Commissioner of Incometax V. M/s.Mahateja Rice Mills pvt.ltd.,

ITTA/447/2011

AI Insights

The case involves the Commissioner of Income Tax, Hyderabad, as the petitioner, and M/s Mahateja Rice Mills Pvt. Ltd., Miryalaguda, as the respondent. The dispute centered on the assessment order for the year 2004-05, where the assessee declared a 'nil' income. The Assessing Officer initially accepted this return without detailed scrutiny. However, the Commissioner of Income Tax later revised this order, citing issues like excess depreciation claims and inflated wastage in paddy processing. The Tribunal, upon appeal by the assessee, found that the Commissioner had erred in his assumptions and reinstated the original assessment, leading to the Revenue's appeal to the High Court.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 719157 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 27-06-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment; Depreciation; Income Tax; Valuation cell; Wastage
• Section: 143(1); 263; 260A

Judgement Text

"HON’BLE SRI JUSTICE GODA RAGHURAM AND HON’BLE SRI JUSTICE N.RAVI SHANKAR I.T.T.A. NO. 447 OF 2011 Between: Commissioner of Income Tax, Hyderabad … Petitioner And: M/s Mahateja Rice Mills Pvt, Ltd,, Miryalaguda … Respondent HON’BLE SRI JUSTICE GODA RAGHURAM AND HON’BLE SRI JUSTICE N.RAVI SHANKAR I.T.T.A. NO. 447 OF 2011 Judgment: (per SRI JUSTICE G. RAGHURAM) This appeal by the Revenue u/Sec. 260A of the Income Tax Act 1961 (‘the Act’) is directed against the order dated 13.08.2009 of the Income Tax Appellate Tribunal (‘the Tribunal’), Hyderabad Bench, in ITA No. 504/HYD/09. The respondent (assessee – Company) which is in the business of paddy milling filed its return of income for the assessment year 2004-05, declaring the total income as ‘nil’. After the return was processed the Assessing Officer (Income Tax Officer, Ward-1, Nalgonda) u/Sec. 143(1) of the Act passed an order of assessment dated 29.12.2006 accepting the income returned, by a laconic order, merely stating that after “careful examination of the material produced” the return is accepted. The Commissioner of Income Tax (CIT) exercising jurisdiction u/Sec.263 of the Act revised the order of assessment, set aside the same and remanded the matter to the Assessing Officer directing passing of a fresh order of assessment, in the light of the findings, observations and directions recorded by him. The revision was initiated on the ground that the assessee has claimed excess depreciation of Rs.4,58,750/- which was accepted by the Assessment Officer without applying his mind; the assessee had inflated the claim of wastage in the processing of paddy and this was accepted without analysis of the consumption – output ratio; and though the assessment was selected for scrutiny to examine the cost of factory building by referring to the departmental valuation cell, the assessment was completed without making any such reference, to the valuation cell. It however requires to be noticed that the CIT while remanding the matter to the Assessing Officer for fresh assessment, had recorded clear findings as to excess claim of depreciation and inflated claim of wastage in the processing of paddy. Aggrieved by the revisional order, the assessee preferred an appeal to the Tribunal which was allowed by the order under appeal herein. The Tribunal having considered the rival submissions of the assessee and the Revenue and the material on record held that on all the three counts i.e., excess claim of depreciation; excess claim of wastage; and non-reference of valuation of factory building etc, to the valuation cell, there was no justification for invoking jurisdiction u/Sec.263 of the Act. On excess claim of depreciation the Tribunal went into this aspect and held that indisputably the assessee Company had received a subsidy of Rs. 37,50,000/- in March 2004 and therefore had reduced the same from plant and machinery in the 2nd half of the year and claimed the depreciation thereafter. In the circumstances the excess depreciation assumed by the CIT, relating to the first half of the year, during which period the value of the plant and machinery was rightly not reduced by the amount of subsidy received, was an erroneous assumption and the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue, concluded the Tribunal. As to excess claim of wastage, the Tribunal held that the assessee had shown an aggregate yield of 75% comprising rice bran, broken rice and param as against 69% pointed out by the CIT, though this was the first year of operation and that the wastage disclosed by the assessee was far below the industrial standard and there occurred no prejudice to the interest of the Revenue even as per the Commissioner’s computation and therefore there was no justification for exercise of power u/Sec. 263. With regard to the Assessing Officer proceeding with the assessment without referring valuation of the factory building to the Valuation Cell, the Tribunal held that only on account of the fact that no reference was made to the valuation cell the assessment cannot be held vitiated even where it is made in the course of scrutiny, warranting invocation of jurisdiction u/Sec. 263. Sri S.R. Ashok, the learned senior Standing Counsel for the Income Tax contended that the Tribunal erred in setting aside the revisional order of the CIT in toto and the proper course for the Tribunal was to invalidate the revisional order on the ground that no finding on the merits of assessment ought to have been recorded when the matter was being remanded for de novo assessment. Sri Ravi S, the learned senior counsel representing the assessee contended per contra that the order of the Tribunal is not susceptible to interference in this appeal u/Sec. 260A, in the absence of any substantial error of law in the order under appeal. Sri Ravi contended that the assessee had canvassed the correctness of the revisional order passed by the CIT on its merits as well, before the Tribunal. The Tribunal having considered the rival submissions and perused the material on record had recorded clear and impeccable findings on facts that there was no excess depreciation claim by the assessee, there was no inflated wastage claimed and non-reference to the valuation cell per se would not vitiate the order of assessment and no substantial question of law arises in the circumstances, warranting interference. Sri Ashok did not seriously contest the assessee’s proposition that the Tribunal was within its jurisdiction in adjudicating upon the correctness of the revisional order on its merits and proceeding to analyze the relevant facts therefor. On a careful consideration of the material on record we hold that the order of the Tribunal suffers from no substantial error of law, warranting interference u/Sec. 260A of the Act. No substantial question of law falls for consideration. The appeal is accordingly dismissed. No costs however. Dt: 27-06-2012 Pvsn/ndr/* ------------------------- Justice G. Raghuram ----------------------------- Justice N. Ravi Shankar "