Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 6113 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-01-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
11-01-2016
Assessment Year
2008-2009
Appeal Filed On
09-03-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.224 & 225/HYD/2015 ASSESSMENT YEARS 2007-08 & 2008-09 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. PAN AAFCS6410C VS. THE DCIT, CENTRAL CIRCLE-3(1), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. K .A. SAIPRASAD FOR REVENUE : MR. KONDA RAMESH DATE OF HEARING : 11 . 0 1 .201 6 DATE OF PRONOUNCEMENT : 20 . 01 .201 6 ORDER PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.YS. 2007- 08 AND 2008-09 RESPECTIVELY. IN BOTH THESE APPEALS, ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT U NDER SECTION 263 OF THE I.T. ACT, DIRECTING THE A.O. TO RE-DO THE ASSESSMENT DENOVO AS PER LAW, AFTER PROVIDING REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE WITH RESPECT TO THE RECEIPT OF CENTRAL SUBSIDY (FOOD PROCESSING) OF RS. 25 LAKHS EACH FOR A.Y. 2007-08 AND 2008-09 AND THE ADDITION MADE TO PLANT AND MACHINERY FOR THE F.Y. 2 006- 07 AND 2007-08 AMOUNTING TO RS.80,45,874 AND RS.8,30,03,567 RESPECTIVELY. 2 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING OF EDIBLE OILS, FILED ITS R ETURN OF INCOME ON 30.10.2007 FOR THE A.Y. 2007-08 AND ON 25.09.2008 FOR THE A.Y. 2008-09. THEREAFTER, THERE WAS A SEARCH AND SEIZURE OPERATION IN THE CASE OF THE ASS ESSEE AND ITS GROUP CONCERNS ON 30.06.2011. ACCORDINGLY, NOTICES UNDER SECTION 153A OF THE ACT FOR BOTH THE ASSESSMENT YEARS WERE ISSUED ON 27.02.2012. IN RESP ONSE TO THE SAID NOTICES, ASSESSEE FILED ITS RETURN OF I NCOME FOR BOTH THE A.YS ON 10.12.2012 DECLARING THE SAME INCO ME WHICH WAS DECLARED IN ITS ORIGINAL RETURN OF INCOME . THEREAFTER, THE A.O. COMPLETED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 153A OF THE I.T. A CT AFTER VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE A ND ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. 3. SUBSEQUENTLY, THE LD. CIT, BY EXERCISING HIS JURISDICTION UNDER SECTION 263 OF THE ACT, PERUSED THE ASSESSMENT RECORD AND OBSERVED THAT THE ASSESSEE HA S RECEIVED RS.25 LAKHS AS CENTRAL SUBSIDY (FOOD PROCE EDING) FOR EACH OF THE A.YS WHICH HAS BEEN APPROVED FOR TH E EXPANSION OF EDIBLE OIL REFINERY. HE OBSERVED THAT IT IS A CAPITAL SUBSIDY AND THE AMOUNT WAS REMITTED TO THE COMPANY IN TWO INSTALLMENTS OF RS.25 LAKHS EACH DUR ING THE F.YS. 2006-07 AND 2007-08 AND THE SAME WAS ALSO REFLECTED IN THE BALANCE SHEET FOR THE YEARS ENDING 31.03.2007 AND 31.03.2008. HE OBSERVED THAT THE SAM E SHOULD HAVE BEEN ADDED TO THE TOTAL INCOME OF THE Y EAR OF 3 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. RECEIPT. FURTHER HE ALSO OBSERVED THAT THERE WERE ADDITIONS MADE TO THE PLANT AND MACHINERY DURING TH E RELEVANT F.YS BUT THE ASSESSEE HAS NOT REDUCED THE CENTRAL SUBSIDY FROM THESE ADDITIONS AND THEREFORE, THERE IS AN EXCESS CLAIM OF DEPRECIATION. HE OBSERVED THA T THE A.O. HAS NOT CALLED FOR ANY DETAILS TO VERIFY THIS ASPECT BEFORE COMPLETION OF THE ASSESSMENT. HE THEREFORE, HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE AND ACCORDINGLY, DIRECT ED THE A.O. TO VERIFY THE CENTRAL SUBSIDY FOR THE RELEVANT A.YS AND ALSO DIRECTED THE A.O. TO RE-DO THE ASSESSMENT DENOVO, AFTER PROVIDING REASONABLE OPPORTUNITY TO T HE ASSESSEE. AGAINST THIS ORDER OF THE LD. CIT UNDER S ECTION 263, THE ASSESSEE IS IN APPEAL BEFORE US. 4. CHALLENGING THE VALIDITY OF THE PROCEEDINGS UNDER SECTION 263 OF THE ACT, LD. COUNSEL FOR THE ASSESSEE, MR. K.A. SAIPRASAD, SUBMITTED AS UNDER : 1. THAT THE ASSESSEE HAD FILED ITS RETURNS OF INCOME FOR THE RELEVANT ASSESSMENT YEARS AND SINCE NO NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED BY THE A.O. WITHIN THE SPECIFIED TIME, THE ASSESSMENTS FOR BOTH THE A.YS GOT CONCLUDED EVEN BEFORE THE DATE OF SEARCH ON 30.06.2011. 