invalid and is quashed. - HELD THAT: - The reasons recorded for reopening relied solely on information from the Investigation Wing and failed to identify or record independent satisfaction by the Assessing Officer; the reasons also contained an erroneous reference to assessment year (top portion stating A.Y. 2009-10 and later A.Y. 2010-11), evidencing non-application of mind. The AO did not bring the purported dubious accounts on record in the reasons nor explain how the information demonstrated that income had escaped assessment. On these facts the recorded satisfaction is a borrowed satisfaction and the reassessment proceedings under sections 147/148 are invalid. The Tribunal declined to remit the matter given the smallness of the amount involved and quashed the reopening. [Paras 7]

Reopening of assessment quashed for want of independent application of mind; proceedings under sections 147/148 set aside.

Penalty under section 271(1)(c) - consequential deletion upon quashing of reopening - Penalty imposed under section 271(1)(c) is deleted as consequential to quashing of reassessment. - HELD THAT: - The penalty confirmed by the First Appellate Authority flowed from the reassessment that has been quashed. Once the reopening and consequent assessment are found invalid, the statutory basis for the penalty collapses and the penalty cannot stand independently. The Tribunal therefore directed deletion of the penalty. [Paras 8]

Penalty under section 271(1)(c) deleted as consequential to quashing of reassessment.

Final Conclusion: Both appeals allowed: reassessment for AY 2010-11 quashed for borrowed satisfaction and non-application of mind; consequential penalty under section 271(1)(c) deleted.

Rectification of a mistake apparent from record under section 154 - computation of limitation and exclusion of the COVID period pursuant to Supreme Court order - duty of revenue authorities not to take advantage of assessee's ignorance and to assist in securing reliefs - acceptability of rectification proceedings in lieu of revised return where order sought to be amended is a rectified order

Computation of limitation and exclusion of the COVID period pursuant to Supreme Court order - filing of appeal within extended limitation period - Whether the appeal filed before the National Faceless Appeal Centre was barred by limitation - HELD THAT: - The Tribunal accepted the appellant's submission that, in computing limitation, the period between 15.03.2020 and 28.02.2022 is excluded pursuant to the Supreme Court's order relied on by the appellant, and that therefore the appeal filed on 26.02.2022 fell within the extended period allowed to taxpayers. The NFAC's conclusion that the appeal was time barred was reversed on this basis. [Paras 8]

The NFAC's finding of limitation was incorrect and the appeal is to be treated as filed within time.

Rectification of a mistake apparent from record under section 154 - duty of revenue authorities not to take advantage of assessee's ignorance and to assist in securing reliefs - acceptability of rectification proceedings in lieu of revised return where order sought to be amended is a rectified order - Whether the assessing officer and CIT(A) erred in rejecting the rectification applications under section 154 as time barred and in holding there was no mistake apparent from the record - HELD THAT: - Having considered the return, the appellant's affidavit and the chronology of rectification applications filed before CPC and the jurisdictional AO, the Tribunal found that the speculative business income had been entered in two different columns in the return and was twice reflected in the CPC intimation although the appellant's return (and the ITR utility) captured the income once. The Tribunal held that this double inclusion in the intimation amounted to a mistake apparent on the record which was rectifiable under section 154. Relying on the Supreme Court's interpretation of 'order' in rectification contexts and on the duty of revenue officers to assist taxpayers in securing reliefs, the Tribunal concluded the rectification applications were filed within the permissible period and that the AO and CIT(A) should have accepted and adjudicated them on merits. The Tribunal therefore set aside the orders rejecting rectification and directed the AO to compute the correct income. [Paras 7, 8, 9]

The rectification applications were timely and the mistake was apparent from the record; the AO/CIT(A) erred and the AO is directed to recompute income as per law.

Final Conclusion: The appeal is allowed: the Tribunal held the appeal was filed within the extended period of limitation and that the double taxation in the intimation was a mistake apparent from record rectifiable under section 154; the orders rejecting rectification are set aside and the AO is directed to compute the correct income.

Section 14A and Rule 8D - Application of mixed funds / appropriation principle - Disallowance in relation to exempt income - Revisionary jurisdiction under section 263 - Erroneous order prejudicial to the interest of the revenue - Faceless assessment and adequacy of inquiry

Revisionary jurisdiction under section 263 - Erroneous order prejudicial to the interest of the revenue - Faceless assessment and adequacy of inquiry - Whether the Principal Commissioner of Income-tax was justified in invoking jurisdiction under section 263 to revise the assessment order dated 28.01.2021. - HELD THAT: - The Tribunal held that the jurisdiction under section 263 can be exercised only if the AO's order is shown to be both erroneous and prejudicial to the interest of the revenue. Mere difference of opinion or possibility of further enquiries does not render an assessment order erroneous. The assessment in the present case was completed under the faceless e-assessment scheme after notices under sections 143(2) and 142(1) and on consideration of the replies and documents furnished by the assessee. The Tribunal accepted the assessee's submissions and authorities emphasising that where the AO has made enquiries and taken a plausible, judicial view, revision under section 263 is impermissible. The PCIT did not point to any material defect showing total lack of inquiry or that the view taken by the AO was wholly unsustainable in law. In these circumstances the exercise of revisionary jurisdiction was held to be unjustified and the section 263 order was quashed. [Paras 7, 8, 10]

Invoking section 263 was not justified; the revisionary order is quashed.

Section 14A and Rule 8D - Disallowance in relation to exempt income - Application of mixed funds / appropriation principle - Whether disallowance under section 14A read with Rule 8D was rightly called for in the assessment. - HELD THAT: - The Tribunal accepted the factual finding that the assessee's investments were made out of its own funds and that its share capital and reserves substantially exceeded the investments. Reliance was placed upon authorities including decisions recognising the principle that where interest-free (own) funds are sufficient to meet investments, investments are to be presumed to have been made from such funds and not from interest-bearing borrowings. The AO examined the material on record, recorded that submissions (including that no interest was paid on funds utilised for investment) were verified and accepted the returned income without modification. The PCIT failed to demonstrate that the AO's view was unsustainable in law or that there was nexus between borrowings and the impugned investments; nor was there material to show indirect expenses were incurred in relation to the exempt income. On these grounds the Tribunal held that no disallowance under section 14A/Rule 8D could be sustained in the facts of this case. [Paras 8, 9, 10]

Proposed disallowance under section 14A/Rule 8D was not sustainable on the record; AO's conclusion was not erroneous or prejudicial.

