Hot Off The PressNews

Taking another step towards e-governance and encouraging participation of citizen as stakeholders in curbing tax evasion, the Central Board of Direct Taxes has launched an automated dedicated e-portal on the e-filing website of the Department to receive and process complaints of tax evasion, foreign undisclosed assets as well as complaints regarding Benami properties.

The public can now file a Tax Evasion Petition through a link on the e-filing website of the Department https://www.incometaxindiaefiling.gov.in/ under the head “File complaint of tax evasion/undisclosed foreign asset/ Benami property”. The facility allows for filing of complaints by persons who are existing PAN/Aadhaar holders as well as for persons having no PAN /Aadhaar. After an OTP based validation process (mobile and/or email), the complainant can file complaints in respect of violations of the Income-tax Act, 1961, Black Money (Undisclosed Foreign Assets and Income) Imposition of Tax Act, 1961 and Prevention of Benami Transactions Act (as amended) in three separate forms designed for the purpose.

Upon the successful filing of the complaint, the Department will allot a unique number to each complaint and the complainant would be able to view the status of the complaint on the Department’s website. This e-portal is yet another initiative of the Income Tax Department to bring about enhanced ease of interaction with the Department, while strengthening its resolve towards e-governance.


Ministry of Finance

[Press Release dt. 12-01-2021]

Case BriefsHigh Courts

Madras High Court: G.R. Swaminathan, J., directed the confiscated goods to be released on a provisional basis noting the delay on the part of Authorities in the adjudication of the matter.

Petitioner a dealer registered under the Goods and Services Tax Act who imports toys from China. It also purchases goods from Delhi-based dealers.

Dealer’s Stand

Dealer’s state that the returns till March 2020 have been filed and there are no arrears. Due to the lockdown restrictions amidst the pandemic, the business was shut down since April, 2020.

Following the partial lifting of restrictions, the petitioner reopened the business. Superintendent, CGST conducted a search at the petitioner’s place of business.

After the search operation, mahazar was drawn which was followed by a seizure order.

The said orders of seizure and prohibition issued by respondent 3 have been put to a challenge.

Analysis & Decision

Bench while addressing and analysing the issue, stated that,

Lord Atkin in his celebrated dissent in Liversidge v. Anderson, (1942) AC 206, proclaimed that laws speak the same language in war as in peace and that the words have only one meaning.

Likewise, laws speak the same language during normal as well as in pandemic times.

“…contemporary imperatives demand that courts, whenever possible, ought to adopt that approach which will kick- start the economy.”

Court also referred to Section 67 (1) and (2) of the Central Goods and Services Tax Act, 2017 which talks about the Power of inspection, search and seizure.

Supreme Court in ITO v. Lakhmani Mewal Das, (1976) 3 SCC 757, held that 

“…the existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression “reason to believe” does not mean a purely subjective satisfaction on the part of the officer. It must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section.”

Evading GST

In the present matter, the impugned proceedings were initiated based on the intelligence developed by CGST (HPU), Madurai that the petitioner is evading GST by mis-declaring the goods while importing.

It has been shown that the stock register was not maintained at the petitioner’s place of business, hence the Court doesn’t want to quash the seizure order, through the order of prohibition has to be necessarily interfered with.

No show-cause notice to date after the lapse of 40 days was issued.

In view of the above, Court stated that the respondent may not be in a hurry, they can afford to wait. Officials who get their salaries in the first week of every month may not be conscious of the cost of delays in such cases.

Further, the Court added that Adjudication proceedings may go on for months. That is why the statute provides for the provisional release of the detained goods.

Therefore, the Court directed the respondents to release the goods on a provisional basis and on taking a personal bond with a payment of Rs 2 lakhs.

While parting with its decision, Bench stated in regard to the Chinese products that,

“…general market is flooded with Chinese goods. The public must make a conscious choice to encourage swadeshi products.”

“The Indian entrepreneur must rise to the occasion. He must ask himself as to why the chinese products are preferred and he must come out with alternatives. There must be no compromise in quality. At the same time, the price factor should also be borne in mind.”

Petition was partly allowed in the above terms. [Tvl.Rising International Co. v. Commr. of Central GST and Central Excise,  2020 SCC OnLine Mad 2951, decided on 06-10-2020]

Case BriefsSupreme Court

Supreme Court: IN a major for the NDTV Ltd, the bench of L. Nageswara Rao and Deepak Gupta, JJ has quashed the notice of the Income Tax department seeking to re-assess the income of the media house for financial year 2007-08. The Court said,

“the notice and reasons given thereafter do not conform to the principles of natural justice and the assessee did not get a proper and adequate opportunity to reply to the allegations which are now being relied upon by the revenue.”

