Tax Judgment of High Courts Annual Digest 2023 (Part-14)

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This Annual Case Digest analytically summarizes the key stories related to Tax judgements of various High Courts in India reported in Taxsca.in during the year 2023. These stories include judgements and observations of High Courts related to Income Tax, Goods and Service Tax(GST), Excise Duty, Service Tax, Customs Duty, etc.

Kerala HC allows to Withdrawal Writ Petition as to approach before Appellate Authority u/s 107 of CGST/Kerala SGST Act PRAKASH VARGHESE vs THE STATE TAX OFFICER CITATION 2023 TAXSCAN (HC) 1770

The Kerala High Court allowed to withdrawal writ petition as to approach before appellate authority under section 107 of the Central Goods and Service Tax (CGST) /Kerala State Goods and Service Tax (SGST) Act, 2017.

Considering the submission, the single bench of Justice Dinesh Kumar Singh disposed of the writ petition with liberty to the petitioner to file an Appeal under Section 107 of the CGST/Kerala SGST Act, 2017 against the order within two weeks from today. If such an Appeal has been filed, the same shall be considered and decided considering it is to be on time as per Notification No. 53/2023 – Central Tax.

TDS Deducted by Employer cannot be Recovered from deductee as per section 205 of Income Tax Act: Delhi HC VISHESH KHANNA vs DEPUTY COMMISSIONER OF INCOME TAX & ORS.CITATION 2023 TAXSCAN (HC) 1764

The Delhi High Court Tax Deducted at Source (TDS) deducted by the employer cannot be recovered from the deductee as per section 205 of the Income Tax Act, 1961.

A division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia quashed the demand and consequentially, the show-cause notice collapsed. The writ petition is disposed of, in the aforesaid terms.

Interest on Delayed GST Refunds Shall be calculated From Expiration of 60 days after Refund Application,not from date of Appellate Order: Delhi HC BANSAL INTERNATIONAL vs COMMISSIONER OF DGST AND ANR CITATION 2023 TAXSCAN (HC) 1772

A Division Bench of the Delhi High Court composed of Justice VibhuBakhru and Justice Amit Mahajan ruled that interest on delayed Goods and Services Tax (GST) refunds should be calculated from the expiration of 60 days after the refund application, not from the date of the appellate order, despite the initial denial.

The court emphasized that applications for refund after Appellate Authority orders does not require fresh adjudication but serve to implement existing orders. Consequently, the court set aside the impugned order and directed the Adjudicating Authority to process the petitioner’s refund application filed on 16.05.2023.

Kerala HC upholds Addition u/s 40 (3) of Income Tax Act in Absence of Material Evidence P.V. THOMAS vs THE INCOME TAX OFFICER CITATION 2023 TAXSCAN (HC) 1765

The Kerala High Court upheld the addition under section 40 (3) of the Income Tax Act, 1961 in the absence of material Evidence.

A division bench of Dr Justice A K Jayasankaran Nambiar & Dr Justice KauserEdappagath observed that “the appellant had admitted the addition under Section 40A (3) of the Income Tax Act and further, had not produced any material before any of the Appellate Authorities to suggest that the addition was not warranted, the finding of the Tribunal based on the admission of the appellant does not warrant any interference in this appeal.” The Court dismissed the appeal.

Failure to Furnish Supporting Evidence against addition under Income Tax Act: Kerala HC upholds addition to Capital Account of Partner M/S. SUNNY SILKS vs ASSISTANT COMMISSIONER OF INCOME TAX CITATION 2023 TAXSCAN (HC) 1763

The Kerala High Court upheld the addition to the capital account of the partner’s failure to furnish supporting evidence against the addition under the Income Tax Act, 1961.

A single bench of Justice Dinesh Kumar Singh observed that the Appellate Authority has passed the order after considering the merit and after giving an opportunity of hearing to the petitioner and the Court cannot interfere with the said order as the Court is not sitting in appeal against the order passed by the 3rd respondent. The Court dismissed the petition.

Cancellation of GST Registration Once Restored with Same Reason is not valid: Delhi HC M/S SAMAYSHRISTI ENTERPRISES vs SUPERINTENDENT, RANGE – 31, GST DIVISION NEW DELHI CITATION 2023 TAXSCAN (HC) 1761

The Delhi High Court in a recent case held that the cancellation of Goods and Service Tax (GST) registration once restored for the same reason is not valid.

A division bench of Justice VibhuBakhru and Justice Amit Mahajan observed that once the petitioner’s GST registration was restored – which was cancelled on an allegation that it was obtained by fraud, misstatement or suppression of facts – it is not open for the respondent to again cancel the petitioner’s GST registration for the same reason unless it is premised on the ground that had occurred after the petitioner’s GST registration has been cancelled on 30.09.2021. While allowing the petition, the Court set aside the impugned order and directed to restore the petitioner’s GST registration.

Interim Relief to Paypal: Bombay HC stays Rs. 32.39 Crore time barred Income Tax Demand PayPal Payments Private Limited vs Assistant Commissioner of Income Tax and Ors CITATION 2023 TAXSCAN (HC) 1771

The Bombay High Court has issued an ad-interim order, staying the enforcement of a substantial tax demand amounting to Rs. 32.39 crore and all associated proceedings against PayPal Payments Private Limited.

The court granted the respondents three weeks to file their replies, as requested, staying the orders until then. Additionally, the petitioners were directed to file their rejoinder within two weeks thereafter, and the matter is scheduled for a hearing on January 8, 2024.

Form-67 Filed Before Issuance of Intimation: Madras HC directs Income Tax Dept to consider FTC Claim Duraiswamy Kumaraswamy vs .The Principal Commissioner of Income Tax – 8 CITATION 2023 TAXSCAN (ITAT) 2646

The Madras High Court has directed the Income Tax department to consider the Foreign Tax Credit (FTC) claim as Form 67 filed before the issuance of intimation.

A single bench of Justice Krishnan Ramasamy observed that the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the respondent, which is not proper and the same is not in accordance with law. While setting aside the impugned order, the Court remitted the matter back to the respondent to make reassessment by taking into consideration of the FTC filed by the petitioner on 02.02.2021. The respondent is directed to give due credit to the Kenya income of the petitioner and pass the final assessment order.

Delhi HC declares CBDT Instruction dated 11th May 2022 to the Extent which Propounds ‘Travel back in Time’theory Bad in Law GANESH DASS KHANNA vs INCOME TAX OFFICER AND ANR CITATION 2023 TAXSCAN (HC) 1766

The Delhi High court has observed that the reference made in paragraphs 6.1 and 6.2(ii) of the Instruction No. 01 of 2022 dated 11.05.2022, to the extent it propounds the “travel back in time” theory, is bad in law.

The bench clearly stated that the “circulars issued by the CBDT cannot run contrary to the decision of the Supreme Court. Likewise, the delegate cannot act in contravention of the Parent Act. Thus, the circulars/instructions/notifications issued by the Central Government cannot override the Parent Act.” While quashing the reassessment notice and orders under Section 148A(d), the high Court concluded that “the reference made in paragraphs 6.1 and 6.2(ii) of the Instruction dated 11.05.2022, to the extent it propounds the “travel back in time” theory, is declared bad in law.”

Pre deposit Amount paid u/s 77(4) of OVAT Act for First Appeal cannot be treated against the Second Appeal: Orissa HC M/s Swastik Agency vs Commissioner of CT & GST, Cuttack & Ors CITATION 2023 TAXSCAN (HC) 1759

The Orissa High Court has held that the pre-deposit amount paid under section 77(4) of the Orissa Value Added Tax (OVAT ) Act for the first appeal cannot be treated against the second appeal.

