TaxTMI Updates e-Newsletter
Sep 17,2019

Annulment by Revisional Authority - Remand for fresh adjudication - Section 108 of Haryana Goods and Services Tax Act, 2017 - Writ rendered infructuous

Annulment by Revisional Authority - Remand for fresh adjudication - Section 108 of Haryana Goods and Services Tax Act, 2017 - Writ rendered infructuous - Petition for quashing the appellate order was disposed of as infructuous in view of intervention by the Revisional Authority under Section 108 which annulled the impugned order and remanded the matter to the Appellate Authority for adjudication on merits. - HELD THAT: - The writ petition challenged the Additional Commissioner (Appeals) order dismissing an appeal. During hearing, the State informed the Court that the Revisional Authority, exercising powers under Section 108 of Haryana Goods and Services Tax Act, 2017, had annulled the impugned order and remitted the matter to the Appellate Authority for fresh adjudication on merits. In those circumstances the challenge to the earlier appellate order ceased to have practical efficacy. The court therefore treated the petition as rendered infructuous and disposed of it accordingly, leaving the matter to be decided afresh by the Appellate Authority in accordance with the Revisional Authority's directions.

Writ petition disposed of as infructuous; Revisional Authority's annulment and remand to the Appellate Authority for adjudication on merits to be acted upon.

Final Conclusion: The petition for quashing the appellate order was disposed of as infructuous because the Revisional Authority under Section 108 annulled the impugned order and remanded the matter to the Appellate Authority for fresh adjudication on merits.

Writ jurisdiction - service tax on rent - liability of tenant to pay element of service tax - challenge to notice for deposit - withdrawal of petition with liberty to pursue alternative remedy

Writ jurisdiction - challenge to notice for deposit - Exercise of writ jurisdiction to entertain challenge to notices issued for deposit of the service-tax element contained in rent - HELD THAT: - Petitioners sought writ relief against notices issued requiring deposit of the element of service tax allegedly payable on rented commercial premises. The Court observed that, at the interlocutory stage, only notices for deposit had been issued and declined to exercise writ jurisdiction to decide the substantive dispute between landlord and tenants regarding liability to pay the element of service tax. Learned counsel for the petitioners, unable to persuade the Court to entertain the writ, sought permission to withdraw the petition so that the petitioners could pursue appropriate remedies against the notices. The Court permitted withdrawal of the writ petition and recorded liberty to the petitioners to avail of their remedy before the appropriate forum.

Writ jurisdiction not invoked; petition dismissed as withdrawn and petitioners granted liberty to pursue appropriate remedy against the deposit notices.

Final Conclusion: Writ petition dismissed as withdrawn; petitioners permitted to seek their remedy before the appropriate forum against the notices for deposit of the element of service tax.

Notice under section 274 read with section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - requirement of specific charge and application of mind - penalty under section 271(1)(c) void for vagueness - natural justice and right to know charges

Notice under section 274 read with section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - requirement of specific charge and application of mind - penalty under section 271(1)(c) void for vagueness - Penalty under section 271(1)(c) upheld by lower authorities is unsustainable because the show cause notice and the AO's recorded satisfaction did not specify which limb of section 271(1)(c) was invoked. - HELD THAT: - The Tribunal found that the notice issued under section 274 merely recited both limbs of section 271(1)(c) without specifying whether proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars, thereby rendering the notice vague and ambiguous. The AO's note of satisfaction at the time of initiating proceedings likewise failed to apply mind to identify the specific limb, indicating non application of mind. Reliance was placed on precedents holding that the assessee must be made aware of the precise grounds so as to have a fair opportunity to meet the case; a generic proforma or framing of charge without striking out irrelevant limbs offends principles of natural justice. The Tribunal also noted that no addition was in fact made in the assessment order and that penalty was imposed on an assumed addition, which is impermissible. Applying these principles, the Tribunal concluded that penalty proceedings and the consequent penalty were not sustainable. [Paras 9, 13, 14]

Penalty levied under section 271(1)(c) quashed and the appeal of the assessee allowed.

Final Conclusion: The Tribunal held that the show cause notice and AO's satisfaction were vague as they did not specify which limb of section 271(1)(c) was invoked; consequently the penalty confirmed by the CIT(A) was deleted and the assessee's appeal was allowed for AY 2011-12.

Allowability of business expenditure - nomination fee as revenue expenditure - nexus between expenditure and business - prudent business decision - precedent and judicial discipline

Nomination fee as revenue expenditure - nexus between expenditure and business - prudent business decision - precedent and judicial discipline - Deletion of disallowance of nomination fees paid by the assessee and allowance of the same as business expenditure for the assessment years 2013-14 and 2014-15. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) order deleting the Assessing Officer's disallowance of nomination fees. The facts recorded - existence of arrangements by which non-resident retail clients nominated the assessee as preferred/sole hanger supplier to garment vendors, the assessee's substantial investment in specialised tools to meet those clients' specifications, and the procurement of additional business thereby avoiding competition - establish a direct nexus between the nomination fees and the assessee's business. The Tribunal rejected the Revenue's objection that the expenditure was unnecessary or lacked nexus, observing that Revenue authorities must not substitute their judgment for commercial decisions of a prudent businessman. The Tribunal applied the ratio of the Hon'ble Supreme Court in SA Builders (as cited) and followed this Tribunal's earlier decision in ITA Nos.3432 & 3433/Chny/2016 dated 18.05.2018 on identical facts; in the absence of any change in law or facts, judicial discipline required following that precedent and sustaining the allowance of the nomination fees. [Paras 7, 9]

The disallowance of nomination fees was deleted and the nomination fees were allowed as deductible business expenditure for AYs 2013-14 and 2014-15.

Final Conclusion: The Revenue appeals for AYs 2013-14 and 2014-15 are dismissed and the assessee's cross objection is rendered infructuous; the Tribunal confirmed the allowance of nomination fees as business expenditure on the stated facts and by following earlier precedent.

Charitable purpose - proviso to Section 2(15) read down in the context of Section 10(23C)(iv) - application of income for charitable purposes - depreciation notwithstanding prior application of capital funds under Section 11(1)(a) - accrual and taxability of income disputed between parties

Charitable purpose - proviso to Section 2(15) read down in the context of Section 10(23C)(iv) - Whether the assessee qualifies for exemption under section 10(23C)(iv)/sections 11&12 notwithstanding the proviso to section 2(15). - HELD THAT: - The Tribunal upheld the CIT(A)'s reliance on the Delhi High Court's decision in the assessee's own case, which held that the proviso to Section 2(15) must be read down in the context of Section 10(23C)(iv). The proviso excludes activities that are in the nature of trade, commerce or business where the dominant and prime objective is profit-making; conversely, where the institution is not profit-driven but seeks to advance objects of general public utility, it retains charitable character. Applying that principle to the facts, the Tribunal found no basis to deny exemption and affirmed the CIT(A)'s conclusion that the assessee is entitled to the exemption claimed. [Paras 8]

Determined against the Revenue; the assessee qualifies for exemption as held by the CIT(A).

