TaxTMI Updates e-Newsletter
Oct 20,2021

Anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973 - power of arrest under Section 69 of the Gujarat Goods and Services Tax Act exercisable on 'reason to believe' - delegation of the Commissioner's powers to subordinate officers - non application of Sections 154-157 CrPC to arrests by authorised GST officers - custodial interrogation in serious economic offence investigations - applicability of constitutional safeguards in D.K. Basu to non police enforcement arrests - refusal of anticipatory bail in view of non cooperation and risk of tampering with evidence

Power of arrest under Section 69 of the Gujarat Goods and Services Tax Act exercisable on 'reason to believe' - delegation of the Commissioner's powers to subordinate officers - Whether the Commissioner may delegate the power to arrest under Section 69 and whether the delegatee's 'reasons to believe' suffice for exercise of that power. - HELD THAT: - The Court accepted the Division Bench precedent that Section 5(3) permits delegation and that the same 'reasonable belief' requirement operates in the hands of the delegatee. The Court held that delegation is permissible and that an authority to whom the Commissioner has validly delegated power may form the requisite 'reason to believe' and exercise arrest powers under Section 69, provided the delegatee's belief is based on cogent materials and credible information. The applicants' submission that only the Commissioner personally can form the belief was rejected in view of the cited precedent. [Paras 24, 25, 26]

Delegation is permissible and the delegatee's reasons to believe suffice for invoking Section 69.

Non application of Sections 154-157 CrPC to arrests by authorised GST officers - applicability of constitutional safeguards in D.K. Basu to non police enforcement arrests - Whether authorised GST officers must comply with Sections 154-157 CrPC or register FIR/seek magistrate's warrant before effecting arrest under Section 69, and the extent to which constitutional safeguards apply. - HELD THAT: - Relying on Division Bench decisions, the Court held that an authorised officer may arrest under Section 69 if he has reasons to believe an offence under Section 132 has been committed, and is not obliged to comply with Sections 154-157 CrPC at the arrest stage. The authorised officer must inform the arrested person of grounds and, where offences are cognizable and non bailable, take the person to a Magistrate without unnecessary delay. The Court reiterated that constitutional safeguards articulated in D.K. Basu apply to such arrests, but procedural provisions of the CrPC (154-157) are not mandatory prerequisites for the authorised officer to effect arrest under the GST scheme. [Paras 27, 28, 29]

Authorised GST officers need not follow Sections 154-157 CrPC or register an FIR prior to arrest under Section 69, though constitutional safeguards remain applicable.

Custodial interrogation in serious economic offence investigations - refusal of anticipatory bail in view of non cooperation and risk of tampering with evidence - Whether, on the facts of this case, anticipatory bail should be granted or refused, having regard to the nature of allegations, magnitude of alleged tax evasion and the applicants' conduct. - HELD THAT: - The Court examined the prosecution material and prior orders. It observed allegations of extensive transactions involving numerous dummy firms, large scale receipts and withdrawals, arrests of other persons and material recovered during investigation. The Court found custodial interrogation to be necessary in light of the prosecution case, the magnitude of the alleged tax liability and the prosecution's claim that the applicants had given evasive replies and had not cooperated despite directions. The Court also noted precedents where the Supreme Court declined bail in prolonged custody in comparable large scale fraud prosecutions. Considering seriousness of charges, likelihood of tampering with evidence and non cooperation, the Court declined to exercise its discretion in favour of anticipatory bail. [Paras 34, 35, 36, 38, 40]

Anticipatory bail refused; custodial interrogation justified and discretion to grant pre arrest bail is not exercised in applicants' favour.

Final Conclusion: The applications for anticipatory bail under Section 438 CrPC are dismissed. The rule is discharged.

Opportunity of personal hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - principles of natural justice

Opportunity of personal hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - principles of natural justice - Whether the appellant was denied the opportunity of personal hearing as mandated by Section 75(4) and whether there was a violation of principles of natural justice. - HELD THAT: - The Court found that notices fixing personal hearings were issued to the appellant (initially for 04.12.2020 and subsequently for dates in December 2020). On 04.12.2020 the appellant neither filed objections nor appeared; a further notice invited objections and fixed a hearing for 14.12.2020. On 14.12.2020 the appellant's representative sought an adjournment of 15 days which was granted. The appellant was thereafter called for hearing and to file objections on 29.12.2020 but did not avail the opportunity. Although the appellant appeared and filed objections on 30.12.2020, the material shows that the respondent had repeatedly given opportunities and accepted an adjournment request, thereby complying with the procedural mandate of Section 75(4). The Court held that no infringement of the principles of natural justice is established where the authorities had afforded multiple chances and the appellant chose not to avail them. [Paras 5, 7]

The appellate challenge that no personal hearing was afforded and that principles of natural justice were violated is rejected.

Final Conclusion: The Writ Appeals are dismissed for lack of merit; the Single Judge's orders are affirmed. No costs; connected miscellaneous petitions closed.

Interim bail - custodial investigation not required - offences triable by Magistrate - furnishing bail/surety bonds

Interim bail - custodial investigation not required - offences triable by Magistrate - furnishing bail/surety bonds - Petitioner released on interim bail pending trial. - HELD THAT: - The petitioner, who has been in custody since 03.08.2021, was held not to be required for further custodial investigation and the offences alleged are triable by the Court of a Magistrate. In view of these circumstances and the pendency of proceedings, the High Court directed the petitioner's release on interim bail until the next listed date, subject to his furnishing bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate. The Court did not adjudicate the merits of the allegations or other contested legal contentions in the petition but granted interim relief to secure the petitioner's release pending adjudication.

Petitioner released on interim bail subject to furnishing bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate.

Final Conclusion: Interim bail granted to the petitioner as custodial detention was unnecessary and the offences are triable by a Magistrate; release subject to bail/surety bonds with matter listed for further proceedings.

Filing/revising TRAN-1 - like cases decided alike - grant of time for compliance

Filing/revising TRAN-1 - grant of time for compliance - Permission granted to the petitioner to file or revise TRAN-1 within a specified time period. - HELD THAT: - The Court applied the principle that like cases should be decided alike and followed the Division Bench decision in W.A. No. 461/2020 (T-RES) between Union of India and others v. M/s AT and S India Pvt. Ltd., which had allowed assesses thirty days' time to submit their TRAN-1. Observing that the petitioner is similarly circumstanced to the respondent in that writ appeal, the Court held that there was no reason to deny the same relief. Consequently, respondents were directed to permit the petitioner to file or revise TRAN-1 either electronically or manually within thirty days. [Paras 2]

Writ petition allowed in part; respondents directed to permit filing/revision of TRAN-1 within thirty days.

Like cases decided alike - Application of the Division Bench precedent to the present petition. - HELD THAT: - The Court relied on the earlier Division Bench order as a bindingly persuasive precedent for similarly placed parties. The principle of uniformity in disposing of like cases was invoked to justify extending the same thirty-day relief to the petitioner as was granted in W.A. No. 461/2020 (T-RES). No separate adjudication on the merits of TRAN-1 eligibility was undertaken; the relief was accorded on parity with the prior decision. [Paras 1, 2]

Relief granted by application of the earlier Division Bench decision; petitioner permitted thirty days to submit TRAN-1.

Final Conclusion: Writ petition allowed in part; respondents directed to permit the petitioner to file or revise TRAN-1, electronically or manually, within thirty days in view of the Division Bench precedent and the principle of treating like cases alike.

Advance ruling - maintainability under Section 95 - supply of goods versus supply of services - supply undertaken by the applicant - completed supply (past transaction) - reverse charge mechanism

Advance ruling - maintainability under Section 95 - supply undertaken by the applicant - completed supply (past transaction) - Application for advance ruling rejected as non-maintainable under Section 95 of the CGST Act, 2017. - HELD THAT: - Section 95(a) requires that an advance ruling request relate to a decision on questions in respect of a supply of goods or services being undertaken or proposed to be undertaken by the applicant. Two conditions therefore must be satisfied: (i) the supply in question must be undertaken by the applicant, and (ii) the supply must be being undertaken or proposed to be undertaken at the time of filing. The Deed of Assignment dated 30 November 2019 shows that Novartis AG (NAG) - not the applicant - undertook the supply, and the effective date of transfer was 10 December 2019. The application was filed on 16 January 2020 after the effective date and after consideration had been paid; accordingly, the subject transfer was a past and completed transaction on the date of filing. Both statutory conditions for maintainability under Section 95 therefore were not satisfied. The Authority declined to adjudicate the substantive questions on classification or reverse charge for this reason and did not proceed to answer the second and third questions. [Paras 5, 6]

Application rejected as non-maintainable under Section 95 because the supply was undertaken by a third party and was completed prior to filing.

Final Conclusion: The Authority refused to admit the advance ruling application and answered the questions by rejecting the application as non maintainable under Section 95 of the CGST Act, 2017; the substantive issues on classification of the trademark transfer and liability under reverse charge were not decided.

Penalty under Section 271(1)(c) - computation of book profit under Section 115JB - concealment of particulars of income or furnishing inaccurate particulars - attempt to reduce tax liability by claiming wrong deduction - revision of assessment under Section 263

Penalty under Section 271(1)(c) - computation of book profit under Section 115JB - concealment of particulars of income or furnishing inaccurate particulars - Validity of imposition of penalty under Section 271(1)(c) for alleged failure to compute and furnish particulars of book profit under Section 115JB in the return of income. - HELD THAT: - The court upheld the concurrent findings of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal that the penalty imposed by the Assessing Officer was not justified. The judgment notes that particulars enabling computation of book profit were in fact available to Revenue - the Commissioner in his revision order observed the book profit figure and triggered reassessment - and that, had any particulars been absent, the Assessing Officer would have called for them during original assessment. Further, the court held that omission to compute book profit in the return, or filing a return showing tax on income computed under normal provisions, does not, by itself, constitute 'concealment of particulars of income' or 'furnishing inaccurate particulars' under the penalty provision. Likewise, an allegation of an attempt to reduce tax liability by claiming a deduction does not ipso facto amount to concealment or inaccurate particulars. Applying these principles to the facts, the Tribunal's deletion of the penalty was not perverse and did not involve incorrect legal principles.

Tribunal's order deleting penalty under Section 271(1)(c) upheld; penalty not sustainable as there was no concealment or furnishing of inaccurate particulars in respect of computation under Section 115JB.

Final Conclusion: The appeal is dismissed; the deletion of the penalty imposed under Section 271(1)(c) is sustained and no order as to costs is made.

Reopening of assessment for escaped income - Requirement of a speaking order while disposing objections to a notice under section 148 - Independent application of mind by the Assessing Officer - Remand for fresh disposal of objections - Quashing of assessment order for procedural infirmity

Requirement of a speaking order while disposing objections to a notice under section 148 - Independent application of mind by the Assessing Officer - The order disposing of the assessee's objections to the reopening notice does not satisfy the requirement of being a speaking order reflecting application of mind. - HELD THAT: - The Court examined the order dated 27.07.2021 disposing of objections and found it cryptic and devoid of reasons showing the Assessing Officer's application of mind. While not requiring an elaborate essay, the disposing order must record clear and specific conclusions and reasoning so as to demonstrate a quasi judicial satisfaction and to convey to the assessee why objections are rejected. The Court relied on precedent emphasising that disposal of objections is not a mere formality and must deal with the contentions raised, and held that the impugned order failed to do so. For that reason the matter requires fresh considered disposal rather than being allowed to stand as a basis for final assessment. [Paras 17]

Order disposing objections dated 27.07.2021 set aside and remitted to the Assessing Officer for fresh speaking disposal in accordance with law.

Quashing of assessment order for procedural infirmity - Reopening of assessment for escaped income - The assessment order passed on 28.09.2021 was quashed because it was finalized after the impugned non-speaking disposal of objections and without proper consideration of the objections as required by law. - HELD THAT: - The Court recorded that disposal of objections was a mandatory step before proceeding to finalise assessment; since the objections were not dealt with by a speaking order, the subsequent assessment order could not stand. The Court did not decide the merits of the reopening on the question of escapement of income, but held that the procedural infirmity in the disposal of objections vitiated the assessment order, necessitating its quashing. The Court therefore quashed the assessment order while leaving the inquiry into merits open for fresh action after proper disposal of objections. [Paras 20, 21]

Assessment order dated 28.09.2021 quashed and set aside; matter remitted for further action after proper disposal of objections.

Reopening of assessment for escaped income - Remand for fresh disposal of objections - The notice under section 148 was not quashed; the Court directed that objections be decided afresh and allowed the Assessing Officer to proceed thereafter in accordance with law. - HELD THAT: - Although the Court found the disposal of objections defective and quashed the consequent assessment order, it declined to quash the initial notice under section 148. The Court observed that it had not entered into merits regarding whether income had escaped assessment. It directed the Assessing Officer to decide the objections within two weeks; if the outcome is prejudicial to the assessee, the assessee is to be granted two weeks more to challenge it, failing which the Assessing Officer may conclude assessment within four weeks thereafter. Thus the reopening notice remains effective subject to fresh, reasoned disposal of objections and subsequent proceedings. [Paras 19, 21]

Notice under section 148 retained; Assessing Officer to pass a speaking order on objections within the stipulated timeline and thereafter proceed in accordance with law.

Final Conclusion: The Court quashed and set aside the order disposing objections and the consequent assessment order, remitted the objections to the Assessing Officer for fresh speaking disposal within a short stipulated timeline, retained the reopening notice under section 148, and permitted the Assessing Officer to proceed thereafter in accordance with law without prejudice to the parties' rights on merits.