Faceless assessment and adequacy of inquiry - Disallowance in relation to exempt income - Whether the faceless mode of assessment and the enquiries made by the AO were inadequate so as to render the assessment order liable to revision. - HELD THAT: - The Tribunal noted that the e-assessment was conducted by NFAC involving assessment, technical, review and verification units and that the AO issued specific notices under sections 143(2) and 142(1) raising pointed queries about investments and expenditures in relation to exempt income. The assessee responded with detailed information which the AO recorded as verified in the assessment order. Established precedents were applied to reiterate that mere possibility of additional enquiries or the Principal Commissioner entertaining a different view does not justify invoking section 263. Since the assessment record evidenced inquiries and verification, the Tribunal concluded there was no total lack of inquiry and the PCIT could not substitute her view for the judicial view taken by the AO. [Paras 8, 9, 10]

The inquiries under the faceless assessment scheme were adequate; inadequacy was not established to warrant revision under section 263.

Final Conclusion: The appeal is allowed: the Tribunal quashed the order passed by the Principal Commissioner under section 263 and held that the assessment order dated 28.01.2021 was not erroneous or prejudicial to the revenue on the facts, so that no disallowance under section 14A/Rule 8D was to be directed to be made by reason of the impugned revision.

Deduction under section 80P(2)(a)(i) for credit co-operative societies - Requirement to verify mandatory statutory deposits under Karnataka Souharda Sahakari Act, 1997 - Deduction under section 80P(2)(d) - Net interest taxable under section 56 after allowance of cost of funds - Remand to Assessing Officer for quantification and verification

Deduction under section 80P(2)(a)(i) for credit co-operative societies - Requirement to verify mandatory statutory deposits under Karnataka Souharda Sahakari Act, 1997 - Remand to Assessing Officer for quantification and verification - Interest income from deposits with DCCB and its eligibility for deduction under section 80P(2)(a)(i). - HELD THAT: - The Tribunal recorded that the assessee is a Souharda Co-operative Society registered under the Karnataka Souharda Sahakari Act, 1997 and provides credit facilities to its members. The assessee received interest on bank deposits (FD/RFD) with DCCB. The assessee asserted that certain funds are mandatorily required to be kept with banks under the Karnataka Souharda Sahakari Act, 1997 and that interest on such mandatory deposits should qualify for deduction under section 80P(2)(a)(i). The assessee, however, did not demonstrate the statutory provision, the exact rule, or the quantum of funds mandatorily required to be deposited. The Tribunal therefore remitted the matter to the Assessing Officer to verify whether a statutory requirement exists, to determine the amount of deposits which are mandatorily required to be maintained, and - if found in order - to allow deduction under section 80P(2)(a)(i) only to the extent of interest attributable to such mandatory deposits. Interest on deposits exceeding the statutory requirement was directed not to qualify for deduction under section 80P(2)(a)(i). [Paras 7]

Issue partly allowed: matter remitted to the AO to verify statutory requirement and to allow deduction under section 80P(2)(a)(i) only to the extent of interest attributable to mandatory deposits; interest on deposits in excess of such mandatory requirement will not qualify for deduction.

Deduction under section 80P(2)(d) - Claim for deduction under section 80P(2)(d) in respect of the interest received from co-operative banks. - HELD THAT: - The Tribunal noted the assessee's alternative plea seeking deduction under section 80P(2)(d) for interest received. The assessee had not shown that the interest was received from another co-operative society as required under that clause. On the materials before it, the Tribunal found that the interest was received from a co-operative bank and not from a co-operative society in the sense contemplated by section 80P(2)(d). Accordingly, the alternative claim under section 80P(2)(d) was held to be not sustainable. [Paras 7]

Claim under section 80P(2)(d) dismissed.

Net interest taxable under section 56 after allowance of cost of funds - Remand to Assessing Officer for quantification and verification - Alternative relief that, if deduction under section 80P(2)(a)(i) is not allowable, the assessee is entitled to deduction of cost of funds so that only net interest income is taxable under section 56. - HELD THAT: - Following the reasoning of the Karnataka High Court and applying the principles that when interest income is assessable as 'other income' under section 56 the assessee is entitled to claim proportionate expenditure incurred in mobilising the deposits, the Tribunal held that the assessee is entitled to claim cost of funds. The Tribunal directed remand to the Assessing Officer to determine the net interest income after allowing the appropriate cost/expenditure attributable to earning the interest, granting the assessee reasonable opportunity and requiring production of supporting documents. The Tribunal emphasised that only net interest after such deduction would be taxable under section 56. [Paras 8, 9]

Alternative claim allowed for statistical purposes and remitted to the AO to compute net interest income after deduction of cost of funds/interest expenditure; net amount to be taxed under section 56.

Applicability of decision mutatis mutandis to subsequent assessment year - Whether the reasoning and result in respect of AY 2017-18 apply to AY 2018-19. - HELD THAT: - The Tribunal found the facts for AY 2018-19 to be identical to AY 2017-18 and therefore applied the same decision mutatis mutandis to AY 2018-19. [Paras 11]

Decision for AY 2017-18 applies mutatis mutandis to AY 2018-19.

Final Conclusion: Appeals partly allowed for statistical purposes: the claim for deduction under section 80P(2)(a)(i) is remitted to the Assessing Officer to verify any statutory mandatory deposits under the Karnataka Souharda Sahakari Act, 1997 and to allow deduction only to the extent attributable to such mandatory deposits; the claim under section 80P(2)(d) is dismissed; alternatively, the assessee is entitled to deduction of cost of funds and the net interest income is to be determined by the AO for taxation under section 56; the same result applies to AY 2018-19.

Penalty under Section 272A(2)(e) for failure to furnish return required by Section 139(4A) - Computation of period of default limited to time available under Section 139(4) - Reasonable cause under Section 273B - Ignorance of law is no excuse

Penalty under Section 272A(2)(e) for failure to furnish return required by Section 139(4A) - Reasonable cause under Section 273B - Ignorance of law is no excuse - Validity of imposition of penalty under Section 272A(2)(e) for failure to furnish the return required by Section 139(4A). - HELD THAT: - The Tribunal found on the record that the assessee trust was obliged to furnish its return for A.Y. 2012-13 under subsection (4A) of Section 139 but failed to do so. The assessee's plea of bona fide belief (grounded on its 12A registration and managed by priests/saints unfamiliar with tax law) and subsequent conduct were examined and rejected: registration under Section 12A and prior dealings negated any claim of inability or excusable ignorance, and the assessee filed the return only after issuance of notice under section 148. The Tribunal agreed with the authorities that no convincing reasonable cause within the meaning of Section 273B was established and that ignorance of law is not a defence, therefore the levy of penalty was sustainable subject to limitation on the period of default (treated separately). [Paras 8, 14, 15]

Penalty under Section 272A(2)(e) is attracted and not wholly excused by Section 273B; the appeal is dismissed on merits insofar as liability is concerned.

Computation of period of default limited to time available under Section 139(4) - Penalty under Section 272A(2)(e) for failure to furnish return required by Section 139(4A) - Whether the period for which penalty under Section 272A(2)(e) may be imposed extends beyond the last date permissible for filing a delayed return under Section 139(4). - HELD THAT: - The Tribunal held that the obligation to file under subsection (4A) of Section 139 refers to the periods contemplated by subsection (1) and the extended period in subsection (4). Once the time for filing a delayed return under Section 139(4) has lapsed, filing a return suo motu is not available, and therefore penalty cannot be validly levied for the period after the last date allowed under Section 139(4). The Tribunal followed precedent holding that the period of default for levy under Section 272A(2)(e) must be computed only up to the time limit provided in Section 139(4) and directed recomputation accordingly. [Paras 17, 18, 19]

Penalty period to be restricted and recomputed only up to the last date available for filing under Section 139(4) (held to be up to 31.03.2014 in the facts of this case); appeal partly allowed on this narrow point.

Final Conclusion: The appeal is partly allowed: the Tribunal upholds liability for penalty under Section 272A(2)(e) but directs that the period of default for computing the penalty be restricted to the time available for filing a delayed return under Section 139(4) (up to 31.03.2014), and the assessing officer is directed to recompute the penalty accordingly.

Assessment of gross receipts as income - mistake apparent from record - rectification under Section 154 - deduction of expenses on commercial principles - decline of exemption under sections 11 and 12

Assessment of gross receipts as income - mistake apparent from record - rectification under Section 154 - Assessing the assessee's gross receipts as its income without considering allowable deductions is a mistake apparent from the record and amenable to rectification under Section 154 of the Act. - HELD THAT: - The Tribunal found that after declining the assessee's claim for exemption under sections 11 and 12, the Assessing Officer could not summarily treat the gross receipts as the assessee's income. The total income must be determined in accordance with commercial principles, i.e., after considering the assessee's claim for expenses as debited in the income and expenditure account to the extent allowable under the Act. The omission to apply such principles and to consider deductions rendered the assessment of gross receipts as income a glaring, patent and evident mistake apparent from the record, justifying rectification under Section 154. The Tribunal relied on an identical earlier pronouncement of the ITAT (SMC) Bench, Raipur, which upheld the decline of exemption but directed the AO to consider deductions, and adopted the same approach in the present case. [Paras 11, 12]

The assessment holding gross receipts as the assessee's income without allowing allowable deductions was a mistake apparent from the record and is rectifiable under Section 154.

Deduction of expenses on commercial principles - decline of exemption under sections 11 and 12 - Whether the matter should be remitted to the Assessing Officer for fresh consideration of the assessee's claim for deduction of expenses. - HELD THAT: - Having held that the AO ought to have computed the assessee's income in accordance with commercial principles, the Tribunal restored the case to the file of the AO with a direction to consider the assessee's claim for deduction of expenses as debited in the income and expenditure account, to the extent allowable under the Act. The AO is to give the assessee a reasonable opportunity of being heard and to compute taxable income after examining and allowing such deductions in accordance with law. [Paras 13]

Case restored to the file of the Assessing Officer with a direction to consider and decide the assessee's claim for deduction of expenses, to the extent allowable, after affording a reasonable opportunity of hearing.

Final Conclusion: The appeal is allowed for statistical purposes by holding that the assessment treating gross receipts as income without allowing allowable deductions was a mistake apparent from the record; the matter is restored to the Assessing Officer to compute taxable income after considering deductions as debited in the income and expenditure account in accordance with law.

Charitable purpose - advancement of any other object of general public utility - interpretation of the proviso to Section 2(15) treating receipts above the statutory threshold as non charitable - activity in the nature of trade, commerce or business for a fee or consideration - threshold receipts exception to charitable character - exemption under section 11

Charitable purpose - advancement of any other object of general public utility - activity in the nature of trade, commerce or business for a fee or consideration - threshold receipts exception to charitable character - exemption under section 11 - Whether the assessee trust's letting of the dharamshala constituted activities in the nature of trade, commerce or business so as to attract the proviso to Section 2(15) and justify denial of exemption under section 11 for AY 2011-12. - HELD THAT: - The Tribunal found on facts that the trust, though registered with charitable objects including establishment and maintenance of dharamshala, had let the dharamshala to the public for multifarious commercial purposes (marriages, political, religious and social functions) and admitted bookings to 170 persons with receipts described as booking/cancellation, repair, cleaning, electricity and related charges. The aggregate receipts from these activities exceeded the statutory threshold applicable for the year, and there was no documentary material to show that the charges were merely nominal or strictly cost based. Reliance on the decision of the Apex Court on cost based charging was distinguished on facts because here substantial commercial receipts were generated and not shown to be nominally above cost. Drawing also on precedent treating letting for commercial purposes as business/service, the Tribunal concluded that the proviso to Section 2(15) applied and consequently the claim of exemption under section 11 was rightly declined by the AO and upheld by the CIT(A). [Paras 9, 11, 12]

The Tribunal upheld the AO's and CIT(A)'s finding that the activities were commercial in nature, the proviso to Section 2(15) was attracted as receipts exceeded the threshold, and the exemption under section 11 was correctly denied for AY 2011-12.

Final Conclusion: The appeal is dismissed; the Tribunal affirms the denial of exemption under section 11 for Assessment Year 2011-12 on the ground that the trust's letting of the dharamshala amounted to commercial activity and its receipts exceeded the statutory threshold, thereby attracting the proviso to Section 2(15).

