Shamanur Sugars Ltd., V. ACIT,

ITA 438/BANG/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7402 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Additional evidence
• Section: 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 438 /BANG/201 3 ASSESSMENT YEAR : 2008 - 09 M/S. SHAMANUR SUGARS LTD., NO. 374, 4 TH MAIN, P.J. EXTENSION, DAVANGERE. PAN: AAKCS 3216P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE 1, DAVANGERE. APPELLANT RESPONDENT ITA NO. 66 6/BANG/201 3 ASSESSMENT YEAR : 200 8 - 0 9 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, DAVANGERE. VS. M/S. SHAMANUR SUGARS LTD., NO. 374, 4 TH MAIN, P.J. EXTENSION, DAVANGERE. PAN: AAKCS 3216P APPELLANT RESPONDENT ASSESSEE BY : SMT. SHEETAL BORKAR, ADVOCATE REVENUE BY : SHRI SANJAY KUMAR , CIT (DR) DATE OF HEARING : 2 1 . 09 .201 7 DATE OF PRONOUNCEMENT : 31 .10 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE WHICH ARE DIRECTED AGAINST THE ORDER OF CIT(A), HUBLI DATED 29.01.2013 FOR ASSESSMENT YEAR 2008- 09. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER. 1. BECAUSE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CONFIRMING / MAKING THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFIC ER, A) DISALLOWANCE OF DEPRECIATION U/S 32 OF THE INCOME T AX ACT, 1961 AMOUNTING TO RS.41,73,299/- AND EXPENDITURE ON THE AIRCRAFT U/S 37 AMOUNTING TO RS.74,08,273/- ITA NOS.438 & 666/BANG/2013 PAGE 2 OF 7 B) DISALLOWANCE OF EXPENSES OF REPAIRS AND MAINTENANCE OF 20% U/S 40A (3) OF THE INCOME TAX ACT, 1961 AMOUNTING T O RS.65,43,465/-. 2. BECAUSE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN OVERLOOKING AND IN SUMMARILY REJECTING THE DETAILED STATEMENT OF FACTS SUBMITTED ALONG WITH THE MEMORAN DUM OF APPEAL, VARIOUS DOCUMENTS AND EVIDENCES PLACED IN PAPER BOO K FILED ON VARIOUS DATES OF HEARING. 3. DISALLOWANCE OF DEPRECIATION U/S 32 AND DISALLOW ANCE OF THE EXPENDITURE CLAIMED ON AIRCRAFT U/S 37 OF THE IT AC T, 1961, A) THE LEARNED CIT (APPEALS) HAS NOT JUSTIFIED IN F AILING TO CONSIDER THE SUBMISSIONS OF THE APPELLANT AND THE OBSERVATIO NS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE ORDER A RE PERVERSE, ARBITRARY, BASELESS AND MISLEADING. DESPITE THE FAC T THE ASSESSEE HAS MAINTAINED DETAILED BOOKS OF ACCOUNTS AND FURNISHED ALL THE INFORMATION AS SOUGHT BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS). B) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN CO NFIRMING THE DISALLOWANCE OF DEPRECIATION U/S 32 OF THE INCOME T AX ACT, 1961 AMOUNTING TO RS.41,73,299/- AND EXPENDITURE ON THE AIRCRAFT U/S 37 AMOUNTING TO RS.74,08,273/- WAS MADE ON SURMISES AN D WITHOUT ANY BASIS .THE AO HAS NOT CONSIDERED THE SUBMISSIONS MA DE