TaxTMI Updates e-Newsletter
Aug 26,2026

Alternative statutory remedy in disputed questions of fact - Service of show cause and hearing notices - Exercise of writ jurisdiction against an adjudication order where service of the show cause notice, hearing notice and order was disputed

HELD THAT: - The rival assertions concerning service through speed post, e-mail and the web portal raised disputed questions of fact. Since the statutory appellate authority was competent to examine those questions, it could not conclusively be held in writ jurisdiction that the petitioner had been denied an opportunity of hearing. [Paras 5, 6]

The petitioner was relegated to the statutory remedy of appeal; any application for exclusion of the period spent in the writ proceedings under Section 14 of the Limitation Act, 1963, shall be considered by the appellate authority on its own merits and in accordance with law.

Final Conclusion: The writ petition was disposed of without examination of the disputed question of service, leaving the petitioner to pursue the statutory appeal.

Invocation of extended limitation for fraud, wilful misstatement or suppression of facts - Validity of show cause notice to be determined from its own contents - Notice deemed to be issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) read with Madhya Pradesh Goods and Services Tax Act, 2017 (MPGST Act).

Whether a show-cause notice issued after expiry of the limitation applicable to non-fraud cases could be sustained under the extended limitation provision on a bare allegation of fraud or concealment of facts? - HELD THAT: - A notice invoking the extended period must itself disclose the allegations and factual basis from which fraud, wilful misstatement or suppression of facts can be inferred. Its deficiency cannot be cured by assertions in a counter affidavit. The notice merely used the expression "fraud or concealment of facts", without stating how either was inferred or detected, and did not disclose a definite basis for invoking the extended period. The ordinary limitation had already expired, even after exclusion of the period directed in Re: Cognizance for Extension of Limitation [2022 (1) TMI 385 - SC ORDER]. [Paras 5, 8, 10, 11]

The show cause notice was unsustainable and was set aside, with a direction to the State not to pursue further proceedings pursuant to it.

Final Conclusion: The appeal was allowed. The impugned order and the show cause notice were set aside.

GST on assignment of long-term leasehold rights - Transfer of benefits arising from immovable property

Levy of GST on assignment by sale and transfer of long-term leasehold rights in land and building allotted by GIDC - HELD THAT: - The Court held that the controversy was covered by the Coordinate Bench decision [2025 (1) TMI 516 - GUJARAT HIGH COURT]. Assignment of leasehold rights by the lessee to a third-party assignee for consideration constitutes assignment, sale or transfer of benefits arising from immovable property; the assignee becomes the lessee in place of the original allottee. Such a transaction does not fall within the scope of taxable supply under section 7(1)(a) read with clause 5(b) of Schedule II and clause 5 of Schedule III, and is not liable to GST. [Paras 5, 6]

The impugned GST order was quashed and set aside, and the writ petition was allowed.

Final Conclusion: The writ petition was allowed on the basis that assignment of the long-term leasehold rights in question was not subject to GST. The impugned order was quashed and set aside.

Refund claim - binding effect of dismissal of Special Leave Petition - Quashing of appellate order contrary to binding precedent

Validity of the appellate order denying the petitioner's refund claim notwithstanding the decision in Britannia Industries Limited and dismissal of the Revenue's Special Leave Petition against that decision [2024 (7) TMI 1809 - SC ORDER] - HELD THAT: - The appellate authority had proceeded on the basis that the Revenue's Special Leave Petition against Britannia Industries Limited was pending. Since that Special Leave Petition stood dismissed, and the concerned officer tendered an unconditional apology while acknowledging that the relevant High Court order had not been brought to notice, the impugned appellate order could not be sustained. [Paras 6]

The impugned appellate order was quashed and set aside; the petitioner was permitted to utilise the refunded amount retained in fixed deposit pursuant to the interim direction.

Final Conclusion: The writ petition was disposed of by quashing the impugned appellate order in view of the dismissal of the Revenue's Special Leave Petition against the precedent relied upon. The petitioner was allowed to use the amount kept in fixed deposit under the interim order.

GST on assignment of long-term leasehold rights - Transfer of benefits arising from immovable property - taxable supply liable to GST

Levy of GST on assignment by sale and transfer of long-term leasehold rights in land and building allotted by GIDC - HELD THAT: - The Court applied the binding decision in the group of petitions by Court passed in a group of petitions in Gujarat Chamber Of Commerce And Industry & Ors., M/s. Multi Thread Fastners, M/s. Imperial Engineers, Lucid Colloids Ltd., M/s. Metal Plast Engineers [2025 (1) TMI 516 - GUJARAT HIGH COURT] against which the SLP [2026 (7) TMI 1434 - SC ORDER] is dismissed.

Assignment of leasehold rights to a third-party assignee, who becomes the lessee in place of the original allottee, is a transfer of benefits arising from immovable property; it is therefore outside the scope of supply and is not liable to GST. [Paras 5, 6]

The show cause notice and the assessment order levying GST on the assignment transaction were quashed and set aside.

Final Conclusion: The writ petition was allowed by applying the decision holding that assignment of the long-term leasehold rights in question is not subject to GST.

Writ petition challenging the GST show-cause notice and demand order - available statutory appellate remedies - HELD THAT:- The writ petition challenging the GST show-cause notice and demand order was dismissed on the ground of availability of statutory appellate remedies; all grounds were left open to be raised in appeal.

