This weekly round-up analytically summarizes the key tax judgments of the Supreme Court and all High Courts reported at Taxscan.in during March 10th to March 23rd of 2024.
SUPREME COURT
The Supreme Court of India has directed the accused to proceed with further trial in a Prevention of Money Laundering Act, 2002 (PMLA) case linked to a false declaration under the Income Declaration Scheme (IDS), involving a fraud amounting to Rs. 8.26 crore. Satyendar Kumar Jain, a Minister in the Government of National Capital Territory of Delhi, and others were named in an FIR for offences under the Indian Penal Code (IPC) and the Prevention of Corruption Act (PC Act).
The investigation uncovered that Satyendar Kumar Jain utilised accommodation entries in various companies to conceal his involvement, receiving a total of Rs. 4.81 crore during 2015-16 from Kolkata-based entry operators. Additionally, Ankush Jain aided Satyendar Kumar Jain by submitting a false declaration under the IDS, 2016. The court reiterated that money laundering offenses under Section 3 of the PMLA encompass a range of activities related to dealing with the proceeds of crime, stressing that any property considered “Proceeds of Crime” under Section 2(1)(u) of the Act must meet specific criteria.
The Supreme Court of India upheld the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)’s order and penalties, affirming that the import of camera stabilizers different from those mentioned in the bill of entry constitutes misdeclaration. M/s Global Technologies and Research, the appellant assessee, contested the judgment and order passed by CESTAT, highlighting inconsistencies in the assessment. The adjudicating authority had valued the imported goods at a significantly higher rate than the declared value, resulting in the imposition of penalties and recovery of differential customs duty.
Despite arguments challenging the definitions of ‘identical’ and ‘similar’ goods under the Customs Valuation Rules, the Court upheld the CESTAT’s decision, emphasizing the officer’s statement regarding the differences in hardware and software functions between the disputed goods and earlier versions. The Court concluded that the penalties imposed were justified, dismissing the appeal without costs.
The Supreme Court of India upheld the Madhya Pradesh High Court’s decision to dismiss the writ petition filed by the assessee against the order of the commercial tax officer determining tax liability. The court ruled that the tax dues of the company had been settled pursuant to the direction of the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985. The appeal stemmed from Niket Udyog Ltd’s writ petitions challenging the tax liability determined under various tax acts.
The court concluded that, given the representation of the Government of Madhya Pradesh in the BIFR order indicating settlement of dues by the company, there was no further basis for consideration in the appeals. Mr. Gaurav Agarwal, Senior Counsel, represented the appellant, while Ms. Mrinal Ekar Majumdar, counsel, appeared for the respondent-State.
The Supreme Court of India dismissed the special leave petition filed against Apple India Private Limited, affirming that warranty claims are allowable when made in accordance with provisions and guidelines. The petition arose from a final judgment by the Karnataka High Court concerning the disallowance of warranty provisions claimed by the assessee company, engaged in trading Apple products in India.
Despite the company’s explanations, the Court noted a delay of 225 days in filing the special leave petition and found the explanation for condonation of delay unsatisfactory. Considering similar matters previously dismissed and the lack of merit, the Court dismissed the special leave petition on both grounds of delay and merits.
In the case of M/S Acer India Pvt Ltd, the Supreme Court of India upheld that Tax deduction at source ( TDS ) does not apply to income from payment received by distributors from customers. The two-judge bench dismissed the Special Leave petition( SLP ) which arose out of impugned final judgment and order passed by the High Court of Karnataka.
The issue was related to the liability to deduct tax at source under Section 194-H of the Income Tax Act, 1961 on the amount which, as per the Revenue, is a commission payable to an agent by the assessees under the franchise/ distributorship agreement between the assessees and the franchisees/distributors. As per the assessees, neither are they paying a commission or brokerage to the franchisees/distributors nor are the franchisees/distributors their agents. The High Courts of Delhi and Calcutta have held that the assessees were liable to deduct tax at source under Section 194-H of the Act, whereas the High Courts of Rajasthan, Karnataka and Mumbai have held that Section 194-H of the Act is not attracted to the circumstances under consideration.
HIGH COURTS
The Delhi High Court addressed the issue of interest payable along with refunds under the Delhi Value Added Tax (DVAT) Act, 2004, noting that refunds had been processed without including interest. Represented by Mr. Mohit Gautam, the petitioner, M/S Vimal Electrical Pvt Ltd, sought a refund for the tax period from January 1, 2017, to March 31, 2017. Respondents, represented by Mr. Rajeev Aggarwal and Ms. Samridhi Vats, admitted to processing and sanctioning the refund without interest.
Justices Sanjeev Sachdeva and Ravinder Dudeja directed the respondents to pass an order considering the payment of interest under section 42 of the DVAT Act. The bench instructed that if interest was payable, it should be paid to the petitioner within four weeks; otherwise, a speaking order justifying the decision should be communicated within the same period. The Court further stated that the petitioner could pursue additional legal remedies if dissatisfied with the order.
The Delhi High Court upheld the rejection of an application for Waiver of Predeposit under section 129 E of the Customs Act, 1962, as the appellant failed to deposit the required amount. The case involved G & S International, which challenged an order passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The appellants were accused of fraudulent exports and were issued Show Cause Notices (SCNs), which were adjudicated upon. The CESTAT ordered the appellants to deposit specified amounts within a given timeframe, but they failed to comply.
The High Court concluded that failure to comply with Section 129E led to the logical consequence of appeal rejection. The discretion provided in the proviso to Section 129E was considered, but the Court found no undue hardship in this case. Consequently, the Court upheld CESTAT’s decision to dismiss the appeal due to non-compliance with the deposit order.