Depreciation notwithstanding prior application of capital funds under Section 11(1)(a) - application of income for charitable purposes - Whether depreciation can be allowed when capital expenditure had earlier been treated as application of funds by the assessee. - HELD THAT: - Following the Delhi High Court's precedent in the assessee's own case, the Tribunal accepted the view that computation of income is separate from application of income for charitable purposes. Section 11(1)(a) requires application of income but is not a computation provision to alter tax computation principles; consequently allowance of depreciation under the Act is not precluded merely because capital funds were treated as applied. The CIT(A)'s allowance of depreciation was thus sustained as consistent with settled judicial interpretation. [Paras 11]

Determined against the Revenue; depreciation allowed and disallowance deleted.

Accrual and taxability of income disputed between parties - Whether notional space-rent disclosed in notes to accounts is taxable where ownership/possession and entitlement to rent are disputed. - HELD THAT: - The Tribunal agreed with the CIT(A) that when entitlement to receive rent is uncertain because of an ongoing dispute between government departments and the assessee over ownership/possession, the notional entries do not constitute accrued income for tax purposes. The assessee produced documents evidencing the dispute and there was no material before the Revenue showing resolution in its favour. Accordingly, the addition based on disputed space-rent was unsustainable and rightly deleted by the CIT(A). [Paras 14]

Determined against the Revenue; additions on account of disputed space-rent deleted.

Final Conclusion: All appeals filed by the Revenue are dismissed; the Tribunal affirms the CIT(A)'s findings that the assessee is entitled to exemption, depreciation was correctly allowed, and additions on account of disputed space-rent are not sustainable.

Business income versus capital gains - Period of holding as indicia of trading or investment - Frequency and volume of transactions as indicia of trade - Presumption where assessee's business is trading in shares - Burden on assessee to prove transactions were investments - Application of judicially recognised factors to classify share transactions

Business income versus capital gains - Period of holding as indicia of trading or investment - Frequency and volume of transactions as indicia of trade - Presumption where assessee's business is trading in shares - Burden on assessee to prove transactions were investments - Income arising from sale of shares for AYs 2014-15 and 2015-16 is assessable as business income and not as capital gains. - HELD THAT: - The Tribunal applied the factors articulated in the cited authority, treating intention at purchase, volume and frequency of transactions, period of holding, manner of accounting treatment and the assessee's existing business activity in shares as determinative. The Assessing Officer found that the assessee transacted in some 22-23 scripts in the relevant years, sold shares within a few days of purchase, did not hold any share for more than three months, and had not credited most shares to the demat account. The assessee declared only a small amount of dividend and had treated certain transactions as business (intraday) in the books. Where the assessee is engaged in trading in shares, a presumption arises that amounts claimed arise from trade and the onus lies on the assessee to prove that particular transactions were bona fide investments. The assessee did not place material before the authorities to rebut that presumption or to establish that the sales proceeded from investments. Applying the established indicia, the Tribunal found the lower authorities' conclusion-reclassifying the receipts as business income-to be justified and lawful.

Appeals dismissed; income from sale of shares held to be business income for the stated assessment years.

Final Conclusion: The Tribunal dismissed the appeals and upheld the reclassification of income from sale of shares as business income for AYs 2014-15 and 2015-16, applying the recognised factors and noting the assessee failed to rebut the presumption of trading.

Deduction under section 54F for investment in a new residential house despite delayed registration and possession - Part performance and transfer under section 2(47) read with section 53A of the Transfer of Property Act - Liberal construction of a beneficial provision to effectuate legislative intent - Precedent: CIT & Another v. Sambandam Udaykumar

Deduction under section 54F for investment in a new residential house despite delayed registration and possession - Part performance and transfer under section 2(47) read with section 53A of the Transfer of Property Act - Liberal construction of a beneficial provision to effectuate legislative intent - Whether the assessee is entitled to deduction under section 54F where the capital gain consideration was paid on 30.06.2012 but the registered sale deed and possession were effected only on 24.06.2016. - HELD THAT: - The Tribunal examined the factual finding that the assessee paid Rs.1 crore by way of advance on 30.06.2012 towards purchase of a residential house, while the registered sale deed and possession were executed on 24.06.2016, beyond the time limit prescribed by section 54F. The AO and the CIT(A) rejected the claim on the ground that transfer/purchase was completed only on registration and possession in 2016 and that there was no part performance (possession) under section 53A. The Tribunal considered the Karnataka High Court decision in CIT & Another v. Sambandam Udaykumar, which held that section 54F is a beneficial provision to be construed liberally and that where the capital gain has been invested in purchasing or constructing a residential house, mere incompleteness of formalities (such as non-registration or incomplete construction) within the stipulated period should not disentitle the assessee if the investment has in substance been made. Applying that principle to the admitted facts (payment of consideration on 30.06.2012 and receipt of capital gains on 19.09.2011), and noting there was no dispute about these factual aspects in the assessment record, the Tribunal respectfully followed the Karnataka High Court ruling and held that the assessee had invested the sale consideration in the new residential house within the relevant period for the purposes of section 54F. Consequently the deduction claimed was allowable. [Paras 6, 7]

Deduction under section 54F allowed to the extent of the claimed amount; disallowance deleted and appeal allowed.

Final Conclusion: Following the Karnataka High Court precedent in Sambandam Udaykumar and on the admitted factual finding that the sale consideration was paid on 30.06.2012, the Tribunal allowed the deduction under section 54F and set aside the disallowance made by the assessing officer.

Comparability - arm's length price - transactional net margin method (TNMM) - functions, assets and risks (FAR) analysis - service revenue filter - segmental reporting - working capital adjustment - functional dissimilarity

Service revenue filter - comparability - functional dissimilarity - Exclusion of Acropetal Technologies Ltd (segment-IT services) from the list of comparables - HELD THAT: - Tribunal examined the annual report and found Acropetal derived only part of its income from the software development service segment (software segment revenue was significantly less than total operating revenue), failing the more-than-75% service revenue filter applied for comparability. The Tribunal accepted that the company operates across multiple segments and provides end-to-end solutions that differ functionally from the assessee's captive contract service model and therefore does not satisfy the service-income criterion for comparability. [Paras 5]

Acropetal Technologies Ltd directed to be excluded from the final list of comparables.

Service revenue filter - segmental reporting - comparability - Exclusion of E-Infochips Ltd from the list of comparables - HELD THAT: - Tribunal relied on earlier coordinate-bench decisions and the record showing absence of necessary segmental information and fluctuations affecting profits and turnover; it was held that E-Infochips did not satisfactorily meet the service-income/segmental transparency requirements and therefore is functionally dissimilar for purposes of the TNMM comparability analysis. [Paras 6]

E-Infochips Ltd directed to be excluded from the final list of comparables.

Segmental reporting - diversified activities - comparability - Exclusion of ICRA Techno Analytics Ltd from the list of comparables - HELD THAT: - Annual report and accounts show revenues aggregated across multiple services (software development, consultancy, web hosting, business analytics, BPO) without bifurcation by segment; Tribunal held the company is engaged in diversified activities and lacks the segmental disclosure necessary to establish one-to-one functional similarity with the assessee's captive software development services, warranting exclusion. [Paras 7]

ICRA Techno Analytics Ltd directed to be excluded from the final list of comparables.

