TaxTMI Updates e-Newsletter
Nov 22,2022

Transitional credit under Section 140 of the CGST Act, 2017 - distribution of Input Service Distributor credit - filing and revision of TRAN-1/TRAN-2 through GSTN common portal - reflection of allowed transitional credit in Electronic Credit Ledger - verification of transitional credit by assessing officers within a stipulated period

Transitional credit under Section 140 of the CGST Act, 2017 - filing and revision of TRAN-1/TRAN-2 through GSTN common portal - distribution of Input Service Distributor credit - Petitioner entitled to avail the Supreme Court-directed window to file or revise TRAN-1 for units/offices to enable transition and distribution of erstwhile ISD service tax credit into the GST regime. - HELD THAT: - Relying on the Supreme Court's directions in Union of India v. Filco Trade Centre Pvt. Ltd., the High Court directed that the petitioner's units/offices registered under the CGST/State Acts may file or revise GST TRAN-1 in the GSTN common portal within the window permitted by that order. The Court recognised that procedural and technical difficulties in the portal and forms impeded transition and, adopting the approach in earlier High Court orders in similar matters, permitted utilization of the remedial window to enable distribution of ISD credits. The filing/revision is to be based on manual ISD invoices issued or to be issued by the petitioner's ISD, subject to the overall cap on available ISD credit as stated by the petitioner.

Direction granted to permit filing/revision of TRAN-1 by petitioner's units/offices to effect transition and distribution of ISD credit.

Verification of transitional credit by assessing officers within a stipulated period - reflection of allowed transitional credit in Electronic Credit Ledger - Assessment authorities to verify claims of transitional ISD credit on merits within 90 days after the filing window and, if allowed, the transitional credit shall be reflected in the Electronic Credit Ledger. - HELD THAT: - Following the procedure mandated by the Supreme Court order, the High Court directed that concerned officers be given 90 days after the filing/revision window to verify the veracity of transitional credit claims, grant reasonable opportunity to the parties, and pass appropriate orders on merits. Upon allowance, the transitional credit is to be reflected in the Electronic Credit Ledger. The Court noted that CBIC has issued a clarification addressing distribution/reporting of ISD credit and that GSTN must ensure the portal functions without technical glitches during the prescribed window.

Officers directed to adjudicate claims within 90 days and, if allowed, ensure reflection of the transitional credit in the Electronic Credit Ledger.

Distribution of Input Service Distributor credit - aggregate cap on ISD credit transitioned - The TRAN-1/revised TRAN-1 filed by petitioner's units/offices must be premised on manual ISD invoices and the aggregate credit distributed shall not exceed the ISD credit stated by the petitioner in its petition. - HELD THAT: - The Court imposed the limitation that distribution and reporting under the remedial filing shall be subject to the cumulative ISD credit available to the petitioner as declared in the petition. This anchors the transitional filings to the documentary foundation of manual ISD invoices and prevents distribution beyond the aggregate ISD credit asserted by the petitioner.

TRAN-1 filings permitted but restricted so that cumulative distributed credit does not exceed the ISD credit admitted by the petitioner.

Final Conclusion: Writ petition disposed by permitting petitioner's units/offices to file or revise TRAN-1 through the GSTN portal under the Supreme Court's remedial window, subject to documentary support and the petitioner's stated aggregate ISD credit; assessing officers to verify claims within 90 days and, if allowed, direct reflection of the transitional credit in the Electronic Credit Ledger.

Entertainment of writ petition at show cause notice stage - alternative statutory remedy and self-imposed restriction on writ jurisdiction - determination of tax liability under Section 73 of the GST Act - power and role of the proper officer - WAMIS data vis-a -vis GSTR-3B discrepancy - revised guidelines dated 10.12.2018 for works contract and transitional computation - non-joinder and mis-joinder of necessary parties - contractual allocation of tax liability (change of law clause)

Entertainment of writ petition at show cause notice stage - alternative statutory remedy and self-imposed restriction on writ jurisdiction - Whether the writ petition challenging Show Cause Notices dated 06.08.2022 is maintainable at the stage of notice. - HELD THAT: - The Court held that entertaining the writ at the stage of issuance of Show Cause Notices would be premature. Where a statutory remedy exists under the GST scheme for adjudication and appeal, the High Court should ordinarily refrain from exercising Article 226 jurisdiction unless exceptional circumstances (such as lack of jurisdiction, breach of natural justice, or vires of the statute) are shown. The judgment applies settled principles limiting writ interference at the notice stage and relies on authorities establishing the rule of self-imposed restraint in the presence of efficacious alternative remedies. Consequently, the Court declined to quash the show cause process at the notice stage and left the petitioner to avail the statutory adjudicatory process. [Paras 5, 6]

Entitlement to writ relief at show cause notice stage denied; invocation of Article 226 is premature and the petition is dismissed.

Non-joinder and mis-joinder of necessary parties - pending representation not a bar to tax adjudication - Whether pendency of representations before Executive Engineers (not impleaded) or mis-joinder/non-joinder precludes initiation of proceedings by the CT&GST Officer. - HELD THAT: - The Court found the writ petition incompetent on account of non-joinder and mis-joinder of proper and necessary parties and noted that pendency of representations before authorities who are not parties to the petition cannot be relied upon to oust the jurisdiction of the tax authority. The Executive Engineer is not the competent authority for adjudication of tax liability under the GST Act; hence pendency of such representations does not invalidate or impede the CT&GST Officer from initiating proceedings under Section 73. [Paras 4]

Writ incompetent for non-joinder/mis-joinder; pendency of representations before non-impleaded authorities does not bar tax adjudication by the proper officer.

Determination of tax liability under Section 73 of the GST Act - power and role of the proper officer - WAMIS data vis-a -vis GSTR-3B discrepancy - Whether the CT&GST Officer was justified in invoking Section 73 on the basis of discrepancy between WAMIS and GSTR-3B returns and in issuing Show Cause Notices for determination of tax not paid/short paid. - HELD THAT: - The Court observed that determination of tax liability is squarely within the remit of the 'proper officer' under the GST Act and that issuance of a show cause under Section 73 on the basis of a discrepancy between the departmental data (WAMIS) and returns (GSTR-3B) is a permissible exercise to initiate adjudication. The petitioner must justify the figures disclosed in Form GSTR-3B vis-a -vis the WAMIS data before the assessing authority; the existence of a pending representation to a non-tax authority does not preclude the assessing authority from proceeding. The Court emphasised that factual disputes as to amounts or entitlement are for the statutory adjudicatory process to resolve. [Paras 4, 5]

Proper officer was competent to invoke Section 73 and issue Show Cause Notices based on WAMIS-GSTR-3B discrepancy; adjudication must proceed through statutory process.

Revised guidelines dated 10.12.2018 for works contract and transitional computation - contractual allocation of tax liability (change of law clause) - Whether the Revised Guidelines dated 10.12.2018 are valid and address the petitioner's claim for reimbursement arising from the introduction of GST for contracts awarded prior to 01.07.2017. - HELD THAT: - The Court upheld the Revised Guidelines of 10.12.2018 as the relevant policy for computing transitional tax effects in works contracts spanning the introduction of GST. The guidelines prescribe bifurcation of work into pre- and post-GST components, derivation of tax-exclusive values, application of revised Schedule of Rates and addition of applicable GST rates to the balance work, and provide for supplementary agreements and recovery/reimbursement mechanisms. The petitioner's reliance on the earlier 07.12.2017 circular was treated as misplaced, and the Court noted that the Revised Guidelines rationally determine the methodology to ascertain GST-inclusive values for balance work. [Paras 4]

Revised Guidelines dated 10.12.2018 are valid and constitute the proper basis for addressing transitional claims; petitioner cannot rely on the superseded circular to derail tax adjudication.

Final Conclusion: The writ petition challenging the Show Cause Notices dated 06.08.2022 is dismissed as premature; the proper officer is entitled to proceed under Section 73 after affording the petitioner opportunity of hearing, the petitioner must avail statutory remedies and the Revised Guidelines dated 10.12.2018 govern transitional computation; parties to bear their own costs.

Transitional credit through TRAN-1 and TRAN-2 - opening of common portal for filing - right of any aggrieved registered assessee to file or revise forms - verification of transitional credit claims by assessing officers within 90 days - reflection of allowed transitional credit in Electronic Credit Ledger - obligation on GSTN to prevent technical glitches

Transitional credit through TRAN-1 and TRAN-2 - right of any aggrieved registered assessee to file or revise forms - opening of common portal for filing - Petitioner's entitlement to file GST TRAN-1 electronically during the limited portal window and to have it treated as filed in accordance with law. - HELD THAT: - The High Court disposed the writ by applying and following the directions in the earlier order (which in turn followed the Hon'ble Supreme Court in Union of India v. Filco Trade Centre Pvt. Ltd.). Those directions mandate that GSTN open a common portal for filing TRAN-1 and TRAN-2 for the period 01.09.2022 to 31.10.2022 and permit any aggrieved registered assessee to file or revise the relevant form irrespective of pending writs or ITGRC decisions. The Court recorded the petitioner's endorsement that it would avail the benefit extended by that order and directed that the petition be disposed on those terms. The order thereby recognises the petitioner's right to electronically file TRAN-1 within the prescribed window and be treated as having filed the form in accordance with law.

Writ petition disposed permitting the petitioner to avail the benefit of filing TRAN-1 electronically during the specified portal window; no costs.

Verification of transitional credit claims by assessing officers within 90 days - reflection of allowed transitional credit in Electronic Credit Ledger - obligation on GSTN to prevent technical glitches - Procedural consequences and safeguards applicable to filings made under the portal window as contemplated by the referenced order. - HELD THAT: - The Court recorded the series of directions from the earlier order which provide that GSTN must ensure absence of technical glitches during the filing window; concerned officers are to verify the veracity of claims within 90 days after the window and pass appropriate orders after granting reasonable opportunity; and any allowed transitional credit is to be reflected in the Electronic Credit Ledger. These procedural directions govern the subsequent scrutiny and accounting of any transitional credit claimed by assessees who file or revise forms in the stipulated period.

The petition is disposed on the terms of the referenced directions, including the procedural safeguards and post-filing verification mechanism.

Final Conclusion: The writ petition is disposed of by permitting the petitioner to avail the relief prescribed in the earlier order-namely to electronically file TRAN-1 within the portal window (01.09.2022 to 31.10.2022) and be treated as filed in accordance with law, subject to verification by the authorities as directed; no costs.

Penalty under section 271AAA - Undisclosed income - definition for section 271AAA - Voluntary disclosure versus disclosure in statement under section 132(4) - Immunity from penalty under section 271AAA(2) - Alternate disclosure regime under section 271AAB

Penalty under section 271AAA - Undisclosed income - definition for section 271AAA - Validity of levy of penalty under section 271AAA where search under section 132 led to disclosure of additional income - HELD THAT: - The Tribunal affirmed the view of the CIT(A) that section 271AAA is mechanically applicable where a search under section 132 has been conducted and the income falls within the statutory definition of 'undisclosed income'. The assessee made a disclosure consequent to the search and declared the additional income in its return; however, the disclosure was not made in a statement under section 132(4). The court held that where the disclosed income is of the character described in the Explanation to section 271AAA and the disclosure arises from the search, the Assessing Officer is entitled to impose penalty under section 271AAA. The Tribunal found no infirmity in the AO's conclusion and sustained the levy of penalty.

Levy of penalty under section 271AAA is upheld.

Voluntary disclosure versus disclosure in statement under section 132(4) - Immunity from penalty under section 271AAA(2) - Whether the assessee was entitled to immunity from penalty under subsection (2) of section 271AAA - HELD THAT: - Sub-section (2) of section 271AAA displaces applicability of sub-section (1) only where the assessee, in the course of the search, admits the undisclosed income in a statement under section 132(4), substantiates the manner in which it was derived and pays tax with interest. The Tribunal accepted the CIT(A)'s finding that the assessee did not make the requisite admission under section 132(4) and that the disclosure was consequential to the search rather than a statutory statement during search proceedings. Consequently, the assessee did not fulfil the conditions of section 271AAA(2) and could not claim immunity from penalty thereunder.

Claim of immunity under section 271AAA(2) is rejected.

Alternate disclosure regime under section 271AAB - Immunity from penalty by declaring before specified date - Acceptability of the assessee's contention based on section 271AAB (post insertion disclosure regime) as a bar to levy of penalty - HELD THAT: - The assessee relied on the later insertion of section 271AAB (Finance Act, 2012) which provides a different penalty and a specified-date declaration route for cases where the assessee did not admit undisclosed income in a statement under section 132(4). The Tribunal noted the contention but found that the assessee did not place material to substantiate entitlement under that provision or to rebut the factual finding that the disclosure was consequent to the search and not made in a statutory search statement. In absence of such material, the Tribunal declined to disturb the findings below.

Reliance on section 271AAB does not avail the assessee on the facts before the Tribunal.

Final Conclusion: The Tribunal affirmed the orders below and dismissed the assessee's appeal; the penalty under section 271AAA was sustained as the disclosure arose consequent to a search and the statutory conditions for immunity were not satisfied.

Revision under section 263 - order erroneous and prejudicial to the interest of revenue - Non-application of mind by the Assessing Officer - Discrepancy between purchases as per books and purchases as per VAT returns and unexplained short-accounting of interest as per Form 26AS - Limits of revisional power - direction to recompute by PCIT versus requirement to remit for verification and opportunity of hearing

Revision under section 263 - order erroneous and prejudicial to the interest of revenue - Non-application of mind by the Assessing Officer - Discrepancy between purchases as per books and purchases as per VAT returns - Whether the Principal Commissioner of Income Tax was justified in invoking section 263 on the ground that the assessing officer failed to verify material discrepancies in purchases, rendering the assessment order erroneous and prejudicial to the interest of the revenue. - HELD THAT: - The Tribunal found on review of the assessment record that the AO's order under section 143(3) did not discuss or examine the discrepancy between purchases debited to the profit and loss account and purchases as per VAT returns. The assessee had not furnished a reconciliation during the original assessment and the AO did not make enquiries or apply his mind to this vital issue. Such complete non-application of mind in relation to a material discrepancy renders the assessment order both erroneous and prejudicial to the revenue. For these reasons the ld. PCIT was justified in invoking the revisional jurisdiction under section 263 and the invocation is upheld. [Paras 14, 15]

Invocation of section 263 was justified and upheld because the AO failed to examine and verify the material discrepancy in purchases, resulting in an order that was erroneous and prejudicial to the revenue.

