Tax LawBeat

“Your Daily Tax Law Newsletter highlighting Income Tax, Direct Tax & International Tax Law Cases” of eminence.

Income Tax Cases

1. Vijay Mittal Vs ITO [ITA No. 572/Kol/2018] – February 17, 2021

Kolkata ITAT while answering in favour of taxpayer, held that disallowance of commission and development charges and addition on account of unexplained cash credit cannot be sustained when assessee has discharged his burden of proof by furnishing relevant evidence.

The ITAT observed that the addition was sustained by the CIT(A) for the reason that compliance was not made during the original assessment proceedings and at the remand stage. This cannot be a ground of making addition for the reasons that the Assessing Officer had made the addition on the ground that the deposits in bank accounts are not explained. Without a copy of the bank account, the Assessing Officer cannot come to a conclusion that the deposits made in a bank account are unexplained. All details including copies of bank accounts were furnished by the assessee. The evidence given by the assessee is not disputed by the revenue. The addition was confirmed in a summary manner, without reference to the facts.

2. Yeshoda Electricals Vs ACIT [1175/Bang/2016] – February 03, 2021

Bangalore ITAT while answering in favour of the taxpayer, held that an unsigned show cause notice issued by the AO cannot be held as valid, particularly when the office copy of the notice is duly signed. The tribunal observed that non-signing of a notice is not a clerical mistake and there cannot be any waiver by the assessee of an irregularity of an unsigned notice. Section 282 of the Act provides that a notice under the Act may be served on the person name therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908. Sub-rule (3) of Rule 1 of Order 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints.

In view of this provision, the notice issued u/s. 148 should have been signed by the AO and omission to do so invalidated the notice. Further, the provisions of section 292B of the Act intended to ensure that an inconsequential technicality does not defeat justice. But, the signing of a notice under section 148 of the Act is not merely an inconsequential technicality. It is a requirement of the provisions of Order 5, Rule 1(3) of CPC, which are applicable by virtue of Section 282 of the Act. Under the circumstances, the provisions of section 292B of the Act would not be attracted so as to make it as a valid notice in the eye of law. Therefore, the requirement of the signature of the AO is a legal requirement.

3. VSR Enterprises Vs ITO [ITA No. 1856/Del./2016] – February 17, 2021

Delhi ITAT while answering in favour of the taxpayer, held that the AO recorded wrong, incorrect and non-existing reasons in the reasons recorded for reopening of the assessment. It would also show that A.O. did not apply his mind to the information received from REIC through ITO, Ward-43(4), New Delhi. The A.O. without any basis has recorded wrong, incorrect and non-existing reasons for reopening of the assessment. The A.O. also did not mention in the reasons that as to how much amount, the income chargeable to tax has escaped assessment in the case for assessee for assessment year under appeal. All these facts clearly support the explanation of assessee that A.O. without any cause or justification recorded wrong, incorrect and non-existing reasons for reopening of the assessment.

Indirect Tax Cases

1. Rashi Peripherals Pvt Ltd Vs UoI [WP (C) No. 3844/2021] – March 23, 2021

Delhi High Court while disposing of the petition, observed it is the case of respondents that the inspection revealed that there was a mismatch between the goods stocked at the premises and the details set forth in the stock register. The petitioner says that no opportunity was given to reconcile the alleged mismatch. That a statement of officer employed with the petitioner, present at the premises during inspection was taken under threat and coercion.

Further, the impugned order is a case of overreach for the reason that the petitioner has been prohibited from dealing with its goods which are worth nearly Rs. 8.00 crores. The petitioner will appear before the concerned officer for the purpose of reconciliation of alleged variation in the stock on 26.03.2021 with relevant documents. The concerned officer, after examining the material placed before him and after granting petitioner a hearing in the matter will pass a speaking order. Needless to add, the concerned officer, apart from anything else, will set forth in the order if he is not satisfied with the explanation given to him, as to the quantum of the variation in monetary terms. The petitioner will, then, have an option to seek release of goods if it chooses not to assail the order passed by the concerned officer by securing the revenue to the extent indicated by him.

2. Medreich Ltd Vs UoI [Writ Petition No. 15280/2020 (T-Res)] – March 15, 2021

Karnataka High Court observed that the petitioner has filed a declaration in FORM GST TRAN-1 and sought to revise it in light of an error which was not possible to rectify due to technical difficulty. It is submitted that in light of the order passed by this court in Asiad Paints Limited, the present petition also requires to be allowed on the same terms. The writ petition is allowed directing the respondents to permit the petitioner to file/revise TRAN-1 either electronically or manually on or before Mar 31, 2021. However, the Department is at liberty to examine the validity and genuineness on the merits of the claim of the petitioner, in accordance with law.

3. Flemingo Dutyfree Shop Pvt Ltd Vs UoI [WP (MD)No. 2129 of 2018 and WMP(MD)No. 2373 of 2018 & 2980 of 2019] – March 11, 2020

Madras High Court (Madurai Bench) observed that the case on hand pertains to the duty free shop run by the petitioner at Trichy International Airport. The question raised in the writ petition is regarding the applicability of Central Goods and Service Tax Act, 2017 and the Integrated Goods and Service Tax Act, 2017 and the Tamil Nadu Goods and Service Tax Act, 2017 and other Rules framed thereunder on the concession fees paid by the petitioner to the airport authority under the petition mentioned agreement. Court had granted an order of interim injunction restraining the airport authority from collecting GST from the petitioner herein.

The Bench found that the very same issue came up for consideration before the Bombay High Court in Sandeep Patil vs. Union of India, wherein it was held that since the duty free shop is located outside the customs frontier of India, it would be entitled to refund of ITC on the GST first paid by them. The said decision was followed by the Kerala High Court and where it was held that no GST is payable by respondent No. 4 Airport Authority and no useful purpose would be served in directing respondents No. 1 to 3 to recover any GST on concession fee till 30.06.2020, which respondent No. 4 will seek to recover from the petitioner since as per judgment dated 07.10.2019, the supply of goods by DFSs to outgoing passengers is export of goods under IGST and zero rated supply, and it would entitle the petitioner(s) to claim 100% of ITC and refund thereof effective from 01.07.2020 onwards. The very same approach can be adopted in the case on hand also but a slight tweaking will be required because the fourth respondent had paid GST to the first respondent for the period from 01.01.2018 to 31.03.2018.

Petition is disposed of with the following directions viz. Inasmuch as the petitioner would be entitled to refund of ITC on the GST paid by them, Bench is of the view that no purpose will be served by asking the petitioner to pay GST and thereafter claim refund. Therefore, for the period prior to 28.02.2021, the petitioner need not pay any GST to the fourth respondent. Petitioner has to pay GST on the concession fee to the fourth respondent and thereafter claim refund as per Section 54 of the CGST Act with effect from 01.03.2021.

4. Jai Maa Jwalamukhi Iron Scrap Supplier Vs State of UP [Writ Tax No. 614 of 2020] – March 17, 2021

Allahabad High Court held that since the GST Tribunal has yet not been constituted, the present writ petition was entertained - Petitioner had filed an appeal before the appellate authority and explained that there was no discrepancy in the GSTR-3B and GSTR-2A. They also sought to reconcile the “loose purchases”; with the original tax invoice as also the e-way bills issued from time to time that were otherwise uploaded on the web portal of the revenue authority. However, the appellate authority accepted the explanation furnished by the petitioner with respect to all but two “loose purchases”. Respondent revenue-authority has not denied the issuance of the invoice and the e-way bills, as claimed by the petitioner.

Thus for the purposes of this writ petition, it has to be assumed as correct that the invoice and the e-way bills appended with the writ petition, had been issued. Once the revenue authority admits that the invoice and the e-way bills relied upon by it had been issued in regular of course, it is difficult to imagine how the appeal authority could have reached a conclusion that the goods sold or purchased against those invoices were unaccounted for. To hold that there was discrepancy in the account is a different and lighter charge than to hold that the assessee had not disclosed or concealed part of its turnover. Merely because there may have been certain discrepancies, the transaction cannot be said to be one falling under the category of undisclosed turnover.