Tax Weekly Round-Up: 6th January - 12th January 2025

Kapil Dhyani

13 Jan 2025 1:20 PM

  • Tax Weekly Round-Up: 6th January - 12th January 2025

    SUPREME COURT Reduction In Share Capital Amounts To Transfer Of Capital Asset Under Income Tax Act : Supreme Court Case Name: PRINCIPAL COMMISSIONER OF INCOME TAX-4 & ANR v. M/S. JUPITER CAPITAL PVT. LTD. Case no.: SPECIAL LEAVE PETITION NO. 63 OF 2025 The Supreme Court (recently on January 02) reiterated that reduction in share capital is covered under Section 2(47) of...

    SUPREME COURT

    Reduction In Share Capital Amounts To Transfer Of Capital Asset Under Income Tax Act : Supreme Court

    Case Name: PRINCIPAL COMMISSIONER OF INCOME TAX-4 & ANR v. M/S. JUPITER CAPITAL PVT. LTD.

    Case no.: SPECIAL LEAVE PETITION NO. 63 OF 2025

    The Supreme Court (recently on January 02) reiterated that reduction in share capital is covered under Section 2(47) of the Income Tax Act, 1961, which talks about transfer of a capital asset. It explained that such reduction would come under the expression “sale, exchange or relinquishment of the asset” used in the provision.

    The Bench of Justices J.B. Pardiwala and R. Mahadevan said that this provision provides an inclusive definition of transfer, covering relinquishment of an asset or extinguishment of any right.

    HIGH COURTS

    Allahabad HC

    [GST] Decision-Making Procedure Adopted By Authority De Hors Provisions Of Act/Rules, Is Liable To Be Rendered As Flawed: Allahabad High Court

    Case Title: M/S Akriti Food Industry Llp v. State Of UP And 3 Others

    Case no.: [WRIT TAX No. - 2070 of 2024]

    While directing that the order under Section 73 of the Goods and Service Tax Act, 2017 uploaded in the “Additional Notices and Tabs” on the GST portal be treated as the show cause notice, the Allahabad High Court observed,

    “If in a decision making procedure adopted by the authority is de hors the provisions of the act or rules framed thereunder, it is liable to be rendered as flawed one.”

    Delhi HC

    Customs Dept Should Serve Notices By Email In Addition To Post, Will Prevent Delay And Non-Appearances: Delhi High Court

    Case title: Bonanza Enterprises v. The Assistant Commissioner Of Customs & Anr.

    Case no.: W.P.(C) 7510/2024

    The Delhi High Court recently called upon the Customs Department to make use of Section 153(c) of the Customs Act, 1962 which empowers it to serve notices through email. A division bench of Justices Prathiba M. Singh and Amit Sharma said such an approach will prevent delay and non-appearances, leading to expeditious disposal of matters.

    “In the opinion of this Court, the provision itself makes it clear that notices can be sent by email…The Customs Department ought to in future follow a system by which in addition to notices by speed post, registered post or courier, notices are also sent on the email address which is provided on the letterhead of the Petitioner or any authorised person. This would avoid substantial delay and matters proceeding ex-parte as has happened in the present case,” it said.

    Uploading Information On Insight Portal Not A Substitute For Handing Over Material To AO For Non-Searched Entity U/S 153C Of IT Act: Delhi HC

    Case title: ATS Township Pvt Ltd v. Assistant Commissioner Of Income Tax Circle 1(1) Delhi & Ors

    Case no.: W.P.(C) 13790/2024

    The Delhi High Court has held that the provision under Section 153C of the Income Tax Act, 1961 for the Assessing officer of a searched person to record 'satisfaction' and handover documents regarding undisclosed income of another person cannot be substituted by merely uploading such information on the Department's insight portal.

    A division bench of Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela observed, “Uploading of information by the investigation wing of the Income Tax department would not be a substitute for recording of a satisfaction note by the AO of a searched person and handing over the assets, books of accounts or other material to the AO of the person other than the searched person for the purpose of initiation of proceedings under Section 153C of the Act.”

    Assessee Must Clearly Establish 'Movement Of Goods' To Defend Allegations Of Accommodation Entries: Delhi HC

    Case title: Abhishek Bansal v. Income Tax Officer, Ward 58(3), Delhi

    Case no.: W.P.(C) 17300/2024

    The Delhi High Court has made it clear that merely producing transaction documents to establish that payments were made to an entity is not sufficient to defend the allegations of accommodation entries.

    A division bench of Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela observed, “The documents provided by the petitioner would establish that the payments had been made to Shri Ajay Gupta through banking channels. However, the same does not address the allegation of purchases reflected were accommodation entries…In the present case, the petitioner was required to clearly show the movement of goods to establish that the goods had in fact moved from Shri Ajay Gupta to the petitioner. However, it does not appear that any such information was provided by the petitioner to the AO.”

