The ITO, Ward-2, Navsari V. Gandevi Taluka Khedut Sahakari Sangh Ltd., Navsari

ITA 2721/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94340 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S.S. GODA RA, J.M.) I.T. A. NO.2721/AHD/2011 (ASSESSM ENT YEAR: 2008-09) INCOME TAX OFFICER, WARD- 2, NAVSARI V/S GANDEVI TALUKA KHEDUT SAHAKARI SANGH LTD., CHAR RASTA, POST BOX NO. 31, GANDEVI, DIST. NAVSARI (APPELLANT) (RESPONDENT) PAN: AAAAG0647C APPELLANT BY : SHRI DINESH SINGH, SR. D.R . RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 31-08-201 5 DATE OF PRONOUNCEMENT : 04 -09-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A), VALSAD, GUJARAT DATED 26.08.2011 FOR A.Y. 2008-09. 2. ON THE DATE OF HEARING AN ADJOURNMENT APPLICATION D ATED 26 TH AUGUST, 2015 WAS FILED BY LD. A.R. REQUESTING FOR AN ADJOURNMENT FOR THE REASON AS THAT DATE IS NOT CONVENIENT TO ME. CONSIDERING THE REAS ON FOR THE ADJOURNMENT TO BE NOT JUSTIFIABLE, WE DISMISS THE ADJOURNMENT APPL ICATION FILED BY LD. A.R. AND PROCEED TO DECIDE THE ISSUE ON MERITS EX-PARTE QUA THE ASSESSEE. ITA NO 2721/ AHD/2011 . A.Y. 2008-09 2 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS STATED TO BE A CO.OP. SOCIETY REGISTERE D UNDER GUJARAT CO.OP. SOCIETY ACT AND ENGAGED IN THE BUSINESS OF AGRICULT URAL AND NON AGRICULTURAL ACTIVITIES. IT ELECTRONICALLY FILED ITS RETURN OF I NCOME FOR A.Y. A.Y. 2008-09 ON 29.09.2008 DECLARING TOTAL INCOME AT RS. NIL AFT ER CLAIMING DEDUCTION OF RS. 73,58,943/- U/S. 80P(2) OF THE ACT. THE CASE WA S SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECT ION 143(3) VIDE ORDER DATED 22.12.2010 AND THE TOTAL INCOME WAS DETERMINE D AT RS. 29,72,680/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 26.08.2011 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. C IT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), VALSAD, WITHOUT APPRECIATING THE FACTS, HAS ERRED I N DELETING THE ADDITION OF RS.45,67,085/- IN RESPECT OF ADMINISTRATIVE & MANAG ERIAL EXPENSES RELATED TO NON-AGRICULTURAL ACTIVITIES BY DIRECTING NOT TO APP LY THE RULE OF 3, THOUGH PRESENT ASSESSEE, BEING A CO. OP. SOCIETY, ENGAGED IN BOTH THE AGRICULTURAL AND NON-AGRICULTURAL ACTIVITIES, RULE OF 3 IS APPLI CABLE IN SEQUENCE TO PROVISION OF SECTION 14A AND THE RATIO OF JUDGMENT OF HON'BLE HIGH COURT, RAJASTHAN IN THE CASE OF CIT VS RAJASTHAN RAJYA SAHAKARI UPBHOKT A SANGH LTD. (1996) 84 TAXMAN 33 (RAJ.) AND ALSO DECISION IN THE CASE OF K OTA CO-OPERATIVE MARKETING SOCIETY LTD. VS CIT(1994) 76 TAXMAN 245 ( RAJ.) TO TAX THE PROFIT EARNED FROM NON-AGRICULTURAL ACTIVITIES AND INTERES T FROM NATIONALIZED BANK. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD CLAIMED DEDUCTION U/S. 80P(2) OF THE ACT. HE ALSO N OTICED THAT ASSESSEE WAS ENGAGED IN AGRICULTURAL AND NON-AGRICULTURAL ACTIVI TIES LIKE TRADING IN ITA NO 2721/ AHD/2011 . A.Y. 2008-09 3 AGRICULTURAL EQUIPMENTS, SEEDS, PESTICIDES ETC. AND THE SALES OF THE ASSESSEE WERE BOTH TO THE MEMBERS OF THE SOCIETY AND ALSO TO THE NON MEMBERS. HE ALSO NOTICED THAT THE ASSESSEE WAS CARRYING OUT MIX ED ACTIVITIES AND THE PROFITS FROM SOME OF THE ACTIVITIES WERE ELIGIBLE F OR DEDUCTION U/S. 80P(2) AND SOME WERE NOT ELIGIBLE FOR DEDUCTION BUT ACCORD ING TO A.O, ASSESSEE HAD CLAIMED DEDUCTION ON THE PROFIT EARNED FROM BOT H EXEMPTED AS WELL AS NON EXEMPTED ACTIVITIES. HE WAS OF THE VIEW THAT WH EN ASSESSEE WAS CARRYING OUT TWO TYPES OF ACTIVITIES ONE OF WHICH Q UALIFIED FOR DEDUCTION U/S. 80P AND OTHER DID NOT QUALIFY FOR DEDUCTION, THE AS SESSEE WAS REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS BUT HOWEVER ASS ESSEE WAS MAINTAINING COMPOSITE ACCOUNTS FOR EXEMPT INCOME AS WELL AS NON EXEMPT INCOME. HE WAS THEREFORE OF THE VIEW THAT PROVISIONS OF SECTIO N 14A TO BE APPLICABLE. HE THEREFORE FOLLOWING RULE OF 3, PROVISION OF SECT ION 14A AND THE RATIO OF THE DECISIONS OF HIGH COURTS, CITED IN HIS ORDER RE WORKED THE DEDUCTION. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO FOLLOWING THE ORDER IN ASSESSEES OWN CA SE FOR A.Y. 2007-08 DELETED THE ADDITION BY HOLDING AS UNDER:- 4.3 DECISION: - I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AN D THE OBSERVATION MADE BY THE A.O IN THE ASSESSMENT ORDER. I HAVE ALS O PERUSED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT. THE FACTS AND CI RCUMSTANCES FOR THIS ASSTT. YEAR ARE IDENTICAL WITH THE FACTS IN A.Y. 2007-08. THE ISSUE IN APPEAL IS ALSO IDENTICAL AS IN THE A.Y. 2007-08. THE APPEAL FOR TH E A.Y. 2007-08 WAS DECIDED BY ME IN THE CASE OF THE APPELLANT VIDE APPELLATE ORDE R IN APPEAL NO. CIT(A)/VLS/276/09-19 DATED 30.11.2010 IN FAVOUR OF THE APPELLANT. FOLLOWING THE SAID ORDER, THE A.O IS DIRECTED TO ALLOW THE APPEAL OF THE APPELLANT. THUS, THIS GROUND OF APPEAL IS ALLOWED. ITA NO 2721/ AHD/2011 . A.Y. 2008-09 4 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, AT THE OUTSET, LD. D.R. SUBMITTED THAT I N A.Y. 2007-08 ON IDENTICAL ISSUE, THE MATTER WAS REMITTED BY TRIBUNAL TO LD. A .O. HE THEREFORE SUBMITTED THAT SINCE THE FACTS OF THE CASE ARE IDENTICAL TO T HAT OF A.Y. 2007-08, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2007-08, THE MATTER IN THE CURRENT YEAR BE ALSO REM ITTED TO A.O. 8. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS GIVEN A FINDING THAT THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 2007-08. WE FIND THAT IN A.Y. 07-08, REVENUE A GAINST THE ORDER OF LD. CIT(A) HAD PREFERRED APPEAL BEFORE TRIBUNAL. THE CO -ORDINATE BENCH OF TRIBUNAL IN ITA NO.813/AHD/2011 ORDER DATED 12.12.2 014 DECIDED THE ISSUE BY HOLDING AS UNDER:- 5. WE FIND THAT THE ASSESSING OFFICER HAS STATED TH AT NO SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR AGRICULTURAL ACTIVITIE S AND NON-AGRICULTURAL ACTIVITIES AND THEREFORE, THE TOTAL ADMINISTRATIVE EXPENSES AN D INTEREST EXPENSES ARE TO BE APPORTIONED IN RESPECT OF THE SAID ACTIVITIES TO AS CERTAIN THE INCOME FROM THE ACTIVITIES WHICH ARE EXEMPT U/S 80P OF THE ACT; WHE REAS THE CIT(A) OBSERVED THAT SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED BY THE A SSESSEE IN RESPECT OF ACTIVITIES FROM WHICH INCOME DERIVED WAS EXEMPT U/S 80P OF THE ACT AND IN RESPECT OF NON-ELIGIBLE ACTIVITIES. WE FIND THAT NO NE OF THE LOWER AUTHORITIES HAVE STATED THAT THEY HAVE VERIFIED THE BOOKS OF ACCOUNT S ACTUALLY MAINTAINED BY THE ASSESSEE. FROM THE ASSESSMENT ORDER, IT APPEARS THA T THE ASSESSING OFFICER HAS CONCLUDED THAT SEPARATE BOOKS OF ACCOUNTS WERE NOT MAINTAINED AND ON THE BASIS THAT ONE TRADING ACCOUNT AND ONE P&L ACCOUNT WAS FI LED BEFORE HIM. IN OUR ITA NO 2721/ AHD/2011 . A.Y. 2008-09 5 CONSIDERED OPINION, MERELY BECAUSE ONE CONSOLIDATED TRADING ACCOUNT OR P&L ACCOUNT HAS BEEN PREPARED, IT CANNOT BE CONCLUDED T HAT SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF ELIGIBLE ACTIVITIES AND NON- ELIGIBLE ACTIVITIES WERE MAINTAINED OR NOT. 6. FURTHER, THOUGH THE CIT(A) HAS STATED THAT SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED, BUT THE BASIS OF HIS ABOVE FINDING HAS NOT BEEN STATED IN THE ORDER. FROM THE ORDER OF THE CIT(A), IT CANNOT BE A SCERTAINED AS ON VERIFICATION OF WHICH MATERIAL THE CIT(A) HAS ARRIVED AT TH E ABOVE FINDINGS. FURTHER, BOTH THE PARTIES BEFORE US, HAS BROUGHT NO MATERIAL TO S HOW EITHER ONE CONSOLIDATED BOOKS OF ACCOUNTS WERE MAINTAINED OR SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR ELIGIBLE/NON-ELIGIBLE ACTIVITIES. TH US, THE CIT(A) HAS OBSERVED THAT THE ASSESSEE HAD DERIVED INCOME FROM AGRICULTURAL I TEMS SOLD TO MEMBERS WAS RS.56,88,446 (ELIGIBLE FOR DEDUCTION U/S 80P AND NO T DISPUTED BY AO. THERE WAS A LOSS OF RS.40,93,683/- ON THE SALE OF AGRICULTURA L & NON-AGRI. ITEMS TO THE MEMBERS & NON-MEMBERS SO DEDUCTION U/S. 80P DOES NO T APPLY, BUT THE BASIS OF ABOVE FINDING OF THE CIT(A) IS NOT CLEAR FROM HIS O RDER. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER VERIFICATION AND THEREAFTER ADJUDICATING THE ISSUE AFRESH BY PAS SING A SPEAKING ORDER. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RE-ADJUDICATE THE ISSUE AS PER LAW AFTER PROPER VERIFICATION AND AFTER ALLOWING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUND NO. 1 OF APPEAL OF THE REVENUE IS ALLOWED FOR STATI STICAL PURPOSES. 9. SINCE THE FACTS OF THE CASE IN THE YEAR UNDER APPEA L ARE IDENTICAL TO THAT OF A.Y. 2007-08, WE THEREFORE RESPECTFULLY FOLLOWING T HE ORDER OF THE CO- ORDINATE BENCH FOR A.Y. 2007-08 AND FOR SIMILAR REA SONS AND WITH SIMILAR DIRECTIONS RESTORE THE ISSUE BACK TO THE FILE OF A. O. THUS THE GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO 2721/ AHD/2011 . A.Y. 2008-09 6 10. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 04 - 09 - 2015. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD