TaxTMI Updates e-Newsletter
Oct 29,2021

Principles of Natural Justice - Writ jurisdiction under Article 226 - Alternate remedy rule in fiscal statutes - Relegation to statutory appeal under Section 107 of TN-GST Act and C-GST Act - Exceptions to the alternate remedy rule (breach of fundamental rights; violation of natural justice; excess of jurisdiction; challenge to vires)

Principles of Natural Justice - Writ jurisdiction under Article 226 - Alleged failure to consider the writ-petitioner's objections raised a breach of the principles of natural justice. - HELD THAT: - The Court examined whether the impugned orders, which state that the assessee's Input Tax Credit was adjusted against outward tax liability, amounted to non-consideration of the petitioner's objections and thereby violated the Principles of Natural Justice. The Court observed that an order may be terse yet sufficient and that the factual matrix concerning adjustment of ITC turns heavily on records and figures. Given that the matter involves factual determination susceptible to appellate scrutiny, the Court found that the asserted omission was not a compelling breach of natural justice warranting exercise of writ jurisdiction. The reasoning was informed by the view that such factual and record-based issues are more appropriately examined by the appellate authority rather than in writ proceedings. Where the petitioner's grievance is essentially one of inadequate reasoning on factual adjustment of ITC, it amounts at most to a ground for appeal rather than a ground for interfering under Article 226. [Paras 7]

Alleged violation of the Principles of Natural Justice was not held to be sufficiently compelling to justify interference by writ jurisdiction.

Alternate remedy rule in fiscal statutes - Relegation to statutory appeal under Section 107 of TN-GST Act and C-GST Act - Exceptions to the alternate remedy rule (breach of fundamental rights; violation of natural justice; excess of jurisdiction; challenge to vires) - Whether the writ petitions should be entertained despite availability of statutory appeal, or whether the petitioner must be relegated to the alternate remedy under Section 107. - HELD THAT: - The Court applied the well-established principle that alternate statutory remedies in fiscal statutes must be applied with rigour and that writ jurisdiction is to be exercised only in exceptional circumstances. The Court noted the cited precedents including Dunlop , Satyawati Tandon , K.C. Mathew , and the recent three-Judge Bench decision in Commercial Steel Limited , and extracted the established exceptions permitting writ relief: (i) breach of fundamental rights; (ii) violation of principles of natural justice; (iii) excess of jurisdiction; and (iv) challenge to the vires of the statute. Having found no compelling breach of natural justice or any other exception on the facts, the Court held that the alternate remedy under Section 107 of the TN-GST Act and C-GST Act must be resorted to. The Court therefore declined to entertain the petitions and relegated the petitioner to the statutory appellate forum, preserving the appellate authority's power to consider limitation and pre-deposit issues and permitting the petitioner to seek exclusion of time spent in these writ petitions under the Limitation Act if so advised. [Paras 13, 15]

Writ petitions dismissed; petitioner relegated to the statutory appeal under Section 107 of the TN-GST Act and C-GST Act, with rights preserved to raise all appropriate contentions before the Appellate Authority.

Final Conclusion: The writ petitions are dismissed and the petitioner is relegated to the alternate statutory remedy by way of appeal under Section 107 of the TN-GST Act and the C-GST Act; no opinion is expressed on the merits and rights to pursue appeal (including preservation of limitation arguments) are expressly preserved; no order as to costs.

Limitation for filing appeal under Section 107 of the SGST Act - principle of audi alteram partem and adequacy of opportunity of hearing in quasi judicial proceedings - prejudice test for breach of natural justice - detention and penalty under Section 129 of the CGST Act for incorrect e way bill

Limitation for filing appeal under Section 107 of the SGST Act - Whether the appeal filed by the petitioner was barred by limitation and rightly dismissed by the appellate authority. - HELD THAT: - The Court examined Section 107 of the SGST Act which prescribes a three month period to file an appeal from communication of the order and permits condonation for a further period not exceeding one month; thus four months is the outer limit. The impugned order dated 02 07 2019 was communicated the same day and, even if the petitioner's asserted date of receipt is accepted, the outer limit for filing the appeal had expired before the appeal was filed on 16 12 2019. The appellate authority correctly held that it had no power to condone delay beyond the statutory outer limit and dismissed the appeal on account of delay. The Court found no error in that conclusion and upheld dismissal on limitation grounds. [Paras 14, 15, 19]

Appeal was barred by limitation and its dismissal on that ground by the appellate authority was proper.

Principle of audi alteram partem and adequacy of opportunity of hearing in quasi judicial proceedings - prejudice test for breach of natural justice - Whether denial of a personal hearing rendered the appellate order invalid for breach of natural justice. - HELD THAT: - The Court applied the flexible doctrine of audi alteram partem as enunciated by the Supreme Court, recognising that personal hearing is not invariably required where the right to make representations is afforded and where no prejudice is caused. In the facts, the appellate authority had issued a notice for hearing, the date fixed coincided with the COVID 19 lockdown, and the petitioner furnished written submissions and emails which were placed on record and considered. Given the pandemic constraints and the availability of written representations, the Court held that pre decisional opportunity to represent was afforded and that no prejudice was shown which would vitiate the order. Consequently, absence of a personal hearing did not warrant interference. [Paras 16, 18, 20, 21, 23]

Written submissions and emails constituted adequate opportunity to be heard in the circumstances; absence of a personal hearing did not invalidate the appellate order.

Detention and penalty under Section 129 of the CGST Act for incorrect e way bill - Whether invocation of Section 129 of the CGST Act and the consequential detention/seizure and penalty were unsustainable because the error in documents was inadvertent or clerical. - HELD THAT: - The Court noted the departmental contention that the e way bill showed a destination different from the place where the consignment was intercepted and that the driver's statement supported the departmental action. The petitioner's case that the mistake was clerical and without fraudulent intent was considered, but the Court observed that Section 129 does not distinguish between inadvertent and deliberate errors and the authorities had also examined merits. No illegality or perversity in invoking Section 129 was demonstrated to warrant interference under Articles 226/227; the appellate authority's consideration of the merits was not shown to be flawed. [Paras 5, 6, 9, 23]

Invocation of Section 129 and the consequential action was not shown to be illegal or perverse; the authorities' conclusion on tax evasion was left undisturbed.

Final Conclusion: The writ petition is dismissed; the orders of the statutory authorities - the detention/penalty order and the appellate order - are upheld as not being vitiated by limitation, a breach of natural justice causing prejudice, or by any demonstrable illegality or perversity.

Non-consideration of reply - principles of natural justice - summary notice transmitted online in Form GST DRC-01 - non-application of mind - remand for fresh consideration

Non-consideration of reply - principles of natural justice - non-application of mind - Whether the impugned assessment order dated 18.11.2020 is sustainable where the petitioner had submitted detailed replies dated 08.10.2020 and 14.10.2020 which were received and acknowledged by the Assessment Officer but were not considered before passing the assessment order. - HELD THAT: - The Court accepted the petitioner's averment that an earlier detailed show cause notice dated 21.05.2019 was responded to by reply dated 08.10.2020 and that, after the matter was transmitted to the present authority, a further reply dated 14.10.2020 was submitted in person and acknowledged by the Assessment Officer. The respondent's reliance on subsequent transmission of an online Form GST DRC-01 notice did not absolve the Assessment Officer of the obligation to consider the previously received replies. The Court found that the Assessment Officer's statement in the impugned order that the petitioner had not replied to the DRC-01 was a result of non-application of mind because the acknowledged reply had been received only five days prior to the online notice and ought to have been considered. In these circumstances the failure to take into account the petitioner's replies amounted to a breach of the principles of natural justice and rendered the impugned order unsustainable. [Paras 8, 10]

The impugned assessment order dated 18.11.2020 is quashed for non-consideration of the petitioner's replies and for non-application of mind, constituting a breach of natural justice.

Remand for fresh consideration - summary notice transmitted online in Form GST DRC-01 - What remedial course should be adopted following quashing of the impugned assessment order? - HELD THAT: - The Court directed that the matter be remanded to the respondent/Assessment Officer for reconsideration. While reconsidering, the Assessment Officer is to take into account the petitioner's replies dated 08.10.2020 and 14.10.2020 along with the documents filed therewith, and, if required, afford an opportunity of personal hearing to the petitioner. After providing these opportunities, the respondent may proceed to pass final orders of assessment expeditiously. [Paras 11]

Matter remanded to the Assessment Officer to reconsider the assessment after taking into account the replies dated 08.10.2020 and 14.10.2020 and, if necessary, after granting personal hearing; impugned order quashed.

Final Conclusion: The writ petition is allowed by quashing the assessment order dated 18.11.2020 and remanding the matter to the Assessment Officer for fresh consideration of the replies dated 08.10.2020 and 14.10.2020, with an opportunity of personal hearing if required; no order as to costs.

Repair and maintenance service - Job work (manufacturing services on physical inputs owned by others) - Classification under SAC 9987 and SAC 9988 - Manufacture - emergence of a new product having a distinct name, character and use - Concessional GST rate for job work under Notification No.11/2017 - Advance ruling on classification

Repair and maintenance service - Job work (manufacturing services on physical inputs owned by others) - Manufacture - emergence of a new product having a distinct name, character and use - Classification under SAC 9987 and SAC 9988 - Reshelling of old, worn-out sugar mill rollers is classifiable as a repair/maintenance service under SAC 9987 and not as a job work manufacturing service under SAC 9988. - HELD THAT: - The Authority found that the rollers received are finished goods which have been used and rendered unserviceable by wear and tear; the process undertaken by the applicant restores those same goods to a usable condition rather than producing a new commodity. Job work under section 2(68) contemplates a process on goods belonging to another that may form part of manufacture, whereas 'manufacture' under section 2(72) requires processing that results in a new product with distinct name, character and use. In the present case the identity of the article (sugar mill roller) remains unchanged before and after the process and no new commercial commodity emerges. Prior precedents holding reshelling to be repair/ reconditioning were applied. For these reasons the activity falls squarely within maintenance/repair services under SAC 9987. [Paras 5]

Subject activity of reshelling old sugar mill rollers is repair activity and falls under SAC 9987.

Concessional GST rate for job work under Notification No.11/2017 - Classification under SAC 9987 and SAC 9988 - Advance ruling on classification - The reshelling activity will continue to attract 18% GST and is not eligible for the concessional 12% GST applicable to manufacturing/job work services under Sr. No.26 (clause (id)) of Notification No.11/2017. - HELD THAT: - Because the activity is held to be repair/maintenance (SAC 9987) and not manufacturing on physical inputs owned by others (SAC 9988), it does not fall within the concessional entry in Sr. No.26 (clause (id)) of Notification No.11/2017 which provides reduced rate for specified manufacturing/job work services. Consequently, the concessional 12% rate is not available and the activity continues to attract the general rate applicable to services of this nature. [Paras 5, 6]

Reshelling of old sugar mill rollers attracts 18% GST under SAC 9987 and not 12% under the concessional notification.

Final Conclusion: The Authority ruled that reshelling of old, worn-out sugar mill rollers is a repair/maintenance service (SAC 9987) and therefore continues to attract 18% GST; it is not a job work manufacturing service (SAC 9988) eligible for the concessional 12% rate under Notification No.11/2017.

Deemed dividend under section 2(22)(e) - trade advance / business advance versus loan or advance - admissibility and effect of assignment agreements corroborating business transactions - protective addition and substantive assessment in the hands of related company - deletion of protective addition upon settlement under Direct Taxes Vivad se Vishwas scheme

Deemed dividend under section 2(22)(e) - trade advance / business advance versus loan or advance - admissibility and effect of assignment agreements corroborating business transactions - Whether amounts advanced by M/s Cauvery Aqua Pvt. Ltd. to M/s Brindavan Beverages Pvt. Ltd. are assessable as deemed dividend under section 2(22)(e) for AY 2007-08 or are bona fide business transactions adjustable against property assignments. - HELD THAT: - The Tribunal examined the agreement dated 14.11.2005 between CAPL and BBPL which expressly recorded CAPL's involvement in BBPL's investments in real estate projects of the Embassy Group and provided that CAPL would make investments as required and that amounts invested would be proportionately adjusted when developed properties are transferred to CAPL. The assignment agreements dated 28.03.2015, endorsed by the developer, corroborated the arrangement and showed adjustment of rights in favour of CAPL against properties. Relying on the contractual terms and the jurisprudential distinction between trade/business advances and loans (as applied by the jurisdictional High Court), the Tribunal held that where advances are made as part of a commercial arrangement for acquisition/investment in capital assets and are to be adjusted against property, they do not assume the character of loans/advances taxable as deemed dividend under section 2(22)(e). The Tribunal found no material to disbelieve the assessee's explanation and held the A.O.'s reasons for treating the transactions as loans to be unconvincing. [Paras 11, 12, 13, 14, 15]

Confirmed the CIT(A)'s deletion of the addition made under section 2(22)(e) for AY 2007-08.

Protective addition and substantive assessment in the hands of related company - deletion of protective addition upon settlement under Direct Taxes Vivad se Vishwas scheme - Whether the protective addition of unexplained investment of Rs. 2,60,00,000 in the assessee's hands should be sustained when the substantive addition of the same amount was upheld/settled in the hands of M/s Brindavan Beverages Pvt. Ltd. - HELD THAT: - The A.O. made a substantive addition in the hands of Brindavan Beverages P Ltd based on loose papers found during search and simultaneously made a protective addition in the hands of the assessee. The CIT(A) confirmed the substantive addition against the company and deleted the protective addition in the assessee's hands. The company thereafter opted to settle the dispute under the Direct Taxes Vivad se Vishwas scheme and the assessee produced Form No.3 evidencing settlement proceedings. Given that the substantive liability in the company's hands has been accepted/settled and that final proof of settlement (Form No.5) remains to be produced, the Tribunal directed restoration to the A.O. with a direction to delete the protective addition upon production of Form No.5. [Paras 16, 17, 18, 19, 20]

Protective addition deleted subject to verification: the issue is restored to the file of the A.O. with direction to delete the protective addition upon the assessee furnishing Form No.5 evidencing final settlement under the Vivad se Vishwas scheme.

Final Conclusion: The Tribunal confirmed the deletion of the addition under section 2(22)(e) for AY 2007-08 and directed that the protective addition of unexplained investment be deleted on production of Form No.5 under the Direct Taxes Vivad se Vishwas scheme; appeal treated as allowed for statistical purposes.

Power of rectification under Section 254(2) - mistake apparent from the record - mistake of counsel - remand for adjudication of additional grounds

Power of rectification under Section 254(2) - mistake apparent from the record - mistake of counsel - The scope of the Tribunal's power under subsection (2) of Section 254 of the Income Tax Act, 1961, insofar as it relates to rectification of orders where the mistake is attributable to counsel for a party. - HELD THAT: - The Court held that the Tribunal's power under Section 254(2) is not confined to mistakes made by the Tribunal itself but extends to rectifying errors which are apparent on the face of the record even if such errors arose from actions or omissions of counsel for the parties. Once a mistake or error apparent on the record is brought to the Tribunal's notice by a party, the Tribunal may amend its order to correct that mistake. The reasoning treats non-consideration or oversight as potentially constituting a mistake apparent from the record when it results in injustice and is capable of summary correction under Section 254(2). [Paras 3]

The Tribunal's rectification power under Section 254(2) includes the ability to amend its order to correct mistakes attributable to counsel when such mistakes are apparent on the face of the record.

Remand for adjudication of additional grounds - Whether the Tribunal's order dismissing the miscellaneous application (M.A. No.555/Del/2019) should be set aside and the matter remitted for adjudication of Ground Nos. 6 and 7 of the appeal. - HELD THAT: - The Court found that the petitioner's counsel had inadvertently withdrawn the appeal without bringing to the Tribunal's attention that Grounds 6 and 7 remained outstanding and required adjudication. Applying the principle that the Tribunal may rectify mistakes apparent from the record (including those arising from counsel's error), the Court concluded that the impugned order dismissing the miscellaneous application was liable to be set aside. The Court directed the Tribunal to take up the petitioner's appeal insofar as Grounds 6 and 7 are concerned and to adjudicate them after hearing the parties or their authorised representatives. [Paras 4, 5]

Impugned order dated 23.09.2020 is set aside and the matter is remitted to the Tribunal to adjudicate Grounds 6 and 7 after hearing the parties.

Final Conclusion: The writ petition is allowed: the Tribunal's dismissal of the miscellaneous application is set aside, the Tribunal may exercise its rectification power under Section 254(2) to correct the counsel's inadvertent error, and the appeal is remitted to the Tribunal for fresh adjudication of Grounds 6 and 7 (pertaining to AY 2011-2012) after hearing the parties.

Assessment in case of search or requisition under Section 153A - Seized material as basis for assessment - Requirement of particulars in show cause/notice - Validity of notice lacking nexus with seized material

Assessment in case of search or requisition under Section 153A - Seized material as basis for assessment - Requirement of particulars in show cause/notice - Validity of the notice dated 29th November 2018 issued under Section 153A which did not specify the seized or requisitioned material forming the basis of the notice. - HELD THAT: - The court held that Section 153A operates mandatorily once a search is conducted, requiring the assessing officer to call for returns for specified assessment years, but an assessment under Section 153A must be founded on the seized material. A show cause notice is a preliminary step to enable the assessee to meet the case against it and therefore must provide sufficient particulars of the basis for the notice. The impugned notice was brief and silent as to whether material was seized under Section 132 or books of account, documents or assets were requisitioned under Section 132A; it merely required the assessee to file a 'true and correct return' without indicating the seized material or the nexus between any seized material and the assessment. In the absence of such particulars, the notice did not furnish the assessee with the information necessary to respond meaningfully and was therefore vulnerable. The court did not decide the merits of any addition on the basis of seized material but confined its reasoning to the territorial sufficiency and content of the notice and the requirement that a fresh notice, if issued, should be suitably worded to indicate the basis on which it is issued. [Paras 4, 5, 6, 7]

Impugned notice quashed; respondent permitted to issue a fresh notice under Section 153A worded to disclose the basis (seized/requisitioned material) so the assessee can respond; all rights kept open.