    Income Tax Dept Can Invoke S.159 When Reassessment Notice Was Issued During Lifetime Of Deceased Assessee: Delhi HC

    Case title: Late Sh. Lal Chand Verma Through His Legal Heir v. Union Of India & Anr.

    Case no.: W.P.(C) 8184/2023

    The Delhi High Court has held that Section 159 of the Income Tax Act can be invoked to proceed against the legal representative of an assessee, only in cases where the reassessment notice was issued to the assessee during his lifetime, not after.

    Division bench of Justices Yashwant Varma and Dharmesh Sharma noted that “Section 159 of the Act is applicable when proceedings are initiated and pending against an assessee during their lifetime, and the legal representative assumes responsibility after the assessee's death. This was not the factual scenario in the present case; therefore, Section 159 of the Act is not applicable here.”

    Customs Dept Cannot Encash Bank Guarantee Furnished By Trader During Pendency Of Appeal If Pre-Deposit Is Made: Delhi HC Affirms

    Case title: Amar Singh And Sons Tree Nuts LLP v. The Superintendent Of Customs, Epm, Import & Ors.

    Case no.: W.P.(C) 149/2025

    Based on a circular issued by the Finance Ministry, the Delhi High Court has affirmed that the Customs Department cannot encash the bank guarantee furnished by a trader, whose import/export transactions are in dispute, if the latter has made a pre-deposit with his appeal against the demand and penalty.

    A division bench of Justices Prathiba M. Singh and Dharmesh Sharma observed, “A perusal of the Circular and the clauses extracted above would show that no coercive measures can be taken against the Appellant during the period when the limitation for filing of the appeal has not expired. In addition, if the pre-deposit has already been made the remaining amount cannot be recovered by encashment of the bank guarantee.”

    Delay In Issuing Requisition U/S 132A Of Income Tax Act Due To Investigation By Department Can Be Condoned: Delhi HC

    Case title: Gautam Thadani v. Director Income Tax (Investigation) And Anr.

    Case no.: W.P.(C) 10960/2016

    The Delhi High Court has held that the delay in issuing requisition under Section 132A of the Income Tax Act, 1961, can be condoned if the same is explained by the Authority concerned.

    A division bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma observed, “...there has been some delay in issuance of the impugned requisition, however, the Income Tax Department has explained that the said delay was on account of investigations conducted by it. In the given circumstances, we are unable to accept that the impugned requisition is liable to be rejected on the ground of delay. ”

    AO Bound To Ascertain 'Correctness' Of Information Available Against Assessee, 'Decide' Whether It Is Sufficient To Reopen Assessment: Delhi HC

    Case title: Sonansh Creations Pvt Ltd. v. Assistant Commissioner Of Income Tax And Anr.

    Case no.: W.P.(C) 12316/2022

    The Delhi High Court has turned down the contention that an Assessing Officer, at the stage of passing an order under Section 148A(d) of the Income Tax Act, 1961 for initiation of reassessment proceedings, is not required to form any opinion as to the genuineness or veracity of the information available against an assessee.

    A division bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma observed, “As is clear from the plain language of Section 148A(d) of the Act, the AO has to decide whether it is a fit case for issuance of notice under Section 148 of the Act. This decision would require the AO to take a view in respect of the material available and form an opinion whether there are grounds to believe that the assessee's income has escaped assessment.”

    Income Tax Act | Reassessment Notice To Merged Entity U/S 148A(d) Not Invalid Merely Because SCN Was Issued In Name Of Ceased Entity: Delhi HC

    Case title: Sonansh Creations Pvt Ltd. v. Assistant Commissioner Of Income Tax And Anr.

    Case no.: W.P.(C) 12316/2022

    The Delhi High Court has made it clear that merely because notice under Section 148A(b) of the Income Tax Act, 1961 is issued in the name of an amalgamating company which had ceased to exist, subsequent notice issued under Section 148A(d) in the name of merged entity cannot be declared invalid.

    A division bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma held, “The nature of proceedings under Section 148A of the Act is to enable the AO to form an opinion whether it is a fit case for issuance of notice under Section 148 of the Act. Given the nature of the proceedings under Section 148A of the Act, we are unable to accept that issuance of a notice under Section 148A(b) of the Act in the name of an entity, which had since amalgamated with the petitioner, would be fatal to the AO assuming jurisdiction by issuance of notice under Section 148 of the Act in the name of the petitioner.”

    Himachal Pradesh HC

    Twin Conditions U/S 127 Of Income Tax Act For Transferring Assessee's Case From One Officer To Another Are Mandatory: Himachal Pradesh HC

    Case title: M/s Deluxe Enterprises v. Income Tax Officer

    Case no.: ITA No. 23 of 2017 alongwith CWP No.6575 of 2014

    The Himachal Pradesh High Court has elucidated the mandatory twin conditions for transfer of an assessee's case under Section 127 of the Income Tax Act, 1961, from one Assessing Officer to another.

