TaxTMI Updates e-Newsletter
Nov 12,2021

Maintainability of writ petition - exhaustion of alternative remedies - garnishee notice - recall of garnishee notice - expeditious disposal of appeal - no adjudication on merits

Maintainability of writ petition - exhaustion of alternative remedies - Writ petition challenging the garnishee notice was not maintainable when statutory/appellate remedies had not been exhausted and an appeal was already pending. - HELD THAT: - The Court recorded that the petitioners had filed an appeal against the Order-in-Original and had not first approached either the authority that issued the garnishee notice or the appellate authority before invoking the writ jurisdiction. In view of the availability of alternative remedies and the pendency of the appeal, the Court declined to entertain the petition and disposed of it on the ground of non-exhaustion of statutory/appellate remedies. The Court therefore refrained from deciding the merits of the challenge to the garnishee notice. [Paras 5]

Writ petition not entertained for want of exhaustion of alternative remedies; disposed of on maintainability grounds.

Garnishee notice - recall of garnishee notice - expeditious disposal of appeal - no adjudication on merits - Relief by way of recall of the garnishee notice and expeditious adjudication of the pending appeal was made available by granting liberty to approach the issuing authority and the appellate authority; merits not examined. - HELD THAT: - Instead of deciding the substantive challenge, the Court granted the petitioners liberty to apply to the authority which issued the garnishee notice for its recall and to the appellate authority to seek expeditious disposal of the already-filed appeal. The Court recorded the respondents' undertaking to take up the appeal at an early date and expressly stated that it had not gone into the merits, directing that authorities proceed in accordance with law. [Paras 6, 7, 8]

Petitioners granted liberty to move the issuing authority for recall of the garnishee notice and to seek expeditious disposal of the appeal; authorities directed to proceed as per law; merits left undecided.

Final Conclusion: Writ petition dismissed for non-exhaustion of alternative remedies with liberty to the petitioners to seek recall of the garnishee notice from the issuing authority and to pursue expeditious disposal of the pending appeal; no decision on merits.

Personal hearing under Sub-section (4) of Section 75 of the TN-GST Act - statutory imperative of opportunity of hearing - setting aside orders for failure to afford personal hearing - remand for fresh consideration after personal hearing

Personal hearing under Sub-section (4) of Section 75 of the TN-GST Act - setting aside orders for failure to afford personal hearing - remand for fresh consideration after personal hearing - Whether the writ petitioner was afforded personal hearing as required by Sub-section (4) of Section 75 of the TN-GST Act and the consequence of non-compliance. - HELD THAT: - The Court examined the record and found nothing to demonstrate that a personal hearing was offered or held in respect of the impugned orders. Sub-section (4) of Section 75 mandates that an opportunity of hearing be granted where a request is received in writing from the person chargeable with tax or penalty, or where an adverse decision is contemplated. In view of the absence of any personal hearing, the statutory requirement was not complied with. Consequently, the Court set aside the impugned summary order dated 15.04.2021 and the subsequent intimation dated 12.08.2021 on the sole ground of non-compliance with the statutory obligation to grant a personal hearing. By consent of the parties the Court fixed a date for personal hearing and directed the respondent to re-do the proceedings on merits after affording the statutorily mandated opportunity of hearing and to pass a fresh decision expeditiously and in any event within four weeks thereafter. The Court expressly refrained from expressing any view on the merits of the matter.

Impugned orders set aside for failure to afford the personal hearing mandated by Sub-section (4) of Section 75 of the TN-GST Act; personal hearing to be afforded and respondent directed to reconsider and pass fresh orders within four weeks; no opinion expressed on merits; no costs.

Final Conclusion: The writ petitions are disposed of by setting aside the impugned orders on the sole ground that the statutorily mandated personal hearing under Sub-section (4) of Section 75 was not afforded; a personal hearing is directed and the respondent shall re-decide the matters on merits within four weeks, the Court expressing no view on the merits and making no order as to costs.

Anticipatory bail - custodial interrogation - modus operandi of GST fraud - offences under Section 132 of the CGST Act, 2017 - investigative necessity outweighing grant of pre-arrest relief

Anticipatory bail - offences under Section 132 of the CGST Act, 2017 - Grant of anticipatory bail to the petitioner in the two complaint cases was refused. - HELD THAT: - The Court considered the material on record including the department's investigation which allegedly disclosed operation of numerous bogus/fake firms, large scale creation and propagation of fake invoices and availing/passing of Input Tax Credit, recovery of blank cheques linking multiple firms, banking and e-way bill portal entries, and statements implicating the petitioner. The prosecution submitted that the fraud is substantial in magnitude and that co-accused have implicated the petitioner. Having heard learned counsel and without deciding merits, the Court found that the seriousness and scale of the alleged GST fraud weighed against granting pre-arrest relief. On these facts the petitions for anticipatory bail were dismissed.

Petitions for anticipatory bail dismissed.

Custodial interrogation - modus operandi of GST fraud - investigative necessity outweighing grant of pre-arrest relief - Custodial interrogation of the petitioner was held to be necessary and was permitted. - HELD THAT: - The Court recorded that, in light of the material relied upon by the investigating authority - including information about fictitious entities, alleged large-scale fake billing and ITC transactions, linkage through bank instruments and identifying credentials - custodial interrogation was required to ascertain the petitioner's role, the modus operandi and involvement of other persons. The Court thereby justified refusal of anticipatory bail to enable the investigating agency to carry out custodial interrogation, while expressly refraining from commenting on the merits of the allegations.

Custodial interrogation permitted; anticipatory bail refused to facilitate investigation.

Final Conclusion: Considering the investigation material and the alleged large-scale GST fraud implicating the petitioner, the High Court declined to grant anticipatory bail and directed that custodial interrogation of the petitioner be permitted to investigate the modus operandi and involvement of other persons.

Stay of payment - Goods and Services Tax - Grant of mining lease - Royalty

Stay of payment - Goods and Services Tax - Grant of mining lease - Royalty - Payment of GST for grant of mining lease/royalty by the petitioner is stayed until further orders. - HELD THAT: - The Court issued an interim order staying the obligation of the petitioner to make payment of Goods and Services Tax in respect of the grant of a mining lease and related royalty. The order is interlocutory in nature and does not include reasoning on the merits; it preserves the petitioner's position on the specific payment obligation until further orders are made by the Court.

Interim stay granted on payment of GST for grant of mining lease/royalty by the petitioner until further orders.

Final Conclusion: Notice issued and interim stay granted restraining enforcement of payment of GST in respect of the grant of the mining lease and royalty by the petitioner, subject to further orders.

Deduction under section 10AA - computation of export turnover and total turnover - Exclusion of receipts from provision of technical services abroad from eligible turnover - Treatment of profit on onsite / deputation of technical manpower (DTM) for deduction purposes - Allocation of common corporate expenses and interest to SEZ units for computing profit eligible under section 10AA - Treatment of foreign exchange fluctuation gains - revenue v. capital distinction - Set off of brought forward losses and unabsorbed depreciation of erstwhile subsidiary - Allowability of suo motu disallowance under section 40(a)(ia) where tax was deducted at a lower rate on a valid section 197 certificate - Allowability of education cess and higher education cess as deduction - Disallowance under section 14A and its applicability in computation of book profits under section 115JB - Depreciation on goodwill acquired earlier and assessment of claim in later years

Deduction under section 10AA - computation of export turnover and total turnover - Exclusion of telecommunication and internet user charges from both export turnover and total turnover in computing deduction under section 10AA. - HELD THAT: - The Tribunal noted that the identical issue for the immediately preceding assessment year had been decided in favour of excluding telecommunication and internet charges from both export turnover and total turnover. Applying that precedent to the year under consideration, the Tribunal upheld the CIT(A)'s direction to exclude such amounts from both export and total turnover and therefore dismissed the appeals of both parties on this point. [Paras 4]

Exclusion of telecommunication and internet charges from both export turnover and total turnover upheld; grounds dismissed.

Exclusion of receipts from provision of technical services abroad from eligible turnover - Exclusion of amount received for providing technical services abroad from both export turnover and total turnover for computation under section 10AA. - HELD THAT: - The Tribunal followed its earlier decision in the immediately preceding assessment year, where the CIT(A)'s exclusion of such receipts from both export and total turnover was upheld. As the view of the CIT(A) for the year under appeal accords with the Tribunal's precedent, the Tribunal approved that approach and dismissed the appeals on this ground. [Paras 5, 6]

Exclusion from both export and total turnover upheld; grounds dismissed.