Final Conclusion: The notice dated 29th November 2018 under Section 153A is quashed for failing to indicate the seized or requisitioned material forming the basis of the notice; respondent may issue a fresh, suitably worded notice indicating the basis within the timeframe noted by the court, with all rights and contentions kept open.

Slump sale - capital gains - goodwill - technical know-how - charging section and computation provisions as an integrated code - remand for verification of revenue treatment - non-compete / non-computation fee - interest under section 220(2)

Slump sale - capital gains - goodwill - technical know-how - charging section and computation provisions as an integrated code - remand for verification of revenue treatment - Whether the consideration received on transfer of the transportation business (including technical know how) is taxable as capital gain by treating the receipt as consideration for goodwill or is not chargeable as capital gain in view of slump sale and related principles. - HELD THAT: - The transfer was by agreement of the ongoing transportation business on a slump-sale basis. The Court applied the principle that the charging provision and the mode of computation form an integrated code and relied on B.C. Srinivasa Setty to observe that self-generated intangible assets (such as technical know how) lack a determinable cost of acquisition and cannot be equated to goodwill merely to bring the receipt within chargeability. The Tribunal's earlier remand required the Assessing Officer to verify whether the costs relating to acquisition/improvement of intangible non-depreciable assets had been accounted in the revenue field and whether the receipts were taxable under revenue heads; no such finding was recorded by the authorities. On the material and authoritative decisions cited, the Tribunal's conclusion that the profit on sale of technical know how could not be taxed as capital gain was upheld. The Court therefore rejected the Revenue's attempt to re-characterise the technical know how as goodwill and resolved the question in favour of the assessee. [Paras 11, 12, 13, 14, 15]

Transaction treated as slump sale/transfer of technical know how and not taxable as capital gain by treating it as goodwill; finding for the assessee.

Non-compete / non-computation fee - benefit in cash - income under Section 28/Section 56 - burden of proof on Department - Whether the Rs.30 crore non-computation / non-compete payment is liable to be taxed as revenue receipt by the assessee. - HELD THAT: - The Court examined the nature of the payment and the evidential position. Given that the transaction was treated as a slump sale of an ongoing concern, and that the non-computation fee represented payment for sharing customer database and trained employees rather than transfer of an identifiable capital asset or recurring business income, the Tribunal's view that the receipt was not exigible to tax as business income was accepted. The Court further noted authorities holding that benefits in cash may not fall under the cited business receipt head and that the Department bore the burden of proving the receipt's chargeability when it contended otherwise. Remand for further account details was held unnecessary given the character of the transaction and the absence of material that could alter the conclusion. [Paras 16, 17, 18, 19, 20]

Non-computation fee held not taxable as revenue receipt; finding for the assessee.

Interest under section 220(2) - interest under section 244A - compounding interest - Whether interest charged under section 220(2) can be computed so as to include interest already paid to the assessee under section 244A (i.e., whether interest on interest can be levied). - HELD THAT: - The Court observed that interest paid by the department under section 244A was compensatory for delay in refund and that, when refunds are subsequently reversed, the statute does not permit charging interest on the interest earlier allowed under section 244A. The Tribunal's direction that interest under section 220(2) be recomputed by reducing only the principal tax amount (and not by charging interest on the interest previously paid under section 244A) was held to be lawful. The Court distinguished the Revenue's reliance on Sandvik Asia as inapposite to the present facts. [Paras 21, 22, 23, 24, 25]

Interest under section 220(2) to be computed excluding interest earlier paid under section 244A; no interest-on-interest to be charged.

Final Conclusion: All three substantial questions were answered in the assessee's favour; the Tribunal's order was upheld and the Revenue's appeal dismissed.

Classification of Foreign Currency Convertible Bonds as debentures / debt instruments - Deduction under Section 35D treated with reference to capital employed - Treatment of foreign exchange fluctuation on FCCBs as gain/loss on capital account - Application of un-amended Section 43A for restatement of foreign currency liabilities

Classification of Foreign Currency Convertible Bonds as debentures / debt instruments - Deduction under Section 35D treated with reference to capital employed - Whether FCCBs issued by the assessee are debentures/debt instruments and thereby part of 'capital employed' for the purpose of allowing deduction under Section 35D of the Act. - HELD THAT: - The Court accepted the Tribunal's finding that FCCBs are interest-bearing instruments issued to investors to raise funds repayable after a period and are thus debt instruments. Relying on the Companies Act definition of "debenture" and on authoritative decisions distinguishing bonds, debentures and preference capital, the Court observed that in commercial parlance bonds and debentures are treated as securities representing loan obligations. The Court noted that the FCCB terms (including convertibility) do not alter their character as instruments evidencing debt. Consequently, fluctuations in liability arising from restatement of such foreign-currency liabilities affect the assessee's capital account, and the Tribunal's conclusion that such instruments form part of the capital structure for consideration under Section 35D could not be faulted. [Paras 5, 6, 7, 11, 15]

FCCBs are debt instruments/debentures and may be regarded as part of the capital employed for purposes of the Section 35D deduction; the Tribunal's finding on this point is upheld.

Treatment of foreign exchange fluctuation on FCCBs as gain/loss on capital account - Application of un-amended Section 43A for restatement of foreign currency liabilities - Whether the foreign exchange gain arising on restatement of FCCB liability is a capital receipt (gain on capital account) and therefore not taxable. - HELD THAT: - The Court endorsed the Tribunal's conclusion that the exchange fluctuation resulted from restatement of FCCB liabilities and that such increase or decrease in liability on the balance sheet impacts the capital account. The Court referred to the un-amended Section 43A principle that changes in exchange rates after acquisition occasion adjustment to the cost/carrying amount of assets and to prior authority (including the Apex Court's decision in Woodward Governor) supporting adjustment of foreign-currency related amounts in the capital account rather than treating them as revenue in the hands of the assessee. Given the admitted factual position that the fluctuation arose from restatement of FCCBs issued for acquisition purposes, the exchange gain/loss was held to be on capital account and not taxable as revenue. [Paras 8, 9, 10, 15]

The foreign exchange fluctuation on restatement of FCCB liability is a capital account gain/loss and not taxable as revenue; the Tribunal's conclusion is affirmed.

Final Conclusion: Both substantial questions are answered in favour of the assessee: FCCBs are to be treated as debenture/debt instruments forming part of capital employed for the Section 35D deduction, and the exchange fluctuation on restatement of FCCB liability is a capital account gain/loss not taxable. The Revenue's appeal is dismissed.

Deletion of additions for provisions for gratuity and prior period expenses - requirement of Form No.10B under section 12A(b) for claiming exemptions - exemption as an educational institution under section 10(23C) / section 10(23C)(vi) - claim made in return versus claim raised during assessment

Deletion of additions for provisions for gratuity and prior period expenses - requirement of Form No.10B under section 12A(b) for claiming exemptions - exemption as an educational institution under section 10(23C) / section 10(23C)(vi) - claim made in return versus claim raised during assessment - Whether the Assessing Officer's additions of amounts claimed as provision for gratuity and prior period expenses were rightly sustained when the assessee claimed exemption under the educational institution category and had registration/claim under section 10(23C). - HELD THAT: - The Assessing Officer disallowed the claim and made additions on the sole basis that the assessee had not enclosed Form No.10B with the late return and had allegedly not claimed exemption under the relevant provision in the return, thereby invoking section 12A(b) non-compliance. The appellate authority accepted that the assessee is an educational institution existing solely for educational purposes and observed that the case had approval by the CBDT for the purposes of section 10(23C)(vi) for later years; moreover, the record (tax return in the Paper Book) shows that the assessee had made the relevant claim in the return. The Tribunal found that the Assessing Officer's factual premise that the claim was not made in the return was incorrect on the material on record, and that the CIT(A)'s conclusion treating the income as not includible in total income on the basis that the assessee qualified as an educational institution was supportable. In that factual and legal context the additions on account of provisions for gratuity and prior period expenses were not sustained. The Revenue's contention that Form No.10B was not filed did not overcome the documentary showing of the claim and the appellate finding that the assessee qualified for exemption; accordingly, the Tribunal found no infirmity in the deletion of the additions by the CIT(A). [Paras 11, 12, 13]

The deletion of the additions was upheld and the Revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the order of the CIT(A) treating the assessee's income as not includible in total income on the basis that it is an educational institution and that the claim for exemption was made on the record; accordingly the additions for provision for gratuity and prior period expenses were deleted and the Revenue's appeal is dismissed.

Obligation to deduct TDS under Section 195 in respect of payments to non-residents - Nature of payment-royalty - rectification under section 154 - infructuousness of proceedings where primary legal obligation is negatived

Obligation to deduct TDS under Section 195 in respect of payments to non-residents - Nature of payment-royalty - infructuousness of proceedings where primary legal obligation is negatived - Whether the payments made by the assessee to a non-resident were in the nature of royalty attracting the obligation to deduct TDS and whether, consequently, the Revenue's appeal against the rectification order becomes infructuous. - HELD THAT: - The Bench recorded that the substantive question - whether the payments to the non-resident constituted royalty and thereby attracted withholding obligation under the Act - has been decided in favour of the assessee by the Hon'ble Karnataka High Court, which placed reliance on the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. CIT. Having been finally determined that the payments were not in the nature of royalty, there was no duty on the assessee to deduct tax at source. The appeal before this Tribunal challenging the rectification order under section 154 related entirely to consequences flowing from a supposed TDS obligation; once the primary legal obligation to deduct TDS is negated, the Revenue's challenge to the rectification order became infructuous. The Tribunal therefore dismissed the appeal without reopening the merits of the rectification which had been rendered academic by the higher court's decision. [Paras 6, 7]

The payments are not royalty and no TDS obligation arose; the Revenue's appeal against the rectification order is therefore dismissed as infructuous.

Final Conclusion: The Tribunal dismissed the Revenue's appeal as infructuous because the question whether the payments were royalty (and hence subject to TDS) was decided in favour of the assessee by the High Court relying on the Supreme Court, removing any obligation to deduct TDS and rendering the appeal against the section 154 rectification academic.

Disallowance under section 14A and Rule 8D - Allowability of premium on foreign currency convertible bonds as business interest - Bad debts after slump sale-effect of transfer of assets and liabilities - Education cess as part of income tax and non deductibility under section 40(a)(ii)

Disallowance under section 14A and Rule 8D - Deletion by CIT(A) of disallowance computed under Rule 8D(2)(ii) and restriction of disallowance under Rule 8D(2)(iii) to investments on which exempt income was earned was sustained. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance under Rule 8D(2)(ii) in view of findings that the loan was for specific purposes and the assessee had sufficient own funds; the Departmental Representative did not point to any error in those findings. As regards Rule 8D(2)(iii), the Tribunal agreed with the CIT(A)'s approach, following the Calcutta High Court in REI Agro and the Delhi High Court in ACB India, that only those investments which actually yielded exempt income should be considered for disallowance. No contrary binding decision was placed before the Tribunal, and the revenue's ground was dismissed accordingly. [Paras 4, 5]

Revenue's challenge to deletion/restriction under Rule 8D dismissed; CIT(A)'s order on section 14A/Rule 8D upheld.

Allowability of premium on foreign currency convertible bonds as business interest - Deduction under section 36(1)(iii) - Premium paid on redemption of FCCBs was held to be in the nature of interest and allowable for deduction under section 36(1)(iii); disallowance by AO was deleted. - HELD THAT: - The AO disallowed the premium on the ground that it was not routed through the profit and loss account and that fixed assets had been purchased before bond maturity. The CIT(A) and the Tribunal accepted that the premium constituted interest on capital borrowed for business purposes and is examinable under the Income tax Act irrespective of accounting treatment. The Department conceded that accounting entries were made as per company law and that a co ordinate Bench had decided similarly for an earlier year. Accordingly, the revenue's ground was dismissed. [Paras 6, 7, 8, 9]

Disallowance of FCCB premium restored by AO set aside; premium allowable as interest under section 36(1)(iii).

Bad debts after slump sale-effect of transfer of assets and liabilities - Claim of bad debts written off relating to the Renukoot unit, after that unit had been transferred by slump sale, was disallowed and the AO's order restored. - HELD THAT: - The Renukoot unit was transferred by slump sale on 23-05-2011, whereby assets and liabilities passed to the purchaser. The assessee sought to claim past advances as bad debts in the relevant assessment year and calculated net worth as on 31-03-2011. The Tribunal found that on slump sale the assets/liabilities had been transferred and that the assessee had inappropriately retained entries to claim the bad debt loss. The assessee's contention that the debtors formed residual assets was not accepted. For these reasons the Tribunal allowed the department's appeal on this point and restored the AO's disallowance. [Paras 10, 11, 12]

Bad debt claim disallowed; AO's order restored in favour of the Department.

Education cess as part of income tax and non deductibility under section 40(a)(ii) - Education cess is an additional surcharge on income tax and therefore not deductible as a business expenditure under section 40(a)(ii); the assessee's additional ground was dismissed. - HELD THAT: - The assessee relied on a CBDT circular and certain High Court and Tribunal decisions holding that cess is not covered by section 40(a)(ii). The Tribunal, however, noted that education cess was introduced as an additional surcharge by the Finance Acts and that the Supreme Court in CIT v. K. Srinivasan has held that surcharges are part of income tax. Reading the Finance Act provisions for the relevant year, the Tribunal concluded that education cess constitutes an additional surcharge on income tax and so falls within the ambit of non deductibility under section 40(a)(ii). The decisions relied upon by the assessee did not consider the Supreme Court authority and the statutory position; therefore the additional ground was rejected. [Paras 19, 20, 21, 22, 23]

Assessee's claim for deduction of education cess dismissed; issue decided against the assessee following the Supreme Court's ratio.

Final Conclusion: For A.Y. 2012 13 the Department's appeal is partly allowed (bad debt disallowance restored) and otherwise dismissed (section 14A/Rule 8D deletion and FCCB premium); the assessee's appeal is dismissed, including the additional ground on education cess which is held non deductible under section 40(a)(ii).

Levy of penalty under section 271(1)(c) for concealment in the return - Voluntariness of disclosure following detection by survey under section 133A - Requirement of variation between returned income and assessed income for imposition of penalty - Belated return under section 139 does not itself sustain penalty where no concealment in return

Levy of penalty under section 271(1)(c) for concealment in the return - Voluntariness of disclosure following detection by survey under section 133A - Requirement of variation between returned income and assessed income for imposition of penalty - Penalty under section 271(1)(c) is not leviable where there is no variation between the returned income and the assessed income despite disclosure made after a survey. - HELD THAT: - The Tribunal accepted that a survey under section 133A led to disclosure of on-money of Rs. 2,02,40,024 and that the assessee filed a belated return declaring that amount. However, the determinative principle is that section 271(1)(c) penalty is imposed with reference to concealment in the return of income. In the absence of any variation between the returned income and the assessed income, the statutory condition for levy of penalty is not satisfied. The Tribunal noted that the Commissioner (Appeals) correctly applied this legal proposition and that decisions of higher courts recognising the need for variation were applicable. Consequently, the mere fact that the disclosure followed detection by survey does not, by itself, justify penalty where the return and assessment are not at variance. [Paras 9]

Penalty under section 271(1)(c) deleted as not sustainable in absence of any variation between returned and assessed income.

Final Conclusion: The Revenue's appeal is dismissed; the penalty imposed under section 271(1)(c) is not sustainable where the assessed income does not differ from the returned income.

Reopening of assessment on receipt of tangible information indicating escapement of income - reopening based on information from investigation wing - unexplained cash credit under section 68 - onus on assessee to prove identity, creditworthiness and genuineness of creditors - rectification of assessment - allowability of interest where principal transaction is held genuine - estimation of profit element in alleged bogus purchases

Reopening of assessment on receipt of tangible information indicating escapement of income - reopening based on information from investigation wing - Validity of reassessment proceedings reopening assessment for AY 2010-11 - HELD THAT: - The Tribunal concurred with the CIT(A) that after completion of assessment u/s 143(3) the Assessing Officer received specific tangible information (letter dated 29/03/2017) from the investigation wing indicating that loans taken by the assessee were from entities involved in penny stock manipulation and sham transactions. Those facts furnished a definite reason to believe that income had escaped assessment and were sufficient to invoke reassessment; nothing beyond the existence of such tangible information was required at the reopening stage. The fact that a subsequent rectification order deleted the addition in respect of one entity based on later evidence did not vitiate the validity of the original reopening which rested on the material available at that time. [Paras 5]

Reopening of assessment for AY 2010-11 was valid and the grounds attacking reassessment were rejected.

Unexplained cash credit under section 68 - onus on assessee to prove identity, creditworthiness and genuineness of creditors - rectification of assessment - Sustainability of addition of Rs. 50,00,000 treated as unexplained cash credit for AY 2010-11 in respect of M/s Gateway Leasing Pvt. Ltd. - HELD THAT: - Although the AO had earlier recorded reasons to doubt the lenders as shell entities, the record before the Tribunal showed that the assessee produced ledger, PAN, address, broker details, securities, sanction letter, board resolution, deposit receipt, pledge agreement and related documents; the lender confirmed the transactions in response to notice u/s 133(6); and the director of the lender recorded a statement on oath acknowledging the loan and repayment. On this material the assessee discharged the onus to establish identity, creditworthiness and genuineness of the loan transaction. The earlier AO's addition, and the partial retention of addition after a rectification based on related proceedings, did not outweigh the cogent documentary and testimonial evidence establishing the genuineness of the Gateway loan. [Paras 6]

Addition of Rs. 50,00,000 in respect of M/s Gateway Leasing Pvt. Ltd. was deleted; assessee's ground allowed.

Allowability of interest where principal transaction is held genuine - Allowability of interest disallowance of Rs. 1.21 Lacs for AY 2011-12 paid to M/s Gateway Leasing Pvt. Ltd. - HELD THAT: - The assessment for AY 2011-12 had added back interest paid on the same loan which was treated as bogus in AY 2010-11. Having held the principal loan genuine for AY 2010-11 and deleted the quantum addition, the Tribunal held that the interest paid is consequentially allowable and must be allowed as deduction. [Paras 7]

Interest disallowance for AY 2011-12 set aside; interest allowed and the appeal partly allowed.

Estimation of profit element in alleged bogus purchases - Validity of estimated additions made by Revenue in AYs 2011-12 to 2013-14 on account of alleged bogus purchases from sales-tax hawala dealers - HELD THAT: - Assessments disallowed purchases where confirmations could not be obtained from suppliers served with notices u/s 133(6). On appeal the CIT(A) accepted that primary purchase documents and bank payments were on record and, following precedent relied upon by the CIT(A), estimated only the profit element embedded in the transactions rather than disallowing full purchases; the profit was quantified at 12.5%. The Tribunal found that the CIT(A)'s approach was fair and reasonable given the documentary support for purchases and the absence of service of confirmations, and there was no reason to interfere with that estimation for all three years. [Paras 8, 9]

Revenue appeals for AYs 2011-12 to 2013-14 dismissed; CIT(A)'s estimation of profit element confirmed.

Final Conclusion: The Tribunal upheld the validity of reassessment for AY 2010-11 but deleted the addition in respect of the Gateway loan and consequentially allowed the related interest for AY 2011-12; the assessee's appeals were partly allowed, while the revenue's appeals for AYs 2011-12 to 2013-14 were dismissed and the CIT(A)'s estimated profit-element adjustments were confirmed.

Validity of DVO valuation in absence of incriminating material - Reference to valuation officer (DVO) - admissibility and reliability - Search and seizure under section 132 and notice under section 153C - evidentiary consequences - Documentary evidence prevailing over oral statements recorded during search - Burden on revenue to establish undisclosed investment beyond assessee's declaration - Unreliability of valuation based on incomparable sales

Validity of DVO valuation in absence of incriminating material - Reference to valuation officer (DVO) - admissibility and reliability - Burden on revenue to establish undisclosed investment beyond assessee's declaration - Sustainability of additions made on the basis of DVO valuation where no incriminating material was found during search/seizure - HELD THAT: - The Tribunal analysed whether additions based on the DVO's valuation could be sustained when the search yielded no material to justify a DVO reference. Relying on the reasoning in CIT v. Abhinav Kumar Mittal, it held that where no material is found in the search to justify referral to the DVO, the DVO's valuation is of no consequence. The Tribunal further observed that the revenue did not point to any corroborative evidence to show that the assessee's investment exceeded the amount declared. Where the DVO's valuation is based on incomparable sales or where the referral lacks supporting incriminating material, the valuation cannot form a basis for addition and the burden remains on the revenue to prove undisclosed investment beyond the assessee's declared amounts. Applying these principles to the facts, the Tribunal set aside the additions sustained by the CIT(A) which rested on the DVO report. [Paras 5, 6, 7]

Addition based on DVO valuation set aside for lack of incriminating material and absence of corroborative evidence; appeal allowed.

Documentary evidence prevailing over oral statements recorded during search - Search and seizure under section 132 and notice under section 153C - evidentiary consequences - Sustainability of addition on account of alleged undisclosed capital gain founded on co-owner's oral statement recorded during post-search investigation - HELD THAT: - The Tribunal considered whether an addition for alleged undisclosed capital gain could be sustained when based primarily on an oral statement of a co-owner recorded during post-search investigation. Noting settled law that documentary evidence prevails over oral statements and that statements made during search have limited evidentiary value unless corroborated, the Tribunal observed that the Assessing Officer had not examined other parties or produced corroborative documentary evidence to support the oral assertion of cash receipt. In absence of such corroboration and with documentary records inconsistent with the oral statement, the addition was held to be based on surmise and conjecture and therefore unsustainable. [Paras 4, 5, 7]

Addition on account of alleged undisclosed capital gain deleted; appeal allowed.

Validity of DVO valuation in absence of incriminating material - Unreliability of valuation based on incomparable sales - Sustainability of additions made on account of alleged undisclosed household expenses and unexplained withdrawals where no incriminating material was found - HELD THAT: - For the co-owner appeals contesting additions for low household expenses and unexplained withdrawals, the Tribunal applied the same principle as in the co-owner and assessee appeals: where search yielded no incriminating material and the assessing authorities have not produced cogent evidence, additions sustained by the CIT(A) lack a proper evidentiary basis. The Tribunal noted that the CIT(A) did not give convincing reasons for upholding the household expenses addition and that the assessee had submitted year-wise household expense details. In the absence of demonstrable incriminating material or other substantive evidence, the additions could not be sustained. [Paras 5, 7]

Additions on account of unexplained household expenses and related items set aside; appeal allowed.

Final Conclusion: All appeals filed by the assessees for AY 2014-15 and 2015-16 are allowed: additions founded on DVO valuation where no incriminating material was found have been set aside, the addition based on an uncorroborated oral statement regarding alleged undisclosed capital gain is deleted, and additions for household expenses/withdrawals are also reversed for want of evidentiary basis.

Deemed dividend - scope of section 2(22)(e) as excluding trade advances/business transactions - assignment agreement as evidence of adjustment of advances - protective addition - Vivad se Vishwas settlement and Form No.5 as condition for deletion

Deemed dividend - scope of section 2(22)(e) as excluding trade advances/business transactions - assignment agreement as evidence of adjustment of advances - protective addition - Protective addition of Rs.1,00,00,000 assessed as deemed dividend under section 2(22)(e) deleted on merits. - HELD THAT: - The Tribunal confirmed the finding of the lower authority that the amounts advanced by M/s. Cauvery Aqua Pvt. Ltd. (CAPL) to M/s. Brindavan Beverages Pvt. Ltd. (BBPL) were business transactions for joint real estate investments and not loans or advances within the mischief of section 2(22)(e). The agreement dated 14-11-2005 envisaged CAPL supporting BBPL's real estate investments and stipulated that amounts invested would be proportionately adjusted when developed properties were transferred to CAPL. Subsequent assignment agreements dated 28-03-2015, endorsed by the developer, corroborated that properties were assigned to CAPL corresponding to amounts advanced. Applying the principle that a trade advance or business advance for purchase of capital assets or goods is not caught by section 2(22)(e), and having regard to the contemporaneous agreements and running account treatment between the companies, the Tribunal held there was no material to displace the business-character of the transactions and accordingly sustained deletion of the protective deemed-dividend addition. [Paras 5, 6, 7, 8, 9]

Protective addition assessed as deemed dividend deleted.

Protective addition - Vivad se Vishwas settlement and Form No.5 as condition for deletion - Protective addition of Rs.53,69,040 relating to unexplained investment restored to AO for deletion upon proof of settlement by the substantive assessee under the DTVSV scheme. - HELD THAT: - The substantive addition was sustained against Shri Prakash Ladhani but subsequently he opted to settle the dispute under the Direct Taxes Vivad Se Vishwas (DTVSV) scheme and filed requisite Form No.1. The Tribunal directed that the protective addition in the present appellant's assessment be deleted only upon production by the AO of Form No.5 (final certificate) issued to Shri Prakash Ladhani under the settlement scheme, and accordingly restored the matter to the file of the AO with that direction. [Paras 11, 12]

Issue remitted to AO to delete the protective addition upon receipt/verification of Form No.5 evidencing settlement under DTVSV.

Protective addition - Cross-objection challenging validity of search proceedings not pressed and dismissed. - HELD THAT: - The assessee did not press the cross-objection contesting the validity of the search; the Tribunal recorded that the cross-objection was not pressed and therefore dismissed it as not pressed. [Paras 13]

Cross-objection dismissed as not pressed.

Final Conclusion: The revenue's appeal is dismissed; the Tribunal confirms deletion of the protective deemed-dividend addition on merits and directs deletion of the protective unexplained-investment addition by the AO upon production of Form No.5 evidencing settlement by the substantive assessee under the DTVSV scheme; the cross-objection is dismissed as not pressed.

