TaxTMI Updates e-Newsletter
Dec 15,2017

Treatment of seized documents and entries in search proceedings - consistency of tribunal's conclusions in closely identical cases - perversity of findings - block assessment under Chapter XIV-B - remand versus final disposal

Consistency of tribunal's conclusions in closely identical cases - treatment of seized documents and entries in search proceedings - Whether the Tribunal was justified in rejecting the assessee's claim based on document No. B-31 when an identical claim by the assessee's co-partner/brother was accepted by the Tribunal in connected proceedings - HELD THAT: - The entries in document No. B-31 recorded jewellery transactions in respect of both the assessee and his brother in the same manner and of the same nature. The Tribunal had upheld the explanation furnished by the brother that the jewellery formed part of the firm's stock-in-trade and was used only for display at a marriage and thereafter returned to stock; that view has attained finality on acceptance by the revenue. There is no distinguishable material or differing factual finding in the assessee's case that would justify a contrary reading of the same document. In these circumstances, the Tribunal's divergent conclusion in the assessee's matter as regards the effect of document B-31 is unsustainable.

Document No. B-31 could not be read differently in the assessee's case; the Tribunal's rejection of the claim was not justified and is set aside.

Perversity of findings - treatment of seized documents and entries in search proceedings - Whether the finding that jewellery weighing 302.450 grams was seized from the assessee during the search proceedings was tenable - HELD THAT: - A remand report and a supporting affidavit from an Income Tax Inspector explicitly state that no jewellery of the stated weight was seized from the assessee during the search. The Tribunal's recorded finding that such jewellery had been seized is therefore contrary to the material placed on record and is perverse. That erroneous finding appears to have been the only possible basis for distinguishing the assessee's case from that of his brother.

The finding of seizure from the assessee is perverse and cannot sustain the addition; it is set aside.

Final Conclusion: Both substantial questions are answered in favour of the assessee and against the revenue; the addition made on account of alleged undisclosed jewellery is set aside in entirety and the appeal is allowed. No costs.

Rejection of books of account under Section 145(3) - best judgment assessment - estimation of income - survey under Section 133A - absence of vouchers as ground for rejection - burden to establish correctness and completeness of books

Rejection of books of account under Section 145(3) - absence of vouchers as ground for rejection - burden to establish correctness and completeness of books - The validity of rejecting the assessee's books of account on the basis of alleged discrepancies and non-production of vouchers. - HELD THAT: - The Court held that the assessing officer's allegation of discrepancy between books produced and registers seized at survey was vague and did not specify the nature or extent of any mismatch. The assessee had maintained OPD and Indoor Patient registers recording receipts and had produced cash book, ledger and bank pass book; no specific defect was pointed out in those books. Mere non-production of vouchers and absence of patient addresses, in the factual matrix of this case, did not justify a finding that the books were incorrect or incomplete. The Court also noted that in a later assessment year the assessee's books were accepted and the assessed income was comparable, reinforcing that the rejection in the year under appeal was based on unfounded suspicion rather than evidence warranting rejection under Section 145(3).

Rejection of the books of account was unfounded and is set aside.

Estimation of income - best judgment assessment - Sustainability of the estimating and enhancement of the assessee's income consequent to the rejection of books. - HELD THAT: - Having held that the books were wrongly rejected, the Court found that the consequential best judgment assessment and enhanced estimate of income could not be sustained. The estimating exercise was founded on the erroneous rejection and was therefore excessive and arbitrary in the circumstances of the case.

The estimation and enhancement of income made following rejection of books cannot be sustained and is set aside.

Final Conclusion: The appeal is allowed: the rejection of the assessee's books of account for A.Y. 2003-04 is set aside and the consequential estimation/enhancement of income is quashed. No order as to costs.

Remission of liability - cessation of liability - Section 41(1) of the Income-tax Act - prima facie observation vs final finding - independent adjudication by appellate tribunal - remand for fresh consideration

Independent adjudication by appellate tribunal - prima facie observation vs final finding - remand for fresh consideration - Whether the Income Tax Appellate Tribunal independently considered the correctness of the Commissioner of Income Tax (Appeals)'s finding on remission/cessation of liability or improperly relied on its earlier prima facie observation, and what relief follows. - HELD THAT: - The High Court examined the Tribunal's impugned order and the Tribunal's earlier order dated 03.4.2012. The earlier order contained only a prima facie observation that there appeared to be a remission of liability which the Assessing Officer ought to examine. The Court found that, in the impugned order, the Tribunal did not render an independent final finding on whether the Commissioner of Income Tax (Appeals) was justified in holding that the liability had been transferred to the SPV, but instead was guided by its earlier prima facie observation. Because the earlier remark was not a conclusive adjudication, the Tribunal was required to undertake fresh, independent consideration of the Assessing Officer's findings and of the Commissioner (Appeals)'s conclusion on reduction/cessation of liability, uninfluenced by the earlier prima facie comment. For these reasons the Court concluded that the matter should be remitted to the Tribunal for fresh consideration where both parties may canvass all factual and legal contentions. [Paras 8, 9]

The Tribunal's order is set aside and the matter is remanded to the Tribunal for fresh consideration uninfluenced by the earlier prima facie observation; parties are permitted to raise all factual and legal contentions.

Final Conclusion: Appeal allowed; impugned Tribunal order set aside and the matter remanded to the Tribunal for fresh consideration on merits without being guided by the earlier prima facie observation; no order as to costs.

Cessation of liability under Section 41 - discharge versus remission of liability - burden on revenue to prove cessation of liability - treatment in profit and loss account not determinative of taxability - related party/subsidiary transactions and separate juristic personality

Cessation of liability under Section 41 - discharge versus remission of liability - burden on revenue to prove cessation of liability - treatment in profit and loss account not determinative of taxability - Whether appropriation of share application money against sale consideration amounted to cessation of liability attracting Section 41 - HELD THAT: - The assessing officer treated the Rs. one crore adjustment as cessation of liability and made an addition under Section 41. The CIT(A) and the Tribunal found, on the material and book entries, that the assessee had adjusted the share application money lying with it against sale consideration due from the purchaser and had thereby discharged the liability. The court accepted that Section 41 applies to remission or cessation of a liability where the assessee's obligation is done away with without consideration passing to the creditor. Here the assessee had a valid claim for sale proceeds and recovered that amount by appropriating the deposit; accounting treatment (non debit to P&L) does not itself create a taxable event. The initial burden lay on the revenue to establish that there was a cessation/remission of liability within the meaning of Section 41, which was not discharged. Consequently Section 41 did not apply.

Appropriation of the share application money against sale proceeds was a discharge of liability and not cessation/remission attracting Section 41; addition deleted.

Related party/subsidiary transactions and separate juristic personality - Whether the fact that the assessee was a wholly owned subsidiary rendered the adjustment liable to taxation or rendered the transaction non genuine - HELD THAT: - The court noted that the assessee and the holding company are separate juristic persons. There was no finding of sham or doubt on the genuineness of the sale transactions; the entries reflecting appropriation were recorded in the assessee's books. On the facts, subsidiary status alone did not convert the adjustment into cessation of liability or otherwise invalidate the transaction. The Tribunal's factual findings on genuineness and appropriation were based on material on record and accepted.

Subsidiary relationship did not affect the conclusion that the appropriation was bona fide and did not attract Section 41.

Treatment in profit and loss account not determinative of taxability - burden on revenue to prove cessation of liability - Whether the assessee's not showing the amount in profit and loss account justified invoking Section 41 or supported revenue's allegation of systematic tax avoidance modus operandi - HELD THAT: - The court observed that omission from the profit and loss account does not, by itself, bring the amount within Section 41. The assessing officer did not doubt the sale transaction nor show receipt of sale proceeds to the extent of the adjustment. Allegations of a modus operandi (supplying at lesser price, holding company funding losses) were not substantiated by the material on record. Given the lack of evidence establishing cessation/remission or a pattern of sham transactions, the revenue failed to meet its burden.

Non posting to P&L and unproven allegations of modus operandi do not justify additions under Section 41 in the absence of proof of cessation/remission.

Final Conclusion: The Tribunal's and CIT(A)'s findings that the Rs. one crore was appropriated against sale consideration and amounted to discharge (not cessation) of liability are supported by the record; the addition under Section 41 was untenable, and the departmental appeal is dismissed.

Maintainability of writ petition challenging assessment order - availability of alternative statutory remedy before Income Tax Appellate Tribunal - disputed questions of fact - principles of natural justice

Maintainability of writ petition challenging assessment order - availability of alternative statutory remedy before Income Tax Appellate Tribunal - disputed questions of fact - Whether the writ petitions challenging the common assessment order are maintainable in view of disputed questions of fact and the existence of an alternative statutory remedy. - HELD THAT: - The Court found that the contentions raised by the petitioners amount to complicated and disputed questions of fact which require examination and proof by the petitioners. Given the existence of a statutory appellate forum under the Income Tax Act, namely the Income Tax Appellate Tribunal, the appropriate course is to pursue the remedy provided under the Act. The Tribunal is the competent forum to call for records, examine factual disputes and determine whether the assessment was made in accordance with law. In these circumstances the High Court declined to adjudicate the factual controversies in writ jurisdiction and held the petitions not maintainable. [Paras 6, 7]

Writ petitions dismissed as not maintainable; petitioners directed to avail remedy before the Income Tax Appellate Tribunal.

Principles of natural justice - disputed questions of fact - availability of alternative statutory remedy before Income Tax Appellate Tribunal - Whether the allegation that assessment proceedings were ex parte and in violation of principles of natural justice should be adjudicated by this Court in writ proceedings or by the statutory appellate authority. - HELD THAT: - The petitioners alleged lack of notice and breach of natural justice in completion of the assessment. The Court observed that such allegations raise factual issues (for example, discrepancies in addresses and the circumstances of notice) which need to be established and adjudicated on evidence. Rather than deciding these factual contentions in writ jurisdiction, the Court held that the same can and should be raised before the Income Tax Appellate Tribunal which can examine the records, appreciate the correctness of the assessment process and determine whether principles of natural justice were complied with. [Paras 4, 5, 6, 7, 9]

Allegations of violative ex parte assessment and breach of natural justice are to be agitated and adjudicated before the Income Tax Appellate Tribunal; High Court will not entertain them in these writ petitions.

Final Conclusion: The writ petitions challenging the assessment order for 2009-10 are dismissed as not maintainable; petitioners are at liberty to raise all factual and legal issues, including alleged breach of natural justice, before the Income Tax Appellate Tribunal.

Priority of secured creditors over government dues - enforcement of security interest - Section 31B introduced by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 - garnishee notice under Section 226(3) of the Income Tax Act, 1961

Priority of secured creditors over government dues - Section 31B introduced by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 - Effect of the 2016 amendment (introduction of Section 31B) on the priority of secured creditors vis-a -vis government dues. - HELD THAT: - The Court accepted the Full Bench decision which construed the Amendment Act, 2016 as introducing Section 31B with a "notwithstanding" clause, operative from 01.09.2016, declaring that the rights of secured creditors to realise secured debts by sale of secured assets shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates. The Full Bench held that the statutory priority applies even to lis pending at the time the amendment came into force, subject to the Insolvency and Bankruptcy Code where applicable. The High Court followed that reasoning, noting that the legislative amendment resolves any doubt and governs parties' rights. [Paras 5, 6]

Section 31B, as introduced by the 2016 Amendment Act, confers priority on secured creditors over government dues and governs pending lis.

Garnishee notice under Section 226(3) of the Income Tax Act, 1961 - enforcement against secured creditor - Whether the impugned garnishee notice issued to the Bank under Section 226(3) of the Income Tax Act can be enforced against the petitioner which is a secured creditor. - HELD THAT: - The petitioner was undisputedly a secured creditor. Applying the principle of priority established by Section 31B and the Full Bench decisions relied upon (including the Court's subsequent ruling in Well Stores), the Court held that attachment or garnishee measures by the Income Tax Department cannot prevail over the rights of a secured creditor entitled to priority in realization of secured debts. Consequently, the impugned garnishee notice issued for recovery of tax dues in relation to the stated assessment years could not be enforced against the petitioner; the Bank may, in any event, set forth facts before the department, but as a matter of law the notice is not sustainable. [Paras 2, 8]

The garnishee notice issued under Section 226(3) cannot be enforced against the petitioner bank, a secured creditor having statutory priority; the impugned notice is set aside.

Final Conclusion: Writ petition allowed; the impugned garnishee notice dated 22.03.2017 issued to the State Bank of India for recovery of tax for assessment years 2005-06 to 2013-14 is set aside in view of the statutory priority conferred on secured creditors by the 2016 Amendment (Section 31B).

Application of section 153A where no incriminating material - evidence seized during search - mandatory nature of prior approval under section 153D - strict construction of taxing statute - invalidation of assessment for non-compliance with mandatory procedural requirement

Application of section 153A where no incriminating material - evidence seized during search - Addition under section 68 made in proceedings under section 153A not permissible where no incriminating material was found or seized during the search. - HELD THAT: - The Tribunal recorded as a fact that no incriminating material against the assessee was found or seized during the search and relied on the jurisdictional High Court decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. In view of sub section (1) of section 153A, notice for six preceding years is mandated where there is a search or requisition, but any addition or disallowance can be made only on the basis of material collected during the search or requisition. The statement of the director relied upon for the addition was recorded later and not during the search; consequently the Assessing Officer could not validly make the addition under section 153A in the absence of incriminating material seized in the search. [Paras 5, 7]

Tribunal correctly held that the addition under section 153A could not be sustained in the absence of incriminating material found/seized during the search.

Mandatory nature of prior approval under section 153D - strict construction of taxing statute - invalidation of assessment for non-compliance with mandatory procedural requirement - Assessment/reassessment passed by an officer below the rank of Joint Commissioner without prior approval of the Joint Commissioner under section 153D is invalid. - HELD THAT: - Section 153D is expressed in negative language commencing with 'No order of assessment or reassessment shall be passed...' which manifests a prohibition against passing such orders except with prior approval of the Joint Commissioner. Decisions of the Supreme Court establish that statutory requirements couched in such negative terms are ordinarily mandatory. As a taxing statute must be strictly construed, the requirement of prior approval under section 153D is absolute. The Tribunal found no evidence on record that such prior approval was obtained where the order was passed by an Income Tax Officer (an officer below the rank of Joint Commissioner); therefore non compliance vitiates the assessment order. [Paras 9, 11]

Tribunal rightly held the assessment to be vitiated for want of prior approval under section 153D.

Final Conclusion: The Tribunal's order dismissing the revenue's appeal was upheld: the addition under section 153A could not be sustained in the absence of incriminating material found during the search, and the assessment was invalid for non compliance with the mandatory prior approval requirement of section 153D; the appeals are dismissed.

Income escaping assessment - Proviso to Section 147 - limitation and non-disclosure requirement - Failure to disclose fully and truly all material facts - Jurisdictional requirement for reopening assessment - Reasons for reopening assessment

Proviso to Section 147 - limitation and non-disclosure requirement - Failure to disclose fully and truly all material facts - Reasons for reopening assessment - Jurisdictional requirement for reopening assessment - Validity of reopening assessment under Section 147/148 after four years where the Assessing Officer relies on alleged failure to disclose fully and truly all material facts. - HELD THAT: - The court held that the proviso to Section 147 operates when reassessment is sought after the four-year period and requires that the Assessing Officer must found his action on the assessee's failure to disclose fully and truly all material facts necessary for assessment. This condition is jurisdictional. The legality of initiation of reassessment is to be judged by the reasons furnished to the assessee and the Assessing Officer is not permitted to improve those reasons later. In the present case the reasons merely recited the statutory language that income had escaped assessment "due to failure on the part of the assessee to disclose fully and truthfully all material facts" without specifying what material facts were not disclosed or explaining how nondisclosure occurred. The order relied on subsequent developments in proceedings of a third party (M/s. Kala Mines and Minerals) but did not identify any particular material fact omitted by the petitioner at the time of the original return or assessment. Mere parroting of the statutory proviso in the reasons is insufficient to constitute the requisite jurisdictional satisfaction. Since the requisite jurisdictional fact (failure to disclose fully and truly all material facts) was not established by adequate reasons, the reopening was beyond jurisdiction and liable to be quashed.

Reopening of assessment and notice dated 30 March 2017 under Section 148/147 quashed as the jurisdictional requirement of failure to disclose fully and truly all material facts was not established by adequate reasons.

Final Conclusion: The petition is allowed; the reassessment notice dated 30 March 2017 is quashed for lack of jurisdiction because the Assessing Officer's reasons do not disclose any particular failure by the assessee to fully and truly disclose material facts, and therefore the proviso to Section 147 is not satisfied.

Characterisation of income as business income or capital gain - Short Term Capital Gains - principle of consistency - res judicata (analogous plea) - appellate fact finding and scope of interference - short holding period, frequency and volume as indicia of trading

Characterisation of income as business income or capital gain - Short Term Capital Gains - short holding period, frequency and volume as indicia of trading - appellate fact finding and scope of interference - Whether the Short Term Capital Gains for the assessment year 20082009 were correctly treated as business income on the facts of that year. - HELD THAT: - The court accepted the Appellate Tribunal's approach that the characterisation must be determined by the facts of the relevant assessment year. The Tribunal and the first appellate authority recorded findings that during the year under appeal the number of scrips transacted and the turnover of purchases and sales had materially increased, and that substantial gains arose from shares held for periods of one to seven days. These factors - short holding period, high frequency and volume - were treated as primary indicia that the activity amounted to trading rather than investment. The High Court found these fact findings to be supported by the record, not perverse, and therefore not open to interference in appeal. [Paras 2, 6]

The STCG in question was rightly treated as business income for assessment year 20082009; the factual findings upholding that characterisation are sustained.

