TaxTMI Updates e-Newsletter
Nov 10,2020

Prohibition on use of physical violence/torture by investigatory officers - right to life and personal liberty under Article 21 - protection against torture - informal custody/deprivation of liberty during prolonged interrogation - right to presence of legal counsel during interrogation (visible but not in hearing range) - transfer of investigation to ensure impartiality where participation is tainted - compliance with procedural safeguards under the CGST Act in searches, summons and enquiries - judicial discretion to grant pre-arrest protection in exceptional cases

Prohibition on use of physical violence/torture by investigatory officers - right to life and personal liberty under Article 21 - protection against torture - Officials of the GST intelligence do not have any privilege to use physical violence or torture while conducting searches, interrogations or enquiries and such conduct would violate Article 21. - HELD THAT: - The Court observed that no law was shown to permit officials under the CGST Act to use physical violence against persons suspected of tax evasion and held that protection against torture and custodial violence is part of the right to life and personal liberty under Article 21. Reliance was placed on the principles set out in D.K. Basu regarding the constitutional and statutory safeguards against torture and the risks posed by prolonged interrogation assumed to be informal custody. While the Court did not finally adjudicate all factual disputes, it found prima facie material (including medical outpatient advice Annexure P-4 and police acknowledgement Annexure P-5) that could not rule out the possibility of use of violence by certain officials, and accordingly enjoined respondents from any acts of violence or torture in the pending enquiry. [Paras 78, 79, 80, 81, 108]

Respondents are prohibited from using any acts of violence or torture against petitioner nos.2 to 4 or their employees in relation to the enquiry.

Transfer of investigation to ensure impartiality where participation is tainted - judicial discretion to grant pre-arrest protection in exceptional cases - Participation of the 5th respondent in the enquiry was inappropriate in view of the prima facie material and absence of a counter-affidavit denying physical violence; the enquiry insofar as it involves the 1st petitioner shall not be handled by the 5th respondent, and pre-arrest protection is maintainable in the exceptional facts of the case. - HELD THAT: - The Court noted the absence of a denial by the 5th respondent to the allegations of physical violence and accepted the Additional Solicitor General's concession that the 5th respondent would not participate further. Applying the principle that pre-arrest protection is available under Article 226 sparingly but can be granted in exceptional cases (following P.V. Ramana Reddy as binding precedent), the Court concluded that, on the facts and prima-facie materials, it would be inappropriate for the 5th respondent to continue in the enquiry and that the Writ Petition was maintainable to grant the reliefs sought. [Paras 93, 94, 108]

The 5th respondent shall not participate in the enquiry and the conduct of the enquiry shall be transferred to another official designated by the 2nd respondent; the writ petition is maintainable and pre-arrest protection was justified in the exceptional facts.

Right to presence of legal counsel during interrogation (visible but not in hearing range) - informal custody/deprivation of liberty during prolonged interrogation - Petitioner nos.2 to 4 and their employees are entitled to have their statements recorded in the visible range of an advocate (but not within hearing distance), and interrogations shall be confined to specified daytime hours. - HELD THAT: - After considering authorities and the balance between investigatory needs and protection of personal liberty, the Court rejected an absolute bar on counsel's presence during examination. Citing precedents that permit observation by counsel from a distance or behind a partition, the Court directed that examinations be between 10:30 a.m. and 5:00 p.m. on weekdays and be conducted within visible range of an advocate who shall not be in hearing range, thereby guarding against informal custody and coercion while allowing investigation to proceed. [Paras 97, 98, 99, 100, 108]

Interrogation of petitioner nos.2 to 4 and their employees shall occur between 10:30 a.m. and 5:00 p.m. on weekdays and within the visible range (but not hearing range) of an advocate appointed by them.

Compliance with procedural safeguards under the CGST Act in searches, summons and enquiries - informal custody/deprivation of liberty during prolonged interrogation - The respondents must adhere to the provisions of the CGST Act, 2017 and avoid practices that amount to deprivation of personal liberty; summons and interrogation practices beyond ordinary hours and prolonged retention are subject to scrutiny. - HELD THAT: - The Court recorded concern about issuance of a summons under Section 70 at 00:30 hrs and the continuation of searches past midnight, noting that such practices prima facie amount to deprivation of liberty and cannot be justified without acceptable explanation. The decision emphasises that enquiries, searches and summons must follow statutory procedure under the CGST Act and constitutional safeguards, and that informal custody consequences attract the protections applicable to detained persons. [Paras 88, 89, 90, 91, 108]

Respondents shall adhere to the provisions of the CGST Act, 2017 in conducting search, investigation or enquiry and shall not subject persons to informal custody or coercive practices.

Compliance with procedural safeguards under the CGST Act in searches, summons and enquiries - transfer of investigation to ensure impartiality where participation is tainted - Limitation on transfer of large-scale interrogation to New Delhi imposed in view of exceptional circumstances (public health risks and expense) - limited attendance in New Delhi permitted only for petitioner nos.2 to 4 on one occasion, while the remainder of interrogations shall be conducted at Hyderabad zonal unit. - HELD THAT: - Balancing the need to advance investigation with the serious public health risks from COVID-19 and the financial and logistical burdens of sending many persons to New Delhi, the Court accepted the respondents' concession that petitioner nos.2 to 4 could attend New Delhi once for two to three days and directed that interrogation of other persons be conducted at the Hyderabad zonal unit. This direction seeks to protect health and limit inconvenience while allowing necessary investigative steps. [Paras 104, 105, 106, 107, 108]

Petitioner nos.2 to 4 may be summoned to New Delhi once for two to three days; other persons and the remainder of interrogations shall be conducted at Hyderabad.

Judicial discretion to grant pre-arrest protection in exceptional cases - Interim applications for direction permitting counsel's presence, stay of arrest and transfer have been disposed as directed in the order. - HELD THAT: - Applying the established principle that pre-arrest protection under Article 226 is to be exercised sparingly, the Court found the facts exceptional and made specific interim directions (including counsel's presence, stay of arrest extended earlier orders) and finally disposed I.A.Nos.1, 2 & 3 of 2019 and I.A.No.1 of 2020 while dismissing I.A.No.2 of 2020. The Court expressly did not express opinion on other contested contentions. [Paras 23, 93, 108, 109]

I.A.Nos.1, 2 & 3 of 2019 and I.A.No.1 of 2020 disposed of in terms of the order; I.A.No.2 of 2020 dismissed.

Final Conclusion: The Court held that GST intelligence officials have no licence to use physical violence or torture; on the prima facie material the enquiry shall not be conducted by the 5th respondent; interrogations of petitioner nos.2 to 4 and employees must be between 10:30 a.m. and 5:00 p.m. in the visible (but not hearing) range of counsel; petitioner nos.2 to 4 may be summoned to New Delhi once for two to three days while other proceedings shall be held at Hyderabad; respondents must comply with CGST Act procedures; specified interim applications were disposed of in accordance with these directions.

Classification of goods under the First Schedule to the Customs Tariff Act - Application of Chapter and Section Notes for tariff classification - Distinction between "areca (betel) nuts" and "betel nut product known as supari" - Application of General Rules of Interpretation of the Tariff (Rule 1) - Reliance on judicial decisions and prior tribunal determination for identical product - Determination of applicable GST rate by reference to Customs Tariff classification and GST rate notifications

Classification of goods under the First Schedule to the Customs Tariff Act - Application of Chapter and Section Notes for tariff classification - Distinction between "areca (betel) nuts" and "betel nut product known as supari" - Application of General Rules of Interpretation of the Tariff (Rule 1) - Reliance on judicial decisions and prior tribunal determination for identical product - Nizam Pakku is classifiable under Chapter heading 0802 of the Customs Tariff and, at the 8-digit level, under CTH 08028090 (other areca nuts) rather than under CTH 21069030 (betel nut product known as "supari"). - HELD THAT: - The Authority examined the product description, manufacturing process and test reports showing that the article consists predominantly of dried areca (betel) nut (92%) with small quantities of vanaspati/edible oil, sugar, menthol and cardamom added. Chapter Note 3 to Chapter 08 permits moderate heat treatment and addition of vegetable oil or small quantities of glucose syrup for preservation or to improve appearance so long as the product retains the character of dried nuts. Applying Rule 1 of General Principles of Interpretation and the Chapter notes, the essential character of areca nut is retained in the product supplied by the applicant. The Authority further relied on the final CESTAT determination in respect of the identical product manufactured by M/s. Azam Laminators (P) Ltd., which classified that product under Central Excise Tariff heading 08028090; the applicant's product was not shown to be different from that product. Accordingly, the product falls in CTH 08028090 (other areca nuts) and not within the definition of a "betel nut product known as supari" in Chapter 21. [Paras 7]

Nizam Pakku is classifiable under CTH 08028090 (areca nuts - other).

Determination of applicable GST rate by reference to Customs Tariff classification and GST rate notifications - Interpretation of GST rate schedules by reference to the First Schedule to the Customs Tariff Act - Application of GST Council deliberations and notification entries to classification-based rate determination - Goods classified under CTH 08028090 attract the rate specified for other nuts under the GST notifications, and Nizam Pakku attracts the rate at Sl. No. 15 of Schedule II (6% CGST and 6% SGST as notified). - HELD THAT: - Having held the product to be classifiable under Chapter 0802 (08028090), the Authority examined the GST rate notifications. The notification and its explanations require reference to the First Schedule to the Customs Tariff Act for tariff interpretation. The schedules distinguish dried areca nuts (Sl. No. 28 of Schedule I - taxed at 5%) from other goods under heading 0802 (Sl. No. 15 of Schedule II - taxed at 6%). The Minutes of the GST Council indicate the policy basis for treating certain dried areca nuts at a concessional rate; however, the product in hand is a betel nut as marketed and retains the essential character of betel nut, thereby falling within the 0802 entries attracting the Schedule II rate. Consequently, the applicable tax rate for the classified entry is as per Sl. No. 15 of Schedule II. [Paras 8, 9]

The product attracts the rate at Sl. No. 15 of Schedule II - 6% CGST and 6% SGST as per the relevant notifications.

Final Conclusion: The Authority rules that "Nizam Pakku" traded by the applicant is classifiable under CTH 08028090 (other areca nuts) and, accordingly, attracts the GST rate specified at Sl. No. 15 of Schedule II of the notifications - 6% CGST and 6% SGST.

Expenditure incurred in relation to income not includible in total income - Rule 8D - method of computing disallowance - Proximate relationship between expenditure and exempt income - Onus on Revenue to establish connection between expenditure and tax-exempt income - Revenue expenditure v. capital expenditure - test of enduring advantage - Expenditure merely facilitating business operations may be revenue in nature

Expenditure incurred in relation to income not includible in total income - Rule 8D - method of computing disallowance - Proximate relationship between expenditure and exempt income - Onus on Revenue to establish connection between expenditure and tax-exempt income - Deletion of additions under section 14A read with Rule 8D in respect of dividend/exempt income - HELD THAT: - The Court held that section 14A and Rule 8D apply only where expenditure falls within the mischief of section 14A and there is a proximate relationship between the expenditure and the exempt income. The Assessing Officer must, with reference to the assessee's accounts, demonstrate how the expenditure relates to income not includible in total income; mere application of Rule 8D or conjecture is insufficient. On the facts, the Tribunal correctly found that the AO had not shown such proximate relationship and had straightaway applied Rule 8D without adequate justification. The Court therefore found no reason to disturb the Tribunal's deletion of the disallowance. [Paras 11, 12, 19, 20, 21]

Tribunal's deletion of additions under section 14A/Rule 8D upheld; disallowance quashed for lack of proximate relationship and absence of proof by Revenue.

