TaxTMI Updates e-Newsletter
Nov 24,2021

Reopening assessment - change of opinion - application of mind in original assessment - failure to disclose truly and fully all material facts - deductibility of expenditure prohibited by law

Reopening assessment - change of opinion - application of mind in original assessment - Whether the Assessing Officer was justified in reopening the completed assessment after four years where the Assessing Officer had applied his mind in the original assessment and the reopening amounted to a change of opinion. - HELD THAT: - The Court found on the material on record, particularly the notice dated 14/8/2014 and the order-sheet entries, that the Assessing Officer had examined and sought details about the petitioner's advertisement and marketing expenditures during the original assessment proceedings and that the petitioner had filed agreements, invoices and discussed the issue before the order under Section 143(3) was passed. Relying on the principle that once the primary facts necessary for assessment are fully and truly disclosed and considered, the Assessing Officer is not entitled to reopen the assessment merely to take a different view, the Court held that reopening on the basis of a change of opinion was impermissible. The Court noted binding coordinate-bench authority to the same effect and observed that where reassessment is sought on account of a mere change of opinion about the manner of computation of deduction (and not on the basis of failure to disclose material facts), reopening is unjustified. Having set aside the reopening notices on this ground, the Court declined to decide other contentions which were left open for adjudication in appropriate proceedings. [Paras 12, 13, 15, 16, 17]

Reopening of assessment quashed as it amounted to an impermissible change of opinion where the Assessing Officer had already applied his mind in the original assessment.

Final Conclusion: The writ petitions are allowed: the notices issued for reopening and the consequential orders rejecting objections are quashed and set aside; rule made absolute.

Principles of natural justice - disposal of appeal on merits - non-appearance and ex-parte disposal by appellate authority - revisionary power of Principal Commissioner under section 263 - exemption under section 54F

Principles of natural justice - non-appearance and ex-parte disposal by appellate authority - disposal of appeal on merits - Whether the appellate authority erred in dismissing the assessee's appeal ex parte without providing a reasonable opportunity of hearing and without disposing the appeal on merits. - HELD THAT: - The Tribunal noted that an appellate authority may dispose of an appeal where the appellant fails to appear after being given opportunities, but even in such circumstances the appeal should, as far as possible, be disposed of on merits on the basis of material on record. Before finally disposing an appeal, a reasonable opportunity must be afforded to the assessee to explain the case. The CIT(A) had proceeded to dispose the appeal ex parte after the assessee failed to appear, and the order was found to be vague and not a reasoned disposal on merits. In view of these considerations and the submissions of the assessee that no adequate hearing was accorded, the Tribunal concluded that the principles of natural justice required that the matter be reconsidered by the CIT(A) after giving the assessee one more opportunity to be heard and to file necessary evidence. [Paras 4, 7]

Order of the CIT(A) set aside insofar as it dismissed the appeal ex parte; appeal restored to the file of the CIT(A) with direction to afford reasonable opportunity of hearing and to decide the appeal on merits.

Exemption under section 54F - revisionary power of Principal Commissioner under section 263 - Whether the denial of exemption claimed under section 54F and the revision by the Principal Commissioner directing the Assessing Officer to disallow the exemption required fresh consideration by the appellate authority. - HELD THAT: - The assessment order had been revised under the Principal CIT's exercise of power under section 263 which resulted in the Assessing Officer disallowing the exemption claimed under section 54F. The Tribunal did not decide the correctness of the substantive disallowance on merits. Instead, having found procedural infirmity in the CIT(A)'s ex parte disposal, the Tribunal remitted the substantive issue back to the CIT(A) for fresh consideration. The remand is directed to permit the assessee to appear, furnish necessary evidence, and for the CIT(A) to examine the claim and the revisionary action on the basis of material and reasoned consideration. [Paras 3, 7]

Substantive issue concerning the disallowance of the exemption under section 54F is remanded to the CIT(A) for fresh consideration after affording the assessee a reasonable opportunity to be heard and to produce evidence.

Final Conclusion: The CIT(A)'s ex parte disposal is set aside and the appeal is restored to the file of the CIT(A) for reconsideration; the assessee shall be given one more reasonable opportunity to appear and furnish evidence, and the substantive question regarding denial of exemption under section 54F (following revision under section 263) is remanded to the CIT(A) for fresh, reasoned adjudication.

Reassessment under section 153A - Unabated assessment years - Incriminating material unearthed during search - Statement recorded under section 132(4) and requirement of corroboration - Nexus between recorded statement and seized evidence - CBDT circulars prohibiting confessions/surrenders as basis for additions

Reassessment under section 153A - Unabated assessment years - Incriminating material unearthed during search - Statement recorded under section 132(4) and requirement of corroboration - Nexus between recorded statement and seized evidence - CBDT circulars prohibiting confessions/surrenders as basis for additions - Validity of additions made under section 153A in respect of AY 2011-12 where no incriminating material was found from the assessee during search and additions were founded on recorded statements and third party material. - HELD THAT: - The Tribunal found that on the date of search (25/07/2013) assessment proceedings for AY 2011-12 had attained finality and the year was unabated; no notice under section 143(2) had been issued and the time for doing so had lapsed (para 7). In such circumstances additions under section 153A could be sustained only if incriminating material was unearthed in the course of the search relating to the assessee. The remand report of the Assessing Officer itself admitted that no incriminating material was found in the assessee's case (para 8). The material seized from the assessee consisted of routine books/ledgers and did not corroborate the AO's allegation that the long term capital gains were bogus; the AO had primarily relied on search findings and statements in the case of a third party (Shri Shirish C. Shah) without establishing any live nexus with incriminating material from the assessee's premises (para 8). The Tribunal applied the settled proposition that a statement recorded under section 132(4) requires corroboration by incriminating material found during search before it can support additions; retracted statements, without corroborative seized material, cannot sustain additions (paras 9-10). The Tribunal also noted the CBDT instructions cautioning against treating confessions/surrenders recorded during search as standalone basis for additions and emphasized the need to focus on evidentiary material gathered during search (para 9). Reliance was placed on binding and persuasive High Court and Tribunal precedents to the same effect, including a Special Bench/SMC bench decision in a closely analogous group case (para 11). Applying these principles, and given absence of any incriminating material linking the assessee to the tainted third party transactions, the Tribunal held the additions unsustainable and deleted them (paras 7-12). [Paras 8, 9, 10, 11, 12]

Impugned additions made under section 153A for AY 2011-12 are deleted as no incriminating material was found in the assessee's search and recorded statements stood uncorroborated.

Final Conclusion: The appeals are allowed: additions made in assessments completed under section 153A for AY 2011-12 are deleted because the year was unabated and no incriminating material was found from the assessee to corroborate recorded statements; hence the assessments are bad in law.

Allowability of deduction for employees' contribution to Provident Fund and ESI paid after statutory due date but before the due date of filing return - treatment of belated PF/ESI payment as deemed income of employer - application of section 36(1)(va) read with section 2(24)(x) of the Income tax Act

Allowability of deduction for employees' contribution to Provident Fund and ESI paid after statutory due date but before the due date of filing return - application of section 36(1)(va) read with section 2(24)(x) of the Income tax Act - Employees' contribution to PF and ESI deposited after the date prescribed under the statutory enactments but before the due date of filing the return of income is allowable as deduction and not liable to be treated as deemed income of the employer. - HELD THAT: - The Tribunal considered whether an employer's belated deposit of employees' PF/ESI contributions (i.e., after the due date under the respective Acts but before the due date for filing the return under section 139(1)) disentitles the employer from deduction under the Income tax Act or results in deemed income. The Tribunal followed the decision of the Hon'ble Delhi High Court in PCIT vs. Pro Interactive Service (India) Pvt. Ltd. , which held that the legislative intent is to allow expenditure when payment is actually made and that belated payment should not be treated as deemed income of the employer. The Tribunal also followed the coordinate Bench decision in CIT v. Dee Development Engineers Ltd. , which applied the same principle to hold that no disallowance under section 36(1)(va) read with section 2(24)(x) can be made where employees' contributions were paid before the return filing due date. Applying those precedents to the admitted facts - that the assessee deposited the employees' contribution to PF and ESI before the due date for filing the return - the Tribunal held that the disallowance confirmed by the CIT(A) was not justified and set aside that order. [Paras 8, 9]

The disallowance under section 36(1)(va) read with section 2(24)(x) is set aside and the claim is allowed since the employees' contributions were deposited before the due date for filing the return.

