TaxTMI Updates e-Newsletter
Oct 30,2020

Summary order. Intervention allowed for Ms. Manasi Joshi; GST Council impleaded as respondent and amendment to implead to be carried out within two weeks with notice to the newly impleaded respondent; petitioners permitted to move a representation before the GST Council regarding exemption on mobility devices (respondents indicate policy objections to granting exemption); counter-affidavits to be filed within two months; matter listed for final disposal in March 2021.

Provisional release of seized goods under Section 67(6) of the Central Goods and Services Act, 2017 - Seizure and prohibition orders - Perishable goods - interim relief - Authority to pass order in accordance with law

Provisional release of seized goods under Section 67(6) of the Central Goods and Services Act, 2017 - Perishable goods - interim relief - Seizure and prohibition orders - Direction to the authority to consider the application for provisional release of seized perishable goods and to pass an appropriate order within a specified short timeframe. - HELD THAT: - The writ applicants had applied on 29th September, 2020 under Section 67(6) of the Act for provisional release of 7,312 bags (perishable goods) which were subject to an order of seizure in Form GST INS-02, an order of prohibition in Form GST INS-03 and an intimation in Form GST DRC-03. The High Court declined to adjudicate the legality or validity of the actions taken by the authorities on merits. In light of the perishable nature of the goods, the court directed the competent authority to consider the pending application dated 29th September, 2020 and to pass an appropriate order in accordance with law within one week from the date of the order. The court expressly refrained from expressing any opinion on the merits of the underlying seizure or prohibition. [Paras 3]

The authority is directed to consider the application dated 29th September, 2020 for provisional release of the seized perishable goods and pass an appropriate order in accordance with law within one week; merits not adjudicated.

Final Conclusion: Writ disposed of by directing the relevant authority to decide the pending application for provisional release of the seized perishable goods within one week; no opinion expressed on the merits of the seizure, prohibition or related proceedings.

Summary order. Petition directed to be connected with Writ Tax No. 1262 of 2019 and to be listed on the date fixed in that case; parties directed to exchange their pleadings in the meantime.

Liability to pay motor vehicle token tax on registered owner or person in possession - dealer-assisted registration scheme and dealer's role in collection and online deposit - calculation of ad-valorem token tax inclusive of GST - retrospective effect of departmental clarification - prohibition on levy of tax-on-tax

Liability to pay motor vehicle token tax on registered owner or person in possession - dealer-assisted registration scheme and dealer's role in collection and online deposit - Liability to pay the one-time ad-valorem token tax is on the registered owner or person having possession or control of the vehicle and not on the dealer who collects the amount under the dealer-assisted registration scheme. - HELD THAT: - Section 4 of the J&K Motor Vehicles Taxation Act, 1957 places the liability to pay the tax on the registered owner or the person in possession of the vehicle. The dealer-assisted registration process required dealers to generate invoices on the Vahaan Portal and collect taxes from buyers for online deposit; this procedure makes the dealer a collecting agent and does not convert the substantive liability onto the dealer. Given that registration certificates were issued upon online payment and the portal-generated invoices disclosed tax computation, attributing primary liability to the dealer is not warranted. [Paras 8, 9, 10]

The dealer cannot be treated as the person primarily liable to pay the token tax; the liability rests on the buyer/registered owner.

Calculation of ad-valorem token tax inclusive of GST - retrospective effect of departmental clarification - prohibition on levy of tax-on-tax - The departmental clarification that token tax is to be levied on the vehicle cost inclusive of GST cannot be given retrospective effect to require dealers to deposit differential tax for the period prior to the clarification; consequently, notices directing dealers to remit differential tax for the period in question were set aside. - HELD THAT: - The Transport Department's clarification of 26.11.2019 stated that token tax is to be calculated on the aggregate cost including GST. However, where departmental practice and the Vahaan Portal had accepted registrations and tax calculated excluding GST between the notification and the clarification, the department cannot retrospectively impose liability on dealers to make good the differential amount. The court observed that the dealers acted under the portal-generated system and accepted deposits; the clarification issued in response to queries cannot alter liabilities retrospectively nor saddle the dealer with a substantive tax burden which, by statute, lies with the buyer. Accordingly, the notices calling upon the petitioner to deposit differential tax for the period specified were without lawful effect and were set aside. [Paras 11, 12]

The clarification does not operate retrospectively to charge dealers for differential token tax for the period 03.08.2019 to 26.11.2019; the notices directing deposit for that period are quashed.

Final Conclusion: Writ petitions allowed; notices directing the petitioner to deposit differential token tax for the period 03.08.2019 to 26.11.2019 set aside, holding that (a) the statutory liability to pay token tax is on the buyer/registered owner and (b) the departmental clarification could not be applied retrospectively to impose that liability on dealers.

E-way Bill non-updation as a minor clerical/technical error - Absence of fraudulent intent / intention to evade tax - Detention and levy under Section 129 of the CGST/HPGST Act and the requirement of opportunity of being heard under Section 129(4) - Discretion in imposition of penalty for minor breaches and easily rectifiable documentation errors - Liability for transporting taxable goods without prescribed documents and penalty under Section 122(1)(xiv)

E-way Bill non-updation as a minor clerical/technical error - Absence of fraudulent intent / intention to evade tax - Detention and levy under Section 129 of the CGST/HPGST Act and the requirement of opportunity of being heard under Section 129(4) - Validity of detention of goods and imposition of tax/penalty under Section 129 where the e-way bill part-B showed the earlier vehicle number and the actual vehicle number had not been updated at the time of inspection, though invoice and e-way bill existed and tax had been paid. - HELD THAT: - The appellate authority found no dispute as to quantity or ownership of goods and that tax had been duly charged and paid and that the invoice and e-way bill identifying the machine/engine numbers were available. The sole procedural lapse was non-updation of part B of the e-way bill to reflect transhipment to a second vehicle caused by a mid-night breakdown. The authority accepted that the appellant updated the part B shortly after interception. The officer who detained and levied tax/penalty failed to demonstrate any intention to evade tax or any tax loss; the material remained in transit and was not offloaded. Further, Section 129(4) mandates that no tax, interest or penalty be determined under sub section (3) without giving the person concerned an opportunity of being heard. The appellate authority concluded that the detaining officer acted in haste, levying tax/penalty without affording the required hearing and without adequately considering that the error was easily rectifiable and bereft of fraudulent intent. Reliance was placed on the statutory approach disfavoring penal action for venial or technical breaches and on precedents treating such minor/clerical discrepancies as not indicative of evasion. Consequently the tax/penalty imposed under Section 129(3) was held unsustainable and ordered to be set aside and refunded. [Paras 6, 7, 8]

Detention and tax/penalty under Section 129(3) set aside and tax/penalty deposited to be refunded for lack of shown intention to evade tax and for non-compliance with the opportunity-of-hearing requirement.

Discretion in imposition of penalty for minor breaches and easily rectifiable documentation errors - Liability for transporting taxable goods without prescribed documents and penalty under Section 122(1)(xiv) - Whether the appellant should nevertheless be subjected to a lesser penalty for the procedural lapse of not updating the e-way bill part-B before resuming the journey. - HELD THAT: - The appellate authority accepted that the appellant committed a procedural lapse by not updating part B of the e-way bill prior to resuming transportation and that Rule 138(10) contemplates updating in cases of transshipment. Applying the statutory scheme disfavoring penalty for minor, rectifiable documentation errors and judicial precedents endorsing leniency for technical or venial breaches, the authority exercised its discretion to impose a reduced/nominal penalty rather than uphold the large tax/penalty levied under Section 129. Having set aside the earlier determination, the authority invoked Section 122(xiv) (penalty for transporting taxable goods without prescribed documents) and, considering facts and mitigating circumstances, imposed a single, modest penalty to mark liability for the lapse while affording substantive relief. [Paras 9, 10]

A nominal penalty of Rs. Ten Thousand imposed under Section 122(1)(xiv); the larger tax/penalty previously levied under Section 129(3) is deleted and amounts deposited are to be refunded.

Final Conclusion: The appeal is allowed: the order under Section 129(3) detaining goods and levying tax/penalty is set aside for lack of intention to evade tax and for non-compliance with the hearing requirement; deposited amounts under Section 129(3) are to be refunded, and a reduced penalty of Rs. 10,000 under Section 122(1)(xiv) is imposed for the procedural lapse of not updating part B of the e-way bill.

Rejection of books of account under Section 145(3) - addition as unexplained cash under Section 69A read with Section 115BBE - requirement of specific reasons and procedure for assessment under Section 144 where books are rejected - status of demonetized high denomination/old currency notes as "money" for tax purposes - assessment year applicability where cash/locker amounts pertain to an earlier year

Rejection of books of account under Section 145(3) - addition as unexplained cash under Section 69A read with Section 115BBE - requirement of specific reasons and procedure for assessment under Section 144 where books are rejected - Whether the Assessing Officer was justified in rejecting the assessee's books of account and making an addition of seized cash as unexplained income - HELD THAT: - The Tribunal examined the AO's stated reasons for rejection - that the spouse did not disclose whereabouts of cash and that unsecured loans appearing in the wife's books were not reflected in the assessee's books - and found these reasons inadequate to justify rejection under Section 145(3). Section 145(3) permits rejection only where the AO is not satisfied about correctness or completeness of accounts, irregularity in the accounting system, or non-compliance with notified accounting standards, and such rejection requires definite, specific defects to be recorded. Further, where books are rejected the assessment ought to be completed under Section 144 with opportunity to the assessee. The records showed the seized amounts were reflected in the cash books and balance sheets of the assessee and his wife. Because the AO did not specify justifiable defects and did not follow the assessment procedure under Section 144, the Tribunal held the addition based on rejection of books was not sustainable and declined to adjudicate other arguments as academic. [Paras 19, 20, 21, 22, 23]

Books of account could not be rejected on the grounds taken by the AO; therefore the addition made by treating the seized cash as unexplained income is not called for and is cancelled.

Status of demonetized high denomination/old currency notes as "money" for tax purposes - assessment year applicability of seizure - Whether cash in old currency notes found in locker (last operated 29.10.2015) could be treated as unexplained money and taxed in AY 2017-18 - HELD THAT: - The Tribunal considered whether the old currency notes retained any representative/intrinsic value during the relevant period between 01.04.2016 and 25.04.2016 and whether the addition in AY 2017-18 was appropriate. Relying on the reasoning in the Karnataka High Court authority reproduced in the order, the Tribunal held that currency notes which had ceased to have representative value by reason of the demonetization measures could not be treated as 'money' for the purpose of charging unexplained income. Moreover, the locker had been last operated on 29.10.2015, and there were no operations between 01.04.2016 and 25.04.2016; on that basis the amount, if at all undisclosed, pertained to the earlier year (assessment year 2016-17) and not AY 2017-18. Consequently the addition in AY 2017-18 could not be sustained. [Paras 24, 26, 27]

The addition on account of old currency notes in AY 2017-18 is not maintainable; the seized locker amount cannot be upheld as unexplained money for AY 2017-18.

Final Conclusion: The Tribunal allowed the appeal: the Assessing Officer's rejection of books of account was not justified and the consequent addition of seized cash as unexplained income was cancelled; additionally, the addition made in AY 2017-18 in respect of old currency notes found in the locker could not be upheld (the amount related to an earlier period).

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Disallowance under section 40A(3) and its non-attraction to penalty - Addition under section 69C upheld in quantum and sustainment of penalty - Unexplained cash credits under section 68 and penalty confirmation - Disallowance for failure to deduct TDS under section 40(a)(ia) and non-applicability of penalty - Special audit under section 142(1) as basis for reassessment and verification

Disallowance under section 40A(3) and its non-attraction to penalty - Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Penalty under section 271(1)(c) could not be sustained merely on account of disallowance made under section 40A(3). - HELD THAT: - The Assessing Officer made a disallowance under section 40A(3) after examining particulars filed by the assessee. The Tribunal found that mere claiming of expenses and their subsequent disallowance does not demonstrate furnishing of inaccurate particulars or concealment of income. In the absence of evidence showing that the expenses were false or that the particulars were inaccurate, imposition of penalty under section 271(1)(c) on the basis of a disallowance under section 40A(3) is not justified. The CIT(A)'s confirmation of penalty on this ground was deleted. [Paras 7]

Penalty deleted in respect of disallowance under section 40A(3).