A division bench of Acting Chief Justice Dr B R Sarangi and Justice Murahari Sri Raman viewed that as per Section 77(4), OVAT Act, the requirement of pre-deposit is for entertainment of the first appeal, but not the second appeal. Therefore, the Sales Tax Tribunal is correct in passing the order dated 02.07.2021. The petitioner stated that the pre-deposit had been made towards the entertainment of the first appeal. It was evident that the petitioner had never asked to quash the order of the first appellate authority. The Court upheld the order and dismissed the writ petition.

10-Year Extended Limitation Period Applies to Escaped Amounts Exceeding 50 Lakhs: Delhi HC quashes Reassessment Notice GANESH DASS KHANNA vs INCOME TAX OFFICER AND ANR 2023 TAXSCAN (HC) 1766

A Division bench of the Delhi High Court, comprising Justice Rajiv Shakdher and Justice Girish Kathpalia, in the course of deciding a writ petition, emphasised that the extended 10-year limitation period for reassessment is applicable exclusively to amounts escaping Rs. 50 lakhs.

The bench stated that “Thus, as per the Memorandum, in “normal cases”, no notice was intended to be issued if three (03) years had elapsed from the end of the relevant AY. Notice, beyond the prescribed three (03) years from the end of the relevant AY, could be issued only in a few specific cases; one such example which is given in the Bill is where the AO was in possession of evidence that escaped income amounted to Rs.50 lakhs or more.” Itwas added that “The State, perhaps, did not deem it worthwhile to chase assessees beyond three (03) years, where the alleged escaped income was less than Rs.50 lakhs. These aspects concerning legislative policy come through if one were to read the relevant provisions of the statute referred to above in the background of the speech of the Finance Minister and the Memorandum.” Consequently, the court concluded that the orders issued under Section 148A(d) and the subsequent notices issued under Section 148 of the amended Income Tax Act, 1961, pertaining to AY 2016–17 and AY 2017–18, cannot be sustained.

Crores of Income Concealment while filing ITR: Madras HC refuse to quash proceedings u/s 276CC of Income Tax Act R.P.Darrmalingam vs Assistant Commissioner of Income Tax CITATION 2023 TAXSCAN (HC) 1760

The Madras High Court refused to quash the proceedings under section 276CC of the Income Tax Act on the offence of a huge amount of income concealment while filing an Income Tax Return(ITR).

The Court held that the prosecution was examined before the trial court. Therefore, all the grounds raised by the petitioner can be agitated before the trial court to rebut the presumption. The Court refused to quash criminal proceedings and dismissed the petition.

Deduction u/s 80P(2)(d) of Income Tax Act Allowable on Interest Earned from Investment in Cooperative Bank: Madras HC Thorapadi Urban Co-op Credit Society Limited vs Income Tax Officer CITATION 2023 TAXSCAN (HC) 1757

In a significant case, the Madras High Court has held that deduction under section 80p(2)(d) of the Income Tax Act, 1961 is allowable on interest earned from investment in Cooperative Bank. The Court set aside the reassessment notice issued under the act.

The Division Bench of the Court in “Commissioner of Income Tax Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd” held that the respondent therein, which is a Co-operative society, is entitled to avail the benefit under 80P(2)(d) of the Act. Since the impugned orders were passed without considering all these aspects, a single bench of Justice Krishnan Ramasamy set aside the reassessment notice while allowing the petition.

Grounds for GST Registration Cancellation Unclear: Bombay HC sets aside Defective SCN, restores Registration Makersburry India Pvt. Ltd vs State of Maharashtra CITATION 2023 TAXSCAN (HC) 1758

The Bombay High Court had set aside the impugned Show Cause Notice (SCN) issued by the Goods and Services Tax (GST) authorities regarding the cancellation of GST Registration. The court criticised the vague reasons given in the show cause notice and the lack of justification in the orders.

Thus, the bench ruled that “We were inclined to impose costs on the respondents, as repeatedly we are called upon to adjudicate on such orders despite our prior pronouncements making the position very clear. However, with a final hope that the respondents would adopt an approach the law would mandate, we refrain from imposing costs on the present proceedings. Hence, no costs.”

Cancellation GST Registration Ab initio from Date it was Granted due to Non-Filing of Return for 6 months is not valid: Delhi HC BALAJEE PLASTOMERS PRIVATE LIMITED vs COMMISSIONER OF DELHI GST & ANR CITATION 2023 TAXSCAN (HC) 1756

The Delhi High Court has held that Goods and Service Tax (GST) Registration Cancelled Ab initio from the date it was granted due to non-filing of Return for 6 months is not valid.

In the absence of a reason for the cancellation of GST registration with a retrospective date, that is, 01.07.2017, the court comprising Justice VibhuBakhru and Justice Amit Mahajan held that respondent no.2’s decision to cancel the GST registration with a retrospective date cannot be sustained. It was observed that the GST Registration was cancelled on the ground that had not furnished any return for six months which cannot be grounds for cancelling the GST registration ab initio from the date it was granted. The Court directed that the cancellation of the petitioner’s GST shall take effect from 28.11.2019 and not from 01.07.2017.

No GST Exemption to Affiliation and Inspection Fee Paid by Colleges to Universities: Telangana HC Care College of Nursing and others vs Kaloji Narayana Rao University of Health Sciences CITATION 2023 TAXSCAN (HC) 1754

The Telangana High Court has declared that Goods and Service Tax (GST) exemption does not extend to affiliation and inspection fees paid by colleges to universities. Justices Sam Koshy and Laxmi Narayana Alishetty, comprising a Division Bench, observed that the GST exemption, as outlined in Notification No.12 of 2017 of the GST Act, 2017, for institutions offering education services, does not encompass the affiliation and inspection fees paid by colleges to universities.

The bench noted that “Notification No.12 of 2017, dated 28.06.2017, which stood amended further vide Notification No.2 of 2018, dated 25.01.2018, specifically enumerates the specific nature of service rendered by the educational institutions which would stand exempted. Inspection and affiliation fees however is not part of the said notification granting exemption. Yet another aspect which needs to be considered is that Notification No.12 of 2017, dated 28.06.2017, provides for exemption of services rendered by the educational institutions to three different categories, i.e., students, faculty and staff. It does not deal with the services rendered by the university to the educational institutions. ‘Affiliation’ and ‘inspection’ is a service rendered by the university to the educational institutions for which the university had charged the respective educational institutions.” Subsequently, the bench dismissed the writ petition and all other connected writ petitions without costs.

Delhi HC stays ED proceedings in Money Laundering Case Against Hero MotoCorp Chairman & MD Pawan Kant Munjal PAWAN KANT vs DIRECTORATE OF ENFORCEMENT CITATION 2023 TAXSCAN (HC) 1753

In a recent development, the Delhi High Court has granted an interim stay in the case of Pawan Kant, a key executive at Hero MotoCorp, who is facing charges under the Prevention of Money Laundering Act, 2002 [PMLA].

Accordingly, the Single Bench of Justice Saurabh Banerjee held that, “till the next date of hearing, ECIR/DLZO-I/39/2023 dated 17.07.2023 and all proceedings emanating therefrom, including the summoning order dated 10.11.2023, shall remain stayed qua the petitioner”, allowing interim relief to the Hero Motocorp Head in the PMLA case.

Tax Research Unit cannot issue Circulars under CGST Act: Delhi HC quashes Classification of non-woven Polypropylene Bags ASSOCIATION OF TECHNICAL TEXTILES MANUFACTURERS AND PROCESSORS & ANR vs UNION OF INDIA & ORS CITATION 2023 TAXSCAN (HC) 1752

A Division Bench of the Delhi High Court has recently quashed a circular issued by the Tax Research Unit in clarification of classification of non-woven polypropylene bags, being devoid of authority under the Goods and Services Tax Act,2017 or the Customs Tariff Act, 1975.

“The writ petition shall consequently stand allowed. The impugned circular dated 31 December 2018 is hereby quashed. We leave it open to the petitioners to adopt such measures, insofar as the issue of classification is concerned, as may be permissible in law”, the Delhi High Court Division bench held. Thus, the bench quashed the circular issued, devoid of legal authority in favour of the petitioners and against the revenue.

Delhi HC Upholds Deletion of Rs. 4 Crore Addition for Unexplained Investments, dismisses Revenue’s Appeal PR. COMMISSIONER OF INCOME TAX vs ELECTRICAL AND ELECTRONIC INDIA LTD CITATION 2023 TAXSCAN (HC) 1755

The Delhi High Court upheld the decision of the Income Tax Appellate Tribunal (ITAT) in deleting the addition of Rs. 4 crore for unexplained investments under Section 69 of the Income Tax Act, 1961.

Considering that the Tribunal, the bench of Justice Rajiv Shakdher and Justice Girish Kathpalia dismissed the appeal due to the dropping of the substantive addition on merits, and the addition in the hands of the respondent/assessee was only on a protective basis, it is concluded that no substantial question of law necessitates consideration by the court. The bench stated that “In these circumstances, we are of the view that no substantial question of law arises for consideration by this court. The appeal is, accordingly, closed.”

Cancellation of GST Registration without specific Reason: Delhi HC directs reconsideration of Application for Amendment & Revocation of Cancellation of GST Registration M/S SAI ALUMINIUM EXIM vs PR COMMISSIONER OF GOODS AND SERVICE TAX NORTH DELHI CITATION 2023 TAXSCAN (HC) 1751

The High Court of Delhi has directed the reconsideration of the application for the amendment of Goods and Services Tax (GST) registration and revocation of cancellation of registration of the petitioner on the finding that both applications were rejected without any specific reason.

The bench highlighted the importance of providing specific reasons for the cancellation of GST registrations and highlighted the need for a fair opportunity for affected parties to present their case. The petitioner has been granted an opportunity to rectify the situation by submitting the required documents and information, ensuring due process in the proceedings.

Cancellation of GST Registration without specific Reason: Delhi HC directs reconsideration of Application for Amendment & Revocation of Cancellation of GST Registration M/S SAI ALUMINIUM EXIM vs PR COMMISSIONER OF GOODS AND SERVICE TAX NORTH DELHI CITATION 2023 TAXSCAN (HC) 1751

The High Court of Delhi has directed the reconsideration of the application for the amendment of Goods and Services Tax (GST) registration and revocation of cancellation of registration of the petitioner on the finding that both applications were rejected without any specific reason.

The bench emphasised that the concerned officer should satisfy themselves that the petitioner is operating its business at the claimed principal place. If the officer is convinced, the order cancelling the GST registration shall be revoked. The bench highlighted the importance of providing specific reasons for the cancellation of GST registrations and highlighted the need for a fair opportunity for affected parties to present their case. The petitioner has been granted an opportunity to rectify the situation by submitting the required documents and information, ensuring due process in the proceedings.

Cess can be levied only on Original Owner of property not Subsequent Purchaser: Rajasthan HC Stays Demand of cess against Hoteiler Khum Singh Balla S/o Shri Gopal Singh vs State Of Rajasthan CITATION 2023 TAXSCAN (HC) 1749

In a recent case, the Rajasthan High Court, while staying the demand for cess against hoteliers, held that cess could be levied only on the original owner of the property, not the subsequent purchaser.

After analyzing the facts, the bench of Justice Arun Monga recognized that the petitioner/assessee, being the subsequent purchaser, cannot be bound by prior liability and that the cess can only be imposed on the original owner. Thus, the notice was sent by the court and is due back on December 13, 2023. In the meanwhile, no coercive action should be taken against the petitioner regarding the recovery in question, the court added.

Retirement amount received by partner through Arbitration Proceedings from partnership firm is not chargeable to tax: Bombay HC quashes Reassessment Proceedings Ramona Pinto vs Deputy Commissioner of Income Tax CITATION 2023 TAXSCAN (HC) 1750

In a recent case, the Bombay High Court, while quashing the reassessment proceedings, held that the retirement amount received by the partner through arbitration proceedings from the partnership firm is not chargeable to tax.

After scrutinizing the arbitration award’s terms and claim statement, the court concluded that the petitioner was entitled to Rs.28 crores as per the award, relinquishing all claims against the partnership firm and partners. The court noted Section 45(4) of the Act, applicable in the concerned assessment year, taxed distribution of capital assets upon retirement of a partner but imposed the tax liability on the firm, not the retiring partner. Following a detailed analysis, a division bench of Justice K. R. Shriram and Justice Dr.Neela Gokhale held that the Rs.28 Crores received by the petitioner, as per the arbitration award, was not chargeable to tax.

Failure to Discharge Burden u/s 155 of CGST Act to Prove Eligibility on ITC Claim: Kerala HC Dismisses Writ Petition NAHASSHUKOOR vs ASSISTANT COMMISSIONER SECOND CIRCLE CITATION 2023 TAXSCAN (HC)1632

The Kerala High Court dismissed the writ petition on failure to discharge the burden under section 155 of the Central Goods and Services Tax Act (‘the CGST Act’) to prove eligibility for Input Tax Credit (ITC) claim.

A division bench of Dr Justice A K Jayasankaran Nambiar & Dr Justice KauserEdappagath observed that “One of the preconditions for the purchasing dealer to claim input tax credit under section 16 of the CGST Act is that he must produce the tax invoice issued by the supplying dealer. The appellants failed to produce the tax invoices despite sufficient opportunities extended. The appellants were issued a show cause notice under section 73(1) of the CGST/SGST Act. The appellants were called for a personal hearing. They did not appear for personal hearing either. As per section 155 of the CGST Act, the burden is on the dealer who claims the benefit of input tax credit to prove that he is eligible for such benefit.” Since the appellant failed to produce any evidence to prove that they are entitled to the benefit of input tax credit. The appellants rushed to the writ court without exhausting the alternative appellate remedy. In such a circumstance the court dismissed the Writ petition.

Setback to Platino Classic Motors: Kerala HC rules no bar u/s 14 of IBC for Finalisation of Assessment and Adjudication Proceedings PLATINO CLASSIC MOTORS INDIA PVT. LTD vs DEPUTY COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE CITATION 2023 TAXSCAN (HC) 1748

In a setback to Platino Classic Motors India Private Ltd, the Kerala High Court ruled that no bar under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) for Finalisation of Assessment and Adjudication Proceedings.

