TaxTMI Updates e-Newsletter
Nov 16,2020

Refunds along with interest u/s 244A - initiation of proceedings pursuant to notice under sub-section (2) of Section 143 - exercise of power of withholding of refund -initiation of proceedings pursuant to notice under sub-section (2) of Section 143 of the Act processing of return in terms of sub-section (1) of Section 143 - HELD THAT:- As gone through the Review Petition and do not find any error apparent on record to justify interference in Review Jurisdiction.

Review Petition is dismissed.

Maintenance of parallel proceedings - abstention in favour of the tribunal - leave to challenge tribunal orders - closure of appellate proceedings for adjudication by the lower forum

Maintenance of parallel proceedings - abstention in favour of the tribunal - Whether the High Court should proceed with revenue appeals while the revenue has filed identical grounds by way of miscellaneous petitions before the Income Tax Appellate Tribunal. - HELD THAT: - The Court declined to adjudicate the substantial questions of law because the revenue has raised the same grounds before the Tribunal by filing miscellaneous petitions which are pending. The Court held that the revenue cannot maintain parallel proceedings before the Tribunal and the High Court on the same issue and that it is appropriate for the Tribunal to consider those grounds first. Consequently the appeals were closed without deciding the substantial questions of law, with liberty granted to the revenue to challenge the impugned Tribunal order and any order in the miscellaneous petitions before this Court if unsuccessful before the Tribunal. The Court observed that this course would also assist the revenue in explaining any delay that might arise in filing subsequent appeals.

Appeals closed; substantial questions of law left open; revenue given liberty to pursue and, if necessary, subsequently challenge the Tribunal's orders; parallel proceedings discouraged.

Closure of appellate proceedings for adjudication by the lower forum - leave to challenge tribunal orders - Disposition of the connected miscellaneous petition and ancillary procedural relief to the revenue. - HELD THAT: - The Court noted the revenue's submission that its grounds were not considered below and that it had filed miscellaneous petitions before the Tribunal seeking consideration. In light of that, the Court closed the connected miscellaneous petition and recorded that no costs would be imposed. The Court expressly granted liberty to the revenue to pursue remedies before the Tribunal and, if unsuccessful, to approach the High Court thereafter.

Connected miscellaneous petition closed; liberty granted to revenue to agitate matters before the Tribunal and thereafter before this Court if necessary; no costs.

Final Conclusion: The High Court closed the tax-case appeals and the connected miscellaneous petition without deciding the substantial questions of law, declined to entertain parallel proceedings while the Tribunal examines the same grounds, granted liberty to the revenue to pursue the matters before the Tribunal and to challenge the Tribunal's orders before this Court if unsuccessful, and directed that no costs be imposed.

Allowability of expenditure as revenue expenditure on abandonment of project - treatment of write off of investment in an SPV as capital loss versus revenue expenditure - deduction under Section 37(1) of the Act - application of Section 36(2) vis a vis claim of bad debt/write off not previously offered as income - allowability of medical expenses as business expenditure - allowability of bonus payments as remuneration for services rendered - prematurity of penalty proceedings under Section 271(1)(c)

Treatment of write off of investment in an SPV as capital loss versus revenue expenditure - deduction under Section 37(1) of the Act - application of Section 36(2) vis a vis claim of bad debt/write off not previously offered as income - allowability of medical expenses as business expenditure - Deletion of disallowance of Rs. 8,21,997 claimed as write off of investment in JSHL and irrecoverable medical expenses - HELD THAT: - The Tribunal found that the investment of Rs. 7,40,000 in the non operational group company designated as the SPV was made for an infrastructure project integrally connected with the assessee's business and was written off when the SPV was wound up after the project could not proceed. The write off was therefore expenditure on an abandoned project having an inextricable link with the assessee's business and is allowable as revenue expenditure under Section 37(1) rather than being a capital loss. The CIT(A)'s reliance on non receipt of earlier taxation as income under Section 36(2) and on the balance sheet classification did not outweigh the commercial reality that the sum was expended in furtherance of the business and subsequently abandoned. Regarding medical expenses written off, the Tribunal accepted that they formed part of business expenditure and deleted the disallowance. On these bases the entire disallowance of Rs. 8,21,997 was deleted. [Paras 3]

Disallowance of Rs. 8,21,997 deleted; write off treated as allowable revenue expenditure under Section 37(1).

Allowability of bonus payments as remuneration for services rendered - deduction under Section 37(1) of the Act - Deletion of ad hoc disallowance of 20% of claimed bonus (Rs. 22,08,975) from employee remuneration - HELD THAT: - The Tribunal accepted the factual finding that the assessee had constituted and tasked a team to effect exit from a non performing project and that the bonus payments were commensurate with the efforts and successful negotiation to exit the project. The Board resolution authorising a senior executive to handle the exit process and evidence of a negotiated sale supported the conclusion that the payments were for services rendered in the course of business and thus deductible. The ad hoc disallowance imposed by the AO (and confirmed by the CIT(A)) was therefore deleted. [Paras 4]

Ad hoc disallowance of Rs. 22,08,975 deleted; bonus payments allowed as business expenditure.

Prematurity of penalty proceedings under Section 271(1)(c) - Treatment of the ground seeking initiation of penalty under Section 271(1)(c) - HELD THAT: - The Tribunal noted that penalty proceedings under Section 271(1)(c) had only been initiated and no adjudication on penalty had been completed. Consequently, the challenge to initiation of penalty proceedings was premature and not ripe for adjudication by the Tribunal at this stage. [Paras 4]

Ground relating to penalty proceedings held premature.

Final Conclusion: The appeal was partly allowed: the disallowances of Rs. 8,21,997 (write off and medical expenses) and Rs. 22,08,975 (ad hoc bonus disallowance) were deleted, and the challenge to initiation of penalty proceedings under Section 271(1)(c) was held premature.

Genuineness of purchases - proof of transactions by documentary evidence - reliance on third-party statements without opportunity to cross-examine - rejection of books of account under section 145(3) - addition on account of alleged bogus purchases

Procedure where a ground is not pressed - Ground challenging validity of reassessment (ground No. (i)) was not pressed before the Tribunal and dismissed as not pressed. - HELD THAT: - The assessee's counsel expressly did not press the ground challenging validity of reassessment at the hearing. The Tribunal records that the statement made from the Bar led to dismissal of that ground as not pressed, treating it as abandoned for the purposes of adjudication. [Paras 3]

Ground No. (i) dismissed as not pressed.

Genuineness of purchases - proof of transactions by documentary evidence - reliance on third-party statements without opportunity to cross-examine - addition on account of alleged bogus purchases - rejection of books of account under section 145(3) - Whether the additions made on account of alleged bogus purchases should be sustained where the assessee produced primary documentary evidence and the Assessing Officer relied on general statements from an investigation without independent inquiry. - HELD THAT: - The Tribunal examined the material on record and found that the assessee had produced primary documents: purchase invoices, bank statements, confirmations, stock records and exports documentation linking purchases to consumption or closing stock, and that sales for the year were not disputed. The AO's conclusion rested on information from an investigation and third-party statements implicating the supplier group, but the AO did not conduct independent examination or afford an opportunity to cross-examine those third parties. The CIT(A)'s order was found to contain factual inaccuracies (notably regarding production of stock register) and to reject the assessee's supporting evidence without adequate basis. The Tribunal also relied on the assessee's favourable earlier adjudication for AY 2012-13 and on binding judicial precedents holding that where books are not rejected and primary documents corroborate transactions, additions for bogus purchases cannot be sustained merely on uncorroborated third-party statements. Applying these principles to the facts, the Tribunal concluded that the addition could not be upheld and directed deletion. [Paras 7, 11, 12, 13]

Disallowance of purchases of Rs. 79,60,882/- held unsustainable and directed to be deleted for AY 2011-12; the same conclusion applied mutatis mutandis to AY 2014-15 and the appeals allowed accordingly (AY 2011-12 partly allowed; AY 2014-15 allowed).

Final Conclusion: The Tribunal dismissed the unpressed ground challenging reopening. On the substantive controversy, it held that primary documentary evidence, absence of independent inquiry and lack of opportunity to cross-examine third-party statements precluded sustaining additions for alleged bogus purchases; the disallowance was directed to be deleted for AY 2011-12 and applied mutatis mutandis to AY 2014-15, resulting in allowance of the appeals as recorded.

Unexplained cash credit under Section 68 - initial onus on assessee to prove identity, creditworthiness and genuineness - onus shifts to assessing officer to disprove documents produced by assessee - principles of natural justice - right to cross-examine third party witness - reopening of assessment under Section 147 - reliance on search materials - deletion of addition where reliance on third party statement without opportunity of cross examination

Principles of natural justice - right to cross examine third party witness - deletion of addition where reliance on third party statement without opportunity of cross examination - Addition under Section 68 based solely on statement of a third party was invalid where the assessee was not given opportunity to cross examine that witness and was not furnished the statement; such denial vitiated the assessment and warranted deletion of the addition. - HELD THAT: - The Tribunal held that where the Assessing Officer relies on the statement of a third party as the basis for making an addition, the AO is obliged to furnish the statement and to afford the assessee an opportunity to cross examine that witness when such cross examination is specifically sought. In the present case the AO proceeded on search materials and a statement attributed to a third party but did not provide the statement nor secure the witness for cross examination despite a request by the assessee. The Tribunal treated this as a breach of the audi alteram partem principle, concluded that the illegality so occasioned vitiated the addition and directed deletion. The Tribunal further noted that the burden of ensuring presence of the witness rests on the revenue and cannot be shifted to the assessee, and that where the AO fails to confront the assessee with the material relied upon, adverse inference cannot be drawn merely on that basis.

Addition deleted because the AO relied on a third party statement without providing the statement or affording the assessee opportunity for cross examination, thereby violating principles of natural justice.

Initial onus on assessee to prove identity, creditworthiness and genuineness - onus shifts to assessing officer to disprove documents produced by assessee - Assessee discharged the initial onus under Section 68 by furnishing identity, corroborative documents and bank records; in absence of cogent rebuttal or verification by the AO, the AO was not justified in treating the share capital as unexplained cash credit. - HELD THAT: - The Tribunal recorded that the assessee had produced PAN/CIN, constitutional documents, confirmations and bank statements evidencing receipt of share application money through banking channels, thereby prima facie establishing the identity, creditworthiness and genuineness of the investors. Once such primary onus was discharged, the responsibility shifted to the Assessing Officer to undertake inquiries and to produce cogent material to disprove the documents. The AO did not carry out adequate verification from the alleged investors nor did he point to specific defects in the documents; instead he relied on unproduced search statements of a third party. In these circumstances and having regard to settled principles, the Tribunal held that the assessee had discharged its onus and the addition could not be sustained.

Assessee's proof was accepted as discharging the initial burden under Section 68; absent effective rebuttal or verification by the AO, the addition could not be sustained.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the CIT(A)'s deletion of the addition under Section 68 for AY 2009-10: the assessee had discharged the primary onus by producing identity and corroborative material, and the AO's reliance on a third party statement without furnishing it or allowing cross examination amounted to a violation of natural justice rendering the addition unsustainable.

Admission of additional evidence under Rule 46A - appellate power to admit evidence and grant relief - exemption under section 54 of the Income tax Act - reinvestment of long term capital gains - scope of section 54 where multiple properties sold

Admission of additional evidence under Rule 46A - appellate power to admit evidence and grant relief - Ld. CIT(A) was entitled to admit and examine additional evidence under Rule 46A and to allow the claim at the appellate stage despite the ld. AO having rejected it in assessment. - HELD THAT: - The Tribunal held that the ld. AO had been given opportunity to consider the additional evidence but chose not to examine it in the remand report; the ld. CIT(A) therefore properly admitted and examined the evidence under Rule 46A and granted relief. The Tribunal found no violation of Rule 46A since the assessing officer had the opportunity to comment and had not given adverse remarks on the merits, and there was no requirement to give the assessing officer a further chance to re-examine the same material which was already on record. [Paras 3, 5]

Admission and consideration of the additional evidence by the ld. CIT(A) under Rule 46A was proper and did not vitiate the appellate order.

Exemption under section 54 of the Income tax Act - reinvestment of long term capital gains - scope of section 54 where multiple properties sold - Assessee was eligible for exemption under section 54 despite having sold two residential properties and reinvesting the long term capital gains in a single residential house. - HELD THAT: - The Tribunal agreed with the ld. CIT(A) that section 54 grants exemption for reinvestment of long term capital gains in a residential house and does not restrict the claimant to having sold only one property. The Tribunal noted that prior to the amendment effective from A.Y.2015-16 the provision itself allowed reinvestment of gains even if more than one residential house was sold, and that the statutory conditions for exemption were satisfied in the present case in respect of both properties whose gains were shown to have been reinvested in Crown Palace. The Tribunal found no infirmity in the appellate authority's conclusion that the conditions of section 54 were fulfilled. [Paras 3, 5]

Exemption under section 54 was correctly allowed in respect of the reinvested long term capital gains even though two properties were sold and the proceeds were reinvested in one residential property.

Final Conclusion: Revenue's appeal is dismissed; the order of the ld. CIT(A) admitting evidence and allowing exemption under section 54 for the reinvested long term capital gains is upheld.

Penalty under section 271(1)(c) - Concealment of particulars of income - Furnishing inaccurate particulars of income - Claim of depreciation - Scrutiny assessment adjustments not amounting to concealment - Deletion of penalty

Penalty under section 271(1)(c) - Claim of depreciation - Concealment of particulars of income - Furnishing inaccurate particulars of income - Scrutiny assessment adjustments not amounting to concealment - Whether penalty under section 271(1)(c) is invokable for disallowance of depreciation claimed by the assessee on control room equipment and digital set top boxes, for the assessment years in question. - HELD THAT: - The Tribunal examined the factual position that the assessee claimed depreciation at 60% on certain equipment which the Assessing Officer restricted to 15% and made corresponding adjustments; the question was whether such disallowance amounted to "concealment of particulars of income" or "furnishing inaccurate particulars" attracting penalty under section 271(1)(c). The Tribunal placed reliance on precedents which hold that mere making of a claim that is not sustainable in law, or ordinary adjustments in scrutiny assessment, does not by itself constitute concealment or inaccurate particulars where particulars furnished in the return were not false or incorrect on their face. The Tribunal noted the reasoning in DCIT v. Apollo Hospitals and in the decisions of higher courts emphasising that additions or disallowances arising from differences of opinion in assessment do not ipso facto attract the penalty provision. While the Court of Law on mens rea was discussed, the determinative point adopted was factual and legal: there was no finding that the particulars submitted by the assessee were false, nor that facts were concealed; the disallowance was an ordinary outcome of scrutiny. Applying these principles to the facts, and having regard also to other tribunal decisions on the point, the Tribunal held that the levy of penalty was not justified and the CIT(A)'s confirmation was set aside in respect of the assessee's appeals. [Paras 5, 9, 11]

The penalty under section 271(1)(c) confirmed by the CIT(A) is deleted and the appeals are allowed.

Final Conclusion: The Tribunal set aside the CIT(A)'s confirmation of penalty for A.Y. 2011-12 and A.Y. 2014-15, deleted the penalty under section 271(1)(c) relating to the depreciation claim, and allowed the assessee's appeals.

Capital gains versus business income - intention test for classification of asset - precedent in assessee's own case - unexplained cash credit under Section 68 - identity, genuineness and creditworthiness of creditors - remand proceedings and remand report

Capital gains versus business income - intention test for classification of asset - precedent in assessee's own case - Whether gains from sale of lands for A.Y. 2013-14 are taxable as capital gains or as business income. - HELD THAT: - The Tribunal upheld the CIT(A)'s treatment of the impugned land sales as chargeable under the head "capital gains". The decision rests on factual findings that the lands were acquired and held over several years as investments, rent was earned on some properties, agricultural income was consistently declared for the lands held, and the assessee had substantial capital relative to the land investments. The Bench relied on and followed earlier coordinate Bench decisions in the assessee's own case involving identical facts, which concluded that the lands were held as capital assets and that gains on sale are chargeable as capital gains. No contrary material was produced by the Revenue before the Tribunal to distinguish or overturn those findings; accordingly the CIT(A)'s direction to treat the gains as capital gains was affirmed. [Paras 11]

Grounds 1 and 2 dismissed; gains on sale of lands for A.Y. 2013-14 to be taxed under the head capital gains in accordance with the Tribunal's earlier findings.

Unexplained cash credit under Section 68 - identity, genuineness and creditworthiness of creditors - remand proceedings and remand report - Whether loans aggregating the impugned amount are liable to be treated as unexplained cash credits under Section 68 for A.Y. 2013-14. - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessee furnished documents during appellate/remand proceedings to establish the identity, genuineness and creditworthiness of the creditors for the loans in question, and that those particulars were forwarded to the AO who made no adverse remarks in the remand report. The assessee produced confirmations, bank statements and returns for the creditors and gave explanations regarding receipts and repayments. The Revenue did not place any contrary material before the Tribunal. On this basis the addition under Section 68 was deleted by the CIT(A) and that deletion was sustained by the Tribunal. [Paras 19]

Ground 3 dismissed; addition under Section 68 deleted.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal affirmed the CIT(A)'s treatment of the land-sale gains as capital gains for A.Y. 2013-14 and upheld the deletion of the addition under Section 68 after finding that the assessee had satisfactorily established identity, genuineness and creditworthiness of the creditors in remand/appellate proceedings.

Depreciation on non-compete fees - non-compete fee as intangible asset - opening written down value - binding effect of appellate precedent in assessee's own case - deletion of disallowance of depreciation

Depreciation on non-compete fees - non-compete fee as intangible asset - binding effect of appellate precedent in assessee's own case - opening written down value - Allowability of depreciation claimed on non-compete fees in assessment year 2015-16 - HELD THAT: - The Assessing Officer disallowed depreciation on the ground that non-compete fees is not an asset but merely a contractual right and added back the amount. The CIT(A) deleted the disallowance, directing the AO to grant depreciation on intangible assets (goodwill/non-compete fee) after correcting the opening WDV based on appellate decisions for earlier years. This Tribunal found the issue squarely covered by its earlier order in the assessee's own case for A.Y. 2012-13, which had upheld the CIT(A) and relied upon relevant High Court precedents. Following that precedent and the identical facts for the year under appeal, the Tribunal upheld the CIT(A)'s direction to allow depreciation and to compute opening WDV in accordance with appellate outcomes for the earlier assessment years.

The disallowance of depreciation was deleted; Revenue's appeal is dismissed and the AO is directed to allow depreciation on the non-compete/goodwill intangible assets after adjusting opening WDV as per appellate decisions.

Final Conclusion: Revenue's appeal against deletion of disallowance of depreciation on non-compete fees for A.Y. 2015-16 is dismissed; the Tribunal upholds the CIT(A) and directs the Assessing Officer to allow depreciation after rectifying the opening WDV in accordance with appellate precedent in the assessee's own case.

Transfer pricing adjustment - specified domestic transactions - arm's length price - operating profit / operating revenue - reimbursement against rental expenditure - working capital adjustment - interest under section 234A - remand to Assessing Officer / Transfer Pricing Officer for fresh examination

Transfer pricing adjustment - reimbursement against rental expenditure - operating profit / operating revenue - arm's length price - Whether reimbursement received in respect of rental expenditure should be set off against rental expenditure while computing operating profit for transfer pricing purposes - HELD THAT: - The Tribunal found that the assessee had paid rent for business premises and concurrently received a one time amount from the seller (GE Power) which was appropriated towards rental expenditure; the assessee treated the reimbursement as operating revenue and the rent as operating expenditure. The Tribunal held that the reimbursement is intricately related to the rental expenditure and that, if rent is to be treated as operating expenditure, the reimbursement should be set off against it (and conversely both excluded if rent is not treated as operating expenditure). The factual matrix and implications for computation of the profit level indicator therefore require fresh examination by the A.O./TPO in the light of the Tribunal's observations. [Paras 11, 12, 13, 14]

Issue restored to the file of the Assessing Officer / Transfer Pricing Officer for fresh examination and determination.

Working capital adjustment - transfer pricing adjustment - Whether the working capital adjustment claimed by the assessee is allowable for computing arm's length price - HELD THAT: - The Tribunal noted that the TPO had rejected the working capital adjustment on the ground that generic adjustments were made without demonstrating how differences in working capital affected comparable companies' margins, while the assessee maintained that relevant details had been furnished and offered to provide further explanations. Given the factual and evidentiary aspects remaining to be examined, the Tribunal directed that the claim for working capital adjustment be considered afresh by the A.O./TPO. [Paras 6, 15, 16]

Claim of working capital adjustment remitted to the Assessing Officer / Transfer Pricing Officer for examination.

Interest under section 234A - Whether interest under section 234A is chargeable where the return of income was filed within the due date under section 139(1) - HELD THAT: - The assessee contended that the return was filed within the time prescribed under section 139(1) and therefore no interest under section 234A is payable. The Tribunal observed that the facts concerning this contention require examination and accordingly directed that the matter be restored to the Assessing Officer for adjudication. [Paras 17]

Issue restored to the Assessing Officer for determination.

Final Conclusion: The Transfer Pricing issues concerning treatment of rental reimbursements and the working capital adjustment, and the question of interest under section 234A, are remitted to the Assessing Officer/Transfer Pricing Officer for fresh examination; the appeal is treated as allowed for statistical purposes.

