No proceedings under sec. 74 if assessee cleared all tax liability along with interest prior to issuance of SCN: Telangana HC

 

Here is a very helpful decision by Telangana High court which would be of great help as the department is recovering the penalty on all payments in the course of departmental audit.

The case is of “Rays Power Infra Private Limited”.

Assessee was engaged in the business of generation of electricity through solar plants.

Returns filed by assessee for the period July 2017 to March 2019 were subjected to audit. The issue is regarding the proceedings after discharging tax liability by assessee – Petitioner.

Summary of audit finding was communicated to assessee.

Accepting findings of provisional audit, assessee immediately paid entire additional tax along with interest.

 Thereafter a show cause notice was issued to the assessee under section 74 to which the assessee submitted a reply.

Authority passed the impugned order after hearing the assessee confirming demand.

Assessee contended that proceedings under section 74(1) was bad in law and entire proceedings and final order was liable to be quashed –

The court has held as under:

A bare perusal of section 73(5) indicate that in event assessee clears all tax liability along with interest at any day prior to issuance of show cause notice, they would not be liable for any further additional taxes by way of penalty and interest –

In instant case, assessee paid entire tax liability along with updated interest much before final audit report was published –

Therefore, action on part of respondent authority in initiating show cause proceedings under section 74 and passing of impugned order was in excess of jurisdiction and the same was to be set aside.