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TMI Blog2020 (2) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... hatever name called which is levied exclusively on or which is appropriated directly or indirectly from a State Government undertaking by the State Government which encompasses the levy of VAT as well. Petitioner was called upon to file a reply to the SCN on or before 24.12.2019. Some time was sought by the petitioner and a detailed reply came to be filed on 27.12.2019. This has culminated in the impugned order of assessment, wherein the Officer confirms the proposal in the SCN, albeit by way of a short order. The length of an order is hardly a parameter to indicate application of mind or otherwise by an Assessing Authority. In the present case, the impugned order insofar as it relates to this issue is seen to be a mere repetition of the entire show cause notice and the legal arguments raised by the petitioner in reply dated 27.12.2019 and case-law referred to, have not been adverted to at all. An addition of a sum of ₹ 14,574.74 crores, in my considered view, does merit some amount of detailed discussion on the legal aspects involved, particularly in the light of the allegation regarding collusion between the State and TASMAC. In effect, the argument of the Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Ms.Hema Muralikrishnan, learned Senior Standing Counsel for the respondents on 10.01.2020 restricting the scope of the Writ Petition only to the disallowance under Section 40(a)(iib) of the Act and relegating the petitioner to statutory appeal in respect of the other issues. 3. Today, learned counsel for the petitioner confirms that an appeal has been filed in respect of other issues arising from assessment and what is assailed in the Writ Petition are the violation of the principles of natural justice as well as the disallowance effected under Section 40(a)(iib). 4. The submissions of the petitioner are that the return of income filed on 31.10.2017 was taken up for scrutiny for the first time by notice under Section 143(2) dated 21.09.2018 only. The petitioner had made certain high value cash deposits during the period of demonetization and on 18.11.2018, a questionnaire was issued calling for certain information that including deposits made during demonetization period that were supplied under cover of letter dated 28.12.2018. The next communication was only on 23.08.2019 by way of a questionnaire again where details of deposits of demonetized notes were sought alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cement (Bharat) Ltd. V. CIT (375 ITR 419) ii) Om Prakash Agarwal V. Giri Raj Kishori Others (164 ITR 376) iii) Municipal Corpn V. Mohd. Yasin Another (142 ITR 737 iv) CIT V. Mc Dowell Co. 314 ITR 84 v) CIT V. Lakshmi Thirtha Swamiar (1954 AIR 282) vi) CIT V. Varas International (P) Ltd. (225 ITR 831) vii) Srikakollu Subba Rao Co. V. UOI (173 ITR 708) viii) CIT V. Dineshkumar Gordhanlal (226 ITR 826) ix) CIT V. Mohanlan Mishrilal Sons (135 CRT 483) x) CIT V. Udaipura Distillery Co. Ltd. (268 ITR 305) xi) Corporation of Calcutta V. Liberty Cinema (1965 SCR (2) 477) xii) Orissa Cement Ltd. V. State of Orissa (1991 SCR (2) 105) xiii) The Hingir-Rampur Coal Co., V. The State of Orissa (1961 SCR (2) 537) xiv) Kewal Krishnan Puri V. State of Punjab (1979 SCR (3) 1217) xv) P.M.Ashwathanarayana Setty V. State of Karnataka (1988 SCR supl.(3) 155) xvi) Sreenivasa General Traders V. State of Andhra Pradesh (1983 SCR (3) 843) xvii) Municipal Corporation of Delhi V. Mohd. Yasin (1983 SCR (2) 999) xviii) Karnataka State Beverages Corpn. Ltd. V. Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a second notice dated 27.09.2019 was issued by the assessing officer in terms of Section 143(2) of the Act, which really is of no relevance. 10. Questionnaires were issued on 23.08.2019, and 13.09.2019 raising various issues again after the elapse of nearly eight months from the last exchange of communication, and at points 10 and 11, specifically calling for details of VAT expenses and expenses falling under the purview of Section 40(a)(iib) and disallowed by the petitioner, for the relevant assessment year. In response, the petitioner vide reply, also dated 13.09.2019, answers query Nos.10 and 11 as follows: Q.10. Kindly give the details of the VAT Expenses claimed for the AY 2017-18 You are requested to furnish detailed explanation on the reason cited above along with supporting documents and evidences in support of your claim as per the return of Income furnished by you for AY 2017-18. Reply Tamil Nadu State Marketing Corporation Limited (TASMAC), is a company, wholly owned by the Government of Tamil Nadu. The VAT (Value Added Tax) was paid as per the Tamil Nadu Value Added Tax Act, 2006. The Value Added Tax paid during the period is ₹ 14,57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schedule of the Tamil Nadu Value Added Tax Act (in short TNVAT ) that provided for the remittance of VAT and the provisions of Section 43B that provided for a deduction to be claimed on actual payment. No ITC had been claimed in line with the prescription contained in Section 3(5) of the TNVAT Act. VAT returns in Form WW were annexed. Questionnaires were issued on 14.11.2019, 20.11.2019 and 28.11.2019 touching upon the aspect of demonetization only, that were also replied to, on 29.11.2019. 14. On 07.12.2019, summons had been issued for personal attendance. This was followed by a show cause notice (SCN) dated 21.12.2019 wherein for the first time, the petitioner was called upon to respond to the proposal for disallowance under Section 40(a)(iib), since the Assessing Authority was of the view that the said provision was attracted to the VAT remittances effected by the petitioner. His reasoning, as seen from the SCN, is this. TASMAC is a wholly owned undertaking of the State. VAT, remitted by TASMAC enures directly and exclusively to the benefit of the State. Thus, according to the officer, the levy was itself a camouflage, in any event directly covered by the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed in some detail by the Officer after examining the contentions of the petitioner as well but have been dealt with in haste, perhaps since the issue was itself crystallized only under show cause notice dated 21.12.2019 issued at the eleventh hour. 18. The SCN soliciting a response could well have been issued in a timely manner particularly when the contentious issue had been identified as early as on 23.08.2019 and 13.09.2019 when queries had been put to the petitioner and its responses solicited. Valuable time has elapsed between 13.09.2019 and 21.12.2019 when the SCN was issued which could have been put to good use had the notice been issued well in advance on this issue at least. After all it is not necessary that all issues arising from the return are fully assimilated and crystallized for a comprehensive show cause notice to be issued. Specific issues, as and when identified, may be put to the assessee then and there to ensure timely and proper response and finalisation. 19. For the aforesaid reasons, the assessment insofar as it relates to disallowance in terms of Section 40(a)(iib) is set aside. The petitioner will appear before the Assessing Officer with its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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