This half-yearly round-up analytically summarizes the key Direct and Indirect Tax Judgments of the Supreme Court and all High Courts of India reported at Taxscan.in during the First half of 2024.
The Supreme Court of India has issued notice against the Central Bank of India regarding a Special Leave Petition (SLP) stemming from a final judgment by the High Court of Judicature at Bombay dated July 21, 2023, in ITA No. 1683/2018. The Bombay High Court disposed of the petition in light of a prior judgment in Commissioner of Income Tax-LTU v/s. Union Bank of India, which raised questions about the taxation of interest on sticky loans.
The Court clarified that the Tribunal’s decision not to treat interest on sticky loans as accrued income was based on instructions issued by the Board in a 1984 circular.
In the case involving Flipkart Pvt Ltd, the Supreme Court upheld the Delhi High Court’s order allowing a refund claim of Rs. 6,62,74,405/- under the Delhi Value Added Tax (DVAT) Act, 2004. The Value Added Tax Officer had filed a Special Leave Petition (SLP) against the High Court’s final judgment and order, which had been filed to command the processing of a refund application dated August 24, 2020, along with the grant of interest as per the DVAT Act.
The High Court observed that the authorities had violated Section 38 of the DVAT Act by not deciding on the refund application within the prescribed time frame, and thus granted the writ petition, quashing the impugned order and directing the respondents to refund the amount along with interest within three weeks. A two-judge bench, comprising Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar, refused to interfere with the High Court’s decision and dismissed the SLP.
The two-judge bench of the Supreme Court of India dismissed a Special Leave Petition (SLP) due to a significant delay of 596 days in filing the petition against an Income Tax Appeal. The SLP, filed by the Commissioner of Income Tax against the final judgment and order dated February 26, 2022, in ITA No. 760/2022 passed by the High Court of Judicature at Bombay in favor of Indo Amines Ltd., lacked a valid reason for the delay. Justices B V Nagarathna and Augustine George Masih noted the substantial delay and found the explanation for condoning it unsatisfactory. Considering a previous order dated January 2, 2024, where a similar petition was dismissed on merits, the court ruled to dismiss the current SLP both due to the delay and on its merits.
A Two-Judge Bench of the Supreme Court has dismissed a challenge to Rule 9(3)(b) of the Chartered Accountants’ (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, enabling the Institute of Chartered Accountants of India (ICAI) Board of Discipline to refer a complaint for misconduct to the ICAI Disciplinary Committee, even when the Director (Discipline) finds the accused person/firm not guilty and allows for further investigation.
The Court upheld the rule, emphasizing the need for the Board to override the Director’s opinion to prevent potential misconduct. Justices PS Narasimha and Aravind Kumar concluded that the rule falls within the scope of delegated power under Section 29A(1) of the Act, aiming to ensure genuine complaints are properly addressed.
The Supreme Court upheld the Delhi High Court’s decision in a special leave petition (SLP) challenging the quashing of a notice issued under Section 148 of the Income Tax Act, 1961, after 16 years. The senior counsel for the Revenue argued the legality of the notice issued in 2008. However, the Two-Judge Bench, comprising Justice Pamidighantam Sri Narasimha and Justice Arvind Kumar, noted that the notice and subsequent order were set aside by the Income Tax Appellate Tribunal in 2013, a decision upheld by the High Court in 2015. Given the conclusion of proceedings in 2015 and the passage of another decade, the Court declined to interfere with the High Court’s judgment while leaving the question of law open for future consideration.
The Allahabad High Court declined to issue a writ of mandamus directing the Central Government to include Sections 129 and 130 of the Central Goods and Service Tax Act, 2017 (CGST Act) in a notification by the Central Board of Indirect Taxes and Customs (CBIC). The petitioner’s counsel argued that a CBIC notification, No. 53/2023-Central Tax, dated November 2, 2023, extended the time to file appeals under Section 107 of the CGST Act, but it only applied to orders passed under Sections 73 and 74, neglecting Sections 129 and 130. The counsel contended that this omission was discriminatory and urged the court to intervene. However, Justice Shekhar B. Saraf, in a single-bench decision, held that while the court couldn’t mandate the inclusion of Sections 129 and 130 in the notification, the government should consider doing so to ensure parity in benefit provisions across different sections of the CGST Act.
The Madras HC overturned an assessment order concerning financial years 2019-20, 2020-21, and 2021-22, citing unresolved defects due to the unavailability of crucial records held by the Central GST Authority. The petitioner, a registered individual under GST laws, contested the assessment following a surprise inspection, where discrepancies in taxable turnover and issues related to circular trading were highlighted. Despite the petitioner’s explanations and notifications of unavailable documents, the assessment order was issued. However, Justice Senthilkumar Ramamoorthy intervened, recognizing the impact of the missing records on the assessment’s validity, and deemed it necessary to provide the petitioner with an opportunity to address the identified defects, warranting interference with the impugned order.
The Bombay High Court has ordered the restoration of Goods and Services Tax (GST) registration for a petitioner whose registration was cancelled without a hearing due to non-filing of GST returns. Despite the petitioner’s application for revocation and subsequent appeals citing unavoidable delays, the revocation application was rejected. However, the petitioner, having now complied with payments and filed returns up to March 2023, pleaded for restoration, promising to clear all dues and file pending returns within four weeks upon restoration. The Division Bench, comprising Justice G. S. Kulkarni and Justice Firdosh P Poonawalla, directed the restoration of the petitioner’s GST registration within one week, with a mandate to file all pending returns and make necessary payments within four weeks from the date of restoration to avoid prejudice to revenue.
The Bombay High Court held that a defect in a notice under Section 271(1)(C) of the Income Tax Act 1961, issued in 1993, could not be raised by the appellant, even in the absence of prejudice to the assessee. The case involved Veena Estate Pvt. Ltd challenging penalty proceedings initiated against them under section 271(1)(c) of the I.T. Act. The appellant contended that the penalty proceedings were initiated without clearly informing them of the charge against them. The court observed that after more than 20 years, it would be accepted that the notice issued under Section 274 of the IT Act was defective. Furthermore, it was noted that a penalty cannot be imposed for alleged breach of one limb of Section 271(1)(c) while the penalty proceedings were initiated for breach of the other limb. Therefore, the court held that the defect in the notice could not be raised by the appellant, even in the absence of prejudice to them.
The Bombay High Court dismissed a writ petition filed by Sansar Texturisers Pvt. Ltd, challenging customs Anti Dumping Duty Notifications regarding the attempt to avail a refund of Anti Dumping Duty paid. The petitioner, engaged in importing Nylon Filament yarn, contested notifications imposing anti-dumping duties on imports from certain countries between January 2012 and January 2018. The bench, consisting of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla, observed that the petition was not maintainable solely for seeking a refund of duty, as such a claim could be pursued through a suit. The court concluded that the petitioner had paid the duty without any mistake, leading to the dismissal of the writ challenging the Customs Anti Dumping Duty Notifications. Saket R. Ketkar and Karan Adik appeared for the respondent.
The Allahabad HC quashed a penalty order imposed by the Commercial Tax Officer, emphasizing the fundamental importance of adhering to the show cause notice (SCN) in administrative proceedings. The court noted that the authorities imposed a penalty on a ground not mentioned in the original SCN, thereby violating the principles of natural justice, particularly the principle of audi alteram partem. Justice Shekhar B. Saraf emphasised that adherence to the show cause notice is essential to uphold fairness, accountability, procedural regularity, and legal certainty. The court concluded that the impugned orders exceeded the boundaries set by the SCN and quashed them, highlighting the importance of respecting procedural safeguards to prevent arbitrary exercises of power.
The Bombay High Court directed fresh adjudication of a matter concerning the refund of unutilized Integrated Goods and Services Tax (IGST) credit on export of services, as the original order was passed without providing due notice or opportunity of hearing to the Petitioner. The petitioner, seeking refund claims for various periods, received sanctions for some claims while others were rejected without affording a hearing. Despite attending multiple personal hearings, the petitioner alleged that no record was provided, and the hearings were conducted by an assistant rather than the concerned authority. Not receiving any order post-hearing, the petitioner filed a petition seeking a personal hearing and timely, reasoned orders. The court emphasized the principles of natural justice, directing the Appellate Authority (Respondent No.4) to provide a personal hearing and pass orders within six weeks from the date of intimation, ensuring procedural fairness and timely resolution.
Justice Shekhar B. Saraf stressed the importance of granting a personal hearing before making any adverse decisions against taxpayers, regardless of whether a formal request is made. In a case involving a firm accused of misusing Input Tax Credit (ITC), despite the petitioner’s responses, tax authorities imposed significant penalties. However, the appellate authority ruled in favour of the petitioner. The High Court, citing Section 75(4) of the UPGST Act, 2017, emphasized the need for personal hearings for fairness and justice. Consequently, it overturned the previous decisions, instructing authorities to provide a personal hearing and issue a reasoned order within two months, ensuring fairness and due process in tax matters.
The Kerala High Court directed the issuance of materials to respond to a show cause notice (SCN) regarding an allegation of wrong IGST refund availing. The petitioner contested notices alleging the wrongful refund without access to the underlying materials referred to by the Commissioner of Customs. Justice P Gopinath instructed the petitioner to appear before the issuing officer on January 30, 2024, to request necessary documents for a proper reply. Upon receiving the requested documents, the petitioner would have two weeks to respond to the notices, followed by adjudication by the competent officer with a fair hearing, ensuring procedural fairness in the matter.
The Kerala High Court directed the appellate authority to promptly address the demand and recovery proceedings against Kerala University concerning an assessment order under the Income Tax Act, 1961. Noting the university’s delay in approaching the appellate authority with an application for interim stay, Justice Dinesh Kumar Singh instructed the authority to expeditiously consider and decide on the petitioner’s requests for condonation of delay and interim stay, preferably within four months, before the National Faceless Appeal Centre, thus resolving the matter efficiently.
The Kerala High Court instructed the Income Tax Commissioner to promptly address recovery proceedings initiated following assessment orders, as the petitioner had filed an appeal with some delay and a stay petition only later. Justice Dinesh Kumar Singh directed the commissioner to consider and decide on the petitioner’s applications for condonation of delay and stay petition within two months, ensuring timely resolution of the matter.
The Allahabad High Court upheld the penalty imposed on Hindustan Petroleum Corporation under the Central Sales Tax Act, 1956, as the petitioner failed to prove a bona fide intention in wrong representation while purchasing goods. Despite the petitioner’s contention that the items purchased were covered under the word “container” in the registration certificate, the court found that the petitioner failed to demonstrate this belief adequately. The court emphasized that the petitioner did not provide sufficient evidence to justify the alleged bona fide belief, leading to the dismissal of the petition and upholding of the penalty by the Commercial Tax Tribunal.
The Bombay High Court invalidated the reassessment notice against Godrej Projects Development Pvt Ltd, emphasizing that the Assessing Officer’s reason for reassessment lacked tangible evidence and relied on borrowed satisfaction rather than independent judgment. The court highlighted that the AO’s questioning of the significant share premium of a newly incorporated company was purely hypothetical and lacked a factual basis. Despite objections raised by Godrej, the court ruled that the reassessment lacked fresh material and constituted impermissible review, ultimately quashing the notice and reinforcing the importance of adhering to jurisdictional conditions in reopening assessments.
The Kerala High Court clarified that the Writ Court does not operate in parallel jurisdiction with the appellate authority and directed the Income Tax Authority to consider the petition filed by Manath Muhammed Ismail, a real estate broker, seeking disposal of appeals and stay applications against assessment orders under Section 153C of the Income Tax Act, 1961. Despite the petitioner’s delay in approaching the appellate authority and inability to deposit 20% of the assessed tax, the Court declined to stay the demand as assessed in the assessment orders, emphasizing its limited role in parallel jurisdiction and urging the appellate authority to expedite the consideration of the petitioner’s applications for condoning the delay and stay petitions within two months.
The Kerala High Court intervened to stay recovery proceedings, prompted by the appellant’s concerns over potential recovery of amounts confirmed by assessment orders before the consideration of stay petitions. The appellant, who had appealed assessment orders under the Income Tax Act for multiple years, feared that recovery steps might be taken before the stay petitions were adjudicated. While the Single Judge directed the authorities to decide on the stay petitions if appeals couldn’t be expedited, no stay on recovery proceedings was granted. The Division Bench, comprising Dr. Justice AK Jayasankaran Nambiar and Dr. Justice Kauser Edappagath, modified the judgment to ensure that recovery proceedings against the appellant would be suspended until the disposal of stay petitions or appeals, whichever occurred earlier, by the appellate authority, providing the appellant with interim relief.
The Kerala High Court remanded a case concerning the submission of GSTR-1 for readjudication based on a CBDT circular, acknowledging difficulties faced by dealers during the initial implementation of GST provisions. M/S Kochi Medicals, the petitioner, faced disallowance of input tax credit due to a mismatch between GSTR-3B and GSTR-2A. The petitioner cited a CBDT circular offering relaxation for FY 2017-18 and 2018-19, providing guidelines for handling such discrepancies. Despite the petitioner’s intention to appeal to the Tribunal, pending its constitution, they sought relief from the Court. Justice Dinesh Kumar Singh set aside previous orders, directing the assessing authority to reconsider the case in light of Circular No. 183/15/2022-GST dated 27.12.2022.
The Kerala High Court dismissed a writ petition filed by Metalex Agencies challenging an assessment order under the Kerala State Goods and Service Tax (KSGST/CGST) Act, 2017, regarding discrepancies in transitional credit claimed by the petitioner. Despite the petitioner’s argument that filing an appeal could be futile due to the excise duty component issue, Justice Dinesh Kumar Singh emphasized that the appellate authority would thoroughly examine all evidence. Therefore, the court deemed the availability of alternative statutory remedies sufficient, leading to the dismissal of the writ petition.
The Kerala High Court directed the petitioner to pursue alternative remedies regarding an assessment order under the Kerala State Goods and Services Tax Act, 2017 (KGST Act). Despite the petitioner challenging the assessment order in court, the government pleader argued that show cause notices were issued prior to completion of assessment, but the petitioner failed to respond. Justice Gopinath P, in a single bench ruling, emphasized that the petitioner had not demonstrated grounds for court interference and urged them to pursue appellate remedies within the statutory time limit, which expires on January 31, 2024. The court directed that if the petitioner files an appeal along with a stay petition by the specified deadline, any recovery proceedings based on the assessment order would be suspended pending a decision by the appellate authority.
The Kerala High Court upheld the demand for service tax by M/S Bright Communications, rejecting claims of a violation of natural justice principles. The petitioner challenged the assessment order assessing service tax liability for advertising agency services and legal consultancy services under the reverse charge mechanism. Despite being given multiple opportunities for a personal hearing, the petitioner failed to respond to show cause notices or produce required documents. Justice Dinesh Kumar Singh observed that the petitioner had not utilized earlier opportunities for a hearing and that the allegation of a violation of natural justice was unfounded. The court emphasized that the petitioner could raise these issues in the appellate process and dismissed the petition, upholding the impugned order.
The Kerala High Court’s Single bench ruled that upon depositing 20% of the assessed tax, the demand for income tax stays automatically, directing the timely resolution of the stay petition. Preetha Ajay petitioned for a writ of mandamus to prompt the second respondent to expedite the appeal and stay application. The petitioner contested an assessment order under the Income Tax Act and appealed to the second respondent while concurrently filing a stay petition. Although the petitioner’s counsel highlighted the delay in deciding the stay application, the Senior Standing Counsel for the Income Tax Department agreed to expedite the stay petition but opposed staying the demand. Justice Dinesh Kumar Singh directed the second respondent to promptly decide the stay petition within two months while halting the demand enforcement for the same duration, citing the automatic stay provision upon depositing 20% of the assessed tax.
The Delhi High Court recently ruled that a party cannot challenge an arbitral award after receiving the payable amount under it. The petitioner, despite being the prevailing party in arbitration, contested the findings on two specific claims, arguing ‘patent illegality’ and violation of fundamental policy of Indian law. However, the respondent countered that the award was faultless and did not meet the criteria for challenge under Section 34 of the Arbitration and Conciliation Act, 1996. The court, led by Justice Sanjeev Narula, observed that the petitioner’s acceptance of the awarded amount on one claim stopped them from challenging the award, citing precedent. Hence, the court declined to interfere with the arbitral award’s decision on the disputed claims.
The Kerala High Court dismissed a writ petition challenging an assessment order, citing the availability of the remedy of appeal under Section 107 of the Central Goods and Service Tax Act, 2017 (CGST Act). The petitioner sought to contest the assessment order dated 21.08.2023, but the Court noted that Section 107(1) of the CGST Act allows aggrieved parties to appeal such decisions within three months of communication. Justice Dinesh Kumar Singh emphasized that the Court is not an appellate authority for assessment orders and advised the petitioner to pursue the appeal process if dissatisfied. Consequently, the writ petition was dismissed, with the petitioner encouraged to file an appeal if desired.
The Delhi High Court allowed the withdrawal of a petition challenging a show cause notice issued beyond the limitation period under Section 73 of the Finance Act, 1944. The petitioner argued that the notice exceeded the statutory time limit, while the respondents contended that the extended period of limitation applied. In light of this objection, the petitioner sought to withdraw the petition while reserving the right to raise all permissible arguments before the Adjudicating Authority. A Division Bench comprising Justices Sanjeev Sachdeva and Ravinder Dudeja dismissed the petition as withdrawn, allowing the petitioner to file a reply to the notice within 30 days. The Court clarified that it had not evaluated the merits of the case and that the time spent on the petition would not count towards the limitation period specified by the Finance Act, 1994.
The Delhi High Court directed the issuance of materials concerning a show cause notice (SCN) for the cancellation of GST registration, citing lack of cogent reasons. The petitioner challenged the SCN dated 18.01.2024, which alleged registration obtained through fraud, wilful misstatement, or suppression of facts under Section 29(2)(e). However, the notice lacked specific details such as the officer’s name or appearance details. A Division Bench of Justice Sanjeev Sachdeva and Ravinder Dudeja instructed the respondents to provide all relevant material to the petitioner within one week. Once received, the petitioner must reply within a week, after which the respondent should adjudicate the SCN within a maximum of two weeks.
The Kerala High Court quashed an order of the National Company Law Tribunal (NCLT) declaring a tax assessment order void, ruling it lacked jurisdiction. The petitioner, Deputy Commissioner (Works Contract), challenged the NCLT’s decision under Article 227 of the Constitution. Despite the 2nd respondent’s application seeking permission to appeal the assessment order, the NCLT deemed the order void ab initio due to a violation of Section 14(1)(a) of the Insolvency and Bankruptcy Code (IBC). However, the High Court found this order preposterous and lacking legal basis, emphasizing the NCLT’s overreach and misunderstanding of the law. It noted that while the moratorium under Section 14 of the IBC halts enforcement, it doesn’t bar the determination of tax liabilities, concluding that the NCLT’s action was beyond its authority.
The Madras High Court ruled that refund claims should be assessed based on documents related to input tax credit (ITC) and zero-rated exports. The petitioner, a manufacturer and exporter, claimed timely filing of Forms W and ITC on capital goods since 2011. Despite objections from the Accountant General and Circular No.22 prohibiting refund, the petitioner argued for refund under Circular No.12. The court found the delay in processing claims unjustified and remanded the matter to consider the refund claim on its merits, instructing the assessing officer not to consider the issue of limitation.
The Madras High Court ruled that electricity qualifies as an input for the grant of cenvat credit, overturning a decision by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The appellant, a cement manufacturer with a Captive Power Plant (CPP), imported coal for electricity generation and claimed cenvat credit. The department alleged improper maintenance of accounts for coal consumption, but the appellant argued that electricity qualifies as an input under the CCR 2004. The court observed that electricity generated in a CPP qualifies as an input, regardless of its location of use, and upheld the appellant’s position.
The Kerala High Court dismissed a writ petition challenging the reopening of assessment for the assessment year 2015-16 under Section 147 of the Income Tax Act, 1961, as the income threshold of Rs. 50 lakhs had been exceeded. The petitioner, a non-resident Indian residing in the UAE, did not file an income tax return for that year. Based on information received through the Insight portal, the assessing authority concluded that income amounting to Rs. 92,63,390/- had escaped assessment, exceeding the threshold limit. The petitioner argued that the actual income that escaped assessment was only Rs. 20,29,690/-. However, the court held that the assessing authority’s estimation of the income exceeding the threshold justified the reopening of assessment and dismissed the petition. The petitioner was directed to pursue rectification proceedings with the assessing authority.
The Madras High Court ruled that electricity qualifies as an input for cenvat credit, dismissing an appeal against a CESTAT order dated 28.02.2018. The case involved a cement manufacturer with a Captive Power Plant in Tirunelveli District, which imported coal for electricity generation, claiming cenvat credit. The appellant argued that electricity is an eligible input under the CCR 2004, and the demand for 6% on wheeled-out electricity lacked basis. The court, led by Justice Dr. Anita Sumanth and Justice R Vijayakumar, emphasized that captively generated electricity qualifies as an input, regardless of its usage location, ensuring transparency via a wheeling agreement with TANGEDCO, concluding that related parties’ supervision can verify the input’s transfer and utilization.
The Kerala High Court dismissed Oleena Mahila Samajam’s petition challenging the cancellation of its GST registration under the CGST Act, 2017, due to non-filing of returns. Despite the petitioner’s argument that its accountant overlooked the notice, the court upheld the cancellation, stating that statutory timelines must be adhered to and that the petitioner failed to utilize the available remedy of filing an appeal against the cancellation order. The court, noting the delay in approaching the court, declined to grant any relief against the impugned order.
The Kerala High Court ruled that the Income Tax Assessment Order issued under the old PAN is appealable as the new PAN is inactive. Mavoor Gramasree Vanitha Sahakarna Sangha No. 3026, a Co-operative Society, received a notice under Section 148 for the assessment year 2018-19 despite surrendering its old PAN and obtaining a new one. The court, after reviewing instructions from the Principal Commissioner of Income Tax, directed the petitioner to file an appeal using the old PAN and proceed accordingly, requiring registration on the e-filing portal with the old PAN.
The Delhi High Court granted significant relief to Kajaria Ceramics as the challenge to the jurisdiction of the adjudicating authority was stayed by the Supreme Court (SC). The decision stemmed from a reference to an order dated 28.03.2022 in a batch of appeals, where the Court directed the matters to be remitted to the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) for consideration on merits, given the stay on jurisdictional challenges based on a previous Division Bench judgment. Prashant Srivastava, Advocate for the respondent, expressed no objection to a similar direction in the current matter. A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja directed the Tribunal to decide the matter on its merits, applying the same principles as in the referenced judgment, given the identical legal question framed in the appeal.
In a case involving the addition of unexplained income under section 69 of the Income Tax Act, 1961, due to the absence of proper documents, the Kerala High Court granted the petitioner, Lavia Infra Ltd, an additional opportunity. The company, engaged in trading construction materials and hardware goods, faced financial difficulties leading to legal actions by banks. Despite notices, the company failed to file income tax returns for the assessment year 2019-2020. The court noted the managing director’s mental illness as a reason for non-compliance and granted six weeks to submit the necessary documents. The revenue was instructed to finalize the assessment under Section 144 if the documents were not provided within the stipulated time.
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