Weekly Round-up on Tax and Corporate Laws | 23rd to 28th May 2022

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 23rd to 28th May 2022, namely:

(a) CBDT notifies Faceless Penalty (Amendment) Scheme, 2022;

(b) CCI held that the dispute w.r.t. of filing of malicious suit for copyright infringement by ‘Inox’ was outside its domain;

(c) Haryana Govt. prescribes taxpayer-friendly measures for conducting enquiry or inspection under GST;

(d) The CBIC issues instructions for payment of tax during search, inspection and investigation; and

(e) Restatement of financial statements and their disclosure as per Ind AS 8.

1. CBDT notifies Faceless Penalty (Amendment) Scheme, 2022

The CBDT has notified Faceless Penalty (Amendment) Scheme, 2022, amending the provisions of the Faceless Penalty Scheme 2021 with effect from 27-05-2022.

The 5 changes introduced by the Amendment Scheme have been discussed below:

a) Regional Faceless Penalty Centres omitted

The Board has removed the Regional Faceless Penalty Centres (RFPC) from the faceless penalty scheme. RFPC was responsible for facilitating the conduct of faceless penalty proceedings and imposing penalties in accordance with the provisions of this scheme.

b) Penalty Unit and Penalty Review Units shall mean AO

The Board has specified that the term ‘Penalty Unit’ or ‘Penalty Review Unit’, wherever used in the Faceless Penalty Scheme, shall refer to an Assessing Officer. Such AO shall have the powers as assigned by the Board.

c) ‘Draft Order’ replaced with ‘Penalty Imposition Proposal’

Instead of preparing a draft order for the imposition of a penalty, the penalty unit shall prepare a penalty imposition proposal for the imposition of the penalty.

d) Rectification Proceedings omitted

The Faceless Penalty Scheme 2021 had allowed the National Faceless Penalty Centre to rectify any mistake which is apparent from the record under this scheme. Application for rectification of mistake was allowed to be filed by:

• • • Assessee or any other person, as the case may be;
    • Penalty unit, which prepared the order;
    • Penalty review unit, which reviewed the order;
    • Income-tax authority; or
    • National Faceless Assessment Centre.

The provisions for rectification of mistake has now been omitted.

e) Record to be authenticated by all units of the scheme

An electronic record under this scheme shall be authenticated by all the units, i.e., penalty unit, penalty review unit, technical unit or verification unit, by affixing a digital signature.

Earlier, only National Faceless Penalty Centre and the assessee or any other person were required to authenticate records.

Read the Notification

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2. Dispute w.r.t. of filing of malicious suit for copyright infringement by ‘Inox’ was outside the domain of CCI

In the Instant case, an application was filed by the CEPL (the applicant) alleging abuse of dominant position by company ‘Inox’ (the respondent).

‘CEPL’ was engaged in providing solutions regarding Air, Gas, and Liquefied Natural Gas (LNG) and also catered to the need for city gas distribution. After obtaining the necessary approvals and procedures, ‘CEPL’ made a foray into the LNG semi-trailer market.

‘CEPL’ alleged that Inox had maliciously instituted a civil suit claiming infringement of Inox’s copyright by ‘CEPL’ over proprietary engineering drawing in relation to the LNG semi-trailer. Inox had also filed an application seeking a temporary injunction against CEPL and LNG Express to restrain them from using the drawing of the LNG semi-trailer of Inox.

Inox further moved an application in the aforesaid suit, seeking to appoint a Court Commissioner to search the premises of CEPL, including making/preparing an inventory of the impugned drawing and making copies of the same from the computer’s hardware, promotional materials, etc., found in CEPL’s possession.

CEPL alleged that the allegations made by Inox were sham. The Inox further made the various threatening communications to the customers/potential customers of CEPL, and to the regulatory authority, with a view to jeopardize the business interests of CEPL, a competitor of Inox in the supply of LNG semi-trailers in India. This amounts to abuse of dominant position by Inox in contravention of provisions of Section 4.

CCI’s Ruling

The CCI held that the alleged IPR infringement perspective requires an examination of whether there is substantial copying of material features, which is based on the appreciation of evidence.

It was held that CCI is not the competent authority to deal with the IPR issue. The subject matter was to be decided by the Court of competent jurisdiction where the matter was pending as it was beyond the domain of competition authority.

Read the Ruling

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3. Haryana Govt. prescribes taxpayer-friendly measures for conducting enquiry or inspection under GST

The Excise and Taxation Department of the Haryana Government has issued taxpayer-friendly measures for improving taxpayers’ experience with the department. Now, no GST officer would visit the premise of the taxpayer without proper authorization, and the officer would not enter the premises of the taxpayer without displaying a proper identity card. Moreover, while conducting any enquiry, a suitable opportunity of being heard would be provided, and repeated summons would be discouraged.

It has also been provided that all communications shall be sent online. If no such facility is available, then no letter or communication should be sent without an ID which is generated from the BO web system. In this regard, Memo No. 362/GST dated 19th May 2022 has been issued.

Read the Memo

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4. CBIC issues instructions for payment of tax during Search, Inspection & Investigation

The CBIC has observed that some of the taxpayers, after voluntarily depositing tax through DRC-03, have alleged the use of force and coercion by the officers to make ‘recovery’ during search or inspection. The Board has issued instructions for officers regarding recovery and payment of tax during search, inspection and investigation.

The Board directed that there may not arise any situation where the officer makes recovery of tax dues during search, inspection & investigation. However, the law does not bar taxpayers from voluntarily paying any tax liability. It is also advised that if any complaint is received against any officer regarding the use of force or coercion for payment of tax, then the same may be enquired at the earliest and strict action will be taken after the enquiry.

Read the instruction

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5. Restatement of Financial Statements and their disclosure as per Ind AS 8

Where an enterprise’s financial statements contain either material errors or immaterial errors made intentionally or unintentionally to achieve a particular presentation of an entity’s financial position, financial performance, or cash flows, then the said financial statements are considered to be in non-compliance with Ind ASs. Sometimes material errors are left undiscovered until a subsequent period. When discovered, these errors are corrected by the principles specified in Ind AS 8, Accounting Policies, Changes in Accounting Estimates, and Errors for presenting the comparative information in the financial statements for that subsequent period. The principles of Ind AS 8 state that an entity shall correct material prior period errors retrospectively in the first set of financial statements approved for issue after their discovery by:

(a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or

(b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities, and equity for the earliest prior period presented.

Where it is impracticable to determine the cumulative effect of the error or the amount of an error, then an entity shall restate the comparative information prospectively from the earliest date practicable.

Further, in case the period-specific effects of an error are impracticable to determine, the entity shall restate the opening balances of assets, liabilities, and equity for the earliest period for which retrospective restatement is practicable.

Ind AS 8 also states that an enterprise shall disclose the nature and amount of material prior period errors corrected during the period.

Read the Story

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