Assistant Commissioner of Income tax, V. Eco Cane Energy Ltd, Kolhapur

ITA 122/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1604 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 16-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI VIKAS AWASTHY, JM / ITA NOS.121 & 122/PUN/2017 / ASSESSMENT YEARS: 2010-11 & 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, KOLHAPUR. ....... / APPELLANT / V/S. ECO CANE ENERGY LTD. GAT NO. 72/2 & 76, MAHALUNG KH. A/P. TUDAYE, TAL. CHANDGAD, DIST. KOLHAPUR-416502 PAN : AABCN7682D / RESPONDENT REVENUE BY : SHRI SUDHENDU DAS ASSESSEE BY : NONE / DATE OF HEARING : 20.11.2018 / DATE OF PRONOUNCEMENT : 26.11.2018 / ORDER PER VIKAS AWASTHY, JM THESE TWO APPEALS HAVE BEEN FILED BY THE DEPARTMENT. IN ITA NO. 121/PUN/2017, THE REVENUE HAS ASSAILED THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS)-2, KOLHAPUR DATED 03.11.2016 FOR THE ASSESSMENT YEAR 2010-11 DELETING PENALTY LEVIED U/S.271(1) (C) OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NOS. 121 & 122/PUN/2017 A.YS.2010-11 & 2012-13 ITA NO.122/PUN/2017, BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLHAPUR DATED 03.1 1.2016 FOR THE ASSESSMENT YEAR 2012-13. 2. THE NOTICE OF APPEALS WAS SENT TO THE ASSESSEE THRO UGH RPAD ON 22.10.2018 FOR TODAY I.E.20.11.2018. DESPITE SERVICE OF NOTICE, N ONE HAS APPEARED ON BEHALF OF THE ASSESSEE. IT APPEARS THAT THE ASSESSEE IS NOT KEEN TO DEFEND THE IMPUGNED ORDERS. IN SUCH CIRCUMSTANCES, WE AR E PROCEEDING TO DECIDE THE APPEALS WITH THE ASSISTANCE OF LD. DR AND THE M ATERIAL AVAILABLE ON RECORD. WE WILL FIRST TAKE UP THE APPEAL OF REVENUE IN ITA NO. 121/ PUN/2017 FOR ASSESSMENT YEAR 2010-11. ITA NO. 121/PUN/2017 A.Y. 2010-11 3. THE REVENUE HAS ASSAILED THE ORDER OF COMMISSIONER O F INCOME TAX (APPEALS)-2, KOLHAPUR BY RAISING FOLLOWING GROUNDS: 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LE VIED U/S.271(1)(C) FOLLOWING THE DECISION OF THE ITAT IN ASSESSEE'S CA SE FOR A.Y.2010-11 IGNORING THE FACT THAT ADDITIONAL SUGARCANE PRICE P AID OVER AND ABOVE THE PURCHASE PRICE FIXED BY THE GOVERNMENT IS NOTHING B UT APPROPRIATION OF PROFIT WHICH IS LIABLE TO BE DISALLOWED AS BUSINESS EXPENDITURE? 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF THE APPEAL AT THE TIME OF PROCEEDI NGS BEFORE THE TRIBUNAL WHICH MAY PLEASE BE GRANTED. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) BE VACATED AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED . 4. SHRI SUDHENDU DAS REPRESENTING THE DEPARTMENT SUBM ITTED THAT DURING SCRUTINY ASSESSMENT PROCEEDINGS, ADDITION OF RS.2,41,58,633/- WAS MADE BY 3 ITA NOS. 121 & 122/PUN/2017 A.YS.2010-11 & 2012-13 ASSESSING OFFICER BY INTER ALIA DISALLOWING PRIOR PERIOD EXPENDIT URE IN RESPECT OF ADDITIONAL CANE PURCHASE PRICE CLAIMED DURING THE CURRENT ASSESSMENT YEAR. THERE WERE OTHER ADDITIONS IN RESPECT OF REPAIRS AND MAIN TENANCE EXPENDITURE, CONSULTANCY FEES AND TRAVELLING EXPENSES. IN APPEAL AGAIN ST THE ASSESSMENT ORDER, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED ALL O THER ADDITIONS EXCEPT ADDITION ON ACCOUNT OF EXCESS PAYMENT OF CANE PR ICE TO THE FARMERS. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WERE INITIATED IN RESPECT OF THE ADDITION CONFIRMED. THE ASSESSING OFFICER VIDE ORDER DATED 1 8.06.2014 LEVIED PENALTY OF RS.81,13,960/- IN RESPECT OF AFORESAID ADDITION. T HE ASSESSEE FILED APPEAL AGAINST THE PENALTY ORDER BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY DELETED THE PENALTY BY PLACING RELIANCE ON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2010-11 IN ITA NO.468/PN/2014 DATED 29.01.2016. THE LD. DR VEHEMENT LY SUPPORTED THE ORDER OF ASSESSING OFFICER DATED 18.06.2014 LEVYING PENALTY U /S.271(1)(C) OF THE ACT AND PRAYED FOR REVERSING THE ORDER OF COMMISSIONER O F INCOME TAX (APPEALS). 