TaxTMI Updates e-Newsletter
Oct 12,2021

Refund of integrated tax - withholding refund pending investigation - power to withhold refund for default in furnishing return or payment - reasoned order after hearing

Refund of integrated tax - withholding refund pending investigation - power to withhold refund for default in furnishing return or payment - reasoned order after hearing - Respondents directed to process the petitioner's IGST refund claim and to pass a reasoned order after hearing; refusal to process solely on ground of pending investigation is not sustainable in the absence of statutory justification. - HELD THAT: - The petitioner's claim for refund under the IGST Act was not being processed on the basis that an investigation was pending. The Court noted the statutory scheme under section 54(10) of the CGST Act which permits withholding of a refund where a registered person has defaulted in furnishing a return or is required to pay tax, interest or penalty which has not been stayed. In the absence of any order or decision on the petitioner's refund application, and having regard to the statutory grounds for withholding set out in section 54(10), the respondents could not decline to process the claim merely because an investigation was pending. The matter was not decided on merits; instead the Court directed respondent No.4 to process the application in accordance with law, hear the petitioner, and pass a reasoned order. The Court specified an expeditious timeframe for disposal and fixed a date for the petitioner to appear before the Competent Authority. [Paras 5]

Respondent No.4 to process the refund application in accordance with law, hear the petitioner and pass a reasoned order preferably within eight weeks; petitioner to appear before the Competent Authority on October 21, 2021; all contentions kept open.

Final Conclusion: Writ petition disposed by directing the competent authority to process and decide the IGST refund claim by a reasoned order after hearing the petitioner within the stipulated time; no decision on merits and all contentions reserved.

Provisional attachment - power to attach provisionally under section 83(1) of the CGST Act - cessation of provisional attachment after one year - operation of law - restoration of bank account operations

Provisional attachment - cessation of provisional attachment after one year - operation of law - restoration of bank account operations - Provisional attachment of the petitioner's bank account made on May 8, 2019 has ceased to have effect by operation of law after the expiry of one year. - HELD THAT: - The Court examined the scheme of provisional attachment under the CGST Act and noted the statutory provision that every provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under the provision empowering provisional attachment. The factual position that one year from May 8, 2019 had expired was not controverted by the respondents. In consequence, the Court held that the provisional attachment order has, by operation of law, ceased to be operative. The Court directed the Joint Commissioner to communicate immediately to the petitioner's banker that the attachment order ceases to be operative and that the petitioner may be permitted to operate the relevant bank account, completing that exercise within seven days. The Court also observed that the pending appeal shall be decided by the authority on merits and requested that it be disposed of expeditiously. [Paras 4, 5, 6, 7]

The provisional attachment ceased by operation of law; the Joint Commissioner is directed to inform the banker and restore operation of the bank account within seven days, and the pending appeal is to be decided on merits expeditiously.

Final Conclusion: Writ petition allowed: the provisional attachment order dated May 8, 2019 has ceased to be operative by operation of law; the Joint Commissioner shall notify the banker to restore operation of the account within seven days and the pending appeal shall be decided by the authority on merits expeditiously; no order as to costs.

Ex parte order - consideration of claim of bona-fide owner - show-cause proceedings under Section 129(3) of the UP GST Act, 2017 - deposit equivalent to tax and penalty for detained goods - remand for fresh adjudication

Ex parte order - consideration of claim of bona-fide owner - show-cause proceedings under Section 129(3) of the UP GST Act, 2017 - Validity of the order dated 24.08.2021 passed under Section 129(3) of the UP GST Act, 2017 which held the detained goods not traceable to any bona-fide owner. - HELD THAT: - The Court found that the impugned order was passed without considering the petitioner's claim of ownership and was therefore ex parte. The petitioner had placed on record a written reply dated 23.08.2021 to the show-cause notice dated 17.08.2021 and produced proof of an on-line deposit made on 23.08.2021 stated to be the amount equivalent to tax payable on the detained goods together with penalty calculated at the rate equal to tax. Having regard to these facts, the Court concluded that the authority reached a conclusion without taking cognisance of the claim and the material on record. The order could not be allowed to stand and required fresh consideration.

The order dated 24.08.2021 is set aside as having been passed ex parte without consideration of the petitioner's claim; the matter is remitted for fresh adjudication.

Remand for fresh adjudication - deposit equivalent to tax and penalty for detained goods - Directions for further proceedings following setting aside of the impugned order. - HELD THAT: - The Court directed that the authority shall consider the petitioner's claim afresh after personal appearance. The petitioner was directed to appear before the authority on the specified date and the authority was ordered to pass an appropriate order within one week of that appearance. All consequential proceedings were directed to abide by the authority's fresh order passed in compliance with this judgment.

Matter remitted to the respondent no. 2 for fresh decision after personal hearing; authority to pass order within one week of the petitioner's appearance and consequential proceedings to follow that order.

Final Conclusion: The writ petition is allowed; the impugned order dated 24.08.2021 is quashed for being ex parte without consideration of the petitioner's claim, and the matter is remitted to the authority for fresh adjudication after the petitioner's appearance, with the authority to decide within one week.

Violation of principles of natural justice - ex parte order - non-speaking order - quashing and remand for fresh adjudication - deposit as condition for hearing of appeal - stay of coercive action during pendency - right to refund of excess deposit

Violation of principles of natural justice - ex parte order - non-speaking order - quashing and remand for fresh adjudication - Impugned appellate order in Form GST APL-04 dated 09.04.2021 and the assessment order dated 09.02.2021 are liable to be quashed for being ex parte, cryptic and in breach of principles of natural justice. - HELD THAT: - The Court held that the appellate order and the underlying assessment order were passed ex parte and did not afford the petitioner sufficient time or opportunity to be heard. The appellate order does not assign sufficient reasons, nor does the assessment order record a decipherable basis for determining the amount due. Such failure to afford a fair hearing and absence of speaking reasons render the orders bad in law. On this short ground of violation of natural justice and non-speaking ex parte disposition, the Court quashed both the appellate and the assessing authority's orders and disposed of the writ petition accordingly. The Court expressly refrained from expressing any opinion on the merits of the tax liability.

Impugned orders dated 09.04.2021 and 09.02.2021 quashed for breach of natural justice and being non-speaking ex parte orders; merits left open.

Quashing and remand for fresh adjudication - deposit as condition for hearing of appeal - right to refund of excess deposit - stay of coercive action during pendency - Matter remanded to the Assessing Authority for fresh decision on merits after compliance with principles of natural justice, subject to specified interim conditions including deposits, de-freezing of accounts and prohibition of coercive steps. - HELD THAT: - Although the orders were quashed, the Court directed that the case be decided afresh by the Assessing Authority. The petitioner represented that ten per cent of the total amount (prerequisite for hearing the appeal) has already been deposited; if not, it must be deposited before the next date. The petitioner further undertook to deposit an additional ten per cent of the demand before the Assessing Officer within four weeks. The Court directed immediate de-freezing/de-attachment of the petitioner's bank account(s), if attached in relation to these proceedings. The Assessing Authority was directed to afford adequate opportunity of hearing, permit filing of essential documents, pass a speaking order assigning reasons, and decide the matter expeditiously (preferably within two months of the petitioner's appearance). During pendency no coercive steps shall be taken; if any deposit ultimately proves to be in excess, it shall be refunded within two months of passing the fresh order. The remand is for fresh consideration; the Court has not adjudicated the merits of the demands.

Proceedings remanded to Assessing Authority for fresh adjudication after affording hearing and recording reasons; interim deposits and de-freezing directed; no coercive steps during pendency; liberty to challenge fresh order reserved.

Final Conclusion: The High Court quashed the ex parte, non-speaking assessment and appellate orders for breach of natural justice, remanded the matter to the Assessing Authority for fresh adjudication on merits after affording an opportunity of hearing and recording reasons, imposed interim deposit conditions and directed de-freezing of accounts and a prohibition on coercive action during the pendency; merits remain open and parties have liberty to pursue available remedies.

IGST refund on export from Non-EDI sites - procedure for processing refund claims - processing of export data using offline utilities - administrative instruction No. 20/2018-Customs

IGST refund on export from Non-EDI sites - procedure for processing refund claims - processing of export data using offline utilities - Petition seeking refund was not finally adjudicated; court recorded the departmental statement that export data had been captured using offline utilities and directed completion of processing within four weeks, with the matter listed thereafter. - HELD THAT: - The petitioner sought refund of IGST paid on exports made from Non-EDI sites. The respondents relied on administrative instruction No. 20/2018-Customs and stated that, as required by the prescribed procedure, the petitioner's export data had been captured through offline utilities and the refund claim was under process. The respondents attributed delay to technical glitches in the system and undertook that the processing would be completed within approximately four weeks. The Court recorded the departmental statement and did not decide the substantive entitlement to refund on merits; instead it directed respondents to complete the process within the stated period and listed the matter after four weeks for further hearing or disposal.

Respondents to complete processing of the petitioner's IGST refund claim (data captured via offline utilities) within four weeks; matter to be listed after four weeks.

Final Conclusion: The Court recorded the respondents' statement that export data had been captured using offline utilities and that processing of the IGST refund claim (as per instruction No. 20/2018-Customs) would be completed within four weeks; the matter was directed to be listed after four weeks for further consideration.

Jurisdiction of High Courts to decide petitions after transfer dismissal - refusal of interim stay - permissibility of executive action subject to judicial outcome - notice accepted on behalf of respondents - mandate for filing of counter-affidavit and rejoinder within fixed time

Jurisdiction of High Courts to decide petitions after transfer dismissal - Petitions transferred to the Apex Court were dismissed and the respective High Courts are left to decide the petitions in accordance with law. - HELD THAT: - The Court records that the petition filed by the Union of India for transfer of similar petitions before the Apex Court has been dismissed, and consequently the matter of adjudication is entrusted to the respective High Courts. The statement of counsel regarding that dismissal is taken on record and the High Court proceeded to list and issue further directions accordingly.

The High Court will decide the petition in accordance with law following the dismissal of the transfer application.

Notice accepted on behalf of respondents - Notice is taken on behalf of the Union of India and the State of Bihar through their respective counsels. - HELD THAT: - The Court records appearance and acceptance of notice by the learned Additional Solicitor General for the Union of India and by the Standing Counsel for the State of Bihar. This formal acceptance enables the respondents to file their affidavits and participate in adjudication before the High Court.

