Tax Assessment Challenge Partially Upheld: NBFC Granted Opportunity to Submit Additional Documents and Clarify Reconciliation HC allowed partial challenge to tax assessment order. Petitioner, a non-banking financial institution, was granted opportunity to submit additional ...
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Tax Assessment Challenge Partially Upheld: NBFC Granted Opportunity to Submit Additional Documents and Clarify Reconciliation
HC allowed partial challenge to tax assessment order. Petitioner, a non-banking financial institution, was granted opportunity to submit additional documents and clarifications regarding tax reconciliation for two financial years. Order was set aside with conditions, requiring 10% tax deposit and allowing reconsideration within three months. No costs were imposed, providing procedural relief to the petitioner.
Issues: Challenge to order on grounds of lack of reasonable opportunity for contesting tax proposal on merits.
Analysis: The petitioner challenged an order dated 18.03.2024, alleging that they were not given a fair opportunity to contest a tax proposal on its merits. The petitioner had received a show cause notice in relation to reconciliation statements for assessment periods 2018-19 and 2020-21. The petitioner responded to the notice and provided clarifications as requested by the first respondent. However, the impugned order was issued despite these submissions.
Regarding the financial year 2018-19, the petitioner's counsel argued that the alleged unreconciled taxable turnover was related to the Puducherry Unit. Even though the petitioner submitted replies and GST returns for Puducherry, the respondent concluded that supporting documents were not provided to prove that services were rendered in Puducherry and not Tamil Nadu. For the financial year 2020-21, due to a moratorium, an amount of Rs. 83.06 crores was reflected in the reconciliation statement, with a lack of clarification on the breakdown between received and accrued amounts.
The senior standing counsel for the respondents contended that the original order was detailed and provided reasons for the conclusions reached, asserting that there was no basis for interference under Article 226 as principles of natural justice were followed.
The petitioner, a non-banking financial institution, had exempt interest income under GST laws but needed to prove that the income was interest-related. Disputes arose concerning turnover attributed to the Puducherry Unit for the 2018-19 assessment period and the taxation of Rs. 80,67,41,667 for 2020-21. The first respondent found shortcomings in the petitioner's explanations, leading to the order being set aside on the condition that 10% of the disputed tax demand be remitted within fifteen days for reconsideration, allowing the petitioner to submit additional replies and supporting documents within the same period.
In conclusion, the impugned order was set aside with conditions for reconsideration and provision of a reasonable opportunity for the petitioner, including a personal hearing, within three months from the receipt of additional submissions. The case was disposed of with no costs incurred, and related applications were closed.
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