This weekly round-up analytically summarises the key stories related to the Supreme Court and High Court reported at Taxscan.in during the previous week from September 19 to September 24, 2022.
The Gujarat High Court has held that the reason that the investigation is “under process” is not a reason to extend the custody of an accused arrested under the GST Act, 2017 unless the department proves that the custody of the accused is necessary. Granting bail to the applicant, the Court held that “the department objected to the bail application mainly on the ground that investigation is still underway. This Court is of the considered view that, merely raising the contention that the investigation is still going on is not enough, but, the department should have pointed out that further custody of the applicant is necessary. It is on record that, no liability is fixed or determined as per the statutory provisions of the Act. It is the right of the assessee to file an appeal against the assessment subject to a deposit of the 10% disputed liability which may not exceed Rs.2 crore. In the facts of the present case, Rs.39,88,318/-, has been recovered during the course of the investigation from the applicant. In such circumstances, when trial of the case would not likely to conclude in a reasonable time and the applicant is in custody since 24.03.2022 and considering the bonafide shown by the applicant to deposit the amount, I am inclined to release the applicant on bail subject to deposit of Rs.60 lakhs, before the Office of Chief Commissioner of State Tax, Ashram Road, Ahmedabad within a period of six months in six equal instalments from the date of his release.”
The Calcutta High Court has, in a recent writ petition filed before it by the petitioner, held that the customs authorities are to immediately release the goods under section 110 A of the Customs Act, 1962, whenever the goods so detained are perishable in nature. The Court observed that “In view of the reasonings and discussions made hereinabove, this writ petition being WPO 2591 of 2022 is disposed of directing the respondent authority concerned to release the goods in question upon the furnishing of bank guarantee of Rs.56 lakhs which was determined by the respondent department as a redemption fine and if such bank guarantee is furnished to the respondent authority concerned, the goods in question shall be released within 48 hours from the date of furnishing of such bank guarantee subject to satisfaction of the department and compliance of any other statutory formalities which should be indicated to the petitioner by the respondent concerned.
While considering a writ petition the Delhi High Court observed that reopening assessment for cash deposits is valid if failed to substantiate with evidence and allows the petitioner to submit details of unexplained cash deposits before the appellate authority. The Court observed that the contention of the petitioner that the details of the cash deposits had been disclosed by him in the income tax returns was not correct, as the assessee has only mentioned detail of cash deposited in the Corporation Bank account and has not mentioned cash deposits in any other bank accounts. The bench consists of Mr Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that the contentions and submissions advanced by the petitioner must be raised before the Appellate Authority.
In a significant ruling, the Madras High Court has permitted the businesses to file returns for the period prior to the cancellation of GST Registration and make payment of tax dues along with interest. The Single Judge, while reiterating the order passed on 31st January this year, also advised the State to instruct GSTN to make necessary changes in the portal to facilitate these changes.
The High Court of Calcutta has held that there is no bar for availing CENVAT Credit under Rule 3(7) when concessional countervailing duty (CVD) is availed. It was observed that while availing the “Basic Customs Duty” (BCD) Exemption at 10 % under FTA can simultaneously avail of the concessional countervailing duty (CVD) at 2 % as per notification No. 12/2012-Customs or he has to pay the CVD at 6 %, which is the rate of excise duty applicable on Steam Coal when CENVAT facility has not been availed. Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya viewed that the tribunal had rightly granted relief in favour of the respondent-assessee and dismissed the appeal filed by the revenue.
In a significant case of Sandvik Asia Pvt. Ltd, the Bombay High Court has held that deduction in respect of profit under section 10 B of the Income Tax Act,1961 will not be a bar to set off losses against the normal business income. Justice Dhiraj Singh Thakur and Justice Abhay Ahuja while dismissing the appeal, held that “there is no provision in Section 10B by which a prohibition has been introduced by the Legislature in setting off of a loss which is sustained from one source falling under the head of profits and gains of business against income from any other source under the same head.” Mr. Suresh Kumar, Advocate appeared for the Appellant, and Mr. J. D. Mistri, Senior Advocate Mr. Atul K. Jasani, Advocate appeared for the Respondent.
