2023 (1) TMI 284 - HC - Income Tax

Manner in which the Tribunal had disposed of the appeal - Unutilized MODVAT credit - Whether Tribunal was justified in law in making the addition in respect of unutilized MODVAT credit for the relevant previous year without even considering that the treatment for accounting of MODVAT credit applied by the appellant was in accordance with the approved method of accounting duly approved by the ICAI and has been regularly followed by the appellant? - HELD THAT - As on a closure scrutiny we find that the Tribunal has abrogated its responsibility in its entirety which is heavily cast upon the learned Tribunal being the last factfinding authority in the hierarchy of authorities. By way of illustration we can point out that in paragraph 11 of the order passed by the Tribunal, the findings rendered by the CIT(A) has been adopted by the Tribunal verbatim as its own findings and so much so, even the directions given by the CIT(A) to the Assessing Officer has been copied verbatim. We find that though the Tribunal has recorded that it had heard the submissions of the learned authorised representative of the assessee as well as the department representative, the submissions made by the authorised representative have not been noted or recorded. Tribunal has stated that the authorised representative has given detailed submission on behalf of the assessee which are all contained in detail in the order of the CIT(A) and, therefore, need not be repeated again. It is seen that all the grounds which have been canvassed before the Tribunal have been dealt with in the very same fashion. Also we note from the impugned order that the Tribunal has verbatim extracted the grounds raised by the parties and in paragraph 60 the Tribunal has held as follows We have examined the rival submissions. We find no infirmity in the order of the CIT(A) which is confirmed. The appeal of the assessee is dismissed on the 10th ground. In a similar fashion the other grounds have also been dealt with as could be seen from paragraph 73 to 79. Thus, it is clear that the order passed by the Tribunal is without any application of mind and suffers from utter perversity. In fact, the order of the learned Tribunal is a classical example of as to how an order should not be drafted. We are informed that though the assessee had filed a miscellaneous application with a prayer to decide all issues by passing a reasoned order, such application was dismissed by the learned Tribunal on the ground that it would tantamount to review. Thus, we are fully satisfied that the order of the Tribunal has to be set aside in its entirety. In the result, the appeals filed by the revenue as well as the assessee are allowed and the order passed by the Tribunal is set aside and remanded to the Tribunal for fresh consideration.

Issues:
1. Disallowance under section 80IB of the Income Tax Act
2. Contribution to Bengal Club Ltd.
3. Expenditure on repairing and replacement of plant and machinery
4. Service charges paid to Birla Management Corporation Ltd.
5. Expenditure on community development
6. Contribution towards personnel scheme under Section 43B of the Act
7. Interest on borrowed funds
8. Addition of unutilized MODVAT credit
9. Disallowance under section 14A of the Income-tax Act

Analysis:

1. The Court considered various substantial questions of law raised by the revenue and the assessee. The issues included disallowance under section 80IB of the Act, contribution to Bengal Club Ltd., expenditure on repairing plant and machinery, service charges paid to Birla Management Corporation Ltd., expenditure on community development, contribution towards personnel scheme under Section 43B, interest on borrowed funds, and interest under section 36(1)(iii) of the Act. The Court highlighted discrepancies in the Tribunal's order, noting that it failed to fulfill its fact-finding responsibilities adequately. The Tribunal merely adopted findings without proper analysis, leading to a lack of application of mind and perversity in the order. Consequently, the Court set aside the Tribunal's order and remanded the case for fresh consideration, emphasizing the need for a reasoned decision on all grounds raised.

2. Regarding the addition of unutilized MODVAT credit, the Court examined whether the treatment applied by the appellant was in accordance with approved accounting methods and accepted by the revenue. The Court referenced relevant case law and accounting standards to assess the correctness of the addition. The Court found that the Tribunal's failure to consider these aspects led to an erroneous decision. As a result, the Court allowed the appeals filed by both the revenue and the assessee, setting aside the Tribunal's order and directing a fresh consideration of the issues.

3. The Court also addressed the disallowance under section 14A of the Income-tax Act. The issue involved a reduction in disallowance amounts determined by the Tribunal, which the revenue and the assessee contested. The Court noted discrepancies in the Tribunal's approach, highlighting the failure to observe facts and findings of the Assessing Officer. The Court deemed the Tribunal's decision as perverse and lacking proper consideration of relevant details. Consequently, the Court allowed the appeals of both parties, setting aside the Tribunal's order and remanding the case for a comprehensive review.

In conclusion, the High Court of Calcutta, through a detailed analysis of various legal issues raised by the revenue and the assessee, found deficiencies in the Tribunal's order, leading to a lack of proper application of mind and factual analysis. The Court emphasized the importance of reasoned decisions and remanded the case for fresh consideration, ensuring all grounds are adequately addressed in accordance with relevant legal provisions and precedents.

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