Revenue expenditure v. capital expenditure - test of enduring advantage - Expenditure merely facilitating business operations may be revenue in nature - Treatment of contribution for construction/repair of bridge as revenue or capital expenditure - HELD THAT: - Applying the tests in L.B. Sugar and subsequent authorities, the Court observed that expenditure which secures an advantage of enduring benefit is not invariably capital; what matters is the commercial nature of the advantage. If the payment merely facilitates the assessee's business operations and enables more efficient conduct of business without creating or acquiring fixed capital for the assessee, it may be revenue in nature. On the facts, contribution for the bridge was held to be of the character that facilitated access and operations and thus revenue expenditure. The Tribunal's conclusion, supported by the co ordinate decision in Salgaocar Mining Industries, was affirmed. [Paras 22, 24, 31, 32]

Contribution for construction/repair of bridge treated as revenue expenditure; addition deleted.

Final Conclusion: Both substantial questions of law answered against the Revenue and in favour of the Assessee; the Tribunal's order is affirmed and the Revenue's appeal is dismissed; no order as to costs.

Inherent powers of High Court - jurisdiction of subordinate criminal courts - power to call status report from investigative tax authority - sanction for prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules Act, 2015 - confidentiality of ongoing investigation and protection of informer identity

Inherent powers of High Court - jurisdiction of subordinate criminal courts - power to call status report from investigative tax authority - Validity of orders passed by the ACMM directing the Income Tax Department to file a status report and calling for an action taken report in respect of a Tax Evasion Petition. - HELD THAT: - The court found that no provision of the Criminal Procedure Code confers inherent powers upon an ACMM or other subordinate courts; inherent powers reside exclusively with the High Court. The impugned orders failed to specify any statutory provision under which the ACMM purported to exercise authority to call for a status report or to initiate contempt or penal proceedings against officials of the Income Tax Department. The filing of a status/action taken report by the investigation wing in absence of a proceeding before the Court did not fall within the ACMM's statutory powers. Consequently, the ACMM usurped jurisdiction vested in the High Court and acted without lawful authority in repeatedly directing the Department to file status reports and in making observations castigating the PDIT's conduct. [Paras 9, 11, 12, 13, 18]

The orders passed by the ACMM calling for a status report and directing compliance were set aside as beyond the jurisdiction of the subordinate court.

Sanction for prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules Act, 2015 - power to call status report from investigative tax authority - Applicability of statutory sanction and prescribed procedure under the Black Money Act to prosecution or action arising from a Tax Evasion Petition. - HELD THAT: - The court noted that the Black Money Act contains specific provisions governing initiation of prosecution and the requirement of sanction by specified authorities. The ACMM did not consider or apply the sanction provisions and related procedural safeguards in the Act when issuing directions to the tax authorities. In matters arising from Tax Evasion Petitions, the statutory scheme and administrative framework of the Income Tax Department govern investigation and communication of outcomes; subordinate criminal courts cannot override or bypass those statutory processes by summoning status reports where no court proceeding is pending. [Paras 14, 15, 17]

Directions issued by the ACMM without regard to the sanction and procedure under the Black Money Act were impermissible and unsustainable.

Confidentiality of ongoing investigation and protection of informer identity - Whether providing investigation status to the informer/complainant during an ongoing tax investigation is appropriate. - HELD THAT: - The court observed that disclosure of investigative progress to an informer is inappropriate and may be injurious to the investigation. It relied on the principle that intrusive supervision by interested parties can impede investigative processes and subject investigating officers to external pressures. Accordingly, routine communication of investigative status to the complainant is not warranted, and the Department's internal framework and restrictions (including exclusion from RTI in certain contexts) support non-disclosure until investigation culmination. [Paras 15, 16]

Communicating the progress of an ongoing investigation to the informer is inappropriate and not a justification for the ACMM's directions to the Department.

Final Conclusion: The impugned orders dated 24.09.2020, 05.10.2020, 21.10.2020 and 28.10.2020 passed by the ACMM directing the Income Tax Department to file status reports are set aside for want of jurisdiction and failure to observe the statutory scheme; the petition is allowed and disposed of.

Refund of tax paid on admitted income - self-assessment under section 140A - chargeability to tax - estoppel against law - effect of possession under Section 53-A of the Transfer of Property Act on time of transfer - finality of assessment / revised assessment - tax avoidance versus tax planning - claim for refund where regular assessment is annulled

Refund of tax paid on admitted income - self-assessment under section 140A - claim for refund where regular assessment is annulled - Whether the petitioner is entitled to refund of tax paid on income admitted in self-assessment returns after annulment of additions in the regular assessment. - HELD THAT: - The Court held that tax paid by the assessee on the basis of self-assessment remains a valid recovery unless the self-assessment itself is disturbed. The annulment of additions made in the regular assessment does not automatically entitle the assessee to refund tax paid under self-assessment. The scheme of the Act treats tax paid on the basis of returns as assessed tax until disturbed by a subsequent regular assessment; consequently, refund cannot be claimed merely because an addition made by the Assessing Officer was set aside in appeal. The High Court relied on the reasoning in the decision referred to in the judgment of the Supreme Court in Shelly Products that self-assessment retains legal effect and tax collected on that basis is not required to be refunded simply because a regular assessment has been set aside. [Paras 13, 14, 16]

Claim for refund of tax paid on admitted income in self-assessment is not sustainable merely because additions in the regular assessment were annulled; no refund was warranted.

Chargeability to tax - estoppel against law - tax avoidance versus tax planning - Whether voluntary admission of income in a later assessment year or filing returns on wrong advice prevents later assessment or mandates refund. - HELD THAT: - The Court observed that chargeability depends on the charging provision and not on an assessee's admissions; there is no estoppel against law to convert an otherwise taxable event into a non-taxable one. An assessee cannot approbate and reprobate by admitting liability in one year and later claiming non-liability; where income is chargeable, it remains so despite late admission. The Court emphasised the distinction between legitimate tax planning and impermissible tax avoidance and held that allowing refund in such circumstances would facilitate avoidance. Earlier authorities relied upon in the judgment (including M/s. McDowell and other Supreme Court pronouncements cited therein) support refusing judicial sanction to devices resulting in avoidance of tax. [Paras 11, 12, 15]

Voluntary admission of income does not estop the Revenue from treating the income as chargeable; refund cannot be allowed on that ground.

Finality of assessment / revised assessment - claim for refund where regular assessment is annulled - Whether the impugned order refusing rectification/revision should be interfered with by writ when the revised assessment order pursuant to the appellate direction remains unchallenged and final. - HELD THAT: - The Court noted that the revised assessment order dated 25.02.2011, passed after giving effect to the Tribunal's decision, was not challenged and has attained finality. The petitioner sought rectification of the assessment and refund instead of availing the statutory appellate remedies; since the assessment accepting the self-assessed tax liability stands unassailed, the consequential refusal to rectify the assessment could not be set aside in writ jurisdiction. The High Court further recorded that if aggrieved by the revised assessment, the petitioner should have preferred an appeal rather than seek writ relief. [Paras 16]

Writ petition challenging refusal to rectify a final revised assessment is not maintainable; petitioner should have availed statutory appeal remedies.

Final Conclusion: The writ petition was dismissed: tax paid on self-assessed admitted income is not refundable merely because additions in the regular assessment were set aside; voluntary admission does not estop the Revenue from treating income as chargeable, and the petitioner, having a final revised assessment available, should have availed statutory appeals rather than seek writ relief.

Deduction under section 80JJAA - Allowability of deduction for new workmen employed for 300 days - Benefit of deduction in subsequent assessment years despite non-fulfilment in first year - Treatment of loss of a foreign LLC as a passthrough entity - Remand for verification of documentary evidence and factual particulars

Deduction under section 80JJAA - Allowability of deduction for new workmen employed for 300 days - Benefit of deduction in subsequent assessment years despite non-fulfilment in first year - Remand for verification of documentary evidence and factual particulars - Allowability of deduction claimed under section 80JJAA for the year and whether the claim can be rejected because additional wages to new employees did not satisfy the 300 day requirement in an earlier year - HELD THAT: - The Tribunal accepted the principle, following its earlier Texas Instruments decision, that denial of the deduction in the first year of employment because a new workman did not work 300 days does not preclude allowance of deduction in subsequent years if in those years the workman satisfies the 300 day requirement. The Tribunal found that the record before it did not contain the requisite particulars to verify that the new employees for whom deduction was claimed had worked at least 300 days in the year under consideration. In view of the absence of verifiable details, the Tribunal remanded the matter to the Assessing Officer for verification of the number of days worked and other relevant particulars for the employees claimed as eligible, directed the assessee to furnish detailed information about regular and new workmen for the relevant years, and instructed the AO to examine compliance and then allow the deduction under section 80JJAA if the statutory conditions are satisfied. [Paras 5]

Issue remanded to the Assessing Officer for verification of employee-wise days of employment and related particulars; directed that deduction under section 80JJAA be allowed if statutory conditions (including 300 days) are satisfied.

Treatment of loss of a foreign LLC as a passthrough entity - Remand for verification of documentary evidence and factual particulars - Allowability in India of the assessee's claimed share of loss from A Squared Elxsi Entertainment LLC (A2E2), USA - HELD THAT: - The Tribunal noted the factual position asserted by the assessee that it had entered into a joint venture resulting in A2E2, that the assessee had remitted its cash equity contribution but allotment of shares to the parties was delayed, and that A2E2 had been treated as a passthrough entity with profits/losses assessable at partner/partner level. The authorities below had rejected the claim because allotment of shares in the LLC to the assessee had not occurred. Given the absence of verification of documents and that material evidence and foreign law/treatment (including any declaration filed by the U.S. LLC, the joint venture agreement, the manner of tax treatment in the source country and applicable Indian tax provisions) were not considered, the Tribunal remanded the issue to the Assessing Officer to examine all relevant documents, the legal nature of the LLC for U.S. and Indian tax purposes, OECD commentary if relevant, and to decide the matter after giving the assessee a proper opportunity of being heard. [Paras 6]

Issue remanded to the Assessing Officer for verification of documents and factual/legal treatment of A2E2 and to decide the allowability of the claimed share of loss after giving the assessee an opportunity of being heard.

Final Conclusion: The appeal is allowed for statistical purposes. Both contested grounds - the claim under section 80JJAA and the claim of share of loss from A2E2, USA - are remanded to the Assessing Officer for verification of documents and factual particulars, with directions to allow the 80JJAA deduction if the statutory conditions are met and to decide the foreign loss claim after examination of the joint venture documentation and applicable treatment.

Applicability of section 56(2)(viib) to DPIIT recognised Startups - CBDT consolidated circular for assessment of Startups - Admissibility of additional grounds in appeal - Remand for verification of compliance with prescribed conditions

Admissibility of additional grounds in appeal - Additional ground filed by the assessee seeking to rely on CBDT circulars and DPIIT recognition was admitted. - HELD THAT: - The Tribunal noted that the documents and circulars relied upon by the assessee were subsequent developments not placed before the authorities below but were material to the core controversy. In view of their potential to go to the root of the dispute, the Tribunal exercised its discretion to admit the additional ground dated 10/03/2018 so that the applicability of the circulars and the DPIIT recognition could be considered on merits by the adjudicating authority. The Tribunal therefore allowed the additional ground for consideration. [Paras 14, 15]

Additional ground admitted and allowed for consideration.

Applicability of section 56(2)(viib) to DPIIT recognised Startups - CBDT consolidated circular for assessment of Startups - Remand for verification of compliance with prescribed conditions - Whether addition under section 56(2)(viib) should be sustained in light of CBDT circulars and DPIIT recognition was remanded to the Commissioner (Appeals) for verification and fresh adjudication. - HELD THAT: - The Tribunal observed that CBDT circulars (including Consolidated Circular No.22/2019 and related communications) provide a procedure and relief in respect of section 56(2)(viib) for DPIIT recognised startups that may affect past additions. As these materials were not considered by the authorities below, the Tribunal directed that the matter be remitted to the CIT(A) to verify whether the assessee fulfils the conditions specified in the circulars and DPIIT notification, to grant the assessee an opportunity of hearing, to call for and examine Form No.2 and other requisite documents, and thereafter to pass a reasoned order after necessary verification/investigation. The remand is for fresh consideration of applicability of the circulars and compliance with their conditions, not for pre emptive adjudication by the Tribunal. [Paras 16]

Matter remanded to the Commissioner (Appeals) for verification of fulfilment of conditions and fresh, reasoned adjudication in accordance with the CBDT circulars; assessee to file requisite details.

