Proper analysis of Demands and Recovery Proceedings

Question:-1   When can demand and recovery proceedings be initiated?

Ans: –    In case of tax not paid, short paid, erroneously refunded, ITC wrongly availed or utilised the demand and recovery procedure can be initiated. There are different provisions if it’s a bonafide mistake (Normal Cases) or a deliberate attempt (Fraud cases etc.)

Question:-2   Is it mandatory to issue show cause notice (SCN)? If yes then what is the time Limit?

Ans: –   Yes, It’s mandatory to issue SCN. The time limit to issue SCN in case of ’Normal cases’ is atleast 3 months prior to the time limit specified for passing the Adjudication order. And in case of ‘Fraud cases’ the time limit is 6 months.

Question:-3   What is adjudication order? And what is the limit to pass such order?

Ans:-     The proper officer after considering the representation made by the person, if any, pass an order, determining the amount of tax, interest and penalty due from such person. The time to pass Adjudication order in case of ‘Normal Cases’ is 3 years from the due date for furnishing the annual return for the financial year to which the tax is not paid/short paid/ITC wrongly availed/utilised relates to or within 3 years from the date of erroneous refund .And time limit in case of ‘Fraud Cases’ is 5 Years.

Question No:-4   What are the provisions for penalty if tax etc has been paid before SCN or after SCN? Whether there are different provisions for ‘Normal cases’ or ‘Fraud Cases’?

Ans: –     The Provisions are summarized in below table:-

In Normal Cases:-

                            Paid All Dues                              Penalty Amount
Before Notice No Penalty
Within 30 Days from Notice No Penalty
Within 30 Days of Communication Order 10% of Tax or 10,000/- Whichever is higher
After 30 Days of SCN or Communication Order 10% of Tax or 10,000/- Whichever is higher

In Fraud Cases:-

                            Paid All Dues                              Penalty Amount
Before Notice 15% of Tax
Within 30 Days from Notice 25% of Tax
Within 30 Days of Communication Order 50% of Tax
After 30 Days of SCN or Communication Order 100% of Tax

Question:-5   What is the time limit to issue notice in cases under Section 76 i.e. taxes collected but not paid to Government?

Ans.  There is no time limit. Notice can be issued on detection of such cases without any time limit.

Question:-7    What are the modes of recovery of tax available to the proper officer?

 Ans.    Modes of Recovery:-

  1. Recovery by deduction from any money owed
  2. Recovery by sale of goods under the control of proper officer
  3. Garnishee proceedings – Recovery from a third person
  4. Recovery by sale of movable/immovable property
  5. Recovery as arrears of land revenue
  6. Recovery as fine imposed by Magistrate
  7. Recovery through execution of a decree, etc.
  8. Recovery through surety
  9. Recovery from company in liquidation

Remark: Recovery of taxes can also be made from distinct persons [referred to in section 25(4) & (5)2] present in different States/ UTs.

  Question:-8   Whether the payment of tax dues can be made in installments?

  Ans. On receipt of any such request, Commissioner/Chief Commissioner may extend the time for     payment or allow payment of any amount due under the Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly installments not exceeding twenty four, subject to payment of interest under section 50 with such limitations and conditions as may be prescribed. However, where there is default in payment of any one installment on its due date, the whole outstanding balance payable on such date shall become payable and recovered without any further notice. {sec.80}

Note:-In the case of ‘Kabeer Reality Private Limited vs MP high Court’ it was held that the Petitioner cannot escape his liability of payment of GST especially when he has filed GSTR-1 & has quantified the tax payable by him while submitting the GSTR-1 and the action of departments warrants no interference.

The Petitioner has certainly not paid the GST. It is noteworthy to mention that GSTR-1 is declaration of tax liability and GSTR-3B is evidence of actual payment. The Petitioner has stated that GSTR-1 cannot be termed or classified as self-assessed liability, it is only a declaration made for limited purpose. The said issued stands concluded on account of notification dated October 9th, 2019 bearing No. 49/2019, wherein an amendment has been made in Rule 61 of the CGST Rules, 2017 whereby retrospective effect the filing of GSTR-3B has been made compulsory.

Responsibility of Non-Executive Director in case of offences


  • The directors of the company can be divided into two categories as Executive Director and Non – Executive Directors.
  • Non-Executive director doesn’t actively participate in affairs of the company. His duties are of an intermittent nature to be performed at periodical board meetings,
  • As per Section 149(12) (ii) of the Companies Act, 2013 The non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.
  • Whether the concept of Doctrine of Vicarious Liability is applicable to the Non – Executive Directors?

Meaning of Doctrine of Vicarious Liability: – Vicarious liability refers to a situation where someone is held responsible for the actions or omissions of another person. 

Supreme Court of India in its judgment in the case N. Rangachari vs Bharat Sanchar Nigam Ltd on 19 April, 2007, stated that there shall be no vicarious liability unless the statue specifically provides so.

We all know a company is a legal entity and does not have any physical existence. Therefore, officers of a Company who are responsible for acts done in the name of the Company are sought to be made personally liable for acts. However NED may not be held liable if he able to prove that the offence was committed without his knowledge or that they had exercised all due diligence to prevent commission of the offence.

  • In the case of Poonam Garg (appellant) vs Sebi on 22 March, 2018 the non-executive director cannot always take immunity under the provisions of section 149 (12)(ii) of the Companies Act 2013.

Capital Gain Taxability on the execution of an agreement or Deed -An Analysis

 Everybody has a question when they sale their property. And the question is whether Capital Gain is taxable when they execute an agreement or when they execute a sale deed. For this we have to go through some of the Income tax provisions to have clear understanding about the timing of the Capital gain taxability.
As per section 45 of IT act i.e. scope and year of chargeability any profits or gains arising from the transfer of capital asset affected in the previous year shall be chargeable to Income tax under this head in the previous year in which the transfer took place.
In other words, for determining the year of chargeability, the relevant date of transfer is not the date of agreement to sell but the actual date of sale, However, Income tax act has recognised certain transactions as transfer in spite of the fact that conveyance deed might not have been
executed and registered.

Now the question arises what is transfer. So for the purpose of this analysis transfer definition defined here which is as follows:-
 As per section 2(47),Transfer means
a. Possession of an immovable property in consideration of part-performance of a contract referred in section 53A of the transfer 53A of the transfer of Property Act, 1882.
b. Transactions which have effect of transferring or enabling the enjoyment of an immovable property.
c. Explanation 2 to section 2(47) clarifies that ‘transfer’ includes and shall be deemed to have always included –disposing of or parting with an asset or any interest therein or Creating any interest in any asset in any manner whatsoever directly or indirectly,
absolutely or conditionally, voluntarily or involuntarily by way of an agreement or otherwise.

After this Consideration come into the picture which is defined by section 50C which says:-
 It has been provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of computing the full value of consideration.
 However, where the stamp duty value does not exceed 105% of the sale consideration received or accruing as a result of transfer, the consideration so received or accruing shall be deemed to be the full value of consideration.

Therefore, from the above provisions we can conclude here that Capital Gain Taxability shall arise on the date of agreement if it satisfies the conditions given under 2(47).And in the case of Sanjay Lal vs CIT Supreme Court held that when an agreement was executed, a right in personam was created in favour of the vendee and the vendor was restrained from selling the property. Thus, the transfer would be effective from the date of agreement to sale.