Madras High Court Suspends Tax Recovery, Orders Thorough Investigation on Alleged Misuse of Tax Login ID

In a significant ruling, the High Court of Judicature at Madras, presided over by the Honourable Mr. Justice C. Saravanan, has ordered a suspension of tax recovery proceedings against M/s. Shewil Trading Company. This decision, pronounced on 02.11.2023, comes in the wake of allegations of unauthorized use of the company’s login credentials for tax filings.

The petitioner, represented by Mr. Hari Radhakrishnan, contested a recovery notice issued by the Commercial Taxes Department, seeking to recover a sum of Rs.11,63,24,233/- for the assessment years 2014-2015 and 2015-2016. The crux of the dispute centered around the claim that the petitioner did not receive a copy of the assessment order before the issuance of the recovery notice and had faced issues with the electronic filing system, leading to manual submissions.

In a key observation, Justice Saravanan highlighted, “The status of the investigation pursuant to the above FIR registered based on the complaint of the petitioner is not known.” This statement underscored the uncertainty surrounding the allegations of misuse of the petitioner’s login ID, prompting the court to call for a detailed investigation.

The court drew parallels with a similar case, W.P.Nos.37044 & 37045 of 2016 involving M/s. Hansa Enterprises, where the misuse of login ID was alleged. Emphasizing the need for a thorough investigation, the court directed the Commercial Tax Officer, in coordination with the Cyber Crime Cell, to investigate the authenticity of the petitioner’s claims.

While the investigation, which is to be completed within 18 months, is underway, the court has ordered that all revenue recovery proceedings against the petitioner be held in abeyance. Furthermore, the assets of the petitioner shall remain attached as a precautionary measure.

Mrs. K. Vasanthamala, representing the respondents, was present during the proceedings. The court’s decision marks a critical juncture in addressing the complexities arising from digital transactions and cybersecurity in the realm of taxation.

Date of Decision: 02.11.2023

M/s.Shewil Trading Company VS .The Commissioner of Commercial Taxes