Treatment of profit on onsite / deputation of technical manpower (DTM) for deduction purposes - Inclusion of profit on onsite / DTM software services as part of turnover for granting deduction under section 10AA. - HELD THAT: - Relying on the Tribunal's decision for the immediately preceding assessment year, which directed that profit on onsite/DTM services be included as part of turnover for section 10AA purposes, the Tribunal overturned the CIT(A)'s contrary view for the year under appeal and directed inclusion of such amount in profit for computation of deduction under section 10AA. [Paras 7, 8]

Profit on onsite/DTM services to be included in turnover for section 10AA; impugned order overturned on this point.

Allocation of common corporate expenses and interest to SEZ units for computing profit eligible under section 10AA - Validity of allocation by the AO of corporate expenses and interest to Hyderabad and Chennai SEZ units (reducing eligible deduction under section 10AA). - HELD THAT: - The assessee had not demonstrated allocation of the corporate expenses and interest to the eligible SEZ units; on a without prejudice basis the assessee itself furnished turnover-based allocations which the AO adopted. The Tribunal found that the costs pertained to all units including SEZ units and that the AO's allocation merely reflected the amounts the assessee had computed. On that basis the AO's recomputation was upheld and the CIT(A)'s confirmation sustained. [Paras 9, 10, 11]

AO's allocation of corporate expenses and interest to SEZ units upheld; ground not allowed.

Treatment of foreign exchange fluctuation gains - revenue v. capital distinction - Taxability of foreign exchange fluctuation gain attributable to overseas branches-distinguishing revenue and capital portions for inclusion in total income. - HELD THAT: - The Tribunal followed its earlier view in the immediately preceding year that the part of foreign exchange fluctuation gain attributable to revenue operations is includible in total income while the capital-related part should be excluded. The CIT(A)'s direction in line with that precedent was therefore upheld. [Paras 12, 13]

CIT(A)'s approach of including revenue-related FX gains and excluding capital-related portion upheld; assessee's ground dismissed.

Set off of brought forward losses and unabsorbed depreciation of erstwhile subsidiary - Direction to the AO by the CIT(A) to verify claim for set off of brought forward losses and unabsorbed depreciation; effect of that direction on the appeal. - HELD THAT: - The CIT(A) restored the matter to the file of the AO with directions that the assessee's claim for set off of brought forward losses and unabsorbed depreciation be verified and allowed as per law. As the CIT(A) had already issued the necessary directions, the Tribunal treated the assessee's ground as rendered infructuous and dismissed it. [Paras 14]

Matter restored to AO for verification as directed by CIT(A); assessee's ground held infructuous and dismissed.

Allowability of suo motu disallowance under section 40(a)(ia) where tax was deducted at a lower rate on a valid section 197 certificate - Whether the assessee's suo motu disallowance under section 40(a)(ia) of a payment is maintainable where tax was in fact deducted at a lower rate pursuant to a certificate issued under section 197. - HELD THAT: - The Tribunal admitted the additional ground under the principle that the Tribunal may entertain a question of law not pressed below if relevant facts are on record. On the merits, the Tribunal directed that the AO examine and verify whether tax was correctly deducted at the lower rate pursuant to a valid section 197 certificate issued to the payee. If so, the suo motu disallowance made by the assessee under section 40(a)(ia) should be deleted after giving the assessee an opportunity of hearing. [Paras 15, 16, 17, 18]

Additional ground admitted; matter remitted to AO to verify correctness of TDS rate and certificate, and delete suo motu disallowance if TDS was correctly deducted.

Allowability of education cess and higher education cess as deduction - Whether education cess and higher education cess paid during the year are allowable as deduction while computing taxable income. - HELD THAT: - The Tribunal admitted the additional legal ground and, following the High Court and Tribunal precedents in the assessee's earlier year, set aside the impugned order and remitted the matter to the AO for verification and appropriate allowance of the deduction if merited. The Tribunal treated the question as legal and not requiring fresh factual investigation beyond verification. [Paras 19, 20]

Additional ground admitted; matter remitted to AO for verification and grant of deduction where appropriate.

Disallowance under section 14A and its applicability in computation of book profits under section 115JB - (a) Whether AO recorded proper satisfaction before making disallowance under section 14A; (b) Whether disallowance under section 14A is permissible in computing book profits under section 115JB. - HELD THAT: - On (a), the Tribunal found that the AO had recorded satisfaction in the assessment order (as in the preceding year) and therefore vacated the CIT(A)'s deletion of the disallowance on grounds of improper satisfaction, allowing Revenue's ground. On (b), however, the Tribunal followed the Special Bench authority that no disallowance under section 14A can be made while computing book profit under section 115JB, and therefore sustained the CIT(A)'s view that section 14A disallowance should not be applied to compute book profits. [Paras 21, 22, 23, 24]

AO's disallowance under section 14A sustained for regular income-tax computation (CIT(A)'s deletion vacated); but no section 14A disallowance to be made in computation of book profits under section 115JB.

Depreciation on goodwill acquired earlier and assessment of claim in later years - Grant of depreciation on goodwill acquired in an earlier year where claim was not made in earlier assessments. - HELD THAT: - The Tribunal noted that the issue was considered by the Tribunal for the preceding year and depreciation was ultimately allowed subject to verifications by the AO. As the facts for the year under appeal are mutatis mutandis similar, the Tribunal directed the AO to decide the claim in accordance with the Tribunal's earlier decision, undertaking necessary verifications. [Paras 25]

Claim for depreciation on goodwill remitted to AO to decide following Tribunal's earlier year directions and verifications.

Final Conclusion: Both appeals are partly allowed for statistical purposes: several issues were decided in accordance with Tribunal precedents (including exclusions under section 10AA, treatment of onsite/DTM profit, allocation of corporate costs, and treatment of FX gains), certain additional legal grounds were admitted and remitted to the AO for verification (section 40(a)(ia) suo motu disallowance and education cess), section 14A disallowance was sustained for regular income-tax computation but held inapplicable for computation of book profits under section 115JB, and the depreciation claim on goodwill was directed to be decided by the AO following the Tribunal's earlier findings.

Assessment of profit on completion of project - recognition of revenue by real estate developers (project completion vs percentage completion) - remission or cessation of liabilities under section 41(1) - bogus purchases and disallowance limited to embedded profit element

Assessment of profit on completion of project - recognition of revenue by real estate developers (project completion vs percentage completion) - Whether addition of profit from sale of one unit of project 'Ellora Castle' could be made for AY 2012-13 by estimating profit on the basis that the project was completed earlier. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the AO's estimated addition. The AO had made an arbitrary computation without rejecting books of account or specifying any recognised project accounting method and relied on a presumption of project completion and transfer of risks and rewards. CIT(A) recorded that actual profit for the project had been reflected in a subsequent assessment (AY 2013-14) and that the AO had neither followed project-completion nor percentage-completion method. In absence of cogent basis for varying the assessee's accounts or rejecting books, and given that significant risk and rewards had not been shown to have passed, the AO's estimate was not sustainable. [Paras 7]

Addition of Rs.12,19,969/- deleted; order of CIT(A) upheld.

Remission or cessation of liabilities under section 41(1) - Whether disallowance under section 41(1) of Rs.16,79,981/- for alleged cessation of sundry creditors was justified. - HELD THAT: - The AO invoked section 41(1) without adducing material to show that liabilities had been extinguished or that there was remission; merely showing balances outstanding in books was insufficient. The Tribunal agreed with CIT(A) that no event in the year indicated remission or cessation of liabilities and that the AO's conclusion rested on conjecture and surmise rather than on any enquiry or evidentiary basis. Consequently the disallowance could not be sustained. [Paras 11]

Disallowance under section 41(1) deleted; order of CIT(A) upheld.

Bogus purchases and disallowance limited to embedded profit element - Whether purchases alleged to be from accommodation-entry providers warranted 100% disallowance, or whether disallowance should be restricted to the profit element. - HELD THAT: - The Tribunal affirmed the CIT(A)'s reduction of the AO's addition to 12.5% of the disputed purchases. The AO had not doubted the sales, and where sales are undisputed courts have held that entire purchases cannot be disallowed; instead the profit margin embedded in such purchases may be disallowed. The assessee produced bills, ledgers and payment evidence and showed onward sales; the AO did not produce conclusive material from sales-tax investigations directly linking the assessee's purchases to bogus supplies. Having regard to the facts and precedent reasoning, the 12.5% restriction on disallowance was held reasonable. [Paras 15]

Disallowance restricted to 12.5% of implicated purchases; order of CIT(A) upheld.

Bogus purchases and disallowance limited to embedded profit element - Whether the decision of the Apex Court in N.K. Proteins Ltd. required affirmance of 100% addition in the present facts. - HELD THAT: - The Tribunal observed that the dismissal of SLP in N.K. Proteins Ltd. did not mandate 100% disallowance on the facts of this case and noted that the decision has been explained/distinguished by the Bombay High Court in earlier proceedings. Given the factual distinction and the absence of conclusive material impugning the assessee's transactions, the reliance on N.K. Proteins Ltd. did not warrant overturning the CIT(A)'s order. [Paras 16]

Reliance on N.K. Proteins Ltd. distinguished; no change to CIT(A)'s order.

