Case Details: Amit Manilal Haria vs. Joint Commissioner, CGST & Central Excise - [2026] 184 taxmann.com 119 (Bombay)

Judiciary and Counsel Details

• G. S. Kulkarni & Aarti Sathe, JJ.
• Abhishek A. Rastogi, Pooja M. Rastogi, Meenal Songire & Aarya More for the Petitioner.
• Ram Ochani & Sangeeta Yadav for the Respondent.

Facts of the Case

The petitioners filed a writ challenging penalties proposed and imposed under Section 122(1A) of the CGST Act. A search was conducted on the assessee and related firms, summons were issued, and statements were recorded and retracted. The show cause notice (SCN) alleged wrongful availment and transmission of ineligible ITC. The adjudicating authority imposed penalties on each petitioner and issued DRC-07. The petitioners contended that they were not taxable persons and had neither retained any benefit from the transactions nor caused them. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Section 122(1) applied only to taxable persons and mandated dual conditions, namely that a person must have retained the benefit of transactions under clauses (i), (ii), (vii), or (ix) and that such transactions were conducted at their instance. Clauses (i), (ii), (vii), and (ix) targeted violations by taxable persons. No material or finding indicated that the petitioners were taxable persons or had retained benefits or caused the transactions. Furthermore, Section 122(1A) was inserted with effect from 01-01-2021, and penalties could not be retrospectively applied to acts committed before that date, as Article 20(1) of the Constitution of India barred ex post facto penal liability. Consequently, the SCNs and orders imposing penalties on the petitioners were held unsustainable.

List of Cases Reviewed

• Shantanu Sanjay Hundekari v. UOI [2024] 161 taxmann.com 27/105 GST 429/89 GSTL 62 (Bombay) (para 27)followed

List of Cases Referred to

• Shantanu Sanjay Hundekari v. UOI [2024] 161 taxmann.com 27/105 GST 429/89 GSTL 62 (Bombay) (para 9)
• UOI v. Shantanu Sanjay Hundekari [2025] 171 taxmann.com 36/109 GST 177/96 GSTL 385 (SC) (para 9)
• Bharat Parihar v. State of Maharashtra [2023] 152 taxmann.com 6/98 GST 694/75 GSTL 129 (Bombay) (para 12)
• Mukesh Kumar Garg v. UOI [2025] 174 taxmann.com 638/98 GSTL 419 (Delhi) (para 14).

The post Retrospective Penalty u/s 122(1A) CGST Barred | HC appeared first on Taxmann Blog.

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Editorial Team – [2026] 184 taxmann.com 132 (Article)

Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.

1. UAE Issues VAT Guide on Profit Margin Scheme (VATGPM1)

The United Arab Emirates Federal Tax Authority (UAE FTA) has issued the VAT guide on profit margin scheme (VATGPM1), January 2026 edition. It provides detailed guidance on the rationale, eligibility conditions, calculation methodology, invoicing, record-keeping, and reporting requirements applicable to the profit margin scheme under the VAT Law and VAT Executive Regulation.

The scheme is an optional special arrangement allowing a registrant to account for VAT based on the profit margin instead of the full value of the supply when reselling eligible goods or goods in respect of which input tax recovery was blocked under Article 53 of the VAT Executive Regulation. The guide clarifies that the scheme applies only where goods were previously subject to VAT and sets out documentary and compliance requirements for its application.

Key aspects of this guidance include:

(a) PMS Allows VAT to be Calculated on the Margin Instead of Full Value

The scheme enables a reseller to calculate VAT on the profit margin, defined as the difference between the selling price and the purchase price of the goods, inclusive of VAT. VAT is not imposed on the full value of the supply when the scheme is applied.

The VAT due is calculated by applying the VAT fraction (5/105) to the profit margin. The scheme is intended to prevent cascading of VAT where full input tax recovery is not available.

(b) Scheme Applies Only to Eligible Goods Previously Subject to VAT

The scheme applies to second-hand goods, antiques (goods older than 50 years), and collectors’ items, provided they were previously subject to VAT. Goods acquired prior to 01-01-2018 or otherwise not previously subject to VAT do not qualify as eligible goods for the scheme.

The reseller bears the onus of retaining sufficient documentary evidence proving prior imposition of VAT. In the absence of such evidence, VAT must be accounted for on the full value of the supply.

(c) Eligibility Covers Purchases from Non-registrants and Suppliers Applying the Scheme

The scheme may be applied where eligible goods were acquired from a non-registrant or from a taxable person who accounted for VAT using the scheme. It also applies where goods are sold, and input tax recovery was blocked under Article 53 of the VAT Executive Regulation.

However, the scheme does not apply to imported goods where import VAT is recoverable under normal input tax recovery rules, unless the import VAT was non-recoverable under Article 53.

(d) Application of the Scheme is Optional and Subject to Prior FTA Approval

The scheme is optional and may be exercised individually for each eligible supply. A registrant opting to apply the scheme must notify the FTA through the VAT return and comply with the prescribed record-keeping and invoicing requirements.

A tax invoice issued under the scheme must clearly state that VAT was charged with reference to the profit margin and must not disclose the VAT amount. The scheme cannot be applied if a tax invoice reflects VAT imposed on the full value of the supply.

(e) No VAT is Due Where Goods are Sold at a Loss or No Profit

Where goods are sold at a loss or no profit, no VAT is due under the scheme. Losses incurred on one supply cannot be set off against profits realised on another supply. VAT must be accounted for only on supplies where a positive profit margin is realised.

(f) Specific Reporting Requirements Apply in VAT Return

Resellers applying the scheme must select the relevant checkbox in VAT Return Form 201. The selling price less VAT on the profit margin is reported in Box 1 (Amount column), and the VAT on the profit margin is reported in the VAT Amount column.

The purchase price of goods intended to be sold under the scheme must be reported in Box 9 (Amount column) in the tax period of acquisition, with no VAT reflected in the VAT amount column.

The guide confirms that it is not legally binding and is intended to assist in understanding and applying the VAT Law, Tax Procedures Law, and VAT Executive Regulation in relation to the Scheme.

Source: VAT Guide- Profit Margin Scheme

Click Here To Read The Full Article

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Press Release, dated 09-03-2026

The Income Tax Department has conducted a nationwide verification exercise to detect tax evasion in the food and beverage (F&B) sector, particularly among restaurants. The exercise involved the use of AI-enabled analytical tools to analyse transactional data and identify discrepancies in reported income.

1. AI-Based Data Analysis of Restaurant Transactions

As part of the initiative, the Department carried out advanced analytics of transactional data from approximately 1.77 lakh restaurants across the country.

This data was compared with the turnover declared in the respective Income Tax Returns (ITRs) filed by these establishments. The analysis revealed instances of large-scale under-reporting of income.

2. Findings of the Verification Exercise

During the examination, it was observed that some restaurants were engaging in practices such as:

• Deletion of bulk bills
• Modification of transaction records

These practices were allegedly used to suppress actual sales figures and reduce the reported taxable income.

3. Nationwide Survey Conducted

Following the analytical findings, the Department conducted a nationwide survey covering 62 restaurants across 46 cities in 22 States.

Preliminary findings from the survey indicate suppression of sales amounting to approximately ₹408 crore.

4. Launch of SAKSHAM NUDGE Campaign

In response to the findings, the Income Tax Department has launched the SAKSHAM NUDGE campaign, aimed at guiding taxpayers and encouraging voluntary compliance.

The campaign seeks to:

• Advise taxpayers to review their reported income
• Encourage correction of discrepancies in tax filings
• Promote voluntary disclosure and compliance

5. Opportunity to File Updated Returns

Restaurants identified during the exercise are encouraged to file updated returns under Section 139(8A) of the Income Tax Act to correct previously filed returns.

As part of the first phase of the campaign, the Department will send emails and messages to approximately 63,000 identified restaurants, requesting them to update their returns.

Taxpayers have been advised to make necessary corrections before 31 March 2026.

6. Objective of the Initiative

The exercise reflects the Department’s increasing use of data analytics and AI-driven tools to detect tax evasion and improve compliance. The SAKSHAM NUDGE initiative also emphasises voluntary compliance and corrective action before enforcement measures are initiated.

Click Here To Read The Full Press Release

The post CBDT Detects Turnover Suppression by Restaurants appeared first on Taxmann Blog.

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Case Details: Smt. Radhamani A. vs. ACIT - [2026] 184 taxmann.com 7 (SAFEMA-New Delhi)

Judiciary and Counsel Details

• Balesh Kumar & Rajesh Malhotra, Member
• Paulose C. Abraham, Adv. for the Appellant.
• Rishabh Bhardwaj, Ajay Kumar, Advs. & Kanhaiya Singhal, SPP for the Respondent.

Facts of the Case

The appellant, alleged as a benamidar, purchased the property in May 2017 for about Rs. 9.09 lakhs. The Initiating Officer provisionally attached the property under section 24(4) of the PBPT Act alleging a benami transaction under section 2(9)(A). The appellant challenged the attachment, asserting she was the true owner and that there was no identified beneficial owner.

The Adjudicating Authority, after issuing notice and hearing both sides, confirmed the provisional attachment and held the property to be benami, treating the appellant as benamidar. However, it did not conclusively hold Shri M.K. Rajendran Pillai as the beneficial owner for want of conclusive material. It was observed that further investigation was needed to identify the beneficial owner.

ITAT Held

On appeal, the Tribunal held that the beneficial owner Sh. MK Rajendran Pillai amassed the huge wealth while working as Additional Superintendent of police in the State of Nagaland, and after retirement, he obtained a large number of contracts through the benamidars, i.e., local Naga persons, in order to procure contracts, as only Nagas were entitled to the same.

