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Section 74A: Summarised, Simplified in Chart Form & duly Explained

Government with the intent to reduce the litigation regarding applicability of extended period has inserted new section 74A in the Finance Act(2), 2024. This new section has also been notified vide N.No. 17/2024 making it effective from 1st November, 2024.


In this article, we have summarised and simplified the Section-74A with the help of charts. Further, we have also explained the provisions of Section-74A with the help of illustrations.


Section 74A will be applicable for the SCN issued for the demand of short/non-paid Tax, wrongful availment/utilisation of ITC and erroneous refund pertaining to the tax period (issue date of SCN is not relevant but the Tax Period is relevant) FY 2024-25 onwards for both type of case i.e. whether

- There is involvement of Fraud/Suppression/material misstatement

- There is no involvement of Fraud/Suppression/material misstatement.

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Introduction

Explanation


From FY 2024-25, SCN will be issued only in Section 74A i.e. Section 73 or 74 will be applicable for issuance of SCN up to the Tax Period of 2023-24.


For instance, in case SCN is issued in 2025-26 related to FY 2022-23, it will be issued in either Section- 73 or Section-74 as the case may be. On the other hand, SCN is issued in FY 2025-26 for the tax period 2024-25, it will be issued in Section-74A.


Further, if demand per FY is less than Rs.1000, no SCN will be issued.


Time Period for issuance of SCN


Explanation


Time line for issuance of SCN under Section 74A will be 42 months as explained above in both type of cases. (there is no differentiation as compared to Section-73 (2 Year & 9 months) & 74 (4 Year & 6 months).


Further, in case where on SCN has already been issued for some issue (like classification of a product) for the period for FY 2024-25, in that case there is no need to issue detailed SCN for issue of classification for the subsequent period like for FY 2025-26 onwards to the same taxpayer. In that case, Department may issue Statement containing Tax Details/ITC details/Refund Details as the case may be. That Statement will be considered as SCN.


Amount of Penalty & Time Limit for issuance of Adjudication Order

Explanation


Section-74A has prescribed the separate penalty for both type of cases as explained in chart above.


Further, Section-74A has also prescribed the time limit for the adjudication of the SCN i.e. 12 months from date of SCN. In this regard, Law has make it mandatory for Adjudicating Authority to decide the cases after considering the submissions of the Taxpayer.


Further, there is provision to extend such time limit by another six months after taking approval of the competent authority as per details below:


In case Adjudicating Authority is Joint/Additional Commissioner: With the approval of the Commissioner.

In case Adjudicating Authority is Deputy/Assistant Commissioner or Superintendent of Central Tax: With the Approval of Joint/Additional Commissioner or the Commissioner.

Settlement of Cases with reduced Penalty


Explanation


As per Section-74A, In case Taxpayer wants to settle the case, he can avail the benefit of reduced penalty by deposit of Tax amount along with interest and reduced penalty as per details in Chart above.


In this regard, it is to be noted that in case there is failure of deposit of self-assessed tax or collected tax with in thirty days, Taxpayer need to mandatorily pay at least 10% of the Tax Amount as penalty even in the cases where there is no involvement of Fraud.


Other Key Points

Explanation


It is to be noted that on settlement of cases after deposit of Tax, interest and penalty as applicable, proceedings for prosecution for the offences prescribed under Section-132 will still continue.


Further, in case Adjudication Authority fails to adjudicate with in time limit prescribed in Section-74A, proceedings will be considered as concluded i.e. it will be lapsed.


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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.




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