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2025 (2) TMI 1162
Power to arrest under the Customs Act, 1962 and the Central Goods and Services Tax Act, 2017 - reasons to believe - non-cognizable offences - Jurisdictionary powers of judicial review under Article 32 and Article 226 of the Constitution of India.
As per Sanjiv Khanna, CJI
HELD THAT:- Section 41-D of the Code is applicable for offences under the Customs Act. Accordingly, a person arrested by a customs officer has the right to meet an advocate of his choice during interrogation, but not throughout interrogation - In Senior Intelligence Officer, Directorate of Revenue Intelligence v. Jugal Kishore Samra, [2011 (7) TMI 910 - SUPREME COURT]. This Court held that an advocate/authorised person may be present within visual distance during interrogation, but he cannot be within hearing distance of the proceedings nor can there be any consultations with such advocate/authorised person during the course of the interrogation.
Reference can also be made to Section 50A of the Code, which states that every police officer or other person making an arrest under the Code shall forthwith give information regarding such arrest and place where the arrested person is being held to any of his friends, relatives, or other person as may be disclosed or nominated by the arrested person for the purpose of giving such information. The arrested person must be informed of this right - the details of compliance with this mandate must be entered into the diary maintained by customs officer. It is the duty of the Magistrate, when an arrested person is produced, to satisfy himself that the requirements of Section 50A(2) and (3) have been complied with. Thus, these stipulations will apply in cases of arrests made by the customs officers.
Arvind Kejriwal v. Directorate of Enforcement, [2024 (7) TMI 760 - SUPREME COURT] a recent judgment authored by one of us (Sanjiv Khanna, J.), is a dictum relating to the Prevention of Money Laundering Act, 2002. This Court held that the power of arrest granted to the Directorate of Enforcement under Section 19 of the PML Act is fenced with certain pre-conditions. These pre-conditions act as stringent safeguards to protect the life and liberty of individuals.
In Arvind Kejriwal, a combined reading of Pankaj Bansal v. Union of India and Others, [2024 (7) TMI 760 - SUPREME COURT] Prabir Purkayastha v. State of NCT of Delhi, [2024 (5) TMI 1104 - SUPREME COURT] and Vijay Madanlal Choudhary and Others v. Union of India and Others [2022 (7) TMI 1316 - SUPREME COURT (LB)] was adopted by this Court. It was held that the power to arrest a person without a warrant and without instituting a criminal case is a drastic and extreme power. Therefore, the legislature had prescribed safeguards in the language of Section 19 itself which act as exacting conditions as to how and when the power is exercisable. These safeguards include the requirement to have “material” in the possession of DoE, and on the basis of such “material”, the authorised officer must form an opinion and record in writing their “reasons to believe” that the person arrested was “guilty” of an offence punishable under the PML Act. The “grounds of arrest” are also required to be informed forthwith to the person arrested.
Arvind Kejriwal also holds that the courts can judicially review the legality of arrest. This power of judicial review is inherent in Section 19 as the legislature has prescribed safeguards to prevent misuse. After all, arrests cannot be made arbitrarily on the whims and fancies of the authorities. This judicial review is permissible both before and after criminal proceedings or prosecution complaints are filed.
The investigating officer is also required to look at the whole material and cannot ignore material that exonerates the arrestee. A wrong application of law or arbitrary exercise of duty by the designated officer can lead to illegality in the process. The court can exercise judicial review to strike down such a decision.
There is substantively no difference between a person being guilty of an offence and a person committing an offence. In a catena of judgments of this Court, it has been held that words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary - given the framework of the Customs Act, which explicitly classifies offences into bailable and non-bailable, as well as cognizable and noncognizable, the “reasons to believe” must reflect these classifications when justifying an arrest. The reasoning must weigh in why an arrest is being made in a specific case, particularly given the specific severity assigned to the offence by the legislature. The reasoning must also state how the monetary thresholds outlined in the Act are met.
There are no inconsistency between Section 19(1) of the PML Act and Section 104(1) of the Customs Act. We are of the opinion that principles and ratio developed in the case of Arvind Kejriwal, and the principles specifically discussed and delineated in paragraphs 30 to 45 of this judgment, are equally applicable to the power of arrest under Section 104 of the Customs Act. The respondent authorities are, therefore, directed to comply with the mandate of this judgment and that of Arvind Kejriwal.
The challenge to the amendments as well as provisions of the Customs Act is rejected. Reliance placed by the petitioners on the decision of this Court in Om Prakash [2011 (9) TMI 65 - SUPREME COURT] is misconceived as the statutory provisions have undergone amendments to bring them in consonance with the law of the land. Moreover, the provisions themselves provide enough safeguards against arbitrary and wrongful arrests.
Section 162(1) of the GST Acts permits compounding of offences and therefore, the ratio in Makemytrip [2016 (9) TMI 52 - DELHI HIGH COURT] should be applied to the GST Acts. The decision in Makemytrip, itself carves out an exception when an assessment order under the Finance Act may not be required, namely cases where a person who is shown to be a habitual evader as one who has not filed service tax returns for a continuous period of time, who has a history of repeated defaults for which there have been fines, penalties imposed, and prosecutions launched, etc. - there are sufficient safeguards to ensure that no arrests are made till the Commissioner is able to show and establish, on the basis of material and evidence, that the conditions of clauses (a) to (d) as well as clause (i) of sub-section 1 to Section 132 of the GST Acts are satisfied and therefore the offences are non-bailable.
Constitutional validity of Sections 69 and 70 of the GST Acts - HELD THAT:- The Parliament, under Article 246-A of the Constitution, has the power to make laws regarding GST and, as a necessary corollary, enact provisions against tax evasion. Article 246-A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies. The impugned provisions lay down the power to summon and arrest, powers necessary for the effective levy and collection of GST. Time and again this Court has held that while deciding the issue of legislative competence, entries should not be read in a narrow or pedantic sense but given their broadest meaning and the widest amplitude because they are intrinsic to a machinery of government.
A penalty or prosecution mechanism for the levy and collection of GST, and for checking its evasion, is a permissible exercise of legislative power. The GST Acts, in pith and substance, pertain to Article 246-A of the Constitution and the powers to summon, arrest and prosecute are ancillary and incidental to the power to levy and collect goods and services tax. In view of the aforesaid, the vires challenge to Sections 69 and 70 of the GST Acts must fail and is accordingly rejected.
The challenge to the constitutional validity as also the right of the authorised officers under the Customs Act and the GST Acts to arrest are rejected and dismissed with elucidation and clarification on the pre-conditions and when and how the power of arrest is to be exercised.
The matters are directed to be listed before an appropriate Bench in the week commencing 17.03.2025 for final hearing and disposal.
As per Bela M. Trivedi, J
HELD THAT:- Whenever the jurisdiction of the High Court or the Supreme Court is invoked under Article 226 or Article 32 as the case may be, challenging the punitive or preventive detention, the Court is expected to take into consideration the nature of right infringed, the scope and object of the legislation under which such arrest or detention is made, the need to balance the rights and interests of the individual as against those of the society, the circumstances under which and the persons by whom the jurisdiction is invoked etc. In exercise of their discretionary jurisdiction, the High Courts and the Supreme Court do not, as courts of appeal or revision, correct errors of law or of facts. The judicial intervention is warranted only in exceptional circumstances when the arrest is prima facie found to be malafide; or is prompted by extraneous circumstances, or is made in contravention of or in breach of provisions of the concerned statute; or when the authority acting under the concerned statute does not have the requisite authority etc.
