TaxTMI Updates e-Newsletter
Dec 04,2020

Confiscation of goods and conveyance under Section 130 - Alternative remedy under Section 107 of the CGST Act - Inter state supply and destination State's authority to collect tax under Section 10 of the IGST Act - Prohibition on precipitous action during the period available for statutory appeal

Alternative remedy under Section 107 of the CGST Act - Confiscation of goods and conveyance under Section 130 - Prohibition on precipitous action during the period available for statutory appeal - Whether the writ petition should be entertained in view of the alternative remedy under Section 107 of the CGST Act and whether authorities should be restrained from taking precipitous action during the appeal period. - HELD THAT: - The Court declined to entertain the petitioner's challenge to the confiscation order as a first recourse, noting that an efficacious statutory remedy under Section 107 of the CGST Act is available and that a Division Bench has affirmed the availability of that remedy. The Court observed that the authorities had not yet taken any final or precipitous steps because the limitation period for filing the statutory appeal had not expired. In these circumstances the Court exercised judicial restraint and directed that the petitioner be permitted to invoke the alternative remedy; simultaneously the authorities were directed not to take any precipitous action in the period during which the petitioner may file the appropriate appeal under the statute. [Paras 5]

Writ petition disposed of with liberty to the petitioner to avail the statutory remedy under Section 107 of the CGST Act and direction to respondents not to take precipitous action while the appeal period subsists.

Final Conclusion: The High Court dismissed the writ petition for the present, directing the petitioner to pursue the alternative remedy under Section 107 of the CGST Act and restraining the authorities from taking precipitous action during the period in which the petitioner may file the statutory appeal.

Profiteering under Section 171 of the CGST Act, 2017 - pass on benefit of reduction in GST rate - computation and quantification of profiteering - deposit into Central and State Consumer Welfare Funds where recipients are not identifiable - effect of interim order of the High Court on deposition and stay of interest and penalty - correction of clerical, arithmetical or factual mistake under the Authority's Procedure and Methodology (Para 30)

Profiteering under Section 171 of the CGST Act, 2017 - pass on benefit of reduction in GST rate - computation and quantification of profiteering - Acceptability of the DGAP report and prior Authority determination that the Respondent had profiteered by failing to pass on the benefit of GST rate reduction. - HELD THAT: - The Authority found the DGAP's investigation and earlier Order No. 37/2020 based on the DGAP's report of 25.10.2019 to be acceptable. The earlier order had adjudicated that the Respondent realized an additional benefit (profiteering) in terms of Section 171 of the CGST Act, 2017 for the period covered by the DGAP's investigation. The present report relates to the same subject-matter and period, and both the applicant and the respondent have either accepted the DGAP findings or not contested the factual conclusion that profiteering occurred. Consequently, the Authority treated the DGAP's computations as reliable for the purposes of this case and noted overlap with the earlier proceedings which had already determined the total profiteering amount against the Respondent. [Paras 1, 2, 5, 10]

DGAP's report and the Authority's earlier determination confirming profiteering by the Respondent are accepted and treated as determinative for these proceedings.

Computation and quantification of profiteering - deposit into Central and State Consumer Welfare Funds where recipients are not identifiable - Entitlement of Applicant No.1 to the quantified benefit and mechanism for its disbursement where the amount was already included in the earlier deposited profiteering sum. - HELD THAT: - The DGAP computed that Applicant No.1 was charged an excess of Rs. 11.73 (inclusive of GST) for a ticket dated 04.01.2019, a date within the period for which profiteering had been established against the Respondent. The Authority held that this amount was already included in the total profiteering amount determined earlier. Since recipients were not identifiable at the time of the earlier order and the amount had been directed to be deposited into the Central and Telangana State Consumer Welfare Funds, the Authority now recognises Applicant No.1's entitlement and directs disbursement from those funds. The Authority applied equal apportionment between the Central and State CWFs; the amount attributable from each Fund was halved and rounded to the nearest whole rupee for payment to the applicant. [Paras 3, 4, 5, 11, 12]

Applicant No.1 is entitled to Rs.11.73 inclusive of GST with applicable interest, to be paid by transfer from the Central Consumer Welfare Fund and the Telangana State Consumer Welfare Fund (Rs.6 from each Fund after rounding).

Effect of interim order of the High Court on deposition and stay of interest and penalty - deposit into Central and State Consumer Welfare Funds where recipients are not identifiable - Effect of the Hon'ble High Court of Delhi's interim order on the deposited amounts and on further proceedings in relation to interest and penalty. - HELD THAT: - The Authority noted the Hon'ble High Court of Delhi's interim direction (in Writ Petition No. 7736/2020) that required the Respondent to deposit the principal profiteered amount subject to certain deductions in six instalments and stayed the payment of interest and penalty. The Authority recorded that the Respondent had complied by depositing amounts into the Central and State CWFs as per the High Court's order. The Authority accounted for this factual position in directing payment to Applicant No.1 from the CWFs, while noting the stay of interest and penalty as ordered by the High Court. [Paras 8, 9, 12]

Authority acknowledges the High Court's interim order and the resultant deposits by the Respondent; disbursement to Applicant No.1 is ordered from the CWFs notwithstanding the High Court's stay on interest and penalty.

Correction of clerical, arithmetical or factual mistake under the Authority's Procedure and Methodology (Para 30) - Permissibility of correcting the earlier Order No.37/2020 beyond the three-month window due to force majeure and subsequent Government notification. - HELD THAT: - Although Para 30 of the Authority's Procedure and Methodology ordinarily requires correction of clerical or arithmetical mistakes within three months of the order, the Authority recognised that the three-month period lapsed. Taking into account the COVID-19 pandemic (force majeure) and Notification No.65/2020-Central Tax dated 01.09.2020 under Section 168A of the CGST Act, 2017, the Authority treated the present order as a permissible correction to address an apparent factual/arithmetic overlap and to effectuate payment to an identified recipient. [Paras 13]

Correction/order is made notwithstanding the three-month lapse on account of force majeure and the cited Government notification, permitting this rectification and disbursement.

Final Conclusion: The Authority accepts the DGAP report and its earlier order confirming profiteering by the Respondent for the period in question. Applicant No.1 is entitled to the excess charged of Rs.11.73 (inclusive of GST) together with applicable interest; payment will be made from the Central and Telangana State Consumer Welfare Funds (Rs.6 from each Fund after rounding). The Authority records the High Court's interim order and the Respondent's deposits and permits this correction despite the three-month window due to the COVID-19-related force majeure and applicable Government notification.

Passage of benefit of tax reduction by way of commensurate reduction in prices - anti-profiteering investigation and DGAP fact-finding - average base price comparison method for computation of profiteering - authority to examine whether benefit of tax reduction has been passed on - scope of investigation into all products impacted by a rate reduction - exclusion of non-impacted goods from profiteering computation - reduction of profiteered amount for transactions reversed by credit note - penalty under Section 171(3A) not leviable retrospectively for period prior to its commencement - deposit of profiteered amount in Consumer Welfare Funds with interest

Passage of benefit of tax reduction by way of commensurate reduction in prices - anti-profiteering investigation and DGAP fact-finding - Whether the Respondent was required to pass on, and in fact failed to pass on, the commensurate benefit of the GST rate reduction to its customers. - HELD THAT: - The Authority examined DGAP's investigation and the Respondent's submissions and found that Notification No. 24/2018 reduced GST on certain goods from 28% to 18% w.e.f. 01.01.2019 and that the Respondent was therefore obliged under Section 171(1) to pass on the benefit by commensurate reduction in cum-tax prices. Comparison of average pre-rate-reduction base prices (01.12.2018 to 31.12.2018) with actual invoice-wise base prices during 01.01.2019 to 30.06.2019 showed that the Respondent increased base prices post rate-reduction so that consumers did not receive a commensurate reduction in final price despite lower tax rate. The Authority found this conduct to be contrary to Section 171(1) and concluded that profiteering occurred. [Paras 22, 23, 25, 26]

Respondent failed to pass on the benefit of tax reduction and has engaged in profiteering.

Average base price comparison method for computation of profiteering - authority to examine whether benefit of tax reduction has been passed on - Whether the DGAP's methodology of computing profiteering by comparing average pre-rate-reduction base prices with actual post-rate-reduction invoice-wise base prices was lawful and appropriate. - HELD THAT: - The Authority held that the DGAP's method-using average base prices for the pre-reduction period (primarily December 2018) and comparing them with actual invoice-wise post-reduction base prices-was reasonable, dependable and consistent with Section 171(1). The Authority rejected the Respondent's contentions that retail price volatility, MRPs, discounts, customer bargaining, or e-commerce competition rendered the average method arbitrary. The Authority explained that average-to-invoice comparison ensures each purchaser is entitled to the benefit on each supply and that comparing average-to-average or using maximum prices would defeat that statutory obligation. [Paras 24, 26, 27, 36, 37]

DGAP's average base price comparison methodology is valid and may be relied upon for computing profiteering.

