TaxTMI Updates e-Newsletter
Nov 20,2024

Summary order. Special Leave Petition dismissed; pending application(s) disposed of.

Opportunity of hearing - service of notice by electronic portal - rectification of assessment - deposit as condition for interim relief - treatment of assessment order as show cause notice - lifting of bank attachment

Service of notice by electronic portal - opportunity of hearing - treatment of assessment order as show cause notice - Impugned order of assessment dated 24.11.2023 set aside and the assessment order to be treated as a show cause notice subject to conditions, in view of non-participation of the petitioner owing to alleged non-service and inability to access the common portal. - HELD THAT: - The Court observed that during scrutiny discrepancies between GSTR-3B and GSTR-2A/GSTR-2B were communicated through notices uploaded on the common portal and the petitioner asserted non-receipt by tender or registered post and inability to access the portal, resulting in non-participation. Having regard to the petitioner's plea and the offer to explain the mismatches, and on reliance placed upon the Court's recent decision in M/s. K. Balakrishnan, the Court considered it appropriate in the exercise of its writ jurisdiction to set aside the impugned assessment order and to afford the petitioner an opportunity to put forward objections. The Court directed that on compliance with a specified deposit the impugned order would be treated as a show cause notice and the petitioner be permitted to file objections supported by documents; the respondent is to consider such objections and pass orders in accordance with law after affording a reasonable opportunity of hearing. The direction balances the need to protect revenue with the petitioner's right to be heard where service and access are disputed. [Paras 7]

Impugned assessment order set aside; treated as show cause notice upon compliance with deposit condition and grant of opportunity to file objections and be heard; respondent to decide thereafter in accordance with law.

Rectification of assessment - deposit as condition for interim relief - lifting of bank attachment - Effect of rectification dated 08.05.2024 on disputed liability and interim relief conditional on deposit of 25% of the tax as reduced by the rectification; bank attachment to be lifted on compliance. - HELD THAT: - The Court noted that the respondent had made a suo-moto rectification by which the tax liability was reduced after taking into account import data not considered earlier. The petitioner offered to pay 25% of the disputed tax as reduced by that rectification and sought interim relief and lifting of bank attachment. The Court directed the petitioner to deposit 25% of the disputed tax (as reduced by the rectification order) within four weeks; upon such deposit, the impugned assessment would be treated as a show cause notice and the petitioner granted time to file objections. The Court ordered that the bank attachment be lifted forthwith on compliance. The Court also provided that failure to comply with the deposit or to file objections within the stipulated time would result in restoration of the impugned order. [Paras 3, 7]

Petitioner to deposit 25% of disputed tax as reduced by rectification within four weeks; on compliance the assessment treated as show cause notice and bank attachment lifted; non-compliance will restore the impugned order.

Final Conclusion: Writ petition allowed in part: impugned assessment order dated 24.11.2023 set aside subject to conditions - deposit of 25% of disputed tax as reduced by rectification within four weeks, opportunity to file objections and be heard, respondent to decide in accordance with law; bank attachment to be lifted on compliance; failure to comply will restore the assessment order.

Mandatory time limit under section 144C(13) of the Income tax Act - dispatch and receipt of electronic records under section 13 of the Information Technology Act - faceless assessment procedure and transfer under section 144B of the Income tax Act - limitation as a bar to the validity of an assessment order

Mandatory time limit under section 144C(13) of the Income tax Act - dispatch and receipt of electronic records under section 13 of the Information Technology Act - faceless assessment procedure and transfer under section 144B of the Income tax Act - Final assessment order dated 01.07.2022 is barred by limitation and therefore void for being beyond the period prescribed by section 144C(13). - HELD THAT: - The determinative fact is the date on which the DRP directions were uploaded on the ITBA portal. Applying the principles governing electronic dispatch and receipt in section 13 of the Information Technology Act (as interpreted by the Supreme Court) and the faceless assessment framework under section 144B, the upload of the DRP order fixes the date of receipt for purposes of section 144C(13). The intimation letter and the record show the DRP order was uploaded on 26.05.2022; accordingly the one month period prescribed by section 144C(13) required the Assessing Officer to complete the final assessment by 30.06.2022. The assessment in the present case was completed on 01.07.2022, i.e., after the prescribed period. For these reasons the final assessment order is time barred and cannot be sustained. [Paras 17, 19]

Impugned final assessment order dated 01.07.2022 is set aside as barred by limitation.

Final Conclusion: The appeal is allowed on the ground that the final assessment order was time barred under section 144C(13) read with the rules on electronic dispatch/receipt; other grounds are left open as academic.

Unexplained cash credit under section 68 of the Income Tax Act - theory of human probability - evaluation of evidentiary support for cash sales and cash-in-hand - comparative analysis of purchases and sales pattern - Rule 114B of IT Rules and PAN requirement for buyers

Unexplained cash credit under section 68 of the Income Tax Act - theory of human probability - evaluation of evidentiary support for cash sales and cash-in-hand - Addition of deposits made during demonetization treated as unexplained cash credit was unjustified where assessee furnished supporting evidence - HELD THAT: - The Tribunal examined whether the Assessing Officer (AO) was justified in treating cash deposits of Rs. 16.24 crores during the demonetization period as unexplained credits under section 68 by applying the theory of human probability. The AO did not dispute that the deposits corresponded to cash-in-hand shown in the assessee's books as on 08/11/2016, nor did he demonstrate any incorrectness in the books, purchases, sales or stock-in-trade. The assessee produced comparative statements of purchases, total sales, cash sales and bank deposits for multiple years together with sales bills and stock records. On the materials, there was no abnormal variation in sales or deposits for FY 2016-17 vis-a -vis earlier years, and the cash sales for 2016-17 were not higher than prior years. Where records and corroborative evidence support the claimed sources, mere reliance on human probability to draw an adverse inference is impermissible. The Tribunal held that the AO's conclusion rested on suspicion and surmise, ignoring the supporting evidence, and therefore the addition under section 68 could not be sustained. (paras 8, 9, 10, 11, 12, 14) [Paras 9, 10, 11, 12, 14]

Addition treated as unexplained cash credit deleted and AO's reliance on human probability rejected

Comparative analysis of purchases and sales pattern - evaluation of evidentiary support for cash sales and cash-in-hand - Comparative sales/purchase analysis and corroborative documents suffice to rebut suspicion of unexplained credits - HELD THAT: - The Tribunal accepted the assessee's comparative analysis showing uniformity in total sales, cash sales and credit sales across years and noted that purchases were supported by purchase bills and payments through banking channels. There was no finding of negative stock, undisclosed sales, or incorrect books. In such circumstances, the AO could not disregard the documentary evidence and treat the credits as unexplained merely because the cash balance during the demonetization period was large. The Tribunal also noted that coordinated case-law relied upon by Revenue was factually distinguishable. (paras 9, 10, 12, 13, 14) [Paras 9, 10, 12, 13, 14]

Assessee's documentary and comparative evidence accepted as adequate to explain deposits

Rule 114B of IT Rules and PAN requirement for buyers - evaluation of evidentiary support for cash sales and cash-in-hand - Non-maintenance of buyer PAN/phone did not justify rejection of sales where Rule 114B did not mandate PAN for sales below threshold and KYC amendments post-dated the assessment year - HELD THAT: - The AO drew adverse inference from absence of phone numbers and PAN of buyers. The Tribunal observed that Rule 114B does not mandate obtaining PAN where sale to a single customer is below Rs. 2 lakhs, and amendments to KYC/Money Laundering obligations relied upon by the AO took effect after the relevant assessment year. Thus absence of PAN/phone in records for sales under the threshold could not be used to discredit the assessee's explanation when sales were otherwise supported by sale bills and stock. (paras 9, 11) [Paras 9, 11]

Absence of PAN/phone did not vitiate the evidentiary value of sales records for the impugned year

Final Conclusion: The Tribunal upheld the order of the CIT(A), held that the Assessing Officer's addition of deposits during the demonetization period as unexplained cash credit under section 68 was not sustainable in view of the assessee's documentary evidence and comparative analysis, rejected reliance on the theory of human probability, and dismissed the Revenue's appeal.

Application of section 13(1)(c) and denial of exemption under section 11 - Use of trust income/property to confer benefit to specified persons - Characterisation of advances and loans as liabilities versus income - Related party transactions and adequacy of consideration - Section 40(a)(ia) disallowance and its applicability to institutions eligible for exemption under section 11 - Remand for de novo assessment for lack of opportunity and principles of natural justice

Application of section 13(1)(c) and denial of exemption under section 11 - Characterisation of advances and loans as liabilities versus income - Related party transactions and adequacy of consideration - Denial of exemption under section 11 for AY 2015-16 by invoking section 13(1)(c); inclusion of corpus donations in income; disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal found that section 13(1)(c) is attracted only where income or property of the trust is used to confer benefit on persons referred to in section 13(3). The AO relied on historical loans advanced in earlier years and on gross receipts of a related party undertaking (AECPL) without demonstrating that any income of the assessee society was used during AY 2015-16 to confer undue benefit. The assessee's case that the loans originated from advances received for a proposed property sale - liabilities rather than income - was accepted as having merit. With respect to transportation arrangements, the Tribunal accepted the audited financials of AECPL showing that after operating costs and the agreed lease payment to the trust, the net benefit to the related party was nominal; the AO's comparison of gross receipts without considering expenses was insufficient to establish undue benefit. Consequently, invocation of section 13(1)(c) for AY 2015-16 was held legally untenable. Separately, on a review of section 40(a)(ia), the Tribunal accepted the assessee's submission that the disallowance was not applicable to institutions eligible for exemption under section 11 and deleted the disallowance relating to rent paid where TDS was not remitted. The Tribunal therefore directed deletion of the corpus inclusion and the impugned disallowance and allowed exemption under section 11 for the year under consideration. [Paras 14, 15]

For AY 2015-16 the invocation of section 13(1)(c) is rejected; exemption under section 11 is allowed, the corpus addition deleted and the disallowance under section 40(a)(ia) deleted.

Remand for de novo assessment for lack of opportunity and principles of natural justice - Section 40(a)(ia) disallowance and its applicability to institutions eligible for exemption under section 11 - Treatment of appeal for AY 2011-12 and whether matter should be adjudicated afresh in view of absence of opportunity to produce evidence. - HELD THAT: - The Tribunal noted that the assessee had not been afforded adequate opportunity to substantiate its claims before the AO and that several opportunities issued by the first appellate authority had not resulted in the production of documentary evidence. The assessee sought one more opportunity and offered to prosecute its case before the Assessing Officer. In the interests of justice and natural justice, the Tribunal remanded the matter to the Assessing Officer for de novo assessment, permitting the assessee to file evidence and requiring the AO to conduct fresh proceedings. [Paras 20]

The assessment for AY 2011-12 is remanded to the Assessing Officer for de novo proceedings and the assessee is permitted to file evidence in support of its claims.

Final Conclusion: The appeals are allowed: for AY 2015-16 the denial of exemption under section 11 and related additions/disallowances are set aside and relief granted on merits; for AY 2011-12 the matter is remanded to the Assessing Officer for de novo assessment to give the assessee an opportunity to produce evidence.

Computation error in assessment computation sheet - Addition under section 14A for exempt income - Rule 8D(2)(ii) - disallowance of interest expense - Rule 8D(2)(iii) - disallowance by applying 0.5% of average value of investments - Availability of interest-free funds as a defence to section 14A disallowance - Remand to Assessing Officer for verification and recomputation

Computation error in assessment computation sheet - Whether the discrepancy between the total income stated in the assessment order and the figure adopted in the computation sheet is an error requiring correction by the Assessing Officer. - HELD THAT: - The Tribunal noted that the AO's assessment order recorded total income as Rs. 16,82,668 but the computation sheet adopted a different figure (Rs. 36,69,410) without explanation. The Tribunal found merit in the assessee's contention that the computation sheet contains an erroneous adoption of total income. Given the absence of explanation in the assessment record, the Tribunal concluded that the matter requires factual and clerical verification by the AO rather than final adjudication at the appellate stage. [Paras 4]

Set aside the appellate decision on this point and restore the matter to the file of the AO for examination and correction, if it is an error.

Addition under section 14A for exempt income - Rule 8D(2)(ii) - disallowance of interest expense - Availability of interest-free funds as a defence to section 14A disallowance - Whether disallowance of interest under Rule 8D(2)(ii) is warranted where investments were made long before the borrowing and the overdraft was availed many years later and used for day-to-day working capital. - HELD THAT: - The Tribunal accepted the assessee's factual position that investments in the partnership and other companies were made in 2000-01 while the bank overdraft was availed in November 2014 and used for working capital, so the borrowed funds could not have been applied for making those historical investments. Relying on the principle reflected in the Gujarat High Court decision relied upon by the assessee (CIT vs. Gujarat Narmada Valley Fertilizers Company Ltd.), the Tribunal held that, on the facts, no disallowance out of interest expenditure under Rule 8D(2)(ii) was called for. The Tribunal therefore concluded that the appellate authority's partial relief was insufficient and the AO's disallowance under Rule 8D(2)(ii) must be deleted. [Paras 5]

Disallowance under Rule 8D(2)(ii) deleted and the Ld. CIT(A)'s order on this issue set aside.

Rule 8D(2)(iii) - disallowance by applying 0.5% of average value of investments - Remand to Assessing Officer for verification and recomputation - Whether the disallowance computed under Rule 8D(2)(iii) was correctly calculated and, if not, whether the matter requires fresh computation by the AO. - HELD THAT: - The assessee pointed to an error in the AO's computation of the average value of investment which, if corrected, would reduce the disallowance under Rule 8D(2)(iii). The Tribunal found that this contention requires verification of the computation and factual matrix by the AO. Accordingly, the Tribunal did not decide the quantum on merits but remitted the computation to the AO for fresh examination after giving the assessee an opportunity of being heard. [Paras 5]

Issue restored to the file of the AO for examination and appropriate decision in accordance with law after affording opportunity to the assessee.

Final Conclusion: The appeal is allowed in part: the Tribunal set aside the CIT(A)'s order and remitted the computation-sheet discrepancy and the Rule 8D(2)(iii) computation to the Assessing Officer for verification and recomputation, and deleted the disallowance under Rule 8D(2)(ii); overall result treated as allowed.

Jurisdiction under section 153C - Transfer of cases under section 127 - Transfer within meaning of section 2(47)(v) - Taxability in the year of accrual - Admissibility of valuation evidence and use of guidance/SRO value

Jurisdiction under section 153C - Transfer of cases under section 127 - Validity of assessment by Assessing Officer at Hyderabad without a transfer order under section 127 - HELD THAT: - The Tribunal held that section 127 applies only where jurisdiction is being transferred from one Assessing Officer/office to another. In the present case the assessee had not filed returns or been assessed by the Delhi jurisdictional Assessing Officer; incriminating documents were found in a search in Hyderabad and notice under section 153C was issued by the Assessing Officer having territorial jurisdiction over the situs of the property and where the records/documents were located. The panel recorded that a requirement of a formal transfer order under section 127 did not arise because there was no prior assessment pending with or conducted by the Delhi officer in relation to the matters unearthed, and the appropriate forum is the office where the situs and records are situated. Reliance on migration of PAN or internal reallocation was held not determinative of statutory jurisdiction. The Tribunal therefore affirmed the exercise of jurisdiction by the Hyderabad Assessing Officer. [Paras 7]

Jurisdiction of AO, Hyderabad under section 153C is valid; no transfer order under section 127 was required in the facts of this case.

Transfer within meaning of section 2(47)(v) - Transfer of capital asset under JDA - Whether the Development Agreement cum GPA (JDA) dated 30.12.2015 effected a transfer attracting capital gains in AY 2016-17 - HELD THAT: - Examining the terms of the JDA and the material on record, the Tribunal concluded that the agreement contained embedded rights and obligations which amounted to transfer of land/rights for development and consequent entitlement to built-up flats; the owner could not receive those built-up flats unless the developer was given rights sufficient to effect development. The Tribunal found no merit in the assessee's contention that absence of the word 'possession' or a literal transfer clause meant no transfer in law, and relied on the substance of the JDA and the Supreme Court authority discussed to hold that a transfer (for the purposes of sections 45 and 48) occurred in AY 2016-17. The Tribunal therefore dismissed the challenge to the assessment on this ground. [Paras 8]

The JDA resulted in a transfer within the meaning of law; capital gains are taxable in AY 2016-17.

Taxability in the year of accrual - Effect of subsequent disclosure in later assessment year - Whether voluntary disclosure of the capital gain in AY 2019-20 precluded assessment for AY 2016-17 - HELD THAT: - The Tribunal reiterated the principle that tax is leviable in the year in which the taxable event accrues. On the finding that the taxable event (transfer) took place in AY 2016-17, the Tribunal held that assessment rightly pertains to that year. The panel observed that if the assessee had subsequently offered the same income in AY 2019-20, the Assessing Officer could verify and, if appropriate, rectify to avoid double taxation; but that subsequent disclosure does not oust the chargeability in the year when income actually accrued. [Paras 9]

Subsequent declaration in AY 2019-20 does not preclude assessment of capital gains in AY 2016-17 where income accrued in 2016-17; rectification/verification may be undertaken to avoid double taxation.

Admissibility of valuation evidence and use of guidance/SRO value - Reliability of registered valuer's report - Appropriateness of adopting SRO/guidance value instead of the registered valuer's higher figure for determining fair market value as on 01.04.2001 - HELD THAT: - The Tribunal examined the registered valuer's report and found it lacking in necessary particulars: the valuer did not produce comparables or basis for adopting the higher figure, the inspection was carried out on a later date which did not reflect the state of the property at the relevant transfer date, and the report failed to inspire confidence. In contrast, the Assessing Officer relied on the guidance/SRO value for the area. The Tribunal accepted the Assessing Officer's reasons for rejecting the valuer's figure and upheld the adoption of the guidance value, noting that the assessee failed to point out any peculiarities of location, status or construction to justify a higher value. [Paras 10]

Adoption of guidance/SRO value by the Assessing Officer upheld; registered valuer's report rejected as unreliable.

Final Conclusion: The appeal is dismissed: jurisdiction of the Hyderabad Assessing Officer under section 153C upheld; the JDA was held to effect a transfer taxable in AY 2016-17; subsequent disclosure in AY 2019-20 does not defeat taxability for 2016-17; the Assessing Officer's adoption of guidance/SRO value was sustained and the valuer's report rejected.

Consequence of failure to deduct tax at source - limitation under Section 201(3) of the Incometax Act - timebarred order under Section 201(1)/201(1A) - retrospective application of statutory amendment

Limitation under Section 201(3) of the Incometax Act - timebarred order under Section 201(1)/201(1A) - retrospective application of statutory amendment - Validity of the order passed under Section 201(1)/201(1A) - whether it was barred by limitation where the TDS statement for the relevant financial year was filed. - HELD THAT: - The Tribunal held that Section 201(3) prescribed a twoyear limitation (where the statement under section 200 was filed) applicable to the facts. The assessee filed the TDS statement in Form 26Q for F.Y. 201011 on 13052011; consequently the twoyear limitation ran from the end of that financial year and expired on 31032014. The Assessing Officer passed the order under Section 201(1) on 28032018, which was after the prescribed period. The Tribunal rejected application of the amendment introduced by Finance Act, 2014 so as to enlarge limitation retrospectively; in the absence of clear legislative intent to make that amendment retrospective, earlier limitation (two years) governs and vested the assessee's right against later proceedings. As the impugned order was passed after expiry of the applicable limitation, it was held to be null and void. The Tribunal therefore confined itself to the limitation question and did not adjudicate the merits of TDS applicability under substantive provisions. [Paras 11, 12, 13]

Order under Section 201(1)/201(1A) held timebarred and void; appeal dismissed in favour of the assessee.

Final Conclusion: The Tribunal dismissed the revenue's appeal, holding that the order deeming the assessee an assesseeindefault under Section 201(1)/201(1A) was barred by the twoyear limitation applicable where the TDS statement was filed for F.Y. 201011 and therefore void.

Tax residency and taxation of employment income - Application of India-UK Double Taxation Avoidance Agreement - Treaty override of domestic taxation for salary earned where services rendered abroad - Proportionate taxation for services rendered in India - Foreign tax paid by employer and effect on relief under DTAA

Tax residency and taxation of employment income - Application of India-UK Double Taxation Avoidance Agreement - Proportionate taxation for services rendered in India - Whether salary received by a non-resident for services performed in the United Kingdom is taxable in India or is exempt under the India-UK DTAA, and whether only proportionate salary for services rendered in India can be taxed in India. - HELD THAT: - The Tribunal accepted that the assessee was a tax resident of the United Kingdom for the relevant previous year and that the salary in question was received for services rendered in the United Kingdom while the employer continued to pay the salary in India. Applying the treaty provisions, the Tribunal held that salary attributable to services performed in the foreign jurisdiction is taxable in that foreign jurisdiction and is exempt in India under the applicable DTAA; only the proportionate salary for services actually rendered in India is taxable in India. The Tribunal relied on coordinate-bench precedents addressing identical facts and reasoning - that domestic charging provisions are subject to the treaty and that DTAA relief is available even where salary is paid from India but earned abroad. The Assessing Officer's view that payment from an Indian payroll alone renders the entire salary taxable in India was rejected; the Assessing Officer was directed to recompute taxable income by excluding the portion attributable to services rendered abroad and taxing only the proportionate India rendered services, having regard to the tax paid in the foreign jurisdiction by the employer. [Paras 6, 7, 8]

Addition disallowing the exemption under the DTAA deleted; income to be recomputed taxing only proportionate salary for services rendered in India.

Final Conclusion: The revenue appeal is dismissed. The Tribunal upholds deletion of the addition and directs recomputation of income so that only the proportionate salary for services rendered in India is taxable here, with DTAA relief recognised for earnings taxed in the United Kingdom.

Unexplained investment (application of section 69) - Discovery during search and seizure - evidentiary significance - Satisfaction recorded for initiation of penalty proceedings under section 271AAB(1A)

Unexplained investment (application of section 69) - Discovery during search and seizure - evidentiary significance - Addition of Rs. 1,76,000 made as unexplained investment set aside - HELD THAT: - The Assessing Officer made an addition of Rs. 1,76,000 under the head of unexplained investment after noting cash deposits of Rs. 1,22,000 and Rs. 54,000 into the husband's account and a corresponding credit of Rs. 5,68,000 shown in books of M/s Mohan Broker Agency. The Tribunal found that the credits in the ledger of M/s Mohan Broker Agency and the confirmation by the husband showing an outstanding loan to the assessee pre-dated and were placed on record; consequently the transaction could not be treated as incriminating material discovered only on search and seizure. Having regard to the documentary evidence (loan/advance entries and confirmation) available before the AO and CIT(A), the Tribunal concluded that the addition under section 69 was not sustainable and therefore ordered it to be set aside. [Paras 12]

Addition of Rs. 1,76,000 under section 69 set aside.

Unexplained investment (application of section 69) - Addition of Rs. 92,700 made as unexplained investment set aside - HELD THAT: - The AO treated unpaid sale consideration and stamp duty aggregating to Rs. 92,700 as unexplained investment although the assessee had paid the major portion of the sale consideration by cheque and had disclosed income in the return and preceding years showing capacity to meet the remaining outgo. The Tribunal took into account the assessee's declared income for the year under consideration and the preceding three years, and the documentary material placed before the AO and CIT(A). On this basis the Tribunal held that the residual payment could not be regarded as unexplained, and therefore the addition under section 69 was unwarranted. [Paras 14]

Addition of Rs. 92,700 under section 69 set aside.

Final Conclusion: The appeals are allowed; the impugned assessment and the CIT(A)'s order are set aside insofar as the additions under section 69 (amounts set out above) are concerned. The other procedural grounds sought to be raised during pendency were not taken up for consideration.

Undisclosed investment u/s 69 - Search and seizure under section 132 - Prior approval for assessment in search cases under section 153D - Validity of assessment vis-a -vis non-mention of DIN in departmental instructions - Requirement of digital signature of assessment order under section 282A - Concealment penalty under section 271AAB(1A)

Undisclosed investment u/s 69 - Addition of Rs. 54,000 made on account of unexplained credit to M/s Mohan Broker Agency - HELD THAT: - Assessing Officer treated a credit of Rs. 54,000 in the ledger of M/s Mohan Broker Agency as unexplained investment and added the amount to the assessee's income. The assessee produced bank statements and ledger entries showing that the sum related to repayment of a loan availed from M/s Mohan Broker Agency (with repayments by account payee cheques and ledger entries corroborating a loan of Rs.4,76,000). The Tribunal found that the Assessing Officer did not consider the material placed on record and that the cash-entry chronology relied upon by the Revenue did not support the addition. In these circumstances the Tribunal concluded that the addition of Rs. 54,000 was not justified and set aside the addition. [Paras 15]

Addition of Rs. 54,000 set aside.

Undisclosed investment u/s 69 - Search and seizure under section 132 - Concealment penalty under section 271AAB(1A) - Addition of Rs. 12,20,600 in respect of purchase of immovable property and limitation of that addition - HELD THAT: - A purchase deed seized during search showed acquisition of a plot for a consideration around Rs.12.20 lakhs paid in cash. The Assessing Officer made an addition under section 69 for lack of explanation of the source and recorded satisfaction for initiating proceedings under section 271AAB(1A). The assessee relied on loans/advances allegedly from her mother in law (proprietor of M/s Hari Om Agency) and produced bank pass book and ledger showing debits in the agency's account and advances reflected in its books. The Tribunal noted (i) payment of sale consideration in cash violated statutory provisions, (ii) the assessee did not, during assessment or before the CIT(A), explain receipt and payment of cash from the mother in law, (iii) the mother in law's self serving confirmation was not sufficient to establish source, and (iv) the assessee had not disclosed the amount in the return and did not maintain books. Having regard to the assessee's admitted income for the year and the material on record, the Tribunal restricted the addition: it deducted the established portion of the assessee's income from the disputed amount and upheld the balance as unexplained source. The addition was therefore limited to Rs. 9,08,376. [Paras 16, 17, 18, 19]

Addition of Rs. 12,20,600 upheld in part and restricted to Rs. 9,08,376.

