TaxTMI Updates e-Newsletter
Sep 21,2021

Preference for statutory appeal over writ jurisdiction - Exceptions permitting writ petition - incompetence, lack of jurisdiction, malafides, imminent threat or gross injustice - Scope of judicial review under Article 226 - review of process not merits - Appellate authority as final fact finding forum - Duty to prefer appeal within prescribed period and appellate adjudication

Preference for statutory appeal over writ jurisdiction - Exceptions permitting writ petition - incompetence, lack of jurisdiction, malafides, imminent threat or gross injustice - Scope of judicial review under Article 226 - review of process not merits - Appellate authority as final fact finding forum - Whether a writ petition is maintainable in lieu of the statutory appeal provided under the Tamil Nadu Goods and Service Tax Act - HELD THAT: - The Court held that filing an appeal is the rule and entertaining a writ petition in place of the statutory appeal is only an exception. Writ relief will be appropriate where the order impugned is challenged on the direct ground that the authority was incompetent or lacked jurisdiction, or where mala fides are alleged, or where there is an imminent threat or gross injustice warranting urgent intervention. Mere allegations of violation of principles of natural justice or other routine complaints do not, by themselves, justify dispensing with the appellate remedy. The High Court's jurisdiction under Article 226 is to scrutinise the legality of the process by which a decision was reached and not to substitute its own fact finding; therefore routine resort to writ jurisdiction without availing the statutory appellate forum would undermine the institutional hierarchy and the role of specialist appellate authorities as final fact finding forums. [Paras 3, 4, 5, 6]

Statutory appeal is ordinarily the appropriate remedy; writ jurisdiction is exceptional and confined to cases of lack of jurisdiction, mala fides, or imminent/gross injustice, and judicial review under Article 226 examines process rather than rehearing disputed facts.

Duty to prefer appeal within prescribed period and appellate adjudication - Appellate authority as final fact finding forum - Whether the petitioner may be permitted to proceed by way of appeal and the manner in which the appellate authority should deal with such appeals - HELD THAT: - Applying the foregoing principles to the facts, the Court observed that the Assistant Commissioner had passed the impugned orders and that the appellate function under Section 31 is being exercised by the Appellate Deputy Commissioner (in the rank of Joint Commissioner). The petitioner was therefore bound to prefer an appeal before the Appellate Deputy Commissioner. The Court granted liberty to the petitioner to prefer appeals against the impugned orders within 30 days from receipt of this order in the prescribed format, and directed that upon filing, the Appellate Deputy Commissioner shall entertain and adjudicate the appeals on merits in accordance with law, affording opportunity to the petitioner and taking into consideration the pendency of these writ petitions, and to pass final orders expeditiously. [Paras 7, 8, 9, 10, 11]

Petitioner permitted to file appeals within 30 days; Appellate Deputy Commissioner to entertain and decide the appeals on merits expeditiously, after affording opportunity to the petitioner.

Final Conclusion: Writ petitions disposed of by directing the petitioner to prefer statutory appeals within 30 days and by directing the appellate authority to entertain and decide those appeals on merits expeditiously; no costs.

Bail under Section 439 Cr.PC - economic offences and bail considerations - completion of investigation/charge-sheet laid - custodial detention not necessary for further investigation - severity of punishment as a relevant factor in bail - imposition of restrictive and safeguarding bail conditions

Bail under Section 439 Cr.PC - economic offences and bail considerations - completion of investigation/charge-sheet laid - custodial detention not necessary for further investigation - severity of punishment as a relevant factor in bail - Grant of regular bail to the accused-petitioner arrested under Section 132(1)(i) of the Assam GST Act, 2017, after completion of investigation and filing of offence report. - HELD THAT: - The Court recognised that the offence alleged is an economic offence of substantial magnitude and acknowledged that seriousness and the severity of punishment are relevant factors. Simultaneously, the Court noted that the investigating agency has completed investigation and the offence report has been filed, rendering custodial custody unnecessary for further investigation. The materials on record did not indicate a likelihood of the petitioner absconding or tampering with witnesses if released. The petitioner had been in custody for the period shown in the record. Balancing the accused's right to bail against the public interest in prosecution of economic offences, and having regard to the prescribed punishment for the offence, the Court concluded that bail was warranted on appropriate terms. [Paras 12, 13, 14, 15, 16]

Petitioner entitled to grant of regular bail on furnishing bond and sureties; custodial detention not necessary for further investigation and bail granted subject to conditions.

Imposition of restrictive and safeguarding bail conditions - custodial detention not necessary for further investigation - Terms and conditions upon which bail is to be released were specified and imposed. - HELD THAT: - The Court specified bail conditions designed to secure the accused's presence at trial and to protect the integrity of the prosecution: execution of a bail bond with two sureties, restriction on leaving territorial jurisdiction without prior written permission (to be granted by reasoned order if allowed), deposit of passport/visa if any, prohibition on tampering with evidence, inducement or threat to persons acquainted with the facts, and prohibition on contacting witnesses. The Chief Judicial Magistrate was permitted to impose additional appropriate conditions if required. [Paras 17, 18]

Bail to be released on bond and sureties and subject to the enumerated restrictive conditions; Chief Judicial Magistrate may add further appropriate conditions.

Final Conclusion: The petition is allowed: the accused-petitioner is directed to be released on regular bail on furnishing the prescribed bond and sureties, subject to the conditions imposed by this Court and any additional appropriate condition that the Chief Judicial Magistrate may require; petition disposed of.

Quashing of show cause notice - audit report under Section 65(6) of the GST Act - supply of audit report within 30 days - consideration of reply by competent authority - speaking order

Quashing of show cause notice - consideration of reply by competent authority - audit report under Section 65(6) of the GST Act - supply of audit report within 30 days - speaking order - Petition for quashing the show cause notice was not entertained; competent authority directed to consider the petitioner's reply and the objection that the audit report was not supplied within 30 days and to pass a speaking order. - HELD THAT: - The petitioner challenged the show cause notice and contended that the audit report prepared under Section 65(6) of the GST Act was not supplied within the 30-day period mandated by that provision. The Court noted that the petitioner had already filed a reply to the impugned show cause notice and that the competent authority was seized of the matter. In view of these facts, the Court declined to quash the notice at this interlocutory stage. Instead, the Court directed the competent authority to consider the petitioner's reply, with particular attention to the specific objection regarding non-supply of the audit report within 30 days as per Section 65(6), and thereafter to pass a reasoned and speaking order on the show cause notice in accordance with law.

Writ petition disposed by refusing to quash the show cause notice and remitting the matter to the competent authority to consider the reply and the objection about non-supply of the audit report within 30 days and to pass a speaking order in accordance with law.

Final Conclusion: The writ petition was dismissed without quashing the show cause notice; the matter is remitted to the competent authority to consider the petitioner's reply, examine the objection that the audit report was not supplied within 30 days under Section 65(6) of the GST Act, and pass a reasoned speaking order in accordance with law.

Redemption of confiscated goods - confiscation under Section 130 of the CGST Act - release of detained goods on deposit of demanded amount - interception and inspection procedure under CBIC Circular - mala prohibita vs mala in se

Redemption of confiscated goods - release of detained goods on deposit of demanded amount - confiscation under Section 130 of the CGST Act - interception and inspection procedure under CBIC Circular - Whether the goods and conveyance detained pending confiscation proceedings under Section 130 of the CGST Act can be released to the apparent owner on his depositing the amount specified in the Section 130 notice, subject to the outcome of those proceedings. - HELD THAT: - The Court examined sub-section (2) of Section 130 which permits the officer adjudging confiscation to give the owner an option to pay a fine in lieu of confiscation and noted the provisos that prescribe levy of fine/penalty for redemption. The Court treated confiscation under the provision as mala prohibita, observing that the consequence of confiscation does not render the goods res extra commercium and that the stigma attaches, if at all, to the owner who may purge it by payment as provided by the statute. The Court also relied on CBIC Circular No.41/15/2018-GST which prescribes short time-frames for inspection and contemplates release where the owner comes forward to make payment of tax and penalty, and which provides for issuance of FORM GST MOV-05/FROM GST MOV-09 and electronic accounting of the demand and payment. Balancing these statutory provisions and the Circular against the indefinite duration of confiscation proceedings, the Court concluded that it is consistent with the statutory scheme and principles of justice to permit release of detained goods and conveyance to the apparent owner upon deposit of the total amount specified in the Section 130 notice, subject to verification of prima facie ownership and the ultimate outcome of confiscation proceedings. The Court made clear that this indulgence does not entitle the owner to any equitable pleas arising from the release order. [Paras 4]

Goods and conveyance in detention shall be released to the petitioner after the court-verified prima facie ownership and on deposit of the total amount comprised in the Section 130 notice dated 13.08.2021 (GST MOV-10), subject to outcome of the confiscation proceedings; petitioner shall not plead equity by virtue of this release.

Final Conclusion: Writ petition allowed in part; limited mandamus issued directing immediate release of the detained goods and conveyance to the petitioner on verification of prima facie ownership and on deposit of the amount specified in the Section 130 notice dated 13.08.2021 (GST MOV-10), all subject to the final outcome of the confiscation proceedings; other contentions left open.

