TaxTMI Updates e-Newsletter
Dec 03,2020

Best judgment assessment under Section 62 - assessment under Section 74 of the CGST Act - survival of earlier assessment orders - statutory appeal to the first appellate authority

Best judgment assessment under Section 62 - assessment under Section 74 of the CGST Act - survival of earlier assessment orders - Whether the assessment orders Exts.P2 to P4 passed under Section 74 operate as the governing assessment orders and extinguish the earlier best judgment assessment orders Exts.P5 to P18 and their summaries Exts.P19 to P32. - HELD THAT: - The Court found on the record that Exts.P5 to P18 were best judgment assessment orders completed under Section 62 for various months between April 2018 and May 2019, and that summaries of those orders were served as Exts.P19 to P32. As there was no payment pursuant to those best judgment assessments, proceedings under Section 74 were initiated and concluded resulting in Exts.P2 to P4. In these circumstances the Court held that the subsequent assessments under Section 74 (Exts.P2 to P4) are the assessment orders which govern the petitioners' liability for the periods in question and that the earlier best judgment orders and their summaries do not survive against the petitioners in view of the later Section 74 assessments. The petitioners' challenge to Exts.P2 to P4 was dismissed and they were relegated to the statutory remedy of filing appeals before the first appellate authority.

Challenge to Exts.P2 to P4 dismissed; Exts.P2 to P4 govern and Exts.P5 to P18 and Exts.P19 to P32 do not survive; petitioners relegated to file statutory appeals before the first appellate authority.

Final Conclusion: The writ petition is dismissed; the assessment orders Exts.P2 to P4 under Section 74 govern for the periods April 2018 to May 2019, earlier best judgment orders and their summaries do not survive, and the petitioners may pursue statutory appeals before the first appellate authority.

Offence under Section 132 of the CGST Act - bail in economic offences - prejudice to fair investigation - arrest under Section 41 Cr.P.C. - recovery of incriminating material

Bail in economic offences - prejudice to fair investigation - offence under Section 132 of the CGST Act - arrest under Section 41 Cr.P.C. - recovery of incriminating material - Whether the accused is entitled to grant of bail in respect of alleged GST fraud involving issuance of fake invoices and alleged loss to the exchequer. - HELD THAT: - The accused is alleged to have floated or been associated with bogus firms and to have issued invoices without actual movement of goods, transactions which the investigation attributes to a loss of Rs. 13.08 crores to the Government exchequer. Investigation is at an initial stage and investigative material recovered includes fake transport-bilty books and a diary containing cash entries in the accused's handwriting. The offence falls within the category of economic offences and, having regard to the stage of investigation and the nature of the alleged offences, the Court held that release on bail would risk prejudicing a fair and effective investigation. The Court also observed that the applicant's contention that he received no direct benefit is not decisive at this stage of an ongoing investigation. Authorities relied upon by the accused were held not to be squarely applicable to the facts of the present case.

Bail application dismissed on grounds that the offence is economic in nature, investigation is at an initial stage and granting bail would prejudice the fair investigation.

Final Conclusion: The application for bail is dismissed; the matter is posted to the date fixed.

Cancellation of registration for non-filing of returns - Revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 - Requirement to furnish returns and pay tax/interest/penalty before filing revocation - Circular clarification on revocation procedure (CBIC Circular No.99/18/2019-GST) - Appeal rendered infructuous by subsequent revocation of registration

Cancellation of registration for non-filing of returns - Revocation of cancellation of registration under Rule 23 of the CGST Rules, 2017 - Requirement to furnish returns and pay tax/interest/penalty before filing revocation - Whether the appeal against cancellation and rejection of revocation application could be entertained after the jurisdictional authority had subsequently revoked the cancellation and made the registration active. - HELD THAT: - The adjudicating authority cancelled the appellant's registration on account of continuous non-filing of returns for six months and rejected the application for revocation for failure to furnish a reply to the show cause notice within the stipulated time. Rule 23 of the CGST Rules, 2017 and CBIC Circular No.99/18/2019-GST require that where cancellation arises from failure to furnish returns, returns (and payment of tax/interest/penalty/late fee) due up to the date of cancellation must be furnished before seeking revocation, and returns for the period from cancellation to revocation are to be furnished within thirty days of revocation. The Commissioner (Appeals) noted these legal requirements and the factual position that the jurisdictional authority, subsequent to the impugned order, had itself revoked the cancellation and the GSTIN stands active. Given the subsequent revocation by the proper officer, the appellate forum found that there was no live controversy to be adjudicated on the merits of the earlier cancellation/rejection and that the appeal had become infructuous. [Paras 6, 8, 9]

Appeal rejected as infructuous because the jurisdictional authority has since revoked the cancellation and the registration is active; procedural requirements under Rule 23 and CBIC circular noted.

Final Conclusion: The appeal against cancellation and rejection of revocation is dismissed as infructuous because the proper officer has subsequently revoked the cancellation and the GST registration is active; the appellant remains bound by the procedural requirements of Rule 23 and the relevant CBIC circular.

Disallowance under section 14A read with Rule 8D - application of Rule 8D(2)(ii) - interest disallowance - application of Rule 8D(2)(iii) - allocation of common administrative expenses - inapplicability of Rule 8D adjustments to computation of book profit under section 115JB - estimation of eligible profits and scope of section 80IE read with section 80IA(10) - burden on Assessing Officer to demonstrate 'arrangement' under section 80IA(10) - requirement of arm's length determination for specified domestic transactions under Chapter X (sections 92/92C/92BA) - powers of CIT(A) under section 250(4) to call for and examine material suo motu - allowability of education cess as deductible business expenditure under section 37 - characterisation of state/central industrial incentives (excise refund; sales tax/VAT subsidy) as capital receipts - exclusion of capital subsidies from book profit under section 115JB

Disallowance under section 14A read with Rule 8D - application of Rule 8D(2)(ii) - interest disallowance - application of Rule 8D(2)(iii) - allocation of common administrative expenses - inapplicability of Rule 8D adjustments to computation of book profit under section 115JB - Validity of additions made u/s 14A read with Rule 8D and their application in computation of book profit u/s 115JB for AY 2014-15. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the interest-linked disallowance computed under Rule 8D(2)(ii) on the factual finding that the assessee had sufficient interest free funds (share capital and free reserves) to cover the investments yielding exempt income; relying on and following judicial precedents the Tribunal accepted the presumption that investments were made from such funds and deleted the interest disallowance. The Tribunal also sustained the CIT(A)'s restriction of disallowance under Rule 8D(2)(iii) for common administrative expenses to the amount of exempt dividend actually earned, following authority that such disallowance cannot exceed exempt income. Separately, the Tribunal held that clause (f) of Explanation 1 to section 115JB does not permit importation of the computation mechanism of Rule 8D (or sub sections (2) and (3) of section 14A) into the book profit computation; being a deeming provision clause (f) must be strictly construed and only the scope of section 14A(1) can be read into it. Following Special Bench and coordinate bench decisions, the Tribunal confirmed deletion of the total addition made under section 14A read with Rule 8D while computing book profit under section 115JB. [Paras 5, 6, 7, 8, 9]

Confirmed deletion of disallowances under section 14A read with Rule 8D (interest component and administrative expenses limited to exempt dividend) and held Rule 8D mechanism not importable into clause (f) of Explanation 1 to section 115JB.

Estimation of eligible profits and scope of section 80IE read with section 80IA(10) - burden on Assessing Officer to demonstrate 'arrangement' under section 80IA(10) - requirement of arm's length determination for specified domestic transactions under Chapter X (sections 92/92C/92BA) - powers of CIT(A) under section 250(4) to call for and examine material suo motu - Validity of AO's estimation and disallowance of part of deduction claimed under section 80IE for AY 2014-15. - HELD THAT: - The Tribunal sustained the CIT(A)'s deletion of the AO's estimated disallowance under section 80IE. The AO had compared profitability of the eligible Assam unit with diverse other activities of the company and, without adducing cogent evidence of any 'arrangement' with related parties or of specified domestic transactions not at arm's length, proceeded to scale down eligible profits on mere surmise. The Tribunal explained that section 80IA(10) (incorporated into section 80IE) is a deeming provision which can be invoked only after the AO establishes that transactions were so arranged with connected persons as to produce more than ordinary profits; mere higher profitability is insufficient. Further, estimation of arm's length profits requires identification of specified domestic transactions and application of methods under section 92C/Rule 10B; the AO had not followed that Chapter X mechanism nor rejected books under section 145(3). The Tribunal also upheld the CIT(A)'s exercise of suo motu enquiries under section 250(4) and found that material gathered on appeal supported the assessee (including TPO findings and comparative cost/subsidy factors), so remand to AO was unnecessary and would be abuse of process. [Paras 23, 25, 26, 27, 30]

AO's estimation and partial disallowance under section 80IE set aside; deletion of addition upheld and remand to AO refused.

Allowability of education cess as deductible business expenditure under section 37 - Whether education cess incurred by the assessee is deductible while computing total income. - HELD THAT: - The Tribunal, following decisions of coordinate benches and relevant High Courts, held that education cess (and similar cesses) debited in the profit and loss account is allowable as business expenditure under section 37(1) and is not liable to be disallowed under section 40(a)(ii). The Tribunal directed the AO to allow the education cess claimed by the assessee. [Paras 36]

Allowed the claim for deduction of education cess as business expense.

Characterisation of state/central industrial incentives (excise refund; sales tax/VAT subsidy) as capital receipts - exclusion of capital subsidies from book profit under section 115JB - Whether excise duty refund and sales tax/VAT incentive received for setting up new industrial undertakings are capital receipts and whether they must be excluded from book profit under section 115JB. - HELD THAT: - Relying on the Supreme Court's 'purpose test' and subsequent High Court and Tribunal precedents, the Tribunal held that the subsidies/incentives granted under State/Central industrial promotion schemes (refund of excise duty for a new unit in Assam and sales tax refund under West Bengal Incentive Scheme) are capital in nature because their object is to promote industrial development and employment. As capital receipts, they do not constitute income and therefore should be excluded from the computation of book profit under section 115JB; inclusion would tax receipts not in the nature of income and defeat the objective of arriving at the real working result. The Tribunal also accepted that the claim could be raised on appeal and exercised the Tribunal's powers to admit the legal plea and direct exclusion of these receipts from book profit. [Paras 45, 46, 47, 48, 51]

Directed exclusion of the excise refund and sales tax/VAT incentive from book profit for computation under section 115JB, holding them to be capital receipts.

Final Conclusion: Revenue's appeal dismissed in full. Additions made under section 14A read with Rule 8D were deleted (interest component and administrative expenses limited to exempt dividend) and Rule 8D computations held not importable into clause (f) of Explanation 1 to section 115JB; AO's estimation and disallowance under section 80IE were set aside for lack of evidence of any arrangement or non arm's length specified domestic transactions and for failure to follow Chapter X / section 145(3) procedure; assessee's cross objections allowed to permit deduction of education cess as business expenditure and to exclude the excise refund and sales tax/VAT incentives (capital receipts) from book profit under section 115JB.

Jurisdiction under Section 153C of the Income Tax Act - Requirement of document-wise correlation between seized material and assessment years - Incriminating material necessary to assume jurisdiction under Section 153C - Denial of exemption under Section 11 - Appreciation of factual findings by the CIT(A) and Tribunal

Jurisdiction under Section 153C of the Income Tax Act - Requirement of document-wise correlation between seized material and assessment years - Incriminating material necessary to assume jurisdiction under Section 153C - Whether the Assessing Officer could assume jurisdiction under Section 153C in the absence of document-wise correlation of seized material with the assessment years. - HELD THAT: - The Court accepted the factual findings of the lower authorities that the seized materials did not establish the requisite nexus, document-wise, with the assessment years under consideration. Applying the principle in CIT-III, Pune v. Sinhgad Technical Education Society, the Court held that assumption of jurisdiction under Section 153C is dependent on discovery of incriminating material relating to the assessee and correlated to the relevant assessment years; absent such correlation the jurisdiction cannot be validly assumed. The CIT(A) had examined the factual material and the Tribunal referred to and adopted those findings; on that basis the Court found no substantial question of law to be considered further. [Paras 8, 9, 10]

Assuming jurisdiction under Section 153C was not justified in these cases for lack of document-wise correlation and incriminating material; the Tribunal's conclusion in this regard is confirmed.