Validity of assessment vis-a -vis non-mention of DIN in departmental instructions - Whether absence of DIN in the assessment order renders the assessment void or requires setting aside the order - HELD THAT: - The assessee contended that the assessment order was a nullity for want of a DIN as per CBDT Circular No.19/2019. The Tribunal noted that the issue is sub judice before the Supreme Court and that the assessee had not raised this ground before the CIT(A). More importantly, the assessee did not allege forgery, fabricated proceedings, or any prejudice caused by the non mention of DIN. Instructions of the CBDT are administrative directions for compliance by tax authorities; absent any material showing prejudice or that the order was not genuinely passed, the Tribunal found no reason to set aside the assessment on this ground. [Paras 22, 23, 24, 25, 26]

Ground rejected; absence of DIN did not vitiate assessment in the facts of the case.

Requirement of digital signature of assessment order under section 282A - Whether manual (non-digital) signing of the assessment order invalidates the order - HELD THAT: - The assessee argued that the assessment order was void because it was not digitally signed as per section 282A and departmental instructions. The Tribunal observed that the assessee did not demonstrate that any prejudice was caused by the alleged lack of digital signature, nor did she allege that the order was forged. The copy on record was a photocopy of the copy supplied to the assessee and the original was part of departmental records. In absence of material showing invalidity or prejudice, the Tribunal declined to set aside the order on this ground. [Paras 27, 28, 29, 30, 31]

Ground rejected; absence of digital signature did not vitiate the assessment in the given facts.

Prior approval for assessment in search cases under section 153D - Whether assessment was without jurisdiction for want of prior approval under section 153D or whether any such approval was mechanical - HELD THAT: - The assessee contended that no prior approval under section 153D had been obtained or that if obtained it was accorded mechanically. The Tribunal examined the material supplied by the assessee and noted that the first document in the paper book was the approval dated 31.12.2019 from the Additional Commissioner (Central Range, Udaipur) which examined the draft assessment order and accorded approval. The approval post-dated the assessment order dated 30.12.2019 but was on file and on its face showed consideration of the draft. On this basis the Tribunal found no merit in the contention that the assessment lacked prior approval or that approval was purely mechanical. [Paras 32, 33, 34, 35]

Ground rejected; prior approval under section 153D was on record and the objection was overruled.

Final Conclusion: Appeal partly allowed: the addition of Rs. 54,000 was set aside; the addition of Rs. 12,20,600 was sustained in part and restricted to Rs. 9,08,376; other grounds alleging invalidity for want of DIN, absence of digital signature, and lack of prior approval under section 153D were dismissed.

Revision under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of Revenue - twin conditions for invoking section 263 - capitalization of expenditure - verification by the Assessing Officer

Revision under section 263 of the Income Tax Act - erroneous and prejudicial to the interest of Revenue - capitalization of expenditure - verification by the Assessing Officer - Whether the Principal Commissioner of Income Tax was justified in treating the assessment framed under section 143(3) as erroneous and prejudicial to the interest of Revenue and exercising revision under section 263 where the impugned expenses were capitalized in the assessee's books and no deduction was claimed in the profit and loss account. - HELD THAT: - The Tribunal noted that the learned PCIT held that the AO had not verified the claim of capital expenditure during the assessment proceedings and therefore the assessment was framed without proper verification. However, the PCIT's order itself records that the disputed expenses had been capitalized in the assessee's books. Given that no deduction of those capitalized expenditures was claimed in the profit and loss account, the Tribunal held that even if some error in the assessment procedure existed, the error could not be said to be prejudicial to the interest of Revenue. The Court reiterated the settled principle that both elements-an assessment being erroneous and being prejudicial to Revenue-must be satisfied to invoke section 263. Because the essential prejudice to Revenue was absent on account of capitalization and non-claim of deduction, the mandatory twin conditions for revision under section 263 were not met and the PCIT's exercise of jurisdiction was unsustainable. [Paras 5, 9]

The order under section 263 is quashed as the twin conditions of being erroneous and prejudicial to the interest of Revenue were not satisfied where the impugned expenses were capitalized and no deduction was claimed.

Final Conclusion: Delay in filing the appeal was condoned and, on merits, the Tribunal allowed the assessee's appeal by quashing the order of revision under section 263 since the assessment, though alleged to be erroneous, was not shown to be prejudicial to the interest of Revenue where the disputed expenditures were capitalized and not claimed as deductions.

Bogus accommodation entries - presumption of rerouting of own funds - acceptance of books of account and inventory - invocation of section 145(3) for rejecting books - sanction under section 151 requires application of mind - mechanical approval / rubber stamping of 'Yes' - invalidity of reassessment notice under section 148 without valid sanction

Bogus accommodation entries - presumption of rerouting of own funds - acceptance of books of account and inventory - invocation of section 145(3) for rejecting books - Whether the addition under section 69A treating sales to Shambhu Dayal Sharma as bogus accommodation entries was sustainable - HELD THAT: - The Tribunal found that the Assessing Officer reopened assessment relying on findings in the case of Shambhu Dayal Sharma but did not reject the assessee's books of account. The Commissioner (Appeals) had recorded that purchases, VAT records, opening and closing stock and audited books were not doubted and that the assessee's declared net profit was accepted. The AO's presumption that the assessee rerouted his own funds was not supported by material. Given acceptance of purchases and inventory and no invocation of section 145(3) to reject books, the Tribunal agreed with the CIT(A) that the notional addition under section 69A could not be sustained and that the AO's inference of bogus sales was not tenable on the record. [Paras 6]

Addition under section 69A treating the sales as bogus is dismissed and the Revenue's appeal is dismissed.

Sanction under section 151 requires application of mind - mechanical approval / rubber stamping of 'Yes' - invalidity of reassessment notice under section 148 without valid sanction - Whether the approval recorded by the Joint CIT as 'yes' under section 151 was a valid application of mind and whether the reassessment proceedings were valid - HELD THAT: - The Tribunal examined the approval form in which the Joint CIT recorded only 'yes' and noted the approval was accorded without further discussion. Considering a later decision of the Delhi High Court (Vinod Kumar Solanki) which held that mere recording of 'Yes' can amount to mechanical approval and following the reasoning that the sanctioning authority must record satisfaction discernible from its endorsement, the Tribunal held that the approval in this case was given mechanically. As the sanction under section 151 was found to be invalid for want of any discernible application of mind, the initiation of reassessment and consequent proceedings under section 148 were held to be bad in law. [Paras 7, 8, 9]

Approval under section 151 held invalid; reassessment proceedings and assessment set aside and the assessee's appeal is allowed.

Final Conclusion: The Revenue's appeal dismissing the assessee's sales as bogus is rejected; the assessee's challenge to the sanction under section 151 succeeds because the approval recorded as 'yes' was held mechanical, vitiating the reassessment under section 148 and leading to quashing of the assessment.

Section 263 revisionary jurisdiction - twin conditions of being erroneous and prejudicial to revenue - deemed erroneous under Explanation 2 to section 263 for lack of inquiries - plausible view of the Assessing Officer - assessment records including Transfer Pricing Officer proceedings under section 92CA - invocation based solely on audit objection

Section 263 revisionary jurisdiction - twin conditions of being erroneous and prejudicial to revenue - plausible view of the Assessing Officer - Validity of the Principal Commissioner of Income Tax invoking Section 263 to set aside the assessment orders. - HELD THAT: - The Tribunal held that invocation of Section 263 requires satisfaction of the twin conditions that the assessing officer's order is both erroneous and prejudicial to the interests of revenue. On the record the AO had carried out detailed enquiries, referred matters to the TPO, considered TPO's speaking order and taken a plausible view on apportionment and costing. Where the AO's conclusion is a plausible view, the exercise of revisional power under Section 263 is impermissible. The PCIT's characterisation of the assessment as erroneous and prejudicial was not substantiated on facts; the observations were held to be perverse to the material on record. Applying the cited precedents, the Tribunal concluded that the PCIT's revisionary order was unjustified and liable to be quashed. [Paras 25, 27, 33, 34]

Order passed under Section 263 setting aside the assessments is quashed as unjustified.

Assessment records including Transfer Pricing Officer proceedings under section 92CA - deemed erroneous under Explanation 2 to section 263 for lack of inquiries - separate books of account for eligible unit - Whether the assessee had maintained and submitted separate books of account and relevant records to AO/TPO so as to constitute assessment records. - HELD THAT: - The Tribunal found on the material that the assessee had furnished standalone balance sheets, profit & loss accounts, cost-sheets, Form 10CCB and ledgers for the eligible unit, and that the TPO had examined and accepted the cost and related workings. These documents formed part of the assessment records and were considered by the AO. Consequently the factual premise for deeming the assessment 'erroneous' for want of inquiries or records was negatived. The Tribunal observed prior years' consistent acceptance of deductions and the use of SAP to segregate unit-wise accounts, reinforcing that separate books were maintained and placed before authorities. [Paras 26, 28, 29]

Assessee maintained and submitted separate books and related records; PCIT's contrary finding is not sustained.

Invocation based solely on audit objection - Section 263 revisionary jurisdiction - Whether initiation of Section 263 proceedings solely on the basis of audit objections and AO's proposal, without independent application of mind by the PCIT, was valid. - HELD THAT: - The Tribunal held that the record shows the PCIT initiated revision primarily on audit objections and a proposal traced to the AO's communication, without conducting any independent inquiry or demonstrating application of mind to displace the AO/TPO findings. Jurisprudence requires the revisional authority to undertake at least a minimal inquiry and not act merely on audit notes. Given absence of such independent enquiry and the AO/TPO having examined the documents, the PCIT's action founded on audit objections alone was held to be without jurisdiction. [Paras 31, 32]

Proceedings under Section 263 founded solely on audit objections without independent application of mind are invalid.

Final Conclusion: Both appeals are allowed; the order passed by the Principal Commissioner of Income Tax under Section 263 dated 30.03.2024 is quashed and the assessments for AY 2017-18 and AY 2018-19 are restored.

Deduction under section 80IB/80IE - Allowability of expenditure on freebies/gifts to medical practitioners under section 37(1) - Disallowance under section 14A read with Rule 8D - Computation of book profit under section 115JB - treatment of assets recorded at fair value on court sanctioned scheme - Revenue v. capital characterisation of consultancy and software upgradation expenses - Stamp duty and ROC filing fees on increase in share capital - capital expenditure - Deduction under section 36(1)(va) for delayed employee contribution (ESIC) - Claim and admissibility of long term capital loss not included in original/revised return - Wealth tax addition to book profit under section 115JB - Related party interest - domestic transfer pricing (section 92BA) and deductibility under section 37(1) - Eligibility of deduction by reconstructed/split undertaking (Sikkim unit)

Deduction under section 80IB/80IE - Disallowance of deduction under section 80IB/80IE in respect of interest on staff advances and bank/statutory deposits - HELD THAT: - The Tribunal followed preceding coordinate bench decisions in the assessee's own case and held that interest on staff advances and interest on bank/FDRs are not deductible under sections 80IB/80IE. The appellate finding upholding the assessing officer's disallowance was sustained as being consistent with earlier Tribunal rulings in the assessee's cases.

Assessee's ground dismissed; disallowance in respect of interest on staff advances and bank/statutory deposits upheld.

Allowability of expenditure on freebies/gifts to medical practitioners under section 37(1) - Deduction under section 80IB/80IE - Allowability of accommodation, business promotion, conference/sponsorship and freebies to doctors; ancillary claim for increased 80IB/80IE deduction if such expenditure relates to eligible unit - HELD THAT: - The assessee's senior counsel expressly did not press the claim for allowability of the impugned doctor facing expenditures for the year under appeal; accordingly the ground became infructuous and was dismissed. The Bench, however, clarified this non pressing should not bind subsequent years. Separately, following CBDT guidance, the AO was directed to verify whether any portion of the disallowed expenditure forms part of profit & loss of a unit eligible for deduction under section 80IB/80IE; if so, the higher deduction must be recomputed.

Assessee's ground dismissed as not pressed; Revenue's related ground partly allowed insofar as AO to verify and recompute 80IB/80IE deduction if applicable.

Disallowance under section 14A read with Rule 8D - Disallowance under section 14A read with Rule 8D (proportionate interest and administrative cost) was set aside for verification - HELD THAT: - The Tribunal found factual conflict between AO's conclusion and the assessee's audited financials regarding availability of interest free funds and the attribution of administrative expenses to exempt income. In view of these factual disputes and principles of natural justice, the matter was remitted to the AO for fresh verification and computation in accordance with law and Rule 8D.

Ground allowed for statistical purpose; issue remanded to AO for verification and recomputation under Rule 8D.

Computation of book profit under section 115JB - treatment of assets recorded at fair value on court sanctioned scheme - Addition of amortisation of intangibles to book profit under section 115JB where intangibles were recorded at fair value pursuant to court sanctioned scheme of arrangement - HELD THAT: - Following coordinate bench precedent, recognized accounting standards (AS 14/AS 10), and the scheme directions of the High Courts instructing initial recognition at fair value, the Tribunal held that recording assets at fair value on initial recognition under a court approved scheme is not 'revaluation' for the purposes of section 115JB. Section 115JB permits only specified adjustments; the AO cannot treat initial recognition at fair value as revaluation and make the addition. The Tribunal therefore quashed the adjustment and directed deletion.

Assessee's ground allowed; adjustment to book profit under section 115JB deleted.

Stamp duty and ROC filing fees on increase in share capital - capital expenditure - Disallowance of stamp duty/ROC filing fees (share expenses pursuant to court sanctioned scheme) as capital expenditure - HELD THAT: - The Tribunal accepted that the expenditure was directly connected with increase in authorised capital and is capital in nature, following judicial authorities relied on by the AO and CIT(A). The coordinate bench decision in the assessee's other years was noted as being adverse.

Assessee's ground dismissed; addition of stamp duty charges confirmed.

Deduction under section 36(1)(va) for delayed ESIC contributions - Disallowance under section 36(1)(va) read with section 2(24)(x) for delayed payment of employees' ESIC contribution - HELD THAT: - Counsel conceded the issue was decided against the assessee by the Supreme Court in Checkmate Services Pvt. Ltd.; the Tribunal respectfully followed that binding authority.

Assessee's ground dismissed.

Claim and admissibility of long term capital loss not included in original/revised return - Claim for long term capital loss on land sale made during assessment proceedings though not claimed in original or revised return - HELD THAT: - The Tribunal applied section 139 and governing return rules, noting that a capital loss not claimed in the return (original or revised) cannot be admitted during assessment. The appellate authority had correctly refused to allow the loss but deleted its incorrect addition to income.

Assessee's ground dismissed; no allowance of LTCL.

Revenue v. capital characterisation of consultancy and software upgradation expenses - Allowability as revenue expenditure of (a) software upgradation/support charges; (b) management consultancy charges (McKinsey) and strategic consultancy charges (Makov) - HELD THAT: - Applying established tests (nature of advantage in commercial sense, enduring benefit, nexus with business), the Tribunal followed jurisdictional High Court and other precedents and agreed with CIT(A) that the impugned software and consultancy expenditures were revenue in nature, incurred wholly and exclusively for business, and did not create a distinct enduring capital asset. The payments were therefore allowable under section 37(1).

Revenue grounds challenging deletion dismissed; consultancy and software upgradation expenditures allowed as revenue deductions.

Wealth tax addition to book profit under section 115JB - Related party interest - domestic transfer pricing (section 92BA) and deductibility under section 37(1) - (a) Whether wealth tax provision must be added to book profit under section 115JB; (b) Deductibility of interest paid to related party (Neetnav) which was within arm's length as per domestic transfer pricing review - HELD THAT: - (a) The Tribunal held that Explanation 1 to section 115JB expressly refers to income tax and analogous provisions do not include wealth tax; following precedents the wealth tax provision need not be added to book profit. (b) On facts, the penal interest arose under contract, was supported by contract terms and found to conform to arm's length under domestic transfer pricing provisions; the payment was held to be incurred bona fide for business and deductible under section 37(1).

(a) Wealth tax addition deleted; (b) Interest to Neetnav allowed as deduction.

Eligibility of deduction by reconstructed/split undertaking (Sikkim unit) - Allowability of deduction under section 80IE for the Sikkim unit formed through split/reconstruction - HELD THAT: - Applying coordinate bench precedent in the assessee's own case for earlier years and detailed fact based scrutiny of bills and remand analysis, the Tribunal found Revenue had not demonstrated that more than permitted percentage of plant & machinery were 'used' (second hand) so as to deny the deduction. No higher authority had overturned those earlier Tribunal decisions; accordingly the CIT(A)'s allowance was upheld.

Revenue's ground dismissed; deduction under section 80IE for Sikkim unit sustained.

Final Conclusion: For Assessment Year 2011 12 the Tribunal partly allowed the assessee's appeals and partly allowed the Department's appeal. Major conclusions: deductions under sections 80IB/80IE are disallowed for interest on staff advances and bank/FDRs but allowed for interest on delayed sales receipts as per earlier coordinate bench precedents; the claim regarding freebies to doctors was not pressed and dismissed (with AO directed to verify any impact on 80IB/80IE); section 14A/Rule 8D disallowance remanded for factual verification; addback under section 115JB for intangibles recorded at fair value pursuant to court sanctioned scheme was deleted; stamp duty challenge dismissed; ESIC delayed contribution disallowance upheld; LTCL claim disallowed; wealth tax addition deleted; software and consultancy expenditures (McKinsey, Makov) allowed as revenue deductions; related party interest (Neetnav) allowed where arm's length established; and deduction under section 80IE for the Sikkim unit sustained.

Characterisation of software payments as royalty - application of India-Singapore Double Taxation Avoidance Agreement over domestic law - distinction between transfer of copy and transfer of copyright - interpretation of End User License Agreement (EULA) in tax characterisation

Characterisation of software payments as royalty - distinction between transfer of copy and transfer of copyright - interpretation of End User License Agreement (EULA) in tax characterisation - application of India-Singapore Double Taxation Avoidance Agreement over domestic law - Supply of software by the assessee to M/s. L&T Ltd. is not taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 or under the India-Singapore DTAA. - HELD THAT: - The Tribunal examined the Letter of Intent and the End-User License Agreement and found that the arrangement granted a non-exclusive, non-transferable licence in object code form and expressly provided that no title or ownership of the software or its documentation was transferred to the buyer; ownership and rights to modifications and derivative works remained with the assessee. Applying the ratio of the Hon'ble Supreme Court in Engineering Analysis (as relied upon by the assessee) and subsequent decisions following that ratio, the Tribunal held that such EULAs do not transfer any of the proprietary interests enumerated in the Copyright Act and therefore do not constitute a grant of the "use of, or right to use" copyright that would attract the definition of "royalty". The Tribunal further observed that the DTAA definition of royalty is narrower and more beneficial to the taxpayer, and in the circumstances the payment for the software licence did not amount to royalty chargeable to tax in India. Consequently the Assessing Officer's conclusion treating the receipt as royalty was rejected and the assessment was set aside on this ground. [Paras 14, 15, 16]

The supply/licence of software is not taxable as royalty under section 9(1)(vi) or under the India-Singapore DTAA; the order of the Assessing Officer/DRP is set aside and the assessee's appeal is allowed on this ground.

Final Conclusion: The Tribunal allowed the appeal on merits by holding that the software supply/licence receipts are not taxable as royalty under the Act or the India-Singapore DTAA, set aside the AO/DRP order on that ground and thereby allowed the assessee's appeal; the other grounds (1-8) were not adjudicated as academic in view of this decision.

Exemption under section 10(23C)(iiiab) - late filing of return under section 139(1) - return filed under section 139(4D) instead of section 139(4C) - denial of exemption for noncompliance with returnfiling requirements

Exemption under section 10(23C)(iiiab) - late filing of return under section 139(1) - denial of exemption for noncompliance with returnfiling requirements - Denial of exemption under section 10(23C)(iiiab) on account of nonfiling or late filing of incometax return beyond the time specified under section 139(1). - HELD THAT: - The Tribunal found no provision in the Incometax Act that disentitles an assessee from claiming exemption under section 10(23C)(iiiab) merely because the incometax return was not filed or was filed late beyond the period specified in section 139(1). The Department was unable to point to any statutory provision justifying denial of the exemption on that ground. Consequently, the denial of exemption by the lower authorities on account of nonfiling/late filing of the return was held to be unsustainable. [Paras 4]

Exemption under section 10(23C)(iiiab) cannot be denied solely for nonfiling or late filing of the return as required by section 139(1).

Exemption under section 10(23C)(iiiab) - return filed under section 139(4D) instead of section 139(4C) - Whether filing the return in Form under section 139(4D) instead of under section 139(4C) disentitles the assessee from exemption under section 10(23C)(iiiab). - HELD THAT: - The Tribunal held that the fact that the return was filed under section 139(4D) instead of section 139(4C) is irrelevant for entitlement to exemption under section 10(23C)(iiiab). In view of the legal position that no provision disentitles the assessee on account of filing in an incorrect form, the action of the lower authorities in denying exemption on this ground could not be justified. [Paras 5]

Filing the return under section 139(4D) instead of section 139(4C) does not disentitle the assessee from claiming exemption under section 10(23C)(iiiab).

Final Conclusion: The impugned order of the Commissioner (Appeals) is set aside and the Assessing Officer is directed to grant the exemption claimed under section 10(23C)(iiiab); the appeal is allowed.

Burden of proof in seizure of non-notified goods under Section 123 of the Customs Act, 1962 - requirement of cogent and positive evidence to establish smuggling - standard of proof in customs proceedings by preponderance of probability - substantial question of law under Section 130 of the Customs Act, 1962 - perversity review where a decision is based on no evidence

Burden of proof in seizure of non-notified goods under Section 123 of the Customs Act, 1962 - requirement of cogent and positive evidence to establish smuggling - Initial burden to prove that seized goods are smuggled, in respect of goods not notified under Section 123(2), lies on the Customs Department and must be discharged by cogent evidence. - HELD THAT: - The Court held that betel/areca nut is not a notified commodity under Section 123(2) and therefore the statutory scheme places the initial burden upon the seizing authority to establish that seized goods are of foreign origin and smuggled. Mere failure of the detenue to produce supporting documents does not, by itself, establish smuggling. The decision follows earlier coordinate-bench authority and the statutory text, and the Court treated this principle as settled law not raising a novel substantial question of law. [Paras 29, 30, 31, 33, 34]

The burden to prove smuggling of non-notified goods rests on the Customs Department and must be discharged by cogent and positive evidence; this principle is settled.

Requirement of cogent and positive evidence to establish smuggling - standard of proof in customs proceedings by preponderance of probability - The CESTAT did not err in setting aside the confiscation where the Customs Department failed to produce cogent positive evidence to show the seized betel nuts were smuggled. - HELD THAT: - On the record the only positive material produced by the Department was the respondent's statement under Section 107 in which he could not produce supporting documents; there were no foreign markings, expert opinion or other evidence establishing foreign origin. The Tribunal's conclusion that the Department had not discharged its burden by positive evidence was a factual conclusion supported by the materials and not an instance of decision without evidence. [Paras 30, 32, 38, 40]

The CESTAT's setting aside of the confiscation was not erroneous; the Department failed to adduce cogent evidence of smuggling.

Acceptance of belated documents in adjudication proceedings - substantial question of law under Section 130 of the Customs Act, 1962 - Acceptance by the adjudicating authorities of GST documents produced belatedly during adjudication is a question of fact and not a substantial question of law for the High Court under Section 130. - HELD THAT: - The Court observed that the contention regarding belated reliance on GST documents raises factual evaluation about admissibility and weight of evidence. The impugned order did not base its conclusion on those documents, and the formulation of that point in the memorandum of appeal did not amount to a substantial question of law warranting interference. [Paras 35, 36, 39]

The question of acceptance of belated GST documents is factual and not a substantial question of law; it does not warrant interference under Section 130.

Perversity review where a decision is based on no evidence - The impugned CESTAT order is not perverse; the Tribunal did not decide the matter on no evidence and provided reasons for setting aside the confiscation. - HELD THAT: - Perversity could be a ground for interference under Section 130 only if the appellate tribunal's decision were based on no evidence. Here the Tribunal's finding was that the Department had not produced cogent and positive evidence of smuggling; that conclusion was supported by the record (absence of foreign markings, expert opinion or other corroborative material) and by consideration of the respondent's claimed purchase documents absent proof of their falsity. [Paras 37, 38, 39, 40]

The impugned order is not perverse; the High Court will not disturb the Tribunal's reasoned factual conclusion.

Final Conclusion: The appeal is dismissed. The High Court held that (i) for goods not notified under Section 123(2) the initial burden to prove smuggling lies on the Customs Department and must be discharged by cogent positive evidence; (ii) on the present record the Department failed to discharge that burden and the CESTAT's order setting aside confiscation was not perverse; and (iii) the challenge regarding belated GST documents raised a factual question not constituting a substantial question of law under Section 130.

Distinction between bona fide mistake and dishonest non-compliance - judicial exercise of discretion in imposing penalty - moderation of excessive redemption fine and penalty - absence of mens rea/no loss of revenue as mitigating factor

Distinction between bona fide mistake and dishonest non-compliance - absence of mens rea/no loss of revenue as mitigating factor - judicial exercise of discretion in imposing penalty - moderation of excessive redemption fine and penalty - Whether the redemption fine and penalty imposed under the Customs Act were justified and, if excessive, whether they should be moderated in light of the facts - HELD THAT: - The Tribunal found that the contravention arose from non deliberate errors and exigencies of business process, not from a deliberate intention to evade duty, and that there was no loss of revenue nor prohibition on import. While breach of a statutory obligation may attract penalty, a distinction must be drawn between bona fide mistakes and dishonest non compliance. The Tribunal relied on the principle that imposition of penalty is a judicial discretion to be exercised after considering all relevant circumstances (M/s. Hindustan Steel Ltd. v. The State of Orissa as cited in the impugned order). Applying that principle to the facts, the Tribunal held the redemption fine and penalty imposed by the original authority to be disproportionate and excessive, and accordingly exercised its discretion to moderate them to amounts considered appropriate in the circumstances. [Paras 4, 5, 6]

The redemption fine and penalty were reduced as a discretionary mitigation: the fine was moderated and the penalty substantially reduced; the appeal was disposed accordingly.

Final Conclusion: The Tribunal allowed the appeal in part by exercising judicial discretion to moderate the redemption fine and penalty imposed for the customs contravention, holding that the breach was a non deliberate bona fide mistake without loss of revenue; the fine and penalty were reduced and the appeal disposed of on those terms.

Confiscation - rejection of assessable value - determination of retail sale price (RSP) - admissibility of statements recorded under section 108 of the Customs Act - onus of proof - market survey evidence - penalty imposition - presumption versus direct evidence

Confiscation - rejection of assessable value - market survey evidence - presumption versus direct evidence - onus of proof - penalty imposition - Whether the confiscation of goods, rejection of declared assessable value, demand of differential customs duty and imposition of penalty on the importer were justified by the evidence produced by the department. - HELD THAT: - The Tribunal found that several admitted facts undermined the department's case: declared quantity and stickers on goods at import were correct; representative samples were sealed at import; goods were released provisionally; and the differential MRP was observed only on items collected later from retailers. The market survey evidence was defective: invoices relied upon included a post GST invoice (thereby not reflecting the pre GST regime relevant for CVD), no sample was drawn from the proximate distributor (Moon Enterprises) despite it being the direct channel between importer and retailers, and there was no evidence of any money flow back to the importer. Investigation officers admitted they had not procured samples from the distributor and that there was no adverse admission by the importer. Retailers conceded they could not reliably identify samples and denied altering stickers or returning money. The Tribunal held that the similarity of font/print on stickers amounted to mere presumption and not direct evidence linking alteration to the importer. The onus to prove that the importer had altered or was party to alteration, including any flow back of money, lay on the department and was not discharged. Further, statements not subjected to cross examination (notably of the distributor) could not be relied upon in view of the prohibition on admissibility under the statutory scheme and settled precedent. The Tribunal also observed that Rule 5 of the Central Excise (Determination of Retail Sale Price) Rules, 2008 was inaptly invoked against an importer as opposed to a manufacturer, and therefore that theory of enhanced RSP could not sustain the demand. In consequence, the Tribunal concluded that the demand, confiscation and penalty were founded on presumptions and surmises rather than admissible evidence. [Paras 7, 8, 9, 10, 11]

The confiscation, rejection of declared value, demand of differential duty and penalty are not sustained; the order under challenge is set aside and the appeal is allowed.

Final Conclusion: The Tribunal held that the departmental case was not supported by admissible and direct evidence, that presumptions regarding altered MRPs and origin of stickers could not replace proof of the importer's culpability, and therefore set aside the order confirming confiscation, demand and penalty.

Boron Ores - classification under Customs Tariff heading 2528 - exemption under notification entries Sr. No. 113 of Notification No. 12/2012-Cus and Sr. No. 130 of Notification No. 50/2017-Cus - test report of CRCL, New Delhi - larger period of limitation under Section 28(4) of the Customs Act, 1962 - confiscation under Section 111(m) of the Customs Act, 1962 - penalties under Sections 114A and 114AA of the Customs Act, 1962 - obligation to follow remand directions of the Tribunal

Boron Ores - classification under Customs Tariff heading 2528 - test report of CRCL, New Delhi - exemption under notification entries Sr. No. 113 of Notification No. 12/2012-Cus and Sr. No. 130 of Notification No. 50/2017-Cus - Imported goods are Boron Ores falling under CTH 2528 and eligible for exemption under the cited notification entries - HELD THAT: - The Tribunal found no dispute that the goods fall under Tariff heading 2528 and placed decisive reliance on the CRCL, New Delhi test report which, after re-test and clarifications, described the sample as "Mineral Colemanite - a Natural Calcium Borate (commonly known as Boron Ore)" and confirmed it was not calcined. CRCL is a government laboratory authorised to test samples for Customs purposes and its report, together with reiterations in letters dated 24.06.2020 and 08.07.2020, established that the imported material is Boron Ore. The notification entries grant exemption to "Boron ores" without any qualifying restriction as to the state in which the ore is imported. Consequently, once the technical report establishes the goods to be Boron Ore and they fall under CTH 2528, the material satisfies the description in Sr. No. 113 and Sr. No. 130 and is eligible for the claimed exemption. [Paras 4]

The imported goods are "Boron Ores" within CTH 2528 and eligible for exemption under the cited notification entries; demand based on denial of that exemption is unsustainable.

Boron Ores - interpretation of "Natural Boron Ore" versus "Boron Ores" in exemption notifications - The exemption entry referring to "Boron ores" is not restricted to ore in the exact physical condition as mined and does not exclude concentrated ore produced by physical removal of impurities - HELD THAT: - The Tribunal examined the evolution of the notification language and observed that earlier notifications used the phrase "Natural Boron Ore" but, from 1 March 2005 onwards, the expression was deliberately changed to "Boron Ores." The entries under the relevant notifications contain no qualification that the ore must be in the state as mined. The adjudicating authority erred in reading additional restrictions into the notifications and in holding that physically concentrated ore ceases to be ore for the purpose of exemption. The Tribunal also noted that precedent permits treating concentrated ore as ore where the process involves physical removal of impurities and the product remains a mineral borate, as supported by the test report. [Paras 4]

The exemption is available to "Boron Ores" generally and is not confined to ore in the pristine state as extracted from the mine; concentrated ore remains eligible.

Larger period of limitation under Section 28(4) of the Customs Act, 1962 - willful mis-statement or suppression of facts - The extended five-year limitation under Section 28(4) is not invokable as there is no recorded willful mis-statement or suppression of facts by the importer - HELD THAT: - The Tribunal held that claiming a particular classification or exemption is a matter of belief and law, not a factual mis-declaration. Several Bills of Entry were assessed by customs officers who examined the goods and extended the exemption after verification; the issue whether the goods were Boron ores was specifically considered at assessment. In these circumstances, the ingredients required to invoke the extended limitation period under Section 28(4)-willful mis-statement or suppression-are not made out. Thus the department cannot rely on the larger limitation period merely because it later formed a different view on the scope of the notification. [Paras 2, 4]

The extended limitation under Section 28(4) is not attracted; any demand dependent on invoking the larger period is unsustainable.

Obligation to follow remand directions of the Tribunal - adjudicating authority exceeding remand scope - The Commissioner failed to comply with the Tribunal's remand directions by re-opening matters already directed to be reconsidered in light of test reports and authorities, and erred in treating the Tribunal's remand as an occasion to reassess contrary to its directions - HELD THAT: - The Tribunal's earlier remand expressly directed reconsideration in light of the CRCL test reports and cited authorities, and cautioned against reliance on internet sources when test reports exist. On re-adjudication the Commissioner again relied on websites and Wikipedia and proceeded as if sitting in appeal over the Tribunal's findings. The Tribunal held that a lower authority must take into account all relevant materials identified by the appellate order and cannot act contrary to the appellate directions. Because the Commissioner did not properly follow the remand and ignored the operative weight of the CRCL reports and the Tribunal's instruction, the subsequent denial of exemption and punitive measures could not be sustained. [Paras 4, 5]

The adjudicating authority failed to follow the Tribunal's remand directions; the re-adjudication that ignored the Tribunal's guidance is unsustainable.

Confiscation under Section 111(m) of the Customs Act, 1962 - penalties under Sections 114A and 114AA of the Customs Act, 1962 - Confiscation, fines in lieu thereof and penalties consequential on the demand cannot be sustained in the facts of this case - HELD THAT: - Having concluded that the goods are Boron Ores eligible for exemption and that the extended limitation period is not attracted, the Tribunal held that the foundational basis for confiscation and penalties collapses. The departmental findings and punitive actions were consequential to the denied exemption and invocation of extended limitation; without a valid demand, the confiscation, redemption fines and statutory penalties are not maintainable. [Paras 4, 5]

Confirmations of confiscation, redemption fines and penalties consequential to the demand are unsustainable and are set aside.

Final Conclusion: All appeals are allowed: the imported goods are held to be Boron Ores within CTH 2528 and eligible for the claimed exemption; the extended limitation under Section 28(4) is not attracted; the adjudicating authority failed to comply with the Tribunal's remand directions; and consequential confiscation, fines and penalties are unsustainable. Appeals disposed with consequential relief as per law.

Approval of resolution plan - Entertainability of appeal against approval of resolution plan where appellants were unaware of the CIRP - Right to seek remedy from successful resolution applicant - Condonation of delay

Entertainability of appeal against approval of resolution plan where appellants were unaware of the CIRP - The NCLAT was correct in not entertaining the appeal filed by the appellants who pleaded ignorance of the CIRP. - HELD THAT: - The Supreme Court found that the appellants' ground of not being aware of the Corporate Insolvency Resolution Process did not justify entertaining the appeal against the order approving the resolution plan. The court expressly endorsed the NCLAT's decision to decline to admit the appeal on that basis and dismissed the appeal subject to a separate protective observation noted below.

The challenge to the approval of the resolution plan is not entertained; the appeal is dismissed on this ground.

Right to seek remedy from successful resolution applicant - Paragraph 9 of the impugned order, which keeps open the appellants' remedy to apply to the successful resolution applicant, is affirmed. - HELD THAT: - Although the appeal against the approval of the resolution plan was dismissed, the Court specifically upheld the part of the impugned order that preserves the appellants' ability to apply to the successful resolution applicant. This affirmation leaves the appellants with the procedural avenue contemplated by paragraph 9 of the impugned order.

Paragraph 9 is affirmed and the appellants' remedy to apply to the successful resolution applicant remains open.

Final Conclusion: Delay is condoned. The appeal is dismissed, while paragraph 9 of the impugned order is affirmed, leaving the appellants free to seek relief from the successful resolution applicant.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor's board resolution - pre-existing dispute - arbitration clause and commencement of arbitration - remand for fresh consideration

Operational creditor's board resolution - Whether the Tribunals correctly held that there was no valid board resolution in favour of the appellant when the demand was raised and the Section 9 application filed - HELD THAT: - The Court found that both the NCLT and the NCLAT relied on a Board resolution of the Corporate Debtor rather than on the Board resolution of the Operational Creditor, which was the relevant document to determine whether the applicant had internal authorization at the time of issuing the demand and filing under Section 9. The question of validity and effect of the Operational Creditor's board resolution at the relevant time was not finally adjudicated by the Tribunals.

Matter remitted for fresh consideration of the validity of the Operational Creditor's board resolution and its effect on maintainability of the Section 9 application.

Arbitration clause and commencement of arbitration - Whether existence of an arbitration clause and service of a notice under Section 21 of the Arbitration and Conciliation Act, 2016 ousted the jurisdiction of the Adjudicating Authority to entertain the Section 9 application - HELD THAT: - The Court noted that only a notice under Section 21 had been issued to preserve limitation and that no arbitration proceedings had commenced. The question whether the arbitration clause operated to bar the Section 9 petition was not finally decided by the Tribunals and requires fresh consideration in the light of the factual position as to whether arbitration proceedings are pending or have been commenced.

Remitted to the Tribunal to examine afresh the effect of the arbitration clause, and whether arbitration proceedings (as opposed to a mere notice) exist to preclude the Section 9 application.

Pre-existing dispute - Whether there existed a bona fide pre-existing dispute between the parties which would defeat the Section 9 application - HELD THAT: - Respondent's counsel relied on the NCLAT's observation that the Corporate Debtor had denied the claimed amount. The Supreme Court held that the existence of a bona fide pre-existing dispute was not dealt with and not the basis on which the Section 9 application had been rejected by the Tribunals. That factual and legal question must be considered afresh by the Tribunal and Appellate Tribunal after hearing parties and examining materials on record.

Remitted for fresh adjudication by the Tribunal on whether a bona fide pre-existing dispute exists that would preclude admission under Section 9.

Remand for fresh consideration - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Disposition of the appeal and the impugned orders of the NCLT and NCLAT - HELD THAT: - The Supreme Court found that the Tribunals had not addressed the determinative issues correctly and that certain factual and legal questions remained undecided. For these reasons the Court set aside the impugned orders and directed that the Section 9 application be considered afresh on merits, allowing parties to raise all contentions permissible under law before the Tribunal.

Appeal allowed; impugned orders set aside; Section 9 application remitted for fresh consideration on merits.

Final Conclusion: The appeal is allowed. Both the NCLT and NCLAT orders are set aside and the application under Section 9 of the IBC is remitted to the Tribunal for fresh consideration on the merits, including examination of the Operational Creditor's board resolution, the effect of the arbitration clause and whether a bona fide pre existing dispute exists; parties may raise all legally permissible contentions before the Tribunal.

Dismissal of appeal - withdrawal of insolvency proceedings - preservation of civil remedies

Dismissal of appeal - The appeal against the impugned judgment is dismissed; no interference is warranted. - HELD THAT: - The Court, upon consideration of the matter, found no sufficient ground or justification to interfere with the impugned judgment and accordingly declined to disturb the decision under challenge. The order records the appellate court's satisfaction with the reasoning or outcome of the impugned judgment and results in dismissal of the appeal without further modification or direction.

Appeal dismissed; impugned judgment is upheld.

Withdrawal of insolvency proceedings - preservation of civil remedies - Withdrawal of proceedings under the Insolvency and Bankruptcy Code, 2016, shall not affect any civil proceedings that the parties may initiate. - HELD THAT: - The Court clarified that a party's withdrawal of insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, does not extinguish or prejudice any civil remedies available to the parties. Civil proceedings remain independent and may be pursued notwithstanding such withdrawal. This clarification preserves the parties' right to initiate or continue civil litigation irrespective of the status of insolvency proceedings.

Withdrawal of IBC proceedings will have no impact on civil proceedings; civil remedies preserved.

Final Conclusion: The appeal is dismissed. Withdrawal of the insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, does not affect any civil proceedings which the parties may initiate; pending applications, if any, are disposed of.

Impleading additional corporate debtor - compliance with Section 9(1) of the Insolvency and Bankruptcy Code, 2016 - prima facie illegality - stay of interlocutory order - proceedings against the original corporate debtor

Impleading additional corporate debtor - compliance with Section 9(1) of the Insolvency and Bankruptcy Code, 2016 - prima facie illegality - stay of interlocutory order - The order dated 26th November, 2020 impleading a company as Additional Corporate Debtor was prima facie illegal for non-compliance with Section 9(1) of the IB Code and was stayed. - HELD THAT: - The Supreme Court examined the order of the National Company Law Tribunal, Kochi Bench dated 26th November, 2020 which had impleaded a company as Additional Corporate Debtor in a pending application under Section 9 of the IB Code. The Court found, prima facie, that the impugned order suffered from illegality because the mandatory compliance required by sub section (1) of Section 9 had not been made. In view of this prima facie defect, the Court granted interim relief by staying the NCLT order of 26th November, 2020. The stay was confined to the impugned impleading order and was granted pending further hearing of the admitted appeal.

Order dated 26th November, 2020 impleading the additional corporate debtor is stayed.

Proceedings against the original corporate debtor - Section 9 of the Insolvency and Bankruptcy Code, 2016 - The main application under Section 9 of the IB Code may continue against the original Corporate Debtor notwithstanding the stay on the impleading order. - HELD THAT: - While staying the order of impleading an additional corporate debtor, the Court clarified that such interim relief would not impede the continuation of the primary Section 9 application insofar as it relates to the original Corporate Debtor. The Court therefore permitted the main insolvency petition under Section 9 to proceed against the original Corporate Debtor despite the stay on the NCLT's impleading order.

Main application under Section 9 may proceed against the original Corporate Debtor.

Final Conclusion: The appeal is admitted; the NCLT order dated 26th November, 2020 impleading an Additional Corporate Debtor is stayed on a prima facie finding of non compliance with Section 9(1) of the IB Code, while the main Section 9 proceeding may continue against the original Corporate Debtor.

Forfeiture of right to invoke arbitration on failure to apply under Section 8 before submitting first statement - duty of the adjudicating authority under Section 7 of the IBC to first record satisfaction on existence of debt and default - pending or prior arbitration does not bar initiation or adjudication of proceedings under Section 7 - acknowledgement of debt and its effect on limitation

Forfeiture of right to invoke arbitration on failure to apply under Section 8 before submitting first statement - maintainability of Application under Section 8 filed after filing the reply/first statement to a Section 7 petition - HELD THAT: - The Court held that Section 8 must be invoked not later than the date of submitting the first statement on the substance of the dispute; where the corporate debtor filed its reply to the Section 7 petition on 28.12.2023 and only thereafter moved Section 8 on 07.03.2024, the right to seek reference to arbitration was forfeited. The Tribunal relied on the principle that a defendant who has submitted to the jurisdiction by filing a written statement or first statement cannot subsequently seek referral under Section 8, and treated the delayed invocation as abandonment of the right. The Court also accepted precedent recognizing the time-bound framework of Section 8 and that failure to pursue it within the available time results in loss of the remedy. [Paras 10, 16, 17]

Application under Section 8 filed after the reply/first statement was not maintainable and was rightly rejected.

Duty of the adjudicating authority under Section 7 of the IBC to first record satisfaction on existence of debt and default - pending or prior arbitration does not bar initiation or adjudication of proceedings under Section 7 - whether the adjudicating authority must decide the Section 7 petition on debt and default even where an application under Section 8 is pending or arbitration proceedings exist - HELD THAT: - Relying on the law summarized in Indus Biotech (as extracted in paragraph 29 of that judgment), the Court reiterated that when a Section 7 petition is before the adjudicating authority, it is duty-bound to first consider and record satisfaction on whether there is debt and default; any Section 8 application filed thereafter will not be maintainable if the Section 7 petition is admitted. The timing of commencement or pendency of arbitration (whether before or after filing of Section 7) is immaterial and does not restrain the authority from deciding the Section 7 petition. Allowing Section 8 to stay Section 7 would frustrate the object of the IBC; accordingly the Adjudicating Authority correctly proceeded to reject the Section 8 application and consider the Section 7 petition. [Paras 13, 14, 18]

Adjudicating authority was required to and correctly proceeded to decide the Section 7 petition on debt and default; pending or prior arbitration did not bar such adjudication.

Acknowledgement of debt and its effect on limitation - effect of the corporate debtor's acknowledgements and one-time settlement proposals on the existence of debt and limitation - HELD THAT: - The Court noted the Section 7 petition's pleading that the corporate debtor had acknowledged the outstanding liability by communications dated 22.08.2019 and 25.05.2022 and that such acknowledgements operate to revive or create a fresh period of limitation. The admitted acknowledgements and the one-time settlement proposals were treated as establishing the existence of debt and default for the purposes of the Section 7 proceeding, supporting the conclusion that the petition was maintainable. [Paras 11, 19]

Acknowledgements by the corporate debtor were sufficient to establish debt and default and to negate limitation objections for the Section 7 petition.

Final Conclusion: The Appeal is dismissed. The Adjudicating Authority correctly rejected the belated Section 8 application filed after the reply/first statement; it was obliged to first decide the Section 7 petition on debt and default, and prior or pending arbitration did not bar such proceedings, especially where the corporate debtor had acknowledged the debt.

Computation of limitation - date of e-filing versus date of presentation at filing counter - condonation of delay under proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - applicability of administrative SOPs issued under Rule 104 of the NCLAT Rules, 2016 to computation of limitation - interaction between Rule 22 (presentation), Rule 103 (e-filing) and Rule 104 (directions) of the NCLAT Rules, 2016 - principle that rules or administrative directions prevailing on the date of consideration apply

Computation of limitation - date of e-filing versus date of presentation at filing counter - applicability of administrative SOPs issued under Rule 104 of the NCLAT Rules, 2016 to computation of limitation - interaction between Rule 22 (presentation) and Rule 103 (e-filing) - Limitation for filing the appeal is to be computed from the date of e-filing in the facts of this case. - HELD THAT: - The Tribunal examined Rule 22 (presentation at filing counter), Rule 103 (permitting e-filing) and the sequence of administrative SOPs dated 03.01.2021, 21.10.2022 and 24.12.2022. The Registrar's SOP dated 21.10.2022 declared computation from date of presentation but was to be effective from 01.11.2022 and was subsequently withdrawn by SOP dated 24.12.2022 which directs that limitation shall be computed from the date of e-filing and physical copy be filed within seven days. Relying on the settled principle that the rules or administrative directions prevailing on the date when the application is considered are to be applied, the Tribunal held that SOP dated 24.12.2022 governed the computation of limitation when the application for condonation was considered. In the light of that SOP and the earlier practice permitting e-filing, the three days delay measured from date of e-filing falls within the scope of computation from e-filing rather than presentation at the counter. [Paras 23, 24, 25, 27, 28]

Objection that limitation must be counted from date of presentation is overruled; limitation is to be computed from date of e-filing.

Condonation of delay under proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - application of prevailing procedural rules to exercise of discretionary condonation power - The three days' delay in filing the appeal is condoned under the proviso to Section 61(2) of the Code. - HELD THAT: - Having held that limitation is to be computed from the date of e-filing, the Tribunal found only a three-day delay in filing the appeal. The appellant furnished an explanation supported by affidavit and documentary material (certified copy receipt, drafts and correspondence) explaining the short delay. Exercising the discretionary power under the proviso to Section 61(2), and being satisfied that sufficient cause was shown, the Tribunal condoned the delay. The Tribunal noted that the power to condone a short delay rests with it but declined to extend any period beyond the statutory outer limit prescribed by the proviso. [Paras 14, 27, 29]

IA 5695 of 2023 is allowed and the three days' delay in filing the appeal is condoned.

Final Conclusion: SOP dated 24.12.2022 (limitation computed from date of e-filing) applies when the application was considered; consequently, the three-day delay measured from e-filing is condoned under the proviso to Section 61(2) and IA No. 5695 of 2023 is allowed.

Demand notice under Section 8 of the Insolvency and Bankruptcy Code - mandatory pre-condition for filing under Section 9 - service of notice at the registered office versus service on key managerial personnel - Form 3 requirement to address notice to the corporate debtor - Rule 5 modes of service of demand notice - distinguishing precedent on facts

Demand notice under Section 8 of the Insolvency and Bankruptcy Code - mandatory pre-condition for filing under Section 9 - Form 3 requirement to address notice to the corporate debtor - service of notice at the registered office versus service on key managerial personnel - Rule 5 modes of service of demand notice - Validity of the demand notice under Section 8 when addressed to the corporate debtor's key managerial personnel instead of to the corporate debtor itself - HELD THAT: - The Tribunal's finding that a demand notice in Form 3 must be addressed to the corporate debtor and delivered to its registered office was affirmed. Section 8 and Rule 5 read together require delivery of the demand notice to the corporate debtor; Rule 5(2)(a) prescribes modes for delivery at the registered office (by hand, registered post or speed post with acknowledgement) while Rule 5(2)(b) permits email delivery to a whole-time director or KMP only where electronic mail is used. A notice addressed to individual KMP in their personal capacity, even if physically received at the registered office, does not satisfy the statutory requirement of delivery to the corporate debtor unless the notice is in terms addressed to the juristic person through its registered office as envisaged by Form 3 and the Rules. Because the impugned demand notice named and addressed only the KMP and was not addressed to the corporate debtor as such, it could not be treated as a notice delivered to the corporate debtor and the Section 9 petition was incompetent for want of a valid Section 8 notice. [Paras 20, 21]

The demand notice was not a valid notice under Section 8 as it was not addressed to the corporate debtor and therefore the Section 9 petition was not maintainable.

Distinguishing precedent on facts - service and nomenclature issues in prior decisions - Applicability of the decision in Niraj Kumar Singh to the facts of the present case - HELD THAT: - The earlier decision relied upon by the appellant was examined and held to be fact-specific. In Niraj Kumar Singh the controversy related to nomenclature and identification of the corporate debtor and the court's conclusion turned on the materials showing that the names used identified the same juristic entity. That precedent did not decide the distinct question whether a notice addressed solely to individual KMP, and not to the corporate debtor by name at its registered office in Form 3, satisfies the statutory requirement. Accordingly the earlier decision was held not to be applicable to the present case. [Paras 22, 23]

The Niraj Kumar Singh decision is distinguishable on facts and does not assist the appellant.

Final Conclusion: The appeal is dismissed; the demand notice in Form 3 addressed only to the corporate debtor's KMP and not to the corporate debtor at its registered office did not constitute valid service under Section 8, rendering the Section 9 petition untenable.

Recognition and enforcement of foreign arbitral awards - scope of review under Section 48 of the Arbitration and Conciliation Act, 1996 - public policy of India (Section 48(2)) - limitation for enforcement of foreign awards (Article 137 of the Limitation Act, 1963) - deeming fiction that a foreign award is a decree (Section 49) - piercing the corporate veil / alter ego doctrine in execution proceedings - collateral challenge to court sanctioned demerger orders - fair hearing principle / requirement to cross examine (Browne v Dunn rule) - capacity and continuance of corporate parties in arbitration (amalgamation/continuance)

Recognition and enforcement of foreign arbitral awards - deeming fiction that a foreign award is a decree (Section 49) - Maintainability of a common petition for recognition/enforcement and execution of foreign awards under Sections 47-49 of the Act of 1996 - HELD THAT: - The Court followed the scheme of Part II and precedents (notably Fuerst Day Lawson and Vedanta) and held that a single petition may proceed in stages: first to determine enforceability under Sections 47-48 and, if enforceable, for effective steps for execution under Section 49 (the legal fiction deeming an enforceable foreign award to be a decree). Accordingly, a combined petition for recognition/enforcement and execution is maintainable and may include execution stage reliefs which the judgment debtor may oppose in execution.

A common petition for recognition/enforcement and execution under Sections 47-49 is maintainable; the Court may decide enforceability first and then proceed to execution steps.

Scope of review under Section 48 of the Arbitration and Conciliation Act, 1996 - Permissible scope of judicial enquiry under Section 48 when resisting enforcement of a foreign award - HELD THAT: - The Court reaffirmed the New York Convention's pro enforcement bias and the settled principle that Section 48 contains exhaustive, limited grounds on which enforcement may be refused. The enforcement court may refuse enforcement only if the party against whom enforcement is sought adduces proof falling within Section 48(1) or (2); the court may not review the merits of the award or re decide factual/merits issues beyond those narrow statutory grounds.

Enforcement court's scrutiny under Section 48 is limited to the enumerated grounds; merits review of the award is not permissible.

Limitation for enforcement of foreign awards (Article 137 of the Limitation Act, 1963) - deeming fiction that a foreign award is a decree (Section 49) - Whether the petition for enforcement was time barred - HELD THAT: - Applying the Supreme Court's authoritative treatment of limitation for foreign awards, the Court held that enforcement proceedings under Sections 47-49 are governed by the residuary Article 137 (three year period) rather than Article 136. The earlier local order treating the award as governed by Article 136 could not bind after higher authority to the contrary. The petitioner did not seek condonation of delay; therefore the enforcement petition filed in March/April 2018 was held to be barred by limitation.

The enforcement petition is time barred under Article 137; no condonation was sought, so the petition cannot be entertained on limitation grounds.

Public policy of India (Section 48(2)) - FEMA / requirement of prior RBI approval - fundamental policy of Indian law - fair hearing principle / requirement to cross examine (Browne v Dunn rule) - Whether enforcement must be refused because the underlying Master Agreement and award contravene public policy (FEMA/RBI approval) and for denial of fair hearing - HELD THAT: - The Court examined the Master Agreement which expressly contemplated prior RBI approval for the proposed remittances/structure. On the material before it (including unchallenged evidence that prior RBI approval had been sought and the tribunal's failure to properly test that evidence), the Court found that the obligation of prior RBI approval was material and not satisfied. Enforcement would, in the Court's view, offend the fundamental policy of Indian law (FEMA regime) and permit transfer of funds contrary to statutory controls. Separately, the tribunal admitted un controverted evidence on this issue without cross examination and then discounted it; that approach offended principles of fair hearing (Browne v Dunn rule) and contributed to perversity in the award. On these grounds the Court declined enforcement.

Enforcement of the awards is refused: (a) for being contrary to the fundamental policy of Indian law (RBI/FEMA requirements); and (b) for breach of fair hearing in the arbitral process.

Collateral challenge to court sanctioned demerger orders - Permissibility of collateral attack on Company Court orders sanctioning demerger as a route to trace assets - HELD THAT: - The Court recorded that both demerger schemes were sanctioned by the Company Court and statutory formalities were observed. The petitioner knew of the demerger and did not directly challenge the sanctioned schemes earlier; collateral attack on such court sanctioned schemes in enforcement proceedings was not permitted. The Court therefore declined to permit indirect re opening of the sanctioned demerger orders in these enforcement proceedings.

Collateral challenge to the court sanctioned demerger orders is not permissible in these enforcement proceedings; the demerger orders stand.

Piercing the corporate veil / alter ego doctrine in execution proceedings - Whether impleading non parties (Respondent Nos.2-4) and executing the award against them is permissible - HELD THAT: - Applying Part II's scheme and authoritative precedents, the Court held that foreign awards are binding only on parties to the arbitration. Non signatories who were not parties to the arbitral proceedings and against whom no award was made cannot be made liable in enforcement proceedings merely on the basis of group affiliation or bald allegations of asset diversion. Piercing the corporate veil is an exceptional remedy requiring cogent pleading and evidence of impropriety linked to misuse of the corporate form; the petition contained only vague, unparticularised allegations. Consequently the impleadment of Respondent Nos. 2-4 was unwarranted and the Chamber Summons for their deletion was to be allowed.

Impleading and proceeding to enforce the foreign awards against non party group companies is not justified on the present material; the additional respondents should be deleted.

Capacity and continuance of corporate parties in arbitration (amalgamation/continuance) - Validity of jurisdictional challenge based on amalgamation/continuance of the claimant (IMAX Ltd. into IMAX Corporation) - HELD THAT: - The Court declined to reopen the tribunal's jurisdictional finding. The arbitral tribunal accepted expert evidence that the change of corporate form/name on Canadian law facts was a matter of form not substance and permitted the claimant's name to be treated as IMAX Corporation; that conclusion involved no ground under Section 48(1)(a)/(d) warranting refusal of enforcement on jurisdictional grounds. The Court therefore did not interfere with the tribunal's ruling on continuance/amalgamation.

The tribunal's conclusion that IMAX Corporation succeeded to IMAX Ltd.'s rights (and that substitution/name amendment was permissible) stands; jurisdictional objection on amalgamation/continuance is not a ground to refuse enforcement here.

Final Conclusion: The petition for recognition, enforcement and execution of the three foreign arbitral awards is dismissed. The Court held a combined petition maintainable but refused enforcement on substantive grounds (contravention of fundamental policy of Indian law/FEMA and breach of fair hearing) and as barred by limitation; the impleadment of non party group companies was unjustified and the sanctioned demerger orders cannot be collaterally challenged in these proceedings.

Dealing in foreign exchange - Section 3(b) of FEMA - Penalty under Section 13 of FEMA - Adjudication procedure under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Admissibility and evidentiary value of statements recorded during investigation - Use of investigation findings of one law enforcement agency by another agency - Determination of "sum involved" for imposition of penalty - Vagueness of show cause notice and requirement of disclosure of material relied upon

Use of investigation findings of one law enforcement agency by another agency - Admissibility and evidentiary value of statements recorded during investigation - Whether the ED could rely upon the investigation, findings and statements recorded by the DRI (Customs) when independently enquiring under FEMA and whether those statements furnished a basis for proceedings under FEMA - HELD THAT: - The Tribunal held that there is no bar on the ED using information and findings generated by the DRI to initiate and conduct independent enquiries under FEMA. Although investigations under the Customs Act had a valuation focus and investigations under FEMA focused on payment of differential amounts through illegal channels, the ED independently recorded statements under FEMA and carried out verifications (including bank confirmations). The consistency of admissions recorded over an extended period and their reconfirmation before ED weighed against the contention that the statements were obtained under duress. Consequently the ED was entitled to rely on the investigative material insofar as it supported contraventions under FEMA. [Paras 54, 55, 56]

ED permissibly relied on DRI material and independently recorded statements; those materials could be used in FEMA proceedings.

Admissibility and evidentiary value of statements recorded during investigation - Whether the appellant's statements were involuntary (obtained by threat, inducement or coercion) and therefore inadmissible or unreliable for adjudication under FEMA - HELD THAT: - The Tribunal examined the chronology and circumstances: statements before DRI were recorded in 2007-08 and the ED recorded statements in 2011, which reconfirmed earlier admissions. The appellant first alleged coercion only at the adjudication stage. Given the temporal gap, the repeated confirmations and absence of retraction, the Tribunal found the coercion argument to be an afterthought. Distinctions with precedents relied upon by the appellant were noted on their facts (e.g., detention or immediate retraction in those cases). The burden to establish involuntariness was considered in context and the Tribunal concluded the department was not shown to have failed in its duty to justify reliance on the statements. [Paras 56, 57, 58]

Allegation of duress rejected; statements treated as reliable evidence for the FEMA adjudication.

Vagueness of show cause notice and requirement of disclosure of material relied upon - Adjudication procedure under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Whether the SCN was vague or defective for failing to disclose particulars and materials relied upon, and whether mere enclosure of the complaint with the SCN was insufficient - HELD THAT: - The Tribunal considered the SCN together with the enclosed complaint and annexures. The complaint specifically alleged payments of the differential amount in cash against 26 Bills of Entry and annexed the DRI SCN, the appellant's earlier statements and ED statements, and bank correspondence. Read as a composite document, the Tribunal found that specific allegations and the material relied upon were sufficiently disclosed and not vague. The Tribunal distinguished precedents where the SCN's allegations diverged from enclosed material, holding those facts not comparable here. [Paras 60, 61, 62, 63]

SCN together with the enclosed complaint and annexures was not vague; enclosure of the complaint satisfied disclosure in the facts of this case.

Adjudication procedure under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Whether the adjudication was vitiated by non compliance with Rule 4(1) and Rule 4(3) - specifically whether the adjudicating authority formed a prima facie opinion before proceeding to inquiry - HELD THAT: - The Tribunal examined the adjudication record and noted that the authority had discussed the factual background and had formed a prima facie view that contraventions under FEMA existed prior to issuing the SCN; a hearing notice was subsequently issued and opportunities were afforded. The Tribunal held that this sequence satisfied the requirement of forming an opinion before proceeding to inquiry and that no illegality flowed from the process followed. [Paras 66, 67]

No infraction of Rule 4(1)/(3); the adjudication process was not vitiated on that ground.

Determination of "sum involved" for imposition of penalty - Penalty under Section 13 of FEMA - Whether the adjudicating authority correctly determined the "sum involved" as the differential amount (Rs. 4,30,20,224/-) and lawfully imposed penalty under Section 13 of FEMA - HELD THAT: - The Tribunal relied on the appellant's own admissions regarding declared and actual values and his admission of payment of the differential amount in cash to representatives of overseas suppliers. The order also noted corroborative material recovered in related DRI investigations and insurance documents showing higher values. In absence of any alternate evidentiary computation by the appellant, the Tribunal found no infirmity in treating the admitted differential as the "sum involved" and in imposing penalty thereon under Section 13. [Paras 68, 69, 70]

The "sum involved" was correctly determined and the penalty under Section 13 was sustainable.

Continuance of proceedings notwithstanding change of adjudicating authority - Whether adjudication by an Additional Director (different officer from the Special Director who issued the SCN) rendered the order void for want of authority or prejudice - HELD THAT: - The Tribunal observed a substantial interval between issuance of SCN and the order and noted that Section 16 of FEMA empowers central government to appoint adjudicating officers. Continuation of proceedings by a successor adjudicating authority is permissible and does not require issuance of a fresh SCN, provided natural justice is observed. No prejudice was shown and no denial of hearing was alleged. Accordingly the change in incumbent did not vitiate the order. [Paras 64]

Change of adjudicating officer did not render proceedings or order invalid.

Final Conclusion: The appeal is dismissed; the adjudicating authority's finding of contravention of Section 3(b) of FEMA and imposition of penalty under Section 13 (based on the determined "sum involved") are upheld, and the penalty order is sustained.

Construction of 'proceeds of crime' to include property or the value of property of equivalent value - provisional attachment order under the Prevention of Money Laundering Act (PMLA) - mandatory 'reasons to believe' requirement under Section 5(1) of PMLA - first proviso to Section 5(1) and its conditions for provisional attachment - requirement to forward the PAO and material 'immediately' to the adjudicating authority - availability of alternative statutory remedy before the adjudicating authority

Construction of 'proceeds of crime' to include property or the value of property of equivalent value - provisional attachment order under the Prevention of Money Laundering Act (PMLA) - Whether the definition of 'proceeds of crime' permits attachment of properties not directly traceable to scheduled offences including property of equivalent value, and whether the PAO was sustainable on that basis. - HELD THAT: - The Court held that the definition of 'proceeds of crime' as interpreted by the Supreme Court in Vijay Madanlal Chaudhary embraces not only property derived from scheduled offences but also the value of such property and property of equivalent value. The transformative amendments and judicial pronouncements (including Axis Bank and Prakash Industries) support categorising proceeds into tainted property and untainted property (including equivalent value and property held outside India). Because the Supreme Court's interpretation supersedes the Division Bench decision in Seema Garg, the latter is no longer good law. Applying this construction, the Bench found sufficient material on record (including seized electronic records, fake e Ravana bills and other entries) to justify provisional attachment under PMLA at the prima facie stage, noting that PAO is provisional and subject to adjudication and opportunity under Section 6. [Paras 3]

The PAO is sustainable on the basis that 'proceeds of crime' includes property or value of equivalent property; the PAO was not vitiated on this ground.

Mandatory 'reasons to believe' requirement under Section 5(1) of PMLA - provisional attachment order under the Prevention of Money Laundering Act (PMLA) - Whether the PAO was invalid for want of recorded 'reasons to believe' required by Section 5(1). - HELD THAT: - The Court examined Section 5(1)'s statutory mandate that the authorised officer record 'reasons to believe' in writing based on material in his possession. On perusal of the PAO dated 09.08.2024, the Court found that the Deputy Director recorded detailed reasons in writing, supported by seized electronic and physical material, discrepancies in mining records, fake invoices and other indicia of laundering. Reliance on precedents cited by the petitioner was distinguished on facts; Vijay Madanlal Chaudhary was read to require written reasons based on material, which in the present case existed. The Court therefore found the contention of non recording to be without substance. [Paras 3]

The PAO meets the 'reasons to believe' requirement of Section 5(1) and is not vitiated on this ground.

First proviso to Section 5(1) and its conditions for provisional attachment - Whether compliance with the first proviso to Section 5(1) (filing/forwarding of report under Section 173 Cr.P.C. or analogous complaint) was a sine qua non for passing the PAO in the facts of this case. - HELD THAT: - The Court parsed the three limbs of the first proviso and observed that the proviso requires a report under Section 173 Cr.P.C. or a complaint by an authorised person in relation to scheduled offences, but it does not make such filing an absolute precondition in every circumstance for provisional attachment against any person in possession of proceeds. The Bench noted that the petitioner was an accused in FIR No.21 registered after the searches conducted by ED and that substantial material prima facie linking the petitioner to illegal mining and laundering existed. The Court concluded that the proviso's requirements were satisfied and that the PAO could be validly passed even if not every antecedent FIR had a final report naming the petitioner. [Paras 3]

The first proviso to Section 5(1) does not render the PAO invalid in the present facts; its conditions were fulfilled and provisional attachment was permissible.

Requirement to forward the PAO and material 'immediately' to the adjudicating authority - Whether the delay in forwarding the PAO and material to the adjudicating authority vitiated the PAO. - HELD THAT: - The Court analysed the term 'immediately' through precedents (including Shento Varghese and Rao Mahmood Ahmad Khan) and held that where no fixed time is prescribed the term must be given a reasonable construction-'as soon as may be' or within reasonable time given the circumstances. The PAO was passed on 09.08.2024 (a Friday) and forwarded with material on 12.08.2024 after intervening holidays; the Court found this explanation reasonable and held that the procedural requirement is directory rather than mandatory where no express consequence is prescribed. Thus the short delay did not vitiate the attachment. [Paras 3]

The delay in forwarding the PAO and material was reasonably explained and does not invalidate the PAO.

Availability of alternative statutory remedy before the adjudicating authority - Whether the writ petitions were barred by availability of an efficacious alternative remedy before the adjudicating authority under PMLA. - HELD THAT: - While acknowledging that an alternative remedy under Section 8 exists and is a relevant consideration, the Court exercised its discretion to entertain the writ petitions. The Bench explained that the petitions were filed on the footing of established precedent (Seema Garg) and, given the legal question raised about interpretation, it was appropriate to adjudicate rather than decline on the ground of alternate remedy. The Court nevertheless indicated that the adjudicating authority would be free to proceed and decide uninfluenced by the observations in this order. [Paras 3]

The writ petitions are maintainable and may be entertained despite the availability of statutory remedies; the Court proceeded to decide the contentions.

Final Conclusion: The writ petitions lack merit and are dismissed. The provisional attachment order is upheld on the considered grounds; the adjudicating authority shall proceed to decide the matter under the PMLA in accordance with law, uninfluenced by this order.

Failure to furnish information under Section 12(1)(b) - obligation to maintain and furnish Cash Transaction Reports under Rule 3 and Rule 7 - time limit and reporting obligation under Rule 8(1) and Rule 8(4) - penalty under Section 13 for each failure - defective reporting is no reporting - civil penalty not requiring mens rea - discretion to issue warning versus impose monetary penalty

Failure to furnish information under Section 12(1)(b) - obligation to maintain and furnish Cash Transaction Reports under Rule 3 and Rule 7 - time limit and reporting obligation under Rule 8(1) - Validity of imposition of monetary penalty for non reporting and delayed reporting of cash transactions in the bank accounts - HELD THAT: - The Tribunal found that the bank admitted non reporting of 16 CTRs and delay in filing 6 CTRs and that the contraventions of the statutory reporting obligations under Section 12(1)(b) read with Rules 3, 7 and 8 were established on the record. Rule 8(1) prescribes the reporting timeline (by the 15th day of the succeeding month) and defective submissions that were rejected by FIU amount to non reporting in law. The Tribunal observed that there were series of transactions across different months in 2015-2016 and that reporting was effected only after RBI brought the matter to FIU; the continuous and prolonged nature of non compliance and the absence of timely corrective steps justified imposition of penalty. The appellate jurisdiction is limited and interference with the quantum of penalty was not warranted as the penalty could not be characterised as disproportionate on the facts. [Paras 24, 25, 35, 37]

Penalty for non reporting and delayed reporting was validly imposed and the appeal is dismissed on this ground.

Penalty under Section 13 for each failure - time limit and reporting obligation under Rule 8(4) - defective reporting is no reporting - Interpretation of the phrase 'each failure' in Section 13 and the effect of Rule 8(4) on counting violations - HELD THAT: - The Tribunal held that the phrase 'each failure' in Section 13 must be read in conjunction with Rule 8(4) which specifies that delay of each day in not reporting a transaction or delay of each day in rectifying a mis reported transaction beyond the prescribed time shall constitute a separate violation. Consequently, 'each failure' refers to failure to furnish information or delay in furnishing information in respect of each transaction (and, as guided by Rule 8(4), each day of delay), and is not confined to a single aggregate concept divorced from Rule 8(4). The Tribunal further noted that had each day been reckoned strictly, the penalty could have been higher than imposed. [Paras 21, 31, 36]

'Each failure' denotes failure to furnish information or delay in respect of each transaction (with Rule 8(4) treating each day of delay as a separate violation).

Civil penalty not requiring mens rea - discretion to issue warning versus impose monetary penalty - Whether mens rea is necessary or whether a warning should have been issued instead of a monetary penalty - HELD THAT: - Relying on subsequent authority distinguishing Hindustan Steel Ltd., the Tribunal held that civil penalties for breach of statutory reporting obligations are attracted on establishment of contravention and do not require proof of mens rea. While Section 13 empowers the Director to issue a warning, direct compliance directions or impose monetary penalty, that discretion is to be exercised judicially. On the facts-continuous, prolonged and admitted non compliance-the Tribunal held that imposition of monetary penalty was justified and a mere warning would not have served the object of ensuring compliance of the Act and Rules. [Paras 29, 33, 34, 35]

Mens rea is not a prerequisite for imposing civil penalty; the Director was entitled to impose monetary penalty rather than confine action to a warning on the facts of this case.

Obligation to evolve internal mechanism under Rule 7(3) and Rule 5(2) - penalty under Section 13 for failure to have effective internal mechanism - Validity of penalty imposed for failure to maintain an effective internal mechanism to detect and report CTRs - HELD THAT: - The Tribunal found that the allegation of failure to put in place an effective internal mechanism was proved because the bank admitted it was not reporting CTRs for loan accounts until after RBI's communication and only rectified procedures thereafter. The bank did not successfully contest this aspect, and therefore the Director was justified in imposing the penalty provided under Section 13 for such failure to comply with duties prescribed under the Rules. [Paras 26]

Penalty imposed for failure to maintain an effective internal mechanism to detect and report CTRs is upheld.

Final Conclusion: The Appellate Tribunal dismissed the appeal, upholding the Director, FIU India's imposition of monetary penalties for admitted non reporting and delayed reporting of cash transactions, for the defective nature of earlier submissions, for failure to maintain an effective internal mechanism, and for the correct interpretation that 'each failure' (read with Rule 8(4)) covers failure in respect of each transaction and delays as specified.

Provisional attachment - confirmation within 180 days - exclusion of period of limitation by In re: Limitation (Covid-19) - proceeds of crime and money laundering

Provisional attachment - confirmation within 180 days - exclusion of period of limitation by In re: Limitation (Covid-19) - Whether the provisional attachment lapsed for want of confirmation within 180 days or whether the period excluded by the Supreme Court in In re: Limitation applies to computation of the 180 days under the PMLA. - HELD THAT: - The Tribunal examined the timeline of provisional attachment dated 18.06.2021 and the confirmation order dated 29.03.2022 and considered the appellant's contention that Section 5(3) of the PMLA required confirmation within 180 days. It analysed the effect of the Supreme Court's orders in the Suo Motu writ petition (In re: Limitation) and subsequent extensions which excluded the period from 15.03.2020 to 28.02.2022 (as explained in the decisions cited) for computation of limitation and for statutes prescribing outer limits for termination of proceedings. Relying on the reasoning that the 180-day period under Section 5(3) is an outer limit for termination of attachment proceedings, the Tribunal held that the exclusion ordered by the Supreme Court applies to computation of the 180 days under the PMLA. The Tribunal rejected the appellant's reliance on authorities that drew a distinction between personal liberty and property rights, and accepted the view that the Apex Court's extension safeguards the litigant's right to remedy and applies where a statute prescribes an outer limit for completing proceedings. Applying the exclusion, the remaining unexcluded period was within 180 days and therefore the confirmation did not lapse. [Paras 27, 28, 29, 30, 31]

The period excluded by the Supreme Court's orders in In re: Limitation is applicable in computing the 180 days under Section 5(3) of the PMLA; accordingly the confirmation order did not lapse and cannot be set aside on that ground.

Proceeds of crime and money laundering - Whether the material on record justified confirmation of provisional attachment on the ground of money laundering. - HELD THAT: - The Tribunal considered the facts underlying two FIRs and the ECIR, including allegations of inflated allotments under the Slum Rehabilitation Scheme, fabrication of documents, and the Transfer-cum-Assignment transaction with M/s Chintan Life Spaces LLP resulting in funds being received by the appellant and his entities. The Adjudicating Authority had relied on investigative material, statements and charge-sheets to find a case of money laundering and that proceeds of crime had been utilised to acquire the attached properties. The appellant framed factual defences (civil suit, supplementary agreement) but did not contest the sufficiency of the material at the adjudicatory stage by way of cogent legal argument. Having reviewed the record and rival submissions, the Tribunal found no ground to interfere with the Adjudicating Authority's conclusion that the material was sufficient to sustain confirmation of attachment. [Paras 16, 24]

The Adjudicating Authority's conclusion that the available material justified confirmation of the provisional attachment in respect of proceeds of crime and money laundering is not interfered with.

Final Conclusion: The appeal is dismissed: the confirmation of provisional attachment stands affirmed - the Supreme Court's exclusion of the Covid-19 period applies for computing the 180-day limit under the PMLA and the material on record sufficed to uphold the attachment on money laundering grounds.

Summary order. Special Leave Petition dismissed; delay in filing and refiling condoned; Court recorded that the refund amount has been released to the respondent pursuant to the High Court's direction; pending applications disposed of.

Order beyond scope of show cause notice - works contract service - scope of adjudication - opportunity to defend against new demand - order travelling beyond notice unsustainable

Order beyond scope of show cause notice - works contract service - opportunity to defend against new demand - Whether the order-in-original travelled beyond the scope of the show cause notice and thus is unsustainable. - HELD THAT: - The Tribunal examined undisputed findings that the appellant's contracts were works contracts involving provision of services along with materials, a fact noted in earlier proceedings and in the impugned order. The Commissioner, following the Supreme Court's decision in Larsen & Toubro, set aside demand prior to 1st June 2007 but proceeded to confirm demand for the period after 1st June 2007 under the head "works contract service." The show cause notice, however, did not propose a demand under the head "works contract service" and the appellant was not given an opportunity to defend against liability under that head. The Tribunal held that an order which imposes a demand or reaches conclusions beyond the scope of the SCN, without giving the affected party notice and opportunity to meet the case, is legally impermissible. Since the impugned adjudication confirmed demand under a head not contemplated in the SCN and without affording a chance to the appellant to contest that specific demand, the order travelled beyond the SCN and could not be sustained. Having decided this determinative point, the Tribunal found it unnecessary to address the other grounds raised by the appellant. [Paras 11, 12, 13]

Impugned order set aside on the ground that it travelled beyond the show cause notice; appeal allowed with consequential reliefs.

Final Conclusion: The Tribunal allowed the appeal, set aside the Commissioner's order dated 13.04.2018 because it travelled beyond the scope of the show cause notice by confirming demand under "works contract service" which was not proposed in the SCN and without affording the appellant an opportunity to meet that case; consequential reliefs were granted.

Summary order. Civil Appeals dismissed; delay condoned; pending applications disposed of.

Summary order. Special Leave Petition dismissed for delay (157 days) and on merits; pending applications, if any, disposed of.