Final Conclusion: The appeal is allowed: following the Delhi High Court and coordinated Tribunal precedent, payments of employees' PF/ESI made after the statutory due date but before the return filing due date are deductible and do not constitute deemed income, and the order of the CIT(A) confirming disallowance is set aside.

Jurisdiction of income-tax authorities - pecuniary jurisdiction of Assessing Officer - validity of notice under section 143(2) of the Income tax Act - power to transfer cases under section 127 of the Income tax Act - CBDT Instruction No.1/2011 fixing monetary limits for assessment jurisdiction - section 292BB-deemed service does not cure complete absence of notice

Pecuniary jurisdiction of Assessing Officer - validity of notice under section 143(2) of the Income tax Act - CBDT Instruction No.1/2011 fixing monetary limits for assessment jurisdiction - power to transfer cases under section 127 of the Income tax Act - section 292BB-deemed service does not cure complete absence of notice - Assessment framed by the ACIT without pecuniary jurisdiction and after a notice issued by an officer lacking jurisdiction is invalid. - HELD THAT: - The Tribunal examined whether the ACIT had pecuniary jurisdiction to issue notice under section 143(2) and to frame assessment u/s 143(3). CBDT Instruction No.1/2011 allocates scrutiny jurisdiction with monetary limits (including corporate returns in metros up to and above the prescribed threshold), and jurisdiction may be determined by income declared in the return. Section 120 permits the Board to direct exercise of powers by income tax authorities and section 127 empowers Commissioners (or higher) to transfer cases; no record was produced showing a transfer by an authority competent under section 127. A notice issued by an officer who did not have pecuniary jurisdiction is therefore null and void; issuance of such a notice by a non jurisdictional officer does not constitute a valid statutory notice under section 143(2). Section 292BB cannot validate the complete absence of a statutory notice because it only cures infirmities in service where a notice has in fact emanated from the department. Applying these principles and following binding coordinate bench precedents cited in the order, the Tribunal held that assessment completed by the ACIT in the absence of a valid notice by the jurisdictional Assessing Officer, and without any valid transfer under section 127, is bad in law. [Paras 7, 8]

Assessment order passed by the ACIT without pecuniary jurisdiction and in absence of a valid notice under section 143(2) is void; assessment set aside and appeal allowed.

Final Conclusion: Following CBDT Instruction No.1/2011 and relevant statutory provisions, and in absence of any transfer recorded under section 127, the assessment for AY 2016-17 framed by the ACIT is quashed as lacking pecuniary jurisdiction and without a valid notice under section 143(2); the assessee's appeal is allowed.

Deduction under section 36(1)(va) of the Income-tax Act - Employees' contribution to PF and ESI - Payment made before due date of filing return under section 139(1) - Belated deposit under statutory PF/ESI timelines - Applicability of amendment to Section 36/Section 43B with effect from 01.04.2021 - Treatment as deemed income under section 2(24)(x)

Deduction under section 36(1)(va) of the Income-tax Act - Employees' contribution to PF and ESI - Payment made before due date of filing return under section 139(1) - Belated deposit under statutory PF/ESI timelines - Applicability of amendment to Section 36/Section 43B with effect from 01.04.2021 - Treatment as deemed income under section 2(24)(x) - Whether the disallowance of employees' contribution to PF and ESI, paid after the statutory due dates under PF/ESI laws but before the due date for filing the return of income, is sustainable or whether such amount is deductible under section 36(1)(va). - HELD THAT: - The Tribunal examined that the assessee deposited employees' contributions to PF and ESI after the dates prescribed under the respective statutes but before the due date for filing the return of income under section 139(1). It noted consistent decisions of coordinate benches and the view of the Hon'ble Delhi High Court in Pro Interactive Service (India) Pvt. Ltd. (following AIMIL Ltd.) that legislative intent is to allow the expenditure when payment is actually made and that belated payment should not be treated as deemed income under section 2(24)(x). The Tribunal also observed that the amendments introduced by the Finance Act, 2021 (effective 01.04.2021) clarifying the scope of section 36(1)(va) / section 43B are prospective and do not apply to the assessment year under consideration. Applying these precedents and reasoning, the Tribunal held that the disallowance in respect of employees' contribution paid before the due date of filing the return was not sustainable and directed deletion of the addition. [Paras 7, 8]

The disallowance of Rs. 21,40,164/- on account of belated deposit of employees' contribution to PF & ESI is set aside and deleted; the appeal is allowed.

Final Conclusion: Following the Tribunal's reliance on coordinate bench decisions and the relevant High Court precedents, and holding that the Finance Act, 2021 amendments are prospective, the Tribunal deleted the disallowance for employees' contribution to PF and ESI deposited before the due date of filing the return for A.Y. 2018-2019 and allowed the appeal.

Annual value - Fair market rent - Section 23 annual value test - Standard rent under Rent Control Act - Municipal valuation as guiding factor - Valuation report of a government approved valuer - Replacement of actual rent by estimated fair rent

Annual value - Fair market rent - Section 23 annual value test - Valuation report of a government approved valuer - Municipal valuation as guiding factor - Standard rent under Rent Control Act - Whether the Assessing Officer was justified in adopting the rent determined by a government approved valuer as the annual letting value (ALV) without determining or comparing municipal value/standard rent - HELD THAT: - The Tribunal analysed section 23 and agreed with the CIT(A)'s interpretation that ALV under section 23(1)(a) is the sum for which the property might reasonably be expected to be let and that municipal valuation or standard rent under Rent Control law are guiding factors for determining fair rent. The authorities must determine reasonable/fair rent and any deviation from municipal value or standard rent must be supported by evidence. In the present case the Revenue relied solely on a government-approved valuer's report to fix ALV at a markedly higher figure without undertaking any exercise to determine municipal value or standard rent or giving reasons for rejecting those guiding factors. The Tribunal found that adopting the valuer's figure as sacrosanct, without comparison to or justification vis-a -vis municipal/standard rent, was arbitrary. Consequently the enhanced rental income assessed on that basis was set aside and the actual rent returned by the assessee was restored. [Paras 10, 11, 12, 13, 14]

Adoption of the valuer's report as the ALV without determining or confronting municipal value/standard rent was unjustified; the assessed enhanced rental income is set aside and the returned income restored.

Statutory deduction under section 24 - Effect of setting aside assessed rental income - Whether the disallowance of statutory deduction under section 24 from the enhanced rental income requires interference - HELD THAT: - The Tribunal observed that since the enhancement of rental income made by the Revenue has been set aside and the assessee's returned rental income restored, the challenge to denial of deduction under section 24 is rendered academic. No substantive decision on merits of those deductions was necessary as the foundational assessed income has been quashed. [Paras 15]

Ground challenging denial of section 24 deductions is of no relevance in view of setting aside the enhanced rental income.

Abandonment of ground for want of argument - Disposition of the ground alleging unfair conduct of assessment proceedings (application under section 144A) where no arguments were pressed before the Tribunal - HELD THAT: - The Tribunal recorded that no arguments were advanced before it in respect of the grievance regarding disposal of the section 144A application and accordingly dismissed that ground for want of prosecution/argument. [Paras 16]

The ground alleging unfair disposal of the section 144A application is dismissed for failure to argue before the Tribunal.

Final Conclusion: The Tribunal allowed the appeal in part: it set aside the enhanced rental income assessed on the basis of the government valuer's report and restored the income returned by the assessee for assessment year 2013-14; the challenge to denial of section 24 deductions was held irrelevant in view of this result, and the remaining procedural ground was dismissed for want of argument.