Functional dissimilarity - intangibles and brand value - comparability - Exclusion of Infosys Ltd from the list of comparables - HELD THAT: - Tribunal noted Infosys's diversified services across the full software lifecycle, large scale, significant R&D and intangible/brand elements which distinguish it from a small captive contract service provider. Relying on precedent that entities with brand value and proprietary intangibles are not suitable comparables for captive service providers, the Tribunal found Infosys functionally dissimilar. [Paras 8]

Infosys Ltd directed to be excluded from the final list of comparables.

Product versus service distinction - segmental reporting - comparability - Exclusion of Persistent Systems Ltd from the list of comparables - HELD THAT: - Annual report demonstrates Persistent earns from both software products (licensing, royalties) and services without separate segmental disclosure; Tribunal concluded the company's mix of product and service activities and lack of distinct segmental reporting render it functionally dissimilar to the assessee's captive service-only operations and unsuitable as a comparable. [Paras 9]

Persistent Systems Ltd directed to be excluded from the final list of comparables.

Ownership of intellectual property - product and service mix - comparability - Exclusion of Sasken Communication Technologies Ltd from the list of comparables - HELD THAT: - Tribunal observed Sasken's reporting shows multiple segments (software services, software products, network engineering services, etc.), ownership of patents/intellectual property and revenue from product licensing/royalties; these attributes and the product-service mix mean its functions, assets and risks differ materially from the assessee's limited captive services performed under AE supervision, justifying exclusion. [Paras 10]

Sasken Communication Technologies Ltd directed to be excluded from the final list of comparables.

Product design versus software development services - segmental reporting - comparability - Exclusion of Tata Elxsi Ltd (segmental) from the list of comparables - HELD THAT: - Tribunal found Tata Elxsi predominantly engaged in niche product design and development services with segmental characteristics different from the assessee's software development services; reliance on earlier coordinate-bench reasoning led to the conclusion that Tata Elxsi is not functionally comparable to the captive service provider. [Paras 11]

Tata Elxsi Ltd (segmental) directed to be excluded from the final list of comparables.

Working capital adjustment - verification - inclusion of comparables - Retention (inclusion) of FCS Software Solutions Ltd in the final list of comparables - HELD THAT: - FCS was initially rejected by the TPO due to computation issues arising from use of consolidated statements and disputed adjustments; the CIT(A) had directed the TPO to verify the assessee's computations. On review the Tribunal observed no reason to overturn the CIT(A)'s direction and therefore retained FCS in the final list, leaving verification of the computations to the TPO as directed by the appellate authority. [Paras 14]

FCS Software Solutions Ltd retained in the final list of comparables; TPO to verify computation as directed by CIT(A).

Final Conclusion: The Tribunal allowed the assessee's objections in respect of Acropetal Technologies Ltd, E-Infochips Ltd, ICRA Techno Analytics Ltd, Infosys Ltd, Persistent Systems Ltd, Sasken Communication Technologies Ltd and Tata Elxsi Ltd by directing their exclusion from the TPO's comparable set for AY 2011-12, and partly allowed the grounds relating to proposed inclusions by retaining FCS Software Solutions Ltd in the final set subject to verification of computations as ordered by CIT(A).

Manufacture - deduction under section 80IB - transformation into a new and distinct article - repacking and cleaning not amounting to manufacture - application of section 2(29BA) definition of manufacture

Manufacture - deduction under section 80IB - repacking and cleaning not amounting to manufacture - application of section 2(29BA) definition of manufacture - Whether profit on sales of ghee and skimmed milk purchased from market and repacked after cleaning qualifies as profit from manufacturing eligible for deduction under section 80IB. - HELD THAT: - The Tribunal applied the settled tests of 'manufacture' framed by the Supreme Court and the statutory definition introduced by section 2(29BA) w.e.f. 01.04.2009, which requires transformation into a new and distinct object having a different name, character or use or a different chemical composition or integral structure. The material on record (auditor's quantitative schedules and assessment working) showed separate purchases and sales of ghee and skimmed milk; the assessee's case rested on removal of moisture/guthla, repacking and an unproved assertion that chemicals/essence were added. The assessee failed to furnish particulars of any chemical/essence addition or a separate production process for goods purchased from the market despite repeated opportunities. The input (purchased ghee and SMP) and the output (sold ghee and SMP) remained the same in identity and use, differing only in degree of cleaning and packaging. Reliance on precedents where addition of material produced a distinct product (e.g., perfumed oil) was not factually comparable. Authorities were cited where mere cleaning, drying, separation or packing did not amount to manufacture. Applying section 2(29BA) and the authorities, the Tribunal held that the processes undertaken did not effect the requisite transformation into a new and distinct article; consequently the profit on such sales could not be treated as profit from manufacture for the purpose of section 80IB. [Paras 7, 8, 9]

The Tribunal confirms the CIT(A)'s and AO's finding that repacking/cleaning of purchased ghee and skimmed milk does not amount to manufacture; profit on such trading sales is not eligible for deduction under section 80IB.

Final Conclusion: The appeal is dismissed. The orders of the AO and the CIT(A) disallowing the net profit from trading sales of ghee and skimmed milk for computing deduction under section 80IB are upheld.

Block assessment under section 158BC(c) - scope of Section 40A(3) in block assessments - treatment of unexplained investment in block assessment - principle against double addition - interest for delayed filing under section 158BFA(1) - non-levy of surcharge for searches prior to 01.06.2002

Scope of Section 40A(3) in block assessments - block assessment under section 158BC(c) - Disallowance under Section 40A(3) cannot be made in a block assessment framed under Section 158BC(c). - HELD THAT: - The Tribunal held that additions under Section 158BC(c) in block proceedings must be based on documents found during search and that the machinery provision in Section 40A(3) lies outside the ambit of block assessment under Section 158BC(c). Applying the precedent of the Bench in ACIT v. Rushiraj Builders and reading the cheque and cash entries as a whole does not convert the entire transaction into a Section 40A(3) disallowance in block assessment. On this basis the Tribunal deleted the disallowance of Rs. 10,30,500 for AY 1996-97 and Rs. 80,000 for AY 1997-98 which had been sustained by the lower authorities. [Paras 11]

Disallowance made u/s 40A(3) in block assessment deleted.

Treatment of unexplained investment in block assessment - principle against double addition - Addition of the same unexplained investment cannot be made in the hands of the partnership firm once it has been made in the hands of another person (Shri Subash G. Pingale); accordingly the addition in the hands of the firm is deleted. - HELD THAT: - The Tribunal noted that the partnership comprised young partners (about 20 years old, students) and the Assessing Officer had recorded that the funds were provided by Shri Subash G. Pingale. An addition on merits had been made in Subash G. Pingale's assessment for undisclosed investment. Having regard to the admitted position and the lack of source of income of the partners, the Tribunal held that it would be inappropriate to make the same addition again in the hands of the partnership firm. Consequently the Tribunal reversed the findings of the authorities below and allowed the assessee's ground challenging the unexplained investment addition of Rs. 55,52,500. [Paras 17]

Addition of Rs. 55,52,500 made in the hands of the partnership firm deleted.

