TaxTMI Updates e-Newsletter
Nov 28,2020

Summary order. Special Leave Petition disposed of; delay condoned; matter allowed to proceed before the Authority; all questions of law left open; pending applications disposed of.

Detention of goods for transportation without a valid e-way bill - lawful detention arising from expiry of e-way bill - release of detained goods on furnishing bank guarantee - challenge to inclusion of cess in computation of demand

Detention of goods for transportation without a valid e-way bill - lawful detention arising from expiry of e-way bill - Detention of goods was justified because the e-way bill accompanying the consignment had expired at the time of detention. - HELD THAT: - The order in FORM GST MOV-9 (Ext.P8) records that the e-way bill's validity period had expired when the goods were detained. The Court accepted that transportation not being accompanied by a valid transport document rendered the detention not unjustified and upheld the legality of detention on that basis.

Detention was not unjustified as the e-way bill had expired.

Release of detained goods on furnishing bank guarantee - Whether the goods and vehicle should be released pending challenge to the demand. - HELD THAT: - Although detention was upheld, the Court directed conditional release of the goods and vehicle upon the petitioner furnishing a bank guarantee for the amount demanded in Ext.P10. The direction for release against a bank guarantee was given while expressly preserving the petitioner's right to contest the demand and other legal contentions before the appellate authority.

Goods and vehicle to be released on petitioner furnishing a bank guarantee for the demanded amount; release without prejudice to the petitioner's appellate rights.

Challenge to inclusion of cess in computation of demand - Legality of inclusion of the cess component in quantification of the demand was not decided on merits and remained open for challenge. - HELD THAT: - The petitioner raised a contention regarding the lawfulness of including the cess component in the computation of the amount payable under the demand in Ext.P10. The Court did not adjudicate the contention on merits; instead it preserved the petitioner's right to question the inclusion of the cess and to raise other legal contentions in the appeal proposed to be filed before the appellate authority.

Issue left undecided and available for adjudication in the appellate proceedings; petitioner may challenge inclusion of cess in the demand.

Final Conclusion: The Court held the detention justified because the e-way bill had expired, directed release of the goods and vehicle on furnishing a bank guarantee for the demanded amount, and permitted the petitioner to challenge the inclusion of the cess component and other legal contentions in the appellate forum.

Judicial direction for time-bound decision - remand of administrative representation for consideration - administrative decision on representation - preservation of parties' rights and contentions - no expression on merits

Judicial direction for time-bound decision - remand of administrative representation for consideration - preservation of parties' rights and contentions - no expression on merits - Direction to the Central Board of Indirect Taxes to decide the petitioner's representation dated 30th June, 2020 and an additional representation to be filed within two weeks, within eight weeks from filing of the additional representation. - HELD THAT: - The petition was heard and, on the petitioner's counsel indicating satisfaction with a time-bound decision on the representations, the Court directed CBIC to decide the representation dated 30th June, 2020 together with the additional representation (to be filed within two weeks) within eight weeks from the date of filing of the additional representation. The order preserves all substantive rights and contentions of the parties and expressly disclaims any expression of opinion on the merits of the underlying controversy. The writ petition and pending applications were disposed of by issuing this administrative direction for fresh consideration within the stipulated timeframe.

CBIC directed to decide the specified representations within eight weeks from filing of the additional representation; all rights and contentions left open; writ petition disposed of.

Final Conclusion: The High Court disposed of the writ petition by directing the Central Board of Indirect Taxes to decide the petitioner's June 30, 2020 representation together with an additional representation to be filed within two weeks, within eight weeks of such filing, while leaving all rights and contentions open and expressing no opinion on the merits.

Anticipatory bail - inadmissible input tax credit - pre-arrest protection on deposit of percentage of disputed liability - deposit as condition for bail in unadjudicated tax liability - custodial interrogation to be avoided where accused cooperates - cooperation with investigation and non-tampering conditions

Anticipatory bail - custodial interrogation to be avoided where accused cooperates - cooperation with investigation and non-tampering conditions - Whether the applicants are entitled to anticipatory bail and on what conditions - HELD THAT: - The Court applied settled parameters for anticipatory bail including the nature and gravity of accusation, the role of the accused, likelihood of absconding, and cooperation with investigation. The allegations relate to large-scale alleged availment of inadmissible input tax credit, but adjudication and assessment are yet to be completed and the investigation is at an initial/documentary stage. The applicants (senior employees/director) have joined and cooperated with the investigation, there is no material showing they are habitual offenders or likely to abscond, and documentary evidence is primarily to be collected. Balancing prevention of harassment and the need for an unimpeded investigation, the Court found custodial interrogation avoidable subject to stringent conditions to secure presence and preserve investigation. Accordingly, the Court directed release on bail upon furnishing specified personal bonds and sureties and imposed conditions including joining investigation when directed, surrendering passports, not leaving the country without court permission, and not tampering with evidence.

Applicants granted anticipatory bail subject to personal bonds and specified conditions to ensure cooperation and protect the investigation.

Pre-arrest protection on deposit of percentage of disputed liability - deposit as condition for bail in unadjudicated tax liability - inadmissible input tax credit - Whether pre-arrest protection can be made conditional on deposit towards the department's tentative/unadjudicated liability and, if so, the quantum - HELD THAT: - The Court examined precedent permitting deposit of a percentage of an alleged but unadjudicated tax liability as condition for pre-arrest relief. Noting that assessment and adjudication are pending and that a portion of the alleged liability has already been deposited by the applicants, the Court held that protection could be granted on the condition of a deposit in line with the authority cited (C. Pradeep). Applying that approach, the Court directed deposit of a lump-sum amount of Rs. 10 crores (out of the tentative total liability alleged by the department) within ten days, with the order to come into operation from the date of payment and matter placed for confirmation of payment on the specified date.

Pre-arrest protection granted subject to deposit of Rs. 10 crores towards the tentative/unadjudicated liability as a condition precedent to the operation of the bail order.

Final Conclusion: Anticipatory bail granted to the four applicants on furnishing personal bond of Rs. 2 lakhs each with like surety and subject to conditions including deposit of Rs. 10 crores within ten days, cooperation with investigation, surrender of passports, prohibition on leaving the country without court permission and non-tampering with evidence; order to operate from date of payment and matter listed for confirmation.

Vires of a statute - validity of Section 40(a)(iib) of the Income Tax Act, 1961 - principles of natural justice

Whether the High Court was obliged to decide on the merits the constitutional challenge to Section 40(a)(iib) of the Income Tax Act despite related proceedings being pending before the Income Tax Authority? - HELD THAT: - The Court held that when the vires of a statutory provision is directly challenged, the High Court, exercising jurisdiction under Article 226, ought to decide the constitutional challenge on merits and not decline adjudication merely because related proceedings are sub judice before the Income Tax Authority. The issuance of a show cause notice in respect of VAT expenditure under Section 40(a)(iib) constituted a cause of action sufficient to invoke the High Court's jurisdiction; the petitioner need not await finalisation of assessment proceedings to challenge the provision. Vires of a provision goes to the root of the matter and is fit for determination by the High Court at the stage when the challenge was raised. In view of the High Court's refusal to adjudicate the question on merits, the matter was required to be remanded for fresh decision on the constitutional challenge. The Supreme Court expressly refrained from expressing any opinion on the legality or validity of Section 40(a)(iib) and remanded the matter solely for merits adjudication by the High Court. [Paras 4, 5, 6, 7]

Impugned judgment of the High Court dismissing the writ petition without deciding the vires of Section 40(a)(iib) on merits was unsustainable; the matter is remitted to the High Court to decide the writ petition on merits regarding the constitutional challenge.

Final Conclusion: Appeal allowed; the High Court's order is quashed and set aside and the matter is remitted to the High Court to decide on the merits the challenge to the vires of Section 40(a)(iib) of the Income Tax Act. No opinion expressed on merits; no order as to costs.

One trial where offences form part of the same transaction under Section 220 Cr.P.C. - Doctrine of Issue Estoppel - abuse of process - assessment-year-specific nature of offences under the Income Tax Act - continuity of action and community of purpose as tests for same transaction

One trial where offences form part of the same transaction under Section 220 Cr.P.C. - continuity of action and community of purpose as tests for same transaction - Whether the three criminal complaints arise out of the same transaction and therefore ought to be tried jointly. - HELD THAT: - The Court examined the genesis and materials of the three complaints and found that the complaints rest on the same information received from the Government of France, the same search and recorded statement, the same documents and allegations and substantially identical evidence. Applying the test for 'same transaction' - proximity of time, unity or proximity of place, continuity of action and community of purpose - the Court concluded that the subsequent complaints were instituted to arrive at figures necessary to meet the ingredients of the first complaint and that their substratum is common. Reliance was placed on the statutory exception embodied in Section 220 Cr.P.C. permitting a single trial where offences form part of the same transaction to avoid conflicting judgments. In these circumstances the Court exercised its supervisory power to set aside the trial court's refusal and directed a common trial of all three complaints before the same court. [Paras 16, 17, 18, 19, 20]

The three complaints were held to form part of the same transaction and a common trial was directed.

Assessment-year-specific nature of offences under the Income Tax Act - abuse of process - Doctrine of Issue Estoppel - Whether the department could legitimately prefer separate complaints for different assessment years and whether that prevented clubbing of trials. - HELD THAT: - The respondent's contention that offences under the Income Tax Act (as alleged) are assessment-year specific and therefore necessitate separate complaints was considered. The Court acknowledged the character of assessment-year-specific offences in principle but observed that where the core factual question - existence and non-disclosure of a foreign account - is common and the subsequent complaints are premised on that same factual substratum, the formal label of separate assessment years does not preclude treating the matters as a single transaction for trial. The Court accepted that multiple complaints on identical material could amount to an abuse of process and that repeated trials on the same core issue could offend the doctrine of issue estoppel and lead to reappreciation of identical evidence. Accordingly, the assessment-year specificity pleaded by the department did not preclude clubbing where the facts and evidence were common. [Paras 11, 12, 15, 19, 20]

Assessment-year labels did not prevent clubbing; separate complaints based on the same material were held to be susceptible to joint trial to prevent abuse of process.

Final Conclusion: Writ petition allowed; order of the trial court refusing clubbing set aside and a common trial ordered for CC No.511538/16 (Old CC No.131/2014), CC No.528982/16 (Old CC No.157/4) and CC No.528983/16 (Old CC No.158/4).

Deduction under Section 37(1) - expenditure laid out wholly and exclusively for the purposes of business - commercial expediency - voluntary retirement scheme compensation - ascertained contractual liability - takeover of employees pursuant to share purchase agreement

Deduction under Section 37(1) - commercial expediency - voluntary retirement scheme compensation - Payment of compensation under the voluntary retirement scheme was allowable as a deduction under Section 37(1). - HELD THAT: - The court held that the sums paid under the scheme constituted revenue expenditure incurred wholly and exclusively for the purposes of the assessee's business. The assessee had taken over employees pursuant to a contractual share purchase and absorption arrangement; the scheme was a contractual and ascertained liability, sanctioned by the Chief Commissioner for exemption under Section 10(10C), and aimed at inducing premature retirement to curtail future expenditure and facilitate carrying on the business. The tribunal and Commissioner (Appeals) had found the payments to be made on grounds of commercial expediency, a view consistent with Supreme Court authority treating similar payments as allowable revenue expenditure. Applying these principles, the court affirmed that the payments fell within the scope of allowable business expenditure under Section 37(1). [Paras 6, 7]

Payments under the voluntary retirement scheme were revenue expenditures incurred wholly and exclusively for business and deductible under Section 37(1).

Takeover of employees pursuant to share purchase agreement - ascertained contractual liability - expenditure not a third party personal liability - The characterisation of the payments as third party or personal liabilities of the transferor company and a tax avoidance device was rejected. - HELD THAT: - The revenue's contention that the payments were liabilities of the transferor company and not of the assessee, or that taking over employees was merely a device to avoid tax, was negatived. The factual matrix showed a share purchase and employees' absorption agreement under which employees continued service continuity and the assessee assumed obligations. The scheme was bona fide, approved by the tax authority, and intended to address labour disputes and future cost management. Consequently, these payments could not be treated as extraneous third party personal liabilities of the transferor or as a perverse finding; they were obligations and commercial decisions of the assessee tied to its business operations. [Paras 4, 6, 8]

The payments were not third party personal liabilities or a tax avoidance device; they were obligations of the assessee connected with its business and thus admissible.

Final Conclusion: The substantial questions of law were answered against the revenue and in favour of the assessee: compensation paid under the voluntary retirement scheme was held to be an allowable deduction under Section 37(1) and not a third party personal liability or a device to avoid tax; the revenue's appeal is dismissed.

Rule of consistency - Treatment of sales as unexplained income - Weight of post-closure physical verification under Section 133B - Acceptance of trading account and stock in earlier scrutiny assessments

Rule of consistency - Treatment of sales as unexplained income - Weight of post-closure physical verification under Section 133B - Acceptance of trading account and stock in earlier scrutiny assessments - Whether the additions treating sales as unexplained income could be sustained in AY 2014-15 in view of earlier years' acceptance of trading account and a post-closure enquiry under Section 133B. - HELD THAT: - The Court affirmed the ITAT's conclusion that the AO was not justified in treating the sales as unexplained income in the impugned year. The ITAT weighed the Section 133B inquiry conducted in FY 2016-17 (after the assessee had closed business in July 2015) against the historical material on record showing that opening stock, purchases, sales and closing stock had been examined and accepted by the department in earlier years, including scrutiny assessments. The tribunal found that the trading account figures and valuation/quantity of stock had attained finality in earlier assessments and were not disturbed; the AO had neither rejected the books nor disturbed opening/closing stock or gross profit for the year under consideration. Given that accepted trading figures form part of the pre-existing record, a belated physical inspection after business closure could not, in the circumstances of this case, outweigh the consistent acceptance of stock and trading activity in prior years. Applying the rule of consistency, the tribunal held that sales shown as disposals of opening stock could not be treated as unexplained income and taxed as income from other sources. The High Court found no perversity in these factual conclusions, observed that the dispute essentially rested on appreciation of facts, and declined to entertain a question of law arising from those findings. [Paras 11]

Addition of Rs. 4,20,62,550/- treated as unexplained income was deleted and the ITAT's order allowing the assessee's appeal in respect of AY 2014-15 is upheld.

Final Conclusion: Appeal dismissed. The High Court upheld the ITAT's deletion of the addition treating sales as unexplained income for AY 2014-15, concluding that the tribunal correctly applied the rule of consistency and reasonably weighed the post-closure Section 133B inquiry against earlier years' accepted trading records.

Cost of acquisition - amenities charges as part of cost of acquisition - indexation of cost of acquisition - remand for verification of similar agreements - veracity of documentary evidence - payments reflected in balance sheet as corroboration

Amenities charges as part of cost of acquisition - cost of acquisition - indexation of cost of acquisition - veracity of documentary evidence - payments reflected in balance sheet as corroboration - Amenities charges paid by the assessee are part of the cost of acquisition of the flat and are allowable for computing indexed cost for capital gain purposes. - HELD THAT: - The dispute concerned whether amounts paid under an amenities agreement should be included in the cost of acquisition for indexation. The ITAT had earlier accepted the assessee's primary contention that the amenities payments, if actually made and works undertaken, ought to be included, and remanded the matter for verification whether other flat owners had entered into similar agreements. On remand, the Assessing Officer obtained information that 33 flat owners had such agreements but nevertheless disallowed the claim, doubting veracity and noting incomplete documentary co-relation. The Tribunal finds that the veracity of the assessee's claim had already been accepted by the earlier ITAT order, the amenities payments were shown in the assessee's balance sheet and documentary evidence of an amenities agreement was on record. The limited remand was for ascertaining whether similar agreements existed; the subsequent enquiries established that multiple other purchasers had entered into amenities agreements. In these circumstances, and having regard to the documentary record and the prior ITAT conclusion, the authorities below ought to have followed the ITAT direction and allowed the amenities charges as part of cost of acquisition for indexation. The denial by the AO and CIT(A) was therefore unsustainable and is set aside. [Paras 5, 6, 7]

Allow the appeal and treat the amenities charges paid by the assessee as part of the cost of acquisition for computing indexed long term capital gain.

Final Conclusion: The Tribunal allows the assessee's appeal, holding that the amenities charges paid (corroborated by the amenities agreement and entries in the balance sheet and supported by enquiries showing similar agreements by other purchasers) form part of the cost of acquisition and must be allowed for indexation when computing long term capital gain for Assessment Year 2010-11.

Manufacture or production - deduction under sections 80HH/80I/80IA/801/801A - nexus of interest and miscellaneous receipts with eligible undertaking - capitalisation and transfer to 'expenditure during construction' - reimbursement of expenses - computation and correctness of addition - ascertainable liability versus contingent liability (guarantee fee) - horticulture expenses as business expenditure - investment allowance under section 32A on enhanced cost of plant and machinery

Manufacture or production - deduction under sections 80HH/80I/80IA/801/801A - Eligibility for deduction under the specified sections in respect of processed/lean gas made at customer terminals and at LPG plants - HELD THAT: - The Tribunal followed its coordinate-bench decision on identical facts in assessee's own case for assessment year 1996-97 and held that extensive processing activities undertaken at customer terminals to make lean gas marketable and fit for use amount to "manufacture". Consequently, deductions under the stated provisions are admissible not only at the two LPG plants (Vijaipur and Vaghodia) but also at the customer terminals where such processing is carried out. The Tribunal observed that revenue had allowed similar deductions in earlier years and had not pointed out distinguishing facts to justify departure. On this basis grounds 1 and 2 of the assessee's appeal were allowed and corresponding revenue grounds dismissed. [Paras 8, 9]

Deduction under sections 80HH/80I/80IA/801/801A allowed in respect of lean gas manufactured/produced at customer terminals as well as at the two LPG plants.

Nexus of interest and miscellaneous receipts with eligible undertaking - deduction under sections 80HH/80I/80IA/801/801A - Whether various interest receipts and miscellaneous income qualify for deduction under the specified sections as derived from eligible business - HELD THAT: - Relying on the Tribunal's earlier decision for assessment year 1996-97, the Tribunal held that interest on fixed deposits, bonds and inter-corporate deposits, interest on employees' loans and advances, interest on customer outstanding and miscellaneous income (e.g., scrap/dividend) have sufficient nexus with the eligible industrial undertaking and are eligible for deduction under the relevant provisions. The Tribunal remitted verification aspects previously directed by the coordinate bench where necessary, but, on the facts before it and in absence of distinguishing circumstances, allowed the assessee's grounds pertaining to these receipts. [Paras 14, 15]

Interest and miscellaneous receipts held eligible for deduction under the specified provisions; grounds allowing these claims are allowed.

Reimbursement of expenses - computation and correctness of addition - Correctness of addition made by AO regarding reimbursement received on Asset Transfer Agreement with Mahanagar Gas Ltd. - HELD THAT: - The Tribunal examined the Asset Transfer Agreement and the AO's computation of the alleged reimbursement amount. It found that the AO proceeded on erroneous figures without applying his mind; the actual reimbursement of cost had already been offered to tax by the assessee. Having identified the computation error, the Tribunal directed deletion of the impugned addition made by the AO. [Paras 19, 20]

Addition of the alleged excess reimbursement deleted; AO directed to delete the impugned addition.

Ascertainable liability versus contingent liability (guarantee fee) - Whether the provision for guarantee fee constituted an allowable prior-period deduction in the year it was made or was a contingent liability not allowable then - HELD THAT: - The Tribunal held that the liability for guarantee fee was properly ascertainable in the year in which the C&AG made an adverse remark and the liability was created in accordance with the Government's office memorandum directing levy of guarantee fee at specified rate. The fact that the assessee pursued waiver with the Ministry did not convert the liability into a contingent or estimated liability. Therefore the provision debited as prior period adjustment was held allowable in the year under consideration; the AO was directed to delete the disallowance. [Paras 21, 25]

Provision for guarantee fee allowed as an ascertainable liability; disallowance deleted.

Horticulture expenses as business expenditure - Allowability of horticulture expenses incurred for planting and maintenance of trees and lawns as business expenditure - HELD THAT: - On facts and following the coordinate-bench decision in the assessee's earlier year, the Tribunal accepted that the horticulture expenses were incurred in compliance with government mandate and for environmental purposes in close vicinity of the assessee's offices/plants, and therefore constituted business expenditure. The Tribunal declined to interfere with the CIT(A)'s deletion of the AO's disallowance. [Paras 28, 31]

Horticulture expenses allowed as business expenditure; revenue ground dismissed.

Investment allowance under section 32A on enhanced cost of plant and machinery - Allowability of investment allowance under section 32A in respect of enhanced cost payable for pipeline (post-settlement) and extent of verification required - HELD THAT: - The Tribunal noted its earlier direction that enhanced cost payable in respect of the pipeline set up in AY 1989-90 is to be considered in determining actual cost and hence eligibility for investment allowance. In the fresh proceedings the CIT(A) after verifying that the assessee had furnished requisite documents and that aggregate reserves satisfied statutory conditions allowed the claim, directing the AO to verify aggregate amounts of investment allowance and reserves. The Tribunal found no error in the CIT(A)'s approach or directions and declined to interfere. [Paras 35, 39]

Claim for investment allowance under section 32A on enhanced cost allowed subject to the verifications directed by the CIT(A); revenue grounds dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeal in part and dismissed the revenue's appeal. It held that processing at customer terminals amounts to manufacture for purposes of deductions under the specified provisions and allowed related deductions (including certain interest and miscellaneous receipts), deleted erroneous additions regarding reimbursement, allowed the provision for guarantee fee as an ascertainable prior-period liability, upheld horticulture expenses as business expenditure, and confirmed allowance of investment allowance on enhanced pipeline cost subject to verification as directed.

Cash credit under section 68: burden to prove identity, creditworthiness and genuineness - repayment not conclusive proof of genuineness of cash credit - estimation of agricultural income as source of unexplained cash credit - afterthought in filing return of income - addition under assessment as income due to unexplained credit

Estimation of agricultural income as source of unexplained cash credit - afterthought in filing return of income - Whether the appellant successfully explained the cash credit of Rs. 19.50 lakhs by proving that the creditor's agricultural income sufficed to make the loan, and whether the returns filed later undermine that explanation. - HELD THAT: - The CIT(A) analysed the landholding, average yield and prices of areca nut, and allocated gross receipts among the landowners in proportion to their holdings. He applied a 50% expenditure assumption to arrive at net agricultural income, made a modest allowance for personal sustenance expenditure and for prior savings, and concluded that only a limited amount of savings was available with the creditor to lend. The CIT(A) further treated the filing of return of income during assessment proceedings as an afterthought and relied on contemporaneous facts (landholding, GPA, non-filing earlier) to estimate available savings. The Tribunal found no material to show that the CIT(A)'s estimation was incorrect, and accepted the reasoning that the agricultural income, when apportioned and after reasonable deductions, supported only part of the claimed loan. [Paras 6, 7, 8]

CIT(A)'s computation accepting only part of the loan as explained from agricultural savings and treating the subsequent return as an afterthought is upheld; the addition sustained to the extent disallowed by CIT(A).

