This weekly round-up analytically summarizes the key stories related to Supreme Court of India and various High Courts reported at Taxscan. in during the previous week from July 31stto August 6th, 2022.
The Bombay High Court ruled that interim compensation in a cheque default case is directory rather than mandatory. The court observed that if the word ‘may’ is mandatory then it has to be coupled with a duty to act and held that “Section 143-A (2) of the N.I. Act confers a discretion upon the Court to direct the deposit of the sum not exceeding 20% of the cheque amount as an interim compensation”.
The Single judge bench of Karnataka High Court has held that prosecution of corruption charges under the Prevention of Corruption Act does not require sanction under section 137 of the Customs Act. The Court observed that the sanction under Section 137(1) of the Customs Act was required only concerning those offences under Section 132, Section 133, Section 134, Section 135 or Section 135-A of the Customs Act and the offences alleged against the petitioner are punishable under Sections 120B, 420, 467, 468 and 471 of the IPC and under Section 13 (2) read with Section 13 (1)(d) of the Prevention of Corruption Act which doesn’t need the sanction under Section 137 of the Customs Act.
In a significant ruling, the Supreme Court has directed the State Governments to consider the implementation of DIN system in order to prevent harassment to the honest taxpayers and advised the Central Government and GST Council to issue necessary instructions. Justice M R Shah and Justice B.V. Nagarathna observed that implementing the system for electronic (digital) generation of a Document Identification Number (DIN) for all communications sent by the State Tax Officers to taxpayers and other concerned persons would be in the larger public interest and enhance good governance.
The Delhi High Court has quashed the recovery proceedings for the income tax demand relating to the issues already decided in favour of the assessee by relying on the circular issued by the Central Board of Direct Taxes (CBDT).Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that the Board has itself issued Instruction No.1914 dated 2nd February, 1993 giving guidelines for Stay of Demand. One of the Guidelines for grant of complete stay is “if the demand in dispute relates to issues that have been decided in assessee’s favour by an appellate authority or court earlier.”
In a relief to Huawei Technologies, the division bench of the Delhi High Court has directed the income tax department to be more careful in filing appeal after the department expressed regret over the filing of an infructuous appeal. In view of the above facts, Justice Manmohan and Justice Manmeet Pritam Singh Arora found that though the present appeal is supported by an affidavit of the Commissioner of Income Tax dated 16thJune, 2022, yet the subsequent order of the ITAT dated 29th October, 2021 was not disclosed by the Department either to its counsel or to this Court. “In fact, this Court is of the view that there was no need for filing the present appeal in view of the subsequent order of the ITAT dated 29th October, 2021. At this stage, learned counsel for the appellant expresses regret for filing an infructuous appeal,” the Court said.
As per the scheme of arrangement and amalgamation, the assets and The Rajasthan High Court (HC) held that stamp duty is leviable on market value of property situated in the state of Rajasthan and required to be assessed by the statutory scheme of the Stamp Act of 1998.Justice Manindra Mohan Shrivastava and Justice Birendra Kumar observed that the demand for payment of stamp duty over such liability is more than authority under the Stamp Act of 1998.
The Supreme Court, in a landmark judgment in Vijay Madan lal v. Union of India, has upheld the constitutional validity of section 5 of the Prevention of Money Laundering Act, 2002 wherein the officer can provisionally attach the property of the accused. A division bench comprising Justice A.M. Khanwilkar, Justice Dinesh Maheshwari, and Justice C.T. Ravikumar, Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person and also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of the person concerned.
While upholding its earlier verdict in Larsen and Toubro Ltd, a two-judge bench comprising Justice M.R. Shah and Justice B.V Nagarathna observed that service tax cannot be levied on the composite works contract prior to the amendment made to the Finance Act, 1994 by insertion of the definition of works contract as under clause (zzzza).
The division bench of the High Court of New Delhi has quashed the notice for provisional attachment without following statutory requirements. The division bench has observed that since the communication was never served and the information received did not disclose that the action had been taken under Section 83 of the 2017 Act, no objections could be filed and consequently, the principles of natural justice were, infracted. Hence, the action is violative not only of the provisions of Section 83 of the 2017 Act but also Rule 159(5) of the 2017 Rules.
In a significant ruling delivered on Monday, the Delhi High Court has quashed a re-assessment notice under section 148A/148A(d) of the Income Tax Act, 1961 issued on the basis of reconciliation between the income tax returns and GST returns data. Quashing the notice, the Court held that “further, the impugned order states that a report was prepared against the Petitioner-company which concludes that the assessee had shown bogus purchases from bogus entities to suppress the profit of the company and reduce the tax liability during the years 2015-16 to 2020-21. However, no such report which forms the basis for the ‘information’ on which the assessment was proposed to be reopened had been provided to the Petitioner. In fact, there are no specific allegations in the show cause notice to which the Petitioner could file a reply.”
The Gujarat High Court has granted bail to an accused person for allegedly evading GST worth Rs. 21 Crores considering the fact that the investigation by the department is virtually over. Granting bail to the accused, the High Court held that “for the foregoing reasons, considering the facts and circumstances of the present case and role attributable to present applicant herein as well as his bona fide to deposit Rs.2 crore, this Court is of the considered view that case is made out for exercising discretion enlarging the applicant on bail and accordingly, I incline to release the applicant on bail, subject to deposition of Rs.2 crore before the office of the Deputy Commissioner of State Tax, Division 8, Enforcement, Surat within a period of 2 months from his release.”
The single bench of Madras High Court presided by Mr. Justice G. K. Ilanthiraiyan has quashed proceedings initiated for evasion of Customs duty without recording the statement of the accused. The High Court while quashing the proceedings in Magistrate Court has held that “the Magistrate ought not to have taken cognizance as against the petitioner even before recording their statements. Therefore, the impugned proceedings cannot be sustained as against the petitioner and it is liable to be set aside”.
In a recent ruling, the Madras High Court has clarified that the benefit of the Supreme Court decision directing the Government to open the GST portal for taxpayers who wants to avail transitional credit, is available to ‘any aggrieved registered assessee’
While granting bail to an accused of a GST Scam using 75 fake companies, the Allahabad High Court has granted bail considering the fact that he is in custody for 5 months and has no criminal history. Granting bail on conditions, the Court held that “the applicant is in jail since 18.2.2022 and has no criminal history. Keeping in view the nature of the offence, an argument advanced on behalf of the parties, evidence on record regarding the complicity of the accused, the larger mandate of Article 21 of the Constitution of India, and the dictum of the Apex Court in the case of Dataram Singh Vs. State of U.P. and another reported in (2018)3 SCC 22 and recent judgment dated 11.7.2022 of the Apex Court in the case of Satendra Kumar Antil Vs. C.B.I., passed in S.L.P. (CRL.) No. 5191 of 2021, and without expressing any opinion on the merits of the case, the Court is of the view that the applicant has made out a case for bail.”
The Karnataka High Court has held that the service tax cannot be levied on the affiliation fee and other incidentals including renting collected by the Universities. The Court was considering writ petitions filed by M/s. Bangalore University, and M/s. Rajiv Gandhi University of Health Sciences wherein the petitioners challenged the show cause notices issued to them proposing to demand service tax on affiliation fees and other incidentals including renting collected by the Universities.
In a significant ruling, the Supreme Court has held that the officers of the Enforcement Directorate (ED) are not police officers and therefore, the statement recorded by such officials under section 50 of the Prevention of Money Laundering Act, 2002 cannot be treated as “self-incriminatory” for the purpose of Article 20(3) of the Indian Constitution.
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