The Kerala High Court granted interim exemption to the mother of a child suffering from Spinal Muscular Atrophy (SMA) from payment of Integrated Goods and Services Tax (IGST) on imported medicine for the rare disease. The petitioner, the child’s mother, filed a writ petition citing provisions in Article 279A(4) of the Constitution of India, which allow the Goods and Services Tax (GST) Council to recommend goods and services exempted from GST.
Referring to the minutes of the 26th GST Council meeting and Circular No. 09/2014-Customs, the petitioner sought exemption for Risdiplam (brand name Evrysdi), a medicine priced at Rs. 6.07 lakh per bottle including 12% GST.
Justice Gopinath P, in a Single Bench, ruled that the Finance Minister could consider exemptions for life-threatening diseases, and the petitioner’s case qualified for such exemption. Consequently, the petitioner was allowed to purchase Risdiplam without GST payment from the concerned respondent, who could issue a bill of supply under the Central Goods & Services Tax Act / State Goods & Services Tax Act.
The Madras High Court declared the continuation of proceedings leading to an assessment order invalid once an ASMT-12 order, signifying no further action, is issued. The petitioner, operating in cash logistics and GST-registered, received an ASMT-10 notice citing return discrepancies for the 2017-2018 assessment year. After the petitioner responded, an ASMT-12 order concluded the proceedings, satisfied with the petitioner’s explanation.
Upon review, Justice Senthilkumar Ramamoorthy found the assessment order confirming the same demand for the same period but with additional interest and penalty. The judge concluded that continuing proceedings after the ASMT-12 order issuance was unsustainable.
The Kerala High Court has directed the Income-tax authority to halt recovery proceedings until the disposal of the stay petition against the Income Tax Assessment Order. The petitioner, represented by R Jaikrishna, Narayani Harikrishnan, C S Arun Shankar, and Anish P, is M/S P Kandankutty and Sons Sea Queen Hotel. They appealed the assessment order under the Income Tax Act, 1961, along with a stay petition and an application for condonation of delay.
The petitioner’s sole request is to defer any recovery pending a decision on the appeal and stay applications. Justice Gopinath P, in disposing of the writ petition, instructed the 2nd respondent to consider and issue orders on the stay petition and application for condonation of delay within one month from the receipt of a certified copy of the judgment, providing an opportunity of hearing to the petitioner. Recovery pursuant to the assessment order will remain suspended until orders are passed on the stay petition and application for condonation of delay. Smt Reshmita Ramachandran appeared for the respondent.
A Single Bench of the Kerala High Court ruled that promoters receiving occupancy certificates after the enactment of the Kerala Real Estate (Regulation & Development) Act, 2016 (K-RERA Act) must register their projects under Section 3 of the Act. The case involved M/s. IFCI Infrastructure Development Limited as the appellant/respondent, represented by Vinod Madhavan, Biju Varghese Erumala, and Saniya C V, and the Kerala Real Estate Regulatory Authority (K-RERA) along with several allottees as respondents/complainants, represented by M P Shameem Ahamed and Akhil Philip Manithottiyil. The debate centered on the legality of K-RERA’s registration directive and the promoter’s rights over the project. The petitioner argued that since the K-RERA Rules came into force after the completion of the project, registration was impossible. However, the allottees’ counsel cited a Supreme Court decision affirming the retroactive nature of the K-RERA Act.
Justice A Badharudeen upheld K-RERA’s order, citing the Act’s retrospective applicability and the promoter’s obligation to register the project. The verdict establishes a precedent for timely registration of ongoing real estate projects under the K-RERA Act, aiming to protect consumers’ interests. The appellant/promoter was directed to register the project within one week from the date of the order.
The Delhi High Court, in a significant ruling, stated that Enforcement Directorate (ED) summons cannot be invalidated solely because specific documents needed for the investigation were not listed. The petitioner, represented by a Senior Advocate, contested the ED’s investigation under various sections, including the Prevention of Money Laundering Act, 2002 (PMLA), following a search and seizure at the petitioner’s Bengaluru premises. The petitioner argued that an audit report deemed unreliable by the National Company Law Tribunal should nullify any proceedings arising from it.
Justice Anoop Kumar Mendiratta noted that ED summons couldn’t be quashed solely due to unspecified documents, highlighting the PMLA’s procedure regarding identification of proceeds of crime.
The Jammu and Kashmir and Ladakh High Court ruled that charges under the Prevention of Money Laundering Act, 2002 (PMLA) do not apply if the investigation into the underlying predicate offence is halted. The case involved allegations of bank loan fraud totaling approximately Rs. 200 crores, with a consortium of banks as victims. An ECIR was registered based on this FIR, initiating PMLA investigations.
Justice Sanjay Dhar noted that if the investigation into the predicate scheduled offences is stayed, proceedings related to money laundering would also be affected, as the PMLA offences stem from the predicate offences. The court emphasised that PMLA offences are standalone but originate from scheduled offences, and if the scheduled offences cease to exist, proceedings under the PMLA cannot continue against the accused.
The Madras High Court delivered a significant ruling stating that Assessing Officers (AO) are not bound by the strict rules of the Evidence Act during assessment proceedings under the Income Tax Act, 1961. The challenge to Assessment Orders primarily revolved around the failure of Assessing Officers to consider a Supreme Court decision regarding the transmission of seized documents in cases where the AO is the same for both the searched person and a third party.
The petitioner argued that the initiation of proceedings under Section 153C of the Income Tax Act was time-barred and raised concerns about the violation of natural justice by not allowing cross-examination of key individuals. However, Justice C Saravanan noted that assessment proceedings are quasi-judicial and do not adhere to the same evidentiary standards as judicial proceedings. Therefore, provisions of the Evidence Act, particularly those relating to computer printouts, are not applicable in this context.
