TAXVANI

Decoding the landmark SC Judgement - Union Of India Vs Ashish Agarwal | Fate of Extended Re-assessment Notices

The Hon'ble Supreme Court, vide its judgment dated 04.05.2022 (2022 SCC Online SC 543), in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on 1st April 2021 and ending with 30th June 2021, within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and various notifications issued thereunder (these reassessment notices hereinafter referred to as "extended re-assessment notices").

This ruling of the Hon’ble Supreme Court has created a lot of confusion and chaos as to what will be the fate of these assessments in the case of 90,000 Assessee’s who have been issued such extended re-assessment notices.

Ms. Ananya Kapoor in collaboration with The Virtual Amicus has nicely explained the landmark judgement/verdict delivered by the Hon'ble Supreme Court of India in simple layman's language.

Ms. Ananya Kapoor, Advocate (Taxation), Chambers of Salil Kapoor, New Delhi is a leading Tax Attorney and Expert and a known name in the field of tax-related Litigation. A graduate from the University of Oxford, UK, a visiting faculty at NALSAR, Hyderabad and an adjunct Professor at The Jindal Global Law School, she has a vast multitude of knowledge to share.

Professionally she is practicing at the Supreme Court of India, Delhi High Court and the Income Tax Appellate Tribunal, New Delhi. She also appears in High Courts and ITAT in other cities, such as Mumbai, Hyderabad, Chandigarh, Jaipur, Bangalore, Calcutta, Cochin, Chennai and Amritsar, representing MNCs, group companies, individuals, trusts, societies and associations and leading business houses. Apart from High Court and ITAT, Ananya also has extensive experience in terms of submissions and arguments before the CIT and DRP.

Ms. Kapoor very amicably uses these four words to describe the whole situation - “OPERATION SUCCESSFUL, PATIENT DEAD”.

She has very gracefully agreed to share with us the recording of a session conducted on the captioned subject and we are more than glad to share it with you.

GSTR-3B available for April 2022 | Special instructions issued by GSTN

GSTR2B is now available for April 2022

It may be noted that, the Input Tax Credit (ITC) gets auto populated in GSTR3B from GSTR2B only if the taxpayer has not saved any data in GSTR3B for that tax period.

2. The auto population of ITC in GSTR3B will not happen for those taxpayers who have already saved data in GSTR3B. In such cases, the taxpayer has to input the ITC data in Table 4 of GSTR 3B.

3. These taxpayers are advised to view the system generated pdf of GSTR3B where ITC figures would be available in Table

4. ITC can also be seen on mouse hover of the respective fields of GSTR 3B.

TEAM GSTN

pic.twitter.com/OunetCWeSi
— GST Tech (@Infosys_GSTN) May 18, 2022

TRACES website and Income Tax Aadhaar based OTP services will not be available for a particular time due to upgradation and scheduled down time

1. TRACES website will not be available on 18th May 2022 (09:00 PM to 11:59 PM) due to planned technical upgradation

2. Income Tax Aadhaar based OTP services will not be available between 11:00 PM on Friday, 20th May to 4:30 AM on Saturday, 21st May, due to scheduled downtime at NSDL

CBDT issues Circular regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961

CBDT issues Circular regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961 vide Circular No. 10 of 2022 dated 17.05.2022,

Vide this circular CBDT has highlighted the fact that even though the functionality provided is user friendly and has been explained through a circular, some of these deductors/collectors are still asking the deductee/collectee to produce evidences of their filing of return of income.

It has been highlighted that the functionality has been developed to ease compliance for tax deductors/collectors. Asking the deductee/collectee to file evidence of furnishing of their return defeat the purpose of this taxpayer friendly measure. All tax deductors/collectors are requested to make note of this circular for compliance.

