TaxTMI Updates e-Newsletter
Sep 03,2022

Compoundability of offence under Section 138 of the CGST Act - attraction of proviso clause (c) to Section 138 where offence is also punishable under another law - scope of accusation under Section 132(1) of the CGST Act - bail jurisprudence in economic offences - grant of bail is rule and refusal is exception - factors for grant of bail: nature of accusation, tampering risk, likelihood of absconding, antecedents, larger public interest

Compoundability of offence under Section 138 of the CGST Act - attraction of proviso clause (c) to Section 138 where offence is also punishable under another law - scope of accusation under Section 132(1) of the CGST Act - Offence alleged against the applicant is compoundable under Section 138 of the CGST Act; proviso clause (c) is not attracted. - HELD THAT: - The Court examined whether the proviso to Section 138 would bar compounding on the ground that the accused is also accused of an offence under another law. The Court held that proviso (c) applies only where the same act constitutes an offence under this Act as well as another law. Here, the allegations that gave rise to separate proceedings under the Customs Act do not constitute the same offence under the CGST Act and vice versa; accordingly proviso (c) does not apply. The complaint framed by the DGGI accused the applicant under clauses of Section 132(1) relating to clandestine supplies and receipt/dealings (132(1)(a) read with 132(1)(i) and 132(5)) and did not charge the applicant under Section 132(1)(k). On that basis the Court found the offence to be compoundable and rejected the Department's contention to the contrary as misconceived. [Paras 21, 22]

The offence alleged is compoundable under Section 138 and proviso (c) is not attracted.

Bail jurisprudence in economic offences - grant of bail is rule and refusal is exception - factors for grant of bail: nature of accusation, tampering risk, likelihood of absconding, antecedents, larger public interest - Applicant entitled to bail in Criminal Case No. 7646 of 2022 subject to conditions. - HELD THAT: - Applying settled principles (including consideration of nature of accusation, severity of punishment, risk of tampering with evidence, likelihood of absconding, the accused's antecedents and larger public interest), the Court found that several factors favoured grant of bail: the offence carries prescribed sentence minimum of six months and maximum of five years and is compoundable; the applicant has paid a substantial amount towards tax, interest and penalty and undertaken to pay any additional liability; the seized cash remains with the Department protecting revenue interests; the applicant had already spent over eight months in custody without custodial interrogation being sought; trial was not commenced; the applicant has no previous criminal history, had earlier been granted bail in related Customs proceedings, and does not hold a passport; and there was no material to show a reasonable apprehension of tampering with evidence or influencing witnesses. Balancing these factors and consistent with the principle that economic offences are not to be treated as a class mandating denial of bail, the Court exercised its discretion to grant bail on stringent conditions. [Paras 31, 32]

Applicant is released on bail on furnishing personal bond and sureties and subject to specified restrictive conditions.

Final Conclusion: Bail granted to the applicant in the CGST complaint case on furnishing prescribed bond and sureties, subject to conditions prohibiting tampering with evidence or influencing witnesses; the offence is held to be compoundable and proviso (c) to Section 138 is not attracted.

Validity of e-way bill and liability for tax and penalty where e-way bill expired during transit under Section 129(3) of the CGST Act - imposition of penalty at 100% for transportation of goods without valid documents - remand for fresh consideration consistent with principles of natural justice and opportunity to produce evidence - rectification of omission or mistake in documentation and its relevance under Section 126 of the CGST Act

Validity of e-way bill and liability for tax and penalty where e-way bill expired during transit under Section 129(3) of the CGST Act - imposition of penalty at 100% for transportation of goods without valid documents - Impugned appellate order sustaining demand of tax and 100% penalty for transport of goods when e-way bill had expired is set aside and matter remitted for fresh consideration after affording opportunity to the petitioner to produce evidence of genuine reasons for delay. - HELD THAT: - The appellate authority had sustained a demand of tax and an equal penalty (100%) on the ground that the e-way bill was not valid at the time the goods were intercepted. The petitioner did not seek extension before interception and paid the amount demanded on the date the show-cause notice was issued, without availing the opportunity to explain the reason for delay. The Court found that there was no finding of deliberate tax evasion and that the petitioner ought to be given an opportunity to establish that the delay was due to genuine reasons (vehicle breakdown and change of vehicle reflected in the record). In consequence, the appellate order could not stand without fresh consideration in light of the material the petitioner may produce and consistent with principles of natural justice. [Paras 14, 16, 17, 18, 19]

Impugned order dated 31.12.2021 is set aside and the matter is remanded to the Appellate Authority for fresh decision after giving the petitioner an opportunity to produce relevant evidence to justify the delay.

Remand for fresh consideration consistent with principles of natural justice and opportunity to produce evidence - rectification of omission or mistake in documentation and its relevance under Section 126 of the CGST Act - The Appellate Authority is directed to issue fresh notice, afford hearing to the petitioner and consider whether omission or mistake in documentation is rectifiable under Section 126 while deciding the demand and penalty. - HELD THAT: - In remanding the matter the Court required the authority to give the petitioner notice of the date and time of hearing and to permit production of relevant material/evidence showing genuine reasons for delay. The authority is also required to bear in mind the provisions relating to rectification of omission or mistake in documentation under Section 126 of the CGST Act, which may be relevant to the question of whether penalty is warranted. [Paras 19, 20]

Matter remitted to respondent no.2 with directions to issue notice, afford hearing, consider petitioner's evidence and the applicability of Section 126 before passing a fresh decision.

Final Conclusion: The writ petition is allowed to the extent that the appellate order dated 31.12.2021 is set aside and the matter is remitted to the Appellate Authority for fresh adjudication after giving the petitioner an opportunity to be heard and produce evidence, with specific direction to consider rectification under Section 126 of the CGST Act; the petition is disposed of accordingly.

Show cause notice under Section 74 of the GST Act, 2017 - failure to state reasons - adequacy of reasons - opportunity to reply - remand for fresh consideration - expeditious decision

Show cause notice under Section 74 of the GST Act, 2017 - failure to state reasons - adequacy of reasons - The petitioner's grievance that the original show cause notice dated 15.09.2021 did not state reasons was addressed by the subsequently issued show cause notice dated 24.12.2021 which sets out reasons. - HELD THAT: - The Court observed that the initial show cause notice relied upon in the petition was challenged on the ground that it did not disclose the reasons for its issuance and thus impeded the petitioner's ability to file an effective reply. During pendency of the petition, a fresh show cause notice dated 24.12.2021 was issued and the Court noted that this subsequently issued notice contains the reasons for issuance. Having regard to the existence of the later notice which supplies reasons, the Court held that the specific grievance premised on absence of reasons in the earlier notice stood satisfied.

Grievance regarding absence of reasons in the show cause notice dated 15.09.2021 is satisfied by the subsequent notice dated 24.12.2021 which sets out reasons.

Opportunity to reply - remand for fresh consideration - expeditious decision - Directions were issued for the petitioner to file a reply to the show cause notice dated 24.12.2021 (if not already filed) and for the competent authority to consider the reply(ies) and decide the matter expeditiously in relation to assessment year 2017-18. - HELD THAT: - The Court directed that if no reply has been filed to the show cause notice dated 24.12.2021, the petitioner shall submit a reply within 30 days. If a reply has already been filed, the competent authority is to consider that reply together with the earlier reply already on record. The competent authority (respondent No.3) was directed to proceed to pass appropriate orders in accordance with law as expeditiously as possible. These directions amount to remanding the matter to the authority for fresh consideration and decision on the merits in respect of assessment year 2017-18.

Petitioner to file reply within 30 days if not filed; competent authority to consider all replies and decide the show cause notice dated 24.12.2021 expeditiously in relation to assessment year 2017-18.

Final Conclusion: The petition is disposed of: the Court found the grievance about absence of reasons in the earlier notice to be cured by the subsequent notice dated 24.12.2021, directed the petitioner to file a reply within 30 days if not already filed, and remanded the matter to the competent authority to consider the reply(ies) and pass appropriate orders expeditiously in respect of assessment year 2017-18.

Detention under Section 129 - expiry of e-way bill - absence of evasion or suppression of tax - minor discrepancies and mitigation by statutory circular - requirement of opportunity of hearing and reasoned exercise of power - remand for reconsideration of penalty quantum

Detention under Section 129 - expiry of e-way bill - absence of evasion or suppression of tax - minor discrepancies and mitigation by statutory circular - Whether the order detaining the vehicle and imposing tax and a major penalty was sustainable where the e-way bill had expired but there was no material to show evasion of tax and the consignment was accompanied by invoice and other documents - HELD THAT: - The Court held that the sole ground for invoking Section 129 was expiry of the e-way bill. The consignement was accompanied by an invoice showing the taxable value and IGST and other particulars matched the e-way bill. There was no finding of any attempt to evade tax. The statutory Circular relied upon by this Court (addressing minor discrepancies and prescribing limited penalties) is binding on officers and demonstrates that minor or bona fide discrepancies which do not affect tax liability should not attract harsh detention and major penalty. Where detention is used as machinery to guard against evasion, it cannot be invoked in the absence of materials indicating evasion; the machinery provisions must be strictly construed. Applying these principles and the precedents on similar facts, the Court found the demand of tax and imposition of a major penalty to be without jurisdiction and quashed the impugned adjudication order.

Impugned order imposing tax and major penalty for expiry of the e-way bill was quashed as being without jurisdiction in the absence of any material suggesting evasion; writ petition allowed.

Requirement of opportunity of hearing and reasoned exercise of power - remand for reconsideration of penalty quantum - Whether the matter should be remitted for fresh consideration of the penalty to be imposed after applying the Court's legal findings - HELD THAT: - Although the adjudication order was quashed, the Court did not finally determine the appropriate penalty on merits. Instead, having held that detention and the major penalty were not justified on the record, the Court remanded the matter to the adjudicating authority with directions to reconsider and determine the penalty amount in light of the Court's findings and the observations in the earlier Ext.P6 judgment, after affording the petitioner an opportunity of hearing. The Court declined to decide procedural questions relating to the appeal pre-deposit conditions, as remand for reassessment of penalty rendered such examination unnecessary at this stage.

Matter remitted to the first respondent to reconsider and quantify the penalty, after hearing the petitioner and applying the Court's findings and the principles set out in the cited circular and precedent.

Final Conclusion: Writ petition allowed; adjudication order imposing tax and a major penalty quashed for want of jurisdiction in the absence of any material of tax evasion, and the matter remanded to the adjudicating authority to determine an appropriate penalty after hearing the petitioner and in accordance with this judgment and the applicable circular/precedent.

Detention, seizure and release under section 129 - inspection of goods in movement under section 68 - validity of e-way bill and requirement of Part B for validity - penalty under section 129 not leviable merely for expiry of e-way bill absent intent to evade - requirement of opportunity of being heard under section 129(4) - Circular clarifying non-initiation of section 129 for minor e-way bill discrepancies

Detention, seizure and release under section 129 - validity of e-way bill and requirement of Part B for validity - penalty under section 129 not leviable merely for expiry of e-way bill absent intent to evade - Legality of imposition of tax and penalty under section 129 where the e-way bill was found expired at the time of inspection despite supporting tax invoice, alleged extensions of e-way bill validity, and payment of IGST. - HELD THAT: - The authority examined whether mere expiry of the e-way bill at the time of interception justified initiation of proceedings under section 129 and levy of tax and penalty. The adjudicatory text records that the consignment was supported by tax invoice and GR, IGST had been charged separately and paid, and the quantity and nature of goods were not disputed. The appellant produced evidence of revalidation/extensions of the e-way bill and a toll receipt indicating entry into the State within the extended validity. Relying on the statutory scheme and the principle that section 129 proceedings aim to prevent evasion of tax, the authority held that expiry of the e-way bill alone, without material demonstrating deliberate evasion or dishonest conduct, cannot sustain the inference of tax evasion necessary for imposing the full tax-plus-penalty under section 129. The decision also referred to the supervisory clarification that minor discrepancies in e-way bill details should not routinely trigger section 129 proceedings. On these grounds the impugned order imposing tax and penalty under section 129 was quashed and set aside. [Paras 25, 26, 30, 31, 32]

The order imposing tax and penalty under section 129 was quashed; tax/penalty could not be sustained based solely on expiry of the e-way bill without evidence of intent to evade.

Inspection of goods in movement under section 68 - requirement of opportunity of being heard under section 129(4) - Circular clarifying non-initiation of section 129 for minor e-way bill discrepancies - Whether the impugned order was vitiated by procedural defects including failure to verify e-way bill details on portal, issuance of notice on the same date/time as interception, failure to upload prescribed forms, and absence of reasoned findings. - HELD THAT: - The authority found deficiencies in the proper officer's conduct and the impugned order. The order contained inconsistent and erroneous entries as to e-way bill validity, and recorded issuance of a notice directing appearance 'on or before' the same date and time as interception, indicating absence of a meaningful opportunity to be heard. The proper officer neither recorded reasons explaining how tax evasion was established nor demonstrated that required portal verifications and uploads (such as MOV-04/MOV-09 and e-way bill parts) had been carried out. These lacunae manifested a lack of application of mind and rendered the order bereft of reasoning. While the section 129 determination was set aside for these and substantive reasons, the authority exercised discretion to impose a mitigated penalty under section 125 for the breach of rules governing movement of goods, directing recovery of that penalty and refund of any balance. [Paras 23, 24, 26, 27, 29]

Impugned order is vitiated by procedural and factual lapses; proceedings under section 129 are quashed, but a reduced penalty under section 125 is imposed and recovery/refund directed.

Final Conclusion: Appeal allowed. The order imposing tax and penalty under section 129 is quashed and set aside for lack of material to infer tax evasion and for procedural infirmities; however a reduced penalty under section 125 is imposed, to be recovered and the balance refunded to the appellant.

Reopening of assessment under Section 148A of the Income Tax Act - obligation to furnish specific material at 148A(b) - supplementary particulars in response to assessee's request - limitation under Section 148A(d) - treatment of bank credits as 'asset' under Section 149(1)(b) - opportunity of hearing / meaningful opportunity to respond

Obligation to furnish specific material at 148A(b) - supplementary particulars in response to assessee's request - opportunity of hearing / meaningful opportunity to respond - Validity of the Assessing Officer issuing the notice dated 23rd June, 2022 furnishing specific transaction particulars after the assessee's request for better particulars under the Section 148A(b) process. - HELD THAT: - The Court held that the AO was not precluded from providing the additional particulars on 23rd June, 2022. The assessee had specifically requested better material in her reply to the 17th May, 2022 communication; the AO accordingly supplied specific details of the transaction said to be the basis of the reopening. The impugned order identifies the transaction (dated 10th August, 2012) as the subject-matter of the notices and the Court accepted the AO's explanation that the particulars were furnished in response to the assessee's request. The Court emphasised the statutory objective of Section 148A requiring that specific material be shared at the 148A(b) stage so that the assessee can give a meaningful response, and found no fault with the AO furnishing such particulars upon the assessee's request. The assessee filed a detailed reply to the 23rd June, 2022 notice but did not substantively explain the transaction; having elected not to provide an explanation, she cannot now contend denial of opportunity. [Paras 19, 21, 23]

The notice dated 23rd June, 2022 furnishing specific particulars was validly issued and the assessee was not denied a meaningful opportunity to respond.

Limitation under Section 148A(d) - reopening of assessment under Section 148A of the Income Tax Act - Whether the impugned order passed under Section 148A(d) on 22nd July, 2022 was barred by limitation because the AO's time to pass the order expired on 30th June, 2022. - HELD THAT: - The contention that the AO was time barred was considered and rejected. The Court noted that the assessee's reply of 24th May, 2022 included a request for further particulars; in the circumstances the AO supplied particulars on 23rd June, 2022 and proceeded thereafter. The Court found no infirmity in the AO's course of action and did not accept that the order dated 22nd July, 2022 was barred on limitation grounds in the facts of this case. [Paras 21, 25]

The impugned order under Section 148A(d) was not held to be barred by limitation.

Treatment of bank credits as 'asset' under Section 149(1)(b) - reopening of assessment under Section 148A of the Income Tax Act - Whether the allegation of a credit of Rs.50,00,000/- from M/s Subshree Financial Management Pvt. Ltd. constitutes an 'asset' under Section 149(1)(b) so as to save the reassessment from limitation, and whether the impugned order failed the test under Section 149(1)(b). - HELD THAT: - The Court did not find error in the AO's reliance on the bank transaction records as material forming the basis of the reassessment. The revenue's case was that the bank credit constituted the relevant entry and that particulars identifying transactions were available on record. The assessee's bare averment that the transactions were loans and repaid was unsubstantiated on the record before the Court; that factual contention must be examined by the AO in assessment proceedings. The Court therefore did not accept the contention that the AO lacked material amounting to an 'asset' within the meaning invoked and found no infirmity at this stage. [Paras 11, 22, 24]

The challenge to the AO's reliance on the bank credit as the basis for reassessment under Section 149(1)(b) was not upheld; the factual contentions raised by the assessee remain open for determination in assessment proceedings.

Final Conclusion: Writ petition dismissed; the Court found no infirmity in the Assessing Officer's issuance of the 23rd June, 2022 notice or in the order under Section 148A(d), and held that the assessee had a meaningful opportunity to respond; no opinion expressed on the merits and all rights and contentions are left open for assessment proceedings.

Jurisdiction under Section 153C - Limitation for reopening under Section 153C construed with reference to date of recording of satisfaction/handing over of seized documents - Date of recording of satisfaction as relevant date for reckoning six assessment years - Assessments beyond six assessment years under Section 153C are barred

Jurisdiction under Section 153C - Date of recording of satisfaction as relevant date - Limitation for reopening under Section 153C - Validity of issuance of notice and consequent assessment framed under Section 153C in respect of AY 2007-08 - HELD THAT: - The Tribunal held that proceedings under Section 153C could be initiated only in respect of assessment years falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the date of recording of satisfaction/handing over of seized documents to the Assessing Officer occurs. The satisfaction note in the present case was recorded on 24.09.2013 (relevant to AY 2014-15), and therefore the six-year window extended back only to AY 2007-08's predecessor years up to AY 2008-09; AY 2007-08 thus fell outside the permissible period for issuing notice under Section 153C. Applying this statutory construction, the Tribunal concluded that the Assessing Officer had no jurisdiction to proceed under Section 153C for AY 2007-08 and that the consequential assessment could not be sustained. The conclusion was reached having regard to the proviso to Section 153C and following the decision in CIT V/s RRJ Securities Ltd. (adopted reasoning that the relevant date for reckoning the six-year period is the date of recording of satisfaction/handing over of documents), and the earlier decision in SSP Aviation Ltd. . In view of lack of jurisdiction and bar by limitation, the Tribunal declined to address merits of the assessment as academic. [Paras 7, 8, 9, 10]

Notice and assessment under Section 153C in respect of AY 2007-08 are invalid for want of jurisdiction and barred by limitation; assessment set aside.

Final Conclusion: The appeal is allowed: the assessment framed under Section 153C for AY 2007-08 is quashed as the Assessing Officer lacked jurisdiction since AY 2007-08 fell outside the six-year period reckoned from the date of recording of satisfaction (24.09.2013).

Unexplained cash additions under section 69A - corroboration of cash withdrawals and deposits by bank statements - onus on the Assessing Officer to prove utilisation of withdrawn cash - set-off of cash withdrawn against cash deposited in the same financial year - treatment of cash deposits in partnership firm's account vis-a -vis partner's personal income

Unexplained cash additions under section 69A - corroboration of cash withdrawals and deposits by bank statements - onus on the Assessing Officer to prove utilisation of withdrawn cash - Deletion of addition of Rs. 22,00,000 treated as unexplained cash deposited in assessee's HDFC bank account. - HELD THAT: - The Tribunal examined the HDFC bank statement and found detailed cash withdrawals from the same branch between 28.07.2016 and 28.10.2016 aggregating to an amount (including additional withdrawals) in excess of the cash deposited during demonetisation. The Revenue produced no material to show that the withdrawn cash had been used for other purposes. Relying on the principle that the assessee cannot be required to prove a negative and that the AO must demonstrate utilisation of withdrawn cash elsewhere before rejecting the claim, the Tribunal held that the withdrawals, as evidenced by bank records, sufficiently corroborated the source of the deposit. In these circumstances the addition under unexplained cash additions under section 69A could not be sustained. [Paras 11]

Addition of Rs. 22,00,000 deleted.

Unexplained cash additions under section 69A - treatment of cash deposits in partnership firm's account vis-a -vis partner's personal income - corroboration of cash withdrawals and deposits by bank statements - Deletion of addition of Rs. 25,00,000 treated as unexplained cash deposited in the partnership firm's bank account and later transferred to the assessee. - HELD THAT: - The Tribunal noted that the cash of Rs. 25 lakh was deposited in the bank account of a partnership firm (a separate taxable entity) and, within days, an equivalent amount was transferred to the assessee. The Revenue did not examine the firm's accounts, record statements of other partners, or produce material showing that the cash belonged to the assessee. The transaction therefore required inquiry in the hands of the firm rather than a direct imputation to the partner without supporting evidence. Absent any finding in the firm's assessment that the cash belonged to the assessee, the Tribunal found no basis to sustain the addition in the assessee's hands under unexplained cash additions under section 69A. [Paras 14]

Addition of Rs. 25,00,000 deleted.

Final Conclusion: Both additions made under section 69A - Rs. 22,00,000 (cash deposited in assessee's HDFC account) and Rs. 25,00,000 (cash deposited in partnership firm's account and later transferred to the assessee) - are deleted and the assessee's appeal is allowed for the assessment year 2017-18.

Valuation of unquoted preference shares under NAV method using guideline (stamp duty) value for immovable property - Application of Rule 11UA(1)(c) for determination of fair market value of shares - Treatment of excess redemption premium as deemed dividend under section 2(22)(d) and section 2(22)(e) - Characterisation of payments made from securities premium reserve vis-a -vis accumulated profits - Exemption from Dividend Distribution Tax under section 115-O(6) for SEZ developers

Valuation of unquoted preference shares under NAV method using guideline (stamp duty) value for immovable property - Application of Rule 11UA(1)(c) for determination of fair market value of shares - Guideline (stamp duty) value of immovable property must be taken into account in computing fair market value of unquoted preference shares under the NAV method; TPO's adoption of book value for land and building is not sustainable. - HELD THAT: - The Tribunal examined Rule 11UA(1)(c), which prescribes that immovable property be taken at the value adopted or assessable for stamp duty when determining fair market value of unquoted equity shares, and noted rule 11UA(1)(c)(c) allowing valuation of unquoted non-equity shares by a report from an accountant. Although the rule is framed for equity shares, a combined reading of these provisions supports applying guideline/stamp duty value for immovable property when valuing preference shares under the NAV approach because such guideline value represents the commercial economic value on the valuation date. The assessee's valuation, prepared by a Chartered Accountant, adopted guideline values for land and building and complied with the valuation requirement; the TPO accepted the NAV method but replaced guideline values with historic book values, producing the impugned adjustment. The Tribunal held that considering guideline value was correct and hence the TPO/AO adjustment based on book value is unsustainable, leading to deletion of the addition that arose solely from that valuation difference. [Paras 12, 13]

Addition based on TPO/AO's use of book value for immovable property is deleted; the assessee's NAV valuation using guideline values is accepted.

Treatment of excess redemption premium as deemed dividend under section 2(22)(d) and section 2(22)(e) - Characterisation of payments made from securities premium reserve vis-a -vis accumulated profits - Exemption from Dividend Distribution Tax under section 115-O(6) for SEZ developers - The excess premium paid on redemption of preference shares is not taxable as deemed dividend under section 2(22)(d) or section 2(22)(e); consequential imposition of Dividend Distribution Tax does not survive. - HELD THAT: - The Tribunal held that clause (d) applies to distributions on reduction of capital and clause (e) to advances or loans (or payments in nature thereof) to specified shareholders; the premium paid on redemption here was neither a reduction of capital nor an advance/loan repayable by the shareholder. Further, the payment was made from securities premium (a specific reserve governed by the Companies Act) and not from accumulated profits as contemplated by section 2(22), and one of the statutory purposes of securities premium specifically permits its application for payment of premium on redemption of shares. Independently, having found that the TP/value-based addition is unsustainable, the CIT(A)'s alternative characterisation of the differential as deemed dividend likewise could not be sustained. The Tribunal therefore deleted the additions and any DDT liability arising therefrom; the assessee's contention under section 115-O(6) was rendered academic by these conclusions. [Paras 13, 24, 25]

Addition treated as deemed dividend under section 2(22)(d)/(e) and any resulting DDT are deleted; no liability sustained.

Final Conclusion: Both appeals for AY 2009-10 and AY 2010-11 are allowed: the Tribunal upholds the assessee's NAV valuation using guideline/stamp duty values for immovable property, sets aside the TPO/AO valuation adjustment based on book value, and holds that the excess redemption premium is not a deemed dividend liable to DDT, resulting in deletion of the impugned additions.

Allowability of bad debts as deduction under Section 36(1)(vii) - Requirement of prior recognition of the debt as income for claiming bad-debt deduction - Burden of proof to establish accounting recognition and supporting documentary evidence - Business expenses: unverifiable Attimari/Coolie payments and reasonableness of partial disallowance - Precedent reliance and application of earlier appellate finding in subsequent assessment year

Allowability of bad debts as deduction under Section 36(1)(vii) - Requirement of prior recognition of the debt as income for claiming bad-debt deduction - Burden of proof to establish accounting recognition and supporting documentary evidence - Whether the Assessing Officer was justified in disallowing the assessee's claim for bad debts written off, and if so to what extent - HELD THAT: - The Tribunal accepted the CIT(A)'s factual finding that most of the debts in question had been written off in the assessee's books in the year under consideration and had been credited as income in earlier year(s), thereby satisfying the twin conditions identified by the Supreme Court for allowability under Section 36(1)(vii). The Assessing Officer's objection that the corresponding debtors had not reflected the amounts in their books, or had rejected the claims, was held irrelevant once the assessee's own books showed the debts as written off and earlier recognised as income. However, for certain specified items (aggregate amount identified by the CIT(A)), the assessee failed to produce documentary evidence to demonstrate prior accounting recognition; those amounts were rightly held not allowable. In view of the CIT(A)'s finding of fact and the material on record, the Tribunal found no reason to interfere and dismissed the Revenue's challenge except insofar as the limited amounts were disallowed. [Paras 8]

The Assessing Officer's disallowance was reduced to the amount which the assessee failed to substantiate (the sum identified by the CIT(A)); the Revenue's ground is dismissed and the CIT(A) order upheld.

Business expenses: unverifiable Attimari/Coolie payments and reasonableness of partial disallowance - Precedent reliance and application of earlier appellate finding in subsequent assessment year - Whether the Assessing Officer was justified in fully disallowing the Attimari Coolie expenses claimed by the assessee - HELD THAT: - The Assessing Officer disallowed the entire claim for want of supporting evidence, although it was not disputed that the expenses were incurred for business. The CIT(A) - following his predecessor's treatment in the immediately preceding year - restricted the disallowance to 25% as a fair and reasonable measure in respect of the unverifiable component. The Tribunal found this approach reasonable in the circumstances, noted absence of any successful challenge to the predecessor order, and declined to interfere with the exercise of appellate discretion to restrict the disallowance to 25% of the claimed amount. [Paras 12]

The CIT(A)'s direction to restrict the disallowance to 25% is upheld and the Revenue's ground is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s order reducing the bad debt disallowance to the specific unsubstantiated amount and restricting the Attimari Coolie expense disallowance to 25% is affirmed.

Classification of sale of undivided share of land as long-term capital gain or business income - remand to the Assessing Officer for fresh examination - proportionate allocation of construction expenses to closing stock / work-in-progress - disallowance under section 14A read with Rule 8D for expenses attributable to exempt income

Classification of sale of undivided share of land as long-term capital gain or business income - remand to the Assessing Officer for fresh examination - Whether the profit on sale of undivided share of land attributable to RMT II is to be treated as long term capital gain or business income, and the appropriate forum for re examination. - HELD THAT: - The Tribunal noted that the Coordinate Benches had earlier examined identical contentions for assessment years 2008 09 to 2011 12 and had remitted the matter to the Assessing Officer for fresh enquiry. In the present appeal for assessment year 2012 13 both parties were unable to place definitive material before the Tribunal and agreed that the issue required fresh factual and documentary scrutiny. In these circumstances the Tribunal exercised its supervisory power to remit the controversy back to the Assessing Officer for fresh examination, permitting the assessee to produce materials and requiring the AO to conduct appropriate enquiries and to afford adequate opportunity before deciding the matter in accordance with law. [Paras 4]

The matter is remitted to the Assessing Officer for fresh examination (allowed for statistical purposes).

Proportionate allocation of construction expenses to closing stock / work-in-progress - treatment of cost of construction in computation of profit on sale of flats - Validity of the reassessment by the AO (and confirmation by the CIT(A)) disallowing excess construction cost claimed by the assessee and reworking cost of construction for flats sold. - HELD THAT: - The Assessing Officer recalculated cost of construction by treating only the proportion of construction expenses attributable to flats sold as chargeable to the profit and loss account and directing the balance to closing stock (work in progress), applying a 4:3 split where 4 flats were sold out of 7. The CIT(A) examined the submissions and upheld the AO's proportional allocation, observing that the assessee could not legitimately charge the entire construction expenditure to cost of sales when part of the construction related to unsold units. The Tribunal found no infirmity in the appellate authority's reasoning and confirmed that the AO's method of apportionment and resultant addition was correct on the facts. [Paras 5]

Assessee's ground is dismissed; the reworking of construction cost and the disallowance confirmed by the CIT(A) are upheld.

Disallowance under section 14A read with Rule 8D for expenses attributable to exempt income - Whether the disallowance under section 14A read with Rule 8D in respect of expenses attributable to exempt dividend income was justified. - HELD THAT: - The AO applied Rule 8D to determine expenses attributable to earning exempt dividend income, having regard to the assessee's substantial investments and the dividend income claimed as exempt. The assessee relied on a large sum disallowed in its computation said to be personal in nature, but the CIT(A) held that section 14A contemplates expenses incurred that are attributable to earning exempt income and that personal expenses do not fall within this ambit. The Tribunal, after considering the nature of the investments and the authorities below' findings, found no infirmity in the confirmation of the disallowance under section 14A read with Rule 8D. [Paras 6]

Assessee's ground is dismissed; the disallowance under section 14A read with Rule 8D is upheld.

Final Conclusion: Revenue appeal allowed for statistical purposes by remitting the issue of classification of sale of undivided share of land to the Assessing Officer for fresh examination; assessee's appeals against reworking of construction cost and the disallowance under section 14A read with Rule 8D are dismissed and the confirmations by the CIT(A) are upheld.

Validity of reassessment notice and jurisdiction under section 147/148 - Requirement that additions in reassessment be attributable to the reasons recorded - Scope and applicability of Explanation 3 to section 147

Validity of reassessment notice and jurisdiction under section 147/148 - Requirement that additions in reassessment be attributable to the reasons recorded - Scope and applicability of Explanation 3 to section 147 - Whether the reopening of assessment and additions made were within jurisdiction where the reasons recorded related to cash deposits but the Assessing Officer made additions unrelated to those reasons. - HELD THAT: - The Tribunal examined the reasons recorded which referred to cash deposits totalling Rs.1,63,85,000/- during F.Y. 2012-13 (relevant to A.Y. 2013-14) and noted that the Assessing Officer did not make any enquiry or additions in respect of those deposits. Instead, the assessment order contained additions on unrelated heads (land development expenses, municipal development charges, unsecured loans, capital introduced and others). Relying on established precedents (including Jet Airways, Ranbaxy and Lark Chemicals and the Supreme Court's treatment thereof), the Tribunal applied the principle that an Assessing Officer must assess or reassess the income which formed the basis of the reason to believe and, only upon so doing, may proceed to assess any other income that comes to his notice during proceedings under Explanation 3 to section 147. If the foundational addition (the income whose escape was the basis for reopening) is not assessed, the jurisdiction to make additions on other unrelated issues ceases to subsist. On the facts, since no addition corresponding to the reasons recorded was made and the additions made could not be attributed to those reasons, Explanation 3 was not attracted and the Assessing Officer lacked jurisdiction to make the impugned additions. [Paras 11, 13, 14]

The reopening and the subsequent additions not attributable to the reasons recorded were without jurisdiction; Explanation 3 to section 147 did not validate the reassessment and the appeal is allowed.

Final Conclusion: Following authoritative precedents, the Tribunal held that where the assessment was reopened on specific reasons (cash deposits) but no addition was made on those reasons and instead unrelated additions were made, the Assessing Officer lacked jurisdiction and Explanation 3 to section 147 did not save the reassessment; the assessee's appeal is allowed.

Disallowance under Section 14A for expenditure relatable to exempt income where no exempt income accrued - Application of Rule 8D(2)(iii) to compute disallowance - Retrospective effect of an Explanation inserted 'for removal of doubts' - Effect of legislative memorandum prescribing prospective operation of an amendment - Precedential effect of a High Court decision in absence of a stay by the Supreme Court

Disallowance under Section 14A for expenditure relatable to exempt income where no exempt income accrued - Application of Rule 8D(2)(iii) to compute disallowance - Retrospective effect of an Explanation inserted 'for removal of doubts' - Whether the disallowance made under section 14A read with Rule 8D(2)(iii) is sustainable where the assessee had not earned any exempt (tax-free) income during the year - HELD THAT: - The Assessing Officer disallowed expenditure by applying Rule 8D(2)(iii) despite the assessee's assertion that no exempt income (such as dividend) was earned in the year. The Tribunal, following the reasoning in the judgment of the Hon'ble Delhi High Court in Principal Commissioner of Income Tax v. M/s. Era Infrastructure (India) Limited, observed that the amendment to Section 14A by insertion of a non-obstante clause and an Explanation said to be "for removal of doubts" could not be given retrospective effect to alter the law as it stood unless plainly intended so by Parliament. The Delhi High Court relied upon the memorandum to the Finance Bill, 2022, which stated the amendment would take effect from 1-4-2022 (applying to AY 2022-23 onwards), and the settled principle that an Explanation which changes the law is not to be presumed retrospective even if couched as clarificatory. In view of that reasoning, and since the assessee had not earned any exempt income for AY 2017-18, no disallowance under Section 14A was warranted and the addition made by the AO (confirmed by the CIT(A)) was deleted. [Paras 4, 5]

The addition under Section 14A read with Rule 8D(2)(iii) is not sustainable for AY 2017-18 where no exempt income was earned; the addition is deleted and the appeal is allowed.

Final Conclusion: The Tribunal, following the Hon'ble Delhi High Court's decision and the legislative memorandum indicating prospective effect of the 2022 amendment, deleted the Section 14A disallowance for AY 2017-18 as the assessee did not earn any exempt income; the appeal is allowed.

Disallowance of employee benefit expenses - ad-hoc disallowance - benefit of doubt - treatment of loans and advances as income - requirement of corroborative evidence for trade advances - valuation of opening and closing stock - lower of cost and net realisable value - effect of stock valuation on adjacent assessment years - treatment of unexplained cash balance

Disallowance of employee benefit expenses - ad-hoc disallowance - benefit of doubt - Deletion of the ad-hoc disallowance of employee benefit expenses of Rs. 6,12,140/- by the CIT(A) was upheld. - HELD THAT: - The AO disallowed 40% of employee benefit expenses on the basis that salaries had increased while turnover declined and that returns/audit reports for the two preceding years were not filed. The Tribunal found that the assessee furnished details of employees and salaries during proceedings, and that an assessing officer cannot substitute the assessee's commercial decision on salary quantum or link salary mechanically to turnover. The AO made an ad-hoc disallowance in absence of evidence showing salaries were not actually paid or were unreasonable compared to market practice; non-filing of earlier returns/audit reports, without initiation of separate penal proceedings, does not justify such disallowance. Given the material before the authorities and absence of contrary evidence from Revenue, the CIT(A)'s grant of benefit of doubt was sustainable and the ad-hoc disallowance was rightly deleted. [Paras 9]

Revenue's ground challenging deletion of the salary disallowance is dismissed; the CIT(A) order deleting the addition is upheld.

Treatment of loans and advances as income - requirement of corroborative evidence for trade advances - benefit of doubt - Deletion of the addition treating advances as unexplained income (Rs. 17,02,736/-) was upheld. - HELD THAT: - The AO treated advances to certain parties as income because contra confirmations, PAN and complete addresses were not on record and there were limited transactions in the year. The Tribunal observed there is no provision treating bona fide advances given in the course of business as income; advances are not deductions and their tax consequence, if any, arises in the year of adjustment. The assessee produced ledgers and payment vouchers showing the advances and subsequent adjustments; their genuineness was not controverted by Revenue. In absence of material discrediting the documents and given the explanations and records placed before the CIT(A), deletion of the addition was justified and sustained. [Paras 16]

Revenue's ground against deletion of the addition of advances is dismissed; the CIT(A) order deleting the addition is upheld.

Valuation of opening and closing stock - lower of cost and net realisable value - effect of stock valuation on adjacent assessment years - benefit of doubt - Deletions of additions made by the AO in respect of opening stock and differential valuation of closing stock were upheld. - HELD THAT: - The AO disturbed opening stock because earlier returns/audits were not filed and sought to value closing stock at average purchase price. The Tribunal held that the closing stock of one year becomes opening stock of the next and mere non-filing of earlier returns is not by itself a basis to disturb opening stock unless material shows the earlier closing stock was not genuine. The assessee produced tax audit report, invoices and sale bills supporting valuation; quantity of stock was not disputed by AO and subsequent sales from such stock were not impugned. While the AO's point that different items have different prices was acknowledged, the sales register showed most products sold at prices at or below the rate relied upon by the assessee and there was no arbitrary basis for rejecting the assessee's valuation. Further, the AO did not direct revision of the opening stock of the next year which would be necessary to give effect to his valuation. On these grounds, the CIT(A)'s deletion of both the opening stock addition and the differential closing stock addition was sustained. [Paras 24]

Revenue's grounds challenging deletion of additions relating to opening and closing stock are dismissed; the CIT(A) order is upheld.

Treatment of unexplained cash balance - benefit of doubt - Deletion of the addition of unexplained cash in hand of Rs. 18,81,497/- was upheld. - HELD THAT: - The AO added the closing cash balance as unexplained income because documentary explanation was not, in his view, adequate. The Tribunal emphasized that cash-in-hand in audited financial statements is the net result of receipts and payments during the year and does not per se constitute income. Absent tangible material questioning the underlying cash transactions, the closing cash balance cannot be disturbed. The assessee had furnished explanations and audit report which were not shown to be unreliable; the CIT(A)'s decision to give benefit of doubt was therefore proper. [Paras 30]

Revenue's ground against deletion of the unexplained cash addition is dismissed; the CIT(A) order deleting the addition is upheld.

Final Conclusion: All grounds of appeal raised by the Revenue were dismissed and the order of the CIT(A) deleting the additions in respect of employee benefit expenses, loans and advances, opening and closing stock valuation differences, and unexplained cash was upheld; the Revenue's appeal is dismissed.

Unexplained cash credit under section 68 - onus of proof under section 68 (identity, creditworthiness, genuineness) - deemed income under section 56(2)(viib) - valuation of unquoted preference shares under Rule 11UA(1)(c) - discounted cash flow method for valuation

Unexplained cash credit under section 68 - onus of proof under section 68 (identity, creditworthiness, genuineness) - Deletion of addition made by the Assessing Officer under section 68 in respect of amounts received on allotment of redeemable preference shares. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee discharged the initial onus under section 68 by establishing identity of the subscriber, the creditworthiness of the subscriber and the genuineness of the transaction. The subscriber (Magi Fin Stock Pvt. Ltd.) responded to the AO's notice under section 133(6) and furnished documentary evidence including audited accounts, bank statements, board resolution, ledger entries, share certificate and explanation of source of funds. The AO did not disprove these submissions. In these circumstances, and having regard to the authorities and the material on record, the addition under section 68 could not be sustained. [Paras 9]

Addition of Rs. 8,71,00,000 made under section 68 deleted.

Deemed income under section 56(2)(viib) - valuation of unquoted preference shares under Rule 11UA(1)(c) - discounted cash flow method for valuation - Validity of alternative addition under section 56(2)(viib) on the ground that share premium exceeded fair market value. - HELD THAT: - The Tribunal agreed with the CIT(A) that Rule 11UA(1)(c) does not prescribe a specific valuation method for unquoted non-equity shares and permits the assessee to obtain a valuation report from an accountant. Preference shares with a fixed cumulative coupon and a fixed redemption tenure are appropriately valued by discounting the redemption proceeds to present value. The assessee produced a valuation report applying a discounted cash flow approach; the AO's contention that DCF is inapplicable was rejected. As the valuation on the record supported the fair market value, the deeming provision under section 56(2)(viib) did not apply. [Paras 10]

Alternate addition under section 56(2)(viib) deleted.

Final Conclusion: The Tribunal confirmed the CIT(A)'s order deleting the additions made under section 68 and alternatively under section 56(2)(viib); the revenue's appeal is dismissed.

Allowability of interest under Section 36(1)(iii) of the Income tax Act, 1961 - disallowance under Section 14A read with Rule 8D of the Income tax Rules, 1962 - commercial expediency of inter company advances - genuineness of business borrowings - notional interest on interest free advances - Maxopp principle on computation of disallowance under Section 14A - assessee's suo moto disallowance

Allowability of interest under Section 36(1)(iii) of the Income tax Act, 1961 - commercial expediency of inter company advances - genuineness of business borrowings - notional interest on interest free advances - Deletion of the disallowance of interest expenditure made under Section 36(1)(iii) was affirmed. - HELD THAT: - The appellate tribunals found that the loans and advances comprised investments and business advances integral to the assessee's business activities (including immovable property and advances to suppliers and group concerns), and that some advances bore interest as reflected in Schedule 17 of the accounts. On the facts, advances were given on account of commercial expediency and were for the purpose of business; therefore notional interest on such advances could not be disallowed under Section 36(1)(iii). The authorities applied the principle that once the genuineness of borrowings and their use for business is established, interest paid on borrowings is allowable, relying on the ratio in Taparia Tools and SA Builders as affirmed by the ITAT and CIT(A). Having endorsed those concurrent findings, the Court declined to interfere with the deletion of the disallowance. [Paras 4]

The deletion of the interest disallowance under Section 36(1)(iii) is upheld; the revenue's appeal on this ground is dismissed.

Disallowance under Section 14A read with Rule 8D of the Income tax Rules, 1962 - Maxopp principle on computation of disallowance under Section 14A - assessee's suo moto disallowance - Deletion of the addition under Section 14A read with Rule 8D was affirmed. - HELD THAT: - The ITAT noted that the assessee had own funds substantially in excess of the investments yielding exempt income and had made a suo moto disallowance. Under Sections 14A(2) and 14A(3) read with Rule 8D, Rule 8D's formulaic computation is invoked only where the Assessing Officer is dissatisfied with the correctness of the disallowance offered by the assessee. Relying on this Court's decision in Maxopp Investment Ltd., as affirmed by the Supreme Court, the tribunals found no justification to apply Rule 8D or to enhance the disallowance where the assessee had itself made a disallowance and the factual position (own funds vs investments) did not warrant interference. Consequently the addition under Section 14A read with Rule 8D was deleted. [Paras 5, 6]

The deletion of the Section 14A/Rule 8D addition is upheld and no interference is warranted.

Final Conclusion: Concurrent findings of the CIT(A) and ITAT upholding the deletion of the interest disallowance under Section 36(1)(iii) and the deletion of the addition under Section 14A read with Rule 8D are affirmed; the revenue's appeal is dismissed as no substantial question of law arises.

Jurisdiction of Assessing Officer - territorial jurisdiction - concurrent jurisdiction of Assessing Officers - directions under Section 120 - jurisdictional vesting under Section 124 - non-obstante clause in Section 124(5) - notice under Section 148

Jurisdiction of Assessing Officer - territorial jurisdiction - concurrent jurisdiction of Assessing Officers - directions under Section 120 - notice under Section 148 - non-obstante clause in Section 124(5) - Validity of notice under Section 148 issued by ITO-2(1) for AY 2017-18 when assessment was earlier completed by ACIT on account of monetary limit - HELD THAT: - The Court found that the ITO-2(1), Moradabad is an Assessing Officer within the meaning of Section 2(7A) and that the Board's directions (and consequent orders by the Chief Commissioner) for allocation of work under Section 120 permit vesting of jurisdiction territorially and permit concurrent or redistributed exercise of powers. The Chief Commissioner's order dated 19.02.2018 (issued pursuant to CBDT instructions) setting monetary limits for distribution of non-corporate work does not oust or create an inherent lack of territorial jurisdiction in an Assessing Officer vested with jurisdiction under directions/orders under Section 120. Section 124(5)'s non-obstante provision confirms that an Assessing Officer vested with jurisdiction has all powers in respect of income arising within the area. Since territorial jurisdiction of ITO-2(1) over the petitioner was admitted, there was no obligation for referral under Section 124(2) and the pecuniary distribution of work between officers does not invalidate issuance of a notice under Section 148 by the territorial Assessing Officer. The Court relied on the principle that concurrent jurisdictions are permissible under the Act and that monetary allocation for administrative distribution does not equate to exclusive jurisdiction to the exclusion of a territorial Assessing Officer; consequently the objection to jurisdiction was rejected and the impugned notice and order sustaining the notice were upheld. [Paras 14, 17, 19, 20, 24]

The notice under Section 148 issued by ITO-2(1) for AY 2017-18 was valid; pecuniary limits for distribution of work do not negate the territorial jurisdiction of the Assessing Officer and the petition is dismissed.

Final Conclusion: Writ petition dismissed; impugned notice under Section 148 and the order rejecting the objection were held valid as the ITO had territorial jurisdiction and pecuniary allocation of work did not oust that jurisdiction.

Validity of attachment under the Second Schedule - Protection of bona fide purchaser - Effect of Rule 2 notice on alienation - Time-bar for sale of attached immovable property under Rule 68B - Distinction between assessment proceedings and recovery proceedings (Assessing Officer vis-a -vis Tax Recovery Officer) - Operation of Section 281 (proviso) / Section 281B as affecting alienations

Validity of attachment under the Second Schedule - Protection of bona fide purchaser - Effect of Rule 2 notice on alienation - Operation of Section 281 (proviso) - Whether attachments made after the petitioners purchased the properties for valuable consideration are legally sustainable - HELD THAT: - The court found the facts undisputed that the petitioners purchased the properties in 2008 and 2009, are in undisturbed possession, paid valuable consideration and there is no allegation of collusion. While Rule 2 notice and Rule 16 restrict dealings by the defaulter once a certificate and notice are issued, Section 281 (proviso) protects alienations made for adequate consideration without notice of pendency. More importantly, the Second Schedule contains a time-bound scheme for sale of attached immovable property. Rule 68B prescribes a limitation (seven years from the end of the financial year in which the order giving rise to the demand became conclusive, subject to limited extension) for sale of attached immovable property. Where the Department did not act within the period stipulated by Rule 68B, the long delay renders subsequent attachments of properties after bona fide purchase impermissible. The court emphasised the statutory distinction between assessment (Assessing Officer) and recovery (Tax Recovery Officer) processes and held that the statutory embargo in Rule 68B is sacrosanct and must be strictly enforced by the Department as well as the assessee. [Paras 28, 29, 30, 31, 32]

Attachments of the properties in question made after the petitioners' bonafide purchases are quashed and the attachments shall be lifted forthwith.

Final Conclusion: Writ petitions allowed; impugned attachments quashed and respondent directed to lift the attachments within one week; no costs.

Condonation of delay - dismissal of appeal as time-barred - liberal interpretation of limitation - corporate decision-making and institutional prescriptions for prosecuting appeals - rectification application under section 154 - opportunity of hearing and decision on merits

Condonation of delay - dismissal of appeal as time-barred - liberal interpretation of limitation - corporate decision-making and institutional prescriptions for prosecuting appeals - Whether the order of the CIT(A) in dismissing the appeal as barred by limitation was sustainable and whether the delay ought to be condoned. - HELD THAT: - The Tribunal found that the CIT(A) dismissed the appeal on the ground of unjustified delay without appreciating the affidavits filed by the society's manager and the CA explaining the delay and without examining the substantive grounds raised by the assessee. The Bench observed that where an institutional or incorporated entity decides to contest an order, the decision-making and filing may follow an internal process and that stringent limitation provisions admit of liberal interpretation. The CIT(A) applied a cursory approach, failed to consider the explanation for each day of delay in context of a society acting through office-bearers, and did not afford an opportunity to contest the assessment on merits; the Tribunal held that in these circumstances the ends of justice require condonation of delay and a hearing. [Paras 6, 7, 8]

Ground allowing condonation of delay; the impugned order is set aside and the appeal is restored for adjudication on merits after giving the assessee a reasonable opportunity of hearing.

Opportunity of hearing and decision on merits - rectification application under section 154 - remand for fresh consideration - Whether the substantive grounds raised by the assessee (including the claim of exemption and the rectification application) require fresh adjudication by the CIT(A). - HELD THAT: - The Tribunal noted that the CIT(A) did not examine the merits of the grounds filed by the assessee, including the contention that the assessment resulted from an apparent software error and that a rectification application under section 154 had been filed and rejected by CPC. Given the summary dismissal and absence of a merits hearing, the Tribunal directed that the CIT(A) must decide the grounds on merits after affording a reasonable opportunity of hearing to the assessee. The order is remitted for fresh consideration rather than being decided on the record before the Tribunal. [Paras 7, 8]

Merits remanded to the CIT(A) for fresh consideration and adjudication after hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeal on the limited ground that the CIT(A) erred in dismissing the appeal as time-barred without proper consideration of the explanation for delay and without adjudicating the substantive grounds; the impugned order is set aside and the matter is remitted to the CIT(A) to decide the grounds on merits after giving the assessee a reasonable opportunity of hearing.

Re-opening of assessment - reasons recorded for reopening - assumption of jurisdiction under section 147 - assessment completed under section 144 r.w.s. 147 - undisclosed bank account and addition of unexplained cash deposits - penalty under section 271(1)(c) consequent upon assessment

Re-opening of assessment - reasons recorded for reopening - assumption of jurisdiction under section 147 - assessment completed under section 144 r.w.s. 147 - undisclosed bank account and addition of unexplained cash deposits - Validity of reopening the assessment and correctness of the addition of cash deposits as income - HELD THAT: - The Tribunal found that the Assessing Officer reopened the assessment on the basis that no return had been filed, whereas it was not disputed that the assessee had e-filed a return for the year under a different PAN. Reasons for reopening form the foundation for assuming jurisdiction under section 147, and an undisputed factual error in the reasons (the assertion that no ITR was filed) evidenced non-application of mind by the AO. Although the CIT(A) upheld the assessment by treating the bank account as an undisclosed account and noting that the return filed under a different PAN did not disclose the ICICI bank account, the Tribunal held that the AO had re-opened and completed the assessment without properly verifying records and despite the existence of the e-filed return. In these circumstances the reopening was held to be illegal and unjustified, and the addition of the cash deposits was quashed. [Paras 9, 10]

Impugned assessment under section 144 r.w.s. 147 quashed and the addition of the deposits deleted.

Penalty under section 271(1)(c) consequent upon assessment - Sustainability of penalty proceedings founded on the quashed assessment - HELD THAT: - The Tribunal observed that the penalty under section 271(1)(c) arises out of and is consequent upon the assessment which the Tribunal quashed for being illegal and unjustified. Since the foundational assessment has been set aside, the penalty based on that assessment cannot survive and must be deleted. [Paras 12, 13]

Impugned penalty deleted.

Final Conclusion: Both appeals for Assessment Year : 2010-11 are allowed: the assessment completed under section 144 r.w.s. 147 is quashed and the addition deleted; the consequential penalty under section 271(1)(c) is also deleted.

Self-assessment finality - assessment includes determination of quantity for duty - refund under Section 27 cannot be used to reopen or modify assessment - re-assessment or appeal required to alter self-assessment - remission under Section 23 applies only where imported goods are lost or destroyed before clearance for home consumption - adequacy of evidence for short-landing (draught survey reports and Master's remarks)

Self-assessment finality - refund under Section 27 cannot be used to reopen or modify assessment - Whether excess duty paid under a self-assessed Bill of Entry can be refunded without first assailing or modifying the self-assessment. - HELD THAT: - The Court held that the substituted, elaborated definition of assessment confirms that quantity is an element of assessment and that a self-assessment, once made, attains finality unless modified by appropriate proceedings. Following the larger bench decision of the Supreme Court in ITC Ltd., a refund cannot be sanctioned by an officer in a manner that has the practical effect of setting aside or modifying a self-assessment. The correct remedy is to assail the assessment (including self-assessment) by appeal or seek re-opening under the statutory provisions; the refund provision is a mechanical process and cannot be used to re-assess duty. [Paras 6, 8, 12, 15]

No refund can be sanctioned so as to modify an unchallenged self-assessment; the self-assessment must be appealed or modified by due process before any refund based on reduced quantity can be granted.

Assessment includes determination of quantity for duty - re-assessment or appeal required to alter self-assessment - Whether a change in the quantity of goods stated in the Bill of Entry amounts to re-assessment. - HELD THAT: - The Court explained that the 2018 substitution of the definition of 'assessment' elaborates that determination of quantity, weight or other specifics is integral to assessment. Therefore, altering the quantity for the purpose of reducing duty is a matter of assessment/re-assessment. Once clearance for home consumption occurs and the assessment stands, it can only be reopened by statutory remedies or appealed against; a simple refund claim cannot effectuate such a change. [Paras 6, 7, 11, 12, 15]

A change in the quantity in the Bill of Entry is a matter of re-assessment and cannot be given effect through a standalone refund without pursuing the statutory channels to modify the assessment.

Adequacy of evidence for short-landing (draught survey reports and Master's remarks) - Whether the documents relied upon by the appellant establish that a lesser quantity was imported than stated in the Bills of Lading. - HELD THAT: - On the facts the Court found the survey reports and certificates inconclusive. In the cited consignments the Master of the vessel recorded that the entire cargo was discharged, some receivers confirmed receipt as per Bill of Lading, while the appellant's agents or surveyors recorded short receipt. There was no accord between the delivering party (Master) and the receivers; the evidence thus amounted to conflicting statements and did not satisfactorily establish short-landing. [Paras 13, 14, 15]

The documents on record do not conclusively establish that lesser quantities were imported; the evidence is inconclusive and does not justify allowing the refund claim on that basis.

Remission under Section 23 applies only where imported goods are lost or destroyed before clearance for home consumption - Whether remission under Section 23 is available to the appellant in lieu of a refund for alleged short-landing. - HELD THAT: - Section 23(1) permits remission where imported goods have been lost or destroyed before clearance for home consumption. The Court observed that the appellant did not claim that the goods were imported and subsequently lost or destroyed prior to clearance; instead the case was founded on alleged short-landing at import. Hence the facts do not fall within the scope of Section 23(1), which is aimed at loss or destruction of goods before clearance. [Paras 9, 10, 11, 15]

Section 23(1) remission is not applicable; the case is one of disputed quantity at import and not of goods imported and thereafter lost or destroyed before clearance.

Final Conclusion: The appeals are dismissed. The self-assessments made by the appellant attained finality and were not appealed or otherwise modified; remission under Section 23 is inapplicable; and the documentary evidence for short-landing is inconclusive. The impugned orders rejecting the refund claims require no interference.

Natural justice - Right to be heard - Ex parte adjudication - Opportunity for personal hearing - Right to cross-examination - Remand for fresh adjudication

Natural justice - Right to be heard - Ex parte adjudication - Opportunity for personal hearing - Right to cross-examination - Whether the adjudication suffered from violation of principles of natural justice by deciding the matter ex parte and not granting adequate opportunity for personal hearing and cross-examination - HELD THAT: - The Tribunal found that the Adjudicating Authority proceeded to decide the matter ex parte despite correspondence indicating the Appellant's residential address and requests for adjournment of personal hearings. The Appellant's request for cross-examination was also not considered. Applying the uncodified but cardinal principles of natural justice - that no one be condemned unheard and that proceedings be conducted fairly and impartially - the Tribunal held that there was a clear violation of natural justice. The Tribunal did not express any opinion on the merits of the allegations but confined its decision to the procedural infirmity caused by denial of adequate hearing and failure to consider cross-examination. [Paras 4, 5]

Impugned ex parte order set aside and matter remanded to the Adjudicating Authority for passing a fresh order after granting sufficient personal hearing (including appropriate opportunity for cross-examination).

Final Conclusion: Appeal allowed by way of remand; impugned Order in Original set aside and the matter remitted to the Adjudicating Authority for fresh adjudication after affording adequate personal hearing and opportunity for cross examination.

Award of interest in absence of statutory provision or contractual obligation - equitable jurisdiction to award interest - interest as damages for breach of contract - refund of court-deposited amount - obligation of ex-directors to file statement of affairs under Section 454 of the Companies Act, 1956 - onus on claimant to prosecute revival scheme - failure to prosecute disentitling claimant to equitable relief

Award of interest in absence of statutory provision or contractual obligation - equitable jurisdiction to award interest - interest as damages for breach of contract - Whether the appellant was entitled to interest on the amount deposited with the Registry - HELD THAT: - The Court held that interest is payable only where there is a substantive statutory entitlement, an enforceable trade/custom practice, an agreement, or where equity demands it upon established circumstances. Interest may also be awarded as damages for breach of contract where a cause of action is established. The amount deposited by the appellant was not a debt owed to him; no statutory provision, contractual term, or enforceable custom entitled him to interest. Equitable relief by way of interest requires that the claimant first establish circumstances attracting equitable jurisdiction; here the appellant failed to do so because he did not prosecute a revival scheme with due alacrity and thereby contributed to delay in the liquidation process. The Court further noted that the appellant could have earlier sought refund but did not, and that his claimed inability to obtain information from the Official Liquidator was not made out on the record. Applying these principles, the Court found no basis to interfere with the Learned Single Judge's exercise of discretion in declining interest. [Paras 20, 21, 22, 23]

No interest was payable on the refunded deposit; the Learned Single Judge rightly declined to grant interest.

Obligation of ex-directors to file statement of affairs under Section 454 of the Companies Act, 1956 - onus on claimant to prosecute revival scheme - failure to prosecute disentitling claimant to equitable relief - Whether the appellant was prevented by the Official Liquidator from obtaining information necessary to present a revival scheme and whether that disentitled him from relief - HELD THAT: - The Court examined the history: the winding up petition was admitted on 31.08.2016, the Company Court appointed the Official Liquidator as provisional liquidator and directed directors to file statement of affairs, and the appellant had earlier been a director and held equity. The appellant obtained an order directing access to records but did not enforce it or otherwise promptly present a revival scheme. On these facts the Court concluded that the appellant bore the onus to file the scheme and that his contention of being impeded by the Official Liquidator was not substantiated and appeared to be a ruse for lack of alacrity. Consequentially, the appellant's conduct weighed against granting equitable relief such as interest. [Paras 8, 10, 18, 19, 22]

The appellant was not prevented in a manner that justified withholding prosecution of a revival scheme; his failure to prosecute disentitles him to equitable relief.

Final Conclusion: The appeal is dismissed; the order directing refund of the deposited amount is affirmed and the refusal to award interest is upheld. Pending applications stand closed.

Admissibility of computer printouts as evidence - certificate requirement for data retrieved from computer under Section 36B - reliance on documents not incorporated in the show cause notice - calculation chart prepared by Department not substituting primary documents - inadmissibility of statements recorded during investigation for want of cross-examination - scope of rectification application - limited to mistakes apparent on face of record

Admissibility of computer printouts as evidence - certificate requirement for data retrieved from computer under Section 36B - Whether the Tribunal erred in holding that the computer printouts relied upon by Revenue were inadmissible for want of certificate under Section 36B and therefore could not support the demand. - HELD THAT: - The Tribunal examined the printouts (RUD-8) and found them to be calculation charts prepared by the Department rather than primary documents authored by the assessee. It noted that the printouts produced at this stage were not accompanied by the mandatory certificate required under Section 36B to authenticate data retrieved from computers. Relying on the principle laid down by the Supreme Court in Anwar P.V. vs. P.K. Basheer, the Tribunal held that in absence of the statutory certificate the computer-derived data was not reliable or admissible to sustain the demand. The demand of duty was therefore held not to be based on relied-upon admissible documents. [Paras 13]

Computer printouts without the certificate under Section 36B are inadmissible and cannot sustain the demand.

Reliance on documents not incorporated in the show cause notice - calculation chart prepared by Department not substituting primary documents - Whether Revenue could rely at the rectification stage on panchnama/printouts that were not part of the documents relied upon in the show cause notice to sustain the demand. - HELD THAT: - The Tribunal found that the panchnama dated 3rd July, 2014 (produced belatedly) was not relied upon in the show cause notice, was not placed or argued before the Tribunal in the appeal, and is not referred to in the rectification application. The printouts produced were identified as departmental calculation charts and not as primary relied-upon documents. The Tribunal applied the principle that demand cannot be confirmed solely on the basis of a calculation chart not founded on primary documents and not included among the relied-upon documents in the show cause notice. Consequently, late production or reliance upon such material at the rectification stage was rejected. [Paras 6, 7, 8, 10, 13]

Documents/printouts not incorporated in the show cause notice and shown to be departmental calculation charts cannot be relied upon at the rectification stage to sustain the demand.

Inadmissibility of statements recorded during investigation for want of cross-examination - scope of rectification application - limited to mistakes apparent on face of record - Whether the Tribunal's exclusion of statements recorded during investigation for want of cross-examination and its refusal to recall the final order on the basis of alleged factual mistakes was justified. - HELD THAT: - The Tribunal reiterated that statements recorded during investigation are inadmissible unless the maker is made available for cross-examination; it found no clinching admissible evidence to support clandestine removal. Further, the Tribunal emphasised the narrow scope of rectification applications - limited to correcting mistakes apparent on the face of the record and not a forum for re opening or reviewing the merits by re weighing evidence. Revenue's attempt to revisit the evidence and to introduce documents not relied upon earlier was held to be beyond the scope of rectification. On these grounds the rectification applications were dismissed. [Paras 11, 12, 13, 14]

Statements not subjected to cross-examination are inadmissible; rectification cannot be used to re open the record or re evaluate evidence and therefore the rectification applications fail.

Final Conclusion: The rectification applications filed by Revenue are dismissed. The Tribunal's Final Order was not vitiated by any mistake apparent on the face of the record: the disputed printouts were departmental calculation charts not forming part of the relied upon documents, lacked the certificate under Section 36B, and statements relied upon were inadmissible for want of cross examination; accordingly no recall was warranted.

Reversal of Cenvat credit - Rule 6(3)(b) of Cenvat Credit Rules - Rule 6(3)(i) of Cenvat Credit Rules - proportionate reversal of credit - revenue neutrality where intermediate inputs are transferred between units - requirement of 'sale' for triggering percentage reversal (pre and post amendment)

Reversal of Cenvat credit - proportionate reversal of credit - Rule 6(3)(b) of Cenvat Credit Rules - Rule 6(3)(i) of Cenvat Credit Rules - revenue neutrality where intermediate inputs are transferred between units - Whether demands for reversal of Cenvat credit under amended or unamended Rule 6(3) could be sustained where Unit I used common inputs for both dutiable (cement) and exempted (limestone) products but had reversed proportionate credit in respect of limestone cleared to Unit II. - HELD THAT: - The Tribunal found as an admitted fact that the appellant (Unit I) had reversed the proportionate Cenvat credit attributable to explosives used for excavation of limestone cleared to Unit II. Rule 6 provides for either proportionate reversal (where calculable) or, alternatively, reversal by applying a specified percentage to the value of the exempted product. Where the assessee has debited/reversed the proportionate credit before clearance of the exempted goods, that step is equivalent to not availing the credit for those goods and falls squarely within the principle established by the Supreme Court in Chandrapur Magnet Wires (that a debit of credit prior to clearance negates the application of the percentage reversal). The Tribunal therefore held that Rule 6(3)(i) (the percentage reversal route) had no application in such a case. The Tribunal further observed that the situation was revenue neutral because both units under common management pay duty on their finished dutiable products and any duty, if paid under the percentage route, would still be available to Unit II as input credit. Accordingly, the absence of separate accounts for inputs and the fact of transfer of limestone between sister units did not sustain a demand where proportionate reversal had been effected. [Paras 13, 14, 15]

Demand under Rule 6(3)(b)/(i) cannot be sustained as the assessee had already reversed proportionate credit; appeals dismissed and impugned order upheld.

Final Conclusion: The Tribunal dismissed the revenue appeals, upholding the adjudicating authority's finding that proportionate reversal of Cenvat credit in respect of explosives used for limestone cleared to the sister unit obviated invocation of the percentage reversal under Rule 6(3), and that the arrangement was revenue neutral; the impugned order is affirmed.

Definition of "input" under Cenvat Credit Rules, 2004 - entitlement to Cenvat credit - Cenvat credit on goods used for repair and maintenance of capital goods - scope of "all goods used in the factory" as inputs

Definition of "input" under Cenvat Credit Rules, 2004 - scope of "all goods used in the factory" as inputs - Cenvat credit on goods used for repair and maintenance of capital goods - entitlement to Cenvat credit - Whether HR Coils/Sheets used for lining furnaces and welding electrodes used for plant maintenance qualify as "inputs" under Rule 2(k) of the Cenvat Credit Rules, 2004 and entitle the appellant to Cenvat credit. - HELD THAT: - Rule 2(k) of the Cenvat Credit Rules, 2004 defines "input" to include "all goods used in the factory by the manufacturer of the final product." The tribunal found no dispute that the HR Coils/Sheets were used for lining furnaces and that welding electrodes were used for maintenance, both activities taking place within the factory. Applying the statutory definition, such goods used in the factory fall within the scope of "inputs" and thereby attract entitlement to Cenvat credit. The tribunal further treated the question as no longer res integra and referred to the decision of the jurisdictional High Court in Sree Rayalaseema Hi-Strength Hypo Ltd. v. Commissioner of Customs & Central Excise, Tirupati as guiding precedent. On that basis the tribunal concluded that the impugned orders denying credit could not be sustained and granted relief to the appellant. [Paras 5, 6, 7, 8]

Appellant entitled to Cenvat credit on HR Coils/Sheets and welding electrodes used in repair and maintenance; impugned order set aside.

Final Conclusion: Appeal allowed; the order denying Cenvat credit is set aside and the appellant is entitled to consequential relief for the period July 2015 to March 2016.

Mandatory pre-deposit for entertaining appeal - no power to waive pre-deposit after statutory amendment - condition precedent to exercise of right of appeal - application of deposit provisions to service tax by statutory deeming

Mandatory pre-deposit for entertaining appeal - application of deposit provisions to service tax by statutory deeming - condition precedent to exercise of right of appeal - Whether the appeal could be entertained notwithstanding non-compliance with the statutory pre-deposit requirement applicable to service tax appeals. - HELD THAT: - The Tribunal found that the requirement of pre-deposit as attracted to service tax by operation of the deeming provision (section 83 of the Finance Act, 1994 applying the deposit regimen of section 35F) had not been complied with by the appellant. Following the statutory scheme as amended on August 6, 2014, the power to waive or dispense with the pre-deposit by the appellate forum was removed and the deposit condition became a mandatory condition precedent to entertaining an appeal. The Tribunal applied the established principle that when a statute confers a right of appeal it may impose conditions for exercising that right and, if a condition precedent is not fulfilled, the appellate forum cannot entertain the appeal. Reliance was placed upon Supreme Court and High Court decisions holding that post-amendment the appellate authority cannot waive or relax the mandatory pre-deposit and that courts cannot direct an authority to act in violation of peremptory statutory commands. In those circumstances, and since the appellant had not made the required pre-deposit despite notice and opportunities to remove defects, the appeal could not be entertained and had to be dismissed.

The appeal is dismissed for non-compliance with the mandatory pre-deposit requirement applicable to service tax appeals, and the Tribunal has no power to waive that requirement under the amended statutory regime.

Final Conclusion: The appeal was dismissed because the appellant failed to make the mandatory pre-deposit required to maintain a service tax appeal and, after the statutory amendment, the Tribunal had no power to waive or dispense with that pre-deposit.

Summary order. Defects in the appeal noted; one final opportunity granted to the appellant to cure defects and fresh notice to be sent by speed post; matter listed before the Tribunal on 29 August 2022.

Predominant nature test (dominant nature test) - Aspect Doctrine - composite supply/composite contract in medical treatment - definition of 'sale' as a composite supply under Section 2(35) of the RVAT Act, 2003 - application of Schedule-IV Entry 86 to transactions with in patients - legislative competence under Entry 54 of List II and Entry 92 C of List I (tax on sale versus tax on services)

Predominant nature test (dominant nature test) - Aspect Doctrine - definition of 'sale' as a composite supply under Section 2(35) of the RVAT Act, 2003 - application of Schedule-IV Entry 86 to transactions with in patients - Whether supplies of implants, lenses, consumables and medicines supplied to in patients in the course of medical treatment constitute 'sale' liable to VAT under the RVAT Act, 2003 or form part of a predominant service exempt from State sales tax jurisdiction. - HELD THAT: - Applying the ratio of Bharat Sanchar Nigam Ltd. and the Aspect Doctrine, the Court analysed whether the transactions are separable sales or part of a composite contract whose dominant character is provision of medical treatment. Where goods such as implants, lenses, surgical items and medicines are supplied to in patients as part of diagnosis or treatment and are naturally bundled with lodging, nursing and procedural services, the predominating element is the service of medical treatment. The test is the substance and intention of the parties and whether the transaction truly represents distinct, severable contracts of sale and service. In the facts before the Court the supplies to in patients were incidental and integral to the health care service, not isolated commercial sales; Entry 86 of Schedule IV therefore applies only to transactions which in truth qualify as sales (for example isolated sales to out patients or outsiders) and does not attract VAT on bundled supplies to in patients. Consequently the State lacks competence to levy sales tax on those composite transactions whose dominant nature is service under Entry 92 C/Entry 97 (Union) and Entry 54 (State) interplay governed by the Aspect Doctrine. [Paras 26, 27, 28, 29, 38]

Supplies of implants, lenses, consumables and medicines to in patients during medical treatment are part of a composite service whose dominant nature is medical treatment and do not constitute a 'sale' liable to VAT; the Tax Board's deletion of tax, interest and penalty is upheld.

Final Conclusion: The substantial question of law is answered in favour of the assessees: supplies of medical goods to in patients in the course of treatment are predominately part of a composite health care service and not sales taxable under the RVAT Act, 2003; the Sales Tax Revision Petitions are dismissed and the Tax Board's order is upheld.

Offence under Section 138 of the Negotiable Instruments Act - Proviso clause (c) to Section 138 - 15 days period for payment - Maintainability of complaint and cognizance - Service of notice by registered post and presumption under Section 27 of the General Clauses Act - Presumption under Section 114 of the Evidence Act - Section 142(b) - limitation for filing complaint and condonation - Non-application of judicial mind in cognizance order

Proviso clause (c) to Section 138 - 15 days period for payment - Maintainability of complaint and cognizance - The complaint was filed prematurely inasmuch as it was presented before the 15 day period prescribed by clause (c) of the proviso to Section 138 had elapsed, rendering the complaint non maintainable and cognizance cannot be taken thereon. - HELD THAT: - The Court applied the principle in Yogendra Singh v. Savitry Pandey that clause (c) of the proviso to Section 138 provides a substantive 15 day period from the date of receipt of the notice within which the drawer may make payment and that no offence under Section 138 is complete, nor does cause of action arise, until that period has expired. A complaint filed before expiry of those 15 days is, therefore, not a complaint in law and a court is barred from taking cognizance of such a complaint; the mere fact that 15 days may have expired by the date of judicial consideration does not cure a prematurely filed complaint. Applying this test to the facts, the notice was issued on 01.03.2016 and the complaint was filed on 21.03.2016; the Court found the statutory 15 day requirement not complied with and held the complaint non maintainable.

Complaint held premature; cognizance set aside.

Service of notice by registered post and presumption under Section 27 of the General Clauses Act - Presumption under Section 114 of the Evidence Act - Presumptions as to service of notice under Section 27 General Clauses Act and Section 114 Evidence Act do not validate a complaint that is filed before the 15 day period under clause (c) has expired. - HELD THAT: - The Court considered the bank's reliance on authorities establishing presumptions of service when a notice is sent by registered post and on Section 114. Those principles address whether notice is deemed served or proof of service at trial, but do not obviate the statutory requirement that 15 days must elapse before a complaint under Section 138 can be validly filed. The judgment distinguished cases relied upon by the bank as addressing service/receipt issues and held they do not assist where the core question is the temporal requirement of clause (c).

Presumption of service did not cure prematurity; reliance on service presumptions was not determinative.

Section 142(b) - limitation for filing complaint and condonation - Offence under Section 138 of the Negotiable Instruments Act - The bank (payee) is not left remediless; it may file a fresh complaint in accordance with Section 142(b) and seek condonation under the proviso if necessary, as directed by the Supreme Court in Yogendra Singh. - HELD THAT: - Relying on paragraph 41 of Yogendra Singh, the Court observed that where a complaint is set aside for prematurity, the payee may present a fresh complaint within one month from the date when cause of action properly arises (as indicated by that decision), and if the fresh complaint cannot be filed within the statutory period the payee may seek condonation by satisfying the court of sufficient cause. In the present matter, the Court set aside the cognizance but permitted the O.P. Bank to pursue a fresh complaint subject to the statutory time limits and proviso.

Bank permitted to file fresh complaint within the framework of Section 142(b) and its proviso; remedy preserved.

Non-application of judicial mind in cognizance order - Maintainability of complaint and cognizance - The cognizance order displayed signs of non application of judicial mind (being a filled in format without judicial consideration), supporting setting aside of that cognizance in the circumstances. - HELD THAT: - On perusal the cognizance order appeared to be a pro forma filling of a template (names, cheque number, reason, dates) without demonstrable application of judicial mind to the crucial maintainability question under clause (c). Coupled with the finding that the statutory 15 day condition had not been satisfied at the time of filing, the Court concluded that taking cognizance on that complaint was improper and set aside the order of cognizance.

Cognizance order quashed for absence of judicial application and prematurity.

Final Conclusion: The order taking cognizance dated 17.08.2016 in Complaint Case No.744 of 2016 is set aside because the complaint was filed before the 15 day period under clause (c) of the proviso to Section 138 NI Act had elapsed; service presumption authorities do not cure such prematurity. The payee (Bank of India) is permitted to file a fresh complaint in accordance with Section 142(b) and may seek condonation under its proviso if required.