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CEOs, CFOs need not appear before taxman despite summons in technical matter, rules Rajasthan HC

A high court has ruled that an “authorised representative” can appear before a taxman while responding to a summons issued by tax authorities, offering respite to many senior executives, including directors and chief financial officers (CFOs), who were being forced to respond to tax department notices.

There are many cases where the tax department has sent notices and summonses, as well as demanded that top executives respond to them in person.

Insiders point out that often these summons are issued by different state and central authorities, and it becomes difficult for top executives to appear before the taxman, especially if the tax demand is not too big or it involves a technically sound person to put across a point.

The high court of Rajasthan on April 8 said that “entitlement of representation through an authorised representative for any summons by GST authorities” should be allowed.

“This is a very topical ruling, as there is a surge in the issuance of summons by DGGI (Directorate General of GST Intelligence) and other indirect tax authorities for the CFO, tax head and, in a few instances, for directors of companies,” said Harpreet Singh, partner-indirect tax at KPMG India. “At times, physical appearance could be a challenge on account of various personal or professional reasons, in which case one would rely on the authorised representatives to fill in.”

In most cases, the tax authorities insist that these executives appear before them even when the amounts involved barely run into lakhs, say tax experts.

In this particular case, the summons were issued by DGGI, the intelligence and investigation arm of the indirect tax department. DGGI had asked a senior executive to appear before the authorities for the investigation.

The executives ideally want tax advisors, finance department executives, or lawyers to take care of these matters, as GST is a specialised subject.

“Principally, any summons issued by the authorities should be duly complied with by the company. However, in any case where personal appearance is not possible due to unavoidable reason, a request for adjournment or representation through an authorised representative may be submitted to the authorities. However, the option of granting any relief is at the discretion of the authorities,” said Singh of KPMG.

Many industry trackers have in the past raised concerns over tax demands by different state GST departments as well. In many cases, state authorities have challenged the transactions of companies over where the GST should have been paid.

Under the GST framework, companies are required to register themselves with every state separately where they operate.

Tax is only paid where consumption actually happens. The GST is also split in such a way that a part of the tax is collected by state authorities while another part is collected by central tax authorities.

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