TaxTMI Updates e-Newsletter
Oct 05,2020

Deficiency Memo - Show Cause Notice - Refund Sanction Order - Input Tax Credit refund under inverted duty structure - Circular cannot impose additional requirements beyond statute - Requirement of recording reasons for satisfaction for issuing notice - Time limit for issuance of deficiency memo under Rule 90 - Opportunity of hearing to authorised representative - Replies and representations not to be rejected on limitation

Deficiency Memo - Show Cause Notice - Refund Sanction Order - Time limit for issuance of deficiency memo under Rule 90 - Replies to the impugned deficiency memo, show cause notice and representation to be filed and considered by respondents by a reasoned order after hearing. - HELD THAT: - The Court did not adjudicate the merits of the impugned deficiency memo, show cause notice or refund sanction order. Instead, it directed the petitioner to advance all contentions in replies to the notices and in the representation. The respondents (by counsel's statement accepted by the Court) are obliged to decide those replies and the representation expeditiously and by a reasoned order in accordance with law. The order leaves open the parties' substantive rights and contentions, including any contention about the timeliness of issuance of the deficiency memo under the relevant rules; the Court did not quash or rule on those contentions but required fresh consideration by the authorities.

Respondents to decide the replies and representation expeditiously by a reasoned order after hearing.

Opportunity of hearing to authorised representative - Requirement of recording reasons for satisfaction for issuing notice - Hearing to be given to the authorised representative and petitioner not required to appear personally. - HELD THAT: - The Court accepted the respondents' statement that the authorised representative of the petitioner shall be given an opportunity of hearing and that the petitioner need not appear personally. The Court thereby obliged the respondents to hear the authorised representative before passing a reasoned order; it did not rule on the adequacy of prior reasons recorded (if any) for issuance of the notices, leaving such legal contentions open for determination by the respondents on reconsideration.

Authorised representative to be heard; personal appearance by petitioner not required.

Input Tax Credit refund under inverted duty structure - Circular cannot impose additional requirements beyond statute - Replies and representations not to be rejected on limitation - Replies and representations filed by the petitioner shall not be rejected or dismissed on the ground of limitation; substantive contentions (including interpretation of the Circular and entitlement under inverted duty structure) are left open for decision by respondents. - HELD THAT: - While the petitioner argued that refund of input tax credit on account of inverted duty structure must be paid to the applicant and that the Circular relied upon cannot add requirements beyond the statute, the Court did not decide these substantive legal issues. Instead it protected the petitioner's procedural right by directing that replies and representations shall not be rejected on limitation grounds and preserved all substantive rights for consideration by the respondents in the reasoned order to be passed after hearing the authorised representative.

Replies and representations shall not be rejected on limitation; substantive legal contentions to be considered afresh by respondents.

Final Conclusion: Writ petition disposed of by directing the petitioner to file replies and representation and by directing respondents to decide them expeditiously by a reasoned order after hearing the authorised representative; petitioner not required to appear personally and replies shall not be rejected on limitation, with all substantive rights and contentions left open.

Detention of goods in transit - e-way bill and accompanying invoice - invoice generated after commencement of transportation - release of goods on bank guarantee - final order under Section 129(3) of the GST Act

Detention of goods in transit - e-way bill and accompanying invoice - invoice generated after commencement of transportation - Lawfulness of detention of goods and vehicle during transportation for absence of a proper invoice or for production of an invoice generated after commencement of transport. - HELD THAT: - The court examined the detention order in Form GST MOV-06 which recorded that although an e-way bill was produced, the invoice that should have accompanied the consignment was not produced; a subsequently produced soft copy of the invoice indicated that it had been generated after the commencement of transportation. Having regard to those findings recorded in the detention order, the court held that the detention could not be characterised as unjustified.

Detention upheld as not unjustified on the ground that the invoice either was not produced at the time of transit or was generated only after transportation had commenced.

Release of goods on bank guarantee - final order under Section 129(3) of the GST Act - Whether the petitioner should be permitted immediate release of the goods and vehicle on furnishing a bank guarantee and the subsequent course of action by the authorities. - HELD THAT: - On the petitioner's request for provisional relief, the court directed release of the goods and vehicle subject to the petitioner furnishing a bank guarantee for the amount demanded in the detention notice(s). The court further directed that, after such release, the respondents were to proceed to pass the final adjudicatory order under Section 129(3) of the GST Act, thereby preserving the respondents' power to adjudicate the liability on merits following the provisional release.

Goods and vehicle to be released on petitioner furnishing a bank guarantee for the amount demanded; respondents to thereafter proceed to pass the final order under Section 129(3) of the GST Act.

Final Conclusion: Writ petition disposed by upholding the detention as not unjustified on the recorded facts, directing provisional release of the goods and vehicle upon furnishing a bank guarantee for the demanded amount, and directing the respondents to proceed to pass the final order under Section 129(3) of the GST Act.

Withdrawal of assessment orders under Section 62 of the CGST Act - filing returns within 30 days to set aside best judgment assessment - communication of order by making it available on the common portal under Section 169(2) of the CGST Act - remedy by statutory appeal against assessment orders

Withdrawal of assessment orders under Section 62 of the CGST Act - filing returns within 30 days to set aside best judgment assessment - communication of order by making it available on the common portal under Section 169(2) of the CGST Act - remedy by statutory appeal against assessment orders - Whether the assessment orders passed on best judgment basis had to be set aside because returns were subsequently filed within the statutory period prescribed by Section 62, having regard to communication of the assessment orders via the common portal. - HELD THAT: - The Court considered the dates of issue of the assessment orders and the dates on which returns were filed by the petitioner. The respondents relied on the recognised mode of communication under Section 169(2) by making orders available on the common portal; therefore the date of communication for the purpose of the one month period under Section 62 is the date the assessment order was made available on the portal. The comparative dates furnished show that the returns were filed more than 30 days after the date of communication of the assessment orders. Consequently the statutory condition for withdrawal of the best judgment assessment under Section 62 was not satisfied. The Court held that the petitioner is not entitled to have the assessment orders set aside on the basis of the belated filing of returns and that the appropriate remedy lies in approaching the first appellate authority against those assessment orders. The Court nonetheless directed that recovery pursuant to the assessment orders be kept in abeyance for one month to enable the petitioner to approach the appellate authority. [Paras 3, 5]

Returns were filed beyond the one month period from communication of the assessment orders on the common portal; assessments could not be set aside under Section 62 and the writ petition is dismissed, subject to the petitioner's right to appeal, with recovery stayed for one month.

Final Conclusion: Writ petition dismissed as returns were filed after the 30 day period following communication of the best judgment assessment orders; the petitioner may challenge the assessments before the first appellate authority and recovery is stayed for one month to permit institution of the appeal.

Summary order. Application allowed subject to just exception; notice issued in writ petition seeking extension/acceptance of TRAN-1 for April, 2017 - June, 2017; respondent counter-affidavits and rejoinder timelines fixed; matter adjourned to await disposition of the related Supreme Court proceedings and listed on 14 December 2020.

Undertaking on oath - interim relief conditional on deposit - extension of time for compliance - vacation of interim relief on non-compliance - garnishee notice - contempt for breach of undertaking

Undertaking on oath - extension of time for compliance - interim relief conditional on deposit - vacation of interim relief on non-compliance - garnishee notice - contempt for breach of undertaking - Extension of time for compliance with the undertaking filed by the petitioner and consequences of non-compliance. - HELD THAT: - The Court noted that the petitioner had filed an undertaking on oath to deposit an initial sum and to pay the balance in specified monthly installments as a condition for interim relief granted in the main writ proceedings. Although non-compliance with such an undertaking ordinarily attracts contempt consequences and could have led to rejection of the present application and vacatur of the interim relief, the Court took into account the petitioner's stated difficulties during the lockdown and granted leniency. The time for compliance was extended by six weeks from the date of the order to enable deposit of the requisite amount. The Court made clear that if the requisite amount is deposited within six weeks, the interim relief previously granted (in terms of paragraph 21E of the main order) shall continue; conversely, failure to pay within six weeks will automatically vacate the interim relief and permit the respondents to proceed with the garnishee notices and the notice dated 3rd February 2020.

Time for compliance with the undertaking is extended by six weeks; payment within six weeks will keep the interim relief intact, whereas non-payment will automatically vacate the interim relief and enable respondents to proceed with garnishee and related notices.

Final Conclusion: The Civil Application is disposed of by extending the time for compliance with the petitioner's undertaking by six weeks; compliance within that period preserves the earlier interim relief, and failure to comply will result in automatic vacatur of the interim relief and permit the respondents to proceed with the garnishee notices and the notice dated 3rd February 2020.

Appeal under Section 112 of the CGST Act - limitation for filing appeal upon constitution of the Tribunal or assumption of office by its President - show cause notice - obligation to file reply and objections - prohibition on precipitative action pending adjudication

Appeal under Section 112 of the CGST Act - limitation for filing appeal upon constitution of the Tribunal or assumption of office by its President - Direction to file appeal against the adjudication order dated 06.03.2020 (Annexure-'AG') and the applicable timeline for filing the appeal. - HELD THAT: - The Court held that Annexure-'AG' dated 06.03.2020 is an appealable order under the CGST Act and the petitioner must avail the statutory remedy by filing an appeal. In view of the clarification circular placed on record, the timeline for filing the appeal is fixed as within three months from the date of constitution of the Tribunal or within three months from the date on which the President enters office. As the Tribunal had not been constituted at the date of this order, the petitioner is directed to file the appeal within the period prescribed by the circular measured from either of those contingency events. [Paras 6]

Petitioner directed to file appeal against Annexure-'AG' within three months from constitution of the Tribunal or from the date the President enters office.

Show cause notice - obligation to file reply and objections - prohibition on precipitative action pending adjudication - Procedure to be followed in relation to show cause notice dated 04.06.2020 (Annexure-'AH') and interim protection against precipitatory action. - HELD THAT: - The Court treated Annexure-'AH' as a show cause notice to which the petitioner must respond. The petitioner is required to file a reply within two weeks, specifically drawing attention to the alleged inclusion of demands relating to the earlier period (July-2017 to April-2018). After receipt of the reply or objections, the Adjudicating Authority is directed to consider those objections, adjudicate the matter on merits and pass orders in accordance with law. Meanwhile, respondents are restrained from taking any precipitative action pursuant to the show cause notice until the Adjudicating Authority disposes of the matter. [Paras 7]

Petitioner to file reply to Annexure-'AH' within two weeks; Adjudicating Authority to consider objections and adjudicate; respondents restrained from taking precipitative action till adjudication.

Final Conclusion: Writ petition disposed directing the petitioner to file an appeal against the order dated 06.03.2020 within three months from constitution of the Tribunal or from the date the President enters office; petitioner to file reply to the show cause notice within two weeks; Adjudicating Authority to consider objections and adjudicate and respondents restrained from taking precipitative action pending such adjudication.

Confiscation of goods and conveyance under Section 130 of the Act - release of seized goods and vehicle subject to deposit and security - show-cause notice in Form GST MOV-10 - final confiscation order in Form GST MOV-11 - statutory appeal under Section 107 of the Act

Release of seized goods and vehicle subject to deposit and security - confiscation of goods and conveyance under Section 130 of the Act - Whether the goods and vehicle seized pending confiscation proceedings should be released on terms and conditions. - HELD THAT: - The Court considered only the limited question of interim release pending completion of confiscation proceedings under the Act and expressly did not decide the merits of the show-cause notice in Form GST MOV-10 or any prospective final order in Form GST MOV-11. The writ applicant offered to deposit the claimed tax and penalty and to furnish a bank guarantee for a portion of the fine in lieu of confiscation. In view of that undertaking, the Court directed conditional release: the writ applicant must deposit the stated amount with the concerned authority within one week from receipt of the order and must furnish the specified bank guarantee; upon fulfilment of these two conditions the authority shall immediately release the goods and the vehicle. The Court clarified that the confiscation proceedings shall continue and be decided by the authority on merits and that, if a final confiscation order is passed, the writ applicant will have the remedy of filing a statutory appeal under Section 107 of the Act. [Paras 4, 5, 6, 7]

Goods and vehicle released pending confiscation proceedings on condition of deposit of the stated tax and penalty within one week and furnishing of the specified bank guarantee; merits of confiscation not adjudicated and statutory appeal remains available.

Final Conclusion: Writ petition disposed by ordering conditional interim release of the seized goods and vehicle upon compliance with the deposit and bank guarantee conditions; confiscation proceedings to continue and be decided on merits with the statutory appellate remedy preserved.

Provisional attachment of bank account under Section 110(5) of the Customs Act - prospective operation of coercive statutory provision - alert on Importer Exporter Code (IEC) - withholding of IGST/GST refunds pending investigation - duty to expedite investigation and limited duration of coercive measures - improper disparaging averments in affidavit without charge sheet or conviction

Provisional attachment of bank account under Section 110(5) of the Customs Act - prospective operation of coercive statutory provision - Freezing of the petitioner's bank account on 1st March, 2019 and continuation thereof was without authority of law. - HELD THAT: - Section 110(5) (inserted with effect from 1st August, 2019) authorises provisional attachment of bank accounts only where the statutory conditions and procedure are complied with, including a written order by a proper officer and prior approval of the Principal Commissioner/Commissioner of Customs, and is coercive in nature. The provision is prospective and could not be invoked for actions taken on 1st March, 2019. No written order under Section 110(5) has been produced by the respondents and no other provision of the Customs Act has been shown to authorise freezing of the petitioner's account. Consequently the attachment effected on 1st March, 2019 and its continuance lack legal authority. [Paras 29, 30, 31, 33, 34]

Bank account freeze effected on 1st March, 2019 is unlawful; respondents directed to unfreeze the petitioner's bank account forthwith.

Alert on Importer Exporter Code (IEC) - withholding of IGST/GST refunds pending investigation - duty to expedite investigation and limited duration of coercive measures - Legality and duration of alert on the petitioner's IEC and withholding of IGST/GST refunds while investigation is pending. - HELD THAT: - Placing an alert on the IEC and withholding refunds has been done on the basis of materials under investigation. Such extreme measures cannot be continued indefinitely merely on suspicion, however strong; investigation must be expedited and concluded within a reasonable, specified period. The court directed completion of the investigation within three months from receipt of the order and made the placing of alert on IEC and the withholding of refunds subject to the outcome of that investigation. [Paras 35, 37, 39]

Investigation to be completed within three months; alert on IEC and withholding of IGST/GST claims to stand only subject to the outcome of that investigation.