A Single Bench of the Madras High Court observed that availing a lower input tax credit (ITC) than the amount reflected in the auto-populated GSTR 2A Return constitutes a lack of application of mind. The petitioner, engaged in the supply of bricks, blocks, tiles, and ceramic goods, claimed ignorance due to being uneducated and computer illiterate. The petitioner’s counsel highlighted discrepancies between claimed ITC in the GSTR 3B return and the auto-populated GSTR 2A return.
Justice Senthilkumar Ramamoorthy noted that the discrepancy in ITC amounts indicated a lack of application of mind. Additionally, the petitioner’s remittance of sums towards CGST and SGST was considered in the context of interest liability for belated filing of returns. The court ordered interference with the impugned order based on these considerations.
In a recent decision, the Madras High Court clarified that the sole criterion for initiating prosecution under Section 276CC of the Income Tax Act, 1961 is wilful failure to furnish returns. The case involved the petitioner’s failure to file returns for Assessment Year 2014-2015 despite earning substantial income, leading to the issuance of a show cause notice for potential prosecution.
The petitioner argued against prosecution, citing delays in the issuance of notice under Section 148 and pending appeals. The Special Public Prosecutor for income tax emphasized the petitioner’s wilful non-filing of returns as per Section 139(1) and the purpose of the notice under Section 148.
Justice N Anand Venkatesh observed that the statutory presumption under Section 278E operates upon wilful failure to furnish returns, regardless of other considerations. The court reiterated that the existence of a culpable mental state suffices for prosecution under Section 276CC.
The Gujarat High Court granted bail to an accused involved in a Goods and Services Tax (GST) scam amounting to Rs. 1466 crores. The accused had been in custody since October 12, 2023. The bail application was filed under Section 439 of the Code of Criminal Procedure, 1973, for regular bail.
The court directed the applicant to surrender their passport, refrain from leaving Gujarat without prior permission, mark their presence before the Directorate General of GST Intelligence once a month, and provide their current address to the Investigating Officer and the Court. Breach of these conditions would result in appropriate action by the Sessions Judge concerned. The court also clarified that its observations at this stage should not influence the trial court’s decision during the trial.
The Andhra Pradesh High Court considered a criminal revision petition filed by the State of Andhra Pradesh challenging a Magistrate’s order denying police custody for the son of a TDP leader in an Rs. 8 crores GST-ITC scam. The prosecution argued for the necessity of police custody to further interrogate the accused, alleging involvement in fraudulent activities such as creating shell companies and diverting government funds.
Justice T. Mallikarjuna Rao found no illegality in the Magistrate’s decision and upheld the dismissal of the petition for police custody, noting the completeness of the investigation conducted by the Directorate General of Goods and Services Tax Intelligence. The court also highlighted the difficulty in appreciating the contention regarding diversion of government funds given the lack of dispute over the investigation report.
A Division Bench of the Delhi High Court ruled that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has the authority to reject Customs Appeals for failure to comply with the pre-deposit condition for filing appeals. The appellants/exporters challenged a CESTAT Final Order dismissing their appeals due to non-compliance with the pre-deposit order.
The court observed that while Section 129E of the Customs Act, 1962 grants discretion to dispense with the deposit in cases of hardship, the right to appeal becomes vested upon fulfilling conditions, including the pre-deposit requirement. The proviso to Section 129E allows the Tribunal to waive the deposit obligation in cases of undue hardship. The court concluded that there was no error in the CESTAT’s orders and upheld the dismissal of the appeals for non-compliance with the deposit order, in accordance with the provisions of the Customs Act, 1962.
The Gujarat High Court granted bail to an accused in a case involving the issuance of GST invoices without supplying goods to buyers. The applicant, a proprietor of M/s. Remgold International, was falsely implicated, according to the counsel. The applicant, a reputed businessman, had no connection with the alleged offense and cooperated fully with investigators. The counsel argued that the applicant had no involvement with the bogus firms mentioned in the production report.
While the complainant argued that the allegations against the applicant were proven, the court observed that the seriousness of the offense alone cannot deprive the accused of their right to bail, citing precedent. Therefore, the court granted bail to the applicant on executing a personal bond of Rs. 15,000 with one surety of the same amount to the satisfaction of the trial court, subject to certain conditions.
The Rajasthan High Court ordered the reconsideration of an application under Section 10(23C)(vi) of the Income Tax Act, 1961, stating that the mere generation of surplus from year to year cannot be the sole reason for rejection. The petitioner, a charitable trust engaged in educational purposes, applied for exemption under the mentioned section. Despite providing satisfactory responses to queries from the respondents, the application was rejected on the grounds that the surplus generated was not incidental to educational purposes. However, the court cited a circular from the Ministry of Finance clarifying that surplus generation alone cannot justify rejection. Therefore, the court set aside the impugned order and directed the respondents to reconsider the application in accordance with the law and the circular.
The Madras High Court ruled that the Tax Recovery Officer under the Income Tax Act, 1961, does not have the authority to declare a sale made in favor of a third party as void. The case involved a dispute where the fourth respondent defaulted in tax payment, and the Income Tax authorities issued demand notices. A sale agreement between the petitioner and the fourth respondent was disputed, with the fourth respondent claiming it was a forged document.
The petitioner argued that the sale was binding and challenged the authority of the Tax Recovery Officer to declare it void. The Income Tax Department contended that the sale was void ab initio under Rule 16(1) of the II Schedule of the Income Tax Act. However, the court cited precedent and ruled that the Tax Recovery Officer’s jurisdiction does not extend to declaring sales void, and the petitioner should seek recourse through a civil suit to establish property rights.
The Allahabad High Court ruled that inputs under the Central Goods and Service Tax Act, 2017 (CGST Act) are meant for day-to-day business operations and are not required to be capitalized in the books of accounts. The petitioner sought a refund of unutilized Input Tax Credit (ITC) paid on various inputs and input services.
