Allahabad High Court Monthly Tax Digest: May 2024

Mr. Pranay Dhabhai v. State Of U.P. And 2 Others 2024 LiveLaw (AB) 299

Mentha And Allied Products Ltd vs. State Of U.P. And 3 Others 2024 LiveLaw (AB) 300

Satish Kumar Bansal Huf v. National Faceless Assessment Centre Nafac And Another 2024 LiveLaw (AB) 301

M/S K Y Tobacco Works Pvt. Ltd. vs. State Of U.P. And 4 Others 2024 LiveLaw (AB) 319

M/S Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia v. State Of U.P. Thru. Prin. Secy. Deptt. Of State Tax,Lko. And 2 Others 2024 LiveLaw (AB) 320

The Pr Commissioner Of Income Tax, Aaykar Bhawan And Another vs. The Mahabir Jute Mills Lts. Sahjanwah Gorakhpur 2024 LiveLaw (AB) 327

The Commissioner, Commercial Tax U.P. v. M/S R.P. Milk Made Products (P) Ltd. 2024 LiveLaw (AB) 328

M/S S Kumar Construction v. Commissioner Of Central Excise (Appeals), Central Goods And Services Tax (Appeals) And Another 2024 LiveLaw (AB) 344

M/S.Raman Ispat Pvt. Ltd. Versus Cce Meerut 2024 LiveLaw (AB) 354

Commissioner Commercial Tax, U.P. At Lucknow V. M/S Pan Parag India Limited 2024 LiveLaw (AB) 356

M/S Tata Steel Ltd. v. Commissioner Trade Tax U.P. Lucknow 2024 LiveLaw (AB) 357

Ravindra Pratap Shahi v. Union Of India And 2 Others 2024 LiveLaw (AB) 358

M/S Ace Manufacturing Systems Limited v. State Of U P And 3 Others 2024 LiveLaw (AB) 360

ORDERS/ JUDGMENTS OF THE MONTH

Tax Dues Can't Be Collected From Director Of Company Under Liquidation Unless Provided By Some Statute: Allahabad High Court Reiterates

Case Title: Mr. Pranay Dhabhai v. State Of U.P. And 2 Others

Case Citation: 2024 LiveLaw (AB) 299

Relying on its earlier decision in A.S. Solanki Vs. State of U.P. and others, the Allahabad High Court has reiterated that tax dues cannot be collected from director of company under liquidation unless it has been provided in any statute.

The Allahabad High Court in A.S. Solanki had held that in a case where it was ascertained that the corporate veil had been used for malafide intent, the corporate personality shall be lifted so that the individuals responsible could be held liable. However, this doctrine could not be applied as a matter of course and be used to recover the dues of a company when they were unrecoverable, from the personal assets of the Directors.

UPVAT | Computation Of Correct ITC Be Examined By Assessing Authority Not Later Than Stage Of Making Regular Assessment Order: Allahabad High Court

Case Title: Mentha And Allied Products Ltd vs. State Of U.P. And 3 Others

Case Citation: 2024 LiveLaw (AB) 300

The Allahabad High Court has held that computation of correct input tax credit can only be done till the passing of the regular assessment order by the Assessing Authority and not at a later stage. The Court held that reverse input tax credit is neither a 'rate of tax' nor a 'turnover' which can be subjected to reassessment under Section 29 of the Uttar Pradesh Value Added Tax Act, 2008.

ThE bench comprising of Justice Saumitra Dayal Singh and Justice Donadi Ramesh held that “ITC did not arise as a "rate" applied to "turnover". It was an "allowance" created/arising upon fulfillment of statutory conditions. If those conditions were not fulfilled, RITC could be done, under Section 14 of the Act and also in the course of regular assessment - for reason of that power specifically vested by the legislature. No such power/jurisdiction has been vested under Section 29(1) of the Act to assume jurisdiction to initiate reassessment proceedings to redetermine ITC or to RITC.”

S.144B(6) Income Tax Act | If Assessee “Requests” Then Opportunity Of Personal Hearing Is Mandatory, Not Optional: Allahabad High Court

Case Title: Satish Kumar Bansal Huf v. National Faceless Assessment Centre Nafac And Another

Case Citation: 2024 LiveLaw (AB) 301

The Allahabad High Court has held that opportunity of personal hearing is mandatory under Section 144B(6)(vii) and (viii) of the Income Tax Act, 1961 when show cause notice is issued regarding why assessment may not be completed as proposed. The Court held that once the assesee “requests” for an opportunity of personal hearing, it becomes incumbent on the Assessing Authority to grant that opportunity under Section 144B(6)(viii).

S.129(3) UPGST| Burden To Prove Double Movement Of Goods Based On Same Documents Lies On The Department: Allahabad High Court Reiterates

Case Title: M/S K Y Tobacco Works Pvt. Ltd. vs. State Of U.P. And 4 Others

Case Citation: 2024 LiveLaw (AB) 319

Relying on its earlier decision in M/s Anandeshwar Traders v. State of U.P. and Others, the Allahabad High Court has held that the burden to prove double movement of goods based on same documents lies on the department.

The Allahabad High Court in M/s Anandeshwar Traders v. State of U.P. and Others held that the positive burden to prove that goods had been transported on an earlier occasion lies on the Assessing Authority. The Court had observed that since no inquiries were made from the assesee, toll plaza, purchasing dealer or any other source as to whether goods had been transported earlier, presumption could not have been drawn by the authorities merely based on the e-way bill.

S.16 GST| Authorities Not Estopped From Taking Action Against Wrongful Claim Of ITC Based On Non-Existent Firms: Allahabad High Court

Case Title: M/S Rajshi Processors Raebareli Thru. Its Partner Ashok Kumar Lakhotia v. State Of U.P. Thru. Prin. Secy. Deptt. Of State Tax,Lko. And 2 Others

Case Citation: 2024 LiveLaw (AB) 320

The Allahabad High Court has held that the authorities are not estopped from taking action against wrongful claim of input tax credit merely because the firms with which transactions were alleged to have been done were registered at the time of the alleged transactions.

Observing that fraud vitiates even the most solemn proceedings, Justice Subhash Vidyarthi, held that “mere fact that the I.T.C. benefit had earlier been granted to the petitioner merely because the firms were registered, would not create any estoppel against the authority taking appropriate action for claiming refund of the benefit wrongly availed by the petitioner on the ground of receiving inward supplies from non-existent firms.”

[Income Tax] Once Books Of Accounts Not Objected To Before Tribunal, AO Can't Disturb Gross Profit Rates Applied By Assesee: Allahabad High Court

Case Title: The Pr Commissioner Of Income Tax, Aaykar Bhawan And Another vs. The Mahabir Jute Mills Lts. Sahjanwah Gorakhpur

Case Citation: 2024 LiveLaw (AB) 327

The Allahabad High Court has held that once the acceptance of books of accounts by the Commissioner of Income Tax (Appeals) have not been objected to by the Assessing Authority before the Income Tax Appellate Tribunal, it is not open to the Assessing Officer to disturb the gross profit rate as declared by the assesee.

The bench comprising of Justice Saumitra Dayal Singh and Justice Donadi Ramesh held that

“in absence of any other objection found in the books of accounts of the assessee as may have been pressed before the Tribunal, there survives no room to reject the books of accounts of the assessee. Consequently, there is no intrinsic evidence to enhance the gross profit rate. Once the books of accounts of an assessee are found accepted the Assessing Officer may have remained within the confines of his powers ad not disturbed the gross profit rate as that would remain in the nature of the result of the book entries and not an original entry by itself.”

S.2(e) UPVAT| Plant, Machinery Sold After Closure Of Business Are Capital Goods, Excluded From Levy Of Tax: Allahabad High Court

Case Title: The Commissioner, Commercial Tax U.P. v. M/S R.P. Milk Made Products (P) Ltd.

Case Citation: 2024 LiveLaw (AB) 328

The Allahabad High Court has held that plant and machinery sold after the closure of business are capital goods under Section 2(f) of the Uttar Pradesh Value Added Tax Act, 2008 and are excluded from levy of tax under the amended definition of 'business' under Section 2(e) of the Act.

The Court held that the amended definition of 'business' under Section 2(e) of the Act presumes that the goods which are being sold were acquired during the active period of business and sold after its closure. However, capital goods were intentionally left out by the legislature while amending the definition.

[S.85 Finance Act 1994] Limitation Period Prescribed In Special Statutes Prevails Over Limitation Act: Allahabad High Court

Case Title: M/S S Kumar Construction v. Commissioner Of Central Excise (Appeals), Central Goods And Services Tax (Appeals) And Another

Case Citation: 2024 LiveLaw (AB) 344

The Allahabad High Court has held that the limitations prescribed under special statutes, such as Finance Act, 1994 will prevail over the limitations mentioned in the Limitation Act, 1963. The Court held that statutes such as the Finance Act, 1994 or the Central Excise Act, 1944 were enabled to address specific areas of law and that they often contained detailed provisions regarding procedural aspects such as limitation.

Option Once Exercised For A Financial Year May Not Be Withdrawn Midway: Allahabad High Court

Case Title: M/S.Raman Ispat Pvt. Ltd. Versus Cce Meerut

Case Citation: 2024 LiveLaw (AB) 354

The Allahabad High Court has held that an option, once exercised for a financial year, may not be withdrawn midway. The bench of Justice Saumitra Dayal Singh and Justice Donadi Ramesh has observed that the only recourse that applicant may have taken may be to apply to the jurisdictional authority to discontinue the benefit of the compounding scheme from the beginning of the next financial year, i.e., 1.4.1998. For the option to be exercised, the applicant ought to have made that application before the date i.e. 1.4.1998, and in any case before making the deposit of the compounding fee for the month of April, 1998. Having done otherwise, the applicant lost the opportunity to withdraw from the compounding scheme for the financial year 1998–99.

Franchise Agreement Granted Non-Exclusive Licence Rather Than Transfer Of Right To Use Goods, VAT Not Payable: Allahabad High Court

Case Title: Commissioner Commercial Tax, U.P. At Lucknow V. M/S Pan Parag India Limited

Case Citation: 2024 LiveLaw (AB) 356

The Allahabad High Court has held that the franchise agreement granted a non-exclusive licence rather than a transfer of the right to use goods and the transaction does not attract Value Added Tax under the Uttar Pradesh Value Added Tax Act (UPVAT Act). Justice Shekhar B. Saraf observed that the respondent-department had received royalty amount from various dealers under the franchise agreement and service tax has been duly paid by it on the same. If the payments have been subjected to service tax, they cannot be recharacterized as the sale of goods to levy VAT or sales tax.

Failure To Cite Judgment Does Not Render Original Judgement Flawed: Allahabad High Court

Case Title: M/S Tata Steel Ltd. v. Commissioner Trade Tax U.P. Lucknow

Case Citation: 2024 LiveLaw (AB) 357

The Allahabad High Court has held that mere failure to cite a judgement does not, in and of itself, render the original judgement flawed. Justice Shekhar B. Saraf observed that the review jurisdiction is not a panacea for addressing every perceived deficiency or oversight in the original judgement; rather, it is a narrow avenue reserved for rectifying errors glaringly evident on the face of the record. Failure to cite a particular judgement does not automatically invalidate the reasoning or merit of the decision under question.

[Income Tax Act] Proceedings U/S 148A Summary In Nature, Assessing Authority To Only See If It Is “Fit Case” For Reassessment: Allahabad HC

Case Title: Ravindra Pratap Shahi v. Union Of India And 2 Others

Case Citation: 2024 LiveLaw (AB) 358

The Allahabad High Court has held that proceedings under Section 148A of the Income tax Act, 1961 are summary in nature. The Court held that at the stage of passing order under Section 148A(d), the Assessing Authority has to only see if it is a “fit case” for initiation of reassessment proceedings or not. The Court held that the Assessing Authority need not go into the correctness of the material but only record its satisfaction as to the relevancy of the material for assuming jurisdiction for initiating reassessment proceedings under Section 148 of the Act.

Over Dimensional Cargo Can't Be Penalized For Reaching Earlier Than Estimated Time: Allahabad High Court

Case Title: M/S Ace Manufacturing Systems Limited v. State Of U P And 3 Others

Case Citation: 2024 LiveLaw (AB) 360

The Allahabad High Court has held that Over Dimensional Cargo cannot be penalized by the authorities for reaching its destination in less time than estimated by travelling at a higher speed when there is no intention to evade tax. Clause 2.4 of the Circular issued by Commissioner, State Tax dated 17.01.2024 provides that Over Dimensional Cargo cannot be detained and penalty cannot be imposed only because the goods have reached the intended place earlier than the estimated time.