Cash credit under section 68: burden to prove identity, creditworthiness and genuineness - repayment not conclusive proof of genuineness of cash credit - Whether repayment of the amount in subsequent years establishes the genuineness and creditworthiness of the creditor so as to negate the addition under section 68. - HELD THAT: - The Tribunal reiterated the settled principle that repayment of cash credit does not, by itself, prove the genuineness of the original transaction; the assessee must satisfy the three-fold requirement of identity of the creditor, his creditworthiness and genuineness of transaction. On the record, the assessee failed to fully establish the creditor's creditworthiness and genuineness of the cash transactions (cash receipts, discrepancy in confirmation and PAN signature) and therefore reliance on repayment was insufficient to overturn the addition. [Paras 8]

Repayment of the loan does not prove genuineness; the assessee failed to discharge the burden and the CIT(A)'s adverse conclusion is sustained.

Final Conclusion: The Tribunal finds no infirmity in the CIT(A)'s order: the assessed addition under section 68 is sustained except to the limited extent allowed by CIT(A); the appeal is dismissed.

Comparability analysis in transfer pricing - Transactional Net Margin Method (TNMM) - Exclusion of comparables due to size disparity - Exclusion of comparables on account of brand value / extraordinary features - Application of precedents in transfer pricing comparability - Directions to TPO/DRP on recomputation of transfer pricing adjustment

Comparability analysis in transfer pricing - Exclusion of comparables due to size disparity - Exclusion of comparables on account of brand value / extraordinary features - Application of precedents in transfer pricing comparability - Directions to TPO/DRP on recomputation of transfer pricing adjustment - Whether Infosys Technologies Ltd, Wipro Ltd and Persistent Systems Ltd should be excluded from the comparable set for benchmarking the software development services segment. - HELD THAT: - The Tribunal examined the comparability of the three disputed companies with the assessee for the software development services segment and directed their exclusion. Infosys Technologies Ltd was excluded on the ground that it possessed huge brand value and had been excluded in the assessee's earlier proceedings and in relied precedent; the Tribunal found no basis to retain it and directed its exclusion. Wipro Ltd was excluded because its turnover was many times (over 500 times, as recorded) the size of the assessee; the Tribunal followed precedent holding that a company with multiple times the turnover of the assessee is not comparable and directed exclusion. Persistent Systems Ltd was excluded as it had been rejected in the assessee's earlier proceedings and that rejection was affirmed by the Punjab and Haryana High Court; in absence of any distinguishing facts the Tribunal followed that decision and directed exclusion. Having directed exclusion of these three comparables from the comparability analysis for the software development segment, and on the assessee's submission that no other arguments would be pressed if these comparables were excluded, the Tribunal allowed the related ground of appeal partly and disposed of the remaining grounds as dismissed without further adjudication. The Tribunal also recorded that a rectification reduced the ITeS segment adjustment to nil and the assessee did not press grounds related to that addition. [Paras 12, 13, 14, 15, 16]

Infosys Technologies Ltd, Wipro Ltd and Persistent Systems Ltd are to be excluded from the comparable set for the software development services segment; appeal partly allowed and remaining grounds disposed of as dismissed without further adjudication.

Final Conclusion: The Tribunal directed exclusion of Infosys Technologies Ltd, Wipro Ltd and Persistent Systems Ltd from the comparability analysis for the software development services segment, allowed the related ground of appeal partly, and dismissed the other grounds without further adjudication; the assessee's contention on the ITeS addition was not pressed following rectification.

Principle that notional income cannot be included in taxable income - requirement of opportunity to be heard before enhancement under section 251(2) - remand for fresh hearing after non-service of notice - transaction at cost and absence of evidence of additional consideration - inapplicability of specified domestic transaction / transfer pricing provisions

Requirement of opportunity to be heard before enhancement under section 251(2) - remand for fresh hearing after non-service of notice - Whether the enhancement made by the CIT(A) could be sustained where the show-cause notice under section 251(2) was not received by the assessee and no specific proposal for enhancement was communicated - HELD THAT: - The Tribunal found on the record that the notice dated 17.12.2018 was sent to an old address and was therefore not received by the assessee; the assessee had updated its address in the income-tax database and had communicated the new address to the AO and in the appeal papers. The notice as downloaded later from the portal merely fixed a hearing date and did not contain the details of the proposed enhancement. In these circumstances the Tribunal held that the assessee was not given a reasonable opportunity of being heard on the proposed enhancement and that the procedure mandated by section 251(2) was not effectively complied with. Having regard to these factual findings the Tribunal set aside the CIT(A)'s order of enhancement and restored the matter to the CIT(A) for fresh consideration after affording the assessee a reasonable opportunity to file accounts, documents and explanations. [Paras 6]

Order of the CIT(A) enhancing income is set aside and the matter is remanded to the CIT(A) for fresh adjudication after giving the assessee a reasonable opportunity of being heard.

Principle that notional income cannot be included in taxable income - transaction at cost and absence of evidence of additional consideration - inapplicability of specified domestic transaction / transfer pricing provisions - Whether the Assessing Officer was justified in adding service charges estimated at 20% of expenses as notional income to the assessee's total income - HELD THAT: - The Tribunal examined the factual matrix and the vendor agreement between the assessee and Cigna TTK and recorded that the assessee had received development cost at cost and there was no evidence or allegation that any consideration over and above the agreement amount was received. The Tribunal relied on the settled legal principle that a taxing authority cannot add fictional or notional income in the absence of material showing that the assessee actually earned such profit (as illustrated by the decisions cited in the order). The Tribunal also noted that specified domestic transaction or transfer pricing provisions did not apply on the facts. In the absence of any evidence of secret profit or receipt beyond the agreed consideration, the Tribunal affirmed the CIT(A)'s deletion of the AO's addition of service charges. [Paras 9, 11, 12]

Addition of Rs. 3,68,97,011/- as notional service charges by the AO is deleted and the Revenue's appeal is dismissed.

Final Conclusion: The assessee's appeal is allowed for statistical purposes by setting aside the enhancement and remanding the matter to the CIT(A) for fresh consideration after providing a reasonable opportunity of hearing; the Revenue's appeal against deletion of the AO's addition of notional service charges is dismissed and the deletion is affirmed.

Fees for technical services - Article 12 of the DTAA - taxability of IT support services - making available - chargeability under section 9(1)(vii) of the Act as Fees for technical services - remand for fresh determination of nature of services

Fees for technical services - Article 12 of the DTAA - chargeability under section 9(1)(vii) of the Act as Fees for technical services - Whether the IT support service fees of Rs. 25.61 crore received from Sandvik Asia Pvt. Ltd. are chargeable to tax in India under Article 12 of the DTAA despite being in the nature of FTS under section 9(1)(vii). - HELD THAT: - The Tribunal found that the nature of services rendered to SAPL-data communication, operational services, backup and recovery, help desk-remained the same as in earlier years. Earlier adjudications (DRP directions and the Tribunal's consolidated order for preceding assessment years) had held identical receipts from SAPL not chargeable to tax under Article 12 of the DTAA, and for two immediately succeeding years the AO had treated such receipts as not chargeable to tax. Given the identical factual matrix for the year under appeal and the finality or acceptance of earlier favourable decisions, the Tribunal held that the SAPL receipts are not chargeable to tax under Article 12 of the DTAA even though they fall within the scope of FTS under section 9(1)(vii) of the Act. [Paras 4]

Sum of Rs. 25.61 crore received from SAPL is not chargeable to tax under Article 12 of the DTAA and is therefore allowed in favour of the assessee.

Remand for fresh determination of nature of services - assessment officer to determine nature of services - precedent of Tribunal requiring fresh determination - Whether the fees received from Walter Tools India Pvt. Ltd., Seco Tools India Pvt. Ltd. and Dormer Tools India Pvt. Ltd. are chargeable under Article 12 or require fresh adjudication of their nature. - HELD THAT: - The assessee was unable to furnish formal agreements or documentary proof satisfactorily establishing the precise nature of services for these three Indian entities and produced only certain invoices. The Tribunal noted that in earlier years similar disputes as to the nature of receipts from these entities had been remitted to the AO for fresh determination. Observing that the facts and circumstances in the year under appeal are admittedly similar to those preceding years, the Tribunal declined to decide the taxability on the present record and, following precedent, set aside the inclusion and remitted the matters to the AO for fresh determination in accordance with the Tribunal's directions in earlier orders. [Paras 6]

The inclusions relating to the three Indian entities are set aside and the matters are remitted to the file of the AO for fresh determination of the nature of services.

Final Conclusion: The appeal is partly allowed: the SAPL receipt is held not chargeable to tax under Article 12 of the DTAA; amounts from Walter, Seco and Dormer are remitted to the AO for fresh determination.

Notice under section 143(2) when proceedings are remanded by the Tribunal - Principles of natural justice in set-aside (de novo) assessments - Cash credits - burden to establish identity, genuineness and creditworthiness for additions under section 68 - Rejection of books of account and availability of estimation (gross profit) adjustments - Valuation of closing stock and acceptance of LIFO basis

Notice under section 143(2) when proceedings are remanded by the Tribunal - Principles of natural justice in set-aside (de novo) assessments - Whether a fresh notice under section 143(2) is mandatory when the Tribunal sets aside and remits issues to the Assessing Officer for de novo adjudication - HELD THAT: - The Tribunal found that when it set aside the matter it gave specific directions and restored the same issues to the file of the Assessing Officer, asking the assessee to furnish evidence and explanations. The Assessing Officer issued a letter on 13.02.2012 requesting books of account and bank statements and the assessee furnished submissions and documents in response. Section 143(2) applies where a return has been furnished under section 139 or in response to a notice under section 142(1); it does not mandate issuance of a fresh notice when the Tribunal remands the matter with directions. Given that the assessee had notice of the issues from the Tribunal's order, had undertaken to produce evidence, and had been given an opportunity to file documents which were considered, the requirements of natural justice were held to be satisfied and no separate notice under section 143(2) was required in the remand proceedings. [Paras 6, 7, 8, 9]

Assessee's ground that a notice under section 143(2) was mandatory on remand is dismissed; no fresh section 143(2) notice required where Tribunal's directions and subsequent requests for documents afforded opportunity to the assessee.

Rejection of books of account and availability of estimation (gross profit) adjustments - Whether the Commissioner (Appeals) erred in rejecting the books of account and upholding gross profit addition - HELD THAT: - The CIT(A) referred to rejection of books of account but also deleted the gross profit addition by telescoping it with other specific additions; the Tribunal found this to be a contradictory treatment. Because the CIT(A) upheld item-wise additions and simultaneously deleted the gross profit addition, the Tribunal concluded that the books of account were not, in effect, rejected for the purposes of making only estimation additions. The Assessing Officer had made item-wise additions which remained upheld, and the deletion of gross profit addition was on that basis. The contradictory passing reference to rejection in the appellate order was held not to amount to an actual rejection of books such that estimation alone could be applied. [Paras 10]

Ground challenging rejection of books of account is dismissed; books were not treated as rejected so as to justify gross-profit only estimation.

Cash credits - burden to establish identity, genuineness and creditworthiness for additions under section 68 - Whether the additions under section 68 relating to amounts shown as loans/gifts from identified persons should be sustained - HELD THAT: - The assessee produced documentary evidence including gift declaration, entries in trading/profit & loss and balance sheet reflecting the gift, donor's PAN and bank statement; ledger entries and account-payee cheque evidence for loans, evidence of interest payment and TDS, repayment by cheque, and a cash deposit trail supporting advances from the HUF creditor. The Tribunal held that the assessee discharged the burden of establishing identity, genuineness and creditworthiness of the creditors/donor. The Revenue did not undertake further inquiries despite the material furnished. On the facts and documents placed before the authorities, the Tribunal found no justification to sustain the additions under section 68. [Paras 12]

Addition of Rs. 7,95,000 under section 68 is deleted.

Valuation of closing stock and acceptance of LIFO basis - Valuation dispute in respect of corrugated cement sheets and M.S. angles - Whether the Assessing Officer's higher valuation of closing stock (cement sheets and angles) was justified and whether additions for undervaluation should stand - HELD THAT: - The assessee, a dealer in building materials, maintained day-to-day stock registers with quantity- and quality-wise records and adopted LIFO valuation for corrugated cement sheets due to their fragile nature and likelihood of damage in handling, valuing them at Rs. 180 per sheet. The Assessing Officer applied higher rates based on last purchase invoices without specifying applicability to particular qualities. For M.S. angles, the assessee's quantity- and quality-wise registers were undisputed and demonstrated correct valuation. Considering the peculiar facts and the contemporaneous registers, the Tribunal accepted the assessee's method and evidence, held that the Assessing Officer's arbitrary higher valuation was not justified, and deleted the additions for both corrugated sheets and angles. The Tribunal noted this finding was fact-specific and should not be treated as a precedent. [Paras 14]

Undervaluation additions in respect of cement sheets and angles are deleted.

Final Conclusion: The appeal is partly allowed: the Tribunal dismissed the claim that a fresh notice under section 143(2) was mandatory on remand and rejected the contention that books of account were rejected; it deleted the addition under section 68 and deleted the undervaluation additions for closing stock, while other contested additions were dealt with as recorded, resulting in a partly allowed appeal for AY 2005-06.

Rejection of books of account under Section 145(3) - computation of income by adopting presumed profit rate - remand for fresh enquiry into profit margins and reliance on past accepted returns - deletion of addition for unproved business activity - taxability of purchase/advance discount received on trading account - cash basis of accounting - principles of natural justice and opportunity of hearing in de novo enquiry

Rejection of books of account under Section 145(3) - computation of income by adopting presumed profit rate - remand for fresh enquiry into profit margins and reliance on past accepted returns - principles of natural justice and opportunity of hearing in de novo enquiry - Whether the enhancement of gross profit rate by the AO (from declared 20% to 25%) was justified and the manner in which profit rate is to be determined. - HELD THAT: - The Tribunal observed that the AO rejected the assessee's books and invoked Section 145(3) to adopt a higher profit margin. The assessee did not furnish earlier years' profit details and proof of acceptability by the Department despite directions. In absence of those records and in view of the need to compare accepted profit rates of the preceding three years, the Tribunal remitted the issue to the AO for de novo enquiry. The AO is directed to examine the profits declared and accepted for the three preceding years; if those profits were accepted and comparable, the AO shall adopt the higher of (i) the average profit of the last three years or (ii) profit declared for the impugned year. If suppression is found on year-specific evidence, the AO must establish comparative profits of other persons in similar business and compute the assessee's profit accordingly. The AO must afford adequate opportunity of hearing and admit evidence filed by the assessee. [Paras 3]

Remitted to the AO for fresh enquiry and determination of profit rate for AY 2008-09 in accordance with the directions and principles stated; grounds 1 and 2 allowed for statistical purposes.

Deletion of addition for unproved business activity - principles of natural justice and opportunity of hearing in de novo enquiry - Whether the addition of Rs. 60,000 on account of alleged income from 'Paan' business carried out by the assessee was justified. - HELD THAT: - The AO and CIT(A) recorded a bald finding that the assessee carried on a paan business, but failed to produce concrete evidence to rebut the assessee's demonstration that the paan business was carried on by his father and that the father's return and assessment disclosed that income. The Tribunal found no material on record to prove that the assessee himself carried on the paan business or suppressed such income. Given the absence of evidence and the co-terminus powers of the CIT(A) who also did not elicit necessary proof, the addition could not be sustained. [Paras 4]

Addition of Rs. 60,000 on account of 'Paan' business deleted; grounds 3 and 4 allowed.

Taxability of purchase/advance discount received on trading account - cash basis of accounting - Whether the discount of Rs. 5,00,000 received from Pepsico (credited in bank on 07-08-2007) is taxable in the hands of the assessee for the impugned AY 2008-09. - HELD THAT: - The Tribunal noted that the discount was a trading receipt (purchase discount) under the agreement and was credited in the previous year relevant to AY 2008-09. The assessee, following cash basis of accounting, had not offered the amount to tax in either AY 2007-08 or AY 2008-09 and offered no justification or evidence before the Tribunal. The assessee had conceded before the CIT(A) that the amount was taxable for the impugned year and did not press the contrary before the Tribunal. In these circumstances the Tribunal found no reason to reverse the addition and confirmed the AO's and CIT(A)'s conclusion that the amount is taxable in the hands of the assessee for AY 2008-09. [Paras 5]

Addition of Rs. 5,00,000 as purchase/advance discount upheld and confirmed; grounds 5 to 7 dismissed.

Principles of natural justice and opportunity of hearing in de novo enquiry - General grounds alleging lack of proper application of mind and violation of natural justice. - HELD THAT: - Grounds 8 and 9 were general in nature and were not argued by the assessee's counsel before the Tribunal. The Tribunal accordingly dismissed these grounds as being general and unsubstantiated. [Paras 6]

General grounds (8 and 9) dismissed.

Final Conclusion: Appeal partly allowed. The addition for enhanced profit ratio is remitted to the AO for fresh enquiry and determination in accordance with the Tribunal's directions; the addition relating to alleged 'Paan' business is deleted; the addition of Rs. 5,00,000 as purchase/advance discount is confirmed and taxable in AY 2008-09.

Cost of improvement - indexed cost of improvement - exemption under Section 54F - purposive and beneficial construction of exemption provisions - purchase of new residential property in name of family member and claim of exemption - confirmation of addition

Cost of improvement - indexed cost of improvement - Entitlement of the assessee to cost of improvement and indexed cost of improvement in respect of the land sold. - HELD THAT: - The Tribunal examined the evidence placed before the assessing officer and the CIT(A), including the compromise petition and material adopted in Civil Court proceedings, and noted that the assessee's wife (co-owner) had been denied cost of improvement in a final assessment order in her case. The AO had recorded that construction, out-houses and boundary works could not be conclusively proved in the absence of supporting bills/vouchers/invoices and that photographs produced did not incontrovertibly establish that the structures were on the land sold. The Tribunal found no sustainable evidence to show that the assessee had carried out improvements on the sold land and observed that the details filed in the Civil Court carry weight. Photographs reproduced by the CIT(A) did not clearly establish that the structures were located on the disputed land. In the factual matrix, and having regard to the finality of the co-owner's assessment, the Tribunal held that the claim for cost of improvement and any indexed cost of improvement was not sustainable.

Claim for cost of improvement and indexed cost of improvement disallowed; addition upheld.

Exemption under Section 54F - purposive and beneficial construction of exemption provisions - purchase of new residential property in name of family member and claim of exemption - Whether exemption under Section 54F is available where the sale proceeds were invested in the purchase of a residential unit in the names of the assessee's wife and son. - HELD THAT: - The Tribunal considered precedent emphasising a purposive and liberal construction of Sections 54/54F to effectuate the legislative object of encouraging acquisition of residential property. Reliance was placed on judicial decisions holding that the new house need not be purchased exclusively in the name of the assessee where the purchase is part of the same scheme and the investment stems from the assessee's sale proceeds. Applying these authorities to the facts - where the sale proceeds were used to acquire the flat in the name of the assessee's wife and son and there was no dispute that the investment derived from the assessee's sale proceeds - the Tribunal concluded that exemption under Section 54F could not be denied on a hyper technical ground. Accordingly the Tribunal set aside the orders of the lower authorities and directed the AO to recompute the exemption under Section 54F in accordance with law and the amount actually invested pursuant to the sale proceeds.

Exemption under Section 54F allowed; matter remitted to AO for recalculation of exemption in accordance with the Tribunal's direction.

Confirmation of addition - Whether the addition of Rs. 53,020 to the assessee's income was liable to be deleted. - HELD THAT: - The assessee's authorised representative did not advance any arguments disputing this addition before the Tribunal. In the absence of contest, the Tribunal affirmed the addition as made by the lower authorities.

Addition of Rs. 53,020 confirmed.

Final Conclusion: Appeal partly allowed: claim for cost of improvement (and indexed cost) rejected; exemption under Section 54F allowed and remitted to AO for recomputation; addition of Rs. 53,020 confirmed.

Disallowance under section 14A read with Rule 8D - Applicability of section 14A in absence of exempt income - Binding effect of CBDT circular vis-a -vis judicial pronouncements

Disallowance under section 14A read with Rule 8D - Applicability of section 14A in absence of exempt income - Binding effect of CBDT circular vis-a -vis judicial pronouncements - Deletion of the addition made under section 14A read with Rule 8D where the assessee did not report any exempt income for the year. - HELD THAT: - The Assessing Officer applied Rule 8D and made a disallowance despite the assessee not declaring any exempt income from the mutual fund investments. The Commissioner (Appeals) deleted the disallowance after noting that the assessee had not shown any exempt income or capital gain for the year and that the investments had been disposed of in the same year. The Tribunal upheld the deletion, relying on precedents of the jurisdictional High Court and the Supreme Court which hold that section 14A and attendant disallowances are not attracted in the absence of exempt income received or receivable in the relevant year, and that a CBDT circular cannot prevail over a binding judicial decision. Applying these principles, the Tribunal found no infirmity in the CIT(A)'s conclusion that, on the facts, no disallowance under section 14A was called for. [Paras 4, 5]

The deletion of the disallowance under section 14A read with Rule 8D is upheld; no disallowance is warranted in the absence of any exempt income in the year under consideration.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) deleting the section 14A disallowance for Assessment Year 2011-12 is upheld.

TDS on consideration paid in kind - Applicability of section 194C to non-cash consideration - Ownership of by-products and transfer of property - Ascertainability of value as part of consideration - Precedential value of coordinate bench decisions - Cancellation of order under section 201(1)/201(1A)

TDS on consideration paid in kind - Applicability of section 194C to non-cash consideration - Ownership of by-products and transfer of property - Ascertainability of value as part of consideration - Precedential value of coordinate bench decisions - Cancellation of order under section 201(1)/201(1A) - Validity of cancellation of the assessing officer's order under section 201(1)/201(1A) for alleged failure to deduct tax where part of consideration was paid 'in kind' (by-products). - HELD THAT: - The Tribunal affirmed the CIT(A)'s decision quashing the demand under section 201(1)/201(1A) after applying the determinative reasoning in the assessee's own earlier ITAT decision for A.Y. 2014-15. That earlier order (paras 22-23) explained that whether section 194C is attracted by consideration paid 'in kind' depends on factual matrix: notably the nature of the contract, intention of parties, whether the payer had ownership/authority to pass the by-product as consideration, and whether the by-product had an ascertainable monetary value capable of being treated as part of the consideration. In the facts of the related earlier case the property in the by-products did not pass from the assessee/procurement agencies as milling charges and hence TDS provisions were not attracted. The Tribunal in the present appeals respectfully followed those findings and observed that the Department has not secured a contrary decision from a higher forum; therefore the coordinate-bench conclusions operate to cover the issue in favour of the assessee. Applying that reasoning to A.Y. 2012-13 and A.Y. 2013-14, the Tribunal found no infirmity in the CIT(A)'s cancellation of the AO's order under section 201(1)/201(1A). [Paras 6, 7]

Appeals dismissed; the cancellation of the order under section 201(1)/201(1A) is sustained as the TDS provisions do not apply on the facts to the by-products passed in kind.

Final Conclusion: The Department's appeals for A.Y. 2012-13 and A.Y. 2013-14 are dismissed; the CIT(A)'s orders cancelling the demand under section 201(1)/201(1A) are upheld following the coordinate-bench reasoning that, on the facts, by-products passed in kind did not attract TDS under section 194C.

Restoration of company name under Section 252(3) - striking off under Section 248 - failure to file financial statements and annual returns - statutory compliance and directors' duty - conditions for restoration including filing, undertakings and payment of costs - power to proceed against company and directors for late filing and other non-compliances

Restoration of company name under Section 252(3) - conditions for restoration including filing, undertakings and payment of costs - Restoration of the appellant company's name to the register of companies on specified conditions. - HELD THAT: - The Tribunal applied the test in Section 252(3) and, having considered the appellant's explanation about non-commencement of operations and the documentary material produced (including balance sheets and income-tax acknowledgement), concluded that it would be just and equitable to restore the company's name. Restoration was granted subject to specified conditions set out by the Tribunal: production of specified documents (see Annexure A8 of CA/34/KOB/2020), allowance for filing annual returns and financial statements, payment of costs to the Central Government, provision of an undertaking regarding misuse of accounts during demonetisation, compliance with filing formalities and fees within 30 days of restoration, prohibition on alienation of assets until compliance, and publication of the order in the Official Gazette by the ROC. The Tribunal also directed that DIN-related issues be dealt with separately by the ROC and required the company's representative to ensure compliance. [Paras 16, 17, 18]

The Tribunal ordered restoration of the company's name subject to the enumerated conditions and compliances.

Striking off under Section 248 - failure to file financial statements and annual returns - statutory compliance and directors' duty - power to proceed against company and directors for late filing and other non-compliances - Validity of the strike-off process and the ROC's entitlement to take action for non-filing, and preservation of ROC's power to proceed for statutory breaches notwithstanding restoration. - HELD THAT: - The ROC's report established that the company had not filed balance sheets and annual returns since incorporation and that requisite notices and publications under Section 248 and the relevant rules were issued prior to striking off. The Tribunal recorded those procedural steps and recognised that the strike-off was triggered by the directors' failure to discharge filing obligations. Nevertheless, the Tribunal's grant of restoration was made without circumscribing the ROC's statutory power to deal with alleged late filing and other non-compliances; the ROC remains entitled to proceed against the company and its directors as mandated under the Companies Act. [Paras 9, 10, 17]

The Tribunal acknowledged the ROC's procedural compliance in striking off for non-filing, but restored the company's name subject to conditions and preserved ROC's power to take further action for statutory breaches.

Final Conclusion: The appeal was allowed: the Tribunal ordered restoration of the appellant company's name to the register as if it had not been struck off, subject to specified documentary production, filing of outstanding statutory records with fees/fines, payment of costs to the Central Government, an undertaking regarding misuse of accounts, non-alienation of assets pending compliance, and publication of the order; the ROC's authority to pursue penalties or other actions for late filing remains intact.

Jurisdiction of the Adjudicating Authority in insolvency resolution - role and mandate of the Resolution Professional - avoidance of preferential transactions - timelines for determination and filing of avoidance applications under the CIRP Regulations - effect of approval of a resolution plan on pending CIRP proceedings

Role and mandate of the Resolution Professional - effect of approval of a resolution plan on pending CIRP proceedings - Whether the Resolution Professional can continue to act and prosecute avoidance applications after approval of the Resolution Plan - HELD THAT: - The RP's authority is finite and confined to conducting and managing the CIRP up to the point an order under Section 31 approving the Resolution Plan is passed. The proviso to Section 23 and the scheme of the Code show a clear START and FINISH line for the RP's mandate; continuation of the RP indefinitely (including acting as a 'Former RP') is not contemplated. Form H or Regulation provisions requiring disclosure of objectionable transactions at the time of submission of the Resolution Plan do not convert into a right for the RP to act post-approval. Any extension of RP functions beyond approval is permissible only if the Resolution Plan itself contains an express clause to that effect; absent such provision the RP ceases to act on behalf of the corporate debtor once the Plan is approved and the new management takes over. [Paras 74, 77, 78, 81, 89]

The RP cannot continue to act or prosecute avoidance applications after approval of the Resolution Plan, except to the extent expressly provided in the Resolution Plan.

Avoidance of preferential transactions - timelines for determination and filing of avoidance applications under the CIRP Regulations - jurisdiction of the Adjudicating Authority in insolvency resolution - Whether an avoidance application filed before approval of the Resolution Plan can be adjudicated by the NCLT after the Resolution Plan has been approved - HELD THAT: - The statutory scheme and the CIRP Regulations foresee that the RP must form an opinion, determine objectionable transactions and file applications within prescribed timelines so that those matters are placed before the NCLT at the time of plan approval. The purpose of these timelines is to ensure such issues are considered prior to approval. The jurisdiction of the NCLT is limited to matters "in relation to insolvency resolution and liquidation"; once the Resolution Plan is approved and the new management takes over, the CIRP concludes and the NCLT lacks jurisdiction to adjudicate avoidance applications in respect of that corporate debtor unless the Resolution Plan reserves or provides for such adjudication or distribution of any recoveries. Consequently, avoidance applications cannot survive in the NCLT beyond the conclusion of the CIRP except as contemplated by the Plan. [Paras 68, 70, 73, 84, 94]

An avoidance application cannot be adjudicated by the NCLT after approval of the Resolution Plan unless the Resolution Plan itself makes provision for such adjudication or for treatment of any recovery.

Avoidance of preferential transactions - effect of approval of a resolution plan on pending CIRP proceedings - Who is entitled to the benefit of any order arising from an avoidance application adjudicated in the CIRP context - HELD THAT: - Orders under Section 44 are intended to benefit the corporate debtor and ultimately the creditors as part of the insolvency resolution process. The objective is that any recoveries or reversal of preferential transactions be taken into account in the Resolution Plan and for the benefit of creditors prior to plan approval. They are not intended to confer post-approval benefits on the new management or to disturb the commercial bargain struck in the approved Plan. Therefore, adjudication of preferential transactions after plan approval would not serve the statutory purpose of benefitting creditors through the CIRP. [Paras 70, 71, 86, 92, 93]

Benefits of avoidance orders are meant to accrue for the corporate debtor/creditors within the CIRP and must be addressed before plan approval; they do not vest in the company under its new management post-approval.

Final Conclusion: Writ petition allowed. The NCLT order impleading the petitioner in CA No.284(PB)/2018 and consequential proceedings against the petitioner in the avoidance application are quashed for lack of jurisdiction, as the RP cannot pursue such proceedings after approval of the Resolution Plan and the CIRP coming to an end.

Existence of a dispute - spurious defence - corporate insolvency resolution process - admission and reconciliation of accounts - principal-agent vicarious liability

Existence of a dispute - spurious defence - Whether a dispute between the Corporate Debtor and the Operational Creditor existed prior to the Section 8 demand notice such as to preclude initiation of CIRP. - HELD THAT: - The Tribunal examined the communications exchanged prior to the demand notice - including emails dated 5th March, 2019 and legal notices of 6th and 28th March, 2019 - and the sequence of events concerning dishonour and re-presentation of cheques. Reliance was placed on the test in Mobilox (quoted in the impugned order) that the adjudicating authority must reject only a truly spurious defence and need only be satisfied that a plausible contention exists requiring further investigation. The Appellate Tribunal found that the materials showed a bona fide dispute about the accounting treatment and alleged payments (including requests for ledgers and assertions of payments to employees) which were raised before the demand notice was issued. The Adjudicating Authority had not reasonably explained why those communications did not amount to a real dispute and had wrongly treated the defence as spurious. [Paras 31, 32, 33, 37, 38]

There was a dispute existing prior to the issuance of the Section 8 notice and the Adjudicating Authority erred in admitting the CIRP.

Admission and reconciliation of accounts - principal-agent vicarious liability - Whether the Operational Creditor's admission regarding payments and the question of payments to its employees required adjudication by an appropriate forum rather than by initiation of insolvency proceedings. - HELD THAT: - The Tribunal noted that the Operational Creditor had, in its pleadings, acknowledged receipt of payments amounting to Rs. 14,17,000/-, described as out-of-pocket expenses. The Appellate Tribunal held that the onus lay on the Operational Creditor to establish that such receipts related to out-of-pocket expenses and not to adjustment of invoices. Further, the Tribunal observed that alleged payments to employees could attract the law of agency and vicarious liability principles, such that fraud or wrongful acts of employees may affect the principal. These factual and legal contentions required adjudication by the appropriate forum and could not be resolved at the admission stage under the I&B Code. [Paras 11, 36, 37, 38]

The factual and legal questions concerning whether payments were received for out-of-pocket expenses, whether cheques were issued as security, and whether payments to employees were authorized are disputed questions of law and fact to be determined by the appropriate forum; they cannot be resolved by admitting CIRP.

Corporate insolvency resolution process - Whether the impugned order initiating CIRP should be set aside. - HELD THAT: - Applying the foregoing conclusions that a pre-existing dispute was shown and that several material questions required adjudication elsewhere, the Appellate Tribunal concluded that initiation of CIRP by the Adjudicating Authority was unsustainable. The Tribunal therefore disagreed with the Adjudicating Authority's admission order and set it aside. The Tribunal also directed the Adjudicating Authority to pass necessary orders for compensating the Interim Resolution Professional for remuneration or expenses incurred while acting in that capacity. [Paras 38, 39, 40]

Impugned order admitting CIRP is set aside and CIRP initiated against the Corporate Debtor is annulled; directions given to the Adjudicating Authority regarding compensation to the Interim Resolution Professional.

Final Conclusion: The appeal is allowed: the Appellate Tribunal set aside the Adjudicating Authority's order admitting CIRP on the ground that a bona fide dispute existed prior to the demand notice and material questions of fact and law required adjudication by the appropriate forum; CIRP initiation is quashed and the Adjudicating Authority is directed to pass orders to compensate the Interim Resolution Professional.

Assets of the corporate debtor - shares held by corporate debtor in subsidiary as part of corporate debtor's assets - Resolution Plan and treatment of third party/subsidiary assets - equitable treatment of creditors - differential treatment of consenting and dissenting financial creditors - Section 30(2) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the Committee of Creditors - prospective operation of amended regulations

Assets of the corporate debtor - shares held by corporate debtor in subsidiary as part of corporate debtor's assets - Resolution Plan and treatment of third party/subsidiary assets - Inclusion of Facor Power Limited (FPL) in the Resolution Plan for Ferro Alloys Corporation Limited (FACL) and the validity of dealing with shares/rights in the subsidiary as part of the CIRP - HELD THAT: - The Tribunal held that shares of FPL owned by the Corporate Debtor (86.09%) form part of the assets of the Corporate Debtor and may legitimately be dealt with in the Resolution Plan. The Resolution Professional had appointed independent valuers and placed valuation materials before the COC, and the shareholding was valued and taken into account (valuation attributed approximately Rs.95 Crores to the Corporate Debtor's shareholding). Clauses in the approved Resolution Plan which contemplate transfer of promoter or pledged shareholdings do not effect automatic transfer but only provide for consensual arrangements and for exercise of contractual rights by pledgees (e.g., REC) where applicable. On these bases the Tribunal found the objection that the Plan unlawfully dealt with a third party company to be unsustainable and that inclusion of subsidiary shareholding in the Plan conformed with the Code and the valuation process carried out during CIRP. [Paras 27, 28, 31, 33]

Objection to inclusion of FPL in the Resolution Plan is rejected; dealing with subsidiary shares held by the Corporate Debtor in the Plan is permissible and compliant with the CIRP process.