Notice is taken on behalf of the respondents.

Mandate for filing of counter-affidavit and rejoinder within fixed time - Respondents are directed to file a counter-affidavit within four weeks and the petitioners may file a rejoinder within a further four weeks. - HELD THAT: - As prayed for by the parties, the Court directs that the respondents shall file their counter-affidavit within four weeks from the date of the order, and the petitioners may file any rejoinder within four weeks thereafter. These time-bound filings structure the further adjudicatory process before the High Court.

Counter-affidavit to be filed by respondents in four weeks; rejoinder, if any, in four weeks thereafter.

Refusal of interim stay - permissibility of executive action subject to judicial outcome - No interim stay is granted; authorities are permitted to take appropriate action in accordance with law subject to the outcome of the petition. - HELD THAT: - The Court declines to grant any interim relief. It explicitly leaves open the right of the relevant authorities to take appropriate action under law notwithstanding the pendency of the petition, while clarifying that such actions will remain subject to the final judicial determination of the petition.

Interim stay refused; authorities may proceed with lawful action subject to the petition's outcome.

Final Conclusion: The transfer application to the Apex Court has been dismissed and the High Court will decide the petition in due course; notice has been accepted, respondents are directed to file counter-affidavit within four weeks with a further four weeks for rejoinder, no interim stay is granted, and authorities may take action in accordance with law subject to the Court's final decision.

Quashing of ex parte appellate order - remand to Appellate Authority for fresh hearing on merits - condonation of delay in filing appeal - interim protection from coercive action pending appeal - deposit as pre-condition for hearing of appeal - de-freezing / de-attachment of bank accounts - requirement of speaking order and compliance with principles of natural justice

Quashing of ex parte appellate order - principles of natural justice - The ex parte appellate order dated 05.07.2021 passed by the Additional Commissioner of State Tax (Appeal) is quashed for failure to follow principles of natural justice. - HELD THAT: - The Court found that the appeal filed by the petitioner was rejected without affording appropriate opportunity and without following the principles of natural justice. Having heard the parties and on the Revenue's concurrence, the Court set aside the impugned appellate order and restored the appeal to its original file and number for fresh consideration.

Impugned appellate order dated 05.07.2021 quashed and appeal restored for fresh adjudication.

Remand to Appellate Authority for fresh hearing on merits - condonation of delay in filing appeal - requirement of speaking order and compliance with principles of natural justice - The Appellate Authority is directed to decide the restored appeal afresh on merits after condoning any delay and after complying with principles of natural justice, by passing a speaking order. - HELD THAT: - The Court directed that the Appellate Authority shall condone delay, if any, and decide the appeal on merits. The Authority must afford opportunity to the parties to place on record essential documents and materials, hear the petitioner (including digitally), and pass a reasoned speaking order. The Authority was further directed to decide the appeal expeditiously, preferably within two months from the petitioner's appearance.

Appeal remitted to Appellate Authority to be heard on merits with condonation of delay, opportunity to produce evidence, and a speaking order to be passed expeditiously.

Deposit as pre-condition for hearing of appeal - interim protection from coercive action pending appeal - de-freezing / de-attachment of bank accounts - Interim protections and conditions concerning deposit and coercive measures were settled: the Court accepted that ten per cent deposit stands made (if so), directed no coercive steps during pendency, ordered de-freezing of bank accounts if attached, and provided for refund if deposit is found excessive. - HELD THAT: - The petitioner stated that the ten per cent deposit (condition precedent for hearing) had already been made; the Court accepted this statement subject to verification and ordered that if the deposit stands made the appeal shall be heard on merits, otherwise the deposit must be made before the next date. The Court directed immediate de-freezing/de-attachment of the petitioner's bank accounts, restrained the respondents from initiating coercive action during pendency of the appeal, and directed refund of any excess deposit within two months from the date of the Appellate Authority's order if excess is found. These protections were ordered without prejudice to the parties' substantive rights.

Ten per cent deposit accepted conditionally; no coercive steps pending; bank accounts to be de-frozen if attached; refund of excess deposit directed if applicable.

Liberty to challenge final order - The Court left all questions of substantive merits open and expressly reserved liberty to the petitioner to challenge the Appellate Authority's fresh order. - HELD THAT: - While remitting the matter, the Court clarified that it has not expressed any opinion on merits and that the parties retain the right to pursue other remedies as available in law. The Court recorded mutual undertakings regarding cooperation and reasonable expedition in subsequent proceedings.

No expression of opinion on merits; liberty preserved to challenge ensuing orders and to pursue other legal remedies.

Final Conclusion: The High Court quashed the ex parte appellate order, restored the appeal relating to the demand notice for October 2019 to March 2020, and remitted it to the Appellate Authority to be heard afresh on merits after condoning delay, with interim protection from coercive action, conditional acceptance of the ten per cent deposit, immediate de-freezing of bank accounts if attached, and a direction to pass a speaking order expeditiously; all substantive issues left open and liberty reserved.

Summary order. The Court ignored the defect relating to filing of the original communicated copy of the impugned order, permitted the State respondents time to seek instructions on the issue, and listed the matter on 21.10.2021 with direction for affidavits, if any, to be filed by 18.10.2021.

Violation of principles of natural justice - non-speaking / cryptic order - cancellation of registration under the Bihar Goods and Services Tax Act, 2017 - quashing of administrative order - restoration of registration with retrospective effect - condonation of delay in filing returns - direction to finalize assessment / pass orders in accordance with law

Violation of principles of natural justice - non-speaking / cryptic order - quashing of administrative order - Validity of the cancellation order dated 30.07.2019 passed by the Joint Commissioner cancelling the petitioner's GST registration. - HELD THAT: - The court found that the cancellation order was cryptic and non speaking, failing to record reasons or to refer to the contents of the show cause notice and the petitioner's response, notwithstanding that the response had been filed. Because the order produces penal and pecuniary consequences, the omission to give reasons and to apply the principles of natural justice rendered the order unsustainable. The court therefore quashed the cancellation order.

The cancellation order dated 30.07.2019 is quashed.

Restoration of registration with retrospective effect - direction to finalize assessment / pass orders in accordance with law - Relief of restoration of the petitioner's GST registration and further administrative directions consequent upon quashing of the cancellation order. - HELD THAT: - In view of the quashing of the impugned order, the court restored the petitioner's registration with effect from the month of July 2019. The Principal Secretary cum Commissioner was directed to finalize the petitioner's assessment and/or pass appropriate orders in accordance with law in light of the restoration. The court exercised remedial discretion to reinstate the registrational status so that statutory proceedings may be concluded on merits.

Petitioner's registration restored effective July 2019 and respondent Commissioner directed to finalize assessment/pass orders in accordance with law.

Condonation of delay in filing returns - Treatment of delay in filing returns and related acceptance of returns filed after July 2019. - HELD THAT: - The record showed that the petitioner filed past returns and discharged tax liabilities for periods up to July 2019 between December 2020 and July 2021 and requested condonation of delay. Having regard to the factual matrix, including the circumstances narrated by the petitioner and the pandemic, the court observed that the authority ought to have condoned the delay. The court closed the issue of delay by directing that it shall remain closed and shall not be raised again by the respondents as undertaken by their counsel.

Delay in filing returns is treated as condoned for the purposes of these proceedings and shall not be raised again.

Final Conclusion: Writ petition allowed: the cancellation order dated 30.07.2019 is quashed; the petitioner's registration is restored effective July 2019; the Commissioner is directed to finalize assessment/pass appropriate orders in accordance with law; the issue of delay in filing returns is treated as closed and shall not be reopened.

Benefit under Section 10(23C)(iiiad) limited to receipts of the educational institution - aggregate annual receipts of each educational institution to be considered separately - activity centric test for exemption under Section 10(23C)(iiiad) - non clubbing of institutional receipts with other receipts of the society - prescribed ceiling under Rule 2(BC) to be applied to individual institution's receipts - irrelevance of Section 12AA registration and corpus direction for entitlement under Section 10(23C)(iiiad) - distinguishability from provision relating to institutions substantially financed by the Government

Benefit under Section 10(23C)(iiiad) limited to receipts of the educational institution - aggregate annual receipts of each educational institution to be considered separately - activity centric test for exemption under Section 10(23C)(iiiad) - prescribed ceiling under Rule 2(BC) to be applied to individual institution's receipts - non clubbing of institutional receipts with other receipts of the society - Denial of exemption under Section 10(23C)(iiiad) by clubbing the Institution's receipts with the Society's other receipts was justified in law. - HELD THAT: - The Court held that exemption under Section 10(23C)(iiiad) is activity centric and applies to receipts of a specified university or educational institution existing solely for educational purposes; the statutory ceiling under Rule 2(BC) must therefore be applied with reference to the aggregate annual receipts of the individual educational institution and not to the total receipts of the person running it (paras 11-15, 21). Reliance on the Karnataka and Jammu & Kashmir High Courts' decisions established that where a society runs one or more educational institutions each institution's receipts are to be examined separately for the prescribed limit and the word 'aggregate' in the provision must be read in that context (paras 14-16). The assessing authority's reasoning that surplus of the institution carried to the society, or that donations received by the society without corpus directions, justified clubbing was held extraneous and unsupported by material; maintaining separate accounts for the institution and the society precluded treating society receipts as institutional receipts (paras 22-25, 27). The Supreme Court decision on a different sub clause concerning institutions substantially financed by government was distinguishable and inapplicable (para 19). [Paras 23, 24, 25, 27, 28]

The Tribunal's order denying exemption and clubbing the Institution's receipts with the Society's other receipts is erroneous; the Institution's receipts alone fall below the prescribed limit and qualify for exemption under Section 10(23C)(iiiad).

Final Conclusion: Appeal allowed: the exemption under Section 10(23C)(iiiad) applies to the receipts of the Institute of Information Management and Technology for A.Y. 2007 08 and those receipts are not to be clubbed with the Society's other receipts for determining eligibility; no order as to costs.

Deduction under Section 80IB(10) - date of completion / completion certificate - housing project as a whole versus separate project - transfer of development rights (TDR) - part-completion certificate - completion within the stipulated period - question of fact versus substantial question of law

Deduction under Section 80IB(10) - date of completion / completion certificate - part-completion certificate - completion within the stipulated period - Whether the respondent was entitled to claim deduction under Section 80IB(10) for the housing project for Assessment Year 2008-2009 despite building 'G' being completed after the stipulated date - HELD THAT: - The Court treated the question of whether the entire project was completed by the stipulated date as one of fact. The original sanctioned plan (2001) and the revised plan dated 20.03.2008 both showed building 'G' only as a parking slab, and up to 31.03.2008 no residential units were contemplated for building 'G'. The respondent produced a completion/occupancy certificate within the time limit in respect of the rest of the project (buildings A, B, C, D, E, H and I). The plans for building 'G' were revised only after purchase of TDR on 19.04.2011, when a fresh plan providing residential units for 'G' was sanctioned; the respondent did not claim deduction in respect of building 'G'. Given that TDR for building 'G' was not available before 2011 and that the completed portion (excluding 'G') obtained the requisite completion/occupancy certificate within the prescribed period, building 'G' could not be treated as part of the housing project for the purpose of Section 80IB(10). Reliance on the Vandana Properties decision supports treating a housing project in common parlance as a building or group of buildings consisting of residential units, and a later-conceived separate building (post-TDR) need not invalidate entitlement in respect of the portion completed within time. Applying these facts, the Court agreed with CIT(A) and ITAT that the respondent was entitled to the deduction under Section 80IB(10). [Paras 5, 6, 7, 8]

Entitlement to deduction under Section 80IB(10) was upheld in respect of the completed portion of the project (excluding building 'G'), and the respondent was held to be eligible for the claimed deduction.

Housing project as a whole versus separate project - transfer of development rights (TDR) - question of fact versus substantial question of law - Whether the questions raised by the Revenue amounted to substantial questions of law warranting interference with the concurrent factual findings - HELD THAT: - The Court held that the critical disputes-whether the assessee had completed the entire project by the stipulated date and whether the completion certificate was in respect of the whole project-were questions of fact. Having found no perversity or misapplication of law by the Tribunal or CIT(A) in analysing the facts (including that building 'G' was conceived as residential only after TDR purchase in 2011), the Court concluded that no substantial question of law arose for its interference. The proper test, applied by the lower authorities and accepted by this Court, turned on factual appraisal of plans, timing of TDR purchase and issuance of completion certificates rather than on a pure point of law. [Paras 5, 8]

No substantial question of law arose; the appellate fora correctly decided the matter on facts and the High Court would not interfere with those concurrent findings.

Final Conclusion: The appeal is dismissed; the respondent's entitlement to deduction under Section 80IB(10) in respect of the completed portion of the housing project (excluding building 'G' conceived later after purchase of TDR) is upheld, and no substantial question of law is made out.

Reopening of assessment under Section 148 read with Section 147 (proviso requiring failure to disclose fully and truly all material facts) - change of opinion as impermissible basis for reassessment - disclosure of primary facts by production of books and documents - inadmissibility of improving or supplementing reasons for reopening by affidavit or later material - extinguishment of rights on capital reduction treated as transfer for capital gains purposes

Reopening of assessment under Section 148 read with Section 147 (proviso requiring failure to disclose fully and truly all material facts) - change of opinion as impermissible basis for reassessment - Validity of the notice under Section 148/147 issued after four years where reassessment is premised on alleged failure to disclose fully and truly all material facts. - HELD THAT: - The Court held that when reassessment is initiated beyond four years, the proviso to Section 147 demands that the Assessing Officer identify the material fact which was not fully and truly disclosed. The reasons recorded in the notice merely asserted failure to disclose and relied on the same account books and balance-sheet material which had been placed before the Assessing Officer during the original assessment. That amounted to a change of opinion rather than discovery of a previously undisclosed primary fact. Reopening on the basis of a mere change of opinion, when the primary facts had been disclosed and the Assessing Officer had earlier taken a view in the original assessment, is impermissible. The reassessment notice and the order rejecting objections were therefore without jurisdiction and liable to be quashed. [Paras 31, 32, 33, 34, 35]

Notice under Section 148/147 issued after four years was invalid; reopening amounted to change of opinion and was quashed.

Disclosure of primary facts by production of books and documents - Calcutta Discount Co. principle on duty to disclose primary facts - Whether the petitioner had disclosed fully and truly all material facts necessary for assessment so as to bar reassessment under the proviso to Section 147. - HELD THAT: - Applying the principle that the assessee's duty extends to disclosure of all primary facts (and not to telling the Assessing Officer what inferences to draw), the Court concluded that the petitioner had placed the relevant account books, profit & loss and balance-sheet schedules, and related party disclosures before the Assessing Officer and had furnished detailed working and submissions during assessment. Production of those materials amounted to disclosure of primary facts within the meaning of the proviso. The Assessing Officer's change of view based on the same material did not demonstrate non-disclosure of a material fact. [Paras 24, 26, 29, 30, 33]

Petitioner had truly and fully disclosed primary material facts; proviso to Section 147 not attracted; reassessment barred.

Inadmissibility of improving or supplementing reasons for reopening by affidavit or later material - Whether the Assessing Officer may rely on factual contentions not stated in the reasons recorded at the time of issuing notice under Section 148 and thereafter supplement reasons by affidavit. - HELD THAT: - The Court reaffirmed that the sufficiency of recorded reasons for reopening must be tested on the basis of the reasons as recorded when the notice under Section 148 is issued. Subsequent attempts to supplement or improve those reasons by affidavit or reliance on later assertions (for example, that the petitioner was a 100% subsidiary) are impermissible. The Respondent's reliance in affidavit on the subsidiary being 100% owned, which was not mentioned in the recorded reasons, could not cure the defect in the notice. [Paras 27, 28, 29, 30, 31]

Reasons for reopening cannot be supplemented or improved by affidavit or later material; such supplementation is impermissible and cannot sustain the reassessment.

Final Conclusion: The writ petition is allowed: the notice dated 31st March 2019 under Section 148 and the order dated 10th September 2019 rejecting objections are quashed and set aside because reassessment after four years was prompted by a change of opinion despite full disclosure of primary facts; the petition is disposed of with no order as to costs.

Reopening of assessment - reason to believe - scope of proviso to Section 147 regarding failure to disclose fully and truly all material facts - duty to disclose primary facts - change of opinion - constructive disclosure under Explanation 1 to Section 147 - jurisdictional facts for issuance of notice under Section 148

Reopening of assessment - reason to believe - scope of proviso to Section 147 regarding failure to disclose fully and truly all material facts - duty to disclose primary facts - change of opinion - constructive disclosure under Explanation 1 to Section 147 - jurisdictional facts for issuance of notice under Section 148 - Validity of the notice dated 27/03/2019 under Section 148 read with Section 147 for reopening assessment for AY 2012-2013 and whether the assessee failed to disclose fully and truly all material facts permitting reassessment after four years - HELD THAT: - The court held that where reassessment is sought after the four year period, the proviso to Section 147 requires that the Assessing Officer must have tangible material demonstrating failure by the assessee to disclose fully and truly all primary facts necessary for assessment; these jurisdictional facts must exist before issuing a notice under Section 148. Explanation 1 to Section 147 deals only with whether undisclosed primary material facts could be deemed constructively disclosed by production of documents and does not impose a duty on the assessee to disclose legal inferences. The assessee had filed returns, audited financials, computation, MAT workings, auditor's report, Form 26AS and responded to notices under Sections 142(1) and 143(2), explaining computation of construction-period interest and eligibility under the deduction provision relied upon. The Assessing Officer's recorded reasons merely restated that the assessee had claimed construction-period interest and deductions under the relevant exemption and made a general assertion of failure to disclose, without identifying any specific primary fact that was not truly and fully disclosed. The reasons relied entirely on material already on record and amounted to a change of opinion as to legal inferences drawnable from the disclosed primary facts. Where all primary facts necessary for assessment were before the Assessing Officer and were considered in the original assessment, reopening on the basis of the same material to take a different view is impermissible. Consequently the notice and consequential order were invalid for want of the requisite jurisdictional satisfaction that there was a failure to disclose fully and truly all material facts. [Paras 17, 18, 19, 20, 21]

Notice dated 27/03/2019 under Section 148 and the order dated 30/09/2019 are quashed as the Assessing Officer did not identify any specific primary fact not fully and truly disclosed and the reopening amounted to impermissible change of opinion.

Final Conclusion: The petition is allowed; the notice dated 27/03/2019 under Section 148 for AY 2012-2013 and the order dated 30/09/2019 are quashed and set aside; no order as to costs.

Principles of natural justice - show cause notice and opportunity to be heard - validity of assessment passed without adequate notice - effect of administrative extension of time on assessment proceedings - setting aside assessment and consequential notices - remand for fresh consideration and directions for personal hearing

Principles of natural justice - show cause notice and opportunity to be heard - effect of administrative extension of time on assessment proceedings - remand for fresh consideration and directions for personal hearing - Assessment order set aside for violation of principles of natural justice and for being passed despite a contemporaneous administrative extension of time. - HELD THAT: - The assessing officer issued a digitally signed show cause notice on 23.4.2021 calling for a reply by 23.59 hours of 24.4.2021, thereby allowing slightly over 24 hours to respond. The officer did not record any reasons for giving only one day's time or explain the urgency for passing the order on 25.4.2021. The order was also passed notwithstanding a press release dated 24.4.2021 by CBDT extending the time for passing assessment or reassessment to 30.6.2021. Given the inadequacy of opportunity afforded and the absence of explanation for the compressed timeline and for proceeding despite the administrative extension, the principles of natural justice were not satisfied. For these reasons the assessment, and consequential demand and penalty notices, cannot stand and require fresh consideration.

The assessment order dated 25.4.2021 and consequential demand and penalty notices are set aside; the matter is remanded for fresh consideration. The petitioner shall file a reply within two weeks after communication from the assessing officer; the matter shall not be assigned to the same officer who passed the impugned order. The assessing officer shall, within four weeks of receiving the reply, give a personal hearing and pass a fresh assessment order. No observations are made on the merits.

Final Conclusion: Assessment for AY 2018-19, and consequential demand and penalty notices, set aside for failure to afford adequate opportunity to be heard and for proceeding despite an extant administrative extension; matter remanded with directions for fresh consideration, personal hearing and reassignment away from the original officer.

Deduction under Section 37(1) of the Income tax Act - contractual liability of employer to bear employee's income tax - re examination by Assessing Officer on evidentiary proof of contractual obligation - application of judicial precedent in tax deductibility (Rambus India)

Deduction under Section 37(1) of the Income tax Act - contractual liability of employer to bear employee's income tax - application of judicial precedent in tax deductibility (Rambus India) - Whether the disallowance of expatriate costs of Rs. 1,35,12,070/-, by reason of absence of adjudication on any contractual liability to bear employees' tax, should be finally sustained or remitted for fresh consideration. - HELD THAT: - The Court did not decide the substantive question of deductibility on merits. It observed that the impugned orders contain no adjudication on whether the assessee had a contractual obligation to bear the income tax liability of expatriate employees, a factual and legal point central to entitlement to deduction under Section 37(1). The Court referred to its earlier decision in M/s Rambus Chip Technologies (India) Pvt. Ltd., where deductibility was allowed where a contractual obligation to bear the employee's tax was established. Given the absence of any finding on the existence of such a contractual liability in the present orders, the Court held that the matter must be reconsidered by the Assessing Officer in the light of the Rambus ruling. All contentions and rights of the parties are left open for the Assessing Officer to examine the evidence and decide whether the claimed expenditure qualifies for deduction and whether it ought to be included in operating costs, applying the legal principle that a contractual obligation to pay an employee's tax may render the payment deductible under Section 37(1). [Paras 10, 11]

Impugned Tribunal order set aside; matter restored to the Assessing Officer for fresh adjudication on whether the assessee has established a contractual liability to bear the employees' income tax and, if not established, for appropriate determination on the allowed deduction; all rights and contentions left open.

Final Conclusion: Appeal allowed; the Tribunal's order dated 29.04.2016 is set aside and the matter is remitted to the Assessing Officer for reconsideration limited to whether the assessee has established a contractual liability to pay the expatriate employees' income tax and consequent entitlement to deduction under Section 37(1), in the light of the Court's ruling in the Rambus India matter; parties' rights preserved.

Recall of court order and revival of tax appeal - exceptional clause of CBDT Circular No.17 of 2019 (audit objections) - placement of material to invoke departmental circular - reopening of assessment under Section 148/147 of the Income Tax Act - exercise of power under Section 263 of the Income Tax Act - distinguishing precedent on reliance upon circular without material

Recall of court order and revival of tax appeal - exceptional clause of CBDT Circular No.17 of 2019 (audit objections) - placement of material to invoke departmental circular - Application to recall the order dated 01.10.2019 and revive Tax Appeal No.465 of 2019 on the ground that the dispute falls within the exceptional clause of the CBDT Circular due to audit objections. - HELD THAT: - The Court examined whether the department's plea to recall the earlier order and revive the tax appeal could be entertained on the basis that the matter arose from audit objections and therefore fell within the exceptional clause of the amended CBDT Circular. The Court recorded that where a party invokes the circular as an exception, supporting material showing the connection to audit objections must be placed on record; mere reliance on the circular without adequate material is insufficient, as held by the Bombay High Court in the cited decision. On the material before it in the present application, the Court was satisfied that the department had placed adequate material to justify treating the matter as covered by the exceptional clause and that the present case could be distinguished from instances where no material was produced to support reliance on the circular. In view of these considerations, and without curtailing the parties' rights to raise all contentions on merits, the Court found it appropriate to allow recall and revive the appeal so that it may be placed before the appropriate bench for adjudication. [Paras 5, 6, 7]

Application allowed; the order dated 01.10.2019 is recalled and Tax Appeal No.465 of 2019 is revived to be placed before the Bench as per roster.

Final Conclusion: The application to recall the earlier order and revive Tax Appeal No.465 of 2019 was allowed on the basis that the department produced material to show the matter arose from audit objections and falls within the exceptional clause of the CBDT circular; the appeal is revived and to be listed before the Bench.

Admission of fresh claims before appellate authorities / tribunal despite absence of revised return - allowability of provision for commission - accrual v. due under mercantile system; revenue matching and prudence principles - remand for examination by assessing officer - weighted deduction for scientific research under DSIR certification - conclusiveness of Form 3CL - disallowance under section 14A read with Rule 8D - interest disallowance test where own funds exceed investments

Admission of fresh claims before appellate authorities / tribunal despite absence of revised return - remand for examination by assessing officer - Claims for deduction under section 35(1)(i) and 35(1)(iv) admitted and restored to the file of the Assessing Officer for examination - HELD THAT: - The assessee did not claim the deductions in the original return but filed a revised computation during assessment and raised specific grounds before the Commissioner (Appeals). The Tribunal noted that the Supreme Court in Goetz India Ltd. did not curtail the Tribunal's power to admit additional claims and that the Karnataka High Court has held that fresh claims can be raised before appellate authorities. Both the Assessing Officer and the Commissioner (Appeals) had not adjudicated the claims. In these circumstances the Tribunal exercised its power to admit the claims and remitted them to the Assessing Officer for consideration in accordance with law. [Paras 5, 7, 8]

Admitted the section 35(1)(i) and 35(1)(iv) claims and restored the matter to the Assessing Officer for examination.

Allowability of provision for commission - accrual v. due under mercantile system; revenue matching and prudence principles - Provision for commission to agent held to be allowable in the year when sales were finalised (accrual), not deferred until receipt of customer payment; disallowance set aside - HELD THAT: - The agreement showed that the service fee (commission) accrues when sales pursuant to the agreement are closed, while payment becomes due only after receipts from customers. The Tribunal read clause 3.3 as creating an accrued liability on finalisation of the sale, with only the timing of payment postponed. Applying mercantile accounting and the principles of revenue-cost matching and prudence (known liabilities should be provided for when the related sales are accounted), and following the reasoning in KCP Ltd., the Tribunal concluded that the commission expense accrued in the year under consideration and is allowable. Consequently the Commissioner (Appeals)'s confirmation of disallowance was set aside and the Assessing Officer directed to allow the commission. [Paras 10, 11, 13, 14]

Commission provision allowed in the year in which sales were finalised; disallowance by tax authorities set aside.

Remand for examination by assessing officer - Claims for setting off brought forward losses and unabsorbed depreciation and claim for refund remitted to the Assessing Officer for verification - HELD THAT: - The Tribunal observed that these claims required factual and documentary verification by the Assessing Officer. No final adjudication was recorded by the authorities below. Accordingly the Tribunal restored these matters to the file of the Assessing Officer for examination. [Paras 16]

Restored to the Assessing Officer for examination of brought forward losses, unabsorbed depreciation and refund claims.

Weighted deduction for scientific research under DSIR certification - conclusiveness of Form 3CL - admissibility of product development expenditure as R&D expenditure certified by DSIR - Disallowance of weighted deduction under section 35(2AB) deleted; assessment confirmed in favour of assessee following jurisdictional High Court ruling recognising DSIR certification - HELD THAT: - The Assessing Officer had disallowed the weighted deduction partly on a numeric mismatch with Form 3CL and also on the ground that product development expenditure did not qualify as eligible R&D. The Commissioner (Appeals) deleted the disallowance by following the Karnataka High Court decision in the assessee's own case, which held that the Assessing Officer cannot sit in judgment over DSIR's certification in Form 3CL. The Tribunal observed that the jurisdictional High Court's decision is binding on subordinate authorities and, having followed that decision, found no reason to interfere with the Commissioner (Appeals)'s order. [Paras 18, 19, 20, 21]

Deletion of disallowance under section 35(2AB) confirmed; weighted deduction allowed in accordance with DSIR certification and binding judicial precedent.

Disallowance under section 14A read with Rule 8D - interest disallowance test where own funds exceed investments - Addition under section 14A/Rule 8D deleted; no disallowance of interest required as assessee's own funds substantially exceeded investments - HELD THAT: - The Assessing Officer sought to disallow part of interest expense under Rule 8D(2)(ii) despite the assessee having already made an adjustment under Rule 8D(2)(iii). On review of the balance sheet, the Tribunal noted that the assessee's own funds were far in excess of its investments. Applying the Karnataka High Court decision in Micro Labs Ltd. (which requires no disallowance where own funds exceed investments), the Tribunal held that no further disallowance out of interest expenditure was called for and confirmed the Commissioner (Appeals)'s deletion of the addition. [Paras 22, 23]

Deletion of disallowance under section 14A/Rule 8D confirmed; no interest disallowance required given own funds exceed investments.

Final Conclusion: The assessee's appeal allowed overall and the revenue's appeal dismissed: the Tribunal admitted and remitted the section 35(1)(i) and 35(1)(iv) claims and remanded the claims on brought forward losses, unabsorbed depreciation and refund to the Assessing Officer; allowed the commission provision in the year of accrual; confirmed deletion of disallowance under section 35(2AB) following DSIR certification and binding High Court precedent; and confirmed deletion of the section 14A/Rule 8D disallowance as own funds exceeded investments.

Mistake apparent from record - Rectification under section 154 - Taxability of income of a non-resident under section 5(2) - No estoppel against law - Condonation of delay - adjudication on merits treated as condonation

Mistake apparent from record - Rectification under section 154 - Taxability of income of a non-resident under section 5(2) - No estoppel against law - Whether salary income earned abroad and erroneously offered in the return by a non-resident constitutes a mistake apparent from record permitting rectification under section 154 - HELD THAT: - The Tribunal found that the assessee was a non-resident and that salary earned abroad is not taxable in India under the provisions applicable to non-residents. Although the assessee had declared the foreign salary in the return (and claimed a corresponding deduction) that declaration did not create a legal estoppel to tax income which is not taxable under law. The Tribunal accepted the submission that an income erroneously offered in the return, when it is not liable to tax under the statute, constitutes a mistake apparent from the record and thus falls within the scope of rectification. In consequence, the AO was directed to examine the rectification petitions filed under section 154 in accordance with law; if the revised return for AY 2010-11 is processed, that may resolve the issue for that year. [Paras 8, 10]

The matter is remitted to the AO to examine and dispose of the section 154 rectification petitions in accordance with law; the Tribunal accepted that the erroneously offered foreign salary is a mistake apparent from record.

Condonation of delay - adjudication on merits treated as condonation - Whether the CIT(A)'s refusal to condone a 74-day delay and subsequent disposal of the appeal on merits amounted to an error requiring interference - HELD THAT: - The Tribunal relied on the principle that when an appellate authority declines to condone delay but nonetheless proceeds to decide the appeal on merits, that course is erroneous because adjudication on merits effectively treats the appeal as if it were properly before the authority. Citing the ratio that such adjudication equates to condonation, the Tribunal held that the CIT(A)'s approach was in error and set aside the CIT(A) orders for both years on that ground as well as for the substantive defect addressed in the rectification petitions. The Tribunal therefore restored the matters to the file of the AO for reconsideration. [Paras 9, 10]

The CIT(A)'s refusal to condone delay and simultaneous decision on merits was held to be erroneous; the CIT(A) orders are set aside and the matters are restored to the AO.

Final Conclusion: The Tribunal set aside the CIT(A) orders for AY 2009-10 and 2010-11, held that the foreign salary erroneously offered by a non-resident is a mistake apparent from record permitting rectification under section 154, and restored the matters to the Assessing Officer to examine and dispose of the rectification petitions; both appeals are treated as allowed for statistical purposes.

Unexplained cash credits - Burden of proof on assessee to explain source of cash deposits - Estimation of income from unaccounted business receipts - Application of section 68 of the Income-tax Act, 1961

Unexplained cash credits - Burden of proof on assessee to explain source of cash deposits - Estimation of income from unaccounted business receipts - Addition of Rs. 40,41,371 treated as unexplained cash credit was not sustainable in full and required estimation of taxable profit - HELD THAT: - The Assessing Officer made an addition by treating the excess of bank deposits over declared business receipts as unexplained cash credit. The Tribunal found that the assessee was engaged in taxi operation (as recorded in the remand report and in preceding and succeeding assessment years) and did not maintain books of account. The assessee failed to discharge the onus to fully explain the cash credits, but having regard to consistent acceptance by the Revenue in other years that the assessee's source was taxi business and in the absence of books, the entire bank deposits could not be treated as personal unexplained income. Applying an estimative approach (guided by coordinate decisions and subsequent acceptance in another year of the business character of receipts), the Tribunal held that a proportionate estimate of profit should be adopted instead of adding the whole amount as unexplained income, and fixed estimation of taxable income at 25% of the difference between total deposits and declared receipts.

Addition confirmed only to the extent of estimated profit calculated at 25% of the unexplained difference; the remainder disallowed as addition.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 40,41,371 as unexplained cash credit is not sustained in full; taxable income is determined by estimating profit at 25% of the unexplained difference for A.Y. 2009-2010.

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interests of the revenue - Explanation 2(a) to Section 263 - Scope of inquiries and verifications by the Assessing Officer - Two views doctrine - Prospective operation of statutory amendment - Attraction of Section 269T to advances

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interests of the revenue - Prospective operation of statutory amendment - Whether the Commissioner was justified in invoking Section 263 to direct re-examination of set off of business loss against surrendered income. - HELD THAT: - The Tribunal found on the materials and assessment record that the Assessing Officer had specifically examined the surrender of income, the claim of set off of preceding year business loss and recorded satisfaction in the assessment order and office note. The amendment to Section 115BBE introduced by Finance Act, 2016 was held prima facie prospective; therefore the amended provision did not apply to the facts before the AO. Documentary queries, valuation reports and statement recorded under section 131 were on record and the AO had considered them. In these circumstances the AO had carried out the enquiries and verifications a prudent AO would undertake and formed a possible view; the Commissioner did not point to any specific omission by the AO that rendered the order erroneous and prejudicial. Consequently the Tribunal held that invoking Section 263 on this ground was not justified. [Paras 7, 8, 9, 10]

The invocation of Section 263 in respect of set off of loss was unjustified and is quashed.

Revisional jurisdiction under Section 263 - Scope of inquiries and verifications by the Assessing Officer - Two views doctrine - Whether the Commissioner was justified in invoking Section 263 in respect of alleged discrepancy between closing stock figures in audit report column and balance sheet. - HELD THAT: - The Tribunal examined the audit report and balance sheet extracts and found that the figures were of different nature (stock-turnover computation using average of opening and closing stock) and thus not comparable. The AO had the relevant documents (PN.83, PN.84) and explanation was available in the record. Applying the principle that where two views are possible and the AO has taken one bona fide view, Section 263 cannot be used to supplant that view, the Tribunal concluded that the PCIT was not justified in treating the assessment order as erroneous and prejudicial on this point. [Paras 11, 12]

The Section 263 action in relation to closing stock discrepancy was unwarranted and is quashed.

Revisional jurisdiction under Section 263 - Attraction of Section 269T to advances - Scope of inquiries and verifications by the Assessing Officer - Whether the Commissioner was justified in invoking Section 263 to direct verification of source of a cash advance of Rs. 25 lakh and in referring to Section 269T. - HELD THAT: - The assessment order and record show that the AO called for and examined the cash book and recorded specific findings regarding the advance; the advance was reflected in the balance sheet and the AO disallowed interest claim on identified basis. Section 269T restricts repayment of certain loans/deposits but does not apply to advancement by the assessee; there was no repayment as envisaged by the provision. Given the AO's enquiries and findings, the Tribunal held that the AO had carried out adequate verification and that PCIT's invocation of Section 263 and reference to Section 269T were misplaced. [Paras 13, 14]

The Section 263 direction on the advance and the application of Section 269T were unjustified and are quashed.

Revisional jurisdiction under Section 263 - Scope of inquiries and verifications by the Assessing Officer - Two views doctrine - Whether the Commissioner was justified in invoking Section 263 for alleged non-examination of unsecured loan from Shri Virendra Agarwal. - HELD THAT: - Record shows that no fresh unsecured loan was received in the year under review; the amount in dispute related to earlier years and appeared in the consolidated balance sheet by virtue of merging individual and proprietorship accounts. The AO had issued detailed queries, called for statements and financials of prior year and examined them; bank statements were on record and would have shown any fresh receipt. On these facts the Tribunal concluded the AO had conducted the necessary verifications and that PCIT's contention was factually incorrect. Applying the principle that differing but permissible views of the AO cannot be treated as erroneous, the Section 263 action was held improper. [Paras 15, 16]

The Section 263 direction regarding unsecured loan from Virendra Agarwal was not sustainable and is quashed.

Revisional jurisdiction under Section 263 - Scope of inquiries and verifications by the Assessing Officer - Whether the Commissioner was justified in invoking Section 263 regarding loans from Smt. Rekha Verma, deduction of TDS on interest and related source issues. - HELD THAT: - The AO had obtained and examined ITRs, computations, bank statements and confirmations signed by both parties for the cash creditors; the bank statement of the creditor corroborated payments. The PCIT had misattributed a transaction to the assessee which, on records, related to the assessee's husband and proprietorship concerns with similar narration. The Tribunal noted settled law that the assessee is not to be compelled to prove that cash credit has suffered tax and that in absence of audit obligation there was no firm basis to fasten TDS liabilities. On the material, the AO's enquiries were adequate and PCIT's exercise under Section 263 was not warranted. [Paras 17, 18]

The Section 263 action on the loans from Rekha Verma and TDS issue was unwarranted and is quashed.

Revisional jurisdiction under Section 263 - Scope of inquiries and verifications by the Assessing Officer - Whether the Commissioner was justified in invoking Section 263 for alleged non-examination of impounded documents found during survey. - HELD THAT: - The Tribunal examined the survey record and statements under section 131 which identified the impounded file as invoices for construction for a specified period and an enumerated total of expenditure. The AO had examined and verified those documents during assessment and note-sheet entries corroborate this. As the AO had carried out the requisite verifications, the PCIT's finding that no inquiry was made was factually incorrect. Consequently, Section 263 could not be invoked on this ground. [Paras 19, 20]

The Section 263 direction regarding impounded survey documents was unjustified and is quashed.

Explanation 2(a) to Section 263 - Two views doctrine - Scope of inquiries and verifications by the Assessing Officer - Whether, on the totality of facts, the AO's assessment was erroneous and prejudicial so as to warrant exercise of jurisdiction under Section 263. - HELD THAT: - After evaluating all points, the Tribunal held that the AO had made the enquiries and verifications expected of a prudent, judicious and responsible AO; documentary evidence, enquiries, statements and balance-sheet examinations were on record. The Tribunal applied the test in Explanation 2(a) and allied precedents that Commissioner's view is subject to judicial scrutiny and that mere disagreement with AO's view or the possibility of another view does not render an order erroneous. As multiple plausible views existed and the AO adopted one bona fide view, the assessment could not be treated as erroneous and prejudicial. The Tribunal therefore set aside and quashed the PCIT's order passed under Section 263. [Paras 21]

On the whole, the AO's order was not erroneous or prejudicial and the Section 263 order is quashed.

Final Conclusion: The appeal is allowed; the order passed by the Principal CIT under Section 263 for A.Y. 2016-17 is set aside and quashed as the Assessing Officer had carried out the necessary enquiries and verifications and his assessment represented a permissible view.

Unexplained cash credit - onus of proof on assessee to prove identity, genuineness and creditworthiness - banking channel as evidence of genuineness - adverse material/information required to treat investment as accommodation entry - addition under section 68

Unexplained cash credit - onus of proof on assessee to prove identity, genuineness and creditworthiness - banking channel as evidence of genuineness - adverse material/information required to treat investment as accommodation entry - addition under section 68 - Deletion of addition of Rs. 2,00,00,000 treated as unexplained share application money/share premium made by the Assessing Officer under section 68. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had discharged the initial onus by producing statutory and corroborative documents - PAN, bank statements showing two transfers of Rs.1 crore each from the subscriber's account to the assessee, income tax returns, audited accounts and share certificates - and by filing correspondence in response to notices u/s 133(6). The AO conducted inquiries but did not bring any adverse material on record to show that the investment actually emanated from the assessee or that it was part of accommodation entries. The Tribunal accepted the CIT(A)'s view that creditworthiness cannot be assessed solely on the basis of one year's income/loss where balance sheet showed adequate share capital and reserves, and that absence of personal appearance of the subscriber's director did not nullify the documentary evidence. In the absence of any adverse information from investigation wings or other material rebutting the documents, the presumption of genuineness stood unrebutted. The later initiation of reassessment proceedings making the same addition did not undermine the appellate conclusion in these proceedings.

Addition of Rs. 2,00,00,000 under section 68 deleted and Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition of Rs. 2,00,00,000 under section 68 for AY 2012-13, holding that the assessee had discharged the initial onus by documentary evidence and that the AO failed to produce adverse material to impugn the genuineness or source of funds.

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interests of the Revenue - Explanation 2(a) to Section 263 - inquiries or verifications which should have been made - Change of opinion doctrine - Reasonable and prudent enquiries/verification by the Assessing Officer - Where two views are possible assessment order not erroneous

Short term capital gain versus business income - Change of opinion doctrine - Where two views are possible assessment order not erroneous - Whether the Commissioner was justified in exercising revisionary jurisdiction under section 263 by directing that sale of land be treated as business income instead of short term capital gain. - HELD THAT: - The Tribunal examined the assessment record and found that the Assessing Officer had carried out detailed enquiries into the sale transaction, including verification of purchase deed, sale deed, cost of improvement ledgers, bifurcation of expenses and documentary replies furnished by the assessee. The PCIT substituted his view by directing recasting the income as business income which the Tribunal treated as a change in opinion. Applying the settled principle that where two views are possible and the AO has taken one permissible view the order cannot be branded erroneous, the Tribunal held that the PCIT could not invoke section 263 merely because he preferred a different view. [Paras 6, 12]

PCIT's direction to treat the sale as business income is a change of opinion and section 263 could not be invoked on that basis; the AO's view was a possible and permissible view.

Apportionment of cost on conversion - Erroneous and prejudicial to the interests of the Revenue - Reasonable and prudent enquiries/verification by the Assessing Officer - Whether the PCIT was justified in holding that the AO failed to verify and examine alleged non-disclosure of sale consideration and apportionment of cost on conversion of agricultural land. - HELD THAT: - The Tribunal found that the assessment proceedings contained detailed scrutiny of the conversion and subsequent apportionment entries, land charts and accounting treatment. The assessee's explanation that conversion and apportionment did not constitute a sale was supported by material on record and had been considered by the AO. Since the PCIT's conclusion was not based on correct appreciation of the factual position and the AO had made the necessary verifications, the order under section 263 could not be sustained. [Paras 7, 12]

PCIT's finding on non-disclosure/apportionment is not sustained; AO had examined the matter and the revision under section 263 is unjustified.

Source of acquisition of immovable assets - Reasonable and prudent enquiries/verification by the Assessing Officer - Erroneous and prejudicial to the interests of the Revenue - Whether the PCIT correctly held that the AO failed to examine the source of acquisition of listed immovable properties and thus exercise jurisdiction under section 263 was warranted. - HELD THAT: - The Tribunal noted that the AO had before him fixed asset charts, interest accounts, financial statements and other documents showing capitalization of interest and earlier year payments. The AO verified the accounts and made enquiries sufficient for a prudent officer. The PCIT did not indicate what further enquiry was necessary. On the facts, the AO's enquiries were reasonable and the PCIT could not interfere under section 263. [Paras 8, 12]

PCIT's direction is misplaced; AO had carried out requisite verifications and revision under section 263 is not warranted.

Verification of unsecured loans and creditors' creditworthiness - Explanation 2(a) to Section 263 - inquiries or verifications which should have been made - Where two views are possible assessment order not erroneous - Whether the AO failed to verify identity and creditworthiness of unsecured loan creditors thereby making the assessment order erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal found that the AO obtained and examined signed account statements, bank records, ITRs and confirmations from creditors and there was no cash deposit immediately prior to credit. The material showed the monies came through banking channels and the AO recorded satisfaction. Relying on precedent and the standard of what a reasonable prudent AO must do, the Tribunal concluded that the AO's inquiries were adequate and the PCIT's invocation of section 263 was not justified. [Paras 9, 12]

PCIT's action in setting aside the assessment on this ground is without jurisdiction; the AO's enquiries were adequate.

Verification of interest payments on loans - Capitalisation of interest - Reasonable and prudent enquiries/verification by the Assessing Officer - Whether the PCIT rightly held that the AO failed to examine the source of interest payments claimed by the assessee. - HELD THAT: - The record showed that the AO examined detailed interest accounts, bank statements and fixed assets chart; a substantial portion of interest was capitalized and therefore not impacting taxable income. The AO's cohesive examination satisfied the requirements of a prudent officer. As no specific deficiency in AO's enquiries was shown by the PCIT, the revisionary jurisdiction could not be exercised. [Paras 10, 12]

PCIT's direction to re-examine interest payments is unsustainable; AO had made adequate verifications.

Form 26AS entries and misclassification of payments - No escapement where TDS misclassification explained - Reasonable and prudent enquiries/verification by the Assessing Officer - Whether the PCIT was justified in treating entries in Form 26AS (alleged dividend receipt and other payments) as indicative of undeclared income requiring revision under section 263. - HELD THAT: - The Tribunal observed that the alleged dividend entry of Rs. 2 crore represented sale consideration for land (TDS in Form 26AS was in fact under the provision relating to immovable property), and the other TDS entry related to a proprietorship where TDS was deducted in proprietor's name and possibly under an incorrect section but at the same rate. The factual explanations were on record and available to the AO; there was no escapement of income shown. Thus, PCIT's interference was unwarranted. [Paras 11, 12]

PCIT's reliance on Form 26AS entries does not justify revision; AO had material and explanations and no escapement of income is established.

Final Conclusion: Having considered the record and authorities, the Tribunal held that the Assessing Officer had carried out reasonable and prudent enquiries and formed a permissible view on the several contested aspects; the PCIT's order under section 263 amounted to a change of opinion and was not supported by a finding of error rendering the assessment prejudicial to revenue. The order under section 263 is quashed and the appeal is allowed.

Revisionary jurisdiction under Section 263 - Explanation 2(a) to Section 263 - absence of inquiries or verifications - Erroneous and prejudicial to the interests of the Revenue - Two views possible doctrine - Standard of a prudent, judicious and responsible Assessing Officer

Revisionary jurisdiction under Section 263 - Explanation 2(a) to Section 263 - absence of inquiries or verifications - Erroneous and prejudicial to the interests of the Revenue - Two views possible doctrine - Standard of a prudent, judicious and responsible Assessing Officer - Whether the Pr. CIT was justified in invoking jurisdiction under Section 263 to set aside the assessment order on the grounds that the Assessing Officer had accepted the assessee's claims without proper verification in respect of surrendered income and unsecured loans. - HELD THAT: - The Tribunal examined the five specific contentions on which the Pr. CIT invoked Section 263 and found on the materials on record that the Assessing Officer had made the requisite enquiries and verifications expected of a prudent, judicious and responsible AO. With respect to the surrendered income, the AO had examined accounts and subjected the surrendered amount to tax under the provision applied in the assessment, and there was no failure of verification warranting revision. Regarding unsecured loans from multiple parties, the AO had obtained and examined account confirmations, bank statements and IT returns of the creditors and had not drawn adverse inferences; thus the record showed inquiries and verifications consistent with a reasonable scrutiny. The Tribunal applied the principle that Section 263 can be invoked only if the AO's order is shown to be erroneous and prejudicial to the revenue, and that mere existence of an alternative view does not render the AO's order erroneous where the AO has taken a plausible view after enquiry. Relying on the test in Sir Dorabji Tata Trust and other authorities, the Tribunal held that Explanation 2(a) does not permit the Commissioner to substitute his view unless there is an objective failure in the inquiries or verifications that a prudent officer would have carried out; no such objective failure was demonstrated here. Specific allegations about creditworthiness of individual creditors, non-deduction of TDS (rebutted by Forms 15G/15H on record), and the source of particular receipts were addressed on facts by the AO and supported by documents. Since the AO had formed a possible view after verification and the Pr. CIT did not point to any enquiry which, if made, would have necessarily led to an adverse finding, the exercise of revisionary jurisdiction was held to be unjustified and unsustainable. [Paras 8, 10, 12, 13, 15]

The order passed by the Pr. CIT under Section 263 is quashed; the assessment order is not shown to be erroneous or prejudicial to the interests of the revenue and the appeal is allowed.

Final Conclusion: The Tribunal set aside the revision order framed by the Pr. CIT under Section 263 for A.Y. 2016-17, holding that the Assessing Officer had carried out requisite enquiries and that the AO's view was a plausible and permissible one; the appeal is allowed.

Contingent liability and allowance of actual expenditure - provision for employee benefits (medical reimbursement and leave travel) and deduction treatment - deduction under Section 37(1) for expenditure wholly and exclusively for the purposes of business (commercial expediency test) - contribution to public welfare / district development fund and nexus with business - Corporate Social Responsibility expenditure and its tax treatment - remand for fresh examination by assessing officer

Provision for employee benefits (medical reimbursement and leave travel) and deduction treatment - contingent liability and allowance of actual expenditure - Whether provisions for medical reimbursement and leave travel allowance are allowable as deduction or are disallowable as contingent liabilities, and whether actual reimbursements debited to provision accounts are allowable. - HELD THAT: - The Tribunal affirmed that the provisions claimed for medical reimbursement and for leave travel allowance were disallowable where they amounted to contingent liabilities because the liability to pay arises only when employees make claims. However, the Tribunal held that where actual reimbursements were incurred during the relevant year and were debited to the provision account (and thus not charged to the Profit & Loss account), those actual payments merit deduction. The Tribunal directed the assessing officer to allow the actual medical and leave travel reimbursements debited to the respective provision accounts for each year while upholding disallowance of the unapplied provisions. [Paras 4, 9, 10, 14, 15]

Provisions for medical reimbursement and leave travel allowance treated as contingent and disallowed; actual reimbursements debited to the provision accounts during the year to be allowed by AO.

Deduction under Section 37(1) for expenditure wholly and exclusively for the purposes of business (commercial expediency test) - contribution to public welfare / district development fund and nexus with business - Whether the contribution made to the Bellary Agenda Task Force (BATF) for district infrastructure is allowable as a business expenditure under Section 37(1). - HELD THAT: - The Tribunal distinguished the facts of earlier authorities where commercial expediency was not established. On the materials (including minutes showing coordinated contributions by mining companies at the direction of district administration and that the funds were to be used for development in the taluk affected by mining), the Tribunal found a sufficient nexus and commercial expediency to treat the contribution as incurred for purposes of the assessee's business. The Tribunal relied on principles in the decisions of the jurisdictional High Court which recognize that contributions to public welfare or district funds may be deductible if connected with and benefiting the business, and directed deletion of the disallowance. The Tribunal applied the same conclusion to the identical claim in the subsequent assessment year. [Paras 7, 12]

Contribution to BATF allowed as deduction; disallowance deleted and AO directed to give effect.

Deduction under Section 37(1) for expenditure wholly and exclusively for the purposes of business (commercial expediency test) - Whether incidental expenses claimed without details are allowable. - HELD THAT: - On the assessee's failure to furnish the nature or particulars of the incidental expenses before the Tribunal (as also before the authorities below), the Tribunal found no basis to disturb the finding of disallowance and confirmed the disallowance for lack of supporting details. [Paras 6, 11, 16]

Disallowance of incidental expenses confirmed for want of details.

Deduction under Section 37(1) for expenditure wholly and exclusively for the purposes of business (commercial expediency test) - contribution to public welfare / district development fund and nexus with business - remand for fresh examination by assessing officer - Whether contributions to relief or public-scheme funds (Bhagyalakshmi Yojana and Chief Minister's Relief Fund) are deductible, and whether the issue needs fresh adjudication. - HELD THAT: - For the payment to Bhagyalakshmi Yojana, the Tribunal confirmed the disallowance where the assessee failed to establish nexus with its business. With respect to large contributions to the Chief Minister's Relief Fund (allegedly for construction of houses under a public scheme), the Tribunal observed that unlike precedents where an MOU and commercial expediency were proved, relevant details were absent in the present record. The Tribunal therefore set aside the appellate order and restored the matter to the assessing officer for fresh examination in light of the High Court's approach in Kanhaiyalal Dudheria, requiring scrutiny of nexus and commercial expediency and evidentiary satisfaction before allowing deduction. [Paras 17, 18]

Payment to Bhagyalakshmi Yojana disallowed for lack of nexus; claim relating to Chief Minister's Relief Fund remanded to AO for fresh examination and decision on nexus/commercial expediency.

Final Conclusion: All appeals partly allowed. Provisions for medical reimbursement and leave travel were disallowed as contingent but AO directed to allow actual reimbursements debited to provision accounts; incidental expenses disallowed for lack of details; contribution to BATF held deductible and disallowance deleted (applied to subsequent year); certain relief-fund payments disallowed for want of nexus while a major contribution to Chief Minister's Relief Fund is remanded to the AO for fresh examination in light of applicable principles of nexus and commercial expediency.

Amendment of Import General Manifest under statutory discretion vested by section 30(3) read with section 149 of the Customs Act, 1962 - judicial review of failure to exercise statutory discretion and requirement of a reasoned order after hearing - refusal to act by customs authorities where civil title disputes exist and role of indemnity - interim restraint on auction pending administrative decision

Amendment of Import General Manifest under statutory discretion vested by section 30(3) read with section 149 of the Customs Act, 1962 - judicial review of failure to exercise statutory discretion and requirement of a reasoned order after hearing - refusal to act by customs authorities where civil title disputes exist and role of indemnity - Competent Authority to consider, by a reasoned order after hearing, the petitioners' application for amendment/substitution in the Import General Manifest (IGM). - HELD THAT: - The Court held that the competent customs authority must exercise the statutory discretion conferred by sub section (3) of section 30 read with section 149 of the Customs Act and consider the petitioners' application on its merits. Reliance upon earlier decisions of this Court was noted to the effect that authorities cannot refuse to act merely because a civil title dispute or protest exists, and that such disputes are ordinarily for civil courts; an authority may permit amendment after following principles of natural justice and, where appropriate, accepting indemnity. The Court directed that the petitioners be granted a personal hearing and that the application for amendment or substitution to the IGM be considered expeditiously and by a reasoned order after hearing all parties. [Paras 8]

Application for amendment/substitution in the IGM remitted to the Joint or Assistant Commissioner of Customs for fresh consideration by a reasoned order after hearing all parties within six weeks from October 20, 2021; petitioners to appear on October 20, 2021 at 11.00 a.m.

Interim restraint on auction pending administrative decision - Respondents restrained from proceeding with auction of the goods until the Competent Authority decides the amendment application or until further orders of the Court. - HELD THAT: - As an ancillary and protective measure pending adjudication of the amendment application, the Court granted interim relief restraining the respondents from taking further action to auction the cargo. This preserves the parties' positions until the competent authority completes consideration in accordance with the directions given. [Paras 9]

Respondents are restrained from taking any further action for auction of the goods until a decision is taken on the application for amendment and until further orders of the Court.

Final Conclusion: Writ petition allowed to the extent that the competent customs authority is directed to afford a personal hearing and decide the application for amendment/substitution to the Import General Manifest by a reasoned order within six weeks from October 20, 2021; meanwhile respondents are restrained from auctioning the goods.

Principles of natural justice - beneficial/amnesty scheme interpretation - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - SVLDRS - arrears category - designated committee's obligation to afford hearing before rejecting application - technical glitches in online filing and hyper technical approach

Principles of natural justice - designated committee's obligation to afford hearing before rejecting application - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - SVLDRS - beneficial/amnesty scheme interpretation - Whether rejection of the SVLDRS-1 application as 'Incorrect application' without affording any opportunity of hearing was vitiated by failure to follow principles of natural justice in view of the beneficent object of the Scheme. - HELD THAT: - The Court held that the Scheme is beneficent in aim and object and must be interpreted liberally to effectuate its purpose of unloading legacy tax litigation. Prior decisions were followed which read the requirement of notice and hearing into the Scheme where adverse civil consequences flow from rejection. It was observed that summary rejection of a declaration on ground of ineligibility without giving the declarant an opportunity to explain would be contrary to the object of the Scheme and amount to non compliance with principles of natural justice. The Court noted the petitioners' mistake was not shown to be malicious and that technical glitches in online filing should not defeat entitlement to the Scheme. Applying these principles, the respondents' blanket rejection without hearing was held unlawful. [Paras 19, 20, 21, 30, 31]

Rejection of the SVLDRS-1 application without affording an opportunity of hearing was contrary to principles of natural justice and the object of the Scheme and is therefore set aside.

Arrears category - technical glitches in online filing and hyper technical approach - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - SVLDRS - Whether the petitioners, belonging to the 'arrears category' and having non malicious/technical errors in online filing, could be left remediless and whether respondents should re consider their declarations. - HELD THAT: - The Court observed that in cases under the 'arrears category' (such as the present petitioners), prior authorities accepted that a liberal approach is required and that where difficulties in online filing arise (including during lockdown), a hyper technical approach is inappropriate. The Court noted precedents where declarations in the arrears category were held to be valid and remitted matters for reconsideration after affording hearing. Given the absence of mala fides and the Scheme's object, the Court directed that petitioners be permitted to file fresh online/offline applications and that respondents treat them as valid, hear petitioners if any infirmity is alleged, and pass speaking orders expeditiously. [Paras 22, 24, 25]

Petitioners to be allowed to file fresh online/offline declarations; respondents to consider them as valid, afford hearing if any flaw is alleged, and pass a fresh speaking order within a reasonable time.

Final Conclusion: Impugned rejections of the SVLDRS-1 applications are set aside; petitioners may file fresh online/offline applications which respondents shall treat as valid, hear the petitioners on any alleged infirmity and pass reasoned orders expeditiously; writ petitions allowed to that extent.

Extended period of limitation - valuation under Section 4A (MRP valuation) - suppression or fraud for invocation of extended period - precedential effect of administrative orders of other Commissionerates

Extended period of limitation - suppression or fraud for invocation of extended period - valuation under Section 4A (MRP valuation) - Whether the extended period of limitation for demand could be invoked on the ground of suppression, when prior administrative/adjudicatory orders in other Commissionerates had directed valuation under Section 4A. - HELD THAT: - The Tribunal held the extended period could not be invoked. The appellant's Chennai and Mumbai units had been advised or adjudicated to value the goods under Section 4A (MRP valuation), and those directions were communicated to the appellant's other units. There was no evidence that the Kolkata factory, owned by the same legal entity, wilfully suppressed material information or deliberately valued under Section 4A to evade duty; the allegation in the SCN was a general averment without supporting proof. In these circumstances, invoking the extended period for alleged suppression was unjustified. Having decided the matter on limitation, the Tribunal set aside the adjudication upholding demand and refrained from deciding merits. [Paras 6, 8, 9]

Impugned order insofar as it invoked the extended period of limitation and confirmed the demand is set aside; extended period not attracted for lack of evidence of suppression.

Valuation under Section 4A (MRP valuation) - precedential effect of administrative orders of other Commissionerates - Whether the merits on valuation under Section 4A were decided by the Tribunal in this appeal. - HELD THAT: - The Tribunal expressly refrained from adjudicating the merits after deciding the limitation point. Although it noted prior adjudication and administrative directions in other Commissionerates supporting valuation under Section 4A, the Tribunal did not pronounce on the correctness of the valuation on merits and therefore did not decide substantive questions of law or fact relating to valuation in this order. [Paras 9]

Merits of valuation under Section 4A remain undecided by this Tribunal and are left open for appropriate consideration if required.

Final Conclusion: The appeal is allowed on limitation grounds; the order confirming demand under extended limitation is set aside. The Tribunal has not decided the merits of valuation under Section 4A and has left those questions open for further consideration as may be appropriate.

Cenvat credit on common inputs used in exempted goods - settlement under Clause 73 of Finance Act, 2010 - recovery under Rule 6 of Cenvat Credit Rules, 2004 - maintainability of appeal under Section 35 of Central Excise Act, 1944 - requirement of CA certificate - right to personal hearing

Maintainability of appeal under Section 35 of Central Excise Act, 1944 - Whether the appeal against the Commissioner (Appeal) order rejecting the application was maintainable before the Tribunal. - HELD THAT: - The Tribunal examined the nature of the impugned order and the communication by the Additional Commissioner. It records that the appeal was directed against the Commissioner (Appeal)'s order rejecting the application dated 21.06.2012 and that, since the decision was taken by the Commissioner and communicated by the Additional Commissioner, the appeal lies before this Tribunal. The Tribunal therefore treated the matter as properly before it rather than dismissing the appeal as not maintainable.

Appeal is maintainable before the Tribunal.

Settlement under Clause 73 of Finance Act, 2010 - recovery under Rule 6 of Cenvat Credit Rules, 2004 - Cenvat credit on common inputs used in exempted goods - Whether the Commissioner (Appeal) was correct to reject the appellant's application for settlement on the sole ground that a show cause notice had been issued under Rule 6 proceedings. - HELD THAT: - The Tribunal held that the Commissioner's rejection was incorrect. The ability to decide an application under Clause 73 is independent of the existence of a show cause notice or pending proceedings under Rule 6; the issuance of an SCN does not oust the power to consider settlement. The Tribunal concluded that the Commissioner should have adjudicated the settlement application on its merits irrespective of the SCN and remanded the matter for fresh decision on the application dated 31.08.2010.

Impugned rejection set aside; application to be re-decided by the Commissioner irrespective of the issuance of the SCN.

Requirement of CA certificate - right to personal hearing - Whether the Commissioner was justified in rejecting the application for failure to submit a proper CA certificate and whether the appellant must be afforded an opportunity to rectify and to be heard. - HELD THAT: - The Tribunal observed that the omission to furnish a correct CA certificate should have led to an opportunity to rectify rather than outright rejection. It directed that the appellant be given an opportunity to submit the proper CA certificate if required and emphasised that the appellant must be afforded sufficient opportunity for personal hearing before the Commissioner re-enters upon the application.

Appellant to be given chance to submit correct CA certificate and to be afforded personal hearing before re-deciding the application.

Final Conclusion: The impugned order is set aside and the matter is remanded to the Commissioner, Central Excise, Customs and Service Tax, Daman, to re-decide the application dated 31.08.2010 on merits irrespective of the SCN, permitting the appellant to furnish a proper CA certificate if required and affording sufficient opportunity of personal hearing; appeal allowed by way of remand.

Show cause notice under proviso to Section 27 of the TNVAT Act - reassessment under Section 27 of the TNVAT Act - procedure for reopened assessment: pre-assessment notice, show cause, production of documents and personal hearing - deemed acceptance of return under Section 22 of the TNVAT Act

Show cause notice under proviso to Section 27 of the TNVAT Act - reassessment under Section 27 of the TNVAT Act - Validity of the impugned reassessment order dated 09.09.2020 in the absence of a proper show cause notice as directed by this Court - HELD THAT: - The Court held that the procedure mandated by the proviso to Section 27 requires that a show cause notice clearly state the circumstances alleged to constitute escaped turnover or wrongful availment of input tax credit and specify the proposed tax rate and quantum so that the assessee can respond. The earlier order of this Court had found that the pre-assessment communication dated 12.12.2017 was not a show cause notice and directed issuance of a proper show cause notice and an opportunity of personal hearing. The notice relied on by the assessing authority dated 11.02.2019 was a short summons to appear for personal hearing and did not satisfy the mandate of a show cause notice; consequently the final order dated 09.09.2020, passed without first issuing a proper show cause notice as directed, is legally infirm. The Court therefore interfered with and quashed the impugned order on this ground. [Paras 14, 16, 17, 18]

Impugned reassessment order dated 09.09.2020 is quashed for failure to issue a proper show cause notice as required by the proviso to Section 27 and by the earlier order of this Court.

Procedure for reopened assessment: pre-assessment notice, show cause, production of documents and personal hearing - Remand for fresh compliance with statutory procedure and opportunity to the assessee - HELD THAT: - The Court remitted the matter to the assessing authority with directions to issue a proper show cause notice in terms of the proviso to Section 27, setting out the circumstances, proposed tax rate and proposal of escaped turnover or wrong input credit, to permit the assessee to file a reply, permit production and verification of documents if necessary, and thereafter issue separate summons for personal hearing before passing a final order under Section 27(1) or (2). The Court mandated that these steps be scrupulously followed and completed within three months from receipt of the judgment, with cooperation from the assessee. [Paras 9, 19, 20]

Matter remitted to the respondent for re-consideration after issuance of a proper show cause notice, opportunity to reply and production of documents, and personal hearing, with final order to be passed thereafter within three months.

Final Conclusion: The reassessment order dated 09.09.2020 is quashed for non-compliance with the mandatory show cause procedure under the proviso to Section 27 as previously directed by this Court; the matter is remitted to the assessing authority to issue a proper show cause notice, afford the assessee an opportunity to reply and to be heard, and then pass a fresh final order in accordance with law within three months.

Jurisdiction of civil courts in service disputes under the Industrial Disputes Act - coram non judice / nullity of decree for lack of jurisdiction - plea of absence of jurisdiction at execution stage - equitable non-recovery of amounts paid pursuant to a void decree

Jurisdiction of civil courts in service disputes under the Industrial Disputes Act - coram non judice / nullity of decree for lack of jurisdiction - Maintainability of a suit in the civil court founded on the provisions of the Industrial Disputes Act and consequence of a decree passed without jurisdiction. - HELD THAT: - The appellant's claim in the civil suit was expressly founded on the ID Act. Having regard to the statutory scheme and the authorities relied on by the High Court (including the three Judge Bench decisions in the Rajasthan SRTC line of cases), this Court held that the civil court lacks jurisdiction to entertain a suit structured on the provisions of the ID Act. A decree passed by a civil court in proceedings over which it has no jurisdiction is coram non judice and therefore a legal nullity. The Court, while noting concurrent findings below, declined to uphold the civil courts' exercise of jurisdiction where the claim was predicated on the ID Act and affirmed the High Court's conclusion that the decree in favour of the plaintiff is void for want of jurisdiction. [Paras 14, 16]

The civil court had no jurisdiction to entertain the suit based on the ID Act; the decree in favour of the plaintiff is a nullity and that conclusion is upheld.

Plea of absence of jurisdiction at execution stage - coram non judice / nullity of decree for lack of jurisdiction - Whether an objection as to absence of jurisdiction can be raised at the stage of execution and the effect of such an objection. - HELD THAT: - The High Court observed that a plea of absence of jurisdiction may be raised even at the stage of execution. This Court, having held that the civil court lacked jurisdiction and that the decree is coram non judice, accepted the consequence that a decree passed without jurisdiction has no force of law. The Court therefore treated the jurisdictional objection as a valid basis for setting aside the decree despite earlier proceedings and concurrent findings below. [Paras 10, 16]

A plea of absence of jurisdiction may be raised at the execution stage and, where established, renders the decree a nullity.

Equitable non-recovery of amounts paid pursuant to a void decree - Whether amounts already paid to the decree holder pursuant to the void decree should be recovered by the employer. - HELD THAT: - Although the decree was declared void for want of jurisdiction, the Court exercised equitable discretion in respect of sums already disbursed to the terminated employee pursuant to the decree. Having regard to the hardship to the employee and the principle applied in earlier authorities (as noted in the High Court's consideration), the Court directed that the arrears paid pursuant to the decree should not be recovered from the decree holder. [Paras 17]

The arrear sum already paid to the decree holder pursuant to the void decree shall not be recovered.

Final Conclusion: The appeal is dismissed. The Supreme Court upholds the High Court's conclusion that a civil court lacks jurisdiction to entertain a suit founded on the Industrial Disputes Act and that any decree so obtained is a nullity; however, amounts already paid pursuant to the void decree shall not be recovered. Parties to bear their own costs.

Section 138 of the Negotiable Instruments Act - Section 141 of the Negotiable Instruments Act - Magistrate's duty when issuing process - Averment that director was in charge of and responsible for conduct of company's business - Quashing under Section 482 CrPC

Section 138 of the Negotiable Instruments Act - Section 141 of the Negotiable Instruments Act - Magistrate's duty when issuing process - Averment that director was in charge of and responsible for conduct of company's business - Whether the complaint contained the requisite averment that the directors were in charge of and responsible for the conduct of the company's business so as to attract liability under Section 141 and to warrant issuance of process under Section 138. - HELD THAT: - Having applied the ratio in S.M.S. Pharmaceuticals Ltd. and subsequent authorities, the Court explained that a complaint must contain material enabling the Magistrate to form opinion that there is sufficient ground for proceeding. Section 141 requires a specific averment that, at the relevant time, the person sought to be made liable was in charge of and responsible for the conduct of the business of the company; mere directorship is not enough unless the complaint so avers. Reading the complaint as a whole in the present case, the Court found explicit allegations that at the time the cheques were issued and dishonoured the appellants were directors who were in charge of and responsible for the company's business, along with particulars of cheque issuance, presentation, dishonour and notice. There was therefore no basis to interfere under Section 482 CrPC absent unimpeachable evidence to the contrary; contentions as to non executive status or other defences were matters for trial. [Paras 25, 26, 27, 28, 30]

The complaint satisfied the necessary averments under Section 141 read with Section 138 and the High Court rightly refused to quash the summons; the questions raised by the appellants are matters for trial.

Consolidation of related proceedings - Expeditious disposal by trial court - Whether the other pending criminal complaints arising from related dishonoured cheques should be dealt with together and expeditiously by the trial Court. - HELD THAT: - Noting that other complaints by the respondent complainant arising from dishonoured cheques were pending and had been stayed by the interim order in these appeals, the Court directed that the three referenced cases be clubbed and disposed of on merits by the trial Court expeditiously and without being influenced by observations in this judgment. The Court specified a timeline for the parties to record attendance before the trial Court and directed disposal as early as possible. [Paras 17, 31]

The referenced cases are to be clubbed and disposed of on their merits by the trial Court expeditiously (parties to record attendance on the specified date).

Final Conclusion: The appeals are dismissed; the High Court did not err in declining to quash the complaint and summoning the directors, and the trial Court is directed to club and dispose of the related cases expeditiously in accordance with the Court's directions.