BY THE ASSESSEE AND HAS MADE THE SAID DISALLOWANCE ONLY ON ASSUMPTIONS. C) THE LEARNED CIT (APPEALS) HAS NOT CATEGORICALLY CONSIDERED THE USAGE OF THE AIRCRAFT IN THE BUSINESS OF THE ASSESS EE AND IS USED IN THE BUSINESS EXIGENCIES OF THE ASSESSEE FOR ATTENDING M EETING OF EXPORT OF SUGAR WITH VARIOUS DIGNITARIES AND ALSO TO ATTEND M EETING OF ELECTRICITY POWER AS AND WHEN CALLED BY THE VARIOUS AUTHORITIES AND OTHER BUSINESS RELATED WORKS THE SAID AIRCRAFT IS U SED AND AS THE SAME IS EXCLUSIVELY USED FOR THE PURPOSE OF COMPANY AND NO PART OF IT HAS BEEN USED FOR THE PERSONAL USE OF THE DIRECTORS AS STATED BY THE LEARNED AO. THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THE ABOVE AND HAS CONFIRMED THE DISALLOWANCES MADE BY T HE AO TO THE EXTENT OF RS.41,73,299/- ON ACCOUNT OF DEPRECIATION ON AIRCRAFT U/S 32 AND DISALLOWANCE OF EXPENDITURE INCURRED ON AIRCRAF T TO THE EXTENT OF RS.74,08,273/- U/S 37 OF THE IT ACT,1961 , AND THE SAME REQUIRES TO BE DELETED IN THE FACTS AND CIRCUMSTANCES SUBMITTED BY THE ASSESSEE. 4. DISALLOWANCE OF EXPENSES UNDER THE HEAD 'REPAIRS AND MAINTENANCE' A) THE LEARNED CIT (APPEALS) HAS NOT JUSTIFIED IN F AILING TO CONSIDER THE SUBMISSIONS OF THE APPELLANT AND THE OBSERVATIO NS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE ORDER A RE PERVERSE, ARBITRARY, BASELESS AND MISLEADING. DESPITE THE FAC T THE ASSESSEE HAS MAINTAINED DETAILED BOOKS OF ACCOUNTS AND FURNISHED ALL THE INFORMATION AS SOUGHT BY THE LEARNED COMMISSIONER O F INCOME TAX ITA NOS.438 & 666/BANG/2013 PAGE 3 OF 7 (APPEALS). B) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN CO NFIRMING THE DISALLOWANCE MADE BY THE LEARNED AO TO THE EXTENT O F RS.65,43,465/- AND WAS MADE ON SURMISES AND WITHOUT ANY BASIS. TH E AO HAS NOT CONSIDERED THE SUBMISSION MADE BY THE ASSESSEE AND HAS MADE THE SAID DISALLOWANCE ONLY ON ASSUMPTIONS. C) THE LEARNED CIT (APPEALS) AND THE LEARNED AO HAS NOT CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND THE LEARNE D AO HAS MADE AN ADHOC DISALLOWANCE WITH SOME BIAS IN MIND AND FU RTHER HE HAS NOT NARRATED A SINGLE INSTANCE AND HAS CATEGORICALLY DI SALLOWED THE SAID AMOUNT WITHOUT ANY BASIS. THE SAID EXPENDITURE HAS BEEN INCURRED FOR THE MAINTENANCE OF THE PLANT AND MACHINERY WHICH IS USED IN THE BUSINESS OF THE ASSESSEE AND ALL THE PAYMENTS ARE M ADE THROUGH BANKING CHANNELS AND ALL THE EXPENDITURE HAS BEEN S UPPORTED WITH NECESSARY BILLS ,VOUCHERS, RECEIPTS ETC AND DETAILE D PARTICULARS THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THE ABOVE AND HAS CONFIRMED THE DISALLOWANCES WHICH WAS MADE WITHOUT ANY BASIS AND ON AN ADHOC BASIS MADE BY THE AO TO THE EXTENT OF R S.65,43,465/-, AND THE SAME REQUIRES TO BE DELETED IN THE FACTS AND CI RCUMSTANCES SUBMITTED BY THE ASSESSEE. 5. THE ASSESSEE CRAVES LEAVE TO ADD / ALTER ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), HUBLI, IS CONTRARY TO THE LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER OF THE LEARNED CIT(A)IS PERVERSE IN SO FAR AS THE REASONS GIVEN FOR DISALLOWANCES DELETED BY HIM. 3. THE LEARNED CIT(A) HAS ACCEPTED ADDITIONAL EVIDE NCE IN THE FORM OF PURCHASE DETAILS FOR CANE IN VIOLATION OF RULE 46A( 3),WITH REGARD TO CANE PURCHASES. 4. THE DELETION MADE BY THE CIT(A) IN RESPECT OF BI O-FUEL PELLETS PURCHASES ADDED BACK IS CONTRARY TO THE FACTS OF TH E CASE ALLOWING THE CLAIM BASED ON THE VIEW TAKEN FOR A.Y.2004-05 IS NO T PROPER . 5. THE PURCHASES DISALLOWED IN RESPECT OF BOTH CANE AND BIO-FUEL PELLETS IS IN KEEPING WITH THE VIEW TAKEN IN THE CA SE OF SRI.S S BAKKESH. THE ORDER OF CIT(A) IN THE CASE OF SRI.S S BAKKESH IS APPEALED AGAINST AND PENDING FOR ADJUDICATION. THE DECISION WILL HAV E DIRECT IMPLICATION IN THIS CASE. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UP ON AT THE TIME OF HEARING. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY OF GROUNDS. ITA NOS.438 & 666/BANG/2013 PAGE 4 OF 7 4. FIRST WE TAKE UP THE ASSESSEES APPEAL. THE LD. AR OF ASSESSEE SUBMITTED THAT GROUND NOS. 1 AND 2 ARE NOT PRESSED AND OUT OF GROU ND NO. 3 ALSO, THE ISSUE REGARDING DISALLOWANCE OF DEPRECIATION U/S. 32 IS N OT PRESSED. THE ONLY ISSUE INVOLVED IN GROUND NO. 3 TO BE DECIDED IS DISALLOWA NCE REGARDING CLAIM ON AIRCRAFT EXPENSES U/S. 37 OF THE I.T. ACT, 1961. A CCORDINGLY GROUND NOS. 1 AND 2 ARE REJECTED AS NOT PRESSED AND PART OF GROUND NO. 3 REGARDING DISALLOWANCE OF DEPRECIATION U/S. 32 IS REJECTED AS NOT PRESSED. 5. REGARDING THE REMAINING ISSUE INVOLVED IN GROUND NO. 3 IN RESPECT OF DISALLOWANCE OF EXPENDITURE CLAIMED ON AIRCRAFT U/S . 37 OF THE I.T. ACT, 1961 AND THE ISSUE INVOLVED IN GROUND NO. 4 OF THE APPEAL IN RESPECT OF DISALLOWANCE UNDER THE HEAD REPAIRS AND MAINTENANCE, IT WAS SUBM ITTED BY LD. AR OF ASSESSEE THAT AS PER PAGE NO. 12 OF THE ORDER OF CI T(A), HE DECIDED THE ISSUE REGARDING THE ASSESSEES CLAIM OF RS. 65,43,465/- U NDER THE HEAD REPAIRS AND MAINTENANCE AGAINST THE ASSESSEE ON THIS BASIS THAT THE ASSESSEE HAS NOT FILED DETAILS IN SUPPORT OF THE CLAIM OF REPAIRS AND MAIN TENANCE. SHE SUBMITTED THAT IN THE INTEREST OF JUSTICE, THIS ISSUE MAY BE RESTO RED BACK TO THE FILE OF AO FOR FRESH DECISION AND IF THIS IS DONE, THE ASSESSEE WI LL SUBMIT THE RELEVANT DETAILS. SHE ALSO POINTED OUT THAT ON PAGES 60 TO 85 OF THE PAPER BOOK, THE ASSESSEE HAS ENCLOSED COPY OF VARIOUS INVOICES ON ACCOUNT O F THESE EXPENSES. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IT IS NOTED BY CIT(A) IN PAGE NO. 11 OF HIS ORDER THAT IT IS FOUND FROM THE BALANCE SHEET THAT THE LOAN HAS BEEN TAKEN IN THE LAST YEAR ITSELF. HE ALSO NOTED THAT THE ASSESSEE WAS REQUESTED TO EXPLAIN THE BUSINESS USE OF AIRCRAFT F OR THE PURPOSE OF BUSINESS OF THE COMPANY WHEN THE COMPANY IS MANUFACTURING SUGAR AND MAINLY DEALS WITH THE AGRICULTURISTS AND HE HAS GIVEN A FINDING THAT THE BUSINESS NEED OF THE AIRCRAFT HAS NOT BEEN EXPLAINED. IN THIS VIEW OF T HE MATTER, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) REGARDING REJECTIO N OF ASSESSEES CLAIM ON ACCOUNT OF DEPRECIATION OF AIRCRAFT AND THE EXPENDI TURE INCURRED ON AIRCRAFT. 7. REGARDING THE ASSESSEES CLAIM FOR EXPENSES UNDE R THE HEAD REPAIRS AND MAINTENANCE RS. 65,43,465/-, WE FEEL IT PROPER TO R ESTORE BACK THE MATTER TO THE ITA NOS.438 & 666/BANG/2013 PAGE 5 OF 7 FILE OF AO FOR FRESH DECISION. WE ORDER ACCORDINGL Y. THIS ISSUE IS RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION WITH THE DIREC TION THAT THE ASSESSEE SHOULD FURNISH REQUIRED DETAILS AND EVIDENCE BEFORE THE AO IN RESPECT OF ASSESSEES CLAIM FOR REPAIRS AND MAINTENANCE EXPENSES AND THER EAFTER, THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING REA SONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. GROUND NO. 4 IS ALLOWED F OR STATISTICAL PURPOSES. 8. NOW WE TAKE UP THE REVENUES APPEAL.AS PER GROUN D NO. 3 OF REVENUES APPEAL, THIS IS THE GRIEVANCE OF THE REVENUE THAT CIT(A) HA S ACCEPTED THE ADDITIONAL EVIDENCE IN THE FORM OF PURCHASE DETAILS FOR CANE I N VIOLATION OF RULE 46A(3) WITH REGARD TO CANE PURCHASES. WE FIND THAT ON PAGE NO. 8 OF HIS ORDER, IT WAS NOTED BY CIT(A) THAT IN THE CASE OF SHRI S.S. BAKKESH FOR ASSESSMENT YEAR 2007-08, IT WAS SUBMITTED BY SHRI S.S. BAKKESH BEFORE THE CI T(A) IN HIS CASE THAT HE HAD SOLD 73.4% OF TOTAL PRODUCTION OF BIOFERTILIZERS / BIO-COMPOST TO THE FARMERS OF SHAMANUR SUGARS LIMITED WHICH MEANS THAT THE FARMER S SUPPLYING THE SUGARCANE TO THE COMPANY WERE GETTING PART CASH / P ART BIO-COMPOST IN LIEU OF SELLING SUGARCANE. HE HAS FURTHER NOTED ON THE SAM E PAGE OF THE ORDER THAT PRODUCTION OF BIO-COMPOST IN THE HANDS OF SHRI S.S. BAKKESH TO THE EXTENT OF RS. 11,63,56,052/- HAS BEEN TREATED AS BOGUS AND TH E SALE OF BIO-COMPOST AMOUNTING TO RS. 11,17,06,900/- TO THE FARMERS OF S HAMANUR SUGARS LIMITED THROUGH THE COMPANY IS TREATED AS BOGUS. IT IS FUR THER NOTED THAT SINCE THIS IS INCLUDED IN THE CANE PURCHASES, AMOUNT OF RS. 11,17 ,06,900/- IS DISALLOWED FROM THE PURCHASES AND ADDED TO THE RETURNED LOSS U NDER THE HEAD INCOME FROM OTHER SOURCES.BEFORE CIT(A) THIS WAS THE CLAI M OF THE ASSESSEE THAT THE ASSESSEE