TaxTMI Updates e-Newsletter
Sep 16,2022

Licensing and registration of food business - License granted in respect of premises (Authorized Premises) and not to an individual - Food Business Operator as person responsible for compliance - Designated Officer's power to refuse, grant or not renew licence where co-ownership/possession is disputed - GST registration linked to legitimate supplier and turnover from legitimately run business

License granted in respect of premises (Authorized Premises) and not to an individual - Food Business Operator as person responsible for compliance - Licences under the Food Safety and Standards Act, 2006 are granted in respect of premises (authorized premises) and the person named is the food business operator responsible for complying with conditions. - HELD THAT: - A conjoint reading of Section 31 of the Act, Regulations 2.1.2-2.1.4 and Form C (Schedule II) shows that a licence under Chapter II is in relation to premises where food business is carried on. The licence identifies the authorised premises and the person shown in the licence is the Food Business Operator responsible for ensuring compliance. Therefore, the correct legal position is that the licence relates to premises and the name of the person reflects who is responsible for operations and compliance, not that the statute confers a freestanding proprietary licence on an individual irrespective of premises ownership or possession. [Paras 11, 12, 13, 14, 15]

Licence is issued in respect of the authorised premises and the named person is the Food Business Operator responsible for compliance; it is not correct to treat the licence as solely a personal grant independent of the premises.

Designated Officer's power to refuse, grant or not renew licence where co-ownership/possession is disputed - Licensing and registration of food business - Whether the Designated Officer acted lawfully in issuing the licence to the premises in favour of respondent No.5 and in refusing/deferring renewal in view of the dispute between co owners. - HELD THAT: - The material shows the property is jointly owned and in possession; both brothers had competing claims and both made representations to authorities. The designated officer issued the licence on the basis of an online application by respondent No.5 after inspection and, upon receipt of the petitioner's complaint, issued a show cause notice and ultimately observed that the licence related to the premises and that it was appropriate to insert the petitioner's name as person incharge. The Court finds no illegality in the designated officer's approach and holds that where co ownership and competing possession/claims exist, the licensing authority may decline to grant or renew a licence in favour of one co owner to the exclusion of the other until the dispute is settled. The designated officer's decision not to renew the licence after its expiry in view of the unresolved dispute is consistent with law. [Paras 17, 18, 19, 20, 21]

The designated officer acted within powers; issuance to the premises after inspection and the later decision not to renew in view of the co ownership dispute are legally sustainable.

GST registration linked to legitimate supplier and turnover from legitimately run business - Designated Officer's power to refuse, grant or not renew licence where co-ownership/possession is disputed - Whether either party is entitled to exclusive GST registration while dispute over the premises and right to run the business remains unresolved. - HELD THAT: - Under the GST scheme a supplier who legitimately runs the business and attains the requisite turnover is liable to be registered. If a person is not legitimately permitted to run the business (for example because the authorised premises and right to operate are under dispute), he cannot claim entitlement to registration under GST to the exclusion of the co owner. By parity with the licensing position under the Act, registering authorities may refuse registration or renewal while the dispute over the premises and right to run the business remains unsettled. The Court directs the GST registering authority to act on similar lines as the designated officer. [Paras 22, 23, 24, 25, 28]

Neither party is entitled to exclusive GST registration in respect of the disputed premises while their dispute remains unresolved; registering authority may refuse registration until the dispute is settled or the parties jointly apply and satisfy statutory requirements.

Final Conclusion: Writ petition disposed: so long as the authorised premises remain under dispute between the joint owners the designated authority may lawfully refuse to grant or renew a licence under the Food Safety and Standards Act in favour of one to the exclusion of the other, and the GST registering authority shall similarly act; the parties are directed to settle the dispute or apply jointly and, if statutory requirements are met, licence and registration shall be granted.

Maintainability of writ petitions in presence of alternative statutory remedy - relegation to statutory appellate remedy under Section 107 of the CGST Act - principles of natural justice and right to personal hearing

Maintainability of writ petitions in presence of alternative statutory remedy - relegation to statutory appellate remedy under Section 107 of the CGST Act - The writ petitions are not maintainable because an efficacious statutory remedy of appeal under Section 107 of the CGST Act is available to the petitioner. - HELD THAT: - The Court accepted respondents' contention that the impugned assessment orders can be assailed by filing an appeal under the statutory appellate mechanism. In view of the ratio of the Supreme Court in the cited Assistant Commissioner of State Tax case, when an alternative efficacious statutory remedy exists, writ jurisdiction is not ordinarily to be exercised. Consequently the petitioners were relegated to invoke the prescribed appellate remedy under Section 107 of the CGST Act instead of proceeding by way of writ petitions.

Writ petitions dismissed as not maintainable; petitioner relegated to file appeal under Section 107 of the CGST Act.

Principles of natural justice and right to personal hearing - No breach of principles of natural justice was made out, as the petitioner had declined the option of personal hearing in the submitted Form GST DRC-06. - HELD THAT: - The Court relied on the reply and the Form GST DRC-06 filed by the petitioner, which expressly recorded a negative choice regarding personal hearing. Accepting that the petitioner consciously elected not to opt for personal hearing, the Court held that the assessment orders could not be impugned on the ground of denial of natural justice. Since there was no asserted procedural deprivation of the opportunity of hearing, the challenge on natural justice grounds failed and did not sustain a writ remedy.

Challenge to the assessment orders on grounds of breach of natural justice rejected.

Final Conclusion: The writ petitions are dismissed for want of maintainability, with liberty to the petitioner to pursue the statutory appeal under Section 107 of the CGST Act; no order as to costs.

Anticipatory bail - custodial interrogation - prima facie case - cheating by obtaining input tax credit through fake GST invoices - exceptional circumstances for grant of anticipatory bail - misuse of pre-trial liberty - parity with co-accused

Anticipatory bail - prima facie case - custodial interrogation - exceptional circumstances for grant of anticipatory bail - misuse of pre-trial liberty - Anticipatory bail is refused to the petitioner and custodial interrogation is required. - HELD THAT: - The FIR and investigation disclose allegations that the petitioner cheated the State by claiming input tax credit through fake invoices and fabricated addresses, resulting in a fraud exceeding one crore rupees; a prima facie case exists against the petitioner. Where serious offences involve large-scale cheating and significant amounts, courts must apply the parameters for exceptional grant of anticipatory bail and record reasons if bail is granted. Reliance is placed on binding precedents that custodial interrogation is qualitatively more effective than questioning a suspect protected by pre-arrest bail, since custodial interrogation may elicit information and materials that might otherwise remain concealed. The petitioner's reliance on alleged inadmissibility of a co-accused's confession and the asserted futility of custodial interrogation does not outweigh the investigating agency's need to interrogate to unearth the scam and rule out involvement of others. In the facts and circumstances peculiar to this case, the materials and nature of allegations do not warrant pre-arrest relief at this stage. [Paras 6, 7, 9, 11, 12]

Petition for anticipatory bail dismissed; custodial interrogation permitted and bail refused.

Parity with co-accused - anticipatory bail - Parity with co-accused does not entitle the petitioner to bail. - HELD THAT: - The co-accused had different specific allegations and had undergone custodial detention of five months in relation to a substantially smaller amount; the bail granted to that co-accused was an application under Section 439 CrPC and arose from distinct facts. Therefore, parity cannot be invoked to grant bail to the petitioner whose alleged involvement and the amount attributed to him are materially different. [Paras 10]

The petitioner is not entitled to bail on the basis of parity with the co-accused.

Final Conclusion: Without expressing any opinion on the merits, the petition for anticipatory bail is dismissed for the reasons recorded; custodial interrogation is directed to continue and the trial court may proceed uninfluenced by these observations.

Zero-rated supply - refund of IGST paid on zero-rated supplies - electronic filing requirement for refund applications - requirement to submit physical copies with supporting documents - CBIC Circular No. 125/44/2019-GST dated 18.11.2019 - principles of natural justice - reconsideration/remand of refund claim

Electronic filing requirement for refund applications - requirement to submit physical copies with supporting documents - CBIC Circular No. 125/44/2019-GST dated 18.11.2019 - Direction to file a fresh refund application in compliance with the CBIC circular and timeline for disposal by authorities. - HELD THAT: - The High Court recorded the parties' agreement and directed the petitioner to make a fresh refund application enclosing necessary supporting documents in accordance with Circular No. 125/44/2019-GST dated 18.11.2019 within three weeks. The Court further directed that on receipt of such fresh application the authorities shall dispose of it on merits and in accordance with law, preferably within three weeks thereafter. The order reflects a procedural directive to ensure compliance with the prescribed electronic filing/physical submission regime under the circular and to secure expeditious adjudication of the claim. [Paras 5]

Petitioner to file fresh refund application in terms of the CBIC circular within three weeks; authorities to dispose of the same on merits expeditiously, preferably within three weeks thereafter.

Refund of IGST paid on zero-rated supplies - zero-rated supply - reconsideration/remand of refund claim - principles of natural justice - Merits of the refund claim and validity of the earlier rejection (Form GST RFD-06) left open for fresh consideration by the authority. - HELD THAT: - The Court did not adjudicate the substantive entitlement to refund or pronounce on alleged breaches of natural justice arising from the earlier rejection orders. Instead, by directing a fresh application and mandating disposal on merits, the Court effectively remitted the claim to the tax authorities for reconsideration in accordance with law and the circular. Any contention as to non-submission of physical copies, procedural lapses, or breach of natural justice was not finally determined by the Court and remains for the authorities to consider while adjudicating the fresh application. [Paras 5, 6]

Substantive issues relating to entitlement to refund and the earlier rejection are left open and remitted to the authorities for fresh consideration on merits.

Final Conclusion: Writ petition disposed by directing the petitioner to file a fresh refund application in terms of CBIC Circular No. 125/44/2019-GST within three weeks and directing the authorities to dispose of the application on merits and in accordance with law (preferably within three weeks thereafter); no adjudication on the merits of the refund claim or on alleged breaches of natural justice was undertaken.

Detention and seizure under Section 129(1) of the CGST/WBGST Act - appellate remedy under Section 107 of the CGST Act - writ jurisdiction under Article 226 of the Constitution - role of constitutional court in fact finding

Detention and seizure under Section 129(1) of the CGST/WBGST Act - role of constitutional court in fact finding - Challenge to detention of goods and detention order under Section 129(1) dismissed in writ jurisdiction on grounds that factual disputes require administrative/appellate adjudication - HELD THAT: - The Court found that the core controversy-whether the goods carried (teak sawn timber) matched declarations in the e way bill, invoice and certificate, and whether the consignor existed at the declared place of business-was a disputed question of fact based on the investigation and physical verification recorded by the GST authority. In such circumstances the High Court exercising jurisdiction under Article 226 will not act as a fact finding or verification authority to re adjudicate those factual findings. The petitioner was directed to pursue statutory remedies; the order under Section 129(1) is amenable to challenge before the appellate forum under Section 107 of the Act. The respondent was directed to supply the written instruction and supporting documents to the petitioner so that appropriate statutory proceedings may be taken.

Writ petition dismissed; factual disputes left for administrative/appellate determination and petitioner directed to avail statutory remedy under Section 107; instruction to be handed over to petitioner.

Final Conclusion: Writ petition dismissed as the challenge to the detention/seizure involves disputed factual questions unsuitable for resolution under Article 226; petitioner directed to pursue remedy before the statutory appellate forum and provided copy of the respondent's instruction to enable such proceedings.

Reopening of assessment under Section 147 of the Income Tax Act - reason to believe on the basis of information from investigation wing - change of opinion doctrine vis-a -vis reassessment - sufficiency of reasons at the stage of recording satisfaction for reopening - role of scrutiny assessment vis-a -vis subsequent material from investigation

Reopening of assessment under Section 147 of the Income Tax Act - reason to believe on the basis of information from investigation wing - Validity of reopening the assessment on the basis of information received from the investigation wing that the assessee was a beneficiary of transactions routed through shell/paper companies. - HELD THAT: - The Court held that reassessment under Section 147 was valid where the assessing officer had received cogent material from the investigation wing showing extensive non-cash credits, transfers from entities operated by known entry operators, admissions from those operators, and a pattern of immediate onward transfers and cash withdrawals. At the initiation stage the requirement is only a "reason to believe" supported by prima facie material on which a reasonable person could form the requisite belief; it is not necessary to establish the escapement of income conclusively. The tribunal's distinction of precedents on the sole ground that the earlier cases involved reopenings within four years was incorrect because those decisions recognise that fresh information from investigation authorities can furnish the requisite material even after scrutiny assessment. The Court therefore found that the assessing officer had prima facie material to form belief and that reopening was not barred. [Paras 8, 10, 11, 13, 14]

Reopening of assessment based on information from the investigation wing was valid and the tribunal's quashing of reassessment was set aside.

Change of opinion doctrine vis-a -vis reassessment - role of scrutiny assessment vis-a -vis subsequent material from investigation - Whether the reassessment amounted to an impermissible change of opinion where scrutiny assessment had earlier been completed. - HELD THAT: - The Court accepted the view of the CIT(A) and the assessing officer that reassessment did not represent a mere change of opinion because the material relied upon (information from the investigation wing regarding entry operators and shell companies, non-compliance with summons, inability to substantiate transactions) was not before the assessing officer at the time of the original scrutiny assessment. The existence of new, specific information that controverted earlier factual positions justified reopening; hence reassessment on that basis cannot be characterised as change of opinion. [Paras 5, 6, 13, 14]

Reassessment was not a prohibited change of opinion; it was justified by new material and the Tribunal's contrary conclusion was incorrect.

Sufficiency of reasons at the stage of recording satisfaction for reopening - Whether the assessing officer was required to conclusively establish the correctness of the information when recording reasons to reopen the assessment. - HELD THAT: - The Court reiterated that at the stage of recording reasons the assessing officer need only have prima facie material sufficient to form a reasonable belief; the correctness or ultimate sufficiency of the information is not to be adjudicated at that stage. Reliance on precedents emphasised that the function is to ascertain if there was relevant material on which a reasonable person could form the requisite belief, not to finally determine escapement of income. Given the nature of the investigation material and the follow-up enquiries and non-compliance by the purported counter-parties, the reasons recorded were adequate to proceed with reassessment. [Paras 10, 11, 13, 14]

The reasons recorded by the assessing officer were sufficient at the initiation stage; the Tribunal erred in holding otherwise.

Final Conclusion: The Revenue's appeal is allowed; the Tribunal's order quashing the reassessment is set aside and the order of the Commissioner of Income Tax (Appeals) restoring the reassessment is reinstated.

Reopening of assessment under Section 147 - Validity of additions not part of reasons recorded for reopening - Effect of Explanation 3 to Section 147 - Requirement of valid notice under Section 148 - Non disclosure of material facts as condition for reassessment beyond four years - Roving inquiry prohibition - Change of opinion doctrine

Validity of additions not part of reasons recorded for reopening - Effect of Explanation 3 to Section 147 - Whether additions made in reassessment proceedings on heads not included in the reasons recorded for reopening are sustainable after insertion of Explanation 3 to Section 147. - HELD THAT: - The Court held that Explanation 3 permits the Assessing Officer to assess or reassess any other income that comes to his notice in the course of valid proceedings under Section 147, but it does not abrogate the substantive prerequisite of Section 147 nor permit an unfettered exercise of power. Reliance on the reasoning in Jet Airways and Ranbaxy shows that Explanation 3 removed a judicial embargo on taxing issues not specified in the reasons for reopening only where the reassessment proceedings validly stand; it does not permit the Assessing Officer, having had the original reason for reopening found to be unsustainable, to independently proceed to assess other unrelated heads without satisfying the statutory conditions (including those applicable where reassessment is beyond four years). Consequently, where the foundational reason for reopening is disallowed, the Assessing Officer cannot sustain additions on other heads merely because they came to notice during the proceedings. [Paras 10, 11, 14]

Additions on heads not part of the reasons for reopening are not sustainable merely by virtue of Explanation 3 where the notice or the recorded reason for reopening is held not to survive.

Requirement of valid notice under Section 148 - Reopening of assessment under Section 147 - Roving inquiry prohibition - Whether an invalid or unsustainable notice under Section 148/recorded reason for reopening precludes the Assessing Officer from assessing other income that allegedly came to his notice during reassessment proceedings. - HELD THAT: - The Court reiterated the principle that the foundation of reassessment is a valid notice under Section 148 and a valid formation of belief under Section 147. If the notice is invalid or the reason for reopening is found to be unsustainable, the reassessment edifice collapses and the Assessing Officer cannot lawfully make a roving inquiry to raise additions on other issues. The assessment power under Explanation 3 is conditional upon the existence of valid proceedings; where that foundation is absent, subsequent additions made in the reassessment cannot be sustained. [Paras 14, 15]

An invalid or unsustainable notice under Section 148 precludes the Assessing Officer from assessing other items of income discovered during the reassessment; such additions must fail.

Change of opinion doctrine - Non disclosure of material facts as condition for reassessment beyond four years - Applicability of the change of opinion principle and the requirement of non disclosure of material facts in reassessment beyond four years. - HELD THAT: - The Court accepted that reopening cannot be used to effect a mere change of opinion where the Assessing Officer, in the original assessment, had considered and recorded satisfaction on the same facts. The judgment also reflects settled law that for notices issued beyond four years, the Assessing Officer must satisfy the statutory requirement of failure to disclose truly and fully all material facts (unless other exceptions apply) with respect to the grounds on which the notice was issued; permitting reassessment on unrelated heads after abandoning the original ground would subvert that requirement. [Paras 3, 4, 12]

Reopening beyond four years must satisfy the non disclosure requirement and cannot be sustained as a mere change of opinion; reassessment cannot proceed on other grounds if the original ground is disallowed.

Interpretation and application of Jet Airways and Ranbaxy precedents - Whether the decisions in Jet Airways and Ranbaxy were correctly interpreted and applied to the facts of the present case. - HELD THAT: - The Court followed the reasoning in Jet Airways and Ranbaxy that Explanation 3 does not confer blanket or unlimited power to the Assessing Officer to explore and tax unrelated items once the basis of jurisdiction is found wanting. Those authorities establish that Explanation 3 permits assessment of issues that come to notice during valid proceedings but does not validate assessments where the notice or reasons for reopening do not survive. The Tribunal's reliance on those precedents was therefore correct and applicable to the facts where the foundational reason for reopening was held unsustainable. [Paras 10, 11, 12, 13]

Jet Airways and Ranbaxy were correctly interpreted and applied; they support the conclusion that Explanation 3 cannot be used to sustain additions when the notice/reason for reopening is invalid.

Final Conclusion: The Income Tax Appellate Tribunal correctly allowed the assessee's appeal by holding that additions made on heads not forming part of the reasons recorded for reopening were unsustainable once the foundational reason for reopening was disallowed; Explanation 3 to Section 147 does not permit assessment on unrelated issues where the notice under Section 148 or the reasons for reopening do not survive. The revenue's appeal is dismissed and the substantial questions of law are answered against the revenue.

Deductibility of notional foreign exchange loss under mercantile system of accounting- application of CIT v. Woodward Governor India Ltd. [2009 (4) TMI 4 - SUPREME COURT] and subsequent ONGC [2010 (3) TMI 81 - SUPREME COURT] precedent to notional/derivative losses - distinction between hedging transactions and trading in foreign exchange derivatives - scope and applicability of CBDT Circular No.3/2010 to derivative losses

Deductibility of notional foreign exchange loss under mercantile system of accounting - application of CIT v. Woodward Governor India Ltd. and subsequent ONGC precedent to notional/derivative losses - Deletion by ITAT of the notional foreign exchange loss disallowed by the Assessing Officer was sustainable - HELD THAT: - The Court held that the legal principles laid down by the Supreme Court in CIT v. Woodward Governor India Ltd. and followed in the ONGC decision govern the question whether a foreign exchange loss, though not actually crystallised, is deductible when the assessee follows the mercantile system. The factors identified by the Supreme Court - including adherence to the mercantile system, consistency of treatment between gains and losses, conformity with accepted accounting standards and bona fides of the accounting method - apply. On the factual findings recorded by the Tribunal, those conditions were satisfied in the present case and therefore the Tribunal correctly deleted the notional forex loss disallowed by the Assessing Officer. [Paras 4, 5, 7]

Tribunal's deletion of the notional foreign exchange loss was upheld.

Distinction between hedging transactions and trading in foreign exchange derivatives - scope and applicability of CBDT Circular No.3/2010 to derivative losses - Whether CBDT Circular No.3/2010 barred deduction in the facts of this case - HELD THAT: - The Court observed that the CBDT Instruction was issued in relation to loss on account of trading in foreign exchange derivatives. The assessee had executed forward contracts as hedges for export receivables rather than for trading in derivatives. Consequently the Circular did not apply to the facts of this case, and it was unnecessary for the Tribunal to pronounce that the Circular was contrary to the Supreme Court decisions. The Tribunal's substantive decision on deductibility thus stands unimpaired. [Paras 6, 7]

CBDT Circular No.3/2010 held inapplicable to the hedging transactions in issue; Tribunal need not have declared the Circular contrary to the Supreme Court decisions.

Final Conclusion: Finding no substantial question of law, the appeal is dismissed; the Tribunal's deletion of the notional foreign exchange loss is sustained and the CBDT Circular No.3/2010 was held not to apply to the assessee's hedging transactions.

Re-assessment under Section 148 as deemed show-cause under Section 148A - Risk Management Strategy as source of information for reassessment - information as basis for reopening proceedings - Section 149(1)(b) - asset representation threshold for issue of notice beyond three years - sanction requirement under Section 151

Risk Management Strategy as source of information for reassessment - information as basis for reopening proceedings - Whether the reasons furnished under Section 148A(b) were legally sufficient and the information relied upon (including from the Department's Risk Management Strategy and Director of Investigation) justified continuation of reassessment proceedings. - HELD THAT: - The Court held that the CBDT circulars of 10.12.2021 and 13.12.2021 validly identify multiple sources of information for initiation of reassessment and define the concept of risk management strategy to include technological processes and collated information. On a combined reading of those circulars and the reasons communicated to the assessee, the material derived from the Director of Income Tax (Investigation and Criminal Intelligence) and other identified sources sufficed as 'information' under Section 148A. The Court rejected the submission that the information was vague, non-specific or not connected to the Risk Management Strategy, and observed that no fetter can be placed on an Assessing Officer's power to gather such information; reliance on material obtained in the course of investigation-type processes was acceptable. [Paras 14, 15, 17, 18, 19]

Objection that information under Section 148A was inadequate is rejected and the reassessment may proceed.

Section 149(1)(b) - asset representation threshold for issue of notice beyond three years - Whether the condition in Section 149(1)(b) - that escaped income represented in the form of asset amounts to or is likely to amount to Rs.50,00,000 or more - is satisfied to permit issuance of a notice beyond three years. - HELD THAT: - On perusal of the reasons, the Court found that the material disclosed that the assessee had sold multiple plots and that income represented in the form of movable property transferred by the assessee amounted, prima facie, to a sum well in excess of the statutory threshold. The Court treated this prima facie quantification in the reasons as satisfying the condition in Section 149(1)(b) for issuance of notice beyond three years. [Paras 20]

Condition in Section 149(1)(b) is prima facie satisfied; reassessment beyond three years is permissible.

Sanction requirement under Section 151 - Whether the reassessment proceedings are vitiated for want of statutory sanction under Section 151. - HELD THAT: - The Court examined the impugned notice dated 30.07.2022 and recorded that sanction had been obtained from the Principal Commissioner of Income Tax. No infirmity in the sanction was pointed out or established, and thus the statutory requirement was held to have been complied with. [Paras 21]

Challenge based on absence of sanction under Section 151 fails.

Final Conclusion: The petition challenging reassessment proceedings for A.Y.2016-2017 is dismissed. The High Court upheld the sufficiency of the information and process under Section 148A, found the threshold in Section 149(1)(b) to be prima facie satisfied, and held that requisite sanction under Section 151 was obtained; reassessment may proceed on merits in accordance with law.

Reference to Valuation Officer under Section 142A - Report of Valuation Officer under Section 55A - Fair market value as on 01.04.1981 - Use of comparable sales instances for valuation - Indexation cost for computation of long term capital gains

Reference to Valuation Officer under Section 142A - Report of Valuation Officer under Section 55A - Validity and effect of the reference to the Valuation Officer and his report - HELD THAT: - The Tribunal recorded the assessee's challenge to the Assessing Officer's reference to the Valuation Officer under Section 142A and to the DVO's report furnished under Section 55A but examined the matter in the factual context of the competing valuation reports. The Bench noted that questions on the legal validity of the reference and applicability of Section 55A were raised, but after comparing the two expert reports and material on record it found the valuation controversy could be resolved on factual grounds. The Tribunal observed that the DVO's report relied on three comparables (small parcels) and that the registered valuer's report produced a broadly similar per unit rate; having accepted the rate adopted by the assessee as reasonable, the Tribunal treated the legal contentions regarding the reference and report as academic and did not decide them independently. Accordingly, the additions founded on the DVO's valuation were not sustained once the Tribunal accepted the assessee's valuation basis for computing indexation cost. [Paras 10]

The legal objections to the reference and the DVO report were rendered academic by the Tribunal's factual finding accepting the assessee's valuation rate; the addition based on the DVO report was not sustained.

Fair market value as on 01.04.1981 - Use of comparable sales instances for valuation - Indexation cost for computation of long term capital gains - Determination of the fair market value of the land as on 01.04.1981 for computing long term capital gain - HELD THAT: - The Tribunal compared the DVO's valuation (average of three comparables yielding @ Rs.21 per sq. m.) and the assessee's registered valuer's valuation (approx. @ Rs.25.69 per sq. m.). Noting that two of the DVO comparables produced higher rates and one was a low outlier attributable to its small size, the Bench excluded the outlier and calculated the average of the remaining comparables which approximated the assessee's adopted rate. Finding the assessee's per unit rate to be reasonable and acceptable, the Tribunal accepted the assessee's valuation for determining the indexed cost of acquisition and thereby held that the addition of long term capital gain based on the DVO valuation could not stand. [Paras 10, 11]

Accepted the assessee's valuation rate (Rs.25.69 per sq. m. as adopted by the assessee) for computing indexed cost as on 01.04.1981; appeal allowed on this basis.

Final Conclusion: The appeal is allowed: the Tribunal accepted the assessee's valuation rate for the land as on 01.04.1981, held the addition based on the DVO valuation unjustified on the facts, and set aside the impugned addition to long term capital gains.

Condonation of delay - ex parte order and requirement of reasonable opportunity of hearing - service of notice and alternative service under Section 282 - mandate of Section 250(6) - reasons and points of determination - reopening of assessment under Section 147 - cash credits/unexplained deposits and application of section 68 - penalty proceedings to await outcome of quantum assessment

Condonation of delay - service of notice and alternative service under Section 282 - Delay in filing appeal in ITA No. 242/Srt/2021 - HELD THAT: - The Tribunal accepted the assessee's sworn statement and supporting record that the appellate order dated 13/07/2018 was not received and that certified copy was obtained only on 17/11/2021. Notices sent by the CIT(A) had been returned unserved. Balancing technical non-compliance against the cause of substantial justice, the Bench held that substantial justice should prevail and condoned the delay in filing the appeal. The Tribunal noted that the assessee would not obtain undue benefit from the belated filing and that prompt steps had been taken upon learning of the dismissal. [Paras 6]

Delay in filing the appeal in ITA No. 242/Srt/2021 is condoned.

Ex parte order and requirement of reasonable opportunity of hearing - mandate of Section 250(6) - reasons and points of determination - Validity of the CIT(A)'s ex parte order confirming addition and whether the appeal was adjudicated in accordance with law - HELD THAT: - The Tribunal found that the CIT(A) recorded that notices were returned unserved but did not adopt alternative modes of service as available under Section 282, nor did the CIT(A) adjudicate the assessee's grounds as required by Section 250(6), which mandates recording of facts, points of determination and reasons. Because the assessee was not afforded sufficient and reasonable opportunity of hearing and the appellate order did not comply with statutory requirements, the Tribunal set aside the ex parte order and restored all the assessee's grounds of appeal to the CIT(A) for fresh adjudication after granting a reasonable opportunity. [Paras 11, 13]

The ex parte order of the CIT(A) is set aside; the assessee's grounds are restored to the CIT(A) to be decided afresh with reasonable opportunity of hearing in accordance with law.

Reopening of assessment under Section 147 - cash credits/unexplained deposits and application of section 68 - Merits of the addition made on account of unexplained cash deposits - HELD THAT: - The Tribunal did not decide the substantive merits. While recounting the AO's reliance on AIR and bank information and the assessee's explanation that deposits related to remittances on behalf of persons from his native place, the Bench observed that the CIT(A) had not examined these grounds on merits. Consequently, the Tribunal restored the grounds of appeal to the CIT(A) for fresh consideration and adjudication on merits, directing the CIT(A) to grant reasonable opportunity and permitting the assessee to file relevant evidence. [Paras 8, 13]

Grounds relating to the addition for unexplained cash deposits are remitted to the CIT(A) for fresh adjudication on merits.

Penalty proceedings to await outcome of quantum assessment - Validity of the penalty confirmed by the CIT(A) in ITA No. 215/Srt/2021 - HELD THAT: - The Tribunal noted that the CIT(A) confirmed the penalty in an ex parte order but had discussed merits. Since the Tribunal has set aside the CIT(A)'s quantum order and remitted the matter for fresh adjudication, it directed that the penalty appeal be restored to the CIT(A) to be decided after the CIT(A)'s fresh decision on the quantum assessment. Thus the penalty question is not finally determined by the Tribunal but remitted for rehearing in light of the quantum outcome. [Paras 15]

Penalty appeal is restored to the CIT(A) for decision after the quantum assessment is finally decided by the CIT(A).

Final Conclusion: The Tribunal condoned the delay in filing ITA No. 242/Srt/2021, set aside the CIT(A)'s ex parte appellate order for AY 2009-10 on grounds of defective service and non-compliance with Section 250(6), restored the assessee's grounds to the CIT(A) for fresh adjudication with reasonable opportunity, and remitted the penalty appeal to the CIT(A) for decision after the quantum matter is redecided.

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - clause (B) cumulative conditions - Rebuttal of presumption under Explanation 1 - Addition under section 68 - Bona fide explanation and disclosure of material facts

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - clause (B) cumulative conditions - Bona fide explanation and disclosure of material facts - Addition under section 68 - Rebuttal of presumption under Explanation 1 - Whether penalty under section 271(1)(c) is sustainable where addition under section 68 was agreed to by the assessee but the assessee had shown the amount as an unsecured loan in its balance sheet and other audited financial statements. - HELD THAT: - The Tribunal examined the scope of Explanation 1 to section 271(1)(c) and accepted the coordinate Bench reasoning that clause (B) contains two distinct conditions connected by the conjunction 'and': (i) the assessee offers an explanation which he is not able to substantiate; and (ii) he fails to prove that such explanation is bona fide and that all facts material to computation of income were disclosed. Both conditions must be cumulatively satisfied for the deeming provision to operate and for penalty to follow. In the present case the AO made an addition of the specified amount arising from an unsecured loan and the assessee's authorised representative agreed to the addition before the AO. However, the amount claimed as unsecured loan was clearly reflected in the assessee's balance sheet and audited financial statements and was never controverted by the revenue at any stage. While the assessee may not have been able to substantiate the explanation to the AO's satisfaction, it successfully established that the explanation was bona fide and that material facts were disclosed. Consequently the cumulative requirement of clause (B) of Explanation 1 was not satisfied and the presumption of concealment under Explanation 1 stood rebutted. The Tribunal therefore held that the penalty imposed under section 271(1)(c) and confirmed by the CIT(A) could not be sustained and directed deletion of the penalty.

Penalty under section 271(1)(c) deleted as the cumulative conditions of clause (B) of Explanation 1 were not satisfied and the presumption of concealment was rebutted.

Final Conclusion: The appeal is allowed: the penalty under section 271(1)(c) confirmed by the CIT(A) is set aside because the assessee proved the explanation to be bona fide and disclosed the material facts, so the deeming provision in Explanation 1 clause (B) did not apply.

Reassessment under section 147/148 - formation of belief of escapement of income - service of notice on deceased assessee - notice under section 143(2) - addition under section 68 (unexplained cash credits) - addition of salary income

Reassessment under section 147/148 - formation of belief of escapement of income - Whether the reassessment was validly initiated on the basis of reasons recorded forming belief of escapement of income. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the AO had sufficient material to form a belief of escapement of income. The record showed that the assessee had not filed any return and substantial cash deposits (Rs.11,51,000) were made in the bank; the AO had issued a pre-notice enquiry seeking explanation which remained unanswered. The absence of response, coupled with unexplained bank credits and non-filing of return, justified the AO's recording of reasons and issuance of notice under section 148; mere non-filing by itself was not the sole ground but the AO's enquiries and lack of explanation supported the formation of belief. [Paras 11, 12, 13]

The reassessment was validly initiated; the ground challenging insufficiency of material to form belief of escapement is dismissed.

Service of notice on deceased assessee - reassessment under section 147/148 - Whether reassessment is vitiated because the notice under section 148 was issued in the name of a deceased assessee. - HELD THAT: - The Tribunal agreed with the CIT(A) that the reassessment could not be declared invalid on this ground because the Revenue had not been informed by any legal representative or family member of the assessee's death prior to or at the time the notice was issued. The CIT(A) distinguished decisions relied upon by the assessee by noting those authorities involved circumstances where the legal heirs had informed the department of the death but the AO proceeded regardless. In the absence of prior notice to the department of the assessee's demise, issuance of notice in the name of the deceased did not render the proceedings invalid in the facts of this case. [Paras 8, 9, 10, 11]

The ground that reassessment is invalid because notice was issued to a dead person is dismissed.

Notice under section 143(2) - reassessment under section 147/148 - Whether failure to issue notice under section 143(2) renders the reassessment invalid where no return was filed in response to the section 148 notice. - HELD THAT: - The Tribunal held that notice under section 143(2) is applicable to verify returns filed under section 139. Reassessment jurisdiction is assumed by issuance of notice under section 148 requiring the assessee to file a return; if no return is filed in response to that notice, there is no occasion to issue a notice under section 143(2). Given that the assessee did not file any return, non-issuance of a section 143(2) notice does not invalidate the reassessment proceedings. [Paras 14, 15, 16]

Non-issuance of notice under section 143(2) in the absence of any return filed does not vitiate the reassessment; the ground is dismissed.

Addition under section 68 (unexplained cash credits) - addition of salary income - Whether the additions of unexplained cash credit under section 68 and salary income were rightly sustained on the merits. - HELD THAT: - Both the AO and the CIT(A) confirmed the additions after noting that the assessee filed no explanations or submissions either during assessment or on appeal. The Tribunal observed that no written material or representation was placed before it by or on behalf of the assessee; in such circumstances the appellate authority's confirmation of additions was upheld. The finding rests on absence of any explanation to rebut the bank credits and the asserted salary income. [Paras 17, 18, 19]

Additions confirmed; grounds challenging the merits of additions are dismissed.

Final Conclusion: The appeal is dismissed in entirety: reassessment under section 147/148 was validly initiated and not vitiated by service of notice on the deceased assessee or by non-issuance of a section 143(2) notice; the additions for unexplained cash credits and salary income were rightly confirmed in absence of any explanation or representation.

Capital receipt - excise duty refund and interest subsidy as capital in nature - inclusion in book profit under Section 115JB / MAT - precedential effect of Supreme Court and High Court decisions

Capital receipt - excise duty refund and interest subsidy as capital in nature - precedential effect of Supreme Court and High Court decisions - Excise duty refund and interest subsidy received by the assessee are capital receipts for the assessment year 2013-14. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in treating the excise duty refund and interest subsidy as capital receipts. The conclusion rests on the view that the notifications and scheme in question were designed to accelerate industrial development and generate permanent employment in Jammu & Kashmir, thereby serving a public purpose and creating new assets or an industrial environment; such incentives cannot be treated as mere production or operational incentives. The Tribunal relied on and applied the Jammu & Kashmir High Court decision in Shree Balaji Alloys & Ors., and noted the Supreme Court's dismissal of the Revenue's appeals which held the issue against the Revenue, thereby covering the matter in favour of the assessee. The Tribunal also observed consistent treatment in subsequent assessment years where the Assessing Officer allowed such receipts as capital. On this basis the addition made under the normal provisions was deleted. [Paras 6]

Addition of the excise duty refund and interest subsidy is deleted under the normal provisions by treating them as capital receipts.

Inclusion in book profit under Section 115JB / MAT - capital receipt - Capital receipts (excise duty refund and interest subsidy) cannot be included in book profit for computation of MAT/Section 115JB. - HELD THAT: - The Tribunal examined whether deletion under normal provisions necessitated exclusion from book profit under Section 115JB. Relying on the principle that only receipts of the character of income can form part of book profit, the Tribunal distinguished Apollo Tyres (where the receipt was taxable but exempt) and followed decisions (including Calcutta High Court in PCIT v. Ankit Power Ltd. and coordinate Tribunal precedents) holding that receipts which are not income cannot be brought to tax as book profits. The Tribunal concluded that once the receipts are held not to be income, they cannot be included in book profit and the MAT addition therefore cannot survive. [Paras 7]

Addition under MAT / book profit computation is deleted; the assessee's appeal on this point is allowed.

Final Conclusion: The Revenue's appeal is dismissed and the assessee's appeal is allowed: the excise duty refund and interest subsidy for AY 2013-14 are held to be capital receipts and are excluded from taxable income and from computation of book profit under Section 115JB (MAT).

Disallowance of business expenses - adhoc disallowance - onus of proof on assessee to produce vouchers - verification of vouchers by Assessing Officer - powers of Commissioner (Appeals) co-terminus with Assessing Officer - deletion of additions where specific defects are not pointed out - exclusion of limitation period due to COVID-19 for filing appeals

Disallowance of business expenses - adhoc disallowance - onus of proof on assessee to produce vouchers - deletion of additions where specific defects are not pointed out - Material expenses aggregating to Rs. 2,15,000/- disallowed by AO and confirmed by CIT(A). - HELD THAT: - The Tribunal found that the assessee produced books of account and vouchers before the authorities below and that the Assessing Officer had verified the bulk of material expenses (Rs. 7,24,10,516/-) leaving an unverified balance of Rs. 2,15,000/-. Neither the AO nor the CIT(A) furnished any specific breakup or pointed to specific defects in respect of the disallowed amount. While adhoc disallowances are impermissible, the addition in this case was of a specific amount; however, where the assessee has discharged the primary onus by producing books and vouchers, the authorities must identify the precise defects after necessary enquiries. On the material on record the Tribunal concluded that the authorities failed to pinpoint which items were unverifiable or the reasons for disallowance; consequently the disallowance was unsustainable and required deletion. [Paras 8, 9]

Deletion of the addition of Rs. 2,15,000/-; material expenses allowed.

Disallowance of business expenses - adhoc disallowance - verification of vouchers by Assessing Officer - deletion of additions where specific defects are not pointed out - Disallowance aggregating Rs. 75,440/- in respect of staff welfare, repairs and maintenance, telephone and mobile, and travelling and conveyance expenses. - HELD THAT: - The Assessing Officer made specified disallowances in respect of various indirect expenses on the ground that some vouchers were unvouched or not verified from third parties. The CIT(A) confirmed these additions without supplying detailed reasons or identifying the specific defective items. The Tribunal observed that the assessee had produced books, ledgers and vouchers and thereby discharged the initial burden; absent a clear identification of deficiencies by the authorities after enquiries, the disallowances could not be sustained. Applying the same reasoning as for the material expenses, the Tribunal deleted the additions aggregating Rs. 75,440/-. [Paras 8, 9]

Deletion of the additions aggregating Rs. 75,440/-; the expenses are allowed.

Final Conclusion: The appeal is allowed: additions of Rs. 2,15,000/- (material expenses) and Rs. 75,440/- (staff welfare, repairs and maintenance, telephone/mobile and travelling/conveyance) are deleted as the authorities failed to point out specific defects in the books/vouchers after the assessee produced records; appeal disposed in favour of the assessee for AY 2010-11.

Exemption under section 10(38) - determination of fair market value of unquoted equity shares - deemed income under section 56(2)(viia) / 56(2)(vii) - application of Rule 11UA of the Income Tax Rules - rights issue and valuation for section 56 purposes - allowability of processing fee as revenue expenditure - bad debt write off versus diminution in capital value of investments - remand to Assessing Officer for fresh consideration

Exemption under section 10(38) - remand to Assessing Officer for fresh consideration - Claim for exemption of long term capital gain under section 10(38) was not finally adjudicated and was directed to be considered by the Assessing Officer in accordance with law and the Apex Court's exposition in Goetze (India) Ltd. - HELD THAT: - The Tribunal noted that the Assessing Officer had rejected the assessee's belated claim of exemption under section 10(38) relying on Goetze (India) Ltd. The Tribunal observed that the Apex Court's decision does not curtail the powers of fact finding authorities (such as the Assessing Officer) to deal with such claims otherwise than by revised return. In view of that exposition, the Tribunal directed the Assessing Officer to consider the assessee's claim afresh and decide it in accordance with law, affording the assessee an opportunity of being heard. [Paras 6]

Matter remitted to the Assessing Officer for fresh consideration of the section 10(38) claim in accordance with law.

Determination of fair market value of unquoted equity shares - deemed income under section 56(2)(viia) / 56(2)(vii) - application of Rule 11UA of the Income Tax Rules - remand to Assessing Officer for fresh consideration - Addition made under section 56(2)(viia)/(vii) on account of difference between purchase price and FMV of unquoted equity shares was not finally upheld by the Tribunal but was remitted to the Assessing Officer for reconsideration in the light of relevant precedents and applicable valuation rules. - HELD THAT: - The Assessing Officer made additions treating the difference between consideration paid and FMV (as per a valuation dated 10.09.2014) as income under section 56(2)(viia)/(vii). The CIT(A) sustained the addition relying on Rule 11UA valuation principles and the September 2014 valuation. The Tribunal examined the submissions and noted a contrary ITAT decision relied upon by the assessee holding that for the relevant period the extant rules required adoption of book value (as per balance sheet) and that the 2017/2018 amendment changing the valuation approach could not be applied retrospectively. Having found that the issue is covered by the cited authority and that factual and legal aspects require reconsideration, the Tribunal remitted the matter to the Assessing Officer to examine the issue in accordance with that exposition, granting the assessee opportunity of being heard. [Paras 17]

Issue remitted to the Assessing Officer for fresh examination in accordance with the cited authority and applicable valuation rules.

Allowability of processing fee as revenue expenditure - nature of expenditure in raising loan - Processing fee paid for obtaining loan used to purchase business assets was held to be an allowable revenue deduction. - HELD THAT: - The Assessing Officer disallowed part of processing fees treating it as capital expenditure. The Tribunal relied on the Supreme Court precedent that expenditure incurred in raising a loan is not rendered capital merely by the purpose for which the loan is taken and that the nature of such expenditure is not dependent on the nature of the loan. Applying that principle, the Tribunal set aside the orders below and allowed the claim of processing fee as revenue expenditure. [Paras 21]

Disallowance of processing fee set aside; expenditure allowed as revenue deduction.

Bad debt write off versus diminution in capital value of investments - Claim of write off of investment in foreign joint venture as a bad debt (revenue loss) was rejected; the disallowance was upheld. - HELD THAT: - The Assessing Officer observed that the investment in Crayons Advertising (Nepal) Pvt. Ltd. remained shown as a non current investment in audited accounts and had not been transferred; therefore a write off claimed as a bad debt lacked basis and amounted to diminution in capital value, not an allowable revenue deduction. The assessee could not demonstrate error in that finding. The Tribunal found no reason to interfere and upheld the conclusions of the authorities below. [Paras 28]

Disallowance of the claimed bad debt write off upheld.

Final Conclusion: The appeal is partly allowed: the section 10(38) claim and the addition under section 56(2) are remitted to the Assessing Officer for fresh consideration in accordance with law and cited precedents; the processing fee disallowance is set aside and allowed as revenue expenditure; the bad debt write off claim is disallowed and upheld.

Deduction under section 80P(2)(d) for co-operative societies on interest from co-operative banks - Revisional jurisdiction under section 263 - erroneous and prejudicial to revenue - Extension of limitation period under Covid Protocol - Preferential application of jurisdictional High Court decisions where conflicting High Court precedents exist

Extension of limitation period under Covid Protocol - Delay in filing the appeal was condoned by applying the Covid Protocol. - HELD THAT: - The Tribunal considered the appellant's application for condonation of delay of 329 days and the submission that the period of limitation is extended by the Supreme Court's Suo Motu order applying the Covid Protocol. Having heard parties and perused the record, the Tribunal accepted that the case is covered by the Apex Court's decision extending limitation on account of the pandemic and accordingly condoned the delay in filing the appeal. [Paras 2, 3]

Delay of 329 days condoned and the appeal admitted for adjudication.

Deduction under section 80P(2)(d) for co-operative societies on interest from co-operative banks - Revisional jurisdiction under section 263 - erroneous and prejudicial to revenue - Preferential application of jurisdictional High Court decisions where conflicting High Court precedents exist - Whether the Principal Commissioner erred in invoking section 263 to set aside the assessment because the Assessing Officer's allowance of deduction under section 80P(2)(d) in respect of interest from co-operative banks was not erroneous or prejudicial to revenue. - HELD THAT: - The Tribunal examined that the assessee, a co operative housing society, earned interest from co operative banks and non co operative banks and claimed deduction under section 80P(2)(d). The Principal Commissioner revised the assessment on the view that interest from co operative banks is not eligible under section 80P(2)(d) following certain High Court authority. The Tribunal analysed coordinate bench decisions and relevant High Court authorities and held that a co operative bank, being a co operative society registered under the Co operative Societies Act, falls within the phraseology of section 80P(2)(d) so long as the interest is derived from investments with another co operative society. The Tribunal noted that the Assessing Officer had taken a possible view supported by orders of co ordinate benches and jurisdictional precedent, and that the Principal Commissioner could not use revisional powers under section 263 to dislodge such a view merely because another High Court in a different jurisdiction had taken a contrary view. Applying the principle that where non jurisdictional High Court decisions conflict a view favourable to the assessee may be preferred, and observing that the AO's standpoint was a tenable one, the Tribunal found no basis to conclude the assessment was erroneous insofar as prejudicial to revenue and therefore held that exercise of revisional jurisdiction was improper. [Paras 8, 9]

Order under section 263 set aside and the assessment order passed under section 143(3) restored; appeal allowed.

Final Conclusion: Delay in filing the appeal was condoned under the Covid Protocol; on merits the Tribunal held that the Principal Commissioner erred in invoking section 263 because the Assessing Officer had taken a possible view, supported by precedent, that entitled the co operative housing society to deduction under section 80P(2)(d) for interest from co operative banks, and accordingly the revisional order was set aside and the assessment restored.

Power of the Commissioner of Income-tax (Appeals) to dismiss appeal for non-prosecution - Obligation of the CIT(A) to dispose of appeals on merits and to apply mind to issues arising from the impugned order - Right to de novo appellate disposal with opportunity to be heard - Admissibility of additional ground of appeal - Validity of assessment framed under Section 153A/143(3) following search and seizure

Power of the Commissioner of Income-tax (Appeals) to dismiss appeal for non-prosecution - Obligation of the CIT(A) to dispose of appeals on merits and to apply mind to issues arising from the impugned order - Right to de novo appellate disposal with opportunity to be heard - Whether the CIT(A) could summarily dismiss the assessee's appeal for non-prosecution without adjudicating the merits. - HELD THAT: - The Tribunal held that the CIT(A) erred in law by summarily dismissing the appeal for non-prosecution. Once an appeal is preferred, the CIT(A) is statutorily obliged to apply his mind to all issues arising from the impugned order and to dispose of the appeal on merits; he is not empowered to dismiss an appeal merely because the appellant did not appear. The Tribunal relied on the scheme and mandate that require the CIT(A) to make such inquiry as he thinks fit and to render decisions on points for determination, and observed that summary dismissal foreclosed the assessee's right to be heard on the contested issues. Consequently the CIT(A)'s order was set aside and the matter directed to be re-heard afresh, with the assessee to be afforded a reasonable opportunity of being heard in the course of de novo appellate proceedings. [Paras 6, 8]

CIT(A)'s summary dismissal for non-prosecution set aside; directed to decide the appeal afresh on merits after affording reasonable opportunity of hearing.

Admissibility of additional ground of appeal - Validity of assessment framed under Section 153A/143(3) following search and seizure - Admitted additional ground challenging the validity of framing assessment under Section 153A/143(3) for A.Y. 2015-16 and whether that issue may be raised and adjudicated in the remand proceedings. - HELD THAT: - The Tribunal admitted the additional ground (a question of law based on record) and observed that the assessee is at liberty to raise before the CIT(A) the challenge to the jurisdiction/validity of the assessment framed under Section 153A/143(3) for A.Y. 2015-16. The Tribunal directed that the CIT(A), in the course of the de novo disposal mandated by the set-aside, shall adjudicate this jurisdictional issue as raised by the assessee. [Paras 1, 8]

Additional ground admitted; issue remanded to CIT(A) to be adjudicated in the de novo appellate proceedings.

Final Conclusion: The appeal is allowed for statistical purposes: the CIT(A)'s order dismissing the appeal for non-prosecution is set aside and the matter is remitted to the CIT(A) for fresh adjudication on merits after affording the assessee a reasonable opportunity of hearing; the admitted additional ground challenging the validity of the assessment under Section 153A/143(3) for A.Y. 2015-16 may be raised and decided by the CIT(A) in those proceedings.

Presumptive taxation under Section 44AE - exemption from maintenance of books under Section 44AA - acceptance of receipts evidenced in Form 26AS - estimation of income at eight percent of unexplained receipts - verification and remand for substantiation of claimed receipts

Presumptive taxation under Section 44AE - exemption from maintenance of books under Section 44AA - Whether income disclosed by the assessee under the presumptive scheme for plying of goods carriages (Section 44AE) and declared at an amount higher than the deemed sum required acceptance and whether books needed to be maintained. - HELD THAT: - The Tribunal recognised that Section 44AE is a presumptive taxation scheme under which income may be declared at the prescribed per-vehicle amount or actual income, whichever is higher, and that an assessee opting for the presumptive scheme is exempted from the requirements of Sections 44AA and 44AB. In the present case the assessee disclosed income from plying of heavy goods vehicles at an amount higher than the deemed sum under Section 44AE; therefore the AO could not draw adverse inference or reject that declared income merely because books were not maintained. The Tribunal accordingly held that the deemed income as disclosed u/s 44AE (to the extent declared higher) had to be accepted by the revenue without insisting on books of account. [Paras 13]

Declared income under Section 44AE, being higher than the deemed amount, is to be accepted and the assessee is exempt from maintaining books under Section 44AA for that stream of business.

Acceptance of receipts evidenced in Form 26AS - Whether receipts that appear in Form 26AS in respect of certain parties should be accepted as transportation receipts of the assessee. - HELD THAT: - The Tribunal found no justification for the AO to have summarily rejected amounts which were reflected in the assessee's Form 26AS. The gross receipts aggregating to the amounts shown in Form 26AS (relating to parties at Sr. No. 3 to 7) were held to be genuine transportation receipts of the assessee. The AO was directed to accept these receipts and to vacate the addition made in relation to them. [Paras 16, 20]

The AO shall accept the assessee's claimed transportation receipts that are evidenced in Form 26AS (Rs. 18,87,536/-) and vacate the corresponding addition.

Verification and remand for substantiation of claimed receipts - Whether the large receipts claimed to have been received from M/s Coal Feeder, Raipur are admissible or require fresh verification. - HELD THAT: - The ledger excerpt produced (from the books of M/s Coal Feeder, Raipur) gave rise to serious doubts as to the authenticity and feasibility of the assessee's claim that his five trucks executed transportation works of the magnitude shown. The Tribunal noted specific indicators of doubt (disproportionate quantities, short time gaps between large jobs, absence of vehicle registration numbers in the ledger) and observed the possibility of connivance between a principal and a small subcontractor to create bogus freight claims. In view of these doubts the matter was restored to the AO for detailed verification. The AO is to call for requisite details from both the assessee and M/s Coal Feeder, Raipur, afford opportunity of hearing, and in the light of verification exclude from or include in the AO's estimate the amounts as substantiated; if the assessee fails to substantiate the claimed receipts the AO's estimation at eight percent of the disputed amount shall be sustained. [Paras 17, 18]

The claim of receipts from M/s Coal Feeder, Raipur (Rs. 3,09,93,450/-) is remanded to the AO for verification; if not substantiated the AO's estimation @8% of that amount shall be sustained, and to the extent substantiated the AO shall exclude such amount from the estimate.

Estimation of income at eight percent of unexplained receipts - Whether the AO's estimation of income at eight percent of the unexplained bank deposits/receipts which the assessee failed to explain is sustainable. - HELD THAT: - The Tribunal upheld the AO's approach insofar as the assessee failed to furnish explanation or supporting particulars for a balance sum (Rs. 53,88,774/-) allegedly received as transport receipts. The AO's estimate of income at the rate of eight percent on such unexplained receipts was found to be reasonable and is sustained. The Tribunal directed that the AO exclude from such estimation any amounts subsequently substantiated on verification (notably the amounts accepted under Form 26AS or proven in the remand proceedings). [Paras 18, 20]

Estimation of income at eight percent is sustained in respect of the unexplained balance receipts for which no service recipient/payer details were furnished.

Disposal of unpressed grounds of appeal. - HELD THAT: - The assessee's counsel conceded not to press Grounds Nos. 1 and 3; Ground No.4 being general was also not pressed. The Tribunal recorded these concessions and dismissed those grounds as not pressed. [Paras 6, 19]

Grounds 1 and 3 dismissed as not pressed; Ground 4 dismissed as not pressed.

Final Conclusion: The appeal is partly allowed. The Tribunal directed acceptance of transportation receipts evidenced in Form 26AS and corresponding vacation of the related addition; sustained the AO's estimation at eight percent in respect of unexplained receipts; and remanded the large claim against M/s Coal Feeder, Raipur to the AO for verification, permitting exclusion from the estimate to the extent the assessee can substantiate those receipts; certain conceded grounds were dismissed as not pressed.

Change of taxpayer status - intimation under section 143(1) of the Income-tax Act - verification of trust status by Assessing Officer - principles of natural justice / opportunity of hearing - remand for verification and fresh consideration

Change of taxpayer status - intimation under section 143(1) of the Income-tax Act - verification of trust status by Assessing Officer - principles of natural justice / opportunity of hearing - remand for verification and fresh consideration - Whether the departmental alteration of the assessee's declared status to AOP/BOI in the intimation under section 143(1) was permissible without verifying records or giving notice, and the consequent course of action. - HELD THAT: - The Tribunal noted that the intimation under section 143(1) recorded the assessee's status as AOP/BOI contrary to the assessee's return claiming trust status. The Assessing Officer (CPC) had effected the change of status without intimating the assessee or verifying the trust deed and other relevant material. The CIT(A) considered certain aspects (for example, Section 115C) but did not address the core complaint that status had been altered without notice or verification. Given that the change of status directly affected tax computation and demand, the Tribunal held that the matter required verification of records and an opportunity to the assessee to be heard. Accordingly, the Tribunal directed that the issue be remitted to the Assessing Officer, CPC for fresh verification of the assessee's status after taking cognizance of the trust deed and other relevant material and after affording the assessee a hearing in accordance with principles of natural justice.

The issue is remanded to the Assessing Officer, CPC for verification of the assessee's status on the basis of the trust deed and other material and for passing an appropriate order after giving the assessee an opportunity of hearing; appeal partly allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the matter to the Assessing Officer, CPC to verify the assessee's claimed status as a trust (on the basis of the trust deed and relevant material) and to pass an appropriate order after affording the assessee a hearing; the appeal is partly allowed for statistical purposes.

Provisional price - production of additional evidence under Rule 5(1)(b) of the Customs (Appeals) Rules, 1982 - amendment of bill of entry - refund consequent to rectification of bill of entry - CESTAT as final fact finding authority

Provisional price - CESTAT as final fact finding authority - amendment of bill of entry - Price recorded in the bills of entry (USD 715) was provisional and the fact was within the knowledge of the Department, thus justifying rectification of the bills of entry. - HELD THAT: - Both the Commissioner of Customs (Appeals) and the CESTAT recorded concurrent findings that the unit price declared at the time of import was provisional and that the Department was aware of that provisional nature. The Assistant Commissioner of Customs had earlier characterised the unit price as provisional, which formed the factual basis for permitting amendment of the bills of entry and consequent refund. As CESTAT is the last fact finding authority on such matters, the High Court affirmed those concurrent findings and upheld the rectification and refund directed below. [Paras 8, 9]

Affirmed that the price was provisional, known to the Department, and that amendment of the bills of entry was justified.

Production of additional evidence under Rule 5(1)(b) of the Customs (Appeals) Rules, 1982 - Assessee was entitled to produce additional evidence before the appellate authority under Rule 5(1)(b) of the Customs (Appeals) Rules, 1982. - HELD THAT: - Rule 5(1)(b) permits an assessee to produce evidence before the appellate authority where he was prevented by sufficient cause from producing such evidence earlier. The Tribunal applied this provision to admit the supplier's e mail and other evidence supporting that the price was provisional and that a lower final price had been agreed. The High Court, after considering the rule and the factual matrix, answered this question in the affirmative, upholding the Tribunal's admission of the additional evidence. [Paras 9]

Affirmed that the assessee was entitled to produce the additional evidence before the appellate authority under Rule 5(1)(b).

Amendment of bill of entry - Question concerning directions by Commissioner (Appeals) to authorize amendment of the bill of entry under Section 149 of the Customs Act, 1962 and the related contention about provisional assessment and refund under Section 18 was not answered by the Court. - HELD THAT: - The High Court treated the third question as not being a pure question of law and declined to decide it. The Court observed that since the first two substantial questions (relating to provisional price and admissibility of evidence) were answered in favour of the assessee, the third question did not call for a determination in the present proceedings and was left unaddressed. [Paras 10]

Not answered by the Court (left unaddressed).

Final Conclusion: Appeal dismissed; Questions 1 and 2 answered in favour of the assessee and against the Revenue; third question not answered. No costs.

Vesting of company assets in the company court/Official Liquidator on winding up - MPID Act cannot supplant the Companies Act in matters of winding up - jurisdictional limits of the MPID Court in relation to liquidation and other creditors - non-obstante clause confined to laws operating in the same field - harmonious construction of overlapping statutes - state legislative competence and repugnancy vis-a -vis central legislation

Vesting of company assets in the company court/Official Liquidator on winding up - MPID Act cannot supplant the Companies Act in matters of winding up - Whether an order under the MPID Act can divest the company court or the Official Liquidator of the assets of a company already in liquidation. - HELD THAT: - The Court upheld the finding that upon winding up a company its assets vest in the company court and are represented for practical purposes by the Official Liquidator, who must administer those assets under the Companies Act. The MPID Act, while capable of applying to a 'financial establishment', is not enacted so as to displace the Companies Act's scheme of winding up. The MPID notification cannot effect a transfer of vesting from the company court to the MPID Court; there is no provision in the MPID Act that permits divesting the company court or ousting the powers of the Official Liquidator in respect of assets of a company in liquidation. The court rejected the State's contention that the MPID Act's protective machinery could operate to the exclusion of the Companies Act in respect of companies already wound up.

The MPID Act does not and cannot divest the company court or the Official Liquidator of assets of a company in liquidation; the appeals on this ground are dismissed.

Jurisdictional limits of the MPID Court in relation to liquidation and other creditors - harmonious construction of overlapping statutes - Whether the MPID Court is competent to adjudicate claims of other creditors or to give depositors priority over statutory preferential payments under company law. - HELD THAT: - The Court agreed with the view that the MPID Act is directed to a specific class of depositors and does not confer jurisdiction on the MPID Court to adjudicate or alter the preferential payment hierarchy established by the Companies Act. The MPID Court's statutory scheme contemplates distribution to depositors and is silent on winding up procedures and preferential payments to secured creditors, workmen or other creditors under company law. The proper construction is to read the two statutes harmoniously; where the Companies Act governs winding up and distribution priorities, those provisions must be respected and cannot be subordinated to MPID relief.

The MPID Court has no jurisdiction to displace the preferential payment regime or to deal with claims of other unsecured or preferential creditors in a manner inconsistent with the Companies Act.

Non-obstante clause confined to laws operating in the same field - state legislative competence and repugnancy vis-a -vis central legislation - Whether the MPID Act's non-obstante provision empowers it to override the Companies Act generally, and whether State enactment can occupy a field reserved to Parliament. - HELD THAT: - The Court applied established principles that a non-obstante clause operates only as regards other laws operating in the same field; it does not permit a state statute to encroach upon a matter fully occupied by central legislation. The Companies Act is traceable to Union legislative entries and its field cannot be displaced by a State law to the extent of any repugnancy. Consequently, the MPID Act cannot be read to 'fully occupy the field' of winding up or to render ineffective the Companies Act's provisions where they operate on the same subject-matter. The two statutes must be read so as to avoid repugnancy and to give effect to each within its proper sphere.

The non-obstante clause in the MPID Act does not authorize it to override the Companies Act in matters that are within the Union field; the MPID Act must be confined to its proper domain and construed harmoniously with central legislation.

Final Conclusion: The appeals are dismissed. The High Court affirms that the Companies Act governs vesting and administration of assets of a company in liquidation through the company court and Official Liquidator; the MPID Act cannot be used to divest those powers, cannot displace the Companies Act's payment hierarchy, and must be confined to its statutory field and harmoniously construed with central legislation.

Scheme of Amalgamation - Dispensation from convening meetings under Section 230(9) of the Companies Act, 2013 - Consent affidavits constituting unanimous/100% consent of shareholders and creditors - Power to dispense with meetings where requisite class consents exist - Filing of second motion for sanction of scheme

Dispensation from convening meetings under Section 230(9) of the Companies Act, 2013 - Consent affidavits constituting unanimous/100% consent of shareholders - Scheme of Amalgamation - Whether meetings of equity shareholders of the Transferor and Transferee companies could be dispensed with on the basis of consent affidavits filed in respect of the proposed Scheme of Amalgamation. - HELD THAT: - The Tribunal examined the affidavits and records showing that all equity shareholders of the Transferor Company (4 shareholders) and of the Transferee Company (2 shareholders) had placed their consent-affidavits on record constituting 100% in value and number. The Board approvals, auditors' certificates and other supporting documents were on file. Applying the statutory power to dispense with meetings where the requisite class consents exist, the Tribunal held that convening and holding meetings of equity shareholders of both the Transferor and the Transferee Companies was unnecessary and dispensed with such meetings. [Paras 5, 6, 14]

Meetings of equity shareholders of both the Transferor and Transferee companies dispensed with as all shareholders filed consent affidavits.

Dispensation from convening meetings under Section 230(9) of the Companies Act, 2013 - Consent affidavits constituting unanimous consent of unsecured creditors - Power to dispense with meetings where requisite class consents exist - Whether convening meetings of unsecured creditors of the Transferee Company and of the Transferor Company was required or could be dispensed with. - HELD THAT: - The Tribunal noted that the Transferor Company had no unsecured creditors and therefore no meeting was required. For the Transferee Company, all five unsecured creditors had filed consent affidavits constituting 100% in value and number. In view of the documentary evidence of unanimous consent and the statutory power to dispense with calling meetings where the requisite class consents exist, the Tribunal dispensed with calling and holding meetings of unsecured creditors of the Transferee Company. [Paras 5, 6, 14]

Meeting of unsecured creditors of the Transferor Company did not arise; meeting of unsecured creditors of the Transferee Company dispensed with on account of consent affidavits.

Power to file second motion for sanction of scheme - Scheme of Amalgamation - Whether the applicants were permitted to proceed to second motion for sanction of the Scheme of Amalgamation within the prescribed time. - HELD THAT: - Having dispensed with the requirement to convene the specified class meetings and having considered the documentary record, the Tribunal permitted the applicants to file the joint second motion application for sanctioning the Scheme within the time prescribed under the Companies Act, 2013. The Tribunal thereby allowed the CA(CAA) 68(ND) of 2022 and directed compliance with the statutory procedure for the second motion. [Paras 14, 15]

Application allowed; applicants permitted to file the second motion within the prescribed time and CA(CAA) 68(ND) of 2022 is allowed.

Final Conclusion: The Tribunal, on the materials and consent affidavits filed, dispensed with convening meetings of the specified classes (shareholders of both companies and unsecured creditors of the Transferee where applicable), allowed the Company Scheme application CA(CAA) 68(ND) of 2022 and permitted filing of the joint second motion for sanction of the Scheme within the statutory time.

Oppression and mismanagement - waiver of the numerical requirement under Section 244(1) - interpretation and application of Articles of Association - rotation and region-wise nomination of the Federation President - convention and established practice in corporate governance - invalidity of Executive Committee meeting and consequential actions - directions for fresh nominations, AGM and supervised election

Waiver of the numerical requirement under Section 244(1) - oppression and mismanagement - Whether the Tribunal should waive the requirement that petitioners constitute one-fifth of total members under Section 244(1)(b) and admit the petition alleging oppression and mismanagement. - HELD THAT: - The Tribunal applied the discretionary principles in Cyrus Investments (as quoted) and considered the history of litigation between the regions, the representational character of Petitioner No.1 (Eastern Region) and the prima facie evidence of concerted actions prejudicial to the Eastern Region. The Tribunal found that exceptional circumstances existed to grant waiver despite petitioners not forming one-fifth of total members, having regard to the broader interest of hundreds of hotels represented by the regional association, earlier proceedings (including interim orders) and the prima facie case of oppression by certain EC members. On this basis the Tribunal was satisfied to grant the proviso waiver and proceed to decide the merits of the petition alleging oppression and mismanagement. [Paras 13, 14, 15, 16]

Waiver under the proviso to Section 244(1) granted and the petition admitted on merits.

Interpretation and application of Articles of Association - rotation and region-wise nomination of the Federation President - convention and established practice in corporate governance - Whether Article 52 of the AOA requires the EC to accept the regional association's nominated candidate as President by convention and whether the conduct of the EC on 30.10.2018 breached Article 52 and established practice. - HELD THAT: - The Tribunal analysed Article 52 together with past practice and the minutes of prior meetings. It concluded that Article 52 contemplates region-wise election by the EC in a manner implemented historically by the Federation whereby the regional association whose turn it is nominates a candidate who is then confirmed by the EC without voting. The Tribunal found that the EC's conduct on 30.10.2018 - including proposals of multiple Eastern Region names (many without consent), voting against the Eastern Region's unanimous nominee, and election of an unwilling nominee - departed from the established convention and was inconsistent with the AOA. The Tribunal rejected respondents' contention that Article 52 permits the EC to impose any candidate irrespective of regional nomination, noting that custom and past implementation gave effect to regional nomination and that the EC offered no satisfactory justification for deviation. The Tribunal also observed that coercing or attempting to thrust office on unwilling persons contravenes the rule that appointment requires consent. [Paras 8, 9, 11, 12, 19]

Article 52 is to be read and applied in light of the Federation's established convention: the Eastern Region's nominated candidate ought to have been accepted; the EC's departure from that practice on 30.10.2018 breached the AOA and demonstrated arbitrariness and prejudice.

Invalidity of Executive Committee meeting and consequential actions - directions for fresh nominations, AGM and supervised election - Whether the Executive Committee meeting dated 30.10.2018 and actions in furtherance thereof are valid, and what remedial directions should follow. - HELD THAT: - Having held that the EC's procedures and conduct on 30.10.2018 were contrary to the AOA and established practice, the Tribunal declared that EC meeting of 30.10.2018 and actions consequent thereto are null and void to the extent they contravene the AOA (subject to statutory compliance orders previously made by the Tribunal). To remedy the breach and to give effect to Article 52 and convention, the Tribunal directed fresh nominations by all four regions within seven days, directed that AGM be held within 30 days of the order with an EC meeting thereafter to elect the President from the Eastern Region and other office-bearers as per the AOA, and ordered that nominations for President be made by the Eastern Region. The Tribunal appointed an independent retired Judge and two supervising advocates to conduct and oversee the AGM and EC meeting and to report to the Tribunal, and directed payment by the Federation for their services. [Paras 21, 22, 23, 24, 25]

The EC meeting of 30.10.2018 is declared null and void; directions issued for fresh regional nominations, holding of AGM and supervised EC election in accordance with AOA; supervising officer appointed and related directions given.

Final Conclusion: The Tribunal granted waiver of the numerical filing requirement under Section 244(1), held that Article 52 must be read in light of the Federation's established region-wise convention (which the EC breached on 30.10.2018), declared the EC meeting of 30.10.2018 and consequent actions invalid to the extent inconsistent with the AOA, and directed fresh nominations, AGM and a supervised EC meeting to elect the President (Eastern Region) and other office-bearers, appointing a retired Judge and two advocates to oversee the process.

Settlement under SEBI Settlement Scheme, 2022 - Acceptance of settlement application in pending proceedings - Regulation 26 of Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 - Reversal trades in the stock option segment

Settlement under SEBI Settlement Scheme, 2022 - Acceptance of settlement application in pending proceedings - Reversal trades in the stock option segment - Application for settlement under the SEBI Settlement Scheme, 2022 in respect of reversal trades during April 1, 2014 to September 30, 2015 is to be permitted and treated as an application in a pending proceeding. - HELD THAT: - The respondent filed an affidavit stating that SEBI has issued the SEBI Settlement Scheme, 2022 under Regulation 26 of the Settlement Proceedings Regulations, 2018, which provides an opportunity for settlement to entities that executed reversal trades in the stock option segment of BSE during April 1, 2014 to September 30, 2015. In view of this, the Tribunal directed that the appellant be permitted to file an application for settlement before the authority concerned within two weeks. The authority is directed to accept such settlement application in terms of the proposed scheme as an application filed in a pending proceeding and to pass appropriate orders thereon. [Paras 1, 2]

The appeal is disposed of with a direction to the appellant to file a settlement application within two weeks and for the authority to accept and decide the application under the SEBI Settlement Scheme, 2022 as one filed in a pending proceeding.

Final Conclusion: Appeal disposed of; appellant directed to file settlement application within two weeks and the authority directed to accept and adjudicate the application under the SEBI Settlement Scheme, 2022 as an application in a pending proceeding.

Settlement under Regulation 26 of Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 - SEBI Settlement Scheme, 2022 - acceptance of settlement application in pending proceedings

SEBI Settlement Scheme, 2022 - Settlement under Regulation 26 of Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 - acceptance of settlement application in pending proceedings - Disposal of the appeal by directing the appellant to file a settlement application under the SEBI Settlement Scheme, 2022 and treatment of such application as filed in a pending proceeding with a direction to the authority to accept and pass appropriate orders. - HELD THAT: - The Tribunal recorded that the respondent filed an affidavit stating that a settlement scheme has been issued in terms of Regulation 26 of the SEBI (Settlement Proceedings) Regulations, 2018, namely the SEBI Settlement Scheme, 2022, which provides an opportunity for settlement to entities who executed reversal trades in the stock option segment during the specified period. In view of that affidavit, the Tribunal disposed of the appeal and directed the appellant to file an appropriate settlement application before the concerned authority within two weeks. The Tribunal further directed that if the application is filed, the authority shall accept the settlement application in terms of the proposed SEBI Settlement Scheme, 2022 as an application filed in a pending proceeding and shall pass appropriate orders thereon. [Paras 1, 2]

Appeal disposed with direction to file settlement application within two weeks and for the authority to accept and decide it as an application in a pending proceeding under the SEBI Settlement Scheme, 2022.

Final Conclusion: The appeal is disposed of; the appellant is directed to file a settlement application within two weeks and the authority is directed to accept and decide it in terms of the SEBI Settlement Scheme, 2022 as an application in a pending proceeding.

Injunction restraining institution or prosecution of proceedings - coercive step - recovery proceedings (generic legal remedies to realise dues) - initiation and maintenance of proceedings under the Insolvency and Bankruptcy Code, 2016 - IB C as a beneficial, non adversarial legislation focused on insolvency resolution - no injunction against actions taken or to be taken in pursuance of powers of the NCLT (Section 64(2) IBC) - prohibition on grant of injunction to restrain proceedings in a Court not subordinate to the forum (Section 41(b) Specific Relief Act)

Initiation and maintenance of proceedings under the Insolvency and Bankruptcy Code, 2016 - recovery proceedings (generic legal remedies to realise dues) - coercive step - IB C as a beneficial, non adversarial legislation focused on insolvency resolution - Clarification whether the High Court's orders of 25th February, 2021 and 3rd December, 2021 prohibited Respondent No.1 bank from initiating or maintaining proceedings under the IBC against the appellant. - HELD THAT: - The Division Bench's order of 3rd December, 2021 modified the earlier restraint (25th February, 2021) and permitted the bank to take recourse to legal remedies for recovery of outstanding loan amounts. The court construed the term 'recovery' in that order as a generic expression encompassing available legal remedies, including those under IBC. Separately, the court held that the 25th February order only restrained 'coercive steps' and that initiation of IBC proceedings does not constitute a coercive step, since the IBC is a beneficial, non adversarial statute aimed at insolvency resolution rather than mere creditor recovery (relying on the principles in Swiss Ribbons and Dena Bank). For these reasons the Court clarified that its orders did not prohibit the bank from initiating or maintaining proceedings under the IBC. [Paras 32, 33, 34, 35, 40]

Clarified that the Court never prohibited the bank from initiating or maintaining IBC proceedings against the appellant.

Prohibition on grant of injunction to restrain proceedings in a Court not subordinate to the forum (Section 41(b) Specific Relief Act) - injunction restraining institution or prosecution of proceedings - Maintainability of the suit filed by the appellant insofar as it seeks injunction restraining the bank from instituting proceedings. - HELD THAT: - The Court observed that Section 41(b) of the Specific Relief Act ordinarily precludes a court from granting an injunction to restrain a person from instituting or prosecuting proceedings in a court not subordinate to it. On that basis the Court expressed 'grave doubts' as to the maintainability of the appellant's suit which seeks preventive relief against institution of proceedings. The bench further noted the settled principle that an interim injunction cannot be granted where a permanent injunction cannot be granted; thus the learned Single Judge's conclusion that granting an injunction would debilitate the bank's remedies was prima facie correct. [Paras 36, 37, 38]

Court recorded prima facie doubts about maintainability of the suit under Section 41(b) SRA and upheld the Single Judge's view on the injunction application.

Injunction restraining institution or prosecution of proceedings - contempt for alleged breach of High Court orders - Whether the contempt petition alleging breach of the High Court's orders by filing the Section 7 IBC petition was maintainable. - HELD THAT: - Having clarified that its orders did not prohibit the bank from initiating or maintaining IBC proceedings, the Court held there was no disobedience of the orders dated 25th February, 2021 and 3rd December, 2021. Consequently, the contempt petition based on the filing of the Section 7 petition was without merit. [Paras 40, 41]

Contempt petition dismissed as without merit.

Final Conclusion: The Division Bench clarified that its earlier orders did not bar the bank from initiating or maintaining proceedings under the IBC; expressed prima facie doubts on maintainability of the appellant's suit under Section 41(b) SRA; and dismissed the contempt petition as without merit. CM Appl.12152/2022 disposed of and Cont. Cas.(C) No.286/2022 dismissed.

Moratorium in liquidation - institution of fresh suits - continuation of pending suits - bar on civil courts' jurisdiction - exclusive jurisdiction of the Adjudicating Authority/NCLT - rule of casus omissus - claim adjudication by liquidator - election of remedies

Moratorium in liquidation - institution of fresh suits - continuation of pending suits - Whether the suit filed prior to commencement of liquidation proceedings can continue notwithstanding the moratorium under Section 33(5) of the IBC. - HELD THAT: - The court held that Section 33(5) of the IBC, by its plain language, bars only the institution of fresh suits or legal proceedings once a liquidation order has been passed; it does not prohibit continuation of suits already instituted. The omission of the words 'continuation of pending suits or proceedings' from Section 33(5) is deliberate and contrasts with Section 14(1)(a), which expressly bars continuation of pending proceedings during the resolution process. Chapter II (resolution) and Chapter III (liquidation) serve different objectives - revival versus winding up - and the differing language must be read in that statutory context. Reliance on reports or policy notes pointing to an omission does not permit the Court to read words into Section 33(5); any legislative change must be effected by Parliament. On this basis the court concluded that the moratorium under Section 33(5) does not operate to stay suits filed before commencement of liquidation. [Paras 17, 18, 23, 26, 29]

The suit filed before commencement of liquidation may proceed; Section 33(5) does not bar continuation of pending suits.

Bar on civil courts' jurisdiction - exclusive jurisdiction of the Adjudicating Authority/NCLT - Whether Sections 60(5), 63 and 231 of the IBC oust the jurisdiction of civil courts to continue pending suits against a corporate debtor in liquidation. - HELD THAT: - The court observed that Sections 63 and 231 bar civil courts from entertaining matters that fall within the jurisdiction of the NCLT under the Code, but these provisions must be read in harmony with Section 33(5). Interpreting Sections 63 and 231 so as to extend the moratorium under Section 33(5) to pending suits would render Section 33(5) otiose. Therefore, the bar under Sections 60(5), 63 and 231 applies to suits instituted after the liquidation order (or matters squarely within NCLT jurisdiction) and does not preclude continuation of suits already pending when liquidation commenced. [Paras 19, 20]

Sections 60(5), 63 and 231 do not prevent continuation of suits instituted prior to commencement of liquidation; their bar applies to fresh suits or matters properly before the NCLT.

Claim adjudication by liquidator - election of remedies - Whether the Liquidator should adjudicate the plaintiff's claim lodged with the Liquidator where the same claim is the subject matter of a pending civil suit. - HELD THAT: - Having held that the pending suit may continue and is competent to adjudicate the plaintiff's claim, the court directed that the Liquidator should not adjudicate the claim submitted by the plaintiff to the Liquidator while the suit remains sub judice. The plaintiff cannot pursue two concurrent remedies in respect of the same claim; therefore the claim before the Liquidator must be left undecided pending the civil proceedings. [Paras 30, 31]

The Liquidator is directed not to adjudicate the claim filed by the plaintiff before the Liquidator while the suit is pending; the claim shall be adjudicated in the pending suit.

Final Conclusion: The High Court held that Section 33(5) of the IBC bars only fresh suits instituted after a liquidation order and does not bar continuation of suits filed prior to commencement of liquidation; Sections 60(5), 63 and 231 do not oust jurisdiction of civil courts to continue such pending suits; accordingly the present suit shall continue and the Liquidator is directed not to adjudicate the same claim filed before him.

Supervisory jurisdiction under Article 227 of the Constitution - limited scope of interference by the High Court under Article 227 - procedure versus merits in exercise of supervisory jurisdiction - conflict between provisions of the Insolvency and Bankruptcy Code and other laws - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - examination and impounding of instruments under the Indian Stamp Act

Supervisory jurisdiction under Article 227 of the Constitution - limited scope of interference by the High Court under Article 227 - Whether the High Court should issue directions to guide the learned NCLT on how to adjudicate pending matters or regulate its procedure under Article 227. - HELD THAT: - The petition sought broad directions to regulate practice and proceedings before the learned NCLT and to guide its adjudicatory approach. The Court reiterated that Article 227 confers supervisory jurisdiction which is corrective and not appellate. The High Court may intervene only where an inferior forum has acted in a manner calling for supervisory correction - for example, grave dereliction, flagrant violation of fundamental principles, or findings so perverse that no reasonable person could reach them. The Court may not be used to direct the manner in which a tribunal exercises its jurisdiction or to substitute its view for that of the tribunal where the tribunal remains within its authority. The present petition attempted to obtain guidance on how the NCLT should decide disputes and was therefore an impermissible exercise to convert supervisory jurisdiction into a mechanism to regulate routine adjudication. [Paras 2, 12, 14, 15, 23]

Petition seeking directions to guide or regulate the NCLT's adjudication or procedure is untenable and is dismissed insofar as it seeks such supervisory directions.

Examination and impounding of instruments under the Indian Stamp Act - procedure versus merits in exercise of supervisory jurisdiction - Whether the High Court should direct the learned NCLT to examine and impound documents under Sections 33 and 35 of the Indian Stamp Act before proceeding to decide the merits of the insolvency petition. - HELD THAT: - The petitioner asked for an order directing the NCLT to impound documents on the ground that they were not duly stamped. The Court observed that the NCLT has already taken an interim view on the applicability of the Stamp Act vis-a -vis the IBC and that such interlocutory rulings are open to reconsideration by the adjudicating authority. Interfering under Article 227 to compel the NCLT to impound documents or to decide a procedural step in a particular manner would amount to impermissible intrusion into the tribunal's function. The High Court emphasized processual correctness rather than substituting its own view on evidentiary admissibility where the tribunal is competent to decide after hearing the parties. [Paras 5, 6, 16, 20, 22]

No direction is issued to the NCLT to impound documents; the question of impounding and admissibility under the Stamp Act is to be determined by the NCLT after hearing both parties.

Conflict between provisions of the Insolvency and Bankruptcy Code and other laws - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - Whether the question of applicability of Sections 33 and 35 of the Stamp Act vis-a -vis Section 238 of the IBC ought to be finally adjudicated by the High Court at this stage. - HELD THAT: - The learned NCLT had taken an interim view that Section 238 of the IBC would prevail over the Stamp Act; the petitioner appealed and the NCLAT dismissed the appeal while leaving all contentions open and directing that observations of the Adjudicating Authority would have no bearing when issues are decided on merits. The High Court held that the matter is premature for supervisory intervention. The proper course is for the NCLT to consider, de novo, the applicability of the Stamp Act in light of the IBC after hearing both sides; any aggrieved party may thereafter pursue remedies available, including appeal. [Paras 8, 17, 18, 20, 21]

The issue of whether Sections 33 and 35 of the Stamp Act apply, notwithstanding Section 238 of the IBC, is left to be decided afresh by the NCLT; the High Court declines to adjudicate that question at this stage.

Procedure versus merits in exercise of supervisory jurisdiction - Whether any interim relief or protective direction granted by the High Court is warranted given the procedural posture of the proceedings before the NCLT and NCLAT. - HELD THAT: - The NCLAT had directed that the NCLT proceed uninfluenced by its earlier interim order and left all contentions open. The High Court noted that the petitioner has not assailed any final order of the NCLT and that the application was premature. The supervisory jurisdiction does not permit the High Court to pre-empt the adjudicatory process or to grant interim reliefs that would determine how the tribunal should exercise its jurisdiction. The appropriate remedy is to press the case before the NCLT and thereafter, if dissatisfied, to pursue appellate remedies. [Paras 16, 17, 18, 19, 21]

No interim protective direction is granted; the petition is premature and disposed of, with leave to the parties to pursue the matter before the NCLT and, if necessary, on appeal.

Final Conclusion: The writ petition under Article 227 is dismissed. The High Court will not direct or guide the NCLT's adjudicatory process; the NCLT is to decide, de novo, the applicability of the Stamp Act vis-a -vis the IBC after hearing both sides, and all substantive and appellate remedies remain open to the parties.

Bona fide dispute - maintainability of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - assignment of operational debt - settlement agreement as discharge of liability - identity of operational creditor

Bona fide dispute - settlement agreement as discharge of liability - assignment of operational debt - identity of operational creditor - Whether the Adjudicating Authority correctly dismissed the Section 9 application on the ground that a bona fide dispute existed and that the debt had been assigned/settled such that the appellant was not the proper operational creditor entitled to initiate proceedings. - HELD THAT: - The Appellate Tribunal upheld the conclusion of the Adjudicating Authority that the dispute was bona fide and that the appellant was not the operative creditor entitled to maintain proceedings under Section 9. The Settlement Agreement dated 21.07.2015, executed with the knowledge and written consent of HSBC and Euler Hermes, expressly recorded that the settlement constituted a full and final discharge in favour of the corporate debtor and that Sansing had taken written consent of HSBC and Euler Hermes for the settlement. The Adjudicating Authority therefore legitimately found that the operational debt was the subject of an arrangement involving assignment/settlement and that HSBC, not the appellant, was the party through whom the invoices had been financed and in respect of whom rights in the invoices had been dealt with. In these circumstances the Authority was entitled to treat the corporate debtor's contentions as a bona fide dispute about the existence/entitlement to the operational debt and to hold the Section 9 application not maintainable. The Tribunal found the reasons recorded by the Adjudicating Authority cogent and not open to interference. [Paras 10]

Affirmation of the Adjudicating Authority's order dismissing the Section 9 application on the grounds that a bona fide dispute existed and that the settlement/assignment affected the identity of the operational creditor, rendering the application not maintainable.

Final Conclusion: The impugned order dated 15.10.2019 rejecting the Section 9 application was affirmed; the appeal was dismissed for lack of merit.

Time-barred claim - written acknowledgement for tolling limitation - verification of claims by IRP/RP under regulation 13 and regulation 14 of the CIRP Regulations - admission of claim and inclusion in Committee of Creditors - non-joinder of parties

Time-barred claim - written acknowledgement for tolling limitation - Whether the claim of New Hind Silk House Pvt. Ltd. (NHSH) was within limitation and could be admitted for inclusion in the Committee of Creditors. - HELD THAT: - The Tribunal examined the documents relied upon to bring the claim within limitation - ledger confirmations dated 1.4.2016 and 1.4.2017, the last payment dated 5.8.2016, and balance sheets prepared during CIRP. It found the ledger confirmations and later balance sheets prepared on 12.3.2020 to be of doubtful authenticity and unreliable for constituting a written acknowledgement sufficient to toll limitation. The Tribunal also held that TDS paid by the corporate debtor did not amount to a written acknowledgement of liability. On the materials and chronology, the claim filed on 26.2.2019 was held to be time-barred and not saved by the purported confirmations. [Paras 17, 18, 20, 22]

NHSH's claim is barred by limitation and the documents relied upon do not constitute a valid written acknowledgement to bring the claim within limitation.

Verification of claims by IRP/RP under regulation 13 and regulation 14 of the CIRP Regulations - admission of claim and inclusion in Committee of Creditors - Whether the Resolution Professional exercised due diligence in verifying NHSH's claim and whether admission of that claim was proper. - HELD THAT: - The Tribunal held that regulation 13 requires the IRP/RP to verify every claim and maintain a list of creditors. Given the importance of voting share in the CoC, the RP owed a duty of care to scrutinise documents for genuineness and authenticity. The Tribunal found that the RP did not satisfactorily discharge this duty: the ledger confirmations and subsequent balance sheets lacked credibility and were not properly examined before admitting the claim. The Tribunal therefore concluded that the RP should not have relied on those documents to admit NHSH and suggested that the Insolvency and Bankruptcy Board of India may investigate the RP's conduct. [Paras 16, 17, 18, 21, 22]

The RP failed to exercise necessary care and diligence in verifying NHSH's claim; admission of the claim on the basis of the impugned documents was improper.

Non-joinder of parties - Whether the appeal was not maintainable for non-joinder of the directors who purportedly signed the ledger confirmations. - HELD THAT: - The Tribunal noted that the admission of NHSH's claim was an act of the RP and that the appellant was aggrieved by that act. The RP was joined as respondent in the appeal. On that basis the Tribunal held that the appeal was properly constituted despite non-impleadment of the suspended directors who were alleged to have signed the confirmations. [Paras 19]

The appeal is maintainable; non-joinder of the directors did not render the appeal incompetent.

Final Conclusion: The Impugned Order upholding admission of NHSH's claim is set aside: NHSH shall not be a member of the Committee of Creditors in the CIRP of Goouksheer Farm Fresh Pvt. Ltd. The Tribunal found the claim time-barred, the documents relied upon unreliable, and the RP deficient in verification; it also observed the appeal was maintainable and suggested IBBI may investigate the RP's conduct. No order as to costs.

Inclusion of third party personal property in a resolution plan - assignment of security, mortgage and incidental rights under an approved resolution plan - continuing rights of creditor against personal guarantor/mortgagor after approval of a resolution plan - scope of judicial interference by adjudicating authorities under the Insolvency and Bankruptcy Code - liberty to seek appropriate forum for adjudication of disputed proprietary rights

Inclusion of third party personal property in a resolution plan - assignment of security, mortgage and incidental rights under an approved resolution plan - Whether the personal property mortgaged by the promoter (a third party) could be treated as an asset of the corporate debtor and dealt with pursuant to the approved resolution plan. - HELD THAT: - The Tribunal recorded that the Mortgage Deed was executed by the promoter prior to CIRP and that rival factual stands exist as to ownership and possession of the subject land. Given that the resolution plan had been approved and implemented, substantial time had elapsed, and there were contrary contentions on whether the land formed part of the corporate debtor's assets, the Tribunal declined to adjudicate the proprietary controversy in the present appellate proceedings. Instead, having noted the settled propositions in higher authority regarding guarantors and security, the Tribunal granted the appellant liberty to pursue its rights in an appropriate forum where the factual questions of ownership, possession and enforceability of the mortgage can be examined afresh and finally determined. [Paras 13, 15]

Liberty granted to the appellant to proceed in an appropriate forum to seek adjudication of the disputed proprietary/mortgage issues; the Tribunal did not set aside the approval of the resolution plan on this ground.

Scope of judicial interference by adjudicating authorities under the Insolvency and Bankruptcy Code - liberty to seek appropriate forum for adjudication of disputed proprietary rights - Whether the NCLT/NCLAT should interfere with the approved and implemented resolution plan in the circumstances of this case. - HELD THAT: - Applying the cautionary principle that judicial intervention in the IBC framework should be minimal and recognising the commercial finality of decisions taken by the Committee of Creditors, the Tribunal observed that the resolution plan had been approved by requisite majority and implemented. In view of the elapsed time, implementation of the plan and the existence of factual disputes as to ownership and possession of the land, the Tribunal refrained from disturbing the approval. Instead of providing substantive relief in appellate proceedings, it granted procedural relief by permitting the appellant to pursue its contested rights in a proper forum. [Paras 14, 15, 16]

The Tribunal declined to interfere with the approved and implemented resolution plan; appeal partly allowed only to the extent of granting liberty to the appellant to seek remedy in an appropriate forum.

Final Conclusion: The appeal is partly allowed: the Tribunal has not set aside the Adjudicating Authority's approval of the resolution plan but has granted the appellant liberty to pursue its claims regarding the mortgaged third party property in an appropriate forum, leaving the substantive proprietary questions to be adjudicated afresh.

Power to recall or review its own order - interlocutory application disguised as an appeal - remedy before the Resolution Professional - finding of default at the stage of Section 95 - opportunity to file reply to the Resolution Professional

Power to recall or review its own order - interlocutory application disguised as an appeal - Validity of dismissal of IA(IBC)/147/KOB/2022 by the Adjudicating Authority on the ground that it had no power to recall or review its earlier order and that the application was an appeal in disguise. - HELD THAT: - The Appellate Tribunal concurred with the Adjudicating Authority's conclusion that an application framed to 'recall' the order dated 05.05.2022 was, in effect, an attempt to challenge that order and amounted to an appeal in disguise. The Tribunal noted that the Adjudicating Authority correctly held that it has no power to recall or review its own order in the circumstances and that only clerical or arithmetical rectification is permissible at that stage. Having regard to the procedural scheme under the Code and the nature of the relief sought, the Tribunal found that dismissal of the interlocutory application was justified and not an impermissible exercise of jurisdiction.

IA(IBC)/147/KOB/2022 was rightly dismissed as an application amounting to an appeal in disguise and the Adjudicating Authority had no power to recall or review its earlier order in the circumstances.

Remedy before the Resolution Professional - opportunity to file reply to the Resolution Professional - finding of default at the stage of Section 95 - Availability of alternative remedy by filing a reply with the Resolution Professional and the effect of earlier observations regarding 'default' made at the Section 95 stage. - HELD THAT: - The Tribunal observed that the procedural scheme contemplates action by the Resolution Professional and that the appellant was afforded an opportunity to file a reply before the Resolution Professional, who had already filed a report on the record. The Tribunal recorded that while earlier orders contained observations suggesting 'default', final adjudication on admission or rejection is the province of subsequent stages (including consideration of the Resolution Professional's report). In light of the opportunity already given to the appellant to submit replies and the continuing pendency of the main petition, the Tribunal held that the appropriate remedy was to utilise the process before the Resolution Professional and the Adjudicating Authority rather than seeking recall of the earlier order.

Appellant may file his reply before the Resolution Professional for redressal of grievances; the interlocutory application was not the correct remedy to impugn observations made at the Section 95 stage.

Final Conclusion: The appeal is disposed of by upholding the dismissal of IA(IBC)/147/KOB/2022 as an impermissible challenge to the order dated 05.05.2022; the appellant remains entitled to pursue remedies by filing a reply before the Resolution Professional and through the pending proceedings before the Adjudicating Authority.

Collusive transaction not constituting financial debt - essential requisites of financial debt - disbursement and consideration for time value of money - admission under Section 7 - scope and discretion of adjudicating authority where prima facie fraud exists - assignment of loan - bona fides of assignment and effect on assignee's status as financial creditor - admissibility of Section 7 petition where independent criminal/agency findings point to loan being sham

Collusive transaction not constituting financial debt - essential requisites of financial debt - disbursement and consideration for time value of money - Phoenix ARC principle - Whether the Term Loans disbursed in the name of the Corporate Debtor qualify as a 'financial debt' under Section 5(8) of the Code. - HELD THAT: - Having considered the investigation reports of statutory agencies (ED, CBI), the PMLA Adjudicating Authority's confirmation of attachment, the flow-of-funds table on record and relevant Supreme Court precedents, the Tribunal held that the commercial substance of the transactions demonstrates collusive disbursement. The money disbursed in the name of the Corporate Debtor was almost immediately routed back within the lender's system to discharge third party liabilities and was not utilized by the Corporate Debtor for the sanctioned end use. Applying the principle that a financial debt requires disbursement against consideration for the time value of money, and relying on the ratio in Phoenix ARC (that collusive transactions do not create financial debt), the Tribunal found that the essential requisites of Section 5(8) were absent and the loans do not fall within the definition of 'financial debt'. [Paras 22, 23, 24]

The Term Loans were collusive in nature and therefore do not constitute a 'financial debt' under Section 5(8) of the Code.

Admission under Section 7 - scope and discretion of adjudicating authority where prima facie fraud exists - admissibility of Section 7 petition where independent criminal/agency findings point to loan being sham - Embassy/ Vidarbha principle - jurisdiction to examine fraud - Whether the Adjudicating Authority erred in admitting the Section 7 petition without addressing the findings of independent investigative agencies and prima facie evidence of fraud. - HELD THAT: - The Tribunal observed that the Adjudicating Authority merely treated the existence of entries in the balance sheet and CIBIL as establishing debt and default, without engaging with the independent investigative findings and the materials showing diversion of funds and contravention of the Corporate Debtor's Articles. In light of Supreme Court guidance that an adjudicating authority has jurisdiction to inquire into allegations of fraud where a prima facie case exists and must exercise its discretion (Vidarbha, Embassy), the Tribunal concluded that the Adjudicating Authority ought to have examined the nature of the transactions and the agency findings before admitting the petition under Section 7. The NCLT's silence on these materials and its cursory approach amounted to error. [Paras 26, 27, 29]

The Adjudicating Authority erred in admitting the Section 7 petition without proper consideration of the investigative findings and prima facie evidence of collusion/fraud.

Assignment of loan - bona fides of assignment and effect on assignee's status as financial creditor - effect of tainted underlying transaction on assignee - Whether the assignment of the loans to the Assignee (Suraksha) renders the Assignee a 'financial creditor' entitled to initiate CIRP when the underlying loans are found to be collusive. - HELD THAT: - The Tribunal examined the timing and circumstances of assignment, the continuing involvement of the original lender in settlement discussions after assignment, and the agency findings that the loans were sanctioned and routed in a collusive manner for the lender's benefit. On the facts, the assignment was held not to be bona fide in the peculiar factual matrix; since the underlying transactions did not satisfy the essential elements of 'financial debt', the assignee could not be treated as a financial creditor for initiating CIRP. [Paras 28]

The Assignment to Suraksha is not bona fide in the attendant facts and Suraksha cannot be treated as a 'financial creditor' entitled to initiate CIRP.

Final Conclusion: The appeals are allowed. The admission order dated 20.09.2021 is set aside; all consequential orders (appointment of IRP, moratorium, freezing of accounts and related directions) are vacated, CIRP proceedings are closed and the Corporate Debtor is released to function through its Board; costs/IRP fees, if any, shall be borne by the Assignee (Suraksha).

Authority of signatory to institute proceedings under section 7 - board resolution authorising officers to file CIRP applications - validity of power of attorney as authorisation - relevance of date of default vis-a -vis date of NPA - application of Section 18 of the Limitation Act to section 7 petitions - acknowledgement in writing extending limitation - admission of debt as basis for fresh limitation

Authority of signatory to institute proceedings under section 7 - board resolution authorising officers to file CIRP applications - validity of power of attorney as authorisation - Whether the petition was filed by a person duly authorised by the Financial Creditor. - HELD THAT: - The Tribunal examined the Financial Creditor's reliance on the MCA Notification dated 27.02.2019 and the Board Resolution dated 21.06.2019 which authorised officers in specified cadres to sign applications to initiate CIRP. The petition was signed and affirmed by an officer who fell within the authorised cadre. In these circumstances the presence of a separate board resolution specific to the present filing was not required and the power of attorney executed in favour of the deponent was not determinative of defect. The Tribunal therefore found the petition non-defective insofar as authorisation to file was concerned. [Paras 7, 8, 9]

Petition filed by a duly authorised person; challenge to authorisation is untenable and petition is not defective on this ground.

Relevance of date of default vis-a -vis date of NPA - Whether an alleged mismatch between the date of default and date of NPA renders the petition defective. - HELD THAT: - The Tribunal held that the Insolvency and Bankruptcy Code requires identification of the date of default and does not make the date of classification as NPA a determinative requirement for initiation of proceedings. The petition specified the date of default as 31.03.2017 (the first default in servicing interest) and that date was accepted for the purposes of the application; therefore any argument based on the 90-day NPA norm was irrelevant to the maintainability of the Section 7 petition. [Paras 9]

Mismatch between date of default and NPA classification does not render the petition defective; date of default as stated is accepted.

Application of Section 18 of the Limitation Act to section 7 petitions - acknowledgement in writing extending limitation - admission of debt as basis for fresh limitation - Whether the petition was barred by limitation or was saved by a written acknowledgement by the Corporate Debtor. - HELD THAT: - Relying on the settled principle that Section 18 of the Limitation Act applies to Section 7 proceedings, the Tribunal noted that a written acknowledgement of debt made within the original limitation period restarts the limitation clock. The Financial Creditor placed on record a letter dated 09.10.2018 addressed to the consortium leader and copied to the Financial Creditor, in which the Corporate Debtor admitted liability. That letter was within the original limitation period calculated from the accepted date of default (31.03.2017), and therefore, under Section 18 a fresh limitation period commenced from the date of that acknowledgement. The Tribunal also took into account the Supreme Court's suo motu order extending limitation during the Covid period, which further favoured maintainability. Consequently, the petition was held to be within time. [Paras 9]

Petition is within limitation; written acknowledgement dated 09.10.2018 restarts limitation under Section 18 and the petition is not time-barred.

Final Conclusion: The petition under section 7 was held to be complete and maintainable: the Financial Creditor was authorised to file the application, the date of default as pleaded was accepted (irrespective of NPA classification), and a written acknowledgement by the Corporate Debtor extended limitation; the application is admitted and CIRP against the Corporate Debtor is ordered with appointment of an Interim Resolution Professional and imposition of moratorium.

Authority of signing officer to initiate CIRP - acknowledgement of debt in balance sheet as per Section 18 of the Limitation Act - fresh period of limitation commencing on part-payment under Section 19 of the Limitation Act - establishment of debt and default for admission under Section 7 of the IBC - maintainability threshold of financial debt

Authority of signing officer to initiate CIRP - The Company Petition was filed by an authorised and competent officer of the Financial Creditor. - HELD THAT: - The petition was filed by an Assistant General Manager authorised by a letter dated 31.12.2020. The Tribunal examined the institutional powers conferred by the Chairman of the bank under Section 27 of the State Bank of India Act, 1955 and the Gazette Notification empowering officers of specified grade to sign documents. On that basis the filing and affidavits were held to have been executed by an officer competent to initiate proceedings under the IBC. [Paras 21, 22, 23]

The petition is filed by an authorised officer and the plea on lack of authority is rejected.

Acknowledgement of debt in balance sheet as per Section 18 of the Limitation Act - fresh period of limitation commencing on part-payment under Section 19 of the Limitation Act - The petition is within limitation because the Corporate Debtor made a part-payment within three years of NPA and additionally acknowledged the debt in its balance sheets for the years ending 31st March, 2018 and 31st March, 2019. - HELD THAT: - The Tribunal found that the loan account was classified NPA on 05.08.2013, but a payment by the Corporate Debtor on 06.06.2016 (credited 07.06.2016) operated to commence a fresh period of limitation under Section 19. Further, entries in the balance sheets for the years ending 31.03.2018 and 31.03.2019 constituted an acknowledgement of indebtedness within the meaning of Section 18 of the Limitation Act, thereby sustaining the claim as within time. Reliance was placed on judicial authority recognising book entries and balance-sheet acknowledgements as sufficient for extending limitation. [Paras 24, 25, 26, 31]

The challenge on limitation is rejected; the petition is within the period of limitation.

Establishment of debt and default for admission under Section 7 of the IBC - maintainability threshold of financial debt - The Financial Creditor has established existence of financial debt and default, and the amount in default exceeds the statutory threshold for initiating CIRP under Section 7. - HELD THAT: - The Tribunal considered the loan agreements, sanction letters, supplemental agreements, balance confirmations, demand notices and other documents filed with the petition. It concluded that the Corporate Debtor had availed loan facilities, had repeatedly defaulted and had admitted default in various records including balance sheets and CIBIL report. The material on record was held sufficient to demonstrate debt and default and to satisfy the monetary threshold for maintainability of the Section 7 petition. [Paras 5, 27, 28, 30, 32]

Debt and default are established and the petition is maintainable under Section 7 of the IBC.

Final Conclusion: The petition under Section 7 is admitted. Moratorium and public announcement are declared; an Interim Resolution Professional is appointed and the IRP/CoC process directed to proceed in accordance with the IBC and the timetable specified in the order.

Operational debt - refundable security deposit in lease/licence of immovable property - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - moratorium under section 14 of the IBC, 2016 - appointment of Interim Resolution Professional

Operational debt - refundable security deposit in lease/licence of immovable property - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the refundable security deposit paid by the applicant in relation to a sub-licence of immovable property qualifies as an operational debt and whether the application under Section 9 of the Code is maintainable thereby warranting admission into CIRP. - HELD THAT: - The Tribunal applied the principle laid down by the NCLAT in Vibrus Homes Pvt. Ltd. v. Ashimara Housing Pvt. Ltd., holding that an interest-free or refundable security deposit paid in respect of a lease or licence transaction concerning immovable property falls within the definition of "operational debt" under the Code. The applicant proved payment of 50% of the security deposit and made an unrebutted demand for its refund after the sub-licence could not be performed due to termination of the licence held by the corporate debtor. As the corporate debtor remained ex parte and did not contest the claim, the averments that a debt existed and remained unpaid stood unchallenged. On that basis the Tribunal concluded that the applicant qualifies as an Operational Creditor and that the petition under Section 9 was maintainable, meriting admission of the corporate debtor into the Corporate Insolvency Resolution Process. [Paras 9, 10]

The refundable security deposit qualifies as an operational debt; the Section 9 application is maintainable and is admitted, triggering CIRP.

Appointment of Interim Resolution Professional - moratorium under section 14 of the IBC, 2016 - Ancillary reliefs consequent to admission: appointment of an Interim Resolution Professional and declaration of moratorium under the Code. - HELD THAT: - Following admission, the Tribunal appointed an insolvency professional from the IBBI list as Interim Resolution Professional and directed filing of his consent and AoA. The IRP was directed to take charge, make the public announcement and call for claims as prescribed. The Tribunal declared moratorium with effect from the date of the order, restrained institution or continuation of suits, transfer or encumbrance of assets, enforcement of security interests and recovery of property occupied by the corporate debtor, and directed continuation of essential supplies as provided by the Code. Directions were also given for initial finance to the IRP and for updating the Registrar of Companies. [Paras 11, 12, 16, 17]

An IRP is appointed and moratorium under section 14 is declared; consequential directions for IRP functions, initial finance and statutory compliance are issued.

Final Conclusion: The application under Section 9 is admitted: the refundable security deposit paid for the sub-licence of immovable property is held to be an operational debt, the corporate debtor is placed under CIRP, an IRP is appointed and moratorium is declared with consequential directions for conduct of the CIRP.

Ineligibility under SVLDRS for persons making voluntary disclosure after being subjected to enquiry, investigation or audit - strict construction of exception clauses in a beneficent amnesty scheme - Section 125(1)(f) exclusion for voluntary disclosures after being subjected to enquiry, investigation or audit - Section 129(2)(c) presumption treating declaration as never made where material particulars are subsequently found false within one year of discharge certificate - disclosure obligations under SVLDRS-1 questionnaire - suppression of material facts disentitles declarant and justifies cancellation of discharge certificate

Section 125(1)(f) exclusion for voluntary disclosures after being subjected to enquiry, investigation or audit - disclosure obligations under SVLDRS-1 questionnaire - Whether the petitioner was eligible to make a 'Voluntary Disclosure' under the SVLDRS-2019 despite having been subjected to audit prior to submitting its declaration. - HELD THAT: - The Court held that Clause (f) of sub section (1) of Section 125 creates a distinct and unqualified exclusion: a person making a voluntary disclosure after having been subjected to any enquiry, investigation or audit is ineligible for the voluntary disclosure category. The SVLDRS 1 form's questionnaire (notably question 8 and its note) requires disclosure of prior enquiry/investigation/audit and states that an affirmative answer renders the declarant ineligible to proceed under the voluntary disclosure category. The scheme's exception clauses are to be construed strictly; there is no requirement that the prior enquiry/audit must have been initiated on or before 30.06.2019 for Clause (f) to operate. On the admitted facts the petitioner had been intimated of the audit on 28.11.2019 and thereafter delayed furnishing documents; the declaration submitted on 31.12.2019 therefore fell squarely within Clause (f) and the petitioner was ineligible to seek relief under the voluntary disclosure category. [Paras 38, 39, 40, 41, 42]

Petitioner's declaration was rightly held ineligible under the voluntary disclosure category and liable to be rejected.

Section 129(2)(c) presumption treating declaration as never made where material particulars are subsequently found false within one year of discharge certificate - suppression of material facts disentitles declarant and justifies cancellation of discharge certificate - Whether the authorities were justified in invoking Section 129(2)(c) to cancel the discharge certificate and reject the SVLDRS applications upon discovery that the declaration omitted material facts. - HELD THAT: - The Court found that the petitioner's failure to disclose the audit intimation of 28.11.2019 when filing the declaration constituted suppression of a material particular. Section 129(2)(c) provides that where a voluntary disclosure's material particular is subsequently found to be false within one year of the discharge certificate, the declaration shall be treated as if never made and proceedings may be instituted. Given the admitted facts and the Internal Audit Group's finding that documents were furnished only on 04.01.2021 after multiple reminders, the authority's conclusion that the discharge certificate was issued in error and its invocation of Section 129(2)(c) to cancel the SVLDRS applications was justified. [Paras 41, 42, 43, 44]

Cancellation of the discharge certificate and rejection of the SVLDRS applications under Section 129(2)(c) was justified.

Strict construction of exception clauses in a beneficent amnesty scheme - no liberal interpretation to extend benefits to expressly excluded categories - Whether the Scheme's exception clauses should be interpreted liberally in favour of the petitioner to allow relief despite exclusion under Clause (f). - HELD THAT: - While recognising the Scheme's beneficent objectives to liquidate legacy disputes, the Court emphasised that exception clauses expressly excluding certain categories are to be construed strictly and not liberally expanded to defeat legislative intent. Extending scheme benefits to those expressly excluded by Section 125 would run counter to the statutory policy. The Court therefore rejected submissions that the scheme should be given a liberal construction so as to include the petitioner. [Paras 27, 29, 30]

Exception clauses must be strictly construed; petitioner cannot be accommodated within the scheme despite its general benevolent purpose.

Natural justice and opportunity of hearing - suppression of material facts disentitles party to relief on procedural fairness ground - Whether denial of an opportunity of hearing vitiated the rejection of the petitioner's declarations or the subsequent audit proceedings, Internal Audit Report and show cause notice. - HELD THAT: - The Court acknowledged the petitioner's contention that it was not afforded a hearing but concluded that mere absence of an opportunity could not rescue a petitioner who had suppressed material facts rendering it ineligible under the scheme. Since the petitioner's omission (failure to disclose the prior audit intimation) meant it was never entitled to the scheme relief, non grant of a hearing did not provide a basis to set aside the authorities' action. Consequently, the challenge to the audit proceedings, Internal Audit Report and show cause notice failed. [Paras 6, 12, 51, 52]

Denial of hearing did not vitiate the rejection or the subsequent audit proceedings given the petitioner's suppression of material facts; the challenge to audit report and show cause notice fails.

Interpretation of FAQs is not determinative where statutory text is clear - Whether the FAQs relied upon by the petitioner (notably Q10 and Q39) supported its claim to eligibility. - HELD THAT: - The Court examined the relevant FAQs and held that they do not assist the petitioner. FAQ No.10 expressly states that a person subjected to enquiry/investigation/audit is not eligible to make a voluntary disclosure under Section 125(1)(f)(i). FAQ No.39 deals with the distinct situation of intimation received on or before 30.06.2019 and likewise answers negatively. The FAQs therefore do not alter the clear statutory exclusion contained in Clause (f). Reliance on the FAQs was therefore misplaced. [Paras 43, 44, 45, 46, 47]

FAQs do not entitle the petitioner to relief; they do not override the statutory exclusion in Clause (f).

Final Conclusion: On the admitted facts the petitioner's declaration was ineligible under Clause (f) of Section 125(1) of the Finance (No.2) Act, 2019 because an audit had been intimated before the declaration; suppression of that material fact justified invocation of Section 129(2)(c) and cancellation of the discharge certificate. The petition seeking quashing of the rejection, the audit report and show cause notice is dismissed.

Maintainability of reference to a Third Member - difference of opinion between Members - requirement of reasons for a differing view - reference framing of specific questions - remand for determination by a Third Member

Maintainability of reference to a Third Member - difference of opinion between Members - requirement of reasons for a differing view - Reference to a Third Member was maintainable notwithstanding that the two Members recorded separate orders and one Member expressed disagreement. - HELD THAT: - The Division Bench examined whether the divergence between the learned Member (Technical) and the learned Member (Judicial) justified reference to a Third Member. The Bench found that the separate orders expressly set out the points on which the Members differed and that the Division Bench had appropriately framed specific questions arising from those differences for determination by a Third Member. The Tribunal rejected the preliminary objection that the reference was not maintainable on the ground that one Member had not given reasons or that there was insufficient discussion; the cited authorities were held not to assist the Department because, on the facts of this case, the points of divergence were explicitly recorded and reduced to specific questions for resolution. [Paras 12, 13, 14]

The reference to a Third Member is maintainable and the appeal was to be listed for further hearing.

Taxability of peering arrangements - internet telecommunication service - invoice as triggering tax liability under Point of Taxation Rules - identification of service provider and service recipient - The substantive questions whether MTNL is liable to pay service tax on invoices raised on NIXI (or whether the peering arrangement is revenue-neutral and NIXI is not a service provider) were referred to a Third Member for determination. - HELD THAT: - Because the two Members recorded conflicting conclusions on (a) whether the services provided by MTNL through NIXI amounted to taxable internet telecommunication services and whether consideration existed, and (b) whether NIXI was a service provider/receiver or merely a facilitator (rendering the demand misconceived), the Division Bench framed specific alternative questions and referred those questions for decision by the Third Member. The Tribunal thus remitted the substantive controversy - including the applicability of Point of Taxation Rules and the characterisation of NIXI's role - to the Third Member for adjudication on merits. [Paras 6, 15]

The substantive taxability issues were referred to a Third Member for determination; the matter was listed for hearing.

Final Conclusion: The Division Bench rejected the preliminary objection and held the reference to a Third Member maintainable because the Members had stated distinct points of difference which were reduced to specific questions; the substantive controversy on the taxability of MTNL's peering-related invoices on NIXI was accordingly referred to the Third Member for decision and the matter was listed for further hearing.

Transmission or distribution of electricity (negative list exclusion) - bundled services (section 66F(3)) - declared service: agreeing to tolerate an act (section 66E(e)) - definition of service and consideration (section 65B(44) and explanation to section 67) - extended period of limitation under proviso to section 73(1) - suppression of facts

Declared service: agreeing to tolerate an act (section 66E(e)) - definition of service and consideration (section 65B(44) and explanation to section 67) - Taxability of penalties/liquidated damages recovered by the appellant as a declared service under section 66E(e) for the period in dispute - HELD THAT: - The Tribunal held that recovery of liquidated damages or penalties is not consideration for any activity of tolerating a default or agreeing to refrain from an act within the meaning of a declared service under section 66E(e). Section 65B(44) requires an activity carried out for another for consideration; the declared service in clause (e) therefore presupposes a flow of consideration for agreeing to tolerate or refrain. Penalties/compensation are imposed to discourage breach and do not reflect payment for toleration or for any distinct activity performed by the appellant; there is no agreement that the appellant will tolerate non-performance. The Tribunal followed earlier Division Bench authorities holding that amounts recovered as penalties/liquidated damages cannot be included as consideration for a taxable or declared service and, on that basis, set aside the demand insofar as it seeks service tax on such penalties for the period under adjudication. [Paras 21, 22, 24, 25, 26]

Demand of service tax on penalties/liquidated damages set aside as not constituting a declared service under section 66E(e).

Transmission or distribution of electricity (negative list exclusion) - wheeling and cross-subsidy charges as activities related to transmission/distribution - bundled services (section 66F(3)) - Taxability of wheeling charges and cross-subsidy surcharge collected by the appellant - HELD THAT: - The Tribunal held that wheeling is transmission using the appellant's network and that cross-subsidy charges arise under the Electricity Act and Regulations to meet transmission/distribution-related obligations. Transmission and distribution of electricity are excluded from service tax under the negative list, and ancillary activities closely connected or bundled with that principal service must be treated as part of the single service that gives the bundle its essential character. Applying the reasoning of the Gujarat High Court in Torrent Power and subsequent decisions, the Tribunal concluded that wheeling and cross-subsidy charges are in relation to transmission/distribution and are not taxable as declared services under section 66E(e). [Paras 13, 14, 27, 28, 29]

Demand of service tax on wheeling charges and cross-subsidy surcharge set aside as being related to transmission/distribution and therefore not exigible to service tax.

Transmission or distribution of electricity (negative list exclusion) - bundled services (section 66F(3)) - Taxability of supervision/incidental charges and transformer & meter testing charges collected by the appellant - HELD THAT: - The Tribunal accepted that such charges are levied in discharge of statutory and regulatory obligations connected to providing electricity service (including mandatory supervision under Indian Electricity Rules) and are bundled with the principal service of transmission/distribution. Following the reasoning in Torrent Power and subsequent Division Bench decisions, these related/ancillary charges have a direct and close nexus with transmission/distribution and must be treated as part of the exempted single service; consequently they are not subject to service tax. [Paras 11, 12, 13, 16, 30]

Demand of service tax on supervision/incidental charges and transformer & meter testing charges set aside as allied to transmission/distribution and not exigible to service tax.

Extended period of limitation under proviso to section 73(1) - suppression of facts - Correctness of invoking extended limitation (proviso to section 73(1)) for rent collected from contractors and whether suppression of facts was established - HELD THAT: - The Tribunal analysed the tests laid down by superior courts for invoking the extended period where 'suppression of facts' must be deliberate, with intent to evade tax, and comparable to fraud, collusion or willful misstatement. The Commissioner made only general assertions that the appellant willfully misstated non-leviable consideration and suppressed turnover in returns; the Department did not prove deliberate suppression with intent to evade service tax. Consequently the proviso to section 73(1) could not be invoked for the extended period. The Tribunal recorded that liability for rent collected from contractors is admitted by the appellant but limited to the normal period of limitation; the Department must compute demand only for the normal period. [Paras 36, 37, 38, 39, 40]

Invocation of extended limitation period under proviso to section 73(1) is not sustainable for lack of proof of deliberate suppression; demand upheld only for the normal period of limitation.

Final Conclusion: The impugned order dated 16.04.2019 is set aside except insofar as it confirms service tax liability for rent collected from contractors within the normal period of limitation; demands in respect of penalties/liquidated damages, wheeling charges, cross-subsidy surcharge, supervision/incidental charges and transformer/meter testing charges for the period 01.07.2012 to 30.06.2017 are not exigible to service tax and the extended period invocation is rejected.

Refund of erroneously paid excise duty - unjust enrichment - presumption under Section 12B of the Central Excise Act, 1944 - credit to Consumer Welfare Fund under Section 11B(2) of the Central Excise Act, 1944 - Cenvat/Modvat availment evidence

Refund of erroneously paid excise duty - unjust enrichment - presumption under Section 12B of the Central Excise Act, 1944 - Cenvat/Modvat availment evidence - Whether the appellant was entitled to refund of excise duty paid twice despite the departmental presumption under Section 12B, or whether the amount must be credited to the Consumer Welfare Fund - HELD THAT: - The Tribunal found it undisputed that the appellant paid excise duty twice on the same sales transaction and claimed refund. The appellant produced a Chartered Accountant's certificate stating that the incidence of duty had not been passed on and that the amount had not been realized from the buyer, together with correspondence from the buyer indicating non-availment of Modvat credit. The Revenue did not controvert the CA certificate or the material showing non-availability of Modvat. Relying on authoritative precedent that where the assessee has not recovered the duty from the buyer it cannot be held to be unjustly enriched, the Tribunal held that the departmental presumption under Section 12B could not be sustained on the record before it. Consequently the denial of refund and the order to credit the amount to the Consumer Welfare Fund were unsustainable.

Impugned orders rejecting the refund and directing credit to the Consumer Welfare Fund set aside; appeal allowed and refund entitlement restored with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, setting aside the orders denying refund and directing credit to the Consumer Welfare Fund, on the ground that the appellant had not passed on the incidence of the excess duty and the Revenue had not controverted the evidence to the contrary; consequential relief granted as per law.

Cenvat credit - capital goods - user test - accessories - amendment to the Cenvat Credit Rules of 07.07.2009 not clarificatory/retrospective - Rule 2(a)(A) of the Cenvat Credit Rules, 2004 - Rule 2(k) of the Cenvat Credit Rules, 2004 - Rule 3 of the Cenvat Credit Rules, 2004

Cenvat credit - capital goods - user test - Rule 2(a)(A) - Rule 2(k) - Entitlement to Cenvat credit on iron and steel materials used to manufacture specified capital goods and support structures for the coal washery plant. - HELD THAT: - The Tribunal examined the use of the impugned iron and steel materials which were shown to have been fabricated into hoppers, conveyors, components, accessories of crushing machines and EOT cranes and attached to foundations/structures by bolting/welding. The emergent items were held to be specified capital goods under Rule 2(a)(A) and the raw materials to be inputs under amended Rule 2(k). Applying the Supreme Court's "user test" (as followed by High Courts), and having regard to certification by a Chartered Engineer and departmental verification, the materials satisfied the requirement of being integral to and used in relation to capital goods. Consequently the appellant was entitled to avail Cenvat credit on those steel items. [Paras 6]

Credit allowed on iron and steel materials used in manufacture/installation of specified capital goods; appeal allowed on this ground.

Amendment to the Cenvat Credit Rules of 07.07.2009 not clarificatory/retrospective - Vandana Global (Larger Bench) - Validity of reliance on the Larger Bench decision in Vandana Global to disallow credit by treating the 2009 amendment as operative retrospectively. - HELD THAT: - The Commissioner(Appeals) had disallowed the credit solely by following the Larger Bench in Vandana Global. The Tribunal noted that that Larger Bench view has been set aside by subsequent High Court decisions, including the Chhattisgarh High Court which upheld the views in Mundra Ports and Thiru Arooran Sugars that the 07.07.2009 amendment cannot be treated as clarificatory or retrospective. In light of those High Court rulings, the basis for the Commissioner(Appeals)'s reliance on Vandana Global is unsustainable and cannot support disallowance of credit. [Paras 5]

Reliance on Vandana Global to disallow credit rejected; amendment held not clarificatory/retrospective and therefore not a ground to deny the appellant's credit claim.

Final Conclusion: The Tribunal set aside the Commissioner(Appeals) order, allowed the appeal, and held that the appellant is entitled to Cenvat credit on the impugned iron and steel materials used in manufacture and installation of specified capital goods; the disallowance founded solely on Vandana Global and the retrospective operation of the 2009 amendment was rejected.

Clandestine removal of excisable goods - burden of proof and requirement of positive/independent evidence to establish clandestine manufacture or removal - mens rea as pre-condition for imposition of penalty - applicability and scope of penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002 - inadmissibility of unexamined investigation statements under section 9D of the Central Excise Act - invocation of extended time-limit under section 11AC based on search records - requirement to specify the particular clause of a rule or provision in show cause notice and order when imposing penalty

Clandestine removal of excisable goods - burden of proof and requirement of positive/independent evidence to establish clandestine manufacture or removal - invocation of extended time-limit under section 11AC based on search records - Demand of duty on the ground that goods detained on 23.10.2013 were meant for clandestine removal was not sustainable. - HELD THAT: - The Tribunal found that the allegation of clandestine removal is a serious charge which must be established by sufficient and positive evidence and cannot rest on apprehension or third party statements alone. The record lacked inculpatory statements from manufacturer representatives, enquiries into procurement of raw materials, transportation records (except an uncorroborated driver's statement), dispatch particulars, realization of sale proceeds, or other positive evidence such as excess power consumption or verified input output analysis. Reliance primarily on non production of documents, third party evidence and rough notes was held insufficient to confirm clandestine manufacture or clandestine removal. Decisions of higher fora requiring detailed investigation into purchase, production, dispatch and receipts were applied, and the Tribunal held that the doubt and apprehension in the show cause notices remained uncorroborated; consequently the duty demands based on clandestine removal could not be confirmed. [Paras 12, 13, 14, 15, 16]

Duty demands founded on alleged clandestine removal are set aside.

Mens rea as pre-condition for imposition of penalty - applicability and scope of penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002 - requirement to specify the particular clause of a rule or provision in show cause notice and order when imposing penalty - inadmissibility of unexamined investigation statements under section 9D of the Central Excise Act - Penalties imposed on the manufacturers, their office bearers, non registered dealers and the transporter under Rule 25/Rule 26 were not sustainable and were set aside. - HELD THAT: - The Tribunal held that imposition of penalty requires proof of mens rea or willful misconduct. There was no evidence of intent to evade duty, no contemporaneous conduct or cash flow corroboration, and no effort to examine available computerized records. Rule 26 requires willful misconduct and knowledge that excisable goods are liable for confiscation; those ingredients were not established. Rule 25 is attracted to registered producers, manufacturers or registered dealers and prescribes specification of the relevant clause; non registered dealers fall outside its scope. The show cause notices and orders failed to specify the precise clause of the Rules allegedly contravened, a defect which is fatal to imposition of penalty. Further, the departmental reliance on unexamined statements recorded during investigation (not tested by adducing witnesses under section 9D) rendered such statements inadmissible for substantiating penalty or demand. In consequence, penalties imposed on manufacturers, their in charges/owners, non registered dealers and the truck driver were held to be beyond statutory warrant and were quashed. [Paras 19, 20, 21, 22, 23]

All penalties imposed under Rule 25/Rule 26 on the respective parties are set aside.

Final Conclusion: Both substantive points of adjudication were decided in favour of the appellants: the duty demands based on alleged clandestine removal and the penalties under Rule 25/Rule 26 were quashed; the Order in Original dated 05.06.2020 is set aside and all ten appeals are allowed.

Treatment of incidental/by product arising during manufacture - reversal of Cenvat credit on clearance of inputs or incidental products - clandestine removal versus permissible shrinkage/transit loss - availability of Cenvat credit on input services for returned goods

Treatment of incidental/by product arising during manufacture - reversal of Cenvat credit on clearance of inputs or incidental products - Liability to reverse Cenvat credit on removal of iron ore fines/iron ore concentrates generated during screening/crushing. - HELD THAT: - The Tribunal applied the reasoning of its earlier decision in CCE, Raipur vs. Nutun Ispat & Power Ltd. and held that iron ore fines/concentrates which emerge incidentally in the process of crushing/screening and cannot be put to the intended use by the manufacturer are incidental/by products and not 'inputs as such'. Where the inputs are put to use as intended and the fines are an incidental emergence cleared for consideration, Rule 3(5) of the Cenvat Credit Rules, 2004 does not require reversal of credit. The adjudicatory findings confirming recovery under Rule 3(5) were therefore set aside and the issue decided in favour of the appellant. [Paras 5, 6]

Demand for reversal of Cenvat credit on clearance of iron ore fines/iron ore concentrates set aside; issue decided for the appellant.

Clandestine removal versus permissible shrinkage/transit loss - Sustainability of demand for duty on alleged short receipt of coal (266.420 MT) asserted as clandestine removal. - HELD THAT: - The Tribunal found no allegation or evidence of clandestine removal and accepted that mere shortage in receipt does not ipso facto establish clandestine removal. Reliance was placed on industry practice and the view of the Punjab & Haryana High Court that transit loss/theft and permissible variance (industry practice) may explain short receipt. In absence of evidence of clandestine removal, the demand on account of short receipt was held unsustainable. [Paras 6]

Demand based on short receipt of coal not sustainable; issue decided for the appellant.

Availability of Cenvat credit on input services for returned goods - Legitimacy of demand for input service credit (GTA service) claimed on goods received back from customers. - HELD THAT: - The Tribunal relied on the decision of a coordinate Bench in Chitrakoot Steel & Power Pvt. Ltd. v. CCE which holds that no demand can be made for input services where finished goods are received back. Applying that precedent to the facts, the Tribunal held that the alleged wrongful availment of credit on GTA service for returned sponge iron does not sustain a demand. [Paras 6]

Demand in respect of input service credit on returned goods set aside; issue decided for the appellant.

Final Conclusion: The appeal is allowed; the demands, interest and penalty confirmed below in respect of (i) clearance of iron ore fines/iron ore concentrates, (ii) alleged short receipt of coal, and (iii) input service credit on returned goods are set aside with consequential reliefs, as recorded by the Tribunal.

Karasamadhana Scheme, 2021 - waiver of penalty and interest - applicability of scheme to reassessment orders completed on or before the cut off date - mutually exclusive and independent clauses of the Scheme - Clause No.2 of the Scheme (KVAT Act related waiver) - Clause No.3 of the Scheme (specific KVAT provisions 72(1)(a), 72(1)(b), 74(4), 72(3-B)) - Clause 5.2 - waiver where only arrears of penalty and interest exist - penalty under Section 70(2) R/w Section 39 of the KVAT Act

Clause No.2 of the Scheme (KVAT Act related waiver) - applicability of scheme to reassessment orders completed on or before the cut off date - penalty under Section 70(2) R/w Section 39 of the KVAT Act - Clause 5.2 - waiver where only arrears of penalty and interest exist - Entitlement of the petitioner to 100% waiver of penalty under the Karasamadhana Scheme, 2021 in respect of reassessment orders for AY 2015-16 and 2016-17. - HELD THAT: - The Court construed Clauses 1 to 5.2 of the Scheme as four independent, mutually exclusive categories, each operating in its own sphere. Clause No.2 applies to waiver of 100% of arrears of penalty and interest under the KVAT Act for assessments/reassessments/rectification orders already completed prior to 29.03.2021 and to be completed on or before 31.07.2021. Clause 5.2 permits waiver where a dealer has no arrears of tax but only arrears of penalty and interest in respect of assessments/reassessments completed on or before the cut off date. The petitioner's reassessment orders dated 24.09.2020 and 27.04.2021 were completed before 31.07.2021 and the petitioner had no arrears of tax but only arrears of penalty. Since the penalty sought to be levied arises under Section 70(2) R/w Section 39 of the KVAT Act and not under the specific provisions enumerated in Clause No.3, Clause No.2 (read with Clause 5.2) governs and the petitioner is entitled to the benefit of 100% waiver of penalty. The respondents' rejection of the waiver application on the ground that Section 70(2) is not listed in Clause No.3 is unsustainable because Clause No.3 addresses a separate category of specific KVAT penalties and does not displace the wider applicability of Clause No.2 to reassessments completed before the cut off date. [Paras 8, 9, 10, 11, 12]

Petitioner entitled to 100% waiver of penalty in respect of the reassessment orders for AY 2015-16 and 2016-17; impugned endorsements rejecting the applications quashed and respondents directed to allow the waiver applications.

Mutually exclusive and independent clauses of the Scheme - Karasamadhana Scheme, 2021 - Applicability of the Division Bench decision in State of Karnataka & others v. Still Tech Engineer (Karasamadhana Scheme, 2017) to the present Scheme and facts. - HELD THAT: - The Court observed that the decision under the Karasamadhana Scheme of 2017 involved different provisions and is therefore inapplicable to the 2021 Scheme and the facts of the present case. Reliance on the 2017 decision cannot justify denial of relief under the distinct provisions of the 2021 Scheme. [Paras 13]

The 2017 Scheme decision relied upon by respondents is inapplicable and does not affect petitioner's entitlement under the 2021 Scheme.

Final Conclusion: Writ petition allowed; impugned endorsements dated 28.12.2021 and 29.12.2021 quashed; respondents directed to allow the petitioner's Karasamadhana Scheme, 2021 applications and grant 100% waiver of the penalties imposed in the reassessment orders for AY 2015-16 and 2016-17.

Alternative efficacious remedy - appealability under Section 107 - seizure and auction of goods under Section 130 - interim relief pending appeal - writ jurisdiction and discretionary relief

Alternative efficacious remedy - appealability under Section 107 - writ jurisdiction and discretionary relief - Maintainability of the writ petition in view of the availability of an alternative remedy by way of appeal under Section 107. - HELD THAT: - The Court found that both impugned orders are appealable under the provision identified by the respondents and that the petitioner therefore has an alternative efficacious remedy. In these circumstances the writ petition was held liable to be dismissed since the existence of a specific statutory appeal remedy ordinarily bars exercise of writ jurisdiction. The Court nonetheless exercised its discretion to grant narrowly tailored interim protection to prevent the appeal from being rendered infructuous by imminent auction proceedings. [Paras 5]

Writ petition dismissed while liberty is reserved to the petitioner to pursue the statutory appeal remedy.

Seizure and auction of goods under Section 130 - interim relief pending appeal - Whether interim protection should be granted to restrain finalisation of the auction pending the petitioner's challenge. - HELD THAT: - Although the petition was dismissed on maintainability grounds, the Court considered the imminent auction date and the risk that the appeal could become nugatory if the goods were sold before the appellate forum could be approached. On that basis the Court issued limited interim relief restraining the respondents from opening bids and finalising the auction proceedings until a specified date, thereby protecting the petitioner's right of appeal without adjudicating the merits of the seizure or the underlying factual disputes. [Paras 5, 6]

Respondents restrained from opening bids and finalising the auction proceedings until 27th July 2022.

Final Conclusion: The writ petition is dismissed on the ground that an alternative remedy of appeal under Section 107 is available; however, limited interim protection is granted restraining the respondents from opening bids and concluding the auction until 27th July 2022, and liberty is reserved to the petitioner to challenge the impugned orders by proceeding to the appropriate appellate forum.

Definition of asset under the Wealth Tax Act (section 2(ea)) - exemption of plot not exceeding 500 sq. meters under section 5(vi) - treatment of agricultural land and urban land for wealth-tax - inclusion of property in net wealth / deletion from net wealth

Definition of asset under the Wealth Tax Act (section 2(ea)) - exemption of plot not exceeding 500 sq. meters under section 5(vi) - treatment of agricultural land and urban land for wealth-tax - inclusion of property in net wealth / deletion from net wealth - Whether the Kodaikanal and Thiruvandanthai lands are assets chargeable to wealth-tax or are exempt and therefore must be excluded from net wealth. - HELD THAT: - The Tribunal examined the material on record and the submissions. It accepted the assessee's contention that the Kodaikanal plot functioned as ancillary parking to an already let property and fell within the scope of exempted assets, and that the Thiruvandanthai land was classified in revenue records as agricultural land intended for development as an organic horticulture farm and did not fall within the definition of urban land under the Wealth Tax Act. On these findings the Tribunal concluded that both properties do not fall within the definition of "asset" under section 2(ea) of the Act and are exempt under the Act (including the exemption applicable to plots not exceeding 500 sq. meters under section 5(vi) as claimed), and therefore they should not be included in the computation of net wealth. [Paras 7]

Properties at Kodaikanal and Thiruvandanthai are not assets chargeable to wealth-tax and are to be deleted from net wealth.

Final Conclusion: The appeal is allowed: the Tribunal set aside the inclusion of the two lands in net wealth, directing that they be excluded from the wealth-tax computation as exempt properties.

Wealth escaping assessment under section 17 - Validity of reopening assessment and recording of reasons - Taxability of agricultural land subject to government acquisition - Onus on assessee to prove exemption and title

Wealth escaping assessment under section 17 - Validity of reopening assessment and recording of reasons - Whether the Assessing Officer was justified in reopening the wealth-tax assessments by issuing notice under section 17 on the belief that net wealth chargeable to tax had escaped assessment. - HELD THAT: - The Tribunal recorded that the Assessing Officer issued notices under section 17 after forming a belief that certain assets shown by the assessee had escaped assessment. The statutory scheme requires the Assessing Officer to have reason to believe that net wealth has escaped assessment and, where applicable, to record reasons before issuing notice. The authorities below found that the assessee had not furnished true particulars of wealth and that the AO's reasons for reopening were supported by the materials on record. The assessee's bare contention that some properties did not fall within the definition of assets was not supported by documentary evidence capable of displacing the AO's belief. In these circumstances the AO's action in reopening the assessments was held to be justified and the grounds attacking reopening were rejected. [Paras 5]

Reopening of the wealth-tax assessments by notice under section 17 was upheld and the ground challenging reopening was dismissed for both assessment years.

Taxability of agricultural land subject to government acquisition - Onus on assessee to prove exemption and title - Whether the land at Gopanapalli was exempt as agricultural land under acquisition and therefore not exigible to wealth-tax, and whether the assessee discharged the burden of proof in that regard. - HELD THAT: - The assessee asserted that the Gopanapalli land was agricultural and under government acquisition, and thus he had no right or title; yet he continued to show the asset in his books. The Assessing Officer noted discrepancies between the names in the acquisition notification and those stated by the assessee and found the assessee's explanations unsupported by documentary evidence. The Tribunal observed that the assessee did not produce material to counter the AO's findings or to establish that the land was not an asset liable to tax. Given the absence of corroborative evidence and the unexplained inconsistencies, the authorities below rightly rejected the plea for exemption of the land. [Paras 6]

The claim that the land was exempt as agricultural land under acquisition was rejected for both assessment years for failure of the assessee to prove title or exemption.

Final Conclusion: Delay in filing the appeals was condoned and, on merits, both appeals were dismissed; the Assessing Officer's reopening under section 17 and the additions relating to the disputed land were upheld for assessment years 2008-09 and 2009-10.

Treatment of jointly held property and beneficial ownership - characterisation of asset as land or building for wealth-tax purposes - valuation of property for wealth-tax on open market value - year-on-year appreciation in valuation - deduction of debts owed and nexus with taxable wealth - computation of interest in wealth-tax assessments

Treatment of jointly held property and beneficial ownership - characterisation of asset as land or building for wealth-tax purposes - valuation of property for wealth-tax on open market value - year-on-year appreciation in valuation - Whether the Natesan Nagar property is assessable as the assessee's wealth, its character as land or building, and the correct valuation to be adopted for assessment years. - HELD THAT: - The Tribunal affirmed the finding that, despite the property being in joint names, the assessee was the effective/beneficial owner based on his sworn statement, his claiming entire capital loss in income-tax returns and the surrounding circumstantial evidence showing co-owners were namesake holders to avoid land ceiling provisions. The plea that the asset was a building used as staff quarters was raised only at the appellate stage and was unsupported by documentary evidence; it was therefore rejected. As to valuation, the applicable rule requires valuation at the price the property would fetch in the open market. Where an actual sale price of Rs.204.50 Lacs was available (sale in AY 2006-07), the Tribunal found no merit in referring valuation to a valuation officer. However, the Tribunal considered the appellate authority's year-on-year appreciation rate of 10% to be low and directed the Assessing Officer to adopt a year-on-year appreciation rate of 20% for AYs 2001-02 to 2004-05, while dismissing the valuation change for AY 2005-06. [Paras 4]

The assessee is treated as sole/beneficial owner; the building characterisation claim rejected for lack of evidence; valuation to be recomputed by AO using 20% year-on-year appreciation for AYs 2001-02 to 2004-05, and the ground dismissed for AY 2005-06.

Deduction of debts owed and nexus with taxable wealth - Whether the assessee was entitled to deduction of the claimed debts owed in computing taxable wealth. - HELD THAT: - The Tribunal upheld the denial of deduction because the assessee failed to discharge the onus of proving the nexus between the liabilities claimed and the assets included in taxable wealth. No supporting documentary evidence establishing this nexus was produced before the assessing officer, the Commissioner (Appeals) or the Tribunal. In absence of such proof, the claim could not be allowed. [Paras 3, 5]

Denial of deduction of the claimed debts upheld for all assessment years; grounds dismissed.

Computation of interest in wealth-tax assessments - Whether the interest computed in the wealth-tax assessments was correct and how it should be dealt with. - HELD THAT: - The Tribunal did not determine the precise quantum of interest but directed that the Assessing Officer should compute the correct interest in accordance with law. The point was allowed for statistical purposes by remitting computation to the Assessing Officer. [Paras 6]

Interest computation remitted to the Assessing Officer for recomputation in accordance with law; ground allowed for statistical purpose.

Final Conclusion: All appeals were partly allowed: beneficial ownership and valuation issues were resolved in favour of the revenue except as to valuation where AO is directed to apply 20% year-on-year appreciation for AYs 2001-02 to 2004-05, denial of debt deductions was upheld for all years, and interest computation was remitted to the Assessing Officer for correct computation.

Classification of urban land versus agricultural land - exemption for agricultural land under Explanation 1 to clause (ea) of Section 2 - requirement of government/revenue records and proof of agricultural use - remand for verification from Revenue records - direction for de novo assessment with opportunity of hearing

Classification of urban land versus agricultural land - requirement of government/revenue records and proof of agricultural use - Whether the lands in question qualify as agricultural land for exemption despite being situated in urban area and whether they were used for agricultural purposes during the relevant assessment years. - HELD THAT: - The Tribunal examined the statutory definition which excludes land from being treated as urban land if it is classified as agricultural land in government records and is used for agricultural purposes. The Tribunal held that the question of classification and actual use during the relevant years was not verified by the authorities. It recorded that the lower authorities should have sought verification/report from the Revenue Authority and summoned records to ascertain whether the lands were reflected in government records as agricultural and whether they were actually used for agriculture during the relevant period. Consequently, the Tribunal remanded the matter to the Assessing Officer for verification from revenue records on both classification in government records and actual agricultural use (including whether the predecessor carried out agricultural activities), leaving determination of entitlement to the exemption to be decided after such verification and opportunity to the assessee to produce evidence. [Paras 10, 11]

Remanded to the Assessing Officer for verification from Revenue records on classification and use; issue of exemption to be decided afresh after verification and hearing.

Direction for de novo assessment with opportunity of hearing - Whether the assessment order of the Assessing Officer and the appellate order of the Commissioner of Wealth Tax (Appeals) should be maintained or set aside in view of the need for verification. - HELD THAT: - Having found that the critical factual questions about classification and use of the land were not independently verified by the authorities and that the ld.CWT(A) failed to obtain or cross-verify revenue records, the Tribunal set aside the assessment order and the appellate order and directed the Assessing Officer to pass a fresh assessment order de novo. The Tribunal mandated that the Assessing Officer grant the assessee opportunity of hearing and call for and consider relevant documents produced by the assessee while undertaking the verification from revenue records. [Paras 10, 11, 12]

Orders of the Assessing Officer and ld.CWT(A) set aside; matter remitted for de novo assessment with opportunity of hearing.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes, set aside the orders of the Assessing Officer and ld.CWT(A), and remitted the matters to the Assessing Officer for fresh adjudication to verify from revenue records whether the lands were classified as agricultural and used for agricultural purposes during A.Y. 2011-12 to A.Y. 2013-14, directing that the assessee be granted an opportunity of hearing and allowed to produce relevant documents.

Cash in hand shown in business books as part of business asset - scope of asset under Section 2(ea) of the Wealth Tax Act - cash in hand of individual versus business cash - treatment of property under construction for wealth-tax purposes - vacant urban land v. land with commenced construction

Cash in hand shown in business books as part of business asset - cash in hand of individual versus business cash - scope of asset under Section 2(ea) of the Wealth Tax Act - The cash in hand appearing in the assessee's business balance-sheet is a business asset and not includible as personal cash under Section 2(ea) for the purpose of wealth-tax. - HELD THAT: - The Tribunal examined the assessee's disclosure of substantial cash in hand in books of account maintained for his business and observed that where cash is part of the regular business funds it partakes the character of a business asset. The bench applied and followed earlier coordinate-bench decisions which held that the expression 'cash in hand' in Section 2(ea)(vi) contemplates personal cash emanating from the assessee's personal balance-sheet and does not extend to cash held as a business asset. Having regard to these precedents and the admitted fact that the impugned cash was recorded in the business accounts as cash in hand of the trade, the Tribunal concluded that the Assessing Officer erred in including that business cash as the assessee's personal asset under Section 2(ea). The Revenue's appeal on this point was therefore dismissed. [Paras 4, 5, 6, 7]

Addition of business cash-in-hand to the assessee's personal wealth under Section 2(ea) is deleted and the Revenue's appeal on this issue is dismissed.

Treatment of property under construction for wealth-tax purposes - vacant urban land v. land with commenced construction - Land on which construction has commenced is not to be treated as vacant urban land liable to wealth-tax under the schedule relied upon by the Revenue. - HELD THAT: - The Tribunal accepted the admitted fact that construction on the T. Nagar plot had begun. Relying on coordinate-bench authority, the bench explained that once construction is initiated the character of the land ceases to be that of vacant land for wealth-tax purposes even though physically it may appear vacant, and such land cannot be assessed as vacant urban land under the provisions relied upon by the Revenue. Applying that principle to the facts, the Tribunal found no merit in the Assessing Officer's valuation and inclusion of the property as a taxable urban land asset and upheld the deletion made by the CIT(A). [Paras 9, 10, 11]

Addition on account of the urban land at T. Nagar (where building construction had commenced) is deleted and the Revenue's appeal on this issue is dismissed.

Final Conclusion: Both grounds of the Revenue's appeal - inclusion of cash in hand recorded in business books as personal wealth and inclusion of land with commenced construction as taxable vacant urban land - were negatived; the Revenue's appeal is dismissed and the Cross-Objection by the assessee is rendered infructuous.

Dishonour of cheque for discharge of a legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act - Time-barred debt and legally enforceable liability - Cognizance by Magistrate and application of mind under Section 190 CrPC - Inherent powers of the High Court under Section 482 CrPC to prevent abuse of process and to quash proceedings - Acknowledgement under the Limitation Act and its bearing on time-barred liabilities

Dishonour of cheque for discharge of a legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act - Time-barred debt and legally enforceable liability - Acknowledgement under the Limitation Act and its bearing on time-barred liabilities - Whether the cheque dated 06.03.2017 was issued towards a legally enforceable debt or liability for the purposes of Section 138 NI Act, where the underlying transactions and agreements date from 2011. - HELD THAT: - The complaint's material shows that the transactions and Assured Return Agreements between the parties arose in 2011 and that whatever was due to the complainant accrued in 2011. The cheque in question, however, was issued on 06.03.2017 and was dishonoured as payment stopped by the drawer. There is no allegation or material demonstrating any acknowledgment by the petitioner (or co-accused) within the period prescribed by the Limitation Act that would revive or render the 2011 liability legally enforceable prior to issuance of the 2017 cheque. The proviso to Section 138 NI Act requires that the cheque be drawn for the discharge, in whole or in part, of a legally enforceable debt or liability. Where the underlying debt is time barred and there is no timely acknowledgement to revive it, the debt is not legally enforceable and Section 138 is not attracted. The court accepted the consistent view of Coordinate Benches and other High Courts that issuance of a cheque in respect of a time-barred liability, without requisite acknowledgement within the limitation period, does not convert the debt into a legally enforceable one for the purposes of Section 138. Applying these principles to the complaint material, the magistrate could not, on the record before it, treat the 2017 cheque as discharging a legally enforceable debt originating in 2011. [Paras 11, 16, 19]

The cheque dated 06.03.2017 was issued towards a time-barred liability arising in 2011 and, in absence of any acknowledgment within the period of limitation, did not constitute discharge of a legally enforceable debt for attracting Section 138 NI Act.

Cognizance by Magistrate and application of mind under Section 190 CrPC - Inherent powers of the High Court under Section 482 CrPC to prevent abuse of process and to quash proceedings - Whether the trial court's summoning order and taking of cognizance against the petitioner in the complaint under Section 138 NI Act could be sustained where the cheque related to a time-barred liability. - HELD THAT: - A magistrate taking cognizance must apply judicial mind to the allegations and the material accompanying the complaint to be satisfied that, if proved, they would constitute an offence. The complaint itself admitted that the liability arose in 2011 whereas the cheque was issued in 2017. Given that there was no material of acknowledgement within the limitation period to render the 2011 liability legally enforceable, the essential ingredient of Section 138 was absent on the face of the complaint. In such circumstances the continuation of proceedings would amount to abuse of process. The High Court, exercising its inherent jurisdiction under Section 482 CrPC to prevent abuse of the process of court and to secure ends of justice, was satisfied that the impugned order of summon could not be legally sustained as to the petitioner and that the complaint must be dismissed qua her. [Paras 3, 17, 18, 20, 21]

The trial court's cognizance and summons insofar as they relate to the petitioner are unsustainable; exercise of the High Court's inherent powers under Section 482 CrPC is warranted to quash the complaint and summoning order as to the petitioner.

Final Conclusion: The petition is allowed. The summoning order dated 03.06.2017 and the criminal complaint CC No.6437 of 2017 are set aside and the complaint is dismissed insofar as it concerns the petitioner, on the ground that the cheque related to a time-barred liability and Section 138 NI Act was not attracted; the petition is disposed of.

Time limit on entertaining complaint - Rule 12 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 - Director's discretion to refuse to entertain a complaint - Difficulty in securing evidence and prejudice to defence due to time lag - Procedure to be followed by Director on a complaint - Formation of prima facie opinion

Rule 12 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 - Director's discretion to refuse to entertain a complaint - Difficulty in securing evidence and prejudice to defence due to time lag - Construction and effect of Rule 12 of the 2007 Rules. - HELD THAT: - Rule 12 does not operate as an absolute bar or limitation that automatically ousts the Director of Discipline from entertaining a complaint merely because it relates to alleged misconduct older than seven years. The provision is conditional: it requires the Director to be satisfied that, by reason of the time lag or changes since the alleged commission of misconduct, there would be difficulty in securing proper evidence, or the member would find it difficult to lead evidence to defend himself, or that changes have rendered the inquiry procedurally inconvenient or difficult. The expression "is satisfied" and the permissive term "may refuse" indicate that the power is discretionary and fact-sensitive; the Director must examine and form an opinion on whether the elapsed time and attendant circumstances make a fair and practicable inquiry impossible or unduly prejudicial to the respondent. Consequently, the mere passage of seven years does not automatically mandate rejection of a complaint under Rule 12. [Paras 11, 12, 13]

Rule 12 is discretionary and not an automatic limitation; the Director must form an evaluative satisfaction before refusing to entertain a complaint made after seven years.

Time limit on entertaining complaint - Procedure to be followed by Director on a complaint - Formation of prima facie opinion - Validity of the Disciplinary Directorate's order of 22 September 2021 rejecting the Rule 12 objection without reasons and the appropriate remedial direction. - HELD THAT: - The impugned order summarily rejected the petitioner's objection under Rule 12 without recording any cogent reasons or engaging with whether the petitioner was materially handicapped in defending the complaint or whether evidence necessary for an inquiry remained available. Given Rule 12's discretionary, fact-specific character, the Director was obliged to consider and record why the time-lag objection was unfounded before calling for a final written statement on merits. The absence of any discussion or reasoned conclusion rendered the rejection unreasonable. In these circumstances the Court quashed the impugned order and remitted the matter to the Disciplinary Directorate to consider the petitioner's preliminary reply (treated as the written statement) afresh, forming and recording its reasoned view in accordance with the 2007 Rules. [Paras 10, 14, 15]

Impugned order quashed; matter remitted to Disciplinary Directorate to reconsider the Rule 12 objection afresh and record reasoned conclusions, treating the petitioner's preliminary reply as his written statement.

Final Conclusion: Writ petition allowed: the order of 22 September 2021 is quashed; Rule 12 construed as a discretionary provision requiring the Director to record satisfaction before refusing time barred complaints; the Disciplinary Directorate is directed to reconsider the petitioner's objections afresh (treating them as his written statement) and proceed in accordance with the 2007 Rules.

Arraignment of juristic person - requirement of arraigning principal offender for prosecution under Section 141 of the Negotiable Instruments Act - construction of 'company' to include firm or other association of individuals - vicarious liability of individuals associated with the company

Arraignment of juristic person - construction of 'company' to include firm or other association of individuals - requirement of arraigning principal offender for prosecution under Section 141 of the Negotiable Instruments Act - Whether a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act is vitiated for non-impleading the sole proprietary concern as an accused when the proprietor alone is sued. - HELD THAT: - The Court construed the Explanation to Section 141, holding that the statutory definition of "company" expressly includes a firm or other association of individuals, and that a "director" in relation to a firm includes a partner. Applying that statutory signification, a sole proprietary concern constitutes a juristic person falling within the scope of "company" for the purposes of Section 141. The Court relied on the principle that penal provisions must be strictly construed and on the reasoning in paragraphs 42 and 43 of Aneeta Hada v. M/s Godfather Travels and Tours Pvt. Ltd., which require that the company (i.e., the juristic principal offender) be arraigned before vicarious liability can be fastened on associated natural persons. Since the memo of parties in the complaint did not implead the sole proprietary concern M/s Thind Traders and sued only the individual proprietor, the complaint was held to be defective. The absence of impleadment of the principal juristic entity meant the prosecution could not be validly maintained against the proprietor on the touchstone of Section 141. [Paras 12, 13, 14, 15, 16]

The complaint is defective for non-impleading the sole proprietary concern as the principal offender and cannot be sustained; arraignment of the juristic entity was a condition precedent to maintain prosecution under Section 141.

Final Conclusion: Petition allowed; the complaint under Section 138 and the summoning order were quashed and set aside for failure to implead the sole proprietary concern as required under Section 141.

Legally enforceable debt requirement for Section 138 of the Negotiable Instruments Act - statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption - burden of proof beyond reasonable doubt versus preponderance of probabilities - insufficiency of proof of financial capacity of the payee - non-reply to legal notice not determinative

Legally enforceable debt requirement for Section 138 of the Negotiable Instruments Act - statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption - burden of proof beyond reasonable doubt versus preponderance of probabilities - insufficiency of proof of financial capacity of the payee - non-reply to legal notice not determinative - Whether the trial Court erred in acquitting the accused for the offence under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The cheque and admitted signature raised the statutory presumption in favour of the complainant under Sections 118 and 139 of the N.I. Act, but those presumptions are rebuttable. The accused's defence-that cheques were issued in relation to transactions with the complainant's son-in-law and not to the complainant-was supported by documents (Exs. D1, D2, D3) and created a preponderance of probability against the complainant's case. The complainant failed to establish that the cheque was issued in discharge of a legally enforceable debt: he did not specify the exact date of advancement of the alleged loan, produced no bank statements or other material to demonstrate financial capacity to advance the claimed amount, and did not examine the son-in-law whose role was central to the accused's defence. The trial Court considered oral and documentary evidence, found the defence more probable, and concluded that the complainant did not discharge the onus of proving a legally enforceable debt beyond reasonable doubt. The appellate Court finds no illegality or infirmity in that reasoning and concurs with the acquittal. [Paras 12, 13, 14, 15, 16]

The acquittal of the accused under Section 138 of the Negotiable Instruments Act is confirmed; the appeal is dismissed.

Final Conclusion: The High Court confirms the trial Court's acquittal, holding that the complainant failed to prove that the cheque was issued towards a legally enforceable debt and that the accused successfully raised a probable defence which rebutted the statutory presumption; appeal dismissed.