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Home e-Newsletters Index Year 2024 April Day 25 - Thursday

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TMI Tax Updates - e-Newsletter
April 25, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws



Highlights / Catch Notes

    GST

  • Detention of the goods and vehicle - stock transfer - Penalty - The petitioner argued that the detained goods were part of a stock transfer and not subject to tax. However, the appellate authority failed to consider this crucial aspect, leading to a flawed decision. Consequently, the High Court set aside the appellate authority's order and remitted the matter for fresh consideration, emphasizing the need for a thorough examination of the petitioner's objections.

  • Penalty for Non-filing of monthly return - Seeking permission to file GSTR 3B Return - Seeking refund of amount illegally debited from the Electronic Cash Ledger towards interest and penalty - It was established that the petitioner initiated the tax payment within the prescribed timeline, absolving them of any responsibility for delays. The High court ruled that the petitioner's timely action discharged their obligation, and any issues arising post-payment were beyond their control. Consequently, the court directed the adjustment of the penalty and interest against future tax liabilities, without incurring any additional liability. This judgment underscores the importance of timely compliance and the need for efficient payment processing mechanisms.

  • Validity of Orders passed u/s 73 - excess claim of Input Tax Credit [ITC] - Inadequate Consideration of Replies - The Court noted that the Proper Officer appeared to have not applied their mind to the petitioner's submissions, as evidenced by the superficial reasons provided for rejecting the replies. The lack of detailed examination indicated a procedural flaw in the adjudication process. Considering the deficiencies in the impugned orders, the High Court deemed it appropriate to set aside the orders and remit the matter to the Proper Officer for re-adjudication.

  • Recovery of demand of service tax - CIRP Proceedings under IBC - The effect of the approved resolution plan on the liabilities of the appellant - The High court noted that the proceedings under the Insolvency and Bankruptcy Code had commenced before the issuance of the show cause notice. The appellant argued that all claims were frozen upon approval of the resolution plan, citing relevant Supreme Court precedent. - The court concluded that the points of law raised needed consideration. Thus, it decided that the appellant need not pursue alternate appellate remedies, especially when the jurisdiction of the second respondent was questioned. The writ petition admitted for hearing.

  • Seeking rectification in Form GSTR-1 - limitation period - Works contract services - Input Tax Credit (“ITC”) - non-uploading of the invoices in GSTR-1 as B2B invoice - The High Court held that despite the payment of taxes by the petitioner, the procedural requirements were not met, particularly the timely correction of errors in GSTR-1 filings. The decision underscored the principle that while the tax system allows for rectification of mistakes, such allowances are bound by strict timelines to prevent abuse and ensure tax compliance.

  • Income Tax

  • TP Adjustment - selection of MAM [Most Appropriate Method] - The High Court upheld the Tribunal's decision, affirming TNMM as the appropriate method for benchmarking transactions. It criticized the TPO's one-to-one comparison and affirmed Assessee's use of TNMM. The High Court found fault with the TPO's reliance on the Bloomberg database without adequate clarification or consideration of Assessee's objections. It supported Assessee's contention regarding the reliability of Indian Customs data.

  • Deemed income u/s 56(2)(x) - Defective Show cause notice - Addition of Unexplained investment u/s 69 - charged to tax u/s 115BBE - The High Court found that the show cause notice issued to the petitioner was defective as it did not specify whether the stamp duty value was proposed to be treated under Section 56(2)(x)(a) or Section 56(2)(x)(b) of the Act. This lack of specificity deprived the petitioner of a reasonable opportunity to respond effectively. Additionally, the assessment order failed to mention Section 56(2)(x) of the Act in its operative part, indicating a deviation from the grounds stated in the show cause notice. The court emphasized that the issuance of a show cause notice is not an empty formality and serves the purpose of providing a fair opportunity to the affected party.

  • Obligation to pass a draft assessment order u/s 144C (1) - Petitioner asserts that even in partial remand proceedings from the Tribunal, the Assessing Officer (A.O.) is obliged to pass a draft assessment order u/s 144C - The High Court, referring to relevant precedents, holds that the A.O. is indeed obligated to pass a draft assessment order in all cases involving proposed variations in the returned income. It emphasizes that failure to comply with this procedure constitutes a jurisdictional error, rendering the impugned order void ab initio. Consequently, the High Court concludes that the impugned order lacks jurisdiction and must be quashed.

