TaxTMI Updates e-Newsletter
Sep 02,2020

Challenge to legality and validity of statutory provision - retrospective/retroactive effect of amendment - transitional credit under GST - show cause notice - refund claim - issuance of notice and interlocutory directions - adjournment pending authoritative precedent

Challenge to legality and validity of statutory provision - retrospective/retroactive effect of amendment - transitional credit under GST - show cause notice - refund claim - awaiting binding precedent - Petition challenging FAQs and Guidance Note on CGST transitional credit, validity of Section 140 notification with retrospective effect, Circular giving retrospective effect to amendments, the Show Cause Notice dated 27th May 2020 and the refund application dated 15th May 2018 was considered for preliminary directions. - HELD THAT: - The Court did not adjudicate the substantive merits of the challenges to the FAQs, the Guidance Note dated 14th March 2018, the notification of Section 140 of the CGST Act or the Circular dated 2nd January 2019, nor did it decide the legality of the impugned Show Cause Notice or the refund claim. Instead, cognizance was taken of an existing and pending challenge before a Division Bench of the Madras High Court on similar issues. In the interim the Court issued notice to the respondents, permitted the respondent to file a counter-affidavit within four weeks and permitted the petitioner to file a rejoinder-affidavit before the next hearing. The matter was adjourned to await the authoritative pronouncement by the Madras High Court Division Bench and listed for further hearing on 07th December, 2020. No substantive determinations on the merits were made in this order.

Notice issued; counter-affidavit permitted within four weeks; rejoinder permitted; matter adjourned and listed on 07th December, 2020 to await the decision of the Division Bench of the Madras High Court.

Final Conclusion: Interlocutory order: notice issued and procedural directions given; substantive challenges to the FAQs, Guidance Note, Section 140 notification, the Circular, the Show Cause Notice and the refund application were not decided and the matter was adjourned pending the Division Bench decision of the Madras High Court.

Power to search and seize documents, books or things under Section 67(2) of the CGST Act, 2017 - interpretation of the expression 'things' to include money - purposive construction / mischief rule in statutory interpretation - confessional statements before revenue officers as admissions - limited scope of judicial review in search and seizure at investigation stage

Interpretation of the expression 'things' to include money - power to search and seize documents, books or things under Section 67(2) of the CGST Act, 2017 - purposive construction / mischief rule in statutory interpretation - Whether cash seized from the residential premises falls within the expression 'things' in Section 67(2) of the CGST Act, 2017 and whether the seizure of the cash was lawful. - HELD THAT: - The Court examined Section 67(2) in the context of the Act as a whole and relied on definition provisions to ascertain legislative intent. Applying purposive construction and authorities on the meaning of 'thing', the Court held that the phrase 'things' in Section 67(2) is to be given a wide meaning and can include money. Reliance was placed on standard lexical definitions treating 'thing' as including money and on the principle that statutes should be interpreted so as to suppress the mischief and advance the remedy. Having regard to the case diary which recorded reasonable belief that the cash constituted proceeds of illicit supply and would be useful for investigation, the Court concluded that the authorised officers were empowered to seize the cash under Section 67(2) pending further investigation and adjudication. [Paras 18, 19, 20, 25]

The expression 'things' in Section 67(2) includes money and the seizure of the cash was lawful; release of the seized amount is not warranted until completion of investigation and adjudication.

Confessional statements before revenue officers as admissions - limited scope of judicial review in search and seizure at investigation stage - Whether the husband's retraction of his earlier confessional statements entitled the petitioner to immediate release of the seized cash. - HELD THAT: - The Court noted that statements made before revenue/customs officers operate as admissions and, even if retracted, constitute evidence which must be considered in the investigative and adjudicatory process. Citing precedents, the Court observed that retracted confessions may still constitute admissible admissions and that, at the investigation stage, retraction does not automatically annul the evidentiary value of such statements. Further, because the matter was at the stage of ongoing investigation and evidence collection, the Court held that the petitioner could not obtain relief solely on the ground of subsequent retraction. [Paras 22, 23, 24, 25]

Retraction of the confessional statement does not mandate release of the seized cash at the investigation stage; no relief granted on this ground.

Limited scope of judicial review in search and seizure at investigation stage - Whether the High Court should interfere with the search and seizure exercise at the initial/investigation stage in exercise of writ jurisdiction. - HELD THAT: - The Court referred to precedent and observed that interference in writ jurisdiction with the sufficiency or adequacy of reasons for conducting search and seizure is limited. Judicial review at the initial stage does not ordinarily permit re-examination of the factual satisfaction underpinning a search warrant; moreover, defects, if any, in authorization do not automatically invalidate material collected during the search. Given that a statutory investigatory mechanism exists and that searches had been conducted on recorded reasonable belief, the Court declined to quash or interfere with the seizure in the writ petition filed at the investigation stage. [Paras 21, 25]

Writ court will not ordinarily interfere with search and seizure at the initial investigation stage; the petition seeking release of seized cash is dismissed on this ground.

Final Conclusion: The High Court held that the seized cash falls within the term 'things' under Section 67(2) of the CGST Act, 2017 and that the seizure was lawful; retraction of confessional statements did not justify release at the investigation stage; accordingly the writ petition seeking release of the seized amount was dismissed.

Writ of Mandamus - provisional refund under Section 54(6) of the CGST Act, 2017 read with Rule 91(2) of the CGST Rules, 2017 - adjudication of show cause notice - hearing before decision - expeditious adjudication - remand for fresh consideration - no opinion on merits

Adjudication of show cause notice - hearing before decision - expeditious adjudication - remand for fresh consideration - provisional refund under Section 54(6) of the CGST Act, 2017 read with Rule 91(2) of the CGST Rules, 2017 - Direction to respondent authority to hear the petitioner on the show cause notice and decide the refund application/SCN expeditiously - HELD THAT: - The High Court, without expressing any opinion on the merits of the show cause notice dated 11.01.2020, directed that in the interest of justice the concerned respondent authority shall hear the petitioner on the show cause notice and thereafter pass appropriate orders. The Court noted the parties' contentions including the petitioner's request for adjudication of the refund claim and the respondent's reference to the Covid-19 situation, but required the authority to proceed and conclude the matter. The Court fixed a timeline for completion of the exercise and emphasised that the authority must decide the matter in accordance with law and without being influenced by the Court's order. This direction effectively remands the matter to the respondent authority for fresh consideration and adjudication of the show cause notice and the refund claim, including any consideration of provisional refund under the cited provisions, subject to the authority's independent adjudication on merits. [Paras 5, 6]

The authority is directed to hear the petitioner and pass an appropriate order in accordance with law expeditiously, preferably by 09.10.2020; the Court expresses no opinion on the merits.

Final Conclusion: Writ petition disposed by directing the concerned respondent authority to hear the petitioner and decide the show cause notice and refund application expeditiously and in accordance with law (preferably by 09.10.2020); no observation made on merits; no costs.

Denial of benefit of input tax credit - determination of profiteered amount under Section 171(2) and Rule 133(1) - violation of Section 171(1) of the CGST Act, 2017 - imposition of penalty under Section 171(3A) of the CGST Act, 2017 - prospective operation of penal provision - non retrospective application of penalty - withdrawal of penalty proceedings

Denial of benefit of input tax credit - determination of profiteered amount under Section 171(2) and Rule 133(1) - violation of Section 171(1) of the CGST Act, 2017 - Whether the respondent failed to pass on the benefit of input tax credit and thereby violated Section 171(1) of the CGST Act, 2017, with resultant determination of profiteered amount for the period specified. - HELD THAT: - The Authority accepted the DGAP's investigation and report that the respondent did not reduce prices commensurate with input tax credit following the introduction of GST from 01.07.2017. On consideration of the material and submissions, the Authority held that the respondent had denied the benefit of ITC to buyers in respect of flats in the project and therefore contravened Section 171(1). Consequentially, the profiteered amount for the relevant period was determined in accordance with Section 171(2) read with Rule 133(1) of the CGST Rules, 2017 as recorded by the Authority in its earlier order dated 21.10.2019. [Paras 1, 2, 6]

The respondent was held to have violated Section 171(1) for the period July, 2017 to October, 2018 and the profiteered amount was determined under the statutory provisions.

Imposition of penalty under Section 171(3A) of the CGST Act, 2017 - prospective operation of penal provision - non retrospective application of penalty - withdrawal of penalty proceedings - Whether penalty under Section 171(3A) could be imposed for the respondent's contravention that occurred between 01.07.2017 and 31.10.2018. - HELD THAT: - The Authority noted that sub section (3A) of Section 171, prescribing a penalty for contravention of Section 171(1), was introduced by the Finance (No. 2) Act, 2019 and brought into force by notification dated 01.01.2020. As no penal provision existed at the time the contravention occurred (July, 2017 to October, 2018), the Authority concluded that the penalty could not be applied retrospectively. Accordingly, the notice for imposition of penalty issued earlier was withdrawn and the penalty proceedings were dropped. [Paras 7]

Penalty under Section 171(3A) could not be imposed retrospectively for the period July, 2017 to October, 2018; the penalty notice is withdrawn and the proceedings are dropped.

Final Conclusion: The Authority affirmed that the respondent violated Section 171(1) for the period July, 2017 to October, 2018 and upheld the determination of profiteered amount; however, penalty under Section 171(3A) was not imposed because the penal provision was made effective only from 01.01.2020, and the penalty proceedings have been withdrawn and dropped.

Failure to pass on benefit of Input Tax Credit under Section 171(1) - Determination of profiteered amount under Section 171(2) read with Rule 133(1) - Non-retrospective operation of penal provision inserted by the Finance (No.2) Act, 2019 - Penalty under Section 171(3A) not leviable for past violations

Failure to pass on benefit of Input Tax Credit under Section 171(1) - Determination of profiteered amount under Section 171(2) read with Rule 133(1) - Respondent denied benefit of input tax credit to buyers and profiteered in violation of Section 171(1). - HELD THAT: - The Authority considered the DGAP's investigation report and its earlier order dated 05.11.2019 determining the profiteered amount. On review of the material and submissions it is affirmed that the Respondent did not reduce prices commensurately on introduction of GST and thereby failed to pass on the benefit of input tax credit to buyers for the period in question. The Authority records that the profiteered amount had been determined under Section 171(2) read with Rule 133(1) in its earlier order and the finding of violation of Section 171(1) is maintained. [Paras 2, 6]

Respondent found to have violated Section 171(1) by not passing on ITC; earlier determination of profiteered amount is affirmed.

Non-retrospective operation of penal provision inserted by the Finance (No.2) Act, 2019 - Penalty under Section 171(3A) not leviable for past violations - Penalty under Section 171(3A) cannot be imposed for the period July, 2017 to September, 2018 as the provision came into force on 01.01.2020. - HELD THAT: - The Authority examined the statutory scheme and the Notification implementing provisions of the Finance (No.2) Act, 2019 from 01.01.2020 which inserted sub section 171(3A). Since no penalty provision under Section 171(3A) existed at the time of the Respondent's contravention (July, 2017 to September, 2018), the penal provision cannot be applied retrospectively. Consequently, the notice issued for imposition of penalty under Section 171(3A) is withdrawn and the penalty proceedings are dropped. [Paras 7]

Notice for imposition of penalty under Section 171(3A) withdrawn; penalty proceedings dropped as the provision is prospective from 01.01.2020.

Final Conclusion: The Authority upholds that the Respondent violated Section 171(1) by not passing on input tax credit for July, 2017 to September, 2018 and affirms the earlier determination of profiteered amount; however, penalty under Section 171(3A) cannot be imposed retrospectively and the penalty proceedings are withdrawn.

Non passage of benefit of tax rate reduction under Section 171(1) of the CGST Act - determination of profiteered amount under Section 171(2) read with Rule 133(1) - penalty not leviable under Section 122(1)(i) for failure to pass on tax benefit - non retroactivity of subsequently inserted penalty provision Section 171(3A) - deposit of determined profiteered amount into Consumer Welfare Fund as compliance

Non passage of benefit of tax rate reduction under Section 171(1) of the CGST Act - determination of profiteered amount under Section 171(2) read with Rule 133(1) - Respondent failed to pass on the benefit of reduction in GST rate on sanitary napkins for the period 27.07.2018 to 30.09.2018 and profiteered amount was determined. - HELD THAT: - The Authority accepted the DGAP's investigation and report and, after notice and hearing, found that the respondent did not reduce prices commensurately when GST rate was reduced from 12% to nil w.e.f. 27.07.2018. Applying Section 171(2) of the CGST Act read with Rule 133(1) of the CGST Rules, 2017, the Authority determined the amount of benefit not passed on to buyers for the specified period and held the respondent to have violated Section 171(1). The respondent's subsequent payment of the determined amount into the Consumer Welfare Fund was recorded but did not negate the finding of violation for the stated period. [Paras 2, 6]

Violation of Section 171(1) established and profiteered amount for 27.07.2018 to 30.09.2018 determined.

Penalty not leviable under Section 122(1)(i) for failure to pass on tax benefit - non retroactivity of subsequently inserted penalty provision Section 171(3A) - Penalty proceedings under Section 122(1)(i) could not be sustained for the Section 171(1) violation and the later inserted Section 171(3A) penalty provision could not be applied retrospectively. - HELD THAT: - The Authority examined the penal provisions and concluded that Section 122(1)(i) does not provide for penalty in respect of failure to pass on benefits of tax reduction under Section 171(1); issuance of incorrect or false invoices under Section 122(1)(i) therefore did not legally cover the anti profiteering breach. Further, a specific penalty provision for contravention of Section 171(1) was inserted by Section 112 of the Finance Act, 2019 (i.e. Section 171(3A)), which came into force from 01.01.2020. As no penalty provision for such violation existed at the time the contravention occurred (the relevant period), the Authority held that the later provision could not be applied retrospectively. Consequently, the show cause notice issued under Section 122(1)(i) was withdrawn and the penalty proceedings dropped. [Paras 7, 8, 9]

Notice for penalty under Section 122(1)(i) withdrawn; penalty proceedings dismissed and retrospective application of Section 171(3A) rejected.

Final Conclusion: The Authority confirmed that the respondent violated Section 171(1) for the period 27.07.2018 to 30.09.2018 and determined the profiteered amount, but held that no penalty could be imposed under Section 122(1)(i) for that violation and that the penalty provision later inserted as Section 171(3A) cannot be applied retrospectively; the penalty proceedings were therefore dropped.

Failure to pass on benefit of tax rate reduction (anti profiteering) - violation of Section 171(1) of the CGST Act, 2017 - penal liability under Section 122(1)(i) for issuance of incorrect or false invoices - non retroactivity of penal provisions and prospective operation of Section 171(3A) (Finance Act, 2019)

Failure to pass on benefit of tax rate reduction (anti profiteering) - violation of Section 171(1) of the CGST Act, 2017 - Respondent had violated the anti profiteering obligation by not passing on the GST rate reduction for the specified product during the stated period. - HELD THAT: - The Authority upheld the DGAP's finding and its earlier order that the Respondent did not reduce the price commensurately when the GST rate was reduced from 18% to 12%, and thereby denied benefit to buyers for the period specified. The Authority had earlier determined the profiteered amount and recorded that the Respondent had compelled buyers to pay excess consideration and GST on that excess, concluding a breach of Section 171(1). The Respondent has since accepted and paid the amount as directed. [Paras 2, 6]

Finding of violation of Section 171(1) and determination of the profiteered amount for the period 15.11.2017 to 28.02.2018 affirmed; Respondent has paid the amount as directed.

Penal liability under Section 122(1)(i) for issuance of incorrect or false invoices - Whether penalty under Section 122(1)(i) could be imposed for the Respondent's failure to pass on the benefit under Section 171(1). - HELD THAT: - On examination of Section 122(1)(i), the Authority concluded that that provision does not cover a failure to pass on benefits under Section 171(1) and does not prescribe penalty specifically for non compliance with anti profiteering obligations. The show cause notice issued under Section 122(1)(i) on that basis therefore lacked statutory foundation. [Paras 7]

Penalty under Section 122(1)(i) cannot be imposed for the violation of Section 171(1) in the facts of this case.

Non retroactivity of penal provisions and prospective operation of Section 171(3A) (Finance Act, 2019) - Whether the penalty regime inserted by Finance Act, 2019 (Section 171(3A)) effective 01.01.2020 could be applied retrospectively to conduct occurring between 15.11.2017 and 31.03.2018. - HELD THAT: - The Authority noted that specific penal provisions for violation of Section 171(1) were introduced by Section 112 of the Finance Act, 2019 by inserting Section 171(3A) with effect from 01.01.2020. As no corresponding penalty provision existed during the period when the Respondent committed the violation, the newly inserted penalty cannot be applied retrospectively. Consequently, initiating penalty proceedings against the Respondent on that statutory basis for the earlier period was impermissible. [Paras 8, 9]

Section 171(3A) (Finance Act, 2019) is prospective; penalty proceedings based on it cannot be applied to the period of violation and are therefore dropped.

Final Conclusion: The Authority affirmed the finding of failure to pass on the benefit of the GST rate reduction and the previously determined profiteered amount (which has been paid), but held that no penalty could be imposed under Section 122(1)(i) for that breach and that the penal provision later introduced by the Finance Act, 2019 (Section 171(3A)) cannot be applied retrospectively; the penalty proceedings are withdrawn and dropped.

Presumptive taxation under section 44AD and conditions for claiming lower profits - requirement of maintenance of books under section 44AA and audit under section 44AB - estimation of income by Assessing Officer versus rejection of books and best judgment assessment under section 144 - use of comparative profitability (subsequent years) for estimation of income

Presumptive taxation under section 44AD and conditions for claiming lower profits - requirement of maintenance of books under section 44AA and audit under section 44AB - estimation of income by Assessing Officer versus rejection of books and best judgment assessment under section 144 - use of comparative profitability (subsequent years) for estimation of income - Whether the Assessing Officer was justified in estimating the assessee's profit at 8% of turnover despite not rejecting the books of account and without audit report, and what profit rate should be adopted. - HELD THAT: - The Assessing Officer applied the presumptive scheme and estimated profits at 8% because the declared net profit (0.99%) was below the presumptive rate and the assessee had not produced an audit report despite turnover exceeding the threshold. However, the AO did not record specific defects in the books, did not reject the books of account under section 145(3), nor proceeded to make a best judgment assessment under section 144; instead the AO made an addition on the basis of conjecture. The Commissioner (Appeals) accepted that some relief was due but reduced the estimated rate to 5% having regard to the assessee's non compliance. The Court examined material on record, noting that the assessee produced books, vouchers and documents and that the AO had not pointed to particular disallowances or shown that claimed expenses were not incurred. The Court also considered the assessee's audited profitability for subsequent years (averaging about 3.09%) as indicia of the business earning trend, observing that while ordinarily previous years' profits are used, subsequent years' audited results provide a reasonable yardstick where earlier audited data is unavailable. Applying these findings and in view of the AO's failure to reject the books or to identify specific defects, the Court found the AO's blanket application of 8% unsustainable. In the exercise of discretion to arrive at a fair estimate and in the interests of justice, the Court reduced the adopted profit rate to 2.5% of turnover and directed the Assessing Officer to compute income accordingly. [Paras 10, 11, 12, 13, 14]

The AO's estimation at 8% was not justified; the assessment is to be recomputed adopting net profit at 2.5% of the declared turnover.

Final Conclusion: Appeal partly allowed; the assessing officer is directed to estimate the assessee's income for A.Y. 2014-15 at 2.5% of the declared turnover and compute tax accordingly.

Validity of notice under section 153A/153C - Framing of assessment after search in third party premises - Section 292B - curative effect for defects in notice - Remand for fresh adjudication on merits

Validity of notice under section 153A/153C - Framing of assessment after search in third party premises - Section 292B - curative effect for defects in notice - Whether the notice dated June 1, 2010 and consequent assessments are invalid for want of a search warrant in the name of the assessee or for being headed as issued under section 153A when the Assessing Officer proposed assessment under section 153C. - HELD THAT: - The court held that issuance of a search warrant in the name of the assessee is a sine qua non for a notice under section 153A; however, on the facts no search warrant was issued in the appellant's name but a search was conducted in the premises of a third party. The notice received by the assessee, though captioned under section 153A, explicitly proposed assessment under section 153C and was received by the assessee who participated by filing returns and replying to notices. In these circumstances the heading alone could not invalidate proceedings where the substance of the notice disclosed assessment under section 153C and the assessee had full knowledge of the nature of proceedings. Further, section 292B operates to cure minor defects, mistakes or omissions in notices and prevents invalidation of proceedings on that ground. Applying these principles, the Tribunal and this Court concluded that the alleged defect in nomenclature did not vitiate the assessments. [Paras 8, 9, 10]

The notice and consequent assessment were not invalidated on the ground that no search warrant in the assessee's name was issued or because the heading referred to section 153A; the defect, if any, is cured by section 292B and the assessments stand on that legal basis.

Remand for fresh adjudication on merits - Whether the additions made by the Assessing Officer require fresh consideration by the Commissioner of Income tax (Appeals). - HELD THAT: - The court noted that the assessee, through his representative, had been given opportunity during assessment proceedings but failed to produce documentary evidence to substantiate the oral contract and payments alleged to have been received from the third party. Having accepted that the appellate authority (ITAT) remitted the matter to the Commissioner of Income tax (Appeals) to examine the merits of the additions, this Court found the remand to be just and proper so that the merits of the additions can be re examined in accordance with law. [Paras 5, 11]

The matter is remitted to the Commissioner of Income tax (Appeals) for fresh adjudication on the merits of the additions.

Final Conclusion: The High Court dismissed the appeal, holding that the assessments were not vitiated by the nomenclature or absence of a search warrant in the assessee's name (section 292B applying to cure defects) and upholding the Tribunal's remand for fresh consideration of the merits of the additions by the Commissioner of Income tax (Appeals).

Deduction under section 80P(2)(d) - Co-operative society versus co-operative bank - Eligibility of interest income on investments with co-operative banks for 80P(2)(d) - Effect of insertion of sub section (4) of section 80P by Finance Act, 2006

Deduction under section 80P(2)(d) - Co-operative society versus co-operative bank - Eligibility of interest income on investments with co-operative banks for 80P(2)(d) - Claim of deduction under section 80P(2)(d) in respect of interest income earned by the co operative housing society on investments with a co operative bank. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of the deduction. It accepted the proposition that a co operative bank is a species of the broader statutory concept of a "co operative society" and that where a co operative society derives interest from investments made with any other co operative society, such interest falls within the scope of section 80P(2)(d). The Tribunal considered the effect of insertion of section 80P(4) (Finance Act, 2006) and held that sub section (4) excludes co operative banks from claiming deductions for themselves under section 80P, but does not prevent another co operative society from claiming deduction under section 80P(2)(d) for interest earned on investments with a co operative bank which remains a registered co operative society. The Tribunal relied on precedents of the Mumbai Benches and relevant High Court decisions favouring the assessee, distinguished authorities relied on by the revenue, and found no infirmity in the CIT(A)'s reasoning; consequently the AO was directed to allow the deduction of the interest income claimed under section 80P(2)(d). [Paras 4, 6]

Deduction under section 80P(2)(d) allowed in respect of interest income on investments with the co operative bank; CIT(A)'s order affirmed.

Penalty proceedings under section 271(1)(c) - Maintainability of grounds seeking initiation or imposition of penalty proceedings under section 271(1)(c). - HELD THAT: - The CIT(A) recorded that penalty proceedings had not been initiated by the AO and therefore grounds seeking penalty were premature. The Tribunal accepted this finding and dismissed those grounds as premature, noting that no penalty had been imposed by the assessing officer at the stage of the assessment challenged. [Paras 4]

Grounds relating to penalty under section 271(1)(c) dismissed as premature.

Final Conclusion: The appeal filed by the revenue is dismissed; the CIT(A)'s allowance of the deduction under section 80P(2)(d) in respect of interest income on investments with the co operative bank is affirmed, and grounds seeking penalty proceedings are dismissed as premature.

Penalty under section 271G - Requirement to furnish transfer pricing documentation under section 92D(3) and Rule 10D - General notice versus specific requisition of documents - Substantive compliance with Rule 10D suffices to defeat penalty - Penalty unsustainable unless specific documents/information under section 92D(3) are shown to be not furnished

Penalty under section 271G - Requirement to furnish transfer pricing documentation under section 92D(3) and Rule 10D - General notice versus specific requisition of documents - Substantive compliance with Rule 10D suffices - Whether penalty under section 271G can be sustained where the notice under section 92D(3) was general and the assessee made substantive compliance with documentation requirements under Rule 10D. - HELD THAT: - The Tribunal found that the facts in the present appeals are identical to those in the group concern decisions where the penalty under section 271G was deleted. The Assessing Officer's notice under section 92D(3) was general and did not specify particular documents demanded; the assessee had maintained and submitted substantial transfer pricing documentation including TP study reports, Form 3CEB, financial statements, agreements with AEs, ledgers, invoice samples and responses to annexures. Relying on the reasoning in the cited decisions (including Leroy Somer & Controls (India) (P) Ltd and Gillette India Ltd ), the Tribunal recorded that Rule 10D contemplates voluminous and varying data and that a general notice cannot be the basis for imposing penalty under section 271G unless specific documents or information specified in section 92D(3)/Rule 10D are shown to have been requested and not furnished. Where there is substantive compliance with Rule 10D and no specific defect is pointed out by the AO, penalty under section 271G is not sustainable. Applying that principle to the present facts, and noting the absence of any contrary binding decision, the Tribunal set aside the CIT(A)'s order and deleted the penalty. [Paras 13, 14, 15]

Penalty under section 271G deleted and appeals allowed because the notice was general and the assessee had made substantive compliance with Rule 10D; no specific non-furnished documents under section 92D(3) were identified.

Final Conclusion: Following earlier tribunal decisions on identical facts and authoritative reasoning that a general notice under section 92D(3) cannot sustain penalty under section 271G when there is substantive compliance with Rule 10D and no specific documents are shown to be withheld, the Tribunal set aside the CIT(A)'s order, deleted the penalty and allowed the assessee's appeals.

Allowability of commission payments to agents - genuineness and business nexus - treatment of payments to HUFs as recipients of commission - disallowance under section 14A of the Income-tax Act r.w. Rule 8D - requirement to record satisfaction having regard to accounts - deductibility of charges described as 'punitive charges' - nature of payment (penal v. compensatory) - notional interest on interest free advances - source of funds and presumption of application of own/interest free funds - peripheral development charges - commercial expediency and direct connection to mining business - claim of deduction for donation under section 35(1)(ii) - genuineness of donee and subsequent survey disclosures - business expenditure test - commercial expediency and welfare payments (mosquito nets, watershed donation)

Allowability of commission payments to agents - genuineness and business nexus - treatment of payments to HUFs as recipients of commission - Deletion of additions made by the Assessing Officer disallowing commission payments for AY 2012-13 and AY 2013-14 was upheld. - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessee had discharged its onus by producing bills, TDS deduction records, service tax compliance where applicable and income tax returns of the recipients; commission payments were recurring in earlier and subsequent years; three major agents confirmed receipt covering substantial part of payments; buyers' denial of involvement of agents did not, by itself, prove payments to be bogus because agents were engaged by the seller to facilitate supply/logistics and need not act as visible intermediaries to buyers. The AO failed to produce positive evidence that agents did not render services or that payments were accommodation entries. Payments to HUFs could not be disregarded merely on the ground that an HUF is not a "physical" entity; whether income is assessable in the hands of HUF or karta is a matter for the recipient's assessment. On these facts and in absence of specific contrary material, the deletions were confirmed.

Tribunal confirmed the CIT(A)'s deletion of the commission disallowances for both assessment years.

Deductibility of charges described as 'punitive charges' - nature of payment (penal v. compensatory) - Deletion of addition in respect of 'punitive charges' (overloading charges) for AY 2012-13 was upheld. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the payments to the port for overloading were additional freight/compensatory in nature and not a penalty for breach of law. The nomenclature 'punitive charges' does not automatically attract the Explanation to section 37(1) unless the payment is for an offence or prohibited act; the AO did not show the payment constituted compounding of an offence or other statutory penalty so as to render it non deductible.

Tribunal upheld deletion of the punitive charges disallowance for AY 2012-13.

Notional interest on interest free advances - source of funds and presumption of application of own/interest free funds - Deletion of notional interest (disallowance) in respect of interest free loans/advances for AY 2012-13 and AY 2013-14 was upheld. - HELD THAT: - The CIT(A)'s finding - followed by the Tribunal - that the assessee had substantial capital and that borrowed funds were applied to creation/acquisition of specific assets, supported the conclusion that advances could have been made out of interest free own funds. In absence of cogent material to show borrowed (interest bearing) funds were diverted to advances, notional interest disallowance could not be sustained; reliance on the principle in CIT v. HDFC Bank was accepted.

Tribunal confirmed deletion of the notional interest addition for both assessment years.

Peripheral development charges - commercial expediency and direct connection to mining business - Deletion of disallowance of peripheral development charges for AY 2012-13 and AY 2013-14 was upheld. - HELD THAT: - The Tribunal agreed with the CIT(A) that expenditure on improvement/maintenance of roads in the periphery of mines was incidentally and directly connected with the assessee's mining operations and commercially expedient for smooth movement of goods and for local stakeholders; the AO had not challenged quantum or mode of payment and had not made enquiries of the contractor. In these circumstances the AO's blanket inability to verify the expenditure did not justify disallowance.

Tribunal upheld the CIT(A)'s deletion of the peripheral development charges disallowance for both assessment years.

Claim of deduction for donation under section 35(1)(ii) - genuineness of donee and subsequent survey disclosures - Deletion of addition disallowing donation under section 35(1)(ii) for AY 2013-14 was upheld. - HELD THAT: - The assessee had made the donation through proper banking channels to a donee that, at the time of donation, held approval under section 35(1). Subsequent survey statements by the donee's office bearers that donations were routed through agents and refunded to donors were generalized and did not establish that the specific donation by the assessee was returned. In absence of evidence that the particular donation was refunded to the assessee, and given the assessee's verification of the donee's approval, the CIT(A)'s deletion of the addition was sustained.

Tribunal confirmed deletion of the disallowance of the donation claimed under section 35(1)(ii) for AY 2013-14.

Disallowance under section 14A of the Income tax Act r.w. Rule 8D - requirement to record satisfaction having regard to accounts - Disallowance under section 14A r.w. Rule 8D confirmed by lower authorities was set aside; AO's addition under section 14A was deleted for both assessment years. - HELD THAT: - The Tribunal held that before invoking Rule 8D the Assessing Officer must record satisfaction that, having regard to the assessee's accounts, the claim that no expenditure was incurred in relation to exempt income is incorrect - satisfaction to be reached on objective examination of accounts. In the present case the AO did not undertake the mandated exercise or record such satisfaction and proceeded directly to compute disallowance on speculative grounds. Relying on the Supreme Court's Maxopp ratio and subsequent High Court/tribunal authority, the Tribunal found the section 14A disallowance unsustainable and directed deletion.

Tribunal allowed the assessee's challenge and deleted the section 14A/Rule 8D disallowance for both years.

Business expenditure test - commercial expediency and welfare payments (mosquito nets, watershed donation) - The CIT(A)'s confirmation of disallowance of expenditure on distribution of mosquito nets and a watershed donation for AY 2013-14 was upheld. - HELD THAT: - The Tribunal held that purchase and distribution of mosquito nets and the Rs. 4 lakh donation to a watershed society did not meet the test of commercial expediency or show a direct business nexus to mining operations. The assessee failed to demonstrate that such welfare and community expenses were necessitated by or incident to its business so as to qualify as deductible business expenditure; the first appellate findings were affirmed.

Tribunal dismissed the assessee's challenge and confirmed the addition of Rs. 1,28,39,665 for AY 2013-14.

Final Conclusion: On the appeals for AY 2012-13 and 2013-14 the Tribunal dismissed the revenue's appeals and allowed the assessee's challenges in substantial part: deletions of commission disallowances, punitive/overloading charges, notional interest on interest free advances, peripheral development charges and the section 35(1)(ii) donation were upheld; the section 14A/Rule 8D disallowance was set aside for both years for failure to record required satisfaction; the assessee's claim relating to distribution of mosquito nets and a watershed donation for AY 2013 14 was rejected and that addition was confirmed.

Capital versus revenue expenditure - non-compete fee - capitalisation of interest under proviso to section 36(1)(iii) - depreciation on intangible/non-compete rights under section 32(1)(ii) - interest income as business income and netting for computation under Explanation (baa) to section 80HHC - 90% exclusion under Explanation (baa) to section 80HHC for receipts not linked to export turnover - reimbursement receipts versus lease/ rental income - treatment for section 80HHC - disallowance under section 40(a)(i) for non-deduction of tax at source - 'fees for technical services' and the DTAA/make available inquiry - deduction under section 80IC and requirement of revised return versus appellate rectification

Capitalisation of interest under proviso to section 36(1)(iii) - capital versus revenue expenditure - Allowability of interest of Rs. 2,80,276 (portion not capitalised by assessee) charged as revenue expense vis-a -vis capitalisation requirement. - HELD THAT: - The loan from Syndicate Bank was partly used to finance plant and machinery already 'put to use' prior to disbursement. Under the proviso to section 36(1)(iii) interest on borrowed money for acquisition of a capital asset is to be capitalised only until the asset is first put to use. The Tribunal accepted the assessee's pleaded fact (not disputed by the Revenue) that a substantial part of the loan funded assets already put to use; accordingly the balance interest disallowed by lower authorities was not exigible to capitalisation and therefore deductible as revenue expenditure. [Paras 6, 9]

Disallowance of interest of Rs. 2,80,276 is deleted; ground allowed.

Non-compete fee - capital versus revenue expenditure - depreciation on intangible/non-compete rights under section 32(1)(ii) - Characterisation of Rs. 5 lakh paid to G.S. Lighting Pvt. Ltd. as capital expenditure (non-compete/part of acquisition of 'Polstar' business) and consequential claim for depreciation/amortisation. - HELD THAT: - On the facts the assessee acquired the 'Polstar' brand (assignment), took a 24% stake and entered into an exclusive manufacturing agreement with lock in and limited termination rights (three year lock in and 12 months' notice thereafter), and contemporaneously entered into a non compete covenant covering the company, partners and family members. The Tribunal followed the jurisdictional High Court precedent (Sharp Business System) and held that the payment formed part of an overall acquisition/transaction conferring an enduring business advantage in the capital field; the non compete payment is therefore capital in nature. The alternative contention for depreciation/amortisation was rejected because the assessee had not established the payment to be an intangible asset eligible under section 32(1)(ii) and the issue was not raised before lower authorities; moreover the jurisdictional High Court authority was followed holding such non compete covenants are not depreciable intangible assets in the facts there considered. [Paras 11, 12, 18, 25, 29]

Non compete fee of Rs. 5 lakh is capital expenditure; claim for depreciation/amortisation denied; ground dismissed.

Interest income as business income and netting for computation under Explanation (baa) to section 80HHC - 90% exclusion under Explanation (baa) to section 80HHC for receipts not linked to export turnover - Treatment of interest earned on margin monies (FDRs/NSCs) - whether business income; whether interest paid may be netted for computing the 90% exclusion under Explanation (baa) to section 80HHC. - HELD THAT: - Assessee placed fixed deposits as margin money against letters of credit and bank guarantees used in the course of its manufacturing and export business. The Tribunal held that interest on such margin monies was inextricably linked with the business and is chargeable under the head 'profits and gains of business or profession'. Once held to be business income, the Supreme Court decision in ACG Associated Capsules (343 ITR 89) applies: for the purpose of Explanation (baa) to section 80HHC, net interest (interest received less interest paid) must be considered and 90% applied on that net amount. Separately, receipts from Crabtree were held to be lease/rental in nature (not reimbursed expenses evidenced) and therefore properly excluded by applying the 90% reduction under Explanation (baa) when computing eligible deduction under section 80HHC. [Paras 30, 34, 35, 38, 43]

Interest on margin monies held to be business income; AO directed to allow netting of interest received and interest paid and then apply 90% exclusion under Explanation (baa) to section 80HHC. Amounts received from Crabtree treated as lease/ rental (not reimbursement) and 90% exclusion upheld; ground partly allowed.

Disallowance under section 40(a)(i) for non-deduction of tax at source - 'fees for technical services' and the DTAA/make available inquiry - Whether payments to foreign testing/certification agencies required TDS under section 195 (and hence disallowance under section 40(a)(i)); relief for payments to certain jurisdictions following coordinate bench precedents. - HELD THAT: - The Tribunal examined invoices, the nature of the testing/certification and relevant precedents including assessee's own coordinate bench decisions and authorities on interpretation of 'fees for technical services' and DTAA scope. Applying those authorities, payments to CSA International (USA) and KEMA (Netherlands) were held not chargeable as FTS on the facts of the assessee's earlier coordinate bench decisions and were deleted. However, payments to testing agencies in China and Germany were held taxable as FTS (and liable to withholding); the coordinate bench decision on India-China DTAA and Section 9 was followed, and disallowance under section 40(a)(i) was confirmed for the sums paid to China and Germany. The Tribunal rejected the assessee's contentions that (i) the services were purely machine performed with no human/technical element, (ii) there existed a bona fide belief negating default, and (iii) the amendments to resident payee disallowance rules should be read into section 40(a)(i). [Paras 57, 70, 76, 78, 83]

Disallowance under section 40(a)(i) deleted for payments to USA and Netherlands; disallowance confirmed for payments to China and Germany; ground partly allowed.

Deduction under section 80IC and requirement of revised return versus appellate rectification - Whether the assessee's enhanced claim of deduction under section 80IC (submitted by letter and revised audit report but without filing a revised return) should be allowed. - HELD THAT: - Assessee initially filed return claiming aggregate figures which netted profit of one eligible unit against loss of another eligible unit. During assessment proceedings the assessee submitted a revised audit computation (letter/form) increasing the eligible deduction by excluding the loss of the second eligible unit. The AO and CIT(A) had refused the change following Supreme Court authority requiring revised returns for fresh claims. The Tribunal held that the appellate authority (and ITAT) may, in appropriate cases, consider a bona fide arithmetic/rectificatory adjustment even if no formal revised return filed, particularly where facts are not in dispute and the adjustment is a straightforward computation concerning two eligible undertakings; accordingly directed AO to allow deduction for the profit of Unit No.1 and not to set off the loss of Unit No.2 while computing section 80IC deduction. [Paras 84, 88]

Assessee's enhanced deduction under section 80IC allowed (AO directed to permit deduction of Unit No.1 profit and not to set off loss of Unit No.2); ground allowed.

Provision for sales incentive - commercial liability crystallisation - Revenue's challenge to deletion of addition for provision for 'Sahenshah' sales incentive scheme (whether provision was a contingent liability or a present contractual liability). - HELD THAT: - The coordinate bench had adjudicated an identical issue for the assessee in AY 2006 07 and found the provision to be a contractual liability crystallised to the extent of rights accrued; the Tribunal followed that coordinate bench reasoning, noting that customer points had accrued and were quantifiable and the provision was made on a scientific basis. No distinguishing facts were pointed out by Revenue for AY 2007 08. [Paras 50, 51]

Revenue's appeal dismissed; provision for sales incentive allowed (ground in Revenue's appeal dismissed).

Final Conclusion: The appeals are disposed as follows. For AY 2004 05: the interest disallowance (capitalisation) is deleted; the Rs.5 lakh non compete payment is held capital and depreciation/amortisation claim is rejected; interest on margin monies is held business income and the AO is directed to net interest received and paid and then apply 90% exclusion under Explanation (baa) to section 80HHC; amounts from Crabtree treated as lease/rent and 90% exclusion upheld. For AY 2007 08: the Revenue's challenge on the sales incentive provision is dismissed; section 40(a)(i) disallowance is deleted for payments to USA/Netherlands but confirmed for China/Germany; and the assessee's revised claim under section 80IC is allowed (AO to give effect).

Deductibility of periphery development / corporate social responsibility expenses as business expenditure - Exchange rate fluctuation on purchase of spare parts - revenue or capital nature and capitalization into block of assets - Depreciation claim where mining operations were suspended - asset entering block and entitlement to depreciation - Deductibility of employees' provident fund contribution where deposited before due date of return - Reconciliation of inventory/stock between audited accounts and statutory H-1 form for mining - treatment of alleged shortage/suppression

Deductibility of periphery development / corporate social responsibility expenses as business expenditure - Periphery development expenses debited in books held to be allowable business expenditure. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that amounts spent by the assessee for periphery development (welfare of people in the mining area) were incurred wholly and exclusively for business purposes and fall within the ambit of business expenditure / CSR-type outgoings. The Assessing Officer's objection that the mode of expenditure differed from the Periphery Development Fund mechanism and that expenditure beyond an alleged 5% limit could be questioned was rejected. The Tribunal endorsed the view that quantum or decision to spend legitimately lies with the assessee and that the AO's contention could not be sustained on the facts; no infirmity was found in the appellate authority's reasoning. [Paras 9]

Addition deleted; revenue's ground on periphery development expenses dismissed.

Exchange rate fluctuation on purchase of spare parts - revenue or capital nature and capitalization into block of assets - Exchange loss on purchase of aircraft spare parts, capitalized and arising from mandatory maintenance, treated as revenue in nature and allowable. - HELD THAT: - The Tribunal agreed with the CIT(A) that the exchange loss arose on purchase of spare parts for the assessee's aircraft and was capitalized in the relevant year. Replacement of certain spare parts was mandatory under DGCA rules and formed part of regular maintenance for an asset that entered the block of assets. On these facts the loss was revenue in character and not a basis for addition; the AO's distinction from relevant authorities was not accepted. [Paras 15]

Addition in respect of exchange rate fluctuation deleted; revenue's ground dismissed.

Depreciation claim where mining operations were suspended - asset entering block and entitlement to depreciation - Depreciation on machinery was allowable despite suspension of mining activity; assets in the block attract depreciation. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the company remained the owner of the machinery and that procurement of assets results in their inclusion in the block of assets. Suspension of production pursuant to court orders did not negate the assessee's entitlement to depreciation. The appellate authority's reliance on precedent and examination of facts showed no infirmity warranting interference. [Paras 21]

Addition by disallowance of depreciation deleted; revenue's ground dismissed.

Deductibility of employees' provident fund contribution where deposited before due date of return - Employees' provident fund contribution paid before the due date of filing the return held to be allowable and not liable to disallowance. - HELD THAT: - The Tribunal followed the CIT(A)'s reliance on the jurisdictional High Court and the Tribunal precedent that payment of employees' PF contribution before the due date of filing the return satisfies compliance for deduction purposes. As the assessee deposited the employees' contribution within that timeline, the disallowance by the Assessing Officer was not warranted. [Paras 27]

Addition in respect of employees' PF contribution deleted; revenue's ground dismissed.

Reconciliation of inventory/stock between audited accounts and statutory H-1 form for mining - treatment of alleged shortage/suppression - Alleged shortage shown in audited accounts did not amount to suppression once reconciliation with Form H 1 and opening balances was examined; no addition warranted. - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that Balance Sheet schedules and Form H 1 were prepared for different dates/periods and volumetric analysis in H 1 could differ from book figures. The CIT(A) reviewed the reconciliation submitted under section 250(4) and found no discrepancy. On that factual examination, the AO's addition treating the difference as suppression of sales was not sustained. [Paras 33]

Addition for alleged suppression/shortage deleted; revenue's ground dismissed.

Final Conclusion: All appeals filed by the Revenue for the assessment years 2016-17, 2015-16 and 2012-13 are dismissed; the tribunal upheld the deletions made by the CIT(A) on each contested issue after examining the factual materials and applicable principles.

Condonation of delay - advancement of substantial justice over technicality - capitalisation of interest under the proviso to section 36(1)(iii) - proviso to section 32 - 180 days rule for depreciation - meaning of 'put to use' / 'ready to use' for claiming depreciation

Condonation of delay - advancement of substantial justice over technicality - Whether the delay of 104 days in filing the appeal before the ITAT should be condoned. - HELD THAT: - The Tribunal applied the established principle that substantial justice must normally be preferred over technical infirmities and referred to the guiding dicta in Collector, Land Acquisition v. Mst. Katiji. The assessee filed an affidavit explaining that the delay resulted from an inadvertent omission by the accountant; the Revenue filed no counter-affidavit and did not allege deliberate or mala fide delay. In the exercise of discretion and having regard to the absence of any adverse material suggesting culpable negligence or deliberate delay, the Tribunal held that the circumstances constituted reasonable and sufficient cause to condone the delay and proceeded to decide the appeal on merits. [Paras 4]

Delay of 104 days condoned; appeal admitted for adjudication on merits.

Capitalisation of interest under the proviso to section 36(1)(iii) - Whether interest paid on loan taken for acquisition of a machine must be capitalised under the proviso to section 36(1)(iii) because the asset was not put to use in the year. - HELD THAT: - The AO capitalised interest on the ground that the machine was not put to use in the year. The Tribunal noted that an identical issue for the immediately preceding year had been decided by the Tribunal in ITA No. 928/AHD/2016 (order dated 20-01-2020), where it was held that acquisition of the machine did not amount to an extension of the existing business and therefore the proviso to section 36(1)(iii) (which excludes interest where the capital borrowed is for acquisition of an asset for extension of existing business) did not apply. The present case involved identical facts and reasoning; no additional documents were necessary to decide the controversy. Respectfully following that earlier decision, the Tribunal set aside the CIT(A)'s finding and directed deletion of the addition. [Paras 12]

Addition of interest under section 36(1)(iii) deleted; ground of appeal allowed.

Proviso to section 32 - 180 days rule for depreciation - meaning of 'put to use' / 'ready to use' for claiming depreciation - Whether the assessee is entitled to full rate of depreciation for the machinery where the asset was alleged to be put to use on 4th October 2011 (and whether that results in use for 180 days or more in the previous year). - HELD THAT: - The proviso to section 32 restricts depreciation to 50% of the prescribed rate where an asset is used for less than 180 days in the previous year. The Tribunal accepted the assessee's unimpeached computation that, counting from 4th October 2011, the asset was put to use for 180 days in the previous year. The Tribunal observed that the proviso applies only where use is less than 180 days (i.e., 179 days or fewer). The computation of days was not disputed by Revenue. Applying the statutory test, the asset therefore fell outside the proviso and the assessee was entitled to depreciation at the full prescribed rate. [Paras 18]

Depreciation at full prescribed rate allowed for the machinery; addition deleted.

Meaning of 'put to use' / 'ready to use' for claiming depreciation - proviso to section 32 - 180 days rule for depreciation - Whether the assessee is entitled to depreciation at the full rate on vehicles purchased on 27th September 2011 despite registration certificates being dated 12th October 2011. - HELD THAT: - The Tribunal examined invoices, insurance policies (effective from 27th September 2011) and evidence of registration fee payment on 28th September 2011. It held that the vehicles were 'ready to use' as on the date of purchase and that trial/use in business fulfills the statutory requirement of being 'put to use'. The Tribunal relied on precedent of the Gujarat High Court that emphasizes that the test is use for business purposes and that limited or trial use suffices; there is no statutory minimum duration apart from the proviso's 180-day threshold. In these facts, even if the registration certificate bears a later date, the documentary material showed the vehicles were available for business use before 28th September 2011 and the assessee was therefore entitled to depreciation at the full rate. [Paras 25]

Depreciation at full rate (15%) on vehicles allowed; addition deleted.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and on merits allowed the assessee's challenges in part: deletion of the interest capitalization addition, allowance of full depreciation for the machinery (on the 180 days analysis), and allowance of full depreciation for the vehicles (being 'ready to use'). The appeal is partly allowed and the AO is directed to give effect to these directions.

Treatment of undisclosed sales and purchases - profit element embedded in undisclosed sales/purchases - application of gross profit rate to undisclosed receipts - valuation of stock found on survey - survey evidence and admissions under section 133A - estimation of income from unaccounted business

Treatment of undisclosed sales and purchases - profit element embedded in undisclosed sales/purchases - application of gross profit rate to undisclosed receipts - survey evidence and admissions under section 133A - Whether the entire amounts of receivables and excess stock found during survey can be treated as the assessee's income or only the profit element embedded therein is assessable, and at what rate. - HELD THAT: - The Tribunal held that the amounts recorded as receivables represent sales and the excess stock represents purchases; neither can be treated as income in their entirety. Only the profit percentage embedded in such undisclosed sales/purchases is taxable. The Tribunal relied on precedents of the Gujarat and Calcutta High Courts which treat undisclosed sales/purchases as giving rise to taxation of the gross-profit element rather than the whole turnover or purchase value. The authorities below correctly concluded that the assessee was engaged in unaccounted business, and the survey inventory and the partner's admissions under section 133A corroborate the presence of undisclosed transactions; however, that does not justify treating full sales or purchases as income. Having noted that the assessee's claimed gross profit rate of 4.57% was undisputed, the Tribunal exercised a reasonable estimation and directed that a rate of 5% be applied to the aggregate of the receivables and excess stock found on survey to determine the income to be brought to tax. The Tribunal observed that the aspect of investment for the unaccounted business was not examined by lower authorities and did not decide on it. The grounds of appeal in respect of these additions were therefore partly allowed to the extent indicated. [Paras 9]

Only the profit element embedded in the undisclosed receivables and excess stock is taxable; the Tribunal directed taxation at 5% of the aggregate of such amounts and partly allowed the appeal.

Remuneration to partners - Whether the addition disallowing remuneration to partners of the firm should be contested in the appeal. - HELD THAT: - The assessee's authorised representative informed the Tribunal that the ground relating to disallowance of partner remuneration was not pressed on account of the smallness of the amount. No substantive adjudication on merits was undertaken as the ground was not pursued by the assessee before the Tribunal. [Paras 10, 11]

Ground not pressed; the contention is dismissed.

Final Conclusion: The appeal is partly allowed: additions for undisclosed receivables and excess stock are restricted to the profit element and assessed at 5% of the aggregate of those amounts; the ground on partner remuneration was not pressed and is dismissed.

Penalty under section 271(1)(c) - Concealment of particulars of income - Voluntary disclosure - Summons under section 131(1A) not amounting to proceedings - Acceptance of return filed under section 148 - Distinguishing MAK Data (P) Ltd

Summons under section 131(1A) not amounting to proceedings - Penalty under section 271(1)(c) - Whether summons issued under section 131(1A) can be treated as 'proceedings' under which satisfaction for imposing penalty under section 271(1)(c) must be recorded. - HELD THAT: - The Tribunal held that summonses issued under section 131(1A) by the ADIT, being enquires made prior to initiation of proceedings under section 148, cannot be equated with 'proceedings' envisaged in section 271(1)(c). The statutory scheme requires that the Assessing Officer or the Commissioner be 'satisfied' in the course of proceedings under the Act (such as assessment or reassessment) before invoking the penal provision. Since the 131(1A) summonses preceded the reassessment proceedings and no satisfaction was recorded by the AO during those summons/enquiry stages, the summonses alone do not supply the requisite statutory basis for penalty under section 271(1)(c). [Paras 9]

Summons under section 131(1A) do not amount to 'proceedings' for the purpose of arriving at satisfaction under section 271(1)(c).

Acceptance of return filed under section 148 - Concealment of particulars of income - Voluntary disclosure - Whether penalty under section 271(1)(c) is sustainable where the assessee, after being called by 131(1A) notices, filed a return under section 148 disclosing the income which was accepted by the AO without any addition. - HELD THAT: - The Tribunal found that when the return filed in response to notice under section 148 fully declared the additional income and the assessing officer accepted the return without making any addition, there remained no difference between returned income and assessed income. Section 271(1)(c) being a penal provision must be strictly construed and applies only where concealment or furnishing of inaccurate particulars is established with reference to the income-tax return. Mere fact that the disclosure followed departmental enquiries or survey does not automatically attract penalty if the returned income ultimately equals the assessed income and no satisfaction of concealment is recorded in proceedings. Reliance was placed on precedents that penal liability cannot rest on conjectures that disclosure would not have been made but for survey; once the revised return is regularised and accepted, penalty is not sustainable. [Paras 9]

Penalty under section 271(1)(c) cannot be imposed merely because the disclosure followed departmental enquiries where the return filed under section 148 was accepted and there is no concealing of particulars in the return.

Distinguishing MAK Data (P) Ltd - Penalty under section 271(1)(c) - Whether the principles of MAK Data (P) Ltd are applicable to sustain penalty in the present facts. - HELD THAT: - The Tribunal observed that MAK Data (P) Ltd involved facts where incriminating documents were found during survey and specific queries in assessment led to surrender of income; those facts materially differ from the present case where no incriminating documents were recovered during survey and the additional income offered in the section 148 return was accepted as filed. Given these factual distinctions, the Tribunal held MAK Data (P) Ltd inapplicable to the present set of facts and therefore not a valid basis to sustain penalty. [Paras 9]

MAK Data (P) Ltd is distinguishable on facts and does not sustain imposition of penalty in this case.

Final Conclusion: The Tribunal set aside the penalty confirmed by the CIT(A) and held that penalty under section 271(1)(c) could not be sustained: (i) summons under section 131(1A) do not amount to 'proceedings' for recording the requisite satisfaction; (ii) where the assessee filed a return under section 148 disclosing the additional income which was accepted by the AO without additions, penalty for concealment could not be imposed; and (iii) the Supreme Court decision in MAK Data (P) Ltd was factually distinguishable and inapplicable. Appeals accordingly allowed (partly) for the stated assessment years.

Condonation of delay for filing appeal - penalty under section 271(1)(c) of the Income tax Act - penalty computation based on quantum upheld by appellate authority - remand for recomputation of penalty upon reduction of assessed addition

Condonation of delay for filing appeal - Delay in filing the appeal was condoned and the appeal admitted for adjudication. - HELD THAT: - The assessee explained the delay of 56 days by affidavit, attributing it to oversight and misplacement of the CIT(A) order by his then advocate and subsequent discovery only upon pressure of recovery. After hearing parties and perusing record the Tribunal accepted this explanation as sufficient cause and applied a liberal approach to enable adjudication on merits rather than dismissal on technical grounds. The appeal was therefore admitted despite the delay. [Paras 4]

Delay of 56 days condoned and appeal admitted for adjudication.

Penalty under section 271(1)(c) of the Income tax Act - penalty computation based on quantum upheld by appellate authority - remand for recomputation of penalty upon reduction of assessed addition - Whether penalty under section 271(1)(c) was rightly levied and the quantum on which it should be computed. - HELD THAT: - The AO levied penalty on an addition of alleged unaccounted purchases. The Tribunal in the separate quantum proceedings found the case involved unrecorded sales and restricted the addition to the profit element of undisclosed sales (Rs. 18,566) rather than the AO's larger investment/addition. Given the Tribunal's categorical finding that undisclosed sales (and only profit thereon) constituted the correct basis of addition, the Tribunal here held that invocation of section 271(1)(c) was legally sustainable but the penalty must be computed on the quantum as confirmed by the Tribunal in the quantum proceedings. Consequently the portion of penalty attributable to the deleted larger addition is not sustainable. The matter was therefore directed back to the AO for recomputation of penalty limited to the reduced addition affirmed by the Tribunal. [Paras 9, 11]

Penalty under section 271(1)(c) is sustained in principle but must be recomputed by the AO on the reduced addition of Rs. 18,566; the remainder of the penalty is deleted.

Final Conclusion: Delay in filing the appeal was condoned and the appeal admitted; penalty under section 271(1)(c) is held to be sustainable in law but shall be recomputed by the AO on the quantum (profit on undisclosed sales) confirmed by the Tribunal, with the balance of the penalty deleted.

Taxability of interest under DTAA - Article 11 of India-Cyprus DTAA - Meaning of "paid" under tax treaty - Article 3(2) of India-Cyprus DTAA - Domestic law meaning of treaty terms - Section 43(2) of the Income Tax Act, 1961 - Cash basis versus mercantile (accrual) accounting - Reference to a Special Bench under section 255(3)

Admission of additional grounds of appeal - Additional grounds of appeal seeking to challenge transfer pricing adjustment by reference to Article 11 of the India-Cyprus DTAA were admitted. - HELD THAT: - The Tribunal considered the petitions seeking leave to raise additional grounds in the appeals for assessment years 2011-12 and 2012-13 and, after hearing rival contentions, allowed the applications and admitted the additional grounds. The admitted grounds challenged the imputation of notional interest and its taxability in India in the light of Article 11 of the Indo Cyprus DTAA, on the basis that interest was not actually paid during the moratorium period and therefore not taxable in the hands of the Cyprus resident assessee. [Paras 3]

Additional grounds were admitted and taken up for hearing.

Meaning of "paid" under tax treaty - Article 11 of India-Cyprus DTAA - Article 3(2) of India-Cyprus DTAA - Section 43(2) of the Income Tax Act, 1961 - Reference to a Special Bench under section 255(3) - Whether the expression 'paid' in Article 11 of the Indo Cyprus DTAA (and the consequential question of taxing notional interest via transfer pricing adjustments) requires determination by a larger bench, having regard to article 3(2) and domestic tax law meaning under section 43(2). - HELD THAT: - The Tribunal observed that coordinate bench decisions have treated the expression 'paid' in Article 11 as requiring cash receipt (i.e., taxation on a receipt basis) but have not examined the relevance of article 3(2) which directs that undefined treaty terms take their meaning from the domestic law of the contracting state unless the context otherwise requires. Section 43(2) of the Income Tax Act defines 'paid' for domestic tax purposes as 'actually paid or incurred according to the method of accounting' and, on the other hand, Indian jurisprud (including the decision in Standard Triumph Motor Co. Ltd.) has recognized that credit entries in the payer's books may amount to receipt by the payee. Given the absence of any coordinate bench analysis on the connotations of 'paid' in light of article 3(2), section 43(2) and relevant Supreme Court precedent, the Tribunal considered that the question is of sufficient importance and complexity to merit reference to a bench of three or more members under section 255(3). The Tribunal emphasised that such a reference is consistent with judicial discipline where doubt as to earlier decisions' correctness may warrant a larger bench consideration. [Paras 7, 8, 9, 10, 11]

Matter referred to a Special Bench for authoritative determination on the interpretation of 'paid' in Article 11 in light of article 3(2) and section 43(2); hearing adjourned sine die.

Final Conclusion: The Tribunal admitted the additional grounds challenging the transfer pricing imputation of notional interest for AYs 2011 12 and 2012 13, and, finding that the determinative question-whether 'paid' in Article 11 of the Indo Cyprus DTAA must be construed having regard to article 3(2), section 43(2) and relevant precedents-requires authoritative resolution, referred the matter to a Special Bench of three or more Members and adjourned the appeals sine die.

Deduction under section 36(1)(iii) of the Income Tax Act for interest on borrowed capital - interest on borrowed capital utilised for investment in shares - business purpose test - investing and financing as principal business activity of an NBFC - application of borrowed funds for share application money - where capital is borrowed for the purpose of business, its application is immaterial

Deduction under section 36(1)(iii) of the Income Tax Act for interest on borrowed capital - interest on borrowed capital utilised for investment in shares - investing and financing as principal business activity of an NBFC - application of borrowed funds for share application money - Allowability of interest expense attributable to short term borrowings used to make share application money where the assessee is an NBFC engaged in investing and financing activities - HELD THAT: - The Tribunal found on the facts that the assessee is a Reserve Bank of India registered NBFC whose principal business is investing and financing, and that payments of share application money formed part of its regular investing activity (supported by details showing such investments since F.Y. 2005 06 and their classification as current assets). Applying established precedent that where capital is borrowed for the purpose of business it is immaterial how the borrowed money is applied, the Tribunal held that interest on borrowed funds employed in the assessee's ordinary course investing activities is deductible under section 36(1)(iii). The Tribunal relied on judicial authorities to the like effect and rejected the revenue's contention that investment in shares was necessarily a capital investment disentitling deduction, concluding that on the present facts the borrowed funds were used for business purposes and the related interest was deductible. [Paras 7, 8, 9]

Interest expenditure attributable to short term borrowings used for payment of share application money by the NBFC is deductible under section 36(1)(iii); the disallowance is deleted.

Final Conclusion: The appeal is allowed: the Tribunal deleted the disallowance of interest made by the AO and confirmed by the CIT(A), holding that interest on borrowings used for share application money was incurred for the purpose of the assessee's business and deductible under section 36(1)(iii).

Penalty under Section 271(1)(c) - concealment of particulars of income versus furnishing inaccurate particulars of income - Notice specificity required by Section 274 - show cause notice must state the specific limb of Section 271(1)(c) - Principles of natural justice - assessee's right to know and meet the case against him - Initiation and imposition of penalty must be on the same specified ground - Penalty proceedings are distinct from assessment proceedings

Notice specificity required by Section 274 - show cause notice must state the specific limb of Section 271(1)(c) - Penalty under Section 271(1)(c) - concealment of particulars of income versus furnishing inaccurate particulars of income - Principles of natural justice - assessee's right to know and meet the case against him - Initiation and imposition of penalty must be on the same specified ground - Whether penalties under Section 271(1)(c) for AY 2013-14 and AY 2014-15 are sustainable when the show cause notices under Section 274 did not specify whether penalty was proposed for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal held that the show cause notices were defective because they did not specify the particular limb of Section 271(1)(c) on which penalty was sought to be imposed. Adopting the reasoning in the cited coordinate-bench decision, the Tribunal applied the legal principle that where a notice is in a printed form enumerating both limbs without striking out the inapplicable limb, it fails to disclose the specific grounds the assessee must meet, thereby offending principles of natural justice. The Tribunal reiterated that initiation of penalty proceedings must disclose the same ground on which penalty is ultimately imposed; initiation on one limb and imposition on another is invalid. Because the defect went to the sufficiency of the notice and the assessee was not put to prove or answer a specifically pleaded limb, the penalty orders could not be sustained. For these reasons the Tribunal directed deletion of the penalties for the assessment years in question and did not adjudicate other merits in view of the notice-defect conclusion.

The penalties imposed under Section 271(1)(c) for AY 2013-14 and AY 2014-15 are cancelled because the show cause notices under Section 274 did not specify whether the proceedings were for concealment of income or for furnishing inaccurate particulars of income.

Final Conclusion: The appeals are allowed; penalties imposed for AY 2013-14 and AY 2014-15 are deleted because the show cause notices failed to specify the particular limb of Section 271(1)(c), thereby violating the assessee's right to know and meet the case.

Arm's Length Price - Intra Group Services - Transfer Pricing adjustment - Advertisement, Marketing and Promotion expenses - Rule of consistency - Lease rent for motor cars - Depreciation on moulds - Deduction under section 80G - Short deduction of TDS/TCS - Interest under sections 234A and 234B - Additional tax on interest on distributable profits - Education cess and higher education cess-deductibility - Remand for fresh adjudication - TPO and DRP directions

Arm's Length Price - Intra Group Services - TPO and DRP directions - Determination of ALP for Intra Group Services received by the assessee. - HELD THAT: - The Tribunal examined the DRP's repetition of directions adopted in earlier years despite coordinate-bench decisions in the assessee's favour. Noting that the TPO had determined ALP at nil and that the Tribunal in the assessee's own earlier matters had consistently decided the same issue for preceding years, the Bench held that the DRP could not travel beyond the view taken by the AO as confirmed by the DRP and declined the Revenue's request to remit the matter for de novo ALP determination. The Tribunal followed its coordinate-bench precedent and found no reason to interfere with the view favourable to the assessee. [Paras 6, 7]

Allowed the ground of the assessee and declined to remit the ALP determination for Intra Group Services.

Arm's Length Price - Advertisement, Marketing and Promotion expenses - TPO and DRP directions - Determination of ALP for Advertisement, Marketing and Promotion (AMP) expenses. - HELD THAT: - The Bench noted that the TPO and DRP repeated their stand contrary to earlier Tribunal decisions in the assessee's own case. Relying on coordinate-bench precedents which had adjudicated the AMP issue in favour of the assessee for earlier assessment years and in absence of any change in facts or law, the Tribunal upheld those decisions and refused to disturb the assessee's position. [Paras 8, 9, 10]

Allowed the ground of the assessee and upheld the Tribunal's earlier findings on AMP expenses.

Rule of consistency - Application of the rule of consistency where identical issues were accepted in earlier assessment years. - HELD THAT: - Applying the rule of consistency as recognised by the Supreme Court (Radhasoami Satsang v. CIT), the Tribunal held that the AO, TPO and DRP erred in departing from positions accepted in earlier years without justification. The Bench accepted the assessee's contention that identical matters had been admitted to be at arm's length in preceding years and that consistency must be observed in income-tax proceedings. [Paras 11, 12]

Allowed the ground based on the rule of consistency.

Lease rent for motor cars - Disallowance of lease rent paid in respect of motor cars. - HELD THAT: - The Tribunal observed that the issue was squarely covered in favour of the assessee by earlier coordinate-bench decisions for the relevant assessment years. In absence of any change in facts or law and no material produced by the revenue to controvert those findings, the Bench found no reason to interfere and followed the earlier coordinate-bench decision. [Paras 13, 14]

Allowed the ground of the assessee in respect of lease rent for motor cars.

Depreciation on moulds - Remand for fresh adjudication - Allowability of depreciation on moulds. - HELD THAT: - While noting that the issue is covered by the Tribunal's earlier decision in the assessee's own case, the Bench observed that the coordinate-bench had restored the matter for fresh adjudication allowing the assessee liberty to produce fresh evidence. Consequentially, the Tribunal set the issue aside to the AO for fresh adjudication and permitted the assessee to file additional evidence. [Paras 15, 16]

Allowed for statistical purposes and remanded to the Assessing Officer for fresh adjudication.

Deduction under section 80G - Remand for fresh adjudication - Claim for deduction under section 80G. - HELD THAT: - After hearing parties, the Tribunal found it appropriate to remit the matter to the Assessing Officer for fresh adjudication and verification of the assessee's claim in accordance with law rather than decide the claim on the record before it. [Paras 17]

Set aside to the file of the Assessing Officer for fresh adjudication.

Short deduction of TDS/TCS - Remand for fresh adjudication - Short grant of credit for TDS/TCS claimed by the assessee. - HELD THAT: - Both parties agreed that the matter required verification by the Assessing Officer. The Tribunal accordingly restored the issue to the AO for fresh verification and disposal. [Paras 18]

Allowed for statistical purposes and remitted to the Assessing Officer for verification.

Interest under sections 234A and 234B - Remand for fresh adjudication - Levy of interest under sections 234A and 234B consequential to other adjustments. - HELD THAT: - The Tribunal treated the questions of interest as consequential to outcomes on substantive grounds and set them aside to the Assessing Officer for fresh calculation after adjudication of the primary issues. [Paras 19]

Set aside to the file of the Assessing Officer for fresh calculation.

Additional tax on interest on distributable profits - Remand for fresh adjudication - Levy of additional tax on interest on distributable profits as agreed by parties. - HELD THAT: - As agreed by the parties, the Tribunal remanded the matter to the Assessing Officer for fresh adjudication in accordance with law. [Paras 20]

Set aside to the Assessing Officer for fresh adjudication.

Education cess and higher education cess-deductibility - Allowability as deduction of education cess and higher education cess on income-tax while computing total income. - HELD THAT: - The Tribunal examined conflicting decisions and legislative history as discussed by the parties and observed that coordinate and other High Court authority (as analysed) supported the assessee's position. Concluding that the education cess and higher education cess are allowable as deduction, the Bench accepted the assessee's submissions on this point. [Paras 21, 22, 25, 26]

Allowed the ground and held that education cess and higher education cess are deductible.

Final Conclusion: The appeal for AY 2015-16 is allowed in part: substantive transfer-pricing and related expenditure issues (IGS, AMP, lease rent) were decided in favour of the assessee; the deductibility of education cess was allowed; several issues (depreciation on moulds, deduction under section 80G, short TDS/TCS credit, interest and additional tax matters) were remanded to the Assessing Officer for fresh adjudication or calculation.

Inherent powers of the High Court under Section 482 Cr.P.C. - permission to travel abroad subject to conditions - embassy undertaking and mutual legal assistance - absence of extradition treaty versus mutual legal assistance treaty - forfeiture of security on non-return - maintainability of successive remedies under Section 397(3) Cr.P.C.

Inherent powers of the High Court under Section 482 Cr.P.C. - maintainability of successive remedies under Section 397(3) Cr.P.C. - Whether the petition under Section 482 Cr.P.C. was maintainable notwithstanding an earlier revision filed by the petitioners. - HELD THAT: - The Court examined the bar in Section 397(3) Cr.P.C. but held that the inherent jurisdiction under Section 482 Cr.P.C. survives and may be exercised sparingly to secure the ends of justice. Applying the principles that such power is available when necessary to give effect to orders or prevent abuse of process, the petition was held maintainable and entertainable by this Court. [Paras 20, 21, 22]

The petition under Section 482 Cr.P.C. is maintainable and is entertained.

Permission to travel abroad subject to conditions - embassy undertaking and mutual legal assistance - forfeiture of security on non-return - Whether petitioner No.1 (Aida Askerbekova) should be permitted to travel to Kyrgyzstan for her child's urgent medical surgery and on what conditions. - HELD THAT: - The Court accepted the verified medical documents and the Embassy of Kyrgyz Republic's undertaking that petitioner No.1's presence would be ensured when required. Although there is no extradition treaty, the Treaty on Mutual Legal Assistance between India and Kyrgyz Republic and the embassy's verified undertaking were held sufficient to mitigate the risk of non-return, subject to protective conditions. Balancing the petitioner's Article 21 interest in securing urgent medical treatment for her child against the prosecution and investigation interests of the Customs Department, the Court permitted travel for a limited period on conditions designed to secure return: deposit of security in the form of an FDR, conversion to auto-renewal, a 45-day travel period with return by the 46th day, and forfeiture of the security if she fails to return. The Court clarified that the order does not express any view on the merits of the adjudication order of the Commissioner of Customs. [Paras 25, 26, 27]

Petitioner No.1 is allowed to travel to Kyrgyzstan for 45 days for her child's surgery subject to deposit of the directed FDR, embassy assurance, return by the 46th day and forfeiture of the FDR on non-return; no adjudicatory conclusion on merits of the Customs order is expressed.

Permission to travel abroad subject to conditions - Whether petitioner No.2 (Begaim Akynova) should be permitted to travel abroad. - HELD THAT: - The Court found that no urgent necessity had been shown by petitioner No.2. Although medical documentation regarding her spouse's COVID-19 status was placed on record and verified, the nature of the ailment and quarantine considerations meant the prayer could not be granted. The Revisional Court's finding that no ground necessitating travel had been made out in respect of petitioner No.2 was affirmed. [Paras 23, 24]

Petitioner No.2's prayer to travel abroad is declined for lack of urgency and requisite justification.

Final Conclusion: The High Court entertained the Section 482 petition; permitted petitioner No.1 to travel to Kyrgyzstan for 45 days for her son's urgent surgery subject to deposit of the directed FDR, embassy assurance and forfeiture on non-return, while refusing petitioner No.2's request for travel for lack of sufficient urgency; no adjudication on the merits of the Customs order was made.

Maintainability of writ petition under Articles 226/227 - Territorial jurisdiction of High Court under Article 226 - Cause of action arising within territorial jurisdiction - Abuse of process / abuse of jurisdiction - Exemplary costs for abuse of jurisdiction

Maintainability of writ petition under Articles 226/227 - Territorial jurisdiction of High Court under Article 226 - Cause of action arising within territorial jurisdiction - Abuse of process / abuse of jurisdiction - Exemplary costs for abuse of jurisdiction - The writ petition is not maintainable before this High Court for want of territorial jurisdiction and was filed as an abuse of the Court's process, warranting dismissal with exemplary costs. - HELD THAT: - The petitioners, both residents of Mumbai, challenge disqualification as directors of a company registered with the Registrar of Companies, Mumbai. There is no averment or material showing that any part of the cause of action arose within the territorial jurisdiction of the Punjab and Haryana High Court. Article 226 permits a High Court to issue writs where the cause of action wholly or in part arises within its territorial jurisdiction; mere impleading of a local authority without a territorial nexus does not confer jurisdiction. The Court relied on established authority to the effect that a High Court must be shown that at least part of the cause of action arose within its territory and that invoking jurisdiction without such connection amounts to an abuse. The petition was instituted apparently to obtain the benefit of an interim order in a separate matter, rather than bona fide invoke this Court's jurisdiction. Having found absence of territorial nexus and mala fides in invocation of jurisdiction, the petition was dismissed and exemplary costs were imposed to deter such misuse of the writ jurisdiction.

Writ petition dismissed for want of territorial jurisdiction; petition constituted an abuse of process and was dismissed with exemplary costs to be paid to the PM-CARES Fund.

Final Conclusion: The High Court dismissed the writ petition for lack of territorial jurisdiction, finding the petition to be an abuse of the Court's process, and directed the petitioners to deposit exemplary costs of Rs. 1,00,000 with the PM-CARES Fund.

Sanction of scheme of amalgamation - compliance with accounting standards (AS-14 paragraph 23) - transfer of assets and liabilities on amalgamation - change of registered office and change of name effected by scheme - single window clearance by Tribunal sanction - inter bench coordination of NCLT for multi jurisdictional scheme

Sanction of scheme of amalgamation - fair and reasonable test for scheme - Sanction of the scheme of amalgamation of the transferor companies with the transferee company - HELD THAT: - The Tribunal examined the scheme under sections 230 to 232 of the Companies Act, 2013, the representations of the Regional Director and replies filed by the petitioner, compliance with directions, the report of the official liquidator and approvals by shareholders. The Tribunal found the scheme to be fair and reasonable, not violative of law or public policy and that requisite statutory compliances have been fulfilled. Consequential undertakings by the petitioner relating to statutory filings were accepted. Accordingly the petition was made absolute and the scheme sanctioned with appointed date fixed as April 1, 2017. [Paras 38, 39, 40]

The scheme is sanctioned and C.P. (CAA) No. 846/MB/2019 is made absolute; appointed date fixed as April 1, 2017.

Compliance with accounting standards (AS-14 paragraph 23) - treatment of reserves in scheme of amalgamation - Applicability of paragraph 23 of AS 14 (treatment of reserves) to schemes sanctioned under Companies Act, 2013 - HELD THAT: - Paragraph 23 of AS 14 prescribes disclosures and restricts deviations in the accounting treatment of reserves prescribed by a scheme. The Ministry of Corporate Affairs' notification dated March 30, 2016 removes any carve out that previously exempted schemes under the Companies Act, 2013 from paragraph 23; consequently paragraph 23 is mandatorily applicable to schemes of amalgamation under the 2013 Act and the accounting treatment in a scheme cannot override paragraph 23. The Tribunal noted earlier judicial decisions permitting deviation were rendered before the 2016 amendment and that the issue post amendment remains to be tested in courts. The Tribunal also observed that, ultimately, the transferee company (within Bengaluru Bench jurisdiction) will have to give effect to accounting entries, and the Tribunal refrained from expressing a final view on the entries themselves. [Paras 29, 31, 32, 33, 34]

Paragraph 23 of AS 14 is mandatorily applicable to the scheme and a scheme cannot prescribe accounting treatment in contravention of that paragraph; the Tribunal declines to express an opinion on the actual accounting entries which fall to be made by the transferee company.

Change of registered office and change of name effected by scheme - single window clearance by Tribunal sanction - Whether separate procedure under section 13 (change of name/registered office) is required when effected as part of a sanctioned scheme - HELD THAT: - The Tribunal applied settled law that provisions of a sanctioned scheme constitute a complete code; where change of registered office or change of name is effected as part of the scheme, separate procedures under other provisions of the Companies Act are not required. Approval by members to the scheme is to be treated as approval for the consequential changes. Practical compliances necessary for registry (such as filings in MCA 21) remain to be carried out and the petitioner undertook to comply with such procedural requirements. [Paras 35, 36]

No separate statutory procedure for change of name or registered office is required where such changes are effected under the sanctioned scheme, subject to necessary registry filings and procedural compliances.

Transfer of assets and liabilities on amalgamation - liabilities to be vested in transferee company - Effect of amalgamation on liabilities, including pending tax demand and appeals - HELD THAT: - The scheme provides that assets and liabilities of the transferor companies shall stand transferred to and vested in the transferee company in terms consonant with section 232(3)(a) of the Companies Act, 2013. The Tribunal noted the Income tax department's demand and that the transferor has an appeal pending; once sanctioned the transferee will succeed to liabilities and be bound to provide information to tax authorities and to prosecute or defend pending proceedings by operation of law. Tax liability remains subject to the outcome of existing appeals and legal processes. [Paras 21, 22, 25]

On sanction, liabilities (including disputed tax demands) vest in the transferee company which will be bound to deal with them and to pursue available appeals or defenses.

Statutory filings following sanction - compliance with stamp duty and official actions - Post sanction filings and directions to effect registry and stamp duty actions - HELD THAT: - The Tribunal directed the petitioner/transferor company No. 2 to file a certified copy of the order with the concerned Registrar of Companies electronically in e Form INC 28 within 30 days and to lodge the certified order and scheme with the Superintendent of Stamps for adjudication of stamp duty within 60 days. The Tribunal also directed that all concerned regulatory authorities may act on certified copies of the order together with the scheme and recorded that interested persons may apply for further directions if necessary. [Paras 41, 42, 43]

The petitioner must file certified copies of the order and scheme as directed (INC 28 and stamp duty filings); regulatory authorities are to act on certified copies of the order and scheme.

Final Conclusion: The Tribunal sanctioned the scheme of amalgamation as filed (appointed date April 1, 2017), recording that the scheme is fair and lawful, while (a) affirming applicability of paragraph 23 of AS 14 to schemes under the Companies Act, 2013 and declining to express final views on accounting entries which fall to the transferee, (b) confirming that changes of name and registered office effected by the sanctioned scheme require no separate substantive procedure though necessary registry filings must be made, (c) directing statutory post sanction filings including e Form INC 28 and stamp duty action, and (d) recording that liabilities, including disputed tax demands, will vest in the transferee company which may pursue available remedies.

Limitation under Article 137 of the Limitation Act - date of default as trigger for limitation (declaration of NPA) - acknowledgement in writing under Section 18 of the Limitation Act - condonation of delay under Section 5 of the Limitation Act

Limitation under Article 137 of the Limitation Act - date of default as trigger for limitation (declaration of NPA) - condonation of delay under Section 5 of the Limitation Act - acknowledgement in writing under Section 18 of the Limitation Act - The Section 7 petition is time-barred and therefore not maintainable as it was filed beyond the period of limitation calculated from the date of default (declaration of NPA). - HELD THAT: - The Tribunal held that Article 137 of the Limitation Act applies to an application under Section 7 of the Insolvency and Bankruptcy Code and that the right to sue accrues on occurrence of default. The date of declaration of NPA (30.11.2013) is the trigger for the running of limitation; the petition filed on 15.12.2017 was therefore beyond three years and barred by limitation unless delay is condoned under Section 5 of the Limitation Act. The Tribunal relied on the Supreme Court precedents (including B.K. Educational Services, Gaurav H. Dave, Vashdeo R. Bhojwani and Sagar Sharma) which establish that the coming into force of the IBC does not reset limitation and Article 137 governs Section 7 applications. The Tribunal also noted authority holding that mere inclusion of a debt in the corporate debtor's balance sheet is not a sufficient written acknowledgement to restart limitation under Section 18. Given that no effective application of Section 5 was made to condone delay and the petition was filed outside Article 137's period, the petition was disposed of on the ground of limitation without adjudication on merits. [Paras 19, 21, 24, 26, 27]

The I.B. Petition is rejected as barred by limitation.

Final Conclusion: The Adjudicating Authority rejected the Section 7 petition on the ground that it was time-barred under Article 137 of the Limitation Act, without entering into merits; no order as to costs.

Liquidation under section 33(1)(a) of the Insolvency and Bankruptcy Code - commercial wisdom of the Committee of Creditors - no interference by the Adjudicating Authority with the commercial wisdom of the COC - resolution professional to act as liquidator

Liquidation under section 33(1)(a) of the Insolvency and Bankruptcy Code - commercial wisdom of the Committee of Creditors - resolution professional to act as liquidator - Application IA 793/2019 filed by the resolution professional under section 33(1)(a) seeking liquidation of the corporate debtor and continuation of the RP as liquidator was to be allowed. - HELD THAT: - The application under section 33(1)(a) was considered in the light of conflicting views expressed by two members of the Tribunal: the Hon'ble Member (Judicial) who allowed the application and directed that the RP continue as liquidator, and the Hon'ble Member (Technical) who recorded a different opinion and sought further clarifications. The Bench reviewed the record and the precedents relied upon by the Judicial Member, particularly the ratio in K. Sasidharan and the subsequent exposition in the Essar Steel matter, which affirm that the commercial wisdom exercised by the Committee of Creditors is not to be interfered with by the Adjudicating Authority. Applying that principle, and having regard to the Committee of Creditors' decision-making and the mandate under the Code, the Bench concurred with the Judicial Member's conclusion that the IA seeking liquidation should be allowed and that the RP should continue as liquidator to take steps as provided in the Code.

IA 793/2019 is allowed; the corporate debtor is ordered into liquidation and the resolution professional shall continue as liquidator to take steps in accordance with the Code.

Final Conclusion: The Tribunal allowed the RP's application for liquidation under section 33(1)(a), endorsing the principle that the Adjudicating Authority should not disturb the commercial wisdom of the Committee of Creditors, and directed that the RP continue as liquidator; IA 793/2019 stands disposed of.

Applicability of Article 137 of the Limitation Act to applications under Section 7 of the I&B Code - Trigger of limitation - date of default/NPA - Effect of acknowledgment under Section 18 of the Limitation Act - Section 22 of the Limitation Act not to determine limitation period for Section 7 applications - Assignment of debt does not revive limitation absent prior acknowledgment - Corporate Insolvency Resolution Process is not a recovery proceeding

Applicability of Article 137 of the Limitation Act to applications under Section 7 of the I&B Code - Trigger of limitation - date of default/NPA - Assignment of debt does not revive limitation absent prior acknowledgment - Application under Section 7 of the I&B Code filed by Phoenix ARC was barred by limitation as the right to apply accrued on occurrence of default prior to assignment and Article 137 governs limitation for Section 7 applications. - HELD THAT: - The Tribunal applied the binding pronouncements of the Hon'ble Supreme Court that Article 137 of the Limitation Act is the residuary article applicable to applications under Section 7 and that the trigger for limitation is the date of default/NPA. The record showed defaults in respect of Loan Nos.2 and 3 occurred prior to 9th September, 2014 and the Section 7 petition was filed on 29th September, 2017 - beyond the three year period from the relevant date of default. Assignment of the debt to Phoenix after that date did not revive the right to apply under the Code absent any acknowledgment by the corporate debtor within the prescribed period. On these facts the Tribunal concluded the Section 7 application was time barred and the admission was unsustainable. [Paras 19, 20, 24]

Section 7 application held barred by limitation and the admission by the Adjudicating Authority set aside.

Effect of acknowledgment under Section 18 of the Limitation Act - No acknowledgement in writing by the corporate debtor was shown that would restart limitation under Section 18; hence limitation could not be extended. - HELD THAT: - The Tribunal examined the record and found nothing to constitute an acknowledgment in writing, signed by the corporate debtor or an authorised signatory, prior to the cut off date that would enable recomputation of the limitation period under Section 18. The books of account maintained by the assignor were held not to qualify as the requisite written acknowledgment signed by the debtor. Consequently, the period of limitation remained unextended. [Paras 21, 22]

No fresh period of limitation arises under Section 18; limitation stood against the Financial Creditor.

Section 22 of the Limitation Act not to determine limitation period for Section 7 applications - Section 22 (relating to breaches and torts) cannot be used to count the period of limitation for Section 7 applications under the I&B Code; limitation is to be counted from date of default/NPA as held by the Supreme Court. - HELD THAT: - The Tribunal noted that while Section 22 deals with fresh periods for successive breaches, it is not the provision to determine the limitation period for an application under Section 7. Reliance was placed on the Supreme Court's guidance that the Section 7 application period is governed by Article 137 and the I&B Code's own provisions identifying default/NPA as the trigger. Therefore Section 22 cannot be employed to recast the limitation timeline for such applications. [Paras 23]

Section 22 not applicable for computing limitation for the Section 7 petition in this case.

Corporate Insolvency Resolution Process is not a recovery proceeding - The admission order of the Adjudicating Authority dated 29th January 2019 was set aside; the Corporate Debtor was released from CIRP and records/assets to be handed back to promoters/board; matter remitted to NCLT for determination of IRP/Resolution Professional fees and CIRP costs. - HELD THAT: - The Tribunal reiterated that CIRP is not a recovery proceeding and, having held the Section 7 application to be time barred, directed that the admission order be set aside. Consequential directions were issued for immediate handover of assets and records by the Interim Resolution Professional to the promoters/board. The Tribunal remitted the limited issue of fees and CIRP costs to the Adjudicating Authority for determination, directing that such costs be borne by the Financial Creditor. [Paras 25, 26]

Admission vacated; Corporate Debtor released from CIRP; matters of fees and CIRP cost remitted to NCLT for determination (to be borne by Phoenix ARC).

Final Conclusion: The appeal is allowed: having applied Article 137 as the governing provision and found the Section 7 petition filed beyond the three year limitation from the date of default/NPA with no qualifying acknowledgement, the NCLT admission dated 29 01 2019 is set aside, the Corporate Debtor is discharged from CIRP and its assets/records are to be handed back; the Adjudicating Authority will determine IRP/Resolution Professional fees and CIRP costs, which are to be borne by the Financial Creditor.

Financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - compulsorily convertible debentures - treatment of instruments as debt where reflected as debt in the books of the corporate debtor - overriding effect of the Insolvency and Bankruptcy Code - direction to Resolution Professional to adjudicate claims within a stipulated timeframe - liberty to seek forensic audit

Compulsorily convertible debentures - financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - treatment of instruments as debt where reflected as debt in the books of the corporate debtor - overriding effect of the Insolvency and Bankruptcy Code - Claim based on investment in compulsorily convertible debentures held by the claimant is a financial debt and must be admitted as such. - HELD THAT: - The Tribunal examined the nature of the instrument and the contemporaneous treatment in the corporate debtor's records. The agreement and balance-sheet entries showed the amount as paid towards fully and compulsorily convertible debentures and reflected in the books as long term borrowings with TDS deducted on interest. The Tribunal held that a party which has consistently treated the obligation as a debt in its books cannot, at the insolvency stage, take a contrary stand relying on provisions of other statutes or regulatory forms. The Supreme Court authority relied upon by the Resolution Professional concerned guidelines for convertible preference shares and employee stock option guidelines and was not held to be apposite to compulsorily convertible debentures in this factual matrix. Further, the Tribunal emphasised that where, as on the date of admission, the instrument has not yet converted and the corporate debtor has defaulted in payment of promised returns, the right of the debenture holder to claim money survives; the Insolvency and Bankruptcy Code, having overriding effect, requires such a claim to be treated as financial debt under Section 5(8). Applying these principles, the Tribunal directed admission of the claimant's claim as financial debt.

Application allowed; the claim based on the compulsorily convertible debentures is admitted as a financial debt under Section 5(8) of the Code.

Direction to Resolution Professional to adjudicate claims within a stipulated timeframe - Resolution Professional directed to consider and decide specified withheld claim forms within a short stipulated period. - HELD THAT: - Two applications alleged that their claim forms had been put on hold by the Resolution Professional without adjudication. The Resolution Professional gave an undertaking to dispose of those claim forms and the Tribunal recorded that undertaking and directed the Resolution Professional to consider the two claim applications in accordance with law within three days. This is a procedural direction to ensure expeditious consideration of pending claims.

Resolution Professional directed to consider and decide the two specified claim applications in accordance with law within three days.

Liberty to seek forensic audit - The request for a forensic audit was not adjudicated and is left open for the party to pursue in accordance with law. - HELD THAT: - In relation to the second relief sought in one application (a forensic audit of the corporate debtor), the Tribunal did not decide the substantive merit of that relief. The order records that the Tribunal has left this relief open and granted liberty to the applicant, if entitled, to proceed in accordance with law. This is not a determination on the merits but an express preservation of the right to seek such relief through appropriate procedure.

Forensic audit relief left open; liberty granted to the party to pursue the relief in accordance with law.

Final Conclusion: The application by the claimant holding compulsorily convertible debentures is allowed and the claim is admitted as financial debt under Section 5(8) of the IBC; the Resolution Professional is directed to decide two specified withheld claims within three days, and the prayer for a forensic audit is left open for determination in accordance with law.

Exclusion of period from Corporate Insolvency Resolution Process - time bound resolution under the Insolvency and Bankruptcy Code - outer limit of 330 days for CIRP - preservation of corporate debtor as a going concern - judicial discretion to extend or exclude time in exceptional circumstances

Exclusion of period from Corporate Insolvency Resolution Process - time bound resolution under the Insolvency and Bankruptcy Code - outer limit of 330 days for CIRP - preservation of corporate debtor as a going concern - Application by the Resolution Professional for exclusion of certain days from the CIRP period was allowed. - HELD THAT: - The Tribunal considered the object of the Insolvency and Bankruptcy Code to achieve time bound resolution while maximising asset value and promoting revival of the corporate debtor as a going concern. Reliance was placed on the Supreme Court's statements that liquidation is a last resort and that the outer limit for completion of CIRP is 330 days, subject to exceptional extension or exclusion by the Adjudicating Authority. Applying these principles to the admitted facts - delay in service on the IRP after admission, a judicial stay preventing CoC meetings, and time consumed between filing and pronouncement of the instant application - the Tribunal found sufficient cause to exclude days from the CIRP so as to enable consideration and approval of resolution plans and to avoid premature liquidation. The Tribunal therefore exercised its discretion to exclude specified days while remaining within the outer limit of 330 days, concluding that exclusion would further the remedial and rehabilitative purpose of the Code and protect livelihoods dependent on the corporate debtor. [Paras 3, 5, 6, 7, 8]

Application allowed; 41 days excluded from the CIRP by allocating 10 days (from admission till service on IRP), 17 days (period of stay on CoC meetings), and 15 days (from filing of the instant application till its pronouncement).

Final Conclusion: The application for exclusion of specified days from the CIRP is allowed to enable consideration of resolution plans and to preserve the corporate debtor as a going concern, the exclusions being granted within the statutory outer limit of 330 days; IA disposed of.

Quantified - tax dues - written communication of the amount of duty payable - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) - admission during enquiry/investigation/audit - discharge certificate - no piecemeal or fractional settlement of a single investigation - purposive interpretation of a beneficial scheme

Quantified - tax dues - written communication of the amount of duty payable - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) - admission during enquiry/investigation/audit - Whether the petitioner was eligible to file a declaration under SVLDRS in respect of its Service Tax liability on the ground that the amount was quantified prior to the relevant date (30.06.2019). - HELD THAT: - Section 123(c) and Section 125(1)(e) require that, where an enquiry, investigation or audit is pending, the amount of duty payable must have been quantified on or before 30.06.2019 for eligibility under the Scheme. Section 121(r) defines "quantified" as a "written communication of the amount of duty payable". The Board's circulars clarify that such written communication includes duties admitted by the person during enquiry/investigation/audit, and that eligibility is to be judged as on the relevant date. In the present case the director admitted a Service Tax liability in a statement dated 26.07.2018. That admission establishes quantification of the Service Tax component alone. However, the investigation remained pending on the relevant date and the final demand-cum-show cause notice dated 13.03.2020 quantifies substantially larger "tax dues" arising from the same investigation across multiple heads. The Court held that the admission of one component (Service Tax) cannot be equated to quantification of the entire "tax dues" arising from the investigation for the purposes of eligibility. Allowing settlement of a single component while the remainder of the demands arising from the same investigation remained to be adjudicated would amount to piecemeal or fractional settlement, which is not contemplated by the Scheme and would frustrate its objective of comprehensive resolution of legacy disputes. Consequently, the petitioner's declaration was rightly rejected on the ground of ineligibility under Section 125(1)(e). [Paras 14, 16, 18, 20, 21]

Petitioner not eligible to file declaration under SVLDRS in respect of the Service Tax component as constituting quantification of the entire "tax dues" prior to 30.06.2019; rejection upheld.

Final Conclusion: The writ petition is dismissed; there is no infirmity in the rejection of the petitioner's declaration under SVLDRS as the admitted Service Tax component did not constitute quantification of the entire tax dues arising from the ongoing investigation as on 30.06.2019.

Franchise Services - service tax liability on grant of licence - representational right of franchisee - statutory activity under the Major Port Trust Act - license fee for use of port appliances

Franchise Services - representational right of franchisee - statutory activity under the Major Port Trust Act - service tax liability on grant of licence - Whether licence fee received by the Port Trust for granting third parties the right to provide crane services in the port area is taxable as Franchise Services under the Finance Act. - HELD THAT: - The Tribunal held that the essential elements of Franchise Services were not present. The conditions contended for franchise taxation - grant of a representational right to the licensee in connection with goods or services identified with the franchisor - do not exist on the facts: the crane operators did not act as franchisees of the Port Trust nor did they render services in the name of the Port Trust. The grant of licence arose from the Port Trust's statutory powers and obligations under the Major Port Trust Act to provide appliances and to permit others to perform port services; the licence was a statutory arrangement for deployment of cranes by third parties, and the actual income from operating the crane services was earned and taxed in the hands of the licensees. The Tribunal applied earlier decisions, including Cochin Port Trust and Vishakhapatnam Port Trust , which treat similar licence/royalty arrangements by port trusts as not constituting taxable franchise services, and concluded that the impugned demand was unsustainable.

Appeal allowed; impugned order demanding service tax under the head Franchise Services set aside with consequential benefits.

Final Conclusion: The demand and penalties confirmed by the adjudicating authority for the period September, 2006 to September, 2008 under the head Franchise Services are quashed; the appeal is allowed and the impugned order set aside with consequential relief as per law.

Manpower Recruitment or Supply Agency Service - reverse charge mechanism - secondment - employer-employee relationship - taxability of reimbursed salary payments - method of disbursement not determinative

Manpower Recruitment or Supply Agency Service - secondment - employer-employee relationship - taxability of reimbursed salary payments - method of disbursement not determinative - Salary and related reimbursements paid in respect of employees seconded by Honeywell International Inc. to the appellant are not taxable as services under the category of Manpower Recruitment or Supply Agency Service under the reverse charge mechanism. - HELD THAT: - The Tribunal held that on the facts and clauses of the secondment agreement the seconded personnel worked under the direction and control of the appellant and for all practical purposes had an employer-employee relationship with the appellant. Applying the principle that the mode of payment or the fact that the parent company remained on its payroll for social security/retiral continuity does not convert the arrangement into a supply of manpower service, the Tribunal concluded there was no supply of manpower by the foreign parent to the appellant. Reliance was placed on earlier Tribunal rulings (noting Volkswagen India and the subsequent Nissin Brake decisions) which held that global employees seconded to Indian entities were employees of the Indian entity and that the method of disbursement of salary cannot determine the nature of the transaction. The Tribunal therefore set aside the Revenue's conclusion that the payments attracted service tax as manpower supply under reverse charge. [Paras 11, 12]

Appeal allowed; impugned demand under Manpower Recruitment or Supply Agency Service set aside and appellant entitled to consequential benefits.

Final Conclusion: The Tribunal allowed the appeal, set aside the Order-in-Original confirming service tax, interest and penalties insofar as they related to the claim that reimbursed salary payments for seconded employees attracted tax as manpower supply, and granted consequential relief in accordance with law.

Refund of education cess and higher education cess on exempted excise duty - erroneous refund - condition precedent to invoke recovery under section 11(A-1) of the Central Excise Act, 1944 - binding precedent versus subsequent Supreme Court pronouncement

Refund of education cess and higher education cess on exempted excise duty - erroneous refund - condition precedent to invoke recovery under section 11(A-1) of the Central Excise Act, 1944 - binding precedent versus subsequent Supreme Court pronouncement - Whether the earlier refunds of education cess and higher education cess could be treated as 'erroneous refunds' so as to enable recovery under section 11(A-1) after a later Supreme Court decision. - HELD THAT: - The petitioner obtained refunds of education cess and secondary and higher education cess pursuant to an earlier Supreme Court precedent (SRD Nutrients) which held that where excise duty was exempted the cesses paid along with it were refundable. A subsequent Supreme Court decision (Unicorn Industries) took a contrary view, questioning that reasoning and holding that exemption of one duty does not automatically extinguish liability for other cesses. The writ challenges the demand-cum-show-cause notice issued after the later decision seeking recovery of amounts earlier refunded. The Court observed that the power under section 11(A-1) can be invoked only where the refund made was erroneous. Since the refunds were granted at a time when the SRD Nutrients view was the law in force and binding, the refunds could not be characterised as erroneous for the purpose of invoking section 11(A-1) without further consideration. On that basis the Court stayed operation of the demand-cum-show-cause notice and restrained recovery until further orders, while directing reciprocal affidavit filing and listing for further consideration.

Operation of the demand-cum-show-cause notice dated 09.06.2020 is stayed; recovery of the refunded cesses shall not be effected until further orders, the Court noting that the condition precedent for invoking section 11(A-1) is not satisfied in the facts as the refunds were made when the contrary precedent was binding.

Final Conclusion: Interim relief granted: the department's demand-cum-show-cause notice is stayed and recovery of education cess and higher education cess earlier refunded shall not be made until further orders; parties directed to file and exchange affidavits and the matter listed for further consideration.

Maximum Retail Price (MRP) printing as evidence of intention for retail sale - assessment under Section 4A of Central Excise Act, 1944 - Standards of Weights & Measures (Packaged Commodities) Rules, 1977 as the source of MRP mandate - packaging and mandated declaration as trigger for retail-assessment

Maximum Retail Price (MRP) printing as evidence of intention for retail sale - assessment under Section 4A of Central Excise Act, 1944 - Standards of Weights & Measures (Packaged Commodities) Rules, 1977 as the source of MRP mandate - Whether multi-piece packs with MRP printed on them are to be assessed under Section 4A (retail-pack assessment) rather than under Section 4. - HELD THAT: - The Tribunal held that the pre-condition for assessment under Section 4A is that the packaged goods bear Maximum Retail Price printed on them, and that the mandate to print MRP flows from the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 rather than from the Central Excise Act itself. Packaging and the mandated declarations are integral to demonstrating the producer's intention to market the goods for retail sale; the printing of MRP on the multipiece pack is the evidentiary manifestation of that intent. Commercial decisions by downstream distributors to break packs at retail have no bearing on assessment at the point of clearance. Applying these principles to the facts, where the appellant packed small pouches into larger multipacks with MRP printed and cleared them accordingly, the appellant was rightly assessed under Section 4A and had discharged duty liability in terms of Section 4A. [Paras 8]

Impugned orders confirming demand and penalties set aside; appeals allowed and the appellant held to have correctly discharged duty under Section 4A where multipiece packs bore MRP.

Final Conclusion: The Tribunal allowed the appeals, holding that where multipiece packs bear MRP printed in compliance with the Packaged Commodities Rules and are intended for retail sale, assessment under Section 4A is appropriate; the impugned demands and penalties were set aside and consequential relief granted.

Rectification under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - ex parte assessment - remand for fresh enquiry and reassessment de novo - opportunity to cross-examine - independent application of mind by the Assessing Officer - reliance on bank, Customs and Income tax records - incomplete or cursory inquiry

Ex parte assessment - independent application of mind by the Assessing Officer - remand for fresh enquiry and reassessment de novo - reliance on bank, Customs and Income tax records - Validity of the impugned assessments and whether they complied with this Court's earlier directions for a proper enquiry - HELD THAT: - The Court found that the Assessing Officer, despite the earlier direction, proceeded to finalize the assessments by relying on the same materials already on record without applying an independent mind or conducting the comprehensive enquiries directed. The Assessing Officer did not adequately address the petitioner's repeated contention that the import transactions and bank accounts were not connected to him, and the assessments show a cursory and arbitrary approach rather than the thorough inquiry mandated. Given that the Income tax Department's enquiries were not conclusive and the Assessing Officer did not undertake the full, effective enquiries ordered by this Court, the assessments were held to be improperly framed. Exercising supervisory jurisdiction, the Court set aside the impugned assessments and remitted the matter for de novo reassessment, directing that the Assessing Officer redo the assessment after making the requisite enquiries of Customs, Income tax and banks and applying independent judgment to those materials.

The impugned assessments are set aside and remitted for de novo reassessment; the Assessing Officer is directed to redo the assessments after hearing the petitioner and making the proper enquiries.

Opportunity to cross-examine - incomplete or cursory inquiry - reliance on bank, Customs and Income tax records - Requirement to afford the petitioner the evidentiary opportunities he sought (production of documents and cross examination of bank and Customs/Customs broker officials) - HELD THAT: - The petitioner had specifically requested disclosure of documents obtained from banks, Customs and the Income tax Department and an opportunity to cross examine officials and the customs broker. The Court observed that these requests were not even referred to, much less considered, by the Assessing Officer. Because the Assessing Officer must give the petitioner effective opportunity to contest the material relied upon, the Court directed that on remand the petitioner be supplied the documents he sought and be afforded the opportunity of cross examination as part of the reassessment exercise.

On reassessment the petitioner must be supplied the requested documents and given an opportunity to cross examine relevant officials and witnesses before any determination is made.

Reliance on bank, Customs and Income tax records - rectification under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - Effect of the Income tax Department's investigation on VAT proceedings and whether the petitioner had been exonerated by that investigation - HELD THAT: - The Court examined the material placed on record from the Income tax Department and noted that the Department's enquiries were not complete or dispositive in favour of the petitioner: the record shows ongoing enquiries, statements recorded and investigative steps taken, and the Income tax Department had not exonerated the petitioner. As a consequence, the Court held that reliance on the incompletely resolved Income tax material without further, independent enquiries was impermissible. Given the unsettled state of the Income tax proceedings, the VAT Assessing Officer must undertake full enquiries afresh rather than treating the Income tax record as conclusively exonerative.

The Income tax investigation does not conclusively exonerate the petitioner; the Assessing Officer must make independent enquiries and not treat the Income tax material as determinative without further verification.

Final Conclusion: Writ petitions allowed; impugned assessments for 2010-11 and 2011-12 set aside and remitted for de novo reassessment. The Assessing Officer is directed to conduct thorough enquiries (including with Customs, Income tax and banks), supply documents sought by the petitioner, afford opportunity for cross examination and apply independent mind; the reassessment shall be completed within eight weeks from uploading of this order. No costs.

Penalty for failure to submit return - penalty for submission of incorrect or incomplete return - willful non-disclosure - mens rea requirement for imposition of penalty - application of General Sales Tax Act procedures to Entry Tax Act - right to personal hearing before imposition of penalty

Penalty for failure to submit return - willful non-disclosure - mens rea requirement for imposition of penalty - application of General Sales Tax Act procedures to Entry Tax Act - Validity of the penalties levied under the Entry Tax Act read with the General Sales Tax Act for the transactions in assessment years 2004-05 and 2005-06 - HELD THAT: - The Court found that penalties were imposed solely on the ground that returns were not filed and that the assessing authority invoked the penal machinery under the Entry Tax Act as applied through the General Sales Tax Act. The Court held that levy of penalty carries a penal element and requires a recorded satisfaction of willful non-disclosure or mens rea; no such satisfaction or finding appears in the impugned orders. The petitioner was not a regular importer or trader in the goods, promptly paid the tax when pointed out during inspection and did not challenge the department's demand. The Court also relied on precedents holding that payment of tax on inspection and absence of a recorded satisfaction of wilfulness are factors militating against imposition of penalty. In the circumstances, the impugned penalty orders were found unsustainable and were quashed. [Paras 9, 11, 13, 14]

Penalties levied for the assessment years 2004-05 and 2005-06 are quashed for want of any recorded finding of willful non-disclosure and mens rea.

Right to personal hearing before imposition of penalty - penalty for failure to submit return - Whether the petitioner was afforded a personal hearing before imposition of penalty - HELD THAT: - The Court noted the pre-assessment notice, the petitioner's detailed reply and that the impugned assessment orders were passed within days of the reply without affording personal hearing. The absence of personal hearing was considered relevant to the fairness of the proceedings, particularly given the penal consequence sought to be imposed. This procedural lapse reinforced the conclusion that the penalty orders could not be sustained. [Paras 10, 13, 14]

Orders imposing penalty were quashed also on account of failure to afford the petitioner a personal hearing prior to imposition of penal consequences.

Final Conclusion: Impugned assessment orders imposing penalties for the assessment years 2004-05 and 2005-06 are quashed on substantive and procedural grounds (absence of recorded satisfaction of willful non-disclosure/mens rea and denial of personal hearing); writ petitions allowed and connected matters closed.

Victim's right to appeal under proviso to Section 372 Cr.PC - Appeal against inadequate sentence not maintainable by victim - State's power to prefer appeal against inadequate sentence under Section 377 Cr.PC - Remedy of appeal is creature of statute

Victim's right to appeal under proviso to Section 372 Cr.PC - Appeal against inadequate sentence not maintainable by victim - State's power to prefer appeal against inadequate sentence under Section 377 Cr.PC - Whether the victim can maintain an appeal under the proviso to Section 372 Cr.PC for enhancement of sentence imposed by the trial court. - HELD THAT: - The proviso to Section 372 Cr.PC, inserted by Act 5 of 2009, confines the victim's right of appeal to three situations: acquittal of the accused, conviction for a lesser offence, or imposition of inadequate compensation. The proviso does not provide a right to the victim to challenge the adequacy of the sentence. By contrast, Section 377 Cr.PC empowers the State Government to prefer an appeal where the sentence is alleged to be inadequate. An appellate remedy exists only insofar as it is created by statute; absent a statutory provision permitting a victim to challenge sentence as inadequate, such an appeal is not maintainable. The High Court correctly applied these principles and relied on the precedent referenced by this Court to dismiss the victim's appeal as not maintainable. [Paras 9, 10]

Appeal by the victim seeking enhancement of sentence is not maintainable under the proviso to Section 372 Cr.PC; remedy for inadequate sentence lies with the State under Section 377 Cr.PC.

Final Conclusion: The appeal is dismissed for lack of merit; the High Court's order dismissing the victim's appeal under Section 372 Cr.PC as not maintainable is affirmed.