TaxTMI Updates e-Newsletter
Dec 29,2023

Summary order. Special Leave Petitions dismissed; pending applications disposed of.

Show cause notice - maintainability of writ petition - jurisdiction of the assessing officer - pre decisional remedy of filing reply - remand for adjudication by competent authority - judicial discipline in administrative adjudication

Show cause notice - pre decisional remedy of filing reply - remand for adjudication by competent authority - judicial discipline in administrative adjudication - Whether the High Court should entertain and decide jurisdictional and merit objections to the impugned show cause notice after the assessee has filed a reply before the adjudicating authority. - HELD THAT: - The Court recorded that the petitioner, being the assessee, had filed a reply to the impugned show cause notice and thereby submitted to the jurisdiction of the assessing authority. In view of that submission, the Court declined to entertain substantive challenges to the jurisdiction of the officer or to decide the merits of the demand at the writ stage. The petitioner was permitted to file an additional reply before the authority incorporating the contentions raised before the Court. The Court directed the adjudicating authority to consider the reply/additional reply and decide the matter afresh with due advertence to the record keeping and the provisions of the GST law, observing the need to maintain judicial discipline in administrative adjudication. The petition was disposed of by issuing these directions rather than adjudicating the disputed questions on merits. [Paras 4, 5, 6]

Petition not entertained on merits; petitioner may file additional reply and the adjudicating authority is directed to consider the reply and decide afresh in accordance with law.

Final Conclusion: Writ petition disposed of: petitioner allowed to file/add to its reply; adjudicating authority directed to consider the reply and pass a reasoned order with due regard to record keeping and applicable GST provisions; Court declined to decide jurisdictional or merit challenges at this stage.

Modification of bail condition - Prior permission to travel - Anticipatory bail condition - Interference under Section 482 Cr.P.C. - Permission to travel abroad

Modification of bail condition - Anticipatory bail condition - Condition of anticipatory bail requiring prior permission of the Investigating Officer was modified to require prior permission of the Trial Court. - HELD THAT: - The petition under Section 482 Cr.P.C. sought modification of an anticipatory bail condition which originally obliged the applicant to obtain prior permission of the Investigating Officer/Apprehending Authority before leaving India. The Court noted that the charge-sheet has since been filed and found it appropriate to alter the supervisory authority for travel permissions from the Investigating Officer to the Trial Court. The respondent did not oppose the modification and observed that earlier permissions to travel had not been misused by the applicant. In view of these facts and the change in the stage of proceedings (charge-sheet filed), the Court modified the condition so that prior permission must now be obtained from the Trial Court instead of the Investigating Officer.

Condition of anticipatory bail amended so that prior permission to travel must be obtained from the Trial Court.

Permission to travel abroad - Prior permission to travel - Applicant was granted permission to travel abroad to Dubai for two months on the same terms and conditions as earlier order dated 31.12.2022, subject to satisfaction of the Trial Court. - HELD THAT: - Having modified the bail condition, the Court considered the prayer for permission to travel abroad. It recorded that the applicant had previously been permitted to travel abroad on two occasions without misuse of that liberty. The Court therefore allowed the application and granted permission to the applicant to travel to Dubai, UAE, for a period of two months on the same terms and conditions imposed by the Trial Court in its order dated 31.12.2022, with the further requirement that such permission be to the satisfaction of the Trial Court.

Permission to travel to Dubai for two months granted on the terms of the Trial Court's earlier order, subject to Trial Court's satisfaction.

Exemption from personal appearance - Application for exemption was allowed. - HELD THAT: - A separate miscellaneous application seeking exemption was allowed by the Court. The order recorded allowance of the exemption application subject to all just exceptions and disposed of that application.

Exemption application allowed and disposed of.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed insofar as the anticipatory bail condition is modified to require prior permission of the Trial Court (instead of the Investigating Officer) and the applicant is permitted to travel to Dubai for two months on the terms of the Trial Court's earlier order; the separate exemption application is also allowed.

Extension of time for filing statutory appeal - pre-deposit for preferring an appeal - adjudiatory consideration without raising limitation - opportunity of hearing and decision on merits - judicial discretion to enlarge statutory time

Extension of time for filing statutory appeal - pre-deposit for preferring an appeal - judicial discretion to enlarge statutory time - Extension of time to prefer appeal and compliance with the pre-deposit direction contained in the writ court's order. - HELD THAT: - The High Court granted an extension of eight weeks from the date of the order for the appellant to prefer the statutory appeal and to make the pre-deposit required by the writ court's direction. The appellant is to file the appeal within the extended period together with the pre-deposit of 10% of the amount specified in the impugned Order-in-Original No.25 of 2023. The court exercised its supervisory jurisdiction to enlarge the time fixed by the learned Judge, on the appellant's limited request, as a matter of discretion and convenience. [Paras 4]

Time extended by eight weeks for filing the appeal with the prescribed 10% pre-deposit; appellant to file appeal within the extended period.

Adjudiatory consideration without raising limitation - opportunity of hearing and decision on merits - Obligation of the adjudicating authority in relation to the appeal filed pursuant to the extended time and pre-deposit. - HELD THAT: - The court directed that on filing of the appeal with the prescribed pre-deposit, the first respondent shall consider the appeal on merits and in accordance with law after affording the appellant an opportunity of hearing. The first respondent was directed not to raise any objection on the ground of limitation, if any, occasioned by the extension granted by this Court, and to pass an appropriate order as expeditiously as possible. [Paras 4, 5]

First respondent to consider the appeal on merits after hearing and not to raise limitation objection arising from the time extension.

Final Conclusion: The writ appeal is disposed by extending the period for filing the statutory appeal by eight weeks and confirming that the appeal shall be filed with the prescribed pre-deposit; the adjudicating authority must entertain the appeal on merits after giving hearing and shall not raise limitation objections arising from the extension. No costs.

Anticipatory bail under Section 438 of the Code of Criminal Procedure - economic offences / white-collar crimes - approach to bail in economic offences impacting public exchequer - prima facie satisfaction for denial of pre-arrest bail - habitual involvement and modus operandi as counter-indication for bail - larger public interest and severity of punishment in bail consideration

Anticipatory bail under Section 438 of the Code of Criminal Procedure - prima facie satisfaction for denial of pre-arrest bail - approach to bail in economic offences impacting public exchequer - Whether the applicant should be granted pre-arrest (anticipatory) bail in FIR No. 11191011220168 of 2022 - HELD THAT: - The Court examined the FIR allegations and the affidavit of the Investigating Officer and concluded that prima facie the applicant played an important role in a scheme to create bogus GST registrations and fabricated bills to obtain false input tax credit, thereby causing substantial loss to the public exchequer. The Court observed that the offence is economic in nature of wide societal effect and must be viewed with a different approach when considering bail applications in such matters. Reliance was placed on the principles that economic offences involving deep-rooted conspiracies and large public loss require serious scrutiny and that the Court at the bail stage must be satisfied about the genuineness of the case against the accused rather than require proof beyond reasonable doubt. Having regard to the nature of allegations, the magnitude of the alleged loss, and the contention of prior similar involvement, the Court found no reason to exercise its discretion in favour of the applicant and held that the case made out by the petitioner was insufficient to warrant grant of pre-arrest bail. [Paras 7, 10, 11]

Application for pre-arrest bail is rejected and the petition is dismissed.

Final Conclusion: The High Court declined to grant anticipatory (pre-arrest) bail to the applicant, holding that prima facie allegations disclose serious economic offences affecting the public exchequer and that the applicant has not established entitlement to relief under Section 438 Cr.P.C.; petition dismissed.

Validity of show cause notice - vagueness and absence of cogent material - initiation of proceedings under Section 73 where 'it appears' requires prior material - judicial review of a show cause notice at pre adjudication stage - quashing of show cause notice for want of due application of mind - departmental right to initiate fresh proceedings in accordance with law

Validity of show cause notice - vagueness and absence of cogent material - quashing of show cause notice for want of due application of mind - Ex. P1 Show Cause Notice dated 30.09.2023 issued under Section 73 of the CGST Act, 2017 is sustainable in law. - HELD THAT: - The Court examined Ex. P1 and found that the notice lacked necessary information, sources or materials on which the authority concluded that tax had been evaded. A plain reading indicated a mechanical issuance without application of mind or requisite scrutiny to establish a reasonable suspicion of suppression or evasion. The Court emphasised that proceedings under Section 73 commence ''where it appears'' to the authority, which presupposes availability of some material, information or complaint justifying initiation; absence of such material renders the notice unsustainable. Applying these principles, the Court concluded that the Show Cause Notice was bereft of facts and materials and therefore liable to be set aside. The Court, however, expressly reserved the Department's statutory right to initiate proceedings afresh in accordance with law if permitted. [Paras 7, 8, 9]

Ex. P1 Show Cause Notice dated 30.09.2023 set aside/quashed; Department's right to initiate fresh proceedings in accordance with law reserved.

Final Conclusion: Writ petition allowed to the extent that the impugned Show Cause Notice dated 30.09.2023 is quashed for want of requisite material and application of mind; no order as to costs; Department may initiate proceedings afresh in accordance with law.

Interim stay of tax demand pending writ where second appellate forum is not constituted - pre-deposit requirement for admission of appeal under the GST appellate regime - condonation of delay in preferring statutory appeal - juridical consequence of non constitution of second appellate tribunal

Juridical consequence of non constitution of second appellate tribunal - interim stay of tax demand pending writ where second appellate forum is not constituted - Petition entertained as second appellate tribunal has not been constituted and interim relief granted. - HELD THAT: - The writ petition was entertained because the Second Appellate Tribunal has not yet been constituted and therefore the statutory second appeal remedy is not presently available to the petitioner. In exercise of its discretionary jurisdiction and as an interim expedient the Court directed that, subject to the petitioner depositing the entire tax demand within four weeks, the balance of the demand shall remain stayed during the pendency of the writ petition. The order reflects the Court's decision to provide temporary protection in the absence of the constituted appellate forum while leaving substantive adjudication to the appropriate forum or further proceedings in this petition. [Paras 2, 8]

Writ petition entertained for interim relief; stay of the rest of the demand granted on condition of deposit of the entire tax demand within four weeks.