Scope of investigation into all products impacted by a rate reduction - anti-profiteering investigation and DGAP fact-finding - Whether the DGAP was entitled to investigate all products impacted by the rate reduction rather than only the product named in the complaint. - HELD THAT: - The Authority held that the DGAP is mandated by Section 171 and Rule 129 to investigate whether benefits of tax rate reductions have been passed on for products impacted by a notified rate change. There is no provision restricting investigation only to the specific product mentioned in the complaint; Rule 133(5) is a clarification and does not bar DGAP from investigating all impacted products when notice so indicates. The Notice of Initiation of Investigation clearly required the Respondent to furnish details for all goods impacted by the rate reduction, so the DGAP's broader enquiry was lawful. [Paras 29, 30, 31, 32, 33]

DGAP was entitled to investigate all products affected by the GST rate reduction; the expansion of scope was lawful.

Exclusion of non-impacted goods from profiteering computation - Whether certain products (Power Banks with Lithium Polymer batteries) were correctly excluded from the profiteered amount. - HELD THAT: - The Respondent produced evidence that several power banks sold were of the Lithium Polymer type which were not within the scope of Notification No. 24/2018 that reduced rate for Lithium Ion power banks. DGAP accepted that these items were not impacted by the rate change and recommended reduction of the profiteered amount accordingly. The Authority examined the material and allowed reduction of the profiteered amount by the sum attributable to such non-impacted power banks. [Paras 42, 43]

Profiteered amount reduced to exclude supplies of non-impacted (Lithium Polymer) power banks.

Reduction of profiteered amount for transactions reversed by credit note - Whether an erroneously included transaction reversed by credit note should be excluded from profiteering computation. - HELD THAT: - The Respondent identified a transaction on 30.06.2019 which had been reversed by a credit note on 01.07.2019. DGAP acknowledged that profiteering on that cancelled invoice had been inadvertently included and recommended its removal from computations. The Authority accepted that correction and directed the profiteered amount to be reduced accordingly. [Paras 40, 41]

Profiteering computed on the cancelled transaction is to be excluded from total profiteered amount.

Penalty under Section 171(3A) not leviable retrospectively for period prior to its commencement - Whether penalty prescribed by Section 171(3A) could be imposed for profiteering that occurred during 01.01.2019 to 30.06.2019. - HELD THAT: - Section 171(3A), providing for penalty equal to 10% of the amount profiteered, was inserted w.e.f. 01.01.2020 and therefore was not in force during the period when the Respondent committed the violation (01.01.2019 to 30.06.2019). The Authority held that the penalty cannot be imposed retrospectively and accordingly did not issue notice for penalty. [Paras 46]

No penalty under Section 171(3A) is leviable for the period 01.01.2019 to 30.06.2019 as the provision was not in force then.

Deposit of profiteered amount in Consumer Welfare Funds with interest - monitoring of compliance by CGST/SGST Commissioners under DGAP supervision - Relief and directions to be issued consequent to the finding of profiteering, including computation, deposit and monitoring. - HELD THAT: - Having determined the net profiteered amount after adjustments, the Authority fixed the profiteered sum at the revised total (as computed in Annexure-20 and DGAP's clarifications) and directed the Respondent to reduce prices commensurately. As recipients were not identifiable, the Authority ordered the Respondent to deposit the total profiteered amount in two equal parts into the Central Consumer Welfare Fund and the State Consumer Welfare Fund(s) of the concerned States, along with interest at 18% from the dates the amounts were realised until deposit. The deposit is to be made within three months; failure will invite recovery under CGST/SGST Acts. The Authority also directed monitoring of compliance by concerned Commissioners under DGAP supervision and submission of a compliance report within four months. [Paras 43, 44, 45]

Respondent directed to deposit the revised profiteered amount with 18% interest into designated Consumer Welfare Funds and to reduce prices; Commissioners to monitor compliance under DGAP supervision.

Final Conclusion: The Authority found that the Respondent did not pass on the benefit of GST rate reduction from 28% to 18% on impacted goods during 01.01.2019-30.06.2019, determined net profiteering of Rs. 34,34,008/- after adjustments, declined to impose penalty under Section 171(3A) as not then in force, and directed commensurate price reduction and deposit of the profiteered amount with 18% interest into the Central and State Consumer Welfare Funds, with compliance to be monitored by the CGST/SGST Commissioners under DGAP supervision.

Deduction under Section 80IB(10) - Pro-rata deduction under Section 80IB(10) - Section 80IB(10)(f) prohibition on allotment to same person/family/spouse - Non-retroactivity of amendment introducing clause (f) - Plot area eligibility (one acre requirement)

Section 80IB(10)(f) prohibition on allotment to same person/family/spouse - Non-retroactivity of amendment introducing clause (f) - Whether disallowance of deduction for the entire housing project was justified because certain flats were allotted to members of the same family after introduction of clause (f). - HELD THAT: - The court held that clause (f) to Section 80IB(10) entered into force on 19.08.2009. Allotments made prior to that date (Flat Nos.401 and 402 and Flat No.104) did not constitute a breach of the prohibition introduced by clause (f) and therefore could not justify denial of the deduction for the entire project. Only the allotment of Flat No.103 on 10.10.2009 fell within the effective period of clause (f) and could attract withholding of deduction to the extent attributable to that unit. Accordingly, denial of the deduction for the entire 60 unit project was not justified; at most a pro rata denial limited to the unit allotted after 19.08.2009 was permissible. [Paras 11, 15, 16]

Deduction cannot be disallowed for the entire project; deduction may be withheld on a pro rata basis only in respect of Flat No.103 allotted on 10.10.2009.

Pro-rata deduction under Section 80IB(10) - Deduction under Section 80IB(10) - Whether a pro rata/proportionate deduction under Section 80IB(10) can be granted when some units do not meet the conditions. - HELD THAT: - The court accepted that pro rata deduction is permissible under Section 80IB(10). Having considered related appeals and the parties' contentions, the court adopted its reasoning in connected matters and concluded that where only specified units breach the statutory condition, the assessee is entitled to deduction for the remainder of the project and a proportionate disallowance limited to the non compliant unit. The ITAT's complete negation of pro rata relief was therefore set aside and the Commissioner (Appeals') grant of pro rata relief was upheld insofar as it related to units allotted prior to 19.08.2009 and specifically allowed for all units except Flat No.103. [Paras 13, 14, 16]

Pro rata deduction under Section 80IB(10) is allowable; the assessee is entitled to pro rata deduction for the project except in respect of Flat No.103.

Plot area eligibility (one acre requirement) - Deduction under Section 80IB(10) - Whether the ITAT was justified in finding that the plot area fell below the statutory threshold when units at issue are excluded. - HELD THAT: - The court found the ITAT's conclusion on the plot area to be perverse. Even if area proportionate to the four questioned units were excluded, the remaining plot area still exceeded 1 acre (4000 sq. metres). Moreover, because only one unit ultimately required exclusion, the available area indisputably exceeded the required threshold. Thus there was no breach of the area eligibility condition. [Paras 8, 12]

ITAT's finding on plot area was perverse; the project meets the area threshold and no deduction is to be denied on this ground.

Final Conclusion: The appeal is partly allowed. The assessee is entitled to deduction under Section 80IB(10) for its housing project except that deduction may be withheld on a pro rata basis only in respect of Flat No.103 (allotted on 10.10.2009); deductions relating to the other specified flats and the project's area eligibility are upheld. The impugned ITAT order is set aside to that extent.

Revisional jurisdiction under Section 263 of the Income Tax Act - principle of consistency - res judicata in income tax assessments - remand for fresh assessment with verification and opportunity of being heard - exercise of revisional power even on debatable issues

Revisional jurisdiction under Section 263 of the Income Tax Act - exercise of revisional power even on debatable issues - Validity of the Commissioner's order under Section 263 directing the Assessing Officer to pass a fresh assessment order. - HELD THAT: - The Court held that the Commissioner had material to prima facie infer that relevant aspects (including alleged under invoicing) were not considered by the Assessing Officer and therefore the twin conditions for invoking revisional jurisdiction were satisfied. Reliance on the principle that the Commissioner may exercise Section 263 even on debatable issues and where proper inquiries were not made supported the direction for a fresh assessment. The Commissioner did not preclude any defence available to the assessee and specifically directed the AO to verify, examine all relevant facts and legal positions and to grant adequate opportunity of hearing before passing a fresh order. [Paras 23, 24, 26, 27]

The exercise of revisional jurisdiction by the Commissioner was valid and the order directing a fresh assessment was sustained.