The power of judicial review keeps a check and balance on the functioning of the public authorities and is exercised for better and more efficient and informed exercise of their powers, such power has to be exercised very cautiously keeping in mind that such exercise of power of judicial review may not lead to judicial overreach, undermining the powers of the statutory authorities. To sum up, the powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation or non-compliance of the statutory safeguards provided under the special Acts, required to be followed by the authorized officers when an arrest is made of a person prima facie guilty of or having committed offence under the special Act.
Conclusion - i) The amendments to the Customs Act and GST Act are valid. ii) The procedural safeguards under the CrPC apply to arrests under the Customs Act and GST Act, ensuring protection of individual rights. iii) Customs officers must exercise their arrest powers with caution, ensuring compliance with statutory and constitutional safeguards. iv) The power of arrest under these Acts is subject to judicial review to prevent arbitrary or unlawful arrests. v) The constitutional validity of Sections 69 and 70 of the GST Acts is upheld, affirming the legislative competence to enact such provisions.
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2025 (2) TMI 1161
Challenge to assessment order - seeking direction to respondents to issue or upload DRC-07 pursuant to the order dated 29.09.2022 for filing appeal under Section 107 of the UPGST Act, 2017 - HELD THAT:- When the matter came up before the Court on 20.01.2025, learned Standing Counsel was directed to complete his instructions on the aspect of nature of order which needs to be passed by the respondents pursuant to the order dated 29.09.2022 against which an online appeal can be filed and/or issue order under DRC-07 in terms of Rule 142 of the UPGST Rules, 2017, as prayed by the petitioner.
Today, instructions have been produced inter alia indicating that summary of order in Form GST DRC-07 has been issued on 03.02.2025 and copy of the instructions has been handed over to counsel for the petitioner.
Petition disposed off.
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2025 (2) TMI 1160
Challenge to order of determination u/s 73 of the GST Act, as well as the appellate order - non-constitution of Tribunal - jurisdiction under Article 226 of the Constitution of India - HELD THAT:- The petitioner can be given the liberty to prefer an appeal to the Tribunal within 30 days of its constitution, and also if the condition stipulated in Section 112(8)(b) of the GST Act is complied with, further recovery can be deferred until disposal of the appeal.
This writ petition is disposed of giving liberty to the petitioner to prefer an appeal within 30 days of the constitution of the Appellate Tribunal contemplated under Section 112(1) of the GST Act. It is further directed that if the petitioner deposits the amount of 10% as contemplated under Section 112(8)(b) within 30 days from today, further proceedings for recovery pursuant to Exhibit-P3 and Exhibit-P5 shall be kept in abeyance till the appeal as directed above is disposed of.
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2025 (2) TMI 1159
Validity of summary of the order in Form GST DRC-07 and the Order-in Original - DRC-07 does not have any physical or digital signature - time limitation - HELD THAT:- Admittedly, the petitioner had a remedy of appeal under the GST Act and did not avail such remedy. This petition is not filed within the statutory time limit prescribed under the GST Act. Thus, in view of the judgment of the Apex Court in GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [2020 (5) TMI 149 - SUPREME COURT], there are substance in the argument of learned Senior Standing Counsel for CBIC that this petition is not liable to be entertained. Otherwise, it will be against the scheme and intention of the statutory provision.
The O.I.O. dated 24.04.2024 contained physical signature and it is issued within the limitation period which was extended upto 30.04.2024. DRC-07 is only a ‘summary of order’ and even if it did not contain any signature, it will not cause any prejudice to the petitioner.
The petitioner can avail the remedy under the relevant statute, if law so permits - petition dismissed.
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2025 (2) TMI 1158
Maintainbaility of petition - availability of alternative remedy of statutory right of appeal - HELD THAT:-Having considered the materials on record as also taking note of the fact that the Appellate Tribunal is yet to be constituted, it is opined that the petition should be heard.
Since, the petitioner has been able to make out a prima facie case, there shall be an unconditional stay of the demand made in Form GST APL – 04 dated 17th September, 2024 for a period of three weeks from date - In the event, the petitioner makes payment of 10% of the balance amount of tax in dispute, in addition to the amount already deposited in terms of Section 107 (6) of the said Act, within three weeks from date, the interim order passed herein, shall continue till the disposal of the writ petition or until further order, whichever is earlier.
Let affidavit-in-opposition to the present writ petition be filed within a period of six weeks from date. Reply, thereto, if any, be filed within four weeks thereafter.
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2025 (2) TMI 1157
Challenge to assessment order in Form GST DRC-07 - said proceeding does not contain the signature of the assessing officer and also DIN number, on the impugned assessment order - HELD THAT:- The effect of the absence of the signature, on an assessment order was earlier considered by this Court, in the case of A.V. Bhanoji Row Vs. The Assistant Commissioner (ST), [2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT]. A Division Bench of this Court, had held that the signature, on the assessment order, cannot be dispensed with and that the provisions of Sections-160 & 169 of the Central Goods and Service Tax Act, 2017, would not rectify such a defect.
A Division Bench of this Court in the case of M/s. Cluster Enterprises Vs. The Deputy Assistant Commissioner (ST)-2, Kadapa [2024 (7) TMI 1512 - ANDHRA PRADESH HIGH COURT], on the basis of the circular, dated 23.12.2019, bearing No.128/47/2019-GST, issued by the C.B.I.C., had held that non-mention of a DIN number would mitigate against the validity of such proceedings.
Conclusion - For the non-mention of a DIN number and absence of the signature of the assessing officer, in the impugned assessment order would have to be set aside.
This Writ Petition is disposed of setting aside the impugned assessment order in Form GST DRC-07, dated 12.08.2024, issued by the 2nd respondent, with liberty to the 2nd respondent to conduct fresh assessment, after giving notice and by assigning a signature to the said order.
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2025 (2) TMI 1156
Violation of principles of natural justice - impugned order passed without considering the petitioner's response - HELD THAT:- Respondents states that the Adjudicating Authority had clearly failed to bear in consideration the reply as submitted by the petitioner and that the petitioner was also perhaps not provided an opportunity of hearing. In view of the above, it was suggested that the ends of justice would merit the matter being remanded for consideration afresh.
The matter shall stand remitted to the Adjudicating Authority for consideration afresh and bearing in mind the response which had been submitted by the petitioner.
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2025 (2) TMI 1155
MIsuse of petitioner's credentials on the Goods and Services Tax portal, leading to allegations of passing fraudulent Input Tax Credit without actual supply of goods - HELD THAT:- Similar issue decided in Aakash Gupta vs. Commissioner of Delhi Goods and Services Tax & Ors [2024 (12) TMI 1535 - DELHI HIGH COURT] where it was held that 'the question of whether the credentials of the petitioner were misused and is a case of identity theft clearly gives rise to disputed questions of fact and would be liable to be duly inquired into by the competent authorities and which investigation cannot be undertaken by this Court.'
Petition disposed off.
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2025 (2) TMI 1154
Challenge to order on the ground that the same is made in violation of principles of natural justice - availing of Input Tax Credit after the due date - HELD THAT:- The said issue is no longer res integra. This Court in a batch of writ petitions in W.P.(MD)Nos.25081 of 2024 etc. [2024 (10) TMI 1631 - MADRAS HIGH COURT], by taking note of the amendment to Section 16(4) of the CGST Act which came into force with retrospective effect from 01.07.2017 had quashed the similar impugned orders and thereafter this Court in a similar issue in JC VALVULAS INDIA PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER, CHENNAI. [2024 (11) TMI 1430 - MADRAS HIGH COURT] taking note of the amendment passed, had set aside the order of assessment and remitted the matter back to the assessing officer for passing order afresh.
The impugned order dated 24.08.2024 is set aside and the matter is remitted back to the respondent for fresh consideration in consonance with the amended provision of Section 16 of the GST Act
Petition allowed by way of remand.
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2025 (2) TMI 1153
Seeking to quash and set aside the impugned SCN - case of the Petitioner is that by the impugned show cause notice, the authorities are seeking to go beyond the Advance Ruling already given in favour of the Petitioner by the Appellate Authority - HELD THAT:- This is certainly not a fit case where it is required to interfere at the show cause notice stage. Whether the show cause notice, in fact, seeks to do something which is also ruled upon in the Advance Ruling order, or otherwise, is something that the authorities will have to decide whilst adjudicating the show cause notice. Further, what tax has to be paid by the Petitioner and at what rate, will also have to be decided whilst adjudicating the show cause notice. At this stage, it is not inclined to interfere with the issuance of show cause notice and the Petitioner will have to face the same.
The Petitioner shall file its Reply/ Representation to the show cause notice within a period of four weeks from today and the show cause notice shall be adjudicated within a period of twelve weeks from today.
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2025 (2) TMI 1152
Liability to pay GST demand for the Assessment Years 2017-2018, 2018-2019, and 2019-2020 - it is alleged that petitioner was indulging in passing Input Tax Credit to facilitate evasion of tax - respondent submit that entire tax liability has been borne by the petitioner out of the Input Tax Credit availed by the petitioner which was passed on by the respective dealers.
HELD THAT:- The law on the subject has been settled by the Division Bench of this Court in Sahyadri Industries Limited Vs. State of Tamil Nadu [2023 (4) TMI 912 - MADRAS HIGH COURT]. Although the said decision was rendered in the context of Tamil Nadu Value Added Tax (TNVAT) Act, 2006, the ratio therein will squarely apply to the facts of the case under the Central Goods and Services Tax (CGST) Act, 2017 and the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017.
The fact remains that the petitioner has discharged the entire tax liability from and out of the Input Tax Credit availed from the invoices raised by the above mentioned suppliers. There is no payment of tax in cash by the petitioner. Prima facie, there are indications that the petitioner acted as an accessory to pass an ineligible Input Tax Credit.
Petition dismissed.
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2025 (2) TMI 1151
Chalelnge to assessment order - said proceeding does not contain the signature of the assessing officer and also DIN number on the impugned assessment orders - HELD THAT:- The effect of the absence of the signature, on an assessment order was earlier considered by this Court, in the case of A.V. Bhanoji Row Vs. The Assistant Commissioner (ST)[2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT] - A Division Bench of this Court, had held that the signature, on the assessment order, cannot be dispensed with and that the provisions of Sections-160 & 169 of the Central Goods and Service Tax Act, 2017, would not rectify such a defect. Following this Judgment, another Division Bench of this Court, in the case of M/s. SRK Enterprises Vs. Assistant Commissioner, [2023 (12) TMI 156 - ANDHRA PRADESH HIGH COURT], had set aside the impugned assessment order.
Conclusion - In view of the non-mention of a DIN number and absence of the signature of the assessing officer, in the impugned assessment order would have to be set aside.
The impugned assessment orders in Form GST DRC-07, dated 30.04.2024 and Form GST DRC-08, dated 18.01.2022, issued by the 3rd respondent set aside - petition allowed.
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2025 (2) TMI 1150
Violation of principles of natural justice - Challenge to impugned order - either the show cause notices nor the impugned order of assessment has been served on the petitioner by tender or sending it by RPAD - petitioner was unaware of the impugned order of assessment - petitioner is ready and willing to pay 10% of the disputed tax and seeks grant of one final opportunity before the adjudicating authority - HELD THAT:- The impugned order dated 19.08.2024 is set aside - The petitioner shall deposit 10% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent, within a period of four weeks from the date of receipt of a copy of this order.
Petition disposed off.
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2025 (2) TMI 1149
Cancellation of registration of the petitioner - non filing of the GST return for a considerable period - petitioner contends that now the petitioner is ready to make the payment towards GST return as well as the penalty, if any, imposed by the respondent-department - HELD THAT:- In view of the consensus between the parties, the matter is covered by the order passed in WPMS No.2285 of 2024, [2024 (9) TMI 904 - UTTARAKHAND HIGH COURT], the present writ petition is also decided in terms of the said order. The petitioner shall be at liberty to move an application for revocation or cancellation of the order under Section 30(2) of the CGST Act, 2017, within two weeks.
The writ petition stands disposed of.
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2025 (2) TMI 1148
Reopening of assessment u/s 147 - attempt to reopen the case based on the audit objection - petitioner's failure to provide attachments and evidence to support their claims - Scope of post-amendment reopening - HELD THAT:- In the absence of any attachments being annexed in the present petition, this Court cannot examine whether the issue for which reopening is sought, details of which were filed during the regular assessment proceedings or not. If the petitioner relied on the same email, it was incumbent upon him to annex the attachments to Exhibit C’. Therefore, even on this count, the petitioner cannot invoke the extraordinary jurisdiction of this Court in support of his submission.
In the assessment order, the officer has stated that the income was assessed after verification of the details. At least prima facie, there is no indication of the details. Therefore, this would require examination and investigation of the facts as to what details were filed, and in the absence of any attachments to Exhibit ‘C’, this Court cannot exercise its discretionary and equitable jurisdiction to investigate such factual issues. The information furnished to the petitioner states that the revenue audit could not find any documentary evidence on record to show nexus. Therefore, this would require the Court to go into facts of what was filed or not, and such an exercise certainly cannot be carried out in writ proceedings.
Given the facts in the present case and the petitioner’s failure to provide the entire material on which he alleges a change of opinion, we do not deem it appropriate to decide the legal contention of whether post-amendment reopening can be done based on an audit opinion even if a query was raised during assessment proceedings. The necessary factual foundation for deciding this issue is simply not evident in this case. Merely relying upon precedents but not demonstrating how they apply to the fact situation at hand or not placing the entire material before the Court renders it quite unsafe to decide this issue one way or the other in this case. Our observations are, therefore, prima facie.
We deem it fit not to exercise discretionary and extraordinary jurisdiction to entertain the present petition but to give the petitioner liberty to raise the issue of the validity of the reassessment proceeding before the Appellate Authority if and when the reassessment order is challenged pursuant to the notice under Section 148 of the Act. WP dismissed.
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2025 (2) TMI 1147
Rectification u/s 254 beyond period of limitation - rectification application must be filed within six months from the date of knowledge of the order sought to be rectified - HELD THAT:- Even according to the Petitioner, the limitation period expired on 31 May 2022, i.e. beyond the period between 15 March 2020 and 28 February 2022. The Petitioner’s contention that the limitation in this matter would commence only from 01 March 2022 cannot be accepted. This is not what the order which the Petitioner relies upon says.
Therefore, even though the plea based on the order of the Hon’ble Supreme Court was never raised by the Petitioner before the ITAT, still, upon consideration of the same, we find that the same would not assist the Petitioner in the facts of the present case.
Insofar as the second contention is concerned, the issue of sufficient cause is not quite relevant. Section 254 of the IT Act does not contain any provision that enables the ITAT to condone a delay beyond 6 months. This is so held by the coordinate bench in Ram Baburao Salve [2024 (9) TMI 1127 - BOMBAY HIGH COURT]
Given the above position, sufficient cause, if any, would be irrelevant. The ITAT has also not gone into the issue of sufficient cause but by relying on the decision of Re. Karuturi Global Ltd. [2019 (7) TMI 939 - KARNATAKA HIGH COURT] held that it has no power to condone the delay in entertaining an application under Section 254 (2) of the IT Act.
Since the ITAT’s view aligns with that of our coordinate bench in Ram Baburao Salve (supra) and the decision of Re. Karuturi Global Ltd. (supra), we see no good ground to interfere with the impugned order.
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2025 (2) TMI 1146
Seizure of gold and jewellery at Airport u/s 132(1)(iii) - as argued bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business - revenue submitted that the petitioners have alternate and efficacious remedy u/s 132B
HELD THAT:- In the clarification, no specific plea is raised regards seizure being ultra vires the provisions of Section 132 (1) (iii) proviso of the Act. If the petitioners seek writ of mandamus, it is important that the petitioners demand justice from the authorities and this is followed by refusal. The issue of seizure being ultra vires Section 132 (1) does not appear to have been raised by the petitioners and based upon the same, there is no demand of return of the gold and jewellery.
Petitioner submits that he would obtain instructions whether such demand is made. If such demand is indeed made, then, the petitioners must point out such demand to the respondents so that the respondents can deal with such demand.
If no demand is made, we grant the petitioners a week’s time to make such demand by giving full particulars and also, by referring to the relevant legal provisions upon which the petitioners seek to rely upon. Within two weeks from receipt of such demand/application/representation, the concerned respondents must deal with such demand/ application/representation and dispose of the same in accordance with law.
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2025 (2) TMI 1145
Validity of Assessment u/s 153C - as argued material gathered had no correlation or connection with the individuals who were subjected to the search - whether in the absence of the evidence gathered being pertinent or relevant to the persons named in the search authorization, the commencement of action u/s 153C against the writ petitioners would not sustain?
HELD THAT:- The trigger for Section 153C is thus the discovery of documents or articles in the course of a search which pertain or belong to a third party, and which may have a bearing on the determination of the total income of such other person for the six AY period or the relevant assessment years.
In terms of the procedure as prescribed under Section 153C, the AO of the searched entity, on being satisfied that the books or articles discovered in the course of the search belong or pertain to a person other than one referred to in Section 153A, would transmit the same to the jurisdictional AO of the non-searched entity. That jurisdictional AO is thereafter obliged to form an opinion whether the books of account, documents or assets seized are likely to have a bearing on the determination of the total income of such other person.
The entire edifice of Section 153C is built on incriminating material that may be gathered in the course of a search. The submission that action under Section 153C must be premised upon some connection between the searched and the non-searched entity or for that matter on the material gathered having some link with the searched person is clearly misconceived. If the material that had been gathered were to have a link or connect to the searched persons, it would clearly not fall within the scope of Section 153C at all. This, since the commencement of action under that provision is itself predicated upon the material gathered in the course of the search belonging or pertaining to an unrelated party and one who may not have been covered under the search authorization.
We are therefore of the firm opinion that the statutory scheme does not mandate or envisage the discovery of a connect or interrelationship between the searched and the non-searched entity.
Action under Section 153C is premised solely on the discovery of incriminating material and which is likely to have an impact or bearing on the assessed income of a non-searched entity. The statute neither requires nor obliges the AO of the other person to find or uncover a relationship or an association between the searched and the non-searched person.
The provision is merely concerned with the evaluation of the material unearthed in the course of a search and an assessment of whether it is likely to have a bearing on the income of a non-searched entity. If the submission of Mr. Sinha were to be accepted, we would be compelled to read Section 153C as being liable to be invoked only if there be some relationship between persons who were subjected to the actual search and those to whom the material may relate. Interpreting Section 153C as suggested would lead one to a situation where even though the material unearthed may be incriminating, absent a relationship between persons, the AO would be left powerless to even consider the likely impact of that material. That clearly does not appear to be the object or the purpose of that provision. We are thus of the considered opinion that the challenge is clearly misconceived. WP dismissed.
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2025 (2) TMI 1144
Suit for recovery - Contravention of the statutory provisions of Section 269ST r.w.s. 271D - plaintiff transferred the money in cash and that the same was received by the defendants - Whether the collaboration agreement is void on account of being violative of the statutory provisions? - HELD THAT:- The defendant received Rs. 1.5 crore in cash, a fact that remains undisputed. The defendant now seeks dismissal of the suit for recovery in limine by relying on Section 269ST of the Income Tax Act, 1961, arguing that the transaction itself is illegal.
Court cannot lose sight of the crucial fact that Section 271DA of the Income Tax Act imposes a penalty only on the recipient of the cash amount, thereby making the defendant the culpable party in the eyes of law. The provision does not render the underlying transaction void but only prescribes a fiscal penalty for the contravention, which would also be chargeable against the hands of the recipient, who in the instant case is the defendant. Therefore, the defendant cannot take advantage of his own wrongdoing to escape liability.
As in Loop Telecom [2022 (3) TMI 1629 - SUPREME COURT] clarified that the 'Principle of In pari delicto' applies only when both parties are equally responsible for the illegality. Here, it remains undisputed that the plaintiff made a payment under the Collaboration Agreement, while the defendant was the party who violated Section 269ST by receiving the amount in cash. As per Loop Telecom, the defendant cannot be allowed to unjustly enrich himself by retaining the money under the guise of statutory violation of Section 269 ST, which draws the penal liability solely against him.
Thus, the defendant cannot be permitted to benefit from the alleged statutory illegality, especially when it is he who has committed the contravention under Section 269ST of the Income Tax Act.
As the Supreme Court in Loop Telecom emphasized, Section 65 of the Contract Act mandates restitution where one party has derived an advantage under a void agreement, provided they are not in pari delicto. Since the plaintiff merely discharged a contractual obligation, and the defendant was the one in violation of the law, he cannot escape the liability for restitution.
Thus, even if the Collaboration Agreement is alleged to contravene the provisions of the Income Tax Act, the determination of such a violation falls exclusively within the domain of the Income Tax Authorities under Section 271D of the Act. The mere receipt of cash in violation of Section 269ST does not, by itself, render the underlying agreement void or unenforceable in a Civil Court. In the absence of any established intent on the part of the plaintiff to evade tax liability, which is also a matter to be adjudicated by the competent Income Tax authority, there exists no statutory bar preventing this Court from entertaining the suit for recovery. The statutory penalty prescribed for contravention of Section 269ST is imposed upon the recipient and not the payer, and the imposition of such a penalty does not automatically nullify the underlying transaction.
The defendant has failed to demonstrate any legal bar to the maintainability of the present recovery suit within the confines of Order VII, nor can such a bar be implied by an overextended interpretation of a fiscal statute whose objective is merely to regulate cash transactions rather than to vitiate otherwise valid agreements.
Accordingly, the plea raised by the defendant, seeking rejection of the plaint under Order VII Rule 11 (d) of the CPC on the ground of statutory violation, is misconceived, as the same fails to establish any express legal prohibition that would preclude the Court from adjudicating the instant claim for recovery.
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2025 (2) TMI 1143
ITAT remanding the matter back to CIT(A) to decide the purely legal issue even after admitting the additional ground as purely legal ground under Rule 27 itself - HELD THAT:- Tribunal itself has reached to the conclusion that there does not seem to be any dispute so far as the legal issues raised before the CIT(A) are concerned. There is also no dispute so far as the assessee having raised the ground of applicability of Rule 27 of the Rules.
The Tribunal also does not seem to be in quarrel to the contention of the appellant that they had, in fact, raised the ground of Rule 27 before the Tribunal and which has been left undecided, though the CIT (A) had decided the matter in favour of the assessee.
Rather than again remitting the matter back to the CIT (A) for fresh adjudication of the matter and thereafter again facing another round of appeals by either of the parties, it would have been more appropriate if the Tribunal itself would had decided the said issue rather than remitting the matter back to the Tribunal.
The view taken by the Income Tax Appellate Tribunal in the instant case does not seem to be proper, legal and justified. The Tribunal should have itself decided the said matter on merits in accordance with law. Hence, the order of remand by the impugned order deserves to be and is, accordingly, set aside and the matter stands remitted back to the Income Tax Appellate Tribunal for the Tribunal itself to decide the grounds.
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