ACIT, Circle -1, Nellore V. The Kovur Cooperative Sugar Factory Limited, Nellore

CO 123/HYD/2012

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0027 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 04-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K UMA
• Assessee Lawyers: B RAMA KRISHNA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1049/HYD/12 & CO NO.12 3 /HYD/2012 THEREIN : ASSESSMENT YEAR 2008 - 09 ITA NO.1050/HYD/12 & CO NO.12 4 /HYD/2012 THEREIN : ASSESSMENT YEAR 2008 - 09 ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE 1, NELLORE. V/S. M/S. THE KOVUR COOPERATIVE SUGAR FACTORY LIMITED, NELLORE. (PAN AAAAT 4049 F) (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI B.RAMAKRISHNA DR RESPONDENT BY : S MT. K.UMA DATE OF HEARING 26 . 11 .2014 DATE OF PRONOUNCEMENT 28.11.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THESE TWO APPEALS PREFERRED BY THE R E VENUE INVOLVE ISSUES WHICH ARE INTERLINKED AND THE SAME THEREFORE, HAVE BEEN H E ARD TOGETHER AND ARE BEIN G DISPOSED OF ALONGWITH THE CROSS OBJ E CTION S FILED BY THE ASSESSEE, B E ING C . O . NO.123 AND 124/HYD/2012 , BY A SINGLE CONSOLIDA TED ORDER FOR THE SAKE OF CONVENIENCE. 2. FI R ST, WE SHALL TAKE UP THE APPEAL O F THE RE VENUE BEIN G ITA N O.1049 /H YD/2012 WHICH I S DIRECTED AGAINS T THE O R DER O F THE LEARNED CIT(A) GUN T UR DATED 8.3.2012. I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 2 3. THE SOLITARY ISSUE IN V OLVED IN THIS APPEAL REL A TES TO TH E DELETION BY THE LEARNED CIT(A) OF THE ADDITION OF RS .33,31,183 MA D E BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST. 4. THE ASSESSEE IN THE PRESENT CA S E IS A COOPERATIVE SOCIETY, WHICH IS ENGAGED IN THE BU S IN E SS O F MANUFACTURING OF SUGAR. THE RETURN OF INCOM E FOR TH E YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.9.2008 DE C LARING A LO S S OF R S .22,73,72,144. DURIN G TH E COU R SE OF ASSESSMENT PROCEEDINGS, IT WAS NO T ICED BY THE ASSESSING OFFICER THAT THE LOAN TAKEN FROM NATIONAL COOP E RATIVE DEVELOPM E N T CORPORATION ( NCDC) , NEW DELHI FOR CANE PROCUREMENT COULD NO T BE REPAID BY THE ASSESSEE, AND THE SAME AMOUNTING TO RS .2,04,51,683 INCLU D ING INTEREST OF R S .33,31,183 WAS REPAID BY THE G OVERNMENT OF ANDH R A PRADESH. TH E SAID I NTEREST WAS DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT WHICH , ACCORDING TO THE ASSESSING OFFICER , WAS NO T ALLOWABLE AS DE D UC T ION , K EEPING IN VIEW THAT IT WAS NO T PAID BY T H E ASSESSEE , BUT WAS PAID BY THE GOVERNM E N T OF ANDHRA PRADESH. HE THER EF OR E , DISALLOWED THE I NT EREST EXPENDITURE OF RS.33,31,183 CLAIMED BY THE ASSESSEE AND ADDED B A CK THE SAME TO THE TOTAL IN C OM E O F TH E ASSESSEE IN TH E ASSESSMENT COM P L E T E D UNDER S .143(3) VIDE ORDER DATED 2 9 .11.2010. 