Factual Background

The case relates to the re-assessment notice issued by the Income Tax department in March 2015 to NDTV after noting that Rs 642 crore had allegedly not been computed for the tax assessment purposes of NDTV for financial year 2007-2008.

  • NDTV Ltd. had submitted the return for the financial year 2007-2008 declaring a loss.
  • it later came to notice that step­up coupon bonds amounting to US$100 million were issued in July, 2007 through the Bank of New York for a period of 5 years by NDTV’s UK based subsidiary named NDTV Network PLC (NNPLC).
  • On 31.03.2015, the revenue sent a notice to the assessee wherein it was stated that the authority has reason to believe that net income chargeable to tax for the assessment year 2008­ 09 had escaped assessment within the meaning of Section 148 of the Act. This notice did not give any reasons.
  • The assessee then asked for reasons and thereafter on 04.08.2015 reasons were supplied.
  • Reason given: In the following assessment year i.e. assessment year 2009­10, the assessing officer had proposed a substantial addition of Rs.642 crores to the account of the assessee on account of monies raised by the assessee through its subsidiaries NDTV BV, The Netherlands, NDTV Networks BV, The Netherlands (NNBV), NDTV Networks International Holdings BV, The Netherlands (NNIH) and NNPLC.

“All these transactions with the subsidiary companies in Netherlands were sham and bogus transactions and that these transactions were done with a view to get the undisclosed income, for which tax had not been paid, back to India by this circuitous round tripping.”

Considering all the facts of the case and the material placed before the Court, it said that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts.  It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case.

Regarding the scope of the applicability of the second proviso of Section 147 of the Income Tax Act, 1961, the Court said that if the revenue is to rely upon the second proviso and wanted to urge that the limitation of 16 years would apply, then in the notice or at least in the reasons in support of the notice, the assessee should have been put to notice that the revenue relies upon the second proviso.

“The assessee could not be taken by surprise at the stage of rejection of its objections or at the stage of proceedings before the High Court that the notice is to be treated as a notice invoking provisions of the second proviso of Section 147 of the Act.”

If not in the first notice, at least at the time of furnishing the reasons the assessee should have been informed that the revenue relied upon the second proviso.  The assessee must be put to notice of all the provisions on which the revenue relies upon.

The Court, hence, held that the notice issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment but since the revenue has failed to show non­disclosure of facts the notice having been issued after a period of 4 years is required to be quashed.

[New Delhi Television Ltd. v. Deputy Commissioner of Income Tax,  2020 SCC OnLine SC 351, decided on 03.04.2020]

Case BriefsHigh Courts

Madras High Court: The Bench of P.N. Prakash, J., in a criminal revision case preferred in respect of setting aside the order of Additional Chief Metropolitan Magistrate, Chennai, stated that,

“The very edifice on which the prosecution was launched against the accused, crumbled like a pack of cards.”

The factual matrix of the case which led to the filing of the present criminal revision case was that, the petitioner herein was accused of the offence under Section 276-C (2) of the Income Tax Act, 1961. It was stated by the IT Department that for the assessment year 1998-1999, accused filed “Income Tax Returns”, wherein his total income was shown to be Rs 48,150. Income Tax Department on conducting an investigation found out that petitioner’s income was Rs 29,05,126, following which the tax payable along with interest was determined to be Rs 16,02,601.

On filing an appeal by the accused before CIT (Appeals) it was determined by the said authority that the income of the accused is Rs 26,69,470 and Rs 14,84,199 is to be paid as tax. Accused in respect of the stated filed an appeal before Income Tax Appellate Tribunal; however the stay petition was dismissed by ITAT and hence accused was liable to be punished under Section 276-C (2) of the IT Act, for non-payment of determined tax.

Reference to the judgment of the Apex Court in CIT v. Bhupen Champak Lal Dalal, (2001) 3 SCC 459 along with Gujarat Travancore Agency v. CIT(1989) 3 SCC 52, in which the Supreme Court considered Section 276 C of the IT Act and held,

“….There can be no dispute that having regard to the provision of Section 276-C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established.”

Further, it was stated that the accused had pursued the matter to ITAT who had set aside the CIT (Appeals) order and remanded the matter back to CIT who ultimately determined the tax to be payable at income Rs 2,82,650. In reference to the stated, it should be noted that the accused had been knocking doors of these bodies challenging the determination of the income by ITO and at the end of the day the fact-finding body itself came to the conclusion that income of accused for that period was only Rs 2,82,650 and tax payable only Rs 1,10,402.

Therefore, there was no necessity for the Income Tax Department to have launched the prosecution hurriedly since the law of limitation under Section 468 CrPC for criminal prosecution has been excluded by the Economic Offences (Inapplicability of Limitation) Act, 1974.

Thus, the accused was not found wilfully evading payment of tax. But unfortunately, trial court failed to appreciate the accused’s contention. Court allowed the present criminal revision case and discharged the accused from prosecution. [Sayarmull Surana v. CIT, 2018 SCC OnLine Mad 3505, decided on 14-12-2018]

Case BriefsHigh Courts

Kerala High Court: The Bench of Dama Seshadri Naidu, J. granted a stay on encashment of bank guarantee by tax authorities until the statutory appeal preferred in that regard was considered by the competent court.

Petitioner herein was transporting certain goods from Tamil Nadu to Perinthalmanna. When the authorities checked the documents carried along with the goods, they found the same to be defective. Suspecting tax evasion, authorities detained the goods and demanded a penalty, as well as tax. Aggrieved, the petitioner filed a petition for the release of goods and for the expeditious completion of adjudication. In terms of the judgment delivered in the said petition, the petitioner furnished a bank guarantee for the entire amount demanded and had the goods released.

Later, the primary authority completed the adjudication and issued an order under imposing a penalty under Section 129(3) of the State Goods & Services Tax Act, 2017 and also appropriating the bank guarantee. The petitioner filed an appeal under Section 107 of the Act against the said order. However, by way of caution, he preferred the instant appeal as he apprehends that the authorities, in the meanwhile, may encash the bank guarantee.

In view of the fact that a statutory appeal had already been filed, the Court directed the respondent authority to keep the bank guarantee untouched till the appeal is considered. [Vinod P.A. v. Assistant State Tax Officer, 2019 SCC OnLine Ker 39, dated 03-01-2019]

NewsTreaties/Conventions/International Agreements

The Union Cabinet has has approved the signing and ratification of Agreement between India and Brunei Darussalam for the Exchange of Information and Assistance in Collection with respect to Taxes.

Details:

  1. The Agreement enables the competent authorities of India and Brunei Darussalam to provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of the two countries concerning taxes covered by this Agreement.
  1. The information received under the Agreement shall be treated as confidential and may be disclosed only to persons or authorities (including courts or administrative bodies) concerned with assessment, collection, enforcement, prosecution or determination of appeals in relation to taxes covered under the Agreement. Information may be disclosed to any other person or entity or authority or jurisdiction with the prior written consent of the information sending country.
  2. The Agreement also provides for automatic exchange of information between India and Brunei with respect to categories of cases.
  3. The Agreement also enables assistance in collection of tax revenue claims between both countries.
  4. The Agreement provides for Mutual Agreement Procedure for resolving any difference or for agreeing on procedures under the Agreement.
  5. The Agreement shall enter into force on the date of notification of completion of the procedures required by the respective laws of the two countries for entry into force of the Agreement.

The Agreement will stimulate the flow of exchange of information between India and Brunei for tax purposes which will help curb tax evasion and tax avoidance. It will also enable assistance in collection of tax revenue claims between both countries. As such, the Agreement does not have any financial implications. Only in the event of extraordinary costs exceeding USD 500 as per Article 9 of the Agreement, the same will be borne by the Government of India. India has similar provisions in other such tax information exchange agreements.

Background: The Central Government is authorized under Section 90 of the Income Tax Act, 1961 to enter into an Agreement with a foreign country or specified territory for exchange of information for the prevention of evasion or avoidance of income tax chargeable under the Income Tax Act, 1961. Negotiations for entering into an Agreement for the Exchange of Information with respect to Taxes were conducted at Brunei from 10th  to 11th January, 2017.  Pursuant to the same, the Governments of India and Brunei Darussalam have agreed on the text of the Agreement.

Cabinet

Treaties/Conventions/International Agreements

On October 15, 2014, a Joint Statement signed between India and Switzerland to strengthen economic ties between both the countries, and to combat tax fraud and evasion with the applicable legal framework. The State Secretary, De Watteville indicated that Switzerland would examine requests which are independent of what the Swiss Government considers as breach of Swiss law. It was also agreed that the Swiss competent authority would assist to provide information on request by the Indian side with respect to both banking and non-banking information in a time bound manner or else indicate the reason why the cases cannot be answered within the agreed timeline. It was discussed to conclude an automatic exchange of Information (AERO) agreement between India and Switzerland to tackle tax fraud and evasion on a global scale.

-Press Information Bureau