TaxTMI Updates e-Newsletter
Oct 13,2022

Application of Government Orders for transition from VAT to GST - methodology for computation of subsumed tax in contracts subsisting on the GST cut off date - liability of the purchaser to bear difference in tax on pre GST contracts - mandamus to departmental authorities to compute tax liability in accordance with prescribed methodology - refund of recoveries effected contrary to prescribed methodology

Application of Government Orders for transition from VAT to GST - methodology for computation of subsumed tax in contracts subsisting on the GST cut off date - liability of the purchaser to bear difference in tax on pre GST contracts - Government Orders G.O.Ms.No.264 and G.O.Ms.No.296 govern computation of GST liability for contracts entered into prior to 01.07.2017 and must be applied to the petitioner's contracts. - HELD THAT: - The Finance Department issued G.O.Ms.No.264 dated 15.09.2017 and G.O.Ms.No.296 dated 09.10.2017 to provide a methodology for estimating subsumed tax where contracts were subsisting on the GST commencement date. The Court accepts and records that those Government Orders set out the methodology to be adopted and are being applied consistently. The Additional Advocate General concurred that the methodology in the said G.O.'s governs computation in respect of contracts entered into prior to 01.07.2017. There has been no challenge to the validity of the Government Orders and therefore they are to be applied without demur to the transactions in question. The Government Orders make clear that the purchaser must ultimately bear the GST of the supply and prescribe detailed steps for estimating subsumed tax including (a) using supplier's breakup where furnished, (b) obtaining supplier's breakup if not furnished, and (c) independent departmental estimates using revised SOR as a proxy for subsumed taxes. [Paras 6, 7, 8, 9, 10]

The computation methodology contained in G.O.Ms.No.264 and G.O.Ms.No.296 applies to the petitioner's pre GST contracts and the orders rejecting application of that methodology are quashed.

Mandamus to departmental authorities to compute tax liability in accordance with prescribed methodology - refund of recoveries effected contrary to prescribed methodology - Respondents are directed to compute the petitioner's tax liability in accordance with the Government Orders and any recoveries made contrary to that methodology must be refunded; the matter is to be determined by the parties following that methodology. - HELD THAT: - The Court granted mandamus requiring the petitioner to appear before the Highways and PWD respondents so that they may compute tax liability in line with the Government Orders. The Court further directed that upon such joint determination of liability, any coercive recoveries effected from the petitioner that are contrary to the methodology prescribed in the G.O.'s shall be refunded. The order therefore leaves the quantification and computation to the departmental authorities applying the prescribed methodology, while protecting the petitioner qua refund where recoveries are inconsistent with that methodology. [Paras 11, 12, 13, 14]

Petitioner to be called before respondents for computation of liability as per the Government Orders; recoveries made contrary to that methodology to be refunded; writ petitions allowed.

Final Conclusion: The writ petitions are allowed: administrative orders refusing to apply the Finance Department's transition methodology are quashed; respondents are directed to compute GST liability in respect of the petitioner's pre GST contracts in accordance with G.O.Ms.No.264 and G.O.Ms.No.296, and any recoveries made contrary to that methodology shall be refunded.

Apparent bias / likelihood of bias in administrative adjudication - separation between investigative function and adjudicatory function - inspection, search and seizure - application of departmental guidelines / circulars to re commenced proceedings - setting aside impugned order and de novo proceedings

Apparent bias / likelihood of bias in administrative adjudication - separation between investigative function and adjudicatory function - inspection, search and seizure - Whether the impugned adjudication order must be set aside on account of likelihood of bias where the same officer conducted the search and seizure and passed the adjudicating order. - HELD THAT: - The Court recorded that the officer who carried out the search and seizure at the petitioner's premises was the same officer who passed the impugned order. On a prima facie appraisal, the Court found a likelihood of bias if the person who conducted the investigation is also empowered to decide the adjudication. In light of that incompatibility between the investigative role and the adjudicatory role, the Court concluded that the impugned order could not stand and stayed, and ultimately set aside, the order to avoid the appearance of prejudgment and to secure impartial adjudication. [Paras 3, 6, 7]

Impugned order dated 11.03.2022 set aside on account of likelihood of bias; stay earlier made was rendered absolute and the order is vacated to ensure impartial adjudication.

Application of departmental guidelines / circulars to re commenced proceedings - setting aside impugned order and de novo proceedings - Whether the respondent must recommence proceedings de novo and issue a fresh show cause notice in conformity with the Circular dated 20.09.2022. - HELD THAT: - The respondent filed the Circular titled "Modification of Guidelines for Tax Authorities for Inspection, Search and Seizure dated 01.12.2020" (dated 20.09.2022) and indicated an intention to align its position accordingly. The Court directed that, bearing in mind the modifications in that Circular, the respondent must commence de novo proceedings. Consequentially, the Court ordered that a fresh show cause notice be issued in accordance with the Circular and its directions, thereby remitting the matter for fresh consideration consistent with those guidelines. [Paras 5, 6, 7, 8]

Proceedings remitted for de novo consideration and a fresh show cause notice to be issued in accordance with the Circular dated 20.09.2022; writ petition disposed accordingly.

Final Conclusion: The impugned order dated 11.03.2022 was set aside on grounds of likely bias arising from the same officer conducting search and passing the order; the matter is remitted for de novo proceedings and a fresh show cause notice is to be issued in conformity with the Circular dated 20.09.2022; the writ petition is disposed of.

Passing on of benefit of Input Tax Credit - profiteering under Section 171 of the CGST Act, 2017 - computation of profiteering by comparing pre GST and post GST ITC to turnover ratio - investigation under Rule 129(6) of the CGST Rules, 2017 and remedial orders under Rule 133 - interest on profiteered amount - penalty under Section 171(3A) of the CGST Act, 2017 - continuing availability of ITC until issuance of completion certificate and consequent future passing on

Passing on of benefit of Input Tax Credit - profiteering under Section 171 of the CGST Act, 2017 - computation of profiteering by comparing pre GST and post GST ITC to turnover ratio - The Respondent contravened Section 171 by not passing on the additional benefit of ITC accruing post GST to customers in the project "JKG Palm Court" for the investigation period. - HELD THAT: - The Authority accepted the DGAP's calculation that ITC available as a percentage of turnover rose from 0.80% (pre GST) to 7.78% (post GST) for the project, producing an additional ITC benefit of 6.98% of turnover. Applying the established methodology of comparing pre GST and post GST ITC to turnover ratios and recalibrating base prices, the DGAP computed the shortfall in passing on this benefit to buyers. The Respondent's unsupported assertion that he had already passed on the benefit was rejected for want of documentary corroboration and because independent verification (emails to a subset of buyers) did not establish comprehensive compliance. On the facts and documentary record for the period 01.07.2017 to 31.10.2020, the Authority found that the Respondent had profiteered by failing to pass the additional ITC benefit to recipients. [Paras 5, 6, 20]

Profiteering established: Respondent failed to pass the additional ITC benefit (6.98% of turnover) to buyers for the period 01.07.2017 to 31.10.2020.

Investigation under Rule 129(6) of the CGST Rules, 2017 and remedial orders under Rule 133 - interest on profiteered amount - penalty under Section 171(3A) of the CGST Act, 2017 - continuing availability of ITC until issuance of completion certificate and consequent future passing on - Remedial measures to be directed against the Respondent, quantum of amount to be refunded with interest, requirement to reduce prices, notice for penalty for the period from 01.01.2020 and directions for further investigations and compliance monitoring. - HELD THAT: - Relying on the DGAP's computations and its own acceptance of the methodology, the Authority quantified the amount determined as profiteered in respect of the investigated period and imposed corresponding remedial obligations. The Authority determined the total amount profiteered for the project as Rs. 5,14,06,920/- (inclusive of applicable tax), ordered that this amount be refunded/passed on to the eligible recipients and directed the Respondent to reduce prices commensurate with the ITC benefit. Interest at 18% per annum was ordered on the entire profiteered amount from the date each part was profiteered until payment. Because Section 171(3A) was inserted effective 01.01.2020, the Authority directed issuance of a notice for imposition of penalty for the period from 01.01.2020 onwards. The Authority further directed monitoring and enforcement by the jurisdictional CGST/SGST Commissioner, publication of an advertisement to inform affected recipients, submission of compliance reports, and a fresh investigation by the DGAP into other projects under the same GST registration; it also recorded that the Respondent remains liable to pass on any further ITC benefit that accrues until issuance of the completion certificate. [Paras 11, 12, 13, 17, 18]

Respondent ordered to refund/pass on Rs. 5,14,06,920/- with interest @18% and reduce prices commensurate with ITC benefit within three months; notice to be issued for penalty w.e.f. 01.01.2020; DGAP and jurisdictional Commissioners directed to ensure compliance and investigate other projects and any future ITC benefits up to completion certificate to be passed on.