Interest for delayed filing under section 158BFA(1) - Interest levied under Section 158BFA(1) for delayed filing of the block return remitted to the Assessing Officer for recomputation in accordance with Tribunal directions. - HELD THAT: - The Tribunal observed that the assessee's delay was attributable to non-supply of photocopies by the Assessing Officer and that the point was covered by a prior bench decision in ACIT v. Mr. Amod Subhash Pingale. Following that parity of reasoning, the Tribunal directed the AO to recompute the interest, if any, leviable, and remitted the matter to the file of the AO for fresh computation in accordance with the directions given. [Paras 19]

Interest under Section 158BFA(1) to be recomputed by the AO as directed by the Tribunal.

Non-levy of surcharge for searches prior to 01.06.2002 - Surcharge is not leviable in respect of additions arising from a search conducted prior to 01.06.2002. - HELD THAT: - Relying on the Tribunal's reasoning in the related matter of Mr. Amod Subhash Pingale, the Bench held that surcharge should not be levied where the search related to a period before 01.06.2002. Applying that principle to the present facts, the Tribunal set aside the levy of surcharge confirmed by the lower authorities. [Paras 20]

Levy of surcharge deleted.

Final Conclusion: The assessee's appeal is allowed: disallowance under Section 40A(3) in the block assessment deleted; addition of Rs. 55,52,500 in the firm's hands deleted as already made in another's hands; interest under Section 158BFA(1) remitted to the AO for recomputation; surcharge set aside. The Revenue's appeal was withdrawn and dismissed as withdrawn.

Application of gross profit rate to unaccounted sales - telescoping / peak credit theory - reliability of books of account and corroboration of cash books - admission recorded during search (statement under section 132(4)) and its evidentiary value - chargeability in the relevant assessment year - corroboration requirement for admissions made during search

Application of gross profit rate to unaccounted sales - reliability of books of account and corroboration of cash books - telescoping / peak credit theory - Whether the addition of Rs. 31,66,463 treated as suppression of sales should be restricted to the gross profit component of Rs. 2,86,881 by applying the gross profit rate - HELD THAT: - The CIT(A) applied the gross profit rate of 9.06% (the gross profit rate disclosed in the assessee's books for the relevant year) to the unrecorded sales of Rs. 31,66,463 and restricted the addition to the profit component of Rs. 2,86,881. The tribunal noted that the AO had concluded that both purchases and sales were unrecorded, so taxing the entire unrecorded sales was not justified where indirect expenses attributable to such unrecorded transactions had already been claimed in the profit and loss account. The tribunal also recorded that the assessee failed to establish that indirect expenses for the unrecorded transactions were not already included in the P&L account. Further, the assessee's cash book and supporting vouchers were found unreliable and not corroborated by proper bills, vouchers or invoices. In these circumstances the tribunal upheld the approach of restricting the addition to the gross profit component and confirmed the CIT(A)'s partial relief.

Addition confirmed but restricted to the gross profit component of Rs. 2,86,881.

Admission recorded during search (statement under section 132(4)) and its evidentiary value - corroboration requirement for admissions made during search - chargeability in the relevant assessment year - Whether the gross profit component of Rs. 2,86,881 is included in the Rs. 20 lakhs seized at the airport and hence should not be taxed in assessment year 2013-2014 to avoid double taxation with assessment year 2014-2015 - HELD THAT: - The assessee contended that the Rs. 2,86,881 formed part of the Rs. 20 lakhs cash seized on 7.11.2013 (subject of proceedings in AY 2014-2015) and that double taxation should be avoided. The tribunal examined the findings of the lower authorities and the CIT(A), which recorded that the disputed profit component was earned in the assessment year 2013-2014. The tribunal relied on the statutory scheme embodied in the charging and scope provisions (Sections 4 and 5 reproduced in the order) and held that income must be charged in the assessment year in which it accrues or is received. The assessee did not dispute that the income related to AY 2013-2014, nor had he established that the profit component was included in the separate seizure matter for AY 2014-2015. Consequently, the claim that the amount formed part of the seized cash and should be taxed in the subsequent year was rejected.

Claim of double taxation rejected; Rs. 2,86,881 rightly taxed in assessment year 2013-2014.

Final Conclusion: The tribunal dismissed the assessee's appeal. The AO's addition for unrecorded transactions was sustained subject to reduction to the gross profit component of Rs. 2,86,881 as held by the CIT(A), and the contention that that amount formed part of the cash seized in a subsequent assessment year was rejected; taxability in AY 2013-2014 is upheld.

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - Full disclosure of facts material to computation of income - Debatable legal view / bona fide explanation - Levy of penalty where two opinions are possible

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - Full disclosure of facts material to computation of income - Debatable legal view / bona fide explanation - Penalty levied under section 271(1)(c) in respect of disallowance of forfeited security deposit is not sustainable because Explanation 1 is not attracted where the assessee made a bona fide explanation and disclosed all facts material to computation of income and the question was debatable. - HELD THAT: - The Tribunal found that the assessee had offered an explanation for treating the forfeiture of security deposit as revenue expenditure and substantiated that explanation during assessment proceedings; the Assessing Officer did not find the explanation to be false. The requirement in Explanation 1-that the assessee offers an explanation which is false or which he is unable to substantiate and fails to prove that the explanation is bona fide and that all facts material to computation of income have been disclosed-was therefore not met. The Tribunal observed that the issue involved the characterization of the expenditure (revenue v. capital) on which two reasonable opinions exist, and accordingly relied on precedents holding that where the question is debatable and facts are disclosed, penalty cannot be imposed. Following decisions to that effect, the Tribunal held Explanation 1 not attracted and set aside the findings of the lower authorities which sustained the penalty. [Paras 7]

Penalty under section 271(1)(c) cancelled and the grounds of appeal allowed.

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) is cancelled as Explanation 1 is not attracted where the assessee made a bona fide, substantiated disclosure and the issue was debatable.

Re-opening of assessment under section 147 read with notice under section 148 - full and true disclosure of material facts - change of opinion doctrine - assessment completed under section 143(3) - prohibition on reassessment in respect of matters subject matter of appeal under the provisos to section 147

Re-opening of assessment under section 147 read with notice under section 148 - full and true disclosure of material facts - change of opinion doctrine - assessment completed under section 143(3) - precedents on validity of reassessment when original assessment considered the issue - Validity of reassessment proceedings initiated by notice under section 148 and re-opening under section 147 for AY. 2006-07 and AY. 2007-08. - HELD THAT: - The Tribunal held that the assessee (a nationalised bank) had disclosed complete particulars and the matter giving rise to the proposed reassessment was available on record when the original assessment was completed under section 143(3). The reassessment was initiated after more than four years and was founded on material already available to the Assessing Officer, effectively amounting to a change of opinion. The Tribunal applied settled principles and precedents establishing that where material facts were fully and truly placed before the AO and the AO had formed an opinion in the original assessment, reopening on the same basis is impermissible. Reliance was placed on authorities which indicate that reassessment cannot be used as a review when the original order shows the issue was considered and decided. In these circumstances the initiation of reassessment was held to be bad in law and without jurisdiction; consequential or substantive grounds raised thereafter became academic.

