Weekly Round-up on Tax and Corporate Laws | 27th to 31st December

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 27th to 31st December 2021, namely:

(a) New Faceless Appeal Scheme, 2021 requires a mandatory personal hearing, if requested by the assessee

(b) Govt. notifies new norms for direct selling; prohibits entities from promoting pyramid schemes

(c) An order can’t be treated as non-speaking order just because it is short and to the point

(d) Due date to file GSTR-9 and GSTR-9C for Financial Year 2020-21 extended to 28-02-2022

(e) Existing GST rates on textiles to continue beyond 01-01-2022; changes deferred by Council

(f) ICAI issues an exposure draft of Guidance Note on Accounting for the Hydropower Industry

1. New Faceless Appeal Scheme 2021

During the petition before the Supreme Court in the case of Lakshya Budhiraja [2021] 131 taxmann.com 51 (SC), the Additional Solicitor General submitted that the Income-tax Dept. is considering changes in the Faceless Appeal Scheme, 2020. The Additional Solicitor General sought 3 months to change the law, which the Supreme Court duly granted.

Meeting the deadline, the Central Board of Direct Taxes (CBDT) has notified the Faceless Appeal Scheme 2021, effective from 28-12-2021. The new scheme is notified in supersession of the earlier Faceless Appeal Scheme, 2020. The scheme has brought several substantial changes to the Faceless Appeal regime. The following are key changes in the new Faceless Appeal Scheme:

(a) It would be mandatory for the CIT(A) to allow a personal hearing if the taxpayer requests for the same during e-proceedings;

(b) There is no concept of a draft order in the new appeal scheme. The CIT(A) shall prepare an appeal order and send it to National Faceless AppealCentre (NFAC) after signing the same digitally. After that, the NFAC shall communicate such order to the appellant;

(c) In the new scheme, the board has removed Regional Faceless Appeal Centres. Now, an appeal is directly assigned to the CIT(A) of a specific Appeal Unit;

(d) Under the erstwhile scheme, the Appeal Unit was required to send a recommendation to the NFAC to initiate penalty proceedings. The new scheme has removed the requirement to send such a recommendation. The CIT(A) can now send a notice to the appellant through the NFAC to initiate the penalty proceedings;

(e) In the erstwhile appeal scheme, NFAC assigns the initiation of penalty proceedings to a specific Appeal Unit in any one RFAC through an automated allocation system. This Appeal Unit may or may not be the same unit that completed the appeal proceedings. However, in the new appeal scheme, the same CIT(A) who has completed the appeal proceedings is authorised to conduct penalty proceedings;

(f) All the orders shall be signed digitally by the CIT(A) before sending them to NFAC. There were no such provisions of signing orders digitally by the Appeal Units in the previous scheme

Read the changes in detail

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2. Key takeaways from New Direct Selling Rules

The Central Government vide Notification No. GSR 889(E), dated 28-12-2021, has notified the Consumer Protection (Direct Selling) Rules, 2021 (‘Direct Selling Rules’). The key highlights of direct selling rules are discussed hereunder:

A. Meaning of Direct Selling entity, Direct Seller

“Direct Selling Entity” means the principal entity that sells or offers to sell goods or services through direct sellers, but does not include an entity engaged in a Pyramid Scheme or money circulation scheme.

“Direct seller” means a person authorised by a direct selling entity through a legally enforceable written contract to undertake direct selling business on a principal to principal basis.

B. Applicability of Direct Selling Rules

The Direct Selling Rules applies in respect of:

(a) Goods and services bought or sold through direct selling;

(b) Models of direct selling;

(c) Direct selling entities offering goods and services to consumers in India;

(d) All forms of unfair trade practices across all models of direct selling.

Rules prohibit direct selling entities from promoting pyramid and money circulation schemes. Under the new norms, direct selling entities must comply with the new norms within 90 days of Notification. The motive behind this step is to protect consumers’ rights and regulate companies involved in direct selling. Direct Selling Rules shall also apply to a direct selling entity not established in India but offers goods or services to consumers in India.

C. Obligations of Direct Selling Entities

(a) Direct Selling rules require entities to be registered under the relevant Acts (i.e., Companies Act, 2013, Partnership Act, 1932 or LLP Act) and have a minimum of one physical location as its registered office within India;

(b) The entities shall have to make self-declaration to the effect that it has complied with the provisions of these rules and is not involved in any Pyramid Scheme or money circulation scheme;

(c) The entities shall maintain a proper and updated website with all relevant details, including contact information, details of its nodal officer, grievance redressal officer, management, products, price, etc.;

(d) The entities shall not give commissions, bonuses, or incentives on the sale of goods or services for which it is not the owner, holder or licensee of trademark, service mark or other identification marks;

(e) The entities must get all information provided by it on its website duly certified by a Company Secretary; and

(f) The entities shall establish a grievance redressal mechanism, display it on its website, and print it on the product information sheet or pamphlet.

D. Application of e-commerce rules.

The direct sellers and the direct selling entities using e-commerce platforms for sale shall comply with the Consumer Protection (e-commerce) Rules, 2020.

E. Prohibition of Pyramid Scheme and money circulation scheme

The direct selling entity or direct seller are prohibited from promoting a Pyramid Scheme or participating in a money circulation scheme in the garb of doing direct selling business.

F. Prohibition of false representation

No direct selling entity shall, directly or indirectly, falsely represent itself as a consumer and post reviews about its goods or services or misrepresent the quality or features of any of its goods or services. New rules also restrict a direct seller to visit a consumer’s premises without an identity card and prior appointment or approval.

G. Maintenance of Record

Every direct selling entity shall maintain a record of relevant information allowing for the identification of all direct sellers who have been delisted by the direct selling entity, and such a list shall be publicly shared on its website.

Read the Notification

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3. An order can’t be treated as non-speaking order just because it is short and to the point: HC

The Madras High Court held that an order could not be treated as non-speaking order merely because it is epigrammatic or when it is terse. Where an order is tersely eloquent, it cannot be treated as non-speaking order unless it is laconic.

Facts

The assessee was a registered ‘Public Charitable Trust’. The CIT cancelled its registration, against which the assessee filed a writ petition. It was contended by the assessee that the impugned order passed by the CIT was a non-speaking order.

Ruling

The Madras High Court held that an order passed by the AO could not be said to be a non-speaking order. Two critical paragraphs in the order had captured the crux and gravamen of the disputed matter. Said paragraphs had recorded the trajectory and the reason for not extending Section 12AA benefit to the assessee.

Thus, those two paragraphs by themselves and the rest of the order clarify that it is not a non-speaking order, and it may at best be a terse order. An order can be tersely eloquent; it cannot be construed as a non-speaking order unless it is laconic, not when it is epigrammatic or merely because it is terse.

In the instant case, the assessee’s case was scrutinised because its registration had been cancelled, and trust failed to upload the registration certificate under Section 12AA despite repeated reminders and opportunities. Thus., the assessment order passed called for no interference in the writ petition when it recorded the crux and gravamen of the matter, i.e. trust was not entitled to exemption since its registration has been cancelled.

Therefore, the assessee’s argument that the order was a non-speaking order becomes a non-starter, i.e., an argument that does not take off.

Read the Ruling

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4. Due date of GSTR-9 & GSTR-9C for FY 2020-21 extended to 28-02-2022

The CBIC has issued Central Goods and Services Tax (Tenth Amendment) Rules, 2021, to amend the Central Goods and Services Tax Rules, 2017. One of the significant changes is extending the due date of filing annual returns in Form GSTR-9 and the reconciliation statement in Form GSTR-9C for the financial year 2020-21. The date has been extended to 28-02-2022 from 31-12-2021.

It has also been provided that a registered person shall not be avail input tax credit if the supplier does not furnish details of such invoices or debit notes in Form GSTR-1, and such details are not reflected in the Form GSTR-2B. In this regard, Notification No. 40/2021 –Central Tax, dated 29-12-2021 has been issued.

Read the Notifications

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5. Existing GST rates on the textiles to continue; changes deferred by Council

The 46th Meeting of GST Council was held today under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman to review the decision of changes in the textile sector taken earlier to remove inverted duty structure.

The all-powerful GST Council has recommended deferring the decision to change the rates in textiles recommended in the 45th Council meeting. Consequently, the existing rates in the textile sector would continue beyond 01-01-2022. In this regard, a Press Release, dated 31-12-2021 has been issued.

Read the Press Release

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6. ICAI issues an exposure draft of Guidance Note on Accounting for the Hydropower Industry

The Institute of Chartered Accountants of India (ICA) has issued an exposure draft of the Guidance Note on accounting for the hydropower industry. The main objective behind this issue is to provide guidance on the accounting principles contained in Ind-ASs to resolve the accounting issues faced by the hydropower industry in transactions like pre-feasibility, pre-construction, construction, maintenance and renovation of hydropower plants, Decommissioning Costs, Borrowing Costs, Depreciation, Provisions & Contingent Liabilities, Impairment of Assets, Leases & Power purchase agreement in nature of a lease, Rate Regulated Activities, Business Acquisitions & Merger of a Subsidiary Company with Parent Company.

This guidance note does not deal with those accounting and reporting issues related to power distribution and transmission activities. Furthermore, this guidance note does not apply to accounting and reporting issues relating to other conventional and/or non-conventional forms of power generation.

The Institute of Chartered Accountants of India invites comments on this exposure draft up to 27-01-2022.

Read the Story

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