Signing of Statement Admitting Tax Liability during Investigation & Making Payments shall not lead to Self-Assessment: Madras HC [Read Order]

The Madras High Court has held that the signing of a statement by the taxpayer admitting tax liability under the stress of investigation and making payments accordingly shall not lead to self-assessment or self-ascertainment under the provisions of section 74 of the Central Goods and Services Tax Act, 1961.

The petitioner has relied on the following decisions and contended that any amount collected during investigation should be refunded in the absence of any determination of demand as against the concerned assessee.

Dr. Justice Anita Sumanth disagreed with the contention of the Revenue that Section 74(5) is a statutory sanction for advance tax payment, pending final determination in assessment.

“What Section 74(5) provides is the first opportunity to an assessee to pay tax, interest and penalty liability even prior to the issuance of a show cause notice and such acceptance will have to be in the form of either self-ascertainment or an ascertainment by the proper officer,” the Court said.

Granting relief to the assessee, the Court held that “Merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment. The ascertainment contemplated under Section 74(5) is of the nature of self-assessment and amounts to a determination which is unconditional, and not one that is retracted as in the present case. Had such ascertainment/self-assessment had been made, there would be no further proceedings contemplated, as Section 74(6) states that with ascertainment of demand in Section 74(5), no proceedings for show cause under Section 74(1) shall be issued. In this case, enquiry and investigation are on-going, personal hearings have been afforded and both the parties are fully geared towards issuing/receiving a show cause notice and taking matters forward. Thus, the understanding and application of Section 74(5) in this case, is, in my view, wholly misconceived.”

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