5. AGAINST THE ORDER PASSED BY THE ASS ESSING OFFICER UNDER S.143(3 ) , AN APPEAL WAS PREFERRED BY TH E ASSESSEE BEFORE THE LEARNED CIT(A) CHALLEN G IN G INTER ALIA THE DISALLOWANCE OF INTER E ST OF R S .33,31,183 MADE BY THE ASSESSING OFFICER ON ACCOUNT O F INTEREST. BEF O RE THE LEARNED CIT(A), I T WAS SU BMI T TED ON BEHALF O F THE ASSESSEE THAT AS PER THE GUARANTEE GIVEN BY THE GOVERNMENT OF AN D H R A PRADESH, THE OUTSTANDING LOAN AMOUNT INCLU D IN G INTEREST I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 3 WAS PAID TO NCDC NEW DELHI ON BEHALF OF TH E ASSESSEE AND THE AMOUNT SO REPAID WAS TR E ATED BY THE STATE GO VERNMEN T OF ANDHRA PRADESH AS LOAN GRANTED TO THE ASSESSEE. IT WAS CONTENDED THAT THE REPAYMENT OF LOAN IN C LU D IN G INTER E ST THUS WAS MADE BY THE ASSESSEE S OCIETY OUT OF FRESH LOAN TAKEN FROM THE ST ATE GOVERNMEN T OF ANDHRA PRADESH , AND THERE WAS NO REASON FOR THE ASSESSING OFFICER FOR MAKING SUCH A DISALLOWANCE OF IN T ER E ST. THE LEARNED CIT(A) FOUND MERIT IN THIS CON T ENTION OF THE ASSESSEE, AND AFTER HAVING FOUND FROM THE REL E VANT RECORD THAT THE LOAN AMOUNT INCLUDING INTER E ST WAS P AID BY TH E STATE GOVERNMEN T TO NCDC NEW DELHI ON BEHALF OF THE ASSESSEE , HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT O F SUCH INTEREST . AGGRIEVED BY THE O R DER OF THE LEARNED CIT(A), REVENUE HAS PREFERRED THIS APP E AL BEFORE THE T RIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE AMOUNT O F IN TER E ST IN QUESTION HAVING BEEN PAID BY THE ST ATE GOVERNMENT OF ANDHRA PRADESH TO NCDC, NEW DELHI, THE ASSESSEE WAS NOT ENTITLED TO CLAIM SUCH INTER E ST AS EXPENDITURE , AND AS THE AMOUNT WAS PAID BY THE STATE GOVER N MENT TO NCDC TOWARDS INTEREST , THE REPAYMENT OF INTEREST ALTERNATIVELY SHOULD BE ASSESSED TO TAX IN TH E HANDS O F THE ASSESSEE SOCIETY AS ITS INCOME. WE ARE UNABLE TO A C CEPT THIS CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. I T IS OBSERVED THAT A SPECI F IC SUBMISSION WAS MADE ON BE H A L F OF THE ASSESSEE BEFORE T H E LEARNED CIT(A) THAT THE LO A N AMOUNT TAKEN FROM NCDC NEW DELHI INCLUDING INTER E ST WAS REPAID BY THE S T ATE GOVERN MENT OF ANDHRA PRA D ESH AS P E R THE GUARANTEE GIVEN BY TH E GOVERNMENT AND THE AMOUN T SO REPAID WAS TR E ATED BY THE STAT E GOVERNMENT AS THE LOAN GRANTED TO THE ASSESSEE SOCIETY. ON I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 4 VERIFICATION OF THE RELEVANT RECORD, TH E LEARNED CIT(A) FOUND THAT THE TOTAL LOAN LIABILITY INCLUDING INTER E ST WAS PAID TO NC DC NEW DELHI BY THE ST ATE GOVER N MEN T OF ANDHRA PRADESH ON BEHALF OF THE ASSESSEE SOCIETY AND THE AMOUN T S O R EP A I D WAS TR E AT E D BY THE STATE GOV ERNMENT AS THE LOAN GRANTED TO THE ASSESSEE SOCIETY. BASED ON THE SAID FINDING OF FACT, THE LEARNED CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST . A T THE TIM E OF H E ARING BEFORE US, THE LEARNED DEPARTMENTAL REPRESEN TATIVE HAS NO T BEEN ABLE TO CONTROVERT OR REBUT THI S FIN D ING OF FACT RECORDED BY THE LEARNED CIT(A) ON VERIFICATION OF THE RELEVANT RE C ORD. THI S BEING SO, WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMP UGNED ORDER OF TH E LEARNED CIT(A), DELETING THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF INTEREST. THE SAME IS , THER E FORE UPHELD ON THIS ISSUE AND THE APPEAL OF THE REVENUE IS DISMISSED. 7. NOW, WE SHALL TAKE UP THE OTHER APPEAL OF THE REVENUE, B E IN G IT A NO.1050/HYD/12, WHICH IS DIR E CTE D A GAIN S T T HE ORDER OF THE LEARNED CIT(A), GUNTUR DATED 8.3.2012, WHEREBY HE CANCELLED THE PENALTY OF R S .51,92,030 IMPO S ED BY THE ASSESSING OFFICER UNDER S.271(1)(C) OF THE ACT. 8. IN THE PROFIT & LOSS ACCOUNT FILED ALO NG WITH THE RETURN OF INCOME AS WELL AS 3CD REPORT ANNEXED THERETO, THE GROSS TURNO V ER FOR THE YE A R UN D E R CONSIDERATION WAS REPORTED BY THE ASSESSEE AT R S . 29,14,42,988 . DU R IN G THE COURSE OF ASSESSMENT PROCEE D INGS, IT WAS HO W EVER , POIN T ED OUT BY THE ASS ESSEE T HAT THE TURNOVER SO REPO R TED WAS SHO R T BY RS.1,34,74,417. IT WAS ALSO POINTED OUT THAT THIS OMISSION IN INCLUDING TH E SALE OF MOLASSES , SALE OF BAGASSE, MANURE AN D SCRAP IN TH E TOTAL TURNOVER WAS DUE TO THE MISTAKE INADVERTENTLY COMMIT T ED BY THE COMPU TE R OPERATOR, WHILE I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 5 MAKIN G THE DATA ENTRY, AND THERE WAS NO INTENTION WH A TSO E VER TO EVADE TAX. TH IS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY TH E ASSESSING OFFICER , AND HE MADE AN ADDITION OF RS.1,34,74,417 TO THE TOTAL INCOME OF THE AS SESSEE ON ACCOUNT OF SUPPRESSION OF SALES. 9. I N RESPECT OF TH E ADDITION MADE ON ACCOUNT OF SUPPRESSION OF SALES AS WELL AS THE ADDITION MADE BY WAY OF DISALLOWANCE OF INTEREST OF R S .33,31,183, PENALTY PROCE E DIN G S UN D ER S.271(1)(C) W E RE INITIATED BY TH E ASSESSING OFFICER AND SIN C E THE EXPLANATION OFFERED BY THE ASSESSEE TO THE SHOW CAUSE NOTICE ISSUED DURING THE C OURSE OF THE SAID PROCEED I NGS WAS NO T FOUND ACCEPTABLE BY HIM, THE ASSESSING OFFICER IMPOSED PENALTY OF R S .51,92,930 UNDER S.271(1)(C) B EING 100% OF TH E TAX SOUGHT TO BE EVADED BY THE ASSESSEE. 10. THE PENALTY IMPO S ED BY THE ASSESSING OFFICER UNDER S.271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BY TH E ASSESSEE BEFORE T HE LEARNED CIT(A) AND AFTER CON S I D ERIN G THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON R E CORD, THE LEARNED CIT(A) CANCELLED THE PENALTY I MPO S ED BY THE ASSESSING OFFICER UNDER S.271(1)(C) FOR THE FOLLOWING REASON S GIVEN IN PARAGRAPH 11 OF HIS IMPUGNED ORDER. 11. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE AO AND HEARD THE AR IN PERSON. ON TWO ADDITIONS MADE THE AO HAS LEVIED CONCEALMENT PENALTY. IN THESE TWO ADDITIONS AS FAR AS THE ADDITION CONCERNING THE INTEREST ELEME NT, THE CIT(A) WHILE ADJUDICATING THE QUANTUM APPEAL HAS DIRECTED THE ASSESSING OFFICER TO DELETE THE SAME. HENCE, THIS ASPECT IS NO MORE RELEVANT AND THUS CONCEALMENT PENALTY ATTRIBUTABLE TO THIS QUANTUM ADDITION NO MORE SURVIVES. IN AS MUCH AS THE OTHER ADDITION CONNECTED WITH UNDER REPORTING OF TURNOVER, IT HAS BEEN EXPLAINED THAT THE NEW DATA ENTRY OPERATOR HAS MADE THE MISTAKE I.E., PRECISELY IN POSTING SOME OF THE ENTRIES WHICH OUGHT TO HAVE BEEN POSTED ON CREDIT SIDE WERE I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 6 IN FACT BY INADVERTENCE BEE N POSTED ON DEBIT SIDE. THE APPELLANT HAS EXPLAINED THESE MISTAKES WITH FACTS AND FIGURES. IN THE CIRCUMSTANCES, THOUGH IN QUANTUM APPEAL THE SAME HAS BEEN CONFIRMED IN AS MUCH AS PENALTY PROCEEDINGS ARE CONCERNED, IT HAS TO BE TREATED AS A BONA FIDE MIST AKE AND AS SUCH PENALTY NO MORE SURVIVES. BESIDES, THE AO HAS NOT BROUGHT ANY COGENT MATERIAL ON RECORD TO PROVE THAT THE APPELLANT HAS INTENTIONALLY RESORTED TO SUCH A PRACTICE TO DEFRAUD THE REVENUE. SUCH A FINDING WAS NOT ATTEMPTED BY THE AO, WHO HAS PLAYED SAFE AND IMPOSED PENALTY ON THE GROUND THAT THERE WAS AN ADDITION IN THIS REGARD. IN THIS REGARD IT MAY BE OBSERVED THAT EVERY ADDITION, IPSO FACTO LEADS TO PENALTY. AN ADDITION MADE BY THE ASSESSING OFFICER OR FOR THAT MATTER ADDITION MADE BY THE ASSESSING OFFICER BEIN G CONFIRMED BY THE CIT(A) IS A FIRST STEP TO SUSPECT C O NCEA L MENT. PENALTY MAY B E DUE TO ADDITION, BUT EVERY ADDITION NEED NOT RESULT IN PENALTY. FOR LEVY OF PENALTY THE ASSESSING OFFICER NEEDS TO PROVE BEYOND DOUBT THAT THE APPELLANT HAS CONCEALED INCOME OR FURNI S H E D INACCURATE PARTICULARS OF INCOME, WHICH IS NO T THE CA S E HERE. I N TH E CIRCUM S TAN C ES, I AM INCLINED TO AGREE WITH THE AR THAT THE PENALTY LEVIED BY THE AO IS NO T SUSTAINABLE AND AS SUCH THE AO IS DIR E CTED TO DELET E THE SAME. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE R E VENUE HAS P R EFERRED THIS APPEAL BEFORE THE TRIBUNAL. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WHILE DISPOSING OF THE QUANTUM APPEAL FIL E D BY THE RE VENUE, WE HAVE ALREADY UPHELD IN THE FOREGOING PORTION OF THIS O R DER, THE ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE OF RS.33,31,183 MADE BY THE ASSESSING OFFICER ON AC C OUN T OF INTEREST . CON S EQUENTLY, THE PENA LTY IMPOSED BY TH E ASSESSING OFFICER UNDER S .271(1) ( C) IN RESPECT OF SAID DISALLOWANCE IS LIABLE TO B E C A NCELLED, HAVING NO LEGS TO STAND, AS RIGHTLY HELD BY THE LEARNED C IT(A). 