Principle of consistency - res judicata (analogous plea) - characterisation of income as business income or capital gain - Whether the appellant could invoke the principle of consistency or a plea analogous to res judicata to compel the revenue to treat the STCG as capital gains for the year under appeal. - HELD THAT: - The court noted the authorised representative's submission that earlier assessment years on similar facts had been taxed as STCG. The Tribunal correctly held that past treatment and entries in books have a limited role where the facts of the specific assessment year differ. Because the factual matrix for the year under appeal showed materially different transaction patterns (increase in turnover, frequency and very short holding periods), the principle of consistency could not override an assessment based on the actual facts of the relevant year. The High Court endorsed this reasoning. [Paras 2]

The plea of consistency/res judicata analogue was rejected; each assessment year must be decided on its own facts and the revenue was not bound to follow earlier treatment where facts differ.

Final Conclusion: The High Court dismissed the appeal, upholding the Appellate Tribunal's factual findings that justified treating a portion of the STCG as business income for assessment year 20082009, and rejecting the contention that prior treatment under earlier assessments compelled a different result; no substantial question of law arises.

Jurisdictional fact - principles of natural justice - reference to Transfer Pricing Officer - speaking order - assessment transfer for computation of arm's length price

Jurisdictional fact - principles of natural justice - Assessing officer must determine the existence of an international transaction (a jurisdictional fact) and afford the assessee a reasonable opportunity of hearing before referring computation of arm's length price to the Transfer Pricing Officer. - HELD THAT: - Section 92CA(1) contemplates that the assessing officer must form a satisfaction that an assessee has entered into an international or specified domestic transaction before making a reference to the TPO. That statutory requirement engages a jurisdictional fact which the assessing officer is obliged to decide. The obligation to decide such a jurisdictional fact carries with it the requirements of principles of natural justice: the assessee is entitled to a reasonable opportunity of hearing and the assessing officer should record reasons in a speaking order. Even though the departmental circular of March 10, 2016 post-dates the assessing officer's action, the underlying obligations of affording a hearing and recording satisfaction on the jurisdictional question flow from the statute and natural justice and therefore apply in the facts of this case.

The assessing officer acted contrary to law in transferring the matter to the TPO without deciding the jurisdictional fact and without affording a hearing; such action breached principles of natural justice.

Reference to Transfer Pricing Officer - speaking order - assessment transfer for computation of arm's length price - Validity of the Transfer Pricing Officer's notice dated April 16, 2015 and subsequent proceedings and the appropriate remedy. - HELD THAT: - Because the assessing officer failed to decide the jurisdictional fact and did not afford the assessee a hearing before making the reference, the TPO's assumption of jurisdiction and subsequent steps are vitiated. In the interest of justice those steps are set aside and the matter is directed back to the assessing officer to proceed on the basis of the show cause notice and the assessee's reply, in accordance with law and having regard to the departmental circular which prescribes affording a hearing and recording a speaking order.

The TPO's notice dated April 16, 2015 and consequent proceedings are set aside; the assessing officer is directed to reconsider and decide the jurisdictional issue and proceed in accordance with law and the departmental circular.

Final Conclusion: The court set aside the Transfer Pricing Officer's notice and subsequent proceedings for want of prior determination by the assessing officer of the jurisdictional fact and denial of hearing, and directed the assessing officer to decide the issue afresh in accordance with law and the departmental circular; writ petition disposed of with no order as to costs.

Classification of receipts as income from business or income from house property - distinction between rent and warehousing charges - mixed question of fact and law - letting as doing of a business versus exploitation of property by an owner - application of Sultan Brothers principle (businessman's point of view) - absence of substantial question of law

Classification of receipts as income from business or income from house property - distinction between rent and warehousing charges - mixed question of fact and law - letting as doing of a business versus exploitation of property by an owner - application of Sultan Brothers principle (businessman's point of view) - Whether the assessee's receipts from utilization of its premises for warehousing are to be treated as income from business or as income from house property. - HELD THAT: - The Court accepted the Tribunal's factual and legal appraisal that the transactions entered into by the respondent-assessee are governed by its statutory authority and consist of warehousing services rather than a mere letting of immovable property. The Tribunal examined the nature of the contractual relations, the manner in which premises were utilized in the course of warehousing operations, and the characteristics distinguishing warehousing charges from rent, and concluded that the receipts arise from business activity. Applying the principle in Sultan Brothers that classification must be viewed from a businessman's point of view to determine whether letting constitutes carrying on a business or exploitation by an owner, the Court found the Tribunal's conclusion to be a mixed question of fact and law and supported by the material considered. Given that the Tribunal reversed the first appellate authority after addressing relevant facts and the nature of the transactions, the Court held that no substantial question of law arises warranting interference by this Court. [Paras 6, 7, 8, 9]

The receipts in question are to be treated as income from business and not income from house property; the Tribunal's reversal is sustained.

Final Conclusion: Revenue's appeals dismissed; no substantial question of law arises and the income of the respondent-assessee in relation to the specified assessment years is to be treated as income from business rather than income from house property.

Disallowance under section 40(a)(ia) - deduction of tax at source on commission under section 194H - principal-to-principal transactions - agency commission characterised as discount - precedential effect of earlier ITAT and High Court decisions - obligation to deduct tax at source

Disallowance under section 40(a)(ia) - deduction of tax at source on commission under section 194H - principal-to-principal transactions - agency commission characterised as discount - precedential effect of earlier ITAT and High Court decisions - Deletion of the addition made by the Assessing Officer under section 40(a)(ia) in respect of amounts described as agency discount/agency commission. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the transactions between the assessee (publisher) and advertising agencies were on a principal-to-principal basis and that the amounts described as agency commission in the books were in substance discounts allowed by the assessee. Following identical reasoning applied in earlier ITAT decisions for assessment years 2006-07 to 2010-11, and noting that the Delhi High Court dismissed the department's appeal against those ITAT decisions, the Tribunal held that the assessee was not the person 'responsible for paying' commission to the agencies and therefore had no obligation to deduct tax under the provision dealing with tax deduction on commission. Since the statutory duty to deduct TDS under section 194H did not crystallise on the assessee in these circumstances, the AO's disallowance under section 40(a)(ia) could not be sustained. The Tribunal found the facts and legal position in the present year identical to the earlier years and, applying the precedents, declined to interfere with the CIT(A)'s order deleting the addition.

The addition under section 40(a)(ia) in respect of agency discount/commission is deleted; the appeal by the revenue is dismissed.

Final Conclusion: Following earlier ITAT decisions upheld by the High Court, the Tribunal affirms that the payments labelled as agency commission were discounts in a principal-to-principal relationship and, as the assessee was not liable to deduct tax under the provision for commission, the disallowance under section 40(a)(ia) cannot be sustained; the revenue's appeal is dismissed.

Genuineness of expenditure - capital gains computation - addition based on presumption - onus of proof lies on the party alleging fabrication - confirmation by contractor and supporting documentary evidence - notice under section 133(6)

Genuineness of expenditure - onus of proof lies on the party alleging fabrication - confirmation by contractor and supporting documentary evidence - deletion of addition based on presumption - Sustenance of addition of Rs. 1,00,77,656/- made by the AO (confirmed by CIT(A)) by treating construction cost claimed by the assessee as bogus while computing capital gain. - HELD THAT: - The assessing officer disbelieved the assessee's claim of construction expenditure on the basis that a verbal sale agreement and receipt of an advance in June 2009 made it improbable that construction expenses would be incurred thereafter, and therefore treated the claimed expenses as fabricated. The assessee produced bills for materials and a major contractor payment, and the contractor (M/s Axiom Buildwell Pvt. Ltd.) replied to the notice (under section 133(6)) confirming performance of work and receipt of payment, produced its bills, TDS certificates, bank account and tax return. The assessee's audited balance sheet and fixed asset schedule also recorded the building addition. The Revenue did not produce any cogent evidence to demonstrate that the bills or payments were bogus. Applying the settled principle that the burden of proof rests on the party which alleges that an apparent transaction is not real, the Tribunal found the addition to be founded on assumption and presumption without supporting material and therefore unsustainable. [Paras 5, 6]

The addition of Rs. 1,00,77,656/- was deleted and the appeal of the assessee was allowed.

Final Conclusion: The Tribunal deleted the addition made by the AO (confirmed by CIT(A)) treating claimed construction expenditure as bogus, finding that the Revenue failed to discharge the burden of proof and relied on presumption; the assessee's claim supported by contractor confirmation and documentary evidence was accepted and the appeal was allowed.

