Shree Revenue Tribunal in Kathmandu

Appeal letter

Ram Babu Karn, Age 34, resident on Janakpur, Dhanusha as an attorney on behalf of J.V. Tata Projects
Limited, located at Baglung District Baglung N.Pa. Ward no. 4.
………………………………. ..........................................1

Against

Shree Medium Level Taxpayer Office, Babarmahal, Kathmandu................................................1

Issue: Income Tax (F.Y. 2074/075)

In regard to amended tax assessment for F.Y. 2074/075 Cha. No. 769, dated 2080/02/30 issued by Shree
Medium Level Taxpayer Office, Babarmahal, Kathmandu for the petitioner company and the decision
form issued in this regard, Company considered the grounds and reasons for assessing the amended
taxes is in contrary to the law or the accepted principles of law, and due to not being able to be
convinced, the matter was filed for administrative review. In relation to the administrative review, the
decision of Shree Internal Revenue Department, Lajimpat, dated 2080/06/12 received on 2080/10/22,
has to be re-applied to the office within 35 days from the date of receipt however due to regular work
schedule, company has applied a separate application and has been granted 15 days of stay as per
Section 223, Civil Code Procedure,2074 and company is presented with appeal within prescribed time
period of 15 days.

1.As the facts of dispute and decision taken during the administrative review could be updated from file,
it has not been repeated in appeal. So, Kindly Review the facts and decisions made from file.

2. The amended tax assessment order mentioned in order and decision paper issued by the opposition,
Shree Internal Revenue Department are flawed which are explained and submitted as follows:

3. Company has submitted income tax return of F.Y. 2074/075 after self-assessment on 2075/12/13 in
respect of which IRD has issued notice for Amended Tax assessment as per Section 101(6) of the Income
Tax Act, 2058. Section 101 of the Income Tax Act, 2058, under sub-section (3) provides that the
assessment will have to be made within four years. After the applicant company submitted its self-
assessment returns dated 2075/12/13 as per Section 99 of the Income Tax Act, 2058, tax assessment
could be done up to four years dated 2079/12/12 according to Section 101(3), however tax assessment
is being done only on the date of 2080/02/14, which crossed the date of expiry for assessment of the
said limit prescribed by the law. Respected Supreme Court Ne. Ka. Pa. 2079, no. 10920 provides “While
assessing the tax, tax authority is responsible to prove the status of income tax return submitted by
taxpayer. The tax authority shall assess the tax within the time limit prescribed by law. Otherwise, the
tax return filed by the taxpayer shall be final and the same return will be recognized”. Considering the
Section 101(3) of the Income Tax Act, 2058 and principle propounded by the respected court the
assessment carried out by opposition office (IRD) after the time limit specified is in contrast which in the
first place is void itself.

Point No. 1 of Amended Tax Assessment Order related to claim of Prior Period Expenses in current
Fiscal Year.
a. As per the amended tax assessment order issued by the opposition office (IRD), decision documents
and administrative review decision clause 1 "This taxpayer has purchased from Multi Lab Pvt. Ltd. out of
which purchase bill amounting to Rs.5,42,400.00 is related to F.Y. 2073/074. Similarly, this taxpayer has
purchased from Delta Core Pvt. Ltd. out of which purchase bill amounting to Rs. 20,78,506. is also
related to F.Y. 2073/074. Thus, this taxpayer has a total purchase amounting to Rs. 26,20,906.00 of
previous year purchased claimed under direct expenses in current year contrary to the provisions of
clause(a) of Section 13 of Income Tax Act, 2058 which shall not be deducted as per section 21(1)(f) of
Income Tax Act, 2058.”

b. In regard to this, purchase transactions made by the appellant company with Multi Lab Pvt. Ltd. and
Delta Core Pvt. Ltd. are related to regular business of the company and thus these expenses incurred for
the purpose of earning income from the business income are actual expenses and there is no dispute
regarding that. In the course of business transactions, towards the end of F.Y. even if the purchase
demand (Order) are made in current financial year, the orders will be executed & received in the next
financial year. Thus, goods ordered are received in next financial year and also invoice is received at
same time. As Company has to close books of accounts at the end of Ashadh Month and start new books
of accounts for next financial year, goods received in next financial year cannot be entered in previous
year books of accounts as a result of which goods received has been accounted for and claimed in next
F.Y.