Final Conclusion: The Revenue's appeal is dismissed and the CIT(A)'s deletions and reductions (deletion of additions for estimated project profit and cessation of liabilities; restriction of disallowance for alleged bogus purchases to 12.5%) are upheld for Assessment Year 2012-13.

Disallowance of expenditure for earning exempt income under section 14A read with Rule 8D - Computation of book profit for MAT excluding disallowance under section 14A - Deemed income from house property - Deduction under section 80IA in the context of amalgamation

Disallowance of expenditure for earning exempt income under section 14A read with Rule 8D - Whether the disallowance computed under section 14A read with Rule 8D should be sustained in respect of interest and administrative expenses relating to tax exempt dividend income. - HELD THAT: - The Tribunal upheld the deletion of the interest component of the disallowance because Revenue failed to demonstrate that the investments yielding exempt income were financed by borrowed funds; the assessee established availability of own funds (share capital and reserves) adequate to cover the investments, and the AO did not discharge the burden to show utilisation of borrowings. However, as regards administrative expenses, the assessee did not furnish particulars or evidence to demonstrate that no expenditure was incurred in earning the exempt income; given the absence of documentary details and the practical necessity of monitoring large investments, the Tribunal found no infirmity in the CIT(A)'s application of Rule 8D to compute and confirm an ad hoc disallowance of administrative expenses. The Tribunal therefore sustained the deletion only qua interest disallowance while upholding the disallowance of administrative expenses as computed under Rule 8D. [Paras 8, 9, 10]

Deletion of disallowance of interest expenditure affirmed; disallowance of administrative/other expenses under Rule 8D upheld.

Deemed income from house property - Whether notional income from two of four flats should be included under the head 'income from house property' where the assessee claims business use as guest houses but fails to produce evidence. - HELD THAT: - The assessee asserted that all four flats were used for business purposes as guest houses and relied on an earlier year order, but did not produce contemporaneous evidence to substantiate business use in the year under consideration. The AO accepted business use for two flats but treated the other two as let out for notional computation; the CIT(A) confirmed that finding. The Tribunal observed that earlier favourable orders were not supported by parity of circumstances or documentary proof in the present year, and in light of absence of evidence demonstrating business use, found no reason to interfere with the addition of notional rental income for the two flats. [Paras 11, 14]

Addition on account of deemed house property income confirmed.

Deduction under section 80IA in the context of amalgamation - Whether the assessee is entitled to deduction under section 80IA in respect of a power plant taken over upon amalgamation. - HELD THAT: - The assessee claimed the 80IA deduction for the power plant transferred on amalgamation with the assessee-company and showed that the same claim had been allowed in earlier assessment years either by the first appellate authority or by the Tribunal. There was no change in facts or circumstances warranting re adjudication. Absent any contrary material from Revenue and in view of the consistent favourable orders in earlier years, the Tribunal declined to revisit the question and upheld the CIT(A)'s allowance of the deduction. [Paras 17, 19]

Deletion of the addition and allowance of deduction under section 80IA upheld.

Computation of book profit for MAT excluding disallowance under section 14A - Whether disallowance computed under section 14A (Rule 8D) can be adjusted while computing book profit under section 115JB for MAT purposes. - HELD THAT: - Following the Special Bench decision in ACIT v. Vireet Investments P. Ltd., the Tribunal held that expenditure computed under section 14A read with Rule 8D should not be incorporated in the computation of book profit under Explanation 1 to section 115JB(2). The Tribunal directed that no adjustment to book profit for MAT liability be made on the basis of disallowances computed under Rule 8D. [Paras 21, 22]

AO directed not to adjust book profit for MAT on account of disallowance under section 14A/Rule 8D.

Final Conclusion: Both the assessee's appeal and the Revenue's cross appeal are dismissed; the CIT(A)'s deletion of interest disallowance but confirmation of administrative disallowance under section 14A/Rule 8D is upheld, the addition for deemed house property income is confirmed, the allowance of deduction under section 80IA on amalgamation is sustained, and the AO is directed not to adjust book profit for MAT on account of section 14A/Rule 8D computations.

Presumption as to documents found in search/survey under section 292C - Rebuttable presumption and requirement of corroborative evidence - Onus on Assessing Officer to disprove explanations using powers under section 133(6)/131(1) - Treatment of cash receipts as income vis-a -vis amounts received for incurring expenses on behalf of clients - Allowability of expenditure not governed by recipient's inclusion of receipt in his income

Presumption as to documents found in search/survey under section 292C - Rebuttable presumption and requirement of corroborative evidence - Seized documents as indicia requiring independent corroboration - Whether the addition based on cash entries in a seized loose paper could be sustained as undisclosed income of the assessee - HELD THAT: - The Tribunal accepted that documents found during survey attract the statutory presumption but reiterated that such presumption is rebuttable. The assessee furnished ledgers and client confirmations that the cash receipts represented amounts received to incur third party municipal and project expenses and that cheque receipts already reflected actual fees in books. The authorities below did not exercise their powers under sections 133(6)/131(1) to verify or contradict the assessee's explanations and produced no corroborative material (forensic evidence, trace of cash, or independent linking of cash to the assessee's available funds). A seized loose paper, without supporting evidence, only directs inquiry and cannot alone justify computing undisclosed income. On this basis the Tribunal found the assessee's explanation sufficient to rebut the presumption and held that the addition could not be sustained. [Paras 7]

The addition made on the basis of the seized document is deleted and the ground of appeal is allowed.

Allowability of expenditure not governed by recipient's inclusion of receipt in his income - Onus on Assessing Officer to disprove explanations using powers under section 133(6)/131(1) - Whether the addition should be deleted to the extent of amounts already included in the recipient's income (claim of double addition) - HELD THAT: - The Tribunal rejected the contention that an expense should be allowed merely because the recipient has included the receipt in his income. Allowability of an expense in the hands of the payer is governed by the provisions relating to profits and gains of business and profession and must meet statutory conditions; it cannot be determined solely by the recipient's tax treatment. The assessee's plea for deletion of the addition insofar as the amount was already taxed in the hands of the payee was therefore not accepted. [Paras 7]

The prayer to delete the addition on the ground that the amount was already added in the hands of the payee is rejected.

Final Conclusion: The Tribunal held that the seized loose paper did not, without corroborative material and absent exercise of investigatory powers by the AO, justify treating the cash entries as the assessee's undisclosed income; the presumption under section 292C was rebutted and the addition deleted, while the plea to reduce the addition on account of its taxation in the hands of the payee was repelled.

Estimation of reasonable net profit where accounts are doubted (Section 145(3) principle) - Application of comparative net profit rate in civil construction contracts - Rejection of expenditure disallowance based on unproved alleged bogus subcontracting - Proof of genuineness of payments by account-payee cheques, TDS and audited accounts - Assessment arising from search and seizure - notice under Section 153A/153C and maintainability (procedural challenge)

Estimation of reasonable net profit where accounts are doubted (Section 145(3) principle) - Application of comparative net profit rate in civil construction contracts - Ld. CIT(A)'s estimate of net profit at 8% of contract receipts and restriction of addition to Rs. 29,68,826/- was correct and is affirmed. - HELD THAT: - Tribunal noted as a fact that the contract work was executed, certified by the Government authority and finally paid after arbitration directions; hence expenditure must have been incurred. The Assessing Officer's addition of the entire subcontract payments was made largely on assumptions and produced an unrealistically high net-profit percentage (about 33.5%). Ld. CIT(A) applied the principle under Section 145(3) that where accounts are doubted, the Assessing Officer should determine profit in the manner provided in section 144, and adopted a reasonable net-profit rate (8%) supported by comparative precedents and sectoral practice. Payments to subcontractors were made by account-payee cheques, TDS was deposited, subcontractors filed audited accounts and PANs, and there was no evidence that the amounts were returned to the assessee. Considering these materials, a deduction to reflect an 8% net profit on total contract receipts was held appropriate, resulting in sustaining only part of the AO's addition. The Tribunal found no infirmity in the reasoning and confirmed the CIT(A)'s computation. [Paras 5, 6]

Addition reduced to Rs. 29,68,826/- by applying 8% net profit; CIT(A)'s order affirmed.

Rejection of expenditure disallowance based on unproved alleged bogus subcontracting - Proof of genuineness of payments by account-payee cheques, TDS and audited accounts - AO's finding that the three subcontractors were non existing and payments were bogus was not sustained. - HELD THAT: - Tribunal recorded that the assessee produced MOUs, audited accounts and affidavits of the subcontractors, TDS details and PANs; payments were by account payee cheques and subcontractors were assessed to tax. The department failed to demonstrate any cash back to the assessee or other concrete evidence of siphoning. The material on record, including verification of work execution and examination referenced by the CIT(A), did not justify treating the subcontract payments as entirely bogus; accordingly, the blanket addition was unwarranted and was appropriately restricted by estimating a reasonable net profit. [Paras 5]

Departmental contention of fictitious subcontractors rejected; entire disallowance not sustained.

