This weekly round-up analytically summarises the key tax judgments of the Supreme Court and all High Courts reported at Taxscan.in during the previous week from September 23 to September 29, 2023.
The Supreme Court of India directed Rajasthan High Court to consider urgent interim relief sought by the petitioner, Kaushal Export and Another, in the matter of confiscation of goods of perishable nature under the Goods and Service Tax Act, 2017.
A Two-Judge Bench of Justice Nagarathna and Justice Ujjal Bhuyan and observed that “Having heard the counsel for the petitioners and having regard to the nature of confiscated goods and bearing in mind the perishable nature of the same, the petitioners are permitted to move the High Court for expeditious interim relief in the matter.” “It is needless to observe that if the petitioners request for urgent interim relief, the High Court would consider the same in accordance with law and having regard to the nature of the goods, which are confiscated” the Court concluded.
The Supreme Court of India directed the petitioner, M/s Classic Decorators, to make payment before the Appellate Authority within two weeks in the matter of payment of mandatory pre-deposit.
A Two-Judge Bench of Justices BV Nagarathna and Ujjal Bhuyan observed that “The special leave petition is accordingly dismissed as withdrawn. It is noted that the High Court had granted two weeks’ time from 29.05.2023 to make the pre-deposit. Hence, we also grant two weeks’ time from today to make the pre-deposit before the appellate authority.”
On October 13, the Supreme Court is scheduled to consider an appeal filed by the National Financial Reporting Authority (NFRA), which is the audit watchdog in India. This appeal is in response to a decision by the Telangana High Court that stayed NFRA’s proceedings against an audit firm.
The High Court further stated that “The obvious basis of the principle against retrospectively is the principle of “fairness”, which must be the basis of every legal rule as was observed in L’Office Cherifien des Phosphates v. Yamashita Shinnihon Steamship Co.Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treat as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation”.
The Delhi High Court has held that Goods and Service Tax (GST) is not payable by Delhi Metro Rail Corporation (DMRC) for the service of Project Report for Surat Municipal Corporation and refund under section 54 of Central Goods and Service Tax (CGST Act), 2017 not applicable where GST is not Charged.
A division bench comprising Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed that the period of limitation for applying for a refund as prescribed under Section 54 of the CGST Act, would not apply where GST is not chargeable and it is established an amount has been deposited under a mistake of law. The Court set aside the impugned order as well as the refund rejection order and directed the respondents to process the DMRC’s claim for a refund of ₹2,90,520/-.
The Delhi High Court in the case of Pepsico India Holding Ltd has held that a late deposit to the employee’s Provident Fund (PF) due to a national holiday is allowable.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed that “since the due date fell on a date which was a National Holiday, the deposit could have been made by the respondent/assessee only on the date which followed the National Holiday. Section 10 of the General Clauses Act would help the respondent/assessee to tide over the objections raised on behalf of the appellant/revenue.” The Court ruled against the appellant/revenue and in favour of the respondent/assessee.
The Calcutta High Court directed the Additional Chief Secretary, Finance Department to decide in the matter of additional tax liability on subsisting Government contracts in pre or post GST regime without updating the Schedule of Rates (SOR).
A Single Bench of Justice Md Nizamuddin observed that “Considering the submissions of the parties this writ petition is disposed of by giving liberty to the petitioner to file appropriate representation in the aforesaid regard as referred in preceding paragraph of this order, before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks from date. On receipt of such representation the Additional Chief Secretary, Finance Department shall take a final decision within four months from the date of receipt of such representation after consulting with all other relevant departments concerned.” The Court also directed to consider such representation shall be considered and final decision will be taken up by the Additional Secretary, after giving opportunity of hearing to the petitioner or his authorized representatives. Till the final decision is taken by the Additional Chief Secretary, no coercive action shall be taken against the petitioner.
The Allahabad High Court ruled that the consignee is deemed owner if the invoice or any other specified document is accompanying the goods.
A Division Bench of Justices Ashwani Kumar Mishra and Syed Aftab Husain Rizvi observed that “It is hereby clarified that if the invoice or any other specified document is accompanying the consignment of goods, then either the consigner or the consignee should be deemed to be the owner. If the invoice or any other specified document is not accompanying the consignment of goods, then in such case, the proper officer should determine who should be declared as the owner of the goods.” “We are of the view that the department ought to have considered the petitioner’s prayer for release of goods and vehicle upon compliance of the provisions contained under Section 129 (1) (a) of the Act. A direction accordingly is issued to the respondents to act in terms of the above circular and release the goods upon compliance of the condition stipulated under Section 129(1)(a)” the Bench noted.
The Delhi High Court recently observed that a search can be authorized only if the conditions specified under Section 67 of the Central Goods and Services Tax (CGST) Act, 2017 are fulfilled.
A Division Bench of Justices Vibhu Bakhru and Tara Vitasta Ganju observed that “We have serious reservations whether any such roving and fishing inquiry under the Central Goods and Services Act, 2017 could have been directed to be conducted by the Special Judge. Further, the proper officer can authorise the search only if the conditions specified in Section 67 of the Act are fulfilled.” The Court also noted that “The respondent shall also produce the relevant files containing the directions for conducting the search. In the meanwhile, the proceedings pursuant to the search conducted are stayed.”
The Delhi High Court in its recent judgement has set aside the order cancelling the Goods and Service Tax (GST) registration order passed without disclosing reason.
A division bench comprising Justice Vibhu Bakhru and Justice Tushar Rao Gedela observed that “Since the impugned show notice dated 5.12.2021 failed to disclose the reason for proposing cancellation of the petitioner’s GST registration, the impugned order cancelling the petitioner’s registration falls foul of the principles of natural justice.” The Court set aside the orders cancelling the petitioner’s registration and the petition is allowed with costs, quantified at ₹5,000/-.
The Delhi High Court observed that disallowance under section 14 A of the Income Tax Act, 1961 without examining accounts of Security Printing and Mining Corporation of India Ltd is invalid.
“Completely ignoring the version of the respondent/assessee that being a cash-rich company, it did not have to deploy any person by way of any special effort which could be treated as expenditure to earn the exempted income, the Assessing Officer recorded a conclusion that the respondent/assessee had infused significant funds by way of equity in the joint venture company. No cogent reasons, much less supported by data extracted from accounts of the respondent/assessee were advanced by the Assessing Officer to explain why the case set up by the respondent/assessee was not believable. Even the quantification of the disallowance was carried out under Rule 8D(iii) of the Rules without scrutinizing the accounts of the respondent/assessee and by jumping over the mandate to first proceed under Section 14A of the Act.”, the court viewed. The court upheld the impugned order of the Tribunal and dismissed the appeal.
The Bombay High Court recently ruled that write-off of bad debt is not asset and clause – (a) of 4th proviso to Section 153A(1) of Income Tax Act, 1961 bars assessment.
A Division Bench of Justices Firdosh P Pooniwalla and K Shriram observed that “In the instant case, the satisfaction note refers to two items. First, the loan account between petitioner and Hubtown Limited and the alleged escapement is only in respect of the part thereof which is written off during the year. That clearly, i.e., the writing-off of a bad debt cannot fall within the ambit of income, represented in the form of an asset.” It was further observed that the other item referred to in the satisfaction note, that is to say, trading in shares of Hubtown Limited has been undertaken on the stock exchange, recorded in the books of account of petitioner, and the resulting gain offered for tax and the amounts taxed in the hands of petitioner. “Since the write-off of a bad debt cannot be held to be an asset, clause – (a) of the 4th proviso to Section 153A(1) of the Income Tax Act would bar any assessment that is proposed to be made for the relevant assessment year/years, i.e., Assessment Year 2011-2012, 2012-2013 and 2013-2014” the Bench concluded.
The Bombay High Court observed that failure to pass draft assessment order under Section 144C (1) of the Income Tax Act, 1961 renders assessment as one without jurisdiction.
A Division Bench of Justices Dr NK Ghokale and K R Shriram observed that “It is clear that the AO shall, in the first instance, forward a draft of the proposed order of assessment to the eligible assessee if he proposes to make any variation is prejudicial to the interest of such assessee. Certainly, there is a variation in the assessment order different from what was filed in the return of income and since it is by way of an addition made, the variation is prejudicial to the interest of Petitioner.” The Court relied on International Air Transport Association v. Deputy Commissioner of Income-tax of the Bombay Court and in the case of Zuari Cement Ltd v ACIT of the Division Bench of the Andhra Pradesh High Court wherein it was held that ‘the failure to pass a draft assessment order under Section 144C(1) of the Income Tax Act would result in rendering the final assessment as one without jurisdiction.
The Delhi High Court quashed the Retrospective Effect of Cancellation of Goods and Service Tax (GST) registration and directed to effect the cancellation only from the date of the closure of the premises of the assessee.
A division bench comprising Justice Vibhu Bakhru and Justice Tushar Rao Gedela directed that the cancellation of the petitioner’s GST registration shall take effect from 31.03.2022. However, this would not preclude the concerned authorities from instituting any proceeding if it is found that the petitioner has violated any provisions of the Statute or is liable to pay any tax, interest or liability.
The Delhi High Court upheld the penalty under the Customs Act, 1962 as there was material evidence showing the complicit and active involvement of the assessee in evasion of customs duty.
A division bench comprising Justice Yashwant Varma and Justice Dharmesh Sharma observed that “the respondents had found that the petitioner was complicit and actively involved in the evasion of duty and the intent of these parties to mis-declare imports while acting in concert. Bearing in mind the material which has been relied upon and the nature of the allegations levelled against the petitioner, we find ourselves unable to hold that his case would fall in the category of rare and exceptional cases.” “Prima facie, and solely to examine whether a waiver is merited, we have delved through the relevant record and find that the conclusions drawn by the respondents insofar as the petitioner is concerned can neither be said to be wholly perverse nor unsustainable. We thus find that the circumstances do not warrant the invocation of the extraordinary power conferred by Article 226 of the Constitution.”, the court held while dismissing the petition.
The Bombay High Court granting of license to developer doesn’t amount to possession within meaning of section 53 A of Transfer of Property Act (TP) and Section 2(47)(v) of Income Tax Act,1961 is not applicable.
The division bench comprising Justice K. R. Shriram and Justice Dr.N.K. Gokhale relying upon the judgment of the Apex Court in the case of Seshasayee Steels (P) Ltd. V Assistant Commissioner of Income Tax VI(2), held that the assessee had only granted a licence to Developer who entered into assessee’s land for the purpose of development and that did not amount to ‘allowing the possession of the land’ as contemplated under Section 53A of the Transfer of Property Act,1882 and therefore Section 2(47)(v) of the Act would not apply. The Court held that granting of a licence for the purpose of development of the flats and selling the same could not be said to be granting possession.
A Division Bench of the Himachal Pradesh High Court, while quashing the denial of the registration of Sale Certificate in revenue records, held that Excise & Taxation Department cannot raise a priority claim over and above the Petitioner-Bank, when, as per Section 26E of SARFAESI Act introduced by amendment carried in 2016.
It was observed that, “Apex Court has categorically held in Kotak Mahindra Bank Ltd. vs. Girnar Corrugators Private Limited and Others, that non-obstante clause in Section 26E of SARFAESI Act shall prevail over the MSMED Act, in absence of any specific express provision giving priority for payment under the MSMED Act over the dues of the secured creditors or over any taxes or cesses payable to central/state government or local authority.” “The Petitioner-Bank has first charge over the properties being secured creditor in priority over all Other Debts, Revenues, Taxes, Cesses and Other Rates payable to the Central or State Government or Legal Authority”, the Himachal Pradesh High Court held.
The Madras High Court directed to release of the consignment of prohibited Black pepper having an MMI of 500/per kg after testing the samples and paying the customs duty and noted that the consignment of Prohibited Black Pepper can be Released Provisionally under Section 110-A of the Customs Act, 1962 pending Adjudication.
A single-judge bench comprising Justice C.Saravanan observed that since “there is no mandate that the goods shall be confiscated and vested with the Government. They can be released provisionally under Section 110-A of the Act pending adjudication. Taking note of the above view of the Madurai Bench of this Court, the Court is inclined to order a provisional release of the imported consignment of black pepper subject to the petitioner furnishing suitable securities in the form of a guarantee and subject to the meeting standards prescribed by the Food Safety Authority under the provisions of the Food Safety and Standards Act, 2006.”
In a significant case, the Allahabad High Court held that the grant of pardon in a scheduled offence has no effect on proceedings under the Prevention of Money Laundering Act,2002 and upheld the proceeding.
A single judge bench comprising Justice Subhash Vidyarthi held that “there is no illegality in the cognizance/ summoning order dated 08.08.2019 passed in Complaint Case No.121/2019 in the Court of Session Judge / Special Judge PMLA, Lucknow, and there is no ground to quash the proceedings of the complaint filed against the applicant under the PMLA. The application under Section 482 Cr.P.C. lacks merit and the same is, accordingly, dismissed.”
In a recent case, the Kerala High Court directed the commissioner of Income Tax to decide the appeal within 2 months since the petitioner is facing the recovery proceeding under the Income Tax Act,1961.
The Court finally disposed of the petition with a direction to the third respondent to consider Exhibit P4 appeal filed by the petitioner and pass an appropriate order within two months.
The Bombay High Court HC set aside an assessment order under section 148 of Income ncome Tax Act,1961 in the absence of evidence proving income escapement in assessment.
The division bench comprising Justice K.R Shriram & Justice Dr. N.k. Gokhale accepted the view taken in CIT vs. Dalmia Cement (Bharat) Ltd that “once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit.”
In a significant ruling the Kerala High Court observed that the Superintendent of Central Tax should take an independent decision without the influence of direction by the Directorate General of GST Intelligence (DGGI) for cancellation of GST Registration.
The Court stated that if the show cause is cancelled, the petitioner would be entitled for restoration of the GST registration certificate. However, if the authority takes a decision to cancel the GST registration of the petitioner, he may take recourse to appropriate proceedings as available under law. The Court made it clear that the Superintendent of Central Tax should take an independent decision without being influenced by the direction of the DGGI, Kochi Zonal Unit. Aswin Gopakumar, Caounsel appeared for the petitioner and P.T. Dinesh, Counseppeared l for the respondent.
The Bombay High Court (HC) has held that delayed payment on the balance amount of self-assessment tax does not amount to tax arrears under Direct Tax Vivad Se Vishwas Act 2020 (DTVSV Act).
The division bench comprising Justice K.R Shriram & Justice Dr. N.k. Gokhale observed that the prosecution against the petitioner has been initiated under section 276-C(2) of the Act because of the delayed payment of the balance amount of the self-assessment tax. Such delayed payment cannot be construed to be a tax arrear within the meaning of section 2(1)(o) of the Act. Therefore, such a prosecution cannot be said to be in respect of tax arrear. Further held that “the declaration of petitioner filed on 31st January 2021 for Assessment Years 2010-2011 and 2011-2012 would have to be decided by respondent no.1 in conformity with the provisions of DTVSV Act. The petition is accordingly allowed to the extent.”
In a recent ruling, a Division Bench of the Delhi High Court has urged the Central Government to expedite the implementation of National Litigation Policy.
Observing that, “More than a decade has passed since the discussion on the issue of a litigation policy commenced and it is unclear as to when the proposed framework or guidelines will be in place”, the Delhi High Court ruled that “The government must prepare a time-bound action plan for implementation of the ‘National Litigation Policy’ or the guidelines that are under contemplation”, directing the registry to communicate a copy of the judgement to the Secretary, Ministry of Law & Justice, Government of India, for necessary action, also to transmit a copy of this judgement to Secretary, Department of Law, Justice & Legislative Affairs, Government of NCT of Delhi, for due consideration.
In a recent ruling, the Kerala high Court has stayed the Recovery cum Garnishee orders issued by the income tax authorities during the pendency of condonation applications on condition of pre-deposit 20% of the assessed tax amount.
The bench of Justice Dinesh Kumar Singh took into account the petitioner’s submissions and directed them to make a 20% deposit of the assessed tax amount within a period of 1 month. Upon completion of the deposit, the appellate authority was further directed to promptly review the applications for condoning the delay and the pending appeals in accordance with law. It was further directed that until a final decision is reached concerning these applications and appeals, the contested demand notices and recovery cum garnishee orders are to be temporarily suspended and not enforced.
In a recent ruling, the Kerala High Court ruled that Input Tax Credit (ITC) cannot be denied solely based on the discrepancy between GSTR 2A and GSTR 3B. The High Court remitted the matter back for the evidence examination.
The High Court, while allowing the writ petition, remitted the matter back to the file of the Assessing Authority to examine the evidence of the petitioner irrespective of the Form GSTR 2A for petitioner’s claim of the input tax credit. Furthermore, it was instructed that, subsequent to a thorough review of the evidence presented by the petitioner/assessee, the Assessing Authority should issue new orders in compliance with applicable regulations. The petitioner has been specifically advised to attend a meeting with the Assessing Officer on October 3, 2023, at 11:00 a.m., along with all supporting evidence to substantiate their input tax credit claim.
The Kerala High Court has recently held that Municipality should only issue demand notices for property tax from the date of issue of completion certificate.
The Single Bench of Justice Dinesh Kumar Singh observed that, “the petitioner is liable to pay the tax for the period after issuance of the occupancy certificate and not prior to the said date, the present writ petition to that extent is allowed. The Municipality is entitled to recover the tax from the date of issuance of the occupancy certificate.”
The Punjab and Haryana High Court, while allowing the Goods and Services Tax (GST) refund, held that innovation and development services in the pharma provided to a German company amounted to an export of services.
The bench observed that the fact of non-issuance of SCN to the remaining 5 claims was not disputed in the reply filed by the respondents. It is not in dispute that issuance of show cause notice and granting of opportunity of hearing before rejecting any refund claim, is a statutory requirement. The petitioner claimed that they meet all the conditions for export of services as defined in Section 2(6) of the Integrated GST Act, 2017, and that they provide services directly to the German company without any intermediaries. The Punjab and Haryana High court has ruled in favor of the petitioner, setting aside the orders dated September 13, 2019, and March 4, 2021. The respondents have been directed to release the refund amount of Rs.25,74,16,653 for the specified period within four weeks.
The Bombay High Court has held that the amendment under section 54 of the Income Tax Act, 1961 has no retrospective effect on restricting investment in India as the amended provision would come into force with effect from 1st April 2015 and therefore, would apply to future periods only and not before the date of amendment.
The bench of Justice K. R. Shriram and Justice N. K. Gokhale has observed that the amendment stated that the amended provision would come into force with effect from 1st April 2015 and therefore, would apply to future periods only and not before the date of amendment. “The language of Section 54(F) of the Act before the amendment is neither ambiguous nor vague. The intention of the legislature to insert the words ‘in India’ with effect from 1st April 2015 is not uncertain or confusing and hence the applicability of the amendment cannot but be prospective.”, the Bench held. It was also clear that Petitioner has not filed the revised returns under Section 139(5) of the Act but he has admitted to an inadvertent error in declaring total income as Nil vide a rectification application. The Court held that the petitioner is entitled to a refund of Rs.72,370/- for the excess amount of tax deduction at source. The order was quashed and set aside.
In a recent ruling, the Delhi High Court has directed the authorities to issue a refund of Rs. 22 crores along-with interest as per Section 42 of the Delhi Value Added Tax Act, 2004 from the date it fell due till realisation. It was observed that the VAT credit cannot be treated as a Pre-deposit for Goods And Services Tax (GST) Adjustments.
Hence, the Court invalidated the challenged adjustment order dated November 18, 2022, and instructed the refund of Rs. 17,10,15,285/- for the fourth quarter of 2015-16 and Rs. 5,44,39,148/- for the initial quarter of 2017-18, inclusive of interest in accordance with Section 42 of the DVAT Act, to be calculated from the due date until it is realized. Furthermore, the court ordered that the refund should be processed within three weeks from the date of this judgment. However, concerning the contested default notices, unless under specific circumstances, the petitioner is granted the right to challenge them through a statutory appeal before the Appellate Tribunal, following the legal procedures.
The Madras High Court in a case of dishonour of cheque in relation to payment made to an Advocate and ruled that the contingent fee of and advocate is not a legal claim.
A Single Bench of Justice G Ilangovan observed that “in the light of the Legal Practitioner’s Fees Rules 1973, the fee that has been claimed by the respondent prima facie shows illegal in nature. So, the illegal claim cannot be construed as legal claim. No legal liability can be fastened upon the petitioner to honour the above said cheque. So, this contention on the part of the respondent is rejected.” The Court commented that this is a classic case of legal practitioner’s abuse of the process of the court. So the continuation of proceedings amounts to illegal. “Legal process can be undertaken to advance or vindicate the grievance, but it should not be permitted to be taken as an act of aberration, abuse and that too by any legal practitioner. So, the entire process is liable to be quashed” the Bench concluded.
“There is not even a whisper in the entire communication trail as to what was not disclosed”, the Bombay High Court observed while quashing the penalty proceedings against the assessee under Section 148 of the Income Tax Act.
Upon observing that, “There is not even a whisper in the entire communication trail as to what was not disclosed. In our view, thus, this is not a case where assessment should be permitted to be reopened on the reasonable belief that income has escaped assessment on account of failure of the assessee to disclose truly and fully or material information necessary for computation of income”, the Division bench of Justices Dr. N K Gokhale and K R Shriram quashed the notice dated 26th March 2021, the order disposing objections dated 24th March 2022, the impugned assessment order and the impugned notice of remand dated 24th March 2022 as well as the impugned show cause notice for levy of penalty dated 24th March 2022.
Directing the respondent to surrender, a Single Bench of the Calcutta High Court has quashed and set aside the order of acquittal granted by the magistrate owing to misreading of evidence.
The court found, perusing the entire evidence on record, that the learned Magistrate recorded an order of acquittal on misreading of evidence and the evidence on record is sufficient to hold the respondent No.2 liable for committing offense under Section 138 of the N.I Act. The order of acquittal was thus set aside. The respondent No.1 was held guilty for committing offense under Section 138 of the N.I Act. The order of acquittal passed in favour of respondent No.3 was not interfered with and the order acquitting the respondent No.3 passed by the Magistrate was affirmed. The respondent No.2 was convicted accordingly and sentenced to undergo simple imprisonment for a period of six months. The respondent No.2 was also directed to pay compensation of Rs.36 lakhs being double the cheque amount with simple interest thereon at the rate of 9% per annum to the appellant/complainant in default of payment of said compensation, the respondent will have to undergo simple imprisonment for further period of six months, the Single Bench of Justice Bibek Chaudhuri held.
In a ruling by Justice Dinesh Kumar Singh of the Kerala High Court, it was determined that the District Collector does not have the authority to approve installment plans for sales tax liabilities under the Kerala General Sales Tax Act. Instead, the High Court granted permission for individuals to submit applications directly to the Sales Tax Officer (STO) in order to settle the petitioner’s dues in six installments.
Additionally, the High Court has instructed that the Sales Tax Officer (STO), who is the fourth respondent in this matter, should render a decision on the application in accordance with the law within 15 days from the date of the directive. Moreover, for a duration of one month, the challenged notices should not be enforced.
A Division Bench of the Bombay High Court issued notice to the Attorney General of India, R. Venkataramani, in a plea challenging the constitutional validity of provision on Resolution Professional.
The Court of Justice MM R. Venkataramani and Justice BP Colabawalla observed that “Once this is the case, we are of the view, at least prima facie, that the ‘Chairperson’ is a separate and distinct category from a ‘Whole-Time Member’. Admittedly the present impugned order has not been passed by a Whole-Time Member but by the Chairperson.” “Since the constitutional validity of Sections 7(5) and 9(5) of the IBC, 2016 are also challenged in the present Petition, notice is issued to the Attorney General of India returnable on 27th September, 2023” the Bench noted.
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