2020 (2) TMI 1291

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....atutory 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 along with details of expenses falling under the purview of Section 40(a)(iib) and VAT expenses claimed. A response was filed on 13.09.2019 furnishing all details as sought for. This was followed by yet another notice under Section 143(2) dated ....

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....2) 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 Tax (391 ITR 185) and i) Commissioner of Income Tax V. Popular Minerals (258 ITR 593) ii) Commissioner of Income Tax V. Gorelal Dubey (89 Taxman 49) iii) Super Sales India Ltd. V. CESTAT (2016 (306) ELT 502) iv) Union of India V. T.R.Verma (AIR 1957 SC 882) v) C.A.Ibrahim V. ITO (AIR 1961 SC 609) vi) H.B.Gandhi V. M/s.Gopinath & Son....

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.... 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 Rs. 14,575.74 crores. Q.11. Kindly give the details of expenses falling under the purview of 40(a)(ii)b and disallowed 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 The Tamil Nadu State Marketing Corporation Limited (TASMAC) has made payment of Rs. 6,06,700/- u/s.40(....

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....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 of Section 40(a)(iib). 15. The State had originally imposed a privilege fee for the exclusive retail vending of IMFL that had been granted to TASMAC under the Tamil Nadu Prohibition Act. The appropriation of surplus of special privilege fee attracted the provisions of Section 40(a)(iib) after its amendment with effect from 01.04.2017. For this reason, according to the officer, the levy of special privilege fee had been withdrawn, only to be replaced by the levy of VAT. The timing of the withdrawal of privile....