The petitioner argued that they followed a capitalization method based on the use of goods and treated them as inputs, not capital goods. The court observed that inputs are for daily operations and should not be capitalized, unlike capital goods.
The court criticized the arbitrary withholding of refund claims and emphasized the importance of consistency in assessments when facts remain the same across assessment periods.
The Gujarat High Court upheld the order granting bail to a co-accused in a Rs. 700 crores GST scam case involving a tax amount of 35 crores. The state filed a petition to quash the bail order, arguing that the court granting bail did not consider relevant factors and failed to address objections filed by the complainant. However, the court noted that the co-accused had already been granted bail by a Coordinate Bench of the same court, and that order remained unchallenged. As there were no supervening circumstances affecting fair trial, the court found no grounds to interfere with the bail order.
The Bombay High Court quashed re-assessment proceedings initiated against Castrol India, a lubricant manufacturing company, under the Income Tax Act. The court ruled that the re-assessment was based on a change of opinion by the Assessing Officer (AO) rather than fresh and tangible material. The court emphasized that the belief for re-assessment must be based on new information not available during the original assessment. The court also noted that the reassessment cannot be initiated solely on the basis of a change of opinion by the AO, as per the precedent set by the Supreme Court.
The Delhi High Court directed the Goods and Service Tax (GST) department to cancel the GST registration of a deceased proprietor retrospectively from the date of his death, rather than from the commencement of GST implementation in July 2017. The court ruled that retrospective cancellation must be based on objective criteria and not solely on non-filing of returns. The petitioner, the legal heir of the deceased proprietor, argued against retrospective cancellation, stating that the business ceased operations after the proprietor’s demise. The court modified the cancellation order to be effective from the date of the proprietor’s death, March 14, 2018, to avoid adverse implications for customers’ input tax credit. However, the respondents retain the right to recover any due tax, penalty, or interest according to the law.
The Kerala High Court directed the Income-tax authority to suspend recovery proceedings until the disposal of the stay petition against the Income Tax Assessment Order. Koothery Narayanan Vijayan, the petitioner, sought relief to have the stay petition considered and decided by the 4th respondent.
Justice Gopinath P disposed of the petition, instructing the 4th respondent to hear the petitioner and decide on the stay petition and the issue of condonation of delay. Recovery proceedings on the assessed amount were ordered to be halted until a decision is made on the stay petition. G Krishnakumar, Agnet Jarard, and Vinay John A J represented the petitioner.
The Kerala High Court suspended Income Tax recovery proceedings until the final decision of the stay petition filed by M/S Giant Properties India Pvt Ltd. Justice Gopinath P directed the 2nd respondent to consider and decide on the stay petition after hearing the petitioner. The court ordered that recovery of any amounts due under the assessment order be suspended pending the decision on the stay petition.
In a recent judgment, the Kerala High Court directed the Income Tax Appellate Tribunal (ITAT) to consider appeals after condoning the delay in filing them. The petitioner, represented by several counsel, challenged orders imposing penalties under the Income Tax Act, 1961. They filed a series of appeals along with delay and stay petitions. The relief sought was to suspend enforcement of the amounts demanded pending consideration of these petitions by the 1st Appellate Authority.
Justice Gopinath P disposed of the writ petition, directing the 3rd respondent to consider and decide on the delay and stay petitions within six weeks. The Court emphasized that the Appellate Authority should decide on stay petitions’ merits only if it condones the appeal filing delay. Recovery proceedings for the demanded amounts were to remain suspended until the mentioned orders were passed.
In a case before the Madras High Court, a petitioner challenged a Goods and Services Tax (GST) assessment order disallowing Input Tax Credit (ITC) due to a mismatch in GSTIN mentioned on invoices. The petitioner explained that the supplier erroneously mentioned another entity’s GSTIN. Despite the explanation, the tax authority confirmed the proposal to impose tax, interest, and penalty.
The court observed that documents indicated a genuine purchase by the petitioner and that the GSTIN mismatch was due to the supplier’s error. The court quashed the assessment order and remanded the matter to the assessing officer. The officer was directed to provide the petitioner with a reasonable opportunity, including a personal hearing, and issue a fresh assessment order within two months. The petitioner was also given the option to rectify the error through appropriate means.
The Delhi High Court upheld the suspension of a Customs Broker Licence (CBL) after it was discovered that the licensee allowed third parties to use the licence for fraudulent imports in exchange for monthly remuneration. Sriaanshu Logistics, the appellant, challenged the suspension order, which was later converted into a revocation of licence. The appellant admitted to subletting the licence to third parties and allowing them to use the digital signature of the G Card holder for uploading data.
The court held that such actions breached trust and violated Customs Broker Licensing Regulations. The appellant’s admission of misconduct warranted the sanction imposed. The appellant was represented by Ms. Reena Rawat and Ms. Jyotika Sharma, while the respondent was represented by Mr. Harpreet Singh, SSC, along with Ms. Suhani Mathur and Mr. Jatin Kumar Gaur.
The Kerala High Court’s single bench quashed an order rejecting a rectification application filed by M/S Premier Exports International under Section 154 of the Income Tax Act, 1961.
The court found that the tax department failed to dispose of the rectification application within the specified time under Section 154(7) of the Act and overlooked a circular issued by the Central Board of Direct Taxes (CBDT).
The petitioner’s counsel argued that applications filed within the stipulated time must be considered on merits, even if not disposed of within the specified time frame, as per the CBDT circular. The Standing Counsel representing the revenue department agreed to consider the matter in light of the circular.
In light of the submissions, Justice Gopinath P quashed the order and directed the respondent to reconsider the application, taking into account the provisions of the circular. Adv S Arun Raj represented the petitioner, while Cyriac Tom appeared for the respondent revenue.
