TaxTMI Updates e-Newsletter
Dec 06,2024

Transitional arrangements for input tax credit - statutory declaration in FORM GST TRAN-1 - mandatory time limit for claiming transitional credit - submission of FORM GST TRAN-3 / Credit Transfer Document (CTD) - input tax credit as concession - rule making power under "within such time and in such manner as may be prescribed" - directory versus mandatory distinction

Statutory declaration in FORM GST TRAN-1 - mandatory time limit for claiming transitional credit - rule making power under "within such time and in such manner as may be prescribed" - directory versus mandatory distinction - Requirement of filing FORM GST TRAN-1 within the prescribed time-frame is mandatory and failure to file within that period can justify denial of transitional credit. - HELD THAT: - The Court held that sub section (3) of Section 140 expressly makes entitlement subject to being claimed "within such time and in such manner as may be prescribed", and Rule 117 was validly framed to prescribe the period and manner for filing TRAN 1. The prescription of a time limit is not a mere procedural formality but a statutory pre condition tied to the object of preventing stale claims and enabling effective verification. The use of mandatory language (eg. "shall" and "within such time") and the legislative scheme support treating the TRAN 1 time limit as mandatory rather than directory. Permitting claims at any time would frustrate the legislative policy of timely settlement of transitional credit and undermine verifiability. The Court also observed that adequate extensions and safeguards were incorporated in the rules (initial 90 days, further 90 days, and possible extension on recommendation of the Council), indicating a balanced legislative scheme for the transitional period. [Paras 33, 34, 35, 36, 37]

Obligation to submit TRAN 1 within the prescribed time is mandatory; non compliance can result in denial of transitional credit.

Submission of FORM GST TRAN-3 / Credit Transfer Document (CTD) - transitional arrangements for input tax credit - statutory declaration in FORM GST TRAN-1 - Filing TRAN 3 with CTD details does not absolve a claimant from the separate statutory requirement of timely filing TRAN 1; TRAN 3 is for a different purpose and cannot substitute for TRAN 1. - HELD THAT: - The Court examined notifications enabling claim through CTDs and concluded they do not negate or override the rule based requirement to make a solemn declaration in TRAN 1 within the prescribed time. Uploading CTD information in TRAN 3 serves a distinct function and cannot be treated as an alternative to the mandatory TRAN 1 declaration. The petitioner's reliance on notifications issuing the CTD mechanism did not demonstrate that TRAN 1 was rendered unnecessary or that TRAN 3 alone sufficed to establish entitlement. [Paras 5, 35, 37]

TRAN 3/CTD filing does not dispense with the mandatory requirement of timely TRAN 1 filing; TRAN 3 cannot substitute for TRAN 1.

Input tax credit as concession - directory versus mandatory distinction - Input tax credit is a concession available only in accordance with statutory conditions; vesting of a right does not permit claiming credit dehors the procedural conditions prescribed by law. - HELD THAT: - While earlier authorities recognize that once validly taken tax credit may be indefeasible in certain contexts, the Court emphasized the settled principle that input tax credit is a statutory concession and can be availed only by complying with conditions prescribed by the statute. The Court relied on precedents holding that concessions under fiscal statutes must be claimed in accordance with the statutory scheme and that procedural or temporal conditions forming part of that scheme must be observed. Thus, the petitioner cannot assert an unfettered vested right to transitional credit that bypasses the statutory filing regimen. [Paras 23, 26, 27, 31, 32]

Transitional input tax credit is a statutory concession and must be claimed in accordance with the conditions (including procedural/time conditions) prescribed by law.

Final Conclusion: The writ petition is without merit and is dismissed: the prescribed requirement to submit FORM GST TRAN 1 within the stipulated time is mandatory (and TRAN 3/CTD filing does not substitute for it), hence the petitioner is not entitled to the relief sought.

Exemption under Section 54F - a residential house - singular versus plural interpretation of 'a' - adjacency requirement for treating multiple units as one residential house - substantial completion and possession for exemption - amendment by Finance Act, 2014 clarifying 'one residential house'

Exemption under Section 54F - a residential house - singular versus plural interpretation of 'a' - amendment by Finance Act, 2014 clarifying 'one residential house' - Whether the phrase 'a residential house' in Section 54F must be read as referring to a singular residential unit or can be construed to include multiple distinct residential units. - HELD THAT: - The Court examined the language of Section 54F (pre-amendment), noting the use of the indefinite article 'a' and the singular term 'new asset', and observed that the words, read in ordinary and statutory context, indicate a singular house or singular asset. The Court considered authorities relied upon by the parties, including decisions which allowed aggregation where multiple units were so constructed or combined as to function as one dwelling (e.g., Gita Duggal, D. Ananda Basappa), and distinguished them on their facts where adjacency or the capacity to use units as one residence existed. The Court also noted the legislative amendment by the Finance Act, 2014 (substituting 'one residential house') and the CBDT circular which clarified that the benefit was intended for investment in one residential house; while the Court did not decide the retroactivity/clarificatory question, it observed that the statutory language and legislative action support a singular reading. The Court nevertheless qualified that where multiple floors or units are constructed or adapted to be used as one single dwelling, they may fall within 'a residential house'. [Paras 22, 31, 33, 36, 39]

The phrase 'a residential house' in Section 54F denotes a single residential unit, subject to the factual exception where multiple units are effectively capable of being used as one single dwelling.

Adjacency requirement for treating multiple units as one residential house - exemption under Section 54F - Whether the two flats purchased by the assessee (located on different floors and at opposite ends of the same tower) qualify as 'a residential house' for the purpose of claiming exemption under Section 54F. - HELD THAT: - On the material placed on record, the AO's enquiries and the Inspector's report established that the two flats were on different storeys and located at opposite ends of the building, separated by open space, and the builder confirmed they could not be physically or legally combined into a single unit. The purchases were under distinct allotment letters and there was no agreement or evidence showing an intention or capability to treat them as one cohesive residential unit. Applying the interpretive principle that multiple units can qualify only where they are constructed or adapted to be used as one dwelling, the Court found those conditions absent on the facts before it. [Paras 24, 25, 26, 40]

The two flats are distinct residential units and do not qualify as 'a residential house' under Section 54F; exemption may therefore be allowed only in respect of one residential unit.

Substantial completion and possession for exemption - exemption under Section 54F - Whether minor unfinished works (such as absence of certain fittings) or non-completion of some finishing works at the time of inspection preclude the assessee from claiming exemption under Section 54F where the assessee has paid the consideration and obtained possession/substantial construction. - HELD THAT: - The ITAT had found that although certain finishing works (for example, lift installation) were incomplete, the assessee had made the full payment, the flats were in the assessee's possession, and substantial construction had been completed. The Court agreed with the ITAT's application of the beneficial object of Section 54F, holding that omission of some finishing work does not defeat the exemption where the assessee has invested the sale proceeds in the purchase, taken possession and substantial construction is complete. The Court therefore endorsed a pragmatic approach that mere absence of non-essential finishing should not automatically deny the benefit. [Paras 7, 11, 29, 40]

Merely unfinished minor works do not negate entitlement to exemption under Section 54F where substantial construction is complete and the assessee has taken possession; exemption can be allowed in respect of the qualifying investment.

Final Conclusion: The appeal is dismissed. The Court holds that 'a residential house' in Section 54F denotes a singular residential unit (subject to the factual exception where multiple units are effectively capable of being used as a single dwelling), the two distinct non-adjacent flats purchased by the appellant do not qualify together as 'a residential house', and the Revenue's allowance of exemption in respect of one flat only was unimpeachable; minor unfinished works did not defeat entitlement where substantial construction and possession existed.

Deduction for provision for leave salary only on actual payment under Section 43B(f) - disallowance of provision for leave encashment under Section 43B(f) - carry forward and set-off of unabsorbed depreciation not restricted by eight-year limitation - effect of amendment and clarificatory circular dispensing the eight-year restriction under Section 32(2)

Deduction for provision for leave salary only on actual payment under Section 43B(f) - Claim for deduction of provision for leave salary was not allowable unless actually paid and was therefore disallowed. - HELD THAT: - The Tribunal record showed that the appellant had merely made a provision for leave salary. In view of the clear statutory language of Section 43B(f), a deduction in respect of any sum payable by an employer in lieu of leave is allowable only on actual payment. The High Court referred to precedent treating identical questions and answered the legal question in favour of the revenue, concluding that the provision made required disallowance under Section 43B(f).

Claim for deduction in respect of the provision for leave salary disallowed; legal question answered for the revenue.

Carry forward and set-off of unabsorbed depreciation not restricted by eight-year limitation - effect of amendment and clarificatory circular dispensing the eight-year restriction under Section 32(2) - Carry forward and set-off of unabsorbed depreciation is not confined by an eight-year limitation and the question is decided in favour of the assessee. - HELD THAT: - Following earlier Division Bench decisions of this Court and the reasoning in cases construing Section 32(2) (as amended) and the clarificatory circular, the Court held that the eight-year restriction for carry forward and set-off of unabsorbed depreciation has been dispensed with. The cited precedents were treated as controlling and the question of law was answered against the revenue, thereby permitting carry forward and set-off beyond eight years.

Question of law answered in favour of the assessee; unabsorbed depreciation not barred by an eight-year limitation.

Final Conclusion: The appeals are disposed: the disallowance under Section 43B(f) upheld in favour of the revenue; the question on limitation for carrying forward unabsorbed depreciation answered in favour of the assessee; the second (reopening/merger) question was not pressed.

Refund of tax - interest on delayed refund - departmental accountability for delayed refunds - direction to file affidavit - public exchequer burden

Refund of tax - public exchequer burden - Refund in respect of AY 2016-17 and AY 2013-14 has been granted to the petitioner. - HELD THAT: - The Court recorded that after earlier orders a refund totalling the amount claimed was credited on 29 November 2024 in the proportion allotted to AY 2016-17 and AY 2013-14. The Court noted that where a taxpayer is entitled to a refund and no proceedings are being pursued by the Revenue, the refund ought to be promptly granted. The judgment emphasises that delay by departmental officials causes an avoidable interest burden on the public exchequer and prejudices both the Revenue and the assessee. [Paras 6]

Refund for AY 2016-17 and AY 2013-14 has been recorded as granted.

Interest on delayed refund - direction to file affidavit - Revenue to take instructions and state position on payment of interest due on the delayed refunds; respondent counsel to make a statement on the adjourned date. - HELD THAT: - The petitioner asserted that interest for delayed payment for the noted assessment years remains unpaid. The Revenue was directed to obtain instructions and indicate whether the interest (as claimed by the petitioner) would be paid. The Court observed the interest burden as an avoidable consequence of departmental inaction and required the Revenue to make an appropriate statement either on the adjourned date or earlier so that orders can be passed on that aspect. [Paras 6, 14]

Payment of interest has not been finally adjudicated; the Revenue must take instructions and state its position regarding payment of interest on the adjourned date.

Departmental accountability for delayed refunds - direction to file affidavit - Respondent Nos. 5 and 6 directed to file an affidavit, after consulting the CBDT, setting out the approach to be followed to avoid incurring avoidable interest on refunds; the affidavit to include interest figures for the last three assessment years. - HELD THAT: - Concerned with systemic lapses causing delayed refunds and consequent interest payments, the Court directed the specified respondents to place on record an affidavit which, after taking instructions from the CBDT, explains the procedures or rules to be followed to prevent such delays. The affidavit must address whether rules exist, why they are not being adhered to, mechanisms for fixing accountability of officers, and include figures of interest paid on refunds during the last three assessment years as a guiding factor. [Paras 10, 11, 12]

Respondent Nos. 5 and 6 to file an affidavit (after consulting CBDT) detailing the approach/rules and accountability measures to avoid interest burden, including figures of interest paid over the past three assessment years.

Final Conclusion: The Court recorded that the refunds for AY 2016-17 and AY 2013-14 have been granted, directed the Revenue to take instructions and state its position on payment of interest on the adjourned date, and directed respondents to file an affidavit (after consulting the CBDT) explaining procedures and accountability measures to prevent avoidable interest payments on delayed refunds; matter adjourned to 10 December 2024 for further hearing.

Refund under Vivad Se Vishwas Act, 2020 - Form 5 determination - non-requirement of Form 26B for VSV refund - entitlement to interest under Section 244A of the Income-tax Act, 1961 - Explanation to Section 7 of the Vivad Se Vishwas Act, 2020 - state liable to pay interest for retention of money without right

Refund under Vivad Se Vishwas Act, 2020 - Form 5 determination - non-requirement of Form 26B for VSV refund - Entitlement to refund determined by Form 5 issued under the VSV Act, 2020 and whether submission of Form 26B was required before refund could be paid. - HELD THAT: - The Court found that the petitioner applied under the VSV Act, 2020 and was issued Form 5 on 20.09.2022 determining a refundable sum. Once Form 5 was issued entitling the petitioner to refund for F.Y. 2008-09, respondents could not, after lapse of two years and after institution of the writ petition, insist on filing Form 26B. The Rules requiring Form 26B relate to claims for refunds paid under Chapter XVII-B of the Income-tax Act and the stage for filling Form 26B, if at all relevant, had long passed in 2008-09. Consequently the respondents' demand for submission of Form 26B to process the refund under VSV Act lacked legal sanction and could not be sustained. [Paras 15, 16, 17]

Petitioner entitled to refund as determined by Form 5 and respondents' requirement to file Form 26B for that refund is rejected.

Entitlement to interest under Section 244A of the Income-tax Act, 1961 - state liable to pay interest for retention of money without right - Explanation to Section 7 of the Vivad Se Vishwas Act, 2020 - Whether petitioner is entitled to interest on the delayed refund despite the Explanation to Section 7 of the VSV Act, 2020. - HELD THAT: - The Court considered precedents holding that where the State has received money without right and retained and used it, it is liable to make the party good including payment of interest. The Explanation to Section 7 of the VSV Act, 2020 applies to amounts paid under the Income-tax Act prior to filing the declaration and clarifies absence of interest for such pre-declaration payments; it does not address entitlement to interest for the period after issuance of Form 5 determining a refund. Therefore, for delay in payment beyond the statutory 90-day period from the refund determination (20.09.2022), the petitioner is entitled to interest on the delayed refund amount as per Section 244A of the Income-tax Act. The Court fixed interest at 6% per annum for the delayed period and directed payment within eight weeks. [Paras 18, 21, 22, 23]

Petitioner entitled to interest on the delayed refund from 20.12.2022 (beyond 90 days from 20.09.2022) at the rate directed by the Court; respondents' reliance on Explanation to Section 7 to deny interest is rejected.

Final Conclusion: Writ petition allowed; respondents directed to pay the refund determined by Form 5 for F.Y. 2008-09 together with interest for delay beyond 90 days from 20.09.2022 (from 20.12.2022) at the rate ordered, the entire amount to be paid within eight weeks.

Section 148A of the Income Tax Act, 1961 - notice under Section 148 - reassessment proceedings - opportunity of being heard - income chargeable to tax escaped assessment - Article 226 jurisdiction and alternative remedy - accommodation entries and bogus transactions - insight portal intelligence

Section 148A of the Income Tax Act, 1961 - opportunity of being heard - accommodation entries and bogus transactions - Impugned orders under Section 148A(d) comply with the requirements of Section 148A - HELD THAT: - The Court examined whether the Assessing Officer complied with the procedural prerequisites under Section 148A before issuing notices under Section 148. The record showed that information from the Department's Insight Portal and survey proceedings disclosed that a racket of accommodation entries was operated by certain persons, and that the petitioners had transactional entries with the implicated firms. The petitioners replied to the show cause notices, admitting transactions but asserting they were sales not purchases and furnished ledger copies, invoices, bank pages and stock-register extracts. The Court found that the Assessing Officer conducted enquiries, considered the show-cause replies and contemporaneous material (including admissions in the survey and the modus operandi pointing to paper transactions), and recorded reasons concluding the transactions were suspect and indicative of a larger inter-State network of bogus purchases/sales. On that basis the Court held the orders under Section 148A(d) were not in violation of Section 148A and the Assessing Officer had the requisite satisfaction to proceed with issuance of notices under Section 148. [Paras 28, 29, 30, 31]

The impugned orders under Section 148A(d) cannot be said to violate Section 148A and are sustainable.

Article 226 jurisdiction and alternative remedy - reassessment proceedings - Whether the writ petitions warrant interference under Article 226 - HELD THAT: - The Court applied settled principles governing exercise of writ jurisdiction where alternative remedies exist, observing that interference is permissible only within recognised exceptions (fundamental rights, natural justice breach, lack of jurisdiction, vires challenge, or pure questions of law). Having found no procedural infirmity in compliance with Section 148A and that the petitioners could challenge any resultant reassessment through statutory appellate fora, the Court concluded the present petitions did not fall within exceptions warranting exercise of extraordinary writ jurisdiction. The earlier coordinate-Bench direction to proceed de novo from the stage of show-cause reply had been complied with and did not preclude the Department from reaching a fresh satisfaction based on the material. [Paras 5, 6, 31, 32]

No interference under Article 226; writ petitions dismissed.

Final Conclusion: The High Court held that the orders passed under Section 148A(d) were in accordance with Section 148A and there was no ground to exercise writ jurisdiction; both petitions were dismissed and interim orders vacated.

Prerequisite of discovery of incriminating material belonging to or pertaining to the assessee for issuance of notices under Section 153C of the Incometax Act - Validity of notices issued under Section 153C where material is retrieved from third parties' electronic devices - Scope of judicial review of sufficiency of material relied upon to invoke jurisdiction under Section 153C

Prerequisite of discovery of incriminating material belonging to or pertaining to the assessee for issuance of notices under Section 153C of the Incometax Act - Validity of notices issued under Section 153C where material is retrieved from third parties' electronic devices - Whether the notices dated 18.10.2023 issued under Section 153C for AYs 2015-16 to 2021-22 were validly issued in view of the material, if any, found in search/requisition proceedings - HELD THAT: - The Court examined the affidavit and material produced by the Revenue concerning a search at a third party's premises and an image of an Agreement to Sell recovered from the mobile phone of the petitioner's husband. The material on record showed an agreement between two other persons recovered from a WhatsApp chat on the husband's device and a subsequent sale deed in the petitioner's name reflecting a different consideration. No books of account, documents, or assets were shown to belong to the petitioner or to contain information directly pertaining to her. The mere presence of an image of an agreement between other parties on a third party's or the husband's electronic device did not establish that the information pertained to the petitioner. On that basis the court held that the requisite nexus - discovery of incriminating material belonging to or pertaining to the assessee - was absent and the jurisdictional requirement to issue notices under Section 153C was not satisfied. [Paras 5, 6, 7]

Impugned notices under Section 153C dated 18.10.2023 for AYs 2015-16 to 2021-22 set aside for want of material found belonging to or pertaining to the petitioner.

Final Conclusion: The petition is allowed; the notices issued under Section 153C for AYs 2015-16 to 2021-22 are quashed on the ground that no incriminating material belonging to or pertaining to the petitioner was found during the search/requisition proceedings.

Reopening of assessment - reasons to assume / reasons to believe that income has escaped assessment - preliminary enquiry under Section 148A - consideration of assessee's response under Section 148A(c) - order under Section 148A(d) - accommodation entries - genuineness of transactions

Reopening of assessment - preliminary enquiry under Section 148A - consideration of assessee's response under Section 148A(c) - order under Section 148A(d) - reasons to assume / reasons to believe that income has escaped assessment - Validity of the impugned notice under Section 148A(b) and order under Section 148A(d) and consequent notice under Section 148 seeking reopening of assessment for AY 2018-19. - HELD THAT: - The Court examined whether the Assessing Officer had performed the limited statutory exercise mandated by Section 148A before issuing the notice under Section 148. The AO had before him material and an investigation report indicating that two suppliers (Balaji Enterprises and Dev Sales Corporation) were not engaged in genuine business activities: matching high-value inflows and outflows in bank accounts suggesting accommodation entries, minimal bank balances with exceptionally high turnover, and investigative summons returning fake addresses. The AO also verified that the vendors' output returns (GSTR-01) appeared in the assessee's inward supplies (GSTR-2A) but received a report from the Investigation Wing casting doubt on the vendors' genuineness; the AO placed these findings on record and additionally conducted telephone verification in the presence of the assessee's counsel. The Court reiterated that at the Section 148A stage the AO's task is confined to forming a view whether there are reasons indicating that income has escaped assessment and not to finally adjudicate the genuineness of transactions, which remain open to the assessee in later proceedings. Given the investigative material bearing a live nexus to the opinion that income may have escaped assessment, and the AO's consideration of the assessee's responses, the Court found no infirmity in the AO's exercise of power to issue the notice under Section 148. [Paras 16, 17, 19, 20, 21]

Impugned notice dated 22.03.2024, impugned order dated 31.03.2024 under Section 148A(d), and the notice under Section 148 for AY 2018-19 are upheld; petition dismissed.

Final Conclusion: The High Court dismissed the petition and declined to interfere with the AO's orders and notices for AY 2018-19, holding that there was material bearing a live nexus to the view that the assessee's income had escaped assessment and that the limited Section 148A pre-reopening exercise was properly conducted.

Remand for fresh adjudication - arm's length price - transfer pricing adjustment - advertisement, marketing and promotion (AMP) expenses - Bright Line Test - most appropriate method - Resale Price Method - Transactional Net Margin Method

Remand for fresh adjudication - arm's length price - advertisement, marketing and promotion (AMP) expenses - Whether the ITAT's order remanding the matter to the TPO/AO for fresh adjudication was confined to AMP expenses or also required fresh adjudication of other transfer pricing adjustments including purchases of finished goods - HELD THAT: - The Court found that the impugned ITAT order remanded the matter to the TPO/AO for fresh adjudication in light of earlier Tribunal directions, but the impugned order itself contains no adjudication of the Assessee's grounds challenging the transfer pricing adjustment in respect of purchase of finished goods. The Court noted that the ITAT proceeded on an assumption that remand would necessarily result in fresh consideration of those grounds, yet there is no indication that the ITAT had adjudicated them. The Court observed that determination of ALP for AMP expenses does not necessarily entail adjudication of transfer pricing adjustments relating to purchases of finished goods and that the TPO subsequently considered AMP but did not address the purchase transactions. Having identified that the specific grounds (challenging application of TNMM over RPM and other comparability and adjustment contentions) were not considered, the Court concluded that the matter should be remitted for proper consideration by the ITAT so that those grounds are dealt with and a reasoned decision is rendered. [Paras 13, 14, 15]

Matter remanded to the ITAT to consider afresh the Assessee's grounds relating to transfer pricing adjustment in respect of purchases of finished goods, and for the ITAT to pass a reasoned order.

Remand for fresh adjudication - Whether this Court should express any opinion on the merits of the transfer pricing adjustments remitted for fresh consideration - HELD THAT: - The Court expressly declined to express any view on the merits of the transfer pricing adjustments. It clarified that its remit was limited to ensuring that the ITAT considers and adjudicates the Assessee's grounds regarding purchases of finished goods and that the ITAT must pass a reasoned order on those issues when hearing the matter on remand. [Paras 16]

No opinion on merits; ITAT to consider merits and pass a reasoned order on remanded issues.

Final Conclusion: The appeal is disposed by remitting the matter to the ITAT to consider and adjudicate the Assessee's grounds challenging the transfer pricing adjustment in respect of purchases of finished goods for AY 2010-11; the High Court has not expressed any view on the merits and directs the ITAT to pass a reasoned order.

Reopening of assessment under Section 147 - Notice under Section 148 - Reasons recorded for reassessment - Borrowed satisfaction - Application of mind by Assessing Officer - Prima facie material and nexus requirement - Investigation/Insight Portal report as material - Confined to recorded reasons test

Reopening of assessment under Section 147 - Notice under Section 148 - Reasons recorded for reassessment - Borrowed satisfaction - Application of mind by Assessing Officer - Prima facie material and nexus requirement - Confined to recorded reasons test - Validity of notices dated 30.03.2021 under Section 148 for AY 2016-17 and AY 2017-18 - HELD THAT: - The Court examined only the reasons recorded for reopening and held that the Assessing Officer relied upon information from investigation/insight portal without forming an independent, self standing satisfaction. The recorded reasons merely repeated third party information, included incorrect particulars (same large sum attributed to both years and wrong counterparty names) and did not demonstrate a nexus between the material and a prima facie belief that income had escaped assessment. Following the settled principles (including that the validity of reassessment is to be tested by the reasons recorded, that the Assessing Officer must apply his mind to form an independent belief and that third party reports must be linked to the assessee by tangible material in the reasons), the Court found the reasons to be vague, based on borrowed satisfaction and devoid of the requisite application of mind. Reliance by the department on material not reflected in the recorded reasons or on post hoc explanations could not be entertained when testing the jurisdiction to reopen. [Paras 9, 10]

Notices under Section 148 issued for AY 2016-17 and AY 2017-18 quashed for want of valid reasons showing independent application of mind and requisite nexus to the assessee.

Final Conclusion: The petitions were allowed; the notices dated 30.03.2021 reopening assessments for Assessment Year 2016-17 and Assessment Year 2017-2018 were quashed and set aside for failure of the Assessing Officer to record independent, non borrowed reasons demonstrating a prima facie nexus that income had escaped assessment.

Validity of reassessment under section 147/148 - Applicability of section 153C vis-a -vis reassessment under section 147 - Rejection of books of account and estimation of income on an estimated percentage - Admission of additional grounds and additional evidence under Rule 29 - Principles of natural justice and right to cross-examination in assessment proceedings - Concurrent factual findings of fact-finding authorities and scope of appellate interference

Validity of reassessment under section 147/148 - Concurrent factual findings of fact-finding authorities and scope of appellate interference - Reopening of assessment under section 147/148 was valid and not amenable to interference - HELD THAT: - The Court held that both the CIT(A) and the Tribunal had given cogent reasons for reopening on the basis of information from the Investigation Wing that the appellants were beneficiaries of accommodation entries provided by the Pravin Kumar Jain group. There was a concurrent finding of fact that the Assessing Officer received credible information and formed an opinion to reopen; in the absence of any independent or contrary finding by the lower authorities, the Court agreed with the decision in the lead matters and found no ground to interfere with the reopening. The Court therefore affirmed the validity of reassessment under section 147/148 and treated the fact-findings of the authorities as binding for the present appeals. [Paras 7]

Reopening under section 147/148 upheld and not interfered with

Applicability of section 153C vis-a -vis reassessment under section 147 - Invocation of section 153C was not warranted and reassessment under section 147 was proper - HELD THAT: - The Court noted that neither the CIT(A) nor the Tribunal had recorded any finding that seized material belonging to the appellants was found during the search operations; no plea invoking section 153C had been urged before those authorities. Once the reopening under section 147 was held valid and there was no material to show seized documents pertained to the assessee, the contention that section 153C should have been invoked was rejected as untenable. [Paras 9]

Contention that Section 153C should have been invoked is rejected; reassessment under Section 147 stands

Rejection of books of account and estimation of income on an estimated percentage - Concurrent factual findings of fact-finding authorities and scope of appellate interference - Books of account were rejectable on the material before the Assessing Officer and Tribunal's estimation of addition at 6% is justified - HELD THAT: - The Tribunal found that where genuineness of purchases was doubted on the basis of the investigation into the syndicate, mere production of purchase documents and account-payee cheque payments did not conclusively establish genuineness; the Assessing Officer's rejection of books under section 145 was sustained. Considering the totality of facts and precedents, the Tribunal increased the restricted addition from 5% to 6% as sufficient to meet the possibility of revenue leakage. This Court concurred with the fact-finding authorities, noting concurrent findings and a need for consistency across similarly situated cases, and therefore confirmed the estimated addition at 6%. [Paras 5, 10]

Rejection of books upheld and addition fixed at 6% confirmed

Admission of additional grounds and additional evidence under Rule 29 - Additional grounds and additional evidence were rightly not admitted by the Tribunal - HELD THAT: - The Tribunal declined to admit additional grounds and documents because the facts relied upon (e.g., matters from other assessments or survey records) did not emanate from the orders of the lower authorities and were not shown to be necessary or relevant to the adjudication of the present years. The Court observed that the Tribunal had recorded reasons for rejection and, in the absence of fresh or requisite material before the CIT(A) or Tribunal, there was no basis to disturb that exercise of discretion. [Paras 5]

Refusal to admit additional grounds and evidence affirmed

Principles of natural justice and right to cross-examination in assessment proceedings - Claims of violation of natural justice by denial of opportunity to cross-examine were not sustained - HELD THAT: - The appellants contended that denial of opportunity to cross-examine persons whose statements under section 132(4) were relied upon rendered the assessment unsustainable. The Court recorded that these contentions were not the subject of independent findings by CIT(A) or the Tribunal and that the matter had been dealt with on the factual matrix of the investigation and the evidence produced. In the context of concurrent fact-findings and the procedural posture, the Court found no merit in reopening the issue at this stage. [Paras 6, 7]

Natural justice/cross-examination grievances did not vitiate the assessment

Final Conclusion: The High Court dismissed the appeals, upheld the reopening under section 147/148, rejected the contention that section 153C ought to have been invoked, affirmed the rejection of books and the Tribunal's estimated addition fixed at 6%, and declined to interfere with the Tribunal's refusal to admit additional grounds or evidence or with the natural justice objections.

Time limit for completion of assessment under Section 153B - handing over of books of account or documents or assets under Section 153C - whichever is later - voidness of notices issued to an amalgamated/ceased entity - strict construction of taxing statutes

Time limit for completion of assessment under Section 153B - handing over of books of account or documents or assets under Section 153C - whichever is later - voidness of notices issued to an amalgamated/ceased entity - Whether the period of limitation for making assessment under the proviso to Section 153B in respect of an "other person" referred to in Section 153C begins from the date of the first notice issued to the transferor companies in 2021 or from the date when books/documents were handed over to the Assessing Officer having jurisdiction (27.12.2022), and whether the notices dated 30.12.2022 are time-barred. - HELD THAT: - The proviso to Section 153B provides two alternative modes for computing limitation for an "other person" under Section 153C and stipulates that the later of the two dates will govern. The court accepted the Revenue's submission that earlier notices issued in 2021 to the transferor companies lost relevance because those notices were void after the transferor companies ceased to exist on amalgamation in view of the decision in Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited . Consequently the dates of those earlier notices cannot be the starting point for limitation. The determinative statutory language is the date on which books of account, documents or assets seized are handed over to the Assessing Officer having jurisdiction over the "other person"; where that date is later, it governs under the "whichever is later" clause. Applying the principle of strict construction applicable to taxing statutes, the court held that delay caused by centralisation or transfer of seized material does not extend or revive limitation unless the statutory handing-over date to the competent Assessing Officer has occurred. On the facts, the court accepted that the seized material was handed over to the jurisdictional Assessing Officer on 27.12.2022, and accordingly the notices dated 30.12.2022 for the relevant assessment years were not barred by limitation. The court also noted and relied upon the reasoning in LKS Gold House (P) Ltd. (Madras High Court) concerning the deemed handing over and the concept of an officer "wearing two hats," but found the present case governed by actual handing over to a different jurisdictional officer. For these reasons the representations against the notices were rightly rejected and the notices stand valid. [Paras 13, 16, 19]

The proviso to Section 153B must be applied so that limitation runs from the later of the two statutory modes; earlier notices to transferor companies which ceased to exist on amalgamation are void and cannot fix limitation, and the limitation in the present case begins from the date on which the seized material was handed over to the Assessing Officer having jurisdiction (27.12.2022), rendering the notices dated 30.12.2022 not time-barred.

Final Conclusion: Writ petitions dismissed; impugned orders rejecting the petitioner's representations upheld and the notices issued on 30.12.2022 held valid as not barred by limitation.

Condonation of delay under section 119(2)(b) - exercise of option under Section 115BAA - prescribed manner of exercising option (Form 10IC / Rule 21AE) - CBDT circular permitting condonation of delay - distinction from mandatory filing principle in Wipro - equitable relief / genuine hardship

Exercise of option under Section 115BAA - prescribed manner of exercising option (Form 10IC / Rule 21AE) - distinction from mandatory filing principle in Wipro - Validity of rejection of the petitioner's application to condone delay where Form 10IC was not filed for Assessment Year 2020-21 but the option under Section 115BAA was exercised in the return - HELD THAT: - The Court found from the return and intimation under Section 143 that the petitioner had adopted the option under Section 115BAA and that the CPC suo motu passed a rectification under Section 154 because Form 10IC had not been uploaded. Sub section (5) of Section 115BAA requires the option to be exercised in the prescribed manner on or before the due date under Section 139 and Rule 21AE prescribes filing Form 10IC. The Court observed that the Wipro principle, which emphasises mandatory compliance where filing at the prescribed time is intended as a check under a specific provision, was distinguishable on facts because Section 115BAA and Rule 21AE operate to grant a concessional tax regime and the CBDT thereafter issued Circular No.6 of 2022 to avoid genuine hardship by condoning delay subject to conditions. The respondent erred in adopting a hyper technical approach in refusing relief where the petitioner had exercised the option in the return, faced technical/confusion in filing Form 10IC, and had relied on bona fide advice. Consequently the impugned rejection could not stand; the Court directed a remedial course permitting the petitioner to regularise the position. [Paras 11, 12, 13, 14, 17]

The rejection of the petitioner's application was unsustainable; the Court distinguished Wipro and held the respondent should have adopted an equitable approach in the facts.

Condonation of delay under section 119(2)(b) - CBDT circular permitting condonation of delay - equitable relief / genuine hardship - Remedial direction whether petitioner may be permitted to obtain Form 10IC for AY 2020-21 and seek fresh condonation under Section 119(2)(b) - HELD THAT: - Having concluded that the respondent's refusal was unduly technical and that CBDT Circular No.6 of 2022 recognises circumstances causing genuine hardship, the Court directed that the petitioner be permitted to obtain Form 10IC for Assessment Year 2020-21. The petitioner is to file a fresh application to condone delay thereafter and the respondent is directed to consider that application afresh in light of the observations made by the Court. The direction is procedural and for fresh consideration - not a final adjudication on merits of condonation - and requires the authority to re examine the petitioner's claim of hardship and compliance with conditions specified by the CBDT. [Paras 13, 14, 18, 19]

Petitioner permitted to obtain Form 10IC for AY 2020-21 and to file a fresh application; respondent directed to consider it within twelve weeks.

Final Conclusion: Petition allowed. The petitioner may procure Form 10IC for Assessment Year 2020-21 and submit a fresh application for condonation; the respondent shall consider that application afresh within twelve weeks in light of the judgment and the CBDT circular, with no order as to costs.

Waiver of interest in search assessments under the Direct Tax Vivad Se Vishwas Act, 2020 - interpretation of amount payable under Section 3 of the Direct Tax Vivad Se Vishwas Act, 2020 - quashing of Form No.3 (Certificate) issued under the DTVSV Rules - direction to accept Forms 1 and 2 and issuance of fresh Form No.3 - court direction overriding CBDT timeline for compliance

Quashing of Form No.3 (Certificate) issued under the DTVSV Rules - Impugned Certificates in Form No.3 dated 26.01.2021 for assessment years 2006-07 to 2009-10 are quashed. - HELD THAT: - The Court found that the Certificates in Form No.3 issued to the petitioner calling upon payment of interest were not in accordance with law. Having examined the material on record and the submissions, the Court concluded that the respondents erred in issuing the impugned Forms 3 and that those certificates were without jurisdiction and contrary to the statutory scheme under the DTVSV Act. In consequence, the impugned Certificates at Annexures E1 to E4 were set aside and quashed. [Paras 6, 9]

The impugned Certificates at Annexures E1 to E4 dated 26.01.2021 are quashed.

Interpretation of amount payable under Section 3 of the Direct Tax Vivad Se Vishwas Act, 2020 - waiver of interest in search assessments under the Direct Tax Vivad Se Vishwas Act, 2020 - Where assessment orders were passed pursuant to search proceedings, the declarant is entitled to waiver of the entire interest as contemplated by the Table in Section 3 of the DTVSV Act. - HELD THAT: - The Court analysed Section 3 of the DTVSV Act and observed that the statutory scheme does not differentiate between waiver of interest on disputed tax and waiver of interest on tax not in dispute in the context of search assessments. The Court held that for tax arrears determined in assessments based on search under section 132/132A, the amount payable is to be computed in accordance with the Table in Section 3 (i.e., the aggregate of disputed tax and prescribed percentage), and that this operation results in waiver of the entire interest amount as determined in such assessment orders. Applying this interpretation to the petitioner's case, where the assessments arose from search proceedings, the Court concluded that the petitioner was entitled to the benefit of waiver of the interest determined in those assessment orders and that the respondents had failed to appreciate this aspect while issuing Form 3. [Paras 5, 6]

The petitioner is entitled to waiver of the entire interest in respect of assessments made pursuant to search proceedings under the DTVSV Act as interpreted under Section 3.

Direction to accept Forms 1 and 2 and issuance of fresh Form No.3 - court direction overriding CBDT timeline for compliance - Respondents are directed to accept the petitioner's Forms 1 and 2 and to issue a fresh Certificate in Form No.3 within four weeks, notwithstanding the CBDT standing order timeline. - HELD THAT: - In view of the quashing of the earlier Certificates and the Court's interpretation of Section 3 granting the petitioner the benefit of waiver of interest for search assessments, the Court directed the respondents to accept the Forms 1 and 2 submitted by the petitioner (Annexures D1 to D4) and to issue fresh Form 3 reflecting the correct computation. Although the CBDT had issued a standing order prescribing a timeline to complete the DTVSV process, the Court directed compliance with the present order even though it may fall beyond the CBDT's stated date, and fixed a four week period for issuance of the fresh certificate from receipt of the order. [Paras 8, 9]

Respondents shall accept Forms 1 and 2 and issue fresh Form No.3 in favour of the petitioner within four weeks; compliance is to be effected notwithstanding the CBDT timeline.

Final Conclusion: The petition is allowed: the Form No.3 Certificates dated 26.01.2021 for AYs 2006 07 to 2009 10 are quashed; the respondents must accept the petitioner's Forms 1 and 2 and issue fresh Form No.3 within four weeks, and the petitioner's entitlement to waiver of interest in search based assessments under Section 3 of the DTVSV Act is recognised.

Reason to believe - reopening of assessment under section 147/148 - approval under section 151(2) - unexplained investment deemed as income under section 69 - tangible material and verification of AIR information

Reason to believe - reopening of assessment under section 147/148 - approval under section 151(2) - tangible material and verification of AIR information - Validity of assumption of jurisdiction by the Assessing Officer in issuing notice under section 148 and validity of the PCIT's approval under section 151(2). - HELD THAT: - The Tribunal examined the reasons recorded by the AO (reproduced at para 22) and the PCIT's approval (para 23). The AO had AIR information of a purchase of immovable property for Rs. 90,95,000/-, compared that information with the assessee's ITR showing modest income, issued notice under section 133(6) (paras 24-25) and obtained a copy of the purchase deed from the Sub-Registrar which showed joint registration but did not record contribution details. The assessee did not comply with the notice under section 133(6). The Tribunal held that at the stage of recording reasons the AO possessed prima facie tangible material - AIR information verified from the Sub-Registrar and the ITR - sufficient to form a reason to believe and that sufficiency or correctness of the material is not to be tested at this stage (para 26). The Tribunal found that the AO formed a reason to believe (not merely a reason to suspect), afforded opportunity to the assessee, and legitimately proceeded to reopen the assessment (paras 26-27). Regarding the sanction, the PCIT recorded that she was satisfied after examining the AO's reasons (para 23, para 29) and the Tribunal held that the approval was not mechanical but reflected application of mind (paras 29-31). Prior authorities cited by the assessee were found factually distinguishable (paras 28, 30-33). [Paras 29, 30, 31, 32, 33]

Notice under section 148 was validly issued as AO had reason to believe based on prima facie tangible material and the PCIT's approval under section 151(2) was not mechanical; Ground No. 1 dismissed.

Unexplained investment deemed as income under section 69 - Merits of addition made under section 69 in respect of purchase of immovable property and extent of deletion/confirmation of addition. - HELD THAT: - On merits the Tribunal accepted that the property was purchased in joint names and that the assessee was required only to explain his 50% share (para 42). The assessee produced bank statements, sale deed copies, loan documents and other material showing sources - housing loan, proceeds of sale of plot/residence, transfers between bank accounts, cash and savings - which were examined (para 43). The Tribunal noted that veracity of certain items (unsecured loans taken by the wife and jewellery sale) had not been adjudicated by AO or CIT(A) and may be examined in appropriate proceedings, but found that the assessee had sufficiently explained his share of the investment on the material before the Tribunal (para 44). Consequently the Tribunal directed deletion of the addition of Rs. 41,47,382/- which the CIT(A) had left confirmed, and allowed Ground No. 2. [Paras 40, 41, 42, 43, 44]

Addition under section 69 reduced: the Tribunal deleted the addition of Rs. 41,47,382/- on account of unexplained investment and allowed Ground No. 2; limited factual aspects (veracity of certain receipts to the wife) left to be examined in appropriate proceedings.

Final Conclusion: The reopening of assessment for A.Y. 2012-13 and the PCIT's approval were held valid; on merits the Tribunal deleted the addition of Rs. 41,47,382/- under section 69 while leaving certain factual aspects concerning the wife's receipts to be examined in appropriate proceedings; the appeal is partly allowed.

Condonation of delay - penalty under section 271(1)(b) of the Incometax Act, 1961 - noncompliance of notice under section 142(1) of the Incometax Act, 1961 - principles of natural justice - separate initiation required for each penalty cause of action - powers of Commissioner (Appeals) coterminus with the Assessing Officer - advancement of substantial justice over technicality

Condonation of delay - advancement of substantial justice over technicality - Condonation of delay of 24 days in filing the appeal before the Tribunal was allowed. - HELD THAT: - The assessee filed the appeal before the Tribunal 24 days beyond the time prescribed under section 253(3). The assessee explained nonreceipt of the firstappellate order in physical form and that departmental email went to spam; the assessee had otherwise prosecuted the matter timely before the first appellate authority and the Tribunal and attended hearings. The Tribunal observed that during the transition to electronic faceless processes initial glitches may occur and a liberal view is required to promote substantial justice. No mala fide was found and the Revenue did not press objection. In the circumstances, and applying the principle that courts lean towards advancement of substantial justice over technicalities, the delay of 24 days was condoned and the appeal admitted for decision on merits. [Paras 2]

Delay of 24 days condoned and appeal admitted for hearing on merits.

Penalty under section 271(1)(b) of the Incometax Act, 1961 - noncompliance of notice under section 142(1) of the Incometax Act, 1961 - principles of natural justice - separate initiation required for each penalty cause of action - powers of Commissioner (Appeals) coterminus with the Assessing Officer - Validity of penalty imposed under section 271(1)(b) for alleged noncompliance with notices under section 142(1) was examined and the penalty was deleted. - HELD THAT: - The AO initiated penalty proceedings purportedly for noncompliance with the notice dated 04.10.2017 but the penalty order treated noncompliance with both the 04.10.2017 and 03.11.2017 notices. The Tribunal noted that each alleged noncompliance gives rise to a separate cause of action and requires specific initiation and notice; treating both noncompliances together without separate initiation was incorrect. Factually, the assessee and/or his counsel had participated in reassessment proceedings on multiple earlier dates; nonappearance on 25.10.2017 was attributable to a Bar strike; the authorised representative was out of station on 13.11.2017 for professional obligations and the assessee asserted he attended AO's office seeking adjournment but the AO did not receive the application or allow adjournment; cause register was not available. The AO proceeded ex parte and imposed penalty by an order after five months without further notices; the first appellate authority did not verify the assessee's explanations or call for records. In these circumstances, principles of natural justice were breached and the assessee provided reasonable cause for noncompliance. Applying section 273B read with the requirement of proper initiation and opportunity to be heard, the Tribunal accepted the explanations and deleted the penalty. [Paras 6]

Penalty under section 271(1)(b) deleted.

Final Conclusion: The Tribunal condoned the 24day delay in filing the appeal and on merits set aside the penalty under section 271(1)(b), allowing the appeal.

Benami transaction - exception to benami transaction for fiduciary holding - fiduciary capacity - benamidar and beneficial owner - notice under Section 24(1) and issuance of copy to beneficial owner under Section 24(2) - fair market value of demonetised currency - property and proceeds - conversion/monetisation of demonetised notes - effect of change of statement on ownership

Benami transaction - exception to benami transaction for fiduciary holding - fiduciary capacity - conversion/monetisation of demonetised notes - Whether the cash recovered from third parties fell within the fiduciary exception to a benami transaction or was held for illegal/other purposes and therefore not protected as fiduciary holding. - HELD THAT: - The Tribunal examined whether the cash found with third parties was merely held on trust in a fiduciary capacity or was transacted for the purpose of conversion/monetisation through banking channels and shell companies. The adjudicatory material, including the manner in which the cash was channelised through firm accounts and transferred onward to trading firms, indicated that the currency notes were given not for mere retention on trust but to effect conversion into monetized funds. Where property is transferred for an illegal or other active purpose (here, to monetize demonetised notes), the holder cannot claim to be acting solely in a fiduciary capacity. The Tribunal distinguished earlier authorities where property had been simply held on trust, and concluded on the facts that the fiduciary exception under the benami definition did not apply in this case. [Paras 11]

The cash did not fall within the fiduciary exception to a benami transaction and therefore could be treated as benami property.

Benamidar and beneficial owner - notice under Section 24(1) and issuance of copy to beneficial owner under Section 24(2) - effect of change of statement on ownership - Whether issuance of notice under Section 24(1) (and not separately under Section 24(2)) and subsequent treatment of the appellant as beneficial owner vitiated the proceedings. - HELD THAT: - Section 24(1) permits issuance of a show-cause notice where the Initiating Officer has reason to believe a person is a benamidar; Section 24(2) requires that a copy of that notice be issued to the beneficial owner if his identity is known. The Tribunal held that at the time of issuance the beneficial owner's identity was not known, so a notice under Section 24(1) to all suspected benamidars was proper. As adjudication progressed, the appellant changed his stance and admitted ownership; this disclosure permitted identification of the beneficial owner during the adjudication process without requiring a separate preliminary notice under Section 24(2). The Tribunal further observed that mis reference to provisions in a notice does not vitiate proceedings where the authority has jurisdiction and material to decide the matter on merits. [Paras 12, 13]

Issuance of notice under Section 24(1) and subsequent treatment of the appellant as beneficial owner did not vitiate the proceedings.

Fair market value of demonetised currency - property and proceeds - conversion/monetisation of demonetised notes - Whether demonetised currency notes lacked fair market value or could not be treated as 'property' within the Act at the time of seizure. - HELD THAT: - The Tribunal considered the definitions of "fair market value" and "property" and noted that demonetised notes, though declared invalid for certain payments, could still be tendered or deposited for conversion to monetized currency during the RBI-authorised window (which had been extended). Given that on the date of search and seizure the notes could lawfully be monetised by deposit or tender, they possessed a realizable market value and amounted to "property" or proceeds thereof for the purposes of the Act. Consequently the argument that demonetised notes were valueless and not property was rejected. [Paras 14, 15]

Demonetised currency seized on the date in question had fair market value and constituted 'property' under the Act.

Effect of change of statement on ownership - benamidar and beneficial owner - Whether the findings of the Initiating Officer and Adjudicating Authority were contrary to the record. - HELD THAT: - The Tribunal reviewed the investigative steps and recorded statements. Initially the appellant disowned the notes but later altered his position and admitted ownership (including declaration under the PM Garib Kalyan Yojana and payment). The change in the appellant's statements formed part of the material before the authority. The Tribunal found no contradiction between the IO's findings and the record; rather, the authorities adjudicated on the basis of the material as it evolved, including the appellant's later admission. [Paras 16]

The IO's and Adjudicating Authority's findings were supported by the record and not contrary to it.

Final Conclusion: All grounds urged by the appellants were rejected and the appeals are dismissed; the attachment and adjudication treating the cash as benami property and the appellant as beneficial owner are sustained.

Provisional release of goods - interim order made absolute - release subject to final adjudication by the Department - questions of law kept open - delay condoned

Provisional release of goods - interim order made absolute - release subject to final adjudication by the Department - Interim order dated 18.11.2024 made absolute and goods ordered provisionally released subject to conditions and to final orders in adjudication proceedings. - HELD THAT: - The Court confirmed and made absolute its interim direction for provisional release of the goods, reiterating that such release is provisional and remains subject to the final orders to be passed by the Department in the adjudication proceedings under the relevant statute. The order preserves the Department's power to decide the substantive adjudication and does not preclude final adverse action in those proceedings. The Special Leave Petition was disposed of by making the interim order absolute, with the proviso that the Department's adjudicatory process will govern the ultimate fate of the goods. [Paras 2, 3, 8]

Interim order made absolute; provisional release of goods ordered, subject to final departmental adjudication.

Questions of law kept open - Questions of law raised by the Revenue were not finally decided and are kept open for consideration in an appropriate case. - HELD THAT: - Although the Court declined to interfere with the High Court's direction for provisional release, it expressly refrained from addressing the substantive legal questions pressed by the Revenue. Those contentions were left open for adjudication in a suitable proceeding, preserving the opportunity for full consideration of the legal issues in a case where they are determinative. [Paras 7]

Questions of law raised by the Revenue are left open for consideration in an appropriate case.

Delay condoned - Delay in filing the petition was condoned. - HELD THAT: - The Court recorded and allowed the application for condonation of delay, thereby validating the filing of the Special Leave Petition despite the delay explained in the record. [Paras 5]

Delay condoned.

Final Conclusion: The Special Leave Petitions are disposed of: the interim order for provisional release of goods is made absolute subject to final departmental adjudication; questions of law raised by the Revenue are left open for consideration in an appropriate case; delay in filing is condoned and pending applications stand disposed of.

Limitation and condonation under Section 128 of the Customs Act - exclusive statutory appellate remedy - prohibition on condoning delay beyond maximum condonable period - scope of writ jurisdiction under Articles 226 and 227

Limitation and condonation under Section 128 of the Customs Act - Appeals against original orders were time-barred and properly dismissed by the Commissioner (Appeals) under Section 128. - HELD THAT: - The Court found that the appeals were instituted well beyond the sixty days prescribed and beyond the further condonable period of thirty days in Section 128. The Commissioner (Appeals) could have entertained appeals within sixty days or, if sufficient cause was shown, within the further thirty days, but not after the extended delay in the present case. The petitioner's asserted date of knowledge was either factually incorrect or, even if accepted, the appeals were instituted after the maximum condonable period, rendering the Commissioner (Appeals)'s dismissal legally sustainable. [Paras 3, 5, 6, 7]

The impugned order dated 20 February 2020 dismissing the appeals as time-barred is not legally infirm.

Scope of writ jurisdiction under Articles 226 and 227 - exclusive statutory appellate remedy - prohibition on condoning delay beyond maximum condonable period - High Court will not exercise writ jurisdiction to permit challenge on merits where the statutory appellate remedy exists and the statutory limitation/condonation limit has been exceeded. - HELD THAT: - Relying on the principle that where a statutory mechanism for challenge, including a maximum limitation and condonable period, is provided, that mechanism must be availed of, the Court held that extraordinary jurisdiction under Articles 226 and 227 cannot be used to bypass or undermine the statutory scheme. The petitioner's submission that he had no earlier opportunity to challenge the original orders was rejected as he had the opportunity but did not avail it. The Court declined to entertain a writ petition seeking to permit a merits challenge in the face of an exhausted condonable period. [Paras 8, 11, 12, 13, 15]

Writ relief under Articles 226 and 227 is not available to circumvent the statutory appellate regime or to condone delay beyond the maximum condonable period; the petition is declined.

Exclusive statutory appellate remedy - The Supreme Court precedent cited (Assistant Commissioner (CT) LTU, Kakinada & Ors. v. M/s Glaxo Smith Kline Consumer Health Care Limited) precludes entertaining writs to defeat the statutory appeal mechanism and to condone delay beyond the statutory maximum. - HELD THAT: - The Court applied the ratio that when a special statutory mechanism for enforcement and challenge is provided, the remedy under the statute must ordinarily be exhausted. The Supreme Court has held that neither Article 142 nor Article 226 can be invoked to undermine such a statutory scheme, and that delay beyond the aggregate condonable period cannot be condoned by exercising writ or inherent powers. That precedent was held to be squarely applicable and dispositive of the present petition. [Paras 10, 11, 12, 13, 14]

The precedent precludes allowing the petitioner's writ-based challenge; the petition cannot be entertained.

Final Conclusion: The petition is dismissed; the Commissioner (Appeals)'s order dated 20 February 2020 upholding dismissal of the appeals as time-barred is sustained and the High Court will not exercise writ jurisdiction to permit a merits challenge or to condone delay beyond the statutory maximum.

Principles of natural justice - Right to be heard - Personal hearing - Quashing and remand for fresh consideration

Principles of natural justice - Right to be heard - Personal hearing - Quashing and remand for fresh consideration - Whether the impugned adjudication order was passed in violation of the principles of natural justice for want of personal hearing, and the appropriate remedy. - HELD THAT: - The court found that the record disclosed discrepancies as to dates of personal hearing intimations and that the petitioner was not afforded an effective opportunity of being heard before the impugned order was passed. The impugned order records personal hearing dates but material in the counter affidavit shows returned intimation letters and variation in the dates mentioned, evidencing that the petitioner was not heard. In view of this failure to accord the right to be heard, the impugned order was held to be vitiated by a violation of the principles of natural justice. The appropriate remedy declared was to quash the impugned order and remit the matter for fresh adjudication after giving the petitioner an opportunity of personal hearing. The court specified that the petitioner shall appear on the directed date for personal hearing and that the authority shall pass fresh orders within a stipulated timeframe. [Paras 8, 9]

Impugned order quashed and matter remitted for fresh consideration after affording personal hearing; petitioner directed to appear on 09.12.2024 and authority to pass fresh orders within three months of receipt of this order.

Final Conclusion: The writ petition succeeds: the adjudication order dated 05.07.2022 is quashed for breach of natural justice and the matter is remitted for fresh decision after personal hearing, with specified timelines; no costs.

Confiscation of smuggled goods - burden of proof under Section 123 - retracted statement and its evidentiary value - corroborative evidence requirement - release on payment of redemption fine - imposition and quantum of penalty under Section 112

Confiscation of smuggled goods - burden of proof under Section 123 - Validity of confiscation of seized gold - HELD THAT: - A total of 36 pieces of gold bearing foreign markings and of 99.90% purity were seized from the three appellants who could not produce any documents to establish licit procurement. As gold with foreign markings and of 99.9% purity is a notified item under the statute, the onus lay upon the claimants to prove that the gold was not smuggled. The appellants admitted they had no documentary proof and therefore failed to discharge the statutory onus. On that basis the adjudicating authority rightly invoked the confiscation provisions and the Tribunal upholds confiscation under the statutory provisions relied upon by the authority. [Paras 6, 8]

Confiscation of the seized gold is upheld.

Release on payment of redemption fine - corroborative evidence requirement - Whether the seized gold could be released on payment of redemption fine - HELD THAT: - Although gold is not a prohibited item, release on payment of redemption fine requires that the claimant establish ownership and licit procurement. The appellants failed to produce documentary evidence discharging the statutory burden. Reliance is placed on relevant High Court authority that the CESTAT erred in directing release where statutory onus is not discharged and where import of gold is strictly regulated. Having found no discharge of burden and no sufficient corroborative material, the Tribunal holds that release on payment of redemption fine is not permissible. [Paras 6, 8]

Goods cannot be released on payment of redemption fine.

Imposition and quantum of penalty under Section 112 - Reduction of penalties imposed on the three persons from whom gold was seized - HELD THAT: - The Tribunal accepts that penalties were imposable because the seized gold was confiscated and the persons claiming ownership did not prove licit procurement. However, having considered the roles played and the nature of the offence, the Tribunal finds the penalties excessive and exercises its power to moderate the quantum. The penalties are accordingly reduced to the specified amounts for each appellant while leaving the finding of liability intact. [Paras 6, 8]

Penalties on Appellant Nos. 1, 2 and 3 are reduced to the amounts specified by the Tribunal.

Retracted statement and its evidentiary value - corroborative evidence requirement - Sustainability of penalty imposed on the person alleged to be owner/mastermind (Appellant No. 4) - HELD THAT: - The only material connecting Appellant No. 4 to the offence was an initial statement by a co-accused which was subsequently retracted while the co-accused was in custody. The investigation produced no other corroborative evidence to implicate Appellant No. 4. The Tribunal holds that the retracted statement cannot be relied upon to sustain the penalty in the absence of independent corroboration and that, accordingly, the penalty imposed on Appellant No. 4 is unsustainable. [Paras 2, 3, 7, 8]

Penalty imposed on Appellant No. 4 is set aside.

Final Conclusion: The Tribunal upholds confiscation of the seized gold and denies release on payment of redemption fine; it moderates the penalties of the three persons from whose possession the gold was recovered, and it sets aside the penalty imposed on the fourth appellant for want of corroborative evidence.

Eligibility of Export Oriented Units to avail other exemption notifications - interpretation of EOU notification vis-a -vis applicability of other concessional notifications - binding effect of administrative clarifications issued by CBIC/TRU on field formations - distinction between exemptions for imports under EOU scheme and exemptions available generally

Eligibility of Export Oriented Units to avail other exemption notifications - binding effect of administrative clarifications issued by CBIC/TRU on field formations - distinction between exemptions for imports under EOU scheme and exemptions available generally - Appellant EOU entitled to avail benefits of notifications other than Notification No. 52/2003-Cus. where substantive conditions of such notifications are fulfilled; field formations cannot deny such concessions contrary to CBIC/TRU clarifications. - HELD THAT: - The Tribunal found that Notification No. 52/2003-Cus. prescribes a nil rate for EOUs subject to specific restrictions and procedural conditions, but does not operate as a bar preventing EOUs from availing other duty-concession notifications which themselves prescribe conditions to be satisfied. The Board/Departmental clarifications relied upon - the DGEP letter dated 09.02.2007 and the TRU/DOT letter dated 01.02.2017 - expressly clarify that EOUs satisfying the substantive procedural and conditional requirements of the respective notifications/rules are eligible to avail those exemptions, and that non-applicability under provisos is confined to specified circumstances relating to DTA clearances of excisable goods. Once the supervising authority (CBIC/TRU) has issued such clarifications allowing EOUs to avail other notifications, subordinate field formations cannot take a contrary stance. Applying these principles to the facts, the Tribunal held that the Commissionerate's denial of benefit under the other notifications was contrary to the CBIC/TRU position and therefore unsustainable. [Paras 4, 5]

Impugned order set aside; appeal allowed.

Final Conclusion: The appeal is allowed: EOUs may avail other concessional/nil-rate duty notifications if they fulfill the substantive conditions of those notifications and the department's clarifications, and the impugned denial by the field formation is quashed.

Inclusion of demurrage charges in transaction value for customs duty - Validity of the Explanation to SubRule (2) of Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - held ultra vires - Application of judicial precedent and coordinatebench decisions in valuation disputes

Inclusion of demurrage charges in transaction value for customs duty - Validity of the Explanation to SubRule (2) of Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - held ultra vires - Demurrage charges cannot be included in the transaction value of imported goods and the Explanation to SubRule (2) of Rule 10 of the Customs Valuation Rules, 2007 is not to be applied to enhance assessable value. - HELD THAT: - The Tribunal held that the question is squarely covered by the decision of the Hon'ble Orissa High Court in Tata Steels Ltd (which declared the Explanation to SubRule (2) of Rule 10 to be ultra vires Section 14 of the Customs Act, 1962 insofar as it seeks to include demurrage as part of cost) and by a subsequent coordinatebench Tribunal decision following that view. Applying those precedents and principles of judicial discipline, the Tribunal concluded that demurrage - being of a penal/compensatory character and not included within the costs contemplated by the principal Act - is not includible in transaction value for customs duty. On that basis the Tribunal set aside the adjudicating authority's order which had enhanced value by adding demurrage and allowed the appeal with consequential relief as per law. [Paras 7, 8]

Impugned order set aside; appeal allowed and enhanced assessable value on account of demurrage disallowed.

Final Conclusion: The Tribunal allowed the appeal, holding that demurrage charges cannot be included in the transaction value for customs duty in view of the Orissa High Court and subsequent Tribunal authorities, set aside the adjudicating order that enhanced value by adding demurrage, and granted consequential relief as per law.

Re-assessment under section 17 of Customs Act - self-assessment - speaking order requirement under section 17(5) of Customs Act - anti-dumping duty levy - procedural non-compliance vitiating assessment - remand for fresh disposal in conformity with statutory mandate

Re-assessment under section 17 of Customs Act - self-assessment - speaking order requirement under section 17(5) of Customs Act - procedural non-compliance vitiating assessment - Affirmation by the first appellate authority of re-assessments imposing anti-dumping duty where no speaking order under section 17(5) and no material justifying re-assessment existed. - HELD THAT: - The Tribunal found that the proper officer revised assessments between filing of the bills of entry and conclusion under section 17, converting self-assessed entries into assessed bills without evidence of notice, acceptance by the importer or a speaking order as mandated by section 17(5). The first appellate authority, having no material on record to demonstrate that the statutory prerequisites for re-assessment were satisfied, nonetheless affirmed the revised classification and levy. Such affirmation, in the absence of the required speaking order and supporting material showing the basis and justification for discarding the self-assessment, is a departure from the statutory framework and invalidates the re-assessment. The Tribunal held that a speaking order justifying re-assessment is not a formality but a substantive requirement; failure to comply renders the re-assessment and the appellate affirmation vitiated ab initio. [Paras 5, 6, 7]

Impugned orders upholding the re-assessments are set aside for want of the speaking order and supporting material; affirmations are invalid and cannot stand.

Remand for fresh disposal in conformity with statutory mandate - anti-dumping duty levy - Procedure to be followed after setting aside: bills of entry restored to the original authority for disposal in accordance with section 17 of the Customs Act. - HELD THAT: - Given the invalidation of the re-assessments and the absence of requisite procedural compliance, the appropriate remedy is to remit the matters to the original authority for fresh disposal strictly in accordance with section 17, including issuance of notice and, where applicable, passing of a speaking order within the statutory time-frame before any re-assessment is sustained. The Tribunal declined to decide the substantive chargeability of anti-dumping duty on the merits in the absence of a lawful re-assessment process and therefore remanded the records for fresh adjudication consistent with statutory requirements. [Paras 8]

Appeals allowed by way of remand; bills of entry restored to original authority for disposal under section 17.

Final Conclusion: The Tribunal set aside the impugned appellate orders affirming re-assessments that imposed anti-dumping duty because the re-assessments lacked the speaking order and supporting material required by section 17; the matters are remitted to the original authority for fresh disposal in accordance with the statutory procedure.

Professional misconduct - failure to comply with Standards on Auditing (SA 300, SA 315, SA 510, SA 320, SA 570, SA 550, SA 505, SA 220, SA 230) - failure to provide Expected Credit Loss provisioning as per Ind AS 109 - non-disclosure and non-evaluation of Related Party Transactions and compliance with Section 177 & 188 - failure to assemble the audit file within prescribed time (SA 230, SQC1) - failure to appoint an Engagement Quality Control Reviewer (EQCR) - failure to communicate with Those Charged With Governance (SA 260) - firm's responsibility for quality control and duties under Section 143 of the Companies Act, 2013 and SQC1 - imposition of penalties and debarment under Section 132(4) of the Companies Act, 2013

Failure to comply with Standards on Auditing (SA 300, SA 315) - failure to plan the audit and understand the entity and its environment - Auditors failed to plan the audit and to obtain and document an understanding of the entity and its environment in breach of SA 300 and SA 315. - HELD THAT: - The audit file contained no documented Audit Strategy or Audit Plan nor any evidence of obtaining the required understanding of the entity, its operations, governance or applicable regulatory framework as required by SA 300 and SA 315. The Engagement Partner's explanation that the audit commenced after the second limited review and that discussions were verbal was rejected because the firm had given consent to act as statutory auditor and was appointed for FY 2020-21; verbal undocumented discussions do not discharge the duty to plan and document the audit. The charge therefore stands established. [Paras 16, 17, 18, 19, 20]

Charge of failure to plan the audit and to understand and document the entity's environment is established.

Failure to verify opening balances (SA 510) - Auditors failed to obtain sufficient appropriate audit evidence regarding opening balances in breach of SA 510. - HELD THAT: - No work papers were produced to show verification of opening balances despite FY 2020-21 being the first year of audit for the firm. Differences between closing balances of FY 2019-20 and opening balances of FY 2020-21 existed and no procedures required by SA 510 (perusal of prior audited financial statements, evaluation of current year procedures or specific procedures) were documented. The Engagement Partner admitted opening balances were not verified. The charge stands established. [Paras 23, 24, 25, 26, 27]

Charge of failure to verify opening balances is established.

Failure to determine Materiality and Performance Materiality (SA 320) - Auditors did not determine or document Materiality and Performance Materiality as required by SA 320. - HELD THAT: - The audit file contained no documentation on the determination of materiality or performance materiality. The Engagement Partner admitted the absence of such documentation and offered no substantive comment. As determination of materiality is fundamental to planning and performing further audit procedures under SA 320, the charge stands established. [Paras 28, 29, 30]

Charge of failure to determine materiality and performance materiality is established.

Failure to provide Expected Credit Loss provisioning as per Ind AS 109 - failure to report material misstatement arising from non-provisioning - Auditors failed to identify and report the company's non-provisioning for Expected Credit Loss on trade receivables in contravention of Ind AS 109 and the SAs. - HELD THAT: - Trade receivables were disproportionately large relative to sales and remained outstanding for prolonged periods. The financial statements showed no ECL provisioning and the audit file lacked ageing analysis or testing for ECL. The Engagement Partner admitted absence of an ECL policy and lack of audit testing and did not report the company's non-compliance. Given the requirements of Ind AS 109 and the auditor's duty to report material misstatement, the charge that auditors failed to report non-provisioning stands established. [Paras 31, 32, 33, 34]

Charge of failure to report non-provisioning for ECL under Ind AS 109 is established.

Failure to assess and report on Going Concern (SA 570) - Auditors failed to obtain sufficient evidence and to report on the appropriateness of management's use of the going concern basis as required by SA 570. - HELD THAT: - Material indicators-substantial losses, negligible bank balance, reliance on sister concerns for payments, trade receivables constituting a large proportion of net worth and adverse net current liability-were present but the audit file contained no documentation assessing going concern. The Engagement Partner admitted absence of documentation and offered no response to this charge. As SA 570 requires auditors to conclude and report on material uncertainties, the charge stands established. [Paras 35, 36, 37, 38, 39]

Charge of failure to assess and report on going concern is established.

Non-disclosure and non-evaluation of Related Party Transactions (SA 550) and compliance with Section 177 & 188 - Auditors failed to identify, evaluate arm's length pricing, disclose and document related party transactions and outstanding balances as required by SA 550 and the Companies Act. - HELD THAT: - Related party transactions were material to the balance sheet, with very large proportions of payables and receivables involving related parties and the company's entire sales made to related parties not disclosed under RPTs. The audit file lacked work papers on identification of related parties, nature of relationships, details of transactions, arm's length evaluation or testing. The Engagement Partner admitted non-disclosure. Given SA 550 and statutory obligations under Sections 177/188, the charge stands established. [Paras 42, 43, 44, 45, 46]

Charge of failure to evaluate, disclose and document related party transactions and arm's length pricing is established.

Failure to report non-charging of depreciation (Ind AS 116, Ind AS 16) and resultant misstatement (SA 705) - Auditors failed to qualify the audit opinion despite identifying non-charging of depreciation on right-of-use assets and plant & machinery, resulting in a materially misstated audit opinion. - HELD THAT: - The Engagement Partner reported the non-charging of depreciation as an internal control weakness but did not reflect its impact in the Independent Auditor's Report; leased land and plant & machinery were not depreciated contrary to Ind AS 116 and Ind AS 16. SA 705 requires qualification where misstatements are material. The EP certified financial statements as true and fair despite this material misstatement. The charge that the auditor issued a misleading/unmodified opinion despite material departures from accounting standards stands established. [Paras 51, 52, 53, 54, 55]

Charge of failure to report non-charging of depreciation and issuing an unmodified opinion despite material misstatement is established.

Failure to assemble the Audit File within 60 days (SA 230, SQC1) - Auditors did not assemble the final audit file within the ordinarily required time frame, in breach of SA 230 and SQC1. - HELD THAT: - The auditor's report was dated 23.06.2021 but the audit file was not compiled within 60 days thereafter. The EP admitted incomplete documentation and later submitted an incomplete audit file only after NFRA's request; affidavit of completeness was not provided timely and EP accepted the file was not complete. In absence of timely assembly of the audit file, there is no basis to verify performance of required procedures. The charge stands established. [Paras 58, 59, 60, 61, 62]

Charge of failure to assemble the audit file within the prescribed time is established.

Failure to obtain sufficient appropriate audit evidence through external confirmations (SA 505) - Auditors failed to obtain external confirmations or perform alternative procedures to validate significant third-party balances, in breach of SA 505. - HELD THAT: - Significant balances (minimal bank balance, large trade payables and advances to suppliers) existed as at 31.03.2021, yet the audit file contained no external confirmations of bank or third-party balances and no documented alternative procedures. The Engagement Partner conceded that third-party balances were subject to confirmation and placed responsibility on management. Absent confirmations or alternatives, SA 505 was not complied with and the charge stands established. [Paras 63, 64]

Charge of failure to obtain external confirmations or adequate alternative evidence is established.

Failure to determine appointment of Engagement Quality Control Reviewer (SA 220) - Auditors failed to determine and appoint an Engagement Quality Control Reviewer for a listed entity audit as required by SA 220 and SQC1. - HELD THAT: - Vikas was a listed company for FY 2020-21 and para 19(a) of SA 220 mandates determination of an EQCR for such audits. The audit file contained no evidence of appointment or review by an EQCR; the EP offered no comment on this charge. Given the mandatory nature of EQCR for listed entities and guidance in SQC1, the failure to appoint an EQCR stands established. [Paras 66, 67, 68, 69, 70]

Charge of failure to determine and appoint an EQCR is established.

Failure to determine Those Charged With Governance and communicate with them (SA 260) - Auditors did not document identification of Those Charged With Governance nor communications required by SA 260. - HELD THAT: - The audit file lacked minutes, records of discussions or documentation of communications with TCWG, including communication of identified internal control weaknesses. The Engagement Partner admitted absence of such documentation and offered no substantive reply. In view of SA 260's requirements, the failure to determine and communicate with TCWG stands established. [Paras 71, 72, 73]

Charge of failure to determine and communicate with TCWG is established.

Firm's responsibility for quality control and duties under Section 143 and SQC1 - The audit firm failed to maintain an adequate system of quality control and is responsible for the Engagement Partner's lapses, amounting to professional misconduct. - HELD THAT: - SQC1 requires firms to establish systems of quality control covering leadership, ethical requirements, acceptance and continuance, human resources, engagement performance and monitoring. The firm failed to ensure compliance with applicable SAs and statutory duties under Section 143; the firm is thus responsible for the EP's deficiencies, incomplete documentation, and issuance of an unjustified audit opinion. Based on the aggregate lapses, the firm committed professional misconduct as defined under the Chartered Accountant Act and Companies Act provisions. [Paras 77, 78, 79, 80, 82]

Charge of professional misconduct against the audit firm for failure of quality control and responsibility for EP's lapses is established.

Final Conclusion: On findings of multiple breaches of applicable Standards on Auditing, Indian Accounting Standards and firm quality-control obligations, NFRA held the Engagement Partner and audit firm guilty of professional misconduct, imposed monetary penalties of 3,00,000 on the firm and 2,00,000 on the Engagement Partner, and debarred the Engagement Partner from audit appointments for two years; the Order takes effect after 30 days from its issue.

Professional misconduct - failure to comply with Standards on Auditing - failure to plan the audit and understand the entity (SA 300; SA 315) - failure to evaluate the internal audit function (SA 610) - failure to determine materiality and performance materiality (SA 320) - non reporting of Expected Credit Loss under the applicable financial reporting framework (Ind AS 109) - failure to evaluate arm's length nature and disclosure of Related Party Transactions (SA 550; corporate approvals under Sections 177/188) - failure to assemble audit file and maintain audit documentation (SA 230; SQC1) - failure to obtain external confirmations or alternative procedures (SA 505) - failure to determine appointment of Engagement Quality Control Reviewer for a listed entity (SA 220) - penalty and debarment under Section 132(4) of the Companies Act, 2013

Failure to plan the audit and understand the entity (SA 300; SA 315) - failure to comply with Standards on Auditing - The Engagement Partner failed to plan the audit and to document understanding of the entity and its environment in breach of SA 300 and SA 315. - HELD THAT: - The audit file contained no documented audit strategy, audit plan or records evidencing the auditor's understanding of the entity and its environment as required by paras 11 of SA 300 and SA 315. The EP admitted absence of such documentation and made no substantive reply in response to the show cause notice. On that basis NFRA concluded non compliance with SA 300 and SA 315 and established the charge of failure to plan and understand the entity, reflecting lack of due diligence. [Paras 13, 14, 15, 16]

Charge of failure to plan the audit and failure to understand the entity and its environment is established.

Failure to evaluate the internal audit function (SA 610) - The EP failed to evaluate and document the work of the internal audit function in breach of SA 610. - HELD THAT: - The company's annual reports disclosed an internal auditor, yet the audit work papers contained no evaluation of the internal audit function against the criteria in para 15 of SA 610 (objectivity, competence, systematic approach). The EP contradicted the company's disclosures by claiming no internal auditor in correspondence and did not address the absence of evaluation in his SCN reply. NFRA therefore found non compliance with SA 610 established. [Paras 17, 18, 19, 20]

Charge of failure to evaluate the internal audit function stands proved.

Failure to determine materiality and performance materiality (SA 320) - The EP did not determine or document materiality and performance materiality as required by SA 320. - HELD THAT: - SA 320 requires the auditor to determine materiality for the financial statements as a whole and performance materiality for assessing risks and designing procedures. The audit file contained no documentation on such determinations and the EP admitted absence of documentation and offered no explanation in his reply. NFRA therefore established the charge of failure to determine materiality and performance materiality. [Paras 21, 22, 23]

Charge of failure to determine materiality and performance materiality is established.

Non reporting of Expected Credit Loss under the applicable financial reporting framework (Ind AS 109) - failure to obtain sufficient audit evidence for trade receivables - The EP failed to report non provisioning for Expected Credit Loss (ECL) on trade receivables and did not perform impairment assessment or maintain supporting documentation as required under Ind AS 109 and auditing standards. - HELD THAT: - The financial statements showed exceptionally large trade receivables relative to sales and there was no ageing or impairment testing evidence in the audit file. The EP confirmed absence of documentation regarding ECL provisioning and made no substantive reply to the SCN. NFRA concluded that the EP failed to report the company's non compliance with Ind AS 109 and did not obtain or document sufficient audit evidence regarding ECL. [Paras 24, 25, 26]

Charge of failure to report non provisioning for ECL and to obtain/document appropriate audit evidence is established.

Failure to evaluate arm's length nature and disclosure of Related Party Transactions (SA 550; Sections 177/188) - The EP did not evaluate arm's length pricing or properly identify and disclose Related Party Transactions, in breach of SA 550 and applicable corporate approval requirements. - HELD THAT: - Related party balances comprised a substantial portion of trade payables and receivables, and a leasehold land acquisition from the Managing Director was not disclosed as a related party transaction. No audit working papers showed identification of related parties, arm's length testing, or verification of requisite approvals as per company law. The EP acknowledged absence of such testing and did not contest the charge in his reply. NFRA found the failure to evaluate and disclose RPTs established. [Paras 27, 28, 29, 30, 31]

Charge of failure to evaluate arm's length pricing and to disclose related party transactions is established.

Failure to assemble audit file and maintain audit documentation (SA 230; SQC1) - The EP failed to assemble the final audit file within the prescribed time and did not maintain required audit documentation as per SA 230 and SQC1. - HELD THAT: - The auditor's reports were dated 22.05.2019 and 27.06.2020, yet the audit file was not compiled within the ordinarily required 60 day period. NFRA's requests for the audit file and an affidavit of completeness were met late and incomplete; the EP submitted the file only after extended deadlines and omitted the required affidavit. In absence of timely and complete documentation, NFRA concluded that there is no basis to confirm required audit procedures were performed, establishing non compliance with SA 230 and SQC1. [Paras 32, 33, 34, 35, 36]

Charge of failure to assemble the audit file within 60 days and maintain proper audit documentation is established.

Failure to report non charging of depreciation (Ind AS 16; Ind AS 116) - The EP failed to report and disclose the non charging of depreciation on leasehold land and plant & machinery, contrary to Ind AS 116 and Ind AS 16, and yet issued an unqualified auditor's report claiming conformity with Ind AS. - HELD THAT: - Leasehold land and plant & machinery were not subjected to depreciation in the relevant years despite being available for use and the accounting standards' requirements. The EP confirmed the absence of depreciation and did not contest the matter in his show cause reply. NFRA held that the EP's Independent Auditor's Reports falsely stated conformity with Ind AS and that the failure to report this material non compliance was established. [Paras 37, 38, 39, 40, 41]

Charge of failure to report non charging of depreciation and making a false statement of conformity with Ind AS is established.

Failure to obtain external confirmations or perform alternative procedures (SA 505) - The EP did not obtain external confirmations for bank balances, trade receivables, trade payables or perform appropriate alternative audit procedures, in breach of SA 505. - HELD THAT: - Significant balances existed in trade receivables, trade payables and advances, yet the audit work papers contained no third party confirmations and no evidence of alternative procedures. The EP relied on management representations and did not respond to this charge in the SCN reply. NFRA therefore found that the EP failed to obtain sufficient and appropriate audit evidence as required by SA 505. [Paras 42, 43]

Charge of failure to obtain external confirmations or adequate alternative evidence is established.

Failure to determine appointment of Engagement Quality Control Reviewer for a listed entity (SA 220; SQC1) - The EP failed to determine and appoint an Engagement Quality Control Reviewer for the audit of a listed entity as required by SA 220 and related SQC1 provisions. - HELD THAT: - For audits of listed entities, SA 220 requires determination and appointment of an EQCR and SQC1 prescribes review procedures and eligibility. The EP made no response to this charge and the record contains no evidence of an EQCR appointment or the requisite reviews. NFRA therefore established non compliance with SA 220 and SQC1 concerning EQCR. [Paras 44, 45, 46, 47, 48]

Charge of failure to determine and appoint an EQCR for the engagement is established.

Professional misconduct under the Chartered Accountant Act - penalties and debarment under Section 132(4) of the Companies Act, 2013 - The cumulative departures from auditing standards and failures in the conduct of the audits constitute professional misconduct warranting imposition of penalty and debarment under Section 132(4) of the Companies Act, 2013. - HELD THAT: - NFRA found proved multiple clauses of professional misconduct as per the Second Schedule to the Chartered Accountants Act (failure to disclose material facts, failure to report material misstatements, gross negligence, failure to obtain sufficient information, failure to follow accepted audit procedures). Considering the nature and gravity of violations, principles of proportionality and deterrence, NFRA exercised its power under Section 132(4)(c) to impose a monetary penalty and debarment. The EP's audit fees disclosure was incomplete in the record but NFRA proceeded to fix sanctions within statutory limits. [Paras 53, 54, 55, 56, 57]

Charges of professional misconduct are proved and NFRA imposed a monetary penalty and debarment in exercise of powers under Section 132(4) of the Companies Act, 2013.

Final Conclusion: NFRA found the Engagement Partner guilty of multiple proven departures from applicable Standards on Auditing and accounting standards in respect of the statutory audits of Vikas Proppant and Granite Limited for FY 2018 19 and FY 2019 20, and in exercise of powers under Section 132(4) of the Companies Act, 2013 imposed a monetary penalty of Rs. 2,00,000 and debarred the auditor and his firm from audit appointments for two years; the Order takes effect after 30 days of issue.

Professional misconduct under Section 132(4) of the Companies Act, 2013 - Failure to comply with Clause 2 of Part I of the Second Schedule to the Chartered Accountants Act, 1949 - Non compliance with Standards on Auditing (SA 220, SA 230, SA 500, SA 700, SA 300, SA 320, SA 510, SA 520, SA 530, SA 580) - Gross negligence and failure to exercise due diligence - Failure to obtain sufficient audit evidence and audit documentation - Disciplinary sanctions under Section 132(4)(c) of the Companies Act, 2013

Failure to comply with Clause 2 of Part I of the Second Schedule to the Chartered Accountants Act, 1949 - Professional misconduct under Section 132(4) of the Companies Act, 2013 - Certification of branch audit reports without evidence that the examination of the statements and related records was made by the member or by a partner or employee of his firm or by another practising chartered accountant was professional misconduct and is proved. - HELD THAT: - The Authority found no evidence in the audit file that the examination of branch accounts and related records was performed by the member, a partner, an employee of the firm, or another practising chartered accountant, as required by Clause 2 of Part I of the Second Schedule to the Chartered Accountants Act, 1949. The absence of any documentation demonstrating who performed or supervised the examination, coupled with the issuance of unqualified "Independent Branch Auditor's Report(s)", establishes that the appellant certified reports without requisite examination or supervision. Those omissions amount to professional misconduct within the meaning of Section 132(4) of the Companies Act, 2013 and the relevant clauses of the Chartered Accountants Act and Code of Ethics. [Paras 17, 19, 20, 21, 24]

The charge of certification without requisite examination under Clause 2 of Part I of the Second Schedule is proved and constitutes professional misconduct.

Non compliance with Standards on Auditing (SA 220, SA 230, SA 500, SA 700, SA 300, SA 320, SA 510, SA 520, SA 530, SA 580) - Failure to obtain sufficient audit evidence and audit documentation - Gross negligence and failure to exercise due diligence - Non compliance with multiple Standards on Auditing, lack of audit documentation and failure to obtain sufficient appropriate audit evidence are proved and amount to gross negligence and failure to exercise due diligence. - HELD THAT: - The audit file lacks records required by SA 230 (nature, timing and extent of procedures, results, conclusions, identity of performers and reviewers), SA 700 (assessment before expressing opinion), SA 220 (engagement partner review and quality control), SA 500 (design and performance of procedures and evaluation of reliability), and other specific SAs enumerated by the Authority. Consequent failures included absence of audit strategy or plan (SA 300), documentation of materiality determinations (SA 320), procedures on opening balances (SA 510), analytical procedures (SA 520), sampling (SA 530), and written representations (SA 580). In view of these pervasive deficiencies, the Authority concluded that the unqualified opinions issued were not supported by sufficient appropriate audit evidence and that the respondent was grossly negligent and failed to exercise due diligence in conducting the branch audits. [Paras 19, 21, 23, 24, 29]

The charges of non compliance with the listed Standards on Auditing, insufficient audit evidence and documentation, and gross negligence are proved.

Disciplinary sanctions under Section 132(4)(c) of the Companies Act, 2013 - Proportionality and deterrence in imposing sanctions - Appropriate sanctions for the proved professional misconduct are imposition of a monetary penalty and debarment, which are ordered and will take effect after 30 days. - HELD THAT: - Having found professional misconduct and gross negligence in the branch audits, and having noted the public interest in branch information forming part of the company's financial statements, the Authority exercised its powers under Section 132(4)(c). Applying principles of proportionality and deterrence, the Authority imposed a monetary penalty and debarment for a limited duration. The Authority also considered non cooperation during proceedings as an aggravating factor. The orders specify the nature of sanctions and their effective date. [Paras 4, 25, 29, 30, 31]

A monetary penalty and debarment for one year are imposed; the order becomes effective after 30 days from issue.

Final Conclusion: The Authority found that CA Krishna Bihari Chaturvedi committed professional misconduct by certifying branch audit reports without evidence of requisite examination or supervision and by pervasive non compliance with applicable Standards on Auditing resulting in gross negligence. Consequent to these findings, a monetary penalty and debarment for one year have been imposed, the order to take effect 30 days after its issue.

Professional misconduct - acceptance of audit engagement without valid authorization - failure to ascertain compliance with statutory appointment requirements under the Companies Act - breach of ethical duties and Code of Ethics obligations of a chartered accountant - non-compliance with Standards on Auditing - insufficient audit documentation and breach of SA 230 - deficient agreement of terms of engagement and breach of SA 210 - absence of professional skepticism and due diligence (SA 200)

Acceptance of audit engagement without valid authorization - failure to ascertain compliance with statutory appointment requirements under the Companies Act - breach of ethical duties and Code of Ethics obligations of a chartered accountant - Whether CA Kashinath Chaturvedi accepted a statutory branch audit engagement without valid appointment and thereby breached statutory and ethical obligations - HELD THAT: - NFRA found that the appointment of branch auditors was not approved by the shareholders at the AGM and that the engagement letters and the Independent Branch Auditors' Reports described the work as a "Branch Statutory Audit." Despite this, CA Kashinath Chaturvedi accepted the appointment and acted as a branch statutory auditor without verifying compliance with the statutory appointment procedure required under the Companies Act and without satisfying the requirement under the Chartered Accountants Act and the ICAI Code of Ethics to ascertain compliance. The conduct demonstrates lack of due diligence and professional behaviour; the contention that the engagement was limited to certifications was rejected as an afterthought in view of appointment letters, acceptance letters and the audit reports issued. The failure to verify statutory compliance and to exercise required professional scepticism and care establishes professional misconduct under the applicable provisions of the Chartered Accountants Act as conceived in Section 132(4) of the Companies Act. [Paras 15, 19, 22, 23, 39]

Established that the CA accepted an invalid statutory branch audit appointment and breached the statutory and ethical duties; this conduct amounted to professional misconduct.

Non-compliance with Standards on Auditing - deficient agreement of terms of engagement and breach of SA 210 - absence of professional skepticism and due diligence (SA 200) - insufficient audit documentation and breach of SA 230 - Whether the branch audit work contravened applicable Standards on Auditing (SA 200, SA 210, SA 230) and thereby constituted professional misconduct - HELD THAT: - NFRA examined the branch audit in substance and form and found multiple breaches of SAs. There was no valid engagement letter or adequate documentation of the objective and scope of the audit as required by SA 210, reflecting absence of professional judgement and scepticism in planning the engagement. The audit file lacked working papers, evidence of procedures performed, results and conclusions, and did not record who performed or reviewed work as required by SA 230. These failures meant the audit report lacked an adequate evidentiary basis and the requirements of SA 200 (overall objectives and conduct of an audit) were violated. Oral explanations were insufficient to cure the absence of contemporaneous documentation. The breaches of these SAs were held to establish gross negligence and professional misconduct. [Paras 33, 34, 35, 36, 37]

Established that the branch audit work did not comply with SA 200, SA 210 and SA 230; such non-compliance amounted to gross negligence and professional misconduct.

Professional misconduct - penalties and debarment under Section 132(4) of the Companies Act - What sanctions should follow from the proved professional misconduct - HELD THAT: - Having found professional misconduct by reason of accepting an invalid appointment and failure to comply with applicable SAs, NFRA applied the remedial scheme under Section 132(4) of the Companies Act. Taking into account the nature of the violations, principles of proportionality, deterrence and signalling value, NFRA imposed disciplinary sanctions in the exercise of its statutory powers. The sanctions were calibrated by reference to the deficiencies in audit quality, the public interest in safeguarding the integrity of financial reporting and the need for remedial deterrence. [Paras 3, 4, 44, 45, 46]

Imposed a monetary penalty and debarment: monetary penalty of Rupees One Lakh and debarment for one year from appointment as auditor, internal auditor or from undertaking any audit of financial statements or internal audit of any company or body corporate; order to take effect after 30 days.

Final Conclusion: NFRA held that CA Kashinath Chaturvedi committed professional misconduct by accepting a statutory branch audit without valid appointment and by failing to comply with applicable Standards on Auditing; accordingly NFRA imposed a monetary penalty of Rupees One Lakh and a one-year debarment from auditor/internal auditor appointments or undertaking audits, the order to become effective after 30 days.

Professional misconduct - failure to communicate with predecessor auditor - misuse of Emphasis of Matter (EoM) - failure to obtain sufficient appropriate audit evidence - lack of professional skepticism - inadequate evaluation of going concern - insufficient audit procedures for Expected Credit Loss (ECL) - failure to respond to suspected fraud reported by previous auditor - deficient audit documentation - firm-level responsibility for audit quality (SQC-1) - monetary penalty and debarment as sanction

Failure to communicate with predecessor auditor - professional misconduct - Acceptance of the audit engagement without prior written communication with the previous auditor and without waiting a reasonable time was professional misconduct. - HELD THAT: - The NFRA found that M/s Shridhar & Associates and the Engagement Partner accepted the appointment prior to receiving professional clearance from the predecessor auditor. Documentary evidence in the audit file (board appointment on 28.06.2019, engagement letter dated 01.07.2019, NOC dated 05.07.2019 and planning work performed before receipt of NOC) establishes that communication with the previous auditor did not precede acceptance. This conduct breached Clause 8 of Part I of the First Schedule to the Chartered Accountants Act, the Code of Ethics, SA 300 and the firm's SQC-1 quality policy, and therefore constituted professional misconduct. [Paras 16, 17, 18, 19, 20]

Proved; the Auditors are guilty of professional misconduct for accepting the engagement without first communicating with the previous auditor and without waiting for a reasonable time.

Misuse of Emphasis of Matter (EoM) - failure to obtain sufficient appropriate audit evidence - professional misconduct - Issuance of an EoM endorsing the company's disclosure on the previous auditor's suspected fraud and failing to modify the opinion was improper and constituted professional misconduct. - HELD THAT: - The auditors included an EoM referring to the company's Note 44(i) and stating that, based on the company and legal opinions, no matter attracted section 143(12). NFRA concluded the disclosure was not appropriately presented under Ind AS 10, was factually incorrect in timing, and that the auditors endorsed the company's legal interpretation without performing required evaluation of management experts under SA 500. The EoM also omitted the required statement that the opinion was not modified, and gave the impression of endorsing management's dismissal of suspected fraud while regulatory action was pending. These failures violated SA 706 (Revised), SA 200 and other standards and amount to professional misconduct. [Paras 21, 22, 23, 25, 26]

Proved; the EoM was inappropriate, the auditors failed to comply with applicable SAs, and the charges in paragraphs 21 and 23 are established.

Inadequate evaluation of going concern - failure to obtain sufficient appropriate audit evidence - professional misconduct - The auditors failed to obtain sufficient appropriate evidence and did not perform required procedures to conclude there was no material uncertainty on going concern. - HELD THAT: - The audit file recorded that material uncertainties existed, yet the engagement team did not perform the evaluation steps mandated by SA 570 (Revised), including testing management's plans, analysing the reliability of cash flow forecasts, detailed maturity profiling and assessment of the Inter-Creditor Agreement (ICA). Other conditions such as CRAR breach and regulatory proceedings were not assessed or disclosed adequately. The auditors' documentation and procedures were inadequate to conclude the absence of material uncertainty, contrary to SA 570 (Revised) and Ind AS 1 requirements. [Paras 29, 30, 31, 32, 34]

Proved; the auditors did not obtain sufficient appropriate evidence regarding going concern and the charge in paragraph 27 is established.

Insufficient audit procedures for Expected Credit Loss (ECL) - lack of professional skepticism - failure to obtain sufficient appropriate audit evidence - The auditors failed to perform adequate audit procedures and document sufficient evidence to verify the reasonableness of the ECL estimate. - HELD THAT: - Workpapers relied upon by the auditors show largely arithmetic checks and copying of management's ECL model without independent verification. There is no evidence of challenge for management bias, testing of forward-looking information, assessment of scenario selection and weightings, use or evaluation of experts where required by SA 540, or consideration of material weaknesses in internal control affecting ECL as required by SA 315. Given the size of the loan book and risk indicators, the absence of substantive procedures rendered the ECL assertions unverified. [Paras 35, 36, 37, 38]

Proved; insufficient evidence exists to ensure reasonableness of the ECL and the charge in paragraph 35 is established.

Failure to respond to suspected fraud reported by previous auditor - lack of professional skepticism - misleading audit report - The auditors failed to adequately address and obtain sufficient appropriate evidence concerning the suspected fraud reported by the previous auditor, resulting in a misleading audit report. - HELD THAT: - Despite being aware of the previous auditor's ADT-4 report alleging suspected fraud, the engagement team did not treat revenue and other relevant assertions as fraud risks, failed to examine end-use of loans and indications of fund siphoning, performed non-representative sampling, and did not design procedures responsive to the fraud risks per SA 240. The EoM and audit report gave the impression that no matters under section 143(12) existed, contrary to evidential gaps and pending regulatory determination. Overall professional skepticism was lacking and required procedures were not performed. [Paras 41, 42, 43, 44, 45]

Proved; all charges in paragraph 40 are established and the audit report was misleading due to inadequate response to suspected fraud.

Key Audit Matters (KAM) communication - documentation of rationale for KAM - The auditors failed to communicate KAMs to Those Charged with Governance and failed to document the rationale for determination of KAMs as required by SA 701. - HELD THAT: - NFRA found no evidence that the mandatory requirements of paragraph 18 of SA 701 were complied with; in absence of such evidence the charges of non-communication and deficient documentation of KAMs are deemed proved. [Paras 46, 47]

Proved; the auditors did not comply with SA 701's requirements on KAM communication and documentation.

Deficient audit documentation - failure to comply with SA 230 - Audit documentation omitted required information on who performed and reviewed work and dates of completion, breaching SA 230. - HELD THAT: - Several workpapers lacked preparer and reviewer identification and the dates of preparation and review. The auditors' assertion that omissions were clerical was not supported by evidence. NFRA concluded that the audit documentation as a whole failed to provide sufficient detail to enable understanding of the nature, timing, extent and results of procedures and the persons responsible, contrary to SA 230. [Paras 48, 49, 50]

Proved; documentation deficiencies contravened SA 230 and were material to the audit failure.

Firm-level responsibility for audit quality (SQC-1) - joint and several responsibility of firm and engagement partner - The audit failures arose from both engagement-level and firm-level deficiencies; the audit firm bears primary responsibility alongside the engagement partner. - HELD THAT: - NFRA emphasised that the firm, as the legal auditor under section 139, is responsible for quality control under SQC-1 and SA 220. Merely providing resources and training was insufficient; there was inadequate supervision and oversight by the firm. The firm and the engagement partner are jointly and severally responsible for adherence to SAs and quality controls, and the failures evidenced in C.1-C.8 demonstrate breach of firm-level obligations. [Paras 53, 54, 55, 56, 57]

Proved; the firm failed in its supervisory and quality-control responsibilities and shares responsibility for the professional misconduct.

Monetary penalty and debarment as sanction - Monetary penalties and debarment were imposed on the audit firm and the engagement partner pursuant to Section 132(4) of the Companies Act, 2013. - HELD THAT: - Having established professional misconduct across multiple charges, NFRA exercised its power under Section 132(4)(c) to impose sanctions. Considering the public interest nature of the entity and the gravity of audit failures, NFRA imposed a monetary penalty of Rupees Two Crore on M/s Shridhar & Associates, and a monetary penalty of Rupees Fifty Lakhs on CA Ajay Vastani together with a five-year debarment from appointment as auditor or undertaking audits. [Paras 60, 61, 62, 63, 64]

Proved; penalties and debarment ordered as specified in paragraph 64.

Final Conclusion: NFRA found M/s Shridhar & Associates and CA Ajay Vastani guilty of multiple instances of professional misconduct in the statutory audit of Reliance Commercial Finance Limited for FY 2018-19-including improper client acceptance, misuse of an Emphasis of Matter, inadequate going concern evaluation, deficient ECL audit procedures, failure to address suspected fraud, deficient KAM communication and documentation, and overall lapses in audit documentation and firm supervision-and imposed monetary penalties on the firm and the engagement partner and a five-year debarment on the engagement partner; the order takes effect 30 days from its date.

Invocation of irrevocable and unconditional bank guarantee during moratorium - independence of bank guarantee as a separate contract - bank guarantees outside the scope of moratorium under Section 14 of the Code - Section 14(3)(b) exception for invocation of bank guarantees - adjustment of amounts recovered by invocation against admitted claim and revision of claim

Invocation of irrevocable and unconditional bank guarantee during moratorium - independence of bank guarantee as a separate contract - Section 14(3)(b) exception for invocation of bank guarantees - Invocation of an irrevocable and unconditional bank guarantee during the moratorium under the Code is permissible and the beneficiary is entitled to encash the guarantee. - HELD THAT: - The Tribunal held that an irrevocable and unconditional bank guarantee constitutes an independent and separate contract, and therefore its invocation is not barred by the moratorium under the Code. The Adjudicating Authority correctly relied on precedent treating bank guarantees as being outside the scope of the moratorium and on the principle that a bank honouring an unconditional demand guarantee must pay notwithstanding disputes between the bank's customer and the beneficiary. The Tribunal agreed with the Adjudicating Authority's conclusion that invocation can be effected even during the moratorium having regard to Section 14(3)(b) and the line of authority cited by the Adjudicating Authority. [Paras 6, 23, 24]

The Adjudicating Authority's order allowing invocation of the bank guarantee is upheld.

Adjustment of amounts recovered by invocation against admitted claim and revision of claim - obligation to inform IRP and revise claim upon receipt of bank guarantee proceeds - Any amount received by the beneficiary on invocation of the bank guarantee must be adjusted against the admitted claim and the beneficiary's claim in the CIRP revised accordingly. - HELD THAT: - The Tribunal noted the Resolution Professional's communication dated 22.12.2022 accepting the respondent's claim and expressly directing that if any amount is recovered by invoking the bank guarantee the respondent should inform the IRP and revise its claim. On that basis the Tribunal agreed with the Adjudicating Authority's view that encashment of the guarantee would not result in a dual claim and that any sums recovered would be adjusted and the admitted claim recalibrated upon intimation to the IRP. [Paras 2, 7, 8]

If the bank guarantee is invoked and proceeds received, the respondent must inform the IRP and revise its admitted claim so that the recovered amount is adjusted against the claim.

Final Conclusion: Appeal dismissed; the Adjudicating Authority's order permitting invocation of the irrevocable bank guarantee is affirmed, subject to adjustment of any amounts recovered against the admitted claim and revision of the claim as directed; parties remain free to bring to the Adjudicating Authority's attention the pending consideration of the Resolution Plan.

Failure to intimate SVLDRS Form-3 under online scheme - onus of proof of intimation in online-regulated scheme - direction to consider SVLDRS application and grant benefit - discharge certificate under Section 127 of the SVLDRS Scheme - writ jurisdiction under Article 226

Failure to intimate SVLDRS Form-3 under online scheme - onus of proof of intimation in online-regulated scheme - Whether the respondents proved issuance and intimation of SVLDRS Form-3 to the petitioner and who bears the onus of proof in an online-regulated scheme - HELD THAT: - The court found it undisputed that the SVLDRS Scheme is fully regulated online and that the petitioner had filed SVLDRS Form-1. The respondents, however, did not produce any positive evidence to demonstrate that SVLDRS Form-3 was intimated to the petitioner by e-mail or otherwise. Given that the scheme operates online, the court held it was not plausible that there would be no means of proving issuance and receipt; therefore the onus lay on the respondents to show that the Form-3 was communicated to the petitioner. The petitioner could not be required to prove a negative. The respondents' failure to produce proof of intimation meant their non-consideration of the petitioner's application was unjustified. [Paras 9, 10, 11]

Respondents failed to discharge the onus of proving intimation of SVLDRS Form-3; non-consideration of the petitioner's application was not justified.

Direction to consider SVLDRS application and grant benefit - discharge certificate under Section 127 of the SVLDRS Scheme - writ jurisdiction under Article 226 - Relief to be granted in view of the respondents' failure to prove intimation and consequent directions to be issued - HELD THAT: - Relying on the court's supervisory jurisdiction under Article 226 and following the approach in the court's earlier decision in Your Fitness Club Pvt. Ltd. (applied as analogous), the court directed respondents to reconsider the petitioner's SVLDRS application dated 26 December 2019. The respondents were ordered to determine and communicate the amount payable under the Scheme within four weeks of uploading the order. The petitioner was directed to pay the amount within four weeks of such communication and inform the respondents, upon which the respondents must issue the discharge certificate under Section 127 of the SVLDRS Scheme. The directions are intended to remedy the procedural lacuna caused by the respondents' inability to prove intimation of Form-3 and to place the petitioner in a position to avail the Scheme subject to payment and issuance of the discharge certificate. [Paras 12, 13]

Petition allowed; respondents directed to consider the application, communicate amount payable, accept payment within specified periods and issue discharge certificate under Section 127.

Final Conclusion: Writ petition allowed: respondents to reconsider the SVLDRS Form-1 application of 26 December 2019, communicate the amount payable within four weeks, petitioner to pay within four weeks of such communication, and on payment respondents to issue discharge certificate under Section 127; no costs.

Pre-deposit from electronic cash ledger - validity of pre-deposit under Section 83 of the Finance Act, 1994 read with Section 35 of the Central Excise Act, 1944 - acceptance of electronic cash ledger payment as equivalent to cash payment - remand for disposal of appeal on merits

Pre-deposit from electronic cash ledger - validity of pre-deposit under Section 83 of the Finance Act, 1994 read with Section 35 of the Central Excise Act, 1944 - acceptance of electronic cash ledger payment as equivalent to cash payment - Pre-deposits made by the petitioners through their electronic cash ledger are to be regarded as valid pre-deposits under the statutory provisions invoked. - HELD THAT: - The court identified the sole adjudicatory question as whether pre-deposits made via the electronic cash ledger qualify as valid pre-deposits under Section 83 of the Finance Act, 1994 read with Section 35 of the Central Excise Act, 1944. The record established, and the respondents accepted, that the petitioners had made pre-deposits in form DRC-03 through their electronic cash ledger. The affidavit on behalf of the revenue acknowledged that, in the peculiar facts of the cases before the court, payment from the electronic cash ledger is as good as cash payment. The court found the respondents' hyper-technical objection untenable because it would lead to a pointless refund-and-redeposit exercise rather than recognition of the pre-deposit already made. The court also held that the issue is covered by the coordinate bench decision in Reliance Infrastructure Limited v. Union of India and applied that precedent to validate the pre-deposits made from the electronic cash ledger. The question of pre-deposits from the credit ledger was left open and not decided. On this basis the court directed acceptance of the pre-deposits and remanded the matters for adjudication on merits. [Paras 6, 7, 9, 10, 11]

Pre-deposits made through the electronic cash ledger are valid and the appellate authority is directed to accept them and decide the appeals on merits.

Remand for disposal of appeal on merits - The appeals are remanded to the appellate authority for disposal on merits and in accordance with law. - HELD THAT: - Having held the pre-deposits to be valid, the court quashed the impugned orders and remitted the matters to the appellate authority with a direction to accept the pre-deposits and adjudicate the appeals on merits. The court required the appellate authority to endeavour to dispose of the appeals expeditiously. No costs were directed and all concerned were permitted to act on authenticated copies of the order. [Paras 10, 11, 12]

Impugned orders quashed; matters remanded to the appellate authority to decide the appeals on merits after accepting the pre-deposits.

Final Conclusion: Writ petitions allowed: pre-deposits made from the electronic cash ledger held valid; impugned orders quashed and appeals remanded to the appellate authority to be decided on merits after accepting the pre-deposits, expeditiously and in accordance with law.

Reversal of cenvat credit under Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and Rule 57CC/57AD(2)(b) of the Central Excise Rules, 1944 - by-product - refund under Cenvat Credit Rules - unjust enrichment - remand for examination of unjust enrichment - binding effect of Tribunal's prior order - proportionate reversal of credit on common inputs

By-product - reversal of cenvat credit under Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and Rule 57CC/57AD(2)(b) of the Central Excise Rules, 1944 - binding effect of Tribunal's prior order - Refund claim filed pursuant to the Tribunal's earlier decision that Sulphur is a byproduct and not liable to the 8% reversal - whether admissible and whether authorities below exceeded the scope of remand. - HELD THAT: - The Tribunal had earlier held that Sulphur, being a byproduct, could not be subjected to the 8% reversal and remanded the matter only for examination of unjust enrichment. The authorities below reexamined admissibility on merits beyond that limited remand. The record shows the appellant had effected a proportionate reversal of cenvat credit (entry dated 06.10.2004) in respect of chemicals used in the Sulphur recovery unit, and no challenge to the correctness of that reversal was raised before the Tribunal. Sample sale invoices indicate the 8% was not collected from customers and the lower authorities produced no contrary evidence. Consequently the respondent travelled beyond the scope of the remand and the refund claim is admissible on the basis of the Tribunal's prior finding on merit. [Paras 7, 8, 9]

The impugned reexamination by lower authorities is set aside and the refund claim is held admissible in view of the Tribunal's prior finding that Sulphur is a byproduct and the appellant's reversal of proportionate credit.

Refund under Cenvat Credit Rules - unjust enrichment - proportionate reversal of credit on common inputs - Whether the principle of unjust enrichment is applicable to refund of amounts reversed/paid under Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and corresponding erstwhile provisions. - HELD THAT: - Applying the principle laid down by the Larger Bench in Kriti Industries (I) Ltd. and followed in Hwashin Automotive India Pvt. Ltd., amounts reversed under Rule 6(3)(b) (and erstwhile Rule 57CC/57AD(2)(b)) constitute refunds under the Cenvat Credit Rules and do not fall within the procedure under Section 11B of the Central Excise Act. Therefore, the doctrine of unjust enrichment is not applicable to such refunds. Given that the appellant had reversed proportionate credit and there is no evidence of recovery of the 8% from customers, the requirement of unjust enrichment as a bar to refund cannot be sustained. [Paras 8, 9]

Principles of unjust enrichment do not apply to refunds made under Rule 6(3)(b) of the Cenvat Credit Rules, 2002; the refund cannot be refused on that ground.

Final Conclusion: The appeal is allowed: the orders of the authorities below are set aside, the refund claim is held admissible in light of the Tribunal's earlier finding that Sulphur is a byproduct and the appellant's proportionate reversal of cenvat credit, and the doctrine of unjust enrichment is held not to bar the refund under the Cenvat Credit Rules.

Eligibility of CENVAT credit on input services used to provide an output service - employer acting as service provider and employees as service recipients - exclusion of CENVAT credit where input service is for personal consumption of employees - interpretation and application of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004

Eligibility of CENVAT credit on input services used to provide an output service - employer acting as service provider and employees as service recipients - interpretation and application of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 - CENVAT credit on insurance services procured for providing Mediclaim policies to parents of employees is admissible where the assessee provided the insurance service to employees for consideration and discharged service tax on the output service. - HELD THAT: - The Tribunal applied Rule 2(1)(ii) of the CENVAT Credit Rules, 2004, which treats as 'input service' any service used by a provider of an output service for providing that output service. The appellants procured insurance from the insurer and resupplied the insurance service to employees for a consideration, collected and paid service tax on that output service and reflected it in returns; hence the appellants were in the position of service provider and the employees the service recipients. The disputed insurance services were used in the course of providing that output service and therefore qualify as input services. The Tribunal relied on coordinated precedents, including the Tribunal's decision in Ultra Tech Cement Ltd. (as cited) and other authorities, which hold that where services are resupplied to employees for consideration (and service tax is discharged), CENVAT credit on input services is admissible; conversely, Rule 2(1) excludes credit only where the service is for personal consumption of employees. Applying this settled position, the impugned order denying credit was set aside. [Paras 4, 5, 6, 7]

Allowed the appeal and set aside the impugned order; CENVAT credit on the disputed insurance input services is admissible.

Final Conclusion: The Tribunal allowed the appeal, set aside the Commissioner (Appeals) order dated 12.11.2021 and held that CENVAT credit on insurance services relating to Mediclaim policies (for the stated period) is admissible where the assessee resupplied the service to employees for consideration and discharged service tax.

Cross-examination of material witnesses - principles of natural justice - Section 9D of the Central Excise Act - relevance of statements recorded during investigation - admissibility under clause (b) of Section 9D(1) - remand for fresh adjudication

Cross-examination of material witnesses - principles of natural justice - Section 9D of the Central Excise Act - Whether denial of opportunity to cross-examine key witnesses whose statements were relied upon vitiated the adjudication and required remand for fresh decision. - HELD THAT: - The Tribunal examined the authorities relied upon and concluded that where statements recorded during inquiry or investigation before a Gazetted Central Excise Officer are relied upon by the revenue, the adjudicating authority must comply with the procedure in Section 9D. Clause (b) of Section 9D mandates that the person who made the statement be examined as a witness before the adjudicating authority and that the authority record reasons before admitting the statement in evidence; only thereafter does the opportunity for cross-examination arise. The Tribunal followed the ratio of the Punjab & Haryana High Court in Jindal Drugs and the Supreme Court in Andaman Timber Industries holding that refusal to permit cross-examination of such material witnesses is a breach of principles of natural justice and vitiates the quasijudicial proceedings. Applying those principles to the present cases, and having regard to earlier Tribunal decisions in similar circumstances, the Tribunal held that the impugned orders could not stand where the request for cross-examination of the key witnesses had been denied and that the matters must be remitted for fresh adjudication in conformity with Section 9D, giving the appellants opportunity to crossexamine the witnesses relied upon. [Paras 8, 9, 12]

Impugned orders set aside and matters remanded to the Adjudicating Authority for fresh adjudication after affording the appellants the opportunity to crossexamine the material witnesses and following the procedure prescribed by Section 9D of the Central Excise Act.

Final Conclusion: Both appeals are allowed by way of remand; the impugned Commissioner (Appeals) orders are set aside and the matters are remitted to the Adjudicating Authority to decide afresh after permitting crossexamination of the material witnesses and complying with Section 9D; appellants to cooperate for expeditious disposal.

Exhaustion of alternate remedies - availability of statutory appeal under the Maharashtra Value Added Tax Act, 2002 - competence of the Tribunal to adjudicate objections and jurisdictional pleas relating to the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2019 - imposition of costs for misleading averments - entertainment of appeal on merits notwithstanding limitation technicality where appeal is filed within limitation and preconditions are complied with

Exhaustion of alternate remedies - availability of statutory appeal under the Maharashtra Value Added Tax Act, 2002 - The writ petition is not maintainable because the petitioner failed to exhaust the alternate statutory remedy of appeal under the said Act. - HELD THAT: - The Court found that, contrary to the petitioner's averments, an efficacious remedy exists by way of appeal under Section 26 of the Maharashtra Value Added Tax Act, 2002. The petitioner's pleadings (paras. 15-16) misleadingly asserted absence of alternate remedy; the Court observed that alleged objections relating to the Settlement Act, 2019 had been considered and rejected previously and that the correctness of such rejection can be examined by the Tribunal on appeal. The petitioner did not plead any reason for departing from the established practice of exhausting alternate remedies and relied on bald assertions of lack of jurisdiction which are insufficient to justify bypassing the appeal route. Applying the reasoning adopted in the Court's earlier order in Writ Petition (L) No.33260 of 2023, the petition was declined for want of exhaustion of alternate remedy. [Paras 3, 5, 6, 7, 8]

Writ petition dismissed insofar as it seeks to bypass the statutory appeal; petitioner relegated to the appeal remedy under the MVAT Act.

Competence of the Tribunal to adjudicate objections and jurisdictional pleas relating to the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2019 - The Tribunal is capable of examining objections and jurisdictional issues raised in relation to the Settlement Act, 2019 and therefore constitutes an efficacious remedy. - HELD THAT: - Rejecting the petitioner's contention that the Tribunal cannot enter into provisions of the Settlement Act, 2019, the Court held that whether the rejection of the petitioner's Settlement Act plea was correct can be examined by the Tribunal on appeal. The Court treated the assertion that the Tribunal lacked competence as misleading and insufficient to oust the appeal remedy, noting that the Tribunal has authority to consider such objections when exercising appellate jurisdiction under the MVAT framework. [Paras 3, 5]

Tribunal's competence to examine the Settlement Act-related objections affirmed; such matters are to be raised and decided in the statutory appeal.

Imposition of costs for misleading averments - Costs were imposed on the petitioner for making misleading averments and attempting to bypass alternate remedies. - HELD THAT: - The Court observed a trend of litigants bypassing alternate remedies and found this petition to be an instance of taking chances based on vague and misleading averments. As a punitive and deterrent measure, the Court imposed costs of Rs. 1,00,000 on the petitioner, directing payment of half to Tata Memorial Hospital and half to the High Court Class IV Employees' Association, with compliance to be reported within four weeks. The Court recorded particulars for the beneficiaries and directed filing of proof of payment in the Registry. [Paras 8, 9, 10, 11]

Costs of Rs. 1,00,000 imposed on the petitioner with specified payment directions and requirement to file compliance proof within four weeks.

Entertainment of appeal on merits notwithstanding limitation technicality where appeal is filed within limitation and preconditions are complied with - If the petitioner files the statutory appeal within four weeks after complying with preconditions and paying the costs, the Appellate Authority should entertain the appeal on merits without addressing a limitation objection. - HELD THAT: - The Court clarified that because the writ petition was instituted within the limitation period prescribed for filing the appeal, if the petitioner files the appeal within four weeks after meeting statutory preconditions and paying the imposed costs, the Appellate Authority ought to proceed to decide the appeal on merits and not raise the question of limitation. This direction is conditional upon the appeal being filed within the specified timeframe and compliance with preconditions required by law. [Paras 13]

Appellate Authority directed to entertain the appeal on merits and not to advert to limitation, provided the appeal is filed within four weeks after compliance.

Relegation to alternate remedy - merits kept open - All contentions on merits are left open for adjudication by the appropriate forum; the petition is disposed of by relegation to the statutory appeal. - HELD THAT: - Having declined to entertain the writ petition for failure to exhaust alternate remedies, the Court expressly kept all contentions of the parties on merits open for consideration by the Tribunal/Appellate Authority. The writ was disposed of subject to the petitioner pursuing the statutory appeal; the Court did not adjudicate the substantive merit issues and remitted those matters for determination in the appellate proceedings. [Paras 12]

Merits not decided; parties to pursue their contentions before the Appellate Authority in the statutory appeal.

Final Conclusion: The petition was dismissed for failure to exhaust the statutory appeal remedy under the MVAT Act; the Tribunal is competent to examine Settlement Act-related objections; costs of Rs. 1,00,000 were imposed with specified payment directions and compliance within four weeks; all merits are left open and, if the petitioner files the appeal within four weeks after complying with preconditions and paying costs, the Appellate Authority should entertain it on merits without raising limitation.

Wrongful availing of input tax credit - surrender of VAT registration - misuse of login credentials - investigation by tracing IP address - forensic examination of electronic records - remand for fresh adjudication after electronic verification

Surrender of VAT registration - wrongful availing of input tax credit - Challenge to the assessment on the ground that the petitioner had surrendered VAT/CST registration on 25.12.2014 and thus could not have been liable for transactions in AY 2016-2017 - HELD THAT: - The Court examined the petitioner's claim of surrender supported by an acknowledged letter dated 25.12.2014 but observed that it was highly implausible for the department to have acknowledged receipt on that date since it was a holiday (Christmas Day). On this prima facie basis the Court found the petitioner's assertion of surrender on 25.12.2014 to be unreliable, and held that the challenge to the impugned assessment order on that ground could not be accepted. The Court further noted that substantive verification as to whether transactions were effected in the disputed period must be undertaken from the department's electronic records, including IP address information. [Paras 5]

Petitioner's plea of prior surrender on 25.12.2014 is not accepted on the materials before the Court; challenge to the assessment on that basis is rejected.

Investigation by tracing IP address - forensic examination of electronic records - misuse of login credentials - remand for fresh adjudication after electronic verification - Requirement for electronic verification and further investigation into alleged misuse of the petitioner's registration and login credentials before passing a fresh order - HELD THAT: - The Court directed the respondents to verify from which IP address the transactions and filing of returns in the petitioner's name during AY 2016-2017 were made, in view of the allegation that the petitioner's login ID had been misused after purported cancellation. The Court ordered a forensic examination of the department's electronic records, instructed the department to obtain assistance from the State Cyber Crime Cell under the Information Technology Act, 2000, and to furnish the forensic findings to the petitioner. Following completion of these electronic verifications and investigation, the department is to pass a fresh order on merits and in accordance with law. [Paras 6]

Respondents directed to carry out IP-tracing and forensic examination of electronic records with Cyber Crime Cell assistance, furnish findings to the petitioner and thereafter pass a fresh adjudicatory order.

Final Conclusion: Writ petition disposed by rejecting the surrender-based challenge to the assessment on prima facie grounds and remitting the matter to the department for electronic forensic verification (including IP address tracing and Cyber Crime Cell assistance) and for passing a fresh order thereafter; no costs.

Liability of directors of private company in liquidation - necessity to establish non-recoverability from the company - opportunity to the director before fastening personal liability - gross neglect, misfeasance or breach of duty defence - recovery against director's personal property - lifting of the corporate veil - requirement of winding up for invoking director's liability

Liability of directors of private company in liquidation - necessity to establish non-recoverability from the company - opportunity to the director before fastening personal liability - recovery against director's personal property - Validity of recovery proceedings and attachment of the deceased director's immovable property under Section 53(3) of the Gujarat VAT Act read with Section 18 of the CST Act to recover tax demands assessed against the company for the periods 2011-2012, 2012-2013 and 2013-2014. - HELD THAT: - The court observed that the husband of the petitioner had resigned as a director on 07.02.2013 and had died on 11.08.2017, whereas recovery proceedings were initiated only thereafter (first recovery notice under the Bombay Land Revenue Code dated 07.08.2018). The statutory provisions invoked impose liability on directors of a private company when the company is wound up and tax cannot be recovered from the company, subject to the director disproving that non-recovery was due to gross neglect, misfeasance or breach of duty. The court held that those provisions presuppose, as a precondition, that recovery against the company is not possible and that the director be given an opportunity to meet the allegations; they do not authorise proceeding against a deceased person. Reliance was placed on precedents which require the revenue to establish non-recoverability from the company before resorting to directors and which caution against lightly lifting the corporate veil. The Apex Court's decision emphasising that director liability arises when winding up has been ordered (and absence of such an order) was noted. Applying these principles on the facts, the court concluded that initiation of recovery proceedings and attachment against the deceased director's property was unsustainable. [Paras 8]

Impugned recovery proceedings, the revenue recovery certificate and the order of attachment issued to recover the company's outstanding dues from the petitioner's late husband are quashed and set aside; rule made absolute to that extent.

Final Conclusion: The Court quashed and set aside the recovery proceedings, the revenue recovery certificate and the attachment of the petitioner's residential property insofar as they sought to recover the company's assessed dues from the deceased director; rule made absolute and no order as to costs.