Assessment arising from search and seizure - notice under Section 153A/153C and maintainability (procedural challenge) - Assessee's ground contesting issue of notice under 153A/153C for A.Y. 2008-09 was not pressed and is dismissed as not pressed. - HELD THAT: - At the hearing the assessee did not pursue the contention that notices under the search provisions could not be issued for the year in question. The Bench recorded that the ground was not pressed and accordingly dismissed it without further adjudication on maintainability. [Paras 7]

Ground dismissed as not pressed.

Final Conclusion: Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, confirming the CIT(A)'s restriction of the addition to Rs. 29,68,826/- by applying an 8% net-profit estimate and rejecting the AO's blanket disallowance based on allegations of fictitious subcontracting; the procedural ground in the cross-objection was dismissed as not pressed.

Chargeability under section 56(2)(viib) as income from other sources - recognised valuation methods under rule 11UA - discounted cash flow (DCF) method - valuation of shares by a qualified chartered accountant - assessing officer's power to scrutinise valuation report but not to change the chosen method of valuation - alternative fair market value determination under explanation (a)(ii) to section 56(2)(viib) - restoration for de novo adjudication to the assessing officer

Valuation of shares by a qualified chartered accountant - discounted cash flow (DCF) method - assessing officer's power to scrutinise valuation report but not to change the chosen method of valuation - recognised valuation methods under rule 11UA - restoration for de novo adjudication to the assessing officer - Whether the valuation of shares determined by a qualified chartered accountant under rule 11UA can be disturbed by the Assessing Officer and the appropriate course when supporting material for the valuation was not filed before the AO. - HELD THAT: - The Tribunal recognised that valuation of shares is a technical exercise and that the Assessing Officer is entitled to scrutinise a valuation report and, if necessary, obtain a fresh determination from an independent valuer, but is not entitled to change the valuation method chosen by the assessee (paras 10, 10.1). In the present case the Assessing Officer rejected the CA's DCF-based certificate because projections (notably change in working capital) differed from past audited figures. The assessee, however, had not furnished the project report relied upon by the valuer before the authorities below and produced it only before the Tribunal. Given the absence of that material at the AO stage, the Tribunal found it necessary that the project report be considered by the AO and that the matter be restored for fresh adjudication so that the AO may examine the valuation (and call for clarifications or an independent valuation if required) while respecting the applicable valuation framework under rule 11UA and the restriction on changing the chosen method merely by substituting another method (paras 10.1-10.3). The Tribunal therefore admitted the assessee's alternate legal contention that fair market value may be determined under explanation (a)(ii) to section 56(2)(viib) subject to the AO's satisfaction, and directed de novo consideration by the AO in the light of the project report and law (para 10.3). [Paras 10]

The issue is remanded to the Assessing Officer for de novo adjudication: the AO shall consider the project report now placed on record, may scrutinise the valuation or seek an independent determination but must respect the applicable valuation framework; the assessee is also permitted to satisfy the AO under explanation (a)(ii) to section 56(2)(viib).

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and set aside the impugned conclusion, directing restoration to the file of the Assessing Officer for fresh adjudication in accordance with law after considering the project report and, if necessary, alternative valuation under explanation (a)(ii) to section 56(2)(viib).

Deduction under Section 35(1)(ii) - withdrawal of approval subsequent to payment - reliance on statements recorded during survey without opportunity of cross-examination - onus of proof in claim for exemption/deduction

Deduction under Section 35(1)(ii) - withdrawal of approval subsequent to payment - reliance on statements recorded during survey without opportunity of cross-examination - onus of proof in claim for exemption/deduction - Assessee entitled to deduction under Section 35(1)(ii) for payment made when the donee was approved, notwithstanding subsequent withdrawal of that approval; adverse reliance could not be placed on survey statements recorded behind the assessee without opportunity of cross-examination where the assessee discharged primary onus. - HELD THAT: - The Tribunal found that the payee institution had valid approval at the time the assessee made the payment and the subsequent withdrawal of recognition by the authority could not retroactively defeat the assessee's right to claim deduction under Section 35(1)(ii). The Tribunal followed coordinate-bench precedents which held that withdrawal of approval after the payment does not affect the donor's entitlement where the donor acted when the donee was duly approved. Further, the Tribunal rejected the department's adverse reliance on statements and investigation material recorded during survey proceedings behind the assessee's back because such material could not be used to impugn the assessee in absence of an opportunity to cross-examine those authors of the statements; the onus to prove that the donation was not genuine had not been discharged by the Revenue. Applying these principles to the facts, and in view of the evidence produced by the assessee (receipts, bank statements and proof of approval at the time of payment), the Tribunal set aside the orders of the authorities below and allowed the claim for deduction for the assessment year in question. [Paras 10, 11]

Order of authorities below set aside; deduction under Section 35(1)(ii) allowed for A.Y. 2014-15 and the appeal is allowed.

Final Conclusion: Appeal allowed; Tribunal directs the Assessing Officer to grant deduction under Section 35(1)(ii) for the assessment year 2014-15, holding that payment made to an approved institution at the time of payment is eligible despite subsequent withdrawal of approval and that adverse inference cannot be drawn from survey statements recorded without opportunity for cross-examination.

Faceless Assessment - Show cause notice time for reply - Assignment of draft assessment to review unit under faceless assessment automated allocation - Writ jurisdiction vis-a -vis alternate statutory remedy in fiscal matters - Exceptions to the alternate remedy rule (breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, challenge to vires)

Show cause notice time for reply - Faceless Assessment - Validity of the show cause notice period of one day and whether that short period warranted interference in writ jurisdiction. - HELD THAT: - The Court held that, although ordinarily one day for replying to a show cause notice would be short, interference was not warranted in the present case because the writ petitioner actually replied on the very next day and did not seek a personal hearing as permitted by the notice. In these factual circumstances the petitioner cannot contend that the short time rendered the proceedings invalid or that the matter required exercise of writ jurisdiction; the petitioner's conduct of replying promptly and not seeking the available personal hearing disposed of the contention regarding the adequacy of time. [Paras 8]

The challenge to the one-day time given in the show cause notice fails and does not justify interference under Article 226.

Assignment of draft assessment to review unit under faceless assessment automated allocation - Writ jurisdiction vis-a -vis alternate statutory remedy in fiscal matters - Exceptions to the alternate remedy rule (breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, challenge to vires) - Whether alleged non-assignment of the draft assessment to a review unit (as envisaged under the faceless assessment mechanism) justified adjudication in writ proceedings instead of pursuing the statutory appellate remedy. - HELD THAT: - The Court treated this contention as essentially raising matters appropriate for the statutory appeal and as overlapping with the alternate remedy principle. Applying the well-established rule that writ jurisdiction should be exercised with restraint in fiscal matters, and having regard to recent Supreme Court elucidation of exceptions to the alternate remedy rule, the Court found that none of the exceptional circumstances (breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, or vires challenge) were made out on the material before it. Consequently the question of whether the draft was assigned to a review unit was left open for consideration by the appellate authority if the petitioner avails the statutory remedy; the Court did not decide the factual or legal merits of that contention in these writ proceedings. [Paras 9, 10, 11, 15]

The challenge regarding non-assignment to a review unit is not adjudicated in writ jurisdiction and is relegated to the statutory appellate remedy (including appeal under Section 246A) for fresh consideration.

Final Conclusion: The writ petition is dismissed; the petitioner is relegated to the alternate statutory remedy (including appeal under Section 246A) and is at liberty to raise all grounds of challenge before the appellate authority, which shall decide the appeal on its merits uninfluenced by this order. No order as to costs.

Deduction under Section 80IB[10] - Deduction not to be allowed unless return furnished (Section 80AC) - Genuineness of revised return - Remand for fresh consideration

Deduction under Section 80IB[10] - Deduction not to be allowed unless return furnished (Section 80AC) - Genuineness of revised return - Remand for fresh consideration - Reconsideration of the assessee's claim of deduction under Section 80IB[10] in light of Section 80AC and the authenticity of the revised return. - HELD THAT: - The Court found that the authorities below denied the deduction primarily on the basis that the assessee had withdrawn the claim by filing a revised return. Noting that Section 80AC provides that deductions under Chapter VI-A (including Section 80IB) shall not be allowed unless the return is furnished on or before the due date, the Court considered it necessary to examine the matter afresh to verify the genuineness and content of the revised return dated 24.12.2008 vis-a -vis the requirement of Section 80AC. The Court observed that denial on hypertechnical grounds would cause injustice and that the assessment for the subsequent year in respect of the same project, where the deduction was allowed, also warranted consideration. Without expressing any opinion on the substantive entitlement, the Court concluded that the proceedings of the authorities and the Tribunal require interference and directed restoration to the Assessing Officer for re-examination of the claim in accordance with law. [Paras 10, 11]

The matter is remitted to the file of the Assessing Officer to re-consider the claim of deduction under Section 80IB[10] in the context of Section 80AC and the genuineness of the revised return, and to pass appropriate orders.

Final Conclusion: Appeal allowed in part; the Tribunal's and lower authorities' orders are set aside and the matter is restored to the Assessing Officer for reconsideration of the deduction claimed under Section 80IB[10] in an expedited manner, with all rights and contentions preserved and no opinion expressed on the substantive questions of law.

Ad-hoc proportionate disallowance of business expenses - survey under section 133A - treatment of disclosed/undisclosed receipts as business income - allowability of business expenses - requirement of positive finding to disallow - set-off of brought forward losses against income declared in survey

Ad-hoc proportionate disallowance of business expenses - allowability of business expenses - requirement of positive finding to disallow - treatment of disclosed/undisclosed receipts as business income - set-off of brought forward losses against income declared in survey - Deletion of the Assessing Officer's proportionate disallowance of expenses of Rs. 3,77,44,000/- made on account of income disclosed during survey - HELD THAT: - The Assessing Officer applied an ad-hoc formula to disallow a proportion of total expenses against the Rs.5.00 crore disclosed during the course of survey. The CIT(A) examined the audited books, comparative expense charts for earlier years and post-survey periods, and noted that the AO had treated the surveyed amount as business income and had allowed set-off of brought forward losses; the AO did not make any specific finding that the expenses were bogus, not genuine, or disallowable. In absence of evidence or a categorical finding on the non-allowability of particular expenses, a mechanical proportionate disallowance is not sustainable. Applying these principles, the CIT(A) rightly held that expenses recorded in the audited profit and loss account were incurred in the business and could not be disallowed merely by proportionate allocation to the disclosed receipts. The Tribunal, after considering the material and precedents relied upon, found no reason to interfere with the CIT(A)'s conclusion and affirmed deletion of the disallowance. [Paras 7, 8, 9]

The ad-hoc proportionate disallowance made by the Assessing Officer is deleted and the order of the CIT(A) is affirmed.

Final Conclusion: The Revenue's appeal is dismissed; the order of the Commissioner of Income Tax (Appeals) deleting the proportionate disallowance of expenses is affirmed.

Arm's length price - transfer pricing documentation - failure to maintain/produce documentation - best judgment assessment - principles of natural justice - remand for fresh adjudication

Arm's length price - transfer pricing documentation - failure to maintain/produce documentation - best judgment assessment - principles of natural justice - remand for fresh adjudication - Whether the assessment/TPO finding that the Arm's length price of the purchase transactions was Nil could be sustained in absence of required documentation, or whether the matter should be remanded for fresh adjudication after affording opportunity to the assessee. - HELD THAT: - The Tribunal noted that it is an admitted fact the assessee entered into purchase transactions reflected in Form 3CEB but did not produce the documentation called for under the transfer pricing rules before the TPO or the DRP. However, the Assessing Officer/TPO recorded ALP as Nil without demonstrating any enquiry or examination of materials on record to justify that conclusion. The DRP accepted the absence of documentation and also failed to consider one of the two submissions the assessee had placed on record. While non-production of documents by the assessee is a relevant factor, the revenue authorities were likewise required to make reasonable efforts to determine the ALP on available materials and to give the assessee an opportunity to be heard. In the circumstances, the Tribunal held that without findings on the merits and without adequate exercise by the TPO/Assessing Officer, the ALP determination could not be sustained and the matter should be remitted for fresh adjudication. The assessee was to be given one final opportunity to file the requisite details/evidence and the TPO/Assessing Officer to proceed while complying with the principles of natural justice. [Paras 6, 7, 8]

Directions of the Ld. DRP set aside and the matter remanded to the Assessing Officer/TPO for re-adjudication after affording the assessee a final opportunity to produce documents and for the revenue to examine the merits in accordance with law.

Final Conclusion: The appeal is allowed for statistical purposes; the DRP's directions are set aside and the matter is remanded to the Assessing Officer/TPO for fresh adjudication on the Arm's length price after the assessee is given a final opportunity to file required documentation and the authorities comply with principles of natural justice.

Deductibility of employees' contribution to EPF/ESI where deposited before filing of return - delayed deposit of employees' contribution to Provident Fund and ESI - non-retrospective application of Explanation 5 to section 43B - binding effect of jurisdictional High Court decision in Vijayshree Ltd. - application of Supreme Court precedent in Alom Extrusion

Deductibility of employees' contribution to EPF/ESI where deposited before filing of return - non-retrospective application of Explanation 5 to section 43B - binding effect of jurisdictional High Court decision in Vijayshree Ltd. - Whether the addition disallowing employees' contribution to EPF/ESI should be sustained where the contribution was deposited after the statutory due date under EPF/ESI Acts but before filing of the return for AY 2017-18. - HELD THAT: - The Tribunal held that the assessee's case is covered by the binding decision of the Jurisdictional High Court in Vijayshree Ltd., which, having applied the Supreme Court decision in Alom Extrusion, permits deduction where employees' contributions though deposited after the statutory due date under the EPF/ESI Acts were paid before filing of the return. The Explanation 5 to section 43B, introduced by the Finance Act, 2021 with effect from 01.04.2021, is not applicable to AY 2017-18 and therefore cannot be invoked to sustain the disallowance. In view of the foregoing legal position and absence of any contrary binding authority, the addition confirmed by the CIT(A) was set aside. [Paras 3, 4]

Addition made on account of delayed deposit of employees' contribution to EPF/ESI is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the CIT(A)'s order and deleting the addition made for delayed employees' contribution to EPF/ESI for AY 2017-18, holding Explanation 5 to section 43B inapplicable to the assessment year and applying the binding Calcutta High Court precedent.

Deduction under section 54/54F for capital gains reinvestment - Time-limit for acquisition versus construction of new residential property (two years v. three years) - Booking with developer and payment of instalments treated as construction - Capital gains account scheme deposit verification - Administrative consistency in assessment treatment between co-owners

Deduction under section 54/54F for capital gains reinvestment - Time-limit for acquisition versus construction of new residential property (two years v. three years) - Booking with developer and payment of instalments treated as construction - Assessee's entitlement to exemption under section 54/54F in respect of payments made to builder for a flat despite possession being handed over after two years - HELD THAT: - The Tribunal found on facts that the assessee made payment of the purchase price to the builder within the financial year in which the original asset was transferred, as evidenced by the bank statement. Relying on the principle applied by the Mumbai Tribunal in Kishore H. Galaiya, where booking a flat with a builder and making instalment payments with possession to be delivered on completion amounts to construction of a new residential house, the Tribunal held that the applicable time-limit for completion is three years from the date of transfer and not two years for acquisition. The delay in handing over possession by the builder therefore cannot be visited on the assessee and does not disentitle him from claiming exemption under section 54/54F. The Tribunal accordingly set aside the finding of the lower authorities and directed deletion of the addition relating to the investment made with the builder. [Paras 12, 13]

Exemption under section 54/54F allowed in respect of the payments made to the builder; benefit could not be denied on account of delay by the builder as the transaction is to be treated as construction with a three-year period.

Capital gains account scheme deposit verification - Whether the alleged deposit of Rs. 14 lakhs was made into the capital gains account scheme - HELD THAT: - The Tribunal examined the bank statement which shows a payment of the said amount but observed that the entry does not by itself establish that the sum was deposited into a capital gains account scheme. The assessee did not produce conclusive evidence at hearing to demonstrate that the payment was to or in the form of a deposit under the capital gains account scheme, and the Revenue did not make inquiries to disprove the claim. In the interest of justice the Tribunal did not decide the matter on the papers but remitted the issue to the Assessing Officer for verification and factual ascertainment as to whether the impugned amount was deposited under the capital gains account scheme. [Paras 12]

Issue remitted to the Assessing Officer for verification whether the amount represents deposit in the capital gains account scheme.

Administrative consistency in assessment treatment between co-owners - Whether the Assessing Officer could reject the assessee's claim when an identical claim by his co-owner (brother) had been accepted by the same AO - HELD THAT: - The Tribunal observed that the assessee was a co-owner of the property and that the claim of the co-owner (his brother) in respect of investment with the same builder had been accepted by the same Assessing Officer. Given the identical facts and circumstances, the Tribunal held that the AO ought to have maintained consistency in treatment and could not accept the claim in one case and reject it in the other without justification. Acting on this principle of consistent administrative treatment, the Tribunal found the authorities' rejection of the assessee's claim unsustainable and set aside the finding of the CIT(A), directing deletion of the addition. [Paras 12]

AO directed to delete the addition; inconsistency in allowing identical claims by co-owner and rejecting assessee's claim found to be untenable.