5. WE HAVE HEARD THE SUBMISSIONS MADE BY LD. DR AND HAV E PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ONLY ISSUE RAISED IN APPEA L IS AGAINST DELETING PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF PAY MENT OF EXCESS CANE PRICE PAID TO FARMERS BY ASSESSEE. THE COMMISSIONER OF INC OME TAX (APPEALS) DELETED THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT BY OBSERVING AS UNDER : 5. DECISION: I HAVE CAREFULLY CONSIDERED THE MATTE R. THE APPELLANT HAS RAISED 7 GROUNDS OF APPEAL OUT OF WHICH 4 ARE GENER AL GROUNDS. IN ANY CASE, ALL GROUNDS ARE RELATED TO THIS SINGLE ADDITI ON MADE BY THE AO. ALL GROUNDS ARE THEREFORE CLUBBED TOGETHER FOR THE SAKE OF CONVENIENCE. I HAVE PERUSED THE ORDER OF THE HON'BLE ITAT IN THE APPELL ANTS OWN CASE FOR THIS AY 2010-11 IN ITA NO. 468/PN/2014. I FIND THAT THE MATTER IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE SAID DECI SION. THE HON'BLE ITAT HAS DELETED THE DISALLOWANCE. QUOTING FROM THEIR OR DER:- '10. THUS IN VIEW OF THE FACTS OF THE CASE AND THE DECISION OF THE HON'BLE DELHI HIGH COURT DISCUSSED ABOVE, WE ARE OF THE CON SIDERED VIEW THAT THE 4 ITA NOS. 121 & 122/PUN/2017 A.YS.2010-11 & 2012-13 AMOUNT OF RS.2,33,30,414 PAID BY THE ASSESSEE TOWAR DS THE ADDITIONAL COST OF PROCUREMENT OF SUGARCANE IN SEASON 2008-09 CRYSTALLISED WHEN THE BOARD OF DIRECTORS DECIDED TO PAY THE ADDITIONAL CO ST TO THE FARMERS. THE MANAGEMENT OF THE ASSESSEE COMPANY COULD NOT HAVE A SCERTAINED THIS EXPENDITURE IN AY 2009-10. ACCORDINGLY WE FIND MERI T IN THE APPEAL OF THE ASSESSEE. THE APPEAL OF THE ASSESSEE IS ACCEPTED TO THE EXTENT OF RS.2,33,30,414 PAID TOWARDS ADDITIONAL COST FOR PRO CUREMENT OF SUGARCANE.' THE HON'BLE ITAT HAS FOLLOWED THE DECISION OF THE H ON'BLE DELHI HIGH COURT IN THE CASE OF EXXON MOBIL LUBRICANTS (P) LTD 328 I TR 17 (DEL). FROM THE ABOVE, IT IS EVIDENT THAT THE ADDITION ITSELF HAVIN G BEING DELETED, THE PENALTY ON THE SAID ADDITION HAS NO LEGS TO STAND. I AM ALSO CONSTRAINED TO POINT OUT THE CURSORY APPROACH OF THE AO. A PLAIN R EADING OF THE PENALTY ORDER REVEALS THAT NO FINDING OF EVEN THE QUANTUM O F INCOME, FOR WHICH INACCURATE PARTICULARS HAVE BEEN FILED, IS NOT MENT IONED. IN THE ABSENCE OF THE SAME, THE VERY BASIS OF DETERMINATION OF TAX SO UGHT TO BE EVADED IS A MYSTERY. THE AO HAS MADE NO EFFORTS TO POINT OUT HO W THE APPELLANT HAS FILED INACCURATE PARTICULARS VIS-A-VIS THIS ISSUE O R CONCEALED HIS INCOME. THE AO SIMPLY REPEATED WHAT THE CIT(A) HAS STATED I N HIS APPELLATE ORDER AND CONCLUDED THAT INACCURATE PARTICULARS HAVE BEEN FILED. IN ANY CASE AS THE QUANTUM ITSELF HAS BEEN DELETED, THERE IS NO QU ESTION OF LEVY OF PENALTY. I THEREFORE CANCEL THE PENALTY LEVIED IN THIS CASE. THE LD. DR HAS FAILED TO CONTROVERT THE WELL-REASONED FINDIN G OF COMMISSIONER OF INCOME TAX (APPEALS). IN ABSENCE OF ANY CONTRARY MATER IAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APP EALS) IN DELETING LEVY OF PENALTY BY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSE ES OWN CASE FOR EARLIER ASSESSMENT YEAR. ACCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. 6. FURTHER, WE OBSERVE THAT THE MANNER IN WHICH PENALTY PROCEEDINGS U/S.271(1)(C) HAVE BEEN INITIATED, ARE AMBIGUOUS. IN ASSESSMEN T ORDER DATED 25.03.2013 WHILE INITIATING PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS RECORDED SATISFACTION U/S.271(1)(C) OF THE ACT WITHOUT SPECIF YING CHARGE FOR LEVY OF PENALTY. HOWEVER, WHILE LEVYING PENALTY, THE ASSESSING OFFICE R CONCLUDED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME, TH EREFORE, PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE ATTRACTED. THE MANNER IN WHICH SATISFACTION FOR INITIATING PENALTY U/S.271(1)(C) OF THE ACT HAS BEEN RECORD ED SUFFERS FROM 5 ITA NOS. 121 & 122/PUN/2017 A.YS.2010-11 & 2012-13 AMBIGUITY AND VAGUENESS. THEREFORE, PENALTY LEVIED U/S.271(1) (C) OF THE ACT IS LIABLE TO BE DELETED ON THIS ACCOUNT AS WELL. WE HOLD AND DIRECT ACCORDING LY. 7. IN THE RESULT, APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. ITA NO. 122/PUN/2017 A.Y.2012-13 8. THE REVENUE IN APPEAL FOR ASSESSMENT YEAR 2012-13 H AS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUN DS: 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW, WHETHER THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF EXPENDITURE PERTAINING TO EARLIER YEAR IGNORING THE FACTS AS THE ASSESSEE HAS BEEN FOLLOWI NG THE MERCANTILE SYSTEM OF ACCOUNTANCY? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW WAS THE CIT(A) WAS NOT JUSTIFIED IN FOLLOWING DECISION OF THE ITAT IN ASSE SSEE'S CASE FOR AY.2010-11 IGNORING THE FACT THAT ADDITIONAL SUGARCANE PRICE P AID OVER AND ABOVE THE PURCHASE PRICE FIXED BY THE GOVERNMENT IS NOTHING B UT APPROPRIATION OF PROFIT WHICH CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF THE APPEAL AT THE TIME OF PROCEEDINGS BE FORE THE TRIBUNAL WHICH MAY PLEASE BE GRANTED. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. 9. THE LD. DR SUBMITTED THAT ASSESSEE IS ENGAGED IN MAN UFACTURE AND SALE OF SUGAR FROM SUGARCANE. DURING SCRUTINY ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD CLAIMED EXPE NDITURE TO THE TUNE OF RS.4,53,44,231/- AS ADDITIONAL PRICE PAID TO SUGARCANE SUP PLIERS I.E. COST OVER AND ABOVE AGREED PURCHASE RATE. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT ADDITIONAL SUGARCANE PRICE PAID TO THE FARMERS PERTA INS TO EARLIER ASSESSMENT YEAR, THEREFORE, THE SAME IS NOT ALLOWABLE IN T HE CURRENT ASSESSMENT YEAR. THE ASSESSING OFFICER RIGHTLY DISALLOWED T HE AFORESAID EXPENDITURE BEING PRIOR PERIOD EXPENDITURE. THE ASSESSEE CARRIED THE MATTER IN 6 ITA NOS. 121 & 122/PUN/2017 A.YS.2010-11 & 2012-13 APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ORDER OF TRIBUNAL IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO.468/PN/2014 ACCEPTE D THE CONTENTIONS OF THE ASSESSEE AND REVERSED THE FINDINGS OF ASSESSING OFFICER. 10. WE HAVE HEARD THE SUBMISSIONS MADE BY LD. DR AND HA VE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE SOLITARY ISSUE RAISED IN THE APPEAL BY REVENUE IS AGAINST ALLOWING CLAIM OF EXPENDITURE PERTAINING TO PRECEDIN G ASSESSMENT YEAR. WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEAL S) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESS EES OWN CASE IN ASSESSMENT YEAR 2010-11 IN ITA NO.468/PN/2014. THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ASSESSMENT YEAR 2010-11 FOLLOWED THE DECIS ION OF HON'BLE DELHI HIGH COURT IN THE CASE OF EXXON MOBIL LUBRICANTS (P) LTD. R EPORTED AS 328 ITR 17. THE LD. DR HAS NEITHER BROUGHT TO OUR NOTICE ANY CON TRARY DECISION NOR THE LD. DR HAS POINTED ANY DIFFERENCE BETWEEN THE NATURE OF T RANSACTION IN THE ASSESSMENT YEAR UNDER APPEAL AND THE ASSESSMENT YEAR 2010-11 FOR WHICH THE TRIBUNAL HAS GRANTED RELIEF TO THE ASSESSEE. WE DO NOT FIND ANY ERROR IN THE ORDER OF FIRST APPELLATE AUTHORITY IN ALLOWING THE APPEAL OF A SSESSEE BY FOLLOWING TRIBUNALS ORDER. ACCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2012-13 IS DISMISSED. 11. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON MONDAY , THE 26 TH DAY OF NOVEMBER, 2018. SD/- SD/- R.S. SYAL VIKAS AWASTHY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 26 TH NOVEMBER, 2018. SB 7 ITA NOS. 121 & 122/PUN/2017 A.YS.2010-11 & 2012-13 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-2, KOLHAPUR. 4. THE PR. CIT-2, KOLHAPUR. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE.