Tax Liability cannot be imposed merely because the financial statement did not provide State-wise turnover

editor — Thu, 04 Apr 2024 10:14:35 +0000

The imposition of tax liability solely based on the absence of state-wise turnover information in financial statements has been contested in the legal realm. This matter was addressed by the Hon’ble Madras High Court in a recent case involving Tvl. Future General India Insurance Co. Ltd. versus Assistant Commissioner (State Tax) [WP No. 3534 OF 2024, dated February 16, 2024].

Facts:

Tvl. Future General India Insurance Co. Ltd. (“the Petitioner”) operated as a private general insurance firm, specializing in insurance services. On August 16, 2021, the Petitioner was served with an audit notice by the Assistant Commissioner (State Tax) (FAC) (“the Respondent”). In response, the Petitioner diligently furnished the necessary documents and addressed the discrepancies highlighted in the audit reports. Subsequently, after issuing both an intimation and a show cause notice (“the SCN”), the Competent Authority issued the assessment order on December 30, 2023 (“the Impugned Order”).

Within the Impugned Order, the issue of defect No. 10 arose, relating to variations in turnover between the Profit & Loss account and balance sheet, as opposed to the figures in GSTR-9. The Petitioner explained that these disparities stemmed from the inclusion of Pan-India operations in the financial statements, whereas GSTR-9 solely focused on turnover within Tamil Nadu. The Petitioner even provided a certificate from a Chartered Accountant, specifically outlining the turnover within Tamil Nadu, amounting to Rs. 80,89,05,068/-. However, despite this clarification and despite the Petitioner having already paid taxes on the stated turnover, the Respondent imposed State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) at 18% each (36% combined) on the aforementioned turnover.

Dissatisfied with the assessment order, the Petitioner sought recourse by filing a writ petition before the Hon’ble High Court of Madras.

Top of Form

Issue:

The central question revolves around whether tax liability can be established solely due to the absence of state-wise turnover information in financial statements.

Held:

In its ruling on Writ Petition No. 3534 OF 2024, the Hon’ble Madras High Court made the following determinations:

The Court acknowledged the variation in turnover for entities operating across multiple states, emphasizing the importance of distinguishing total turnover from state-wise turnover.
It criticized the Competent Authority's decision to impose GST at a higher rate of 36% instead of the appropriate 18%, despite the Petitioner having already paid tax on the turnover in question.
The Impugned Order was deemed invalid and the case was remanded to the Respondent for reconsideration.
Furthermore, the Court directed the Respondent to afford the Petitioner a fair opportunity, including a personal hearing, and instructed issuance of a fresh assessment order within a maximum period of two months, in compliance with legal provisions.

Understanding ITR-U: Definition and Updates

editor — Tue, 05 Mar 2024 11:34:46 +0000

Introduction to ITR-U:

ITR-U, or Updated Income Tax Return, is a form introduced by the government to allow taxpayers to rectify errors or omissions in their previous income tax returns. It can be filed within two years from the end of the relevant assessment year.

Latest Update on ITR-U:

As of January 1st, 2024, taxpayers cannot file belated or revised ITRs after December 31st, 2023. However, they can file an updated return using the ITR-U form, specifically designed for correcting minor errors or omissions in the original ITR.

What is ITR-U?

ITR-U enables individuals to update their ITRs by rectifying errors or omissions within two years from the end of the relevant assessment year. It provides an opportunity to enhance tax compliance without triggering legal action.

Eligibility Criteria for Filing ITR-U:

Under Section 139(8A) of the Income Tax Act, individuals who have made errors or omissions in their original, belated, or revised returns are eligible to file an updated return using ITR-U.

Ineligibility for Filing ITR-U:

Certain situations disqualify individuals from filing ITR-U, including already filing an updated return, resulting in lower tax liability, or facing search or survey proceedings by the Income Tax authorities.

Time Limit for Filing ITR-U:

The time limit for filing ITR-U is 24 months from the end of the relevant assessment year. For example, for the assessment year 2023-24, the last date to file ITR-U is March 31st, 2026.

Additional Tax Implications:

Additional tax is applicable when filing ITR-U, with rates of 25% or 50% depending on the timing of the return filing.

How to File Form ITR-U:

Filing Form ITR-U involves furnishing Part A and Part B of the form, providing general information and details of additional income, respectively. The form must be verified using either a Digital Signature Certificate or an Electronic Verification Code.

Filing ITR-U with TaxCloudIndia:

TaxCloudIndia offers a user-friendly platform for preparing and filing ITR-U. Users can follow a step-by-step guide to select or recreate the return, enable ITR-U, and fill out the necessary schedules.

Conclusion:

ITR-U serves as a valuable tool for taxpayers to rectify errors or omissions in their previous income tax returns within a specified time frame, thereby enhancing tax compliance and avoiding legal repercussions.

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Tax Liability cannot be imposed merely because the financial statement did not provide State-wise turnover

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Understanding ITR-U: Definition and Updates

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