#Tax Evasion

The ITAT Ahmedabad has ruled that donations to political parties accompanied by cash-back arrangements constitute accommodation entries with no genuine economic substance, rendering them ineligible for tax deduction under Section 80GGC. This sets a critical precedent for the Income Tax Department to scrutinize politically linked donations and crack down on shell transactions disguised as electoral funding.

The Gauhati High Court has ruled that partners of a firm can be penalized under Section 122(1A) of the CGST Act for retaining benefits from fraudulent transactions, even if they are not registered taxable persons. This extends liability beyond the entity to individuals who profit from tax evasion, and applies retroactively to pre-2021 transactions if notice was issued after the provision came into force, significantly broadening enforcement scope for GST fraud cases.

Madras High Court rules that prosecution under Section 276C(2) of the Income Tax Act requires proof of wilful intent to evade tax, not mere non-payment. The court held that financial distress or inadvertent default does not attract penal provisions, reinforcing that mens rea is a prerequisite for criminal liability in tax evasion cases.

The ITAT Delhi has ruled that an investigation wing’s report identifying a company as bogus is insufficient to sustain additions under Sections 68 and 69C unless corroborated by independent, verifiable evidence such as bank trails, stock records, or third-party confirmations. This reinforces the burden of proof on the Revenue and protects taxpayers from speculative assessments based solely on departmental assertions.

Calcutta High Court ruled that excise duty levied on production capacity under Section 3A of the Central Excise Act need not align with actual output, provided the mechanism serves the legislative intent to prevent tax evasion. The judgment validates the use of 'deeming fiction' in taxation, impacting manufacturers of notified goods like chewing tobacco.