  • Rejection of application u/s 119(2)(b) for condoning the delay in filing the Form 10B - delay was about 1257 days - Exemption u/s 10(23C) - assessment of trust - The High Court noted that the petitioner had a history of timely compliance with filing returns and Form 10B for other assessment years. Considering this, the Court inferred that the failure to file for the relevant assessment year was likely due to human error. The Court referred to a similar case where delay due to oversight by the auditor was accepted as reasonable cause. Ultimately, the Court allowed the writ petition, quashing the order of the revenue authority and condoning the delay in filing Form 10B.

  • Validity of Reopening of assessment u/s 147 - reason to believe - Reply of the assessee through reproduced but the contents thereof are not even referred or analyzed prima facie - The High Court observed that the Assessing Officer had not adequately considered the evidence presented by the petitioner in response to the notice. According to Section 148A(d) of the Income Tax Act, the Assessing Officer is required to decide the validity of issuing a notice based on the material available, including the assessee's reply. However, in this case, the Assessing Officer's decision seemed to ignore the petitioner's evidence.

  • Reassessment proceedings against company insolvent/dissolved - The court held that any tax notices for hearing appeals related to reassessment orders issued after the approval of the resolution plan should be considered void. This is because such proceedings would lapse and could not be sustained under the IBC framework. The court reaffirmed the principle that the approval of a resolution plan under the IBC results in the extinguishment of all claims not included in the plan.

  • Assessment of trust - Rate of Tax - Maximum Marginal Rate (MMR) - The ld. AR of the assessee argued that the trust should be taxed based on the specific provision of section 164(2) of the Act, rather than section 164(1) as applied by the AO. The Tribunal agreed with the ld. AR's interpretation, citing similar precedents and provisions of the Income Tax Act. It directed the Assessing Officer to charge the assessee as per the provisions of Section 164(2) of the Act.

  • Disallowance of bonus paid to directors u/s 36(1)(ii) - assessee paid a bonus in addition to the remuneration to two of its directors - The revenue contended that bonus payment was a tax avoidance scheme. The tribunal analyzed the law and precedent, ruling in favor of the appellant, citing legitimate compensation grounds. The conversion of limited scrutiny and penalty initiation were considered premature and thus not upheld.

  • Addition of the suppressed gross receipts as were disclosed by the assessee company during the survey proceedings u/s. 133A - The AO initially added the entire unrecorded amount as income, but the Tribunal agreed with the Commissioner's approach that only the profit element should be taxed. This decision was based on the principle that the total sales could not be regarded as profit and was supported by various judicial precedents.

  • Validity of Assessment order as time barred - delay dispatching assessment order - The Tribunal, after considering the submissions and relevant precedents, concluded that the assessment order was indeed time-barred due to being dispatched after the prescribed time limit. As a result, the Tribunal set aside the assessment order. Consequently, the Tribunal did not delve into the other issues raised by the assessee.

  • Addition in assessment u/s 153C - Addition u/s 69 - addition on basis of loose papers on which name of the appellant was mentioned along with some other parties - The Assessee contested the addition, arguing that the documents lacked authenticity and were not maintained in the ordinary course of business. The Appellate Tribunal, after thorough review, upheld the Assessee's contention and dismissed the addition, citing lack of corroborative evidence and failure to conduct necessary enquiries. Thus, the Tribunal ruled in favor of the Assessee, allowing the appeal.

  • Nature of receipts - interest earned on FDs during the year was prior to commencement of business - The Appellate Tribunal referred to a previous decision involving the assessee for assessment years 2013-14 and 2014-15, wherein the ITAT Ahmedabad Bench ruled in favor of treating interest income earned on FDs before the commencement of business as capital receipts. Based on this precedent, the Tribunal upheld the decision to treat the interest income as capital receipts. It dismissed the Department's objection regarding the nexus between borrowed funds and investments, deeming it irrelevant in light of previous assessments.

  • Additions of income earned - Taxable Person - Land transactions facilitated by a financier but executed in another's name - Taxable in the hands of company or Individual - Protective Assessment in the Hands of Individual - Burden of proof - The tribunal determined that the economic substance of the transactions indicated that Individual acted as a mere financier or conduit rather than as a principal participant. It concluded that the income should not be assessed in the hands of Such Individual as he did not exercise control over the land or the transactions beyond merely being the named party in the documentation. - This case highlights the complexities involved in transactions where the nominal parties do not reflect the true nature of the economic interests at stake.

