Bhima Sahakari Sakhar Karkhana Ltd, Pune V. Joint Commissioner of Income-tax, Range - 3, Pune

ITA 2177/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3405 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 1997-1998
• Appeal Filed On: 17-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Revised return; Revenue expenditure; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No. 2177/PUN/2017 (Assessment Year: 1997-98) M/s. Bhima Sahakari Sahkar Karkhana Ltd. A/P Madhukarar Nagar TAL. Daund, Dist Pune 413801 Vs. JCIT, Special Range - 3 Aaykar Bhavan Swargate, Pune 411009 PAN – AAATB1781B Appellant Respondent Appellant by: None Respondent by: Shri S.P. Walimbe Date of Hearing: 21.04.2022 Date of Pronouncement: 28.04.2022 O R D E R Per S.S. Godara, JM This assessee’s appeal for AY 1997-98 is against the order of the CIT(A) - 2, Pune dated 04.07.2017 passed in case No. PN/CIT (A)-2/Set aside/PN/66/2011-12.755 involving proceedings under Section 143(3) r.w.s. 260A of the Income Tax Act, 1961 in short the Act. 2. Case called twice. None appears at assessee’s behalf. It is accordingly proceeded ex-parte. The assessee’s first and foremost substantial ground raised in the instant case seeks to reverse both the lower authorities action rejecting its stand of having not treated an amount of Rs.1,01,11,934/- received from other sugar co-operatives as income in the course of assessment framed on 29,02.2000 as upheld in the CIT(A) order. It emerges with the able assistance coming from the Revenue side that this is second round of proceeding between the parties before the Tribunal. Learned coordinate bench’s earlier order dated 31.03.2007 had upheld Revenue’s stand that the assessee’s impugned amount received from other sugar cooperatives represented its taxable income only. The assessee thereafter appears to have filed its Tax Appeal ITA No. 1399 of 2009 before the hon'ble jurisdictional high court. Their lordships judgement dated 22.10.2012 therein had restored the instant issue back to the file of the CIT(A) to be decided afresh in light of Siddheshwr Sahakari Sakhar Karkjhana Ltd. Vs. CIT (2004) 270 ITR ITA No. 2177/Pun/2017 M/s. Bhima Sahakari Sahkar Karkhana Ltd. 2 01 (SC) inter alia adjudicating such co-operative societies’ trading receipts, income issue in the very business as well as other ancillary question(s) of diversion by overriding title etc. 3. We note that the CIT (A)’s second round order in issue before us has nowhere considered the said hon’ble apex court decision as follows: - 3.1 The first issue which is subject to the order of Hon'ble High court is regarding the receipt or-sum of Rs. 1,01,11,934/- on account of Cane price received from other sugar factories by the appellant. Brief facts of the issue are that the AO during the assessment proceedings found that the assessee received a sum of Rs. 1,01,11,934/- on account of Cane price received on sale of surplus sugar cane from other sugar factories. Although in the original return, the receipt was shown as income but in the revised return the amount was claimed as non- taxable. The AO did not agree with the contention of the appellant and treated the entire receipts as revenue receipts in the hands of the assessee. The CIT (A) also confirmed the stand taken by the AO and held that there is no reason why the same receipts should not be treated as revenue receipts in the hands of the appellant. The matter was thereafter taken to the ITAT and Hon'ble ITAT Pune Bench vide its order dated 31/03/2007 confirmed the stand taken by the lower authorities by mentioning as under:- 14.6 It is not in dispute that the assessee had received a sum of Rs. 1,01,11,934/- being the cane price of the sugar sold to other sugar factories. This is undoubtedly a revenue receipt in the hands of the .assessee. The assessee has not been able to point out the nexus and link between the cane development und and expenses made therefrom as to the cane price received by the assessee for the cane' supplied by the assessee to other factories. The excess cane available with the assessee has been supplied by the assessee to other sugar factories and, therefore, the same should have been included in the sale receipts. Whatever expenditure has been incurred by the assessee for growing the cane which has been supplied by the assessee to other factories has been claimed in the profit and loss account. The assessee has not given the details of the expenses that can be .said to have been incurred during the year for the purpose of growing the cane which has been supplied by the assessee to other sugar factories. We,. therefore find no reason to interfere with the order of the CIT{A) in upholding the disallowance made by the A.0. 3.2 After the order of Hon'ble High court as discussed supra the appeal was again fixed for hearing. The appellant in the written submission has submitted as under:- Aggrieved by the order of the Learned Joint Commissioner of Income Tax, Spl Range - 3, Pune passed an order under section 143(3) of Income Tax Act 1961, appeal has preferred before your honour for proper appreciation fact. Parawise submission is made for your honour's kind adjunction. Ours is a Co-operative society engaged in the Business of Manufacturing of sugar for the Assessment Year 1997- 1998 relevant to financial year 1996-1997. The Hon 'ble High Court Bombay in the case of Bhima SSK Ltd, Dist Pune Tax Appeal No. 1349 of 2009, dated 22/10/2012 for the ITA No. 2177/Pun/2017 M/s. Bhima Sahakari Sahkar Karkhana Ltd. 3 assessment year 1997-1998 In the said order, High Court Bombay, has set aside the issue namely disallowance on account of i) CANE PRICE RECEIPT NOT SHOWN AS INCOME ii) CEREMONY EXPENSES The written submission of which are as under:- GROUND NO. 1 1) CANE PRICE RECEIPT NOT SHOWN AS INCOME Rs. 1,01,11,934 The learned: Assessing Officer erred in disallowing and adding back an amount of 1,01,11,934/- towards Cane Price Receipt Not Shown as Income. In this .reqard it is stated as under: In this season 1990-91 and 1991-92, The Society had suffered a loss of Rs. 2, 71,37,840i- in respect of Sugar Can diverted to other Sugar Factories (as per the specific' Direction from Commissioner of Sugar Pune M. S.) The society is always facing the problem of Surplus Sugar cane in the area of operation, and it is the responsibility of the society to crush all the sugar cane and therefore society enters into an Agreement with the other sugar factories to sale the sugarcane to those suqqr factories as per specific instructions and directions of the Commissioner of Sugar Pune (M.S.) the society has sold the surplus Sugar cane to other sugar factories. In present case the said loss, are n.ot debited to Profit & Loss and carried forward to subsequent years through Differed Revenue Expenditure shown in the Balance Sheet Assets side on the assumption that if Contingent Income/ Profit is occurred in future transactions, then such loss may be adjusted against the Contingent Income. If it is done loss would have been increase. In the Financial Year 1995-96 and as per the Board Resolution No. 6(2) Dated 28/03/1997, The amount of Rs.1, 73,27,029 was shown as a credit Balance in Sugar Cane Development Fund. Rs.1, 73,27,029/ - has been reduced from the Sugar Cane Development Fund, as it is shown as utilized, and such amount is utilized, to reduce the Differed Revenue Expenditure, Which is a clearly wrong entry passed by our Society, because this amount is to be utilized from the sugar Cane. Development Fund and It is always utilized after the permission obtained from the Commissioner of Sugar Pune (M.S.) and such amount of Sugar Cane Development Fund is utilized for the purpose of the Development and for the other purpose specified by the Commissioner of Sugar Pune (M.S) And though the amount is deducted from the Sugar Cane Bills, It is clearly a liability of the society thereof it is not the income of our society and there is no question of adding the amount to the Total Income of the Assessee. The society is Selling Surplus Sugar Cane to other Sugar factories, but at the same time the society enters into an agreement with those sugar factories for Harvesting and Transportation Expenses, but many times dispute takes place regarding payment osf H&T therefore such payment is shown as Receivable