TaxTMI Updates e-Newsletter
Dec 07,2020

Deduction under section 80IC for income from sale of manufacturing scrap - Expenditure disallowance under section 14A read with Rule 8D - Objective satisfaction by the Assessing Officer as a pre condition before invoking Rule 8D - Binding effect of Tribunal's own earlier decisions on identical facts

Deduction under section 80IC for income from sale of manufacturing scrap - Binding effect of Tribunal's own earlier decisions on identical facts - Whether income from sale of scrap generated by the eligible industrial undertaking is eligible for deduction under section 80IC. - HELD THAT: - The Tribunal examined the Assessing Officer's disallowance of the deduction claimed under section 80IC in respect of sale of scrap and found the facts and the legal question to be squarely covered by its earlier orders in the assessee's own case, including the Tribunal's decision for A.Y. 2014-15 which allowed the identical claim. Noting that the provisions of section 80IC are analogous to those earlier considered (section 80IB in prior years) and that no contrary order was brought on record by the Revenue, the Tribunal followed the earlier consistent decisions and upheld the Commissioner (Appeals)'s deletion of the disallowance. [Paras 6]

Order of ld. CIT(A) deleting the disallowance and directing allowance of deduction under section 80IC in respect of sale of scrap is upheld; Revenue's appeal dismissed for A.Y. 2012-13.

Expenditure disallowance under section 14A read with Rule 8D - Objective satisfaction by the Assessing Officer as a pre condition before invoking Rule 8D - Whether the Assessing Officer could apply Rule 8D to compute disallowance under section 14A without first recording objective satisfaction and addressing the assessee's suo moto disallowance or demonstrating errors in the assessee's computation. - HELD THAT: - The Tribunal, following its common order in the assessee's earlier years and authority of the jurisdictional High Court, reiterated that sub section (2) of section 14A requires the Assessing Officer to record objective satisfaction-having regard to the accounts-before invoking the method in Rule 8D. The Assessing Officer in the subject assessments proceeded to compute disallowance under Rule 8D without first examining the assessee's suo moto disallowance or recording reasons demonstrating why the assessee's claim was incorrect. In those circumstances the application of Rule 8D was held to be violative of the statutory pre condition and unsustainable. [Paras 11, 12]

Disallowance under section 14A read with Rule 8D deleted for the relevant years; the Assessing Officer's computation under Rule 8D set aside for lack of recorded objective satisfaction.

Final Conclusion: Following earlier Tribunal decisions on identical facts and the requirement that an Assessing Officer must record objective satisfaction before invoking Rule 8D, the Tribunal dismissed the Revenue's appeal on the section 80IC issue for A.Y. 2012 13 and allowed the assessee's appeals deleting disallowances made under section 14A read with Rule 8D for A.Y. 2012 13 and A.Y. 2014 15.

Search and seizure under Section 132 - reason to believe - recording of reasons / satisfaction note - scope of judicial review under Article 226 - protection of privacy under Article 21 - malafide or arbitrary action

Search and seizure under Section 132 - reason to believe - recording of reasons / satisfaction note - malafide or arbitrary action - Legality of the warrant of authorization dated 27th October, 2008 and the search and seizure carried out on 7th November, 2008. - HELD THAT: - The Court examined the satisfaction note and the material placed before the competent authority and applied settled principles that an authorization under Section 132 is valid only where the authority has information on which a reasonable belief is founded and has applied its mind to record reasons. Relying on precedents, the High Court's role is to test relevance of the reasons recorded and to ensure the action was not mala fide, arbitrary or for a collateral purpose. On the facts, the satisfaction note referred to the petitioner's alleged connection with the companies under investigation and to documents and recoveries indicating undisclosed transactions. The petitioner's assertion of prior resignation did not displace the documentary record (including Registrar of Companies entries) relied upon by the authority; questions as to whether seized documents disclose taxable income are matters for adjudicatory proceedings. The Court found no mala fides or arbitrariness and held that reasons calling for authorization were recorded. [Paras 23, 24, 27, 28, 30]

The warrant of authorization and the consequent search and seizure were not illegal or ultra vires and the impugned action cannot be quashed on the grounds raised.

Scope of judicial review under Article 226 - recording of reasons / satisfaction note - reason to believe - Extent to which the High Court in writ jurisdiction may examine the reasons recorded for formation of belief leading to search and seizure. - HELD THAT: - The Court restated the settled rule that while the High Court may peruse the file and examine whether reasons have been recorded and whether those reasons are relevant to the formation of belief, it must not undertake an appellate inquiry into the sufficiency, adequacy or the correctness of the material or substitute its own view as to whether the search should have been authorized. Reliance was placed on authoritative decisions holding that scrutiny of relevance is permissible but assessment of sufficiency or acceptability of the information is beyond Article 226. Applying that principle, the Court held that the High Court cannot go into sufficiency or adequacy of reasons recorded in the satisfaction note. [Paras 12, 14, 16, 21, 29]

The writ court is limited to examining relevance of the reasons recorded and cannot assess their sufficiency or adequacy; interference on that ground is impermissible.

Final Conclusion: The writ petition is dismissed. The authorization and search under Section 132(1) were valid on the material before the authority, and the High Court's review is confined to relevance of recorded reasons and to preventing mala fide or arbitrary exercise of power, not to reassessing the sufficiency or adequacy of the reasons.

Disallowance under section 40A(3) of the Income-tax Act - disallowance under section 40(a)(ia) of the Income-tax Act - principal and agent relationship - implied contract and applicability of section 194C - remand for fresh adjudication by the CIT(A) in accordance with section 250(6)

Disallowance under section 40A(3) of the Income-tax Act - principal and agent relationship - remand for fresh adjudication by the CIT(A) in accordance with section 250(6) - Whether the question of disallowance under section 40A(3) could be finally adjudicated without first determining existence of a principal-agent (agency) relationship between the assessee and SNBT. - HELD THAT: - The Tribunal remitted the matter to the CIT(A) because the record did not satisfactorily establish a 'principal and agent relationship' between the assessee and M/s Srinivas Buildtech Pvt. Ltd. The High Court agreed that determination of whether an agency/contractual relationship existed is a prerequisite to deciding the applicability of section 40A(3) where cash payments were made to the company. Consequently the Court directed that the CIT(A) is to decide the issue afresh, giving a reasoned and speaking order as required by section 250(6), considering Revenue's arguments, the Tribunal's observations and relevant authorities, and after affording the assessee an opportunity of being heard. [Paras 3]

Issue remanded to the CIT(A) for fresh and reasoned adjudication on the existence of an agency relationship and consequent determination under section 40A(3).

Disallowance under section 40(a)(ia) of the Income-tax Act - implied contract and applicability of section 194C - remand for fresh adjudication by the CIT(A) in accordance with section 250(6) - Whether disallowance under section 40(a)(ia) arising from alleged failure to deduct tax at source could be finally determined without first resolving the contractual/agency relationship and related findings. - HELD THAT: - The Tribunal's order on section 40(a)(ia) was inter linked with the question whether payments to SNBT were pursuant to a contract (express, oral or implied) attracting provisions of section 194C. The High Court held that because the Tribunal had remitted the agency/contract question under section 40A(3), the related question under section 40(a)(ia) must also be restored to the file of the CIT(A) for fresh consideration. The assessee was directed to adduce evidence on the agency agreement as directed by the Tribunal, and the CIT(A) was directed to decide both issues afresh in accordance with law. [Paras 4]

Issue remanded to the CIT(A) for fresh adjudication on applicability of section 40(a)(ia) (and related section 194C considerations) after determination of the contractual/agency relationship.

Final Conclusion: The High Court found no substantial question of law for its determination and disposed of the appeals by directing the assessee to establish the agency/contractual relationship before the CIT(A); both the issues under section 40A(3) and section 40(a)(ia) are to be decided afresh by the CIT(A) by a reasoned speaking order in accordance with law, after affording the assessee a hearing.

Summary order. The tax appeal is disposed of in view of the assessee's declaration under the Direct Tax Vivad Se Vishwas Act, 2020; the Competent Authority is directed to process the declaration and pass appropriate orders expeditiously. The assessee is granted liberty to restore the appeal if the outcome under the Scheme is adverse, and the Registry is directed to entertain restoration without insisting on condonation of delay. The substantial questions of law are left open.

Rectification under section 254(2) of the Income-tax Act, 1961 - mistake apparent on the record - failure to consider authorities cited at hearing - recall of order for limited reconsideration - re hearing before a regular Bench - Honda Siel principle on rectification

Rectification under section 254(2) of the Income-tax Act, 1961 - mistake apparent on the record - failure to consider authorities cited at hearing - Application for rectification of the Tribunal's order dated 23.05.2019 was allowed to the limited extent of recalling the order for reconsideration in view of authorities placed before the Bench but inadvertently not considered. - HELD THAT: - The counsel for the assessee had placed and relied upon decisions including Lotus Investments Ltd. and Elde Electricals Agencies Pvt. Ltd. during the hearing, and copies of those decisions were filed. The Tribunal, while disposing the appeal by the order dated 23.05.2019, omitted to advert to those decisions. Such omission, where authorities cited at hearing are not considered in the adjudication, qualifies as a mistake apparent on the record which permits rectification under section 254(2) of the Act in the light of the Supreme Court's decision in Honda Siel Power Products Ltd. The Bench accordingly recalled the earlier order to the limited extent of examining the application of the cited decisions to the present case and directed that the matter be placed before a regular Bench for hearing afresh on that limited issue. [Paras 4, 5]

Miscellaneous Application allowed; order dated 23.05.2019 recalled to the limited extent indicated and case directed to be listed for hearing before a regular Bench.

Final Conclusion: The Tribunal allowed the rectification application, holding that the omission to consider authorities placed before it was a mistake apparent on the record; the original order was recalled for limited reconsideration and the case is to be re listed before a regular Bench.

Admission of additional evidence under Rule 46A - remand for fresh consideration - addition under section 68 as unexplained credit - addition under section 69 as unexplained investment - addition of undisclosed/excess expenses - reliance on statement of third party's counsel insufficient evidentiary value - deletion of addition for want of evidentiary basis

Admission of additional evidence under Rule 46A - remand for fresh consideration - addition under section 68 as unexplained credit - addition of undisclosed/excess expenses - Whether the additions on account of unexplained bank credits and unexplained expenses should stand where the CIT(A) rejected evidence under Rule 46A. - HELD THAT: - The Tribunal found that the assessee had furnished explanations, reconciliations and supporting documents in respect of credits in the HDFC bank account and the expenditure disallowed by the AO, but the CIT(A) rejected those materials on the ground that conditions of Rule 46A were not satisfied without dealing with the merits. The AO had treated credits as unexplained without appreciating that amounts were recycled (loans repaid and reborrowed) and had treated payments as cash-expenditure despite account-payee cheques and bank certification supporting withdrawals and payments. Since the evidentiary material was not examined on merits by the adjudicating authority and no specific findings were recorded rejecting the explanations, the Tribunal concluded that these issues require fresh consideration on the basis of the evidence already placed on record and after affording the assessee a reasonable opportunity of hearing. [Paras 12, 13, 14, 15, 16]

Both issues remitted to the Assessing Officer for fresh examination of the evidence and explanations furnished by the assessee and fresh decision after giving reasonable opportunity of being heard; grounds treated as allowed for statistical purposes.

Addition under section 69 as unexplained investment - reliance on statement of third party's counsel insufficient evidentiary value - deletion of addition for want of evidentiary basis - Whether the addition of Rs. 97 lakhs as unexplained investment could be sustained where it rested on the statement of the seller's counsel. - HELD THAT: - The AO made the addition solely on the statement attributed to the counsel of the vendor (Shri Ram Babu) that the assessee had given cash of Rs. 97 lakhs. The Tribunal noted that the vendor had died before the assessment proceedings in which the counsel's statement was relied upon, and therefore the counsel's assertion lacked evidentiary value. The Tribunal held that the addition was founded on assumptions and surmises and that reliance on such statement, without independent evidentiary support, was improper. [Paras 17, 18, 19]

Addition of Rs. 97 lakhs deleted.

Addition of undisclosed interest - remand for reconciliation and fresh decision - Whether the addition for difference in interest income as per bank statement and return should be sustained. - HELD THAT: - The Tribunal directed the assessee to reconcile and explain the difference between interest shown in books and bank statement. As the matter had not been finally reconciled, the AO was directed to examine the reconciled position and decide the issue afresh after giving the assessee an opportunity of hearing. [Paras 20]

Ground treated as allowed for statistical purposes and remitted to the AO for verification after reconciliation and hearing.

Final Conclusion: The appeal is allowed in part: additions relating to unexplained bank credits and unexplained expenses are remitted to the Assessing Officer for fresh adjudication after examining the evidences and affording hearing; the addition of Rs. 97 lakhs under section 69 is deleted; the interest discrepancy is remitted for reconciliation and fresh decision.

Onus under section 68 of the Income-tax Act, 1961 - genuineness of long term capital gains arising from share transactions - addition treated as income under section 115BBE - reliance on investigation wing / third-party information without independent verification - duty of Assessing Officer to confront and verify material and afford opportunity to the assessee

Onus under section 68 of the Income-tax Act, 1961 - genuineness of long term capital gains arising from share transactions - reliance on investigation wing / third-party information without independent verification - duty of Assessing Officer to confront and verify material and afford opportunity to the assessee - Whether the assessee discharged the onus cast upon her under section 68 in respect of long term capital gains on sale of shares of LDPL. - HELD THAT: - The Tribunal found that the assessee was a habitual investor and had furnished documentary evidence in support of the share acquisitions and sales. The Assessing Officer relied predominantly on the Investigation Wing's report and general observations about entry operators without conducting independent enquiries, confronting the assessee with the material, or using statutory powers to verify third party statements. The Tribunal noted that LDPL (Arihant Multi Commercial Ltd) was not a shell company on the material before the authority and that SEBI's suspension of trading took place after the assessee's sales. Applying the principle that third party information cannot be the sole basis for additions without independent verification, and having regard to precedents where assessments based solely on investigation reports were held unsustainable, the Tribunal held that the assessee had discharged the initial burden under section 68 and the Assessing Officer had failed to rebut the evidences produced by the assessee. [Paras 23, 25, 30]

Long term capital gain on sale of shares of LDPL declared by the assessee is accepted and the onus under section 68 is held discharged.

Addition treated as income under section 115BBE - consequential addition for commission paid to entry providers - reliance on investigation wing / third-party information without independent verification - Whether the consequential additions-treating the sale proceeds as income under section 115BBE and adding presumed commission-are sustainable. - HELD THAT: - Having accepted the genuineness of the long term capital gain on the facts and documentary record, the Tribunal held there was no justification for treating the receipts as income under section 115BBE. The consequential addition of presumed commission (2%) was based on the same unsupported inference that the primary receipts were bogus and therefore fell with the deletion of the primary addition. The Tribunal accordingly deleted the consequential additions. [Paras 12, 31]

The addition treating the sale proceeds as income under section 115BBE and the consequential commission addition are deleted.

Final Conclusion: The appeal is allowed: the Assessing Officer is directed to accept the declared long term capital gain on sale of LDPL shares and the consequential additions, including the addition under section 115BBE and the presumed commission, are deleted.

Levy of penalty for non-payment of self-assessment tax - Charging of interest for default in payment of self-assessment tax - Deemed assessee in default for non-payment of self-assessment tax - Recovery of tax and interest on the basis of the return - Use of recovery provisions in lieu of penalty

Levy of penalty for non-payment of self-assessment tax - Charging of interest for default in payment of self-assessment tax - Recovery of tax and interest on the basis of the return - Whether penalty was leviable for non-payment of self-assessment tax in the assessment for A.Y. 2010-11 - HELD THAT: - The Tribunal held that the legislative amendment w.e.f. 01.04.1989 replaced the earlier provision for levy of penalty on non-payment of self-assessment tax with a regime of mandatory charging of interest and vesting of recovery powers on the basis of returns. The Circular dated 31.10.1989 and the explanatory notes indicate that sub section (3) prescribing penalty was omitted and a new provision treated an assessee as in default where self-assessment tax and interest were not paid before filing the return; consequently interest (and recovery as deemed assessee in default) is the statutory consequence of such default rather than imposition of penalty. Applying this legislative intent to A.Y. 2010-11, the Tribunal found that the Assessing Officer was not justified in invoking recovery provisions to levy a penalty and directed deletion of the penalty imposed under the provisions governing self-assessment default. [Paras 7, 8]

Penalty imposed for non-payment of self-assessment tax was deleted as the amended statutory scheme provides for charging interest and recovery as a deemed default, not levy of penalty.

Final Conclusion: The appeal is allowed; the penalty levied for non-payment of self-assessment tax for A.Y. 2010-11 is deleted and the Assessing Officer is directed to give effect to this order.

Deduction under Section 80P(2)(a)(i) - co-operative bank (definition under Banking Regulation Act, 1949) - primary co-operative bank - banking business (definition under Banking Regulation Act, 1949) - charter documents / bye laws as determinative of status - no estoppel against the statute - remand for de novo adjudication

Deduction under Section 80P(2)(a)(i) - co-operative bank (definition under Banking Regulation Act, 1949) - primary co-operative bank - banking business (definition under Banking Regulation Act, 1949) - charter documents / bye laws as determinative of status - Entitlement of the assessee (a co operative credit society) to deduction under Section 80P(2)(a)(i) for the specified assessment years. - HELD THAT: - The Tribunal examined the definition of "co operative bank" and "primary co operative bank" in Part V of the Banking Regulation Act, 1949 and the definition of "banking" to conclude that a co operative bank carries on banking business with the public (members and non members) and normally requires RBI licence. The assessee's bye laws confined transactions to members alone (accepting deposits from members and lending only to members) and did not permit dealings with non members. On that basis the Tribunal held that the assessee did not satisfy the criteria of a primary co operative bank and therefore did not fall within the exclusion in Section 80P(4). The Tribunal further held that a prior admission by the assessee's authorised representative in penalty proceedings (that the society was a bank) could not determine status where charter documents and governing facts show otherwise, observing that admissions or misapprehensions do not override the substantive statutory test; the status must be determined from the bye laws and object documents. Relying on this legal analysis and relevant High Court authorities cited in the order, the Tribunal allowed the assessee's claim of deduction under Section 80P(2)(a)(i) for the years in question and directed the AO to grant the deduction accordingly. [Paras 6]

Assessee is a co operative credit society (not a co operative bank) and is entitled to deduction under Section 80P(2)(a)(i) for the stated assessment years; appeals partly allowed.

Remand for de novo adjudication - no estoppel against the statute - Treatment of the appeal against deletion of penalty under Section 271D for A.Y.2007 08 and whether the penalty appeal requires fresh consideration. - HELD THAT: - The Tribunal noted that during penalty proceedings for A.Y.2007 08 the assessee's then authorised representative had described the society as a co operative bank, leading the earlier CIT(A) to delete penalty under Section 271D. The assessee subsequently filed an appeal before the Tribunal against observations made in that order and placed on record an affidavit by the chartered accountant and a rectification petition under Section 154 as well as a Section 119 petition to CBDT, showing the assessee's bona fide attempt to correct the earlier mis statement. The Tribunal held that the question of penalty requires fresh consideration uninfluenced by the earlier status finding and directed that the appeal (ITA No.4211/Mum/2018 for A.Y.2007 08) be remanded to the file of the CIT(A) for de novo adjudication in accordance with law. [Paras 6]

Appeal against deletion of penalty u/s 271D (ITA No.4211/Mum/2018 for A.Y.2007 08) is remanded to the CIT(A) for fresh hearing and decision.

Final Conclusion: The Tribunal held that on the facts and bye laws the assessee is a co operative credit society and not a co operative bank; consequently it is eligible for deduction under Section 80P(2)(a)(i) for A.Y.2007 08, 2010 11, 2013 14 and 2014 15 (appeals partly allowed). The related appeal against deletion of penalty for A.Y.2007 08 was remanded to the CIT(A) for de novo adjudication.

Hire purchase agreement - distinction between hire-purchase finance charge and interest - deduction of tax at source under section 194A - disallowance under section 40(a)(ia) - second proviso to section 40(a)(ia) and retrospective/curative effect - CBDT instruction on characterization of hire-purchase payments

Hire purchase agreement - distinction between hire-purchase finance charge and interest - deduction of tax at source under section 194A - disallowance under section 40(a)(ia) - second proviso to section 40(a)(ia) and retrospective/curative effect - CBDT instruction on characterization of hire-purchase payments - Whether finance/financial charges paid under a hire-purchase agreement are interest attracting TDS under section 194A and liable to disallowance under section 40(a)(ia); and whether the second proviso to section 40(a)(ia) precludes disallowance where the recipient has included the amount in its income and paid tax. - HELD THAT: - The Tribunal found on the facts that the payments were made under a hire-purchase agreement where the hirer had the option to purchase and no obligation to buy; the finance charge is the difference between cash price and hire-purchase price and represents payment for hire and the option to purchase rather than interest on a loan. This characterization is supported by CBDT instruction and judicial precedents cited in the order, which hold that instalments under hire-purchase contracts are not interest within the meaning of the Income-tax Act and therefore section 194A is not attracted. Consequently, disallowance under section 40(a)(ia) premised on failure to deduct TDS under section 194A was not justified. The Tribunal further observed that the second proviso to section 40(a)(ia), held to be curative and retrospective by the Supreme Court, operates to preclude disallowance where the recipient has treated the receipt as income and paid tax; accordingly, where the recipient (Tata Capital Ltd.) had assessed and paid tax on the charges, invocation of section 40(a)(ia) was not called for. Applying these principles, the Tribunal deleted the disallowance made by the Assessing Officer and allowed the appeal. [Paras 5, 7, 8, 9, 10]

The finance/financial charges under the hire-purchase agreement are not interest for the purposes of section 194A; disallowance under section 40(a)(ia) is not justified and is deleted; additionally, the second proviso to section 40(a)(ia) precludes disallowance where the recipient has offered the amount to tax.

Final Conclusion: Appeal allowed: the Tribunal deleted the disallowance of finance charges made under section 40(a)(ia) for AY 2010-11, holding that hire-purchase finance charges are not interest chargeable to TDS under section 194A and that the second proviso to section 40(a)(ia) operates to prevent disallowance where the recipient has included the amount in its income.

Revision under section 263 - deduction under section 35(2AB) - requirement of DSIR Form 3CL - erroneous and prejudicial to the revenue test - two-views doctrine in exercise of jurisdiction under section 263 - legal sanctity of Form 3CL prior to 1.7.2016

Revision under section 263 - deduction under section 35(2AB) - requirement of DSIR Form 3CL - erroneous and prejudicial to the revenue test - two-views doctrine in exercise of jurisdiction under section 263 - legal sanctity of Form 3CL prior to 1.7.2016 - Validity of revision under section 263 in setting aside assessment for allowing deduction under section 35(2AB) without production of DSIR Form 3CL for AY 2015-16. - HELD THAT: - The Tribunal examined whether the Principal CIT was justified in invoking section 263 to revise an assessment because the Assessing Officer allowed weighted deduction under section 35(2AB) although the assessee had not produced DSIR Form 3CL. Applying the twin conditions from Malabar Industrial Co. Ltd. - that the AO's order must be both erroneous and prejudicial to the revenue - the Tribunal found that there existed a firmly arguable alternate view. Prior decisions of coordinate benches and judicial authorities held that prior to the amendment of Rule 6(7A)(b) w.e.f. 1.7.2016 Form 3CL did not have decisive legal sanctity for quantification of deduction and that once the R&D facility was approved the AO could allow the expenditure. As two views were possible and the AO adopted one defensible view in allowing the claim, the assessment could not be treated as erroneous and prejudicial to the revenue within the meaning of section 263. Accordingly the prerequisite satisfaction for exercise of revisionary jurisdiction was absent and the revision order setting aside the assessment was not sustainable. [Paras 10, 11]

Revision order under section 263 set aside; appeal allowed.

Final Conclusion: Because the Assessing Officer adopted a tenable view on allowance of deduction under section 35(2AB) without production of DSIR Form 3CL for AY 2015-16 and there were binding coordinate decisions supporting that view, the exercise of jurisdiction under section 263 was not justified; the revision order is set aside and the assessee's appeal is allowed.

Corpus donation - voluntary contributions forming part of corpus - capital receipt - specific direction by donor - taxability of corpus donations - inter-trust transfers and possible abuse - prospective effect of Finance Act 2017 Explanation

Corpus donation - voluntary contributions forming part of corpus - capital receipt - taxability of corpus donations - Whether the amounts received by the assessee from sister trusts could be treated as corpus donations (capital receipts) and excluded from income for the assessment year 2015-16. - HELD THAT: - The Tribunal examined earlier decisions of various benches and High Courts which have held that voluntary contributions made with a specific direction to form part of the corpus are capital receipts and not taxable as income, irrespective of registration under section 12AA. The CIT(A) had directed that Rs. 36,16,88,341/- received from group trusts be treated as corpus donation. The Tribunal noted the jurisprudence collected in several Tribunal and High Court decisions and accepted that corpus-specific voluntary contributions assume the character of capital receipts and are outside the scope of income, subject to the facts and genuineness of the transaction. The Tribunal further observed the amendment (Explanation 2 by Finance Act, 2017 w.e.f. 01.04.2018) is prospective and does not affect the present assessment year. Applying these principles to the material on record, the Tribunal upheld the CIT(A)'s finding that the amounts in question should be treated as corpus donations. [Paras 4, 7, 9]

Amounts treated by the CIT(A) as corpus donations are to be regarded as capital receipts and not taxable for AY 2015-16; the CIT(A)'s direction is upheld.

Specific direction by donor - inter-trust transfers and possible abuse - prospective effect of Finance Act 2017 Explanation - Whether the Assessing Officer was justified in treating the receipts from sister trusts as regular income without conducting necessary enquiries into the source and genuineness of the alleged corpus donations. - HELD THAT: - The Tribunal found that the Assessing Officer recorded no findings on the source from which the donor trusts had made the payments nor carried out the enquiries necessary to determine whether those donors had a specific direction that the amounts be applied to the assessee's corpus. Reliance on the AO's apprehension of possible manipulation between trusts, without factual enquiry, was held to be inadequate. The Tribunal held that in absence of material to show abuse and given the assessee's receipts and accounting entries indicating corpus receipts, the AO could not sustain treating the sums as current income. The Tribunal therefore declined to reverse the CIT(A)'s conclusion which was reached after consideration of fact and law. [Paras 3, 5, 9]

The Assessing Officer's treatment of the receipts as regular income is not sustained because he failed to make the requisite enquiries; CIT(A)'s reversal of the AO is affirmed.

Final Conclusion: Revenue's appeal is dismissed; the CIT(A)'s direction to treat the impugned receipts as corpus donations (capital receipts) is upheld for AY 2015-16, because the Assessing Officer failed to make necessary factual enquiries and the 2017 explanatory amendment operates prospectively and does not affect the assessment.

Chargeability of unexplained cash credits as income under Section 68 - Onus on assessee to prove identity, creditworthiness and genuineness of lenders/investors - Burden on revenue to rebut assessee's evidence with cogent corroborative material - Proviso to Section 68 inserted by Finance Act, 2012 applicable from AY 2013-14 and not retrospective - Inapplicability of the proviso to unsecured loans/deposits - Admissibility and weight of third party information not confronted to the assessee - Scope of scrutiny under CASS and powers of AO in a complete scrutiny assessment

Chargeability of unexplained cash credits as income under Section 68 - Onus on assessee to prove identity, creditworthiness and genuineness of lenders/investors - Burden on revenue to rebut assessee's evidence with cogent corroborative material - Admissibility and weight of third party information not confronted to the assessee - Deletion of additions made under Section 68 in respect of share application money and unsecured loans for AY 2012-13. - HELD THAT: - The assessee produced account confirmations, PAN details, bank statements showing transfers through banking channels, income tax returns and audited financial statements of the six lender/investor entities. On perusal, these documents demonstrated identity, creditworthiness and genuineness of the transactions and discharged the primary onus cast upon the assessee. The revenue relied on unserved summons and third party information from investigative authorities which was not confronted to the assessee and was unsupported by corroborative material. The Tribunal held that mere doubts, conjectures or uncorroborated third party statements cannot dislodge the assessee's evidence and that it was incumbent upon the revenue to undertake further investigation to rebut the documented proof. Consequently the additions under Section 68 were not sustainable and were deleted. [Paras 5]

Additions under Section 68 in respect of the impugned share application money and unsecured loans for AY 2012-13 deleted.

Proviso to Section 68 inserted by Finance Act, 2012 applicable from AY 2013-14 and not retrospective - Inapplicability of the proviso to unsecured loans/deposits - Proviso to Section 68 is prospective (effective from 01/04/2013) and is not applicable to the facts of AY 2012-13 or to unsecured loans/deposits. - HELD THAT: - The Tribunal noted that the proviso introduced by Finance Act, 2012 operates from AY 2013-14 and is not retrospective. The proviso's requirement that the person in whose name the credit is recorded must also furnish a satisfactory explanation does not apply to unsecured loans or deposits, and thus has no bearing on the present assessment year. [Paras 1]

The proviso to Section 68 is not applicable to AY 2012-13 and does not apply to unsecured loans/deposits.

Scope of scrutiny under CASS and powers of AO in a complete scrutiny assessment - Whether the AO exceeded the scope of scrutiny selected under CASS by making additions under Section 68. - HELD THAT: - The Tribunal examined the selection record and observed that the assessment was a complete scrutiny (not limited scrutiny). In such circumstances the Assessing Officer was empowered to examine and make appropriate additions after evaluating all material relevant to the correct assessment of income. No jurisdictional defect was made out to invalidate the AO's exercise of power. [Paras 6]

The plea that the AO exceeded the scope of CASS selection is rejected; the AO was competent to make the additions in a complete scrutiny assessment.

Final Conclusion: For AY 2012-13 the Tribunal held that the assessee discharged the primary onus under Section 68 by adducing documentary evidence of identity, creditworthiness and genuineness of transactions; revenue failed to rebut the same with cogent corroborative material and relied on un confronted third party information, hence the additions under Section 68 are deleted. The proviso to Section 68 introduced w.e.f. 01/04/2013 is prospective and inapplicable to the year under consideration and to unsecured loans; the contention that the AO exceeded CASS selection is rejected as the scrutiny was complete.

Depreciation rate for computer and computer parts - computation under section 14A read with Rule 8D - rectification under section 154 - mistake apparent from the record - debatable question cannot be rectified under section 154 - allowability of interest on delayed payment of TDS as compensatory expense

Depreciation rate for computer and computer parts - Whether office equipment comprising computers and computer parts are entitled to depreciation at 60% - HELD THAT: - The Tribunal examined the asset classification and applicable rates in the appended schedule to the Income Tax Rules. Entry No.5 in the new Appendix I (w.e.f. Assessment Year 2006-07) prescribes 60% depreciation for computers and computer parts. The assessee had disclosed such items separately as office equipment/computer peripherals. Reliance was placed on the Tribunal's earlier decision in M/s. Mphasis Ltd. recognizing 60% depreciation for computer accessories. Applying this legal and factual matrix, the Tribunal held that the items in question qualify for depreciation at 60% and directed the AO to allow depreciation accordingly. [Paras 4]

Depreciation on the computers and computer parts to be allowed at 60%; order of CIT(A) upheld on this point and AO directed to grant depreciation at 60%.

Computation under section 14A read with Rule 8D - debatable question cannot be rectified under section 154 - mistake apparent from the record - Whether the disallowance under section 14A read with Rule 8D could be recomputed and rectified in proceedings under section 154 as a mistake apparent from the record - HELD THAT: - The Tribunal observed that computing disallowance under section 14A r.w.r. Rule 8D requires examination of multiple factual and accounting components (such as interest-bearing funds, average value of investments, average value of total assets and expenditure directly relating to exempt income). Such computation involves debatable questions of fact and law which were not previously adjudicated and therefore cannot be treated as a 'mistake apparent from the record' amenable to rectification under section 154. A point not examined on facts or law does not qualify for rectification under section 154 merely by recomputation. [Paras 4]

Rectification under section 154 could not be invoked to reopen or recompute the section 14A/Rule 8D disallowance; CIT(A)'s view that the matter is debatable and not rectifiable under section 154 is upheld.

Allowability of interest on delayed payment of TDS as compensatory expense - Whether interest on delayed payment of TDS is allowable as revenue expenditure - HELD THAT: - The Tribunal treated interest on delayed payment of TDS as compensatory in nature rather than punitive. Relying on the coordinate bench's view in a comparable case, the interest was held to be not penal and therefore deductible as an allowable expenditure in computing income. [Paras 4]

Interest on delayed payment of TDS is allowable as a compensatory expense; CIT(A)'s decision on this issue is affirmed.

Final Conclusion: Revenue's appeal and the assessee's cross-objection are dismissed. The Tribunal directs the AO to allow 60% depreciation on qualifying computer and computer-part assets; holds that the section 14A/Rule 8D disallowance cannot be rectified under section 154 as it raises debatable questions; and upholds the allowability of interest on delayed payment of TDS as compensatory expenditure.

Recognition under section 80G - Continuance of registration under section 12A/12AA - Genuineness and sufficiency of charitable activities - Principle of consistency - Renewal of 80G recognition dependent on demonstrable activities

Recognition under section 80G - Continuance of registration under section 12A/12AA - Genuineness and sufficiency of charitable activities - Principle of consistency - Renewal of 80G recognition dependent on demonstrable activities - Entitlement of the assessee Trust to grant of recognition under section 80G in view of its continuing registration under section 12A/12AA and the activities carried on by it. - HELD THAT: - The Tribunal found that the Trust was validly registered under section 12AA and that its original objects, which formed the basis for that registration, continued to be carried out. The assessee produced material demonstrating active educational operations (an institution providing pre primary to higher primary education, 400-450 students, and details of fee collection and expenditure for AY 2017 18 to AY 2019 20). In these circumstances the finding of the CIT(E) that there were no sufficient activities was not justified. The Tribunal applied the principle of consistency-recognition under section 12A/12AA having been granted and not rescinded, continuation of the same objects and demonstrable activity supported renewal of section 80G recognition. The Tribunal distinguished the authorities relied upon by the CIT(E) (which hold that renewal is not automatic where no charitable activities are shown) on the ground that those cases involved absence of material to satisfy the Commissioner about genuineness of activities, whereas in the present case the assessee had furnished adequate evidence of ongoing educational activity. Consequently, rejection of the 80G application was set aside and the CIT(E) was directed to grant recognition under section 80G. [Paras 8, 9]

The CIT(E)'s rejection of the application for recognition under section 80G was set aside and the CIT(E) was directed to grant recognition under section 80G; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessee Trust, having valid registration under section 12A/12AA and having demonstrated continuing and sufficient educational activity for the periods in question, is entitled to recognition under section 80G and directing the CIT(E) to grant such recognition.

Restoration of name to the Register of Companies - discretion under Section 252(1) of the Companies Act, 2013 - striking off under Section 248(1) read with Rule 7 and Rule 9 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 - company being in operation at the time of striking off - conditional restoration subject to filing pending statutory documents and payment of fees - payment to Prime Minister's Relief Fund as a condition of restoration

Company being in operation at the time of striking off - discretion under Section 252(1) of the Companies Act, 2013 - The company was in operation prior to striking off and it is just to restore its name to the register. - HELD THAT: - The Tribunal considered whether the appellant-company could demonstrate that it was carrying on business or was in operation at the time its name was struck off and whether, on that basis, restoration under Section 252(1) was warranted. The appellant produced audited financial statements for the financial years including 2018-19, bank statements showing transactions and a credit balance as on the date of strike off, income-tax returns for the relevant assessment years and GST returns up to October 2019. On the material produced the Tribunal concluded that the company was not a defunct concern and had been in operation in the period preceding the strike off. Exercising the discretionary power vested by Section 252(1), and having regard to the interests of stakeholders and the evidence before it, the Tribunal held that it was just to restore the company's name to the register. [Paras 10, 11]

The appeal is allowed insofar as the Tribunal finds the company was in operation and that restoration is justifiable under Section 252(1).

Conditional restoration subject to filing pending statutory documents and payment of fees - payment to Prime Minister's Relief Fund as a condition of restoration - striking off under Section 248(1) read with Rule 7 and Rule 9 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 - Terms and conditions on which the company's name is to be restored were specified and the strike-off order was set aside. - HELD THAT: - Having determined that restoration was warranted, the Tribunal declared the ROC's public notice of striking off illegal and set it aside. The Tribunal directed restoration of the company's name to the Register of Companies subject to compliance by the appellant of specified conditions: filing all outstanding statutory documents with the Registrar along with proper filing fees and any additional late fees or charges leviable under law, completion of formalities required for late filing, and payment to the Prime Minister's Relief Fund. The ROC had indicated no objection to restoration provided pending filings and fees were made; the Tribunal adopted that approach and imposed the stated conditions as prerequisites to effecting restoration. [Paras 12]

The strike-off order is set aside and restoration is ordered subject to the appellant complying with filing requirements, payment of requisite fees and charges, and payment to the Prime Minister's Relief Fund.

Final Conclusion: The appeal is allowed: the Registrar's strike-off notice is declared illegal and the company's name shall be restored to the Register of Companies as if it had not been struck off, subject to the company filing all outstanding statutory documents, payment of applicable fees and late charges and the specified payment to the Prime Minister's Relief Fund.

Bail under Section 439 Cr.P.C. - cognizance under the SEBI Act and complaint by the Board - application of other laws notwithstanding SEBI Act (Section 32) - police investigation into offences punishable under the IPC - distinction between 'fees' and 'deposit' for applicability of M.P. Nikshepakon Ke Hiton Ka Sanrakshan Adhiniyam, 2000

Cognizance under the SEBI Act and complaint by the Board - application of other laws notwithstanding SEBI Act (Section 32) - police investigation into offences punishable under the IPC - Whether police could investigate and criminal courts take cognizance of offences under the IPC arising out of facts connected with a SEBI-regulated advisory firm. - HELD THAT: - The Court held that Section 26(1) of the SEBI Act prohibits cognizance only of offences punishable under the SEBI Act save on a complaint by the Board, but does not bar application of other statutes. Section 32 makes the SEBI Act additional to and not in derogation of other laws. Consequently, offences cognizable under the IPC arising from information obtained from SEBI may be investigated by police and are not excluded merely because SEBI supplied particulars; lodging of FIR by police on directions after obtaining information from SEBI and subsequent recording of complainants' statements under Section 161 Cr.P.C. supported prima facie attraction of IPC provisions and the legitimacy of police investigation. [Paras 6]

Police investigation and court cognizance of IPC offences in the present facts is permissible; the SEBI Act does not oust such proceedings.

Distinction between 'fees' and 'deposit' for applicability of M.P. Nikshepakon Ke Hiton Ka Sanrakshan Adhiniyam, 2000 - Whether amounts collected by the advisory firm from clients were 'fees' or were in the nature of 'deposit' attracting the M.P. Nikshepakon Ke Hiton Ka Sanrakshan Adhiniyam, 2000. - HELD THAT: - The Court observed that to invoke the State Act it must be shown that the amounts taken were deposits. On the material before it - the text invoices and receipts - the sums charged did not prima facie appear to be legitimate fixed service fees. The invoices showed inconsistent amounts for the same described service and period, supporting complainants' contention that the receipts reflected monies taken for investment rather than ordinary service charges. On this prima facie view, the transactions bore the character of deposits rather than fixed professional fees, lending substance to prosecution under the State Act and related charges. [Paras 7, 8]

Prima facie the amounts appear to be in the nature of deposits rather than mere fees, making the provisions of the State Act and related criminal provisions relevant for investigation.

Bail under Section 439 Cr.P.C. - Whether the applicant was entitled to grant of bail in the second repeat application. - HELD THAT: - Having considered that the FIR discloses cognizable offences under the IPC, that multiple complainants' statements have been recorded, and that prima facie the transactions may amount to deposits under the State Act, the Court found no ground to relax custody. The Court also noted the applicant's role in operations and recruitment and that the principal accused is absconding, all of which weighed against grant of bail. [Paras 9]

The bail application is rejected.

Final Conclusion: Second repeat bail application refused; police investigation into IPC offences permitted despite involvement of a SEBI regulated advisory firm, and on prima facie view the amounts collected appear to be deposits attracting the State protection Act.

Bail in cases of serious economic offences involving breach of fiduciary duty - gravity of alleged economic fraud as a factor in bail - role of regulatory findings (SEBI/forensic audit) in criminal proceedings - non-arrest during investigation not creating automatic right to bail - interim bail on humanitarian grounds where urgency is not shown

Bail in cases of serious economic offences involving breach of fiduciary duty - gravity of alleged economic fraud as a factor in bail - non-arrest during investigation not creating automatic right to bail - role of regulatory findings (SEBI/forensic audit) in criminal proceedings - Application for regular bail by the applicant accused of facilitating alleged fraudulent transfer and misuse of mutual fund units was rejected. - HELD THAT: - The Court found that the applicant, who occupied a fiduciary position, is alleged to have been involved in a large-scale economic fraud affecting public investors and involving complex transactions and alleged collusion with other accused. Independent forensic and regulatory findings (including SEBI-related observations and an internal forensic audit) and the FSL report indicating forged signatures and irregular collateral movements were material in assessing the gravity and magnitude of the alleged offences. The Court held that these factors disentitle the applicant to bail notwithstanding that the charge-sheet was filed without his arrest and that he had cooperated with investigation. The earlier jurisprudential proposition that non-arrest during investigation may ordinarily weigh in favour of bail was held not to be an absolute bar where the facts demonstrate exceptional gravity, risk to the investigatory process, and public interest implications. Applying these considerations, the Court declined to grant regular bail. [Paras 31, 32, 33, 34, 36]

Regular bail rejected.

Interim bail on humanitarian grounds where urgency is not shown - Prayer for interim bail on account of the applicant's wife's illness was not granted. - HELD THAT: - The Court observed that the interim bail request based on the wife's health was not pressed by the applicant during proceedings and, in any event, no urgent medical necessity was demonstrated despite the application being pending since June 2020. On this basis the Court refused interim relief. [Paras 34, 35]

Interim bail prayer refused / not pressed and dismissed for want of urgency.

Final Conclusion: The petition for regular bail and the interim bail request were dismissed: regular bail was refused due to the exceptional gravity of the alleged economic offences, supporting forensic and regulatory findings, and public-interest considerations; the interim bail on humanitarian grounds was not granted for lack of demonstrated urgency and because it was not pressed.

Locus standi of director of corporate debtor during corporate insolvency - authority of resolution professional to represent corporate debtor under Insolvency and Bankruptcy Code - maintainability of third party application after withdrawal of main petition

Locus standi of director of corporate debtor during corporate insolvency - authority of resolution professional to represent corporate debtor under Insolvency and Bankruptcy Code - maintainability of third party application after withdrawal of main petition - Whether the Miscellaneous Civil Application filed by the director of the respondent company seeking return of a demand draft is maintainable after initiation of corporate insolvency proceedings and suspension of the company's management. - HELD THAT: - The Court found that the application was filed by the applicant in his capacity as director of the respondent company after the Special Civil Application had been withdrawn. There was no order at the time of withdrawal dealing with the demand draft. Subsequently, the respondent company became subject to corporate insolvency proceedings on admission of a creditor's petition by the NCLT and the management of the company was suspended. In those circumstances the Resolution Professional appointed under the Insolvency and Bankruptcy Code is the only person competent to represent the company and to move applications on its behalf. Consequently the director lacked locus standi to press the present application for return of the demand draft and the application was not maintainable. [Paras 6, 7]

Application dismissed as not maintainable; applicant lacks competence to file the application after suspension of the company's management and appointment of the Resolution Professional.

Final Conclusion: The Miscellaneous Civil Application filed by the director was dismissed for want of maintainability because, after admission of the company petition and suspension of management, only the Resolution Professional is competent to represent the company; notice discharged.

Admissibility of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - effect of pendency of proceedings under the SARFAESI Act on initiation of CIRP - existence of financial debt and default for triggering CIRP - effect of Section 238 of the IBC overriding inconsistent laws - appointments and powers of Interim Resolution Professional and imposition of moratorium under Section 14 - inapplicability of amended threshold and Section 10A exclusion where default predates notified period

Effect of pendency of proceedings under the SARFAESI Act on initiation of CIRP - effect of Section 238 of the IBC overriding inconsistent laws - Pendency of actions under the SARFAESI Act does not bar filing or admission of a Section 7 application under the IBC, 2016. - HELD THAT: - The Tribunal relied on precedents of higher fora to hold that initiation or pendency of recovery proceedings under the SARFAESI Act does not prevent a financial creditor from filing an application under Section 7 of the IBC. Section 238 gives the Code overriding effect over inconsistent enactments and the object of the IBC-bringing about resolution of the corporate debtor-differs from the recovery focus of SARFAESI, hence parallel or antecedent SARFAESI actions do not constitute a bar to admission of a Section 7 petition. [Paras 13, 14, 15, 16]

The Tribunal held that SARFAESI proceedings do not bar admission of the Section 7 application and admitted the petition.

Existence of financial debt and default for triggering CIRP - admissibility of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - inapplicability of amended threshold and Section 10A exclusion where default predates notified period - There is a financial debt and default by the corporate debtor; the Section 7 application is maintainable and must be admitted; the subsequent increase in threshold and the relief under Section 10A are not applicable to the present case. - HELD THAT: - After examining the application and documents, the Tribunal found that the financial creditor established existence of a financial debt and default. Reliance was placed on Supreme Court authorities explaining that where debt and default are shown the adjudicating authority is bound to admit a Section 7 application. The Tribunal noted that the petition was filed on 17.06.2020 and the claimed default occurred well before 25.03.2020, so the Central Government notification raising the threshold and the amendment under Section 10A (which excludes defaults arising in the notified period) do not assist the corporate debtor in this matter. [Paras 17, 18, 19, 20]

The Tribunal found debt and default proved, held the application to be maintainable, and admitted the Section 7 petition.

Appointments and powers of Interim Resolution Professional and imposition of moratorium under Section 14 - On admission, the proposed IRP was appointed and the statutory moratorium under Section 14 commenced. - HELD THAT: - The Financial Creditor's nominated person furnished the prescribed written communication and was appointed as Interim Resolution Professional to carry forward the CIRP and to perform duties under the Code, including taking steps under Sections 15, 17 and 18. Consequent upon admission, the moratorium provisions under Section 14(1)-(4) were declared to operate in relation to the corporate debtor, with the registry directed to communicate the order to the parties, IBBI and the Registrar of Companies. [Paras 21, 22, 23, 24, 25]

The nominated IRP was appointed and the moratorium under Section 14 took effect from the date of the order.

Final Conclusion: The Tribunal admitted the Section 7 application, appointed the proposed Interim Resolution Professional to conduct the CIRP and declared the moratorium; pendency of SARFAESI proceedings did not preclude admission, and notifications/amendments invoked by the corporate debtor were held inapplicable to the facts of this case.

Admission of application under Section 10 of the Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process (CIRP) - Requirement of special resolution for filing under Section 10(3)(c) - Completeness of Form No. 6 and compliance with Section 10(2) - Statement of affairs requirement (Annexure VI(f) / Form 6) - Intervention application-maintainability and scope of enquiry - Non-disclosure of facts unrelated to Form 6 not ground for rejection - Moratorium under Section 14 of the Code - Appointment of Interim Resolution Professional and suspension of board's powers

Admission of application under Section 10 of the Insolvency and Bankruptcy Code - Corporate Insolvency Resolution Process (CIRP) - Application filed by the corporate debtor under Section 10 is admitted and CIRP is initiated. - HELD THAT: - The Tribunal found that the corporate applicant has established existence of default by adducing emails, notices and the statement of affairs showing a negative net worth and specified instances of non-payment. The petition was filed in prescribed Form No.6 with the required particulars, a proposed resolution professional had furnished consent and declared no disciplinary proceedings, and no disqualification under Section 11 was alleged by any party. Subject to the reservation concerning potential non-compliance of the EGM (see next issue), the application is complete and the Tribunal was satisfied to admit the Section 10 application and initiate CIRP. [Paras 14, 17, 18, 19, 26]

Section 10 application admitted and CIRP initiated against the corporate debtor.

Requirement of special resolution for filing under Section 10(3)(c) - Existence of a special resolution approving filing of the Section 10 application is prima facie satisfied but admission is subject to reconsideration if the EGM is found non-compliant. - HELD THAT: - A copy of the EGM resolution dated 31.10.2018 was placed at Annexure A-14 indicating members' consent to apply under Section 10. However, the attendance sheet and details of members present were not filed. The Tribunal accepted the resolution for present purposes but expressly made the admission subject to reconsideration in the event the EGM is subsequently shown not to comply with the Companies Act, 2013. [Paras 15, 16]

Special resolution in the EGM is accepted for admission purposes, but admission is subject to later verification of EGM compliance.

Completeness of Form No. 6 and compliance with Section 10(2) - Statement of affairs requirement (Annexure VI(f) / Form 6) - Form No.6 including statement of affairs and disclosure of members was found to be complete after rectification of defects and compliance with the 14 day requirement. - HELD THAT: - The petition was filed in Form No.6 containing the particulars mandated by Section 10 and the Rules. The statement of affairs dated 20.10.2018 satisfied the Annexure VI(f) requirement given the filing date (accounting for closed days). A notice of defect regarding members' details was issued and subsequently complied with by filing members' particulars. The Form 2 consent of the proposed IRP, including declaration of no disciplinary proceedings, was on record. On these bases the application was treated as complete. [Paras 17, 18]

Formal requirements of Form No.6 and the statement of affairs were satisfied (defect cured), rendering the application complete.

Intervention application-maintainability and scope of enquiry - Non-disclosure of facts unrelated to Form 6 not ground for rejection - Intervention application filed by RNY Healthcare Services Pvt. Ltd. (CA No. 519/2019) is rejected and the Tribunal will not allow a roving inquiry into matters beyond Section 10/Form 6 requirements. - HELD THAT: - The intervener alleged suppression of material facts and reliance funding from the holding company, and questioned genuineness of the EGM. The Tribunal held that under the settled approach (as explained by NCLAT), the Adjudicating Authority must confine itself to the material required under Section 10 and Form 6 and to eligibility under Section 11; non disclosure of facts unrelated to these requirements does not warrant rejection. The intervener produced no evidence to prove that the EGM did not take place and the arbitral award referred to arose after filing and could be considered by the IRP upon claim. Consequently the intervention application was dismissed. [Paras 20, 21, 22, 23, 24]

Intervention application rejected; no scope for rejecting Section 10 petition on the alleged non disclosures unrelated to Form 6 or Section 11 in the absence of evidence.

Moratorium under Section 14 of the Code - Appointment of Interim Resolution Professional and suspension of board's powers - Moratorium is declared and interim reliefs under Section 14 are imposed; Mr. Madan Gopal Jindal is appointed as Interim Resolution Professional with specified directions. - HELD THAT: - Upon admitting the Section 10 application, the Tribunal declared the moratorium in terms of Section 14(1), enjoining suits, alienation of assets, enforcement of security and recovery of property during the insolvency process, while preserving supply of essential goods as per law. The Tribunal evaluated the proposed IRP's credentials (no adverse record) and appointed him, directing suspension of the board's powers under Section 17, inventory and public announcement obligations, constitution of the committee of creditors, and regular reporting to the Tribunal. [Paras 27, 28, 29, 30, 31]

Moratorium imposed and Mr. Madan Gopal Jindal appointed as Interim Resolution Professional with attendant duties and directions.

Final Conclusion: The Tribunal admitted the corporate debtor's Section 10 application and initiated CIRP (subject to later verification of EGM compliance), rejected the intervener's application for intervention, declared moratorium under Section 14 and appointed an Interim Resolution Professional with directions to manage the corporate debtor's affairs and proceed with the insolvency process.

Non speaking order - delegation/external dictation of administrative power - interpretation of Regulation 6 and Regulation 9 of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 - effect of pending investigations - requirement to consider factors specified in Regulation 9(3) - remand for fresh consideration

Non speaking order - Validity of RBI's order dated 30.12.2019 rejecting petitioner's application which gave no reasons - HELD THAT: - The impugned order is a cryptic, non speaking order that records rejection without stating reasons. Administrative action affecting substantial rights cannot be sustained where the statutory authority records no reasons; the authority cannot afterwards validly supplement the grounds by affidavit. For these reasons the order dated 30.12.2019 is vitiated and liable to be set aside. [Paras 15, 22, 23]

The cryptic order of 30.12.2019 rejecting the petitioner's application is quashed as being a non speaking order.

Interpretation of Regulation 6 and Regulation 9 of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 - effect of pending investigations - requirement to consider factors specified in Regulation 9(3) - Whether mere existence of investigations by enforcement agencies ipso facto disqualifies an Indian party from making direct investment and how RBI must apply Regulation 9 - HELD THAT: - Regulation 6 disqualifies parties under investigation from automatic entitlement, but Regulation 9 permits such parties to apply to RBI for approval. A conjoint reading shows that mere pendency of investigations does not automatically bar direct investment; instead, where Regulation 9 is invoked RBI must consider the application on its merits having regard to the factors in Regulation 9(3) (prima facie viability, contribution to external trade/benefit to India, financial position and track record, expertise and experience). The counter affidavit and ED objection did not show that RBI applied or recorded consideration of these Regulation 9(3) factors when rejecting the application. [Paras 5, 20, 25, 26]

Mere pendency of investigations is not an automatic bar; RBI must consider applications under Regulation 9 in accordance with the statutory factors in Regulation 9(3). The rejection did not comply with this requirement.

Delegation/external dictation of administrative power - Whether RBI acted impermissibly at the behest of the Enforcement Directorate in rejecting the application - HELD THAT: - An administrative authority must exercise its discretion independently and cannot allow another agency to dictate its decision. The record shows the rejection was founded on objections from the Enforcement Directorate without independent reasoning or application of Regulation 9(3) criteria. Such exercise of power at the instance of another agency is ultra vires and vitiates the decision. [Paras 27, 28, 32]

RBI's rejection, being effectively dictated by objections of the Enforcement Directorate without independent application of relevant statutory criteria, is invalid.

Remand for fresh consideration - Remedy and further direction after quashing the impugned order - HELD THAT: - Given the quashing of the order for the reasons above, the appropriate remedy is to remit the petitioner's application to RBI for fresh consideration. RBI is directed to reconsider the application in accordance with law, applying the factors in Regulation 9(3) and giving reasoned decision; this exercise must be done expeditiously. Transactions effected under this Court's interim orders were held valid; undertakings previously furnished by the petitioner remain the basis on which interim transfers were permitted. [Paras 35, 36, 37, 38]

The communication dated 30.12.2019 is quashed and the matter is remanded to RBI for fresh, reasoned consideration in accordance with law; interim transactions under earlier orders are validated subject to the undertakings given.

Final Conclusion: The impugned non speaking order dated 30.12.2019 is quashed as unlawful: RBI cannot reject an application merely on objections of another agency without independent, reasoned application of Regulation 9(3) of the 2004 Regulations; mere pendency of investigations does not automatically bar an application under Regulation 9. The matter is remitted to RBI to reconsider the petitioner's application afresh and expeditiously in accordance with law; transfers made under this Court's interim orders are validated subject to the undertakings already furnished.

Attachment of property under the Prevention of Money Laundering Act - proceeds of crime - overriding effect of the PMLA - moratorium under the Insolvency and Bankruptcy Code - conflict between PMLA and IBC - interim stay of appellate order

Attachment of property under the Prevention of Money Laundering Act - proceeds of crime - overriding effect of the PMLA - Validity of the attachment of properties of M/s. Diamond Power Infrastructure Limited under the PMLA and whether such attachment can be released pending appeal - HELD THAT: - The Court held that a prima facie case under the PMLA was made out on the basis of the FIR, investigation and related material and that properties held and utilised by M/s. DPIL could properly be treated as proceeds of crime and attached to prevent dissipation and to preserve a source for recovery. The Court accepted the submission that the PMLA, by virtue of its overriding provision, operates to protect attachments made under the Act and that releasing attachments while appeals are pending would render the remedies under the PMLA nugatory. In that view, the Appellate Tribunal erred in vacating the attachment without adequately considering the nature and seriousness of the allegations and the statutory scheme for preservation of proceeds of crime. The Court therefore concluded that the attachment was justified in law and ought to remain in force pending disposal of the appeal. [Paras 6]

Attachment of the properties under the PMLA was lawful and shall continue in operation pending the final outcome of the appeal.

Moratorium under the Insolvency and Bankruptcy Code - conflict between PMLA and IBC - Whether the moratorium under the Insolvency and Bankruptcy Code, 2016 (NCLT admission) precluded attachment under the PMLA where the provisional attachment pre-dated the NCLT admission - HELD THAT: - The Court noted and found as a matter of fact that the provisional attachment order was dated 24th April, 2018 while the NCLT admitted insolvency proceedings on 24th August, 2018. Consequently, the moratorium could not retrospectively affect an attachment that had been made prior to the commencement of the moratorium. The Appellate Tribunal's observation that attachment was subsequent to the moratorium was therefore a misdirection. Given the chronological primacy of the PMLA attachment, the moratorium did not invalidate or automatically override the attachment made earlier under the PMLA. [Paras 4, 6]

The moratorium under the IBC did not bar the earlier provisional attachment under the PMLA and the Appellate Tribunal was misdirected in treating the attachment as being subsequent to the moratorium.

Interim stay of appellate order - Whether the impugned order of the Appellate Tribunal releasing the attachment should be stayed pending final disposal of the appeal - HELD THAT: - Balancing the serious allegations of large-scale money laundering, the risk that release of attachment would render the appeal futile, and the statutory purpose of preserving proceeds of crime, the Court exercised its appellate jurisdiction to grant an interim stay of the Appellate Tribunal's order. The Court found that continuation of the original attachment order was necessary until the appeal is finally decided, while preserving the parties' right to seek expeditious final hearing thereafter. [Paras 5, 7]

The order of the Appellate Tribunal dated 18th June, 2019 releasing the attachment is stayed and the original attachment order shall remain in operation during the pendency of this appeal.

Final Conclusion: The appeal is admitted; the Appellate Tribunal's order releasing attachment is stayed and the provisional attachment (confirmed by the Adjudicating Authority) shall remain in force pending final disposal of this appeal, with liberty to seek final hearing after three months.

Writ jurisdiction and maintainability in revenue matters involving mixed questions of fact and law - Availability of statutory appellate remedy and requirement to exhaust remedies - Judicial discipline relating to Trade Notices and inter-departmental adherence - Entitlement to withdraw writ and pursue statutory appeal - Direction to appellate authorities to decide appeals on merits uninfluenced by earlier judicial observations

Writ jurisdiction and maintainability in revenue matters involving mixed questions of fact and law - Availability of statutory appellate remedy and requirement to exhaust remedies - Maintainability of a writ petition impugning an assessment/order that raises mixed questions of fact and law and the requirement to resort to the statutory appellate forum. - HELD THAT: - The High Court held that the challenge to the assessment/order, which involved mixed questions of fact and law (specifically whether additional Service Tax was payable by the assessee notwithstanding tax paid by its banker and the applicability of Trade Notices), was not appropriately raised by invoking writ jurisdiction at the threshold. Such controversies ought to be ventilated and adjudicated through the statutory appellate mechanism by filing a regular appeal before the first appellate authority and subsequently before the Tribunal, with the High Court being approached only on substantial questions of law arising from the tribunal's order. The Court therefore concluded that the writ was not the correct remedy for the grievance presented.

Writ petition was not maintainable against the assessment/order raising mixed questions of fact and law; the assessee should pursue statutory appeals.

Entitlement to withdraw writ and pursue statutory appeal - Direction to appellate authorities to decide appeals on merits uninfluenced by earlier judicial observations - Judicial discipline relating to Trade Notices and inter-departmental adherence - Permission to withdraw the writ and direction permitting the appellate authorities to entertain and decide the statutory appeal on merits despite delay, and to remain uninfluenced by observations in the impugned order. - HELD THAT: - The Court granted liberty to the assessee to withdraw the writ petition and file a regular appeal before the designated appellate forum within six weeks. Subject to usual conditions for entertaining an appeal, the appellate authority was directed to entertain the appeal without raising objection to delay and to decide it on merits in accordance with law. The Court further directed that the appellate authorities should decide the appeals uninfluenced by observations made by the Single Judge in the impugned order. The question regarding applicability or effect of Trade Notices was left to be considered by the appellate authorities within the statutory appellate process rather than decided in writ proceedings.

Assessee granted liberty to withdraw writ and file statutory appeal within six weeks; appellate authorities to admit and decide the appeal on merits without being influenced by earlier observations.

Final Conclusion: Writ challenge to the assessment was inappropriate where mixed questions of fact and law arise; the assessee was permitted to withdraw the writ and file statutory appeals, which the appellate authorities were directed to entertain and decide on merits, uninfluenced by the Single Judge's observations.

Refund of service tax - unjust enrichment - refund payable to service recipient - limitation / time barred - interest on delayed refund - litigation policy dismissal and finality

Refund of service tax - limitation / time barred - litigation policy dismissal and finality - The appellant is entitled to refund of service tax paid for the period March, 2015 to December, 2015, including the amount relating to March, 2015 which is not time barred. - HELD THAT: - The Tribunal had earlier upheld the Commissioner (Appeals) order rejecting the time bar argument and dismissed the Revenue's appeal under the litigation policy. The Revenue's subsequent application for rectification seeking recall on the ground that a substantial question of law was involved was dismissed. The presence of the Revenue's authorised representative at the earlier hearing without objection, the prior detailed consideration of identical issues by the Tribunal in M/s A.P. Enterprises v. C.C.E. & S.T. Panchkula, and the dismissal of the rectification application establish the finality of the earlier finding that the refund claim is not barred by limitation. Applying those conclusions to the present claim, the amount for March, 2015 cannot be rejected as time barred and the appellant is entitled to the refund for the stated period. [Paras 7]

Refund claim for March, 2015 to December, 2015 (including March, 2015) is allowable.

Unjust enrichment - refund payable to service recipient - interest on delayed refund - The refund cannot be diverted to the Consumer Welfare Fund on the ground of unjust enrichment and must be paid into the account of the service recipient (Garrison Engineers (MES)); interest is payable as provided by law. - HELD THAT: - The Tribunal in M/s A.P. Enterprises concluded that where the service recipient has borne the tax and has directed the service provider to file the refund and receive the refund directly, the refund must be sanctioned in the account of the service recipient. Given that position and the identical factual matrix here (service recipient being Garrison Engineers (MES) which is not commercially engaged), the adjudicating authority erred in transferring the sanctioned refund to the Consumer Welfare Fund on unjust enrichment grounds. The Tribunal applies the established principle that the person who bore the tax is entitled to the refund and directs sanction to the service recipient's account. Interest on delayed payment is awarded as held by the Apex Court in Ranbaxy Laboratories Ltd. v. Union of India. [Paras 3, 8]

Amount must be refunded to the service recipient's account with interest from three months after filing the refund claim until realisation; diversion to the Consumer Welfare Fund set aside.

Final Conclusion: Appeal allowed; the refund previously sanctioned shall be paid into the account of the service recipient (Garrison Engineers (MES)) together with interest from three months after filing of the refund claim until its realisation; the transfer to the Consumer Welfare Fund is set aside.

Interest on delayed refund - pre-deposit under Section 35F - Section 35FF - period of three months from communication of appellate order

Interest on delayed refund - Section 35FF - pre-deposit under Section 35F - period of three months from communication of appellate order - Whether the appellant is entitled to interest on the refund of the pre-deposit made under Section 35F and, if so, from which date. - HELD THAT: - The Tribunal applied the unamended provision of Section 35FF which provides that where an amount deposited under the first proviso to Section 35F is required to be refunded consequent upon an appellate order, interest is payable at the specified rate only after the expiry of three months from the date of communication of that appellate order until the date of refund, unless the order is stayed. The Tribunal noted that its order in the appellant's appeal was dated 05.09.2019 and the adjudicating authority sanctioned the refund on 04.11.2019. As the refund sanction fell within three months from the date of the Tribunal's order, the statutory condition for payment of interest (expiry of three months from communication of the appellate order) was not satisfied. Relying on the reasoning adopted in the tribunal's contemporaneous decisions, the Tribunal consequently held that no interest was payable to the appellant.

No interest is payable on the refunded pre-deposit because the refund was sanctioned within three months from the date of the appellate order; appeal dismissed.

Final Conclusion: The appeal is dismissed: the refund of the pre-deposit was sanctioned within three months of the Tribunal's order, therefore no interest on delayed refund is payable.

Ex-parte appellate order - principles of natural justice - exemption for self-occupied residential property - exemption under Section 5(vi) of the Wealth Tax Act - addition on account of cash in hand - remand for fresh adjudication - opportunity of being heard

Exemption for self-occupied residential property - exemption under Section 5(vi) of the Wealth Tax Act - principles of natural justice - opportunity of being heard - Denial and confirmation of claimed exemptions in respect of two residential properties were not finally adjudicated and require fresh consideration. - HELD THAT: - The Assessing Officer denied exemptions claimed for two residential properties for want of documentary evidence. The Commissioner (Appeals) confirmed those additions by passing an ex-parte order in the absence of any evidence or appearance by the assessee. The Tribunal observed that the assessment record does not clearly indicate what specific details or documents were required to allow the claimed exemptions and that the appellate order was rendered without engagement with the matter on merits. In view of the absence of adjudication on the substantive entitlement to exemption and the lack of clarity about material required, the matter is remanded to the Assessing Officer for fresh adjudication after affording the assessee a reasonable opportunity of being heard. [Paras 6]

Remanded to the Assessing Officer for fresh adjudication of the claimed exemptions after affording a reasonable opportunity of being heard.

Addition on account of cash in hand - remand for fresh adjudication - opportunity of being heard - Addition of cash-in-hand to the net wealth was not supported by material showing availability on the relevant date and requires fresh examination. - HELD THAT: - The material on record indicates the cash was seized in Financial Year 2009-10 while the assessment relates to the relevant financial year ending 31.03.2011. There is no reference to any material establishing the presence of the cash on hand as on 31.03.2011. Given the absence of such material and that the appellate order confirming the addition was passed ex-parte, the Tribunal considered it appropriate in the interests of justice to remit the issue to the Assessing Officer to examine evidence pertaining to cash on hand for the relevant period and to give the assessee an opportunity to be heard before making any addition. [Paras 6]

Remanded to the Assessing Officer to verify the presence of cash on hand for the relevant period and to adjudicate afresh after affording the assessee a reasonable opportunity of being heard.

Final Conclusion: The appeal is partly allowed for statistical purposes and the matter is remitted to the Assessing Officer for fresh adjudication on the claimed exemptions and the alleged cash-in-hand addition after affording the assessee a reasonable opportunity of being heard.

Exemption under section 5(1)(vi) of the Wealth Tax Act (500 sq. metres plot exemption) - Exemption under section 5(1)(iv) (own residential house) - Assessment under the Wealth Tax Act in respect of unclaimed exemptions

Exemption under section 5(1)(vi) of the Wealth Tax Act (500 sq. metres plot exemption) - Exemption under section 5(1)(iv) (own residential house) - Whether the Kelambakkam plot is exempt from wealth tax under section 5(1)(vi) where the assessee has no residential house and has not claimed exemption under section 5(1)(iv). - HELD THAT: - The Tribunal found that the assessee did not possess a residential house and had not claimed the exemption available under section 5(1)(iv). In that position, the assessee was entitled to claim the alternative exemption under section 5(1)(vi) for any one plot subject to the specified area limit of 500 sq. metres. The Kelambakkam land measured 4,300 sq. ft., which falls within the 500 sq. metres ceiling; accordingly the assessing officer ought not to have brought the value of that plot to tax. The Tribunal accepted the assessee's contention and directed the assessing officer to exempt the Kelambakkam plot under section 5(1)(vi). [Paras 4, 5]

Kelambakkam plot held exempt under section 5(1)(vi); assessing officer directed to exempt its value.

Final Conclusion: The appeal is allowed; the assessing officer is directed to exempt the value of the Kelambakkam land under section 5(1)(vi) of the Wealth Tax Act for the assessment year 2009-10.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption - Section 138 N.I. Act criminal liability for dishonour of cheques - section 482 Cr.P.C. powers used sparingly - compounding/settlement versus execution and criminal proceedings - admissions recorded under Section 313 Cr.P.C. - admission by parties and estoppel under Section 58 of the Evidence Act

Section 482 Cr.P.C. powers used sparingly - compounding/settlement versus execution and criminal proceedings - Whether the High Court should exercise inherent powers under Section 482 Cr.P.C. to club civil execution proceedings and criminal proceedings or to grant compounding/settlement relief sought by the petitioner. - HELD THAT: - The Court held that the relief to combine pending civil execution proceedings (execution of the settlement decree dated 29.01.2015) and criminal proceedings (for compliance of the order of conviction under Section 138 N.I. Act) could not be granted because the proceedings are mutually exclusive and pertain to different reliefs and fora. The petition under Section 482 Cr.P.C. was inappropriate for overriding, modifying or seeking to circumvent the settled settlement decree and the criminal orders; Section 482 powers are to be exercised sparingly and not where other efficacious remedies or procedures are available. The petitioner had not sought assistance from the trial forum or the executing court by appropriate applications, and had not come with clean hands in view of defaults under the settlement decree and avoidance of compliance. Consequently, the Court declined to exercise inherent jurisdiction to grant the clubbing/compounding reliefs sought. [Paras 20, 21, 22]

Petition under Section 482 Cr.P.C. seeking clubbing/compounding and related reliefs dismissed as inappropriate and not maintainable.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - rebuttable presumption - Section 138 N.I. Act criminal liability for dishonour of cheques - admissions recorded under Section 313 Cr.P.C. - admission by parties and estoppel under Section 58 of the Evidence Act - Whether the trial and appellate courts committed illegality or perversity in convicting the petitioner under Section 138 N.I. Act in view of the petitioner's contention of a part payment and that the cheques were given as security. - HELD THAT: - The Court reiterated the legal position that once execution and signatures on cheques are admitted, statutory presumptions under Sections 118 and 139 arise in favour of the complainant, shifting the burden to the accused to rebut on preponderance of probabilities. The presumptions are rebuttable but not displaced unless the accused adduces a reasonably probable defence. The record showed admissions by the petitioner in his Section 313 Cr.P.C. statement that he had issued eight cheques (and acceptance in evidence of liability qua remaining cheques), and trial testimony in which the petitioner could not specify linkage of the part payment to a particular cheque; the payee had admitted receipt of the part payment and described it as against the running account. Further, admissions and agreed matters attract Section 58 of the Evidence Act. Given the admissions, defaults, the settled civil decree and the petitioner's conduct (including defaults under the settlement), the High Court found no reason to hold that the trial and appellate courts erred in law or fact in convicting and sentencing the petitioner. The petitioner had not successfully rebutted the statutory presumptions nor established such probability as would vitiate the prosecution case. [Paras 29, 30, 31, 32, 33]

Findings of the Trial Court and Appellate Court upholding conviction under Section 138 N.I. Act are not illegal or perverse; the petition challenging those orders is dismissed.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed. The High Court declined to exercise inherent jurisdiction to club or compound the civil execution and criminal proceedings and found no illegality in the conviction and sentence imposed under Section 138 N.I. Act; the settlement decree and criminal orders must be complied with.

Lookout Circular (LOC) - right to travel abroad under Article 21 - conditions precedent for issuance of LOC - judicial review of coercive travel restraints - evasive or non-cooperative conduct not by itself justifying LOC - Office Memorandum dated 27.10.2010 - LOC as a coercive measure to secure surrender

Lookout Circular (LOC) - conditions precedent for issuance of LOC - evasive or non-cooperative conduct not by itself justifying LOC - Office Memorandum dated 27.10.2010 - judicial review of coercive travel restraints - Validity of the LOC issued on 25.07.2019 and its extension against the petitioner - HELD THAT: - The Court examined whether the impugned LOC complied with the conditions precedent for issuance and whether there were adequate reasons on the date the request was made. The right to travel abroad is a facet of personal liberty under Article 21 and LOCs, being coercive measures that restrict movement, must be supported by disclosed reasons and issued only when justified by the circumstances prevailing at the relevant time. The Enforcement Directorate issued the LOC in undue haste shortly after registration of ECIR, and the respondents did not assert that the petitioner was a flight risk or lacked roots in India; reliance solely on the petitioner's alleged evasive or non-cooperative conduct was held insufficient to justify the LOC. The amendment to the Office Memorandum relied upon by the respondents, permitting LOCs in the economic interest of India, was not shown to be applicable on the facts; mere assertion of that power without explanation does not substitute for reasons supporting exercise of the power. For these reasons the impugned LOC and its extension were found to be unjustified and liable to be quashed, while the order preserves the continuation of investigative proceedings and does not adjudicate the merits of the FIR/ECIR. [Paras 11, 12, 14, 15, 16]

The Impugned LOC dated 25.07.2019 and its extension are set aside and quashed; the order does not affect the ongoing investigation or pronounce on the merits of the FIR/ECIR.

Final Conclusion: The petition is allowed; the Lookout Circular issued against the petitioner and its extension are quashed while preserving the respondent agencies' right to continue investigation; no order as to costs.

Regular bail - judicial custody - delay in trial / non-examination of prosecution witnesses - admissibility of confessional statement of co-accused - nomination on disclosure - non-commercial quantity - first offender

Regular bail - judicial custody - delay in trial / non-examination of prosecution witnesses - admissibility of confessional statement of co-accused - nomination on disclosure - Grant of regular bail to the petitioner in FIR No. 170 dated 26.06.2019 (NDPS and IPC offences). - HELD THAT: - The Court, without adjudicating the merits of the prosecution case, allowed the petition for regular bail. The determinative considerations were that the petitioner had remained in judicial custody for over one year and four months; charges had been framed on 18.12.2019 yet out of 21 prosecution witnesses none had been examined; a co-accused from whom recovery was effected had earlier been granted regular bail by this Court; the petitioner was on bail in other FIRs; and the confessional statement of the co-accused - on which the petitioner was alleged to have been nominated - raised arguable questions of admissibility to be decided at trial. On these facts the Court exercised its discretion under the criminal procedure code to release the petitioner on regular bail while expressly refraining from commenting on the merits of the case.

The petition is allowed and the petitioner is directed to be released on regular bail on furnishing bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate/Illaqa Magistrate; no observation on merits.

Final Conclusion: Petition allowed; petitioner granted regular bail subject to furnishing bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate/Illaqa Magistrate; merits left open for trial.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption - Standard of proof in complaint under Section 138 of the Negotiable Instruments Act - Evaluation of documentary and oral evidence - Acquittal for failure to prove offence

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption - Evaluation of documentary and oral evidence - Acquittal for failure to prove offence - Whether the presumption under Section 139 of the Negotiable Instruments Act stood rebutted and the acquittal of the accused under Section 138 of the Negotiable Instruments Act was liable to be interfered with on appeal. - HELD THAT: - The trial court reviewed the oral and documentary material and concluded that the accused had successfully rebutted the statutory presumption arising from the cheque. The trial court relied on documentary exhibits (Exts. D9 to D11) showing absence of licence for conducting the alleged textile business in 2003 and evidence that the accused was abroad in 2002, which undermined the complainant's case. The court also scrutinised the series of bills produced as Ext. P9, noting inconsistencies: the bills were produced later in large volume, lacked corresponding day books, assessments or other records mandated by sales tax law, and did not show regular transactional patterns expected of a wholesale business. Disputed signatures on certain bills and the absence of objection by the complainant to defence exhibits further weakened the prosecution's claim that the cheque (Ext. P1) corresponded to the asserted liability. On these materials the trial court held that the presumption under Section 139 was rebutted and that the prosecution had failed to prove the offence under Section 138. The High Court, on appellate review, found no reason to interfere with the trial court's assessment of evidence and concurred that the offence was not proved. [Paras 20, 21, 22, 23, 24]

The presumption under Section 139 was held to be rebutted on the evidence and the acquittal under Section 138 is confirmed.

Final Conclusion: Criminal appeal dismissed; judgment of acquittal dated 25.4.2006 in C.C. No. 1389/2003 is confirmed.

Section 482 Cr.P.C. - Section 138 Negotiable Instruments Act - prima facie satisfaction - trial court's role in appreciation of evidence - summons and non-bailable warrant - liberty to file discharge application - bailable offence and surrender with bail bonds

Section 138 Negotiable Instruments Act - prima facie satisfaction - trial court's role in appreciation of evidence - Validity of issuance of summons in prosecution under Section 138 where the signature on the cheque is disputed. - HELD THAT: - The revisional court found that the ingredients of Section 138 Negotiable Instruments Act were prima facie established from the cheque, its dishonour and the complainant's statements recorded under Sections 200 and 202 Cr.P.C., and therefore summons could rightly be issued. The High Court held that a dispute over whether the applicant signed the cheque is a question of evidence to be examined by the trial court at the appropriate stage and that invocation of inherent jurisdiction under Section 482 Cr.P.C. was not justified to re-appraise such evidence at the threshold. The court emphasised that when prima facie ingredients of the offence are made out, a higher court should not delve into detailed evidential scrutiny which is the province of the trial court.

Summons were validly issued; the revisional court did not err in upholding issuance of summons and dismissing the revision.

Section 482 Cr.P.C. - liberty to file discharge application - bailable offence and surrender with bail bonds - Whether the applicant should be granted relief or leave to file a discharge application / be protected from arrest in the present application under Section 482 Cr.P.C. - HELD THAT: - The High Court observed that the applicant is not precluded from availing statutory or ordinary remedies; if a discharge application is available, the applicant does not require the Court's prior permission to file it. Further, since an offence under Section 138 is bailable, the court directed that the applicant may surrender before the trial court, furnish bail bonds and pursue remedies available in law. There was no ground to exercise inherent jurisdiction to grant the relief sought in the petition.

No liberty or protective order granted; applicant may surrender, seek bail and pursue remedies including filing a discharge application in accordance with law.

Final Conclusion: The petition under Section 482 Cr.P.C. is rejected; the High Court found no error in the revisional court's conclusion that prima facie ingredients of Section 138 were established and that disputed questions of signature are matters of evidence for the trial court, while noting the applicant may surrender, obtain bail and pursue statutory remedies.

Repossession of hypothecated goods - hire purchase/hypothecation ownership remains with financier - willful default - maintainability of criminal proceedings for recovery of hypothecated goods - interim custody conditional on payment - concurrent recourse to specialised recovery forum (DRT) for sale and realization

Hire purchase/hypothecation ownership remains with financier - repossession of hypothecated goods - Lawfulness of PNB's taking possession of the hypothecated vehicle and legal character of ownership under the hypothecation/hire purchase agreement. - HELD THAT: - The borrower admitted procurement of vehicles on loan and execution of the hypothecation deed. The Court applied the settled principle that under a hire purchase/hypothecation arrangement the purchaser remains a trustee/bailee and ownership remains with the financier until full payment. The Bank, after notices and classification of accounts as NPA, lawfully took possession through its recovery agent; such repossession cannot be characterized as a criminal act. The Court relied on the authority recognizing financier's right to repossess goods owned by it where conditions of the higher purchase agreement are violated, holding that the Bank's conduct in taking possession was not illegal. [Paras 9, 10]

PNB's repossession of the hypothecated vehicle was lawful and ownership remained with the financier.

Maintainability of criminal proceedings for recovery of hypothecated goods - interim custody conditional on payment - willful default - Validity of the trial Court's order granting interim custody of the seized vehicle to the borrower on conditions and maintainability of the criminal complaint alleging offences arising from repossession. - HELD THAT: - The trial Court, though not taking cognizance of fraud/entrustment offences, granted interim custody of the vehicle to the borrower subject to payment and other conditions. The High Court found this to be untenable because the borrower was a willful defaulter, the Bank had grounds to resume possession, and the dispute over possession and sale was sub judice before the DRT. In proceedings under Section 323/506 IPC the criminal forum is not the appropriate forum to adjudicate disposal of hypothecated goods; permitting interim custody to a defaulter who repeatedly defaulted and sought indulgence was not bonafide. Accordingly the learned trial Court erred in passing the impugned order. [Paras 11, 12, 13, 14]

The order granting interim custody to the borrower on the specified conditions was not sustainable and the criminal complaint was not a proper vehicle to determine rights of possession of hypothecated goods.

Concurrent recourse to specialised recovery forum (DRT) for sale and realization - Whether the Bank's prayer to sell the vehicles for recovery of dues should be decided by the criminal Court or the Debts Recovery Tribunal. - HELD THAT: - The Court recorded that the Bank had already instituted recovery proceedings before the DRT (O.A. No.328/2018) and that questions of sale and realization of the hypothecated vehicles fall within the remit of the DRT. The High Court therefore declined to entertain the Bank's prayer for sale in the criminal petitions and directed that the matter be determined by the DRT where the claim petition is pending for final disposal. [Paras 2, 15]

Bank's claim for sale and realization of vehicles is to be determined by the DRT in O.A. No.328/2018; the criminal Court is not the forum for that relief.

Final Conclusion: Impugned order dated 28.11.2018 granting interim custody of the hypothecated vehicle to the borrower is quashed and set aside; Bank's repossession was lawful and questions of sale/realization of the vehicles are left to the pending DRT proceedings for decision.