2014 (2) TMI 1345 - HC - Income Tax

Unutilized CENVAT/MODVAT credit - Revenue submitted that section 145A was introduced with effect from 1st April 1999 which would govern the present situation and not the decision of Commissioner of IncomeTax v. Indo Nippon Chemicals Company Limited 2003 (1) TMI 8 - SUPREME COURT which was rendered in background of the statutory provisions prevailing before that date - Held that - Tax Appeal is admitted for consideration of the following substantial question of law Whether the Appellate Tribunal has substantially erred in upholding the order of the CIT A in deleting the addition made by the Assessing Officer on account of unutilized Cenvat/Modvat credit of ₹ 1,98,868/- ?

Summary

Issues Involved:
1. Challenge to the judgment of the Income Tax Appellate Tribunal regarding the addition made by the Assessing Officer.
2. Interpretation of provisions of Section 40A(3) of the Act in relation to cash purchases.
3. Deletion of addition on account of unutilized Cenvat/Modvat credit.
4. Application of the Supreme Court's decision in the case of Indo Nippon Chemicals Company Limited post the amendment to Section 145A.

Issue 1:
The Revenue challenged the Tribunal's decision to restrict the addition made by the Assessing Officer to 5% of the total bogus purchases. The High Court declined to entertain the appeal as it had already considered and dismissed similar questions in a related appeal. Therefore, the questions {A} and {B} were not accepted in this Appeal.

Issue 2:
The question of whether Section 40A(3) of the Act applies to cash purchases claimed to have been made from other parties was raised. The counsel for the Revenue argued that Section 145A introduced from 1st April 1999 should govern the situation, not the Supreme Court's decision in the case of Indo Nippon Chemicals Company Limited. The High Court admitted the Tax Appeal to consider this substantial question of law.

Issue 3:
The deletion of an amount towards unutilized Cenvat/Modvat credit was contested. The counsel for the Revenue argued that the Tribunal erred in upholding the CIT [A]'s order in deleting this addition. The High Court admitted the Tax Appeal to consider whether the Tribunal substantially erred in upholding the deletion of the addition made by the Assessing Officer on account of unutilized Cenvat/Modvat credit.

Issue 4:
The application of the ratio of the Supreme Court's decision in the case of Indo Nippon Chemicals Company Limited post the amendment to Section 145A was questioned. The counsel for the Revenue argued that many Tax Appeals are admitted on this issue. The High Court admitted the Tax Appeal for consideration along with another related appeal.

This detailed analysis of the judgment addresses the various issues raised by the Revenue in challenging the Tribunal's decision and the interpretation of relevant provisions of the Income Tax Act.