Equitable treatment of creditors - differential treatment of consenting and dissenting financial creditors - Section 30(2) of the Insolvency and Bankruptcy Code, 2016 - commercial wisdom of the Committee of Creditors - prospective operation of amended regulations - Whether the approved Resolution Plan unlawfully discriminates between consenting and dissenting (or abstaining) Financial Creditors and whether it violates Section 30(2) or applicable CIRP Regulations - HELD THAT: - The Tribunal analysed the treatment afforded to dissenting/abstaining Financial Creditors in light of Section 30(2), Regulation 38 and relevant Supreme Court precedents. It noted that as on the date the COC approved the Plan (13.11.2019) the post amendment priority rule in Regulation 38(1) (effective 27.11.2019) did not apply; therefore the only statutory requirement vis a vis dissenting creditors at that time was provision of at least the liquidation value as required by Section 30(2). The Plan contemplated payment by a combination of cash and issuance of non convertible debentures to dissenting Financial Creditors and thus did not fail the statutory minimum protections. The Tribunal reiterated that the Adjudicating Authority and Appellate Tribunal cannot re open the commercial wisdom of a COC majority where the Plan otherwise conforms to the Code and Regulations, and found no arbitrary or discriminatory treatment that would warrant interference. [Paras 34, 41, 44, 54, 55]

The approved Resolution Plan is not discriminatory as between consenting and dissenting Financial Creditors and is not violative of Section 30(2) or the applicable CIRP Regulations; no interference is warranted.

Final Conclusion: Both Appeals are dismissed. The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan: inclusion of the subsidiary shareholding in the Plan was permissible and the Plan did not unlawfully discriminate between creditors nor contravene Section 30(2) or the applicable regulations.

Liquidation of corporate debtor under Insolvency and Bankruptcy Code - Commercial wisdom of Committee of Creditors - Cessation of moratorium on liquidation - Exemption of lockdown period for filing

Liquidation of corporate debtor under Insolvency and Bankruptcy Code - Commercial wisdom of Committee of Creditors - Cessation of moratorium on liquidation - Application for initiation of liquidation of the Corporate Debtor was allowed and the moratorium was ordered to cease from the date of liquidation. - HELD THAT: - The Adjudicating Authority found that the Committee of Creditors had resolved in its Sixth meeting that there was no possibility of receiving a resolution plan and had therefore decided for liquidation. The Authority observed that it has no jurisdiction to interfere with the commercial wisdom of the CoC and relied on the settled principle that the Adjudicating Authority cannot reverse the commercial decision of the CoC. On that basis, the application under Sections 33 and 34 of the Code was allowed, an order for liquidation was passed, the moratorium under Section 14 was directed to cease with effect from the liquidation order, and the RP was appointed as Liquidator. [Paras 3, 5]

IA 491 of 2020 under Sections 33 & 34 is allowed; liquidation of Neuromed Imaging Centre Private Limited is ordered and the RP shall act as Liquidator; moratorium ceases from the liquidation order.

Exemption of lockdown period for filing - Lockdown period from 25.03.2020 to 31.05.2020 was exempted for the purpose of filing the instant application. - HELD THAT: - The Authority expressly exempted the period of national lockdown stated in the application from the computation of filing time for the instant IA, thereby allowing the application despite the delay attributable to the lockdown period. [Paras 5]

The lockdown period 25.03.2020 to 31.05.2020 is exempted from filing the application; IA is partially allowed and disposed of with the observations recorded.

Final Conclusion: The Tribunal allowed the RP's application under Sections 33 and 34 for liquidation, appointed the RP as Liquidator, directed cessation of the moratorium from the liquidation order, and exempted the lockdown period 25.03.2020 to 31.05.2020 from filing computation; the IA is disposed of accordingly.

Assignee of debt treated as related party where assignor is related party - related party - assignee steps into the shoes of the assignor - verification of claims and due diligence by the interim resolution professional - abeyance of claims pending verification - see-through provision

Assignee of debt treated as related party where assignor is related party - assignee steps into the shoes of the assignor - related party - verification of claims and due diligence by the interim resolution professional - abeyance of claims pending verification - Applicant, being assignee of a loan earlier held by a related party of the Corporate Debtor, is a Related Party and its exclusion from participation in the Committee of Creditors was justified; the IA seeking inclusion in the CoC is dismissed. - HELD THAT: - The Tribunal applied the reasoning in Pankaj Yadav & Anr. (as relied upon) that an assignee's rights and disadvantages are no better than those of the assignor and that an assignee steps into the shoes of the assignor; where the assignor is a related party of the corporate debtor the assignee is liable to be treated likewise. The IRP had conducted preliminary verification, recorded objections raised by major financial creditors that the applicant (an assignee) was linked to the corporate debtor, kept the claims of the four contested creditors in abeyance pending detailed due diligence, and thereafter communicated a finding that the applicant was a related party. The applicant was given opportunity to produce documents but did not satisfactorily negate the related party allegation and did not challenge the IRP's subsequent letter dated 27.04.2020. In these circumstances the Tribunal held that the IRP did not exceed powers in suspending the applicant from the CoC pending verification and, on the dispositive application of the assignee/assignor principle, concluded that the applicant is a related party. Because the IRP's final finding was not challenged before the Tribunal and rendered the prayer infructuous, the application was dismissed without costs. [Paras 25, 26, 35, 36, 38]

Application dismissed; applicant held to be a Related Party and exclusion from the Committee of Creditors upheld; IA/345/2020 dismissed without costs.

Final Conclusion: The Tribunal dismissed the application seeking inclusion of the applicant in the Committee of Creditors, holding that the applicant-being an assignee of debt from a related party of the corporate debtor-is itself a Related Party; the IRP's verification process and consequent finding were not impugned before the Tribunal and the relief sought was therefore infructuous.

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - quantified for purposes of SVLDRS - written communication constituting quantification - relief under SVLDRS for cases under investigation, enquiry or audit - principles of natural justice - notice and hearing - Designated Committee's duty to issue estimate and provide hearing

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - quantified for purposes of SVLDRS - written communication constituting quantification - relief under SVLDRS for cases under investigation, enquiry or audit - Declaration under the SVLDRS filed in the category 'Investigation, Enquiry or Audit' was not barred where the duty had been quantified or admitted on or before 30.06.2019. - HELD THAT: - The proprietor's recorded statement dated 11.01.2018 admitted service tax liability (approximately Rs. 60 lakhs) for the period upto June, 2017, and departmental communication dated 24.01.2018 corroborated that admission. The Scheme defines 'quantified' as a written communication of the amount payable; Board's Circular and FAQs expressly treat an admission in a statement or a departmental letter intimating demand as constituting quantification for the cut off of 30.06.2019. Applying these provisions and clarifications, the Court held that the amount of duty involved in the petitioner's investigation had been quantified on or before 30.06.2019 and therefore the petitioner could not be treated as ineligible under the negative list provision of section 125(1)(e). [Paras 17, 26, 27, 28, 29]

The petitioner's declaration is not ineligible under clause (e) of section 125(1) of the Finance (No.2) Act, 2019 because the duty was quantified/admitsed on or before 30.06.2019.

Principles of natural justice - notice and hearing - Designated Committee's duty to issue estimate and provide hearing - Summary rejection of the declaration without affording an opportunity of hearing was contrary to the principles of natural justice and inconsistent with the scheme's procedural safeguards. - HELD THAT: - Section 127 requires that where the Designated Committee's estimate exceeds the amount declared, an intimation and an opportunity of hearing must be given before determining the payable amount. It is illogical and contrary to the object of a beneficent amnesty scheme to summarily reject a declaration as ineligible without giving the declarant a chance to explain or establish quantification. Prior decisions of this Court emphasise that when adverse civil consequences follow, notice and hearing are mandatory. Given that the petitioner's duty was held to be quantified on or before 30.06.2019, the Designated Committee's summary rejection without hearing was invalid. [Paras 30, 31, 32]

The rejection dated 22.01.2020 is set aside; the matter is remanded to the Designated Committee to treat the declaration as valid, to afford the petitioner a hearing (with notice of date, time and place), to decide by a speaking order and to complete the exercise within six weeks from receipt of this order.

Final Conclusion: Writ petition allowed: impugned rejection set aside and matter remitted to the Designated Committee to consider the declaration afresh as a valid declaration, afford the petitioner a hearing and pass a speaking order within six weeks; no order as to costs.

Amount in arrears - amount payable - calculation of relief under the Scheme - deduction of pre-deposits when issuing statement indicating amount payable - interpretation of Section 124(1)(c) read with Section 121(c)

Interpretation of Section 124(2) - deduction of pre-deposits when issuing statement indicating amount payable - calculation of relief under the Scheme - Paragraph 2(iv) of the impugned circular dated 25.09.2019 complies with the scheme and is not in breach of subsection (2) of Section 124. - HELD THAT: - The court examined the statutory definitions in Section 121 and the relief computation prescribed by Section 124. Section 121(e) defines "amount payable" as the final amount determined by the designated committee calculated as tax dues less tax relief. Section 124(2) requires deduction of any amount paid as predeposit or deposit when issuing the statement indicating the amount payable. Applying these provisions, the circular's provision for calculating relief on the basis of the tax dues and adjusting deposits in the statement is consistent with the statutory scheme. The court found no inconsistency between paragraph 2(iv) of the circular and the mandate of subsection (2) of Section 124 and therefore concluded that the circular is not violative of the statutory provisions. [Paras 6, 8, 9]

The challenge to paragraph 2(iv) of the circular as violative of Section 124(2) is rejected.

Amount in arrears - amount payable - calculation of relief under Section 124(1)(c) - The amount determined in SVLDRS3 dated 01.02.2020 was computed in accordance with Section 124(1)(c) read with Section 121(c) and does not suffer from any error. - HELD THAT: - The court considered the facts that the original order dated 29.03.2019 appropriated earlier deposits and fixed the tax in arrear at the figure reflected in the SVLDRS3. Under Section 121(c) "amount in arrears" is the duty recoverable as arrears under the indirect tax enactment; under Section 121(e) "amount payable" is tax dues less tax relief as determined by the designated committee. The designated authority computed the relief under Section 124(1)(c) on the amount in arrears and issued the SVLDRS3 showing the relief and the estimated balance payable. On this application of the statutory definitions to the admitted facts, the court found no error in the computation recorded in SVLDRS3. [Paras 7, 8, 9]

The challenge to the computation in SVLDRS3 is dismissed; the SVLDRS3 does not contravene Section 124(1)(c) or Section 124(2).

Final Conclusion: The petitioner's contentions that the impugned circular and the SVLDRS3 are contrary to the scheme of Section 124 are repelled; the court held both the circular and the SVLDRS3 to be in conformity with the statutory provisions and posted the matter for further hearing on 25.11.2020.

Claim for refund under Section 11B - limitation for refund claims - unjust enrichment - incidence of tax and passing on - provisional assessment and Rule 9-B / Rule 7 - requirement of documentary proof of payment to Government

Claim for refund under Section 11B - limitation for refund claims - provisional assessment and Rule 9-B / Rule 7 - Whether the refund claim was time barred and whether absence of provisional assessment by the service provider precluded treating the claim as within time under Section 11B - HELD THAT: - The Court held that the Tribunal erred in treating the respondent's refund claim as within time. The scheme of Section 11B makes the limitation period applicable to independent refund claims and distinguishes refunds arising from provisional assessment under the rules. Where the service provider had not sought provisional assessment, the respondent could not avoid compliance with Section 11B. Reliance on precedents demonstrates that payment under provisional assessment (or refunds made under rules governing provisional assessment) operates differently from independent refund claims under Section 11B; accordingly, in the absence of provisional assessment by the service provider, the limitation prescribed by Section 11B applied and the claim filed beyond the statutory period could not be allowed.

Claim for refund was time barred and the Tribunal's direction to process the claims within time was set aside.

Unjust enrichment - incidence of tax and passing on - requirement of documentary proof of payment to Government - Whether the respondent was entitled to refund because there was no unjust enrichment, having issued credit notes and asserting that the incidence of tax was borne by them - HELD THAT: - The Court answered against the respondent. The mere issue of a credit note after clearance does not ipso facto negate the principle of unjust enrichment where the statutory scheme requires proof that the incidence of tax was not passed on. The assessee bears the burden of establishing, with documentary evidence, both payment to the Government by the service provider and that the incidence of tax was not passed on to any other person. Shifting the burden to the department to demonstrate passing on is impermissible in the factual matrix of the case. Established authority was applied to emphasise the distinct rights and obligations of payers and buyers under the refund regime and to require compliance with statutory safeguards against unjust enrichment.

No refund on grounds of absence of unjust enrichment; claim rejected for lack of requisite proof and on merits.

Requirement of documentary proof of payment to Government - incidence of tax and passing on - Whether a refund claim can be entertained in the absence of documentary proof that the service provider paid the tax to the Government and that the incidence was borne by the claimant - HELD THAT: - The Court held that an assessee cannot succeed in a refund claim merely by asserting that it bore the incidence of tax; documentary evidence is necessary to establish payment by the service provider to the Government and that the incidence has not been passed on. The adjudicating authority and Commissioner (Appeals) were right to require such proof and to reject the claim when the required documentation was not furnished.

Claim unsustainable for want of documentary proof; rejection by the authorities upheld.

Final Conclusion: The CESTAT order setting aside the adjudicating authority and remanding for fresh adjudication is set aside; the order of the Assistant Commissioner and its affirmation are restored. Appeal disposed of in terms of the Court's decision in CEA No.96/2018.

Input service - CENVAT credit of service tax - insurance service provided by the Deposit Insurance and Credit Guarantee Corporation to banks - binding effect of a Larger Bench decision on divergent CESTAT views - remand for fresh decision in conformity with binding precedent

Input service - CENVAT credit of service tax - insurance service provided by the Deposit Insurance and Credit Guarantee Corporation to banks - binding effect of a Larger Bench decision on divergent CESTAT views - The insurance service provided by the Deposit Insurance and Credit Guarantee Corporation to banks is an input service and CENVAT credit of service tax paid for this service can be availed by banks for rendering output services. - HELD THAT: - The High Court recorded and applied the decision of the Larger Bench of CESTAT which, after resolving divergent views existing between CESTAT benches (including the contrary view in ICICI Bank Limited and the view in State Bank of Bikaner and Jaipur), held that the Deposit Insurance Corporation's service to banks qualifies as an input service. The Larger Bench specifically answered the reference by stating that CENVAT credit of service tax paid for that insurance service can be availed by banks for rendering output services. The High Court found that in view of that Larger Bench decision the contrary impugned CESTAT order could not be sustained. [Paras 11, 12]

The Court accepted and applied the Larger Bench's conclusion that the Deposit Insurance Corporation's insurance service is an input service and CENVAT credit thereon is allowable to banks.

Remand for fresh decision in conformity with binding precedent - binding effect of a Larger Bench decision on divergent CESTAT views - The impugned CESTAT order dated 12.02.2019 was set aside and the matter remanded to the CESTAT for fresh decision in conformity with the Larger Bench decision. - HELD THAT: - Having held that the Larger Bench's ruling is determinative, the High Court quashed the impugned order which had followed the contrary view and remitted the appeals to the CESTAT to decide them afresh in conformity with the Larger Bench's finding. The Court therefore did not decide factual quantification but mandated reconsideration consistent with the binding precedent. [Paras 8, 9]

Impugned order set aside; appeal remanded to CESTAT for fresh decision in conformity with the Larger Bench ruling; appeal allowed without costs.

Final Conclusion: The High Court set aside the impugned CESTAT order, applied the Larger Bench's determination that the Deposit Insurance Corporation's insurance service is an input service allowing CENVAT credit to banks, and remanded the matter to CESTAT for fresh decision in conformity with that Larger Bench ruling; appeal allowed with no order as to costs.

Delayed adjudication of show-cause notices - stale show-cause notice - exercise of power within a reasonable time - keeping show-cause notice in call book without informing the party - breach of procedural fairness and principles of natural justice - writ jurisdiction to quash adjudication rendered after inordinate delay - passing order during pendency of writ to frustrate court scrutiny

Delayed adjudication of show-cause notices - stale show-cause notice - exercise of power within a reasonable time - breach of procedural fairness and principles of natural justice - Whether commencement and completion of adjudication more than a decade after issuance of show-cause notices is legally tenable - HELD THAT: - The Court held that adjudication initiated about 13 years after issuance of the show-cause notices and after the petitioner had replied was unreasonable and unsustainable. Citing precedents, the Court reiterated that in absence of a statutory limitation the authority must act within a reasonable time and that a period of thirteen years cannot ordinarily be so characterized. The delay here was attributable to the respondents and not to any default by the petitioner; prolonged inaction defeated the purpose of issuing show-cause notices, impaired the petitioner's ability to defend and amounted to a breach of procedural fairness and natural justice. Accordingly, commencement of adjudication after such inordinate delay was held invalid and any consequential order based on that adjudication could not be sustained. [Paras 17, 21, 23, 27, 28]

Adjudication commenced and concluded after about 13 years is invalid; consequential orders based on such delayed adjudication are unsustainable.

Keeping show-cause notice in call book without informing the party - duty to inform parties when notices are kept in dormant list - transparency in revenue administration - Whether placing show-cause notices in the call book without informing the petitioner justifies the long delay - HELD THAT: - The Court held that internal departmental practice of retaining matters in a call book cannot be invoked to justify inordinate delay unless the party is duly informed. The Court observed that when notices are kept in abeyance the revenue ought to communicate this to the affected parties so they can preserve evidence and, if necessary, challenge the basis for keeping the matter dormant. Failure to inform the petitioner of such abeyance here militated against the respondents and could not validate the delay. [Paras 22, 23]

Keeping show-cause notices in the call book without informing the petitioner does not justify the inordinate delay and is no defence to revive stale proceedings.

Passing order during pendency of writ to frustrate court scrutiny - writ jurisdiction to quash adjudication rendered after inordinate delay - Whether the order-in-original passed after filing of the writ petition (and during its pendency) to pursue the adjudication is permissible and can render the writ infructuous - HELD THAT: - The Court held that administrative action taken to finalize adjudication after the petitioner had invoked the High Court's writ jurisdiction - particularly where the delay had been inordinate - was impermissible if intended to frustrate judicial scrutiny. The Court noted earlier authorities condemning initiation or conclusion of parallel proceedings while the court is seised and found that allowing respondents to materially alter the subject-matter during pendency so as to evade relief would be unacceptable. Consequently the order-in-original passed in those circumstances could not stand. [Paras 24, 25, 26, 28]

Order-in-original passed during the pendency of the writ to revive and conclude delayed adjudication is impermissible and is liable to be set aside.

Final Conclusion: The writ petition was allowed: adjudication proceedings commenced and concluded after about 13 years were held invalid, the order-in-original passed on that basis was set aside, and the delayed revival of call-book matters without informing the petitioner was rejected as a justification for such delay; no order as to costs.

Refund of merchant overtime / supervision charges - waiver of merchant overtime charges by Board circular dated 23.04.2003 - storage of non-duty paid excisable goods outside factory premises - self-assessment and reduction of physical supervision - interest on refund / notional interest to balance equities

Refund of merchant overtime / supervision charges - waiver of merchant overtime charges by Board circular dated 23.04.2003 - storage of non-duty paid excisable goods outside factory premises - The appellant is entitled to refund of the supervision charges paid. - HELD THAT: - The Board's circular dated 23.04.2003 clarified that recovery of merchant overtime charges in respect of storage of non-duty paid excisable goods outside factory premises is no longer warranted and that earlier instructions stand modified to that extent. The Tribunal and lower authorities continued to permit collection of such charges despite the circular. Having regard to the Board's clear direction that merchant overtime charges are not to be recovered and that the earlier circulars were modified, the collections made from the appellant could not be lawfully retained. The court therefore set aside the orders of the deputy commissioner, the commissioner (appeal) and the Tribunal and directed refund of the supervision charges paid by the appellant. [Paras 11, 13]

Refund of the supervision charges paid by the appellant was directed to be made within eight weeks.

Interest on refund / notional interest to balance equities - self-assessment and mistaken payment - The appellant is entitled to interest on the refunded amount at a notional rate of 3% per annum from date of deposit till date of payment. - HELD THAT: - Although the supervision charges were not chargeable by law after the Board's circular, the payments were made under a mistaken notion of law. The court balanced equities by awarding notional interest rather than penal interest, observing that the department cannot be held completely blameworthy for the collection. Consequently, interest at 3% per annum was awarded on the refunded amount from the respective dates of deposit until payment. [Paras 12, 13]

Interest at 3% per annum to be paid on the refunded amount from date of deposit to date of payment.

Final Conclusion: The appeals succeed: the collections of merchant overtime / supervision charges must be refunded to the appellant (sums deposited for February to March, 2003 and April to July, 2003), and the refunded amounts shall carry interest at 3% per annum from the dates of deposit until payment; impugned orders are set aside.

Effect of amounts realised in auction on the original defaulter's liability - forfeiture under Section 49(3) of the Kerala Revenue Recovery Act - recovery proceedings under the Revenue Recovery Act - application of amnesty scheme and credit for amounts already realised

Effect of amounts realised in auction on the original defaulter's liability - forfeiture under Section 49(3) of the Kerala Revenue Recovery Act - application of amnesty scheme and credit for amounts already realised - Whether the amount forfeited to the Government pursuant to an unsuccessful auction conducted for realisation of the petitioner's tax dues can be allowed to reduce the petitioner's liability and be taken into account while processing his application under the amnesty scheme. - HELD THAT: - The auction steps undertaken by the respondents were for the purpose of realising the petitioner's tax arrears; therefore amounts realised in that procedure must be treated as realisation towards the petitioner's liability. Although the auction did not culminate in a completed sale, the sum paid by the identified bidder (and subsequently forfeited to the Government on his default) constitutes a portion of the sale consideration obtained by the State through measures aimed at recovering the petitioner's dues. Consequently, that forfeited amount enures to the purpose of reducing the petitioner's outstanding liability. The petitioner's amnesty application (Ext.P5) duly reflected the forfeited amount as already realised, and in view of the foregoing legal conclusion the application is to be treated as valid. The competent authority is directed to grant credit for the forfeited amount when computing the balance payable under the amnesty scheme and to communicate the amount payable to the petitioner within the timeframe fixed by the Court. [Paras 4]

The forfeited auction amount shall be credited against the petitioner's liability and the amnesty application (Ext.P5) is to be processed accordingly; the authority must compute the balance payable under the amnesty scheme and intimate the petitioner within two weeks of receipt of the judgment.