Special statute prevailing over general penal law - Prospective application of substantive penal law - delayed/non-deposit of GST/TDS allegation

Special statute prevailing over general penal law - GST/TDS non-deposit - whether Criminal prosecution for delayed or non-deposit of GST/TDS deducted from payments for Gram Sabha works under the general penal provision, without recourse to the statutory mechanism under the U.P. Goods and Services Tax Act, 2017? - HELD THAT: - The GST enactment constitutes a complete code governing deduction, delayed payment, determination of default, interest, penalty, prosecution and compounding in respect of GST liabilities. Resort to general penal law is impermissible unless the allegations independently disclose the ingredients of a distinct offence. As the FIR and charge sheet alleged only delayed or non-deposit of GST/TDS, without alleging dishonest misappropriation, forgery, fabricated records, cheating or wrongful gain, the matter fell within the GST statutory framework.

The Hon'ble Supreme Court in Sharat Babu Digumarti [2016 (12) TMI 1821 - SUPREME COURT] has recognized the settled principle that where a Special Statute creates a complete mechanism dealing with offences, penalties and prosecution, resort to the general penal law is not permissible in absence of independent ingredients constituting separate offences under the general criminal law.

Thus allegations levelled in the present case are squarely governed by the provisions of the U.P.Goods and Services Tax Act, 2017 and initiation of prosecution solely under Section 316(5) B.N.S., without invoking the statutory mechanism prescribed under the GST Act, appears legally unsustainable. [Paras 13, 14, 15, 16, 17]

The prosecution under Section 316(5) B.N.S. was legally unsustainable; the authorities were left at liberty to proceed under the U.P. Goods and Services Tax Act, 2017 in accordance with law.

Prospective application of substantive penal law - Retrospective invocation of Bharatiya Nyaya Sanhita - Application of Section 316(5) of the Bharatiya Nyaya Sanhita, 2023 to an alleged GST/TDS default pertaining to the financial year 2017-18 - HELD THAT: - The substantive penal law applicable is the law in force when the alleged occurrence took place. Though subsequent investigation may be governed by the procedural law then in force, a subsequently enacted penal provision cannot alter the substantive offence applicable to an earlier occurrence. Section 316(5) B.N.S. was not in force during the financial year 2017-18. [Paras 19, 20, 21, 22]

Registration of the FIR, submission of the charge sheet and cognizance under Section 316(5) B.N.S. could not be legally sustained.

Final Conclusion: The charge sheet, cognizance/summoning order and criminal proceedings against the applicants were quashed. The competent authorities may nevertheless take action under the U.P. Goods and Services Tax Act, 2017 in accordance with its provisions.

Statutory appeal to the GST Tribunal - Availability of the statutory appellate remedy after the GST Tribunal became functional - HELD THAT: - The writ petition had been entertained when the GST Tribunal was not functional. As the Tribunal had commenced functioning at Bhopal, the petitioner was directed to avail the statutory appeal under Section 121 of the GST Act; the amount deposited pursuant to the interim order was permitted to be adjusted against the prescribed pre-deposit. [Paras 2, 3]

An appeal filed before the Tribunal within 30 days was directed to be entertained on merits, with adjustment of the interim deposit towards the pre-deposit requirement.

Final Conclusion: The writ petition was disposed of with liberty to pursue the statutory appeal before the GST Tribunal within the stipulated period, subject to adjustment of the interim deposit towards pre-deposit.

Inter-Commissionerate transfer in Executive Assistant cadre - Separate cadre under Cadre Controlling Authorities - Absence of provision for absorption in transferee Commissionerate -

Entitlement of Executive Assistants to Inter-Commissionerate Transfer where the applicable Recruitment Rules contain no provision for absorption in the transferee Commissionerate - HELD THAT: - The Court held that the policy against Inter-Commissionerate Transfer applied to the Executive Assistant cadre. The petitioners had not shown that the Recruitment Rules governing their cadre differed from those considered in the earlier decisions. As each Cadre Controlling Authority maintains a separate cadre and the Recruitment Rules do not provide for absorption by transfer in another Commissionerate, appointment in the Shillong Commissionerate could not be made through Inter-Commissionerate Transfer.

The Court does not find any infirmity with the observations made by the learned Central Administrative Tribunal, Gauhati Bench that the issue involved in the said O.A. was only decided by the High Court of Kerala in the case of Gulshan Kumar & Ors [2019 (4) TMI 1859 - KERALA HIGH COURT] and in the case of Shri. Khaisonthang & Ors [2026 (5) TMI 1849 - CENTRAL ADMINISTRATIVE TRIBUNAL GUWAHATI] [Paras 13, 14, 15]

The Tribunal's dismissal of the challenge to treatment of the transfers as deemed loan cases and consequent repatriation was upheld.

Final Conclusion: The writ petition was dismissed, the Court finding no infirmity in the Tribunal's order. The petitioner seeking relaxation on medical grounds was left at liberty to make a representation for consideration on its merits.

Mandatory E-Way Bill for transportation of taxable goods - Tax evasion intent from transportation without E-Way Bill

Whether transport of taxable goods without an e-way bill at the time of interception justified tax and penalty under the statutory detention provisions despite subsequent production of the e-way bill? - HELD THAT: - Rule 138(1) mandates furnishing prescribed information and generation of an E-Way Bill before commencement of movement of goods. The E-Way Bill is an integral statutory mechanism for monitoring movement of taxable goods. The subsequently produced E-Way Bill did not cure the breach, since its online generation, unlike a manually issued invoice, is necessary to ensure statutory monitoring and prevent manipulation of accounts. On the facts, transportation without the E-Way Bill established intention to evade tax; the precedents relied upon by the first appellate authority were found distinguishable.

The original order imposing tax and penalty under section 129(3) was rightly passed and was restored.

Final Conclusion: The departmental appeal was allowed. The first appellate order was quashed and the order imposing tax and penalty under section 129(3) was restored.

