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 January 1 to January 7, 2023.
In a major setback to the Congress Leader Kamal Nath, the Calcutta High Court has dismissed a petition by the former Chief Minister of Madhya Pradesh seeking transfer of income tax proceedings to Delhi from Kolkata.Justice Shekhar B. Saraf observed that the Principal Commissioner of Income Tax, Kolkata has clearly delineated the reasons of the transfer under Section 127 of the Act in the Impugned Order for a detailed and coordinated investigation of the petitioner. “It is to be noted that the files of several other persons have also been transferred under Section 127 of the Act. The petitioner is the only one whose file is still not being transferred because of the writ petition filed before the Calcutta High Court,” the Court said.
The Calcutta High Court has recently condoned the delay of assessee-Aditya Saraf (HUF) in an appeal by the revenue against the decision of the Income Tax Appellate Tribunal (ITAT).The Division Bench of Justice T S Sivagnanam and Justice Hiranmay Bhattacharya observed that, “had the appeal been preferred within the period of limitation the assessee could have filed an application well before the time stipulated under the Scheme.” The Court further noted that, “the assessee should not be non-suited for the default committed by the revenue in nor preferring the appeal within the period of limitation.”
The Orissa High Court chaired by the Chief Justice S. Muralidhar and Justice M.S. Raman quashed the Show Cause Notice (SCN) issued by the Customs Department after 16 years. The bench quashed the SCN dated 11th March, 1999 issued by the Department to the Petitioner in relation to the alleged violations of Rules 9(1), 52A, 173B and 173C of the Central Excise Rules, 1944 read with Section 11A(1) of the Central Excise Act, 1944 (CE Act)
A two-judge Bench of the Supreme Court comprised of Justice M R Shah and Justice B V Nagarathna recently overruled a decision of the Allahabad High Court and held that assessee cannot be denied relief under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for non-formation of committee. The Allahabad High Court had dismissed the said writ petition preferred by the appellant herein seeking direction to the respondents for consideration of the case of the petitioner under the scheme “Sabka Vishwas (Legacy Dispute Resolution) Scheme”, 2019.
A Division Bench of the Calcutta High Court has recently set aside the Income Tax Revision order passed under Section 263 of the Income Tax Act, 1961. The revision order was quashed as the same was passed against the assessee, Britannia Industries Limited without any due enquiry or application of mine by the Principal Commissioner of Income Tax. In light of the ruling of the Supreme Court in Malabar Industrial Company Limited Versus Commissioner of Income Tax, wherein it was held that every loss of revenue cannot be treated as prejudicial to the interest of revenue and that the assessee had only taken one of the courses permissible as per law, the Calcutta High Court Bench of Justice T S Sivagnanam and Justice Hiranmay Bhattacharya set aside the revision order.
The Bombay High Court ruled that the clause printed in tax invoice to Sole Arbitrator is Arbitration Clause. The primary issue that arises for consideration in the present Arbitration Application is, whether a clause contemplating reference of disputes and differences arising out ofor in relation to a contract or order of advertisement, bill or otherwise breach thereof, to be referred to Sole Arbitrator, printed at the back of the tax invoice would amount to an arbitration clause.
In a recent judgment a Division Bench of the Madras High Court expressed its grief in the mushrooming of tax evasion cases in the country and held that Tax Evasion attracts criminal liability. The Bench comprising Justice S Vaidyanathan and Justice C Saravanan observed that if the contention of the petitioner that Tirupur SreeAnnapoorna Hotel and SreeAnnapoorna Sweets are independent entities is accepted, then the term “sister concern” will become diluted and all the firms will adopt the same tactics of creation of one or more sister concerns under one umbrella with different names and claim the benefit of tax. In that event, it will defeat the real intention of the legislature.
Calcutta High Court (HC), division bench of Justice T. Sivagnanam and Justice Hiranmay Bhattacharya set aside the order issued by the Assessing Officer (AO) under section 148A(d). Further, the bench directed the AO to initiate the fresh proceedings on the same. The bench remarked that the AO should examine the correctness of the stand taken by the appellants, which according to the appellants, was an inadvertent mistake. The division bench continued by asserting that because the order was issued in non-speaking, they were inclined to interfere with it, remand the case back to the AO for new review, and keep the directive of the single bench for the appellants to submit a representation.
The Gujarat High Court Division Bench of Chief Justice Aravind Kumar and Justice Ashutosh J Shastri recently held that, no remedy can be availed under writ jurisdiction against reopening of income tax assessment when alternate statutory remedy by way of appeals exist.The bench headed by the Chief Justice thus observed that, “we find no such eventuality has arisen to assume that authority will not examine or petitioner will not have any opportunity to put forth his case during the proceedings post-issuance of notice impugned”, and dismissed the writ petition.
In a major ruling, the Telangana High Court (HC) held that period extended by Court during Prevention of Money Laundering Act, 2002 ( PMLA ) Proceedings shall be excluded to compute 180 Days for provisional attachment. The writ petition has been filed under Article 226 of the Constitution of India to issue a direction to grant extension of time to the petitioners to prepare a reply to the show cause notice, for a further period of two months and consequently exclude two-month period from the computation of 180 days under Section 5(3) of the Prevention of Money Laundering Act, 2002.
The Calcutta High Court, while allowing a writ petition, has directed the VAT department to grant refund along with interest as the department was withholding partial refund in the light of existing CST dues. The petitioner, Alkem Laboratories Limited &Anr was aggrieved by the inaction on the part of the respondents Authority concerned in refunding the admitted refundable amount of approx. Rs.5,58,54,103.61.Justice Md. Nizamuddin, after examining the documents, held that “On perusal of the aforesaid report it appears that there is no assessed dues against the petitioner relating to the relevant period and whatever due was there relating to the financial year 2015-2016, it has been adjusted against the excess payment refunded for the period 2013-2014.”
A Division Bench of the Calcutta High Court (HC) ruled that Input Tax Credit (ITC) cannot be Denied due to Cancellation of GST Registration with retrospective effect. The respondents in the writ petition is LGW Industries Limited &Ors. The intra court appealis against a common judgment and order passed by the Single Judge though there spondents /writ petitioners, had sought for a larger relief in the writ petition mainly for issuance of writ of declaration to declare Section 16(2) (c) of the CGST Act/WBGST Act as unconstitutional.
A division bench has quashed the assessment proceedings under section 153A of the Income Tax Act, 1961 on the ground that the income tax department did not provide a valid search warrant under section 132 of the Act. Dismissing the appeal by the income tax department, Chief Justice Dr. S. Muralidhar and Justice M.S. Raman held that “Before this Court also the Revenue has not been able to demonstrate that there exists in the records of the Revenue a valid search warrant authorizing the searches that were conducted in the premises of the Respondent-Assessee on 9th and 10th August, 2005.”
In a recent ruling, the Orissa High Court dismissed a petition by Vedanta Ltd to read down the Rule 89(4) of the GST rules and held that the provision is intravires. A bench comprising Chief Justice Dr. S. Muralidhar and Justice Murahari Sri Raman relied on the recent decision of the Supreme Court wherein the Apex Court declined to substitute its wisdom for that of the subordinate legislation prescribed under Rule 89(5) in the context of refund on account of inverted duty structure.
The Calcutta High Court held that Teak Sawn timber is “Natural Produce” and quashed the detention order due to a discrepancy in mentioning “Nature of Goods” in the E-Way Bill. Justice T.S. Sivagnanam and Justice Supratim Bhattacharya observed that if there is any discrepancy in goods the State Tax Authority is directed to obtain an opinion from the Forest Department by requesting one of their officers to inspect the goods in the place where it has been detained. The Court held that “since the goods being natural products, it is exposed to the fury of weather, there is the likelihood of deterioration. Therefore the authority pending compliance with the above directions shall permit the appellant to provide a requisite number of tarpolene for securing the goods so that the goods are not exposed to sun and rain.”
The High Court (HC) of Gujarat has held that extending the warehousing period of Baroda Rayon Corporation is not permissible when CESTAT finalised the payment of penalty and duty under Customs Act,1962.A Coram comprising Chief Justice Aravind Kumar and Justice Ashutosh J Shastri observed that the owner of the goods would be liable to pay the full amount of duty with interest and penalty if the goods are to be cleared from home consumption. Further observed that the owner of the goods has not complied with this statutory mandate. Clause (b) of sub-section (1) of Section 72 mandates where warehoused goods have not been removed from the warehouse at the expiry of the period, then the proper officer would be empowered to demand and the owner of the goods would be liable to pay the full amount of the duty chargeable on account of such goods together with interest, fine and penalty.
A two-judge bench of the Supreme Court has held that the non-banking finance companies are not liable to pay interest tax on the interest component received under the hire-purchase agreement under the Interest Tax Act, 1974.A bench comprising Justice Sanjiv Khanna and Justice M.M. Sundresh observed that the hire-purchase agreement has two elements, an element of bailment and an element of sale. “The element of sale fructifies when the option to purchase is exercised by the intending purchaser after fulfilling the terms of the agreement. Till then, the goods are given on hire. One can argue that in a hire-purchase, an element of interest is inbuilt, but what is payable is the hire amount and not interest per se,” the Apex Court said.
The Bombay High Court has recently granted bail to Chartered Accountants and ten others in the bank fraud case filed on the basis of a complaint by the General Manager of Indian Overseas Bank (IOB), Mumbai. The accused had allegedly acquired a loan from the IOB to the tune of Rs. 292.20 Crores.The Bombay High Court Single Bench further observed that “When the charge sheet is carefully perused, it becomes apparent that the investigation is largely premised on the documentary evidence. The accusation of criminal conspiracy levelled in the charge sheet will ultimately have to be established by the prosecution during trial.” The accused were alleged of inflating the turn over, sale, purchase, profit figures etc. in the balance sheet, in a systematic manner to avoid its detection by any statutory agency including the banks.
A Division Bench of the Patna High Court (HC), quashed order passed without considering submissions of petitioner, Pamm Advertising and Marketing Office holding that there is gross violation of natural justice principles. The writ petition has been filed by the petitioner under Article 226 of the Constitution of India, wherein the relief sought includes setting aside the order passed by the Assistant Commissioner of State Taxes, Patna whereby the tax, interest and penalty of Rs. 12 lakhs have been imposed in exercise of jurisdiction under Section 74 of the Bihar Goods and Services Tax Act, 2017.
A Single Bench of Calcutta High Court has held that mere expiry of the time period of six months prescribed under Section 18 of the Foreign Exchange Regulation Act, 1973 while rejecting the argument of a resigned director of M/s Grapco Industries Limited, in the alleged contravention of provisions of Sections 18 (2) and 18 (3) of the Foreign Exchange Regulation Act, 1973. The trial court had taken cognizance of the offence under Section 56 of the Foreign Exchange Regulation Act and issued process against the accused persons including the petitioner. The Bench of Justice Rai Chattopadhyay observed that, “last day of the prescribed six months period is only the outer limit, that is the cut off date, within which the company or any responsible person holding office of the same should not refrain from doing as necessary to repatriate the sale proceeds of exported goods.”, in the issue of the repatriated exports.
A Division Bench of the Calcutta High Court (HC), quashed non speaking order and directed fresh adjudication. A Bench consisting of Justice TS Sivagnanam and Justice Hiranmay Bhattacharyya noted that they fully agreed with the substantial part of the direction issued by the Judge directing the appellants to go before the assessing officer and make a representation, the Assessing Officer will be precluded from considering the representation since already he has passed an order under Section 148A(d) of the Income Tax Act.
A Single Bench of Rajasthan High Court headed by Justice Mahendar Kumar Goyal has granted bail to Goods and Services Tax (GST) evasion accused, allegedly evading tax to the tune of ₹20.83 Crores. The accused had been arrested and placed in custody on 01.08.2022. After the conclusion of the investigation, a charge-sheet had been filed on 30.09.2022 and he had already deposited 10 percent of the alleged evaded tax amount. Observing that, “the petitioner is in custody since 01.08.2022, charge-sheet has been filed on 30.09.2022 and he has already deposited about 10 percent of the amount of alleged evaded tax duty”, the Single Bench of Rajasthan High Court granted bail to the petitioner, Khem Chand Thathera.
The Patna High Court (HC) ruled that Ex parte assessment order passed in violation of principles of natural justice, entails civil consequences. A Bench comprising Chief Justice Sajay Karol and Justice Partha Sarthy observed that “We form an opinion that the order is bad in law. This we say so, for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case(b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee.”
A Division Bench of the Jammu & Kashmir and Ladakh High Court has recently dismissed the Goods and Services Tax ( GST ) exemption claim of Godrej Consumer Products Limited as the notification withdrawing exemption of GST was a policy matter and not a vested right available to the assessee. Observing that the withdrawal of exemptions was in public interest, the bench of Justices Mohan Lal and Tashi Rabstan held that, the assessee-petitioner, Godrej Consumer Products Limited is not entitled to GST exemptions as contended and thereby dismissed the Writ petitions.
The Allahabad High Court (HC) has held that assessment under section 153 A of the Income Tax Act is invalid in absence of independent application of mind by JCIT before granting Approval. The Department-Revenue challenged the order dated 7.10.2021 passed by the Income Tax Appellate Tribunal, Lucknow Bench ‘A’, Lucknow whereby the appeals filed by the assessee have been allowed to quash the assessment orders and the consequent orders of CIT (A). Justice Sunita Agarwal and Justice Chandra Kumar Rai observed that the draft assessment orders in 123 cases, i.e. for 123 assessment years placed before the Approving Authority on 30.12.2017 and 31.12.2017 were approved on 31.12.2017, which was humanly impossible to go through the records of 123 cases in one day to apply independent mind to appraise the material before the Approving Authority.
The Gujarat High Court headed by Justice N.V.Anjaria and Justice Bhargav D. Karia quashed the demand of the Income Tax of Rs. 101 Crore on the ground of violation of principles of natural justice. The bench settled that after issuing a show cause notice-cum-draft assessment order to give the petitioner an opportunity to be heard within 12 days of the date of receipt of a copy of this order, the respondent/Revenue will be free to proceed with assessment under the provisions of section 144B of the Income Tax Act in manner permitted by law.
The Punjab and Haryana High Court, quashed a patently wrong enhanced sentence which was passed without making out special case, the petitioner, Muneesh Suneja, being found guilty under the Foreign Exchange Regulation Act (FERA), 1973. A Bench of Justice Arvind Singh Sangwan observed that “The judgment passed by the lower Appellate Court, enhancing six months Rigorous Imprisonment (R.I.) and fine of Rs.5,000, as awarded by the Trial Court, to 02 years R.I. and to pay a fine of Rs.5,000 and in default thereof, to further undergo R.I. for two months, is set aside and that of the trial Court is restored.”
The Allahabad High Court (HC) lashed against the Commercial Tax Tribunal and commented that Taxing authorities and Tribunal should understand concept of remand before applying it. Setting aside the remand back proceedings a Bench of Justice Rohit Agarwal observed that “The officials and the members of the Tribunal who are dealing with the tax matters should be sensitive of the fact that business matter should be dealt and tried with strictly in accordance with law, at the earliest. Delay only leads to more litigation and loss to the revenue.”
The Supreme Court of India, in deciding the plea against demonetization argued by the four-time Finance Minister P Chidambaram, ruled that the demonetization of currency notes of denomination of Rs. 500 and Rs. 1000 was valid and satisfies the test of proportionality. However, the Constitution Bench delivered a 4-1 verdict with Justice Nagarathna differing from the majority view.
25 Important Income Tax High Court Judgments of 2022
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