Commencement of business in real estate - preliminary expenses treated as revenue expenditure - joint development agreement as evidence of commencement - distinction between capital and revenue expenditure

Commencement of business in real estate - joint development agreement as evidence of commencement - preliminary expenses treated as revenue expenditure - distinction between capital and revenue expenditure - Allowability as revenue expenditure of legal, professional and consultancy charges debited to profit and loss account which were treated as capital expenditure by the Assessing Officer and sustained by the Commissioner (Appeals). - HELD THAT: - The Tribunal examined whether the legal, professional and consultancy charges debited to the Profit & Loss account could be treated as revenue expenditure despite the Assessing Officer treating them as capital on the ground that they were incurred before commencement. The assessee had entered into a joint development agreement dated 18/01/2008 for development of land, which the Tribunal held to demonstrate that the real estate business had been set up and commenced. The Tribunal noted that in the service/real estate context there is no bright-line test for commencement and that preliminary steps (such as negotiation, employment of personnel and obtaining legal/due-diligence advice) may be sufficiently linked to the ultimate commercial activity to be revenue in nature. Reliance was placed on the ratio in the decision of the Delhi High Court in Indian Railway Stations Development Corporation Ltd. v. Pr. CIT [as cited in the record], which supports treating preparatory activities as indicative of business having been set up and the expenses being relevant to the revenue account. Applying that principle to the facts, the Tribunal concluded that the expenditures towards legal, professional and consultancy charges were incurred in the course of the assessee's business activity and are allowable as revenue expenditure. [Paras 8]

The legal, professional and consultancy charges of Rs. 69,19,950/- are allowed as revenue expenditure.

Final Conclusion: The appeal is allowed on the issue of disallowance of legal, professional and consultancy charges: the Tribunal held that the joint development agreement evidences commencement of the real estate business and the impugned expenditures are allowable as revenue expenditure.

Characterisation of rental receipts as Income from House Property or Profits and Gains of Business - Intention / primary object of the assessee and objects clause of Memorandum of Association - Tests for characterisation: tenure of lease, services provided, and whether activities are systematic and organised - Principle of consistency and uniformity in head of income across assessment years - Revision of assessment by Pr. CIT under section 263 and consequential re-examination of nature of income

Characterisation of rental receipts as Income from House Property or Profits and Gains of Business - Intention / primary object of the assessee and objects clause of Memorandum of Association - Tests for characterisation: tenure of lease, services provided, and whether activities are systematic and organised - Principle of consistency and uniformity in head of income across assessment years - Rental income declared by the assessee for AY 2012-13 is to be assessed as income from house property and not as business income. - HELD THAT: - The Tribunal applied established tests to determine the character of receipts: (a) the objects clause of the assessee's Memorandum shows development of property and letting on lease but does not conclusively establish that letting was the assessee's sole business; (b) the tenure of leases (long-term) and the factual matrix indicated the assessee intended to enjoy long-term rental income rather than to exploit the properties commercially on a short-term, business-like basis; (c) the services rendered after letting were limited to providing infrastructure, furniture and fittings as per lease annexures and there was no systematic or organised ongoing activity akin to a business of providing services to occupiers; and (d) the assessee had consistently offered such receipts as income from house property in preceding years and the Revenue had accepted that characterisation until AY 2012-13. Applying these tests and relying on precedents which distinguish cases where letting is a commercial business from those where letting yields passive rental income, the Tribunal concluded that the receipts retain the character of income from house property. The Tribunal also observed that the reopening under Pr. CIT's revision order required reconsideration in light of case law, and on such reconsideration the facts supported assessment under the head "income from house property." [Paras 3, 7]

Assessee's characterisation of the rental receipts as income from house property is upheld and the appeal is allowed; Revenue's appeal is dismissed.

Final Conclusion: On the facts and applying established tests (objects clause, tenure of leases, services provided and absence of systematic exploitation), the Tribunal held that the rental receipts for AY 2012-13 are assessable as income from house property; Revenue's appeal is dismissed.

Reopening of assessment under section 147 - reason to believe - requirement to furnish audit report with return for deduction under section 80-IB(13) read with section 80-IA(7) - annexure-less returns / Board Instructions for filing ITR - statutory provisions prevail over Board Instructions

Reopening of assessment under section 147 - reason to believe - requirement to furnish audit report with return for deduction under section 80-IB(13) read with section 80-IA(7) - annexure-less returns / Board Instructions for filing ITR - statutory provisions prevail over Board Instructions - Validity of reassessment proceedings initiated under section 147/148 based on the reasons recorded alleging non-conduct/non-furnishing of audit and consequent ineligibility for deduction under section 80-IB(11A). - HELD THAT: - The Tribunal found both limbs of the reason recorded by the AO insufficient to sustain formation of a 'reason to believe' under section 147. The first limb-the assessee marking non-liability to audit under section 44AB in its return-does not, by itself, imply escapement of income; at best it exposes the assessee to penalty and cannot constitute a basis for reassessment absent other material. The second limb-alleged non-compliance with audit/furnishing requirements for claiming deduction under section 80-IB(11A) by reference to section 80-IB(13) read with section 80-IA(7)-also failed. The Board's Instructions permitting annexure-less electronic/paper returns (and the related rule-making framework) do not override the statutory requirement; however, the assessee had obtained the prescribed audit report (Form 10CCB) in time and produced it to the AO during reassessment proceedings. The Instructions and rules allow returns without annexures but do not negate the statutory entitlement once the audit report exists. Given these facts and the legal framework, the AO had no valid foundation to form a belief of escapement of income, and therefore no valid assumption of jurisdiction under section 147 was made.

Reopening/assessment under section 147/148 held invalid; consequential assessment order quashed and the appeal allowed on this ground.

Deduction under section 80-IB(11A) - disallowance of depreciation - Whether the additions/disallowances made by the assessing authority in respect of claim of deduction under section 80-IB(11A) and disallowance of depreciation are to be adjudicated. - HELD THAT: - The Tribunal did not adjudicate the merits of the assessing officer's additions-disallowance of deduction under section 80-IB(11A) and disallowance of depreciation-because the appeal was allowed on the legal ground invalidating the reassessment proceedings. Having quashed the reassessment for want of valid jurisdiction under section 147, the Tribunal found it unnecessary to travel to the substantive grounds which therefore became infructuous in the present proceedings.

Substantive grounds (challenge to disallowance of deduction under section 80-IB(11A) and disallowance of depreciation, and the related Ground 3) were not decided and remain without adjudication as they became infructuous upon allowing the appeal on the reopening issue.

Final Conclusion: The appeal is allowed by quashing the reassessment initiated under section 147/148 for AY 2008-09 for want of valid 'reason to believe'; consequential assessment order set aside. Other substantive grounds challenging additions/disallowances were not decided as they became infructuous on this outcome.

Disallowance under section 14A read with Rule 8D - Disallowance limited to amount of exempt income - Net interest expenditure consideration under Rule 8D(2)(ii) - Administrative expenditure disallowance under Rule 8D(2)(iii) - Only investments yielding exempt income to be considered for Rule 8D computation - Marked-to-market loss on foreign exchange derivatives as business loss - Utilisation of CENVAT credit as payment for excise duty and deduction under section 43B - Additional depreciation on new commercial vehicle - applicability of Motor Vehicles Act definition - Expenses attributable to exempt income not to be added to book profit for MAT under section 115JB - Disallowance of employer's failure to remit employees' contributions under section 36(1)(va) - Bad debts written off against earlier provisions deductible under section 36(1)(vii) - Cessation of liability under section 41(1) - Prior period commission provision and mercantile accounting treatment - Remand for verification where supporting details are on record but not considered - CBDT Instruction No.3/2010 does not override binding judicial precedent

Disallowance under section 14A read with Rule 8D - Disallowance limited to amount of exempt income - Net interest expenditure consideration under Rule 8D(2)(ii) - Administrative expenditure disallowance under Rule 8D(2)(iii) - Only investments yielding exempt income to be considered for Rule 8D computation - Extent and computation of disallowance under section 14A read with Rule 8D - HELD THAT: - The Tribunal upheld that disallowance under section 14A read with Rule 8D must be computed only after applying the tests in Rule 8D and relevant judicial precedents. Where interest income exceeded interest expenditure, proportionate interest disallowance under Rule 8D(2)(ii) need not be made and administrative disallowance under Rule 8D(2)(iii) is to be computed on average investment relevant for exempt receipts. The Tribunal further applied the principle that, for computing disallowance under section 14A, only those investments which yielded exempt income during the year are to be considered and, in several years, restricted the disallowance to no more than the exempt income actually earned. In one assessment year the Tribunal set aside the CIT(A)'s order and remitted the matter for de novo computation following the Special Bench ratio in Vineet Investment Pvt. Ltd. (requiring only investments yielding exempt income to be taken into account) after giving the assessee an opportunity to be heard. [Paras 6, 36, 47, 57, 61]

Disallowances under section 14A/read with Rule 8D were restricted in the several assessment years - generally to the amount of exempt income or otherwise reworked following Rule 8D principles; one assessment year was remitted for recomputation following the Vineet Investment ratio.