Final Conclusion: The Authority accepted the DGAP's investigation for the period 01.07.2017 to 31.10.2020, held that M/s JKG Construction Pvt. Ltd. profiteered by not passing on additional ITC benefit (6.98% of turnover), quantified the profiteered amount for the project as Rs. 5,14,06,920/-, directed refund/passing on of that amount with interest @18% within three months, ordered price reduction commensurate with the ITC benefit, issued directions for penalty proceedings from 01.01.2020, and mandated monitoring, publication and further investigation into other projects under the same GST registration.

Faceless Assessment - Procedure under Section 144B for faceless assessment - Show Cause Notice / Draft Assessment Order (SCN/DAO) - Principles of natural justice - Curability of procedural irregularity

Faceless Assessment - Procedure under Section 144B for faceless assessment - Show Cause Notice / Draft Assessment Order (SCN/DAO) - Principles of natural justice - Requirement of issuance of a show cause notice/draft assessment order prior to finalisation of assessment under the faceless assessment scheme - HELD THAT: - The Court held that the faceless assessment scheme contemplates a process in which, after initial exchanges, the assessment unit prepares a draft order proposing variations and, where a proposal is prejudicial to the assessee, the draft order (SCN/DAO) must be served on the assessee to enable objections and invoke dispute resolution mechanisms. On a plain reading of the scheme and its implementing clauses, the requirement of SCN/DAO is mandatory and forms part of the statutory procedure. Failure to issue the SCN/DAO amounts to a violation of the principles of natural justice. The Court distinguished provisions and precedents relating to other notice regimes (such as Section 143(2) and Section 144C) but affirmed that the notices envisaged by Section 144B are integral to faceless assessments and cannot be sidestepped. [Paras 58, 60, 61, 64, 65]

The requirement of issuing a SCN/DAO under the faceless assessment procedure is mandatory and its non-issuance violates principles of natural justice.

Curability of procedural irregularity - Faceless Assessment - Remand for de novo assessment - Remedial consequence of non-issuance of SCN/DAO and appropriate relief in the present petitions - HELD THAT: - While the Court found the omission to issue SCN/DAO to be a mandatory procedural lapse, it treated the lapse as a curable irregularity in the facts of these cases. Relying on a body of High Court decisions, the Court held that the impugned assessment orders (except one matter addressed separately) should be set aside and the respondents be permitted to issue the SCN/DAO afresh, receive objections, hear the assessees and pass assessments de novo within specified timelines. The Court therefore granted liberty to the Department to cure the procedural defect rather than directing outright quash of proceedings without opportunity for fresh compliance. For W.P.No.14373 of 2021 the Court applied specific directions to afford effective opportunity and timetables for filing replies, enabling the website, personal hearing and completion within a limited period. [Paras 17, 18, 19, 66, 67]

Impugned assessment orders (other than W.P.No.14373 of 2021 to which specific directions apply) are set aside; respondents are permitted to issue SCN/DAO within four weeks, receive responses, hear the assessees and pass assessments de novo within sixteen weeks; in W.P.No.14373 of 2021 the assessment is set aside and the petitioner given four weeks to file reply, with hearing and de novo assessment in the timelines directed, the whole exercise not to exceed the period specified by the Court.

Final Conclusion: The writ petitions are allowed. The Court held that issuance of a SCN/DAO under the faceless assessment procedure is mandatory; although the non-issuance vitiates the assessments, the defect is remediable. Except for W.P.No.14373 of 2021 (for which tailored timelines and directions were given), the impugned assessment orders are set aside and the Department is granted liberty to issue SCN/DAO within four weeks, invite objections, hear the assessees and pass assessments de novo within sixteen weeks; connected petitions closed with no order as to costs.

Income escaping assessment - Proviso to Section 147 - failure to disclose fully and truly all material facts - Reassessment beyond four years - Validity of reassessment notice under Section 148 - Separate jurisdictions of assessment wing and ITO (I&CI)

Proviso to Section 147 - failure to disclose fully and truly all material facts - Reassessment beyond four years - Validity of reassessment notice under Section 148 - Assessee did not fully and truly disclose material facts at the original assessment and therefore reassessment beyond four years is permissible. - HELD THAT: - The Court found that the assessment-stage communications and records did not disclose the ICICI Bank account which contained large cash deposits and immediate debits by RTGS. The assessing authority, on scrutiny of assessment records and the submissions made by the assessee during the original assessment, concluded that the assessee had not fully and truly disclosed necessary facts, and thereafter acted on information regarding suspicious transactions to form reason to believe that income had escaped assessment. Consequently the proviso to Section 147 permitting action after four years on account of failure to disclose was satisfied and the reassessment proceedings under Section 148 were not barred by limitation. [Paras 6, 12, 14, 17]

Assumption of jurisdiction by the assessing authority beyond four years upheld; impugned reassessment order confirmed and writ petition dismissed.

Separate jurisdictions of assessment wing and ITO (I&CI) - Income escaping assessment - Disclosure to the ITO (I&CI) does not constitute disclosure before the assessing officer and does not excuse non-disclosure to the assessment wing. - HELD THAT: - The Court emphasised that the criminal investigation wing (ITO(I&CI)) is distinct from the assessment wing; information or disclosures made to the ITO(I&CI) cannot be treated as having been made to the assessing officer. The differing contents of communications to the two wings illustrated that no disclosure of the ICICI account was made before the assessing officer during the original assessment, and therefore disclosure to the ITO(I&CI) did not relieve the assessee of the obligation to make full and true disclosure to the AO. [Paras 15, 16]

Reference to the ICICI account before the ITO(I&CI) did not preclude the reopening of assessment; disclosure to the criminal wing did not exonerate the assessee vis-a -vis the assessing officer.

Final Conclusion: The High Court upheld the validity of reopening the assessment for A.Y.2011-2012 on the ground that the assessee failed to make full and true disclosure before the assessing officer; disclosures made to the criminal investigation wing were not a substitute for disclosure to the assessment wing, and the reassessment proceedings under Section 148/147 were accordingly sustained and the writ petition dismissed.

Registration under section 12AA - Rule 17A of the Income-tax Rules - applicability of amended rule - self-certified copies sufficient for registration - power to call for documents for satisfaction of genuineness of activities - genuineness of charitable activities - condonation of delay

Condonation of delay - Delay of 15 days in filing the appeal by the assessee is condoned. - HELD THAT: - The assessee filed an application for condonation of a 15-day delay in filing the appeal, attributing the delay to circumstances arising during the COVID-19 pandemic and limitations on movement. The Revenue raised no objection. Having heard the parties and considered the explanation, the Tribunal found the plea for condonation to have merit and accordingly exercised its discretion to condone the delay so that the appeal could be heard on merits. [Paras 4]

Delay of 15 days in filing the appeal is condoned.

Registration under section 12AA - Rule 17A of the Income-tax Rules - applicability of amended rule - self-certified copies sufficient for registration - power to call for documents for satisfaction of genuineness of activities - genuineness of charitable activities - Whether the Commissioner was justified in rejecting the application for registration under section 12AA on the ground that originals were not produced and genuineness of activities was not established. - HELD THAT: - The Tribunal examined the correspondence, submissions and the Rule 17A applicable as on the date of application (filed 06.02.2020). The substituted Rule 17A (effective from 19-02-2018) requires production of self-certified/self-attested copies of the instrument or document evidencing creation of the trust (and related documents), not the original instrument as a precondition for registration. The assessee produced extensive documentary material (including certified copies of trust deed, audited accounts, bank statements, note on activities, photographs and other records) in a paper book and through submissions dated 28.08.2020. The CIT(E)'s rejection rested on insistence on originals and on a finding that genuineness of activities was not established. Applying the amended Rule 17A and after considering the materials on record and the authorities cited, the Tribunal concluded that the CIT(E) erred in treating non-production of originals as a ground for rejection when certified/self-certified copies were furnished and that the assessee had placed on record material establishing charitable activities. For these reasons the Tribunal allowed the grounds and directed registration under section 12AA. [Paras 9]

The CIT(E)'s rejection is set aside; as amended Rule 17A applied, self certified copies were sufficient and, on the material produced, the assessee is entitled to registration under section 12AA.