Computation of advance tax under Section 209(1)(d) - Meaning of "would be deductible or collectible at source" - Liability for interest on short payment of advance tax under Section 234B - Interaction between Chapter XVII provisions on deduction/collection at source and advance tax - Proviso to Section 209(1)(d) (Finance Act, 2012) as interpretative aid for prior law

Computation of advance tax under Section 209(1)(d) - Meaning of "would be deductible or collectible at source" - Proviso to Section 209(1)(d) (Finance Act, 2012) as interpretative aid for prior law - Interpretation of Section 209(1)(d) prior to the Finance Act, 2012; whether an assessee could reduce estimated advance tax by amounts which "would be deductible or collectible at source" even though the payer had in fact paid or credited such income without deducting tax. - HELD THAT: - The Court held that, for assessment periods prior to the financial year 2012-13, the words "would be deductible or collectible at source" in Section 209(1)(d) must be understood to permit an assessee to reduce estimated advance tax by the tax which was deductible or collectible at source, even if the payer had not in fact deducted or collected that tax at the time of payment. The proviso introduced by the Finance Act, 2012-making the assessee liable for advance tax where the person responsible for deduction/collection has paid or credited the income without deduction/collection-was treated as a subsequent legislative clarification which resolves an ambiguity in the earlier provision. Having regard to the memorandum to the Finance Bill, 2012 and established principles permitting reference to subsequent legislation to resolve ambiguity, the Court concluded that the pre-2012 statutory scheme entitled assessees to reduce advance tax by tax "would be deductible or collectible" and that the 2012 amendment changed that position prospectively from 1 April 2012 (financial year 2012-13) onwards. [Paras 14, 15, 16, 19, 20]

For periods prior to financial year 2012-13, Section 209(1)(d) allowed reduction of advance tax by amounts "would be deductible or collectible at source" notwithstanding that the payer had not deducted/collected such tax; the 2012 proviso alters the law prospectively.

Liability for interest on short payment of advance tax under Section 234B - Interaction between Chapter XVII provisions on deduction/collection at source and advance tax - Whether an assessee is liable to pay interest under Section 234B where tax was payable by deduction at source but was not deducted by the payer, for assessment periods prior to 2012-13. - HELD THAT: - The Court held that liability to pay interest under Section 234B is predicated on the pre-conditions of (i) liability to pay advance tax and (ii) non-payment or short payment of such advance tax. Section 209 governs computation of advance tax and, prior to the 2012 amendment, permitted reduction of advance tax by amounts deductible/collectible at source. Consequently, where the assessee lawfully computed advance tax after excluding tax "would be deductible or collectible at source," and thus had no shortfall in advance tax for the relevant period, the pre-conditions for levy of interest under Section 234B were not satisfied. The Court further observed that the Revenue has a statutory remedy against the payer who defaults in deduction/collection at source, and that Section 234B cannot be invoked against the payee in such circumstances for periods prior to the 2012 amendment. [Paras 12, 13, 20, 22, 25]

For assessment periods prior to financial year 2012-13, interest under Section 234B could not be imposed on the payee-assessee where advance tax computation lawfully excluded tax deductible/collectible at source and therefore no default in advance tax existed; Revenue's appeals on this point dismissed.

Final Conclusion: The appeals filed by the Revenue were dismissed in respect of the question whether interest under Section 234B can be levied on assessees for periods prior to assessment year 2013-14 where tax was deductible at source but not deducted by the payer; the Finance Act, 2012 amendment (proviso to Section 209(1)(d)) altered the law prospectively from financial year 2012-13.

Deduction under Section 43B - actual payment - deemed payment - legal fiction - sales tax set off - adjustment under sales tax rules - tax liability

Deduction under Section 43B - actual payment - deemed payment - sales tax set off - adjustment under sales tax rules - legal fiction - Whether the sales tax set off of Rs. 7,06,590/- which was adjusted under the sales tax rules amounts to an "actual payment" for purposes of allowing a deduction under Section 43B of the Income-tax Act. - HELD THAT: - Section 43B permits a deduction for any sum payable by way of tax only in the previous year in which such sum is actually paid. The court found that the appellant was entitled, under the sales tax scheme, to set off the purchase-tax amount against sales tax collected on sale of finished goods. That entitlement to adjustment effects a legal fiction whereby the liability, though not paid in cash, is treated as adjusted and hence as actual payment within the meaning of Section 43B. The Bombay Sales Tax Rules (specifically Rule 41D read with Rule 45(3)) permit such an adjustment in the return itself, creating a parallel legal fiction analogous to statutory provisions which treat liabilities as effectively discharged. The court relied on the reasoning in Commissioner of Income Tax v. National Standard Duncan Ltd. (Calcutta High Court) that where a part of sales tax is adjusted or set off in terms of the sales tax rules, it is to be presumed as a deemed payment to be included in the relevant assessment. Applying this principle, the amount of Rs. 7,06,590/- being a tax liability adjusted by statutory machinery is a deemed actual payment and therefore deductible under Section 43B. [Paras 6, 7]

The sales tax set off of Rs. 7,06,590/- is a deemed actual payment by legal fiction and is deductible under Section 43B.

Final Conclusion: The disallowance of the sales tax set off of Rs. 7,06,590/- for Assessment Year 1988-89 was incorrect; the amount is to be treated as actual payment under Section 43B and the appeal is disposed of accordingly with no order as to costs.

Principles of natural justice - technical glitch in e-filing portal - show cause notice under Section 142(1) - disallowance under Section 14A - unexplained loan under Section 68 - demand notice under Section 156 - penalty under Section 271(1)(c) - remand for de novo consideration - personal hearing

Principles of natural justice - technical glitch in e-filing portal - show cause notice under Section 142(1) - remand for de novo consideration - personal hearing - Assessment order passed without affording effective opportunity to reply and personal hearing due to admitted technical glitch in the income-tax e-filing system - HELD THAT: - The Court found that respondents admitted the existence of a technical glitch in the upgraded e-filing system and that the portal displayed a response date of 21st July 2021 while the impugned assessment order was passed on 8th July 2021. In view of the admitted system failure and the petitioner's contention that the portal indicated a later response date, the assessment was held to have been passed in circumstances affecting the petitioner's opportunity to be heard. The Court declined to express any view on the merits of the additions but concluded that the proceedings were vitiated by the procedural defect arising from the technical glitch. The matter was therefore remanded for fresh consideration, allowing the petitioner a limited period to file its response and directing that a personal hearing be granted if requested, after which the assessing authority is to pass an assessment order in accordance with law.

Assessment order set aside and remanded for de novo consideration; petitioner permitted two weeks to file response and entitled to personal hearing if sought.

Disallowance under Section 14A - unexplained loan under Section 68 - demand notice under Section 156 - penalty under Section 271(1)(c) - remand for de novo consideration - Consequential demand and penalty issued on the basis of the impugned assessment set aside along with the assessment and remanded for fresh adjudication - HELD THAT: - Because the Court set aside the impugned assessment on procedural grounds, it also set aside the consequential demand notice issued under Section 156 and the penalty notice issued under Section 271(1)(c). Those consequential orders were remitted to the assessing authority to be considered afresh in the course of the de novo assessment proceedings, so that any determination on the claimed disallowance under Section 14A, the alleged unexplained loan under Section 68, the resultant demand and any penalty may be re-examined after the petitioner is afforded the opportunity to be heard.

Demand notice and penalty notice dated 8th July 2021 set aside and remitted for fresh consideration along with the reassessment.

Final Conclusion: Impugned assessment order dated 8th July 2021, demand notice under Section 156 and penalty notice under Section 271(1)(c) set aside and remanded for de novo consideration because of an admitted technical glitch affecting the petitioner's opportunity to be heard; petitioner given two weeks to file its response and entitled to a personal hearing if requested; no observation made on merits.

Best judgment assessment under Section 144(1)(b) - service of notice - application of mind - quashing and setting aside of assessment order - setting aside of consequential penalty notices - remand for de novo adjudication - right to personal hearing

Application of mind - best judgment assessment under Section 144(1)(b) - Whether the assessment order for AY 2018-19, framed as a best judgment assessment, was passed without application of mind and on incorrect reasons - HELD THAT: - The Court found that the Assessing Officer proceeded on the footing that notices under Section 142(1) were left unheeded and the assessee was untraceable, and therefore framed the assessment as a best judgment assessment. The record, however, showed that the petitioner had received a notice under Section 143(2) and had filed a reply dated 7th October 2019 which the impugned order failed to notice; a reply to the Section 142(1) notice is asserted by the petitioner to have been filed on 23rd January 2020 (disputed by the department); and a partial response was filed on 30th April 2021 to the last notice. The verification-unit reports relied upon by the Assessing Officer, stating that the petitioner could not be located at three addresses, were held to be unreliable because the petitioner is a registered company with its registered office and commercial address reflected in filings and returns, and the verification reports stating that the address was found but details of the specified person could not be ascertained were not acceptable. In those circumstances the Court concluded that the assessment was founded on incorrect factual premises and that the AO had not applied his mind to the available material.

Assessment order dated 30th April 2021 quashed and set aside.

Setting aside of consequential penalty notices - Whether the consequential notices imposing penalties and other consequences issued on the basis of the impugned assessment should stand - HELD THAT: - Since the primary assessment order was quashed on the ground that it was passed without proper application of mind and on incorrect reasons about service and non-responsiveness, the Court also set aside the consequential notices issued on the same date under the specified penalty provisions. The Court did not adjudicate on the merits of the liability or penalties.

Consequential notices dated 30th April 2021 under penalty provisions set aside.

Remand for de novo adjudication - right to personal hearing - Procedure to be followed upon remand and scope of fresh consideration - HELD THAT: - The matter was remitted for de novo adjudication, leaving open the rights and contentions of the petitioner. The Court accepted the petitioner's undertaking to file all further documents required in response to the notices within two weeks. The Court directed that if the petitioner fails to file documents, the Assessing Officer may proceed with the adjudication considering the response already on record but must grant a personal hearing in accordance with law. The Court expressly refrained from making any observation on the merits of the case.

Matter remanded for de novo adjudication; petitioner permitted to file documents; AO to grant personal hearing; no observations on merits.

Final Conclusion: The High Court quashed and set aside the assessment order dated 30th April 2021 for AY 2018-19 and the consequential penalty notices, remanded the matter for de novo adjudication while keeping open all contentions, permitted the petitioner to file outstanding documents within two weeks, and directed that a personal hearing be granted before any fresh order is passed.

Seizure of property during search - Retention and release of seized assets under Section 132B - Effect of completed assessment on release of seized assets - Tax liability determined by assessment and pending appeal - Error apparent on record justifying review - Prejudice to Revenue from non-disclosure of material fact

Retention and release of seized assets under Section 132B - Effect of completed assessment on release of seized assets - Tax liability determined by assessment and pending appeal - Whether the jewellery seized during search could be released to the assessee notwithstanding that an assessment order determining tax liability for the assessment year 2013-14 had been passed and an appeal against that assessment was pending. - HELD THAT: - The Court analysed Section 132B(i) which permits recovery of existing liability or liability determined on completion of assessment out of assets seized under Section 132/132A. The Court found that, contrary to the representation before it when the earlier order was passed, the assessment for AY 2013-14 had been completed on 17.10.2018 and a demand was raised; an appeal against that assessment is pending. Because the tax liability was determined prior to the earlier order, the goods could not be released in full. The Court therefore directed that, while the applications for release filed by the assessee are to be considered, the Department must retain jewellery up to the amount of tax liability together with interest, and may release the remaining jewellery following the procedures required by law. This direction implements the statutory principle that assets may be appropriated to satisfy liabilities determined by assessment even where an appeal is pending. [Paras 5, 6, 8, 11, 15]

Seized jewellery shall not be fully released; respondent-Department to retain jewellery equal to the determined tax liability with interest and consider release of remaining jewellery in accordance with law.

Error apparent on record justifying review - Prejudice to Revenue from non-disclosure of material fact - Whether the earlier order dated 04.11.2019 should be reviewed on account of non-disclosure of the assessment order and the tax liability determined therein. - HELD THAT: - The Court concluded that an error apparent on the face of the record occurred because the assessment order dated 17.10.2018 and the tax liability determined by it were not placed before the Court when the earlier order was passed. That omission, attributed to both parties, caused prejudice to the Revenue and warranted review. In consequence, the Court reviewed the earlier order, directed consideration of the pending release applications by the Department subject to retention equal to the liability, and disposed of the writ petition accordingly. [Paras 6, 11, 13, 15, 16]

Review allowed; order dated 04.11.2019 is reviewed and writ petition disposed of with directions to the Department as indicated.

Final Conclusion: The review application is allowed. The earlier order is reviewed because the assessment for AY 2013-14 determining tax liability was not disclosed; the Department is directed to consider the release applications but retain jewellery equal to the tax liability with interest and release the balance in accordance with law within four weeks.

Definition of short-term capital asset - proviso to Section 2(42A) - distinction between shares and other securities - holding period for shares (12 months) versus other securities - explanatory memorandum to Finance Act, 1994 - CBDT Circular on shorter holding period for shares

Definition of short-term capital asset - proviso to Section 2(42A) - distinction between shares and other securities - holding period for shares (12 months) versus other securities - explanatory memorandum to Finance Act, 1994 - CBDT Circular on shorter holding period for shares - Whether shares of a company not listed on a recognized stock exchange are to be treated as long-term capital assets if held for more than twelve months under the proviso to Section 2(42A). - HELD THAT: - The Court construed the proviso to Section 2(42A) and observed that the proviso separately mentions 'a share held in a company' and, by use of the disjunctive 'or', separately addresses 'any other security listed in a recognised stock exchange'. The statutory language does not qualify 'share held in a company' by reference to listing; consequently the reduced twelve-month holding period applies to shares generally (whether listed or unlisted). The legislative history and the Explanatory Notes to the Finance Act, 1994 show that the amendment was intended to put company shares on a par with other securities traded on recognised exchanges by reducing the holding period, and the proviso's drafting confirms that the requirement of listing applies to the category 'any other security' and not to 'shares held in a company'. The Tribunal's reasoning in analogous authorities, and the CBDT Circular and later explanatory note, which state that all shares whether listed or unlisted have enjoyed the benefit of the shorter holding period, were relied upon and found consistent with the statutory text and purpose. Applying these principles to the facts (shares acquired in 1993 and sold in 1996), the Court held that such shares ceased to be short-term capital assets if held for more than twelve months and therefore qualify as long-term capital assets under the proviso to Section 2(42A). [Paras 12, 13, 16, 19, 20]

Shares of a company not listed on a recognised stock exchange are eligible to be treated as long-term capital assets if held for more than twelve months under the proviso to Section 2(42A); the substantial question of law is answered in favour of the assessee and against the Revenue.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's and CIT(A)'s view that shares (whether listed or unlisted) held for more than twelve months qualify as long-term capital assets under the proviso to Section 2(42A) is upheld for AY 2007-08.

Best judgment assessment under section 144 - scope and applicability of section 153C - applicability of section 50C to transfer of development rights - computation of capital gains under section 48 where section 50C is inapplicable - remand for fresh determination of fair market value

Best judgment assessment under section 144 - scope and applicability of section 153C - Validity of completing assessment under section 144 instead of initiating proceedings under section 153C. - HELD THAT: - The Tribunal examined whether the statutory preconditions of section 153C were satisfied so as to require assessments to be framed under that provision. It noted that section 153C is triggered only when the Assessing Officer of the searched person hands over incriminating material to the AO having jurisdiction over the person in respect of whom material was found. In the present case, the incriminating information was reported by ADIT, Nashik to the assessee's AO, but ADIT was not the AO of the searched party; therefore the requirement of section 153C was not fulfilled. Separately, as the assessee had not filed a return, the conditions for resort to best judgment assessment under section 144(1)(a) were attracted. In these circumstances the AO's completion of assessment under section 144 was held to be correct and additional ground asserting mandatory application of section 153C was dismissed. [Paras 6, 7, 8]

Assessment completed under section 144 was valid; section 153C did not apply.

Applicability of section 50C to transfer of development rights - Whether section 50C applies to the transfer of development rights (by way of a development agreement) as opposed to transfer of land or building. - HELD THAT: - The Tribunal analysed the development agreement and relevant clauses, observing that ownership/record of rights remained with the assessee and what was granted to the developer was development rights on a license/irrevocable license basis, not a transfer of the capital asset (land or building). The Tribunal relied on the statutory language distinguishing 'land' and rights in land, and noted authority holding that section 50C applies to transfer of land and not to mere rights in land. On the totality of facts it held that section 50C was not triggered by the transfer of development rights in the present case and allowed the additional ground challenging the invocation of section 50C. [Paras 14, 15, 16, 18, 19]

Section 50C does not apply to the transfer of development rights under the facts of this case; invocation of section 50C was disallowed.

Remand for fresh determination of fair market value - Whether the fair market value of the land as on 01.04.1981 adopted by the authorities was sustainable or required fresh adjudication. - HELD THAT: - The Tribunal found that neither the Assessing Officer nor the assessee had produced a cogent, reasoned basis for the determination of the fair market value as on the relevant date, and that the reasons for valuation should be clearly recorded in the AO's order. In the interest of justice and to ensure compliance with principles of natural justice, the Tribunal set aside the appellate finding on valuation and restored the matter to the file of the Assessing Officer for fresh adjudication and determination of fair market value with opportunity to the assessee. [Paras 21, 22, 23, 24]

Order set aside on this issue and matter remanded to AO for fresh determination of fair market value in accordance with law.

Computation of capital gains under section 48 where section 50C is inapplicable - Whether long term capital gain for assessment year 2007-08 should be computed by applying section 50C (adopting stamp duty value) or under section 48 without invoking section 50C, and the proper year of taxation for transfer events. - HELD THAT: - Having held that only development rights were transferred in 2006 and that section 50C did not apply to such transfer, the Tribunal determined that capital gain attributable to the transfer of development rights for the year under consideration must be computed under section 48 without application of section 50C. The Tribunal further observed that any capital gain arising on transfer of ownership rights (allegedly occurring later in 2009) would be relevant to the appropriate subsequent assessment year and not to AY 2007-08. Consequently, the challenge to adoption of stamp duty value as full consideration for AY 2007-08 was allowed. [Paras 29, 30, 31, 32]

For AY 2007-08 capital gains to be computed under section 48 without invoking section 50C; any gain on later transfer of ownership to be considered in the year in which that transfer occurred.

Final Conclusion: Appeal partly allowed: assessment under section 144 sustained; invocation of section 50C in respect of transfer of development rights disallowed; valuation issue remanded to the AO for fresh determination; capital gains for AY 2007-08 to be computed under section 48 without applying section 50C, with gains on any later transfer to be taxed in the appropriate subsequent year.

Addition under section 68 in abated assessment in absence of incriminating material unearthed during search - approval under section 153D - requirement of independent application of mind by sanctioning authority - validity of consolidated assessment orders under section 153A when approvals are given in bulk - statement recorded under section 132(4) not itself constituting incriminating material

Addition under section 68 in abated assessment in absence of incriminating material unearthed during search - statement recorded under section 132(4) not itself constituting incriminating material - Addition made under section 68 in assessments completed pursuant to section 153A where no incriminating material relating to share application money/premium was seized - HELD THAT: - The Tribunal found that no incriminating material regarding the share application money or share premium was recorded in the panchnama arising from the search. It noted that the statements of the director were retracted and that a statement under section 132(4) does not itself constitute incriminating material. Relying on the principle that an assessment already completed can be reopened under section 153A only on the basis of incriminating material unearthed during the search which was not available to the original assessment, the Tribunal held that additions under section 68 in the unabated assessments were not warranted in absence of any such incriminating material and accordingly allowed the ground raising that contention. [Paras 18, 20]

Additions under section 68 deleted for the concerned assessment years as they were not supported by incriminating material found during the search.

Approval under section 153D - requirement of independent application of mind by sanctioning authority - validity of consolidated assessment orders under section 153A when approvals are given in bulk - Validity of the approval accorded by the Joint Commissioner under section 153D where approval was granted in bulk and on presumption without independent appraisal of records - HELD THAT: - The Tribunal examined the approval memo of the JCIT which stated that it was 'presumed' that the Assessing Officer had given proper opportunity, verified seized material and satisfied himself that issues were verified. The Tribunal found no record of independent application of mind by the JCIT and concluded that the approval was a mechanical, perfunctory sanction. Following coordinate Tribunal decisions, the Tribunal held that such abstract or blanket approval under section 153D, given on the basis of presumed compliance by the AO and in bulk for numerous orders, amounts to non-application of mind and renders the approval invalid. Consequential assessment orders founded on such non-est approval under section 153D were therefore held to be void ab initio. [Paras 21, 22, 24, 28]

Approval under section 153D set aside as void for want of application of mind; consequential assessments based on that approval held void-ab-initio.

Final Conclusion: The Tribunal allowed the appeals: additions under section 68 were deleted for the stated assessment years for lack of incriminating material from the search, and the JCIT's bulk approval under section 153D was held to suffer from non-application of mind, rendering the consequential assessment orders void-ab-initio; following these conclusions, all the grouped appeals were allowed.

Requirement of incriminating or seized material to reopen completed assessments under Section 153A - limits of reassessment where additions are based solely on survey material - treatment of completed assessments in search-and-seizure proceedings - scope of assessment when no search is conducted on the assessee

Requirement of incriminating or seized material to reopen completed assessments under Section 153A - limits of reassessment where additions are based solely on survey material - scope of assessment when no search is conducted on the assessee - Whether additions made in reassessments framed under Section 153A for AYs 2009-10 and 2010-11 could be sustained where the original assessments were completed and no incriminating material seized or produced during search on the assessee or third parties, and the additions were based solely on a survey report. - HELD THAT: - The Tribunal examined the assessment records and found that the original assessments for the two years were completed prior to the relevant search date, and that the reassessments under Section 153A were invoked without any reference in the assessment orders to seized or incriminating material relating to the assessee. The additions arose from discrepancies noted in a survey under Section 133A and the AO's reliance on the survey report; the assessment orders did not identify any seized documents or other incriminating material discovered during search of the assessee or the searched third parties that could justify disturbing the completed assessments. The Tribunal applied the principle, as enunciated by the jurisdictional High Court in the cited precedents, that Section 153A permits interference with completed assessments only on the basis of incriminating material unearthed in search/requisition which was not earlier disclosed; absent such material, completed assessments cannot be upset merely on the basis of survey findings. Given the absence of any seized/incriminating material linked to the additions and the AO's failure to show any such material, the reassessments' additions could not be sustained and the appellate authority was correct to quash them. [Paras 4, 7, 8]

Additions made in the assessments completed earlier were quashed because no incriminating or seized material was found or relied upon to reopen those completed assessments; reliance solely on the survey report was insufficient to sustain the additions under Section 153A for AY 2009-10 and AY 2010-11.

Final Conclusion: The Tribunal dismissed the revenue's appeals and confirmed the CIT(A)'s order quashing the additions made in reassessments under Section 153A for AY 2009-10 and 2010-11, holding that completed assessments could not be reopened in absence of incriminating material seized or discovered during search; additions based only on a survey report were unsustainable.

Revisionary jurisdiction under section 263 - erroneous order prejudicial to the interests of revenue - limited scrutiny (CASS) - scope of enquiry - distinction between lack of inquiry and inadequate inquiry - examination under section 68 - identity, creditworthiness and genuineness - section 56(2)(viib) - valuation of share premium and rule 11UA - Explanation 2 to section 263 - limits on revisional power

Revisionary jurisdiction under section 263 - erroneous order prejudicial to the interests of revenue - distinction between lack of inquiry and inadequate inquiry - limited scrutiny (CASS) - scope of enquiry - Validity of the Pr. CIT's exercise of revisional jurisdiction under section 263 in setting aside the assessment order dated 16.11.2018 for A.Y. 2016-17 - HELD THAT: - The Tribunal examined whether the AO's assessment was 'erroneous' and 'prejudicial to the interests of revenue' - the twin conditions for invoking section 263. It held that the assessment file showed specific and relevant queries were raised by the AO under notices issued in the limited scrutiny exercise, the assessee responded with documentary evidence (including bank statements, PANs, ITR acknowledgements and confirmations), and the AO examined those materials and accepted the returned income. The Tribunal applied the settled distinction between 'lack of inquiry' and 'inadequate inquiry' and found that there was enquiry and application of mind by the AO; mere inadequacy (or a different view by the Commissioner) does not justify exercise of revisional power. The Tribunal further observed that in limited scrutiny the AO's scope is circumscribed to the reasons for selection and that conversion to complete scrutiny requires appropriate administrative approval; the Pr. CIT could not broaden the scope under section 263 merely because he considered further verification desirable. In these facts the Pr. CIT's conclusion that the assessment was erroneous and prejudicial amounted to substitution of opinion rather than correction of an order that was unsustainable in law. [Paras 7, 11, 15, 16, 17]

Order passed by the Pr. CIT under section 263 setting aside the assessment was quashed as the AO had made relevant enquiries and applied his mind; the vitiating standard of 'erroneous and prejudicial' was not satisfied.

Examination under section 68 - identity, creditworthiness and genuineness - section 56(2)(viib) - valuation of share premium and rule 11UA - limited scrutiny (CASS) - scope of enquiry - Whether the AO failed to verify identity, creditworthiness and genuineness of shareholders and whether assessment should have invoked section 56(2)(viib) on share premium - HELD THAT: - The Tribunal reviewed the material before the AO: PAN and address details of shareholders, bank receipts credited to the company's account, confirmations from shareholders, copies of shareholders' ITR acknowledgements and the company's bank statements and ledgers. The AO also accessed the shareholders' records on the tax portal and held personal hearings; an expert valuation under rule 11UA was on file. On these facts the Tribunal found that the identity, genuineness and creditworthiness of the shareholders were established to the satisfaction of the AO and that the AO had applied mind to the question of valuation of share premium; the Pr. CIT's insistence on further probing or revaluation amounted to substituting his opinion. The Tribunal noted that the reason for limited scrutiny related to funds being from disclosed sources and that the AO's enquiries addressed that reason; issues beyond the limited scope could not be expanded by the Commissioner under section 263 without proper basis. [Paras 11, 12, 13, 14, 17]

No infirmity in the assessment on the questions of identity, genuineness, creditworthiness or application of section 56(2)(viib) was made out; therefore direction to the AO to re-open these issues under section 263 was unwarranted.

Final Conclusion: The Tribunal allowed the assessee's appeal and quashed the Pr. CIT's order under section 263 for A.Y. 2016-17, holding that the AO had made relevant enquiries within the limited-scrutiny scope, had applied his mind to identity, genuineness and valuation issues, and that the conditions for invoking revisional jurisdiction were not satisfied.

Unexplained cash credit under section 68 - identity, creditworthiness and genuineness of share applicants - onus of proof under section 106 of the Evidence Act vis-a -vis section 68 - relevance of non-appearance of alleged creditors before the Assessing Officer - distinction between assessing the assessee and pursuing assessment of alleged creditors/sub creditors - taxability of share premium under company law vis-a -vis income tax assessment

Unexplained cash credit under section 68 - identity, creditworthiness and genuineness of share applicants - Validity of addition made under section 68 in respect of share capital and share premium received from directors and their concerns. - HELD THAT: - The Tribunal examined documents placed on record (PAN, income tax return acknowledgements, audited financial statements, bank statements, share application forms, allotment letters, share certificates and ROC details) and found that the assessee had established the identity of the director investors, the genuineness of the transactions and that consideration was received through banking channels. The Tribunal applied the principle that once identity and actual receipt by account payee cheques are established, the onus shifts to the Revenue to prove collusion or lack of creditworthiness; further, section 106 Evidence Act limits the assessee's burden to facts within his knowledge. Mere non appearance of some investors before the AO or inability to serve summons does not, by itself, justify treating the receipts as unexplained income of the assessee-company. On these findings the Tribunal held that the addition in respect of amounts received from directors and their concerns was not warranted and deleted the same. [Paras 12, 13, 19]

Addition under section 68 in respect of share capital and premium received from directors and their concerns deleted.

Unexplained cash credit under section 68 - distinction between assessing the assessee and pursuing assessment of alleged creditors/sub creditors - Validity of addition made under section 68 in respect of share capital and share premium received from persons other than directors (third party investors). - HELD THAT: - For investments from other subscribers, the assessee produced bank statements, income tax acknowledgements, balance sheets and explanations of source (including repayments from Shree Bade Baba Trading Co. Pvt. Ltd. and other own fund sources). The Tribunal relied on authoritative propositions that the Revenue, upon dissatisfaction with source of funds of creditors, should proceed against those creditors and sub creditors rather than treat the amount as the assessee's income; the assessee satisfied the statutory triad (identity, genuineness and creditworthiness) to the extent required of it. Consequently, additions based on conjecture or the non service/non appearance of some investors were held unsustainable and were deleted. [Paras 14, 16, 19]

Addition under section 68 in respect of share capital and premium received from other investors deleted.

Taxability of share premium under company law vis-a -vis income tax assessment - Whether the share premium was taxable as income of the assessee on account of alleged contravention of company law provisions. - HELD THAT: - The Assessing Officer contended that share premium was liable to tax on account of alleged violation of company law provisions. The Tribunal observed that the share premium account stood as an outstanding liability in the audited financials as on 31.03.2012 and no basis was shown for treating the premium as income of the company. Absent any finding that the premium had been written off or otherwise converted into income, the AO's alternate plea that the premium was taxable was not sustained. [Paras 11, 19]

Alternate contention that share premium was taxable on company law grounds rejected; no addition on this basis.

Final Conclusion: The Tribunal found that the assessee had discharged its burden to establish identity, genuineness and creditworthiness of the share applicants for A.Y. 2012 13; additions of Rs. 1,37,25,000 under section 68 were deleted and the appeal was allowed.

Revision under section 263 - Erroneous and prejudicial to the interest of revenue - Allocation of share in joint property - area-based versus contribution-based - Tax neutrality in reassessment proceedings - Limit on scope of proceedings under section 147 - Principal Commissioner cannot expand scope of section 147 while invoking section 263 - Deduction under section 54B - eligibility and jurisdictional limits for revision

Allocation of share in joint property - area-based versus contribution-based - Revision under section 263 - Tax neutrality in reassessment proceedings - Whether the order of the Assessing Officer could be revised under section 263 on the ground that the assessee's share in the sale consideration of jointly held land was incorrectly accepted on a contribution basis instead of an area basis, and whether such error was prejudicial to the revenue. - HELD THAT: - The Tribunal examined the Pr. CIT's conclusion that, in absence of an express sharing ratio in the original purchase deed, the assessee's share must be determined by area (50% of the 4680 sq.mtrs. parcel = 2340 sq.mtrs., yielding 18.88% of total property) and that the AO erred in accepting the assessee's return declaration of a smaller share based on contribution. Even if that error is accepted, the Tribunal found the total sale consideration and costs are undisputed and that any increase in the assessee's share would produce a corresponding decrease in the father's share. The calculations placed before the Tribunal showed that, on adjustment, aggregate long-term capital gains and aggregate tax remain unchanged. Therefore the alleged error, even if established, did not result in prejudice to the revenue. Applying the twin conditions required for exercise of jurisdiction under section 263 - that the order be (i) erroneous and (ii) prejudicial to the revenue - the Tribunal held that prejudice was absent because the exercise would be tax neutral. Reliance was placed on the principle that absence of prejudice defeats invocation of section 263 notwithstanding an error. [Paras 7]

The Pr. CIT's revision under section 263 could not be sustained on this ground because the alleged error did not cause prejudice to the revenue; section 263 was not duly attracted.

Deduction under section 54B - eligibility and jurisdictional limits for revision - Limit on scope of proceedings under section 147 - Principal Commissioner cannot expand scope of section 147 while invoking section 263 - Whether the Pr. CIT validly proceeded under section 263 to withdraw the deduction claimed under section 54B when the assessment was reopened under section 147 only on account of discrepancy in sale consideration under section 50C. - HELD THAT: - The Tribunal noted that the reassessment under section 147 was initiated for understatement of sale consideration vis-a -vis stamp duty value under section 50C, and that the AO's reasons to reopen did not relate to the claim under section 54B. While an Assessing Officer conducting proceedings under section 147 may in the course of those proceedings consider other incomes which come to notice, the power to expand scope of the reassessment proceedings is vested in the AO and not in the Principal Commissioner exercising revision under section 263. The Pr. CIT, by revisiting and withdrawing the deduction under section 54B (finding that the investment was in a shop and not in agricultural land or a residential house) effectively widened the scope beyond the subject-matter of the section 147 proceedings and exceeded his jurisdiction. Consequently the Pr. CIT's direction to withdraw the deduction under section 54B was held to be beyond permissible scope of revision under section 263 in the present circumstances. [Paras 7]

The Pr. CIT exceeded jurisdiction in invoking section 263 to reopen the section 54B claim which was not within the scope of the reasons recorded for reassessment under section 147; the revision on this ground was quashed.

Final Conclusion: The appeal is allowed. The Tribunal held that (i) even if the AO erred in determining the assessee's share, the error did not prejudice revenue and therefore section 263 could not be invoked on that ground, and (ii) the Pr. CIT exceeded jurisdiction by expanding the scope of reassessment to withdraw the section 54B deduction; the section 263 order is quashed.

Royalty under DTAA - Use of software/database as royalty - Tax deduction at source under section 195 - Assessee in default under section 201(1) - Interest under section 201(1A) - Applicability of DTAA vis-a -vis domestic law - Precedent: Engineering Analysis Centre of Excellence

Royalty under DTAA - Use of software/database as royalty - Tax deduction at source under section 195 - Assessee in default under section 201(1) - Interest under section 201(1A) - Applicability of DTAA vis-a -vis domestic law - Precedent: Engineering Analysis Centre of Excellence - Payments made by the assessee to Facebook Ireland for online advertisement are not 'royalty' chargeable in India and therefore did not require deduction of tax at source, so the assessee is not an assessee in default and the consequential interest demand is not sustainable. - HELD THAT: - The Tribunal examined the agreements and nature of services provided by Facebook Ireland and applied the Supreme Court's reasoning in Engineering Analysis Centre of Excellence. The facilities and software access granted to the assessee were found to be enabling and intertwined with the activity of placing advertisements and did not confer any separate right to use or transfer of copyright such as would fall within the definition of 'royalties' in the applicable DTAA. The Tribunal observed that the Karnataka High Court authority relied upon by the CIT(A) (Samsung) has been superseded by the Supreme Court's decision, which requires examination of the DTAA definition and its application. Applying that precedent, the Tribunal concluded that the payments do not give rise to income taxable in India and therefore there was no obligation to deduct tax under section 195; consequently the assessee cannot be treated as an assessee in default under section 201(1) nor be liable for interest under section 201(1A). [Paras 10, 11, 12]

The demand under section 201(1) and the consequential interest under section 201(1A) are deleted for the tax periods before the Tribunal because the payments to Facebook Ireland are not 'royalty' chargeable in India and no TDS was required.

Final Conclusion: All three appeals are allowed; the orders of the lower authority are set aside and the assessing officer is directed to delete the demand raised under section 201(1) and the consequential interest under section 201(1A) for the periods in dispute.

Disallowance under section 40(a)(ia) for failure to deduct tax at source where tax was not required to be withheld as income did not accrue in India - Applicability of section 195 to payments of commission to non-residents - Deduction under section 36(1)(va) in respect of employees' contribution to welfare funds deposited before the due date of filing return - Disallowance under section 14A read with Rule 8D where no exempt income was received in the relevant year - Application of binding ratio of coordinate Tribunal and jurisdictional High Court decisions in assessment appeals

Disallowance under section 40(a)(ia) for failure to deduct tax at source where tax was not required to be withheld as income did not accrue in India - Applicability of section 195 to payments of commission to non-residents - Application of Tribunal precedent in identical facts - Deletion of addition made under section 40(a)(ia) for non-deduction of tax at source on export commission paid to non-residents - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee was not liable to deduct tax under section 195 because, on the facts and following the order of the ITAT in IDS Infotech Ltd. and earlier appellate decisions in the assessee's own case, the commission payments did not give rise to income accruing or arising in India. The Tribunal agreed with the reasoning that where the activities giving rise to the commission are performed outside India and no income is chargeable to tax in India, withholding under section 195 is not attracted and consequently no default under section 40(a)(ia) arises. In view of the consistent coordinate-bench and appellate authority relied upon by the CIT(A), interference was refused. [Paras 7, 8]

Addition of Rs. 2,06,81,641/- under section 40(a)(ia) deleted and the CIT(A)'s order upheld; Revenue appeal dismissed on this point.

Deduction under section 36(1)(va) in respect of employees' contribution to welfare funds deposited before the due date of filing return - Followed ratio of jurisdictional High Court - Deletion of addition under section 36(1)(va) for employees' contribution to welfare funds deposited after due date but before due date of filing return - HELD THAT: - The Tribunal endorsed the CIT(A)'s reliance on the Punjab & Haryana High Court decision in Commissioner of Income Tax vs Mark Auto Industries Ltd. and relevant Tribunal decisions, holding that where employees' contributions (ESI/PF) are deposited before the due date for filing the return, the claim is allowable and disallowance under section 36(1)(va) is not warranted. Applying that binding ratio to the facts, the CIT(A)'s deletion of the small addition was affirmed. [Paras 11, 12]

Addition of Rs. 38,307/- under section 36(1)(va) deleted and the CIT(A)'s order upheld; Revenue appeal dismissed on this point.

Disallowance under section 14A read with Rule 8D where no exempt income was received in the relevant year - Reliance on jurisdictional High Court precedent barring invocation of section 14A absent receipt of exempt income - Deletion of disallowance under section 14A where no exempt income (dividend) was received in the relevant year - HELD THAT: - The Tribunal agreed with the CIT(A)'s application of the Punjab & Haryana High Court decision in CIT vs Lakhani Marketing, which holds that section 14A cannot be invoked unless exempt income has been received in the year under consideration. On the facts the assessee had invested out of internal accruals and received no dividend in the relevant year; therefore the AO's suo motu disallowance under section 14A read with Rule 8D could not be sustained. The CIT(A)'s deletion was accordingly affirmed. [Paras 15, 16]

Addition of Rs. 20,973/- under section 14A deleted and the CIT(A)'s order upheld; Revenue appeal dismissed on this point.

Final Conclusion: For Assessment Year 2014-15 the Tribunal dismissed the Revenue's appeal in its entirety, upholding the CIT(A)'s deletions of additions made under sections 40(a)(ia), 36(1)(va) and 14A by applying relevant coordinate-bench and jurisdictional High Court precedents.

Revision jurisdiction under Section 263 - Section 43CA(3) - stamp duty valuation on date of agreement - Erroneous and prejudicial to revenue test for exercise of revisional power - Prohibition on substitution of opinion by revisional authority

Revision jurisdiction under Section 263 - Section 43CA(3) - stamp duty valuation on date of agreement - Erroneous and prejudicial to revenue test for exercise of revisional power - Prohibition on substitution of opinion by revisional authority - Validity of the Principal Commissioner of Income Tax's exercise of revisionary jurisdiction under Section 263 in directing a larger addition by taking stamp duty value on date of registration instead of date of agreement under Section 43CA(3). - HELD THAT: - The Assessing Officer had compared stamp duty valuation on the date of the agreement (booking) with the actual sale consideration and made an addition under Section 43CA. Section 43CA(3) expressly permits taking the stamp duty value on the date of the agreement where the agreement date and registration date differ. The Principal Commissioner of Income Tax directed the AO to adopt stamp duty valuation on the date of registration, thereby supplanting the view taken by the AO. The AO's approach was a plausible application of Section 43CA(3) and did not amount to an order that was erroneous and prejudicial to the revenue. As the twin conditions necessary to invoke Section 263 were not cumulatively satisfied, the revisional order amounted to an impermissible substitution of opinion by the revisional authority. Consequently the revision could not be sustained and the AO's order could not be revised on that basis. The Tribunal therefore allowed the assessee's challenge to exercise of jurisdiction and declined to decide the merits so as not to prejudice the pending appeal before the Commissioner (Appeals). [Paras 3, 4]

Revision jurisdiction under Section 263 was invalidly exercised; the AO's application of Section 43CA(3) taking stamp duty value on the date of agreement was a plausible view and the revisional order is quashed; merits left open.

Final Conclusion: The assessee's appeal is allowed by setting aside the Principal Commissioner of Income Tax's revision order under Section 263; the Tribunal declines to express any view on the merits, leaving those issues to the Commissioner (Appeals).

Amendment of documents under section 149 of the Customs Act - Discretion of the proper officer to authorise amendment - Proviso permitting amendment only on basis of documentary evidence which existed at time of clearance - Limitations of the Indian Customs EDI/ICES system and availability of manual remedy - Requirement of reasoned orders where amendment is refused and duty to give opportunity of hearing

Amendment of documents under section 149 of the Customs Act - Discretion of the proper officer to authorise amendment - Proviso permitting amendment only on basis of documentary evidence which existed at time of clearance - Whether amendment of Bill of Entry under section 149 is permissible after goods have been cleared for home consumption. - HELD THAT: - The Court accepted the interpretation in Dimension Data that section 149 vests discretion in the proper officer to authorise amendments of documents after presentation, subject to the proviso which allows amendment after clearance only on the basis of documentary evidence that existed at the time of clearance. The coordinate decision in Micromax was held to have adopted a fact-specific, narrow reading of the proviso and therefore not to be a universally applicable bar. The Court also relied on the Madras High Court observations in Hindustan Unilever that system limitations cannot deny a statutory right to amendment and that manual consideration may be required until system improvements are effected. Applying these principles, the Court held that amendments under section 149 are permissible even post-clearance provided the statutory condition in the proviso is met and that respondents must consider such requests in accordance with law. [Paras 4, 13, 14, 15, 17]

Amendment of Bill of Entry under section 149 is permissible even after goods are cleared, subject to the proviso that the amendment be based on documentary evidence existing at the time of clearance, and the respondents must consider applications accordingly.

Limitations of the Indian Customs EDI/ICES system and availability of manual remedy - Requirement of reasoned orders where amendment is refused and duty to give opportunity of hearing - Whether inability of the ICES/EDI system to permit electronic amendment can be relied upon to refuse amendment requests, and what remedy is available. - HELD THAT: - The Court held that technological or system deficiencies in the ICES/EDI environment cannot be used as a shield to deny a party relief which is otherwise permissible under section 149. Until the system is suitably upgraded, respondents are obliged to provide appropriate manual recourse to consider and, if justified, effect amendments. If amendment is refused, the respondent must pass and communicate a reasoned order after affording the applicant an opportunity of hearing. The Court noted absence of any demonstration that sections 30 or 41 bar such amendments or that documentary evidence required by the proviso was lacking. [Paras 9, 15, 17, 18, 19]

System limitations in ICES/EDI do not justify refusal; respondents must consider amendments manually where necessary and, if refusing, record a reasoned order after hearing.

Requirement of reasoned orders where amendment is refused and duty to give opportunity of hearing - Consistency of administrative stance before Courts - Whether the respondents should be permitted to take divergent stands before different High Courts and what the Court directs where respondents have previously agreed to reconsider amendments. - HELD THAT: - The Court observed that the respondents before the Gujarat High Court had undertaken to consider amendment requests afresh and cannot be permitted to take a contrary stand in another proceeding. The Court emphasised that where respondents decline amendment they must do so by a reasoned order and after affording an opportunity of hearing. Given the respondents' prior representation and the absence of any legal bar demonstrated under other provisions of the Act, the Court found the grounds for refusal untenable and judicial intervention necessary to secure justice. [Paras 16, 17, 18, 19]

Respondents cannot adopt divergent positions; they must reconsider the petitioners' amendment applications consistently, afford hearing, and if refusing, communicate reasoned orders.

Amendment of documents under section 149 of the Customs Act - Requirement of reasoned orders where amendment is refused and duty to give opportunity of hearing - Remand of the petitioners' applications for fresh consideration by the concerned respondents. - HELD THAT: - Rather than adjudicating all merits, the Court directed that the concerned respondents consider the pending applications for amendment of the petitioners' documents afresh in the light of the Court's observations and in accordance with law. The petitioners' authorised representatives are to be given an opportunity of hearing. If the amendment is refused, a reasoned order is to be passed and communicated; if allowed, follow-up steps are to be taken without delay. The Court imposed a four week timeline for fresh consideration from receipt of this order. [Paras 19, 20]

Applications for amendment are remanded for fresh consideration by the respondents, with an opportunity of hearing to the petitioners and a four week deadline; refusal must be by reasoned order and grant must be followed by prompt action.

Final Conclusion: Writ Petition (L) No. 8163 of 2021 is allowed in the terms prayed; Writ Petition (L) No. 13894 of 2021 is partly allowed. The respondents are directed to consider the petitioners' applications for amendment under section 149 afresh, afford opportunity of hearing, decide within four weeks, record reasons if refusing, and effect any granted amendments without delay.

Summary order. Matter adjourned to 16/09/2021 to enable the department to obtain necessary instructions; request for adjournment allowed.

Scheme of Amalgamation and Arrangement - composite scheme - effect of non-receipt of approvals / revocation clause - rejection of scheme in entirety - appeal as continuation of the original proceeding - inherent powers under Rule 11 of NCLAT Rules - rectification under Section 420(2) of the Companies Act, 2013 - power to modify / supervise implementation under Section 231 - role of Regional Director's report

Scheme of Amalgamation and Arrangement - composite scheme - effect of non-receipt of approvals / revocation clause - rejection of scheme in entirety - Whether the Tribunal's order rejecting the composite scheme can be clarified/modified so as to exclude and leave intact the merger of the private transferor companies with the transferee company. - HELD THAT: - The Tribunal examined the Scheme as a single composite proposal encompassing all nine entities and noted Clause 21 providing that if required sanctions/approvals are not obtained the entire Scheme shall stand revoked, cancelled and be of no effect except as specifically contemplated. The NCLT Mumbai order in respect of certain transferor companies was rendered in the context of an incorrect on-record statement that the Chennai Bench had already approved the Scheme; the Regional Director had viewed the matter as a composite scheme. This Tribunal had reversed the NCLT Chennai order after considering objections including those of the Regional Director and material defects in the valuation and basis of the Scheme, and accordingly rejected the Scheme as a whole. Given the composite character of the Scheme, the revocation clause and the fact that the appeal is a continuation of the original proceeding, the Tribunal cannot, by way of clarification under Rule 11, sever and uphold only the private-company mergers while rejecting the rest of the Scheme. The application therefore seeking partial reinstatement was unsustainable. [Paras 15, 16, 17, 18, 20]

Application for clarification/modification to preserve the merger of the private companies while rejecting the rest of the composite Scheme is rejected.

Inherent powers under Rule 11 of NCLAT Rules - rectification under Section 420(2) of the Companies Act, 2013 - power to modify / supervise implementation under Section 231 - Whether the Applicant can invoke Rule 11 inherent powers, or other statutory modification/rectification provisions, to reopen the Tribunal's judgment and allow partial enforcement of the previously rejected Scheme. - HELD THAT: - Rule 11 confers inherent powers to meet ends of justice or prevent abuse of process but does not equate to a power of review permitting re examination of merits. Section 420(2) (rectification) permits amendment of an order to remedy mistakes apparent on the face of the record; no such mistake apparent on record exists in this matter. Section 231(1)(b) permits the Tribunal to modify a Scheme only where the Tribunal has made an order under Section 230 sanctioning the compromise or arrangement; here the sanctioning order was reversed by this Tribunal, so Section 231 cannot be invoked to seek modification of a scheme that the Tribunal has rejected. Accordingly, the Applicant cannot reopen the merits or obtain partial enforcement by relying on these provisions. [Paras 21, 22, 23]

Invocation of Rule 11, Section 420(2) or Section 231 to reopen the Tribunal's rejection of the Scheme and permit partial enforcement is impermissible; the application is therefore dismissed.

Final Conclusion: The application under Rule 11 seeking modification/clarification to preserve the merger of certain private companies while the composite Scheme was rejected is dismissed; the Tribunal held the Scheme to be composite and revoked when not fully sanctioned, declined to reopen or modify its rejection by inherent or statutory powers, and directed transfer of the contempt record to the Chennai Bench.

Taxability of services received from outside India - reverse charge mechanism - requirement that show cause notice specify the particular taxable service - principles of natural justice and vagueness of adjudicatory proceedings - Import Rules: applicability of rule 3(ii) (services provided outside India) - burden on revenue to prove that foreign remittances relate to taxable services - limitation and extended period where bona fide belief on non-taxability existed

Requirement that show cause notice specify the particular taxable service - principles of natural justice and vagueness of adjudicatory proceedings - burden on revenue to prove that foreign remittances relate to taxable services - Validity of adjudication where show cause notice and order did not specify the category of taxable service and were based on differences between balance sheet and ST-3 returns. - HELD THAT: - The Tribunal held that neither the show cause notices nor the impugned order specify which particular taxable service under section 65(105) is alleged to have been provided, nor explain how sections 66 and 66A read with the Import Rules are attracted. A charging provision must be construed strictly and the revenue bears the heavy burden of establishing taxability; vague or non-specific allegations based merely on discrepancies between accounting entries and returns are legally infirm. Reliance on earlier Tribunal authorities reinforced that absence of a categorical finding as to the nature of service and failure to analyze supporting evidence vitiate the demand. [Paras 12, 13, 14, 15, 16]

The confirmation of demand founded on a vague show cause notice and non-specific findings is unsustainable.

Taxability of services received from outside India - reverse charge mechanism - burden on revenue to prove that foreign remittances relate to taxable services - Demand confirmed in respect of specified foreign remittances (Serial Nos. 1, 5 and 7) where the appellant had paid service tax (albeit on differing challan amounts). - HELD THAT: - The Tribunal examined entry-wise particulars and accepted the appellant's explanation that service tax had in fact been paid in respect of the impugned remittances, the discrepancy arising from exchange rate differences and TDS, and that identical transactions dropped for one year could not be sustained for another year. Given the payment by the appellant and absence of a justified basis for treating the entries as unpaid, the show cause notice ought not to have been issued under section 73(3). Accordingly the departmental demand in respect of these remittances cannot be sustained. [Paras 18, 19, 20, 21, 22]

Demand in respect of the identified foreign remittances is set aside as the appellant had discharged the service tax liability and the department failed to justify the differential demand.

Burden on revenue to prove that foreign remittances relate to taxable services - requirement that show cause notice specify the particular taxable service - Demand confirmed for entries which the appellant could not trace (Serial Nos. 4, 6 and 8). - HELD THAT: - The Tribunal found that the department had not established conclusively that the foreign remittances identified in the annexure pertained to the appellant. The appellant repeatedly sought bank reference numbers and debit details to enable linkage but the department did not provide adequate material; the adjudicating authority merely recorded non-production of documents by the appellant. Where the department proposes a demand it must substantiate the linkage from its records; absent such proof, the demand cannot stand. [Paras 24, 25, 26, 27, 28]

Demand relating to entries not traceable to the appellant is unsustainable and set aside.

Import Rules: applicability of rule 3(ii) (services provided outside India) - taxability of services received from outside India - reverse charge mechanism - Demand for service tax on 'market research and exploration' services provided by a foreign consultant (Serial No. 3) where the work was carried out outside India. - HELD THAT: - On examination of the contract's scope of work, the Tribunal accepted that the substance of the contract related to market research and exploration, a taxable category under section 65(105)(y), but held that the services were performed entirely outside India. Under rule 3(ii) of the Import Rules services provided wholly outside India are not exigible to service tax; therefore, despite the categorisation as market research, no service tax was payable on these foreign-sourced services. [Paras 30, 31, 32, 33, 34]

Service tax demand on market research and exploration performed outside India is not exigible and is set aside.

Limitation and extended period where bona fide belief on non-taxability existed - taxability of services received from outside India - Invocation of extended period of limitation and allegation of suppression where the appellant had a bona fide belief about non-taxability. - HELD THAT: - The Tribunal noted that the scope and applicability of reverse charge on import of services were subject to considerable litigation and clarifications during the relevant period. Precedents were cited where the existence of bona fide doubt led to disallowance of extended limitation or allegations of suppression. Given the contemporaneous ambiguity in law and the appellant's bona fide belief that the services were not taxable, the extended period could not be invoked and allegations of willful suppression were unfounded. [Paras 36, 37, 38, 39, 40]

Extended period of limitation and penalties based on alleged suppression are not sustainble in the circumstances of bona fide belief and legal uncertainty.

Final Conclusion: For the reasons stated, the order dated 26.05.2015 confirming parts of the demands is set aside; the appeals are allowed and the departmental demands and penalties confirmed in respect of the impugned entries are quashed.

Full and true disclosure - application for settlement under Section 32-E - rejection of settlement application at admission stage for non-disclosure - obligation to cooperate with the Settlement Commission - power to send case back under Section 32-L for non-cooperation - assessing disputed investigation report by production of contra-evidence - settlement as an enabling provision, not a right - proceedings before the Settlement Commission are judicial proceedings

Full and true disclosure - application for settlement under Section 32-E - rejection of settlement application at admission stage for non-disclosure - Application under Section 32-E must contain full and true disclosure of duty liability and may be rejected at the admission stage if such disclosure is found to be absent. - HELD THAT: - Section 32-E requires that an application for settlement contain a full and true disclosure of the duty liability not previously disclosed to the jurisdictional Central Excise Officer. This is a mandatory pre-condition to entertain and admit an application. If, upon prima facie scrutiny, the Settlement Commission traces non-disclosure of material facts or duty liability, the application is liable to be rejected at the admission stage. The Court accepted the Commission's approach that non-disclosure frustrates the statutory scheme of settlement and justifies rejection without proceeding to settlement on merits. [Paras 12, 13]

The requirement of full and true disclosure is mandatory and failure to satisfy it permits rejection of the settlement application at the admission stage.

Obligation to cooperate with the Settlement Commission - power to send case back under Section 32-L for non-cooperation - Once an application is admitted, the applicant must cooperate with the Settlement Commission and non-cooperation empowers the Commission to send the case back to the adjudicating authority under Section 32-L. - HELD THAT: - The Court analysed Section 32-L(1) which permits the Settlement Commission to return a case to the jurisdictional Central Excise Officer if it forms the opinion that the applicant has not cooperated in proceedings. The Court emphasised the twin conditions: initial full and true disclosure and continued cooperation after admission. Given the conclusive nature of settlement orders, these conditions are vital to protect revenue and the fairness of the process. The Commission's findings that the applicant did not cooperate and thereby impeded settlement were held to be a valid exercise of the power under Section 32-L. [Paras 15, 16, 17]

Non-cooperation after admission permits the Settlement Commission to remit the matter to the adjudicating authority under Section 32-L.

Assessing disputed investigation report by production of contra-evidence - proceedings before the Settlement Commission are judicial proceedings - Where an investigating authority files a report (including GEQD findings) and the assessee disputes its authenticity, the assessee must produce contrary evidence; mere objections without supporting evidence are insufficient for the Commission to disregard the investigation report. - HELD THAT: - The Court reviewed the Commissioner (Investigation)'s report which concluded that GEQD data were retrieved from the seized hard disks and had not been entered after seizure. The Court held that if the assessee contests such a report, it is incumbent upon the assessee to submit substantive contra-evidence to disprove the investigation findings. Merely raising objections or alleging manipulation, without adducing evidence, does not displace the investigative report and does not facilitate settlement. The Court accepted the Settlement Commission's prima facie acceptance of the investigation report in the absence of contrary evidence from the petitioner. [Paras 21, 22, 23, 24]

Dispute of an investigation report requires production of contra-evidence by the assessee; unsupported objections do not suffice to overturn the report for settlement purposes.

Settlement as an enabling provision, not a right - full and true disclosure - Settlement under the Act is an enabling provision and cannot be claimed as a matter of right; entitlement to settlement is limited to applicants who approach the Commission with clean hands and make full and true disclosure and cooperate throughout the proceedings. - HELD THAT: - The Court reiterated that the legislative purpose of settlement is to enable resolution where an applicant makes full and true disclosure and cooperates. Because settlement bars reopening by authorities, entitlement is conditioned on the applicant's conduct. The Commission is confined to the statutory procedure and scope; an applicant who refuses to disclose material facts or obstructs proceedings cannot insist on settlement. The Court found that the petitioner failed to meet these standards and therefore was not entitled to relief. [Paras 26, 27, 28]

Settlement is discretionary and conditional; applicants who do not make full disclosure and cooperate are not entitled to settlement relief.

Final Conclusion: The High Court dismissed the writ petition, upholding the Settlement Commission's conclusion that the petitioner failed to make full and true disclosure and did not cooperate; the Commission lawfully remitted the matter to the adjudicating authority under Section 32-L and the petitioner is not entitled to settlement relief.

Reversal of CENVAT credit under Rule 6(3) of CENVAT Credit Rules - requirement of separate final products for presumptive reversal - exempted goods / NIL rate goods - procedure under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable goods) Rules 2001 - remission versus exemption of duty

Reversal of CENVAT credit under Rule 6(3) of CENVAT Credit Rules - requirement of separate final products for presumptive reversal - procedure under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable goods) Rules 2001 - exempted goods / NIL rate goods - Applicability of Rule 6(3)(b) of the CENVAT Credit Rules to require reversal where a manufacturer clears the same excisable product partly on payment of duty and partly to a purchaser availing exemption under Notification No.82/84 after following Rules 2001 procedure. - HELD THAT: - The Rule applies where a manufacturer produces two distinct categories of final products - one chargeable to duty and another exempt or chargeable to nil-rate - while taking credit on inputs used for both, thereby necessitating presumptive reversal. In the present case the appellant manufactures a single final product (dissolved acetylene gas) which, as per tariff, is chargeable to duty at the applicable rate and is cleared on payment of duty except in transactions where the specific buyer (M/s HSL) obtained exemption under Notification No.82/84 after compliance with the prescribed procedure under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable goods) Rules 2001. There are not two separate final products manufactured by the appellant; the product itself is not generally exempted or at nil-rate. The distinction between the historical concept of "remission" under Chapter X and the Rules 2001 terminology of "exemption" does not alter the core statutory test under Rule 6(3): presumptive reversal is triggered by manufacture of both dutiable and exempt final products from common inputs. Given the factual matrix - a single excisable product cleared sometimes on payment and sometimes to a purchaser entitled to exemption after following the Notification/Rules procedure - Rule 6(3)(b) is not attracted. Reliance on prior decisions and authorities was considered; those decisions supporting non-applicability where only one final product existed were treated as binding in the circumstances of this case. [Paras 5, 8, 9, 10]

Rule 6(3)(b) of the CENVAT Credit Rules is not applicable to the appellant's clearances to M/s HSL; the adjudicating authority's order requiring reversal is incorrect and is set aside.

Final Conclusion: The order-in-original confirming recovery under Rule 6(3)(b) is set aside and the appeal is allowed, since the appellant manufactured a single excisable product (dissolved acetylene gas) and the conditions for presumptive reversal under Rule 6(3) were not satisfied.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - burden to rebut the presumption and probabilisation of defence - presentation of cheque and statutory notice compliance - defence of cheque obtained by third party / blank cheque allegation

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - Whether the ingredients of the offence under Section 138 were established and the presumption under Section 139 was rebutted. - HELD THAT: - The Court examined whether the cheque was issued for discharge of a legally enforceable debt and whether the accused had rebutted the statutory presumption under Section 139. The signature on the cheque was not denied by the accused and no substantial evidence was produced to show that the cheque had been issued exclusively to a third person (Radhakrishnan) or had been obtained by coercion. The Court held that, in the absence of probabilisation of the accused's defence on a preponderance of probabilities, the rebuttable presumption under Section 139 operated in favour of the complainant and the cheque was to be treated as issued for discharging a legally enforceable liability. Consequently the essential ingredients of Section 138 stood satisfied on the material on record. [Paras 10, 11, 12]

The presumption under Section 139 was not rebutted and the offence under Section 138 is established.

Presentation of cheque and statutory notice compliance - Whether the cheque was presented and the statutory notice requirements were complied with. - HELD THAT: - The prosecution evidence established that the cheque was presented for collection on 02.11.2007 and returned on 03.11.2007 with the endorsement 'Account closed'. The statutory demand notice was sent on 16.11.2007 and proof of receipt and postal cover were placed on record. The Court found these facts sufficient to satisfy the presentation and notice conditions required by Section 138. [Paras 5, 11]

Presentation of the cheque and the issuing of statutory notice were proved and satisfy the procedural ingredients of Section 138.

Defence of cheque obtained by third party / blank cheque allegation - burden to rebut the presumption and probabilisation of defence - Whether the accused's defence that the cheque was a blank cheque taken by a third party and not issued to the complainant succeeded. - HELD THAT: - The accused relied on prior complaints and documentary material to contend that the cheque was a blank cheque obtained by a third party (Radhakrishnan). The Court noted absence of substantive evidence to establish the date on which the cheque was said to have been taken, lack of averments in the earlier complaint supporting coercion, no proof of relationship or agency between the third party and the complainant, and admissions in cross-examination that undermined the defence. Consequently the Court held that the defence was not adequately proved and could not displace the presumption in favour of the complainant. [Paras 6, 7, 8, 12]

The defence that the cheque was obtained by a third party or was a blank cheque was not proved and fails to rebut the statutory presumption.

Final Conclusion: Criminal Revision dismissed; the conviction and sentence imposed by the trial and appellate Courts under Section 138 of the Negotiable Instruments Act are confirmed.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption and burden of proof - existence of a legally enforceable debt - appellate interference with concurrent finding of acquittal

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption and burden of proof - existence of a legally enforceable debt - Whether the trial court erred in acquitting the accused under Section 138 of the Negotiable Instruments Act by failing to draw the presumption under Section 139 and by misappreciating the evidence relating to the existence of a legally enforceable debt. - HELD THAT: - The cheque undisputedly belonged to the accused and his signature was not denied, thereby attracting the initial statutory presumption in favour of the complainant under Section 139. The accused, however, gave a plausible explanation - supported by a demand promissory note (Ex. D1) - that the transaction was antecedent (2005) and related to an earlier loan of a smaller amount, which served to rebut the statutory presumption. Once the presumption stood rebutted, the onus returned to the complainant to prove that the cheque was issued in discharge of a legally enforceable debt. The trial court accepted that the complainant failed to prove the date of advancement of the alleged Rs. 2,00,000 loan, his financial capacity to have advanced such a sum (no bank statements or supporting documents produced), and other material particulars; these lacunae rendered the complainant's case improbable. The court found the defence explanation more probable in view of the absence of documentary proof and the complainant's own admissions in cross examination. In these circumstances the trial court held that the complainant had not established that Ex. P1 was issued in discharge of a legally enforceable debt. The High Court, on appellate review of the record and the reasons given by the trial court, found no perversity or misappreciation in those findings and declined to interfere with the acquittal. [Paras 8, 9, 10]

The trial court's finding that the presumption under Section 139 was rebutted and that the complainant failed to prove that the cheque was issued in discharge of a legally enforceable debt is affirmed; the acquittal is upheld.

Final Conclusion: The appeal is dismissed. The judgment of acquittal is maintained as the trial court rightly found the statutory presumption rebutted and the complainant failed to prove the existence of a legally enforceable debt; no interference is warranted.