  • Addition u/s 69 r.w.s. 115BBE - Higher rate of tax treating the surrendered income as unexplained investment / income - Amount surrendered during a survey due to stock discrepancies and an excess cash amount. - The Tribunal concluded that since the income from the surrendered stock was from regular business operations, it should not be taxed under the harsher provisions of Section 115BBE. They pointed out that the Assessee's books were audited and no discrepancies other than those already declared were found. Thus, the addition made by the AO under Section 115BBE was overturned.

  • Rectification u/s 154 - The Assessee argued that the assessments u/s 143(1) and 143(3) merged, precluding further additions u/s 154, while the Revenue contended that they were distinct assessments. The Tribunal found that there was no merger between the assessments and upheld the validity of the rectification u/s 154. It concluded that the additions made under Section 143(1) were not revisited during the assessment u/s 143(3), necessitating rectification to correct the apparent error. The Tribunal differentiated the present case from previous precedents and dismissed the Assessee's appeal.

  • Customs

  • Detention Order under COFEPOSA - legal heirs of detenu - Smuggling - diesel oil of foreign origin - The High Court addressed the challenge against a detention order issued under COFEPOSA, wherein the petitioner sought to quash the order on various grounds. These grounds included the detenu's alleged lack of English proficiency, delay in execution, non-application of mind by the detaining authority, and inadequate provision of requested documents. The court examined each contention and found them to be unsubstantiated. It concluded that the detenu's endorsement in English, previous affidavit in English, and his evasion of arrest contributed to the delay in execution.

  • Levy of penalty - mis-declaration of goods - unflavoured boiled supari - reduction of the penalty under section 112 by the Commissioner (Appeals) - according to Revenue reduction was very high and unwarranted. - The Tribunal analyzed the CRCL report, emphasizing the discretionary nature of penalty imposition and the responsibility of the adjudicating authority to exercise it judiciously. Finding no substantial evidence to support the allegations and considering the respondent's reasonable classification, the Tribunal upheld the penalty reduction, affirming the decision of the Commissioner (Appeals).

  • Suspension of license of public bonded warehouse - bonded goods were stored in non-bonded tanks - appellants pleaded that the disputed goods cannot be confiscated, when subsequent permission for bonding of tanks was given by the department - The Tribunal noted that the licensee had obtained necessary permissions for the activities questioned by the adjudicating authority. These activities were carried out under the supervision of customs officials, thereby aligning with the legal requirements stipulated under the Customs Act, 1962. The Tribunal found that the imposition of penalties and redemption fines were not justified as the licensee had complied with all relevant regulations and permissions were duly granted.

  • Classification of imported goods - Navigation System - Multifunctional Devices or not -The Tribunal upheld the Order-in-Appeal No.84/2018, confirming the classification of the imported multifunctional device under Chapter Heading 8527. It rejected the appeal based on detailed evidence from the product’s catalogue and technical literature, which indicated that the device serves multiple functions typical of an infotainment system in motor vehicles. The decision also addressed the issues of misdeclaration and suppression, penalizing the appellant for not accurately declaring the product's multifunctional nature at the time of import.

  • Indian Laws

  • Legal implication of a promotional trailer - absence of specific content from the trailer in the movie - promotional trailer is an offer or a promise - unfair trade practice - The Supreme Court clarified that a promotional trailer is unilateral and does not constitute an offer or contract. It serves to encourage viewers to purchase tickets for the movie but does not create any binding agreement regarding the content of the film. The Court held that there was no deficiency of service as the transaction of purchasing a movie ticket was independent of the promotional trailer. The absence of specific content from the trailer in the movie did not amount to a breach of contract or deficiency in the service provided.

  • Dishonour of Cheque - territorial jurisdiction - Foreign instrument - Cheque not made payable in India; and, was not drawn on a bank in India - The court noted that the cheque, though foreign, was presented for payment in Delhi, thereby invoking the jurisdiction of Indian courts per the amended Section 142 of the NI Act. The amendments allow for the court within whose local jurisdiction the cheque is presented for collection to have authority over the matter. The court concluded that Section 138 of the NI Act, despite the cheque being a foreign instrument, applied due to its presentation in Delhi. The NI Act’s provisions cater specifically to where the cheque was presented and dishonored, making the place of its origin irrelevant in this context.