    A division bench of Justices Tarlok Singh Chauhan and Rakesh Kainthla observed, “The twin conditions to be complied with by the respondents for transferring the case of the appellant/petitioner from respondent No.4 to respondent No.5 are: (i) the assessee should have been given a reasonable opportunity of being heard and (ii) the reasons for transfer should have been recorded.”

    Madras HC

    FAOs And JAOs Have Concurrent Jurisdiction For Assessment, Re-assessment Or Re-Computation U/S 147 Income Tax Act: Madras High Court

    Case Title: Mark Studio India Private Limited v. Income Tax Officer and Others

    Case No: W.P.Nos.25223 & 25227 of 2024

    The Madras High Court recently clarified that both the Faceless Assessment Officer and Jurisdictional Assessment Officer have concurrent jurisdiction as far as assessment, re-assessment or re-computation under Section 147 of the Income Tax Act.

    Justice Krishnan Ramasamy made it clear that for issuance of notice under Section 148 of the IT Act, the JAO had exclusive jurisdiction. The court added that in matters of international taxation, central Circle charges and search and seizure cases also, the JAO had exclusive jurisdiction and the FAO, in such cases, did not have jurisdiction to make assessment, re-assessment or re-computation.

    What Constitutes Valid Service Of Notice U/S 169 Of CGST Act? Madras High Court Clarifies

    Case Title: Udumalpet Sarvodaya Sangham v. The Authority

    Case Number: W.P.(MD)Nos.26481

    The Madras High Court interpreted Section 169 of Central Goods and Services Tax Act, 2017 and stated that Section 169 mandates a notice in person or by registered post or to the registered e-mail ID alternatively and on a failure or impracticability of adopting any of the aforesaid modes, then the State can, in addition, make a publication of such notices/ summons/ orders in the portal/ newspaper through the concerned officials.

    The Bench of Justice K. Kumaresh Babu observed that “when the Statute had also mandated issuance of notice in person/ registered post/ e-mail, etc., the Rules cannot be limited to only serving it through electronic modes.”

    Telangana HC

    S.168A GST Act | 'Recommendation' Of GST Council To Extend Limitation Period Can't Be Substituted By Subsequent 'Ratification': Telangana HC

    Case title: M/s.Brunda Infra Pvt. Limited and Others. vs. The Additional Commissioner of Central Tax

    Case no.: WRIT PETITION Nos.1154 OF 2024

    The Telangana High Court has upheld the validity of a 2023 notification, issued by the GST Department post COVID-19 pandemic, for extending the limitation period prescribed for issuing notices under Section 73 of the Central Goods and Services Tax Act, 2017. A division bench of Justice Sujoy Paul and Dr. Justice G. Radha Rani also upheld a notification issued in 2022 for similar purpose. In doing so, it observed,

    “In the manner statute i.e., Section 168A is worded, there is no cavil of doubt that the Law makers intended to give it a broader umbrella to bring within its shadow, such actions which could not be completed or complied with, due to force majeure…The COVID-19 Pandemic created extraordinary difficulties which could not have been anticipated, measured and solved with mathematical precision. Thus, hair-splitting in many aspects must be eschewed…While dealing with such an extraordinary crisis, Government's action must be viewed in a broad perspective.”

    TRIBUNALS

    Service Tax Not Payable On Commission Received From Foreign Universities For Promoting & Publicizing Business In India: CESTAT

    Case Title: TC Global India Pvt. Ltd. v. Additional Director General, DGCEI, New Delhi

    Case Number: Service Tax Appeal No. 51355 of 2017

    The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that service tax is not payable on commission received from foreign universities for promoting and publicizing business in India.

    The Bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that “the assessee is held not liable to pay service tax with reference to foreign Consultancy Income i.e. the income received from foreign universities for promoting and publicizing their business in India.”

    Goods Loaded Without Proper Documents Can't Be Exported Without Clearance By Customs Officials: CESTAT Kolkata Sets Aside Penalty

    Case title: M/s. Samudera Shipping Line (India) Pvt. Ltd. v. Commissioner of Customs (Port)

    Case no.: Customs Appeal No. 75641 of 2021

    Stating that goods wrongly loaded by the steamer agent could not have been exported without clearance by the Customs officials themselves, the Customs, Excise & Service Tax Appellate Tribunal at Kolkata set aside the penalty imposed under Section 114 of the Customs Act, 1962.

    Noting that the goods had been successfully exported and remittance against it had been received, the bench comprising Judicial Member R. Muralidhar and Technical Member K. Anpazhakan said the same could not have been possible without clearance by the Customs Department. Thus, the penalty imposed on Appellant would be bad in law.

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