Final Conclusion: The appeal is allowed: the 15 day delay in filing the appeal is condoned and the order of the CIT(E) rejecting registration is set aside; the assessee is entitled to registration under section 12AA in view of the applicability of the amended Rule 17A and the documents and material produced.

Bogus purchases - addition limited to profit element in bogus purchases - re-opening under section 147 - service of notice under section 143(2) - onus to prove genuineness of purchases

Service of notice under section 143(2) - assessment validity and notice service - Validity of notice issued under section 143(2) and its effect on the assessment order - HELD THAT: - The Tribunal examined whether the notice under section 143(2) was validly issued and served after re-opening under section 147. The record showed that notice under section 148 was issued and affixed and that the notice under section 143(2) was issued within the six-month period measured from the end of the financial year in which the return in response to notice under section 148 was filed. The notice contained a Speed Post registration number and the assessee did not dispute the address on the notice. The assessee's objection was limited to alleged differences in the signatures and to the non-traceability of the Speed Post number; no asserted forgery, lack of issuance by a competent officer, or specific prejudice was shown. The assessee had not raised this objection before the Assessing Officer during assessment proceedings. The Tribunal concluded that the defects alleged were technical and curable and did not vitiate the assessment, and therefore rejected the challenge to service and validity of the notice. [Paras 12]

Objection to service/validity of notice under section 143(2) rejected and assessment held validly sustained.

Bogus purchases - addition limited to profit element in bogus purchases - onus to prove genuineness of purchases - Whether addition on account of purchases from entities of the PK Jain group should be made and the appropriate quantum of disallowance - HELD THAT: - The Assessing Officer made a 100% addition of purchases from entities managed by the PK Jain group on the basis of information from search and investigation indicating accommodation entries. Before the CIT(A) the assessee produced invoices, ledger entries, confirmations and sales details and relied on authorities to contend genuineness; the CIT(A) restricted the addition to 5% of disputed purchases by applying precedents that tax only the embedded profit element in unverifiable purchases. The Tribunal noted that PK Jain was a known entry provider and that the assessee had shown a negligible net profit for the year, but also observed that the CIT(A) followed earlier decisions. Applying the Tribunal's consistent approach in similar cases, and to meet the possibility of revenue leakage given the very low net profit declared, the Tribunal found 5% to be on the lower side and enhanced the disallowance to 6% of the aggregate disputed purchases, thereby partly allowing the Revenue's appeal. [Paras 13]

Addition upheld but increased from 5% to 6% of the aggregate purchases from the impugned entities; Revenue's appeal partly allowed.

Final Conclusion: The Tribunal rejected the assessee's challenge to the service and validity of the notice under section 143(2) and, on merits, increased the disallowance in respect of purchases from entities of the PK Jain group from 5% to 6% of the aggregate disputed purchases; the Revenue's appeal is partly allowed.

Revisional jurisdiction under section 263 - limitation for revisional order under section 263(2) - scope of reassessment under section 147 - Explanation 3 to section 147 - doctrine of merger - escaped income and reassessment

Limitation for revisional order under section 263(2) - revisional jurisdiction under section 263 - Whether the revision under section 263 was within time where the Commissioner revised an order passed after reassessment under section 147/143(3). - HELD THAT: - The Tribunal examined the chronology and the scope of the reassessment. It noted that the time-limit for invoking revisional jurisdiction under section 263 runs from the date of the assessment order in respect of the subject-matter being revised. Where the Commissioner sought to revise aspects that formed part of the original assessment but were not the subject of the reassessment proceedings, limitation for section 263 would commence from the date of the original assessment and not from the date of reassessment. Applying the principles in Alagendran Finance Ltd. and subsequent High Court and appellate decisions, the Tribunal held that the issue on which PCIT acted related to an item (the benefit alleged under section 2(24)(iv)) which was part of the original assessment and not the subject of the reassessment initiated for a different escaped income. Consequently, revisional action taken after the period applicable to the original assessment was time-barred. [Paras 11, 12, 15, 17, 18]

Revision under section 263 was time-barred insofar as it sought to revise an item that formed part of the original assessment but was not the subject of the reassessment.

Scope of reassessment under section 147 - Explanation 3 to section 147 - doctrine of merger - escaped income and reassessment - Whether the PCIT could treat the reassessment order under section 143(3) r.w.s.147 as erroneous and prejudicial for matters that were not the subject of reopening under section 147 and thereby validly exercise revisional power. - HELD THAT: - The Tribunal analysed section 147 and Explanation 3, observing that reassessment proceedings permit the assessing officer to assess the escaped income specified in the reasons for reopening and any other escaped income that comes to his notice during those proceedings. However, where the reassessment was initiated and completed for a specific escaped income (here, the unexplained cash deposit), matters concluded in the original assessment that did not form part of the reassessment continue to stand. The doctrine of merger does not apply where the subject-matter of reassessment and the original assessment are not the same. Hence, the Commissioner could not validly characterise the reassessment order as erroneous in respect of issues that were not within the scope of the reassessment merely to surmount limitation; such exercise is impermissible and the revisional order is unsustainable. [Paras 14, 15, 16, 17, 18]

PCIT could not validly revise the reassessment order in respect of matters that were not the subject of the section 147 proceedings; the revisional exercise was impermissible and unsustainable.

Final Conclusion: The Tribunal held that the revisionary order passed by the PCIT under section 263 was barred by limitation and impermissible because the matters revised were part of the original assessment and not within the scope of the reassessment under section 147; the impugned order was quashed and the assessee's appeal was allowed.

Admission of additional evidence in appellate proceedings - reassessment proceedings and unexplained investments - remand for fresh consideration by the Assessing Officer - imposition of costs as condition for admission of evidence - penalty under section 271(1)(c) becoming infructuous upon remand - Rule 46A and non-cooperation with departmental proceedings

Admission of additional evidence in appellate proceedings - Rule 46A and non-cooperation with departmental proceedings - remand for fresh consideration by the Assessing Officer - imposition of costs as condition for admission of evidence - Whether the additional evidence filed before the Commissioner (Appeals) should have been admitted and whether the matter should be remanded to the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal examined the material placed on record including the dates of documents relied upon by the assessee, the remand report and the assessee's rejoinders explaining non-production before the Assessing Officer. It accepted that the mutual fund statement and certain bank/FDR documents were not obtainable by the assessee prior to completion of reassessment for reasons of ill health, transfer of residence and practical difficulties in obtaining bank copies. Having found these explanations sufficient to show cause for non-production before the AO, the Tribunal concluded that the matter deserved fresh consideration rather than final exclusion of the materials. In the exercise of appellate supervisory power the Tribunal set aside the assessment and directed remand to the Assessing Officer to afford one final opportunity to the assessee to produce the documents and to verify the claimed sources, while imposing a cost of Rs. 10,000 payable to the Prime Minister's Relief Fund as a consequence of the assessee's earlier non-cooperation. The Tribunal emphasised that the opportunity on remand is the last chance and directed full cooperation with the AO for reassessment proceedings.

Assessment set aside and remitted to the Assessing Officer for fresh consideration; one final opportunity to the assessee to produce additional evidence subject to payment of a cost of Rs. 10,000 to the Prime Minister's Relief Fund.

Penalty under section 271(1)(c) becoming infructuous upon remand - Whether the penalty levied under section 271(1)(c) survives after the assessment order was set aside. - HELD THAT: - The Tribunal held that since the reassessment/order giving rise to the penalty has been set aside and remitted for fresh adjudication, the penalty order based on the impugned assessment becomes infructuous and cannot be sustained pending the outcome of fresh proceedings on remand.

Penalty order set aside as infructuous.

Final Conclusion: The appeal against the reassessment is allowed for statistical purposes by setting aside the assessment and remitting the matter to the Assessing Officer for fresh consideration with one final opportunity to produce the additional evidence upon payment of a cost directed to the Prime Minister's Relief Fund; the penalty order is held to be infructuous.

Disallowance under section 40A(3) of the Income-tax Act - Interpretation of section 40A(3) read with Rule 6DD - Payment in cash forming part of sale consideration - Genuineness of transaction and identification of payees

Dismissal of ground as not pressed - Ground No. 1 was dismissed as not pressed by the assessee. - HELD THAT: - The assessee expressly stated non-interest in prosecuting ground No. 1 and prayed for its dismissal. The Tribunal recorded that submission and dismissed ground No. 1 as not pressed. [Paras 3]

Ground No. 1 dismissed as not pressed.

