In a pivotal decision, the Calcutta High Court has provided crucial clarity on the scope of Advance Rulings and the importance of considering fresh evidence . The court observed:

Assessee asserts non-consideration of ‘all’ issues by AA while disposing of appeal; In that context, HC remarks “we find that the only exercise done by the appellate authority is… on the ground that penalty could not have been imposed under Section 74… should have been imposed under Section 73”; Accordingly, remands the matter back to AO for fresh decision with a direction to afford an opportunity of personal hearing and re-adjudicate, ‘un-influenced’ by neither its earlier order nor Goa AAR ruling.

Interesting observation by Court :

1. Firstly, the Advance Ruling rendered in Goa cannot be made automatically applicable to the appellant/ Assessee who is registered taxpayer in the State of West Bengal.
2. Secondly, the Advance Ruling may bind the Department at Goa but cannot bind a third-party taxpayer and bind only the applicant who went before the Advance Ruling Authority for a decision.

This decision reinforces the principle that AAR rulings are not universally binding and emphasizes the importance of considering all relevant issues in tax adjudications.

Citation : Sarkar Diesel & Anr. vs. The Deputy Commissioner State Tax | dtd 12-Jul-2024