Weekly Round-up on Tax and Corporate Laws | 29th May to 3rd June 2023

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 29^th May to 3^rd June 2023, namely:

(a) CBDT notifies e-Appeals Scheme, 2023; implements functioning of JCIT(A);

(b) ICAI’s non-outsourcing of CPE seminars that are eligible for CPE credits does not indicate abuse of dominance: HC;

(c) GSTN issued a new advisory on the filing of declaration in Annexure V by GTA opting to pay tax under forward charge;

(d) SCN which fails to provide material information/statement containing details of ITC under the question to be set aside: HC; and

(e) Key non-compliances observed by the Financial Reporting Review Board (FRRB) in the Financial Statements of Banks.

1. CBDT notifies e-Appeals Scheme, 2023; implements functioning of JCIT(A)

The Finance Act 2023 introduced a new designated income tax authority of the Joint Commissioner (Appeals) [JCIT (Appeals)] to handle a certain class of cases involving small appeal disputes.

To implement the functioning of the JCIT (Appeals), the CBDT has rolled out e-Appeals Scheme, 2023, effective from 29-05-2023. The scheme enlists the scope, procedure to be adopted, penalty proceedings, rectification proceedings, and other provisions to ease the implementation.

The key highlights of the scheme are mentioned in the below paragraphs:

• The scheme shall apply to such persons or a class of persons covered under Section 246 of the IT Act.
• The Principal Director General (Systems) or the Director General (Systems), as the case may be, shall devise a process to randomly allocate or transfer the appeals to the JCIT (Appeals).
• On assignment of appeal, the JCIT (Appeals) shall issue a notice to the appellant asking him to file his submissions within the prescribed time. He shall also issue a copy of such notice furnished to the Assessing Officer (AO).
• JCIT (Appeals) may obtain further information, document or evidence from the appellant or any other person. Further, he may obtain a report of AO on the grounds of appeal or information, document or evidence furnished by the appellant.
• The appellant may file additional grounds of appeal to the JCIT (Appeals). The AO may request the JCIT (Appeals) to direct the production of any document or evidence, or the examination of any witness, as may be relevant to the appellate proceedings.
• The JCIT (Appeals) shall prepare a show-cause notice containing the reasons if he intends to enhance an assessment or a penalty or reduce the refund amount.
• The JCIT (Appeals) shall prepare an appeal order in accordance with the provisions of section 251 stating the points for determination, the decision thereon and the reason for the decision.
• For non-compliance with any notice, direction or order, the JCIT (Appeals) can issue a show-cause notice to initiate the penalty proceedings. After considering all the relevant materials and response to the notice issued, he shall prepare a penalty order or drop the penalty proceedings as the case may be.
• To rectify any mistake apparent from the record, JCIT (Appeals) can amend any order upon receiving an application from the appellant or the Assessing Officer. After examining the application, providing the opportunity of being heard by both parties and considering all the relevant material on record, he shall issue an order to rectify the mistake or reject the application.
• An appeal against an order passed by the JCIT (Appeals) shall lie before the ITAT having jurisdiction over the jurisdictional Assessing Officer of the appellant-assessee.
• The scheme clarifies that a person shall not be required to appear either personally or through an authorised representative in connection with any proceedings under this scheme. However, a request for a personal hearing can be made, which can be conducted through video conferencing or video telephony.
• The CBDT has also amended the existing Rules 45 and 46A with Form 35 to enable the filing of appeals before JCIT(A).

Read the e-Appeal Scheme 2023

Read the Notification

2. ICAI’s non-outsourcing of CPE seminars that are eligible for CPE credits doesn’t indicate abuse of dominance: HC

In the matter of ICAI v. CCI, the High Court held that the ICAI is not guilty of abuse of dominance for not outsourcing the holding of Continuing Professional Education (CPE) seminars eligible for CPE credits.

In the instant case, the ICAI filed a petition before the High Court against the order passed by the CCI, which had directed an investigation into the CPE program conducted by the ICAI in response to information filed by a Chartered Accountant under Section 19 of the Act.

The informant claimed that only the ICAI and its organs conduct structured learning activities for members of the ICAI and that it has not affiliated with or recognised any other body to conduct such activities. Thus, the informant sought that the said function be outsourced.

The informant believed that the ICAI’s exclusive conduct of learning activities restricted competition and contravened Section 4 of the Competition Act, which deals with the abuse of a dominant position.

The informant argued that as a member of the International Federation of Accountants (IFAC), the ICAI is obliged to recognise other educational institutions and their programs as educational programs to qualify as chartered accountants. Numerous universities run degree courses in the subject of accountancy.

The High Court noted that the ICAI, being a statutory body and charged with taking the necessary powers to take decisions regarding the conduct of the CPE program for enrolling as a chartered accountant and maintaining the standards of the profession. Therefore, its decisions in this regard cannot be a subject matter of review by the CCI. Further, the decisions concerning the CPE program do not operate in any market of trade or commerce.

The High Court highlighted the ICAI’s powers under clause (k) of Section 30 of the CA Act. The Court stated that the ICAI, subject to the prior publication and approval of the Central Government, has the power to regulate and maintain the status and standard of professional qualifications of members of the Institute.

Further, apart from conducting the CPE program, the ICAI also operates an educational program for qualifying as a chartered accountant, including training and evaluating students.

The High Court held that the ICAI’s decision to frame the CPE Program to maintain professional standards could not be considered an abuse of its dominant position. Further, the CCI’s power is limited to regulating the markets and does not extend to reviewing the decisions taken by any statutory authority in the exercise of their statutory powers.

In the present case, the CCI proceeded on the basis that there is a relevant market “for organising recognised CPE Seminars/Workshops/ Conferences”. The Court disagreed with the CCI’s view, asserting that no such market exists.

Read the Ruling

3. GSTN issued a new advisory on the filing of declaration in Annexure V by GTA opting to pay tax under forward charge

The GSTN has issued a new advisory to inform that the GTAs, who commence business or cross the registration threshold on or after 1^st April 2023, and wish to opt for payment of tax under the forward charge mechanism are required to file their declaration in Annexure V for the FY 2023-24 physically before the concerned jurisdictional authority.

Such declaration must be filed within the timelines prescribed, i.e. before the expiry of 30 days from the date of obtaining registration or 45 days from the date of application of registration, whichever is later. In this regard, GSTN has issued an update dated 31^st May 2023, on GST Portal.

Read the News

4. SCN which fails to provide material information/statement containing details of ITC under the question to be set aside: HC

The Madhya Pradesh High Court has held that a show cause notice cannot be issued to the assessee under Section 74(1) without communicating relevant information and material details of the ITC transaction under question. Such notice would disable the assessee from responding to the notice. Therefore, the order along with such notice, would be liable to be set aside.

A show cause notice was issued to the assessee under Section 74(1) of the CGST Act 2017. It was submitted by the assessee that the said show cause notice did not satisfy the requirement of Rule 142 as it was vague to the extent of not communicating the relevant information and material. Therefore, it filed a writ petition and contended that the final order passed by the authority was vitiated in law since it was not able to respond to the show cause notice.

The High Court noted that as per Section 74 of the Act, the Revenue must issue a show cause notice to be speaking enough to enable the assessee to respond to the same. In the instant case, the bare reading of the show cause notice revealed that it neither contained material and information nor a statement containing details of the ITC transaction under question.

The Court noted that the GST Statute itself prescribes for affording a reasonable opportunity, and it is incumbent upon Revenue to afford same, and any deficiency in that regard vitiates the end result. Therefore, the Court held that the impugned orders and show cause notice were liable to be quashed.

Read the Ruling

5. Key non-compliances observed by the Financial Reporting Review Board (FRRB) in the Financial Statements of Banks

The Financial Reporting Review Board (FRRB) of the ICAI plays a vital role in ensuring that the general purpose financial statements of various organisations adhere to accepted accounting principles (GAAP). The FRRB is a proactive mechanism to improve financial reporting and auditing practices. As part of its efforts to encourage compliance with financial reporting requirements, the board regularly publishes notable instances of non-compliance or errors identified in the financial statements of banks. In this discussion, we will explore some of the key non-compliances and errors observed by the FRRB in the financial statements of banks.

Non-Reporting of ‘No Segments for reporting’

• Reporting Issue: A bank has not disclosed anything regarding “Segment Reporting” in the notes to accounts in its financial statements.
• FRRB Opinion: The bank should have disclosed the fact in its notes to accounts that neither any segment reporting disclosures have been made nor the fact that the bank has only one ‘business segment’ as well as only one ‘geographical segment’ as per the provisions of AS 17 (Segment Reporting).

Accounting Policy on Investment

• Reporting Issue: A cooperative bank has the following policy on Investments: Investments in subsidiaries/joint ventures are categorised as held to maturity (HTM) and assessed for impairment to determine permanent diminution, if any, in accordance with the RBI guidelines and suitable provisions are made.
• FRRB Opinion: The cooperative bank has drafted the policy on ‘Investments’ by loosely interchanging the words’ other than temporary’ with the words ‘permanent diminution’. ‘Permanent diminution’ and ‘other than temporary diminution’ carries an altogether different meaning. The bank should have restrained using the word ‘permanent diminution’ instead of ‘other than temporary diminution’.

Read the Story