Additional depreciation on new commercial vehicle - applicability of Motor Vehicles Act definition - Allowability of higher rate of depreciation on a newly purchased vehicle claimed as a 'new commercial vehicle' - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the vehicle qualified as a 'commercial vehicle' within the Appendix to the Income Tax Rules by reference to the Motor Vehicles Act definition (including Light Motor Vehicle specifications). The Coordinate Bench decision in Voltamp Transformers Ltd. and similar precedents were followed to allow depreciation at the higher rate, rejecting the Assessing Officer's reliance on registration description alone. [Paras 7, 8, 9]

The higher rate of depreciation claimed on the new commercial vehicle was allowed and the Revenue's addition was dismissed.

Utilisation of CENVAT credit as payment for excise duty and deduction under section 43B - CBDT Instruction No.3/2010 does not override binding judicial precedent - Whether reversal/utilisation of CENVAT credit to meet excise liability amounts to payment eligible for deduction under section 43B - HELD THAT: - On facts where excise authorities determined that previously availed CENVAT credit was not allowable and the assessee settled the liability by adjustment against its CENVAT receivable balance, the Tribunal accepted the CIT(A)'s reasoning that such adjustment is one of the statutory modes of payment under the Excise law and effectively extinguishes the liability. The case was distinguished from Maruti Udyog Ltd. where the issue and facts differed; the Tribunal noted that CBDT Instruction No.3/2010 cannot override judicial decisions and relied on precedents (including Hawkins Cookers and others) to hold the adjustment/ utilisation as payment for purposes of section 43B. [Paras 10, 11, 12, 13]

The disallowance was deleted and the assesssee's claim allowed: utilisation of CENVAT credit to discharge the excise liability was treated as payment for section 43B purposes.

Expenses attributable to exempt income not to be added to book profit for MAT under section 115JB - Inclusion of section 14A disallowance in book profit for computation under section 115JB - HELD THAT: - Following the Special Bench decision in ACIT v. Vinit Investment Pvt. Ltd., the Tribunal accepted that expenses disallowed under section 14A (relating to earning exempt income) are not to be added back for computing book profit under section 115JB. The Department did not contest the applicability of the Special Bench precedent and the Tribunal applied it to grant relief. [Paras 14, 19, 37, 62]

Disallowance under section 14A need not be added back to book profit under section 115JB; the appeals on this ground were allowed where applicable.

Disallowance of employer's failure to remit employees' contributions under section 36(1)(va) - Deductibility of employer's contribution not remitted to Provident Fund/ESIC by due date - HELD THAT: - The Tribunal sustained the CIT(A)'s finding following binding jurisdictional precedent that where the employer fails to credit employees' contribution to the relevant fund within the time prescribed (as per the explanation to section 36(1)(va)), the employer is not entitled to deduction of such amounts. The assessee's cross objections on similar grounds in other years were dismissed consistently. [Paras 15, 16, 63]

Disallowance of employer's contribution was upheld; the cross objections on identical grounds were dismissed.

Stock written off-remand for verification - Remand for verification where supporting details are on record but not considered - Claim for stock written off - sufficiency of supporting details and requirement for fresh examination - HELD THAT: - The Tribunal found that the assessee had filed detailed particulars and supporting documents for the stock written off but the Assessing Officer had not considered those particulars in the assessment order. In such circumstances the Tribunal restored the matter to the file of the Assessing Officer for fresh consideration and verification of the details already placed on record. [Paras 31, 33]

The issue was restored to the Assessing Officer for de novo examination and verification of the stock written off claim.

Bad debts written off against earlier provisions deductible under section 36(1)(vii) - Allowability of bad debt claimed though not separately debited to current year P&L but written off against provisions created earlier (including merged entities) - HELD THAT: - The Tribunal accepted the CIT(A)'s findings and relevant High Court/Tribunal precedents that writing off debts by adjusting provision accounts (including where the provision was created in earlier years or in merged entities) satisfies the requirement of Section 36(1)(vii) provided supporting records show the debts were written off and corresponding incomes were offered to tax earlier. Incorrect comparisons by the AO between stand alone and consolidated figures were held to be unsustainable. [Paras 41, 42, 43]

The Assessing Officer's disallowance was deleted and the bad debt claim allowed subject to verification already accepted on record.

Marked-to-market loss on foreign exchange derivatives as business loss - CBDT Instruction No.3/2010 does not override binding judicial precedent - Allowability of mark to market loss on outstanding foreign exchange forward/derivative contracts as business loss - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that mark to market losses on derivative contracts entered into for bona fide hedging of business exposure (backed by trading liabilities or exports/imports) are allowable as business losses under section 37/section 28 and are not speculative. The Tribunal relied on Supreme Court authority (Woodward Governor), Coordinate Bench decisions (including Adani Enterprises, Heavy Metal & Tubes) and held that CBDT Instruction No.3/2010 cannot displace such judicial precedent; on the facts the mark to market loss outstanding at year end was deductible. [Paras 44, 45, 46]

The disallowance of the mark to market foreign exchange derivative loss was deleted and the loss allowed as business expenditure.

Prior period commission provision and mercantile accounting treatment - Allowability of commission payments debited in current year though provision was made earlier (mercantile system) - HELD THAT: - The Tribunal agreed with the CIT(A) that where the assessee consistently provides for commission on a mercantile basis and provisions are reversed at the beginning of the succeeding year with actual bills debited when raised, the expense in question is not a prior period expenditure disallowable in the current year. The AO's objection based on timing of crystallisation was rejected on facts and on authority of coordinate decisions. [Paras 26, 27]

The Assessing Officer's disallowance of commission expenditures was deleted.

Cessation of liability under section 41(1) - Whether sundry creditors not paid and appearing in books should be treated as ceased liabilities under section 41(1) - HELD THAT: - The Tribunal followed the CIT(A) in holding that where liabilities continue to be shown in the books and there is no material to indicate their cessation, the Assessing Officer cannot treat them as deemed income under section 41(1). The decision of the Gujarat High Court was applied to dismiss the Revenue's addition. [Paras 20, 21, 22]

The additions under section 41(1) were deleted for lack of evidence of cessation of liability.

Deductibility of reimbursement payments and applicability of section 40(a)(ia) - Whether reimbursement of travel tickets required TDS and disallowance under section 40(a)(ia) - HELD THAT: - The Tribunal confirmed the CIT(A)'s factual finding that the payment was a reimbursement of travel expenses (not a contractual payment) and therefore did not attract TDS under the relevant provisions; the AO's disallowance under section 40(a)(ia) was not warranted. [Paras 51, 52]

The disallowance under section 40(a)(ia) was deleted.

Final Conclusion: The Tribunal disposed the array of appeals and cross objections by largely upholding the CIT(A)'s orders: disallowances under section 14A/Rule 8D were reworked or restricted (often to the exempt income) and one matter remitted for recomputation in light of the Vineet Investment Special Bench ratio; higher depreciation on the new commercial vehicle was allowed; utilisation of CENVAT credit to meet excise liability was treated as payment for section 43B purposes and the related disallowance was deleted; mark to market forex hedge losses and bad debt adjustments (when supported by records and earlier provisions) were allowed; employer's failure to remit employees' contributions was disallowed; a stock write off claim was remanded for verification; and several other additions raised by the Assessing Officer were dismissed. Appeals and cross objections were accordingly partly allowed, remitted or dismissed as set out in the order.

Revisionary jurisdiction under section 263 - reopening under section 147 - principles of natural justice - consistency in valuation among co-owners - audit objection not sufficient to render an assessment order erroneous and prejudicial - presumption of correctness of sale deed value unless agreement was acted upon and consideration paid

Revisionary jurisdiction under section 263 - audit objection not sufficient to render an assessment order erroneous and prejudicial - principles of natural justice - consistency in valuation among co-owners - presumption of correctness of sale deed value unless agreement was acted upon and consideration paid - Validity of the order of the Principal Commissioner of Income Tax cancelling the assessment under section 263 in respect of A.Y. 2011-12. - HELD THAT: - The Tribunal examined whether the Pr. CIT was justified in invoking section 263 to cancel the assessment framed under section 143(3) r.w.s. 147. The record shows the Assessing Officer reopened proceedings, issued statutory notices, called for information and documents and made enquiries from the assessee, co-owners, witnesses and sellers; the assessee furnished written submissions and affidavits and payment in respect of the sale deed was through banking channels. The AO after verification accepted the assessee's explanation and framed the assessment at the returned income. The Pr. CIT's action under section 263 was principally founded on an audit objection and on the value noted in an unexecuted or unacted-upon agreement to sell which, on the material before the AO, had not been shown to have been acted upon or paid. The Tribunal applied the legal principle that a mere audit objection, or the possibility of a different view, does not, by itself, render an AO's order erroneous and prejudicial to revenue; where the AO has made inquiries and taken a possible view based on documents and oral enquiries, section 263 cannot be invoked merely because a different conclusion could be reached. The Tribunal also noted the accepted valuations in the assessments of co-owners and, in the absence of material showing the agreement price was realized, held that consistency in valuation among co-owners militated against upsetting the AO's conclusion. The Tribunal therefore found that the Pr. CIT erred in holding the assessment to be erroneous and prejudicial to the interest of the Revenue and that the cancellation under section 263 was not justified on the facts and materials placed before the AO. [Paras 8]

Impugned order under section 263 quashed; assessment order dated 28/12/2018 upheld and appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the Pr. CIT's order under section 263 for A.Y. 2011-12 and held that the AO had made proper enquiries and taken a possible view; an audit objection and the existence of an unacted-upon agreement did not render the assessment erroneous and prejudicial to the Revenue.

Colourable device - substance over form in tax transactions - separate legal entity of shareholder and company - holding period and indexation benefit on transfer of shares - disallowance of interest where borrowed funds diverted to interest-free advances - presumption that investments are out of interest-free funds if sufficient - extension of return filing due date where transfer pricing audit (Form 3CEB) required - entitlement to deduction under section 80-IB(10) where construction completed and application for BU permission filed within prescribed time - reliance on expert/chartered accountant certificate (Form 3CEB) unless dislodged

Colourable device - substance over form in tax transactions - separate legal entity of shareholder and company - holding period and indexation benefit on transfer of shares - Whether the sale of shares of M/s Ahmedabad Royal Garden Hotel Pvt. Ltd. by the assessee was a colourable device to effect transfer of the company's immovable property and deny indexation benefit, or a genuine transfer of shares attracting long term capital loss treatment. - HELD THAT: - The Tribunal examined whether the transaction was a sham to disguise transfer of land. It held that selling shares is a legally permissible alternative to selling the company's asset and that tax effective choice between two lawful options does not by itself constitute a colourable device. The fact that the subsidiary held land as its sole significant asset, or that the holding period was 34 months, did not compel treating the share sale as a disguised transfer of land. The separate legal personality of the company means the shareholder is not the owner of company property; what the shareholder can transfer is only its shares. The assessee had consistently treated the investment as shares (including earlier 14A adjustments), and there was no evidence of concealment or manipulation to misstate the true nature of the transaction. On these findings the Tribunal set aside the conclusions of the AO and CIT(A) and directed deletion of the addition. [Paras 9]

Assessee's sale of shares was genuine; not a colourable device to transfer the company's land - indexation benefit on shares allowed and addition deleted.

Disallowance of interest where borrowed funds diverted to interest-free advances - presumption that investments are out of interest-free funds if sufficient - Whether interest expense of the assessee was liable to be disallowed on the ground that interest bearing borrowed funds were diverted to make interest free advances. - HELD THAT: - On facts the assessee's own funds exceeded the amount of interest free advances; accordingly, the Tribunal drew the presumption (consistent with authoritative decisions referenced) that the advances could have been made out of interest free funds. Where sufficient interest free funds are available to meet such advances, disallowance of interest under the relevant provision cannot be sustained. Applying that principle to the recorded facts, the Tribunal held there was no justification for the AO's disallowance and allowed the ground. [Paras 16]

Disallowance of interest on account of alleged diversion of borrowed funds set aside; addition of interest disallowed deleted.

Extension of return filing due date where transfer pricing audit (Form 3CEB) required - reliance on expert/chartered accountant certificate (Form 3CEB) unless dislodged - entitlement to deduction under section 80-IB(10) where construction completed and application for BU permission filed within prescribed time - Whether the assessee was entitled to deduction under section 80 IB(10) - (a) whether the return of income was filed within the extended due date because a Transfer Pricing report (Form 3CEB) was required, and (b) whether the residential project was completed within the prescribed period despite some BU permissions being issued later by the successor authority. - HELD THAT: - On the technical point, the Tribunal accepted the finding that ATTCO became a deemed associated enterprise by reason of guarantee and related transactions, and that the assessee obtained a Form 3CEB transfer pricing report before filing the return; the Chartered Accountant's certification was not displaced by the AO. Consequently the due date for filing the return extended to 30.11.2012 and the return filed on 28.11.2012 was within time, so section 80AC did not bar the deduction. On the merit point, the Tribunal accepted documentary evidence (engineer's certificate, applications for BU permission filed with fees before the prescribed date, conveyance/possession evidence) and the finding of CIT(A) that delays in issuance of BU permission were attributable to administrative/jurisdictional transfer from AUDA to AMC and not to the assessee. Applying the established principle that an assessee who has completed construction and applied for BU permission within time is entitled to the deduction notwithstanding later delay by the authority, the Tribunal upheld the CIT(A) and dismissed the Revenue's appeal. [Paras 27]

Assessee entitled to deduction under section 80 IB(10); return held filed within extended due date and project held completed for purposes of the deduction - Revenue's appeal dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeal: the sale of shares was genuine (not a colourable device) and indexation/long term treatment was upheld; the disallowance of interest on account of alleged diversion was deleted; and the Revenue's appeal against allowance of deduction under section 80 IB(10) was dismissed, the Tribunal finding the return was timely filed in view of Form 3CEB and the project was completed/applications for BU permission were filed within the prescribed time.

Revisionary jurisdiction under section 263 - assessment passed in name of non-existent entity - time bar under section 263(2) - goodwill as intangible asset eligible for depreciation - amalgamation - purchase method v. pooling of interest (AS 14) - tax neutrality of amalgamation (cost/WDV continuity) - principle of consistency in recurring depreciation claims

Revisionary jurisdiction under section 263 - assessment passed in name of non-existent entity - time bar under section 263(2) - Whether the Principal Commissioner of Income tax validly exercised jurisdiction under section 263 to revise the assessment dated 29.10.2018 framed in the name of the amalgamating / erstwhile company (SGSL) in relation to depreciation on goodwill arising from amalgamation. - HELD THAT: - The Tribunal found that SGSL ceased to exist with effect from 31.03.2016 on account of court approved amalgamation and that the assessment dated 29.10.2018 had been framed in the name of a non existent entity. Reliance on binding authority established that framing assessment in the name of an entity which has ceased to exist is a jurisdictional defect and renders the assessment void. Further, the Principal CIT proceeded to examine depreciation claimed by the successor company (SSL) though that claim arose from an intimation under section 143(1) dated 30.12.2016; any revisional action in respect of that intimation was subject to the two year limitation under section 263(2) and was time barred by the notice dated 22.03.2021. Because the revision was sought against an assessment in the name of a non existent company and the proper target (the successor's 143(1) intimation) could not be revised after expiry of the statutory period, the exercise of jurisdiction under section 263 was held unsustainable. [Paras 8]

The s.263 order setting aside the assessment dated 29.10.2018 is not sustainable - the assessment was a nullity as made in the name of a non existent company, and revisional action against the successor's intimation was time barred.

