Tax News & Updates

The Gujarat HC held that reopening u/s 147 is invalid where it is based on the same material already examined in scrutiny proceedings. It ruled that in the absence of a final assessment order within limitation, and without any fresh tangible material, reassessment cannot be initiated. The Court quashed the notice u/s 148 and the order u/s 148A(3), holding that the Revenue cannot use reassessment to cover up its failure to complete original assessment proceedings.

The HC held that the sales tax subsidy retained by the assessee constituted a capital receipt, and therefore was not liable to tax. The Court applied the purpose test, relying on the principle laid down by the Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd., emphasizing that the subsidy was linked to setting up industries in backward areas. Accordingly, the Court dismissed the Revenues appeal and upheld the Tribunals order, confirming that such incentives are capital in nature when tied to capital investment.

The SC held that the grant of exemption u/s 80G is not automatic merely because the assessee holds registration u/s 12AA. It clarified that the specific conditions prescribed u/s 80G must be independently satisfied for each assessment year to claim the benefit. While not disturbing the existing benefit already granted, the Court permitted the Revenue to take appropriate action in case of any violation of Section 80G conditions, subject to due process of law.

The Court noted that the entire basis of the impugned recovery orders was Rule 96(10), and no independent statutory provision supported the action of the department. It was held that once the rule was omitted without any saving clause, all proceedings initiated under that rule ceased to have legal validity and could not be continued. Accordingly, the Court quashed and set aside the recovery orders dated 21.12.2023 and allowed the writ petitions in favour of the assessee.

The Court held that proceedings u/s 148A are only for forming a prima facie view regarding escapement of income, and not for final adjudication. It ruled that cross-examination is not mandatory at the section 148A stage and becomes necessary only during reassessment u/s 147 if the statement is relied upon. Accordingly, the writ petition was dismissed, and the Court clarified that the assessee would be entitled to cross-examination at the appropriate stage of reassessment proceedings.

The SC declined to interfere with the judgment of the HC and dismissed the SLP filed by the Revenue. It affirmed that CAM charges do not partake the character of rent, as they are paid towards maintenance services and common utilities rather than for the use or occupation of immovable property. Accordingly, the Court upheld that tax is to be deducted at source u/s 194C and not u/s 194-I, thereby deciding the matter in favour of the assessee.

The HC of Karnataka noted that the order was passed without the benefit of any reply. Considering the recovery made and the assessees request to explain the case, the Court granted an opportunity. The order was set aside and matter remitted for fresh adjudication. Bank attachment was rescinded, and recovered amount made subject to the outcome.

The Court held that assessment orders passed in the name of non-existent entities are fundamentally invalid and void ab initio, especially when the Revenue had prior knowledge of the amalgamation. It was further held that the HC was justified in allowing the production of additional evidence, as such material was necessary for effectively deciding whether the AO had knowledge of the amalgamation. The SC of India dismissed the SLP filed by the Revenue, observing that no interference was warranted in the HCs decision.

The Court held that the seizure of cash was illegal and without authority, as mandatory conditions u/s 67(2), especially the reason to believe, were not fulfilled. It ruled that non-issuance of notice within 6 months violated Section 67(7), making retention of cash unlawful. The Court quashed the seizure orders and directed a refund of Rs. 1 crore with applicable interest to the petitioner.

The Allahabad HC held that rejection of refund claims without excluding the Covid period was legally unsustainable. The impugned orders were quashed as the computation of limitation stood vitiated due to non-compliance with the SC directions. The matter was remanded for fresh consideration of refund applications after applying the mandated exclusion period and granting proper hearing.

The HC held that the appellate order suffered from clear non-application of mind, as it simply reiterated the findings of the adjudicating authority without any independent analysis. The Court observed that the appellate authority failed to consider the explanations and documentary evidence already available on record, thereby rendering the order unreasoned and legally unsustainable. Accordingly, the impugned appellate order was set aside, and the matter was remanded back to the appellate authority for fresh consideration on the merits after proper evaluation of all records and contentions.

The Court held that section 263 requires both error and prejudice, and since the AO made proper inquiries and adopted a plausible view, revision was unjustified. It was ruled that income from unlisted shares is to be treated as capital gains as per the CBDT Instruction, and the assessees conduct clearly reflected an investment, not trading. The ITATs order was upheld, the revision u/s 263 was quashed, and the Revenues appeal was dismissed in favour of the assessee.

The Bombay HC held that GSTAT possesses inherent and incidental powers to grant interim relief, including a stay of recovery during the pendency of an appeal. Such power flows from the wide appellate jurisdiction u/s 111 and 113 of the CGST Act, even though there is no express provision for stay. Since an effective alternative remedy existed before GSTAT, the assessee should approach the Tribunal for interim relief; the writ petition was therefore not entertained.

The Calcutta HC held that the relevant date for refund was 20-06-2021 (due date of return), and the application filed in June 2023 was within the two-year limit u/s 54(1). The Court ruled that an executive circular cannot retrospectively restrict a statutory right to claim a refund once it has accrued. The rejection orders were set aside, and the authority was directed to reconsider the refund claim on the merits without applying the circular.

The Court held that ISD is required to distribute ITC and not merely the tax shown in the invoice, and such credit arises only after the conditions u/s 16(2) are fulfilled. Rule 39(1)(a) must be interpreted to mean that the ITC available for distribution in a month refers to the ITC that has become eligible after fulfilling Section 16 conditions, not simply upon receipt of an invoice. Accordingly, allegations of delayed distribution must be examined in light of this interpretation, and the SCNs must be adjudicated considering that the distribution obligation arises only when ITC becomes legally available.

The HC held that the cancellation order contained no reasons and showed no application of mind, making it arbitrary and violative of Article 14 of the Constitution. Consequently, the cancellation order and the appellate order dismissing the appeal were quashed. The Court directed the assessee to file a reply to the SCN within three weeks, and the authority to pass a fresh order after providing an opportunity of hearing.

The Court held that Section 122(1A) can apply only when a person retains the benefit of the transaction, and the transaction is conducted at his instance, which was not established against the petitioners. Since the petitioners were employees and not taxable persons, a penalty u/s 122(1A) could not be imposed on them. As Section 122(1A) came into force from 1-1-2021, applying it to acts prior to that date violated Article 20(1) of the Constitution, and the penalty orders were quashed.

The assessee discharged its burden u/s 68 by proving identity, creditworthiness, and genuineness through strong documentary evidence. Non-appearance of directors cannot override verified records; suspicion cannot substitute evidence. No substantial question of law arose; the Tribunals order deleting Rs. 6.22 crore was upheld and Revenues appeal was dismissed.

Section 148A mandates the supply of information suggesting escapement of income, not copies of the entire material relied upon. Mention of transaction amounts and the nature of alleged bogus transactions was sufficient compliance at the 148A stage. No jurisdictional error was found; the reassessment notice and proceedings were upheld in favour of the Revenue.

Though portal upload is a valid mode of service u/s 169, in the absence of a response, the officer should have explored other statutory modes (preferably RPAD) to ensure effective service. Passing an ex parte order without a personal hearing amounted to a violation of principles of natural justice; both assessment and appeal rejection orders were unsustainable. The matter was remanded for fresh adjudication, subject to payment of 25% of the disputed tax, with direction to provide an effective personal hearing.