Shock Causing Notices (SCNs) of Service tax by GST department

Arjun (Fictional Character): Krishna, many taxpayers have been receiving Show Cause Notices of service tax from the GST departments across India. Why are such notices being issued?

Krishna (Fictional Character): Arjuna, in these crucial times of Coronavirus Pandemic, when complying with the Tax deadlines is a hard nut to crack, the Central GST department has been issuing Show Cause Notices (SCN’s) for differences in receipts as per Service tax returns & Income tax returns for different FY’s- 14-15, 15-16 and so on. It seems Crores of rupees tax notices have been issued to taxpayers without proper evaluation, and even fulfilling the required law mandates. This is a critical topic to discuss.

Arjun (Fictional Character): Krishna, on what ground such notices are being issued?

Krishna (Fictional Character): Arjuna, many notices are being issued on the grounds that receipts as per Income Tax Return or taxable value as per VAT return is different as compared to receipts shown in the service tax return, on which straight away a percentage of service tax is applied. Such an amount of tax is shown payable in the notices, where such taxpayers are not even liable to pay service tax. Many professionals such as doctors have also received service tax notices, who were not at all liable to levy service tax. It can clearly be stated that no due diligence is followed while issuing many notices, and baseless grounds are used for such a purpose.

Arjun (Fictional Character): Krishna, what are the difficulties faced by the taxpayers due to these notices?

Krishna (Fictional Character): Arjuna, many notices have called upon for much older information & documents that they are not entitled to call for. Enquiry up to 5 years can be called upon only if service tax has not been paid due to fraud, collusion, willful statement, or suppression of facts. In a few cases, taxpayers are being troubled by sending notices again, whose replies have already been sent by them to the departments. Principles of natural justice, a reasonable opportunity of being heard, etc are not followed in many cases.

Arjun (Fictional Character): Krishna, what is the remedy available with the taxpayer in such a situation?

Krishna (Fictional Character): Arjuna, after receipt of the notice, the assessee can file his reply on why the extended period under section 73(1) should not be invoked, service tax recovery, interest recovery, penalty u/s 77, 78, and late fees u/s 70 not to be levied within 30 days. He will be given the opportunity for a personal hearing. After considering the representation of the person on whom notices are served, the adjudicating authority will determine the tax payable by issuing a reasoned order. This procedure is a farce. Once show cause notice is issued, demand is as good as confirmed.

 

An order will be issued after adjudication, in which demand may be dropped or confirmed, as the case may be. Penalty & Interest may be levied. Accordingly, tax, interest & penalties need to be paid within the given time frame. The last remedy available to the taxpayer is to go for an appeal. In a few major cases where notice is prima facie against law & strongly in favour of the taxpayer, filing a writ petition can be another option.

Arjun (Fictional Character): Krishna, what are the important points & judgments to be kept in mind while dealing with the SCN’s?

Krishna (Fictional Character): Arjuna, the followings are important points to be kept in mind :

1. If notice is not issued under section 73, the demand of service tax and interest is not sustainable. [Diamonds cable v/s CCE (2005) 1 STT 91 (CESAT)]

2. Drafting mistake in amendment section 73(2A)- The amendments refer to the appellate authority, tribunal, or court, who may conclude that there was no fraud, suppression, etc. However, what happens if the adjudicating authority itself comes to the conclusion that there was no fraud, suppression, etc.? (It is assumed that adjudication, in any case, is a farce, the adjudicating authority is, in any case, going to confirm demand for all five years.)

3. If the assessee has a bona fide belief, demand beyond 30 months is not sustainable. (earlier 1 year) [Secretary, Townhall committee, Mysore city Corpn. v/s CCE (2007) 10 STT 434 (CESTAT) ; Singh Brothers v/s CCE (2009) 20 STT 357 (CESTAT) ; Toyota Kirloskar Motors v/s CCE (2009) 21 STT 378 (CESTAT) ; Padam Chand Mutha v/s CCE (2009) 21 STT 422 ; Asian cranes (2009) v/s CCE 22 STT 510]

4. If there was bona fide doubt about chargeability of service tax, the extended period of limitation is not available. If there is no mala fide intention, beyond 18 months is not sustainable.

 

[Indian Institute of Chemical Technology v/s CCE (2009) 23 STT 61 (CESTAT)

5. If the department was itself raising demands under various categories for the same activity, departmental authorities themselves made the assessee land in total chaos and confusion. Hence they are not entitled to allege that assessee did anything or omitted to do anything with an intent to evade tax. Hence, the extended period of limitation cannot be invoked and demand beyond 30 months is to be set aside. [ Nexcus computers v/c CCE (2009) 22 STT 10 (CESTAT) ]

6. If the department itself was in doubt about the taxability of service, demand for an extended period is not sustainable. CST v/s Gujrat State Seeds Certification Agency (2013) 64 VST 433 (Guj HC DB)

7. If there is no suppression of facts, demand beyond 30 months is not sustainable. [MP Water & Power management institute v/s CCE (2009) 20 STT 79 (CESTAT) ; Sapphire Security v/s CCE (2010) 24 STT 277 (CESTAT) ; Vishal Traders v/s CCE (2010) 32 STT 75

8. Extended period is not invocable when earlier Tribunal decisions were in favour of the assessee, even if later the decision was overruled by a large bench. [ Nice color labs v/s CCE (2013) 31 STT 407 (CESTAT) ]

9. There can be no suppression if the assessee was ignorant – In Tamil Nadu Housing Board v/s CCE 1995 Supp(1) SCC 50 = 1994, it was observed, "intention to evade payment of duty is not mere failure to pay duty" it must be something more. "Evade" means defeating the provisions of law paying duty. It is made more stringent by the use of the word – "intent". In other words, the assessee must deliberately avoid payment of duty payable under the law.

Arjun (Fictional Character): Krishna, what should the taxpayer learn from this?

Krishna (Fictional Character): Arjuna, it is totally unjust action taken by the tax departments against few taxpayers. Many show cause notices are mere illegal and putting the taxpayers in a dilemma by using words such as suppression, intend to evade tax, failed to pay, failed to assess, etc. Still, notices have been sent in bulk, without the satisfaction of purpose. Taxpayers & tax organizations have raised this concern with the Finance Minister in this regard. Let’s hope that genuine taxpayers will not be harassed. It is a "Shock Causing Notice" instead of a "Show Cause Notice" for many taxpayers

The Central Board of Direct Taxes (CBDT) has extended the deadline to file the income tax return (ITR) for the financial year 2019-20 to December 31, beyond the usual date of July 31, owing to the ongoing coronavirus pandemic.

The Central Board of Direct Taxes (CBDT) has extended the deadline to file the income tax return (ITR) for the financial year 2019-20 to December 31, beyond the usual date of July 31, owing to the ongoing coronavirus pandemic.

According to the rules, individuals below 60 years of age earning Rs 250,000 or more annually are mandatorily required to file ITRs, whereas, the limit for senior citizens or those between 60 years and 80 years of age is Rs 500,000.

This year the government has raised the penalty amount for missing the deadline, by imposing a fine up to Rs. 10,000, as opposed to the Rs. 5,000, imposed last year. The practise of charging late filing fees under section 234F was introduced in the Budget of 2017 and became effective for financial year 2017-18 or assessment year 2018-19 onward.

The hefty late filing fee is only applicable if the taxpayer’s net total income, i.e. income after claiming eligible deductions and tax exemptions, exceeds Rs 500,000 in the current financial year. Individuals with taxable income up to Rs 500,000 will have to pay a fine of Rs 1,000 if they file their ITR after December 31. For individuals whose taxable income is more than Rs 500,000, the same penalty will go up to Rs 10,000.

There are however, exemptions to the above rule due to the amendments made in the Income-tax Act, 1961, via Budget 2019 which stipulates the following categories of people will not be exempted from the penalty;

1. Individuals who have deposited an amount or aggregates of the amount exceeding Rs.1 crore in one or more banking accounts.
2. Individuals who have incurred expenditures exceeding Rs 2 lakh due to foreign travel.
3. Individuals who incur expenditure or aggregate expenditures of Rs 1 lakh and more due to electricity consumption.

Filing ITR dues also guarantees that the interest payable on the tax refund is calculated from April 1 of the relevant assessment year. In case of belated filings the individual loses out on some amount of the interest.

Rule 138(14)(j)

Rule 138(14)(j) कहता है कि अगर कोई goods exempt है , तो उनको Eway Bill बनाने की ज़रूरत नही है 

लेकिन वो छूट Exempt goods 07/2017 CTR (Supply to CSD to Canteen) और 26/2017 CTR (Supply to Atomic Engergy) के लिए है 

मतलब ये है की RP का Exempted goods Eway Bill के Rule 138(14)(j) के लिए exempt goods नही है

अगर डिपार्टमेंट Registered Person को Fake Invoice allegation के बेसिस पर ITC Reversal करने के लिए बोलता है तो RP को कभी भी उसको admit करके Reversal नहीं करना चाहिए की ये तो छोटा amount है और कौन डिपार्टमेंट से dispute करे और penalty दे करके 

लेकिन उसको प्राब्लम तब आयेंगे तब उसकी पूरी Purchase Income Tax में Sec 68/69/115BBE/271AAD/40A(3) में disallow होकर वहा penalty लग जायेंगी

मतलब सीधा है की अगर आपने fake Purchase GST में Admit की है तो उसको Income Tax में भी Fake माना जाएगा और GST में ITC Reversal होगा जबकि Income Tax में पूरी purchase Disallow हो जायेगी

*Quarterly Return Monthly Payment Scheme*

*GST UPDATE*

*Quarterly Return Monthly Payment Scheme*

The Return filing of GSTR-1 and GSTR-3B can be filed on Quarterly basis by Taxpayers having aggregate Turnover less than 5 crores. 

The option to file on Quarterly basis can be exercised on the GST Portal. *The option is available from 5 Dec to 31 Jan.*

If this scheme is opted the Tax Payment has to be done on monthly basis by depositing in Cash Ledger.

माह दिसम्बर2020 की निर्धारित अंतिम तिथि

Reminder

1-TDS/TCS Liability Deposit for Nov 2020 is due on 2020-12-07

2-(i) GSTR-7(Monthly) for Nov 2020 is due on 2020-12-10

   (ii) GSTR-8(Monthly) for Nov 2020 is due on 2020-12-10

3- GSTR-1(Monthly) for Nov 2020 is due on 2020-12-11

4- GSTR-6(Monthly) for Nov 2020 is due on 2020-12-13

5- (i) PF/ESI Deposit for Nov 2020 is due on 2020-12-15

(ii) Advance Tax Payment for Oct to Dec’20 is due on 2020-12-15

6 (i) GSTR-5(Monthly) for Nov 2020 is due on 2020-12-20

(ii) GSTR-5A(Monthly) for Nov 2020 is due on 2020-12-20

7- GSTR-3B for Nov 2020 is due on 2020-12-22

7- GSTR-3B for Nov 2020 is due on 2020-12-24

8-(i) Form MSME(outstanding payments to MSMEs) for Oct’19-Mar’20 is due on 2020-12-31

(ii) Form 11(LLP Annual returns) for FY 2019-20 is due on 2020-12-31

(iii) DIR-3 KYC for FY 2019-20 is due on 2020-12-31

(iv) Form DPT-3 for FY 2019-20 is due on 2020-12-31

(v) Eligible pending filings for LLP and Company is due on 2020-12-31

(vi) GSTR-9(Yearly) for FY 2018-19 is due on 2020-12-31

(vii) GSTR-9C(Yearly) for FY 2018-19 is due on 2020-12-31

(viii) Tax audit report for FY 2019-20(AY 2020-21) is due on 2020-12-31

(ix) Income Tax Return for FY 2019-20(AY 2020-21) is due on 2020-12-31

*Deferment of provisions for new registration procedure of Charitable Trusts and Institutions u/s 12AB/10(23C)/80G:*

*Deferment of provisions for new registration procedure of Charitable Trusts and Institutions u/s 12AB/10(23C)/80G:*

~The Finance Act, 2020 prescribed a new electronic registration procedure for Charitable Trusts and Institutions under section 12AA/ 12AB / 10(23C)/ 80G.

~Originally was made applicable from 1st June 2020 : Subsequently extended to 1st October 2020 :Finally withdrawn from Finance Act, 2020 and made applicable from 1st April 2021. 

~ So, New Scheme of electronic Registration deferred and made applicable w.e.f. 1st April 2021. Old Scheme would continue uptill 31st March 2021.

*Amendments applicable from A.Y. 2020-21:*

~Audit Report in Form No. 10BB shall be uploaded one month prior to the due

date of submission of return of income. For A.Y. 2020-21 – uptill 31-12-2020.

~Income by way of Corpus Donation: By insertion of an Explanation, it has been clarified that w.e.f. A.Y. 2020-21, income of an entity covered by section 10(23C)(iv)/(v)/(vi)/(via) shall not include income in the form of voluntary contributions which are received with a specific direction that they shall form part of the corpus of the recipient.

~Corpus Donation given to other entities: Shall not be taken as application of income of the entity giving donation from the A.Y. 2020-21, if the following conditions are satisfied-

a) is given by an entity covered by section 10(23C)(iv)/(v)/(vi)/(via);

b) is given voluntarily with a specific direction that it shall form part of the

corpus of recipient; and

c) is given to an entity covered by section 10(23C)(iv)/(v)/(vi)/(via) or to a trust registered u/s. 12AA.

CA Amresh Vashisht

CBDT to validate Unique Document Identification Number (UDIN) generated from ICAI portal at the time of upload of Tax Audit Reports

The Institute of Chartered Accountants of India, in its gazette notification dated 2^nd August, 2019, had made generation of UDIN from ICAI website www.icai.org mandatory for every kind of certificate/tax audit report and other attests made by their members as required by various regulators. This was introduced to curb fake certifications by non-CAs misrepresenting themselves as Chartered Accountants.

In line with the ongoing initiatives of the Income Tax Department for integrating with other Government agencies and bodies, Income-tax e-filing portal has completed its integration with the Institute of Chartered Accountants of India (ICAI) portal for validation of Unique Document Identification Number (UDIN) generated from ICAI portal by the Chartered Accountants for documents certified/attested by them.

It may be noted that, in consonance with the above requirement, Income-tax e-filing portal had already factored mandatory quoting of UDIN with effect from 27^th April, 2020 for documents certified/attested in compliance with the Income-tax Act,1961 by a Chartered Accountant. With this system level integration, UDIN provided for the audit reports/certificates submitted by the Chartered Accountants in the e-filing portal shall be validated online with the ICAI.  This will help in weeding out fake or incorrect Tax Audit Reports not duly authenticated with the ICAI.

If for any reason, a Chartered Accountant was not able to generate UDIN before submission of audit report/certificate, the Income-tax e-filing portal permits such submission, subject to the Chartered Accountant updating the UDIN generated for the form within 15 calendar days from the date of form submission in the Income- tax e-filing portal. If the UDIN for the audit report/certificate is not updated within the 15 days provided for the same, such audit report/certificate uploaded shall be treated as invalid submission.

The Press Release can be accessed at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1676103

*Fifteen (15) Important Points about Quarterly Return and Monthly Payment (‘QRMP’) Scheme*

1. QRMP Scheme will be effective from *January 01, 2021* and the GSTN system would itself compute the aggregate annual turnover of the taxpayer.

2. The registered person whose aggregate turnover in the preceding financial year is *up to Rs 5 crore* & who is required to furnish Form GSTR-3B is eligible;

3. The option to avail the QRMP Scheme *GSTIN wise is available*, i.e., some GSTINs for a PAN can opt for the QRMP Scheme and remaining GSTINs may not opt for the Scheme but once it is exercised it would be valid for future tax periods.

4. The registered persons opting for the Scheme would be required to furnish the details of outward supply in Form *GSTR-1 on quarterly basis*;

5. *Invoice furnishing facility* (‘IFF’) has been introduced in respect of reporting the invoice for details of supply made to registered persons for the first two months of the quarter.

6. The supplier can upload these invoices *on monthly basis*. The taxpayer can upload maximum of Rs 50 Lakhs worth invoices in each of the two months of quarter. 

7. The IFF facility is *optional*. 

8. The registered persons, whose aggregate turnover for the FY 2019-20 is up to Rs 5 crore and who have furnished the return in Form GSTR-3B for the month of October, 2020 by 30th November, 2020, shall be *automatically migrated* on the common portal.

9. The registered taxpayer having turnover less than Rs 1.5 crores and filing monthly GSTR 1 *would not be automatically migrated* to QRMP scheme.

10. The registered person under the QRMP Scheme would be required to *pay the tax due on monthly basis*  in each of the first two months of the quarter by depositing the due amount in *Form GST PMT-06*. 

11. The amount of tax shall be deposited by the *25th day of next month*.

12. Two types of Payment schemes are made available for first two months of the Quarter – *Fixed Sum Method and Self-Assessment Method*.

13. The registered persons opting for the QRPM Scheme would be required to *furnish Form GSTR-3B, for each quarter*, on or before 22nd or 24th day of the month succeeding such quarter for Class A States and Class B States respectively.

14. The facility for opting out of the Scheme for a quarter will be available from *first day of second month of preceding quarter to the last day of the first month of the quarter*.

15. Registered person, whose aggregate turnover *crosses 5 crore rupees* during a quarter in current financial year, *shall opt for furnishing of return on a monthly basis from the succeeding quarter*.

Income Tax Department conducts searches in Kerala

The Income Tax Department has carried out search and seizure operations on 05.11.2020 in the case of a well-known self-styled evangelist of Thiruvalla in Kerala and his group of various trusts that enjoy exemption under the Income-tax Act, 1961 as charitable/religious trusts. The group operates places of worship, a number of schools and colleges across the country, a medical college and a hospital in Kerala. The action covered 66 premises located in Kerala, Tamilnadu, West Bengal, Karnataka, Chandigarh, Punjab and Telengana. The searches were carried out as credible information was received that the group has received donations from foreign countries ostensibly for helping the poor and the destitute and for evangelical purposes, but was actually siphoning out such tax-exempted funds in cash to engage in unaccounted cash transactions for personal and other illegal expenses in real estate transactions. The group operates about 30 trusts, registered across the country, and most of them exist only on paper and have been found to be used for routing the unaccounted funds and for accommodation transactions. It has been found that the modus operandi of the group is to systematically inflate expenses with the help of other parties, who would return the inflated amount in cash through domestic hawala channels to the functionaries of the group. Some of these other parties were also covered in the search action. During the search action, evidences have been found of systematic inflation of expenses in purchase of consumables, construction expenses, real estate development expenses, payment of salary, etc. The search has led to unearthing of a number of real estate transactions involving unaccounted cash payments. Related documents such as sale agreements, etc have been seized. The group has also inflated the price in real estate transactions to show as if the money received in donations is being spent on the activities of the trusts. The evidence found so far indicate that the siphoning of funds in cash may be running into hundreds of crores of rupees. Unexplained cash of approximately Rs. 6 crore has also been found during the search, including Rs 3.85 crore in a place of worship in Delhi. Substantial electronic computing and data storage has been found, which is being examined. Further investigations are going on. The Press Release can be accessed at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1670628