Mandatory issuance of notice under Section 143(2) for completion of reassessment proceedings - validity of assessment completed under Section 143(3) read with Section 147 where notice under Section 143(2) was not issued - non curability of statutory notice defect by deeming provision in Section 292BB - admission of legal grounds at any stage challenging jurisdiction

Admission of legal grounds at any stage challenging jurisdiction - Additional ground challenging non issuance of notice under Section 143(2) was admitted for decision despite being raised at the appellate stage. - HELD THAT: - The Tribunal examined the nature of the additional ground, which challenged the very jurisdiction and validity of the assessment. Relying on settled principles that a legal ground going to jurisdiction may be raised at any stage, the Tribunal observed that the issue was no longer res integra and merited admission. In view of the jurisdictional character of the challenge, the Tribunal permitted the assessee to press the additional ground and proceeded to decide it first. [Paras 20]

Additional ground was admitted and taken up for decision.

Mandatory issuance of notice under Section 143(2) for completion of reassessment proceedings - validity of assessment completed under Section 143(3) read with Section 147 where notice under Section 143(2) was not issued - non curability of statutory notice defect by deeming provision in Section 292BB - Reassessment completed under Section 143(3) read with Section 147 was quashed because no notice under Section 143(2) was issued after receipt of return in response to notice under Section 148; Section 292BB could not cure the absence of the mandatory notice. - HELD THAT: - On verification of records the Tribunal found that no notice under Section 143(2) had been issued after the assessee filed a return in response to the Section 148 notice. The Tribunal held that issuance of the Section 143(2) notice is a mandatory procedural requirement for completion of reassessment proceedings under Section 147/148, since the Assessing Officer must apply his mind and specify particulars of escaped income. The deeming provisions of Section 292BB were considered but rejected as a cure for non issuance of the statutory notice: Section 292BB operates only where a notice was not served in time or in proper manner and the assessee nonetheless appeared or cooperated, and it cannot substitute for the mandatory statutory step necessary for assumption of jurisdiction. Citing the settled position of law that absence of a statutory notice invalidates the proceeding, the Tribunal quashed the reassessment order. [Paras 21, 22]

Reassessment order under Section 143(3) r.w.s. 147 was quashed for failure to issue the mandatory Section 143(2) notice; Section 292BB does not cure this defect.

Final Conclusion: The Tribunal admitted the additional jurisdictional ground and, finding that no notice under Section 143(2) was issued after the return filed in response to the Section 148 notice, quashed the reassessment order under Section 143(3) read with Section 147; consequentially all merits issues in the assessment were rendered academic.

Cursus curiae est lex curiae - practice of Official Liquidator/Administrator filing a report instead of an affidavit - Benami Transactions (Prohibition) Act - applicability and exemption for persons holding in fiduciary capacity - Power of attorney sale and fiduciary relationship between attorney and principal - Application of Sections 88, 91 and 92 of the Indian Trusts Act to characterize fiduciary holding - Prospective operation of judicial decisions on power of attorney sales - Company Court jurisdiction under Sections 446 and 456 (Companies Act) to challenge transactions affecting company property - Temporal limit - Company Court power restricted in respect of transactions completed more than one year prior to presentation of winding up petition - Company Court's power to determine validity of foreign Civil Court decrees presented to it - Requirement of evidence and trial for findings of fraud or misrepresentation - Company Court jurisdiction under Section 10 (Companies Act) to determine title outside ordinary original territorial jurisdiction

Cursus curiae est lex curiae - practice of Official Liquidator/Administrator filing a report instead of an affidavit - Whether an application to set aside a sale may be entertained on the basis of a report filed by the Official Liquidator/Administrator in place of an affidavit and judge's summons. - HELD THAT: - The Court held that the established practice of the Madras High Court permits the Official Liquidator or Administrator to file a signed and sealed report instead of an affidavit accompanied by a judge's summons. The maxim 'Cursus curiae est lex curiae' was applied, and precedent recognising the practice of courts adhering to their established procedures was followed. In consequence, until a new procedure is introduced by competent authority, the practice of receiving reports from Official Liquidators/Administrators must be respected and such applications are entertainable on that basis. [Paras 9, 15]

The practice of the Official Liquidator/Administrator filing a report (instead of an affidavit with a judge's summons) is to be followed; the first question is answered accordingly.

Benami Transactions (Prohibition) Act - applicability and exemption for persons holding in fiduciary capacity - Power of attorney sale and fiduciary relationship between attorney and principal - Application of Sections 88, 91 and 92 of the Indian Trusts Act to characterize fiduciary holding - Prospective operation of judicial decisions on power of attorney sales - Whether the company can be treated as owner of land under the Benami Transactions (Prohibition) Act, 1988 where title remained in the true owners but powers of attorney were given to employees who effected transfers to customers. - HELD THAT: - The Court found that the transactions did not amount to benami transfers because there was no conveyance transferring title to an ostensible owner; instead the original owners executed powers of attorney to their employees who, acting as agents, effected transfers to customers. The relationship between power of attorney holder and principal was held to be fiduciary; combined reading of Sections 88, 91 and 92 of the Indian Trusts Act places the employees and landowners in a fiduciary relation vis-a -vis the company. Section 4(3)(b) of the Benami Act exempts persons holding in a fiduciary capacity, and accordingly the Benami Act did not apply on the facts. Further, relevant Supreme Court decisions on power of attorney sales were held to have prospective effect and did not invalidate bona fide transactions predating those decisions. [Paras 18, 24, 30]

The Benami Act is inapplicable to the described transactions; they are at best power of attorney sales and fall within the fiduciary exemption, so the company cannot be treated as benamidar on these facts.

Company Court jurisdiction under Sections 446 and 456 (Companies Act) to challenge transactions affecting company property - Temporal limit - Company Court power restricted in respect of transactions completed more than one year prior to presentation of winding up petition - Whether, in absence of a petition under Sections 542 and 543, the Company Court may entertain proceedings to question transactions in favour of third parties by way of a company application or whether a civil suit in a competent court is required with permission of the Company Court. - HELD THAT: - The Court held that when a winding up petition is pending and a provisional liquidator is appointed, the Company Court has jurisdiction under Sections 446 read with Section 456 to entertain and determine proceedings relating to transactions affecting the company's property, including transactions alleged to be in favour of third parties. However, that jurisdiction is subject to the temporal limitation that the Company Court's power does not extend to transactions concluded and titles vested in third parties more than one year prior to the presentation of the petition. [Paras 31]

The Company Court has jurisdiction to question such transactions under Sections 446 and 456, subject to the one year temporal limitation prior to the petition.