Reopening of assessment beyond four years - reason to believe that income has escaped assessment - failure to disclose fully and truly all material facts - change of opinion - tangible material - proviso to Section 147 (pre-amendment)

Reopening of assessment beyond four years - failure to disclose fully and truly all material facts - change of opinion - tangible material - proviso to Section 147 (pre-amendment) - Validity of notice issued under Section 148 read with Section 147 to reopen assessment for Assessment Year 2012-13 after more than four years - HELD THAT: - The Court examined the reasons recorded for reopening and the material before the Assessing Officer and applied the legal tests laid down by the Supreme Court (as discussed in Calcutta Discount Co. Ltd.) and this Division Bench's earlier decision in Ananta Landmark Pvt. Ltd. The proviso to Section 147 applicable to the present case requires that, where more than four years have elapsed, the Assessing Officer must identify tangible material showing both (i) escapement of income and (ii) failure by the assessee to truly and fully disclose all material facts necessary for assessment. The Court found that the Assessing Officer relied on the petitioner's audited accounts and the very figures disclosed therein to contend that a deduction under Section 57 was wrongly claimed, but did not point to any primary fact that was not disclosed or any part of the accounts that was concealed. There was no articulation of what material fact was not truly and fully disclosed; instead the reasons disclose only a change of opinion about the correctness of a claim. The Court held that mere reliance on figures in the audited accounts or reworking of admitted figures does not constitute tangible undisclosed material sufficient to invoke the proviso. Where the Assessing Officer had admitted that details were fully disclosed and the reopening is prompted by a change of opinion on computation of a deduction, the jurisdictional requirement for reopening after four years is not satisfied. Applying these principles to the facts, the Court concluded that the statutory condition precedent for reopening was not fulfilled. [Paras 13, 14, 15, 16, 17]

Notice dated 26.03.2019 under Section 148 and order dated 30.09.2019 rejecting objections are quashed and set aside for failure to demonstrate non-disclosure of primary material facts necessary to justify reopening after four years.

Final Conclusion: The petition is allowed; the reassessment notice dated 26.03.2019 and the order dated 30.09.2019 are quashed and set aside for want of jurisdiction to reopen the Assessment Year 2012-13 beyond four years where only a change of opinion and no undisclosed primary material was shown.

Allowability of interest expense for business purposes under section 36(1)(iii) - Genuineness of business purpose for deduction of interest - Use of borrowed funds for investment and disallowance - Financial health of the assessee not determinative of allowability of expense - Reliance on precedent in testing allowability of expenditure

Allowability of interest expense for business purposes under section 36(1)(iii) - Genuineness of business purpose for deduction of interest - Use of borrowed funds for investment and disallowance - Financial health of the assessee not determinative of allowability of expense - Whether the disallowance of interest of Rs. 30,00,000/- under section 36(1)(iii) was justified - HELD THAT: - The Tribunal accepted the assessee's characterisation as a company engaged in finance and investment and found that the interest paid was incurred for the purpose of earning interest income, which the assessee had disclosed and offered to tax. The Revenue did not controvert that interest receipts of Rs. 30,27,571/- were offered as business income, nor could it controvert the rates at which funds were borrowed and lent. The Tribunal observed that mere financial weakness or the existence of losses is not a ground to deny an otherwise proved business expenditure and relied on the principle in the cited Delhi High Court decision that financial health is not a criterion to judge allowability of an expense. Having regard to the nature of the assessee's business, the inclusion of interest income in taxable income, and that own capital and free reserves exceeded the investments, the Tribunal concluded that the AO/CIT(A) had no basis to disallow the interest. Consequently, the addition was set aside and the AO was directed to delete the disallowance. [Paras 9, 10, 11, 12]

Addition of interest of Rs. 30,00,000/- under section 36(1)(iii) is deleted and the appeal is allowed.

Final Conclusion: The Tribunal held that interest paid was for the purpose of the assessee's finance and investment business, the revenue did not rebut the assessee's case, and following relevant precedent the disallowance under section 36(1)(iii) was set aside; the appeal is allowed.

Deductibility under section 37(1) read with Explanation thereto - expenditure for a purpose which is prohibited by law - Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - rule 6.8.1 - section 20A of the Indian Medical Council Act, 1956 - precedential value of coordinate bench decisions vis-a -vis higher court rulings - CBDT circular No. 05/2012 - interpretative role (not binding on appellate fora) - reference to a larger bench under judicial discipline principles

Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - rule 6.8.1 - section 20A of the Indian Medical Council Act, 1956 - deductibility under section 37(1) read with Explanation thereto - Deletion of disallowance of sales-promotion expenditures (freebies to medical professionals) in assessment years 2011-12 and 2012-13 - HELD THAT: - The Tribunal found on the material before it that the assessee had incurred substantial expenditures by way of corporate gifts, sponsored travel, gift cards, journals and medical instruments for medical professionals. Rule 6.8.1 framed under section 20A of the Indian Medical Council Act, 1956 prohibits medical practitioners from accepting such freebies. The Explanation to section 37(1) denies deduction for any expenditure incurred for a purpose which is prohibited by law. The Bench held that the relevant MCI regulations, having statutory backing, render acceptance of such freebies unlawful and hence any expenditure incurred for that prohibited purpose cannot be treated as incurred 'wholly and exclusively' for business and is not deductible under section 37(1). The Tribunal further observed that the CBDT circular is interpretative and not binding on appellate fora, but where a higher court (Hon'ble Himachal Pradesh High Court) has endorsed the circular's interpretation of the Explanation to section 37(1), that view is authoritative and must be followed. The Bench rejected the reasoning of coordinate-bench precedents relied upon by the CIT(A) to sustain the deletion, noting judicial discipline requires inferior fora to yield to the higher forum's view and that conflicting coordinate-bench decisions call for reconsideration by a larger bench. Applying these principles to the facts, the Tribunal held the Assessing Officer's disallowance could not be faulted. [Paras 1, 7, 19]

The deletion of the disallowance by the CIT(A) was unsustainable; the Assessing Officer's disallowance in respect of freebies to medical professionals for AYs 2011-12 and 2012-13 is upheld.

Precedential value of coordinate bench decisions vis-a -vis higher court rulings - reference to a larger bench under judicial discipline principles - CBDT circular No. 05/2012 - interpretative role (not binding on appellate fora) - Whether the conflicting coordinate-bench jurisprudence on disallowance of freebies to medical practitioners requires reference to a larger bench - HELD THAT: - The Bench noted a clear conflict among coordinate-bench decisions - some following PHL Pharma and related rulings that declined disallowance, and others (including Liva Healthcare) upholding it. Given that a High Court (Hon'ble Himachal Pradesh High Court) has interpreted the Explanation to section 37(1) consistently with the CBDT circular and that such higher-court views have persuasive/authoritative effect on the Tribunal, the Bench considered the divergence of coordinate-bench precedents to be substantial. Relying on principles of judicial hierarchy and the competence of tribunal members to doubt earlier decisions where necessary, the Bench held that the legal question of whether expenditure on freebies to medical professionals hit by rule 6.8.1 and section 20A can be allowed under section 37(1) merits consideration by a Special (larger) Bench. [Paras 8, 11, 12, 24]

The matter is fit for reference; the record is directed to be placed for constitution of a Special Bench of three or more members to decide the stated question.

Final Conclusion: For the facts before it, the Tribunal held that the CIT(A) erred in deleting the disallowance of sales-promotion expenditures attributable to freebies given to medical professionals for AYs 2011-12 and 2012-13, and upheld the Assessing Officer's disallowance; observing conflicting coordinate-bench precedents on the legal question, the Tribunal directed constitution of a Special Bench to determine whether expenditures on freebies to medical professionals hit by rule 6.8.1 read with section 20A can be allowed as deductions under section 37(1) read with the Explanation.

Proviso to section 2(15) - charitable purpose test and dominant motive - entitlement to exemption under section 11 where dominant objective is not profit-making - allowance of depreciation notwithstanding capital cost treated as application of income - prospective amendment by Finance (No.2) Act, 2014 inserting section 11(6) effective from AY 2015-16

Proviso to section 2(15) - charitable purpose test and dominant motive - entitlement to exemption under section 11 where dominant objective is not profit-making - Assessee not hit by the proviso to section 2(15) for the assessment year 2009-2010 and entitled to exemption under section 11. - HELD THAT: - The Tribunal applied its earlier decision in the assessee's own case for AYs 2010-11 to 2014-15, adopting the principles laid down by the Hon'ble Delhi High Court in India Trade Promotion Organization regarding interpretation of the proviso to section 2(15). The decisive test is whether the institution is driven primarily by a profit motive; incidental commercial or non-traffic revenue does not alter the charitable character where the dominant object remains public utility. Considering the statutory framework under the RTC Act, 1950 (duties to provide public transport, state-fixed fares, requirement to use profits for road development) and findings that the corporation is not profit-driven, the proviso does not apply. The Assessing Officer was therefore directed to grant exemption under section 11 for the relevant year. [Paras 5]

Proviso to section 2(15) held inapplicable; exemption under section 11 to be granted for AY 2009-2010.

Allowance of depreciation notwithstanding capital cost treated as application of income - prospective amendment by Finance (No.2) Act, 2014 inserting section 11(6) effective from AY 2015-16 - Disallowance of depreciation disallowed by Assessing Officer set aside; depreciation allowable for AY 2009-2010 even though cost was allowed as application of income. - HELD THAT: - The Tribunal followed precedents (including decisions of High Courts and the Supreme Court's treatment in subsequent cases) holding that depreciation is deductible in computing income of charitable institutions and does not amount to a prohibited double benefit. The decision relied on earlier ITAT rulings and the Supreme Court's confirmation in CIT v. Rajasthan & Gujarati Charitable Foundation Poona that depreciation is allowable where cost was earlier treated as application. The amendment introducing section 11(6) by Finance (No.2) Act, 2014 disallows such depreciation prospectively from AY 2015-16; it does not affect AY 2009-2010. Accordingly the Assessing Officer was directed to allow depreciation. [Paras 6]

Depreciation to be allowed for AY 2009-2010 despite prior allowance of asset cost as application of income; prospective amendment to section 11(6) not applicable.

Final Conclusion: Appeal partly allowed: exemption under section 11 granted for AY 2009-2010 by holding proviso to section 2(15) inapplicable; depreciation allowed for AY 2009-2010 as amendment to section 11(6) is prospective from AY 2015-16.

Principles of natural justice - requirement of providing material and opportunity to cross-examine - reliance on statements recorded during search - use of investigation reports and third party statements as basis for additions - exemption under section 10(38) of the Income tax Act - addition as unexplained income/receipt under section 68 and unexplained expenditure under section 69C

Principles of natural justice - requirement of providing material and opportunity to cross-examine - use of investigation reports and third party statements as basis for additions - Whether additions made on the basis of material gathered behind the assessee without supplying that material or affording opportunity of cross examination violated principles of natural justice and therefore were unsustainable. - HELD THAT: - The Tribunal found that material relied upon by the AO (investigation reports and statements gathered in search proceedings) was not placed before the assessee nor was any opportunity given to cross examine third parties whose statements were used against him. The assessment relied upon such behind the assessee material without enabling the assessee to controvert it. Judicial precedents require that where adverse inferences are drawn from third party statements or documentary material gathered without confronting the assessee, the assessee must be given an opportunity to examine and rebut that material. On the facts, no such opportunity or supply of material is shown and the reliance on un supplied investigation reports/third party statements is a violation of natural justice. [Paras 8]

Additions of Rs. 2,85,12,276 and Rs. 8,00,000 are unjustified for want of compliance with principles of natural justice and are deleted.

Reliance on statements recorded during search - use of investigation reports and third party statements as basis for additions - Whether the additions were made solely on the basis of the assessee's statement recorded during search or on independent enquiries and material sufficient to sustain the additions. - HELD THAT: - The Tribunal examined the assessment file and noted that the AO had carried out further enquiries - calling purchaser details, obtaining inspector reports about purchasers and bank accounts, and referring to material gathered before the search (albeit not specifically related to the assessee). The Tribunal held that, on the facts, the additions were not founded purely on the retracted statement made during search, since the AO relied on additional enquiries and gathered materials. The Tribunal also observed that some judicial decisions cited by the assessee were distinguishable on facts. [Paras 9]

The contention that additions were based solely on the retracted search statement is rejected; this legal issue is dismissed.

Exemption under section 10(38) of the Income tax Act - addition as unexplained income/receipt under section 68 and unexplained expenditure under section 69C - Whether the long term capital gain claimed from sale of Premier Capital Services Ltd. shares qualified for exemption under section 10(38) and whether the alleged commission/expenditure required addition. - HELD THAT: - On the material placed before the authorities and the Tribunal, the assessee held the shares for more than one year, sold them through a recognized stock exchange, paid securities transaction tax and received sale consideration through banking channels with contract notes and demat records. The Tribunal also relied on a coordinate Bench decision dealing with transactions in the same scrip which accepted the 10(38) claim where the assessee had furnished documentary proof and the AO had not supplied or confronted the investigative material. Applying those findings and considering the documentary chain (preferential allotment, demat entries, contract notes, bank credits and STT payment), the Tribunal concluded that the conditions of section 10(38) were fulfilled and no independent evidence sustained the claim of unexplained commission/expenditure. [Paras 10]

Exemption under section 10(38) is allowed and the additions of Rs. 2,85,12,276 and Rs. 8,00,000 are deleted.