Thereafter, Sh. MK Rajendran Pillai diverted the funds from the said Naga benamidar to his family members, friends and their companies/firms in the State of Kerala and other States, for building his empire and making investments in various business activities, including the company managed by his son Sh. Arun Pillai, MD of M/s Rajavalsam Motors Pvt. Ltd.

Therefore, technically, not only Sh. MK Rajendran Pillai is the beneficial owner, but his son and his company are also joint beneficial owners in the present transaction pertaining to impugned property, as the sale consideration was tendered by the appellant through M/s Rajavalsam Motors Pvt. Ltd.

The post Benami Attachment Valid Without Identifying Owner | SAFEMA appeared first on Taxmann Blog.

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1. Introduction

In the normal course of business, entities may become involved in litigation with customers, suppliers, regulators, or other parties. The accounting treatment of such litigation requires careful evaluation of whether a provision should be recognised or merely disclosed as a contingent liability. In practice, a common issue arises when the legal opinion regarding the likely outcome of litigation is obtained after the reporting period but before the financial statements are approved for issue. In such cases, entities must determine whether such information represents an adjusting event under Ind AS 10 and whether the recognition criteria prescribed under Ind AS 37 are satisfied.

2. Relevant Provision under Ind AS

Ind AS 37 – Provisions, Contingent Liabilities and Contingent Assets

Ind AS 37 prescribes the conditions for recognition of a provision. As per paragraph 14 of Ind AS 37, a provision shall be recognised when:

(a) An entity has a present obligation (legal or constructive) as a result of a past event;

(b) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(c) A reliable estimate can be made of the amount of the obligation.

If these conditions are not satisfied, a provision should not be recognised.

Further, in respect of contingent liabilities, Ind AS 37 states that, where an entity has a possible obligation arising from past events whose existence will be confirmed only by uncertain future events, or where a present obligation exists but the outflow of resources is not probable or cannot be reliably estimated, the obligation should be disclosed as a contingent liability unless the possibility of outflow is remote.

Moreover, Ind AS 37 specifies that the amount recognised as a provision should represent the best estimate of the expenditure required to settle the present obligation at the reporting date.

Ind AS 10 – Events after the Reporting Period

Ind AS 10 addresses the accounting treatment of events that occur between the reporting date and the date on which the financial statements are approved for issue. The standard classifies such events into adjusting and non-adjusting events.

As per paragraph 3(a) of Ind AS 10, adjusting events are those that provide additional evidence of conditions that existed at the end of the reporting period, and in accordance with paragraph 8, entities are required to adjust the amounts recognised in the financial statements to reflect the impact of such events.

Conversely, paragraph 3(b) defines non-adjusting events as those that are indicative of conditions that arose after the reporting period. In terms of paragraph 10, these events do not require any adjustment to the recognised amounts in the financial statements; however, disclosure may be required where such events are material to the users of the financial statements.

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Shobhit Mishra – [2026] 184 taxmann.com 130 (Article)

1. Introduction

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the “Black Money Act”) was enacted with the specific objective of addressing the persistent problem of undisclosed foreign income and assets held by persons resident in India. The Preamble of the Black Money Act reflects the legislative intent to establish a comprehensive statutory framework for the identification, taxation, and penal consequences associated with such undisclosed foreign holdings.

The Act came into force with effect from 1 July 2015, marking a decisive legislative step by the legislature to combat the menace of black money stashed abroad. This move was bolstered by India’s commitment to international transparency norms like the Common Reporting Standard (CRS). Recognising the limitations of the existing regime under the Income-tax Act, 1961 (“Income Tax Act”) in dealing with offshore non-disclosures, Parliament introduced a separate and stringent code providing for the imposition of tax on undisclosed foreign income and assets, along with robust enforcement mechanisms.

Although the objective of the Act is to curb the pervasivemenace of undisclosed foreign income and assets, its penalty framework has often been viewed as excessively stringent. The scheme under Sections 42 and 43 of the Black Money Act operates as a ‘one-size fits all’ model in a manner that even minor or technical lapses, such as failure to disclose a dormant foreign account or inadvertent omission of particulars in the return may attract substantial fixed penalties. The provisions of the Black Money Act lacks a clear distinction between wilful concealment and bona fide, unintentional error, thereby creating a de facto strict liability regime in practice.

Unlike the comparatively graded and discretionary penalty structure found under the Income-tax Act, the Black Money Act adopts a deterrence-driven approach with limited scope for considering assessee’s intent or the principle of proportionality. As a result, even small or incidental compliance failures may trigger severe civil penalties and, in certain cases, prosecution. While this stringent framework may be justified in targeting deliberate offshore evasion, its uniform application to all non-disclosures raises significant concerns regarding fairness, proportionality, the fundamental principles of natural justice and reasonableness and the due process under Article 21 of the Indian constitution.

2. Invocation of Penalty under Sections 42 & 43 – Scope and Threshold

Section 42 of the Black Money Act imposes a fixed penalty of INR 10 lakh where a resident (other than “not ordinarily resident” within the meaning of Section 6(6) of the Income-tax Act) is required to file a return under Section 139(1) of the Income-tax Act and, during the relevant previous year, held a foreign asset (including financial interest therein), was a beneficiary of such asset, or earned income from a foreign source, but fails to furnish the return before the end of the relevant assessment year. The provision is triggered by non-filing of the return itself, not merely by non-disclosure within a filed return. The penalty is uniform and does not depend on the value of the foreign asset or income, subject to a limited carve-out where the aggregate value of foreign asset or assets (other than immovable property) does not exceed INR 20 lakh at any time during the year. In essence, Section 42 of the Black Money Act is invoked where there is a complete failure to file the return despite the existence of a foreign asset or foreign income during the relevant year.

Section 43 of the Black Money Act operates in a distinct but related field. It applies where a resident (other than not ordinarily resident) has filed a return of income under Section 139(1), 139(4), or 139(5) of the Income-tax Act but fails to disclose, or furnishes inaccurate particulars regarding, any foreign asset, financial interest, beneficiary interest, or foreign-source income held at any time during the previous year. Unlike Section 42 of the Black Money Act, the default here is not non-filing of the return, but misreporting or defective or inaccurate/ incomplete disclosure within a filed return. Upon such failure or inaccuracy, the Assessing Officer (the “AO”) may direct payment of a fixed penalty of INR 10 lakh, again subject to the limited exemption wherein the aggregate value of such foreign asset or assets (excluding immovable property) does not exceed INR 20 lakh during the year. Therefore, Section 43 of the Black Money Act is invoked in cases of omission or misreporting of foreign assets or income in the return, even where the taxpayer has otherwise fulfilled their general filing obligations i.e., return itself has been duly filed.

3. Section 72(c) – Deeming Fiction and the Question of Retrospective Operation

Section 72(c) of the Black Money Act specifically employs a “removal of doubts”, provision that creates a legal fiction in respect of foreign assets acquired unreported prior to the commencement of the Black Money Act (i.e., prior to 1 July 2015). It declares that where such an asset was acquired before the Black Money Act came into force and no declaration was made under the one-time compliance window, the asset shall be deemed to have been acquired in the year in which a notice under Section 10 of the Black Money Act is issued by the AO. This fiction bridges the temporal gap, enabling taxation and penalties post 2015 without historical tracing. By shifting the “date of acquisition” to the date of discovery, the Black Money Act effectively bypasses the traditional bar on retrospective taxation, as the tax is technically levied in the year of the notice.

A significant interpretative nuance lies in the language of Section 72(c) that the deeming fiction applies only to “asset” and not to “undisclosed income.” The provision does not declare that undisclosed income relating to such assets shall be deemed to arise in the year of notice. This distinction is critical. This statutory asymmetry creates a significant jurisdictional hurdle, while the asset can be taxed under the Black Money Act by virtue of the deeming clause, the absence of corresponding deeming provision in respect of income raises questions about the extent to which past income streams connected to that asset can be subjected to the Black Money Act’s penal regime. Taxpayers frequently challenge additions to “income” by citing this omission, arguing that “income” must be taxed in the year it was actually earned, subject to the limitation periods of the Income-tax Act.

Click Here To Read The Full Article

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Raising Finance from Capital Markets refers to the process through which companies obtain long-term funds from the public by issuing securities such as equity shares, preference shares, debentures, or convertible securities through recognised stock exchanges. Companies access the capital market primarily through instruments such as Initial Public Offer (IPO), Follow-on Public Offer (FPO), Rights Issue, Qualified Institutional Placement (QIP), and private placements. These securities are offered to investors in order to mobilise capital for business expansion, project financing, debt repayment, or other corporate purposes.

Table of Contents

1. REG – 7 General Conditions for Public & Right Issue
2. Appointment of Merchant Bankers & Other Intermediaries
3. REG – 6 Conditions for Initial Public Offer (IPO)
4. REG – 28 Pricing
5. REG – 29 Price & Price Band
6. REG – 30 Differential Pricing
7. REG – 14 Minimum Promoter Contributions
8. REG – 16 Lock-In of Specified Securities Held by Promoters
9. Book Building Process (BBP) – SCH XI
10. REG – 32 Allocations in Net Offer

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1. REG – 7 General Conditions for Public & Right Issue

A public or right issue of equity shares & convertible securities cannot be made by an issuer under following conditions:

• SEBI has debarred the issuer, any of its promoters, promoter group or directors or selling shareholders from accessing the capital market.
• SEBI has debarred any other company whose promoters, directors are also director or promoter of the issuer, from accessing the capital market.
• If any of its promoters/directors is fugitive (runaway) offender, the restriction (a) & (b) shall not apply to persons who were debarred in the past and the period is over on the date of filing of prospectus.
• A public issue cannot be made if promoter/director is wilful defaulter.
• Issue cannot be made unless an application for in principles approval of listing of equity shares & convertible securities is made to Recognised Stock Exchanges (RSE) & one of them is chosen as Designated Stock Exchange (DSE).
• In case of IPO, application is to be made to at least 1 RSE having nation-wide terminals.
• Unless an agreement is entered into with depositories for dematerialisation of equity shares & convertible securities already issued or proposed to be issued.
• Unless firm arrangements of finance through verifiable means for 75%of stated means of finance, excluding amount to be raised through proposed public or right issue or existing identifiable internal accruals.
• Promoter’s holding before filling of offer document must be in dematerialised form.
• The amount for general corporate purposes mentioned objects in draft offer document should not exceed 25% of amount raised.
• Unless the existing partly paid up shares are either forfeited or are fully paid up.
• Issue shall be open for at least 3 days & not more than 10 days.
• Minimum subscription shall be 90% of issuer size. If not then, amount will be refunded within 15 days of closure of issue.

2. Appointment of Merchant Bankers & Other Intermediaries

The issuer will appoint one or more merchant bankers (MR) of whom at least 1 will be lead merchant banker (LMR).

The rights, obligations & responsibilities relating to disclosures, allotment, refund & underwriting should be pre-determined & disclosed in offer document, if more than 1 merchant banker is appointed.

The issuer should also appoint SEBI registered intermediaries, in consultation with LMR for carrying out the obligations relating to issue.

The issuer shall in case of BBP, appoint syndicate members & in other case appoint bankers to issue at various centers.

The issuer shall appoint Registrar to issue registered with SEBI having connectivity with all depositories.

The issuer shall appoint compliance officer who shall be responsible for monitoring the compliance of securities laws & for redressal of investors.

3. REG – 6 Conditions for Initial Public Offer (IPO)

All of the following conditions are to be fulfilled:

• The issuer must have Net Tangible Assets (NTA) of at least Rs. 3 crores in each of the preceding 3 years (of 12 months each).

1. 1. Out of which not more than 50% NTA must be held in monetary assets.
   2. If more than 50% of NTA are held in monetary assets, then firm commitment to use the excess in business projects must be made.
   3. The 50% will not apply in case of IPO entirely through offer for sales.

• The issuer must have average pre-tax operating profit of Rs. 15 crores during 3 most profitable years out of preceding 5 years.
• The issuer must have Net Worth (NW) of at least Rs. 1 crore in each of preceding 3 full years.
• If the issuer has changed its name within last 1 year, then at least 50% of revenue for preceding 1 year must be earned from activities conducted under changed name.

If any of the above conditions are not fulfilled then the issuer may make an IPO by fulfilling following conditions:

1. Issue is made through Book Building Process (BBP).
2. Issuer undertakes to allot at least 75% of net offer to public to Qualified Institutional Buyers (QIB).
3. Issuer must refund the entire subscription money, if it fails to make allotment to QIB.

• The issuer must have at least 1000 prospective allottees.
• An issuer can make IPO of convertible debt instruments without making a prior public issue of its equity shares & listing, provided company has not defaulted payment of interest/principal for a period of 6 months.
• IPO can be made only if there are no outstanding convertible securities or any other rights entitling person an option to convert into equity after IPO.
• If the issue size is more than Rs. 100 crore, a bank, PFI shall monitor on quarterly basis till 95% of utilization of funds.
• The issuer may obtain grading for its IPO from 1 or more Credit Rating Agencies registered with SEBI.

4. REG – 28 Pricing

The issuer in consultation with LMR or through BBP may determine the prices of equity shares.

The issuer in consultation with LMR or through BBP may determine the coupon rate & conversion price in case of issue of convertible securities.

The issuer may mention a price or price band in offer document & floor price in red herring prospectus.

The issue price shall not be less than the face value.

5. REG – 29 Price & Price Band

The issuer may in case of:

• Fixed Price Issue – Price or price band in offer document
• Book Built Issue – Floor price or price band in red herring prospectus

The floor price shall not be less than the face value.

The cap price should not be more than 20% of floor price.

Face value may be less than Rs. 10 but not less than Rs. 1 per share, if the issue price is Rs. 500 or more.

The face value shall be Rs. 10 per share, if the issue price is less than Rs. 500.

6. REG – 30 Differential Pricing

The issuer may offer its specified securities at different prices subject to following:

7. REG – 14 Minimum Promoter Contributions

The promoter’s contribution varies case to case as follows:

8. REG – 16 Lock-In of Specified Securities held by Promoters

In case of public issue of IPO, the promoter’s contribution shall be locked

9. Book Building Process (BBP) – SCH XI

A process undertaken to arise demand & assess price for determining the quantum or value of specified securities or IDR as per SEBI (ICDR) Regulations, 2018 is called book building process.

10. REG – 32 Allocations in Net Offer

In an issue made through book building process, the allocation in net offer to public is made as follows:

In an issue made through the book building process, the issuer may allocate up to 60% of the portion available for allocation to QIB to an Anchor Investor in accordance with the conditions specified.

Any unsubscribed part of RII or NII may be allocated to applicants in any other category. Along with 5%, the mutual funds are also eligible for allocation under balance available for QIB.

In an issue made through book building process under REG 6(2), the allocation in net offer to public is made as follows:

In an issue made other than through book building process, the allocation in net offer to public is made as follows:

Any unsubscribed part in remaining section can be allocated to any other applicant.

If RII’s are entitled to more than 50% on proportionate basis, then they will be allocated that higher percentage.

The post Raising Finance from Capital Markets – IPO | Book Building appeared first on Taxmann Blog.

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Case Details: DGAP vs. Pacifica Developers (P.) Ltd. - [2026] 184 taxmann.com 88 (GSTAT-NEW DELHI)

Judiciary and Counsel Details

• Anil Kumar Gupta, Technical Member

Facts of the Case

The applicant, a homebuyer, submitted that the developer failed to pass on the benefit of additional input tax credit (ITC) in respect of construction services supplied. The Directorate General of Anti-Profiteering (DGAP) conducted a re-investigation and observed that the credit-to-purchase ratio for the respondent was 7.09 percent in the pre-GST period and 6.44 percent in the post-GST period, indicating a decrease of 0.65 percent. It concluded that no additional ITC benefit had accrued to the respondent, and the applicant contended that the benefit should be passed on. The matter was accordingly placed before the Goods and Services Tax Appellate Authority (GSTAT).

GSTAT Held

The GSTAT held that since the credit-to-purchase ratio had decreased in the post-GST period, no additional ITC benefit had accrued to the respondent and, therefore, no benefit was required to be passed on to the applicant. It was noted that the DGAP report had correctly applied the methodology to assess the ITC benefit, with no errors in calculation or approach. The report was accepted, recording no contravention of Section 171 of the CGST Act and the Delhi GST Act, and the applicant’s contentions were rejected, upholding the respondent’s compliance with anti-profiteering provisions.

List of Cases Referred to

• Reckitt Benckiser India (P.) Ltd. v. Union of India [2024] 158 taxmann.com 675/102 GST 495/82 GSTL 344 (Delhi) (para 2).

The post No Anti-Profiteering as ITC Ratio Fell Post-GST | GSTAT appeared first on Taxmann Blog.

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Case Details: DGAP vs. Axis Infratech LLP - [2026] 184 taxmann.com 78 (GSTAT-NEW DELHI)

Judiciary and Counsel Details

• Anil Kumar Gupta, Technical Member

Facts of the Case

The Directorate General of Anti-Profiteering (DGAP) conducted an investigation and identified 11 buyers who had booked units prior to the issuance of the completion certificate and were therefore eligible for an incremental input tax credit (ITC) benefit. Applying the area-based methodology, it determined an incremental ITC ratio and computed the profiteered amount on the post-GST purchase value. However, examination of records revealed that ITC benefits had already been passed to the eligible buyers. It was further noted that a minor shortfall for one buyer was subsequently transferred via NEFT and confirmed by the buyer. The matter was accordingly placed before the GST Appellate Authority (GSTAT).

GSTAT Held

The GSTAT held that, since the entire incremental ITC benefit had been passed on to all eligible buyers and the nominal shortfall had also been rectified, the statutory obligation to pass the benefit was fully discharged. It was observed that the DGAP report, along with documentary evidence and buyer confirmations, established compliance with the anti-profiteering provisions. Accordingly, it was held that the requirement under Section 171 of the CGST Act and the Delhi GST Act had been satisfied, and the investigation report was accepted, concluding that no further action was warranted under Rule 129 of the CGST Rules.

List of Cases Referred to

• Reckitt Benckiser India (P.) Ltd. v. Union of India [2024] 158 taxmann.com 675/82 GSTL 344/102 GST 495 (Delhi) (para 3).

The post Builder Passed ITC Benefit to Buyers – No Profiteering | GSTAT appeared first on Taxmann Blog.

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Cost Audit Report is a formal report issued by a cost auditor after examining and verifying the cost accounting records, cost statements, and related information of a company to ensure that they are maintained in accordance with applicable cost accounting standards and statutory requirements.

Table of Contents

1. Introduction
2. Critical Elements of Cost Audit Report and Related Evidences (Physical and Digital)
3. Qualified Audit Report
4. Adverse Audit Report
5. Filing of Cost Audit Reports to MCA IN XBRL Format (As Per Taxonomy)

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1. Introduction

The primary responsibility of preparation of the Annexures to the Cost Audit Report lies with the company. However, the same should be prepared in consultation with the cost auditor to ensure that the reporting conforms to the prescribed rules and at the same time the report is in conformity with the cost accounting records.