Pre-deposit requirement for admission of appeal under the GST appellate regime - condonation of delay in preferring statutory appeal - Court recorded the contentions regarding deposit and delay but did not condone delay or alter statutory pre deposit rules; directions for appeal procedure and compliance were recorded. - HELD THAT: - The revenue argued that there was delay in preferring the appeal and that statutory limits and the appellate authority's restricted discretion to condone delay must be respected; it also contended that a further pre deposit (balance 20%) would be required before the second appellate tribunal if the petitioner sought to pursue that remedy. The Court recorded these contentions, issued notice, and set short timelines for service of process and filing of reply and rejoinder; it did not modify or dispense with the statutory pre deposit or condonation regime but provided interim relief subject to the specific deposit condition set out in the order. [Paras 4, 5, 7]

Contentions on delay and statutory pre deposit noted; parties directed on procedure and timelines; interim relief confined to the deposit condition set by the Court.

Final Conclusion: The Court entertained the writ petition because the Second Appellate Tribunal is not constituted, issued notice, recorded the parties' contentions on delay and pre deposit, and granted an interim stay of the balance of the tax demand during the writ proceedings provided the petitioner deposits the entire tax demand within four weeks; procedural directions for service and pleadings were given.

Entertainment of writ petition due to non-constitution of statutory tribunal - constitution of appellate tribunal - interim stay of tax demand on deposit - jurisdiction of High Court when appellate forum absent - delay in preferring appeal and condonation limits

Entertainment of writ petition due to non-constitution of statutory tribunal - jurisdiction of High Court when appellate forum absent - constitution of appellate tribunal - High Court may entertain writ petition when the statutorily mandated Second Appellate Tribunal has not been constituted - HELD THAT: - The Court entertained the writ petition because the Second Appellate Tribunal envisaged under the GST scheme has not been constituted, leaving no alternate appellate forum. The Court recorded that non-constitution of the Tribunal, despite the GST Act being in operation since 1 July 2017, imposes pressure on High Courts and that creation of the Tribunal is a statutory mandate which the Central Government is duty bound to fulfil. Consequently, the petition has been admitted for consideration and notice issued to the Central Government to explain the non-constitution of the appellate forum. [Paras 2, 6, 7]

Writ petition entertained and notice issued to the respondents, including the Central Government, on account of non-constitution of the Second Appellate Tribunal.

Interim stay of tax demand on deposit - delay in preferring appeal and condonation limits - Interim relief in the form of stay of remaining tax demand subject to deposit of the entire tax demand within a stipulated time - HELD THAT: - Although the first appellate authority had refused to admit the appeal (citing non-compliance with procedural timelines), the Court granted an interim measure to preserve the petitioner's right to challenge the demand while the writ is pending. As an interim measure, the Court ordered that if the petitioner deposits the entire tax demand within fifteen days, the balance of the demand shall remain stayed for the duration of the writ proceedings. The Court also directed service of the petition and issuance of notices with timelines for filing replies and rejoinder, thereby preserving procedural contest between the parties while the substantive issue of absence of the Tribunal is examined. [Paras 10]

Subject to deposit of the entire tax demand within fifteen days, the remaining tax demand is stayed during the pendency of the writ petition; procedural directions for service and pleadings were issued.

Final Conclusion: The High Court entertained the writ petition because the Second Appellate Tribunal has not been constituted, issued notice to the respondents including the Central Government, and granted interim stay of the balance tax demand subject to the petitioner depositing the entire tax demand within fifteen days; matter listed for further hearing.

Document Identification Number (DIN) requirement in departmental communications - Validity of assessment order issued without DIN - Binding effect of CBDT Circular No.19/2019 on revenue authorities - Communication to be treated as invalid and deemed never to have been issued under paragraph 4 of the Circular - Exceptions permitting manual communication only with recorded reasons and prior written approval of CCIT/DGIT

Document Identification Number (DIN) requirement in departmental communications - Validity of assessment order issued without DIN - Binding effect of CBDT Circular No.19/2019 on revenue authorities - Communication to be treated as invalid and deemed never to have been issued under paragraph 4 of the Circular - Exceptions permitting manual communication only with recorded reasons and prior written approval of CCIT/DGIT - Impugned assessment orders dated 31.12.2019 are invalid for non-compliance with CBDT Circular No.19/2019 by not quoting DIN or stating the prescribed reasons and approvals for manual issue. - HELD THAT: - The Tribunal examined CBDT Circular No.19/2019 which mandates that communications (including assessment orders) issued on or after 01.10.2019 must quote a computer-generated Document Identification Number (DIN) in the body of the communication. Paragraph 3 of the Circular permits limited exceptions for manual issuance, but only after recording reasons in the file and with prior written approval of the Chief Commissioner/Director General of Income-Tax, and requires the communication itself to state the specified reasons and approval particulars. Paragraph 4 declares any communication not in conformity with paragraphs 2 and 3 to be invalid and deemed never to have been issued. The Assessing Officer's orders of 31.12.2019 do not mention any DIN nor do they state the reasons/approvals prescribed by the Circular. In light of the Circular's object of creating an audit trail and its binding character on revenue authorities, the Tribunal, following the reasoning applied by the Delhi High Court in Brandix Mauritius Holdings Ltd. and by coordinate benches of the Tribunal, held that such non-compliant assessment orders lose their validity and must be quashed. Consequential factual enquiries about post hoc generation of DIN or administrative validation were held to be immaterial to the legal conclusion that the impugned orders, as issued, are non est in law. [Paras 10, 11]

Impugned assessment orders dated 31.12.2019 are quashed as invalid for non-compliance with CBDT Circular No.19/2019.

Final Conclusion: The assessee's appeals are allowed by quashing the AO's assessment orders dated 31.12.2019 for Assessment Years 2012-13, 2013-14 and 2014-15 for non-compliance with CBDT Circular No.19/2019; the Revenue's cross-appeal is dismissed and remaining grounds are rendered academic.

Reopening of assessment under section 147/148 - definition of capital asset under section 2(14) - distinction between municipal limits and notified urban/industrial development area for characterization of land - application of section 50C valuation fiction - admission and consideration of documentary evidence on nature of land

Reopening of assessment under section 147/148 - admission and consideration of documentary evidence on nature of land - Validity of reopening proceedings initiated under Section 147 read with Section 148 - HELD THAT: - The Tribunal examined whether the Assessing Officer had a justified belief to reopen the assessment. The AO relied on recital in the sale deed and Stamp Valuation Authority's valuation to form belief that income had escaped assessment. The assessee produced contemporaneous revenue records, certificate of village authority/Gram Panchayat, government notifications showing Lajpore not included within Surat Municipal Corporation limits, and extracts confirming administration under Panchayat Raj. The Tribunal accepted that mere declaration of an area as an urban development or industrially notified area does not ipso facto bring it within municipal limits; a separate inclusion notification is required. On the material before it the AO's assumption that the land fell within municipal limits was based on an incorrect factual premise and the assessee's documentary evidence was sufficient to rebut that premise. Having found the foundational fact for reopening to be misplaced, the reopening was not justified in the circumstances. [Paras 14, 15]

Reopening under Section 147/148 was not justified as it rested on an incorrect assumption of fact; the assessee's evidence showing the land lay outside municipal limits was accepted.

Definition of capital asset under section 2(14) - distinction between municipal limits and notified urban/industrial development area for characterization of land - application of section 50C valuation fiction - Whether the impugned land was a capital asset under Section 2(14) and whether Section 50C valuation could be applied to compute capital gains - HELD THAT: - The Tribunal considered the character of the land on the date of transfer. Relying on the revenue records, local certificates and statutory notifications showing that Lajpore was not within municipal limits, and on the principle that mere notification for industrial or urban development does not automatically convert rural/agricultural land into municipal land, the Tribunal held the land retained its agricultural character. The Tribunal distinguished the facts of Sarifa Bibi (where the land was in the heart of the city) and found them inapplicable. Because the land was not a capital asset within the meaning of Section 2(14), the legal fiction in Section 50C (substituting stamp valuation authority value for consideration) was not applicable for treating the sale proceeds as taxable capital gains. Consequently the short term capital gains addition was deleted. [Paras 16]

The impugned land was agricultural (not a capital asset under Section 2(14)); Section 50C valuation fiction did not apply and the addition of short term capital gains was deleted.

Final Conclusion: The appeal is allowed: the Tribunal accepted the assessee's evidence that the land lay outside municipal limits and retained agricultural character, quashed the basis for reopening and deleted the additions treating the sale proceeds as taxable capital gains.

Natural justice - dismissal for non-prosecution versus adjudication on merits - unexplained cash deposits treated as unexplained money under section 69A - best judgment assessment under section 144 - appellate jurisdiction and pre-condition of grievance under section 253 - remand for fresh adjudication / restoration to file

Natural justice - dismissal for non-prosecution versus adjudication on merits - Whether the Commissioner (Appeals) erred by disposing the appeal without affording a reasonable opportunity and by summarily dismissing the appeal instead of deciding it on merits. - HELD THAT: - The Tribunal found on the record that the assessee repeatedly failed to file its return, to respond to statutory notices, to appear or to file written submissions both before the Assessing Officer and before the Commissioner (Appeals) despite multiple opportunities spanning two years. Given the absence of any documentary or other evidence to rebut the AO's conclusion, the CIT(A) proceeded on available material and recorded reasons for sustaining the AO's view. The Tribunal distinguished the reliance on the Bombay High Court decision in Prem Kumar Arjundas Luthra (HUF) on the facts: this was not a case where the appeal was dismissed in limine for non-prosecution, but one where the CIT(A) considered the material on record and upheld the reasoned order of the AO. The Tribunal therefore held that no breach of principles of natural justice or summary dismissal without adjudication on merits occurred. [Paras 10, 11, 12, 14]

The contention that the appeal was disposed without reasonable opportunity or summarily dismissed is rejected and the CIT(A)'s disposal on the basis of material on record is upheld.