Final Conclusion: The Tribunal admitted the additional ground raised by the assessee and remitted the issue whether additions under section 56(2)(viib) are tenable, in light of the CBDT consolidated circulars and DPIIT recognition, to the Commissioner (Appeals) for verification, hearing and a reasoned fresh decision; appeal allowed for statistical purposes.

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - concealment of particulars of income - distinctness of assessment proceedings and penalty proceedings - bonafide claim or erroneous deduction not amounting to concealment - presumption under Explanation 1 to section 271(1)(c)

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - distinctness of assessment proceedings and penalty proceedings - bonafide claim or erroneous deduction not amounting to concealment - Whether penalty under section 271(1)(c) was justified on disallowance of proportionate interest expenses attributable to interest-free advances - HELD THAT: - The Tribunal held that imposition of penalty under section 271(1)(c) requires concealment of particulars of income or furnishing of inaccurate particulars and that assessment disallowance on estimated basis does not automatically constitute such concealment. The AO disallowed a portion of interest expenditure proportionate to interest-free advances but did not show that the interest expenditure was not actually incurred. The Explanation to section 271(1)(c) contemplates a presumption which can be rebutted; where the claim is a bonafide but erroneous deduction or an inference as to commercial expediency, such an incorrect claim does not equate to dishonest concealment or inaccurate particulars attracting penalty. Relying on precedent and principles of distinctness between quantum assessment and penalty proceedings, the Tribunal concluded that adverse inference about commercial motive or a mere erroneous claim cannot sustain penalty in absence of contumacious or dishonest conduct by the assessee. Consequently the penalty confirmed by the CIT(A) in respect of the disallowed estimated interest expenditure was not maintainable. [Paras 7, 8, 9]

Penalty imposed under section 271(1)(c) on disallowance of estimated interest attributable to interest-free advances is not sustainable and is deleted.

Penalty under section 271(1)(c) - presumption under Explanation 1 to section 271(1)(c) - Scope and application of the Explanation to section 271(1)(c) where disallowance is based on estimation - HELD THAT: - The Tribunal noted the statutory presumption under Explanation 1 but emphasised that the presumption can be rebutted and that assessment estimates do not ipso facto convert into inaccurate particulars for penalty purposes. The statute envisages independent consideration in penalty proceedings; where material facts have been placed on record and the disputed claim arises from a bona fide position (even if shown untenable in assessment), the presumption does not automatically support penalty without evidence of concealment or dishonest conduct. Thus, application of the Explanation does not relieve the revenue from the need to show circumstances that reasonably indicate the disputed amount represents concealed income. [Paras 7]

Explanation 1 to section 271(1)(c) does not permit automatic imposition of penalty on estimated disallowances absent evidence of concealment or dishonest conduct; the presumption may be rebutted.

Final Conclusion: The Tribunal allowed the appeal ex parte, set aside the CIT(A)'s confirmation of penalty in respect of the estimated disallowance of interest attributable to interest-free advances for AY. 2012-13, and directed deletion of the penalty imposed under section 271(1)(c).

Unexplained cash credit - burden of proof under section 68 - identity, creditworthiness and genuineness - onus and satisfaction of the Assessing Officer - reopening assessment under section 147 - reliance on SEBI findings

Burden of proof under section 68 - identity, creditworthiness and genuineness - unexplained cash credit - Deletion of addition made under section 68 of the Act of the amount treated as unexplained cash credit. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had discharged the onus under section 68 by producing documents and confirmations establishing the identity of the lenders, their creditworthiness and the genuineness of the loan transactions. The Tribunal noted that the amounts were recorded in the assessee's and lenders' accounts, supporting the genuineness of transactions, and that the assessing officer had not pointed to cogent discrepancies in the material produced. Relying on the co-ordinate bench's reasoning in the assessee's earlier year, the Bench observed that once the assessee places on record bank statements, confirmations and accounts satisfying the three ingredients, the AO must undertake further specific enquiry before rejecting them; mere suspicion by the AO is insufficient to sustain an addition under section 68. The Tribunal found no reason to interfere with the CIT(A)'s deletion of the addition. [Paras 4, 8, 9]

Addition under section 68 deleted; CIT(A)'s order upheld and revenue's appeal dismissed.

Reliance on SEBI findings - onus and satisfaction of the Assessing Officer - Whether absence of an identical SEBI investigation in the assessment year before the Tribunal prevents reliance on the co-ordinate bench decision in the preceding year. - HELD THAT: - The Tribunal acknowledged the Revenue's submission that a SEBI investigation existed in the earlier assessment year but not in the subject year. It nevertheless held that the core question on merits-whether the assessee proved identity, creditworthiness and genuineness-was identical and therefore squarely covered by the co-ordinate bench's decision in the assessee's own case. The Bench observed that the co-ordinate bench had considered and rejected reliance on an interim SEBI order where that order was subsequently reversed, and that no fresh contradictory material was placed before the Tribunal to displace the CIT(A)'s conclusion. Consequently, the Tribunal declined to distinguish the earlier decision on the ground of the differing SEBI context. [Paras 8, 9]

Difference in SEBI inquiry did not warrant departure from the co-ordinate bench's earlier decision; the appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upheld the CIT(A)'s deletion of the addition under section 68 for AY 2008-09, and directed that no interference be made with the finding that the assessee established the identity, creditworthiness and genuineness of the loan transactions.

Capitalisation of product development expenditure - deductibility of foreign commission and TDS obligation under section 195 - reasonableness of interest on unsecured loans and applicability of 40A(2)(b) - capitalization of interest on capital advances and nexus test under section 36(1)(iii) - precedential weight of prior ITAT and High Court decisions

Capitalisation of product development expenditure - precedential weight of prior ITAT and High Court decisions - Whether the disallowance of product development expenditure of Rs. 10,707,684 was correctly sustained by the AO or rightly deleted by the CIT(A). - HELD THAT: - The Tribunal noted that identical or substantially similar expenditure had been allowed by the department and sustained by the ITAT in the immediate preceding year(s). The earlier ITAT order in the assessee's own case was final (no appeal pending), and on parity with that binding decision the Tribunal concluded that the assessing officer's factual finding was incorrect and declined to interfere with the CIT(A)'s deletion of the disallowance. The Tribunal therefore dismissed the Revenue's appeal on this ground. [Paras 6]

Revenue's appeal dismissed and deletion of the disallowance upheld.

Deductibility of foreign commission and TDS obligation under section 195 - precedential weight of prior ITAT and High Court decisions - Whether export commission paid to non-resident agents was liable to deduction of tax at source and whether the disallowance under section 40(a)(i) was justified. - HELD THAT: - The Tribunal accepted that commission was paid to non-resident agents who had no permanent establishment in India and that the payments were not chargeable to tax in India. Relying on the principle affirmed in GE India Technology Centre (as cited in the record) that tax is required to be deducted at source only if the payment is chargeable to tax in India, and following the jurisdictional High Court decision cited (MGM Exports) which dismissed Revenue's challenge, the Tribunal found no obligation to deduct TDS and upheld the CIT(A)'s deletion of the disallowance. [Paras 15]

Revenue's appeal dismissed and deletion of the disallowance for foreign commission upheld.

Reasonableness of interest on unsecured loans and applicability of 40A(2)(b) - precedential weight of prior ITAT and High Court decisions - Whether the AO was justified in disallowing interest on unsecured loans by restricting allowable rate to 15% and whether CIT(A) was correct in deleting the disallowance. - HELD THAT: - The Tribunal observed that the CIT(A) granted relief because the AO had not provided a basis for adopting the reduced rate and that coordinate-bench precedent had allowed the rate of 18% in similar circumstances (Laxmi Pulse Rice). Applying that consistent treatment and parity with the earlier ITAT decision, the Tribunal declined to disturb the CIT(A)'s order. The Tribunal thus found no substantive basis to interfere with the allowance made by the CIT(A). [Paras 20]

Revenue's appeal dismissed and deletion of the interest disallowance upheld.

Capitalization of interest on capital advances and nexus test under section 36(1)(iii) - precedential weight of prior ITAT and High Court decisions - Whether interest attributable to capital advances was correctly disallowed and capitalized by the AO under section 36(1)(iii) or rightly deleted by the CIT(A). - HELD THAT: - The Tribunal noted that the CIT(A) relied on audited balance-sheet details showing substantial interest-free funds (share capital and reserves) available with the assessee, and that there was no material to establish that interest-bearing borrowings were specifically used for the capital advances. Relying on the High Court precedent (Raghuvir Synthetics) and applying the principle that, absent evidence to the contrary, interest is not disallowable where sufficient interest-free funds existed, the Tribunal upheld the CIT(A)'s deletion of the disallowance. [Paras 27]

Revenue's appeal dismissed and deletion of the capitalization of interest upheld.

Final Conclusion: For the reasons stated, the Appellate Tribunal dismissed the Revenue's appeal in its entirety and upheld the deletions made by the CIT(A) on the issues of product development expenditure, foreign commission TDS, interest on unsecured loans, and capitalization of interest on capital advances.

Registration under Section 12A / Section 12AA - cancellation of registration under Section 12AA(3) - charitable purpose as defined in Section 2(15) - meaning of "education" as a charitable purpose - business undertaking as property held under trust - application of income by donation to another trust - doctrine of estoppel / rule of consistency - retrospective cancellation of registration

Cancellation of registration under Section 12AA(3) - registration under Section 12A / Section 12AA - Validity of the order cancelling the assessee's registration under Section 12A/12AA - HELD THAT: - The Court held that the DIT(E) failed to record the requisite satisfaction under Section 12AA(3) that the Trust's activities were not genuine or not in accordance with its objects. Cancellation under Section 12AA(3) requires a factual satisfaction, based on specific materials, that activities are not genuine or not carried out in accordance with the trust objects; mere reliance on the amended proviso to Section 2(15) or on turnover figures does not substitute for such a recorded satisfaction. The authority examining registration must distinguish between registration (a one-time administrative/quasi judicial act) and annual entitlement to exemption under Sections 11/12; detailed scrutiny of application of funds ordinarily arises at assessment, not at the registration stage. Hence the cancellation order was not sustained. [Paras 31, 64, 71, 72, 73]

Order cancelling registration set aside for want of requisite recorded satisfaction under Section 12AA(3).

Charitable purpose as defined in Section 2(15) - meaning of "education" as a charitable purpose - business undertaking as property held under trust - Whether the assessee's newspaper business and its donations fall outside 'education' or 'charitable purpose' as per amended Section 2(15) - HELD THAT: - The Court applied the binding earlier decisions in the assessee's own litigation (including the Division Bench and Supreme Court pronouncements) holding that the supplementary deed and the decree in C.S.No.90 of 1961 establish that the business undertaking is property held under trust and is carried on exclusively for fulfilling charitable objects (notably education and relief of the poor). Merely because the activity yields profit or involves publication does not automatically destroy charitable character; the determinative question is the dominant purpose. The amendment by way of proviso to Section 2(15) cannot nullify or dilute final inter partes judicial findings that the primary object is charitable and that the business is incidental and held under trust. The authorities' reliance on narrower precedents and on turnover thresholds was rejected on these facts. [Paras 36, 37, 39, 40, 42]

On the facts and binding precedents, the Trust's activities qualify as charitable (education / relief) and the business is property held under trust; the proviso to Section 2(15) cannot be used to reopen those settled conclusions.

Doctrine of estoppel / rule of consistency - retrospective cancellation of registration - Whether the Department could reopen and cancel registration after final adverse/ favourable judicial pronouncements and whether such cancellation could be given retrospective effect from 01.04.2009 - HELD THAT: - The Court held that the Revenue is estopped from reopening issues finally decided between the same parties; the rule of consistency and finality prevents revisiting settled inter partes conclusions. The Court also relied on precedent that express legislative power to cancel registration under Section 12AA(3) arose only prospectively and that cancellation cannot be made with retrospective effect to dates earlier than permitted by law and administrative instructions. Specifically, the attempted retrospective cancellation with effect from 01.04.2009 was held impermissible in the circumstances and contrary to settled law and CBDT instructions. [Paras 39, 44, 58, 84, 89]

Revenue estopped from reopening settled issues; retrospective cancellation from 01.04.2009 held invalid.

Application of income by donation to another trust - business undertaking as property held under trust - Whether donations by the assessee Trust to Aditanar Educational Trust constitute application of income for charitable purposes - HELD THAT: - Following the Division Bench and Supreme Court findings in the assessee's own cases, the Court held that credits and transfers to the educational trust, together with the donee's conduct in drawing funds, amount to proper application of income under Section 11. The Court cited precedents recognising that a charitable trust's gift to another charitable institution, where bona fide, is an application of income; and reiterated that where business is held under trust and income is bound by overriding obligation to be applied for charitable objects, such amounts do not lose charitable application merely because they flow by way of donation to another registered charity. [Paras 34, 35, 38, 41]

Donations to the Aditanar Educational Trust constitute application of income for charitable purposes and support the assessee's claim to charitable status.

Final Conclusion: The Tribunal's order upholding cancellation of the Trust's registration is set aside. On the facts and binding judicial precedents, the Thanthi Trust's business is held to be property held under trust and its activities charitable (education/relief); the DIT(E) did not record the necessary satisfaction under Section 12AA(3) and cannot rely on the proviso to Section 2(15) or turnover figures to reopen final inter partes findings; retrospective cancellation from 01.04.2009 is invalid. The appeal is allowed in favour of the assessee.

Production of records by tax authorities - supply of certified copies of return and annexures - unavailability of records as a bar to mandating supply - remedy before appellate forum for production of record

Production of records by tax authorities - unavailability of records as a bar to mandating supply - Whether the High Court can direct the Income Tax Department to supply certified copies of the assessee's income-tax return and accompanying annexures when the department states such documents are not traceable. - HELD THAT: - The Court found that a writ directing the Income Tax Department to supply documents cannot be granted where the department has represented that the documents sought are not available or traceable. The absence or unavailability of the requested records removes the court's ability to command their production. The Court observed that where an appellate proceeding is pending against the assessment order, the appropriate course is to seek from the appellate authority any directions necessary for the production of relevant records by the tax authorities.

Writ seeking direction to supply certified copies of returns and annexures dismissed as documents were not available; petitioner may pursue production of records before the appellate authority where the appeal is pending.

Final Conclusion: Writ petition dismissed: no direction to supply documents could be issued because the Income Tax Department stated the records were not traceable; petitioner may seek appropriate directions from the appellate forum where his appeal is pending.

Rejection of books of account and estimation of income - application of net profit rate for estimating taxable income - disallowance of depreciation after estimation of income - principle that once income is estimated on a percentage basis further specific disallowances based on rejected books are not permissible

Disallowance of depreciation after estimation of income - rejection of books of account and estimation of income - application of net profit rate for estimating taxable income - Whether disallowance of depreciation is permissible after the Assessing Officer estimated income by rejecting books of account and applying an enhanced net profit rate. - HELD THAT: - The Assessing Officer rejected the assessee's books under the provisions invoked and estimated income by enhancing the declared net profit from 5.09% to 6%. After adopting the estimated net profit, the Assessing Officer further disallowed depreciation on the ground that a truck purchased during the year was not put to use. The Tribunal applied the established principle that once income is estimated on the basis of a percentage of turnover (net profit rate) after rejection of books, the assessing authority cannot thereafter make separate additions or disallowances by relying on the rejected books. Reliance was placed on the reasoning in Indwell Constructions (as cited) that additions based on specific items in rejected accounts are impermissible where income has been determined by estimation; allowing such selective add backs would be inconsistent with the method of estimation and would impermissibly rely on the very books that were rejected. Applying that principle, the Tribunal held that the disallowance of depreciation after estimating income on net profit basis was arbitrary and unjustified, and therefore the disallowance had to be deleted. [Paras 4, 6]

Disallowance of depreciation deleted; Ground No.7 allowed.

Final Conclusion: The appeal is partly allowed: the disallowance of depreciation upheld below is set aside as impermissible after income was estimated by applying an enhanced net profit rate; other grounds were dismissed as not pressed.

Stay against tax demand - assessment under section 153A arising from search and seizure - prima facie case - incriminating material requirement for additions in search assessments - payment of twenty per cent as condition for grant of stay - protection against coercive recovery

Assessment under section 153A arising from search and seizure - incriminating material requirement for additions in search assessments - prima facie case - Sustainability of additions made in assessments under section 153A for AYs.2005-06 and 2006-07 in absence of incriminating material found during search. - HELD THAT: - The Tribunal observed that the disputed additions in assessments framed under section 153A derive from the search and seizure action and the assessee contends that the years 2005-06 and 2006-07 were not pending on the date of search and that no incriminating material was found to justify the additions. At the stay stage the Tribunal declined to finally adjudicate the contention because resolution requires detailed examination of the facts and the material relied upon by the Assessing Officer. However, having noted that those assessment years were not abated by the search and that in the absence of incriminating material the assessee has a good arguable case, the Tribunal treated the assessee's challenge as prima facie strong for the purpose of granting interim relief. [Paras 4]

Assessee established a prima facie case regarding the sustainability of the additions for AYs.2005-06 and 2006-07 sufficient to weigh in favour of interim protection.

Payment of twenty per cent as condition for grant of stay - stay against tax demand - Whether payment already made by the assessee satisfies the threshold for granting a stay. - HELD THAT: - The Tribunal noted the assessee had paid Rs. 43.18 Lakhs after part relief by the CIT(A) which, on the material before the Tribunal, amounted to more than twenty per cent of the disputed demand aggregated for the three years. Given the statutory and precedential position treating payment of at least twenty per cent as material for consideration of stay, and coupled with the prima facie case noted on merits for the earlier years, the Tribunal found the payment criterion to be fulfilled for the purpose of the interim order. The Tribunal also provided the department liberty to place correct facts before it by way of application if the claimed payment is incorrect. [Paras 4]

Payment claimed by the assessee satisfies the more-than-20% threshold and supports grant of interim stay.

Protection against coercive recovery - stay against tax demand - Extent and duration of interim relief to restrain coercive recovery of the balance outstanding demand. - HELD THAT: - Weighing the prima facie merits on the challenge to additions and the payment made, the Tribunal exercised its discretion to grant interim protection. The order restrains the Assessing Officer from taking coercive recovery action in respect of the balance outstanding demand for a limited period to protect the assessee's position pending final disposal of the appeals. The Tribunal fixed a timetable for hearing (16-12-2020) in the category of stay-granted matters and directed filing of Paper Books in advance; adjournments would not be routinely permitted. [Paras 4]

Assessing Officer restrained from coercive recovery for three months or until disposal of the three appeals, whichever is earlier; hearing fixed and directions issued for proceedings.

Final Conclusion: All three stay applications allowed. In view of a prima facie case on the sustainability of certain additions and the payment exceeding twenty per cent of the disputed demand, the Assessing Officer is restrained from initiating coercive recovery of the balance demand for three months or until the appeals are disposed of, whichever is earlier; hearing fixed and the department may seek modification if the claimed payment is shown to be incorrect.

Capital contribution - capital reserve - income from other sources u/s.56(1) - deemed income u/s.56(2)(viia) - capital gains on contribution - section 45(3) - partner's interest / consideration on capital contribution - intermediate entity / conduit doctrine - colourable device / sham transaction - principle that special provision prevails over general provision - indeterminate consideration in partner contribution

Capital reserve - income from other sources u/s.56(1) - intermediate entity / conduit doctrine - colourable device / sham transaction - Whether amounts credited to capital reserve (approximately Rs. 2,111.23 crore) on receipt of capital contribution from Piramal Enterprises Ltd. are taxable in the hands of the partnership firm as income under section 56(1) (alternatively section 56(2)(viia)) for A.Y.2015-16. - HELD THAT: - The Tribunal examined the factual matrix including PEL's board resolutions, the mode in which PEL became a partner of the firm, the use of funds through the assessee's wholly owned subsidiary (Novus) to obtain shares of Shriram Capital Ltd. and the subsequent amalgamation. It held that PEL's intention, as reflected in its board resolution, was to acquire an effective stake through intermediate entities and not to hold shares in its own name. The Tribunal found no transfer or allotment of shares to PEL in its own books and accepted the assessee's explanation for creation of a capital reserve (to avoid a lopsided balance sheet) as provided in the partnership deed and reflected in accounts. The Tribunal rejected the revenue's contention that the firm was merely a conduit or that the arrangement was a colourable device to avoid taxation, observing that the transactions complied with legal formalities and that there was no element of 'income' within section 2(24). The Tribunal also noted that the revenue had earlier advanced alternative heads (sections 2(47)/45(4), 28(iv)) and ultimately sought to tax the receipt residually under section 56(1) without establishing it to be 'income'. The Tribunal further rejected the applicability of section 56(2)(viia) on the facts, observing those provisions do not cover the assessed transactions. Having found the receipts to be in the capital field and supported by the partnership deed and confirmations, the Tribunal upheld the CIT(A)'s deletion of the addition. [Paras 10, 12]

Addition treating the capital reserve as taxable under section 56(1) (and alternatively under section 56(2)(viia)) for A.Y.2015-16 deleted; appeal dismissed.

Deemed income u/s.56(2)(viia) - capital contribution - capital gains on contribution - section 45(3) - partner's interest / consideration on capital contribution - indeterminate consideration in partner contribution - principle that special provision prevails over general provision - Whether transfer of shares by Shriram Ownership Trust to the partnership as capital contribution (recorded under section 45(3)) attracts deemed income in the hands of the firm under section 56(2)(viia) for A.Y.2014-15. - HELD THAT: - The Tribunal analysed the nature of capital contribution by a partner and the meaning of 'consideration' in section 56(2)(viia). It held that contributions made by a partner are transactions in the capital field where the partner obtains an indeterminate consideration (rights to share profits and a share in assets on dissolution), and there is no enforceable consideration payable by the firm during its subsistence. The Tribunal relied on the principle that the determinative mechanism under section 45(3) makes the value for the transferor 'determinate' for computing capital gains in the hands of the transferor, but this statutory mechanism does not and should not be extended to treat the same contribution as a receipt chargeable under section 56(2)(viia) in the hands of the recipient firm. Applying the rule that a specific/special provision (section 45(3)) prevails over a general provision (section 56(2)(viia)), and having regard to Supreme Court authority recognising the indeterminate nature of consideration on partner contribution, the Tribunal held that section 56(2)(viia) is not attracted to capital contribution in kind by a partner; consequently the addition was rightly deleted by the CIT(A). [Paras 18, 19, 21]

Addition under section 56(2)(viia) for A.Y.2014-15 deleted; section 56(2)(viia) held not applicable to partner's capital contribution recorded under section 45(3).

Final Conclusion: Both appeals filed by the Revenue (for AY 2014-15 and AY 2015-16) were dismissed. The Tribunal held that the amounts in issue arose in the capital field: (i) for AY 2015-16 the sum credited to capital reserve on PEL's capital contribution was not taxable as income under section 56(1) (nor under section 56(2)(viia)), and (ii) for AY 2014-15 the shares brought in by a partner as capital contribution (valued under section 45(3)) do not attract deemed income in the hands of the firm under section 56(2)(viia); the CIT(A)'s deletions were upheld.