c. Section 24 of the Income Tax Act, 2058 provides that expenditure should be accounted for at the time
the liability for payment is created. The appellant company, adhering to accrual accounting principles,
appropriately recorded and claimed the goods received along with invoices during the current financial
year, notwithstanding their scheduled delivery in the preceding financial year.

d. Section 101(1) of the Income Tax Act, 2058 provides that tax should be assessed on an equitable
basis. In the presented point, the expenses claimed by the appellant company are the actual expenses
incurred by the company and the tax office could not say otherwise in the above case, only because of
the complexity of the accounting in the above case. Since the intention of the Income Tax Act is to
recognize the actual expenses claimed and incurred by the taxpayer, the tax assessment which is
contrary to the intention of the Income Tax Act is flawed, so the said tax assessment should be canceled
and the actual expenses should be recognized.

Point No. 2 of Amended Tax Assessment Order related to expenses of the upcoming fiscal year
claimed in the current fiscal year.

a. As per the amended tax assessment order issued by the opposition office (IRD), decision documents
and administrative review decision clause 2 "This taxpayer has purchased from United Builders and
Historic Construction J.V. out of which purchase bill amounting to Rs. 1,03,20,791.00 is related to F.Y.
2074/075 which is claimed under direct expenses in current year contrary to the provisions of clause(a)
of Section 13 of Income Tax Act, 2058 which shall not be deducted as per section 21(1)(f) of Income Tax
Act, 2058.”

b. Regarding this matter, there is no dispute that the expenses incurred for the construction services
obtained from United Builders/Historic Construction J.V. are related to the regular business of the
appellant company and incurred for the purpose of earning income from business activities. The
opposition office (IRD) maintains that the expenses for upcoming financial year’s is claimed in current
financial year. Regarding that, the company asserts that the construction services obtained from
aforementioned J.V. were obtained in the F.Y. 2074/75, and as the work was also completed in the
same financial year, thus the expenses are claimed in this financial year.

c. Under the provisions of Section 13 of the Income Tax Act, 2058, there is a legal provision to deduct
the expenses incurred in activities that generate income from business or investment in any income
year. According to legal provisions, expenses incurred in the financial year in which income is generated
must be claimed in the same financial year. In this context, as the work was completed in this year &
income was earned in same fiscal year, I appeal expenses incurred will not be legally allowed to claim in
next financial year.

d. Section 24 of the Income Tax Act, 2058 provides that expenditure should be accounted for at the time
the liability for payment is created. The service purchased by this company from the aforementioned
service provider company was completed in 2074/075, and the obligation to pay for it is also created in
the same year according to the said law. Thus, expenses claimed in 2074/075 invalidated by the tax
assessment is flawed.

Point No. 3 of Amended Tax Assessment Order regarding Purchase shown less than the actual
purchase:

a. Clause 3 of the amended tax assessment order, decision paper, and administrative review decision
states that, “The taxpayer has shown a purchase from Shivam Cement Pvt. Ltd. amounting to Rs.
8,48,93,322.00, whereas Shivam Cement Pvt. Ltd. has shown sales to this tax payer amounting to Rs.
8,49,08,109.00, thus it is noticed that the taxpayer has shown a lower purchase amounting to Rs.
14,787.00 in the purchase made from Shivam Cement Pvt. Ltd. Similarly, when it is observed that the
taxpayer has shown a purchase from Panchakanya Steel Pvt. Ltd. amounting to Rs. 8,39,70,492.00, and
Panchakanya Steel Pvt. Ltd. has shown sales to this tax payer for Rs. 8,77,58,397, it is noticed that the
taxpayer has incurred a lower purchase amounting to RS. 37,87,455.00 in the purchase made from
Panchakanya Steel Pvt. Ltd. Likewise, when it is observed that the taxpayer has shown a purchase from
Delta Corp Pvt. Ltd. amounting to Rs. 1,19,88,542.00, and Delta Corp. Pvt. Ltd. has shown sales to this
tax payer for Rs. 1,23,85,806.00, it is noticed that the taxpayer has shown a lower purchase amounting
to Rs. 3,97,264.00 in the purchase made from Delta Corp Pvt. Ltd. Similarly, when it is observed that the
taxpayer has shown a purchase from Bata Shoes Pvt. Ltd. amounting to Rs. 4,18,465.00, and Bata Shoes
Pvt. Ltd. has shown sales to this tax payer for Rs. 4,89,949.00, it is noticed that the taxpayer has shown a
lower purchase amounting to Rs. 71,484.00 in the purchase made from Bata Shoes Pvt. Ltd. and when it
is observed that the taxpayer has shown a purchase from United Builders/Historic Construction J.V.
amounting to Rs. 6,97,56,767.00, and United Builders/Historic Construction J.V. has shown sales to this
taxpayer for Rs. 7,15,21,725.00, it is noticed that the taxpayer has shown a lower purchase amounting to
Rs. 17,64,958.00 in the purchase made from United Builders/Historic Construction J.V. Thus, this tax
payer has understated the purchase amount by total of Rs. 60,35,948.00. As tax payer could not submit
the fact or evidence related to understated purchase during tax assessment as a result of which it is
deemed to have been sold without reflecting in books of accounts to other individuals or firms, with
increment of 29.16% as increment compared in income tax returns submitted, amounting to Rs.
77,96,030.00. This sum will be included as sales in current financial year. Deducting the related cost of
sale for the aforementioned sales, which amounts to Rs. 60,35,948.00, the remaining balance of Rs.
16,60,082.00 to be included in income tax return in accordance with Section 7(2)(k) of Income Tax Act,
2058.

b. In this regard, the appellant company, which conducts business in accordance with the prevailing law,
also maintains its regular business accounts in accordance with the prevailing law. I appeal that the
balance sheet, income statement, etc. prepared by this appellant company is verified by the auditor
appointed according to the law. The expenses claimed by the company are claimed according to the
invoices issued by the vendors and service providers. It is not possible to claim an amount more or less
than the said invoice amount. In the presented point, the amounts claimed is according to the invoice
issued by the seller. The subject of how much business has been conducted between two companies
cannot be conclusively determined solely based on the accounts of one company. If one company shows
increased sales to another company, it does not necessarily mean that the other company has made
purchases of the same amount.

c. In order to confirm this, the appellant company has the burden of proving the actual transaction,
including the bill for which the appellant company has purchased the excess amount, the means by
which this company has paid the excess amount, and so on. Mr. Internal Revenue Department, when
the decision of administrative review is made, it is the responsibility of the taxpayer to reconcile and
confirm the transaction with the supplier firm from which he purchases the goods. All the documents to
confirm the tax are submitted at the time of tax audit. In this way, when the evidence related to its
business is presented, how the other company has disclosed the said business is not within the
knowledge of this appellant company, then it is the responsibility of the opposite office to show which
tax payer's details are real in relation to the difference in the business between the two sellers and
buyers.

c. "The burden of proving that it is taxable income is on the tax office or tax officer" from the honorable
Supreme Court N. K. Pa. 2066, No. No. In 7730 the theory has been proved. Similarly, N.K.P. 2079, no. In
10920, it is explained that "the burden of proving the validity of the above tax return submitted by the
taxpayer during the assessment of tax shall remain with the tax officer". Appointed by the honorable
court. From the principle, it is clear that the responsibility of the opposing office is to verify the claim on
an objective basis by ascertaining what kind of goods this company has purchased more from the said
vendor companies and for which invoice, and how the appellant company has paid the price for the said
excess purchase amount. However, the opposition office has not been able to confirm with objective
evidence whether the statement under schedule-13 submitted by this company is wrong, or whether
the statement submitted by the taxpayer is correct, so the tax assessment of the opposition office is
flawed.

d. In Section 14 of the Evidence Act, 2031, "Accounts, books, etc. regularly maintained in connection
with any work, action or business, any matter regularly submitted or reported in other sources, letters
written in relation to transactions or business, compensation, Chalani or any other details can be taken
as evidence. When the appellant company has submitted objective evidence documents such as
invoices, ledgers, bank statements confirming the actual transaction with the seller under the above
point, the opposing office, which bears the responsibility of making a judicial decision, has submitted the
evidence submitted by this company without examining the submitted evidence. Without mentioning in
the decision why the details and proofs are wrong, the tax assessment which is included in the profits
and gains of the company, which has not been purchased by this company, is wrong.
e. Section 2 of the Income Tax Act, 2058 defines income as the income received by a person from
employment, business, investment or windfall and the term also refers to the total amount of such
income calculated in accordance with this Act. A. of income. The definition seems to define only the
actual earnings received by a taxpayer as income, while it is also clear that tax cannot be levied only on
the basis of estimates. The income statements and accounting statements prepared annually by this
company have been prepared by an approved auditor in accordance with prevailing laws. Even though
the said taxpayers showed more sales to this company, this company did not have any more
transactions with the said companies than this company showed and in the case that the opponent
could not even confirm the said excess purchase, it is assumed that the said excess purchase amount
was shown sales by this company to some other person due to lack of objective evidence. By giving false
recognition that the said amount has been earned by this company, the tax assessment made by
maintaining the fictitious income for the amount not earned by the company has been wrong.

Point of order no. 4 In relation to the difference in the amount payable entered by the taxpayer:

a. Revised tax assessment order issued by the opposition office, decision sheet and administrative
review decision point no. 4 in “This taxpayer Panchakanya Steel Pvt. Ltd. The amount to be taken is Rs.
4,06,80,596.00 for entering the said Panchakanya Steel Pvt. Ltd. The amount to be collected from this
taxpayer is Rs. 4,44,36,048.00 while Rs. 37,55,452.00 as there was a difference in the amount that
should be taken and the fact that the said difference was not proved during the tax examination was not
presented during the tax audit, so the said difference amount was considered an asset/liability
according to section 39 and section 40 of the Income Tax Act, 2058. . According to Section 7(2)(c) of the
Act, it appears that the tax has been determined as "must be included in profits and gains".

b. In this regard, the appellant company, which conducts business in accordance with the prevailing law,
also maintains its regular business accounts in accordance with the prevailing law. I request that the
balance sheet, income statement, etc. prepared by this appellant company be verified by the auditor
appointed according to the law. The expenses claimed by this appellant company are claimed according
to the invoices issued by the vendors and service providers, while the amounts to be received are also
entered by issuing the invoices according to the law. It is not possible to claim that more or less amount
is due. The amounts claimed under this point are claimed as per the issued invoice. The issue of how
much business has been transacted between the two companies is not a matter to be determined based
on the accounts of one of the companies, so it cannot be assumed that this company has borne the
responsibility of the excess amount just based on the fact that some company shows that it has taken
more from this company.

c. In order to confirm this, the appellant company has the burden of proving the real transaction,
including the invoices for which the excess purchase and sale has been made, the means by which this
company has given or received the excess amount of payment, etc. In case of administrative review
decision by Mr. Internal Revenue Department, it is the responsibility of the taxpayer to confirm the
transaction with the supplier firm from which he buys or sells the goods. . All the documents to confirm
the tax are submitted at the time of tax audit. In this way, when the evidence related to its business is
presented, how the other company disclosed the business is not within the knowledge of this company,
if there is a difference in the business between the two sellers and the buyer, it is the responsibility of
the opposite office to show which taxpayer's details are real.
d. "The burden of proving that it is taxable income is on the tax office or the tax officer" from the
honorable Supreme Court N. K. Pa. 2066, No. No. In 7730 the theory has been proved. Similarly, N.K.P.
2079, no. In 10920, it is explained that "the burden of proving the validity of the above tax return
submitted by the taxpayer during the assessment of tax shall remain with the tax officer". Appointed by
the honorable court. From the theory itself, it is clear that it is the responsibility of the opposition office
to verify this claim on an objective basis by ascertaining the issue of what kind of goods has been
purchased from the seller companies and for what invoice. However, the opposition office has not been
able to confirm with objective evidence whether the statement under schedule-13 submitted by this
company is wrong, or whether the statement submitted by the taxpayer is correct, so the tax
assessment of the opposition office is flawed.

e. In Section 14 of the Evidence Act, 2031, "Accounts, books, etc. regularly maintained in connection
with any work, action or business, any matter regularly submitted or reported in other sources, letters
written in relation to transactions or business, compensation, Chalani or any other details can be taken
as evidence. The appellant company has submitted objective proof documents such as invoice, ledger,
payment of the invoice amount and received bank statement confirming the actual transaction with the
taxpayer under this point, and the opposing office, which bears the responsibility of making a judicial
decision, has not examined the submitted evidence. Without mentioning in the decision why the
submitted details and evidence are wrong, the tax assessment which is included in the profits and gains
of this company based on the details prepared by other taxpayers is wrong.

f. Section 2 of the Income Tax Act, 2058 defines income as the income received by a person from
employment, business, investment or windfall and the term also refers to the total amount of such
income calculated in accordance with this Act. A. of income. The definition seems to define only the
actual earnings received by a taxpayer as income, while it is also clear that tax cannot be levied only on
the basis of estimates. The income statements and accounting statements prepared annually by this
company have been prepared by an approved auditor in accordance with prevailing laws. Even though
the said taxpayers have shown that they have taken/give more than this company, this company has not
done any more business with the said companies than this company has shown and the opponent has
not even confirmed the excess amount. In the absence of evidence, the company falsely claimed that
the said amount was earned by this company, and the tax assessment made by maintaining a fictitious
income for the amount not earned by the company is wrong.

Point of order no. 5 In relation to the fact that the taxpayer has entered an amount greater than the
amount actually purchased:

a. Revised tax assessment order issued by the opposition office, decision sheet and administrative
review decision point no. 5 in "This taxpayer has this A.O. Ma Tulsi Bhakta/Mother Dblam J. From Rs.
6,96,42,306 worth of purchases, the taxpayer has entered the VAT Returns Details of the Internal
Revenue Department's ITS System this year. Taxable sales in Rs. 5,98,44,437 as it is seen that the VAT
return has been submitted by this taxpayer Tulsi Bhakta/Ama Dblam J. Bhi than the sales amount of Rs.
97,97,869.00 as the expenses have been deducted in excess of 97,97,869.00 as the said excess amount
cannot be said to be an expense as per Section 13 and 15 of the Income Tax Act, 2058. According to
Section 21(1)(f) of the Act, it seems that the tax has been determined as "expenses cannot be
deducted".
b. In relation to this, the appellant company Ama Dblam/Royal Construction J. There is no dispute about
the fact that the purchases taken with V are related to the regular business of the company and thus the
expenses incurred for the purpose of earning income from the business are actual expenses. Section 13
of the Income Tax Act, 2058 states that expenses incurred by a person in earning income from business
or investment in any income year must be deducted. As far as the sales shown by the taxpayer are less
than the purchases shown by this company, the issue of how much business has been transacted
between the two companies is not a matter to be determined based on the accounting of one company
alone, if a public company shows less sales to this company, this company claims more amount of
expenses. It cannot even be assumed that it was done.

c. If the expenses claimed by the appellant company were claimed according to the invoice issued by the
seller, then the invoices, ledgers and other evidences proving the claimed expenses have been
submitted during the tax audit. In this way, when the evidence related to its business is presented, how
the other company disclosed the business is not within the knowledge of this company, if there is a
difference in the business between the two sellers and the buyer, it is the responsibility of the opposite
office to show which taxpayer's details are real. In Section 14 of the Evidence Act, 2031, "Accounts,
books, etc. regularly maintained in connection with any work, action or business, any matter regularly
submitted or reported in other sources, letters written in relation to transactions or business,
compensation, Chalani or any other details can be taken as evidence. In the case that the appellant
company has submitted objective proof documents such as invoices, ledgers, invoices, which confirm
the actual transactions with the taxpayers under the presented point, the opposing office, which bears
the responsibility of making a judicial decision, has not examined the submitted evidence, and why the
details and evidence submitted by this company are wrong. The tax assessment which invalidated the
actual expenses related to the business done by this company based only on the statement prepared by
other taxpayers without mentioning it in the decision is flawed.

