TaxTMI Updates e-Newsletter
Nov 12,2020

Detention, seizure and release of goods in transit under Section 129 - confiscation of goods for bogus input tax credit under Section 130 - show cause notice and ongoing departmental inquiry - compliance with documentary requirements under Rule 138A - interim release on execution of bond pending adjudication

Confiscation of goods for bogus input tax credit under Section 130 - show cause notice and ongoing departmental inquiry - compliance with documentary requirements under Rule 138A - Whether the Court should quash the notice in Form GST MOV-10 and interfere with the ongoing inquiry into alleged bogus transactions and invocation of confiscation provisions. - HELD THAT: - The Court declined to interfere with the impugned show cause notice or the ongoing inquiry since the departmental investigation into alleged bogus transactions and claim of input tax credit is in progress. Although the petitioner produced an invoice and an E-way bill for the transit when intercepted, the State has placed on record material and past conduct giving rise to suspicion (including earlier detention and payment in lieu of confiscation, disputed e-way bill patterns, and alleged failure to produce purchase e-way bills) which justify continuing the enquiry. The Court therefore refrained from adjudicating the merits of the alleged contraventions under the confiscation provisions at this interlocutory stage and directed that the inquiry proceed in accordance with law. [Paras 14, 15]

The petition seeking quashing of the show cause notice and interference with the ongoing inquiry is refused; the departmental inquiry shall proceed in accordance with law.

Release of goods and conveyance on bond pending inquiry - detention, seizure and release of goods in transit under Section 129 - Whether the goods and the conveyance should be released pending the outcome of the inquiry and confiscation proceedings. - HELD THAT: - Having considered that the driver produced a valid E-way bill and invoice at the time of interception, the Court exercised its supervisory jurisdiction to order interim relief without prejudicing the continuing inquiry. The Court directed release of the vehicle and goods subject to the petitioner executing a bond for the amount specified by the Court. The order expressly preserves the authority of the respondents to continue and conclude the statutory proceedings under the confiscation provisions. [Paras 14, 15, 16]

The vehicle and goods are ordered to be released upon the petitioner furnishing the directed bond; the inquiry and adjudication on the show cause notice to continue.

Final Conclusion: The writ petition is partly allowed: the Court refused to quash the show cause notice or halt the inquiry into alleged bogus transactions but granted interim relief by directing release of the goods and conveyance on the petitioner furnishing the ordered bond; departmental proceedings shall continue in accordance with law.

Detention of goods and conveyance under Section 129 - confiscation under Section 130 - prima facie satisfaction requirement for issuing a show cause notice - suspicion insufficient to invoke confiscation or detention

Confiscation under Section 130 - prima facie satisfaction requirement for issuing a show cause notice - Validity of the show cause notice in Form GST MOV-10 dated 15.09.2020 issued under Section 130 of the Act - HELD THAT: - The Court held that a show cause notice seeking confiscation under Section 130 cannot be issued on mere suspicion. There must be some prima facie material on the basis of which the authority arrives at satisfaction that the goods are liable to be confiscated. The impugned notice was founded on conjectures and surmises about possible past contraventions by the driver and an assumed second carriage on the same E-way bill. Such speculative basis does not satisfy the legal threshold required to initiate confiscation proceedings under Section 130. [Paras 7, 9, 10]

The show cause notice in Form GST MOV-10 dated 15.09.2020 is quashed and set aside.

Detention of goods and conveyance under Section 129 - suspicion insufficient to invoke confiscation or detention - Lawfulness of detention of the goods and vehicle under Section 129(1) of the Act in the circumstances of this case - HELD THAT: - The Court observed that detention under Section 129 is permissible only where the goods are being transported in contravention of the Act or the Rules. On inquiry, the State conceded that at the time of detention the goods were in transit and no specific contravention of the Act or Rules in respect of the transaction in question was established. The authority's case rested on a vague suspicion that the driver might previously have entered and exited the State on the same E-way bill to effect tax evasion for some unidentified transaction. The Court held that such suspicion, unaccompanied by prima facie material of contravention, does not render detention tenable in law. [Paras 7, 8, 9]

Detention and any proposed confiscation cannot be sustained on mere suspicion; detention under Section 129 must be supported by demonstrable contravention of the Act or Rules.

Final Conclusion: The writ petition is allowed; the show cause notice dated 15.09.2020 (Form GST MOV-10) is quashed. The Court recorded that detention or confiscation cannot be sustained on mere suspicion and left the authorities free to conduct any legitimate further inquiry into other transactions if material emerges.

Provisional release under Section 67(6) - appeal under Section 107 - writ under Article 226

Provisional release under Section 67(6) - appeal under Section 107 - writ under Article 226 - Application filed under Section 67(6) for provisional release of goods and conveyance to be decided by the authority within a fixed time; writ petition disposed without adjudication on merits and with direction to avail statutory remedy. - HELD THAT: - The Court declined to examine the merits or the jurisdictional contention and noted that a final order in Form MOV-11 has been passed, rendering that order appealable under the statutory appellate provision. It observed that an application under the provision for provisional release had been pending for approximately three months without orders. Rather than adjudicating the substantive challenges to the confiscation and related orders, the Court disposed of the writ petition by directing the concerned authority to immediately take up the pending application under the provisional-release provision and to pass an appropriate order in accordance with law within one week from presentation of the order. The Court left open the remedy of filing an appeal under the appellate provision and expressly clarified that it has not gone into the merits. [Paras 4, 5]

Writ petition disposed with direction to the authority to decide the pending Section 67(6) application for provisional release within one week; merits not considered and statutory appeal remains available.

Final Conclusion: The writ petition under Article 226 is disposed of by directing the authority to decide the pending application for provisional release under the relevant provision within one week; the court has not gone into merits and the statutory appellate remedy under the Act remains available.

Benefit of input tax credit - commensurate reduction in prices - profiteering under Section 171 of the CGST Act, 2017 - methodology for computing profiteering by comparing pre GST CENVAT/VAT ratio with post GST ITC ratio - verification of passing on of ITC under Rule 133(4) of the CGST Rules, 2017 - interest on profiteered amount - penalty under Section 171(3A) of the CGST Act, 2017 - supervision and recovery by Commissioners CGST/SGST

Profiteering under Section 171 of the CGST Act, 2017 - benefit of input tax credit - Whether the Respondent contravened Section 171 by not passing on the benefit of additional ITC to his buyers and the aggregate amount of profiteering during the investigation period - HELD THAT: - The Authority accepted the DGAP's computation comparing the ratio of CENVAT/VAT to turnover in the pre GST period with the ratio of ITC to turnover in the post GST period and held that the Respondent derived an additional ITC benefit of 2.67% of turnover after 01.07.2017. Applying this methodology to the recorded turnovers and ITC data for the project, the Authority found that the Respondent did not pass on the additional ITC benefit to buyers and thereby contravened Section 171. The DGAP's computation of the aggregate profiteered amount for the period 01.07.2017 to 31.12.2018 was accepted as being based on the Respondent's statutory returns and ITC registers and therefore reliable. [Paras 15, 29, 30, 44, 47]

The Respondent contravened Section 171 and the aggregate profiteered amount for the period 01.07.2017 to 31.12.2018 is determined as Rs. 1,95,86,429/- (inclusive of applicable GST).

Verification of passing on of ITC under Rule 133(4) of the CGST Rules, 2017 - matching of ledgers and credit notes - Whether the Respondent had actually passed on ITC benefit to buyers as claimed and the balance amounts, if any, to be refunded - HELD THAT: - On remand under Rule 133(4) the DGAP verified the Respondent's ledger entries, credit notes and supporting documents. The DGAP confirmed that the Respondent had passed on ITC benefit amounting to Rs. 2,06,88,394/- to eligible buyers (categories and unit counts as examined) but shortfall remained for specified subsets of buyers. The DGAP furnished annexures identifying buyers who received excess, who received correct amounts and who were yet to receive the balance, and the Authority accepted the DGAP's verified reconciliation. [Paras 32, 33, 35, 43, 45]

Verified ITC passed on totals Rs. 2,06,88,394/-. The Respondent must pass on the balance aggregate amount of Rs. 25,08,041/- to the identified 157 buyers as per Annexure 3 and Annexure 5 within three months.

Interest on profiteered amount - use of amount in business and liability to pay interest - Whether the Respondent is liable to pay interest on the profiteered amounts passed on belatedly and the rate applicable - HELD THAT: - The Authority noted that the Respondent utilised amounts received from buyers (being the additional consideration) in his business and therefore directed payment of interest under the statutory scheme. The DGAP is directed to ensure interest is disbursed to eligible buyers and to report compliance; non payment to be recovered by the concerned Commissioner. [Paras 49]

Interest at 18% per annum to be paid to eligible buyers from the dates when the additional amounts were collected until payment of ITC benefit; DGAP to ensure payment and report compliance; recovery if not paid.

Commensurate reduction in prices - future ITC accruals to be passed on - Whether the Respondent must reduce prices commensurate with ITC benefit and pass on any ITC benefits accruing after the investigation period - HELD THAT: - The Authority ordered that the Respondent shall reduce prices to be realised from buyers commensurate with the ITC benefit already determined. It further clarified that the investigation covered up to 31.12.2018 and any ITC benefit accruing subsequently must also be passed on to buyers when ascertained. [Paras 50]

Respondent directed to effect commensurate reduction in prices and pass on any subsequent ITC benefits accruing after 31.12.2018 to buyers.

Penalty under Section 171(3A) of the CGST Act, 2017 - show cause for imposition of penalty - Whether proceedings for penalty for contravention should be initiated against the Respondent - HELD THAT: - Having found contravention of Section 171(1), the Authority held that the Respondent committed an offence under Section 171(3A) and directed issuance of a show cause notice asking why penalty under the provision read with Rule 133(3)(d) should not be imposed. [Paras 51]

A show cause notice shall be issued to the Respondent to explain why penalty under Section 171(3A) read with Rule 133(3)(d) should not be imposed.

Supervision and recovery by Commissioners CGST/SGST - monitoring of compliance - Mechanism for monitoring compliance with the Authority's directions and recovery if the Respondent fails to refund amounts - HELD THAT: - The Authority directed the Commissioners of CGST/SGST, Haryana to monitor implementation under DGAP's supervision, ensure the profiteered amount and interest are paid to eligible buyers, and to recover amounts if the Respondent fails to comply. A compliance report is ordered within four months. [Paras 48, 52]

Commissioners CGST/SGST Haryana to monitor and, if necessary, recover amounts; a compliance report to be submitted to the Authority through DGAP within four months.

Final Conclusion: The Authority found that the Respondent contravened Section 171 by not passing on the additional ITC benefit (2.67% of turnover) for the period 01.07.2017 to 31.12.2018 and fixed the aggregate profiteered amount at Rs. 1,95,86,429/-. The DGAP's verification that Rs. 2,06,88,394/- had been passed on was accepted and the Respondent is directed to pay the remaining Rs. 25,08,041/- to identified buyers within three months with interest at 18% per annum from the dates of collection; a show cause notice for penalty under Section 171(3A) is to be issued and Commissioners CGST/SGST Haryana shall supervise compliance and recovery where necessary.

Failure to pass on benefit of additional Input Tax Credit - Violation of Section 171(1) of the CGST Act, 2017 - Determination of profiteered amount under Section 171(2) read with Rule 133(1) - Alleged offence under Section 122(1)(i) for incorrect or false invoice - Non-applicability of existing penal provision to omission to pass on tax benefit - Insertion of penalty provision via Section 171(3A) by Finance Act, 2019 - Non-retrospectivity of newly enacted penal provision

Failure to pass on benefit of additional Input Tax Credit - Violation of Section 171(1) of the CGST Act, 2017 - Determination of profiteered amount under Section 171(2) read with Rule 133(1) - Respondent did not pass on the benefit of additional Input Tax Credit to buyers for the period 01.07.2017 to 31.08.2018 and therefore violated Section 171(1). - HELD THAT: - The Authority considered the DGAP's investigation and report dated 28.11.2018 and, after hearing the parties, accepted the DGAP's determination. By Order No. 21/2019 the Authority quantified the profiteered amount and found that the respondent failed to pass on additional ITC to the complainant and other home buyers for the period from 01.07.2017 to 31.08.2018, thereby contravening the statutory obligation in Section 171(1). The factual finding of omission to pass on benefit and the consequent determination of profiteering were affirmed on the basis of the investigation and submissions before the Authority. [Paras 2, 6]

Findings that the respondent violated Section 171(1) by not passing on additional ITC for 01.07.2017 to 31.08.2018 and that a profiteered amount was determined were confirmed.

Alleged offence under Section 122(1)(i) for incorrect or false invoice - Non-applicability of existing penal provision to omission to pass on tax benefit - Penalty under Section 122(1)(i) could not be imposed for the respondent's failure to pass on the benefit of tax reduction/ITC. - HELD THAT: - The Authority examined the statutory text of Section 122(1)(i) and concluded that it does not cover the failure to pass on benefits of tax reduction or ITC under Section 171(1). Although a show-cause notice was issued invoking Section 122(1)(i) on the premise that incorrect or false invoicing accompanied charging of excess consideration, the legal scope of Section 122(1)(i) does not extend to the specific omission constituting a breach of Section 171(1). Consequently, the penalty provision invoked in the notice could not validly be applied to the anti-profiteering violation. [Paras 7]

Penalty under Section 122(1)(i) is not attracted by the respondent's omission to pass on ITC benefits and therefore cannot be imposed for that violation.

Insertion of penalty provision via Section 171(3A) by Finance Act, 2019 - Non-retrospectivity of newly enacted penal provision - The penalty introduced by insertion of Section 171(3A) with effect from 01.01.2020 cannot be imposed retrospectively for violations committed during 01.07.2017 to 31.08.2018. - HELD THAT: - The Authority noted that specific penal consequences for contravention of Section 171(1) were legislated only by Section 112 of the Finance Act, 2019, which inserted Section 171(3A) effective from 01.01.2020. As there were no corresponding penalty provisions in force at the time the respondent's violation occurred (01.07.2017 to 31.08.2018), applying the newly enacted penalty retrospectively would be impermissible. On that basis, the notice dated 01.04.2019 invoking penalty proceedings was withdrawn and the penalty proceedings were dropped. [Paras 8, 9]

Penalty under Section 171(3A) (inserted w.e.f. 01.01.2020) cannot be applied retrospectively to the respondent's conduct during 01.07.2017 to 31.08.2018; penalty proceedings withdrawn.

Final Conclusion: The Authority confirmed that the respondent failed to pass on additional ITC to buyers for 01.07.2017 to 31.08.2018 and that profiteering was determined, but concluded that no penalty under Section 122(1)(i) was tenable for that omission and that the penalty newly provided by Section 171(3A) (effective 01.01.2020) could not be imposed retrospectively; accordingly the penalty proceedings were withdrawn.

Transitional credit under GST - revision of FORM GST TRAN-1 under Rule 120-A - power to extend time under proviso to Rule 117 - application of Section 14 of the Limitation Act to condonation of delay - remand for fresh consideration - CBIC circular on technical glitches and its applicability

Revision of FORM GST TRAN-1 under Rule 120-A - CBIC circular on technical glitches and its applicability - remand for fresh consideration - transitional credit under GST - Order dated 22.1.2020 rejecting the petitioner's application for revision of FORM GST TRAN-1 was set aside and the matter was remanded to the Commissioner for fresh consideration. - HELD THAT: - The High Court found that the impugned order rejected the petitioner's request by treating it as a case of inability to file TRAN-1 due to technical glitches and applying the CBIC circular dated 3.4.2018, whereas the petitioner had already filed TRAN-1 and sought revision under Rule 120-A. The Court observed that the order did not address the petitioner's contention about seeking revision of the filed declaration and therefore quashed that order. The petition was therefore remitted to respondent no. 3 with a direction to hear and decide the revision application filed on 24.9.2019 afresh, taking into account the petitioner's arguments and the correct legal frame regarding revision of TRAN-1 and entitlement to transitional input tax credit.

Order dated 22.1.2020 set aside; Commissioner directed to decide the revision application afresh.

Application of Section 14 of the Limitation Act to condonation of delay - power to extend time under proviso to Rule 117 - remand for fresh consideration - The Commissioner was directed to decide the question of delay in filing the revision application in accordance with Section 14 of the Limitation Act within a specified timeframe. - HELD THAT: - The Court directed that the Commissioner, while reconsidering the revision application, must determine any delay in filing the revision under the statutory framework of limitation, applying the mandate of Section 14 of the Limitation Act. The direction requires the Commissioner to consider the petitioner's justification for delay and any power to extend time (including the proviso to Rule 117 where relevant) when adjudicating the revision request.

Commissioner to decide the delay issue under Section 14 of the Limitation Act and the revision application within four weeks from filing a copy of this order.

Final Conclusion: The writ petition is disposed by setting aside the order dated 22.1.2020 and remitting the petitioner's revision application (filed 24.9.2019) to the Commissioner for fresh consideration, with directions to decide the question of delay in the light of Section 14 of the Limitation Act within four weeks.

Lawful exercise of powers under Section 131(1A) of the Income Tax Act - search and seizure under Section 132 of the Income Tax Act and its procedural scheme - requirement of "reason to suspect" before invoking Section 131(1A) - illegality of search and seizure where statutory prerequisites are not satisfied - review petition under Article 226 of the Constitution and Order XLVII Rule 1 CPC

Lawful exercise of powers under Section 131(1A) of the Income Tax Act - requirement of "reason to suspect" before invoking Section 131(1A) - illegality of search and seizure where statutory prerequisites are not satisfied - Whether the Revenue could lawfully proceed under Section 131(1A) (and thereby take steps leading to a search under Section 132) in the absence of any material establishing a "reason to suspect" concealment of income. - HELD THAT: - The Court examined the statutory scheme and observed that Section 131(1A) permits the officer to exercise powers of enquiry under Section 131(1) prior to initiating clauses (i)-(v) of Section 132 only if the officer has a reason to suspect that income has been or is likely to be concealed. The Court repeatedly invited the Revenue to point to any material on record demonstrating such reason to suspect before the action of 10.09.2018. The Revenue candidly accepted that no such material existed. Accordingly, the Court held that, even if the steps of 10.09.2018 were taken under Section 131(1A) and followed by action under Section 132, that exercise was contrary to the statutory scheme because the prerequisite "reason to suspect" was absent. The Court further noted that this finding does not affect the determinative outcome recorded in the earlier judgment which set aside the search and seizure. [Paras 7, 8]

Proceedings initiated under Section 131(1A) (and consequent action under Section 132) were contrary to the scheme of the Act in the absence of any material establishing a reason to suspect concealment.

Review petition under Article 226 of the Constitution and Order XLVII Rule 1 CPC - Whether the Revenue has made out any ground for review of the final judgment dated 09.01.2020 which had allowed the writ petition and set aside the search action and declared the seizure and consequent proceedings illegal. - HELD THAT: - The Review Petition challenged the earlier order but the Court found no new or substantive ground warranting review. The Revenue's acceptance that no material existed to justify the pre-search enquiries under Section 131(1A) reinforced the Court's earlier reasons and did not furnish any basis for recall or modification of its prior decision. The Court therefore found that the Review Petition did not disclose any ground for review. [Paras 3, 9]

Review petition dismissed; no order as to costs.

Final Conclusion: Review petition dismissed. The earlier judgment setting aside the search and seizure and declaring the consequential proceedings illegal stands; the Court held that steps taken under Section 131(1A) (and any subsequent action under Section 132) were contrary to the statutory scheme in the absence of material establishing a reason to suspect concealment of income.

Premature criminal prosecution during pendency of appellate proceedings - Crystallization of tax demand - Independence of adjudicatory and criminal proceedings - Exoneration on merits bars criminal prosecution - Section 276C(2) of the Income Tax Act, 1961

Premature criminal prosecution during pendency of appellate proceedings - Crystallization of tax demand - Section 276C(2) of the Income Tax Act, 1961 - Whether prosecution under section 276C(2) could be permitted while the assessee's appeal against the assessment/order was restored and pending adjudication before the ITAT, such that the tax demand was not crystallized. - HELD THAT: - The Tribunal had dismissed the appeal for want of prosecution and granted liberty to apply for restoration; the assessee successfully got the appeal restored and the ITA No.3604/AHD/2015 is pending adjudication. Because the appeal has not been adjudicated on merits, the departmental demand cannot be said to have been crystallized. Although civil adjudication and criminal prosecution are independent and may proceed simultaneously, where the adjudication may result in exoneration on merits the continuation of criminal prosecution would amount to an abuse of process. If the adjudication on merits negates the finding of concealment (or sets aside penalty under section 271(1)(c)), the Assessing Officer would be obliged to correct his order and there would be no legal basis for prosecution. Given that the appeal is pending and the petitioner has deposited a substantial part of the demand and sought restoration promptly, continuation of the prosecution would amount to a double injury to the petitioner and cannot be permitted until the ITAT delivers final judgment. [Paras 6, 7, 8, 9, 10]

Prosecution under section 276C(2) cannot continue while the appeal remains pending before the ITAT and the tax demand is not crystallized; criminal proceedings are stayed until the ITAT delivers its final judgment.

Final Conclusion: The petition is partly allowed: Criminal Case No.1622 of 2019 (prosecution under section 276C(2) of the IT Act) is stayed until the ITAT delivers final judgment in ITA No.3604/AHD/2015; the Department remains free to consider the assessee's case under the Vivad se Vishwas Scheme.

Attachment of bank account under Section 226(3) of Income Tax Act, 1961 - Infructuousness of writ relief - Statutory appeal under Section 144 of Income Tax Act, 1961 - Exercise of writ jurisdiction when alternative remedy available - Application for early hearing before appellate authority

Attachment of bank account under Section 226(3) of Income Tax Act, 1961 - Infructuousness of writ relief - Whether the challenge to the notice of attachment of the petitioner's bank account requires judicial interference. - HELD THAT: - The respondents stated, and the petitioner did not contradict, that an amount was attached in response to the notice under Section 226(3) and that following deposit the bank account was released on 15.04.2020. The court noted these facts and held that, in view of the subsequent deposit and release of the account, the relief sought in the writ petition challenging the attachment had become infructuous. The court therefore declined to grant any effective relief against the attachment notice. [Paras 2, 4]

Relief challenging the bank account attachment rendered infructuous and no interference warranted.

Statutory appeal under Section 144 of Income Tax Act, 1961 - Exercise of writ jurisdiction when alternative remedy available - Application for early hearing before appellate authority - Whether the High Court should entertain the challenge to the assessment order despite the availability of a statutory appeal. - HELD THAT: - The assessment order for Assessment Year 2017-18 has been challenged by the petitioner, who has already instituted a statutory appeal under Section 144 which remains pending. The court declined to exercise extraordinary writ jurisdiction to disturb the assessment merely because of the alleged backlog of over 600 appeals or asserted non-availability of the appellate authority-facts which are disputed by respondents. The petitioner was not granted indulgence by the court and was directed to pursue the statutory appeal; liberty was given to file an appropriate application for early hearing before the appellate authority, to be considered on its merits. [Paras 2, 5, 7]

Writ relief refused in respect of the assessment order; petitioner to pursue statutory appeal and may apply for early hearing before the appellate authority.

Final Conclusion: The petition is finally disposed of: the challenge to the bank account attachment is rendered infructuous by deposit and release, and relief against the assessment order is declined in writ jurisdiction because a statutory appeal is pending; petitioner may seek early hearing from the appellate authority.

Violation of principles of natural justice due to denial of opportunity of cross-examination - genuineness of transactions and existence of leased assets - concurrent findings of fact - appellate interference under Section 260A: perversity test

Violation of principles of natural justice due to denial of opportunity of cross-examination - genuineness of transactions and existence of leased assets - concurrent findings of fact - appellate interference under Section 260A: perversity test - Whether the Tribunal was correct in holding that denial of opportunity of cross-examination resulted in violation of natural justice and whether the leased assets were non-existent such as to warrant interference under Section 260A. - HELD THAT: - The question whether the leased assets existed and the transactions were genuine was treated as a pure question of fact. The Commissioner of Income Tax (Appeals) on meticulous appreciation of the material - including sanction letters, lease agreements, purchase invoices, installation certificates, joint and independent inspection reports, and pre- and post-search inspection records - held that the transactions were genuine and the assets existed, and allowed depreciation. The Income Tax Appellate Tribunal affirmed those findings. Given concurrent findings of fact supported by evidence and no perversity shown, the High Court held that there was no ground to interfere under Section 260A. The Court therefore rejected the revenue's contention that denial of an opportunity to cross-examine (as relied upon by the Tribunal) required interference, observing that the factual conclusion as to existence and genuineness was supported by evidence and not vitiated by perversity.

The substantial question is answered against the revenue; concurrent factual findings that the leased assets existed and transactions were genuine are upheld and are not amenable to interference under Section 260A.

Final Conclusion: The appeal is dismissed; the concurrent findings upholding existence of the leased assets and genuineness of the transactions are maintained and do not warrant interference under Section 260A.