A Singe Bench comprising of Justice Dinesh Kumar Singh “From perusal of Section 14 of the IBC and several Judgments of the other High Courts as well as the Supreme Court, it is well settled that Section 14 of the IBC does not create a bar for finalisation of the assessment and adjudication proceedings in respect of the taxes. On the resolution once the reference has been admitted, there is moratorium for recovery of the tax dues but, there is no bar for finalisation of the assessment and adjudication proceedings.” “It is the petitioner who was issued notice. The representative of the petitioner remained present during the hearing. His reply was also filed in the show cause notice and thereafter the orders in has been passed. Thus, I find no substance in the writ petition and the same is hereby dismissed. The Official Liquidator should consider the five claims of the petitioner in accordance with the law” the Court noted.

Kerala HC Dismisses Writ Petition Challenging Revenue Recovery Notice for GST Dues Citing Failure to Avail Statutory Remedy of Appeal against Assessment Order M/S MUNDETH PLYBOARDS vs THE STATE TAX OFFICER CITATION 2023 TAXSCAN (HC) 1743

The High Court of Kerala has dismissed a writ petition challenging a revenue recovery notice for Goods and Services Tax (GST) dues amounting to Rs.1,39,35,225/- citing failure to avail statutory remedy of appeal against the assessment order.

The bench emphasised the importance of following the established statutory remedies and procedures, and the dismissal of the writ petition highlighted the necessity of following due process and exhausting all available statutory remedies before seeking judicial intervention. In result, the single bench of Justice Dinesh Kumar Singh dismissed the writ petition filed by the petitioners permitting them to approach the Commissioner under Section 80 of the GST Act, 2017 for payment of the dues in instalments.

Kerala HC Directs Deposit of 10% Penalty Amount for Penalty Order u/s 67(1) of KVAT Act to Stay Recovery Proceedings, Citing Amendment to Section 55 NIRAPARA ROLLER FLOUR MILLS [P] LTD vs THE STATE TAX OFFICER CITATION 2023 TAXSCAN (HC) 1746

The High Court of Kerala has directed the petitioner to deposit 10% of the penalty amount imposed under Section 67(1)(b) and (d) of the Kerala Value Added Tax (KVAT) Act, 2003 to stay the recovery proceedings initiated against them citing the amendment made to Section 55 of the KVAT Act.

The bench clarified that if the petitioner complies with this directive and deposits the balance amount, the recovery notice shall remain stayed until the disposal of the appeal pending before the second respondent, the Joint Commissioner of State Tax, Appeals. In result, the single bench of Justice Dinesh Kumar Singh disposed of the writ petition with the above directions to the petitioner assessee and the respondent revenue stating that the pending interlocutory application, if any, in the writ petition shall stand dismissed.

Time Limit For Making Payment Under SLVDRS Scheme is only Directory: Madras HC directs Dept to Issue Discharge Certificate on payment M/s.RR Housing (India) Pvt.Ltd. vs The Designated Committee CITATION 2023 TAXSCAN (HC) 1747

The Madras High Court has held that the time limit for making payment under Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SLVDRS) is only directory.

The Court viewed that the amount, that was paid by the petitioner on 02.03.2021 shall be considered as the amount paid under the SVLDRS Scheme and hence, the Department is bound to issue the Form SVLDRS- 4 about the discharge of liabilities. While allowing the writ petition, the respondents are directed to accept the payment of Rs.14,98,836/- made by the petitioner under SVLDRS-3 on 01.03.2021. The petitioner is directed to pay interest at 15% p.a. on 14,98,836/- from 01.07.2020 till the date of payment, within four weeks and on such payment being made by the petitioner, the respondents are to issue a discharge certificate to the petitioner.

PCIT has no Jurisdiction to Revise Assessment u/s 263 of the Income Tax Act When Assessment Order Attained Finality by Court Order: Madras HC R.Revathy vs The Assistant Commissioner of Income Tax CITATION 2023 TAXSCAN (HC) 1744

The Madras High Court has held that the Principal Commissioner of Income Tax (PCIT) has no jurisdiction to revise the assessment under section 263 of the Income Tax Act when the assessment order attained finality by court order.

A Singe bench of Justice C Saravanan observed that the High Court merely gave a fresh opportunity to the petitioner to explain the case afresh. The Assessing Officer has passed a consequential order by stating that the case does not attract a penalty since the additional income towards investment in jewellery was offered only to purchase peace with the Department. The Court dismissed the Writ Petition.

Live Consignment from China Seized by Customs Authority: Madras HC directs to Verify Documents Submitted M/s.Jineshwar Enterprise vs .The Commissioner of Customs (Gr.2) New Customs House CITATION 2023 TAXSCAN (CESTAT) 1481

The Madras High Court directed the customs authority to verify documents to release the Live Consignment from China which was seized.

A single bench of Justice Krishnan Ramasamy held that “since the issue pertains to disposal of the representation dated 08.09.2023 for release of the subject goods/live consignment imported from China vide Bill of Entry No.6548176 dated 23.06.2023 and as the petitioner had already appeared before the concerned authorities and had provided all the details and even according to the respondents, the respondents are in the process of investigation, it would be appropriate to direct the respondents to dispose of the representation dated 08.09.2023 made by the petitioner, on merits and in accordance with law, within a period of thirty days from the date of receipt of a copy of this order.”

1.2 Kg Gold Seized Illegally From Sri Lankan Citizen: Madras HC Directs Customs Authority to Decide Matter Mohamed Fazaldeen vs The Chief Commissioner of Customs CITATION 2023 TAXSCAN (HC) 1745

The Madras High Court directed the Customs authority to decide the matter as the department had illegally seized 1.2 Kg of gold from Sri Lankan Citizen.

The petitioner contended that the respondent had illegally seized 1.2 kg of gold from the petitioner without following any procedures provided under the provisions of the Customs Act. Further, he contended that even though a representation was made by the petitioner, the respondent had neither considered the said representation nor returned the 1.2 Kg of gold to the petitioner. Considering the submissions, the single bench of Justice Krishnan Ramasamy directed the first respondent to look into the matter seriously take appropriate action following the law and dispose of the petitioner’s representation within two weeks.

Delhi HC upholds Luxury Tax Levy on Gymkhana Club under Delhi Tax on Luxuries Act, 1996 DELHI GYMKHANA CLUB vs COMMISSIONER (LUXURY TAX), NEW DELHI & ORS CITATION 2023 TAXSCAN (HC) 1742

The Delhi High Court has upheld the luxury tax levy on Delhi Gymkhana Club under the Delhi Tax on Luxuries Act, 1996.

Thus, finding no grounds to interfere with the Assessing Authority’s conclusion, the Delhi High Court held that the club was indeed liable to pay luxury tax. However, the court made a crucial observation, stating that this decision should not serve as a precedent for assessment periods following the promulgation of the 2012 Amendment Act.

Delhi HC issues Corrigendum in Coal Scam Case Ruling MOLOY GHATAK vs DIRECTORATE OF ENFORCEMENT CITATION: 2023 TAXSCAN (HC) 1869

The Delhi High Court has issued a corrigendum for a typographical error in the coal scam case ruling. The court noted that the authorities, under Section 50 of PMLA, possess the power to summon any person deemed essential for providing evidence or producing records in the course of investigations or proceedings under PMLA. The ongoing investigation in the present ECIR(Enforcement Case Information Report) prompted the summons to the petitioner for appearing and submitting specific documents. Upon careful consideration of the petition and in alignment with legal precedents, the Court finds no grounds to annul the summons issued under Section 50 of PMLA to the petitioner.

Justice Swarana Kanta Sharma directed the respondent to notify the petitioner at least 24 hours in advance and secure the petitioner’s attendance at its office located in Kolkata in the original case.

Simultaneous Continuance of Arbitration Proceedings and Section 138 NI Act Proceeding can be initiated from Separate causes of Action NEWTON ENGINEERING AND CHEMICALS LIMITED AND ORS. vs UEM INDIA PVT LTD CITATION: 2023 TAXSCAN (HC) 1870

The Delhi High court recently ruled that simultaneous continuance of arbitration proceedings and section 138 of Negotiable Instrument Act 1881 proceedings could be initiated , even if the two arise from the separate causes of action.

The court observed that the arbitration proceedings as well as the proceedings under Section 138 of the NI Act arise from separate causes of action and the pendency of the arbitration proceedings would not affect the proceedings under Section 138 of the NI Act.

Justice Amit Bansal held that simultaneous continuance of arbitration proceedings and section 138 of Negotiable Instrument Act 1881 proceedings could be initiated , even if the two arise from the separate causes of action.

Relief to SBI, Disallowing Registration of Sale Certificate and Mutation Dehors Provision of SARFAESI Act State Bank of India. vs State of Himachal Pradesh & Ors CITATION: 2023 TAXSCAN (HC) 1871

The Himachal Pradesh High Court has held that disallowing registration of sale certificates and mutation dehors provision of the Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act (SARFAESI) Act, 2002.

A division bench comprising Justice Tarlok Singh Chauhan and Justice Satyen Vaidya noted that when assets such as land, buildings, plants, and machinery are mortgaged or hypothecated to a secured creditor, the Secured Creditor, in accordance with Section 2(zc) to (zf) of the SARFAESI Act, 2002, along with Section 13 of the SARFAESI ACT, 2002, holds the First Charge on the Secured Assets. Furthermore, Section 35 of the SARFAESI Act, 2002, stipulates that its provisions shall take precedence over all other laws. It is crucial to highlight that even the provisions in Section 11E of the Central Excise Act, 1944, are subservient to the SARFAESI Act, 2002. The Court granted approval to the current petition.

Adjustment of Entry Tax paid on Damaged Cement not Admissible under Bihar Entry Tax Act: Patna HC upholds order of Commercial Tax Tribunal M/s ACC Limited vs The State of Bihar CITATION: 2023 TAXSCAN (HC) 1872

The Patna High Court upheld the order of the commercial tax tribunal wherein it was held that adjustment of entry tax paid on damaged cement is not admissible under Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993.

The court acknowledged that the obligation to pay tax and the actual remittance of tax were deemed conceptually distinct. The finding in favor of the assessee emphasized that the exemption notification does not eliminate the liability established by the charging section but merely relieves the assessee of the obligation to pay the tax.

Chief Justice and Justice Rajiv Roy highlighted the query regarding an exemption that does not erase the tax liability. Additionally, they noted that the words “by sale of imported scheduled goods or sale of goods manufactured by consuming such imported scheduled goods” were introduced to the provision granting set-off through an amendment subsequent to the ACC case. The ruling explicitly stated that set-off is a concession that cannot be claimed as a matter of right unless the specific conditions for its grant are fulfilled. The matter was remanded only for consideration of the ground raised of no liability of entry tax since the OMCs to which the appellant had sold petroleum products had sold it outside Patna and thus the goods were not consumed, used or sold within the local limits of Patna. The court dismissed the appeal.

Explanation 7 of Section 9(1)(i) of Income Tax Act has retrospective effect: Delhi HC upholds Deletion of Addition towards LTCG THE COMMISSIONER OF INCOME TAX – INTERNATIONAL vs AUGUSTUS CAPITAL PTE. LTD CITATION: 2023 TAXSCAN(HC) 1873

The Delhi High Court has held that Explanation 7 of Section 9(1)(i) of the Income Tax Act, 1961has retrospective effect and upheld the deletion of addition towards Long Term Capital Gain (LTCG)

The court observed that the Finance Act, of 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1-4-1988, when the first proviso was introduced. Indeed, Parliament has explicitly stated that the Finance Act, of 2003, will operate with effect from 1-4-2004.

The division bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the object of Explanation 5 was not to extend the scope of Section 9(1)(i) of the Act to income, which had no territorial nexus with India, but to tax income that had a nexus with India, irrespective of whether the same was reflected in a sale of an asset situated outside India.

Object of section 31 of Motor Vehicles Act is only for Collection of Tax: Gujarat HC HIMATBHAI LAXMANBHAI OGNAJA vs STATE OF GUJARAT CITATION: 2023 TAXSCAN (HC) 1874

The Gujarat High Court observed that the object of section 31 of the Motor Vehicles Act, 1988 is only for collection of tax.

Justice Hasmukh D Suthar observed that the petitioner is not a registered owner of the vehicle and has failed to prove his ownership as regards he has purchased the vehicle and paid loan instalments also to respondent No.4 – Finance Company and except bare words, the petitioner is not having any evidence even to prove the said fact that he had made the payment towards the instalment of loan for the muddamal vehicle.

Further, the trial Court is directed to decide the question of ownership of the muddamal vehicle without being influenced by any of the observations made by the Revisional Court in Criminal Revision Application No.61/2023 while deciding the ownership and possession.

Filing of Application u/s 119 (2) (b) of Income Tax Act seeking Condonation of Delay to Rectify ITR: Kerala HC permits to Rectify ITR S. UMESH SHENOY vs THE PRINCIPAL COMMISSIONER OF INCOME TAX (HC) 1876

The Kerala High Court has granted permission to amend the income tax returns (ITR) as the application under Section 119 (2) (b) of the Income Tax Act, 1961, was filed to seek condonation of delay for rectifying the ITR.

The current writ petition challenges the order passed by the Principal Commissioner of Income Tax, which rejected the petitioner’s application to condone the delay in filing the return of income for the assessment years 2016-17.

Justice Dinesh Kumar Singh stated, “I am of the opinion that the application dated 31.05.2023 should not be treated in isolation, as it dates back to 26.02.2019 when the petitioner raised her grievance for the first time. Thus, I consider the application to be on time. Hence, the impugned order is set aside. The petitioner should be allowed to rectify the returns of income for the assessment year 2016-17. The petitione should approach the Assessing Authority within a period of ten days from today an rectify the errors/defects in the returns. After the petitioner rectifies the errors, his claim for refund should be processed in accordance with the law.”

Mere Possession and Recovery of Currency Notes without Proof of Demand not enough to Convict Accused: Himachal Pradesh HC Neeraj Kumar vs State of Himachal Pradesh CITATION: 2023 TAXSCAN (HC) 1875

The Himachal Pradesh High Court has held that mere possession and recovery of currency notes without proof of demand is not enough to convict the accused.

Charges were framed by the learned trial Court against the accused under Sections 7 and 13(2) of the PC Act, vide order dated 24.03.2015. The accused did not plead guilty to the charge framed against him and claimed trial.

The court observed that In the absence of any proof of demand for illegal gratification, the use of corrupt or illegal means or abuse of position as a public servant to obtain any valuable thing or pecuniary advantage cannot be held to be proved. It was settled law that in the absence of proof of demand, the presumption under Section 20 of the Prevention of the Corruption Act would not be attracted.

Justice Sushil Kukreja observed that “the prosecution has failed to prove its case against the accused beyond reasonable doubt. There has been a wrong appreciation of evidence on record by the trial Court, which has resulted in a miscarriage of justice.” While allowing the criminal appeal, the court set aside the impugned judgment of conviction and order of sentence passed by the Special Judge. Further the appellant-accused is acquitted of the charges framed against him. The fine amount collected, if any, shall be refunded to him. The bail bonds executed shall stand cancelled.

