TaxTMI Updates e-Newsletter
Dec 19,2022

Reopening of assessment under Section 147/148 - Pre-issuance inquiry and opportunity under Section 148A - Compliance with procedural requirements for issuing notice under Section 148 - Reliance on departmental intelligence/data portals (CRIU/VRU/INSIGHT) - Prior approval of the specified authority - Judicial review at the pre-assessment stage

Pre-issuance inquiry and opportunity under Section 148A - Compliance with procedural requirements for issuing notice under Section 148 - Reliance on departmental intelligence/data portals (CRIU/VRU/INSIGHT) - Prior approval of the specified authority - Judicial review at the pre-assessment stage - Validity of the order passed under Section 148A(d) and the notice issued under Section 148 insofar as procedural compliance and sufficiency of material for reopening for AY 2018-2019 - HELD THAT: - The Court examined whether the Assessing Officer complied with the statutory process under Section 148A prior to issuance of notice under Section 148 and whether there was material suggesting escape of income for AY 2018-2019. The show-cause notice identified information from the INSIGHT portal (High Risk CRIU/VRU) and specific entries in the records of M/s. Panveer Trading Private Limited indicating sales shown to the assessee aggregating to the amount in question. The Assessing Officer considered ITRs and carried out financial analysis of the alleged supplier, observed abnormal jump in turnover with negligible PBT and absence of place of business, and treated the supplier as a paper entity providing accommodation entries; these findings formed the tangible material relied upon for reopening. The assessee replied by way of a Chartered Accountant's certificate denying transactions and requested supply of underlying information, but did not produce books of account, bank statements, or seek a personal hearing despite the show-cause notice providing an opportunity. The Court noted that the CBDT guidelines and communications relied upon by the assessee were issued after the AO's order and were not before the AO when the order was passed. On the record, the AO considered the assessee's reply and recorded reasons, and there was prima facie material to proceed; sufficiency or ultimate correctness of the material is to be tested in assessment proceedings and not at the pre-assessment/notice stage. Consequently, the writ Court should not interfere at this premature stage where statutory requirements under Section 148A have been followed insofar as there was tangible material and prior approval was obtained to issue the notice. [Paras 29, 31, 32, 33]

The order under Section 148A(d) and the notice under Section 148 were held to be validly issued; there was prima facie material to reopen for AY 2018-2019 and no interference with the Single Judge's dismissal of the writ petition.

Final Conclusion: Writ appeal dismissed; the High Court upheld the Single Judge's conclusion that the Assessing Officer had prima facie material and complied with the procedural requirements to issue notice under Section 148 for AY 2018-2019, and declined to entertain pre-assessment merits at the interlocutory stage.

Primary society - Deduction under Section 80P(2)(b)(i) - Classification as Apex or Central society under the Tamil Nadu Co-operative Societies Act - Remand for fresh examination by the Assessing Officer

Primary society - Deduction under Section 80P(2)(b)(i) - Classification as Apex or Central society under the Tamil Nadu Co-operative Societies Act - Remand for fresh examination by the Assessing Officer - Whether the appellant is a "primary society" for the purposes of Section 80P(2)(b)(i) and thereby entitled to the deduction claimed, having regard to the definitions in the Tamil Nadu Co-operative Societies Act. - HELD THAT: - The Tribunal and lower authorities decided the claim on merits without examining whether the appellant falls within the statutory meaning of a "primary society" as defined in Section 2(21) of the Tamil Nadu Co-operative Societies Act, nor whether it is an "Apex Society" or a "Central Society" under Sections 2(5) and 2(9) of that Act. The High Court held that the question of the appellant's status under the State Act is material to entitlement under Section 80P(2)(b)(i) and that the absence of any examination of that statutory classification by the Assessing Officer, the Appellate Commissioner or the Tribunal vitiates the impugned orders. Consequently, the Court set aside the Tribunal's orders and remitted the matter to the Assessing Officer for re-examination strictly in the light of the definitions contained in the Tamil Nadu Co-operative Societies Act, directing a fresh order to be passed within six months and allowing the appellant to produce documents to substantiate its status before the Assessing Officer. [Paras 36, 38, 39, 40, 41]

Impugned Tribunal orders set aside and the question whether the appellant is a primary society (or an apex or central society) remitted to the Assessing Officer for fresh examination and decision within six months.

Final Conclusion: The Tribunal's orders are set aside and the appeals are disposed by remitting the issue of the appellant's status under the Tamil Nadu Co-operative Societies Act (and consequent entitlement under Section 80P(2)(b)(i)) to the Assessing Officer for fresh examination and a decision within six months; no costs.

Book profit - provision for bad and doubtful debts - Section 115JA - computation of book profits - retrospective amendment to the Explanation to Section 115JA - remand for fresh consideration

Book profit - provision for bad and doubtful debts - retrospective amendment to the Explanation to Section 115JA - remand for fresh consideration - The Tribunal's order allowing the assessee was set aside and the matter remitted to the Tribunal to re-examine whether provision for doubtful advances (bad and doubtful debts) must be added back while computing book profit under Section 115JA in the light of clause (g) to the Explanation to Section 115JA inserted retrospectively from 01.04.1998 by Finance (No.2) Act, 2009. - HELD THAT: - The court observed that clause (g) was inserted into the Explanation to sub-section (2) of Section 115JA by Finance (No.2) Act, 2009 with effect from 01.04.1998 and that this amendment was not considered by the Supreme Court in Commissioner of Income Tax v. HCL Comnet Systems & Services Ltd., which dealt with an earlier assessment year. Given that the present dispute relates to Assessment Year 1998-99, the amendment is material to the issue and must be examined. Consequently, the impugned order of the Tribunal, which followed the pre-amendment Supreme Court view, was set aside and the matter remitted to the Tribunal for de novo consideration in the light of the inserted clause (g). The court expressly declined to answer the substantial question of law and left all issues open to be canvassed before the Tribunal. [Paras 19, 20, 21, 22]

Impugned order set aside; matter remitted to the Tribunal to re-examine afresh in light of the retrospective insertion of clause (g) to the Explanation to Section 115JA, with liberty to parties to canvass all issues and direction to finalise within six months.

Final Conclusion: The High Court set aside the Tribunal's order and remitted the appeal for fresh consideration in view of the retrospective amendment to the Explanation to Section 115JA (with effect from 01.04.1998), leaving the substantial question of law undecided and directing the Tribunal to dispose of the matter afresh within six months.

Principles of natural justice - request for adjournment/time to respond to a show cause notice - preliminary hearing under Section 148A(b) and decision under Section 148A(d) - revival of a previously set aside order if no response is filed - assumption of jurisdiction under Section 149(1)(b) as a question of fact - previous approval of the specified authority before issuance of notice under Section 148

Principles of natural justice - request for adjournment/time to respond to a show cause notice - preliminary hearing under Section 148A(b) and decision under Section 148A(d) - previous approval of the specified authority before issuance of notice under Section 148 - Whether the order dated 29.03.2022 passed under Section 148A(d) is vitiated for non-consideration of the petitioner's request for time to respond to the show cause notice. - HELD THAT: - The show cause notice under Section 148A(b) required a response by 28.03.2022. The petitioner sought 15 days' time on 28.03.2022 to collate materials. The assessing authority did not advert to or decide that request nor put the petitioner on notice of its rejection, and proceeded to pass the impugned order on 29.03.2022. This failure to consider the request amounted to a breach of principles of natural justice. Consequently the order dated 29.03.2022 is set aside. The petitioner is granted two weeks from receipt of the court's order to file its reply, the portal shall be enabled for that purpose, and on receipt the time frame under Section 148A(d) will be triggered requiring the officer to decide, by a speaking order with previous specified authority's approval, whether to issue a notice under Section 148. The court further clarified that if no response is filed within the stipulated period, the impugned order will revive and its consequences will follow. [Paras 4, 6, 7, 8]

Impugned order dated 29.03.2022 set aside for violation of natural justice; petitioner granted two weeks to reply; officer to reconsider under Section 148A(d) by a speaking order with prior specified authority's approval; failure to reply revives the impugned order.

Assumption of jurisdiction under Section 149(1)(b) as a question of fact - Challenge to the authorities' assumption of jurisdiction under Section 149(1)(b). - HELD THAT: - The petitioner contested the satisfaction of the precondition under Section 149(1)(b). The High Court declined to adjudicate this factual contention at writ stage and observed that it is a question of fact to be established before the assessing authorities. No further determination on this point was made by the court. [Paras 5]

Left open for determination by the authorities; the court expresses no opinion on the factual question of satisfaction of Section 149(1)(b).

Final Conclusion: Writ petition disposed: the order dated 29.03.2022 under Section 148A(d) is set aside for breach of natural justice; petitioner given two weeks to file a reply and portal to be enabled; authorities to decide afresh under Section 148A(d) by a speaking order with prior specified authority's approval; the jurisdictional challenge under Section 149(1)(b) is remitted for factual determination by the authorities; no costs.

Deductibility of expenditure under Section 37(1) - Corporate Social Responsibility expenditure - prospective operation of statutory amendment - clarificatory Explanation to statutory provision - binding nature of CBDT circulars

Prospective operation of statutory amendment - clarificatory Explanation to statutory provision - Explanation 2 to Section 37(1) operates prospectively with effect from 1.4.2015 and does not apply to the assessment years before 2015-16. - HELD THAT: - The Court examined the Finance (No.2) Act, 2014 and the memorandum to the Finance Bill which expressly stated that the amendment inserting Explanation 2 would take effect from 1st April, 2015 and apply to assessment year 2015-16 and subsequent years. The CBDT Circular dated 21.01.2015 reiterates the same commencement and applicability. On this factual and legislative material, the Court concluded that Explanation 2 is prospective in operation and therefore not applicable to the assessment years 2013-14 and 2014-15 in issue. The circular and legislative memorandum remove any doubt as to commencement and applicability of the amendment. [Paras 10, 11, 12]

Explanation 2 is prospective from 01.04.2015 and does not apply to AYs 2013-14 and 2014-15.

Deductibility of expenditure under Section 37(1) - Corporate Social Responsibility expenditure - binding nature of CBDT circulars - Deduction of CSR expenditure under Section 37(1) for the assessment years 2013-14 and 2014-15 was properly sustained by the Tribunal. - HELD THAT: - Section 37(1) permits deduction for expenditure laid out wholly and exclusively for the purposes of business or profession, subject to exclusions. Because Explanation 2 (which would deem CSR expenditure not to be incurred for business) does not apply to the years in question, the Tribunal was entitled to examine whether the particular expenditures met the tests under Section 37(1). The Court observed that the CBDT circular and the legislative memorandum are authoritative on the amendment's applicability; circulars are binding on the revenue. In view of the prospective commencement and the Tribunal's reasoning, the Revenue's contention that the Tribunal erred in allowing the deduction was rejected. [Paras 9, 11, 13, 14, 15]

Tribunal correctly allowed the CSR-related expenditures as deductible under Section 37(1) for AYs 2013-14 and 2014-15.

Final Conclusion: The appeals are dismissed; Explanation 2 to Section 37(1) is prospective with effect from 01.04.2015 and the Tribunal did not err in allowing the CSR expenditures as deductions under Section 37(1) for assessment years 2013-14 and 2014-15.

Processing of income-tax return - outer time limit for processing under Section 149(1) - authority to process return before expiry of the outer limit - mandamus under Article 226 - requirement to furnish reasons for non-processing - CBDT Instruction on timely refunds

Processing of income-tax return - outer time limit for processing under Section 149(1) - authority to process return before expiry of the outer limit - mandamus under Article 226 - The Assessing Officer may process an income-tax return before the expiry of the nine-month outer period prescribed by Section 149(1); the statutory outer limit does not create a bar to earlier processing, and the availability of the nine-month period does not, by itself, preclude relief under Article 226 where appropriate. - HELD THAT: - The Court accepted that Section 149(1) prescribes an outer period of nine months for the Assessing Officer to process a return filed under Section 199(1), but held that this is an outer limit and does not prevent the A.O. from processing the return earlier. Consequently, the mere existence of the nine-month period does not preclude the Court from issuing directions in exercise of constitutional jurisdiction where the facts justify earlier processing. The Court considered the petitioner's grievance that a substantial amount by way of TDS is held by the Revenue and observed that withholding such amounts may prejudice the assessee and affect its business. The determinative legal principle is that statutory outer time limits for assessment or processing are not intended to prevent earlier action and, where early processing is withheld, the A.O. must be able to state cogent reasons for not processing the return earlier. [Paras 3]

The outer nine-month limit is not a bar to earlier processing; the A.O. may process the return earlier and the availability of the statutory period does not automatically preclude interlocutory relief under Article 226.

Requirement to furnish reasons for non-processing - CBDT Instruction on timely refunds - Respondent No.9 (Director of Income Tax, CPC, Bengaluru) was directed to file an affidavit stating the date of filing of the return, whether it is under process, and if not, the reasons for non-processing; the matter was remanded for this limited verification. - HELD THAT: - In view of the petitioner's claim of a substantial refundable amount and its anxiety at non-release of the refund, the Court directed a factual verification by requiring Respondent No.9 to file an affidavit giving precise details as to when the return was filed, the present processing status, and reasons for any delay in processing. The direction is procedural and confined to obtaining information and reasons; the Court indicated that failure to file the affidavit may invite appropriate orders on the next date. The CBDT instruction aiming at earlier refunds was noted as part of the context for expecting timely action. [Paras 4]

Respondent No.9 to file an affidavit specifying filing date, processing status and reasons for non-processing on or before the next listing; the matter is listed for further consideration.

Final Conclusion: The Court held that the nine month period under Section 149(1) is an outer limit and does not prohibit earlier processing of the return; it directed Respondent No.9 (CPC Bengaluru) to file an affidavit stating the date of filing, processing status and reasons for any non-processing, and listed the matter for further hearing.

Revisional jurisdiction under section 263 of the Income Tax Act - prejudice to the interest of the Revenue - verification of books of account and bank statements - explanation of cash deposits during demonetisation period - acceptance of addition and telescoping

Revisional jurisdiction under section 263 of the Income Tax Act - prejudice to the interest of the Revenue - Whether the Principal Commissioner of Income Tax was justified in invoking revisional jurisdiction under section 263 by treating the assessment order as erroneous and prejudicial to the interest of the Revenue. - HELD THAT: - The Tribunal examined the record of assessment and the material placed before the Assessing Officer and found that the AO had carried out enquiries, verified bank account statements, VAT returns, tax audit report and books of account, and framed the assessment after applying a gross profit ratio and making an addition which the assessee accepted. The Pr. CIT's view that the assessment was passed without enquiries or verification was contrary to the material on record. In these circumstances the conditions for invoking revisional jurisdiction - existence of an error in the assessment order coupled with prejudice to the revenue - were not satisfied. The Tribunal concluded that exercise of power under section 263 was unjustified and quashed the revisional order, thereby upholding the AO's assessment order.

Order of the Principal Commissioner under section 263 quashed; the assessment order upheld.

Verification of books of account and bank statements - explanation of cash deposits during demonetisation period - acceptance of addition and telescoping - Whether the AO had adequately verified the sources of cash deposits made during the demonetisation period and whether the assessee's explanation and records justified the deposits and the assessment treatment. - HELD THAT: - The Tribunal noted that the assessee had furnished bank statements, audited financials, Form 3CD disclosing yield at 69%, cash book entries, VAT returns and other supporting material during assessment proceedings; the AO verified these documents and recorded satisfaction while making the addition for low gross profit which the assessee accepted. The Tribunal accepted the assessee's explanation that cash withdrawn prior to demonetisation and subsequent cash sales accounted for the deposits, and found merit in the contention that the AO had, in fact, verified the matters relied upon. Given that the AO had examined and accepted the explanations and documents, the Pr. CIT's adverse conclusion on these issues was not sustainable.

Findings of the AO regarding cash deposits and supporting records sustained; no fault found warranting revisional interference.

Final Conclusion: The appeal is allowed; the revisional order passed by the Principal Commissioner under section 263 is quashed and the assessment order for Assessment Year 2017-18 is upheld.

Revisionary jurisdiction under section 263 - Order erroneous and prejudicial to the interests of revenue - Duty of assessing officer to make requisite enquiries / investigation - Substantial expansion and deduction under section 80IC - Setting aside assessment order for fresh adjudication by the Assessing Officer

Revisionary jurisdiction under section 263 - Order erroneous and prejudicial to the interests of revenue - Duty of assessing officer to make requisite enquiries / investigation - Substantial expansion and deduction under section 80IC - Setting aside assessment order for fresh adjudication by the Assessing Officer - Validity of the Pr. CIT's exercise of powers under section 263 in setting aside the assessment order and remanding the issue of deduction under section 80IC to the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal found that the assessee claimed deduction under section 80IC for Unit IV (claimed amount noted in audit report) but failed to place on record before the Assessing Officer the documentary support (Form 10CCB and other material) showing substantial expansion during the assessment proceedings. The Pr. CIT issued show cause and, after considering the material on record and the assessee's submissions, concluded that the assessment order passed under section 143(3) suffered from lack of requisite enquiries and verification and was therefore erroneous and prejudicial to the interests of revenue. The Tribunal accepted the Pr. CIT's reasoning that an assessing officer is not merely a passive adjudicator but has a duty to make enquiries where circumstances demand, and failure to do so can render an assessment order revisable under section 263. Because there was no document on record to demonstrate that the AO had examined the 80IC claim during assessment, the Pr. CIT was justified in setting aside the assessment and directing the AO to grant a reasonable opportunity to the assessee to produce documents and then pass a fresh assessment order in accordance with law. The Tribunal found no infirmity in the revisionary order and upheld the remand. [Paras 6, 7]

The order passed by the Pr. CIT under section 263 setting aside the assessment order dated 28.03.2016 and remanding the matter to the Assessing Officer for fresh adjudication was upheld and the assessee's appeal dismissed.

Final Conclusion: Appeal dismissed. The Pr. CIT's revisionary order under section 263 holding the assessment order to be erroneous and prejudicial for lack of requisite enquiries into the section 80IC deduction was upheld; the matter is remitted to the Assessing Officer to reconsider after affording the assessee opportunity to produce relevant documents.

Deduction under section 80P(2)(d) - income by way of interest or dividends from investments with any other co-operative society - Interpretation of 'co-operative society' to include cooperative banks carrying on banking business - Non-applicability of section 80P(4) to a Primary Agricultural Credit Society - Deduction under section 80P(2)(a)(i) - profits and gains from carrying on banking business or providing credit facilities to members

Deduction under section 80P(2)(d) - income by way of interest or dividends from investments with any other co-operative society - Interpretation of 'co-operative society' to include cooperative banks carrying on banking business - Assessee entitled to deduction under section 80P(2)(d) for interest earned on deposits with Burdwan Central Co-operative Bank Ltd. - HELD THAT: - The Tribunal examined section 80P(2)(d), which grants deduction in respect of income by way of interest or dividends derived by a co operative society from its investments with any other co operative society. Although Burdwan Central Co operative Bank Ltd. holds a licence under the Banking Regulation Act, 1949 to carry on banking business, it remains fundamentally a co operative society permitted to do banking. Section 80P(2)(d) uses the expression 'co operative society' without excluding cooperative banks. The Tribunal therefore interpreted the term 'co operative society' in section 80P(2)(d) to include cooperative societies which carry on banking business as cooperative banks, and held that interest earned by the assessee from such a cooperative bank falls within the sweep of section 80P(2)(d) and is deductible. The Tribunal reversed the contrary view of the CIT(A) and allowed the claimed deduction. [Paras 13]

Interest of the assessee earned from deposits with Burdwan Central Co operative Bank Ltd. is deductible under section 80P(2)(d).

Non-applicability of section 80P(4) to a Primary Agricultural Credit Society - Section 80P(4) does not exclude the assessee (a Primary Agricultural Credit Society) from claiming the benefit of section 80P. - HELD THAT: - Section 80P(4) provides that the provisions of section 80P shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co operative agricultural and rural development bank. The assessee is a Primary Agricultural Credit Society and not a cooperative bank; accordingly, section 80P(4) is not attracted and does not bar the assessee from claiming deduction under section 80P to the extent allowable by the relevant provisions. [Paras 11]

Section 80P(4) is not applicable to the assessee; the assessee remains eligible to claim deduction under section 80P.

Deduction under section 80P(2)(a)(i) - profits and gains from carrying on banking business or providing credit facilities to members - Interest income from deposits with the cooperative bank is not allowable under section 80P(2)(a)(i). - HELD THAT: - Section 80P(2)(a)(i) refers to profits and gains of business attributable to carrying on the business of banking or providing credit facilities to its members. The Tribunal found that the disputed interest income arose from investments of idle funds in fixed and recurring deposits with a cooperative bank and was not interest received from the assessee's members in the course of providing credit facilities. Therefore, that income cannot be treated as profits and gains from banking or credit provision to members for the purposes of section 80P(2)(a)(i). [Paras 12]

The interest income is not deductible under section 80P(2)(a)(i).

Final Conclusion: The Tribunal admitted the new legal ground and, on interpretation of section 80P, held that (i) section 80P(4) does not bar the Primary Agricultural Credit Society from claiming the deduction; (ii) the interest income is not deductible under section 80P(2)(a)(i) as not derived from members; but (iii) such interest income qualifies for deduction under section 80P(2)(d) as income from investments with another co operative society (the cooperative bank). The appeal is allowed.