Final Conclusion: The appeal is partly allowed: additions of Rs. 2,85,12,276 and Rs. 8,00,000 are deleted on the combined grounds of violation of principles of natural justice and on merits that the long term capital gain qualified for exemption under section 10(38); other legal contentions regarding reliance on search statements were examined and, where appropriate, dismissed.

Transfer pricing adjustment - specified domestic transaction - omission of clause (i) of section 92BA - reference to Transfer Pricing Officer (TPO) - effect of omission as repeal and application of General Clauses Act - re-examination of expenditure under section 40A(2)

Transfer pricing adjustment - specified domestic transaction - omission of clause (i) of section 92BA - reference to Transfer Pricing Officer (TPO) - effect of omission as repeal and application of General Clauses Act - Validity of reference to the TPO and consequential transfer pricing adjustment in respect of specified domestic transactions covered by clause (i) of section 92BA - HELD THAT: - The Tribunal held that clause (i) of section 92BA has been omitted by a subsequent Finance Act and, following the reasoning of the coordinate bench and the High Court of Karnataka, the omission renders the provision as not in the statute for purposes of reference to the TPO. In view of authoritative decisions considered by the Tribunal, the reference made by the AO to the TPO under the now-omitted clause (i) of section 92BA and the consequential TPO/DRP orders are invalid. The Tribunal therefore deleted the transfer pricing addition arising solely from the reference under clause (i) of section 92BA and did not sustain the adjustment made by the AO/TPO. [Paras 6]

Reference to the TPO in respect of specified domestic transactions under clause (i) of section 92BA is not valid; the transfer pricing adjustment is not sustainable.

Re-examination of expenditure under section 40A(2) - remand to Assessing Officer - Procedure to be followed after invalidating the TPO reference - HELD THAT: - Having held the reference to the TPO invalid, the Tribunal directed that the Assessing Officer should re-adjudicate the claim of expenditure afresh under the ordinary provisions of law, specifically in accordance with section 40A(2). The Tribunal restored the matter to the file of the AO for examination of the expenditure and afforded the AO liberty to proceed after giving the assessee opportunity of being heard; the Tribunal did not decide the merits of the expenditure itself. [Paras 6]

Matter remanded to the Assessing Officer to examine the claim of expenditure in accordance with section 40A(2) of the Act.

Final Conclusion: Transfer pricing adjustment made pursuant to reference under the omitted clause (i) of section 92BA is unsustainable; the addition is deleted and the issue is remitted to the Assessing Officer for fresh adjudication of the expenditure under section 40A(2).

Capital loss on investment - deduction as business loss under Section 37(1) - allowability of bad debts / deduction under Section 36(2) and Section 37(1) - cessation of liability under Section 41(1) - remand for fresh consideration to the Assessing Officer

Capital loss on investment - deduction as business loss under Section 37(1) - Treatment of Rs. 5,00,00,000 advanced to M/s Blue Ocean Cruises Lines Pvt. Ltd. - revenue (business) loss or capital loss - HELD THAT: - The Tribunal examined the nature and purpose of the Rs.5 crore advance and the surrounding factual matrix and precedent relied upon by the assessee. Unlike cases where advances to a wholly owned subsidiary were held to be for business expansion and therefore revenue in nature, the material here showed that the advance was made with a view to acquiring shares and creating a capital holding. The Tribunal noted the distinction drawn by the Karnataka High Court in United Breweries Ltd., that advances made essentially to secure shares or in contemplation of future issuance of shares amount to capital expenditure and do not qualify as revenue deduction under s.37(1) or as bad debts under s.36(2). Applying that principle to the present facts, the Tribunal found the claim was in the nature of a capital loss and not allowable as a business loss. [Paras 7, 8, 9]

Claim in respect of the Rs.5 crore advance is a capital loss; the ground is dismissed.

Admission of additional grounds - deduction as business loss under Section 37(1) - Admissibility of additional grounds and their effect on the claim regarding investments - HELD THAT: - Relying on the Supreme Court precedent cited (NTPC) the Tribunal admitted the additional grounds because no fresh facts required investigation. However, the Tribunal observed that the additional ground seeking to recharacterise the investment loss as business loss could not succeed in light of its earlier concluded finding that the investment loss was capital in nature. Accordingly, while the additional ground was admitted procedurally, it was dismissed on merits insofar as it related to the treatment of the investment loss. [Paras 11, 12]

Additional ground admitted; the claim to treat the investment loss as business loss is dismissed as the loss is held to be capital in nature.

Allowability of bad debts / deduction under Section 36(2) and Section 37(1) - remand for fresh consideration to the Assessing Officer - Claim for write off of Lee deposits (MDLR Airlines) and miscellaneous deposits as bad debts / business loss - HELD THAT: - The assessee had originally claimed these items under s.36(2) before the lower authorities, who disallowed them. Before the Tribunal the assessee sought deduction under s.37(1), and the Tribunal observed that the lower authorities had not examined the claim under s.37(1). In the interest of justice and because the necessary evidentiary details (names and addresses of parties, confirmations, etc.) must be placed on record, the Tribunal remitted these specific issues to the Assessing Officer for fresh consideration and directed the assessee to produce necessary evidence. [Paras 16]

Claims relating to Lee deposits and miscellaneous deposits remitted to the Assessing Officer for fresh adjudication on merits with directions to the assessee to place requisite evidence.

Cessation of liability under Section 41(1) - Confirmation of addition of Rs.1,28,301 under the cessational liability provision - HELD THAT: - The Tribunal noted that the amount represented outstanding entries in the assessee's books from five parties for which no confirmations or supporting evidence were produced before the authorities or the Tribunal. On the basis of absence of evidence to show that the liabilities subsisted on the balance sheet date, the Tribunal upheld the lower authorities' invocation of the cessational liability provision and agreed that the amounts constituted income by way of cessation of liability. [Paras 17, 18, 19]

Addition of Rs.1,28,301 under the cessational liability provision is confirmed.

Final Conclusion: The appeal is partly allowed: the claim of Rs.5 crore advance is held to be a capital loss and rejected as business loss; the Tribunal admitted an additional ground but dismissed it on merits insofar as it sought recharacterisation of the investment loss; claims in respect of Lee deposits and miscellaneous deposits are remitted to the Assessing Officer for fresh consideration on production of evidence; the addition under the cessational liability provision is confirmed. The appeal is disposed of accordingly.

Revisionary power under section 263 of the Income-tax Act - erroneous and prejudicial to the interest of the revenue - lack of inquiry versus inadequate inquiry - duty of the Assessing Officer as investigator to verify returns - relevance of Transfer Pricing Officer's report in assessment

Revisionary power under section 263 of the Income-tax Act - erroneous and prejudicial to the interest of the revenue - lack of inquiry versus inadequate inquiry - relevance of Transfer Pricing Officer's report in assessment - duty of the Assessing Officer as investigator to verify returns - Whether the Principal Commissioner was justified in exercising jurisdiction under section 263 to set aside the assessment completed under section 143(3) read with section 153A for AY 2011-12 on the ground that the assessment was erroneous and prejudicial to the interest of the revenue for lack of inquiry and for not awaiting the TPO report. - HELD THAT: - The Tribunal found the material facts undisputed: a reference to the Transfer Pricing Officer (TPO) had been made in July 2013, the search was in September 2013, and the Assessing Officer completed the assessment accepting the returned income without awaiting the TPO report. The assessee failed to produce evidence that the AO had inquired into and satisfied himself about the arm's length nature of the international transactions before accepting the return. Citing settled precedents, the Bench emphasised the distinction between an inadequate inquiry and a lack of inquiry - only in cases of lack of inquiry (or where the order is unsustainable in law) can the Commissioner exercise revisionary powers under section 263. The Tribunal held that when circumstances require further inquiry, the AO, as investigator, must verify facts in the return; failure to do so renders the order "erroneous" within the meaning of section 263. On the facts, the AO's acceptance of the return without waiting for the TPO report and without demonstrable inquiry amounted to lack of inquiry. Consequently, the Principal Commissioner was entitled to set aside the assessment and direct reconsideration by the AO after taking into account the TPO report. The Tribunal, therefore, upheld the Pr. CIT's order under section 263. [Paras 5]

The exercise of power under section 263 was justified; the assessment order was set aside for lack of inquiry and for not considering the TPO report, and the Pr. CIT's order was upheld.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the Principal Commissioner's revision under section 263: the assessment for AY 2011-12 was erroneous and prejudicial to revenue for lack of inquiry and for not awaiting the TPO report, and the matter stands remitted for fresh consideration by the Assessing Officer.

Validity of reference for special audit under section 142(2A) of the Income-tax Act, 1961 - assessment barred by limitation due to invalid special audit reference - jurisdiction of the Tribunal to examine validity of a section 142(2A) reference for the limited purpose of deciding time-bar - extended time taken on account of special audit not to be reckoned if reference is invalid

Validity of reference for special audit under section 142(2A) of the Income-tax Act, 1961 - assessment barred by limitation due to invalid special audit reference - extended time taken on account of special audit not to be reckoned if reference is invalid - Reference made by the Assessing Officer for special audit u/s. 142(2A) was invalid and the assessments completed in extended time are barred by limitation. - HELD THAT: - The Tribunal found that the facts and reasons for the reference in the present cases were identical to those in M/s Sunder Mal Satpal, where the ITAT held the reference under section 142(2A) to be not in accordance with law because no requisite complexity in accounts was demonstrated. The AO's common letter directing special audit showed identical purposes and reasons, which the Tribunal found insufficient. Following the coordinate ITAT decision and subsequent dismissal of the Revenue's miscellaneous application, and having regard to decisions permitting examination of the 142(2A) reference when limitation is challenged, the Tribunal held that the extended period invoked on account of the special audit could not be counted. Consequently, the assessment orders passed beyond the original limitation period are time-barred and must be set aside. [Paras 9, 15]

Reference for special audit under section 142(2A) was invalid; assessments passed in extended time are barred by limitation and appeals allowed.

Jurisdiction of the Tribunal to examine validity of a section 142(2A) reference for the limited purpose of deciding time-bar - ITAT has jurisdiction to examine the validity of the order directing special audit under section 142(2A) for the limited purpose of deciding whether the assessment is barred by limitation. - HELD THAT: - The Tribunal considered the Revenue's contention that it lacked jurisdiction, relying on apex court dicta, but noted that coordinate benches and the Delhi High Court have held that while an order under section 142(2A) is not generally appealable, the Tribunal may examine its validity when an assessment is challenged as time-barred. The ITAT in the Sunder Mal Satpal matter rejected the Revenue's miscellaneous application raising the jurisdiction point. On this basis and on the authorities applying Rajesh Kumar/Sahara India in a limited manner, the Tribunal concluded it was empowered to adjudicate the reference's validity for the purpose of determining limitation. [Paras 11, 13]

Tribunal has jurisdiction to consider the validity of the 142(2A) reference insofar as it is necessary to decide whether the assessment is time-barred.

Final Conclusion: Appeals allowed: the references for special audit under section 142(2A) were held invalid on the facts, the assessments completed in extended time were barred by limitation, and the Tribunal acted within jurisdiction in examining the 142(2A) references for that limited purpose.

Disallowance under section 36(1)(va) read with section 2(24)(x) - remittance of employees' contribution before filing return u/s. 139(1) - prospective operation of explanation inserted by Finance Act, 2021 - jurisdiction of revisional power under section 263 - plausible view doctrine - precedential effect of jurisdictional High Court decision

Disallowance under section 36(1)(va) read with section 2(24)(x) - remittance of employees' contribution before filing return u/s. 139(1) - prospective operation of explanation inserted by Finance Act, 2021 - jurisdiction of revisional power under section 263 - plausible view doctrine - precedential effect of jurisdictional High Court decision - Validity of the Ld. PCIT's invocation of revisionary jurisdiction under section 263 to set aside the assessment for not disallowing employee contributions where those contributions were deposited before filing the return. - HELD THAT: - The Tribunal found on the record that the Assessing Officer had taken a view not to disallow the employees' contribution because the assessee had deposited the contributions to PF and ESI before filing the return u/s. 139(1), a fact discernible from the PCIT's own chart. The Tribunal noted that the issue is covered by the binding view of the jurisdictional High Court in Vijayshree Ltd. and by the Tribunal's earlier coordinate decisions holding that the explanation inserted by the Finance Act, 2021 operates prospectively and cannot upset pre-2021 assessment years. Because the AO's conclusion was consistent with relevant precedent and constituted a plausible view, the Ld. PCIT could not exercise revisionary power under section 263 merely to prefer an alternative view. Invoking Malabar Industrial Co. Ltd. (plausible view bar to s.263 interference), the Tribunal held that absence of a conclusion unsustainable in law precluded exercise of revisional jurisdiction, rendering the PCIT's order beyond jurisdiction. [Paras 5, 6]

The Ld. PCIT's order under section 263 is without jurisdiction and is quashed; the AO's view not to disallow the amount is upheld as a plausible and legally sustainable view.

Final Conclusion: The appeal is allowed; the order passed by the Ld. PCIT under section 263 dated 05.03.2020 for A.Y. 2015-16 is quashed and the assessment stands undisturbed on the issue of disallowance of employees' contribution.