Kerala HC directs to Release Seized Gold Items from Employee on Furnishing Bonds and Securities BYJU.V.G vs COMMISSIONER OF CUSTOMS CITATION: 2023 TAXSCAN (HC) 1878

The Kerala High Court directed the release of seized gold items from employee on furnishing bonds and securities.

Justice Dinesh Kumar Singh observed that “In view of the above, the present writ petition is disposed of with a direction to the respondents to release the aforesaid gold items seized from the employee of the petitioner, to the petitioner on furnishing bonds and securities other than the Bank Guarantee. Such release shall be subject to any order(s) passed by the appellate authority, in case the Department has preferred an appeal or preferring an appeal against the Order.”

Kerala HC dismisses Writ Petition to approach Appellate Authority against Assessment Order under Income Tax Act MATHAI MOOLECHALIL VARKEY vs THE INCOME TAX OFFICER CITATION: 2023 TAXSCAN (HC) 1880

The Kerala High Court dismissed A writ petition to approach Appellate Authority against assessment order under the Income Tax Act, 1961.

The petitioner’s counsel expressed the intention to withdraw the writ petition to pursue recourse to the Appellate Authority as per the provisions of the Income Tax Act, 1961, challenging the assessment order dated 17.03.2023 issued under Section 147 read with Section 144B of the Income Tax Act for the Assessment Year 218-19.

Justice Dinesh Kumar Singh, presiding over the case, remarked, “Considering the aforesaid prayer, the writ petition is dismissed as withdrawn with the liberty of the petitioner to approach the Appellate Authority against the impugned assessment order dated 17.03.2023 within a period of fifteen days from today. If the petitioner is filing the appeal within a period of fifteen days from today, the Appellate Authority should proceed with the appeal on merits.”

Bombay HC directs GST Dept to Refund Tax Deposited by HSBC Bank under Protest The Hongkong and Shanghai Banking Corporation vs The Union of India, through the Secretary (HC) 1881

The petitioner, Hongkong and Shanghai Banking Corporation (HSBC), challenges the retention of Rs.56,19,84,075 by the respondents (GST department). HSBC asserts that the amount was deposited under protest to preclude potential service tax and interest on “interchange income.” There was no show cause notice for ‘interchange income’ from October 2007 to June 2012. The petitioner argues that the retention of funds is unauthorized and violates Article 265 of the Constitution. The Bombay High Court directs the GST department to refund the amount deposited by HSBC under protest.

A Division Bench of Justices Jitendra Jain and GS Kulkarni observed that “It is well settled that once such amounts were deposited by the petitioner and were retained by the department without the authority in law, the claim of the petitioner for refund could not have been denied. In such circumstances, it was appropriate for the petitioner to invoke the jurisdiction of this Court under Article 226 of the Constitution praying for writ for directing refund of money illegally retained / withheld.”

Relief to Godaddy: Delhi HC rules fee received for registration of domain names of third parties not royalty GODADDY.COM LLC vs ASSISTANT COMMISSIONER OF INCOME TAX 2023 TAXSCAN (HC) 1949

The Delhi High Court held that the fees collected for the registration of domain names for third parties do not qualify as royalty. The petitioner’s(Godaddy.Com LLC,) counsel argued that the appellant/assessee does not transfer any right to use the domain name to the customer, i.e., the registrant. According to the argument, it is the registrant who possesses ownership of the domain name, and any potential transfer of the domain name would be initiated by the customer/the registrant.

Furthermore, it was asserted that the appellant/assessee functions solely as an intermediary, providing registration services in this capacity. Therefore, the appellant/assessee lacks any rights in the property or trademark associated with the domain name. The consideration received by the appellant/assessee in the form of fees is not compensation for the use or right to use the domain name, nor does it involve the transfer of any rights related to the domain name.

A Division Bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia noted, “The Supreme Court, in Satyam Infoway, held that it is the registrant (and not the Registrar) who owns the domain name and can protect its goodwill by initiating a passing-off action against a subsequent registrant of the same domain name or a deceptively similar domain name.”

Cases where Payment made during search is not Voluntary, Taxpayer is required to be Refunded : Delhi HC SANTOSH KUMAR GUPTA PROP. MAHAN POLYMERS vs COMMISSIONER, DELHI GOODS AND SERVICES TAX ACT & ORS 2023 TAXSCAN (HC) 1915

In a recent ruling, the Delhi High Court emphasized that in cases where the payment made during a search is not voluntary, the taxpayer is entitled to a refund. The petitioner claimed that a sum of 22,14,226/- was deposited by reversing the Input Tax Credit (ITC) available in the Electronic Credit Ledger (ECL) under duress. The statement recorded on 18.10.2022, indicating the reversal of ITC, was also alleged to be made under coercion.

The Division Bench, comprising Justices Vibhu Bakhru and Amit Mahajan, noted that if the tax is not paid on a self-ascertainment basis, the taxpayer cannot avail the benefit of Section 73(6) of the DGST Act or Section 74(6) of the DGST Act. In the present case, where the petitioner contested the voluntariness of the ITC reversal, the court affirmed that if the payment made during the search is not voluntary, the taxpayer should be refunded the deposit. However, it clarified that GST authorities retain the right to proceed against the taxpayer in accordance with the law.

Destruction of confiscated goods by Explosives Department: Kerala HC directs Customs Dept to process refund SHAJI K.A vs COMMISSIONER OF CUSTOMS 2023 TAXSCAN (HC) 1914

A Single Bench of the Kerala High Court, presided over by Justice Dinesh Kumar Singh, recently instructed the Customs Department to proceed with the refund process following the destruction of confiscated goods by the Explosives Department. Another plea in the writ petition sought an order or directive to instruct the respondents to dispose of the confiscated goods and reimburse the remaining excess duty and deposit paid by the petitioner, deducting the actual cost of destruction of the confiscated goods within a timeframe set by the Court. The Standing Counsel for the Customs Department stated that, according to his instructions, the confiscated goods have been demolished by the State Government’s Explosives Department. He further emphasized that the cost of destroying those confiscated goods would be evaluated and subtracted from the petitioner’s refund claim.

Extraordinary Jurisdiction under Article 226 cannot be Invoked When Assessee Failed to File Statutory Appeal under GST Act: Patna HC M/s Punit Kumar Choubey vs The Commissioner 2023 TAXSCAN (HC) 1916

The Patna High Court has held that extraordinary jurisdiction under Article 226 of the Constitution of India cannot be invoked when the assessee fails to file a statutory appeal before the Central Goods and Service Tax Act(CGST).

The GSTR-2A provided by the petitioner-assessee’s supplier indicated a credit of only Rs. 93,825.77/-. Initially, an electronic notice was posted on the portal, dated 17.08.2021, receiving no response. Subsequent reminders on 06.09.2021 and 16.09.2021 also went unanswered. Ultimately, a show-cause notice, along with a summary in Form GST DRC-01 dated 08.11.2021, was issued to the petitioner, setting 07.12.2021 as the last hearing date. The petitioner did not appear, and the order was issued on 10.12.2021 under Section 73(9) of the BGST Act.

The order summary was electronically served on the petitioner on 10.12.2021 by uploading it to the common portal. The petitioner filed an appeal with a substantial delay of one month and nine days, as the assessment order was dated 10.12.2021, and the appeal was submitted on 10.07.2022. The High Court can decline to exercise discretion if there is a suitable and effective alternative remedy. The High Court can use its power only if it determines a breach of principles of natural justice or a lack of due procedure required for the decision.

