M/S.LAKSHMI PACKAGINGS vs. THE ASST COMMISSIONER OF IT

TCA.Nos.911, 912, 925 & 926 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.1.2021 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MS.JUSTICE R.N.MANJULA Tax Case Appeal Nos.911, 912, 925 & 926 of 2019 and CMP.Nos.24481 & 24651 of 2019

M/s.Lakshmi Packagings, Thepperumanallur ...Appellant Vs The Assistant Commissioner of Income Tax, Circle I, Kumbakonam ...Respondent APPEALS under Section 260A of the Income Tax Act, 1961 against (i) the common order dated 21.2.2005 passed by the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai made in I.T.A.Nos. 1289 and 1290/Mds/2004 respectively for the assessment years 1997- 98 and 1998-99 and (ii) the common order dated 16.6.2006 made respectively in MP.Nos.202 and 203/Mds/2005 in ITA.Nos.1289 and 1290/Mds/2004 respectively for the assessment years 1997-98 and 1998-99. 1/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 For Appellant: Mr.A.S.Sriraman For Respondent : Mr.M.Swaminathan, SSC assisted by Mrs.V.Pushpa, JSC COMMON JUDGMENT (Judgment was delivered by

T.S.SIVAGNANAM

,J)

These appeals have been filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) challenging (i) the common order dated 21.2.2005 passed by the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai made in I.T.A.Nos.1289 and 1290/Mds/2004 respectively for the assessment years 1997-98 and 1998-99 and (ii) the common order dated 16.6.2006 made respectively in MP.Nos.202 and 203/Mds/2005 in ITA.Nos.1289 and 1290/Mds/2004 respectively for the assessment years 1997-98 and 1998-99. 2. The assessee filed the above appeals by raising the following substantial questions of law: “TCA.Nos.911 and 925 of 2019 : 1. Whether the Tribunal is correct in concluding that the addition sustained by the First Appellate Authority with regard to the claim of packing expenses and packing charges was justified even though all the vouchers for the purchase of raw materials were placed on record and even though the packing of goods 2/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 quantity wise or bundle wise was not disputed ? 2. Whether the Tribunal is correct in law in concluding that the disallowance of interest paid to associate concerns M/s.Shanmuga Finance Corporation and M/s.Dass & Co., was justified even though the said borrowed funds were utilized for business purposes and even though on an overall analysis of the balance sheet would not justify the diversion of borrowed funds for other purposes as assumed? 3. Whether the Tribunal is correct in law in concluding that the partial disallowance of purchase expenses was justified on the facts and in the circumstances of the case in as much as the evidence placed on record were overlooked and not considered while sustaining the disallowance partially ? And 4. Whether the Tribunal is correct in law in coming to the conclusion that the foreign travel expenses had no nexus with the business of the appellant even though the materials placed on record would suggest and demonstrate that the expenses were incurred for expanding the scope of business of export of silver and gold articles? 3/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 TCA.Nos.912 & 926 of 2019 : 1. Whether the Tribunal is correct in concluding that the loss on account of driage of tobacco to the extent mentioned in para 23 of the impugned order was sustainable even though it was demonstrated with the facts and figures that the loss claimed under that head was normal and factually sustainable ? 2. Whether the Tribunal was correct in law in concluding that the enhancement of value of closing stock was just and reasonable even though the appellant was valuing the closing stock on the basis of cost or market price whichever is lower, consistently followed ? And 3. Whether the Tribunal is correct in law in concluding that the sustenance of addition towards valuation of packing materials was justified based on the reasonings given in the earlier order in spite of detailed analysis of the value of various components submitted before the Authorities below? Additional question in TCA.Nos.925 and 926 of 2019 : Whether the Tribunal is correct in rejecting the prayer for rectification in terms of Section 254(2) of the Act of the earlier order passed on the various issues raised even 4/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 though there was clear demonstration of mistake committed on facts and in law while passing the said earlier order ?” 3. We have heard Mr.A.S.Sriraman, learned counsel for the appellant/assessee and Mr.M.Swaminathan, learned Senior Standing Counsel assisted by Ms.V.Pushpa, learned Junior Standing Counsel appearing for the respondent/Revenue. 4. The learned counsel for the appellant/assessee, on instructions, submits that the appellant/assessee intends to avail the benefit of Vivad Se Vishwas Scheme ('VVS Scheme' for brevity) and in this regard, the assessee is taking steps to file the applications/ declarations in Form No.1. 5. It may not be necessary for this Court to decide the substantial questions of law raised for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. 5/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 6. In terms of the said Act, the assessee has been given an option to put an end to the tax disputes, which may be pending at different levels either before the First Appellate Authority or before the Tribunal or before the High Court or before the Hon'ble Supreme Court of India. Under Section 2(j) “disputed tax” has been defined. In terms of Section 3, where a declarant means a person, who files a declaration under Section 4 on or before the last date files a declaration to the designated authority in accordance with the provisions of Section 4 in respect of tax arrears, then, notwithstanding anything contained in the Income Tax Act or any other law for the time being in force, the amount payable by the declarant shall be determined in terms of Section 3(a-c) thereunder. 7. The First Proviso to Section 3 states that in case, where an appeal or writ petition or special leave petition is filed by the Income Tax authority on any issue before the Appellate Forum, the amount payable shall be one-half of the amount in the table stipulated in Section 3 calculated on such issue, in such a manner as may be prescribed. The Second Proviso deals with the cases, where the matter is before the Commissioner (Appeals) or before the Dispute Resolution Panel. The Third Proviso deals with cases where the issue is pending before the Income Tax Appellate Tribunal. The filing of the declaration 6/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 is as per Section 4 of the Act and the particulars to be furnished are also mentioned in the Sub-Sections of Section 4. Section 5 of the Act deals with the time and manner of the payment and Section 6 deals with immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases. Section 9 of the Act deals with cases, where the Act 3 of 2020 will not be applicable. 8. As observed, the assessee is given liberty to restore these appeals in the event the ultimate decision to be taken on the declarations to be filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeals and on such request made by the assessee by filing a miscellaneous petition for restoration, the Registry shall place such petition before the Division Bench for orders. 9. In the light of the above, we direct the appellant/assessee to file Form No.1 in the respective cases and the Competent Authority shall process the applications/declarations in accordance with the Act and pass appropriate orders as expeditiously as possible preferably within a period of six (6) weeks from the date, on which, the declarations are filed in proper form. 7/8 https://www.mhc.tn.gov.in/judis/ TCA.Nos.911, 912, 925 & 926 of 2019 T.S.SIVAGNANAM,J AND R.N.MANJULA,J RS 10. The tax case appeals stand disposed of with the aforementioned liberty. Consequently, the substantial questions of law raised are left open. No costs. Consequently, the connected CMPs are closed. 19.1.2021

To 1.The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2.The Assistant Commissioner of Income Tax, Circle 1, Kumbakonam. TCA.Nos.911, 912, 925&926 of 2019 and CMP.Nos.24481 & 24651 of 2019 8/8 https://www.mhc.tn.gov.in/judis/