Exemption under section 54F - Investment in new residential house within one year before transfer - Cost of new residential house includes stamp duty and registration charges - Interior decoration not part of cost for section 54F - Liberal interpretation of exemption provisions / substantial compliance test

Exemption under section 54F - Investment in new residential house within one year before transfer - Liberal interpretation of exemption provisions / substantial compliance test - Whether the assessee was eligible for exemption under section 54F for the assessment year 2016-17 having invested sale proceeds in the new residential house within one year before the transfer of the original asset. - HELD THAT: - The Tribunal held that the essential precondition for invocation of section 54F is substantial satisfaction that the capital gains realised were parted with and invested in a residential house within the period prescribed. Applying the jurisprudence of the Karnataka and other High Courts, and the interpretative approach explained by the Supreme Court in Dilip Kumar, the Tribunal observed that once the threshold applicability of the exemption clause is established strictly, the provision may thereafter be construed liberally. On facts the assessee had invested amounts (including stamp duty and registration) towards the new house within the relevant period and, adopting the substantial compliance approach, the Tribunal held that the assessee substantially fulfilled the necessary conditions and is eligible for relief under section 54F. The claim was however not accepted in full because certain components of expenditure were excluded (see next issue). [Paras 4]

Assessee is eligible for exemption under section 54F for the year under consideration subject to exclusion of certain interior decoration expenditure and proportionate computation.

Cost of new residential house includes stamp duty and registration charges - Interior decoration not part of cost for section 54F - Whether stamp duty, registration charges and interior decoration expenditures paid in relation to the new residential house form part of the cost eligible for exemption under section 54F. - HELD THAT: - The Tribunal held that stamp duty and registration charges paid in relation to acquisition of the new residential house are part of the cost for the purpose of section 54F and may be taken into account. However, expenditure on interior decoration was held not to be expenditure necessary to make the house habitable for the purposes of section 54F and therefore cannot be allowed as part of the cost qualifying for exemption. The Tribunal applied relevant High Court decisions and an ITAT precedent to exclude interior decoration expenses as aimed at making the house plush or luxurious rather than constituting acquisition/construction cost. [Paras 4]

Stamp duty and registration charges to be included in qualifying cost; interior decoration expenses excluded.

Proportionate computation of exemption - Exemption under section 54F - Manner of computation of the allowable exemption under section 54F after inclusion/exclusion of specific cost components. - HELD THAT: - Having held that stamp duty and registration charges qualify while interior decoration does not, the Tribunal directed a proportionate computation of deduction. The Tribunal specified the formula to be adopted by the Assessing Officer to determine the deductible portion of long-term capital gains in accordance with the qualifying expenditure actually incurred towards the new residential house. [Paras 4]

Assessing Officer to compute proportionate deduction using the formula: LTCG x Amount spent for Registration & Stamp Duty / Net Consideration; appeal partly allowed.

Final Conclusion: Appeal partly allowed: assessee entitled to exemption under section 54F for AY 2016-17 on satisfaction of conditions and inclusion of stamp duty and registration charges in qualifying cost; interior decoration expenses excluded; Assessing Officer directed to compute proportionate deduction as directed by the Tribunal.

Penalty under Section 271(1)(c) - survey under Section 133A - concealment of particulars of income - furnishing inaccurate particulars of income - return filed within due date under Section 139(1) - acceptance of returned income in assessment - strict construction of penal provisions

Penalty under Section 271(1)(c) - survey under Section 133A - concealment of particulars of income - return filed within due date under Section 139(1) - acceptance of returned income in assessment - strict construction of penal provisions - Deletion of penalty levied under Section 271(1)(c) was correctly upheld where income revealed in survey was offered in the return filed within the due date and accepted in assessment. - HELD THAT: - The Tribunal held that where an assessee declares income revealed during a survey in the return of income filed within the due date prescribed by Section 139(1) and the assessing officer accepts that return without making additions, the conditions for imposing penalty under Section 271(1)(c) - namely concealment of particulars of income or furnishing inaccurate particulars - are not satisfied. The order reasons that a penal provision must be strictly construed and that mere exposure of discrepancies during survey does not, by itself, establish concealment in the return filed; the decisive document is the income-tax return. The Tribunal followed authoritative rulings which have held that if the surrendered amount is reflected in the timely return and no further additions are made in assessment, imposition of penalty is not warranted. Applying these principles to the facts (survey on 26.10.2010; surrendered income offered in the return filed on 30.09.2011 and accepted in assessment), the Tribunal found no basis to interfere with the CIT(A)'s deletion of the penalty. [Paras 8, 9, 11, 12]

Revenue's grounds challenging deletion of penalty are dismissed and the CIT(A)'s order deleting the penalty is confirmed.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal confirms deletion of the penalty under Section 271(1)(c) because the income revealed during survey was offered in the return filed within the due date and accepted in assessment.

Estimation of income under best judgment assessment - Use of previous years' accepted profit ratios in estimation - Estimate must be related to evidential material and not mere suspicion - Penalty not sustainable on estimated income - Deduction under Chapter VI-A subject to verification

Estimation of income under best judgment assessment - Use of previous years' accepted profit ratios in estimation - Estimate must be related to evidential material and not mere suspicion - Validity of estimating net profit at 8% of turnover for the assessment year 2012-13 under best judgment assessment - HELD THAT: - The Tribunal held that an assessing authority exercising powers under best judgment assessment cannot make an adhoc estimate based on mere suspicion and must relate the estimate to material on record. Where earlier years' returns and accepted profit ratios are available and were accepted by the Revenue, those materials constitute relevant evidential material. Applying the ratio in Raghubar Mandal Harihar Mandal, the Tribunal directed that, instead of the flat 8% estimated by the AO and sustained by the CIT(A), the AO should compute income by applying the average net profit rate actually accepted in the immediately preceding assessment years (0.62% for AY 2010-11 and 0.42% for AY 2011-12; average 0.52%) to the gross receipts for AY 2012-13 and add the difference over the declared 0.08% (i.e., the balance 0.44%) to the returned income. The Tribunal set aside the estimation at 8% insofar as it related to determination of taxable business income and remitted the matter to the AO for computation as directed. [Paras 8, 14]

Grounds 1 and 2 partly allowed; AO directed to estimate profit for AY 2012-13 by applying the average accepted profit rate of 0.52% (based on AYs 2010-11 and 2011-12) and adjust the declared income accordingly.

Deduction under Chapter VI-A - Allowability of the Chapter VI-A deduction claimed by the assessee - HELD THAT: - The Tribunal noted that no specific argument was advanced by the authorised representative on this ground and therefore directed the Assessing Officer to verify the claim of the assessee afresh. If the deduction is allowable in law on verification of documents and compliance with statutory conditions, the AO is to allow it. [Paras 9]

Claim under Chapter VI-A remitted to the AO for verification and allowance if permissible.

Interest consequential to estimation - Claim relating to interest under sections 234A, 234B, 234C and 234D - HELD THAT: - The Tribunal treated the interest issue as consequential to the determination of taxable income. Since the primary estimation issue is to be recalculated as directed, the Tribunal dismissed the ground relating to interest as consequential. [Paras 10]

Ground on interest dismissed as consequential.

Penalty not sustainable on estimated income - Sustainability of penalty under section 271(1)(c) imposed by the AO where income was determined by estimation - HELD THAT: - Relying on the principle that penalty cannot be levied on income that is merely estimated by the assessing authority, and in view of the Tribunal's direction to restrict estimated profit by reference to prior accepted years, the Tribunal held that the penalty imposed on the basis of the earlier estimation was not sustainable. Consequently, the AO was directed to delete the penalty levied under section 271(1)(c). [Paras 13]

Penalty under section 271(1)(c) deleted.

Final Conclusion: The appeal is partly allowed: the AO's estimation of profit at 8% for AY 2012-13 is set aside and the AO is directed to compute taxable business income by applying the average accepted net profit rate of 0.52% (AYs 2010-11 and 2011-12) and adjust for the declared 0.08%; the Chapter VI-A claim is remitted to the AO for verification; interest objections are dismissed as consequential; and the penalty under section 271(1)(c) is deleted.

Benami transaction - burden of proof in benami plea - statutory presumption under Section 3(2) of the Benami Transactions (Prohibition) Act, 1988 - proof and validity of a will - devolution under the Hindu Succession (Amendment) Act, 2005 - partition and share computation among coparceners

Benami transaction - burden of proof in benami plea - statutory presumption under Section 3(2) of the Benami Transactions (Prohibition) Act, 1988 - The contesting defendants failed to discharge the burden of proving that the suit property standing in the name of the deceased wife was a benami purchase by the husband. - HELD THAT: - The title deed (Ex.A.1) stood in the name of Swarnalakshmi Ammal and the defendants who alleged a benami transaction bore the onus throughout to prove that she was merely a benamidar and that the beneficial ownership lay elsewhere. The Court applied the settled principle that that burden never shifts. Even assuming purchase money came from the husband, Section 3(2) of the Benami Transactions (Prohibition) Act, 1988 preserves the presumption in favour of property purchased in the name of a wife unless the contrary is proved. The courts below ignored material evidence - including joint execution of Ex.A.2 and Ex.A.3 and recitals treating the land as joint family property - and failed to appreciate that the defendants did not discharge the onus of establishing a benami purchase. [Paras 10, 11, 12, 15]

The finding that the property was a benami purchase by the husband is not established; the burden on the defendants remains unproven and the statutory presumption in favour of the wife stands unrebutted.

Proof and validity of a will - Ex.B.21 (Will dated 09.04.1975) was duly proved and validly established by the defendants. - HELD THAT: - The Court affirmed the concurrent finding of the courts below that the Will in favour of defendants 2 to 4 had been proved according to law. No substantial challenge was pressed against that finding before this Court, and the Will was treated as effecting the bequest of the testator's share. [Paras 16, 17]

Ex.B.21 is held to be duly proved and valid.

Devolution under the Hindu Succession (Amendment) Act, 2005 - partition and share computation among coparceners - Consequent upon the changed rules of devolution under the amended Hindu Succession Act and the proved Will, the respective shares of the plaintiffs and defendants in the suit property were determined. - HELD THAT: - The Court noted that at the time of suit institution only sons were coparceners but, following the amendment to Section 6 of the Hindu Succession Act and the Supreme Court's interpretation in Vineeta Sharma, daughters are equally entitled. That reduces the testator's undivided interest to 1/7th, which was bequeathed by the proved Will to defendants 2 to 4. Applying these principles, the Court computed the shares: plaintiffs and defendant 5 (Chandra Bai) to receive 6/63rd each; defendants 6 and 7 to receive 6/63rd each; defendants 2 to 4 to receive 6/63rd each as coparceners and additionally the 1/7th share bequeathed under the Will. [Paras 16, 17]

The shareholding is adjusted in accordance with the amended succession law and the proved Will; specific shares are allotted to the respective parties as recorded by the Court.

Final Conclusion: The second appeal is allowed: the finding of benami purchase is set aside for failure of defendants to discharge the burden; Ex.B.21 (Will) is held proved; shares in the suit property are determined in accordance with the amended succession law and the Will as set out by the Court. No costs.

Interim bail extension - medical exigency - prima facie consideration of photographic evidence - taking document on record subject to exceptions

Taking document on record subject to exceptions - Accompanying document taken on record subject to all just exceptions. - HELD THAT: - The Court, on the application filed, allowed the same and recorded that the accompanying document is taken on record, explicitly subject to all just exceptions. No further adjudication on the merits or admissibility of the document was undertaken in this order.

Application allowed and accompanying document taken on record subject to all just exceptions.

Interim bail extension - medical exigency - prima facie consideration of photographic evidence - Interim bail of the petitioner extended until the next date of hearing. - HELD THAT: - The petitioner sought extension of interim bail on medical grounds for his wife, who was represented to be seriously ill and bed ridden with carcinoma. The complainant opposed extension citing a discharge certificate indicating haemodynamically stable condition and follow up instructions. The Court did not decide the merits of these rival contentions; instead it made a prima facie observation of the photograph which suggested the petitioner's wife was in an almost unconscious condition at home. Relying on that prima facie assessment and without entering into substantive adjudication, the Court considered it just and appropriate to extend interim bail until the next listed hearing.

Interim bail extended till the next date of hearing (16.11.2021).

Final Conclusion: The applications were allowed: the accompanying document was taken on record subject to exceptions, and the petitioner's interim bail was extended until the next hearing on 16.11.2021 without adjudication on the underlying merits.

Anticipatory bail - maintainability of successive anticipatory bail applications - inter-departmental conflict in investigation - reference to an independent investigating agency - preliminary enquiry by the Central Bureau of Investigation

Anticipatory bail - maintainability of successive anticipatory bail applications - Second petition for anticipatory bail was not entertained and the earlier dismissal on merits precluded grant of relief. - HELD THAT: - The Court noted that the petitioner had earlier filed and lost an anticipatory bail application which was dismissed on merits. In view of the earlier dismissal and the absence of any convincing change of circumstances or special reasons persuading the Court to revisit that conclusion, the second anticipatory bail petition was not to be entertained. The Court also had regard to the stage of the proceedings (notice under the Customs Act and ongoing enquiries) and the serious allegations concerning alleged evasion and collusion, which weighed against granting anticipatory relief. Consequently, the application for anticipatory bail was not granted.

Second anticipatory bail petition not entertained; relief of anticipatory bail refused.