The Jharkhand High Court has quashed a demand notice issued by the tax authorities to a Senior Advocate seeking payment of service tax on legal services provided by him to a legal firm. The Court also observed that if any amendment is being made by way of substitution, it will relate back to the original document and therefore, the Court had to decide as to whether the amendments which have been brought by virtue of Notification No. 18/2016-ST dated 01.03.2016 and Notification No.34/2016-ST dated 06.06.2016 are by way of substitution and if yes, what would be its consequence? The Court noted that the provision as contained in Notification No.30/2012 dated 20.06.2012 has been amended by virtue of Notification No.18/2016-ST dated 01.03.2016 by way of substitution and thereafter, the said notification was further amended by way of substitution vide Notification No.34/2016- ST dated 06.06.2016.
The Madras High Court has held that an application filed before the Authority for Advance Rulings (AAR) under the Tamil Nadu VAT Act does not survive after the enactment of the Tamil Nadu GST Act, 2018. Allowing the contentions of the petitioner, Justice Anita Sumant held that “The sum and substance of the petitioner’s submissions are that, with the enacting of the TNGST Act, 2018, the Authority for Clarification and Advance Ruling does not exist in the form in which it did under the TNVAT Act and hence, the application filed by the petitioner itself does not survive. Thus, the impugned order is assailed on this basis.”
A Single Bench consisting of Justice Jasjit Singh Bedi of the Punjab and Haryana High Court granted bail to the accused considering their medical condition and non-framing of necessary charges in the case of fraudulent availing of Input Tax Credit (ITC). The Court observed that “Coming back to the facts of the present case, it may be pertinent to mention here that the petitioners were arrested on 13.03.2021 and the complaint came to be filed on 12.05.2021. Therefore, as of date, they have undergone a total custody period of approximately 01 years and 06 months. The maximum sentence that could be awarded would be 05 years. As yet, even the charges have not been framed and as many as 66 prosecution witnesses are yet to be examined. Therefore, at any rate, the trial cannot be concluded any time soon. Further, no serious apprehension has been expressed by the prosecution of the petitioners being flight risks, or that they would tamper with the evidence or influence witnesses in case bail was granted to them.”
While dismissing an appeal filed by the Income Tax Department, the Delhi High Court has allowed Huawei CEO Xiongwei Li to travel abroad subject to the depositing of an FDR of Rs. 5 crores. A Single judge bench of Justice Anu Malhotra added that the condition so imposed will be forfeited on account of Xiongwei Li’s non-joining of the investigation and non-appear as and when directed by the Trial Court.
In a recent ruling, a five-judge constitutional bench led by Justice Indira Banerjee refused to deliver an opinion relating to the controversial sale tax levy on the product “pan masala” stating that a unanimous Judgment did not have more precedential value than a Judgment delivered by a Bench of the same strength where one or more Judges dissented.
The Gujarat High Court has recently while allowing a writ petition, held that imposing the penalty of 5 times the regular fees upon the appellants, under Clause 14 (2), Chapter VI of the Plant Quarantine Order (Regulation of Import into India), 2003, is arbitrary, unreasonable and violate of the fundamental rights guaranteed under Article 19(g) of the Constitution of India. The impugned Regulation 14(2) of the Plant Quarantine (Regulation to Import into India) Order, 2003 of Chapter-VI is thus declared arbitrary and unreasonable, and in violation of fundamental rights guaranteed under Article 19(g) of the Constitution of India to the extent it stipulates charging of fees of five times of normal rates, and the same is quashed and set aside to the said extent”- Justice A. S. SUPEHIA commented, allowing the writ petitions.
In a significant ruling, the division bench of the Delhi High Court has upheld the validity of the re-assessment notices issued by the income tax department from 1st April 2021 To 30th June, 2021 holding that the same are not time-barred. Noting the submission is not maintainable, a bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “The contention of the petitioner that assessment for AY 2013-14 became time barred on 31st March, 2020 is incorrect. The time period for assessment stood extended till 30th June, 2021. The initial reassessment notice for AY 2013-14 has been issued to the petitioner within the said extended period of limitation. The Supreme Court has declared that the said reassessment notice be deemed as a notice issued under Section 148A of the Act and permitted Revenue to complete the said proceedings. In this case, the income alleged to have escaped assessment is more than 50 lakhs, and therefore, the rigor of Section 149(1)(b) of the Act (as amended by the Finance Act, 2021) has been satisfied.”
A Division Bench of the High Court of Allahabad held that Assessing Officer (AO) has no jurisdiction to issue the notice under Section 148 of the Income Tax Act, 1961 without recording valid satisfaction. The bench consisting of Justices Surya Prakash Kesarwani and Chandra Kumar Raj held that “In the present set of facts there was no valid satisfaction recorded by the Prescribed Authority under section 151 of the Act, 1961 when the Assessing Officer issued notice to the assessees under section 148 of the Act, 1961. At the time when the notice under section 148 of the Act, 1961was issued by the Assessing Officer to the petitioner there was no valid satisfaction recorded by the Prescribed Authority i.e. the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Subsequent to the issuance of the notice under section 148 of the Act, 1961 by the Assessing Officer, the satisfaction under section 151 was digitally signed by the Prescribed Authority.”
The Delhi High Court on Thursday, held that payment aggregators fall within the definition of the payment system u/s 23 of the Payment and Settlement Systems Act, 2007, and that the Reserve Bank of India (RBI), has the power to regulate them. “In our opinion, this protection is vital for securing fully, the interests of the customers and the merchant clients of the PAs. Added to that, the PAs can now get interested in the core funds available in the escrow accounts. The difficulties put forth on behalf of PAs, perhaps are a small wrinkle, which cannot be the reason for striking down the impugned clauses of the 2020 Guidelines. In our view, the public interest element, which is imbued in the framing of the Guidelines, trumps the concerns raised by the petitioners.”- the Court commented, dismissing the writ petition.
The Supreme Court has held that the disputes related to tax concessions are not arbitrable and has overruled the Allahabad High Court order holding that the terms of e-auction provided that any dispute was arbitrable. Overruling the High Court order, a coram of Justice Dr. Dhananjaya Y. Chandrachud and Justice Hima Kohli observed that “On both these aspects, we are of the view that the High Court was in error. The appellant is not asserting a contractual claim in pursuance of the e-auction. Undoubtedly, a contractual dispute would be amenable to being resolved by arbitration. However, in the present case, as the reliefs which have been extracted above indicate, the dispute was not of that nature. Hence, we are inclined to set aside the impugned judgment and order dated 15 March 2018 and remand the proceedings back to the High Court for consideration of merits. The appeal is allowed. The impugned judgment and order dated 15 March 2018 are set aside. Writ Tax No 850 of 2016 is restored to the file of the High Court for consideration afresh.”
The High Court of Gujarat has, in a recent appeal filed before it by the parents of the deceased assessee, held that the income tax return filed prior to the death of the assessee shall be the basis of computing the loss of the future income of the assessee for MACT claim. “Following the decision of the apex court in the case of Sangita Arya & others vs. Oriental Insurance, preceded by the Allahabad High Court’s decision in Sheela Devi & others vs. Sumit Kumar, and the decision of a Coordinate Bench of this High Court Itself in the case of New India Assurance Company Limited vs. Salmabibi Jainulabedin Doi, the method of assessing the income on the basis of the aggregate income of the last three years has deprecated, and both the High Court of Allahabad as well as this court, has thus considered assessing the income, based on the latest income tax returns, for the computation of income, considering such income tax returns to be the base for awarding the future prospective income”. – Justice Gita Gopi observed, allowing the appeal in part.
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