Improper disparaging averments in affidavit without charge sheet or conviction - Permissibility of descriptive averments in the department's affidavit labelling the petitioner a 'hardened criminal' absent criminal charge or conviction. - HELD THAT: - The affidavit-in-reply described the petitioner as a 'hardened criminal' but did not aver conviction, charge-sheeting, or naming as an accused in any FIR. Making such disparaging assertions in a sworn affidavit filed before the High Court without supporting material is improper and should be avoided; affiants must exercise restraint in their averments. [Paras 36]

Observation recorded that disparaging averments in the affidavit were improper in the absence of charge/conviction; affiants should be careful in such sworn statements.

Final Conclusion: Writ petitions allowed: respondents directed to unfreeze the petitioner's specified bank account forthwith; investigation into allegations to be completed within three months from receipt of this order; placing of alert on IEC and withholding of IGST/GST refunds to be governed by the outcome of that investigation; no order as to costs.

Extension of time for payment under the Income Tax Declaration Scheme, 2016 - retrospective effect of notification - consideration of pending representation during subsistence of notification - remand for fresh consideration on merits - stay on unilateral action during subsistence of notification while writ petition is pending - interest for delayed payment at one per cent per month or part thereof

Extension of time for payment under the Income Tax Declaration Scheme, 2016 - retrospective effect of notification - consideration of pending representation during subsistence of notification - remand for fresh consideration on merits - Petitioner's representation for extension of time to pay the third instalment under the Income Tax Declaration Scheme, 2016, is to be considered by the Principal Commissioner of Income Tax in light of the Notification dated 13th December, 2019 which was given retrospective effect. - HELD THAT: - The Court noted that the petitioner had declared income under Section 183 of the Finance Act, 2016 and had paid the first two instalments but not the third due to illness. The Notification dated 13th December, 2019 (S.O. 4455(E)) extended the time for payment until 31st January, 2020 and was deemed to have come into force from 1st June, 2016, and was given retrospective effect. The Court observed that neither the Revenue nor the petitioner could act upon the Notification while the writ petition was pending without the leave of the Court. Given that the petitioner's request for extension was live and pending during the subsistence of the Notification, the petitioner was entitled to have that representation examined on merits by the respondent authority in the context of the Notification and its retrospective operation. The Court directed that the respondent no.2/the Principal Commissioner of Income Tax assess the ramifications on the facts and decide the representation on merits, taking into account the Notification and applicable interest, within six weeks of communication of the order.

The matter is remanded to the Principal Commissioner of Income Tax for consideration on merits of the petitioner's representation under the Notification dated 13th December, 2019, to be decided within six weeks.

Final Conclusion: Writ petition disposed of by remanding the petitioner's pending representation for extension of time to the Principal Commissioner of Income Tax for fresh consideration in light of the Notification dated 13th December, 2019; decision to be completed within six weeks.

Disallowance under Section 14A - Method of computation under Rule 8D - Cap of disallowance by amount of exempt income - Requirement of Assessing Officer's recorded satisfaction before invoking Rule 8D - Real income principle versus hypothetical or notional income

Disallowance under Section 14A - Cap of disallowance by amount of exempt income - Real income principle versus hypothetical or notional income - Disallowance computed under Section 14A read with Rule 8D cannot exceed the exempted income earned by the assessee in the relevant assessment year. - HELD THAT: - The Court held that Section 14A operates as a restriction on allowance of expenditure incurred to earn exempt income and is not a charging provision creating a notional income. Rule 8D is a method provision for computing the amount of expenditure relatable to exempt income and cannot be read to permit disallowance beyond the quantum of actual exempt income. Allowing disallowance in excess of exempt income would amount to taxing a hypothetical or notional income contrary to the principle of taxing real income under Section 5. The decision cites and follows earlier authoritative judicial pronouncements and rejects the CBDT Circular as justifying a contrary approach. The Court emphasised commercial prudence and rational nexus between expenditure disallowed and the exempt income actually earned, and noted that even estimates under Rule 8D must bear a reasonable proportion to the dividend income of the year. [Paras 15, 16, 17, 21, 22]

Disallowance under Rule 8D read with Section 14A cannot exceed the exempted dividend income of the assessee in the relevant assessment year and may not be treated as hypothetical taxable income.

Requirement of Assessing Officer's recorded satisfaction before invoking Rule 8D - Method of computation under Rule 8D - Assessing Officer must record cogent reasons of satisfaction rejecting the assessee's apportionment or claim of no expenditure before invoking the computation method under Rule 8D; absent such satisfaction the invocation of Rule 8D is impermissible. - HELD THAT: - The Court reiterated that Section 14A(2) requires the AO to be 'not satisfied' with the assessee's claim as to expenditure relatable to exempt income before applying a prescribed method. Accordingly, the AO cannot treat Rule 8D as an automatic or standalone charging mechanism; he must record rational and cogent reasons for rejecting the assessee's apportionment or denial of expenditure and then compute disallowance in accordance with Rule 8D. The Court criticised the practice of authorities applying Rule 8D in isolation or delegating the computation to the assessee, and observed that any estimate must have a rational nexus to the actual exempt income. [Paras 13, 14, 21, 22]

AO must record satisfaction with reasons before resorting to Rule 8D; computation under Rule 8D cannot be invoked without such recorded satisfaction.

Method of computation under Rule 8D - Disallowance under Section 14A - The assessments and appellate orders that applied Rule 8D to make disallowances exceeding the exempt income are unsustainable and the matter is remitted for fresh computation. - HELD THAT: - Having found that the lower authorities applied Rule 8D without the requisite recorded satisfaction and produced disallowances disproportionate to actual dividend income, the Court set aside the findings on Section 14A by the three authorities below and remanded the matter to the Assessing Officer to recompute disallowance, if any, in accordance with law. The remand requires the AO to undertake the exercise himself, record reasons if he is not satisfied with the assessee's apportionment or claim of no expenditure, and ensure any computation bears reasonable nexus to the exempt income of the year. [Paras 13, 15]

Findings below set aside; matter remanded to Assessing Officer for recomputation in accordance with law and after recording requisite satisfaction and reasons.

Final Conclusion: Appeal allowed in part; the Court held that disallowance under Section 14A read with Rule 8D cannot exceed the exempted dividend income for the assessment year and that Rule 8D can be applied only after the Assessing Officer records cogent satisfaction rejecting the assessee's apportionment, and remanded the matter to the Assessing Officer for recomputation in accordance with law.

Revisional jurisdiction under Section 263 of the Income-tax Act - assessment under Section 143(3) of the Income-tax Act - erroneous and prejudicial to the interest of the Revenue - limited scrutiny (CASS) and verification of sources - appreciation of factual evidence in assessment proceedings - absence of a substantial question of law

Erroneous and prejudicial to the interest of the Revenue - revisional jurisdiction under Section 263 of the Income-tax Act - absence of a substantial question of law - Validity of the Principal Commissioner's exercise of revisionary jurisdiction under Section 263 in setting aside the assessment dated 23.12.2016. - HELD THAT: - The Court held that the PCIT did not specify how the assessment order was erroneous nor did he make a concurrent finding that the order was prejudicial to the interest of the Revenue, a prerequisite for exercise of jurisdiction under Section 263. The Tribunal had found that the matters forming the basis of revision were considered during the limited scrutiny (CASS) and addressed by the Assessing Officer in the assessment order. On the material before it, including the assessee's explanation to the show-cause notice, the Tribunal concluded the order of assessment was not shown to be erroneous and prejudicial. Reliance placed by Revenue on precedents was found distinguishable on facts. Applying the governing principle that revision under Section 263 requires both an error and prejudice to Revenue, the Court found no substantial question of law arising from the Tribunal's conclusion and upheld the Tribunal's order. [Paras 10, 11, 12, 13]

The PCIT's invocation of revisionary jurisdiction under Section 263 was not justified; the assessment was not shown to be erroneous and prejudicial and no substantial question of law arises.

Assessment under Section 143(3) of the Income-tax Act - limited scrutiny (CASS) and verification of sources - appreciation of factual evidence in assessment proceedings - Whether the Assessing Officer failed to make adequate enquiries in the original assessment such that the assessment required revision. - HELD THAT: - The Court accepted the Tribunal's finding that the issues which prompted selection under CASS - increase in capital and discrepancy in reported sale consideration - were considered and verified by the Assessing Officer through review of documents, enquiries with the company where the assessee held shares, and examination of the return. The assessee's explanation to the PCIT's show-cause notice was recorded and found cogent by the Tribunal. The Court distinguished Revenue's cited authorities as factually inapposite where factual inadequacy of enquiry had been established; no similar finding was recorded here. Consequently, the Tribunal's conclusion that the Assessing Officer had applied his mind and made requisite enquiries was upheld as a factual conclusion not giving rise to a substantial question of law. [Paras 5, 6, 11, 12, 16]

The Assessing Officer's enquiries in the limited scrutiny and the assessment under Section 143(3) were adequate; there is no basis to fault the assessment for lack of enquiry.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's order setting aside the PCIT's revision under Section 263 and restoring the assessment dated 23.12.2016 for AY 2014-15 is confirmed; no substantial question of law is found to arise.

Speculative transaction settled otherwise than by actual delivery - foreign exchange derivative losses characterised as business loss - incidental hedging transactions entered into by exporters - characterisation of derivative loss as capital or revenue expenditure - limited remand for verification of nexus between hedge and underlying transaction

Speculative transaction settled otherwise than by actual delivery - foreign exchange derivative losses characterised as business loss - incidental hedging transactions entered into by exporters - Whether loss on foreign exchange derivative transactions is a speculative loss or a business loss incidental to the assessee's export business. - HELD THAT: - The Court upheld the Tribunal's conclusion that losses on foreign exchange derivative contracts entered into by an exporter as a hedge cannot be treated as speculative merely because there was no actual delivery; where derivative contracts are incidental to the assessee's regular course of business (export transactions), such losses partake of the character of the underlying transactions and may be allowable as business loss. The Court relied on earlier High Court precedents and its own recent decision in CIT v. Celebrity Fashion Ltd., noting that an assessee who is not a dealer in foreign exchange but uses forward/derivative contracts to hedge export exposures is entitled to treat losses as revenue/business losses. The Tribunal's approach was held to be correct and not to be interfered with. [Paras 8, 11, 12]

The Tribunal was right in holding that the foreign exchange derivative loss could not be disallowed as speculative and may be treated as business loss where the transactions were incidental to the export business; this finding is confirmed.

Characterisation of derivative loss as capital or revenue expenditure - limited remand for verification of nexus between hedge and underlying transaction - Whether the derivative transactions related to capital items or revenue items and the consequent need for further examination. - HELD THAT: - The Court recorded that the Tribunal found the Assessing Officer had not verified whether the foreign exchange derivative transactions related to capital or revenue items. Applying the principle that derivative contracts adopt the character of the underlying transaction, the Tribunal remanded the matter to the Assessing Officer to examine and determine, on the material, whether the hedges pertained to capital or revenue transactions. The remand was limited to this verification in accordance with the directions in the impugned order. [Paras 9]

The issue was remanded to the Assessing Officer for determination whether the derivative contracts related to capital or revenue items (limited verification to be carried out).

Final Conclusion: The Revenue's tax case appeal is dismissed; the Tribunal's order is confirmed and the substantial questions of law are answered against the Revenue, with a limited remand to the Assessing Officer to verify the capital/revenue nature of the underlying transactions.

Allowability under Section 37(1) - revenue expenditure versus capital expenditure - commercial expediency test - current repairs and replacement - remand for fresh consideration without reasons

Allowability under Section 37(1) - commercial expediency test - Whether foreign travel expenditure of Rs. 17,42,595/- was wholly and exclusively for the assessee's business and thus allowable under Section 37(1). - HELD THAT: - The Court found that the bonafides and genuineness of the foreign travel expenditure were never disputed by the Assessing Officer, CITA or the Tribunal and that substantial parts of the travel were for vendor development, production and sourcing directly benefiting the holding company. The CITA allowed significant portions but disallowed Rs. 17,42,595/- without articulating reasons or factual analysis. Applying the commercial expediency test and precedents that permit expenditure voluntarily incurred for business expediency even if third parties also benefit, the Court held the partial disallowance to be cryptic and unsupported by reasons. The Tribunal's affirmation was also held to be devoid of reasons. Consequently the disallowance was held to be erroneous and the substantial question answered in favour of the assessee. [Paras 13, 15, 16, 18]

Disallowance of Rs. 17,42,595/- in respect of foreign travel expenses set aside; expenditure held to be allowable under Section 37(1).

Revenue expenditure versus capital expenditure - allowability under Section 37(1) - Whether payments to M/s Stehlin & Associates, Paris in connection with acquisition of M/s Belair, France amounted to capital expenditure or were deductible revenue/business expenses under Section 37(1). - HELD THAT: - The Court noted that the payments were professional and legal fees incurred in the course of expanding the assessee's global operations and acquiring shares in a foreign company to further the assessee's business. Reliance was placed on established authorities holding that expenditure incurred for commercial expediency and for the carrying on or expansion of business may qualify as revenue expenditure even if related to acquisition or where third parties benefit. The Tribunal treated the expenditure as capital without adequately addressing the nexus with the assessee's business. On the facts and by application of the commercial expediency test and precedents, the Court concluded that the expenditure was incurred wholly and exclusively for business purposes and therefore deductible. [Paras 19, 20, 21, 22]

Overturned the Tribunal's capitalisation; payments to M/s Stehlin & Associates held to be revenue/business expenditure allowable under Section 37(1).

Current repairs and replacement - revenue expenditure versus capital expenditure - remand for fresh consideration without reasons - Whether expenditure on replacing the CNC drive system with a CAN-based control system is capital in nature or revenue (repairs and maintenance), and whether the Tribunal was justified in remanding the issue to the Assessing Officer. - HELD THAT: - The Assessing Officer treated the replacement as capital, but the CITA after detailed factual examination concluded that the CNC control formed part of the machine, that only the electronic control/operating system was replaced (a technology modification), and that the replacement did not constitute installation of a new machine; accordingly the expenditure was held to be revenue in nature. The Tribunal set aside the CITA's finding and remanded the matter, but did so without giving reasons and despite the record (photographs, catalogue, explanatory notes) having been already placed before the Assessing Officer and CITA. Applying principles distinguishing current repairs from capital expenditure and having regard to the CITA's factual findings (including manufacturer recommendations and the nature of the modification), the Court found no justification for remanding the matter. The CITA's revenue-characterisation was upheld. [Paras 24, 25, 26, 31, 32]

Tribunal's remand set aside; CITA's finding that the expenditure is revenue in nature (repairs and maintenance) upheld.

Final Conclusion: Both Tax Case Appeals are allowed. The Court set aside the disallowance of certain foreign travel expenses and the characterisation of professional fees as capital expenditure, and upheld the CITA's finding treating the machinery control-system replacement as revenue expenditure; the Tribunal's remand was held unjustified. Substantial questions of law answered in favour of the assessee.

Depreciation on Floor Space Index (FSI) - FSI as an asset for depreciation - Depreciation on intangible assets - Substantial question of law

Depreciation on Floor Space Index (FSI) - FSI as an asset for depreciation - Substantial question of law - Tribunal's allowance of depreciation on FSI was not a substantial question of law warranting interference by this Court. - HELD THAT: - The Court considered the revenue's challenge to the Tribunal's allowance of depreciation claimed on the Floor Space Index component of the consideration. The same issue had already been decided in the connected appeal (Income Tax Appeal No.1734 of 2017 arising from the same Tribunal order for assessment year 2006-2007), where this Court held that no substantial question of law arose. Following that decision, the Court declined to entertain the revenue's contention and held that no substantial question of law arises on this point from the Tribunal's order in respect of assessment year 2007-2008. [Paras 8]

Appeal dismissed on this point; no substantial question of law arises from the Tribunal's allowance of depreciation on FSI.

Depreciation on intangible assets - Substantial question of law - Tribunal's allowance of depreciation on intangible assets does not raise a substantial question of law for this Court. - HELD THAT: - Counsel for both parties accepted that this point had been previously addressed by this Court in Income Tax Appeal Nos.835 and 836 of 2016 decided on 17th December, 2018 (in respect of the same assessee under its former name). That earlier decision held that the question is not a substantial question of law. Having regard to that precedent and the parties' consensus, the Court recorded that question No.2 is already answered and is not a substantial question of law warranting interference. [Paras 7]

No substantial question of law arises from the Tribunal's allowance of depreciation on intangible assets; the point was already decided.

Final Conclusion: The revenue's appeal under section 260A is dismissed; no substantial question of law arises from the Tribunal's order for assessment year 2007-2008. No order as to costs.

Treatment of unexplained cash deposits as income and estimation of income - burden of proof and onus shifting in relation to cash credits and documentary evidence - estimation of income on a reasonable basis where books/returns are not maintained - appellate interference with factual findings and estimates made by the Tribunal

Treatment of unexplained cash deposits as income and estimation of income - estimation of income on a reasonable basis where books/returns are not maintained - burden of proof and onus shifting in relation to cash credits and documentary evidence - Whether the Tribunal was justified in restricting the addition made in respect of unexplained bank deposits to 2% of the deposits - HELD THAT: - The Tribunal examined the bank statements, withdrawals and the documentary material produced by the assessee and found that the assessee discharged the initial onus by producing evidence of business activity. The Tribunal observed that the Assessing Officer did not undertake further enquiries or bring material to demonstrate that withdrawals were used for investments or expenses; nor did the Revenue place on record information to justify the Assessing Officer's computation. The Tribunal held that in absence of cogent material and given the need to make a reasonable estimate, it was permissible to estimate income at a modest percentage of deposits, applying a margin of estimation rather than treating entire deposits as income. The High Court recorded that the Tribunal replaced the CIT(A)'s unsupported 8% estimate with 2% after considering the precedents and factual matrix and found no reason to disturb that factual assessment and estimate. [Paras 10]

Tribunal's reduction of the addition to 2% of the amount deposited is acceptable and should not be disturbed.

Appellate interference with factual findings and estimates made by the Tribunal - Whether the question framed by the Revenue constituted a substantial question of law warranting interference by this Court - HELD THAT: - The Court noted that the Tribunal's decision involved evaluation of documentary material, factual findings on onus and the exercise of applying a reasonable estimate in the absence of decisive material. The High Court held that the question posed by the Revenue did not raise a substantial question of law but related to factual conclusion and the Tribunal's discretionary estimation, which the Court was not inclined to disturb. [Paras 11]

The proposed question of law is not a substantial question of law; appellate interference is unwarranted.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order estimating the assessee's income at 2% of the bank deposits for A.Y. 2003-04 is upheld.

Assessment under section 153A linked to search or requisition - Requirement of incriminating material found during search for additions under section 153A - Reiteration of earlier assessment where no incriminating material is found - Revival of abated assessments under section 153A(2)

Requirement of incriminating material found during search for additions under section 153A - Assessment under section 153A linked to search or requisition - Reiteration of earlier assessment where no incriminating material is found - Whether additions/disallowances under proceedings initiated under section 153A could be sustained for A.Y. 2009-10 when no incriminating material relating to that year was found during the search. - HELD THAT: - The Court accepted the Tribunal's approach and held that section 153A is triggered by a search or requisition and the assessments under it must relate to material found during that search or requisition. Following the reasoning set out in the cited High Court decision (paras 15-19 of Saumya Construction (P.) Ltd.), an Assessing Officer may issue notices for the six preceding years but any addition or disallowance for a particular assessment year under section 153A can be made only on the basis of incriminating material discovered during the search or requisition for that year. If no such incriminating material is found in relation to a specific assessment year, the earlier assessment for that year must be reiterated and cannot be displaced by later-collected material unconnected to the search. The Tribunal applied parity with a co ordinate decision and allowed the assessee's technical challenge to the validity of proceedings under section 153A without addressing the merits; the High Court found no error in that conclusion. [Paras 11, 12, 13]

Additions/disallowances under section 153A for A.Y. 2009-10 cannot be sustained in the absence of incriminating material found during the search; the Tribunal's order allowing the assessee's appeal is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's allowance of the assessee's appeal is sustained on the ground that no incriminating material relating to A.Y. 2009-10 was found during the search, and therefore additions under section 153A could not be made for that year.

Bogus purchases - ad hoc addition - genuineness of purchases - presumption of grey market and accommodation entries - estimation of income by way of addition - substantial question of law

Bogus purchases - ad hoc addition - genuineness of purchases - estimation of income by way of addition - Whether the Appellate Tribunal was justified in restricting the addition made on account of alleged bogus purchases to 5% of such purchases. - HELD THAT: - The Tribunal noted that sales corresponding to the purchases were admitted by the Revenue and there was no challenge to the genuineness of the assessee's books of account which were audited. The Tribunal also observed the prevalent practice of purchasing from the grey market and showing purchases in the names of accommodation suppliers where VAT/CST registration was absent, and referred to the Maharashtra Sales Tax Department's allegation that the suppliers were not genuine. Applying an estimation approach guided by earlier tribunal practice, the Tribunal exercised discretion to make an ad hoc addition of 5% of the impugned purchases as a measured estimation of the revenue leakage. The High Court recorded these findings and held that, in the facts and materials on record, the Tribunal did not commit any error warranting interference with its exercise of discretion to make the 5% ad hoc addition. [Paras 9, 10]

Tribunal's imposition of ad hoc addition at the rate of 5% of the purchases upheld and not interfered with.

Substantial question of law - Whether the question framed by the Revenue amounted to a substantial question of law for consideration by the High Court under Section 260A. - HELD THAT: - The Court examined the substantial question of law proposed by the Revenue challenging the Tribunal's restriction of the addition to 5% and concluded that the matter was essentially factual and related to the Tribunal's discretionary evaluation of evidence and estimation of income. The Court found no determinative legal principle of general importance raised by the Revenue's question which would constitute a substantial question of law. [Paras 11, 12]

Proposed question of law held not to be a substantial question of law.

Final Conclusion: The appeal is dismissed; the Appellate Tribunal's order directing an ad hoc addition of 5% of the impugned purchases is sustained and the Revenue's proposed substantial question of law is rejected.

Assessment under Section 153A in respect of concluded/unabated assessment years - Finality of assessment and limitation on reopening without incriminating material - Assessing Officer's power under Section 153A read with Section 143(3)

Assessment under Section 153A in respect of concluded/unabated assessment years - Finality of assessment and limitation on reopening without incriminating material - Assessing Officer's power under Section 153A read with Section 143(3) - Whether, in the absence of any incriminating material found during search, an assessment framed under Section 153A read with Section 143(3) can disturb a previously concluded/unabated assessment for the same assessment year - HELD THAT: - The Tribunal held, and this Court agreed, that the statutory scheme distinguishing abated and unabated proceedings requires that a concluded/unabated assessment which has attained finality cannot be disturbed by an assessment under Section 153A unless incriminating material relating to that concluded assessment year is unearthed in the search. The Tribunal analysed that there is no legislative intent to differentiate assessments based on how they were originally completed (for example, under Sections 143(1), 143(3) or 147) and that the Assessing Officer's powers in respect of unabated assessments are confined to following the conclusions already reached unless fresh incriminating material is discovered during the course of the Section 153A proceedings. As the record did not disclose any incriminating material pertaining to the concluded assessment year, the Assessing Officer could not legitimately revisit or alter the assessment already attained as final; accordingly the addition made in the Section 153A assessment was directed to be deleted. The High Court found this reasoning sound and held that the question framed by the Revenue did not give rise to a substantial question of law warranting interference. [Paras 6, 7, 8, 9]

The assessment already concluded for the relevant year could not be disturbed under Section 153A in absence of incriminating material found during search; the Tribunal's order deleting the addition is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the proposed substantial question of law is negatived and the Tribunal's order in favour of the assessee is affirmed.

Deduction as cost of acquisition or cost of improvement under Section 48/49 - payment to clear mortgage by heir regarded as cost of acquisition - treatment of collateral mortgage/encumbrance for capital gains computation - average of Registered Valuer and Sub-Registrar valuation for determination of fair market value - binding nature of Tribunal's findings of fact and remand for fresh fact-finding

Average of Registered Valuer and Sub-Registrar valuation for determination of fair market value - Assessee's challenge to adoption of average of Registered Valuer and Sub-Registrar valuations for determining FMV as on 01.04.1981 - HELD THAT: - The Court noted that the assessee himself had taken an alternative ground before the Tribunal and relied on the decision of the Co-ordinate Bench in M/s. Kutty Flush Doors. The Tribunal and the CIT(A) adopted the average of the two valuations and, given the assessee's admission in the lower authorities, the High Court refused to permit the question to be agitated afresh under Section 260A. The Court therefore declined to entertain the challenge to the valuation methodology on merits. [Paras 4, 5]

Question on averaging the Registered Valuer and Sub-Registrar valuations answered against the assessee; no interference with Tribunal's adoption of that average.

Payment to clear mortgage by heir regarded as cost of acquisition - deduction as cost of acquisition or cost of improvement under Section 48/49 - treatment of collateral mortgage/encumbrance for capital gains computation - binding nature of Tribunal's findings of fact and remand for fresh fact-finding - Whether amounts applied to discharge a mortgage/loan liability connected with the property settled in favour of the assessee constitute cost of acquisition or cost of improvement for computation of long term capital gains - HELD THAT: - On prima facie consideration of documents placed before the High Court the judges found that the Tribunal had not properly considered material factual aspects relating to the settlement, the OTS payments and apportionment of the settlement amount to the land vested in the assessee. The Court referred to the ratio of the Supreme Court in R.M. Arunachalam v. CIT, which holds that where a successor/ heir inherits property subject to a mortgage and discharges the mortgage debt, the payment operates to acquire the mortgagee's interest and is to be treated as cost of acquisition under Sections 48 read with Section 55 (and in the context of S.49 modes of acquisition). The Court observed the converse position where the mortgage is created by the owner after acquisition. Applying these legal principles to the facts, the High Court concluded that the assessee's contribution to clear the encumbrance prima facie falls within cost of acquisition/improvement, but the exact computation and factual apportionment (including the correctness of the claimed sum and particulars such as the advance of Rs. 4 crores) required re-examination by the fact-finding Tribunal. The Court emphasised that findings of fact of the Tribunal are ordinarily binding, but found the Tribunal's order perverse on the present record and necessitating remand for proper adjudication in light of the cited legal position. [Paras 13, 14, 17, 20, 21]

Held that payment by a person who acquires property subject to mortgage to clear that encumbrance can be treated as part of cost of acquisition/cost of improvement; matter remitted to the Income Tax Appellate Tribunal for fresh factual determination and recomputation of capital gains.

Final Conclusion: Valuation challenge under Section 260A dismissed as barred by the assessee's admission; on the question whether amounts used to clear a mortgage affecting land settled in the assessee's favour form part of cost of acquisition/improvement the High Court applied the Supreme Court's ratio that such payments may be deductible and remitted the matter to the Tribunal for fresh fact-finding and recomputation of long term capital gains.

Fringe benefit tax - Deemed fringe benefits under Section 115WB(2) - Business expenditure versus personal benefit - Visa charges and tour and travel - Concurrent findings of fact

Fringe benefit tax - Deemed fringe benefits under Section 115WB(2) - Visa charges and tour and travel - Business expenditure versus personal benefit - Concurrent findings of fact - Whether expenditure incurred by the employer towards visa charges and related payments constitutes a deemed fringe benefit under Section 115WB(2) and is liable to fringe benefit tax. - HELD THAT: - The Court examined the object and scope of the fringe benefit tax as reflected in the legislative memorandum and the scheme of Section 115WB, distinguishing direct fringe benefits under sub section (1) from deemed fringe benefits arising under sub section (2). The purpose of the levy is to tax expenditures where personal elements enjoyed collectively by employees cannot readily be attributed to individuals. Applying those principles, the Court found that the visa charges and related payments in this case were statutory or business necessary expenses incurred to make employees eligible to enter and work at foreign workplaces for assigned tenures, and were not payments conferring personal benefits akin to foreign `tour and travel'. The Court noted that such visa expenses were not recurrent tour and travel expenditures and were not paid as consideration conferring a personal amenity; they were incurred for business necessity. In these circumstances the expenses do not fall within the category of deemed fringe benefits in Section 115WB(2)(F) or (Q). The Court further observed that the Commissioner (Appeals) and the Tribunal made concurrent findings of fact, reached after appreciation of evidence, which were not shown to be perverse. On that basis the appellate findings in favour of the assessee were upheld and the revenue's contention was rejected.

Expenditure on visa charges and related payments do not constitute a deemed fringe benefit under Section 115WB(2) and are not liable to fringe benefit tax; concurrent factual findings in favour of the assessee are not perverse.

Final Conclusion: The substantial questions of law raised by the revenue are answered against it; the appeal is dismissed and the findings of the Commissioner (Appeals) and the Tribunal upholding that visa and related charges are business expenditure and not subject to fringe benefit tax are affirmed.

Fringe Benefit Tax on in-house training expenses - Fringe Benefit Tax on loan principal repayments/EMI for cars on finance/lease - Incidental expenses (boarding, lodging, travel) treated as deemed conference expenditure - Deeming provision in Section 115WB(2)(C) regarding conference expenditure - Interpretation of Circular No.8/2005 FAQ 51 - Preclusive effect of prior assessment findings and consistency in tax proceedings

Fringe Benefit Tax on loan principal repayments/EMI for cars on finance/lease - Repayment of loan/principal component of EMI for cars taken on finance/lease is not chargeable to fringe benefit tax; only running and maintenance expenditure is liable. - HELD THAT: - The Tribunal's factual finding, accepted by this Court, is that repayment of loan obtained for acquisition of assets (the principal component of EMI) cannot be brought within the purview of fringe benefit tax. The court treated the principal repayment as not forming part of expenditure for running or maintaining the motor car. Only actual running and maintenance expenditure of cars taken on finance/lease falls within the charge to FBT. That finding of fact was supported by material on record and was not shown to be perverse. [Paras 6]

Principal component of EMI for cars on finance/lease is outside the scope of fringe benefit tax; only running/maintenance expenses are taxable.

Fringe Benefit Tax on in-house training expenses - Incidental expenses (boarding, lodging, travel) treated as deemed conference expenditure - Interpretation of Circular No.8/2005 FAQ 51 - Deeming provision in Section 115WB(2)(C) regarding conference expenditure - Preclusive effect of prior assessment findings and consistency in tax proceedings - Expenditure incurred for imparting in-house training to employees is not liable to fringe benefit tax, but incidental expenses such as boarding, lodging, tour and travel in connection with such training are taxable as deemed conference expenditure. - HELD THAT: - A conjoint reading of Circular No.8/2005 FAQ 51 and the deeming provision in Section 115WB(2)(C) shows that FBT does not extend to expenditure incurred for in-house training itself, while expenditures on food and beverage, tour and travel, and lodging and boarding in connection with such training are liable to FBT. The assessee produced material before the authorities to show expenditure for imparting training, and the Tribunal rightly held there was no fringe benefit in the in-house training expenditure. Further, the Court relied on the principle that where a fundamental aspect has been accepted in an earlier assessment year and not challenged by the revenue, it is inappropriate to alter that position in a subsequent year; the assessee's favorable finding for Assessment Year 2008-09, accepted by the revenue, reinforced the position as regards in-house training treatment. [Paras 4, 5, 6, 7]

In-house training expenditure is excluded from FBT, but incidental expenses (boarding, lodging, travel, conveyance) connected to such training are chargeable to FBT; the Tribunal's conclusions are upheld.

Final Conclusion: The appeal is dismissed. The Tribunal's deletion of the addition relating to the principal component of EMI and the holding that in-house training expenses are not subject to FBT (with incidental travel/boarding/lodging being taxable) are affirmed.

Limitation - rectification under Section 154 of the Income-tax Act, 1961 - appeal maintainability - jurisdictional error - condonation of delay - natural justice - restoration and remand for de novo adjudication

Rectification under Section 154 of the Income-tax Act, 1961 - limitation - appeal maintainability - jurisdictional error - Whether the Commissioner (Appeals) committed jurisdictional error by treating the intimation under section 143(1) dated 29.03.2009 as the impugned order and dismissing the first appeal as time-barred instead of treating the AO's order dated 16.08.2018 rejecting the section 154 application as the impugned order. - HELD THAT: - The Tribunal found that the assessee had filed an application under Section 154 on 08.01.2018 which was rejected by the AO by order dated 16.08.2018. The first appeal filed on 05.09.2018 challenged the AO's 16.08.2018 order. Learned CIT(A) computed delay from the intimation dated 29.03.2009 under section 143(1) and held the appeal to be barred by 3,417 days, thereby dismissing it in limine. The Tribunal held that this was a jurisdictional error because the order under challenge before the CIT(A) was the AO's 16.08.2018 order rejecting the rectification application and not the 2009 intimation; consequently the appeal filed on 05.09.2018 was within the statutory period applicable to appeals against the 16.08.2018 order. The Tribunal therefore set aside the CIT(A)'s appellate order and restored the appeal to the CIT(A) for fresh adjudication. [Paras 3]

Learned CIT(A)'s order dismissing the appeal as barred by limitation is set aside as a jurisdictional error; the appeal is restored to the CIT(A) for de novo adjudication treating the AO's order dated 16.08.2018 as the impugned order.

Restoration and remand for de novo adjudication - natural justice - admission of evidence in interest of justice - Remedies and procedural directions following the finding of jurisdictional error. - HELD THAT: - Having found that the CIT(A) erred in law in treating the 2009 intimation as the impugned order, the Tribunal directed that the appellate order be set aside and the appeal be restored to the CIT(A) for fresh consideration. The CIT(A) was directed to conduct de novo appellate proceedings, to afford the assessee proper and adequate opportunity of being heard in accordance with principles of natural justice, and to admit the evidence filed by the assessee in the interest of justice. The Tribunal expressly refrained from commenting on the merits of the issues, keeping all contentions open for adjudication by the CIT(A). [Paras 3]

The matter is remitted to the CIT(A) for fresh adjudication de novo with directions to follow principles of natural justice and to admit the assessee's evidence; no decision on merits is expressed by the Tribunal.

Final Conclusion: The appellate order dated 21.05.2019 of the CIT(A) is set aside for jurisdictional error and the appeal is restored to the CIT(A) for fresh de novo adjudication treating the AO's order dated 16.08.2018 as the impugned order; the CIT(A) is directed to afford adequate opportunity of hearing and admit the assessee's evidence, the Tribunal expressing no view on the merits. Appeal allowed for statistical purposes.

Allowability of transfer-related expenses under section 48(1) - entitlement to deduction under section 54EC consequent to long-term capital gain - genuineness of transaction and sham transaction doctrine - admission of additional evidence and remand for fresh adjudication - application of surrounding circumstances and test of human probabilities

Allowability of transfer-related expenses under section 48(1) - admission of additional evidence and remand for fresh adjudication - Whether travelling and litigation expenses of Rs.1,69,18,142/- incurred in the financial year 2009-10 are allowable as deductions from long-term capital gain under section 48(1), and whether additional evidence should be admitted. - HELD THAT: - The Tribunal noted that the AO had not adjudicated the allowability of the transfer-related expenses because he had treated the gain as short-term. The CIT(A) rejected the claim on the ground that the assessee had not substantiated the expenses, and did not deal with or comment on the documents furnished. Having considered the pleadings, paper book and submissions, the Tribunal found it appropriate in the interests of justice to admit the additional evidence tendered before it and restore the issue to the file of the AO. The AO is directed to decide the allowability of the travelling and litigation expenses afresh in accordance with law after affording the assessee a hearing and considering the documents now on record. [Paras 8]

Additional evidence admitted and the question of allowability of the claimed travelling and litigation expenses remanded to the AO for fresh adjudication after affording opportunity to the assessee.

Genuineness of transaction and sham transaction doctrine - application of surrounding circumstances and test of human probabilities - admission of additional evidence and remand for fresh adjudication - Whether the long-term capital loss of Rs.4,12,59,906/- on sale of preference shares was a genuine loss or a sham transaction and therefore disallowable. - HELD THAT: - The AO held the sale at a nominal price was a sham designed to book losses; the CIT(A) upheld that conclusion, applying the principle that surrounding circumstances and human probabilities may be examined. The Tribunal observed that the AO had not confronted the assessee with findings nor considered the material now placed on record, and that the CIT(A)'s order is silent on that aspect. In the interest of justice, the Tribunal admitted the additional financial documents and restored the issue to the AO to examine the genuineness of the transaction afresh, considering the admitted evidence and after giving the assessee an opportunity of being heard. [Paras 14]

Claim of long-term capital loss set aside for fresh consideration by the AO; matter remanded for adjudication of genuineness after taking into account additional evidence and hearing the assessee.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, admitted the additional evidence and remanded both the disputes-the allowability of transfer-related expenses and the genuineness of the claimed long-term capital loss-to the AO for fresh adjudication in accordance with law after affording the assessee an opportunity of being heard.

Provisional attachment of bank account - prospective operation of coercive statutory provision - procedural preconditions for provisional attachment - absence of statutory authority for freezing under Section 108 - temporary nature and time limitation of provisional attachment

Absence of statutory authority for freezing under Section 108 - provisional attachment of bank account - Validity of the communication dated 19th April, 2018 to the bank requesting no debit transactions from the petitioner's account in the absence of any order under the statutory provision now embodied in Section 110(5). - HELD THAT: - The Court examined the statutory scheme and found that Section 108 does not empower freezing of bank accounts. The provision which contemplates provisional attachment of bank accounts is Section 110(5), inserted with effect from 1 August 2019; prior to that insertion there was no power under the Customs Act to provisionally attach a bank account. In the absence of any order passed under Section 110(5) or any other statutory provision conferring such authority at the relevant time, the communication of 19 April 2018 purporting to freeze the petitioner's bank account lacked statutory authority and was therefore unlawful. [Paras 6, 7, 34]

The communication dated 19th April, 2018 effected an unlawful freezing of the petitioner's bank account as there was no statutory power to do so at that time.

Procedural preconditions for provisional attachment - temporary nature and time limitation of provisional attachment - prospective operation of coercive statutory provision - Whether, even assuming Section 110(5) applied, the requirements and time limits prescribed by that sub section were complied with and whether continuation of the attachment beyond the permissible period was lawful. - HELD THAT: - The Court set out the mandatory conditions under Section 110(5): a written order by a proper officer during proceedings under the Act, formation of opinion as to necessity for protecting revenue or preventing smuggling, prior approval of the Principal Commissioner/Commissioner, and a temporal limit of six months with a possible single six month extension recorded in writing and communicated before expiry. The Court noted these are coercive procedural preconditions and, being coercive, the provision operates prospectively; it further observed that respondents did not produce any order under Section 110(5) or show compliance with the prescribed procedure. The statutory language and dictionary definition confirm the provisional attachment is temporary, subject to the statutory timeline, and cannot be continued indefinitely; continuation beyond the permissible period is therefore bad in law. [Paras 6, 8, 31, 32, 33]

The procedural preconditions and time limits for provisional attachment were not shown to have been complied with, and continuation of the attachment beyond the permissible period was unlawful.

Provisional attachment of bank account - Relief to be granted in view of the illegality of the freezing of the bank account. - HELD THAT: - In light of the absence of statutory authority at the time of the communication and the failure to comply with the mandatory procedure and timelines where applicable, the Court concluded that the impugned communication must be set aside. The temporary nature of any lawful provisional attachment and the excessive continuance of the freeze justified immediate relief allowing the petitioner to operate the account. [Paras 9]

Impugned communication dated 19th April, 2018 is quashed and respondents are directed to allow the petitioner to operate its bank account.

Final Conclusion: Writ petition allowed; the communication freezing the petitioner's bank account is set aside as made without statutory authority and beyond permissible temporal limits, and the bank is directed to permit operation of the account.

Provisional release under section 110-A - appeal under section 129A(1)(a) - adjudication and confiscation under section 110 - show cause notice under section 124 - sale of seized hazardous goods - board circular dated 16.08.2017 on provisional release

Provisional release under section 110-A - appeal under section 129A(1)(a) - board circular dated 16.08.2017 on provisional release - Validity of the order dated 31.08.2020 granting provisional release subject to conditions and availability of appellate remedy. - HELD THAT: - The Court observed that an order granting provisional release under section 110-A is a decision within the meaning of the Customs Act and is amenable to appeal under section 129A(1)(a), consistent with earlier precedent relied upon by the Court. While noting the Commissioner relied upon the board circular dated 16.08.2017 and the decision in M/s. Amit Petroleum Pvt. Ltd., the Court did not finally adjudicate the reasonableness of the conditions imposed. Instead the Court granted the petitioner liberty to file an appeal against the order dated 31.08.2020 and provided for expedited disposal of such appeal by CESTAT, reflecting that challenges to the conditions must be decided by the appellate forum or on merits in due course. [Paras 25, 26, 27, 28, 32]

Liberty granted to file appeal before CESTAT against the order dated 31.08.2020; if filed within four weeks and early hearing sought, CESTAT to decide the appeal within four weeks.

Adjudication and confiscation under section 110 - show cause notice under section 124 - Requirement of expeditious adjudication on whether seized goods are liable for confiscation and related procedural timetable. - HELD THAT: - The Court emphasised that seizure under section 110 is a step towards possible confiscation and that adjudication cannot be kept pending, particularly given the hazardous and inflammable nature of the goods. In order to protect both revenue and parties' rights, the Court directed the adjudicating authority to initiate the adjudication process by issuing a show cause notice under section 124 and to conclude the proceedings in accordance with law and principles of natural justice within four weeks from receipt of a copy of this order. [Paras 31, 32]

Adjudicating authority directed to issue show cause notice under section 124 and conclude adjudication within four weeks.

Sale of seized hazardous goods - provisional release under section 110-A - Right to seek sale of seized hazardous/inflammable goods and obligation of respondents to consider such application. - HELD THAT: - Recognising the hazardous and inflammable character of the seized goods and relevant disposal provisions and instructions, the Court granted the petitioner liberty to apply to the respondents for sale of the seized goods. The respondents were directed to take a considered decision in accordance with law within two weeks of receipt of such application, with due intimation to the petitioner. The Court left all contentions open and did not express any opinion on merits. [Paras 21, 32]

Petitioner granted liberty to apply for sale of seized goods; respondents to decide the application in accordance with law within two weeks.

Final Conclusion: Writ petitions disposed of with liberty to file an appeal against the provisional release order before CESTAT (expedited hearing), directions for the adjudicating authority to issue show cause notice and complete adjudication within four weeks, and liberty to apply for sale of the seized hazardous goods with respondents to decide within two weeks; all contentions kept open and no order as to costs.

Violation of principles of natural justice by denial of opportunity to cross-examine - reliability and corroboration of solitary extra-judicial statement as basis for penalty - imposition and quashing of penalty under Section 112 of the Customs Act, 1962 for lack of evidence

Violation of principles of natural justice by denial of opportunity to cross-examine - reliability and corroboration of solitary extra-judicial statement as basis for penalty - imposition and quashing of penalty under Section 112 of the Customs Act, 1962 for lack of evidence - Whether the penalty imposed on the appellant under Section 112 of the Customs Act, 1962 was sustainable in the absence of cross-examination and independent corroborative evidence - HELD THAT: - The Tribunal found that the proceedings against the appellant rested solely on the statement of one person (Shri Manoj Roy) who had been intercepted and, in turn, had named others. The appellant expressly sought cross-examination of that person and denied any knowledge or involvement; this request was not allowed by the Adjudicating Authority. Following the principle that denial of an opportunity to cross-examine witnesses whose statements form the basis of an adverse order amounts to a serious breach of natural justice, the Tribunal held that such omission undermines the reliability of the impugned evidence. Relying on the Supreme Court's decision in Andaman Timber Industries (as reproduced in the order), the Tribunal reasoned that where the testimony relied upon is discredited or left untested by cross-examination, the Department lacks material to justify the penalty. On the facts, the investigation was held to be inconclusive and based on assumption or suspicion without corroborative or substantial evidence directly or indirectly connecting the appellant with the seized currency. Consequently, the penalty could not be sustained. [Paras 5, 6, 7]

Penalty imposed under Section 112 of the Customs Act, 1962 on the appellant set aside for want of corroborative evidence and for breach of natural justice in not allowing cross-examination; appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed under Section 112 of the Customs Act, 1962 on the ground that the case against the appellant was founded on an uncorroborated statement which was not tested by cross-examination, and directed consequential relief as per law.

Penalty under Section 114(i) of the Customs Act, 1962 - evidentiary value of statements recorded under Section 108 of the Customs Act - retraction of confessional statements and afterthought - confession of co-accused as corroborative evidence - standard of proof in adjudication proceedings - preponderance of probabilities

Penalty under Section 114(i) of the Customs Act, 1962 - evidentiary value of statements recorded under Section 108 of the Customs Act - retraction of confessional statements and afterthought - confession of co-accused as corroborative evidence - standard of proof in adjudication proceedings - preponderance of probabilities - Whether the two appellants rendered themselves liable to penalties under Section 114(i) of the Customs Act, 1962 for involvement in smuggling of Red Sanders, having regard to their statements (recorded under Section 108), subsequent retractions, other corroborative material and the fact that CBI did not charge-sheet them. - HELD THAT: - The Tribunal held that the determinative question was one of adjudication on preponderance of probabilities, not criminal proof beyond reasonable doubt (paras 16, 23). The statements of the appellants were recorded under Section 108 and were detailed, signed and self-referential (paras 17.1, 18, 20). Retractions filed later were examined and, on facts, held to be afterthoughts because they were non-specific, delayed and not supported by cogent reasons (paras 19 21). Co noticees and other witnesses identified the appellants and call detail analysis of the mobile number allegedly used by one appellant corroborated the nexus with other conspirators; a departmental officer also stated the number belonged to the appellant (paras 17.1, 20, 21). The Tribunal rejected the contention that absence of CBI charge sheet or criminal proceedings in respect of the appellants ipso facto vitiated adjudication, reiterating the separate standards applicable to adjudicatory and criminal fora (paras 22 24). On the totality of evidence - statements recorded under Section 108, corroborative call records and identifications by co accused and witnesses - the Tribunal found the role of Shri Mohammed Altaf established with reasonable satisfaction in the adjudicatory proceedings and the role of Shri Ali Imran Shafiullah Khan sufficiently established to attract penal consequences (paras 26 28). Applying principles of proportionality, the Tribunal reduced the penalty originally imposed by the Commissioner: for Shri Mohammed Altaf the penalty was reduced to the modified amount; for Shri Ali Imran Shafiullah Khan the penalty was similarly moderated (paras 27 28). [Paras 24, 26, 27, 28, 30]

Appellants are liable to penalty under Section 114(i) of the Customs Act, 1962; penalty on Shri Mohammed Altaf upheld but reduced, and penalty on Shri Ali Imran Shafiullah Khan upheld but reduced.

Final Conclusion: The Tribunal upheld adjudicatory liability of both appellants for involvement in smuggling on the basis of statements under Section 108 and corroborative material, treated retractions as afterthoughts, applied the preponderance of probabilities standard, and modified the penalties downward in the appeals.

Provisional release of goods pending adjudication - Section 110A of the Customs Act, 1962 - non-speaking order - application of mind - remand for fresh consideration with reasons

Section 110A of the Customs Act, 1962 - provisional release of goods pending adjudication - non-speaking order - application of mind - Validity of the communication dated 27.04.2020 purporting to provisionally release seized goods on execution of bond and furnishing of bank guarantee. - HELD THAT: - Section 110A permits the adjudicating authority to release seized goods pending final adjudication on taking a bond with such security and conditions as it may require. That power must be exercised by the adjudicating authority applying its mind and recording reasons for the provisional release in each case. A mere office note indicating values for bond and bank guarantee which is signed by officers, without a reasoned order communicated to the owner, does not satisfy the statutory requirement. The communication dated 27.04.2020 merely recorded the bond and bank guarantee amounts and did not disclose the reasons or show application of mind by the Commissioner; the notesheet signed by officers cannot substitute for a reasoned order in compliance with Section 110A. For these reasons the provisional release communication is a non-speaking order and cannot stand. [Paras 8, 9]

The communication dated 27.04.2020 is set aside as being a non-speaking order failing to record reasons or application of mind under Section 110A.

Remand for fresh consideration with reasons - provisional release of goods pending adjudication - protection against disposal pending fresh decision - Direction to the Commissioner to reconsider and pass a reasoned order on provisional release and interim protection of the seized goods. - HELD THAT: - Because the prior communication was quashed for want of reasons, the matter was remitted to the Commissioner to pass an order afresh in accordance with Section 110A, applying mind to the facts of the case and recording reasons for any provisional release or conditions imposed. The nature of the goods (stated to be for human consumption and prone to deterioration) was noted as a material consideration. The Commissioner is directed to decide the question of provisional release within one week of service of this order. Meanwhile, disposal of the seized goods is restrained for eight weeks from the date of this order to protect the appellant's interest pending reconsideration. [Paras 10, 11, 12]

Matter remitted to the Commissioner to pass a reasoned order on provisional release within one week; seized goods shall not be disposed of for eight weeks.

Final Conclusion: The appeal is allowed to the limited extent that the communication dated 27.04.2020 is set aside for want of reasons; the Commissioner is directed to pass a reasoned order under Section 110A within one week and the seized goods are protected from disposal for eight weeks pending that decision.

Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 - Sanction of compromise/arrangement - Dispensation of meetings of shareholders and creditors - Continuance of legal proceedings post-amalgamation - Transfer and vesting of assets and liabilities on amalgamation - Employees' transfer of service and preservation of terms - Compliance with statutory requirements and liability for deficiencies - Role of Regional Director and Official Liquidator reports in company arrangement proceedings - Consideration of objections by the Income Tax Department and effect of pending/ completed assessments

Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 - Sanction of compromise/arrangement - Sanction of the Scheme of Amalgamation between the petitioner transferor companies and the transferee company under Sections 230-232 of the Companies Act, 2013. - HELD THAT: - The Tribunal considered the joint petition, the filed scheme, certificates of statutory auditors as to accounting treatment, affidavits of publication and service, approvals recorded by members and creditors (meetings having been dispensed with in first motion), and responses from statutory authorities. No objector appeared pursuant to publication and no objection was received by the petitioners. The Tribunal found no impediment to sanctioning the scheme after taking into account the affidavit of the Regional Director, the report of the Official Liquidator and the replies to observations of the Income Tax Department, and accordingly granted sanction under Sections 230-232.

The Scheme of Amalgamation is sanctioned and the petition is disposed of in terms of the order.

Consideration of objections by the Income Tax Department and effect of pending/ completed assessments - Whether the objections and observations raised by the Income Tax Department (including allegations of tax-evasion motive, shell company status, pending assessments and disputed valuation) precluded sanction of the scheme. - HELD THAT: - The Tribunal examined the Income Tax Department's observations and the petitioners' rejoinder and supporting documents. The petitioners produced audit reports, statutory auditor certificates, a registered valuer's valuation report, particulars of directors and dates of incorporation, and copies of assessment orders (including orders showing nil demand where relevant). The Tribunal noted that the IT Department's referenced ITAT order did not relate to the petitioner companies and that assessment orders relevant to the transferor company had been passed with nil demand. On this basis and having considered the replies and documentary material, the Tribunal found the Income Tax Department's objections did not constitute a bar to sanctioning the scheme.

The Income Tax Department's objections were considered and, having regard to the petitioners' replies and supporting documents, did not prevent sanction of the scheme.

Role of Regional Director and Official Liquidator reports in company arrangement proceedings - Compliance with statutory requirements and liability for deficiencies - Effect of the Regional Director's report and the Official Liquidator's report on sanction and requirement of compliance with statutory formalities. - HELD THAT: - The Regional Director reported no prosecution, inspection or investigation pending in respect of the petitioner companies and raised a compliance point in relation to fee payable on revised authorized share capital; the Transferee Company furnished an undertaking regarding compliance. The Official Liquidator reported no complaints and that affairs of the transferor companies did not appear prejudicial to members or public interest. The Tribunal accepted these records, sanctioned the scheme subject to the petitioners remaining bound to comply with statutory requirements, and clarified that sanction will not preclude action in accordance with law if any deficiency or violation is subsequently found.

The Regional Director's and Official Liquidator's reports do not impede sanction; the petitioners must comply with statutory requirements and sanction does not bar later lawful action for any deficiencies.

Transfer and vesting of assets and liabilities on amalgamation - Continuance of legal proceedings post-amalgamation - Employees' transfer of service and preservation of terms - Consequential legal effects of the sanctioned scheme regarding dissolution of transferor companies, vesting of assets and liabilities, continuation of proceedings and transfer of employees. - HELD THAT: - The Tribunal ordered that on the scheme taking effect the transferor companies shall stand dissolved without winding up; all property rights and powers of the transferor companies shall transfer and vest in the transferee company; all liabilities and duties shall become those of the transferee company; pending proceedings by or against the transferor companies shall be continued by or against the transferee company; and employees in service immediately before the effective date shall become employees of the transferee company on terms not less favorable than those subsisting earlier. The order also preserved liberty for interested persons to apply for directions and mandated filing a certified copy of the order with the Registrar of Companies for registration and dissolution formalities.

The specified consequential effects (dissolution, transfer/vesting of assets and liabilities, continuance of proceedings, and transfer of employees on preserved terms) are ordered to follow from the sanctioned scheme.

Final Conclusion: The Tribunal, having considered the scheme, statutory auditor certificates, publication and service compliance, the Regional Director's and Official Liquidator's records and the petitioners' replies to the Income Tax Department, sanctioned the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013; the petition is disposed of subject to statutory compliance and without prejudice to any subsequent lawful action in respect of deficiencies or violations.

Withdrawal of approved Resolution Plan - jurisdiction of the Adjudicating Authority to permit withdrawal - primacy of the Committee of Creditors - binding nature of an approved Resolution Plan - feasibility and viability scrutiny of a Resolution Plan - performance bank guarantee as deterrent to withdrawal - estoppel by conduct of a Successful Resolution Applicant - time bound CIRP and maximisation of asset value

Withdrawal of approved Resolution Plan - jurisdiction of the Adjudicating Authority to permit withdrawal - primacy of the Committee of Creditors - binding nature of an approved Resolution Plan - Adjudicating Authority has no jurisdiction to permit withdrawal of a Resolution Plan after it has been approved by the Committee of Creditors. - HELD THAT: - The Tribunal upheld the view that once a Resolution Plan is approved by the Committee of Creditors by the requisite majority and placed before the Adjudicating Authority for approval, the Adjudicating Authority cannot entertain an application by the Successful Resolution Applicant to withdraw that approved plan. The insolvency regime accords primacy to the commercial decision of the Committee of Creditors; judicial intervention by the Adjudicating Authority is limited to the statutory grounds of scrutiny of the approved plan. Allowing a Successful Resolution Applicant to retract its approved plan would undermine the bidding process, eliminate rival bidders' expectations and could push the corporate debtor into liquidation, defeating the object of a time bound CIRP and maximisation of asset value. The Tribunal rejected reliance on earlier appellate observations from a different factual matrix where a plan violated statutory requirements, holding that those observations do not stand as a precedent permitting withdrawal generally. [Paras 5, 6, 7, 8, 9]

Application for withdrawal of a Resolution Plan approved by the Committee of Creditors cannot be permitted; the appeal challenging the Adjudicating Authority's refusal to allow withdrawal is dismissed.

Commercial unviability as ground for withdrawal - performance bank guarantee as deterrent to withdrawal - estoppel by conduct of a Successful Resolution Applicant - time bound CIRP and maximisation of asset value - Commercial unviability arising from delay in CIRP is not a permissible ground to allow a Successful Resolution Applicant to withdraw an approved plan. - HELD THAT: - The Tribunal considered the contention that delay and consequent commercial unviability justified withdrawal. It held that permitting a Successful Resolution Applicant to take a 'U turn' after acceptance of conditions and after displacing other bidders would defeat the CIRP's objectives; the obligation not to withdraw is reinforced by mechanisms like performance bank guarantees and by estoppel arising from the applicant's conduct. The Tribunal relied on its earlier precedent rejecting withdrawal where the plan had been approved by the CoC despite delay making implementation difficult, and distinguished cases where the approved plan was found statutorily infirm. [Paras 5, 7, 8]

The plea of commercial unviability due to delay does not justify permitting withdrawal of an approved Resolution Plan; the appeal is without merit on this ground as well.

Final Conclusion: Appeal dismissed. The Tribunal affirmed that an approved Resolution Plan is binding on the Successful Resolution Applicant and that neither commercial inconvenience arising from delay nor an application to withdraw after CoC approval entitles the applicant to unsettle the resolution process; therefore the Adjudicating Authority's refusal to permit withdrawal was upheld.

Initiation of corporate insolvency resolution process - financial creditor - financial debt - default - ascertainment of default from records of an information utility or other evidence - realisation of security/possession of immovable property does not ipso facto extinguish debt - moratorium - appointment of interim resolution professional

Financial creditor - financial debt - default - ascertainment of default from records of an information utility or other evidence - Application under Section 7 of the IBC filed by the Financial Creditor to initiate corporate insolvency resolution process was maintainable and required to be admitted - HELD THAT: - The Tribunal found on the material on record that the Financial Creditor had sanctioned cash credit, term loan and ancillary facilities to the Corporate Debtor and that advances and subsequent enhancements were neither denied nor controverted by the Corporate Debtor. Account statements and statutory notices were placed on record showing non payment after 15.07.2017 and classification as NPA. Reliance was placed on the approach in Swiss Ribbons and Innoventive Industries that a financial creditor must prove existence of a debt and default by documentary evidence and that the Adjudicating Authority must ascertain default from information utility records or other evidence. The Corporate Debtor's contention that the Financial Creditor had taken possession of a mortgaged property and was realising rent, and that sale proceeds would suffice to liquidate the debt, did not negate the existence of a due and payable financial debt. The Tribunal held that taking possession or receiving rent does not amount to realisation that extinguishes the debt so as to defeat an application under Section 7. As the application was complete, default was established on the evidence, and no disciplinary proceedings impeded the proposed professional, the Tribunal was obliged to admit the Section 7 petition. [Paras 14, 15, 18, 19, 20]

The Section 7 application is admitted and corporate insolvency resolution process is initiated.

Moratorium - appointment of interim resolution professional - Consequential orders on moratorium, appointment of IRP and interim funding were directed - HELD THAT: - On admission under Section 7(5)(a), the statutory moratorium under Section 14 was declared with its usual prohibitions on suits, alienation or enforcement, and protection for supply of essential goods/services. The Financial Creditor's proposed interim resolution professional, empanelled with IBBI, was appointed as IRP and directed to perform duties under the Code. The Financial Creditor was directed to deposit an amount to meet immediate IRP expenses, to be accountable and recoverable as CIR costs from the committee of creditors. [Paras 21, 22, 23]

Moratorium to operate forthwith; proposed IRP appointed; Financial Creditor to deposit funds for IRP's immediate expenses.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by the Jammu & Kashmir Bank Ltd., held that documentary evidence established a financial debt and default despite the Financial Creditor's possession/realisation of rent from mortgaged property, imposed the statutory moratorium, appointed the proposed interim resolution professional and directed interim funding for IRP expenses.

Pre-existing dispute - existence of dispute under Section 5(6) and proof under Section 8(2) of the IBC - demand notice and reply compliance under Section 8(2) - plausible contention test in Mobilox - limited jurisdiction of the adjudicating authority under Section 9

Pre-existing dispute - existence of dispute under Section 5(6) and proof under Section 8(2) of the IBC - demand notice and reply compliance under Section 8(2) - plausible contention test in Mobilox - limited jurisdiction of the adjudicating authority under Section 9 - Whether the application under Section 9 is liable to be rejected because a pre-existing dispute was raised by the corporate debtor prior to issuance of the demand notice and the genuineness of documents relied upon gives rise to a bona fide dispute requiring adjudication elsewhere. - HELD THAT: - The Tribunal found that the corporate debtor had, prior to issuance of the demand notice, placed on record correspondence and account confirmations (including exchanges with M/s. Prominent Metals Pvt. Ltd.) asserting that accounts were settled as on 31.03.2018 and that no amount was outstanding. Those documents were executed before the demand notice and were relied upon in the corporate debtor's reply to the earlier legal notice. The operational creditor did not disclose those pre-existing communications in its main application and, only after the corporate debtor filed its reply, alleged that the documents were forged or signed by unauthorised clerical staff. The Tribunal held that such allegations themselves give rise to a dispute over the existence and discharge of the debt which cannot be resolved in the limited summary jurisdiction under Section 9. Applying the principle in Mobilox the adjudicating authority's role at this stage is to determine whether a plausible dispute exists that warrants further investigation; it need not decide the merits or the ultimate correctness of the documents. The Tribunal also relied on the NCLAT precedent that the question of whether documents are fictitious is for a competent forum and cannot be finally determined in a Section 9 proceeding. Given that (a) the corporate debtor had raised the dispute prior to the demand notice and (b) the operational creditor itself contested the genuineness of the documents, the dispute was held to be real and not a spurious defence, and therefore outside the limited scope for admission of a Section 9 petition. [Paras 23, 24, 25]

The Section 9 application is rejected because a bona fide pre-existing dispute, supported by documents predating the demand notice and questioned as to their authenticity, exists and must be adjudicated by an appropriate forum; the adjudicating authority therefore declined to admit the petition.

Final Conclusion: The application under Section 9 is dismissed on the ground that a pre-existing dispute, including challenges to the genuineness of documents executed prior to the demand notice, exists and falls outside the limited summary jurisdiction to admit an insolvency petition.

Default - financial debt - channel finance facility - disbursement to supplier - Section 7 of the Insolvency and Bankruptcy Code - disputed debt and arbitration clause - overriding effect of the Insolvency and Bankruptcy Code - appointment of interim resolution professional - moratorium - CIRP costs

Default - financial debt - channel finance facility - disbursement to supplier - The application under Section 7 was admitted on the ground that a financial default had occurred in respect of the channel finance facility and the loan was duly sanctioned and disbursed in accordance with the financing documents. - HELD THAT: - The Tribunal examined the sanction letter, the channel finance agreement and its modification, the deed of hypothecation, power of attorney, guarantee and the statements of account and found that the corporate debtor had applied for and accepted the channel finance facility which identified the sellers (Vedanta and Hindalco) and envisaged payments to suppliers at the request of the dealer. The Tribunal rejected the corporate debtor's contention that absence of direct payment to its bank account negatived disbursement, observing that the facility permitted disbursements to suppliers and that the applicant had produced statements and notices evidencing disbursements and demand. Having found that the financing documentation existed, disbursements were made as per the facility and repayment was not made, the Tribunal concluded that a default had occurred and the Section 7 application was complete for admission. [Paras 14, 15, 19]

The application under Section 7 is admitted as a default in respect of the channel finance facility has occurred and the claim is complete.

Section 7 of the Insolvency and Bankruptcy Code - disputed debt and arbitration clause - overriding effect of the Insolvency and Bankruptcy Code - Proceedings under Section 7 are maintainable despite contentions of dispute and invocation of arbitration; existence of a dispute did not preclude admission where a default is established. - HELD THAT: - The Tribunal referred to the scheme of Section 7 and to the judicial exposition in Innoventive Industries regarding the adjudicating authority's limited role at the admission stage - viz., to ascertain existence of default from records or other evidence. It noted that the corporate debtor's objections amounted to disputes as to amounts and manner of disbursement but were not such as to demonstrate that the debt was not due. The Tribunal accepted the applicant's submission that initiation of arbitration or the existence of disputes did not, by itself, bar admission under Section 7 and that Section 238 gives IBC overriding effect over conflicting provisions, thereby rendering the application maintainable. [Paras 16, 17, 18, 19]

The Section 7 petition is maintainable and may be admitted notwithstanding the respondent's contentions of dispute or invocation of arbitration.

Appointment of interim resolution professional - moratorium - CIRP costs - An interim resolution professional was appointed, the moratorium under the Code was declared with immediate effect, and the operational creditor was directed to deposit amounts for IRP expenses. - HELD THAT: - Having admitted the Section 7 petition and found no bar in respect of the proposed IRP (no disciplinary proceedings pending and consent filed), the Tribunal appointed the proposed IRP and directed him to perform the statutory functions under the Code. The Tribunal issued the moratorium in terms of Section 14, staying suits, proceedings, enforcement of security and transfers by the corporate debtor. The Tribunal also directed the operational creditor to deposit the specified amount to meet immediate IRP expenses, to be accountable and recoverable as CIRP costs. [Paras 20, 21]

Mr. Dhiren Shantilal Shah is appointed as IRP; moratorium is imposed forthwith; and the operational creditor is directed to deposit the IRP expense amount.

Final Conclusion: The Tribunal admitted the Section 7 petition on finding a financial default under the channel finance facility, held that invocation of arbitration or disputes as to amounts did not bar admission under Section 7, appointed the proposed IRP, declared the moratorium, and directed deposit for immediate IRP expenses.

Admission of petition under Section 7 of the Insolvency and Bankruptcy Code - existence of debt and default - date of default - limitation period for Section 7 petition - appointment of Interim Resolution Professional - moratorium under Section 13 and 14 of the Insolvency and Bankruptcy Code - completeness of Section 7 application

Existence of debt and default - admission of petition under Section 7 of the Insolvency and Bankruptcy Code - limitation period for Section 7 petition - completeness of Section 7 application - date of default - Whether the Section 7 petition was maintainable and liable to be admitted on the ground of existence of debt and default and within limitation - HELD THAT: - On consideration of the contract, the flow of funds, the demand notices and the documents on record, the Adjudicating Authority found that the corporate debtor had availed funds from the petitioner for creation of FDRs and issuance of bank guarantees in respect of the works awarded to the corporate debtor, that a debt above the threshold exists, that the debt was due and that default occurred on 10.10.2017. The Tribunal also recorded that the petition filed on 06.06.2018 was within limitation and that the application under Section 7 was complete for initiation of CIRP. The Authority observed that factual disputes as to performance of work or counterclaims did not preclude admission under Section 7 at this stage and such disputes could be agitated in appropriate fora, while the I.A. under Section 7 proceeds on the limited satisfaction of existence of debt, default and completeness of the application. [Paras 16]

The Section 7 petition was admitted: debt and default were held to exist, the date of default recorded as 10.10.2017, the petition was within limitation and the application was complete.

Appointment of Interim Resolution Professional - moratorium under Section 13 and 14 of the Insolvency and Bankruptcy Code - Reliefs and directions consequential to admission of the Section 7 petition - HELD THAT: - Consequent to admission of the petition, the Authority appointed the proposed Insolvency Professional as Interim Resolution Professional and directed him to make the public announcement and to perform duties under the Code. The Tribunal declared the moratorium with effect from the date of the order prohibiting institution or continuation of suits, transfer or disposition of assets, enforcement of security interests and related actions, and further directed compliance with procedural duties by the IRP and cooperation by the corporate debtor's personnel. Ancillary directions concerning time-limits for CIRP and communication of the order were also issued. [Paras 17, 18, 19, 20]

Interim Resolution Professional appointed; moratorium declared and directions issued for conduct of CIRP and communication of the order.

Final Conclusion: The Adjudicating Authority admitted the petition under Section 7 of the IBC (date of default recorded as 10.10.2017), appointed the Interim Resolution Professional, and declared the moratorium with directions for conduct of CIRP. A concurring/dissenting opinion recorded that the petitioner could be an operational creditor and that the petition might be time-barred and maintainable only under Section 9; that view was not adopted for admission.

Operational debt - pre-existing dispute - Mobilox test for pre-existing dispute - default - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium

Operational debt - default - Whether the amounts claimed by the Operational Creditor fall within the scope of operational debt and whether there is a default exceeding the statutory threshold. - HELD THAT: - The Tribunal examined the nature of the contractual relationship under the General Agency Agreements (2003-2017) and concluded that the Corporate Debtor acted as agent for the Operational Creditor in India, collecting payments and remitting them. Such amounts fall within the definition of operational debt. The Tribunal noted the Operational Creditor produced invoices, debit notes, audited financial statements and a demand notice, and that material on record (including the Corporate Debtor's own accounts and replies) show admitted liabilities. Having regard to the admitted sums and the evidence of non-payment after the demand notice, the Tribunal found that there was a default in discharging an operational debt that met the minimum monetary threshold for initiation of proceedings under the Code. [Paras 8, 15, 16]

The claimed amounts constitute operational debt and there is a proven default.

Pre-existing dispute - Mobilox test for pre-existing dispute - Whether a bona fide pre-existing dispute exists which would bar admission of the Section 9 petition. - HELD THAT: - Applying the test in Mobilox Innovations (that the Adjudicating Authority must determine whether a plausible dispute exists which is not a patently feeble or spurious contention), the Tribunal considered the Corporate Debtor's objections alleging fabricated invoices, mismatch with financial statements, FEMA violations, and adjustments/claims against the Operational Creditor. The Tribunal observed that many of these contentions amounted to matters requiring detailed investigation and documentary proof beyond the scope of summary proceedings under Section 9. The Tribunal found that the Corporate Debtor had, in its reply to the demand notice and elsewhere, admitted substantial parts of the liability and even offered to repay by way of sale of assets, and that no pre-existing dispute had been shown to be genuine and cogent enough to defeat the petition at this stage. Allegations of fabrication, falsification, or regulatory contraventions were held to be investigatory issues outside the remit of the Section 9 summary adjudication. [Paras 9, 10, 11, 12, 13]

No bona fide pre-existing dispute exists that would preclude admission of the petition under Section 9.

Initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the petition should be admitted under Section 9 and CIRP initiated with consequential directions including appointment of IRP and moratorium. - HELD THAT: - Having concluded that there was an operational debt and default and that no substantive pre-existing dispute barred the petition, the Tribunal proceeded to exercise its statutory powers under Section 9(5)(i). The Tribunal noted the Operational Creditor had proposed a qualified Resolution Professional who had filed the requisite consent. In light of the proved debt and default and absence of a viable pre-existing dispute, the Tribunal held that it was mandatory to admit the petition, appoint the Interim Resolution Professional, and declare the statutory moratorium. The Tribunal limited its consideration to the materials on record and observed that detailed contentions as to fabrication, set-offs, limitation or regulatory contraventions could be agitated in appropriate fora or in the CIRP process. [Paras 17, 18, 19]

The petition is admitted; CIRP is initiated, Mr. Ritesh Prakash Adatiya is appointed as IRP and moratorium is declared with consequential directions.

Final Conclusion: The Tribunal admitted the Company Petition filed under Section 9, holding that the claimed sums are operational debt and that no bona fide pre-existing dispute barred summary admission; CIRP was initiated, an Interim Resolution Professional appointed and moratorium imposed, with investigatory or contested factual matters left for appropriate forums or the CIRP process.

Existence of operational debt - default and date of first default - limitation for filing petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute (existence or absence) between parties prior to demand notice - admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 and initiation of Corporate Insolvency Resolution Process - declaration of moratorium under Sections 13 and 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Existence of operational debt - default and date of first default - Existence of operational debt due to the Operational Creditor and occurrence of default on the pleaded date. - HELD THAT: - The Adjudicating Authority examined the invoices and ledger details placed on record and was satisfied that supplies of steam-coal were made and invoices were raised for amounts exceeding Rs. One Lakh. The record showed non-payment of specified invoices and that the first default occurred on 26.06.2015. On the materials before it, the Authority concluded that a debt was due and that default had occurred on the pleaded date. [Paras 27, 28]

A valid operational debt exists and default occurred on 26.06.2015.

Limitation for filing petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Timeliness of the Section 9 petition filed by the Operational Creditor. - HELD THAT: - The Authority noted the date of first default as 26.06.2015 and that the petition was filed on 26.06.2018. Having regard to the dates of default and the last payment received (28.11.2017), the Authority was satisfied that the petition was filed within the applicable limitation period and that the petition complied with the temporal requirements for admission. [Paras 27, 28]

The petition under Section 9 was filed within the limitation period.

Pre-existing dispute (existence or absence) between parties prior to demand notice - Whether there was a pre-existing dispute between the parties prior to issuance of the demand notice under Section 8. - HELD THAT: - The Respondent alleged inferior quality of goods and produced letters, laboratory reports and a debit note after service of the demand notice. The Authority considered the materials and chronology and found no evidence of a dispute existing prior to the demand notice. The Authority observed that documents produced by the Respondent were not shown to have been received by the Operational Creditor before the demand notice and treated the asserted defence as not establishing a pre-existing dispute for the purpose of rejecting admission. [Paras 11, 12, 15, 28]

No pre-existing dispute was found to exist prior to the demand notice.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 and initiation of Corporate Insolvency Resolution Process - declaration of moratorium under Sections 13 and 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Admission of the Section 9 petition, declaration of moratorium and appointment of an Interim Resolution Professional. - HELD THAT: - Having recorded satisfaction on existence of operational debt, default, timeliness and absence of a prior dispute, the Adjudicating Authority proceeded to admit the petition under Section 9 and directed commencement of the Corporate Insolvency Resolution Process. Consequentially, the Authority declared moratorium as contemplated by the Code and appointed Mr. Kedar Laddha as Interim Resolution Professional, directing him to perform duties and make public announcements in accordance with the Code, Rules and Regulations. [Paras 28, 29, 30, 31]

The petition was admitted, moratorium declared and Mr. Kedar Laddha appointed as Interim Resolution Professional.

Final Conclusion: The Adjudicating Authority admitted the Section 9 petition filed by the Operational Creditor, having found an operational debt, default on 26.06.2015, no pre-existing dispute prior to the demand notice and that the petition was within limitation; it declared the moratorium and appointed an Interim Resolution Professional to initiate and conduct the Corporate Insolvency Resolution Process.

Operational debt - corporate insolvency resolution process - demand notice under section 8 of the IBC - MSME registration and interest under the MSME Act - requirement of clarity and quantification of claim

Requirement of clarity and quantification of claim - demand notice under section 8 of the IBC - Sufficiency and clarity of the petition and statement of claim to trigger CIRP under section 9 of the IBC - HELD THAT: - The Tribunal found material inconsistencies between the petition and the statement of claim: the petition lists ninety-two invoices but only two invoices are annexed; fifty-nine invoices were shown as paid leaving thirty-three unpaid; the date of default stated in the petition (16.04.2017) is inconsistent with invoice and purchase order dates and the claimed credit period. There is no contractual provision in the purchase order or invoices for the interest claimed. Owing to these mismatches and lack of clarity on quantification of the claim, the petition did not present a clear, unambiguous debt payable in law and fact for the purpose of initiating CIRP. The Tribunal therefore held that the petition, as framed, was defective and not a fit case for initiation of CIRP. [Paras 10, 11, 15, 20]

Petition is defective for want of clarity and quantification of the claim and does not warrant initiation of CIRP.

Operational debt - MSME registration and interest under the MSME Act - Sustainability of the interest claim and effect of non-disclosure of MSME status on the petition - HELD THAT: - The Operational Creditor initially claimed interest at 24% p.a. as "industry practice" and later asserted entitlement to interest under the MSME Act. The Tribunal observed that the Operational Creditor never communicated its MSME status to the Corporate Debtor prior to the petition and that this amounted to suppression of a material fact when issuing the demand notice. The invoices and purchase order contained no contractual rate of interest. Given that a substantial part of the petition was founded on interest which was neither contracted for nor properly disclosed, and having regard to authorities cautioning against premature or extortionate use of the Code, the Tribunal was not satisfied that the interest claim rendered the petition maintainable under section 9. The Tribunal directed that, if advised, the Operational Creditor may pursue recovery of interest before the Council under section 18(1) of the MSME Act. [Paras 13, 15, 18, 22, 24]

Interest claim is not sustainable before this Adjudicating Authority in the present petition due to non-disclosure of MSME status and absence of contractual provision; Operational Creditor may seek interest remedy before the MSME Council.

Corporate insolvency resolution process - operational debt - Appropriate relief and directions following rejection of the petition - HELD THAT: - Although the Tribunal rejected the petition for initiation of CIRP, it recorded the Corporate Debtor's willingness to pay any principal sum due and noted that the Operational Creditor declined offers to accept payment. In the interest of justice the Tribunal directed the Corporate Debtor to pay the principal sum due within fifteen days of pronouncement; acceptance of such payment was left to the Operational Creditor's discretion. The Tribunal clarified that its observations should not prejudice the petitioner's rights before other forums. [Paras 14, 21, 25, 26]

Petition rejected; Corporate Debtor directed to pay principal due within fifteen days; Operational Creditor may accept or pursue other remedies.

Final Conclusion: The Tribunal rejected the section 9 petition as defective and not a fit case for CIRP due to lack of clarity in quantification of the claim and an unsustainable interest claim compounded by non-disclosure of MSME status; the Corporate Debtor was directed to pay the principal sum due within fifteen days, and the Operational Creditor was advised to seek recovery of interest, if at all, before the MSME Council.

Existence of debt and default - application under Section 7 of the Insolvency & Bankruptcy Code - limitation and date of default under Article 137 of the Limitation Act - admission of application and initiation of Corporate Insolvency Resolution Process (CIRP) - appointment of Interim Resolution Professional and moratorium under Section 14 of the Insolvency & Bankruptcy Code

Existence of debt and default - acknowledgement of debt in balance sheet - loan sanction and repayment schedule - The Financial Creditor proved that the Corporate Debtor availed the loan, acknowledged the liability and committed default, establishing a debt due and payable. - HELD THAT: - The Tribunal found the loan sanction letter (Annexure A-6) and related loan documents sufficient to prove that the Corporate Debtor availed facilities aggregating as set out in the sanction and that repayment was to be made in specified half-yearly instalments commencing September 2014. The Corporate Debtor produced no evidence showing repayment according to the sanctioned schedule. The Corporate Debtor's balance sheet for FY 2015-16 recorded borrowings from the Financial Creditor, which the Tribunal treated as an acknowledgement of liability. The Financial Creditor's demand notice dated 12.07.2016 and the NeSL report (produced at hearing) further supported the Financial Creditor's case that the account stood NPA with effect from 30.06.2016 and that the debt remained unpaid. On these materials the Tribunal concluded that the debt is due and payable and that default has occurred. [Paras 6, 7, 8, 11, 13]

The Financial Creditor succeeded in proving the existence of the debt and default; the claim is not shown to be barred and is due and payable.

Limitation and date of default under Article 137 of the Limitation Act - effect of date of execution of last loan document on limitation - The application is not barred by limitation; the Tribunal accepted 30.06.2016 as the date of default and held filing on 25.01.2019 to be within the limitation period. - HELD THAT: - The Corporate Debtor relied on authorities holding that the right to sue accrues on the date of default and contended that, as the last loan document was dated 27.03.2015, the date of default was 27.03.2015 and the petition was time-barred. The Tribunal, however, found no evidence to fix the date of default at 27.03.2015 and noted the Financial Creditor's material showing classification of the account as NPA with effect from 30.06.2016. The NeSL report produced at hearing, though filed belatedly, corroborated the Financial Creditor's position. In view of the accepted date of default 30.06.2016, the Tribunal held the Section 7 application filed on 25.01.2019 to be within the prescribed period and not barred under Article 137. [Paras 9, 10, 11, 13]

The date of default is 30.06.2016; the application filed on 25.01.2019 is within limitation and not barred.

Appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency & Bankruptcy Code - The Tribunal appointed the proposed Insolvency Professional as Interim Resolution Professional (IRP) and declared moratorium upon admission of the Section 7 application. - HELD THAT: - The Financial Creditor proposed an Insolvency Professional and produced Form 2 and communication confirming no disciplinary proceedings were pending against him. The Tribunal found that the requirements under Section 7(3) were satisfied. Upon admission of the application, the Tribunal directed the IRP to make the public announcement, ascertain particulars of creditors, convene the meeting of the Committee of Creditors and carry out functions under the Code within the prescribed timelines. The Tribunal further declared the moratorium as required by Section 14 and recorded the consequential prohibitions and exceptions. [Paras 12]

Proposed Insolvency Professional appointed as Interim Resolution Professional; moratorium under Section 14 declared with directions to the IRP to proceed with CIRP.

Final Conclusion: The Section 7 application by the Financial Creditor is admitted; the Tribunal held that the Corporate Debtor committed default and the claim is due and payable and not barred by limitation, appointed the Interim Resolution Professional and directed initiation of the CIRP with moratorium in force.

Garnishee notice - recovery under Section 87 of the Finance Act, 1994 - ascertained liability / crystallisation of tax - admission of liability - principles of natural justice

Ascertained liability / crystallisation of tax - recovery under Section 87 of the Finance Act, 1994 - Section 87(b)(i) cannot be validly invoked to freeze bank accounts unless the amount payable has been first determined and crystallized by adjudication. - HELD THAT: - The Court analysed the language of Section 87(b)(i) and held that the expressions 'any amount payable', 'is not paid' and 'shall proceed to recover' must be read together to mean that a sum must be determined as payable to the Government before coercive recovery by way of garnishee notice can be undertaken. Reliance was placed on earlier Division Bench decisions of this Court which held that 'tax due' denotes an ascertained and quantified liability following adjudication (including reference to the need for show-cause notice and adjudication under Chapter V). The Court observed that without assessment or adjudication under the Finance Act, 1994 (for example under Sections 72/73), the invocation of Section 87 is premature and coercive measures such as freezing of bank accounts are unjustified. [Paras 21, 22, 23]

Invocation of Section 87 for recovery prior to adjudication was held premature; the restraint on the bank account could not be sustained for want of crystallised liability.

Admission of liability - garnishee notice - Admissions or statements by the assessee's representatives, without adjudication, do not constitute determination of amount payable sufficient to justify garnishee proceedings under Section 87. - HELD THAT: - The Court examined the recorded statements of the Petitioner's accountant, legal consultant and director admitting a liability and undertaking to verify books and pay. It held that such statements, including assurances to pay, cannot supplant the statutory process of assessment and adjudication required to quantify an amount 'due' for the purposes of recovery. Accordingly, mere admissions do not satisfy the requirement of an ascertained liability that would permit freezing of bank accounts by garnishee notice. [Paras 18, 23]

The recorded statements were held insufficient to constitute an adjudicated, payable amount; they did not validate the garnishee action impugned.

Final Conclusion: The writ petition was allowed: the restraint on the Petitioner's bank account was quashed and Respondents directed to withdraw the hold, the Court holding that garnishee proceedings under Section 87 cannot be resorted to in the absence of an adjudicated and crystallized liability; there was no order as to costs.

Computation of interest - Service Tax Voluntary Compliance Encouragement Scheme, 2013 - recovery notice - interest on unpaid dues - partial payments - quash and recompute - bank restraint and permitted operation

Computation of interest - Service Tax Voluntary Compliance Encouragement Scheme, 2013 - interest on unpaid dues - partial payments - recovery notice - quash and recompute - Validity of the recovery notice Annexure-M and correctness of interest computation thereunder. - HELD THAT: - The Court examined break-up of payments made by the petitioner and found that several partial payments were made on various dates from April to December 2017 towards the declared amount under the VCES. On the material placed before it, the recovery notice directing payment of the stated interest prima facie computed interest on the entire declared amount without accounting for those partial payments. That method of computation runs contrary to Section 110 of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 as interpreted by the Court, because interest ought to be computed on the unpaid dues after taking into account payments made on different dates rather than on the full declared amount. For these reasons the impugned notice is not sustainable and requires quashing with a direction for recomputation by the competent authority after factoring in the dates and amounts of payments already made. [Paras 5]

Impugned recovery notice quashed; respondent No.4 directed to re-compute interest taking note of payments made on various dates towards the declared amount.

Bank restraint and permitted operation - quash and recompute - Interim directions to the bank regarding operation of the petitioner's account pending recomputation and recovery. - HELD THAT: - As a practical consequence of directing recomputation, the Court addressed immediate financial measures. The Court accepted the parties' stance that an amount of Rs. 5 lakhs may be withheld for recovery purposes. Accordingly, the bank was directed to permit the petitioner to operate the account for sums in excess of Rs. 5 lakhs while withholding Rs. 5 lakhs until the authority completes the recomputation and takes further steps consistent with that exercise. [Paras 7]

Bank directed to permit operation of the account over and above an amount of Rs. 5 lakhs and to withhold Rs. 5 lakhs pending respondent No.4's recomputation.

Final Conclusion: Writ petition disposed by quashing the impugned recovery notice and directing respondent No.4 to recompute interest after taking into account the petitioner's dated partial payments under the VCES; bank permitted to allow operations above Rs. 5 lakhs while withholding Rs. 5 lakhs pending recomputation.

Definition of under Rule 2(l) of the Cenvat Credit Rules, 2004 - inclusive part 'activities relating to business' - amendment of Rule 2(l) w.e.f. 01.04.2011 excluding services used primarily for personal use - refund under Rule 5 of the Cenvat Credit Rules, 2004 - 'in or in relation to' test for input services used for export - no requirement of direct one to one nexus between input services and exported output service - application of the prescribed formula under Notification No. 5/2006 C.E. (N.T.) dated 14.03.2006 - recovery of irregularly availed Cenvat credit under Rule 14 read with Section 73 - remand for quantification and fresh fact finding

Definition of under Rule 2(l) of the Cenvat Credit Rules, 2004 - inclusive part 'activities relating to business' - amendment of Rule 2(l) w.e.f. 01.04.2011 excluding services used primarily for personal use - recovery of irregularly availed Cenvat credit under Rule 14 read with Section 73 - remand for quantification and fresh fact finding - Entitlement to Cenvat credit of service tax on Health Insurance, Cargo Handling and Photography Services and treatment of availment before and after amendment of Rule 2(l). - HELD THAT: - Under the unamended Rule 2(l) (effective up to 31.03.2011) the inclusive limb containing the phrase 'activities relating to business' brings within 'input service' services which pertain to or form part of the cost of the output service; therefore the disputed services fall within the definition of 'input service' for the period up to 31.03.2011 and Cenvat credit is allowable for that period. The amendment to Rule 2(l) effective from 01.04.2011 excludes certain services (e.g., health insurance) to the extent they are used primarily for personal use or consumption of employees; accordingly Cenvat credit taken after 01.04.2011 must be examined to ascertain the quantum attributable to personal use and, if so, disallowed. The Tribunal noted that the adjudicating authority did not quantify credits taken before and after the amendment and that the department had not proceeded under Rule 14 read with Section 73 for recovery; therefore a remand to the original authority is necessary for determination of the amount of credit availed after 01.04.2011 and whether such credit relates to personal consumption of employees (in which case it must be denied) or otherwise (in which case credit should be allowed). [Paras 7, 10]

Cenvat credit on the disputed services is allowable up to 31.03.2011; the matter is remanded for quantification and determination of entitlement for the period after 01.04.2011.

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - 'in or in relation to' test for input services used for export - no requirement of direct one to one nexus between input services and exported output service - application of the prescribed formula under Notification No. 5/2006 C.E. (N.T.) dated 14.03.2006 - Tax Research Unit letter dated 16.03.2012 - remand for fresh finding on correct application of formula - Sustainability of rejection of refund claims on the ground of non establishment of nexus between input services and exported output service and requirement to apply the prescribed formula. - HELD THAT: - Rule 5 and the notifications thereunder (as amended to read 'in or in relation to') permit refund of unutilised input service credit in the ratio of export turnover to total turnover; the phrase 'in or in relation to' is broad and does not require a one to one direct correlation between particular input services and exported output services. The Tribunal relied on the statutory amendments and the administrative clarification (Tax Research Unit letter dated 16.03.2012) to hold that refund claims should ordinarily be decided by applying the prescribed formula without insisting on direct nexus. Consequently, denial of refund solely for failure to demonstrate direct nexus was held unsustainable. Separately, where the lower authorities did not address whether the appellant had correctly applied the formula under Rule 5 and the notification, the Tribunal remanded that issue to the original authority for fresh fact finding on compliance with the prescribed formula. [Paras 8, 9, 10]

Rejection of refund claims for want of direct nexus is set aside; refunds are to be considered by applying the prescribed formula under Rule 5, and where formula application was not adjudicated, the matter is remanded for fresh determination.

Final Conclusion: Appeals partly allowed: Cenvat credit on Health Insurance, Cargo Handling and Photography Services is permitted up to 31.03.2011 and the quantification/entitlement for the post amendment period is remanded; denial of refund for lack of direct nexus is set aside and refunds are to be determined by applying the statutory formula, with one matter remanded for fresh fact finding on correct application of that formula.

Interest on delayed refund - refund under Rule 5 of Cenvat Credit Rules, 2004 treated as refund under Section 11B - applicability of Section 11BB - finality of adjudicating authority's order - entitlement to interest from three months after filing

Refund under Rule 5 of Cenvat Credit Rules, 2004 treated as refund under Section 11B - applicability of Section 11BB - finality of adjudicating authority's order - interest on delayed refund - Whether the appellant is entitled to interest on the delayed refund where the adjudicating authority had sanctioned the refund under Section 11B and that part of the order has attained finality. - HELD THAT: - The Tribunal found on record that the adjudicating authority had sanctioned the refund claim under Section 11B of the Central Excise Act, 1944 and that aspect of the order was not challenged by the Revenue, thus attaining finality. The mere observation in the Commissioner (Appeal)'s order that the adjudicating authority had erroneously applied Section 11B could not improve the Commissioner (Appeal)'s conclusion when the adjudicating authority's order granting refund under Section 11B stands unassailed. Given the sanction under Section 11B and its finality, the provisions of Section 11BB, which govern payment of interest on delayed refunds sanctioned under Section 11B, are attracted. On that basis the Tribunal held that the appellant is entitled to interest on the delayed refund. [Paras 7, 8]

Appellant entitled to interest on the delayed refund as the refund was sanctioned under Section 11B and that part of the order is final, bringing Section 11BB into play.

Entitlement to interest from three months after filing - interest on delayed refund - Ranbaxy principle - From which date the appellant is entitled to claim interest on the delayed refund. - HELD THAT: - Relying on the settled principle laid down by the Hon'ble Supreme Court in Ranbaxy Laboratories Ltd., the Tribunal applied the rule that interest on delayed refunds accrues after three months from the date of filing the refund claim and continues till realization. The appellant filed the refund claim on 19.09.2016; accordingly, interest is payable from three months after that date until the refund is realised. [Paras 9, 10]

Interest is payable from three months after the date of filing the refund claim (filed on 19.09.2016) up to its realisation.

Final Conclusion: Appeal allowed to the extent of directing payment of interest on the delayed refund; interest to run from three months after 19.09.2016 until realisation.

Limitation - extended period of limitation - invocation of extended period where adjudicating authorities have divergent views - availability of cenvat credit under exemption notification - no statutory obligation to produce supplier invoices before the department

Limitation - extended period of limitation - invocation of extended period where adjudicating authorities have divergent views - no statutory obligation to produce supplier invoices before the department - Whether the demand by denial of cenvat credit is barred by limitation where the show cause notice invokes the extended period - HELD THAT: - The appellant confined its challenge to limitation. The Tribunal observed there is no provision in law obliging the assessee to file supplier invoices with the department within the limitation period. Noting that the assessee had earlier been allowed credit by an adjudicating authority while the Revenue had preferred appeals, and that divergent views existed between adjudicating authorities, the Tribunal held that invocation of the extended period of limitation was not permissible in the facts of the case. Reliance was placed on this Tribunal's earlier decisions where similar conclusions were reached; the Tribunal did not go into merits of entitlement to credit but confined its decision to the question of limitation. Consequently, the show cause notice issued by invoking the extended period was held to be time-barred and the demand founded thereon could not be sustained. [Paras 6, 7]

The show cause notice invoking the extended period is barred by limitation; the demand for denial of credit is time barred and the impugned order is set aside, appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal on limitation grounds, holding the notice invoking the extended period time barred and setting aside the impugned order; the Tribunal did not adjudicate the merits of entitlement to cenvat credit.

Input Tax Credit - admissibility of additional evidence at appellate stage under the Uttarakhand VAT law - admissibility of additional evidence under Section 67 of the Uttarakhand Value Added Tax Act - judicial restraint in exercise of discretionary jurisdiction on account of de minimis quantum

Admissibility of additional evidence at appellate stage under the Uttarakhand VAT law - admissibility of additional evidence under Section 67 of the Uttarakhand Value Added Tax Act - Question of law regarding whether additional evidence could be adduced by the assessee at the appellate stage under Section 67 of the Uttarakhand Value Added Tax Act was left open for consideration in an appropriate petition. - HELD THAT: - The Court observed that an important question of law arises on whether evidence not produced before the assessing authority can be admitted at the appellate stage under the statutory scheme identified by the revenue. However, the Court declined to decide that legal issue in the present petition. Having noted the significance of the point, the Court expressly left the question of law open to be considered in an appropriate petition, thereby neither admitting nor rejecting the contention on merits. [Paras 3, 4]

The question of law on admissibility of additional evidence at the appellate stage was not decided and is left open for determination in an appropriate petition.

Input Tax Credit - judicial restraint in exercise of discretionary jurisdiction on account of de minimis quantum - Whether the petition should be entertained in view of the small monetary value involved and prevailing circumstances. - HELD THAT: - The Court considered the quantum involved in the dispute and the prevailing pandemic situation and concluded that, despite the legal importance of the question raised, it would not be appropriate to entertain the petition for a paltry sum. Emphasising judicial restraint and proportionality, the Court declined to answer the substantive legal question in the present proceedings on account of the limited monetary interest and public-health considerations, and disposed of the petition accordingly. [Paras 3, 5]

The petition was not entertained and disposed of on the ground that the sum involved was paltry and in view of the prevailing pandemic; the substantive legal question was left open.

Final Conclusion: Revision petition disposed of without adjudication on the substantive legal issue; the question of admissibility of additional evidence at the appellate stage under Section 67 of the Uttarakhand VAT Act is left open for consideration in an appropriate petition, and the petition is dismissed on grounds of de minimis value and judicial restraint.

Penalty for belated tax payment under VAT regime - imposition of penalty where interest on delayed payment has been deposited - revenue loss as determinative factor for imposing penalty - judicial leniency in view of financial hardship and pandemic - appellate and tribunal review of penalty orders

Penalty for belated tax payment under VAT regime - imposition of penalty where interest on delayed payment has been deposited - revenue loss as determinative factor for imposing penalty - appellate and tribunal review of penalty orders - Validity of penalty imposed on the assessee for delayed deposit of admitted tax where interest for the delayed period was paid and no financial loss accrued to the revenue. - HELD THAT: - The Tribunal correctly concluded that both the assessing officer and the first appellate authority erred in imposing (and in part upholding) the penalty for belated payment. The Court accepted the Tribunal's reasoning that the delayed payment by the assessee included payment of interest for the period of delay, producing no financial loss to the revenue; consequently, imposing a penalty under the VAT regime in the facts of the case was unjustified. The Court also took judicial notice of the prevailing pandemic and the consequent financial burden on the assessee and similarly situated persons, treating this factor as relevant in exercising appellate restraint. The Court noted that a prior, closely connected revision was dismissed by a common judgment and applied those reasons to the present matters. The Court emphasised that its conclusion was confined to the facts of these cases and was not intended to serve as precedent.

Revisions dismissed; substantial questions of law answered against the revenue and in favour of the assessee.

Final Conclusion: The High Court dismissed the departmental revisions and upheld the Tribunal's setting aside of the penalty, observing that interest on delayed payment had been paid, no revenue loss had occurred, and that leniency was appropriate in the factual matrix (including pandemic-related hardship); the decision is confined to the facts of these cases.

Licence versus tenancy - damages for use and occupation - continuing liability of a tenant for rent despite non-use - arbitral award made rule of the court - reliance on party's statement of accounts and estoppel from withdrawing it - post-award interest - reduction subject to conditional payment

Licence versus tenancy - damages for use and occupation - continuing liability of a tenant for rent despite non-use - Appellants held liable to pay damages for use and occupation of the premises for periods during which business was not running and possession was not handed over. - HELD THAT: - The Arbitrator, after framing Issue No.15A, found that possession was not handed over by the appellants and rejected the plea that closure was due to respondents' obstruction; he awarded damages. The Single Judge upheld that finding, reasoning that if the relationship is treated as tenancy the respondents would remain liable for rent under the principle that a tenant continues to be liable for rent even if not carrying on business unless the premises are surrendered; that conclusion supported the award of damages. The Division Bench affirmed these conclusions and this Court finds no error in the concurrent findings of fact recorded by the Arbitrator and the High Court. [Paras 12, 13]

Liability to pay damages for use and occupation established and award upheld.

Reliance on party's statement of accounts and estoppel from withdrawing it - arbitral award made rule of the court - Arbitrator's adoption of the appellants' own statement of accounts for quantification of damages was upheld and appellants not permitted to repudiate that statement. - HELD THAT: - The Learned Arbitrator calculated the quantum of damages by adopting the statement of accounts filed by the appellants (based on audited accounts and after TDS deductions) for pre-closure and post-closure periods and applied an averaging formula for the closed period. The appellants' plea that certain deductions were wrongly made (sales-tax not deducted, generator expenses allocated improperly) was rejected because the appellants had themselves furnished and acted upon the statement in arbitration, respondents had relied on it and deducted/paid taxes accordingly, and the appellants could not be permitted to withdraw or contradict their own prior statement at this stage. The High Court concurred and this Court finds no merit in the challenge to the adopted calculations. [Paras 15, 16, 17]

Quantum as determined from the appellants' statement of accounts upheld; appellants estopped from revising that statement.

Post-award interest - reduction subject to conditional payment - Rate of post-award interest reduced from 16% per annum to 9% per annum from the date of the award until date of judgment, subject to conditional payment of decretal amount by a specified date. - HELD THAT: - The Division Bench of the High Court had reduced the rate of interest on the decretal amount for the post-award period; this Court, while dismissing the appeal, granted a similar discretionary benefit by reducing the rate of interest from 16% to 9% per annum from the date of the Award until the date of this judgment, conditioned upon payment of the complete decretal amount by the appellants on or before the date stipulated by this Court. Failure to make the payment within the stipulated time would result in the award and original interest standing as earlier determined. [Paras 1, 19]

Interest reduced to 9% p.a. from date of Award until date of judgment, subject to payment by stipulated date; otherwise original interest remains.

Final Conclusion: The appeal is dismissed; the arbitral award quantified on the basis of the appellants' statement of accounts is upheld and made rule of the court; appellants held liable to pay damages for use and occupation; post-award interest reduced from 16% to 9% per annum from the date of the Award until the date of this judgment provided the appellants pay the complete decretal amount by the date directed by this Court, failing which the award along with the original interest will remain enforceable.

Leave to appeal - criminal leave petitions - part-heard matters - prima facie case for grant of leave - leave to appeal under Section 378 of the Code - presumption of innocence on acquittal - video conferencing hearings - interest of administration of justice

Leave to appeal - part-heard matters - interest of administration of justice - Whether the applications for early hearing of the criminal leave petitions should be allowed and the part-heard petition proceeded with expeditiously by the Bench. - HELD THAT: - The Court considered rival submissions on urgency, prejudice from video-conferencing, volume of records and competing claims for priority (including matters where accused are in custody). It observed that detailed part-arguments had already been heard in one petition (Crl.L.P.185/2018) and that, where possible, part-heard matters should not be left inconclusive for a new Bench in order to avoid wastage of judicial time and burden on the public exchequer. The Court rejected the contention that voluminous records or pandemic-era constraints necessarily preclude effective hearing by video conferencing, noting that the Court has been conducting hearings through video conferencing and has decided voluminous matters by that mode. The Court acknowledged the principle that an acquittal fortifies the presumption of innocence but held that this principle will be applied at the appropriate stage and does not preclude completing part-heard proceedings. Applying the guiding principle from the cited Apex Court authority that the High Court must consider whether a prima facie case or arguable points exist when deciding leave to appeal, the Court concluded that procedural and administrative considerations favoured allowing early hearing so as to conclude part-heard proceedings rather than leave them for rehearing afresh. [Paras 36, 39, 42, 46, 47]

Applications for early hearing are allowed; the petitions shall be listed on 5th October, 2020 at 02:30 P.M. for hearing on day-to-day basis, with Crl.L.P.185/2018 (the part-heard petition) to be heard first and the other petitions thereafter; applications disposed of.

Video conferencing hearings - presumption of innocence on acquittal - Whether hearings of these criminal leave petitions can appropriately proceed through video conferencing despite voluminous records and pandemic constraints. - HELD THAT: - Respondents argued that voluminous records and inability to consult clients or instructing teams materially prejudice their ability to argue via video conferencing and that only urgent matters should be heard remotely. The Court noted that hearings by video conferencing have been conducted since April 24, 2020 and that even voluminous matters have been decided by that mode. The Court held that technological means make remote participation feasible, that the asserted difficulties do not automatically excuse failure to proceed, and that concerns about adequate opportunity to be heard will be addressed by ensuring effective hearings and avoiding irrelevant or repetitive submissions. [Paras 42, 45, 46]

Hearing through video conferencing is acceptable; parties shall be given effective opportunity to be heard and must cooperate to enable expeditious disposal.

Final Conclusion: The applications for early hearing of the criminal leave petitions are allowed to enable conclusion of part-heard proceedings; the Bench directed day-to-day hearing beginning 5th October, 2020 (with the part-heard petition to be taken up first), observing that part-heard matters ought not be left inconclusive and that hearings by video conferencing are a permissible means to achieve expeditious disposal while ensuring parties an effective opportunity to be heard.