Inter-departmental conflict in investigation - reference to an independent investigating agency - preliminary enquiry by the Central Bureau of Investigation - The dispute between Customs and CGST about the manner of clearance and responsibility for the alleged breach was referred to the Central Bureau of Investigation for an independent preliminary enquiry. - HELD THAT: - The Court observed an apparent and substantive conflict between the Department of Customs and the Anti-Evasion Unit of the CGST Commissionerate regarding how the consignment was cleared without proper entries and whether departmental officers colluded with the importer. Finding the two investigating agencies unable to resolve or cooperate effectively and noting the gravity and complexity of the allegations, the Court considered referral to an independent investigating agency appropriate. Accordingly, the matter was directed to be referred to the Central Bureau of Investigation, with an officer not below the rank of Superintendent of Police to conduct a preliminary enquiry and submit a report within 30 days. The petitioner and both departments were directed to hand over all relevant documents to the enquiry officer, and the Director Generals of Customs and CGST were directed to ensure cooperation.

Matter referred to the CBI for preliminary enquiry; directions issued for enquiry officer, production of documents and cooperation by departmental heads.

Final Conclusion: The Court refused to entertain the second anticipatory bail application, having regard to the earlier dismissal on merits and the stage of proceedings, and directed that the dispute between Customs and CGST be investigated by the CBI by way of a preliminary enquiry under an officer not below the rank of Superintendent of Police, with prescribed directions for cooperation and submission of a report within 30 days.

Refund of Special Additional Duty (SAD) - Validity of time-bar imposed by amending notification - Preferential construction favouring the assessee where two reasonable interpretations exist - Precedential value of non jurisdictional High Court decisions

Refund of Special Additional Duty (SAD) - Validity of time-bar imposed by amending notification - The appellant is entitled to refund of 4% SAD and denial of refund on the ground of time bar by the amending notification is not sustainable. - HELD THAT: - The Tribunal found that the appellant's claim for refund of 4% SAD under Notification No.102/2007-Cus was correctly made and that denial on the basis of a time bar introduced by an amending notification was legally impermissible in the circumstances of the case. Applying settled authorities relied upon by the appellant, the Tribunal held that neither the original statute nor the principal notification prescribed a limitation that would preclude the refund, and therefore an amending notification could not be used to retrospectively defeat the claim. The Tribunal set aside the orders denying the refund, concluding that the denial was bad in law and the appellant must be granted the refund with consequential benefits as per law. [Paras 4, 8]

Denial of refund of 4% SAD as time barred was set aside and the appeal allowed; refund granted with consequential benefits.

Preferential construction favouring the assessee where two reasonable interpretations exist - Precedential value of non jurisdictional High Court decisions - When reasonable conflicting interpretations by High Courts exist, the Tribunal will adopt the construction favourable to the assessee and may follow reasoned decisions of non jurisdictional High Courts. - HELD THAT: - The Tribunal observed that multiple High Courts had expressed differing views on the issue and that no binding guidance from the jurisdictional High Court was available. Relying on Supreme Court authority that where two reasonable constructions are possible the one favourable to the assessee should be adopted, the Tribunal held that it was proper to follow the non jurisdictional High Court decisions which reasonably supported the appellant's claim. The Tribunal rejected the notion that a reference by another Bench to a Larger Bench precluded following the favourable ratios of High Court decisions, emphasising that it would be inappropriate for the Tribunal to sit in judgment over High Court views and that precedence requires following the ratio of higher courts rather than selecting between them on perceived correctness. [Paras 5, 6, 7]

The Tribunal adopted the construction favourable to the assessee and followed non jurisdictional High Court decisions supportive of the refund claim.

Final Conclusion: The impugned orders denying refund of 4% SAD were set aside; the appeal is allowed and the appellant is entitled to refund of the claimed 4% SAD with consequential benefits, and the Tribunal applied the rule of construction favouring the assessee where reasonable conflicting interpretations exist, giving regard to non jurisdictional High Court decisions supportive of the claim.

Jurisdiction of the Directorate of Revenue Intelligence to issue a show cause notice under Section 28(4) - invalidity of adjudication founded on a show cause notice issued by an officer not being a 'proper officer' under Section 28(4) - consequential setting aside of confiscation and penalty proceedings predicated on an invalid demand - application of precedent establishing the invalidity of SCNs issued by DRI for recovery of differential duty

Jurisdiction of the Directorate of Revenue Intelligence to issue a show cause notice under Section 28(4) - invalidity of adjudication founded on a show cause notice issued by an officer not being a 'proper officer' under Section 28(4) - Validity of the show cause notice issued by DRI under Section 28(4) and the competence of DRI to demand differential duty - HELD THAT: - Both parties accepted that the show cause notice in these matters was issued by the Directorate of Revenue Intelligence and that the legal position is governed by the ratio in the Supreme Court decision holding that officers of DRI are not 'proper officers' for issuing notices under Section 28(4). The Tribunal noted that subsequent decisions, including a Larger Bench follow-up and High Court authorities, have applied the same principle. As the foundational demand for differential duty under Section 28(4) was issued by an officer lacking the statutory competence, the impugned adjudication which proceeds on that demand cannot be sustained. Given the parties' common concession and the binding precedent, there was no requirement to examine the merits of classification, valuation or other factual contentions.

The show cause notice issued by DRI under Section 28(4) was held to be invalid and the adjudication founded on that notice could not be sustained.

Consequential setting aside of confiscation and penalty proceedings predicated on an invalid demand - application of precedent establishing the invalidity of SCNs issued by DRI for recovery of differential duty - Consequences for confiscation, demand of differential duty, interest and penalties flowing from the invalid SCN - HELD THAT: - The adjudicating order confirmed reclassification, enhanced assessable value, demanded differential duty and interest, and ordered confiscation and imposed penalties. The Tribunal observed that part of the show cause notice also invoked provisions for confiscation and penalties, but those measures were premised on the same mis-declaration/mis-valuation basis and on the demand under Section 28(4). Once the SCN and the demand under Section 28(4) were determined to be without jurisdiction, the consequential orders for recovery, confiscation and penalties could not survive. In view of the binding precedent and both parties' reliance on it, the Tribunal set aside the entire impugned order without adjudicating the substantive factual merits.

The adjudication order, including the demand for differential duty, interest, confiscation and penalties premised on the invalid SCN, was set aside; appeals by the importer and the individual respondents were allowed and the Revenue's appeal rejected.

Final Conclusion: The Tribunal set aside the impugned adjudication order on the ground that the show cause notice for recovery of differential duty was issued by DRI officers who are not proper officers under Section 28(4); consequently the demand, interest, confiscation and penalties founded on that notice were held unsustainable, the appeals of the importer and the individual respondents were allowed and the Revenue's appeal was rejected.

Admission of Company Application under Sections 230-232 - Condonation of delay - Dispensing with meetings of shareholders and creditors - Directions for notice and publication including service on statutory authorities - Filing affidavit of service - Objections by regulatory authorities

Condonation of delay - The delay in filing the Second Motion petition was condoned. - HELD THAT: - The applicant companies sought condonation of a delay of 72 days in filing the present petition on the ground of death of both counsels due to Covid-19. Having considered the explanation, the Tribunal exercised its discretion to condone the delay and proceeded to admit the petition. [Paras 5, 6]

Delay of 72 days is condoned.

Admission of Company Application under Sections 230-232 - The Company Application (Second Motion) was admitted and a date of hearing was fixed. - HELD THAT: - On admission of the petition under Sections 230 to 232 of the Companies Act, 2013 read with Rule 16 of the Companies (Compromise, Arrangements and Amalgamation) Rules, 2016, the Tribunal recorded admission of the petition and fixed the date for final hearing for approval of the Composite Scheme of Amalgamation. [Paras 6]

The petition is admitted and the hearing is fixed for 28.09.2021.

Dispensing with meetings of shareholders and creditors - The Tribunal recorded that the meetings of equity shareholders, secured creditors and unsecured creditors had been dispensed with by earlier order. - HELD THAT: - The Tribunal noted that in the First Motion (C.A.(CAA)-32/ND/2021) it had, by order dated 05.04.2021, directed that the meetings of the equity shareholders and of the secured and unsecured creditors of the applicant companies be dispensed with. That earlier direction stands recorded in the present proceedings. [Paras 3]

Meetings of equity shareholders and of secured and unsecured creditors were dispensed with by order dated 05.04.2021.

Directions for notice and publication including service on statutory authorities - Filing affidavit of service - Objections by regulatory authorities - Directions issued for newspaper publication, service of notices on specified authorities, filing of affidavit of service and procedure for objections. - HELD THAT: - The Tribunal ordered publication of the notice in English and Hindi newspapers not less than 40 days before the hearing and directed the applicant companies to serve individual notices on specified authorities including the Regional Director (Northern Region), Registrar of Companies (NCT of Delhi & Haryana), Official Liquidator (Delhi), the Income Tax Department and any sectoral regulators at least 40 days before the hearing. The applicants are required to file an affidavit of service at least 7 days before the hearing. Any objections by the authorities filed on or before the hearing date will be considered; absence of such objections will be treated as no objection, subject to compliance with applicable provisions of the Companies Act and rules. [Paras 6, 7, 8, 9]

Publication, service, filing of affidavit and procedure for objections directed as specified.

Final Conclusion: The Tribunal condoned the delay, admitted the Company Application for approval of the Composite Scheme of Amalgamation, fixed the hearing for 28.09.2021, recorded that meetings had earlier been dispensed with, and directed publication, service on statutory authorities, filing of affidavit of service and the mode for filing objections.

Admission of application under Section 9 and initiation of Corporate Insolvency Resolution Process (CIRP) - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Admission where there is debt in default and no notice of dispute - Appointment of Interim Resolution Professional (IRP) - Tribunal's territorial jurisdiction and limitation (date of default)

Admission of application under Section 9 and initiation of Corporate Insolvency Resolution Process (CIRP) - Admission where there is debt in default and no notice of dispute - The Section 9 application by the operational creditor is admitted and the CIRP of the corporate debtor is initiated. - HELD THAT: - The Tribunal analysed the material on record and found that the corporate debtor neither denied liability nor rebutted the claim of the operational creditor; furthermore, the corporate debtor had made admissions before the Hon'ble High Court of Delhi (recorded in the High Court order dated 20.09.2018) that the petitioner company was ready to pay the principal amount. The operational creditor served the demand notice and complied with statutory requirements. Applying the statutory requisites under Section 9(5)(i) - completeness of the application, non-payment of unpaid operational debt, delivery of invoice/notice, absence of notice of dispute or record of dispute - the Tribunal found that the conditions for admission were satisfied and therefore admitted the application and initiated CIRP. [Paras 15, 16, 17]

Application under Section 9 admitted and CIRP of the corporate debtor initiated.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium under the Code is imposed consequent to admission of the Section 9 application. - HELD THAT: - Upon admission of the application and initiation of CIRP, the Tribunal imposed the moratorium contemplated by the Code. The scope of the moratorium recorded includes prohibition of institution or continuation of suits or proceedings, transfer/encumbrance/alienation of assets, enforcement of security interests, and recovery of property occupied by the corporate debtor; exceptions and the duration of moratorium were noted as per the statutory scheme. [Paras 17]

Moratorium in the terms stated in the order is imposed with effect from the date of the order until completion of the CIRP.

Appointment of Interim Resolution Professional (IRP) - An Interim Resolution Professional is appointed to conduct the CIRP and to take steps under the Code. - HELD THAT: - As the applicant had not proposed a name, the Tribunal appointed Mr. Sumit Sharma (registration details recorded in the order) as the IRP and directed him to take actions required under Sections 15, 17 and 18 of the Code and to file his report within 30 days. The Tribunal also directed the applicant to deposit funds to meet immediate expenses of the IRP, with accounting and reimbursement provisions stated in the order. [Paras 18, 19]

Mr. Sumit Sharma is appointed as IRP and the applicant directed to deposit the specified amount to meet immediate CIRP expenses.

Tribunal's territorial jurisdiction and limitation (date of default) - The Tribunal has jurisdiction to entertain the petition and the application is within the period of limitation. - HELD THAT: - The Tribunal noted that the registered office of the corporate debtor is situated in Delhi and therefore the Tribunal has territorial jurisdiction to try the application. The date of default recorded in Form V was 01.04.2016 and the present application was filed on 01.09.2017; on that basis the Tribunal held the petition was not time-barred and was filed within the period of limitation. [Paras 12, 13]

Tribunal has jurisdiction and the Section 9 application is within limitation.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated CIRP against the corporate debtor, imposed the statutory moratorium, appointed the named IRP to conduct the CIRP, and directed the applicant to deposit funds to meet immediate expenses; the Tribunal also recorded that it has jurisdiction and that the petition is within limitation.

Issuance of Occupation and Completion Certificate - liability for current utility charges during CIRP - claims for pre CIRP dues to be raised before the Resolution Professional - compounding charges and entitlement to withhold certificates - obligation of Resolution Professional to procure statutory clearances - application of Amarpali Group precedent

Liability for current utility charges during CIRP - Responsibility for payment of current water bills after commencement of CIRP - HELD THAT: - The Tribunal held that payment of current water bills falling due after initiation of the CIRP is the responsibility of the persons occupying the flats and the RWA which had entered into a maintenance agreement to maintain the society. In consequence, the occupants and the RWA were directed to pay current bills within one month of the order; such payment is a pre condition for the NOIDA Authority to grant the water/sewer connection and for issuance of OC/CC insofar as current charges are concerned. [Paras 10]

Occupants and the RWA to pay current water bills within one month; OC/CC/water connection may be issued subject to such payment.

Claims for pre CIRP dues to be raised before the Resolution Professional - compounding charges and entitlement to withhold certificates - application of Amarpali Group precedent - Whether the NOIDA Authority can refuse issuance of OC/CC on the ground of compounding charges and other dues incurred prior to initiation of CIRP - HELD THAT: - The Tribunal found that dues and compounding charges arising prior to initiation of CIRP constitute claims which must be filed before the Resolution Professional. Applying the principle reflected in the cited Amarpali Group order, the NOIDA Authority cannot refuse to grant the occupancy/completion certificate or NOC solely on the ground of outstanding pre CIRP dues. The authority may, however, lodge its claim before the RP for adjudication in the CIRP process; refusal to issue certificates on the basis of pre CIRP outstanding amounts was interdicted. [Paras 10]

NOIDA Authority shall not refuse OC/CC or NOC on account of pre CIRP compounding charges; such dues are to be raised as claims before the RP.

Obligation of Resolution Professional to procure statutory clearances - issuance of Occupation and Completion Certificate - Conditions for issuance of OC/CC in relation to statutory certificates and clearances - HELD THAT: - The Tribunal directed that the RP must take necessary steps to obtain outstanding statutory certificates and clearances (such as Group Housing Department no dues, Environment NOC, consent to operate from the pollution control board, labour cess no dues and solid waste management compliance). Upon production of those certificates by the RP and payment of the current water bills by occupants or the RWA, the NOIDA Authority is directed to issue the OC/CC and shall not withhold issuance on the ground of outstanding pre CIRP dues. [Paras 10]

RP to procure required certificates; upon their production and payment of current water bills, NOIDA Authority to grant OC/CC.

Final Conclusion: IA/3883/2020 disposed: occupants and the RWA directed to pay current water bills; pre CIRP compounding charges must be raised as claims before the RP and cannot be a ground to refuse OC/CC; RP to obtain outstanding statutory clearances and on their production together with payment of current bills, NOIDA Authority to issue OC/CC.

Initiation of liquidation where no resolution plan is received or plan is rejected - effect of COVID-19 lockdown exclusion on CIRP timelines (Regulation 40C) - duty of the Resolution Professional to complete CIRP within statutory/extended timelines - appointment and functions of the liquidator and ancillary directions on commencement of liquidation - cessation of earlier moratorium and commencement of moratorium on liquidation - public announcement and statutory intimation upon liquidation

Initiation of liquidation where no resolution plan is received or plan is rejected - Liquidation of the corporate debtor was to be ordered following CoC resolution where no viable resolution plan was received and the CoC passed a resolution for liquidation. - HELD THAT: - The Tribunal recorded that the CIRP had not produced a viable resolution plan: Form-G invitations resulted in only one EOI whose plan was rejected by the CoC with overwhelming voting share. The CoC in its meeting passed a resolution under the statutory scheme to initiate liquidation and authorized the RP to file the application. In view of the provisions reproduced from the Code that mandate liquidation where no resolution plan is received or where a plan is rejected, the Tribunal directed that the corporate debtor be liquidated and ordered the commencement of liquidation in terms of the Code and the Liquidation Regulations.

Order for liquidation of the corporate debtor was passed and the petition for liquidation disposed of accordingly.

Effect of COVID-19 lockdown exclusion on CIRP timelines (Regulation 40C) - duty of the Resolution Professional to complete CIRP within statutory/extended timelines - The Tribunal considered the COVID-19 related exclusion and timeline extensions but held that the RP retains the duty to complete CIRP within the permitted/extended period; filing an application seeking directions to complete CIRP within 330 days was dismissed as unnecessary. - HELD THAT: - The Bench noted the period of lockdown excluded under Regulation 40C and the consequent revision of CIRP timelines, including subsequent extensions that led to the 330-day benchmark. The Tribunal observed that while exclusions and extensions were recognised, the RP is nonetheless bound by the duty to complete the CIRP within the applicable period and does not require separate directions from the Adjudicating Authority to do so. An earlier application by the RP seeking such directions was dismissed as frivolous with costs. The Tribunal accepted that pandemic-related restrictions delayed CoC action but proceeded on the record that the CoC ultimately resolved for liquidation.

COVID-19 timeline exclusions and extensions recognised; RP remains under obligation to complete CIRP within the applicable extended period and need not seek directions to that effect.

Appointment and functions of the liquidator and ancillary directions on commencement of liquidation - cessation of earlier moratorium and commencement of moratorium on liquidation - public announcement and statutory intimation upon liquidation - Appointment of the RP as liquidator and ancillary procedural directions (public announcement, communications to ROC, IBBI and tax/regulatory authorities, moratorium effect, preliminary report timeline) were ordered and specified. - HELD THAT: - The Tribunal accepted the written consent of the then Resolution Professional to act as liquidator and appointed him accordingly. It directed issuance of the public announcement required under the Liquidation Regulations, communication of the order to the Registrar of Companies and the Insolvency Board, and intimations to tax and other regulatory authorities. The order declared that the earlier moratorium under Section 14 would cease and a fresh moratorium under the liquidation provisions would commence; it further deemed the order to be a notice of discharge to officers, employees and workmen and directed the liquidator to submit a preliminary report within the regulatory period from liquidation commencement date.

The Resolution Professional was appointed liquidator and directed to carry out liquidation steps including public announcement, statutory intimations, commencement of the liquidation moratorium, and submission of a preliminary report.

Final Conclusion: The Tribunal directed liquidation of VGA Developers Private Limited pursuant to the CoC resolution and the Code, recognised COVID-19 timeline exclusions but reaffirmed the RP's obligation to conclude CIRP within the applicable extended period, appointed the consenting Resolution Professional as liquidator and issued ancillary directions for public announcement, statutory intimations, moratorium effect and preliminary reporting.

Initiation of liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Deference to commercial decision of the Committee of Creditors - Appointment of Liquidator recommended by Committee of Creditors where Resolution Professional does not consent - Liquidation to be conducted in accordance with Chapter III of the Code - Consequences of liquidation order: cessation of moratorium and deemed notice of discharge

Initiation of liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Deference to commercial decision of the Committee of Creditors - Adjudicating Authority to pass liquidation order where Committee of Creditors, with requisite voting share, resolves to liquidate after rejection of resolution plan - HELD THAT: - The Tribunal applied Section 33 of the Code and the principle that the Adjudicating Authority's role is limited and it is not to re-appraise the commercial decision of the Committee of Creditors. Having found that despite compliance with CIRP steps no viable resolution plan was acceptable to the CoC, and that the CoC resolved to proceed with liquidation with an overwhelming majority, the Adjudicating Authority was bound to initiate liquidation in the manner prescribed by the Code. The Tribunal accordingly allowed the application under Section 33 and ordered liquidation. [Paras 8]

Application allowed; liquidation ordered under Section 33 of the Code

Appointment of Liquidator recommended by Committee of Creditors where Resolution Professional does not consent - Deference to commercial decision of the Committee of Creditors - Committee of Creditors' recommendation for appointment of a person as liquidator is to be given effect where the incumbent Resolution Professional does not consent to act as liquidator - HELD THAT: - The Tribunal noted that the Resolution Professional did not consent to act as liquidator and the CoC, by the requisite majority, recommended a specific insolvency professional to perform liquidation. In view of Section 33 read with the CoC resolution, the Adjudicating Authority appointed the recommended insolvency professional as liquidator. [Paras 4, 8]

Recommended insolvency professional appointed as Liquidator

Liquidation to be conducted in accordance with Chapter III of the Code - Consequences of liquidation order: cessation of moratorium and deemed notice of discharge - Consequential directions in respect of the liquidation process were issued and made operative as part of the liquidation order - HELD THAT: - The Tribunal directed that the liquidation be conducted in accordance with Chapter III of the Code and issued consequential directions: public announcement of liquidation; cessation of the moratorium under Section 14; vesting of powers of board and KMP in the liquidator; prohibition on suits against the corporate debtor subject to Section 52 exceptions; exercise of liquidator's powers as per specified sections and regulations; cooperation of personnel; and entitlement of the liquidator to fees as specified in the CoC resolution. These directions give effect to the statutory consequences and procedural framework for liquidation.

Consequential directions issued for conduct of liquidation and made part of the order

Final Conclusion: The application under Section 33 was allowed; Gourmet Renaissance Private Limited is ordered to be liquidated in accordance with Chapter III of the IBC, the CoC-recommended insolvency professional is appointed as liquidator, and consequential directions (public announcement, cessation of moratorium, vesting of powers in the liquidator, conduct of liquidation and entitlement to fees as per CoC resolution) are issued.

Initiation of Corporate Insolvency Resolution Process - Existence of debt and default - Admission of petition under the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional - Moratorium under corporate insolvency resolution process - Prohibition on institution or continuation of suits and enforcement actions during moratorium - Public announcement of CIRP - Management vests in IRP during CIRP

Existence of debt and default - Admission of petition under the Insolvency and Bankruptcy Code - Initiation of Corporate Insolvency Resolution Process - Company petition under Section 7 of the Insolvency and Bankruptcy Code admitted and CIRP ordered against the corporate debtor. - HELD THAT: - The Tribunal found that the corporate debtor had not filed a reply since January 2020 and the claim of the financial creditor remained unchallenged. The record showed prior consent proceedings but subsequent non-payment and dishonour of cheques; the debt was within limitation. Satisfied that the petition met statutory requirements and that there was existence of debt and default, the Tribunal admitted the petition and ordered initiation of the Corporate Insolvency Resolution Process. The Tribunal also recorded the petitioner's proposal of an Interim Resolution Professional and proceeded to appoint the IRP.

Petition admitted and CIRP initiated against the corporate debtor; IRP appointed.

Moratorium under corporate insolvency resolution process - Prohibition on institution or continuation of suits and enforcement actions during moratorium - Appointment of Interim Resolution Professional - Management vests in IRP during CIRP - Public announcement of CIRP - Consequences and incidental directions upon admission including moratorium, protection of supplies, vesting of management in IRP, public announcement and payment towards initial CIRP costs. - HELD THAT: - Upon admission the Tribunal declared the statutory moratorium operative from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. The order restrains institution or continuation of suits and enforcement actions, preserves supply of essential goods/services, and directs that management of the corporate debtor shall vest in the IRP who is to be provided documents and information by the suspended directors and employees. The Tribunal directed immediate public announcement of the CIRP and required the financial creditor to pay the initial CIRP cost to the IRP.

Moratorium imposed with specified prohibitions and protections; management vested in the IRP; public announcement to be made and initial CIRP cost payable by the financial creditor.

Final Conclusion: The Tribunal admitted the company petition and ordered initiation of the Corporate Insolvency Resolution Process against the corporate debtor, appointed an Interim Resolution Professional, imposed the statutory moratorium with attendant protections and directions, and directed the public announcement and payment of initial CIRP costs.

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Absence of a resolution plan under Section 30(6) as a ground for liquidation - Appointment of Liquidator and requirement of consent and Authorization for Assignment - Cessation of moratorium consequent to liquidation - Vesting of management powers in the Liquidator and duties under Sections 35 to 50 and 52 to 54 - Priority to sale as a going concern under Regulation 32A of the Liquidation Process Regulations - Liquidator's fee fixed by the Committee of Creditors under Regulation 39D

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Absence of a resolution plan under Section 30(6) as a ground for liquidation - Order for initiation of liquidation of the Corporate Debtor. - HELD THAT: - The Adjudicating Authority found that no resolution plan was received under Sub Section (6) of Section 30 of the Code within the extended CIRP period. The Committee of Creditors, by requisite voting majorities recorded in its meetings, recommended initiation of liquidation. In exercise of the powers under Clause (b)(i)-(iii) of Sub Section (1) of Section 33, the Authority allowed the application filed by the Resolution Professional and ordered liquidation of the Corporate Debtor to be carried out in accordance with Chapter III of Part II of the Code.

Application for liquidation allowed and corporate debtor ordered to be liquidated.

Appointment of Liquidator and requirement of consent and Authorization for Assignment - Requirement of public announcement by the Liquidator - Appointment of the proposed Liquidator and conditions for his assumption of office. - HELD THAT: - The Authority appointed the person proposed by the Committee of Creditors as Company Liquidator and directed him to file his consent to act as Liquidator along with a valid Authorization for Assignment within seven days of the order. The Liquidator was further directed to issue a public announcement stating that the Corporate Debtor is in liquidation, as required for commencement of the liquidation process and stakeholder notification.

Proposed Liquidator appointed subject to filing of consent and AoA and to make the statutorily required public announcement.

Cessation of moratorium consequent to liquidation - Restriction on institution of suits during liquidation subject to Section 52 - Effect of liquidation order on the moratorium and legal proceedings against the Corporate Debtor. - HELD THAT: - The Authority held that the moratorium declared under Section 14 shall cease to have effect from the date of the liquidation order. Subject to the protections in Section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor; however, the Liquidator may institute suits on behalf of the Corporate Debtor with the prior approval of the Authority. The order preserves statutory exceptions notified by the Central Government in consultation with financial sector regulators.

Moratorium terminated on liquidation; new proceedings barred except as permitted and Liquidator may sue with prior approval.