Company Court's power to determine validity of foreign Civil Court decrees presented to it - Company Court jurisdiction under Sections 446 and 456 (Companies Act) to challenge transactions affecting company property - What is the effect of a Civil Court decree which has attained finality when presented before the Company Court? - HELD THAT: - The Court observed that the Company Court's powers under Section 446 are wide and include the jurisdiction to consider and decide upon the validity of a civil court decree when that decree is presented before the Company Court. Whether such a decree is binding on the company and the official liquidator depends on evidence and matters to be gone into at trial; the Company Court can take evidence and adjudicate the suit or proceeding. [Paras 31]

A final civil court decree may be examined and its validity decided by the Company Court when presented before it; binding effect is a matter for trial and evidence.

Requirement of evidence and trial for findings of fraud or misrepresentation - Company Court's power to determine validity of foreign Civil Court decrees presented to it - Whether, in absence of positive evidence, a finding of fraud and misrepresentation can be recorded without trial solely on the basis of a report of the Administrator/Provisional Liquidator. - HELD THAT: - The Court indicated that although the Company Court has broad powers under Section 446 to entertain and decide proceedings, determinations concerning fraud or misrepresentation require appropriate evidence and are matters to be gone into at trial. The authority of the Administrator/Provisional Liquidator to present reports does not obviate the need for trial and evidence before recording such findings. [Paras 31]

Findings of fraud or misrepresentation cannot be recorded without trial and positive evidence; the Company Court may decide such issues but only after hearing and evidence.

Company Court jurisdiction under Section 10 (Companies Act) to determine title outside ordinary original territorial jurisdiction - Letters Patent treated as parliamentary statute - interaction with Companies Act - Whether the Company Court has jurisdiction to determine title of land situated outside the ordinary original territorial jurisdiction of the High Court in view of Clause 12 of the Madras High Court Letters Patent. - HELD THAT: - The Court held that Section 10 of the Companies Act confers power upon Company Courts to determine title of properties notwithstanding that such properties lie outside the ordinary original territorial jurisdiction of the High Court, when the company is registered within the High Court's jurisdiction. Letters Patent have been treated as having statutory force until replaced by parliamentary statute, and the Companies Act is a parliamentary statute which expressly vests such power in Company Courts. [Paras 31]

The Company Court has jurisdiction to determine title of land outside the Court's ordinary territorial jurisdiction where the company is registered within that High Court's jurisdiction.

Final Conclusion: The Division Bench answered the six referred questions: the Court's established practice permits Official Liquidators/Administrators to file reports in place of affidavits; the transactions in question do not attract the Benami Act and are characterised as power of attorney sales falling within fiduciary exemptions; the Company Court has jurisdiction under Sections 446/456 (subject to the one year limitation) and under Section 10 to determine titles even outside ordinary territorial limits; civil decrees presented before the Company Court can be examined and decided by it; and findings of fraud or misrepresentation require trial and evidence. The matter is remitted to the Learned Single Judge to proceed in accordance with law.

Benami transaction presumption under Section 3(2) of the Benami Transaction (Prohibition) Act - Proof of ancestral nucleus and joint family property - Burden of proof for self-acquisition by a coparcener - Validity and proof of a Will - onus on propounder and suspicious circumstances - Effect of the Hindu Succession (Amendment) Act, 2005 on coparcenary shares

Benami transaction presumption under Section 3(2) of the Benami Transaction (Prohibition) Act - Burden of proof for self-acquisition by a coparcener - Items 1 to 3 (sale deed dated 27.10.1948 in name of Sowdammal) are self-acquisition of T.S. Ramasamy Chettiar and not benami in favour of Sowdammal - HELD THAT: - The Trial Court's finding that though the sale deeds stood in the name of Sowdammal, the consideration was paid by Ramasamy Chettiar and the surrounding evidence (including an endorsement in Ex.A2 and income tax returns Exs.A8-A15) rebutted the statutory presumption under Section 3(2) of the Benami Transaction (Prohibition) Act. The Court accepted the totality of circumstances and oral evidence (notably D.W.1) to conclude the properties were purchased by Ramasamy Chettiar out of his funds for the benefit of the family rather than for Sowdammal alone. Having held the properties to be his self-acquisition, the share computation followed the principles of succession and coparcenary shares under the amended succession law. [Paras 25, 26, 27]

Confirmed that Items 1 to 3 are self-acquisition of Ramasamy Chettiar and not benami; beneficiaries are entitled to shares accordingly

Validity and proof of a Will - onus on propounder and suspicious circumstances - Will dated 05.06.1995 executed by Sowdammal is not proved and is invalid - HELD THAT: - Although the Will was registered and attesting witness (D.W.4) and scribe (D.W.5) were examined, significant discrepancies in signatures (including admitted differences and a missing Tamil letter) and the suspicious circumstance of excluding six children in favour of a daughter-in-law, without adequate explanation or evidence to dispel suspicion, led the Court to conclude the propounder failed to put the Will beyond doubt. The Court reiterates that the propounder must produce evidence to remove suspicious circumstances; absence of such evidence requires leaning in favour of intestate succession among heirs. [Paras 29, 30, 31, 32, 33]

Will not proved; invalid and not binding on other heirs; Sowdammal's share devolves by intestacy under applicable succession law

Proof of ancestral nucleus and joint family property - Burden of proof for self-acquisition by a coparcener - Item 4 (purchased in 1967 in the name of the 2nd defendant) is the separate property of the 2nd defendant and not joint family property - HELD THAT: - The plaintiffs failed to show that the ancestral nucleus (Item 5) generated sufficient surplus income after family expenses to fund the purchase of Item 4. Item 5 being a house in a small town was not shown to have yielded the necessary income. Further, the 2nd defendant, being a junior member in 1967 while the karta was alive, required cogent evidence that the purchase was out of joint funds; the 2nd defendant adduced sales tax returns and assessment orders (Exs.B15, B18-B21) to show independent business income. On this basis, the Trial Court's characterization of Item 4 as the 2nd defendant's separate property is upheld. [Paras 34, 35]

Item 4 is the absolute property of the 2nd defendant; not a joint family asset

Benami transaction presumption under Section 3(2) of the Benami Transaction (Prohibition) Act - Proof of ancestral nucleus and joint family property - Item 6 (purchases in 1990 in the name of the 9th defendant) is the absolute property of the 9th defendant and not liable as joint family property - HELD THAT: - Item 6 was purchased after the Benami Act came into force (post 17.05.1988). Plaintiffs did not demonstrate that the purchase was made out of income from joint family properties nor that the ostensible owner stood in a fiduciary capacity. In absence of evidence to rebut the statutory presumption, the purchase is hit by Section 3 and must be treated as the 9th defendant's separate property. The Court therefore upholds the Trial Court's finding that plaintiffs have no share in Item 6. [Paras 36]

