Madras HC quashes Assessment Order passed without giving Proper Opportunity of Personal Hearing u/s

The Madurai Bench of Madras High Court presided by Mr. Justice M. Nirmal Kumar has quashed the assessment order passed without giving a proper opportunity for a personal hearing under section 74(1) of the Goods and Service Tax Act.

The petitioner, M/s. Anantham Silks was engaged in the trading of textiles and garments. During the course of the surprise inspection, the inspection team found certain irregularities in the transactions of the dealers, and a revision of the assessment was made based on the inspection report. The petitioner failed to give a proper explanation with supporting documents, hence respondent confirmed the demand of tax, penalty, and interest as already proposed made in Form DRC-01A for the four assessment years. The aggrieved petitioner filed a Writ petitions before the High Court.

The counsel for the petitioner submits that the inspection and investigation have been conducted by different officers in a wrong manner, resulting in a misunderstanding of facts and misinterpretation of provisions, misapplication of tariff, and exemption notifications. The learned counsel also submits that the proceedings carried out were completely perverse and information and statements collected with intimation, an inducement of dropping of proceedings, are in complete violation of principles of natural justice and unreliable and the demand made in Form DRC-01A has to be rejected.

The single bench observed that the respondent failed to follow the procedure since the petitioner has got any objection and not paid tax as ascertained, a show cause notice has to be issued under Section 74(1) of the TNGST Act and after receiving objections, giving personal hearing, the assessment order ought to have been finalized.

The High Court while allowing the Writ petition has held that “the respondent is directed to issue notice after following the procedures prescribed under the TNGST Act and issue show cause notice and after giving an opportunity to file their objections, pass appropriate orders on merits and in accordance with law.”

‘True Copies’ submitted before Income Tax Authorities do not have Evidentiary Value: ITAT

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the “true copies” submitted before the income tax authorities do not have evidentiary value under the Income Tax Act, 1961.

A division bench of the Tribunal comprising Smt Annapurna Gupta (Accountant Member) and Shri Mahavir Prasad (Judicial Member) was considering an appeal by Smt. Nitaben Shaileshbhai Patel wherein the assessee’s case was reopened under section 147 of the Act on account of cash deposits in her bank account and in the absence of any explanation thereof, addition accordingly was made of the cash deposits amounting to Rs.18,63,000/- and further on account of sundry creditors amounting to Rs.81,24,561/-which remained unexplained. The assessee had originally filed return of income of Rs.1,39,140/- and the impugned addition made by the AO resulted in assessed income at Rs.1,01,26,701/-. These additions were upheld by the CIT(A) also in the absence of any justification or pleadings against the same made by the assessee before him.

Dismissing the appeal, the Tribunal observed that the assessee has chosen to make this plea of restoring her matter to the lower authorities before us without even making any effort to substantiate the explanation offered.

“All documents filed before us in support of her case as mentioned above are only stated as being “true-copies”. Even the affidavit filed by the assessee before us, stating allegedly on oath the reason for non compliance to notices of authorities below, we find, is not original copy, but only mentioned as “true copy”. Such documents have no evidentiary value. It is the assessee who has sought redressal of her grievance against orders of the IT authorities by filing appeal before us. The assessee cannot sit back after filing the appeal seeking adjournment time and again and by simply filing written submissions to make a plea totally unsupported and unsubstantiated. It seems that the assessee has chosen to ignore the gravity of the situation despite being aware of it, which is evident by the fact that she has repeatedly filed appeal before the first appellate authority and also before us,” the Tribunal said.

RCM on Residential Dwelling: Maharashtra Tax Practitioners seeks Clarification to avoid Unnecessary

The Maharashtra Tax Practitioner’s Association (MTPA) has requested Union finance minister Smt. Nirmala Sitharaman to clarify levy of Reverse charge Mechanism (RCM) on Renting Residential Dwelling to avoid ambiguity and hardship faced by the taxpayer and also to avoid unnecessary litigation and ensure proper compliance of the law.

The Government has levied RCM on Renting of Residential Dwelling under Notification No. 05/2022 – CT Rate dated 13th July 2022.The meaning of the term ‘Residential Dwelling’ is not defined anywhere in GST. The said term is explained by Para 4.13.1 Educational Guide on Service Tax by CBIC which defines Residential Dwelling as – “It is any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for a temporary stay.”

It was submitted that the main issue faced by the taxpayers is the meaning of ‘Residential Dwelling’ for the RCM entry. There arise confusion as to the applicability of the entry in case of use of Guest House or flat taken on rent for a short stay of the employee of the company and Residential Property used as Office/ Godown/Warehouse.

The MTPA submitted that the second issue is the applicability and discharge of GST liability in the case of rented property in another state, where the registered taxpayer is not registered. The Third issue pointed out is whether the Input Tax Credit of RCM liability on Residential Dwellings is allowed or not.

If RCM is applicable in the case of Residential Property used as office/Godown/Warehouse, then its ITC will definitely be allowed, as it is used for business purposes. However, Confusion is because, Sec16 allows all ITC used for business purpose, whereas Sec 17(5) restrict ITC for personal usage. Therefore, there is a strong need to issue a clarification on ITC on RCM paid on Residential Properties used as Guest House, flats taken on Rent for a temporary stay of Employee,andflats taken on Rent for permanent stay of Employee.When employees stay in the hotel for a business visit, its ITC was allowed in general practice. Therefore, on the same logic suitable clarification should be issued about the eligibility of ITC.

Because of all the aforementioned issues, the association requested to kindly issue suitable clarification in this regard, on an urgent basis to avoid unnecessary litigation and to ensure proper compliance with the law.