HAS NOT DEBITED IN THE BOOKS OF ACCOUNTS O N ACCOUNT OF PURCHASE OF BIO-COMPOST WHICH WAS PURCHASED BY THE FARMERS OF A SSESSEE COMPANY. THEREAFTER IT IS NOTED BY CIT(A) IN PAGE NO. 9 OF T HE ORDER THAT ONLY DETAILS OF PURCHASE OF CANE IS THERE AND THERE IS NO PURCHASE OF BIOFERTILIZER AND THEREFORE, THE CONTENTION OF THE AO THAT CANE PURCHASES INCLUD ES BIOFERTILIZER IS NOT JUSTIFIABLE AND ON THIS BASIS, HE DELETED THE DISAL LOWANCE MADE BY THE AO. IN OUR CONSIDERED OPINION, CIT(A) HAS NOT PROPERLY UND ERSTOOD THE AOS OBJECTION. IN OUR UNDERSTANDING, THE OBJECTION OF THE A. O. IS THIS THAT AGAINST THE CANE SUPPLY BY THE FARMERS AND DEBITED BY THE ASSESSEE I N P & L ACCOUNT, ONLY PART AMOUNT HAS BEEN PAID BY THE ASSESSEE TO THE AGRICUL TURISTS IN THE FORM OF CASH AND THE REMAINING PART TO THE EXTENT OF RS. 11,17,0 6,900/- WAS NOT PAID BY THE ITA NOS.438 & 666/BANG/2013 PAGE 6 OF 7 ASSESSEE BY CASH OR CHEQUE AND IT IS SHOWN AS PAID IN THE FORM OF BIO-COMPOST SUPPLIED BY SHRI S.S.BAKKESH TO THOSE FARMERS. ONC E IT IS ACCEPTED THAT THE CLAIM OF THE ASSESSEE THAT THE PAYMENT TO THIS EXTE NT IS BY WAY OF SUPPLY OF BIO- COMPOST TO THE FARMERS AND SUCH CLAIM IS FOUND BOGU S, IT IS IMPLIED THAT NO PAYMENT IS MADE BY THE ASSESSEE TO FARMERS IN RESPE CT OF THAT PART OF CANE PURCHASE SHOWN BY THE ASSESSEE AND THEREFORE, AS A CONSEQUENCE, IT HAS TO BE HELD THAT THE CANE PURCHASES CLAIMED BY THE ASSESSE E TO THIS EXTENT IS ALSO BOGUS UNLESS THE ASSESSEE SHOWS THAT PAYMENT IS MAD E IN SOME OTHER MANNER AND NOT IN THE MODE OF SUPPLY BY MR. BAKKESH AS STA TED BY THE A. O. IN OUR CONSIDERED OPINION, THIS ASPECT OF THE MATTER SHOUL D BE EXAMINED AFRESH BY EXAMINING THE QUANTITATIVE DETAILS OF SUGAR PRODUCE D AND SUGARCANE CONSUMPTION SHOWN BY THE ASSESSEE ALONG WITH YIELD RATIO TO FIND OUT AS TO WHETHER THE QUANTITY OF SUGARCANE PURCHASE AND CONS UMPTION SHOWN BY THE ASSESSEE IS PROPER OR NOT AS PER THE FIGURE OF SUGA RCANE PRODUCTION AND YIELD RATIO AND THEREAFTER, THIS ISSUE IS TO BE SEEN AS T O WHETHER THE PER QUINTAL PURCHASE PRICE SHOWN BY THE ASSESSEE IS MARKET PRIC E OR IT IS INFLATED COST IF PART PAYMENT IN RESPECT OF SUGARCANE PURCHASE IS BO GUS THEN IT WILL BE FOUND THAT EITHER THE QUANTITY OF CANE PURCHASE SHOWN BY THE ASSESSEE IS INFLATED OR SUCH CANE PURCHASE IS SHOWN AT EXCESSIVE PRICE. WE , THEREFORE FEEL IT PROPER TO RESTORE THIS MATTER BACK TO THE FILE OF AO FOR FRES H DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. 10. IN THE COMBINED RESULT, APPEAL FILED BY THE REV ENUE IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2017. /MS/ ITA NOS.438 & 666/BANG/2013 PAGE 7 OF 7 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.