Tribunal remand directions binding on Assessing Officer - Reopening of assessment by notice issued under section 148 and its validity where post-search material is relied upon - Applicability of section 153C for assessment of another person when material is found in a third party search - Addition under section 68 for unexplained credits and requirement to prove genuineness of payments to creditors/sub contractors - Burden on the assessee to produce documentary evidence to substantiate claimed payments

Tribunal remand directions binding on Assessing Officer - Addition under section 68 for unexplained credits and requirement to prove genuineness of payments to creditors/sub contractors - Addition of Rs. 4,87,88,586 remanded by the tribunal and thereafter upheld by the Assessing Officer and CIT(A). - HELD THAT: - The tribunal in its earlier order remanded the dispute on genuineness of sub contractor credits to the AO with the direction that the AO should follow his own earlier findings in subsequent reassessment proceedings. On consideration of the second reassessment order, the AO recorded that genuineness of the sub contract payments was not proved and had disallowed the development expenses, noting that only a balance sum remained to be added. The AO's fresh assessment and the CIT(A)'s order followed the tribunal's remand direction and the AO's factual finding that genuineness was not established. The assessee failed to produce documentary evidence before the AO, CIT(A) or the Tribunal to rebut those findings. [Paras 5, 6, 7]

The addition of Rs. 4,87,88,586 was sustained; no interference with the CIT(A) order.

Applicability of section 153C for assessment of another person when material is found in a third party search - Reopening of assessment by notice issued under section 148 and its validity where post-search material is relied upon - Whether section 153C applied so as to preclude issuance of notice under section 148 and render the reopening void. - HELD THAT: - Section 153C applies only where, in the course of search, specified articles or books/documents belonging to a person other than the searched person are seized/requisitioned and are handed over to the AO of that other person after recording satisfaction. The Tribunal examined the assessment records and found that the assessee did not produce any material showing that such articles or books/documents, belonging to the assessee, were found in the third party search. In the absence of evidence that clause (a) or (b) of section 153C(1) was attracted, section 153C could not be invoked and the AO was not precluded from issuing notice under section 148. The tribunal decisions cited by the assessee were inapplicable on facts since those cases involved seized materials qualifying under section 153C. [Paras 11, 12, 13]

The additional ground alleging lack of jurisdiction to issue notice under section 148 (reliance on section 153C) was rejected.

Addition under section 68 for unexplained credits and requirement to prove genuineness of payments to creditors/sub contractors - Burden on the assessee to produce documentary evidence to substantiate claimed payments - Validity of the AO's disallowance of Rs. 20,47,19,154 as unexplained payments and the consequent demand. - HELD THAT: - The AO found substantial cash payments to sub contractors and that many alleged sub contractors either did not respond, had not filed returns for subsequent years, or admitted they were mere name lenders. CIT(A) recorded that the assessee failed to produce documentary evidence to substantiate the payments during appellate proceedings. No new material was placed before the Tribunal to show genuineness of the transactions. In view of the factual findings recorded by the AO and affirmed by CIT(A), and the absence of evidence from the assessee, the additions under section 68 were held to be justified. [Paras 14, 15, 16]

The addition of Rs. 20,47,19,154 and the consequential demand were upheld; grounds on merit were rejected.

Final Conclusion: Both appeals filed by the assessee for A. Y. 2005 - 06 are dismissed: the Tribunal upheld the remand based addition in ITA No. 212/Bang/2020, rejected the contention that section 153C precluded notice under section 148, and affirmed the disallowance of unexplained payments for lack of documentary proof in ITA No. 589/Bang/2020.

Registration under section 12AA of the Income-tax Act, 1961 - reasonable opportunity of being heard - genuineness of charitable activities - proposed activities as activities for registration - remand for fresh consideration

Reasonable opportunity of being heard - registration under section 12AA of the Income-tax Act, 1961 - genuineness of charitable activities - Whether the order denying registration under section 12AA should be sustained or the matter remitted for fresh consideration after affording opportunity of being heard. - HELD THAT: - The Tribunal examined the impugned order and found the Commissioner had called for information to satisfy himself as to the genuineness of the trust's activities, but the record did not clearly show that a reasonable opportunity of being heard was afforded to the appellant. Reliance was placed on the principle in Ananda Social and Educational Trust that, for registration under section 12AA, 'activities' include proposed activities and that absence of past activity does not preclude registration; the primary inquiry at the registration stage is whether the objects are charitable in nature. In view of the unclear record on whether a proper hearing was granted and the settled law that proposed activities may suffice for registration, the Tribunal considered it appropriate to remit the matter to the Commissioner for re-examination of the grant of registration under section 12AA after affording the appellant a reasonable opportunity of being heard. [Paras 5]

Matter remitted to the Commissioner of Income Tax (Exemption) to re-examine the question of registration under section 12AA after affording the appellant a reasonable opportunity of being heard.

Final Conclusion: Appeal partly allowed for statistical purposes and the order denying registration under section 12AA is set aside to the extent that the Commissioner must re-consider the application after granting a reasonable opportunity of hearing, taking into account that proposed activities may qualify as 'activities' at the registration stage.

Remand for fresh consideration - Principles of natural justice - Territorial jurisdiction of Regional Authority - Officer's jurisdiction determined by value of authorisation

Remand for fresh consideration - Territorial jurisdiction of Regional Authority - Officer's jurisdiction determined by value of authorisation - Principles of natural justice - Remand to respondent no.3 for fresh adjudication of the show cause notice dated 6th June, 2018 - HELD THAT: - The writ petition challenged an order dated 10th June, 2020 on the ground that the Deputy Director General lacked territorial jurisdiction, petitioner relying on appendix 1A and respondents contending jurisdiction based on the value of the authorisation. The Court did not resolve the contested jurisdictional dispute. In the interest of justice the matter is remanded to respondent no.3, who has unlimited jurisdiction as to the value of the authorisation, to decide the case afresh on the basis of the show cause notice dated 6th June, 2018. All points are expressly kept open for fresh consideration. The petitioners are permitted to rely upon documents forming part of the writ petition; the respondents are permitted to rely upon documents in their possession not forming part of the writ petition. The form of hearing is left to respondent no.3, subject only to broad compliance with the principles of natural justice, having regard to the prevailing pandemic situation. The Court has not called for any affidavit and therefore treated the allegations in the writ petition as not admitted by the respondents.

Matter remanded to respondent no.3 for fresh decision on the show cause notice dated 6th June, 2018, with liberty to the parties to rely on documents as specified and subject to broad observance of natural justice; decision to be rendered by 31st December, 2020.

Final Conclusion: Writ petition disposed of by remitting the matter to respondent no.3 for fresh adjudication of the show cause notice dated 6th June, 2018, with all substantive points left open and directions for procedure and timeline as recorded.

Condonation of delay - Due diligence - No mala fide explanation - Lenient and pragmatic approach in condonation applications - Scheme of amalgamation - prejudice to stakeholders

Condonation of delay - No mala fide explanation - Due diligence - Lenient and pragmatic approach in condonation applications - Scheme of amalgamation - prejudice to stakeholders - Whether the delay of 201 days in filing the company petition connected with sanction of the scheme of amalgamation should be condoned. - HELD THAT: - The Tribunal observed that NCLT had dismissed the condonation application on the ground that the reasons did not clearly explain the delay. This Appellate Tribunal analysed the established approach that courts/tribunals should adopt a lenient and pragmatic view in condonation applications, assessing whether the explanation is bona fide and whether the applicant exercised due diligence. The Appellate Tribunal held that the explanation given by the appellant - preoccupation with internal compliance and closure of audit/accounts - did not smack of mala fide. It emphasised that the mere length of delay is not in itself decisive of negligence and that refusal to condone delay where the explanation is not mala fide would cause undue prejudice, particularly where a scheme of amalgamation, approved by shareholders and creditors, is at the final stage and stakeholders would suffer. Applying these principles, the Tribunal found the NCLT's conclusion unsustainable and interfered to prevent an aberration of justice by condoning the delay. [Paras 13, 14, 15, 16]

The appeal is allowed; the impugned NCLT order dated 13.02.2020 is set aside and the delay of 201 days in filing the connected company petition is condoned; MA/102/2020 is allowed and IA No.2309/2020 is closed with directions to file the certified copy of the impugned order.

Final Conclusion: The Appellate Tribunal allowed the appeal and condoned the 201 day delay in filing the company petition relating to the scheme of amalgamation, holding that the explanation was not mala fide, that a pragmatic and lenient approach assessing due diligence was warranted, and that refusal to condone would cause prejudice to stakeholders; the NCLT order of 13.02.2020 was set aside and the connected application was allowed.

Restoration of name of struck off company - Revival limited for recovery of tax dues - Waiver of filing of annual returns and annual financial statements for limited revival - Imposition of penalty/fine for non-compliance - Registrar of Companies' duty to restore and publish order in Official Gazette - Registrar of Companies' authority to take further action and to initiate proceedings under Section 248

Restoration of name of struck off company - Revival limited for recovery of tax dues - Restoration of the struck off company's name in the Register of Companies to enable recovery of Income Tax demand. - HELD THAT: - The Tribunal considered the Department of Income Tax's application under Section 252(3) seeking restoration of Aldiablos Infotech Pvt. Ltd. on the ground that an assessment for Assessment Year 2017-18 had been completed and recovery could not proceed while the company's name remained struck off. The Tribunal found that the company's name had been struck off without prior communication to the Income Tax Department and that the demand was not in dispute. In these circumstances the Tribunal held there was a just cause to revive the company's name in the ROC register from the date of striking off so as to facilitate recovery of the admitted tax demand. The revival was ordered to be effective as if the name had not been struck off, but confined to the purpose of enabling recovery by the Income Tax Department.

The company is restored in the Register of Companies for the limited purpose of facilitating recovery of the departmental dues.

Waiver of filing of annual returns and annual financial statements for limited revival - Imposition of penalty/fine for non-compliance - Whether regulatory compliance requirements should be enforced during the limited revival and whether penalties may be imposed for past non-compliance. - HELD THAT: - While restoring the company's name only for recovery purposes, the Tribunal expressly waived the requirement for filing Annual Returns and Annual Financial Statements for the limited period of revival so that immediate recovery could proceed. Simultaneously, the Tribunal observed that restoration may be subject to imposition of suitable penalty or fine for the company's earlier non-compliance with the Companies Act, 2013, and left scope for ROC to impose such penalties based on the material on record.

Filing of annual returns and financial statements is waived for the limited revival; ROC may impose suitable penalty/fine for prior non-compliance.

Registrar of Companies' duty to restore and publish order in Official Gazette - The procedural directions to the Registrar of Companies following restoration. - HELD THAT: - The Tribunal directed the Registrar of Companies, Gujarat (Dadra & Nagar Haveli), to restore the company's name in its register as if it had not been struck off, upon receipt of a certified copy of this order within thirty days. The ROC was further directed to publish the order under its official name and seal in the Official Gazette after compliance. These directions were given to render the restoration effective and to place on record the revival for the limited purpose ordered.

ROC is directed to restore the company's name on receiving a certified copy of this order and to publish the order in the Official Gazette.

Registrar of Companies' authority to take further action and to initiate proceedings under Section 248 - Whether restoration prevents ROC from taking subsequent action for other violations or from initiating striking-off proceedings after recovery. - HELD THAT: - The Tribunal clarified that the order of restoration is confined to the violations that led to striking off and does not preclude the ROC from taking appropriate actions for any other violations or offences committed by the company before or during striking off. The Tribunal further directed the applicant to inform the ROC after recovery of its dues so that the ROC may, if appropriate, initiate proceedings under Section 248 of the Companies Act, 2013. Thus, the revival is temporary and does not bar ROC's statutory powers thereafter.

Restoration is limited and without prejudice to ROC's power to take further action; applicant must notify ROC after recovery so ROC may proceed under Section 248 as appropriate.

Final Conclusion: The Company Appeal is allowed: the Tribunal restored the struck off company's name in the ROC register as if not struck off, solely to enable recovery of the undisputed Income Tax demand for Assessment Year 2017-18; filing requirements were waived for this limited purpose, ROC was empowered to impose penalties for prior non-compliance and to publish the order in the Gazette, and the revival does not preclude ROC from taking further statutory action thereafter.

Restoration under Section 252 of the Companies Act, 2013 - restoration of company name - just and equitable doctrine - strike off for non filing of annual returns - technical default as ground for strike off - consequential actions on restoration - costs and compliance conditions for restoration

Restoration under Section 252 of the Companies Act, 2013 - restoration of company name - just and equitable doctrine - technical default as ground for strike off - consequential actions on restoration - costs and compliance conditions for restoration - Whether the name of Radhey Krishna Hotels Private Limited should be restored to the Register of Companies and on what terms and conditions. - HELD THAT: - The Tribunal found that the Company had, in substance, fulfilled the relevant statutory compliances and that its name was struck off due to technical reasons; the Registrar of Companies reported no objection to restoration and the Income Tax authorities did not oppose restoration. Applying the principle that restoration is warranted where it is just and equitable and where striking off for non filing would be an excessive or inappropriate penalty in the circumstances, the Bench held that restoration would be in the interest of the company, its shareholders and creditors. The Tribunal recorded that the Company has assets necessitating restoration and that an opportunity to take remedial steps was required rather than permanently denying relief for filing defaults. Consequently, the Tribunal exercised its jurisdiction under Section 252 to direct restoration and set out connected procedural and compliance conditions: ROC to restore the company's status and undertake consequential actions (including change from 'Strike Off' to 'Active' and restoration of DIN status); the company to file all statutory documents and pay prescribed fees/additional fee/fine within thirty days of restoration; payment of the specified cost online; delivery of a certified copy of the order to ROC to enable publication in the Official Gazette; publication of a newspaper notice after ROC approval of its draft; and that ROC publish the restoration in the Official Gazette at the appellant's expense. [Paras 11, 12, 13, 14, 15]

The Tribunal ordered restoration of the Company's name in the Register of Companies as if it had not been struck off, directed ROC to take consequential actions, and imposed specified compliance steps, payment of costs and publication obligations as conditions of restoration.

Final Conclusion: Appeal allowed; the name of Radhey Krishna Hotels Private Limited is restored on the Register of Companies subject to the Tribunal's directions regarding filing of statutory documents, payment of prescribed fees and costs, ROC's consequential actions and publication requirements.

Restoration of name of company - just and equitable - striking off from Register of Companies - jurisdiction under Section 252 of the Companies Act, 2013 - opportunity to take remedial measures - consequences of non-filing of annual returns - publication in the Official Gazette - filing of outstanding statutory documents and payment of fees

Restoration of name of company - just and equitable - jurisdiction under Section 252 of the Companies Act, 2013 - filing of outstanding statutory documents and payment of fees - publication in the Official Gazette - Whether the Tribunal should direct restoration of the appellant company's name in the Register of Companies and the consequential conditions and directions for such restoration. - HELD THAT: - The Tribunal found that although the Registrar of Companies had proceeded to strike off the company after invoking the procedure under Section 248, the appellant demonstrated that it remained a living entity with movable and immovable assets and had filed certain income-tax returns. The non-filing of annual returns and balance-sheets was attributable to miscommunication and other difficulties; restoration would permit remedial compliance and would be in the interests of the company, its shareholders and creditors. Applying the power exercisable under Section 252 of the Companies Act, 2013, the Tribunal held that it is just and equitable to restore the name of the company. The Tribunal therefore directed the RoC to restore the company's status as if it had not been struck off and to take consequential actions (including change of status to 'Active' and restoration of DIN status). Conditional directions were issued requiring the appellant to file all outstanding statutory documents with prescribed/additional fees and fines within thirty days of restoration, to pay a stated cost by online payment, to deliver a certified copy of the order to the RoC for publication in the Official Gazette, and to publish a newspaper notice after RoC's approval of the draft. The RoC was directed to verify and, if in order, approve the draft notice and to publish the Tribunal's order in the Official Gazette at the appellant's expense. [Paras 12, 13, 14, 15, 16]

The Tribunal ordered restoration of the appellant company's name in the Register of Companies as if it had not been struck off, with directions for filing outstanding statutory documents and payment of prescribed fees/fines, payment of the specified cost, delivery of a certified copy of the order for publication in the Official Gazette, and publication of a notice in a local newspaper after RoC's approval.

Final Conclusion: The appeal was allowed: the Tribunal directed restoration of the company's name on the Register of Companies under Section 252 as just and equitable, subject to the appellant's compliance with filing requirements, payment of prescribed fees/fines and costs, and fulfilment of publication formalities, and directed the RoC to take consequential steps to restore the company's status.

Restoration of name under Section 252 of the Companies Act, 2013 - Strike off for failure to file annual returns - Just and equitable restoration - Opportunity to take remedial measures - Filing of outstanding statutory documents and payment of fees - Consequential actions on restoration (status change, DIN restoration) - Publication in Official Gazette and newspaper

Restoration of name under Section 252 of the Companies Act, 2013 - Strike off for failure to file annual returns - Just and equitable restoration - Opportunity to take remedial measures - Whether the appellant company's name should be restored to the Register of Companies despite its failure to file statutory returns and balance sheets. - HELD THAT: - The Tribunal held that, although the Registrar had proceeded under the removal provisions after giving opportunity, the appellant demonstrated that the company remained a living entity with movable and immovable assets and transactional bank records. The failure to file annual returns and financial statements was attributed to oversight, lack of professional guidance and other difficulties; mere non-filing would not automatically render restoration unjust. Exercising jurisdiction under Section 252, the Tribunal concluded that it would be in the interest of the company, its shareholders and creditors to restore the name, since a stringent consequence like striking off requires that the company be given an opportunity to take remedial measures and refusal to restore merely on non-filing would be excessive. The Tribunal therefore found it just and equitable to order restoration. [Paras 8, 9, 10, 11]

Appellant's name to be restored in the Register of Companies and the company treated as if not struck off.

Filing of outstanding statutory documents and payment of fees - Consequential actions on restoration (status change, DIN restoration) - Publication in Official Gazette and newspaper - What conditions and consequential steps should follow upon restoration of the company's name. - HELD THAT: - The Tribunal directed that restoration be subject to compliance by the appellant with filing all outstanding statutory documents and payment of prescribed fees/additional fee/fine within thirty days of restoration. The appellant was also ordered to pay a cost for revival through the MCA miscellaneous fee, deliver a certified copy of the order to the Registrar within thirty days, and publish the order in the Official Gazette. Further directions included publication of a notice in a leading local newspaper after RoC approval of the draft, and that RoC shall take all consequential administrative actions (including change of status to active and restoration of DIN) and publish the restoration at the appellant's expense. These steps were imposed to regularise statutory records and notify stakeholders. [Paras 13, 14, 15, 16, 17]

Restoration ordered subject to specified filings, payment of fees and costs, delivery of certified order, and prescribed publication and consequential actions by RoC.

Final Conclusion: The Tribunal allowed the appeal, directed restoration of the company's name as if it had not been struck off, and imposed conditional directions requiring the appellant to regularise statutory filings, pay prescribed fees and costs, and comply with publication and other consequential formalities to effect restoration.

Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and date of default - service and sufficiency of notice under Section 8 of the IBC - compliance with Section 9(3)(b) and Section 9(3)(c) of the IBC - declaration of moratorium under Section 14 of the IBC - appointment and duties of Interim Resolution Professional under Section 13(1)(c) and Sections 17-21 of the IBC - continuity of supply of goods/services during moratorium

Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and date of default - service and sufficiency of notice under Section 8 of the IBC - compliance with Section 9(3)(b) and Section 9(3)(c) of the IBC - Application under Section 9 was admissible and the Corporate Debtor was to be admitted into CIRP. - HELD THAT: - The Tribunal found that the Operational Creditor produced invoices evidencing supply of goods/services and established the outstanding operational debt and that the date of default was 31.05.2019. It was recorded that the notice under Section 8 of the IBC was served on the Corporate Debtor and no reply or dispute was pointed out. The Operational Creditor filed the required affidavit asserting non-receipt of the claimed amount and absence of any dispute, thereby complying with Section 9(3)(b) and Section 9(3)(c). In view of these facts and compliance, the Tribunal saw no reason to reject the petition and admitted the Corporate Debtor to CIRP. [Paras 5, 6, 7, 9]

CP (IB) No. 809/9/NCLT/AHM/2019 admitted and Corporate Debtor placed in CIRP.

Declaration of moratorium under Section 14 of the IBC - Moratorium to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. - HELD THAT: - Upon admission under Section 9, the Tribunal declared the moratorium in terms of Section 14(1) of the Code, prohibiting institution or continuation of suits or other proceedings against the Corporate Debtor, disposition or encumbrance of its assets, enforcement of security interests and recovery of property occupied by the Corporate Debtor, and stated the temporal extent of the moratorium until completion of the CIRP or further orders under the Code.

Moratorium declared with effect from the date of the order until completion of CIRP or as otherwise provided under the Code.

Appointment and duties of Interim Resolution Professional under Section 13(1)(c) - functions under Sections 17, 18, 20 & 21 of the IBC - An Interim Resolution Professional (IRP) was appointed and directed to perform statutory duties and manage the Corporate Debtor as a going concern. - HELD THAT: - The Tribunal appointed the named IRP to act under Section 13(1)(c) and directed that he perform his functions under the relevant provisions of the Code, including protecting and preserving the Corporate Debtor's assets and managing operations as a going concern. The order also imposed on personnel connected with the Corporate Debtor, its promoters and management an obligation to assist the IRP and permitted the IRP to seek the Adjudicating Authority's intervention if cooperation was withheld.

Named IRP appointed and directed to carry out statutory functions and manage the Corporate Debtor accordingly.

Continuity of supply of goods/services during moratorium - Supply of goods or services to the Corporate Debtor shall not be terminated, suspended or interrupted during the moratorium period. - HELD THAT: - The Tribunal specifically directed that ongoing supplies to the Corporate Debtor must continue during the moratorium, ensuring that suppliers are not entitled to terminate or suspend supply on account of the CIRP having been initiated.

Suppliers' ongoing supply shall continue during the moratorium.

Interim funding for conduct of CIRP - Operational Creditor directed to provide interim funds to the IRP for smooth conduct of CIRP. - HELD THAT: - The Tribunal directed the Operational Creditor to pay an advance to the IRP within two weeks for the purpose of facilitating the CIRP and noted that the IRP may later raise further demands for interim funds, which are to be provided as per rules.

Operational Creditor to pay advance to IRP and further interim funds to be provided as required under the rules.

Final Conclusion: The Tribunal admitted the Section 9 petition, placed M/s. Texon Global Private Limited under CIRP, declared the statutory moratorium, appointed an Interim Resolution Professional with directions as to his duties and preservation of assets, ordered continuity of supply during the moratorium and directed interim funding for conduct of the CIRP.

Possession of corporate debtor's assets by a financial creditor - rights and duties of the resolution professional to take custody of assets, books and records and to access the registered office - obligation of suspended directors, management and employees to cooperate with the resolution professional - power of the Adjudicating Authority/Tribunal to direct handing over of possession notwithstanding prior proceedings under SARFAESI/DRT - contempt proceedings for disobedience of directions

Possession of corporate debtor's assets by a financial creditor - power of the Adjudicating Authority/Tribunal to direct handing over of possession notwithstanding prior proceedings under SARFAESI/DRT - State Bank of India (R 1) was directed to hand over forthwith possession of all assets and of the registered and corporate offices of the Corporate Debtor in its possession to the Resolution Professional. - HELD THAT: - The Tribunal found it improper that a member of the CoC continued to hold possession of secured interests and the registered office long after initiation of CIRP. The submission that SBI could withhold access in the absence of a specific order from the Adjudicating Authority was rejected as devoid of merit. In order to enable the Resolution Professional to carry out CIRP duties and to avoid multiplicity of litigation, the Tribunal directed SBI to hand over possession of assets and the registered and corporate offices to the RP so that the RP may take custody of records and moveables necessary for the process. [Paras 6, 11, 12]

R1/State Bank of India is directed to forthwith hand over possession of all the assets of the Corporate Debtor and the registered and corporate offices in its possession to the Resolution Professional.

Rights and duties of the resolution professional to take custody of assets, books and records and to access the registered office - obligation of suspended directors, management and employees to cooperate with the resolution professional - The Resolution Professional was authorised to open the registered office in the presence of the suspended directors, prepare an inventory, and take custody of books of account and other records; suspended directors and management were directed to cooperate and assist. - HELD THAT: - The Tribunal observed that the RP could not ascertain documents or the need for further information while the registered office remained closed and in the possession of SBI. To eliminate disputes and facilitate CIRP, the Tribunal ordered that the RP open the office in the presence of the suspended board members, prepare an inventory of documents and movables, and take custody of available records. The directors, management and concerned employees were directed to provide full cooperation and assistance to enable verification and custody of books, records and assets. [Paras 7, 11, 12]

RP to open the office in presence of suspended directors, prepare inventory and take custody of available books and records; directors, management and employees to provide full cooperation.

Obligation of suspended directors, management and employees to cooperate with the resolution professional - rights and duties of the resolution professional to obtain further information and documents - Directors of the suspended board were directed to furnish any further information or documents specified by the RP within one week of receipt of the RP's list. - HELD THAT: - Having authorised the RP to take custody of available documents, the Tribunal provided a mechanism for obtaining residual information: if further documents or information are required, the RP shall give a list to the directors, who must supply the same within one week. This order addresses concerns that documents may be dispersed or in the custody of various parties and ensures timely cooperation for completion of CIRP. [Paras 8, 10, 12]

Upon receipt of a list from the RP, the suspended directors shall furnish the required information and documents within one week.

Contempt proceedings for disobedience of directions - The Resolution Professional was granted liberty to initiate contempt proceedings in case of disobedience of the Tribunal's directions. - HELD THAT: - To enforce the directions and secure compliance, the Tribunal expressly conferred on the RP the liberty to initiate contempt proceedings if any party disobeys the orders issued. This serves as an enforcement mechanism to ensure cooperation and possession handover necessary for CIRP. [Paras 12]

RP given liberty to initiate contempt proceedings for disobedience of the directions.

Final Conclusion: The Interlocutory Application was allowed in part: SBI was directed to hand over possession of assets and the registered and corporate offices to the Resolution Professional; the RP was authorised to open the office in the presence of suspended directors, inventory and take custody of records; suspended directors, management and employees were ordered to cooperate and to furnish any further documents requested within one week; and the RP was given liberty to initiate contempt proceedings for non compliance. IA disposed of accordingly with no order as to costs.

Personnel to extend co-operation to interim resolution professional - direction to personnel to comply with instructions of resolution professional - misjoinder of parties - misuse of process of law - costs for frivolous impleadment

Personnel to extend co-operation to interim resolution professional - direction to personnel to comply with instructions of resolution professional - Maintainability of the application under section 19 of the IB Code against the Suspended Management - HELD THAT: - The Tribunal examined the scope of the provision reproduced in the order which mandates that personnel of the corporate debtor, its promoters or any other person associated with management shall extend assistance and co-operation to the interim resolution professional and that the interim resolution professional may apply to the Adjudicating Authority for directions where such assistance is not forthcoming. Applying that principle, the Tribunal held that an application under section 19 is competent and maintainable against the Suspended Management (promoters/directors) for non-cooperation in furnishing documents and assisting the resolution professional during the CIRP. Consequently the Tribunal directed issuance of notice to the Suspended Management and listed the matter for further hearing.

Application under section 19 is maintainable as against the Suspended Management; notice to be issued and matter listed on 16.09.2020.

Misjoinder of parties - misuse of process of law - costs for frivolous impleadment - Permissibility of impleading the Operational Creditor and the Bank in the section 19 application and reliefs against them - HELD THAT: - The Tribunal found that the RP, while invoking section 19, had sought directions against Respondent No.3 (Operational Creditor) and Respondent No.4 (Bank) for payment/reimbursement of alleged professional fees. The Tribunal held such prayer does not fall within the ambit of the provision, and that impleading third parties who are not persons required to assist or co-operate under section 19 amounted to misjoinder and misuse of the process. The Tribunal noted the prejudice caused to those parties by unnecessary impleadment and replies filed. In consequence, the application was dismissed insofar as it related to Respondent No.3 and Respondent No.4, and costs were imposed on the applicant to be paid to Respondent No.3 (respondent No.4 neither appeared nor filed a reply).

Application dismissed as against Respondent No.3 and Respondent No.4 for misjoinder/misuse of process; cost of Rs. 30,000 to be paid to Respondent No.3.

Final Conclusion: The Tribunal upheld the maintainability of the section 19 application against the Suspended Management and directed service of notice, but found the impleadment of the Operational Creditor and the Bank to be improper and dismissed the application as against them with costs awarded to the Operational Creditor.

Admission under Section 9 of the Insolvency and Bankruptcy Code - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional - Duties and powers of Interim Resolution Professional including preservation and management as a going concern - Public announcement of initiation of CIRP and submission of claims - Prohibition on termination or suspension of supply during moratorium - Operational creditor's obligation to provide interim funding to the IRP

Admission under Section 9 of the Insolvency and Bankruptcy Code - Application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 is admitted and CIRP is initiated against the Corporate Debtor. - HELD THAT: - The Tribunal found that the operational debt claimed exceeded the requisite threshold, was not barred by limitation, remained unpaid and no plausible defence was placed on record by the Corporate Debtor. The application was complete and defect free, and the statutory pre requisites for initiation of the Corporate Insolvency Resolution Process under Section 9 were satisfied. On these findings the Tribunal admitted the application and ordered initiation of CIRP. [Paras 3]

Application under Section 9 admitted and Corporate Debtor is admitted into CIRP.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Moratorium following initiation of CIRP is declared, prohibiting specified actions against the Corporate Debtor for the duration of the CIRP. - HELD THAT: - Upon admission of the Section 9 application the Tribunal declared the moratorium in terms of Section 14, restraining institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interests and recovery of property by owners or lessors for the period of the CIRP or until approval of a resolution plan or liquidation as applicable. The moratorium was ordered to have effect from the date of the order till completion of CIRP or other terminal orders under the Code.

Moratorium under Section 14 is declared and will remain in force for the duration specified by the Code.

Appointment of Interim Resolution Professional - Duties and powers of Interim Resolution Professional including preservation and management as a going concern - An Interim Resolution Professional (IRP) is appointed and directed to perform statutory functions, preserve assets and manage the Corporate Debtor as a going concern. - HELD THAT: - The Tribunal appointed the IRP whose consent was on record and noted absence of disciplinary proceedings against him. The IRP was directed to discharge functions under the Code including those specified in Sections 17, 18, 20 and 21, to protect and preserve the value of the Corporate Debtor's property and to manage its operations as a going concern. The Tribunal also made clear that persons connected with the Corporate Debtor are under a statutory obligation to assist and cooperate with the IRP and that appropriate applications may be made if obstruction occurs. [Paras 4]

IRP appointed and vested with statutory duties to conduct the CIRP, preserve assets and manage the Corporate Debtor as a going concern.

Public announcement of initiation of CIRP and submission of claims - Prohibition on termination or suspension of supply during moratorium - Operational creditor's obligation to provide interim funding to the IRP - The IRP is directed to make the public announcement and call for claims; supply of goods/services to the Corporate Debtor shall not be terminated during moratorium; and the Operational Creditor is directed to provide interim funds to the IRP. - HELD THAT: - Consistent with statutory requirements, the Tribunal directed the IRP to make the public announcement of initiation of CIRP and to call for submission of claims. The Tribunal further ordered that ongoing supplies to the Corporate Debtor shall not be terminated or suspended during the moratorium. To enable conduct of the CIRP, the Operational Creditor was directed to pay an advance for interim expenses to the IRP within a specified time and the IRP may seek further interim funds as per rules.

IRP to make public announcement and call for claims; supply shall not be terminated during moratorium; Operational Creditor to provide interim funding to the IRP.

Final Conclusion: The Tribunal allowed the Section 9 petition, admitted the Corporate Debtor into CIRP, declared the moratorium, appointed an IRP with statutory duties to preserve and manage the company as a going concern, directed public announcement and claim submission, protected continued supply during moratorium and ordered interim funding by the Operational Creditor.

Liquidation - Corporate Insolvency Resolution Process - Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' approval requirement for actions during CIRP - Approval of managerial remuneration by the Central Government - Resolution Professional's duty to seek approvals subject to CoC mandate

Liquidation - Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' approval requirement for actions during CIRP - Whether the Application filed under Section 60(5) seeking directions to the Resolution Professional to approach the Central Government for approval of remuneration should be adjudicated despite liquidation of the Corporate Debtor. - HELD THAT: - The Application was instituted during the Corporate Insolvency Resolution Process. The record shows that the Committee of Creditors' requisite majority to authorise seeking Central Government approval for the managerial remuneration was not obtained. Subsequent to the pendency of this Application, the Adjudicating Authority passed an order of liquidation in relation to the Corporate Debtor. In view of the liquidation order, the Tribunal declined to adjudicate the substantive grievance under Section 60(5) and considered it appropriate to close the Application and direct the applicant to seek the relief, if any, from the Liquidator who is the competent officer post-liquidation to deal with claims and related reliefs arising out of the CIRP and liquidation process. The Tribunal therefore did not decide on the merits of the claim regarding the correctness of the Committee of Creditors' decisions or the Resolution Professional's conduct, leaving those matters to be pursued before the Liquidator. [Paras 5, 6]

The Application is closed in view of the liquidation of the Corporate Debtor, with liberty to the applicant to approach the Liquidator for relief; no order as to costs.

Final Conclusion: The Tribunal declined to adjudicate the merits of the Section 60(5) application after the Corporate Debtor was liquidated, closed the Application and granted liberty to the applicant to seek appropriate relief from the Liquidator; no order as to costs.

Separate juristic personality of a company and lifting of the corporate veil - garnishee order under Section 87(b)(i) of the Finance Act - personal liability of directors for company tax dues - vicarious liability of directors for company tax - statutory provisions rendering directors liable in liquidation (comparative reference to provisions under other fiscal statutes) - principles of natural justice in recovery proceedings

Garnishee order under Section 87(b)(i) of the Finance Act - separate juristic personality of a company and lifting of the corporate veil - Attachment of the petitioner's personal bank account under Section 87(b)(i) of the Finance Act for recovery of the assessee-company's service tax dues was lawful. - HELD THAT: - The Court held that Section 87(b)(i) of the Finance Act provides for a garnishee mode of recovery, i.e., attachment of funds of an assessee lying with third parties, and does not authorize attachment of a director's personal bank account merely on the basis that he was formerly a director. The judge reiterated the fundamental principle that a company is a distinct juristic entity separate from its directors and that this distinction cannot be disregarded unless a specific statutory provision so provides or the corporate veil is lifted. In the absence of any provision in the Finance Act making ex-directors personally liable for company service tax liabilities, the assumption that money in the petitioner's personal account was due to or held on behalf of the company was misconceived and beyond the scope of Section 87(b)(i). [Paras 22, 23, 24, 25]

Attachment under Section 87(b)(i) could not be sustained; the provision does not permit recovering company dues from the petitioner's personal bank account in the circumstances of this case.

Personal liability of directors for company tax dues - vicarious liability of directors for company tax - statutory provisions rendering directors liable in liquidation (comparative reference to provisions under other fiscal statutes) - Whether the petitioner, an ex-director, was vicariously or jointly liable for the assessee-company's service tax dues in absence of a specific statutory provision. - HELD THAT: - The Court found that unlike certain provisions in other fiscal statutes that expressly impose joint and several liability on directors in limited contexts (for example, provisions applicable in liquidation and prefaced by non-obstante clauses), there is no comparable provision in the Finance Act imposing personal liability on directors for service tax dues of a company. Reliance on penal or criminal provisions dealing with offences by a company was held to be inapposite to fasten civil liability to pay tax. The Court emphasised that levy and collection of tax must be made by authority of law; therefore, absent express statutory language conferring personal liability on directors for the period in question, the department could not treat the petitioner as personally liable merely because he was once a director. [Paras 20, 21, 25, 27]

The petitioner is not vicariously or jointly liable for the company's service tax dues in the absence of a specific statutory provision; the department bears the onus of proving a director's personal liability before initiating recovery.

Principles of natural justice in recovery proceedings - Whether the impugned demand notices and attachment order were issued in compliance with principles of natural justice to the petitioner in his personal capacity. - HELD THAT: - The Court observed that no show-cause notice or any personal notice had been issued to the petitioner prior to the demand notices and the attachment order. Adjudication proceedings had been conducted and concluded against the assessee-company only, and the department conceded that it had no material against the petitioner other than his former directorship. The Court recorded that notices addressed to the company cannot be treated as notice to the petitioner in his personal capacity, and that recovery could not be selectively initiated against only one director without providing opportunity to be heard or adducing material to justify such singling out. [Paras 29, 30, 31]

Impugned demand notices and attachment order violated principles of natural justice as no prior personal notice was issued to the petitioner and recovery could not be selectively directed at him without material justification.

Final Conclusion: The writ petition was allowed: the demand notices dated 21st May, 2019 and 08th November, 2019 and the attachment order dated 08th June, 2020 were quashed, and all actions taken pursuant to those notices and the Order in Original dated 08th August, 2018 against the petitioner were set aside.

Refund of Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 - definition of input/input service under Rule 2 of Cenvat Credit Rules, 2004 - reverse charge payment treated as eligible Cenvat credit when undisputed and not denied under Rule 14 - nexus between input service and exported output service for refund - FIRC, banker and chartered accountant certification as sufficient evidence of realization of export proceeds - payment of interest under Section 11BB on delayed refund where refund is treated as refund under Section 11B

Refund of Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 - definition of input/input service under Rule 2 of Cenvat Credit Rules, 2004 - reverse charge payment treated as eligible Cenvat credit when undisputed and not denied under Rule 14 - Whether the appellant was entitled to refund of Cenvat credit taken on the imported software under Rule 5 where the credit had been taken and not disputed by the Department - HELD THAT: - The Tribunal held that the definition of "input" and "input service" in Rule 2 of the Cenvat Credit Rules, 2004 applies to both the taking of Cenvat credit and to refund claims under Rule 5; there is no separate definition in Rule 5 or the notification. The appellant had paid service tax under reverse charge, recorded the payment in ST-3 returns and taken Cenvat credit which the Department had not challenged by initiating recovery proceedings under Rule 14. Once credit has been allowed and not denied by appropriate proceedings, the input/input service does not cease to be such for the purposes of a refund claim. In the facts, the Department accepted the credit in practice and did not issue a Rule 14 notice; accordingly the appellant was entitled to claim refund under Rule 5 in respect of the input service used for export. [Paras 9, 10, 11]

The appellant is entitled to refund under Rule 5 in respect of the Cenvat credit taken on the imported software because the credit was taken and not denied under Rule 14 and the Rule 2 definition applies to refund.

Nexus between input service and exported output service for refund - FIRC, banker and chartered accountant certification as sufficient evidence of realization of export proceeds - Whether the appellant established that the imported software was used in providing exported services and that export proceeds were realised such that refund under Rule 5 was admissible - HELD THAT: - The Tribunal examined the agreement, invoices, SOFTEX forms, FIRCs, banker statements and the RBI set off certificate and accepted the appellant's explanation that the imported software (Netcool Suite) was an input service used to produce exported services by a 100% EOU (hence no domestic sale issue). The Tribunal rejected the Department's objections about mismatch of values and timing of receipts by explaining that FIRCs commonly do not record invoice numbers, receipts may be in advance or in parts, and linkage can be established by CA/bank certification and RBI set off permission. The bank and CA certificates and the RBI letter were held sufficient to establish realization of export proceeds and nexus between the input service and exported output for the relevant period. [Paras 12, 13]

The appellant established nexus and realization of export proceeds by documentary evidence and certifications, entitling them to refund for the period claimed.

Payment of interest under Section 11BB on delayed refund where refund is treated as refund under Section 11B - Whether interest is payable on the refund of Cenvat credit under Rule 5 - HELD THAT: - Although the Cenvat Credit Rules themselves do not provide for interest on refunds, the Tribunal followed the decision of the High Court of Gujarat (as upheld by the Supreme Court in the SLP dismissal) that a refund of Cenvat credit under Rule 5 is to be treated as a refund under Section 11B of the Central Excise Act and therefore the provisions for payment of interest under Section 11BB apply. Applying that precedent, the Tribunal held that interest on the delayed refund is payable. [Paras 14, 15]

The appellant is entitled to interest on the refunded Cenvat credit as governed by Section 11BB, treating the refund as a refund under Section 11B.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the appellant is entitled to the refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 for January to March, 2010 together with interest as applicable under Section 11BB.

Section 436-A Cr.P.C. - default bail - economic offence - offences under Sections 9 and 9AA of the Central Excise Act - detention period caused by accused to be excluded - risk of absconding and jeopardy to revenue - continued detention for reasons to be recorded

Section 436-A Cr.P.C. - default bail - detention period caused by accused to be excluded - economic offence - Whether the applicant is entitled to release on default bail under Section 436-A Cr.P.C. after having undergone detention equal to half of the maximum sentence prescribed for the alleged offences. - HELD THAT: - The Court examined Section 436-A Cr.P.C. and its explanation which excludes from computation any period of detention caused by delay attributable to the accused. The applicant is charged with serious economic offences under Sections 9 and 9AA of the Central Excise Act involving clandestine manufacture and removal of excisable goods without payment of duty. The Court relied on the gravity of the economic offence, the existence of a substantial demand levied against the applicant, the applicant's alleged attempt to escape custody and his failure to cooperate with trial directions (including non-appearance), and the risk that release would enable avoidance of the law or prolongation of trial. Although COVID-19 related disruptions were noted, the Supreme Court had directed conclusion of the trial within a fixed period, and the applicant did not establish a right to default bail. Applying the proviso permitting continued detention where reasons are recorded, the Court concluded that release under Section 436-A was not warranted in the circumstances.

Default bail under Section 436-A Cr.P.C. is refused and the applicant is not entitled to be released on that ground.

Risk of absconding and jeopardy to revenue - continued detention for reasons to be recorded - Whether the trial court should be directed to proceed expeditiously and ensure attendance of witnesses. - HELD THAT: - The Court recorded that evidence of several departmental witnesses has been concluded and that directions from the Supreme Court require the trial to be concluded within a stipulated timeframe. Given the importance of completing the trial and the prosecution's case involving substantial revenue, the High Court directed the trial court to ensure presence and cross-examination of witnesses on the dates fixed and to take coercive measures if necessary. The Court emphasised that judicial power must be exercised to secure attendance and to proceed de die in diem as directed by the Supreme Court.

The trial court is directed to ensure attendance of witnesses, use coercive measures if needed, and conclude the trial expeditiously within the timeframe fixed by the Supreme Court.

Final Conclusion: The bail application is rejected; the applicant is not entitled to default bail under Section 436-A Cr.P.C. in view of the nature of the economic offence, risk of absconding and other factors, and the trial court is directed to ensure witness attendance and to conclude the trial expeditiously.

Entitlement to Cenvat credit on Minimum Take Or Pay (MTOP) charges - entitlement to Cenvat credit on proportionate Fixed Facility Charges (FFC) - binding effect of Central Board of Excise and Customs clarification - credit admissible where excise duty has been discharged on transaction value

Entitlement to Cenvat credit on Minimum Take Or Pay (MTOP) charges - entitlement to Cenvat credit on proportionate Fixed Facility Charges (FFC) - binding effect of Central Board of Excise and Customs clarification - credit admissible where excise duty has been discharged on transaction value - Whether the appellant is entitled to avail Cenvat credit on MTOP charges and proportionate FFC in respect of gases supplied by INOX - HELD THAT: - The Tribunal accepted the appellant's submission that the jurisdictional High Court in Inox Air Products Pvt. Ltd. Vs. UOI considered the same Order in Original dated 26.05.2015 and, relying on the CBEC clarification dated 10.11.2014, held that field authorities are bound to comply with that clarification and allow Cenvat credit where MTOP and proportionate FFC are included in the transaction value. The Tribunal further noted that the appellant had paid central excise duty on those components; once duty has been discharged as part of the transaction value, denial of the credit cannot be sustained. Applying the High Court's binding conclusion and the rule that credit is allowable where excise duty has been paid on the relevant value, the Tribunal found the demand unsustainable.

Impugned Order in Original set aside; appeal allowed and Cenvat credit on MTOP and proportionate FFC directed to be permitted with consequential reliefs as per law.

Final Conclusion: The appeal is allowed: the impugned denial of Cenvat credit on MTOP and proportionate FFC is set aside in view of the CBEC clarification and the High Court's decision, and credit is to be permitted since excise duty on those components was discharged.

Summoning order under Section 138 of Negotiable Instruments Act - Inherent jurisdiction under Section 482 Cr.P.C. - Prima facie satisfaction for issuance of process - Scope of enquiry under Section 482 - limits on reappraisal of evidence - Prevention of abuse of process of court

Summoning order under Section 138 of Negotiable Instruments Act - Prima facie satisfaction for issuance of process - Validity of the Magistrate's summoning order in the complaint under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The High Court examined the complaint, affidavit, oral statement and documentary material placed before the Magistrate (including the cheque, bank memo of dishonour, notice through counsel and postal receipt) and concluded that the factual contentions in the complaint were corroborated by the evidence collected during the Magistrate's inquiry. The Court held that there were sufficient grounds for the Magistrate to reach a prima facie satisfaction and to pass the impugned summoning order. The High Court emphasised that factual disputes and the reliability of evidence are matters for trial and not for reappraisal at the stage of an inherent-jurisdiction petition under Section 482 Cr.P.C.

The impugned summoning order was held to be within the Magistrate's jurisdiction and founded on sufficient prima facie material.

Inherent jurisdiction under Section 482 Cr.P.C. - Scope of enquiry under Section 482 - limits on reappraisal of evidence - Prevention of abuse of process of court - Whether the High Court should exercise its inherent power under Section 482 Cr.P.C. to quash the criminal complaint and summoning order. - HELD THAT: - Relying on settled principles, the Court reiterated that inherent jurisdiction under Section 482 must be exercised sparingly and not to substitute a trial court's function of appreciating evidence. The Court noted authorities that the High Court ordinarily should not probe the reliability of evidence or decide whether an accusation would be sustained; interference is justified only where the complaint discloses no offence or is frivolous, vexatious or oppressive. Applying these tests to the material before it, the Court found no basis to treat the proceedings as an abuse of process warranting quashing and declined to re-open factual questions left for trial.

Exercise of inherent jurisdiction to quash was refused; the petition under Section 482 Cr.P.C. was dismissed.

Final Conclusion: The petition under Section 482 Cr.P.C. challenging the summoning order in the complaint under Section 138 N.I. Act is dismissed; the Magistrate's order was supported by prima facie material and the High Court will not reappraise evidence at this interlocutory stage.