  • IBC

  • Offences triable by Special Court - offences other than the Companies Act i.e. under the IBC Act - The Supreme Court held that the IBC is a complete code in itself and incorporates the provisions of the Companies Act concerning Special Courts by reference to the state of the law at the time of the IBC's enactment. The Court clarified that such incorporation means subsequent amendments to the Companies Act do not alter the jurisdictional framework established by the IBC for trying its offenses. This was deemed "legislation by incorporation" rather than "legislation by reference." The Court overturned the High Court's decision, reinstating the jurisdiction of the Special Courts under the Companies Act to try IBC offenses and remanding the case for consideration on its merits.

  • Service Tax

  • Judicial Discipline - Seeking refund of accumulated Cenvat credit - input services or not - The department had not accepted the judgement in the case of Paul Merchants and filed a Civil Appeal before the Supreme Court - The Tribunal emphasized the importance of judicial discipline, citing the Supreme Court's ruling in Union of India versus Kamlakshi Finance Corporation Ltd. The Commissioner (Appeals) was criticized for failing to adhere to judicial discipline by disregarding the Tribunal's previous decisions. It was emphasized that the Commissioner was obligated to follow the Tribunal's orders unless they were stayed or set aside by a higher court.

  • Works Contract Service - availment of Composition Scheme - The Tribunal set aside this demand, recognizing the appellant’s exercise of the composition scheme as valid, even if not explicitly communicated in writing, following the precedent of Mehta Plast Corporation v Commissioner of Central Excise, Jaipur. The payment under the scheme itself was considered an implicit exercise of the option.

  • Central Excise

  • Refund of accumulated credit - Eligibility to CENVAT credit to a manufacturer of goods having ‘nil’ tariff rate of duty - The Tribunal found that the provisions under Rule 6 of the CENVAT Credit Rules, 2004, specifically exempt goods cleared for export from restrictions on CENVAT credit usage. Therefore, the Tribunal held that the Commissioner (Appeals)'s denial of CENVAT credit was incorrect and not legally sustainable.


Articles


Notifications


Circulars / Instructions / Orders


News


Case Laws:

  • GST

  • 2024 (4) TMI 950
  • 2024 (4) TMI 949
  • 2024 (4) TMI 948
  • 2024 (4) TMI 947
  • 2024 (4) TMI 946
  • 2024 (4) TMI 945
  • 2024 (4) TMI 944
  • 2024 (4) TMI 943
  • Income Tax

  • 2024 (4) TMI 942
  • 2024 (4) TMI 941
  • 2024 (4) TMI 940
  • 2024 (4) TMI 939
  • 2024 (4) TMI 938
  • 2024 (4) TMI 937
  • 2024 (4) TMI 936
  • 2024 (4) TMI 935
  • 2024 (4) TMI 934
  • 2024 (4) TMI 933
  • 2024 (4) TMI 932
  • 2024 (4) TMI 931
  • 2024 (4) TMI 930
  • 2024 (4) TMI 929
  • 2024 (4) TMI 928
  • 2024 (4) TMI 927
  • 2024 (4) TMI 926
  • 2024 (4) TMI 925
  • 2024 (4) TMI 924
  • 2024 (4) TMI 923
  • 2024 (4) TMI 922
  • 2024 (4) TMI 921
  • 2024 (4) TMI 920
  • Customs

  • 2024 (4) TMI 919
  • 2024 (4) TMI 918
  • 2024 (4) TMI 917
  • 2024 (4) TMI 916
  • 2024 (4) TMI 915
  • Insolvency & Bankruptcy

  • 2024 (4) TMI 914
  • 2024 (4) TMI 913
  • Service Tax

  • 2024 (4) TMI 912
  • 2024 (4) TMI 911
  • 2024 (4) TMI 910
  • 2024 (4) TMI 909
  • 2024 (4) TMI 908
  • 2024 (4) TMI 907
  • 2024 (4) TMI 906
  • 2024 (4) TMI 905
  • Central Excise

  • 2024 (4) TMI 904
  • 2024 (4) TMI 903
  • 2024 (4) TMI 902
  • 2024 (4) TMI 901
  • 2024 (4) TMI 900
  • 2024 (4) TMI 899
  • CST, VAT & Sales Tax

  • 2024 (4) TMI 898
  • Indian Laws

  • 2024 (4) TMI 897
  • 2024 (4) TMI 896
 

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