Goodwill as intangible asset eligible for depreciation - amalgamation - purchase method v. pooling of interest (AS 14) - tax neutrality of amalgamation (cost/WDV continuity) - principle of consistency in recurring depreciation claims - Whether depreciation on goodwill arising in the scheme of amalgamation was correctly claimable and whether the Principal CIT was justified in treating the amalgamation as a merger (pooling of interest) thereby disallowing depreciation. - HELD THAT: - On the facts, the Tribunal concluded that the scheme did not satisfy the conditions of an amalgamation in the nature of merger under AS 14 (para 3(e)), because consideration was discharged by cancelling investments and assets were recorded at fair market value, so the transaction operated as a purchase method which permits recognition of goodwill where purchase consideration exceeds net assets. The Tribunal accepted the legal position that 'goodwill' falls within the definition of intangible assets for section 32(1) and that goodwill arising on amalgamation can be 'acquired' by the transferee (Smifs Securities Ltd.). The statutory provisions governing amalgamation aim at tax neutrality for assets (cost/WDV continuity and limits on aggregate depreciation), but those provisions apply to assets transferred at book values and do not, in the Tribunal's view, preclude recognition and depreciation of goodwill created under a purchase method amalgamation. Separately, for AY 2017 18 the Tribunal applied the principle of consistency: depreciation allowed in the first year of amalgamation attains finality and subsequent disturbance without change of facts or law is impermissible. For these reasons the s.263 direction to re do assessment on merits was quashed. [Paras 8, 10]

Depreciation on the goodwill in question was allowable; the Principal CIT's conclusion that the amalgamation was a merger disallowing goodwill was incorrect and the s.263 order in respect of the depreciation claim is quashed; similarly, the deduction for AY 2017 18 must be respected on the principle of consistency.

Final Conclusion: Both appeals are allowed: the order under section 263 quashing the earlier assessment/intimation is set aside - the assessment framed in the name of the non existent amalgamating company was void and could not be the basis for revision, the revisional attack on the successor's intimation was time barred, and on the merits the goodwill arising under the purchase method amalgamation was an intangible asset eligible for depreciation (further supported by consistency of prior allowance).

Admissibility and evidentiary value of statement recorded under section 132(4) - Requirement of corroborative incriminating material to sustain additions based on a 132(4) statement - Distinction between statements recorded during the course of search and statements recorded after conclusion of search - Allocation of transactions to partners or family members vis-a -vis the firm (separate assessment of partners) - Reliance on seized loose papers/diaries: necessity of direct nexus with the assessee's business - Reconciliation of physical stock found on search with book stock and valuation principles for seized jewellery - Primacy of audited books of account (not rejected) over contradictory manual records for cash quantification

Admissibility and evidentiary value of statement recorded under section 132(4) - Requirement of corroborative incriminating material to sustain additions based on a 132(4) statement - Deletion of addition of Rs. 1,60,00,000/- which was made solely on the basis of a statement recorded under section 132(4). - HELD THAT: - Tribunal found that the assessing officer's addition was founded purely on a consolidated surrender recorded in a statement under section 132(4) without any reference to, or correlation with, incriminating/seized material having direct nexus with the alleged undisclosed income. The Tribunal applied its earlier consistent coordinate-bench reasoning that a statement recorded under section 132(4) has evidentiary value but additions cannot be sustained solely on such statements unless corroborated by seized material or other evidence establishing nexus with the assessee. In the absence of any such corroboration and with no binding precedent favouring Revenue on these facts, the addition was held unsustainable and deleted. [Paras 10, 12]

Addition of Rs. 1,60,00,000/- deleted.

Allocation of transactions to partners or family members vis-a -vis the firm (separate assessment of partners) - Use of seized diaries to attribute pawning and moneylending transactions to the firm - Deletion of additions under section 69 (pawning and moneylending) made in the hands of the firm where evidence showed the activities and income were attributable to partners/family members and reflected in their individual returns. - HELD THAT: - On review of seized diary BS-4 and related material, the CIT(A) and the Tribunal accepted that pawning and money-lending activities were carried out by partners and family members in their individual capacities, that interest/incomes were disclosed in their personal returns and that the seized documents did not bear the firm's name or direct nexus to the firm's books. The assessing officer's presumption that the firm carried out the financing activity was held to be speculative; once family members had disclosed relevant income and produced supporting records, the additions in the hands of the firm were not justified and were rightly deleted. [Paras 23, 24]

Additions for pawning and moneylending in the hands of the firm deleted; revenue grounds on these points dismissed.

Primacy of audited books of account (not rejected) over contradictory manual records for cash quantification - Reliability of partner's on-the-spot surrender versus completed audited accounts - Deletion of addition of Rs. 60,00,000/- as unexplained cash found during search where audited books (not rejected) explained the cash balance and partner's surrender was a speculative estimate. - HELD THAT: - The Tribunal agreed with the CIT(A) that the audited books (completed after the search and produced to the AO) showed opening and pre-search cash balances that, when properly accounted for, explained the cash found at search. The manual cash book seized (with pencilled and incomplete entries) could not be preferred over audited accounts which the AO had not rejected. The partner's voluntary surrender at search was held to be speculative and contradicted by completed records; accordingly the AO's addition based on that surrender was deleted. [Paras 30, 31]

Addition of Rs. 60,00,000/- deleted.

Use of seized loose papers/diaries to make additions-necessity of nexus with assessee - Requirement that seized entries correspond to the assessee's books to sustain additions - Deletion of addition of Rs. 2,25,544/- based on seized diary BS-44 where the entries represented outstanding debtors recorded in the assessee's audited books and were not unexplained loans. - HELD THAT: - CIT(A) examined the seized page and the audited balance sheets and concluded the entries were outstanding debtors recorded in the firm's regular books. The assessing officer's treatment of those entries as undisclosed loans was not sustained because documentary records reconciled the seized list with book entries. The Tribunal found no infirmity in this factual appraisal and confirmed deletion. [Paras 32, 33]

Addition of Rs. 2,25,544/- deleted.

Use of seized loose papers/diaries to make additions-necessity of nexus with assessee - Deletion of addition of Rs. 5,00,000/- made on the basis of loose paper (LPS-1) which related to donations to a trust and belonged to a partner in his capacity as trustee/preacher, not to the firm. - HELD THAT: - The loose paper identified payments/receipts connected to a Jain Trust; corroborative receipts and confirmations from the Trust matched the seized paper. The document was found at a partner's residence and not in the firm's business records; the CIT(A) accepted the trust's explanation and supporting evidence. The Tribunal found no reason to interfere as the seized document lacked nexus with the firm's business. [Paras 36, 37]

Addition of Rs. 5,00,000/- deleted.

Reconciliation of physical stock found on search with book stock and valuation principles for seized jewellery - Application of CBDT instruction and admissibility of wealth-tax disclosures as explanatory material for seized jewellery - Deletion of addition of Rs. 4,18,16,751/- for alleged undisclosed stock of gold and silver after accepting cogent explanations and documentary evidence (personal jewellery of partners, purchases with invoices filed post-search, and jewellery of third parties). - HELD THAT: - The assessing officer's initial valuation of physical stock exceeded books; the assessee produced detailed reconciliations, supplier invoices (showing pre-search payments), wealth-tax returns of family members, affidavits and a will explaining personal holdings, and valuation reports. CIT(A) reduced the seized stock by specified quantities attributable to partners' personal jewellery, purchases accounted after search, and third-party jewellery, and directed recomputation of valuation on consistent purity/rate basis. The Tribunal upheld this fact-sensitive appraisal, noting CBDT guidance and precedents that personal jewellery shown in wealth-tax returns or explained by evidence should not be treated as unexplained stock. [Paras 45, 55]

Addition of Rs. 4,18,16,751/- deleted; revenue ground dismissed.

Final Conclusion: All additions challenged by the assessee (including the addition based solely on a section 132(4) statement, unexplained cash, pawning/moneylending attributions, seized-diary items and loose papers, and a large part of the alleged undisclosed jewellery stock) were set aside by the Tribunal for A.Y. 2016-17 on the facts and documentary records; the assessee's appeal is allowed and the revenue's appeal is dismissed.