Entitlement to exemption under Section 10A - requirement of compliance with Section 10A(2)(ia) (75% export threshold) - allocation of overheads between STP and non STP units on turnover basis - maintenance of separate accounts for STP and non STP units - directory v. mandatory - double exemption/deduction in respect of payments to subcontractors - remand for fresh consideration of compliance with statutory export condition

Allocation of overheads between STP and non STP units on turnover basis - entitlement to exemption under Section 10A - Concurrent factual finding that allocation of overheads on turnover basis was reasonable and supports computation of exemption under Section 10A. - HELD THAT: - The Commissioner (A) and the Tribunal recorded concurrent findings accepting the assessee's bifurcation of STPI, 80HHE and domestic receipts and the apportionment of direct and indirect expenses to export turnover. The Tribunal held that, given dispersed units, turnover proportion is the plausible and reasonable basis for allocating overheads and that the exercise yields a near accurate determination of profit eligible for exemption. No perversity in these concurrent findings has been shown. [Paras 8]

Allocation of overheads on turnover basis upheld and the related computation of exemption under Section 10A sustained in favour of the assessee.

Maintenance of separate accounts for STP and non STP units - directory v. mandatory - entitlement to exemption under Section 10A - Maintenance of separate accounts under the STPI scheme is directory and non compliance does not by itself disentitle the assessee to exemption under Section 10A where statutory conditions are otherwise satisfied. - HELD THAT: - Sub section (2) of Section 10A, as in force for the relevant period, does not require maintenance of separate books or accounts; where the legislature intended such a requirement it has done so expressly in other provisions. The STPI registration conditions may require separate accounts but no statutory consequence for failure to comply is prescribed in Section 10A; therefore compliance with STPI/ RBI stipulations is directory and does not preclude the assessee from claiming the exemption under Section 10A. [Paras 10]

Non maintenance of separate accounts under STPI scheme held directory; assessee not denied Section 10A exemption on that ground.

Double exemption/deduction in respect of payments to subcontractors - entitlement to exemption under Section 10A - No double exemption arose in the facts where subcontractors provided support to the assessee and payments to them reduced the assessee's exempt profit. - HELD THAT: - The Commissioner (A) found, and the Tribunal affirmed, that subcontractors rendered software support to the assessee (not to the assessee's customers) and operated from the STP unit; subcontractors' claims under Section 10A based on foreign inward remittance certificates do not negate the assessee's claim because the assessee's exempt profit stood reduced to the extent of payments made to subcontractors. On the factual matrix, the contention of double benefit to two assesses on the same manufacturing activity does not arise. [Paras 11]

Question of double exemption rejected; no disallowance on that ground.

Requirement of compliance with Section 10A(2)(ia) (75% export threshold) - remand for fresh consideration of compliance with statutory export condition - Tribunal's order insofar as it failed to decide compliance with Section 10A(2)(ia) is quashed and the matter remitted for fresh adjudication on whether the 75% export condition is satisfied. - HELD THAT: - Section 10A(2)(ia) explicitly requires that for undertakings commencing on or after 01.04.1995 exports of such articles or things must be not less than 75% of total sales during the previous year. The Commissioner (A) and Tribunal did not record a finding on fulfillment of this statutory threshold; therefore the Tribunal's order on this aspect cannot stand. The Court remitted the question to the Tribunal to decide afresh in accordance with law whether the statutory export percentage condition is satisfied. [Paras 12]

Tribunal's order set aside to the extent it pertains to Section 10A(2)(ia); issue remitted to Tribunal for fresh consideration.

Final Conclusion: The appeal is disposed of by upholding the Tribunal's factual conclusions on allocation of overheads, the directory nature of STPI account keeping requirements and absence of double exemption, but the Tribunal's order is quashed insofar as it omitted adjudication on compliance with the 75% export requirement under Section 10A(2)(ia); that issue is remitted to the Tribunal for fresh decision in accordance with law.

Exemption under sections 11 and 12 of the Income-tax Act - commercial activity versus charitable purpose under the provisions of section 2(15) - accumulation of income under section 11 - precedential effect of Ahmedabad Urban Development Authority vs. ACIT (Exemption)

Exemption under sections 11 and 12 of the Income-tax Act - commercial activity versus charitable purpose under the provisions of section 2(15) - Whether the Appellate Tribunal was justified in allowing exemptions under sections 11 and 12 despite findings or contentions of commercial activities covered by section 2(15). - HELD THAT: - The Court held that the questions raised by the Revenue concerning the allowability of exemptions under sections 11 and 12 in the face of alleged commercial activities governed by section 2(15) are no longer res integra. The High Court's earlier decision in Ahmedabad Urban Development Authority vs. ACIT (Exemption) squarely covers the legal proposition, and that precedent governs the present controversy. Consequently, the Tribunal's allowance of exemption was sustainable in view of the binding effect of the High Court's decision. [Paras 3]

The question was decided against the Revenue and in favour of the assessee, being covered by the earlier High Court decision.

Accumulation of income under section 11 - precedential effect of Ahmedabad Urban Development Authority vs. ACIT (Exemption) - Whether the Tribunal was justified in allowing accumulation under section 11 (including accumulation at the claimed percentage) and in relying upon coordinate-bench and High Court decisions, some of which were the subject of further appeals. - HELD THAT: - The Court observed that reliance on the High Court precedent and coordinate-bench decisions was permissible because the legal questions raised are settled by the High Court's ruling cited by the Court. The pendency of further appeals in other matters did not displace the controlling effect of the cited High Court decision on the issues in this appeal. Hence the Tribunal's grant of benefit of accumulation under section 11 stood validated. [Paras 3]

The Tribunal's allowance of accumulation under section 11 was upheld; the Revenue's challenge was rejected.

Final Conclusion: The Revenue's appeal is dismissed. The questions raised were held to be covered by the High Court's earlier decision in Ahmedabad Urban Development Authority vs. ACIT (Exemption), and therefore the Tribunal's order allowing exemptions and accumulation under section 11 was sustained.

Rectification of apparent mistake - rectification under section 254(2) of the Income Tax Act, 1961 - genuineness of sale of shares - payment of share premium - reliance on statement recorded on oath - absence of valuation report - no interference with findings of lower authorities

Rectification of apparent mistake - rectification under section 254(2) of the Income Tax Act, 1961 - genuineness of sale of shares - payment of share premium - reliance on statement recorded on oath - absence of valuation report - Whether the Tribunal's order contains an apparent mistake warranting rectification under section 254(2) in respect of its consideration of the assessee's contention and supporting affidavit regarding payment of share premium. - HELD THAT: - The Tribunal had considered the rival submissions and noted that both the AO and CIT(A) gave several reasons for rejecting the assessee's claim of payment of share premium, including the statement of the company's MD recorded on oath that shares were allotted at Rs.10 per share and that the company's net worth was negative at the time of purchase, together with the absence of any valuation report. The Tribunal held that these facts and reasons were not controverted by the assessee's representative and therefore no interference with the CIT(A)'s order was called for. The Tribunal further observed the improbability of the sale price but, to avoid making the assessee worse off, declined to reduce the loss allowed by the AO. The present petition alleged that the Tribunal failed to consider the affidavit filed by the assessee; however, the Tribunal's order expressly records and discusses the MD's statement and the absence of valuation, and bases its primary decision on uncontested findings of the lower authorities. On this basis the appellate bench found no apparent mistake in the impugned order that would justify rectification under section 254(2). [Paras 3, 4]

Miscellaneous petition dismissed; no apparent mistake found in the Tribunal order and no rectification under section 254(2) warranted.

Final Conclusion: The Miscellaneous Petition under section 254(2) is dismissed: the Tribunal had considered and recorded the MD's statement and the absence of a valuation report, anchored its decision on reasons given by the lower authorities which were not controverted, and therefore there is no apparent mistake requiring rectification.

Rectification of apparent mistake under section 254(2) of the Income Tax Act - grounds not pressed / dismissed as not pressed - onus of proof to establish that arguments were advanced before the Tribunal - recordal in the Tribunal log book and paper book as evidence of submissions

Grounds not pressed / dismissed as not pressed - recordal in the Tribunal log book and paper book as evidence of submissions - Whether the Tribunal was incorrect in recording in para 15 that no arguments were advanced by the assessee's AR on ground Nos.8 to 19 and whether those grounds were wrongly dismissed as not pressed. - HELD THAT: - The Tribunal's order shows that ground Nos.1 and 2 were rejected as not pressed (para 2), and ground Nos.3 to 7 concerned sale and lease-back/depreciation issues which were argued and decided (paras 3-4). The Tribunal recorded in para 15 that no arguments were advanced on ground Nos.8 to 19 and therefore treated them as not pressed. The assessee, in the MP, disputed that finding and relied on para 4 of the impugned order as demonstrating that other grounds were argued. The Tribunal examined its hearing record and found no noting in the log book of any arguments on ground Nos.8 to 19, and the Paper Book filed by the assessee contained parawise comments only on the sale and lease-back issues (pages 1-7), not on grounds 8-19. The applicant produced no evidence to establish that arguments on these grounds were in fact advanced at the hearing. In the absence of any contemporaneous record or supporting evidence, the Tribunal's factual finding that those grounds were not pressed stands and is not an apparent mistake requiring rectification under section 254(2). [Paras 2, 3, 4, 15]

The Tribunal's finding that no arguments were advanced on ground Nos.8 to 19 is upheld and the miscellaneous petition seeking rectification is rejected.

Final Conclusion: Miscellaneous Petition dismissed; the Tribunal's factual finding that ground Nos.8 to 19 were not pressed (owing to absence of any contemporaneous record or evidence of arguments) is maintained and does not amount to an apparent mistake warranting rectification under section 254(2).

Rectification of defects in appeal - service and receipt of defect memo/notice - opportunity to cure defects - duty of appellant to file a defect-free appeal - recall of adjudicatory order for alleged non-receipt of notice

Rectification of defects in appeal - service and receipt of defect memo/notice - opportunity to cure defects - Miscellaneous Petition by Revenue seeking recall of ITAT order dismissing the Revenue's appeal for non-rectification of defects was dismissed. - HELD THAT: - The Tribunal found that the notice and defect memo were issued on 28.06.2018 addressed to ACIT, Circle 1(1), Bengaluru and that appearance of Revenue's representatives on subsequent hearing dates (including 05.09.2018 and 03.04.2019) demonstrated that the notice (and, by implication, the defect memo) had been received by the Revenue. The Tribunal rejected the Revenue's contention that the defect memo did not reach the correct authority, observing that it is the primary duty of an appellant to file an appeal free of defects and not to rely upon the Registry to detect and correct defects. In view of the receipt of notice and the appearances before the Tribunal, the claim of non-receipt did not justify recalling the earlier order; accordingly the MP was found devoid of merit and dismissed. [Paras 4, 5]

MP dismissed; no recall of the ITAT order allowing opportunity to cure defects.

Final Conclusion: The miscellaneous petition filed by the Revenue seeking recall of the Tribunal's order was dismissed for want of merit, the Tribunal holding that the notice/defect memo was received and that the Revenue had a primary duty to file a defect-free appeal.

Jurisdiction of Principal Commissioner under section 263 - exclusivity of Income Tax Settlement Commission once an application is admitted - pending assessment proceedings for settlement under Section 245C and definition of "case" under Section 245A - revisional jurisdiction when settlement proceedings are pending - treatment of short term capital gains vis a vis business income (trade vs investment)

Pending assessment proceedings for settlement under Section 245C and definition of "case" under Section 245A - exclusivity of Income Tax Settlement Commission once an application is admitted - revisional jurisdiction when settlement proceedings are pending - Assessee's application before the Income Tax Settlement Commission filed on 5 December 2019 vested exclusive jurisdiction in the Settlement Commission and, consequently, the Principal Commissioner could not validly assume jurisdiction under section 263 and pass the revisionary order dated 30 March 2020. - HELD THAT: - The Tribunal examined whether a "case" was pending for the purposes of Section 245C(1) and the explanatory clauses of Section 245A(b). A proceeding is "pending" once commenced and until concluded. On 5 December 2019 (date of the settlement application) notices under section 147/148 could still have been issued for AY 2015 16, therefore an application under Section 245C(1) was competent. The Settlement Commission admitted the application on 18 December 2019 and, by statute, assumes exclusive jurisdiction to exercise the functions of an income tax authority in relation to that case from the date of application until an order under Section 245D(4) is passed. Given admission of the application, the Principal Commissioner's assumption of jurisdiction under section 263 (order dated 30 March 2020) was improper because the Settlement Commission had exclusive cognizance of the matter during the relevant period. [Paras 15, 16]

The order under section 263 dated 30 March 2020 was quashed for lack of jurisdiction in view of the admitted settlement application.

Treatment of short term capital gains vis a vis business income (trade vs investment) - revisional jurisdiction when settlement proceedings are pending - Even on the merits of the substantive concern (classification and genuineness of the short term capital gains), no prejudice to revenue was shown because the same issue was before the Settlement Commission and the assessee had offered the amount as additional income to the Settlement Commission. - HELD THAT: - The Tribunal noted that the revisionary proceedings principally sought re examination of the nature and genuineness of the short term capital gains. However, the Settlement Commission had already admitted the assessee's application in respect of the same issue and the assessee had offered the income as additional income before that forum. The Settlement Commission alone has the statutory power to grant immunity from penalty and prosecution; the possibility of waiver or immunity under that statutory scheme does not, by itself, render the Settlement Commission's jurisdiction prejudicial to revenue or furnish a ground for invoking section 263. Consequently, no error prejudicial to revenue was established that would validate the section 263 order while settlement proceedings were pending. [Paras 17]

On the substantive issue of classification of the gains, the Tribunal found no basis to sustain the section 263 order in view of the pending and admitted settlement proceedings and quashed the revisionary order.

Final Conclusion: The appeals are allowed; the order passed by the Principal Commissioner under section 263 on 30 March 2020 is quashed because the Income Tax Settlement Commission had admitted the assessee's application and exercised exclusive jurisdiction over the "case" for AY 2015 16.

Bogus accommodation entries - burden of proof to establish genuineness of purchases - estimation of income by applying gross profit margin to suspected purchases - precedential effect of coordinate-bench ITAT decision - maintainability of Revenue appeal under CBDT monetary limit

Bogus accommodation entries - burden of proof to establish genuineness of purchases - precedential effect of coordinate-bench ITAT decision - Whether additions made by treating purchases from certain suppliers as bogus accommodation entries could be sustained. - HELD THAT: - The Tribunal found the present facts identical to those in the assessee's own earlier ITAT order for A.Y. 2007-08, where the coordinate bench had held that the assessee discharged the burden of proving genuineness by producing confirmations/affidavits and supplier responses to notices u/s 133(6), and the AO had not brought independent material to rebut those confirmations but relied on the investigation report. Noting that in the present proceedings the assessee had placed on record purchase bills, confirmations, bank statements and other supplier records and that the ld. CIT(A) recorded those details, the Tribunal followed the earlier coordinate-bench decision and held that no addition on account of alleged bogus purchases was called for. Since the issue was decided on merits in favour of the assessee, the Tribunal did not examine reopening or other ancillary contentions. [Paras 11, 12]

Addition for alleged bogus purchases deleted for the listed assessment years following the coordinate-bench ITAT decision; appeals of the assessee allowed on this ground.

Maintainability of Revenue appeal under CBDT monetary limit - Whether the Revenue's cross-appeals were maintainable in view of the CBDT instruction fixing a monetary threshold for filing appeals. - HELD THAT: - The Tribunal noted the CBDT instruction specifying that Revenue should not file appeals before the Tribunal where the tax effect is below the prescribed threshold (Rs. 50 lakhs as per the circular relied upon). The relief granted by the ld. CIT(A) in each assessment year resulted in tax effects below that limit. The Departmental Representative did not contend that any exception to the instruction applied. On that basis the Tribunal held the Revenue's appeals to be not maintainable and dismissed them. [Paras 13, 14, 15]

Revenue's appeals dismissed as not maintainable under the CBDT monetary threshold; consequential relief to the assessee sustained.

Final Conclusion: The Tribunal allowed the assessee's appeals by deleting additions made on account of alleged bogus purchases for A.Y. 2008-09, 2009-10, 2010-11, 2012-13, 2013-14 and 2014-15 following a coordinate-bench ITAT decision; the Revenue's cross-appeals were dismissed as not maintainable under the CBDT monetary threshold.

Obligation to deduct tax at source under section 195 read with charging provisions - income deemed to accrue or arise in India - commission paid to non-resident agents for services rendered outside India not taxable in India - distinction between fees for technical services and commission for procuring orders - disallowance under section 40(a)(i) for failure to deduct tax at source

Obligation to deduct tax at source under section 195 read with charging provisions - commission paid to non-resident agents for services rendered outside India not taxable in India - disallowance under section 40(a)(i) for failure to deduct tax at source - distinction between fees for technical services and commission for procuring orders - Whether payment of agency commission to non-resident foreign agents for promotion of export sales outside India attracted liability to deduct tax at source and consequent disallowance under section 40(a)(i). - HELD THAT: - The Tribunal, following the Division Bench decision in the assessee's own case for AY 2011-12 and several authoritative precedents, held that section 195 must be read along with the charging provisions (section 4/5/9) and that an obligation to withhold arises only if the income is chargeable to tax in India. The payments in question were commissions to agents who rendered services outside India through their overseas offices. Such payments did not accrue or arise in India and could not be treated as fees for technical services. On those findings and the cited precedents, the Tribunal concluded that there was no liability to deduct tax at source and therefore no basis for the disallowance under section 40(a)(i). The Tribunal accordingly deleted the addition and allowed the assessee's appeal. [Paras 6, 7]

Addition deleted; assessee not liable to deduct tax at source on the foreign agency commission and appeal allowed.

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition and held that commission paid to non-resident foreign agents for services rendered outside India did not attract a withholding obligation and consequent disallowance, following the Division Bench precedent in the assessee's own case.

Applicability of section 14A - Rule 8D(2)(ii) - netting of interest expenditure against taxable interest income - Rule 8D(2)(iii) - disallowance of administrative/head office expenses - Deduction under section 44C - ceiling and attribution of head office expenditure - Non-resident branch - income from self (interest from head office)

Applicability of section 14A - Rule 8D(2)(ii) - netting of interest expenditure against taxable interest income - Non-resident branch - income from self (interest from head office) - Whether disallowance under section 14A is attracted in respect of interest received by the Indian branch from its head office and the manner of computing the disallowance under Rule 8D(2)(ii). - HELD THAT: - The Tribunal noted that earlier decisions of the Tribunal and the Bombay High Court held interest received by the Indian branch from its head office could not be taxed in the branch's hands as one cannot earn income from self, but the Tribunal had directed quantification under section 14A. Following precedents, the Tribunal rejected the assessee's contention that the section 14A disallowance should be vacated for want of a recording of satisfaction by the Assessing Officer. The Tribunal accepted the assessee's submission, supported by High Court decisions, that for the purpose of Rule 8D(2)(ii) the interest expenditure to be disallowed must be computed after netting taxable interest income against interest paid on borrowings. The matter was therefore remitted to the AO for recomputation of the section 14A disallowance in accordance with the netting principle. [Paras 8]

Section 14A applies as directed by earlier orders; disallowance under Rule 8D(2)(ii) must be computed after netting interest paid and taxable interest earned - AO to recompute accordingly.

Rule 8D(2)(iii) - disallowance of administrative/head office expenses - Applicability of section 14A - Whether administrative (head office) expenses are to be disallowed under Rule 8D(2)(iii) where the assessee had not made specific investments to earn the exempt interest from the head office. - HELD THAT: - The Tribunal rejected the assessee's contention that absence of any investment made for earning the interest from the head office negated any disallowance under Rule 8D(2)(iii). Relying on the statutory scheme that from A.Y. 2008-09 disallowance under section 14A is to be computed in accordance with Rule 8D, the Tribunal found no substance in the claim that administrative expenses cannot be apportioned merely because no investment exists. Consequently, the Tribunal declined to accept the assessee's claim to restrict administrative expense disallowance to a small percentage of exempt income. [Paras 8]

Disallowance under Rule 8D(2)(iii) stands; the assessee's contention that no disallowance is called for in absence of investments is rejected.

Deduction under section 44C - ceiling and attribution of head office expenditure - Whether the assessee is entitled to deduction under section 44C (five percent of adjusted total income) despite absence of head office expense entries in the India branch's books, notes to accounts or audit report. - HELD THAT: - The Tribunal examined section 44C and its Explanation defining head office expenditure and observed the statutory purpose: to provide a practicable ceiling for deductions where verification of head office claims is difficult. The Tribunal held that absence of head office expenditure entries in the branch's books or notes is not decisive and does not preclude allowance under section 44C. On the facts, the Tribunal found the assessee's claim of 5% of adjusted total income to be lower than the head office expenditure attributable to the India business and therefore allowable. The Tribunal set aside the orders of the lower authorities and directed the AO to allow the deduction under section 44C. [Paras 12]

Assessee entitled to deduction under section 44C as claimed (5% of adjusted total income); order of CIT(A) set aside and AO directed to allow the claim.

Applicability of section 14A - For A.Y. 2010-11, whether the disallowance under section 14A should be limited to the amount of exempt interest income received from the head office when that exempt income is nominal. - HELD THAT: - On the facts for A.Y. 2010-11 the exempt interest income received from the head office was a negligible amount. Both parties agreed to restrict the section 14A disallowance to that extent, and the Tribunal, guided by relevant High Court decisions, accepted that the disallowance under section 14A should be restricted to the amount of exempt income where appropriate. The Tribunal observed the assessee's concession not to press other grounds was made solely because of the miniscule exempt income and would not prejudice its alternative claims. [Paras 16]

Section 14A disallowance for A.Y. 2010-11 restricted to the amount of exempt interest income received by the assessee.

Final Conclusion: The appeals are partly allowed. For A.Y. 2009-10 the Tribunal upheld the application of section 14A but directed recomputation of the Rule 8D(2)(ii) disallowance after netting interest paid and taxable interest earned, affirmed disallowance under Rule 8D(2)(iii), and allowed the deduction under section 44C (directing the AO to give effect). For A.Y. 2010-11 the section 14A disallowance is restricted to the amount of exempt interest income received.

Business loss versus capital loss on conversion of investment into stock-in-trade - Revision under Section 263 - assessment erroneous and prejudicial to the interests of Revenue - Succession to business and carry forward/set off of unabsorbed depreciation - Application of Section 50C - SRO/stamp valuation vis-a -vis sale consideration - Treatment of sale of block asset - reduction from written down value versus short-term capital loss - Requirement that Assessing Officer apply mind and record reasons when allowing claims

Business loss versus capital loss on conversion of investment into stock-in-trade - Requirement that Assessing Officer apply mind and record reasons when allowing claims - Validity of AO's allowance of the loss on sale of shares as business loss instead of capital loss and whether the assessment order is erroneous and prejudicial to revenue under Section 263. - HELD THAT: - The Tribunal found that the AO had issued notices under section 142(1) and had called for explanation regarding the loss on sale of shares, and that the assessee furnished detailed replies dated 29.02.2016 and 14.03.2016 which the AO considered before allowing the claim. Non-mention of reasons in the assessment order does not itself establish lack of application of mind; to invoke section 263 it must be shown that the AO did not apply correct law or appreciate facts. On the material, the Tribunal held the AO had applied his mind and therefore the assessment could not be held erroneous and prejudicial on this issue. Consequently the Pr.CIT's revision insofar as it set aside allowance of the loss on sale of shares was not sustained. [Paras 5]

Grounds 3(a) and 3(b) allowed; assessment order not erroneous or prejudicial on the loss-on-sale-of-shares issue.

Succession to business and carry forward/set off of unabsorbed depreciation - Revision under Section 263 - assessment erroneous and prejudicial to the interests of Revenue - Whether unabsorbed depreciation of the erstwhile partnership firm could be set off in the assessee's individual assessment after conversion/succession and whether the AO's allowance was erroneous. - HELD THAT: - The Tribunal examined the partnership deed and the deed of retirement/dissolution and conversion into proprietary concern and applied section 170. Section 32(2) permits carry forward of unabsorbed depreciation as part of depreciation for subsequent years. In case of succession where the predecessor cannot be found, section 170 makes the successor liable to assessment and entitled to adjustments in like manner. Section 78(1) deals with certain restrictions on carry forward on change in firm constitution but does not address unabsorbed depreciation. Relying on statutory scheme and authorities cited, the Tribunal held that the unabsorbed depreciation becomes depreciation of the current year of the business and is eligible for set off in the hands of the successor; accordingly the Pr.CIT's direction to withdraw the claim was not sustained. [Paras 5]

Ground No.4 of the appeal allowed; set off of unabsorbed depreciation upheld.

Application of Section 50C - SRO/stamp valuation vis-a -vis sale consideration - Revision under Section 263 - assessment erroneous and prejudicial to the interests of Revenue - Whether the difference between SRO (stamp) value and sale consideration required application of section 50C and whether the AO's omission rendered the assessment erroneous and prejudicial. - HELD THAT: - The Tribunal noted the AO had not examined the discrepancy between the sale consideration and SRO value. The Tribunal distinguished decisions relied upon by the assessee that related to differences between a Valuation Officer's estimate and consideration where specific objections and references under section 50C(2) were made; those precedents did not address an unexamined difference between SRO value and consideration. As section 50C (as in force at the relevant time) contains no discount or threshold for differences vis-a -vis SRO value, the Tribunal held the AO failed to consider the issue and that the Pr.CIT was justified in treating the assessment as erroneous and prejudicial in this respect. The Pr.CIT's direction on application of section 50C was therefore confirmed. [Paras 7]

Pr.CIT's action under section 263 upheld in respect of non-application of section 50C; AO to address the issue.

Treatment of sale of block asset - reduction from written down value versus short-term capital loss - Revision under Section 263 - assessment erroneous and prejudicial to the interests of Revenue - Correct treatment of loss on sale of vehicle (whether it should have been adjusted against the block of assets under written down value or treated as short-term capital loss) and whether the assessment requires reconsideration. - HELD THAT: - The Tribunal observed that the assessee admitted a possible mistake in computation by treating the sale as short-term capital loss though the vehicle may be part of a block of assets. Given this admitted error and that the AO had not examined the matter, the Tribunal directed the Assessing Officer to reconsider the issue in accordance with law, allowing the assessee a fair opportunity of hearing rather than deciding the correctness at the revision stage. This direction contemplates fresh adjudication by the AO. [Paras 8]

Issue remanded to the AO for reconsideration and adjudication in accordance with law; assessment treated as erroneous on this specific point and requires fresh examination.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the Pr.CIT's revision insofar as it sought to re-characterise the loss on sale of shares (assessment held proper on that point) and upheld the assessee's entitlement to set off unabsorbed depreciation as successor to the business; the Pr.CIT's exercise under section 263 was upheld in respect of non-application of section 50C; the question regarding sale of the vehicle is remitted to the AO for fresh consideration with opportunity to the assessee.

Admissibility of surrender made during survey - examination of books of account and audit evidence - set-off of brought forward losses and unabsorbed depreciation - remand to assessing officer for fresh verification

Admissibility of surrender made during survey - examination of books of account and audit evidence - remand to assessing officer for fresh verification - Whether the addition of Rs. 60.00 lakhs surrendered during the course of survey was correctly sustained by the authorities. - HELD THAT: - The Tribunal noted that at the time of survey the assessee did not maintain books of account but subsequently maintained accounts, got them audited under the statutory audit provisions and filed a return based on those audited accounts. The CIT(A) had confirmed the addition without examining the books of account and had also made an alternative estimate of business income without such examination. The Tribunal held that since the assessee furnished audited books and the assessing officer did not examine those books before upholding the surrender, the proper course is to have the AO examine the books and give reasoned findings on whether the surrendered amount continues to be chargeable. The Tribunal further observed that the CIT(A)'s reduction of declared business income could amount to relief against the alleged surrendered income and that conclusions on the surrender cannot be sustained without fresh scrutiny of the accounts. [Paras 10, 11, 13, 14, 15]

Order of the CIT(A) on the addition is set aside and the matter is restored to the file of the assessing officer for fresh examination of the books of account and reconsideration of the addition in accordance with law, with opportunity to the assessee.

Set-off of brought forward losses and unabsorbed depreciation - verification of documentary proof for claims - remand to assessing officer for fresh verification - Whether the claim for set-off of brought forward losses and unabsorbed depreciation should be allowed. - HELD THAT: - The assessee produced earlier years' returns and acknowledgements and contended that filing returns within the due dates under the statutory provision suffices for claiming set-off. The Tribunal treated the claim as a factual matter requiring verification of the documents and history of acceptance by tax authorities. Consequently, rather than deciding on merits, the Tribunal directed the AO to examine the claim and the documents furnished and decide the issue in accordance with law, providing the assessee adequate opportunity of being heard. [Paras 16, 17]

The issue is restored to the file of the assessing officer for verification of documents and adjudication in accordance with law, with an opportunity of being heard to the assessee.

Final Conclusion: The orders under challenge are set aside and both contested issues are remitted to the assessing officer for fresh consideration in accordance with law; the appeal is treated as allowed for statistical purposes.

Bail granted on prima facie satisfaction - offence under Customs Act involving smuggling of foreign origin gold - reasonable apprehension of tampering with witnesses - release on bail subject to conditions - personal bond with two sureties - undertaking to surrender passport - obligation to cooperate with investigation and trial - attendance at specified stages of trial and consequences for non attendance

Bail granted on prima facie satisfaction - offence under Customs Act involving smuggling of foreign origin gold - reasonable apprehension of tampering with witnesses - Whether the accused applicant is entitled to be released on bail - HELD THAT: - The Court, having considered the submissions, the nature of the accusation and the supporting evidence, and while noting the reasonable apprehension of tampering with witnesses, recorded a prima facie satisfaction in support of the charges but nonetheless held that, without expressing any opinion on the merits, the applicant is entitled to bail. The Court noted factual background that recovery of foreign gold had been shown to have been made from the applicant and that the accused had no previous criminal history; the offence as charged carries limited punishment. On that basis the Court exercised its discretion to grant bail. [Paras 5, 6]

The applicant is entitled to be released on bail.

Release on bail subject to conditions - personal bond with two sureties - undertaking to surrender passport - obligation to cooperate with investigation and trial - attendance at specified stages of trial and consequences for non attendance - Conditions on which bail is to be granted to the accused applicant - HELD THAT: - The Court ordered release on bail subject to furnishing a personal bond with two sureties to the satisfaction of the trial court and compliance with the bond executed under the applicable provisions of the Criminal Procedure Code. The applicant must not engage in criminal activity, must not tamper with witnesses or evidence, must cooperate with investigation and trial, surrender his passport to the trial court, and undertake not to seek adjournments when witnesses are present. The Court stipulated presence at each date fixed and specified that deliberate absence at critical stages (opening of the case, framing of charge, recording of statement under Section 313 Cr.P.C.) or misuse of bail could invite proceedings under the relevant penal provisions or treatment as abuse of bail by the trial court. [Paras 6]

Bail granted subject to enumerated conditions including bond with two sureties, undertakings (including surrender of passport and cooperation), and attendance obligations with specified legal consequences for default.

Final Conclusion: Bail granted to the accused in Case Crime No. 21 of 2020 (smuggling of foreign gold) on the Court's prima facie satisfaction, subject to specified conditions including furnishing of personal bond with two sureties, surrender of passport, cooperation with investigation/trial and strict attendance obligations; defaults may invite appropriate penal or procedural action by the trial court.

Statements recorded under Section 108 of the Customs Act, 1962 - principles of natural justice - prejudice requirement for denial of cross-examination - admissions/confessions as obviating need for cross-examination - availability of alternative remedy of appeal under Section 129A of the Customs Act, 1962

Statements recorded under Section 108 of the Customs Act, 1962 - principles of natural justice - prejudice requirement for denial of cross-examination - Whether an adjudicating authority under the Customs Act, 1962 is invariably required to permit cross-examination of persons whose statements have been recorded under Section 108. - HELD THAT: - The Court held that there is no absolute rule mandating cross-examination whenever a statement recorded under Section 108 is relied upon. The authorities cited (including Romesh Chandra Mehta, Kanungo & Co., Telestar Travels and Surjeet Singh Chhabra) establish that proceedings under customs-like statutes are revenue/adjudicatory in nature and that the necessity for cross-examination must be judged in light of whether denial of cross-examination caused prejudice to the affected party. While prior decisions (e.g., Andaman Timber Industries, New India Assurance) have recognised that denial of an opportunity to cross-examine can amount to a breach of natural justice, the Court emphasised that prejudice will not be presumed in all cases and must be demonstrable. Where material independent of untested statements (such as admissions by the party or seized documents confronted with the party) exist, or where cross-examination would make no material difference, refusal to permit cross-examination does not automatically vitiate the order. [Paras 24, 25, 30, 34, 35]

No absolute obligation to permit cross-examination; the requirement is contingent and governed by whether denial caused prejudice to the party.

Admissions/confessions as obviating need for cross-examination - prejudice requirement for denial of cross-examination - Whether admissions or confessions recorded from the affected party constitute an exception to the requirement of permitting cross-examination of third party declarants. - HELD THAT: - The Court noted that where the parties themselves have made admissions or confessions in statements under Section 108, such admissions bind them and may obviate the necessity of cross-examining third party witnesses whose statements implicate the party. Reliance was placed on Surjeet Singh Chhabra and Telestar Travels, which recognise that in cases where all material facts are admitted or where the contested facts are otherwise adequately confronted and disclosed, cross-examination of third parties may be unnecessary and denial of it may not cause prejudice. Applying this principle, the Court observed that the impugned order largely relied upon the petitioners' own statements and seized/produced documents, and thus any denial of cross-examination of third parties did not occasion prejudice in the present case. [Paras 32, 33, 36, 37]

Admissions/confessions by the party can justify not permitting cross-examination of third party declarants where the absence of cross-examination causes no prejudice; on the material before it, the Court found no prejudice in this case.

Availability of alternative remedy of appeal under Section 129A of the Customs Act, 1962 - Whether the Writ Petition is maintainable in view of the availability of an alternative statutory appeal under Section 129A. - HELD THAT: - The Court observed that the petitioners had a statutory remedy of appeal under Section 129A and that, in the absence of a demonstrable breach causing prejudice warranting extraordinary jurisdiction, the writ was not the appropriate forum at the admission stage. The Court recorded that the petitioners had been served with a show cause notice, had submitted replies, and had personal hearings, and therefore declined to entertain the writ petition at the admission stage. The Court made it clear that it did not express any opinion on the merits and granted liberty to the petitioners to pursue the appellate remedy, directing that any such appeal be decided uninfluenced by the observations made in this order. [Paras 15, 38, 40, 41]

Writ Petition dismissed at admission as not maintainable; petitioners granted liberty to avail the appeal under Section 129A.

Final Conclusion: The High Court held that cross examination is not an absolute prerequisite whenever statements under Section 108 are relied upon; the determinative question is whether denial of cross examination caused prejudice. Admissions by the parties and the existence of other material confronting the allegations can obviate the need for cross examination. On the facts before it the Court found no prejudice, declined to entertain the writ petition at the admission stage, and dismissed it as not maintainable while granting liberty to pursue the statutory appeal under Section 129A.

Condonation of delay - sufficient cause - liberal approach to condonation to advance justice - delay caused by pendency of proceedings before another authority (DGFT) for issuance of EODC - remittal for fresh adjudication after condonation

Condonation of delay - sufficient cause - delay caused by pendency of proceedings before another authority (DGFT) for issuance of EODC - Whether the appellant established sufficient cause for condonation of delay of 751 days in filing the appeal to the Tribunal. - HELD THAT: - The Court applied the settled principle that 'sufficient cause' must be construed liberally to advance the cause of justice rather than to penalise litigants. The impugned order of the Commissioner of Customs (Appeals) was solely based on non-issuance of the Export Obligation Discharge Certificate (EODC). The appellant had been pursuing issuance of the EODC before the Director General of Foreign Trade and had sought condonation from that office; the pendency of those proceedings accounted for the delay in instituting the appeal. The Tribunal's rejection on a technical approach was thus unsustainable in the facts of this case. Having found that the delay was occasioned by bona fide pursuit of the EODC and that the interests of justice favour condonation, the Court condoned the delay and remitted the matter to the Tribunal for adjudication on merits after affording the parties an opportunity of hearing. [Paras 5, 6]

Delay in filing the appeal is condoned and the matter is remitted to the Tribunal to decide the appeal on merits after hearing the parties.

Final Conclusion: The appeal is allowed: the Tribunal's order refusing condonation of delay is quashed; delay is condoned and the appeal is remitted to the Tribunal for fresh decision on merits after affording opportunity of hearing.

Summary order. Civil Appeal dismissed; delay condoned; pending applications, if any, disposed of.

Summary order. Delay condoned; no interference with the Customs, Excise and Service Tax Appellate Tribunal order dated 24 June, 2019 in C.A. No. 70216 of 2019; appeal dismissed.

Condonation of delay - Interference with tribunal order on appeal - Dismissal of appeal for lack of merit

Condonation of delay - Application for condonation of delay in filing the appeal - HELD THAT: - The Court considered the application for condonation of delay and exercised its discretion to allow the same. The order records that delay is condoned, enabling the appeal to be heard on its merits.

Delay in filing the appeal was condoned.

Interference with tribunal order on appeal - Dismissal of appeal for lack of merit - Whether the Supreme Court should interfere with the impugned order dated 27 April, 2011 of the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai - HELD THAT: - Having heard the parties and examined the impugned order, the Court found no reason to interfere with the Tribunal's decision dated 27 April, 2011. No error warranting appellate intervention was shown that would justify setting aside or modifying the Tribunal's order.

No interference with the impugned Tribunal order; the appeal is dismissed.

Final Conclusion: Delay in filing the appeal was condoned; on the merits the Supreme Court found no reason to disturb the Customs, Excise and Service Tax Appellate Tribunal's order dated 27 April, 2011 and accordingly dismissed the appeal.

Interest on delayed refunds under Section 27A of the Customs Act, 1962 - Date for computation of interest: date of receipt of refund application - Deemed effect of appellate/tribunal order under the Explanation to Section 27A

Interest on delayed refunds under Section 27A of the Customs Act, 1962 - Date for computation of interest: date of receipt of refund application - Whether interest under Section 27A is payable from three months after the date of receipt of the refund application or from three months after receipt of the Tribunal's final order. - HELD THAT: - Section 27A prescribes interest for delayed refunds where the relevant trigger for computing the three month period is the date of receipt of the refund application. The Explanation to Section 27A deems an order of the Commissioner (Appeals), Appellate Tribunal or court to be an order under sub section (2) for purposes of this section, but the statutory provision contains a single reference point for computation of interest - the date of receipt of the refund application. The Commissioner (Appeals) treated the date of receipt of the Tribunal's order as the relevant date for computing interest, but that approach is contrary to the clear mandate of Section 27A which requires computation from the date of receipt of the refund application where refund is not made within three months. Applying this principle to the record, the appellant's refund application was received by the department and, insofar as the refund was not paid within three months from that receipt, interest is payable from the date immediately after the expiry of three months from the date of receipt of the refund application until actual payment. [Paras 5, 6]

The Assistant Commissioner's and Commissioner (Appeals)'s view that interest is to be reckoned from receipt of the Tribunal's order is reversed; interest under Section 27A is payable from three months after the date of receipt of the refund application until the date of actual payment, and the department is directed to pay the interest accordingly.

Final Conclusion: Appeal allowed; department directed to pay interest on the delayed refund calculated from three months after receipt of the refund application until actual payment.

Tribunal's power under Section 71(10) of the Companies Act, 2013 to direct redemption of debentures forthwith on payment of principal and interest - obligation of a company to pay interest and redeem debentures in accordance with the terms of issue (Section 71(8)) - limits on the Tribunal's reliance on a company's financial condition when ordering relief under Section 71(10) - availability of specific performance/enforcement of contract for subscription to debentures - consequence of non-compliance with a Tribunal order under Section 71(11) - judicial discretion to direct repayment with a fixed timeline where statutory scheme so provides

Tribunal's power under Section 71(10) of the Companies Act, 2013 to direct redemption of debentures forthwith on payment of principal and interest - obligation of a company to pay interest and redeem debentures in accordance with the terms of issue (Section 71(8)) - limits on the Tribunal's reliance on a company's financial condition when ordering relief under Section 71(10) - judicial discretion to direct repayment with a fixed timeline where statutory scheme so provides - Whether NCLT complied with the statutory mandate of Section 71(10) read with Section 71(8) while disposing of the petition and whether the appellate Tribunal should direct repayment. - HELD THAT: - The Appellate Tribunal held that Section 71(10) empowers the Tribunal to hear the parties and to direct the company to redeem debentures forthwith by payment of principal and interest due thereon. While the NCLT considered the company's financial condition and directed the company to "explore all possibilities of settlement" and granted six months, Section 71(10) does not permit the Tribunal to substitute that statutory remedy by merely deferring an enforceable right on account of the company's asserted financial difficulties. The record showed admissions of default by the company in its reply and no proximate steps had been taken by the company or its representatives to initiate settlement or arbitration (the latter not being provided for in the Debenture Trust Deed and not consented to by the petitioners). Reliance on the company's financial status to indefinitely delay the statutory remedy was therefore inappropriate. Applying the statutory scheme and the facts (including lapse of the six month period granted by NCLT and absence of steps by the respondent), the Appellate Tribunal exercised its supervisory power to give effect to the right of debenture holders under Section 71(10) and directed repayment within a fixed time, leaving the appellants free to pursue legal remedies if the respondent failed to comply. The Bench referred to earlier authorities to the effect that powers conferred must be exercised in proper cases [Dhampur Sugar Mills Ltd. ] and that reliefs must ordinarily be confined to prayers made [Manohar Lal ], applying those principles to the statutory entitlement under Section 71. [Paras 13, 14]

NCLT's direction to merely "explore all possibilities of settlement" did not satisfy the statutory mandate under Section 71(10); appeal disposed directing the respondent company to repay the amounts due to the appellants within two months, failing which appellants may take legal steps.

Final Conclusion: The appeal is allowed in part: having regard to Section 71(8) and 71(10) and the factual admissions of default and inaction by the company, the Appellate Tribunal directed the respondent company to repay the amounts due to the appellants within two months; failure to comply leaves the appellants free to take further legal steps. No costs.

Enforcement of settlement agreement - extension of time for performance - Rule 15 and Rule 153 of the National Company Law Tribunal Rules, 2016 - breach of undertaking - balancing prejudice and pandemic hardship - office memorandum on force majeure not applicable to settlement agreements

Extension of time for performance - enforcement of settlement agreement - balancing prejudice and pandemic hardship - Revised schedule of payments under the Memorandum of Settlement was ordered by the Tribunal and the Miscellaneous Application was disposed of with directions to make payments on specified dates. - HELD THAT: - The Tribunal, after hearing parties and perusing documents, found that although the applicants cited pandemic-related difficulties, the respondents had already accommodated an extension until 15.08.2020 and had incurred financial commitments in reliance on the settlement. Taking into account that more than two months had elapsed from the extended date and weighing the parties' respective hardships, the Tribunal exercised its authority under the Rules to direct a modified payment schedule and refused further open-ended postponement. The order prescribes specific cheque dates for transfer of shares to both respondents and disposes of MA No.116/KOB/2020 accordingly. [Paras 12, 13, 14, 15]

Tribunal granted a definite revised schedule for payment and ordered performance of the settlement as per the dates directed; MA No.116/KOB/2020 stands disposed of.

Breach of undertaking - enforcement of settlement agreement - Applicants were held to be in breach of the undertaking under the Memorandum of Settlement and could not absolve themselves from the payment obligations. - HELD THAT: - The Tribunal observed that TCP/25/KOB/2019 had been disposed of on the basis of the parties' settlement and that the applicants cannot absolve themselves of the responsibility to make payments stipulated in that settlement. The respondents had undertaken financial commitments in reliance on the settlement; accordingly, the Tribunal treated the applicants' failure to meet the agreed dates as a breach warranting enforcement by directing the revised schedule. [Paras 12]

Applicants held accountable for non-performance of the settlement obligations and directed to comply with the payment schedule.

Office memorandum on force majeure not applicable to settlement agreements - The Tribunal rejected the applicants' reliance on the cited Office Memorandum as inapplicable to excuse non-performance of the settlement obligations. - HELD THAT: - The Tribunal noted that the Office Memorandum relied upon relates to disruption of supply chains and contractual procurement contexts; it is not germane to a settlement agreement under which parties agreed mutual obligations and withdrawal of proceedings. Therefore, the memorandum could not be used to justify refusal to perform the obligations under the Memorandum of Settlement. [Paras 9]

Reliance on the Office Memorandum as a ground to avoid performance of the settlement was held to be irrelevant and not acceptable.

Final Conclusion: The Tribunal enforced the Memorandum of Settlement by directing a specific revised payment schedule, held the applicants in breach of their undertaking, rejected reliance on the procurement Office Memorandum to excuse non-performance, and disposed of MA No.116/KOB/2020 by ordering compliance with the directed dates.

Petition under Section 252(3) for restoration of company name - restoration of company name in the Register of Companies - striking off and removal of name by Registrar of Companies - failure to file annual returns and financial statements - publication of proposed removal in Official Gazette and on Ministry website - opportunity of hearing and service of notice in removal proceedings - reinstatement subject to compliance and costs - interest of justice

Restoration of company name in the Register of Companies - failure to file annual returns and financial statements - interest of justice - reinstatement subject to compliance and costs - Whether the name of the company should be restored to the Register of Companies notwithstanding its removal for non filing of statutory returns - HELD THAT: - The Tribunal found on the materials before it that although the company had failed to file financial statements and annual returns for several years, the company maintained books and records, produced audited accounts for multiple years, held fixed assets and short term borrowings, had taken on a lease of industrial premises and obtained statutory approvals for power and water supply, and had filed income tax returns for specified assessment years. The Bench accepted the explanation of non filing as inadvertence and noted evidence of ongoing steps towards commencement of business and an intention of the members to continue operations. Balancing the statutory scheme for removal of names with the facts demonstrating active steps to carry on business and preservation of corporate assets, the Tribunal concluded that, in the interest of justice, restoration was warranted. The restoration was made conditional: payment of costs to the specified fund and filing of all pending financial statements and annual returns with applicable fees and late fees within the stipulated period, failing which the order would stand vacated. [Paras 13, 14, 15, 16]

Name of the company restored in the Register of Companies subject to payment of costs to the designated fund and filing of all pending financial statements and annual returns with applicable fees and late fees within the time specified, failing which the order shall stand vacated.

Final Conclusion: The Tribunal allowed the petition and directed restoration of the company's name in the Register of Companies on payment of costs to the specified fund and on condition of filing all outstanding statutory financial statements and annual returns with applicable fees and late fees within the prescribed periods, with automatic vacatur of the order if conditions are not complied with.

Authorisation for assignment - Power to frame model bye-laws under Section 196 of the IBC - Delegation of legislative power / excessive delegation - Fit and proper person - Regulatory control of professional bodies - Equality under Article 14 - Right to carry on profession (Article 19) and personal liberty (Article 21) - Appeal time-limits and condonation - Eligibility criteria and administrative directions/circulars

Power to frame model bye-laws under Section 196 of the IBC - Delegation of legislative power / excessive delegation - Model bye-laws and IPA powers - Validity of conferring power on Insolvency Professional Agencies to issue or renew Authorisation for Assignment (AFA) and whether such delegation is excessive. - HELD THAT: - The Court examined the source of regulatory power and the chain of rule-making. Regulation 7A of the IP Regulations and Regulation 12A of the Model Bye-Laws were framed by the IBBI under powers traceable to the IBC, notably provisions empowering the Board to prescribe model bye-laws to be adopted by IPAs. Section 196(2) expressly contemplates model bye-laws providing for minimum standards, enrolment requirements and monitoring of insolvency professionals, and Section 205 permits IPAs to frame bye-laws consistent with the model bye-laws subject to IBBI approval. Given that the IBBI prescribed the model bye-laws and set out the criteria in Regulation 12A(2), the impugned exercise is an instance of delegated rule-making within the scheme of the parent statute. The Court found that substantive principles and norms have been laid down by the IBBI and that IPAs operate under supervisory control, so the delegation is not excessive or in derogation of the principle against sub-delegation. [Paras 11]

Delegation to IPAs to issue or renew AFA is valid; there is no excessive delegation.

Authorisation for assignment - Fit and proper person - Equality under Article 14 - Right to carry on profession (Article 19) and personal liberty (Article 21) - Regulatory control of professional bodies - Eligibility criteria and administrative directions/circulars - Constitutionality of requiring registered insolvency professionals to obtain an AFA annually and validity of the eligibility criteria under Articles 14, 19 and 21. - HELD THAT: - The Court recognised that insolvency professionals form a distinct class and that the impugned scheme uniformly applies to all members of that class, thereby meeting the non-discrimination requirement. The regulatory architecture envisaged by the BLRC and the IBC contemplates a two-tier supervisory structure in which the IBBI registers and disciplines IPs while IPAs manage membership and AFAs under IBBI supervision. The criteria in Regulation 12A(2) (registration, fitness, non-debarment, age limit, absence of pending disciplinary proceedings, compliance with fees, filings, CPE and other requirements) were held to be germane to maintaining professional standards and not manifestly arbitrary. The Court addressed the contention that references to circulars, directions and guidelines render the criteria nebulous by construing such references as limited to relevant and material requirements issued by the IBBI or the IPA. The regulatory measures were characterised as intended to regulate the profession and not to deprive persons of the right to practice. [Paras 12, 13, 14]

Requirement of AFA and the eligibility criteria do not violate Articles 14, 19 or 21 and are not unconstitutional.

Appeal time-limits and condonation - Right to appeal as a statutory remedy - Validity of the seven-day period for appeal to the Membership Committee against rejection of AFA and applicability of condonation under the Limitation Act. - HELD THAT: - The Court emphasised that the right of appeal provided under the Model Bye-Laws is a statutory remedy and must be exercised according to the time-limit prescribed unless that condition is struck down. It observed that Section 238A of the IBC does not extend the Limitation Act's Section 5 condonation mechanism to these IPA internal appeals. Nevertheless, the Regulation's appeal period runs from the date of receipt of the rejection order, and practical recourse exists because rejection is not final - an IP may remedy defects and re-apply. The Court found the seven-day limit not unconstitutional but noted that the limited period may pose practical difficulties and recommended the IBBI consider amending Regulation 12A(7) to provide a longer period or confer power to condone delay for sufficient cause. [Paras 15]

Seven-day appeal period is not struck down as unconstitutional, but the IBBI is advised to consider extending or providing condonation powers.

Remedial avenues and supervisory jurisdiction - Regulatory control of professional bodies - Whether the petitioner is precluded from prosecuting his pending appellate remedy or from re-applying for AFA. - HELD THAT: - The Court recorded that rejection of an application for AFA does not extinguish the right to pursue the appellate remedy provided in the bye-laws or to cure the defects noted in the order of rejection and submit a fresh application, provided the petitioner retains professional membership and registration as an IP. The judgment therefore preserves the petitioner's procedural remedies even while upholding the impugned regulatory scheme. [Paras 16, 17]

Petitioner may pursue the pending appeal and may re-apply after remedying defects; the writ petition is dismissed.

Final Conclusion: The challenge to Regulation 7A of the IP Regulations and Regulation 12A of the Model Bye-Laws IPA Regulations is dismissed. The delegation to IPAs to grant AFAs is valid; the AFA requirement and eligibility criteria do not violate Articles 14, 19 or 21; the seven-day appeal period is not unconstitutional though the IBBI is advised to consider a longer period or condonation power; the petitioner remains entitled to pursue the internal appeal and to remedy defects and re-apply.

Default in delivery of possession - date of default vis-a -vis scheduled possession - construction-linked payment plan and stage-wise demand notices - burden on promoter after prima facie case by allottee - Section 7 admission under Insolvency and Bankruptcy Code, 2016 - Section 65 - fraudulent or malicious initiation of proceedings - occupation certificate as relevant to completion and default

Date of default vis-a -vis scheduled possession - occupation certificate as relevant to completion and default - default in delivery of possession - Section 7 admission under Insolvency and Bankruptcy Code, 2016 - Corporate Debtor committed default by failing to complete construction and deliver possession by the scheduled date under the Apartment Buyer Agreement. - HELD THAT: - The Tribunal found that possession was contractually due by the first week of February 2016 (taking the Agreement date and the agreed 36 months plus 180 days grace), and there is no record that possession was offered or that an occupation certificate was applied for within that time. The Corporate Debtor itself admitted that internal finishing and flooring were still underway as late as November 2018 and applied for the occupation certificate only on 3 July 2019 (granted on 29 October 2019). These facts establish that the Corporate Debtor failed to complete the project and deliver possession by the stipulated date, and therefore a default on the part of the Corporate Debtor is made out for the purposes of admission under Section 7 of the Code. [Paras 15, 28, 35, 43]

Default by the Corporate Debtor in completing construction and delivering possession is established and supports admission of the Section 7 application.

Construction-linked payment plan and stage-wise demand notices - default in delivery of possession - burden on promoter after prima facie case by allottee - The Allottee/Financial Creditor was not held to have committed a default in payment such as to defeat the Section 7 application. - HELD THAT: - The Agreement required stage-wise demand notices to be issued by speed post/courier for construction-linked instalments. There is no evidence that such mandatory notices were sent at the commencement of the respective stages, and the Corporate Debtor has not shown when internal finishing/flooring commenced. The allottee had paid approximately 72-75% of the sale consideration by 2013; given the Contractor's delay in completing the project, the Tribunal accepted that non-payment of further instalments in the circumstances (where possession was overdue and construction incomplete) cannot be treated as a payment-default that bars relief. The Tribunal also applied the principle that once a prima facie case is made by the allottee, the burden shifts to the promoter to prove that the allottee is the defaulter, and found that the Corporate Debtor did not discharge that burden. [Paras 16, 31, 34, 44]

Respondent-allottee's stoppage of payments in the backdrop of delayed construction does not constitute a disqualifying default; the allottee is not held to be the defaulter.

Section 65 - fraudulent or malicious initiation of proceedings - burden on promoter after prima facie case by allottee - There is no prima facie basis to invoke Section 65 against the Allottee; the Section 7 application was not shown to be filed fraudulently or with malicious intent. - HELD THAT: - The Tribunal reviewed the principles in Pioneer and Swiss Ribbons concerning Section 65: penal action under Section 65 requires a prima facie finding that the petition was filed fraudulently or with malicious intent for purposes other than insolvency resolution. On the facts, the Corporate Debtor failed to prove that the Allottee was a speculative investor or that the proceedings were instituted to pressurise the promoter rather than to seek resolution/possession. The Corporate Debtor's admissions regarding incomplete works and the timing of the occupation-certificate application undermined any contention of mala fides. Consequently, no penalty under Section 65 was warranted. [Paras 45, 48, 49]

Section 65 cannot be invoked; no prima facie case of fraudulent or malicious initiation is made out against the Allottee.

Date of default vis-a -vis scheduled possession - limitation - Section 7 admission under Insolvency and Bankruptcy Code, 2016 - The Section 7 petition was not barred by limitation; the date of default is the failure to deliver possession by the scheduled date, and the petition was filed within three years of that date. - HELD THAT: - The Appellant's contention that the date of default was when the Allottee stopped paying instalments was rejected. The Tribunal held that, given the construction-linked scheme and the uncontroverted failure of the Corporate Debtor to deliver possession by the contractual date (and no evidence of timely application for occupation certificate), the relevant date of default is the failure to deliver possession. The petition was filed within three years from the scheduled delivery date, so the limitation objection fails. [Paras 14, 15]

Limitation objection is rejected; the Section 7 application is within time.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's order admitting the Section 7 petition is upheld: the Corporate Debtor defaulted in completing construction and delivering possession; the allottee was not shown to be a defaulter nor to have instituted proceedings fraudulently; and the petition is not time-barred.

Revision of admitted claims under Regulation 14(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Verification of claims based on audited financial statements - Exemption of healthcare services by clinical establishments from GST under Notification No.9/2017 - Appeal to Joint Commissioner for reassessment of GST liability - Adjudication of tax liability by tax authorities

Revision of admitted claims under Regulation 14(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Verification of claims based on audited financial statements - Resolution Professional entitled to revise amounts of admitted claims, including estimates, upon receipt of additional information warranting revision. - HELD THAT: - The Resolution Professional initially admitted the GST claim as an estimate under Regulation 14(1) due to limited access to books. Under Regulation 14(2) he received additional information from the suspended Managing Director and, after re-assessment with the internal auditor and CoC deliberation, revised the admitted claim. The Tribunal recorded that Regulation 14(2) permits such revision when additional information is available and that the RP acted on information and internal verification before placing the matter before the Committee of Creditors and proposing further steps for verification through audited statements and appeal to tax authorities. The Tribunal also observed that the applicant had not explained the delay in pressing claims earlier, a matter noted for the applicant's attention but not determinative of the RP's power to revise estimates. [Paras 3, 4, 5]

The RP's revision of the admitted claim in light of additional information is recognised; the RP is directed to pursue verification and reassessment steps as recorded.

Appeal to Joint Commissioner for reassessment of GST liability - Exemption of healthcare services by clinical establishments from GST under Notification No.9/2017 - Adjudication of tax liability by tax authorities - Quantification of the GST liability is to be determined by the tax authority on appeal; the Tribunal will not decide the adjudicatory question of the RP's power to determine the GST amount. - HELD THAT: - The Tribunal found that the correct quantification of GST payable by the Corporate Debtor requires reassessment by the appropriate tax authority in light of the claim that certain receipts fall under the healthcare exemption (Notification No.9/2017) and that only specific heads of income are taxable. Given that the RP placed the matter before the CoC and resolved to file an appeal, the Tribunal declined to adjudicate the substantive tax liability or whether the RP possesses final adjudicatory power in that respect, and instead directed the RP to file an appeal before the Joint Commissioner with audited financial statements for FY 2018-19 and relevant papers so that the Joint Commissioner may reassess the liability promptly. [Paras 6, 7]

The Tribunal remitted quantification of GST liability for reassessment by the Joint Commissioner and directed the RP to file the appeal within two weeks; the Tribunal will not decide the RP's adjudicatory competence on this question.

Final Conclusion: The Tribunal recognised the RP's power to revise admitted claims on receipt of additional information under Regulation 14(2), but remitted quantification of the GST liability to the Joint Commissioner for reassessment (to be initiated by the RP within two weeks using audited FY 2018-19 statements); the Tribunal declined to adjudicate whether the RP has final adjudicatory power to determine GST liability.

Liquidation process continuation - exclusion of interim stay and lockdown period from computation of one year limit under Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016 - requirement under Regulation 44(2) to file an application with a report explaining delay and specifying additional time - effect of interim stay by the High Court on liquidation timeline

Liquidation process continuation - requirement under Regulation 44(2) to file an application with a report explaining delay and specifying additional time - Permission granted to the liquidator to continue the liquidation process after expiry of one year as contemplated under Regulation 44 read with Section 60(5) of the Code. - HELD THAT: - The Tribunal examined the liquidator's statutory application filed under Regulation 44(2) (and Section 60(5) of the Code) together with Report No.100/KOB/2020 which set out reasons for non completion of the liquidation within one year and specified additional time required. The report narrated that an interim stay by the High Court (OP(C) No.484/2020) was in force from 20.02.2020 until it was vacated on 13.07.2020, and that following vacation the High Court restrained distribution of sale proceeds until disposal of appeals under Section 42 before the NCLT, thereby impeding disbursement and completion of liquidation. The report also recorded operational impediments arising from the national lockdown and containment restrictions where the liquidator operates, and the failure of an e auction to attract bids (stated reasons including demonstrations). Having considered the factual narrative and the statutory requirement in Regulation 44(2) that the liquidator must file an application with an explanatory report and specify additional time, the Tribunal was satisfied that the liquidator had complied with the procedural requirement and that continuation of the liquidation process should be permitted. [Paras 6, 7, 9, 10]

The applicant is permitted to continue with the liquidation process.

Exclusion of interim stay and lockdown period from computation of one year limit under Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016 - effect of interim stay by the High Court on liquidation timeline - The period from February 20, 2020 to November 30, 2020 is excluded from computation of the one year period under Regulation 44 for completing the liquidation process. - HELD THAT: - The Tribunal recorded that the one year period for completion of liquidation in the present matter would have expired on 20.10.2020. Having regard to the interim stay of the liquidation granted by the High Court from 20.02.2020 to 13.07.2020, the subsequent High Court direction barring distribution of sale proceeds until the disposal of Section 42 appeals before the NCLT, and the operational restrictions during the COVID 19 lockdown which affected the liquidator's ability to perform tasks, the Tribunal found it appropriate to exclude the period from 20.02.2020 until 30.11.2020 from computation of the 365 day period. The Tribunal proceeded to exclude that period from computation of time for completion of liquidation, following the norms prescribed in the Regulations and on the basis of the explanations and estimates furnished by the liquidator in his report. [Paras 6, 7, 9, 10]

The period between February 20, 2020 and November 30, 2020 is excluded from calculation of the one year period under Regulation 44 for completing the liquidation process.

Final Conclusion: The Tribunal allowed the liquidator's application under Regulation 44(2)/Section 60(5) to continue the liquidation and directed that the period 20.02.2020 to 30.11.2020 be excluded from computation of the one year timeline for completion of the liquidation; the miscellaneous application is disposed of accordingly.

Relegation to appellate forum - pre deposit requirement for statutory appeals - interlocutory application for waiver of pre deposit - consideration of interlocutory application in light of pending Supreme Court orders

Relegation to appellate forum - appealability of adjudication order - Writ petition seeking to set aside the adjudication order was not entertained and the petitioner was relegated to the appellate forum. - HELD THAT: - The High Court declined to entertain the petition on merits where an appeal against the adjudication order is available. The court directed the petitioner to prefer the statutory appeal before the appropriate appellate authority within 15 days. The court observed that availability of an alternate remedy in the form of appeal militates against exercise of writ jurisdiction and therefore relegated the petitioner to the appellate forum rather than deciding the substantive question whether service tax is leviable on the royalty and allied charges.

Petition dismissed and petitioner directed to file appeal before the appellate authority within 15 days.

Pre deposit requirement for statutory appeals - interlocutory application for waiver of pre deposit - consideration of interlocutory application in light of pending Supreme Court orders - Appellate authority was directed to consider any interlocutory application for waiver of the pre deposit requirement, having regard to the pendency of related proceedings before the Supreme Court and any interim orders passed by it. - HELD THAT: - The court acknowledged the petitioner's grievance that the statutory condition of depositing 75% of the demanded amount as a pre condition to entertain the appeal would cause prejudice. Noting that the question of levy of service tax on mining royalty was pending before the Supreme Court and that there was an interim order by the apex court on the issue, the High Court left it open to the petitioner to file an interlocutory application in the appellate forum seeking waiver of pre deposit. The appellate authority was directed to consider such application and decide it by a reasoned and speaking order after hearing the parties, taking into account the Supreme Court's orders.

If an appeal and interlocutory application for waiver are filed, the appellate authority shall hear and decide the interlocutory application by a reasoned, speaking order in accordance with law.

Final Conclusion: The writ petition is disposed of by relegating the petitioner to the statutory appellate forum; the petitioner is directed to file the appeal within 15 days and may seek waiver of the pre deposit by lodging an interlocutory application, which the appellate authority must decide on merits in a reasoned order after hearing the parties, having regard to the pending Supreme Court proceedings.

Refund of excise duty - doctrine of unjust enrichment - presumption under Section 12B regarding passing on of duty - locus standi for refund claim - credit notes as evidence of non-passing on - binding precedent of Mafatlal and Addison on refund claims

Refund of excise duty - locus standi for refund claim - binding precedent of Mafatlal and Addison on refund claims - Whether the appellant (manufacturer) was entitled to refund of excise duty where invoices were raised through a separate marketing company and the duty was thereby passed on to the buyer. - HELD THAT: - The Court held that the statutory and judicial scheme requires that only the person who has borne the incidence of an excise duty not leviable in law is entitled to claim refund. On the undisputed facts the appellant raised its invoice on a separate marketing company which in turn invoiced the purchaser; accordingly the incidence of duty is deemed to have been passed on to the buyer. The Constitution Bench decision in Mafatlal Industries Ltd., as applied and followed by the Supreme Court in Addison & Co. Ltd., governs the right to refund and precludes a manufacturer who has passed on the duty from recovering it as a refund. The Court found no material to show that the buyer had not borne or further passed on the duty, and therefore the appellant lacked the requisite locus to claim refund under the statutory scheme. [Paras 10, 11]

Refund claim by the appellant denied because the incidence of duty was passed on to the buyer and binding precedents preclude the manufacturer from claiming refund.

Credit notes as evidence of non-passing on - presumption under Section 12B regarding passing on of duty - doctrine of unjust enrichment - Whether issuance of credit notes by the marketing company established that the appellant had borne the incidence of duty and was therefore entitled to refund. - HELD THAT: - The Court rejected the contention that mere issuance of credit notes by the marketing company conclusively shows that the manufacturer bore the incidence of duty. The Tribunal's observation (adopting Addison) that credit notes alone cannot be the sole basis to conclude the duty was not passed on was accepted. The statutory presumption under Section 12B that duty paid by a person is deemed to have been passed on to the buyer stands unless the claimant adduces contrary material; absent such material the doctrine of unjust enrichment prevents refund to a person who has not borne the duty. [Paras 6, 10]

Credit notes issued by the intermediary did not establish that the appellant bore the incidence of duty; mere issuance of credit notes was insufficient to overturn the statutory presumption and avoid the application of unjust enrichment.

Binding precedent of Mafatlal and Addison on refund claims - locus standi for refund claim - Whether any question of law arises for reconsideration in view of the appellant's reliance on credit notes and earlier decisions permitting refunds in trade-discount situations. - HELD THAT: - The Court concluded that no substantial question of law arises contrary to the binding decisions of the Supreme Court. Even if there are authorities allowing refund where trade discounts/credit notes show the supplier bore the duty, the facts here do not establish that the appellant bore the incidence. The Court therefore held that the Tribunal correctly applied the Supreme Court precedents (Mafatlal and Addison) and that the appeals do not call for departure from those rulings. [Paras 11, 12]

No question of law warranting interference with binding Supreme Court precedent; appeals dismissed.

Final Conclusion: Appeals dismissed. The High Court upheld the Tribunal's rejection of the refund claims, holding that the incidence of excise duty was passed on to the buyer, that mere issuance of credit notes by an intermediary did not establish that the manufacturer bore the duty, and that binding Supreme Court precedents (Mafatlal and Addison) preclude the appellant's refund in these facts.

Entitlement to Cenvat credit on invoice issued by manufacturer/registered importer where consignee is the recipient - Transit sale through un-registered dealer - invoice of manufacturer as basis for credit - Admissibility of credit despite vendor being unregistered where goods consigned to assessee - Board clarification in Circular No. 1003/10/2015-CX regarding transit sale and Cenvat credit - Disallowance of Cenvat credit and consequential demand, interest and penalty

Entitlement to Cenvat credit on invoice issued by manufacturer/registered importer where consignee is the recipient - Transit sale through un-registered dealer - invoice of manufacturer as basis for credit - Admissibility of credit despite vendor being unregistered where goods consigned to assessee - Appellant entitled to avail Cenvat credit on invoices issued by manufacturers/first-stage dealers which consign goods to the appellant as consignee, even though the intermediary dealer was un-registered and the department alleged non-purchase. - HELD THAT: - The Tribunal applied the Board clarification contained in Circular No. 1003/10/2015-CX dated 05.05.2015 which permits a consignee to avail credit on the basis of an invoice issued by the manufacturer or registered importer where an un-registered dealer has negotiated sale and goods are transported directly to the consignee. The invoices in the present case bore the appellant's name as consignee and the appellant's receipt and use of inputs were not disputed. Reliance was placed on the Tribunal's earlier decision in Hydro Electro Machinery which holds that where the duty-paying invoice is consigned to the end-user, credit is legally admissible to the consignee; the Board's circular and the cited precedent establish that a registered recipient need not be prevented from taking credit merely because an intermediary is un-registered. Applying these principles to the facts, the disallowance of credit (and attendant demand, interest and penalty) could not be sustained and the impugned orders were set aside. [Paras 6, 7, 8, 9]

Impugned orders disallowing Cenvat credit and confirming demand, interest and penalty are set aside; appeal allowed and appellant granted consequential benefit.

Final Conclusion: The appeal is allowed: Cenvat credit is admissible to the appellant on invoices issued by the manufacturer consigning goods to the appellant (transit sale through an un-registered dealer), and the orders confirming demand, interest and penalty are set aside with consequential relief.

Open remand - denovo adjudication - expunge inconsistent findings - verification of duty demand and penalty - principles of natural justice

Expunge inconsistent findings - open remand - The observation in the Commissioner (Appeals) order recording that the appellant had not disputed clandestine removal of goods and was therefore not contesting that aspect. - HELD THAT: - The Tribunal found that paras 6 and 7 of the impugned order plainly remanded the entire matter for re-verification and examination of the correctness of the confirmed duty of Rs. 11,22,927/- and penalty. That open remand is inconsistent with para 5 of the impugned order which records that the appellant did not dispute clandestine removal. Because the Commissioner (Appeals) explicitly directed re-examination of the correctness of the demand and verification of documents, the contradictory observation in para 5 cannot stand. The Tribunal therefore held that the remark recording non-dispute of clandestine removal should be expunged so as not to fetter the adjudicating authority on remand. [Paras 5, 6, 7]

The observation in para 5 of the impugned order is expunged and the remand is to be treated as an open remand.

Denovo adjudication - verification of duty demand and penalty - principles of natural justice - Scope and directions of remand to the adjudicating authority for fresh adjudication of the duty demand and penalty. - HELD THAT: - The Tribunal directed that the adjudicating authority must decide the matter afresh in accordance with the directions recorded by the Commissioner (Appeals) in paras 6 and 7 of the impugned order, namely to verify facts with available documents and re-examine the correctness of the confirmed duty and the penalty. The adjudication on remand is to be de novo and must not be influenced by the expunged observation. The Tribunal further required observance of the principles of natural justice and fixed a time frame for completion of the de novo adjudication. [Paras 6, 7]

Matter remanded for de novo adjudication on the correctness of the duty demand and penalty, with directions to verify documents and observe principles of natural justice; adjudicating authority to decide within three months.

Final Conclusion: The Tribunal allowed the appeal to the extent of expunging the contradictory observation in para 5 of the impugned order, treated the remand as an open remand, and directed de novo adjudication by the adjudicating authority on verification of documents and re-examination of the duty demand and penalty, to be completed within three months observing principles of natural justice.

Eligibility of input service for Cenvat credit - distinction between sales activity and sales promotion - claim of Cenvat credit for sales commission paid to agents - precedential application of earlier tribunal and High Court decision

Eligibility of input service for Cenvat credit - claim of Cenvat credit for sales commission paid to agents - distinction between sales activity and sales promotion - precedential application of earlier tribunal and High Court decision - Claim for Cenvat credit of Service Tax paid under 'Business Auxiliary Service' on sales commission to commission agents is allowable. - HELD THAT: - The appellants had availed Cenvat credit of Service Tax paid on commissions to their sales agents for the period September, 2008 to April, 2013. The department denied credit on the ground that such agents were directly concerned with sales rather than sales promotion and therefore not input services. The Tribunal examined the controversy in the appellants' own earlier final order dated 28.10.2010 and applied the decision of the Hon'ble High Court of Punjab & Haryana in Commissioner of Central Excise, Ludhiana v. Ambika Overseas reported in 2012 (25) STR 348 (P&H). Following that precedent and the earlier tribunal determination in the appellants' case, the Tribunal held that the impugned denial of credit could not be sustained and set aside the impugned order. The order grants consequential reliefs as permissible by law.

Impugned demand, interest and penalties set aside and appeal allowed; Cenvat credit claim sustained for the period September, 2008 to April, 2013.

Final Conclusion: Following the appellants' earlier tribunal determination and the Punjab & Haryana High Court authority relied upon, the denial of Cenvat credit for sales commission paid to commission agents for September, 2008 to April, 2013 was quashed and the appeal allowed with consequential reliefs.

Limitation for reopening assessment - retrospective operation of amendment - treatment of assessment as pending under Section 42(3) - protective effect of records-retention rule - reasonableness and fairness in exercise of reassessment powers

Limitation for reopening assessment - retrospective operation of amendment - Whether assessment proceedings under Section 25 could be validly initiated after the expiry of five years in view of a later amendment extending limitation and the retrospective insertion of Section 42(3). - HELD THAT: - The Court examined the effect of the 2017 amendment extending the limitation period from five to six years and earlier judicial treatment of retrospective operation of amendment to Section 42. Reliance was placed on precedents holding that the extension effected prospectively and cannot validate assessments initiated after the earlier five-year period had expired. The Court noted that although Section 42(3) was given retrospective operation by notification, the reassessment powers remain subject to the limits imposed by the principle of certainty in tax matters and the statutory scheme governing limitation under Section 25. Where the exercise of power to reopen assessments is effected after the earlier five-year limitation had expired, such action is beyond the permissible period and cannot be sustained merely because of a subsequent amendment increasing limitation prospectively. [Paras 4, 5]

Assessments initiated after the expiry of five years were beyond limitation and could not be sustained.

Treatment of assessment as pending under Section 42(3) - protective effect of records-retention rule - reasonableness and fairness in exercise of reassessment powers - Whether Section 42(3), as retrospectively inserted, authorises reopening of completed assessments in circumstances where the assessee cannot reasonably be expected to produce books and records, and the role of Rule 58(20) in defining limits of that power. - HELD THAT: - The Court considered the text of Section 42(3) which treats assessment as pending where audited accounts or prescribed annexures are not filed, but observed that the power to reopen must be exercised consistently with principles of reasonableness and fairness. Rule 58(20) (requirement to retain books for five years from the end of the assessment year or for a specified period thereafter) was held to be a safeguarding factor that constrains the exercise of Section 42(3). The Court emphasised that retrospective invocation of reassessment power should not operate so as to leave an assessee without any means to defend against alleged escaped turnover because of absence of records. Reopening in such prejudicial circumstances would be improper. [Paras 5]

Section 42(3) cannot be applied in a manner that prejudicially affects an assessee who lacks requisite books and records; Rule 58(20) limits the scope of reopening and acts as a safeguard.

Final Conclusion: In view of the foregoing, the assessments for AYs 2009-10 and 2010-11 were held unsustainable and the assessment orders (Exts.P3 and P4) were set aside; the writ petition was allowed.