This weekly round-up analytically summarizes the key stories related to the Supreme Court and High Court reported at Taxscan.in from June 1st, 2024 to June 7th, 2024.
SUPREME COURT
The Supreme Court dismissed the Special Leave Petition ( SLP ) filed by the Income Tax Department regarding the assessment of expenditure on software application development.
The Karnataka High Court ruled that the software’s obsolescence and abandonment of the project justified classifying the expenditure as a revenue expense. A two-judge bench of Justices Pamidighantam Sri Narasimha and Aravind Kumar dismissed the Special Leave Petition (SLP) filed by the department challenging the decision of the High Court.
HIGHCOURTS
The Bombay High Court has rendered a judgment upholding a Circular issued by the Insolvency and Bankruptcy Board of India ( IBBI ) regarding the computation of liquidation fees.
The division bench of Justice B.P. Colabawalla and Justice Somasekhar Sundaresan upheld certain aspects of the Circular while striking down others, providing a nuanced understanding of the legal framework surrounding liquidation fees.
The Madras High Court has taken a groundbreaking step to improve the lives of young lawyers in India. In a powerful message, the court directed the Bar Council of Tamil Nadu and Puducherry to establish a minimum stipend for junior lawyers working under senior advocates.
The Madras High Court Division Bench decision sets forward a strong example that other Bar Councils across India may choose to follow, leading to a nationwide improvement in the treatment of young and junior lawyers.
The Gauhati High Court has invalidated a reassessment order passed under Section 40 of the Assam Value Added Tax ( VAT ) Act, 2003 citing late filing of tax returns rendering the self assessment incomplete under Section 35 and the lapse of five year assessment limitation under Section 39.
the bench emphasised the importance of the five year assessment limitation period prescribed by Section 39 of the Assam VAT Act. Since assessments for the relevant tax year had become time-barred by March 31, 2015, without prior completion under Sections 34, 35, 36, or 37, the initiation of reassessment proceedings under Section 40 was deemed unlawful. In result, the single bench of Justice Kaushik Goswami quashed the impugned reassessment order and notice of demand
In a major relief to Samsung India, the Delhi High Court quashed the initiation of reassessment proceedings after lapse of 4 years
A Division Bench comprising Justices Purushaindra Kumar Kaurav and Yashwant Varma observed that “We find that the initiation of reassessment proceedings after a lapse of four years herein, is dehors the settled position of law as no new tangible material can be said to have been discovered by the Revenue which would warrant reopening the assessment for the AY in question. Thus, we do not find any reason to intermeddle with the order of the ITAT.”
The Kerala High Court set aside the order of a single judge which directed to deposit 25% of the dues of tax assessed within two weeks as a condition for grant of stay of recovery of balance tax, interest and penalty. It was found that the assessment order was passed beyond 6 years which is the Limitation period under the Kerala Value Added Tax ( KVAT ) Act, 2003.
Since the issue of applicability of the limitation provision under Section 25(1) on the facts of the instant case is under consideration before the Court, the division bench of Dr. Justice A K Jayasankaran Nambiar & Justice Syam Kumar V M viewed that the appellant herein had established a prima facie case for the grant of a stay pending disposal of the writ petition. This is more so because the express provisions of Section 25(1) of the KVAT Act clearly indicate that the limitation period for completion of assessment is six years from the end of the relevant assessment year.
In a recent case, the Delhi High Court has directed the assessee to appear before the proper officer for hearing against the Goods and Service Tax ( GST ) cancellation as the court found that the proper officer failed to issue intimation to assessee.
A division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja directed the petitioner to appear before the Proper Officer on 04.06.2024 at noon in the Office of Sales Tax Officer Class-II, AVATO, Ward-39 and provide the necessary documents and clarification. The Proper Officer shall thereafter dispose of the application within a period of four weeks.
The Delhi High Court directed the Proper Officer to dispose application for the cancellation of GST Registration on discontinuation of business by the petitioner, Janarden Pandey.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “Petition is disposed of directing the Proper Officer to dispose of the application of the petitioner seeking cancellation of its registration within four weeks from today, if not already done. In case the application has already been disposed of, order be communicated to petitioner within four weeks.”
The Delhi High Court directed re-adjudication of the show cause notice ( SCN ) in the absence of application of mind by the Proper Officer.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “Perusal of the Show Cause Notice shows that the Department has raised grounds under separate headings i.e., under declaration of output tax; the tax on outward supplies under declared on reconciliation of data in GSTR-09; excess claim Input Tax Credit [“ITC”]; scrutiny of ITC availed; ITC to be reversed on non-business transaction and exempt supplies; under declaration of ineligible ITC and ITC claimed from cancelled dealers, return defaulters and tax non-payers. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving detailed disclosures under each of the heads with supporting documents.”