If, as a result of the examination of the books of the accounts, the cost auditor wants to point out any material deficiency or give a qualified report, he shall indicate the same against the relevant paragraph in the prescribed form of the cost audit report giving details of discrepancies noticed by him. It implies that the cost auditor should put his comments in the respective paragraphs of the cost audit report itself.

The report, suggestions, observations and conclusions given by the cost auditor shall be based upon data duly verified, and reference to which shall be made in the report and shall be included after an opportunity is given to the company to comment on them. The cost auditor is required to point out any deficiency or reservation to the management first. In case he is satisfied with the response of the management, he may decide to drop the issue. However, if he is not satisfied with the explanation of the management, he may decide to qualify the report to that extent.

2. Critical Elements of Cost Audit Report and Related Evidences (Physical and Digital)

A cost audit comprises the following:

Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique. Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective.

Cost audit helps in detection of errors and frauds. The management gets accurate and reliable data based on which they can make day-to-day decisions like price fixation, margin, continuity or outsourcing, make or buy etc. It helps in cost control and finding avenues of cost reduction.

The Cost Audit and requirement of details are informative for better and clear understanding of the Users of Report.

Accordingly, the prescribed Format (Ref. CRA-3) i.e. the Cost Audit Report includes Unit-wise, Product/Service-wise Cost Statements and Schedules, deviation for the same need to be reported. Part – D of CRA-3 is a measure towards performance orientation which includes the following aspects:

• Product and Service profitability statement
• Profit reconciliation
• Value addition and distribution of earnings
• Financial position and ratio analysis

It is needless to point out that appropriate documentation (Working papers, Files, process document in physical or electronic form/mode) and additional supporting, if any, to be to be filed along with XBRL.

The following critical elements must be stated in the cost auditor’s report:

• Whether the machines and labour remained idle during the year because of the shortage of raw materials.
• Whether a large quantity of raw materials were stocked which remained unutilised for a long time, thereby locking up the working capital of the company.
• He should state whether the cost records maintained by the company were adequate for the purpose of audit.
• He should state whether the broad policy laid down by the management was faithfully followed.
• The report should concentrate more on the cost of production, comparative profitability, and operating efficiency of different lines in which the company is engaged rather than the routine statistical or financial information.
• The cost auditor should state if there has been a rise in the cost of production as compared to that of the previous year. He should analyse the causes of such a rise. He should clearly point out where the problem originates from.
• The report should state if there has been any wastage during the process of manufacture and how it could be avoided.
• The cost auditor should also mention the areas in which it is possible to reduce the cost of production.
• He should state whether or not the cost statement reveals a true and fair view of the cost of production.

Every Company covered under this rules, within a period of 30 days from the receipt of the cost audit report to submit/upload in XBRL Format the detail and report with full information and explanations on every reservations or quantification contained therein in CRA-4 as specified in the Companies’ Filing of Documents and Forms in XBRL Rules 2015 in MCA Portal. This helps Companies to integrate Financial and Cost datum across all operational areas for better control.

3. Qualified Audit Report

A qualified audit report is given by the cost auditor when the cost statements are materially misstated due to misstatement in one particular cost element, class of transaction or disclosure that does not have pervasive effect on the cost statements and when the cost auditor is unable to obtain audit evidence regarding particular cost element, its allocation and apportionment, class of transaction or disclosure that does not have pervasive effect on the cost statements.

A qualified audit report issued when the cost auditor encounters any of these situations which do not comply with the generally accepted cost accounting principles and is not in conformity with the principles laid down in CRA-1.

Case Study – Under what circumstances is a qualified audit report to be issued?

A qualified audit report is issued when the cost auditor concludes that there is a limitation or deviation in the audit that materially affects the cost statements, but is not pervasive to the extent of rendering them misleading as a whole. The report in which Cost Auditors express a qualified view of cost statements is a qualified audit report. It means that the company’s cost records are not maintained in accordance with Generally Accepted Accounting Principles (GAAP) but no misinterpretations are involved.

• Non-compliance with Cost Accounting Standards – If the company fails to follow mandatory CAS without justification.
• Improper Maintenance of Cost Records – When records are incomplete, inaccurate, or not maintained as prescribed under the Companies Act and Cost Audit Rules.
• Material Misstatements or Omissions – Errors or omissions in cost statements that affect decision-making.
• Non-availability of Information – If necessary records or explanations are not provided by the company despite repeated requests.
• Discrepancies in Resource Utilisation – If there is excessive wastage or inefficiency not addressed by the management.
• Conflict with Financial Statements – If cost data materially differs from financial records without reconciliation.

A qualified audit report is issued when the cost auditor encounters any of these situations which do not comply with the generally accepted cost accounting principles and is not in conformity with the principles laid down in CRA-1.