Final Conclusion: Appeal partly allowed: Tribunal allowed exemption under section 54/54F in respect of payments made to the builder treating the transaction as construction with a three year period; remitted the question of deposit into the capital gains account scheme to the Assessing Officer for verification; directed deletion of the addition in view of inconsistent treatment of identical claims between co-owners.

Repayment of loan by journal entry / adjustment of liabilities - prohibition on repayment otherwise than by account-payee cheque / banking channel - penalty under section 271E for contravention of section 269T - immunity under section 273B for bona fide belief / sufficiency of cause - requirement of proving genuineness by documentary corroboration - remand for fresh adjudication to verify genuineness and supporting evidence

Repayment of loan by journal entry / adjustment of liabilities - penalty under section 271E for contravention of section 269T - requirement of proving genuineness by documentary corroboration - immunity under section 273B for bona fide belief / sufficiency of cause - remand for fresh adjudication to verify genuineness and supporting evidence - Whether penalty under section 271E for alleged contravention of section 269T is liable where loan liability was reduced by journal entry claimed to record purchase of land, and whether the matter required remand for verification of genuineness and documentary proof. - HELD THAT: - The assessee reduced a loan liability by passing a journal entry of adjustment, contending that he had paid the seller through banking channels for a jointly purchased piece of land and therefore did not contravene the prohibition against repayment other than by account-payee cheque/electronic means. The tax authorities imposed penalty under section 271E on the footing that repayment was not made by the prescribed modes under section 269T. The Tribunal noted authorities recognising that book adjustments may constitute valid transactions but emphasized that such immunity from penalty depends on proof of the genuineness of the underlying transaction. The CIT(A) found absence of corroborative documentary evidence (agreement/deed) to establish the land purchase and therefore sustained the penalty. The Tribunal observed that the appellant's books reflected the entries and that payments to the seller through banking channel were produced, but the CIT(A)'s finding on lack of corroboration remained unassailed on the record. In the interest of justice the Tribunal declined to finally decide the substantive question on the merits and directed that the issue be remitted to the Assessing Officer for fresh adjudication in accordance with law so that genuineness can be examined and evidence tested; if genuineness is established, no penalty would be exigible under section 271E by reason of section 273B. [Paras 9, 10]

The matter is set aside and remanded to the Assessing Officer for fresh adjudication on the question of genuineness and documentary proof; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the issue to the Assessing Officer for fresh adjudication to verify the genuineness of the claimed land purchase and supporting documents; if genuineness is proved, penalty under section 271E will not be attracted, and the appeal is allowed for statistical purposes.

Mandatory pre-deposit under Section 129E of the Customs Act - quashing of administrative orders for non-compliance with pre-deposit requirement - remand for hearing on merits where statutory pre-deposit has been made

Mandatory pre-deposit under Section 129E of the Customs Act - remand for hearing on merits - Effect of subsequent compliance with the statutory pre-deposit requirement on earlier orders rejecting appeal and revision for non-deposit, and the consequent relief. - HELD THAT: - The Court examined the TR-6 challans evidencing payment of the required pre-deposit of duty and penalty. Having found that the statutory pre-deposit under Section 129E of the Customs Act was made by the petitioners, the Court held that the orders which rejected the appeal and the revision application for want of the mandatory pre-deposit could not stand. The Court therefore quashed the impugned order of the Revisionary Authority dated 21.01.2021 and the order-in-appeal dated 16.02.2018, and remanded the matter to the Commissioner (Appeals) for fresh hearing on merits. The Court expressly refrained from expressing any opinion on the merits of the underlying controversy and directed that the Commissioner (Appeals) decide the appeal in accordance with law.

Impugned orders rejecting appeal and revision for non-payment of pre-deposit quashed; matter remanded to Commissioner (Appeals) for hearing on merits in accordance with law.

Final Conclusion: Writ petition allowed: since the mandatory pre-deposit was subsequently made, the orders rejecting the appeal and the revision for non-deposit were quashed and the matter remanded to the Commissioner (Appeals) for adjudication on merits; no opinion expressed on substance of appeal.

Look Out Circular - LOC validity and automatic removal after one year - Office Memorandum dated 27.10.2010 para 8(i) - Interim stay of administrative action - Duty to cooperate with investigation - Medical grounds as basis for interim relief

Look Out Circular - LOC validity and automatic removal after one year - Office Memorandum dated 27.10.2010 para 8(i) - Interim stay of administrative action - Whether the LOC issued against the petitioner dated 08.07.2019 remains in force and whether its operation should be stayed. - HELD THAT: - The Court noted that the respondent informed that the LOC was issued on 08.07.2019 and applied the deeming provision in para 8(i) of the O.M. dated 27.10.2010 that an LOC is valid for one year from date of issue and the name is automatically removed thereafter unless renewed. The Show Cause Notice and its supplements indicate that the respondent was aware of the petitioner's residential and official addresses, and there is no allegation that the petitioner has evaded service or refused cooperation. In view of the expiry by efflux of time under the O.M. and the absence of pleaded renewal, the Court found prima facie merit in the contention that the LOC had ceased to operate and granted interim relief. The Court therefore stayed the operation, execution and implementation of the LOC till the next date of hearing. [Paras 6, 7, 9]

Operation, execution and implementation of the LOC issued against the petitioner is stayed until the next date of hearing.

Duty to cooperate with investigation - Medical grounds as basis for interim relief - Interim stay of administrative action - Conditions on which interim relief is granted, including requirement of cooperation by the petitioner and filing of an undertaking; relevance of petitioner's medical condition. - HELD THAT: - The Court observed that adjudication remains incomplete and the petitioner has produced medical certificates and averred ongoing medical treatment while residing abroad. Taking these facts into account, and as a condition for interim relief, the Court accepted counsel's assurance that the petitioner will cooperate with the respondent in any investigation or adjudication. The Court directed the petitioner to inform the respondent of arrival dates, address and active mobile contact details, not to leave the country without informing the respondent and to file an affidavit of undertaking recording these terms within 15 days. The order preserves the respondent's right to move for variation or vacation of the stay in case of any breach of the undertaking. [Paras 8, 10, 11, 12]

Petitioner to file an affidavit undertaking to cooperate, notify travel and contact particulars, and not to leave the country without informing the respondent; breach will enable the respondent to seek variation/vacation of the stay.

Final Conclusion: The High Court granted an interim stay of the LOC issued against the petitioner (issued 08.07.2019) on the prima facie finding that, applying para 8(i) of the O.M. dated 27.10.2010, the LOC had expired unless renewed; the stay is subject to specified conditions of cooperation and an affidavit of undertaking by the petitioner, and the respondent may seek modification of the order if those conditions are breached.

Burden of proof under Section 123 - Application of reversed burden to notified classes of goods - Smuggling and confiscation under Section 111 - Imported goods and effect of clearance for home consumption - Responsibility of Revenue to prove illegal importation

Burden of proof under Section 123 - Application of reversed burden to notified classes of goods - Section 123 does not shift the burden of proving non-smuggling in respect of Betel Nuts because they were not a class of goods notified under that provision. - HELD THAT: - The Tribunal examined Section 123 and observed that the statutory reversal of burden applies only where (i) seizure is made in the reasonable belief that the goods are smuggled and (ii) the goods belong to classes specified in the notification under Section 123(2) (such as gold, watches or other notified classes). There is nothing on the record to show that Betel Nuts were notified under Section 123. Consequently the statutory burden did not shift to the persons from whose possession the goods were seized, and they were not obliged under Section 123 to prove that the Betel Nuts were not smuggled. [Paras 4]

The reversed burden provision of Section 123 is inapplicable to the seized Betel Nuts.

Smuggling and confiscation under Section 111 - Imported goods and effect of clearance for home consumption - Responsibility of Revenue to prove illegal importation - The confiscation of the seized Betel Nuts cannot be sustained because Revenue failed to establish that they were smuggled or illegally imported into India. - HELD THAT: - The Tribunal noted that even if goods are of foreign origin, once imported and cleared for home consumption they cease to be 'imported goods' and no duty can be levied under Section 17; moreover, there is no obligation on subsequent holders to retain or produce import documents unless smuggling is established. Confiscation under Section 111 requires proof that the goods were smuggled into India otherwise than through designated ports or stations. In this case the goods were discovered within India and the documentation (GST invoices, e-way bills etc.) produced by the appellants, while found unsatisfactory by the DRI, did not relieve Revenue of its primary burden to prove illegal importation. As Betel Nuts were not within the notified class under Section 123, the burden did not shift to the appellants. Revenue therefore failed to establish smuggling and the adjudicating authority's confiscation order could not be sustained. [Paras 5]

The confiscation order is set aside for want of proof that the Betel Nuts were smuggled; appeals allowed with consequential relief, if any.

Final Conclusion: The Tribunal set aside the adjudicating authority's confiscation order and allowed the appeals because Section 123 did not apply to Betel Nuts (they were not a notified class) and Revenue failed to prove illegal importation or smuggling; consequential relief to the appellants was granted.

Jurisdiction to issue show cause notice under Section 28 of the Customs Act - power of re-assessment vested in the proper officer who made the original assessment - invalidity of proceedings initiated by an officer who is not the proper officer - survival of proposals for confiscation and imposition of penalty where demand of duty fails

Jurisdiction to issue show cause notice under Section 28 of the Customs Act - power of re-assessment vested in the proper officer who made the original assessment - invalidity of proceedings initiated by an officer who is not the proper officer - The Additional Director General, DRI did not have jurisdiction to issue the show cause notice under Section 28 and the proceedings initiated by him are without authority of law. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Canon India, which held that the power to recover duties which have escaped assessment under Section 28 is a power of administrative review exercisable by "the proper officer" who made the original assessment or his successor/authority assigned the assessment function. The Court explained that allowing an officer who did not pass the original assessment (such as the Additional Director General, DRI) to re-open assessment would be impermissible and lead to unruly operation of the statute. On that basis, and following subsequent Supreme Court and High Court decisions applying the same principle, the show cause notice issued by the Additional Director General, DRI was held to be issued without jurisdiction and the proceedings founded on that notice are invalid. [Paras 5, 14]

Show cause notice issued by the Additional Director General, DRI under Section 28 is without jurisdiction; the proceedings initiated thereunder are invalid and liable to be set aside.

Survival of proposals for confiscation and imposition of penalty where demand of duty fails - segregability of confiscation/penalty proceedings from duty demand - Proceedings for confiscation of goods and imposition of penalty cannot be sustained where the demand of duty fails because the show cause notice was invalid. - HELD THAT: - The Tribunal accepted the appellant's reliance on the earlier Tribunal decision in Bakeman's Home Products and related precedents which hold that proposals for confiscation and penalty are so interlinked with the demand of duty (especially where based on the same allegation, e.g., mis-declaration of value) that they cannot be segregated and survive independently when the foundational demand fails. Applying that principle, since the show cause notice and resultant demand were quashed for want of jurisdiction, the ancillary proposals for confiscation and penalty also fail. [Paras 17, 18, 19]

Proposals for confiscation and imposition of penalty do not survive independently once the duty demand fails; they are likewise set aside.

Final Conclusion: The impugned order dated 31.05.2012 is set aside; appeal allowed. All proceedings and demands arising from the show cause notice issued by the Additional Director General, DRI, including proposals for confiscation and penalty, are invalid and are set aside.

Proper officer under Section 28(4) - power of re assessment and recovery - invalidity of proceedings initiated by non assessing officers (Additional Director General, DRI) - entitlement to be a Customs officer and vesting of functions under Section 6 - entrustment requirement - non segregability of confiscation and penalty proceedings from duty demand

Proper officer under Section 28(4) - power of re assessment and recovery - invalidity of proceedings initiated by non assessing officers (Additional Director General, DRI) - Whether the Additional Director General, DRI had jurisdiction to issue the show cause notice under the power to recover duties under Section 28(4) of the Customs Act. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Canon India that the power to re assess or recover duties which have escaped assessment is a review type power conferred on "the proper officer" and must be exercised by the officer who originally assessed and cleared the goods or his successor/assignee expressly entrusted with assessment functions. An officer who did not pass the original assessment order, even if of equivalent rank, cannot initiate reassessment under Section 28(4). The Supreme Court further held that the Additional Director General, DRI was not shown to be a Customs officer appointed or entrusted with the functions of a proper officer under Section 6, and that notifications purporting to confer such functions were invalid. Following Canon India and subsequent approvals in Agarwal Metals and various High Court and Tribunal decisions, the Tribunal held that the show cause notice issued by the Additional Director General, DRI was without jurisdiction and all proceedings founded thereon were invalid. [Paras 5, 6, 14]

Show cause notice issued by the Additional Director General, DRI under Section 28(4) is without jurisdiction; proceedings initiated thereon are invalid and set aside.

Non segregability of confiscation and penalty proceedings from duty demand - confiscation and penalty contingent on sustaining duty demand - Whether proposals for confiscation under Section 124 (with reference to Sections 111 and 112) can survive when the duty demand founded on the same show cause notice fails for want of jurisdiction. - HELD THAT: - Relying on Tribunal precedent in Bakeman's Home Products and other authorities, the Tribunal accepted the proposition that proposals for confiscation and imposition of penalty are so interlinked with the demand of differential duty (here based on alleged mis declaration) that they cannot be segregated and sustained independently when the foundational duty demand is set aside. The Tribunal therefore held that since the show cause notice and duty demand were invalid for want of jurisdiction, the related proceedings for confiscation and penalty cannot survive. [Paras 16, 18, 19]

Proceedings for confiscation and penalty arising from the same show cause notice do not survive where the duty demand fails for want of jurisdiction; such proposals are set aside.

Effect of pending review of precedent - no automatic stay of similar appeals - Whether this appeal should be deferred awaiting disposal of the Department's review petition in Canon India. - HELD THAT: - The Tribunal considered the Department's request to defer the hearing because a review petition in Canon India remained pending, noted that other courts (including the Karnataka High Court) have rejected similar pleas to adjourn, and proceeded to decide the appeal in accordance with the binding Supreme Court precedent. The pendency of a review petition did not preclude immediate disposal of this appeal. [Paras 15]

Request to defer hearing pending review petition in Canon India declined; appeal decided on existing Supreme Court precedent.

Final Conclusion: The order of the Commissioner of Customs (Adjudication) dated 31.05.2012 is set aside: the show cause notice issued by the Additional Director General, DRI is held to be without jurisdiction and all consequential demands, confiscation and penalty proposals arising from that notice are quashed; the appeal is allowed.

Rectification of clerical error in SVLDRS declaration - verification of declaration by the designated committee under the SVLDR scheme - time limit for rectification under the SVLDR scheme - pre-deposit requirement and payment deadline under the SVLDR scheme - lapse of SVLDR application for non-payment - onus on the declarant to complete the declaration form

Rectification of clerical error in SVLDRS declaration - verification of declaration by the designated committee under the SVLDR scheme - onus on the declarant to complete the declaration form - Whether the respondent was obliged to rectify the petitioner's incomplete SVLDRS-1 declaration and correct the pre-deposit amount after the petitioner left the pre-deposit column blank. - HELD THAT: - The Court found that although the designated committee is obliged to verify the correctness of a declaration under the SVLDR scheme, that obligation does not extend to completing or correcting an incomplete form filed by the declarant. The petitioner had left the pre-deposit column blank; this was a mistake attributable to the petitioner. The department's duty to verify does not convert into an obligation to supply omitted particulars or to supply information necessary to make the application complete. Consequently, the challenge to the rejection of the rectification request cannot succeed where the declaration itself was incomplete through the petitioner's omission. [Paras 5]

Rectification was not mandated; the petitioner cannot fault the respondents for not completing an incomplete SVLDRS-1 declaration.

Time limit for rectification under the SVLDR scheme - pre-deposit requirement and payment deadline under the SVLDR scheme - lapse of SVLDR application for non-payment - Whether the petitioner's rectification/application for correction made beyond the thirty day period and non-payment by the scheme deadline could be allowed. - HELD THAT: - The Court noted the scheme prescribes a thirty-day period for rectification and that the petitioner did not file a rectification within that period. The declaration was filed on 27 February 2020, and the rectification was sought after the prescribed period and only much later (allegedly near closure of the Scheme). Further, payment required under the SVLDR scheme was not made by the stipulated cut-off and, in terms of the scheme and applicable provisions, the application was liable to be treated as lapsed for non-payment by the deadline. The Court rejected the petitioner's contention regarding pandemic-related difficulties as insufficient to excuse the delay given the time available prior to the second wave. [Paras 6]

Rectification sought beyond the thirty-day period and non-payment by the deadline cannot be permitted; the SVLDR application was rightly treated as lapsed for non-payment.

Pre-deposit requirement and payment deadline under the SVLDR scheme - lapse of SVLDR application for non-payment - Whether the Court could adjudicate or grant relief against alleged non-crediting of payment by the petitioner's bankers or the Reserve Bank of India in relation to the SVLDR payment deadline. - HELD THAT: - The Court observed that the petitioner alleged it had instructed banks to make the requisite payment on the deadline date but that the banks/RBI failed to effect the credit. The Court declined to make a determination against non-party banks or the Reserve Bank in proceedings where they are not impleaded. It held that any remedy for alleged bank or RBI default lies in proceedings against those entities, if permissible in law, and cannot form a basis to set aside the departmental action treating the application as lapsed. [Paras 7, 8]

Court will not attribute default to non-parties; alleged banking failure does not justify relief in these writ proceedings.

Final Conclusion: The petition challenging rejection of rectification and seeking issuance of a discharge certificate was dismissed: the petitioner's incomplete SVLDRS-1 declaration and failure to seek timely rectification or make the required payment by the scheme deadline justified treating the application as lapsed, and the Court declined to entertain allegations of bank/RBI default in the absence of those parties.

Reversal of Cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 - Common Cenvat credit - Option under Rule 6(3)(ii) vis-a -vis Rule 6(3)(i) - Recovery limited to amount of Cenvat credit availed - Computation of trading turnover for Rule 6 - Extended period of limitation / invocation of extended period

Recovery limited to amount of Cenvat credit availed - Option under Rule 6(3)(ii) vis-a -vis Rule 6(3)(i) - Whether demand under Rule 6 could exceed the total Cenvat credit actually availed by the appellant and whether Revenue could compel application of option (3)(i) when the assessee had opted for Rule 6(3)(ii). - HELD THAT: - The Tribunal held that Rule 6 is not intended to extract an amount greater than the Cenvat credit attributable to inputs or input services used in relation to exempted services. Reliance was placed on the Tribunal's decision in Mercedes Benz which recognised that recovery cannot exceed the Cenvat credit availed. The adjudicating authority's confirmation of a demand far exceeding the appellant's total Cenvat credit availed (demand confirmed being substantially higher than the admitted credit) could not be sustained. The Tribunal also noted that there is no provision that a failure to opt for one choice causes automatic imposition of the alternative option; where the assessee had opted under Rule 6(3)(ii), Revenue could not insist on application of Rule 6(3)(i). [Paras 6]

Demand cannot exceed the Cenvat credit actually availed and Revenue cannot compel application of Rule 6(3)(i) where the assessee had opted for Rule 6(3)(ii); therefore the confirmed demand is unsustainable on this ground.

Computation of trading turnover for Rule 6 - Common Cenvat credit - Whether the Department was justified in applying 6% to the appellant's entire balance sheet turnover instead of applying the statutory measure of trading turnover (sale price less cost of goods sold or 10% of cost of goods sold) or restricting reversal to the Mani Square unit. - HELD THAT: - The Tribunal found that the Department had mechanically applied 6% to the appellant's entire balance sheet turnover without explaining why that turnover was taken instead of the measure prescribed in the Rules (the difference between sale price and cost of goods sold, determined as per generally accepted accounting principles, or 10% of cost of goods sold, whichever is more), and without segregating the Mani Square unit's trading turnover. The appellant had availed credit only in respect of its Mani Square unit; therefore, proportionate reversal, if any, should be computed with reference to the relevant turnover as provided by the Rules and not the entire balance sheet turnover. The mechanical computation was thereby held unsustainable. [Paras 6]

Computation by applying 6% on entire balance sheet turnover is incorrect; any proportionate reversal must follow the statutory yardstick and be confined to the relevant unit's trading turnover.

Extended period of limitation / invocation of extended period - Reversal of Cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004 - Whether invocation of the extended period of limitation and issuance of the show cause notice under Rule 6 was sustainable in circumstances where the service tax audit wing had already conducted detailed scrutiny and issued a Final Audit Report addressing Cenvat credit issues. - HELD THAT: - The Tribunal recorded that the service tax audit wing had carried out scrutiny, issued a Final Audit Report (dated 24/10/2016) identifying and limiting the reversal to a much smaller amount which was paid by the appellant, and that this report was available to the adjudicating authority before passing the Order-in-Original. Given that the audit wing had verified books and informed Revenue of the appellant's position, the Tribunal held that issuing the instant SCN invoking the extended period for a larger recovery was not sustainable. The Tribunal relied on analogous authority (Castrol India) where similar facts led to rejection of extended period invocation. The Tribunal also noted the appellant had paid penalty arising from audit-classification issues and had not availed credit beyond what was recorded for the Mani Square unit. [Paras 6, 7]

Invocation of extended period and the demand raised by issuing the SCN cannot be sustained in view of the prior audited verification and Final Audit Report; the demand is liable to be set aside on limitation and related grounds.

Final Conclusion: The appeal is allowed; the demand confirmed under Rule 6 of the Cenvat Credit Rules, 2004 is set aside as unsustainable both because it exceeds the Cenvat credit availed and because the computation and invocation of extended limitation were improper; consequential relief, if any, to follow as per law.

Refund of unutilized cenvat credit - reversal of cenvat credit - substantial right of a taxpayer cannot be denied for mere procedural lapse - remand for verification of reversal and supporting documents

Refund of unutilized cenvat credit - substantial right of a taxpayer cannot be denied for mere procedural lapse - Whether the rejection of the appellant's refund claims for the stated periods on the ground that the credit had been carried forward in the GST Tran-1 was legally sustainable. - HELD THAT: - The Tribunal found no dispute as to facts and recorded that the appellant had subsequently effected reversal of the entire credit in its GST Electronic Credit Ledger (filed for March 2021) and placed GSTR-3B copies on record before the Tribunal. Relying on the principle that a substantial right of a taxpayer should not be defeated by a mere procedural lapse (as affirmed by this Bench in JMT Consultant Detailing Pvt. Ltd. Vs. CCT, Bengaluru East), the Tribunal held that the authorities below erred in rejecting the refund claims solely for want of reversal. The Tribunal did not finally decide quantification or verification of the reversal but concluded that the legal ground for summary rejection on that basis was unsustainable. [Paras 5, 6]

Rejection of the refund claims on the ground of non-reversal was erroneous; the impugned orders are set aside to that extent.

Reversal of cenvat credit - remand for verification of reversal and supporting documents - Whether the matter should be remitted to the original adjudicating authority for verification of the appellant's averred reversal and supporting documents. - HELD THAT: - Although the Tribunal found the rejection unsustainable, it observed that the adjudicating authority had not had the benefit of the reversal documents now placed before the Tribunal. In the interest of adjudicating the claim on complete material, the Tribunal directed that the original authority verify whether the claimed reversal has in fact been effected and examine all supporting documents. The appellant was directed to cooperate and furnish any additional documents called for. The remand is for verification and fresh adjudication in accordance with law rather than for mere mechanical acceptance. [Paras 6]

Matter remitted to the original adjudicating authority to verify the reversal and supporting documents and to pass fresh orders thereon; appellant to cooperate.

Final Conclusion: The impugned orders rejecting the refund claims for the three stated periods are set aside; the matter is remitted to the original adjudicating authority for verification of the reversal of cenvat credit and supporting documents and for passing fresh orders in accordance with law.

Imposition of penalty under Section 11AC - intent to evade payment of duty - revenue neutrality - refund restriction by Notification No.17/2008-CE - Central Excise Valuation Rules: cost plus 10% valuation - related party valuation - suppression and misstatement

Imposition of penalty under Section 11AC - intent to evade payment of duty - refund restriction by Notification No.17/2008-CE - related party valuation - revenue neutrality - Assessee is liable to penalty under Section 11AC notwithstanding earlier Tribunal's view that refund would neutralise duty. - HELD THAT: - The remand concerned only the question of penalty in the light of the amending notification which curtailed cash refund. The duty demand as upheld by the earlier Tribunal attained finality because the assessee did not challenge it. The Tribunal declines to reopen valuation when the assessee has not appealed against the duty demand. Evidence placed on record is inadequate to show that prices charged to related parties equalled prevailing market prices or were comparable to prices charged to independent parties. The assessee failed to controvert the department's computation under the Valuation Rules and did not disclose or substantiate related-party prices. Further, the assessee was aware of Notification No.17/2008-CE which restricted refunds but did not place that fact before the Tribunal earlier. The combination of deliberate over valuation to obtain higher refundable duty and undervaluation to short pay duty, without rebuttal, amounts to suppression/misstatement indicative of intent to evade duty where refund is not fully available. In that factual matrix, complete revenue neutrality is absent and the legal prerequisite to negate intent to evade payment of duty is not satisfied; consequently penalty under Section 11AC cannot be waived. [Paras 5, 6]

Penalty under Section 11AC is sustained and the appeal is rejected.

Final Conclusion: On remand the Tribunal finds no merit in the assessee's plea to waive penalty: valuation non compliance, absence of evidence of arm's length related party pricing and the restriction on refunds by Notification No.17/2008-CE demonstrate suppression/misstatement and intent to evade duty; penalty is therefore upheld and the appeal dismissed.