The Kerala High Court directed the Income Tax Appellate authority to condone a delay of 141 days in filing an Income Tax appeal, as the delay occurred due to a mistake in filing the appeal manually instead of online. The petitioner, Aluva Co-Operative Agricultural and Rural Development Bank Ltd, filed an appeal before the Commissioner of Income Tax (Appeals) manually on 18.4.2016, unaware that online filing was mandatory since 1.3.2016. Upon realizing the error, they filed an online appeal on 3.11.2016 along with an application for condonation of delay. However, the application was dismissed by the 3rd respondent. The petitioner argued that the mistake was genuine and sought condonation of delay, citing relevant Supreme Court judgments. The Income Tax Department contended that since no appeal was filed before the competent authority, there was no delay to condone. Justice Gopinath P observed that the mistake of filing manually instead of online constituted sufficient cause for condonation of delay, given that the online filing requirement was introduced after the manual filing. The court quashed the order and directed the 3rd respondent to consider the appeal filed within time and dispose of it accordingly under the law.
The division bench of the Kerala High Court set aside a reopening assessment made under the Income Tax Act, 1961, in response to an intracourt appeal arising from a judgment of the Single Judge. The appellant, Cherupurath Mohammed Jeens, challenged the assessment order for the assessment year 2013–2014 after it was reopened under Section 148 of the Income Tax Act. The appellant argued that the assessment was barred by limitation, citing the proviso to Section 149 of the Income Tax Act, which was not considered by the Single Judge. The division bench, comprising Justice A Muhamed Mustaque and Justice Shoba Annamma Eapen, found that the issue relating to limitation had not been addressed in the assessment order. Consequently, the court set aside the assessment order for the assessment year 2013–2014 for reconsideration after hearing the petitioner. The writ appeal was disposed of accordingly.
The Delhi High Court set aside the retrospective cancellation of Goods and Service Tax (GST) registration and upheld the cancellation from the date of issuance of the show cause notice. Singla Enterprises challenged the retrospective cancellation of its GST registration, arguing that the proper officer rejected the revocation application without considering the reply of the assessee. The petitioner, a proprietorship firm engaged in trading and retailing, received a show cause notice citing reasons for cancellation related to invoice issues without supplying goods/services and mismatches in the year 2018-19. However, the notice did not specify the retrospective cancellation. The impugned order lacked reasons for cancellation and showed nil demand against the petitioner. Despite the petitioner’s detailed reply, the proper officer failed to consider it.
The court modified the order, treating the registration as cancelled from the date of the show cause notice issuance, considering the petitioner’s cessation of business activities. Mr. Rakesh Kumar, Mr. P.K. Gambhir, and Mr. Akul Mangla appeared for the petitioner, while Mr. Rajiv Aggarwal, Ms. Samridhi Vats, Mr. Anurag Ojha, Mr. Subham Kumar, and Mr. Vipul Kumar represented the respondent.
The Kerala High Court dismissed a writ petition challenging the denial of Input Tax Credit (ITC) under the Central Goods and Service Tax (CGST) Act, 2017. Kuriakose Parappottu Binu, the petitioner, contested an order from the State Tax Officer determining their liability to CGST/SGST for the assessment year 2018-19. The Government Pleader argued that the petitioner failed to appear before the officer or file a reply to the show cause notice. The court noted that the petitioner has the statutory remedy of filing an appeal against the order within the specified time frame.
Thus, the court dismissed the writ petition, stating that no further relief is required since the petitioner can avail of the statutory remedy.
The Delhi High Court upheld the Income Tax Appellate Tribunal’s ( ITAT ) decision today, confirming the recovery of outstanding income taxes demand exceeding Rs. 100 crores for the assessment year 2018-19. The court refused to grant stay on recovery notice.
The dispute arose from the denial of tax exemption claimed by Congress under Section 13A of the Income Tax Act,1961, based on the timing of their income declaration and receipt of donations exceeding the prescribed limit.
The Kerala High Court set aside an order denying Input Tax Credit (ITC) to Philips Auto Agencies due to a mismatch between GSTR-2A and GSTR-3B under the Goods and Services Tax Act for the year 2018-19. The petitioner argued that GSTR-2A was introduced only in September 2018 and thus, the denial of ITC based on the mismatch was unjustified. They also contended that they were not provided with a statement of mismatch as required by Section 73(3) of the GST Act.
The court directed the Assessing Authority to reconsider the petitioner’s claim, taking into account the Circular dated 27.12.2022. If requested, the statement of mismatch should be provided to the petitioner. The court set aside the assessment order and remitted the matter for fresh consideration, directing the petitioner to appear before the authority on 20.03.2024 for further proceedings.
The Bombay High Court ruled that interest paid on borrowed funds for investment in shares is disallowed under Section 14A of the Income Tax Act, 1961 if the dividend received on shares does not form part of the total income.
The appellant, a Chartered Accountant turned stockbroker, faced disallowance of interest by the Assessing Officer as the purpose of investment was to earn tax-free dividend income. The ITAT upheld the disallowance, stating that the borrowed funds were primarily invested in shares of the appellant’s own group companies, from which no income was received.
The appellant argued that the borrowed funds were utilised to expand his business as a corporate entity, and the interest paid was a business expenditure. However, the court held that since the dividend income from the invested shares was not taxable, the expenditure on interest incurred did not qualify for deduction under Section 14A of the Income Tax Act.
The Delhi High Court directed the competent authority to decide the claim of refund under the Delhi Value Added Tax (DVAT) Act, 2004 within four weeks, as the refund request by Central Herbal Expo (India) was under consideration. The petitioner sought a refund of Rs 12,70,879/- for the fourth quarter of 2013-2014, along with statutory interest due to the delay in refund. The respondents assured that the refund request was under review, and a decision would be made within four weeks.