The Delhi High Court held that the interest should be computed from date of order passed by the Delhi Value Added Tax ( DVAT ) Appellate Tribunal.
A Division Bench of Justices Ravinder Dudeja and Sanjeev Sachdeva observed that “Section 42 of the DVAT Act provides that the interest shall be computed from the date when refund was due to be paid to the person until the date of refund. Admittedly, the refund became payable consequent to the orders passed by the DVAT Appellate Tribunal. The interest therefore shall be computed from the date(s) of the orders passed by the DVAT Appellate Tribunal.”
In a recent decision the Bombay High Court observed that ‘Transit Rent’ cannot be taxed as revenue receipt.
A Single Bench of Justice Rajesh S Patil observed that “The ordinary meaning of Rent would be an amount which the Tenant / Licensee pays to the Landlord / Licensor. In the present proceedings the term used is “Transit Rent”, which is commonly referred as Hardship Allowance / Rehabilitation Allowance / Displacement Allowance, which is paid by the Developer / Landlord to the tenant who suffers hardship due to dispossession. Hence, in my opinion ‘Transit Rent’ is not to be considered as revenue receipt and is not liable to be tax, as a result there will be no question of deduction of T.D.S. from the amount payable by the Developer to the tenant.”
The Kerala High Court set aside dismissal of appeal on technical ground of non-compliance with a pre-condition for maintaining the appeal as no income is assessable to tax.
A Division Bench of Dr Justice AK Jayasankaran Nambiar and Justice Syam Kumar VM observed that “In the result, we set aside Ext.P3 order of the First Appellate Authority (2nd respondent) and direct the 2nd respondent to consider the application to be preferred by the appellant in terms of the proviso to Section 249(4)(b), within a month from the date of receipt of the same from the appellant herein. On his part, the appellant shall take steps to file the said application in terms of the proviso to Section 249(4)(b) before the 2nd respondent within ten days from the date of receipt of a copy of this judgment.”
The Allahabad High Court has dismissed a batch of petitions against Section 73 Goods and Services Tax ( GST ) notices issues, invoking the extended period of limitation.
The Bench added that, “Hearing of all cases where adjudication proceedings are pending may recommence and be concluded, after excluding the duration of stay of the extended limitation to frame the adjudication order. Wherever adjudication orders have been passed and recovery stayed by this Court, the petitioners shall have 45 days from today to file appropriate appeals”
The Delhi High Court has held that approval under Section 153D of the Income Tax Act, 1961, cannot be merely a ritualistic formality or rubber stamping by the authority. The court held that the order of approval dated December 30, 2020, which was produced by the assessee, clearly signifies that a single approval has been granted for AYs 2011–12 to 2017–18 in the case of the assessee.
The division bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that a single approval has been granted for AYs 2011–12 to 2017–18 in the case of the assessee. The order failed to make any mention of the fact that the draft assessment orders were pursued at all, much less perusal of the same with an independent application of mind. The bench noted that it cannot lose sight of the fact that the concerned authority has granted approval for 43 cases in a single day, which is evident from the findings of the ITAT
In a recent case, the Delhi High Court has held that once the Transfer Pricing Officer ( TPO ) had proceeded to pass the order, the AO was obliged to pass an assessment order by the procedure prescribed in Section 92CA(4) of the Income Tax Act, 1961.
The division bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “te prescription of nine months would also be applicable to a fresh order that is liable to be made in accordance with Section 92CA of the Act. This is since Section 153 of the Act speaks not merely of assessments but also of orders that are liable to be framed under Section 92CA. The order which is spoken of in Section 92CA of the Act, as explained above, is the one which the TPO may come to make in accordance with sub-section (3) thereof. It is thus manifest that the assessment exercise was liable to be concluded within a period of nine months when computed from July 14, 2017,”.
The Rouse Avenue Court on Wednesday dismissed the regular bail application of businessman Amit Katyal in the Land for Job money laundering case. The Court had declined to extend his interim bail. He was granted interim bail in February this year. The court had asked him to surrender before the jail authorities on May 1.
Special CBI Judge Vishal Gogne dismissed the bail application of Amit Katyal. Earlier, the court had disposed of the plea seeking an extension of interim bail with direction to accused Amit Katyal to surrender before the Superintendent, Central Jail.
The Delhi High Court has quashed the demand order issued under the Central Goods and Services Tax (CGST) Act, 2017 as there is no opportunity given to file a reply to the Show Cause Notice.
Acknowledging the exceptional circumstances, the division bench of Justices Sanjeev Sachdeva and Ravinder Dudeja allowed M/s Services International to file a reply to the Show Cause Notice within 30 days.
In a recent ruling, the Madras High Court directed the release of immovable properties which were attached within three months following an original GST (Goods and Services Tax) order. The High Court also set aside the demand order.
The bench of Justice Senthilkumar Ramamoorthy observed that “In this case, without waiting for the statutory period of three months, an attachment was effected of the petitioner’s immovable property. Such attachment is contrary to the statutory prescription and cannot be sustained.”
The Delhi high Court directed the Proper Officer to pass orders under Section 75(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) as no opportunity was granted to the petitioner to clarify the reply filed by them.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “The observation in the impugned order dated 21.03.2023 is not sustainable for the reasons that the reply dated 11.01.2024 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is devoid of merits without any justification which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.”
The Delhi High Court quashed a demand of Rupees 22 lakhs in the absence of proper uploading of the show cause notice (SCN) in the GST portal.
A Division bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “Clearly, petitioner has made out a case that Petitioner has missed out the receipt of the notice as it was merely uploaded on the portal under the category of “Additional Notices” tab and accordingly could not respond to the Show Cause Notice. In view of the above, impugned order 14.03.2024 is set aside. Since the only reason for passing the impugned order is that Petitioner had not filed any reply/explanation, Petitioner needs to be granted one opportunity to respond to the Show Cause Notice and thereafter, the Show Cause Notice to be re-adjudicated.”
The Delhi High Court treated the GST Registration to be cancelled from the date of issue of the show cause notice (SCN) on non-continuation of business by the petitioner.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “In view of the above and the fact that the Petitioner does not seek to carry on business or continue the registration, impugned order dated 15.05.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 27.04.2023 i.e., the date when Show Cause Notice seeking cancellation of GST registration was issued. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons.”
The Delhi High Court directed the Proper Officer to adjudicate the show cause notice (SCN) due to the non-consideration of reply filed by the petitioner.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “The observation in the impugned order dated 29.04.2024 is not sustainable for the reasons that the reply dated 09.01.2024 and 27.02.2024 filed by the Petitioner are detailed replies with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is not properly replied/filed without any justification which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner
The Calcutta High Court has held that the letter by the joint secretary of CBDT cannot override the plain and unambiguous provisions of the Income Tax Act, 1961 and the Finance Act. It was observed that the letter of the Joint Secretary violating plain and unambiguous provision of the Income tax act and Finance Act, 1994 is not valid.
The division bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that the letter of the Joint Secretary violating plain and unambiguous provision of the Income Tax Act, 1961 and Finance Act, 1994 is not valid.
The Kerala High Court directed to consider the stay petition on the ground that the appeal was pending against the assessment order pass under Income Tax Act, 1961.
A Single Bench of Justice Murali Purushothaman observed that “Since there is a statutory appeal, there will be a direction to the 2nd respondent to dispose of the stay petition as expeditiously as possible, at any rate, within a period of two months from the date of receipt of a copy of this judgment. Till such time the stay petition is disposed of, there will be stay of recovery proceedings against the petitioner.”
The Kerala High Court directed to consider delay condonation application for filing appeal as the stay petition was filed against the assessment order passed under the Income Tax Act, 1961.
A Single Bench of Justice Murali Purushothaman observed that “Since Exts.P4 to P6 are statutory appeals, there will be a direction to the 3rd respondent to consider the applications of the petitioner for condonation of delay in filing the appeal expeditiously. If the delay can be condoned, the stay petitions shall be considered expeditiously thereafter.”
In a recent case, the Madras High Court has held that the Commercial Tax Dept can Exercise Power under section 25 or section 27 of the Tamil Nadu Value Added Tax ( TNVAT )Act, 2006 for summoning documents, even if the assessment is completed
The Single bench of Justice C. Saravanan held that “I see no embargo on the respondent Commercial Tax Department from summoning the respective petitioners to furnish the records. The assessment will be deemed to have been completed only if the petitioners have complied with all the requirements of Section 22(2) of the TNVAT Act, 2006. The return that was to be filed under Rule 7 of the TNVAT Rules, 2007 should be in the prescribed form and should accompany prescribed documents and proof of payment of tax.”
The Delhi High Court directed the re-adjudication of the show cause notice (SCN) as the petitioner was unaware of the proceedings due to the leave of absence of the accountant entrusted with GST compliance on maternity leave.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “Keeping in view the peculiar facts of the present case and since the only reason for passing the impugned order is that petitioner had not filed any reply/explanation, one opportunity needs to be granted to the petitioner to respond to the Show Cause Notice. The matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 17.04.2024 is set aside.”
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