Appreciation of factual findings by the CIT(A) and Tribunal - Denial of exemption under Section 11 - Whether the denial of exemption under Section 11 and the additions made could be sustained in view of the factual findings regarding absence of nexus, unexplained deposits being explained, and no admission by the supplier. - HELD THAT: - The Court noted that the CIT(A) performed an elaborate factual inquiry and the Tribunal correctly relied upon those findings. Both authorities concluded there was no material proving that withdrawals by the alleged supplier were returned to the managing trustee, that purchases were inflated by the trust, or that deposits in the trustee's account remained unexplained. The Tribunal took note of the Settlement Commission record and the absence there of supporting evidence of cash being returned to the hospital. On these factual bases the CIT(A) allowed the appeals and the Tribunal dismissed the Revenue's appeals; the High Court found these conclusions tenable and that no substantial question of law arose for re-examination. [Paras 8, 9, 10, 11]

The Tribunal was right in holding that the Assessing Officer was not justified in denying exemption under Section 11 or sustaining the additions in the absence of evidential nexus; the findings of the CIT(A) and Tribunal are upheld.

Final Conclusion: Revenue's appeals are dismissed; the common order of the Income Tax Appellate Tribunal confirming the CIT(A)'s allowance of the assessee's appeals is affirmed, and no substantial question of law is held to arise.

Dismissal for non-appearance - dispose of the appeal on merits - Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 - setting aside ex-parte order on sufficient cause - restoration of appeal - ratio in S. Chenniappa Mudaliar

Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 - dispose of the appeal on merits - dismissal for non-appearance - ratio in S. Chenniappa Mudaliar - setting aside ex-parte order on sufficient cause - Whether the Income Tax Appellate Tribunal was justified in dismissing the appeals in limine for non-appearance instead of deciding them on merits under Rule 24. - HELD THAT: - Rule 24 mandates that where an appellant does not appear when an appeal is called on for hearing the Tribunal may dispose of the appeal on merits after hearing the respondent, and, if the appellant subsequently satisfies the Tribunal of sufficient cause for non-appearance, the ex parte order must be set aside and the appeal restored. The Supreme Court's decision in S. Chenniappa Mudaliar requires the Tribunal to examine the correctness of points decided by departmental authorities and decide appeals on questions of fact and law rather than by dismissing them for default. Applying the language of Rule 24 and the ratio in S. Chenniappa Mudaliar, the High Court held that the ITAT's order dismissing the appeals in limine on the ground that the assessee was not interested in prosecuting the appeals was unsustainable; the Tribunal was duty bound to decide the appeals on merits after hearing the Revenue and could not simply dismiss them for non appearance. The Court therefore quashed the impugned orders, restored the appeals for adjudication on merits and kept the parties' substantive contentions open. [Paras 7, 8, 9, 10]

Impugned ITAT order dismissing appeals in limine for non appearance is set aside; appeals restored for adjudication on merits in accordance with Rule 24 and the ratio in S. Chenniappa Mudaliar.

Final Conclusion: Income Tax Appeals allowed; ITAT order dated 1-2-2013 set aside and the appeals for assessment years 2002-03, 2003-04 and 2004-05 restored for fresh adjudication on merits, parties to appear before the Tribunal and bear their own costs.

Computation of deduction under section 10A and 10AA - Set-off of losses between 10A units and non-10A units - Disallowance under section 14A for expenditure relating to exempt income - Precedential effect of Supreme Court decisions on tribunal and High Court orders - Appellate interference with findings of fact - perversity test

Computation of deduction under section 10A and 10AA - Precedential effect of Supreme Court decisions on tribunal and High Court orders - Validity of the Tribunal's setting aside of the Assessing Officer's computation of deduction under section 10A/10AA. - HELD THAT: - The Court held that the first substantial question has been answered by the Supreme Court in COMMISSIONER OF INCOME TAX CENTRAL-III NEW DELHI VS. HCL TECHNOLOGIES LTD., and therefore the Tribunal's decision setting aside the Assessing Officer's computation of section 10A deduction must be upheld. The High Court accepted the binding precedential effect of the Supreme Court decision and declined to disturb the Tribunal's order on this legal point. [Paras 3]

First substantial question answered against the revenue and in favour of the assessee.

Set-off of losses between 10A units and non-10A units - Precedential effect of Supreme Court decisions on tribunal and High Court orders - Validity of the Tribunal's reliance on the decision in CIT v. Yokogawa for setting aside the Assessing Officer's findings on set-off of losses of 10A units and non-10A units. - HELD THAT: - The Court observed that the second substantial question is covered by the Supreme Court's decision in CIT v. Yokogawa India Ltd. and therefore the Tribunal was justified in relying on that decision. In view of the binding authority of the Supreme Court, the High Court answered this substantial question against the revenue and in favour of the assessee. [Paras 4]

Second substantial question answered against the revenue and in favour of the assessee.

Disallowance under section 14A for expenditure relating to exempt income - Appellate interference with findings of fact - perversity test - Whether the Tribunal rightly set aside the Assessing Officer's disallowance under section 14A in respect of expenditure allegedly in relation to exempt income. - HELD THAT: - The Tribunal recorded a factual finding (see its paragraph No.29) that the assessee did not incur expenditure directly or indirectly to earn the dividend income; on that factual basis it allowed the claim and set aside the section 14A disallowance. The High Court emphasised that this is a finding of fact based on meticulous appreciation of evidence and that the revenue had not shown the finding to be perverse. Under Section 260-A the High Court will not interfere with such factual findings unless perversity is demonstrated; consequently the Court declined to disturb the Tribunal's conclusion. [Paras 5]

Third substantial question answered against the revenue and in favour of the assessee.

Final Conclusion: All three substantial questions of law are answered against the revenue and in favour of the assessee; the revenue's appeal under Section 260-A is dismissed.

Maintenance of separate accounts for STP units - entitlement to deduction under Section 10A for payments to subcontractors who have claimed 10A - treatment of expenses attributable to delivery of software outside India for computation of deduction under Section 10A - deduction for bad debts written off in the assessee's accounts - requirement to establish irrecoverability after amendment of Section 36(1)(vii) - remand for specific finding on whether bad debts were written off as irrecoverable in accounts

Maintenance of separate accounts for STP units - Maintenance of separate accounts for STP units and non STP units is directory and not mandatory in the circumstances of this case. - HELD THAT: - The Court, following its reasons given in the companion judgment in I.T.A.No.286/2010 for Assessment Year 2000-01, answered the substantial question relating to the requirement of maintaining separate accounts in favour of the assessee and against the revenue. The tribunal's and appellate authority's approach that the requirement was directory and not mandatory was accepted and the substantial questions Nos.1 to 3 were answered accordingly. [Paras 3]

Substantial question concerning maintenance of separate accounts for STP and non STP units answered in favour of the assessee and against the revenue.

Entitlement to deduction under Section 10A for payments to subcontractors who have claimed 10A - treatment of expenses attributable to delivery of software outside India for computation of deduction under Section 10A - Payments to subcontractors who separately exported and obtained foreign inward remittance certificates and claimed Section 10A deduction, and expenses like freight, telephone and insurance attributable to delivery outside India, were to be treated as the tribunal and appellate authority held for computing deduction under Section 10A. - HELD THAT: - By adopting the findings recorded in the earlier judgment in I.T.A.No.286/2010, the Court sustained the tribunal's conclusions on these aspects and answered the substantial questions Nos.2 and 3 against the revenue. The appellate conclusions that such subcontractor payments and specified expenses should be treated as allowed for computing deduction under Section 10A were accepted. [Paras 3]

Substantial questions on entitlement to double deduction for payments to subcontractors and on reduction of specified expenses from total turnover for Section 10A were answered in favour of the assessee.

Deduction for bad debts written off in the assessee's accounts - requirement to establish irrecoverability after amendment of Section 36(1)(vii) - remand for specific finding on whether bad debts were written off as irrecoverable in accounts - The tribunal's blanket allowance of bad debts was quashed to the extent that it did not record a specific finding whether the debts were written off as irrecoverable in the assessee's books; the matter was remitted to the tribunal for fresh decision after such finding is recorded. - HELD THAT: - Although the tribunal relied on higher judicial pronouncements holding that, after the 1989 amendment, deduction may follow once debts are written off in accounts, the High Court observed that the tribunal did not record any specific finding that the assessee had in fact written off the debts as irrecoverable in its books. Consequently, the Court quashed the tribunal's finding on bad debts and remitted the matter for the tribunal to determine-after examining the assessee's accounts and evidence-whether the debts were written off as irrecoverable, and then to decide the claim in accordance with law and precedent such as T.R.F. Ltd. [Paras 4]

Order on bad debts set aside and remitted to the tribunal to decide afresh after recording a specific finding whether the debts were written off as irrecoverable in the assessee's books.

Final Conclusion: The appeal is disposed of: substantial questions Nos.1-3 answered against the revenue and in favour of the assessee; substantial questions Nos.4 and 5 answered by quashing the tribunal's finding on bad debts and remitting the matter to the tribunal to decide afresh after recording whether the debts were written off as irrecoverable in the assessee's accounts.

Admission of additional evidence under Rule 46A - principles of natural justice - CBDT Circular limiting Departmental appeals by tax effect - addition under section 69 (unexplained cash/investment) - share application money - burden under section 68 - confession recorded under section 132(4) and admissibility of surrender - remand report and enquiry by Assessing Officer

CBDT Circular limiting Departmental appeals by tax effect - Revenue appeals for specified assessment years are not maintainable where tax effect is below threshold under the CBDT Circular and are dismissed. - HELD THAT: - The Tribunal examined the Revenue's appeals for A.Y. 2013-14 and A.Y. 2015-16 and found that the tax effect in those appeals was less than the monetary threshold prescribed by CBDT Circular No. 17/2019 dated 08.08.2019. On that basis the appeals were held not maintainable and dismissed. The Tribunal applied the Circular as the determinative threshold for admitting departmental appeals in these matters. [Paras 3, 4, 5]

Revenue appeals ITA No. 6085/DEL/2019 (A.Y. 2013-14) and ITA No. 4880/DEL/2019 (A.Y. 2015-16) dismissed as not maintainable under the CBDT Circular.

Admission of additional evidence under Rule 46A - principles of natural justice - remand report and enquiry by Assessing Officer - Admission of additional evidence by the CIT(A) under Rule 46A complied with principles of natural justice where the appellate authority transmitted the evidence to the AO, called for remand/enquiry report and framed order after considering the report. - HELD THAT: - The Revenue contended that the CIT(A) admitted additional evidence without following Rule 46A and thereby violated natural justice. The Tribunal found that the assessee had filed an application under Rule 46A, the CIT(A) admitted the petition and forwarded the written submissions and supporting evidence to the Assessing Officer, called for and received an enquiry/remand report, and then framed the appellate order. Given that the AO had sufficient opportunity to consider the additional evidence and to submit a report, the Tribunal held that procedural requirements and principles of natural justice were satisfied and rejected the Revenue's grievance. [Paras 6, 7, 8, 9, 10]

Revenue's challenge to the CIT(A)'s admission of additional evidence dismissed for non-merit; CIT(A) complied with Rule 46A and natural justice.

Addition under section 69 (unexplained cash/investment) - Addition of Rs. 43,39,80,220 as unexplained cash receipts (pertaining to F.Y. 2008-09) deleted because the receipts were found recorded in the regular books of account. - HELD THAT: - During search proceedings an incriminating loose-sheet showed alleged cash receipts; AO treated those figures as unaccounted cash and made addition. On appeal the CIT(A) examined audited financial statements for F.Y. 2008-09 and found that gross receipts and related entries, including 'Other Charges', when read together, matched the figures in the seized document and were recorded in the books. The AO's later contention that books/evidence were fabricated was not supported; the Tribunal observed the financials for F.Y. 2008-09 had been filed much earlier and could not have been doctored post-search. Given that the receipts were reflected in regular books, section 69 did not apply and the CIT(A)'s deletion was upheld. [Paras 16, 17, 18, 21, 22]

Ground No. 1 (deletion of addition of Rs. 43,39,80,220) upheld; addition deleted.

Addition under section 69 (unexplained investment) - Addition of Rs. 7,08,23,250 as unexplained investment in land deleted because the investment was duly recorded in the regular books of account and AO's allegation of post-search fabrication was not supported. - HELD THAT: - Seized handwritten notes suggested payments for land purchase. AO added the amount as unexplained investment. The CIT(A) examined ledger accounts and party ledgers and was not persuaded by the AO's suggestion that the books had been prepared after the search. The Tribunal accepted the CIT(A)'s factual examination that entries for purchase of specified Khasra nos. were reflected in the books. The common practice of seizure/copying of books during search made it implausible that the assessee could fabricate entries after seizure. On these facts section 69 did not apply and the addition was rightly deleted. [Paras 26, 29, 30, 33, 34]

Ground No. 2 (deletion of addition of Rs. 7,08,23,250) upheld; addition deleted.

Block period relevance - addition under section 69 (unexplained cash) - Addition of Rs. 7,02,38,672 on account of alleged cash payments deleted because the transactions related to earlier financial years (2005-06/2006-07) outside the block period and were thus not exigible in the present search assessments. - HELD THAT: - The seized document was alleged to show cash payments for land in Haridwar. The CIT(A) examined affidavits, transfer deeds and related documents showing transfer and consideration paid in 2005-06 and bank agreements dated 2008. The CIT(A) concluded that the transactions pertained to F.Y. 2005-06/2006-07, which fall outside the block period applicable to the present search assessments, and deleted the addition. The Tribunal found no factual error in the CIT(A)'s determination of the relevant years and sustained the deletion. [Paras 40, 41, 42, 43, 46]

Ground No. 3 (deletion of addition of Rs. 7,02,38,672) upheld; addition deleted.

Addition under section 69 (unexplained cash - maintenance charges) - Addition of Rs. 1,54,09,440 as unexplained cash/outside-books maintenance expenditure deleted where seized documents represented expected maintenance receipts and corresponding entries were found in books of the assessee and a related company. - HELD THAT: - Seized notings indicated maintenance-related figures. AO treated them as unaccounted expenditure and made an addition. The CIT(A) examined the tripartite agreement, accounting by Greenwell Mark Buildwell Pvt. Ltd and the appellant, and remand report; actual receipts and expenditures were recorded in the books of both entities and were reconciled. The seized document reflected expected receipts which were accounted for. As entries were in the regular books, section 69 did not apply and the CIT(A)'s deletion was sustained. [Paras 56, 57, 58, 59, 61]

Ground No. 1 in ITA No. 4881/D/2019 dismissed; addition of Rs. 1,54,09,440 deleted.

Dumb document - addition based on seized jottings - Addition of Rs. 89 lakhs held unsustainable where the seized entry was a 'dumb document' (jottings) not indicating 'commission' or any clear taxable receipt. - HELD THAT: - The seized diary entry contained figures but no explicit reference to 'commission' or any definitive source. The CIT(A) treated the document as a dumb document from which no logical inference of taxable receipt could be drawn and deleted the addition. The Tribunal found no factual contradiction in that conclusion and agreed that the AO could not reasonably characterize the jottings as commission without corroborative material. [Paras 64, 69, 70, 71, 72]

Ground No. 2 in ITA No. 4881/D/2019 dismissed; addition of Rs. 89 lakhs deleted.

Parallel sets of accounts - trial balance discrepancies - Addition of Rs. 27,97,84,156 on account of differences in two trial balances rejected where one trial balance was incomplete/missing pages and differences were reconciled to the CIT(A)'s satisfaction; no evidence of maintenance of two parallel sets of books. - HELD THAT: - AO treated discrepancy between two seized trial balances as proof of parallel sets of accounts and made a large addition. The CIT(A) examined both trial balances, found one incomplete with missing pages, and accepted reconciliations of closing entries. The assessment order itself did not record seizure of two distinct complete sets of books. The Tribunal held that trial balance differences alone, absent clear proof of parallel books or which trial balance produced the final accounts, could not justify the addition, and therefore upheld the deletion. [Paras 74, 75, 76, 77, 78]

Ground No. 3 in ITA No. 4881/D/2019 dismissed; addition of Rs. 27,97,84,156 deleted.

Addition under section 69 (cash payments for land) - Addition of Rs. 1.75 crores added as unexplained cash payments for land deleted where cash payments were recorded in the regular books, registered deeds and reconciled with cashbook and bank statements. - HELD THAT: - Seized ledger copies suggested payments by cheque and cash to five persons totaling Rs. 4 crores including Rs. 1.75 crores in cash. AO added the cash portion as unexplained. The CIT(A) verified registered deeds, ledger accounts, cashbook and bank statements and found the total consideration, including cash, reflected in audited books and tallied with records. Given that the payments were recorded in regular books and supported by registry entries, section 69 did not apply and the addition was rightly deleted. [Paras 85, 86, 87, 88, 90]

ITA No. 6084/DEL/2019 dismissed; addition of Rs. 1.75 crores deleted.

Share application money - burden under section 68 - Additions made under section 68 in respect of share application money in A.Ys 2012-13, 2013-14 and 2014-15 and A.Y. 2015-16 were deleted where the assessee discharged the threefold onus of identity, genuineness and capacity of investor entities (including by showing loans repaid and re applied, bank transfers, net worth and compliance by investor companies). - HELD THAT: - For A.Y. 2012-13, the Tribunal found that the investor companies complied with summons and provided source documents; one investor was assessed in the same circle and details showed capacity, so addition of Rs. 21.13 crores was deleted. For A.Y. 2013-14 and A.Y. 2014-15, the Tribunal accepted evidence that amounts earlier appearing as loans were repaid and the same funds were routed as share application money (with RTGS traces and matching entries), and directors of investor companies were common or related, negating stranger status; consequently additions aggregating Rs. 13.46 crores and Rs. 54.90 lakhs were deleted. For A.Y. 2015-16, surrender-based additions (Rs. 10 crores and enhancement of Rs. 15 crores) premised on statements under section 132(4) were also deleted: the Tribunal held there was no corroborative incriminating material, the surrender appeared under compulsion, and CBDT/instructional guidance requires corroboration by evidence rather than blind acceptance of confessions. [Paras 123, 125, 130, 131, 133]

Assessee's appeals allowed: additions under section 68 in ITA Nos. 4687/DEL/2019, 4688/DEL/2019, 4311/DEL/2019 and surrender/enhancement in ITA No. 4312/DEL/2019 deleted.

Final Conclusion: The Tribunal dismissed the Revenue's appeals (specified ITA numbers) largely for non maintainability under the CBDT Circular or on merits where additions based on seized documents were found recorded in regular books, beyond block period, reconciled or otherwise unsupported. The assessee's appeals contesting additions under section 68 and surrender-based additions were allowed after the Tribunal found the assessee had discharged the statutory onus and that confessions/surrenders were uncorroborated. Orders were pronounced on 27.11.2020.

Transfer Pricing - Most Appropriate Method - Comparable Uncontrolled Price (CUP) - Transactional Net Margin Method (TNMM) - Internal comparables versus external comparables - Back-to-back transactions - Arm's length price - Contemporaneous data for benchmarking - Adjustments for start-up, under utilisation, working capital and risk differentials

Comparable Uncontrolled Price (CUP) - Back-to-back transactions - Internal comparables versus external comparables - Arm's length price - Admissibility and correctness of CUP as the most appropriate method for purchases from Associated Enterprises - HELD THAT: - The Tribunal examined the factual materials showing that the Associated Enterprise purchased the raw material from independent suppliers and supplied the same raw material to the assessee on a back to back basis without addition of costs, expenses or profit. The lower authorities rejected the assessee's CUP analysis primarily on the ground that internal/back to back invoices do not constitute a valid CUP and that the taxpayer had not furnished supporting documents; the TPO/AO did not, however, bring independent evidence to contradict the invoices and samples placed on record. The Bench relied on authoritative guidance preferring internal comparables where available and on coordinate decisions recognizing internal CUP in comparable circumstances. Given the invoices and purchase documents in the appeal record and absence of contrary material from the revenue, the Tribunal found no reason to reject the CUP for purchases and concluded that the purchase transactions were at arm's length. [Paras 8]

Set aside the adjustment in respect of purchases and direct the Assessing Officer to adopt CUP as the most appropriate method for purchases.

Comparable Uncontrolled Price (CUP) - Internal comparables versus external comparables - Contemporaneous data for benchmarking - Arm's length price - Aggregation of internal transactions - Admissibility and correctness of CUP as the most appropriate method for sales to Associated Enterprises - HELD THAT: - The assessee produced contemporaneous internal data showing sales to AEs and to third parties and demonstrated that average sale prices to AEs were equal to or higher than those to non AEs. The TPO rejected the assessee's internal report as an internal document not fit for CUP and proceeded to apply TNMM using earlier year comparables; however, the revenue produced no evidence contradicting the contemporaneous sales break up and prices furnished by the assessee. The Tribunal applied principles favouring internal comparables where the taxpayer supplies relevant data and found that the AO/TPO/DRP had not given valid reasons for ignoring the contemporaneous internal data or for selecting alternative comparables. Reliance was placed on coordinate decisions where aggregation and internal comparison were accepted to determine ALP. On the facts, the Tribunal held CUP to be the most appropriate method for sales. [Paras 9]

Direct the Assessing Officer to adopt CUP as the most appropriate method for sales and delete the transfer pricing additions made in respect of sale transactions.

Transactional Net Margin Method (TNMM) - Contemporaneous data for benchmarking - Adjustments for start-up, under utilisation, working capital and risk differentials - Validity of TPO/DRP's adoption of TNMM, reliance on earlier year data and refusal to grant adjustments claimed by the assessee - HELD THAT: - The TPO adopted TNMM and utilised comparable data drawn from earlier years, and the DRP sustained that approach while rejecting the assessee's requests for adjustments (start up losses, under utilisation, working capital, risk). The Tribunal held that where the assessee had placed contemporaneous internal transactional data and supporting documents before the TPO/DRP, the revenue bore the burden to demonstrate why those should be discarded. The authorities below failed to provide proper reasoning for rejecting contemporaneous internal data and for denying the adjustments sought; moreover, having accepted CUP on the facts, it was unnecessary to adjudicate further on alternative grounds. The Tribunal therefore found the approach of the TPO/DRP in adopting TNMM and relying upon earlier year data to be incorrect in the circumstances of this case. [Paras 8, 9]

Hold that the adoption of TNMM and reliance on earlier year data by the TPO/DRP was not justified on the facts, and decline to sustain the adjustments computed thereunder.

Final Conclusion: For Assessment Year 2011-12 the Tribunal allowed the appeal of the assessee, set aside the transfer pricing adjustments made by the AO/TPO/DRP, and directed the Assessing Officer to adopt the Comparable Uncontrolled Price method as the most appropriate method for both purchases and sales, deleting the additions; other grounds were not adjudicated as unnecessary in view of this conclusion.

Addition to income from undisclosed sources - explanation of cash deposits by source and application of funds - credit for opening cash balance and bank withdrawals - assessment officer's duty to consider cash flow and available sources - weight of confirmation evidence for receipt from third party

Addition to income from undisclosed sources - explanation of cash deposits by source and application of funds - credit for opening cash balance and bank withdrawals - assessment officer's duty to consider cash flow and available sources - weight of confirmation evidence for receipt from third party - Whether the relief granted by the Commissioner (Appeals) by setting aside part of the addition and allowing Rs. 2,00,28,550 as explained by opening cash balance and bank withdrawals was justified and whether the balance addition of Rs. 27,42,000 should be sustained. - HELD THAT: - The Tribunal upheld the CIT(A)'s approach that the Assessing Officer erred in taxing the deposits without properly considering the available sources and the application of funds. The CIT(A) accepted the assessee's evidence of an opening cash balance shown in wealth tax returns and a confirmation from the third party's daughter regarding earlier advances, and found these were not disproved by the AO. The CIT(A) further examined bank statements and withdrawals, computed total cash available (including opening balance and withdrawals) to be approximately Rs. 2 crores, and concluded that the cash deposits of Rs. 1,76,28,550 were explained. Although detailed tracing of each expenditure was not possible, the CIT(A) allowed relief to the extent of the explained amount and sustained only the remaining unexplained sum. The Tribunal agreed that the AO should have prepared a cash-flow analysis and given credit for opening balance and withdrawals rather than ignoring them; mismatch in dates between withdrawals and deposits did not warrant rejection of all withdrawals. On these findings the Tribunal found no reason to interfere with the CIT(A)'s deletion of Rs. 2,00,28,550 and confirmation of the balance addition. [Paras 6, 7]

The relief of Rs. 2,00,28,550 allowed by the CIT(A) is upheld and the remaining addition of Rs. 27,42,000 is sustained; the revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeal against the CIT(A)'s order for A.Y. 2012-13, upholding deletion of Rs. 2,00,28,550 by crediting opening cash balance and bank withdrawals and sustaining the residual addition, and the assessee's cross-objections became infructuous.

Revision under section 263 - Application of mind - Difference of opinion - Estimation of income by assessment - Write-off of sundry creditors as business income - Taxability of interest on business deposits

Revision under section 263 - Application of mind - Difference of opinion - Estimation of income by assessment - Pr.CIT's revision under section 263 was impermissible as it amounted to substitution of the Assessing Officer's view and was based on difference of opinion. - HELD THAT: - The Tribunal found that the assessment under section 143(3) was completed after directions under section 144A and that the AO had called for and considered details relating to the disputed items. The AO verified bills and vouchers, formed a conscious view to reject the books for certain unverifiable vouchers and estimated income at 0.5% of turnover. The AO's consideration of the replies and exercise of judgment in making an estimation demonstrates application of mind. The Pr.CIT's revision sought to substitute his own view where the AO had already applied his mind; mere difference of opinion does not justify exercise of powers under section 263. Reliance placed on the decisions of the jurisdictional High Court and coordinate benches establishes that revision cannot be invoked merely because the Commissioner disagrees with the AU's conclusions. For these reasons the Tribunal held the revision to be impermissible and set aside the Pr.CIT's order. [Paras 6, 7]

Order under section 263 set aside; appeal allowed on this ground.

Write-off of sundry creditors as business income - Taxability of interest on business deposits - Application of mind - The amounts representing write off of paddy creditors and interest on bank deposits were considered by the AO as part of business income and did not require separate addition. - HELD THAT: - The assessee had furnished explanations that the large sum recorded in profit and loss arose from write off of paddy creditors (claimed as income in accounts) and that interest on SBI deposits related to deposits held as margin money for bank guarantees and formed part of business operations. The AO specifically called for details of these items in the assessment proceedings and, after examining the material, took a conscious decision not to make separate additions and to proceed by estimating income. The Tribunal noted precedent holding that sundry creditors written off can constitute business receipts and, absent evidence to invoke section 41(1), no separate taxation was warranted. Accordingly the Tribunal endorsed the AO's treatment as business income and refused the Pr.CIT's contention that these were unexamined "other income" requiring revision. [Paras 6]

No separate addition warranted in respect of the write off and interest; AO's treatment upheld.

Final Conclusion: The Tribunal held that the Assessing Officer had applied his mind and taken a conscious decision in the assessment; the Pr.CIT's revision under section 263 was therefore founded on mere difference of opinion and was set aside, with the appeal allowed and no separate addition directed in respect of the disputed write off and interest.

Re-opening of assessment under section 147 - failure to fully and truly disclose all material facts - original assessment completed under section 143(3) - mere change of opinion - objections to notice under section 148 must be disposed before completion of reassessment

Re-opening of assessment under section 147 - original assessment completed under section 143(3) - failure to fully and truly disclose all material facts - mere change of opinion - Validity of re-opening assessment for AY 1999-2000 where original assessment was completed under section 143(3) and reassessment was initiated after four years - HELD THAT: - The proviso to section 147 applies where the original assessment was completed under section 143(3) and the notice for re-opening was issued after the four-year period. Re-opening after four years is valid only if there was failure on the part of the assessee to fully and truly disclose all material facts. The Assessing Officer's reasons show that the issue in dispute - deduction under section 36(1)(viia) for rural advances - was specifically enquired into during the original assessment, the assessee furnished detailed replies and the Assessing Officer disallowed the claimed deductions in the original assessment order. The Assessing Officer's contemporaneous observations indicate he was conscious that certain branches might not qualify as rural, and he applied his mind to that issue. Where the original assessment resulted in a complete disallowance on the same issue, no income was shown to have escaped assessment; consequently, re-opening on that same issue amounts to a mere change of opinion and is impermissible. Further, the assessee had raised objections to the section 148 notice; those objections - including the relevance of a later census report - were not disposed of independently before completion of the reassessment, contrary to settled law that objections must be decided prior to completing reassessment. On these combined grounds the initiation and the resultant assessment under section 147/148 were held invalid and quashed. [Paras 12, 13, 14, 15, 16]

Re-opening of assessment and the reassessment order for AY 1999-2000 quashed; grounds of appeal allowed.

Re-opening of assessment under section 147 - application of same legal principle to another assessment year - Application of the same legal principle to invalidate re-opening of assessment for AY 2000-01 - HELD THAT: - Facts and legal questions in relation to AY 2000-01 were materially identical to those in AY 1999-2000. Although the reassessment involved a different quantum and a single branch, the determinative legal conclusions - that the original assessment under section 143(3) had considered the issue, that no escapement of income was shown, and that objections to the section 148 notice were not disposed before reassessment - apply equally. The Tribunal therefore followed the reasoning adopted in the earlier part of the judgment and quashed the reassessment order for AY 2000-01 as well. [Paras 18, 19]

Re-opening of assessment and the reassessment order for AY 2000-01 quashed; grounds of appeal allowed.

Final Conclusion: Both appeals are allowed and the reassessment orders passed under section 147/148 for assessment years 1999-2000 and 2000-01 are quashed on the grounds that the proviso to section 147 was not satisfied, the reassessment was a change of opinion on matters examined in the original section 143(3) assessments, and objections to the notices under section 148 were not disposed of before completion of reassessment.

Penalty under section 271D and 271E - Provisions of section 269SS and 269T - Receipt and repayment of loans by book/journal entries - Reasonable cause under section 273B - Precedential effect of judicial decisions

Receipt and repayment of loans by book/journal entries - Provisions of section 269SS and 269T - Whether availing and repayment of loan by book/journal entries falls within the ambit of the prohibition in section 269SS and the restriction in section 269T - HELD THAT: - The Tribunal recorded that the Assessing Officer and the Commissioner (Appeals) treated the transactions as effected by book entries. It noted the decision of the Jurisdictional High Court in Triumph International Finance India Ltd. holding that receipt and repayment by book/journal entries would attract sections 269SS and 269T. The Tribunal did not repudiate that legal position; rather it recognised that such judicial pronouncement treats book/journal entries as falling within the statutory prohibitions. However, the Tribunal emphasised that classification alone does not automatically sustain penalty where there is a contemporaneous reasonable cause arising from contrary precedent and practice prior to the High Court ruling. [Paras 3, 4]

Book/journal entry transactions have been judicially held to attract sections 269SS and 269T, but that legal classification does not by itself determine the question of penalty in the facts of this case.

Penalty under section 271D and 271E - Reasonable cause under section 273B - Precedential effect of judicial decisions - Whether penalty under section 271D and 271E can be imposed for the assessee's book-entry loans in Assessment Year 2007-08 - HELD THAT: - The Tribunal examined the factual material on record, including the assessee's written submissions and supporting documents (ledger, bank statements, cheque details) showing that, except for small amounts below the statutory threshold, loans exceeding the threshold were availed and repaid through account payee cheques. The Commissioner (Appeals) expressed only a doubt regarding timing discrepancies between ledger entries and bank statements, but made no substantive enquiry. Critically, the Tribunal relied on the Jurisdictional High Court's subsequent decision in Ajitnath High Tech Builders Pvt. Ltd., which held that, because prior to the High Court's decision in Triumph (12 June 2012) there existed Tribunal decisions taking the opposite view, non compliance with sections 269SS/269T before that date could constitute a reasonable cause under section 273B. Since the transactions in the present case occurred prior to 12 June 2012, the Tribunal held that the assessee had a reasonable cause for non compliance and that imposition of penalty under sections 271D and 271E was therefore not justified. The Tribunal further observed that the assessee's claim could not be rejected on mere suspicion without proper enquiry. [Paras 3, 4]

Penalty imposed under sections 271D and 271E is deleted as non compliance prior to 12 June 2012 constituted reasonable cause under section 273B; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for Assessment Year 2007-08 and deleted the penalties imposed under sections 271D and 271E, holding that non compliance with sections 269SS/269T prior to 12 June 2012 amounted to a reasonable cause under section 273B and therefore did not justify imposition of penalty.

Defective show cause notice under section 274 read with section 271(1)(c) - penalty under section 271(1)(c) invalid for failure to specify whether concealment or furnishing of inaccurate particulars - requirement to strike out inapplicable charge in a penalty notice - conflicting High Court precedents - doctrine of following view favourable to assessee

Defective show cause notice under section 274 read with section 271(1)(c) - penalty under section 271(1)(c) invalid for failure to specify whether concealment or furnishing of inaccurate particulars - requirement to strike out inapplicable charge in a penalty notice - conflicting High Court precedents - doctrine of following view favourable to assessee - Validity of penalty proceedings where the show cause notice issued under section 274 read with section 271(1)(c) included both alternative charges without striking out the inapplicable charge. - HELD THAT: - The Tribunal examined the show cause notices for AY 2011 12 and AY 2012 13 and found that each notice recited both possible faults under section 271(1)(c) - concealment of particulars of income and furnishing inaccurate particulars of income - without striking out the inapplicable alternative. The Tribunal held that such a notice is defective because it does not specify the charge on which the penalty is proposed and manifests a patent non application of mind by the Assessing Officer. The Tribunal relied on the decisions of the Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory and CIT v. SSA's Emerald Meadows, as well as subsequent orders including the dismissal of the Special Leave Petition by the Supreme Court and the coordinate Calcutta/ITAT decisions, to conclude that a penalty based on a defective show cause notice cannot be sustained. The Tribunal considered contrary authority (including decisions following the Bombay and Patna High Courts) but preferred the view favourable to the assessee where two conflicting High Court views exist, observing that the line of reasoning in the Karnataka decisions directly addresses the conformity of the show cause notice with the statutory requirement to indicate the specific charge. Applying that legal principle to the facts of the present cases, the Tribunal found no specification of the charge in the notices and held the consequent penalty proceedings invalid. [Paras 4, 5, 7]

Penalty levied under section 271(1)(c) quashed and penalty proceedings cancelled for both AY 2011 12 and AY 2012 13.

Final Conclusion: The appeals are allowed: the show cause notices for AY 2011 12 and AY 2012 13 were defective for failing to specify or strike out the inapplicable charge under section 271(1)(c), and the penalties imposed and confirmed are deleted.

Registration under section 12AA - genuineness of activities of a charitable trust - corpus donations as capital receipts outside the scope of income - corpus contributions taken to balance sheet not reflected in Income & Expenditure Account - limited scope of enquiry by the CIT(Exemptions) while considering registration

Corpus donations as capital receipts outside the scope of income - corpus contributions taken to balance sheet not reflected in Income & Expenditure Account - Whether the funds received and shown as corpus contributions could be treated as taxable income requiring disclosure in the Income & Expenditure Account and return of income. - HELD THAT: - The Tribunal accepted the assessee's contention that the amounts received for acquisition of fixed assets were corpus-specific voluntary contributions of a capital nature and therefore not exigible to tax. The receipts were directly taken to the Balance Sheet by the trust and, being capital in character, were not required to be reflected as income in the Income & Expenditure Account or in the return of income. The Tribunal placed reliance on the coordinate Bench decision in ITO (Exemptions) Vs. Serum Institute of India, which treated corpus-specific contributions as outside the definition of income for these purposes. The Revenue's objection that no evidence was filed was answered by noting that details of corpus donations and their utilisation for purchase of assets had been furnished to the CIT(Exemptions) by the assessee. [Paras 5]

The receipts in question are corpus contributions of a capital nature and are not taxable income, and their non-reflection in the Income & Expenditure Account did not render them exigible to tax.

Registration under section 12AA - genuineness of activities of a charitable trust - limited scope of enquiry by the CIT(Exemptions) while considering registration - Whether the CIT(Exemptions) was justified in rejecting the trust's application for registration under section 12AA on the ground that correct income was not disclosed and therefore the activities were not genuine. - HELD THAT: - On remand the Tribunal had specified that the CIT(Exemptions)'s enquiry while deciding registration under section 12AA was limited to examining the objects of the trust and the genuineness of its activities. The CIT(Exemptions) did not dispute the charitable character of the trust's objects but doubted genuineness because the corpus receipts were not offered to tax or shown in the Income & Expenditure Account. Having found that the receipts were capital in nature and that details and utilisation of corpus donations had been furnished, the Tribunal held there was no justifiable reason to doubt genuineness of activities. Consequently the basis for denial of registration was invalid. [Paras 5]

The CIT(Exemptions) erred in rejecting registration under section 12AA on the stated ground; the trust's activities were genuine and registration must be granted.

Final Conclusion: The Tribunal allowed the appeal, set aside the order of the CIT(Exemptions) rejecting registration, and directed that registration under section 12AA be granted to the assessee trust.

Revision under Section 263 - erroneous and prejudicial to the interest of the revenue - rejection of books and estimation of income by applying net profit rate - verification of bank deposits for determining turnover - remand for fresh speaking assessment and verification of sources

Revision under Section 263 - erroneous and prejudicial to the interest of the revenue - rejection of books and estimation of income by applying net profit rate - Validity of the revisional order under Section 263 setting aside the assessment passed under section 143(3)/147 - HELD THAT: - The Tribunal upheld the Commissioner's exercise of revisional jurisdiction under Section 263. The Commissioner demonstrated that the assessment order was based on incorrect and incomplete facts because the AO, after rejecting the assessee's books under section 145(3), accepted the turnover figure equal to the amount recorded in the reasons for reopening without examining and verifying the total deposits shown in the bank statement. The AO applied a net profit rate of 2.75% on sales of Rs. 1,04,97,340/- despite bank statements reflecting total deposits of Rs. 1,89,51,996/-, including cheque receipts which the assessee treated as sales. The Tribunal found this amounted to a factual error and lack of minimum enquiry, rendering the assessment order erroneous and prejudicial to revenue; the settled principle that the Commissioner cannot disturb an AO's order merely for taking a possible view did not apply where there was a demonstrable factual shortcoming in the AO's inquiry. [Paras 5]

The revisional order under Section 263 was valid; ground challenging its invocation is rejected.

Verification of bank deposits for determining turnover - remand for fresh speaking assessment and verification of sources - Whether the matter should be remitted to the AO for fresh consideration and specific verification of sources of bank deposits - HELD THAT: - The Tribunal recognised that the Commissioner did not direct an automatic inclusion of all bank deposits as turnover but set aside the assessment and directed the AO to conduct proper enquiries. The assessee's assertion that deposits represented earlier withdrawals or opening cash balance could not be accepted without documentary verification because the assessee had not maintained accounts as required and had not got them audited. The Tribunal approved the Commissioner's direction that the AO should verify the availability and source of cash deposits, examine cheque receipts asserted to be sales, and pass a speaking assessment order after affording the assessee opportunity of being heard. [Paras 8]

The assessment is remitted to the AO to make fresh, speaking assessment after proper enquiries into the bank deposits and their sources.

Final Conclusion: The Tribunal affirms the Commissioner's invocation of Section 263 as the assessment was found to be based on incorrect and incomplete facts; the order is set aside and the matter is remitted to the AO to carry out detailed verification of bank deposits and to pass a fresh speaking assessment order after affording the assessee an opportunity of being heard. Appeal is partly allowed for statistical purposes.

Registration under section 12AA - Rule 17A of the Income Tax Rules - power of the Competent Authority to verify original documents - genuineness of activities of a charitable institution - remand for verification and fresh consideration

Rule 17A of the Income Tax Rules - power of the Competent Authority to verify original documents - Whether Rule 17A precludes the Competent Authority from calling for and verifying original documents produced with an application for registration under section 12AA. - HELD THAT: - The Tribunal held that Rule 17A prescribes the procedure and mode of submitting an application in Form No.10A accompanied by self attested copies, but it does not restrict the Competent Authority from seeking production of original documents for verification. The Competent Authority remains entitled to ask for originals to satisfy itself about the objects of the applicant and the genuineness of its activities. Consequently, the assessee's contention that filing self attested copies alone discharges the obligation was rejected.

Rule 17A does not bar the Competent Authority from calling for original documents for verification when processing an application for registration under section 12AA.

Registration under section 12AA - genuineness of activities of a charitable institution - remand for verification and fresh consideration - Whether the rejection of the assessee's application for registration under section 12AA for non production of original documents and incomplete details of staff/salary was valid, and what remedy should follow. - HELD THAT: - The Tribunal recorded that the ld. Commissioner (Exemptions) had directed the assessee to produce original documents and furnish details regarding staff, salary payments and PF/ESI deductions to verify the genuineness of its educational activities. The assessee failed to produce the originals and did not furnish complete information as requisitioned. The Tribunal observed that the assessment under section 143(3) does not supplant the Competent Authority's duty to verify and be satisfied about charitable objects and genuineness of activities at the registration stage. While upholding the Competent Authority's power to seek such verification, the Tribunal, exercising its discretion in the interest of justice, set aside the rejection and remanded the matter to the ld. Commissioner (Exemptions) for fresh consideration after verification of original documents and the requisite details, directing that the assessee be given a proper opportunity of being heard.

Impugned rejection set aside; matter remanded to the ld. Commissioner (Exemptions) to allow production and verification of original documents and requisite details, and to pass a fresh order after giving the assessee an opportunity of hearing.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the Commissioner (Exemptions)'s order rejecting registration under section 12AA and remanding the matter for fresh verification of original documents and requisite details regarding staff and payments, with a direction to afford the assessee a proper opportunity of being heard.

Custody of warehoused goods - control of proper officer over warehoused goods - warehouse keeper's right to recover rent and sell goods - apportionment of sale proceeds under section 150 - cum-duty (backward calculation) method for duty on auctioned goods - contemporanea expositio as aid to statutory interpretation

Custody of warehoused goods - warehouse keeper's right to recover rent and sell goods - The warehouse keeper is the custodian of warehoused goods under Chapter IX of the Customs Act, 1962. - HELD THAT: - A conjoint reading of sections 62 and 63 shows that warehoused goods are under the control of the proper officer while the warehouse keeper has statutory entitlements to rent and, on default, to select and sell portions of the goods with the permission of the proper officer. Absent custody vested in the warehouse keeper, the statutory right to receive rent and to select and sell goods when charges are unpaid would be illusory. The post-enactment insertion of section 73A(1) (clarifying that licensed warehouse-keepers remain in custody of warehoused goods until clearance or transfer) corroborates this position. For these reasons Question (a) is answered in favour of the respondent. [Paras 13]

Warehouse keeper has custody of warehoused goods.

Apportionment of sale proceeds under section 150 - sale under section 72 falls within section 150 - Proceeds of an auction sale conducted under section 72 are to be appropriated as provided in section 150 of the Customs Act, 1962. - HELD THAT: - Section 150(1) applies to any sale under the Act of goods not being confiscated goods and prescribes the order of application of sale proceeds in section 150(2). A sale under section 72 (exercise of power by the proper officer) is not a sale of confiscated goods and therefore falls within the scope of section 150. Consequently proceeds from a section 72 sale are to be applied in the order mandated by section 150(2). [Paras 14]

Sale under section 72 is subject to appropriation in accordance with section 150.

Cum-duty (backward calculation) method for duty on auctioned goods - apportionment of sale proceeds under section 150 - Customs duty on auctioned (unclaimed/uncleared) goods must be determined by treating sale proceeds as the cum-duty price and calculating duty by backward (working back) method. - HELD THAT: - The Supreme Court's decision in Union of India v. Associated Container Terminal Ltd., together with the Customs manual and CBEC Circular dated November 28, 2001, establish that sale proceeds of unclaimed/uncleared goods are to be treated as the cum-duty price (value + duty) and duty must be calculated by working backwards on the price realised, without allowing deductions for sale expenses before calculating duty. After determination of duty in that manner, the sale proceeds are to be appropriated as per section 150(2). In the present case the department did not apply the cum-duty method and the Tribunal's contrary finding was upheld. [Paras 16]

Duty on auctioned goods is to be computed by backward calculation treating sale proceeds as cum-duty price.

Apportionment of sale proceeds under section 150 - treatment of interest on customs duty vis-a -vis warehouse charges - contemporanea expositio as aid to statutory interpretation - Interest on customs duty does not have precedence over the warehouse keeper's claims for rent and charges under section 150. - HELD THAT: - Section 150(2) prescribes a specific order of priority: (a) sale expenses, (b) freight/other carrier charges, (c) duty on the goods, (d) charges due to the person having custody of the goods (warehouse keeper), and (e) other amounts due to the Central Government. The text of section 150 does not specifically accord precedence to interest on customs duty over the warehouse keeper's dues. The Board's contemporaneous clarification dated May 22, 1990 treats warehousing interest as distinct from customs duty and holds it cannot take precedence over warehouse keeper's claims; this administrative exposition is consistent with the statutory language and may be relied upon. Accordingly, interest on customs duty ranks after the warehouse keeper's dues (i.e., cannot override the priority accorded under section 150(2)(d)). [Paras 18, 21]

Interest on customs duty does not outrank warehouse rent and charges under section 150.

Final Conclusion: All substantial questions of law raised were answered in favour of the respondent: the warehouse keeper is in custody of warehoused goods; sales under section 72 are governed by section 150; duty on auctioned unclaimed/uncleared goods is to be computed by treating sale proceeds as cum-duty price and working backwards; and interest on customs duty does not have precedence over warehouse keeper's rent and charges. The appeal is dismissed.

Scheme of Amalgamation - dispensing with convening of meetings - consent affidavits - no secured creditors - no meeting required - appointed date - service on statutory authorities

Scheme of Amalgamation - dispensing with convening of meetings - consent affidavits - Dispensing with convening and holding of the meeting of equity shareholders of the Transferee Company. - HELD THAT: - The Tribunal examined the affidavits of consent placed on record and the certificate from the Chartered Accountant certifying the list of equity shareholders showing 100% of voting share in favour. On that basis, and having regard to the requirements for convening meetings under the Scheme of Amalgamation, the Tribunal found it appropriate to dispense with the convening and holding of a meeting of the equity shareholders of the Transferee Company.

Meeting of equity shareholders of the Transferee Company is dispensed with in view of filed consent affidavits constituting 100% voting share.

No secured creditors - no meeting required - Whether a meeting of secured creditors of the Transferee Company was required to be convened. - HELD THAT: - The record, including the certificate from the Chartered Accountant, established that the Transferee Company has no secured creditors. In the absence of any secured creditors, the statutory requirement to convene a meeting of secured creditors does not arise and no further action in that regard was necessary.

No meeting of secured creditors required as there are no secured creditors.

Dispensing with convening of meetings - consent affidavits - Dispensing with convening and holding of the meeting of unsecured creditors of the Transferee Company. - HELD THAT: - The Tribunal considered the certificate from the Chartered Accountant and the affidavit filed by the lone unsecured creditor, which represented 100% of the total value of debt and gave consent to the Scheme. Given the unanimous consent evidenced on the record, the Tribunal concluded that convening a meeting of unsecured creditors was unnecessary and dispensed with holding such a meeting.

Meeting of unsecured creditors is dispensed with in view of the consent affidavit representing 100% of the debt.

Service on statutory authorities - appointed date - Directions regarding service of notice to statutory authorities and related disclosure requirements. - HELD THAT: - The Tribunal directed that notice of the application be served on specified statutory authorities including the Regional Director, Registrar of Companies, Official Liquidator and Income Tax Department, and any other sectoral regulators as required. The Tribunal specifically required that notices to the Income Tax Authorities disclose sufficient details such as PAN, ward numbers and assessing officers so that timely and proper replies may be filed. The appointed date in the Scheme was recorded as 23rd August 2019 subject to directions of the Tribunal.

Application to be notified to the listed statutory authorities with the required disclosure; appointed date recorded subject to Tribunal's directions.

Final Conclusion: The application for sanction of the Scheme of Amalgamation is allowed on the terms recorded: meetings of the Transferee Company's equity shareholders and unsecured creditor are dispensed with on account of consent affidavits; no meeting of secured creditors is required; and the specified statutory authorities are to be served with notice including the prescribed disclosures.

Restoration of company name to Register of Companies - striking off and dissolution - failure to file financial statements and annual returns - notice in Form STK-1, STK-5 and STK-7 - opportunity to rectify defaults - power under section 252(3) of the Companies Act, 2013

Striking off and dissolution - notice in Form STK-1, STK-5 and STK-7 - failure to file financial statements and annual returns - Validity of the Registrar's strike-off procedure and whether restoration is warranted despite defaults in statutory filings. - HELD THAT: - The Tribunal examined the Registrar of Companies' report and records and found that the Registrar had issued the statutory notices (Form STK-1) and published the public notices (STK-5 and STK-7) before striking off and publishing the dissolution. Although the petitioner contended that no notice was issued, the ROC's report recorded the issuance of the notices and the absence of any representation against the proposed strike-off. The Tribunal considered the petitioner's explanation of inadvertent non-filing and reviewed the audited financial statements and other documents filed by the petitioner which demonstrated revenue from operations, current and non-current assets and borrowings. Balancing the procedural compliance by the ROC with the petitioner's showing of continuing business activity and assets, the Tribunal concluded that it would be just and equitable to permit restoration so that the company may rectify its defaults and continue operations. [Paras 10, 11, 12, 13, 14]

The strike-off was acknowledged to have followed notice and publication, but on the material placed before it and in the interest of justice the Tribunal allowed restoration of the company's name so the company may rectify defaults.

Restoration of company name to Register of Companies - opportunity to rectify defaults - power under section 252(3) of the Companies Act, 2013 - Terms and consequences of restoration of the company's name to the Register of Companies. - HELD THAT: - Relying on its discretionary power under section 252(3) of the Companies Act, 2013, the Tribunal directed restoration of the petitioner's name to the Register of Companies subject to specified conditions. The Tribunal imposed a costs direction to be paid online to the Ministry of Corporate Affairs within thirty days of receipt of the order. It mandated that upon restoration the company must file all pending financial statements and annual returns with applicable fees and late fees within thirty days of restoration, failing which the order would stand vacated automatically. The Tribunal further directed that after restoration and compliance with terms, the Registrar shall communicate with bank authorities to facilitate defreezing of the company's accounts. [Paras 15, 16]

Restoration allowed on terms: payment of costs, filing of all pending statutory documents within the stipulated time, automatic vacatur on non-compliance, and Registrar to inform banks to defreeze accounts upon restoration.

Final Conclusion: The petition for restoration of Ensure Insurance Brokers Private Limited's name to the Register of Companies is allowed; restoration is ordered on payment of costs and subject to filing of pending financial statements and annual returns within the stipulated time, failing which the restoration will be vacated, and the ROC is directed to communicate with banks to effect defreezing upon compliance.

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - appointed date - compliance with Regional Director's observations - report of the Official Liquidator - filing with Registrar of Companies (E-Form INC-28) - publication and disclosure to stakeholders - lodging order for adjudication of stamp duty - payment of costs to statutory authorities

Scheme of Amalgamation - sanction under Sections 230 to 232 of the Companies Act, 2013 - Sanction of the Scheme of Amalgamation between the two Transferor Companies and the Transferee Company - HELD THAT: - The Tribunal considered the petitions, the material on record, the absence of any objector and the statutory compliance asserted by the petitioners. The Tribunal recorded that the Scheme appears fair and reasonable, not violative of law and not contrary to public policy. Having accepted the explanations and undertakings furnished and noting that requisite statutory compliances have been fulfilled, the Tribunal made the consolidated Company Scheme Petition absolute in terms of clauses (a) to (c). [Paras 4, 6, 19, 21, 22]

The Scheme of Amalgamation is sanctioned and the Company Scheme Petition is made absolute.

Compliance with Regional Director's observations - undertakings by petitioners - Acceptance of clarifications and undertakings given by the petitioners in respect of the Regional Director's report - HELD THAT: - The Regional Director raised observations regarding accounting entries and compliance with appointment and effective date formalities, approvals by requisite majorities, set-off of fees paid on authorised capital, filing consistency of the scheme, notices to authorities, alteration of objects and related ROC filings, and protection of creditors' interests. The petitioners furnished explanations and undertakings addressing each observation (paras 10-18). The Tribunal accepted those clarifications and undertakings and recorded compliance with the material requirements. [Paras 15, 16, 17, 18, 19]

The Tribunal accepted the petitioners' clarifications and undertakings in respect of the Regional Director's report and treated the observations as addressed.

Report of the Official Liquidator - dissolution of transferor companies - Finding on conduct of affairs of the Transferor Companies and order for dissolution - HELD THAT: - The Official Liquidator reported that the affairs of the Transferor Companies were conducted properly and not prejudicial to shareholders, recommending that the Transferor Companies may be ordered to be dissolved. The Tribunal, having considered the Official Liquidator's report and other material, proceeded to sanction the Scheme which contemplates dissolution of the Transferor Companies consequent to amalgamation. [Paras 20, 22]

The Tribunal recorded the Official Liquidator's favourable report and, consequent to sanctioning the Scheme, ordered dissolution of the Transferor Companies as envisaged by the Scheme.

Appointed date - Fixation of the Appointed Date for the Scheme - HELD THAT: - The petitioners stated that the Appointed Date is the opening hours of business on 1st April, 2019 and the Scheme would be effective from that date. The Tribunal considered the point raised by the Regional Director about the requirement that the scheme indicate an appointed date and accepted the petitioners' assertion. [Paras 11, 28]

The Appointed Date for the Scheme is fixed as 1st April, 2019.

Filing with Registrar of Companies (E-Form INC-28) - publication and disclosure to stakeholders - lodging order for adjudication of stamp duty - payment of costs to statutory authorities - Ancillary directions consequent to sanction: statutory filings, publication, stamp duty adjudication and payment of costs - HELD THAT: - Upon sanctioning the Scheme, the Tribunal directed compliance with consequential procedural steps: filing a copy of the Order and the Scheme with the ROC electronically via E-Form INC-28 and in physical form within 30 days; publication of the approval in the same newspapers previously used and hosting the Order on petitioners' websites for disclosure; lodging a certified copy with the Superintendent of Stamps for adjudication of stamp duty within 60 days; and payment of specified costs to the Regional Director and the Official Liquidator within four weeks. The Tribunal also directed that authorities act on authenticated copies of the Order. [Paras 23, 24, 25, 26, 27]

The petitioners are directed to effect the enumerated filings, publications, lodging for stamp duty adjudication and to pay the costs as ordered.

Final Conclusion: The National Company Law Tribunal, Mumbai Bench, after considering the petitions, the Regional Director's report, the Official Liquidator's report and the petitioners' undertakings, sanctioned the Scheme of Amalgamation, fixed the Appointed Date as 1st April, 2019, accepted the clarifications and undertakings given, ordered dissolution of the Transferor Companies in terms of the Scheme, and directed the petitioners to complete consequential filings, publications, stamp duty lodgement and payment of costs.

Withdrawal of petition pursuant to settlement agreement - Disposal of company petition as withdrawn - Enforcement of settlement terms - Direction to comply with settlement agreement - Arbitration clause in settlement agreement - No order as to costs

Withdrawal of petition pursuant to settlement agreement - Disposal of company petition as withdrawn - Petition disposed of as withdrawn in view of the settlement reached between the parties. - HELD THAT: - The petitioner filed a memo of withdrawal after the parties entered into a written Memorandum of Agreement resolving their disputes and providing for transfer of the petitioner's shares and payment in full and final settlement. The Tribunal recorded that, on receipt of the withdrawal memorandum and having regard to the settlement agreement executed by the parties, nothing further survives for adjudication in TCP/120/KOB/2019 and accordingly disposed of the petition as withdrawn. [Paras 5, 6]

TCP/120/KOB/2019 stands disposed of as withdrawn.

Enforcement of settlement terms - Direction to comply with settlement agreement - Arbitration clause in settlement agreement - No order as to costs - Parties directed to comply with the terms of the settlement agreement; arbitration mechanism preserved; no costs awarded. - HELD THAT: - The Tribunal directed strict compliance with the conditions of the settlement agreement, which sets out the obligations of the parties including surrender and transfer of share certificates, payment in full and final settlement, time for performance, and reference to arbitration for disputes arising under the deed. The Tribunal recorded the terms and left enforcement of those contractual remedies, including arbitration, to the parties, and made no order as to costs. [Paras 5, 6]

Parties must strictly comply with the settlement terms; disputes under the deed to be referred to arbitration as provided; no order as to costs.

Final Conclusion: The Company Petition is dismissed as withdrawn pursuant to the parties' settlement; the parties are directed to perform the settlement terms and to seek arbitration for any disputes under the agreement; no costs are awarded.

Interim ex-parte orders - exercise of interim powers sparingly in extreme urgent matters - balance of convenience and irreparable injury in interim relief - deposit of disgorgement prior to adjudication - power to impound and retain proceeds pending investigation under Section 11(4)(d)

Interim ex-parte orders - exercise of interim powers sparingly in extreme urgent matters - balance of convenience and irreparable injury in interim relief - Whether the Tribunal correctly set aside the ex parte interim order passed by the Whole Time Member on the ground that there was no extreme urgency to justify such an order. - HELD THAT: - The Court accepted the Tribunal's factual conclusion that the investigation into trades dated 2016 had been pending since 2017 and that information was furnished to the investigating team on 28 November 2019. In that factual backdrop the Tribunal was held to be correct in concluding that the Whole Time Member's ex parte interim order, requiring an advance deposit into an escrow, was not justified by any demonstrated extreme urgency. The Court affirmed that SEBI possesses power to pass ex parte interim orders in appropriate cases but such powers must be exercised sparingly and only in matters of demonstrated extreme urgency; consideration of the balance of convenience and irreparable injury is requisite when exercising such interim powers. The Court confined its affirmation to the facts emerging on the record before the Tribunal. [Paras 5, 6]

Tribunal's setting aside of the ex parte interim order was affirmed on the facts; no urgency existed to justify the impugned ex parte measure.

Deposit of disgorgement prior to adjudication - power to impound and retain proceeds pending investigation under Section 11(4)(d) - Whether the Tribunal's broader interpretation that no amount towards disgorgement can be directed to be deposited in advance unless adjudicated should be treated as precedent constraining SEBI's powers. - HELD THAT: - The Court reviewed paragraph 9 of the impugned Tribunal order which stated that disgorgement cannot be directed to be deposited in advance unless adjudicated. The Supreme Court declined to accept that interpretation as a binding precedent. It clarified that the impugned order's statement on the point of law shall not be cited as precedent in other cases and emphasised that orders passed by SEBI must be in conformity with the powers conferred by Section 11(4), including the measure permitting impoundment and retention of proceeds pending investigation. The clarification preserves SEBI's statutory powers while disallowing the Tribunal's categorical proposition as a general legal rule. [Paras 7, 9]

Paragraph 9 of the impugned order shall not be treated as precedent; SEBI's exercise of powers must conform to the statutory framework under Section 11(4).

Final Conclusion: The appeals are disposed of by affirming the Tribunal's factual conclusion that the ex parte interim order was unjustified for want of extreme urgency; concurrently, the Court clarified that the Tribunal's categorical legal observation regarding advance deposit of disgorgement (paragraph 9) is not to be treated as a precedent and that SEBI must act in accordance with its statutory powers under Section 11(4).

Validity and enforceability of exchange circulars/operational parameters - power to withdraw trading facilities and close out under Bye laws 17 and 18 - requirement of prior approval by SEBI/Central Government for operational parameters - binding nature of undertakings by trading and clearing members - continuing obligation to maintain deposits despite withdrawal of trading facility - expulsion for failure to maintain prescribed deposits and continued admission requirements - vesting and realisation of withheld securities upon declaration of defaulter or expulsion (Rule 20(f)) - discretion of Exchange/NSCCL in dealing with withheld securities including registration or sale - duty of care / limited fiduciary obligation of the Exchange in respect of withheld securities

Requirement of prior approval by SEBI/Central Government for operational parameters - validity and enforceability of exchange circulars/operational parameters - Whether prior approval of SEBI/Central Government was essential for enforcing the circular dated 19.05.1997 as an operational parameter. - HELD THAT: - The Court held that operational parameters (including trading limits and related procedural measures) fall within the expansive rule making and operational competence vested in the Exchange by its pre approved Byelaws. Such operational parameters, issued as circulars or communications by the Exchange or the Clearing Corporation and adopted and notified under the Byelaws, assume enforceable character so long as they do not run counter to the 1956 Act or the 1992 Act. The subjection of Regulations/operational parameters to the Acts does not import a requirement of prior approval by the Central Government/SEBI for every operational circular; prior approval is required where the Byelaws or Rules themselves are to be framed or amended under Section 4/4(5) but not for issuance of operational parameters authorised by the Byelaws. The appellant's contention that the circular required separate prior approval was rejected.

Prior approval from SEBI/Central Government was not required for enforcing the subject circular as an operational parameter issued under the Exchange's Byelaws.

Power to withdraw trading facilities and close out under Bye laws 17 and 18 - validity and enforceability of exchange circulars/operational parameters - Whether the circular conflicted with or was ultra vires Clauses 17 and 18 of the Byelaws regarding the manner and timing of closing out. - HELD THAT: - The Court analysed the text and scheme of Clauses 17 and 18 and concluded that Clause 17 deals with closing out on failure of delivery/payment by the due date, whereas Clause 18 is residuary and empowers the relevant authority to prescribe manner, time frame and conditions for closing out in other circumstances. The circular contemplated withdrawal of trading facilities for breach of exposure limits and forthwith closing out to prevent market mischief; that scheme falls within Clause 18 and does not render Clause 18 otiose. Hence the circular did not contravene the Byelaws and furthered the purpose of Clause 18 rather than amending or repugning the Byelaws.

The circular is not in conflict with Clauses 17 and 18; withdrawal of trading facilities and forthwith closing out under the circular are permissible under Clause 18.

Binding nature of undertakings by trading and clearing members - validity and enforceability of exchange circulars/operational parameters - Whether the appellant was legally bound by the circular which allowed withdrawal of trading facility and forthwith closing out. - HELD THAT: - The appellant had given unconditional undertakings to abide by the Rules, Byelaws, Regulations and circulars of both the Exchange and the Clearing Corporation. The Court held that such undertakings, coupled with the fact that the circular was a valid operational measure under the Byelaws, bound the appellant; even absent the undertaking, a valid circular issued under the Byelaws would bind members. Reliance on later SEBI master circulars reinforced that circulars issued under Byelaws are part of the regulatory obligations of brokers.

The appellant was bound by the circular and liable for breach of its obligations thereunder.

Continuing obligation to maintain deposits despite withdrawal of trading facility - expulsion for failure to maintain prescribed deposits and continued admission requirements - Whether the appellant was obligated to maintain the prescribed Interest Free Security Deposit and other deposits despite withdrawal of its trading facilities, and whether failure justified expulsion. - HELD THAT: - The Court distinguished withdrawal of trading facility (a temporary, preventive action) from continued admission obligations. Byelaws and Rules (including Rule 32 and related provisions) prescribe capital adequacy and deposit requirements for continued membership; those obligations continue so long as membership subsists. Withdrawal of trading does not extinguish membership or its attendant duties. Given that the appellant failed over a prolonged period to replenish deposits despite notices and opportunities, the Exchange lawfully proceeded to suspend and ultimately expel the appellant in accordance with its Byelaws and Rules.

The appellant remained obliged to maintain prescribed deposits despite withdrawal of trading facility; failure to do so justified suspension and expulsion under the Byelaws.

Vesting and realisation of withheld securities upon declaration of defaulter or expulsion (Rule 20(f)) - Whether withheld securities could be realised forthwith by the Exchange without vesting, or whether vesting (by declaration of defaulter or operation of Rule 20(f) on expulsion) is a precondition to realisation. - HELD THAT: - The Court held that security deposits and withheld securities are treated differently. Security deposits are subject to a statutory/contractual lien and may be realised under the Byelaws. Withheld 'receiving securities' require legal vesting before realisation; Clause 11 provides that assets 'vest ipso facto on declaration of any trading member as a defaulter.' Rule 20(f) makes Chapter XII (defaults) applicable upon expulsion and thus can effect vesting where a formal declaration was not separately made. Consequently, realisation of withheld securities absent vesting is not required or permissible; vesting (by declaration of defaulter or by expulsion under Rule 20(f)) is the operative trigger for disposal.

Withheld receiving securities cannot be realised until they vest in the Exchange by declaration of defaulter or by operation of Rule 20(f) upon expulsion; forthwith realisation prior to vesting is not mandated.

Discretion of Exchange/NSCCL in dealing with withheld securities including registration or sale - duty of care / limited fiduciary obligation of the Exchange in respect of withheld securities - What is the permissible manner of dealing with withheld securities after vesting, and whether the Exchange had a mandatory duty to register withheld securities in its name to protect corporate benefits. - HELD THAT: - Regulation 9.10 (and corresponding NSE provisions) vests the Clearing Corporation/Exchange with discretion to deal with withheld securities 'at such times and in such manner' as it deems fit, including appropriation, closing out or registration. The Court held that this discretion is accompanied by a duty to 'deal' prudently with the assets - a duty analogous to a limited fiduciary or trustee role obliging the Exchange to act as a prudent person and not sit idle. However, the discretion to register securities is not absolute and not converted into a mandatory one; registration may be exercised as an option among legitimate measures and may be conditioned upon fulfilment of prerequisites (e.g., settlement, undertaking, deposits). The defaulting member also has enabling obligations (request for registration, fulfilment of payment/conditions). The Court emphasised balance: Exchange must not abuse discretion but is not per se obliged to register unconditionally.

After vesting, the Exchange may realise or register withheld securities in accordance with its discretionary powers under the Regulations, but must exercise that discretion prudently; there is no absolute statutory duty to register immediately without satisfaction of conditions.

Binding nature of exchange decisions on expulsion and withholding; remedies and recovery - Whether the Tribunal correctly upheld expulsion and the exercise by the Exchange/Clearing Corporation to withhold and, after vesting, realise withheld assets to satisfy dues, and whether the Tribunal's quantification of liability should be interfered with. - HELD THAT: - The Court found no error in the Tribunal's conclusion that the Exchange lawfully expelled the appellant for failure to meet membership obligations and that the Exchange/Clearing Corporation were entitled to withhold and, after vesting, apply assets to satisfy dues. The factual determination of outstanding liability (quantum) was a matter of fact for the Tribunal; no substantial question of law was shown to justify interference under Section 22F. The Court accepted the Tribunal's computation and the Exchange's right to appropriate realised proceeds, subject to accounting for surplus and return of remaining securities as directed.

The Tribunal rightly confirmed expulsion and the Exchange's entitlement to realise vested assets to satisfy dues; the factual quantification of liability was not disturbed.

Remedies and directions for realisation, return and interest on surplus - What remedial directions should be given for final settlement between the parties in respect of remaining securities, realisation and return of surplus. - HELD THAT: - While affirming the legal principles above, the Court gave specific directions to effect final settlement: NSE to evaluate and transfer remaining transferable securities to its name and recover outstanding amount within a stipulated period; return surplus after realisation with interest at 12% per annum from date of determination/vesting until payment; return unrealised securities (including those with objections) to appellant within a time bound period; and where recovery is not possible, communicate to appellant to pay demanded amount within a fixed time. These directions balance the Exchange's rights to realise vested assets with the appellant's right to surplus and a time bound resolution.

Directions issued for evaluation, transfer, realisation and return of securities and surplus with interest; specified timelines for completion of settlement.

Final Conclusion: The appeals were disposed of by upholding the Tribunal's confirmation of expulsion. The Court held the subject circular to be a valid operational parameter issued under the Exchange's Byelaws (not requiring prior SEBI/Central Government approval), that Clause 18 authorises withdrawal of trading facilities and forthwith closing out in circumstances distinct from Clause 17, and that the appellant was bound by the circular and remained obligated to maintain deposits despite withdrawal of trading. Withheld receiving securities vest and become realisable upon declaration of defaulter or by operation of Rule 20(f) on expulsion; the Exchange/NSCCL has discretion to register or realise vested securities but must exercise a duty of care in dealing with them. The Tribunal's factual quantification of liability was not disturbed, and the Court directed time bound steps for transfer, realisation and return of securities and surplus with interest to conclude the dispute.

Admission of application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - operational debt and Operational Creditor

Service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - proceedings in absence of Corporate Debtor - Sufficiency of service of notices and continuation of proceedings despite non-appearance of the Corporate Debtor - HELD THAT: - The Tribunal recorded attempts to serve the Corporate Debtor at the registered office which returned with postal remark 'addressee not found', and further directed service by email and publication in two widely circulated newspapers. The Operational Creditor filed proof that the emailed communication bounced and that paper publication was effected in both English and Malayalam. The Corporate Debtor did not appear or file any representation thereafter. On this basis the Tribunal proceeded to hear and decide the application in the absence of the Corporate Debtor, treating the statutory demand notice and subsequent modes of publication as sufficient for the purposes of proceeding under the Code. [Paras 4]

Service by registered post, attempted email and mandated newspaper publication were treated as sufficient and the Tribunal proceeded in the absence of the Corporate Debtor.

Admission of application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - operational debt and Operational Creditor - Whether the Section 9 application filed by the Operational Creditor deserved admission - HELD THAT: - Relying on the definition of Operational Creditor and Operational Debt and on the requirements of Section 9(3)(a)-(c) of the Code, the Tribunal examined the record which showed a claimed operational debt and that the cause of action arose before March 2020. The Tribunal found the application complete and that the Operational Creditor was entitled to claim unpaid dues. On that basis the Tribunal held the application fit for admission under Section 9(5). [Paras 5, 6]

The Section 9 application was admitted.

Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - effect of moratorium on proceedings and transactions - Imposition and scope of the moratorium consequent to admission of the Section 9 application - HELD THAT: - Upon admission of the application the Tribunal directed that the moratorium envisaged under Section 14(1) shall follow in relation to the Corporate Debtor. The order specified the customary prohibitions on institution or continuation of suits or proceedings against the Corporate Debtor, on transfer or disposal of assets, on actions to enforce security interests (including under SARFAESI Act) and on recovery of property occupied by the Corporate Debtor. It also directed that services to the Corporate Debtor, if continuing, shall not be terminated during the moratorium and noted the limited exceptions as provided under the Code. [Paras 6, 7]

Moratorium was imposed with the standard prohibitions and directions as specified in the order.

Appointment of Interim Resolution Professional - public pronouncement of CIRP - Appointment of Interim Resolution Professional and requirement of public announcement following admission - HELD THAT: - As the Operational Creditor did not propose a nominee, the Tribunal appointed an Interim Resolution Professional by name and directed compliance with IBBI regulations regarding fees and submission of the Authorization for Assignment by the Insolvency Professional Agency within two days. The Tribunal further directed that the public pronouncement of the Corporate Insolvency Resolution Process be made immediately as specified under the Code and ordered communication of the order to the parties and the IRP by the Registry. [Paras 8, 9]

Interim Resolution Professional appointed; public pronouncement and communication of the order directed.

Final Conclusion: The Tribunal admitted the Section 9 application, imposed the statutory moratorium, appointed an Interim Resolution Professional and directed public pronouncement and communication of the order; the proceedings were lawfully continued despite non-appearance of the Corporate Debtor after deemed service by publication and other attempted modes.

Commercial wisdom of the Committee of Creditors - liquidation upon Committee of Creditors' decision - non-justiciability of the Committee of Creditors' commercial decision - Committee of Creditors may decide liquidation any time after its constitution - discretion of the Adjudicating Authority under procedural rules - opportunity to submit a revival scheme during liquidation

Commercial wisdom of the Committee of Creditors - liquidation upon Committee of Creditors' decision - discretion of the Adjudicating Authority under procedural rules - Whether the Applicant's prayer to keep the liquidation application in abeyance and grant time to settle creditors should be permitted. - HELD THAT: - The Tribunal rejected the Applicant's request to keep the liquidation application in abeyance. The rejoinder and submissions revealed no concrete settlement offer placed before the financial creditor; instead the Applicant proposed to introduce a financier/buyer for negotiations, which did not amount to a firm proposal to settle the claims. The Tribunal observed that the CoC had, by requisite majority, resolved to liquidate and that the adjudicating forum is not to substitute its view for the commercial decision of the CoC. Arguments invoking Rule 11 of the NCLT Rules to grant more time were examined but found inconsistent with the legislative scheme and judicial precedents which protect the CoC's commercial decision-making. The Tribunal noted that remedies short of upsetting the CoC decision exist during liquidation (such as filing a revival scheme) but these do not justify arresting the liquidation order on the facts before it. Accordingly the application was dismissed. [Paras 11, 12, 16, 17, 18]

Application to keep the liquidation application in abeyance and to grant time for settlement dismissed.

Committee of Creditors may decide liquidation any time after its constitution - non-justiciability of the Committee of Creditors' commercial decision - opportunity to submit a revival scheme during liquidation - Whether the CoC could validly decide liquidation before expiry of 180 days and whether the Adjudicating Authority may review that commercial decision. - HELD THAT: - The Tribunal held that, following the statutory amendment (Explanation to the relevant provision), the CoC is empowered to decide liquidation any time after its constitution and before confirmation of a resolution plan, including before preparation of the information memorandum. Reliance was placed on NCLAT authority confirming that once the RP intimates the Adjudicating Authority of a CoC decision to liquidate (approved by the required voting threshold), the Adjudicating Authority must pass a liquidation order. The Tribunal further relied on the Supreme Court's exposition that the legislature has not vested the Adjudicating Authority with jurisdiction to reassess or substitute its view for the CoC's commercial wisdom; such commercial decisions are non-justiciable. The Tribunal observed that although avenues for revival (for eligible persons) remain available during liquidation, these statutory mechanisms do not permit judicial re-examination of the CoC's collective business decision. [Paras 13, 14, 15, 16, 17]

CoC validly decided liquidation before the 180-day mark; Adjudicating Authority cannot review the commercial wisdom of the CoC; liquidation order to follow subject to statutory revival avenues.

Final Conclusion: The application seeking to keep the liquidation proceeding in abeyance and time to effect a settlement was dismissed. The Tribunal reaffirmed that the CoC may decide liquidation any time after its constitution and that the adjudicating forum cannot interfere with the CoC's commercial wisdom; remedies to seek revival remain available during liquidation under the statutory scheme.

Pre-existing dispute - default in payment - admissibility of Section 9 application - moratorium - appointment of Interim Resolution Professional - public announcement of CIRP

Pre-existing dispute - admissibility of Section 9 application - No pre-existing dispute was established by the Corporate Debtor and therefore the Section 9 application was not barred on that ground. - HELD THAT: - The Tribunal applied the principle in Innoventive Industries Ltd. to hold that for a dispute to defeat a Section 9 application it must be pre-existing - i.e., existing prior to receipt of the demand notice or invoice. The Corporate Debtor's contentions (difference as to dates, asserted payments, and alleged defects in the certificate) did not amount to a plausible or demonstrable pre-existing dispute. The alleged credits and other assertions were not supported by contemporaneous record sufficient to show a dispute that existed before service of the demand notice; they were held to be hypothetical or illusory and therefore insufficient to oust the Tribunal's jurisdiction to admit the application. [Paras 14, 15, 16]

The plea of pre-existing dispute is rejected and does not render the application under Section 9 non-maintainable.

Default in payment - admissibility of Section 9 application - Operational Creditor's entitlement - The Operational Creditor established default in payment and the Section 9 petition is admitted. - HELD THAT: - On examination of the invoices, demand notice and accompanying material, and having found no pre-existing dispute, the Tribunal concluded that the Operational Creditor had established default in payment of the operational debt. The claim as presented was found complete in form and substance for the purposes of admission under Section 9. Consequently, the petition met the statutory threshold for initiation of the Corporate Insolvency Resolution Process. [Paras 17, 19]

The application is admitted and the applicant is entitled to claim its dues; CIRP is initiated.

Moratorium - appointment of Interim Resolution Professional - public announcement of CIRP - Moratorium under Section 14 is operative from the date of the order, public announcement is to be made, and an Interim Resolution Professional is appointed. - HELD THAT: - Upon admission of the Section 9 application the Tribunal ordered the statutory moratorium to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. The Tribunal directed immediate public announcement of the corporate insolvency resolution process as required by the Code. The Tribunal appointed the nominated registered insolvency professional as Interim Resolution Professional and directed that his functions and fee be governed by the Code and regulations of the Insolvency and Bankruptcy Board of India. [Paras 19, 20, 22]

Moratorium ordered with immediate effect; public announcement to be made; Mr. Dileep K.P. appointed as Interim Resolution Professional.

Final Conclusion: The Tribunal admitted the Section 9 application, holding that no pre-existing dispute barred the petition; the Corporate Insolvency Resolution Process is initiated, the moratorium is effective from the date of the order, the public announcement of CIRP is directed, and an Interim Resolution Professional is appointed; no order as to costs.

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - arrears category and appeal period finality - negative list under section 125(1)(c) - Designated Committee procedure and requirement of hearing under section 127 - principles of natural justice before summary rejection of a declaration

Arrears category and appeal period finality - negative list under section 125(1)(c) - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether petitioner No.1 was eligible to file a declaration under the arrears category of the Scheme despite final hearing on the show cause notice having taken place before 30th June, 2019 - HELD THAT: - The court examined the interplay between the definitions of "amount in arrears" and "tax dues" under the Scheme and the exclusion in section 125(1)(c). It held that where final hearing on a show cause notice preceded 30th June, 2019 but the adjudication order was passed thereafter and no appeal was filed within the statutory period, the case falls within the arrears category. The Board's circulars and the Scheme FAQs expressly clarify that cases in which final hearing has taken place on or before 30th June, 2019 may nonetheless be eligible under the arrears category once the adjudication order is passed and the appeal period is over or appeal has attained finality, subject to other Scheme requirements. Applying these clarifications to the facts, the court found that although the final hearing occurred on 9th May, 2019, the order in original was passed on 9th August, 2019 and by the time the declaration was filed no appeal remained available; accordingly petitioner No.1 is eligible to file a declaration under the arrears category. [Paras 28, 29, 30, 34, 35]

Petitioner No.1 is eligible to file a declaration under the arrears category of the Scheme.

Principles of natural justice before summary rejection of a declaration - Designated Committee procedure and requirement of hearing under section 127 - Whether rejection of the petitioner's declaration without notice or hearing was legally sustainable - HELD THAT: - The court referred to the procedural scheme under section 127 and Rule 6 which contemplate issuance of an estimate and, where the Designated Committee's estimate exceeds the declared amount, an opportunity of hearing before final determination. The court observed that summary rejection of a declaration without affording any opportunity to explain is contrary to the Scheme's objectives and violates principles of natural justice, particularly where adverse civil consequences may follow. Reliance was placed on earlier reasoning that a liberal approach consistent with the Scheme's purpose must be adopted and that decisions affecting civil consequences require notice and hearing. In the present case the rejection order contained no reasons and was not preceded by notice or hearing; accordingly the rejection was quashed and the matter remitted for reconsideration with an opportunity of hearing and a speaking order. [Paras 21, 22, 36, 37, 38]

Rejection without notice or hearing was invalid; the rejection is quashed and the matter is remanded to the Designated Committee for reconsideration after giving the petitioner an opportunity of hearing and for issuance of a speaking order.

Final Conclusion: Writ petition allowed: the Designated Committee's rejection of the declaration dated 8th January, 2020 is set aside; petitioner No.1 is held eligible to be considered under the arrears category and the matter is remanded to the Designated Committee to decide the declaration afresh after giving notice and an opportunity of hearing and by a speaking order; no order as to costs.

Standard Input-Output Norms (SION) - determination of production for levy of central excise duty - audit objection as basis for demand - extended period of limitation under Section 11A (fraud, collusion, willful mis-statement, suppression of facts) - requirement of corroborative evidence to establish clandestine removal

Standard Input-Output Norms (SION) - determination of production for levy of central excise duty - audit objection as basis for demand - requirement of corroborative evidence to establish clandestine removal - Whether SION under DGFT/Foreign Trade Policy and proviso to condition 3(d) of Notification No. 52/2003-Cus can be applied to determine production and to sustain demand of excise duty where demand is founded solely on audit objection. - HELD THAT: - The exemption Notification No. 52/2003-Cus is issued under the Customs Act and does not prescribe any method for determining quantum of production under the Central Excise Act. Section 3 of the Central Excise Act charges duty on goods actually produced or manufactured; a demand based on presumed production derived from SION, without physical verification or any corroborative evidence of clandestine removals, is not permissible. In both appeals the departmental demand rested solely on audit objections comparing declared input-output ratios with SION (95%) and used SION serial numbers not specified in the show cause notices. No investigation was carried out - there were no statements from buyers, transporters, no flow-back analysis and no other corroborative material to substantiate clandestine manufacture or removal. Reliance on precedents holding that input-output norms alone cannot sustain a demand in absence of evidence of diversion or clandestine removal supports this approach. The adjudicating authority's reliance on SION (and SION numbers not mentioned in the show cause notices) went beyond the scope of the show cause and cannot substitute for evidence of actual evasion of duty. [Paras 14, 15, 16, 17]

Demand of duty founded solely on SION-based presumed production and on audit objection, without any corroborative evidence of clandestine removal, is unsustainable and cannot form the basis for levy of excise duty.

Extended period of limitation under Section 11A - fraud, collusion, willful mis-statement or suppression of facts - periodic audit and knowledge of department - Whether extended period of limitation under Section 11A(4) can be invoked where the demand arises from audit objections but there is no evidence of fraud, collusion, willful mis-statement or suppression of facts by the assessee. - HELD THAT: - Section 11A(4) permits invocation of the extended period only where non-levy or short payment of duty is by reason of fraud, collusion, willful mis-statement, suppression of facts or contravention with intent to evade duty. In the present cases the appellants were registered units subject to periodic central excise audits (records show repeated audits over the years) and there is no finding or material in the orders to establish that the appellants withheld returns or suppressed facts from the department. The departmental case was based on audit objections discovered during routine audit and there is no other evidence of deliberate concealment or intent to evade. In these circumstances extended period cannot be invoked. [Paras 18, 19]

Extended period of limitation under Section 11A cannot be invoked in absence of material establishing fraud, collusion, willful mis-statement or suppression of facts; therefore the computation of demand on that basis is not sustainable.

Final Conclusion: The Tribunal set aside the impugned orders: demands premised on presumed production computed by applying SION without corroborative evidence of clandestine removals are unsustainable, and invocation of the extended period under Section 11A is unjustified in absence of material showing fraud or suppression; both appeals are allowed with consequential relief.

Seniority - date of appointment - selection and subsequent selection - proviso as exception to main provision - reckoning seniority between direct recruits and departmental promotees

Date of appointment - seniority - proviso as exception to main provision - Construction of Rule 27 after its 2002 amendment and the effect of its proviso on fixing seniority. - HELD THAT: - The amended main clause of Rule 27 fixes seniority in the cadre from the date of appointment. The second proviso preserves the rule that persons selected and appointed as a result of an earlier selection shall rank senior to those selected by a subsequent selection, but the proviso is an exception confined to its field of operation. It does not supplant the main provision which generally determines seniority by date of appointment. The proviso operates to protect inter se seniority where two selections from the same source/stream occur and selection dates (as distinct from appointment dates) would otherwise be determinative; it does not apply so as to nullify the amended main rule where the recruitments are from different sources or where appointment-date based seniority is appropriate. The Court applied the principle that a proviso must be confined to its intended exceptional operation and cannot be read to annul the main enacted provision. [Paras 27, 30, 31]

Rule 27, as amended, primarily fixes seniority from the date of appointment; the second proviso is a limited exception applicable where two selections from the same category/source are concerned and does not displace the main provision.

Reckoning seniority between direct recruits and departmental promotees - selection and subsequent selection - seniority - Application of Rule 27 to the facts: whether direct recruits who began selection earlier but were appointed later rank senior to departmental promotees appointed earlier. - HELD THAT: - The cadre in question was being filled for the first time and the two advertisements related to distinct streams (80% direct recruitment and 20% departmental promotion). Administrative delays (including police verification and medicals for a large number of DR candidates) and the comparatively shorter process for DPs resulted in earlier appointment of DPs. Given the amended Rule 27 which fixes seniority by date of appointment, and the limited scope of the proviso (which applies primarily where selections are from the same source), the promotees who were appointed earlier properly occupy senior positions in the seniority list. The High Court Division Bench's conclusion that the main provision governs seniority in these circumstances and that the DRs were not entitled to seniority over DPs is upheld. [Paras 29, 32]

On the facts, departmental promotees appointed earlier rank senior to direct recruits who were appointed later; the appeals challenging that placement are dismissed.

Final Conclusion: The appeals are dismissed. The amended Rule 27 fixes seniority from date of appointment and the proviso is a limited exception applicable where two selections from the same source are concerned; on the facts the departmental promotees appointed earlier properly rank senior to the direct recruits appointed later.