Re-opening of assessment for AY. 2006-07 and AY. 2007-08 by notice under section 148 and proceedings under section 147 are quashed as being based on change of opinion where the assessee had made full and true disclosure.

Final Conclusion: The Tribunal set aside the Commissioner(Appeals)'s confirmation of reassessment and quashed the reassessment proceedings for AY. 2006-07 and AY. 2007-08; the assessee's appeals are partly allowed and the Revenue's cross-appeals are dismissed.

Addition under Section 68 for unexplained cash credits - disallowance of depreciation where investment in building is unexplained / alleged bogus expenditure - addition under Section 41(1) on cessation or remission of trading liability - entitlement to depreciation on proof of ownership and business use - As per HC [2017 (8) TMI 1442 - RAJASTHAN HIGH COURT] Tribunal's deletions of additions and/or allowance of depreciation are upheld on the legal principles applied and precedents cited, and no substantial question of law arises warranting interference.

HELD THAT:- SLP dismissed on the ground of low tax effect.

Reopening of assessment u/s 147 - invalid notice - contention of assessee is that the notice was not issued with the prior sanction of the Joint Commissioner, but sanction was accorded by the Additional Commissioner therefore, notice u/s 148 issued by the A.O. was without jurisdiction - Section 2 of the Act is Definitions Section. Clause (28C) of Section 2 of the Act defines the word “Joint Commissioner” and explains it means a person appointed to be a Joint Commissioner of Income Tax or an Additional Commissioner of Income Tax under sub-section (1) of Section 117 - HELD THAT:- SLP dismissed.

Warrant of Authorization under section 132A(1) - subjective satisfaction for seizure of undisclosed income - distinction between "has not been" and "would not have been" disclosure - judicial review of administrative satisfaction - procedure under section 132B for verification

Warrant of Authorization under section 132A(1) - subjective satisfaction for seizure of undisclosed income - judicial review of administrative satisfaction - Validity of the Warrant of Authorization issued under section 132A(1) and whether the satisfaction recorded was vitiated by vagueness or lack of material. - HELD THAT: - The Court applied the settled principle that when the exercise of power in issuing a Warrant of Authorization is challenged, the issuing officer must satisfy the Court as to the regularity and bona fides of the action; however, an error of judgment by the officer does not itself vitiate the exercise of statutory power if the authority entertained the requisite belief for reasons recorded. The record established that cash of Rs. 2.45 crore was seized and that ownership of the cash by the petitioner was not in dispute; inquiries and statements indicated conflicting explanations by the petitioner about sources and withdrawals. The Court examined the original file and was satisfied that the satisfaction for issuance of the warrant had been recorded based on cogent materials; the matter remained under investigation and the procedure under section 132B was available to clarify the position. The Court found no lack of clarity in the warrant concerning whether the cash was income "has not been" disclosed or "would not have been" disclosed, and distinguished the relied-upon precedent on its facts. The review application did not demonstrate a palpable or apparent error on the face of the record warranting interference. [Paras 4, 6, 7, 8]

The Warrant of Authorization under section 132A(1) was held valid; the satisfaction recorded was not vitiated and the challenge failed.

Final Conclusion: The review application is rejected; the judgment and order dated 27/08/2019 stand affirmed and the petitioner may seek remedy before the Hon'ble Supreme Court if so advised.

Registration under Section 12AA and entitlement to exemption - absence of dissolution clause and disbursement of assets on dissolution - object of the trust as the determinative factor for conferring registration - remedy by civil courts under Sections 91-92 CPC for protection of trust property - Section 115(TD)(c) - fiscal consequence for failure to transfer assets on dissolution

Registration under Section 12AA and entitlement to exemption - absence of dissolution clause and disbursement of assets on dissolution - object of the trust as the determinative factor for conferring registration - Whether absence of any provision in the trust deed for disposition of assets on dissolution justified denial of registration under Section 12AA. - HELD THAT: - The Court held that the determinative factor for conferring registration under Section 12AA is whether the objects of the society are charitable or religious and whether its activities are genuine. The CIT (Exemption) had denied registration solely because the trust deed did not provide for distribution of assets in the event of dissolution. The Court treated the absence of a dissolution clause as relating to an uncertain future eventuality which, by itself, cannot defeat registration when the objects and activities are otherwise genuine. The Court noted that protection of trust property on dissolution can be pursued by interested parties (including the Revenue) through civil remedies; thus, lack of a dissolution clause is not a valid ground to refuse registration under Section 12AA. The ITAT's reasoning that registration is an enabling provision and that substantive entitlement to exemptions remains subject to requirements such as Section 13 was approved.

Order of denial of registration was set aside; registration under Section 12AA directed to be granted.

Section 115(TD)(c) - fiscal consequence for failure to transfer assets on dissolution - remedy by civil courts under Sections 91-92 CPC for protection of trust property - Whether the same conclusion applies in the second appeal having regard to the statutory provision introduced by Section 115(TD)(c). - HELD THAT: - The Court observed that the legal proposition decided in the principal appeal applies equally to the second appeal. It further noted that Section 115(TD)(c), brought into force w.e.f. 1 June 2016, addresses the fiscal consequence where a registered trust fails to transfer assets on dissolution to specified eligible institutions within the prescribed period. Having regard to the preceding conclusion that absence of a dissolution clause does not preclude registration, and that statutory tax consequences for failure to transfer assets are provided by Section 115(TD)(c), the appeal lacked merit.

Second appeal dismissed; question answered in favour of the assessee and against the Revenue.

Final Conclusion: Both appeals were dismissed: the Court directed grant of registration under Section 12AA despite absence of a dissolution clause in the trust deed, noting that the objects and genuine activities govern entitlement to registration and that civil remedies and statutory tax consequences (Section 115(TD)(c)) address concerns about disposition of assets on dissolution.

Summary order. Delay in filing the court fee and delay in filing the affidavit of valuation are condoned; both applications are disposed of.

Post clearance audit under Section 17(6) - reassessment and speaking order requirement - self assessment regime and reassessment - competence of Commissioner (Appeals) to decide on merits - remand for decision on merits

Post clearance audit under Section 17(6) - reassessment and speaking order requirement - self assessment regime and reassessment - Whether Section 17(6) post clearance audit was invocable where the departmental enhancement of value amounted to reassessment and goods were cleared on payment of duty - HELD THAT: - The Tribunal examined the statutory import of Section 17(6) and concluded that the provision contemplates post clearance audit where reassessment has not been done or a speaking order on reassessment has not been passed. The record indicated a change in the value and that duty was paid by the importer and goods were cleared, but it was not clear whether the importer had accepted the loading in writing or paid under protest. The factual matrix suggested that the department had increased the value (a reassessment) without following the reassessment procedure. In such circumstances invoking post clearance audit would be inappropriate and could lead to an absurd result of auditing an assessment that had effectively been revisited by the department. Consequently, the direction to resort to audit under Section 17(6) was held to be inapplicable to the facts and legally unsustainable. [Paras 4, 5, 6]

Section 17(6) was not applicable to the circumstances; directing audit was erroneous and unsustainable.