Disallowance under section 40A(3) of the Income-tax Act - Interpretation of section 40A(3) read with Rule 6DD - Payment in cash forming part of sale consideration - Genuineness of transaction and identification of payees - Addition under section 40A(3) of the Act in respect of cash payment forming part of sale consideration was deleted. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Attar Singh Gurmukh Singh and held that section 40A(3) must be read collectively with Rule 6DD so as not to unduly restrict bona fide business transactions. Where cash payment is part of the sale consideration, is incorporated in the purchase deed, the payees are identified and have admitted receipt (including before the registering authority), and payment in the prescribed manner was not practicable due to unavoidable circumstances, the exceptions envisaged by Rule 6DD operate to exclude disallowance. On the facts the assessee established that the sellers, owing to intra-family distrust, demanded cash and that the cash payment of the sale consideration was recorded in the purchase deed and admitted before the registering authority; the AO did not dispute identification or receipt. Applying the foregoing principles and relying on Tribunal precedents to like effect, the Tribunal held the disallowance was not sustainable and deleted the addition. [Paras 4, 8, 9, 11]

Addition of the cash payment disallowed under section 40A(3) deleted; ground No. 2 allowed.

Infructuousness of ancillary ground - Ground No. 3 became infructuous in view of the decision on ground No. 2 and required no adjudication. - HELD THAT: - Having allowed the primary challenge to the disallowance under section 40A(3), the Tribunal recorded that any issue raised in ground No. 3 had become moot and did not require separate consideration. [Paras 12]

Ground No. 3 not adjudicated as infructuous.

Final Conclusion: The appeal is allowed: the disallowance under section 40A(3) in respect of the cash payment forming part of sale consideration is deleted; ground No. 1 dismissed as not pressed and ground No. 3 rendered infructuous.

Reopening of assessment beyond four years where assessee failed to disclose fully and truly all material facts - proviso to section 147 regarding disclosure of material facts - change of opinion - re-opening under section 147/148

Reopening of assessment beyond four years where assessee failed to disclose fully and truly all material facts - change of opinion - re-opening under section 147/148 - Validity of reassessment proceedings initiated u/s 147/148 for AY 2009-10 where reopening was beyond four years and the assessee had furnished material facts during original scrutiny assessment - HELD THAT: - The Tribunal considered whether the reassessment initiated by the AO on 28-03-2016 was valid where the original scrutiny assessment u/s 143(3) for AY 2009-10 had been completed and the assessee had, during those original proceedings, submitted detailed letters and supporting documents disclosing the transfer of rights and receipt from M/s. Bhumiraj Agro (India) Pvt. Ltd. The AO's reasons for reopening were held to be identical to matters already on record and acknowledged by the AO in the reasons themselves. No new material or evidence was produced by the AO which was not earlier placed before him. In these circumstances the proviso to section 147 requires the AO to establish failure by the assessee to disclose fully and truly all material facts before reopening beyond four years is permissible. The Tribunal, applying that principle and having regard to the ld. CIT(A)'s findings and the material on record, concluded the reassessment was occasioned by a mere change of opinion of the AO and not by any nondisclosure of material facts. Reliance was placed on the analogous view expressed by the Hon'ble Bombay High Court that reopening which merely reflects a change of opinion is impermissible under the proviso to section 147. Having found no whisper of new evidence or nondisclosure, the reassessment was held invalid and bad in law. [Paras 5, 6, 7]

Reassessment proceedings initiated u/s 147/148 were invalid and bad in law as the assessee had fully and truly disclosed all material facts during the original scrutiny assessment and the AO produced no new material; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that reassessment for AY 2009-10 was invalid because the assessee had disclosed all material facts in the original assessment and the reopening beyond four years was only a change of opinion; the Revenue's appeal is dismissed and the assessee's cross-objection is rendered infructuous.

Reopening of assessment under section 147/148 of the Income-tax Act, 1961 - addition of unexplained bank deposits based on suspicion and conjecture - violation of principles of natural justice by non-supply of adverse material / recorded statements - quashing of reassessment proceedings for lack of proper reasons to believe and verification

Reopening of assessment under section 147/148 of the Income-tax Act, 1961 - addition of unexplained bank deposits based on suspicion and conjecture - Validity of reopening the assessment and the addition of bank deposits to the assessee's income - HELD THAT: - The Tribunal found that the Assessing Officer made the impugned addition purely on suspicion without effective material on record to justify reopening or to support the addition. The assessee furnished agreement documents, bank statements and an affidavit linking the deposits to a land transaction; these materials established a coherent connection between the alleged receipts and the claimed source. The AO failed to apply mind and to undertake proper verification before making the addition under the reopened assessment. Consequently, the addition was treated as founded on conjecture and was unsustainable.

Addition of unexplained bank deposits and reopening under section 147/148 set aside and deleted.

Violation of principles of natural justice by non-supply of adverse material / recorded statements - quashing of reassessment proceedings for lack of proper reasons to believe and verification - Whether denial of copies of recorded statements and other adverse material vitiated the assessment proceedings - HELD THAT: - The Tribunal held that adverse statements or materials relied upon to form an opinion adverse to the assessee could not be kept from him; the assessee must be confronted with such material and given an opportunity to rebut or cross-examine. The AO's failure to supply the recorded statements and other adverse material, coupled with lack of proper reasons to believe and absence of adequate verification, amounted to a serious breach of natural justice and rendered the reassessment order a nullity.

Assessment vitiated for violation of natural justice; reassessment proceedings quashed.

Final Conclusion: Both appeals allowed: the additions in respect of the bank deposits were deleted and the reassessment proceedings under section 147/148 were quashed on the grounds of being founded on suspicion and for breach of natural justice by non-supply of adverse material.

Final assessment under section 144C(13) - dispatch of assessment order - CPC upload vis-a -vis manual order - binding nature of Dispute Resolution Panel directions - conformity with DRP directions - transfer pricing adjustment - reconciliation of invoice revenue and financial statements - suppression of income - claim for depreciation on prior capitalised expenditure

Final assessment under section 144C(13) - dispatch of assessment order - CPC upload vis-a -vis manual order - Validity of the final assessment order dated 24.01.2017 and whether it was barred by limitation for want of dispatch within time prescribed under section 144C(13). - HELD THAT: - The DRP's directions dated 23.12.2016 required completion of the assessment within the statutory period. The final assessment order bears the date 24.01.2017 and the assessment record contains a Tapal/dispatch seal dated 24.01.2017. The Tribunal accepted the departmental explanation that the CPC portal shows a later date (13.03.2017) because only the demand/computation was uploaded later; manual orders were passed earlier and subsequently their figures were fed into CPC. There is nothing on record to show non-dispatch of the manual final order on 24.01.2017; therefore the order was passed within the time limit under section 144C(13) and is not barred by limitation. [Paras 9]

Grounds 1 to 3 rejected; final assessment order dated 24.01.2017 held valid and not time-barred.

Binding nature of Dispute Resolution Panel directions - conformity with DRP directions - transfer pricing adjustment - Whether the final assessment order conforms to the DRP's directions in relation to the transfer pricing adjustment and consequences of non-conformity. - HELD THAT: - The DRP directed specific recomputations: treating foreign exchange gain/loss as operating, exclusion of specified comparables, and correction of working capital adjustment for the assessee and comparables. The TP adjustment in the draft assessment order (Rs.26,85,43,457) is identical to that incorporated in the final assessment order, showing no effect given to the DRP's directions. Section 144C(10) makes DRP directions binding and section 144C(13) requires the AO to complete assessment in conformity with those directions. Non-implementation of the DRP's material directions renders that part of the final assessment illegal. The Tribunal relied on precedents and deleted the TP adjustment to the extent it is not in conformity with the DRP. [Paras 12]

TP adjustment as incorporated in the final assessment order is not in conformity with the DRP's directions and is deleted; TP grounds on merits not adjudicated in view of deletion.

Reconciliation of invoice revenue and financial statements - suppression of income - Addition for alleged suppressed income based on difference between invoice revenue and revenue in financial statements and correctness of the AO/DRP addition. - HELD THAT: - The assessee follows a cost plus model and invoices monthly based on cost plus mark up; differences between invoice value and revenue in financial statements arose from items such as service tax/VAT credits reclassified as receivables and foreign exchange restatements. A reconciliation produced by the assessee explains the movement from invoice totals to revenue as per financials. The AO accepted similar submissions in the subsequent year (AY 2013-14). Given the material and explanations, the Tribunal directed the AO to take into account the reconciliation, afford the assessee a reasonable opportunity of hearing and decide the matter afresh. [Paras 16]

Grounds 4 and 5 allowed for statistical purposes; matter remitted to the AO to examine reconciliation and decide after hearing the assessee.

Claim for depreciation on prior capitalised expenditure - Whether the assessee is entitled to depreciation in respect of expenses held to be capital in earlier assessment years. - HELD THAT: - The assessee challenged earlier disallowances of expenditures (monitors, desktops, software, accessories) treated as capital in preceding assessment years and seeks depreciation. The Tribunal did not decide entitlement on merits but directed the AO to examine whether the assessee is entitled to claim depreciation on those amounts disallowed earlier and to proceed accordingly. [Paras 18]

Matter remitted to the AO to examine and decide the claim for depreciation on prior capitalised expenditure.

Final Conclusion: The appeal is partly allowed: the challenge to the timeliness of the final assessment order (grounds 1-3) is rejected; the TP adjustment in the final order is deleted to the extent it is not in conformity with the DRP's directions; the addition for alleged suppression of income and the claim for depreciation on amounts capitalised in earlier years are remitted to the AO for fresh consideration after affording the assessee an opportunity of hearing.

Validity of show-cause notice under section 274 read with section 271AAB - Discretionary nature of penalty under section 271AAB - Requirement to specify clause (a)/(b)/(c) in penalty notice - Determination whether disclosed sum qualifies as "undisclosed income" under the Explanation to section 271AAB

Validity of show-cause notice under section 274 read with section 271AAB - Requirement to specify clause (a)/(b)/(c) in penalty notice - The show-cause notice which failed to specify the precise limb of section 271AAB under which penalty was sought is invalid and the penalty consequent thereto is void ab initio. - HELD THAT: - The Tribunal observed that the show-cause notice dated 27-12-2017 merely alleged that the assessee "deliberately concealed the true income" without specifying which limb of section 271AAB(1) - clauses (a), (b) or (c) - was being invoked or the applicable rate of penalty. A penalty under section 271AAB requires discrimination between its distinct limbs because the conditions and rates under each limb are different. A routine, non-specific notice that does not inform the assessee of the precise charge or limb cannot be regarded as a valid notice in law. Applying the co-ordinate Bench reasoning in Padam Chand Pungliya, the Tribunal held that invocation of section 271AAB presupposes a determination in penalty proceedings that the amount disclosed falls within the statutory definition of "undisclosed income"; absent a valid show-cause notice specifying the applicable limb, the consequent penalty cannot stand and is void ab initio. [Paras 5, 6]

The penalty sustained by the Commissioner (Appeals) is quashed as the show-cause notice was legally defective for not specifying the relevant limb of section 271AAB.

Discretionary nature of penalty under section 271AAB - Determination whether disclosed sum qualifies as "undisclosed income" under the Explanation to section 271AAB - Imposition of penalty under section 271AAB is discretionary and must be imposed on the merits after examining whether the disclosed amount constitutes "undisclosed income" as defined in the Explanation to section 271AAB. - HELD THAT: - The Tribunal noted that section 271AAB uses the word "may" and provides that the Assessing Officer "may direct" that the assessee shall pay penalty, indicating discretion rather than a mandatory imposition. Consequently, the Assessing Officer must examine the facts and the basis of any surrender and determine in penalty proceedings whether the income disclosed in the statement under section 132(4) meets the statutory definition of "undisclosed income" before invoking the penalty. The Tribunal also recorded that the assessee had substantiated the availability of the cash to the extent of the surrendered sum, reinforcing that penalty determinations require examination on merits rather than automatic imposition. [Paras 5]

Penalty under section 271AAB is not automatic; it is discretionary and must be imposed only after a merits examination that the disclosed amount qualifies as "undisclosed income" under the statute.

Final Conclusion: The assessee's appeal is allowed for AY 2016-17; the penalty under section 271AAB sustained by the Commissioner (Appeals) is quashed because the show-cause notice did not specify the applicable limb of section 271AAB and, in any event, the penalty is a discretionary measure that must be imposed only after merits-based determination that the amount constitutes "undisclosed income."

Registration under section 12AA - Genuineness of trust's activities - Application of income not to be examined at registration stage - Compliance with procedural requirements for registration (Form 10A and Rule 17A) - Principles of natural justice - right to confront evidence and cross examine - Use of undisclosed third party material cannot be relied upon

Principles of natural justice - right to confront evidence and cross examine - Use of undisclosed third party material cannot be relied upon - Whether the CIT(Exemptions) could reject the application for registration by relying on third party material or statements which were not supplied to the assessee and without giving opportunity of confrontation or cross examination. - HELD THAT: - The Tribunal found that the CIT(Exemptions) relied on alleged departmental enquiry material and third party allegations which were not furnished to the assessee and that no statements were placed on record for confrontation. Relying on settled principles that material not confronted to an assessee does not constitute admissible evidence, and that opportunity of cross examination is part of natural justice, the Tribunal held that such undisclosed material could not be used to reject the registration application. The Tribunal noted authorities cited by the assessee and observed that the department had not afforded an opportunity to meet or rebut the alleged evidence; consequently reliance upon such material amounted to a breach of natural justice and could not sustain the rejection order.

The rejection of registration insofar as it was founded on undisclosed departmental/third party material and without affording the assessee opportunity of confrontation or cross examination was unsustainable.

Registration under section 12AA - Genuineness of trust's activities - Application of income not to be examined at registration stage - Compliance with procedural requirements for registration (Form 10A and Rule 17A) - Whether, on the record before it, the assessee was entitled to registration under section 12AA or whether the CIT(Exemptions) was justified in examining application of income and denying registration on the basis of suspicions about receipts. - HELD THAT: - On the merits the Tribunal observed it was an admitted fact that the society was duly registered under the State Societies Act, was running a CBSE affiliated school up to senior secondary level and had filed the requisite constitutional documents and Form 10A. The Tribunal reiterated the legal position, supported by higher court decisions, that at the registration stage the jurisdiction of the CIT(Exemptions) is limited to satisfying himself about the charitable objects and the genuineness of activities (i.e. whether the trust is not a sham), and that detailed scrutiny of application of income or allegations of under reported receipts is a matter for assessment proceedings. The Tribunal found no finding that the trust was a sham or that activities were not in accordance with objects; allegations about understatement of fees were on presumption and, even if correct, were matters for assessment in the relevant year. Having regard to the documents on record and the absence of probative, confronted evidence to displace the admitted facts, the Tribunal held the assessee met the procedural and substantive threshold for registration under section 12AA.

The CIT(Exemptions)'s rejection of the registration application for the reasons recorded was erroneous; the assessee's application complied with the requirements and registration under section 12AA was warranted.

Final Conclusion: The Tribunal set aside the order of the CIT(Exemptions) rejecting the application and allowed the appeal, holding that (i) undisclosed departmental material could not be relied upon without affording the assessee confrontation and cross examination, and (ii) on the record the society's objects and genuine running of a school entitled it to registration under section 12AA, registration being a prerequisite for claiming exemption but not a substitute for year to year assessment of application of income.

Opportunity to show cause before prejudicial variation - duty to serve draft assessment order with show cause notice under Section 144B(1)(xvi)(b) of the Income tax Act, 1961 - faceless assessment procedure by National Faceless Assessment Centre (NaFAC) - remand for fresh assessment on procedural infirmity

Opportunity to show cause before prejudicial variation - duty to serve draft assessment order with show cause notice under Section 144B(1)(xvi)(b) of the Income tax Act, 1961 - faceless assessment procedure by National Faceless Assessment Centre (NaFAC) - remand for fresh assessment on procedural infirmity - Assessment order set aside for failure to serve the show cause notice accompanied by the draft assessment order before making a variation prejudicial to the assessee; matter remitted for fresh assessment. - HELD THAT: - The Court held that, under the faceless assessment procedure as it stood prior to the Finance Act, 2022 amendment, NaFAC was obliged to furnish the assessee an opportunity to show cause against any proposed variation prejudicial to the assessee and that such show cause notice must be accompanied by the draft assessment order proposed to be passed. In the present case no such show cause notice with the draft order was served, which deprived the petitioner of its statutory right to respond, place documents on record and be heard before the final assessment. For this procedural deficiency the assessment order dated 30 April 2021 and consequential notices were set aside and the matter remanded to respondent No.1 to complete the assessment afresh in accordance with law. The Court expressly refrained from expressing any opinion on the merits of the controversy. [Paras 5, 6, 7, 8]

Assessment order and consequential notices set aside; matter remitted to respondent No.1 to complete assessment within twelve weeks; no opinion expressed on merits.

Final Conclusion: Assessment dated 30 April 2021 and consequential notices set aside for failure to serve statutory show cause notice with the draft assessment order; matter remitted to respondent No.1 for fresh assessment to be completed within twelve weeks; merits not adjudicated.

Allotment of PAN and cessation of earlier PAN - prohibition on possessing two PANs - mandate to file return with valid PAN - activation and deactivation of PAN in assessment proceedings - discretion of the Income Tax Commissioner to determine usable PAN

Allotment of PAN and cessation of earlier PAN - prohibition on possessing two PANs - activation and deactivation of PAN in assessment proceedings - discretion of the Income Tax Commissioner to determine usable PAN - Whether the petitioner's grievance regarding deactivation of the old PAN and activation of the new PAN should be adjudicated by this Court or remitted to the Income Tax Commissioner for resolution as to which PAN the petitioner should use for filing returns and future transactions. - HELD THAT: - The Court observed that Section 139A mandates allotment of PAN and provides that upon allotment under a new series the earlier PAN shall cease to have effect, and that no person may possess more than one PAN. The petitioner had earlier surrendered the newly issued PAN but that PAN was subsequently activated in consequence of pending proceedings under Section 148, while the erstwhile PAN was deactivated. Noting the practical difficulties and possible future complications for the petitioner in filing returns and conducting transactions if compelled to use the reactivated PAN, the Court considered the matter to be one fit for administrative determination by the Income Tax Commissioner. The Court therefore directed that the petitioner submit a detailed representation to the Commissioner/ respondent No.1, and that the Commissioner should consider and decide the representation in accordance with law, taking into account the statutory scheme regarding PANs and the factual circumstances, within a stipulated period. [Paras 8, 9, 10]

Petition remitted to the Income Tax Commissioner for decision; petitioner to file detailed representation and Commissioner to decide in accordance with law within 60 days.

Final Conclusion: Writ petition disposed of by directing the petitioner to submit a detailed representation to the Income Tax Commissioner, who is to consider and decide which PAN the petitioner should use for future transactions and filing returns, within 60 days; no order otherwise made.

Substantial question of law under Section 260A - mixed question of fact and law - burden of proof for deduction under Section 37 - books of account seized by investigating agency and duty of AO to summon under Section 131 - inadmissibility of ad hoc disallowance without rejecting books under Section 145 - assessment under Section 143(3) and best judgment assessment

Substantial question of law under Section 260A - mixed question of fact and law - Whether the appeal under Section 260A could be entertained on the redrafted question and whether that question was a substantial question of law or a mixed question of fact and law. - HELD THAT: - The Court examined the scope of an appeal to the High Court under Section 260A and reiterates that an appeal lies only if the High Court is satisfied that the case involves a substantial question of law. A 'substantial' question must be debatable and materially affect the rights of the parties. The redrafted question framed by the Revenue required ascertainment of primary facts concerning business expenditure and application of legal principles to those facts. Such a controversy was characterised as a mixed question of fact and law, falling short of the pure substantial question of law contemplated by Section 260A. The Court observed that ordinarily answering such questions requires scrutiny of evidentiary records and therefore lies outside the exclusive province of a Section 260A appeal as a question of law.

The redrafted question admitted under Section 260A is essentially a mixed question of fact and law and not a pure substantial question of law.

Burden of proof for deduction under Section 37 - books of account seized by investigating agency and duty of AO to summon under Section 131 - inadmissibility of ad hoc disallowance without rejecting books under Section 145 - assessment under Section 143(3) and best judgment assessment - Whether the addition made by the AO disallowing transport creditors for AY 2009-10 was sustainable where the assessee's records were seized by CBI and the AO did not summon the seized documents or reject books under Section 145. - HELD THAT: - The Court reiterated that the burden to prove expenditure wholly and exclusively for business under Section 37 lies on the assessee and must be discharged on the preponderance of probabilities. However, where evidentiary material is in the exclusive custody of a statutory agency due to raid and seizure, the assessee may be excused from producing those documents and cannot be blamed for non-production. The AO, vested with powers akin to a Civil Court under Section 131, had the duty to summon or obtain the seized books/documents from the custody of the CBI or other public authority. The AO did not invoke those powers nor reject the books of account under Section 145; instead he proceeded to make an ad hoc addition by reference to an addition in the preceding year. The Court noted that absence of documents with the assessee is not evidence of absence of the expenditure and that, where necessary, the AO must make best judgment assessment consistent with law. The ITAT had correctly held that the ad hoc addition lacked basis and that creditors accepted as genuine in the earlier year could not be summarily treated as non-genuine in the subsequent year without proper inquiry.

The addition made by the AO was unsustainable; the AO should have summoned the seized documents or, if appropriate, rejected books under Section 145 before making any disallowance, and the ITAT rightly set aside the ad hoc disallowance.

Final Conclusion: The Revenue's appeal is rejected: the redrafted question framed under Section 260A was essentially a mixed question of fact and law, and on the merits the AO's ad hoc disallowance of transport creditors-made without procuring seized documents or rejecting books under Section 145-was unsustainable; the ITAT's order setting aside the addition is upheld.

Payment of interest for delayed refund - interest at simple rate - compensation for delayed compliance with appellate order - claim for interest arising from request for reassessment - equitable relief for inordinate administrative delay

Payment of interest for delayed refund - interest at simple rate - claim for interest arising from request for reassessment - Entitlement of the petitioner to interest on the refunded principal amount and the rate, period and manner of payment of such interest. - HELD THAT: - The Court found that the petitioner had procured an Order-in-Appeal dated 19.08.2013 and made a request for reassessment on 05.09.2013, but verification and compliance took several years and the principal was refunded only on 12.08.2022. The unexplained delay in verification and further delay in effecting the refund led the Court to conclude that the petitioner was entitled to interest as compensation for the period of delay. Acting on principles of fairness and equity, the Court fixed interest at the rate of 6% per annum (simple) from 05.12.2013 - i.e., three months after the reassessment request of 05.09.2013 - up to 12.08.2022, being the date when the principal amount was refunded. The Court directed that the interest amount be remitted to the petitioner within four weeks. [Paras 7, 8, 9, 10]

Interest awarded at 6% simple per annum from 05.12.2013 to 12.08.2022; interest to be paid to the petitioner within four weeks and the writ petition disposed of on these terms.

Final Conclusion: The writ petition is disposed of by directing payment of interest at 6% per annum (simple) from 05.12.2013 until 12.08.2022 on the refunded principal, to be remitted to the petitioner within four weeks.

Acknowledgement of debt in balance sheets - extension of limitation under Section 18 of the Limitation Act by entries in financial statements - existence of a jural relationship for acknowledgment - financial debt and financial creditor under the IBC - default for the purposes of Section 7 of the IBC - discretion of the Adjudicating Authority under Section 7 to admit or reject - effect of settlements/waivers recorded in notes to accounts on claimed debt

Acknowledgement of debt in balance sheets - extension of limitation under Section 18 of the Limitation Act by entries in financial statements - existence of a jural relationship for acknowledgment - Whether the entries in the corporate debtor's balance sheets amount to an unequivocal acknowledgment extending limitation for the debt claimed in the Section 7 application. - HELD THAT: - The Tribunal examined successive balance sheets from FY 2006-07 to FY 2015-16 relied upon by the appellant and the accompanying 'Notes to the Accounts'. Though earlier balance sheets recorded a secured loan of Rs.4.50 crores, from FY 2008-09 onwards the amount shown in the name of the appellant stood at Rs.1.35 crores and the Notes to the Accounts recorded settlements and waivers (including amounts credited to Capital Reserve and write-backs of interest). Applying the principles in the cited Supreme Court authorities, the Tribunal held that an entry in a balance sheet must be unequivocal and demonstrate a subsisting jural relationship to operate as an acknowledgment for extending limitation. Where entries are qualified by settlements/waivers or show material change in amount across years, they do not constitute an unambiguous admission of the debt claimed. Given the discrepancy between the amount acknowledged in the books and the amount claimed in the Section 7 petition, and the presence of notes indicating settlements/waivers, the balance-sheet entries could not be treated as extending limitation for the claim made in the Section 7 application. [Paras 23, 24, 28, 31, 41]

The entries in the balance sheets do not amount to an unequivocal acknowledgment extending limitation in favour of the appellant; the Section 7 claim is time-barred as presented.

Financial debt and financial creditor under the IBC - effect of settlements/waivers recorded in notes to accounts on claimed debt - Whether the amount shown in the balance sheets (notably Rs.1.35 crores after FY 2008-09) constitutes a financial debt owed to the appellant and whether the larger claim in the Section 7 petition is thereby established. - HELD THAT: - The Tribunal analysed the definition of 'financial debt' and the material placed on record, including the Assignment Agreement and the balance-sheet notes showing settlements and write-backs. The notes to accounts for FY 2008-09 disclose one-time settlements with secured and unsecured creditors and crediting of waived amounts to Capital Reserve, and no continuing interest liability is recorded in subsequent years. The Tribunal observed that the change from Rs.4.50 crores to Rs.1.35 crores and absence of a repayment schedule or recorded interest casts doubt on the characterisation of the Rs.1.35 crores as a subsisting financial debt. The Tribunal found it plausible that the amount reflected in the books was a consequence of settlement/contribution or reclassification rather than an unequivocal continuing loan obligation bearing interest as a financial debt. [Paras 22, 23, 31, 35, 41]

The appellant failed to prove that the amount appearing in the balance sheets constituted the alleged financial debt in the sense required by the IBC; the loan as presented in the Section 7 petition is not established as a subsisting financial debt.

Default for the purposes of Section 7 of the IBC - absence of repayment schedule or demand - Whether there was a default by the corporate debtor in repayment of the alleged loan sufficient to attract admission under Section 7. - HELD THAT: - The Tribunal noted that after assignment and the indicated settlements there was no repayment schedule agreed between the parties for the amount reflected in later balance sheets, no recorded interest accruals in successive years, and limited demonstrable efforts by the assignee to demand or recover the huge sum now claimed. The Tribunal emphasised that default must be explicit and direct; in the absence of a repayment schedule, clear demand and unambiguous book entries evidencing the same debt in default, the existence of default for the larger claim could not be inferred from fragmented proceedings in BIFR/DRT. Consequently, even assuming some liability existed, default in repayment as pleaded for the claimed amount was not established. [Paras 15, 29, 30, 40, 41]

Default in repayment of the alleged loan, as presented in the Section 7 petition, was not established; the necessary default for admission under Section 7 is lacking.

Discretion of the Adjudicating Authority under Section 7 to admit or reject - Whether the Adjudicating Authority erred in exercising its discretion under Section 7 in rejecting the Section 7 application. - HELD THAT: - The Tribunal reviewed the statutory scheme of Section 7 and recent precedents confirming that the Adjudicating Authority has discretion (use of 'may') to admit or reject a Section 7 application after applying its mind to the facts, including feasibility and surrounding circumstances. Having found significant discrepancies between the amounts claimed and amounts reflected in the corporate debtor's books, indications of settlement/waiver, doubts as to existence of a subsisting financial debt and absence of clear default, the Tribunal concluded that the Adjudicating Authority lawfully exercised its discretion in rejecting the application. The Tribunal also referenced authorities holding that admission is not automatic even if a debt is shown to exist; relevant factors can warrant rejection. [Paras 36, 37, 38, 41]

The Adjudicating Authority did not err in exercising its discretion to reject the Section 7 application in the circumstances of this case.

Final Conclusion: The Appellate Tribunal affirmed the Impugned Order: the appellant failed to establish an unequivocal acknowledgment extending limitation, failed to prove the claimed sum as a subsisting financial debt or a clear default, and the Adjudicating Authority was justified in rejecting the Section 7 petition; the appeal is dismissed.

Inherent powers - Power to review or recall - Finality of Tribunal's orders - Limitation on inherent powers to make substantive changes - Applicability of Section 151 CPC jurisprudence - Maintainability of contempt petition

Inherent powers - Power to review or recall - Finality of Tribunal's orders - Limitation on inherent powers to make substantive changes - Whether NCLAT can, under Rule 11 of the NCLAT Rules, 2016, modify, review or recall its final order so as to make substantive changes to that order. - HELD THAT: - The tribunal examined Rule 11 of the NCLAT Rules, 2016, which preserves the tribunal's inherent powers, but found that the Insolvency and Bankruptcy Code does not provide any statutory power for review or recall of a final NCLAT order. Relying on the coordinate decision in Agarwal Coal Corporation Pvt. Limited v. Sun Paper Mills Limited and the Supreme Court's exposition on the limits of inherent powers under Section 151 CPC (as reiterated in My Palace Mutually Aided Cooperative Society v. B. Mahesh & Ors.), the tribunal held that inherent powers cannot be used to reopen or substantively alter final adjudicatory conclusions where a specific statutory remedy (appeal to the Supreme Court under section 62 of the IBC) exists. The tribunal also observed that Section 151 CPC jurisprudence applies only where no alternative remedy is available and cannot be invoked to bypass statutory safeguards to correct perceived errors in a final order. Applying these principles, the tribunal concluded that Rule 11 cannot be invoked to recall or modify the impugned portions of its order dated 20.07.2022 which constitute substantive determinations. [Paras 7, 8, 10, 12, 13]

The application under Rule 11 seeking recall/modification of the tribunal's final order is not maintainable and is rejected.

Maintainability of contempt petition - Finality of Tribunal's orders - Whether the tribunal would recall its observations regarding the maintainability of a contempt petition because such observations may affect a contempt proceeding pending before the NCLT. - HELD THAT: - The applicant submitted that observations in the tribunal's order would impede a contempt petition pending before the NCLT and relied on authorities establishing that contempt is available where a decree or order is wilfully disobeyed. The tribunal observed that those authorities may be relevant if the tribunal were entertaining the application on merits, but emphasized that the present application seeks substantive alteration of a final appellate order. Given the lack of statutory power to review or recall under the IBC and the limited scope of Rule 11 (which cannot be used to effect substantive change), the tribunal declined to revisit or expunge its prior observations on maintainability. The proper remedy for challenging the tribunal's final order remains statutory appeal to the Supreme Court under section 62 of the IBC. [Paras 3, 11, 12, 13]

The request to recall or modify observations touching the maintainability of the contempt petition is not permissible under Rule 11 and is refused.

Final Conclusion: The application under Rule 11 seeking clarification/recall of portions of the tribunal's order dated 20.07.2022 is rejected; the tribunal lacks power under the IBC to review or recall its final order for substantive modification. No order as to costs.

Admissibility of Section 9 application - default and debt under the Insolvency and Bankruptcy Code, 2016 - prospective effect of enhancement of threshold for initiation of CIRP - commencement of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Code, 2016 - appointment and duties of Interim Resolution Professional

Default and debt under the Insolvency and Bankruptcy Code, 2016 - admissibility of Section 9 application - The Applicant proved existence of a debt and default and the Section 9 petition was maintainable. - HELD THAT: - The Tribunal found that invoices for supply of goods and a demand notice under Section 8 had been placed on record and that the Corporate Debtor had replied to the demand notice. A bank certificate demonstrating non-receipt of the claimed sum during the relevant period was also produced. Having regard to the documentary evidence and compliance with the procedural requirements under the Code, the Applicant satisfied the conditions for instituting proceedings under Section 9 and established default by the Corporate Debtor. [Paras 5]

Application under Section 9 was held maintainable on proof of debt and default.

Prospective effect of enhancement of threshold for initiation of CIRP - The increase in the minimum threshold for initiating CIRP is prospective and does not apply to defaults occurring prior to the notification dated 24.03.2020. - HELD THAT: - Noting that the application was filed in 2019 when the threshold limit for initiating CIRP was lower, the Tribunal applied the established principle that the statutory increase in the threshold amount has prospective effect. Reliance was placed on authoritative treatment that the notification of 24.03.2020 enhancing the threshold to Rupees One Crore applies only to defaults occurring on or after that date; the defaults in the present case arose prior to 24.03.2020 and therefore the enhanced threshold did not operate to bar the petition. [Paras 6, 7]

Notification raising the threshold to Rupees One Crore held inapplicable to the defaults in this case; petition not barred by subsequent enhancement.

Commencement of Corporate Insolvency Resolution Process - appointment and duties of Interim Resolution Professional - moratorium under Section 14 of the Code, 2016 - The petition was admitted; CIRP was ordered to commence, an IRP was appointed, and moratorium declared with ancillary directions. - HELD THAT: - Upon satisfaction of the existence of debt and default and the applicability of the threshold as on the date of default, the Tribunal admitted the Section 9 application and ordered commencement of CIRP. The Tribunal appointed an Interim Resolution Professional from the IBBI panel and directed him to file consent and authorization, take charge of management, make the public announcement, and call for claims as prescribed. A moratorium under Section 14 was declared with the statutory prohibitions; directions were also given regarding continuity of essential supplies, compliance by the IRP with statutory duties, and deposit by the Operational Creditor of an advance towards IRP fees and CIRP expenses to be ratified by the Committee of Creditors. [Paras 9, 10, 11, 13, 14]

Application admitted; CIRP ordered; IRP appointed and directed to act; moratorium declared; applicant directed to deposit advance towards CIRP costs.

Final Conclusion: The Tribunal admitted the Section 9 application, holding that the Operational Creditor had proved debt and default and that the subsequent enhancement of the monetary threshold was not applicable to defaults predating 24.03.2020; the Corporate Insolvency Resolution Process was ordered to commence, an Interim Resolution Professional appointed, the moratorium under Section 14 declared, and ancillary directions issued including payment of advance costs by the Applicant.

Abatement for material component - Service Tax (Determination of Value) Rules, 2006 - valuation of works contracts - original works vs repair/maintenance - amendment to valuation rules w.e.f. 1.10.2014 - apportionment of service tax liability between provider and corporate recipient (50%-50%) - penalty under Section 78

Abatement for material component - Service Tax (Determination of Value) Rules, 2006 - valuation of works contracts - repair and maintenance - Claim for abatement in respect of material component in works contract/repair and maintenance services was allowable and its rejection by the authorities was incorrect. - HELD THAT: - The Tribunal examined the nature of the contracts and the supporting work orders and bills on record which showed that the appellant carried out works contract/repair and maintenance alongside supply/use of materials. Rejection of the claim of abatement for the material component was held to be contrary to the Valuation Rules; the appellant's calculation of taxable value and admitted tax, made in accordance with the Service Tax (Determination of Value) Rules, 2006 (as amended), was accepted. The Tribunal therefore allowed the abatement claimed and disagreed with the lower authorities' denial of the same. [Paras 13, 14]

Abatement for the material component is allowable; appellant's calculation of admitted tax is accepted.

Apportionment of service tax liability between provider and corporate recipient (50%-50%) - Notification No.30/2012 ST - liability sharing where recipient is corporate - Liability to pay service tax was to be shared with the corporate recipients and only 50% of the computed service tax liability was payable by the appellant. - HELD THAT: - The Tribunal applied Notification No.30/2012 ST as reflected in the record, under which, where the recipient of service is a corporate entity, service tax liability is to be apportioned equally between the provider and the recipient. Having accepted the appellant's computation of taxable value, the Tribunal held that the appellant is liable to pay only 50% of the service tax so computed, the balance being payable by the corporate recipients. [Paras 14]

Appellant liable to pay only 50% of the service tax liability as per the notification; balance payable by corporate recipients.

Final Conclusion: The appeal is allowed; the impugned order is set aside insofar as it denied abatement and computed liability incorrectly. The appellant's computation of tax (as per the Valuation Rules) is accepted and, applying Notification No.30/2012 ST, the appellant is liable for only 50% of the service tax so computed; appellant entitled to consequential benefits in accordance with law; the question of limitation left open.

Appeal dismissed as infructuous - approved resolution plan by NCLT - finality of NCLAT order upholding NCLT - liberty to approach the Tribunal for grievance

Appeal dismissed as infructuous - approved resolution plan by NCLT - finality of NCLAT order upholding NCLT - Whether the appeal is rendered infructuous in view of the NCLT order approving the resolution plan and the NCLAT order upholding the same, warranting dismissal of the appeal. - HELD THAT: - The Tribunal noted that the appellant's corporate insolvency proceedings resulted in the committee of secured creditors' approved resolution plan being accepted by the NCLT by order dated 19th March, 2020, and that acceptance was upheld by the NCLAT by order dated 23.12.2020. The Tribunal referred to its earlier disposal of an appeal by the same appellant as infructuous on the basis of the NCLT/NCLAT orders and the authorities cited. In the light of the NCLT's approval of the resolution plan and the NCLAT's upholding of that approval, the Tribunal concluded that the present appeal had become infructuous and followed the earlier view to dismiss the appeal. The order preserves parity by granting liberty to both parties to approach the Tribunal in case of any grievance. [Paras 3, 4]

Appeal dismissed as infructuous with liberty to both sides to approach the Tribunal in case of any grievance.

Final Conclusion: The appeal is dismissed as infructuous because the NCLT-approved resolution plan was accepted and that acceptance was upheld by the NCLAT; both parties are granted liberty to approach the Tribunal for any grievance.

Levy of tax on transfer of goods involved in works contract - taxable turnover of works contract - computation under Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007 - deduction for labour and other non-transfer charges in valuation of works contract - remand for reassessment applying correct statutory methodology

Taxable turnover of works contract - computation under Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007 - deduction for labour and other non-transfer charges in valuation of works contract - Methodology adopted in the impugned assessments for computing value of works contract was incorrect and the taxable turnover must be determined in accordance with Rule 8(5) of the Rules. - HELD THAT: - The Court examined the assessments and the statutory scheme for levy under Section 5 of the Act and Rule 8(5) of the Rules. It observed that the assessing authority had computed a deemed sale value bringing the entirety of the contract to tax at the first stage, influenced by the fact that the petitioner had availed input tax credit for purchases. The learned Government Pleader accepted that there was no statutory basis for the methodology adopted in the impugned assessments. The Court held that the proper method for assessing turnover from works contracts is to apply Rule 8(5), which requires deduction of specified amounts (including labour and other charges not involving transfer of property in goods, or where not ascertainable, specified percentages) from total turnover to arrive at taxable turnover. Consequently, the impugned assessments based on the alternative methodology were set aside and required to be recomputed strictly in accordance with Rule 8(5). [Paras 6, 7, 8]

Impugned assessments set aside; taxable turnover to be recomputed de novo applying Rule 8(5) of the Rules.

Remand for reassessment applying correct statutory methodology - Assessments for the specified periods were remanded to the assessing authority for completion afresh with directions on conduct and timeframe. - HELD THAT: - The Court directed that the assessments for 2011-12, 2012-13 and 2013-14 be reopened and completed de novo by the assessing authority applying the methodology mandated by Rule 8(5). The petitioner was directed to appear before the assessing authority on the specified date without awaiting further notice and make submissions. The assessing authority was directed to complete the assessments within eight weeks from receipt of the order's copy. The remand was for fresh application of the statutory rule to the material on record and any submissions the petitioner may make; the Court did not decide ancillary factual determinations that may be required to apply the rule. [Paras 8, 9]

Writ petitions disposed by setting aside the impugned assessments and remanding them for reassessment in accordance with Rule 8(5); timetable and appearance directed.

Final Conclusion: The assessments dated 14.03.2019 for 2011-12, 2012-13 and 2013-14 are set aside; the assessing authority is to recompute taxable turnover for works contracts strictly applying Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007, and complete reassessment within the directed timeframe after the petitioner's submissions.

Obligation to supply report of Regional Vigilance and Enforcement - violation of principles of natural justice - remand for fresh consideration after furnishing vigilance material - limitation under Section 37 of A.P. VAT Act, 2005

Obligation to supply report of Regional Vigilance and Enforcement - violation of principles of natural justice - remand for fresh consideration after furnishing vigilance material - Assessment passed on material supplied by Regional Vigilance and Enforcement without furnishing that material to the assessee and without affording opportunity to object was contrary to principles of natural justice. - HELD THAT: - The Court relied on earlier Division Bench authorities holding that where an assessment is based on reports/material furnished by the Regional Vigilance and Enforcement Department, it is obligatory to supply such material to the assessee along with notice and invite objections before passing a revised assessment. The impugned order was found to have proceeded on material which was not supplied to the Petitioner and thus denied a fair opportunity to meet the case made out against him. On this short ground, without entering into the merits of the assessment, the Court set aside the impugned order and remanded the matter to the Assessing Authority to consider the case afresh after furnishing the vigilance report and affording the Petitioner an opportunity of filing objections and being heard. [Paras 12, 13]

Impugned assessment order set aside; matter remanded to Assessing Authority to proceed afresh after supplying the vigilance report and affording opportunity to the Petitioner.

Limitation under Section 37 of A.P. VAT Act, 2005 - Whether the assessment proceedings were barred by limitation. - HELD THAT: - The Court did not adjudicate the question of limitation on merits because the matter was remanded on the ground of nondisclosure of the vigilance material. The Petitioner was left free to raise the limitation plea before the Assessing Authority in the remanded proceedings. [Paras 13]

Issue of limitation left open for consideration by the Assessing Authority in the remanded proceedings; Petitioner permitted to raise the limitation defence there.

Final Conclusion: Writ petition allowed in part: impugned assessment set aside and remitted for fresh decision after supplying the vigilance report and affording opportunity to the Petitioner; limitation plea to be raised and considered before the Assessing Authority in the remanded proceedings; no costs.