Vesting of management powers in the Liquidator and duties under Sections 35 to 50 and 52 to 54 - Obligation of Corporate Debtor's personnel to assist the Liquidator - Extent of powers and duties vested in the Liquidator and cooperation by the Corporate Debtor's personnel. - HELD THAT: - On commencement of liquidation, all powers of the Board of Directors, Key Managerial Personnel and partners ceased and vested in the Liquidator, who is to exercise powers and duties enumerated in Sections 35-50 and 52-54 of the Code and applicable liquidation regulations. The personnel of the Corporate Debtor are directed to provide assistance and cooperation to the Liquidator in managing the affairs during liquidation.

Management powers vested in the Liquidator who shall perform statutory duties and be assisted by the Corporate Debtor's personnel.

Priority to sale as a going concern under Regulation 32A of the Liquidation Process Regulations - Time bound attempt to sell as going concern with fallback to asset wise sale - Procedure and sequence for realisation of assets during liquidation. - HELD THAT: - The Liquidator is required to have regard to Regulation 32A and endeavour first to sell the Corporate Debtor or its business as a going concern. If unable to effect such sale within 90 days from the liquidation commencement date, the Liquidator shall proceed to sell assets under the clauses of Regulation 32, i.e., on group/individual basis or otherwise as permitted. This imposes a time bound priority to attempt a going concern sale before resorting to piecemeal realisation.

Liquidator to prioritise going concern sale within 90 days, failing which to proceed with other modes of asset realisation.

Liquidator's fee fixed by the Committee of Creditors under Regulation 39D - Liquidator entitled to charge fee in accordance with CoC decision and liquidation regulations - Fixation and entitlement of Liquidator's remuneration. - HELD THAT: - The Committee of Creditors fixed the Liquidator's fees by the prescribed voting majority in terms of Regulation 39D, approving a fee structure for the first year and thereafter. The Authority recorded that the Liquidator shall be entitled to charge such fee for conducting the liquidation proceedings in accordance with the CoC decision read with Regulation 4(1) of the Liquidation Process Regulations.

Liquidator's fee recognised as fixed by the CoC and payable in accordance with the applicable regulations.

Final Conclusion: The Tribunal allowed the Resolution Professional's application and ordered liquidation of the corporate debtor, appointed the nominated Liquidator subject to formal consent and AoA, terminated the moratorium from the liquidation date, vested management powers in the Liquidator who shall prioritise a going concern sale within 90 days and realise assets thereafter, and permitted remuneration in accordance with the Committee of Creditors' decision and the liquidation regulations.

Power of review under Order XLVII Rule 1 CPC - mistake or error apparent on the face of the record - any other sufficient reason - quantification of tax liability for purposes of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - entitlement to tax relief under the enquiry/investigation/audit category and the arrears category

Power of review under Order XLVII Rule 1 CPC - mistake or error apparent on the face of the record - any other sufficient reason - Whether the High Court should review its order dated 14.12.2020 in W.P. No.11190/2020 on the grounds of mistake or other sufficient reason and recall that order. - HELD THAT: - The Court examined the limited grounds for review under Section 114 read with Order XLVII Rule 1 CPC - discovery of new evidence, mistake or error apparent on the face of the record, or any other sufficient reason analogous to the specified grounds. The Court found that material statutory provisions and circumstances (specifically provisions relied upon by the petitioner concerning quantification and the petitioner's stated intention to seek relief under the arrears category) were not drawn to the Court's attention during the original hearing. The failure to place those provisions before the Court amounted to a misconception of material facts by counsel and, in the circumstances of this case, constituted a sufficient reason analogous to the recognised grounds for review. The Court emphasised that the merits were not decided afresh at this stage and that the review jurisdiction is narrowly circumscribed, but concluded that the omission of material statutory provisions and circumstances justified recalling the prior order and restoring the writ petition for reconsideration. [Paras 13, 18, 20]

Review allowed; the order dated 14.12.2020 in W.P. No.11190/2020 is recalled and the writ petition is restored for reconsideration.

Quantification of tax liability for purposes of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - entitlement to tax relief under the enquiry/investigation/audit category and the arrears category - Whether the petitioner's declaration and the questions of quantification and category of entitlement require fresh consideration by the adjudicating forum. - HELD THAT: - The Court did not adjudicate the merits of whether the petitioner's liability was 'quantified' as of 30.06.2019 or whether the petitioner is entitled to relief under the enquiry/investigation/audit or arrears category of the Scheme. Instead, having found sufficient reason for review, the Court directed that these substantive issues - including the relevance of the provisions relied upon by the petitioner and the petitioner's stated intention before the adjudicating authority - be reconsidered on merits by the appropriate Bench. The judgment restores the writ petition to be re-listed so that those questions may be examined and decided after hearing the parties. [Paras 20]

Substantive questions of quantification and entitlement under the Scheme are remitted for fresh consideration; the writ petition is restored for re-hearing.

Final Conclusion: The review petition is allowed; the High Court's order dated 14.12.2020 in W.P. No.11190/2020 is recalled and the writ petition is restored for reconsideration on merits (to be listed before the roster Bench on 01.10.2021).

Entertainment tax - recreation parlour - place of entertainment - proprietor - payment for admission - interest and penalty under the KET Act - travelling beyond notice

Recreation parlour - entertainment tax - travelling beyond notice - Tribunal erred by upholding levy of entertainment tax where the notice alleged tax under Section 4F for a 'recreation parlour' but the Tribunal confirmed demand on a different ground. - HELD THAT: - The High Court held that the notice originally proposed levy under Section 4F treating MARENA as a 'recreation parlour'. The Tribunal however confirmed the demand by applying the wider definitions of 'entertainment' and 'amusement' under Section 2(e)(iii) and related clauses, thereby travelling beyond the specific allegations in the notice. The Court found this to be impermissible and that the Tribunal failed to appreciate that the statutory levy alleged was confined to a 'recreation parlour' and could not be sustained by introducing a new basis for taxation not pleaded in the notice. [Paras 8, 16]

Tribunal incorrectly travelled beyond the notice; its dismissal of the appeals on that basis is set aside.

Place of entertainment - entertainment tax - payment for admission - MARENA does not qualify as a 'place of entertainment' for imposition of entertainment tax in the facts of this case. - HELD THAT: - Having considered the factual matrix and authoritative exposition of 'entertainment', the Court emphasised the requirement of public colour and openness to the public. MARENA is part of an educational institution, primarily for students and faculty, not a commercial venue open to the public at large. The Court concluded that the Tribunal's reliance on the definitions in Section 2 to treat MARENA as a place of entertainment overlooked the institutional and non-commercial character of the facility and the absence of requisite public character for taxation as entertainment under the KET Act. [Paras 9, 15]

Facilities at MARENA do not qualify as a 'place of entertainment' attracting entertainment tax; the levy is unsustainable.

Proprietor - payment for admission - The Tribunal erred in treating the petitioner as a 'proprietor' liable to pay tax in the circumstances of this educational institution. - HELD THAT: - The Court examined the Tribunal's conclusion that the petitioner amounted to a 'proprietor' under Section 2(k) by reason of being responsible for management of the facilities. Taking the institutional purpose and restricted user base into account, the High Court found that treating the University as a proprietor for purposes of imposing entertainment tax-on the factual matrix where MARENA is not a commercial recreation parlour open to the public-was incorrect. The character and object of the facility as part of a non profit educational institution were determinative. [Paras 17]

Finding that the petitioner is a 'proprietor' for levy of entertainment tax in these facts is incorrect; the Tribunal's conclusion is set aside.

Interest and penalty under the KET Act - Confirmation of interest and penalty under Sections 9 and 12 of the KET Act cannot stand once the substantive tax levy is held to be unsustainable. - HELD THAT: - The Court recorded that the consequential interest and penalty upheld by the lower authorities stemmed from the now disallowed tax demand. As the foundational levy was found to be legally unsustainable, the statutory consequences premised upon that levy (interest and penalties) were likewise erroneous. The Court therefore set aside the assessments and the ancillary impositions which flowed from them. [Paras 18]

Confirmation of interest and penalty under Sections 9 and 12 is quashed as consequential to the vacated tax demand.

Final Conclusion: Petitions allowed; the judgments of the Karnataka Appellate Tribunal dated 27.08.2018 and 16.09.2019 and the orders of the Assessing Authority and First Appellate Authority are set aside insofar as they upheld entertainment tax, interest and penalty on MARENA; no order as to costs.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - authority of company officer / principal officer to institute criminal complaint - onus to prove that cheque was issued for consideration (not as security) - appellate interference with acquittal where two reasonable views are possible

Authority of company officer / principal officer to institute criminal complaint - maintainability of complaint under Section 138 of the Negotiable Instruments Act - Whether the complaint was maintainable when instituted and prosecuted by the person (Sita Ram Verma) on whose authority the Company relied. - HELD THAT: - The Court examined the evidence regarding the authority of Sita Ram Verma to sign, verify and prosecute the complaint on behalf of the Company. The trial court's finding was that Sita Ram Verma was not shown to have been authorised by a Board resolution nor proved to be a Principal Officer. The High Court observed that, even assuming arguendo a presumption of authority because he was working with the Company, the foundational evidentiary lacuna remained: the complainant failed to produce board-level authorisation establishing his capacity beyond such presumption. The Court therefore treated the question of his authority as not satisfactorily proved by the complainant. [Paras 19]

The complainant did not satisfactorily prove formal authority of the person who instituted the complaint; this defect supported the trial court's view on maintainability.

Onus to prove that cheque was issued for consideration (not as security) - presumption under Section 139 of the Negotiable Instruments Act - Whether the complainant discharged the onus to prove that the cheque was issued for consideration and not merely as security. - HELD THAT: - The Court noted that where the accused raises the defence that a cheque was given only as security, the complainant must lead evidence of the underlying transaction and contemporaneous accounting records showing sale or consideration. The evidence adduced by the complainant failed to establish sales ledgers, invoices or other regular business records demonstrating that the cheque represented payment for supplies. The witnesses could not prove that the cheque was issued for supplies made; consequently the onus which shifts to the complainant when the defence of security is pleaded was not discharged. Although Section 139 gives a presumption in favour of the holder, the presumption can be rebutted by cogent evidence showing the cheque was not for consideration; on the facts the rebuttal stood established. [Paras 13, 19, 20]

The complainant failed to prove that the cheque was issued for consideration; the evidence supported the view that it may have been given as security, and the trial court's finding on this point stands.

Appellate interference with acquittal where two reasonable views are possible - Whether the High Court should interfere with the trial court's order of acquittal. - HELD THAT: - The High Court applied settled principles that, although an appellate court has power to reappreciate evidence, where two reasonable conclusions are possible on the evidence the appellate court should not disturb an acquittal. The Court relied on authorities establishing that reversal of an acquittal is inappropriate unless the trial court's conclusion is perverse or legally infirm. Having reappreciated the evidence and found that the trial court's conclusion-particularly regarding lack of proof of consideration and defects in proof of authority-was a tenable view, the High Court concluded there were no substantial or compelling reasons to overturn the acquittal. [Paras 21, 22, 23, 24]

No interference with the trial court's acquittal; the appellate court will not reverse where two reasonable views are possible and the acquittal is not perverse or legally infirm.

Final Conclusion: The High Court upheld the trial court's acquittal of the accused under Section 138 of the Negotiable Instruments Act, finding that the complainant failed to prove the complainant's agent's authority and did not discharge the onus to show the cheque was issued for consideration; accordingly the appeal is dismissed and the acquittal affirmed.

Ingredients of offence under Section 138 of the Negotiable Instruments Act - requirement of issuance, dispatch and service of legal notice and lapse of the statutory period - presumption in favour of holder under Section 139 of the Negotiable Instruments Act - revisional interference with concurrent criminal findings where conviction is perverse

Ingredients of offence under Section 138 of the Negotiable Instruments Act - requirement of issuance, dispatch and service of legal notice and lapse of the statutory period - presumption in favour of holder under Section 139 of the Negotiable Instruments Act - revisional interference with concurrent criminal findings where conviction is perverse - Whether the prosecution proved all essential ingredients of the offence under Section 138 of the Negotiable Instruments Act so as to sustain the conviction of the petitioner. - HELD THAT: - The Court applied the settled test that, in addition to proof of drawing and dishonour of the cheque, the proviso to Section 138 requires proof of (a) presentation within time, (b) receipt of information of dishonour and service of a written demand/notice to the drawer and (c) expiry of the statutory period after notice before filing complaint. The record established issuance and dishonour of the cheques and the postal receipt (Ext.2), but the prosecution did not exhibit the legal notice nor adduce evidence specifying the dates of dispatch or service of the notice or of receipt of information of dishonour. The postal receipt was a mere dispatch receipt and could not be treated as proof of the legal notice or its service. Applying the ratio in Kusum Ingots and the statement of law reproduced from Yogendra Pratap Singh, the Court held that mere bouncing of a cheque and an assertion that a notice was sent are insufficient; the timelines and service of notice are essential ingredients. Although the presumption under Section 139 was available in favour of the holder, that presumption does not dispense with proof of the other statutory ingredients; the petitioner failed to rebut the presumption but the prosecution equally failed to prove service and requisite dates. In these facts the concurrent findings sustaining conviction were held to be perverse and entitling revisional interference. [Paras 25, 27, 28]

Conviction under Section 138 of the Negotiable Instruments Act set aside; petitioner acquitted.

Final Conclusion: The High Court allowed the revision, set aside the judgments of conviction by the trial and appellate courts for offence under Section 138 N.I. Act, and acquitted the petitioner on the ground that the prosecution failed to prove service/dispatch/dates of the requisite legal notice and other essential ingredients of the offence.

Offence under Section 138 of the Negotiable Instruments Act - Liability of partners under Section 141 (Explanation) of the Negotiable Instruments Act - Prima facie averments for arraignment of a partner - Distinction between directors and partners for criminal liability - Requirement of control over affairs for prosecution of directors

Liability of partners under Section 141 (Explanation) of the Negotiable Instruments Act - Prima facie averments for arraignment of a partner - Whether the complaint under Section 138 could be proceeded with against the partner (petitioners/A3) or required to be quashed at the threshold - HELD THAT: - The Court observed that partners of a firm stand on a different footing from company directors: ordinarily partners share profits and losses and thus have co-existing liability in respect of firm transactions unless the partnership deed specifically excludes a partner (for example, a sleeping or minor partner). Where both persons are admitted partners and no specific pleading shows exclusion of interest or lack of participation, it is reasonably presumed they have equal interest in the firm. The complaints aver that the petitioner is responsible for day-to-day activities and that the cheques were signed in her presence; such averments, viewed on a prima facie reading, are sufficient to array her as an accused and to permit prosecution to proceed. The Court relied on authorities requiring that for directors there must be averments showing control over affairs, but held that the partnership context leads to joint liability unless the partnership deed or pleaded facts negate such liability. Consequently the criminal petitions seeking quashment were dismissed and the accused partners must face trial. [Paras 28, 29, 30, 32, 33]

Criminal petitions dismissed; complaints not quashed and prosecution against the partner may proceed.

Prima facie averments for arraignment of a partner - Offence under Section 138 of the Negotiable Instruments Act - Whether factual contentions about the petitioner's role in the firm and interest in profits/losses require trial determination - HELD THAT: - The Court held that factual questions - whether the petitioner had direct role in the firm's transactions, whether she would benefit from profits or suffer losses, whether she was a sleeping partner or otherwise excluded by the partnership deed, and whether the cheques were signed in her presence - cannot be resolved on the pleadings and documents before the High Court. Those matters are to be established or refuted through evidence at trial; if the petitioner can prove lack of participation or lack of interest during trial, such evidence would be considered by the learned Magistrate. Accordingly the trial process was endorsed as the proper forum to examine these factual defenses. [Paras 10, 30, 31, 32]

Factual issues concerning the petitioner's role and interest in the partnership remitted for trial; parties to adduce evidence before the Magistrate.

Final Conclusion: The High Court refused to quash the complaints under Section 138 as against the partner-petitioner; partners sharing ordinary interest in the firm may be prima facie arraigned where complaints allege day-to-day involvement and cheques signed in presence, while contested factual pleas about non-participation or exclusion are left for trial.

Quashing of criminal proceedings - mala fide prosecution / arm-twisting - dishonour of cheque - drawn for discharge of debt or liability - absence of legally enforceable debt - criminal jurisdiction under Section 482 of the Code of Criminal Procedure - offence under Section 138 of the Negotiable Instruments Act

Dishonour of cheque - drawn for discharge of debt or liability - absence of legally enforceable debt - quashing of criminal proceedings - Whether the complaint under Section 138 of the Negotiable Instruments Act against the petitioner in her personal capacity is maintainable when the cheque was issued from a college account signed by the petitioner in an official capacity and there is no personal or institutional liability shown against the college. - HELD THAT: - The Court examined Section 138 which requires that a cheque be drawn on an account maintained by the drawer for payment to another for the discharge, in whole or in part, of any debt or liability. The petitioner signed the cheque only in her capacity as Correspondent/Secretary of V.N. Krishnaswamy Naidu College of Arts and Science for Women and the cheque was issued from the college's account; the college was not made an accused. There is no allegation that the respondent had any contractual supply or liability relationship with the petitioner personally or with the college; the respondent's supply was to V.N.K. Textiles and Paper Mills Limited, against which separate proceedings are pending. The complaint against the petitioner personally therefore lacks the essential factual foundation of an existing personal debt or liability drawn on the petitioner's account. Instituting criminal proceedings against the petitioner in these circumstances was held to be an abuse of process and an arm twisting manoeuvre to recover amounts in respect of a separate corporate transaction. Viewing the matter from any angle, the complaint does not withstand judicial scrutiny and must be interfered with under the Court's powers to prevent misuse of criminal process. [Paras 12, 13, 15, 16, 17]

Proceedings in C.C. No. 14 of 2015 against the petitioner quashed as not maintainable for lack of personal liability and because the cheque was issued from the college account while the college was not made an accused.

Final Conclusion: The petition under Section 482 CrPC is allowed; criminal proceedings in C.C. No. 14 of 2015 against the petitioner are quashed and connected miscellaneous petitions are closed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Probable defence - security cheque - Locus standi of proprietor to file complaint on behalf of firm - Scope of revisional jurisdiction of High Court

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Sections 118 and 139 of the Negotiable Instruments Act - Probable defence - security cheque - Conviction under Section 138 upheld on the basis that the cheque was issued by the accused, was dishonoured for insufficiency of funds, and the accused failed to rebut statutory presumption that the cheque was issued for discharge of a lawful liability. - HELD THAT: - Both courts below found that the accused admitted issuance of the cheque and his signature was not denied; the complainant proved presentation and return memo showing dishonour and service of legal notice. Once issuance and signature stood admitted, the rebuttable presumption under Sections 118 and 139 of the Negotiable Instruments Act arose in favour of the complainant that the cheque was issued for discharge of a debt. The accused asserted in his 313 statement that the cheque was a 'security cheque' but did not lead positive evidence or rely on materials to establish a probable defence. In the absence of evidence creating preponderance of probability in the accused's favour, the courts rightly applied the statutory presumption and convicted the accused for the offence under Section 138. [Paras 7, 9, 11]

Conviction and sentence under Section 138 of the Negotiable Instruments Act affirmed.

Locus standi of proprietor to file complaint on behalf of firm - Complaint was maintainable though the cheque was issued in favour of the firm because the complainant was the sole proprietor and had locus to file the complaint on behalf of the proprietorship concern. - HELD THAT: - The Court accepted the complainant's averment in the complaint that he was the proprietor of M/s. Roshan Lal & Sons. The bill and other material on record supported that the transaction was between the accused and the proprietorship. Although the complainant admitted in cross-examination that he could not then produce proprietorship documents, he stated he could do so if given time and never disowned proprietorship. No objection to proprietorship was taken during trial. In these circumstances the courts below correctly held that the complainant had locus standi under the Act to prosecute the complaint in his capacity as proprietor. [Paras 12, 13, 14, 15]

Maintainability upheld and complaint entertained by trial court was valid.

Scope of revisional jurisdiction of High Court - High Court will not re-appreciate evidence in exercise of revisional jurisdiction where concurrent findings of fact and law by trial and appellate courts are based on proper appreciation of the evidence and no glaring miscarriage of justice is shown. - HELD THAT: - The High Court observed that its power under Section 397 Cr.P.C. is supervisory and not equivalent to an appellate re-evaluation of evidence. Given concurrent, reasoned findings by the trial court and the appellate court, and absence of any demonstrable material irregularity or gross miscarriage of justice, there was no basis to disturb the conclusions reached below. The Court relied on established precedent that revisional interference is inappropriate unless a clear error or miscarriage is shown. [Paras 17, 18, 19]

No interference with concurrent findings; revisional petition dismissed.

Final Conclusion: Revision petition dismissed; concurrent findings of conviction under Section 138 NI Act and maintainability of the complaint affirmed; accused directed to surrender and serve the sentence, interim directions vacated.

Compounding of offence under Section 138 of the Negotiable Instruments Act - withdrawal of criminal complaint by compromise - quashing of convictions and sentences upon compounding - discretion to remit or reduce compounding fee - revival of conviction on default in payment of compounding fee - release of court-deposited funds to complainant after compromise

Withdrawal of criminal complaint by compromise - quashing of convictions and sentences upon compounding - Whether the complaint under Section 138 NI Act could be withdrawn on the parties' compromise and the convictions and sentences recorded by the courts below be quashed and set aside. - HELD THAT: - The parties filed and placed on record a compromise, and the respondent-complainant endorsed the compromise and raised no objection to disposal in its terms. Having regard to the amicable settlement between the parties and the respondent's endorsement, the complaint was permitted to be withdrawn, the complaint arising from dishonour of the cheque under Section 138 Negotiable Instruments Act was treated as withdrawn, and the judgments of conviction and sentence passed by the courts below were quashed and set aside, resulting in the acquittal of the petitioner-accused. [Paras 2, 3]

Complaint compounded on compromise; convictions and sentences quashed and petitioner acquitted.

Discretion to remit or reduce compounding fee - compounding of offence under Section 138 of the Negotiable Instruments Act - Whether the petitioner should be exempted or the compounding fee reduced in view of the parties' settlement and the petitioner's financial condition and relevant precedent. - HELD THAT: - The High Court considered the petitioner's plea for exemption from compounding fee on grounds of poor financial condition and his submission invoking the ratios in Damodar S. Prabhu v. Sayed Babalal H. and its clarification in Madhya Pradesh State Legal Services Authority v. Prateek Jain. Applying those principles and the court's discretion in view of the facts and circumstances of the case, the court declined full exemption but exercised leniency by directing deposit of a reduced compounding fee of Rs. 2,000 with the H.P. State Legal Services Authority, Shimla within eight weeks. The court further directed that failure to deposit the fee within the stipulated time would result in automatic revival of the judgments of conviction and sentence. [Paras 4, 5, 6]

Compounding fee reduced to Rs. 2,000 to be deposited within eight weeks; failure to deposit will revive convictions and sentences.

Release of court-deposited funds to complainant after compromise - Whether the amount deposited in the Registry of the High Court should be released to the complainant following the compromise. - HELD THAT: - An amount of Rs. 70,000 had been deposited by the petitioner in the Registry. In view of the compromise and the accommodation of the settlement terms, the Registry was directed to release the deposited amount in favour of the complainant, along with any accrued interest, without issuing notice to the accused, by remitting the sum to her bank account on the complainant furnishing account details in person or through counsel. The court permitted use of a downloaded copy of the order for the purpose of depositing compounding fee and for other related actions, and directed transmission of a copy of the judgment to the H.P. State Legal Services Authority. [Paras 7, 9, 10]

Registry to release deposited amount in favour of complainant to her bank account on furnishing account details; copy of order to be sent to Legal Services Authority.

Final Conclusion: The petition is disposed of in terms of the parties' compromise: the complaint under Section 138 NI Act is compounded, convictions and sentences quashed and the accused acquitted; a reduced compounding fee of Rs. 2,000 is directed to be deposited with the H.P. State Legal Services Authority within eight weeks subject to revival on default; and the amount deposited in Court is to be released to the complainant.

Grant of bail pending appeal to convicted accused - Effect of conviction on presumption of innocence - Requirement of reasons and clarity in judicial orders - Consideration of accused's conduct, antecedents and threats to witnesses in bail decisions - Parity in granting bail

Grant of bail pending appeal to convicted accused - Effect of conviction on presumption of innocence - Consideration of accused's conduct, antecedents and threats to witnesses in bail decisions - Whether the High Court was justified in releasing the convicted accused on bail pending their appeals. - HELD THAT: - The High Court's grant of bail pending appeal was examined on merits. The Court held that once accused have been convicted by the trial court for serious offences (here, offences under Sections 302/149, 201 r/w 120B IPC), there is no continuing presumption of innocence that should make the High Court liberal in granting bail pending appeal; the High Court therefore ought to be very slow in granting bail in such cases. The High Court failed to appreciate and consider material circumstances which weighed heavily against bail: the convictions after appreciation of evidence by the trial court; findings that the investigating officer and the doctor had sought to derail the investigation; repeated threats by the accused to prosecution witnesses and villagers during trial and FIRs lodged for offences under Sections 504 and 506 IPC. The High Court's casual treatment of those FIRs and the antecedents of the accused was impermissible. Having regard to these considerations and the limited period of actual sentence undergone (about eight months against life sentences), the Supreme Court found the High Court's orders releasing the accused on bail unsustainable and quashed them, directing the accused to surrender and serve the sentence imposed by the trial court. [Paras 9, 11, 13]

Impugned orders releasing the accused on bail pending appeal were quashed and set aside; the accused were directed to surrender forthwith to serve the sentence imposed by the trial court, failing which warrants of arrest to be issued.

Requirement of reasons and clarity in judicial orders - Parity in granting bail - Whether the High Court's bail orders met the standards of clarity and reasoned decision-making required of judicial pronouncements. - HELD THAT: - The Court recorded that the High Court's orders lacked clarity on what constituted submissions and what constituted findings or reasoning, and omitted reference to the State's detailed counter affidavit opposing bail. The orders did not disclose the submissions of the Public Prosecutor nor identify the reasoning that led to the grant of bail; they also relied on parity to release co-accused without proper independent reasoning. The Supreme Court emphasised the essential elements of a judgment - material facts, issues, summary of rival arguments, application of law and reasoned conclusions - and held that the High Court's disposal of the bail applications was defective for want of intelligible and specific reasons. For these reasons the High Court's orders could not be approved. [Paras 9, 10, 11]

High Court's orders were found to lack requisite clarity and reasoned explanation and were set aside.

Final Conclusion: The appeals are allowed: the High Court orders dated 08.10.2018 and 06.12.2018 releasing the accused on bail pending appeal are quashed and set aside; the accused are directed to surrender to serve the sentence imposed by the trial court, and the High Court is directed to decide the pending appeals on their merits uninfluenced by observations in this judgment.