The division bench, comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja, disposed of the writ petition, directing the competent authority to decide the refund claim within the stipulated time. Additionally, if the refund is deemed admissible, it should be paid along with statutory interest at 6% per annum.
However, if the competent authority finds the refund claim inadmissible, a reasoned order must be passed and communicated to the petitioner, who may pursue further remedies as permissible by law.
The division bench of the Delhi High Court modified the order cancelling Goods and Service Tax (GST) registration retrospectively, emphasizing that registration cannot be cancelled merely for failure to furnish returns for a continuous period of six months. Manish Anand, the petitioner, challenged the retrospective cancellation of GST registration, citing deficiencies in the show cause notice and the order. The notice lacked specific reasons for cancellation and did not inform the petitioner of the retrospective cancellation.
The court observed that registration cannot be cancelled retroactively without valid grounds, especially when the taxpayer was compliant during the period in question. Since the petitioner ceased business activities and shifted abroad, the court modified the order, cancelling registration from the date of the show cause notice issuance, i.e., 02.12.2021. The petitioner must comply with Section 29 of the Central Goods and Services Tax Act, 2017.
The Delhi High Court set aside the order cancelling Goods and Service Tax (GST) registration of Ganesh Sales Corporation due to deficiencies in the Show Cause Notice (SCN). The SCN lacked crucial details such as the name of the officer to appear before and did not specify the place for appearance.
Moreover, the notice did not notify the petitioner of the retrospective cancellation of registration, depriving them of the opportunity to object. The subsequent order also lacked reasons for cancellation and merely referenced the SCN date.
The court emphasised that cancellation with retrospective effect should consider the impact on taxpayers’ input tax credit. The petitioner must comply with Rule 23 of the Central Goods and Services Tax Rules, 2017. The respondents are not precluded from taking steps for recovery under the law, including retrospective cancellation.
The Delhi High Court directed the re-adjudication of a show cause notice (SCN) by the Proper Officer as the petitioner, Polytec Industries, failed to reply due to non-access to the Goods and Service Tax (GST) portal. The petitioner’s registration was retrospectively cancelled, preventing access to the portal until the cancellation became prospective following a subsequent order. Consequently, the petitioner couldn’t upload a reply to the SCN.
The court, comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja, deemed it necessary to grant the petitioner an opportunity to respond and ordered the re-adjudication of the SCN. The previous order was set aside, and the proceedings were restored on the record of the Proper Officer. The petitioner must upload a reply within one week, following which the Proper Officer will adjudicate the SCN in accordance with the law.
The Delhi High Court upheld the order of the Income Tax Appellate Tribunal (ITAT) regarding reassessment proceedings under the Income Tax Act, 1961, stating they were conducted without proper application of mind. Pioneer Town Planners Pvt Ltd, the respondent-assessee, had its income tax return processed under Section 143(1) of the Act, but reassessment proceedings were initiated after a search operation on Shriji Group entities.
The respondent appealed to the Commissioner of Income Tax (Appeals) [CIT (A)], and then to the ITAT, which found the AO’s actions lacked independent application of mind. The Revenue argued that the AO’s actions were based on subjective satisfaction and met the requirements of Section 151 of the Act. However, the respondent argued that the approval for reassessment was not satisfactory, akin to rubber-stamping. The Court upheld the ITAT’s order, dismissing the appeal.
Puneet Kothapa, the son-in-law of former Municipal Administration Minister P Narayana, received temporary relief as the High Court of Andhra Pradesh issued interim orders on Tuesday, instructing the police to refrain from taking immediate action, such as arrest, against him for alleged charges of GST evasion related to vehicle purchases.
In the proceedings at the High Court of Andhra Pradesh in Amaravati, the case number being Criminal Petition No.1583 of 2024, the learned Assistant Public Prosecutor sought time to gather instructions. The court directed the petitioner’s counsel to serve personal notice on the respondent within three weeks and file proof of service.
The Bombay High Court recently ruled that ex gratia bonuses provided to employees, exceeding the eligible bonus under the Payment of Bonus Act, qualify as permissible business expenditures.
The bench, comprising Justices K. R. Shriram and Neela Gokhale, noted that the earlier decision by the Income Tax Appellate Tribunal ( ITAT ) was legally incorrect in asserting that liabilities for salary and wages resulting from the Justice Palekar Award are not deductible in the current year but only in the year of agreement between management and employees. The Bombay High Court further clarified that bonuses paid to employees for services rendered cannot be claimed under Section 37(1) of the Income Tax Act.
The Delhi High Court applied the rule of consistency in a recent decision regarding the withdrawal of upward adjustments of income proposed by the Transfer Pricing Officer (TPO). The case involved a wholly owned subsidiary of Oriflame International SA engaged in selling skin care and cosmetic products.
The TPO rejected selected comparable entities and proposed upward income adjustments, leading to assessment orders reflecting these adjustments. The Income Tax Appellate Tribunal (ITAT) remanded the matter to the TPO, ultimately ruling that the selected comparable entity, Modicare, was unsuitable and recommending the Transactional Net Margin Method (TNMM) for benchmarking.
The Department appealed these findings. However, during the hearing, it was revealed that for the assessment year 2014-15, Modicare was excluded from the comparables list, and no upward adjustments were made. The court noted that this approach was accepted and followed in subsequent years, indicating consistency.
The Allahabad High Court recently ruled that the confiscation of goods under the Customs Act, 1962 must be based on credible material and a valid “reason to believe.” In the case, the petitioner challenged the seizure of 49,210 kgs of arecanuts based on opinions from traders, a report from the Arecanuts Research and Development Foundation, and alleged discrepancies in quantity and valuation.