Item 6 belongs absolutely to the 9th defendant; plaintiffs are not entitled to any share

Effect of the Hindu Succession (Amendment) Act, 2005 on coparcenary shares - Decree for partition and shares: plaintiffs entitled to 1/7th share in Items 1-3 and 5 of Schedule 1 and Item 1 of Schedule 2; suit O.S.No.841 of 2007 dismissed - HELD THAT: - Having held Items 1-3 to be self-acquisition of Ramasamy Chettiar and the Will invalid, the share of Sowdammal (previously 1/8th) devolves to her children on intestacy; applying the Hindu Succession (Amendment) Act, 2005, the children are treated as coparceners and the plaintiff is entitled to 1/7th share in the specified schedule items. The Trial Court's decree as to the admitted joint family properties (Item 5 of Schedule 1 and Item 1 of Schedule 2) is affirmed. Consequently, the cross-suit in O.S.No.841 of 2007, which sought to uphold the Will and related reliefs, is dismissed in its entirety. [Paras 27, 33, 36, 37, 38]

Partition decree confirmed in part: plaintiff entitled to 1/7th in Items 1-3 and 5 of Schedule 1 and Item 1 of Schedule 2; O.S.No.841 of 2007 dismissed; parties may seek mensne profits determination in Trial Court

Final Conclusion: Appeals by defendants 2, 9 and 10 dismissed; appeals by plaintiffs allowed in part. Items 1-3 held to be self-acquisition of T.S. Ramasamy Chettiar and, on invalidation of the Will, plaintiff entitled to 1/7th share in Items 1-3 and 5 of Schedule 1 and Item 1 of Schedule 2; Item 4 held to be 2nd defendant's separate property and Item 6 held to be 9th defendant's separate property; suit O.S.No.841 of 2007 dismissed; parties may approach Trial Court for mensne profits; no order as to costs.

Exemption for packaging materials under export-oriented undertaking notification - interpretation of "used in connection with the production or packing" - import of used/second-hand goods and restriction under Foreign Trade Policy - confiscation and imposition of redemption fine and penalty under the Customs Act

Exemption for packaging materials under export-oriented undertaking notification - interpretation of "used in connection with the production or packing" - Whether imported used Enviro-tuff Liner (ETL) liners qualified for exemption under Notification No.52/2003 as packaging material used for manufacture or in connection with production or packing of export goods. - HELD THAT: - The Tribunal recorded that the ETL liners were admitted to be used items serving as liners inside containers to ensure safe transportation of export goods. The notification grants exemption to goods when imported for manufacture for export or for being used in connection with production or packing of goods for export by EOUs. The liners were used solely for facilitating transportation and not for production or packing as envisaged by the notification. Further, the notification does not permit import of used items. Relying on comparable authority where transport equipment used only for transportation was held not to qualify for notification benefit, the Tribunal held that the liners do not fall within the exemption and benefit cannot be extended to used ETL liners. [Paras 5]

Benefit of Notification No.52/2003 not available to the imported used ETL liners; exemption denied.

Import of used/second-hand goods and restriction under Foreign Trade Policy - confiscation and imposition of redemption fine and penalty under the Customs Act - Whether import of the used ETL liners contravened the Foreign Trade Policy making the goods liable for confiscation and whether the confiscation, redemption fine and penalty imposed should be upheld or modified. - HELD THAT: - The Tribunal noted that used ETL liners are second-hand goods and, as per the Foreign Trade Policy (para 2.17), second-hand goods are restricted for import. Import of such restricted second-hand items thus rendered the goods liable for confiscation. The Commissioner(A)'s confiscation, and the demand of duty with interest, were upheld. Applying precedents and principles on quantum of ancillary monetary sanctions, the Tribunal considered proportionality and reduced the redemption fine and penalty to levels it considered reasonable, while confirming the duty demand with interest and upholding confiscation. [Paras 6, 7]

Confiscation and duty demand with interest upheld; redemption fine reduced and penalty reduced to specified lower amounts.

Final Conclusion: The appeal is disposed of by confirming the demand of duty with interest and upholding confiscation of the imported used ETL liners, while reducing the redemption fine and the penalty to the revised amounts; the claim for exemption under Notification No.52/2003 is rejected.

Validity of Load Port Test Certificate - Systematic Sampling as per IS 436 - Provisional assessment under Section 18(b) - Reliability of delayed laboratory reports - Procedural fairness in relying on undisclosed clarification

Validity of Load Port Test Certificate - Provisional assessment under Section 18(b) - Whether the assessing authority could resort to provisional assessment and departmental chemical testing when the importer produced an unchallenged Load Port Test Certificate showing ash content below the threshold. - HELD THAT: - The Tribunal applied the ratio in Tata Chemicals Ltd v CC as cited in the judgment and held that in the absence of any reason or ground advanced to doubt or reject the Load Port Test Certificate, the assessing officer had no jurisdiction to resort to provisional assessment under Section 18(b) to obtain departmental chemical analysis. The decision records that the appellant's claim for exemption was duly supported by a Load Port certificate showing ash below 12% and that no contemporaneous reasons were recorded by the department for distrusting that certificate. Accordingly, the departmental chemical analysis conducted pursuant to provisional assessment was held to be ultra vires the limits of Section 18(b) in such circumstances. [Paras 11, 12, 27]

The departmental exercise of provisional assessment and reliance on its own chemical analysis was impermissible where the Load Port Test Certificate showing ash below 12% stood unchallenged and no reasons to reject it were recorded.

Systematic Sampling as per IS 436 - Whether the departmental test report based on a sample not drawn by systematic sampling under IS 436 is admissible and can be relied upon to deny exemption. - HELD THAT: - The Tribunal found that IS 436 prescribes systematic sampling for coal - dividing the lot into sub-lots, drawing gross samples from each sub-lot and averaging results - and that the Supreme Court has held that where the sample is not drawn as per IS 436 the departmental test report cannot be relied upon. The Show Cause Notice and record indicated that the sample sent to CRCL was a random sample and not in accordance with IS 436. On this basis, and applying the cited authority, the Tribunal held that the departmental test report was not a reliable basis to deny the exemption. [Paras 13, 14, 15, 16, 26]

Test reports based on samples not drawn by the systematic sampling procedure of IS 436 are not dependable and cannot be relied upon to refuse the exemption.

