This weekly round-up analytically summarises the key tax judgements of the Supreme Court and all High Courts reported at Taxscan.in during the previous week from April 22 to April 29, 2023.
The Supreme Court Bench comprising Justice Krishna Murari and Justice Ahsanuddin Amanullah held that “pre-condition of furnishing bank guarantee imposed by the High Court is not liable to be sustained and is hereby set aside.”
The Apex Court also upheld the rest of the conditions imposed for the grant of bail by the Chief Judicial Magistrate which were upheld by the High Court and directed to release the applicant on bail.
In a recent judgement, the Supreme Court of India held that confiscation of smuggled silver is not allowable as a’ business loss’.
The Court viewed that the impugned judgement and order passed by the High Court quashing and setting aside the orders passed by the Assessing Officer, CIT(A) and the ITAT rejecting the claim of the Assessee to treat the silver bars confiscated by the customs authorities as a business loss and consequently value allowing the same as business loss is unsustainable.
While allowing the appeal, the Court quashed and set aside the impugned judgement and the order passed by the High Court and restored the orders passed by the assessing officer, CIT(A) and the ITAT.
The Supreme Court of India in a recent judgement held that loss incurred for expenditure for an offence is not deductible tax and upheld the disallowance of smuggled silver as business loss.
The two-judge Supreme Court Bench comprising Justices M R Shah and M M Sundresh observed that a penalty or a confiscation is a proceeding in rem, and therefore, a loss in pursuance to the same is not available for deduction regardless of the nature of business, as a penalty or confiscation cannot be said to be incidental to any business. The Apex Court thus set aside the judgement and order dated 22.11.2016 passed by the High Court of Rajasthan at Jaipur.
The Supreme Court of India, in a recent judgement held that the right of default bail under Section 167(2) of the Code of Criminal Procedure, 1973 (Cr. PC) is not a mere statutory right, but a fundamental right and upheld the interim bail order for arrest under the Prevention of Corruption Act, 1988.
The two-judge Supreme Court Bench comprising Justice Krishna Murari and Justice C T Ravikumar held that the right of default bail under Section 167(2) of the CrPC is not merely a statutory right, but a fundamental right that flows from Article 21 of the Constitution of India.
The reason for such importance being given to a seemingly insignificant procedural formality is to ensure that no accused person is subject to the unfettered and arbitrary power of the state. The Court upheld the interim order of bail passed in favour of the accused.
In a significant case, the Delhi High Court held that an application filed for refund of excess payment could not be treated as non-est if it was not deficient in material particulars and set aside the order of Appellate Authority.
It was observed that “If the application filed is not deficient in material particulars, it cannot be treated as non-est. If it is accompanied by the “documentary evidence” as mentioned in Rule 89(2) of the Rules, it cannot be ignored for the purposes of limitation.”
The Bombay High Court at Goa held that the assessee cannot take advantage of the failure of the state government to insist upon a timely deposit of Annual Recurring Fees (A.R.F.).
The Two Judge Bench comprising Justice Valmiki Sa Menezes and Justice M S Sonak observed that the State Government’s denial of waiver or exemptions cannot be held as a palpably arbitrary, unreasonable or unfair exercise of power. Further held that the State Government has not breached the equality mandate under Article 14 of the Constitution and the Petitioners cannot wriggle out of their obligations.
The Bombay High Court at Goa has directed the petitioner companies to pay the principal amount demanded on gambling casinos for arrears of ₹321.66 Cr Annual Recurring Fees (A.R.F.) during covid and waived the interest.
The Two Judge Bench comprising Justice Valmiki Sa Menezes and Justice M S Sonak noted that the licence fee currently demanded was not very high, and the number of tenders was lapsing as there were no bidders for these shops. Further held that the Petitioners pay the entire principal amount within four weeks and waived the interest.
The Bombay High Court at Goa in its recent judgement has held that the licence fee paid to the Goa state government for allowing permission of casino amount to price or consideration of Contract and no Fee for Technical Service (FTS) is applicable.
The Two Judge Bench comprising Justice Valmiki Sa Menezes and Justice M S Sonak observed that the State Government has only parted with its exclusive privilege and permitted the petitioners to undertake casino operations, which are otherwise not even the legitimate objects of any trade, occupation or business. The licence fee so-called is the price or the consideration for parting with such privilege, which is exclusively owned and controlled by the State Government.
The Bombay High Court has directed the VAT department to conduct an enquiry on whether VAT shall be applicable on the amount of road tax, insurance premium, octroi duty and other charges collected by the vehicle dealers from the customers in the light of the recent AAR ruling by the Maharashtra VAT department in the year 2018.
“We make it clear that we have not concluded on other aspects that may arise during the assessment proceedings other than the decision of the Tribunal in the case of M/s. B.U.Bhandari Auto and the Commissioner would examine the facts of each case and pass the order as per law. Needless to state, the contentions of the Petitioners and the department are expressly kept open,” the Court concluded.
The bench of Rajani Dubey of Chattisgarh High Court directed the petitioner to make a fresh claim on the reimbursement of additional Goods and Services Tax (GST) paid.
Further, the court directed the authorities to proceed with the necessary scrutiny and enquiry. Based on the same, the authorities were asked to reimburse the additional tax liability incurred upon the petitioners, suitably be refunded.
The Delhi High Court bench of Justice Vibhu Bakhru and Justice Tushar Rao Gadela set aside the Show Cause Notice (SCN) and restored the cancelled Goods and Services Tax (GST) registration.
The bench observed that the SCN did not disclose the reason for the cancellation of the GST registration. Further stated that a show cause notice must clearly set out the reasons for proposing an adverse action in order for the noticee to respond to the same.
In a recent ruling, the Madras High Court bench of Justice P T Asha stated that the petitioner company must be permitted to show their bona fides and settle the dues and permitted the petitioner to pay the amount in instalments.
The court ordered the petitioner to pay the income tax department in 11 payments. It was also indicated that failure to pay even one of the instalments would result in the termination of the petitioner’s concession.
The bench noted that the petitioner company does not own any property that could be easily sold to satisfy the respondent’s debts in this case. Despite the odds stacked against them, the petitioner’s intention appeared to be forthright and allowed to settle the dues in instalments.
The Delhi High Court stayed the proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 to examine the validity of the retrospective application.
Since there were several other issues/grounds that the petitioner would want to put forth for consideration to the court, the two-judge bench comprising Justice Rajiv Shakdher and Justice Tara Vitasta Ganju stayed the matter and directed to file all details before the next hearing for further examination.
The Bombay High Court at Goa has held that the Goa Value Added Tax (12th Amendment) Act, 2020, confronts the doctrine of Separation of Power and directed the Value Added Tax (VAT) department to allow a refund of excess tax collected.
The bench of Justice M. S. Sonak and Justice Bharat P. Deshpande directed the respondent to deposit the amounts in terms of the referred earlier decisions together with interest within four weeks and allowed the petitioner’s liberty to withdraw the said amounts after furnishing bank details.
The Gujarat High Court has held that the revision under Section 263 of the Income Tax Act, 1961 without any tangible material is not valid and set aside the proceedings against Axis Bank.
A two-judge bench comprising Justice Ashutosh J. Shastri and Justice J C Doshi observed that there was no tangible material and the reopening was sought based on the assessment record itself.
The Madras High Court allowed the assessee to file a GST return since the GST registration was cancelled on failure to file a GST return due to health issues.
The Single judge bench comprising Justice P T Asha held “that the benefit extended by the Court in the earlier orders in Suguna Cutpiece Centre’s case may be extended to the Petitioner.”
In the absence of the Goods and Services Tax Appellate Tribunal (GSTAT), the Orissa High Court bench of Justice Dr. B.R. Sarangi and Justice M S Raman ruled to stay the amount of penalty and interest claimed by the GST authorities. The High Court entertained the appeal only because the Second Appellate Tribunal had not yet been constituted.
If the petitioner intends to seek redress by filing an appeal with the 2nd appellate tribunal, the petitioner must pay a 20% balance disputed tax in order for the 2nd appellate tribunal to examine its case. However, the bench decided not to proceed with the penalties and interest.
The Kerala High Court has held that the pre-condition for claiming the deduction under Section 80P Of the Income Tax Act has been made more stringent by reducing the time available to an assessee formaking the claim.
A Bench of Justice A.K. Jayasankaran Nambiar and Justice Mohammed Nias C P observed that the claim for deduction under Section 80P of the Income Tax Act is conditional on filing a return within the due date prescribed under Section 139(1) of the Income Tax Act.
The Madras High Court stayed the recovery proceedings against the Non-Resident Indian (NRI) since the notice under section 142(1) of the Income Tax Act, 1961 was issued in the Peak period of Covid 19 which prohibited the assessee to file a reply.
The Court directed the respondent to dispose of the statutory appeal filed by the petitioner under Section 246(A) of the Act and further since 20% of the disputed tax, interest and penalty has been recovered by the respondent from the banks, in which the petitioner had accounts, a direction is issued to the appellate authority to dispose of the appeal within a period of 12 weeks.
In a recent judgement, the Telangana High Court dismissed the petition challenging re-assessment against HSBC Holdings on the availability of alternative remedies under the Income Tax Act, 1961.
The two-judge bench comprising Chief Justice Ujjal Bhuyan and Justice Surepalli Nanda viewed that a writ Court would not ordinarily invoke its jurisdiction when an aggrieved party has adequate and efficacious remedy provided under the statute. The Court refused to entertain the writ petition on the point of statutory remedy available to the petitioner.
The Supreme court had also set aside the observations of the High Court observing that the writ petitions would not be maintainable in view of the alternative remedy. Conclusively, the bench directed to file a detailed reply if not filed.
In a recent ruling the bench composed of Chief Justice Ujjal Bhuyan and Justice N. Tukaramji meets the ends of justice, while entertaining a writ petition, directed to pay an amount of Rs. 3 crores within a period of fifteen days from the date of the order.
Based on the submissions of both parties, the court concurred to stay the department’s claim until the settlement of the appeals pending before the first appellate body on a deposit of 3 crores by the petitioner.
The Uttarakhand High Court remanded an Income Tax matter to the Commissioner of Appeals for re-adjudication since enhancing cash in hand was made without issuing a show cause notice (SCN).
The two-judge bench comprising Chief Justice Sri Vipin Sanghi and Justice Alok Kumar Verma observed that the appellant/assessee was entitled to put to notice before enhancing the cash in hand, by the Commissioner (Appeals). The matter was remanded to the Commissioner (Appeals) for rehearing of the appeal on the aforesaid issue.
In a recent ruling, the bench of Justice Abhay Ahuja and Justice Nitin Jamdar of Bombay High Court set aside the refund rejection order issued by the Goods and Services Tax (GST) authorities and restored the Form GST RFD-01.
The petitioner was not given an opportunity to rectify any discrepancies, and the petitioner was not given a chance to be heard before the reimbursement claim was rejected, therefore the High Court Division Bench found that the impugned order could not be upheld.
The Gujarat High Court has recently in a writ petition filed before it, held that the fact of the co-owner showing different capital gains amount, is not a ground to reopen an assessment.
The Bench of Justice N.V.Anjaria and Justice Devan M. Desai held: “Neither there existed foundational facts, nor it could be said that any tangible material was available with the assessing officer to justify exercise of power. It could be said that the basis for reopening was absent. When the foundation was missing, there could not have been erection of ground to seek reopening of assessment. It could not be said, in the facts of the case, that the assessing officer could have harboured a reason to believe acceptable in the eyes of law to seek reopening. As a result of the above discussion, the impugned notice deserves to be set aside. Accordingly, the notice dated 30.03.2018 seeking to reopen the assessment of the petitioner in respect of Assessment Year 2011-2012 is hereby set aside.”
The Orissa High Court, has recently, in a writ petition filed before it, with regard to Goods and Services Tax (GST) Input Tax Credit (ITC) refund claim on inputs of electric vehicle manufacturing, directed the refund of balance claim amount.
The Division Bench of Justice Dr B.R Sarangi and Justice M.S Raman held: “In view of facts and law, as discussed above, this Court directs the opposite parties to refund the balance amount, excluding Rs.5,18,230/- from out of total amount of Rs.2,22,97,228/-, to the petitioner pending final adjudication of the disputed amount in accordance with law.”
The Allahabad High Court has recently dismissed a writ petition filed before it, on account of failure on part of the petitioner to submit reply within allotted time.
The Bench declined to exercise the extraordinary discretionary jurisdiction under Article 226 of the Constitution of India.
In a recent ruling, the bench of Justice Rohit Ranjan Agarwal of Allahabad High Court granted relief to the Chief Income tax Officer committing contempt of court.
The bench stated that if the officer failed to comply with the judgement again, it is open to the applicant to approach the court again.
The Rajasthan High Court in its recent judgement has held that the assessee can claim Input Tax Credit (ITC) when the department considers the issue of revocation of Cancelled GST registration.
The two-judge bench of Justice Vijay Bishnoi and Justice Praveer Bhatnagar has held that “when the competent authority considers the issue of revocation of cancellation of petitioner firm GST registration under the notification dated 31.03.2023, the petitioner-firm, shall be entitled to lodge its claim for availment of ITC in respect of the period from the cancellation of the registration till the registration is restored.”
In a significant case, the Punjab and Haryana High Court has held that deposits of tax during searches cannot be retained by the department until the adjudication of the notice.
The two-judge bench of Justice Ritu Bahri and Justice Kuldeep Tiwari has directed the department to return the amount of Rs.2.54 crores to the petitioner(s) along with simple interest at the rate of 6% per annum from the date of deposit till the payment is made.
In a recent decision the Madras High Court observed that the liability to interest will arise only in a situation where there has been actual utilisation of the Input Tax Credit (ITC) by the assessee.
The Bench of Dr Justice Anita Sumanth observed that “The petitioner cannot be faulted for the same, since transition has been sought in line with the procedures set out under the Act and Rules. The flaw was in the maintenance of the ECL by revenue”.
The Bench further noted that “In view of the retrospective amendment of 2022, it is only when ITC has been wrongly availed and utilized with a revenue impact, that interest liability is attracted. In the present case, the original error of non-maintenance of ECL is admittedly related to the department. Moreover, the petitioner has not utilized the credit.”
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