4. Adverse Audit Report

An adverse audit report on the cost accounting records and cost statements of a company means that the cost statements are materially misstated and such misstatements have pervasive effect on the cost of production, cost of sales and margin of the products. An adverse opinion is issued when the cost auditor determines that the cost statements of an auditee are materially misstated and when considered as a whole, do not conform to the generally accepted cost accounting principle. It is considered the opposite of an unqualified or clean opinion, essentially stating that the information contained is materially incorrect, unreliable, and inaccurate in order to assess the company’s operational results.

5. Filing of Cost Audit Reports to MCA IN XBRL Format (As Per Taxonomy)

Rule 6(6), of the Companies (Cost Records and Audit) Rules, 2014, as amended by the Companies (Cost Records and Audit) Amendment Rules, 2016,

“Every company covered under these rules shall, within a period of thirty days from the date of receipt of a copy of the cost audit report, furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein, in Form CRA-4 in Extensible Business Reporting Language format in the manner as specified in the Companies (Filing of Documents and Forms in Extensible Business Reporting language) Rules, 2015 along with fees specified in the Companies (Registration Offices and Fees) Rules, 2014.”.

Accordingly, all the cost audit reports have to be filed online, with MCA, in XBRL format, attached to the prescribed Form CRA-4. XBRL international, and the MCA portal, provide detailed information about XBRL and its applications. The necessary information and procedure for understanding XBRL in general and filing of cost audit report in that format, as extracted from these portals is briefly recited below:

XBRL is the open international standard for digital business reporting, managed by a global not for profit consortium called “XBRL International”. XBRL is used around the world, in more than 50 countries. Millions of XBRL documents are created every year, replacing older, paper-based reports with more useful, more effective and more accurate digital versions. The change from paper, PDF and HTML based reports to XBRL is like the change from film photography to digital photography, or from paper maps to digital maps.

XBRL makes reporting more accurate and more efficient. It allows unique tags to be associated with reported facts, allowing:

• People publishing reports to do so with confidence that the information contained in them can be consumed and analysed accurately.
• People consuming reports to test them against a set of business and logical rules, in order to capture and avoid mistakes at their source.
• People using the information to do so in the way that best suits their needs, including by using different languages, alternative currencies and in their preferred style.
• People consuming the information to do so confident that the data provided to them conforms to a set of sophisticated pre-defined definitions.

5.1 Potential Uses of XBRL

XBRL can be applied to a very wide range of business applications including financial and cost data. XBRL has applications in the following areas:

• Reporting for internal and external purposes by an entity involving financial and costing data/information.
• Business reporting to all types of regulators, including tax and financial authorities, central banks and governments.
• Filing of loan reports and applications; credit risk assessments.
• Exchange of information between government departments, institutions and banks.

5.2 Benefit from Using XBRL

All types of organisations can make use of XBRL to automate their process of data collection and distribution to various stakeholders. It helps in saving costs and improving the efficiency in managing business information, financial or cost. XBRL being extensible and flexible, can be adapted to a wide variety of requirements. All stakeholders whether they are preparers, transmitters or users of business data in the financial information supply chain can benefit from the use of XBRL.

5.3 Future of XBRL

XBRL has a bright future ahead of it that goes way beyond the current focus on regulatory reporting and compliance. Businesses that are now creating XBRL filings for regulatory bodies should be thinking about how they can leverage their investment in understanding and using XBRL to drive more consistent and comparable internal reporting. By tagging data at the account/transaction level, by investigating how XBRL can help to deliver new holistic reports that integrate and connect financial and non-financial data, and by leveraging emerging online XBRL data streams for better industry performance and peer group analytics, every business can power its own journey towards financial transformation.

5.4 Benefits of Having Cost Related Data in XBRL Format

Government and Regulators require cost data of different sectors for policy making. The availability of cost data [without compromising on the confidentiality] in XBRL format enables informed decision making and for sectoral studies.

With full adoption of XBRL, companies would be able to integrate its financial and cost data across its operational areas and exercise better control on its activities.

5.5 Costing Taxonomy

Costing Taxonomy is a dictionary of all cost elements required in the cost audit report. The costing taxonomy contains the properties and interrelationships of all these cost elements for the purposes of capturing the required reporting data in XBRL format.

5.6 Conversion of Cost Audit Report into the XBRL Format

XBRL is an open source technology. Any of the following methods can be adopted to create the instance document required for filing of the respective reports.

• XBRL-enabled software packages developed by different software vendors which support the creation of cost reports in XBRL format can be used to create the necessary document.
• Various elements of Cost Audit Report can be mapped into XBRL tags of the costing taxonomy using specialised XBRL software tools specifically designed for this purpose.
• Different third party packages can be integrated into the existing accounting systems to generate XBRL Cost statements.
• There are various web based applications available that take input reports in various formats viz. Microsoft Excel etc. and transform them into XBRL format.

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