Final Conclusion: Writ petition allowed: the forfeited amount arising from the auction conducted for recovery of the petitioner's VAT dues must be credited against his liability and the amnesty application shall be processed accordingly, with the authority directed to compute and communicate the balance payable within two weeks.

Bail jurisdiction and factors to be considered - presumption of innocence - NDPS Act Section 37 bar on bail in cases involving commercial quantity - admissibility of voluntary statement under Section 67 of the NDPS Act - prima facie involvement and membership of a drug syndicate as basis for denial of bail

NDPS Act Section 37 bar on bail in cases involving commercial quantity - bail jurisdiction and factors to be considered - Whether the petitioner should be released on bail despite allegations of involvement in trafficking of a commercial quantity of contraband - HELD THAT: - The Court applied the well settled principle that bail jurisdiction requires consideration of multiple cumulative factors including nature and gravity of the offence, nature of evidence, likelihood of tampering with prosecution evidence and of fleeing from justice. In matters under the NDPS Act where commercial quantity is involved, Section 37 imposes additional limitations: if the Public Prosecutor opposes bail the court must be satisfied that there are reasonable grounds for believing the accused is not guilty and that he is not likely to commit an offence while on bail. The record disclosed seizure of 24.5 kg of Pseudoephedrine and a charge sheet indicating the petitioner's role in a drug syndicate. Applying the statutory test and weighing the factors collectively, the Court found no reasonable ground to believe the petitioner was not guilty nor that he would not commit an offence if released, and therefore bail could not be granted. [Paras 11, 12]

Bail is refused as the requirements of Section 37 and the cumulative bail factors are not satisfied.

Admissibility of voluntary statement under Section 67 of the NDPS Act - prima facie involvement and membership of a drug syndicate as basis for denial of bail - Whether the petitioner is prima facie implicated on the basis of the investigation, including voluntary statements and phone records - HELD THAT: - The petitioner and the co accused tendered voluntary statements under Section 67 of the NDPS Act. The petitioner's statement admitted arranging the travel and directing collection of the bag containing Pseudoephedrine, and the co accused's statement implicated the petitioner in the operation. Examination of mobile phones revealed communications between the petitioner and other accused persons, which the Court observed as prima facie indicia of membership of a drug syndicate and involvement in trafficking. The Court treated the voluntary statements as admissible in evidence and relied on these investigative materials to conclude that a prima facie case against the petitioner exists. [Paras 10, 11]

The petitioner is prima facie implicated on the basis of admissible voluntary statements and phone records, supporting refusal of bail.

Final Conclusion: The bail application is dismissed; the Court declines to grant bail because the statutory conditions under Section 37 of the NDPS Act and the cumulative factors relevant to bail are not satisfied, while reserving any opinion on the merits of the trial.

Presumption of service by registered post - Section 27 of the General Clauses Act - reasonable period for deemed service (up to thirty days) - offence under Section 138 of the Negotiable Instruments Act - prima facie satisfaction for issuance of process under Section 203 Cr.P.C. - remand for fresh hearing

Presumption of service by registered post - Section 27 of the General Clauses Act - reasonable period for deemed service (up to thirty days) - Whether the complaint under Section 138 N.I. Act was time barred having regard to the presumption of service of the statutory notice sent by registered post. - HELD THAT: - The High Court held that the legal presumption of service of a notice sent by registered post is governed by Section 27 of the General Clauses Act and the authorities of the Supreme Court which recognise that service may be presumed to occur within a reasonable time and, at best, up to thirty days from dispatch. Applying that principle to the facts, the notice sent on 18.12.2017 was to be deemed served by 17.01.2018 and the fifteen day period for payment thereafter expired thereafter; the complaint filed on 15.02.2018 therefore fell within the permissible period. The trial Judge's contrary presumption that service had occurred within 24-48 hours (and consequent conclusion that the complaint was time barred) was held to be contrary to the binding authorities and Section 27. [Paras 10]

The complaint was not time barred; the trial Court erred in presuming earlier service and rejecting the complaint on limitation grounds.

Offence under Section 138 of the Negotiable Instruments Act - prima facie satisfaction for issuance of process under Section 203 Cr.P.C. - remand for fresh hearing - Whether, on the material placed under Section 200/202 Cr.P.C., a prima facie case under Section 138 N.I. Act was made out and what remedial course should follow. - HELD THAT: - Having held that the notice could be deemed served within thirty days and that the complaint was not time barred, the Court examined the statements and documentary evidence (affidavit under Section 200, payment notice, registered post receipt, cheque and dishonour memo) and concluded that a prima facie case under Section 138 was made out. In view of the trial Court's mis application of law in dismissing the complaint under Section 203 Cr.P.C., the proper course was to set aside the impugned order and remit the matter to the trial Court for hearing and fresh adjudication in accordance with law. [Paras 6, 10, 12]

Impugned order dismissing complaint under Section 203 Cr.P.C. is set aside; file remanded to trial Court for fresh hearing and disposal.

Final Conclusion: Revision allowed; impugned order dated 7.2.2020 dismissing the complaint under Section 138 N.I. Act as time barred is set aside and the matter is remitted to the trial Court for hearing afresh in accordance with law.

Quashing of private criminal complaint under Section 482 Cr.P.C. - Maintainability of complaint alleging forged financial instrument - Requirement of production of dishonoured instrument at cognizance stage - Effect of alleged payment and collection of instrument on continuance of complaint - Abuse of process of law - Right of person disowning signature to prosecute alleged payee

Quashing of private criminal complaint under Section 482 Cr.P.C. - Abuse of process of law - Whether the private complaint alleging forgery and dishonour of a withdrawal slip/cheque is to be quashed under Section 482 Cr.P.C. on the facts pleaded. - HELD THAT: - On a prima facie reading of the complaint and annexures, the Court found that the complainant had made serious allegations of fraud and forgery and had placed some material before the trial court. There was no showing that continuation of the prosecution would amount to an abuse of the process of law or occasion grave injustice to the petitioner. In these circumstances the High Court declined to exercise its inherent power under Section 482 Cr.P.C. to quash the complaint and left the factual contentions to be examined by the trial court. [Paras 14]

Criminal petition under Section 482 Cr.P.C. dismissed; complaint not quashed at this stage.

Requirement of production of dishonoured instrument at cognizance stage - Quashing of private criminal complaint under Section 482 Cr.P.C. - Whether the learned Magistrate ought to have declined cognizance because the complainant did not produce the alleged dishonoured cheque along with the complaint. - HELD THAT: - The Court held that in the absence of material showing that the complainant had paid the cheque amount to the accused and taken the instrument back, it could not be expected that the complainant must produce the alleged cheque along with the complaint at the cognizance stage. The mere non-production of the instrument at this stage did not render the Magistrate's taking of cognizance impermissible. [Paras 11]

Non-production of the alleged cheque at the complaint stage did not warrant quashing of the complaint or denial of cognizance.

Effect of alleged payment and collection of instrument on continuance of complaint - Whether the respondent's failure to initiate a case under Section 138 N.I. Act and the petitioner's contention that the cheque amount had been paid back to the complainant establish that the complaint must be quashed. - HELD THAT: - The Court rejected the petitioner's contention that non-initiation of proceedings under Section 138 of the Negotiable Instruments Act or the petitioner's assertion that the cheque amount had been paid to them conclusively establishes that the complaint is unsustainable. Having regard to the pleadings and annexures, the Court observed that such contentions could be defences raised by the accused and that prima facie material supported the complainant's case; these factual disputes were to be resolved by the trial court. [Paras 12]

Allegation of payment and the absence of a Section 138 proceeding do not, by themselves, justify quashing the complaint.

Right of person disowning signature to prosecute alleged payee - Maintainability of complaint alleging forged financial instrument - Whether a person who denies issuance of the cheque and disowns the signature can nevertheless prosecute the alleged payee by filing a private complaint. - HELD THAT: - The Court held that where the payee has issued a legal notice alleging dishonour and the alleged drawer disowns the instrument and his signature, the drawer has the right to prosecute the alleged payee for forgery and related offences. The bank's statement that the cheque was not issued to the complainant does not preclude the complainant from initiating criminal proceedings; rather, the denial is part of the controversy to be tried. [Paras 13]

A person disowning the cheque and signature is entitled to prosecute the alleged payee; such a defence does not render the complaint non-maintainable.

Final Conclusion: On the pleadings and annexures, and absent any prima facie indicia of abuse of process or manifest injustice, the High Court declined to quash the private complaint; the criminal petition is dismissed and the trial court may proceed to examine the factual disputes.

Vicarious liability of company directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments in complaint to fasten individual criminal liability - effect of insolvency moratorium and appointment of Interim Resolution Professional under the Insolvency and Bankruptcy Code on prosecution and compounding - primary liability of drawer company for dishonour of cheque issued on its behalf

Vicarious liability of company directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments in complaint to fasten individual criminal liability - primary liability of drawer company for dishonour of cheque issued on its behalf - Whether the complaint and summoning order could be sustained against the petitioner in his individual capacity as a director where the complaint lacks specific averments that he was in charge of and responsible for conduct of the company's business. - HELD THAT: - The Court found that the impugned complaint contains no specific averment that the petitioner, as a director, was in charge of and responsible for the conduct of the accused company's business. Reliance was placed on the principle that merely being described as a director is not sufficient to attract vicarious criminal liability under the Act; a complaint must specifically aver the factual nexus envisaged by Section 141. Applying these principles to the averments in paras 3-5 of the complaint and the material on record, the Court concluded that continuation of prosecution against the petitioner individually is not sustainable and is bad in law. [Paras 4, 5, 8, 10]

Complaint and summoning order set aside insofar as they relate to the petitioner personally; prosecution may continue against the company.

Effect of insolvency moratorium and appointment of Interim Resolution Professional under the Insolvency and Bankruptcy Code on prosecution and compounding - primary liability of drawer company for dishonour of cheque issued on its behalf - Whether insolvency proceedings against the corporate debtor, leading to suspension of directors and vesting of management in an Interim Resolution Professional, preclude continuation of prosecution against a suspended director and affect the right to compound the offence. - HELD THAT: - The Court noted that after initiation and admission of insolvency proceedings the existing management, including the petitioner, stood suspended and the Interim Resolution Professional assumed control. Under the IBC framework the IRP is mandated to protect and preserve corporate assets and creditors' claims are to be dealt with through the Committee of Creditors and the resolution process. Given those consequences, the Court held that (a) the option to compound a cheque-bounce offence is not available to suspended directors and (b) the primary liability for cheques issued on behalf of the company rests with the drawer company. In the circumstances, it would be unfair and contrary to the IBC scheme to impose individual criminal liability on a suspended director; accordingly the complaint against the petitioner was quashed while proceedings against the company may continue. [Paras 12, 13, 14, 15, 16]

Further prosecution qua the petitioner is barred by the effect of insolvency proceedings and suspension of directors; claims and recovery shall proceed against the company through statutory insolvency processes.

Final Conclusion: The High Court set aside the criminal complaint and the summoning order insofar as they pertain to the petitioner in his individual capacity as a director, holding that the complaint failed to aver responsibility required to fasten vicarious liability and that insolvency proceedings and appointment of an Interim Resolution Professional precluded imposing individual liability; the complaint proceedings shall continue against the accused company in accordance with law.