Revisional powers under section 263 - Explanation 2(a) to section 263 - lack of inquiry versus inadequate inquiry - plausible view of the Assessing Officer - erroneous and prejudicial to the interests of the revenue - application of mind - disallowance under section 14A

Revisional powers under section 263 - Explanation 2(a) to section 263 - lack of inquiry versus inadequate inquiry - plausible view of the Assessing Officer - application of mind - erroneous and prejudicial to the interests of the revenue - Validity of the Principal CIT's invocation of revisional powers under section 263 to set aside the assessment order. - HELD THAT: - The Tribunal held that section 263 can be invoked only if the Assessing Officer's order is erroneous and prejudicial to the revenue, which occurs when the AO fails to apply the law rightly or omits necessary enquiries (a case of 'lack of inquiry'), not merely because the Commissioner prefers a different or more elaborate inquiry. The records show that the AO specifically raised the question of disallowance (notice dated 13-12-2017), received the assessee's reply (20-12-2017), examined the issue in the assessment order and made a disallowance under section 14A. The Principal CIT had accepted the explanation on the capital investment issue in the 263 proceedings itself. Reliance on judicial authorities established that where the AO has made enquiries and taken a plausible view after applying his mind, revisional power under section 263 is not exercisable merely to substitute the Commissioner's opinion. The Tribunal found no omission by the AO amounting to lack of inquiry or a legally unsustainable conclusion and therefore concluded that the revisional order was unjustified. [Paras 6]

The Principal CIT's order under section 263 is not sustainable and is set aside; the grounds of appeal are allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2015-16, setting aside the Principal CIT's revisional order under section 263 as the Assessing Officer had made enquiries, applied his mind and taken a plausible view; there was no case of lack of inquiry or an order shown to be erroneous and prejudicial to revenue.

Valuation of shares under Discounted Cash Flow method - taxability of share premium under section 56(2)(viib) - assessing officer's power to change valuation method - reliance on valuation report without independent verification - fair market value determined by net asset value versus DCF - valuation based on management projections and future business prospects

Valuation of shares under Discounted Cash Flow method - taxability of share premium under section 56(2)(viib) - assessing officer's power to change valuation method - reliance on valuation report without independent verification - fair market value determined by net asset value versus DCF - valuation based on management projections and future business prospects - Whether the Assessing Officer was justified in invoking section 56(2)(viib) and substituting the assessee's DCF-based fair market value with a book/net asset value resulting in an addition. - HELD THAT: - The Tribunal held that the assessee adopted a valuation under the Discounted Cash Flow (DCF) method in conformity with the rules governing valuation and that DCF is a recognised methodology intrinsically based on projections and the potential value of future business. The Assessing Officer rejected the DCF valuation solely because actual results did not match projections and did not demonstrate that the methodology itself was incorrect or furnish an alternative fair value. The AO therefore had no power to change the valuation method adopted by the assessee merely because subsequent performance differed from the assumptions underlying the valuation. Reliance on the valuer's statement that no independent verification or due diligence was undertaken did not, without more, justify supplanting the DCF valuation with net asset/book value. The Tribunal followed the precedent that valuation is not an exact science and must be assessed with regard to facts and assumptions prevailing on the date of valuation, and observed that where the methodology is not shown to be improper and no alternative valuation is provided by the Revenue, the addition under section 56(2)(viib) cannot be sustained. The Tribunal therefore upheld the order of the Commissioner (Appeals) deleting the addition. [Paras 5, 6]

The addition made by the AO under section 56(2)(viib) by replacing the assessee's DCF valuation with net asset value is not sustainable; the CIT(A)'s deletion of the addition is upheld.

Final Conclusion: Revenue's appeal dismissed; the Commissioner (Appeals)'s order deleting the addition under section 56(2)(viib) is upheld for AY 2017-18. The assessee's cross-objection is dismissed as infructuous.

Deduction under Chapter VIA conditional on timely filing of return - deduction under Section 80P - power of assessment under section 143(1)(a)(v) to make adjustments in intimation - prospective effect of statutory amendment to assessment machinery

Deduction under Section 80P - deduction under Chapter VIA conditional on timely filing of return - power of assessment under section 143(1)(a)(v) to make adjustments in intimation - prospective effect of statutory amendment to assessment machinery - Sustainability of disallowance of the assessee's claim for deduction under Section 80P in intimation under section 143(1) for A.Y.2018-19 where the return was filed after the due date. - HELD THAT: - The Finance Act, 2018 amended the proviso in Section 80AC to render deductions under Chapter VIA inadmissible unless the return is furnished on or before the due date specified in Section 139(1) with effect from 01.04.2018. However, the machinery provision in Section 143(1)(a)(v) empowering the assessing authority to make adjustments in an intimation to give effect to such disallowance was not amended to include Chapter VIA deductions until the Finance Act, 2021 effective 01.04.2021. Consequently, for A.Y.2018-19 the CPC issuing an intimation under Section 143(1) could not validly disallow a Section 80P claim by way of adjustment under Section 143(1)(a)(v) because the assessment machinery did not then authorise such an adjustment in respect of Chapter VIA deductions. The tribunal therefore held that the disallowance made by CPC in the 143(1) intimation exceeded the power vested in it at the relevant time and could not be sustained, and accordingly vacated the disallowance. [Paras 9, 10, 11]

Disallowance of the Section 80P deduction in the 143(1) intimation for A.Y.2018-19 is unsustainable and is vacated because the machinery provision enabling such an adjustment was introduced only with effect from A.Y.2021-22.

Final Conclusion: Appeal allowed: the disallowance of the assessee's claim for deduction under Section 80P in the intimation under Section 143(1) for A.Y.2018-19 is set aside and the deduction is restored, since the assessment machinery provision necessary to effect such a disallowance was not in force for that assessment year.

Revisionary jurisdiction under Section 263 - Chargeability of anonymous donation under Section 115BBC - Set-off of deficits and carry forward losses against assessed income - Scope of verification permissible in revision where assessment reopened under Section 147

Revisionary jurisdiction under Section 263 - Scope of verification permissible in revision where assessment reopened under Section 147 - Validity of the CIT's exercise of powers under Section 263 in setting aside the assessment framed after reopening under Section 147 - HELD THAT: - The Tribunal held that Section 263(2)'s limitation operates in relation to the original assessment year and that, where an assessment has been reopened and a fresh assessment order passed under Section 143(3) read with Section 147, the revision under Section 263 is confined to issues which were reopened under Section 147. The learned PCIT's order purporting to revisit matters (such as filing of ITR form, non-filing of statutory audit reports, and carry forward/carry back aspects) which were not within the scope of the reopening was beyond the permissible ambit of revision. The Tribunal emphasised that only those issues which formed the subject matter of the reopening (i.e., taxation of alleged cash/anonymous donations) could be examined in revision. Applying this principle, the Tribunal found that several grounds relied upon by the CIT related to matters outside the subject matter of reopening and thus were not open to be revised under Section 263. (See findings and reasoning at paras 16, 17, 18) [Paras 16, 17, 18]

The invocation of Section 263 insofar as it sought to revisit matters beyond the scope of the reopening under Section 147 was not sustainable; the CIT's order on those aspects could not be upheld.

Chargeability of anonymous donation under Section 115BBC - Set-off of deficits and carry forward losses against assessed income - Whether the assessing officer erred in computing income by adding alleged anonymous donations and then allowing set off of the trust's deficit against that addition - HELD THAT: - The Tribunal examined the assessing officer's order and computation. It noted that the AO had in his assessment recorded that the assessee produced names and addresses of contributors and, by that account, the receipts could not be characterised as anonymous under the statutory definition in Section 115BBC(3). Separately, on the question of computation, the Tribunal held that set off of the losses/deficit for the same assessment year against income of that year was not an error merely because the return was filed late; accordingly there was no error in the AO starting computation with the deficit and making the addition of the alleged donation. The Tribunal treated the question of chargeability under Section 115BBC (whether the donation was anonymous) as the core issue arising from the reopening, and observed that as per the AO's own findings the donation could not be treated as anonymous. (See paras 19, 21, 22) [Paras 19, 21, 22]

No error was shown in the AO's computation by allowing set off of the deficit; moreover, on the AO's own findings the receipts could not be treated as anonymous donations under Section 115BBC.

Revisionary jurisdiction under Section 263 - Chargeability of anonymous donation under Section 115BBC - Whether the CIT's conclusion that the assessment order was erroneous and prejudicial to revenue warranted setting aside the AO's order and directing de novo assessment - HELD THAT: - The Tribunal found that the CIT's show cause and revision order did not point out any sustainable error prejudicial to the revenue in respect of the matter which was within the scope of the reopening. The CIT's conclusions primarily rested on matters either outside the reopening or on an incorrect characterisation of the AO's findings. Given that the AO had recorded particulars of donors and the computation of income by setting off the deficit did not involve an illegality, the Tribunal concluded that the CIT had not made out a case for interference under Section 263. Consequently, the revisionary order was without adequate foundation and amounted to non sustainable interference. (See paras 20, 23) [Paras 20, 23]

The CIT's order under Section 263 setting aside the assessment was quashed and the assessee's appeal allowed.

Final Conclusion: The revisionary order passed by the CIT(E) under Section 263 was quashed: revision was impermissibly applied to matters beyond the scope of the reopening under Section 147, no prejudicial error was established in the AO's computation (including set off of the deficit), and the assessing officer himself recorded particulars that precluded treating the receipts as anonymous for the purposes of Section 115BBC; accordingly the appeal of the assessee is allowed.

Applicability of section 68 to sales recorded in books - addition under section 68 as unexplained cash credits - double taxation of same income - rejection of books of account and section 145(3) - demonetisation and deposits of Specified Bank Notes as legitimate sales receipts

Applicability of section 68 to sales recorded in books - addition under section 68 as unexplained cash credits - double taxation of same income - rejection of books of account and section 145(3) - demonetisation and deposits of Specified Bank Notes as legitimate sales receipts - Deletion of the addition made by the Assessing Officer under section 68 of the Act in respect of cash deposits during the demonetisation period - HELD THAT: - The Assessing Officer treated cash deposited during the demonetisation period as unexplained cash credits and added the amount to the assessee's income under section 68. The Tribunal examined the assessment record and the appellate findings that the assessee had maintained audited regular books of account, bills, vouchers and a manual day-to-day stock register, and that copies of sales invoices and stock records were produced before the Assessing Officer. The AO had not rejected the books of account under section 145(3) nor brought any material to show that sales bills were bogus or that sufficient stock did not exist for the sales recorded. Given that the cash receipts were reflected as sales in the trading and profit and loss account and had been offered to tax, treating the same amounts again as unexplained cash credits under section 68 would amount to taxing the same income twice. The Tribunal also noted the factual context of demonetisation (purchase rush after the 8-11-2016 announcement) as supporting the genuineness of cash sales. On these grounds, and having regard to the authorities and reasoning relied upon by the parties, the Tribunal agreed with the CIT(A) that the AO was not justified in making the addition under section 68 and upheld deletion of the addition. [Paras 2, 3]

The addition under section 68 was deleted and the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition made under section 68 in respect of cash deposits during the demonetisation period, concluding that the amounts were recorded as sales in audited books, there was no rejection of books under section 145(3) nor material to show bogus sales, and re-taxation of the same receipts under section 68 would amount to double taxation; accordingly the Revenue's appeal was dismissed.