Tribunal's final order as triggering event for interest on refund - statutory rate of interest under the Customs Act - interest on interest - creature of statute doctrine

Tribunal's final order as triggering event for interest on refund - Interest on refund accrues from the date of the Tribunal's final order and not from expiry of three months after passing of the Tribunal's order. - HELD THAT: - The Tribunal relied on its earlier concurrent finding and the High Court order which held that where the Tribunal finalised the assessment and its order was not stayed, the liability to pay interest arises from the date of the Tribunal's order. That concurrent finding was not challenged by Revenue and therefore attained finality. In view of those precedents and the Tribunal's own earlier order, the appellant is entitled to interest from the date of the Tribunal's order rather than from the expiry of three months thereafter. The Commissioner (Appeals) order on this point was held not sustainable and was modified accordingly. [Paras 4, 5]

Entitlement to interest arises from the date of the Tribunal's final order; the Commissioner (Appeals) order on this point set aside.

Statutory rate of interest under the Customs Act - creature of statute doctrine - Rate of interest on refund is governed by the statutory provision and is limited to the prescribed rate of 6% per annum; the Tribunal has no power to award a higher rate. - HELD THAT: - The Tribunal observed that the rate of interest is prescribed by statute (section 27A and the relevant notification) and that departmental authorities are bound to follow the statutory prescription. Being a creature of the Customs Act, the Tribunal cannot independently fix a rate different from that provided by statute. Although higher rates in some decisions of High Courts or the Supreme Court were cited, those courts may exercise inherent or constitutional powers not available to the Tribunal. Consequently, the simple rate of 6% applied by the Adjudicating Authority and upheld by the Commissioner (Appeals) is correct and the appellant cannot be granted interest at 15% or any rate exceeding the statutory 6%. [Paras 4, 5]

Interest payable at the statutory rate of 6% p.a.; no entitlement to a higher rate.

Interest on interest - creature of statute doctrine - Interest on interest is not allowable under the Customs Act in the absence of any statutory provision permitting it; the Tribunal cannot award interest on interest. - HELD THAT: - The Commissioner (Appeals) relied on earlier Tribunal and High Court reasoning distinguishing decisions under other tax statutes (such as Income Tax) where interest on interest was granted-often in exercise of broader powers-finding them inapplicable to Customs/Excise statutes. Given that the Customs Tribunal is a statutory body, and there is no provision in the Customs Act or Rules to grant interest on interest, the Tribunal has no power to award such relief. The present Tribunal found no infirmity in that legal conclusion and concurred with the Commissioner (Appeals). [Paras 4, 5]

Claim for interest on interest rejected for want of statutory authority; no power in the Tribunal to award interest on interest.

Final Conclusion: The appeal is partly allowed: interest on refund to be calculated from the date of the Tribunal's final order; interest is payable at the statutory rate of 6% per annum; claim for interest on interest is disallowed for lack of statutory authority.

Scheme of amalgamation - sanctioning of scheme under Section 230 and 232 of the Companies Act, 2013 - dispensation of meetings of shareholders and creditors - service of notices to regulatory and governmental authorities - public notice and newspaper publication requirement - affidavit of compliance for service and publication - compliance with proviso requiring auditor's certificate - hearing date fixation

Hearing date fixation - public notice and newspaper publication requirement - Fixation of hearing date for consideration of the Scheme and requirement of public notice in specified newspapers. - HELD THAT: - The Tribunal fixed 01.12.2021 as the date of hearing for the joint petition for approval of the Scheme and directed that a notice of hearing be advertised in the newspapers specified (English and vernacular Delhi editions) not less than 10 days before the hearing. This direction implements the publication requirement under the Companies Act regime to inform members, creditors and the public of the pendency of the petition and the date of hearing, ensuring transparency and opportunity for representations. [Paras 5]

Hearing date fixed for 01.12.2021 and public notice in specified newspapers directed.

Service of notices to regulatory and governmental authorities - service of notices on Sectoral Regulatory Authorities - Obligation to serve the petition and notices on specified authorities and Sectoral Regulators and the timeline for their representations. - HELD THAT: - The petitioner company was directed to serve notice of the petition by all modes (including email and speed post) on the Central Government through the Regional Director (Northern Region), the Registrar of Companies (NCT of Delhi & Haryana), the Income Tax Department (DCIT (HC Cell) at Delhi High Court), the Official Liquidator attached to the Delhi High Court, and any other Sectoral Regulatory Authorities likely to be affected. Those authorities were given 30 days from receipt of such notice to send their representations as contemplated by sub section (5) of Section 230 of the Act. This implements the procedural safeguard of consulting relevant statutory and sectoral authorities before sanctioning a scheme. [Paras 5]

Notices to specified authorities and Sectoral Regulators directed; 30 day period granted for filing representations.

Service of notices to objectors and right to be heard - affidavit of compliance for service and publication - Requirement to serve notices to objectors or their representatives and to file an affidavit of compliance before the hearing. - HELD THAT: - The petitioner must serve notices to objectors or their representatives who have sought to be heard, along with copies of the petition and annexures, at least 15 days before the hearing. In addition, at least 7 days before the hearing the petitioner must file an affidavit of compliance evidencing the paper publication and service of notices on the authorities, sectoral regulators and objectors, if any. These steps ensure that interested parties and objectors receive adequate notice and that the Tribunal is furnished with proof of compliance prior to hearing. [Paras 5]

Service on objectors and filing of affidavit of compliance directed with specified timelines.

Compliance with proviso requiring auditor's certificate - sanctioning of scheme under Section 230 and 232 of the Companies Act, 2013 - Requirement to file the auditor's certificate as per the proviso to sub section (3) of Section 232 or proviso to sub section (7) of Section 230, as applicable, before the hearing. - HELD THAT: - The petitioner was directed to comply with the applicable proviso by filing the required certificate of the company's auditor on or before the date fixed for hearing. This direction enforces the statutory prerequisite that certain financial certifications or auditor confirmations be placed on record prior to the Tribunal considering sanction of the amalgamation, thereby enabling the Tribunal to satisfy itself on accounting/valuation or other matters envisaged by the statutory provisos. [Paras 5]

Petitioner required to file the auditor's certificate in terms of the applicable proviso before the hearing.

Registry directions - Registry to issue notices to the authorities specified in the order. - HELD THAT: - In addition to petitioner's obligations, the Tribunal directed the Registry to issue notices to the authorities identified in the order, ensuring administrative dissemination of the petition to the concerned governmental and regulatory bodies to facilitate their consideration and response within the prescribed period. [Paras 6]

Registry directed to issue notices to the specified authorities.

Service of copy of order on parties - Direction to serve a copy of the order on the parties. - HELD THAT: - The Tribunal ordered that a copy of its order be served on the parties, a routine but necessary administrative step to ensure parties have official notice of the directions, timelines and the next date of hearing. [Paras 7]

Copy of the order to be served on the parties.

Final Conclusion: The Tribunal fixed 01.12.2021 as the hearing date for sanctioning the Scheme and issued detailed procedural directions: publication of notice, service of petition and notices on specified authorities and sectoral regulators with a 30 day window for representations, service on objectors with at least 15 days' notice, filing of an affidavit of compliance 7 days before hearing, filing of the auditor's certificate as required by the applicable proviso prior to the hearing, registry issuance of notices to authorities, and service of the order on the parties.

Admission of petition under section 9 of Insolvency and Bankruptcy Code, 2016 - Effect of non-response to demand notice as admission of debt / absence of dispute - Initiation of Corporate Insolvency Resolution Process (CIRP) - Appointment of Interim Resolution Professional and requirement of written consent - Declaration of moratorium in terms of the Code - Ex parte admission for non-appearance of the corporate debtor

Admission of petition under section 9 of Insolvency and Bankruptcy Code, 2016 - Initiation of Corporate Insolvency Resolution Process (CIRP) - The petition under section 9 of the IBC was admitted and CIRP against the corporate debtor was ordered to commence. - HELD THAT: - The Tribunal found the application to be complete on record, noting the decree obtained by the operational creditor in the civil suit, the demand notice dated 09.12.2019 served on the corporate debtor and the absence of any reply disputing the debt. In view of these findings and the material on record showing non-payment, the Tribunal concluded that the petition merited admission and ordered initiation of the CIRP to be completed within the prescribed period.