Reliability of delayed laboratory reports - Whether the delay of eleven months in testing the departmental sample and CRCL's admitted limitations affected the reliability of the CRCL test report. - HELD THAT: - The Tribunal accepted the appellant's contention that CRCL tested the sample after an unexplained delay of 11 months, contrary to CRCL's own guidance that testing should be prompt. The Tribunal also noted the appellant's reliance on technical literature showing that prolonged storage or weathering can alter ash content and the contention that CRCL did not have precise instrumentation for ash analysis prior to 2019. In light of the unexplained delay, supporting authority (including Adani Exports) and the absence of authoritative material to show the delay would not affect results, the Tribunal held the delayed CRCL report to be suspect and unreliable. [Paras 18, 19, 20, 21, 27]

The unexplained eleven-month delay in testing and the laboratory's admitted limitations rendered the CRCL test report unreliable for displacing the Load Port certificate.

Procedural fairness in relying on undisclosed clarification - Whether the Deputy Commissioner and Commissioner (Appeals) could rely on a clarification obtained from CRCL behind the appellant's back without disclosing it or affording an opportunity to respond. - HELD THAT: - The Tribunal recorded that the Deputy Commissioner had relied upon a clarification dated 22-10-2013 obtained from CRCL which was not referred to in the Show Cause Notice, not supplied to the appellant, and was procured without giving the appellant an opportunity to respond or cross-examine the signatory. The Tribunal found that reliance on such undisclosed material deprived the appellant of the opportunity to meet the case and was a procedural defect. Coupled with the other substantive infirmities in sampling and delay, this contributed to the conclusion that the impugned demand could not be sustained. [Paras 8, 22, 27]

The departmental reliance on an undisclosed clarification obtained without supplying it to the appellant or affording an opportunity to respond was procedurally improper and prejudicial.

Final Conclusion: The appeal was allowed: the Tribunal held that the departmental actions were vitiated by absence of contemporaneous reasons to reject the Load Port Test Certificate, non compliance with IS 436 sampling, unexplained delay rendering the laboratory report unreliable, and procedural unfairness in relying on undisclosed clarification; the impugned orders were set aside.

Summary order. Special Leave Petitions dismissed; proceedings under Article 226 pending before a Single Judge of the High Court of Delhi and the Court recorded that jurisdictional issues may be addressed before the High Court. Pending applications, if any, disposed of.

Operational debt - claim in respect of the provision of goods or services - nexus with provision of goods or services - earnest money deposit (EMD)

Operational debt - claim in respect of the provision of goods or services - nexus with provision of goods or services - earnest money deposit (EMD) - Whether the earnest money deposit (EMD) paid by the tenderer constitutes an "operational debt" under Section 5(21) so as to sustain a Section 9 application. - HELD THAT: - Section 5(21) defines "operational debt" as a claim in respect of the provision of goods or services. The controlling requirement is that the claim must bear a nexus with the provision of goods or services. While the Supreme Court has held that advances relating to goods or services may fall within this definition where such nexus exists, that principle applies only where the payment is demonstrably made towards goods or services. In the present case the appellant was a mere tenderer whose EMD was paid as part of a bid process and the tender was rejected. The EMD payment was not made towards any supply of goods or provision of services to the respondent, and the contention that, had the tender been accepted, services would have been rendered is speculative and does not establish the requisite nexus. The facts are therefore distinguishable from authorities where advances were paid in the context of an executable contract or project and were thereby linked to provision of services. On these findings the Adjudicating Authority correctly concluded that the EMD does not amount to operational debt and rightly rejected the Section 9 application. [Paras 5, 6, 7, 8]

The rejection of the Section 9 application by the Adjudicating Authority is upheld; the EMD does not constitute operational debt.

Final Conclusion: Appeal dismissed. The Adjudicating Authority correctly found that the earnest money deposit submitted with a rejected tender did not satisfy the statutory requirement of being a claim in respect of the provision of goods or services and therefore did not qualify as operational debt; appellant remains free to pursue any other remedies available in law.

Permission to file Special Leave Petition - placement of affidavit and annexures on record - authentication of court transcript - reassignment of judicial proceedings - administrative communication to Registrar General

Permission to file Special Leave Petition - Permission to file the Special Leave Petitions was granted. - HELD THAT: - The Court granted leave to institute the Special Leave Petitions and entertained the matters for consideration by permitting the filing of the petitions. [Paras 1]

Leave to file the Special Leave Petitions is granted.

Placement of affidavit and annexures on record - authentication of court transcript - Affidavit of the Registrar General placing the note, transcript and CD on record was considered and the transcript was noted to have been authenticated by the Interpreting Officer. - HELD THAT: - Pursuant to this Court's earlier order, the affidavit of the Registrar General of the High Court at Calcutta dated 27 April 2023 was placed on the record. The Court considered the note prepared by Justice Abhijit Gangopadhyay in respect of the transcript and perused the transcript of the interview, which bears authentication by the Interpreting Officer (Original Side) of the Calcutta High Court dated 26 April 2023. The affidavit and annexures were accepted into the record for the purposes of adjudication. [Paras 2]

The affidavit and authenticated transcript were placed on the record and considered by the Court.

Reassignment of judicial proceedings - administrative communication to Registrar General - Pending proceedings in the High Court at Calcutta were directed to be reassigned to another Judge and consequential administrative steps were ordered; the Special Leave Petitions were disposed of. - HELD THAT: - Having considered the note and authenticated transcript, the Court directed that the Acting Chief Justice of the Calcutta High Court reassign the pending proceedings in the case to another Judge, who would be at liberty to take up related applications. The Court further ordered that a copy of this order be communicated by the Secretary General of this Court to the Registrar General of the Calcutta High Court for placement before the Chief Justice on the administrative side. Pending applications were disposed of and the Special Leave Petitions were accordingly disposed of. [Paras 3, 4, 5, 6]

Proceedings to be reassigned to another Judge; order to be communicated to the Registrar General; Special Leave Petitions disposed of; pending applications disposed of.

Final Conclusion: Leave to file the Special Leave Petitions was granted; the affidavit and authenticated transcript placed on record were considered; the Calcutta High Court was directed administratively to reassign the pending proceedings to another Judge and to take consequential steps; the Special Leave Petitions and pending applications were disposed of.

Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) - acceptance of belated payment where bona fide attempt made before scheme deadline - bank/technical failure in RTGS causing re-credit and mismatch in challan - equitable relief to permit payment despite expiry of scheme due to bank error - payment with interest for period of delay

Acceptance of belated payment where bona fide attempt made before scheme deadline - bank/technical failure in RTGS causing re-credit and mismatch in challan - Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) - Petitioner entitled to have payment accepted under SVLDRS despite amount being re-credited on account of bank/RTGS mismatch where a bona fide attempt to pay was made before the scheme's cut-off date. - HELD THAT: - The Court applied the principle that a genuine attempt to pay under the SVLDRS which is frustrated by technical or banking failures cannot be allowed to deprive the petitioner of the benefit of the scheme. Reliance was placed on earlier decisions of this Court which recognized that amounts debited and re-credited due to system or bank errors should not defeat settlement under the scheme (Subramaniya Siva Co-operative Sugar Mills Ltd. ; Jai Guru Cables ). Having regard to those precedents and the material showing that the petitioner initiated RTGS and was debited but the amount was re-credited because of a mismatch in challan and bank-imposed limits, the Court held that the petitioner should be permitted to complete the payment and obtain closure under the scheme, subject to fulfilling other conditions of the scheme and within the time stipulated by the Court. [Paras 9, 10, 11]

Writ petition allowed insofar as respondents are directed to accept the payment from the petitioner if paid within the period specified by the Court and to grant closure under the scheme subject to other scheme conditions.

Payment with interest for period of delay - equitable relief to permit payment despite expiry of scheme due to bank error - Petitioner directed to pay the due amount together with interest at bank rate (7.5% p.a.) for the period from date of re-credit until actual payment, within the time specified, failing which the order will stand revoked. - HELD THAT: - The Court fixed interest at the prevailing bank rate as a measure to compensate for the period during which the sum remained with the petitioner after being re-credited on account of the RTGS mismatch. The payment, together with interest computed from 01.07.2020 until the date of payment, must be made within the period directed by the Court; non-compliance will result in automatic revocation of the relief granted. This condition balances the equitable allowance to remedy a bank-induced failure with protection of public revenue. [Paras 12]

Petitioner to pay the specified amount with interest at 7.5% p.a. from 01.07.2020 until payment, within 45 days from receipt of the order; failure will result in automatic revocation.

Final Conclusion: Writ petition allowed: respondents directed to accept payment under SVLDRS where a bona fide RTGS payment attempt was made but re-credited due to bank error, subject to payment (with interest at 7.5% p.a. from 01.07.2020) within 45 days and fulfilment of other scheme conditions; order to be revoked if payment not made within the stipulated time.

Entry tax liability on purchases from unregistered dealer - consistency of concurrent findings under allied fiscal statutes - finality of uncontested tribunal findings - perverse finding

Entry tax liability on purchases from unregistered dealer - consistency of concurrent findings under allied fiscal statutes - finality of uncontested tribunal findings - Whether the Tribunal was justified in setting aside the levy of entry tax when, in the companion VAT proceedings, purchases from unregistered dealers had been confirmed and that finding was not assailed. - HELD THAT: - The Court held that the Tribunal's conclusion under the Entry Tax Act - that there was no purchase from unregistered dealers and therefore the entry tax could not be levied - was untenable in view of the Tribunal's own concurrent finding in the VAT proceedings that purchases from unregistered dealers had been made. The VAT-related findings, except for purchases from outside the State and imports (which were separately accepted), confirmed the levy insofar as purchases from unregistered dealers were concerned and those confirmed findings were not challenged. The Tribunal's contrary observation under the Entry Tax Act was recorded without discussion or supporting material and amounted to a perverse conclusion. Where a tribunal's earlier finding on closely related tax liability is left unchallenged, a subsequent inconsistent conclusion that negates that liability cannot stand.

Impugned order set aside to the extent of deletion of entry tax; levy of entry tax as assessed by the Assessing Authority is confirmed and the revision is allowed.

Final Conclusion: The revision is allowed: the Tribunal's deletion of the entry tax levy is set aside and the entry tax assessed by the Assessing Authority is confirmed for the assessment year 2013-14.

Quashing of recovery and garnishee notices - interim protection against recovery pending appellate adjudication - stay of proceedings by the Tribunal - awaiting final adjudication before enforcement - remand for fresh consideration - provisional assessment under Section 25 of the TN VAT Act, 2006

Quashing of recovery and garnishee notices - interim protection against recovery pending appellate adjudication - Validity of the Impugned Recovery Notices and the Garnishee notice issued to the sixth respondent in respect of the specified assessment years and months. - HELD THAT: - The Court found that the respondents issued the Impugned Recovery Notice without properly taking into account the stay granted by the Tribunal in the appeals pending for Assessment Years 2007-2008 to 2015-2016. The petitioner had paid the disputed tax for those assessment years and, in respect of certain demands for 2016-2017 and 2017-2018, the matters had been set aside and remitted to the Assessing Officer. On these facts there was no justification for recovering amounts from the sixth respondent/garnishee. Consequently the impugned recovery and garnishee notices were quashed and enforcement was restrained until the appellate and remanded proceedings reach finality. [Paras 8, 9, 10, 11]

Impugned recovery and garnishee notices quashed; respondents restrained from recovering amounts from the garnishee pending final adjudication.

Stay of proceedings by the Tribunal - awaiting final adjudication before enforcement - remand for fresh consideration - provisional assessment under Section 25 of the TN VAT Act, 2006 - Procedural directions as to interim treatment of disputes and scope of remand pending final orders of the Tribunal and departmental revisional fora. - HELD THAT: - The Court recorded that interim orders in respect of penalty had been secured before the Tribunal and that the main appeals in respect of Assessment Years 2007-2008 to 2015-2016 were likely to be heard on 21.07.2023. Proceedings under Section 57 had been remitted by departmental authorities in specified revision petitions, and orders in respect of provisional assessments for January-April 2017 were governed by this Court's earlier orders dated 11.02.2020 and 17.07.2020. In view of these pending and remanded adjudications, the Court directed the respondents to await the final orders of the Tribunal and to act in accordance with the departmental remand orders before enforcing recovery. [Paras 4, 5, 6, 7, 10]

Respondents to await the final order of the Tribunal and to comply with the departmental remand directions; no recovery to be effected until such final adjudication and consequential departmental action.

Final Conclusion: Writ petitions allowed; impugned recovery and garnishee notices quashed and respondents directed to refrain from recovery until final adjudication by the Tribunal and completion of remanded departmental proceedings; no costs.