Addition under section 69C upheld in quantum and sustainment of penalty - Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Penalty under section 271(1)(c) sustained in respect of the addition made under section 69C because the addition was confirmed in the quantum proceedings and not successfully challenged by the assessee. - HELD THAT: - The Tribunal noted that the addition under section 69C was confirmed in the first appellate (quantum) proceedings and that the assessee had not challenged that conclusion before the Appellate Forum. Given that the quantum addition stood confirmed and the assessee accepted the addition, the CIT(A)'s confirmation of penalty under section 271(1)(c) on this ground was upheld as there was no basis to overturn the finding. [Paras 10]

Penalty upheld in respect of addition under section 69C.

Unexplained cash credits under section 68 and penalty confirmation - Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Penalty under section 271(1)(c) sustained in respect of additions made under section 68 where no cogent evidence was produced to rebut the unexplained cash credits. - HELD THAT: - The Assessing Officer treated certain entries as unexplained cash credits and made additions under section 68. The assessee contended these entries were outside the books and relied on special auditors' verification, but produced no cogent evidence before the Tribunal to substantiate deletion of the additions. The CIT(A) therefore rightly declined to accept the assessee's contentions and confirmed the penalty; the Tribunal found no infirmity in that conclusion. [Paras 12]

Penalty upheld in respect of additions under section 68.

Disallowance for failure to deduct TDS under section 40(a)(ia) and non-applicability of penalty - Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Penalty under section 271(1)(c) could not be sustained for disallowance under section 40(a)(ia) (failure to deduct TDS) as mere disallowance for TDS non-deduction does not amount to furnishing inaccurate particulars or concealment of income. - HELD THAT: - The Assessing Officer initiated penalty proceedings for failure to deduct TDS on payments relating to TDR/land cost and disallowed amounts under section 40(a)(ia). The Tribunal observed that initiation of penalty proceedings for failure to deduct TDS indicated only that TDS was not deducted; this does not by itself constitute furnishing of inaccurate particulars or concealment. Reliance placed by the assessee on precedent (as before the CIT(A)) supports the proposition that mere disallowance for TDS failure does not attract penalty. Accordingly, the CIT(A)'s confirmation of penalty on this ground was deleted. [Paras 15]

Penalty deleted in respect of disallowance under section 40(a)(ia).

Final Conclusion: The Tribunal, after hearing the Revenue and noting absence of the assessee, allowed deletion of penalty under section 271(1)(c) in relation to disallowances under section 40A(3) and section 40(a)(ia), while upholding the penalty in respect of additions under sections 69C and 68; as a result the appeals for AY 2004-05 and 2005-06 were partly allowed and the appeal for AY 2007-08 was allowed.

Manufacture or production - deduction under Sections 80HH/80I/80IA - first degree nexus ("derived from") - exclusion of capitalised interest and miscellaneous income from eligible profits - revenue deductibility of statutory/mandatory horticulture expenses - revenue treatment of deferred revenue expenditure incurred for business expansion - consistency of treatment with prior years

Manufacture or production - deduction under Sections 80HH/80I/80IA - consistency of treatment with prior years - Whether processing activities at customer terminals and compressor/terminal stations amount to "manufacture or production" so as to attract deduction under Sections 80HH, 80I and 80IA and whether deduction already allowed in earlier years precluded re examination. - HELD THAT: - The Tribunal held that the extensive processing activities undertaken by the assessee at customer terminals and related stations to make lean gas or processed natural gas marketable and fit for use amount to "manufacture/production" for the purposes of Sections 80HH, 80I and 80IA. The Tribunal accepted that lean gas manufactured/produced is eligible for deduction and disagreed with the CIT(A)'s restrictive view that manufacturing occurs only at the two LPG plants. It also noted that deductions allowed in earlier years militated against denying the claim in the year under appeal and that the revenue had not maintained a consistent adverse position supported by substantial reasons. On these bases Ground Nos. 1 and 2 of the assessee's appeal were allowed and corresponding grounds of the revenue appeal were dismissed. [Paras 21]

Deduction under Sections 80HH/80I/80IA allowed in respect of lean gas/processed natural gas produced at customer terminals and the assessee's grounds on earlier consistency accepted; revenue's appeals on these points dismissed.

First degree nexus ("derived from") - deduction under Sections 80HH/80I/80IA - Whether various components of interest and miscellaneous income (interest on fixed deposits, interest on employee loans, interest on customer outstanding and miscellaneous receipts) qualify for deduction under Sections 80HH/80I/80IA as profits "derived from" the eligible undertakings. - HELD THAT: - The Tribunal examined the nature and source of each component. It observed that (a) interest on customer outstanding and miscellaneous income (e.g. sale of scrap) have a direct nexus with the eligible undertaking and, relying on High Court authorities cited by the assessee, held they are eligible for deduction; (b) interest on employee loans and advances was held to be inextricably linked to the business and therefore eligible; and (c) interest on fixed deposits and similar investments - on the material before it - warranted further consideration by the assessing officer. Consequently the Tribunal allowed the assessee's claim on interest on customers, employee loan interest and miscellaneous income, directed that interest on fixed deposits be considered by the Assessing Officer (remand), and dismissed the corresponding ground of revenue's appeal. [Paras 19]

Ground No. 3 of the assessee's appeal allowed (interest on customers, employee loans and miscellaneous income treated as eligible); revenue's Ground No. 3 dismissed; interest on fixed deposits remitted to Assessing Officer for determination.

Exclusion of capitalised interest and miscellaneous income from eligible profits - Whether amounts of interest and miscellaneous income which had been capitalised (transferred to IEDC / expenditure during construction) should be reduced from the quantum of interest/miscellaneous income excluded while computing eligible profits for deduction. - HELD THAT: - The Tribunal noted that a portion of the interest and miscellaneous income had been capitalised (transferred to IEDC) and that in an earlier Tribunal order for a related assessment year the issue had been decided in favour of the assessee. The CIT(A) had failed to direct the Assessing Officer to reduce the capitalised amounts while excluding interest/miscellaneous income from eligible profits. The Tribunal therefore remanded this issue to the Assessing Officer with a direction to reduce the capitalised amounts when computing exclusions from eligible profits. [Paras 20]

Issue remanded to the Assessing Officer to reduce capitalised interest and miscellaneous income while excluding the same from eligible profits; Ground No. 4 of the assessee's appeal partly allowed for statistical purpose.

Revenue deductibility of statutory/mandatory horticulture expenses - revenue expenditure - Whether horticulture expenses incurred pursuant to statutory/regulatory conditions are revenue in nature and deductible under the Act. - HELD THAT: - The Tribunal accepted the assessee's evidences that the horticultural expenditure (planting trees, maintenance of green belts etc.) was incurred to meet governmental/environmental conditions and approvals and was a recurring obligation necessary to carry on the business. On that basis the CIT(A)'s allowance of the horticulture expenses was sustained and the revenue's ground challenging that allowance was dismissed. [Paras 26]

Horticulture expenses held to be deductible revenue expenditure; Revenue's Ground No. 4 dismissed.

Revenue treatment of deferred revenue expenditure incurred for business expansion - Whether market survey expenditure paid to assess feasibility of expanded production (deferred revenue expenditure) is revenue in nature and allowable. - HELD THAT: - The Tribunal found that the market survey related to expansion/setting up of an additional production facility in the same business and accordingly treated the expenditure as revenue in nature. Reliance was placed on precedents that revenue expenditure incurred by an existing business for expansion is deductible. The CIT(A)'s allowance was upheld and the revenue's ground was dismissed. [Paras 29]

Deferred revenue expenditure incurred for project related market survey held revenue and allowable; Revenue's Ground No. 5 dismissed.

Revenue treatment of leasehold amortisation - Whether amortisation of leasehold rent is allowable. - HELD THAT: - The Tribunal recorded that this specific issue had already been decided against the assessee by the Delhi High Court in the assessee's own case for A.Y. 1996 97 and, given identical facts, dismissed the assessee's ground seeking amortisation. The Tribunal therefore declined the claim consistent with the High Court's earlier ruling. [Paras 23]

Ground No. 5 of the assessee's appeal dismissed in view of the Delhi High Court's prior decision.

Final Conclusion: The Tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal. It held that processing at customer terminals can constitute "manufacture/production" and permitted deductions under Sections 80HH/80I/80IA in respect of lean/processed gas at such terminals; allowed the assessee's claims in respect of interest on customer dues, interest on employee loans and miscellaneous receipts while remitting interest on fixed deposits to the Assessing Officer for consideration; remanded the question of reducing capitalised interest/miscellaneous income from exclusions of eligible profits; upheld allowance of horticulture and deferred revenue expenditure; and dismissed the claim for amortisation of leasehold rent in view of earlier High Court decision.

Disposal of appeal subject to issue of Form No. 3 under the Direct Tax Vivad Se Vishwas Act, 2020 - Declaration in Form 1 under Section 4 of the Direct Tax Vivad Se Vishwas Act, 2020 - Certificate in Form 3 under Section 5 of the Direct Tax Vivad Se Vishwas Act, 2020 - Liberty to file miscellaneous application to recall order - Dismissal of appeal as infructuous

Disposal of appeal subject to issue of Form No. 3 under the Direct Tax Vivad Se Vishwas Act, 2020 - Declaration in Form 1 under Section 4 of the Direct Tax Vivad Se Vishwas Act, 2020 - Certificate in Form 3 under Section 5 of the Direct Tax Vivad Se Vishwas Act, 2020 - Liberty to file miscellaneous application to recall order - Revenue appeals disposed of with liberty to the Department to move for recall if Form No. 3 is not issued to the assessee under the Direct Tax Vivad Se Vishwas Act, 2020. - HELD THAT: - The assessee filed a Declaration in Form 1 under Section 4 of the Direct Tax Vivad Se Vishwas Act, 2020 and informed the Tribunal that Form 3 under Section 5 (certificate determining tax arrears) had not yet been issued by the Designated Authority. In view of the pending acceptance and issuance of Form 3, the Tribunal exercised its discretion to dismiss the Revenue's appeals while preserving the Department's right to file a miscellaneous application to recall the dismissal if Form No. 3 is not ultimately issued. The order conditions the finality of the dismissal on the administrative completion of the Vivad Se Vishwas process and affords the Department a procedural remedy by recall application in the event the certificate is not granted. [Paras 5]

Both Revenue appeals are dismissed, with liberty to the Department to file a miscellaneous application to recall the order if Form No. 3 under the Direct Tax Vivad Se Vishwas Act, 2020 is not issued to the assessee.

Dismissal of appeal as infructuous - Liberty to file miscellaneous application to recall order - Assessee's cross-objection held infructuous and dismissed, subject to the same liberty to the Department to move for recall if it files a miscellaneous application. - HELD THAT: - Because the Revenue's appeal (ITA No. 3971/Del/2002, A.Y. 1999-2000) was dismissed on the condition noted above, the Tribunal found the assesee's cross-objection to have become infructuous and dismissed it. The dismissal of the cross-objection is conditional in the sense that it may be revisited if the Department brings a miscellaneous application to recall the principal dismissal in the event Form No. 3 is not issued. [Paras 6]

Assessee's cross-objection is dismissed as infructuous, with liberty to the Department to seek recall by filing a miscellaneous application.

Final Conclusion: Both Revenue appeals (A.Y. 1998-99 and A.Y. 1999-2000) and the assessee's cross-objection are dismissed; the dismissals are conditional and the Department is granted liberty to file a miscellaneous application to recall the order if the Designated Authority does not issue Form No. 3 under the Direct Tax Vivad Se Vishwas Act, 2020.

Registration under section 12AA - genuineness of objects and proposed activities - scope of 'activities' for registration - includes proposed activities - distinction between registration under section 12AA and cancellation under section 12AA(3) - prohibition on remand for fresh enquiry where legal position is settled

Registration under section 12AA - genuineness of objects and proposed activities - scope of 'activities' for registration - includes proposed activities - Whether the denial of registration under section 12AA on the sole ground that the trust had not carried out charitable activities in the last three financial years is sustainable. - HELD THAT: - The Tribunal found that the Commissioner denied registration solely because the trust had not undertaken charitable activities in the last three financial years, without disputing that the objects themselves were charitable. Reliance was placed on the Hon'ble Supreme Court decision in Ananda Social and Educational Trust which holds that for purposes of registration under section 12AA the Commissioner must be satisfied as to the genuineness of the trust's objects and that the activities proposed to be carried on are genuine; the term 'activities' for registration includes proposed activities and registration is not a forum to assess what a trust has actually done. The Tribunal observed that a finding of no expenditure or absence of activities in the past does not ipso facto establish that activities carried out are contrary to the objects, which would be a different question relevant to cancellation under section 12AA(3). The Revenue's request for remand for fresh enquiry was declined as amounting to impermissible fresh investigation when the legal position is settled. Applying this legal principle to the facts, the Tribunal held that the Commissioner's reasoning was untenable and directed grant of registration under section 12AA. [Paras 8, 9, 10, 11]

The denial of registration was set aside and the Commissioner was directed to grant registration under section 12AA.

Final Conclusion: Appeal allowed; impugned order denying registration under section 12AA set aside and the Commissioner directed to grant registration of the trust.

80P deduction for co-operative societies - co-operative bank exclusion under section 80P(4) - claim for deduction u/s.80P(2)(a)(i) for providing credit to members - requirement of RBI licence to be a co-operative bank - remand for fresh consideration in light of Supreme Court decision

80P deduction for co-operative societies - co-operative bank exclusion under section 80P(4) - claim for deduction u/s.80P(2)(a)(i) for providing credit to members - requirement of RBI licence to be a co-operative bank - Whether the assessee was entitled to deduction under section 80P(2)(a)(i) for income from providing credit facilities to its members, having regard to the exclusion of "co-operative bank" under section 80P(4) and the requirement of an RBI licence to constitute a co-operative bank. - HELD THAT: - The AO disallowed the deduction on the basis that the assessee was a co-operative bank and therefore excluded from section 80P by operation of sub-section (4) introduced with effect from 1-4-2007. The CIT(A) allowed the claim by applying earlier Tribunal authority which treated income from providing credit to members as eligible for deduction under section 80P(2)(a)(i), but did not address the applicability of section 80P(4). Subsequent decisions of this Tribunal in the assessee's own cases for AYs 2013-14 and 2014-15 were remitted to the AO for fresh consideration in view of the Hon'ble Supreme Court's decision in The Citizens Co-operative Society Ltd. v. ACIT. The Supreme Court held that to carry on the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, and therefore a co-operative society that does not possess an RBI licence cannot be equated with a co-operative bank for the purpose of statutory exclusion. Given that the CIT(A)'s order pre-dated that Supreme Court ruling and did not consider it, the Tribunal concluded that the present assessment year requires fresh consideration by the assessing officer with reference to the Supreme Court's principle regarding the necessity of an RBI licence to classify an entity as a co-operative bank and the consequent applicability or inapplicability of section 80P(4). [Paras 8, 9, 10]

Impugned order set aside and the issue remitted to the assessing officer for fresh consideration in accordance with the directions referenced and in light of the Supreme Court's decision; appeal of the revenue allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and remitted the matter to the assessing officer for fresh adjudication on the claim of deduction under section 80P(2)(a)(i), directing reconsideration in light of the Supreme Court's ruling that an RBI licence is necessary to constitute a co-operative bank and thereby determine the applicability of the exclusion under section 80P(4).

Exemption from deduction of tax at source under section 194A for co-operative societies - Eligibility for deduction under section 80P(2)(a)(i) - role of Registrar's certificate and requirement of factual inquiry - Maintainability of reopening where reasons recorded were not pursued by appellant

Exemption from deduction of tax at source under section 194A for co-operative societies - Applicability of section 40(a)(ia) for non-deduction of TDS on interest paid to members - Assessee was not liable to deduct TDS under section 194A on interest paid to its own members and the addition under section 40(a)(ia) was deleted. - HELD THAT: - The Tribunal, after considering the parties' submissions and precedents of the Cochin Bench, held that where an entity is a co operative society registered under the State Co operative Societies Act and carries out activities without RBI approval as a bank, it falls within the class of co operative societies exempt from deduction under section 194A. The Tribunal followed its decisions in Kadachira Service Co op. Bank Ltd. and Kodungallur Town Co operative Bank Ltd., which rely on the Kerala High Court authorities holding that primary agricultural co operative societies registered under the State Act are not subject to TDS under section 194A in respect of interest paid to members. Applying those precedents to the facts on record, the Tribunal concluded that the Assessee was not required to deduct TDS on interest paid to its own members and therefore the disallowance under section 40(a)(ia) could not be sustained. [Paras 6, 7]

Addition under section 40(a)(ia) on account of non-deduction of TDS on interest paid to members deleted.

Maintainability of reopening where reasons recorded were not pursued by appellant - Ground challenging communication of reasons recorded for initiation of proceedings under section 147 was not pressed and is dismissed. - HELD THAT: - The assessee did not argue the ground relating to non-communication of reasons for reopening; the Tribunal accordingly dismissed that ground without further adjudication. [Paras 4]

Ground relating to reopening of assessment dismissed for want of argument.

Eligibility for deduction under section 80P(2)(a)(i) - role of Registrar's certificate and requirement of factual inquiry - Effect of section 80P(4) and necessity of year wise factual determination - Claim for deduction under section 80P(2)(a)(i) was not finally decided on merits and is remanded to the Assessing Officer for fresh examination of loan disbursements and activities in accordance with the Full Bench decision of the Kerala High Court in The Mavilayi Service Co operative Bank Ltd. v. CIT. - HELD THAT: - The Tribunal examined the authorities including the Larger Bench decision which held that, after insertion of sub section (4) of section 80P, the Assessing Officer must enquire into the factual activities of the society for each assessment year and is not bound by the registration certificate alone. The Assessing Officer had found that agricultural credit constituted only a minuscule part of disbursements but did not undertake a detailed loan by loan examination to determine purpose. The Tribunal observed that narration in audit loan extracts is not conclusive as to the purpose of loans and directed that the AO must list and examine instances of non agricultural disbursements and decide eligibility year wise following the Full Bench dictum. Consequently the issue is restored to the file of the Assessing Officer for fresh adjudication in accordance with law. [Paras 8, 9, 10, 11, 13]

Deduction claim under section 80P(2)(a)(i) remitted to the Assessing Officer for fresh, year wise factual inquiry and decision in accordance with the cited Full Bench authority.

Final Conclusion: The appeal is partly allowed: the disallowance under section 40(a)(ia) for non deduction of TDS on interest paid to members is deleted; the claim for deduction under section 80P(2)(a)(i) is remanded to the Assessing Officer for fresh, year wise factual examination; the ground on reopening is dismissed.

Deduction under Section 80P(2) - primary agricultural credit society - Assessing Officer's factual inquiry into activities of society - registration certificate not conclusive - separate determination for each assessment year - remand for fresh examination

Deduction under Section 80P(2) - primary agricultural credit society - Assessing Officer's factual inquiry into activities of society - registration certificate not conclusive - separate determination for each assessment year - Claim of deduction under Section 80P(2)(a)(i) was not finally adjudicated but remanded to the Assessing Officer for fresh factual examination whether the assessee-societies qualify as primary agricultural credit societies for the relevant assessment years. - HELD THAT: - The Tribunal applied the legal principle laid down by the Full Bench of the Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT that, after insertion of sub section (4), the Assessing Officer is not bound by the registration certificate and must conduct an enquiry into the factual activities of the society for each assessment year. The Assessing Officer's conclusion in the assessments under appeal - that the societies were effectively carrying on banking business and that agricultural lending was only minuscule - was founded on loan narrations in statutory audit reports without detailed examination of the purpose of each loan. The Tribunal held that such narration alone is not conclusive, and that the AO must examine loan wise particulars to determine whether disbursements were for agricultural purposes, identify instances of non agricultural lending, and thereafter decide entitlement to deduction under Section 80P(2) in accordance with law. Consequently, the matter is restored to the AO to follow the Full Bench dictum and decide afresh for each assessment year. [Paras 7]

Issue remanded to the Assessing Officer for fresh examination of the nature and purpose of loan disbursements and determination of entitlement to deduction under Section 80P(2) for the assessment years 2009-10 and 2014-15.

Final Conclusion: Appeals disposed of by remanding the matter to the Assessing Officer to examine and determine afresh, in accordance with the Full Bench decision in The Mavilayi case, whether the assessee societies qualify for deduction under Section 80P(2) for assessment years 2009 10 and 2014 15; appeals allowed for statistical purposes.

Deduction under section 36(1)(va) - income under section 2(24)(x) - section 43B - deduction on actual payment and proviso regarding due date for filing return under section 139(1) - due date under PF/ESI statute versus due date for filing return under section 139(1) - binding effect of jurisdictional High Court precedent and principle of judicial discipline

Deduction under section 36(1)(va) - income under section 2(24)(x) - section 43B - deduction on actual payment and proviso regarding due date for filing return under section 139(1) - due date under PF/ESI statute versus due date for filing return under section 139(1) - binding effect of jurisdictional High Court precedent and principle of judicial discipline - Whether employees' contributions to PF/ESI, collected by the employer and deposited with authorities after the statutory due date under PF/ESI but before the due date for filing the return under section 139(1), are allowable as a deduction under section 36(1)(va) (read with section 2(24)(x) and having regard to section 43B). - HELD THAT: - The Tribunal held that, while the literal wording of section 36(1)(va) and its Explanation require that employees' contributions be credited to the relevant fund on or before the due date prescribed under the PF/ESI statute, judicial decisions of superior courts have construed the legislative scheme so as to avoid an absurd or inequitable result. The Supreme Court in Alom Extrusions construed the 2003 amendment to section 43B as curative and retrospective and treated the proviso relating to payment before the due date for filing return under section 139(1) as applicable. Several High Courts and coordinate benches have applied that reasoning to permit deduction where the contributions were deposited before the return-filing due date, notwithstanding delay under the PF/ESI statute. The Tribunal observed conflicting High Court decisions but noted that the Madras High Court (the jurisdictional High Court) has decided the issue in favour of taxpayers. By reason of judicial discipline the Tribunal followed the jurisdictional High Court decision and the line of decisions applying Alom Extrusions and held that employees' contributions deposited with PF/ESI authorities after the statutory due date but before the due date for filing the return under section 139(1) are allowable as deduction under section 36(1)(va). The Tribunal therefore allowed the claim of the assessee for the disputed amount for the assessment year in question. [Paras 7, 8]

The belated employees' contributions to PF/ESI, though deposited after the PF/ESI statutory due date, were deposited before the due date for filing the return under section 139(1) and are allowable as a deduction under section 36(1)(va).

Final Conclusion: Appeal partly allowed: the Tribunal allowed the deduction for employees' PF/ESI contributions deposited after the PF/ESI due date but before the due date for filing the return (ay: 2014-15), following the binding view of the jurisdictional High Court and the Supreme Court's reasoning in Alom Extrusions.

Treatment of survey-declared receipts as business income versus income from other sources - eligibility for deduction under section 40(b) of the Income-tax Act - deemed income under section 69 of the Income-tax Act - book profit for purpose of section 40(b)

Treatment of survey-declared receipts as business income versus income from other sources - eligibility for deduction under section 40(b) of the Income-tax Act - book profit for purpose of section 40(b) - Whether amounts declared during survey, received as extra consideration on sale of flats and not recorded in regular books, are business receipts chargeable under profits and gains of business and eligible for allowances under section 40(b), or whether they are to be treated as unexplained/deemed income under section 69 and excluded from book profit. - HELD THAT: - The Tribunal found on the materials that the assessee (a firm engaged solely in construction of the housing project) sold 37,752 sq. ft. and received an extra Rs. 200 per sq. ft. which was the amount declared during the survey. The assessee consistently maintained that these receipts were trading receipts and recorded them in the profit and loss account; partner remuneration was also reflected in the accounts. Given that the assessee had no other business activity and the disclosed survey amount was attributable to the construction business, the Tribunal held that the nature and source of the amount were established as business income. The Tribunal applied the principle that amounts representing unexplained excess (or similar survey-declared receipts) which are shown in the profit and loss account and relate to business operations are to be taken into account in determining book profit for section 40(b), referring to the Tribunal's earlier decision in Rashtriya Leather Works where unexplained excess stock found in survey was held to be chargeable as business income and included for computing book profit. Consequently, the receipts could not be treated as deemed/unexplained income under section 69 so as to deny business deductions; they are part of business profits and eligible for allowances under section 40(b). [Paras 7, 8]

The amounts declared during the survey are business receipts attributable to the construction activity and are includible in book profit; the claimed allowances under section 40(b) are allowable and the CIT(A)'s order treating the amounts as income from other sources is set aside.

Final Conclusion: The appeal is allowed: the Tribunal holds the survey-declared receipts to be business income attributable to the housing-project activity and includible for computing book profit, thereby permitting the deductions under section 40(b); the CIT(A)'s confirmation of treatment as income from other sources is set aside.

Summary order. Appeal disposed with direction to the assessee to file declaration under the Direct Tax Vivad Se Vishwas Act, 2020 in Form No. I on or before 09.11.2020; competent authority to process the declaration and pass appropriate orders preferably within six weeks; liberty granted to restore the appeal without an application for condonation of delay if the scheme outcome is unfavourable; substantial questions of law left open.

Mercantile system of accounting and accrual concept - recognition of revenue on transfer of possession in real estate transactions - Accounting Standard I (accrual basis) as notified under section 145(2) - Maharashtra Ownership of Flats Act (MOFA) - promoter's liability, refund obligation and charge on property until possession - admission of additional evidence and compliance with Rule 46A of the Income Tax Rules

Mercantile system of accounting and accrual concept - Accounting Standard I (accrual basis) as notified under section 145(2) - recognition of revenue on transfer of possession in real estate transactions - Whether addition of receipts recognised by the assessee in later years could be shifted to an earlier year merely on the basis of registered agreements of sale reported in AIR - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the AO's reliance solely on AIR registration of sale agreements to bring back gross sale receipts was incorrect. The assessee followed the mercantile system and applied the accrual concept embodied in Accounting Standard I notified under section 145(2); accrual means revenue is recognised in the period to which it relates. The AO shifted gross receipts from the years in which the assessee recognised them to an earlier year without correspondingly shifting the expenditures related to completion of the projects. That approach violated the notified Accounting Standard and was impermissible. Further, there was no finding that the books of account were defective; the AO ought to have examined the accounts rather than mechanically rely on AIR data. In the context of real estate, the Tribunal accepted the CIT(A)'s finding that effective transfer of risk and completion for revenue recognition occurs on handover of possession, supported by the statutory scheme under MOFA which leaves promoters liable to refund amounts (with interest) until possession is given, indicating that risk remains with the promoter until possession is delivered.

Addition of Rs. 2,76,07,910/ by shifting receipts to an earlier year was deleted; the AO's action was set aside.

Maharashtra Ownership of Flats Act (MOFA) - promoter's liability, refund obligation and charge on property until possession - recognition of revenue on transfer of possession in real estate transactions - Whether 'possession letters' furnished by the assessee correctly establish the date of sale/recognition of revenue instead of the date of agreement registration - HELD THAT: - The Tribunal agreed with the CIT(A) that under MOFA the promoter remains liable to refund amounts with interest until possession is handed over as per the agreement (or within permitted extension), and such liability operates as a charge on the promoter's property. A possession letter issued on completion, acknowledged by the buyer, denotes handover of possession and marks transfer of effective risk. Consequently, recognition of sale on delivery of possession (as evidenced by possession letters) is consistent with the legal and accounting position, and the AO's view that risks and rewards passed on the date of sale agreements (registration) was not correct on the facts.

CIT(A)'s acceptance of possession letters as basis for recognising sale was upheld; the AO's contrary finding was rejected.

Admission of additional evidence and compliance with Rule 46A of the Income Tax Rules - Whether the CIT(A) erred in admitting and acting upon evidence (on cancellation/compensation) in contravention of Rule 46A and in deleting the addition relating to interest/premium on cancellation of gala - HELD THAT: - The Tribunal examined the materials placed before the CIT(A), including the earlier year balance sheet, ledger accounts and TDS certificates. On that examination the CIT(A) reached a finding that the amounts were repaid to parties and that tax had been deducted on the compensation/premium paid on cancellation. The record did not establish any contravention of Rule 46A by the CIT(A) in admitting or considering the evidence. Given the CIT(A)'s material-based finding, the AO's addition was unsustainable.

Deletion of the addition of Rs. 29,23,305/ was upheld; no infirmity in CIT(A)'s admission and consideration of evidence under Rule 46A was found.

Final Conclusion: The Tribunal dismissed the Revenue's appeal in all respects for AY 2011-12, upholding the CIT(A)'s deletions of the additions challenged by the Revenue and affirming the assessee's method of revenue recognition based on possession and the related factual findings on repayment and tax deduction.

Transfer as defined in section 2(47) - receipt under section 56(2)(vii)(b) - operation of a registered document under section 47 of the Registration Act - de facto transfer and de facto ownership - effect of registration on date of transfer - application of precedents Mormasji Mancharji Vaid and Balbir Singh Maini

Transfer as defined in section 2(47) - operation of a registered document under section 47 of the Registration Act - de facto transfer and de facto ownership - application of precedents Mormasji Mancharji Vaid and Balbir Singh Maini - Whether the immovable property was 'received' by the assessee in the previous year ending 31.3.2013 (fy 2012-13) on execution of the sale deed dated 30.3.2013 or only on registration on 24.4.2013. - HELD THAT: - The Tribunal examined the concepts of 'transfer' under section 2(47) and the operation of a registered document under section 47 of the Registration Act. While section 47 permits a registered instrument to operate from an earlier date, binding precedents (Ram Saran Lall and Hiralal Agrawal as considered in Mormasji Mancharji Vaid) establish that a sale which is compulsorily registrable is not complete until registration is effected. Notwithstanding that rule, the Tribunal recognised that a de facto transfer - enabling enjoyment and effective control of the property - can occur on execution where parties have performed their contractual obligations. Applying this analysis, and having regard to the facts that the parties executed the sale and performed their parts on 30.3.2013, the Tribunal held that a de facto transfer and thereby receipt for the purposes of section 56(2)(vii)(b) took place on 30.3.2013 (the previous year relevant to AY 2013-14). The Tribunal rejected the Revenue's argument that Balbir Singh Maini confines recognition solely to registered documents, holding that that decision supports the proposition that where registration is mandatorily required the legal effect for de jure title follows registration, but does not preclude recognising a de facto transfer under section 2(47)(vi) when the parties have performed the contract prior to registration. [Paras 4, 5]

There was receipt of the subject land by the assessee on 30.3.2013 (fy 2012-13), constituting a de facto transfer under section 2(47)(vi).

Receipt under section 56(2)(vii)(b) - effect of registration on date of transfer - Whether the difference between stamp duty value and stated consideration could be taxed under section 56(2)(vii)(b)(ii) in AY 2014-15. - HELD THAT: - Because the Tribunal held that the assessee received the property on 30.3.2013 (previous year relevant to AY 2013-14) by virtue of a de facto transfer, the taxable event contemplated by section 56(2)(vii)(b) occurred in that earlier previous year. The Tribunal therefore concluded that the Revenue could not invoke section 56(2)(vii)(b)(ii) for AY 2014-15 in respect of the short consideration, as no receipt in that year had occurred. The legal correctness of the date-of-receipt conclusion determined the taxability question without requiring reliance on the later legislative amendment that widened clause (b). [Paras 4, 5, 6]

Invocation of section 56(2)(vii)(b)(ii) for AY 2014-15 is not sustainable because the receipt occurred in the previous year relevant to AY 2013-14.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order: the property was received by the assessee on 30.3.2013 (previous year relevant to AY 2013-14) as a de facto transfer, and the addition under section 56(2)(vii)(b)(ii) for AY 2014-15 was unsustainable.

Rectification under Sec.254(2) of the Act - disallowance under Section 36(1)(iii) - presumption as to source where sufficient interest free funds are available - review not permissible under Sec.254(2) - distinguishability of precedent on facts

Rectification under Sec.254(2) of the Act - review not permissible under Sec.254(2) - Application for rectification under Sec.254(2) seeking to alter the Tribunal's appellate order was not maintainable as it amounted to a review beyond the Tribunal's power under subsection (2) of Sec.254. - HELD THAT: - The assessee sought correction of the Tribunal's order sustaining the disallowance by contending a mistake apparent on record. The Tribunal had earlier taken a conscious factual view when upholding the disallowance. The present application effectively sought reconsideration of those factual conclusions and amounted to a review of the appellate order. Such review cannot be permitted under Sec.254(2), which does not empower the Tribunal to re open its order on review in the guise of rectification. Consequently the application could not be entertained as a request for review and was liable to be dismissed. [Paras 6]

Application under Sec.254(2) dismissed as an impermissible attempt to review the Tribunal's order.

Disallowance under Section 36(1)(iii) - presumption as to source where sufficient interest free funds are available - distinguishability of precedent on facts - The Tribunal's conclusion upholding the disallowance under Section 36(1)(iii) was based on the factual matrix and the Supreme Court's decision relied upon by the assessee was distinguishable on facts and therefore did not assist the assessee. - HELD THAT: - The Tribunal's order recorded that the assessee had substantial interest free advances to third parties in earlier years and had overdrawn partners' capital accounts; the profits of the year were insufficient to eliminate the debit balances. On that factual foundation the Tribunal related the interest free advances and overdrafts to interest bearing borrowings and sustained the disallowance. The assessee's reliance on the Supreme Court's observation that a presumption may arise where sufficient interest free funds exist was examined and rejected as the facts of that precedent did not match the present factual position. The Tribunal therefore legitimately applied its factual findings to uphold the disallowance. [Paras 5]

Tribunal's sustainment of the disallowance under Section 36(1)(iii) affirmed; the relied upon precedent was distinguishable and did not avail the assessee.

Final Conclusion: The miscellaneous application for rectification was dismissed; the Tribunal's factual conclusion sustaining the disallowance under Section 36(1)(iii) stands and the Supreme Court precedent relied on by the assessee was held distinguishable on facts.

Power of the Commissioner of Income tax under section 263 to revise an assessment - Scope of inquiry required of the Assessing Officer into unexplained cash deposits - Requirement that revision under section 263 be preceded by demonstration of failure of the Assessing Officer to make proper inquiry - Relevance of inquiries under section 133(6) and corroboration from bank and third party records - Condonation of delay in filing appeals where satisfactory explanation is furnished

Power of the Commissioner of Income tax under section 263 to revise an assessment - Scope of inquiry required of the Assessing Officer into unexplained cash deposits - Requirement that revision under section 263 be preceded by demonstration of failure of the Assessing Officer to make proper inquiry - Relevance of inquiries under section 133(6) and corroboration from bank and third party records - Validity of the CIT's exercise of power under section 263 in setting aside the assessments on the ground that the Assessing Officer did not make proper inquiry into cash deposits in the assessees' bank accounts. - HELD THAT: - The Tribunal examined the assessment records and found that the Assessing Officer had specifically called for and obtained evidence regarding cash deposits in the assessees' savings bank accounts, recorded statements of the third party Mr. Dilip Talekar and the assessees, and made enquiries from the bank and from Wockhardt Limited by invoking provisions for third party verification. The AO concluded, on the basis of bank records and statements, that the cash deposits reflected transactions effected by Mr. Dilip Talekar for and on behalf of Shri Laxmisen Agencies and that the assessees' accounts were used for purchase of demand drafts in favour of Wockhardt Limited. The AO conveyed the information to the Assessing Officer of Shri Laxmisen Agencies, who in turn made substantial additions in that firm's assessment for unaccounted purchases. Given these inquiries and corroborative findings, the Tribunal held that the AO had made proper verification and had reached a reasonable conclusion; the ld. CIT's order under section 263, which set aside the assessments on the premise of inadequate inquiry, was therefore not sustainable. Applying the same reasoning to the facts of the second appeal, which were held to be mutatis mutandis identical, the Tribunal set aside the CIT's orders and allowed the appeals. [Paras 5, 6, 7, 10, 11]

The CIT's exercise of revision under section 263 was unjustified because the Assessing Officer had carried out proper inquiries and verification; the impugned orders under section 263 are set aside and the appeals are allowed.

Final Conclusion: Both appeals are allowed: delay in filing the appeals is condoned and the orders passed by the Commissioner exercising jurisdiction under section 263 are quashed on the ground that the Assessing Officer had made adequate inquiry and verification into the cash deposits.

Appealability of adjudicatory determinations recorded during personal hearing - Appeal under Section 129A(1)(a) of the Customs Act, 1962 against orders of adjudicating authority - Right to lead evidence and to seek testing of seized consignments - Remand for fresh consideration where reasons for denial of request are inadequate

Appealability of adjudicatory determinations recorded during personal hearing - Appeal under Section 129A(1)(a) of the Customs Act, 1962 against orders of adjudicating authority - The record of personal hearing which contains a determination rejecting the appellant's request for testing is an order passed by the adjudicating authority and is appealable to the Appellate Tribunal under Section 129A(1)(a). - HELD THAT: - The adjudicating authority, acting in its adjudicatory capacity, recorded that the request for testing "was considered and found to be not acceptable, in view of the fact of the case and evidences placed before the adjudicating authority." Such a determination made during adjudication constitutes an order within the meaning of Section 129A(1)(a) and therefore falls within the tribunal's appellate jurisdiction. The tribunal accordingly treated the communication as an appealable order rather than a mere internal or non-appealable record. [Paras 3]

The communication dated 18.11.2019 is a decision of the adjudicating authority and appealable under Section 129A(1)(a).

Right to lead evidence and to seek testing of seized consignments - Remand for fresh consideration where reasons for denial of request are inadequate - The adjudicating authority's brief rejection of the testing request without adequate reasons was unsatisfactory and required reconsideration; the sentence rejecting testing was set aside and the matter remanded for fresh consideration. - HELD THAT: - The tribunal observed that in judicial or quasi-judicial proceedings an affected party has the right to lead evidence in the manner it deems appropriate. A summary denial of the request for testing, expressed only as "found to be not acceptable" without reasoned consideration, did not meet the standards expected of an adjudicatory order. Reliance on the need for reasoned treatment (as emphasised by the Apex Court in the cited authority) led the tribunal to conclude that the adjudicating authority should re-examine the request and record its reasons. Consequently the specific sentence in the record of personal hearing rejecting testing was set aside and the matter remanded to the adjudicating authority for fresh consideration of the testing request. [Paras 3, 4]

The statement rejecting the request for testing is set aside and the matter is remanded to the adjudicating authority for reconsideration with reasons.

Final Conclusion: The appeal was entertained as the record of personal hearing contained an appealable adjudicatory determination; the adjudicating authority's terse rejection of the request for testing was set aside and the matter remanded for fresh consideration, and the application for early hearing was allowed.

Scheme of Arrangement - Demerger - Appointed Date - Consent affidavits of all shareholders - Dispensing with meetings of shareholders - Dispensing with meetings of unsecured creditors - No secured creditors - no notice required - Notice to unsecured creditors and regulatory authorities pursuant to Section 230(5) - Filing of compliance report in lieu of affidavit of service

Consent affidavits of all shareholders - Dispensing with meetings of shareholders - Appointed Date - Dispensation of meeting of equity shareholders and recognition of the Appointed Date - HELD THAT: - The Tribunal recorded that both applicant companies had procured written consent affidavits from their entire equity shareholding in respect of the proposed Scheme of Arrangement. In view of unanimous shareholder consent, the Tribunal dispensed with the convening of meetings of the equity shareholders as prayed by the applicant companies and noted the Appointed Date as fixed under the Scheme. [Paras 3, 6, 8]

Meetings of equity shareholders are dispensed with and the Appointed Date as fixed in the Scheme is recognised.

Dispensing with meetings of unsecured creditors - No secured creditors - no notice required - Notice to unsecured creditors and regulatory authorities pursuant to Section 230(5) - Whether meetings of unsecured creditors can be dispensed with and the requirement of notice to unsecured creditors - HELD THAT: - The Tribunal accepted the applicants' submission that the Scheme does not involve any compromise or arrangement with creditors and that the rights of unsecured creditors are not affected because unsecured creditors would be paid in the ordinary course of business. On that basis, the Tribunal dispensed with convening meetings of unsecured creditors. Simultaneously, the Tribunal directed the applicant companies to issue notices to all unsecured creditors at their last known addresses or by email (where available) informing them of the Scheme and allowing thirty days from receipt to submit representations to the Tribunal, failing which it would be presumed they have no representations. [Paras 9, 10, 11]

Meetings of unsecured creditors are dispensed with, subject to the requirement that the applicant companies issue statutory notice to unsecured creditors allowing 30 days for representations.

Notice to unsecured creditors and regulatory authorities pursuant to Section 230(5) - Filing of compliance report in lieu of affidavit of service - Service of notice on regulatory authorities and filing of compliance report - HELD THAT: - The Tribunal directed service of the notice along with a copy of the Scheme on the Central Government through the Regional Director (Western Region), the concerned Registrar of Companies and the concerned Income Tax Authority within whose jurisdiction the applicants are assessed, permitting them thirty days to submit representations under Section 230(5). Given the prevailing lockdown, the Tribunal permitted the applicant companies to file a compliance report with the registry in lieu of the customary affidavit of service, demonstrating dispatch of notices to relevant creditors and regulatory authorities and reporting compliance with the directions. [Paras 12, 13]

Applicants must serve the specified regulatory authorities and file a compliance report proving dispatch of notices in lieu of affidavit of service.

Final Conclusion: The Tribunal recorded board approval and the Appointed Date, dispensed with convening meetings of the equity shareholders and unsecured creditors (subject to statutory notice to unsecured creditors), directed service of notice on specified regulatory authorities with a 30 day period for representations, and required the applicant companies to file a compliance report in lieu of the affidavit of service.

Scheme of Arrangement and Amalgamation - Arrangement under section 230(1)(b) - Dispensing with meetings of creditors - Issue and allotment of shares pursuant to scheme - Increase of Authorised Share Capital for allotment - Notice and disclosure requirements under section 230(3) and Rule 6 - Service on statutory authorities and deemed no-objection - Appointment of Chairperson for shareholders' meeting - Official Liquidator scrutiny and report

Scheme of Arrangement and Amalgamation - Arrangement under section 230(1)(b) - Classification of the proposed scheme as an arrangement under Section 230(1)(b) (between companies and their shareholders) and not as a compromise or arrangement with creditors under Section 230(1)(a). - HELD THAT: - The Tribunal recorded that the proposed Scheme contemplates transfer and vesting of the businesses of Transferor Company No.1 and Transferor Company No.2 into the Transferee Company and that the Scheme is between those transferor companies and their shareholders. The Tribunal further noted that no sacrifice is called for by creditors and that the rights of creditors will not be affected, leading to the conclusion that the Scheme falls under Section 230(1)(b) rather than Section 230(1)(a). [Paras 8]

Scheme is an arrangement under Section 230(1)(b) and not a scheme with creditors under Section 230(1)(a).

Dispensing with meetings of creditors - Whether meetings of creditors of the Applicant Companies should be dispensed with. - HELD THAT: - The Applicant Companies obtained affidavits of consent from all their unsecured creditors and there are no secured creditors. On that basis the Tribunal exercised its power to dispense with convening meetings of creditors and accepted the prayer to dispense with such meetings. [Paras 12]

Meetings of the creditors of the Applicant Companies are dispensed with.

Issue and allotment of shares pursuant to scheme - Increase of Authorised Share Capital for allotment - Mechanism for issuance and allotment of equity shares to shareholders of the Transferor Companies under the Scheme and the requirement to increase the Transferee Company's authorised share capital. - HELD THAT: - The Tribunal noted the share exchange ratios proposed in the Scheme whereby the Transferee Company will issue specified numbers of equity shares to the shareholders of Transferor Company No.1 and Transferor Company No.2 in consideration of the transfer. The Tribunal observed that the current authorised capital of the Transferee Company is insufficient to permit the allotment contemplated and therefore directed the Transferee Company to pass a resolution to increase its authorised share capital to enable the allotment of further shares upon effectiveness of the Scheme. [Paras 4, 7]

The share exchange mechanism as provided in the Scheme is recognized and the Transferee Company is directed to increase its authorised share capital to permit allotment pursuant to the Scheme.

Notice and disclosure requirements under section 230(3) and Rule 6 - Service on statutory authorities and deemed no-objection - Directions regarding convening shareholders' meetings, manner and timing of notices, publication requirements, and service upon statutory authorities with the consequence of deemed no-objection in absence of response. - HELD THAT: - The Tribunal ordered that meetings of equity shareholders be convened on the date specified and directed issuance of notice at least 30 clear days prior by physical delivery or registered communication and by email, together with the Scheme and the statement of material facts as required by section 230(3) and Rule 6. It further directed publication of notice in an English and a Marathi newspaper and hosting the notice on the companies' websites. The Applicant Companies were directed to serve notice on the Regional Director, Registrar of Companies and the Income Tax Authority (with PANs supplied) pursuant to section 230(5) and Rule 8, and it was recorded that if no response is received within 30 days, it will be presumed those authorities have no objection.

Tribunal directed manner, timing and publication of notices to shareholders and directed service on statutory authorities with the stated deeming provision for lack of response.

Appointment of Chairperson for shareholders' meeting - Official Liquidator scrutiny and report - Appointment of a Chairperson for the shareholders' meetings and appointment of a firm to assist the Official Liquidator in scrutinising books of the Transferor Companies, including payment of fees and requirement of report. - HELD THAT: - The Tribunal appointed a Practising Company Secretary as Chairperson for the shareholders' meetings and vested the Chairperson with powers to conduct the meetings and decide procedural questions and any proposed amendment. The Tribunal also directed that the Transferor Companies serve the Application and Scheme on the Official Liquidator, High Court, Bombay, and appointed a specified Chartered Accountant firm to assist the Official Liquidator in scrutinising the books of accounts of the Transferor Companies, directing payment of specified fees to that firm and requiring the Official Liquidator to submit a report or representation within thirty days, failing which the Official Liquidator would be presumed to have no objection.

Chairperson appointed for the shareholders' meetings; Chartered Accountant appointed to assist the Official Liquidator, who shall submit a report within thirty days or be presumed to have no objection.

Service on statutory authorities and deemed no-objection - Permitting filing of a compliance report in lieu of customary affidavit of service due to prevailing lockdown and proof of service on regulatory authorities. - HELD THAT: - Recognising constraints due to prevailing lockdown, the Tribunal allowed the Applicant Companies to file a compliance report with the Registry in lieu of the customary affidavit of service for proving service of notices on regulatory authorities as directed in the order.

Compliance report may be filed with the Registry in lieu of the customary affidavit of service to prove service on regulatory authorities.

Final Conclusion: The Tribunal classified the Scheme as an arrangement among the companies and their shareholders under Section 230(1)(b), dispensed with creditors' meetings on account of consents obtained, directed convening of shareholders' meetings with specified notice, publication and service requirements, appointed a Chairperson for the meetings, directed the Transferee Company to increase its authorised share capital to enable allotment under the Scheme, appointed a firm to assist the Official Liquidator and allowed filing of a compliance report in lieu of affidavit of service.

Scheme of amalgamation - Sanction under sections 230 to 232 of the Companies Act, 2013 - Appointed date - Transfer and vesting of assets and liabilities - Continuation of pending proceedings against transferee - Tax implications subject to tax authorities - Compliance with FEMA/RBI regulations - Registrar of Companies' registration and fee compliance - Transfer of liability under section 135 - Statutory filing and post-sanction compliance obligations

Scheme of amalgamation - Sanction under sections 230 to 232 of the Companies Act, 2013 - Appointed date - Sanction of the scheme of amalgamation between the transferor companies and the transferee company and fixation of the appointed date. - HELD THAT: - Having considered the company petition, statutory reports of the Regional Director and Registrar of Companies, the affidavits filed by the petitioners and objections/comments of the Official Liquidator and Income-tax Department, the Tribunal found that the procedure prescribed in sub-sections (1) and (2) of section 232 has been complied with. The Regional Director observed the scheme to be fair and not contrary to public policy. On that basis the Tribunal sanctioned the scheme and fixed the appointed date as April 1, 2019. [Paras 15]

The scheme of amalgamation is sanctioned and the appointed date shall be April 1, 2019.

Transfer and vesting of assets and liabilities - Continuation of pending proceedings against transferee - Effect of sanction on assets, liabilities and pending proceedings of the transferor companies. - HELD THAT: - Pursuant to the sanction under section 232, the Tribunal ordered that all assets, rights, liabilities, taxes, levies, charges and duties of the petitioner/transferor companies shall, without further act or deed, stand transferred to and vest in the transferee company, subject to existing charges. It further directed that all proceedings pending by or against the transferor companies shall be continued by or against the transferee company.

Assets, liabilities and pending proceedings of the transferor companies stand transferred to the transferee company pursuant to the sanctioned scheme.

Tax implications subject to tax authorities - Compliance with FEMA/RBI regulations - Registrar of Companies' registration and fee compliance - Incidence of taxes, regulatory approvals and compliance obligations following sanction. - HELD THAT: - The Tribunal clarified that sanctioning the scheme does not grant any exemption from stamp duty, taxes or other charges and that tax implications, particularly under the Income-tax Act, are subject to final decision by the concerned tax authorities and shall be binding on the transferee. The petitioners were directed to ensure compliance with applicable FEMA/RBI guidelines and to undertake payment of any additional registration fee under section 232(3)(i) after adjusting fees already paid by transferor companies. The Tribunal noted Registrar and RD observations (including pending income-tax demands and the need for FEMA/CCI considerations) and required undertakings/compliances from the petitioners but did not adjudicate the substantive tax or regulatory claims.

Tax and regulatory consequences remain subject to respective authorities; petitioners must comply with FEMA/RBI requirements and Registrar-related fee formalities.

Official Liquidator scrutiny - Matters noted but not determinative of sanction - Treatment of Official Liquidator's scrutiny reports and observations regarding transferor companies. - HELD THAT: - The Official Liquidator's reports recorded certain observations including disputed income-tax liabilities, TDS defaults and tax refunds/receivables, and concluded that affairs of transferor companies had not been conducted prejudicial to interests. The Tribunal considered these reports along with other material but, having found procedural compliance and the scheme to be fair, sanctioned the scheme while preserving the rights of other authorities to take action under law. The Tribunal also directed that liabilities, if any, continue to attach and be enforceable against the transferee post-amalgamation.

Official Liquidator's observations were noted; they do not preclude sanction but liabilities and pending issues continue and remain enforceable against the transferee company.

Statutory filing and post-sanction compliance obligations - Transfer of liability under section 135 - Post-sanction procedural directions and compliance obligations imposed on the petitioners. - HELD THAT: - The Tribunal imposed specific post-sanction directions: delivery of a certified copy of the order and scheme to the Registrar of Companies for registration; filing of statutory returns; submission of quarterly/annual compliance affidavits by the managing director/director with CA/ICWA/CS certificate until compliance is ensured; handing over books of account and documents to the transferee for purposes of section 239; and that liabilities arising from non-compliance with section 135 would stand transferred to the transferee. The Tribunal also warned of penal consequences for contravention of section 232.

Petitioners must fulfill specified registration, filing and compliance obligations and hand over records; liabilities under section 135 transfer to the transferee and statutory penalties for contravention of section 232 apply.

Final Conclusion: The Tribunal sanctioned the proposed scheme of amalgamation with appointed date April 1, 2019, subject to statutory and regulatory compliances; assets, liabilities and pending proceedings of the transferor companies are to vest in the transferee, tax and other regulatory consequences remain for the concerned authorities to determine, and the petitioners are directed to carry out specified post-sanction filings, compliances and hand over records.

Provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - reason to believe and requirement of recording reasons in writing - conjunctive reading of predicates in clauses (a) and (b) of Section 5(1) - proceeds of crime and equivalence/valuation of untainted property - judicial control on conditions imposed for release of attached property

Judicial control on conditions imposed for release of attached property - provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - Whether the Tribunal could modify its conclusion that attachments were liable to be released by imposing conditions and continuing attachment of certain properties/FDRs in the name of 'striking a balance'. - HELD THAT: - The High Court held that once the Tribunal concluded the attachment orders were liable to be set aside, it could not avoid wholly setting aside those orders by imposing conditions or continuing attachment in the name of striking a balance between interests of the ED and the accused. The directions in paragraph 79 of the Tribunal's order, including continued attachment of FDRs and requiring indemnity bonds or undertakings before releasing immovable properties, were not warranted by the Tribunal's antecedent reasoning and were not contemplated by the PMLA. The Court emphasised that such directions were contrary to the Tribunal's own findings and therefore unsustainable. The Court accepted the appellants' undertaking not to alienate or encash the properties/FDRs pending trial as sufficient to protect ED's interests in the peculiar facts of the case. [Paras 26, 51, 52, 53]

The Tribunal's conditional directions in para 79 were set aside and the conditions imposed for release of immovable properties as well as continuance of attachment of FDRs were quashed; the appellants' undertaking not to alienate or encash the properties was accepted as sufficient protection.

Conjunctive reading of predicates in clauses (a) and (b) of Section 5(1) - reason to believe and requirement of recording reasons in writing - Whether the predicates in clauses (a) and (b) of Section 5(1) of the PMLA must be read conjunctively or can be read disjunctively by construing 'and' as 'or'. - HELD THAT: - The Court examined the text, context and precedents and concluded that the two predicates in Section 5(1) must be satisfied cumulatively. The director or authorised officer must have reason to believe both that a person is in possession of proceeds of crime and that such proceeds are likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings; moreover, reasons for such belief must be recorded in writing. The Court rejected the submission that 'and' should be read as 'or' unless compelling contextual necessity exists. Authorities permitting conjunctive/disjunctive substitution were considered, but the Court found no justification to read 'and' as 'or' in Section 5(1) and emphasised the primacy of the statutory text and the need for recorded reasons. [Paras 32, 33, 38, 41, 43]

Clauses (a) and (b) of Section 5(1) are to be read conjunctively; 'and' is not to be read as 'or' in the absence of compelling contextual necessity, and reasons for belief must be recorded in writing.

Reason to believe and requirement of recording reasons in writing - provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - Whether the Joint Director's provisional attachment order dated 30.03.2017 complied with the requirement to record reasons supporting the belief that proceeds of crime were likely to be concealed, transferred or dealt with (clause (b)). - HELD THAT: - The Court analysed the Joint Director's order and found that, although reasons were recorded to show belief that the appellants were in possession of proceeds of crime, there was no material or contemporaneous record articulating any reasoned belief that those proceeds were likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings. The ED had been unable to produce additional reasons despite adjournments and admitted there were no separate contemporaneous reasons on file. A mere recital that the officer had such a belief did not satisfy the statutory requirement. On this short ground-the absence of recorded reasons regarding predicate (b)-the attachment order was held to be vitiated and liable to be set aside. [Paras 48, 49, 50]

The provisional attachment order dated 30.03.2017 is vitiated for non-compliance with the requirement to record reasons in support of clause (b) of Section 5(1) and therefore warrants interference.

Provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - judicial control on conditions imposed for release of attached property - Relief to be granted and consequential directions following the findings on legality of attachment orders. - HELD THAT: - Applying the conclusions that the Tribunal's conditional directions were unsustainable and that the Joint Director's order was vitiated for failure to record reasons under clause (b), the High Court allowed the appellants' appeal, set aside the impugned Tribunal order to the extent it continued attachments or imposed conditions, and accepted the appellants' undertaking not to alienate or encash the properties/FDRs pending conclusion of trial and for one month thereafter. The Court dismissed the ED's appeals. The Special Court was directed to expedite disposal of the underlying PMLA case within one year from filing an authenticated copy of this order. No order as to costs was made in the peculiar facts of the case. [Paras 51, 53, 54, 55]

Appellants' appeal allowed; Tribunal's conditional directions and continuance of attachment set aside; ED's appeals dismissed; appellants' undertaking accepted; Special Court directed to dispose of PMLA case expeditiously within one year.

Final Conclusion: The High Court set aside the Tribunal's conditional directions and the continuance of attachment, held that the predicates of Section 5(1) of the PMLA must be satisfied cumulatively with reasons for belief recorded in writing, found the Joint Director's order vitiated for failure to record reasons under clause (b), allowed the appellants' appeal, dismissed the ED's appeals, accepted the appellants' undertaking restraining alienation/encashment pending trial, and directed the Special Court to decide the PMLA trial expeditiously within one year.

Liability of service provider to pay service tax - registration and return filing obligation of service provider - non-receipt of payment from service recipient not a defence - adjudicatory mechanism under the Finance Act for assessment, interest and penalty - best judgment assessment and special audit powers - intradepartmental and appellate remedies under the Act

Liability of service provider to pay service tax - registration and return filing obligation of service provider - Liability to pay service tax under Chapters V and VA of the Finance Act, 1994 rests on the service provider. - HELD THAT: - The Court examined the charging provisions and related obligations in Chapters V and VA, including definitions of "service", the charge of service tax, and provisions making the service provider liable to pay, register and file returns. Reliance on precedents of the Apex Court was noted to the effect that the statutory obligation for levy and assessment is on the person rendering the service. The Act requires registration and timely payment irrespective of pass-through or contractual allocation; non-registration and non-payment found against the petitioner. The Assessing Authority's determination that the petitioner was the person liable and that the amount received constituted taxable consideration was upheld.

The petitioner, as service provider, is liable to pay service tax and was under obligation to register and file returns for the periods in question.

Non-receipt of payment from service recipient not a defence - Non-receipt of payment of tax or non-payment by the service recipient cannot excuse the service provider from statutory compliance or be set up as a defence in adjudication. - HELD THAT: - The Court held that the statute mandates timely payment of the tax component by the service provider and contains no provision permitting deferment until actual receipt from the recipient. Contractual disputes between the parties and pending arbitration between the petitioner and the Railway do not alter the statutory obligation; arbitrations determine inter se contractual rights but do not affect compliance with tax law. Consequently the Assessing Authority correctly rejected the defence that non-receipt absolved the petitioner.

Petitioner's contention that liability could be deferred until receipt from the recipient or that non-payment by the recipient was a defence was rejected.

Adjudicatory mechanism under the Finance Act for assessment, interest and penalty - best judgment assessment and special audit powers - The impugned adjudicating order confirming demand, interest and penalties was not perverse, illegal or erroneous and falls within the statutory adjudicatory scheme. - HELD THAT: - The Court reviewed procedural compliance including issuance of show-cause notice, opportunity of hearing, consideration of contentions and the Assessing Authority's application of statutory provisions including exclusion of amounts attributable to specified dry-cleaning services. It found no misapplication of law, denial of natural justice, or perversity. The statutory powers to determine tax, levy interest and impose penalties were properly invoked. The existence of intelligence-based investigation and the Assessing Authority's reliance on gathered material were held to support the assessment.

The order dated 02.04.2018 confirming demand, interest and penalties is upheld as not being perverse, illegal or erroneous.

Intradepartmental and appellate remedies under the Act - Availability of the Act's internal adjudicatory and appellate remedies means factual or legal errors are to be corrected within the statutory mechanism; writ relief is not appropriate to supplant those remedies. - HELD THAT: - The Court noted the comprehensive statutory machinery (including provisions for appeal to the Commissioner (Appeals) and Tribunal) for correction of errors of fact and law. Citing the principle that a writ court should not ordinarily correct errors that the statute provides mechanisms to remedy, the Court observed that the statutory remedies were available and that the petitioner was not entitled to have the matter re-decided by the writ forum on merits as a substitute for those remedies, though the Court proceeded to decide the substantive issues on merits given the period involved.

The Act provides complete mechanisms for rectification and appeal; the writ forum should not displace those remedies, and errors are to be remedied under the statutory scheme.

Final Conclusion: The petition is dismissed. The order dated 02.04.2018 passed by the Joint Commissioner, CGST & Central Excise Patna-I confirming demand, interest and penalties for the financial years 2011-12 and 2012-13 is upheld; the petitioner, as service provider, was under statutory obligation to register, file returns and pay service tax and cannot rely on non-receipt from the service recipient or pending arbitration as a defence.

Limitation for refund claims under section 11B of the Central Excise Act, 1944 - Interpretation of notification 27/2012-C.E.(N.T.) and amendment by notification 14/2016-C.E.(N.T.) - Distinction between manufacturers and service providers for refund limitation

Interpretation of notification 27/2012-C.E.(N.T.) and amendment by notification 14/2016-C.E.(N.T.) - Distinction between manufacturers and service providers for refund limitation - Clause 3(b) of notification 27/2012-C.E.(N.T.) applied section 11B limitation to manufacturers and the amendment by notification 14/2016-C.E.(N.T.) only introduced a separate, relaxatory provision for service providers without changing the position of manufacturers. - HELD THAT: - The Tribunal examined the language of clause 3(b) of notification 27/2012 which required applications for refund under Rule 5 to be filed "before the expiry of the period specified in section 11B of the Central Excise Act, 1944." Notification 14/2016 substituted clause 3(b) to specify separate filing timelines: (i) for manufacturers, filing before the expiry of the period specified in section 11B; and (ii) for service providers, a one year timeline from specified events. The Tribunal found that the substitution did not alter the position in respect of manufacturers but afforded relaxation only to service providers. There was therefore no ambiguity in the original notification as it applied to manufacturers, and the amendment merely clarified and relaxed time limits for service providers.

Clause 3(b) as originally framed applied section 11B to manufacturers; notification 14/2016 did not change that position and only granted relaxation to service providers.

Limitation for refund claims under section 11B of the Central Excise Act, 1944 - The refund claim filed on 22nd September, 2017 in respect of manufacture and export for June to August, 2015 was barred by the limitation prescribed under section 11B and rightly rejected. - HELD THAT: - Applying the determinative construction that manufacturers are governed by the limitation in section 11B, the Tribunal considered the dates: the manufacture and export occurred in June-August 2015, while the refund application was filed on 22 September 2017. That filing date fell outside the period prescribed by section 11B for claims under Rule 5 as applied to manufacturers. In the absence of any ambiguity or retrospective relaxation affecting manufacturers, the Commissioner's rejection on limitation grounds was upheld.

The refund claim was time-barred under section 11B and the Commissioner's order rejecting the claim on limitation grounds is upheld; the appeal is dismissed.

Final Conclusion: The Tribunal held that notification 14/2016 merely relaxed time limits for service providers and did not alter the application of section 11B to manufacturers; the appellant's refund claim for June to August, 2015, filed on 22 September, 2017, was barred by limitation and the appeal is dismissed.

Indefeasible right to default bail - proviso to Section 167(2), CrPC - effect of subsequent filing of chargesheet/additional complaint on statutory bail - time of filing of bail application vs time of disposal - Explanation I to Section 167(2), CrPC - requirement of public prosecutor's report for extension of time under special enactments - Article 21 - protection of personal liberty

Indefeasible right to default bail - effect of subsequent filing of chargesheet/additional complaint on statutory bail - The indefeasible right accrued under the Proviso to Section 167(2), CrPC is not extinguished by the subsequent filing of a chargesheet or additional complaint if the accused has, before such filing, filed an application for default bail and offered to furnish bail. - HELD THAT: - Relying on the majority opinion in Uday Mohanlal Acharya and subsequent precedents, the Court holds that once the statutory period for investigation expires and the accused files an application for bail under the proviso to Section 167(2), he is deemed to have availed of his right even if the court has not yet finally disposed of the application or the accused has not actually furnished the bail. Allowing the prosecution to defeat that right by filing a chargesheet or additional complaint after the accused has filed his bail application would frustrate the legislative purpose and the protection of personal liberty under Article 21. The court therefore affirms that subsequent filing of a chargesheet/additional complaint cannot defeat the right where the accused has already applied for default bail and offered to abide by bail conditions. [Paras 10, 12, 17, 18]

The appellant was entitled to default bail as he had filed the bail application and offered bail prior to the additional complaint; the subsequent filing did not extinguish his right.

Time of filing of bail application vs time of disposal - proviso to Section 167(2), CrPC - The decisive moment for enforcement of the right to default bail is the filing of the bail application (with offer to furnish bail) after expiry of the prescribed period, not the time at which the application is disposed of by the court. - HELD THAT: - The Court reiterates that the accused is deemed to have exercised the indefeasible right at the moment he files the application for default bail and offers to furnish bail. A rule that makes the right dependent on the time of disposal would permit the prosecution or court delays to nullify the statutory protection. The authorities cited (including Uday Mohanlal Acharya, Rakesh Kumar Paul and Bikramjit Singh) are applied to hold that filing, rather than disposal, is the operative event for protecting the accused's right. [Paras 10, 11, 12, 16, 17]

Filing the bail application after expiry of the statutory period vests the accused with the right to default bail regardless of pendency or delayed disposal of that application.

Explanation I to Section 167(2), CrPC - indefeasible right to default bail - Explanation I to Section 167(2) operates where the accused, having been granted bail, fails to furnish the bail as directed; it does not authorise continued detention where the accused has filed a bail application and offered bail but has not yet been able to furnish bonds due to pendency of the application. - HELD THAT: - The Court accepts the majority view in Uday Mohanlal Acharya that Explanation I applies only when the accused has availed of the right by undertaking to furnish bail and then fails to do so. It rejects the argument that an accused's detention remains authorised merely because he has not physically furnished bail at the exact moment a chargesheet is filed while his properly filed bail application remains pending. Such a narrow interpretation would render the proviso ineffectual. [Paras 12, 13, 18]

Explanation I cannot be invoked to justify continued detention where the accused had filed for default bail and offered to furnish bail prior to the filing of the chargesheet.

Requirement of public prosecutor's report for extension of time under special enactments - proviso to Section 167(2), CrPC - A public prosecutor may resist default bail by filing a timely report or application for extension of time under the relevant special statute; however, if the accused files a default bail application before any such extension report or chargesheet is filed, the prosecution cannot defeat the accused's right by subsequently filing those documents. - HELD THAT: - The Court clarifies the ratio in Hitendra Vishnu Thakur and Sanjay Dutt: when the prosecutor files a report seeking extension before the accused files his bail application, both matters must be considered together and an extension may defeat the right. By contrast, where the accused has already filed a bail application on expiry of the statutory period, subsequent filings by the prosecution cannot be used as a stratagem to deny default bail. The notice to the prosecution on a bail application is meant to allow them to show a valid prior extension or earlier filing; it must not be used to permit dilatory tactics. [Paras 14, 15, 16]

Prosecution cannot frustrate a properly invoked right to default bail by filing an extension report or chargesheet after the accused has filed his bail application; only a prior and valid extension/report can defeat the right.

Article 21 - protection of personal liberty - proviso to Section 167(2), CrPC - Interpretation of Section 167(2) must be consonant with Article 21 and not be formalistic; provisions must be interpreted to protect personal liberty and prevent indefinite detention by prosecutorial or procedural delay. - HELD THAT: - The Court emphasises the constitutional underpinning of default bail and the legislative intent to balance investigative needs with protection of civil liberty. Precedents are cited to affirm that in matters affecting personal liberty technicalities should not be allowed to defeat substantive rights and that magistrates and counsel should promptly inform accused persons of their statutory rights. [Paras 11]

Section 167(2) and its proviso must be interpreted in a manner that vindicates Article 21; procedural formalism must not nullify the accused's statutory protection against prolonged detention.

Final Conclusion: The High Court's order cancelling the Trial Court's grant of default bail was set aside. The appellant, having filed a bail application and offered to furnish bail after expiry of the 180 day period, had availed his indefeasible right under the proviso to Section 167(2), CrPC read with Section 36A(4), NDPS Act; subsequent filing of an additional complaint could not defeat that right. The Trial Court's order granting bail is confirmed subject to conditions directed by this Court.

Bias from informant being investigating officer - Presumption of innocence and standard of proof of reasonable doubt - Effect of non-examination of independent witnesses in NDPS cases - Chance recovery and chain of custody in NDPS seizures - High Court power to reverse an acquittal for perverse findings or miscarriage of justice - Non-applicability of search safeguards to articles carried by an accused under Section 50 of the NDPS Act

Bias from informant being investigating officer - Presumption of innocence and standard of proof of reasonable doubt - Whether the fact that the complainant (PW8) himself conducted the investigation vitiates the trial by creating a presumption of bias. - HELD THAT: - The Court held that the law is no longer res integra on this point and relied on the Constitutional Bench decision in Mukesh Singh to conclude that mere identity of informant and investigator does not automatically vitiate the investigation. To establish prejudice from such identity, there must be proof of actual bias or a real likelihood of bias; a blanket presumption is impermissible. Mere deficiencies or lapses in investigation, absent evidence of mala fide motive or tangible bias, cannot by themselves sustain a conclusion of unfairness. The appellants did not demonstrate enmity or motive that would indicate the police falsely planted evidence, and the magnitude of the seizure made a planting theory implausible on the material before the Court. [Paras 9, 10, 11, 12]

No adverse inference of bias was drawn against PW8 merely because he was both the complainant and the investigator; that circumstance by itself did not vitiate the trial.

Effect of non-examination of independent witnesses in NDPS cases - Chance recovery and chain of custody in NDPS seizures - Presumption of innocence and standard of proof of reasonable doubt - Whether the alternate version advanced by the appellants and the non-examination/hostility of independent witnesses entitled the appellants to acquittal. - HELD THAT: - The Court examined the appellants' alternate story - that an unknown third person placed the backpack and fled - and found it to be inherently improbable and unsupported by evidence. The concept of reasonable doubt requires that an alternative view favourable to the accused must be reasonably probable and not fanciful or remote. The hostile or non-corroborative stance of PW3 (the sole independent witness) was held to be inadmissible as substantive proof of the alternate version because parts of his evidence amounted to hearsay, were impeached, and did not negate recovery from the appellants. While courts must exercise heightened care where independent witnesses are absent, non-examination of such witnesses is not ipso facto fatal to prosecution; the official witnesses' evidence may suffice if, upon careful scrutiny, it is found credible and the chain from seizure to chemical analysis is intact. The Court agreed with the High Court's reappraisal that the official testimony was reliable and that the appellants' narrative did not create a reasonably probable alternative. [Paras 14, 15, 16, 17, 18]

The alternate version and non-examination/hostility of the independent witness did not create a reasonable doubt entitling the appellants to acquittal; the prosecution evidence, including the chain of seizure and analysis, was held to be sufficient.

High Court power to reverse an acquittal for perverse findings or miscarriage of justice - Non-applicability of search safeguards to articles carried by an accused under Section 50 of the NDPS Act - Whether the High Court erred in setting aside the trial Court's acquittal and convicting the appellants. - HELD THAT: - The Court reiterated that High Courts may interfere with acquittals where there are patent legal errors, grave miscarriage of justice, or perverse findings of fact. Here the trial Court was found to have misapplied legal principles and to have mechanically disbelieved the prosecution by improperly treating the absence or hostility of independent witnesses and other perceived investigative lapses as determinative. The High Court's detailed reappraisal accepting the official witnesses' testimony and the completeness of the chain of events was sustainable. The appellants' contention regarding noncompliance of Section 50 of the NDPS Act was rejected on the ground that statutory safeguards concerning search of a person do not extend to articles (such as a backpack) carried by the person, and therefore noncompliance of Section 50 was not material in the facts of this case. [Paras 19, 20, 21]

The High Court did not err in reversing the trial Court's acquittal; its interference was justified and the conviction was upheld.

Final Conclusion: The appeals are dismissed; the High Court's reversal of the trial Court's acquittal and conviction of the appellants under the NDPS Act were upheld, their bail bonds cancelled and they were directed to be taken into custody to serve the remainder of their sentences.

Appeal against acquittal - Appellate reappreciation of evidence - Perverse finding - Chance recovery - Reliance on court record not confronted in cross-examination - Admission requiring opportunity of explanation under evidence law - Independent witness and reliance on police testimony - Minimum mandatory sentence and computation of 'commercial quantity' under the NDPS regime

Appeal against acquittal - Appellate reappreciation of evidence - Perverse finding - Whether the High Court was justified in interfering with the trial Court's acquittal by reappreciating evidence and convicting the appellant. - HELD THAT: - The Court reaffirmed that there is no difference in jurisdiction or scope between appeals against conviction and acquittal and that an appellate Court may reappreciate questions of law and fact, subject to self restraint and established principles. Interference with an acquittal is warranted where there is a patent error of law, grave miscarriage, or a perverse finding arrived at by ignoring or excluding relevant material or by taking into account irrelevant material. The limited scope of this Court on Article 136 is to examine whether the High Court correctly applied these principles rather than to re appreciate the entire evidence afresh. Applying these tests, the Court held that the High Court legitimately found the trial Court's reliance on irrelevant material to be a flaw and properly reappreciated the evidence to convict. [Paras 11, 12, 13, 14]

The High Court was justified in reversing the acquittal because the trial Court's conclusion was vitiated by reliance on irrelevant material and its findings were open to being set aside on appeal.

Reliance on court record not confronted in cross-examination - Admission requiring opportunity of explanation under evidence law - Whether the trial Court properly relied on a written reply filed by the prosecution in earlier proceedings (not confronted to witnesses in cross examination) to infer prior information and thereby justify acquittal. - HELD THAT: - The Court held that although court records need not be proved in the same manner as extraneous documents, no legal presumption of veracity attaches to the contents of such a reply when it is used as an admission against a witness who was not confronted with it during his evidence. Authority was applied for the principle that an admission, if to be used against the party who made it, requires that the maker be given an opportunity to explain it in cross examination. The trial Court impermissibly relied on the prosecution's earlier reply to infer prior information; the High Court correctly noted that PW5 was not confronted with that reply and that the trial Court's reliance on it was thereby unjustified. [Paras 15, 16, 17, 18]

The trial Court erred in basing acquittal on the reply filed in earlier proceedings which had not been confronted in cross examination; the High Court correctly discounted that material.

Independent witness and reliance on police testimony - Chance recovery - Whether absence of independent witnesses or contradictions in police testimony fatally vitiated the prosecution case. - HELD THAT: - The Court reiterated that lack of independent witnesses is not fatal to the prosecution and that reliable testimony of police witnesses, tested with care, can sustain conviction. It examined the evidence and concluded that the trial Court's findings that no independent witness supported seizure and that police witnesses were contradictory were unreasoned. The testimony of the declared hostile witness (PW1) in fact broadly corroborated the prosecution on crucial facts (stop of vehicle, consent to search, inspection, sample identification). Alleged contradictions between PW2 and PW5 were minor and immaterial; both consistently stated that the polythene bag was inspected after independent witnesses arrived. On reappraisal, the High Court's acceptance of the prosecution version and finding of chance recovery was sustainable. [Paras 19, 20, 21, 22]

The absence of independent witnesses did not vitiate the prosecution case where police testimony and the hostile witness's deposition substantially corroborated seizure; the High Court's acceptance of the prosecution case was justified.

Minimum mandatory sentence and computation of 'commercial quantity' under the NDPS regime - Whether the sentence imposed by the High Court was proper in law, particularly with reference to computation of 'commercial quantity' and minimum mandatory punishment. - HELD THAT: - The Court observed that the High Court had adopted the pure resin content for sentencing, but subsequent authoritative clarification requires that the total weight of the mixture (including neutral matter) be considered for determining 'commercial quantity'. The total seized weight exceeded the notified threshold, attracting the statutory minimum sentence prescribed by the NDPS law at the relevant time. Nevertheless, having regard to the High Court's leniency already shown and the appellant's circumstances and delay, the Supreme Court declined to disturb the two year sentence imposed by the High Court despite noting that as a matter of law the quantity assessed for sentencing should have been the total mixture. [Paras 23, 24, 25]

Although the proper legal standard for 'commercial quantity' is the total weight of the mixture, the Court opted not to disturb the High Court's lenient sentence of two years' rigorous imprisonment.

Final Conclusion: The appeals are dismissed. The High Court was entitled to set aside the trial Court's acquittal for the reasons stated; the conviction and the sentence of two years' rigorous imprisonment with the fine as imposed by the High Court are to be enforced, the appellant's bail bonds are cancelled and the State is directed to take him into custody to serve the remainder of the sentence.

Investigation authorised under Section 17 of Prevention of Corruption Act - irregularity in investigation vs prejudice requirement - non examination of investigating officer and prejudice - proof of disproportionate assets and documentary evidence - conviction for abetment under Section 109 IPC requires proof of ingredients - application of amended criminal sentencing provisions and non retroactivity/Article 20

Investigation authorised under Section 17 of Prevention of Corruption Act - irregularity in investigation vs prejudice requirement - Validity of the investigation conducted by a Police Sub Inspector under the authority of the Superintendent of Police and effect of any irregularity under Section 17 of the Prevention of Corruption Act. - HELD THAT: - The record shows the FIR was registered by the Superintendent of Police who, by a formal written order, authorised PSI Surve to investigate and issued authorization under Section 18 as well. The Court relied on Supreme Court precedents (including Ashok Bhutia and Vinod Kumar Garg) holding that a defect or irregularity in the rank of the investigating officer is an irregularity of procedure and does not vitiate cognizance or trial unless prejudice or miscarriage of justice is established. The appellants did not demonstrate any prejudice arising from the alleged breach of Section 17 or absence of sanction; the issue was not pressed before the trial court and was raised only later in written submissions. In these circumstances the investigation was held not to be invalid and the alleged irregularity did not warrant interference with conviction. [Paras 29, 30, 31, 32, 33]

No invalidity in investigation; alleged breach of Section 17 and absence of sanction do not vitiate trial in absence of demonstrated prejudice.

Non examination of investigating officer and prejudice - Whether non examination of the investigating officer (IO) by the prosecution fatally prejudiced the appellants' defence. - HELD THAT: - The Court examined authorities establishing that non examination of the IO is not ipso facto fatal; prejudice must be shown and depends on the facts of each case. Where the prosecution case is substantially documentary and those documents were admitted without challenge, the IO's testimony may not be necessary. The appellants did not show that they had given any explanation to the IO which was not investigated or that material collected in investigation regarding their defence was withheld. The charts relied upon by the trial court were derived from proved documentary evidence; the IO was not the principal architect whose non examination would cause miscarriage. Given the lack of demonstrated prejudice, non examination of the IO did not impair the prosecution case. [Paras 36, 37, 38, 39, 40]

Non examination of the IO was not fatal; no prejudice shown and prosecution case stands.

Proof of disproportionate assets and documentary evidence - Whether the prosecution proved beyond reasonable doubt that A1 possessed assets disproportionate to his known sources of income. - HELD THAT: - The Court reviewed documentary and oral evidence establishing A1's income from salary and other known sources during the check period, and the documentary proof of receipts, insurance surrenders, sale proceeds and expenditures. The trial court's tabulation of known income (about not exceeding Rs. 10 lakhs) and the finding of actual income/possession and expenditure (substantially higher) were based on voluminous documentary material, much of which was admitted under Section 294 Cr.P.C. and went unchallenged. Specific items such as substantial insurance premiums were supported by the testimony of the LIC branch manager and receipts. Even excluding routine or raid items would not materially alter the large disproportionality. The trial court also considered and rejected the appellants' denials in their Section 313 statements. [Paras 41, 44, 45, 48, 50]

Prosecution proved beyond reasonable doubt that A1 possessed disproportionate assets; conviction of A1 is upheld.

Conviction for abetment under Section 109 IPC requires proof of ingredients - Whether the prosecution proved beyond reasonable doubt that A2 abetted A1's offence and thereby committed an offence under Section 109 IPC read with the Prevention of Corruption Act. - HELD THAT: - The trial court's findings against A2 rested on omissions (non filing of income tax returns), payments from A1's account for A2's business and insurance policies in A2's name, and evidence that the transport vehicle was in A2's name while A1 conducted business operations. The High Court found that such circumstances, at most, raised suspicion that A1 conducted business in A2's name; there was no evidence that A2 knew the vehicle or business acquisitions were funded by illicitly earned monies or that she had the requisite mens rea to abet A1. Mere receipt of payments or failure to file returns does not establish the ingredients of abetment. On the cumulative evidence the prosecution failed to prove A2's culpability beyond reasonable doubt. [Paras 53, 54, 55, 56, 58]

Benefit of doubt to A2; conviction and sentence of A2 under Section 109 IPC set aside.

Application of amended criminal sentencing provisions and non retroactivity/Article 20 - Whether the trial court applied the 2014 amendment increasing minimum sentence retrospectively in sentencing A1, thereby contravening Article 20. - HELD THAT: - The High Court examined the sentencing reasoning and found the trial court did not impose the 2014 amended minimum sentence as a retrospective application. The law in force during the check period provided for minimum one year and maximum five years; the trial court imposed four years' rigorous imprisonment which is within the statutory range applicable to the check period. The court therefore found no breach of Article 20 or retrospective imposition of enhanced punishment. [Paras 59]

No illegitimate retrospective application of the 2014 amendment; sentence of A1 is lawful and not interfered with.

Final Conclusion: Criminal Appeal No.59/2014 filed by Suresh Morajkar is dismissed and his conviction and sentence under the Prevention of Corruption Act are affirmed; he is directed to surrender as ordered. Criminal Appeal No.63/2014 filed by Smt. Sushma Morajkar is allowed and her conviction and sentence under Section 109 IPC read with the Prevention of Corruption Act are set aside. No costs.