ITA 905/DEL/2021 addresses significant tax compliance issues faced by Ajanta Offset & Packagings Ltd., focusing on the assessment year 2014-15. The case underlines the importance of maintaining precise accounting records across different business units to ensure proper tax deductions.
The case began with a survey operation uncovering that while Ajanta Offset managed to comply with tax deductions for its Faridabad unit, it failed to do so for its Delhi unit during the financial year 2012-13. This led to significant tax discrepancies and subsequent legal challenges.
Upon failing to provide adequate evidence and documentation to differentiate expenses between the Delhi and Faridabad units, the company faced an order from the Income Tax Officer, demanding substantial tax liabilities. This order was challenged and taken to the Commissioner of Income Tax Appeals, who upheld the original decision due to the lack of detailed financial records.
The proceedings took a turn when it was revealed that a Corporate Insolvency Resolution Process (CIRP) had been initiated for Ajanta Offset, leading to the appointment of an Interim Resolution Professional. Despite this significant development, the appeal proceedings initially continued without accommodating the changes brought about by the insolvency process.
The Tribunal, recognizing the oversight, remanded the case to the Commissioner to reconsider in light of the NCLT’s involvement and the corporate insolvency proceedings. This decision underscores the necessity of integrating corporate restructuring events into ongoing tax litigation to ensure fair and just legal processes.
The case of ITA 905/DEL/2021 is a quintessential example of the complexities involved in corporate tax compliance and the impact of corporate governance issues on such processes. It serves as a crucial lesson for companies to maintain clear and separate records for all business units to facilitate straightforward tax compliance and reduce litigation risks.
Complex Tax Compliance in ITA 905/DEL/2021: Ajanta Offset vs ITO, Faridabad
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