This weekly roundup analytically summarizes the key stories related to the Supreme Court and High Court reported at Taxscan.in from October 5th, 2024, to October 11th, 2024.
The Supreme Court of India in a recent Appeal before it remanded an Income Tax matter back to the Assessing Officer (AO) while directing the AO to reconsider the nature of business conducted by the Assessee and the purpose for which the Short-Term Fixed Deposits (FD) had been opened by the Assessee.
Therefore, in the interest of maintaining uniformity of law, the Apex Court proceeded to allow the appeal and remanded the matter back to the AO to determine the purpose for which the short-term fixed deposit accounts were opened by the Assessee in the bank, while directing the AO to be cognizant of nature of income derived by the assessee and the treatment of interest income as income from other sources or business income.
The Supreme Court of India recently dismissed a series of review petitions challenging its earlier judgement concerning the classification of royalty payments as distinct from taxes. This reaffirmation came in the case of Karnataka Iron and Steel Manufacturers Association and other petitioners against the Mineral Area Development Authority.
Ultimately, the dismissal of the review petitions reinforce the view that royalty payments are not within the nature of a tax but are contractual payments governed by specific agreements between the state and the lessee.
The Delhi High Court, recently held that simply recording “I am satisfied” is insufficient to validate an approval for issuing a notice under Section 148 of the Income Tax Act, 1961.
The court concluded by setting aside the impugned notice, stating that the approval given was akin to a “rubber stamping” of the process rather than a considered evaluation.
The Patna High Court stayed the Goods and Services Tax ( GST ) recovery proceedings, ruling that taxpayers cannot be deprived of their legal rights due to the non-constitution of the GST Appellate Tribunal ( GSTAT ).
Additionally, the bench instructed to release the bank account attached if any. The writ petition was disposed of with these directions, ensuring the petitioner retains the statutory right to appeal without facing immediate recovery actions.
The Himachal Pradesh High Court recently observed that Rule 86B of the Central Goods and Services Tax (CGST/HPGST) Rules, 2017, which restricts use of Input Tax Credit ( ITC ) in the Electronic Credit Ledger for releasing Output tax, appears to be ultra vires the HP Goods and Services Tax Act 2017.
The Bench of Chief Justice M.S. Ramachandra Rao and Justice Satyen Vaidya said that the petitioner’s contention that Rule 86B of the Act has no statutory backing and appears to be ultra vires the provisions of the HPGST Act, 2017.
The Himachal Pradesh High Court recovery officer cannot attach taxpayer’s over draft account with banks by exercising powers under section 226(3) of Income Tax Act,1961. The High Court clarified that bank does not become a debtor to its customers and cannot hold money for account of its customers merely because it has provided a facility of overdraft to its customers.
The court further reiterated the decision of Gujarat High Court in Kaneria Granitio Ltd. vs. Assistant Commissioner IT, 2016 that the Cash Credit limit is a facility provided by the bank to its customers to use and utilize the money; and if such facility availed of, it would attract the interest to be charged for the same so utilized. Thus, the High Court allowed Assessee’s petition and quashed the attachment order passed by the I-T authorities under section 226(3) of the act.
The High Court of Delhi has set aside the cancellation of the Goods and Services Tax ( GST ) registration of Subhana Fashion, holding that non-payment of dues for a period of three months is not a valid ground under Section 29 of the Central Goods and Services Tax ( CGST ) Act, 2017. The court also noted that the cancellation violated principles of natural justice as the petitioner was not afforded an opportunity for a personal hearing.
The bench, however, clarified that this order would not preclude the authorities from initiating recovery proceedings or addressing any statutory non-compliance by the petitioner in accordance with the law. This bench stressed that any action taken by tax authorities must strictly adhere to statutory provisions and respect the principles of natural justice.
The Patna High Court has ruled that a pending income tax demand cannot be used by the Assessing Officer (AO) as the sole basis to summarily reject an application for lower or nil deduction of tax at source ( TDS ) under Section 197 of the Income Tax Act, 1961.
The High Court set aside the impugned orders and restored the petitioner’s application before the AO, directing the officer to reconsider the matter.
The Gauhati High Court has held that Summary of Show Cause Notice in Form GST DRC-01 not amounts to a valid Show Cause Notice (SCN) under Section 73 of the Central Goods and Services Tax (CGST) Act, 2017. The Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73(1) of the Central Act as well as the State Act.
While allowing the batch of petitions challenging orders , the court set aside the impugned orders. The Court also granted liberty to Revenue to initiate fresh proceedings under Section 73 for the relevant financial year, if deemed fit.
In a recent ruling, the Madras High Court confirmed a 150% penalty imposed under Section 16(2)(d) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) for sales/purchases suppression despite deleting speculative additions.
Therefore, the court upheld the additions made towards purchase and sales suppression and penalty but deleted the speculative double additions made by the assessing authority. The writ petition was disposed of and the Connected miscellaneous petition was closed.
In a recent ruling, the Madras High Court remanded the matter concerning the Goods and Service Tax (GST) demand order alleged suppression of table turnover citing Tax Authorities’ failure to consider the petitioner’s submission.
Therefore, the court set aside the impugned orders and remanded the matter to the respondent for reconsideration of Defect No. 8 after providing the petitioner with a personal hearing. The petitioner’s writ petition was allowed.
In a recent ruling, the Madurai Bench of the Madras High Court set aside an order rejecting the Value Added Tax (VAT) Input Tax Credit (ITC) claim made based on a web-generated report.
The High Court ordered to set aside the impugned order and directed the Assistant Commissioner to redo the assessment, strictly adhering to the procedures laid out in the circular. The petitioner was directed to appear before the assessing authority on 21-10-2024, for further proceeding. The Single bench of the High Court comprising of Justice Mohammed Shaffiq, directed to lift the petitioner’s bank attachment.
The Kerala High Court in a significant case held that the ‘interest income’ on the short-term deposits of the funds infused by the Government, which are sanctioned for purpose of setting up of business, are in nature of ‘capital receipt’ and not ‘revenue receipt’.
The High Court concluded that interest earned on funds granted by the government, which were kept in bank till its utilization for setting up of business, are capital receipt and allowed Assessee’s appeals.
In a recent case, the Jammu and Kashmir and Ladakh High Court has held that the limitation period for refund of GST is to be determined from the date the original application is filed by an assessee, and quashed the deficiency memo.
It was directed by the J&K Tax Department, particularly Assistant Commissioner (GST), to process and release the GST refund of petitioner along with interest at the rate of 7% from the date the same fell due to the petitioner concern till the date of its final realization.
The Chhattisgarh High Court recently upheld an ex-parte assessment under Section 144 of the Income Tax Act, 1961, against an assessee who failed to participate in assessment proceedings or explain the source of a cash deposit of ₹11,44,070 in his bank account.
In light of the decision of the Supreme Court in Vijay Kumar Talwar , by allowing the appeal, the court held that the finding of the ITAT is the correct finding of fact based on record and the appellant has failed to demonstrate any substantial question of law in this appeal and as such, no substantial question of law arises from the order of the ITAT requiring formulation for consideration.
The Madhya Pradesh High Court recently took a compassionate approach in a case involving the dismissal of an income tax appeal due to a mistake by the counsel representing the appellant. The court directed both the counsel and the applicant to undertake community service at a mercy home, demonstrating a novel form of restorative justice.
Ultimately, the court allowed the restoration of the appeal, contingent on the fulfilment of the suggested community service within fifteen days. This decision not only reinstates the legal proceedings but also sets an example of blending judicial process with social responsibility.
In the recent case the Punjab and Haryana High Court upheld the Income Tax Appellate Tribunal (ITAT)’s decision granting Section 12A registration to the Unique Educational Society, which operates a vocational training institute.
The Court upheld the ITAT’s findings, ruling that vocational education was vital for individual development and earning a livelihood and rejected the Revenue’s reliance on a Kerala High Court judgment, noting that vocational education is now widely recognized as part of the broader field of education.
In a recent case, the Gujarat High Court held that issuance of Pre’ Consultation notice in Form DRC 01A is not compulsory from 15 th October, 2020. The court viewed that though the requirement of issuance of the pre- consultation notice in Form-DRC-01A is not compulsory as per the amendment brought on the statute with effect from 15th October, 2020, the word ”may” is required to be read as “shall” otherwise, Subsection (5) of Section 74 of the Act would become redundant.
Considering the above submissions, the court comprising Justice Bhargav D. Karia And Justice Niral R. Mehta issued Notice returnable on 16th October, 2024. It was further held that “by way of ad-interim relief, the petitioners shall continue to cooperate in the adjudication process of the impugned show- cause notice, however the respondents shall not pass the final order during the pendency of this petition.”
While upholding the order of Income Tax Appellate Tribunal ( ITAT ), the Calcutta High Court held that deduction under section 80IA of the Income Tax Act is allowable on port infrastructure development.The court held that the tribunal was fully justified in allowing the assessee’s appeal and the impugned order does not call for any interference.
The division bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the benefit of deduction provided for under Section 80IA(4) of the Act is for a beneficial purpose, the purpose being to promote industrial undertakings or enterprises engaged in infrastructural developments etc. Therefore, the interpretation to be given to the said provision should advance the object for which the provision was introduced and not to frustrate it. The court held that the tribunal was fully justified in allowing the assessee’s appeal and the impugned order does not call for any interference.
The Madras High Court allowed the provisional release of zero-rated export goods seized by authorities due to the non-generation of an E-invoice. The vehicle carrying the export goods of zero rated had been detained under Section 129(3) of the GST Act.
The High Court concluded that the provisional release of the goods should be allowed if the petitioner could provide evidence that the transaction was reported as a zero-rated export in the GSTR-1 return. However, the court clarified that the petitioner still had the right to challenge the detention order by filing an appeal under Section 107 of the GST Act.
The division bench of the Karnataka High Court in a ruling in favour of Patanjali foods limited, has held that Claims not included in approved resolution plan are extinguished. It was viewed that once a resolution plan is approved by the Adjudicating Authority under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC), no further proceedings can be initiated against the corporate debtor in respect of claims which are not included in the resolution plan.
While allowing the appeal, the Court set aside the impugned order dated 17.11.2023, passed by the CESTAT. The demand of Rs. 19,40,00,646 made by the revenue against the appellant-assessee under the order dated 31.07.2012 was held to have abated and extinguished.
In the recent ruling the Delhi High Court,upheld the customs compounding fees imposed on the petitioners, finding them reasonable as they constituted a small fraction of the seized currency.
The bench observed that the amounts determined were a minor fraction of the currency carried by the petitioners. It concluded that there was no basis to interfere with the impugned order under Section 226 of the Constitution of India. However, the petitioners were granted an additional thirty days to deposit the specified amounts and submit proof of payment to the Compounding Authority.
The Madras High Court sets aside an ex parte Goods and Services Tax ( GST ) demand order issued six months after the Show Cause Notice ( SCN ) on 10% pre-deposit condition. The court also directed to lift the bank account on receipt of the payment.
The bench also instructed the GST authorities to provide the petitioner with a clear 14-day notice for a personal hearing, ensuring that the case is heard on merits. In addition, the Court directed the department to instruct the concerned bank to release the attachment immediately upon receiving proof of the 10% payment.
The Madras High Court has directed the Goods and Services Tax ( GST ) department to re-do the assessment considering the amendments in Finance Act ( No. 2 ), 2024 in a matter of rejection of Input Tax Credit ( ITC ) claim filed beyond the statutory period mentioned under Section 16(4) of the GST Act.
The Madras High Court has directed the Goods and Services Tax ( GST ) department to re-do the assessment considering the amendments in Finance Act ( No. 2 ), 2024 in a matter of rejection of Input Tax Credit ( ITC ) claim filed beyond the statutory period mentioned under Section 16(4) of the GST Act.
In a recent case,the Delhi High Court ordered the restoration of the Goods and Service Tax ( GST ) registration of petitioner, whose business, “Shri Salasar Balaji Steel,” had faced suspension due to alleged non-compliance with Rule 86B of the Central Goods and Service Tax ( CGST ) Rules
A coram of Vibhu Bakhru ( Justice ) and Sachin Datta ( Justice ) disposed of the petition in favour of the petitioner allowing him to resume his business activities without further delay.
In the recent ruling, the Delhi High Court ,upheld the decision of the Principal Commissioner of Income Tax ( CIT ) to revise the assessment due to the Assessing Officer’s ( AO ) failure to verify dishonored cheques.
Upon further appeal to the court, the appellant’s case was dismissed. The court ruled that the CIT had correctly invoked Section 263 of the Act, as the AO’s failure to properly investigate the dishonored cheques rendered the assessment order erroneous and prejudicial to the Revenue.
The Punjab & Haryana High Court dismissed the plea challenging ED arrest, observing that the arrest was made in well documented reason to believe under section 19 of Prevention of Money Laundering Act, 2002 ( PMLA ) .It was found that the Arresting Officer had conveyed his intention, reasons, grounds and belief to arrest the petitioner.
The court Viewed that the satisfaction of the concerned Officer is also duly reflected in the wordings and the necessity of arrest and has also clearly revealed. Thus, there is no fault in the grounds of arrest and consequent arrest.
In a significant ruling, the Madhya Pradesh High Court has clarified that the non-functionality of the Income Tax Department’s TRACES Portal cannot be used as a justification to deny an assessee the benefits provided under the Income Tax Act, 1961.
It stated, “The rights which have been given to the assessee under the Income Tax Act cannot be withheld due to the non functionality of the TRACES.” The court further directed that the refund, along with interest, must be issued or set off against any outstanding tax payable by the petitioner within 30 days.
In a recent ruling the Delhi High Court, upheld the Income Tax Appellate Tribunal’s ( ITAT ) decision to invalidate an assessment order for exceeding the statutory timelines under the Income Tax Act, 1961.
The Revenue counsel, Mr. Bhatia, argued that the assessee should not benefit from filing objections after the 30-day period. However, this argument was unconvincing. Section 144C(4) of the Act clearly stated that the Assessing Officer was still required to issue the final order within the stipulated timeframe, regardless of the late objections.
The Madras High Court has ruled in favour of a manufacturing company facing financial difficulties, allowing it to clear its pre-GST ( Goods and Services Tax ) dues of Rs. 1.2 crores through monthly instalments. However, the court also instructed the department to take legal actions against the company if it fails to clear the dues within 12 months.
The court also warned that if the company fails to comply with this payment plan, the authorities are authorised to take legal action, which may include attaching the company’s properties for recovery.
The Karnataka High Court held that recovery proceedings initiated under Central Goods and Service Tax (CGST Act) during pendency of investigation stating ‘Self Ascertainment of Tax’ is violative of Article 265. It was clarified that when notice sought to be issued under section 74(1) indicate a fresh and complete adjudication and does not refer to short fall of actual tax required to be paid as contemplated under section 74(7), the State itself is estopped from contending that there was self-ascertainment by the assessee.
The High Court directed the Department to refund the amount of Rs.2.50 crores along with interest, which was alleged to be recovered by the Department in the garb of ‘self-ascertainment’ and partly allowed the Assessee’s petition.
The Delhi High Court recently quashed a demand order issued against AXA France Vie-India (AXA) demanding the payment of Integrated Goods and Services Tax (IGST) on reinsurance services rendered by AXA.
In light of the observations, the Delhi High Court allowed the Writ Petition while insisting that the GST Council and Union Government had taken conscious decisions to regularize the period between 01.07.2017 to 26.07.2018 and further quashed the impugned demand order dated 20.12.2023 issued against the Petitioner.
The condonation application for delay in filing a Goods and Services Tax ( GST ) appeal was rejected by the Allahabad High Court. The bench referred to the precedent where it was ruled that the Section 107 of the GST Act is a complete code and it excludes the general limitation provisions like Section 5 of the Limitation Act.
The writ petition which challenged the dismissal of appeal on grounds of limitation was dismissed again by the high court. Taking M/s Yadav Steels as precedent, the court refuses to condone the delay in filing the GST appeal and dismissed the petition.
The Kerala High Court in a recent case ruled that the restrictive interpretation adopted to the application of the limit prescribed with reference to yearly deposits by clubbing Public Provident Fund ( PPF ) accounts is incorrect. The court quashed the order and directed to the respondents to credit the amount of Rs.6,87,021/- (Rupees Six lakhs eighty seven thousand and twenty one only) to the accounts of the petitioners with interest, as applicable under the PPF Act.
The court quashed the order and directed to the respondents to credit the amount of Rs.6,87,021/- (Rupees Six lakhs eighty seven thousand and twenty one only) to the accounts of the petitioners with interest, as applicable under the PPF Act.
In ruling in favour of Ola Fleet Technologies, the Telangana High Court held that issuing Goods and Service Tax ( GST ) order manually without considering reply on GST Portal amounts to violation of principles of natural justice.
The court disposed of the writ petition by setting aside the order and the Authority is directed to consider the reply filed by the petitioner to the show-cause notice and proceed further in accordance with law from that stage.
In a recent case, the Kerala High Court held that tax/ penalty under Section 129(1)(a) or 129(1)(b) of the Central Goods and Service Tax ( CGST/ SGST) can be imposed only for violations which may lead to evasion of tax or which was done with the intention to evade or in case of repeated violations.
The Court ruled that in cases of minor discrepancies, the authorities can impose penalties after considering Sections 122 and 126 of the Acts. The Court added that the Revenue Officials can still initiate proceedings under Section 129 of the Act in cases of expiry of e-bill or other discrepancies if such act was done with the intention to evade tax.
The Andhra Pradesh High Court in its recent ruling has held that an Assessing Officer ( AO ) cannot refer an assessee’s file to the Joint Commissioner of Income Tax for levying penalty under Section 271D of the Income Tax Act, 1961 without recording its “satisfaction”.The satisfaction of the Assessing Officer is required to be recorded because the officer, who passed the assessment order would not be levying the penalty under Sec.271D of the Act, unless it is recorded in the assessment order, he cannot refer the file to superior officer for initiating levy of penalty.
It was evident that there will not be any occasion to the Joint Commissioner, who is not the Assessing Officer, to exercise his jurisdiction to levy Penalty under Section 271D Unless the Assessing Officer, who is the primary authority, based on the material before it, during assessment proceedings, arrives at a finding that there has been a violation of the provisions, like in the present case, of Section 269SS. The Court allowed the writ petition and set aside the order passed under Section 271D of the Income Tax Act.
In a recent case, the Calcutta High Court set aside an order of the Goods and Service Tax ( GST ) and held that the Appellate Authority under CGST Act cannot suo motu enhance tax liability on an assessee, without following the procedure under Section 107(11) of the CGST/ WBGST Act.
While allowing the appeal, the court set aside the orders passed by the appellate authority as well as the adjudicating authority and remanded the matter back for fresh consideration, in light of some subsequent events.
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