Click here to download

CBIC extends due date for filing GSTR-3B for the month of April 2022

The due date for filing FORM GSTR-3B for the month of April, 2022 has been extended till 24th May, 2022 (refer notification No. 05/2022-Central Tax dated 17.05.2022). (1/2)

The due date of payment of tax for the month of April, 2022 by taxpayers under QRMP scheme in FORM GST PMT-06 has been extended till 27th May, 2022 (refer notification No. 06/2022-Central Tax dated 17.05.2022) (2/2)

The due date of payment of tax for the month of April, 2022 by taxpayers under QRMP scheme in FORM GST PMT-06 has been extended till 27th May, 2022 (refer notification No. 06/2022-Central Tax dated 17.05.2022) (2/2) pic.twitter.com/Ohg1FIavTp
— CBIC (@cbic_india) May 17, 2022

Extension of due date of filing GSTR-3B for April 2022 is being considered by CBIC

Extension of due date of filing GSTR-3B for April 2022 is being considered by CBIC as per the latest tweet posted on the twitter handle.

"A technical glitch has been reported by @Infosys_GSTN in generation of April 22 GSTR-2B & auto-population of GSTR-3B on portal. Infosys has been directed by Govt for early resolution.Technical team is working to provide GSTR-2B & correct auto-populated GSTR-3B at the earliest(1/2)

Considering the difficulties faced by taxpayers in filing their GSTR-3B for the month of April 2022, a proposal to extend the due date of filing GSTR-3B for April 2022 is under active consideration. Inconvenience caused to the taxpayers is regretted. @Infosys_GSTN (2/2)"

Considering the difficulties faced by taxpayers in filing their GSTR-3B for the month of April 2022, a proposal to extend the due date of filing GSTR-3B for April 2022 is under active consideration. Inconvenience caused to the taxpayers is regretted. @Infosys_GSTN (2/2)
— CBIC (@cbic_india) May 17, 2022

Over ₹50,000-crore fake input tax credit detected in 18 months

The Centre, with support from States, has managed to detect fake Input Tax Credit (ITC) amounting to over ₹50,000 crore in a period of 18 months. However, the recovery has been much less and experts have called for more such initiatives to check fake invoices.

Vivek Johri, Chairman of the Central Board of Indirect Taxes & Custom (CBIC), said the special drive, which commenced in November 2020 along with States, has so far resulted in the booking of more than 6,700 cases and arrests of over 650 persons. More than 20,000 fake GSTNs have been unearthed and over ₹50,000 crore fake ITC detected.

“We have recovered over ₹2,400 crore through this drive and attempts are on to improve recovery,” he said while talking to people from industries. As per Section 132 of the CGST Act, 2017, issuance of an invoice or bill without supply of goods or services and wrongful availing or utilisation of ITC is a cognisable and non-bailable offence, if the amount is over ₹5 crore.

‘More initiatives needed’

Though experts acknowledge the success achieved so far, through the special drive, they suggest further initiatives. MS Mani, Partner with Deloitte India, said several businesses that take input tax credits based on their vendors’ invoices have already put in place stringent tax processes to weed out suspicious vendors. This will need to become a way of life for all businesses in order to end the menace of fake invoices. “In addition, there would be increased scrutiny on invoices issued to related parties,” he said.

Prateek Bansal, Associate Partner (Tax and Custom) with White and Brief, a law firm, called for a multi-pronged strategy. There is a mechanism of physical scrutiny/verification of all premises and business activities of a company/firm by GST authorities before granting registration. Now, the system may be devised where the concerned jurisdictional officer should also be held accountable, in the event the said registered entity is found to be non-existing or engaged in fake invoicing without actual supply/receipt of goods/services, he said.

“Quarterly verification and mapping of various GST related documents/procedures (returns, invoices, e-Way bills, exports, etc.) in the capacity of system-generated short-listed taxpayers should be undertaken by jurisdictional GST authorities to ensure there is no leakage of revenue,” he suggested.

Tanushree Roy, Director — Indirect Tax, Nangia Andersen LLP, said it is equally important to identify users of fake invoices, and this can be done by examining unusual ITC utilisation (say, above 95 per cent). In addition, sectors historically prone to tax evasion should also be investigated. Additionally, it may also be required to keep a database of offenses committed by entities involved in fake invoicing. “Blocking ITC of entities issuing fake invoices, as well as their users would also help deter the issuance of fake invoices. In case any entity has availed ITC basis fake invoices, adequate recovery proceedings should be put in place for recovery,” she said.

Source:https://business-journal.in/

LLP CAN FORM A PARTNERSHIP FIRM WITH AN INDIVIDUAL OR OTHER PERSONS- RULES KERALA HIGH COURT

In a significant ruling, the Kerala High Court held that a Limited Liability Partnership could form a partnership with an individual or other persons.

BRIEF FACTS

A partnership deed was executed between an individual and an LLP.
When the said deed was submitted for registration, the Registrar of Firms refused registration of the partnership firm on the reasoning that an LLP cannot be a partner in the firm.
The Petitioner claimed that a partnership and an LLP are not prohibited under the Partnership Act and that LLP is a legal entity, as defined under the LLP Act, and it is separate from its partners. It has perpetual succession and has a common seal. The Petitioner argued that on its registration, it is capable of suing and being sued under Section 14. It can also acquire, develop, or dispose of movable or immovable properties. Therefore, the petitioner claims that the LLP is liable to be treated as a person, and there cannot be any objection to registering a partnership with an LLP.
The respondent filed a statement reiterating his stand in the impugned order.
According to the respondent, Section 25, 26, and 49 of the Indian Partnership Act, 1932 makes the partners jointly and severally liable with all other partners.
At the same time, under Section 28 of the LLP Act, 2008, the provisions regarding the liability of the partnership firm are restricted only to the extent provided in the agreement. Such a provision runs contrary to Section 25 and 49 of the Indian Partnership Act.
It is also pointed out that foreign investment is permissible in LLP, whereas it is not permissible under the Partnership Act.

THE QUESTION THAT AROSE WAS:

Whether LLP can be treated as a person, who can be permitted to form a partnership with an individual?

THE HIGH COURT’S RULING

The High Court of Kerala held that-“a partnership can be entered into between two persons. Such persons can be an incorporated body of individuals. LLP is a body corporate. It can be said to be a person, as defined in Section 3(42) of the General Clauses Act, 1897 if there is no repugnancy in the subject or context. To examine the same, it is necessary to look at some more provisions in both the Acts viz. Partnership Act and LLP Act”

The High Court of Kerala further held that the liability of partners of LLP and liability of the LLP as a partner under the Partnership Act would be different. The liability of partners in an LLP cannot be relevant when the LLP becomes a partner, as the provisions in the Partnership Act would bind it. The liability of the LLP would be as in the case of a company that joins a firm after entering into a partnership.

Section 26 in The Indian Partnership Act, 1932- Liability of the firm for wrongful acts of a partner—Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefor to the same extent as the partner.

Section 49 in The Indian Partnership Act, 1932- Payment of firm debts and of separate debts—Where there are joint debts due from the firm, and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him. The separate property of any partner shall be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm.

Section 27 in The Limited Liability Partnership Act, 2008

Extent of liability of limited liability partnership .-

(1) A limited liability partnership is not bound by anything done by a partner in dealing with a person if-

(a) the partner in fact has no authority to act for the limited liability partnership in doing a particular act; and

(b) the person knows that he has no authority or does not know or believe him to be a partner of the limited liability partnership.

(2) The limited liability partnership is liable if a partner of a limited liability partnership is liable to any person as a result of a wrongful act or omission on his part in the course of the business of the limited liability partnership or with its authority.

(3) An obligation of the limited liability partnership whether arising in contract or otherwise, shall be solely the obligation of the limited liability partnership.

(4) The liabilities of the limited liability partnership shall be met out of the property of the limited liability partnership.

Section 28 in The Limited Liability Partnership Act, 2008

Extent of liability of partner .-

(1) A partner is not personally liable, directly or indirectly for an obligation referred to in sub-section (3) of section 27 solely by reason of being a partner of the limited liability partnership.

(2) The provisions of sub-section (3) of section 27 and sub-section (1) of this section shall not affect the personal liability of a partner for his own wrongful act or omission, but a partner shall not be personally liable for the wrongful act or omission of any other partner of the limited liability partnership.

Source:https://thetaxtalk.com/2022/05/14/llp-can-form-a-partnership-firm-with-an-individual-or-other-persons-rules-kerala-high-court/

Banks to seek change in definition of 'fraud'

Synopsis

A rigid regulation requires all banks to label a borrowing company and all its accounts as 'fraud account (s)' when one lender puts a fraud tag. It sets off a process where lenders have to file police complaints and take a knock- which is often disproportionately higher than the size of the fraud -on their bottom lines.

All high-street banks will jointly move the Reserve Bank of India (RBI) to urge a change in the sweeping definition of 'fraud' which cripples businesses, scares away financiers and results in legal tangles.

A rigid regulation requires all banks to label a borrowing company and all its accounts as 'fraud account (s)' when one lender puts a fraud tag. It sets off a process where lenders have to file police complaints and take a knock- which is often disproportionately higher than the size of the fraud -on their bottom lines.

The combined action rapidly worsens the fortunes of the borrowing corporate, driving away creditors, suppliers, investors and other stakeholders. And lenders which place all the information in public domain may face legal action - as some of the court battles bear out - when angry borrowers think they were disgraced without being properly heard.

Bank CEOs decided to make a representation to RBI at a meeting held a few weeks ago to discuss certain issues faced by the lenders, two senior bank officials told ET.

When contacted, Sunil Mehta, chief executive of the industry body Indian Banks Association, said, "We should have a system where the entire company is not tarnished bec

ause of a small diversion of funds and its entire borrowing is declared as 'fraud'. Such a declaration and associated procedure like filing of FIR can deepen the problems for a company, creating a negative perception and holding back banks from taking lending decisions."

"We plan to take up the matter with the RBI, but I would not like to discuss the matter further at this point," said Mehta, a former banker.

While fraud is linked to malafide intention and cheating in the criminal law, banks categorise any diversion of funds as fraud. According to existing regulations, if a Rs 300 crore fraud surfaces in a company whose total borrowings from a dozen banks is Rs 15,000 crore, all banks classify the entire borrowing as 'fraud', initiate criminal proceedings, and make full provisioning on their books. "In such a case, banks want RBI to allow them to restrict the categorisation of fraud to only the Rs300 crore, or the 'value-at-risk'. Today, even banks to whom the company has not defaulted have to grade the company as a fraud account," said a senior bank official.

A borrower account is declared as fraud based on the findings of a forensic report where the loan has become a non-performing asset (where interest or principal payment is overdue for 90 days).

"A forensic audit will always come out with something. Even if it can't conclusively prove, it would point at certain lapses. Now, if the end-use of the loan is changed, it is a fraud. But a change in end-use may not necessarily mean that funds have been siphoned off to purchase personal assets. Also, fraud is a criminal offence, not a civil recovery action - hypothetically, even if the amount is repaid, the criminal proceedings may continue," said another banker.

Clarification issued by GSTN on Incomplete GSTR-2B in some cases

Incomplete GSTR-2B in some cases - regarding.

15/05/2022

1. It has been noticed that in a few cases, certain records are not reflected in the GSTR-2B statement for the period of April 2022. However, such records are visible in GSTR-2A of such recipients.

2. The technical team is working to resolve this issue for the impacted taxpayers and generate fresh GSTR-2B at the earliest.

3. In the interim, affected taxpayers interested in filing GSTR-3B are requested to file the return on self-assessment basis using GSTR-2A.

Inconvenience caused in this regard is deeply regretted.

Regards,
Team GSTN

‘More initiatives needed’

All high-street banks will jointly move the Reserve Bank of India (RBI) to urge a change in the sweeping definition of 'fraud' which cripples businesses, scares away financiers and results in legal tangles.

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