Petition admitted and CIRP ordered to commence.

Effect of non-response to demand notice as admission of debt / absence of dispute - Non-issuance of a reply to the demand notice was treated as admission of the debt and absence of a dispute. - HELD THAT: - The Tribunal recorded that the corporate debtor did not respond to the demand notice issued under section 8(1) of the Code. Having considered the affidavit and the copy of the demand notice on record, and in the absence of any material showing a genuine dispute, the Tribunal held that failure to reply amounted to admitting the debt and supported admission of the section 9 petition.

Non-response to demand notice treated as admission; no dispute found.

Appointment of Interim Resolution Professional and requirement of written consent - An Interim Resolution Professional (IRP) was appointed and directed to file written consent in the prescribed form. - HELD THAT: - As the operational creditor did not propose a name for IRP, the Tribunal appointed Mr. Srinivas Gudla Rao (with the registration details recorded in the order) as Interim Resolution Professional. The Tribunal noted that no disciplinary proceedings were shown pending against him on the IBBI website and directed the appointee to file his written consent in Form No. 2 forthwith.

IRP appointed and directed to file consent in Form No. 2.

Declaration of moratorium in terms of the Code - IRP to assume management and duties under the Code - Moratorium was declared and the IRP was directed to take charge and perform functions under the Code and Rules. - HELD THAT: - Upon admission of the petition, the Tribunal declared the moratorium in terms of the Code and directed the IRP to take charge of the corporate debtor's management immediately and to carry out the duties specified under the relevant provisions of the Code and the Rules, including seeking cooperation from directors and management to enable effective discharge of the IRP's functions.

Moratorium declared; IRP directed to assume management and discharge statutory duties.

Ex parte admission for non-appearance of the corporate debtor - The petition was admitted ex parte due to non-appearance of the corporate debtor. - HELD THAT: - The Tribunal recorded that no one appeared for the corporate debtor despite service and, by virtue of the earlier order, the corporate debtor was set ex parte. In light of the absence of any response or participation by the corporate debtor, the Tribunal proceeded to admit the petition and pass consequential orders.

Petition admitted ex parte on account of non-appearance.

Final Conclusion: The Tribunal admitted the section 9 petition ex parte, directed initiation of CIRP against the corporate debtor, appointed an IRP (with requisite directions to file consent and assume management), declared moratorium and required cooperation of the corporate debtor's management for effective conduct of the CIRP.

Recall of witness under Section 311 Cr.P.C. - judicial superintendence under Article 227 and Section 482 Cr.P.C. exercised sparingly for patent error or gross injustice - mere change of counsel is not a ground for recall of witnesses - balancing fair trial rights of accused with expeditious disposal and prejudice to complainant - limited opportunity to lead defence evidence subject to costs and expedition

Recall of witness under Section 311 Cr.P.C. - mere change of counsel is not a ground for recall of witnesses - Recall of CW-1 to confront him with the agreement dated 05.12.2012 - HELD THAT: - The Court examined the petitioners' plea for recall of the complainant's witness (CW-1) on the ground that earlier counsel had not cross-examined him about the agreement dated 05.12.2012. The trial record shows the petitioners themselves had placed a copy of that agreement on record prior to CW-1's cross-examination, and the complainant did not dispute execution of the agreement. The Court applied the settled principle that mere change of counsel or belated discovery of a perceived omission by earlier counsel does not ordinarily justify recalling a witness, particularly where the petitioners had knowledge of the document and had delayed seeking recall for a long period. Reliance was placed on the Supreme Court's exposition that powers under Article 227/Section 482 Cr.P.C. must be exercised sparingly and only where there is patent error or gross injustice; no such error or injustice was shown here. On these grounds the prayer for recall was rejected. [Paras 12, 13]

Prayer for recall of CW-1 is rejected.

Balancing fair trial rights of accused with expeditious disposal and prejudice to complainant - limited opportunity to lead defence evidence subject to costs and expedition - judicial superintendence under Article 227 and Section 482 Cr.P.C. exercised sparingly for patent error or gross injustice - Whether petitioners should be permitted one opportunity to lead defence evidence despite history of delays - HELD THAT: - While the petitioners were found guilty of repeatedly delaying the trial and had failed to avail multiple opportunities to lead defence evidence over several years, the Court observed that the right to adduce defence evidence is a valuable facet of a fair trial. Applying the statutory and constitutional supervisory principles, the Court balanced the need to prevent abuse and to protect the complainant from undue harassment against the accused's entitlement to a fair opportunity. In the exercise of its supervisory jurisdiction, and notwithstanding the petitioners' dilatory conduct, the Court granted a single, final opportunity for the petitioners to lead and examine defence witnesses, with the condition that all defence evidence (including cross-examination) be completed in one day. The Court imposed costs to the respondent as a condition precedent to availing the opportunity and directed expedition of the trials, including a three-month target for conclusion from the date of the order. The Trial Court was directed to list the matter on the specified date and to grant only that one opportunity, failing which it shall proceed in accordance with law. [Paras 15, 16, 18, 19, 20]

Petitioners permitted one final opportunity to lead defence evidence subject to completion in one day, payment of costs to the respondent, and directions for expeditious conclusion of trial.

Final Conclusion: The petitions are disposed of by refusing the recall of CW-1 but allowing the petitioners one final, single-day opportunity to lead defence evidence on specified conditions (payment of costs and expedition directions), with the Trial Court instructed to proceed if that opportunity is not availed.

Vicarious liability under Section 141 of the Negotiable Instruments Act - maintainability of complaint under Section 138 of the Negotiable Instruments Act - presumption of liability under Section 139 of the Negotiable Instruments Act - cognizance by Magistrate on dishonour endorsements such as "Account Closed" or "Exceeds arrangement" - burden on directors to disprove liability at trial

Vicarious liability under Section 141 of the Negotiable Instruments Act - presumption of liability under Section 139 of the Negotiable Instruments Act - burden on directors to disprove liability at trial - Whether the complaint, read with the statutory notice and rejoinder, prima facie discloses the role of the petitioners as directors so as to attract liability under Section 141 and sustain cognizance. - HELD THAT: - The court held that the complaint, statutory notice and rejoinder, taken together, aver that the petitioners were directors and actively participated in the affairs of the company and that the post-dated cheques were issued with their consent. Such averments are prima facie sufficient to constitute an offence under Section 141. The presumption under Section 139 operates on the complaint and it is for the directors to rebut at trial. Questions as to internal management, who actually signed or authorised the cheques, or whether the company was non-functional from a particular date are factual matters peculiarly within the knowledge of the petitioners and require trial. The petitioners failed to produce substantial material to displace the complaint's averments, and therefore the Court declined to quash the proceedings at the threshold. [Paras 9, 10, 18, 19]

Complaint and supporting documents prima facie disclose the petitioners' role as directors and sustain cognizance; factual disputes are for trial.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - cognizance by Magistrate on dishonour endorsements such as "Account Closed" or "Exceeds arrangement" - Whether the magistrate could take cognizance of the complaint based on the returned cheques and the statutory notice. - HELD THAT: - The court observed that the statutory notice, rejoinder and complaint together satisfy the pre-requisites for prosecution under Section 138. Reliance on precedent supports that dishonour endorsements like "Exceeds arrangement" or "Account Closed" do not preclude cognizance; they fall within the statutory scheme when read with the notice and related documents. The maintainability of the complaint and the question of whether the notices were properly addressed or the internal company explanations suffice are matters to be tested at trial rather than by quashing the complaint at this stage. [Paras 7, 11, 15, 21]

Magistrate was justified in taking cognizance; maintainability is established on the material and trial is the appropriate forum to resolve disputes.

Final Conclusion: The petitions to quash the criminal complaints were dismissed: on the material before the Court the averments disclose prima facie liability of the directors and the matters relied upon by petitioners are factual issues to be adjudicated at trial, not by summary quashing.