TaxTMI Updates e-Newsletter
Sep 20,2021

Principle of natural justice (audi alteram partem) - Show cause notice and prior service - Non-speaking order - Remand for fresh adjudication after hearing - Bar of alternative remedy

Principle of natural justice (audi alteram partem) - Show cause notice and prior service - Non-speaking order - Validity of the adjudication order dated 24.7.2021 in light of alleged non-service of show cause notice, absence of reasons and compliance with principles of natural justice. - HELD THAT: - The High Court found that the impugned order records only the adjudicating authority's conclusion without discussing facts or adducing reasons. Even assuming the revenue's assertion that a show cause notice was served, the order itself fails to demonstrate that the petitioner was afforded an opportunity to be heard or that reasons were recorded for the conclusion reached. The absence of reasoning and absence of evidence in the order that the audi alteram partem rule was observed renders the adjudication vitiated for want of adherence to essential principles of natural justice. The Court therefore set aside the impugned order and directed that the matter be considered afresh in accordance with law after affording the petitioner a hearing.

Impugned order set aside for breach of natural justice and being non-speaking; matter remitted for fresh adjudication after affording opportunity of hearing.

Remand for fresh adjudication after hearing - Bar of alternative remedy - Whether the petition should be relegated to alternative remedy or whether the Court should remit the matter for fresh adjudication. - HELD THAT: - The court considered the preliminary objection of the State that an alternative remedy existed but concluded that, given the impugned order's substantive defect (lack of reasons and breach of natural justice), relegation to the alternative forum would serve no useful purpose. The Court accordingly exercised its jurisdiction to quash the order and remitted the matter to the assessing authority to decide afresh, observing that the adjudicating authority remains free to draw appropriate conclusions after providing a hearing and following law.

Petition not relegated to alternative remedy; matter remitted to assessing authority to pass fresh order in accordance with law after hearing the petitioner within six months.

Final Conclusion: The adjudication order dated 24.7.2021 is quashed for being non-speaking and for breach of the audi alteram partem principle; the matter is remitted to the assessing authority for fresh decision in accordance with law after affording the petitioner an opportunity of hearing, to be completed within six months.

Restriction on electronic credit ledger under Rule 86A - temporary attachment of input tax credit - automatic cessation after one year - requirement of adjudication for permanent disallowance of credit - interim relief for release of electronic credit ledger

Restriction on electronic credit ledger under Rule 86A - automatic cessation after one year - temporary attachment of input tax credit - Continuation of restriction on use of amounts in the petitioner's electronic credit ledger beyond one year from imposition under Rule 86A - HELD THAT: - Rule 86A permits the Commissioner or an authorised officer, upon recording reasons in writing and having reason to believe that input tax credit has been fraudulently availed or is ineligible, to disallow debit from the electronic credit ledger as an interim measure. Sub rule (3) provides that such restrictions shall cease to have effect after expiry of one year from the date of imposing the restriction. The Court held that the legislative scheme contemplates a temporary measure only and that there is no scope for extension; on expiry of one year the restriction ceases automatically. Consequently, where the restriction was imposed on 21.05.2020 and more than one year has elapsed, the department cannot lawfully continue the restriction and must release the electronic credit ledger so the petitioner may utilise the credited amount for payment of taxes in accordance with law.

Restriction imposed under Rule 86A cannot be continued beyond one year and must be released; the petitioner's electronic credit ledger shall be freed for use.

Requirement of adjudication for permanent disallowance of credit - temporary attachment of input tax credit - Whether the department may keep an interim restriction in place as a permanent substitute for adjudication - HELD THAT: - The Court emphasised that Rule 86A is an interim provision; if the department intends permanently to disallow credit it must adjudicate the matter after bi parte hearing and pass an appropriate order. The interim restriction cannot be allowed to assume a permanent character without following the statutory adjudicatory process.

Permanent disallowance of input tax credit requires adjudication; interim restriction alone cannot substitute for final adjudication.

Interim relief for release of electronic credit ledger - Grant of interlocutory relief to lift the restriction and ancillary interim directions - HELD THAT: - For the limited purpose of interim relief the Court directed release of the restrictions imposed on the petitioner's electronic credit ledger so that the petitioner may utilise the credited amount for payment of taxes. The Court declined, however, to stay the show cause notice proceedings or grant broader interim relief; it directed the respondents to file their full reply to the writ petition and listed the matter for further hearing.

Interlocutory relief granted to lift the restriction on the petitioner's electronic credit ledger; no stay of show cause proceedings; respondents to file reply and matter listed for hearing.

Final Conclusion: The Court held that restrictions under Rule 86A are temporary and cease automatically after one year; the petitioner's electronic credit ledger, on which restriction was imposed on 21.05.2020, must be released for utilisation. The Court refused to stay the show cause proceedings and directed the respondents to file their reply, listing the writ petition for further hearing.

Natural justice - Service of notice through GST Portal - Quashing of assessment order for want of hearing - Remand for fresh and speaking order - De-freezing/de-attaching of bank accounts - Refund of excess recovery

Natural justice - Service of notice through GST Portal - Quashing of assessment order for want of hearing - Original assessment order dated 19th March 2020 was quashed on account of want of opportunity of hearing caused by failure to serve statutory notices through the GST Portal. - HELD THAT: - The Court found that notices in Form DRC 01 and DRC 01A were not uploaded/served on the petitioner via the GST Portal and the Gmail receipt did not demonstrate service upon the petitioner. Since the assessment order dated 19th March 2020 was passed without affording the petitioner an opportunity of hearing, the order was set aside. The High Court rejected other allegations of malice or extraneous motive and noted that authorities had subsequently rectified the assessment by a later order reducing the quantified demand, but the sole ground meriting relief was procedural non-compliance with principles of natural justice. The Court therefore quashed the impugned order and directed a de novo consideration with opportunity to be heard.

Impugned assessment order dated 19th March 2020 quashed for want of hearing; matter remitted for fresh adjudication in compliance with principles of natural justice.

Remand for fresh and speaking order - Proceedings remitted for fresh adjudication and the assessing officer directed to pass a fresh speaking order after hearing the petitioner. - HELD THAT: - The petitioner was directed to appear before the assessing officer on the specified date (with digital mode permitted), and the officer was commanded to consider all materials placed on record and pass a fresh, speaking order in accordance with law and principles of natural justice within two months of the petitioner's appearance. The Court preserved parties' rights to raise other issues by separate proceedings or to pursue alternate remedies under the CGST/BGST Acts. The Court also permitted placing of additional material and recommended digital conduct of proceedings given the pandemic.

Matter remitted to the assessing officer for fresh hearing and issuance of a speaking order within two months from petitioner's appearance.

De-freezing/de-attaching of bank accounts - Refund of excess recovery - Bank accounts attached in reference to the impugned proceedings were ordered to be de-frozen/de-attached immediately and any amount recovered in excess of the demand assessed pursuant to the fresh order directed to be refunded within two months. - HELD THAT: - In view of quashing of the original assessment and remand, the Court directed immediate de-freezing/de-attaching of the petitioner's bank account(s) that had been attached in connection with the impugned proceedings. Further, the Court provided that if, following the fresh assessment, the amount earlier recovered exceeded the liability determined in the fresh order, the excess shall be remitted into the petitioner's bank account within two months thereafter.

Immediate de-freezing/de-attaching of bank accounts and refund of any excess amount recovered within two months of finalization of the fresh assessment.

Final Conclusion: Writ petition disposed by quashing the assessment order dated 19.03.2020 for the periods September 2018, December 2018 and March 2019 on the ground of non service and want of hearing; matter remitted to the assessing officer for fresh and speaking adjudication in compliance with natural justice within two months of the petitioner's appearance; bank accounts attached in the proceedings to be de frozen immediately and any excess recovery to be refunded as directed.

Order of attachment - recall of attachment - mootness / infructuousness of proceedings - cause of action - disposal of writ petitions on account of supervening events

Order of attachment - recall of attachment - mootness / infructuousness of proceedings - Effect of recall of the order of attachment on the maintainability of the writ petitions - HELD THAT: - The Court recorded that the Respondent CGST filed an affidavit stating that the attachment order issued on 11.01.2021 had been recalled by order dated 3.09.2021. The writ petitions arose from the attachment order; with that order having been recalled during the pendency of the petitions, there remained no live cause of action. In these circumstances the petitions were rendered infructuous and no further adjudication on the underlying grievance was necessary. [Paras 3, 5, 6]

Writ petitions disposed of as nothing survives following recall of the attachment order.

Final Conclusion: The affidavit filed by the respondent recording recall of the attachment order removed the cause of action; the writ petitions were accordingly disposed of as infructuous.

Provisional attachment of bank accounts under Section 83 of the CGST Act - right of post-provisional attachment under Rule 159(5) of the CGST Rules (objection and hearing) - requirement of communication/notice of attachment to the affected person - necessity of proceedings in prescribed Form GST DRC-22 and Form GST DRC-23 - formation of opinion by the Commissioner as a pre-condition for provisional attachment - strict compliance with statutory procedure for exercise of adverse powers

Requirement of communication/notice of attachment to the affected person - right of post-provisional attachment under Rule 159(5) of the CGST Rules (objection and hearing) - Validity of the provisional attachment insofar as the attachment order was not shown to have been communicated to the petitioner and the consequent denial of the opportunity under Rule 159(5). - HELD THAT: - The Court found that communication of the provisional attachment to the affected person is a necessary pre-condition for meaningful exercise of the right provided under Rule 159(5), which permits filing objections and requires an opportunity of being heard. The material produced by the Revenue did not conclusively establish that the order dated 21.09.2020 was sent to or received by the petitioner; the document relied upon by the Revenue bore a handwritten endorsement but no cogent evidence (such as postal receipt or acknowledgement) was produced to prove service. In those circumstances the petitioner could not be presumed to have received the notice; the seven day period for objections under Rule 159(5) presupposes prior communication of the order and therefore the Revenue's plea that the petitioner's representation dated 13.10.2020 was time barred was rejected. The Court held that the respondent Authority was under an obligation to consider the representation under Rule 159(5) and that failure to demonstrate lawful communication vitiated the attachment process. [Paras 23, 24, 25, 26, 27]

The provisional attachment could not be sustained for want of proof of communication to the petitioner and for denial of the Rule 159(5) opportunity; the petitioner's representation could not be treated as belated on that basis.

Provisional attachment of bank accounts under Section 83 of the CGST Act - formation of opinion by the Commissioner as a pre-condition for provisional attachment - necessity of proceedings in prescribed Form GST DRC-22 and Form GST DRC-23 - strict compliance with statutory procedure for exercise of adverse powers - Whether the provisional attachment complied with the prescribed statutory procedure and was supported by the requisite formation of opinion and proceedings in the prescribed Form. - HELD THAT: - The Court examined the provisional order and found it was not in the requisite Form GST DRC-22 and did not disclose the substantive averments required by the form. The attachment purportedly related to proceedings under Section 74, but no show cause notice under Section 74 had been issued to the petitioner; consequently an impending or contemplated proceeding under Section 74 could not justify exercise of power under Section 83. Further, the statutory power under Section 83 requires that the Commissioner form an opinion that provisional attachment is necessary to protect Government revenue; such an opinion must be reflected in some proceedings. No proceedings or material showing formation of such opinion were placed before the Court. Given the wide and potentially harsh discretion conferred, the Court held that the power must be exercised with circumspection and supported by substantive material and compliance with mandatory procedural prescriptions. On these grounds, and having regard to the authorities cited, no case was made out to uphold the provisional attachment. [Paras 30, 31, 32, 33, 34]

The provisional attachment was procedurally defective for not complying with the prescribed form and for absence of any recorded formation of the Commissioner's opinion or valid proceedings justifying attachment; it could not be upheld.

Final Conclusion: The petition is allowed. The provisional attachment order dated 21.09.2020 is set aside and the respondent Authority is directed to communicate with the bank to lift the attachment forthwith, having regard to the statutory requirement and the imminent expiry of the one year period under Section 83(2).

Time limit for availing input tax credit - transitional credit under Section 140 of the CGST Act - retrospective amendment - directory versus mandatory nature of procedural timelines - revision of TRAN-1 as distinct from fresh filing of TRAN-1 - judicial review of amendment's effect on existing rights

Retrospective amendment - judicial review of amendment's effect on existing rights - directory versus mandatory nature of procedural timelines - Effect of the retrospective amendment inserting a time limit into Section 140 on the petitioner's right to claim transitional input tax credit. - HELD THAT: - The Court held that the retrospective amendment dated 18.05.2020 inserting a time limit for taking input tax credit into Section 140 does not defeat the petitioner's right to claim transitional credit. The judgment in SKH Sheet Metals Components (supra) was followed: that decision did not rest solely on the absence of a statutory time limit and contained additional grounds which continue to apply despite the amendment. The Court accepted the reasoning that procedural timelines (as reflected in Rule 117 and the amendment) must be construed in the context of their consequences and purpose; where consequences for non-compliance are not prescribed and timelines, if construed as mandatory, would frustrate the legislative intent to benefit taxpayers, they are to be viewed as directory. The Court further observed that the present matter involves revision of TRAN-1 (not a fresh filing), and is covered by earlier precedents including Gillette India Ltd. & Anr. Thus the retrospective amendment does not, in the circumstances of this case, extinguish the petitioner's entitlement to transitional credit.

The retrospective amendment does not affect the petitioner's right to claim transitional input tax credit; the legal position in SKH Sheet Metals Components (supra) governs the matter.

Transitional credit under Section 140 of the CGST Act - revision of TRAN-1 as distinct from fresh filing of TRAN-1 - Procedure to obtain the claimed transitional credit and the course to be followed by the revenue. - HELD THAT: - The Court granted the petitioner liberty to apply for the claimed transitional credit of Rs. 6,04,47,033/- and directed that the department shall deal with and dispose of the application in accordance with law. This direction is subject to any further order of the Supreme Court in the pending SLP (C) No.7425-7428/2020. The effect of this direction is that the matter is remitted to the administrative authority for consideration and decision on the application/revision of TRAN-1 in accordance with the law and relevant precedents.

Petitioner permitted to apply for transitional credit; department to consider and dispose of the application in accordance with law and subject to any further orders of the Supreme Court.

Final Conclusion: Writ petition disposed of: the retrospective amendment does not, on the facts and legal reasoning adopted, preclude the petitioner from claiming transitional credit; petitioner may apply for the credit and the department is directed to decide the application in accordance with law, subject to any further order of the Supreme Court.

Anticipatory bail under Section 438 Cr.P.C. - inherent powers under Section 482 Cr.P.C. - discretionary jurisdiction of the trial court in granting bail - protection of personal liberty under Article 21 - violation of bail conditions as ground for interference

Anticipatory bail under Section 438 Cr.P.C. - inherent powers under Section 482 Cr.P.C. - violation of bail conditions as ground for interference - discretionary jurisdiction of the trial court in granting bail - protection of personal liberty under Article 21 - High Court declined to exercise its inherent jurisdiction under Section 482 Cr.P.C. to set aside the order of the court below granting anticipatory bail in Crl.Misc.No.5875/2019. - HELD THAT: - The High Court held that the trial court had exercised its discretionary jurisdiction in granting anticipatory bail under Section 438 Cr.P.C. and had imposed stipulated conditions. In the absence of any violation of those conditions or other ground warranting interference, there was no occasion for the High Court to invoke its inherent powers under Section 482 Cr.P.C. The court emphasized the need to guard personal liberty under Article 21 and observed that interference with a discretionary bail order is not justified unless conditions are breached or other compelling reasons exist. The petitioner-Authority's challenge to the bail order therefore did not merit setting aside the order, and issuance of notice to the respondent was unnecessary. The court, however, left open the petitioner's remedy to proceed in accordance with law should any violation of the bail conditions occur.

Petition dismissed; High Court refused to set aside the anticipatory bail order and reserved liberty to the petitioner to act if bail conditions are violated.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking to set aside the anticipatory bail granted in Crl.Misc.No.5875/2019 is dismissed for want of any violation of the conditions imposed; liberty reserved to the petitioner to take action in accordance with law if conditions are breached.

Reopening of assessmentu/s 147- reasons to believe - no link between the statement that there is a reason to believe that income as escaped assessment - HELD THAT:- No case is made out to interfere with the impugned judgment and order passed by the High Court [2021 (3) TMI 188 - BOMBAY HIGH COURT] in exercise of powers under Article 136 of the Constitution of India. Special Leave Petition is dismissed.

Withholding of the refund in terms of Section 241A - Withholding of refund in certain cases - exercise of powers under Section 241A - as HC held [2020 (2) TMI 1282 - BOMBAY HIGH COURT] the automated intimation could not operate as an order under Section 241A and that the Assessing Officer's substantive withholding order did not satisfy the statutory safeguards or the facts of the case; the impugned orders were set aside and the refund arising from processing under Section 143(1) for AY 2017-18 was directed to be released with interest within three weeks.

HELD THAT:- SLP dismissed on the ground of delay.

Residence test under Section 6(1)(a) - taxability of global income of a resident - scope of revision under Section 264 - non-production of evidence before assessing and revisional authorities - primacy of statute over administrative circular - judicial review under Article 226-limited scope

Residence test under Section 6(1)(a) - taxability of global income of a resident - Assessee was correctly held to be a resident for the relevant year and his global salary was assessable in India. - HELD THAT: - The court accepted the factual position recorded by the assessing authority and relied upon the petitioner's own declaration that he stayed in India for 182 days during the relevant previous year. The statutory criterion in Section 6(1)(a) turns on presence in India for 182 days or more; the assessment under Section 147/144 treated the petitioner as resident accordingly and brought his global salary to tax. The petitioner failed to establish contrary factuality before the tax authorities so as to displace the finding of residency.

Petitioner is to be treated as a resident for the year in question and the global income is taxable in India.

Non-production of evidence before assessing and revisional authorities - judicial review under Article 226-limited scope - Writ court will not admit or appreciate evidence produced for the first time in writ proceedings which was not placed before the Assessing Officer or the Commissioner in revision. - HELD THAT: - The certificate relied on by the petitioner to show greater foreign stay was produced for the first time before this Court and was not available to or considered by the Assessing Officer or the Commissioner exercising revisional jurisdiction under Section 264. In exercise of constitutional writ jurisdiction under Article 226, the High Court should not scrutinise or admit such fresh evidence to reappreciate facts that were open to the statutory authorities, particularly where no attempt was made to place that evidence before them.

Evidence not placed before the assessing/revisional authorities cannot be entertained in the writ petition and will not justify interference.

Scope of revision under Section 264 - judicial review under Article 226-limited scope - Petitioner's choice to seek revision under Section 264 rather than appeal did not furnish cause for writ interference; scope of revision and the limited scope of writ review do not warrant upsetting the revisional order. - HELD THAT: - The court observed that Section 264 confers narrower powers on the Commissioner than an appeal to the Commissioner (Appeals), and that the petitioner did not avail statutory remedies such as rectification under Section 154 or appeal to the Commissioner (Appeals) against the assessment order. Given the limited scope of judicial review under Article 226 and that the revisional authority had declined to alter the assessment, the High Court declined to interfere with the revisional order confirming the assessment.

No interference with the revisional order under Section 264 in writ jurisdiction.

Primacy of statute over administrative circular - residence test under Section 6(1)(a) - The Circular relied upon by the petitioner cannot override the clear statutory test in Section 6(1)(a). - HELD THAT: - The petitioner invoked Circular No. 586 to contend crew members' period of foreign service should exempt salary from Indian tax. The court held that where a circular conflicts with the express statutory provision, the statute prevails. The wording of Section 6(1)(a) determines residence by presence in India for 182 days or more and cannot be displaced by an inconsistent circular.

Circular cannot be applied to contradict the statutory residence test; statute prevails.

Final Conclusion: Writ petition dismissed. The revisional order confirming the assessment treating the petitioner as resident for assessment year 2004-05 is not interfered with; petitioner's fresh evidence and reliance on the Circular cannot prevail over the admitted factual finding of 182 days' presence and the statutory test in Section 6(1)(a).

Stay of operation of impugned order - Interim stay pending appeal - Penalty under the Income-tax Act, 1961 (penalty under section 271(1)(c)) - Admission of appeal and framing of substantial question of law - Payment of penalty and no outstanding demand

Stay of operation of impugned order - Interim stay pending appeal - Payment of penalty and no outstanding demand - Admission of appeal and framing of substantial question of law - Prayer for interim stay of the impugned penalty order pending disposal of the appeal - HELD THAT: - The Court considered the application for stay of the operation of the impugned order dated 3 August 2016 against which the appeal has been admitted and a substantial question of law framed. The applicant has paid the entire penalty amount and no demand is outstanding against the assessee, although related proceedings before the Magistrate were noted. In view of admission of the appeal, framing of a substantial question of law, and payment of the penalty leaving no demand subsisting, the Court found it appropriate to stay the operation of the impugned order pending final disposal of the appeal and accordingly disposed of the interim application granting the stay in terms of the prayer clause (a). [Paras 2, 3]

Interim stay of the operation of the impugned order granted pending final hearing and disposal of the appeal; interim application disposed of accordingly.

Final Conclusion: The interim application for stay is allowed: operation of the impugned penalty order is stayed pending final disposal of the admitted appeal in which a substantial question of law has been framed, the penalty having been paid and no demand remaining.

Allowability of bad debts under section 36(2) of the Act - characteristics of an allowable bad-debt (written off after earlier taxation) - revenue v. capital characterisation of expenditure on land acquisition incurred by a contractor - treatment of provision written back where original provision was disallowed in earlier years - admission of additional evidence under Rule 46 of the Income Tax Rules, 1962

Allowability of bad debts under section 36(2) of the Act - characteristics of an allowable bad-debt (written off after earlier taxation) - Deletion of disallowance of Rs. 4,44,994/- as bad debts written off - HELD THAT: - The Tribunal held that the issue was squarely covered by the coordinate-bench decision in the assessee's earlier year. When a debt is written off in the books and the corresponding amounts had been taken into income in earlier years, the claim satisfies the characteristics of an allowable bad debt under section 36(2). The Assessing Officer's disallowance for lack of details was not sustained in view of the assessee's documentation and the precedent applied by the CIT(A) and the coordinate bench. The Tribunal confirmed the deletion. [Paras 8]

Disallowance deleted; addition deleted and order of CIT(A) confirmed in favour of the assessee.

Revenue v. capital characterisation of expenditure on land acquisition incurred by a contractor - Deletion of disallowance of Rs. 76,50,97,493/- alleged to be capital expenditure on land acquisition - HELD THAT: - The Tribunal accepted the reasoning of the CIT(A) and the coordinate bench that the assessee, being a contractor executing works for the Ministry, incurred land-acquisition and service-connection expenses as project expenditure under the contract and not for creating an enduring asset in the assessee's hands. The corresponding contract income had already been taxed as revenue; therefore, the expenditure did not assume capital character in the hands of the contractor. The Tribunal found no infirmity in treating the expenditure as revenue in nature and confirmed the CIT(A)'s deletion of the disallowance. [Paras 9, 10]

Disallowance treated as revenue expenditure and deleted; order of CIT(A) confirmed.

Treatment of provision written back where original provision was disallowed in earlier years - Deletion of addition of Rs. 8,48,30,839/- on account of provision written back - HELD THAT: - The Tribunal agreed with the CIT(A) and the coordinate bench that where a provision made in earlier years was never allowed (having been disallowed in computation then), its subsequent write-back in the assessment year cannot be taxed again. The revenue failed to show that those provisions had been allowed earlier. On that basis the CIT(A)'s deletion of the addition was upheld and the Tribunal confirmed the order. [Paras 11, 12]

Addition deleted; provision written back not taxable in the assessment year and order of CIT(A) confirmed.

Admission of additional evidence under Rule 46 of Income Tax Rules, 1962 - Validity of admission by CIT(A) of additional evidence produced by the assessee despite Assessing Officer's opposition - HELD THAT: - The Tribunal observed that admission of additional evidence at the appellate stage is within the prerogative of the CIT(A) under Rule 46. The CIT(A) had admitted the evidence, noted that the issues were covered by earlier decisions in the assessee's favour, and examined the matter on merit. The Tribunal found no infirmity in the exercise of discretion by the CIT(A) and upheld the admission and the consequential findings. [Paras 13]

Admission upheld; consequential findings in favour of the assessee sustained.

Final Conclusion: The appeal filed by the revenue for Assessment Year 2012-13 is dismissed; the orders of the CIT(A) deleting the additions and admitting evidence are confirmed in favour of the assessee.

Deduction under Section 54F - Ownership of residential property for exemption - Characterisation of farmhouse as residential house - Credit-card expenditures reimbursed by employer treated as business expenditure - Addition for unexplained expenditure

Deduction under Section 54F - Ownership of residential property for exemption - Characterisation of farmhouse as residential house - Whether the assessee was entitled to deduction under Section 54F despite alleged ownership of more than one residential property and purchase of a farmhouse - HELD THAT: - The assessing officer denied exemption on the basis that the assessee owned more than one residential house and that the newly acquired farmhouse was not a residential house. The assessee produced cancellation agreement and documentary explanation showing advances returned and that only one residential house was purchased from the sale consideration. The CIT(A) examined the documentary record, accepted the assessee's explanation that certain payments were advances or loans not linked to purchase of other residential properties, and found no material on record to show ownership of multiple residential houses. The Tribunal observed that mere description as a "farmhouse" does not render the property non residential absent evidence that excessive land was purchased and only a token residence constructed; there was no finding that the purchase comprised predominantly agricultural land or that deduction should be restricted. In view of the evidence and absence of contrary proof by the revenue, the CIT(A)'s deletion of the disallowance was upheld. [Paras 7, 8, 9]

Deduction under Section 54F allowed; AO's disallowance set aside and ground dismissed.

Credit-card expenditures reimbursed by employer treated as business expenditure - Addition for unexplained expenditure - Whether the addition on account of credit card expenses was justified where the assessee produced employer's PAN, bank evidence and the employer had accounted for and reimbursed the expenses - HELD THAT: - The AO added credit card expenditures on the basis that bills/vouchers were not produced and personal benefit was suspected. The assessee, however, produced particulars showing three cards used for employer's business, copies of employer's accounting treatment and evidence of reimbursement; the AO produced no material disproving reimbursement or showing that the expenditures were personal perquisites. The CIT(A) found no basis for the addition, noting absence of evidence that the assessee derived personal benefit or that the employer had not recorded the expenses; the Tribunal concurred, observing that mere incurrence through the assessee's cards does not justify treating the amounts as the assessee's income when adequately accounted for and reimbursed by the employer and when similar treatment was not made in subsequent years. [Paras 4, 10, 11]

Addition on account of credit card expenditures deleted; AO's disallowance set aside and ground dismissed.

Final Conclusion: The Tribunal dismissed the revenue's appeal; the CIT(A)'s deletions of the disallowance under Section 54F and the addition relating to credit card expenditures were upheld and the assessment additions set aside.

Revenue expenditure versus deferred revenue expenditure - Allowability under section 37 - Accounting amortisation not determinative for tax deduction - Reasonableness of ad hoc disallowance

Revenue expenditure versus deferred revenue expenditure - Allowability under section 37 - Accounting amortisation not determinative for tax deduction - Allowability of marketing expenses of Rs. 35,00,000 shown as deferred in books but claimed as revenue expenditure in the return for A.Y. 2015-2016. - HELD THAT: - The Tribunal held that the expenditure in question - comprising printing and stationery, exhibition and conference expenses, tour and travelling and business promotion - was in substance revenue expenditure and its genuineness was not disputed. The fact that the assessee's books showed the amount as deferred and amortised did not preclude deduction in the year of incurrence where the expenditure satisfied the tests of business expenditure under the statute. The Tribunal relied on the decisions cited by the assessee, including ACIT vs. Ashima Syntex Ltd. and Commissioner of Income Tax vs. Citi Financial Consumer Fin. Ltd. , and the coordinate Bench decision in DCIT vs. Hitz FM Radio India Ltd. , to the effect that there is no concept of "deferred revenue expenditure" in the income-tax law that would deny a revenue deduction when the expenditure is otherwise allowable. Applying that principle, the Tribunal concluded that the CIT(A) was not justified in disallowing the claimed marketing expenses and directed deletion of the addition. [Paras 6]

The addition of Rs. 35,00,000 made by the A.O. and sustained by the CIT(A) is deleted; the marketing expenses are allowable as revenue expenditure for A.Y. 2015-2016.

Reasonableness of ad hoc disallowance - Accounting amortisation not determinative for tax deduction - Validity and quantum of adhoc disallowance (originally 10% by AO, reduced by CIT(A)) on account of vehicle running & maintenance, depreciation on car, telephone and interest expenses. - HELD THAT: - The Tribunal noted that the A.O. had made a 10% ad hoc disallowance amounting to Rs. 88,979 and the CIT(A) had restricted it to Rs. 44,489. Having considered the submissions and the totality of facts, the Tribunal exercised its discretion to further moderate the estimate in the interest of justice. Instead of maintaining either of the earlier ad hoc percentages, the Tribunal directed a lump-sum disallowance of Rs. 25,000 as a reasonable estimate to meet the ends of justice. [Paras 7]

Ad hoc disallowance is modified to a lump-sum amount of Rs. 25,000.

Final Conclusion: The appeal is partly allowed: the marketing expenses of Rs. 35,00,000 are held allowable as revenue expenditure for A.Y. 2015-2016 and the adhoc disallowance in respect of other operating expenses is reduced to a lump-sum disallowance of Rs. 25,000; other general grounds dismissed.

Reopening of assessment and validity of reassessment proceedings - best judgment assessment under section 144 - burden to prove source of cash deposits - admission of additional evidence under Rule 46A of the IT Rules, 1962 - remand for fresh enquiry and opportunity to produce evidence

Reopening of assessment and validity of reassessment proceedings - Grounds challenging validity of reassessment proceedings were not pressed before the Tribunal and dismissed as not pressed. - HELD THAT: - The assessee did not pursue arguments on the validity of reopening before the Tribunal. The Tribunal recorded that Learned Counsel for the assessee did not make any arguments in respect of the validity of reassessment proceedings and accordingly treated that ground as not pressed. No adjudication on the merits of validity of reopening was undertaken by the Tribunal.

Ground challenging validity of reassessment proceedings dismissed as not pressed.

Burden to prove source of cash deposits - admission of additional evidence under Rule 46A of the IT Rules, 1962 - best judgment assessment under section 144 - remand for fresh enquiry and opportunity to produce evidence - Addition made in respect of unexplained bank deposits was not sustained by the Tribunal; matter remanded to the Assessing Officer for fresh enquiry and opportunity to the assessee to substantiate source of deposits. - HELD THAT: - The Assessing Officer had made addition by treating unexplained cash deposits as the assessee's income after accepting part of the explanation and making a best judgment addition under section 144 in respect of the remaining deposits in a joint account. The CIT(A) sustained that addition primarily on finding the Agreement to Sell produced during appeal to be forged or an afterthought. The Tribunal found merit in the assessee's submission that the AO/CIT(A) did not conduct adequate enquiry - for example, by examining the alleged payor or verifying prior withdrawals and agricultural income claimed as source. Given the contested veracity of the Agreement to Sell and the absence of effective enquiry, the Tribunal concluded that the issue required fresh consideration on facts. The Tribunal therefore directed that the assessee be given one more opportunity to produce evidence and appear before the AO without adjournment and that the AO make such enquiries as he deems proper, failing which appropriate order may be passed.

Addition set aside for fresh adjudication; matter restored to the file of the Assessing Officer with directions to grant one opportunity to the assessee and to conduct necessary enquiries; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal dismissed as not pressed the ground challenging validity of reassessment; on the substantive question of unexplained bank deposits the Tribunal set aside the confirmed addition and remanded the matter to the Assessing Officer for fresh enquiry and to grant the assessee a final opportunity to substantiate the source of deposits, directing the AO to decide the issue in accordance with law.

Deductibility of statutory tax deductions paid after year end but within statutory due date under cash system of accounting - Apportionment and disallowance of common office overheads where premises are partly occupied by other entities - Allowability of interest paid to partners and calculation under section 40(b)(iv) of the Income tax Act - Remand for recalculation and application of section 40(b)(iv)

Deductibility of statutory tax deductions paid after year end but within statutory due date under cash system of accounting - Disallowance of TDS payables outstanding at year end but paid within the due date - whether deductible when the assessee follows cash system of accounting. - HELD THAT: - The Tribunal found that the assessee consistently follows the cash system of accounting and that the disputed TDS amounts were paid within the statutory due date. Prior assessment years did not feature such sustained disallowance (and a similar addition in an earlier year was deleted). Reliance was placed on the Tribunal's decision in Deloitte (supra) where the addition was deleted. On these facts the Tribunal held that the Revenue's stand that amounts unpaid on the year end are not allowable was not tenable where payment was made within the statutory due date and the assessee follows cash accounting. The Tribunal therefore allowed the ground and deleted the addition. [Paras 7, 14]

Disallowance of TDS payable outstanding on year end but paid within the due date is deleted for A.Y. 2012 13 and A.Y. 2014 15.

Apportionment and disallowance of common office overheads where premises are partly occupied by other entities - Estimated disallowance of 4/5th of electricity expenses for L 41 office - whether sustainable in absence of supporting evidence and in view of earlier decisions in favour of the assessee. - HELD THAT: - The Tribunal examined the materials placed before the Assessing Officer and found that the disallowance was an estimate unsupported by evidence. The assessee had placed plausible explanations and the issue had been decided in the assessee's favour in preceding assessment years, on which the CIT(A) had relied. No distinguishing facts were shown by Revenue. In view of absence of evidentiary support for the estimate and the precedent in earlier years, the Tribunal held the disallowance unsustainable and allowed the ground. [Paras 10, 14]

The estimated disallowance of electricity expenses is deleted for A.Y. 2012 13 and A.Y. 2014 15.

Allowability of interest paid to partners and calculation under section 40(b)(iv) of the Income tax Act - Remand for recalculation and application of section 40(b)(iv) - Disallowance of interest paid to a partner - whether to be finally adjudicated or remanded for computation in accordance with the statutory test. - HELD THAT: - The Tribunal noted that the partnership deed provided for interest payments but that the Income tax Act prescribes the method and the limit under section 40(b)(iv). A prior Tribunal order in ITA No. 97/Del/2015 observed that the Assessing Officer had wrongly computed interest and that the matter should be restored to compute interest payable in accordance with section 40(b)(iv). The facts in the present year were identical; accordingly the Tribunal did not finally uphold or reject the addition on merits but restored the issue to the file of the Assessing Officer for computation in accordance with section 40(b)(iv), directing opportunity of hearing to the assessee. The ground was allowed partly for statistical purposes and remanded for fresh calculation. [Paras 13]

Issue restored to the Assessing Officer to calculate interest payable to partner as per section 40(b)(iv); ground allowed partly for statistical purposes (remand for computation and fresh consideration).

Final Conclusion: The appeals are allowed in part: disallowances relating to outstanding TDS (paid within the due date) and the estimated electricity expense allocation are deleted for A.Y. 2012 13 and A.Y. 2014 15; the disallowance of interest to a partner is remanded to the Assessing Officer for recalculation and fresh adjudication in accordance with section 40(b)(iv), with opportunity to the assessee.

Royalty characterization of computer software - Withholding tax obligation under section 195 of the Income-tax Act - Application of Article 12(3) of India-USA Double Taxation Avoidance Agreement - Precedential effect of the Supreme Court decision in Engineering Analysis Centre of Excellence on taxation of software receipts

Royalty characterization of computer software - Withholding tax obligation under section 195 of the Income-tax Act - Application of Article 12(3) of India-USA Double Taxation Avoidance Agreement - Precedential effect of the Supreme Court decision in Engineering Analysis Centre of Excellence on taxation of software receipts - Whether the amounts remitted by the assessee to a non-resident software supplier constituted royalty taxable in India (and therefore required deduction of tax at source under section 195), having regard to Article 12(3) of the India-USA DTAA and the Supreme Court's decision in Engineering Analysis Centre of Excellence. - HELD THAT: - The Tribunal examined the nature of the payments made to the non-resident supplier of computer software and the legal effect of the Supreme Court decision in Engineering Analysis Centre of Excellence. The Tribunal held that the Supreme Court in paragraph 169 (and related discussion) categorically found that receipts in respect of the types of computer software transactions considered cannot be characterised as "royalty". The Tribunal rejected the Revenue's contention that factual differences rendered the Apex Court's ratio inapplicable, observing that the Supreme Court's legal conclusion on the absence of an element of royalty in such software transactions applies across the defined categories of computer software. In view of that precedent, the receipts from the foreign software supplier did not amount to royalty under domestic law or Article 12(3) of the DTAA, and consequently no obligation to deduct tax at source under section 195 arose on the assessee in respect of those remittances. The Tribunal therefore concluded that the demand under sections 201(1)/201(1A) read with section 195 was not sustainable. [Paras 7, 8]

Assessee's appeal allowed; payments to the foreign software supplier are not taxable as royalty and no TDS under section 195 was required.

Final Conclusion: The Tribunal allowed the appeal, holding that the Supreme Court's decision in Engineering Analysis Centre of Excellence precludes treating the software remittances as royalty; therefore the demand under sections 201(1)/201(1A) read with section 195 is set aside.

Deduction under section 80P(2)(a)(i) - "co-operative society" definition under section 2(19) - entities registered under the Karnataka SouhardaSahakari Act, 1997 treated as co-operative societies - cognate statutory interpretation of co-operative enactments

Deduction under section 80P(2)(a)(i) - "co-operative society" definition under section 2(19) - entities registered under the Karnataka SouhardaSahakari Act, 1997 treated as co-operative societies - Whether an entity registered under the Karnataka SouhardaSahakari Act, 1997 qualifies as a "co-operative society" under section 2(19) of the Income Tax Act and is therefore entitled to deduction under section 80P(2)(a)(i). - HELD THAT: - The Tribunal considered the definition of "co-operative society" in section 2(19) of the Income Tax Act and the Karnataka High Court's decision in Swabhimani Souharda Credit Co-operative Ltd., which held that entities registered under the Karnataka SouhardaSahakari Act, 1997 fit within the statutory definition of "co-operative society". The High Court's reasoning was examined: both the 1959 and 1997 Karnataka Acts are cognate statutes enacted under the same constitutional head (Entry 32, List II), their preambles and provisions reflect cooperative principles, and the respective dictionary clauses and corporate-form provisions (including perpetual succession and body corporate status) show substantial proximity in content and effect. The Tribunal accepted that the nomenclature difference does not exclude souharda entities from the scope of section 2(19), and that the High Court declaration that such entities are entitled, subject to exceptions, to claim benefits under section 80P is binding on the issue. No other ground was urged by the authorities to deny the deduction; accordingly the CIT(A)'s allowance of the deduction was upheld. [Paras 9, 10, 11]

Assessee registered under the Karnataka SouhardaSahakari Act, 1997 is a "co-operative society" for the purposes of section 2(19) and is entitled to deduction under section 80P(2)(a)(i); the CIT(A)'s order is upheld.

Final Conclusion: The Revenue's appeal is dismissed and the order of the CIT(A) allowing the claim under section 80P(2)(a)(i) for AY 2016-17 is upheld.

Rectification under section 154 - limitation period for rectification - effect of rectification at assessee's instance - principles of natural justice and opportunity of hearing - interest under section 234D - interest under section 244A

Rectification under section 154 - limitation period for rectification - effect of rectification at assessee's instance - Validity of the rectification order dated 05/06/2018 under section 154 insofar as limitation is concerned. - HELD THAT: - The Tribunal examined whether the AO's rectification dated 05/06/2018 constituted rectification of the original assessment order giving effect to the ITSC directions dated 31/12/2013 or whether it corrected the earlier section 154 order dated 11/06/2014. The rectification of 05/06/2018 only altered computations made in the 11/06/2014 section 154 order (which itself was passed at the assessee's instance) and did not disturb the assessed income determined pursuant to the ITSC order. Counting the limitation period from the end of the financial year in which the order sought to be rectified was passed, the relevant starting point is the 11/06/2014 section 154 order. Measured from that order, the rectification dated 05/06/2018 falls within the four year limitation window and is therefore not time barred. [Paras 7]

Rectification order dated 05/06/2018 is within limitation and not void on limitation grounds.

Principles of natural justice and opportunity of hearing - rectification under section 154 - Whether failure to grant prior opportunity of hearing before passing the rectification dated 05/06/2018 renders the rectification void. - HELD THAT: - The Tribunal noted that the AO is obligated to afford an opportunity of hearing before raising a fresh demand by way of rectification. While the CIT(A) observed that appellate proceedings had afforded the assessee an opportunity, the Tribunal directed that on giving effect to the appellate order the AO must provide sufficient opportunity of hearing to the assessee. The Tribunal thus addressed the procedural defect remedially by ordering compliance rather than annulling the rectification ab initio. [Paras 5, 8]

Non grant of prior hearing does not ipso facto render the rectification void; AO must give sufficient opportunity of hearing when giving effect to the appellate directions.

Interest under section 234D - interest under section 244A - rectification under section 154 - Correctness of levy/allowance of interest under sections 234D and 244A as reflected in the rectification order. - HELD THAT: - On merits the Tribunal found that the earlier orders involved reworking of interest under sections 244A and 234D without disturbing assessed income. The assessee's contention that interest under section 234D could not be levied where refund was never granted and that interest under section 244A had not been allowed for the relevant month was accepted in part. The Tribunal directed the AO to verify facts and compute/charge interest under section 234D and grant interest under section 244A strictly in accordance with law and after due verification. [Paras 6, 8]

Matters of interest computation are remitted to the AO for verification and correct computation/adjustment of interest under sections 234D and 244A in accordance with law.

Final Conclusion: The appeal is partly allowed: the 05/06/2018 rectification is valid as within limitation (measured from the 11/06/2014 section 154 order); the AO must afford sufficient opportunity of hearing when giving effect to appellate directions; and computation of interest under sections 234D and 244A is remitted to the AO for verification and correct determination in accordance with law.

Deemed dividend under section 2(22)(e) - loan or advance and individual benefit - beneficial ownership versus legal title - commercial expediency and accounting treatment as company asset

Deemed dividend under section 2(22)(e) - loan or advance and individual benefit - commercial expediency and accounting treatment as company asset - Whether the payment made by M/s. SDCPL for purchase of immovable property in the names of its directors constituted a loan/advance or a payment for the individual benefit of the director attracting deemed dividend under section 2(22)(e), or whether the transaction was for the company's business and accordingly not exigible to section 2(22)(e). - HELD THAT: - The Tribunal examined documentary material including the company's bank payments for the purchase, the Land & Building ledger in the company's books, the Board resolution authorising purchase in the names of two directors expressly stating that the land would be assets of the company, and consistent disclosure of the land as a fixed asset in the audited balance sheets for subsequent years. Applying the statutory test in deemed dividend under section 2(22)(e), the decisive elements are whether there was a loan/advance to the director or a payment made for the director's individual benefit and whether the company possessed accumulated profits to the extent of such payment. The Tribunal found no evidence of any loan or advance recorded as payable to the director, and concluded that the payments were made by the company for commercial expediency and for the company's business purposes, with the company treating the property as its asset in its books. The Tribunal accepted the principle that substance of the transaction as reflected in board resolution and accounting treatment controls over mere registration in individual names, and relied on coordinate Tribunal precedent where similar facts led to deletion of addition under section 2(22)(e). On these grounds, the AO erred in invoking section 2(22)(e). [Paras 8, 11, 12]

The addition made treating the assessee's share of the property as deemed dividend under section 2(22)(e) is deleted and the appeal is allowed.

Final Conclusion: On the facts and documents (board resolution, payment records and consistent accounting treatment showing the land as company fixed asset) the Tribunal held that no loan/advance or individual benefit to the director was established; the invocation of section 2(22)(e) was therefore incorrect and the addition of the assessee's share in the property was deleted for A.Y. 2014-15.

Deduction under section 80IA - Amalgamation and continuity of tax benefits - Applicability of section 80IA(12) to the amalgamated company - Requirement of "new" plant and machinery for entitlement - Burden on the Assessing Officer to rebut entitlement

Deduction under section 80IA - Applicability of section 80IA(12) to the amalgamated company - Requirement of "new" plant and machinery for entitlement - Burden on the Assessing Officer to rebut entitlement - Claim of deduction under section 80IA(4) by the assessee for A.Y. 2010-11 where plant & machinery were transferred to the assessee on amalgamation - HELD THAT: - The Assessing Officer disallowed the deduction on the premise that more than 90% of the machinery was "old" as it had been transferred from the erstwhile Shanti Processor Ltd., and the AO required detailed proof that the amalgamating company had purchased new plant & machinery and that the same were not previously used. The CIT(A) examined the scheme of amalgamation and applied section 80IA(12), observing that where an undertaking entitled to deduction is transferred to another Indian company by amalgamation, the provisions of section 80IA are to apply to the amalgamated company as they would have applied to the amalgamating company, provided the amalgamating company was itself eligible. The Assessing Officer failed to produce evidence disproving the material facts that the plant was newly purchased by the amalgamating company and that similar claims for adjacent years had been allowed. The Tribunal on identical facts in the assessee's earlier years had recorded that the plant was new, that the assessee had commenced generation within the relevant period and that the AO had previously allowed the deduction. In the absence of any contrary material, the AO's presumption that the machinery became "old" merely by reason of transfer on amalgamation was held to be incorrect, and the benefit under section 80IA was held to carry over to the amalgamated company under sub section (12). The Tribunal and CIT(A) therefore rightly deleted the addition and allowed the deduction for the assessment year in question. [Paras 6, 7]

Addition disallowing the deduction under section 80IA deleted; deduction allowed to the assessee and the Revenue's appeal dismissed.

Final Conclusion: The Tribunal upholds the CIT(A)'s order allowing the assessee's claim of deduction under section 80IA for A.Y. 2010-11 on the application of section 80IA(12) to amalgamation facts and for failure of the Assessing Officer to disprove entitlement; Revenue's appeal is dismissed.

Reopening of assessment under section 147/148 - reason to believe versus reason to suspect - borrowed satisfaction - failure to dispose objections within reasonable time and effect of GKN Driveshafts - violation of principles of natural justice (audi alteram partem) - reliance on third party/excise findings for income tax reassessment

Reopening of assessment under section 147/148 - reason to believe versus reason to suspect - borrowed satisfaction - reliance on third party/excise findings for income tax reassessment - Validity of reassessment initiated under section 147/148 where the Assessing Officer relied on information and findings of the Central Excise authorities and did not form an independent reason to believe. - HELD THAT: - The Tribunal held that reopening under section 147/148 requires an Assessing Officer's own honest and reasonable "reason to believe" and not mere suspicion or a belief borrowed from another authority. The AO in this case proceeded on information contained in a show cause notice and on findings recorded by the Commissioner of Central Excise, and did not apply independent mind or demonstrate a material link between the tangible material and formation of his own belief. The excise adjudication itself later quashed the principal basis relied upon (the booking register/annexure A), and no independent material was shown to establish clandestine removals from the assessee's premises. Reliance solely on third party records and the excise order, without separate application of mind under income tax law, amounted to borrowed satisfaction and did not vest jurisdiction to reopen the assessment. The Tribunal applied precedents emphasising that information from investigation wings or other authorities must be independently examined by the AO before issue of a valid notice under section 148, and concluded that the foundational reason for reopening did not survive. [Paras 9, 10, 11, 12]

Reopening was invalid; proceedings under section 147/148 quashed for lack of independent reason to believe and for being based on borrowed satisfaction and third party/excise findings.

Failure to dispose objections within reasonable time and effect of GKN Driveshafts - violation of principles of natural justice (audi alteram partem) - Effect of the Assessing Officer's delay in disposing the objections to the reasons for reopening and passing assessment in haste on validity of reassessment. - HELD THAT: - The Tribunal found that after service of reasons, the assessee filed objections which were not disposed by the AO within a reasonable time; the objections were disposed shortly before the assessment order and the assessment was completed in a hurried manner without affording an effective opportunity to the assessee. Applying the binding guidance in GKN Driveshafts and subsequent authorities, and recognising the rule of audi alteram partem as mandatory, the Tribunal held that the AO's conduct-delayed disposal of objections and passing of assessment without adequate opportunity-vitiated the reassessment proceedings. The Tribunal noted authorities holding that disposal of objections must be by a speaking order within a reasonable time and that passing of assessment in disregard of such requirement renders the action invalid. [Paras 8, 9, 12]

Proceedings were vitiated by failure to dispose objections within a reasonable time and by violation of natural justice; reassessment quashed on this ground as well.

Final Conclusion: The Tribunal allowed the appeal, quashed the reassessment proceedings initiated under section 147/148 for A.Y. 2008-09 on the twin grounds that the AO acted on borrowed satisfaction/reliance on excise findings without forming an independent reason to believe and that the objections to reopening were not disposed of within a reasonable time (violating GKN and principles of natural justice); other grounds were not adjudicated as the reopening was set aside.

Natural justice - pre-notice consultation - personal hearing - show-cause notice under Section 28(1) of the Customs Act, 1962 - service of notice - misclassification of goods - application of mind - quashing of notice

Natural justice - pre-notice consultation - personal hearing - service of notice - application of mind - quashing of notice - show-cause notice under Section 28(1) of the Customs Act, 1962 - Validity of the pre-notice consultation and the show-cause notice issued without affording reasonable opportunity of personal hearing in view of delayed service of the consultation letter and fixation of hearing within 24 hours. - HELD THAT: - The Court found that the pre-notice consultation letter dated 01.06.2021 called for a personal hearing on 02.06.2021 at 15:00 hours, but the petitioner averred that the letter was served only on 10.06.2021. Fixing a hearing within 24 hours of dispatch by registered post was arbitrary and amounted to an empty formality, since it was foreseeable that service could not occur in time. Such conduct gives rise to the presumption that the authority did not apply its mind and deprived the petitioner of a reasonable opportunity to be heard. Principles of natural justice require that sufficient time be allowed between issuance and the date fixed for hearing so that the notice reaches the addressee and the party can put forward its case. The respondent, through learned Additional Solicitor General, undertook to grant a personal hearing. In these circumstances the Court quashed the impugned show-cause notice dated 02.06.2021, revived the pre-notice consultation letter dated 01.06.2021 and directed a fresh personal hearing to be afforded to the petitioner, leaving it open to the respondent to decide the matter thereafter in accordance with law. [Paras 6, 8]

Show-cause notice dated 02.06.2021 quashed; pre-notice consultation revived and petitioner granted a fresh personal hearing.

Final Conclusion: Writ petition allowed; the show-cause notice dated 02.06.2021 is set aside, the pre-notice consultation is revived and the petitioner is to be afforded a personal hearing as directed, after which the respondent may proceed in accordance with law.

Penalty for attempt to export goods improperly under Section 114 of the Customs Act, 1962 - misdeclaration to evade export duty and obtain undue drawback - collusion between the CHA and the exporter - overwriting of package numbers as evidence of abetment - confiscation consequent to improper export

Penalty for attempt to export goods improperly under Section 114 of the Customs Act, 1962 - overwriting of package numbers as evidence of abetment - misdeclaration to evade export duty and obtain undue drawback - Levy of penalty under Section 114 of the Customs Act, 1962 on the appellants was upheld. - HELD THAT: - The Show Cause Notice recorded that package numbers on the shipping bill consignments were overwritten, statements of concerned persons were recorded, and a CLRI certificate confirmed that 26 of the 31 bundles contained semi-finished leather which would attract higher export duty and affect drawback claims. The appellants as CHA did not rebut the allegations: there was admission that their staff had overwritten package numbers (the employee was dismissed), no denial that CHA personnel alone access the examination area where overwriting occurred, and no refutation of the CLRI finding. The investigation therefore established sufficient basis to infer collusion between the CHA and the exporter and to conclude that the appellants abetted an attempt to export goods improperly with a misleading declaration to evade export duty and secure undue drawback. Applying Section 114 (specifically sub clause (ii) as relied upon), the Tribunal found that the facts disclosed reasonable suspicion of abetment and loss to revenue and that imposition of the penalty was justified. The Tribunal rejected the contention that the order was based on surmise and conjecture, holding the documentary and testimonial findings, together with the appellants' admissions and conduct, constituted adequate evidence to uphold the penalty. [Paras 3, 7, 8, 9]

Penalty under Section 114 affirmed and the appeals dismissed.

Final Conclusion: On the evidence recorded in the Show Cause Notice, the CLRI report, the admission regarding overwriting by CHA staff and the absence of effective rebuttal, the Tribunal upheld the penalties imposed under Section 114 of the Customs Act, 1962 and dismissed the appeals.

Penalty for use of false and incorrect material under the Customs Act (knowledge and intent requirement) - Knowledge and intention as essential element for imposition of penalty - Responsibility of exporter ceasing upon customs stuffing and sealing - Evidence of third party tampering undermining mens rea

Penalty for use of false and incorrect material under the Customs Act (knowledge and intent requirement) - Knowledge and intention as essential element for imposition of penalty - Evidence of third party tampering undermining mens rea - Responsibility of exporter ceasing upon customs stuffing and sealing - Whether penalty under Section 114AA of the Customs Act could be sustained against the appellant. - HELD THAT: - The Tribunal held that Section 114AA requires proof that the person knowingly or intentionally made, signed or used, or caused to be made, signed or used, a declaration or document false or incorrect in any material particular. The material on record did not establish that the appellant had knowledge or intention to facilitate the illegal export. A neutral surveyor reported that the container had been tampered with, and the Revenue did not allege that the appellant was responsible for the tampering or that he signed or used any false document. There was no finding that the appellant had acquaintance with the alleged mastermind or acted with deliberate mala fides. Further, the appellant's role as exporter was treated as having ceased once the goods were stuffed, sealed in the presence of Customs officers and handed over to the custodian, and the Shipping Bill declarations were not shown to be false or signed by him with requisite knowledge. In these circumstances the essential mens rea for imposing penalty under Section 114AA was not established and the penalty could not be sustained. [Paras 6, 7, 8]

Penalty under Section 114AA set aside and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed under Section 114AA of the Customs Act on the ground that the requisite knowledge or intention on the part of the appellant was not proved and the material indicated possible third party tampering.

Minutes of board meeting - typographical/inadvertent error in minutes - minutes as evidence of proceedings - fraud and false statement - intent to deceive, gain undue advantage or injure - quashing of criminal complaint - inherent jurisdiction under Section 482 CrPC

Minutes of board meeting - typographical/inadvertent error in minutes - minutes as evidence of proceedings - fraud and false statement - intent to deceive, gain undue advantage or injure - quashing of criminal complaint - inherent jurisdiction under Section 482 CrPC - Proceedings in complaint case no. 15 of 2018 quashed as the record did not prima facie disclose an offence under sections 118(2) and (7) read with sections 447/448 of the Companies Act, 2013. - HELD THAT: - The Court found that item no. 12 of the minutes of the Board meeting dated 11th June, 2014 contained the phrase 'for its de registration as NBFC', which was not supported by the application to the RBI dated 28th March, 2014 and that the company was not a registered NBFC at the relevant time. The erroneous recording was held to be a typographical/inadvertent error which was detected and rectified by the company by a Board resolution of 9th September, 2015. The statutory scheme establishes that minutes kept in accordance with section 118 are evidence of proceedings, but penal provisions in sections 447/448 require an element of intent - namely intent to deceive, gain undue advantage or injure the interests of the company or others. The complaint, on its face, did not prima facie disclose such intent; the petitioners' explanatory reply to the show cause notice was not reflected in the complaint and the sequence of events did not support a finding of mala fides. Given these facts, allowing the prosecution to proceed would amount to an abuse of process; accordingly, the Court, exercising its inherent jurisdiction under Section 482 CrPC, quashed the proceedings. [Paras 13, 14, 15, 16, 18]

Complaint case no. 15 of 2018 quashed and proceedings before the Learned 2nd Special Court, Calcutta terminated.

Final Conclusion: The revisional petition was allowed and complaint case no. 15 of 2018 was quashed under the Court's inherent jurisdiction, as the record disclosed only a typographical error in the minutes which, having been rectified and unexplained by the complaint as involving fraudulent intent, did not prima facie constitute an offence under the Companies Act, 2013.

Default in holding annual general meeting - power of Tribunal to call and direct annual general meeting under Section 97 - appointment of an observer for conduct of a general meeting - deeming one member present to constitute a meeting - appropriateness of calling an extra ordinary general meeting where AGM is directed

Default in holding annual general meeting - power of Tribunal to call and direct annual general meeting under Section 97 - appointment of an observer for conduct of a general meeting - deeming one member present to constitute a meeting - Tribunal's jurisdiction under Section 97 to direct that the respondent company hold its Annual General Meeting for Financial Year 2018-2019 and related incidental directions including appointment of an observer. - HELD THAT: - Section 97 is invoked where a default has been made in holding the annual general meeting under Section 96; existence of such default is a precondition to exercise of the Tribunal's power. The admitted position in the pleadings establishes a default in conducting the AGM for Financial Year 2018-2019, although the parties attribute blame to each other. The second respondent, while contesting, agreed to conduct the AGM in compliance with the Act. Exercising the power under Section 97, the Tribunal directed the respondents to hold the AGM for Financial Year 2018-2019 on 30 October 2021, appointed an independent observer to conduct and determine mode and venue (physical or video conferencing) having regard to the pandemic, required issuance of clear 21 days' notice and made explicit that one member present in person or by proxy shall be deemed to constitute the meeting. The Tribunal also directed that the remuneration of the observer be borne equally by the petitioner and the second respondent in consultation with the observer. [Paras 12]

Respondents directed to hold the AGM for Financial Year 2018-2019 on 30.10.2021; Mr. K. Easwara Pillai appointed as observer with specified notice, mode and venue directions; observer's remuneration to be borne equally by petitioner and second respondent.

Appropriateness of calling an extra ordinary general meeting where AGM is directed - attending AGM as alternative to calling EGM - Whether an order should be passed under Section 98 directing convening of an Extra Ordinary General Meeting when an AGM has been directed to be held. - HELD THAT: - Having directed the holding of the AGM for the Financial Year 2018-2019 and having appointed an observer to conduct it, the Tribunal found that calling an EGM was not appropriate. The petitioner, being a shareholder, may attend the scheduled AGM and raise his submissions therein; therefore separate relief under Section 98 for convening an EGM is unnecessary. [Paras 2]

Petition under Section 98 disposed of as unnecessary; no direction to call an EGM - petitioner may participate in the AGM scheduled for 30.10.2021.

Final Conclusion: The Tribunal, finding a default in holding the Annual General Meeting for Financial Year 2018-2019, directed the respondents to hold the AGM on 30.10.2021 with an appointed observer and incidental directions; the separate petition for an EGM was declined as unnecessary since the petitioner can raise his concerns at the directed AGM.

Scheme of Amalgamation - dispensing with meeting of shareholders - dispensing with meeting of secured creditors - convening meeting of unsecured creditors - notice and publication requirements under the Companies Act, 2013 - quorum for meeting - voting and proxy provisions - appointment of chairperson and scrutinizer - filing of affidavit of service and report of meeting

Dispensing with meeting of shareholders - consent of all shareholders - The requirement to convene and hold separate meetings of the shareholders of the Applicant Companies in relation to the proposed Scheme of Amalgamation was dispensed with. - HELD THAT: - The Tribunal found that each equity shareholder of the Applicant Companies had considered the Scheme and given written consent by way of affidavits, certified by Chartered Accountant filings annexed to the Application. In view of the unanimous written consents of all equity shareholders, the Tribunal exercised its power to dispense with the convening and holding of separate shareholders' meetings for ascertaining their wishes in relation to the Scheme of Amalgamation.

Meetings of the shareholders of the Applicant Companies are dispensed with as all shareholders have given written consent to the Scheme.

Dispensing with meeting of secured creditors - consent of secured creditors - The requirement to convene and hold separate meetings of the secured creditors of the Transferee Company in relation to the proposed Scheme of Amalgamation was dispensed with. - HELD THAT: - The Tribunal recorded that the secured creditors of the Transferee Company had given written consent to the Scheme and had agreed to waive the holding of a separate secured creditors' meeting, as certified by the statutory auditor. Having received such written consents, the Tribunal dispensed with convening separate meetings of the secured creditors of the Transferee Company.

Meetings of the secured creditors of the Transferee Company are dispensed with as the secured creditors have given written consent and waived meetings.

Convening meeting of unsecured creditors - notice and publication requirements under the Companies Act, 2013 - quorum for meeting - voting and proxy provisions - appointment of chairperson and scrutinizer - filing of affidavit of service and report of meeting - A meeting of the unsecured creditors of the Transferee Company was ordered to be convened with specified procedural directions concerning notice, advertisement, quorum, voting, proxy, appointment of Chairperson and Scrutinizer, and filing of requisite affidavits and report. - HELD THAT: - The Tribunal directed that an unsecured creditors' meeting be held on the specified date and venue and prescribed the procedural framework to be followed. Directions include: publication of an advertisement and service of notice and accompanying documents at least thirty clear days prior to the meeting in specified newspapers and by sending notices to unsecured creditors by post/email/other modes; fixing quorum in accordance with the Companies Act provisions; allowing voting in person or by proxy with prescribed timelines for filing proxies; permitting bodies corporate to vote through authorised representatives upon deposit of certified board resolutions; appointment and remuneration of a Chairperson and Scrutinizer and their respective duties; consolidation and scrutiny of votes by the Scrutinizer and reporting of results; determination by the Chairperson of disputed entries in the books for purposes of valuing claims; and filing of affidavits proving service, publication and the Chairperson's report in Form CAA-4. The Tribunal also directed service of notices to statutory and regulatory authorities and prescribed timelines for filing representations and applicants' compliance affidavits.

The unsecured creditors' meeting shall be convened and conducted in accordance with the Tribunal's procedural directions; requisite notices, publications, filings and the Scrutinizer's and Chairperson's reports are to be made as directed.

Final Conclusion: The Company Application for sanctioning steps in furtherance of the Scheme of Amalgamation is disposed of with directions: shareholders' and secured creditors' meetings are dispensed with on account of written consents; an unsecured creditors' meeting is to be convened with specified procedural and reporting requirements, and the applicants must comply with service and filing obligations within the timelines ordered.

Restoration of company struck off under Section 252(3) of the Companies Act, 2013 - Requirement to show company was carrying on business or in operation at time of striking off - Proprietary asset as basis for restoration - Discretionary power to restore subject to compliance, payment of fees and costs - Publication of restoration order in the Official Gazette

Restoration of company struck off under Section 252(3) of the Companies Act, 2013 - Requirement to show company was carrying on business or in operation at time of striking off - Discretionary power to restore subject to compliance, payment of fees and costs - Whether the name of NABADURGA BUILDERS PRIVATE LIMITED should be restored to the Register under Section 252(3) of the Companies Act, 2013 - HELD THAT: - The Tribunal applied the statutory test in Section 252(3), which permits restoration of a struck off company's name where the applicant (company or its member/creditor/workman) files within the prescribed period and it is shown that the company was carrying on business or in operation at the time of striking off. The Tribunal examined the records including audited accounts for 31.03.2014 to 31.03.2020, bank account maintenance and a sale deed evidencing purchase of land in 2013. Although the audited accounts showed no revenue during the defaulting years, the existence of a bank account and ownership of valuable land led the Tribunal to conclude that the company had proprietary assets and merited sympathetic consideration. ROC had issued statutory notices and proceeded under Section 248, and did not oppose restoration. Exercising its discretionary power, the Tribunal held that restoration was appropriate but expressly made it conditional: filing of all pending statutory documents from FY 2013-14 onwards with prescribed fees/late fees/fines, payment of costs for revival, filing a certified copy of the order with ROC, and publication of the order in the Official Gazette. The Tribunal also clarified that the restoration is confined to the violations leading to striking off and does not preclude ROC from taking other lawful actions for any prior or concurrent violations. [Paras 8, 10, 13]

Allowed; Registrar of Companies, Odisha directed to restore the company's name to the Register subject to filing pending statutory documents and payment of prescribed fees/late fees/fines, payment of revival cost, filing a certified copy of the order, and publication in the Official Gazette; other enforcement actions by ROC not precluded.

Final Conclusion: The Tribunal allowed the application under Section 252(3) and directed restoration of NABADURGA BUILDERS PRIVATE LIMITED to the Register, subject to specified compliance steps, payment of costs, and publication of the order; the restoration is confined to the grounds that led to striking off and does not bar ROC from taking other lawful actions.

Power to restore name under Section 252(3) of the Companies Act, 2013 - striking off for non-filing of statutory returns - restoration of struck-off company to register - compliance of pending statutory documents and filing obligations - publication in the Official Gazette - payment of costs for revival

Striking off for non-filing of statutory returns - going concern / carrying on business at time of striking off - The company was carrying on business at the time its name was struck off. - HELD THAT: - The Tribunal examined the audited annual accounts, profit and loss statements, income-tax returns and bank statements produced by the petitioner. The financial statements show revenue and reported profits for each year in the defaulting period, presence of fixed assets, long-term loans and advances, finance costs and expenditure on employee benefits. The company's bank account exhibited regular operative credits and debits and Income-tax returns were filed for later years. On this material the Tribunal held, prima facie, that the company was a going concern and was carrying on business when its name was struck off. [Paras 10, 11, 12, 13]

Accepted that the company was carrying on business when struck off; the application under Section 252(3) succeeds on this factual basis.

Power to restore name under Section 252(3) of the Companies Act, 2013 - restoration of struck-off company to register - compliance of pending statutory documents and filing obligations - payment of costs for revival - publication in the Official Gazette - Exercise of the Tribunal's power to direct restoration of the company's name and the conditions attached to such restoration. - HELD THAT: - Relying on the statutory power conferred by Section 252(3) and having accepted that the company was carrying on business when struck off, the Tribunal directed the Registrar of Companies to restore the company's name in the register as if it had not been struck off. The restoration was made subject to specified conditions: filing of all pending statutory documents including annual accounts and returns for the financial year ended March 31, 2010 onwards within 30 days with prescribed fees/late fees as determined by the Registrar; personal assurance by the company's representative to ensure compliance; payment of the revival cost by online payment; delivery of a certified copy of the order to the Registrar within 30 days; and publication of the order in the Official Gazette by the Registrar. The Tribunal clarified that the order is confined to violations leading to the striking off and does not preclude the Registrar from taking other lawful actions for any separate violations or offences. [Paras 8, 13]

Ordered restoration of the company's name subject to compliance with the enumerated conditions and reserved the Registrar's right to take action for other violations.

Final Conclusion: The Tribunal allowed the petition under Section 252(3), finding that the company was carrying on business when its name was struck off, and directed the Registrar of Companies to restore the company's name to the register subject to filing of pending statutory documents from the financial year ended March 31, 2010 onwards, payment of revival costs, delivery of the order, publication in the Official Gazette and compliance with other specified conditions; the order is confined to the striking-off violations and does not bar the Registrar from pursuing other lawful actions.

Maintainability of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - conversion of loan transaction into agreement for purchase of flat - prematurity of insolvency petition where possession not yet due - offer of possession and absence of default

Maintainability of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - conversion of loan transaction into agreement for purchase of flat - The Section 7 petition was not maintainable because the parties had entered into a subsequent agreement treating the earlier loan transaction as the basis for purchase of a flat, constituting the latest contractual arrangement between them. - HELD THAT: - The Court accepted the findings of the adjudicating authority and the NCLAT that the agreement dated 1 October 2016 was the latest document between the parties and, by its terms, evidenced that the earlier loan had been appropriated or subsumed into a fresh bargain for purchase of a flat. Given that the admitted subsequent agreement altered the legal relation between the parties, the petition filed under Section 7, based on the earlier loan transaction, could not be maintained in face of the later agreement which governed the parties' rights and obligations.

The Court affirmed that the Section 7 petition was not maintainable in view of the subsequent agreement dated 1 October 2016, which constituted the operative contract between the parties.

Prematurity of insolvency petition where possession not yet due - offer of possession and absence of default - The petition was premature because, on the material dates, no default was established: possession of the flat had been offered before the contractual due date, and the petition was filed before the expiry of the period fixed for delivery of possession under the later agreement. - HELD THAT: - The NCLT and NCLAT findings, endorsed by this Court, show that possession was offered on 7 March 2018 while the agreement stipulated possession by 1 April 2018 (accounting for the contractual period and grace period). The petition under Section 7 was filed on 4 January 2018, prior to the expiry of the period for delivery of possession; consequently, the adjudicating authority correctly held that no default stood established and that the petition was premature.

The Court held the insolvency petition to be premature for lack of established default, affirming dismissal on that ground.

Final Conclusion: The judgment and order of the NCLAT dismissing the Section 7 petition were affirmed and the civil appeal is dismissed; the dismissal does not preclude the appellant from pursuing any other remedy available in law.

Payment of CIRP costs by committee of creditors - proportional contribution to CIRP costs in accordance with voting share - duty of CoC under regulations 33 and 34 to pay resolution professional's fees and costs - time bound nature of the Insolvency and Bankruptcy Code, 2016 - debarment from participation in Committee of Creditors for refusal to pay CIRP costs

Payment of CIRP costs by committee of creditors - proportional contribution to CIRP costs in accordance with voting share - duty of CoC under regulations 33 and 34 to pay resolution professional's fees and costs - time bound nature of the Insolvency and Bankruptcy Code, 2016 - debarment from participation in Committee of Creditors for refusal to pay CIRP costs - First respondent's obligation to pay its share of CIRP costs and the consequence of refusal to do so. - HELD THAT: - The Tribunal found that regulations 33 and 34 cast a duty on members of the Committee of Creditors to pay fees and costs incurred by the resolution professional once ratified by the CoC. A financial creditor who is a CoC member must contribute to CIRP costs in proportion to its voting share and cannot avoid that liability while exercising voting rights concerning the corporate debtor. Given the IBC's time bound mandate and the practical necessity that the resolution professional not be left to pursue collections, a member who expressly refuses or is unable to make the required contribution frustrates the process. Where a CoC member (and the related lender) decline to bear the CIRP costs, equity and the statutory scheme justify excluding such member(s) from participation in CoC meetings. Applying these principles to the facts, the Tribunal held that the first respondent's asserted requirement of RBI approval to pay CIRP costs was not a valid exception to its obligation and that, having refused to contribute, it should be debarred from CoC participation. [Paras 11, 14, 16, 17, 18]

First respondent is barred from participating in the Committee of Creditors for refusing to pay its share of CIRP costs; the applicant is directed to remove the first respondent and reconstitute the CoC without it, while the first respondent's claim remains intact.

Final Conclusion: Application allowed to the extent of directing removal of the first respondent from the Committee of Creditors and reconstitution of the CoC without it; the first respondent's monetary claim is preserved but it is barred from participating in CoC meetings for refusal to pay CIRP costs.

Existence of financial debt under a Debenture Trust Deed - default and occurrence of an Event of Default under the Debenture Trust Deed - initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code - debt being due and payable despite pending arbitration and interim award - recall of redemption amount upon event of default - moratorium on suits, recovery and enforcement on admission of CIRP - appointment of Interim Resolution Professional

Existence of financial debt under a Debenture Trust Deed - default and occurrence of an Event of Default under the Debenture Trust Deed - recall of redemption amount upon event of default - There existed a financial debt and a default by the Corporate Debtor under the Debenture Trust Deed which crystallised the right to recall the entire redemption amount. - HELD THAT: - The Tribunal found on the admitted record that Petitioner No.3 had disbursed Rs.72 crores to the Corporate Debtor under the Debenture Trust Deed and a Supplemental Agreement. The first coupon/interest became payable on the stipulated date and, despite an extended grace period, the coupon amount remained unpaid on the extended due date. The Deed expressly treated non-payment of such monies as an Event of Default, entitling the debenture holder/trustee to recall the entire redemption amount. The Tribunal held that the essential ingredients of a financial debt and default for a Section 7 application were satisfied on the documentary record and that the non-payment triggered the contractual right to demand repayment of the outstanding redemption amount, crystallising the creditors' rights under the DTD. [Paras 8, 9, 16, 17, 19]

The existence of financial debt and default under the DTD was established and the Petition satisfies the core requirements for admission under Section 7.

Debt being due and payable despite pending arbitration and interim award - initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code - The petition under Section 7 was maintainable notwithstanding prior invocation of arbitration and an interim arbitral award. - HELD THAT: - The Tribunal observed that the Section 7 petition was filed prior to the arbitration being commenced to a stage where relief would supplant the Section 7 filing, and that the adjudicating authority's task is to ascertain existence of a default from the creditor's records or evidence. Reliance was placed on the principle that a disputed claim does not preclude admission if the debt is due and payable on the record. The Interim Award passed by the Arbitrator later affirmed the existence of a monetary entitlement in favour of the Petitioners, which the Bench treated as corroborative of the default and debt rather than as a bar to the Section 7 petition. Consequently, the contentions that the Petitioners had elected arbitration thereby waiving their rights under the Code, or that the Interim Award ousted the maintainability of the Section 7 petition, were rejected. [Paras 10, 12, 17, 18]

The Section 7 petition was maintainable and not rendered incompetent by the arbitration proceedings or the interim arbitral award.

Moratorium on suits, recovery and enforcement on admission of CIRP - appointment of Interim Resolution Professional - On admission, the Tribunal imposed the statutory moratorium and appointed an Interim Resolution Professional to commence the CIRP. - HELD THAT: - Having concluded that debt and default were established and the Section 7 petition complete, the Tribunal admitted the petition and ordered the consequential reliefs mandated on admission: prohibition of institution or continuation of suits and enforcement actions against the Corporate Debtor, restriction on transfer or encumbrance of assets, protection of supply of essential goods or services, public announcement of CIRP, and appointment of an Interim Resolution Professional to carry out the functions under the Code. The moratorium was directed to be effective from the date of pronouncement until completion of the CIRP or earlier orders in accordance with the Code. [Paras 19, 20]

The petition was admitted; moratorium imposed and Mr. Anuj Bajpai was appointed as Interim Resolution Professional.

Final Conclusion: The Tribunal admitted the Section 7 petition: it held that a financial debt and default under the Debenture Trust Deed were established on the record, that the petition was maintainable despite arbitration and an interim arbitral award, and accordingly ordered commencement of CIRP with moratorium and appointment of an Interim Resolution Professional.

Completion of liquidation within two years - Continuation/extension of liquidation under Regulation 44(2) - Obligation to file report explaining delay in liquidation - Effect of COVID-19 lockdowns on liquidation timelines - Adherence to IBBI model timelines during extended liquidation

Continuation/extension of liquidation under Regulation 44(2) - Completion of liquidation within two years - Obligation to file report explaining delay in liquidation - Effect of COVID-19 lockdowns on liquidation timelines - Application under Regulation 44(2) for continuation of the liquidation period of the corporate debtor for a further period of one year - HELD THAT: - The liquidator had not completed the liquidation within the two-year period prescribed by the regulations owing to multiple failed e-auctions and the disruptions caused by the COVID-19 pandemic and attendant lockdowns. Regulation 44(2) mandates that where liquidation is not completed within two years, the liquidator must apply to the Adjudicating Authority with a report explaining the reasons for non-completion and specifying the additional time required. The Tribunal found the liquidator's explanation and the material about unsuccessful sale efforts and pandemic-related constraints sufficient to justify granting the requested extension. Having applied the statutory test in Regulation 44(2), the Tribunal extended the liquidation period for one year from the date of the order, set the new outer date for completion, and directed the liquidator to make every endeavour to complete the process within the extended period and to comply with the IBBI model timelines and reporting requirements.

IA/622/CHE/2021 is allowed; the liquidation period is extended for one year from the date of this order, the liquidation process to be completed on or before 02.08.2022, and the liquidator is directed to adhere to IBBI model timelines and file required reports.

Final Conclusion: The Tribunal allowed the liquidator's application under Regulation 44(2), extended the liquidation period by one year to conclude on or before 02.08.2022, and directed the liquidator to comply with IBBI model timelines and reporting obligations while endeavouring to complete the liquidation within the extended period.

Overriding effect of the Insolvency and Bankruptcy Code - transfer of title to bonafide purchaser by e-auction - liquidator's power to realise assets and distribute proceeds under the waterfall mechanism - requirement to file claims with the liquidator for pre admission dues - prohibition on creating lien or withholding NOC after valid transfer

Overriding effect of the Insolvency and Bankruptcy Code - transfer of title to bonafide purchaser by e-auction - prohibition on creating lien or withholding NOC after valid transfer - Tribunal's jurisdiction to order transfer of shares held by the Corporate Debtor in the society and to direct the society to grant NOC to the purchaser. - HELD THAT: - The Tribunal held that section 238 confers the Code an overriding effect over other laws and thereby empowers it to adjudicate disputes relating to the corporate debtor notwithstanding provisions of the Maharashtra Co operative Societies Act. The sale of the property by the liquidator by e auction resulted in transfer of title/ownership/possession to the successful bidder by a registered sale deed. Once title and possession have passed to a bonafide purchaser through the liquidator's e auction process, the society cannot fetter or condition that transfer by withholding a no objection certificate on account of alleged pre existing dues. The Tribunal therefore exercised its jurisdiction to direct the society to transfer the shares of the corporate debtor in favour of the purchaser and to grant the requested NOC, finding that such directions are consistent with the Code's scheme and the completed transfer to the purchaser. [Paras 23, 24, 25, 26, 27]

Tribunal directed Respondent No.1 to transfer the corporate debtor's shares to the purchaser and to grant NOC, holding it had jurisdiction under the Code and that the completed e auction sale vested title in the purchaser.

Requirement to file claims with the liquidator for pre admission dues - liquidator's power to realise assets and distribute proceeds under the waterfall mechanism - Whether the society's remedy for alleged dues lies in filing a claim with the liquidator and whether those dues can be directly enforced against the purchaser. - HELD THAT: - The Tribunal observed that claims for pre admission dues relating to the corporate debtor must be filed before the liquidator in accordance with the liquidation process; absent such filing the claims are not directly realizable against the asset or the purchaser. The sale proceeds have been distributed to the secured creditor in accordance with the Code's waterfall, and the society cannot extort the purchaser by seeking payment from the third party buyer. Consequently the society was directed to file its claim with the liquidator forthwith if it wished to pursue recovery, but it could not withhold NOC or create an encumbrance on the basis of unfiled dues. [Paras 23, 24, 26, 27]

Tribunal directed the society to file its claims with the liquidator and held that alleged pre admission dues do not permit withholding of NOC or direct enforcement against the purchaser.

Final Conclusion: Application allowed: Respondent No.1 ordered to transfer the corporate debtor's shares to the purchaser and to grant NOC; Respondent No.1 directed to file its claim with the liquidator forthwith; application disposed accordingly.

Approval of resolution plan under section 30(6) of the Insolvency and Bankruptcy Code, 2016 - compliance with section 30(2) of the Code and regulations 37, 38, 38(1A) and 39(4) of the IBBI Regulations - limited judicial review of the Adjudicating Authority guided by K. Sashidhar and Essar Steel - binding effect of an approved resolution plan and bar on claims other than liabilities taken over - incompetence of the Committee of Creditors to determine rights of operational creditors created during management of a former successful resolution applicant without hearing - commercial wisdom of the CoC not susceptible to judicial modification except within section 30(2) parameters

Approval of resolution plan under section 30(6) of the Insolvency and Bankruptcy Code, 2016 - compliance with section 30(2) of the Code and regulations 37, 38, 38(1A) and 39(4) of the IBBI Regulations - limited judicial review of the Adjudicating Authority guided by K. Sashidhar and Essar Steel - binding effect of an approved resolution plan and bar on claims other than liabilities taken over - Approval of the resolution plan submitted by Dev Land and Housing P. Ltd. and its conformity with statutory requirements - HELD THAT: - The Tribunal considered whether the resolution plan, as approved by the Committee of Creditors with 67.01% voting share, satisfies the requirements of section 30(2) of the Code and relevant Regulations. Applying the principles in K. Sashidhar and the Essar Steel decision, the Adjudicating Authority's role is limited to satisfying itself that the plan conforms to statutory mandates and does not trespass upon the commercial wisdom of the CoC. The Tribunal found that the plan provides for priority payment of CIRP costs, addresses payment to operational and dissenting financial creditors, contains implementation, management and supervisory arrangements, and includes declarations required by regulation 38(1A) and 38(1B). The plan was held not to contravene section 29A. Consequently, the plan meets the statutory requirements and may not be judicially modified beyond the parameters of section 30(2). The Tribunal therefore approved the plan and directed that it shall be binding on the corporate debtor, its creditors and other stakeholders, and that the moratorium shall cease from the date of the order.

The resolution plan submitted by Dev Land and Housing P. Ltd. is approved and shall become effective and binding as ordered.

Incompetence of the Committee of Creditors to determine rights of operational creditors created during management of a former successful resolution applicant without hearing - binding effect of an approved resolution plan and bar on claims other than liabilities taken over - Whether the CoC could treat liabilities created by the former successful resolution applicant as pre CIRP and determine rights of those operational creditors without hearing them - HELD THAT: - The Tribunal examined the CoC's decision to treat operational creditors whose liabilities arose while the company was under the management of the former successful resolution applicant as pre CIRP and to limit their recovery under the present plan. The Tribunal held that liabilities created by the former SRA during its management cannot be adjudicated by the CoC in a manner that adversely affects the rights of those operational creditors without affording them an opportunity to be heard. Such a determination does not fall within the untrammelled domain of the CoC's commercial wisdom. The Tribunal therefore declined to endorse the CoC's treatment of that liability and made clear that the issue must be decided in an appropriate proceeding after hearing the affected operational creditors; meanwhile the present resolution applicant shall not be held accountable for that liability.

The CoC cannot determine and extinguish the rights of those operational creditors without hearing them; the question remains to be decided in appropriate proceedings after hearing the affected parties.

Final Conclusion: The resolution plan of Dev Land and Housing P. Ltd. is approved as meeting the requirements of section 30(2) and relevant Regulations and is ordered to be binding and effective; however, the Tribunal has declined to permit the CoC to preclude or adjudicate the rights of operational creditors whose liabilities arose during the tenure of the former SRA without hearing them, leaving that issue for appropriate proceedings.

Fraudulent trading or wrongful trading - intent to defraud creditors - due diligence of directors - fraud - siphoning of funds - forensic audit evidence

Fraudulent trading or wrongful trading - intent to defraud creditors - forensic audit evidence - due diligence of directors - siphoning of funds - Whether creation of fixed deposits from funds in the Trust and Retention Account and pledging them to secure loans for related subsidiary companies constituted fraudulent trading under section 66 of the I&B Code requiring contributions to the corporate debtor's assets. - HELD THAT: - The Tribunal examined the material including the Forensic Audit Report and other documentary evidence and held that the Resolution Professional failed to establish fraudulent trading with intent to defraud creditors. The Forensic Audit Report contained explicit disclaimers, was opinion-based and sample-driven, and the auditors themselves recorded limitations, making it inconclusive (finding recorded when considering the audit report). The transactions were shown to have occurred with knowledge of the consortium lenders and with the Axis Bank permitting use of funds to create fixed deposits; the Corporate Debtor remained a going concern and was ultimately sold as such, undermining a finding of total misuse. No material was produced to show that loans raised by subsidiary companies were diverted by the suspended management for their personal benefit. Reliance on general pronouncements (such as CAG/RBI guidelines) without specific evidence of diversion or deceit was held insufficient to prove siphoning. Applying the statutory test in section 66 (which requires proof of carrying on business with intent to defraud, and failure to exercise due diligence where applicable), the Tribunal found that the ingredients of fraudulent trading were not made out on the available record and that the earlier adverse finding could not be revisited absent cogent and sufficient new material. [Paras 16, 18, 21, 22, 26]

The transactions involving creation of fixed deposits and pledging them for subsidiaries' loans do not constitute fraudulent trading under section 66 on the material before the Tribunal; the RP failed to make respondents liable to contribute.

Fraudulent trading or wrongful trading - intent to defraud creditors - Whether the advance made in 2014 to M/s. Sokeo Power Pvt. Ltd. amounted to a fraudulent transaction under section 66 of the I&B Code. - HELD THAT: - The Tribunal noted that the advance to Sokeo Power Pvt. Ltd. was made several years prior to commencement of the I&B Code and that in its earlier order it had recorded that such an older transaction could not be characterised as fraudulent trading under section 66. No fresh or sufficient material was placed on record to displace that earlier finding. Consequently, the allegation that the advance amounted to a fraudulent transaction intended to defraud creditors was not established. [Paras 23, 24, 26]

The advance to Sokeo Power Pvt. Ltd. is not a fraudulent transaction under section 66 on the material before the Tribunal and does not attract liability to contribute.

Forensic audit evidence - intent to defraud creditors - Whether, in view of parallel criminal investigation by investigative agencies, the Adjudicating Authority should itself record a finding of fraud on the disputed transactions. - HELD THAT: - The Tribunal observed that some lenders had lodged an FIR and that the CBI had registered a crime and was investigating. It held that it would be contrary to principles of justice for the Adjudicating Authority, in its limited jurisdiction under the I&B Code, to preempt the outcome of an ongoing criminal investigation and record a per se finding of fraud on the same material; such factual determinations are for the investigating agency and, if necessary, the criminal courts during trial. [Paras 25, 26]

The Tribunal declined to record a conclusive finding of fraud where a criminal investigation is pending and reserved fact-finding in that forum.

Final Conclusion: For want of cogent and sufficient material the application under section 66 was rejected; the Tribunal found that the Resolution Professional did not establish fraudulent trading or siphoning requiring respondents to contribute to the corporate debtor's assets, and declined to pre-empt concurrent criminal proceedings.

Natural justice - opportunity of personal hearing - remand for fresh consideration - eligibility to avail benefits of the Scheme - condition under section 125(1)(e) of the Finance Act, 2019 - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Natural justice - opportunity of personal hearing - eligibility to avail benefits of the Scheme - remand for fresh consideration - Whether the impugned order declaring the petitioner ineligible under the Scheme should be set aside for want of an opportunity of hearing and remitted for fresh consideration. - HELD THAT: - The writ petition challenged a formatted order declaring the petitioner ineligible to avail benefits of the Sabka Vishwas Scheme on the stated ground that a condition in section 125(1)(e) was not satisfied because no quantification had been made by Anti Evasion, CGST, Mumbai Central. The Court noted that no opportunity of hearing had been afforded to the petitioner and the respondents did not dispute that position; the respondents conceded that eligibility may be reconsidered afresh. In these circumstances the Court set aside the impugned order and directed the appropriate authority to afford the petitioner a personal hearing and to reconsider and decide the question of eligibility in accordance with law. The Court expressly refrained from expressing any view on the merits of the petitioner's entitlement and left all points open for determination by the authority on fresh consideration.

Impugned order set aside; matter remitted to the appropriate authority for fresh consideration of eligibility with an opportunity of personal hearing to be provided within a fortnight and a fresh order to be passed in accordance with law; no opinion expressed on merits.

Final Conclusion: The High Court set aside the order declaring the petitioner ineligible under the Sabka Vishwas Scheme for want of an opportunity of hearing, directed a fresh consideration after personal hearing within a fortnight, and left all substantive points open for decision by the appropriate authority.

Cenvat credit - input service - nexus between input service and output service - port services - dredging service - ownership of asset not relevant for availment of Cenvat credit - service provider-recipient relationship - use by third parties not a ground for denial of credit - limitation - extended period requires suppression of facts

Input service - nexus between input service and output service - port services - dredging service - Dredging services availed for creation of navigation channel qualify as input service creditable against output port and cargo handling services. - HELD THAT: - The Tribunal held that the dredging was integral and essential to enable mother vessels to call at the appellant's jetty and thereby to render the taxable output services of port service and cargo handling. The dredging was undertaken pursuant to contract entered into by the appellant and the dredging service was used exclusively to create draft up to the appellant's jetty; without it the appellant could not provide the contracted port services. Applying the definition of input service in the Cenvat Credit Rules, 2004 and consistent precedents of this Tribunal, the dredging service used for providing the output service falls within the scope of input service and Cenvat credit is admissible.

Cenvat credit on dredging services is admissible as input service for the appellant's port and cargo handling output services.

Ownership of asset not relevant for availment of Cenvat credit - service provider-recipient relationship - The fact that the navigation channel/jetty ownership vests with Gujarat Maritime Board does not disentitle the appellant from availing Cenvat credit on dredging services. - HELD THAT: - The Tribunal observed that coastal land and port infrastructure commonly vest with sovereign or maritime authorities while operations are undertaken by private operators under license or lease. The Cenvat rules do not require ownership of the location or asset for availment of credit; what matters is that the appellant was the contractual recipient of the dredging service, bore the cost including service tax, and used that service to provide taxable output services. Reliance was placed on Tribunal and High Court authorities holding that ownership or immovability is not a criterion for denying input credit.

Ownership of the jetty or channel by GMB is immaterial; the appellant, being the service recipient and user of the dredging service, is entitled to Cenvat credit.

Use by third parties not a ground for denial of credit - nexus between input service and output service - Theoretical or contractual provision that other users may use the channel does not preclude credit where the appellant exclusively contracted, paid for and used the dredging for its output service. - HELD THAT: - The Tribunal found on the facts that the dredging was effected up to the appellant's jetty and in practice no other user availed the deep-draft channel; the appellant alone contracted with and paid the dredging contractors. Even if an agreement theory permitted common use, the mere possibility that others could benefit does not negate that the appellant received and used the service for its taxable output. Accordingly, benefit to third parties in theory is not a ground to deny credit where the input service is used for the recipient's output service.

Credit cannot be denied merely because the channel could theoretically be used by third parties; appellant's exclusive receipt and use of the service sustains entitlement to credit.

Limitation - extended period requires suppression of facts - Demand raised under the extended period is not sustainable because there was no suppression of facts by the appellant; the department had knowledge of the relevant agreement and availment. - HELD THAT: - The Tribunal reviewed audit records and earlier communications showing that the appellant had submitted the license agreement and that the department had raised objections in audits for the relevant years. The Show Cause Notice related to availment from 19.04.2010 to 1.12.2012 was issued on 13.04.2015 (extended period). Given that the agreement and details of dredging and credit were within departmental knowledge during audits, the Tribunal concluded there was no suppression or mis-declaration warranting invocation of the extended period.

The extended-period demand is unsustainable for lack of suppression; the demand is time-barred.

Final Conclusion: The impugned adjudication denying Cenvat credit, demanding interest and imposing penalty was set aside. The Tribunal allowed the appeal, holding dredging services to be admissible input services for the appellant's port and cargo handling output services, that ownership of the channel/jetty or possible use by others did not preclude credit, and that the extended-period demand was not sustainable for lack of suppression; consequential relief to follow as per law.

Fixation of special rate of value addition - exemption/refund of excise duty by way of fixation of special rate - limitation for filing applications for fixation of special rate - expeditious consideration of pending applications - stay on passing final orders in show-cause notices pending decision

Fixation of special rate of value addition - exemption/refund of excise duty by way of fixation of special rate - Applications filed by the petitioner for fixation of special rate of value addition were to be considered afresh by the assessing authority. - HELD THAT: - The petitioner had filed applications under the Industrial Policy and notifications (initially dated 14.11.2002 and amended by notifications dated 27.03.2008 and 10.06.2008) seeking fixation of a special rate for value addition so as to enable exemption/refund of excise duty. Noting that the applications filed on 09.07.2020 remained undecided and that the respondents expressed willingness to consider them, the Court directed respondent No.3, Assistant Commissioner, to consider the applications in accordance with law and to decide them expeditiously. The Court also indicated that reliance should not be placed on the time of filing to refuse consideration in light of the judgment of the Gauhati High Court in M/s Jyothy Labs Ltd. v. UOI and others. The order requires fresh consideration rather than deciding the merits on the basis of procedural non-compliance or delay. [Paras 3, 5, 6]

The applications for fixation of special rate of value addition were remitted to respondent No.3 for fresh consideration in accordance with law, to be decided expeditiously (if possible within one month of production of the order).

Limitation for filing applications for fixation of special rate - stay on passing final orders in show-cause notices pending decision - No final order shall be passed on the show-cause notices listed until the applications for fixation of special rate are decided or for a limited period. - HELD THAT: - Having directed fresh consideration of the petitioner's applications and noting the contention that authorities were routinely rejecting such applications on limitation grounds, the Court restrained the authorities from passing final orders in response to specified show-cause notices for a period of one month or until the aforesaid applications are decided. This interim protection was granted to preserve the petitioner's position while the assessing authority conducts the ordered reconsideration, thereby preventing prejudice that might be caused by contemporaneous final action on the notices. [Paras 6, 7]

Passing of any final order in response to the listed show-cause notices is stayed for one month or until the applications for fixation of special rate are decided as directed.

Final Conclusion: Writ petition disposed of by directing the assessing authority to consider and decide the petitioner's applications for fixation of a special rate of value addition in accordance with law, without insisting on time of filing in the light of the Gauhati High Court decision, and by staying final orders on specified show-cause notices for one month or until the applications are decided.

Taxation of inter-state sale - Local VAT versus Central Sales Tax - Prohibition of double taxation - Taxation of incremental value for installation services - Use of advance permits in the name of contractees to shift tax incidence

Taxation of inter-state sale - Local VAT versus Central Sales Tax - Prohibition of double taxation - Taxation of incremental value for installation services - Validity of demand of local VAT on sale and supply of elevators treated as inter-state sales where Central Sales Tax was paid, and whether VAT could be levied on the same transactions. - HELD THAT: - The court found that the elevators were supplied by way of sale from branches outside the State and such transfers were inter-state sales on which Central Sales Tax was payable and paid. The Assessing Officer and revisional authority erred in treating those sales as local sales liable to VAT by construing that, because the dealer was locally registered, the goods could have been brought into the State and title transferred locally. The court held that the incidence of tax depends on where title and the goods actually passed, not on an artificial hypothesis of how the sale could have been effected. Where the transaction was a clear inter-state sale, local VAT could not be levied again; at most VAT would be chargeable on any incremental value arising from local supply of installation services. The Assessing Officer's approach amounted to impermissible double taxation and an artificial attempt to tax the same transaction under the TVAT Act despite payment of Central Sales Tax.

Assessment demand of local VAT on the elevators (inter-state sales) set aside; only incremental value for local installation could be subject to VAT, not the sale proceeds already taxed under Central Sales Tax.

Use of advance permits in the name of contractees to shift tax incidence - Whether the Assessing Officer's reliance on use of Form XXIV permits in the name of contractees justified treating inter-state sales as local sales for VAT liability. - HELD THAT: - The court rejected the Assessing Officer's reasoning that the dealer's use of advance permits in the contractees' names justified recharacterising the inter-state sales as local sales. The recharacterisation was an artificial device to attribute local tax liability despite documentary and factual indication that title passed outside the State and CST had been paid. The mere possibility that goods could have been procured through the dealer's local registration did not permit converting an actual inter-state sale into an intra-state transaction for VAT purposes.

Finding based on alleged misuse of Form XXIV did not sustain a VAT demand on the inter-state sale; the demand was impermissible and set aside.

Final Conclusion: Revision petition allowed; impugned assessment order demanding VAT on elevators treated as inter-state sales set aside. Pending applications disposed of.