The petitioner’s failure to avail the appellate remedy precludes the invocation of extraordinary jurisdiction under Article 226 of the Constitution of India. The Court determined that there is no jurisdictional error, violation of principles of natural justice, or abuse of the court process alleged or argued by the petitioner in the aforementioned writ petition. The writ petition was dismissed.

Delhi HC upholds Deletion of Income Tax Addition made on investment in Wrist Watches PR. COMMISSIONER OF INCOME TAX vs NIRMAL KUMAR MIND 2023 TAXSCAN (HC) 1919

The Delhi High Court upheld the order ofthe Income Tax Appellate Tribunal [“Tribunal”] which deleted the Income Tax Addition made on investment in Wrist Watches.

The appellant/revenue challenges the decision dated 03.05.2023 rendered by the Income Tax Appellate Tribunal [“Tribunal”]. A search and seizure operation, as per Section 132 of the Income Tax Act, 1961 [“Act”], was conducted at the business and residential premises of the Minda Group.

The Tribunal acknowledged that the entire family resided in a single residential premise, constituting a unified family unit. It further noted that the family had disclosed all jewelry as a single unit in its wealth tax return, which exceeded the jewelry discovered during the search operation. The Tribunal emphasized that the respondent/assessee provided the Assessing Officer (AO) with a detailed item-wise reconciliation of the articles listed in the wealth tax return, accompanied by the valuation report from the search. The Tribunal found no flaws in the reconciliation statement submitted by the respondent/assessee, as noted by the AO.

Regarding the valuation of artwork, the Tribunal concluded that differences among experts are conceivable. Additionally, considering that the valuers appointed by the appellant/revenue did not raise any concerns about the report submitted by the expert appointed by the respondent/assessee, the Tribunal deemed the additional assessment related to paintings unwarranted.

The division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia, Tribunal dismissed the additions made for investments in wristwatches.

Procuring Entity and First Appellate Authority cannot be the Same in Municipal Corporation Tenders: Rajasthan HC Sets Aside Tender on Apprehension of Bias Yashi Consulting Services Pvt. Ltd vs State of Rajasthan 2023 TAXSCAN (HC) 1921

The Rajasthan High Court has held that the procuring entity and first appellate authority cannot be the same in municipal corporation tenders and set aside the tender on apprehension of bias.

The petitioner filed the initial appeal pursuant to Section 38 of the Rajasthan Transparency in Public Procurement Act, 2012 (‘the Act of 2012’). The counsel contended that the procuring entity was the Deputy Commissioner (Development), Ajmer Municipal Corporation, Ajmer (‘the Deputy Commissioner’), and according to Annexure-C, attached with the tender document, the Deputy Commissioner was designated as the First Appellate Authority.

The petitioner contended that an error was committed by the respondents in appointing the Deputy Commissioner as the First Appellate Authority and the Commissioner, Ajmer Municipal Corporation, Ajmer as the Second Appellate Authority. Conversely, the respondents’ counsel opposed the petitioner’s arguments, asserting that, without utilizing the alternative statutory remedy of filing a second appeal under Section 38(4) of the Act of 2012, the petitioner has approached this Court through the filing of this writ petition under Article 226 of the Constitution of India.

It was noted that “Since the respondents have rectified their mistake by sending a letter to the petitioner stating that the First Appellate Authority is the Director, Department of Local Bodies, the petitioner is instructed to file a statutory appeal under Section 38 of the Act of 2012 before the Director, Department of Local Bodies, along with an application under Section 39 of the Act of 2012. If such an appeal is submitted before the Director, Department of Local Bodies within ten days from today, the First Appellate Authority, i.e., the Director, Department of Local Bodies, is expected to hear and decide the appeal after affording a due opportunity of hearing to all the respective parties, including respondent No.4, strictly adhering to the law and expeditiously, preferably within 15 days following the filing of the appeal.”

Direction to deposit 20 % of Income Tax Demanded as Condition to Treat assessee as Person not in Default: Kerala HC upholds Order Directing to file Stay Application T.S. AJI vs INCOME TAX OFFICER CITATION: 2023 TAXSCAN (HC) 1918

The Kerala High Court upheld the order granting one week time to file a stay application against an income tax order where the assessee was directed to remit 20% of the demand as a condition for Treating him as a person, not in default.

T. S. Aji, the appellant, is dissatisfied with the uniform orders issued by the respondent, requiring a 20% remittance of the demand as a condition to be regarded as a person not in default. The appellant’s father was a taxpayer under the Income Tax Act of 1961 (the IT Act). Unhappy with the assessment order, the appellant’s father filed statutory appeals before the Commissioner of Income Tax (Appeals). Additionally, the appellant’s father submitted an application under section 220(6) of the IT Act before the first respondent.

It was determined that the appeals filed by the appellant’s father against the assessment orders are currently pending before the Appellate Authority/Commissioner of Income Tax (Appeals). The appellant has the option to submit stay applications before the Appellate Authority. However, there is no indication that the appellant has filed any such stay applications. The learned Single Judge granted the appellant one week to file the stay applications. A division bench, consisting of Dr. Justice A. K. Jayasankaran Nambiar and Dr. Justice Kauser Edappagath, dismissed the petition.

Hearing through Video Conferencing; Failure to file Affidavit for Delay in Filing Income Tax Appeal: Kerala HC allows to File Condonation Application Afresh CITATION 2023 TAXSCAN (HC) 1917

The Kerala High Court was allowed to file condonation of application afresh as the Income Tax Appeal was dismissed in the absence of cogent reason and the assessee failed to file an affidavit on time due to facing difficulty in Hearing through video conferencing.

The Income Tax Appellate Tribunal (the Tribunal) dismissed the appeal filed by the appellant assessee, Save A Family Plan (India), solely due to the inadequacy of reasons presented in the affidavit accompanying the delay condonation application, aiming to excuse the delay in filing the appeal before the Tribunal.

The Tribunal expressed the need for a more comprehensive affidavit to support the delay condonation application and directed the appellant to submit a more satisfactory affidavit. Despite the granted time, the appellant allegedly did not file the requested affidavit, leading to the dismissal of the delay condonation application. Senior counsel Sri.V.Abraham Markose, representing the appellant, asserted that the revised affidavit, as requested by the Tribunal, was prepared and ready for submission on the scheduled date of the appeal.

A division bench comprising Justice A K Jayasankaran Nambiar and Justice Kauser Edappagath instructed the appellant to submit an additional affidavit explaining the reasons for the delay in filing the appeal within two weeks. Upon receiving the said affidavit, the Tribunal is directed to review the application for condonation of delay within an additional three weeks, following a hearing with the appellant.The impugned order dated 03.07.2023 of the Tribunal was set aside.

High Court cannot exercise jurisdiction on Non-Consideration of one or more Grounds by ITAT: Kerala HC VALLAPUZHA SERVICE CO-OPERATIVE BANK LTD vs THE INCOME TAX OFFICER CITATION: 2023 TAXSCAN (HC) 1922

The Kerala High Court has held that the High Court cannot exercise jurisdiction on the Non-Consideration of one or more grounds by the Income Tax Appellate Tribunal(ITAT).

The petitioner, Vallapuzha Service Co-Operative Bank Ltd, contested the decisions made by the second respondent under Section 250 of the Income Tax Act, 1961, pertaining to the assessment years 2014-15 and 2015-16.

