Weekly Round-up on Tax and Corporate Laws | 23rd to 28th December 2024
- Blog|Weekly Round-up|
- 8 Min Read
- By Taxmann
- |
- Last Updated on 31 December, 2024
This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from December 23rd to 28th, 2024, namely:
- CBDT extends due date for filing belated/revised ITR for AY 2024-25 to 15-01-2025 for resident individuals
- CBDT directed to extend due date for e-filing of ITR due to issues with new utility affecting Section 87A rebate: HC;
- GSTN issued guidelines for accurate entry of Receipt Numbers in the E-Way Bill (EWB) System for Leased Wagons;
- Denial of ITC justified as assessee claimed higher amount in GSTR-3B than available in GSTR-2A; HC dismissed writ;
- SLP against IBBI’s 1 year suspension of RP dismissed as it was within jurisdiction u/s 220 of IBC, no interference warranted: SC; and
- NFRA imposes 2 Crore penalty for audit lapses and red flags in Financial Accounts, debars 2 partners
1. CBDT extends due date for filing belated/revised ITR for AY 2024-25 to 15-01-2025 for resident individuals
The Central Board of Direct Taxes (CBDT) has extended the deadline for filing belated or revised income tax returns for the Assessment Year 2024-25 from December 31, 2024, to January 15, 2025.
This extension applies exclusively to resident individuals. For all other taxpayers, the due date for filing belated or revised returns remains unchanged at December 31, 2024.
Read the Circular
2. CBDT directed to extend due date for e-filing of ITR due to issues with new utility affecting Section 87A rebate: HC
The department of Income Tax annually releases utilities for filing income tax returns online. The department published a change in utility with effect from 5-7-2024, said modification unilaterally disabled assessees from claiming rebate under section 87A. As a result, taxpayers, despite being statutorily eligible, were effectively deprived of their entitlements solely due to technical modifications introduced by the department.
The Chamber of Tax Consultants (petitioner) had filed the writ petition before the Bombay High Court seeking a direction to modify the system developed and put in place by the Tax Department for filing income-tax returns for assessment year 2024-2025 so as to allow the assessees at large to take complete benefit of the rebate available under section 87A.
The issue in the present writ petition was, whether the utility in the form of software can take away the statutory right to claim rebate as per the proviso to section 87A and is it necessary for an assessee to make a claim for seeking rebate under section 87A.
The issue involved in the present petition required detailed examination by giving an opportunity of hearing to both sides to make submissions in detail. However, at this stage, the matter was being considered for the purpose of grant of interim relief and as to whether the petitioner made out a case for grant of interim relief.
Therefore, for considering a prima facie case, it is necessary to note that under the Income-tax Act, 1961, there is a concept of self-assessment wherein an assessee is required to compute his own income, determine his tax liability, and pay such tax, and then file a return declaring his income. However, due to the change in the utility with effect from 5-7-2024, the assessees at large were not able to compute rebate under section 87A under the new regime, in respect of income taxable at special rates. As a result, the assessees may have to pay additional tax to the extent of the rebate not allowed to be claimed by the assessee. The petitioner is entitled to file a revised return computing rebate under section 87A, which would enable such an assessee to compute a refund in the revised return. Undisputedly, the last day to file a belated return in terms of section 139(4) is 31-12-2024, which allows even those assessees who have not filed their return within normal due dates.
The rebate under section 87A is inherently linked to the total income and tax liability of the taxpayer. The responsibility lies with the tax authorities to ensure proper implementation of the rebate, as long as the taxpayer fulfills the statutory criteria. Procedural changes, such as those in utility software or instructions issued by the tax department, cannot override the substantive right to the rebate. Any action or inaction on part of the tax authorities that limits the ability of taxpayers to avail of this statutory benefit is arbitrary and violative of the rule of law. Taxpayers should not bear the consequences of administrative inefficiencies or unilateral executive actions that undermine the legislative intent behind section 87A.
It is well-settled that statutory benefits must be extended in a manner that aligns with the objectives of the legislature. In this regard, procedural changes that deprive taxpayers of such benefits warrant judicial intervention to rectify the anomaly and ensure justice. Tax authorities must act as facilitators to help taxpayers comply with the law rather than creating impediments through technical or procedural hurdles. Ensuring fairness, equity, and transparency in tax administration is crucial for upholding public confidence in the system.
Based on the above discussion by way of interim relief, the Central Board of Direct Taxes was directed to forthwith issue requisite notification under section 119 extending the due date for e-filing of the income-tax returns in relation to the assessees who are required to file a return of income by 31-12-2024, at least to 15-1-2025. This extension was to ensure that all taxpayers eligible for the rebate under section 87A are afforded the opportunity to exercise their statutory rights without facing procedural impediments.
Read the Ruling
3. GSTN issued guidelines for accurate entry of Receipt Numbers in the E-Way Bill (EWB) System for Leased Wagons
The GSTN has issued an update to provide guidelines for accurate entry of Receipt Numbers in the E-Way Bill (EWB) System for Leased Wagons. The taxpayers transporting goods via Leased Wagons must prefix Receipt Numbers with the identifier “L” when entering them into the EWB system. In case of discrepancies such as mismatched or missing numbers, taxpayers will receive an alert and must correct the entry promptly.
Similarly, the taxpayers transporting goods via PMS and FOIS have already been advised to enter PWB/RR numbers with Prefix P for PMS and F for FOIS systems (refer to the advisories issued for PMS and FOIS). The users will be mandated to input PWB/RR numbers with the appropriate prefixes to ensure proper validation in the EWB system. These changes would come into effect from January 1st, 2025. In this regard, a GSTN Update dated December 24th, 2024, has been issued.
Read the GSTN Advisory
4. Denial of ITC justified as assessee claimed higher amount in GSTR-3B than available in GSTR-2A; HC dismissed writ
The Honorable Allahabad High Court has recently held that writ petition filed by assessee was to be dismissed since order was passed confirming demand for discrepancies in GSTR 3B and GSTR-2A/2B return and reply of assessee to show cause notice was considered by authority. This ruling is given in the case of Laxmi Telecom vs. State of U.P. [2024] 169 taxmann.com 550 (Allahabad).
Facts
The petitioner received a SCN, pointing out discrepancies in ITC between the amounts claimed in GSTR-3B and those reflected in GSTR-2A/2B. The authority alleged a discrepancy of Rs. 7.7 lakh, while the petitioner claimed the actual difference was only Rs. 74,000. The petitioner responded to the notice with supporting documents, and part of their explanation was accepted. However, the authority still issued a demand for Rs. 7,41,218. The petitioner contended that the SCN was invalid because it did not include the necessary supporting documents and there was a procedural irregularity, as the final order was issued on August 27, 2024, instead of the scheduled hearing date of August 24, 2024.
The department contended that the petitioner’s response was fully considered, and part of their claim was accepted. Furthermore, the petitioner could challenge the order through the statutory appeal process, making the writ petition unnecessary.
High Court
The High Court noted that the lack of supporting documents with the SCN was not a valid objection since the petitioner had submitted responses without raising this issue. Additionally, the difference in dates between the hearing and the final order did not cause any significant prejudice to the petitioner. Therefore, the Court dismissed the writ petition, stating that the petitioner could pursue the matter through the alternative statutory remedy of filing an appeal.
Read the Ruling
5. SLP against IBBI’s 1 year suspension of RP dismissed as it was within jurisdiction under section 220 of IBC, no interference warranted: SC
The Supreme Court (SC), in the matter of Vijendra Kumar Jain v. IBBI [2024] 169 taxmann.com 644, dismissed the special leave petition (SLP) against the order of the High Court, whereby the High Court justified the action of the Disciplinary Committee of the IBBI in suspending the registration of the petitioner as Resolution Professional.
Brief facts of the case
In the instant case, pursuant to the initiation of the Corporate Insolvency Resolution Process (CIRP) of the corporate debtor, the petitioner was appointed as a Resolution Professional (RP) by the NCLT.
The Insolvency and Bankruptcy Board of India (IBBI), in the exercise of powers conferred under section 218 of IBC, appointed an Investigating Authority (IA) to investigate the matter of the corporate debtor (CD).
After receipt of the Investigation Report, the IBBI issued a show cause notice to the petitioner, alleging a lack of due diligence while verifying the resolution plan of the corporate debtor and non-intimation of the claim of the KCIL, despite being aware of the partial admission of its claim. The petitioner submitted his reply to the show-cause notice and denied the assertions made therein.
The Disciplinary Committee of the IBBI passed an order suspending the registration of petitioner as RP for period of 1 year for failing to perform his duties under the Code read with relevant Regulations made thereunder.
Aggrieved by the order of suspension, the petitioner filed an instant writ petition challenging the said order.
The High Court justified the action of IBBI’s suspending the petitioners’ registration as RP based on material available with the Disciplinary Committee and especially the judgment passed by the NCLAT.
The High Court further held that the exercise undertaken by the IBBI was within its jurisdiction and powers conferred by section 220 of the IBC. Thus, the petitioner’s suspension for one year could not be highly disproportionate, which would shock the conscience of the Court for it to interfere in the exercise of writ jurisdiction. Thereafter, an appeal was made before the Supreme Court.
The Supreme Court held that the special leave petition filed against the said order of the High Court was to be dismissed.
Read the Ruling
6. NFRA imposes 2 Crore penalty for audit lapses and red flags in Financial Accounts, debars 2 partners
The National Financial Reporting Authority (NFRA) issued an order on December 23, 2024, addressing serious professional misconduct in the statutory audits of Zee Entertainment Enterprises Limited for FY 2018-19 and 2019-20. The investigation exposed major lapses by Deloitte Haskins & Sells LLP and its partners, leading to penalties and sanctions for their negligence.
Key Findings and Violations:
- Unauthorized Use of Funds:
- A ₹200 crore fixed deposit (FD) was used as a guarantee for loans to promoter group companies without board, audit committee, or shareholder approval.
- The premature closure of the FD by the bank to settle related-party dues was unauthorized, violating Sections 177 and 185 of the Companies Act, 2013.
- Audit Deficiencies:
- Statutory auditors failed to report unauthorized transactions and overlooked critical evidence.
- Inadequate follow-up on communications and discrepancies in bank reconciliations demonstrated a lack of professional skepticism.
- Insufficient Audit Evidence:
- Key documents, such as bank communications, were missing from audit files, raising questions about the validity of the unmodified audit opinion.
- Failure to Address Red Flags:
- Auditors ignored inconsistencies in transactions involving related parties and potential fraud indicators.
- Engagement Quality Review Failures:
- The Engagement Quality Control Review (EQCR) partner failed to conduct an objective review, particularly of the ₹200 crore FD transaction.
- Non-Compliance with Auditing Standards:
- Violations included inadequate fraud detection (SA 240), insufficient evidence (SA 500), poor documentation (SA 230), and ineffective communication with governance (SA 260).
The NFRA imposed a ₹2 crore penalty on the audit firm, fined the engagement partner ₹10 lakh and debarred from auditing for five years, penalized the EQCR partner with a fine of ₹5 lakh and a three-year debarment, and directed the firm to reassess and revise audit documentation within 90 days.
Read the Story
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