d. "The burden of proving that it is taxable income is on the tax office or tax officer" from the honorable
Supreme Court N. K. Pa. 2066, No. No. In 7730 the theory has been proved. Similarly, N.K.P. 2079, no. In
10920, it is explained that "the burden of proving the validity of the above tax return submitted by the
taxpayer during the assessment of tax shall remain with the tax officer". Appointed by the honorable
court. From the theory itself, it is clear that the responsibility of the opposing office is to verify the claim
on an objective basis by ascertaining the issue of what kind of goods and what kind of invoice has been
purchased and claimed more expenses from the said vendor companies. However, the opposing office
has determined the tax to invalidate the actual expenses shown by this company even though objective
evidence has not been able to confirm whether the statement under schedule-13 submitted by this
company is wrong, or whether the statement submitted by the taxpayer is correct. The office's tax
assessment is flawed.

Point of order no. 6 Regarding the fees as per section 120(a) and section 119a of the Income Tax Act,
2058:

a. Revised tax assessment order issued by the opposition office, decision sheet and administrative
review decision point no. In 6, "This taxpayer has not entered the details of the purchase/sale of more
than 1 lakh and the amount to be received/received in Schedule-13 in the E-Return System of the
Internal Revenue Department. According to 119A Rs. 5,000 fee should be demanded.
b. In Section 120 of the Income Tax Act, 2058, it is provided that "filing of false and misleading returns
shall be charged". Nowhere in the revised tax assessment order, the decision sheet issued in relation to
it, the decision of the administrative review, the opposition office has claimed that the appellant
company has filed false and misleading information. Section 120(a) of the Income Tax Act, 2058 provides
that "fifty percent of the reduced tax amount will be levied if false or misleading information is filed, not
knowingly or negligently". As this appellant company has not filed any false or misleading statement in
the opposite office, it does not appear that there is any legal condition for levying charges under Section
120(a).

c. In relation to this, the appellant company this year. I would like to request that the taxpayer has
entered the correct details of all the transactions in schedule 13 during the tax audit of the transaction.
It is not even found that the opposite office has mentioned anywhere that this company has not entered
the correct details of the transactions in schedule 13. In Section 119A of the Income Tax Act, 2058, there
is a provision that "persons who do not comply with any provision of the rules made under this Act shall
be charged a fee of five thousand rupees to twenty-five thousand rupees". As this company has
complied with all the rules made under this Act, the opposition office said that it has not fully complied
with the Income Tax Act and Rs. 5,000 be set aside as erroneous.

4. Therefore, on the basis of the above considered facts, the law and the valid theory propounded by the
court, the revised tax assessment order, the decision paper and the administrative order to invalidate
the expenses according to the law claimed by this taxpayer and to include the transactions not from this
appellant company in the income of the company as the review order is flawed, it should be quashed
and justice should be done.

5. A.W. Disputed tax in 2074/075 Rs. 1,39,18,754.25 half of Rs. 69,59,377.12 during the administrative
review on depositing as security Rs. 34,80,000.00 has been deposited as a bond, the remaining amount
to be deposited is Rs. 34,80,000 filed along with a copy of the bank voucher submitted with this
application, I have attended to register the appeal letter.

6. The present appeal falls within the jurisdiction of this Tribunal under Section 116(1) of the Income Tax
Act, 2058.

7. Attached copies of documents and evidence:

a. Revised Tax Assessment Order dated 2080/02/30

b. Decision sheet dated 2080/02/30 issued by Mr. Internal Revenue Office

c. Decision sheet dated 2080/06/12 issued by Mr. Internal Revenue Department

d. Compensation for understanding the letter

e. Bank Voucher

f. Authority

is. In Waresna
8. The information written in it is true, if it is found to be a lie, the money will be paid according to the
law.

the appellant

He or Rambabu Karna

In this regard, every day of the month of 2080