Revision under section 263 - order erroneous and prejudicial to the interest of revenue - Non-application of mind by the Assessing Officer - Unexplained short-accounting of interest as per Form 26AS - Whether the Principal Commissioner of Income Tax was justified in invoking section 263 on the ground that the AO failed to verify and bring to tax the short-accounted interest income shown in Form 26AS. - HELD THAT: - The assessment record showed that interest income reported in the P&L account differed from Form 26AS and the AO did not discuss or verify this discrepancy in the assessment order. The Tribunal held that the AO's failure to enquire into the mismatch amounted to non-application of mind, thereby making the assessment order erroneous and prejudicial to the interest of the revenue. Accordingly, the PCIT's exercise of revisional jurisdiction in respect of the unverified interest discrepancy is sustained. [Paras 14, 15]

Invocation of section 263 was justified and upheld because the AO did not examine the discrepancy between interest recorded in accounts and Form 26AS, producing an order erroneous and prejudicial to the revenue.

Limits of revisional power - direction to recompute by PCIT versus requirement to remit for verification and opportunity of hearing - Whether the PCIT could direct specific recomputation (disallowance of excess purchases and addition of short-accounted interest) instead of remitting the matter to the AO for verification and fresh decision after giving the assessee an opportunity of being heard. - HELD THAT: - While the Tribunal upheld the validity of invoking section 263, it concluded that the substantive directions issued by the PCIT to recompute income by mechanically disallowing the claimed excess purchases and adding the short-accounted interest were not in accordance with law. The proper exercise of revisional power requires either the revising authority to itself examine matters or to direct the AO to verify details and decide after giving the assessee an opportunity of hearing. Therefore the Tribunal modified the PCIT's order directing that the AO should examine the details, verify the discrepancies and pass an appropriate order in accordance with law, after affording the assessee a hearing and uninfluenced by the PCIT's prior numeric directions. [Paras 15]

The PCIT's direction to recompute income by specific additions/disallowances is set aside; the matter is to be remitted to the AO to verify details and decide after giving the assessee an opportunity of being heard.

Final Conclusion: The Tribunal dismissed the assessee's appeal. It upheld the PCIT's invocation of section 263 insofar as the AO's order was found erroneous and prejudicial due to non-application of mind on discrepancies in purchases and interest, but set aside the PCIT's specific directions to recompute figures and remitted the matter to the AO for verification and fresh decision after affording the assessee a hearing.

Disallowance of subcontracting expenses - bogus expenditures / bogus bills - reopening of assessment under section 147 - reason to believe and prima-facie material - addition of profit element in respect of bogus purchases/expenses

Disallowance of subcontracting expenses - bogus expenditures / bogus bills - addition of profit element in respect of bogus purchases/expenses - Extent to which payments to subcontractors, held by AO to be bogus, could be disallowed - HELD THAT: - For each assessment year the AO concluded that large payments to subcontractors were non genuine based on statements of some subcontractors, operation of subcontractors' bank accounts by assessee's employees, absence of supporting purchase/wage records and bills generated from assessee's computer. The CIT(A) reversed the AO's deletion of the disallowance and the Tribunal examined the totality of facts including (i) that the assessee's contractual income (sales) arising from the same works was not disputed, (ii) subcontractors had admitted engagement and receipt of payments and TDS had been deducted and (iii) practical realities of contracting business where labour disbursements are often made in cash and books may be maintained loosely. Applying precedents which permit restricting an AO's addition to the profit element embedded in alleged bogus purchases, the Tribunal held that disallowing the entire subcontracting payments was unjustified but some disallowance was warranted on the AO's adverse findings. Considering the assessee's net profit rate for the year and the authorities cited, the Tribunal exercised an evaluative reduction and fixed the quantification of disallowance at 10% of the alleged bogus subcontracting expenses for each year under consideration, directing that 10% be added back to the assessee's income.

Tribunal directed that 10% of the disputed subcontracting payments (characterised as alleged bogus expenses by the AO) be disallowed and added to income for each of the A.Ys 2009-10, 2010-11, 2011-12, 2012-13 and 2016-17.

Reopening of assessment under section 147 - reason to believe and prima-facie material - Validity of reopening assessments under section 147 (challenge to notices issued under section 148) in these years - HELD THAT: - The assessee challenged the reassessments contending absence of 'reason to believe' and that only suspicion existed. The Tribunal examined the material relied upon by the AO (survey, recorded statements of subcontractors, bank operations of subcontractors, absence of records and other investigative material) and concurred with the CIT(A)'s view that the AO had prima facie material to form a belief that income had escaped assessment. Applying settled law that the AO need only have prima facie material when recording satisfaction (the sufficiency or correctness of material is to be tested during assessment and not at the notice stage), the Tribunal found no infirmity in issuance of notices and dismissed the assessee's Rule 27 application challenging reopening for the years in issue.

Tribunal held that the AO had prima facie material to form reason to believe and therefore the reopening under section 147/notice under section 148 was valid; the challenge to reopening was dismissed for the years considered.

Final Conclusion: All Revenue appeals are partly allowed: for each of A.Y. 2009-10, 2010-11, 2011-12, 2012-13 and 2016-17 the Tribunal upheld validity of reassessment proceedings but restricted the AO's additions by directing that only 10% of the disputed subcontracting payments be disallowed and added to the assessee's income.

Treatment of specified bank notes deposited during demonetisation as undisclosed income - RBI circular exempting public sector and government transport operators from demonetisation restrictions - reasonable estimation of income by assessing officer and proportionality with turnover

Treatment of specified bank notes deposited during demonetisation as undisclosed income - RBI circular exempting public sector and government transport operators from demonetisation restrictions - Whether deposits of specified bank notes in the assessee's bank accounts during the demonetisation period could be treated as undisclosed income where the assessee operated government buses on contract and fell within the category permitted by the RBI circular. - HELD THAT: - The Tribunal examined the RBI circular dated 08.11.2016 which permitted public sector transport operators and government transport operators to accept specified bank notes as legal tender during the demonetisation period. The assessee, being a contractor operating government buses, was held to fall within the exempted category described in the circular. On that basis the Tribunal concluded that deposits of specified bank notes by the assessee - being fares collected from passengers and accepted pursuant to the RBI circular - could not be treated as undisclosed income. The Tribunal therefore found the addition made by the Assessing Officer and confirmed by the CIT(A) to be unsustainable and deleted it. [Paras 4]

Addition made on account of deposit of specified bank notes deleted.

Reasonable estimation of income by assessing officer and proportionality with turnover - Whether, in any event, the addition representing specified bank-note deposits was reasonable in light of the assessee's declared turnover and the AO's own estimation rate. - HELD THAT: - The Tribunal additionally considered the quantum and proportionality of the deposits vis-a -vis the assessee's turnover. The assessee's turnover from operation of contracted government buses exceeded Rs.4.05 crores, while the deposits of specified bank notes amounted to about 5% of that turnover. The AO had estimated the assessee's income at 2.25% of turnover. The Tribunal held it would be farfetched to treat 5% of turnover as undisclosed income when the AO's own estimate was lower, reinforcing the conclusion that the addition was not sustainable. [Paras 4]

Even on a proportionality and reasonableness basis the addition could not be sustained.

Final Conclusion: The Tribunal allowed the assessee's appeal, deleted the addition made in respect of specified bank-note deposits both because the assessee fell within the category permitted by the RBI circular and because the deposits were not reasonably classifiable as undisclosed income given the turnover and the AO's own estimation.

Validity of reassessment under section 147 - Reason to believe - Reopening assessment: reasons to suspect vs reasons to believe - CBI/Investigation report as tangible material - Admission under Rule 27 of ITAT Rules, 1963 to raise jurisdictional challenge

Validity of reassessment under section 147 - Reason to believe - Reopening assessment: reasons to suspect vs reasons to believe - CBI/Investigation report as tangible material - Reassessment proceedings initiated for A.Y. 2007-08 under section 147 were invalid and the order passed thereunder was set aside. - HELD THAT: - The Assessing Officer's reasons for reopening relied on information from ADIT(Inv.)/CBI alleging that the assessee was part of a group providing or receiving accommodation entries and that unsecured loans in the books were not genuine. The recorded reasons, however, do not identify any transaction or specify the source or entity from which any bogus accommodation entry was allegedly received by the assessee. The reasons fail to disclose the material facts or the vital nexus between the investigative material and a concluded belief that income chargeable to tax had escaped assessment. In absence of such linkage and in view of the requirement that 'reason to believe' must rest on tangible material, application of mind and a tentative inference of escapement, the recorded reasons amount to reasons to suspect and merely justify further inquiry rather than the exercise of jurisdiction under section 147. The approach is consistent with the principles laid down in earlier decisions relied upon in the judgment (including Hindustan Lever Ltd and PCIT vs Shodiman Investments (P.) Ltd. ) which require clear, unambiguous reasons disclosing the AO's mind and the nexus to escapement of income. Applying these principles, the Tribunal set aside the CIT(A)'s conclusion upholding reassessment and allowed the petition under Rule 27 to challenge jurisdiction. [Paras 18, 20, 21]

Reassessment order for A.Y. 2007-08 set aside; petition under Rule 27 admitted and allowed; Revenue's grounds on merits rendered academic and dismissed.

Validity of reassessment under section 147 - Reason to believe - Reopening assessment: reasons to suspect vs reasons to believe - CBI/Investigation report as tangible material - Reassessment proceedings initiated for A.Y. 2008-09 under section 147 were invalid for the same reasons as in A.Y. 2007-08 and the order passed thereunder was set aside. - HELD THAT: - The AO recorded reasons for reopening in A.Y. 2008-09 that are materially identical to those in A.Y. 2007-08, relying on investigative information without articulating the necessary nexus between that material and a belief that the assessee's income had escaped assessment. For the reasons explained in the decision on A.Y. 2007-08 - namely absence of specific transactions, absence of linkage, and reasons amounting to suspicion rather than belief - the reassessment for A.Y. 2008-09 is equally unsustainable. The Tribunal applied the same legal tests and precedent-based reasoning mutatis mutandis and allowed the petition under Rule 27 for this year as well. [Paras 26, 27]

Reassessment order for A.Y. 2008-09 set aside; petition under Rule 27 admitted and allowed; Revenue's grounds on merits rendered academic and dismissed.

Final Conclusion: The Tribunal admitted the assessee's petition under Rule 27 and, applying settled principles governing 'reason to believe' and the adequacy of recorded reasons for reopening, held that the AO's reasons (based on CBI/Investigation reports) lacked the requisite nexus and were vague-constituting reasons to suspect rather than reasons to believe. Consequentially, the reassessment orders for A.Y. 2007-08 and A.Y. 2008-09 were set aside and the Revenue's appeals were dismissed.

Genuineness of expenditure - work-in-progress - expenditure wholly and exclusively for the purpose of business - onus of proof - admission of additional evidence under Rule 29 of the ITAT Rules, 1963 - remand to Assessing Officer for fresh adjudication

Genuineness of expenditure - work-in-progress - expenditure wholly and exclusively for the purpose of business - onus of proof - Claimed work-in-progress representing payments for acquisition/surrender of tenancy rights was not finally adjudicated on merits and was remanded to the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal noted that the Assessing Officer and the Commissioner (Appeals) had disallowed and upheld disallowance of the claimed WIP primarily because registered documents recorded nil consideration, corresponding entries in the books of the alleged payer were absent on the dates claimed, the unregistered documents and declarations were unsigned or unproduced before the lower authorities, and bank/payment instrument discrepancies were noted. The Tribunal observed that the Income-tax authorities may examine such claims only under the permissible lens of section 37(1) (i.e., whether expenditure was wholly and exclusively for business) and that the onus lay on the assessee to substantiate the payments. Given that the assessee produced additional evidence before the Tribunal (a certified memorandum of understanding indicating Vedang Builders LLP's obligation to make payments), the Tribunal found this evidence went to the root of the matter and therefore directed a restoration of the issue to the Assessing Officer for fresh adjudication. The Tribunal required the assessee to produce the seller parties before the AO, present documentary proof (including bank/payment evidence and confirmations), and permitted the AO to carry out such enquiries as deemed fit before deciding the genuineness and business nexus of the claimed WIP. [Paras 7]

Issue remanded to the Assessing Officer for fresh adjudication after taking into account the additional evidence; assessee to produce seller parties and relevant documentary proof; appeals allowed for statistical purposes.

Final Conclusion: Both appeals (AY 2011-12 and AY 2012-13) are allowed for statistical purposes by remanding the question of genuineness of the claimed work-in-progress to the Assessing Officer for fresh consideration in light of the additional evidence; the Assessing Officer is permitted to make such enquiries as necessary and the assessee must cooperate and produce the seller parties and documentary proof.

Condonation of delay - dismissal for delay - appellate discretion to condone delay - reconsideration of appeal on merits - consequences of settlement under the Vivad Se Vishwas Scheme

High Court's [2017 (4) TMI 1669 - DELHI HIGH COURT] refusal to condone the delay of 86 days in preferring the appeal -HELD THAT: - The Supreme Court found that the High Court acted too technically in refusing to condone an 86-day delay in filing the appeal. Having considered the facts and circumstances of the case, the Court concluded that the High Court ought to have exercised its discretion to condone the delay. Consequently, the order refusing condonation and dismissing the appeal on the ground of delay was held to be unsustainable and was quashed and set aside.

The delay of 86 days in filing the appeal is condoned; the impugned High Court order refusing condonation and dismissing the appeal on that ground is quashed and set aside.

The appeal is remitted to the High Court to be decided and disposed of on merits in accordance with law.

Consequences of settlement under the Vivad Se Vishwas Scheme - Any settlement effected under the Vivad Se Vishwas Scheme during the pendency of these proceedings is to be placed before the High Court, which will consider its consequences in accordance with law. - HELD THAT: - The Supreme Court recorded that the assessee has settled the dispute under the Vivad Se Vishwas Scheme during the pendency of the proceedings. The Court permitted the assessee to place the settlement before the High Court and directed the High Court to consider the legal consequences of such a settlement when adjudicating the remitted appeal. The Supreme Court did not adjudicate on the legal effect of the settlement itself but left that question for the High Court to determine on the facts and law.

The assessee may place the Vivad Se Vishwas Scheme settlement before the High Court, which shall consider and decide the consequences of that settlement in accordance with law.