Interest under Section 234B on alternate minimum tax - Advance tax liability and applicability of Section 208 to AMT - Deeming operation of Section 115JC and its parity with Section 115JB - Scope of rectification under Section 154 - mistake apparent

Interest under Section 234B on alternate minimum tax - Advance tax liability and applicability of Section 208 to AMT - Deeming operation of Section 115JC and its parity with Section 115JB - Whether interest under Section 234B is leviable for failure to pay advance tax in respect of alternate minimum tax payable under Section 115JC and whether advance tax provisions (Sections 207-208) apply to AMT determined under Section 115JC. - HELD THAT: - The Tribunal held that Section 115JC, substituted w.e.f. 01.04.2013 to extend AMT to persons other than companies, is pari materia with the MAT provisions (Section 115JB) and was enacted to ensure payment of tax on book profits by assessees who would otherwise pay little or no tax. The prerequisite for applicability of Section 234B is that the assessee is liable to pay tax under the advance-tax scheme (Section 208) and that the tax is an "assessed tax" as defined. Judicial precedent, including the decision of the Hon'ble Supreme Court in JCIT v. Rolta India Ltd., establishes that interest under Sections 234B and 234C is leviable where advance tax obligations arise from tax determined on book profits under the MAT/AMT provisions. The Tribunal rejected the assessee's submission that deeming provisions in Section 115JC are confined to the purpose of computing tax and cannot attract advance-tax machinery or interest provisions; it noted that excess advance payment based on book profits, if any, is refundable and attracts statutory consequences, and that the statutory scheme contemplates application of advance tax provisions to special code provisions like Sections 115JA/115JB and by parity Section 115JC. The Tribunal therefore found no error in the CIT(A)'s confirmation of the AO's levy of interest under Section 234B for non-payment of advance tax attributable to AMT under Section 115JC. The Tribunal also observed that rectification under Section 154 is confined to mistakes apparent on the record but proceeded to decide the substantive question on merits since the parties had argued it.

Appeals dismissed; interest under Section 234B is payable for default in payment of advance tax in respect of AMT under Section 115JC and advance-tax provisions apply to such AMT.

Final Conclusion: The Tribunal affirmed the levy of interest under Section 234B and held that the advance tax mechanism applies to alternate minimum tax determined under Section 115JC (paralleling the position under Section 115JB); the assessee's appeals are dismissed.

Reopening of assessment - time-barred reassessment - limitation under Section 149 read with Section 150(2) - effect of appellate directions on limitation - merger of orders for determining subject matter of appeal

Reopening of assessment - time-barred reassessment - limitation under Section 149 read with Section 150(2) - effect of appellate directions on limitation - merger of orders for determining subject matter of appeal - Validity of reassessment proceedings initiated by notice under section 148 dated 30.07.2010 for AYs 2001-02 and 2002-03 in view of limitation prescribed by section 149 and the provisos in section 150. - HELD THAT: - The Tribunal examined whether the notice under section 148 issued pursuant to its directions in the related company's case was barred by the time limits in section 149 or saved by section 150. Section 149 fixes the outer periods for issuance of a notice under section 148, while section 150(1) permits issuance of notices to give effect to appellate or revisional directions notwithstanding section 149. However, section 150(2) limits the scope of that saving: no assessment, reassessment or recomputation in consequence of appellate directions can be made where, at the time the order which was the subject matter of appeal/reference/revision was made, such action could not lawfully have been taken because of any other provision limiting the time for assessment. The Tribunal accepted the construction that where directions are given by the Tribunal, the order which was the subject matter of appeal is the order of the first appellate authority (CIT(A)) and that the time for limitation must be reckoned as on the date of that order. Applying that principle, the Tribunal found that the CIT(A)'s order in the companion company's case was dated 15.07.2009 and, on that date, the six year period from the end of the relevant assessment years had already expired for AY 2001 02 and AY 2002 03. Consequently, reassessment in consequence of the appellate directions was barred by section 150(2) read with section 149, and the reopening and reassessments were quashed. Because the reopening was held time barred, the Tribunal declined to adjudicate the substantive addition made under section 69 as that ground became infructuous. [Paras 5, 6]

Reopening and reassessments for AYs 2001-02 and 2002-03 are barred by limitation under section 149 read with section 150(2) and are quashed; consequential merit challenge to the addition is rendered infructuous.

Final Conclusion: The appeals are allowed: the reassessment proceedings initiated by notice dated 30.07.2010 for AYs 2001-02 and 2002-03 were time barred under section 149 read with section 150(2), the reassessments are quashed and the challenge to the addition was not adjudicated as it became infructuous.

Exemption from payment of cost recovery charges - prospective operation of exemption - relating-back of grant to date of application - performance benchmarks for exemption - condition of no outstanding charges - role of jurisdictional Commissioner under review procedure

Exemption from payment of cost recovery charges - prospective operation of exemption - relating-back of grant to date of application - condition of no outstanding charges - Whether the exemption granted by order dated 15.12.2015 should operate only prospectively from the date of that order or should relate back to the date of the petitioners' application of 12.04.2013 - HELD THAT: - The circular dated 10.04.2013 set out performance norms and procedures: eligibility required meeting prescribed volume/value and document norms in each of the preceding two financial years, the exemption was stated to be 'prospective', and 'no cost recovery charges should be outstanding'. Para 6 prescribed that the jurisdictional Commissioner would review facilities and send proposals within 60 days and thereafter annually in April. The Court construed the term 'prospective' in clause (b) as not intended to deny relief for the period during which an application, made in conformity with the circular, was being processed by the Commissioner and concerned departments. Administrative processing time, including annual April reviews, is contemplated by the circular and does not supply an automatic bar to relating the exemption to the date of a bona fide application. Clause (c)'s requirement that no charges be outstanding cannot be read so as to render nugatory a relating-back where the applicant was never informed that non-payment during processing would disqualify consideration; if the department intended that recurring deposits continue pending decision, that position should have been communicated. In the facts, the petitioners satisfied the performance benchmarks, the departmental processing caused delay, and the petitioners were not warned their application would not be entertained for non-payment; furthermore, the department ultimately granted exemption on merits. Consequently, making the exemption effective only from the date of the order was erroneous and the exemption should be effective from the date of the application, 12.04.2013. [Paras 18, 19, 20, 21, 22]

The condition in the impugned order making the exemption effective only from the date of the order is struck down; the exemption is held to be available from the date of the application, 12.04.2013, and amounts paid by the petitioners are ordered to be refunded subject to the terms set out by the Court.

Final Conclusion: Writ petition allowed. The Chief Commissioner's condition that the exemption operate only prospectively from 15.12.2015 is set aside; exemption is deemed effective from the petitioners' application dated 12.04.2013 and amounts paid under protest are to be refunded by 15.04.2018 or thereafter with simple interest at 7.5% per annum as directed.

Prima facie mismanagement and conduct of affairs against public interest - prima facie case for relief under Section 242(4) of the Companies Act, 2013 - interim suspension of directors - interim injunction restraining alienation, mortgage or creation of charge over assets - appointment of nominee directors subject to judicial approval - interim directions subject to compliance with higher court orders

Prima facie mismanagement and conduct of affairs against public interest - prima facie case for relief under Section 242(4) of the Companies Act, 2013 - The affairs of Respondent No.1 company prima facie are not being conducted in accordance with the Companies Act and are against large public interest, justifying interim relief under Section 242(4). - HELD THAT: - The Tribunal recorded that substantial payments by large numbers of home buyers and depositors remained unutilised, construction had not commenced, and numerous irregularities were indicated by earlier inspection directed on 06.10.2016. Having considered the material and the opinion formed on the original file, the Bench found a prima facie case that the company's affairs were not being conducted in accordance with the Companies Act and that relief under Section 242(4) was warranted in the larger public interest. [Paras 3]

A prima facie case of mismanagement and public interest breach was found and interim relief under Section 242(4) was justified.

Interim suspension of directors - The current directors (Respondents No.2 to 9) were suspended and restrained from acting as directors of Respondent No.1 company on an interim basis. - HELD THAT: - Relying on the prima facie finding of mismanagement and public interest concerns, the Tribunal directed interim suspension of the current board members named as Respondents No.2 to 9. The suspension was ordered as an interim protective measure pending further proceedings and investigation initiated by the earlier Tribunal order. [Paras 5]

Respondent No.2 to 9 were suspended and restrained from acting as directors of Respondent No.1 company interimly.

Interim injunction restraining alienation, mortgage or creation of charge over assets - All respondents were restrained from alienating, mortgaging, creating charge, lien or interest in properties owned by them personally or by the company until completion of the inspection/investigation directed earlier. - HELD THAT: - As a protective measure to preserve assets for the large number of affected home buyers and depositors and to safeguard the subject matter of the investigation ordered on 06.10.2016 (which remained incomplete due to non-cooperation), the Tribunal issued an interim injunction restraining any alienation or encumbrance of the company's or respondents' properties until conclusion of the investigation. [Paras 5]

An interim restraint was placed on alienation, mortgage or creation of any charge, lien or interest on properties of the respondents or the company.

Appointment of nominee directors subject to judicial approval - nominee directors' antecedents and eligibility to be placed before the Tribunal - The applicant was permitted to appoint up to ten nominee directors on the board of Respondent No.1 company subject to the Tribunal's approval after filing antecedents and affidavits. - HELD THAT: - To facilitate interim management consistent with the protective measures, the Tribunal allowed the applicant to appoint ten nominee directors, provided a full list with antecedents and an affidavit of a responsible officer was filed so the Bench could examine their antecedents, eligibility and qualifications. The appointments were made provisional and expressly remained subject to the Tribunal's subsequent approval. [Paras 5]

The applicant may appoint ten nominee directors on the company's board subject to the Tribunal's scrutiny and approval upon filing required particulars and affidavits.

Interim directions subject to compliance with higher court orders - binding effect of Supreme Court directions - The interim order of the Tribunal was made subject to compliance with directions previously issued by the Supreme Court, and any newly constituted board would be bound by those Supreme Court directions. - HELD THAT: - On mention of interlocutory orders passed by the Supreme Court in related bail proceedings and deposits ordered therein, the Tribunal clarified that its forenoon order would remain subject to compliance with all directions of the Supreme Court. The Bench further directed that any new Board constituted pursuant to its order would also be bound to obey the directions of the Supreme Court, which are binding on all authorities. [Paras 8]

The Tribunal's interim directions were made subject to and must be complied with in accordance with the directions of the Supreme Court; any newly constituted board is likewise bound by those directions.

Final Conclusion: Notice was ordered returnable on 20th December 2017; interim reliefs were granted including suspension of specified directors, restraint on alienation of assets, and permission to appoint up to ten nominee directors subject to Tribunal approval, all subject to compliance with existing Supreme Court directions.

Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 - admission of corporate insolvency petition and appointment of Interim Resolution Professional - general authorisation of bank officers as authorised representative for initiation of insolvency proceedings - use of the expression "Power of Attorney" not determinative where instrument is in substance an authorisation - effect of defect in Authorised Representative particulars in Form I - opportunity to cure - treatment of secured creditor observations as not relevant to admission under Section 7

Substitution of parties - petition for substitution allowing Shri Sumeet Ahuja to be substituted as appellant and transposing M/s Paramshakti Steels Ltd through IRP as second respondent - HELD THAT: - The Appellate Tribunal allowed the petition for substitution filed by Mr. Sumeet Ahuja and directed that he be substituted as appellant and that M/s Paramshakti Steels Ltd through the Interim Resolution Professional be transposed as the second respondent, with the appellant to make necessary corrections in the cause title. The interlocutory application I.A. No.860 of 2017 was disposed of accordingly.

Petition for substitution allowed; I.A. No.860 of 2017 disposed of

Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 - general authorisation of bank officers as authorised representative for initiation of insolvency proceedings - use of the expression "Power of Attorney" not determinative where instrument is in substance an authorisation - application admission and appointment of IRP - challenge on competency of signatory - whether the Section 7 application filed by the bank officer described under an instrument as a 'Power of Attorney' was incompetent and required rejection - HELD THAT: - Relying on the reasoning in M/s Palogix Infrastructure Pvt Ltd v. ICICI Bank (as cited in the judgment), the Tribunal held that where a financial creditor has generally authorised its officer to conduct legal proceedings, the denomination of the instrument as a "Power of Attorney" does not alter its character as an authorisation. Such an authorised officer qualifies as the Authorised Representative for filing applications under Sections 7, 9 or 10 of the I&B Code. The Court noted that defects in particulars of the Authorised Representative in Form I do not warrant rejection of the application; instead, the applicant may be given time to produce board resolutions or cure defects. Applying this principle to the present case, the application filed by the Deputy General Manager of the bank, though described as under a Power of Attorney, was in substance an authorisation and therefore competent. Observations in the impugned order treating the respondent as a 'secured creditor' were held to be irrelevant to the question of admission, and no opinion was expressed on that aspect. [Paras 5, 6]

Challenge to competence of signatory rejected; appeal against admission under Section 7 dismissed

Final Conclusion: The petition for substitution was allowed. On the merits, the appeal against the Adjudicating Authority's admission of the Section 7 application, grant of moratorium and appointment of IRP was dismissed: an officer authorised by the financial creditor (even where the instrument is styled a "Power of Attorney") can act as the Authorised Representative for filing under the I&B Code, and minor defects in representation particulars are curable.

Pre-existing dispute - plausible dispute test - Section 9(3)(c) bank certificate requirement - Section 9(2)(b) disclosure of winding-up notice - summary jurisdiction under IBC

Pre-existing dispute - plausible dispute test - There exists a pre existing dispute between the Operational Creditor and the Corporate Debtor which precludes initiation of CIRP by summary adjudication under Section 9 of IBC, 2016. - HELD THAT: - The Tribunal found that the Corporate Debtor had, prior to the Section 8 notice and CIRP petition, disputed the claim by replying to the winding up/statutory notice and raising specific contentions about deficient services (insufficient illumination and electrical defects) relating to the hoardings. The defence was held to be plausible and not a patently feeble or frivolous assertion; in light of the test set out by the Supreme Court in Mobilox Innovations (P.) Ltd. v. Kirusa Software Private Limited , a plausible dispute, even if not finally adjudicated, is sufficient to defeat a summary petition under Section 9. The Tribunal therefore concluded that the dispute existed on the pleadings and could not be resolved in summary proceedings.

Petition cannot be maintained as a summary proceeding because a plausible pre-existing dispute exists between the parties.

Section 9(3)(c) bank certificate requirement - The bank certificate produced by the Operational Creditor did not comply with the mandatory requirements of Section 9(3)(c) and therefore could not sustain the petition. - HELD THAT: - The Tribunal observed that the certificate from the bankers, produced belatedly, failed to disclose the amount of unpaid liability as required by the statutory mandate. Because the certificate did not conform to the prescribed contents, it could not be relied upon to establish the debt for the purposes of initiating CIRP under Section 9. The defect in the banker's certificate weighed against acceptance of the petition on the face of the record.

Bank certificate non-compliant with Section 9(3)(c) vitiated the Operational Creditor's claim and contributed to dismissal of the petition.

Section 9(2)(b) disclosure of winding-up notice - summary jurisdiction under IBC - Failure to disclose the prior statutory winding up notice and the Corporate Debtor's reply in the affidavit filed under Section 9(3)(b) was a material non-disclosure undermining the petition. - HELD THAT: - The Tribunal noted that the Operational Creditor's affidavit and application did not disclose the winding up notice issued and the reply received from the Corporate Debtor, contrary to the requirement to disclose pre-existing disputes and relevant communications. This omission, together with the existence of the dispute on service quality, meant the Tribunal could not fairly exercise summary jurisdiction to adjudicate the claim. Given these material non-compliances and the disputed factual matrix, the petition could not be allowed to proceed.

Material non-disclosure of the winding-up notice and reply, together with the disputed facts, precluded adjudication by summary process and warranted dismissal of the petition.

Final Conclusion: The petition under Section 9 is dismissed (without costs) because a plausible pre-existing dispute exists and the bank certificate and disclosures required under Section 9 were defective, rendering the claim unsuitable for summary adjudication under IBC, 2016.

Sanctioned scheme - deemed approved resolution plan under section 31(1) of the Insolvency and Bankruptcy Code, 2016 - absence of power in adjudicating authority to review or extend a sanctioned scheme under the IBC - consequences of failure to implement a sanctioned scheme (liquidation) - effect of SICA Repeal Act notifications on BIFR proceedings and sanctioned schemes

Absence of power in adjudicating authority to review or extend a sanctioned scheme under the IBC - Tribunal's power to extend the term of a scheme sanctioned by BIFR after commencement of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal held that although a scheme sanctioned by BIFR is continued in force by the SICA Repeal provisions and notifications, the Insolvency and Bankruptcy Code, 2016 (and Part II as incorporated) does not vest the adjudicating authority with any express power to review or extend an already sanctioned scheme. Earlier powers under the Companies Act (e.g., section 262(6) of the Companies Act, 1956) enabling review or modification of sanctioned schemes have been omitted or are not carried forward into the IBC. In absence of a statutory provision in the IBC authorising the Tribunal to extend the term of the sanctioned scheme, the Tribunal is not competent to grant the relief of extension sought by the petitioner or to modify the sanctioned scheme's term. [Paras 15, 18, 19]

Application for extension of the period of the sanctioned scheme cannot be allowed because the Tribunal lacks statutory power under the IBC to review or extend a BIFR-sanctioned scheme.

Effect of SICA Repeal Act notifications on BIFR proceedings and sanctioned schemes - sanctioned scheme - deemed approved resolution plan under section 31(1) of the Insolvency and Bankruptcy Code, 2016 - Legal effect of the SICA Repeal Act and subsequent Government notifications on existing BIFR-sanctioned schemes. - HELD THAT: - The Tribunal noted the legislative and executive measures: the SICA Repeal Act, 2003 abated BIFR proceedings but preserved sanctioned schemes by saving them under section 5; subsequent notifications (including the one dated 24/5/2017) clarified that a scheme sanctioned under SICA shall be deemed to be an approved resolution plan under section 31(1) of the IBC. While the sanctioned scheme thus continues to be binding as an approved resolution plan, the operative scheme is to be dealt with under the IBC framework, subject to the limitations of powers available under the Code. [Paras 7, 9, 16, 17, 18]

BIFR-sanctioned scheme is preserved and deemed an approved resolution plan under section 31(1) of the IBC by the notifications, but its treatment is governed by the IBC and the limits of powers therein.

Consequences of failure to implement a sanctioned scheme (liquidation) - Consequence of the corporate applicant's failure to make its net worth positive within the term of the sanctioned scheme. - HELD THAT: - The Tribunal observed that the sanctioned scheme's period has expired and the company has not turned its net worth positive within that period as recorded by BIFR's earlier order and the audited accounts. Such failure to comply with the terms of the sanctioned scheme amounts to violation of the scheme, and having regard to the IBC framework and absence of power to extend the scheme, the appropriate consequence is initiation of liquidation proceedings in accordance with the provisions of the IBC. [Paras 4, 6, 11, 20]

The company's inability to make its net worth positive within the sanctioned scheme period is treated as breach of the scheme and liquidation proceedings shall follow under the IBC.

Final Conclusion: The petition for extension of the BIFR-sanctioned scheme is not maintainable because the Tribunal has no statutory power under the IBC to review or extend such schemes; sanctioned schemes are preserved and deemed approved resolution plans under section 31(1) of the IBC by statute/notifications, and since the corporate applicant failed to render its net worth positive within the scheme period, liquidation proceedings are the prescribed consequence under the IBC.

Jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code - maintainability of applications by operational creditors during corporate insolvency resolution process - application under Sections 43 to 49 (preferential and undervalued transactions) during resolution and liquidation - scope and effect of moratorium on proceedings and reliefs under the Code - rights of operational creditors to submit claims and participate in insolvency proceedings - duty of the Interim Resolution Professional / Resolution Professional to examine transactions and take action - limitation on Tribunal directing third parties or financial creditors to commence proceedings

Jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code - application under Sections 43 to 49 during resolution process - Maintainability of the Application under Section 60(5)(c) and whether allegations of preferential/undervalued transactions can be entertained during the corporate insolvency resolution process. - HELD THAT: - The Tribunal held that questions of law or fact arising out of or in relation to the insolvency resolution or liquidation proceedings fall within the jurisdiction conferred by Section 60(5)(c). Allegations concerning screening or diversion of assets and transactions potentially avoidable under Sections 43 to 49 are relevant to the resolution process because those provisions expressly contemplate action by the Resolution Professional during resolution and, if necessary, applications to the Adjudicating Authority. Accordingly, the Application raising such allegations is maintainable and may be examined by the Interim Resolution Professional / Resolution Professional; if the Resolution Professional forms an opinion to invoke Sections 43, 45 or 49 he may approach the Adjudicating Authority, and if the Resolution Professional fails to act the Applicant may approach the Adjudicating Authority later when a resolution plan is considered or in liquidation. [Paras 14, 16]

The Application is maintainable under Section 60(5)(c); allegations pertinent to Sections 43-49 can be examined during the resolution process and acted upon by the Resolution Professional or brought before the Adjudicating Authority.

Rights of operational creditors to submit claims and participate - impleading of creditors as parties to insolvency proceedings - Whether the Applicant (an operational creditor) must be impleaded as a party to CP (IB) No. 19 of 2017. - HELD THAT: - The Tribunal noted that an operational creditor is entitled to file claims, raise objections before the Resolution Professional, and participate in meetings of the Committee of Creditors; there is thus a right of audience. There is no provision in the Code that mandates impleading of creditors other than the applicant who triggered the insolvency petition. Given the operational creditor's statutory rights to participate and be heard, a formal order of impleading the Applicant as a party was unnecessary in the facts and circumstances. [Paras 13, 15]

No formal order of impleading the Applicant as a party is required; the Applicant may participate and submit claims/objections through the Resolution Professional.

Scope and effect of moratorium - limitations on Tribunal directing third parties to act - duty of Interim Resolution Professional to recover assets - procedural reliefs versus investigative reliefs during moratorium - Availability of the specific reliefs sought in prayers (d) to (k), including directions to financial creditors to initiate proceedings against related entities, orders against group companies, clarification of earlier orders, garnishee/intervention directions, summoning guarantors, and production of books. - HELD THAT: - The Tribunal rejected or declined to grant the specific reliefs sought at this stage for the reasons stated: it cannot direct financial creditors to commence insolvency proceedings against other entities; it lacks jurisdiction to pass orders affecting third-party group companies; the moratorium prohibits grant of reliefs that would interfere with pending proceedings (including auction or enforcement proceedings) or investigative steps during the moratorium; ordering examination on oath of guarantors or compelling production of books by the Adjudicating Authority at this stage was inappropriate. However, the Tribunal emphasised that the Interim Resolution Professional / Resolution Professional must take all reasonable steps to recover amounts due to the corporate debtor and secure books and records; the Applicant may place relevant materials before the Resolution Professional, who if warranted may invoke the Adjudicating Authority under the Code. Several reliefs were thus refused or deferred, and certain matters were directed to be pursued through the Resolution Professional or in appropriate fora once the moratorium or procedural constraints permit. [Paras 15, 16]

Reliefs (d)-(k) are not granted: directions to financial creditors or orders against third-party group entities are not permissible; moratorium precludes several reliefs now; the Interim Resolution Professional/Resolution Professional must investigate and take steps to recover assets and may approach the Adjudicating Authority under relevant sections if required.

Final Conclusion: The Application filed by the operational creditor is maintainable under Section 60(5)(c) and allegations regarding preferential or undervalued transactions may be examined by the Interim Resolution Professional/Resolution Professional who may approach the Adjudicating Authority under the Code; a formal impleading of the Applicant is unnecessary, several specific reliefs sought are refused or deferred (many being barred by moratorium or outside the Tribunal's present scope), and the Resolution Professional is directed to consider the material and take appropriate steps while the Committee of Creditors resolves the stalemate over appointment of the Resolution Professional.

Binding nature of appellate tribunal directions on lower authorities - remand for fresh consideration for non-compliance with appellate directions - obligation to consider and apply binding precedents - time-bar limitation and requirement of specific averment for invoking extended period

Binding nature of appellate tribunal directions on lower authorities - remand for fresh consideration for non-compliance with appellate directions - obligation to consider and apply binding precedents - Whether the Commissioner (Appeals) complied with the directions of the Tribunal and considered the petitioner's additional submissions and the law referred to by the Tribunal. - HELD THAT: - The Tribunal had directed the Commissioner (Appeals) to consider questions of law, facts and evidence including the decision in Uniworth Textiles Ltd. and to pass appropriate orders after affording opportunity to the appellant. The petitioner made the prescribed pre-deposit and filed additional written submissions urging consideration of the Uniworth Textiles Ltd. ratio and contending that extended period could not be invoked in the absence of specific averment of suppression. The Commissioner (Appeals), however, did not address the plea on limitation nor apply or consider the Uniworth Textiles Ltd. decision as required by the Tribunal's directions. In view of the principle that directives of superior authorities are binding on subordinate authorities, the impugned order fails to comply with the mandatory directions given by the Tribunal and cannot stand. The matter therefore requires remand for fresh consideration in terms of the Tribunal's directions. [Paras 6, 7, 8, 10, 11]

Impugned order set aside and the matter remitted to the Commissioner (Appeals) for fresh consideration in compliance with the Tribunal's directions, including consideration of the Uniworth Textiles Ltd. decision and the petitioner's additional submissions.

Time-bar limitation and requirement of specific averment for invoking extended period - Whether the demand for periods beyond one year is time-barred in the absence of specific averment of suppression or fraudulent intention. - HELD THAT: - The petitioner submitted that the order-in-original lacked any specific averment of suppression or fraudulent intention and relied on the Uniworth Textiles Ltd. principle that extended limitation cannot be invoked without such particularised allegation. The Commissioner (Appeals) did not adjudicate this contention on the merits when deciding the stay petition on remand. Given the omission, the question as to time-bar and applicability of extended limitation requires fresh consideration by the Commissioner (Appeals) in the light of the petitioner's submissions and the binding precedents noted by the Tribunal. [Paras 7, 8, 11]

Question of limitation and whether demand beyond one year is time-barred remitted to the Commissioner (Appeals) for fresh decision after hearing and consideration of the petitioner's specific submissions.

Final Conclusion: Writ petition allowed; impugned order quashed and matter remitted to the Commissioner (Appeals) to decide afresh in accordance with the Tribunal's directions and binding precedent, afford personal hearing to the petitioner preferably within 30 days, and ensure the petitioner specifies clearly the parts of any Notification relied upon; no costs.

Writ of Prohibition - production of records - adjudication after examination of documents - exemption from service tax for Haj and Umra pilgrimage services - opportunity of personal hearing / show cause notice - prematurity of writ remedy

Writ of Prohibition - production of records - prematurity of writ remedy - Whether the court should grant a writ of prohibition restraining the second respondent from holding enquiry, assessment or raising demand without permitting production and examination of records - HELD THAT: - The Court held that seeking a writ of prohibition at the interlocutory stage was premature. Petitioners, being registered service providers, are bound to produce the records called for so that the second respondent may peruse them and determine the nature of services rendered. Two factual/legal aspects require examination by the second respondent: (i) services rendered to persons other than Haj/Umra pilgrims and the manner of assessment of such transactions; and (ii) services rendered to Indian Haj and Umra pilgrims visiting Saudi Arabia and the applicability of claimed exemptions. Absent perusal of the documents and an adjudicatory exercise, the Court declined to pre-empt the statutory process. The court further directed that on production of records, if the second respondent considers any services liable to service tax, a show cause notice and an opportunity of personal hearing must be afforded. [Paras 10, 12, 14, 16, 18]

Writ petitions dismissed as premature; petitioners directed to produce records and cooperate with the second respondent, who shall examine the documents and proceed in accordance with law, affording opportunity of personal hearing if liability is considered.

Exemption from service tax for Haj and Umra pilgrimage services - adjudication after examination of documents - opportunity of personal hearing / show cause notice - Whether the services rendered to Indian Haj and Umra pilgrims are exempt from service tax under the CBEC notifications and whether reliance on the Delhi High Court decision precludes inquiry - HELD THAT: - The Court did not decide the merits on the applicability of the Notifications dated 30.10.2009 and 20.8.2014 or the effect of the Delhi High Court decision relied upon by the petitioners. It held that the question must be determined by the second respondent after perusal of the records and through a proper adjudication process in which the petitioners will have an opportunity to explain and canvass the said contentions. The Court expressly refrained from expressing any view on the merits and remitted the matter for determination in accordance with law. [Paras 11, 12]

Merits of claimed exemptions and applicability of precedent not decided; remitted to the second respondent for adjudication after examination of records and after giving petitioners opportunity of personal hearing.

Final Conclusion: The writ petitions seeking prohibition are dismissed as premature. Petitioners must produce the records to the second respondent within the time directed, who shall examine and adjudicate the taxability or exemption claims in accordance with law, affording the petitioners a show cause notice and opportunity of personal hearing if any liability is proposed; no coercive action shall be taken in the interim.

Business Auxiliary Service (BAS) - Service tax liability on commission for marketing/agent services - Service provider versus principal-agent characterisation for tax liability - CENVAT credit entitlement for tax paid by a sub-agent/input service - Remand for verification of documentary evidence for credit/quantification - Penalty mitigation for bona fide belief

Business Auxiliary Service (BAS) - Service tax liability on commission for marketing/agent services - Service provider versus principal-agent characterisation for tax liability - Appellant liable to pay service tax on the entire commission received from the principal for marketing services. - HELD THAT: - The Tribunal found no documentary proof that the alleged sub-agent received commission directly from the principal; invoices produced show the sub-agent invoiced the appellant, and the appellant treated amounts paid to the sub-agent as input services. Accepting the appellant's alternative plea that the sub-agent was acting as agent of the principal would be inconsistent with the record. Consequently the services rendered fall within Business Auxiliary Service and the appellant remains liable to discharge service tax on the total commission received. [Paras 6, 7]

Liability for service tax upheld on the entire commission received by the appellant.

CENVAT credit entitlement for tax paid by a sub-agent/input service - Remand for verification of documentary evidence for credit/quantification - Eligibility of appellant to avail CENVAT credit on service tax paid by the sub-agent is remanded to the adjudicating authority for verification and quantification. - HELD THAT: - Documents and challans were produced to claim CENVAT credit for service tax allegedly paid by the sub-agent. The Tribunal observed that those documents require verification. For the limited purpose of ascertaining whether the appellant is entitled to CENVAT credit and for adjusting any benefit in quantification of demand, the matter is remitted to the adjudicating authority to examine the authenticity and applicability of the documents and to compute the consequent adjustment, if any. [Paras 8]

Matter remanded to the adjudicating authority to verify entitlement to CENVAT credit and to quantify benefit, if any.

Penalty mitigation for bona fide belief - Penalties imposed on the appellant are set aside on the basis of a bona fide belief and reasonable cause under the statutory mitigation provision. - HELD THAT: - The appellant had discharged part of the service tax, maintained accounts, and asserted a bona fide belief that the sub-agent's payment or status absolved it of liability for that portion. The Tribunal found these facts demonstrate a reasonable cause for non-payment and that invoking the statutory provision permitting mitigation is appropriate. Consequently, penalties imposed by the lower authorities are not sustained. [Paras 9]

Penalties set aside and appeal allowed in part on this ground.

Final Conclusion: The appeal is partly allowed: the appellant remains liable for service tax on the entire commission received; penalties are set aside on account of bona fide belief; and the question of entitlement to CENVAT credit for tax paid by the sub-agent is remanded to the adjudicating authority for verification and quantification.

Service tax liability on transportation - no double taxation where tax already deposited - payment by service provider discharges recipient's liability - CBEC Circular No.341/18/04-TRU (PT) dated 17.12.2004 - paragraph 5.7

Service tax liability on transportation - payment by service provider discharges recipient's liability - CBEC Circular No.341/18/04-TRU (PT) dated 17.12.2004 - paragraph 5.7 - no double taxation where tax already deposited - Demand of Rs. 36,33,920/- (approximately) confirmed against the appellant for service tax on goods transport agency services - HELD THAT: - The records show that for the period January 2005 to December 2005 the appellant had received goods transport agency services from M/s RTCL. The adjudicating authority confirmed a demand against the appellant but it is an admitted factual position that RTCL had collected and deposited the service tax with interest to the Government and that such payment was accepted by Revenue by an independent adjudication (Order No.21/2007 (MRR) dated 31.10.2007) and confirmed in revision. Paragraph 5.7 of CBEC Circular No.341/18/04-TRU (PT) dated 17.12.2004 provides that where service tax due on transportation of a consignment has been paid or is payable by a person liable to pay service tax, the same amount should not be charged from any other person to avoid double taxation. Applying that principle, since the tax liability (with interest) stood discharged to the Government by the GTA service provider and the factual finding that RTCL had collected and paid the amounts remains undisputed, the demand confirmed against the appellant in respect of that amount is unsustainable. The Tribunal therefore set aside the confirmed demand. The Tribunal further held that having set aside the demand on the factual basis that the tax with interest was discharged by RTCL, there was no reason to uphold interest charged on the appellant. [Paras 7, 8, 9]

Demand of Rs. 36,33,920/- set aside as tax (with interest) was discharged by the GTA; interest charged on the appellant not upheld.

Final Conclusion: The appeal is allowed; the impugned order is set aside to the extent challenged - the confirmed demand in respect of the amount paid to the Government by the GTA is quashed and no interest is leviable on the appellant.

Clandestine removal of goods - burden of corroborative evidence - demand based on shortage of inputs - Standard Input Output Norms (SION) - process loss / average wastage - reliability of production records and cross-examination - presumption versus proof - shortage of some inputs insufficient to prove clandestine manufacture

Clandestine removal of goods - burden of corroborative evidence - demand based on shortage of inputs - presumption versus proof - Whether the demand of duty, interest and penalty for alleged clandestine manufacture and removal could be sustained solely on the basis of shortages found during stock verification. - HELD THAT: - The Tribunal found that the Revenue relied primarily on shortages in raw materials and finished goods recorded at the time of visit but produced no corroborative evidence to show actual manufacture and clearance of final products without payment of duty. There is no material demonstrating procurement of other requisite inputs, identity of buyers, transport or sale of the alleged clandestinely manufactured goods, or other independent indicia such as payment/receipt records or extra consumption (electricity/labour) to connect the shortages to clandestine removals. Absent such corroboration, the demand rested on assumptions and presumptions; the Tribunal applied the settled principle that mere shortages detected during an inspection do not ipso facto prove clandestine manufacture and clearance and that the burden on Revenue requires cogent evidence. In view of these findings the impugned demand and penalty, being based on uncorroborated inference, were held unsustainable. [Paras 21, 28]

Demand and penalty confirmed by the adjudicating authority set aside; appeal allowed.

Shortage of some inputs insufficient to prove clandestine manufacture - absence of shortage of other inputs - burden of corroborative evidence - Whether shortage of certain raw materials, without shortage or explanation regarding other inputs necessary for production, can substantiate a charge of clandestine manufacture and removal. - HELD THAT: - The Tribunal observed that the appellant used multiple inputs in manufacture and Revenue did not allege or prove shortage of those other inputs nor the source by which they could have been procured to effect clandestine manufacture. Precedents and the facts on record were held to show that shortage of some materials alone cannot sustain a finding of clandestine manufacture unless linked by evidence to the use and disposal of finished goods. Consequently the charge of clandestine manufacture based solely on partial shortages was rejected. [Paras 12, 22, 25]

Charge of clandestine manufacture and removal not sustainable on the basis of shortages of only some raw materials; demand set aside on this ground.

Standard Input Output Norms (SION) - process loss / average wastage - reliability of production records and cross-examination - Whether reliance on SION and computed average wastage/production to quantify demand was permissible and whether the production-related statements and records could be relied upon by Revenue. - HELD THAT: - The Tribunal held that Revenue's reliance on SION and an alleged increase in process loss to derive clandestine production was not sustainable in the circumstances. The ex-director's statements and production sheets were subject to cross-examination, and the Tribunal found that the cross-examination diluted the probative value of the statements relied upon by Revenue. The appellant's explanation about changes in product quality (leading to higher wastage) and the failure of the adjudicating authority to give credence to those explanations undermined the average-based computation. Further, the demand was raised on an aggregate/average basis despite multiple different final products being manufactured, rendering the calculation legally unsound. [Paras 26, 27]

Demand founded on SION-based average wastage and aggregate production calculations held unsustainable; such computation set aside.

Final Conclusion: In the absence of independent and corroborative evidence linking the recorded shortages to actual clandestine manufacture and clearance, and having found the SION/average-based quantification and related production evidence unreliable, the Tribunal set aside the impugned demand, interest and penalty and allowed the appeal with consequential relief, if any.

Rejection of claim of exemption on payments to sub-contractors - claim of exemption under Rule 8(5)(c) of the Tamil Nadu Value Added Tax Rules, 2007 - order devoid of reasons is liable to be set aside - remand for fresh consideration - opportunity of personal hearing - requirement to pass a speaking order on merits

Rejection of claim of exemption on payments to sub-contractors - claim of exemption under Rule 8(5)(c) of the Tamil Nadu Value Added Tax Rules, 2007 - remand for fresh consideration - Finding of the Assessing Officer rejecting the petitioner's claim of exemption for payments made to sub-contractors - HELD THAT: - The Court applied the reasoning in its earlier order in W.P.No.28684 of 2017 and found that the Assessing Officer's conclusion on denial of exemption was not sustained. For AY 2012-13 the petitioner furnished records for all listed sub-contractors; for AY 2011-12 details from some sub-contractors were awaited; and AY 2013-14 had already been remanded. The Court held that the impugned findings rejecting exemption claims must be set aside and remitted to the Assessing Officer for fresh consideration limited to this issue. The remand requires the Assessing Officer to re-examine the claim under Rule 8(5)(c) in accordance with law and the materials produced by the petitioner. [Paras 4, 6, 7]

Findings rejecting the exemption claims set aside and matters remitted to the first respondent for fresh consideration (including the already remanded 2013-14 assessment).

Order devoid of reasons is liable to be set aside - opportunity of personal hearing - requirement to pass a speaking order on merits - Reliefs and procedural directions to be followed on remand - HELD THAT: - The Court reiterated the principle that an assessment order must contain reasons and that orders lacking reasons are liable to be quashed. Pursuant to the remand, the Assessing Officer is directed to afford the petitioner an opportunity of personal hearing and to redo the assessment on the specified head by passing a speaking order on merits and in accordance with law. Further, the petitioner is granted 15 days to file an appeal before the Appellate Deputy Commissioner (CT), Cuddalore, and if so presented, the papers shall not be returned on the ground of limitation. [Paras 7]

Assessing Officer to afford personal hearing and pass a speaking order on merits; petitioner granted 15 days to file appeal and appeal papers shall not be returned on limitation grounds.

Final Conclusion: Writ petitions partly allowed: the Assessing Officer's findings rejecting exemption for payments to sub-contractors are set aside and the matters (including AY 2013-14) are remitted for fresh consideration confined to that issue; the Assessing Officer must afford personal hearing and pass a speaking order on merits; petitioner given 15 days to file appeal and appeal papers shall not be returned for limitation; no costs.

Independent application of mind - assessment completed on inspection report - quashing of assessment order for lack of reasons - remit for fresh consideration - opportunity of personal hearing - penalty under Section 27(3)(c) of the Tamil Nadu Value Added Tax Act, 2006

Assessment completed on inspection report - independent application of mind - quashing of assessment order for lack of reasons - Validity of the assessment order completed solely on the basis of the Enforcement Wing's inspection proposal without independent consideration of the assessee's objections. - HELD THAT: - The assessing authority acted as a mere rubber stamp by completing assessment solely because the petitioner was said to have accepted omissions at the time of inspection, without independently examining the explanations filed by the petitioner. The practice of accepting the inspection wing's proposal as conclusive is impermissible; the Assessing Officer, vested with quasi judicial functions, must apply independent mind and consider the objections on merits before reaching a conclusion. Earlier decisions of this Court in Madras Granites (P) Ltd. and Narasus Roller Flour Mills , and subsequent authorities cited in the impugned order, support the principle that assessments made merely on the basis of the inspection wing's report and without reasons are unsustainable. Applying these principles, the impugned assessment is illegal and devoid of reasons and must be set aside. [Paras 5, 6, 10]

Impugned assessment order quashed for lack of independent application of mind and absence of reasons.

Remit for fresh consideration - opportunity of personal hearing - peruse documents and independent conclusion - penalty under Section 27(3)(c) of the Tamil Nadu Value Added Tax Act, 2006 - Disposition of the matter on remand and directions regarding fresh consideration including levy of penalty. - HELD THAT: - The matter is remitted to the Assessing Officer for fresh consideration. On remand the respondent is directed to afford the petitioner an opportunity of personal hearing, peruse the documentary material and objections filed, and arrive at an independent conclusion without being solely guided by the Enforcement Wing's report. Although reliance was placed on precedents including Nokia India Private Ltd. regarding the requirements for invoking Section 27(3)(c), the Court's order mandates fresh adjudication on merits, which would include consideration of whether the basic ingredients for levy of penalty are satisfied in accordance with law. [Paras 11]

Matter remitted to respondent to rehear and decide afresh after giving personal hearing and independent consideration; no costs.

Final Conclusion: Writ petition allowed; impugned assessment order set aside and remitted to the Assessing Officer for fresh consideration after affording personal hearing and independently examining the petitioner's objections, with directions to decide on levy of penalty, if any, in accordance with law.

Limitation on initial assessment - interpretation of Rule 5(6) of the Central Sales Tax (Pondicherry) Rules, 1967 - scope of Rule 5(10) - reassessment of escaped turnover within five years - mandatory production of Form C for concessional CST rates - strict and literal construction of taxing statutes

Limitation on initial assessment - interpretation of Rule 5(6) of the Central Sales Tax (Pondicherry) Rules, 1967 - strict and literal construction of taxing statutes - Validity of assessment orders dated 06.01.2016 issued a decade after the end of the years 2004-2005 and 2005-2006 - HELD THAT: - The Court held that Rule 5(6) must be read conjunctively with the opening phrase "after the close of the year" and the duty cast on the assessing authority to scrutinise accounts and make the assessment for the preceding year (paras 42-49). The words in Rule 5(6) require the assessing authority to complete the initial assessment in the year following the close of the financial year for which returns are submitted; the provision cannot be read to permit initial assessments "at any time" long after the year in question (paras 46-50). Applying established principles of literal construction in taxing statutes, the Court rejected the revenue's contention that there is no time-limit for first assessments and concluded that permitting initial assessments after a decade would frustrate the statutory scheme and enable unduly protracted assessment/reassessment cycles (paras 51-53). The assessment orders for 2004-05 and 2005-06 therefore did not conform to Rule 5(6) and were liable to be set aside (para 54). [Paras 50, 51, 52, 53, 54]

Assessment orders dated 06.01.2016 for 2004-2005 and 2005-2006 are not in conformity with Rule 5(6) and are set aside.

Scope of Rule 5(10) - reassessment of escaped turnover within five years - reassessment v. initial assessment - Whether Rule 5(10) (five-year limit for reassessment) applied to the assessment orders in question - HELD THAT: - The Court distinguished Rule 5(10), which permits re-assessment of turnover assessed at a lower rate within five years from the expiry of the year to which the return relates, from an initial assessment under Rule 5(6) (para 38). The impugned orders were held to be first assessments and not reassessments; consequently the five-year reassessment limitation in Rule 5(10) could not be invoked by the revenue to justify a delayed initial assessment (paras 24, 38, 52-53). The Court observed that allowing initial assessment at any time would subvert the temporal constraints that Rule 5(10) seeks to impose on reassessment (para 52). [Paras 24, 38, 52, 53]

Rule 5(10)'s five-year limitation for reassessment does not validate the delayed first assessments; the impugned orders are first assessments and cannot be sustained on the basis of Rule 5(10).

Mandatory production of Form C for concessional CST rates - acceptance of declaration forms on appeal - Lawfulness of taxing inter state sales at higher rates for lack of Form C and the receipt/acceptance of Form C late or on appeal - HELD THAT: - The Court recorded the settled statutory position that concessional CST rates are available only on production of original declaration forms (Form C) within the prescribed time and that appellate authorities should admit late forms only upon sufficient cause being shown (paras 16, 22, 29). While the revenue contended the dealer had not produced all requisite Forms C despite ample opportunities and extensions, the Court emphasised that even if non-production could justify taxation at higher rates, the assessing authority must act within the temporal limits imposed by Rule 5(6). Because the initial assessment orders were set aside as time barred in law, the related imposition of higher tax for non-production of Forms C could not be sustained in those orders (paras 22-24, 28, 54). The Court nevertheless noted the legal principle (from the Apex Court) that appellate authorities admit late Forms C only upon satisfaction of sufficient cause (para 29). [Paras 23, 24, 28, 29, 54]

The imposition of higher tax for non-production of Form C in the impugned, time barred assessment orders cannot be sustained; acceptance of late Forms C remains subject to the requirement of sufficient cause as recognised by higher authority.

Final Conclusion: Both Tax Case Revisions are allowed; the assessment orders dated 06.01.2016 for the years 2004-2005 and 2005-2006 are set aside as not being in conformity with Rule 5(6) of the Central Sales Tax (Pondicherry) Rules, 1967; substantial questions of law are answered in favour of the assessee; no costs.