A.C.I.T Cir - 3,Siliguri, Siliguri V. M/s North Bengal Tea Plantation Company, Siliguri

ITA 2284/KOL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0536 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P NAG
• Assessee Lawyers: S K TULSIYAN
• Keywords: Depreciation; Assessment record
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE SHRI P.K.BANSAL, A M & SHRI MAHAVIR SINGH , J M ] I.T.A NO S . 278 & 2284 /KOL/20 1 3 ASSESSMENT YEAR S : 200 9 - 1 0 & 2010 - 11 ASSTT. COMMISSIONER OF INCOME - TAX VS. M/S NORTH BENGAL TEA PLANTATION CO. CIRCLE - 3, SILIGURI (PAN:AAEFN 2932N) ( APPELLANT ) ( RESPONDENT ) I.T.A NO S . 1420 /KOL/201 4 ASSESSMENT YEAR : 20 11 - 12 D EPUTY COMMISSIONER OF INCOME TAX V S. M/S NORTH BENGAL TEA PLANTATION CO. CIRCLE - 3, SILIGURI ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 18 .0 6 .2015 DATE OF PRONOUNCEMENT: 10 . 0 7 . 2015 FOR THE ASSESSEE : SHRI S.K.TULSIYAN, ADVOCATE FOR THE RE V EN UE : S HRI R.P.NAG, JCIT, SR. DR ORDER PER SHRI MAHAVIR SINGH, JM: T HESE THREE APPEAL S BY REVENUE ARE ARISING OUT OF DIFFERENT ORDER S OF CIT (A) , SILIGURI - JALPAIGURI VIDE APPEAL S NO. 149/CIT(A)/SLG/2011 - 12, 19/CIT(A)/SLG/2013 - 14 & 39/CIT(A)/SLG/2014 - 15VIDE DATED 3 0 . 1 1 .20 1 2 , 18.06.2013 AND 06.05.2014. ASSESSMENT S W ERE FRAMED BY ACIT/JCIT/ D C I T, C IRCLE - 3 , SILIGURI U/S. 143(3) OF THE INCOME - TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR S 200 9 - 1 0 TO 2011 - 12 AND VIDE ORDER S DATED 20 .12.20 11, 18.03.13 & 30.03.2014 RESPECTIVELY . FIRST WE TAKE UP REVENU E S APPEAL IN ITA NO. 278 /K/201 3 . 2. THE FIRST ISSUE IN THE APPEAL OF REVENU E IS AGAINST THE ORDER OF CIT(A) IN DELET ING THE DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT OF BIFURCATION OF EXPENSES BY APPLICATION OF RULE 8D OF THE I.T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES ) AND ALSO AN INCREASE IN VALUE OF STOCK . FOR THIS, REVENUE HAS RAISED FOLLOWING GROUNDS NO. 1 & 2: - 1. WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A), SILIGURI WAS JUSTIFIED IN DELETING THE ADDITION OF RS.51,12,814/ - ON ACCOUNT OF INCREASE IN VALUE OF STOCK. IN THE AUDITED ACCOUN TS THE ASSESSEE HAD SHOWN VALUE OF OPENING STOCK AT RS.1,48,50,000/ - AND CLOSING STOCK OF RS.1,99,62,814/ - . THUS THE R E WAS AN INCREASE OF RS.51,12,814/ - IN THE 2 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 VALUE OF THE STOCK DURING THE YEAR AS SHOWN BY THE ASSESSEE ITSELF IN ITS RETURN OF INCOME. IN T HE SCRUTINY PROCEEDINGS, THE AO HAS TAKEN THE SAME AMOUNT ONLY IN HIS REVISED ADOPTION OF SPECIAL METHOD BY WHICH INCOME FROM SALE OF TEA GROWN AND MANUFACTURED COULD BE COMPUTED IN TERMS OF RULE 8 OF INCOME TAX RULES 1962. THE LD. CIT(A) COULD NOT POINT O UT ANY DEFECT IN THE SAID COMPUTATION OF THE AO BUT SIMPLY STATED THAT THE AO WAS WRONG INVADING RS.51,12,814/ - TOWARDS INCREASE IN STOCK WITHOUT APPRECIATING THAT THE AO HAD SIMPLY ADOPTED THE FIGURE ( CLOSING STOCK RS. 1,99,62,814/ - , OPENING STOCK RS.1,48 ,50,000/ - ) BY THE ASSESSEE ITSELF. THUS THE LD. CIT(A) WAS WRONGLY ASSUMED THAT THE AO HAD MADE FURTHER ADDITION OF RS.51,12,814/ - WHICH IS FACTUALLY INCORRECT. 2. WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN TREATING THE ME THOD ADOPTED BY THE AO AS NOT REASONABLE AND LOGICAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR THE SAKE OF CLARITY, THE AO ANALYZED ALL THE EXPENSES AND INCOME CLAIMED IN THE AUDIT REPORT AND RECOMPUTED THE INCOME ON THE BASIS OF FACTS AND FIGURE A VAILABLE IN THE AUDIT REPORT. THE METHOD AO ADOPTED FOR COMPUTATION OF INCOME WAS WITHIN THE PROVISIONS OF INCOME TAX ACT, 1961. WITHOUT POINTING OUT ANY DEFECT SPECIFICALLY IN THE SAID COMPUTATION, THE LD. CIT(A) BUT SIMPLY STATED THAT THE AO WAS WRONG I N ADOPTING THE SAID METHOD. THEREFORE, THERE WAS NO REASON TO TREAT THE METHOD ADOPTED BY THE AO AS NOT REASONABLE AND LOGICAL. 3. BRIEFLY STATED FACTS ARE THAT ASSESSING OFFICER MADE ADDITION OF INCREASE IN STOCK BY APPLYING RULE - 8 OF THE IT RULES AND IN CREASED THE STOCK TO THE EXTENT OF RS.51,12,814/ - BY GIVING FOLLOWING CALCULATIONS AS IS REPRODUCED BY CIT(A) IN HIS ORDER AT PAGES 3 AND 4 , WHICH IS AGAIN REPRODUCED FOR THE SAKE OF CLARITY : - ON EXAMINATION OF ASSESSMENT RECORDS, THE FOLLOWING DISCREPANCIES HAVE BEEN NOTICED WHICH WAS THEN FORWARDED TO THE ASSESSEE VIDE LETTER DATED 14.10.2011 FOR ITS COMMENTS. 1. A PERUSAL OF AUDIT REPORT AND COMPUTATION OF INCOME SUBMITTED BY THE ASSESSEE SHOWS THAT THE ASSESSEE FIRM HAS NOT SUBMITTED TRUE AND CO RRECT CALCULATION OF INCOME. BASE UPON AUDIT REPORT, THE INCOME OF THE ASSESSEE COMPANY WAS COMPUTED AND SENT TO THE ASSESSEE FOR COMMENTS INCORPORATING REASONS FOR DISAGREEMENT, IF ANY ON EACH OF THE POINT AS MENTIONED HEREUNDER: [A] 100% AGRICULTURE EXPENDITURE AS: GARDEN EXPENSES, CULTIVATION: RS.1,24,18,479.50 WAGS (GARDEN) : RS. 55,64,247.83 WAGES(INCREASED ARREAR) : RS. 1,20400.00 WAGES(PLUCKING) : RS . 56,95,391.00 RS.2,37,98,518.33 [B] MI XED EXPENDITURE (I) SALARY, WAGES AND BONUS EXCEPT THE WAGES MENTIONED AT [A]: RS.55,05,697.29 (II) REPAIR AND MAINTENANCE RS.53,97,650.38 (III) STAFF AND LABOUR WELFARE RS.21,37,229.30 (IV) ADMINISTRATIVE EXPENSES RS.35,72,119.25 (V) INTEREST PAID RS.20 ,62,050.86 (VI) DEPRECIATION RS.30,40,105.00 (VII) POWER, FUEL, PACKING AND OTHERS: RS.1,54,28,219.33 RS.3,71,43,071.41 RULE 8 OF THE INCOME TAX RULES, 1962, OUTLINES A SPECIAL METHOD BY WHICH INCOME FROM SALE OF TEA GRO W N AND MANUFACTURED COLD BE COMPUTED. THE RULE PROVIDES THAT INCOME DERIVED FROM THE SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER SHALL BE COMPUTED AS IF IT WERE INCOME DERIVED FROM BUSINESS BUT ONLY 40% OF 3 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 SUCH INCOME SHALL BE DEEMED TO BE THE INCOME L IABLE TO TAX. TAKING INTO CONSIDERATION OF THE ABOVE RATIO, THE MIXED EXPENDITURE HAS BEEN DIVIDED IN 60:40 RATIO AS AGRICULTURE EXPENDITURE AND MANUFACTURING EXPENDITURE. (1) AGRICULTURE EXPENDITURE RS.2,22,85,842.84 (2) MANUFACTURING EXPENDITURE R S.1,48,57,228.57 [C] 100% MANUFACTURING EXPENDITURE: EXCISE DUTY : RS.3,75,606.00 SELLING EXPENSES : RS.27,06,240.37 RS.30,81,846.37 [D] TOTAL AGRICULTURE EXPENDITURE : [A]+[B](1) = RS.4,60,84,361.17 [E] TOTAL MANUFA CTURING EXPENDITURE : [B](2)+[C] = RS.1,79,39,074.94 [F] TOTAL GREEN LEAF CONSUMED DURING THE YEAR 54,51,373 KG. [G MANUFACTURING EXPENDITURE FOR PER KG GREEN LEAF : [E] / [F] RS.3.29/KG [H] MANUFACTURING EXPENDITURE INCURRED FOR 21,19,731 KGS OF GREEN LEAF PURCHASED 21,19,731 X 3.29 = RS.69,73,914.99 [I] GREEN LEAF PURCHASED RS.2,85,95,141.25 [J] TOTAL TEA SOLD DURING THE YEAR 11,27,940.8 KG [K] TOTAL SALE VALUE RS.9,17,61 ,996.45 [M] PERCENTAGE OF YIELD AS PER AUDIT REPORT 21.80% [N] QUANTITY OF MANUFACTURED TEA OUT OF GREEN LEAF PURCHASED 21,19,73 KGS X 21.80% = 4,62,101.35 KG [O] TOTAL SALE CONSIDERATION OF TEA MANUFACTURED OUT OF GREEN LEAF PURCHASED [N] X [L] = RS.3,75,91,945.47 [P] PROFIT ON SALE OF TEA OUT OF GR EEN LEAF PURCHASED [O] - [H] - [I]= RS . 20,22,889.23 [Q] TOTAL EXPENDITURE INCURRED IN TEA GROWN AND MANUFACTURED EXCLUDING THE EXPENDITURE INCURRED MANUFACTURING OF TEA OUT OF GREEN LEAF PURCHASED [A]+[B]=[C] [H] = RS.5,70,49,521.12 [R] TOTAL SALE CONSIDERATION OF TEA MADE OUT OF OWN LEAF [K] [O] = RS.5,41,70,050.98 [S] COMPOSITE INCOME [R] [Q] = ( - ) RS.11,51,788.06 ADD: INCREASE IN STOCK: RS.51,12,814.00 AS PER RULE 8 40% OF LOSS FOR INCOME TAX ( - ) RS.11,51,788.06 ADD : INCREASE IN STOCK : RS.51,12,814.00 RS.39,61,025.00 ADD: PROFIT FROM TEA MADE OUT OF GREEN LEAVES PURCHASED RS. 20,22,889.23 RS. 59,83,914.23 ADD: 40% OF INTEREST RECEIVED FROM NABARD AND WBSEB RS. 56,644.00 REVISED TOTAL INCOME RS. 60,40,558.23 4. AGGRIEVED, AGAINST THE ACTION OF AO, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) , WHO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE DELETED THE ADDITION BY OBSERVING AS UNDER: - I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND ALSO PERUSED THE ASSESSMENT ORDER. I HAVE ALSO CONSIDERED THE REMAND REPORT SUBMITTED BY T HE LD. AO. ON PERUSAL IT IS FOUND THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND SALE OF TEA OUT OF TEA LEAVES GROWN IN ITS OWN TEA GARDEN AND ALSO OUT OF TEA LEAVES PURCHASED FROM OUTSIDE. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 22.0 9.2009 DECLARING A TOTAL INCOME OF RS.20,28,108/ - . THE ASSESSEE COMPANY COMPUTED INCOME OF RS.32,05,584/ - AFTER ALLOWING DEPRECIATION & OTHER DEDUCTIONS AND BIFURCATED IT IN THE RATIO OF OWN 4 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 LEAVES CONSUMED (61.22% AND BOUGHT LEAVES (38.78%). THE INCOME AR ISING OUT OF TEA MANUFACTURED FROM BOUGH T LEAVES WAS FULLY OFFERED FOR TAXATION WHEREAS 40% OF THE INCOME ARISING OUT OF TEA MANUFACTURED FROM TEA LEAVES GROW N IN OWN GARDENS WAS OFFERED OR TAXATION AS PER RULE 8 OF IT RUL E S, 1961. THE ASSESSEE COMPANY HAS CLAIMED THAT IT HAS BEEN FOLLOWING THIS METHOD OF COMPUTATION OF INCOME SINCE ASSESSMENT YEAR 1996 - 97 AND THE DEPARTMENT HAS BEEN ACCEPTING SUCH COMPUTATION. THE LD AO IN THIS ASSESSMENT YEAR ADOPTED NEW METHOD OF COMPUTATION OF INCOME BY CONSIDERING EXPE NDITURE IN THREE DIFFERENT CATEGORIES 10% AGRICULTURE EXPENDITURE, MIXED EXPENDITURE AND 100% MANUFACTURING EXPENDITURE AND DETERMINING PROFIT ARISING OUT OF MANUFACTURING OF TEA FROM TEA LEAVES GROWN IN OWN TEA GARDENS AND TEA LEAVES BOUGHT FROM OUTSI DE SEPARATELY. BY APPORTIONING EXPENDITURE TO TEA MANUFACTURED OUT OF TEA LEAVES GROWN IN OWN GARDENS AND OUT OF BOUGHT LEAVES FROM OUTSIDE THE LD AO COMPUTED REVISED TOTAL INCOME TO THE TUNE OF R S.60,40,588.232 AND FORWARDED THIS COMPUTATION TO THE ASSESS EE VIDE LETTER DATED 1 4 .10.2011. IN RESPONSE TO THIS LETTER THE ASSESSEE COMPANY SUBMITTED A REVISED COMPUTATION OF INCOME SHOWING NET LOSS OF RS.25,44,920 - WITHOUT DEDUCTION U/S.33AB CLAIMING THAT IT HAS FOLLOWED THE SAME METHOD OF COMPUTATION AS APPLIED BY THE LD. AO. THE LD. AO AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AND REVISED COMPUTATION OF INCOME OF THE ASSESSEE REJECTED IT BY STATING REASONS AS MENTIONED IN THE ASSESSMENT ORDER. THE D AO THEREAFTER COMPUTED REVISED TOTAL INCOME TO THE TUNE OF RS.62,91,510/ - AND ASSESSED THE TOTAL INCOME ACCORDINGLY. BEFORE ADJUDICATING OTHER GROUN D S OF APPEAL IT WOULD BE APPROPRIATE IF GRO U ND NO. 4 IS FIRST ADJUDICATED. IT IS FOUND THAT THE LD AO HAS ADDED A SUM OF RS.51,12,814/ - ON ACCOUNT OF INCREASE IN S TOCK IN THE REVISED COMPUTATION OF TOTAL INCOME TO THE TUNE OF RS.62,91,510/ - . THE LD AO HAS NOT EXPLAINED IN THE ASSESSMENT ORDER WHO INCREASE IN STOCK TO THE TUNE OF RS.51,12,814/ - WA S ADDED. EVEN IN THE REMAND REPORT DATED 22.08.2012 THE LD AO HAS NOT C O MMENTED ON THE ADDITION OF INCREASE IN STOCK TO THE TUNE OF RS.51,12,814/ - . THE LD AR IN HIS WRITTEN SUBMISSION DATED 10.09.2012 HAS CONTESTED THE ADDITION OF INCREASE OF STOCK SATING THAT THE ADDITION ON ACCOUNT OF INCR E ASE STOCK IS NOT WARRANTED AS PE R THE PRINCIPLES OF ACC O UNTANCY OR U N DER THE LAW. CLOSING STOCK IS ALWAYS VALUED UNDER THE SETTLED PRINCIPLES OF LAW OF ACCOUNTANCY I.E. COST OR MARKET VALUE WHICHEVER IS LOWER. THE L D . AR HAS S T A T ED THAT THE AUDITOR HAS ALREADY CER T IFIED THE VALUE OF CLOS ING STOCK IN HIS AUDIT REPOR T AND THE SAID VALUE HAS BEEN T AKEN IN THE AUDITED ACCOUNTS IN ARRIVING AT THE GROSS PROFIT OF THE BUSINESS. THE INCREASE OR DECREASE IN CLOSING STOCK AS COMPARED WITH THE LAST YEA R CAN N OT BE A BASIS FOR MAKING ANY AD D ITION UNDE R THE ABOVE HEAD. I AGREE W IT H THE LD. AR THAT THE LD. AO SHOULD NOT HAVE MADE SUCH A D DITION. THE OPENING STOCK OF 246806 KGS. OF TEA VALUED AT RS.1,48,50,000/ - IS CLEARLY REFLECTED IN THE AUDITED ACCOUNTS. THE CLO SI NG STOCK OF 30712.2 KS OF TEA VALUED AT RS.1,99,62,814/ - IS ALSO CLEARLY REFLECTED IN THE AUDITED ACCO U NTS. THE LD A O HAS NOT D I SPUTED EITHER THE QUANTITY OF TEA OR ITS VALUE OF EITHER THE OPE N ING OR CLOSING STOCK IN THEISM ORDER. IN SUCH SITUATION THE LD AO HAS NOT APPRECIATED THA T THE ADDITION OF INCREASE IN STOCK IS NOT WARRANTED AND ALSO WITHOUT ASSIGNING ANY REASON. THER EF ORE, THE ACTION OF THE LD. AO IN TAKING ADDITION OF INCREASE IN STOC K TO THE TUNE OF RS.51,12,814/ - IS N O T AT ALL JUSTIFIED AND THEREFORE DELETED. AGGRIEVED, REVENUE IS IN SECOND APPEAL BEFORE TRIBUNAL. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH CASE RECORDS, FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO PASSED THE ASSESSMENT ORDER ESTIMATING THE INCOME AT RS,62,91,510/ - AND THE SAID INCOME WAS ESTIMATE D BY AO ON THE BASIS OF ONE FORMULA ADOPTED BY HIM FOR CALCULATION OF AGRICULTURE INCOME I.E. COMPOSITE INCOME 5 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 AND MIXED INCOME UNDER RULE 8(1) OF THE IT RULE , WHICH IS THE GUIDING FACTOR IN DECIDING AND COMPUTING THE INCOME FROM MANUFACTURE OF TEA RULE 8( 1) STATED AS UNDER: - INCOME DERIVED FROM THE SALE OF TEA GROWN AND MANUFACTURED BY THE SELLER IN INDIA SHALL BE COMPUTED AS IF IT WAS INCOME DERIVED FROM BUSINESS AND 40% OF SUCH INCOME SHALL BE DEEMED TO BE INCOME LIABLE TO TAX. WE HAVE PERUSED THE ABOV E RULE, WHICH DOES NOT GIVEN ANY FORMULA FOR ARRIVING MIXED INCOME OR COMPOSITE INCOME BUT RULES STATED CATEGORICALLY THAT THE INCOME FROM TEA GROWN, MANUFACTURED AND SOLD HAS TO BE ASCERTAIN FIRST AND THEN THE INCOME @ 60% SHALL BE THE AGRICULTURE INCOME AND 40% OF INCOME SHALL BE INCOME LIABLE TO BE TAXED UNDER INCOME TAX ACT. THE FORMULA ADOPTED BY THE AO IS NON - SCIENTIFIC AND IRRATIONAL. WE FIND FROM THE FACTS OF THE CASE THAT W HILE COMPLETING THE ASSESSMENT THE AO HAS MADE AN ADDITION OF RS.51,12,814/ - ON ACCOUNT OF INCREASE IN CLOSING STOCK. THE ABOVE ADDITION ON ACCOUNT OF INCREASE IN STOCK IS NEITHER PERMITTED UNDER THE PRINCIPLE OF ACCOUNTANCY NOR UNDER THE LAW. CLOSING STOCK IS ALWAYS VALUED UNDER THE SETTLED PRINCIPLE OF LAW AND ACCOUNTANCY I.E, COST OR MARKET VALUE WHICHEVER IS LOWER. THE AUDITOR OF ASSESSEE HAS ALREADY CERTIFIED THE VALUE OF CLOSING OF ASSESSEE IN HIS AUDIT RE P ORT AND THE SAID VALUE HAS BEEN TAKEN IN TRADING AND PROFIT AND LOSS ACCOUNT IN ARRIVING AT THE GROSS PROFIT OF THE BUSINESS OF THE ASSESSEE. THE INCREASE OR DE CREASE IN CLOSING ST O CK AS COMPARED WITH THE LAST YEAR CANNOT BE A BASIS FOR MAKING ANY AD D ITI O N UNDER THE ABOVE HEAD AND ASSESSED INCOME IS AT RS.62,91,510/ - AND THE ADDITION ON ACCOUNT OF INCREASE IN CLOSING S TOCK IS RS.51,12,814/ - AND IF THIS ADDITION IS DELETED THEN THE ASSESSED INCOME WILL STAND AT RS.11,78,696/ - AND THE RETURNED INCOME OF ASSESSEE WAS AT RS.20,28,108/ - . LD. COUNSEL FOR THE ASSESSEE STRONGLY RAISED THAT THE FORMULA ADOPTED BY THE AO IS UNS CIENTIFIC AND CIT(A) DID NOT ACCEPT THE SAID FORMULA BUT FOR ARGUMENT SAKE IF THE FORMULA ACCEPTED THEN THE NET PROFIT AS PER THE ABOVE FORMULA WILL BE MUCH LESSER THEN THE RETURNED INCOME OF ASSESSEE AND IN THAT CASE THERE WILL BE A REVENUE LOSS TO THE GO VERNMENT. 6. BUT WE FIND THE TOTAL EXPENDITURE INCURRED FOR MANUFACTURE OF TEA OUT OF GREEN LEAF PURCHASED BY ASSESSEE AS PER CALCULATION OF THE AO IS ERRONEOUS, HENCE PROFIT ON TEA MANUFACTURE OUT OF OUR OWN LEAF IS ALSO ERRONEOUS. AND THE FORMULA ADOPTED BY THE AO GIVES DISTORTED FIGURES FOR PROFIT MADE OUT OF THE ASSESSEE S OWN LEAF AND BOUGHT LEAF. WE FIND FROM THE FACTS THAT THE ASSESSEE DURING APPELLATE PROCEEDINGS TRIED TO GIVE FIGURE 6 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 AND CALCULATION AS PER THE FORMULA APPLIED BY THE AO AS POSSIBLE A ND ASSESSEE CAME TO THE CONCLUSION THAT AFTER EXCLUDING THE DEDUCTION U/S. 33AB OF THE ACT THE INCOME CAME AT RS.13 LAKH WHICH AGAIN PROOF THAT THE FORMULA IS NOT CORRECT, SINCE THE INCOME COME LESS THAN THE RETURN INCOME. WE FIND THAT W HILE FRAMING THE AS SESSMENT , THE AO HAS DIVIDED EXPENDITURE UNDER THREE HEAD FIRSTLY 100% AGRICULTURE EXPENDITURE, SECONDLY MIXED EXPENDITURE AND THIRDLY 100% MANUFACTURING EXPENDITURE. THE AO DIVIDED MIXED EXPENDITURE AT THE RATIO 60:40 A ND ARRIVED AT AGRICULTURE EXPENDIT URE AND MIXED EXPENDITURE AND ADOPTED THE FORMULA OF 60% AND 40% IN MIXED EXPENDITURE WHICH IS NOT PERMISSIBLE IN LAW. IN THE PRESENT CASE PERCENTAGE OF BOUGHT LEAF PURCHASED IS LESS THAN ASSESSEE S OWN CROPS, BUT IN CASE OF ASSESSEE WHERE BOUGHT LEAF PURC HASE IS MUCH MORE THAN OWN CROP OF GREEN LEAF THEN APPLYING THE RATION OF 60:40 IN THAT CASE WILL BE A DANGEROUS PROPOSITION AND THE FORMULA HAS GIVEN ABSURD FINDING AS UNDER: - 1. MANUFACTURING EXPENDITURE WAS NOT ARRIVED AS RIGHT FIGURE 2. MANUFACTURING EXPEND ITURE ARRIVED @ RS.3.20 PE KG OF GREEN LEAF IS WRONG. 3. AGAIN THE CONCEPT OF AVERAGE SALE PRICE PER KG OF TEA IS A THUMB RULE. MY QUALITY OF GREEN LEAF MAY BE GOOD AND THE QUALITY OF BOUGHT LEAF MAY BE WORST AND AVERAGE SALE PRICE OF OUR OWN LEAF AND PURCHAS ED LEAF CANNOT BE SAME. 4. THE AVERAGE SALE PRICE THEORY AS ADOPTED BY THE AO IS NOT TENABLE FURTHER WE FIND THAT ASSESSEE IS NOT MAINTAINING SEPARATE ACCOUNT FOR MANUFACTURE OF TEA FROM PURCHASE LEAF AND ITS OWN PRODUCED LEAF AND THERE IS NO SYSTEM WHICH CAN DIVIDE THE EXPENDITURE IN TERMS OF PURCHASE AND ASSESSEE S OWN LEAF AND AS SUCH THE FORMULA AS ADOPTED BY THE AO IS TOTALLY ABSURD. IN THE FIELD OF AGRICULTURE PARTICULARLY IN PRODUCE OF GREEN TEA LEAF THERE IS NO MECHANISM TO DIVIDE THE PROFIT AS AGRICUL TURE AND NON - AGRICULTURE I.E. WHILE AFTER GIVING DEEP THOUGHT TO THE POINT AND AFTER TAKING EXPERT OPINION ON THIS SUBJECT THE GOVERNMENT INTRODUCE RULE 8 OF IT RULES FOR ARRIVING THE INCOME AND DIVIDING THE SAME AT 60:40 RATIO FOR AGRICULTURE AND NON - AGRI CULTURE INCOME AND ASSESSEE ALSO APPLIED THE SAME IN ITS COMPUTATION FROM LONG PASTE YEARS AND IT WAS ACCEPTED BY THE DEPARTMENT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. ACCORDINGLY, THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 7 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 7 . NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN GRANTING REBATE U/S 33AB OF THE ACT. FOR THIS, REV HAS RAISED FOLLOWING GROUND NO.3: - 3. WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN GRANTING REBATE OF RS.12,00,000/ - U/S 33AB OF THE I.T. ACT. IN THE ASSESSMENT ORDER THE AO HAS CLEARLY BROUGHT OUT THE FACTS ON THE BASIS OF WHICH CLOSING STOCK WAS DETERMINED AND OTHE R DETAILS REGARDING THE COMPUTATION OF INCOME OF THE ASSESSEE. THUS, THE ORDER OF THE LD. CIT(A) IS NOT BASED ON FACTS BUT MERELY ON WHIMS AND FANCIES. 8 . WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT AO DID NOT ALLOW THE REBATE U/S 33AB OF THE ACT IN VIEW OF THE FACT THAT THERE WAS A LOSS AFTER DETERMINATION OF COMPOSITE INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO ALLOWED THE REBATE. AGGRIEVED, NOW REVENUE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 9 . WE FIND THAT ASSESSEE IN ITS RETURN INCOME CLAIMED DEDUCTION OF RS . 12 LAKHS U/S 33AB OF THE ACT AND ASSESSEE FILED A RECEIPT DATED 1809.2008 EVIDENCING DEPOSIT OF RS.12 LAKH WITH NABARD IN TEA DEVELOPMENT SCHEME IN 200 7. IN VIEW OF THIS, CIT(A) DIRECTED THE AO TO ALLOW THE REBATE TO THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND SAME IS CONFIRMED. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 10 . SIMILAR ISSUE IS ALSO RAISED BY REVENUE IN ITA NO.2284/K/201 3 AND ITA NO. 1420/K/2014 FOR AYS 2010 - 11 AND 2011 - 12. THE RELEVANT GROUND RAISED IN A.Y. 2010 - 11 READS AS UNDER: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND EVIDENCE ON RECORD, `THE LD. CIT(A), SILIGURI, WAS JUSTIFIED IN DISALLOWING THE BIF URCATION OF EXPENSES FOR APPLICATION OF RULE 8 OF THE IT RULES, 1961, WHEN THE ASSESSING OFFICER S DECISION WAS BASED ON FACTS DERIVED FROM THE ASSESSEE S OWN BOOKS OF ACCOUNTS AFTER CONSIDERING ALL SUBMISSIONS MADE BY THE ASSESSEE. AND IN A.Y. 2011 - 12 RE ADS AS UNDER: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND EVIDENCE ON RECORD, `THE LD. CIT(A), SILIGURI, WAS JUSTIFIED IN DISALLOWING THE BIFURCATION OF EXPENSES FOR APPLICATION OF RULE 8 OF THE IT RULES, 1961, WHEN THE ASSESSING OFFICER S DECISION WAS BASED ON FACTS DERIVED FROM THE ASSESSEE S OWN BOOKS OF ACCOUNTS AFTER CONSIDERING ALL SUBMISSIONS MADE BY THE ASSESSEE. 11 . BOTH LD. COUNSEL FOR ASSESSEE AS WELL AS LD. SR - DR CONCEDED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE EXACTLY IDENTICAL WHAT IS DECIDED IN APPEAL OF REVENUE IN ITA NO.278/KOL/2013 FOR AY 2009 - 10 I.E. THE FIRST ISSUE AND HENCE, TAKING A CONSISTING 8 I TA NO S . 278, 2284 /K/20 13 & 1420/K/14 N.B.T.P.CO. AY S 200 9 - 10 TO 2011 - 12 VIEW , WE CONFIRM THE ORDER OF CIT(A) IN BOTH THE APPEAL OF REVENUE ALSO. HENCE, BOTH THE APPEAL S OF REVENUE ARE ALSO DI SMISSED. 12 . IN THE RESULT, ALL, THREE APPEAL S OF REVENUE ARE DISMISSED . 1 3 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 0 .0 7 .2015 S D / - S D / - ( P. K. BANSAL ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER *DKP/ .P.S. DATED : 1 0 T H JU LY , 201 5 COPY OF THE ORDER FORWARDED TO: 1 . A SSESSEE M/S NORTH BENGAL TEA PLANTATION CO . MITURKA HOUSE NEHRU ROAD, SILIGURI - 734001 2 RE V EN UE ACIT/ DCIT, C IRCLE - 3, SILIGURI, CENTRAL REVENUE BUILDING, HAREN MUKHERJEE ROAD, HAMIMPARA, SILIGURI - 734001 3 . THE C I T (A), SILIGURI 4. 5. C I T, SILIGURI . DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .