TaxTMI Updates e-Newsletter
Sep 27,2022

Input Tax Credit blocking - Rule 86A of the Central Goods and Services Tax Act, 2017 - opportunity of hearing before blocking - verification of documents for genuineness of purchases - expeditious administrative decision without influence of earlier communications

Input Tax Credit blocking - opportunity of hearing before blocking - verification of documents for genuineness of purchases - Whether the remaining blocked Input Tax Credit of Rs. 1,02,468/- should be unblocked or reconsidered by the authorities after affording opportunity to the petitioner and verifying documents. - HELD THAT: - The court recorded that a major portion of the credit earlier blocked under Rule 86A has been unblocked by the authorities, while a balance amount remains blocked. The petitioner asserted non-provision of hearing and absence of reasons for partial blocking. The respondents have indicated willingness to consider documents filed by the petitioner and have conducted a hearing which is stated to be underway. The Assistant Government Pleader, on instructions, undertook that an appropriate decision will be taken by the authorities by 30th September, 2022. The court, without expressing any opinion on the merits, directed that the authorities must complete consideration of the petitioner's case and the documents produced and arrive at an appropriate decision expeditiously, ensuring that the decision is not influenced by earlier communications or grounds. [Paras 4, 5, 6, 7]

The matter of the remaining blocked Input Tax Credit is remitted to the respondents for fresh consideration after hearing and verification of documents, and a decision is to be taken expeditiously on or before 30th September, 2022.

Final Conclusion: Petition disposed of without expressing any opinion on the merits; respondents directed to consider and decide the claim for unblocking the remaining Input Tax Credit after hearing and verification of documents expeditiously, by 30th September, 2022, uninfluenced by earlier communications.

Validity of notice under Section 148A(b) of the Income Tax Act, 1961 - Requirement to furnish relevant material and documents with notice - Fresh adjudication under Section 148A(d) of the Income Tax Act, 1961 - Right to an opportunity to reply before passing fresh order - Use of departmental intelligence/Insight Portal information as material in reassessment proceedings

Validity of notice under Section 148A(b) of the Income Tax Act, 1961 - Requirement to furnish relevant material and documents with notice - Impugned order under Section 148A(d) set aside because relevant material shown to Court was not enclosed with the Section 148A(b) notice. - HELD THAT: - The Court concluded that documents and material (including information from the Insight Portal identifying the assessee among beneficiaries of alleged accommodation entries) which were relied upon by the Revenue ought to have been enclosed with the Section 148A(b) notice. The absence of those documents deprived the petitioner of a proper opportunity to meet the material relied upon. For fairness and to balance equities, the Court found it necessary to set aside the earlier order under Section 148A(d) and direct the Revenue to furnish a supplementary notice attaching all relevant material after redaction of third party information. [Paras 5, 6]

Order dated 29th June, 2022 under Section 148A(d) is set aside and the Revenue directed to issue a supplementary Section 148A(b) notice enclosing all relevant material.

Fresh adjudication under Section 148A(d) of the Income Tax Act, 1961 - Right to an opportunity to reply before passing fresh order - Use of departmental intelligence/Insight Portal information as material in reassessment proceedings - The matter remitted for fresh consideration with directions on procedure and disclosure; petitioner to be allowed opportunity to file additional reply and supporting account statements. - HELD THAT: - The Court directed the Revenue to issue a supplementary notice within four weeks enclosing the relevant material (including the documents shown in Court, after redaction of third party details). The petitioner was granted liberty to file an additional reply within four weeks thereafter and required to enclose copies of its Demat account and bank account statement with the reply. The Assessing Officer was directed to pass a fresh order under Section 148A(d) in accordance with law. The Court explicitly refrained from expressing any view on the merits and left all substantive rights and contentions open for adjudication afresh by the Assessing Officer. [Paras 6]

Matter remitted for fresh adjudication: supplementary Section 148A(b) notice to be issued with documents, petitioner given opportunity to reply with Demat and bank statements, and Assessing Officer to pass fresh order under Section 148A(d).

Final Conclusion: Writ petition disposed of: the order under Section 148A(d) dated 29th June, 2022 for Assessment Year 2014-15 is set aside; respondents directed to issue a supplementary Section 148A(b) notice enclosing relevant material (with necessary redactions), petitioner permitted to file an additional reply with Demat and bank statements, and the Assessing Officer directed to pass a fresh order under Section 148A(d) in accordance with law; no observation made on merits.

Liability for failure to deduct tax at source under section 195 - deemed assessee in default under section 201(1) - interest liability under section 201(1A) - first proviso to section 201(1) and its applicability to resident payee - effect of statutory amendment and applicability to earlier assessment years

Liability for failure to deduct tax at source under section 195 - deemed assessee in default under section 201(1) - Whether the assessee is a deemed assessee in default for not deducting tax while making payments to non-resident sellers and liable to tax under section 201(1) and interest under section 201(1A). - HELD THAT: - The Tribunal found on the facts that the assessee paid consideration to non-resident sellers through a GPA agent and did not deduct tax at source. The Assessing Officer rightly invoked section 195 and held the assessee to be in default; the CIT(A) also held that non-deduction attracted liability under section 201(1) and interest under section 201(1A). The Tribunal affirmed that the language of section 195 casts an obligation on the payer (even though resident) to deduct tax when making payments chargeable to tax in India, and that non-deduction gives rise to liability under section 201(1) and interest under section 201(1A). [Paras 6, 7]

Assessee is a deemed assessee in default for failing to deduct tax on payments to non-resident sellers and is liable to tax under section 201(1) and interest under section 201(1A).

First proviso to section 201(1) and its applicability to resident payee - effect of statutory amendment and applicability to earlier assessment years - Whether the first proviso to section 201(1), as inserted by Finance Act, 2012, could be applied to negate deeming liability for the impugned assessment year. - HELD THAT: - The Tribunal observed that the proviso to section 201(1) introduced w.e.f. 01.07.2012 provides that a person failing to deduct tax shall not be deemed to be an assessee in default if the payee (then limited to resident) has filed return, taken the sum into account and paid tax, subject to certificate. The Tribunal held that this amendment is not applicable to AY 2009-10 because the proviso came into force after the date of default and the settled position is that the statute as on the date of default governs liability under section 201(1). The Tribunal also noted that prior to later amendment (Finance (No.2) Act, 2019) the proviso applied only in respect of resident payees and not non-residents. [Paras 7]

The proviso to section 201(1) introduced by Finance Act, 2012 is not applicable to AY 2009-10 and cannot be invoked to absolve the assessee of deeming liability; additionally, at that time the proviso applied only to resident payees and not to non-resident payees.

Direction to verify taxes paid by payee - scope of appellate interference with statutory liability at the date of default - Whether the CIT(A) was correct in directing the Assessing Officer to verify taxes paid by the payee (non-resident seller) and recompute liability under section 201(1) and interest under section 201(1A). - HELD THAT: - The CIT(A), while recognizing the obligation under section 195, directed verification of taxes paid by the payee relying on the proviso to section 201(1). The Tribunal held this direction to be incorrect because the proviso was not applicable to the assessment year in question and because liability under section 201(1) is to be determined with reference to the law as it stood on the date of default. Accordingly, the Tribunal reversed the CIT(A)'s direction and allowed the revenue's ground on this point. [Paras 6, 7, 9]

CIT(A)'s direction to verify payee's taxes and recompute liabilities based on the 2012 proviso is reversed; AO to apply law as on date of default.

Limitation, jurisdictional and double taxation/contention of compensatory interest - Whether the assessee's contentions regarding limitation, lack of jurisdiction of the ITO (International Taxation), compensatory nature of interest (double taxation), and extinction of deductor's liability upon collection from recipient succeed. - HELD THAT: - The Tribunal considered these grounds, which mirror the assessee's submissions, and found them to be without merit in the light of the statutory position that liability under section 201(1) arises upon failure to deduct as per law prevailing on the date of default. The Tribunal dismissed the assessee's grounds and upheld the orders treating the assessee as in default and liable to interest. [Paras 9]

Assessee's grounds on limitation, jurisdiction, compensatory interest and extinction of liability upon collection from recipient are dismissed.

Final Conclusion: The appeals by the assessees are dismissed and the revenue's appeal is allowed. The Tribunal held that the assessee was correctly treated as a deemed assessee in default for non-deduction of tax on payments to non-resident sellers and liable to tax and interest under sections 201(1) and 201(1A); the first proviso to section 201(1) (Finance Act, 2012) is not applicable to AY 2009-10 and the CIT(A)'s direction to verify payee's tax under that proviso is reversed.

Rectification under section 154 - mistake apparent from the record - clerical error in the title of an order - inherent power of judicial and quasi judicial authorities to correct clerical mistakes - no requirement of a fresh hearing for correction of clerical mistakes - continuity of legal entity on amalgamation

Rectification under section 154 - mistake apparent from the record - clerical error in the title of an order - continuity of legal entity on amalgamation - Validity of the assessing officer's rectification under section 154 to correct the assessee's name in the title of the assessment order where amalgamation had occurred and the body of the order recorded the amalgamation. - HELD THAT: - The Tribunal held that an error in the title of a judicial or quasi judicial order concerning the identity of parties is a clerical mistake and does not alter the merits of the order. The assessing officer had recorded in the body of the assessment order the fact of amalgamation and the continuity of the legal entity into the amalgamated company. That manifestation in the body of the order shows the assessment was completed with awareness of the amalgamation, and correction of the title to reflect the amalgamated entity was therefore a mistake apparent from the record. Such an error is correctible under the rectification power; it is not a redetermination of any substantive issue and may be corrected as a clerical matter. The Tribunal agreed with the AO's view and with the First Appellate Authority's confirmation of the rectification. [Paras 6, 7, 8]

The rectification made by the assessing officer to correct the assessee's name in the title was valid and amounted to correction of a mistake apparent from the record.

No requirement of a fresh hearing for correction of clerical mistakes - inherent power of judicial and quasi judicial authorities to correct clerical mistakes - Whether the existence of a ground of appeal challenging the assessment order prevents exercise of rectification powers or requires providing an opportunity of hearing before correcting the clerical mistake. - HELD THAT: - The Tribunal held that the fact that the incorrect name in the assessment order was also pleaded as a ground of appeal before the CIT(A) did not oust the AO's inherent and statutory power to correct a mistake apparent from the record under section 154. Correction of a clerical error in the title does not constitute redetermination of issues on merits and therefore does not require a separate hearing. The confirmation of the AO's rectification by the First Appellate Authority was held to be sustainable. [Paras 9]

Pending appeal on the ground of incorrect name did not bar the AO from exercising rectification powers, and no separate hearing was necessary for the clerical correction.

Final Conclusion: The Tribunal dismissed the appeals, holding that the assessing officer validly exercised rectification under section 154 to correct a clerical error in the title of the assessment order relating to the assessee's name (in view of recorded amalgamation and continuity of the legal entity), and that confirmation of the rectification by the First Appellate Authority was proper; no fresh hearing was required for such clerical correction.

Cessation of liability - remission of liability - section 41(1) - falsity of documentary evidence - admission of additional evidence

Cessation of liability - section 41(1) - falsity of documentary evidence - admission of additional evidence - Validity of the addition under Section 41(1) in AY 2014-15 by treating the claimed outstanding sundry creditor amount as remission/cessation of liability. - HELD THAT: - The Assessing Officer added the claimed outstanding amount on the view that no valid confirmation was produced and the liability had been outstanding for over three years. Before the Commissioner (Appeals) the assessee sought to rely on additional confirmations said to show payment in FY 2011-12 and etailed bills; those confirmations were admitted and remanded to the AO for verification. On remand the creditor denied signing the confirmations and furnished ledger/returns showing no outstanding balance, and expressly stated receipt of payment in FY 2011-12. The AO reported that the confirmations produced by the assessee were false. The Tribunal examined the material before it and found the assessee's later contention that payment had been made by the director from his personal account to be an afterthought unsupported by entries in the company's books. The Tribunal treated the creditor's contemporaneous ledger/statement and his repudiation of the confirmations as compelling evidence that the liability had ceased earlier (in FY 2011-12), and that the confirmations relied upon by the assessee were not genuine. Applying the principle that remission/cessation of liability in an earlier year disentitles the assessee from claiming the balance in the relevant assessment year, the Tribunal upheld the view that Section 41(1) applied and that the addition was justified.

Addition under Section 41(1) confirmed; appeal dismissed.

Final Conclusion: The Tribunal upheld the addition made by the revenue under Section 41(1) for AY 2014-15 after finding that the creditor had received payment in FY 2011-12 and that the confirmations produced before the authorities were not genuine; the assessee's alternative plea regarding payment by its director was rejected as an afterthought.

Estimation of disallowance of undocumented cash site and conveyance expenses - Adverse inference from non-compliance with notices issued under section 133(6) - Disallowance of unverifiable purchases as unexplained investment under section 69C - Disallowance of labour contract payments where contracting parties do not respond to verification - Requirement of documentary corroboration and ledger/consumption evidence for purchases and labour charges - Adjudication of additions by balancing proportional estimation rather than blanket disallowance

Estimation of disallowance of undocumented cash site and conveyance expenses - Requirement of documentary corroboration and ledger/consumption evidence for purchases and labour charges - Appropriate quantum of disallowance for undocumented cash site and conveyance expenses for A.Ys.2015-16 to 2017-18 - HELD THAT: - The Tribunal accepted that cash site and conveyance expenditures were incurred in the normal course of carrying out civil contracts but noted deficiencies in supporting vouchers and corroborative evidence found during search. While the Assessing Officer disallowed 50% and the CIT(A) reduced it to 35%, the Tribunal held that a fair proportional estimate is warranted to meet the ends of justice. Considering the nature of the business (cash expenses at sites), the existence of vouchers (albeit voluminous and not immediately produced) and deficiencies revealed by investigation, the Tribunal reduced the disallowance to 20% of site and conveyance expenses for all three assessment years. [Paras 3]

Disallowance of site and conveyance cash expenses confirmed at 20% for A.Ys.2015-16, 2016-17 and 2017-18.

Disallowance of unverifiable purchases as unexplained investment under section 69C - Adverse inference from non-compliance with notices issued under section 133(6) - Requirement of documentary corroboration and ledger/consumption evidence for purchases and labour charges - Validity and quantum of disallowance in respect of purchases treated as unverifiable/bogus for A.Ys.2015-16 to 2017-18 - HELD THAT: - The Tribunal examined the Assessing Officer's verification exercise in which notices under section 133(6) were issued to 19 suppliers. Thirteen suppliers responded, and their transactions were supported by consumption evidence and payment records; the Tribunal held that purchases from those responding parties could not be disallowed. For six parties who did not respond, although the assessee furnished various supporting documents, deficiencies existed. The Tribunal declined the Assessing Officer's 100% disallowance and the AO's general 3% ad hoc disallowance for all purchases; instead, it sustained a limited disallowance of 2% of the value of purchases relating to the non-responding parties for each year as sufficient to meet the deficiencies revealed during search. [Paras 4]

Deletions directed for other disallowances; specific disallowances in respect of purchases where 133(6) notices were not complied with sustained only at 2% for each relevant year; no disallowance for purchases from parties who responded to 133(6).

Disallowance of labour contract payments where contracting parties do not respond to verification - Adverse inference from non-compliance with notices issued under section 133(6) - Requirement of documentary corroboration and ledger/consumption evidence for purchases and labour charges - Adjudication of additions by balancing proportional estimation rather than blanket disallowance - Validity and quantum of disallowance in respect of labour contract payments for A.Ys.2015-16 to 2017-18, including payments to labour sansthas - HELD THAT: - The Tribunal recorded that many labour contractors are migrant/unorganised and may not be traceable by post-verification, and that a substantial portion of verification by the AO covered large percentages of total labour charges. Where contractors responded to 133(6), their payments could not be treated as bogus. For parties who did not respond, the assessee had nevertheless produced bank statements, ledgers, bills and other relevant records; the Tribunal found the AO's blanket 100% disallowance excessive. Considering documentary deficiencies discovered during search but also the operational realities of labour deployment, the Tribunal reduced specific disallowances to nominal percentages: it sustained a 2% disallowance (applied to the specific labour payments not responded to) to meet deficiencies and directed deletion of other disallowances. Separately, additions relating to payments to 14 labour sansthas for A.Y.2016-17 were deleted as the assessee had furnished required details and no adverse inference was justified. [Paras 5]

Disallowances sustained only to the limited extent of 2% of specific labour payments where 133(6) compliance was lacking; other labour-related additions deleted; addition in respect of payments to labour sansthas for A.Y.2016-17 deleted.

Adjudication of jurisdiction under section 153C - Assessee's additional ground challenging validity of assessments framed under section 153C for A.Ys.2015-16 and 2016-17 - HELD THAT: - The Tribunal admitted the additional ground as raising a legal question. However, having decided all contested additions on merits, the Tribunal held that adjudication of the jurisdictional challenge would be academic. Consequently the Tribunal declined to express any opinion on the validity of jurisdiction under section 153C and left the additional ground open. [Paras 6]

Jurisdictional challenge under section 153C admitted but not adjudicated; left open (no opinion rendered).

Final Conclusion: The Tribunal partly allowed the assessee's appeals for A.Ys.2015-16 to 2017-18 and partly allowed the Revenue's appeal for A.Y.2016-17. Disallowance of site and conveyance cash expenses reduced to 20% for all three years; disallowance of unverifiable purchases limited to 2% in respect of parties who did not comply with notices under section 133(6), with other purchase disallowances deleted; labour-payment additions largely deleted except for a nominal 2% disallowance on specific non responding parties and deletion of the large addition relating to labour sansthas for A.Y.2016-17; the legal challenge to jurisdiction under section 153C was admitted but left undecided as academic.

Deduction under section 80IC - classification under Central Excise Tariff headings - Schedule 13 negative list exclusion - judicial consistency and follow-on precedent

Deduction under section 80IC - classification under Central Excise Tariff headings - Schedule 13 negative list exclusion - judicial consistency and follow-on precedent - Whether the addition made by the AO by disallowing deduction under section 80IC for AY 2014-15 was rightly deleted by the CIT(A) and whether that deletion should be upheld. - HELD THAT: - The AO disallowed the assessee's claim under section 80IC on the basis that the products manufactured fell within Schedule 13 (serial No.19) - a negative list - after examining product samples and treating them as paper/paperboard items under chapter 48. The CIT(A) examined classification, relied upon earlier orders in the assessee's own case and relevant circulars, and concluded that the products fall under tariff headings such as 7607/8309 rather than the chapter relied upon by the AO. Coordinate-bench Tribunal decisions in the assessee's own case for earlier assessment years (including orders dated 18.02.2019 and 11.10.2021) held that the unit qualified for deduction under section 80IC and treated the laminated aluminium foil products under chapter 7607, not the negative list entries. The Revenue did not place any material to show that facts for AY 2014-15 differed from earlier years or that the earlier Tribunal orders had been set aside. Applying the principle of judicial consistency and following the assessee's own earlier Tribunal decisions, the appellate conclusion to allow the deduction was warranted. No infirmity was found in the CIT(A)'s order and the Revenue's appeal was therefore liable to be dismissed. [Paras 6, 7, 8, 9, 10]

CIT(A)'s deletion of the addition made by the AO by allowing the deduction under section 80IC for AY 2014-15 is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal, following coordinate-bench decisions in the assessee's own case concerning product classification and entitlement, affirmed the CIT(A)'s allowance of deduction under section 80IC for AY 2014-15 and dismissed the Revenue's appeal.

Enhancement of assessment - show cause under section 251(2) - change of head of income from capital gains to business income - treatment of rental income as income from business versus income from house property - application of percentage completion method and revision of estimated contract value - valuation under section 50C and use of Departmental Valuer's report - disallowance under section 14A and computation under rule 8D

Enhancement of assessment - show cause under section 251(2) - change of head of income from capital gains to business income - treatment of rental income as income from business versus income from house property - Validity of CIT(A)'s change of head of income (capital gains/house property to business income) where no specific show cause opportunity was proved to have been given. - HELD THAT: - The Tribunal examined whether the Commissioner (Appeals) complied with the mandate of section 251(2) before enhancing assessment by changing the head of income. The Tribunal found that the Assessing Officer had assessed the impugned receipts as capital gains and house property, and that the CIT(A) recast them as business income which has different tax consequences (rate, availability of indexation and deductions). The assessee produced order sheet notings and asserted that no show cause was issued; the Revenue failed to produce documentary evidence to establish that a written show cause specifying the proposed enhancement was served. The Tribunal held that where a change of head of income results in enhancement (or different tax treatment) the appellate authority must give the appellant a reasonable opportunity to show cause against such enhancement; absence of such opportunity vitiates the enhancement. Applying the principle and related precedents, the Tribunal held that the CIT(A)'s treatment of the sale proceeds and lease/rental receipts as business income was without valid show cause and therefore unsustainable in the facts of this case, and allowed the relevant grounds of appeal. [Paras 10, 11, 21, 23]

CIT(A)'s change of head of income to business income (and consequent enhancement) quashed for want of compliance with section 251(2); the AO's treatment (capital gains and house property as assessed) is restored where applicable.

Application of percentage completion method and revision of estimated contract value - accounting estimates and subsequent events - remand for recalculation - Validity of addition on account of alleged understatement of contract revenue by reducing the Total Estimated Contract Value (ECV) and the consequential addition under the percentage completion method. - HELD THAT: - The dispute concerned the assessee's reduction of the contract value by Rs. 10 crore for the project, which the AO rejected and which the CIT(A) upheld. The Tribunal examined the contract documentation and the later executed registered conveyance deed showing that, after negotiations and due to purchaser completing remaining construction, the contract consideration was reduced. The Tribunal observed that the same project had its contract value revision accepted by the department in the subsequent year. Given the registered conveyance deed reflecting reduction in consideration and the inter relation between the reduced scope/cost and profit recognition under the percentage completion method, the Tribunal held that the AO should re compute the revenue from the project taking the reduced contract value into account. The matter was therefore remitted to the AO for recomputation consistent with the registered deed and percentage completion accounting. [Paras 13, 14]

Addition on account of alleged suppressed revenue set aside and matter remitted to the AO to recalculate revenue/profit from the project applying the reduced contract value evidenced by the registered conveyance deed.

Valuation under section 50C and use of Departmental Valuer's report - change of head of income from capital gains to business income - Appropriate valuation and treatment of sale consideration for capital gains where departmental valuer's report became available after assessment and whether capital gains treatment should be sustained for AY 2011 12. - HELD THAT: - For AY 2011 12 the Tribunal considered factual material including earlier entries in the books, lease/license agreements and that the asset was shown as fixed asset in prior years. Applying those facts and the jurisdictional precedent that an assessee may hold similar assets as investment despite dealing in land, the Tribunal concluded the sale of the Matrix building was to be taxed as capital gain rather than adventure in the nature of trade. The Tribunal directed the Assessing Officer to compute capital gains taking into account the Departmental Valuer's valuation (which was filed after completion of assessment) and thereby allowed the assessee's additional ground for AY 2011 12. [Paras 20, 21, 24]

Sale to be taxed as capital gains for AY 2011 12; AO directed to compute capital gains adopting the Departmental Valuer's valuation.

Disallowance under section 14A and computation under rule 8D - Sustainability of the disallowance under section 14A computed using Rule 8D where the assessee had not maintained separate books for exempt income and could not prove no expenditure was incurred. - HELD THAT: - The AO recorded satisfaction and applied Rule 8D to determine the disallowance in respect of exempt income. The assessee failed to establish that no expenditure was incurred for earning the exempt income and did not maintain separate books for investments. On these facts the Tribunal found the AO's application of Rule 8D justified and upheld the disallowance assessed under section 14A. [Paras 24]

Disallowance under section 14A computed under Rule 8D upheld; the ground challenging that addition is dismissed.

Final Conclusion: The appeals are partly allowed. The Tribunal set aside the CIT(A)'s enhancements effected without adequate show cause and restored the AO's treatment where applicable, remitted the project revenue computation to the AO to take into account the registered reduction in contract value, directed the AO to compute capital gains for AY 2011 12 using the Departmental Valuer's report, and upheld the section 14A/Rule 8D disallowance.

Assessment under section 153C read with section 153A - non-obstante operation of section 153C excluding initiation under section 147 - jurisdictional date governed by recording of satisfaction note / date of initiation of search - invalidity of assessment completed under section 144 when proceedings were required under section 153C

Assessment under section 153C read with section 153A - jurisdictional date governed by recording of satisfaction note / date of initiation of search - invalidity of assessment completed under section 144 when proceedings were required under section 153C - Whether the assessments for A.Y. 2010-11 and A.Y. 2011-12, initiated after a search on the Reliable Group, were required to be framed under section 153C read with section 153A and not under section 144/143(3). - HELD THAT: - The Tribunal found as an undisputed factual matrix that incriminating material relating to the assessee was seized during the search of a third party and that the Assessing Officer had recorded satisfaction on 19.11.2012. Under the operative provisos to the relevant provisions, the AO acquires jurisdiction from the date of recording satisfaction (the date of initiation of the search) and, therefore, was obliged to proceed under the provision applicable to assessments based on seized material for the six immediately preceding assessment years, which include 2010-11 and 2011-12. The Revenue failed to discharge the onus of proving any other date of satisfaction; the record, including prior Tribunal findings in related years, supports 19.11.2012 as the date of recording satisfaction. Given the non-obstante character of the provision governing assessments arising from seized material, initiation of assessment under section 144 (or section 147/148) where section 153C/153A applied was held to be impermissible. Because the additions in the impugned orders were not founded upon seized material and the statutory scheme mandates proceedings under section 153C/153A when seized material pertains to the assessee, the assessments completed under section 144 were quashed without entering into the merits. [Paras 11, 12, 14, 16, 18]

Assessments for A.Y. 2010-11 and A.Y. 2011-12 framed under section 144 are not sustainable and are quashed because proceedings should have been initiated and completed under section 153C read with section 153A.

Final Conclusion: The Tribunal allowed the appeals of the assessee, quashed the assessments for A.Y. 2010-11 and 2011-12 framed under section 144, and dismissed the Revenue's cross-appeal, on the ground that proceedings ought to have been initiated and completed under section 153C read with section 153A in view of seized material and the date of recorded satisfaction.

Application of section 153C where documents seized prior to amendment - documents "belong to" versus documents that "pertain to or relate to" - jurisdictional requirement for assessment under section 153C - addition based on third party seized documents and requirement of incriminating material - additions cannot be based on mere presumption; need for cogent evidence

Application of section 153C where documents seized prior to amendment - documents "belong to" versus documents that "pertain to or relate to" - jurisdictional requirement for assessment under section 153C - Validity of framing assessment under section 143(3) r.w.s. 153C based on documents seized on 10.03.2015 which did not "belong to" the assessee but were described as "pertain/relate" to him. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that, as the search on third parties occurred prior to the 1 June 2015 amendment, the unamended jurisdictional test (that seized material must "belong to" the other person) governed. The assessment order itself recorded satisfaction only that the documents "pertain/relate" to the assessee, indicating the seized papers did not "belong to" him. Reliance was placed on binding decisions of the jurisdictional High Court and subsequent authorities holding that the expanded scope introduced by the amendment could not be applied to searches conducted before its commencement. Consequently, in absence of seized documents that belonged to the assessee as on the date of search, the AO lacked jurisdiction to make additions under section 153C based on those loose papers.

Assessment framed under section 143(3) r.w.s. 153C on the basis of documents seized on 10.03.2015 that did not "belong to" the assessee is void; deletion of the addition upheld.

Addition based on third party seized documents and requirement of incriminating material - additions cannot be based on mere presumption; need for cogent evidence - application of provisions regarding unexplained cash/loans (sections 68/69 context) - On the merits, whether the addition of the alleged unexplained amount could be sustained on the basis of the seized loose papers and inferences drawn by the AO. - HELD THAT: - The Tribunal agreed with the CIT(A) that, even on merits, the AO's addition rested on presumption and loose documents not found in the assessee's possession; there was no clinching or corroborative evidence of cash payment or receipt by the assessee. The earlier treatment of the transaction as a bona fide loan through banking channels, credit entries and interest/TDS records, and absence of incriminating vouchers found from the assessee rendered the AO's inference unsustainable. The Tribunal also followed a coordinate ITAT decision which held that where the primary source transaction via banking channel is accepted as genuine, consequential cash flow entries on third party papers cannot be the basis for additions without further cogent proof. Hence, addition based on such presumptions was deleted.

Addition deleted on merits as unsupportable by cogent evidence; AO could not base addition on mere presumption from third party loose papers.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the addition for AY 2013 14, holding that (i) assessments under section 153C could not be sustained on documents seized before 1 June 2015 which did not "belong to" the assessee, and (ii) in any event the addition was based on mere presumption and inadequate evidence; the assessee's cross objections were not pressed and dismissed accordingly.

Disallowance under section 14A read with Rule 8D - computation of disallowance limited to exempt income - interest/finance charges for purposes of Rule 8D - treatment of capital subsidies for computing book profit under section 115JB - Explanation 1 to section 115JB - addition of reserves to book profit - remand for determination whether subsidy is capital or revenue in nature

Disallowance under section 14A read with Rule 8D - computation of disallowance limited to exempt income - Extent and computation of disallowance under section 14A read with Rule 8D and whether it can exceed the exempt dividend income for the year - HELD THAT: - The Tribunal accepted the Assessee's alternative contention, relying on the jurisprudence of the jurisdictional High Court, that where Rule 8D is invoked the disallowance in relation to income not includible in total income should be restricted to the investments which yielded exempt income during the relevant year and, consequently, cannot exceed the exempt income actually earned in that year. The Commissioner had directed recomputation of disallowance under Rule 8D(ii) and (iii) by considering only investments yielding exempt income; the Tribunal endorsed that approach to cut short litigation and directed the Assessing Officer to restrict the disallowance under section 14A to the extent of exempt income earned during the assessment year. The Tribunal also recorded that there was no effective rebuttal before it regarding the upward adjustment under Explanation 1 to section 115JB in respect of the Assessee's own suo moto disallowance, and accordingly left the recomputation and adjustment as directed by the Commissioner. [Paras 6]

Disallowance under section 14A/Rule 8D is to be restricted to the exempt income earned in AY 2016-17; Assessing Officer directed to recompute accordingly; Grounds 1-1.4 partly allowed.

Treatment of capital subsidies for computing book profit under section 115JB - Explanation 1 to section 115JB - addition of reserves - remand for determination whether subsidy is capital or revenue in nature - Whether subsidies/incentives credited directly to capital reserves should be added back to book profit under section 115JB, and whether authorities below correctly treated such receipts as taxable for MAT purposes - HELD THAT: - The Tribunal found that the authorities below proceeded to add back the subsidies to book profit under section 115JB without first determining whether the subsidies/incentives were capital or revenue in nature and without testing the purpose and scheme of the grants as required by precedent. Noting the Assessee's claim that the amounts were capital in nature and treated as promoters' contribution in accordance with applicable accounting treatment, and observing that the lower authorities had not made a factual determination on nature of receipts, the Tribunal held that the matter required fresh consideration. Consequently the Tribunal set aside the findings of the authorities below on this issue and remitted the matter to the Assessing Officer for fresh decision on whether the subsidies are capital or revenue in nature and thereafter to determine the tax liability under section 115JB in accordance with that conclusion. [Paras 11]

Issue remitted to the Assessing Officer for fresh determination of whether the subsidies/incentives are capital or revenue in nature and for recomputation of book profit under section 115JB; Grounds 2-2.1 allowed for statistical purposes.

Appeal by Revenue dismissed - Validity of the Commissioner's direction to recompute disallowance under Rule 8D as challenged by Revenue - HELD THAT: - In view of the Tribunal's decision in the Assessee's appeal limiting disallowance to the exempt income earned, the Revenue's ground challenging the Commissioner's direction to recompute the Rule 8D disallowance was not sustained. The Tribunal therefore dismissed the Revenue's appeal. [Paras 12, 13]

Revenue's appeal dismissed.

Final Conclusion: The Assessee's appeal is partly allowed: disallowance under section 14A/Rule 8D is to be restricted to the exempt income for AY 2016-17 and recomputed accordingly; the addition of subsidies to book profit under section 115JB is set aside and remitted to the Assessing Officer for fresh decision on the capital or revenue character of the receipts; the Revenue's cross appeal is dismissed.

Unexplained cash credit - genuineness, identity and creditworthiness of shareholders/subscribers - paper companies and accommodation entries - reopening of assessment based on information received from investigation/search - prima facie belief that income has escaped assessment - application of precedents on proof of identity and creditworthiness (Sumati Dayal; Navodaya Castle)

Unexplained cash credit - genuineness, identity and creditworthiness of shareholders/subscribers - paper companies and accommodation entries - Whether the deletion by the CIT(A) of additions made by the Assessing Officer treating share application money as unexplained cash credits was sustainable. - HELD THAT: - The Tribunal held that the Assessing Officer was justified in treating the share application monies received from seven parties as unexplained cash credits. The record showed statements admitting provision of accommodation entries, financials of the alleged investor companies that did not corroborate the investments, bank transactions that did not inspire confidence, and prior assessment findings in respect of those investor companies. The CIT(A) had deleted additions in respect of three companies after finding identity, genuineness and creditworthiness but the Tribunal found those conclusions unjustified on the material on record and held the companies to be mere paper entities. Applying the principles in Sumati Dayal and subsequent authorities that mere production of incorporation documents, PAN and routine papers is not enough where the creditworthiness and genuineness are doubtful, the Tribunal set aside the CIT(A)'s deletions and upheld the Assessing Officer's additions. [Paras 8, 9, 10, 11]

Order of the CIT(A) deleting additions of Rs.11 crores is set aside and the Assessing Officer's additions are upheld.

Reopening of assessment based on information received from investigation/search - prima facie belief that income has escaped assessment - Whether the reassessment under section 143(3) read with section 147 was invalid and ought to have been made under section 153C in consequence of a search. - HELD THAT: - The Tribunal found that the Assessing Officer had received credible information from the Investigation Wing and statements of persons connected with the alleged investor companies admitting use of those companies for accommodation entries. That information constituted a reliable basis for a prima facie belief that income had escaped assessment. Consequently, the reopening under section 147 (with assessment under section 143(3) r.w.s.147) was valid. The Tribunal rejected the assessee's contention that the reopening was bad in law or that section 153C should have been invoked instead. [Paras 13, 14, 15, 16]

Cross-objection dismissed; reopening and reassessment under section 143(3) r.w.s.147 upheld as valid.

Final Conclusion: Revenue appeal allowed: CIT(A)'s deletion of additions of Rs.11 crores set aside and Assessing Officer's additions upheld; assessee's cross-objection against reopening dismissed and reassessment under section 143(3) r.w.s.147 held valid.

Allowability of interest on borrowed funds for business purpose - commercial expediency and business nexus for deduction - allowability of loan processing fees as business expenditure - effect of concession by authorised representative on appellate rights - impact of Vivad Se Vishwas declaration on admission or acquiescence

Allowability of interest on borrowed funds for business purpose - commercial expediency and business nexus for deduction - effect of concession by authorised representative on appellate rights - impact of Vivad Se Vishwas declaration on admission or acquiescence - Whether interest paid on loan borrowed to purchase shares of Oyster & Pearl Hospitals Pvt. Ltd. is deductible as expenditure incurred for the purpose of the assessee's business and whether a concession by the authorised representative before the AO or the assessee's earlier acceptance under Vivad Se Vishwas precludes contesting the disallowance on appeal. - HELD THAT: - The Tribunal accepted the factual narrative and sequence recorded by the CIT(A) showing that the assessee, a hospital-owning company, borrowed funds (from Saraswat Cooperative Bank) and used part of the loan to purchase 49% shares in Oyster & Pearl Hospitals Pvt. Ltd. to protect its business interest and control of the hospital premises. The Tribunal applied the commercial-expediency test: once it is established that borrowed funds were utilized for business purpose, interest paid on such funds is an allowable deduction. The Tribunal found no diversion of funds to non-business purposes and noted the AO had already allowed interest relating to repayment/closure of the construction loan, thereby accepting business purpose for part of the borrowing. The Tribunal further held that a concession by an authorised representative before the AO does not automatically preclude the assessee from contesting the disallowance on appeal where the question involves mixed fact and law; reliance was placed on the Supreme Court doctrine that concessions on mixed questions do not finally decide a case. Finally, the Tribunal rejected the Revenue's contention that the assessee's availing of Vivad Se Vishwas in other years estopped it from contesting the issue, observing the Explanation to Section 5 of the Vivad Se Vishwas Act and CBDT clarifications which state that a declaration under the scheme does not amount to conceding the tax position and cannot be used to contend acquiescence in other proceedings. Applying these principles to the facts, the Tribunal found a direct nexus between the borrowing, its use to protect the assessee's business, and the interest claimed, and therefore upheld the CIT(A)'s deletion of the interest addition. [Paras 9, 10, 11, 12, 21]

The disallowance of interest on the loan used to purchase shares of ONP is deleted; the interest is allowable as business expenditure.

Allowability of loan processing fees as business expenditure - allowability of interest on borrowed funds for business purpose - Whether processing fees charged by banks in respect of the loans (used for business and for purchase of shares) are allowable as business expenditure. - HELD THAT: - The Tribunal held that once the loans taken from Bank of Baroda and Saraswat Cooperative Bank are held to have been utilised for the purpose of the assessee's business, the loan processing fees paid to those banks are incidental to and inextricably linked with obtaining business finance and thus constitute allowable business expenditure. The CIT(A)'s reasoning that the processing fees relate to loans used for business (repayment of earlier business loan and purchase of shares held for protecting business interests) was accepted. Given the confirmation on the allowability of interest, the processing fees were also held deductible. [Paras 23, 24]

The addition made on account of processing fees is deleted; the processing fees are allowable as business expenditure.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal upholds the CIT(A)'s deletions of the additions relating to interest on the loan taken to purchase shares of ONP and the processing fees, finding both to be deductible as expenses incurred for the purpose of the assessee's business and rejecting the contentions that prior concession or Vivad Se Vishwas filings precluded appellate challenge.

Restriction of addition to incriminating documents found during survey - inadmissibility of extrapolation of one month's receipts to annual turnover - taxability of profit element embedded in unaccounted receipts as distinct from gross receipts - evidentiary value of statements recorded during survey proceedings - penalty for concealment or furnishing inaccurate particulars under section 271(1)(c)

Restriction of addition to incriminating documents found during survey - inadmissibility of extrapolation of one month's receipts to annual turnover - taxability of profit element embedded in unaccounted receipts as distinct from gross receipts - evidentiary value of statements recorded during survey proceedings - Whether the assessing officer was justified in making an addition of the extrapolated annual receipt and in treating the full extrapolated amount as income. - HELD THAT: - The Tribunal upheld the view of the CIT(A) that only the incriminating loose papers found for February 2014 (quantified as Rs. 6,33,339) constituted direct evidentiary material and that extrapolating that single month's figures to estimate annual receipts at Rs. 76,00,068 was arbitrary and not a logical or reliable basis for assessing the entire year's income. The CIT(A) also considered that the assessee had returned substantially higher gross receipts for the year compared to the earlier year, effectively accounting for a large part of the difference between the extrapolated figure and declared receipts. The Tribunal found the CIT(A)'s restriction of the addition to the amount reflected in the incriminating documents for February to be based on sound reasoning, noting variations in receipts across months and that gross receipts cannot be equated mechanically with taxable profit; it therefore affirmed the reduction of the addition to the incriminating amount. [Paras 11, 14, 15]

Addition confirmed as limited to the incriminating amount found for February 2014 (Rs.6,33,339); the extrapolated annual addition was rejected and the appeal on quantum was dismissed.

Penalty for concealment or furnishing inaccurate particulars under section 271(1)(c) - evidentiary value of statements recorded during survey proceedings - Whether penalty under section 271(1)(c) was leviable in view of the facts and the reduction of the addition by the appellate authority. - HELD THAT: - Although the Assessing Officer had initially imposed penalty based on the original addition, the CIT(A) restricted the quantum of addition to the amount supported by incriminating material. The Tribunal, while affirming the CIT(A)'s view on quantum, held that on the facts the assessee had neither concealed particulars nor furnished inaccurate particulars warranting penalty. Given the appellate reduction and the Tribunal's view that the case did not demonstrate concealment or furnishing of inaccurate particulars attracting penalty, the Tribunal directed deletion of the penalty under section 271(1)(c). [Paras 17, 18]

Penalty under section 271(1)(c) deleted; the penalty appeal is allowed.

Final Conclusion: For A.Y. 2014-15 the Tribunal affirmed the CIT(A)'s restriction of the addition to the amount evidenced by incriminating documents for February 2014 and dismissed the quantum appeal; separately, it deleted the penalty under section 271(1)(c) and allowed the penalty appeal.

Exercise of jurisdiction under section 263 - assessment order erroneous and prejudicial to the interests of revenue - allowability of deduction for employees' provident fund contributions - timely deposit requirement under section 36(1)(va) and its Explanation - failure by the Assessing Officer to make inquiries or verification - remand for reframing assessment after verification

Exercise of jurisdiction under section 263 - assessment order erroneous and prejudicial to the interests of revenue - failure by the Assessing Officer to make inquiries or verification - Whether the Principal Commissioner was justified in invoking section 263 to set aside the assessment on the ground that the assessment order was erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Tribunal upheld the Principal Commissioner's exercise of power under section 263. The Tribunal accepted that the issue-deductibility of amounts claimed as employees' provident fund contributions and whether deposits were made within the time prescribed-had been decided against the assessee by the jurisdictional High Court, and therefore the Assessing Officer was under a duty to make enquiries rather than accept the assessee's submissions on their face. In the absence of such verification and inquiry by the AO, the assessment was treated as having been passed without making inquiries which should have been made, bringing it within Explanation 2 to section 263. The Tribunal found no infirmity in the Principal Commissioner holding the assessment order to be erroneous and prejudicial to revenue and exercising revisionary jurisdiction. [Paras 4]

Principal Commissioner rightly invoked section 263 and set aside the assessment to the extent indicated for lack of requisite inquiry and verification.

Allowability of deduction for employees' provident fund contributions - timely deposit requirement under section 36(1)(va) and its Explanation - remand for reframing assessment after verification - Whether the Assessing Officer was required to verify (a) that employees' contribution claimed as expenditure was not simply amounts deducted from employees' salaries, and (b) that deposits of employees' contributions into the relevant fund were made within the time required under section 36(1)(va) and its Explanation, and the consequence of failure to verify. - HELD THAT: - The Tribunal noted that the Principal Commissioner observed the assessee had claimed employees' contributions as expenditure and that certain employee contributions were deposited after the due date prescribed by the statutory provision. The Tribunal referred to adverse decisions of the jurisdictional High Court on the question of disallowance where employee contributions were not deposited within the prescribed time, and to the statutory Explanation which makes an order passed without necessary inquiries vulnerable to revision under section 263. Given that the AO had not examined the bifurcation of employer and employee contributions or verified the dates of deposit against the statutory due dates, the Tribunal concurred that these aspects required fresh scrutiny. Consequently, the matter was remitted to the Assessing Officer for fresh adjudication after proper verification and after affording the assessee a reasonable opportunity of being heard. [Paras 4, 5]

Assessment set aside to the extent indicated; Assessing Officer directed to reframe the assessment after verifying the nature of the contributions and the timeliness of deposits and after giving the assessee an opportunity of hearing.

Final Conclusion: The appeal is dismissed. The Appellate Tribunal found no infirmity in the Principal Commissioner's order under section 263; the assessment is set aside to the extent indicated and the matter remitted to the Assessing Officer for verification and fresh adjudication in accordance with law.

Reliance on uncorroborated third-party statements - diary entries as evidentiary material - addition of unexplained cash deposits - requirement of corroborative evidence to sustain additions

Reliance on uncorroborated third-party statements - diary entries as evidentiary material - requirement of corroborative evidence to sustain additions - addition of unexplained cash deposits - Whether additions made to the assessee's income on the basis of entries in a diary and the statement of the son of a deceased hawala operator, without corroborative evidence, are sustainable. - HELD THAT: - The Tribunal found that the additions were founded solely on diary entries and the statement of Dharmendra Doshi, who stated that he had transcribed names on oral instructions of his deceased father and could not identify depositors or produce corroborative material linking the deposits to the assessee. The CIT(A) had upheld the additions on the basis of a "reasonable probability" arising from the diary entry. The Tribunal held that, on the facts, Revenue did not produce substantive or corroborative evidence to demonstrate that the amounts deposited in the hawala-operated bank accounts belonged to the assessee. Reliance exclusively on third-party diary entries or uncorroborated oral statements, without supporting evidence, is insufficient to fasten tax liability. The Tribunal applied the principle reflected in authorities cited in its order that mere entries in third-party records or unsupported statements cannot substantiate an addition where no other corroboration exists, and accordingly deleted the additions. The Tribunal further held that the reasoning and result in respect of AY 2011-12 apply equally to AY 2010-11. [Paras 6, 7, 8, 11, 12]

Additions deleted for lack of corroborative evidence; appeals allowed for both assessment years.

Final Conclusion: The Tribunal set aside the additions made for AY 2011-12 and, on identical facts, for AY 2010-11, holding that entries in a third-party diary and uncorroborated oral statements were insufficient to establish that the deposited amounts belonged to the assessee; appeals allowed.

Provisional attachment under Section 24(4) of the Prohibition of Benami Property Transactions Act - right to copies of documents and sworn statements in pre-adjudicatory proceedings - applicability of principles of natural justice in statutory provisional proceedings - prematurity of writ challenge to provisional orders pending adjudication - effect of interim stay on administrative action where order communicated after action taken

Right to copies of documents and sworn statements in pre-adjudicatory proceedings - provisional attachment under Section 24(4) of the Prohibition of Benami Property Transactions Act - Entitlement of the appellant to the certified copy of his sworn statement recorded during survey and the scope of disclosure at the pre-adjudicatory stage. - HELD THAT: - The court accepted that the appellant sought copies of documents and his sworn statement recorded during survey proceedings. It held that while many documents relied upon for issuance of the show cause notices were furnished, the sworn statement recorded by the Investigation Wing was not originally provided because it was not relied upon in the Section 24 proceedings. Notwithstanding that distinction, the High Court directed that the certified copy of the statement recorded from the petitioner during the survey proceedings (to the extent it was shown to be prima facie used for issuing a notice under the Benami Act) be furnished to the petitioner within one week. The court expressly rejected the appellant's vague demand for any and all other sworn statements recorded during the separate investigation, noting those proceedings were conducted by a different office and such a broad request was not maintainable. The order balanced disclosure sufficient for making submissions in the provisional process against limitations on access to materials not relied upon by the initiating officer. [Paras 4, 5, 7, 13]

Certified copy of the sworn statement recorded from the petitioner in the survey proceedings is to be furnished; broader, vague requests for other sworn statements were rejected.

Applicability of principles of natural justice in statutory provisional proceedings - prematurity of writ challenge to provisional orders pending adjudication - Whether the orders dated 23.05.2018 under Section 24(4) violated principles of natural justice or were amenable to quashing in writ proceedings before adjudication. - HELD THAT: - The court analysed Section 24 of the PBPT Act and the scheme which contemplates provisional attachment on a prima facie satisfaction by the Initiating Officer, with substantive adjudication by the Adjudicating Authority thereafter. Applying settled principles, the court held that the extent and manner of protection of natural justice depend on statutory scheme and facts. Because the orders under Section 24(4) are provisional and interlocutory, the Adjudicating Authority is equipped to examine all materials and grant full opportunity of hearing at adjudication; consequently, a premature writ challenge to the provisional orders was not warranted. The court relied on precedent and statutory appeal/remedial fora to observe that interference at the provisional stage would obstruct the adjudicatory process and that absence of specific prejudice or breach of natural justice in the provisional process had not been demonstrated. [Paras 9, 12, 13, 15, 16]

Writ challenge to the provisional attachment orders dismissed as premature and not in violation of natural justice; appellant may raise all contentions before the Adjudicating Authority.

Effect of interim stay on administrative action where order communicated after action taken - prematurity of writ challenge to provisional orders pending adjudication - Whether the passing of Section 24(4) orders on 23.05.2018 amounted to wilful disobedience of the interim order granted by the High Court on the same date. - HELD THAT: - The court examined the chronology and documentary material showing that the draft of the Section 24(4) orders was placed before the Approving Authority on 22.05.2018 and approved, and that the orders were passed on 23.05.2018. The interim order granted by the court on 23.05.2018 was communicated to the departmental office only on 25.05.2018. On these facts, the court found that the Initiating Officer became aware of the interim order only after passing the Section 24(4) orders and therefore there was no deliberate or wilful disobedience of the interim direction. Given the provisional character of the orders and their passage prior to communication of the stay, no interference was justified on that ground. [Paras 4, 14, 15]

No wilful disobedience of the interim order; the initiating officer passed the provisional orders before becoming aware of the interim stay.

Final Conclusion: All appeals are dismissed. The High Court directed production of the certified copy of the petitioner's sworn statement recorded during the survey; held that the provisional orders under Section 24(4) did not infringe principles of natural justice and that a writ challenge at the provisional stage is premature, and found no wilful disobedience of the interim order. The appellant is at liberty to raise all contentions before the Adjudicating Authority.

Natural justice - final assessment under Section 18(2) of the Customs Act without consideration of subsequent codified re-test - retesting of samples (codified re-test) and Board's Circular No.30/2017-Cus - conflicting laboratory reports and judicial restraint in re-appreciation of scientific/technical evidence - strict construction of exemption notification and burden of proof on assessee

Final assessment under Section 18(2) of the Customs Act without consideration of subsequent codified re-test - natural justice - Validity of the final assessment order dated 28/29.06.2022 which relied upon CRCL, Kolkata and CRCL, New Delhi reports without awaiting the subsequent codified re-test report from CRCL, Mumbai and without affording the petitioner an opportunity to place that material before the assessing authority. - HELD THAT: - The Court found that the assessing authority proceeded to finalise the provisional assessment notwithstanding the petitioner's request that the outcome of a codified re-test (CRCL, Mumbai) be awaited. The codified re-test report reached the petitioner only after the final assessment and thus the petitioner had no opportunity to present that material before the authority. In these circumstances there was invasion of the principles of natural justice and the assessment could not be sustained. The Court reiterated that where conflicting test reports exist, the determination of such factual and technical controversy is for the statutory authorities and not for the Court to decide by undertaking a roving inquiry; but where a party is prevented from placing material before the authority, the assessment procedure is vitiated. Applying these principles, the Court set aside the impugned assessment order and directed that the petitioner be afforded an opportunity to place the codified re-test report and any other evidence before the assessing authority for fresh consideration. [Paras 5, 6]

Impugned final assessment order set aside for breach of natural justice and failure to consider subsequent codified re-test; petitioner to be afforded opportunity to place the codified re-test report before the assessing authority.

Conflicting laboratory reports and judicial restraint in re-appreciation of scientific/technical evidence - retesting of samples (codified re-test) and Board's Circular No.30/2017-Cus - Scope of re-examination by the assessing authority when confronted with conflicting test reports from different CRCLs and the tenor of the remedy directed by the Court. - HELD THAT: - The Court declined to resolve the technical conflict between the differing CRCL reports itself, observing that when parameters and scientific analyses are contradictory, the Court should not engage in weighing disputed scientific facts under its writ jurisdiction. Instead, the statutory authorities are required to resolve such factual disputes. Consistent with Circular No.30/2017-Cus regarding procedure for re-testing, the Court directed the assessing authority to hear the petitioner, permit adducing of evidence, weigh the contradictory CRCL reports and then pass an appropriate assessment order after granting a reasonable opportunity of hearing. The Court emphasised that unnecessary adjournments are to be avoided and that the assessing authority must record reasons if it relies upon one report over another. [Paras 5, 6]

Matter remitted to the assessing authority to decide afresh after hearing the petitioner, permitting production of the codified re-test and other evidence, and weighing conflicting laboratory reports in accordance with law and Board guidance on re-testing.

Final Conclusion: The final assessment order dated 28/29.06.2022 is set aside. The petitioner is directed to appear before the assessing authority for further proceedings; the assessing authority shall afford a reasonable hearing, permit the petitioner to adduce the codified re-test report and other evidence, weigh the conflicting CRCL reports, and pass a fresh assessment order without unnecessary adjournments.

Categorisation as non-cooperative - duty to consider information before final recommendation - power of Designated Authority to seek information from related/associated parties - obligations under Rule 17 of the 1995 Rules - disclosure statement and final recommendation

Power of Designated Authority to seek information from related/associated parties - obligations under Rule 17 of the 1995 Rules - Whether the Designated Authority may seek information from the Indian related entity SMTIL and the manner in which that question is to be addressed. - HELD THAT: - The Court declined to resolve the statutory question itself and held that the Designated Authority (DA) must consider, while returning its final finding under Rule 17 of the 1995 Rules, whether it has jurisdiction or power to seek information from the Indian company SMTIL and whether SMTIL properly qualifies as an "interested party" whose information can be sought. The Court noted competing contentions - the petitioner contends that seeking information from SMTIL is not contemplated by the 1995 Rules, whereas respondents rely on provisions (including Rule 6(4) read with Rule 2(c)) to assert that SMTIL is an interested/related party from whom information may be obtained. Those aspects were left for the DA to deliberate and decide in its final recommendation under Rule 17. [Paras 12, 13, 14, 16]

The DA is directed to address and record its reasons on whether it could, and in what manner, seek information from SMTIL when returning its final finding under Rule 17 of the 1995 Rules.

Categorisation as non-cooperative - duty to consider information before final recommendation - disclosure statement and final recommendation - Whether the petitioner's categorisation as "non-cooperative" is final at this stage and what the DA must do before arriving at such a categorisation. - HELD THAT: - The Court held that the categorisation of the petitioner as "non-cooperative" cannot be treated as final or immune from reconsideration at this interim stage. The DA must consider the information already supplied by the petitioner and thereafter decide whether the petitioner ought to be categorised as non-cooperative. The facts and conclusions on this point must be reflected in the DA's final recommendation. The Court rejected any submission that the categorisation is merely preliminary in the sense of not requiring consideration; instead, the DA must deliberate and record its conclusion in the final finding under Rule 17. [Paras 15, 16]

The DA shall examine the information furnished by the petitioner and expressly record its view on the petitioner's categorisation as "non-cooperative" in the final recommendation under Rule 17.

Obligations under Rule 17 of the 1995 Rules - disclosure statement and final recommendation - Request for additional time to respond to transaction data furnished late and the consequences if the DA does not grant extension. - HELD THAT: - The Court recorded the petitioner's contention that transaction data was supplied only on 05.09.2022 after hours and that a short period would be required to respond. The Court placed the official respondents on notice that this assertion must be borne in mind; if an extension of time is required, respondent no.1/Union of India may take steps under the proviso to Rule 17(1) (permitting an extension in special circumstances). The matter of extension was left to the DA/Union of India to decide; the Court observed that if refusal to grant extension compromises the petitioner's interests, the appropriate forum can consider that grievance when the petitioner challenges any final notification. [Paras 17, 18]

Respondents are put on notice to consider the petitioner's request for a short time to respond; any decision on extension under Rule 17(1) is to be taken by respondent no.1/Union of India, and consequences of refusal can be agitated by the petitioner against any final notification.

Final Conclusion: The writ petition is disposed of by directing the Designated Authority to consider and record its findings in the final recommendation under Rule 17 of the 1995 Rules on (a) whether it may seek information from the related Indian entity SMTIL and (b) whether the petitioner should be categorised as "non-cooperative", and by putting the official respondents on notice to consider the petitioner's request for time to respond to late-supplied transaction data; all rights are kept open in respect of any final notification.

Option to pay fine in lieu of confiscation and consequent liability for duty - Vesting of confiscated goods in the Central Government and effect on charge of duty - Relevancy and admissibility of statements recorded under section 108 read with section 138B - Evidentiary value of loose price labels and internal price lists for redetermination of Retail Sale Price - Confiscation under provisions analogous to section 111(d) & (m) and imposition of penalty

Option to pay fine in lieu of confiscation and consequent liability for duty - Vesting of confiscated goods in the Central Government and effect on charge of duty - Liability to pay differential customs duty where goods are confiscated and the option to redeem is not exercised. - HELD THAT: - The Tribunal held that sub-section (2) of section 125 operates only when the owner exercises the positive option to pay the fine in lieu of confiscation and redeems the goods; absent such exercise, the liability to pay duty under that provision does not arise. Upon confiscation, title to the goods vests in the Central Government under section 126 and the statutory charge of customs duties is on the goods (not on the person) as explained by Section 12. When the Government becomes owner, the duty is to be recovered in accordance with the statutory mechanisms (for example, from sale proceeds under section 150) and not by imposing liability on the original importer who did not exercise the option. The Tribunal followed the Supreme Court's decision in Fortis Hospital Ltd. and rejected the Revenue's contention that duty is payable by the importer even if redemption is not opted for. [Paras 16, 17, 18, 19, 20]

Where confiscated goods are not redeemed by exercise of the option under section 125(1), the importer is not liable to pay duty; the duty incident attaches to the goods which vest in the Central Government and is to be recovered under the statutory scheme.

Relevancy and admissibility of statements recorded under section 108 read with section 138B - Evidentiary value of loose price labels and internal price lists for redetermination of Retail Sale Price - Sustainability of rejection of declared Retail Sale Price (RSP) and redetermination of Additional Duty of Customs based on loose labels, price lists and recorded statements. - HELD THAT: - The Tribunal found that the Commissioner did not follow the safeguards in section 138B for admitting statements made to customs officers; consequently those statements lack the required relevancy. The recorded statements were also subsequently retracted. With the statements excluded, the remaining material consists of loose labels and internal price lists seized from the warehouse. There is no material to show that those labels were affixed to goods offered for sale or that the higher prices were actually communicated or effected in the market. On these facts the Tribunal held that loose labels and internal price lists, without corroborative evidence of market application or sale at those prices, are insufficient to displace the declared RSP in the Bills of Entry. Therefore the Commissioner's rejection of the declared RSP and redetermination of duty cannot be sustained. [Paras 21, 22, 23]

Rejection of the declared RSP and reassessment of additional duty on the basis of loose labels and price lists (and on retracted statements not admitted under section 138B) is not justified and must be set aside.

Confiscation under provisions analogous to section 111(d) & (m) and imposition of penalty - Interplay between confiscation, evidence of mis-declaration and penalty liability - Sustainability of confiscation of goods and the penalties imposed in the impugned order. - HELD THAT: - The Tribunal treated confiscation, duty demand and penalties as inter-linked and originating from the finding of mis-declared RSP. Having held that the statements are inadmissible and that loose labels and price lists do not sufficiently establish mis-declaration, the foundational premise for confiscation under section 111(d) & (m) and for imposing penalties collapses. In consequence the confiscation and penalties based on that mis-declaration cannot be sustained. [Paras 21, 23, 24]

Confiscation of the goods and the penalties imposed cannot be sustained and are set aside.

Final Conclusion: The appeals are allowed: the order rejecting the declared RSP, the consequential demand of differential duty, the confiscation and the penalties are set aside; consequential relief to the appellants follows.

Classification of goods by tariff heading - interpretation of General Rules for Interpretation of the Import Tariff (rule 3(a) and rule 3(c)) - scope of chapter and heading descriptions versus end-use - note 2(a) to section XVI - parts included in chapter headings - relevance of GST rate notification entries to customs classification - onus of proof on Revenue for substitution of classification

Classification of goods by tariff heading - interpretation of General Rules for Interpretation of the Import Tariff (rule 3(a)) - note 2(a) to section XVI - parts included in chapter headings - scope of chapter and heading descriptions versus end-use - Impugned imported metal-clad printed circuit boards are classifiable under the heading corresponding to printed circuits (heading 8534) and not under the heading for lamps and lighting fittings (heading 9405). - HELD THAT: - The Tribunal examined the competing four-digit headings and held that the appellant's description 'printed circuits' corresponds to the specific heading for printed circuit boards. Rule 3(a) of the General Rules for Interpretation of the Import Tariff requires identification of the appropriate heading at the four-digit level and, on that basis, the specificity of the appellant's claimed heading is determinative. The presence of an additional metallic layer for thermal management does not alter the basic character or function of the goods so as to exclude them from the claimed heading. End-use (manufacture of lamps) and changes in manufacturing processes are not by themselves decisive of classification; the product must be tested against the tariff description. Note 2(a) to section XVI, which contemplates parts that are goods themselves being classifiable in their respective headings, supports classifying such printed circuit boards within the chapter covering electronic circuit boards. Consequently, the assessing authority's placement of the goods under the broader, non-specific heading for lamps and lighting fittings was not justified. [Paras 7]

Set aside the classification under heading 9405 and allow classification under the heading for printed circuits (heading 8534).

Relevance of GST rate notification entries to customs classification - interpretation of General Rules for Interpretation of the Import Tariff (rule 3(c)) - onus of proof on Revenue for substitution of classification - Reliance on entries in the GST rate notification or residuary GST description could not supplant the statutory duty of the assessing authority under section 12 of the Customs Act, and the Revenue failed to discharge the burden of proof required to justify substitution of the appellant's claimed classification. - HELD THAT: - The Tribunal held that descriptions in the GST rate notification are intended for levy of IGST and cannot be read as interpreting the classification applicable under the Customs Act; the assessing authority retains the statutory responsibility to determine classification under section 12. The lower authorities erred in applying rule 3(c) at the tariff-item level instead of identifying the appropriate four-digit heading and applying rule 3(a). Further, established authorities require the Revenue to adducesufficient evidence when seeking to classify goods differently from the importer's claim. On the record, the assessing authorities did not discharge this onus and relied on past clearances and notification descriptions without adequate evidentiary basis. [Paras 5, 6, 9]

The reliance on GST notification entries and application of rule 3(c) was misplaced; the Revenue failed to discharge the burden to justify reclassification, supporting allowance of the appeal.

Final Conclusion: The appeal is allowed; the assessing authority's reclassification is set aside and the goods are to be classified under the heading corresponding to printed circuits (heading 8534) as claimed by the importer.

Classification of goods for levy - burden of proof on the Revenue in classification - levy of integrated tax on imported goods - jurisdictional limits of proper officer under the Customs Act - residuary entry cannot be invoked without displacing declared classification - confiscation and penalty for misdeclaration

Classification of goods for levy - burden of proof on the Revenue in classification - residuary entry cannot be invoked without displacing declared classification - Declared classification in the bills of entry prevails and the adjudicating authority could not place the imported goods under the residuary entry to impose a higher rate of integrated tax without discharging the burden of proof. - HELD THAT: - The adjudicating authority subjected the imported goods to a residuary description attracting a higher rate without specific and detailed discussion of each article or adducing evidence to displace the declared heading under the First Schedule to the Customs Tariff Act, 1975. Judicial authorities require the Revenue to discharge the burden of proof when it seeks classification different from that claimed by the importer. The impugned order proceeded by process of elimination of the enumerated descriptions in the rate notification and assumed jurisdiction to apply the residuary entry in Schedule III without establishing that the impugned goods were excluded from the claimed entries. Given that the Revenue did not demonstrate that the goods did not fit heading 3822 or the specific kit entries in the rate notification, the declared classification must prevail and the charge of misdeclaration fails. Consequential confiscation and penalty based on that misdeclaration cannot be sustained. [Paras 15, 16, 17, 18, 19]

The declared classification as per the bills of entry is upheld; the charge of misdeclaration is rejected and the confiscation and penalty are set aside.

Levy of integrated tax on imported goods - jurisdictional limits of proper officer under the Customs Act - Proper officers under the Customs Act do not have jurisdiction to determine or substitute the rate of integrated tax under the IGST regime; disputes as to rate under the integrated tax regime fall within the competence of central tax officers and their appellate structure. - HELD THAT: - The levy of integrated tax on imports is imposed by reference to rates notified under the IGST framework and, while enabled in the Customs Tariff Act, the implementing machinery contemplated valuation and rate application in accordance with the IGST scheme. The adoption or dispute of the rate claimed by an importer under self-assessment can be intruded upon only by officers empowered under the central tax statutes. A 'proper officer' charged with assessment or recovery under the Customs Act exceeds jurisdiction if it ventures to determine the applicable IGST rate in place of the competent central tax authority. There was no showing of prejudice to revenue that would justify such an intrusion in this case. [Paras 8, 9, 11, 12, 13]

The adjudicating authority exceeded its jurisdiction in substituting the IGST rate; determination of the integrated tax rate is beyond the competence of the proper officer under the Customs Act.

Final Conclusion: The appeal is allowed: the declared classifications in the bills of entry are upheld, the adjudication placing the goods under the residuary entry is set aside, and the consequent confiscation and penalty are quashed; the order records that determination of IGST rate lies within the competence of central tax authorities and the customs adjudicating authority erred in venturing beyond its jurisdiction.

Invocation of Performance Bank Guarantee - moratorium under Section 14 - Performance Bank Guarantee not a security interest - irrevocable bank guarantee clause - absence of fraud in invocation - use of encashed guarantee proceeds for preserving going concern

Invocation of Performance Bank Guarantee - irrevocable bank guarantee clause - absence of fraud in invocation - Invocation of the two Performance Bank Guarantees by the corporate debtor was proper and not vitiated by fraud. - HELD THAT: - The Adjudicating Authority found that the BGs were invoked on 18.10.2019, prior to admission of CIRP, and that Clause 2 of the BGs made the beneficiary's demand conclusive and binding, permitting immediate payment without enquiry. The City Civil Court had held that there was no element of fraud in the invocation, and no material was placed on record to establish fraud. Having regard to the irrevocable nature of the BGs and the absence of material establishing fraud, the invocation was held to be lawful and not susceptible to setting aside on the grounds urged by the appellant. [Paras 10, 11, 12, 13, 19]

Invocation of the BGs on 18.10.2019 was proper and the challenge based on fraud and wrongful invocation was rejected.

Moratorium under Section 14 - Performance Bank Guarantee not a security interest - Whether the moratorium under Section 14 of the Code precluded invocation or encashment of the Performance Bank Guarantees. - HELD THAT: - Section 14(3)(b) excludes a surety in a contract of guarantee from the moratorium. Further, Section 3(31) excludes Performance Bank Guarantees from the definition of security interest. The notices of invocation were sent on 18.10.2019, prior to the CIRP commencement on 07.11.2019. In these circumstances, and in view of the statutory exclusion, the moratorium did not operate to nullify the invocation/encashment of the PBGs. [Paras 15, 16, 18]

Moratorium under Section 14 did not bar invocation or encashment of the Performance Bank Guarantees.

Invocation of Performance Bank Guarantee - finality of High Court order - Whether the Adjudicating Authority was justified in treating the High Court of Telangana's order (setting aside trial court injunction) as final for the purposes of this dispute. - HELD THAT: - The appellate proceedings in the High Court set aside the Trial Court's ad interim injunction on the ground that the BGs had been invoked prior to filing of the suit. The appellant subsequently withdrew SLPs before the Supreme Court in view of pending applications before the Adjudicating Authority. The Tribunal accepted that, with the SLPs withdrawn and no material establishing fraud, the High Court's order and consequent encashment could be treated as attaining finality for purposes of the adjudication before the Adjudicating Authority. [Paras 10, 19]

The Adjudicating Authority rightly proceeded on the basis that the High Court order had the effect of negating the Trial Court's injunction and that the invocation/encashment could not be stayed in the circumstances.

Use of encashed guarantee proceeds for preserving going concern - Whether part of the encashed BG proceeds may be released for running the corporate debtor as a going concern. - HELD THAT: - The Resolution Professional sought permission to utilise a portion of the encashed amounts to ensure continued operation of the debtor's plant. Although the appellant contended that such utilisation would render the appeal infructuous, the Tribunal accepted the RP's objective of preserving the corporate debtor as a going concern. Balancing interests, the Tribunal allowed utilisation of the specified amount for functioning of the corporate debtor. [Paras 20]

A portion of the encashed BG proceeds may be utilised by the Resolution Professional for maintaining the corporate debtor as a going concern.

Final Conclusion: The appeal is dismissed. The invocation and encashment of the Performance Bank Guarantees were upheld as lawful (no fraud established and BGs invoked prior to CIRP), the moratorium under Section 14 did not bar such invocation, the High Court order negating the Trial Court injunction was treated as conclusive in the circumstances, and a portion of the encashed proceeds was permitted to be used for preserving the corporate debtor as a going concern.

Commercial wisdom of the Committee of Creditors is non-justiciable - Limited judicial review of approval of a resolution plan under Section 30(2) and Section 31 - Payment to operational creditors under Section 30(2)(b) must not be less than amounts payable under liquidation scenario - Notice to operational creditors under Section 24(3)(c) and saving provision of Section 24(4) - Confidentiality of fair value and liquidation value under Regulation 35

Payment to operational creditors under Section 30(2)(b) must not be less than amounts payable under liquidation scenario - Limited judicial review of approval of a resolution plan under Section 30(2) and Section 31 - Validity of the Resolution Plan insofar as it provides 2% payment to operational creditors and compliance with Section 30(2) of the Code - HELD THAT: - The Tribunal examined whether the Resolution Plan complied with Section 30(2) of the IBC, having regard to the liquidation value and the distribution that would arise under Section 53. The record shows the liquidation value was lower than the plan value and that, in both liquidation scenarios considered, the amount payable to operational creditors under Section 53 would have been nil. The Tribunal applied the settled principle that interference with the commercial decision of the CoC is limited and must be within the parameters of Sections 30 and 31. Concluding there was no material irregularity on the face of the record, the Tribunal held that the proposed payment of 2% to operational creditors was in accordance with Section 30(2)(b) and did not amount to a contravention of the Code or a ground for invalidating approval of the plan. [Paras 12, 15]

The Resolution Plan's provision to pay 2% to operational creditors is compliant with Section 30(2) and the plan approval is not liable to be set aside on that ground.

Notice to operational creditors under Section 24(3)(c) and saving provision of Section 24(4) - Whether non-issuance of notice to the operational creditors under Section 24(3)(c) or absence of their representative at CoC meetings vitiated the CoC proceedings or caused prejudice - HELD THAT: - Section 24(3)(c) requires notice to operational creditors or their representatives where aggregate dues are at least ten percent; Section 24(4) makes attendance of such representatives non-voting and provides that their absence shall not invalidate proceedings. The Tribunal found no documentary evidence that a representative's name was furnished to the resolution professional and accepted the RP's case that no such information was provided. Given that operational creditors lack voting rights and that the liquidation analysis showed no prejudice in quantum to operational creditors, the Tribunal concluded that any non-compliance did not cause prejudice nor invalidate the CoC proceedings. [Paras 10, 11]

Non-issuance of notice under Section 24(3)(c) did not vitiate the CoC proceedings and did not afford a ground to set aside approval of the plan.

Confidentiality of fair value and liquidation value under Regulation 35 - Whether operational creditors are entitled to receive the fair value and liquidation value under Regulation 35(2) - HELD THAT: - Regulation 35(2) entitles only members of the CoC to receive fair value and liquidation value after receipt of resolution plans, subject to an undertaking of confidentiality to prevent undue gain or loss. The Tribunal noted the statutory confidentiality scheme and held that operational creditors are not entitled, as a matter of right under the Code and regulations, to know the liquidation value disclosed to CoC members. The provision aims to protect the valuation process and avoid misuse of such information. [Paras 12, 13]

Operational creditors were not entitled to be furnished the fair value or liquidation value under Regulation 35 and confidentiality obligations are to be respected.

Commercial wisdom of the Committee of Creditors is non-justiciable - Limited judicial review of approval of a resolution plan under Section 30(2) and Section 31 - Whether there was any material irregularity warranting interference with the CoC's approval of the Resolution Plan or the Adjudicating Authority's order approving it - HELD THAT: - Relying on Supreme Court precedent cited in the judgment, the Tribunal reiterated that the commercial wisdom of the CoC is sacrosanct and subject only to limited judicial review under Sections 30 and 31. The Tribunal reviewed the record, including minutes showing discussion of the Adjudicating Authority's observations, the higher offer vis-a -vis liquidation value, and the absence of evidence of prejudice to operational creditors. Finding no material irregularity or contravention of law, and noting the elapsed time since approval and implementation aspects, the Tribunal held there was no basis to disturb the Adjudicating Authority's approval. [Paras 14, 15, 16]

No material irregularity was established; the Tribunal declined to interfere with the CoC's commercial decision or the Adjudicating Authority's approval of the Resolution Plan.

Final Conclusion: The appeal is dismissed. The Tribunal found the Resolution Plan was approved in compliance with the Code and regulations, no prejudice or material irregularity to operational creditors was shown, confidentiality of valuation information under Regulation 35 was properly applied, and the commercial wisdom of the CoC is not subject to interference beyond the limited judicial review permitted by the Code.

Initiation of CIRP under section 9 of the Insolvency and Bankruptcy Code, 2016 - incompleteness for non compliance with section 9(3)(c) of the Code - date of default requirement in a section 9 petition - acknowledgement of debt under section 18 of the Limitation Act, 1963 - extension/suspension of limitation under section 14 of the Limitation Act, 1963 - effect of the Tea Act, 1953 and the decision in Duncans Industries on limitation for tea undertakings - bar of limitation as a ground for rejection of a section 9 petition

Date of default requirement in a section 9 petition - incompleteness for non compliance with section 9(3)(c) of the Code - The petition under section 9 was incomplete for failure to specify a clear date of default and for non production of the certificate required by section 9(3)(c) and supporting bank statements. - HELD THAT: - The Tribunal held that the Operational Creditor failed to explicitly and unambiguously state the date of default: while the petition referred to a first default occurring 90 days after the first bill (31.01.2012) and to supplies and a last payment on different dates, this created ambiguity rendering the petition incomplete. Further, the Operational Creditor did not produce the certificate mandated by section 9(3)(c) of the Code nor the relevant bank statements to demonstrate absence of payments after the date of default. These lacunae meant that essential statutory and evidentiary prerequisites for a maintainable section 9 petition were not satisfied, and therefore the petition was incomplete on this ground. [Paras 8]

Petition is incomplete for want of a clear date of default and for non compliance with section 9(3)(c) and failure to produce supporting bank statements.

Acknowledgement of debt under section 18 of the Limitation Act, 1963 - extension/suspension of limitation under section 14 of the Limitation Act, 1963 - effect of the Tea Act, 1953 and the decision in Duncans Industries on limitation for tea undertakings - bar of limitation as a ground for rejection of a section 9 petition - The section 9 petition is barred by limitation; the purported acknowledgment and pendency of winding up proceedings did not extend limitation sufficiently to render the petition timely. - HELD THAT: - The Tribunal examined the purported acknowledgment dated 09.03.2015 and found it to be only an acknowledgement of receipt of a letter where the corporate debtor stamped "Contents not verified," and therefore it could not be treated as an acknowledgment of debt under section 18 of the Limitation Act. Even if that document were treated as an acknowledgment, the resulting limitation would have expired by March 2018. The Tribunal further held that exclusion of the short pendency of the winding up petition (filed February 2016 and dismissed on 29.03.2016) under section 14 would not bridge the gap up to the Supreme Court decision in Duncans Industries (04.10.2019); in the interregnum the Operational Creditor could have pursued remedies with the prior governmental consent required by section 16M of the Tea Act. Consequently, the limitation period would have run out by May 2018 and the section 9 petition filed on 31.12.2019 was time barred. [Paras 8]

Petition is barred by limitation and therefore liable to be rejected.

Final Conclusion: The Adjudicating Authority dismissed the company petition under section 9 of the Code as both incomplete for non compliance with statutory requisites and barred by limitation; the Operational Creditor remains free to pursue other remedies under law.

Admission under section 9 of the Insolvency & Bankruptcy Code, 2016 - existence of debt and corporate default - initiation of Corporate Insolvency Resolution Process and moratorium under section 14 of the IBC - appointment of Interim Resolution Professional and conduct of CIRP - public announcement and claims invitation under CIRP - jurisdiction of the Adjudicating Authority and limitation for filing

Jurisdiction of the Adjudicating Authority and limitation for filing - bench jurisdiction - This Tribunal has territorial jurisdiction to adjudicate the petition and the petition was filed within the period of limitation. - HELD THAT: - The Corporate Debtor was incorporated and had its registered office within the territorial jurisdiction of this Bench, and the petition was therefore maintainable before this Adjudicating Authority. The last date of invoice/default was 24.12.2019 and the petition was filed on 06.04.2021; the Tribunal found the filing to be within the applicable limitation, hence there was no bar to admission on limitation grounds. [Paras 2, 7]

Jurisdiction of this Bench is established and the petition is within limitation.

Existence of debt and corporate default - admission under section 9 of the Insolvency & Bankruptcy Code, 2016 - The Corporate Debtor was in default of a debt due and payable and the petition under section 9 was fit for admission. - HELD THAT: - The Operational Creditor produced invoices and records evidencing supply of goods and the Corporate Debtor's liability. The Tribunal relied upon the last invoice date and the unequivocal admission of liability in the Corporate Debtor's email dated 11.03.2021 to conclude that a debt was due and payable and that default occurred on 24.12.2019. The default exceeded the statutory monetary threshold for triggering proceedings. On these findings the petition complied with the requirements for filing under section 9 and was held to be complete and admitable. [Paras 3, 8, 9]

Default established and petition under section 9 admitted; CIRP to be initiated.

Initiation of Corporate Insolvency Resolution Process and moratorium under section 14 of the IBC - appointment of Interim Resolution Professional and conduct of CIRP - public announcement and claims invitation under CIRP - On admission, CIRP was ordered to be initiated, an IRP was appointed, moratorium and ancillary directions were imposed and procedural steps for the CIRP were directed. - HELD THAT: - Following admission, the Tribunal directed the commencement of CIRP and imposed the statutory moratorium proscribing institution or continuation of suits, transfer or encumbrance of assets, enforcement of security, and recovery of property as specified. The Operational Creditor's proposed professional was appointed as Interim Resolution Professional to perform functions under the Code; the Registry was directed to communicate the order; public announcement of CIRP and invitation of claims were ordered as per the Regulations; and the Operational Creditor was directed to deposit funds with the IRP to meet initial costs. Registrar of Companies was directed to update Master Data. These directions were given to secure the corporate insolvency process and to enable the IRP to take over management and comply with statutory timelines. [Paras 10, 12]

CIRP ordered; moratorium imposed; IRP appointed; public announcement, claims procedure and administrative directions directed.

Final Conclusion: The Company Petition under section 9 of the IBC filed by the Operational Creditor was admitted; the Corporate Insolvency Resolution Process against the Corporate Debtor is initiated, a moratorium is imposed, an Interim Resolution Professional is appointed and consequential procedural directions for conducting the CIRP have been issued.

Corporate Insolvency Resolution Process - maintainability of a Section 7 petition - Financial Debt - Financial Creditor - default - Section 238 overriding effect - pecuniary threshold under Section 4 - amendment of pleadings under Section 7(5)(b) - moratorium under Section 14 - appointment of Interim Resolution Professional

Maintainability of a Section 7 petition - amendment of pleadings under Section 7(5)(b) - Whether the petition was maintainable despite initial defects in authorization and signing of the application. - HELD THAT: - The Tribunal found that defects relating to signing and authorization were cured in compliance with the Tribunal's order dated 17.05.2022 by filing an amended petition executed and signed by the authorised signatory with an authorization letter. Reliance was placed on the principle that pleadings and documents in a Section 7 application can be amended or supplemented and that the adjudicating authority may permit filing of additional documents unless inordinate delay justifies refusal. On the facts, the defects were rectified and therefore did not render the petition unmaintainable. [Paras 9]

Defects in authorization and signing were cured; the petition is maintainable.

Section 238 overriding effect - maintainability of a Section 7 petition - Whether the Uttar Pradesh Regulation of Money Lending Act, 1976 could bar or defeat the Section 7 petition. - HELD THAT: - The Tribunal held that the Insolvency and Bankruptcy Code is a special law with overriding effect under Section 238 and therefore it would not undertake a detailed inquiry into the applicability of the State Money Lending Act to defeat a statutory right under Section 7. The corporate debtor, having accepted and availed the loan, could not rely on that statute to avoid the initiation of CIRP; the tribunal declined to entertain the contention as a ground to reject the Section 7 petition. [Paras 10, 11, 12]

The Uttar Pradesh Money Lending Act cannot be invoked to defeat the Section 7 petition; the tribunal will not decide its applicability in place of the Code.

Pecuniary threshold under Section 4 - default - Financial Debt - Whether the claimed debt, inclusive of interest, meets the pecuniary threshold for filing a Section 7 petition. - HELD THAT: - The Tribunal examined the computation chart and the Form 1 claim and found that principal and accrued interest (including interest in default) constitute 'financial debt' within Section 3(12) and Section 5(8). The outstanding principal after receipts and the accumulated interest in default led the Tribunal to conclude that the financial debt in default exceeded the statutory threshold of Rs. 1 crore under Section 4. Accordingly the petition satisfied the pecuniary requirement for Section 7 proceedings. [Paras 13]

The claimed debt (principal plus interest in default) exceeds the pecuniary threshold; the petition satisfies Section 4.

Financial Debt - Financial Creditor - default - Whether the loan transaction qualifies as a 'financial debt' and the applicant as a 'financial creditor'. - HELD THAT: - Applying the test in Jaypee Infratech and examining the loan agreement and supporting documents, the Tribunal found that the loan was disbursed against consideration for the time value of money (interest at 3% per month) and for a commercial purpose identified in the board resolution. The existence of a repayment schedule charging interest demonstrated the commercial character and time value element required by Section 5(8); therefore the obligation is a financial debt and the applicant a financial creditor as defined in Section 5(7). [Paras 14, 16, 17, 18]

The transaction constitutes a financial debt and the applicant is a financial creditor.

Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14 - Whether the Section 7 petition should be admitted and CIRP initiated, and incidental directions including appointment of IRP and declaration of moratorium. - HELD THAT: - Having found existence of debt and default and that the petition met procedural and pecuniary requirements, the Tribunal under Section 7(5)(a) admitted the application and ordered initiation of CIRP. The Tribunal appointed the proposed Interim Resolution Professional whose consent in Form 2 was recorded. The moratorium under Section 14 was declared and the statutory prohibitions and consequences flowing from it were imposed. Directions were also issued for public announcement, deposit towards IRP expenses, and cooperation with the IRP. [Paras 21, 22, 24, 25, 26]

The petition is admitted; CIRP is initiated, an IRP is appointed, moratorium is declared and consequential directions issued.

Final Conclusion: The Tribunal admitted the Section 7 petition: defects in authorization were cured; the State Money Lending Act was held not to defeat the Code by virtue of Section 238; the claim (principal plus interest in default) qualified as financial debt and exceeded the pecuniary threshold; CIRP of M/s. Newcon Engineers Private Limited is initiated, an Interim Resolution Professional is appointed, moratorium is declared and related administrative directions were given.

Quashing of complaint under the Prevention of Money Laundering Act - cognizance and issuance of process - prima facie satisfaction at cognizance stage - presumption in interconnected transactions under the Prevention of Money Laundering Act - burden of proof on the accused under the Prevention of Money Laundering Act - director's liability and the test of being "in-charge and responsible" for conduct of company's affairs

Quashing of complaint under the Prevention of Money Laundering Act - cognizance and issuance of process - prima facie satisfaction at cognizance stage - Validity of the supplementary complaint, the order taking cognizance and whether the proceedings should be quashed at the pre-trial stage - HELD THAT: - The High Court examined the supplementary complaint and the cognizance order and found that allegations against the companies and their directors were contained in the complaint, including averments that proceeds of crime were channelled into share transactions and accommodation entries were provided in exchange for cash. The Court applied the settled principle that at the stage of issuance of process a strict standard of proof is not required and the court's task is to satisfy itself whether there are sufficient grounds to proceed; the learned trial court had applied its mind and recorded a speaking order taking cognizance. The High Court declined to weigh evidentiary value or examine probable defences at this premature stage and therefore refused to quash the proceedings.

The petitions seeking quashing of the supplementary complaint and the cognizance orders were dismissed and the cognizance/order was held not to be vitiated.

Presumption in interconnected transactions under the Prevention of Money Laundering Act - burden of proof on the accused under the Prevention of Money Laundering Act - Applicability of statutory presumptions in interconnected transactions and the allocation of burden of proof under the PMLA at the pre-trial stage - HELD THAT: - The Court noted that section 23 of the PMLA envisages presumptions in interconnected transactions and that section 24 places the burden on the accused to rebut such presumptions at trial. These provisions were held to be constitutionally and legally recognised by the Supreme Court in recent authority relied upon by the respondent. Consequently, factual contentions aimed at negating the statutory presumption could not be determinatively resolved at the cognizance stage and must await trial where the accused may lead evidence to discharge the burden.

The Court held that the statutory presumptions and burden allocation under the PMLA are relevant and operative and do not warrant quashing of proceedings at the pre-trial stage.

Director's liability and the test of being "in-charge and responsible" for conduct of company's affairs - Whether mere allegation of directorship without specific pleading of a director being in overall control or responsible for the company's conduct defeats proceedings under PMLA at the cognizance stage - HELD THAT: - The petitioners relied on precedent concerning constructive/vicarious liability of directors where liability attaches only if a person was "in-charge of" and "responsible for" the conduct of the company's business. The Court observed that some petitioners are directors and companies are accused; however, factual disputes as to mens rea, the precise role of individual directors and whether they were in overall control are matters for trial. The Dayle De'souza line of reasoning was considered not directly decisive in the PMLA context on the present record, and the Court refrained from undertaking a detailed inquiry into directors' culpability at the cognizance stage.

Allegations against directors were held to raise triable issues; the question of a director being "in-charge and responsible" and mens rea will be determined during trial and do not justify quashing now.

Final Conclusion: On the material placed before it the High Court declined to quash the supplementary complaint or the order taking cognizance under the PMLA, held that statutory presumptions in interconnected transactions and the burden on the accused must be tested at trial, and directed that the proceedings continue; the listed petitions were dismissed and interim reliefs vacated.

Cenvat credit admissibility - reverse charge mechanism - retrospective amendment to Cenvat Credit Rules - scope of adjudication limited to show cause notice - admissible input service under Rule 2(l) - Board Circular clarification

Cenvat credit admissibility - reverse charge mechanism - retrospective amendment to Cenvat Credit Rules - Board Circular clarification - Whether the demand for Cenvat credit paid under reverse charge (Section 66A) was correctly dropped by the Adjudicating Authority. - HELD THAT: - The show cause notice challenged Cenvat credit on the ground that credit was not admissible because service tax was paid under reverse charge under Section 66A while Rule 3 referred to service tax leviable under Section 66. The Adjudicating Authority held that retrospective amendment to Rule 3 (with effect from 18.04.2006) and the subsequent Board Circular clarified that Section 66A is within the scope of eligible credit, and therefore the demand was correctly dropped. The Tribunal found no error in this reasoning and accepted that the Adjudicating Authority correctly addressed the specific contention raised in the show cause notice and applied the retrospective amendment and Board clarification to allow credit. [Paras 4]

The Adjudicating Authority correctly dropped the demand in view of the retrospective amendment to Rule 3 and the Board Circular; the order on this ground is upheld.

Scope of adjudication limited to show cause notice - admissible input service under Rule 2(l) - Whether the Adjudicating Authority was required to examine admissibility of the services as "input service" under Rule 2(l) despite that issue not being raised in the show cause notice. - HELD THAT: - The Tribunal observed that the show cause notice did not raise the question of whether the services constituted admissible input service under Rule 2(l). It is settled that an adjudicating authority need not decide issues beyond the scope of the show cause notice. Consequently, the Adjudicating Authority was not obliged to adjudicate afresh on admissibility under Rule 2(l) when that issue was not the subject of the notice. The Tribunal further noted that the services claimed appeared prima facie to be input services, reinforcing that no fault was found with the Adjudicating Authority for not addressing an unraised contention. [Paras 4]

The Adjudicating Authority was not required to examine admissibility under Rule 2(l) as that issue was not raised in the show cause notice; no remand is warranted.

Final Conclusion: The impugned order dropping the demand was affirmed; Revenue's appeal dismissed as the Adjudicating Authority correctly decided the issue raised in the show cause notice and was not required to adjudicate on an unraised contention regarding admissibility under Rule 2(l).

Cenvat credit refund under Rule 5 of Cenvat Credit Rules, 2004 - entitlement to refund where adjustment is not possible - export to SEZ and characterization under the SEZ Act - relevance of Customs definition of export to Cenvat refund claims - scope of show cause notice and travelling beyond the grounds therein - unjust enrichment bar under Section 11B(2) of the Central Excise Act

Cenvat credit refund under Rule 5 of Cenvat Credit Rules, 2004 - export to SEZ and characterization under the SEZ Act - relevance of Customs definition of export to Cenvat refund claims - entitlement to refund where adjustment is not possible - Refund claim filed under Rule 5 of Cenvat Credit Rules, 2004 for the quarter April 2008 to June 2008 was admissible despite pendency of a Special Civil Application before the Gujarat High Court concerning characterization of DTA-to-SEZ movement under the Customs Act. - HELD THAT: - The Tribunal examined Rule 5 CCR, 2004 and the Notification framing safeguards for refund of Cenvat credit when inputs are used in manufacture of goods cleared for export under bond or LUT. The Court noted admitted facts that the refund claim was filed within the time limit, there were no government dues, no drawback or rebate was claimed, and no condition of the Notification was violated. The pendency before the Gujarat High Court related to whether movement from DTA to SEZ constituted 'export' for purposes of the Customs Act (taxability under Customs), which did not determine entitlement to refund under Rule 5. The Gujarat High Court's later decision confirmed that Customs law did not treat DTA-SEZ movement as export for imposition of export duty; irrespective of that characterization for Customs, the transaction constituted export for purposes of the SEZ Act and for invoking Rule 5. Consequently the pendency of the SCA did not constitute a valid ground to reject the refund claim and the Commissioner (Appeals) was right in holding the refund admissible. [Paras 5, 6, 7, 8, 9]

Refund claim under Rule 5 CCR, 2004 for April 2008 to June 2008 was held admissible and the Original Adjudicating Authority erred in rejecting it on the ground of pendency before the Gujarat High Court.

Scope of show cause notice and travelling beyond the grounds therein - unjust enrichment bar under Section 11B(2) of the Central Excise Act - Whether the Original Adjudicating Authority acted beyond the scope of the show cause notice by making additional computations and treating amounts as set off against duty, thereby justifying reversal by the Commissioner (Appeals). - HELD THAT: - The Tribunal observed that the show cause notice proposed rejection of the refund solely on the ground of dependency on the High Court's decision. The Original Adjudicating Authority, however, went further and performed a tabular computation, treating certain Cenvat credits as set off and concluding only a small balance was available against the claimed refund - a contention not invoked in the show cause notice. Citing settled principle that an adjudicating authority cannot travel beyond grounds raised in the show cause notice, the Tribunal agreed with Commissioner (Appeals) that the O.I.O. introduced extraneous factors and thus exceeded the scope of the notice. The Tribunal relied on the proposition that invocation of provisions or grounds not mentioned in the notice is impermissible and vitiates the order. [Paras 10]

The Commissioner (Appeals) correctly held that the Original Adjudicating Authority travelled beyond the scope of the show cause notice; those extraneous computations could not sustain rejection of the refund.

Final Conclusion: The appeal by the department is rejected. The Tribunal upholds the Commissioner (Appeals) in holding the refund claim under Rule 5 CCR, 2004 admissible for April 2008 to June 2008 and in finding that the Original Adjudicating Authority had travelled beyond the grounds of the show cause notice in rejecting the claim.

Input Service - cenvat credit on insurance/mediclaim - nexus to business - admissibility of credit in respect of employees v. family members - remand for quantification of eligible credit - extended period of limitation - penalty under Rule 15(1) of Cenvat Credit Rules, 2004

Input Service - cenvat credit on insurance/mediclaim - admissibility of credit in respect of employees v. family members - remand for quantification of eligible credit - Admissibility of cenvat credit on group mediclaim and personal accident policies - HELD THAT: - The Tribunal held that, for the period prior to the April 2011 amendments, cenvat credit on insurance premium is admissible to the extent the insurance pertains to employees because such cover bears a nexus to business operations (e.g., maintaining workforce and avoiding disruption of manufacture). Credit in respect of the portion of premium attributable to family members of employees does not have such nexus and is not admissible. As the appellant had not provided a breakup between the portion relating to employees and that relating to their family members, the matter was remanded to the original adjudicating authority for determination and re-quantification of the eligible credit limited to the employee-related portion. The Tribunal relied on prior decisions recognising employee-related insurance as qualifying input service while excluding family-member coverage, and therefore modified the Commissioner (Appeals) order to allow credit to the extent attributable to employees and remanded the remainder for quantification. [Paras 4, 6]

Cenvat credit allowed to the extent the policies pertain to employees; credit in respect of family members is not admissible; remand to original authority to quantify the eligible and inadmissible portions.

Extended period of limitation - penalty under Rule 15(1) of Cenvat Credit Rules, 2004 - Validity of invoking extended period of limitation and imposition of penalty under Rule 15(1) - HELD THAT: - The Tribunal found no recorded satisfaction or factual findings establishing the ingredients necessary to invoke the extended period of limitation. The adjudicating authority and the show cause notices did not give reasons justifying invocation of the extended period. In consequence, the Tribunal set aside the demand to the extent premised on extended limitation and also set aside the penalty imposed under Rule 15(1), observing that the Revenue had knowledge of the availment but had not demonstrated the requisite conditions for extended limitation or sustained penalty. [Paras 5]

Invocation of the extended period of limitation is not sustained and the penalty under Rule 15(1) is set aside.

Final Conclusion: Appeal partly allowed: cenvat credit on employee-related portion of mediclaim and personal accident policies is admissible; credit attributable to family members is inadmissible and remanded for quantification by the original authority; demands based on extended limitation and the penalty under Rule 15(1) are set aside.

Availability of Cenvat credit on input services received through reimbursement/debit notes on transfer of business - Interpretation of Rule 3 of the Cenvat Credit Rules, 2004 - Limitation - extended period under Section 11A read with Rule 14 - applicability where there is no suppression

Availability of Cenvat credit on input services received through reimbursement/debit notes on transfer of business - Interpretation of Rule 3 of the Cenvat Credit Rules, 2004 - Denial of cenvat credit claimed on service-tax component of debit notes raised by the transferor company in respect of procurement of inputs. - HELD THAT: - The Tribunal examined the debit notes issued by the transferor company to the appellant, which were narrated as reimbursement of expenses incurred for procurement of clinker. At the time the expenses were incurred the transferor (JSW Steel Ltd.) was a separate corporate entity and was the beneficiary of any cenvat credit of Central Excise duty or Service Tax paid on the inputs/input services. Sub rule (1) of Rule 3 permits a manufacturer to take cenvat credit of duties/taxes paid on inputs, input services and capital goods received in the factory of manufacture. Because the procurement and payment occurred while the transferor was a distinct entity and the appellant took over the business at a later date, the statutory requirements for availment by the appellant were not satisfied. The Tribunal therefore found no infirmity in the conclusion of the authorities below that the service tax component claimed on the basis of the debit notes was not admissible as cenvat credit under Rule 3. [Paras 5]

Cenvat credit claimed on the service tax component of the debit notes is not available to the appellant under Rule 3 and the denial on merits is upheld.

Limitation - extended period under Section 11A read with Rule 14 - applicability where there is no suppression - Whether the department could invoke the extended period of limitation for issuance of the show cause notice in respect of the disputed cenvat credit. - HELD THAT: - The appellant had reflected the debit note amounts in its books and in the ER 1 return filed on 07.04.2015, and the service tax amount was deposited on 05.03.2015. The Tribunal found that the department was thus aware of the availment of cenvat credit in April 2015 and there was no element of suppression of facts by the appellant. Where the irregular availment is recorded and not concealed, the demand is confined to the normal limitation period and the extended period cannot be invoked. The show cause notice having been issued on 21.06.2017 fell beyond the normal period and could not be sustained under the facts of this case. [Paras 6]

Proceedings to recover the disputed cenvat credit could not be sustained under the extended limitation; the appeal succeeds on the ground of limitation.

Final Conclusion: Although the Tribunal agreed with the authorities that the cenvat credit claimed on the service tax component of the debit notes was not admissible on merits, the appeal is allowed and the impugned order set aside because the department could not invoke the extended period of limitation in the absence of suppression; consequently the demand cannot be sustained beyond the normal limitation period.

Identification of decretal immovable property under Order 7 Rule 3 and Order 20 Rule 3 CPC - execution, discharge or satisfaction of decree within the meaning of Section 47 CPC - entitlement to mesne profits and their computation under Order 20 Rule 12 CPC - appointment of Revenue Officer as Local Commissioner for demarcation - restoration of excess land taken in execution

Entitlement to mesne profits and their computation under Order 20 Rule 12 CPC - identification of decretal immovable property under Order 7 Rule 3 and Order 20 Rule 3 CPC - Decree is confined to Plot No. 4/4; respondent is entitled to possession of Plot No.4/4 and to mesne profits from 1 March 2006 until delivery of possession. - HELD THAT: - The suit and the decree relate exclusively to Plot No.4/4. The Trial Court's finding that the lease ended and the High Court's modification determining mesne profits to be payable from 1 March 2006 have assumed finality insofar as Plot No.4/4 is concerned. The respondent is therefore entitled to possession of Plot No.4/4 and to mesne profits at the rate fixed by the Trial Court, subject to computation as directed by this Court. The Court emphasised that a decree for possession and mesne profits must be executed only in respect of the suit property as identified in the decree; the mesne profits will run until the date on which the appellant relinquishes possession of the suit property. [Paras 47, 48]

Respondent entitled to possession of Plot No.4/4 and to mesne profits from 1 March 2006 until the appellant relinquishes possession.

Identification of decretal immovable property under Order 7 Rule 3 and Order 20 Rule 3 CPC - execution, discharge or satisfaction of decree within the meaning of Section 47 CPC - appointment of Revenue Officer as Local Commissioner for demarcation - Executing Court must ascertain exact description of the decretal property and appoint a Revenue Officer as Local Commissioner to demarcate Plot No.4/4 and effect delivery of possession. - HELD THAT: - Where a decree for immovable property has been passed but the property is not definitely identified for execution, the defect can and should be cured by the Court which passed the decree or by the Executing Court as part of execution, discharge or satisfaction of the decree. This Court directed that the Executing Court shall decide the execution applications afresh and appoint a Revenue Officer (preferably the Kanoongo of the area) as Local Commissioner to demarcate Plot No.4/4 and to make over possession of that plot to the respondent. The appointment and demarcation are necessary to ensure that execution is confined to the decretal area and the decree is not defeated by uncertainty in identification. [Paras 49, 50, 51, 56]

Execution remitted to the Executing Court to ascertain the exact description and, by appointing a Revenue Officer as Local Commissioner, demarcate Plot No.4/4 and hand it over to the respondent.

Entitlement to mesne profits and their computation under Order 20 Rule 12 CPC - Mesne profits awarded by the Trial Court (as modified by the High Court) are to be recomputed afresh taking into account relevant factors and shall run from 1 March 2006 until relinquishment of possession by the appellant. - HELD THAT: - Order 20 Rule 12 permits a decree for mesne profits and directions for inquiry and computation. This Court held that although the entitlement and the rate (as fixed by the Trial Court and modified by the High Court) stand, the mesne profits must be computed afresh by the Executing Court, taking into account all relevant factors and the actual extent of possession handed over to the decree-holder. The computation must therefore reflect the period from 1 March 2006 up to the date on which the appellant relinquishes possession of the suit property. [Paras 52, 53]

Mesne profits to be computed afresh in terms of the Trial Court's decree as modified by the High Court, from 1 March 2006 until relinquishment of possession.

Restoration of excess land taken in execution - appointment of Revenue Officer as Local Commissioner for demarcation - Any excess land taken in execution, including land belonging to Plot No.4/5 or to the Delhi Government, shall be restored to the appellant; execution court to ensure restoration after demarcation. - HELD THAT: - The record shows that contiguous plots (including Plot No.4/5 and portions belonging to the Delhi Government) have been involved in possession disputes. This Court recognised that the decree is not executable against Plot No.4/5 or land of the Delhi Government and directed that any excess land of which possession may have been taken in execution must be restored to the appellant. The Executing Court, after demarcation by the appointed Revenue Officer Local Commissioner, is to ensure restoration of any such excess area. [Paras 54, 55, 56]

Excess land, whether part of Plot No.4/5 or belonging to the Delhi Government, must be restored to the appellant following demarcation by the Local Commissioner.

Final Conclusion: Appeals allowed in part; the impugned judgment and order are set aside and the execution proceedings are remitted to the Executing Court to be decided afresh. The Executing Court shall appoint a Revenue Officer as Local Commissioner to demarcate Plot No.4/4 and hand it over to the respondent; any excess land taken in execution (including Plot No.4/5 or land of the Delhi Government) shall be restored to the appellant; mesne profits to be computed afresh in accordance with the Trial Court's decree as modified by the High Court, from 1 March 2006 until relinquishment of possession.

Presumptions under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption and standard of proof of preponderance of probabilities - revisional jurisdiction under Sections 397 and 401 Cr.P.C. and scope of interference - interference in revision permissible only if finding is perverse, wholly unreasonable or amounts to gross miscarriage of justice - compensation under Section 357 Cr.P.C. and its interplay with levy of fine in offences under the Negotiable Instruments Act - modification of sentence in cheque bounce cases to effect payment of fine as compensation

Presumptions under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption and standard of proof of preponderance of probabilities - Validity of conviction under Section 138 N.I. Act in light of statutory presumptions and absence of rebuttal by the accused - HELD THAT: - The complainant discharged the initial burden by proving issuance and dishonour of the cheque with supporting documents; once signatures and the cheque are established, the reverse presumptions under Sections 118 and 139 operate. Those presumptions are rebuttable on the preponderance of probabilities. The accused suggested on cross-examination that the cheque was a blank/security and was filled up by the drawer, but adduced no evidence to substantiate that defence. In the absence of any cogent material or independent evidence to rebut the statutory presumptions, the trial court and the appellate court rightly applied the presumptions and convicted the accused under Section 138 of the N.I. Act. [Paras 11, 12, 15, 16]

Conviction under Section 138 of the Negotiable Instruments Act is affirmed.

Revisional jurisdiction under Sections 397 and 401 Cr.P.C. and scope of interference - interference in revision permissible only if finding is perverse, wholly unreasonable or amounts to gross miscarriage of justice - Scope of High Court's revisional power to reappreciate evidence and whether interference was warranted in the present case - HELD THAT: - The revisional jurisdiction of the High Court is supervisory and not appellate; it cannot ordinarily reappreciate evidence where concurrent findings have been rendered by the trial court and the appellate court. Interference is permissible only where the impugned finding is perverse, wholly unreasonable, there is non-consideration of relevant material, or the decision amounts to gross miscarriage of justice. No such glaring defect or perversity was shown in the present case; therefore, the court declined to disturb the concurrent findings of guilt. [Paras 9, 10, 11]

No interference with concurrent findings; revisional jurisdiction exercised only to the limited extent necessary.

Compensation under Section 357 Cr.P.C. and its interplay with levy of fine in offences under the Negotiable Instruments Act - modification of sentence in cheque bounce cases to effect payment of fine as compensation - Validity of sentence as imposed by the courts below and requirement to order compensation by directing fine under Section 357 Cr.P.C. - HELD THAT: - The trial court had sentenced the accused to imprisonment and directed payment of compensation under Section 357(3) Cr.P.C.; however, when imprisonment and fine both are available for the offence under Section 138, fine forms part of the sentence and Section 357(1)(b) mandates that whole or part of the fine may be directed to be applied as compensation recoverable in a civil court. The High Court therefore modified the sentence: imprisonment reduced to one day till rising of court, levy of fine equal to the cheque amount to be paid to the complainant as compensation under Section 357(1)(b), default imprisonment curtailed to six months, and a time period was granted for payment. [Paras 17, 18, 19, 20, 21]

Sentence modified so that fine equal to the cheque amount is directed to be paid to the complainant as compensation under Section 357(1)(b) Cr.P.C., with limited default imprisonment and time granted for payment.

Final Conclusion: Revision petition allowed in part: concurrent conviction under Section 138 N.I. Act is confirmed; sentence modified - accused to undergo simple imprisonment for one day till rising of court and to pay fine equal to the cheque amount as compensation under Section 357(1)(b) Cr.P.C., default imprisonment limited and time granted for payment; execution of sentence deferred as directed.

Existence of arbitration agreement - Section 8(1) of the Arbitration and Conciliation Act, 1996 - consensus ad idem - incorporation by reference

Existence of arbitration agreement - Section 8(1) of the Arbitration and Conciliation Act, 1996 - consensus ad idem - incorporation by reference - Whether an arbitration agreement existed between the parties so as to entitle the trial Court to exercise power under Section 8(1) and refer the dispute to arbitration. - HELD THAT: - The Court examined the documents relied upon by the parties: the respondents' proposal (annexed by letter dated 26/06/2012) which alone contained an arbitration clause at clause (14); the petitioners' letter of intent dated 12/07/2012 (the only document signed by both parties) which referred to the proposal but independently recorded terms and conditions for execution of the project and contained no arbitration clause; and the purchase order dated 16/07/2012 (signed only by the petitioners) which reiterated specifications and terms but likewise contained no arbitration clause. For the Court to exercise jurisdiction under Section 8(1), there must be an arbitration agreement showing consensus ad idem between the parties. Mere unilateral inclusion of an arbitration clause in a proposal signed only by one party, and mere reference to that proposal in subsequently executed documents, does not establish that an arbitration agreement came into existence unless the clause is incorporated into a document executed by both parties. The trial Court erred in treating the unilateral proposal's clause as constituting a binding arbitration agreement between the parties; reliance on Sundaram Finance (para. 8) did not assist the respondents because that decision turned on factual findings that an agreement existed. Consequently, the impugned orders referring the parties to arbitration were unsustainable. [Paras 11, 12, 13, 15, 18]

No arbitration agreement existed between the parties; the trial Court's order referring the parties to arbitration under Section 8(1) is set aside and the suit is restored for trial.

Final Conclusion: Writ petition allowed. The trial Court's orders dated 01/12/2018 referring the parties to arbitration are quashed and set aside; the suit is restored and the trial Court shall proceed in accordance with law. The District Court judgment dated 12/02/2021 is rendered meaningless by this order and is set aside.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 and Section 118(a) of the Negotiable Instruments Act as rebuttable - Burden of proof and standard of proof for rebuttal: preponderance of probabilities - Requirement that cheque be issued in discharge of a legally enforceable debt or liability - Scope of remand and jurisdiction of trial court on open remand to decide issues necessary for adjudication

Scope of remand and jurisdiction of trial court on open remand to decide issues necessary for adjudication - Whether the learned Trial Court transgressed its jurisdiction by deciding issues on remand which were said to be already answered by the appellate order. - HELD THAT: - The Co-ordinate Bench had set aside the appellate judgment and sent the matter back with a direction to permit the complainant to lead further evidence on the limited question of the proprietorship of Subhrangshu Das. The remand was effectively open and required the Trial Court to decide all points necessary to adjudicate a proceeding under Section 138 after complying with the direction in CRA 504 of 2013. There was no jurisdictional transgression in the Trial Court appreciating the evidence on record and recording its findings; the Trial Court was obliged to consider and decide the points necessary for the prosecution under Section 138. [Paras 5]

Trial Court did not exceed its jurisdiction in deciding the issues on remand; it was entitled to appreciate evidence and adjudicate the matters necessary for determination of the Section 138 proceeding.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 and Section 118(a) of the Negotiable Instruments Act as rebuttable - Requirement that cheque be issued in discharge of a legally enforceable debt or liability - Burden of proof and standard of proof for rebuttal: preponderance of probabilities - Whether the complainant proved that the cheque was issued by the accused in discharge of a legally enforceable debt and whether the presumption under Section 139 was rebutted. - HELD THAT: - To succeed under Section 138, the complainant must prove issuance, presentation, dishonour, service of notice and failure to pay, and that the cheque was issued in discharge of a legally enforceable debt. While Section 139 raises a presumption in favour of the holder, that presumption is rebuttable on the preponderance of probabilities. The material on record, including information recorded in English Bazar P.S. Case No. 220/2003 (Exhibit-D), showed that the cheque was handed over by Ajit Sinha of Mourya Finance Company Limited and not directly by the proprietor of A.B. Construction; no cogent evidence established a nexus between A.B. Construction and Mourya Finance Company Limited or that A.B. Construction had any obligation to pay the complainant. The accused adduced evidence explaining that the cheque was a blank cheque obtained by his employer and was used by the owner of Mourya Finance Company. On that basis the Trial Court found the presumption under Section 139 rebutted and that the complainant failed to prove that the cheque was issued in discharge of a legally enforceable debt. [Paras 13, 17, 18]

Presumption under Section 139 was successfully rebutted on the preponderance of probabilities; the complainant failed to prove that the cheque was issued by the accused in discharge of any legally enforceable debt, warranting acquittal.

Final Conclusion: The High Court affirmed the Trial Court's order of acquittal: the Trial Court had jurisdiction on the open remand to decide the necessary issues, and on the evidence the presumption under Section 139 was rebutted and the complainant failed to prove that the cheque was issued in discharge of a legally enforceable debt; the appeal is dismissed.