This weekly round-up analytically summarizes the key stories related to High Courts reported at Taxscan.in during the previous week from March 1st to March 12, 2022.
NEHAL ASHWINKUMAR SHAH vs State of Gujarat
The Gujarat High Court has held that there is no provision under the Sales Tax Act to fasten the liability of the Company on its Director and lifts the attachment of the Directors bank account. The division bench comprising of Justice J.B Pardiwala and Justice Nisha M. Thakore while allowing the writ petition held that “Thus, unlike Section 179 of the Income Tax Act, 1961, there is no provision in the Sales Tax Act fastening the liability of the company to pay its sales tax dues on its Director”. Further held that, “the attachment on the bank account of the writ applicant is hereby ordered to be lifted. The bank shall permit the writ applicant to operate the bank account. It is needless to clarify that the dues which are payable by the company shall remain pending and it shall be open for the department to take appropriate steps against the company in accordance with law for the purpose of recovering its dues”.
M/s Indian Metal and Ferro Alloys Ltd vs Commissioner of Income Tax, Bhubaneshwar – 2022 TAXSCAN (HC) 104
A division bench of the Orissa High Court has held that deposit of amount in ‘no-lien/escrow account’ will not constitute ‘actual payment’ under Section 43-B of the Income Tax Act, 1961. The Court observed that the objective of Section 43B of the Act was to ensure that liability could be claimed as deduction only if the Assessee has actually parted with the sum without any recourse to it thereafter. In the present case, the interim stay granted in favour of the Assessee was only to ensure that the disputed amount of electricity duty did not go to the State Government. Thus, the Court held, short of such ‘actual’ payment, the Assessee was permitted, first by the High Court and then by the Supreme Court, to deposit the disputed amount of duty in a ‘no-lien’/escrow account. The very nature of the stay was to prevent the State Government from having access to the amount placed in such no-lien/escrow account. Therefore, while it may be correct to say that the Assessee ‘paid’ the amount in dispute, it paid it only into an account from which the State Government could not withdraw the amount.
Union of India vs M/s Bundl Technologies Private Limited – 2022 TAXSCAN (HC) 101
A division bench of the Karnataka High Court has ordered the GST department to grant a refund of Rs. 27 crores illegally collected from Swiggy. The Division Bench of Justice Alok Aradhe and Justice MGS Kamal dismissed an appeal filed by the Central government against a decision of the single-judge directing them to consider granting GST refund.
PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 3, NEW DELHI vs M/S AGSON GLOBAL PVT. LTD – 2022 TAXSCAN (HC) 102
The Delhi High Court has dismissed the appeal against the deletion of income tax addition for share or bogus purchases or cash deposits and held that appeal under section 260A of Income Tax Act cannot be entertained by High Court except on the grounds of perversity or for the complete lack of evidence.
Swetabh Suman vs Centrak Bureau of Investigation
The Uttarakhand High Court has upheld the judgment of a special CBI Special court against former income tax commissioner, who was found guilty in a disproportionate assets case after it emerged that his assets had risen by over 300% between 1997 and 2004. Justice Ravindra Maithani held that while upholding the judgment, reduced the quantum of punishment from seven years to five years of rigorous imprisonment.
Nico Tiles vs State Tax Officer
The Kerala High Court has held that the Taxpayer cannot invoke writ jurisdiction and approach the High Court to avoid the mandatory pre-deposit since the matter is already pending before the Statutory appellate authority under the Central Goods and Services Tax Act, 2017. The High Court held that “In view of the above consideration, this Court is of the view that since the petitioner had already invoked the appellate remedy, the said appeal ought to be pursued as contemplated by law. The remedy of Article 226 of the Constitution of India being extra ordinary, I do not find the existence of any circumstances warranting the invocation of the extra ordinary jurisdiction, after invoking such an appellate remedy.”
Devendra Pai vs The Assistant Commissioner of Income Tax
The Karnataka High Court has held that the Assessing Officer cannot take advantage of the ignorance on the part of the assessee to collect more tax amount than is legitimately due relying on a circular issued by the Central Board of Direct Taxes (CBDT). Justice Sunil S.Yadav, while condoning a delay of 6 years in filing revised Income Tax Return (ITR) held that the intention of Circular No.014 (XL-35) dated 11.04.1955 was not that tax due should not be charged or that any favor should be shown to anybody in the matter of assessment, or where investigations are called for, they should not be made.
M/s.Ganges International Private Ltd vs The Assistant Commissioner of GST & Central Excise
The Madras High Court has allowed the Credit of Service Tax Paid under RCM which could not be availed as Transitional Credit under the Goods and Services Tax ( GST ) regime. While allowing the petition, a Single Judge bench of Justice R. Suresh Kumar observed that, “in these kinds of special situations, for which, the provision if not Section 142(3), no other eligible provision is available. Therefore, this Court feels that, since it is a dire necessity, as these kind of situation necessarily to be met with by the Legislation, for which, these transitional provision has been brought in in the Statute Book, there can be no impediment for invoking Section 142(3) of the Act by invoking the ‘Doctrine of Necessity ”.
The Court also said that, “Normally, the theory of “Doctrine of Necessity” could be invoked when there is a dire necessity with regard to the forum, before whom, the issue has to be referred to and disposed and decided by such forum. Earlier the view was that, it would apply only to judicial matters but in Mohapatra and Company and another Vs. State of Orissa and another, it was held that “the doctrine of necessity applies not only to judicial matters but also to quasi-judicial and administrative matters”.
While relying on many case laws, the Court also added that, The “Doctrine of Necessity” though would be applied only with regard to the forum or the authority by whom it shall be decided, here, since it is a transitional period from the erstwhile tax regime to the present GST regime, where, the available provisions are to be best utilised by the taxpayers, it becomes imperative in order to meet the special situation as the one discussed above, to have a forum, for which, the available legal provision of the Act viz., GST Act, 2017 can very well be invoked. Therefore, though normally the “Doctrine of Necessity” would only be invoked for want of forum, here in the case, it also can be construed that, if Section 142(3) is not permitted to be invoked in meeting situations like this, that situation would render that taxpayer remediless, hence, here also the “Doctrine of Necessity” can be invoked, in the considered opinion of this Court.
COMMISSIONER OF INCOME TAX (EXEMPTIONS) DELHI vs M/S SHUGAN CHANDRA KOTHARI TRUST
The Delhi High Court has held that the High Court, while entertaining an appeal under Section 260A of the Income Tax Act, 1961 cannot interfere with the finding of fact if it involves re-appreciation of the evidence. A Division Bench, consisting of Justices Manmohan and Sudhir Kumar Jain, held that if a particular receipt has been disclosed in the income and expenditure account, the same cannot be considered as unaccounted income in the hands of the Assessee and be subject to proceedings under Section 263 of the Act.
M/S V.K. Traders vs Union of India
The Allahabad High court has held that Anticipatory Bail does not arise for an offence which is bailable, but for non-bailable and cognizable offences. The single bench of Justice Sri Samit Gopal without going into the merits of the case proceeds to examine whether an application under Section 438 CrPC would lie and is maintainable for an offence which has been declared by the concerned statute as a bailable offence. It was held by the court by rejecting the application that “The provision of anticipatory bail as per its scheme can be invoked by a person who has a “reason to believe that he may be arrested” for committing a “non – bailable offence” and resultantly, the question thus being answered by holding that granting of anticipatory bail does not arise for an offence which is bailable and a direction for the same can be issued only in respect of non-bailable and cognizable offences, the present anticipatory bail application deserves rejection and, accordingly, it is rejected”.
M/s. V.R.S. Traders vs Assistant Commissioner (State Taxes)
The Madras High Court, while quashing an assessment order, held that DRC-1 Notice is mandatory before concluding Assessment under the GST regime. Justice R Suresh Kumar observed that if the revenue wants to initiate proceedings under Section 74 of the Act, has to serve a notice to pay the amount of tax along with interest payable under Section 50 and a penalty equivalent to 15% of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.
While quashing the notice, the Court observed that “Therefore a Section 74(1) notice is an independent notice to be issued in DRC-01, whereas the notice under Section 74(5) was to be issued in DRC01A. Herein the case in hand, admittedly DRC-01A was issued, thereafter straightaway the respondent revenue proceeded to pass the impugned assessment order. The DRC-01 notice under Section 74(1) of the Act, which is also mandatory to be issued before passing the impugned order of assessment has not been issued in this case. In the absence of any such notice, the proceedings, which is culminated in the order of assessment, which is impugned herein, is, no doubt, vitiated.”
AANCHAL MITTAL & ORS vs ANKUR SHUKLA
The Delhi High Court has held that carrying of business in any place does not confer jurisdiction on courts to adjudicate a dispute inter se partners in an LLP. A Single Bench of Delhi High Court of Justice Amit Bansal, has held that carrying of business in any place does not confer jurisdiction on courts to adjudicate a dispute inter se partners in an LLP.
CREATIVE MUSEUM DESIGNERS vs INCOME TAX OFFICER, EXEMPTIONS, WARD-1(1), KOLKATA
The Calcutta High Court has held that a non-profit organization under section 25 of the Companies Act imparting education is eligible for income tax exemption as the same would be treated as charitable activity for the purpose of the Income Tax Act, 1961.
The court ruled that the ITAT had misread the nature of the activities done by the Assessee Company qua the objects behind its incorporation under Section 25 of the Companies Act, 1956. The High Court held that the object behind the projects carried out by the Assessee, such as the establishment of science centres or museums on turn-key basis, was in public interest to educate the general public in an easy and attractive manner. It observed that the technical expertise and research done by the Assessee, for carrying out the projects for a specified purpose, could not be within the capacity of a contractor.
Allowing the contentions of the assessee, the Court has ruled that when a Company has been established as a non-profit organization under the Companies Act, and its profits are applied solely for the promotion of its objects, its activities would by necessary implication fall under the definition of a “charitable purpose” under the Income Tax Act, 1961.
The Delhi High Court, in a major relief to LG, has directed the Central Processing Center to determine and process the Income Tax Refund due to LG Electronics in accordance with the law after the later filed a rectification application under Section 154 of the Income Tax Act, 1961.
A two-judge bench consisting of Justice Manmohan and Justice Navin Chawlahas held that “due to some technical reasons the accounting of order under Section 154 could not be completed on 24th February, 2022 and the same may get completed by 25th February, 2022. The demand raised in intimation under Section 143(1) for Assessment Year 2020-21 has been cancelled and once the accounting of rectification order is completed at CPC, refund due will be determined.In view of the aforesaid development, the CPC is directed to determine and process the refund in accordance with law.”
HDFC BANK LTD vs Assistant Commissioner of Income Tax
A division bench of the Bombay High Court has invalidated a re-assessment order passed by the income tax department against HDFC Bank as the jurisdictional condition for invoking the power under section 147 of the Income Tax Act was not satisfied.
The court noted that it is trite law that once the AO on consideration of the material on record and the explanation offered, arrives at a final conclusion that the assessee is entitled to the deduction as claimed then, on the basis of the very same material, the AO cannot form a prima facie opinion that the deduction is not allowable and accordingly reopen the assessment on the ground that income chargeable to tax has escaped assessment.
SAINT-GOBAIN INDIA PRIVATE LIMITED vs Union of India
A two-judge bench of the Gujarat High Court has held that only the persons on whom lay the ultimate burden to pay the tax would be entitled to get a refund of the same.
Upholding the decision of a coordinate bench, Justice JB Pardiwala and Justice Nisha Thakore observed that the issue of consideration herein was covered squarely by the J.KI. Cement Ltd. vs. State of Gujarat, Special Civil Application No.15333 of 2019 judgment which had held: “The burden of paying the amount in question was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refund. Only the persons on whom lay the ultimate burden to pay the amount would be entitled to get a refund of the same.”
M/s. PRASHANTHI AFFILIATES vs THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES
The Karnataka High Court has held that the District Magistrate is empowered to attach the property and not the Commissioner of Bengaluru Mahanagara Palike Commissioner (BBMP)in order to recover the sales tax dues. The single bench of Justice S.P Sandesh has observed that the Commissioner of BBMP, has no authority to attach the property as ordered by the Special JMFC (Sales Tax) Court and it ought to be enforced under Section 421(1)(b) of Cr.P.C, through the collector of the District.