A single bench, presided over by Justice Dinesh Kumar Singh, noted that the order passed by the first appellate authority does not become legally flawed if certain grounds raised by the assessee were not considered. The petitioner retains the option to appeal against the orders, presenting all grounds raised before the first appellate authority, including additional ones. The court further emphasized that it cannot invoke its judicial review jurisdiction under Article 226 of the Constitution of India solely on the basis of certain grounds not being considered by the first appellate authority.

Pending Income Tax Appeal before ITAT on Income Tax Recovery: Kerala HC directs to file Stay Application PULIYAMMAKKAL MATHAI SEBASTIAN vs INCOME TAX OFFICER 2023 TAXSCAN (HC) 1920

The Kerala High Court directed the petitioner to file a stay application as the Income-tax appeal is Pending before the Income Tax Appellate Tribunal (ITAT) on Income Tax Recovery.

Puliyammakkal Mathai Sebastian and Punathil Nishriya, the appellants, are dissatisfied with the identical orders issued by the respondent, which requires them to remit 20% of the demand as a prerequisite for being considered as individuals not in default. The appellants fall under the purview of the Income Tax Act, 1961 (the IT Act). Following the assessment order, the appellants lodged statutory appeals with the Commissioner of Income Tax (Appeals) and also submitted an application under Section 220(6) of the IT Act to the 1st respondent.

In response, the respondent mandated the appellants to remit 20% of the demand for the status of non-defaulters. Dissatisfied with this condition, the appellants filed writ petitions to challenge it. After a thorough hearing of both parties, the Single Judge dismissed the writ petitions.

In rejecting the plea, the division bench of Dr. Justice A K Jayasankaran Nambiar & Dr. Justice Kauser Edappagath stated that “provided the appellants submit stay applications before the Commissioner of Income Tax (Appeals) within one week from today, he is obligated to review and resolve either the stay applications or the appeals themselves within three weeks after receiving the stay applications and hearing both parties involved.

No Violation of Principle of Natural Justice on Income Tax addition made u/s 68 of Income Tax Act: Kerala HC directs to File Statutory Appeal HEARTWARES MEDICALS INDIA PRIVATE LIMITED vs ASSESSMENT UNIT 2023 TAXSCAN (HC) 1924

The Kerala High Court was directed to file a statutory appeal against the Income Tax Addition under section 68 of the Income Tax Act, 1961 was made in violation of the principle of Natural Justice.

The appellant, instead of utilizing the available statutory remedy of appeal against the assessment order, promptly approached the court with a writ petition, even though the appellant had been duly notified and the assessment proceedings were subsequently finalized.

In the context of exercising judicial review powers under Article 226 of the Constitution of India, the court is precluded from delving into the substantive merits of the assessment order.

A division bench of Dr. Justice A K Jayasankaran Nambiar & Dr. Justice Kauser Edappagath held that no jurisdictional lapse or violation of principles of natural justicewas identified in the impugned assessment order.

The court also held that if such an appeal and stay application are submitted, the Appellate Authority is directed to assess and resolve either the appeal or the stay application within one month from the date of receipt, affording an opportunity for both parties to present their cases.

Direction to Deposit 10% of Demanded VAT to Stay Recovery Notice under KVAT is Reasonable: Kerala HC Dismisses Petition of Nirapara Roller Flour Mills NIRAPARA ROLLER FLOUR MILLS (P) LTD vs THE STATE TAX OFFICER 2023 TAXSCAN (HC) 1925

In a recent judgment, the Kerala High Court dismissed the petition of Nirapara Roller Flour Mills as the direction to deposit 10% of the demanded VAT to stay recovery notice under the Kerala Value Added Tax Act(KVAT), 2003 is found to be reasonable.

The appellant simultaneously submitted a stay petition. Meanwhile, the respondent issued a notice to initiate revenue recovery procedures for collecting the demanded amount through attachment. The appellant challenged the notice in front of the Single Judge.

A division bench, consisting of Dr. Justice A K Jayasankaran Nambiar & Dr. Justice Kauser Edappagath, affirmed the reasonableness of the Single Judge’s instruction to remit 10% of the penalty amount as a precondition for a stay, particularly since the appellant did not establish grounds for an unconditional stay. The Court dismissed the appeal while extending the one-month duration granted by the Single Judge for remitting 10% of the penalty amount.

Disallowance u/s 14 A of Income Tax Act Cannot Exceed Exempt Income: Delhi HC THE PR. COMMISSIONER OF INCOME TAX vs DEVATA TRADELINK LTD CITATION:   2023 TAXSCAN (HC) 1926

The Delhi High Court has held that disallowance under section 14 A of the Income Tax Act cannot exceed exempt income.

A two member bench of the Delhi High court held that that disallowance under section 14 A of the Income Tax Act cannot exceed exempt income.

The bench observed that upon careful examination of the straightforward language used, it becomes evident that the correlation must be assessed between the exempt income and the associated expenditure, not the other way around. The crucial factor is determining the expenditure related to the exempt income, not vice versa. The three clauses of Rule 8D reveal that the section’s requirement is to calculate the amount of expenditure not allowed under Section 14A, which is attributable to the exempt income, rather than evaluating individual expenses to ascertain if any of them led to exempt income and subsequently treating such an amount as disallowable under Section 14A.

The bench comprising of Justice Rajiv Shakder and Justice Girish Kathpalia held that once the appellant/revenue acknowledges the transaction as one involving the sale of shares held as stock-in-trade, neither the CIT(A) nor the AO should have additionally considered the interest paid on the loan obtained by the respondent/assessee. The shares purchased with borrowed funds were sold, and the resulting profit was offered for taxation, an acceptance by the appellant/revenue. The question, as presented, focuses on the disallowance of Rs. 5,06,73,874/- under Section 14A of the Act, read with Rule 8D of the Rules.

Revision Order on LTCG Exemption Passed Against Buyer of Non-Existing Seller: Delhi HC Quashes Revision Order COMMISSIONER OF INCOME TAX vs CAIRNHILL CIPEF LTD 2023 TAXSCAN (HC) 1927

The Delhi High Court quashed the revision order and held that a revisionary order under Section 263 of the Income Tax Act, 1961 could not be passed against a non-existing seller entity. The Long Term Capital Gain (LTCG) exemption passed against the buyer of non existing seller.

A share purchase agreement was executed among three entities, namely Cairnhill CIPEF Ltd., Cairnhill CGPE Ltd., and Monet Ltd., regarding the shares of the Indian public limited company, Mankind Pharmaceutical Ltd. [“Mankind Ltd.”], for the sale of shares to Cairnhill CIPEF Ltd. and Cairnhill CGPE Ltd. An assessment order was issued regarding Monet Ltd., the entity that sold the shares to Cairnhill CIPEF Ltd. and Cairnhill CGPE Ltd. The records indicate that Monet Ltd. was, at that time, a wholly-owned subsidiary of another company incorporated in Mauritius, namely Chryscapital IV LLC.

The Assessing Officer (AO) scrutinized the sale of shares, and the utilization of the carried forward loss is evident from the assessment order. The appellant/revenue contends that the Commissioner of Income Tax (CIT) issued an order dated 27.03.2021 under Section 163 of the Act related to the respondent/assessee.

A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia remarked that the assertion that the revisory power under Section 263 of the Act is directed at the assessment order is untenable since the assessment order is framed with respect to “an assessee.”

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