Principle of consistency - res judicata in income tax assessments - Whether the principle of consistency or res judicata barred the Commissioner from directing a fresh assessment for Assessment Year 2008 09 because of findings in Assessment Year 2009 10. - HELD THAT: - The Court affirmed that each assessment year is a separate unit and principles of res judicata do not apply to preclude re examination of issues in a different assessment year. The ITAT correctly observed that any question as to identity of facts and applicability of prior findings can be examined by the AO in the course of the fresh assessment after giving the assessee full opportunity. Thus, a different view for another year is not impermissible merely by relying on the AO's order for a subsequent year; such identity of factual matrix is for the AO to examine afresh. [Paras 19, 20, 21, 26]

The plea of consistency/res judicata does not preclude the Commissioner's direction for fresh assessment; questions of identical facts between years are open for fresh adjudication by the AO.

Remand for fresh assessment with verification and opportunity of being heard - Scope and consequences of directing the AO to make a fresh assessment. - HELD THAT: - The Court clarified that the AO, in conducting the fresh assessment, must verify and examine all relevant facts and legal positions and afford adequate opportunity to the assessee. The assessee may rely on all legally permissible material (including the Court's earlier observations in Sesa Sterlite Limited) before the AO. The direction amounts to remand for fresh consideration and does not curtail the assessee's rights to raise contentions or rely upon precedents; the AO must make a fresh order on merits. [Paras 23, 25, 26, 28]

The matter is remitted to the AO for fresh assessment, with directions to consider all contentions and to grant adequate opportunity of hearing.

Final Conclusion: The appeal is dismissed: the Commissioner's exercise of revisional jurisdiction under Section 263 directing a fresh assessment is upheld; principles of consistency and res judicata do not bar re examination across assessment years; the matter is remitted to the Assessing Officer to make a fresh assessment after verification of facts, consideration of all contentions and giving adequate opportunity of hearing.

Pro-rata deduction under Section 80IB(10) of the Income Tax Act, 1961 - operation of Section 80IB(10)(e) of the Income Tax Act, 1961 - minimum plot-size condition for housing project deduction

Pro-rata deduction under Section 80IB(10) of the Income Tax Act, 1961 - Allowability of pro-rata deduction under Section 80IB(10) in respect of the housing project "Models Legacy" - HELD THAT: - The Court considered whether the Income Tax Appellate Tribunal was justified in denying pro-rata deductions where only five residential units out of a total 352 were excluded. Having examined the rival authorities and the reasoning in connected appeals, the Court concluded that pro-rata deductions can be granted under Section 80IB(10). The Court rejected the ITAT's approach that exclusion of a small number of units would defeat the claim for pro-rata relief and adopted the reasoning applied in the connected Tax Appeals, restoring the Commissioner (Appeals') grant of pro-rata deductions. The Court also recorded the assessee's concession that it would be satisfied with pro-rata relief while reserving its right to raise other contentions in collateral proceedings. [Paras 13, 16, 17, 18]

Pro-rata deduction under Section 80IB(10) is allowable; the ITAT order denying pro-rata deduction is set aside and the Commissioner (Appeals) order granting pro-rata deduction is restored.

Minimum plot-size condition for housing project deduction - pro-rata deduction under Section 80IB(10) of the Income Tax Act, 1961 - Whether exclusion of 5 residential units affected the minimum one-acre plot-size condition so as to deny deduction - HELD THAT: - The Court examined the ITAT's reasoning that exclusion of five units might reduce the plot area below the statutory minimum of one acre and found that such reasoning was unsustainable on the facts of the case. The total plot measured 28,014 sq. meters (approximately seven acres); exclusion of the proportionate area for five units could not reduce the plot below one acre. Consequently, denial of pro-rata deduction on that ground was unwarranted. [Paras 12]

ITAT's finding that exclusion of five units affected the one-acre requirement is rejected; that ground could not justify denial of pro-rata deduction.

Operation of Section 80IB(10)(e) of the Income Tax Act, 1961 - Other substantial questions of law raised on admission but not pressed by the assessee - HELD THAT: - The Court noted that the other substantial questions of law raised at admission (including the question on the effective date or retroactivity of Sub-clause (e) to Section 80IB(10)) were not pressed by the assessee. Consequently, those questions were not answered by the Court in the present appeal. The Court expressly preserved the assessee's right to raise such contentions in collateral proceedings, such as penalty proceedings. [Paras 3, 7, 18]

Other substantial questions of law are not answered in this appeal since they were not pressed by the assessee; the assessee's rights in collateral proceedings are preserved.

Final Conclusion: The appeal is partly allowed: the ITAT order is set aside to the extent it denied pro-rata deductions and the Commissioner (Appeals') order granting pro-rata deductions under Section 80IB(10) is restored; other substantial questions were not decided as they were not pressed.

Reasoned order - remand for fresh consideration - transfer pricing - determination of method for Arms Length Price - comparability analysis - Resale Price Method - Berry Ratio - CUP method - TNMM

Reasoned order - remand for fresh consideration - The ITAT's order is inadequate for want of clear reasons and failure to decide all grounds of appeal, and therefore the matter is remanded to the Tribunal for fresh adjudication. - HELD THAT: - The High Court examined the impugned ITAT order and found that the Tribunal did not give cogent, clear reasons for its conclusions on the appropriate method for determining the Arms Length Price. Paragraph 5 of the Tribunal's order was held to create confusion rather than clarity, and the Tribunal failed to address all grounds raised by the assessee. In view of these shortcomings, the Court held that the substantial questions of law cannot be entertained until the Tribunal furnishes proper findings of fact and reasons. Consequently, the ITAT's order dated 26.4.2017 is set aside and the matter is remitted for fresh decision on merits after hearing both parties and dealing with all grounds raised before it. [Paras 5, 6, 7, 8]

ITAT's order set aside and appeals remanded for fresh adjudication with directions to decide all grounds with appropriate reasons.

Transfer pricing - determination of method for Arms Length Price - comparability analysis - CUP method - Resale Price Method - Berry Ratio - TNMM - The Tribunal must reconsider and record reasons for acceptance or rejection of particular transfer pricing methods (including CUP, RPM/Berry Ratio, or TNMM) and must address comparability and value addition contentions raised by the assessee. - HELD THAT: - The Court directed that on remand the ITAT should explicitly address the contested transfer pricing issues: whether the CUP method was wrongly rejected; the selection and functional comparability of comparables used for TNMM or RPM; the correctness of applying Berry Ratio; and the treatment of items such as other income in computing ratios or margins. The Tribunal was required to give appropriate findings of fact and reasoning for rejecting the CUP method or for adopting any other method prescribed under the rules, and to hear both parties before re deciding the appeals. [Paras 4, 5, 8]

Matter remitted to ITAT to re examine and record reasons on choice and application of transfer pricing methods and comparability issues, after hearing the parties.

Final Conclusion: The ITAT order dated 26.4.2017 is set aside and the appeals for the Assessment Year 2010-2011 and 20011-2012 are remitted to the Tribunal for fresh decision on merits; the Tribunal must deal with all grounds, explain its reasons for accepting or rejecting particular transfer pricing methods and comparability findings, and afford both parties an opportunity of hearing.

Onus of proof to establish that payments to non-residents were for services rendered outside India - obligation to deduct tax at source on payments to non-residents under Section 195 - deductibility of business expenditure under Section 37(1) - concurrent findings of fact by the Commissioner (Appeals) and the Tribunal

Onus of proof to establish that payments to non-residents were for services rendered outside India - deductibility of business expenditure under Section 37(1) - obligation to deduct tax at source on payments to non-residents under Section 195 - Assessability and disallowance of payments made to foreign parties where assessee failed to establish that the payments were for services rendered outside India and thus deductible as business expenditure. - HELD THAT: - Both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal recorded concurrent findings that the assessee did not place any material evidence on record to establish that the payments to the foreign firms were for services rendered outside India. The revenue did not dispute that payments were made, but maintained that the assessee failed to prove nexus with business so as to claim deduction under Section 37(1). The Tribunal after affording opportunity also noted absence of material to controvert the findings of the CIT(A). In these circumstances the Court found that the lower fora had legitimately sustained the disallowance because the foundational fact - that the expenditure related to services performed outside India and was therefore deductible - was not proved by the assessee. Since the concurrent factual findings were determinative, the substantial questions of law posed at admission were not required to be answered.

The concurrent findings that the assessee failed to establish with material evidence that the payments were for services rendered outside India and hence not allowable as business expenditure were upheld; the disallowance was sustained.

Final Conclusion: The appeal is dismissed; concurrent factual findings of the CIT(A) and the Tribunal that the assessee failed to prove that the payments to foreign parties were for services rendered outside India (and thus deductible) are sustained, rendering consideration of the framed substantial questions unnecessary.

Deduction under Section 80IA - captive consumption of power - profit or gains "derived" by own consumption - interpretation of "derived" in Section 80IA - precedent binding within jurisdiction

Deduction under Section 80IA - captive consumption of power - profit or gains "derived" by own consumption - precedent binding within jurisdiction - Assessee entitled to claim deduction under Section 80IA for value of power consumed captively, including power charges realised from group/sister companies within the same premises, for the assessment year 2006-2007. - HELD THAT: - The Tribunal allowed the claim following the jurisdictional High Court's reasoning in CIT v. Thiagarajar Mills Ltd., which rejected the contention that only profits from sale to outsiders fall within Section 80IA. The High Court construed the expression 'derived' in Section 80IA to include benefits obtained from one's own consumption of the product of the undertaking, reasoning that savings from captive consumption constitute profit or gains derived from the undertaking. The Tribunal noted that this view overruled the earlier coordinate Bench decision relied upon by the Revenue, and the decision was thereafter followed by another Bench of the Madras High Court in Tamil Nadu Petroproducts Limited. Given these binding and subsequent decisions within the jurisdiction, the controversy was no longer res integra and the claim for deduction in respect of captive power consumption (including charges from group companies situated in the same premises) was correctly allowed. [Paras 6, 7]

Revenue's appeal dismissed; no substantial question of law arises and the assessee's claim under Section 80IA for captive power consumption stands allowed.

Final Conclusion: In view of binding decisions of the Madras High Court construing 'derived' in Section 80IA to cover benefits from captive consumption, the Revenue's appeal is dismissed and the assessee is entitled to deduction for captive power consumption (including charges from group companies within the same premises) for AY 2006-2007.

Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 - Dismissal in limine / ex parte dismissal - Inherent power to set aside orders and restore appeals - Section 254(2) of the Income Tax Act, 1961 - Commencement of limitation from date of knowledge of order - Condonation of delay

Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 - Dismissal in limine / ex parte dismissal - Inherent power to set aside orders and restore appeals - Validity of the Tribunal's dismissal of the appeals in limine for non-appearance. - HELD THAT: - Rule 24 requires that where the appellant is absent the Tribunal shall dispose of the appeal on merits after hearing the respondent, and if the appellant subsequently appears and shows sufficient cause the Tribunal shall set aside the ex parte order and restore the appeal. The Supreme Court decision in S. Chenniappa Mudaliar and subsequent High Court authorities establish that dismissal in default without adjudication on merits is not the proper mode and that the Tribunal ought to exercise its power to set aside such orders and decide the appeal on merits. Applying these principles, the High Court found that the Tribunal was not justified in dismissing the assessee's appeals in limine in the absence of the appellant or its authorized representative and that such dismissal was susceptible to being set aside and the appeals adjudicated on merits.

The Tribunal's dismissal in limine was not justified; the principle that absent appellants' pleas require adjudication on merits applies and the order is amenable to being set aside.

Section 254(2) of the Income Tax Act, 1961 - Commencement of limitation from date of knowledge of order - Condonation of delay - Whether the period for seeking rectification/ restoration under Section 254(2) runs from the date of the order or from the date the affected party obtained knowledge of the order, and whether the delay in filing appeals was to be condoned. - HELD THAT: - Section 254(2) permitted the Tribunal to rectify mistakes apparent from the record within the statutory period (four years as applicable when the order was passed). The court accepted the reasoning in Golden Times Services (Delhi High Court) that limitation under Section 254(2) commences from the date the affected party obtained knowledge of the decision, not merely from the date the order was passed. Applying that principle, the High Court held that the assessee obtained knowledge of the Tribunal's dismissal only upon service of the attachment notice on 19.11.2019, and that the period between 01.02.2013 and 19.11.2019 could not be treated as delay for purposes of seeking restoration. The steps taken from November 2019 through March 2020 to pursue restoration, and the subsequent filing of appeals during the lockdown, were held to sufficiently explain the time taken. Consequently, the court found sufficient cause to condone the delay in filing the appeals from the date of knowledge.

Limitation under Section 254(2) is to be reckoned from the date the party obtained knowledge of the order; the delay from that date until filing is sufficiently explained and is condoned.

Condonation of delay - Costs - Relief to be granted once delay is condoned. - HELD THAT: - Having accepted that the period of limitation began on the date of knowledge and that the time thereafter was satisfactorily explained, the court exercised its discretion to condone the delay in filing the appeals. However, in view of the protracted lapse between the original order and its knowledge and the need to deter inaction, the court imposed costs as a condition of allowing the applications for condonation.

Delay in filing each appeal is condoned; applicants must pay costs of Rs. Ten thousand per appeal to the Revenue within three weeks.

Final Conclusion: The applications for condonation of delay are allowed; the Tribunal's ex parte dismissal was not justified and the limitation for seeking restoration commences from the date the assessee obtained knowledge of the order (19.11.2019); delay in filing the appeals is condoned subject to payment of costs of Rs. Ten thousand per appeal to the Revenue within three weeks.

Condonation of delay - assessment under section 144 / best judgment assessment - opportunity of hearing / natural justice - unexplained cash credit u/s.68 - unexplained expenditure u/s.69C

Condonation of delay - Delay in filing the appeal of 60 days was condoned and the appeal was admitted for hearing on merits. - HELD THAT: - The assessee filed a condonation petition supported by a medical certificate explaining the delay. The Revenue did not dispute the explanation and the Departmental Representative raised no objection to condonation. The Tribunal found that the delay was not attributable to mala fide or deliberate conduct and therefore condoned the delay of 60 days and proceeded to hear the appeal on merits. [Paras 3]

Delay of 60 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

Unexplained cash credit u/s.68 - Addition of Rs. 2,00,000 as unexplained cash credit under section 68 was deleted. - HELD THAT: - The Assessing Officer had treated a cash deposit of Rs. 2,00,000 as unexplained in the absence of clarification. The CIT(A) rejected the assessee's explanation that the deposit originated from earlier bank withdrawals. On review, the Tribunal observed that the Revenue did not dispute the earlier withdrawals nor the fact that the assessee had sufficient cash balance as per records. There was no evidence brought by Revenue to show the deposit arose from some other undisclosed source. Given that the deposit was satisfactorily explained as coming from earlier withdrawals, the addition could not be sustained. [Paras 5, 6]

The addition under section 68 is set aside and Ground No.3 is allowed.

Unexplained expenditure u/s.69C - The disallowance of expenditure under section 69C was upheld to the extent confirmed by the CIT(A) (restricted to 10% of direct expenses). - HELD THAT: - The Assessing Officer made a best judgment disallowance of 20% of direct expenses after noting substantial cash payments supported by self-made vouchers. The CIT(A), on consideration of the remand report and circumstances (including lack of corroborative evidence, prevalence of cash payments, and failure to furnish books despite opportunities), exercised discretion to restrict the addition to 10% of direct expenses. The Tribunal found that the assessee failed to produce corroborative evidence or confirmations to show the payments were genuinely incurred for business purposes and that the CIT(A)'s restriction to 10% was reasonable and required no interference. [Paras 7, 8, 9]

Ground No.4 is dismissed; the disallowance as restricted by the CIT(A) is upheld.

Assessment under section 144 / best judgment assessment - opportunity of hearing / natural justice - The contention that the assessment order was void-ab-initio for want of natural justice was rejected. - HELD THAT: - The Tribunal examined the record and the CIT(A)'s findings that the Assessing Officer had repeatedly given reasonable opportunities to the assessee to explain the return and substantiate claims, had communicated intention to frame assessment under section 144, and that the assessee failed to avail the opportunities. In these circumstances the Assessing Officer lawfully proceeded to make a best judgment assessment. There was no legal infirmity rendering the order void-ab-initio for lack of natural justice. [Paras 10, 11]

Ground No.1 is dismissed; the assessment framed under section 144 is not void-ab-initio.

Opportunity of hearing / natural justice - The grievance of lack of opportunity in the final hearing was rejected. - HELD THAT: - The record shows multiple opportunities were provided to the assessee and that the Assessing Officer had given a final notice under which the assessee still did not appear. Notices were held to be duly served. The Tribunal agreed with the CIT(A) that the assessee's failure to avail the opportunities precluded a finding of denial of natural justice, and the Assessing Officer was justified in proceeding under the statute. [Paras 12, 13]

Ground No.2 is dismissed; there was no failure to afford opportunity warranting setting aside the assessment.

Final Conclusion: The Tribunal condoned the delay and partly allowed the appeal: the addition under section 68 (cash deposit) is deleted, while the disallowance under section 69C (as restricted by the CIT(A) to 10% of direct expenses) and challenges to the assessment being void or to lack of opportunity are dismissed.

Penalty under section 271(1)(b) - penalty for non-compliance with statutory notices - limitation under section 275(1) - recording of satisfaction for imposition of penalty - assessment under section 143(3) v. section 144 - independence of penalty proceedings from assessment proceedings

Penalty under section 271(1)(b) - recording of satisfaction for imposition of penalty - assessment under section 143(3) v. section 144 - limitation under section 275(1) - Validity of penalty levied under section 271(1)(b) for non-compliance with statutory notices in the assessment years 2012-13 and 2013-14 - HELD THAT: - The Tribunal held that the penalty levied under section 271(1)(b) could not be sustained where the assessment was completed under section 143(3) and not under section 144, because subsequent compliance in the assessment proceedings evidenced that earlier defaults had been treated as cured and there was no recorded satisfaction in the assessment order justifying the penalty. The coordinate-bench decision was followed which applied the distinction drawn by the High Court in Hissaria Bros. between clauses of section 275(1): where penalty proceedings are not integrally linked to the assessment outcome, clause (c) and its own limitation rule apply and the extended appellate-linked limitation under clause (a) cannot be invoked. The Tribunal also relied on authority that mere initiation of penalty proceedings or issuance of a penalty notice does not substitute for a recorded satisfaction in the assessment order. Applying these principles to the facts, and noting the assessment was under section 143(3), the Tribunal concluded there was no basis to sustain the penalty and allowed the appeals.

Penalties imposed under section 271(1)(b) for AYs 2012-13 and 2013-14 set aside; appeals allowed.

Final Conclusion: Both appeals are allowed and the penalties levied under section 271(1)(b) for the assessment years 2012-13 and 2013-14 are quashed on the basis that the assessment under section 143(3) and absence of recorded satisfaction precluded sustaining the penalty under the circumstances.

Disallowance under section 40(a)(i) - deductibility of expenses in computing business income - tax deduction at source under section 195 - remand for factual verification of accounting treatment - consequences for non-deduction of tax at source

Disallowance under section 40(a)(i) - deductibility of expenses in computing business income - Disallowance under section 40(a)(i) is inapplicable where the related expenditure has not been claimed as a deduction under sections 30 to 38. - HELD THAT: - The Tribunal held that section 40(a)(i) operates as a restriction on the deductibility of expenses otherwise allowable under sections 30 to 38. If the related expenditure is not claimed in the computation of business income there is no occasion to invoke section 40(a)(i) to disallow it. Applying this principle to the facts, the assessee, an advertising agency, ordinarily accounts only for its agency commission (15% of net billing) and does not claim the gross payment to Facebook Ireland Limited as its own expense. Therefore, if the assessee has not claimed the advertisement payments as a deduction in its profit and loss account and computation of business income, the statutory disallowance under section 40(a)(i) cannot be sustained. [Paras 6, 7, 8]

The plea that section 40(a)(i) cannot be invoked where no deduction for the relevant expenditure has been claimed is accepted in principle.

Remand for factual verification of accounting treatment - The matter is remitted to the Assessing Officer to verify whether the assessee has accounted for only the agency commission or has claimed the entire billing (including payments to Facebook Ireland Limited) as a deduction. - HELD THAT: - Although the legal principle disfavouring invocation of section 40(a)(i) where no deduction is claimed was accepted, the Tribunal directed a factual verification because the outcome depends on the assessee's actual accounting and the computation of business income filed with returns. The Assessing Officer is to examine the profit and loss account and computation to determine whether the assessee accounted only for agency commission or claimed the advertisement payments as expenditure. The remand is limited to this factual inquiry. [Paras 8]

The appeal is remitted to the file of the Assessing Officer for verification of the accounting treatment and computation of business income.

Consequences for non-deduction of tax at source - Revenue remedies under provisions relating to failure to deduct tax at source remain open irrespective of the outcome on section 40(a)(i). - HELD THAT: - The Tribunal made clear that its acceptance of the limited principle regarding section 40(a)(i) is without prejudice to action available to the revenue under provisions that deal with failure to deduct or deposit tax at source. The authorities may proceed, where appropriate, under the provisions providing for recovery of such tax, interest for delay and imposition of penalty. This observation preserves the revenue's power to enforce consequences for non-deduction of tax at source independent of the disallowance issue. [Paras 9]

The revenue is entitled to pursue consequences for non-deduction of tax at source in accordance with law.

Tax deduction at source under section 195 - The broader question whether tax was deductible from payments to Facebook Ireland Limited and whether income embedded in such payments is taxable in India is left open and not decided. - HELD THAT: - The Tribunal declined to adjudicate the wider controversy on whether tax was deductible under section 195 and whether the receipts to Facebook Ireland Limited are taxable in India, noting that Facebook Ireland Limited was being assessed elsewhere and that adverse observations might affect separate proceedings. Accordingly, despite extensive arguments, the Tribunal refrained from deciding the taxability and TDS points and left them for determination in an appropriate case. [Paras 10]

The question of taxability of payments to Facebook Ireland Limited and deductibility under section 195 is not decided and is left open for future adjudication.

Final Conclusion: The appeal is allowed in part: the Tribunal held that section 40(a)(i) cannot be invoked where the expenditure has not been claimed as a deduction and remitted the matter to the Assessing Officer to verify the assessee's accounting and computation; the revenue's remedies for failure to deduct tax at source remain available; the broader question of taxability and deductibility under section 195 is left open.

Form of appeal verification - authority to verify return under section 140 - summary dismissal / ex-parte dismissal - violation of principles of natural justice - remand for fresh adjudication after opportunity of hearing

Form of appeal verification - authority to verify return under section 140 - summary dismissal / ex-parte dismissal - violation of principles of natural justice - Validity of learned CIT(A)'s ex parte dismissal of the appeal on the ground that Form No.35 was not verified by the managing director or a director as required under rule 45 read with section 140. - HELD THAT: - The Tribunal found that the learned CIT(A) dismissed the appeal solely because Form No.35 was digitally signed by the assessee-company in the verification block rather than by the managing director or another director. While Rule 45 and section 140 prescribe who is authorised to verify an appeal and return respectively, the CIT(A) was not entitled to summarily dismiss the appeal on that hyper technical basis without giving the assessee any opportunity to explain or rectify the alleged defect. The course adopted by the CIT(A) amounted to an ex parte summary dismissal without affording a hearing and was therefore contrary to the principles of natural justice. The Tribunal accordingly set aside the impugned order of dismissal. [Paras 3, 5]

Impugned ex parte dismissal set aside for violation of natural justice; dismissal on the stated verification defect held untenable.

Remand for fresh adjudication after opportunity of hearing - Remedy to be granted and consequence for other grounds raised before the CIT(A). - HELD THAT: - Given the defect in procedure and denial of opportunity, the Tribunal remitted the matter to the file of the CIT(A) for fresh adjudication in accordance with law after furnishing a reasonable opportunity of hearing to the assessee. As the remand disposes of the procedural infirmity which led to dismissal, the Tribunal held that all other grounds raised in the appeal become academic at this stage and do not require adjudication by the Tribunal. [Paras 5, 6]

Matter remitted to CIT(A) for fresh adjudication after hearing; other issues rendered academic.

Final Conclusion: Appeal allowed for statistical purposes by setting aside the ex parte dismissal and remitting the matter to the CIT(A) for fresh adjudication after affording a reasonable opportunity of hearing to the assessee.

Section 50C - valuation by reference to guidance value - Year of taxability of capital gains - Remand for de novo assessment - Opportunity of hearing

Section 50C - valuation by reference to guidance value - Year of taxability of capital gains - Guidance value - Remand for de novo assessment - Whether capital gains arising from the sale/transfer of the property should be computed for Assessment Year 2005-06 by applying the guidance value under Section 50C or whether the transfer and taxability arose earlier, and whether the assessment made by the AO requires reassessment. - HELD THAT: - The Tribunal noted that a memorandum of agreement of transfer and assignment dated 17/03/1993 records receipt of sale consideration by the assessee, while the final registered sale deed is dated 04/10/2004 in favour of a different person. The authorities below applied Section 50C on the basis of the guidance value as on the date of registration in 2004 and made additions. The Tribunal observed that the proviso to Section 50C is a clarification and that the provisions should be examined from the date of the memorandum dated 17/03/1993. The Tribunal also recorded that the assessee did not offer capital gains in 1993 and that no material was placed to show entitlement to a loss in the year under appeal. In view of the factual complexity-payments recorded in 1993, registration in 2004, and relationships between parties involved-the Tribunal directed that the matter be remitted to the file of the AO for de novo consideration. The AO was directed to examine all relevant evidence, verify the links between the 1993 agreement and the 2004 registration, address queries raised, and afford the assessee a proper opportunity of being heard before completing assessment in accordance with law. [Paras 20, 21]

Issue set aside and remitted to the AO for de novo consideration; assessee directed to adduce evidence and reply to queries; proper opportunity of hearing to be granted.

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal has remitted the disputed capital gains/Section 50C issue to the AO for fresh adjudication in light of the materials on record and has directed that the assessee be afforded opportunity to establish relevant links; other grounds were either not pressed or rendered academic.

Capital gains on deemed transfer - deemed transfer under section 2(47)(v) read with section 53A of the Transfer of Property Act - piercing the corporate veil - notional rent / income from house property - disallowance under section 40(a)(ia)

Procedural maintainability of grounds of appeal - Grounds 4 and 5 (additional grounds relating to travelling expenses and depreciation) did not arise out of the order of the CIT(A) and were not entertained by the Tribunal. - HELD THAT: - The Tribunal noted that the grounds now urged before it (Grounds 4 and 5) were not raised before the CIT(A) and do not arise out of the impugned order of the CIT(A). Consequently the Tribunal declined to adjudicate these grounds and dismissed them for want of locus to be considered on appeal to the Tribunal. [Paras 16]

Grounds 4 and 5 dismissed as not arising out of the impugned order.

Capital gains on deemed transfer - deemed transfer under section 2(47)(v) read with section 53A of the Transfer of Property Act - piercing the corporate veil - Addition of short-term capital gains on account of the alleged transfer to M/s Synergy Consultants Pvt. Ltd. was not finally adjudicated by the Tribunal and is remanded to the Assessing Officer for fresh consideration in accordance with law. - HELD THAT: - The Tribunal examined the facts that the assessee (owner) is a 50% director in the purchaser company, substantial advance was received under an MOU for proposed sale, and occupation of the premises by the company without payment of rent. Observing that the question whether the transaction amounted to a de facto transfer (invoking section 2(47)(v) read with section 53A) must be judged from the intention of parties and all circumstances, and that the transaction appeared to be an arranged transaction where the corporate veil may be pierced, the Tribunal found it appropriate to remit the matter. The Tribunal directed that the Assessing Officer consider the issue afresh in accordance with law rather than finally deciding the matter itself. [Paras 22, 23, 24]

Issue remanded to the Assessing Officer for fresh adjudication in accordance with law.

Disallowance under section 40(a)(ia) - The disallowance of Rs. 25,000 under section 40(a)(ia) as upheld by the CIT(A) was not disturbed by the Tribunal. - HELD THAT: - The CIT(A) examined payments claimed and observed that one payment of Rs. 25,000 constituted consultancy/professional charges on which tax was deductible at source and hence liable to disallowance under section 40(a)(ia), while other amounts were held not liable to TDS. The Tribunal recorded the CIT(A)'s conclusion on this point and did not reverse it in the impugned appeal.

Disallowance of Rs. 25,000 under section 40(a)(ia) stands (partly upheld as per CIT(A)).

Final Conclusion: The Tribunal dismissed Grounds 4 and 5 as not arising out of the CIT(A)'s order, remanded the disputed short-term capital gains addition to the Assessing Officer for fresh consideration in accordance with law, and did not interfere with the CIT(A)'s partial upholding of the disallowance under section 40(a)(ia); the appeal is party allowed for statistical purposes.

Invoking of Section 153C of the Income-tax Act - Prima facie incriminating material found during search - Adjudication on unexplained cash deposits - Admissibility of cash flow statement as evidence - Reopening and reassessment under Section 153A/153C - Remand for de novo adjudication

Invoking of Section 153C of the Income-tax Act - Prima facie incriminating material found during search - Adjudication on unexplained cash deposits - Admissibility of cash flow statement as evidence - Validity of assessment and additions for AY 2006-07 under proceedings initiated u/s 153C r.w.s. 153A r.w.s. 143(3) and whether the assessee's explanations and cash-flow evidence warrant deletion of additions - HELD THAT: - The Tribunal recorded that a search and simultaneous survey were conducted against the Vaish Group and that some incriminating material pertaining to the assessee was found during those search proceedings, which is a relevant trigger for invoking Section 153C. The Assessing Officer made additions for unexplained cash deposits in bank accounts; the assessee maintained before the AO that deposits arose from withdrawals from other bank accounts and later before the CIT(A) produced a cash-flow statement asserting an opening cash balance as source. The CIT(A) rejected the cash-flow on the ground it was not filed earlier. The Tribunal found the record does not show whether the bank accounts were declared in earlier returns or whether the alleged opening cash balance had been accepted by the Revenue in earlier years. In the interest of justice and because the factual matrix regarding prior disclosure and acceptance is not evident on record, the Tribunal declined to decide the additions finally and directed that the matter be restored to the AO for fresh consideration. The assessee was directed to produce all relevant evidence before the AO, and the AO was directed to admit and adjudicate the evidence in accordance with law and principles of natural justice. [Paras 6]

Matter remanded to the file of the Assessing Officer for de novo adjudication on merits for AY 2006-07; assessee to produce supporting evidence and AO to provide opportunity and decide in accordance with law.

Invoking of Section 153C of the Income-tax Act - Prima facie incriminating material found during search - Adjudication on unexplained cash deposits - Admissibility of cash flow statement as evidence - Validity of assessment and additions for AY 2008-09 under proceedings initiated u/s 153C r.w.s. 153A r.w.s. 143(3) and whether the assessee's explanations and cash-flow evidence warrant deletion of additions - HELD THAT: - For AY 2008-09 the Tribunal noted that incriminating material pertaining to the assessee was found during the search against the Vaish Group, supporting invocation of Section 153C. Additions were made in respect of cash deposits which the assessee sought to explain by way of cash-flow statements and prior disclosures. The record before the Tribunal did not clearly establish whether the relevant bank accounts had been declared year to year in earlier returns or whether the alleged opening cash in hand had been accepted by the Revenue previously. Given these lacunae in the record and because the CIT(A) rejected the cash-flow on procedural grounds, the Tribunal considered it appropriate in the interests of justice to remit the matter to the AO for fresh adjudication. The assessee was directed to produce all necessary evidence and the AO was directed to admit and adjudicate the same in accordance with law and principles of natural justice. [Paras 6, 7]

Matter remanded to the file of the Assessing Officer for de novo adjudication on merits for AY 2008-09; assessee to produce supporting evidence and AO to provide opportunity and decide in accordance with law.

Final Conclusion: Both appeals for AY 2006-07 and AY 2008-09 are allowed for statistical purposes and the assessments are set aside and restored to the Assessing Officer for fresh consideration and adjudication on merits; the AO shall admit and consider the evidence produced by the assessee and decide in accordance with law and principles of natural justice.

Bar on reopening assessments for non-registration under the second proviso to section 12A(2) - retrospective/declaratory effect of provisos to section 12A(2) - availability of exemption under sections 11 and 12 consequent to registration under section 12AA for earlier assessment years - binding effect of CBDT Circular No.1 of 2015 in interpreting provisos to section 12A(2)

Bar on reopening assessments for non-registration under the second proviso to section 12A(2) - availability of exemption under sections 11 and 12 consequent to registration under section 12AA for earlier assessment years - Validity of reopening assessments issued under section 147/148 where registration under section 12AA had been granted and the AO reopened solely on account of non-registration for earlier years. - HELD THAT: - The Tribunal found on the facts that the assessing officer's recorded reason for reopening was exclusively that the assessee lacked registration for the years under consideration and therefore the surplus should be assessed as taxable income. The second proviso to section 12A(2) bars initiation of proceedings under section 147 merely for non-registration of a trust for any assessment year preceding the first year for which registration applies, where registration has been granted and the trust's objects and activities remain the same. The provisos, explained by CBDT Circular No.1 of 2015 and treated as declaratory by judicial authority, operate retrospectively and therefore apply to bar reopening where the registration certificate was in force at the time notices under section 148 were issued. Applying these legal principles to the recorded reasons, the Tribunal concluded that the AO's action violated the second proviso to section 12A(2) and was therefore invalid. As the reopening was quashed on this legal ground, the Tribunal did not adjudicate the merits of the additions made by the AO. [Paras 9, 12, 13, 17, 18]

Reopening of the assessments for the years under consideration was invalid as it was taken only for non-registration and thus contrary to the second proviso to section 12A(2); the orders are quashed.

Final Conclusion: All appeals are allowed; the reopening orders for assessment years 2009-10 to 2013-14 are quashed as barred by the second proviso to section 12A(2) and consequent merits issues were not decided.

Import of substances not intended for medicinal use-exemption under Rule 43 and Schedule D - requirement of import licence in Form 10 A depends on declared intended use - restraint by issuance of Form 15 for alleged contravention of licensing requirements - acceptance of undertaking/end user bond and supervisory checks as adequate regulatory safeguard

Import of substances not intended for medicinal use-exemption under Rule 43 and Schedule D - requirement of import licence in Form 10 A depends on declared intended use - Whether the imported Inositol NF 12, being declared 'Not for Medicinal Use' and sold for non pharmaceutical purposes, was exempt from licensing requirements and not liable to detention for lack of Form 10 A. - HELD THAT: - The court examined Rule 43 and Schedule D which exempt substances "not intended for medicinal use" from provisions of Chapter III subject to conditions including certification by the importer when imported in bulk. The admitted facts established that the consignment was imported and sold as "Not for Medicinal Use" and the petitioner furnished undertakings that the goods would be used/sold only to non pharma industries and would furnish end user particulars and reconciliation data. Applying the rule that licensing obligations under Rule 23/Form 10 A turn on the intended use, the court held that where import is legitimately for non medicinal purposes the insistence on Form 10 A is not warranted. The court relied on prior authoritative decisions endorsing that declared non medicinal use attracts Rule 43/Schedule D exemption and that supervisory safeguards (undertaking, end user bond and checks) are adequate to prevent misuse. Consequently, detention on the ground of absence of Form 10 A was held unsustainable in the facts of the case. [Paras 11, 12, 13, 14, 17]

The imported Inositol NF 12, being declared and used for non medicinal purposes, falls under the exemption in Rule 43 and Schedule D and could not be lawfully retained merely for lack of Form 10 A.

Restraint by issuance of Form 15 for alleged contravention of licensing requirements - acceptance of undertaking/end user bond and supervisory checks as adequate regulatory safeguard - Whether the goods in the petitioner's possession should be released and on what conditions, notwithstanding earlier issuance and periodic renewal of Form 15. - HELD THAT: - Having found that Rule 43 and Schedule D applied and that the samples conformed to standards, the court addressed the continued restraint effected by Form 15. The court observed that the petitioner had given express undertakings to restrict use to non pharmaceutical purposes and to furnish end user particulars and reconciliation data. In light of the statutory exemption applicable to non medicinal imports and consistent judicial precedents permitting release subject to undertakings and permitting supervisory checks, the court concluded that the proper course was to order release rather than continued detention. The court directed release after obtaining the necessary undertaking, while leaving open the authority's power to act if misuse is later revealed. [Paras 12, 13, 16, 18]

Respondents are directed to release the locally procured Inositol NF 12 to the petitioner upon obtaining the specified undertaking, within two weeks from receipt of the order.

Final Conclusion: The writ petition is allowed: the court held that the consignment of Inositol NF 12 declared for non medicinal use falls under the exemption in Rule 43/Schedule D and cannot be retained solely for lack of Form 10 A; respondents are directed to release the goods to the petitioner upon receipt of the prescribed undertaking within two weeks, with no order as to costs.

Deactivation and reactivation of Director Identification Number (DIN) - disqualification of directors under Section 164(2) of the Companies Act, 2013 - interaction of Section 164(2) and Section 167(1) of the Companies Act, 2013 - absence of power in Rule 11 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 to deactivate DIN upon disqualification - publication of list of disqualified directors by the Registrar of Companies (ROC) - requirement of an enquiry to attribute default to specific directors before initiating disqualification consequences

Deactivation and reactivation of Director Identification Number (DIN) - absence of power in Rule 11 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 to deactivate DIN upon disqualification - interaction of Section 164(2) and Section 167(1) of the Companies Act, 2013 - Validity of ROC's deactivation of DIN and the consequent relief of reactivation - HELD THAT: - The Court followed the First Division Bench in Meethelaveetil Kaitheri Muralidharan's case and held that Rule 11 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 does not authorize cancellation or deactivation of a DIN on the ground of disqualification under Section 164(2). Read with Section 167(1), a director who is disqualified by reason of a default by a company may nevertheless continue to hold office in the defaulting company and would need the DIN to file requisite documents; therefore deactivation of DIN is legally impermissible and would frustrate the statutory scheme. Applying that reasoning, the impugned deactivation is quashed and the DIN must be reactivated within the timeframe directed by the Division Bench. The Court also recognised that the ROC may still initiate proceedings to determine attribution of default to specific directors, but such action must follow an enquiry consistent with the observations in the precedent. [Paras 6, 7]

Impugned deactivation of DIN and publication of the disqualified list quashed; DIN to be reactivated in accordance with the Division Bench's directions, while permitting the ROC to initiate enquiry-based action to attribute defaults.

Final Conclusion: Writ petitions allowed following the Division Bench precedent; the ROC's deactivation of the petitioners' DINs and related publication is quashed and the DINs are to be reactivated, subject to any future enquiry by the ROC to attribute defaults to particular directors.

Initiation of Corporate Insolvency Resolution Process - default under Section 7 of the Insolvency and Bankruptcy Code - limitation and acknowledgement of debt under Section 18 of the Limitation Act - substitution following amalgamation of banks and continuance of proceedings - authorization of bank officer to sign and file insolvency application - non-joinder and res judicata not a defence under the IBC - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code

Authorization of bank officer to sign and file insolvency application - substitution following amalgamation of banks and continuance of proceedings - The application was filed by an authorized person and substitution of Union Bank of India for Corporation Bank was permissible following amalgamation. - HELD THAT: - The Tribunal examined the authorization furnished by the Financial Creditor and found that the Chief Manager was competent to sign and file the insolvency application under the Bank's board resolution and specific authorization. In view of the Government notification effecting amalgamation of Corporation Bank into Union Bank of India, paragraph 9 of that notification preserves pending proceedings and permits continuance and enforcement by the transferee bank; therefore substitution of Union Bank of India as applicant is valid and the technical objection to maintainability on these grounds is rejected. [Paras 2, 27]

The objection on authorization and substitution is rejected; the application is maintainable by Union Bank of India.

Limitation and acknowledgement of debt under Section 18 of the Limitation Act - default under Section 7 of the Insolvency and Bankruptcy Code - The application is not barred by limitation and the existence of debt and default has been established for the purpose of admission under Section 7. - HELD THAT: - The Tribunal considered the sequence of events including classification of the loan as NPA, SARFAESI actions, filing of OA No. 407/2012 within three years of the NPA classification and the filings/acknowledgements in the corporate audited statements. Having reviewed the documents and authorities relied upon, the Tribunal held that the Financial Creditor has demonstrated existence of debt and default sufficient for admission under Section 7(4) of the IBC. The filing before the DRT within three years and subsequent proceedings, together with alleged acknowledgements reflected in financial statements, preclude a finding that the petition is time-barred, and the Tribunal relied on relev ant principles concerning disputes and procedural requirements under the Code. [Paras 4, 8, 10, 15, 28]

Limitation plea is rejected; the application is within time and the default is established for initiation of CIRP.

Non-joinder and res judicata not a defence under the IBC - Contentions of non-joinder of parties and res judicata are not tenable as defences to the Section 7 application. - HELD THAT: - The Tribunal held that procedural defences grounded in the Code of Civil Procedure do not apply to insolvency proceedings under the IBC. The IBC permits proceedings against a principal borrower and guarantor(s) and does not preclude simultaneous or separate applications against different corporate debtors; res judicata and non-joinder arguments based on other fora are therefore not a bar to admission under Section 7. The Tribunal referred to NCLAT precedents to support that separate applications may be filed, subject to the statutory scheme. [Paras 29, 30]

The pleas of non-joinder and res judicata are rejected.

Initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code - The Tribunal admitted the Section 7 application, initiated the CIRP, appointed an Interim Resolution Professional, and directed operation of the moratorium. - HELD THAT: - Having found default and rejected other objections, the Tribunal admitted the application under the IBC. It appointed the Financial Creditor's proposed Insolvency Professional as Interim Resolution Professional after correcting Registrar details, directed the IRP to file requisite documentation, and ordered public announcement and compliance with statutory duties. Consequentially the moratorium under Section 14 operates from the date of the admission order, with the usual exception for uninterrupted supply of essential services and directions as to the IRP's duties and reporting. [Paras 31]

The Section 7 application is admitted; IRP appointed and moratorium declared effective from the date of the order.

Final Conclusion: The Tribunal admitted the Financial Creditor's Section 7 application against the Corporate Debtor, held the application to be filed by an authorized representative and not barred by limitation, rejected non-joinder and res judicata defences, appointed the interim resolution professional proposed by the Financial Creditor (with corrected registration details), and declared the moratorium effective from the date of the admission order.

Pre-consultation before issue of Show Cause Notice - abuse of process of law - writ jurisdiction at the pre-adjudication stage - administrative guideline not supplanting statutory remedy - principles of natural justice / audi alteram partem

Pre-consultation before issue of Show Cause Notice - administrative guideline not supplanting statutory remedy - abuse of process of law - Whether non-compliance with the Board's pre-consultation instruction (para 5 of Circular dated 10.03.2017) vitiates the issuance of the Show Cause Notice and entitles the assessee to quash the notice by invoking writ jurisdiction. - HELD THAT: - The Court held that the Board's pre-consultation requirement is an administrative guideline aimed at narrowing disputes before issuance of a Show Cause Notice and is not a statutory pre-condition that converts non-compliance into jurisdictional infirmity. Invocation of writ jurisdiction at the stage of issuance of a Show Cause Notice, where departmental adjudicatory remedies and appellate fora are available, amounts to an abuse of process when used to delay assessment proceedings. The Court observed that assessees may not use the constitutional courts to circumvent or postpone the statutory adjudicatory mechanism provided under the taxing statutes and that entertaining such writs at a premature stage permits undue delay and defeats the purpose of revenue proceedings. [Paras 13, 14, 18, 19]

Non-compliance with the Board's pre-consultation guideline does not, by itself, invalidate the Show Cause Notice or justify quashing it via writ; invoking writ jurisdiction at that stage is an abuse and not permissible.

Writ jurisdiction at the pre-adjudication stage - principles of natural justice / audi alteram partem - Whether the Single Judge's disposal-directing the assessee to file objections to the Show Cause Notice, allowing a post-issuance pre-consultation hearing, and setting aside paragraph 11 of the Show Cause Notice as redundant-was correct. - HELD THAT: - The Court found that the Single Judge acted benevolently and correctly in directing the assessee to avail the departmental process by filing objections to the Show Cause Notice after a post-issuance pre-consultation hearing was held. The Court noted that the pre-consultation conducted ex post facto rendered paragraph 11 of the SCN (recording prior consultation with audit) redundant, and that the appropriate course is adjudication by the authority after hearing the assessee's objections, followed by statutory appeals if aggrieved. The Court emphasised that the assessee was obliged to pursue available departmental remedies and appellate fora rather than seek premature relief by way of writ. [Paras 4, 5, 20]

The Single Judge's order directing the assessee to file objections to the Show Cause Notice and setting aside paragraph 11 as redundant was proper; the assessee must pursue departmental adjudication and statutory appeals.

Final Conclusion: The writ appeal is dismissed. The High Court held that the Board's pre-consultation guideline does not oust the statutory adjudicatory process, that invoking writ jurisdiction at the show-cause stage is an abuse of process, and that the assessee must file objections and pursue the departmental adjudication and statutory appeals; consequently the Single Judge's disposal was upheld and the writ appeal dismissed.

Tax on sales in course of import - Article 286(1)(b) - prohibition on State taxing imports - application of Section 5(2) of the Central Sales Tax Act - error apparent on the face of the record - rectification of mistake under Section 69(1) of the Act - limits of revisional power under Section 63A

Tax on sales in course of import - Article 286(1)(b) - prohibition on State taxing imports - application of Section 5(2) of the Central Sales Tax Act - Sales made in the course of import to ISTRAC were not exigible to tax under the Karnataka Value Added Tax Act, 2002. - HELD THAT: - The court found that the transactions were sales in the course of import and therefore fell within the scope of Section 5(2) of the Central Sales Tax Act and were beyond the taxing power of the State under Article 286(1)(b) of the Constitution. Consequently, levy of Value Added Tax under the State Act on those goods was outside the Act's purview and constituted an error apparent on the face of the record. [Paras 5]

The sales in question are not taxable under the State Act as they took place in the course of import and are excluded from State taxation.

Error apparent on the face of the record - rectification of mistake under Section 69(1) of the Act - limits of revisional power under Section 63A - The Assessing Officer rightly exercised powers of rectification under Section 69(1) to correct the manifest error; the revisional authority's cancellation under Section 63A and the tribunal's affirmation were erroneous. - HELD THAT: - Although the assessing order referenced Section 39(1), on its tenor the authority had in substance exercised the power to rectify a mistake apparent from the record under Section 69(1). A misdescription of the source of power did not invalidate the rectification where the order plainly effected rectification of an apparent error. The revisional authority and the tribunal failed to appreciate this legal characterisation and improperly set aside the assessing officer's rectification by invoking revisional powers under Section 63A. The High Court therefore quashed the revisional authority's and tribunal's orders and restored the assessing officer's rectification order. [Paras 5]

The Assessing Officer's rectification under Section 69(1) was valid; the revisional authority's order and the tribunal's order are quashed and the assessing officer's order is restored.

Final Conclusion: The revision petition is allowed: the court holds that the sales were not taxable as they were in the course of import and that the Assessing Officer validly rectified the tax charge under Section 69(1); the revisional authority's and tribunal's orders are quashed and the assessing order is restored.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption shifting burden of proof to the accused - concurrent findings of fact and revisional interference - power to take additional evidence under Section 391 of the Code of Criminal Procedure - revisional jurisdiction to correct miscarriage of justice - modification of sentence in the interest of justice

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption shifting burden of proof to the accused - concurrent findings of fact and revisional interference - Conviction under Section 138 of the Negotiable Instruments Act is sustainable on the evidence on record. - HELD THAT: - The cheque's execution was admitted and the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act therefore operated, shifting the evidential burden to the accused to rebut that the cheque was issued for discharge of a debt or liability. The accused's case that the cheque was a blank signed security for a chitty transaction was not proved by cogent evidence at trial; no defence evidence was adduced to discharge the shifted burden. Where trial and appellate courts have concurrent findings of fact, the High Court will not ordinarily re-appreciate evidence in revision in the absence of perversity. Applying these principles and authority construing Section 139, the petitioner's challenge to the conviction was rejected and the conviction under Section 138 was confirmed. [Paras 7, 8, 12, 13]

Conviction under Section 138 of the Negotiable Instruments Act is confirmed.

Power to take additional evidence under Section 391 of the Code of Criminal Procedure - revisional jurisdiction to correct miscarriage of justice - Whether additional documents filed in revision should be admitted or the case remanded for retrial. - HELD THAT: - Although receipts and other documents were produced with the revision petition to support the plea that the cheque was security for a chitty transaction, the trial evidence did not establish that the accused had rebutted the statutory presumption. The revisional power to take additional evidence or to remit for fresh trial is exercised in the interest of justice, but it is not appropriate to remit for further evidence after a long lapse (the complaint being prosecuted for 14 years) where the accused failed to adduce rebuttal evidence at trial and concurrent findings have been recorded. The non-production of the reply notice and its acknowledgment was held immaterial where the complainant had admitted receipt of a reply in the complaint. Consequently, the court declined to admit the additional documents for the purpose of ordering a retrial or remand. [Paras 9, 10, 11, 13]

Application to admit additional documents and remand for retrial refused; no remand ordered.

Modification of sentence in the interest of justice - Appropriate sentence to be imposed after confirming conviction under Section 138. - HELD THAT: - Considering the long pendency of the case and the circumstances, the court exercised its discretion to modify the sentence imposed by the courts below. The conviction was sustained but the sentence was altered to a fine equal to the cheque amount and, in default, simple imprisonment for three months, with a period of six months granted for payment in view of the Covid-19 pandemic, and direction for disbursement of any amount paid to the complainant as compensation in accordance with law. [Paras 14]

Sentence modified: fine equal to the cheque amount with default simple imprisonment for three months; six months' time granted for payment; directions for disbursement and execution.

Final Conclusion: The High Court in revision confirmed the conviction under Section 138 of the Negotiable Instruments Act on the ground that the accused failed to rebut the statutory presumptions under Sections 118 and 139, refused to admit additional documents or remand for retrial after prolonged delay, and modified the sentence by imposing a fine (with default simple imprisonment) while granting six months for payment in view of the Covid-19 situation.

Reasonableness of condition for suspension of sentence - Power of Appellate Court to impose conditions under Section 389 CrPC - Order to apply fine as compensation under Section 357 CrPC - Judicial discretion in granting bail and modification under Section 482 CrPC

Reasonableness of condition for suspension of sentence - Power of Appellate Court to impose conditions under Section 389 CrPC - Judicial discretion in granting bail and modification under Section 482 CrPC - Whether the pre-condition imposed by the Appellate Court requiring deposit of a substantial part of the fine as a condition for suspending sentence and releasing the appellant on bail was onerous and required modification. - HELD THAT: - The High Court applied the settled principle that while an Appellate Court may, for reasons to be recorded, suspend sentence and impose conditions for release on bail, such conditions must be reasonable and not so onerous as to amount to denial of bail. The Court considered the scheme of Section 357 CrPC (power to apply fine towards compensation) and Section 389 CrPC (power to suspend sentence and release on bail) and relied on authoritative precedents which hold that (i) the amount directed as compensation/fine must be reasonable having regard to relevant factors and the capacity of the accused to pay, and (ii) an appellate condition imposing an unreasonable deposit as a pre-condition for entertaining or suspending sentence is not permissible. Applying those principles to the facts - namely that the trial court had imposed a fine as part of the substantive sentence and the Appellate Court had conditioned suspension on deposit of a large portion of that fine - the High Court found the pre-condition to be onerous and harsh in the circumstances. Exercising its supervisory jurisdiction under Section 482 CrPC, the Court modified the pre-condition to a proportionate and reasonable deposit (10% of the fine) while leaving the other bail conditions (personal bond and sureties) intact until disposal of the appeal. [Paras 6]

Pre-condition to deposit a substantial portion of the fine for release on bail held to be onerous and modified so that the applicant shall deposit only 10% of the fine as a pre-condition for suspension of sentence and grant of bail, subject to furnishing the prescribed bond and sureties until disposal of the appeal.

Final Conclusion: Application under Section 482 CrPC partly allowed; the impugned orders are modified to require deposit of only 10% of the fine as the pre-condition for bail, with the directed personal bond and two sureties to remain in force pending disposal of the appeal.