2. DURING THE COURSE OF SEARCH ON 30.06.2011 ALSO, NO INCRIMINATING MATERIAL WAS FOUND AND SEIZED FROM THE POSSESSION OF THE ASSESSEE AS IS EVIDENT FROM THE FACTS RECORDED IN THE ASSESSMENT ORDER. 4 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. 3. AN ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 153A CAN BE MADE ONLY IN SO FAR AS SEIZED MATERIAL IS CONCERNED AND THERE BEING NO MATERIAL SEIZED DURING THE COURSE OF SEARCH, THE A.O. COULD NOT HAVE CONSIDERED ANY OTHER ISSUE RELATING TO THE REGULAR ASSESSMENT DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 153A OF THE I.T. ACT. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD., REPORTED IN 374 ITR 645 (BOM.) (HC). HE ALSO RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. AMR INDIA LTD., IN ITA.NO.1828 TO 1831 OF 2012 DATED 23.10.2013. 4. LD. CIT HAS DIRECTED THE A.O. TO RE-DO THE ASSESSMENT BY CONSIDERING THE CENTRAL SUBSIDY (FOOD PROCESSING) WHICH IS OUTSIDE PURVIEW OF THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 153A OF THE ACT AND THEREFORE, THE SAID ORDER IS NOT SUSTAINABLE. 5. EVEN ON MERITS, THE SUBSIDY WAS IN FACT GRANT-IN- AID GIVEN TO THE EDIBLE OIL REFINERY ESTABLISHED I N THE BACKWARD AREAS AND WAS NOT MEANT AS A SUBSIDY FOR PURCHASE OF ANY PARTICULAR MACHINERY AND THEREFORE IT WAS NOT A CAPITAL SUBSIDY BUT WAS 5 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. A GRANT-IN-AID AND WOULD NOT BECOME INCOME OF THE ASSESSEE. 6. THE LD. CITS DIRECTION TO RE-DO THE ASSESSMENT ALSO MAKES IT CLEAR THAT THE LD. CIT WAS NOT SURE AS TO THE NATURE OF THE RECEIPT AND AS TO WHETHER IT WAS ASSESSABLE AS ASSESSEES INCOME AND THEREFORE, THE LD. CIT HAS NOT ESTABLISHED THE ASSESSMENT ORDER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND HENCE, ALSO THE ORDER OF THE LD. CIT UNDER SECTION 263 IS NOT SUSTAINABLE. IN SUPPORT OF THE ABOVE CONTENTIONS, LD. COUNSEL RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF INVENTAA CHEMICALS LTD., VS. ACIT 42 SOT 249. HE ALSO PLACED RELIANCE UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA FOR THE PROPOSITION THAT THE COMPLEMENTED ASSESSMENTS CAN BE INTERFERED WITH BY THE A.O. WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS FOR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 5. THE LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO PLACED REL IANCE 6 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. UPON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN T HE CASE OF GOPAL LAL BHADRUKA IN ITTA.NO.367 TO 369 OF 2011 AND OTHERS DATED 15 TH DECEMBER, 2011 FOR THE PROPOSITION THAT IN THE ASSESSMENTS UNDER SECTION 1 53A, THE A.O. CAN TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABLE DURING THE SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOS ED INCOME OF THE ASSESSEE. THEREFORE, ACCORDING TO HIM , THE ORDER OF THE LD. CIT UNDER SECTION 263 IS SUSTAINAB LE. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS F ILED ITS RETURNS OF INCOME FOR THE RELEVANT ASSESSMENT YEARS ON 30.10.2007 AND 25.09.2008 RESPECTIVELY AND A.O. DID NOT ISSUE ANY FURTHER NOTICES FOR COMPLETING THE ASSESS MENTS UNDER SECTION 143(3) OF THE I.T. ACT WITHIN THE SPE CIFIED PERIOD I.E., WITHIN A PERIOD OF TWELVE MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN IS FURNISHED. THE REFORE, AS RIGHTLY SUBMITTED BY THE ASSESSEE, THE ASSESSMEN TS, FOR THE ABOVE ASSESSMENT YEARS GOT CONCLUDED. 6.1. THEREAFTER, THERE WAS A SEARCH IN TH E CASE OF THE ASSESSEE AND ITS GROUP ON 30.06.2011 BUT THERE WAS NO INCRIMINATING MATERIAL FOUND OR SEIZED DURING TH E COURSE OF SEARCH. IN VIEW OF THE SAME, THE A.O. COM PLETED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTI ON 153A BY ACCEPTING THE RETURNED INCOME OF THE ASSESS EE. AS SEEN FROM THE ORDER OF THE LD. CIT UNDER SECTION 263 OF THE ACT, THE INFORMATION ABOUT THE CENTRAL SUBSIDY 7 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. RECEIVED BY THE ASSESSEE DURING THE RELEVANT F.YS W AS VERY MUCH AVAILABLE ON RECORD DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND THE NATURE OF RECEIPT WAS ALSO EVIDENT FROM THE ORDERS OF THE GOVERNMENT OF A.P. WHILE MAKING THE PAYMENT OF THE SUBSIDY. THEREFORE, IT IS EVIDENT THAT RELEVANT MAT ERIAL FOR CONSIDERATION OF THE ISSUE WAS VERY MUCH AVAILABLE ON RECORD AND THE A.O. HAS TO BE PRESUMED TO BE AWARE OF SUCH INFORMATION. IT WAS POINTED OUT BY THE LD. COU NSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD INSTALLED TH E MACHINERY IN MONTH OF AUGUST, 2003 AND ASSESSEE HAS BEEN MAKING A CLAIM FOR CENTRAL SUBSIDY SINCE THEN AND THE SUBSIDY HAS BEEN GRANTED ONLY IN THE RELEVANT F .YS AND THEREFORE, RECEIPT CANNOT BECOME THE INCOME OF THE ASSESSEE FOR THE RELEVANT A.YS. BE THAT AS IT MAY, THE LD. CIT UNDER SECTION 263 OF THE ACT CANNOT DIRECT THE A.O. TO DO WHAT THE A.O. CANNOT DO DURING THE COURSE OF ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 53A OF THE I.T. ACT. IT HAS BEEN LAID DOWN BY THE HONB LE SUPREME COURT AS WELL AS VARIOUS HIGH COURTS IN A C ATENA OF CASES, THAT IN THE CASES OF COMPLETED ASSESSMENT S, ASSESSMENTS UNDER SECTION 143(3) READ WITH SECTION 153A HAVE TO RESTRICT TO THE MATERIAL FOUND AND SEIZED D URING THE COURSE OF SEARCH AND CANNOT CONSIDER THE MATERI AL DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME. IT IS ONLY IN THE CASE OF THE ASSESSMENTS WHICH ARE PENDI NG WITH THE A.O. OR HAVE BECOME ABATED, CAN THE A.O. G O INTO THE MATERIAL ON RECORD OTHER THAN THE SEIZED MATERI AL AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE 8 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. OF GOPAL LAL BHADRUKA (CITED SUPRA) FOR MAKING THE ASSESSMENT. BUT AS RIGHTLY POINTED OUT BY THE LD. C OUNSEL FOR THE ASSESSEE, THE ASSESSMENTS IN THE CASE OF TH E ASSESSEE GOT CONCLUDED BY VIRTUE OF NON-ISSUANCE OF NOTICES UNDER SECTION 143(2) OF THE I.T. ACT. THERE FORE, THE A.O. COULD NOT HAVE CONSIDERED ANY OTHER MATERIAL, OTHER THAN THE MATERIAL FOUND DURING THE COURSE OF SEARCH , DURING THE ASSESSMENTS COMPLETED UNDER SECTION 143( 3) READ WITH SECTION 153A OF THE I.T. ACT. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (CITED SUPRA) HAS CLEARLY H ELD THAT THE ASSESSMENTS UNDER SECTION 143(3) READ WITH SECTION 153A/153C HAVE TO BE CONFINED ONLY TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH. FURTHER , EVEN ON MERITS, WE FIND THAT THE CENTRAL SUBSIDY GIVEN F OR INSTALLING THE FOOD PROCESSING UNITS IN THE SPECIFI ED AREAS IS NOT ASSET SPECIFIC BUT IS INDUSTRY SPECIFIC. THE REFORE, IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THEREF ORE, THE ASSESSMENT ORDER IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HENCE, ON BOTH THE COUNTS, WE HOLD THAT THE ORDER OF THE LD. CIT U NDER SECTION 263 IS NOT SUSTAINABLE. THE APPEALS OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE ACCORDIN GLY ALLOWED. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. 9 ITA.NOS.224 & 225/HYD/2015 M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. ORDER PRONOUNCED IN THE OPEN COURT ON 20.01.20 16. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIALMEMBER HYDERABAD, DATED 20 TH JANUARY, 2016 VBP/- COPY TO : 1. M/S. SARAIWALA AGRO REFINERIES LTD., HYDERABAD. C/O. CH. PARTHASARATHY & CO., 1-1-298/2/B3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOKNAGAR, HYDERABAD 500 020. 2. THE DCIT, CENTRAL CIRCLE - 3(1), HYDERABAD. 3. COMMISSIONER OF INCOME TAX - 3, HYDERABAD. 4 . ADDL. CIT, RANGE - 3, HYDERABAD. 5 . D.R. ITAT A BENCH, HYDERABAD. 6 . GUARD FILE