Penalty for e-way bill lapse in absence of intent to evade tax - Penalty for transportation of motorcycles without an e-way bill at the time of interception, where the e-way bill was generated shortly thereafter and no intention to evade tax was established

HELD THAT: - Though generation of the e-way bill after interception constituted a procedural lapse, the transaction was genuine and traceable through invoices, challans, accounts, bank records, and the engine and chassis numbers of the motorcycles. In the absence of any discrepancy in quantity, value or classification, or material showing suppression, undervaluation, fake documentation, unaccounted goods or intention to evade tax, the lapse was held to be bona fide and procedural rather than an attempt at tax evasion. [Paras 7]

The penalty proceedings were unsustainable; the orders imposing and confirming penalty were set aside, with refund of the deposited amount in accordance with law, subject to verification and statutory requirements.

Final Conclusion: The appeal was allowed and the penalty for the delayed generation of the e-way bill was set aside, as the record did not establish any intention to evade tax.

Classification of Psyllium seeds (Isabgol) - GST exemption under Entry 77 (HSN 12) of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025

Classification of Psyllium seeds procured through APMC auctions and stored in dry ventilated godowns - Isabgol supplied in their natural, raw and unprocessed form as procured through Agricultural Produce Market Committee (APMC) auctions directly from farmers, without undergoing any drying, freezing, crushing or other processing - HELD THAT: - We find that the product “Psyllium seeds” appears at sub-heading 1211 9013. The name against the sub-heading is mentioned as Psyllium seed (Isobgul). Further, the name Plantago psyllium : herbs and seeds also finds mention under the HSN notes of heading 1211. We therefore, find that Psyllium seeds are correctly classifiable under Sub-heading 1211 9013 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975).

Psyllium Seeds (Isabgol) supplied by the applicant can not be said to qualify as “fresh” Isabgol seeds and are not exempted under Entry 87 (HSN 1211) of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025 as “Plants and parts of plants (including seeds and fruits) of a kind used primarily in perfumery, in pharmacy or for insecticidal, fungicidal or similar purpose, fresh or “chilled.” The same are liable to tax @ 5% under Not. No. 09/2025-CT dt 17.09.2025.

Psyllium Seeds (Isabgol) as discussed above does not qualifies as “goods of seed quality” and are exempt from GST under Entry 77 (HSN 12) of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025

Final Conclusion: The application was answered against the applicant on exemption: the Psyllium seeds are classifiable under sub-heading 1211 90 13 but, having been treated as dried at the time of supply, are taxable at 5%.

TDS refund consequent upon assessment and appellate orders - Inapplicability of Form 26B after assessment u/s 201 - Withholding of refund only by a legally valid adjustment order

Entitlement to TDS refunds quantified upon giving effect to assessment and appellate orders, without furnishing Form 26B, and the legality of withholding such refunds on account of outstanding demands - HELD THAT: - Sections 200A and 201 operate in distinct fields: Section 201 concerns assessment of TDS, whereas Section 200A, Rule 31A and Form 26B concern processing and adjustment of TDS statements before assessment. A refund arising upon an assessment under Section 201 or an appellate order becomes a vested and crystallised right, with applicable interest. Such refund cannot be made conditional upon Form 26B and may be withheld or adjusted only under a legally passed order under Section 245. In the absence of any such order, withholding the refund because of demands against the assessee's PAN or sister TANs was untenable, arbitrary and violative of constitutional protections. [Paras 17, 18, 19, 20, 21]

The writ petitions were allowed and the respondents were directed to release the quantified refunds with applicable statutory interest; additional interest was directed in the event of default.

Final Conclusion: The Department could not insist on Form 26B for refunds arising from assessment or appellate orders under Section 201, nor withhold them without a valid adjustment or withholding order under Section 245. The refunds with statutory interest were directed to be paid.

Deductibility of actuarial deficit contributions to approved superannuation funds - Deductibility of actuarial deficit contributions to approved gratuity funds - Employees' provident fund contributions - absence of prescribed due date

Actuarial deficit contributions to approved superannuation fund - Rule 87 ceiling on ordinary annual contributions - Deductibility of contributions to an approved Superannuation Fund made to meet an actuarial deficit beyond the ceiling prescribed for ordinary annual contributions - HELD THAT: - The legal character of a contribution depends upon its purpose. Contributions made to bridge an actuarially determined deficit caused by past funding constraints are ad hoc gap-filling payments, not ordinary annual contributions subject to the Rule 87 ceiling. Applying that ceiling to actuarially necessary funding would compromise the fund's solvency and be contrary to the scheme governing deduction of employer contributions to an approved superannuation fund. [Paras 8]

The deletion of the disallowance of the Superannuation Fund contribution was upheld.

Actuarial deficit contributions to approved gratuity fund - Binding effect of approval of gratuity fund - Deductibility of contributions to an approved Gratuity Fund made to bridge the gap between actuarial liability and fund availability beyond the prescribed annual ceiling - HELD THAT: - A payment made to meet an actuarial shortfall and preserve the capacity of an approved gratuity fund to discharge its obligations is not an ordinary annual contribution subject to the restrictive ceiling. Deduction for employer contributions to an approved gratuity fund is not per se subject to that ceiling; and, while the fund's approval subsists, the Assessing Officer cannot question conformity with the conditions of approval or disregard its approved status in assessment proceedings. [Paras 9, 10]

The deletion of the disallowance of the Gratuity Fund contribution was upheld.

Employees' provident fund contributions - absence of prescribed due date - Disallowance of employees' provident fund and ESI contributions as delayed where the regulations governing the assessee did not prescribe a due date for crediting those contributions - HELD THAT: - Disallowance of employees' contributions can arise only upon failure to credit them by the due date prescribed under the applicable statutory or regulatory regime. The regulations governing the assessee did not prescribe such a date; the date recorded in the tax audit report was generated solely because the e-filing software required a date to be entered. The general due date under the Employees' Provident Fund Scheme was inapplicable, and in the absence of a legally prescribed due date, no delay could trigger disallowance. [Paras 11, 12]

The deletion of the disallowance of employees' PF and ESI contributions was upheld.

Final Conclusion: The revenue's appeal was dismissed, and the Tribunal's deletion of the disallowances relating to the Superannuation Fund, Gratuity Fund, and employees' PF/ESI contributions was sustained.

Validity of Reassessment - change of opinion - Fresh tangible material for reopening assessment

Validity of reopening the completed scrutiny assessment concerning the valuation and sale of shares after their stock split - HELD THAT: - The share transactions, including the disparity between purchase cost and sale price, valuation and sale at a lower value, had been specifically examined in the original scrutiny assessment, for which the assessee furnished the requisite explanations and documentary material. The recorded reasons for reopening proceeded on the same share transaction and stock-split issue already examined.

Reopening on that basis constituted a mere change of opinion; reassessment is impermissible in the absence of fresh tangible material demonstrating escaped income and suppression of material facts. [Paras 10, 11, 12, 13]

The notice for reassessment and the order disposing of objections were quashed.

Final Conclusion: The writ petition was allowed, as the reassessment proceedings were founded on a change of opinion on matters examined during the completed scrutiny assessment.

Reassessment based on notional partner's interest and remuneration - Discretionary clauses in partnership deed

Validity of reopening the partner's assessments on the basis that interest on capital and remuneration were payable by the partnership firm but had not been offered as income - HELD THAT: - The Court adopted the reasoning in the earlier decision concerning the partnership firm [2021 (3) TMI 345 - GUJARAT HIGH COURT]. Clauses concerning interest and remuneration, being subject to mutual agreement and subsequently amended to provide that no interest was payable, were enabling and not mandatory. In the absence of material establishing actual receipt by the partner, the premise that such income had escaped assessment could not sustain the reopening. [Paras 23, 24]

The impugned reassessment notices were quashed and set aside.

Final Conclusion: The writ petitions were allowed and the reassessment notices concerning the partner were quashed.

Interest on delayed refund - Grant of tax deducted at source credit

Interest on delayed refund - Entitlement to interest on refunds arising from appellate effect orders for Assessment Years 2014-15 to 2016-17 - HELD THAT: - The orders giving effect to the appellate orders had been passed, but the consequential payments remained unpaid. The Assessing Officer was directed to calculate interest under Section 244A(1A) from 1st December 2025 until the date of payment; if payment was not made by the stipulated date, interest under Section 244A would also be payable for September 2026. [Paras 5]

The Assessing Officer was directed to compute the applicable interest and ensure consequential payment through the CPC within the time stipulated.

Grant of tax deducted at source credit - Interest on short grant of tax deducted at source credit - HELD THAT: - The tax deducted at source credit reflected in the appellate effect order differed from that shown in the petitioner's Form 26AS. The Assessing Officer was required to determine the correct credit and, if a short grant was established, to grant interest under Section 244A(1) from 1st April 2014 until payment. [Paras 5]

The correctness of the tax deducted at source credit was directed to be determined, with consequential interest payable if a short grant was found.

Final Conclusion: Directions were issued for computation of interest on the delayed refunds for Assessment Years 2014-15 to 2016-17 and for verification of the alleged short grant of tax deducted at source credit for Assessment Year 2014-15. No further direction was issued concerning Assessment Year 2009-10.

Writ jurisdiction against preliminary reassessment proceedings - Alternative statutory remedy in reassessment - threshold of the reassessment stage

Maintainability of a writ petition against the show cause notice, order and consequential notice initiating reassessment, before completion of reassessment - HELD THAT: - Proceedings under Sections 148A(1) and 148A(3), followed by notice under Section 148, are preliminary and investigative steps and do not conclude the assessee's tax liability. Objections concerning the search-based information, applicability of Section 152(3), and validity of sanction under Section 151 required examination by the Assessing Officer during reassessment and, if necessary, by the statutory appellate authorities. Threshold writ interference is exceptional and is warranted only upon total absence of jurisdiction or patent breach of a mandatory pre-condition; the contentions raised required appraisal of material and could not be examined in writ jurisdiction. [Paras 16, 17, 18, 19, 20]

The preliminary reassessment proceedings could not be assailed at this stage under Article 226; the writ petition was dismissed, leaving the petitioner to pursue the statutory process and remedies.

Final Conclusion: The writ petition challenging the initiation of reassessment for Assessment Year 2024-25 was dismissed as premature. The petitioner was relegated to the reassessment and statutory appellate remedies.

Deduction of cost of funds and proportionate administrative expenditure on deposit income of a co-operative society

Disallowance of deduction towards cost of funds in computing deposit income of the Primary Agriculture Credit Cooperative Society - HELD THAT: - As deduction towards cost of funds had been disallowed, the Court considered it expedient to permit fresh adjudication having regard to the decision in Totagars, Co-operative Sale Society Ltd. v. Income-Tax Officer, Karnataka [2010 (2) TMI 3 - SUPREME COURT] as referred to in the order. The merits, including the claim for proportionate administrative and other expenditure, were expressly kept open. [Paras 5]

The impugned intimation, assessment orders and consequential penalty orders for the relevant assessment years were quashed, and the matter was remanded to the concerned authorities; the petitioner was permitted to submit objections and reply to the notice under section 142(1).

Final Conclusion: The writ petition was partly allowed. The challenged intimation, assessment orders and consequential penalty orders were quashed and the matter was remanded for fresh adjudication, with all merits contentions left open.

Character of land as agricultural land or capital asset - Deduction for investment in agricultural land - Challenge to revisionary order in consequential assessment appeal

Character of land sold - agricultural land or capital asset - HELD THAT: - The registered sale deed described the land as industrial-purpose land; the revenue record showed it as fallow, and it had been sold to non-agriculturists for non-agricultural use. The assessee had also offered the gain on sale to tax in the return. Applying the cumulative test in Smt. Sarifabibi Mohmed Ibrahim [1993 (9) TMI 10 - SUPREME COURT] these circumstances established that the land was not agricultural land at the time of sale. [Paras 11]

The land sold was held to be a capital asset under section 2(14), and the claim that it was agricultural land was rejected.

Deduction for investment in agricultural land - Eligibility for deduction under section 54B on purchase of land classified as industrial-purpose land following sale of the Village Vaki land - HELD THAT: - The purchased land was described in the registered purchase deed as industrial-purpose land. Land sold had neither been agricultural land nor shown to have been used for agricultural purposes during the prescribed preceding period. The statutory conditions for deduction under section 54B were therefore not fulfilled. [Paras 13, 14]

The deduction under section 54B was denied.

Challenge to revisionary order in consequential assessment appeal - Maintainability of the challenge to the order under section 263 in an appeal arising from the consequential assessment and appellate order- HELD THAT: - The assessee had not challenged the revisionary order under section 263. In proceedings arising from the appellate order on the consequential assessment, the assessee was precluded from assailing the validity of that unchallenged revisionary order. [Paras 15]

The challenge to the revisionary order was held not maintainable.

Final Conclusion: The appeal was partly allowed. The land sold was held to be a capital asset, deduction under section 54B was denied, and the challenge to the unappealed revisionary order was held to be unavailable in the consequential assessment proceedings.

Reassessment beyond four years - jurisdictional foundation - Statutory sanction - meaningful application of mind

Reassessment beyond four years - competence of sanctioning authority - Validity of sanction for reassessment notice issued beyond four years where approval was granted by the Principal Commissioner rather than the Principal Chief Commissioner - HELD THAT: - Under the then applicable section 151(1), the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner and Commissioner were alternative authorities competent to accord sanction for a notice issued after four years. Approval by the Principal Commissioner was therefore not invalid merely because it was not granted by the Principal Chief Commissioner. [Paras 17, 20]

The challenge to the competence of the Principal Commissioner to grant sanction was rejected.

Reassessment beyond four years - defective recorded reasons - Statutory sanction-meaningful application of mind - Validity of reassessment founded on recorded reasons containing an incorrect PAN and an incorrect assertion that no return had been filed, without particulars or quantification of escaped income, and sanctioned on the same defective record - HELD THAT: - For a notice issued beyond four years, the recorded reasons must disclose a statutory belief founded on correct and relevant material, including the jurisdictional requirement concerning the quantum of income escaping assessment. The reasons proceeded on the materially incorrect premise that no return had been filed, mentioned a PAN different from that of the assessee, and contained no particulars connecting the reported transactions with taxable income or quantification of alleged escaped income. The proposal repeated the incorrect return-filing status and left blank the column for escaped income. Though sanction need not contain elaborate reasons, it cannot be an empty formality; the approval signature could not cure foundational defects in the reasons or establish meaningful application of mind. [Paras 31, 32, 33, 34, 35]

The notice and reassessment were quashed; consequently, the additions founded on the invalid reassessment did not survive.

Final Conclusion: The reassessment for Assessment Year 2010-11 was held void for want of a valid jurisdictional foundation and meaningful statutory sanction. The assessee's appeal was allowed, while the limited challenge to the competence of the Principal Commissioner as sanctioning authority was rejected.

Unexplained cash credits claimed as advances against sales - Prospective application of enhanced tax rate on unexplained income

Unexplained cash credits claimed as advances against sales - Addition for cash credits shown as advances from customers against subsequent sales - HELD THAT: - The assessee furnished only self-maintained ledger accounts, without postal addresses, PANs or other identification particulars of the alleged customers, or independent material establishing their identity, creditworthiness and the genuineness of the transactions. The uniform cash advances and subsequent sales recorded for precisely identical amounts in every case remained unexplained. Subsequent adjustment of the credits against sales entries in the assessee's own books could not substitute independent evidence of the original credits. [Paras 10, 11]

The addition under section 68 was sustained, as the assessee failed to explain the nature and source of the credits and discharge the statutory onus.

Prospective application of enhanced tax rate on unexplained income - Applicability of the enhanced rate under the amended section 115BBE to unexplained cash credits for A.Y. 2017-18 - HELD THAT: - Following the co-ordinate Tribunal's decision in Soma Shekhar Bingumalla [2026 (8) TMI 1413 - ITAT HYDERABAD] which adopted the view favourable to the assessee amid divergent High Court views, the enhanced rate was held prospective and applicable from A.Y. 2018-19 onwards. The enhanced rate could therefore not be applied for the year under consideration. [Paras 13]

The Assessing Officer was directed to compute tax on the sustained addition at the rate applicable under the unamended section 115BBE.

Final Conclusion: The appeal was partly allowed. While the addition for unexplained cash credits was sustained, tax thereon was directed to be computed under the unamended rate prescribed by section 115BBE.

Depreciation on goodwill arising on amalgamation - Depreciation on brands and trade names transferred on demerger - Arm's length pricing of inter-unit electricity and steam transfers

Depreciation on goodwill arising on amalgamation - HELD THAT: - The first appellate authority had followed earlier Tribunal decisions in the assessee's own case on the identical issue [2025 (6) TMI 2060 - ITAT AHMEDABAD] allowing depreciation on goodwill. The Tribunal found no reason to depart from that consistent position. [Paras 6, 9]

Deletion of the disallowance of depreciation on goodwill was upheld and the Revenue's grounds were dismissed.

Depreciation on brands and trade names transferred on demerger - HELD THAT: - The first appellate authority's decision was founded on earlier Tribunal orders in the assessee's own case [2025 (9) TMI 1183 - ITAT AHMEDABAD] deciding the identical depreciation claim in its favour. The Tribunal upheld that approach. [Paras 8, 9]

Deletion of the disallowance of depreciation on the transferred intangible assets was upheld and the Revenue's grounds were dismissed.

Arm's length pricing of inter-unit electricity transfers - assessee's benchmarking of electricity supplied through inter-unit transactions - HELD THAT: - CIT(A), taking note of the judgment of Gujarat Alkalies & Chemicals Ltd. [2016 (10) TMI 1111 - GUJARAT HIGH COURT] held that the market price of electricity supplied by the CPP (Captive Power Plant) will be determined by adopting the rate at which the manufacturing unit has been purchasing the electricity from the open market. CIT(A) also relied upon the findings of the coordinate bench of this Tribunal in the case of the Assessee itself for the Assessment Years 2012-13, 2013-14, and 2014-15 [2025 (6) TMI 2060 - ITAT AHMEDABAD] The Tribunal upheld the decision on that basis. [Paras 9, 11]

Deletion of the transfer-pricing adjustment on inter-unit sale of electricity was upheld.

Arm's length pricing of steam generated as a by-product - whether Steam generated by a captive power plant and transferred to a non-eligible unit could not be valued at nil merely because it was a by-product? - HELD THAT: - The fact that steam is generated as a by-product does not establish that it has no cost or nil value. For inter-unit transactions between eligible and non-eligible units, the arm's length price may be benchmarked with reference to a reliable external market price; meaningful comparables are not confined to internal cost. The nil valuation adopted by the Assessing Officer and Transfer Pricing Officer was therefore unsustainable. [Paras 10]

The deletion of the adjustment arising from valuation of steam at nil was upheld and the Revenue's grounds were dismissed.

Final Conclusion: Both Revenue appeals were dismissed. The deletions of the depreciation disallowances and transfer-pricing adjustments relating to inter-unit electricity and steam transfers were upheld.

Period of holding of previous owner - Long-term capital gains on property devolving through family trust - Indexed cost of acquisition - Characterisation of gains on sale of immovable properties devolving upon a beneficiary on dissolution of a private family trust, and the corresponding entitlement to indexation

HELD THAT: - The Hon'ble Bombay High Court in CIT v. Manjula J. Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] has held that where the period of holding of the previous owner is required to be included for determining whether the asset is a long-term capital asset, the previous owner's period of holding is also relevant for computation of the indexed cost of acquisition.

The above view is also supported by the decision of Bharat Lakhaji Nandwana [2026 (3) TMI 797 - ITAT AHMEDABAD] wherein, on similar facts, the property originally belonging to the predecessor had vested in a family trust under his Will and, upon dissolution of the trust, devolved upon the beneficiaries and Coordinate Bench, after considering the provisions of section 49(1)(iii) read with Explanation 1(b) to section 2(42A) and the decisions of the Hon’ble Supreme Court and High Courts, held that the period for which the property was held by the previous owner was required to be included for determining the nature of the capital asset.

Where the properties devolved upon the assessee through succession, inheritance or devolution within the scope of section 49(1), the Assessing Officer having adopted the previous owner's cost of acquisition could not exclude the previous owner's holding period. Explanation 1(b) to section 2(42A) mandates inclusion of that period; consequently, the properties constituted long-term capital assets. The same deemed holding governs computation of indexed cost of acquisition, which must be reckoned from the year in which the previous owner first held the properties. [Paras 9]

The gains were rightly assessed as long-term capital gains, and the deletion of the addition was sustained.

Final Conclusion: The Revenue's appeal was dismissed and the treatment of the gains as long-term capital gains was upheld.

Unexplained investment in stamp duty payment - source of payment of stamp duty - Proof of creditor's identity, creditworthiness and genuineness

Addition for the source of stamp duty paid on acquisition of immovable property, where the assessee claimed family funds received from her father-in-law - HELD THAT: - The assessee had consistently explained that the stamp duty amount was received from her father-in-law and had furnished his income-tax return. Since that return established the lender's identity, financial capacity and genuineness of the transaction, and was not disputed by the Assessing Officer, the explanation could not be rejected merely for want of confirmation or further supporting evidence. [Paras 8]

The addition was deleted and the assessee's appeal was allowed.

Final Conclusion: The addition for the stamp duty payment was deleted upon acceptance of the documented explanation regarding funds received from the assessee's father-in-law.

Interest received on loans advanced to companies - business income OR Income from other sources - Scope of compensation for termination or modification of management or agency contracts - Deduction of interest expenditure incurred for earning income from other sources

Interest on loans advanced from borrowed funds - Scope of compensation for termination or modification of management or agency contracts - HELD THAT: - Though the pattern of borrowing from financial institutions and advancing funds to the companies supported the view that the lending activity was an adventure in the nature of trade, the specific provision invoked applies only to payments connected with termination or modification of an agency or management contract. The interest was accretion on loans advanced by the assessee; no agency or management contract, or its termination or modification, was established. The Revenue could not substitute the invoked basis with the general charging provision for business income, as that would amount to improving the assessment by taking a different stand.

A reference in this regard apt to be made to the decision in case of ‘CIT Vs Bangalore Metro Rail Corporation Ltd’ [2022 (7) TMI 336 - KARNATAKA HIGH COURT] wherein held that, the Revenue cannot in law be permitted to take divergent or contrary stand so as to make out a case. In view thereof, the Revenue’s argument stands rejected. Consequently we see no reasons to disturb the head of income under which the interest income offered for taxation by the appellant assessee. The impugned order thus stand set-aside. [Paras 9, 11, 13]

The interest income remained assessable under the head under which it was offered, namely income from other sources, and the contrary appellate order was set aside.

Deduction of interest expenditure incurred for earning income from other sources - Proximate nexus between borrowed funds and interest income - Allowability of interest paid on borrowed funds used for advancing loans that generated taxable interest income - HELD THAT: - For deduction of expenditure incurred in earning income from other sources, the governing test is a reasonable and proximate nexus between the expenditure and the income sought to be earned, not actual or immediate yield in the same previous year. The borrowed funds were shown to have been advanced to the entities from which interest income was earned and offered to tax; the genuineness of the interest expenditure and that correlation were not disputed. Disallowance solely on the alleged violation of the Companies Rules could not defeat a deduction satisfying the statutory nexus and purpose test.

Thus, where the utilisation of borrowed funds for earning interest income is established on the basis of material on record and the corresponding interest income is duly offered to tax, the interest expenditure incurred on such borrowings is allowable as a deduction under section 57(iii) of the Act, being expenditure laid out wholly and exclusively for the purpose of and with intention of making or earning such income. A similar view can be traced in ‘Amarsingh Thakur [2026 (2) TMI 1463 - ITAT MUMBAI], and ‘Ankur C Shah [2026 (1) TMI 1417 - ITAT MUMBAI]’ [Paras 19, 20, 21, 22, 23]

The interest expenditure was allowable as a deduction against the interest income, and the disallowance was deleted.

Final Conclusion: The appeal was allowed. The interest income was retained under income from other sources and the corresponding interest expenditure was allowed as deduction.

Unexplained cash credit - Cash deposits during demonetisation from disclosed cash sales

Addition as unexplained cash credit in respect of cash deposited during demonetisation by a cloth trader, where the deposits were claimed to represent cash-sale proceeds - HELD THAT: - The purchases, stock-in-trade and sales were not doubted. Having regard to the nature of cloth trading, the undoubted purchases reasonably supported corresponding sales, and the profit embedded in such cash sales had already been offered to tax.

A higher bank deposit during demonetisation could not, by itself, warrant an adverse inference, since cash otherwise available for purchases or expenditure had necessarily to be deposited in the bank. Even a possible violation of demonetisation directions in making cash sales would not render the receipts undisclosed income. [Paras 8]

The cash deposits were not assessable as unexplained cash credit, and the addition was deleted.

Final Conclusion: The appeal was allowed and the addition made in respect of the demonetisation-period cash deposits was deleted.

Statutory safeguards for seizure of imported goods - detaining car, which was imported - Limitation for confiscation notice after detention of goods - Provisional release conditions under invalidated circular

Detention of imported vehicle without a seizure order - Limitation for confiscation notice after detention - Continued detention of the imported Toyota Land Cruiser under a panchnama, followed by a seizure memo and confiscation notice after more than one year. - HELD THAT: - A panchnama directing the owner not to deal with or part with the vehicle constituted detention but could not itself satisfy the statutory requirements of seizure. A valid seizure requires a separate order recording reasons to believe that the goods are liable to confiscation and, where physical seizure is impracticable, recorded satisfaction under the applicable proviso. The requirement for an appropriate reasoned order is coterminous with, or must follow, the panchnama; the authorities cannot indefinitely retain goods in the guise of detention and subsequently issue a seizure memo to avoid the limitation governing the confiscation notice. In the absence of a lawful contemporaneous order, the limitation ran from the actual detention. [Paras 22, 23, 27, 28, 29]

The belated seizure and consequential confiscation notice could not validate the prolonged detention; release of the vehicle was directed.

Provisional release of seized goods - Discretion in fixing release conditions - Provisional release of the detained vehicle on conditions prescribed under paragraph 2 of Circular No. 35/2017-Customs. - HELD THAT: - The order of provisional release is illegal, as the conditions mentioned in the said order are premised on paragraph No.2 of Circular No.35/2017 dated 16.08.2017, which has been struck down in the decision rendered in the case of Shanus Impex [2023 (12) TMI 597 - DELHI HIGH COURT]

Resort to that invalidated provision rendered the provisional-release order illegal. [Paras 14, 30]

The provisional-release order was held illegal.

Final Conclusion: The respondents were directed to release the imported vehicle. Costs were imposed on the respondents.

Provisional release of imported goods - Prospective operation of exemption notification - Consideration of provisional release of used digital multifunction print, copying and scanning machines where the amendment introducing an exemption for Highly Specialised Equipment came into force after the date of the Bill of Lading.

Whether the Customs authorities could rely on a notification amendment effective from 15.06.2026 to refuse consideration of provisional release of imported goods where the Bill of Lading was dated 12.05.2026? - HELD THAT: - As the Bill of Lading pre-dated the effective date of the amendment, and the amendment contained no express retrospective operation, it could operate only prospectively. The customs authorities could not rely on that amendment to reject or decline consideration of the request for provisional release. The applicable rate of duty was left for determination in accordance with Section 15 of the Customs Act, 1962. [Paras 5, 6, 7, 8]

The respondents were directed to consider and decide the request for provisional release under Section 110A, subject to lawful conditions, and to release the goods upon compliance; such release remains subject to the adjudication proceedings.

Final Conclusion: The writ petition was disposed of by directing consideration of provisional release without reliance on the subsequently effective amendment, while leaving duty determination and adjudication to the competent authority in accordance with law.

Appellate restraint in disciplinary penalties - Proportionality of Customs Broker licence revocation

Whether the Department established grounds for appellate interference with the Commissioner's discretionary decision to impose a monetary penalty instead of revoking the Customs Broker licence? - HELD THAT: - Disciplinary proceedings under the Customs Broker Licensing Regulations require the original authority to assess the evidence and impose an appropriate consequence. An appellate forum cannot substitute its view on punishment merely because another view is possible, unless the discretion exercised is arbitrary, perverse or contrary to law. Revocation, being a severe consequence affecting the licensee's business, is not an automatic consequence of every regulatory infraction and must remain proportionate to the established breach.

We also bear in mind that the consequence of revocation of a Customs Broker’s licence is severe, as it directly affects the continuation of the business and livelihood of the licensee and its employees. The exercise of disciplinary jurisdiction must, therefore, remain proportionate to the established breach. Further, as held by the Hon’ble Supreme Court in State of Kerala Vs M.K. Mathew [1978 (8) TMI 178 - SUPREME COURT] suspicion, however strong, cannot take the place of legal proof. [Paras 4, 5, 6, 7]

As no arbitrariness, perversity or statutory infirmity was shown in the Commissioner's decision to impose penalty rather than revoke the licence, the request for remand for revocation was rejected.

Final Conclusion: The departmental appeal was rejected and the order imposing penalty, without revocation of the Customs Broker licence, was sustained.

Pre-institution mediation - urgent interim relief exception - Rejection of plaint for non-compliance with mandatory mediation

Maintainability of the commercial suit without pre-institution mediation where urgent interim relief was sought for disclosures and protection against dealing with assets - HELD THAT: - Section 12A is mandatory for a commercial suit not contemplating urgent interim relief; however, the exception must be assessed from the plaintiff's standpoint by examining the nature and subject matter of the suit, the cause of action and the pleaded need for immediate protection.

The requirement cannot be evaded through an unfounded plea of urgency. In the present case, the Court had already granted ad-interim disclosure and protective relief after being apprised of the existing regulatory restraints. That grant was necessarily founded on the urgency disclosed in the plaint, and the Court, while considering rejection of the plaint, could not sit in appeal over that determination. The suit sought recovery for the benefit of investors, and the defendants' disclosures being confined to an earlier period justified further immediate relief notwithstanding the regulatory order. The delay objection was also rejected since the suit could be instituted only after investor claims were received and the immediate need arose from inadequate disclosures. [Paras 25, 26, 28, 29, 30]

The suit contemplated urgent interim relief within Section 12A; pre-institution mediation was therefore not a condition precedent, and the plaint was not liable to rejection under Order VII Rule 11.

Final Conclusion: The application for rejection of the plaint was dismissed. The suit fell within the urgent-interim-relief exception to mandatory pre-institution mediation.

Reasoned orders by quasi-judicial authorities - Discretion to refuse admission of low-value appeals - Exercise of the Appellate Tribunal's discretion to refuse admission of appeals involving fine or penalty below the prescribed monetary limit without addressing their merits

HELD THAT: - The second proviso to Section 35B(1) permits the Tribunal, in its discretion, to refuse admission of an appeal involving fine or penalty below the prescribed limit; it does not permit dispensation with reasons. A quasi-judicial and statutory appellate forum must assign reasons, and may reject an appeal only after considering its merits and finding it unworthy of admission. [Paras 9]

The cryptic dismissal of the appeals solely on the monetary limit was quashed, and the Tribunal was directed to decide them by a reasoned order after hearing the petitioners.

Final Conclusion: The writ petition was partly allowed, with the Tribunal's orders set aside and the appeals remitted for fresh reasoned determination.

Registrar's power to amend service rules - Directory nature of legislative laying requirement

Registrar's power to amend service rules - Delegation of statutory functions - Validity of statutory action despite nomenclature - Validity of deletion of the bar on technical employees being promoted to non-technical posts under the District Cooperative Central Bank service rules - HELD THAT: - The Registrar's statutory power to frame rules governing service conditions necessarily included the power to amend, vary or rescind them. The deletion of the relevant rule was made under the Registrar's order; the Additional Registrar's communication merely conveyed that order and was not invalid in the absence of any bar on delegation. Since the State did not dispute that the amendment had been ordered by the Registrar, its description as a circular or communication could not detract from the statutory authority supporting it. [Paras 10, 15]

The deletion of the rule was held to be a valid exercise of the Registrar's statutory power, and the appellant's promotion founded on that amendment could not be set aside.

Legislative laying requirement - Mandatory and directory provisions - Effect of non-laying of the amended service rules before the Legislative Assembly - HELD THAT: - Though the statutory provision used the word 'shall', it prescribed no consequence for failure to lay the rules before the Legislative Assembly. Having regard to the nature of the laying requirement and the absence of an invalidating consequence, the requirement was construed as directory and intended for information and legislative supervision, rather than as a condition affecting the Registrar's exercise of rule-making power. [Paras 11, 12, 13, 14]

Non-compliance with the laying procedure did not invalidate the amendment made by the Registrar.

Final Conclusion: The appeal was allowed and the orders setting aside the appellant's promotion were set aside. The appellant was restored to the promoted position with protected seniority, consequential promotional benefits and the stipulated back wages.