Final Conclusion: The appeal is allowed to the extent that the High Court's refusal to condone the 86-day delay is quashed and set aside; the delay is condoned, and the matter is remitted to the High Court to decide the appeal on its merits and to consider any Vivad Se Vishwas settlement in accordance with law.

Assessment under Section 153A in respect of completed (non abated) assessments - Requirement of incriminating material or nexus with seized material for additions under Section 153A - Interference with finalised assessments in absence of post search incriminating material - Application of precedent where Supreme Court review is pending but no stay operates

Requirement of incriminating material or nexus with seized material for additions under Section 153A - Interference with finalised assessments in absence of post search incriminating material - Whether additions under Section 153A could be sustained in respect of assessments which had attained finality prior to search, in the absence of incriminating material seized or other post search material having nexus with seized material. - HELD THAT: - The Court accepted the view, as expounded in Kabul Chawla and summarised in PCIT v. Meeta Gutgutia, that although Section 153A does not expressly state that additions must be strictly founded on material unearthed during search, an assessment under Section 153A cannot be arbitrary and must have relevance or nexus with seized material. Where assessments had attained finality prior to the date of search and no incriminating documents or materials were found or seized during the search, the Assessing Officer cannot legitimately interfere with such completed assessments by making additions under Section 153A. The Court noted that this position has been consistently followed by decisions of this Court, including Principal Commissioner of Income Tax v. Bhadani Financiers Pvt. Ltd., and that the fact that the issue is under challenge before the Supreme Court does not affect application of these precedents where no stay has been granted.

Additions under Section 153A in the present appeals, being unconnected to any incriminating material seized during search and relating to assessments finalised before the search, cannot be sustained; the ITAT's deletion of such additions was upheld.

Application of precedent where Supreme Court review is pending but no stay operates - Whether, in view of existing contrary authorities of this Court and absence of any stay, the appeals raised any substantial question of law warranting interference. - HELD THAT: - The Court observed that the judgments of this Court in Kabul Chawla and Bhadani Financiers embody the legal position relied upon and that no stay of those decisions has been granted by the Supreme Court. In light of those binding decisions, the present appeals did not present any substantial question of law which required admission or interference with the Tribunal's order.

No substantial question of law arises; the appeals are dismissed.

Final Conclusion: The High Court dismissed the appeals, upholding the ITAT's deletion of additions made under Section 153A because the assessments had attained finality prior to the search and no incriminating material or nexus with seized material justified interference; no substantial question of law was found to arise.

Jurisdictional notice issued in the name of a deceased person is invalid - notice must be issued to the correct person / legal representative as condition precedent to jurisdiction - invalidity of proceedings and assessment framed on account of defective jurisdictional notice - Section 159 applies only where proceedings were initiated or pending against the assessee when alive

Jurisdictional notice issued in the name of a deceased person is invalid - notice must be issued to the correct person / legal representative as condition precedent to jurisdiction - invalidity of proceedings and assessment framed on account of defective jurisdictional notice - Validity of the notice issued under Section 143(2) in the name of the deceased assessee and validity of the consequential assessment and notices. - HELD THAT: - The Court applied the principle that issuance of a jurisdictional notice in the name of a dead person is a jurisdictional defect and is not merely procedural. A valid jurisdictional notice must be issued to the correct person (i.e., the legal representative where appropriate) as a condition precedent to exercise jurisdiction. In the present facts the initial scrutiny notice dated 22nd September, 2019 was issued in the name and PAN of the deceased assessee without bringing the legal heirs or legal representative on record; the assessment order dated 30th September, 2021 was likewise passed in the name of the deceased assessee and for the complete FY 2017-18. On these grounds the proceedings following from the defective notice lacked jurisdiction and were null and void. The Court therefore set aside the impugned notice and the consequential assessment and notices, while permitting the Revenue liberty to proceed afresh in accordance with law. [Paras 12, 13]

The notice dated 22nd September, 2019 under Section 143(2) and the assessment order dated 30th September, 2021 (and consequential notices) are null and void and are set aside.

Section 159 applies only where proceedings were initiated or pending against the assessee when alive - Whether Section 159 of the Income Tax Act applies to validate proceedings initiated after the death of the assessee. - HELD THAT: - Relying on settled precedents, the Court reiterated that Section 159 is attracted only where proceedings were initiated or pending against the assessee during his lifetime and, thereafter, the legal representative steps into the shoes of the deceased. Where, as in this case, proceedings were not initiated against the assessee while alive and the jurisdictional notice was issued after death in the name of the deceased, Section 159 does not apply to cure the defect. The admitted facts showed the initial notice and subsequent assessment were issued in ignorance of record entries regarding the legal representative, and therefore Section 159 cannot validate the defective proceedings. [Paras 9, 11, 12]

Section 159 is inapplicable to the facts; it does not cure a jurisdictional defect where the jurisdictional notice was issued after the assessee's death.

Final Conclusion: Writ petition allowed; the notice dated 22nd September, 2019 under Section 143(2) and the assessment order dated 30th September, 2021 (and consequential proceedings) are set aside as null and void; Revenue may take further steps in accordance with law, subject to the petitioner's right to challenge such steps.

Power of Commissioner of Income-tax (Appeals) under section 250(4) - entertaining fresh claims by appellate authority - remand to the Assessing Officer and requirement of cogent reasons - deduction under section 80JJAA - deduction for loss on exchange rate fluctuation - non-reasoned order vitiates remand

Power of Commissioner of Income-tax (Appeals) under section 250(4) - entertaining fresh claims by appellate authority - Whether the Commissioner of Income-tax (Appeals), in exercise of powers under section 250(4), can entertain fresh claims and verify material placed before it. - HELD THAT: - The Court held that the Commissioner of Income-tax (Appeals) is empowered under section 250(4) to entertain fresh claims and to seek production of documents and material to satisfy itself as to the sustainability of deductions claimed. Where the appellate authority has accepted jurisdiction to examine fresh claims and has scrupulously verified the material, the Tribunal should have examined whether such verification was adequate rather than remanding the matter merely because the Assessing Officer was not given an opportunity. The Court relied on the coordinate-bench reasoning in the assessee's earlier decision and accepted that the appellate verification, if properly conducted, is sufficient. [Paras 3]

Allowed the conclusion that the CIT(A) can entertain fresh claims under section 250(4) and verify material placed before it; this conclusion is affirmed in favour of the assessee.

Remand to the Assessing Officer and requirement of cogent reasons - non-reasoned order vitiates remand - Whether, absent perversity or cogent reasons, the Tribunal may remit matters to the Assessing Officer after the CIT(A) has allowed relief following verification. - HELD THAT: - The Court held that remand is not warranted merely because the Assessing Officer was not given an opportunity; remand requires clear identification of what was wrong or missing in the CIT(A)'s examination. A remand without such reasoning renders the appellate power infructuous. Where the Tribunal failed to give cogent reasons for remanding, the remand was set aside and the appellate order sustaining the claims was restored. [Paras 4, 5]

Remand by the Tribunal in the absence of cogent reasons was set aside; the CIT(A)'s exercise of verification stands.

Deduction under section 80JJAA - entertaining fresh claims by appellate authority - Whether the ITAT was justified in setting aside the CIT(A)'s allowance of deduction under section 80JJAA which was allowed after verification by the CIT(A). - HELD THAT: - Applying the principle that the CIT(A) may entertain and verify fresh claims under section 250(4), the Court found that the Tribunal erred in remanding the issue without demonstrating a defect in the CIT(A)'s verification. Given the earlier coordinate-bench decision in the assessee's favour on similar facts, the Court concluded that the ITAT's setting aside of the CIT(A)'s allowance of deduction under section 80JJAA was not sustainable. [Paras 3]

ITAT's order setting aside the CIT(A)'s allowance under section 80JJAA was reversed; the CIT(A)'s allowance is sustained.

Deduction for loss on exchange rate fluctuation - non-reasoned order vitiates remand - Whether the ITAT was justified in remanding the issue of deduction of loss on account of exchange rate fluctuation when the CIT(A) had allowed it after verification. - HELD THAT: - Although the earlier coordinate-bench decision did not specifically deal with exchange rate fluctuation loss, the Court held that the same reasoning applies: the Tribunal failed to provide cogent reasons for remanding the matter to the Assessing Officer. The impugned order was non-reasoned with respect to this issue and therefore could not stand. Consequently, the detailed order of the CIT(A), which had allowed the deduction after due verification, was sustained. [Paras 4, 5]

ITAT's remand on the exchange rate fluctuation loss was set aside and the CIT(A)'s allowance of the deduction is sustained.

Final Conclusion: The appeal is allowed. The Court answered the admitted questions of law in favour of the assessee and against the revenue, set aside the non-reasoned remand by the Tribunal, and sustained the detailed orders of the Commissioner of Income-tax (Appeals) on all contested issues.

Reopening of assessment - reasons recorded / reasons to believe - escapement of income - verification of claim under section 54F - failure to disclose fully and truly all material facts - reopening beyond four years

Reopening of assessment - verification of claim under section 54F - escapement of income - Validity of reopening where the Assessing Officer recorded reasons only to verify correctness of the claim under section 54F and did not record satisfaction of escapement of income. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer which stated that the assessment was being reopened to verify the correctness of the claim under section 54F. The Assessing Officer did not record that the claim was wrong or that income had in fact escaped assessment; the stated object was verification of the claim. The Tribunal held that reopening must be predicated on the Assessing Officer's satisfaction that income chargeable to tax has escaped assessment and not merely on a desire to verify a claim. Reopening on the ground of verification alone is not in accordance with law and is therefore invalid. [Paras 8]

Reopening quashed as invalid because the reasons recorded merely sought verification of the section 54F claim and did not record escapement of income.

Reopening beyond four years - failure to disclose fully and truly all material facts - reasons recorded / reasons to believe - Validity of reopening effected after four years where the Assessing Officer did not record failure by the assessee to disclose fully and truly all material facts. - HELD THAT: - The Tribunal noted that the reopening was made after the four year period from the end of the assessment year. For such belated reopening, the Assessing Officer must record satisfaction that the assessee failed to disclose fully and truly all material facts which would justify invoking the extended period. The reasons as recorded did not state any such failure to disclose. In absence of the requisite finding in the reasons recorded, the extended period reopening is not sustainable. [Paras 8]

Reopening quashed on the additional ground that when reopening after four years, the Assessing Officer failed to record the requisite satisfaction of non disclosure of material facts.

Final Conclusion: The notice under section 148 and the assessment order passed under section 143(3) read with section 147 were quashed; the assessee's appeal is allowed.

Section 68 - identity, genuineness and creditworthiness of share application money - Burden of proof shifted on Revenue after assessee adduces satisfactory documentary evidence - Rejection of explanation on surmise and conjecture is unsustainable

Section 68 - identity, genuineness and creditworthiness of share application money - Burden of proof shifted on Revenue after assessee adduces satisfactory documentary evidence - Rejection of explanation on surmise and conjecture is unsustainable - Deletion of addition made by the Assessing Officer under Section 68 in respect of share application money received from three group companies. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s conclusion that the assessee had discharged its onus under Section 68 by producing PAN details, bank statements showing receipt through proper banking channels, audited financial statements and income tax returns of the investor companies, evidence of common directorship and cross shareholding, and material demonstrating the investors' capacity to make the investments. The Assessing Officer's addition was founded on generalized allegations, surmise and conjecture and on the alleged failure to cross examine witnesses, whereas he did not undertake independent enquiries such as issuing notices under statutory provisions to the investor companies or otherwise bring forward cogent material to rebut the documentary evidence. Once the assessee placed satisfactory and contemporaneous documentary evidence establishing identity, creditworthiness and genuineness, the burden shifted to the Revenue to disprove those materials; the AO failed to do so. The Tribunal found no infirmity in the appellate authority's view that the AO's conclusions were not supported by tangible material and that the addition was therefore unjustified. [Paras 4, 7, 8]

The addition under Section 68 amounting to the share application money was rightly deleted by the Commissioner (Appeals); the revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirms the CIT(A)'s finding that the assessee proved the identity, creditworthiness and genuineness of the share application monies and that the Assessing Officer failed to rebut the documentary evidence, accordingly dismissing the Revenue's appeal and upholding deletion of the addition.

Unexplained cash credit - burden of proof on assessee to prove identity, creditworthiness and genuineness of creditors - admissibility and weight of seized material in assessments under proceedings initiated by search - power to remand for production/verification of witnesses and documents - assessment under section 153A - scope of additions based on seized material - restoration/remand for fresh adjudication in interest of justice

Unexplained cash credit - burden of proof on assessee to prove identity, creditworthiness and genuineness of creditors - power to remand for production/verification of witnesses and documents - Addition of Rs.19,00,000 (loan from Shri M. Asif Basha) treated as unexplained cash credit - HELD THAT: - The Assessing Officer added Rs.19,00,000 as unexplained cash credit on the ground that the assessee failed to satisfy the AO as to the creditor's creditworthiness and genuineness of the loan. The assessee denied having admitted the addition and offered to produce the creditor for examination and to file supporting evidence. Considering the totality of facts and in the interest of justice, the Tribunal restored the issue to the file of the Assessing Officer directing that one opportunity be afforded to the assessee to produce the creditor for examination and to file necessary evidence; the AO is to decide the matter on facts and law after hearing the assessee. [Paras 13, 15]

Issue restored to AO for fresh decision after permitting production/examination of the creditor and supporting evidence.

Unexplained cash credit - admissibility and weight of seized material in assessments under proceedings initiated by search - power to remand for verification of bank records and documentary evidence - Addition of Rs.5,00,000 (receipt noted in seized diary entry attributed to Shri Srinivasulu Reddy) treated as unexplained cash/interest - HELD THAT: - Seized diary notation and subsequent documentary material (confirmation letter, bank statement and ledger) were placed before the Tribunal. The Tribunal observed that the amount is reflected in the assessee's bank account and the confirmation was signed by the manager on behalf of the creditor. Considering the material on record and in the interest of justice, the Tribunal restored the issue to the AO with a direction to verify details and, if the amount is shown as sale consideration received through banking channels, to delete the addition; the AO is to give the assessee opportunity of being heard and decide in accordance with law. [Paras 13, 16]

Issue restored to AO for verification; delete the addition if established as sale proceeds received through bank; AO to decide afresh after hearing.