Competence of Commissioner (Appeals) to decide on merits - remand for decision on merits - Whether the Commissioner (Appeals) erred in remanding the matter to the assessing officer for audit instead of deciding the appeal on merits - HELD THAT: - Given that an appeal had been filed by the importer against the enhanced value, and because the record did not support application of Section 17(6), the Tribunal found that the Commissioner (Appeals) should have adjudicated the dispute on merits rather than directing the assessing officer to undertake a post clearance audit. The Tribunal accepted the department's contention that directing an audit in these circumstances would produce an absurdity by effectively permitting audit of an entry that had been reassessed. For these reasons the Tribunal held that the Commissioner (Appeals) erred in issuing the direction for audit and that the proper course was to decide the matter on merits. [Paras 6, 7]

Impugned direction for audit was erroneous; matter remitted to Commissioner (Appeals) with direction to decide the appeal on merits.

Final Conclusion: Appeal allowed in part; the impugned order is set aside insofar as it directs post clearance audit under Section 17(6), and the matter is remanded to the Commissioner (Appeals) to decide the value dispute on merits.

Possession in liquidation - vacation of leased premises on liquidation - adjustment of refundable security against arrears - payment of outstanding rent and utility charges - disposal of writ petition as infructuous

Possession in liquidation - vacation of leased premises on liquidation - Whether the petitioner was required to vacate and hand over physical possession to the Liquidator and whether that requirement was complied with. - HELD THAT: - The petitioner had been occupying leased premises of the landlord who entered liquidation. The NCLT had declined a further extension to remain in possession. The petitioner vacated the premises and handed over physical possession to the Liquidator on 30.6.2019. The Court recorded that the petitioner had conceded vacation and that the remaining dispute related only to payment of arrears. Having received the surrender of possession, the principal controversy regarding continuation in occupation became academic.

Petitioner vacated and handed over possession to the Liquidator on 30.6.2019; the question of continued possession accordingly stands resolved.

Adjustment of refundable security against arrears - payment of outstanding rent and utility charges - Whether the refundable security and amounts tendered by the petitioner satisfy outstanding liabilities for the period of occupation, and the petitioner's liability for remaining utility charges. - HELD THAT: - The parties agreed that after adjustment of the refundable security and the amount tendered in Court by the petitioner in settlement of arrears of rent, nothing remained payable by the petitioner except electricity charges amounting to the sum stated in the electricity bill for the period prior to 1.7.2019. The petitioner undertook to pay that amount by way of crossed cheque to the Liquidator within two weeks. The Court recorded these admissions and treated the monetary aspects as settled subject to the petitioner's undertaking.

After adjustment of the refundable security and the sum tendered in Court, the petitioner remains liable only for the stated electricity charges and is bound to pay them within two weeks.

Disposal of writ petition as infructuous - Whether the writ petition should be proceeded with or disposed of following surrender of possession and settlement of monetary disputes between the parties. - HELD THAT: - Given that the petitioner vacated the premises and the parties reached a settlement on outstanding rent and the residual electricity charges (with the petitioner undertaking to pay the latter), the substantive relief sought became academic. The Court noted the settlement and the petitioner's undertaking and concluded there was no live controversy requiring further adjudication.

Writ petition disposed of as infructuous; pending applications, if any, also disposed of.

Final Conclusion: The petitioner vacated the leased premises and handed over possession to the Liquidator; arrears of rent have been adjusted against the refundable security and amounts tendered, leaving only stipulated electricity charges payable by the petitioner within two weeks; the writ petition is disposed of as infructuous.

Summary order. [The appeal was dismissed as withdrawn.]

Substantial mis-declaration - Voluntary Compliance Encouragement Scheme (VCES) - classification of services - works contract service - construction of residential complex service - specific classification prevailing over general classification - binding nature of Board/Tax Research Unit circular

Substantial mis-declaration - VCES - classification of services - Whether a difference in classification of services, where the declared value is not disputed, constitutes a substantial mis-declaration permitting reopening of declarations under VCES. - HELD THAT: - The Tribunal found that the respondents had declared the value of services and there was no dispute regarding the amount declared; the Revenue's grievance related only to classification (respondents declaring under construction of residential complex service while Department contended it was works contract service). Relying on the reasoning in Frontline Builders and Developers (Tri-Bang), mere reclassification by the Department does not establish a substantial mis-declaration under the VCES. The Revenue had not produced any contract or document showing that the assessee had failed to declare the full service tax liability; it only advanced a different interpretation of the nature of the service. In such circumstances, the power to reopen a VCES declaration could be exercised only where substantial mis-declaration is shown, which was not the case here.

Difference in classification without any dispute as to value does not amount to substantial mis-declaration and does not justify reopening of VCES declarations; the Department's appeal on this ground is rejected.

Construction of residential complex service - works contract service - specific classification prevailing over general classification - binding nature of Board/Tax Research Unit circular - Whether the classification as Construction of Residential Complex Service prevails over classification as Works Contract Service and whether the Department is bound by the Tax Research Unit/Board clarification. - HELD THAT: - The Tribunal observed that construction of residential complex service provides a more specific description than works contract service and therefore prevails as the appropriate classification. The Tax Research Unit's clarification was noted, which explained the wide scope of works contract and valuation rules, while acknowledging that construction of a complex may be a sub-specie of works contract; nevertheless, a specific classification for construction of residential complex exists and is controlling. The Tribunal further observed that Board circulars/clarifications are binding on the Department as recognised by the Apex Court. Given the plausible view open to the respondent to classify the service as construction of residential complex, and in presence of the TRU clarification, the Department's contrary classification could not be sustained.

The specific classification of Construction of Residential Complex Service prevails and the Department is bound by the Board/TRU clarification; classification in favour of the respondents is upheld.

Final Conclusion: The departmental appeals are rejected and the impugned orders upholding the respondents' VCES declarations (classified as Construction of Residential Complex Service) are affirmed.

Business Auxiliary Service - service tax demand - penalty - issue covered by earlier decision

Business Auxiliary Service - service tax demand - penalty - issue covered by earlier decision - Whether services provided to the appellant by co-operative sugar factories fall within the category of Business Auxiliary Service attracting service tax and penalty, and whether the impugned confirmation should stand in view of an earlier tribunal decision in the same case. - HELD THAT: - The Tribunal recorded that the Revenue had confirmed a service tax demand and imposed penalty treating the services as Business Auxiliary Service. Both parties agreed that the question is governed by the Tribunal's earlier Final Order in M/s U.P. Co Operative Sugar Factories Federation Ltd. V/s Commissioner of Central Excise & Service Tax, Lucknow dated 12 April, 2017. Applying that precedent to the present appeal, the Tribunal set aside the impugned order and allowed the appeal to the extent indicated, thereby overruling the confirmation insofar as it was inconsistent with the earlier decision. [Paras 1, 2, 3]

Impugned order setting aside the earlier confirmation of service tax and penalty is allowed in accordance with the Tribunal's prior Final Order; appeal allowed to that extent.

Final Conclusion: The Tribunal, applying its earlier decision in the same matter, set aside the impugned order and allowed the appeal insofar as the service tax demand and penalty were concerned.

Maintainability of appeal - monetary threshold for appellate jurisdiction - administrative instructions limiting forum competence - refund claim - withdrawal of appeal with liberty to raise questions

Maintainability of appeal - monetary threshold for appellate jurisdiction - administrative instructions limiting forum competence - Appeal not maintainable before the High Court as the claimed refund falls below the monetary limit prescribed by administrative instructions. - HELD THAT: - Learned counsel for the appellant admitted that in view of the instructions dated 22.8.2019 issued by the Ministry of Finance (CBIC Judicial Cell) the present appeal is not maintainable because the claimed refund is below the monetary limit of Rs. 1 crore. The Court recorded that admission and accepted the position that the appellate forum is restricted by those administrative instructions insofar as monetary threshold is concerned. Consequently the appeal could not be pursued before this Court on maintainability grounds.

Appeal not maintainable before this Court due to admitted non-satisfaction of the monetary threshold prescribed by the administrative instructions.

Withdrawal of appeal with liberty to raise questions - refund claim - Appellant permitted to withdraw the appeal while keeping the substantial question of law open for future consideration. - HELD THAT: - In view of the admission on maintainability, counsel for the appellant sought withdrawal of the appeal. The Court allowed the appeal to be dismissed as withdrawn and expressly left open the substantial question of law raised by the respondent regarding whether non-fulfilment of a substantive condition of a notification can be treated as merely procedural or technical so as to permit extension of exemption. No adjudication was made on that substantive question or on the pending applications for condonation of delay.

Appeal dismissed as withdrawn with liberty to raise the substantial question of law in an appropriate forum; no orders on condonation applications.

Final Conclusion: The appeal was dismissed as withdrawn after the appellant conceded that, by virtue of administrative instructions dated 22.8.2019, the High Court lacked maintainability because the claimed refund was below the prescribed monetary threshold; the substantive question of law raised remains open for future adjudication.

Maintainability of statutory appeal in view of monetary threshold - instruction of the Central Board of Indirect Taxes and Customs on forum competence - withdrawal of appeal with reservation of substantive questions of law

Maintainability of statutory appeal in view of monetary threshold - instruction of the Central Board of Indirect Taxes and Customs on forum competence - withdrawal of appeal with reservation of substantive questions of law - Appeal before the High Court not maintainable as the recoverable demand falls below the monetary limit prescribed by the Departmental instructions; appeal dismissed as withdrawn with liberty to raise questions of law. - HELD THAT: - Learned counsel for the appellant conceded that, in view of the instructions dated 22.8.2019 issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (Judicial Cell), the instant appeal was not maintainable before the High Court because the recoverable demand (approximately Rs. 50,53,000) is below the monetary threshold of Rs. 1 crore. On that basis the appellant sought to withdraw the appeal while reserving the substantial questions of law raised against the Tribunal's order. The Court allowed the appeal to be dismissed as withdrawn, expressly leaving the questions of law open for future consideration. Because the main appeal was withdrawn, the Court declined to adjudicate or pass any orders on the pending applications under the Limitation Act for condonation of delay.

Appeal dismissed as withdrawn for want of maintainability in light of departmental monetary-limit instructions; substantive questions of law left open; no orders on condonation applications.

Final Conclusion: The High Court permitted withdrawal of the appeal after recording the appellant's concession that the appeal was not maintainable before this Court under the CBIC instructions concerning monetary limits; the appeal stands dismissed as withdrawn, questions of law reserved, and no orders were passed on the applications for condonation of delay.

Clandestine removal - remission of duty for goods destroyed by fire - preclusion of demand pending remission decision - requirement of positive evidence for clandestine clearance - onus of proof in excise adjudication - penalty under Rule 25 of Central Excise Rules, 2002 - interest under section 11A of the Central Excise Act, 1944

Remission of duty for goods destroyed by fire - preclusion of demand pending remission decision - clandestine removal - Validity of confirmation of duty, interest and penalty for alleged clandestine removal of goods said to have been destroyed in a factory fire when a remission application was pending and no remission certificate had been produced - HELD THAT: - The Tribunal found that the physical verification on 10.01.2011 was carried out at the request of the appellant to verify goods destroyed by fire and that extensive correspondence on the fire, applications for remission and departmental actions were on record. The adjudicating authority doubted the occurrence of the fire and drew an adverse inference from non-production of a remission certificate, but failed to consider the material correspondence and the letter of the department dated 06.10.2010 confirming that the remission request was under active consideration. The appellate authority accepted occurrence of the fire while the adjudicating authority had doubted it, exposing a contradiction in the concurrent findings. The Tribunal reiterated that a charge of clandestine clearance is a serious allegation requiring positive evidence such as unaccounted procurement, statements of buyers or transporters, interception or recovery of sale proceeds; no such corroborative evidence was produced. Further, the assessable value and duty invoked in the proceedings derived from the appellant's own intimation and supporting CA and engineer certificates. In these circumstances, confirmation of duty, penalty and interest was held to be premature and unsustainable where the remission application had not been rejected and no positive evidence of clandestine removal existed. [Paras 7, 8, 9]

Impugned demand, penalty and interest set aside and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudication and appellate orders confirming duty, penalty and interest for alleged clandestine removal of goods destroyed in a fire, holding the demand premature in absence of remission rejection and of positive evidence of clandestine clearance.

Clandestine removal - diversion to DTA with prior permission of Deputy Commissioner - absence of mala fide intention / mens rea - confirmation of demand for clearances to DTA - penalty under Rule 25 of the Central Excise Rules, 2002 - penalty equal to duty under Section 11AC

Clandestine removal - diversion to DTA with prior permission of Deputy Commissioner - absence of mala fide intention / mens rea - penalty under Rule 25 of the Central Excise Rules, 2002 - penalty equal to duty under Section 11AC - Whether penalty equal to duty under Section 11AC was imposable on the appellant for diversion of goods to DTA after cancellation of EOU order, or whether the penalty under Rule 25 was correctly imposed instead. - HELD THAT: - The Tribunal accepted the factual finding that the goods had been initially cleared to another EOU under ARE-3 against CT-3 certificate and were not clandestinely removed. The subsequent diversion to DTA occurred only after cancellation of the original order and was carried out after obtaining permission from the Deputy Commissioner. On these facts the Tribunal concurred with the Ld. Commissioner that there was no mala fide intention on the part of the appellant and that the case did not constitute clandestine removal warranting imposition of penalty equal to duty under Section 11AC. The Ld. Commissioner had given detailed reasons for applying penalty under Rule 25 of the Central Excise Rules, 2002 instead of Section 11AC; the Tribunal found no infirmity in those findings and affirmed them.

Findings of no clandestine removal and absence of mala fide intention are upheld; penalty under Rule 25 affirmed and imposition of penalty equal to duty under Section 11AC rejected.

Final Conclusion: The impugned order upholding the demand and imposing penalty under Rule 25 of the Central Excise Rules, 2002 is affirmed; Revenue's appeal for imposition of penalty under Section 11AC is dismissed.

Doctrine of unjust enrichment - refund of excess duty - presumption under Section 12B of the Central Excise Act, 1944 - rebuttal by issuance of credit notes - passing on of duty to customers

Doctrine of unjust enrichment - refund of excess duty - presumption under Section 12B of the Central Excise Act, 1944 - rebuttal by issuance of credit notes - passing on of duty to customers - Whether the refund claim for excess duty is barred by the doctrine of unjust enrichment where the assessee had shown duty in invoices but subsequently issued credit notes and reflected adjustment as receivables in accounts. - HELD THAT: - The appellant undisputedly invoiced customers showing the duty amount and, upon discovering excess payment, issued credit notes to adjust the excess duty. The adjustment was recorded in the appellant's accounts as receivables. The Tribunal applied the statutory presumption envisaged under Section 12B of the Central Excise Act, 1944, but found that the documentary and accounting evidence - issuance of credit notes and corresponding entries in the balance sheet - effectively rebutted that presumption. Having been rebutted, the presumption that the duty was passed on did not operate to deny the refund. Consequently, the rejection of the refund claim on the ground of unjust enrichment could not be sustained. [Paras 6]

Impugned order rejecting the refund on the ground of unjust enrichment is set aside and the appeal allowed with consequential relief, the appellant having rebutted the presumption by issuance of credit notes and accounting entries.

Final Conclusion: The Tribunal held that where an assessee, after invoicing duty, issues credit notes and records the adjustment as receivables thereby rebutting the statutory presumption, a refund claim for excess duty cannot be denied on the ground of unjust enrichment; the impugned order is set aside and the appeal allowed.

Exemption under G.O.Ms.No.604 dated 22.04.2008 - requirement to produce certification in advance - exemption condition incapable of performance - doctrine of substantial compliance - discriminatory treatment / singling out - judicial review of arbitrary assessment orders

Exemption under G.O.Ms.No.604 dated 22.04.2008 - requirement to produce certification in advance - exemption condition incapable of performance - doctrine of substantial compliance - Whether the petitioner was entitled to the exemption under G.O.Ms.No.604 despite not producing the Andhra Pradesh Film Development Corporation certificates in advance, and whether the assessment orders denying the exemption on that ground were sustainable. - HELD THAT: - The notification (G.O.Ms.No.604) required the theatre proprietor to intimate screenings in advance and to furnish a certified copy of the Film Development Corporation certificate in the application form. The Court recorded that the Film Development Corporation could issue the requisite certificate only after determining the number of prints released, and thus the requirement of producing that certificate in advance was practically impossible to perform. Applying the principle in COMMISSIONER OF CENTRAL EXCISE v. HARI CHAND SHRI GOPAL relating to substantial compliance, the Court held that where a condition is impossible to comply with and the certificates were in fact produced after release, strict literal insistence on prior production could not be used to deny the exemption. The third respondent did not dispute the practical impossibility nor contest that the certificates were subsequently produced, and the petitioner's unrefuted claim that other similarly situated theatres were permitted belated production pointed to arbitrariness. In these circumstances, the assessments which refused the exemption solely because the certificates were not furnished in advance lacked application of mind and were unsustainable. [Paras 5, 6, 11, 12]

The assessment orders denying exemption merely because certificates were not produced in advance were set aside; the petitioner was entitled to the benefit of G.O.Ms.No.604 as the requirement to produce the certificate in advance was practically impossible and the certificates were produced after release.

Discriminatory treatment / singling out - judicial review of arbitrary assessment orders - Whether delay and laches or availability of alternate remedy barred interference with the assessment orders in the exercise of writ jurisdiction. - HELD THAT: - Although the third respondent pleaded delay and availability of an appellate remedy under Section 9(B) of the Act of 1939, that contention was not pressed at the hearing. The Court observed that technical delays would not impede exercise of Article 226 where impugned orders are patently arbitrary and demonstrate lack of application of mind. The respondent failed to rebut the petitioner's assertion of being singled out, and no satisfactory explanation was offered for differing treatment; in view of the illegality and arbitrariness found in the assessments, writ remedy was appropriately invoked and delay/laches did not preclude relief. [Paras 9, 12]

Delay and the existence of alternate remedies did not preclude interference with the impugned assessment orders which were arbitrary and lacking application of mind.

Final Conclusion: Writ petitions allowed; impugned assessment orders dated 16.03.2016 and 20.03.2017 and all consequential proceedings and notices are set aside; pending miscellaneous petitions closed; no order as to costs.

Principles of natural justice - service of assessment order - substituted service - Section 25 of the Kerala Value Added Tax Act - setting aside assessment order and restoration for fresh decision - deferment of recovery proceedings

Principles of natural justice - service of assessment order - Section 25 of the Kerala Value Added Tax Act - Assessment order dated 25.09.2018 is invalid for want of service and for being contrary to the requirements of Section 25 and principles of natural justice. - HELD THAT: - The Court examined the contention that the assessment under Section 25 was completed without serving the petitioner with the original copy of the assessment order. The respondents' instructions indicated that postal covers were returned with the endorsement 'door locked' and that substituted service by affixture was effected at the petitioner's last known address. The Court was satisfied on the material before it that the petitioner had not been served with the assessment order and that, on that basis, the assessment order was violative of the principles of natural justice and contrary to the requirements of Section 25. The Court did not adjudicate the merits of the assessment itself but confined its decision to the procedural infirmity arising from defective service and failure to comply with statutory and natural justice norms.

Assessment order dated 25.09.2018 set aside.

Setting aside assessment order and restoration for fresh decision - substituted service - deferment of recovery proceedings - Proceedings remanded for fresh completion of assessment and recovery stayed for a limited period. - HELD THAT: - Having set aside the assessment order for the procedural defect, the Court restored the matter to file and directed the petitioner to appear before the assessing authority with a copy of the judgment. The first respondent was directed to complete the assessment afresh (either on the listed date or after giving notice to the petitioner) on or before 30.09.2019. In the interim, the recovery proceedings initiated through the impugned recovery documents were deferred for eight weeks from the date of the order to enable fresh adjudication in conformity with statutory procedure and principles of natural justice. The Court's directions effect a remand for fresh consideration rather than a determination on merits.

Matter restored for fresh assessment; petitioner to appear and assessment to be completed by 30.09.2019; recovery proceedings deferred for eight weeks.

Final Conclusion: The assessment order dated 25.09.2018 was set aside for failure of service and breach of natural justice; the matter was restored for fresh assessment to be completed within the timetable directed by the Court and recovery proceedings were temporarily deferred to permit compliance with the order.