M/s. Develok Hatcheries & Poultry Farm, Lucknow V. Commissioner of Income Tax, Lucknow

ITA 310/LKW/2012

• Counselvise Citation: 31023714 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S D SETH; ASHOK SETH
• Keywords: Business income
• Section: 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.310/LKW/2012 A.Y.:2008 - 2009 M/S DEVLOK HATCHERIES & POULTRY FARM, C - 187, NIRALA NAGAR, LUCKNOW. PAN:AADFD9612J VS. C.I.T. - II, LUCKNOW. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. D. SETH & SHRI ASHOK SETH RESPONDENT BY SHRI MANOJ KUMAR GUPTA, CIT, D.R. DATE OF HEARING 26/12/2013 DATE OF PRONOUNCEMENT 0 7 /02/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT - II, LUCKNOW U/S 263 OF THE ACT ON 03/05/2012 FOR ASSESSMENT YEAR 2008 - 09. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT LEARNED COMMISSIONER OF INCOME TAX ERRED FACTS AND LEGAL ASPECTS OF THE CASE IN CANCELLING THE ORDER OF THE ASSESSING OFFICER U/S 263 OF THE INCOME TAX ACT. 2. THAT THE ORDER OF THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 3. THAT THE ASSESSING OFFICER HAD PASSED THE ORDER AFTER DUE ENQUIRY AND EXAMINATION OF ALL ISSUES RAISED BY THE LEARNED COMMISSIONER OF INCOME TAX THUS THE ORDER OF AO WAS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 4. THAT THE I NCOME FROM LETTING OF THE GODOWN WAS RIGHTLY ASSESSED UNDER THE HEAD INCOME FROM BUSINESS IN VIEW OF THE FACTS AND LEGAL ASPECTS OF THE CASE AS THE APPELLANT WAS NOT THE 'OWNER' OF THE GODOWN. 3. THAT IF THE GODOWN RENT IS ASSESSED UNDER THE HEAD PROPERTY INCOME WOULD HAVE BEEN BENEFICIAL TO THE APPELLANT AND NOT TO THE REVENUE. 6. THAT THE VALUATION OF THE CLOSING STOCK OF BIRDS WHICH WAS DONE IN ACCORDANCE WITH THE 'MONOGRAPH ON ACCOUNTING FOR POULTRY FARMING' ISSUED BY THE INSTITUTE OF CHARTERED ACCOUN TANTS OF INDIA WHICH WAS EXAMINED BY THE AO AND ALSO ACCEPTED IN ASSESSMENT PROCEEDINGS OF LAST 10 YEARS CANNOT BE SAID TO BE ERRONEOUS. 7. THAT DETAIL REGARDING MORTALITY AND PRODUCTION OF EGGS WERE FILED WHICH WERE DULY EXAMINED BY AO AND ACCEPTED ON TH E FACTS AND LEGAL ASPECTS OF THE CASE. 8. THAT THE ORDER PASSED U/S 263 BY THE LEARNED COMMISSIONER OF INCOME TAX IS AGAINST THE MERIT, CIRCUMSTANCES AND LEGAL ASPECTS OF THE CASE. 9. THAT THE APPELLANT SEEKS PERMISSION TO MODIFY AND/OR ADD ANY OTHER GROUND OR GROUNDS OF APPEAL AS THE CIRCUMSTANCES OF THE CASE MIGHT REQUIRE OR JUSTIFY. 2. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE ORDER PASSED BY LEARNED CIT U/S 263 IS NOT JUSTIFIED AND THE SAME SHOULD BE SET ASIDE. HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS A.R.J. SECURITY PRINTERS [2003] 264 ITR 276 (DEL) . HE SUBMITTED THAT IT WAS HELD BY HON'BLE HIGH COURT IN THIS CASE THAT W HERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 98 - 99 IN I.T.A. NO.23/LKW/2003 3 DATED 16/02/2005 AND SUBMITTED THAT THE COPY OF THE TRIBUNAL DECISION IS AVAILABLE ON PAGES 12 & 13 OF THE PAP ER BOOK. HE ALSO PLACED RELIANCE ON ANOTHER JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX - XIII VS. ASHISH RAJPAL [2009] 180 TAXMAN 0623 AND SUBMITTED THAT THE COPY OF THE JUDGMENT IS AVAILABLE ON PAGES 17 TO 21 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT IT WAS HELD BY HON'BLE HIGH COURT THAT EVERY LOSS OF TAX TO THE REVENUE CANNOT BE TREATED AS BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ALSO SUBMITTED THAT IT IS ALSO HELD IN THIS CASE THAT IF THE ASSE SSING OFFICER ACTS IN ACCORDANCE WITH LAW, HIS ORDER CANNOT BE TERMED AS ERRONEOUS BY THE CIT SIMPLY BECAUSE ACCORDING TO HIM , THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY AND UNDER THESE FACTS, RECOURSE CANNOT BE TAKEN TO SECTION 263 TO SUBSTITUTE THE VIEW OF THE ASSESSING OFFICER WITH THAT OF THE CIT. 2.1 HE FURTHER SUBMITTED THAT COPY OF SHOW CAUSE NOTICE ISSUED BY CIT U/S 263 IS AVAILABLE ON PAGE 10 OF THE PAPER BOOK. H E ALSO POINTED OUT THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER IN COUR SE OF ASSESSMENT PROCEEDINGS ON 01/11/2010 IS AVAILABLE ON PAGE 10 & 11 OF THE PAPER BOOK AND ITS REPLIES ARE AVAILABLE ON PAGES 13 & 14 OF THE SAME PAPER BOOK. HE FURTHER POINTED OUT THAT AN EARLIER NOTICE ISSUED BY THE A.O. ON 17/09/2010 IS ALSO AVAILAB LE ON PAGE 19 AND ITS REPLY DATED 28/09/2010 IS AVAILABLE ON PAGE 20 OF THE PAPER BOOK. 3. AS AGAINST THIS, IT WAS SUBMITTED BY LEARNED D.R. OF THE REVENUE THAT THE ASSESSING OFFICER HAS NOT VERIFIED THE REPLY OF THE ASSESSEE. HE ALSO SUBMITTED THAT NO E XPLANATION WAS FILED BY THE ASSESSEE FOR VALUATION OF STOCK AND THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AND NO INDEPENDENT ENQUIRY WAS MADE BY HIM AND, THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIA L TO THE INTEREST OF THE REVENUE AND, THEREFORE, THE ACTION OF THE CIT U/S 263 SHOULD BE CONFIRMED. 4 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE NOTICE ISSUED BY LEARNED CIT U/S 263 ON 08/02/2012, TH IS IS ONE OF THE OBJECTIONS OF THE CIT THAT DURING THIS YEAR , THE ASSESSEE HAS PAID AN AMOUNT OF RS.3.24 LAC TOWARDS RENT TO THE PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT BUT THE ASSESSING OFFICER HAS NOT EXAMINED THE REASONABLENESS OF THE RENT PAID. ON THIS ASPECT, WE FIND THAT A QUE RY WAS RAISED BY THE ASSESSING OFFICER ON 01/11/2010 AND IN REPLY , IT WAS SUBMITTED BY THE ASSESSEE AS PER ITS LETTER DATED 18/11/2010 THAT THE RENT PAID BY THE ASSESSEE IN THIS YEAR IS THE SAME SINCE LAST MANY YEARS WHEN IT WAS ACCEPTED. 4.1 THE SECOND Q UERY RAISED BY LEARNED CIT U/S 263 (1) NOTICE IS THAT INCOME FROM GODOWN RENT OF RS.9,27,352/ - HAS BEEN CLAIMED AS BUSINESS INCOME AND WAS ALLOWED BY THE ASSESSING OFFICER AS SUCH. THIS SHOULD CORRECTLY HAVE BEEN TREATED AS INCOME FROM HOUSE PROPERTY. ON THIS ASPECT, WE DO NOT FIND ANY QUERY IN THE NOTICE ISSUED BY THE ASSESSING OFFICER ON 01/11/2010. SIMILARLY IN EARLIER NOTICE ISSUED BY THE ASSESSING OFFICER ON 17/09/2010 ALSO, THERE IS NO QUERY RAISED BY THE ASSESSING OFFICER ON THIS ASPECT. 4.2 THE T HIRD QUESTION RAISED BY THE CIT IN HIS NOTICE IS THIS THAT THE CLOSING STOCK OF BIRDS IS REFLECTED AT RS.26,40,995/ - ONLY. THE TOTAL COST OF FEED AND MEDICINES DURING THE YEAR IS VERY LARGE. THE METHOD OF VALUING CLOSING STOCK OF BIRDS HAS NOT BEEN EXAMI NED BY THE ASSESSING OFFICER. ON THIS ASPECT, WE FIND THAT IN THE NOTICE ISSUED BY THE ASSESSING OFFICER ON 17/09/2010, A QUERY WAS RAISED BY THE ASSESSING OFFICER ASKING THE ASSESSEE TO GIVE THE METHOD OF VALUATION OF STOCK DURING THE YEAR. AGAIN IN HIS NOTICE ISSUED BY HIM ON 01/11/2010, HE HAS ASKED THE ASSESSEE THAT THE MORTALITY RATE SHOWN BY THE ASSESSEE IS 22.5% IN THIS YEAR WHICH IS MUCH HIGHER THAN THE PRESCRIBED RATE OF MORTALITY BY NABARD AND SBI. THE ASSESSING OFFICER ASKED THE ASSESSEE TO 5 EX PLAIN AS TO WHY DISALLOWANCE SHOULD NOT BE MADE ACCORDINGLY. IN THE REPLY OF THE ASSESSEE TO TH IS LETTER DATED 17/09/2010 AS PER REPLY DATED 28/09/2010, IT WAS STATED BY THE ASSESSEE THAT THE DETAIL OF CLOSING STOCK IS GIVEN BY THE AUDITOR IN HIS REPORT. THE VALUATION IS LIKE EARLIER YEAR AND METHOD EMPLOYED IS HISTORICAL COST OR REALIZABLE VALUE WHICHEVER IS LOWER. IN REPLY TO LETTER DATED 01/11/2010 AS PER REPLY LETTER DATED 18/11/2010 , SOME SUBMISSIONS WERE MADE REGARDING HIGH MORTALITY RATE POINTED O UT BY THE ASSESSING OFFICER BUT THE REPLY OF THE ASSESSEE IS VERY GENERAL STATING THEREIN THAT THE MORTALITY RATE DEPENDS ON NUMBER OF REASONS SUCH AS OUTBREAK OF DISEASE, ACCIDENTAL DEATHS, FUNGAL PROBLEMS, TOXICITY ETC. APART FROM NORMAL MORTALITY PERCEI VED IN THESE REPORTS. IT WAS ALSO STATED THAT DATE - WISE STOCK REGISTER OF TWO FLOCKS OF WHOLE YEAR AS SAMPLE IS ENCLOSED BUT THERE IS NO EXPLANATION GIVEN AS TO OUT OF VARIOUS REASONS POINTED OUT BY THE ASSESSEE, WHICH REASON HAS CAUSED HIGHER MORTALITY IN THE ASSESSEES CASE . 4.3 A COPY OF THE ASSESSMENT ORDER DATED 30/11/2010 IS AVAILABLE ON PAGES 29 TO 30 OF THE PAPER BOOK IN WHICH THERE IS NO DISCUSSION REGARDING VALUATION OF STOCK OR HIGH MORTALITY RATE. THIS GOES TO SHOW THAT THE OBJECTION OF THE ASSESSING OFFICER IN HIS LETTER DATED 01/11/2010 POINTING OUT HIGHER MORTALITY RATE OF BIRDS TO THE EXTENT OF 22.52%, WHICH IS STATED TO BE MUCH HIGHER THEN THE PRESCRIBED RATE OF MORTALITY BY NABARD & SBI AND ASKING THE ASSESSEE THAT WHY THE DISALLOWANCE SHOULD NOT BE MADE, NEITHER ANY DISALLOWANCE IS MADE BY THE ASSESSING OFFICER NOR ANY BASIS IS INDICATED BY HIM AS TO HOW HE FOUND THE REPLY OF THE ASSESSEE AS ACCEPTABLE ON THIS ASPECT. THE RELEVANT PARA OF THE REPLY IS REPRODUCED FOR T HE SAKE OF READY REFERENCE: SIR, THE ASSESSEE HAS MAINTAINED STOCK REGISTERS OF LIVESTOCK ON DAY TO DAY BASIS FLOCK WISE. IN PREVIOUS YEARS PATTERN OF MORTALITY HAS BEEN AS UNDER WHICH HAS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS. 6 ASSESSMENT YEAR 2008 - 09 22.52% 2007 - 08 17.79% 2006 - 07 22.41% 2005 - 06 9.61% 2004 - 05 14.24% AS PER MODEL PROJECT REPORT PREPARED BY NABARD EXPECTS MORTALITY OF 13% AND PROJECT REPORT PREPARED BY STATE BANK OF INDIA EXPECTS THE MORTALITY OF 20%. I MAY MENTION HEREIN THE MODEL PROJECT REPORTS ARE BASED UPON IDEAL CONDITIONS. FURTHER THE MORTALITY DEPENDS ON NUMBER OF REASON SUCH AS OUTBREAK OF DISEASE, ACCIDENTAL DEATHS, FUNGAL PROBLEMS, TOXICITY ETC., APART FROM THE NORMAL MORTALITY PERCEIVED IN THESE REPORTS. DATE WISE STOCK REGISTER OF TWO FLOCKS OF WHOLE YEAR AS SAMPLE IS ENCLOSED. 4.4 FROM THE ABOVE PARA OF ASSESSEES REPLY LETTER, WE FIND THAT EVEN IN ASSESSEES OWN CASE, THE MORTALITY RATE WAS MUCH LOWER IN THREE OF THE PRECEDING FOUR YEARS. IT WAS ONLY 9.61% IN ASSESSMENT YEAR 2005 - 06 AS AGAINST 22.50% IN THE PRESENT YEAR. IN THE JUST PRECEDING YEAR I.E. ASSESSMENT YEAR 2007 - 08, IT WAS 17.79% AND IN ASSESSMENT YEAR 2004 - 05 , IT WAS 14.24%. REGARDING THE HIGHER MORTALITY RATE IN THE PRESENT YEAR, NO SPECIFIC REASON HAVE BEEN POINTED OUT BY THE ASSESSEE IN THE ABOVE PARA OF THE REPLY AND O NLY SOME GENER AL REASONS ARE GIVEN ON WHICH THE MORTALITY RATE DEPENDS BUT THIS CANNOT BE SAID THAT THIS REPLY EXPLAINED THE HIGHER MORTALITY RATE OF THE ASSESSEE IN THE PRESENT YEAR, WHICH IS HIGHER TO THE RATES SPECIFI ED BY NABARD & SBI AND ALSO HIGHER THAN THE MORTAL ITY RATE IN ASSESSEES OWN CASE IN THE PRECEDING YEAR S . THIS GOES TO SHOW THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND AND ACCEPTED THE REPLY OF THE ASSESSEE AS IT IS. UNDER THESE FACTS, IN OUR CONSIDERED OPINION, THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4.5 NOW IN THE LIGHT OF THE ABOVE FACTUAL DISCUSSION, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS A.R.J. SECURITY PR INTERS (SUPRA). IN THIS 7 CASE, IT WAS HELD THAT W HERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORD ER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IN THE PRESENT CASE, WE HAVE SEEN THAT THE MORTALITY RATE OF THE BIRDS WAS VERY LOW IN THE PRECEDING THREE YEARS AS COMPARED TO MORTALITY RATE CLAIMED BY THE ASSESSEE IN THE PRESENT YEAR. HENCE, IT CANNOT BE SAID THAT THE FACTS IN THE PRESENT YEAR ARE IDENTICAL AS COMPARED TO THE FACTS IN EARLIER YEARS. THEREFORE, THIS JUDGMENT OF HON'BLE DELHI HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE. 4.6 THE SECOND DECISION CITED BY LEARNED A.R. OF THE ASSESSEE IS THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 98 - 99. IN THIS CASE, THE DISPUTE BEFORE THE TRIBUNAL WAS REGARDING EXPENSES INCURRED BY THE ASSESSEE FOR CARRYING OUT NECESSARY R EPAIRS OF THE PREMISES IN QUESTION AS WELL AS RAISING A TOILET. IN THE PRESENT CASE, THIS IS NOT THE ISSUE IN DISPUTE, THEREFORE, THIS TRIBUNAL DECISION IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 4.7 THE ANOTHER JUDGMENT CITED BY LEARNED A.R. OF THE ASS ESSEE IS THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX - XIII VS. ASHISH RAJPAL (SUPRA). IN THIS CASE, IT WAS HELD THAT EVERY LOSS OF TAX TO THE REVENUE CANNOT BE TREATED AS BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS ALSO HELD THAT IF THE VIEW TAKEN BY THE ASSESSING OFFICER IS A POSSIBLE VIEW THEN CIT CANNOT SUBSTITUTE HIS VIEW IN PLACE OF THE VIEW OF THE ASSESSING OFFICER. THERE IS NO QUARREL ON TH ESE ASPECT S BUT IN THE PRESENT CASE, WE HAVE SEEN THAT ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER WITHOUT APPLYING HIS MIND ON A ISSUE OF DISALLOWANCE RAISED BY HIM IN HIS NOTICE ISSUED TO THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS ON 01/11/2010 REGARDING HIGH MORTALITY RATE OF B IRDS. THE REPLY T O THIS QUERY OF THE ASSESSING OFFICER IS VERY GENERAL, AS HAS 8 BEEN REPRODUCED ABOVE AND THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER WITHOUT MAKING ANY FURTHER QUERY AND HENCE, IT HAS TO BE ACCEPTED THAT THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AND, THEREFORE, THIS JUDGMENT IS ALSO NOT RENDERING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. THIS IS BY NOW A SETTLED POSITION OF LAW THAT IF ASSESSMENT IS FRAMED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND AND WITHOU T MAKING PROPER ENQUIRY, THEN SUCH ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, THIS JUDGMENT IS NOT RENDERING ANY HELP TO THE ASSESSEE. 5. IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT THE REVISIONARY POWER HAS BEEN RIGHTLY EXERCISED BY LEARNED CIT AND WE DO NOT FIND ANY REASON TO INTERFERE IN HIS ORDER. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 7 T H FEBRUARY, 2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR