TaxTMI Updates e-Newsletter
Oct 30,2021

Release of seized goods under Section 129(1)(a) of the CGST Act, 2017 - detention and release under Section 129(1)(b) of the CGST Act, 2017 - imposition of tax and penalty under Section 129 of the CGST Act - documentary proof produced by driver as basis for treating consignor as owner - unilateral enhancement of invoice value by assessing authority

Release of seized goods under Section 129(1)(a) of the CGST Act, 2017 - documentary proof produced by driver as basis for treating consignor as owner - Interim release of goods for which invoices were produced by the driver on payment of tax and penalty under Section 129(1)(a) of the CGST Act. - HELD THAT: - The Court granted an interim measure directed to respondents to release goods of the petitioners in respect of the invoices that were produced by the driver at the time of interception on the condition that tax and penalty be paid under Section 129(1)(a) of the CGST Act. The Court recorded the petitioners' contention that production of invoices entitled them to be treated as owners of the goods for those invoices and therefore to be governed by the release mechanism under Section 129(1)(a) rather than Section 129(1)(b). The order is interlocutory and provisional: respondents were afforded three weeks to file a counter-affidavit and petitioners may file a rejoinder within two weeks thereafter. The Court confined its present direction to interim release upon payment and did not finally decide the merits of the challenge to the appellate authority's affirmation or the contention regarding valuation or alleged unilateral enhancement of invoice value by the authority.

Goods corresponding to the invoices produced by the driver shall be released on payment of tax and penalty under Section 129(1)(a) of the CGST Act as an interim measure; other goods to be released in terms of the appellate order; on such payments the seized vehicle shall be released.

Final Conclusion: Interim directions issued: respondents given three weeks to file counter-affidavit; goods for which invoices were produced by the driver released on payment of tax and penalty under Section 129(1)(a) of the CGST Act; other goods to be released in accordance with the appellate order; seized vehicle to be released on payment as directed.

Stay of impugned order - conditional deposit as pre-condition for grant of interim relief under Section 129(1)(a) of the IGST Act - release of seized goods and vehicles on compliance with conditions - security by non-cash instrument instead of cash or bank guarantee - challenge to enhancement of assessed value by Mobile Squad for want of reasons

Stay of impugned order - conditional deposit as pre-condition for grant of interim relief under Section 129(1)(a) of the IGST Act - release of seized goods and vehicles on compliance with conditions - security by non-cash instrument instead of cash or bank guarantee - Interim stay of the appellate order and release of seized goods and vehicles upon specified compliance by the petitioner. - HELD THAT: - The Court noted the petitioner's contention that the Mobile Squad's order enhanced the value of goods without stating grounds and that the officer had recorded no violation of law by the petitioner, yet the appellate authority imposed tax and penalty. In view of the petitioner's undertaking to deposit 50% of the amount assessed by the appellate authority under Section 129(1)(a) of the IGST Act (after adjusting amounts already deposited) within four weeks, and to furnish security other than cash or a bank guarantee to the satisfaction of the competent authority for the remaining 50%, the Court ordered that, on such compliance, the impugned appellate order dated 12.10.2021 shall remain stayed and the seized goods and vehicles shall be released. The order conditions interim relief on the specified deposit and non-cash security, balancing the exigencies of enforcement with the petitioner's grievance about lack of reasons for enhancement of value.

On deposit of 50% of the assessed amount within four weeks and furnishing non-cash security for the balance to the satisfaction of the competent authority, the impugned order dated 12.10.2021 is stayed and the seized goods and vehicles are to be released.

Procedural timetable for filing of counter and rejoinder affidavits - Time granted to respondents to file counter-affidavit and to the petitioner to file rejoinder. - HELD THAT: - The Court granted the respondents four weeks to file their counter-affidavit and permitted the petitioner to file a rejoinder affidavit, if any, within two weeks thereafter. This timeline was ordered to facilitate substantive adjudication after the interim directions have been complied with and to ensure orderly conduct of further proceedings.

Respondents granted four weeks to file counter-affidavit; rejoinder, if any, to be filed within two weeks thereafter.

Final Conclusion: The petition is disposed of by directing conditional interim relief: upon the petitioner depositing 50% of the assessed amount within four weeks and furnishing non-cash security for the balance to the satisfaction of the competent authority, the appellate order dated 12.10.2021 shall remain stayed and the seized goods and vehicles released; respondents permitted four weeks to file a counter-affidavit and the petitioner two weeks thereafter for rejoinder.

Form GST TRAN-1/TRAN-2 filing and electronic upload - compliance under Section 140 of the CGST Act and Rule 117 of the CGST Rules - jurisdictional authority reporting and forwarding to GST Network - opportunity to correct, revise or re-revise physical TRAN forms - no rejection for submission outside time - GST Network to upload or permit electronic upload

Form GST TRAN-1/TRAN-2 filing and electronic upload - compliance under Section 140 of the CGST Act and Rule 117 of the CGST Rules - jurisdictional authority reporting and forwarding to GST Network - no rejection for submission outside time - GST Network to upload or permit electronic upload - Whether the petitioner is entitled to direction for physical filing and electronic uploading of Form GST TRAN-2 in terms of the order passed in Writ Tax No. 477 of 2021 dated 15.09.2021. - HELD THAT: - The Court applied the directions recorded in the judgment dated 15.09.2021 in Writ Tax No. 477 of 2021 and allowed the present petition on identical terms. The procedure mandated requires the petitioner to first file the physical Form GST TRAN-1/TRAN-2 before the jurisdictional authority within the period directed by the Court; the jurisdictional authority must report in writing regarding compliances contemplated under Section 140 of the CGST Act and Rule 117 of the CGST Rules. If no objection is raised, the authority shall arrange for electronic submission/revision of the Form. If objections arise, a limited opportunity to correct, revise or re-revise the physical form must be given and reported. Upon completion, the jurisdictional authority shall forward the physical form and its report to the GST Network, with copy to the petitioner; forms submitted in compliance with the order shall not be rejected on the ground of having been filed outside time. The GST Network is directed to either upload the TRAN form within two weeks of receipt or allow the petitioner a reasonable opportunity to upload electronically. The present petition is disposed of by directing compliance with these measures, with the petitioner required to make the required compliance within one week from the date of the order.

Petition allowed on the terms and directions laid down in the judgment dated 15.09.2021 in Writ Tax No. 477 of 2021; petitioner to comply within one week.

Final Conclusion: Writ petition allowed by applying the directions of the earlier judgment dated 15.09.2021; petitioner directed to file the physical TRAN form and follow the prescribed reporting, correction and forwarding procedure so that the GST Network uploads or permits electronic upload; compliance to be completed within one week.

Interim restraint on payment of refunds - investigatory jurisdiction and territorial limits of tax authorities - balance of equities in interlocutory relief - conduct of concurrent investigations by Central and State tax authorities

Interim restraint on payment of refunds - balance of equities in interlocutory relief - Whether refunds to the petitioners should be restrained pending further orders - HELD THAT: - The Court observed that, in the interim, investigation by DGGI, Ahmedabad has been stayed and that no effective investigation is taking place. To balance the equities between the parties while the petitions remain pending, the Court directed an interlocutory measure to prevent possible prejudice arising from release of refunds pending final adjudication. The direction is provisional and intended to preserve the status quo until the matters are further heard and decided. [Paras 8]

Till further orders, no refunds shall be released to the petitioners.

Conduct of concurrent investigations by Central and State tax authorities - investigatory jurisdiction and territorial limits of tax authorities - Proceedings and further hearing directions in the writ petitions - HELD THAT: - The Court declined to decide the contested question of law concerning the entitlement of the Ahmedabad Unit of GST Intelligence to investigate notwithstanding actions by State GST authorities in a jurisdictional vacuum; it observed that the question of law cannot be determined without consideration of relevant facts. The Court therefore listed the matters for further hearing and directed that the petitioners seeking to argue facts be permitted to do so on the next date fixed by the Court. [Paras 5, 6, 7]

Matters listed for further hearing on 22nd November, 2021 for arguments by the petitioners; factual material will be considered before adjudicating the legal question of investigatory jurisdiction.

Final Conclusion: Interim order: pending further orders and fuller hearing on the questions of investigatory jurisdiction and related factual contentions, the Court has directed that no refunds shall be released to the petitioners and has listed the matters for further hearing on 22nd November, 2021.

Absence of E-way bill and validity of seizure - application of Division Bench precedent - seizure under Section 129(3) of UPGST Rules, 2017 - quashing of order passed under Section 107 of UP GST Act - refund of amounts deposited

Absence of E-way bill and validity of seizure - seizure under Section 129(3) of UPGST Rules, 2017 - application of Division Bench precedent - Impugned order sustaining seizure or consequential proceedings was impermissible in view of the Division Bench decision that absence of an E-way bill could not justify seizure for the period 1.2.2018 to 31.3.2018. - HELD THAT: - The High Court found the present petition to be covered by the Division Bench decision in Writ Tax No. 356 of 2018 (M/s Loverly Traders v. State of U.P.), which held that the condition of an E-way bill was not applicable for the period 1.2.2018 to 31.3.2018 and that absence of the E-way bill could not be a reason to seize goods under the provisions then invoked. Applying that precedent, the court held that the impugned order could not stand and followed the reasoning and outcome of the cited Division Bench order. The court therefore allowed the writ petition and quashed the impugned order dated 1.5.2019, directing consequential relief.

Writ petition allowed; impugned order quashed and consequential proceedings dropped in accordance with the Division Bench precedent.

Refund of amounts deposited - quashing of order passed under Section 107 of UP GST Act - Direction for refund of any amounts deposited by the petitioner as consequence of the quashed order. - HELD THAT: - Having quashed the impugned order, the Court directed that any amount deposited by the petitioner pursuant to that order shall be refunded in accordance with law. The direction is consequential to the quashing and follows established practice of restoring parties to their pre-deprivation position where seizures or orders are set aside.

Amount, if any, deposited shall be refunded in accordance with law.

Final Conclusion: The writ petition was allowed by applying the Division Bench precedent that absence of an E-way bill did not justify seizure for the period 1.2.2018 to 31.3.2018; the impugned order dated 1.5.2019 was quashed and any amounts deposited are to be refunded in accordance with law.

Principles of natural justice - ex parte order - limitation - quashing of administrative order - remand for fresh decision on merits - deposit as pre-condition for appeal - stay of coercive action pending proceedings

Principles of natural justice - ex parte order - quashing of administrative order - Validity of the impugned assessment and appellate orders challenged as ex parte and passed without affording adequate hearing or stating reasons. - HELD THAT: - The Court found that both the assessment order and the appellate order were ex parte and did not disclose sufficient reasons nor afforded the petitioner adequate opportunity of hearing. The bench held that an order passed in violation of principles of natural justice and devoid of decipherable reasons is legally infirm. For these reasons the Court exercised its jurisdiction to interfere despite available statutory remedies and quashed the impugned orders.

Impugned orders set aside on account of violation of natural justice and absence of reasons.

Limitation - remand for fresh decision on merits - Whether the appeal was properly rejected as barred by limitation and the consequence of such rejection. - HELD THAT: - While the appellate order rejected the appeal on grounds of delay, the Court observed that the delay was sufficiently explained in light of COVID-19 restrictions. Rather than adjudicating the limitation point finally, the Court remitted the matter to the Assessing Authority/competent forum for fresh adjudication on merits after complying with procedural fairness. The Court emphasised that all issues on merits remain open for decision by the authority.

Matter remanded to the Assessing Authority for fresh decision on merits after affording opportunity of hearing; limitation issue to be considered in that process.

Deposit as pre-condition for appeal - stay of coercive action pending proceedings - Interim measures to be applied during remand proceedings including deposits, freezing/defreezing of bank accounts and prohibition of coercive steps. - HELD THAT: - The Court accepted the petitioner's statement that ten per cent of the total amount (pre-condition for hearing of the appeal) has been deposited and directed that if not deposited it shall be made before the next date. Additionally, the petitioner undertook to deposit a further ten per cent of the demand within four weeks. The deposit was ordered to be without prejudice to rights of parties and refundable if found excess. The Court directed immediate de-freezing/de-attaching of bank accounts, and ordered that no coercive steps be taken against the petitioner during pendency of the proceedings.

Interim directions issued: specified deposits to be made, bank accounts to be defrozen if attached, and prohibition of coercive action pending fresh adjudication.

Remand for fresh decision on merits - quashing of administrative order - principles of natural justice - Directions governing the conduct and timeline of the remanded proceedings. - HELD THAT: - The Court directed the Assessing Authority to afford adequate opportunity to the parties to place on record all essential documents, to pass a speaking order assigning reasons, and to decide the matter on merits expeditiously, preferably within two months from the petitioner's appearance. The petitioner undertook to cooperate and avoid unnecessary adjournments. The Court left all substantive issues open and preserved liberty to the parties to pursue available remedies.

Assessing Authority to decide afresh on merits after hearing, furnish reasons in a speaking order, and preferably conclude proceedings within two months; parties given liberty to challenge the future order.

Final Conclusion: The High Court quashed the ex parte assessment and appellate orders for breach of natural justice and lack of reasons, remitted the matter for fresh adjudication on merits, granted interim reliefs including specified deposits and de-freezing of bank accounts, restrained coercive action during pendency, and directed expeditious, speaking decision by the authority while keeping substantive issues open and preserving parties' remedies.

Release of seized goods - bank guarantee as condition for release - adjustment of deposited amount - continuation of investigation - power to issue show cause notice

Release of seized goods - bank guarantee as condition for release - adjustment of deposited amount - Release of seized Areca Nuts subject to furnishing of a bank guarantee for the balance quantity, without permitting adjustment of the earlier deposit against that quantity. - HELD THAT: - The parties proposed and the Court, with their consent, directed release of the entire seized quantity of 48.36 lakhs kgs of Areca Nuts. The Court recorded that eighteen suppliers were found genuine and 17.12 lakhs kgs were tax paid. Respondents stated they would release goods on receipt of a bank guarantee but would not permit adjustment of the Rs. 1.5 crores paid by the petitioner against the remaining seized goods because that amount had been applied by respondents to goods already sold by the petitioner. Balancing these positions, the Court ordered release of the seized quantity subject to the petitioner furnishing a bank guarantee, without prejudice to the respondents' stance on adjustment, fixing the guarantee for 31.24 lakhs kgs at the rate specified by the respondents. [Paras 4, 6, 7]

Seized goods released; petitioner to furnish bank guarantee for 31.24 lakhs kgs @ Rs. 274/- per kg; earlier deposit not adjusted against that balance as per respondents, and release ordered without prejudice to parties' rights.

Continuation of investigation - power to issue show cause notice - Department's entitlement to continue investigation and to issue show cause notice remains unaffected by the order for release of goods. - HELD THAT: - The Court expressly clarified that the direction for release of seized goods is without prejudice to the Department's statutory rights. The respondents retain the authority to carry on investigation and to issue a show cause notice if the material warrants such action. The release order does not curtail or preclude further adjudicatory steps by the Department. [Paras 8]

Department permitted to continue investigation and to issue show cause notice if warranted.

Final Conclusion: Writ petition disposed of: seized goods released on furnishing of the directed bank guarantee for the specified balance quantity; the Department's investigatory and adjudicatory rights remain unimpaired.

Order under Section 129(3) of the CGST Act, 2017 - certified copy - communication/service of order - technical glitch in uploading electronic order - filing of statutory appeal within prescribed period reckoned from date of issuance of certified copy

Order under Section 129(3) of the CGST Act, 2017 - certified copy - technical glitch in uploading electronic order - communication/service of order - filing of statutory appeal within prescribed period reckoned from date of issuance of certified copy - Direction to supply a fresh certified copy of the impugned order which was not uploaded on the portal due to a technical glitch and grant of liberty to the petitioner to seek legal redressal thereafter. - HELD THAT: - Petitioner complained that the order passed under Section 129(3) of the CGST Act was not uploaded on the portal and a certified copy was not furnished despite request. The respondent's counsel, on instructions from the Assistant Commissioner (Enforcement), accepted that uploading had failed due to a technical glitch and undertook to issue a certified copy. The petitioner indicated that issuance of a certified copy and permission to file an appeal within the appropriate limitation period would substantially address the grievance. In view of the respondent's undertaking and without deciding the substantive merits, the Court disposed of the petition by directing issuance of a fresh certified copy and by permitting the petitioner to initiate appropriate appellate proceedings within the time permitted under law, reckoned from the date of issuance of the fresh certified copy. The Court thereby remedied the procedural deficiency in service/availability of the order while refraining from adjudicating the substantive challenge to the order itself. [Paras 4, 6, 7]

Respondent to issue the certified copy of the impugned order (undertaken to be issued within a week) and petitioner granted liberty to file appropriate legal proceedings within the period of limitation to be reckoned from the date of issuance of that certified copy.

Final Conclusion: The petition is disposed of on the respondent's undertaking to issue a fresh certified copy of the impugned order; no adjudication on merits was undertaken and the petitioner is permitted to seek appellate or other legal remedies within the time prescribed, to be counted from the date of issuance of the certified copy.

Tax Deduction at Source (TDS) and "income comprised therein" - Applicability of Section 194J - Assessee in default under Section 201 and levy of interest under Section 201(1A) - Remand for factual re examination whether payment includes service charges - Relevance of recipient's taxability / effect of registration under Section 12A

Remand for factual re examination whether payment includes service charges - Tax Deduction at Source (TDS) and "income comprised therein" - Applicability of Section 194J - Assessee in default under Section 201 and levy of interest under Section 201(1A) - Relevance of recipient's taxability / effect of registration under Section 12A - The question whether the payments of Rs.1225 Crores by the assessee to KIADB include service charges (and consequently whether TDS under Section 194J and liability under Section 201/201(1A) arises) is remitted to the Tribunal for fresh consideration and fact finding. - HELD THAT: - The Court observed that the determinative question is factual and goes to the root of liability for deduction of tax at source - namely whether the amount paid by the assessee to KIADB comprises service charges that would represent "income comprised therein" attracting Section 194J. The Court reviewed authorities establishing that TDS provisions apply only where a sum paid embodies income of the payee (the "income comprised therein" test) and that where the right to payment is disputed or the amount is not finally an income of the recipient, TDS obligations may not arise. The appellants relied on KIADB's accounts showing the amount as a deposit and on ongoing governmental deliberations on the rate of service charges; the revenue relied on audit notes and prior modifications of service charge rates and assessments of KIADB. Given conflicting factual material in the record (including Annexure D1 and Note No.29 to KIADB's accounts) and the Tribunal's role as the last fact finding forum, the Court declined to answer the substantial legal questions on the existing record and directed the Tribunal to re examine whether the payments include service charges and decide consequential TDS/default/interest issues, keeping open all contentions and considering the legal principles culled from precedents on "income comprised therein", Section 194J, and Sections 201/201(1A). [Paras 20, 21, 22]

Matter remanded to the Tribunal for reconsideration of whether the payments include service charges and, on that basis, for fresh adjudication of TDS liability and related defaults/interest, with all rights and contentions kept open.

Final Conclusion: Appeals allowed in part; the Tribunal's common order dated 05.08.2016 is set aside and the matter relating to assessment years 2011 12, 2012 13 and 2013 14 is remanded to the Tribunal for reconsideration and decision in accordance with law, expeditiously, keeping open all rights and contentions of the parties.

Search and seizure authorization under Section 132(1) - Clarificatory retrospective amendment - Search warrant issuance by Additional Director/Additional Commissioner - Assessment under Section 153A in absence of seized incriminating material - Nexus requirement between seized material and interference with completed assessments

Search and seizure authorization under Section 132(1) - Clarificatory retrospective amendment - Search warrant issuance by Additional Director/Additional Commissioner - Validity of the amendment to Section 132(1) conferring or clarifying authorization powers on Additional Directors/Additional Commissioners with retrospective effect - HELD THAT: - The Court accepted the Department's explanation and the CBDT's explanatory note that the amendment inserting Additional Director/Additional Commissioner in clause (B) of subsection (1) of Section 132 is clarificatory and declaratory of the position that such officers always had power to issue authorisations. The clarification in the CBDT note was treated as sufficient to negative the petitioner's Article 14 and retrospective-vires challenge to the amendment. Consequently the challenge to the amendment to Section 132(1) was negatived. [Paras 11]

Challenge to the retrospective clarificatory amendment to Section 132(1) was rejected; the amendment held to be clarificatory and valid.

Assessment under Section 153A in absence of seized incriminating material - Nexus requirement between seized material and interference with completed assessments - Validity of initiation of assessment proceedings under Section 153A where no incriminating material was found or seized during search - HELD THAT: - The Court held that Section 153A cannot be applied mechanically merely because a search has taken place. Relying on established High Court precedents, the Court emphasised that while notice under Section 153A must be issued after a search, assessments under that provision cannot be arbitrary and must have relevance or nexus with seized material. Where there is an absence of any incriminating material (the Panchnama recorded 'NIL'), there was no justification for initiating assessment proceedings under Section 153A. Completed assessments can only be reopened under Section 153A on the basis of incriminating material unearthed during the search or other post-search material having nexus with the seized material. [Paras 12, 13, 15, 17]

Notices issued under Section 153A read with Section 143(3) were quashed because no incriminating material was found; initiation of assessment proceedings under Section 153A in these circumstances was unjustified.

Final Conclusion: The Court upheld the retrospective clarificatory amendment to Section 132(1) but quashed the Section 153A/143(3) notices issued for the assessment years 2002-2003 and 2008-2009 on the ground that no incriminating material was seized; writ petitions allowed, no order as to costs.

Reopening of assessment - reassessment under Section 147 of the Income Tax Act - reason to believe - change of opinion - tangible material - application of mind - escapement of income

Reopening of assessment - reason to believe - change of opinion - tangible material - application of mind - Validity of the notice dated 16th September 2013 under Section 148 read with Section 147 seeking reopening of assessment for AY 2009-10 - HELD THAT: - The Court examined whether the Department possessed new material or only formed a fresh opinion on the same materials which were earlier examined during the original assessment. Under the test explained in Kelvinator of India Limited, reopening under Section 147 is permissible only if there is "reason to believe" founded on tangible new material and not merely a change of opinion. The material relied upon by the Department consisted of the accounts and documents already produced and considered in the original assessment proceedings (including responses to questionnaire and the assessment order). The Assessing Officer's re-examination of those same materials to dispute the deduction claimed amounted to a mere change of opinion; there was no disclosure of new material or information which could not have been earlier examined. The Court therefore held that the pre-condition for reopening was not satisfied and the reason to believe recorded by Opposite Party No.1 was based on a change of opinion rather than fresh tangible material. Applying the foregoing legal principle to the facts, the proposed reassessment was held to be unsustainable and liable to be quashed. [Paras 9, 12, 13, 17]

Notice dated 16th September 2013 and all proceedings consequent thereto quashed as being based on mere change of opinion and not on new material.

Final Conclusion: Writ petition allowed; the reassessment notice dated 16th September 2013 under Section 148/147 for AY 2009-10 and all proceedings pursuant thereto are quashed; no order as to costs.

Mandatory duty to file return under Section 139(1) - prosecution for failure to file return - proviso to Section 276CC not available after detection/notice under Section 142/148 - presumption as to culpable mental state under Section 278E - quashing of criminal prosecution is an exception and court must be circumspect

Mandatory duty to file return under Section 139(1) - prosecution for failure to file return - presumption as to culpable mental state under Section 278E - Criminal proceedings under Sections 276CC and 276C(1) in EOCC.No.121/2016 for Assessment Year 2013 - 2014 should be quashed or allowed to proceed. - HELD THAT: - The Court applied binding precedent of the Hon'ble Supreme Court holding that filing a return within the stipulated period is a mandatory duty and that the proviso to Section 276CC does not apply once the failure to file is detected and notices under Section 142 or 148 have been issued. The statutory presumption under Section 278E permits inference of culpable mental state in prosecutions requiring mens rea, placing on the accused the burden of proving absence of such state. The petitioner's explanation that the mismatch in Form 26AS arose from the erstwhile employer and that tax (including self-assessment tax) was paid does not negate the need for trial because the Department alleges unexplained high-value transactions and delayed replies to notices; such factual disputes and the defence of absence of mens rea must be tested at trial. Reliance on judgments quashing prosecutions was distinguished because those decisions did not engage the statutory presumption under Section 278E or were cases where taxes/dues were paid but facts differed. Given these principles, interference with initiation of criminal proceedings would be inappropriate; quashing is an exception and the matter must proceed to trial where the accused may adduce evidence to rebut the presumption of culpable mental state. [Paras 25, 26, 27, 29, 30]

Criminal Original Petition dismissed; EOCC.No.121/2016 to proceed to trial before the Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai, with trial directed to commence and be completed by 31.01.2022.

Final Conclusion: Petition to quash the criminal proceedings under Sections 276CC and 276C(1) for Assessment Year 2013 - 2014 dismissed; trial directed to proceed (to be completed by 31.01.2022).

Failure to grant personal hearing / virtual hearing - compliance with the procedure under Section 144B(1)(xvi) - draft assessment order - opportunity to be heard before making additions - addition under Section 68

Failure to grant personal hearing / virtual hearing - opportunity to be heard before making additions - Whether the assessment order is vitiated by denial of personal/virtual hearing sought by the petitioner. - HELD THAT: - The Court found that the petitioner had requested a personal/VC hearing during the assessment proceedings and a hearing was fixed, but the VC could not be held due to technical problems. The impugned order records that no hearing was granted despite the request. The absence of an effective opportunity for personal hearing amounted to a failure to afford the petitioner the chance to be heard, rendering the assessment proceedings defective. For this reason the Court concluded that the impugned order stands vitiated on this ground and requires setting aside. [Paras 2, 5]

Assessment order set aside for failure to grant the requested personal/virtual hearing; relief prayed under clauses (a) and (c) granted.

Compliance with the procedure under Section 144B(1)(xvi) - draft assessment order - opportunity to be heard before making additions - Whether the assessment order is vitiated for non-issuance of a draft assessment order as required under the assessment procedure. - HELD THAT: - The Court examined the notices relied upon by the Revenue and held that the notice dated 18th February 2021 was a request for information and documents and could not be treated as the statutorily mandated draft assessment order. The affidavit filed on behalf of the Revenue asserting that the show cause notice amounted to a draft assessment order was rejected as untenable. Because a draft assessment order was not issued in accordance with the statutory requirement, the petitioner was deprived of the procedural protection intended by that requirement and the assessment was set aside on this ground as well. [Paras 3, 5]

Assessment order quashed for non-compliance with the draft assessment order requirement under the assessment procedure.

Addition under Section 68 - opportunity to be heard before making additions - Whether additions under Section 68 were made without adequate notice or opportunity to file objections. - HELD THAT: - The petition alleged, and the Court accepted, that the specific additions under Section 68 were not mentioned in the alleged draft assessment order or in any of the notices issued during the assessment proceedings, and that no opportunity was given to the petitioner to object to those additions. The Revenue's affidavit did not deny the absence of reference to the proposed additions in the notices; it addressed the merits of the additions but did not show that the petitioner was put on notice. The Court emphasised that issuance of a show cause notice is a preliminary step necessary to enable a party to meet the case against it and, in the absence of such notice regarding the additions, the assessment is procedurally defective and liable to be set aside. [Paras 4, 5]

Additions made under Section 68 set aside for being imposed without prior notice or opportunity to the petitioner.

Final Conclusion: The writ petition is allowed: the assessment order dated 24th May 2021 for A.Y.-2018-2019 is quashed and set aside on the grounds of failure to grant the requested personal/virtual hearing, non-issuance of the draft assessment order as required by the procedure, and imposition of additions under Section 68 without prior notice or opportunity; respondents are restrained from taking action in furtherance of the impugned order. Petition disposed of with no order as to costs.

Mandatory procedure under Section 144B - faceless assessment - show cause notice with draft assessment order - communications through the National Faceless Assessment Centre - assessment non est for non-compliance

Mandatory procedure under Section 144B - show cause notice with draft assessment order - communications through the National Faceless Assessment Centre - Whether the procedure prescribed by Section 144B for faceless assessment, including service of a show cause notice with the draft assessment order through the National Faceless Assessment Centre, was complied with. - HELD THAT: - The assessment order is silent as to issuance of any show cause notice with a draft assessment order and the petitioner denies receipt of any such draft. The affidavit filed for respondents asserting issuance by a Regional E-Assessment Unit is inadequate because Section 144B(5) mandates that all communications for faceless assessment must be through the National Faceless Assessment Centre, and the record does not demonstrate compliance with that requirement. The Court finds the provisions of Section 144B to be mandatory, noting subsection (9) makes assessment not in accordance with Section 144B 'non est'. Because the material does not show the prescribed procedure - including opportunity to show cause when a variation prejudicial to the assessee was proposed - was followed, the procedure under Section 144B was not complied with. [Paras 3, 4, 6]

Procedure under Section 144B for faceless assessment, including service of show cause notice with the draft assessment order through the National Faceless Assessment Centre, was not complied with.

Assessment non est for non-compliance - faceless assessment - Consequences of non-compliance with Section 144B in respect of the impugned assessment, demand and penalty notices dated 19th April 2021. - HELD THAT: - Given the mandatory nature of Section 144B and the failure to follow its procedure, the assessment order, demand notice and penalty notice dated 19th April 2021 for the stated assessment year are held to be non est. The Court quashed and set aside those orders but permitted respondents to take steps in accordance with law to make faceless assessment afresh, observing no comments were made on merits of the case. [Paras 6, 7]

Impugned assessment order, demand notice and penalty notice dated 19th April 2021 are quashed and set aside as non est; respondents may reinitiate faceless assessment following the statutory procedure.

Final Conclusion: The writ petition is allowed: the assessment order, demand notice and penalty notice dated 19th April 2021 for A.Y.-2018-2019 are quashed as non est for failure to follow the mandatory procedure under Section 144B; respondents are at liberty to proceed afresh in accordance with law, and no observation is made on the merits.

Certificate under Section 197 - withholding tax rate on dividend - Double Taxation Avoidance Agreement - Most Favoured Nation clause - application of treaty rate via Protocol - binding precedent

Certificate under Section 197 - withholding tax rate on dividend - Double Taxation Avoidance Agreement - Most Favoured Nation clause - application of treaty rate via Protocol - Petitioner entitled to a certificate under Section 197 permitting deduction of tax at 5% on dividend under the India-Netherlands DTAA read with the Protocol / MFN clause. - HELD THAT: - The petitioner, a Netherlands company and majority shareholder of an Indian company proposing to distribute dividend in Financial Year 2021-22, applied under Section 197 for a certificate authorising withholding at 5% on dividend income in terms of the India-Netherlands DTAA read with the Protocol which contains an MFN clause. The Assessing Officer had issued a certificate at 10%. The Court observed that the question is covered by the earlier decisions of this Court in Concentrix Services Netherlands B.V. and Nestle SA, which apply the MFN/Protocol to permit the lower 5% treaty rate where India has agreed a lower dividend withholding rate with other OECD countries. The respondents conceded that the issue is squarely covered by the cited precedents. In view of the binding effect of those decisions and the respondents' admission, the impugned order and certificate were set aside and the AO was directed to issue a fresh certificate under Section 197 indicating the applicable rate of tax on the dividend as 5% under the India-Netherlands DTAA. [Paras 5, 6]

Impugned order and certificate set aside; directing issuance of a fresh certificate under Section 197 stating tax on dividend at 5% under the India-Netherlands DTAA read with the Protocol/MFN clause.

Final Conclusion: Writ petition allowed; the Assessing Officer's order and certificate are quashed and a fresh certificate under Section 197 is to be issued declaring the applicable withholding rate on the dividend as 5% under the India-Netherlands DTAA (Protocol/MFN), in accordance with this Court's precedents.

Reopening of assessment under Section 147 - change of opinion - failure to disclose fully and truly material facts necessary for assessment - actuarial valuation and actuarial surplus in life insurance business - overriding computation provisions applicable to life insurance business

Reopening of assessment under Section 147 - change of opinion - failure to disclose fully and truly material facts necessary for assessment - Validity of reopening the assessment for AY 2003-2004 under Section 147 on the ground that income had escaped assessment. - HELD THAT: - The Court accepted the factual findings of the ITAT that the actuarial report (including the negative reserve) had been furnished during the original assessment proceedings and that the Assessing Officer had considered the actuarial valuation when making the original assessment. Applying the principle that reopening is impermissible where it rests on a mere change of opinion rather than on tangible material showing non disclosure, the Court found no material to demonstrate a failure by the assessee to disclose fully and truly all material facts necessary for assessment. The Court relied on the precedent cited (Ananta Landmark) to hold that a re opening based on a different view of computation or on reassessment of the correctness of actuarial treatment is a change of opinion and not a valid basis for invoking Section 147. Having found that the Assessing Officer did not place any fresh tangible material to support a belief that income had escaped assessment, the reopening was held to be invalid. [Paras 6, 8, 9]

Proceedings under Section 147 were not valid; reopening was based on change of opinion and not on failure to disclose material facts.

Actuarial valuation and actuarial surplus in life insurance business - failure to disclose fully and truly material facts necessary for assessment - Whether the Assessing Officer produced tangible material to show understatement of income by omission of the negative reserve from actuarial surplus. - HELD THAT: - The Court endorsed the ITAT's finding that the Assessing Officer did not bring any tangible material on record to indicate that the assessee had omitted or failed to disclose material facts relevant to computation of income. The actuarial form showing the negative reserve was part of the material before the Assessing Officer at the time of original assessment, and the Assessing Officer had in fact referred to the actuarial report dated 31/3/2003 in the assessment order. In these circumstances, the Court concluded that the Assessing Officer's action amounted to reassessment by a different view of the material rather than discovery of new material justifying reopening under Section 147. [Paras 8, 9]

No tangible material was produced to show omission or failure to disclose; addition based on negative reserve could not be sustained as a basis for reopening.

Final Conclusion: Appeal dismissed. The High Court upheld the ITAT's conclusion that the reassessment under Section 147 was invalid because it was founded on a mere change of opinion and absence of tangible material showing non disclosure; consequential merits based question was not entertained.

Quasi-judicial function - disciplinary proceedings for quasi-judicial orders - mere existence of a second view not a ground for disciplinary action - requirement of a speaking order - remand for fresh hearing - expedited disposal of proceedings

Quasi-judicial function - disciplinary proceedings for quasi-judicial orders - mere existence of a second view not a ground for disciplinary action - requirement of a speaking order - remand for fresh hearing - Validity of the Tribunal's order which declined to examine whether disciplinary proceedings could be initiated for an order passed in quasi judicial capacity and which did not contain reasons. - HELD THAT: - The Tribunal's brief rationale merely observed that initiation of disciplinary proceedings in respect of quasi judicial orders depends on whether the department can point to serious infirmity, illegality or extraordinary features, and that a mere second view is insufficient; however, the Tribunal did not apply these principles to the facts nor furnish reasoning on whether the petitioner's assessment order was passed in good faith or fell within exceptions permitting disciplinary action. Given the serious consequences of the charge memo and the Tribunal's non speaking disposition, the High Court found the impugned order unsatisfactory. The matter is set aside and remitted so that the Tribunal may issue a speaking order after hearing the parties and examine, with reasons, whether the charge against the petitioner (arising from assessment proceedings relating to AY 2009 2010) is tenable in view of the protections attendant upon quasi judicial adjudication and the limits on disciplinary action where only a second view exists. [Paras 4, 5]

Impugned order set aside; matter remitted to the Tribunal for fresh hearing and for passing a speaking order after affording opportunity to the parties.

Expedited disposal of proceedings - remand for fresh hearing - Direction as to the timeline and interim procedural steps following remand. - HELD THAT: - The Court noted the delay in serving the charge memo (served nearly a decade after the assessment order) and the petitioner's concern about prospective promotion. To avoid prejudice and to expedite resolution, the Court directed the petitioner to appear before the Registrar on a specified date for early placement before the Bench, required the Tribunal to issue notice and hear the parties afresh, and recorded an expectation that the Tribunal would endeavour to conclude the proceedings by December 2021. The Court also preserved the petitioner's liberty to pursue further remedies against any adverse order passed by the Tribunal. [Paras 6]

Tribunal to list the matter at the earliest (as directed) and endeavour to conclude proceedings by December 2021; petitioner granted expedited listing and liberty to pursue remedies thereafter.

Final Conclusion: The High Court set aside the Tribunal's non speaking order and remanded O.A. No.643/2021 for fresh hearing and a speaking order on merits (relating to AY 2009 2010), directed expedited listing and an endeavour to conclude the proceedings by December 2021, and preserved the petitioner's right to seek further remedies as per law.

Revisionary powers under Section 263 - Amortisation of certain preliminary expenses under Section 35D - Interpretation of the phrase "being" in Explanation to Section 35D(3) - Distinction between extension and expansion of industrial undertaking - Capital employed/cost of project for computing limits under Section 35D(3)

Revisionary powers under Section 263 - Amortisation of certain preliminary expenses under Section 35D - Validity of exercise of revisional jurisdiction under Section 263 in assessment year 2008-09 when the claim under Section 35D had been allowed in the first year of the block period (assessment year 2007-08) and the first-year order remained undisturbed at the material time. - HELD THAT: - The Court applied the principle in Shasun Chemicals & Drugs Ltd. that once a claim under Section 35D has been accepted in the initial year and the clock for the block period has started, benefit granted in the first year cannot be withdrawn in subsequent years without disturbing the decision in that initial year. Post-facto actions taken in the initial year (such as Section 154 action) which occurred after initiation of revision do not validate an otherwise impermissible exercise of powers under Section 263. The Court also relied on precedents holding that where an assessing officer has adopted a plausible view in earlier years, revisional powers are not warranted to displace that view for later years absent disturbance of the initial year's order. On that basis the Court held the Commissioner's exercise of revision for AY 2008-09 was not sustainable. [Paras 12]

Revisional order under Section 263 in respect of AY 2008-09 set aside; issue answered in favour of the assessee.

Amortisation of certain preliminary expenses under Section 35D - Capital employed/cost of project for computing limits under Section 35D(3) - Whether share premium collected on issue of share capital could be taken as part of 'capital employed' for allowing deduction under Section 35D. - HELD THAT: - Both parties accepted that this question has been considered by the Supreme Court in Berger Paints India Ltd., which was held in favour of the Revenue. The High Court followed that precedent and answered the question accordingly in favour of the Revenue. [Paras 13]

Claim that share premium forms part of 'capital employed' for Section 35D disallowed; issue answered against the assessee.

Interpretation of the phrase "being" in Explanation to Section 35D(3) - Distinction between extension and expansion of industrial undertaking - Cost of project for Section 35D(3) - Whether cost of acquisition of companies (by acquiring 100% subsidiary shares) qualifies as 'cost of the project' or fixed assets 'being' acquired or developed in connection with extension of the undertaking so as to permit amortisation under Section 35D. - HELD THAT: - A close reading of Explanation (a)(ii) to Section 35D(3) led the Court to construe the phrase 'being' as coloured by the preceding expression 'fixed assets' and the specific list that follows (land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings). The Court rejected the assessee's reliance on authorities construing 'being' as illustrative to include acquisition of companies by purchase of shares and rejected the argument that consolidation accounting (AS-21) converts share acquisition into acquisition of fixed assets. The Court accepted the view that acquisition of 100% subsidiary shares does not amount to acquisition of the enumerated fixed assets and emphasised the statutory distinction between 'extension' and 'expansion', holding that the acquisition of companies by share purchase does not fall within the statutory conception of acquiring fixed assets for an extension of the undertaking. The Court aligned with precedents treating the phrase 'being' as restrictive in this context and answered the question against the assessee. [Paras 23]

Cost of acquisition of companies by acquiring shares is not treatable as fixed assets forming part of 'cost of project' for Section 35D; issue answered against the assessee.

Final Conclusion: Appeal partly allowed: revisional exercise under Section 263 in respect of AY 2008-09 set aside (in favour of the assessee); questions on treatment of share premium as 'capital employed' and on cost of company acquisitions as 'cost of project' under Section 35D decided against the assessee and in favour of the Revenue.

Acceptance and repayment of cash between near relatives for personal purposes not attracting the prohibition on cash loans and repayments - Liability to penalty under provisions imposing penalty for acceptance and repayment of cash loans - Reasonable cause defence to penalty under the statutory provision preserving relief where failure to comply is for reasonable cause

Acceptance and repayment of cash between near relatives for personal purposes not attracting the prohibition on cash loans and repayments - Liability to penalty under provisions imposing penalty for acceptance and repayment of cash loans - Whether the cash receipts by the assessee from his uncle and subsequent repayments were personal family transactions and therefore did not attract the statutory prohibitions on cash loans and repayments or the penalties imposed therefor. - HELD THAT: - The Tribunal examined the material on record including the assessee's plea, confirmation letters from the uncle explaining that monies were given to enable purchase of a flat and that the transactions were personal and not business loans, and the AO's contrary view that the payments appeared in the uncle's firm's imprest account. The Tribunal found that the factual assertions by the assessee and the uncle were not controverted by the Revenue with any material to the contrary. Relying on precedents treating transactions between close family members as personal and outside the ambit of the statutory prohibition on cash loans and repayments, the Tribunal concurred with the CIT(A)'s conclusion that the moneys were personal transactions and that there was no basis to treat them as business loans attracting the penalty provisions. Consequently, the penalties imposed were held to have been rightly cancelled by the CIT(A). [Paras 12, 16, 17]

Penalty imposed under the provisions penalising cash acceptance and repayment deleted as the transactions were personal between near relatives and did not attract the prohibitions or penalties.

Final Conclusion: The Revenue's appeals are dismissed; the Tribunal upholds the CIT(A)'s deletion of penalties for the assessment years 2006-07, 2007-08 and 2008-09 on the ground that the cash transactions were personal family transactions and did not attract the statutory prohibitions or penalties.

Taxability of unaccounted receipts (on-money) - taxation of profit element versus gross receipts - evidentiary value of statement under Section 132(4) - rebuttable nature of statements recorded during search - application of net profit rate to seized unrecorded receipts

Taxation of profit element versus gross receipts - taxability of unaccounted receipts (on-money) - application of net profit rate to seized unrecorded receipts - rebuttable nature of statements recorded during search - Whether the entire gross amounts surrendered in statements recorded under Section 132(4) can be assessed as income, or only the profit element embedded in those unrecorded receipts is taxable. - HELD THAT: - The Tribunal found it was undisputed that seized papers reflected unrecorded receipts and that statements under Section 132(4) recorded surrender of those receipts. However, the search did not disclose substantial excess cash or unaccounted assets or investments to corroborate the surrendered gross receipts, and the statement indicated that the amounts were ploughed back into the business. In this factual matrix, the Tribunal held that the Assessing Officer was not justified in taxing the entire gross receipts. Relying on consistent judicial precedent and co-ordinate bench decisions, the Tribunal applied the proposition that only the profit element embedded in unaccounted sales/receipts is chargeable to tax and not the whole gross receipt. Consequently, the Assessing Officer's addition replacing the net-profit-based declaration with the gross-surrendered amounts was unsustainable and had to be deleted. [Paras 6]

Additions made by assessing officer treating entire surrendered gross receipts as income are deleted and the appeals are allowed by restricting taxability to the profit element embedded in the unrecorded receipts.

Final Conclusion: On the facts that no substantial excess cash or unaccounted assets were found and the surrendered amounts were shown to have been ploughed back into the business, the Tribunal set aside the orders of the lower authorities and deleted the additions treating gross surrendered receipts as income, allowing the assessee's appeals.

Transfer Pricing - Arm's Length Price - Comparable Uncontrolled Price (CUP) method - Transactional Net Margin Method (TNMM) - comparability - geographical market and level of market - benchmarking of royalty for technical know how - benchmarking of interest on External Commercial Borrowings - information systems / ERP service charges - allocation and substantiation

Comparable Uncontrolled Price (CUP) method - Transactional Net Margin Method (TNMM) - comparability - geographical market and level of market - Validity of CUP-based TP adjustment on export of finished products where similar products were sold to AEs abroad and to non-AEs in India and whether TNMM aggregation should have been applied. - HELD THAT: - The Tribunal followed its coordinate bench decisions in the assessee's own cases for earlier assessment years holding that CUP could not be applied where the uncontrolled transactions used as comparables related to parties operating in materially different geographical markets. The condition in rule 10B(2) requiring consideration of market conditions including geographical location was applied; sales to non AEs located in India could not be treated as comparable for sales to AEs located outside India. Given that the TPO had relied on product wise comparisons between prices charged to overseas AEs and largely domestic non AEs, the CUP application was held invalid and TNMM/aggregation (as advanced by the assessee) was accepted by implication by rejecting the CUP based adjustment. [Paras 6]

CUP method rejected for lack of geographic comparability; the TP adjustment on export of finished products is deleted.

Benchmarking of royalty for technical know how - Comparable Uncontrolled Price (CUP) method - methodology obligation of the TPO - Sustainability of the TPO's CUP based disallowance/adjustment to royalty payments where comparable agreements were with entities outside India and earlier Tribunal decisions had rejected CUP. - HELD THAT: - The Tribunal noted that earlier orders in the assessee's own cases had held that the TPO could not determine ALP on an ad hoc basis and that CUP was not the most appropriate method where comparables involved entities in different jurisdictions. The TPO in the year under appeal followed the same CUP methodology previously rejected; on that consistent basis the Tribunal deleted the royalty adjustment and disallowed the TPO's CUP based benchmarking. [Paras 8]

TP adjustment to royalty payment deleted; CUP not applied as MAM in the facts.

Benchmarking of interest on External Commercial Borrowings - Arm's Length Price - RBI-prescribed rates as relevant benchmark - Whether the ALP of interest on ECB should be determined by market comparables from databases (Bloomberg) or by reference to the RBI permitted rate for ECBs. - HELD THAT: - The Tribunal relied on its earlier decisions for preceding assessment years which held that the ALP for such ECB type transactions is more accurately determined by reference to the rates fixed/allowed by the Reserve Bank of India for ECBs. The assessee had benchmarked interest using the RBI permitted rate and the TPO's Bloomberg derived lower rate (producing an upward adjustment) was therefore rejected. The Tribunal followed its consistent view in earlier years and deleted the interest related TP addition. [Paras 10]

Adjustment on interest for ECB loans deleted; RBI rate accepted as appropriate benchmark.

Information systems / ERP service charges - allocation and substantiation - methodology obligation of the TPO - arm's length price for intra group service charges - Allowability and benchmarking of IS (ERP) charges allocated by AE to the assessee where the assessee furnished third party audit certificates, sample vendor invoices and evidence of usage. - HELD THAT: - The Tribunal observed that similar claims had been allowed in the assessee's earlier assessment years and that the TPO was required to determine ALP using one of the prescribed methods rather than by ad hoc denial. The assessee had furnished third party audit certificates, sample third party invoices and flowcharts demonstrating benefit and usage; on recurring consistent treatment in prior years the TPO was not justified in denying the internal cost allocation. Therefore, the IS charge adjustment was deleted following earlier Tribunal precedents. [Paras 12]

Adjustment disallowing internal IS charges deleted; assessee's substantiation accepted.

Final Conclusion: The Tribunal, following its consistent earlier decisions in the assessee's own cases, found the TPO's CUP applications and ad hoc disallowances unsustainable on the facts and deleted the TP adjustments in relation to export sales, royalty, interest on ECB and IS charges; the appeal is partly allowed in the terms recorded.

Exemption under Section 11 - application of income - accumulation of income in the form of fixed deposits - contravention of Section 13 - Rule 46A of the Income tax Rules, 1962

Exemption under Section 11 - application of income - contravention of Section 13 - entitlement of the assessee trust to exemption under Section 11 for Assessment Year 2009 2010 - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the Assessing Officer had not made out a case to deny the benefit of Section 11. The AO's objections - including that the trust accumulated surplus funds in fixed deposits and certain expenditures or deficiencies in documentation - did not, taken together, establish that the activities were not charitable or that Section 13 was contravened. The CIT(A) obtained and considered the AO's remand report and the assessee's written explanations; on the specific contested points (governing body meeting/chairman's visit expenses and lab expenses) the CIT(A) found that the expenditures were either reasonable in context and not remuneration attracting Section 13, or that missing bills, even if disallowed as expenditure for commercial assessment, did not preclude the trust from claiming exemption under Section 11. The Tribunal agreed that the AO had not shown any violation of the trust deed or of Section 13 that would disentitle the trust from Section 11, and directed that the AO allow the exemption and compute income accordingly. [Paras 7, 8]

Claim for exemption under Section 11 for AY 2009 10 allowed; additions disallowing exemption set aside and AO directed to compute income after allowing Section 11 benefit.

Rule 46A of the Income tax Rules, 1962 - whether the CIT(A) accepted new evidence in violation of Rule 46A of the Income tax Rules - HELD THAT: - The Tribunal found that the CIT(A) had followed the procedure of obtaining the AO's remand report and had called for the assessee's explanation and rejoinder after receiving written submissions and documents. On the material on record the CIT(A) did not accept fresh evidence in breach of Rule 46A; rather, the procedure of seeking remand report and considering the assessee's responses satisfied the requirements for admissibility and consideration of the materials relied upon. The Department failed to identify any procedural irregularity in the manner the CIT(A) dealt with the submissions. [Paras 7]

No violation of Rule 46A; CIT(A)'s consideration of submissions and remand report upheld.

Final Conclusion: The revenue's appeal is dismissed: the assessee trust is entitled to exemption under Section 11 for Assessment Year 2009 2010, and the CIT(A)'s admission and consideration of the materials did not contravene Rule 46A of the Income tax Rules.

Accrual versus receipt of income - mercantile system of accounting and recognition of income - taxability of interest on non-performing / sticky advances - real income doctrine: hypothetical income cannot be taxed - treatment of interest in view of recovery uncertainty leading to recognition on receipt basis - legislative amendment effect providing actual basis charging of interest for certain financial institutions

Taxability of interest on non-performing / sticky advances - accrual versus receipt of income - mercantile system of accounting and recognition of income - real income doctrine: hypothetical income cannot be taxed - Whether interest on seed money advances classified as sticky advances is taxable on accrual despite the assessee following mercantile accounting, when the assessee's accounting policy recognises such interest only on receipt due to uncertainty of recovery - HELD THAT: - The Tribunal examined the taxability of interest on seed money advances which were treated as sticky/non-performing advances and for which the assessee, though following the mercantile system, had a stated accounting policy of recognising interest only on receipt because of uncertainty of recovery. The Tribunal applied the principle that only real income, in respect of which the right to receive has accrued, can be taxed and that hypothetical or virtually irrecoverable interest cannot be brought to tax. Reliance was placed on earlier judicial pronouncements referred to in the impugned order, including UCO Bank vs. CIT , CIT vs. Shoorji Vallabhdas And Co. and CIT vs. Vasisth Chay Vyapar , for the proposition that interest not recognised in the books on doubtful or non-performing advances, where recovery is uncertain or virtually nil, does not accrue as taxable income. The Tribunal also noted the line of High Court decisions, including the decision in PCIT vs. Solapur District Central Co-op. Bank Ltd. , and subsequent High Court authorities which treated interest on NPAs as taxable in the year of receipt rather than on accrual, and observed that the Supreme Court had not interfered with the Gujarat High Court outcome. Having regard to the assessee's disclosed accounting policy in the notes to accounts, the uncertainty of recovery of principal and interest on such advances, and the settled principle against taxing hypothetical income, the Tribunal concluded that the interest had not accrued as income for tax purposes and the addition was not sustainable.

Addition of interest on seed money (sticky) advances deleted; interest taxable on receipt, not on accrual, in the facts of this case.

Legislative amendment effect providing actual basis charging of interest for certain financial institutions - Whether subsequent amendment (inserting cooperative banks within the scope of a provision dealing with charging of interest on actual basis) alters the outcome in the present proceedings - HELD THAT: - The Tribunal noted the later insertion in the legislation which provides for charging of interest on actual basis in specified cases and observed that such amendment may be viewed as addressing the situation and providing relief to certain categories (for example cooperative banks). The Tribunal, however, found no need to decide the effect of that amendment in the present appeal and left its consideration to appropriate proceedings, treating the amendment as not being decisive for the present dispute.

Effect of the legislative amendment left open for appropriate proceedings; it did not alter the dismissal of the Revenue's appeal in this case.

Final Conclusion: Following earlier Tribunal and High Court authorities and applying the real-income principle, the Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition of accrued interest on seed-money (sticky) advances for Assessment Year 2013-14, leaving any question as to the impact of subsequent legislative amendment to be considered in appropriate proceedings.

Redemption fine under Section 125 - penalty under Section 112(a) - classification of imported goods as insecticide - port restriction under Insecticide Rules, 2017 - doctrine of precedent - ratio over conclusion - failure to examine material facts rendering action arbitrary

Redemption fine under Section 125 - penalty under Section 112(a) - classification of imported goods as insecticide - port restriction under Insecticide Rules, 2017 - Whether imposition of redemption fine under Section 125 and penalty under Section 112(a) was justified in the absence of proper determination that the imported cargo was an insecticide and that port restriction applied. - HELD THAT: - The Tribunal found no dispute as to the appellant's bona fides but recorded that the adjudicating authorities failed to carry out the factual examination directed by the High Court in the appellant's own proceedings to determine whether the cargo was Copper Sulphate or Copper Sulphate Pentahydrate. The Order in Original proceeded to confiscate (with an option of redemption) and to impose penalty solely on the basis of a port restriction notice, without placing requisite material on record to establish that the imported goods were per se insecticide and therefore within the restricted import regime. Reliance upon the High Court's conclusions in a different case was improper where the factual foundation in the present case was not established. Penalty under Section 112(a) can only be imposed when facts disclose commission or omission contemplated by that provision; absent the fundamental factual determination as to the nature of the goods, levying redemption fine and penalty was arbitrary. The Tribunal also relied on the High Court of Kerala's ratio that port restrictions invoked under the Insecticide Rules, 2017 could not be sustained as applied in similar circumstances, and emphasised that the ratio, not mere conclusions, governs precedent. Applying these principles, the Tribunal concluded that the impugned imposition of fine and penalty could not be sustained. [Paras 6, 7, 8, 9]

Redemption fine under Section 125 and penalty under Section 112(a) set aside as unjustified for want of proper factual adjudication that the imported cargo was an insecticide and therefore subject to port restriction.

Final Conclusion: The appeal is allowed insofar as the redemption fine and penalty are concerned; the impugned order is set aside on the ground that authorities acted without properly examining whether the imported goods were an insecticide and thereby applied port restrictions and penalties arbitrarily.

Verification of Importer Exporter Code (IEC), GSTIN and identity and functioning of client at declared address - Regulation 10(n) of CBLR, 2018 - scope of documentary verification by customs broker versus requirement of physical verification of premises - revocation of customs broker licence and imposition of penalty - proportionality of sanction

Verification of Importer Exporter Code (IEC), GSTIN and identity and functioning of client at declared address - Regulation 10(n) of CBLR, 2018 - scope of documentary verification by customs broker versus requirement of physical verification of premises - revocation of customs broker licence and imposition of penalty - proportionality of sanction - Whether the appellant violated Regulation 10(n) of CBLR, 2018 by failing to verify the importer's functioning at the declared address and whether revocation of licence and penalty were justified - HELD THAT: - The Tribunal examined the inquiry finding that the broker had visited and verified the Delhi address recorded in the bill of lading and bills of entry but had not visited a factory address in Jaipur which appeared in IEC/Aadhaar/GSTIN. The Inquiry Officer relied on a departmental communication that no factory was functioning at the Rajasthan address and concluded that the broker failed to verify the "functioning" of the client at the declared address. The Tribunal held that the broker had carried out verification of the Delhi address which was the address declared in shipping and customs documents and which was found to be a proper address. Documents such as IEC, Aadhaar and GSTIN are issued by governmental authorities, and the broker was entitled to rely on those documents; there is no regulatory mandate that a customs broker must undertake post-import physical verification of every address given in such documents. Applying the regulatory text and precedents relied upon by the appellant, the Tribunal found that the failure to visit the Rajasthan factory did not establish a violation of Regulation 10(n) of CBLR, 2018 sufficiently grave to justify revocation of licence. The Tribunal therefore concluded that the department had not made out the alleged breach and that the revocation and penalty were not justified. [Paras 8, 17, 18]

Findings of violation of Regulation 10(n) not established; revocation of licence and penalty set aside; appeal allowed.

Final Conclusion: The impugned order confirming violation of Regulation 10(n) of CBLR, 2018 and revoking the customs broker licence with imposition of penalty is set aside; the appeal is allowed with consequential relief, if any.

Compliance of a resolution plan with Section 30(2) of the IBC - priority payment of insolvency resolution process costs - payment to operational creditors not less than liquidation share - management and control post-approval of a resolution plan - implementation and supervision of a resolution plan - non contravention of law by a resolution plan - eligibility of a resolution applicant under Section 29A - requirement of performance bank guarantee under Regulation 39(4) - requirement to obtain Competition Commission approval under Section 31(4) proviso - continuance of proceedings on preferential transactions / Regulation 35A

Compliance of a resolution plan with Section 30(2) of the IBC - priority payment of insolvency resolution process costs - payment to operational creditors not less than liquidation share - management and control post-approval of a resolution plan - implementation and supervision of a resolution plan - non contravention of law by a resolution plan - Whether the resolution plan submitted by the Consortium satisfies the mandatory requirements of Section 30(2) of the Code and the CIRP Regulations - HELD THAT: - The Tribunal examined the resolution plan (dated 09.09.2020 with addendum 19.09.2020) against the mandatory contents of Section 30(2). The plan provides for payment of CIRP costs in priority and in full, with a stated mechanism for meeting any excess from contingencies or corporate debtor funds; it proposes payment to operational creditors of an amount represented as not less than liquidation recovery and schedules that payment immediately after CIRP costs; it contains specific provisions for resignation of existing directors and appointment of new directors to manage the company post approval; and Part 11 furnishes a mechanism for implementation and supervision. The RP certified compliance in Revised Form H and the Consortium filed an affidavit as required under Section 30(1) confirming eligibility under Section 29A. On this appraisal the Tribunal concluded that the plan conforms to the requirements of Section 30(2) and the corresponding CIRP Regulations, including Regulations 38 and 39, and did not contravene law for the time being in force. [Paras 17, 18, 20, 24, 25]

The resolution plan as approved by the Committee of Creditors satisfies the mandatory requirements of Section 30(2) and the CIRP Regulations and is approved.

Eligibility of a resolution applicant under Section 29A - Whether the Consortium was eligible to submit the resolution plan under Section 29A - HELD THAT: - The Tribunal recorded that the Consortium submitted an affidavit pursuant to Section 30(1) of the Code by its lead member confirming its eligibility under Section 29A. The RP's Revised Form H also certified compliance with the Code and Regulations. Having considered these filings, the Tribunal treated the eligibility requirement as satisfied for the purpose of approving the plan. [Paras 19, 24, 25]

The Consortium is held to be eligible under Section 29A for submission of the resolution plan.

Requirement of performance bank guarantee under Regulation 39(4) - Whether the Resolution Applicant complied with the requirement to furnish the performance bank guarantee under Regulation 39(4) - HELD THAT: - The record shows submission of performance bank guarantees aggregating the required amount to the RP on 23.10.2020. The RP's compliance statement in Revised Form H and annexures were considered. On this basis the Tribunal was satisfied that the requirement concerning performance bank guarantee under Regulation 39(4) had been complied with. [Paras 21, 24, 25]

The performance bank guarantee requirement under Regulation 39(4) is satisfied.

Requirement to obtain Competition Commission approval under Section 31(4) proviso - Whether the requirement of the second proviso to Section 31(4) (obtaining Competition Commission of India approval) was met and the consequence thereof - HELD THAT: - The Tribunal observed that no statement had been made in the application regarding approval by the Competition Commission of India as envisaged by the second proviso to Section 31(4). Recognising the statutory requirement, the Tribunal directed that the Resolution Applicant shall obtain CCI approval within one year of the Tribunal's approval of the resolution plan, treating this as a condition to implementation. [Paras 22, 25]

CCI approval was not on record; the Resolution Applicant is directed to obtain such approval within one year of this order.

Continuance of proceedings on preferential transactions / Regulation 35A - Status of adjudication on preferential transactions under Regulation 35A and related proceedings - HELD THAT: - The Tribunal noted delay in determination of preferential transactions; the matter was determined on the 152nd day and an application (IA No. 80/JPR/2020) is pending before the Adjudicating Authority. The Tribunal recorded that the preferential transaction proceedings are to continue even after approval of the resolution plan, indicating that the pending proceedings would not be foreclosed by the present approval. [Paras 23, 25]

The preferential transaction issue under Regulation 35A remains pending and shall continue to be adjudicated notwithstanding approval of the resolution plan.

Final Conclusion: The Tribunal approved the Consortium's resolution plan (dated 09.09.2020 with addendum 19.09.2020) as satisfying the Code and CIRP Regulations; directed cessation of the moratorium, transmission of records to IBBI, and conditional direction that the Resolution Applicant obtain Competition Commission approval within one year; and left the pending preferential transaction proceedings to continue. IA No. 310/JPR/2020 is disposed of.

Corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Admission of application on establishment of default - Proof of debt and failure to demonstrate repayment - Limitation and time bar for filing insolvency application - Moratorium and its prohibitions under Section 14 of the IBC - Appointment of Interim Resolution Professional and his statutory duties - Jurisdiction of the Adjudicating Authority

Jurisdiction of the Adjudicating Authority - This Adjudicating Authority has territorial jurisdiction to entertain the petition against the corporate debtor. - HELD THAT: - The corporate debtor is a Limited Liability Partnership with its registered office located within the State of Rajasthan. The Tribunal therefore finds that the petition falls within the territorial jurisdiction of this Adjudicating Authority and may be entertained here. [Paras 2]

Jurisdiction of this Adjudicating Authority is established and the petition is maintainable here.

Proof of debt and failure to demonstrate repayment - Admission of application on establishment of default - The financial creditor established default by the corporate debtor and the corporate debtor failed to prove repayment of the debt due to the petitioner in his individual capacity. - HELD THAT: - The petition records advances made to the corporate debtor and production of post dated cheques and bank statements evidencing transfers. The corporate debtor disputed the claim and relied on LLP agreements and alleged payments to another entity. The Tribunal afforded opportunity to the corporate debtor to produce proof of payment to the petitioner in his individual capacity but no valid proof was shown. Consequently, the Tribunal accepts that the debt claimed remained due and payable to the petitioner and that default has been established for the purposes of admission under Section 7. [Paras 3, 6, 7, 8, 9]

Default is established and the corporate debtor has not shown valid proof of discharge of the debt owed to the petitioner in his individual capacity.

Limitation and time bar for filing insolvency application - The petition was filed within the period of limitation. - HELD THAT: - On the materials before the Tribunal, including the stated date of default, the Tribunal finds that the petition has been filed within the prescribed limitation period and there is no bar to admission on limitation grounds. [Paras 10]

The petition is within time.

Corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Moratorium and its prohibitions under Section 14 of the IBC - Appointment of Interim Resolution Professional and his statutory duties - The petition under Section 7 is admitted; moratorium under Section 14 is declared; and an Interim Resolution Professional is appointed with directions to perform statutory functions. - HELD THAT: - Having found the petition complete, default established and the petition within limitation, the Tribunal admits the Section 7 application in terms of Section 7(5) of the Code. Consequent moratorium is declared and the statutory prohibitions specified in Section 14 are imposed. The Tribunal examined credentials of the proposed IRP and found nothing adverse; accordingly Mr. Prashant Sharma is appointed as Interim Resolution Professional subject to filing of Form 2 if not filed, and is directed to perform statutory functions including convening the Committee of Creditors and filing periodic reports to the Tribunal. [Paras 11, 12, 13]

The petition is admitted, moratorium is declared, and Mr. Prashant Sharma is appointed as Interim Resolution Professional with directions to carry out the duties mandated under the Code.

Final Conclusion: The Section 7 petition is admitted: the Tribunal holds territorial jurisdiction, finds default by the corporate debtor and absence of proof of repayment to the petitioner in his individual capacity, records that the petition is within limitation, declares moratorium under Section 14 and appoints the named Interim Resolution Professional with directions to perform statutory duties.

Approval of resolution plan under Section 30 and Section 31 of the Code - Compliance with mandatory contents of a resolution plan including priority payment of insolvency resolution process costs and treatment of operational creditors - Compliance with CIRP Regulations (Regulation 38 and Regulation 39) and Form H certification - Eligibility under Section 29A and submission of Performance Bank Guarantee / security - Treatment of a claim as a financial debt for settlement purposes - Requirement to obtain Competition Commission of India approval under Section 31(4) - Effect of approval order on moratorium and binding nature of approved plan

Approval of resolution plan under Section 30 and Section 31 of the Code - Compliance with mandatory contents of a resolution plan including priority payment of insolvency resolution process costs and treatment of operational creditors - Compliance with CIRP Regulations (Regulation 38 and Regulation 39) and Form H certification - Eligibility under Section 29A - Whether the resolution plan submitted by Kals Distilleries Pvt. Ltd., as approved by the Committee of Creditors, satisfies the requirements of the Code and the CIRP Regulations and is fit for approval by the Tribunal. - HELD THAT: - The Tribunal examined the resolution plan against the mandatory requirements of Section 30(2) and related Regulations. It found that the plan provides for payment of insolvency resolution process costs in priority and identifies sources for such payment; provides for settlement of operational creditors (employees, non-related operational creditors and statutory dues) with specified percentages; contains detailed provisions for post-approval management and control of the corporate debtor; provides for implementation and supervision mechanisms; and the Resolution Professional has filed the compliance certificate in Revised Form H as required by Regulation 39(4). The successful resolution applicant had submitted an affidavit confirming eligibility under Section 29A and furnished a performance guarantee by way of a fixed deposit receipt. On that basis the Tribunal concluded that the resolution plan meets the requirements of the Code and Regulations and is approvable. [Paras 19, 20, 21, 24, 25]

The resolution plan submitted by Kals Distilleries Pvt. Ltd., as approved by the Committee of Creditors, is approved as satisfying the requirements of the Code and the CIRP Regulations.

Treatment of a claim as a financial debt for settlement purposes - Effect of appellate finding on approvability of resolution plan - Whether M/s. Sach Marketing Pvt. Ltd. is to be treated as a financial creditor for the purpose of settlement of its claim and whether that determination impedes approval of the resolution plan. - HELD THAT: - The Tribunal noted the decision of the appellate authority (NCLAT) holding that the amount claimed by Sach Marketing Pvt. Ltd. is a financial debt and that the impugned Adjudicating Authority order which had taken a contrary view was set aside. The NCLAT observed that the appellant was not seeking reconstitution of the CoC or to oppose the resolution plan but only to have its debt treated as financial. Given that specific observation and the appellate ruling, the Tribunal held there was no impediment to approving the resolution plan and directed that Sach Marketing Pvt. Ltd. shall be treated as a financial creditor for settlement of its claim. [Paras 26, 27, 28]

M/s. Sach Marketing Pvt. Ltd. shall be treated as a financial creditor for the purpose of settlement of its claim; this does not preclude approval of the resolution plan.

Requirement to obtain Competition Commission of India approval under Section 31(4) - Effect of approval order on moratorium and binding nature of approved plan - Obligation to forward CIRP records to the Board under Section 31(3)(b) - Ancillary directions consequential to approval of the resolution plan: requirement to obtain Competition Commission approval, effect on moratorium, and transmission of records to IBBI. - HELD THAT: - The Tribunal observed that the record did not contain a statement regarding approval of the Competition Commission of India as contemplated by the proviso to Section 31(4), and accordingly directed the resolution applicant to obtain CCI approval within one year from the date of tribunal approval. The Tribunal further declared that the moratorium under Section 14 shall cease to have effect upon approval and directed the Resolution Professional to forward all CIRP records and the resolution plan to the IBBI for recording in its database as required by Section 31(3)(b). These directions are incidental to and flow from the approval of the resolution plan. [Paras 22, 29]

The Resolution Applicant must obtain CCI approval within one year; the moratorium shall cease to have effect; and the RP shall forward all CIRP records and the resolution plan to the IBBI.

Final Conclusion: The Tribunal approved the resolution plan of Kals Distilleries Pvt. Ltd. as meeting the statutory and regulatory requirements, directed that Sach Marketing Pvt. Ltd. be treated as a financial creditor for settlement purposes, required the resolution applicant to obtain CCI approval within one year, declared the moratorium terminated, and directed the RP to forward CIRP records to the IBBI.

Dissolution of the corporate debtor - completion of liquidation - realisation of security interest under Section 52 - priority payment of insolvency resolution process cost and liquidation cost under Section 53(1) - discharge of the liquidator - compliance with liquidation process regulations (public announcement, claims verification, asset sale report)

Completion of liquidation - dissolution of the corporate debtor - compliance with liquidation process regulations (public announcement, claims verification) - Final dissolution of Kokama International Private Limited on completion of liquidation. - HELD THAT: - The Tribunal found that the liquidator conducted the liquidation process in accordance with the Regulations by making public announcement(s), inviting and verifying claims, maintaining custody of assets, preparing valuation and preliminary reports and maintaining a liquidation bank account. The assets of the corporate debtor were liquidated, the liquidation account was closed and there were no other stakeholders who submitted claims except the secured creditor. On these facts the Tribunal held that liquidation was complete and allowed the application under the Code and Regulations for dissolution of the corporate debtor. [Paras 3, 4, 10, 14, 15]

Liquidation held to be complete and Kokama International Private Limited dissolved.

Realisation of security interest under Section 52 - sale of secured assets by secured creditor - requirement of asset sale report and transfer of proceeds - Validity and effect of ARCIL exercising its right to realise security interest under Section 52 and the consequent sale and application of proceeds. - HELD THAT: - The Tribunal recorded that ARCIL, the secured creditor, sought and obtained permission from the liquidator to realise its security under Section 52. Possession was handed over and ARCIL conducted e-auctions; after an initial failed attempt, a subsequent e-auction was successful and the assets were transferred to buyers. ARCIL deposited the insolvency resolution and liquidation costs into the liquidation account and adjusted the balance against its secured debt. The Tribunal accepted these steps as constituting proper exercise of the secured creditor's rights under Section 52 and as part of the liquidation process. [Paras 10, 11, 12, 13, 15]

ARCIL's realisation of security interest under Section 52 and sale of secured assets was valid; proceeds were applied as recorded.

Priority payment of insolvency resolution process cost and liquidation cost under Section 53(1) - reimbursement of liquidation costs from sale proceeds - discharge of the liquidator - Application of priority of payment under Section 53(1) and consequent discharge of the liquidator. - HELD THAT: - The Tribunal noted that from the sale proceeds ARCIL deposited amounts towards insolvency resolution process cost and liquidation cost and the balance was adjusted against ARCIL's secured debt. Applying Section 53(1), the Tribunal accepted that the insolvency resolution and liquidation costs were to be paid first from the proceeds and, since no further amounts were available for distribution and no other claimants existed, concluded that the liquidation account was closed. Consequently, the Tribunal allowed the application, directed dissolution, ordered registry to intimate the Registrar of Companies and discharged the liquidator. [Paras 11, 12, 13, 15]

Insolvency resolution and liquidation costs paid in priority from proceeds; liquidation account closed and liquidator discharged.

Final Conclusion: The Tribunal allowed the liquidator's application, held that liquidation of Kokama International Private Limited was complete following sale of secured assets and distribution in accordance with the Code and Regulations, dissolved the company, directed intimation to the Registrar of Companies and discharged the liquidator.

Reverse CIRP - treatment of operational creditors under Section 53 - CIRP cost - waiver of valuation and valuer appointment in project-specific CIRP - information memorandum and NDA obligations in project-specific CIRP - redundancy of resolution plan requirements where project-completion route is directed

Treatment of operational creditors under Section 53 - CIRP cost - Whether existing operational creditors could be paid up-front to secure continuation of construction and how their claims are to be treated in the reverse CIRP. - HELD THAT: - The Tribunal noted that operational creditors had indicated they would resume work only if existing dues were cleared, but held that operational creditors cannot be given preference over financial creditors contrary to the Code. The RP was directed to engage new suppliers or service providers if needed; the cost of such engagement shall be included in the CIRP cost. The treatment of existing operational creditors is to be governed by Section 53 of the Code rather than by making upfront preferential payments outside the statutory priority framework. [Paras 7, 8]

Existing operational creditors are not to be preferred over financial creditors; RP may hire new suppliers with costs included in CIRP cost and existing operational claims shall be dealt with in accordance with Section 53.

Waiver of valuation and valuer appointment in project-specific CIRP - redundancy of resolution plan requirements where project-completion route is directed - Whether appointment of registered valuers and preparation of valuation (fair value/liquidation value) is required in a project-specific reverse CIRP where liquidation is not envisaged and project-completion route has been directed. - HELD THAT: - The Tribunal observed that valuation for fair value and liquidation value primarily aids CoC in evaluating resolution plans and ensuring resolution plan value is not less than liquidation value. In the present reverse CIRP the CIRP is project-specific, liquidation of the project is not contemplated and the CoC had agreed arrangements (including promoter/erstwhile director financing) to complete the project. Consequently the appointment of valuers and corresponding valuation exercises were held to be unnecessary and the RP was granted waiver from complying with those valuation requirements. [Paras 8]

Requirement to appoint registered valuers and to carry out valuation exercises was waived as redundant in the project-specific reverse CIRP where project completion by alternative financing was directed.

Information memorandum and NDA obligations in project-specific CIRP - reverse CIRP - Whether the RP must prepare and furnish an Information Memorandum (IM) and obtain NDAs from CoC members in a reverse CIRP directed to be project-specific. - HELD THAT: - The Tribunal noted that the IM is prepared to enable formulation and evaluation of resolution plans for the corporate debtor as a whole. In a project-specific reverse CIRP where a resolution plan is not intended, preparation of a full IM was unnecessary. Further, given the composition of the CoC (allottees/home buyers represented by an Authorized Representative and a secured lender) the RP was not required to obtain NDAs from individual allottees; relevant project information as directed earlier was to be collated and provided by the RP without the IM/NDA formalities. [Paras 8]

RP was granted waiver from preparing/submitting the IM and from obtaining NDAs from allottees/CoC members; relevant project information is to be collated and provided as directed.

Redundancy of resolution plan requirements where project-completion route is directed - reverse CIRP - Whether provisions relating to invitation of EOI, formulation and approval of resolution plans and related regulatory mandates (including sections/regulations tied to resolution plans) are applicable in the present reverse CIRP focused on completion of a specific project. - HELD THAT: - The Tribunal referred to its earlier direction that CIRP would be project-centric aimed at completing the project on priority through financing by promoters/financial creditor/third-party lenders and noted that an erstwhile director had come forward as independent financier. Given this project-completion mandate, the Tribunal found that requirements tied to solicitation, evaluation and approval of resolution plans (including related regulatory provisions) were redundant. Accordingly the RP was not required to undertake functions purely directed towards promoting or assessing resolution plans, and waivers were granted in respect of those procedural requirements. [Paras 3, 8]

Procedural mandates connected solely to inviting and evaluating resolution plans were held redundant and waived in view of the project-completion direction and the financing arrangement accepted by the CoC.

Final Conclusion: The application was allowed: the Tribunal granted specified waivers and directions adapting procedural and regulatory compliances to a project-specific reverse CIRP-treatment of operational creditors to follow Section 53 with CIRP costs covering engagement of suppliers, valuation/valuator and IM/NDA requirements waived as redundant, and resolution-plan-related procedural mandates dispensed with given the directed project-completion route; IA disposed of.

Operational Debt - Corporate Insolvency Resolution Process (CIRP) - Demand Notice under Section 8 - Admission under Section 9 - Default - Moratorium - Appointment of Interim Resolution Professional

Operational Debt - Demand Notice under Section 8 - Default - Admission under Section 9 - Whether the Company Petition under Section 9 establishing existence of operational debt and default is maintainable and liable to be admitted. - HELD THAT: - The Tribunal found that the Operational Creditor had supplied furnishing fabrics which were received by the Corporate Debtor and that invoices and a demand notice dated 16.10.2019 were issued and received by the Corporate Debtor on 22.10.2019. The Corporate Debtor did not reply to the demand notice within the statutory period nor did it demonstrate any pre-existing suit, dispute or arbitration prior to receipt of the notice. The Corporate Debtor's contentions regarding discrepancies and adjustments were unsupported by documentary evidence, and its acknowledgment of working capital difficulties coupled with a conditional statement to pay after adjustments was treated as admission of debt and default. Having concluded that debt and default were clearly established and within limitation, and that the petition complied with requisite formalities including proposal of an interim resolution professional with consent, the Tribunal held the petition maintainable and admitted it for initiation of CIRP. [Paras 17, 18, 19, 20, 21]

Company Petition under Section 9 admitted as debt and default are established and requirements for admission are satisfied.

Moratorium - Appointment of Interim Resolution Professional - Corporate Insolvency Resolution Process (CIRP) - Reliefs and directions consequent to admission, including appointment of IRP and imposition of moratorium. - HELD THAT: - On admission, the Tribunal appointed the proposed insolvency professional as Interim Resolution Professional to carry out functions under the Code and directed the Operational Creditor to deposit initial CIRP costs. The Tribunal ordered moratorium prohibiting institution or continuation of suits, execution of decrees, transfer or disposition of assets, and enforcement of security interests against the corporate debtor for the moratorium period. It directed immediate public announcement of CIRP, vesting of management in the IRP/RP during CIRP, and notification to the Registrar of Companies for updating master data. Supply of essential goods or services was protected from termination during the moratorium and limited exceptions under sub section (1) of Section 14 were noted. [Paras 21]

IRP appointed; moratorium declared and ancillary directions issued to give effect to CIRP.

Final Conclusion: The Tribunal admitted the Section 9 Company Petition, held that operational debt and default were proved and within limitation, appointed an Interim Resolution Professional, and ordered moratorium and ancillary directions to initiate the CIRP against the corporate debtor.

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Exclusion of lockdown period for computation of CIRP timelines - Appointment of resolution professional as liquidator under Section 34(1) of the Insolvency and Bankruptcy Code, 2016 - Commercial wisdom of the Committee of Creditors in deciding liquidation - Liquidation costs and fees pursuant to Regulation 39B, 39C and 39D of the CIRP Regulations, 2016 - Sale as a going concern under liquidation process - Statutory directions on publication of liquidation commencement and claim submission

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Commercial wisdom of the Committee of Creditors in deciding liquidation - Whether the Adjudicating Authority should pass a liquidation order under Section 33(2) on receipt of the CoC decision to liquidate. - HELD THAT: - The CoC, after consideration of the corporate debtor's affairs and absence of realistic resolution prospects, approved liquidation and appointed the RP to be liquidator. The Tribunal applied Section 33(2) which mandates that where the resolution professional intimates the adjudicating authority of a CoC decision approved by not less than sixty-six percent of voting share to liquidate, the Adjudicating Authority shall pass a liquidation order. The Tribunal noted the NCLAT view that a CoC's decision to liquidate, following evaluation of assets and liabilities and absence of a resolution plan, is a business decision within the CoC's commercial wisdom and is not amenable to judicial review. On the material before it, the Tribunal was satisfied that the statutory condition for passing a liquidation order under Section 33(2) was fulfilled and proceeded to direct liquidation in accordance with Chapter III of the Code. [Paras 3, 4, 5, 6, 18]

Liquidation order under Section 33(2) is passed and the corporate debtor is directed to be liquidated as per Chapter III of the Code.

Exclusion of lockdown period for computation of CIRP timelines - Prescribed period for filing under Section 12/33 - Whether the application for liquidation was filed within the prescribed period after excluding the lockdown period. - HELD THAT: - The Tribunal examined timeline computation. It relied upon the NCLAT suo motu order and subsequent IBBI regulations (Regulation 40C of CIRP Regulations and Regulation 47A of Liquidation Process Regulations) excluding the lockdown period from timeline computation. Applying that exclusion to the admitted date and the CoC decision date, the Tribunal concluded that the RP's application was filed within the prescribed period. Consequently, the matter was taken up under Section 33(2). [Paras 7, 8, 9, 10, 11]

The application is within the prescribed period after excluding the lockdown period and is maintainable under Section 33(2).

Appointment of resolution professional as liquidator under Section 34(1) of the Insolvency and Bankruptcy Code, 2016 - Whether the existing resolution professional should be appointed as the liquidator. - HELD THAT: - Section 34(1) provides that the resolution professional appointed for CIRP shall, subject to written consent, act as liquidator unless replaced. The CoC had resolved to appoint the RP as liquidator. The RP filed the required consent in the specified form and the Tribunal verified credentials from the IBBI records and found no adverse material. No ground to replace the RP was found. Accordingly, the Tribunal appointed the existing RP as Liquidator. [Paras 12, 13]

Mr. Hansraj Mutreja, the incumbent Resolution Professional, is appointed as the Liquidator upon submission of consent and on verification of credentials.

Liquidation costs and fees pursuant to Regulation 39B, 39C and 39D of the CIRP Regulations, 2016 - Sale as a going concern under liquidation process - Whether the CoC approvals regarding estimated liquidation cost, proposal to attempt sale as a going concern, and consolidated fees of the liquidator are to be recorded and acted upon. - HELD THAT: - The Tribunal examined the CoC's 4th meeting approvals where the RP apprised members of Regulations 39B-39D. The CoC approved the estimated liquidation cost and contributions under the Liquidation Process Regulations, resolved to attempt sale as a going concern as the first option in accordance with applicable liquidation regulations, and fixed consolidated fees of the liquidator to be paid along with expenses. The Tribunal directed the Liquidator to take necessary steps in accordance with Regulation 2A of the Liquidation Process Regulations and the applicable provisions governing sale as a going concern and liquidator's fees. [Paras 14, 15, 16, 17]

The CoC approvals regarding liquidation cost, pursuit of sale as a going concern, and fixation of consolidated fees are noted and the Liquidator is directed to implement them in accordance with the applicable regulations.

Statutory directions on publication of liquidation commencement and claim submission - What statutory directions should be issued consequential to the liquidation order concerning stay of suits, cessation of board powers, publication, and claim submission timelines. - HELD THAT: - On passing the liquidation order the Tribunal applied the statutory consequences under Section 33 and relevant liquidation regulations. It directed that suits shall not be instituted or continued except as permitted; the order shall serve as notice of discharge to officers/employees except where business continues; powers of directors and KMPs shall cease and vest in the Liquidator; personnel must cooperate; the Liquidator shall publish the public announcement in the prescribed Form and call for claims within 30 days from the liquidation commencement date; and the Liquidator shall file preliminary and regular progress reports in accordance with the Liquidation Process Regulations. [Paras 18]

Statutory directions attendant to liquidation are issued, including stay on suits, cessation of management powers, publication of liquidation commencement, claim submission timeline, and reporting obligations of the Liquidator.

Final Conclusion: The Tribunal, applying Section 33(2) of the IBC and relevant IBBI regulations excluding the lockdown period, held the CoC's decision to liquidate to be a valid exercise of commercial wisdom, directed liquidation of the corporate debtor, appointed the incumbent RP as Liquidator upon consent, recorded CoC approvals on liquidation costs, sale as a going concern and fees, and issued the statutory consequential directions for conduct of the liquidation process.

Allottee under RERA - Real estate project registration - Threshold requirement for CIRP by allottees (100 or 10%) - Speculative investor / genuineness of allottee - Scope of IBC versus contractual remedies under the Indian Contract Act

Allottee under RERA - Real estate project registration - Petitioners do not qualify as allottees under the RERA for the purposes of invoking the IBC because Wing E was not a registered project/phase. - HELD THAT: - The Tribunal applied the principle that the RERA applies only to projects or phases that have been registered and that an unregistered wing cannot be treated as a registered real estate project for the purposes of Section 2(d) of RERA and the IBC explanation. Relying on the decision cited from the Bombay High Court, the Bench found that since Wing E was not registered and the project/phase was incomplete, the Petitioners cannot be held to be allottees falling within the RERA definition and therefore cannot invoke the IBC as allottees under the proviso to Section 7. The Tribunal recorded this finding after hearing parties and examining the registration status of the wings of the project. [Paras 42, 43]

Petitioners do not qualify as allottees under RERA because Wing E was unregistered; RERA does not apply to them for triggering CIRP under IBC.

Threshold requirement for CIRP by allottees (100 or 10%) - Speculative investor / genuineness of allottee - The petition does not satisfy the statutory threshold and, in any event, raises concern of speculative investor/genuineness of allottee such that the petition is liable to be rejected. - HELD THAT: - The Tribunal held that even if the Petitioners were treated as allottees, the proviso to Section 7 requires joint filing by not less than one hundred allottees or not less than ten per cent of allottees of the same real estate project. The Petitioners failed to demonstrate they met that threshold. Further, applying the reasoning in Navin Raheja and the Supreme Court's concerns about trigger happy or speculative allottees, the Tribunal observed absence of satisfactory evidence of intent to take possession and found the petition vulnerable to being filed by speculative investors. On these bases the Tribunal was inclined to reject the petition. [Paras 44, 45, 46]

Petition fails the threshold requirement and is undermined by concerns regarding the genuineness of the allottees; petition is liable to be rejected.

Scope of IBC versus contractual remedies under the Indian Contract Act - Claims framed under the Indian Contract Act seeking restitution/repayment are outside the scope of the Adjudicating Authority under the IBC and must be pursued before appropriate fora. - HELD THAT: - The Tribunal noted that reliefs pleaded under Sections 55, 56 and 73 of the Indian Contract Act pertain to contractual restitution and damages and fall outside the remedial scope of an insolvency petition under Section 7. The Tribunal accordingly recorded that such contractual remedies should be prosecuted before the appropriate authority and are not to be adjudicated in the present proceeding under the IBC. [Paras 47]

Relief under the Indian Contract Act is outside the Tribunal's remit in this Section 7 petition and must be pursued before the appropriate forum.

Final Conclusion: The Section 7 petition is rejected: the Petitioners do not qualify as allottees under RERA for an unregistered Wing E, they have not satisfied the statutory threshold (and their standing is further weakened by concerns of speculative investment), and contractual claims under the Indian Contract Act fall outside the IBC forum and must be pursued before the appropriate authority.

Grant of regular bail in offences under the Prevention of Money Laundering Act, 2002 - Triple test under Section 45 of the PMLA - Offence having cross-border implications under the PMLA - Effect of foreign conviction and the question of double jeopardy - Condition of deposit of passport as bail precaution

Triple test under Section 45 of the PMLA - Grant of regular bail in offences under the Prevention of Money Laundering Act, 2002 - Petitioner's entitlement to regular bail under Section 45 of the PMLA - HELD THAT: - The Court examined the threefold requirement in Section 45: (i) opportunity to the Public Prosecutor to oppose bail (which was given), (ii) where opposition is raised, the Court must be satisfied there are reasonable grounds to believe the accused is not guilty and is not likely to commit an offence while on bail, and (iii) Cr.P.C. principles additionally apply. The Court observed that unlike offences where re-offending while on bail is facile (e.g., NDPS), in the present PMLA case it is not easy for the accused to commit the same offence while remaining in India. The Court also took into account the stage of proceedings (investigation complete and chargesheet filed), the petitioner's age, the fact of attendance before the authorities on multiple occasions, the circumstances of arrest on an LOC which was not disclosed to the writ court, and the absence of material establishing a real risk of tampering or flight if stringent bail conditions were imposed. On these considerations the Court concluded that the petitioner satisfies the requirements of Section 45 and is entitled to regular bail subject to conditions.

Petitioner granted regular bail under Section 45 of the PMLA, subject to bail and surety bonds, deposit of passport and undertaking to appear when required.

Effect of foreign conviction and the question of double jeopardy - Offence having cross-border implications under the PMLA - Whether the prosecution in India is barred by double jeopardy due to the petitioner's conviction in Netherlands - HELD THAT: - The Court noted the Netherlands authorities had sought mutual legal assistance in 2017 and that the petitioner was convicted in the Netherlands; however, it held that the question whether prosecution in India amounts to double jeopardy is a matter for trial and factual/legal adjudication in the regular course. The Court observed there was no evidence that the Netherlands authorities had requested registration under specific PMLA provisions or that they were informed of the Indian prosecution. Consequently, the Court did not finally adjudicate on double jeopardy but indicated that it is a matter to be determined at trial.

Question of double jeopardy left open for trial; not finally decided by this order and to be considered in the course of proceedings.

Final Conclusion: The petition is allowed and the petitioner is directed to be released on regular bail subject to furnishing bail and two sureties (one local), deposit of passport with the prosecuting agency or trial Court, and an undertaking to attend the investigating agency and trial Court as required; default will permit prosecution to seek cancellation of bail.

Reasons to believe - Relied Upon Documents (RUDs) - two-tier satisfaction of reason to believe (ED and Adjudicating Authority) - transmission of material in possession to Adjudicating Authority in sealed cover - service of show cause notice with complete relied upon documents - right to inspection of records and provision of copies - domestic law supremacy over international mutual legal assistance - procedure under Chapters III and V of the PMLA applies to letters of request under Section 60

Procedure under Chapters III and V of the PMLA applies to letters of request under Section 60 - domestic law supremacy over international mutual legal assistance - Procedure to be followed by the ED when letters of request are received from a contracting state under Section 60 of the PMLA - HELD THAT: - Requests from contracting states under Section 60 must be executed strictly in accordance with domestic law; the safeguards and procedures contained in Chapters III and V of the PMLA, and the Rules and Regulations thereunder, apply to such requests. International Conventions (Merida/Palermo) require cooperation but implementation is subject to and constrained by Indian municipal law; the ED cannot treat requests from contracting states as attracting a higher threshold or operate outside the statutory scheme. [Paras 50, 52, 54, 55]

Letters of request under Section 60 must be processed by the ED in conformity with the PMLA procedure and safeguards under Chapters III and V; international conventions do not override domestic statutory requirements.

Reasons to believe - transmission of material in possession to Adjudicating Authority in sealed cover - Whether the ED must forward its 'reasons to believe' and material in its possession to the Adjudicating Authority upon seizure/freezing under Section 17 - HELD THAT: - Section 17(2) requires that immediately after search/seizure or issuance of a freezing order, the authorised officer must forward a copy of the reasons recorded together with the 'material in his possession' to the Adjudicating Authority in a sealed envelope. Rule 8 of the 2005 Rules prescribes a detailed procedure for indexing, sealing, acknowledgement and retention to preserve sanctity and prevent tampering. 'Material in possession' is to be transmitted in full and not selectively; transmission is a precondition for the AA to form its independent satisfaction. [Paras 66, 67, 68, 69, 74]

The ED is required to forward its reasons to believe and all material in its possession to the Adjudicating Authority in the manner mandated by Section 17(2) and Rule 8; partial retention or selective transmission is impermissible.

Two-tier satisfaction of reason to believe (ED and Adjudicating Authority) - service of show cause notice with complete relied upon documents - Procedure to be followed by the Adjudicating Authority upon receipt of an application under Section 17(4) and the level of satisfaction to be recorded before issuing a show cause notice under Section 8(1) - HELD THAT: - The Adjudicating Authority must form an independent 'reason to believe' distinct from the ED's reasons; it cannot mechanically adopt the ED's view. Upon forming such satisfaction, the AA must issue a show cause notice accompanied by all documents it has relied upon (RUDs) in a bound paper book as per Regulation 13(2). The thirty day period for reply must be counted from service of the complete RUDs. The AA must give a meaningful hearing, consider replies, hear parties, and take into account all relevant materials before recording a finding under Section 8(2). [Paras 77, 78, 79, 81, 86]

The AA must independently satisfy itself before issuing a show cause notice and must serve that notice together with all relied upon documents; it must then afford a meaningful hearing and consider replies and materials before recording any finding.

Relied Upon Documents (RUDs) - right to inspection of records and provision of copies - Whether all 'Relied Upon Documents' must be supplied to the parties when the Adjudicating Authority issues the show cause notice and the procedure for inspection - HELD THAT: - Section 8(1) read with Regulation 13(2) mandates that the AA serve all RUDs relied upon in the making of its 'reason to believe' along with the show cause notice. Inspection and copy provisions (Regulations 16-18) apply to material beyond RUDs; RUDs themselves must be supplied without charge. If defendants seek inspection of other material in the AA's possession, they may apply under Form 7 and pay the prescribed fee; inspection must be facilitated expeditiously and confidentiality maintained. Charging fees is permissible for inspection/copies of non-RUD material but not for supplying RUDs. [Paras 81, 82, 96, 98]

All RUDs must accompany the show cause notice; defendants have a statutory route to inspect additional material and to obtain copies under the AA Regulations, with RUDs supplied free of charge.

Transmission of material in possession to Adjudicating Authority in sealed cover - right to inspection of records and provision of copies - Whether the ED may show additional documents to the Adjudicating Authority after issuance of the show cause notice without supplying them to the parties - HELD THAT: - The statutory scheme contemplates transmission of the material in ED's possession to the AA prior to issuance of the show cause notice; showing documents to the AA post-notice outside the prescribed sealed transmission procedure or behind the parties' back is impermissible. Any documents already in ED's possession must have been forwarded in terms of Rule 8; documents cannot be introduced to the AA secretly after issuance of notice. Parties are entitled to receive and rely upon the material the AA considered. [Paras 70, 105]

The ED cannot produce or show to the AA documents post-issuance of the show cause notice without following the sealed transmission procedure and without supplying them to the parties; such practice violates the PMLA Rules and principles of natural justice.

Reasons to believe - Whether the question of supply of 'reasons to believe' recorded by the ED at the stage of Section 17 to the affected parties is finally decided - HELD THAT: - The Court noted the contention and observed that the question whether 'reasons to believe' recorded by the ED under Section 17 must be supplied to the parties is pending before the Supreme Court in SLP(C) No. 12865/2018 (Union of India v. J. Sekar). Consequently, the Delhi High Court refrained from finally deciding that specific question and recorded its position accordingly. [Paras 65, 100]

The specific question whether the ED must supply its Section 17 'reasons to believe' to the parties is left open and is pending adjudication before the Supreme Court.

Proportionate measures - Principle of proportionality and conduct where freezing orders are issued on foreign requests - HELD THAT: - Freezing of bank accounts is a draconian measure and must be proportionate and limited to amounts reasonably linked to the alleged offence. Where clarifications are necessary from the requesting state, the ED should seek them before adopting sweeping freezing measures. Mechanical execution of letters of request without independent satisfaction and proportionality is impermissible under the PMLA and international instruments require measures to be consistent with domestic law. [Paras 106, 107, 108]

Freezing under the PMLA in response to foreign requests must be proportionate, based on independent satisfaction, and limited to amounts reasonably connected to the alleged offence.

Transmission of material in possession to Adjudicating Authority in sealed cover - service of show cause notice with complete relied upon documents - Remedial directions where procedure was not followed in these petitions - HELD THAT: - On the specific facts of these writ petitions the Court found non-compliance: the ED did not transmit all material in its possession to the AA before issuance of the show cause notice and RUDs supplied to parties were limited to panchnamas. The ED admitted willingness to reconsider. By consent the Court set aside the impugned Section 17(1A) orders and the AA's orders dated 28.12.2020; directed the ED to supply the withheld documents to petitioners by 15.11.2021, permit submissions by 15.12.2021, and to pass fresh orders by 15.02.2022; in the interim the specific amounts identified by the AA remain frozen subject to possible de-freezing upon bank guarantees or securities to ED's satisfaction; remedies preserved. [Paras 101, 102, 110]

Impugned ED freezing orders and AA orders set aside; ED to supply all withheld documents, permit submissions, and pass fresh orders within prescribed timelines; interim limited freezing to continue subject to safeguards.

Final Conclusion: The Court held that requests from contracting states under Section 60 must be processed within the PMLA's domestic procedural framework (Chapters III and V); the ED must forward its recorded 'reasons to believe' and all material in its possession to the Adjudicating Authority in sealed cover as required by Section 17(2) and Rule 8; the Adjudicating Authority must form an independent 'reason to believe', serve the show cause notice together with all RUDs, and afford a meaningful hearing with inspection/copying rights as prescribed. On the facts, the freezing and AA orders challenged were set aside, the ED was directed to supply withheld documents and to reconsider and pass fresh orders within specified timelines, and interim limited freezes were permitted to continue subject to safeguards and preservation of remedies.

Anticipatory bail under Section 438 of the Cr.P.C. - prima facie case - cheating by 'Hawala' / 'underground banking' - forgery and use of sham transactions as colourable device - custodial interrogation necessity - maintainability of FIR despite parallel Enforcement Directorate complaint - foreign conviction not a bar to domestic prosecution

Anticipatory bail under Section 438 of the Cr.P.C. - prima facie case - Application for pre-arrest/anticipatory bail refused - HELD THAT: - On the allegations contained in the FIR and the respondent-State's affidavit the court finds that a prima facie case is made out against the petitioner. Repeated averments in the FIR that illegitimate 'Hawala'/'underground banking' operations were run in the name of S.M. Fashion BV and that the petitioner signed instruments (POA, loan agreement, deed) to facilitate those operations persuade the court that the extraordinary relief of anticipatory bail cannot be granted. The court observed that whether the allegations ultimately stand proved is a matter for trial, but for the purpose of this petition the seriousness and nature of the allegations preclude admission to anticipatory bail. [Paras 21]

Petition for anticipatory bail dismissed.

Cheating by 'Hawala' / 'underground banking' - forgery and use of sham transactions as colourable device - Allegations of 'Hawala'/'underground banking' transactions amounting to prima facie cheating and supporting offences of forgery are recognised as made out in the FIR - HELD THAT: - The FIR and the State's reply repeatedly allege that Pabbi conducted 'Hawala' operations disguised as legitimate business through S.M. Fashion BV, that transactions shown in books were sham, and that payments/repayments could not be located in accounts. The court therefore finds it impossible to accept the petitioner's contention that no offence of cheating is alleged. For the limited purpose of deciding the anticipatory bail petition, these allegations prima facie amount to cheating and lend substance to the offences under the IPC relied upon by the prosecution. [Paras 13, 19, 20, 21]

Court accepts that the FIR alleges prima facie cheating by use of 'Hawala'/'underground banking' and sham documentation supporting forgery-related offences.

Foreign conviction not a bar to domestic prosecution - maintainability of FIR despite parallel Enforcement Directorate complaint - Foreign conviction of co-accused and parallel ED proceedings do not preclude registration/continuation of the FIR under IPC in India - HELD THAT: - The court rejects the contention that because the co-accused was tried/convicted in the Netherlands (with the petitioner only summoned as a witness there), no proceedings can be maintained in India. A finding or lack thereof under foreign law does not entitle the petitioner to anticipatory bail in India where the FIR alleges offences under the IPC. Similarly, the existence of a complaint/prosecution under the Prevention of Money Laundering Act before the Enforcement Directorate and cognizance taken by the competent court does not render the FIR under the IPC non-maintainable; the Directorate's limited jurisdiction meant the matter could properly be forwarded to the local police when offences under the IPC were alleged. [Paras 23, 24]

Contentions based on foreign proceedings and parallel ED complaint are rejected; domestic FIR and prosecution may proceed.

Custodial interrogation necessity - prima facie case - Custodial interrogation may be necessary despite age of accused and documentary evidence, and thus bail protection is not warranted - HELD THAT: - Although the petitioner is aged and documentary evidence (POA, loan agreement, deed) exists, the court accepts the State's submission that the 'modus operandi' of alleged 'Hawala' transactions and the petitioner's role may only be effectively disclosed by custodial interrogation. Given the gravity of the allegations and the need to investigate the manner of transfers and concealment, the court finds custodial interrogation a matter for the police and that this consideration militates against granting anticipatory bail. [Paras 25]

Custodial interrogation deemed potentially necessary; bail refused on this ground as well.

Final Conclusion: In view of the FIR and the State's affidavit the High Court found a prima facie case of cheating by 'Hawala'/'underground banking' and related sham documentation, rejected arguments based on foreign proceedings and parallel ED action, held custodial interrogation may be necessary, and accordingly dismissed the petition for anticipatory bail without expressing any final view on merits.

Denial of CENVAT credit on works contract service - renovation/modernisation not amounting to construction - denial of CENVAT credit on sponsorship services - abolition of nexus test for input service credit - remand for production of challans and limited verification - automatic entitlement to interest under Section 11BB on grant of refund

Denial of CENVAT credit on works contract service - renovation/modernisation not amounting to construction - Validity of denial of CENVAT credit claimed on works contract service in respect of renovation/modernisation works - HELD THAT: - The Tribunal examined whether the services for which credit was denied constituted construction of commercial buildings excluded from input services. The assessee established that the works were confined to renovation, modernisation and repairs and did not result in creation of a new structure or complex. On that factual and legal basis the denial of credit could not be sustained. [Paras 3]

Denial of CENVAT credit on works contract service set aside; credit allowed as the works were renovation/modernisation and not new construction.

Denial of CENVAT credit on sponsorship services - abolition of nexus test for input service credit - Lawfulness of denial of CENVAT credit on sponsorship services for lack of nexus with exported output service - HELD THAT: - Applying the Bench's earlier decision in Samsung R&D (as noted), and the CBEC communication of 16/03/2012 which dispensed with the nexus test, the Tribunal held that denial of credit on sponsorship services for want of nexus could not be sustained. The Tribunal also observed that where the Department had not earlier challenged the availing of credit, it could not be faulted when refund was claimed. Consequently, the impugned denial was unsustainable except where factual documentation was missing. [Paras 4]

Denial of CENVAT credit on sponsorship services quashed and credit/refund directed to be allowed in accordance with the cited ratio without insisting on nexus.

Remand for production of challans and limited verification - Appropriate course where sponsorship-credit claims lacked supporting challan copies in two specified appeals - HELD THAT: - For two appeals the adjudicating authority had recorded absence of challan copies and consequently could not determine the exact nature of the service. Although the legal ratio rejecting the nexus requirement applies, the Tribunal directed a limited remand so that the assessee may furnish the missing challans and the adjudicating authority may satisfy itself on the documentation and thereafter apply the established ratio without insisting on nexus. [Paras 5, 6]

Appeals remitted for limited purpose: assessee to produce challans; on satisfaction, adjudicating authority to apply the stated ratio and grant refund.

Automatic entitlement to interest under Section 11BB on grant of refund - Whether the assessee is entitled to consequential interest upon grant of refund - HELD THAT: - The Tribunal noted that interest under Section 11BB of the Central Excise Act is automatic and contingent on the grant of refund. Since refunds were to be allowed (or directed to be considered in accordance with directions), the assessee would be entitled to interest under Section 11BB. [Paras 7]

Assessee entitled to consequential interest under Section 11BB upon grant of refund.

Final Conclusion: Appeals allowing CENVAT credit on works contract services and on sponsorship services are allowed; two appeals are remitted for limited verification of challan documents with directions to apply the bench ratio without insisting on nexus; consequential interest under Section 11BB shall follow the grant of refund.

Intermediary - export of services - sub contracting / subcontractor - essential character test for bundled services - definition of intermediary under Rule 2(l) of the Place of Provision of Services Rules, 2012 - res adjudicata / finality of departmental decision on classification

Intermediary - definition of intermediary under Rule 2(l) of the Place of Provision of Services Rules, 2012 - sub contracting / subcontractor - export of services - Whether the appellant was acting as an intermediary for the foreign universities (and thus taxable) or was a subcontractor providing services to IDP Australia (and thus not an intermediary), with the services treated as export of services. - HELD THAT: - The Tribunal found on the record that the appellant had a contract only with IDP Australia and received commission exclusively from IDP Australia. IDP Australia received consideration from the foreign universities and had sub contracted the recruitment work to its wholly owned subsidiary in India. There was no material to show any privity of contract between the appellant and the foreign universities or that the appellant was liaising between IDP Australia and the universities. Applying the definition in Rule 2(l) and examining the essential character of the arrangements, the Tribunal concluded that the appellant was a subcontractor performing services sub contracted by IDP Australia and not an intermediary arranging or facilitating the provision of the main service by a third party. Consequently, the Revenue failed to establish that the appellant acted as an intermediary; the services were held to be export of services or otherwise not taxable as intermediary services. [Paras 8]

Find in favour of the appellant: appellant is not an intermediary; impugned demand on merits is not sustained.

Res adjudicata / finality of departmental decision on classification - resubmission of already settled issue - Whether the Revenue could reopen the same question of classification which had been earlier considered and dropped by the Department for a prior period. - HELD THAT: - The Tribunal recorded that identical services had earlier been the subject of a show cause notice for an earlier period and that the demand had been dropped by the Department holding the services amounted to export of services. DGCEI subsequently took a different view and issued a fresh show cause notice on the same issue for a later period. The Tribunal held that where the Department itself had settled the issue for the same services, issuing a fresh show cause notice on the identical issue simply because a different view is now taken by DGCEI was not sustainable; the proper course, if aggrieved, would have been to challenge the earlier order before a higher forum. On this ground the impugned order was also set aside. [Paras 9]

Impugned demand set aside also on the ground that the issue had been previously settled by the Department and could not be reopened by DGCEI in the manner attempted.

Penalty and interest contingent on sustaining demand - Whether interest and penalties imposed on the appellant could be sustained where the substantive demand was not established. - HELD THAT: - The Tribunal's findings that the appellant was not an intermediary and that the demand was unsustainable necessarily negated the basis for levy of interest and penalties confirmed in the impugned order. Having set aside the substantive demand both on merits and for having been previously settled, the consequential imposition of penalty and interest could not survive. [Paras 10]

Penalty and interest confirmed in the impugned order are not sustainable and are set aside consequentially.

Final Conclusion: The impugned order demanding service tax (for 1.4.2014 to 30.9.2015), and the consequential interest and penalties, is set aside; the appeal is allowed with consequential reliefs, if any.

Refund of tax paid under mistake of law - unconstitutionality of levy of service tax on ocean freight - refund claim under Section 11B of the Central Excise Act - limitation not applicable where duty/tax paid without authority of law

Refund of tax paid under mistake of law - unconstitutionality of levy of service tax on ocean freight - refund claim under Section 11B of the Central Excise Act - limitation not applicable where duty/tax paid without authority of law - Validity of rejection of the appellant's refund claim for service tax paid on ocean freight for April 2017 to June 2017. - HELD THAT: - The appellant's claim for refund of service tax paid on ocean freight was founded on judicial decisions holding the levy unconstitutional. The tribunal accepted that the levy on ocean freight had been held ultra vires by the jurisdictional High Courts cited, so the tax paid was by mistake of law. Following the reasoning in the jurisdictional decisions relied upon, a payment which was not payable in law does not fall within the ambit of the statutory refund provision relied upon by the department and cannot be retained by the authorities. Analogous authorities dealing with customs duties establish that where duty/tax is paid without authority of law the limitation under the enactment is not a bar to refund and the department is liable to refund the excess/erroneously paid amount. On these legal premises the reasons recorded by the lower authorities for rejecting the refund claim are unsustainable.

Impugned order rejecting the refund claim is set aside; the appeal is allowed and the appellant is entitled to refund with consequential benefits as per law.

Final Conclusion: The appellate order rejecting the refund of service tax on ocean freight for April 2017 to June 2017 is quashed; the refund claim is allowed and the appellant shall receive consequential benefits in accordance with law.

Refund of service tax paid without authority of law - mistaken payment doctrine - limitation for refund claims and applicability of Limitation Act - inapplicability of statutory refund time-bar where duty/service tax was not payable in law - refund under CENVAT Credit Rules, 2004 - Rule 5

Refund of service tax paid without authority of law - mistaken payment doctrine - limitation for refund claims and applicability of Limitation Act - inapplicability of statutory refund time-bar where duty/service tax was not payable in law - refund under CENVAT Credit Rules, 2004 - Rule 5 - The rejection of the appellant's refund claim as time-barred was not sustainable and the appeal was allowed. - HELD THAT: - The Tribunal held that the refund claim for service tax paid for October 2016 to December 2016, filed under Rule 5 of the CENVAT Credit Rules, 2004, could not be rejected solely on the ground of time-bar where the payment was not a tax 'payable in law' but made by mistake or without authority. The Court relied on the reasoning in the jurisdictional High Court decisions cited in the order, including the decision in CCE (Appeals), Bangalore Vs KVR Construction , which treated payments made under a mistake as not attracting statutory refund bars, and the decision in M/s DHL Express India Pvt. Ltd. Vs Commissioner of Service Tax , which held that where duty is paid in excess or without authority, the specific short statutory limitation for refund under the Customs code is not necessarily applicable and the Limitation Act governs. Applying these principles, the Tribunal found no justification in the lower authorities' reliance on Notification No.27/2012-CE (NT) and the impugned orders rejecting the refund on limitation grounds were set aside. The Tribunal allowed the appeal and directed consequential benefits, if any, as per law. [Paras 3, 4, 5]

Impugned order rejecting the refund claim as time-barred set aside; appeal allowed and refund claim to be considered in accordance with law with consequential benefits, if any.

Final Conclusion: The appeal succeeds. The order rejecting the refund claim for service tax paid for October 2016 to December 2016 as time-barred is set aside and the appellant is entitled to refund subject to verification and consequential benefits as per law.

Reverse charge mechanism - manpower recruitment or supply agency service - management, maintenance and repair service - business auxiliary services - export of services - classification of composite services by essential character - penalty under Section 78 of the Finance Act, 1994

Penalty under Section 78 of the Finance Act, 1994 - reverse charge mechanism - Penalties imposed in respect of Online Information and Database Access and Retrieval Service and Consulting Engineering Service set aside. - HELD THAT: - The appellant did not contest the tax liability for Online Database and Consulting Engineering services and has paid service tax with interest. The Tribunal accepted the appellant's bona fide belief that the obligation to pay under the reverse charge mechanism arose only from 19.04.2006 and that litigations and evolving jurisprudence influenced compliance. Considering that tax was paid with interest and that payment would have been revenue-neutral because of entitlement to credit, the Tribunal held that penalties under Section 78 could not be sustained and accordingly set them aside. [Paras 10]

Penalties in respect of Online Information and Database Access and Retrieval Service and Consulting Engineering Service are set aside, while the tax and interest are upheld.

Manpower recruitment or supply agency service - reverse charge mechanism - Demand of service tax under the head 'Manpower Recruitment or Supply Agency Service' set aside. - HELD THAT: - The Secondment Agreement shows deputation of expatriate employees by related foreign companies to the appellant and that the appellant entered into individual employment contracts, bore salary costs (split as local and home country portions) and treated assignees as its employees. Payments to the foreign group were part of salary arrangements and not consideration for recruitment or supply of manpower. Following the Tribunal's and appellate authorities' reasoning that secondment where an employer-employee relationship with the Indian entity exists does not attract manpower supply tax, the demand under this category was held unsustainable and set aside. [Paras 11, 12, 13, 16]

Demand under 'Manpower Recruitment or Supply Agency Service' is set aside.

Management, maintenance and repair service - business auxiliary services - classification of composite services by essential character - export of services - Demand of service tax classified as 'Management, Maintenance and Repair Service' set aside; services held to be 'Business Auxiliary Services' and qualify as export of services. - HELD THAT: - The Memorandum and its Appendix show that the principal activity performed by the appellant for the foreign group was marketing, sales promotion and product support, with after-sales repair and servicing being incidental to the marketing function. Applying the statutory rule that composite services are to be classified according to the service giving them their essential character, the Tribunal concluded the essential character is marketing/sales promotion (Business Auxiliary Service). As the recipient is situated outside India, such Business Auxiliary Services qualify as export of services under the Export of Service Rules and are not taxable in India. The department's classification as Management, Maintenance and Repair Service was therefore rejected and the demand set aside. [Paras 17, 18, 19, 20, 21]

Demand under 'Management, Maintenance and Repair Service' is set aside; services classified as 'Business Auxiliary Services' and treated as export of services.

Online Information and Database Access and Retrieval Service - consulting engineering service - Tax demands in respect of Online Information and Database Access and Retrieval Service and Consulting Engineering Service upheld (with interest); penalties set aside. - HELD THAT: - The Tribunal noted the appellant does not contest the tax liability for these two categories and has paid the tax with interest. Accordingly, while the tax and interest were sustained, the imposition of penalties was negated on the grounds described in the Tribunal's reasoning (bonafide belief, litigation on reverse charge applicability and revenue-neutrality due to credit). [Paras 23]

Service tax demands for Online Information and Database Access and Retrieval Service and Consulting Engineering Service upheld with interest; penalties in respect of these services set aside.

Final Conclusion: The appeal is partly allowed: demands under 'Manpower Recruitment or Supply Agency Service' and 'Management, Maintenance and Repair Service' are set aside; demands for 'Consulting Engineering Service' and 'Online Information and Database Access and Retrieval Service' are upheld with interest but penalties in respect of those two services are set aside. Consequential reliefs, if any, follow.

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - limitation of one year under Notification No.14/2016-CE (N.T.) - reckoning of limitation period from the end of the quarter - time barred refund - entitlement to refund when filed within prescribed period

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - limitation of one year under Notification No.14/2016-CE (N.T.) - reckoning of limitation period from the end of the quarter - time barred refund - Refund claim for the quarter October-December 2016 filed on 05.01.2018 is time barred under the one year limitation. - HELD THAT: - The Tribunal applied the condition in paragraph 2 of Notification No.14/2016-CE (N.T.) which bars filing more than one claim in a particular quarter and requires the one year limitation to be reckoned from the end of the quarter for which refund is sought. For the quarter October December 2016 the one year period expired on 31 December 2017. Although the claim form was dispatched by post on 02.01.2018, the refund was filed only on 05.01.2018, which is beyond the one year period; hence the refund is time barred. The rejection of this refund claim is therefore maintained. [Paras 4]

Refund for October-December 2016 is time barred and the rejection is upheld.

Refund under Rule 5 of the Cenvat Credit Rules, 2004 - limitation of one year under Notification No.14/2016-CE (N.T.) - entitlement to refund when filed within prescribed period - Refund claim for the quarter January-March-2017 filed on 27.03.2018 is within the one year limitation and is allowable. - HELD THAT: - Applying the same reckoning principle from the end of the quarter, the claim for January March 2017 filed on 27.03.2018 falls within one year of the end of that quarter. The Tribunal therefore held that this refund is not time barred and the appellant is entitled to the refund. [Paras 4]

Refund for January-March-2017 is within time and is allowed.

Final Conclusion: Appeal partly allowed: the refund claim for October-December 2016 is rejected as time barred, and the refund claim for January-March-2017 is allowed.

Inadmissibility of statements not recorded in accordance with section 9D of the Central Excise Act, 1944 - oral evidence inadmissible to prove contents of a document; primacy of primary evidence - requirement to produce lab test reports as primary evidence when relying on documentary chemical composition - burden of proof in establishment of ineligible CENVAT credit - set aside of demand and appropriation for failure to establish allegations in show cause notice

Inadmissibility of statements not recorded in accordance with section 9D of the Central Excise Act, 1944 - burden of proof in establishment of ineligible CENVAT credit - Statements of dealers relied upon by the department which were not produced for examination under section 9D of the Central Excise Act, 1944 cannot be admitted or relied upon to establish that CENVAT credit was ineligible. - HELD THAT: - The Tribunal found that the department's case rested materially on statements of the proprietors/managers of the dealers which were not subjected to examination under section 9D. Following authority recognizing the mandatory procedure under section 9D, the Tribunal held such statements to be inadmissible and irrelevant for proof. Because the department relied primarily on those unexamined statements to allege that dealers had procured non-duty paid scrap locally and passed on ineligible CENVAT credit to the appellant, the foundational evidentiary basis for the demand was lacking. The absence of examination of those witnesses deprived the adjudication of admissible evidence necessary to discharge the burden of proof on the department to establish the allegation of ineligible credit. [Paras 10, 12]

Reliance on the unexamined statements was impermissible; the departmental case based on those statements fails and cannot sustain the demand.

Oral evidence inadmissible to prove contents of a document; primacy of primary evidence - requirement to produce lab test reports as primary evidence when relying on documentary chemical composition - The department could not rely on the appellant's oral admission and third party letters alone to prove disparity in chemical composition; the lab test reports relied upon had to be produced in primary form and comparison required production of both reports. - HELD THAT: - The Tribunal applied the principle that oral evidence cannot be admitted to prove the contents of a document and that primary documentary evidence is required where the contents of a document (here, lab test reports) are relied upon. The department produced a lab test report of the manufacturer and a letter from the manufacturer but did not produce corresponding lab test reports of the appellant's inputs; instead it relied on the oral statement of the appellant's Manager (Process) to establish discrepancies. Such reliance on oral evidence in place of the primary documents contravened the best evidence rule and Section 59 (and Section 22 in context) of the Evidence Act as explained in the judgment. Consequently the asserted difference in chemical composition was not proved by admissible evidence. [Paras 11, 12]

Failure to produce the requisite primary lab reports and reliance on oral evidence rendered the alleged discrepancies unproven; the evidentiary basis for confirming the demand was insufficient.

Final Conclusion: The Tribunal set aside the adjudicating authority's order confirming the demand and imposing penalties for alleged inadmissible CENVAT credit and also set aside the appropriation of amounts from the appellant's rebate claim; both appeals were allowed with consequential relief.

Refund of tax and interest - interest under Section 42 of the Delhi Value Added Tax Act, 2004 - transitional input tax credit carried forward under Section 140(1) of the Delhi Goods and Services Tax Act, 2017 - principle of unjust enrichment - direction to decide pending refund application expeditiously

Refund of tax and interest - direction to decide pending refund application expeditiously - The respondents were directed to decide the petitioner's pending refund claim for the specified tax period in accordance with law. - HELD THAT: - The court recorded that the petitioner's application for refund (including claimed interest) for the period 01.04.2017 to 30.06.2017 remained pending despite reminders. The factual position was undisputed between the parties that no decision had been rendered. In exercise of its supervisory jurisdiction the court directed the concerned respondents to decide the petitioner's refund claim in accordance with law and as expeditiously as possible and practicable, giving explicit instruction to consider the claim for refund and interest without expressing any view on the merits of the claim itself. [Paras 6, 7]

Respondents directed to decide the petitioner's refund claim for 01.04.2017 to 30.06.2017 in accordance with law and expeditiously.

Interest under Section 42 of the Delhi Value Added Tax Act, 2004 - principle of unjust enrichment - transitional input tax credit carried forward under Section 140(1) of the Delhi Goods and Services Tax Act, 2017 - No adjudication on the merits of entitlement to interest or the correctness of transitional credit carry-forward; respondents were directed to consider these aspects having regard to law and the principle of unjust enrichment. - HELD THAT: - The court noted the petitioner's claim for interest under Section 42 of the DVAT Act and the fact that part of the claimed amount had been carried forward as transitional input tax credit under Section 140(1) of the DGST Act. Rather than deciding entitlement on merits, the court required the respondents, when adjudicating the pending refund application, to consider these statutory provisions and the established principle of unjust enrichment (as articulated in Mafatlal Industries Ltd. v. Union of India) while determining the claim. The court therefore remitted the substantive issues of entitlement to refund, interest and the effect of transitional credit for fresh decision by the authority concerned. [Paras 3, 6]

Entitlement to interest and effect of transitional credit not decided on merits; these matters remitted to the respondents for consideration in accordance with law, mindful of the principle of unjust enrichment.

Final Conclusion: Writ petition disposed of by directing the respondents to decide the petitioner's pending refund claim for 01.04.2017 to 30.06.2017 in accordance with law and expeditiously; entitlement to interest and related transitional-credit issues were not adjudicated and are to be considered afresh by the authority, having regard to the principle of unjust enrichment.

Writ of Mandamus - revisit assessment - principles of natural justice - duty of Assessing Officer - direction by superior authority - summons for production of documents

Direction by superior authority - duty of Assessing Officer - revisit assessment - Writ of Mandamus - Whether the second and third respondents must act upon the first respondent's directions dated 12.04.2017 and revisit the assessments for the specified assessment years and complete reassessment. - HELD THAT: - The Court found that the first respondent (head of the department) had directed that the Assessing Officer should be instructed to re-visit the assessments and provide bill-wise details so as to adhere to the principles of natural justice. The petitioner complained that no further communication had been made and the assessments remained pending. The respondents explained that earlier summons were not complied with by the petitioner which impeded the process. The Court held that if the second respondent has not already issued the requisite instruction to the third respondent, he shall do so immediately; and if the instruction was already given, the third respondent is under a duty to revisit the assessments for the assessment years in question and complete the reassessment exercise. The Court further recorded that, for verification of the alleged mismatch, the Assessing Officer may issue summons to the petitioner for production of necessary documents, and on receipt of such summons the petitioner must produce the required inputs so that the reassessment can be finalized. The Court therefore issued a mandamus-styled direction limited to ensuring the departmental directions dated 12.04.2017 are acted upon and the reassessment process is completed expeditiously. [Paras 7, 8]

The second respondent shall, if not already done, instruct the third respondent to revisit and complete reassessment for 2013-14 and 2014-15 in accordance with the first respondent's letter dated 12.04.2017; the third respondent may summon the petitioner for documents and, on receipt, shall complete the reassessment as early as possible.

Final Conclusion: Writ petition disposed by directing the respondents to ensure that the departmental direction dated 12.04.2017 is implemented and the assessments for 2013-14 and 2014-15 are revisited and finalized; no order as to costs.

Cheating - offence under Section 420 of the Indian Penal Code - prima-facie satisfaction for summoning - facilitator / intermediary liability in marketplace model - quashing of criminal complaint and process

Cheating - offence under Section 420 of the Indian Penal Code - facilitator / intermediary liability in marketplace model - prima-facie satisfaction for summoning - Whether the allegations and inquiry disclose a prima-facie case of cheating against the Petitioner (an e commerce marketplace intermediary) warranting issuance of process under Section 420 IPC. - HELD THAT: - The Court found as admitted that the Petitioner operates a marketplace based e commerce model and acts as a neutral facilitator/intermediary, does not own the goods, and does not control the transaction or physical delivery. The learned Magistrate recognised the limited human contact but nonetheless held prima facie that the Petitioner intended to deceive the complainant. The Court held that the complaint and the police inquiry/report do not disclose that the Petitioner induced the complainant to part with property by means of any representation known to be false, nor do they show a dishonest intention on the part of the Petitioner at the time the order was placed. There is no material to demonstrate active participation or control by the Petitioner (or by the identified officer) over dispatch or delivery that would establish the essential ingredients of cheating under Section 420 IPC. Consequently the learned Magistrate erred in recording a prima facie satisfaction to issue process against the Petitioner where the facts disclose a commercial/consumer grievance arising in a marketplace transaction rather than criminal deception. [Paras 14, 15, 16]

Allegations do not constitute an offence of cheating against the Petitioner; prima facie satisfaction for summoning was not made out.

Final Conclusion: Writ petition allowed. Complaint No. 193/2020 and the order dated 16th August, 2021 issuing process against the Petitioner are quashed insofar as they pertain to the Petitioner.