M/s Kolhapur Udyam Co-Op. Soc. Ltd., Kolhapur V. ACIT,Cir.-1, Kolhapur

ITA 437/PUN/2009

• Counselvise Citation: 43724514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 437 & 438/PN/09 (ASSTT. YEAR: 2004-05 & 2005-06) KOLHAPUR UDYAM CO-OP. SOCIETY LTD., .. APPELLANT 1328/25-A Y.P. POWARNAGAR KOLHAPUR PAN AAAAK0364N VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RE SPONDENT CIR.I, KOLHAPUR APPELLANT BY: SHRI M. K. KULKARNI RESPONDENT BY: SHRI HARESHWAR SHARMA ORDER PER G.S. PANNU, AM THE CAPTIONED APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST SEPARATE BUT SIMILAR ORDERS OF THE COMMISSIONER OF INCOME-TAX-I, KOLH APUR PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT SETTING ASIDE THE ORDER S PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEARS 2004-05 AND 2005 -06. 2. WE SHALL FIRST TAKE UP ASSESSEES APPEAL VIDE ITA NO 437 /PN/09 FOR THE ASSESSMENT YEAR 2004-05. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE REVISIONAL ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE ACT. THE RELEVANT FACTS ARE AS FOLLOWS. 3. THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING OUT ACT IVITIES TOWARDS PROMOTION OF INDUSTRIAL ACTIVITY FOR ITS MEMBERS. FOR T HIS PURPOSE, THE ASSESSEE HAS GIVEN OUT ON LEASE UNITS TO ITS MEMBERS FOR CARRYING OUT INDUSTRIAL ACTIVITIES. IT ALSO TRADES IN RAW MATERIAL SUCH AS COKE, SCRAP, PIG IRON, M.S SCRAP, ETC., WITH ITS MEMBERS AND OTHERS. THE ASSESSEE HAS ALSO BECOME INDENTIN G AGENT FOR OTHER CONCERNS PROVIDING SIMILAR RAW MATERIAL TO ITS MEMBERS AN D OTHER CONCERNS IN 2 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD. KOLHAPUR REGION. THE ASSESSMENT WAS COMPLETED UNDER SECTIO N 143(3) ASSESSING THE INCOME OF THE ASSESSEE AT RS 8,58,032/- AFTER ALLOWING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80P(2)(E) OF RS 2 6,83,432/- AND DEDUCTION UNDER SECTION 80P(2)(D) OF RS 5,21,860/-. 4. ON A PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE ASSE SSING OFFICER UNDER SECTION 143(3) OF THE ACT, THE COMMISSIONER OF IN COME-TAX OBSERVED THAT THE SAID ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE IN TERESTS OF REVENUE FOR THE FOLLOWING REASON: DEDUCTION CLAIMED OF RS 26,83,432/- UNDER SECTION 80P(2 )(E) OF THE I.T. ACT, 1961 WAS WRONGLY ALLOWED U/S 143(3) AS IT IS SEEN TH AT NO ACTIVITY OF LETTING OF GO-DOWNS, WAREHOUSES FOR STORAGE, PROCESSING OR FACILITATING THE MARKETING OF COMMODITIES WAS CARRIED ON BY THE ASSESSEE CO-OPE RATIVE SOCIETY AND AS SUCH THE SOCIETY DO NOT HAVE ANY INCOME DERIVED FROM THE AFORESAID ACTIVITY ELIGIBLE FOR DEDUCTION U/S 80P(2)(E) OF THE I.T. ACT, 1961. IN RESPONSE TO THE NOTICE UNDER SECTION 263(1) ISSUED B Y THE COMMISSIONER OF INCOME-TAX, THE ASSESSEE OBJECTED TO THE PROPOSED REVISI ON AND FILED DETAILED WRITTEN SUBMISSIONS. IT WAS SUBMITTED THAT THE PROCEEDING S UNDER SECTION 263 COULD NOT BE INVOKED IN CASE OF CHANGE OF OPINION IN RE SPECT OF ALLOWABILITY OF CLAIMS MADE BY THE ASSESSEE AND ALLOWED BY THE ASSESSING OFF ICER. THE ASSESSEE ALSO STRESSED UPON THE SATISFACTION OF TWIN CONDITIO NS, NAMELY, ERRONEOUS NATURE OF THE ASSESSMENT ORDER AND ITS PREJUDI CE TO THE REVENUE ON ACCOUNT OF THE ERRONEOUS NATURE. AFTER CONSIDERING THE VARIOUS SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE COMMISSIONER HELD THA T THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(E) OF THE ACT SINCE, ACCORDING TO THE COMMISSIONER, THE ASSESSEE HAS NOT CARRIED OUT OR WAS NOT E NGAGED IN THE BUSINESS OF LETTING OF GO-DOWNS, WAREHOUSES FOR STORAGE, P ROCESSING OR FACILITATING THE MARKETING OF COMMODITIES. HE ACCORDINGL Y HELD THAT THE ASSESSING OFFICER WAS NOT RIGHT IN ALLOWING DEDUCTION UNDER SE CTION 80P(2)(E) OF THE ACT TO THE EXTENT OF RS 26,83,432/- AND TO THAT EXTENT THE ASSESSMENT ORDER DATED 26.9.2006 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. IN THIS VIEW OF THE MATTER, THE COMMISSIONER DIRECTED THE ASSESSING OF FICER TO MODIFY THE 3 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD. ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 IN THE L IGHT OF DIRECTIONS AND OBSERVATIONS GIVEN IN THE ORDER UNDER SECTION 263 OF TH E ACT. AGGRIEVED BY THIS ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONT ENDED THAT THE COMMISSIONER HAS ERRED IN DISTURBING THE ASSESSMENT FINAL ISED BY THE ASSESSING OFFICER BY INVOKING SECTION 263 OF THE ACT. IT HAS BEEN POINTED OUT THAT DEDUCTION UNDER SECTION 80P(2)(E) WAS ALLOWED BY THE ASSESSING OFFI CER IN THE ASSESSMENT PROCEEDINGS, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND, THEREFORE, THE COMMISSIONER WAS NOT CORRECT IN TREATING SUCH ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE WITHIN THE MEA NING OF SECTION 263 OF THE ACT. ACCORDING TO THE LEARNED COUNSEL, IN THIS CASE THE C OMMISSIONER HAS SUBSTITUTED HIS OWN VIEW IN PLACE OF THE ASSESSING OFFICER S VIEW, WHICH IS IMPERMISSIBLE IN TERMS OF THE LIMITED JURISDICTION AVAI LABLE WITH THE COMMISSIONER UNDER SECTION 263 OF THE ACT. IT HAS FURTHER BEEN POINT ED OUT THAT PROCEEDINGS UNDER SECTION 263 IN THE IMPUGNED ASSESSMENT YEAR HAVE B EEN INITIATED PRIMARILY BECAUSE OF THE ASSESSMENT FINALISED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 WHER EIN THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80P(2)(E) HAS BEEN DISA LLOWED. IT WAS, THEREFORE, CONTENDED THAT IT IS A CASE WHERE THE ASSESSME NT ORDERS FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 HAVE BEEN CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE UNDER SECTIO N 263 MERELY ON THE BASIS OF A CHANGE OF OPINION. IT WAS ALSO POINTED OUT THAT E VEN ON MERITS OF THE CLAIM THE ASSESSEE HAD MADE DETAILED WRITTEN SUBMISSIONS TO THE C OMMISSIONER JUSTIFYING THE ALLOWANCE OF DEDUCTION UNDER SECTION 80P( 2)(E) OF THE ACT, WHICH HAVE NOT BEEN APPROPRIATELY CONSIDERED IN THE IMPUGNE D ORDER. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS VEHEMENTLY CONTENDED THAT THE CO MMISSIONER HAS RIGHTLY 4 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD. INVOKED THE JURISDICTION, INASMUCH AS THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80P(2)(E) HAS BEEN ALLOWED BY THE ASSESSING OFFICER WITHOUT VERIFYING THE FACTUAL POSITION. IT WAS ALSO POINTED OU T THAT DEDUCTION UNDER SECTION 80P(2)(E) IS ALLOWABLE IN RESPECT OF ANY INCOME DERIVED FROM THE LETTING OF GODOWNS AND WAREHOUSES FOR STORAGE, PROCESSING OR FACILITAT ING THE MARKETING OF COMMODITIES AND, IN THIS CASE, THE ASSESSEE HAS EARNED INCOM E FROM M/S SESA GOA MERELY ACTING AS AN INTENDING AGENCY AND, THEREFO RE, THE CLAIM WAS NOT ALLOWABLE. IT HAS BEEN POINTED OUT THAT THE ASSESSING O FFICER FAILED TO APPRECIATE THAT AS PER AGREEMENT WITH M/S SESA GOA, THE ASSESSEE WAS APPOINTED AS A CONSIGNMENT SALES AGENT AND SUCH INCOME IS NOT DERIVED FRO M LETTING OUT OF GODOWNS WHICH IS THE REQUIREMENT OF SECTION 80P(2)(E) O F THE ACT. IN THIS CONNECTION, IT WAS ALSO POINTED OUT THAT TDS CERTIFICATE ISSUED BY M/S SESA GOA DEPICTED NATURE OF INCOME AS COMMISSION/BROKERAGE AND, THE REFORE, THIS ALSO SUPPORTED THE CONCLUSION OF THE COMMISSIONER THAT THE ASSE SSMENT ORDER WAS ERRONEOUS IN THE EYES OF LAW INASMUCH AS THE DEDUCTION UN DER SECTION 80P(2)(E) HAS BEEN WRONGLY ALLOWED. 7. IN REPLY, THE LEARNED COUNSEL SUBMITTED THAT IT I S THE CUSTOMERS OF THE ASSESSEE WHO ARE USING THE STORAGE FACILITIES AND INCOME HA S BEEN CREDITED IN THE PROFIT & LOSS ACCOUNT AS DEPOT MANAGEMENT CHARGES. IT WAS POINTED OUT THAT MERELY BECAUSE THE NOMENCLATURE HAS BEEN STATED AS DEPOT MANAGEMENT CHARGES, THE SAME WILL NOT BE DETERMINATIVE OF THE QUE STION, WHEREAS IN ACTUALITY THE ASSESSEE HAS MERELY GIVEN ITS GODOWNS ON RENT AND EA RNED INCOME THEREOF BY WAY OF COMMISSION. IT WAS THUS CONTENDED THAT EVEN ON MERITS OF THE CASE THE CLAIM UNDER SECTION 80P(2)(E) OF THE ACT HAS BEEN WRON GLY FOUND TO BE ERRONEOUS BY THE COMMISSIONER. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I N SO FAR AS THE ASSESSMENT YEAR 2004-05 IS CONCERNED, IT EMERGES THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS FINALISED BY THE ASSESSING OFF ICER ON 26.9.2006 5 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD. WHEREIN THE INCOME HAS BEEN ASSESSED AT RS 8,58,032/-, WH ICH, INTER ALIA , INCLUDED THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(E) OF THE ACT IN RESPECT OF DEPOT MANAGEMENT CHARGES OF RS 26,83,432/-. THE DEDUC TION UNDER SECTION 80P(2)(E) OF RS 26,83,432/- WHICH HAS BEEN ALLOWED BY T HE ASSESSING OFFICER, WAS CONSIDERED BY THE COMMISSIONER AS ERRONEOUS AND, THER EFORE, HE HAS INVOKED THE PROVISIONS OF SECTION 263 AND DIRECTED THE A SSESSING OFFICER THAT SUCH DEDUCTION BE WITHDRAWN. SECTION 80P(2)(E) PERMITS CO-OPERATIVE SOCIETIES A DEDUCTION IN RESPECT OF ANY INCOME DERIVED FROM THE LETTING OF GODOWNS AND WAREHOUSES FOR STORAGE, PROCESSING OR FACILITATING THE MAR KETING OF COMMODITIES. IN THIS CASE, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80P(2)(E) OF THE ACT IN RESPECT OF DEPOT MANAGEMENT CHARGES. SUCH CHARGES ARE CLAIMED TO HAVE BEEN RECEIVED FROM SESA GOA INDUSTRIES GROUP IN TERMS OF AN AGREEMENT DATED 01.07.2002. THE CASE SET-UP BY THE COMMISSIONER IS THAT THE RECEIPTS IN TERMS OF THE SAID AGREEMENT DO NOT QUALIFY FOR CLAIM OF DEDUCTI ON UNDER SECTION 80P(2)(E) OF THE ACT AND THAT IN THE ASSESSMENT PROCEEDINGS UNDER SE CTION 143(3) OF THE ACT DATED 26.9.2006, THE ASSESSING OFFICER HAS NOT FACTU ALLY ANALYSED SUCH ACTIVITIES OF THE ASSESSEE SOCIETY VIS-A-VIS THE REQUIREMEN TS OF SECTION 80P(2)(E) OF THE ACT. THE SAID CHARGE MADE BY THE COMMISSIONER HA S BEEN EXAMINED BY US WITH REFERENCE TO THE DISCUSSION IN THE ASSESSMENT ORDER DATED 26.9.2006 AND ALSO THE SUBMISSIONS MADE BY THE ASSESSEE TO THE ASSESSING OFF ICER DURING ASSESSMENT PROCEEDINGS, COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 27 TO 28. ON THE BASIS OF THE AFORESAID, IT IS QU ITE EVIDENT THAT THE TERMS AND CONDITIONS OF THE AGREEMENT AND THE NATURE OF IN COME HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER AT ANY STAGE DURING TH E ASSESSMENT PROCEEDINGS CULMINATING IN ASSESSMENT ORDER DATED 26.9.200 6. THE CHARGE OF THE COMMISSIONER CONTAINED IN THE IMPUGNED ORDER VIDE PARA 8 THAT APPARENTLY NO VERIFICATION HAS BEEN MADE IS QUITE TENABLE. MOREOVER, WE ALSO F IND THAT THE COMMISSIONER HAS REFERRED TO AN ASSESSMENT ORDER PASSED UN DER SECTION 143(3) OF THE ACT FOR THE SUBSEQUENT ASSESSMENT YEAR 2006-07 WH EREIN SUCH ACTIVITY HAS 6 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD. BEEN FACTUALLY ANALYSED AND IT HAS BEEN HELD BY THE A SSESSING OFFICER THEREIN THAT THE SAME DOES NOT FULFILL THE REQUIREMENTS OF SECT ION 80P(2)(E) OF THE ACT. WITHOUT GOING INTO THE MERITS, IT WOULD BE SUFFICIENT TO OBSERVE THAT IN THE INSTANT ASSESSMENT YEAR WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) VIDE ORDER DATED 26.9.2006, THE NATURE OF SUCH INCOME HAS NOT BE EN EXAMINED VIS-A-VIS REQUIREMENTS OF SECTION 80P(2)(E) OF THE ACT. THIS, IN O UR VIEW, HAS RENDERED THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT HAVING REGARD T O THE PARITY OF REASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., V.CIT 243 ITR 83 (SC). PER CONTRA, THE PLEA SE T-UP BY THE ASSESSEE IS THAT HAVING REGARD TO THE TERMS AND CONDITIONS OF THE AGREE MENT, THE OBLIGATIONS OF THE ASSESSEE ARE SUCH THAT THE SAME FULFILLS THE REQUIREME NTS OF SECTION 80P(2)(E) OF THE ACT AND THAT THE NOMENCLATURE OF THE INCOME CA NNOT BE DETERMINATIVE OF THE TRANSACTION. THE LEARNED COUNSEL HAD ALSO BROUGHT TO OUR NOTICE THE WRITTEN SUBMISSIONS ADDRESSED TO THE COMMISSIONER IN THIS REGARD, C OPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 1 TO 26 TO JUSTI FY THE MERITS OF THE CLAIM. AS AGAINST THIS, WE OBSERVE THAT THE COMMISSIONER HAS MERE LY GONE BY THE DECISION OF THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDIN GS FOR THE ASSESSMENT YEAR 2006-07 AND HAS DIRECTED MODIFICATION OF THE ASSESSMENT ORDER OF THE INSTANT ASSESSMENT YEAR WITHDRAWING THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(E) OF THE ACT. IN OUR VIEW, IT WOULD BE IN TH E FITNESS OF THINGS THAT THE CLAIM OF THE ASSESSEE ON MERITS IS EXAMINED HAVING REGARD TO TH E TERMS AND CONDITIONS OF THE AGREEMENT WITH SESA GOA AND OTHER RELEVANT MA TERIAL. FOR THIS PURPOSE, WE MODIFY THE IMPUGNED ORDER PASSED BY THE COMMISSIONE R AS FOLLOWS. WHILE UPHOLDING THE INVOKING OF JURISDICTION BY THE COMMISSION ER UNDER SECTION 263 OF THE ACT AND SETTING ASIDE THE ASSESSMENT ORDER DATED 26. 9.2006 (SUPRA),QUA THE ISSUE OF SECTION 80P(2)(E) OF THE ACT, WE DIRECT THE ASSE SSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80P (2)(E) OF THE ACT ON THE BASIS OF SUBMISSIONS AND ANY OTHER MATERIAL WHICH THE ASSE SSEE MAY DEEM 7 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD. PROPER TO SET UP BEFORE HIM. THE ASSESSEE SHALL BE AT LIB ERTY TO PRODUCE SUCH MATERIAL AS IT WOULD DEEM FIT IN SUPPORT OF THE DEDUCT ION CLAIMED UNDER SECTION 80P(2)(E) AMOUNTING TO RS 26,83,432/- AND THE ASSESSING OFFICER SHALL PASS AN ORDER THEREAFTER AFRESH ON THIS ASPECT, IN ACCORDANCE WI TH LAW. THEREFORE, WHILE UPHOLDING THE ACTION OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT IN PRINCIPLE, THE SAME STANDS MODIFIED TO THE AFORESAID EX TENT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 10. THE FACTS AND CIRCUMSTANCES ARE SIMILAR IN THE ASSESSMEN T YEAR 2005-06 (ITA NO 438/PN/09), EXCEPT THE FACT THAT IT ALSO ENTA ILS THE DEDUCTION CLAIMED BY THE ASSESSEE AND ALLOWED BY THE ASSESSING OFFICER UNDER SECTI ON 80P(2)(A)(I), APART FROM THE DEDUCTION UNDER SECTION 80P(2)(E) OF T HE ACT. THEREFORE, ON THE SIMILAR PARITY OF REASONING, WHILE UPHOLDING THE ACTI ON OF THE COMMISSIONER UNDER SECTION 263 FOR THE ASSESSMENT YEAR 2005-06, WE MODIFY T HE IMPUGNED ORDER TO THE EXTENT DISCUSSED ABOVE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR THE A SSESSMENT YEAR 2005-06, (ITA NO 438/PN/09) IS ALSO PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF AUGUST, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G. S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 24 TH AUGUST, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT, KOLHAPUR 4) DR, A BEN CH, ITAT, PUNE. 5) GUARD FILE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE 8 ITA NOS 437 & 438/PN/09 KOLHAPUR UDYAM CO-O. SOCIETY LTD.