The petitioner’s counsel argued that seizure requires a valid “reason to believe” that the goods are liable for confiscation, which was lacking. The revenue authorities claimed they acted bona fide and presented opinions and reports as evidence.
However, the court found that the authorities failed to provide credible objective material or establish a valid reason for their belief, rendering the seizure invalid. The court emphasized that without proper justification, seizure and confiscation actions lack jurisdiction and are non-actionable.
The Allahabad High Court has rejected the anticipatory bail application of the accused involved in the Goods and Services Tax (GST) – Input Tax Credit (ITC) scam of Rs. 2645.2 Crore at a PAN-India level. Due to the severity of the offence, the court opted not to grant bail.
Justice Samit Gopal, presiding over the bench, noted the gravity of the economic offence, citing the law established by the Apex Court. Considering the elaborate scheme employed to defraud the government exchequer and the potential need for custodial interrogation, the court deemed the case unfit for anticipatory bail.
Furthermore, the state revealed during submissions that an investigation has uncovered a network of individuals involved in the scam, collectively claiming Input Tax Credit amounting to Rs. 26,452,895,600. This extensive fraudulent activity has resulted in substantial revenue loss, strengthening the court’s decision to reject anticipatory bail for the accused.
The Allahabad High Court has rebuked the GST Department for its inconsistent handling of Unutilised Input Tax Credit (ITC) refund claims by Samsung India Electronics. The petitioner, exporting IT design and software development services to its overseas holding company, criticized the department’s varying treatment of refund applications stemming from identical circumstances.
M.P. Devnath, representing the petitioner, argued against the Department’s inconsistent approach, emphasizing its legal inaccuracy. However, the Additional Chief Standing Counsel for the respondents contended that the principle of res judicata doesn’t apply in tax matters, asserting that previous refund approvals don’t guarantee subsequent ones.
The Bench stressed the importance of consistency in taxation, highlighting its pivotal role in maintaining public trust, ensuring compliance, and upholding the tax system’s integrity. Inconsistencies, they argued, can undermine these pillars, necessitating standardized rules and principles to govern taxpayers facing similar factual and legal situations.
The Bombay High Court recently ruled that ex gratia bonuses paid to employees, exceeding the eligible bonus under the Payment of Bonus Act, qualify as permissible business expenditures. The court overturned the Income Tax Appellate Tribunal’s decision, which disallowed deductions for such payments.
The case involved Indian Express, engaged in newspaper printing and publishing, facing disallowances by the Assessing Officer concerning additional salary and wages due to the Justice Palekar Award. Additionally, the AO disallowed ex gratia bonuses exceeding the statutory limit. The Commissioner of Income Tax (Appeals) overturned the AO’s decision, but the ITAT reinstated it.
However, the High Court ruled in favor of the appellant, citing previous judgments, and clarified that bonuses paid for services rendered cannot be claimed under Section 37(1) of the Income Tax Act. Nonetheless, ex gratia payments exceeding the Bonus Act’s limit were deemed allowable as business expenditures.
The Telangana High Court has served notice to the government regarding a writ petition lodged by M/s GVK Power and Infra Limited, contesting the Central Board of Indirect Taxes and Customs ( CBIC ) circular’s clarification on the taxability of Personal and Corporate Guarantees under the Goods and Services Tax ( GST ) regime.
R.K. Associates represented the petitioner, while Gadi Praveen Kumar, Deputy Solicitor General of India, appeared for the respondents. The trade and field formations have forwarded representations seeking clarification on certain issues concerning the taxability of providing personal bank guarantees by directors to banks to secure credit facilities for the company. Similar clarifications are sought regarding the taxability and valuation of providing corporate guarantees by related persons to banks/financial institutions for other related persons, as well as by a holding company to secure credit facilities for its subsidiary company.
A Single Bench of the Madras High Court has remanded a Goods and Services Tax ( GST ) Assessment and Demand Order, issued based on all India turnover instead of State-wise turnover.
The Bench noted that, “On examining the impugned assessment order, it is noticeable that the assessing officer has taken into consideration the closing balance of creditors on all India basis. Similarly, based on the profit and loss account of the petitioner, the total revenue and expenditure of the corporate entity were made the basis for imposing GST.”
In a major relief to Adani Wilmar, the Calcutta High Court sanctioned incentives under the West Bengal State Support for Industries Scheme, 2008 post GST.
A Single Bench of Justice Sabyasachi Bhattacharyya observed that “The concession given by the scheme has been accepted by the petitioners and the petitioners, acting on the said promise of the State, have continued commercial production for a considerable time. The respondents have acceded to the claim of the petitioners under the Scheme, concession or otherwise, by granting RC-I and RC-II and also disbursing a part of the payment. Hence, it is too late in the day to raise a demur to the entitlement of the petitioners to the scheme itself.”
The Calcutta High Court ruled that tea saplings were not liable to tax under the Bengal Agriculture Income Tax Act, 1944. The writ petition has been filed praying to quash the impugned order passed by the West Bengal Taxation Tribunal, Kolkata. The petitioner has also sought relief for a direction to the respondents to calculate depreciation in accordance with Section 7A of the Bengal Agricultural Income Tax Act, 1944 and not under Section 7 thereof.
A Division Bench of Justices Surya Prakash Kesarwani and Rajarshi Bharadwaj observed that “Definition of “tea” as given in Section 3(n) of the Tea Act of 1953 is not liable to be adopted for the purpose of the Bengal Agricultural Income Tax Act. That apart, even the definition of “tea” given under Section 3(n) of the Tea Act, 1953 does not include saplings. Thus, by any stretch of imagination or logic “tea” shall not include saplings.”
In a significant ruling the Delhi High Court observed that appending the phrase ‘Yes’ by the Principal Commissioner of Income Tax ( PCIT ) is not valid under Section 151 of the Income Tax Act, 1961.
Section 151 of the Income Tax Act stipulates that the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner must be “satisfied”, on the reasons recorded by the AO, that it is a fit case for the issuance of such notice. Thus, the satisfaction of the prescribed authority is a sine qua non for a valid approval as per the said Section.
A Division Bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav observed that “The said approval cannot be granted in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase “Yes” does not appropriately align with the mandate of Section 151 of the Income Tax Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose.”
A Single Bench of the Madras High Court ruled that the Income Tax Department should mandatorily follow Digital Evidence Investigation Manual by the Central Board of Direct Taxes ( CBDT ) while conducting searches and seizing electronic evidence.
The Court of Justice Krishnan Ramasamy observed that “Under these circumstances, this Court is of the considered view that since the respondents had not followed the Digital Evidence Investigation Manual while collecting and preserving the evidences, as per the law laid down by the Hon’ble Apex Court, if there is no corroborative evidence and proved in the manner known to law, the digital data collected by the Department in the course of search and seizure and thus, the said search and seizure is against the law and ab initio bad.”
In a major ruling, the Himachal Pradesh High Court declared ‘water cess’ levy on hydropower generation as ‘unconstitutional’.
A Division Bench of Justices Tarlok Singh Chauhan and Satyen Vaidya observed that “The provisions of the Himachal Pradesh Water Cess on Hydropower Electricity Generation Act, 2023, are declared to be beyond the legislative competence of the State Government in terms of Articles 246 and 265 of the Constitution of India and, thus, ultra vires the Constitution. (ii) Consequently, the Himachal Pradesh Water Cess on Hydropower Electricity Generation Rules 2023, are also quashed and set aside.”
In a recent development at the Madras High Court, the Commissioner of Customs, Chennai II Commissionerate, withdrew appeals filed against various entities in a tax dispute.
The appeals were brought before the Madras High Court in response to final orders issued by the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Chennai, on 25th January 2023. The appeals filed under Section 130 of the Customs Act, challenging the final orders passed by CESTAT, Chennai.
The Apex court has also allowed the income tax and indirect tax appeals to be withdrawn, owing to low tax effects. As per the Notification dated 08.08.2019 at Instruction No.17 of 2019”the Central Board of Direct Taxes enhanced the specified monetary limits for filing of income tax appeals by the Department before Income Tax Appellate Tribunal. High Courts and SLPs/appeals before the Supreme Court .
A Single Bench of the Allahabad High Court quashed the penalty imposed for vehicle number discrepancy in consignment note – bility as the Part-B of the e-way bills were updated with the new vehicle registration number after a vehicle breakdown.
The Bench noted that, “It is to be noted that the goods were in order and the e-way bill was also as per the goods that were being transported.” The Bench observed that, “Upon perusal of the documents, it is clear that Part-B of the eway bill has been changed due to change of the vehicle. It is obvious that when a vehicle is changed, the number in the bilty could not be changed as the goods were in transit. Consequently, the first ground is baseless and is rejected out rightly.”
The Allahabad High Court directed the Central Bureau of Investigation (CBI) to provide a post-trap memo or arrest memo to the accused in a case involving alleged demands of a bribe by an EPFO Inspector. The complainant alleged that demands of Rs. 12 lakh were made to avoid tax imposition by EPFO officials. The CBI conducted a trap, resulting in the arrest of the accused. The accused sought a copy of the post-trap memo to understand the grounds of arrest. The CBI argued that providing the memo may hamper the investigation.
However, the court emphasized the accused’s right to a fair trial and ordered the CBI to provide the memo within seven days, stating that the accused should be provided with necessary documents even during the investigation stage.
The Delhi High Court directed the revenue department to refund Rs. 35,00,000/- deposited involuntarily during a search operation to reverse Input Tax Credit (ITC), along with interest. The petitioner, Mahavir Singh, argued that the deposit was coerced during the search, and there was no claim against him at the time of deposit. The court observed that the deposit lacked voluntariness and violated CBIC instructions. As a result, the court ordered the refund of the amount with interest within four weeks.
The Bombay High Court ruled that service tax is not applicable on ocean freight or sea transportation services for goods imported under CIF contracts. The petitioner, a yarn manufacturing company, faced a demand for service tax payment for transportation services covered by foreign suppliers. The court cited the “Negative List of Taxation Scheme” and the precedent set by the Gujarat High Court, holding that service tax on ocean freight is not legally valid. However, the petitioner must apply for a refund, adhering to lawful requirements, including unjust enrichment principles.
The Kerala High Court granted relief to Cherian Koshy by staying the recovery proceedings under the income tax assessment order until a final decision is made on the stay petitions filed in appeals pending before the 4th respondent. Koshy sought limited relief, requesting that the demands in the assessment order not be enforced until a decision is reached on the stay petitions. Justice Gopinath P directed that the demands in the assessment order shall not be enforced until the 4th respondent decides on the stay application, with a mandate to do so within two months from the receipt of the judgment’s certified copy.
The Kerala High Court upheld the denial of Input Tax Credit (ITC) claimed by Sri Puthaparambil Shereef Shanavas, stating that it was based on a forged invoice. The court dismissed Shanavas’s writ petition seeking to quash the intimation blocking the input tax credit. Rule 86A of the GST Rules empowers the Commissioner or authorized officers to disallow debits on electronic credit ledgers if fraudulent claims are suspected. The government argued that Shanavas claimed ITC based on forged invoices without actual supply of goods or services. Justice Dinesh Kumar Singh found no grounds to interfere with the notices, dismissing the petition and directing the adjudication authority to conclude the process promptly.
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