Unexplained cash deposits treated as unexplained money under section 69A - best judgment assessment under section 144 - Whether the addition of the cash deposits as unexplained income under section 69A sustained by the CIT(A) was valid. - HELD THAT: - The AO, after obtaining bank details under section 133(6), quantified cash deposits in the relevant bank account and, in the absence of any explanation or supporting material from the assessee, treated the total cash deposits as unexplained money and completed assessment by best judgment under section 144. The CIT(A) examined the record, noted lack of any evidence from the assessee to substantiate the source of credits, and agreed with the AO's reasoned order. The Tribunal observed that where the assessee by volition abstains from filing returns, replying to notices or prosecuting appeal, and places no material to rebut the cash-deposit findings, the sustaining of the addition under section 69A is justified. [Paras 4, 10, 11, 13, 21]

The addition made by the AO under section 69A and upheld by the CIT(A) is upheld.

Appellate jurisdiction and pre-condition of grievance under section 253 - remand for fresh adjudication / restoration to file - Whether the Tribunal should remit the matter to the CIT(A) or AO for fresh adjudication. - HELD THAT: - The Tribunal noted that section 253 contemplates an appeal to the Tribunal against an order of assessment or specified orders of the Commissioner (Appeals). The assessee sought restoration for fresh adjudication, but the Tribunal held that the grounds before it were devoid of merit and that the assessee cannot, by way of appeal to the Tribunal, raise for the first time matters which it omitted to prosecute before the lower authorities. In view of the assessee's persistent non-participation and absence of any material warranting reconsideration, remand was refused. [Paras 13, 15]

Request for restoration/remand to the lower authorities for fresh adjudication is refused.

Final Conclusion: The Tribunal finds no infirmity in the orders of the lower authorities: the CIT(A) correctly adjudicated the appeal on the material available and the AO's addition treating cash deposits as unexplained money under section 69A (confirmed by best judgment assessment under section 144) is upheld; the assessee's appeal is dismissed.

Income taxable in India - Fees for Technical Services (FTS) and hence exigible to tax u/s 44DA and Section 115Aof the Income Tax Act, 1961 - PE in India - whether Section 44BB of the Act would be applicable to the respondent/assessee, who is a second line contractor? - HELD THAT:- Delay condoned. We are not inclined to interfere in the matter. The Special Leave Petition stands dismissed.

However, liberty is reserved to the petitioner to raise the issue which arises in this Special Leave Petition, in the event any adverse final order is passed by the High Court [2023 (2) TMI 1240 - DELHI HIGH COURT] against the petitioner herein.

Pending application(s) shall stand disposed of.

Compounding of offence under Section 279(2) of the Income Tax Act - Benefit of Section 279(1A) upon reduction of penalty - Binding effect of an unchallenged writ order - Prem Dass principle that reduction of penalty bars prosecution - Limits of contempt jurisdiction to dilute or alter prior orders

Compounding of offence under Section 279(2) of the Income Tax Act - Benefit of Section 279(1A) upon reduction of penalty - Prem Dass principle that reduction of penalty bars prosecution - Binding effect of an unchallenged writ order - Validity of the Single Judge's order remitting the respondent's compounding application to the compounding authority and directing fixation of compounding fee - HELD THAT: - The Division Bench upheld the learned Single Judge's remedial direction to remit the matter to the compounding Committee, holding that the Single Judge in W.P. No. 3929 of 2014 had conclusively found that the respondent is entitled to the benefit of Section 279(1A) in view of the reduction of penalty by the appellate authority and that the Supreme Court's decision in Prem Dass supports that entitlement. The Court observed that the revenue did not challenge that writ order and is therefore bound by it; consequently the revenue cannot now contend otherwise or frustrate compounding. The Bench declined to re-examine the correctness of the Single Judge's interpretation of Section 279(1A) or the applicability of the Prem Dass principle since those conclusions have attained finality as against the appellants, and on that basis held there was no interference warranted with the remittal and direction to compound. [Paras 6, 11]

The remittal directing compounding and fixation of compounding fee is upheld; the writ appeal is dismissed.

Limits of contempt jurisdiction to dilute or alter prior orders - Binding effect of an unchallenged writ order - Whether observations in the contempt proceedings could be used to dilute or negate the earlier writ order directing entitlement to compound - HELD THAT: - The Court held that a contempt jurisdiction is confined to determining whether there has been wilful disobedience of a court's order and is not competent to revisit, alter or dilute substantive conclusions reached in the original writ proceeding. The Division Bench found that the observations in the contempt proceedings which purported to treat the earlier writ order as not containing positive directions were misconceived; the appellants were bound by the earlier unchallenged writ order and the contempt forum could not lawfully water down those directions. Reliance was placed on established principles limiting the scope of contempt jurisdiction to maintain the integrity of prior adjudications. [Paras 7, 8, 9, 10]

Contempt-stage observations cannot be used to dilute or override the prior writ order; the revenue is bound by the earlier order.

Final Conclusion: The Division Bench dismissed the writ appeal and upheld the Single Judge's order remitting the respondent's compounding application to the compounding authority for fixation of compounding fee, holding that the respondent is entitled to the benefit of Section 279(1A) in view of the reduction of penalty and that the revenue, having not challenged the earlier writ order, is bound by it; contempt-stage observations cannot dilute that order.

Condonation of delay - Advertising, Marketing and Promotion expenses - international transactions - binding effect of coordinate-bench decisions and like-case principle - liberty to revive appeal upon favourable higher forum outcome

Condonation of delay - Application for condonation of delay of 42 days in filing the appeal - HELD THAT: - The Court considered the application seeking condonation of delay of 42 days filed by the appellant/revenue. Having regard to the period involved and the explanations advanced, the Court exercised its discretion in favour of the appellant and allowed the application. The order records that the delay is condoned and the application is disposed of accordingly.

Delay of 42 days in filing the appeal is condoned; the condonation application is allowed and disposed of.

Advertising, Marketing and Promotion expenses - international transactions - binding effect of coordinate-bench decisions and like-case principle - liberty to revive appeal upon favourable higher forum outcome - Whether the appeal should proceed where the core question (whether AMP expenses qualify as international transactions) is identical to that raised and decided in an earlier appeal between the same parties - HELD THAT: - The Court noted that the core controversy in the instant appeal relates to whether Advertising, Marketing and Promotion expenses qualify as international transactions. It was recorded that an appeal concerning AY 2010-11 (ITA 674/2023) raising identical questions had been heard and an order pronounced on 01.12.2023. In view of the identical nature of the questions and the prior determination in the related appeal, the Court held that the present appeal must 'suffer the same fate' and accordingly closed the appeal without entering into the merits. The Court also recorded that the appellant/revenue has challenged the coordinate-bench decisions relied upon (including Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT and Maruti Suzuki India Ltd. v. CIT) before the higher forum; it was clarified that should the appellant succeed in the pending Special Leave Petition, it would have liberty to seek revival of the instant appeal.

The appeal is closed as it is covered by the decision in the related appeal raising identical questions; liberty granted to the appellant to seek revival if it obtains a favourable outcome in the pending higher forum challenge.

Final Conclusion: Condonation of 42 days' delay in filing the appeal is allowed. The substantive appeal (AY 2009-10) is closed because the same question regarding whether AMP expenses constitute international transactions has been decided in a related appeal; the revenue is permitted to apply for revival of the present appeal if it obtains a favourable result in its pending higher forum challenge.

Admission of additional evidence by first appellate authority - co-equal powers of Commissioner of Income Tax (Appeals) and Assessing Officer in appellate inquiry - requirement of procedure under Rule 46A(3) in appellate proceedings - best judgment assessment and verification of bank-reported credits

Admission of additional evidence by first appellate authority - requirement of procedure under Rule 46A(3) in appellate proceedings - co-equal powers of Commissioner of Income Tax (Appeals) and Assessing Officer in appellate inquiry - Validity of CIT(A)'s admission and consideration of additional evidence without following the procedure in Rule 46A(3) and consequent deletion of addition - HELD THAT: - The Court accepted the Tribunal's conclusion that the CIT(A), exercising the inquiry powers under Section 250(4), was entitled to call for and examine evidence and to make necessary inquiries when the assessee had not been given a fair opportunity before the Assessing Officer. The CIT(A)'s factual findings-viz., that the bank had wrongly reported a larger amount and that the actual time deposits were Rs. 9.50 crores supported by remittances from the assessee's overseas account-were recorded after examining bank information and documents produced during appellate proceedings. The Tribunal lawfully upheld those findings, observing that where the first appellate authority, on examining material, records a factual finding and no contrary material is produced by the Revenue to show deficiency or discrepancy, the decision cannot be reversed merely on the ground of non-compliance with Rule 46A. Having regard to the co-terminus powers of the CIT(A) and AO to inquire and the absence of any material to disturb the factual conclusion, interference was not warranted. [Paras 15, 16, 17, 18, 19]

The deletion of the addition by the CIT(A), upheld by the Tribunal, was valid; no interference warranted with the CIT(A)'s admission and consideration of evidence in the circumstances.

Condonation of delay in filing and re-filing appeals - Application for condonation of delay in filing and re-filing the appeal - HELD THAT: - The Court, after noting the periods of delay (82 days in filing and 7 days in re-filing), exercised its discretion to condone the delays. The applications for condonation were allowed and disposed of accordingly. [Paras 1, 2, 3]

Delay in filing and re-filing the appeal was condoned and the condonation applications were allowed.

Final Conclusion: The appeal raises no substantial question of law. The CIT(A)'s deletion of the addition (in respect of the corrected quantum of time deposits and their source) was affirmed by the Tribunal and is not interfered with; the appeal is dismissed. The applications for condonation of delay in filing and re-filing the appeal are allowed.

Condonation of delay under Section 119(2)(b) of the Income Tax Act - directory nature of audit report/Form 10B - substantial compliance - avoidance of genuine hardship - non-speaking/cryptic order - quashing of consequential orders

Condonation of delay under Section 119(2)(b) of the Income Tax Act - non-speaking/cryptic order - avoidance of genuine hardship - Impugned order dated 31.07.2023 rejecting the application for condonation of delay in filing Form 10B for AY 2017-18 was arbitrary, cryptic and required to be set aside. - HELD THAT: - The Court examined the impugned order and found it to be cryptic and non-speaking, not dealing with the grounds advanced under Section 119(2)(b). Section 119(2)(b) confers a discretionary and liberal power to condone delay to avoid genuine hardship. On the facts, the return was filed within time, the audit report was prepared on 20.09.2017 and was uploaded belatedly but well before the assessment order dated 24.09.2021. Given the statutory purpose of Section 119(2)(b) and the absence of reasoned consideration in the impugned order, the Court concluded that the rejection was unsustainable and interference was warranted. The Court therefore set aside the impugned order and directed the authority to pass consequential orders in accordance with law. [Paras 14, 15, 16, 17, 22]

Impugned order rejecting condonation application quashed; application for condonation of delay allowed; respondent directed to pass consequential order in accordance with law.

Directory nature of audit report/Form 10B - substantial compliance - Non-filing/late filing of the audit report in Form 10B is procedural and, on substantial compliance, cannot automatically defeat entitlement to exemption under Section 11. - HELD THAT: - Relying on established precedent and the legislative purpose, the Court treated the requirement to furnish the auditors' report as procedural and directory. The Court noted authorities holding that substantial compliance suffices and that the auditor's report may be furnished at a later stage, including before assessment, if sufficient cause is shown. On the facts, the audit report was prepared within time and uploaded well before the assessment order; accordingly denial of exemption merely on the ground of belated uploading without reasoned consideration was inappropriate. [Paras 18, 19, 20, 21, 22]

Requirement to file Form 10B treated as directory; substantial compliance found on the facts and the late filing did not justify denial of exemption without reasoned exercise of discretion.

Final Conclusion: Writ petition allowed. Impugned order dated 31.07.2023 rejecting the condonation application set aside; consequential orders quashed; application for condonation of delay in filing Form 10B for AY 2017-18 allowed and respondent directed to pass appropriate consequential order in accordance with law.

Opportunity of being heard - service of notice by electronic mode vs physical service - violation of principles of natural justice - limitation for issuance of notice under Section 148A - service of notice as per Section 282(1) and Rule 127

Opportunity of being heard - service of notice by electronic mode vs physical service - violation of principles of natural justice - service of notice as per Section 282(1) and Rule 127 - Validity of the show cause notice dated 23.03.2022 issued under Section 148A(b) in view of the mode and timing of service and the resulting opportunity afforded to the assessee. - HELD THAT: - The Court held that a notice dated 23.03.2022 attains finality for reckoning the statutory response period only when it is served on the assessee. In the present case the postal service reached the assessee on 28.03.2022, one day before the last date fixed for response; hence the seven-day period under Section 148A(b) had to be reckoned from 28.03.2022. The Department's contention that mere uploading on the e-portal on 23.03.2022 constituted sufficient service was rejected. Reliance was placed on the service modes listed in Section 282(1) and the rule-making provision in Rule 127, and the Court concluded that electronic transmission by e-portal or e-mail cannot supplant physical service but may operate in addition thereto. Because the Assessing Officer proceeded without granting the requisite opportunity of not less than seven clear days from the date of actual service and without further extension despite actual receipt on 28.03.2022, the show cause notice violated the procedural requirement and principles of natural justice and is unsustainable. [Paras 10]

The show cause notice dated 23.03.2022 under Section 148A(b) is quashed for defective service and violation of the assessee's right to be heard.

Limitation for issuance of notice under Section 148A - Sustainability of the proceedings on the ground of limitation in respect of AY 2015-16. - HELD THAT: - The Court observed that the assessment year in question is AY 2015-16 and that the limitation period for initiating proceedings under Section 148A had expired on 31 March 2021. The Department failed to take action within the mandatory limitation period of six years; the Court treated the limitation as mandatory and held that the impugned proceedings are not sustainable on this ground. The Court noted that the Department cannot indefinitely keep proceedings pending against an assessee when the statutory limitation has expired. [Paras 10]

Proceedings in respect of AY 2015-16 are unsustainable on limitation grounds; the impugned proceedings are quashed.

Final Conclusion: Writ petition allowed; the show cause notice dated 23.03.2022 and all consequential proceedings (including orders dated 05.04.2022 and notice dated 06.04.2022) are quashed as unsustainable both for defective service/violation of natural justice and on limitation grounds; no costs.

Reopening of assessment and issuance of notice under section 147/148 - validity and jurisdiction - requirement of sanction/approval of competent authority for reopening after four years - change of opinion doctrine - consequences of invalid reopening - actions void ab initio - admissibility of procedural objection where assessee has participated - section 292BB

Reopening of assessment and issuance of notice under section 147/148 - validity and jurisdiction - requirement of sanction/approval of competent authority for reopening after four years - change of opinion doctrine - Validity of re-opening the assessment for AY 2007-08 and issuance of notice under section 148 - HELD THAT: - The Tribunal found that the reassessment was initiated by a notice dated 29.03.2014 issued after the four-year period and there is no record of the requisite sanction/approval by the competent authority as required when reopening beyond four years. The notice was issued by ITO Ward-33(2), New Delhi, whereas the assessee's jurisdictional assessing officer was at Surat; there was no transfer order under section 127 or any show-cause/notice informing the assessee of change of jurisdiction. The material on the disputed purchases was available to the assessing officer at the time of the original assessment and the earlier additions on similar issues had been considered and adjudicated upon in the original proceedings and on appeal. On these facts the reassessment amounted to a mere change of opinion and the prerequisites for valid reopening were not satisfied. Therefore the reopening and the notice under section 148 were held invalid. [Paras 9]

Reopening and issuance of notice under section 148 held invalid for want of jurisdictional competence and required sanction/approval.

Consequences of invalid reopening - actions void ab initio - admissibility of procedural objection where assessee has participated - section 292BB - Legal consequence of invalid reopening on subsequent reassessment proceedings and on merits of addition - HELD THAT: - Having held the reopening and notice invalid, the Tribunal concluded that all subsequent proceedings flowing from that invalid action are vitiated and therefore void ab initio. Although the Revenue relied on participation of the assessee in reassessment and invoked section 292BB to contend that technical objections cannot be raised after participation, the Tribunal treated the primary contention on validity as decisive. As a result, adjudication on the merits of the additions was found to be academic and was not proceeded with. [Paras 10]

Subsequent reassessment proceedings are void ab initio; merits of the additions not adjudicated as they became academic.

Final Conclusion: Appeal allowed: reassessment notice under section 148 and consequent proceedings for AY 2007-08 quashed as invalid for want of competent sanction and jurisdiction; consequential additions set aside as proceedings vitiated ab initio.

Charitable purpose - advancement of any other object of general public utility - incidental income - trade, commerce or business - Section 11 and 12 exemption - Section 13(8) read with the proviso to Section 2(15) - corpus donation - depreciation and capital expenditure as application of income

Charitable purpose - advancement of any other object of general public utility - incidental income - trade, commerce or business - Section 13(8) read with the proviso to Section 2(15) - Whether the assessee's activities qualify as charitable activities for exemption under Sections 11 and 12, having regard to retained receipts and the tests laid down in Ahmedabad Urban Development Authority and related precedents. - HELD THAT: - The Tribunal noted conflicting treatments below and that its earlier decision for A.Y. 2009-10 did not have the benefit of the Supreme Court's elucidation in Ahmedabad Urban Development Authority on 'incidental' or cost-based receipts. The Court observed that the Supreme Court permits collection of cost/norminal consideration in furtherance of charitable objects so long as such receipts do not take the colour of trade/professional fees and are confined to what is required to effectuate charitable activities. Given these principles and the factual controversy whether the assessee's retained portion of donations is merely incidental to carrying out charitable activities or constitutes fees for rendering services, the Tribunal found it appropriate in the interest of justice to remit the primary issue to the Assessing Officer for fresh examination. The AO is to analyse the assessee's facts in light of AUDA and relevant precedents, and determine whether the retained earnings are incidental to charitable objects or constitute business/fee income attractable to Section 13(8) and the proviso to Section 2(15). [Paras 16]

Restored to the Assessing Officer for de novo consideration of charitable status and the impact of AUDA; issue allowed for statistical purposes.

Depreciation and capital expenditure as application of income - Section 11 and 12 exemption - Whether depreciation on assets and capital expenditure can be treated as application of income to charitable purposes (relevant to A.Y. 2014-15). - HELD THAT: - The Tribunal, having restored the primary question of charitable status to the Assessing Officer, also directed that related claims concerning allowance of depreciation and treatment of capital expenditure as application of income require fresh consideration in that broader factual re-examination. Consequently, the Tribunal remitted this issue to the Assessing Officer for de novo adjudication in conformity with the outcome of the enquiry on charitable character and application/accumulation of income. [Paras 19, 20]

Restored to the Assessing Officer for de novo consideration; appeal allowed for statistical purposes.

Corpus donation - Section 11(1)(d) - Section 11 and 12 exemption - Whether corpus donations received/paid are taxable or exempt, and the correctness of treating certain corpus donations as income (relevant to A.Ys. 2012-13, 2013-14, 2014-15 and 2015-16). - HELD THAT: - The Tribunal observed that the treatment of corpus donations depends on the primary determination of whether the assessee is entitled to exemption and on the factual characterisation of those receipts. Since the principal issue (charitable status and application/retention of receipts) was remitted for fresh inquiry, the Tribunal directed that the Assessing Officer revisit the question of corpus donations in the light of that inquiry and applicable provisions governing corpus and application of income. The Tribunal therefore remitted the matter for de novo consideration rather than deciding it on merits. [Paras 19, 20]

Restored to the Assessing Officer for de novo consideration; appeals allowed for statistical purposes in respect of these issues.

Final Conclusion: All primary controversies (charitable status under Section 2(15)/Sections 11-12, allowance of depreciation as application of income, and taxability of corpus donations) are remitted to the Assessing Officer for de novo consideration in light of the Supreme Court's decision in AUDA and the facts of the case; both the assessee's and Revenue's appeals are allowed for statistical purposes.

Most Appropriate Method - Comparable Uncontrolled Price (CUP) method - Other method under Rule 10AB - Hard-to-value intangibles - Arm's length price - Price-orientation in transfer pricing

Most Appropriate Method - Comparable Uncontrolled Price (CUP) method - Hard-to-value intangibles - Arm's length price - Selection of the Most Appropriate Method for benchmarking royalty paid for licence of technical know-how and trademark - HELD THAT: - On the facts, the Tribunal found the intangibles licensed by the AE to be unique, evolving and hard-to-value, and that searches in Royalty-STAT did not yield sufficiently comparable agreements. The Tribunal noted that CUP requires a high degree of comparability and that the two comparables relied upon by the Revenue differed materially in product, technology and contractual features from the assessee's Technical License Agreement. It accepted that RPM, CPM, PSM and TNMM were inapplicable or unsuitable in the circumstances. Applying Rule 10AB and the OECD guidance on hard-to-value intangibles, the Tribunal concluded that where reliable CUP comparables are lacking and intangibles are unique, an alternative price-oriented method falling within Rule 10AB can be the Most Appropriate Method. Accordingly, the Tribunal held that the assessee's approach falls within the "other method" under Rule 10AB and that the "other method" is the MAM in the peculiar facts of this case. [Paras 21, 22, 23, 24, 25]

CUP is not the MAM; the "other method" under Rule 10AB is the Most Appropriate Method for benchmarking the royalty on the facts of the case.

Other method under Rule 10AB - Price-orientation in transfer pricing - Arm's length price - Remand for fresh application of the "other method" and verification of allocation and computation - HELD THAT: - Although the Tribunal accepted the "other method" as MAM, it did not accept the assessee's working as final. The Tribunal directed the TPO to adopt the "other method" and to examine afresh the assessee's substituted working, including identifying costs and profits attributable to manufacturing and sales in the Non-AE segment and determining appropriate allocation to arrive at the royalty component. The Tribunal therefore remitted the computation and verification to the TPO and directed the assessee to substitute its working based on the "other method" for fresh determination of ALP. [Paras 25]

Direction to the TPO to adopt the "other method" as MAM and to re-examine and compute the ALP of royalty afresh on the basis of revised workings; assessee to substitute working accordingly.

Final Conclusion: The appeal is allowed for statistical purposes: CUP is rejected as the MAM on the facts; the "other method" under Rule 10AB is held to be the Most Appropriate Method, and the matter of quantification is remitted to the TPO for fresh examination and computation in accordance with the Tribunal's directions.

Demurrage charges - detention of goods by customs - custodian's authority under Section 45 - prohibition on charging demurrage during certified period of detention under Regulation 6(1) of the Regulations of 2009 - effect of appellate order confirming transaction value on liability to demurrage

Demurrage charges - detention of goods by customs - prohibition on charging demurrage during certified period of detention under Regulation 6(1) of the Regulations of 2009 - effect of appellate order confirming transaction value on liability to demurrage - Whether the custodian (Container Corporation of India Limited) was entitled to charge demurrage/rent for the period during which the goods remained detained by the customs authorities despite issuance of a detention certificate directing that no rent or demurrage be charged - HELD THAT: - The Court found that the appellate order dated 23.5.2019 accepting the petitioner's declared transaction value attained finality and the petitioner thereafter deposited duty. A detention certificate dated 17.9.2019 was issued directing the custodian not to charge rent or demurrage for the period of detention. Relying on the Division Bench decision in M/s Continental Carbon India Ltd. and consistent authorities from other High Courts, the Court held that a customs cargo service provider appointed under Section 45 read with the Regulations of 2009 is prohibited from charging demurrage on goods seized or detained by the customs department for the certified period. The Court distinguished precedents relied upon by respondents (earlier Supreme Court decisions concerning different statutory regimes) as inapplicable on the facts. Applying Regulation 6(1) and the reasoning in Continental Carbon, the Court concluded that the custodian had no authority to demand demurrage for the period of detention certified by customs and therefore could not lawfully refuse release of goods on that ground. The relief was confined to waiver of demurrage up to the certified date, subject to payment of other charges accruing after that period. [Paras 9, 10, 14, 15]

Petitioner entitled to clear the goods without payment of demurrage charges for the period of detention certified by customs (detention certificate dated 17.9.2019); demurrage cannot be charged for that period, subject to payment of other charges accruing after the certified detention period.

Final Conclusion: Writ petition allowed to the extent that the petitioner may clear the goods without payment of demurrage/rent for the period of detention certified by customs (subject to payment of charges accruing after that period); otherwise disposed of.

Liability to pay court-fees under section 129A(6) of the Customs Act, 1962 - classification versus refund distinction in appeals - effect of payment "under protest" on existence of demand - interpretation of "duty and interest demanded" for triggering fee liability - proviso/exceptions to section 129A(6)

Liability to pay court-fees under section 129A(6) of the Customs Act, 1962 - classification versus refund distinction in appeals - effect of payment "under protest" on existence of demand - interpretation of "duty and interest demanded" for triggering fee liability - proviso/exceptions to section 129A(6) - Appellant is liable to pay court fees under section 129A(6) for the 4191 appeals challenging classification and the consequent demand of duty. - HELD THAT: - The Tribunal found on the record (Form CA-3 Para 10 and the memorandum of appeal) that the appeals challenge classification of phone covers and the consequent differential duty, not a standalone refund application. The grounds of appeal and factual averments concerning use, manufacture and tariff classification demonstrate that the dispute concerns classification and resultant demand of duty. The appellant had paid the enhanced duty at clearance "under protest", which the Tribunal held amounted to a dispute against a deemed demand; payment under protest does not extinguish the demand but evidences that a demand existed and is being contested. The proviso to section 129A(6) exempts only appeals referred to in subsection (2) or memoranda under subsection (4); those exceptions do not apply here. Reliance on earlier decisions holding that no fee is payable for pure refund/rebate appeals was distinguished because the present appeals do not arise from refund/rebate proceedings but from challenged assessments/reassessments. Applying the statutory language and the factual characterisation of these appeals, the Tribunal concluded that section 129A(6) is attracted and court fees are payable. [Paras 6, 7, 12, 14]

Objection on deficient court-fees sustained; appellant directed to deposit the requisite court fees under section 129A(6) within two weeks.

Final Conclusion: The appeals concern classification and a disputed demand (paid under protest); therefore section 129A(6) applies and the appellant must deposit the prescribed court-fees for the 4191 appeals within two weeks.

Retrospective application of exemption notification - benefit of exemption notification on imports - reassessment and refund claim - remand for verification by original authority

Retrospective application of exemption notification - benefit of exemption notification on imports - remand for verification by original authority - Whether the appellant is entitled to the benefit of Notification No. 12/2012-CE dated 17.03.2012 for imports made in 2011 and whether the matter requires fresh verification by the original authority. - HELD THAT: - The appellant has abandoned the contest on classification of the goods, but maintains that, if classifiable under CTH 5505, they are entitled to the concessional/exempt rate under Notification No. 12/2012 dated 17.03.2012 and that the retrospective operation of subsequent amendments renders the import (in 2011) eligible. The Tribunal noted that the factual contention as to manufacture from waste was not pressed to the extent of classification, yet the asserted eligibility under Notification No. 12/2012 is a new plea at the appellate stage which requires factual verification. The Tribunal therefore held that the correctness of the claim - including consideration of documentary evidence available at the time of import, the retrospective effect of the notification and the precedents relied upon by the appellant - must be examined by the adjudicating authority afresh. Accordingly, the Tribunal remanded the matter to the original authority for verification of entitlement to the benefit of Notification No. 12/2012 and for consideration of the decisions cited by the appellant that addressed retrospective application of that notification.

Matter remanded to the original authority to verify and decide the appellant's entitlement to Notification No. 12/2012 dated 17.03.2012; impugned order set aside.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal by remanding the matter to the adjudicating authority for verification and fresh decision on the appellant's claim to the benefit of Notification No. 12/2012-CE (including consideration of retrospective application and authorities relied upon).

Customs valuation - rejection of declared value under Rule 12 - sequential application of Rules 4 to 12 of the Customs Valuation Rules, 2007 - transaction value - market survey evidence - NIDP data and contemporaneous imports - assessable value

Rejection of declared value under Rule 12 - transaction value - sequential application of Rules 4 to 12 of the Customs Valuation Rules, 2007 - Validity of departmental enhancement of declared import value without first putting the importer on notice and without following the sequential provisions of the Customs Valuation Rules, 2007 - HELD THAT: - The Tribunal found that the Department did not put the Appellant on notice as to why the transaction value declared in the Bill of Entry was unacceptable before proceeding to enhance value. The Customs Valuation Rules, 2007 require that Rules 4 through 12 be applied in sequence to determine value; that procedure was not followed. Documentary evidence produced by the Appellant (NIDP/contemporaneous import data) showing several identical imports at the relevant time was not given due regard. For these reasons the enhancement based on rejection under Rule 12 was held legally unsustainable. [Paras 6, 7]

Enhancement based on rejection of declared transaction value without notice and without sequential application of Rules 4-12 is unsustainable; the enhancement is set aside.

Market survey evidence - NIDP data and contemporaneous imports - assessable value - Reliability and admissibility of the Department's market survey report and the method of arriving at assessable value by applying an unexplained discount - HELD THAT: - The Tribunal observed that the Department relied on a Market Survey Report prepared by officials who collected unspecified market information. The report did not identify any purchase or sale invoices relied upon to compute the average price, and then an arbitrary 60% discount was applied to arrive at the assessable value. There is no legal provision authorising such an ad hoc practice. Given the existence of contemporaneous import data (NIDP) produced by the Appellant and the opaque methodology of the survey, the value fixed by the Revenue was found to be neither realistic nor legally sustainable. [Paras 5]

Market survey without documentary support and the application of an unexplained discount to determine assessable value is inadmissible; the resultant valuation cannot be sustained.

Final Conclusion: The Tribunal set aside the impugned order enhancing customs value and allowed the appeal, holding that the Department failed to comply with the statutory procedure for valuation, relied on an unsatisfactory market survey lacking documentary support and applied an impermissible ad hoc discount; consequential relief, if any, to follow as per law.

Similar goods - standard input output norms (SION) - duty foregone - onus of proof for intended use - evidentiary value of statements and seized electronic records - limits of adjudication beyond show cause notice

Similar goods - limits of adjudication beyond show cause notice - Whether goods cleared to the domestic tariff area (DTA) were dissimilar to goods exported and thereby disentitle the assessee to concessional treatment. - HELD THAT: - The Tribunal held that the finding of dissimilarity in the adjudicating order was founded on speculation and admissions taken out of context rather than an evaluation of facts or product examination. Mere absence of embossing/printing did not demonstrate that the goods acquired a different character or usage; comparison must be grounded in product descriptions and, where samples are lacking, accepted descriptions should be juxtaposed for factual assessment. The Tribunal also disapproved the adjudicating authority's substitution of a detriment (denial of concessional rate) that was not the consequence expressly contemplated in the show cause notice. Applying these principles, the Tribunal concluded that the domestically cleared plain goods were not dissimilar to the embossed/printed exported goods and that the denial of concessional treatment in the impugned order was improper. [Paras 19, 20, 21, 22, 23]

Goods cleared to the DTA were held to be similar to exported goods; the denial of concessional rate for such clearances in the impugned order was improper.

Standard input output norms (SION) - duty foregone - onus of proof for intended use - Whether deviation from SION can, by itself, support a presumption of diversion and justify recovery of duty foregone on procured raw materials (notably PVC resin). - HELD THAT: - The Tribunal analysed the origin and purpose of SION and concluded that SION operate as ceilings or monitoring benchmarks and were not designed to furnish mathematical precision for post procurement presumptions of diversion. Absent evidence of movement to an alternate user/trader or other verifiable destination, non conformity with norms may indicate inefficiency but does not suffice to establish diversion with penal consequences. Consequently, recovery of duty foregone solely on the basis of alleged deviations in SION, or by relying on intra material ratios (e.g., PVC resin to plasticizer), was unsustainable. The Tribunal emphasised that a finding of diversion must reference movement/destination of goods; where that is absent, the proposed recoveries premised only on norms fail. [Paras 49, 50, 51, 52, 53]

Deviation from SION alone does not justify presuming diversion or recovering duty foregone; the claim for duty on PVC resin based solely on norms was rejected.

Evidentiary value of statements and seized electronic records - onus of proof for intended use - Admissibility and weight of statements recorded during investigation and of data from seized USB/pen drives in supporting the allegation of diversion. - HELD THAT: - The Tribunal declined to place evidentiary weight on statements and related materials that were inseparably connected to proceedings before the Settlement Commission or that had been retracted or were otherwise unreliable. Statements of co noticees and transporters drawn from the prior Settlement Commission context were treated as not disentanglable and thus unacceptable. As to data from pen drives and hard disks, the Tribunal noted absence of forensic authentication and observed that the information from these devices had not been used for computation of duty but only to allege record manipulation; accordingly, such materials were of limited relevance and could not sustain the demand. The Tribunal therefore upheld the adjudicating authority's rejection of those materials as reliable evidence for proving diversion. [Paras 36, 37, 38]

Statements tied to earlier Settlement Commission proceedings and un forensically authenticated data from seized electronic media were rejected as unreliable and insufficient to prove diversion.

Limits of adjudication beyond show cause notice - Whether the adjudicating authority was entitled to transgress the boundaries of the show cause notice by substituting or imposing other consequences not pleaded in the notice. - HELD THAT: - The Tribunal criticised the adjudicating authority for substituting a different consequence (denial of concessional treatment and assessment under section 3) in place of the specific recoveries pleaded in the show cause notice. It reiterated that an adjudicatory outcome must remain within the compass of the notice, and disapproved the practice of converting or enlarging the relief sought without appropriate notice. The Tribunal found such substitution improper and disapproved the adjudicating authority's approach to the extent it altered the nature of the demand beyond what was proposed in the notice. [Paras 13, 14, 15, 24]

Adjudication transgressing the scope of the show cause notice by imposing unpleaded consequences was improper and disapproved.

Final Conclusion: The Tribunal allowed the appeal of the assessee (M/s Responsive Industries Ltd) and dismissed the appeals of the Commissioner of CGST & Central Excise, Palghar, holding that the domestically cleared goods were similar to exported goods, that deviation from SION alone cannot be the basis for presuming diversion and recovering duty foregone (absent evidence of movement/destination), and that statements and un forensically authenticated electronic records could not sustain the alleged diversion. The adjudicating authority's excursion beyond the scope of the show cause notice was also disapproved.

Impleadment of parties - necessary and proper party - persons concerned with the affairs of the company - effectual and complete adjudication - judicial discretion to add or strike out parties - shareholding threshold under Section 244 - transmission of shares under Section 56 - oppression and mismanagement

Impleadment of parties - necessary and proper party - persons concerned with the affairs of the company - effectual and complete adjudication - shareholding threshold under Section 244 - transmission of shares under Section 56 - Impleadment of Appellants No.1 and No.2 as parties in C.P. No.129/ND/2019 was permissible and should be directed. - HELD THAT: - The Tribunal found that the NCLT had not commented on the shareholding of Appellants No.1 and No.2 and that the Respondents did not dispute the Appellants' status as shareholders (para 12). Given that the company is family-owned with each branch represented, the presence of the Appellants as parties would assist in effectually and completely adjudicating disputes of alleged oppression and mismanagement (paras 12-14). Relying on the principle that any person concerned with the affairs of a company may be added where their impleadment facilitates an effective, efficacious, just and fair adjudication, and on the appellate tribunal's power to add parties in appropriate cases, the Tribunal held that the Appellants have a direct and substantive interest and are proper and necessary parties (para 13). The NCLT's rejection of impleadment was therefore set aside and impleadment directed (paras 14-15). The Tribunal also noted issues raised below regarding transmission of shares under Section 56 and the statutory shareholding threshold under Section 244, but allowed impleadment to ensure comprehensive adjudication of the main petition (paras 3-5, 12-14). [Paras 12, 13, 14, 15]

Appeal allowed; NCLT order dated 19.01.2022 set aside and Appellants No.1 and No.2 impleaded in C.P. No.129/ND/2019.

Final Conclusion: The Company Appeal (AT) No. 76 of 2022 is allowed; the NCLT order dated 19.01.2022 is set aside and Appellants No.1 and No.2 are directed to be impleaded as parties in C.P. No.129/ND/2019. No order as to costs.

Maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - exercise of the Supreme Court's discretionary jurisdiction in interlocutory appeals - finality of an appellate conclusion on maintainability between the NCLT and NCLAT - direction for expeditious disposal of pending Section 7 proceedings

Exercise of the Supreme Court's discretionary jurisdiction in interlocutory appeals - maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the Supreme Court would entertain the instant appeals at the interlocutory stage when the Section 7 petition before the NCLT is pending adjudication on merits - HELD THAT: - The Court declined to entertain the appeals at this interlocutory stage because the impugned NCLAT order only addressed maintainability and the Section 7 application before the NCLT remains pending on merits. Nearly two years have elapsed in the interim, but the Court recorded that it is not inclined to intervene before the NCLT has disposed of the main petition on merits. The Court left open the parties' rights to pursue appropriate proceedings after adjudication of the Section 7 petition and reserved the power to examine both merits and maintainability at that later stage if necessary. The Court therefore exercised its discretionary jurisdiction to refuse interim interference while preserving the availability of remedies post-adjudication. [Paras 1, 4, 5]

Appeals dismissed at present; Court will not entertain interlocutory challenge to maintainability while Section 7 petition is pending, subject to parties' rights after final disposal.

Finality of an appellate conclusion on maintainability between the NCLT and NCLAT - direction for expeditious disposal of pending Section 7 proceedings - Legal effect of the impugned NCLAT order on maintainability and the procedural direction for disposal of the pending Section 7 application - HELD THAT: - The Court clarified that insofar as the NCLT and the NCLAT are concerned, the issue of maintainability stands concluded by the impugned NCLAT order dated 17 November 2023. Separately, noting the pendency of the Section 7 application for over two years, the Court directed the NCLT to take up the petition at the earliest and to endeavour an expeditious disposal within two months. This is a procedural direction intended to secure prompt adjudication of the main dispute; the Court also left open the possibility of subsequent enquiry into merits and maintainability if required after final disposal. [Paras 2, 3]

Impugned NCLAT conclusion on maintainability is final as between NCLT and NCLAT; NCLT directed to dispose of the Section 7 application expeditiously within two months.

Final Conclusion: Civil Appeals dismissed without adjudication on the merits of the Section 7 petition; the Court declined interlocutory interference, treated the NCLAT's view on maintainability as final between NCLT and NCLAT, and directed the NCLT to dispose of the pending Section 7 application expeditiously within two months.

Deed of compromise/settlement taken on record - Binding effect of compromise - Revival of insolvency petition on default of settlement - Disposal of insolvency petition on full payment without invoking the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process costs to be determined and recovered by the adjudicating authority

Deed of compromise/settlement taken on record - Binding effect of compromise - The Deed of Compromise/settlement dated 04.10.2023 is taken on record and the parties are bound by its terms and conditions. - HELD THAT: - The Court recorded the settlement embodied in the Deed of Compromise/settlement dated 04.10.2023 between the parties and directed that the terms and conditions contained therein shall bind the appellant and respondent. By taking the deed on record, the Court gave effect to the parties' agreement and treated the compromise as determinative of their rights under the pending proceedings to the extent provided by the deed.

Deed of compromise dated 04.10.2023 taken on record; parties bound by its terms.

Revival of insolvency petition on default of settlement - In the event of any default in payment under the compromise/settlement, the proceedings in C.P. no. (IB)-245(ND)/2021 shall be revived and will continue from the present stage. - HELD THAT: - The Court provided for a mechanism to restore the previously stayed or compromised insolvency proceedings if the bound party defaults on the payment obligations under the recorded settlement. Revival is to take place without prejudice to the stage already reached in the proceedings, thereby preserving the adjudicating body's power to proceed if the settlement is not honoured.

Default under the settlement will result in revival of C.P. no. (IB)-245(ND)/2021 to continue from the present stage.

Disposal of insolvency petition on full payment without invoking the Insolvency and Bankruptcy Code, 2016 - On full payment in terms of the compromise/settlement, C.P. no. (IB)-245(ND)/2021 will be treated as disposed of without any further orders or recourse to the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Court directed that complete performance of the settlement obligations will culminate in final disposal of the insolvency petition, obviating further steps under the Insolvency and Bankruptcy Code. This preserves the consequence agreed by the parties that performance of the compromise extinguishes the need to pursue IBC remedies in that matter.

Full payment as per the compromise will result in C.P. no. (IB)-245(ND)/2021 being treated as disposed of without recourse to the IBC.

Corporate Insolvency Resolution Process costs to be determined and recovered by the adjudicating authority - The appellant and respondent no. 1 shall pay the CIRP costs as may be determined by the National Company Law Tribunal; failure to pay will entitle the adjudicating authority to take appropriate recovery steps in accordance with law. - HELD THAT: - The Court left determination of the Corporate Insolvency Resolution Process costs to the adjudicating authority/NCLT and directed payment by the parties to the compromise. It further authorised the adjudicating authority to pursue recovery measures if those costs are not paid, ensuring that the settlement does not negate the tribunal's statutory power to quantify and recover CIRP costs.

Parties directed to pay CIRP costs as determined by the NCLT; NCLT empowered to recover unpaid costs.

Final Conclusion: Appeal partly allowed by recording the settlement dated 04.10.2023 and directing that the parties be bound by its terms; default will revive the insolvency petition while full payment will treat the petition as disposed of, and the parties must bear CIRP costs to be determined and recoverable by the adjudicating authority; pending applications disposed of.

Power of the Committee of Creditors under Section 33(2) of the Insolvency and Bankruptcy Code to decide liquidation - requirement that the Committee of Creditors give reasons for a decision to liquidate - publication of Form G and invitation for expression of interest (EOI) in the CIRP process - effect of a dismissed SLP/review and pending curative petition on continuation of insolvency proceedings

Power of the Committee of Creditors under Section 33(2) of the Insolvency and Bankruptcy Code to decide liquidation - requirement that the Committee of Creditors give reasons for a decision to liquidate - Validity of the Committee of Creditors' resolution dated 27.09.2022 to liquidate the corporate debtor - HELD THAT: - The Tribunal examined the CoC resolution of 27.09.2022 which recorded objective reasons (absence of employees, business, registered office, filings and banking transactions) for proposing liquidation. The scheme of the IBC, as reflected in Section 33(2) and its Explanation, vests the CoC with wide power to decide liquidation any time after its constitution and before confirmation of a resolution plan. While such decisions must be supported by reasons and are amenable to judicial review, on the facts before the Tribunal the CoC applied objective considerations and its decision was not arbitrary. The Adjudicating Authority erred in rejecting the RP's application and, on scrutiny of the CoC record, the Tribunal found grounds to allow liquidation and direct appointment of a liquidator. [Paras 11, 12, 20]

The CoC's decision to liquidate was upheld; the impugned Adjudicating Authority order of 31.08.2023 was set aside and liquidation was directed with appointment of a liquidator.

Publication of Form G and invitation for expression of interest (EOI) in the CIRP process - Effect of publication of Form G and absence of any EOI received after publication - HELD THAT: - The Tribunal noted that the Resolution Professional published Form G after the interim direction of this Tribunal, but no EOI was received. The subsequent separate application filed by the RP after issuance of Form G was rendered infructuous by the Tribunal's decision in the appeal and therefore was to be closed. The absence of EOIs post-publication did not preclude the Tribunal from directing liquidation where the CoC decision and surrounding facts warranted it. [Paras 18, 19]

The subsequent application filed by the RP after issuance of Form G is rendered infructuous and to be closed.

Effect of a dismissed SLP/review and pending curative petition on continuation of insolvency proceedings - Whether pending curative petition or earlier dismissed SLP/review petitions preclude adjudication or adjournment of the appeal and related steps - HELD THAT: - The Tribunal observed that the SLP and review petitions had been dismissed and that a curative petition was pending. It held that dismissal of SLP and review by the Supreme Court is binding on the Tribunal and the Adjudicating Authority and that the pendency of a curative petition did not warrant adjournment of the hearing. The appeal could not be deferred merely because a curative petition was filed. [Paras 7, 17]

Pending curative petition did not justify adjournment; proceedings and adjudication of the appeal proceeded.

Final Conclusion: Appeal allowed; order of the Adjudicating Authority dated 31.08.2023 set aside; IA No. 543/JPR/2022 allowed and liquidation directed with appointment of a liquidator; parties to bear their own costs.

Condonation of delay - issuance of fresh Form G - inclusion of assets discovered after issuance of Information Memorandum - impact of newly added assets on fair market value and liquidation value in CIRP - liberty to submit Expression of Interest - time bound completion of CIRP process

Condonation of delay - Application for condonation of 15 days' delay in filing the appeal - HELD THAT: - The application explained that the Director of the appellant was travelling abroad and therefore could not sign the memorandum of appeal, which caused the delay. The Tribunal found the cause shown to be sufficient and allowed the application, condoning the 15 days' delay in filing the appeal. [Paras 1]

Delay of 15 days in filing the appeal is condoned.

Issuance of fresh Form G - inclusion of assets discovered after issuance of Information Memorandum - impact of newly added assets on fair market value and liquidation value in CIRP - liberty to submit Expression of Interest - time bound completion of CIRP process - Validity of the Adjudicating Authority's direction to reject the present resolution plan and to issue a fresh Form G after addition of certain properties to the assets of the corporate debtor - HELD THAT: - The Tribunal agreed with the Adjudicating Authority's finding that properties added to the asset pool during the CIRP (being units in Dwarka) were not part of the Information Memorandum and that their subsequent inclusion could materially change the fair market value and liquidation value, thereby affecting prospective bidders. On that basis the Adjudicating Authority's decision to direct issuance of a fresh Form G and permit a fresh call for EOIs was affirmed. The Tribunal clarified that this was not an order directing re valuation by a third authority but a direction to notify the enhanced asset pool so interested resolution applicants could participate; accordingly the CoC's contention that the process should not be reopened was rejected. The Tribunal further directed that the entire process, including consideration of resolution plans, be completed within three months, while expressly preserving the SRA's liberty to submit an EOI. [Paras 6, 8, 9, 10]

Order directing issuance of fresh Form G and allowing fresh EOIs is affirmed; the CIRP process, including consideration of plans, must be completed within three months and the SRA may submit an EOI.

Final Conclusion: Delay in filing the appeal is condoned; the Adjudicating Authority's direction to issue a fresh Form G following addition of assets to the corporate debtor's pool is affirmed, the re notification process is justified to inform prospective applicants of the enhanced asset base, and the entire resolution process is directed to be completed within three months with the successful resolution applicant having liberty to submit an EOI.

Authentication of default - record or evidence of default - information utilities - pre-existing dispute - financial debt and default - acknowledgement under Section 18 of the Limitation Act - without prejudice communications and acknowledgment - delegation under power of attorney

Authentication of default - record or evidence of default - information utilities - Whether non-filing of a record of default from an Information Utility (IU) mandates rejection of a Section 7 application. - HELD THAT: - The Tribunal examined Regulation 20(1A) and Regulation 21 of the IBBI (Information Utilities) Regulations, 2017 and compared them with Section 7(3)(a) of the Code, Rule 4 of the Adjudication Rules and Regulation 2A of the CIRP Regulations. It held that Regulation 20(1A) cannot be read so as to make IU-record the only permissible evidence of default because regulations must be consistent with the Code and Rules; Regulation 2A expressly permits alternative records (e.g., certified bankers' book entries) as evidence of default. The Adjudicating Authority correctly relied on certified entries in the bankers' book and related statements and therefore correctly repelled the contention that absence of an IU record required rejection of the Section 7 petition. [Paras 17, 18, 28, 29, 31]

Non-filing of IU authentication does not automatically disentitle a financial creditor to proceed under Section 7 where other statutory evidence of default (e.g., certified bankers' book entries) as contemplated by Regulation 2A is furnished; the Section 7 application was rightly admitted.

Pre-existing dispute - financial debt and default - counter-claim and set-off - Whether the existence of a counter-claim, pending money suit or a pre-existing dispute defeats admission of a Section 7 petition by a financial creditor. - HELD THAT: - Relying on the statutory scheme contrasted in Innoventive and Swiss Ribbons, the Tribunal reiterated that the concept of a pre-existing dispute operates differently for operational creditors under Sections 8-9; for financial creditors under Section 7 the Adjudicating Authority need only be satisfied that a financial debt is due and that default has occurred. Filing of counter-claims or other suits by the corporate debtor does not, by itself, negate the existence of a financial debt or preclude admission; set-off and counterclaims are to be considered at the claims-admission stage during CIRP. The material produced by the financial creditor (including bankers' books and statements) proved default for the purposes of admission. [Paras 34, 35, 36, 37, 38]

Pending counter-claims, money suits or assertions of dispute do not automatically bar admission of a Section 7 petition where the financial debt and default are established by permissible evidence; the Adjudicating Authority correctly admitted the petition.

Acknowledgement under Section 18 of the Limitation Act - without prejudice communications and acknowledgment - limitation and one-time settlement offers - Whether one-time settlement proposals and related communications (including those captioned 'without prejudice') constituted acknowledgements that extended limitation and rendered the Section 7 petition timely. - HELD THAT: - The Tribunal applied settled principles that an acknowledgment in writing attracts Section 18 of the Limitation Act and extends limitation. It noted the pleadings and annexures showing multiple OTS proposals and acknowledgements (including deposits) by the corporate debtor up to 03.11.2020, and held such communications to be acknowledgements of liability for limitation purposes. The Tribunal also considered authority on the effect of 'without prejudice' labels and concluded that where the communication operates as an acknowledgment of liability (and the factual matrix so shows), the mere use of 'without prejudice' does not negate the effect of the acknowledgment; precedent (including ITC v. Blue Coast Hotels) supports this approach. [Paras 44, 47, 48, 49, 50]

The OTS proposals and related communications constituted sufficient written acknowledgements to extend limitation; reliance on a 'without prejudice' label did not defeat the acknowledgment and the Section 7 petition was within time.

Delegation under power of attorney - delegatus non potest delegare - Whether the Section 7 petition was invalid for want of authority because the nominated signatory purportedly exceeded delegatory powers under the power of attorney. - HELD THAT: - The Tribunal reviewed the power of attorney chain: the principal POA (dated 01.09.2021) empowered the named attorney (Nidhi Kumar) to nominate and constitute substitutes; the subsequent instrument dated 22.12.2021 validly nominated Pawan Sharma. The POA language expressly permitted substitution/nomination and the nominated person was a senior bank official. Thus there was no impermissible delegation; the petitioner was represented by an authorised signatory and the petition was properly filed. [Paras 51, 52, 53]

The power of attorney validly empowered the nominated signatory; the Section 7 petition was not vitiated for want of authorization.

Final Conclusion: The Tribunal found no merit in the appellant's challenges. The Adjudicating Authority correctly admitted the Section 7 petition: absence of an IU-issued record did not preclude admission where other statutory evidence of default was furnished; pending counterclaims or suits did not negate the financial debt or defeat admission; the OTS communications constituted acknowledgements for limitation purposes despite 'without prejudice' labels; and the bank's authorised representative validly signed the petition. The appeal is dismissed.

Admission of application under Section 7 - existence of financial debt - discharge of debt by payment to third parties pursuant to settlement agreement - reliance on balance sheet and ledger as evidence of crystallised liability - person aggrieved under Section 61 - piercing the veil/sham transaction enquiry

Admission of application under Section 7 - existence of financial debt - reliance on balance sheet and ledger as evidence of crystallised liability - Whether the Adjudicating Authority rightly admitted the Section 7 application by treating a financial debt as subsisting on the date of filing. - HELD THAT: - The Tribunal held that the Code does not mandate an express loan agreement where contemporaneous financial statements and ledger entries acknowledge debt and disbursement. The LLP agreement required preparation of a balance sheet to determine amounts payable on retirement, and the balance sheet dated 31.03.2016 (duly signed by partners and statutory auditors) recorded the outstanding due to the financial creditor as Rs. 5,16,55,842/-. Ledger entries and bank records corroborated repayment transactions, including demand drafts dated 28.10.2016, leaving no unpaid financial debt on the date of filing. The Adjudicating Authority had admitted the Section 7 application on the ground that no valid proof of payment in the individual capacity was shown; the Tribunal found this to be a misappreciation of the documentary record and therefore concluded that no financial debt was due on the date of filing, rendering admission of the Section 7 application erroneous. [Paras 49, 50, 52, 56, 57]

Admission of the Section 7 application was incorrect as there was no financial debt due on the date of filing.

Discharge of debt by payment to third parties pursuant to settlement agreement - reliance on balance sheet and ledger as evidence of crystallised liability - Whether payments made to entities other than the financial creditor could operate as discharge of the creditor's claim in view of the LLP settlement agreement. - HELD THAT: - The Tribunal examined Clause 5(vi) of the LLP agreement dated 31.12.2015 which expressly provided that balances with named sister concerns would be adjusted to the account of the outgoing partner. Having regard to that contractual provision, the signed balance sheet and ledger entries, the Tribunal held that the parties had deliberately agreed that payments to specified third parties (including Guman Builders & Developers Pvt. Ltd. and Guman Furniture & Services Pvt. Ltd.) would satisfy the outgoing partner's dues. Bank statements and the two demand drafts dated 28.10.2016 were accepted as proof of full and final discharge in accordance with the settlement mechanism in the LLP agreement; the Adjudicating Authority had failed to appreciate this contractual arrangement. [Paras 45, 46, 47, 51, 52]

Payments to third parties made pursuant to the LLP settlement clause operated as discharge of the financial creditor's dues.

Person aggrieved under Section 61 - admission stage parties to Section 7 proceedings - Whether the appellants (including RIICO and a partner) had locus to challenge the Adjudicating Authority's admission order under Section 61. - HELD THAT: - The Tribunal noted that at the pre-admission stage an application under Section 7 involves only the financial creditor and the corporate debtor as necessary parties for the purpose of admission. However, Section 61 confers a right of appeal to any person aggrieved by an order of the Adjudicating Authority. Both appellants had filed appeals under Section 61 and were therefore entitled to challenge the admission order; the Tribunal entertained their appeals and proceeded to decide the merits. [Paras 34, 35, 41]

The appellants were persons aggrieved entitled to prefer appeals under Section 61 and could challenge the admission order.

Final Conclusion: Both appeals succeed. The National Company Law Tribunal's impugned order dated 13.10.2021 admitting the Section 7 application is set aside, since the claimed financial debt had been crystallised and discharged in terms of the LLP settlement and supporting ledger and bank records; the admission was therefore in error.

Twin conditions for grant of bail under the Prevention of Money Laundering Act - reason to believe requirement for arrest under Section 19 of the PMLA - application of broad probabilities at the bail stage - relevance of absence of charge sheet in predicate offence to PMLA bail enquiry - cooperation of accused and absence of antecedents as factor for bail

Twin conditions for grant of bail under the Prevention of Money Laundering Act - application of broad probabilities at the bail stage - relevance of absence of charge sheet in predicate offence to PMLA bail enquiry - cooperation of accused and absence of antecedents as factor for bail - Grant of bail to the petitioner under the PMLA subject to conditions - HELD THAT: - The Court applied the statutory twin conditions applicable to bail under the PMLA and the settled principle that at the bail stage the court acts on broad probabilities without weighing evidence as in trial. The investigation discloses allegations of diversion of government funds through a network of entities, and the petitioner was arrested after being examined by agencies. However, the Court noted that (i) no charge sheet has been filed in the predicate FIR registered by CBCID for more than 14-15 months; (ii) there is no material showing funds flowed into the petitioner's account; (iii) searches did not yield incriminating material linking the petitioner to the proceeds of crime; (iv) the petitioner has been cooperative, appeared repeatedly before investigating agencies, and was earlier granted bail in the predicate crime; and (v) it is his first offence and there is no allegation of tampering with evidence or interference. Relying on the approach in the authorities referred to by the parties, the Court concluded that the second limb of the PMLA twin test (that the accused is not likely to commit an offence while on bail) is satisfied on the material on record and that continued incarceration is not justified. The Court therefore exercised its judicial discretion to grant bail, while imposing conditions of personal bond, sureties, regular appearance for investigation and restraint on travel without court permission. The Court did not undertake a trial like appreciation of evidence nor record a final view on guilt; its findings are provisional for the limited purpose of the bail application. [Paras 12, 16, 17, 18]

Criminal Petition allowed; petitioner enlarged on bail on furnishing personal bond and sureties and subject to conditions including weekly attendance and prohibition on leaving the country without permission.

Final Conclusion: Bail granted to the petitioner under the PMLA on conditions, the Court finding on available material and broad probabilities that continued detention was not justified and that the statutory conditions for bail were satisfied subject to imposed terms.