Substituted service by affixation under Order V Rules 17 and 20 CPC - mode of service under section 282 of the Act - reopening of assessment under section 147 based on erroneous assumption of non-filing - jurisdictional defect void ab initio - penalty under section 271(1)(c) lapses on quashing of assessment

Substituted service by affixation under Order V Rules 17 and 20 CPC - mode of service under section 282 of the Act - reopening of assessment under section 147 based on erroneous assumption of non-filing - jurisdictional defect void ab initio - Validity of service of notice under section 148 and consequent validity of reopening under section 147 for A.Y. 2010-11. - HELD THAT: - The notice under section 148 dated 12-03-2014 was effected by affixation on 18-03-2014. Section 282 prescribes service by post/courier (or as provided under the CPC) as the primary mode; Order V Rules 17 and 20 CPC permit substituted service by affixation only after due and reasonable diligence or where the addressee is avoiding service. The record contains no contemporaneous attempt to effect ordinary service by post/courier nor any finding that the preconditions of Rules 17 or 20 were satisfied; the serving report merely records affixation in the absence of the assessee. Separately, the assessing officer's raison d'e tre for reopening (note dated 10-03-2014) was an erroneous belief that the assessee had not filed a return; in fact the return for A.Y. 2010-11 was filed and processed under section 143(1). Because the statutory mode and preconditions for substituted service were not exhausted and the belief underlying reopening was premised on incorrect facts, the service of notice was invalid and the initiation of proceedings under section 147 suffered a jurisdictional defect. The assessment completed under section 143(3) read with section 147 is therefore void ab initio and the appellate order sustaining the assessment is set aside. [Paras 14, 16, 17, 18, 19]

Notice under section 148 was not validly served and reopening under section 147 (and the resultant assessment) is void ab initio; assessment order quashed and Commissioner (Appeals) order set aside.

Penalty under section 271(1)(c) lapses on quashing of assessment - Sustenance of penalty under section 271(1)(c) consequent to the quashed assessment for A.Y. 2010-11. - HELD THAT: - The penalty was founded upon additions upheld in the assessment. Having quashed the underlying assessment (and the additions), the basis for imposition of penalty under section 271(1)(c) disappears. There being no surviving addition on which the penalty rested, the penalty cannot stand. [Paras 22]

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

Final Conclusion: For A.Y. 2010-11 the Tribunal held that the section 148 notice was not validly served by affixation without exhausting the modes in section 282 and the preconditions of Order V Rules 17/20 CPC, and that reopening was premised on an erroneous belief of non-filing; the assessment was therefore void ab initio and quashed, and the consequential penalty under section 271(1)(c) was deleted.

Proceedings under section 153C of the Income-tax Act - requirement of incriminating material for making additions - effect of assessments not having abated on date of search

Proceedings under section 153C of the Income-tax Act - requirement of incriminating material for making additions - assessments not abated on date of search - Whether additions/disallowances made in assessments completed under proceedings initiated under section 153C can be sustained in absence of any incriminating material when assessments had not abated on the date of search - HELD THAT: - The Tribunal found on record that the returns for the impugned assessment years had been processed under section 143(1) prior to the search dated 24-09-2013 and hence the assessments had not abated on the date of search. The assessing officer's orders do not refer to or rely upon any incriminating material discovered as a result of the search; the Departmental Representative could not point to any such material on file. Applying the ratio of the jurisdictional High Court in CIT vs Continental Warehousing Corporation and Another and subsequent consistent authorities, the Tribunal held that where the assessments have not abated on the date of search, additions or disallowances in proceedings under section 153C are permissible only if they are founded on incriminating material recovered from the searched person. As the additions in the present matters were not shown to be based on any incriminating material, the Commissioner (Appeals) was correct in deleting those additions and the Revenue's grounds challenging that deletion fail. [Paras 5]

Deletions of the additions/disallowances by the Commissioner (Appeals) upheld and revenue appeals dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeals for A.Y. 2008-09, A.Y. 2011-12 and A.Y. 2012-13, holding that where assessments had not abated on the date of search, additions under proceedings initiated under section 153C are unsustainable in absence of incriminating material found as a result of the search.

Revision under Section 263 - deduction under Section 54B - capital asset and Section 2(14) - failure to afford opportunity/audi alteram partem - quashing of revisional order as nullity

Deduction under Section 54B - capital asset and Section 2(14) - revision under Section 263 - Whether the PCIT was justified in setting aside the assessment under Section 263 on the ground that the AO erroneously allowed deduction under Section 54B by treating the land as agricultural land - HELD THAT: - The Tribunal found that the PCIT proceeded on a misconception of law and irrelevant considerations. If agricultural land is outside specified municipal limits it is not a capital asset under Section 2(14)(iii) and therefore capital gains would not arise; hence the PCIT's emphasis on obtaining a certificate from land revenue authorities and on the subsequent intended use of the land was misplaced. The assessee had calculated LTCG and claimed deduction under Section 54B after the AO examined records showing agricultural use and supporting documents (including revenue records and purchase documentation). There was no demonstrable error in the AO's application of mind in admitting the claim. The PCIT disturbed the assessment on irrelevant grounds and without showing any substantive error in the AO's order, rendering the revisional order palpably arbitrary. On these merits the revisional exercise was unsustainable and was set aside. [Paras 8, 11]

PCIT's exercise of revision under Section 263 on merits was unjustified; revisional order set aside on merits.

Failure to afford opportunity/audi alteram partem - quashing of revisional order as nullity - revision under Section 263 - Whether the revisional order is vitiated by non-service of the show-cause notice and denial of opportunity of hearing - HELD THAT: - The Tribunal recorded that the show-cause notice was dated 10.03.2021 calling for a hearing on 15.03.2021 at 11:00 AM but bore a signature time of 15.03.2021 at 1:49 PM and was not received by the assessee's email as claimed. There being no other notice or opportunity afforded, the PCIT's failure to give reasonable opportunity was attributable to the Department. Reliance on authority establishes that an order passed in violation of the audi alteram partem rule is a nullity; such a defective revisional order cannot be sustained or merely remitted to cure the defect where the failure is incurable. The revisional order was therefore also quashed on procedural grounds. [Paras 9, 10, 11]

Revisional order under Section 263 is void for want of opportunity and is quashed.

Final Conclusion: The appeal is allowed; the revisional order passed by the PCIT under Section 263 is set aside and quashed both on merits and for failure to afford the assessee a hearing, and the assessment as completed by the AO is restored.

Maintainability of appeal under Section 130 of the Customs Act, 1962 - appeal to Supreme Court under Section 130E of the Customs Act, 1962 - interpretation of exemption Notification No.53/1997-Cus - general public importance - breach of conditions of exemption notification

Maintainability of appeal under Section 130 of the Customs Act, 1962 - appeal to Supreme Court under Section 130E of the Customs Act, 1962 - interpretation of exemption Notification No.53/1997-Cus - general public importance - Whether the appeal under Section 130 of the Customs Act, 1962 is maintainable before the High Court - HELD THAT: - The Court applied the principles laid down by the Supreme Court in MOTOROLA and subsequent decisions and examined the subject-matter of the dispute. The controversy centres on whether duty can be levied for failure to fulfil conditions of Notification No.53/1997-Cus - specifically the applicability of Clause 6(1) and 6(4) and the levy of duty where Net Foreign Exchange Earnings/Export Performance conditions are not met - and not on determination of rate, valuation or classification of goods. The Court concluded that the question involves interpretation of the exemption notification and has implications beyond the inter se dispute between the parties such that it partakes the character of a question of general public importance. Accordingly, the matter falls within the special appellate jurisdiction of the Supreme Court under Section 130E and is not cognisable in an appeal under Section 130 before the High Court. The Court therefore declined to adjudicate the substantive questions (including duty, penalty and confiscation) and directed the Revenue to pursue remedy before the Supreme Court under Section 130E. [Paras 6, 10, 11, 12]

The appeal under Section 130 is not maintainable and is dismissed with liberty to the Revenue to file an appeal under Section 130E before the Supreme Court.

Final Conclusion: The High Court held that the dispute involves interpretation of Notification No.53/1997 and a question of general public importance; the appeal under Section 130 of the Customs Act is therefore not maintainable and is dismissed, with liberty to the Revenue to approach the Supreme Court under Section 130E.

Summary order. The intra-Court appeal is disposed of by granting the appellant liberty to prefer an appeal against the Adjudicating Authority's order dated 28.02.2015; the appellant may raise all available contentions in law and the Appellate Authority shall decide the appeal after referring to the findings contained in the Single Judge's order dated 22.04.2015.

Moratorium under the Insolvency and Bankruptcy Code, 2016 - levy and condonation of regulatory fines during corporate insolvency resolution process - continuation of regulatory proceedings against a corporate debtor during moratorium - obligations of listed entities under SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 - role and duties of the resolution professional in relation to statutory and regulatory compliances

Moratorium under the Insolvency and Bankruptcy Code, 2016 - levy and condonation of regulatory fines during corporate insolvency resolution process - obligations of listed entities under SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 - Sustainability of the National Stock Exchange's imposition of a fine on the corporate debtor for delayed regulatory compliances after initiation of CIRP and the effect of moratorium on such levy. - HELD THAT: - The Tribunal found that after commencement of CIRP against the corporate debtor the Resolution Professional notified the respondent of the moratorium and explained impediments to making certain compliances. Although the respondent contended some defaults pre-dated CIRP and relied on obligations under SEBI (LODR) Regulations, 2015 (including timelines for submission of shareholding pattern and intimation of board meetings), the Tribunal observed that the failures arose from the board's prior mismanagement and that the Resolution Professional subsequently effected certain compliances and faced reasonable impediments in others. Applying the moratorium's prohibitions on continuation of proceedings and enforcement against the corporate debtor, and having regard to the subsequent compliance and the object of the Code to preserve value and facilitate resolution, the Tribunal held that burdening the corporate debtor with the impugned fine was unsustainable. The Tribunal therefore condoned the imposition of the fine, while directing that the Resolution Professional or, if applicable, the successful resolution applicant, shall comply with remaining obligations in accordance with law once impediments are removed. [Paras 6, 9, 10, 11, 12]

The application is allowed; the imposition of the fine by the National Stock Exchange is set aside/condoned and the corporate debtor shall, through the Resolution Professional or the successful resolution applicant, comply with outstanding regulatory requirements in accordance with law.

Final Conclusion: I.A. No. 208/JPR/2020 is allowed: the Tribunal set aside the impugned communication of the National Stock Exchange imposing a fine on the corporate debtor during CIRP, condoned the levy in light of the moratorium and subsequent/completed compliances, and directed lawful compliance by the Resolution Professional or successful resolution applicant.

Statutory appeal - pre-deposit requirement / exemption from pre-deposit - limitation / extension of time for filing appeal - appellate authority to decide on merits

Statutory appeal - The petitioner must pursue the remedy of statutory appeal in view of the final order dated 31-1-2019. - HELD THAT: - The Court agreed with the High Court's view that the competent authority had passed a final order on 31-1-2019, and therefore the appropriate remedy for challenging that order is by way of the statutory appeal. The Court declined to entertain the special leave petition on merits and granted liberty to the petitioner to file the statutory appeal within the timeframe specified by the Court. [Paras 2, 15, 16]

Special Leave Petitions disposed of with liberty to file statutory appeal within three weeks.

Pre-deposit requirement / exemption from pre-deposit - The Appellate Authority shall not insist on the pre-deposit requirement qua the petitioner M. Umesh if he files the statutory appeal within the time granted. - HELD THAT: - On the petitioner's specific stand that he had no causal connection with the company's affairs after his resignation and therefore should not be compelled to make a pre-deposit, the Court directed that the Appellate Authority exempt the petitioner from the pre-deposit requirement. This relief is personal to the petitioner M. Umesh and is granted to enable the petitioner to pursue the statutory remedy without being compelled to pre-deposit the amount ordinarily required for such appeals. [Paras 5]

Appellate Authority directed not to insist on pre-deposit from M. Umesh if appeal is filed in time.

Limitation / extension of time for filing appeal - The petitioner shall not be non-suited on the ground of limitation provided the appeal is filed within three weeks; if not, the limited relief shall be withdrawn. - HELD THAT: - The Court recorded that the petitioner had been bona fide pursuing remedies before the High Court and this Court after issuance of the show cause notice. In view of that conduct, the Appellate Authority was directed not to non-suit the petitioner on limitation grounds provided the appeal is filed within three weeks from the date of the order. The Court made the grant of this limited concession conditional: late filing beyond three weeks will result in the withdrawal of the limitation relief and reckoning of the entire limitation period by the Appellate Authority. [Paras 6, 7, 17, 19]

Petitioner granted a three-week period to file the appeal; if filed within that period, cannot be non-suited for limitation; otherwise the concession lapses.

Appellate authority to decide on merits - pre-deposit requirement / exemption from pre-deposit - The Appellate Authority is to consider any formal application by the petitioner for exemption from paying the full pre-deposit on its own merits. - HELD THAT: - While the Court afforded specific relief to the petitioner M. Umesh not to insist on pre-deposit for the purpose of enabling filing of the appeal, it expressly refrained from expressing any concluded view on the broader question of exemption from paying 100% pre-deposit. The petitioner may file a formal application before the Appellate Authority for such exemption; that application must be considered independently and in accordance with law. This directs the Appellate Authority to undertake fresh consideration of any such application rather than determining the question at this stage. [Paras 18]

Appellate Authority to consider any formal application for exemption from 100% pre-deposit on merits; no view expressed by this Court.

Final Conclusion: The Special Leave Petitions are disposed of by directing the petitioner to pursue the statutory appeal against the final order dated 31-1-2019 within three weeks; the Appellate Authority shall not insist on pre-deposit from M. Umesh for the purpose of filing the appeal nor non-suit him on limitation if the appeal is timely filed, and any formal application for exemption from the full pre-deposit is to be considered by the Appellate Authority on its merits.

Power of Government to grant exemptions and relaxations - Prerogative nature of exemptions under statute - Non-justiciability of directing exercise of executive discretion - Requirement to approach the competent authority before seeking judicial relief - Treatment of writ petition as representation and remand for administrative decision - Prior permission under Section 11 of the Foreign Contribution (Regulation) Act, 2010

Power of Government to grant exemptions and relaxations - Prerogative nature of exemptions under statute - Non-justiciability of directing exercise of executive discretion - Prior permission under Section 11 of the Foreign Contribution (Regulation) Act, 2010 - Whether the Court could direct the Government to exempt registered associations/organisations from obtaining prior permission under Section 11 of the FCRA or to relax conditions for receiving foreign contributions. - HELD THAT: - The Court held that exemptions and relaxations under statutes are prerogative governmental powers and not a matter of right for applicants. It is not appropriate for the Court to command the Government to exercise its statutory power in a particular manner. The petitioner had not made any application to the competent authority under the Act prior to filing the petition, a fact accepted in proceedings. Consequently, judicial direction compelling exemption or relaxation was declined as impermissible given the executive character of the power and the absence of administrative recourse having been invoked. [Paras 3, 5]

Prayer for a writ directing exemption or relaxation of conditions under the FCRA was refused; the Court declined to direct the Government to exercise its discretion in a particular way.

Requirement to approach the competent authority before seeking judicial relief - Treatment of writ petition as representation and remand for administrative decision - Treatment of the pending writ petition as a representation and the appropriate course to obtain relief. - HELD THAT: - Noting that the petitioner had not earlier approached the competent authority, the Court directed that the petition be treated as a representation. The competent authority in the concerned Ministry was directed to consider and decide the grievances raised, in accordance with law, relevant rules, regulations and government policies, and to do so as early as practicable while bearing in mind the nature of the relief sought. The order thus remanded the substantive issues for administrative decision rather than adjudicating them on merits. [Paras 4, 5]

The petition was directed to be treated as a representation and remitted to the competent authority for expeditious decision in accordance with law.

Final Conclusion: Writ petition dismissed insofar as it sought a judicial direction to compel exemption or relaxation; petition is directed to be treated as a representation and remitted to the competent authority for decision in accordance with law at the earliest practicable opportunity.

Jurisdiction under Article 226(2) for partial cause of action - Search and seizure of goods under FEMA - Protection of stock-in-trade and requirement of a reasoned order on seizure - Right to legal representation during summons at an inaudible distance

Jurisdiction under Article 226(2) for partial cause of action - Writ petition maintainable before the Calcutta High Court despite coordinating authority being situated in Jaipur. - HELD THAT: - The Court held that because part of the cause of action arose within the State of West Bengal (search and seizure taking place in West Bengal and the petitioner company being situated there), the High Court may entertain the writ petition. Clause (2) of Article 226 permits jurisdiction where the cause of action has partly arisen within the forum notwithstanding that the seat of the authority is outside the jurisdiction. The Court therefore found no impediment to maintainability before this High Court. [Paras 8, 9]

Writ petition is maintainable before the Calcutta High Court.

Search and seizure of goods under FEMA - Protection of stock-in-trade and requirement of a reasoned order on seizure - Seized jewellery alleged to be stock-in-trade was not finally adjudicated on merits; Enforcement Directorate directed to examine documentary evidence and pass a reasoned order and to release items if duly accounted for. - HELD THAT: - The Court did not decide the merits as to whether the seized excess jewellery constituted stock-in-trade. Instead, having noted the petitioner's reliance on documents asserting that the excess jewellery was accounted for and sent for job work, the Court directed the Enforcement Directorate to examine the documents filed in the writ petition and to pass a reasoned order on whether the goods are stock-in-trade. If the Directorate finds they are duly accounted for, they are to be released in accordance with law. The inquiry and reasoned order were directed to be completed within eight weeks from date. The Court expressly refrained from adjudicating merits and required a fresh administrative determination by the authority. [Paras 10, 11, 13]

Enforcement Directorate to consider the petitioner's documentary claims, pass a reasoned order within eight weeks, and release the goods if found to be duly accounted for; merits not decided by the Court.

Right to legal representation during summons at an inaudible distance - Authorized representative of the petitioner may have a lawyer present during summons at an inaudible distance as per Supreme Court guidelines. - HELD THAT: - The Court directed that the authorized representative of the petitioner-company be permitted to have a lawyer of his choice present during the summons at an inaudible distance in accordance with the guidelines laid down by the Supreme Court. This direction was given to ensure presence of legal assistance during proceedings before the Enforcement Directorate while preserving investigational confidentiality and audibility concerns. [Paras 12]

Lawyer of petitioner's choice to be allowed to be present during summons at an inaudible distance as per Supreme Court guidelines.

Final Conclusion: The writ petition was held maintainable before the Calcutta High Court; the Court remitted the question whether the seized jewellery is stock-in-trade to the Enforcement Directorate for a reasoned decision within eight weeks (with release if duly accounted for) and directed that the petitioner's authorised representative be allowed legal representation at an inaudible distance during summons; merits were not adjudicated by the Court.

Anticipatory bail - prevention of money laundering investigations and custodial necessity - apprehension of arrest and reasonable suspicion - conditions for grant of bail and liberty to move for cancellation on breach - custodial interrogation versus stage of investigation

Anticipatory bail - apprehension of arrest and reasonable suspicion - custodial interrogation versus stage of investigation - Grant of anticipatory bail to the petitioner in ECIR No. DLZO I/43/2021 and CC No. 17/21 registered under Section 3 read with Section 4 of the PMLA, 2002. - HELD THAT: - The Court examined whether the petitioner had a reasonable apprehension of arrest and whether custodial interrogation was necessary at the stage when the prosecution complaint had already been filed and cognizance taken. The petitioner had repeatedly joined investigation, cooperated on multiple occasions and there was no material on record showing he had threatened witnesses, tampered with evidence, was a flight risk or had otherwise obstructed investigation. Several accused had already been released on bail and one had been charge sheeted without arrest. The Special Court had not summoned the petitioner and the prosecution had not filed any supplementary complaint after cognizance to indicate a changed factual matrix. The mere possibility that further proceeds may surface, or that what is uncovered may be the 'tip of the iceberg', did not justify custodial arrest in absence of specific grounds showing necessity of custodial interrogation. Balancing the stage of investigation, the nature of the allegations and the lack of material suggesting tampering or flight, the Court held that anticipatory bail was appropriate subject to conditions and with liberty to the respondent to move for cancellation if the petitioner failed to join investigation or attempted to tamper with evidence or threaten witnesses. [Paras 24, 25, 26, 27]

Anticipatory bail granted; on arrest the petitioner to be released on bail on furnishing personal bond with one surety, subject to conditions including joining investigation and liberty to ED to apply for cancellation on breach.

Conditions for grant of bail and liberty to move for cancellation on breach - custodial interrogation versus stage of investigation - Imposition of specific conditions incident to grant of anticipatory bail and preservation of respondent's remedy for cancellation. - HELD THAT: - The Court imposed conditions tailored to preserve the integrity of investigation: petitioner to furnish a personal bond with one surety to the satisfaction of the investigating officer, to join investigation as and when called, and to refrain from tampering with evidence or threatening witnesses. The Court expressly left open the respondent's right to move for cancellation of bail on proof of contravention of these conditions. This approach reconciles the grant of anticipatory bail at a non custodial investigative stage with the prosecuting agency's legitimate interest by creating an enforceable supervision mechanism. [Paras 27]

Bail subject to bond and surety, obligation to join investigation, and liberty to ED to seek cancellation on breach of conditions.

Final Conclusion: Anticipatory bail under Section 438 Cr.P.C. granted to the petitioner in the PMLA proceedings; bail subject to specified bond and surety, requirement to cooperate with investigation, and with liberty to the Enforcement Directorate to seek cancellation of bail if the petitioner absconds, tampers with evidence or threatens witnesses; no expression of opinion on merits.

Cenvat credit entitlement - eligibility of banking services as input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - denial of credit on basis of photocopy of document - limitation and extended period - requirement of fraud or suppression

Eligibility of banking services as input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - Cenvat credit entitlement - Entitlement to Cenvat credit of banking charges (processing and upfront fees) received from the Bank for the period in dispute - HELD THAT: - The Tribunal found no dispute that the appellant received banking services and paid the charges; the adjudicating authority had denied credit on the ground that such financial services were not directly or indirectly in connection with manufacture. The Commissioner (Appeals) had accepted the eligibility of banking services in principle. Having regard to the admitted receipt and payment for the services and the appellate authority's in-principal acceptance under Rule 2(l), the Tribunal held there was no reason to deny the credit and allowed the claim. [Paras 4, 5]

Credit for the banking charges is allowable as input service and the denial by authorities is set aside.

Denial of credit on basis of photocopy of document - Cenvat credit entitlement - Validity of denying Cenvat credit merely because invoices/certificates were supported by photocopies - HELD THAT: - The adjudicating authority's show cause notice alleged that credit was availed on the basis of photocopies of bank certificates, but the adjudication order did not make a finding adverse to the appellant on that point. The Commissioner (Appeals) observed that credit cannot be denied on photocopy documents while upholding entitlement in principle. The Tribunal observed that the authorities had travelled beyond the allegations in the SCN and, since receipt of service was not disputed and no adverse finding on photocopies was recorded, denial on that ground was unjustified. [Paras 4, 5]

Credit cannot be denied solely on the ground that supporting documents were photocopies where receipt of service and payment are not disputed.

Limitation and extended period - requirement of fraud or suppression - Sustainability of the demand when the show cause notice invokes extended period of limitation - HELD THAT: - The SCN was issued invoking the extended period of limitation. The Tribunal noted there was no evidence of fraud or suppression of facts by the appellant; moreover the credit availed had been disclosed in periodical returns filed with the Department. In absence of any material to justify invocation of extended period, the demand raised by the impugned orders was held to be time-barred. [Paras 5]

The demand is barred by limitation as extended period invocation is not justified.

Final Conclusion: The appeal is allowed: the Cenvat credit availed in respect of banking charges is restored and the demand is held to be time-barred; consequential relief, if any, shall follow.

Alternate remedy rule in fiscal statutes - Assessment under Section 27-assessment of escaped turnover and reversal of input tax credit - Reasonable opportunity to show cause / personal hearing not statutorily imperative - Availability of statutory appeal under Section 51 of TNVAT Act

Alternate remedy rule in fiscal statutes - Availability of statutory appeal under Section 51 of TNVAT Act - Maintainability of writ petitions in view of availability of alternate statutory remedy - HELD THAT: - The Court held that the availability of an effective statutory remedy under the TNVAT Act disentitles the petitioner to relief under writ jurisdiction in the absence of any established exception. The Court applied the well settled principle that alternate remedy rule must be applied with greater rigour in fiscal matters and relied on the established authorities emphasising that Article 226 should not short circuit statutory procedures where statutory remedies are available. The Court further noted the recent three Judge pronouncement reiterating exceptions to the rule and observed that none of those exceptions (breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, or challenge to vires) were made out on the facts. Consequently, the petitioners were relegated to the statutory appellate remedy under Section 51, subject to limitation and pre deposit conditions, and the High Court declined to examine the merits of the impugned orders in writ jurisdiction. [Paras 13, 16, 17, 18, 19]

Writ petitions dismissed as not maintainable in view of available statutory appeal; right to pursue appeal under Section 51 preserved subject to pre deposit and limitation.

Assessment under Section 27-assessment of escaped turnover and reversal of input tax credit - Reasonable opportunity to show cause / personal hearing not statutorily imperative - Whether personal hearing is statutorily mandatory before passing orders under Section 27 of TNVAT Act - HELD THAT: - The Court analysed the proviso to sub sections (1) and (2) of Section 27, which requires 'a reasonable opportunity to show cause against such order'. Distinguishing the phraseology from 'a reasonable opportunity of being heard' used elsewhere in the Act, the Court held-consistent with its earlier order in State Bank of India officers case law (affirmed on intra Court appeal)-that personal hearing is not statutorily imperative for assessments or reversals under Section 27; it is optional and may be held if the assessing authority considers it necessary. Notwithstanding this principle, the Court recorded that personal hearing had in fact been granted in the present cases and that the petitioner had not availed that opportunity. [Paras 9, 11, 12]

Personal hearing is not an absolute statutory requirement under Section 27; it is optional, and in the present matters personal hearing was offered but not availed by the petitioner.

Assessment under Section 27-assessment of escaped turnover and reversal of input tax credit - Alternate remedy rule in fiscal statutes - Whether alleged 'mismatch' required examination by this Court despite petitioner not responding to the personal hearing notice - HELD THAT: - The Court observed that the factual issue of 'mismatch' and whether the dealer at the far end paid tax could appropriately be examined by the Appellate Authority in the statutory appeal. Given the availability of the appellate forum which can go into the facts and evidence, this Court refrained from undertaking factual re examination in writ jurisdiction. The Court noted that the assessing authority would have examined the matter had the petitioner responded to the hearing notice, but in any event appellate scrutiny is the proper channel for such factual inquiries. [Paras 6, 12, 17]

Issue of mismatch to be considered by the Appellate Authority in the statutory appeal; not a ground for writ interference here.

Final Conclusion: The six writ petitions challenging revisional/re assessment orders under Section 27 of the TNVAT Act are dismissed for want of maintainability in writ jurisdiction in view of the available statutory appeal under Section 51; personal hearing under Section 27 is not statutorily mandatory and, in any event, was offered but not availed; petitioners' rights to pursue the statutory appeal subject to pre deposit and limitation are preserved.