under' head Differed Revenue Expenditure (Expenses) and the amount of Rs.l,51,91,083.53/- is carried forward since the Financial Year 1994-1995 and in the financial year 1995-96 Entry for Rectification of Mistake was passed for the amount of Rs.1,08, 72,627.32/- and the balance of Rs.43,18,457/- is carried forward since the financial year 1995-96. ITA No. 2177/Pun/2017 M/s. Bhima Sahakari Sahkar Karkhana Ltd. 4 In the financial year 1996-97 the society has earned a Contingent Income and the above the amount of Rs. 43,18,457/- and Rs. 98,10,811/- appearing in the Balance Sheet as a Differed Revenue Expenditure (Expenses) Differed Revenue Expenditure (Sugar Cane). But at the time of filling of Revised Return it is noticed that the amount of Rs. 1,73,27,029/- which was shown as a amount utilized from Sugar Cane Development Fund which was clearly a wrong entry passed in the Financial Year 1995-96 to Sugar Cane Development Account. Therefore it is just an adjustment of carried forward differed revenue expenditure (incurred in selling sugar cane to other sugar factories) against the contingent income which is earned in the financial year 1996-97, We therefore request your good honour to consider the above and Delete the addition of Rs. 1,01,11,934/- and such contingent income is not a concealment u/ s 271 (1)(c) of the Income Tax Act 1961. 3.3 I have gone through the facts of the case and the orders passed by the AO, CIT(A) and the ITAT. The contention of. the appellant that the amount received on the sale of sugar cane to other sugar factories is transferred to sugar cane developmental fund and therefore the same is not taxable, is not an acceptable argument. The excess cane available with the appellant was sold to other sugar factories and therefore the same is a revenue receipt which should have been included as revenue receipt by the appellant. The transfer of such receipt to cane development fund is immaterial and the same is nothing but appropriation of income. I am therefore of the opinion that the amount of Rs. 1,01,11,934/- has been rightly included by the AO in the income of the appellant. The order of the AO is accordingly found in order and the same is confirmed. However; it is observed that. the AO has omitted to add the amount of Rs. 1,01,11,934/- in the computation of total income forming part of the assessment order, The AO is accordingly directed to rectify this mistake and add the same to the total income while giving effect to this order.” 4. Mr. Walimbe vehemently could hardly rebut the clinging fact that the CIT(A)’s detailed discussion has failed to comply with their lordships directions in explicit terms. We thus restore the instant issue once again back to the CIT (A) for his afresh adjudication on merits as contemplated under Section 250(6) of the Act. The assessee succeeds in its first substantive ground for statistical purposes. 5. Next comes the issue of ceremonial expenses disallowance of Rs.5,93,711/- restricted @ 25% in the CIT (A) order. Learned D.R. vehemently contented that the CIT(A) has followed the tribunal’s order in Shri Vitthal SSK Ltd. In ITA No. 883/Pun/1995 while restricting the impugned disallowance to 25 per cent only. We are of the opinion that such an estimation of routine day-do-day expeses; not doubted in principle but disallowed on adhoc basis, does not always form a binding judicial precedent. More so when the CIT (A) has not even discussed the evidence on record. Faced with this situation, we hold that larger interest of justice would be met in case the impugned ITA No. 2177/Pun/2017 M/s. Bhima Sahakari Sahkar Karkhana Ltd. 5 disallowance is restricted @ 10% only subject to the condition that the same shall not be treated as a precedent. Ordered accordingly. 6. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open court on 28 th April, 2022. Sd/- Sd/- (Dr. Dipak P. Ripote) (Satbeer Singh Godara) Accountant Member Judicial Member Pune, Dated: 28 th April, 2022 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -2, Pune 4. The Pr.CIT - 1, Pune 5. The DR, “A” Bench, ITAT, Pune By Order //True Copy// Assistant Registrar ITAT, Pune Benches, Pune n.p.