Validity of reassessment under proviso to section 147 where original assessment completed under section 143(3) and no failure to disclose fully and truly - Change of opinion versus fresh material as justification for reopening assessment - Reopening of assessment initiated beyond four years from the end of the relevant assessment year - Admission of additional legal grounds before appellate tribunal

Validity of reassessment under proviso to section 147 where original assessment completed under section 143(3) and no failure to disclose fully and truly - Change of opinion versus fresh material as justification for reopening assessment - Reopening of assessment initiated beyond four years from the end of the relevant assessment year - Reopening of assessment under section 147/148 held invalid where original assessment was completed under section 143(3), reassessment was initiated after four years, and assessing officer did not demonstrate failure by the assessee to disclose fully and truly all material facts or produce new material. - HELD THAT: - The Tribunal found that the original assessment under section 143(3) was completed on the basis of information which was on record and verified by the assessing officer. The reassessment was initiated after the four year period and was based on an internal audit objection challenging the method of calculation adopted by the assessee. The assessing officer did not place any new material on record nor demonstrate in the reasons recorded that the assessee had failed to disclose fully and truly all material facts necessary for assessment. In these circumstances the reopening amounted to a mere change of opinion of the assessing officer and did not satisfy the condition in the proviso to section 147 for lifting the four year bar. The Tribunal followed coordinate precedent where similar facts led to quashing of reassessment initiated after four years without new material or demonstration of non disclosure. Having found absence of any fresh material or failure to disclose, the reopening was held to be bad in law and was set aside. [Paras 6, 9, 10, 11]

Reopening under section 147/148 quashed; additions sustained by reassessment set aside and the ground allowing challenge to reopening is allowed in favour of the assessee.

Admission of additional legal grounds on appeal - Additional grounds of appeal challenging the validity of reopening were admitted by the Tribunal as being legal questions despite not having been taken before the First Appellate Authority. - HELD THAT: - The Tribunal exercised its discretion to admit additional grounds because they raised pure legal questions concerning the validity of reassessment. Relying on legal principle and precedent (NTPC cited by the assessee), the Tribunal accepted the additional grounds for consideration and proceeded to decide the challenge to reopening on merits. [Paras 6, 11]

Additional grounds admitted and decided; they formed part of the Tribunal's adjudication leading to allowance of the appeal.

Final Conclusion: The appeal is allowed: the reassessment initiated after four years was quashed for lack of new material and absence of failure to disclose fully and truly, and the additional legal grounds challenging reopening were admitted and upheld.

Monetary threshold for filing appeals before the ITAT - application of CBDT Circular No.17 of 2019 revising monetary limit for appeals - penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - bona fide claim disclosed in return as defence to penalty - precedential application where mere disallowance without concealment disentitles levy of penalty

Monetary threshold for filing appeals before the ITAT - application of CBDT Circular No.17 of 2019 revising monetary limit for appeals - Dismissal of Revenue's appeal under revised monetary threshold for institution of appeals before the Tribunal. - HELD THAT: - The revenue appealed against deletion of penalty relating to reversal of provision in computing book profit, the net addition being less than the revised monetary limit for filing appeals before the ITAT. The tribunal noted that the total addition was below the limit set out in CBDT Circular No.17 of 2019 increasing the filing threshold to Rs. 50 lakhs and that this fact was conceded by the departmental representative. In view of the circular and the admitted quantum, the tribunal found no basis to admit the revenue's appeal and dismissed it. [Paras 4]

Revenue's appeal dismissed as falling below the monetary threshold for filing appeals before the ITAT under CBDT Circular No.17 of 2019.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - bona fide claim disclosed in return as defence to penalty - precedential application where mere disallowance without concealment disentitles levy of penalty - Deletion of penalty under section 271(1)(c) where expenditure on purchased software was bona fide, disclosed in return, and its characterization was a debatable issue. - HELD THAT: - The assessing officer treated purchase of computer software as capital and allowed only depreciation, while the assessee had claimed the cost as revenue expenditure and accepted that the incorrect treatment was inadvertent. The tribunal analysed whether the prerequisites for imposing penalty under section 271(1)(c) (concealment or furnishing inaccurate particulars) were satisfied. Following the coordinate decision cited (Torque Pharmaceuticals) and authorities recognizing that a bona fide, disclosed claim which is merely disallowed does not establish concealment or inaccurate particulars, the tribunal observed there was no material showing malafide or deliberate concealment. Given that the nature of the claim was debatable, fully disclosed in the return and tax audit report, and that the assessee admitted the inadvertent error, the tribunal concluded that the conditions for levy of penalty were not made out and accordingly deleted the penalty. [Paras 5, 6, 8, 9]

Penalty under section 271(1)(c) deleted in favour of the assessee on the ground that the claim was bona fide, disclosed and its disallowance did not establish concealment or furnishing of inaccurate particulars.

Final Conclusion: The appeal filed by the assessee is allowed by deleting the penalty under section 271(1)(c); the appeal filed by the revenue is dismissed as barred by the revised monetary threshold for filing appeals before the ITAT under CBDT Circular No.17 of 2019.

On-money - estimation-based addition - burden of proof on Revenue to establish unreported receipts - project completion method - taxability in year of completion - telescoping/set-off of cash payments within group subject to verification of cash availability - reconciliation of estimated and audited profit & loss - apportionment of expenses between business income and income from house property

On-money - estimation-based addition - burden of proof on Revenue to establish unreported receipts - Validity of addition made by applying adhoc rates to compute on-money and sustaining addition based on statements recorded during search. - HELD THAT: - The Tribunal found that the addition computed by applying adhoc rates to all flats and shops was based on presumption and estimation without corroborative seized material. Following the coordinate-bench decision in the sister concern, the addition based on such adhoc estimation is unsustainable because the Revenue must prove actual receipt of excess consideration or produce incriminating material; mere estimate or statements without corroboration cannot support an addition. However, the Tribunal directed that where direct evidences of acceptance of on-money are found during search the AO may make additions; further, the AO must verify the availability of cash within the group before allowing any set off or telescoping of payments to contractors and may make further additions to the extent of any proven shortfall. Accordingly the matter was set aside to the AO for limited quantification and verification in terms of these directions. [Paras 9, 11]

Addition based on adhoc estimation deleted; issue remanded to AO for limited purpose of quantification only where incriminating materials exist and for verification of cash availability within the group.

Project completion method - taxability in year of completion - Whether unrecorded receipts (on-money) are taxable in the year of receipt or in the year of project completion when the assessee follows project completion method. - HELD THAT: - Applying the coordinate-bench authority, the Tribunal held that where an assessee follows the project completion method unrecorded receipts relating to a project must be taxed in the year in which the project is completed, consistent with the treatment of recorded receipts. For projects completed during the relevant year, unrecorded receipts pertaining to those units are properly brought to tax in that year; receipts relating to projects not completed in the year (e.g. R Square) are to be assessed in the year of completion. [Paras 14, 16, 17]

Unrecorded receipts are taxable in the year of project completion; for completed projects in AY 2015-16 the treatment is upheld, and receipts from incomplete projects are to be taxed on completion.

Reconciliation of estimated and audited profit & loss - income to be taxed on real income not on estimated figures - Sustainability of additions made by comparing audited/book profits with tentative profit & loss accounts prepared during search. - HELD THAT: - The Tribunal accepted that differences between estimated profits prepared during search and audited/professionally prepared accounts were reconciled and explained by the assessee. In absence of any defect pointed out in the audited books or cogent material from Revenue to contradict the audited figures, additions based solely on the tentative estimation made during search cannot be sustained. Income tax is leviable on real income as per books supported by evidence, not on search-time estimates. [Paras 18, 22]

Additions based on tentative profit & loss prepared during search deleted; the authorities below directed to give effect accordingly.

Apportionment of expenses between business income and income from house property - actual expenditure basis for disallowance - Validity of disallowance of expenses claimed in business income on the ground that similar deductions (standard 30%) were claimed under income from house property. - HELD THAT: - Following the coordinate-bench approach in the assessee's earlier years, the Tribunal held that a notional or statutory claim under the head 'income from house property' (e.g., standard deduction) cannot by itself be the basis for a disallowance from business income. The AO must examine and quantify actual expenditure debited to profit & loss account that relates to rental income and disallow only that apportioned amount. Accordingly the matter is set aside to the AO with directions to determine actual expenses attributable to the rental income and restrict any disallowance to that figure. [Paras 24, 26]

Disallowance set aside for limited purpose; AO to quantify actual expenses attributable to house property and restrict disallowance accordingly.

Final Conclusion: The appeal is partly allowed: additions made on the basis of adhoc estimation were deleted but remanded to the AO for limited quantification only where incriminating material exists and for verification of group cash availability; unrecorded receipts are taxable in the year of project completion (with incomplete-project receipts to be assessed on completion); additions based on tentative P&L prepared during search are deleted where reconciled by audited accounts; and the disallowance of expenses is set aside for the AO to apportion and determine actual expenses relating to rental income. The directions of the Tribunal are confined to quantification and verification as indicated.

Section 68 - Cash credits - identity, creditworthiness and genuineness of shareholders - nature and source of cash credits - onus of proof under Section 68 - reopening of individual assessments where shareholders are bogus - pronouncement of orders within 90 days - rule 34(5) of ITAT Rules - exclusion of lockdown period for computation of time-limits (COVID-19 force majeure)

Section 68 - Cash credits - identity, creditworthiness and genuineness of shareholders - nature and source of cash credits - onus of proof under Section 68 - reopening of individual assessments where shareholders are bogus - Whether the addition made by the AO under Section 68 treating share application and share premium of Rs. 4,83,50,000/- as unexplained cash credit was sustainable. - HELD THAT: - The Tribunal upheld the findings of the CIT(A) that the assessee had discharged the primary onus under Section 68 by producing confirmations from the investors, audited accounts/ITRs and bank statements showing payments by banking channels, share application forms, share certificates and related records. Applying the principle in Lovely Exports and consistent authorities, once the assessee establishes the nature and source of the credited sums and identity/creditworthiness of the subscribers, the amount cannot be treated as undisclosed income of the assessee; the appropriate remedy, if shareholders are bogus, is reopening/prosecution of their individual assessments. The Tribunal found the AO's reliance on the investigation report insufficient to rebut the documentary evidence produced by the assessee and distinguished authorities relied on by Revenue on facts. Consequently the addition under Section 68 was deleted and the Revenue's appeal was dismissed. [Paras 6, 10]

Addition under Section 68 of Rs. 4,83,50,000/- deleted; Revenue's appeal on this ground dismissed.

Pronouncement of orders within 90 days - rule 34(5) of ITAT Rules - exclusion of lockdown period for computation of time-limits (COVID-19 force majeure) - Whether the Tribunal's delay in pronouncing the order beyond 90 days from conclusion of hearing amounted to a procedural infirmity requiring interference. - HELD THAT: - The Tribunal considered rule 34(5) and the requirement that orders be pronounced 'ordinarily' within 90 days of conclusion of hearing. It held that the nationwide and local lockdowns due to the COVID-19 pandemic, governmental notifications treating the pandemic as force majeure and judicial directions extending limitation, constituted exceptional and extraordinary circumstances. Accordingly, the Tribunal excluded the lockdown period for computing the 90-day limit and found the delay justified. The Tribunal therefore refused to take a pedantic view and declined to interfere with the order on the ground of delayed pronouncement. [Paras 11, 14, 15]

Delay in pronouncement beyond 90 days excused by exclusion of the lockdown period; no interference on procedural ground.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld deletion of the addition under Section 68 for AY 2010-11, and held that the delay in pronouncement of the order beyond 90 days was excused by the COVID-19 lockdown period and did not vitiate the order.

Unexplained investment U/s. 69 - unexplained expenditure U/s. 69C - proof of source for bank deposits - veracity and admissibility of sale agreements - onus on Revenue to examine relevant parties

Unexplained investment U/s. 69 - proof of source for bank deposits - veracity and admissibility of sale agreements - onus on Revenue to examine relevant parties - Deletion of additions made as unexplained investment by treating bank deposits as unexplained income under section 69. - HELD THAT: - The Tribunal examined documentary material furnished by the assessees including partition deed, purchase deed, an unregistered sale agreement and a registered sale-cum-GPA deed. The records showed related-party transactions in agricultural land and particulars of buyers. The Tribunal found that the Revenue did not examine the buyers or otherwise test the veracity of the transaction despite availability of material particulars, and that the assessees had limited alternative sources of income. The Tribunal concluded that the deposits in the bank accounts represented sale proceeds of agricultural land and that the Assessing Officer and the CIT(A) erred in making additions without adequately investigating the claimed source and the documents produced by the assessees. For these reasons the additions computed as peak deposits and attributed to unexplained investments were set aside. [Paras 6]

Addition made under section 69 deleted and the appeals allowed on this ground.

Unexplained expenditure U/s. 69C - proof of source for claimed business expenditure - Deletion of addition treating claimed expenditure as unexplained under section 69C in the case of Sri Sunil Kumar Bommineni. - HELD THAT: - The Assessing Officer had disallowed claimed expenditure on the basis of alleged insufficient withdrawals and treated the amount as unexplained expenditure. The Tribunal observed that the assessee had recurring professional commission income and access to family agricultural resources, providing sufficient funds to meet the claimed expenditures. On this factual appraisal the Tribunal held that the addition under section 69C was not warranted and directed deletion of the addition. [Paras 8]

Addition made under section 69C deleted and the appeal allowed on this ground.

Final Conclusion: Both appeals are allowed: the additions made as unexplained investments under section 69 and the addition treated as unexplained expenditure under section 69C are deleted; the Assessing Officer is directed to give effect to this order.

Settlement under Section 127B - applicability of the third proviso to Section 127B in relation to goods notified under Section 123 - maintainability of settlement application where goods are notified under Section 123 - spirit of surrender in settlement proceedings - remand for fresh consideration by the Settlement Commission

Spirit of surrender in settlement proceedings - settlement under Section 127B - Validity of the Settlement Commission's rejection of the petitioner's application on merits for lack of a clear, consistent admission and 'spirit of surrender'. - HELD THAT: - The Settlement Commission rejected the application principally on the ground that the applicant repeatedly changed its stand and failed to demonstrate the requisite spirit of surrender and full disclosure in settlement proceedings (paras 6.6-6.7, 13-14). The High Court found that the petitioner had indeed shifted its position during the proceedings and had not presented a clear, consistent admission (para 13-14). However, rather than upholding the rejection outright, the Court exercised supervisory jurisdiction to set aside the impugned order and to afford the petitioner one further opportunity to pursue settlement by accepting the amounts originally admitted. The Court held that the matter should be remitted to the Settlement Commission for fresh consideration and directed the Commission to pass a fresh order within six months (paras 15-16). [Paras 6, 13, 14, 15, 16]

Impugned Final Order dated 16-7-2015 rejecting the settlement application on merits set aside; matter remitted to the Settlement Commission for fresh consideration within six months and the petitioner granted one further opportunity to accept the originally admitted amounts.

Applicability of the third proviso to Section 127B in relation to goods notified under Section 123 - maintainability of settlement application where goods are notified under Section 123 - Whether the Settlement Commission's preliminary objection to maintainability under the third proviso to Section 127B (in respect of goods notified under Section 123) could be adjudicated by the Commission in the present proceedings. - HELD THAT: - The Settlement Commission had raised a preliminary objection that applications under Section 127B are barred in relation to goods to which Section 123 applies (paras 5-6). The petition advanced arguments that the proviso applies only where goods are smuggled and not where they are merely notified (para 11). The High Court did not pronounce finally on the legal question of the third proviso's applicability; it observed the competing contentions and noted precedent relied upon by the parties but expressly left the maintainability issue open for the Settlement Commission to decide in the course of fresh consideration (paras 7-11, 16). [Paras 5, 6, 7, 11, 16]

Maintainability issue under the third proviso to Section 127B (as it relates to goods notified under Section 123) left open for determination by the Settlement Commission on remand.

Final Conclusion: The High Court set aside the Settlement Commission's Final Order dated 16-7-2015 and remitted the matter to the Settlement Commission for fresh consideration within six months, granting the petitioner one further opportunity to settle by accepting the amounts originally admitted; the question of maintainability under the third proviso to Section 127B (in relation to goods notified under Section 123) is left open for determination by the Commission.

Confiscation under Section 111 of the Customs Act, 1962 - prohibited goods and restricted import - redemption under Section 125 of the Customs Act, 1962 - penalty under Section 114A for short levy/non levy of duty - penalty under Section 112 for improper importation - penalty under Section 114AA for use of false or incorrect information - mutual exclusivity of penalties under Section 114A and Section 112 - requirement of determination of duty under Section 28 for application of Section 114A

Confiscation under Section 111 of the Customs Act, 1962 - prohibited goods and restricted import - Gold imported in concealed consignments whether liable to confiscation under Section 111(d) in addition to clauses (i), (l) and (m). - HELD THAT: - The Tribunal held that gold which is a restricted item under the Foreign Trade (D&R) Act but imported without fulfilling the statutory conditions falls within the definition of 'prohibited goods' under Section 2(33). Since the gold was brought into India clandestinely, concealed in packages and not declared, it attracted confiscation under Section 111(d) as well as under clauses (i), (l) and (m). The Tribunal noted that adding clause (d) did not materially alter the outcome because confiscation had already been ordered under the other clauses.

Confiscation is ordered also under Section 111(d) in addition to Section 111(i), (l) and (m).

Penalty under Section 112 for improper importation - mutual exclusivity of penalties under Section 114A and Section 112 - Whether penalty under Section 112 should have been imposed instead of Section 114A. - HELD THAT: - The Tribunal found that the Commissioner imposed penalty under Section 114A for non levy/short levy of duty arising from suppression/misstatement. Because a penalty under Section 114A was levied, the proviso to Section 114A precludes levying a penalty under Section 112. Consequently the Commissioner correctly refrained from imposing Section 112 penalty.

No penalty under Section 112; penalty under Section 114A was correctly imposed and excludes Section 112.

Penalty under Section 114A for short levy/non levy of duty - requirement of determination of duty under Section 28 for application of Section 114A - Whether imposition of penalty under Section 114A is invalid because the amount of duty under Section 28 was not determined in the adjudication order. - HELD THAT: - Both parties contended that Section 114A presupposes determination of duty under Section 28. The Tribunal relied on the Delhi High Court's prior disposal of the writ petition in the same matter which held that the order contained value and the ad valorem duty could be readily calculated. In view of that decision, omission to compute the duty in the original order did not vitiate imposition of penalty under Section 114A in this case, and the penalty was upheld.

Penalty under Section 114A was valid despite absence of explicit duty computation in the original order.

Redemption under Section 125 of the Customs Act, 1962 - prohibited goods and restricted import - Whether redemption of the confiscated gold under Section 125 on payment of fine and duty was impermissible because gold is a prohibited item. - HELD THAT: - Section 125 mandates giving option to redeem non prohibited goods and vests discretion to the adjudicating authority in respect of prohibited goods. The Tribunal analysed statutory provisions, departmental guidance and case law, noting a distinction between absolutely prohibited goods and restricted items imported without authorisation. Given settled precedent and the Government's practice allowing redemption of restricted goods (including smuggled gold in several instances), the Commissioner was within his discretion to allow redemption of the gold on payment of redemption fine and applicable duty. The redemption fine imposed was within the statutory ceiling (not exceeding market value).

Redemption under Section 125 was permissible and the Commissioner's decision to allow redemption on payment of fine and duty is upheld.

Redemption under Section 125 of the Customs Act, 1962 - Whether redemption could be allowed to Shri Amanullah in absence of an express claim of ownership. - HELD THAT: - The Tribunal observed that the show cause notice treated Shri Amanullah as the importer and imposed penalties on him; departmental investigations identified him as the importer despite use of a fictitious name. Therefore allowing redemption to him was not impermissible. If he had not been shown to be the importer/owner, the goods would have become unclaimed; but factual findings established his link to the goods, justifying redemption to him.

Allowing redemption to Shri Amanullah in the facts of this case was not erroneous.

Section 28(5) and Section 28(6) - Whether Shri Amanullah is entitled to benefit under Section 28(5) and Section 28(6). - HELD THAT: - On specific inquiry, counsel for the appellant conceded that duty was not paid within the time limits specified in Section 28(5) and (6). No evidence was produced to show compliance with the conditions for those sub sections. Accordingly, the Tribunal declined to grant any benefit under Sections 28(5) or 28(6).

No entitlement to the benefits of Section 28(5) or Section 28(6).

Penalty under Section 114A for short levy/non levy of duty - penalty under Section 114AA for use of false or incorrect information - Whether imposition of penalties under both Section 114A and Section 114AA was erroneous because they are overlapping or mutually exclusive. - HELD THAT: - The Tribunal examined the distinct ingredients of Sections 114A and 114AA. Section 114A penalises non levy/short levy of duty arising from fraud, collusion or wilful suppression and operates on the duty determined under Section 28. Section 114AA penalises use of incorrect or false information/documents in transactions for purposes of the Act. The importer misdeclared the nature of goods and used a false identity, and the courier filed declarations based on that information; these acts fall within Section 114AA. The sections address different wrongs and are independent; both penalties can therefore be imposed concurrently.

Penalties under both Section 114A and Section 114AA were correctly imposed as independent penalties.

Final Conclusion: The impugned order is upheld except that confiscation is recorded additionally under Section 111(d); the Revenue's appeal is allowed to that limited extent and otherwise rejected; the appellant's appeal is dismissed. Redemption of the confiscated gold on payment of the redemption fine and applicable duty, and imposition of penalties under Section 114A and Section 114AA, are sustained.

Waiver of the requirements under Section 244(1)(a) of the Companies Act, 2013 - oppression and mismanagement - threshold shareholding for maintenance of a company petition - consent affidavits under Section 244(2) - role and removal of Managing Director - exceptional circumstances test as applied in Cyrus Mistry

Waiver of the requirements under Section 244(1)(a) of the Companies Act, 2013 - exceptional circumstances test as applied in Cyrus Mistry - Validity of the Tribunal's order waiving the requirement under Section 244(1)(a) permitting the petitioner to file a company petition under Sections 241 and 242. - HELD THAT: - The Appellate Tribunal limited its determination to whether the NCLT was justified in permitting waiver of the statutory requirement at the threshold. The Tribunal below had allowed the waiver because the allegations required detailed inquiry and could not be dismissed at the threshold. The Appellate Tribunal found that the respondent had been functioning as Managing Director and that facts disclosed prima facie necessitated inquiry; further, the combination of facts presented amounted to exceptional and compelling circumstances meriting waiver despite the respondent and his immediate family holding less than 10% when taken strictly. The Court therefore held that the NCLT's exercise of discretion to grant waiver was sustainable because the matter could not be resolved summarily and required fuller inquiry under Sections 241/242. [Paras 12, 18]

The waiver granted by the Tribunal is valid; the appeal insofar as it challenges the grant of waiver is dismissed.

Consent affidavits under Section 244(2) - threshold shareholding for maintenance of a company petition - Whether the consent affidavits filed by the respondent's wife and daughters satisfy the requirement under Section 244(2) and whether the combined family shareholding meets the statutory threshold. - HELD THAT: - The Appellate Tribunal accepted that the respondent filed consent affidavits of his wife and daughters before the Tribunal below (at the rejoinder stage) and held those affidavits constituted valid consent within the meaning of Section 244(2). The court recorded that, on the material, the respondent together with his family members held 2.93% shareholding and that they were four members; their combined shareholding remained below the 10% benchmark. Nonetheless, the Court treated the existence of valid consents and the factual matrix as relevant to exercise of discretion on waiver. [Paras 15]

Consents filed by family members were valid for purposes of Section 244(2); their combined shareholding, however, remained below 10% though this did not preclude discretionary grant of waiver in the circumstances.

Role and removal of Managing Director - oppression and mismanagement - Whether the respondent was acting as Managing Director and whether his removal by board resolution could be ignored for purposes of the waiver application. - HELD THAT: - The Appellate Tribunal accepted the Joint Venture Agreement and the notice/resolution dated 6.5.2019 and 14.5.2019 as establishing that the respondent was functioning as Managing Director and that an agenda item had been to withdraw his rights, powers and privileges. The Court observed that technical non-incorporation of the arrangement in the Articles of Association did not negate the factual position of the respondent having managed company affairs; therefore, allegations of his removal and the mode of removal required detailed enquiry under Sections 241/242 rather than summary rejection at threshold. [Paras 13, 16]

The respondent was prima facie the Managing Director and his removal could not be treated as a mere technicality to deny him access to statutory relief; the question requires fuller adjudication.

Threshold shareholding for maintenance of a company petition - Whether the respondent could aggregate indirect shareholding held through Kurinji Metals Pvt Ltd for satisfying the threshold. - HELD THAT: - The Appellate Tribunal rejected the contention that the respondent's wife's proportionate interest in Kurinji Metals Pvt Ltd could be counted without a company resolution from Kurinji Metals. The Court held that corporate shareholding cannot be attributed to an individual for the statutory threshold absent corporate action authorising such consent; proportionate indirect holding through another corporate entity was not countable in the absence of the company's resolution. [Paras 17]

The respondent's claim to count indirect shareholding through Kurinji Metals Pvt Ltd was not accepted; corporate consent/resolution would be required for the company's shareholding to be treated as supporting the petition.

Final Conclusion: The appeal is dismissed. The NCLT's order permitting waiver of the requirement under Section 244(1)(a) and allowing the petitioner to file a company petition under Sections 241/242 is upheld; the Company Petition remains pending for substantive adjudication.

Liquidation under the Insolvency and Bankruptcy Code - failure to receive a resolution plan within the CIRP period and its effect on initiation of liquidation - Committee of Creditors' power to recommend replacement of the resolution professional under Section 27 - appointment and replacement of liquidator by the Adjudicating Authority under Section 34(4) - duty of the resolution professional to attempt to maintain the corporate debtor as a going concern - remand for appointment of a substitute liquidator where CoC has sought replacement

Failure to receive a resolution plan within the CIRP period and its effect on initiation of liquidation - duty of the resolution professional to attempt to maintain the corporate debtor as a going concern - Validity of the liquidation order in view of non-receipt of any resolution plan within the CIRP period and the conduct of the CIRP by the resolution professional. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's conclusion that, as no resolution plan was received before the expiry of the CIRP period (including the extended period), liquidation was unavoidable. The record of CoC meetings and minutes showed repeated opportunities granted to the sole prospective resolution applicant (which included the appellant) and no plan was submitted within the stipulated time; the CoC consequently resolved to initiate liquidation and the RP filed the liquidation application. The Court accepted that the RP had informed the CoC of the financial position, non-cooperation by directors and steps taken to preserve the corporate debtor as a going concern, and that continuing operations was producing recurring losses. In those circumstances the Adjudicating Authority did not err in ordering liquidation. [Paras 21, 24, 26, 28]

The liquidation order was maintained because no resolution plan was submitted within the CIRP period and the Adjudicating Authority correctly ordered liquidation.

Committee of Creditors' power to recommend replacement of the resolution professional under Section 27 - appointment and replacement of liquidator by the Adjudicating Authority under Section 34(4) - remand for appointment of a substitute liquidator where CoC has sought replacement - Whether the Adjudicating Authority should have considered replacement of the resolution professional before appointing him as liquidator, in view of the CoC/Joint Lenders' Meeting seeking his replacement. - HELD THAT: - The Tribunal held that, although the liquidation order itself was properly passed, the Adjudicating Authority ought to have considered the CoC's request for replacement of the resolution professional before appointing him as liquidator. The Joint Lenders' Meeting minutes expressed concerns that the CIRP had not been conducted in the desired manner and recorded a recommendation for replacement. Section 34(4) permits replacement of a resolution professional by the Adjudicating Authority where the Board recommends replacement. Given that the liquidation order was yet to be passed when the CoC sought replacement, the appropriate course was to replace the RP and then proceed with appointment of a liquidator. The Tribunal therefore set aside the Adjudicating Authority's dismissal of the application seeking replacement and remitted the matter for appointment of another insolvency professional and proper handing over of charge. [Paras 30, 31, 33, 34]

The Adjudicating Authority's order dismissing the CoC's application to replace the resolution professional is set aside; the matter is remitted for appointment of another insolvency professional as liquidator and for necessary handing over of charge.

Final Conclusion: The appeal is disposed of by upholding the liquidation order (as no resolution plan was submitted within the CIRP period) but setting aside the Adjudicating Authority's rejection of the CoC's request to replace the resolution professional; the matter is remitted for the Adjudicating Authority to appoint a different insolvency professional as liquidator and ensure proper handover.

Site formation and clearance, excavation and earthmoving and demolition services - mining of mineral, oil or gas services - inclusive definition of site formation service - legislative intent in creating a separate taxable entry for mining services w.e.f. June 1, 2007 - extended period of limitation under proviso to section 73(1)

Site formation and clearance, excavation and earthmoving and demolition services - mining of mineral, oil or gas services - inclusive definition of site formation service - legislative intent in creating a separate taxable entry for mining services w.e.f. June 1, 2007 - Whether the services rendered by the appellant during April 1, 2006 to May 31, 2007 were classifiable as site formation service or as mining services - HELD THAT: - The Tribunal examined the service agreements, scope of work and the division of responsibilities between the Operator (ONGC) and the Contractor (the appellant). The agreement and its appendices show that site preparatory work - identifying drilling locations, constructing access roads, cellar pits, foundations and other site works - was to be performed by the Operator and that the appellant was engaged to provide specialised mobile drilling rigs, qualified crew and to perform drilling, coring, casing, cementation, logging and related drilling operations on sites already prepared by the Operator. The definition of site formation service is inclusive and lists drilling, boring and core extraction among illustrative activities; however the Circular and the statutory scheme indicate that site formation service denotes preparatory work undertaken to make land suitable for construction, exploration or mining. The Tribunal applied these principles and found that the appellant's activities were integral to mining/exploration (drilling and coring) carried out on a prepared site and were not work of site preparation. Further, when the legislature introduced a distinct taxable entry for mining services effective June 1, 2007 without altering the site formation entry, it manifested an intention to tax mining-related drilling under the mining-services entry. Applying the statutory definition, the contractual allocation of preparatory work to the Operator, the nature of the appellant's operations and the legislative intent, the Tribunal concluded that the appellant did not render site formation services in the period April 1, 2006 to May 31, 2007. [Paras 15, 16, 21, 24, 26]

The appellant's services for April 1, 2006 to May 31, 2007 were not site formation services and the demand confirmed by the Commissioner on that basis is unsustainable.

Final Conclusion: The Commissioner's order confirming service-tax demand for the period April 1, 2006 to May 31, 2007 on the ground that the appellant rendered site formation service is set aside and the appeal is allowed.

Renting of immovable property - flow of consideration - declared services - threshold exemption

Renting of immovable property - flow of consideration - Whether the Appellant rendered 'renting of immovable property' service to film distributors and was therefore liable to service tax - HELD THAT: - The Tribunal found on construction of the agreements that theatrical exhibition rights were granted to the Appellant and that the Appellant paid the distributors by way of a share of Net Box Office Collections or fixed payments for such rights. The nature of the transactions showed that the Appellant used and occupied the theatre in its own right to screen films and no right to use or occupy the immovable property was transferred to the distributors. Further, as consideration flowed from the Appellant to the distributors (and not vice versa), there was no consideration received by the Appellant from the distributors for any alleged service. The Tribunal also applied the reasoning of the Division Bench decision in Moti Talkies , which held that where the exhibitor pays the distributor for screening rights and does not receive payment from the distributor, the element of a service rendered by the exhibitor to the distributor (and corresponding taxable consideration) is lacking. On these bases the Tribunal held that the finding of the Principal Commissioner that the Appellant had rendered 'renting of immovable property' service to distributors was unsustainable. [Paras 10, 11, 12, 13]

Finding of service tax liability under 'renting of immovable property' as against the Appellant is set aside.

Renting of immovable property - threshold exemption - Whether incomes shown as 'weighing machine receipts' and 'miscellaneous income' were liable to service tax as 'renting of immovable property' or were exempt by virtue of the threshold notification - HELD THAT: - The Tribunal held that 'weighing machine receipts' arose from coin-operated use of a weighing machine and did not constitute provision of 'renting of immovable property' service. The 'miscellaneous income' related to screening of films at an annual film festival and, on the facts, was akin to the Appellant's screening activities rather than income from letting of immovable property. Independently, the Tribunal found that both categories of income fell below the notified threshold exemption (as per the Notifications in force up to and after 1 July 2012) and therefore were not leviable to service tax for the relevant period. Consequently, demands in respect of these receipts could not be sustained. [Paras 15, 16, 17]

Demands in respect of 'weighing machine receipts' and 'miscellaneous income' are not sustainable and are set aside.

Final Conclusion: The confirmation of demand by the Principal Commissioner for the period October 2008 to March 2014 is set aside: the Appellant did not render 'renting of immovable property' service to distributors and the challenged miscellaneous receipts are not leviable (and in any event fall under the threshold exemption). The appeal is allowed.

Sovereign immunity from taxation - definition of 'service' in section 65B(44) - distinction between 'for' and 'to' in service levy - exclusions under section 66D (negative list) - exemption notification no. 25/2012-ST (serial no.51 insertion) - exemption power under section 93 - hierarchy of escapement: definition, exceptions, exclusions and exemptions - limitation and extended period under section 73 - penalty under section 78 - natural justice - right to personal hearing

Natural justice - right to personal hearing - Validity of adjudication and demand confirmed in respect of the second show cause notice where disposal followed a hearing granted only for the first notice - HELD THAT: - The Tribunal found that personal hearing had been granted only pursuant to response to the first show cause notice and that the adjudicating authority did not independently deal with the second notice. The noticee was therefore deprived of adequate opportunity to prepare and be heard in respect of the second notice. In consequence, confirmation of demand and attendant penalties arising from the second notice were set aside to enable fresh adjudication consistent with principles of natural justice. [Paras 18]

Confirmation of demand and penalties under the second show cause notice set aside; matter remitted for fresh decision.

Sovereign immunity from taxation - limitation and extended period under section 73 - penalty under section 78 - Whether the extended period of limitation and imposition of penalty under section 78 were sustainable in respect of the first show cause notice - HELD THAT: - Having examined the statutory position, the nature and origin of SEBI as successor to a government department, the retention of fees in a designated fund, the absence of any allegation of suppression or misrepresentation and the administrative awareness of the matter, the Tribunal concluded that the ingredients necessary to invoke the extended period and to impose penalty under section 78 were not established. The adjudicating authority erred in holding otherwise. Consequently, the demand beyond the normal limitation could not be sustained and the penalty under section 78 was set aside. [Paras 30]

Demand beyond normal limitation not sustained; penalty under section 78 set aside in respect of the first notice.

Exemption notification no. 25/2012-ST (serial no.51 insertion) - exemption power under section 93 - hierarchy of escapement: definition, exceptions, exclusions and exemptions - Taxability of fees charged by SEBI in light of the insertion of serial no.51 in notification no.25/2012-ST and the broader question whether SEBI's activities amount to taxable services - HELD THAT: - The Tribunal declined to adjudicate the substantive legal question of whether SEBI's fees were taxable in view of the Central Government's issuance of notification no.9/2016-ST inserting serial no.51 (effective 1 April 2016) in notification no.25/2012-ST, which exempts SEBI's services. The Tribunal considered such statutory exemption to be within the executive's competence and not amenable to negation by the Tribunal; accordingly it refrained from pronouncing on the legality of SEBI's claim to sovereign status or on the taxability of its fees. The Tribunal also observed that adjudicating authorities should test claims of escapement in the prescribed sequence (definition, exceptions within definition, exclusions, exemptions), noting that the impugned order had not completed that sequence. [Paras 23, 24, 25]

Impact of the mega-exemption insertion (serial no.51) and the question of taxability of SEBI's fees left undetermined by the Tribunal; Tribunal will not adjudicate on the legality of the statutory exemption.

Final Conclusion: The appeal is disposed as follows: the confirmation of demand and penalties under the second show cause notice are set aside and remitted for fresh adjudication; in respect of the first notice the demand beyond the normal limitation fails and the penalty under section 78 is set aside; the Tribunal declines to decide the substantive question of taxability of SEBI's fees in view of the Central Government's exemption (serial no.51 to notification no.25/2012 ST) and leaves that aspect undetermined.

Reliance on third-party records - corroborative evidence requirement - clandestine manufacture and removal - personal penalty under Rule 26 of Central Excise Rules

Reliance on third-party records - corroborative evidence requirement - clandestine manufacture and removal - Whether duty and penalty for alleged clandestine removal of MS ingots could be sustained when based predominantly on private records and statements recovered from third party brokers without independent corroboration. - HELD THAT: - The Tribunal found that the demand was founded principally on private records seized from two brokers and on their statements. The author of significant entries in the seized records was not examined and the brokers admitted that entries were maintained by another person. The Department did not demonstrate any seizure of consignments, document interception or independent enquiries from alleged recipients to corroborate the entries. While such third party records may give rise to suspicion, the Tribunal held that suspicion alone is insufficient to establish clandestine manufacture and removal; corroborative evidence from sources other than the seized third party records was necessary. In the absence of such corroboration and having regard to the deficiencies in the evidentiary foundation, the confirmed demand and penalties could not be sustained. [Paras 31, 32]

Demand of excise duty and consequential penalties confirmed by the adjudicating authority were set aside and the appeals were allowed; appellants entitled to consequential benefits.

Final Conclusion: The Tribunal allowed the appeals, holding that a demand for clandestine removal predicated mainly on private records and statements of third party brokers, without corroborative evidence, is unsustainable; the confirmed duty and penalties were set aside.

Maintainability of appeal against an adjudicatory communication under Section 129A(1) of the Customs Act - violation of principle of natural justice by denial of cross-examination without reasons - requirement of a speaking order when refusing cross-examination - prohibition on conditioning cross-examination on prior submission of questions

Maintainability of appeal against an adjudicatory communication under Section 129A(1) of the Customs Act - The appeal against the impugned communication of the adjudicating authority is maintainable before the Tribunal. - HELD THAT: - The Tribunal examined the statutory scope of appeals under Section 129A(1) of the Customs Act and noted that the intimation given by the Superintendent of Adjudication was on behalf of the adjudicating authority. On that basis the Tribunal held that the communication constituted a decision or order of the adjudicating authority which is amenable to challenge before the Tribunal and rejected the preliminary objection to maintainability. [Paras 5]

Preliminary objection overruled; appeal is maintainable.

Violation of principle of natural justice by denial of cross-examination without reasons - requirement of a speaking order when refusing cross-examination - prohibition on conditioning cross-examination on prior submission of questions - Whether the adjudicating authority was justified in refusing cross-examination of witnesses without reasons and in conditioning cross-examination on advance submission of questions. - HELD THAT: - The Tribunal recalled its earlier remand directing the adjudicating authority to consider the appellant's plea for cross-examination. It found that the impugned order rejected the request for cross-examination without assigning any reasons. Such unexplained rejection was held to amount to a breach of the principles of natural justice and the impugned order was held to be non-speaking and not sustainable. The Tribunal further held that the adjudicating authority must consider the request afresh and pass a reasoned (speaking) order either granting or refusing cross-examination. As part of that direction the Tribunal negatived the practice of imposing a condition that the specific questions proposed to be asked must be furnished in advance as a prerequisite to permitting cross-examination. [Paras 2, 7, 8]

Impugned order set aside; matter remanded to the adjudicating authority to reconsider the request for cross-examination and to pass a speaking order; the adjudicating authority shall not require advance submission of questions as a condition for permitting cross-examination.

Final Conclusion: The appeal is allowed: the preliminary objection on maintainability is rejected and the impugned order denying cross-examination without reasons is set aside; the adjudicating authority is directed to reconsider the request and pass a reasoned order on whether cross-examination may be allowed, without conditioning permission on prior submission of questions.

Exclusion of export clearances from aggregate value for SSI exemption - acceptance of Form H/ST-49 as proof of export - procedural non-compliance not defeating substantive SSI benefit - exclusion of value of traded goods from aggregate clearances - exclusion of clearances bearing third-party brand names from aggregate clearances

Exclusion of export clearances from aggregate value for SSI exemption - Small Scale Industry exemption scheme - Supplies made to merchant exporters against Form 'H' and Form 'ST-49' are not required to be included in the aggregate value of clearances for determining eligibility for SSI exemption under the Notifications dated March 1, 2002 and March 1, 2003. - HELD THAT: - The Notifications apply to clearances for home consumption and, by a plain reading and consistent Board Circular, exports are outside their ambit. The Tribunal's and High Court decisions accepting Form 'H'/'ST-49' as proof of export were held persuasive. The Commissioner's conclusion that export clearances could not be excluded was erroneous because the statutory and Board guidance treat supplies evidenced by these forms as exports for the purpose of computing aggregate clearances. The court relied on prior Tribunal and High Court decisions which accepted Form 'H' certificates as proof of export and held that such clearances should not be included in the aggregate for SSI exemption. The result is that the impugned demand predicated on including such supplies in aggregate clearances could not be sustained. [Paras 11, 15, 16, 17, 31]

Benefit of SSI exemption could not be denied on the ground that supplies against Form 'H'/'ST-49' were clearances for home consumption; such supplies are excluded from aggregate value.

Acceptance of Form H/ST-49 as proof of export - procedural non-compliance not defeating substantive SSI benefit - Certificates in Form 'H' and Form 'ST-49' issued by merchant exporters are acceptable as proof of export even where the goods are not physically despatched directly from the SSI unit, and failure to follow the exact procedural formulation in the Board's Circular does not defeat the substantive export character of such clearances. - HELD THAT: - The Board Circular of July 25, 2002 recognises Form 'H'/'ST-XXII' as evidence of export for exempted units exporting through merchant exporters. The Commissioner's restrictive reading-that the facility applies only where exports are undertaken directly from the unit-was rejected. The court accepted the reasoning of the Tribunal in Vadapalani Press and subsequent decisions and the Gujarat High Court in Amar Packaging Industries , which held that Form 'H' issued by exporter and accompanied by export particulars constitutes proof of export even if export occurs from buyer's premises. Procedural lapses, if any, therefore cannot be used to deny the substantive benefit where export is established by the prescribed certificates. [Paras 19, 20, 21, 22, 23]

Form 'H'/'ST-49' certificates issued by merchant exporters are sufficient proof of export for SSI exemption purposes; non-observance of the Circular's procedural detail does not nullify that proof.

Exclusion of value of traded goods from aggregate clearances - The value of traded goods (goods not manufactured by the assessee) is not includible in the aggregate value of clearances for determining entitlement to SSI exemption. - HELD THAT: - The court accepted the appellant's contention, relying on Tribunal precedents (Pioneer Magnesia Works Ltd. ; Sigma Pneumatics Pvt. Ltd. ) that traded goods should be excluded when computing the aggregate clearances under the Notifications. The Commissioner's denial based on alleged procedural non-compliance was not upheld; where the substance shows the goods were traded and not manufactured, their value is excludible for SSI computation. [Paras 25, 26, 29]

Value of traded goods is excludible from the aggregate value of clearances for SSI exemption.

Exclusion of clearances bearing third-party brand names from aggregate clearances - Clearances of printed material bearing the brand name or trade name of another person are not includible in the aggregate value of clearances for the purpose of SSI exemption. - HELD THAT: - Paragraph 3A(b) of the Notifications excludes clearances bearing the brand name or trade name of another person from the aggregate. The appellant's printed material bearing buyers' brand names falls within that exclusion. The Commissioner's refusal, premised on procedural non-compliance, was rejected because substantive entitlement under the Notification existed and procedural irregularity could not be allowed to defeat that entitlement. Tribunal authorities cited in the judgment support this construction. [Paras 27, 28, 29]

Clearances bearing the brand name of another person are not to be included in the aggregate clearances for SSI exemption.

Final Conclusion: The Commissioner's order denying SSI exemption and invoking recovery (including appropriation of deposit, penalty and interest) was set aside: supplies evidenced by Form 'H'/'ST-49' are exports and excluded from aggregate clearances; traded goods and clearances bearing third-party brand names are excludible; procedural lapses do not defeat substantive SSI entitlement, rendering the demand unsustainable.

Condition for suspension of sentence and bail under Section 389 CrPC - Reasonableness of fine/compensation and power under Section 357 CrPC - Judicial discretion to impose conditions for suspension of sentence - Onerous conditions amounting to denial of bail

Condition for suspension of sentence and bail under Section 389 CrPC - Reasonableness of fine/compensation and power under Section 357 CrPC - Onerous conditions amounting to denial of bail - Whether the appellate court's requirement to deposit a specified portion of the fine as a pre-condition for suspension of sentence and grant of bail was lawful and whether the amount fixed was unreasonable or onerous. - HELD THAT: - The Court accepted that an Appellate Court has power to suspend sentence and to impose terms for suspension and release on bail under Section 389 CrPC, and that where fine includes a component applicable as compensation the provisions of Section 357 CrPC are relevant. However, the Court applied the principle that any condition imposed for suspension of sentence must be reasonable and not so onerous as to amount to a denial of bail. Reliance was placed on the observations of the Apex Court that a convicted person seeking suspension of sentence may be required to remit at least a portion of a heavy fine but that the amount of compensation or deposit must be reasonable, having regard to the condemned person's capacity and other relevant factors, and that summary or arbitrary fixation of an excessive amount is impermissible. The decision of the Appellate Court to require deposit of a substantial portion of the fine was held to be excessive and onerous in the facts of this case. In exercise of the revisional power under Section 482 CrPC the Court modified the impugned bail condition to a proportionate and reasonable deposit, directing deposit of only 10% of the fine as the pre-condition for suspension of sentence and release on bail, and preserved the remaining bail formalities (personal bond and two sureties) until disposal of the appeal. The Court followed the approach in the earlier decisions cited in the judgment (Stanny Felix Pinto , Dilip S. Dhanukar , Keshab Narayan Banerjee , Sheikh Ayub ) emphasising that conditions must not be so onerous as to render bail illusory. [Paras 3, 6]

Pre-condition imposed by the Appellate Court to deposit a substantial portion of the fine was modified; directed deposit of only 10% of the fine as a pre-condition for suspension of sentence and release on bail, subject to furnishing a personal bond and two sureties until disposal of the appeal.

Final Conclusion: The application under Section 482 CrPC is partly allowed by modifying the appellate court's bail condition: the applicant shall deposit only 10% of the amount of fine as the pre-condition for suspension of sentence and be released on bail on furnishing a personal bond and two sureties of the specified amount until disposal of the appeal.

Presumption under Section 139 of the Negotiable Instruments Act - offence under Section 138 of the Negotiable Instruments Act - rebuttal of presumption by acceptable evidence - conviction based on admission of cheque and signature - requirement to prove account closure by the accused - scope of revisional jurisdiction under Section 397 Cr.P.C.

Presumption under Section 139 of the Negotiable Instruments Act - conviction based on admission of cheque and signature - rebuttal of presumption by acceptable evidence - Whether the presumption under Section 139 arises on admission of cheque and signature and whether the accused successfully rebutted that presumption. - HELD THAT: - The Court held that since the petitioner admitted that the cheque belonged to his account and that the signature on the cheque was his, the statutory presumption under Section 139 arose in favour of the complainant. The burden therefore shifted to the accused to rebut that presumption by leading acceptable evidence. The trial Court and the first appellate court found that the defences raised by the accused (collusion with a third party and other explanations) were inconsistent, not raised at the earliest opportunity in the reply notice, and were not supported by independent evidence. Reliance was placed on authoritative decisions distinguishing Mudibasappa where applicable, and confirming that mere suggestions in cross-examination or unsupported assertions do not discharge the evidentiary burden to rebut the presumption. Accordingly, the courts below correctly concluded that the accused failed to rebut the presumption and convicted him under Section 138 of the NI Act. [Paras 15, 16, 22, 26]

The presumption under Section 139 arose on admission of the cheque and signature, and the accused failed to rebut it by acceptable evidence; conviction under Section 138 was justified.

Requirement to prove account closure by the accused - rebuttal of presumption by acceptable evidence - Whether the defence that the bank account was closed in 2001 (and therefore the cheque could not have been issued in 2003) was established. - HELD THAT: - The Court accepted the finding of the courts below that the accused bore the onus to prove that the account was closed in 2001. The alleged passbook (Ex.D1) did not show closure, the respondent disputed Ex.D1, and the accused did not summon bank records or bank officials to substantiate the claim. The defence of account closure was not taken in the reply notice and was therefore treated as an afterthought. On this basis the trial Court and the first appellate court rightly rejected the contention that the account was closed in 2001 and that issuance of the cheque in 2003 was doubtful. [Paras 18, 19, 20]

The contention that the account was closed in 2001 was not proved and was rightly rejected.

Rebuttal of presumption by acceptable evidence - conviction based on admission of cheque and signature - Whether the complainant's lending capacity was effectively disputed so as to rebut the presumption under Section 139. - HELD THAT: - The Court noted that the accused did not dispute the complainant's asserted business or means (possession and operation of autorickshaws) in a manner that would negate lending capacity. The reply notice did not deny the lending capacity and the accused's later varying affidavits and suggestions in cross-examination were inconsistent. Mere suggestions that the complainant lacked funds, without positive evidence or specific denial of his business, did not discharge the evidentiary burden on the accused to rebut the presumption. The courts below therefore correctly held that the defence based on lack of lending capacity failed and that precedents relied upon by the accused were distinguishable. [Paras 21, 22, 23, 24, 25]

The accused did not rebut the complainant's lending capacity; that defence failed to discharge the burden to rebut the Section 139 presumption.

Scope of revisional jurisdiction under Section 397 Cr.P.C. - Whether interference by the revisional court was warranted in view of allegations of perversity, illegality or impropriety in the impugned orders. - HELD THAT: - The Court emphasised the limited scope of revision under Section 397 Cr.P.C., noting that reappreciation of evidence is permissible only if the impugned orders suffer from perversity, illegality or impropriety. Having reviewed the findings of the trial and first appellate courts - including the application of the Section 139 presumption, rejection of belated and unsupported defences, and the absence of proof for account closure - the High Court found no such defect. The authorities relied upon by the petitioner were considered and distinguished where appropriate. In view of these considerations, there was no ground to invoke revisional jurisdiction to upset the concurrent findings below. [Paras 12, 26]

No ground for interference in revision; the revisional jurisdiction under Section 397 Cr.P.C. was not attracted.

Final Conclusion: The High Court dismissed the revision petition, holding that the cheque and signature admission gave rise to the Section 139 presumption which the accused failed to rebut by acceptable evidence; the defences of collusion and account closure were unproven; and there was no perversity or illegality warranting interference under Section 397 Cr.P.C.

Amendment of complaint - Section 138 of the Negotiable Instruments Act - trial court's discretion in allowing amendments - rule of estoppel - remand for fresh consideration

Amendment of complaint - trial court's discretion in allowing amendments - Whether the trial Court erred in rejecting the complainant's application to delete the words "on the dated first week of December 2018" from the complaint. - HELD THAT: - The trial Court's sole reason for rejecting the deletion was that mentioning the date or period of transaction is "very much necessary" in proceedings under Section 138 of the N.I. Act. The High Court held that it is not mandatory for a complainant to furnish the exact date or period of transaction as a precondition to maintain a complaint under Section 138. The decision to include or omit such particulars lies with the complainant and relates to the strength or detail of the pleading; the trial Court should not refuse an amendment merely on the basis that deletion might affect the complaint's strength. Given that the trial had not commenced, the complainant's application to delete specified words could be permitted and the trial Court's apprehension about the omission of date particulars was not a convincing ground to refuse the amendment. [Paras 5, 6, 7]

Application dated 10.05.2019 to delete the words "on the dated first week of December 2018" in para 3 of the complaint is allowed; the complainant permitted to amend and file an amended complaint within three weeks.

Amendment of complaint - rule of estoppel - remand for fresh consideration - Whether the trial Court rightly dismissed the subsequent application to substitute "in the first week of December" with "in the month of November and December" on the ground of maintainability because an earlier, similar application had been rejected. - HELD THAT: - The trial Court rejected the second application on the basis that the earlier similar application had been rejected and the complainant did not challenge that order. In view of the High Court allowing the first application (deletion), the maintainability ground on which the second application was rejected became inappropriate. The High Court did not decide the merits of the substitution request; instead it set aside the impugned order rejecting the second application and remanded that application to the trial Court for fresh consideration and disposal in accordance with law. [Paras 7, 8]

Impugned order dated 21.12.2019 is set aside; the application dated 24.09.2019 is remanded to the trial Court for fresh consideration in accordance with law.

Final Conclusion: Criminal Petition No.100118/2020 is allowed by permitting the deletion sought in the complaint and directing filing of an amended complaint; Criminal Petition No.100119/2020 is allowed in part by setting aside the rejection of the substitution application and remanding it to the trial Court for fresh consideration.

Liability of a drawer where a cheque is duly signed and delivered - rebuttable presumption that a cheque was issued for payment of a debt or discharge of liability - risk of an inchoate instrument under Section 20 of the Negotiable Instruments Act - admissibility and relevance of expert opinion on the age of ink in cheque dispute - filling of a negotiable instrument by holder and its effect on criminal liability

Admissibility and relevance of expert opinion on the age of ink in cheque dispute - liability of a drawer where a cheque is duly signed and delivered - Whether the trial Court erred in rejecting the accused's application under the Indian Evidence Act for expert examination to determine the age of the ink used in filling the cheque. - HELD THAT: - The Court considered the accused's defence that, although the cheque bore his signature, it was issued to a different party and the complainant may have filled the cheque; hence an expert opinion on the age of the ink was sought. The Court observed that where the signature is admitted, the law places the risk upon the drawer who signs and hands over the cheque, subject to his adducing evidence to rebut the presumption that the cheque was issued for payment of a debt or discharge of liability. In that factual and legal matrix the age of the ink would not necessarily be determinative of criminal liability under Section 138. Applying these principles, the High Court concluded that the circumstances did not warrant interference with the trial Court's order rejecting the application for expert examination. The Court, however, clarified that rejection of the application does not extinguish the accused's defence; he remains free to rebut the presumption at trial by other evidence. [Paras 6, 8, 9]

The petition seeking interference with the trial Court's rejection of the application for expert examination of the ink is dismissed; the accused may still present evidence to rebut the presumption at trial.

Rebuttable presumption that a cheque was issued for payment of a debt or discharge of liability - risk of an inchoate instrument under Section 20 of the Negotiable Instruments Act - filling of a negotiable instrument by holder and its effect on criminal liability - Whether the age of the ink materially affects liability where the drawer's signature on the cheque is admitted but the drawer contends the cheque was issued to a different person. - HELD THAT: - Relying on the principle that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the statutory presumption, the Court noted that it is immaterial if the cheque was filled by someone other than the drawer so long as the cheque is duly signed. The Court referred to the risk of the instrument remaining inchoate under Section 20, and to precedent holding that admission of signature undermines the need for handwriting or ink-age examination. Consequently, the mere determination of the age of ink would not necessarily alter the legal position arising from an admitted signature, although the substantive defence that the cheque was not intended for the complainant may still be urged and proved at trial. [Paras 7, 8]

Age of the ink is not, by itself, decisive where the drawer's signature is admitted; the accused must adduce evidence to rebut the presumption of issuance for debt or liability.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the trial Court's rejection of the application for expert examination is not interfered with and the accused remains entitled to advance and prove his defence at trial.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption - distinctness of transactions (cheque loan vis-A -vis vehicle loan) - scope of revisional jurisdiction - application of Basalingappa v. Mudibasappa

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - Validity of conviction and sentence under Section 138 of the Negotiable Instruments Act - HELD THAT: - The Courts below found that the cheque belonged to the accused and bore his signature, and the cheque return memo (Ex.P2) recorded reasons including "funds insufficient" and "payment stopped by drawer". The trial court held that the accused failed to rebut the statutory presumption in favour of the complainant under Sections 118 and 139 of the Negotiable Instruments Act. The appellate court concurred. The High Court, applying the limited scope of revisional jurisdiction, examined the evidence relied upon by the accused (including his pleadings, his admission of signature and ownership of the cheque, the bank manager's testimony about verification, and the absence of account extracts showing sufficient funds) and concluded that there was no perversity or glaring illegality in the concurrent findings. The trial court's appreciation that the presumption under Section 139 stood unrebutted was upheld as being based on admissible evidence and proper reasoning. [Paras 10, 15, 17, 27, 29]

Conviction and sentence under Section 138 were lawful and are upheld.

Distinctness of transactions (cheque loan vis-A -vis vehicle loan) - rebuttal of presumption - Whether the cheque related to the same transaction as the vehicle loan or to a separate loan, and whether that distinction rebuts the presumption under Section 139 - HELD THAT: - The accused contended that the cheque was security for a distinct transaction (a small balance of Rs.10,000 after repayment) and that the complainant retained the vehicle and cheque wrongfully. The complainant maintained the car-loan and the cheque-loan were separate transactions (larger loan amount). The trial court found, on the evidence including admissions in cross-examination, receipts produced by the accused covering only a small sum, lack of documents showing repayment of the larger claimed loan, and the accused's failure to initiate legal steps to recover alleged dues from third parties, that the two loan transactions were distinct and that the accused did not successfully rebut the presumption under Sections 118/139. The High Court found this appreciation sustainable and not vitiated by any legal error. [Paras 20, 23, 24, 26, 27]

The Courts correctly treated the cheque transaction and the vehicle-loan transaction as distinct and validly concluded that the presumption was not rebutted.

Application of Basalingappa v. Mudibasappa - rebuttal of presumption - Applicability of the precedent relied upon by the accused (Basalingappa) to the facts of the case - HELD THAT: - The accused relied on Basalingappa to contend that where the complainant's lending capacity is in doubt (or his own evidence creates doubt), the presumption may be rebutted without the accused leading defence evidence. The High Court examined the factual matrix and concluded that Basalingappa was distinguishable: in that case the complainant's own evidence cast doubt on his lending capacity, whereas here the complainant's evidence and the surrounding documentary and oral material did not create comparable doubt. The trial court's finding that the accused failed to rebut the presumption therefore could not be displaced by the cited authority. [Paras 12, 28, 29]

Basalingappa is not attracted to these facts; its ratio does not assist the accused and the precedential reliance was rightly rejected.

Final Conclusion: The High Court found no perversity, illegality or incorrectness in the concurrent findings of the trial and first appellate courts; the revision petition is dismissed and any deposited compensation with accrued interest shall be disbursed to the complainant.

Compounding of offences under the Negotiable Instruments Act - effect of compounding in setting aside conviction under Section 138 N.I. Act - judicial guidelines for compounding at later stages (Damodar S. Prabhu) - payment of costs as condition for compounding at appellate/High Court stage - condonation of delay in filing criminal revision

Condonation of delay - Delay of 27 months in filing the criminal revision is condoned. - HELD THAT: - The petitioner attributed the delay to non-appearance and failure of his counsel at trial, lack of information about legal aid representation and only learning of the conviction on arrest. The Court found these reasons to be bonafide and without mala fides, and exercised its discretion to allow the application for condonation of delay. The delay of 27 months in filing the revision is therefore condoned.

Application for condonation of delay is allowed and the delay of 27 months is condoned.

Compounding of offences under the Negotiable Instruments Act - effect of compounding in setting aside conviction under Section 138 N.I. Act - judicial guidelines for compounding at later stages (Damodar S. Prabhu) - payment of costs as condition for compounding at appellate/High Court stage - Parties permitted to compound the offence and conviction set aside subject to payment of costs at the rate of 15% of the cheque amount. - HELD THAT: - Having found on record a categorical affidavit and statement by the complainant that the amount directed by the courts has been paid and that he does not wish to continue proceedings, the Court applied the settled law that offences under Section 138 of the N.I. Act are compoundable at any stage. The Court relied on the decisions cited, including the rule that compounding permits setting aside the conviction, and the guidelines in Damodar S. Prabhu which permit courts to impose staged costs where compounding is sought at a later forum. Since the accused did not take effective steps at an initial stage, the Court followed those guidelines and conditioned compounding on payment of costs equal to 15% of the cheque amount to the complainant within 15 days. Upon such payment, the judgment and conviction are to be set aside and the revisionist acquitted and released if not required in any other case.

Compounding allowed on terms: payment of 15% of the cheque amount to the complainant within 15 days; on such payment the conviction and sentence are set aside and the revisionist is acquitted and to be released.

Suspension of sentence rendered infructuous - Application for suspension of sentence is rendered infructuous and disposed of. - HELD THAT: - An interlocutory application for suspension of sentence was listed; in view of the primary order permitting compounding on fulfilment of the condition and the consequent setting aside of conviction, the application for suspension no longer required adjudication and was disposed of as infructuous.

Application for suspension of sentence disposed of as infructuous.

Final Conclusion: The High Court condoned the delay in filing the criminal revision, allowed compounding of the Section 138 N.I. Act offence on the parties' settlement subject to payment of costs equal to 15% of the cheque amount within 15 days, and directed that upon compliance the conviction and sentence be set aside and the accused be acquitted and released; the suspension application was rendered infructuous.

Criminal conspiracy - cheating - abuse of position as public servant - offence under the Prevention of Corruption Act - prima facie case for framing of charge - scope of Section 482 Cr.P.C. - mala fide prosecution

Prima facie case for framing of charge - criminal conspiracy - cheating - offence under the Prevention of Corruption Act - scope of Section 482 Cr.P.C. - mala fide prosecution - Prayer to quash the charge-sheet, cognizance order and consequential criminal proceedings under Section 482 Cr.P.C. - HELD THAT: - The petition challenges the charge-sheet, cognizance order and consequent proceedings in CBI RC No.1202019A0004. The material on record, taken at face value, discloses allegations that the applicant, while exercising appellate jurisdiction, dishonestly adjudicated 13 appeals outside jurisdiction in conspiracy with co-accused, fabricated or failed to maintain records, failed to issue mandatory intimation to Assessing Officers (ITNS-51), antedated orders and obtained wrongful gains causing loss to revenue. The Court applied the settled principle that at the stage of considering a challenge under Section 482 Cr.P.C. it is not permissible to probe the sufficiency of evidence; only whether uncontroverted allegations and material disclose no offence or the prosecution is manifestly mala fide can justify quashing. The Judge found that circumstantial material and surrounding facts, including absence of assessment records called, typing of appellate orders by private typists and alleged discrepancies in dates, prima facie satisfy ingredients of criminal conspiracy, cheating and offences under the Prevention of Corruption Act. The Court also held that the prosecution was not shown to be manifestly mala fide or instituted with ulterior motive and the petitioner failed to point out any jurisdictional error or illegality in the impugned order. Consequently, the petition seeking quashing was not maintainable. [Paras 24, 25, 27, 28, 29]

The petition is dismissed; the trial court may proceed in accordance with law.

Suo moto contempt - scandalous pleadings - Whether the Court should initiate contempt proceedings suo moto in respect of scandalous and derogatory allegations made in the petition and rejoinder affidavit. - HELD THAT: - Counsel for the CBI pressed that the pleadings contain scandalous and contemptuous allegations and urged initiation of contempt proceedings. The Court observed that no formal application for initiation of contempt proceedings had been filed. Exercising caution, the Court declined to initiate contempt suo moto in the absence of a formal application, but recorded that disposal of the petition would not preclude any aggrieved party, including the CBI, from seeking appropriate remedy by filing a formal application in accordance with law. The matter was left open for that purpose. [Paras 1, 2, 3, 4]

Court declined to initiate suo moto contempt proceedings and kept the matter open for any aggrieved party to move appropriately.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the charge-sheet, cognizance and consequential proceedings is dismissed on the ground that prima facie material discloses offences of criminal conspiracy, cheating and under the Prevention of Corruption Act and the prosecution is not shown to be manifestly mala fide; the trial court is directed to proceed in accordance with law. The High Court declined to initiate contempt suo moto in the absence of a formal application, keeping the issue open for appropriate proceedings.

Exercise of inherent powers under Section 482 Cr.P.C. - Quashing of criminal complaint - Prima facie case - Appreciation of evidence not permitted at quashing stage - Abuse of process of law

Quashing of criminal complaint - Prima facie case - Appreciation of evidence not permitted at quashing stage - Exercise of inherent powers under Section 482 Cr.P.C. - Whether the complaint and summoning orders ought to be quashed under the inherent jurisdiction of the High Court - HELD THAT: - The High Court held that exercise of powers under Section 482 Cr.P.C. is exceptional and must be exercised to give effect to the Code, prevent abuse of process or secure ends of justice, but not to embark upon appreciation of evidence at the threshold. The court examined the complaint, the statement recorded under Section 200 Cr.P.C. and the material placed before the Magistrate and found that the complainant had incorporated the necessary ingredients to prosecute the accused; whether the cheque was issued or the signature forged remained matters of evidence for trial and could not be adjudicated on an application under Section 482 Cr.P.C. The court relied on settled principles that a complaint need not verbatim reproduce every ingredient if the factual foundation is laid, and that contradictions or inconsistencies in witness statements involve appreciation of evidence reserved for trial (see Rajesh Bajaj v. State NCT of Delhi & Ors. ; Md. Allauddin Khan Vs. The State of Bihar and others ; M. Jayanthi Vs. K.R. Meenakshi and another ). Applying these principles to the material on record, the court found no occasion to quash the proceedings or to conclude there was an abuse of process or a failure of justice warranting interference. [Paras 8, 9, 10, 14, 15]

Application under Section 482 Cr.P.C. dismissed; summoning order and consequent orders not quashed.

Final Conclusion: The High Court dismissed the petition under Section 482 Cr.P.C., holding that prima facie case has been made out from the complaint and recorded statements and that questions of issuance of the cheque and forgery are matters of evidence for trial, not for quashing at this stage.