Levy of late fee under section 234E - Notice under section 200A - Prospective operation of statute - Retrospective operation of statute - Benefit of conflicting decisions to the assessee

Levy of late fee under section 234E - Notice under section 200A - Prospective operation of statute - Benefit of conflicting decisions to the assessee - Deletion of late fee levied under section 234E for TDS returns filed for periods prior to 01.06.2015 - HELD THAT: - The Tribunal examined whether the late fee introduced by amendment w.e.f. 01.06.2015 (chargeable under section 234E) could be levied for TDS defaults occurring before that date where notices under section 200A had been issued. Relying on the Division Bench decision in ICMC Projects Pvt. Ltd. (ITA nos.1361/Del/2021 & others) and the Karnataka High Court decision in Fatehraj Singhvi, the Tribunal held that the amendment operates prospectively and notices/orders imposing fee under section 234E in respect of defaults prior to 01.06.2015 are not maintainable. In the presence of conflicting decisions, the Tribunal applied the principle that the view favourable to the assessee should be followed. No binding precedent favouring the Revenue was placed before the Bench. Consequently the late fee levied for periods prior to 01.06.2015 was directed to be deleted, and the same conclusion was applied to all appeals in the consolidated bunch. [Paras 6, 7, 8]

Late fee under section 234E levied for defaults prior to 01.06.2015 is set aside and directed to be deleted.

Final Conclusion: Assessee's appeals are allowed; the late fee imposed under section 234E in respect of TDS returns for the periods prior to 01.06.2015 is deleted in accordance with the Tribunal's reliance on earlier Division Bench and High Court decisions and the principle favouring the assessee where conflicting precedents exist.

Impleadment under Order 1 Rule 10(2) CPC - necessary party - proper party - dominus litis - disposal of infringing goods under IPR Enforcement Rules - Rule 11 of the IPR Enforcement Rules

Impleadment under Order 1 Rule 10(2) CPC - necessary party - proper party - dominus litis - Rule 11 of the IPR Enforcement Rules - disposal of infringing goods under IPR Enforcement Rules - Application by the Commissioner of Customs for impleadment as a party in the plaintiffs' trademark infringement suit. - HELD THAT: - The court applied the established tests for necessary and proper parties under Order 1 Rule 10(2) CPC as explained by the Supreme Court: a necessary party is one in whose absence an effective decree cannot be passed, and a proper party is one whose presence would enable complete and effective adjudication though no relief may be sought against them. The plaintiffs, as dominus litis, have not sought any relief against the Commissioner; the reliefs claimed are directed against the defendant for trademark infringement and for delivery up/destruction of infringing goods. Rule 11 of the IPR Enforcement Rules permits the Customs authority to destroy or dispose of confiscated infringing goods only where no legal proceedings are pending in relation to the determination; consequently, while the Court's final determination on infringement will bind the Commissioner, the Commissioner cannot proceed under the IPR Enforcement Rules while the present suit is pending. Because no right to relief was claimed against the Commissioner and an effective decree can be passed without impleading it, the Commissioner is neither a necessary nor a proper party. The application for impleadment was therefore without merit. The court also recorded that dismissal is without prejudice to any statutory rights or remedies available to the Commissioner. [Paras 9, 12, 13, 14]

Application for impleadment dismissed; Commissioner is neither a necessary nor a proper party and may not exercise the Rule 11 disposal power while the suit is pending, subject to its statutory rights.

Final Conclusion: The application by the Commissioner of Customs to be impleaded in the trademark infringement suit is dismissed on the ground that the Commissioner is neither a necessary nor a proper party; the Commissioner's statutory remedies remain unaffected and the Court's final determination on infringement will be binding on the Commissioner.

Power of Settlement Commission to grant immunity from interest - Effect of amendment to section 127H(1) by Finance Act, 2007 - Retrospectivity and temporal application of statutory amendment - Immunity from prosecution, penalty and fine under settlement

Power of Settlement Commission to grant immunity from interest - Effect of amendment to section 127H(1) by Finance Act, 2007 - Validity of the Settlement Commission's grant of complete immunity from interest to the applicant after deletion of the word 'interest' from section 127H(1). - HELD THAT: - Section 127H(1) originally empowered the Settlement Commission to grant immunity "either wholly or in part from the imposition of any penalty, fine and interest." The Finance Act, 2007, effective from 1 June 2007, deleted the word "interest" from section 127H(1). The show-cause notice in the present case is dated 4 September 2008 and the settlement application was filed after the amendment. The Settlement Commission's order granting complete immunity from interest therefore omits to give effect to the statutory amendment which removed power to grant immunity in respect of interest. The Department challenged that omission and the challenge was uncontroverted by Respondent No.1, which did not file any reply or furnish instructions to its counsel. On this basis the Court concluded that the Settlement Commission had no jurisdiction to grant immunity from interest post-amendment and that the grant of such immunity must be set aside. [Paras 9, 10]

The Settlement Commission's order to the extent it granted complete immunity from interest is quashed and set aside.

Final Conclusion: The writ petition is allowed in part: the Settlement Commission's grant of complete immunity from interest to Respondent No.1 is quashed and set aside; no order as to costs.

Principles of natural justice - Remand to adjudicating authority - Confiscation and redemption fine - Duty liability and interest - Section 128A

Principles of natural justice - Remand to adjudicating authority - Section 128A - Whether the first appellate authority was justified in remanding aspects of the matter to the adjudicating authority. - HELD THAT: - The adjudicating authority issued a show cause notice after a delay of over 12 years and allowed only 15 days to reply, a period found to be shorter than the minimum 30 days ordinarily required, which the Tribunal treated as a breach of the principles of natural justice. The first appellate authority partially remanded the matter for reconsideration of confiscation, redemption fine and penalty while sustaining duty and interest. The Tribunal held that in these factual circumstances the remand was proper and did not amount to an excess of jurisdiction under Section 128A, because the remand addressed procedural defects and the need for re-examination arising from the denial of adequate opportunity to the respondent. [Paras 4]

The partial remand by the first appellate authority is upheld; the Revenue's challenge to the remand is rejected and the remand is maintained.

Duty liability and interest - Whether the appellate authority's sustaining of duty liability and interest was liable to interference. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) sustained the adjudicating authority's demand of duty and interest. The Revenue's contention that the appellate order should be set aside in toto because the remand was improper was examined and rejected: interference with the appellate finding on duty and interest was not warranted given the limited nature of the remand and the Tribunal's conclusion that remand for procedural reconsideration was appropriate. [Paras 4, 5]

The appellate authority's sustention of duty liability and interest is not disturbed.

Confiscation and redemption fine - Scope and subject-matter of the remand concerning confiscation, redemption fine and penalty. - HELD THAT: - The Tribunal observed that the imported items under the advance authorizations were raw materials subsequently converted into final products; consequently the order of confiscation could properly be limited to the raw materials. The first appellate authority remanded the matter to the adjudicating authority for re-examination of confiscation, redemption fine and penalty under Section 112(a). The Tribunal found this partial remand to be correct and warranted by the circumstances described in the record. [Paras 4]

The matter is remanded to the adjudicating authority for re-examination limited to confiscation (insofar as it concerns raw materials), redemption fine and penalty.

Final Conclusion: The Revenue appeals are dismissed; the Tribunal upholds the Commissioner (Appeals) insofar as it sustained the duty and interest but affirms and maintains the partial remand for re-examination of confiscation, redemption fine and penalty, on the ground that procedural infirmities justified remand.

Transaction value - rejection of declared value under Rule 12 - reasonable doubt as threshold for rejection - sequential valuation under Rules 3 to 9 - value based on contemporaneous imports (Rule 4/5) - deductive method of valuation (Rule 7) - importer's option to apply Rule 8 before Rule 7 - acceptance of declared value after enquiry

Transaction value - rejection of declared value under Rule 12 - reasonable doubt as threshold for rejection - acceptance of declared value after enquiry - Acceptance of declared transaction value in respect of certain Bills of Entry was justified and rightly upheld by the Commissioner (Appeals). - HELD THAT: - The Court applied the test laid down in Century Metals and held that mere initiation of investigation or prima facie suspicion is not sufficient; the proper officer must have a reasonable doubt about the truth or accuracy of the declared value, must call for further information and documents, consider the response (if any), record and communicate reasons and afford hearing before rejecting transaction value under Rule 12. Both the original authority and Commissioner (Appeals) found that none of the conditions warranting rejection under Rule 12 were satisfied in respect of the specified Bills of Entry. The Chartered Engineer's certificate (deductive method under Rule 7) is irrelevant unless the threshold for rejection under Rule 12 is crossed and sequential valuation under Rules 4-9 becomes applicable. On the material before it, the Tribunal found no basis to conclude that reasonable doubt existed and accordingly upheld acceptance of the declared values. [Paras 21, 22, 24, 25]

The acceptance of declared transaction value in those Bills of Entry is upheld.

Sequential valuation under Rules 3 to 9 - value based on contemporaneous imports (Rule 4/5) - deductive method of valuation (Rule 7) - importer's option to apply Rule 8 before Rule 7 - Remand to the original authority to re-determine value on the basis of contemporaneous imports for other Bills of Entry was correct and warranted; Rule 4/5 must be considered before resort to Rule 7 unless contemporaneous data is absent and the importer elects otherwise. - HELD THAT: - The Tribunal reiterated that where transaction value is rejected, valuation must proceed sequentially through Rules 4 to 9. Rule 4 requires examination of contemporaneous imports of identical goods and Rule 5 of similar goods; only if those fail can Rule 7 (deductive method) be applied. The exception permitting the importer to apply Rule 8 before Rule 7 is an option for the importer and not for the assessing officer. The record did not establish to the Tribunal's satisfaction that contemporaneous import data for identical or similar common items was unavailable; the Revenue produced no evidence (for example from the Customs EDI system) proving absence of such imports. It was therefore appropriate for the Commissioner (Appeals) to remit for re-determination on the basis of contemporaneous imports rather than accept the Chartered Engineer's certificate under Rule 7 as the primary basis. [Paras 27, 28, 29, 30, 31]

The matter is correctly remanded for determination of value on the basis of contemporaneous imports; the remand is sustained.

Final Conclusion: The Tribunal dismissed the Revenue appeals and upheld the Commissioner (Appeals) orders: acceptance of declared transaction value in respect of certain Bills of Entry is sustained, and the remand for re-determination of value on the basis of contemporaneous imports for other Bills of Entry is confirmed.

Pre-deposit for admission of appeal - deposit as condition for admission - stay of recovery pending appeal - without prejudice deposit - interim reliefs before appellate tribunal

Pre-deposit for admission of appeal - deposit as condition for admission - without prejudice deposit - stay of recovery pending appeal - Whether deposit of 10% of the penalty as directed by the NCLAT could be imposed merely for admission of the appeal and whether recovery of the remaining penalty should be stayed upon such deposit. - HELD THAT: - The High Court observed that the NCLAT order admitting the appeal (dated 6.12.2022) directed deposit of 10% of the penalty but did not state reasons for such deposit nor grant any explicit interim protection as to recovery of the remaining 90% (paras 6-8). The Court held that a pre-deposit of 10% could not properly be required merely for admission of a first appeal against the CCI order and that the ambiguous tenor of the NCLAT order suggested an intention against immediate recovery of the balance (paras 7-9). Having obtained the petitioner's offer to deposit 10% of the penalty without prejudice to its rights, the Court directed that on such deposit no recovery shall be effected in respect of the remaining 90% of the penalty, and that the deposit shall be without prejudice to the parties' contentions (para 11). The Court expressly left other directions of the CCI and any other interim reliefs to be sought before the NCLAT and did not adjudicate other contentions including maintainability (paras 12-13). [Paras 7, 8, 11]

Directed that upon deposit of 10% of the total penalty (without prejudice), recovery of the remaining 90% shall be stayed; other interim reliefs remain open before the NCLAT and other contentions were not adjudicated.

Final Conclusion: The petition is disposed of by directing that conditional on the petitioner depositing 10% of the penalty amount (without prejudice), no recovery shall be made of the remaining 90%; the petitioner remains free to seek other interim reliefs before the NCLAT and the Court has not adjudicated other substantive contentions or maintainability.

Restoration of name of company struck off - striking off without opportunity of hearing and notice - company not defunct where pending litigation and material assets exist - mandatory compliance for restoration subject to conditions - power of Registrar to initiate punitive proceedings despite restoration

Striking off without opportunity of hearing and notice - restoration of name of company struck off - Striking off of the appellant company's name without affording opportunity of hearing was not sustainable and the Tribunal's dismissal was set aside. - HELD THAT: - The Appellate Tribunal found that the Registrar of Companies had struck off the company's name notwithstanding pending litigation and apparent continuing transactions, and without providing the requisite opportunity of hearing under the statutory scheme. The Court recorded that bank statements and ongoing litigation demonstrated that the company was not a defunct entity and that the procedure adopted by the ROC was contrary to the objects of the provision as applied in the facts. On these findings the impugned order of the National Company Law Tribunal was set aside and the company's name ordered to be restored. [Paras 10, 11]

Impugned order dated 08.10.2021 is set aside and the company's name is ordered to be restored.

Company not defunct where pending litigation and material assets exist - mandatory compliance for restoration subject to conditions - Restoration of the company's name was made subject to specified compliances including payment of costs and filing of statutory returns and fees within stipulated time. - HELD THAT: - While restoring the name, the Tribunal imposed conditions to give effect to restoration: payment of costs to the ROC within eight weeks and filing of all annual returns and balance sheets with requisite fees and late charges within eight weeks after restoration. The Court thereby balanced the equities by reinstating the company because of pending litigation and evidence of assets, while requiring statutory regularisation by the present management. [Paras 11]

Name restored subject to payment of costs and filing of statutory returns and fees within prescribed timelines.

Power of Registrar to initiate punitive proceedings despite restoration - Registrar of Companies remains free to initiate or continue any punitive or other steps under the Companies Act for non-filing or late filing despite restoration of the company's name. - HELD THAT: - The Tribunal expressly preserved the ROC's statutory powers and clarified that restoration would not preclude the ROC from taking any other action, punitive or otherwise, under the Act against the company or its directors for defaults in filing statutory returns or documents. This preserves the ROC's ability to enforce compliance even after restoration. [Paras 11]

ROC remains free to take any other steps under the Companies Act for non-filing/late filing notwithstanding restoration.

Final Conclusion: Appeal allowed to the extent that the order setting aside the company's name is quashed and the company's name is restored to the Register subject to payment of costs and mandated filing compliances; the Registrar's enforcement powers remain unaffected.

Extinguishment of claims on approval of resolution plan - binding nature of an approved resolution plan on creditors including the Central and State Governments - obligation to present claims during the CIRP when invited by the Resolution Professional - moratorium and overriding effect of the Insolvency and Bankruptcy Code during CIRP - commercial wisdom of the Committee of Creditors

Obligation to present claims during the CIRP when invited by the Resolution Professional - commercial wisdom of the Committee of Creditors - Whether the Appellant's challenge to the approved resolution plan is maintainable where the Appellant failed to file its claim when claims were invited during the CIRP and did not seek admission before approval of the resolution plan. - HELD THAT: - The Tribunal recorded that the Appellant did not file any claim when claims were invited by the Resolution Professional and did not even file a belated claim prior to approval of the resolution plan by the Committee of Creditors. The Adjudicating Authority had approved the resolution plan and the plan has since been implemented; the RP and Resolution Applicant stated no residual funds remain in the plan. The Tribunal relied on the settled principle that commercial wisdom vests with the Committee of Creditors and that relief is available only to creditors who diligently present their claims during the CIRP. Given the Appellant's omission to file its claim in the prescribed process and timelines, the appeal could not be entertained to re-open the approved plan or to allocate funds post-approval. [Paras 11]

Appeal dismissed insofar as it seeks to reopen or reallocate amounts from the approved resolution plan for claims not filed during the CIRP.

Extinguishment of claims on approval of resolution plan - binding nature of an approved resolution plan on creditors including the Central and State Governments - moratorium and overriding effect of the Insolvency and Bankruptcy Code during CIRP - Whether statutory dues not included in the resolution plan remain enforceable after the Adjudicating Authority approves the resolution plan. - HELD THAT: - The Tribunal applied the principle that once a resolution plan is duly approved under the Code, claims not provided for in the approved plan stand frozen and, on the date of approval, such claims are extinguished and cannot be pursued. The Tribunal referred to authoritative pronouncements to the effect that the 2019 amendment to the Code is clarificatory and that statutory dues not forming part of an approved plan stand extinguished. In the present case the statutory dues claimed by the Appellant were not part of the approved resolution plan and the plan has been implemented with no residual funds; consequently the Tribunal held that those claims cannot be entertained post-approval. [Paras 11]

Statutory dues not included in the approved resolution plan are not enforceable after approval and the Appellant cannot proceed in respect of such pre-approval claims.

Final Conclusion: The appeal is dismissed. The Tribunal upheld that claims not filed during the CIRP and not incorporated in the resolution plan stand extinguished upon approval of the plan, which is binding on the Corporate Debtor and all creditors including government authorities; the implemented resolution plan leaves no residual fund for the Appellant's belated claim.

Approval of resolution plan by the Committee of Creditors and its binding effect on minority homebuyers - Authorised Representative's duty to represent homebuyers and obtain instructions for CoC voting - Commercial wisdom of the CoC and limited interference by adjudicatory forum - Replacement of the Resolution Professional

Approval of resolution plan by the Committee of Creditors and its binding effect on minority homebuyers - Validity of the Adjudicating Authority's rejection of the application by 68 home buyers challenging approval of the resolution plan. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's rejection of the application, noting that where the majority within a class of creditors (here, home buyers) approve a resolution plan, minority members of that class must accept the majority decision. The Tribunal relied on its earlier decision in Priya Puri & Ors. and on the Supreme Court decision in Jaypee Kensington Boulevard Apartments Welfare Association and Ord. vs. NBVV (India) Ltd. and Ors. to hold that democratic principles embedded in the Code give determinative role to the opinion of the majority. Objections by a subset of home buyers raising similar procedural and voting complaints cannot sustain overturning the CoC's approval of the plan.

The Adjudicating Authority's order rejecting the application was affirmed; the minority homebuyers' challenge to the CoC-approved resolution plan was repelled.

Authorised Representative's duty to represent homebuyers and obtain instructions for CoC voting - Whether the authorised representative's alleged failure to obtain instructions from homebuyers vitiated the CoC proceedings. - HELD THAT: - The Tribunal held that an authorised representative participating in the CoC must represent the collective interest of the class and is expected to obtain instructions to vote in accordance with the majority position on agenda items where a CoC vote is taken. Where an agenda item is not put to vote, the authorised representative's expressed opinion may be noted and considered by the CoC. The Tribunal did not find that the asserted failure to obtain individual instructions justified setting aside the CoC's decisions.

The contention that the authorised representative's conduct vitiated the CoC process was rejected.

Commercial wisdom of the CoC and limited interference by adjudicatory forum - Whether the Tribunal should examine or interfere with the CoC's conclusion on the feasibility and viability of the resolution plan. - HELD THAT: - The Tribunal observed that approval of a resolution plan by the CoC in its commercial wisdom imports a presumption of viability and feasibility. Absent a demonstrable legal defect, the adjudicatory forum will not interfere with the commercial judgment of the CoC. The Tribunal found no ground to reassess feasibility or viability merely on the assertions raised by the appellants.

No interference with the CoC's commercial decision on the plan's viability and feasibility; challenge on these grounds was dismissed.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's rejection of the homebuyers' application is affirmed, the authorised representative's conduct did not vitiate the CoC process, and the Tribunal will not interfere with the CoC's commercial approval of the resolution plan.

Admission of Section 7 application - proof of financial debt and default - requirement of entries from the bankers' book as evidence - applicability of Regulation 2A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - compliance with Section 7(3) of the Code regarding record or evidence of default - Section 65B(4) of the Evidence Act and admissibility of computer generated documents - effect of non denial in the reply on admission of Section 7 application

Requirement of entries from the bankers' book as evidence - applicability of Regulation 2A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Section 65B(4) of the Evidence Act and admissibility of computer generated documents - Whether the Financial Creditor was obliged to file certified copies of bankers' book entries or certificates under Section 65B(4) of the Evidence Act for admitting the Section 7 application. - HELD THAT: - The Tribunal observed that Regulation 2A - which prescribes furnishing certified copies of entries in the bankers' book as one form of evidence of default - was introduced by amendment effective 13.11.2020 and therefore was not applicable to the Section 7 application filed in January 2020. Consequently, insistence on certified bankers' book entries under the Bankers' Books Evidence Act or a Section 65B(4) certificate was not a precondition for admission in the facts of this case. The Tribunal further noted that the Supreme Court decision relied upon by the Appellant concerning Section 65B(4) arose in the context of election petition trials and did not control the present statutory framework under the IBC. Hence, absence of a Section 65B(4) certificate or formal bankers' book certification did not by itself render the Section 7 application fatally defective where other documentary evidence had been furnished. [Paras 6, 7, 13]

Requirement of certified bankers' book entries or a Section 65B(4) certificate was not mandatory for admitting the Section 7 application filed in January 2020; Regulation 2A did not apply retrospectively.

Admission of Section 7 application - proof of financial debt and default - compliance with Section 7(3) of the Code regarding record or evidence of default - effect of non denial in the reply on admission of Section 7 application - Whether the Adjudicating Authority rightly admitted the Section 7 application on the material before it, despite the appellant's objections regarding the source and certification of the disbursement statement. - HELD THAT: - The Tribunal recorded that the Financial Creditor had filed sanction letters and loan agreements with the Section 7 application and that the Corporate Debtor's reply did not deny execution of the sanction letters, loan agreements, the disbursement or the default. Although the statement of disbursement was prepared by the Financial Creditor, it was supported by HDFC Bank statements reflecting transactions between the parties. The Tribunal treated Section 7(3) and Form 1 Part V as allowing various documents to prove debt and default and held that, on the record before the Adjudicating Authority and in the absence of denial of debt or default by the Corporate Debtor, the Adjudicating Authority did not err in admitting the application. Allegations of fraud or malicious initiation of proceedings were noted as matters capable of being raised under Section 65 of the Code before the Adjudicating Authority, but did not negate the admitted documentary evidence for the purpose of admission. [Paras 9, 10, 12, 14, 15]

Admission of the Section 7 application was proper on the material filed and the lack of denial by the Corporate Debtor; objections as to the source or certification of the disbursement statement did not vitiate admission.

Final Conclusion: The Appeal is dismissed; the Appellate Tribunal upheld admission of the Section 7 application, holding that Regulation 2A (and the bankers' book certification requirement) did not apply to the Section 7 filing in January 2020 and that the Financial Creditor had furnished sufficient documentary evidence of debt and default which was not denied by the Corporate Debtor.

Existence of operational debt and default - pre-existing dispute under Section 8(2) - adjudicating authority's duty under Section 9(5) - restarting of limitation by part-payment - debit note and supporting documents as evidence of dispute

Existence of operational debt and default - adjudicating authority's duty under Section 9(5) - Operational debt was established and default had occurred, warranting admission of the Section 9 application. - HELD THAT: - The Tribunal found that the invoices and the terms of contract (including contractual interest at the stipulated rate) supported that the sum claimed formed part of an operational debt. The Corporate Debtor had admitted the outstanding amount in an email dated 05.08.2015 which was not disputed before the Adjudicating Authority or this Tribunal. The Adjudicating Authority correctly treated the contractual interest as part of the contractual debt under the invoices. In view of these facts and the absence of payment after the demand notice, the requirements for admission under Section 9(5) were satisfied and the Section 9 application was rightly admitted. [Paras 16, 17]

The Section 9 application was properly admitted on the ground that an operational debt existed and default had occurred.

Pre-existing dispute under Section 8(2) - debit note and supporting documents as evidence of dispute - adjudicating authority's duty under Section 9(5) - No real and substantial pre-existing dispute was discernible on the record such as to bar admission under Section 9. - HELD THAT: - Applying the Mobilox test, the Tribunal examined whether a plausible dispute existed prior to receipt of the demand notice. The Corporate Debtor had not replied to the demand notice and did not place on record cogent proof that the debit note of 16.11.2015 or coal quality test reports had been communicated to the Operational Creditor before the demand notice. Material infirmities were noted in the debit note and the timing and manner of its service were not proved. The coal test reports were submitted as additional documents after the Section 9 application was filed, lending to the conclusion that they were after thoughts. The Adjudicating Authority had therefore correctly concluded that the defence was not a bona fide pre-existing dispute but a moonshine/afterthought defence which did not require rejection of the application under Section 9(5). [Paras 24, 25, 26, 27, 28]

The plea of a pre-existing dispute was rejected; the defence was held to be an after thought and not a bar to admission.

Restarting of limitation by part-payment - The Section 9 application was within the period of limitation because the Corporate Debtor's part payment restarted the limitation period. - HELD THAT: - The record showed part payments by the Corporate Debtor, the last being on 13.01.2016. The Adjudicating Authority correctly held that such part payment triggered a fresh period of limitation, and the Section 9 application filed in May 2018 fell within three years from the last part payment or from the acknowledged debt. The Tribunal found no error in this conclusion. [Paras 11, 17]

The claim was not time barred; the application was within limitation.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's admission of the Section 9 application: the operational debt and default stood established, no bona fide pre existing dispute was proved to bar the application, and the claim was not time barred. The appeal is dismissed.

Approval of resolution plan by Adjudicating Authority - commercial wisdom of the Committee of Creditors - modification of resolution plan by Adjudicating Authority - Section 31 of the Insolvency & Bankruptcy Code - duty to approve or reject a resolution plan - fraud on the court and suppression of material facts - MSME classification and its bearing on eligibility under Section 29A

Section 31 of the Insolvency & Bankruptcy Code - duty to approve or reject a resolution plan - modification of resolution plan by Adjudicating Authority - approval of resolution plan by Adjudicating Authority - Validity of the Adjudicating Authority's modification (para 15) of a resolution plan approved by the Committee of Creditors. - HELD THAT: - The Tribunal examined Section 31 and observed that once the Adjudicating Authority is satisfied that the resolution plan meets the statutory requirements it must either approve the plan (the statute uses 'shall') or, if not so satisfied, reject it under sub section (2). There is no statutory power under Section 31 to alter or modify conditions of an approved resolution plan. The Adjudicating Authority exceeded its jurisdiction to the extent it inserted/modifed the immunity clause in para 15 of the impugned order, and that condition shall not be taken note of. [Paras 22, 23]

Company Appeal (AT)(Ins) No.201/2021 is allowed; the condition introduced in paragraph 15 of the impugned order shall not be taken note of.

Fraud on the court and suppression of material facts - MSME classification and its bearing on eligibility under Section 29A - commercial wisdom of the Committee of Creditors - Maintainability and merit of the appeal by the operational creditor challenging approval of the resolution plan on grounds of alleged fraud and suppression (MSME status). - HELD THAT: - The appellant alleged that the resolution plan was procured by fraud and suppression of the Corporate Debtor's MSME status. The Tribunal noted that the appellant had available remedies before the Adjudicating Authority and that an IA raising related issues was dismissed and not challenged. The Tribunal emphasised that the appellant did not raise the MSME objection before approval despite being privy to materials and that belated allegations before the Appellate Tribunal were not permissible. On this basis the appeal was held to be not maintainable and liable to be dismissed. [Paras 20]

Company Appeal (AT)(Ins) No.266/2021 is dismissed (without costs).

Final Conclusion: The appeal by the successful resolution applicants is allowed to the extent that the Adjudicating Authority exceeded its jurisdiction by inserting/modifying the immunity clause in paragraph 15 of the approval order; the appeal by the operational creditor challenging approval on grounds of alleged fraud/suppression is dismissed as not maintainable.

Anticipatory bail under Section 438 Cr.P.C. - Prevention of Money Laundering Act, 2002 - provisional attachment under Section 5(1) - Custodial interrogation and gravity of offence as factors - Economic offences and stricter approach - Cooperation in investigation as condition for grant of bail

Anticipatory bail under Section 438 Cr.P.C. - Prevention of Money Laundering Act, 2002 - provisional attachment under Section 5(1) - Custodial interrogation and gravity of offence as factors - Cooperation in investigation as condition for grant of bail - Anticipatory bail granted to the petitioner Lokesh Paliwal subject to conditions. - HELD THAT: - The Court considered that investigation under PMLA was completed and complaint filed; the petitioner was not in custody and had no criminal antecedents. Material on record showed transfer of Rs.36 lakhs into the petitioner's account from proceeds of crime, partial cash disbursement to another accused and provisional attachment of part of the petitioner's property under Section 5(1) of PMLA. The Court relied on the principle that Section 438 Cr.P.C. may be exercised even after cognizance or filing of charge-sheet where facts justify it, and had regard to precedents cited by both parties. Having noted that the main accused's arrest warrant had been stayed and that the petitioner had already been interrogated, the Court found that custodial interrogation was not necessary and that the petitioner should be enlarged on anticipatory bail while ensuring continued cooperation in investigation. Accordingly, anticipatory bail was granted on furnishing bond and sureties and subject to conditions restraining travel without permission, tampering with evidence, and requiring availability for investigation.

Petitioner enlarged on anticipatory bail on furnishing a personal bond and two sureties and subject to conditions including availability for investigation, no leaving India without court permission, and no tampering with evidence or witness intimidation.

Final Conclusion: Anticipatory bail application allowed; petitioner Lokesh Paliwal to be released on bail on arrest upon furnishing bond and sureties and subject to specified conditions ensuring cooperation in investigation and non interference with evidence or witnesses.

Export of services - input tax credit refund - intermediary vs service provider - unjust enrichment - judicial discipline and finality of adjudicatory orders

Intermediary vs service provider - export of services - judicial discipline and finality of adjudicatory orders - Validity of the Assistant Commissioner's re examination and denial of refund despite earlier appellate and tribunal findings that the petitioner was a service provider engaged in export of services. - HELD THAT: - The Assistant Commissioner reopened and re adjudicated whether the petitioner's services qualified as export of services and whether the petitioner was an intermediary, notwithstanding that the Commissioner (Appeals) had allowed the petitioner's appeals and the CESTAT had upheld that SGIPL was not an intermediary and provided telecommunication services to SingTel on its own account. The impugned order criticised reliance on the Delhi High Court decision in Verizon on account of a pending SLP and re cast the matter as sub judice, and proceeded to reassess applicability of Rule 6A and the Place of Provision of Service Rules. The High Court held that the Assistant Commissioner acted in disregard of judicial discipline and attempted to overreach orders passed by superior fora; the Revenue could not, in the adjudication of the refund application, substitute its own view for the findings recorded by the appellate authority and the CESTAT which had become binding for the purpose of processing the refund application. [Paras 15, 16, 17, 18, 19]

Impugned order setting aside the appellate and tribunal findings and re adjudicating the export/intermediary question was unlawful and is set aside.

Input tax credit refund - unjust enrichment - Relief to be afforded following setting aside of the impugned order-directions regarding processing of the refund claim and consideration of interest. - HELD THAT: - Having set aside the impugned order, the Court directed the Revenue to process the petitioner's refund application as per the earlier appellate and tribunal findings that the petitioner was engaged in export of services and thereby entitled to refund of unutilised input tax credit. The respondent was ordered to process the application within four weeks and to consider the petitioner's entitlement to interest in view of delay in processing. [Paras 20, 21, 22]

Respondent to process the refund application within four weeks and to consider payment of interest; petition allowed and disposed.

Final Conclusion: The impugned order of the Assistant Commissioner denying the refund and re adjudicating the export/intermediary issue was set aside for overreaching appellate and tribunal findings; the respondent is directed to process the petitioner's refund claims for the stated periods within four weeks and to consider interest on delayed payment.

Non-application of mind - violation of principles of natural justice - quashing and setting aside of adjudication order - remand for fresh consideration - duty to consider reply and documentary evidence - obligation to afford personal hearing

Non-application of mind - violation of principles of natural justice - quashing and setting aside of adjudication order - Impugned order confirming service-tax demand and imposing penalty was quashed for failure to consider the petitioner's reply and documentary evidence and for non-application of mind, amounting to breach of principles of natural justice. - HELD THAT: - The Court found that Respondent No.2's order confirming the demand for the period April 2013 to March 2015 did not refer to or deal with the reply dated 20 June 2016 and the deed of cancellation dated 1 April 2013 produced therewith. The impugned order proceeded on the premise that the joint venture continued without addressing the petitioner's specific contention and supporting document that the joint venture had been terminated with effect from 1 April 2013. The order also failed to take into account the Appellate Tribunal's earlier decision which negated the department's demand for the prior period. These omissions disclose non-application of mind and a breach of natural justice, justifying quashing of the impugned order. [Paras 19, 21, 23]

Impugned order dated 27.04.2021 quashed and set aside.

Remand for fresh consideration - duty to consider reply and documentary evidence - obligation to afford personal hearing - Matter remitted to the adjudicating authority for fresh decision after considering the petitioner's reply, documents and earlier appellate order, and after affording personal hearing within a stipulated time. - HELD THAT: - Rather than deciding the merits afresh, the Court directed that the authority shall reconsider the show-cause notice for April 2013 to March 2015 taking into account the reply dated 20 June 2016, the deed of cancellation and the Appellate Tribunal's earlier order. The authority is to give the petitioner a personal hearing and pass a reasoned decision. The Court mandated expedition by requiring the authority to decide the matter within four weeks from receipt of an authenticated copy of this order. [Paras 19, 23]

Matter remanded to the respondent authority to decide afresh within four weeks after considering the reply, documents and giving personal hearing; parties to bear their own costs.

Final Conclusion: The adjudication order confirming the service-tax demand and imposing penalty for the period April 2013 to March 2015 is quashed for non-application of mind and breach of natural justice; the matter is remitted for fresh, expeditious consideration after taking into account the petitioner's reply, documentary evidence and earlier appellate order, and after affording personal hearing, to be decided within four weeks.

Availability of Cenvat credit for duty debited in Served From India Scheme (SFIS) - application of the Cenvat Credit Rules, 2004 to determine admissibility of credit - prospective application of change in Foreign Trade Policy

Prospective application of change in Foreign Trade Policy - Change in Foreign Trade Policy (para restricting Cenvat/Duty Drawback under SFIS) does not have retrospective effect. - HELD THAT: - The Tribunal examined the insertion in the FTP (paras 3.12.1/3.17.6) which expressly stated that adjustment as Cenvat Credit or Duty Drawback under duty credit scripes would be allowed except under SFIS. Revenue's contention that this change operated retrospectively was rejected. The Court held that treating the policy change as retrospective would unsettle earlier assessments and therefore the change should be given prospective effect. The Tribunal thus declined to apply the FTP amendment retrospectively to deny credits which had allegedly accrued prior to the insertion of the provision. [Paras 9]

The FTP change is to be given prospective effect and cannot be applied retrospectively to deny credits accrued earlier.

Availability of Cenvat credit for duty debited in Served From India Scheme (SFIS) - application of the Cenvat Credit Rules, 2004 to determine admissibility of credit - Admissibility of Cenvat credit claimed on CVD debited to SFIS scrips for imports during the disputed period must be determined under the Cenvat Credit Rules, 2004; the matter is remitted for fresh adjudication. - HELD THAT: - During the period 2004-05 to 2006-07, the FTP did not contain an express provision either allowing or disallowing Cenvat credit for CVD paid through SFIS scrips. In that factual and legal vacuum, the Tribunal held that entitlement must be decided by reference to the Cenvat Credit Rules, 2004 which govern availment of credit. Since the adjudicating authority had applied a policy-based denial instead of deciding admissibility under the CCR, the Tribunal set aside the impugned order and remitted the matter for re-adjudication in accordance with the CCR, 2004 after affording the assessee an opportunity of hearing and passing a speaking order. [Paras 10]

Impugned order set aside; matter remitted to adjudicating authority to decide admissibility of Cenvat credit on the disputed imported capital goods afresh under the Cenvat Credit Rules, 2004.

Final Conclusion: Appeal allowed in part: the Tribunal ruled that the FTP amendment operates prospectively and remitted the question of admissibility of Cenvat credit on CVD debited to SFIS for imports during 2004-05 to 2006-07 to the adjudicating authority for fresh decision under the Cenvat Credit Rules, 2004 after giving the assessee a reasonable opportunity of hearing.

Refund of unutilised Cenvat credit - Rule 5 of the Cenvat Credit Rules, 2004 - Notification No. 5/2006-CE (N.T.) - Notification No. 27/2012-CE (N.T.) and retrospective application - non-transfer/non-debit of Cenvat credit on debonding and vested right/non lapsing of credit - interest on delayed refund under Section 11BB of the Central Excise Act, 1944

Refund of unutilised Cenvat credit - Rule 5 of the Cenvat Credit Rules, 2004 - Notification No. 5/2006-CE (N.T.) - Notification No. 27/2012-CE (N.T.) and retrospective application - non-transfer/non-debit of Cenvat credit on debonding and vested right/non lapsing of credit - Sanction of refund under Notification No. 5/2006-CE (N.T.) cannot be defeated by relying on Notification No. 27/2012-CE (N.T.), and non-transfer of unutilised Cenvat credit on debonding did not constitute a prohibited double benefit. - HELD THAT: - The refund claims were filed and sanctioned under Notification No. 5/2006-CE (N.T.), which did not require debiting the claimant's Cenvat account at the time of making the claim. Notification No. 27/2012-CE (N.T.) (dated 18.06.2012) introduced an obligation to debit the Cenvat account, but it cannot be applied to refund claims governed by Notification No. 5/2006. The Tribunal found that the Commissioner (Appeals) erred in assessing the claims under Notification No. 27/2012. The record shows that the refund sanctioning authority had applied the conditions of Rule 5 read with Notification No.5/2006 and that range officers had verified the claims. The revenue's allegation of double benefit was unfounded: there was no material to show that the appellant both obtained the refund and also utilised the same credit for payment of duty. Moreover, the non transfer or non debit of the unutilised Cenvat balance upon debonding cannot be equated with utilisation; the non transfer was treated as equivalent to reversal for practical purposes and did not amount to an impermissible double claim. Consequently, the impugned appellate orders rejecting the refund were set aside and the refunds allowed. [Paras 5, 6]

Impugned orders upholding denial of refund were set aside; refund sanctioned under Notification No.5/2006-CE (N.T.) must be sustained and could not be negated by Notification No.27/2012-CE (N.T.).

Interest on delayed refund under Section 11BB of the Central Excise Act, 1944 - Appellant entitled to interest on delayed refund as provided under Section 11BB of the Central Excise Act, 1944, in accordance with the ratio in Ranbaxy Laboratories Ltd. - HELD THAT: - Following the settled position in the decisions cited (notably the Supreme Court in Ranbaxy Laboratories Ltd.), interest on delayed refunds is payable under Section 11BB of the Central Excise Act, 1944. The Tribunal applied that ratio and held that interest is payable from the expiry of three months from receipt of the refund application as envisaged by the statutory scheme. Consequently, the appellant's claim for interest on the delayed sanction of refund was allowed. [Paras 5, 6]

Interest on the delayed refund was awarded to the appellant in terms of Section 11BB and the authoritative precedent.

Final Conclusion: Appeals allowed: orders denying refund and interest set aside; refund sanctioned under Notification No.5/2006-CE (N.T.) upheld and interest on delayed refund awarded to the appellant.

Pre-deposit under Section 35F - Interest on delayed refund of pre-deposit under Section 35FF - Inapplicability of Section 11B/11BB to refunds of pre-deposits - CBEC Circulars mandating return of pre-deposits within three months

Pre-deposit under Section 35F - Interest on delayed refund of pre-deposit under Section 35FF - CBEC Circulars mandating return of pre-deposits within three months - Entitlement to interest under Section 35FF where amounts deposited as pre-deposit under Section 35F are not refunded within three months of the appellate authority's order. - HELD THAT: - The Tribunal analysed the statutory scheme and relevant Board Circulars and case law and held that deposits made as a pre-condition for filing an appeal under Section 35F are not payments of duty but are pre-deposits refundable if the appeal succeeds. Explanation (v) to Section 35F expressly includes interest in the concept of "duty demanded" for purposes of deposit, and Section 35FF provides for interest where an amount deposited under the proviso to Section 35F is not refunded within three months from communication of the appellate order. The Commissioner (Appeals) erred in treating the refund claim as governed by Section 11B/11BB (refund of duty) merely because the applicant's letter invoked the wrong provision; the legal character of the deposit determines the remedy. The Tribunal relied on binding precedent and the Board Circulars dated 2 January 2002 and 8 December 2004, which direct that pre-deposits (other than duty) be returned promptly and within three months and envisage interest liability for delay. In consequence, where the department failed to refund the pre-deposit within three months of the Tribunal's favourable order, interest under Section 35FF became payable from the expiry of three months from the appellate order until actual refund, at the prescribed rate. [Paras 10, 16, 29]

The appellant is entitled to interest under Section 35FF on the delayed refund of the pre-deposit; the refund must bear interest from the expiry of three months from the appellate authority's order until payment.

Final Conclusion: The appeal is allowed. The order of the Commissioner (Appeals) is modified to direct payment of interest under Section 35FF on the pre-deposit not refunded within three months of the Tribunal's order, computed from the expiry of that three month period until actual refund (at the rate applied by the Tribunal).

Accrued business liability - contingent liability - transfer of liabilities in slump sale / sale deed - specific contractual provision prevailing over inconsistent generic clause - liability of purchaser for pre sale dues

Transfer of liabilities in slump sale / sale deed - specific contractual provision prevailing over inconsistent generic clause - liability of purchaser for pre sale dues - Liabilities in respect of operations and activities of the Amroha unit prior to the signing date are to be borne by the seller and not by the purchaser. - HELD THAT: - The Slump Sale Agreement and the subsequent Sale Deed contain specific provisions allocating liabilities. Clause 9 of the Sale Deed and Clauses 12.1-12.2 of the Slump Sale Agreement make the seller liable for assessments, rents, rates, taxes and other outgoings up to the Signing Date and make the purchaser liable only for obligations arising after the Signing Date. Where a specific provision in the Sale Deed deals with distribution of liabilities, it governs and overrides any contrary or more generic stipulation (such as clause 2.6 relating to contingent liabilities) in the Slump Sale Agreement. Applying these specific provisions to the facts, dues relating to the period anterior to 17.7.2010 could not properly be fastened on the purchaser. [Paras 18, 19, 20]

The impugned orders fastened pre signing date liabilities on the purchaser were unsustainable and are set aside.

Accrued business liability - contingent liability - The disputed dues arising out of pre sale transactions are accrued business liabilities and not contingent liabilities. - HELD THAT: - Relying on the settled principle that where a business liability has definitely arisen in an accounting period and is capable of estimation with reasonable certainty, it is not contingent but an accrued liability, the Court held that the liabilities in question arose from operations prior to the Signing Date. Although quantification and discharge might occur later, the incurring of liability was certain and therefore not contingent. Consequently, such liabilities could not be shifted to the purchaser by treating them as contingent obligations. [Paras 16, 17]

The liabilities arising from pre signing date transactions are accrued liabilities and cannot be treated as contingent liabilities transferable to the purchaser.

Liability of purchaser for pre sale dues - A purchaser who was not the dealer or operator prior to the sale cannot be treated as liable for tax/duty obligations arising from the seller's pre sale operations. - HELD THAT: - The Court noted that before 17.7.2010 the appellant was neither a dealer nor the operator of the unit and therefore had no tax or duty obligations in respect of the unit's pre sale transactions. The UPSSCL had collected sums on behalf of the State and was obliged to deposit them in the government treasury; it could not shift that obligation to a purchaser who had no role in those earlier transactions. Treating the purchaser as liable in such circumstances would be arbitrary. [Paras 20]

The purchaser cannot be fastened with tax/duty liabilities arising from transactions prior to the date on which it became the dealer/operator.

Final Conclusion: The appeals are allowed; the impugned orders holding the purchaser liable for dues arising from pre signing date transactions are set aside, and the parties are left to bear their own costs.

Definition of "motor vehicle" under the Motor Vehicles Act - definition of "trailer" as vehicle drawn or intended to be drawn by a motor vehicle - exclusion of tractor from the definition of "motor vehicle" in the Orissa Entry Tax Act - entry tax liability under the Orissa Entry Tax Act

Definition of "motor vehicle" under the Motor Vehicles Act - definition of "trailer" as vehicle drawn or intended to be drawn by a motor vehicle - exclusion of tractor from the definition of "motor vehicle" in the Orissa Entry Tax Act - entry tax liability under the Orissa Entry Tax Act - Tractor trolly is not a 'motor vehicle' for the purposes of Section 2(h) of the Orissa Entry Tax Act and therefore is not amenable to entry tax under that Act. - HELD THAT: - Section 2(h) of the OET Act adopts the Motor Vehicles Act definition of 'motor vehicle' but expressly excludes 'any tractor'. The Motor Vehicles Act definition includes 'trailer' (a vehicle drawn or intended to be drawn by a motor vehicle), but the OET Act's exclusion of 'tractor' means a trailer or trolly that cannot exist independently of a tractor does not fall within the OET Act's definition of 'motor vehicle'. The Tribunal erred in treating the trolly as a stand-alone motor vehicle; legislative intent, as reflected by the separate definitions and the explicit exclusion, precludes classifying a tractor-towed trolly as a 'motor vehicle' liable to entry tax under the OET Act. Consequently the Tribunal's reversal of the first appellate authority was unwarranted and the JCST's conclusion that the trolly did not attract entry tax is restored. [Paras 7, 8, 9, 11, 12]

Answered in the negative in favour of the petitioner; the Tribunal's order is set aside and the order of the first appellate authority is restored.

Final Conclusion: Revision allowed; the tractor trolly is not a 'motor vehicle' under Section 2(h) of the OET Act and is not liable to entry tax for the period 1st April, 2007 to 31st March, 2012; Tribunal order set aside and first appellate order restored, no order as to costs.

Pre-deposit requirement for admission of appeal - power to grant stay of recovery under Section 33(6) - discretionary nature of stay conditions - pre-deposit does not automatically entitle stay - requirement of further verification of records before granting unconditional stay

Pre-deposit requirement for admission of appeal - power to grant stay of recovery under Section 33(6) - discretionary nature of stay conditions - pre-deposit does not automatically entitle stay - Whether payment of the statutory pre-deposit of 25% of the differential tax automatically entitles the dealer to stay of collection of the balance disputed tax pending appeal, or the authority may impose further conditions including additional deposit. - HELD THAT: - The Court examined the statutory scheme under Section 33, noting the mandatory pre-deposit required for admission of an appeal (payment of admitted tax plus 25% of the differential tax). It held that Section 33(6) vests the Additional Commissioner/Joint Commissioner with a discretion to grant stay of collection pending appeal "subject to such terms and conditions as he may think fit." Acceptance of the submission that the initial statutory pre-deposit alone entitles a dealer to an unconditional stay would render the discretionary stay provision nugatory. The Court considered earlier decisions relied upon by the petitioner but followed the Division Bench reasoning in ACT Digital Home Entertainment Pvt. Ltd., which declined to treat a statutory pre-deposit as automatically suspending realization of the remainder. Applying that ratio, the Court found no illegality in the 3rd respondent's order: after perusing the grounds of appeal, the authority concluded that the contentions required further verification of records and, in the exercise of his statutory discretion, imposed an additional condition (payment of further 25% with credit for amounts already paid) while granting stay. The exercise of discretion was within statutory bounds and did not amount to extreme hardship warranting interference by the writ court.

Writ petition dismissed; the Additional Commissioner was entitled in law to impose further conditions for stay and the impugned order directing deposit of 50% (with credit for amounts already paid) is not legally flawed.

Final Conclusion: The statutory pre-deposit required for admission of an appeal does not automatically entitle the dealer to a stay of recovery; the competent authority has statutory discretion under Section 33(6) to impose terms and conditions (including additional deposits) after considering whether the grounds require further verification, and the impugned stay order was held lawful. No interference is warranted; writ dismissed.

Reversal of Input Tax Credit - Mismatch of particulars in Annexures I and II - Procedure for verification of mismatch under departmental circular - Principles of natural justice in assessment proceedings - De novo assessment after procedural non-compliance

Reversal of Input Tax Credit - Mismatch of particulars in Annexures I and II - Procedure for verification of mismatch under departmental circular - Validity of reversal of Input Tax Credit on account of alleged mismatch where the Assessing Authority did not follow the prescribed procedure in Circular No.5 of 2020-2021. - HELD THAT: - The Court found that the Assessing Authority failed to follow the procedure mandated by Circular No.5/2020-2021 for verification of computer-generated mismatch reports, which requires intra-departmental verification, issuance of notice to the dealer, opportunity to show cause, communication with the Other End Assessing Authority and, where necessary, initiation of assessment proceedings after enquiry. Because the prescribed steps for reconciliation and enquiry under the circular, including giving the dealer an opportunity to explain and cross-verification with the other end, were not followed, the impugned assessment orders that resulted in reversal of ITC could not be sustained. The Court set aside the assessments and directed that the matter be proceeded with afresh in accordance with the circular and applicable law.

Impugned assessments quashing the reversal of ITC were set aside and the matter remitted for fresh adjudication in accordance with Circular No.5/2020-2021 and law.

Non-maintenance of books of accounts - Principles of natural justice in assessment proceedings - De novo assessment after procedural non-compliance - Validity of findings against the petitioner for non-maintenance of books of accounts in the impugned assessments. - HELD THAT: - The Court observed that the issue of non-maintenance of books was explained before the Assessing Authority but was not properly considered. As the primary assessments were set aside for failure to follow the circular and for want of proper procedure and enquiry, the ancillary finding on non-maintenance of books was also set aside. The petitioner is to be issued notice and heard afresh when the Assessing Authority proceeds in accordance with the mandated procedure, ensuring adherence to principles of natural justice.

The finding on non-maintenance of books was set aside and will be reconsidered in the course of the de novo proceedings directed to be held in accordance with law and the circular.

Final Conclusion: The writ petitions are allowed: the assessments for 2014-15 and 2015-16 are set aside for failure to follow the procedure prescribed in Circular No.5/2020-2021; the Assessing Authority shall issue notice, afford opportunity of hearing and proceed de novo in accordance with the circular and law within twelve weeks; ancillary findings including non-maintenance of books are also set aside.

Revision of assessment by issuance of a notice - recomputation of turnover in a notice - limitation for assessment of escaped turnover under Section 18 - quashing of notice as time barred - criminal liability and limitation where escapement not determined within assessment period

Limitation for assessment of escaped turnover under Section 18 - quashing of notice as time barred - Validity of recomputing turnover and denying exemption by a notice issued long after assessment and beyond the limitation period - HELD THAT: - The Court held that the impugned notice sought to re compute turnover for a period long after completion of the original assessment and after expiry of the five year limitation for determination of escaped turnover. The notice in effect revised the earlier assessment without any pre assessment proposal and without adherence to the time limit prescribed for assessing escaped turnover; such re computation undertaken eleven years after the period in question was held to be impermissible and barred by law. Consequently the recomputation and denial of exemption effected by the notice were set aside. [Paras 4, 6, 7]

Recomputation of turnover and denial of exemption by the notice is quashed as time barred and impermissible.

Revision of assessment by issuance of a notice - recomputation of turnover in a notice - Whether an assessment order can be revised by issuing a notice which itself purports to make a fresh assessment - HELD THAT: - The Court found that the officer had, by the impugned notice, effectively attempted to revise the original assessment order and to make an assessment through the notice itself. Such procedure was held to be irregular and legally impermissible: an assessment cannot be rewritten or revised by a notice without following the statutory scheme for reassessment or re opening within the prescribed limitations. The notice therefore could not stand to alter the earlier assessment. [Paras 6, 7]

The attempt to revise the original assessment by means of the notice is illegal and the re assessment contained in the notice is set aside.

Criminal liability and limitation where escapement not determined within assessment period - limitation for assessment of escaped turnover under Section 18 - Competence to invoke penal/criminal consequences where escapement of turnover has not been validly determined within the assessment limitation period - HELD THAT: - The Court observed that limitation for prosecution under the criminal law presupposes that the escapement of turnover has been validly determined within the statutory period for assessment. Because determination of escapement was not made within the time prescribed under the tax statute, any attempt to found criminal liability thereafter was misconceived. The impugned notice which contemplated penal action in respect of an escapement that could not be legally determined was therefore unsustainable. [Paras 8, 9, 10, 11]

Proceedings contemplating criminal liability based on the time barred determination of escapement are barred; the notice insofar as it seeks to found penal consequences is quashed.

Final Conclusion: The impugned notice (and consequential orders) purporting to recompute turnover, deny exemption and to found penal consequences for the stated periods are quashed as impermissible and time barred; the writ petition is allowed and connected petitions are closed.

Rectification under Section 84 - principles of natural justice - right to personal hearing - reconsideration of addition made as purchase tax and reversal of input tax credit - remand for fresh adjudication - revival of impugned order upon non-appearance

Rectification under Section 84 - principles of natural justice - right to personal hearing - remand for fresh adjudication - revival of impugned order upon non-appearance - Whether the impugned order passed on the petitioner's Section 84 application violated principles of natural justice by denying personal hearing and whether the matter required remand for fresh consideration. - HELD THAT: - The Court found that the counter-affidavit's assertion of prior personal hearing was inconsistent with the record and that the respondent failed to produce any notice or date of personal hearing despite repeated opportunities. On these findings the Court concluded that the petitioner had not been afforded a personal hearing before the impugned order was passed, thereby infringing the principles of natural justice. In consequence, the impugned rectification order was set aside and the matter remitted for fresh consideration on merits. The Court directed the petitioner to appear before the tax authority on a specified date without further notice and required the respondent to hear the petitioner, consider any materials furnished, and decide the pending Section 84 application within a fixed four week period. The Court also provided that if the petitioner failed to appear on the directed date, the benefit of the order would be forfeited and the impugned order would stand revived automatically. [Paras 6, 7, 8, 9]

Impugned order set aside for lack of personal hearing; matter remitted for fresh decision on the Section 84 application with directions for personal hearing and a timeline for disposal, and automatic revival of the impugned order if the petitioner fails to appear.

Final Conclusion: The High Court set aside the rectification order for the period 2014-15 for breach of natural justice, directed a personal hearing and fresh decision of the pending Section 84 application within four weeks from 05.12.2022, and ordered that failure of the petitioner to appear on the specified date would revive the impugned order.