12. INSO F A R AS THE PEN A L T Y IN RESPECT OF ADDITION MADE ON AC C OUN T OF ALLE GED SUPPRESSION O F SALES IS CONCERNED, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE SO CALLED MISTAKE ST A TED TO B E COMMI TTE D BY THE COMPU T ER OPERATOR CANNOT B E CON S I D ERED AS A BONA FIDE MISTAKE AND THE LEARNED CIT(A) IS NO T I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 7 JU S TIFI E D IN CANCELLING THE PENALTY IMPOSED BY THE ASSESSING OFFICER IN RESPE C T OF THIS ADDITION. HE HAS CONTENDED THAT T H E SUPPRESSION OF SALE BY THE ASSESSEE WAS IN T ENTIONAL TO EVADE PAYMENT OF TAX, AS RIGHTLY H E LD BY THE ASSESSING OFFICER AND THE PEN A L PROVISION S O F S.271(1)(C) A RE THUS CLEARLY ATTRACTED. AFTER H AVING CONSIDER E D ALL THE FACTS OF THE C ASE AS BO R NE OUT FROM THE R E CORD, WE FIND IT DIFFICULT TO ACCEPT THIS CON TEN TION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. IT I S OBSERVED F R OM THE ASSESSMENT ORDER TH AT THE MISTAKE IN REPORTING THE TURNOVER SHO R T BY RS.1,3 4 , 74, 417 WAS POINTED OUT BY TH E ASSESSEE ON ITS OWN, WITHOUT THERE BEING ANY SPECIFIC DETECTION MADE BY THE ASSESSING OFFICER. MOREOVER, A LOSS OF R S .22, 73,72,144 W AS DECL A RE D BY TH E ASSESSEE SO C I E TY IN ITS RETURN O F INCOME AND K EEPING IN VIEW THIS UN D I S PU T ED PO SI TION, IT CANNO T B E SAID THAT THE ALLEGED SUPPRESSION OF SALE OF RS. 1,34,74,417 BY TH E ASSESSEE WAS IN T ENTIONAL TO AVOID PAYM E N T O F TAXES. WE THER EF ORE, FIND OURSELVES IN AGREEMENT WITH THE LEARNED CIT(A) THAT THE UNDERSTATEMENT O F SALES WAS A RESULT OF MISTAKE INADVERTENTLY COMMITTED BY THE NEW DATA ENTRY OPERATOR OF THE ASSESSEE SOCIETY AND SIN CE THE SAME WAS A BONA FIDE MISTAKE, PENALTY UNDER S.271(1)(C) WAS NO T WARRANTED. AS SUCH, CO NSIDERING ALL THE FACTS OF THE CA S E, WE FIND NO INFIRM I TY IN THE ORDER OF THE LEARNED CIT(A) CANCELLIN G THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER S.271(1)(C) AND U P HOLDING THE SAME, WE DISMISS THE APPEAL OF THE REVENUE. 13. NOW TURNING TO THE CROSS OBJECTIONS OF THE ASSESSEE, WE FIND THAT THE GROUNDS OF THE ASSESSEE RAISED THEREIN ARE MERELY SUPPORTIVE OF THE RESPECTIVE ORDERS OF THE CIT(A) IMPUGNED IN THE APPEALS OF THE REVENUE AND DO NOT SEEK ANY INDEPENDENT ADJUDICATION. AS SUCH, THEY ARE INFRUCTUOUS AND THE SAME ARE ACCORDINGLY DISMISSED. I TA NO. 1049 - 1050 /H YD/20 12 &COS THEREIN M/S. KOVUR CO - OP. SUGAR FACTORY LTD., POTHIREDDYPALEM, KOVUR MANDAL, NELLORE 8 14. TO SUM UP, BOTH THE APPEALS OF THE REVENUE AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 28 TH NOVEMBER, 2014 SD / - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 28 TH NOVEMBER, 2014 COPY FORWARDED TO: 1. M/S. THE KOVUR COOPERATIVE SUGAR FACTORY LIMITED, POTHIREDDYPALEM, KOVUR MANDAL, NELLORE DIST. 2 . ASSTT. COMMISSIONER OF INCOME - TAX CIRCLE 1, NELLORE 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) GUNTUR COMMISSIONER OF INCOME - TAX, GUNTUR 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S