Treatment of seized notings and assessee's statement recorded under oath - reconstruction/clarification of seized entries - remand for fresh adjudication - Addition of Rs.5,00,000 treated as undisclosed interest received from Shri Sambasiva Rao - HELD THAT: - A seized entry described the receipt as 'cash received ... interest purpose'. The AO treated it as interest income and made an addition. The Tribunal found from the seized document that the notation is consistent with a loan rather than taxable interest and noted that certain documents filed before the CIT(A) were not properly appreciated. In the interest of justice, the Tribunal restored the issue to the AO to decide afresh after giving the assessee opportunity to be heard. [Paras 17, 20]

Issue restored to AO for fresh adjudication; direction to decide in accordance with seized notings and evidence after hearing the assessee.

Remand to lower authority to adjudicate unaddressed ground - duty of appellate authority to decide grounds raised before it - Ground challenging addition of Rs.11,00,000 (unexplained investment in purchase of property at Dagegallu Village) which CIT(A) did not adjudicate - HELD THAT: - Seized agreement and questionnaire replies showed the assessee's claimed investment and inconsistent explanations regarding sources. The Tribunal noted that the CIT(A) inadvertently omitted adjudication of the specific ground and therefore directed restoration to the file of the CIT(A) with a direction to adjudicate the ground in accordance with fact and law. [Paras 39, 41]

Issue restored to the CIT(A) for adjudication on merits.

Unexplained cash credit / advance for sale of property - opportunity to substantiate advance-sale claim before AO - Addition of Rs.18,00,000 (Rs.16,00,000 from Sri Ram Reddy and Rs.2,00,000 from Sri Uma Maheshwar Rao) treated as unexplained cash credit in A.Y.2009-10 - HELD THAT: - The AO added the amounts as unexplained cash credit for want of identity/creditworthiness and genuineness. The assessee claimed the amounts were sale advances from family of a buyer and produced confirmations and ledger entries. The CIT(A) sustained the addition due to perceived conflicting claims. The Tribunal, considering the evidence and in the interest of justice, restored the issue to the AO granting one more opportunity to the assessee to substantiate that the receipts were advances for sale of property and that the sale concluded in the subsequent year; AO to decide as per fact and law. [Paras 29, 35]

Issue restored to AO for further verification and fresh decision after permitting additional substantiation by the assessee.

Assessment under section 153A - reliance on seized material for additions - limits of additions when property is purchased by third party (father) and not the assessee - Addition of Rs.2,50,00,000 (unexplained investment in purchase of property at Bellary) - deletion by CIT(A) and challenge by Revenue - HELD THAT: - Seized cheques and notings suggested payments linked to a land deal. The AO added Rs.2.5 crores to the assessee's income treating it as unexplained investment. On remand, statements and evidence, including registration deed, showed the Ramnagar property was registered in the name of the assessee's father and that Chandrahas acted as a middleman who accepted monies on behalf of others. The CIT(A) found the AO had not proved that the property belonged to the assessee and deleted the addition. The Tribunal found no infirmity in the CIT(A)'s reasoning, observed that any addition, if justified, would lie in the father's hands and upheld deletion. [Paras 45, 50, 51]

Deletion of addition of Rs.2,50,00,000 in the hands of the assessee is upheld.

Assessment under section 153A - whether addition must be based on incriminating/seized material - opportunity to produce evidence to establish source - Addition of Rs.3,75,000 (receipt from Sharmila HUF) treated as unexplained cash credit in A.Y.2009-10 - HELD THAT: - The AO disbelieved the assessee's claim that the cash was from HUF funds and added the amount. The CIT(A) deleted the addition on the view that the addition was not based on any incriminating/seized material but on routine assessment material. The Tribunal noted that the CIT(A)'s legal conclusion conflicted with the jurisdictional High Court precedent that material other than seized material can be considered; nonetheless, the Tribunal accepted the assessee's request for an opportunity and restored the issue to the AO directing that the assessee be given another chance to substantiate source with cogent evidence and the AO decide afresh. [Paras 53, 54, 55]

Issue restored to the AO for fresh decision after affording opportunity to the assessee to substantiate source; matter allowed for statistical purposes.

Computation errors and consequential directions - adoption of correct taxable income and consequential relief - Addition of Rs.4,07,057 (difference between original return and return under section 153A) - direction to AO to adopt correct taxable amount - HELD THAT: - AO's computation included exempt receipts and incorrectly computed taxable income, resulting in excess addition. The CIT(A) directed the AO to adopt the correct taxable amount (excluding exempt share of firm profit) and pass consequential order. The Tribunal found no infirmity in that direction and upheld the CIT(A)'s order. [Paras 57, 59, 61]

Direction to AO to adopt correct taxable amount and pass consequential order is upheld; Revenue's challenge dismissed.

Final Conclusion: For A.Y.2008-09 the Tribunal partly allowed the appeal for statistical purposes: additions of Rs.19,00,000, Rs.5,00,000 (Srinivasulu Reddy) and Rs.5,00,000 (Sambasiva Rao) were restored to the AO for fresh decision after giving the assessee opportunity to produce evidence or witnesses; the legal challenge to assessment under section 153A was not pressed and dismissed. For A.Y.2009-10 the Tribunal allowed several grounds for statistical purposes: it restored issues of certain additions (including Rs.18,00,000 and Rs.3,75,000) to the AO/CIT(A) for further enquiry and upheld the deletion of Rs.2,50,00,000 in the assessee's hands and the CIT(A)'s direction to correct computation for the difference of Rs.4,07,057; the AO/CIT(A) are directed to decide the remanded matters in accordance with facts and law after affording the assessee opportunity of being heard.

Unexplained cash credits - onus of proof under section 68 relating to identity, creditworthiness and genuineness of creditors - short term capital gains - agreement of sale seized during search - admission of additional grounds on appeal where material facts are on record - double taxation in computation of capital gains

Unexplained cash credits - onus of proof under section 68 relating to identity, creditworthiness and genuineness of creditors - Whether additions in respect of cash credits totalling Rs.8,49,600/- should be sustained or the assessee be granted further opportunity to substantiate the loans - HELD THAT: - The Tribunal noted that the AO had added cash credits received from three creditors because the assessee did not produce those persons for examination and did not satisfy the AO as to their creditworthiness. While recognizing the settled legal position that the onus is on the assessee to substantiate identity and creditworthiness for acceptance under section 68, the Tribunal observed that the assessee has placed confirmation letters, bank entries and ledger extracts on record and asserted that he can produce the parties if given an opportunity. In the interest of justice and considering the totality of facts, the Tribunal restored the matter to the file of the AO directing that the assessee be granted one more opportunity to produce the three creditors for examination and to file evidence of creditworthiness, and that the AO decide the issue on facts and law after affording hearing to the assessee. [Paras 14]

Issue restored to the AO for fresh adjudication after giving the assessee an opportunity to produce the creditors and prove creditworthiness; ground allowed for statistical purposes.

Short term capital gains - agreement of sale seized during search - Whether the addition of short term capital gain computed on the basis of the seized agreement of sale (treating consideration as Rs.1,08,08,000/-) is sustainable or requires further enquiry - HELD THAT: - The Tribunal recorded that an agreement of sale seized during search recorded a much higher consideration than the amount shown in the registered sale deed and that the assessee had failed to produce the buyer for examination; the AO therefore adopted the higher consideration and made the addition. The assessee contended that market circumstances changed (alleged drift of ring road) and that he received only the amounts recorded in the registered deed and an earlier advance. Considering the competing contentions and the assessee's claim that he can produce the buyer and evidence about the change in circumstances, the Tribunal directed that the assessee be given an opportunity to produce Mr. C. Veerabhadra Reddy for examination and to produce evidence showing that the proposed plan drifted away from the land leading to price decline. The AO was directed to decide the issue afresh on facts and law after affording hearing. [Paras 26]

Issue restored to the AO for fresh adjudication after giving the assessee opportunity to produce the buyer and corroborative evidence; ground allowed for statistical purposes.

Admission of additional grounds on appeal where material facts are on record - double taxation in computation of capital gains - Whether the additional grounds raising errors in quantification of short term capital gains and alleged double taxation should be admitted and adjudicated - HELD THAT: - The Tribunal admitted the additional grounds (relying on the availability of material facts on record) and examined the computation dispute where the AO had not given credit for amounts already offered in the revised return, resulting in an excessive addition. The ld.CIT(A) had directed the AO to rectify the mistake and to give effect to the appellate order. The Tribunal, noting the assessee's contention that certain components of gain were already included in declared figures and the possibility of double addition, restored the matter to the AO with directions to verify the claim of double addition and adjudicate the quantification afresh in accordance with law after giving the assessee an opportunity of hearing. [Paras 31]

Additional grounds admitted; matter remanded to the AO to verify and rectify quantification and any double taxation, and to pass fresh orders after hearing the assessee; allowed for statistical purposes.

Final Conclusion: The Tribunal partly allowed the appeal for statistical purposes by admitting the additional grounds and restoring to the AO for fresh adjudication: (i) the unexplained cash credits of Rs.8,49,600/- - AO to grant one more opportunity to produce creditors and decide on creditworthiness; (ii) the short term capital gain addition based on the seized agreement - AO to give opportunity to produce the buyer and corroborative evidence and decide afresh; and (iii) the additional grounds on quantification/double taxation - AO to verify and rectify the computation and pass appropriate orders after hearing the assessee. Other grounds not pressed or general were dismissed.

Admissibility and effect of supplementary partnership deed - treatment of contractual receipts between a firm and its partner - protective assessment and subsequent substantive assessment - re-opening of assessment under the Income-tax Act, 1961 - remand for fresh consideration after giving opportunity of hearing

Admissibility and effect of supplementary partnership deed - treatment of contractual receipts between a firm and its partner - protective assessment and subsequent substantive assessment - Whether the Assessing Officer and the Commissioner (Appeals) were justified in making substantive additions in the hands of the partner despite the supplementary partnership deed and related explanations furnished by the assessee - HELD THAT: - The Tribunal found that the authorities below made the addition on the basis that the partner had treated the contractual receipts in his individual capacity and that the Supplementary Partnership Deed was not placed before the AO during the original assessment proceedings. The Tribunal observed that neither the AO nor the CIT(A) gave clear findings on the terms of the original partnership deed and the Supplementary Deed produced by the assessee. In view of the absence of a conclusive adjudication on the legal effect of the deed and the factual allocation of receipts, the matter required fresh consideration. The Tribunal therefore set aside the impugned order and restored the issue to the file of the AO with a direction to decide the question afresh after providing the assessee adequate opportunity of hearing. The grounds raised were allowed for statistical purposes. [Paras 8, 10]

Impugned order set aside and issue remanded to the Assessing Officer for fresh adjudication after affording opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the orders under challenge and remitted the dispute regarding the effect of the partnership deeds and the allocation of contractual receipts to the Assessing Officer for fresh decision after giving the assessee an adequate hearing; appeal allowed for statistical purposes.

Preventive detention and subjective satisfaction of the detaining authority - non-production/non-supply of documents and disclosure obligations under Article 22(5) - delay in passing or executing a detention order and the 'live and proximate link' test - absconding of detenu as justification for delayed execution - duty to consider representations and the role of the Advisory Board

Preventive detention and subjective satisfaction of the detaining authority - non-production/non-supply of documents and disclosure obligations under Article 22(5) - Non-production by the Sponsoring Authority of certain documents (CCTV visuals of 13.05.2019, Ext.P11, decision of Principal DG of DRI, and complaints said to have been lodged before the Magistrate) did not vitiate the detention order Ext.P1. - HELD THAT: - The Court applied settled principles that the Detaining Authority's subjective satisfaction must be based on relevant materials placed before it, but the scope of interference under Article 226 is limited. The Court found no material on record to show that the Sponsoring Authority had possession of the CCTV visuals or the other documents, or that those materials were withheld in a manner that could prima facie vitiate the subjective satisfaction. Even if a co-accused's confessional statement is placed, a retraction must be proved to have been in the Sponsoring Authority's possession to affect satisfaction; and independent facts (such as declaration receipts and seizure particulars) can sustain satisfaction notwithstanding non-production of a retraction. There was also no evidence that written complaints to the Magistrate existed to be supplied. On these bases the Court held the non-production alleged did not invalidate Ext.P1. [Paras 22, 23, 25, 26, 27]

Contention that non-production of the four documents vitiated Ext.P1 is rejected; Ext.P1 is not set aside on that ground.

Delay in passing or executing a detention order and the 'live and proximate link' test - Delay in passing the detention order (between incident and 27.09.2019) did not render the order invalid. - HELD THAT: - The Court noted that issuance of a detention order in the present case required detailed investigation and consideration of voluminous materials and multiple persons. Having regard to the chronology and necessity for thorough inquiry, the Court held there was no unjustified delay. The Court relied on precedent that delay in issuing a detention order by itself is not fatal where explanation shows necessity for detailed consideration. [Paras 28, 29]

Delay in passing the detention order is satisfactorily explained and does not invalidate Ext.P1.

Absconding of detenu as justification for delayed execution - delay in passing or executing a detention order and the 'live and proximate link' test - Delay in execution of the detention order (order dated 27.09.2019, execution on 28.12.2021) did not vitiate the order because the detenu had absconded and authorities took steps to procure his arrest. - HELD THAT: - Applying the principle that a long unexplained delay may snap the link between grounds and purpose of detention, the Court examined the actions taken by authorities: repeated summons, publication in newspapers and Gazette, steps under Section 7 of COFEPOSA to declare absconding and follow-up actions. The Court found the instances relied upon by the detenu (voting, vaccination, receipt of a notice by family members, caring for wife) did not demonstrate accessibility for arrest. Authorities' consistent efforts and recalcitrant conduct of the detenu justified the delay; therefore the 'link' was not snapped but supported. Precedents were applied to hold that an absconding detenu cannot successfully challenge detention on the ground of execution delay when proper steps were taken. [Paras 30, 31, 33, 37, 43]

Delay in execution is satisfactorily explained by the detenu's absconsion and does not invalidate Ext.P1.

Non-production/non-supply of documents and disclosure obligations under Article 22(5) - Non-supply to the detenu of documents not relied upon by the Detaining Authority (including the four documents earlier mentioned and para-wise comments to the Advisory Board) did not vitiate the detention where the materials relied upon and furnished were sufficient to enable an effective representation. - HELD THAT: - The Court reiterated that there is no requirement to supply every document mentioned in proceedings; only those documents relied upon by the Detaining Authority to reach subjective satisfaction must be supplied. Citing precedents, the Court held that where materials referred to and relied upon in the grounds are sufficient for an effective representation, other materials (such as CCTV footage not relied upon) need not be supplied. The Court found no prejudice to the detenu's right to representation and no vitiating effect from non-supply of the alleged documents or para-wise comments. [Paras 46, 47, 48, 50, 51]

Claim of denial of effective representation by non-supply of the said materials is rejected; Ext.P1 is not vitiated on that ground.

Duty to consider representations and the role of the Advisory Board - There was no inordinate delay in disposing of the detenu's representations by the Detaining Authority or the Central Government; the authorities acted within the principles that the Detaining Authority should decide promptly while the Central Government may await the Advisory Board's report if the case had been referred. - HELD THAT: - The Court reviewed the timeline: representation received 28.01.2022; sponsoring authority's para-wise comments 03.02.2022; Detaining Authority rejected representation 04.02.2022 and informed the detenu; the Advisory Board's report was received and the Central Government considered and confirmed detention on 21.03.2022; Director General disposed of the representation on 29.03.2022 and detenu was informed on 30.03.2022. Taking into account intervening holidays and settled law permitting the Government to await the Advisory Board's opinion when a case is referred, the Court found no lethargy or unjustified delay. Precedents distinguishing the Detaining Authority's immediate obligation from the Central Government's duty to await the Board where appropriate were applied. [Paras 54, 55, 58, 59, 67]

No inordinate delay in disposal of representations; the process and timeline are adequately explained and do not invalidate Ext.P1.

Final Conclusion: All grounds raised against the detention order Ext.P1 - non-production/non-supply of certain documents, delay in passing the order, delay in execution, and delay in disposal of representations - were examined and found not to vitiate the detention; the writ petition is dismissed and Ext.P1 is upheld.

Condonation of delay - requirement of reasons for rejection of an application to condone delay - restoration of appeal - exercise of extraordinary writ jurisdiction under Articles 226 and 227 of the Constitution of India - maintainability of appeal under Section 130 of the Customs Act, 1962

Condonation of delay - requirement of reasons for rejection of an application to condone delay - restoration of appeal - Application to condone delay of 178 days in filing appeal before the CESTAT was allowed and the appeal was restored to the file of the Tribunal. - HELD THAT: - The CESTAT rejected the petitioner's application to condone a delay of 178 days without recording any reasons for rejecting the explanation tendered. The High Court, exercising jurisdiction under Articles 226 and 227, observed that where no reasons are recorded and, having regard to the peculiar facts and the passage of time spent by the petitioner since 2019, delay should not be permitted to obstruct substantial justice. For these reasons the Court ordered the delay of 178 days to be condoned and directed that the appeal be restored to the CESTAT file. The Court expressly refrained from expressing any opinion on the merits and permitted both parties to agitate all contentions before the Tribunal. [Paras 5, 6]

Delay of 178 days condoned; Appeal No. C/10249/2017-DB restored to the CESTAT; no opinion on merits; parties free to raise contentions before the Tribunal.

Final Conclusion: Writ petition allowed to the limited extent of setting aside the CESTAT order rejecting condonation of delay; delay of 178 days condoned and the appeal restored to the CESTAT for adjudication on merits; no costs.

Obligations of Customs Broker under Regulation 10(n) of CBLR, 2018 - Verification of IEC and GSTIN - scope and standard - Verification of identity and functioning at declared address - documents, data or information sufficiency - No requirement of physical inspection by Customs Broker - Presumption of genuineness of government-issued certificates (Section 79, Evidence Act, 1872) - Revocation of Customs Broker licence - standard of proof and sufficiency of verification reports

Obligations of Customs Broker under Regulation 10(n) of CBLR, 2018 - Verification of IEC and GSTIN - scope and standard - Presumption of genuineness of government-issued certificates (Section 79, Evidence Act, 1872) - Construction and scope of the obligation on a Customs Broker to verify IEC and GSTIN under Regulation 10(n). - HELD THAT: - Regulation 10(n) requires the Customs Broker to verify correctness of IEC and GSTIN by using reliable, independent, authentic documents, data or information. That obligation is satisfied where the Customs Broker ensures that the IEC and GSTIN were in fact issued by the concerned government officers; it does not extend to obliging the Customs Broker to re-examine or sit in judgment over whether the issuing officers correctly issued those certificates. Treating the Customs Broker as competent to assess the correctness of actions by DGFT or GST officers would be an improper construction and inconsistent with the statutory scheme. Certificates and registrations issued or purportedly issued by government officers are to be presumed genuine (Section 79, Evidence Act) and may be verified by online checks or comparison with originals; an onus to investigate the propriety of the issuing officer's action is not cast on the Customs Broker. Accordingly, reliance by a Customs Broker on IECs and GSTINs properly issued or appearing to be valid does not by itself constitute a breach of Regulation 10(n). [Paras 6, 7, 8, 11, 13]

Regulation 10(n) is to be read as requiring verification that IEC/GSTIN were issued by the appropriate authorities; it does not require the Customs Broker to verify the correctness of the issuing authority's decision or to investigate issuance procedures.

Verification of identity and functioning at declared address - documents, data or information sufficiency - No requirement of physical inspection by Customs Broker - Extent and manner in which a Customs Broker must verify the identity of a client and the client's functioning at the declared address under Regulation 10(n). - HELD THAT: - Regulation 10(n) obliges the Customs Broker to verify identity and functioning at the declared address by using reliable, independent, authentic documents, data or information. Any one or more of the three prescribed modes - documents, data or information - suffices if they are independent, reliable and authentic. Government-issued identity documents (PAN, passport, driving licence, voter ID, GSTIN, IEC) qualify as independent, reliable and authentic, but are not the sole permissible means. Nothing in Regulation 10(n) mandates physical inspection of the client's premises; the Regulation expressly allows verification by documents, data or information. Practical considerations (geographic dispersion of clients, business realities, facilitation objectives) reinforce that imposing a requirement of physical inspection would be unduly onerous and impracticable. Once a Broker fulfils verification using reliable means, there is no continuing duty of surveillance to ensure the client remains at the same address unless the Broker is aware of a change. [Paras 6, 9, 10, 11, 12]

Verification of identity and functioning can be satisfied by independent, reliable, authentic documents, data or information; Regulation 10(n) does not require physical inspection or continuous surveillance by the Customs Broker.

Revocation of Customs Broker licence - standard of proof and sufficiency of verification reports - Whether the impugned revocation orders, forfeiture of security deposits and penalties imposed on the appellants were sustainable on the basis of the verification reports relied upon by the Department. - HELD THAT: - The verification reports (Relied Upon Documents) on which the SCNs and orders were based were vague, inconsistent and in some instances did not even identify the exporter by name. The reports variously stated that exporters were 'not bonafide', 'not recommended' or 'ITC not admissible', without establishing that the exporters did not exist at the time the Customs Brokers relied on the IEC/GSTIN and other government-issued documents or that the Brokers were aware of any falsity when they processed the shipping bills. There is no requirement under CBLR that a Customs Broker must obtain a certificate of 'bonafides' or a recommendation from officers, nor is the Broker responsible for determining admissibility of ITC. Where government-issued documents (GSTIN, IEC, PAN etc.) were relied upon and there is no evidence that those documents were forged or invalid at the time of reliance, the subsequent finding on verification does not, without more, justify revocation. The Department's hindsight conclusion that registrations were wrongly issued by other officers cannot be imputed to the Customs Broker absent evidence that the Broker failed to perform the verification required by Regulation 10(n) or had knowledge of falsity. [Paras 16, 21, 30, 31, 36]

The impugned orders revoking the licences, forfeiting security deposits and imposing penalties cannot be sustained on the basis of the available verification reports and are set aside.

Final Conclusion: The Tribunal construed Regulation 10(n) of CBLR, 2018 as requiring verification that IEC/GSTIN were issued by the appropriate authorities and permitting verification of identity and functioning at the declared address by reliable, independent, authentic documents, data or information - physical inspection is not mandated. Applying that construction, and on the facts that the Department's verification reports were vague, inconsistent and did not establish that the Customs Brokers had failed their verification duties or had knowledge of falsity, the revocation orders, forfeiture of security deposits and penalties imposed on the appellants were quashed and the appeals allowed.

Inspection, inquiry and investigation under sections 206-210 of the Companies Act, 2013 - Validity of multiple proceedings under section 206(4) of the Companies Act, 2013 - Scope of judicial interference by writ court where statutory forum (NCLT) has pending winding up proceedings - Tribunal's powers in winding up under section 273 of the Companies Act, 2013

Validity of multiple proceedings under section 206(4) of the Companies Act, 2013 - Inspection, inquiry and investigation under sections 206-210 of the Companies Act, 2013 - Whether the Registrar of Companies is statutorily precluded from initiating a subsequent proceeding under section 206(4) after an earlier inquiry report dated 13th April, 2021. - HELD THAT: - The Court examined the sequential scheme of inspection, inquiry and investigation contained in sections 206-210 and held that the statutory scheme does not contain a bar on the Registrar calling for information or conducting a fresh inspection or inquiry where additional material is discovered. The stage of filing a report under section 208 follows completion of inspection or inquiry, and section 210 contemplates further investigation by the Central Government if conditions are met. Nothing in these provisions prevents the ROC from initiating another proceeding under section 206(4) upon discovery of further financial irregularities; the presumption that an earlier report automatically stays subsequent action is not supported by the statutory text. [Paras 4, 5]

The contention that the respondents are statutorily precluded from initiating a proceeding under section 206(4) after the impugned inquiry report dated 13th April, 2021 is rejected.

Scope of judicial interference by writ court where statutory forum (NCLT) has pending winding up proceedings - Tribunal's powers in winding up under section 273 of the Companies Act, 2013 - Whether this Court should grant injunctive relief restraining the ROC from acting on the impugned inquiry report in view of pending winding up proceedings before the NCLT, Kolkata. - HELD THAT: - The Court noted that the winding up proceedings under sections 271-273 are before the Tribunal which has wide powers including interim and other orders under section 273(1)(e). Factual disputes regarding timing of initiation and service of proceedings are for the statutory forum to decide. Granting the injunction sought would have the practical effect of staying further notices and potentially prejudicing the winding up proceedings. The petitioners therefore have the opportunity to contest and seek appropriate reliefs before the NCLT, and the writ forum is not the appropriate forum to adjudicate these factual and forum-sensitive issues at this stage. [Paras 6, 7, 8]

The Court declined to interfere or restrain the respondents from acting on the impugned inquiry report dated 13th April, 2021 and held that the petitioners may raise their contentions before the NCLT.

Final Conclusion: Writ petition dismissed; the Court refused to stay or interdict the inquiry report dated 13th April, 2021, directing that the petitioners may pursue their objections before the Tribunal hearing the winding up proceedings.

Operational debt - operational creditor - debt due and payable - existence of a pre-existing dispute - application under Section 9 of the I & B Code, 2016 - no privity of contract with a third party - Mobilox test for Section 9

Operational debt - debt due and payable - Mobilox test for Section 9 - Existence of debt which is due and payable and has not been paid. - HELD THAT: - The Tribunal examined the statutory definitions of "debt" and "claim" and applied the principles laid down in Mobilox Innovations (the Mobilox test) to Section 9 applications. The corporate debtor expressly acknowledged supply of 16,130 AMR modems, installation and integration of 2,945 units, and prior payments made constituting part performance. Those acknowledgments and the documentary material showing payments made establish that an operational debt remained unpaid. No cogent evidence was produced to demonstrate a dispute existing prior to the Section 8 notice; the arbitration between the corporate debtor and TANGEDCO did not amount to a pre-existing dispute between the operational creditor and the corporate debtor. Applying the Mobilox criteria, the Adjudicating Authority correctly concluded that the operational debt was due and unpaid.

There exists an operational debt owed by the corporate debtor to the operational creditor which was due and unpaid; the Adjudicating Authority rightly admitted the Section 9 application on this ground.

No privity of contract with a third party - application under Section 9 of the I & B Code, 2016 - existence of a pre-existing dispute - Liability of the corporate debtor to pay the claimed amounts notwithstanding the NOC and interactions with TANGEDCO. - HELD THAT: - The appellant's contention that the debt was effectively assigned to or to be paid by TANGEDCO was examined. The record did not show any valid contract or prior approval by TANGEDCO making it liable to pay the operational creditor on behalf of the corporate debtor. The NOC did not create privity such that the corporate debtor's liability was extinguished. Consequently, the corporate debtor retained the onus to ensure payment to the operational creditor. Since no pre-existing dispute between the corporate debtor and the operational creditor was established, the Adjudicating Authority's finding that the corporate debtor is liable to pay the claimed amounts was sustained.

The corporate debtor remains liable to pay the operational creditor; the appellant's plea that liability lies only against TANGEDCO fails and does not negate maintainability of the Section 9 application.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly applied the Mobilox criteria, found an unpaid operational debt and the corporate debtor's liability to pay, and there was no established pre-existing dispute between the parties; the impugned order admitting the Section 9 petition is upheld.

Pre-existing dispute under Section 5(6) of the Insolvency & Bankruptcy Code, 2016 - relevant date for determining existence of dispute (date of demand notice) - requirement of proof of debt and default in proceedings under Section 9 - summary nature of insolvency proceedings and limited scope to probe merits - maintainability of an application under Section 9 of the Insolvency & Bankruptcy Code, 2016

Pre-existing dispute under Section 5(6) of the Insolvency & Bankruptcy Code, 2016 - relevant date for determining existence of dispute (date of demand notice) - requirement of proof of debt and default in proceedings under Section 9 - summary nature of insolvency proceedings and limited scope to probe merits - The Adjudicating Authority correctly found that a pre-existing dispute between the parties existed prior to the valid demand notice dated 05.03.2021 and therefore the Section 9 petition (CP (IB) No.67/BB/2021) was not maintainable. - HELD THAT: - The Tribunal applied the settled principle that the relevant date for determining existence of a dispute is the date of the demand notice. The record showed communications from the corporate debtor (including the reply dated 03.10.2020) and earlier email exchanges (notably dated 19.03.2020 and 27.03.2020) indicating disputes regarding performance and entitlement which pre-dated the demand notice of 05.03.2021. While proceedings under Section 9 are summary and the Adjudicating Authority cannot decide disputed claims on merits, it must satisfy itself that any dispute raised is genuine and plausible. On the material before it the Adjudicating Authority was entitled to conclude that the dispute was real and existed prior to the relevant date and hence to reject the Section 9 application. The Tribunal found no legal error in that conclusion, applying the principle that an existing dispute prior to the demand notice renders the petition under Section 9 liable to be dismissed. [Paras 3, 36, 37, 40, 42]

Appeal against dismissal of CP (IB) No.67/BB/2021 fails; the Adjudicating Authority's finding of a pre-existing dispute prior to 05.03.2021 is upheld and the Section 9 petition is not maintainable.

Admission of additional documents for determination of appeal - IA No.967/2022 seeking permission to place on record a copy of the plaint in Commercial O.S. No.229/2021 was allowed for the purposes of determining the appeal. - HELD THAT: - The Tribunal allowed filing of the plaint copy pursuant to a specific application, observing that the document was required for determination of the pending appeal. The allowance was procedural and granted without costs. [Paras 1]

Permission granted to file the plaint in Commercial O.S. No.229/2021; no costs.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's dismissal of the Section 9 petition on the ground of a pre-existing dispute prior to the demand notice of 05.03.2021 is affirmed; an application to place the plaint on record was permitted without costs.

Pre-existing dispute - Initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code, 2016 - Legal set-off / equitable set-off - Separateness of contracts and purchase orders - Letter of Credit dishonour and default - Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional

Pre-existing dispute - Separateness of contracts and purchase orders - Legal set-off / equitable set-off - Letter of Credit dishonour and default - There is no pre-existing dispute in relation to the claim covered by the Letter of Credit under the purchase order dated 25 September, 2017; the petition under section 9 is maintainable. - HELD THAT: - The Tribunal examined the contractual matrix and filings and found that the claim before this Adjudicating Authority relates to supplies under Purchase Order No. CIMM/17-18/000568 and payment due under an IndusInd Bank Letter of Credit for that contract. Separate proceedings before the Mumbai Bench concern different purchase orders (CIMM/17-18/001617 and CIMM/17-18/001618) arising from distinct contracts and transactions. The Corporate Debtor itself characterised those claims as separate and arising from different contracts. Reliance on the Supreme Court's exposition of legal and equitable set-off establishes that set-off is available only where cross-demands arise out of the same transaction or are so connected as to make allowance of the claim inequitable; an equitable set-off is discretionary and unavailable where cross-demands do not arise from the same transaction. Applying that principle, the Tribunal held that the alleged counterclaims before the Mumbai Bench do not constitute a pre-existing dispute in respect of the debt asserted under the specific purchase order and Letter of Credit that form the subject matter of this petition. Having concluded absence of a bona fide dispute on the specific debt claimed, the Tribunal found the petition complete in all respects and that default has been established for the purpose of initiating CIRP under section 9. [Paras 10, 11, 12, 13, 14]

No pre-existing dispute found as to the debt under Purchase Order No. CIMM/17-18/000568; petition under section 9 admitted.

Final Conclusion: The Company Petition under section 9 is admitted; moratorium under the Code is declared; public announcement and claims process to be carried out; an Interim Resolution Professional is appointed and directed to perform the duties specified under the Code, and the Operational Creditor directed to deposit funds for initial expenses.

CIRP cannot be initiated for recovery of interest alone - interest claim after repayment of principal not maintainable under Section 9 - interest clause in one-sided invoices not constituting agreement - application pursued with malicious intent and barred by Section 65

CIRP cannot be initiated for recovery of interest alone - interest claim after repayment of principal not maintainable under Section 9 - interest clause in one-sided invoices not constituting agreement - application pursued with malicious intent and barred by Section 65 - Maintainability of a Section 9 petition where only the interest component remains unpaid after the principal has been repaid. - HELD THAT: - The Tribunal found that the core question is whether CIRP can be pursued for realization of interest alone. The Corporate Debtor had repaid the entire principal over time and the Operational Creditor amended its claim to seek only the unpaid interest component. The Bench relied on the settled position that interest by itself is not sufficient to maintain a petition under Section 9 and noted NCLAT's observations that interest clauses in one-sided invoices do not necessarily amount to an agreement to pay interest. Further, pursuing the petition solely for interest, after the principal has been paid and settlement talks failed, amounted to prosecution of the application for recovery of debt rather than for resolution of insolvency. Such conduct was considered to be against the object and spirit of the Code and akin to pursuing the application with malicious intent, falling foul of the prohibition in Section 65. Applying these principles to the facts, the Tribunal concluded that the petition was not maintainable when prosecuted only for the interest component. [Paras 6, 7, 8, 9, 10]

The Company Petition filed under Section 9 seeking CIRP for the unpaid interest alone is not maintainable and is dismissed.

Final Conclusion: The petition under Section 9 was dismissed because only the interest component remained unpaid after repayment of the principal; proceedings solely to recover interest were held to be contrary to the Code and not maintainable.

Appointment of Interim Resolution Professional - no notice required to personal guarantor before appointment of Resolution Professional - principles of natural justice and furnishing of the Resolution Professional's report - procedural timeline and steps under Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 - replacement of Resolution Professional under Section 98 is not stage-specific

No notice required to personal guarantor before appointment of Resolution Professional - principles of natural justice and furnishing of the Resolution Professional's report - procedural timeline and steps under Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 - Whether the Personal Guarantor is entitled to notice or a right of audience before the Adjudicating Authority appoints the Interim/Resolution Professional. - HELD THAT: - The Tribunal analysed Sections 95 to 100 of the IBC and related rules and precedent. The statutory scheme provides a stepwise timeline for nomination and appointment of the resolution professional and contemplates furnishing of the resolution professional's report to the debtor under Section 99(10). While the Bombay High Court observed that hearing before admission under Section 100 would serve natural justice, the statutory provisions do not mandate advance notice to the guarantor prior to appointment of the IRP. The Tribunal observed that Sections 99(2) and 99(4) and the obligation to furnish the RP's report afford the debtor opportunities to make submissions and provide information before the adjudicating authority decides under Section 100. Reliance on NCLAT and Supreme Court discussions of the legislative design did not alter the conclusion that the IBC does not require prior notice or personal hearing of the guarantor at the stage of appointment of the IRP. Consequently, omission of a pre-appointment notice does not amount to violation of principles of natural justice in the statutory scheme.

No notice or right of audience is required to be given to the Personal Guarantor before appointment of the Resolution Professional; the statutory scheme provides post-appointment opportunities and furnishing of the RP's report to protect the debtor's rights.

Replacement of Resolution Professional under Section 98 is not stage-specific - appointment of Interim Resolution Professional - Whether Section 98 requires that the debtor be given an opportunity to seek replacement of the Resolution Professional before the Adjudicating Authority appoints the IRP. - HELD THAT: - The Tribunal held that Section 98 contemplates replacement of a resolution professional but is not confined to the initial appointment stage and may apply at later stages (for example, implementation of a repayment plan). Consequently, the contention that Section 98 mandates that the debtor be heard prior to the initial appointment of the IRP has no substance. The power of replacement under Section 98 operates after appointment, and does not convert into a statutory requirement of prior notice or a pre-appointment forum to seek replacement.

Section 98 does not entitle the debtor to a pre-appointment opportunity to seek replacement of the Resolution Professional; replacement is a post-appointment remedy.

Appointment of Interim Resolution Professional - procedural timeline and steps under Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 - Whether the petition under Section 95 was complete and whether the suggested insolvency professional should be appointed; and the directions regarding the RP's report. - HELD THAT: - The Tribunal found the application under Section 95 to be complete. The petitioner proposed Mr. Madasa Kumar as the Resolution Professional; the Tribunal noted that no disciplinary proceedings were pending against him on the IBBI website and appointed him as Resolution Professional. The RP was directed to file written consent forthwith and to submit his report within ten days from receipt of the order recommending approval or rejection of the application in terms of Section 99 and Section 100 of the IBC. The Registry was directed to communicate the order to the parties and provide necessary copies to the RP for compliance.

The Tribunal appointed the proposed Resolution Professional and directed him to give consent and submit his report within ten days; the petition under Section 95 was entertained as complete.

Final Conclusion: The Tribunal held that no prior notice or hearing is required to be afforded to the Personal Guarantor before appointment of the Resolution Professional; Section 98 does not create a pre-appointment right to seek replacement; the petition under Section 95 was found complete and the nominated Resolution Professional was appointed with directions to file consent and submit his report within ten days.

Initiation of Corporate Insolvency Resolution Process - operational debt - existence of debt and default - demand notice under Section 8 - limitation for filing Company Petition - appointment of Interim Resolution Professional - moratorium - public announcement of CIRP - management vesting in IRP/RP during CIRP - prohibition on continuation of suits and enforcement actions

Existence of debt and default - demand notice under Section 8 - limitation for filing Company Petition - Whether the Company Petition under Section 9 satisfied the statutory requirements for admission by demonstrating debt, default, service of demand notice and compliance with limitation - HELD THAT: - The Tribunal examined the documents annexed to the petition including purchase orders, invoices, delivery challans, debit notes and the Demand Notice dated 06.03.2019 together with proof of service at the registered and factory addresses. A bank certificate demonstrating no receipt of payment for the relevant period was also placed on record. The Corporate Debtor did not file any reply despite directions to do so and was set ex parte. Having perused the material and heard the Operational Creditor, the Bench found that the Operational Creditor had successfully demonstrated the existence of a debt and default and that the petition filed on 04.12.2019 was within limitation. The unchallenged documentary evidence and absence of any defence supported admission of the petition. [Paras 11, 15, 16]

The Company Petition satisfies the legal requirements for admission and is admitted.

Appointment of Interim Resolution Professional - moratorium - public announcement of CIRP - management vesting in IRP/RP during CIRP - prohibition on continuation of suits and enforcement actions - supply of essential goods not to be terminated - Reliefs and consequential directions upon admission including appointment of IRP, imposition of moratorium and related procedural directions - HELD THAT: - On admission of the petition, the Bench appointed an Interim Resolution Professional from the IBBI list as no IRP had been proposed by the Operational Creditor. The Bench directed deposit of initial CIRP costs by the Operational Creditor for the IRP to expend towards expenses (not fees until fixed by the Committee of Creditors). The Tribunal declared the moratorium operative from the date of the order until completion of CIRP or approval of a resolution plan or liquidation, and prohibited institution or continuation of suits, execution of decrees, transfer or disposal of assets, and enforcement actions including under the SARFAESI Act. The Bench directed that supply of essential goods or services shall not be terminated during the moratorium, ordered immediate public announcement of the CIRP and directed that management of the corporate debtor shall vest in the IRP/RP, with suspended directors and employees obliged to cooperate. Registry was directed to inform the Registrar of Companies and communicate the order to parties and the IRP. [Paras 17]

An IRP is appointed; moratorium and ancillary directions are issued and the CIRP is ordered to commence.

Final Conclusion: The Company Petition (IB) 4356 of 2019 filed by the Operational Creditor is admitted; CIRP against the Corporate Debtor is ordered, an Interim Resolution Professional is appointed, moratorium and related directions are imposed and steps for public announcement and statutory communication are directed.

Unauthorised Corporate Guarantee - fraudulent and engineered document - non-compliance with provisions of Section 185 - director's unauthorised act attracting liability - indemnity for liabilities arising from unauthorised act - security by deposit to protect company from CIRP exposure

Unauthorised Corporate Guarantee - fraudulent and engineered document - The Corporate Guarantee executed by the respondent was unauthorised and constituted an engineered/fraudulent document thereby exposing the company to liability. - HELD THAT: - On examination of the record the Bench found that the Corporate Guarantee in favour of Sourya Containers was issued without requisite authority from Aranca (Mumbai) Pvt. Ltd. and that the document was fabricated to create liability on the company. The Tribunal noted the sequence of correspondence whereby Aranca denied knowledge of the guarantee and sought a copy only after demand notices were issued, and found that the manner of execution and surrounding circumstances indicated an intent to perpetrate a fraud against Aranca (Mumbai) Pvt. Ltd. The Bench concluded that the guarantee was issued in breach of required corporate authority and amounted to an engineered transaction which rendered the document illegal. [Paras 40, 41]

The Corporate Guarantee was held to be unauthorised and indicative of fraudulent conduct by the respondent.

Non-compliance with provisions of Section 185 - director's unauthorised act attracting liability - indemnity for liabilities arising from unauthorised act - The respondent shall indemnify Aranca (Mumbai) Pvt. Ltd. for all liabilities arising from signing the unauthorised Corporate Guarantee, the act being contrary to applicable statutory provisions. - HELD THAT: - The Tribunal found that the respondent acted without authority and in breach of the statutory scheme governing related party transactions and guarantees, citing non-compliance with the statutory provisions applicable to such acts. Having regard to past misconduct recorded in the proceedings and the exposure of Aranca to insolvency proceedings on account of the alleged guarantee, the Bench directed that the respondent must indemnify Aranca for any liability arising out of the purported guarantee so that the consequences of the unauthorised act fall on the respondent who caused them. [Paras 36, 41]

Respondent directed to indemnify Aranca (Mumbai) Pvt. Ltd. for liabilities arising from the unauthorised Corporate Guarantee.

Security by deposit to protect company from CIRP exposure - indemnity for liabilities arising from unauthorised act - Interim security to protect Aranca's interest was granted by directing the respondent to deposit the claimed amount with the Registry of the Tribunal within a specified time. - HELD THAT: - Given the finding that the Corporate Guarantee was unauthorised and that Aranca faced potential insolvency proceedings, the Tribunal considered interim measures necessary to secure the company's interest. The Bench accordingly directed deposit of the amount claimed by the petitioner in the Section 7 proceedings with the Registry of the NCLT Mumbai Bench, allowing a limited extension of time on the respondent's request. This deposit was ordered as a protective measure pending further adjudication and to prevent immediate jeopardy to Aranca's financial position. [Paras 42]

Respondent directed to deposit the claimed amount with the Registry within three weeks as security for Aranca (Mumbai) Pvt. Ltd.'s interest.

Final Conclusion: The application was allowed in part: the Tribunal held that the Corporate Guarantee was unauthorised and indicative of fraudulent conduct by the respondent, directed the respondent to indemnify Aranca (Mumbai) Pvt. Ltd. for all liabilities arising therefrom, and ordered the respondent to deposit the claimed amount with the Registry of the NCLT Mumbai Bench within the time permitted to secure the company's interest; the connected application stands disposed in these terms.

Proceeds of crime - predicate offence requirement for money laundering - twin conditions under Section 45(1)(i)(ii) of the PML Act - power of arrest under Section 19 of the PML Act - prima facie assessment at bail stage (quality and character of evidence) - approbate and reprobate (self contradictory investigative stands) - placement, layering and integration (stages of money laundering)

Twin conditions under Section 45(1)(i)(ii) of the PML Act - prima facie assessment at bail stage (quality and character of evidence) - Whether the applicants satisfied the twin conditions for grant of bail under Section 45(1)(i)(ii) of the PML Act. - HELD THAT: - The Court applied a careful prima facie inquiry into whether there were reasonable grounds to believe the accused were guilty and whether they were likely to commit an offence while on bail. The Court examined contemporaneous materials, the character and quality of statements relied on by the Enforcement Directorate, the absence of any contemporaneous FIR or clear evidence of dishonest intention at the inception of the project, and the admitted role of other persons (notably the Wadhawans and HDIL) in generating and diverting funds. The Court held that the prosecution failed, on the material before it, to prima facie establish that the sums said to be tainted were derived "as a result of" criminal activity relating to the scheduled offences, and that the quality of the newly relied evidence (including late statements) was insufficient to meet the stringent assessment required at this stage. Applying these conclusions, the Court was satisfied that there were reasonable grounds for believing the applicants were not guilty of the offence and that they were not likely to commit an offence while on bail.

Applicants satisfied the twin conditions under Section 45(1)(i)(ii) and are entitled to bail.

Proceeds of crime - predicate offence requirement for money laundering - Whether the amounts alleged by the Enforcement Directorate (including the sums described as Rs.95/100/112 crore and the larger FSI sale proceeds) were prima facie 'proceeds of crime' within the meaning of the PML Act. - HELD THAT: - The Court applied the legal principle that property qualifies as 'proceeds of crime' only if it is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. Relying on documentary materials, prior judicial orders, and the prosecution's own pleadings, the Court found that the principal role in sale of FSI and diversion of funds was attributed to others (the Wadhawans and HDIL), that MHADA had previously accepted and litigated the development arrangements, and that there was no contemporaneous FIR or clear evidence of dishonest intention at the project's inception. The Enforcement Directorate's inconsistent positions regarding the source and character of the sums (different ECIRs and PAO proceedings suggesting different sources) further undermined the prosecution's case. On that basis the Court concluded that the prosecution had not made out a prima facie case that those amounts were proceeds of crime arising from scheduled offences.

Prosecution failed to prima facie establish that the contested amounts were 'proceeds of crime'.

Power of arrest under Section 19 of the PML Act - approbate and reprobate (self contradictory investigative stands) - Whether the arrests of the applicants under Section 19 of the PML Act were legally justified. - HELD THAT: - The Court examined the basis for arrest, noting that an arrest under Section 19 requires recorded reasons to believe the person has committed an offence under the PML Act. The Court found that (a) the material indicated prolonged civil litigation and contested development activity rather than contemporaneous criminality attributable to the applicants; (b) key decision makers and persons primarily identified by the prosecution as responsible for the alleged scheme were not arrested; and (c) the Enforcement Directorate had taken contradictory positions in related ECIRs and attachment proceedings, resulting in an approbate reprobate situation. The cumulative effect was that the Court concluded the arrests were not qualified under Section 19 and had been effected in a pick and choose manner.

Arrests under Section 19 were not legally justified; they were held to be illegal in the circumstances.

Prima facie assessment at bail stage (quality and character of evidence) - placement, layering and integration (stages of money laundering) - Whether the supplementary complaint and late investigative material (including newly recorded statements) sufficed to displace the applicants' entitlement to bail. - HELD THAT: - The Court scrutinised the timing and content of statements newly relied upon in the supplementary complaint, observing that several pivotal statements were recorded after the applicants had filed detailed bail material and defences. The Court highlighted deficiencies in the quality and corroboration of that evidence (for example, late recollections, absence of official minutes for alleged high level meetings, and statements based on hearsay). The Court reiterated that while it must not conduct a mini trial, it is obliged to assess the quality of evidence to determine whether the stringent prima facie threshold under Section 45 is met. On that assessment the newly relied evidence did not supply the required prima facie foundation to refuse bail.

Supplementary complaint and late statements did not prima facie defeat the applicants' claim to bail.

Bail as exception and jail as rule (contextual application under PMLA) - judicial protection of liberty where arrest is irregular - What order should be passed on the bail applications and on what conditions. - HELD THAT: - Having found illegality in the arrests and insufficiency of prima facie material to satisfy the twin conditions, and having regard to parity, the nature of the allegations and the applicants' ties and conduct, the Court directed release on bail. The Court imposed standard conditions to protect the integrity of the trial process: execution of PR bonds with sureties, undertakings not to intimidate witnesses or leave the country without permission, attendance at trial stages, and interim provisional cash security for an initial period. The Court emphasised that bail was granted after a thorough prima facie assessment and subject to conditions.

Both bail applications allowed; applicants released on conditions (PR bond, sureties, undertakings, provisional cash security).

Final Conclusion: The Special Court concluded after a focused prima facie inquiry that the Enforcement Directorate had not established, on the material before it, that the contested sums were 'proceeds of crime' arising from scheduled offences or that the applicants met the threshold for denial of bail under Section 45(1)(i)(ii). The Court further held the arrests infirm in the circumstances and, applying protective conditions to safeguard the trial process, allowed both bail applications and ordered release on bonds and specified undertakings.

Condonation of delay - interpretation of exemption notification (Mega Exemption Notification No.25/2012-ST) - scope of exemption for services to or by local authorities - appropriate forum for adjudication of service tax liability - remand for fresh adjudication and joinder of necessary parties - stay on coercive action pending adjudication

Condonation of delay - Delay in filing the appeals in GA/1908/2017 and GA/2254/2017 was condoned and the condonation applications were allowed. - HELD THAT: - The Court considered the affidavits filed in support of the applications for condonation of delay and was satisfied with the reasons advanced. In GA/1908/2017 the delay of seven days in filing the appeal was condoned and in GA/2254/2017 the delay of fourteen days was condoned. The Court therefore allowed the respective applications and admitted the appeals for hearing. [Paras 1, 2, 3, 4]

Applications for condonation of delay in GA/1908/2017 and GA/2254/2017 allowed; delays of seven and fourteen days respectively condoned.

Interpretation of exemption notification (Mega Exemption Notification No.25/2012-ST) - scope of exemption for services to or by local authorities - appropriate forum for adjudication of service tax liability - remand for fresh adjudication and joinder of necessary parties - stay on coercive action pending adjudication - Whether the question of applicability of the Mega Exemption Notification to the contractual supply of security services and the correctness of the KMC Circular should be decided in writ proceedings or by the designated service tax adjudicating authority, and the consequent course of action. - HELD THAT: - The Court observed that the core controversy-whether services rendered by or to the Kolkata Municipal Corporation are exempt under the Mega Exemption Notification-involves interpretation of the notification and related adjudication under the Finance Act and is therefore for the appropriate service tax adjudicating authority to decide. Given that adjudication before the service tax authorities had not been completed in the presence of KMC, the Court held that a writ forum was not appropriate to determine the issue at first instance. To secure an authoritative and binding determination and to avoid multiplicity of proceedings, the Court directed the concerned Service Tax Commissionerate to issue fresh notices to the appellants and to the KMC (to be treated as continuation of earlier show cause notices), afford the parties an opportunity of personal hearing, and thereafter adjudicate the matter by a reasoned order within specified timeframes. The Court also requested the CESTAT to defer hearings in the specified appeals until the adjudication is complete, directed that no coercive action be taken against the appellants until adjudication is finished, and provided procedural timelines for issuance of notices, filing of replies, and completion of adjudication. The Court expressly refrained from deciding the legal question on merits, leaving it open for the adjudicating authority. [Paras 7, 8, 9, 10, 11]

Matter remitted to the Service Tax Commissionerate for fresh adjudication after issuing notice to both the appellants and KMC; CESTAT hearings deferred; no coercive action to be initiated against the appellants until adjudication is complete; legal issue left open for adjudication.

Final Conclusion: Delay in two miscellaneous applications was condoned and the appeals were admitted; on the substantive question of exemption under the Mega Exemption Notification the High Court declined to decide the issue in writ proceedings and remitted the matter for fresh adjudication by the Service Tax Commissionerate with directions to issue notices to both the appellants and KMC, afford hearings, complete adjudication within stipulated time, defer tribunal hearings and refrain from coercive action until adjudication is complete.

Classification of goods under Central Excise Tariff - Tariff heading classification dispute between Chapters 54, 60 and 63 and competing polymer/plastics headings - Precedential effect of a Tribunal decision accepted by the Department - Reliance on earlier appellate orders accepted by the Department

Classification of goods under Central Excise Tariff - Tariff heading classification dispute between Chapters 54, 60 and 63 and competing polymer/plastics headings - Precedential effect of a Tribunal decision accepted by the Department - Whether the goods manufactured and cleared by the respondent are correctly classifiable under Chapters 54, 60 and 63 of the Central Excise Tariff rather than under the polymer/plastics headings sought by the Department. - HELD THAT: - The Commissioner examined the classification question and held that the products manufactured by the respondent are appropriately classifiable under Chapters 54, 60 and 63. That conclusion was reached with express reliance on the Tribunal's decision in M/s Flora Agro dated 28.10.2014, which had been accepted by the Department, and on earlier orders of the Commissioner (Appeals) dated 05.09.2011, 22.03.2012 and 20.08.2014 which were also accepted by the Department. Given the Tribunal decision accepted by the Department and the consistent appellate orders, the Commissioner found no error in the respondent's classification and considered it unnecessary to address ancillary points on value of clearances, penalty or issuance of the show cause notices.

Classification of the goods under Chapters 54, 60 and 63 is upheld; the demand proposed in the show cause notices is dropped.

Final Conclusion: The appeal is dismissed. The Commissioner's order dropping the demand on the ground that the goods are classifiable under Chapters 54, 60 and 63 - a conclusion reached having regard to the Tribunal decision accepted by the Department and earlier appellate orders accepted by the Department - is upheld.

Rule 173H of the Central Excise Rules, 1944 - exemption under Notification No.5/98-CE (Sr. No.69) subject to Condition No.10 - reliability of statutory intimations and registers (Forms Annexure A, Annexure C, Form V Register) - requirement of evidence for clandestine removal / proof of procurement of raw materials - inadmissibility of importing a limitation period by Trade Notice into Rule 173H - reliability of security supervisor's inward-outward register and statement - confiscation under Rule 173Q(1) - necessity to specify the particular clause attracting confiscation

Rule 173H of the Central Excise Rules, 1944 - statutory intimations and registers (Forms Annexure A, Annexure C, Form V Register) - Whether the Polycarbonate Bottles cleared under Rule 173H were received back for repair and re cleared under Rule 173H or were fresh goods clandestinely manufactured and cleared. - HELD THAT: - The Tribunal accepted the statutory record demonstrating receipt and re clearance: Forms Annexure A bearing department's received stamp/signature, entries in the Form V Register, Forms Annexure C with inspector's stamp/signature, and invoices cross referencing earlier duty paid invoices. The show cause notice did not dispute the genuineness of these documents nor produced statements of the officers who acknowledged them. In those circumstances the Revenue's case that no goods were received under Rule 173H cannot be sustained. The Tribunal also found it inherently improbable that the manufacturer would falsely declare freshly manufactured goods as repaired when it had earlier availed duty free clearance and recorded the same in its returns. The finding that the goods were received back, repaired and removed under Rule 173H is therefore upheld and the demand premised on clandestine manufacture is unsustainable. [Paras 4]

The Bottles were received back and re cleared under Rule 173H; the demand treating them as freshly manufactured goods is unsustainable.

Reliability of security supervisor's inward-outward register and statement - Whether reliance could be placed on the inward outward register and statement of the security supervisor to discredit the appellant's statutory records. - HELD THAT: - The Tribunal held that the security supervisor's register and statement are unreliable, noting the Tribunal's earlier finding to that effect. Further, the Commissioner declined to allow cross examination of the security supervisor yet relied upon his statement; that approach was improper and inconsistent with the Tribunal's earlier directions. The inward outward register, if treated as complete, would in fact show far fewer outward clearances (only 8,440 bottles), undermining the department's case rather than supporting it. Reliance on that register and on the security supervisor's statement was therefore misplaced. [Paras 4]

The inward outward register and the security supervisor's statement are unreliable and could not be validly used to discredit the statutory intimations and records.

Requirement of evidence for clandestine removal / proof of procurement of raw materials - Whether the Department proved clandestine manufacture by reference to production figures and annual report without evidence of corresponding raw material procurement. - HELD THAT: - The Tribunal applied settled law that allegations of clandestine removal require corroborative evidence such as purchase/procurement of requisite raw materials; mere figures in an annual report are insufficient. The department produced no evidence of purchase of excess raw material that would substantiate manufacture of the extra quantity alleged. The apparent discrepancy in the annual report production figure was explained as an obvious error or accounting treatment and import timing of raw material (stocks lying in bonded warehouse) further undermined the department's reliance on those figures. In absence of procurement evidence, the clandestine removal case fails. [Paras 4]

No case of clandestine manufacture/clearance was made out in the absence of evidence of requisite raw material procurement.

Exemption under Notification No.5/98-CE (Sr. No.69) subject to Condition No.10 - Whether the appellant was ineligible for exemption under Sr. No.69 of Notification No.5/98 CE dated 2 6 1998 by reason of taking credit of duty. - HELD THAT: - Condition No.10 prohibits availing credit of duty paid on products mentioned in column 2 or on any other product manufactured in the same factory. The Tribunal accepted the appellant's contention and precedent that the condition does not prohibit availing MODVAT/credit of duty paid on inputs used for other products in the same factory. There was no dispute that the appellant had not availed credit of duty paid on the bottles or any other finished product. The Commissioner's conclusion that the appellant had violated Condition No.10 by taking input credit in respect of a different product was legally erroneous. [Paras 4]

The appellant was eligible for exemption under Sr. No.69; Condition No.10 was satisfied and did not preclude input credit on inputs used for other products.

Inadmissibility of importing a limitation period by Trade Notice into Rule 173H - Whether clearance after six months of receipt under Rule 173H could justify demand of duty by application of a Trade Notice prescribing a six month period. - HELD THAT: - Rule 173H contains no limitation period prescribing that repaired goods must be cleared within six months. The Tribunal held it is impermissible to read such a limitation into the statutory rule by relying on a non statutory Trade Notice, which lacks statutory force. Consequently, the demand of duty on 490 bottles solely on the ground that they were cleared after six months is untenable. Moreover, given the Tribunal's finding that the goods were not fresh manufacture, there is no basis to demand duty on that ground. [Paras 4]

No duty can be demanded on account of clearance after six months; the Trade Notice cannot introduce a limitation into Rule 173H.

Confiscation under Rule 173Q(1) - necessity to specify the particular clause attracting confiscation - Whether confiscation of 23,887 bottles (and confiscation of land, building, plant & machinery with redemption fine) and penalties could be sustained. - HELD THAT: - The Tribunal found no evidence that the 23,887 bottles physically present in the factory were freshly manufactured or liable to confiscation; they were part of the quantity received under Rule 173H and not cleared. Confiscation was ordered on mere presumption without specification of the particular clause of Rule 173Q(1) said to be attracted, which is legally impermissible. As the duty demand itself is unsustainable, consequential orders of confiscation of immovable/ movable assets, redemption fines and the penalties imposed on the appellant companies and individuals lack foundation and must be set aside. [Paras 4]

Confiscation orders, redemption fines and penalties are unsustainable and are set aside.

Final Conclusion: The Tribunal set aside the impugned Order in Original dated 18 12 2018: the goods were held to have been received and re cleared under Rule 173H; demands based on alleged clandestine manufacture, reliance on the security supervisor's register/statement, a six month limitation read into Rule 173H, confiscation orders and penalties were held unsustainable; appeals allowed with consequential relief.

Eligibility for refund of CENVAT credit reversed under rule 6(3A) of the CENVAT Credit Rules, 2004 - classification of LPG cleared under PDS as exempted goods within the meaning of rule 2(d) of the CENVAT Credit Rules, 2004 - operability of Rule 6 of the CENVAT Credit Rules where a by product inevitably emerges in the manufacturing process - principle that inevitable emergence of a by product does not require denial of credit or separate accounts under Rule 6 - allowance of CENVAT credit/refund where no incremental input is used for the exempted quantity

Eligibility for refund of CENVAT credit reversed under rule 6(3A) of the CENVAT Credit Rules, 2004 - allowance of CENVAT credit/refund where no incremental input is used for the exempted quantity - Whether the appellant was entitled to refund/credit for amounts reversed in the CENVAT account under rule 6(3A) for LPG cleared under PDS during April 2010 to March 2011 - HELD THAT: - The Tribunal applied the ratio of earlier decisions of the Tribunal, the Hon'ble Gujarat High Court and the Hon'ble Supreme Court which held that where a by product (or exempted goods) emerges inevitably in the manufacturing process and no additional or segregable quantity of input or input services is specifically used for production of that by product, Rule 6 does not come into play. The Tribunal found that the appellant used the entire quantity of inputs and input services for manufacture of dutiable goods and that LPG arose as an inevitable by product in the manufacturing stream; there was no use of incremental inputs for the exempted quantity. On that basis Rule 6 was held inapplicable ab initio to such clearances and the reversed credits were found to be refundable/allowable. The reasoning relies on the determinative principle that inevitable and automatic emergence of a by product does not disentitle an assessee to credit where identical quantity of inputs is simultaneously used for the dutiable product, and therefore no separate accounting or percentage denial under Rule 6 is warranted. [Paras 4, 5]

The appeal is allowed; the impugned denial of refund/credit is set aside.

Classification of LPG cleared under PDS as exempted goods within the meaning of rule 2(d) of the CENVAT Credit Rules, 2004 - operability of Rule 6 of the CENVAT Credit Rules where a by product inevitably emerges in the manufacturing process - principle that inevitable emergence of a by product does not require denial of credit or separate accounts under Rule 6 - Whether LPG cleared under the Public Distribution System constituted 'exempted goods' for the purpose of invoking Rule 6 and thereby disallowing credit - HELD THAT: - The Tribunal, after considering the factual position and authoritative precedents, held that treating such LPG clearances as attracting Rule 6 adjustments would be inappropriate where the LPG was an inevitable by product and no separate or additional inputs were consumed for its production. Reliance was placed on the reasoning in prior Tribunal and higher court decisions which explain that when the manufacturing technology makes the emergence of the by product inevitable and the identical quantity of input is used for the dutiable product, the by product cannot be treated as a basis for denial of credit. Accordingly, the classification of those clearances as attracting Rule 6 adjustments was rejected and Rule 6 was treated as inoperable ab initio in the circumstances. [Paras 4, 5]

The view that LPG clearances under PDS attract Rule 6 adjustments is rejected; Rule 6 is inoperable ab initio for such clearances in the facts of this case.

Final Conclusion: The appeal is allowed; the order of the Commissioner (Appeals) denying refund/credit for amounts reversed under rule 6(3A) for April 2010 to March 2011 is set aside and the cross objection is disposed of.

Entitlement to Cenvat credit on outward GTA services - sale on FOR basis determining place of removal - point of sale determines place of removal - freight and risk borne by seller as integral part of assessable value

Entitlement to Cenvat credit on outward GTA services - sale on FOR basis determining place of removal - Appellant is entitled to Cenvat credit on outward GTA services where the sale is on FOR basis - HELD THAT: - The Tribunal applied its earlier decision in the appellant's own case (order dated 06.07.2021) holding that where sale is on FOR basis - demonstrated by sale invoices, LR copies and accompanying documents showing freight included in price, risk up to destination borne by seller and property passing at the port of export - the place of removal is not the factory gate and outward transport services constitute inputs eligible for Cenvat credit. The appellant's reply (para 13) and annexed documents were held to demonstrate that freight and risk were borne by the appellant and that freight formed part of the sale price; on this factual foundation the Tribunal found the ratio of the earlier order squarely applicable. The impugned order denying credit for lack of documentary proof was set aside and the appeal allowed, with consequential relief in accordance with law. [Paras 4, 5]

Impugned order set aside; appeal allowed and Cenvat credit on outward GTA services granted on findings that sale is on FOR basis

Final Conclusion: The Tribunal allowed the appeal, holding that on the facts showing sale on FOR basis with freight and risk borne by the seller, the appellant is entitled to Cenvat credit on outward GTA services and the impugned denial is set aside.

Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to waste/residue cleared from manufacturing process - deeming Explanation introduced w.e.f. 01.03.2015 treating non-excisable clearances as exempted goods - whether waste arising incidentally in manufacture is 'goods manufactured' by the assessee - treatment of non-excisable goods as exempted goods for levy under Rule 6

Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to waste/residue cleared from manufacturing process - whether waste arising incidentally in manufacture is 'goods manufactured' by the assessee - deeming Explanation introduced w.e.f. 01.03.2015 treating non-excisable clearances as exempted goods - Rule 6(3) of the Cenvat Credit Rules, 2004 (as amended w.e.f. 01.03.2015) is not attracted to sales of zinc dross/flux/skimmings which are waste/residue arising incidentally in the process of manufacture and are not goods manufactured by the assessee. - HELD THAT: - The Tribunal examined whether the Explanation introduced w.e.f. 01.03.2015, which deems non-excisable clearances as exempted goods, brings waste/residue arising during manufacture within the ambit of Rule 6(3). It followed co-ordinate Bench decisions in the appellant's own case and in related matters which held that materials which merely emerge incidentally during the manufacture of finished excisable goods (such as zinc scrap, dross, flux skimmings) are not goods 'manufactured' by the appellant and therefore cannot be treated as exempted goods manufactured by them for the purpose of Rule 6. The Tribunal noted that the deeming Explanation did not effect a corresponding amendment to sub-rule (1) so as to convert such incidental waste into goods manufactured by the assessee. In light of consistent decisions of different Benches of the Tribunal applying this ratio, the impugned demands founded on Rule 6(3) were held unsustainable and were set aside.

Impugned orders confirming demands under Rule 6(3) in respect of zinc dross/flux/skimmings for the stated periods are set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals and set aside the orders confirming demands under Rule 6(3) insofar as they related to sales of zinc dross/flux/skimmings (waste arising incidentally in manufacture) for the periods mentioned, following co-ordinate Bench decisions that such waste is not goods manufactured by the assessee and thus not attractable to Rule 6(3) as exempted goods.

Typographical/inadvertent error in property description - vitiation of auction proceedings - Rule 9(4) - payment of balance within fifteen days or such extended period by written agreement - Rule 9(5) - forfeiture and resale on default - written agreement for extension of time between parties - exhaustion of statutory remedy and pre deposit under Section 18

Typographical/inadvertent error in property description - vitiation of auction proceedings - Typographical error in the door number of the mortgaged property does not vitiate the auction proceedings where full description was otherwise clear and no prejudice was shown. - HELD THAT: - The Court found that from the commencement of proceedings the door number was mistakenly recorded as "12-3-393" instead of "12-3-39", but the notice otherwise contained full particulars - boundaries, measurements, ward, block, T.S. number and plot - and there was no evidence of any other property bearing the erroneous number in the locality. The borrowers failed to demonstrate any actual prejudice or that bidders were misled or that the property could not have fetched its proper value because of the inadvertent error. A mere typographical mistake which does not create ambiguity in the identification of the mortgaged asset cannot, without proof of prejudice, annul proceedings that otherwise comply with the Rules, 2002. [Paras 23, 36, 37]

Typographical error in the door number held to be inconsequential; auction not vitiated on that ground.

Rule 9(4) - payment of balance within fifteen days or such extended period by written agreement - Rule 9(5) - forfeiture and resale on default - written agreement for extension of time between parties - Delay of four days in depositing the balance 75% of the bid, under the facts of this case, did not frustrate or annul the auction; the period in Rule 9(4) is not sacrosanct and may be extended in appropriate circumstances. - HELD THAT: - The Court examined the scheme of pre amended Rules 9(4) and 9(5), earlier precedent and the subsequent legislative amendment clarifying extension by written agreement. It noted that the auction purchaser paid earnest money and 25% on the auction date and that the deposit of the remaining 75% was made during a period when the matter was in flux because borrowers had obtained interim orders from the Tribunal and sought extensions to deposit a conditional sum. The secured creditor had requested the purchaser to wait pending the Tribunal proceedings. In that factual context a four day delay did not amount to a default that would justify forfeiture under Rule 9(5). The Tribunal's finding that the delay was excusable was supported by record and was not open to interference. [Paras 38, 41, 43, 44, 45]

Four day delay in depositing balance held not to vitiate sale; auction purchaser not a defaulter under Rule 9(4)/(5) in these circumstances.

Exhaustion of statutory remedy and pre deposit under Section 18 - High Court should not ordinarily entertain writ petitions under Article 226 where an effective statutory remedy by way of appeal under Section 18 (subject to pre deposit) is available; the borrowers erred in approaching the High Court without exhausting statutory remedy. - HELD THAT: - The Court reiterated the settled principle that where a comprehensive statutory remedy exists, the High Court must ordinarily insist on its exhaustion before entertaining writ jurisdiction. The borrowers had an appeal remedy under Section 18 against Tribunal orders but directly invoked writ jurisdiction to avoid the pre deposit condition; such practice was deprecated and provided no justification for the High Court to set aside auction proceedings on that basis. [Paras 32, 33, 34]

Writ challenge without exhausting statutory remedy was improper; High Court should have been cautious in entertaining the petition.

Vitiation of auction proceedings - Direction for transfer of surplus sale proceeds to borrowers/guarantor with written consent as to account and time frame. - HELD THAT: - After adjusting outstanding dues and ancillary charges, a surplus remained with the bank. The Court directed that the original sum with accrued interest be transferred to the account of the borrower/guarantor, subject to their written consent as to the designated account, and prescribed an eight week period for the bank to effect the transfer. [Paras 46]

Bank directed to transfer surplus with interest to borrower/guarantor within eight weeks upon written consent as to account.

Final Conclusion: The appeal is allowed; the High Court judgment setting aside the e auction and consequential proceedings is quashed and set aside. The auction sale is upheld; the bank is directed to transfer the surplus sale proceeds with interest to the borrower/guarantor within eight weeks in accordance with their written instructions. No order as to costs.

Conversion of acquittal into conviction - Revisional jurisdiction and its limits - Sub Section 3 of Section 401 Cr.P.C. - limitation on revisional power - Inherent powers of High Court under Section 482 Cr.P.C. - Right of appeal against acquittal under Section 378 Cr.P.C. - Exclusion of time in computing limitation under Section 470 Cr.P.C.

Conversion of acquittal into conviction - Revisional jurisdiction and its limits - Sub Section 3 of Section 401 Cr.P.C. - limitation on revisional power - Whether the revisional jurisdiction exercised by the Sessions Judge could reverse an order of acquittal and record conviction. - HELD THAT: - The High Court held that the revisional power exercised under Section 401(3) Cr.P.C. cannot be used to convert an order of acquittal into an order of conviction. Where the Code provides a specific statutory remedy against an acquittal (appeal under Section 378 Cr.P.C.), the inherent or revisional power must yield to that statutory scheme. Reliance on the inherent jurisdiction under Section 482 Cr.P.C. to overturn an acquittal is impermissible when the legislature has provided a distinct remedy; the principle in Madhu Limai was applied to restrict invocation of inherent powers against express statutory bars. The earlier decision cited by the opposite party was held not to assist on this point and does not permit departure from the statutory limitation on revisional jurisdiction. [Paras 6, 11, 12]

Revisional reversal of the acquittal into conviction was not permissible and the impugned conviction cannot be allowed to remain.

Inherent powers of High Court under Section 482 Cr.P.C. - Right of appeal against acquittal under Section 378 Cr.P.C. - Exclusion of time in computing limitation under Section 470 Cr.P.C. - Extent to which the High Court could afford relief and the procedural consequence directed by the Court. - HELD THAT: - Although the Court declined to sustain the conviction substituted in revision, it recognised the complainant's right to pursue the statutory remedy. The High Court refused to exercise inherent jurisdiction to uphold the conviction but granted liberty to the complainant to file, within 30 days, an application under Section 378 Cr.P.C. before the appropriate appellate court. The appellate court was directed to consider such application having regard to Section 470 Cr.P.C. which permits exclusion of time where a party has been prosecuting with due diligence another prosecution relating to the same facts or where other statutory conditions for exclusion are met. This course preserves the statutory appellate remedy while guarding against loss of rights by reason of prior proceedings. [Paras 13, 14, 15]

Liberty granted to the complainant to prefer appropriate appeal under Section 378 Cr.P.C. within 30 days; appellate court to consider Section 470 Cr.P.C. while adjudicating.

Final Conclusion: Criminal revision disposed: the Sessions Judge's conversion of the Trial Court's acquittal into conviction could not be sustained under revisional or inherent jurisdiction; the complainant was afforded liberty to pursue the statutory appeal remedy within a limited time, and the appellate court was directed to consider exclusion of time where applicable.