Assistant Commissioner of Income tax, Ahmednagar V. Vridheshwar Sahkari Sakhar Karkhana Ltd, Ahmednagar

ITA 472/PUN/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7573 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-07-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: PRATIK SANDHBER
• Keywords: Business expenditure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 143(3); 148; 37

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI S.S. VISWANETHRA RAVI, JM . / ITA NO.2965/PUN/2016 / ASSESSMENT YEAR : 2009-10 SHRI VRIDHESHWAR SAHAKARI SAKHAR KARKHANA LIMITED, A/P ADINATHNAGAR, TAL. PATHARDI, DIST. AHMEDNAGAR. PAN : AABCV0782E. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 3, AHMEDNAGAR. . / RESPONDENT . / ITA NO.472/PUN/2017 / ASSESSMENT YEAR : 2009-10 THE ASST. COMMISSIONER OF INCOME TAX, AHMEDNAGAR. . / APPELLANT V/S SHRI VRIDHESHWAR SAHAKARI SAKHAR KARKHANA LIMITED, A/P ADINATH NAGAR, TAL. PATHARDI, DIST. AHMEDNAGAR. PAN : AABCV0782E. . / RESPONDENT ASSESSEE BY : SHRI PRATIK SANDHBER. REVENUE BY : SHRI PANKAJ GARG. / DATE OF HEARING : 25.09.2019 / DATE OF PRONOUNCEMENT: 24.10.2019 2 / ORDER PER ANIL CHATURVEDI, AM : 1. THESE CROSS-APPEALS FILED BY ASSESSEE AND REVENUE E MANATE OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (A) 2, PUNE DAT ED 03.08.2016 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE SOCIETY STATED TO BE ENGAGE D IN THE BUSINESS OF MANUFACTURING AND SELLING OF SUGAR AND ITS BY-PR ODUCTS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 30.09 .2009 DECLARING TOTAL INCOME AT RS.NIL. THE ASSESSMENT WAS INITIALL Y FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.30.10.2011 ACCEPTING THE INCOM E FILED BY THE ASSESSEE. THEREAFTER, ASSESSMENT WAS RE-OPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 12.03.2014 WHICH WAS SERVED ON A SSESSEE ON 14.03.2014. IN RESPONSE TO NOTICE U/S 148 OF THE ACT, AS SESSEE INTER-ALIA SUBMITTED THAT THE RETURN FILED BY IT FOR A.Y. 2009-10 ON 3 0.09.2009 MAY BE TREATED AS RETURN OF INCOME IN RESPONSE U/S 148 OF T HE ACT. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND CONS EQUENTLY ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VID E ORDER DATED 18.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.9,59 ,62,590/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 03.08.2016 (IN APPEAL NO.PN/CI T(A)- 2/ITOWD-3/AN/43/2015-16) GRANTED PARTIAL RELIEF TO THE AS SESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 3 3. THE GROUND RAISED BY THE ASSESSEE IN ITA NO.2965/P UN/2016 FOR A.Y. 2009-10 READS AS UNDER : 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN SUSTAINING THE ORDER PASSED BY THE ASSESSING OFFICE R U/S 143(3) R. W.S. 147 BEING BAD IN LAW IN AS MUCH AS THE REASONS STATED F OR REOPENING ARE NEITHER LEGAL NOR CORRECT AS ON COMPLETION OF ORIGINAL ASSE SSMENT U/S 143(3) THE ISSUE RELATING TO CANE PURCHASE PRICE HAS BEEN THOROUGHLY EXAMINED AND NOW ON THE BASIS OF ASSUMPTION THAT THERE HAS BEEN EXCESS PAYM ENT MADE FOR CANE PURCHASE PRICE THERE CANNOT BE REOPENING OF COMPLET ED ASSESSMENT AS IT CONSTITUTES 'CHANGE OF OPINION'. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND WITHOUT PREJUDICE TO ABOVE GROUNDS NO.1, LD. CIT(A) HAS ERRED IN NOT ALL OWING THE EXEMPTION' OF ENTIRE INCOME U/S 80P(2)(A)(II) OF THE I.T. ACT, 19 61 AS THE SUGAR IS AN AGRICULTURAL PRODUCE. REFER FULL BENCH JUDGMENT OF P & H HIGH COURT IN THE CASE OF BUDHEWAL CO-OP SUGAR MILLS LTD. - 315 ITR 3 51. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION ON ACCOUNT OF CANE PURCH ASES PRICE PAID BY THE APPELLANT IN EXCESS OF STATUTORY MINIMUM PRICE(SMP) PLUS AMOUNT PAYABLE UNDER CLAUSE 5A OF SUGARCANE CONTROL ORDER BEING NO T AN ALLOWABLE EXPENDITURE U/S 37. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DESPITE THE FACT THAT LD.CIT(A) HOLDS THAT QUESTION OF INVOKING SEC 40A(2 ) DOES NOT ARISE 011 THE GROUND THAT THIS EXCESS CANE PURCHASE PRICE IS NOT AT ALL AN ALLOWABLE EXPENDITURE U/S 37 PER SE, IN ANY CASE PROVISIONS O F SEC 40A(2) ARE NOT APPLICABLE TO THE CO-OPERATIVE SOCIETY. (REFER SHIV AMRT DOODH UTPADAK SANGH - BOMBAY HIGH COURT) 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF SO-CALLED EXCESS CANE PURCHASES PRICE RELYING ON THE ORDER OF LD. CIT(A)- V IN LEAD CASE OF SHRI DYNESHWAR SSK LTD., IS TO BE HELD AS INCORRECT IN VIEW OF THE LATEST DE CISION OF THE SUPREME COURT REFERRING THE ISSUE TO A LARGER BENCH WHILE DECIDIN G THE IDENTICAL ISSUE IN THE CASE OF TASGAON TALUKA SSK LTD., SUGGESTING IT'S RE SERVATION ON THE DECISION TAKEN BY THE SUPREME COURT IN THE CASE OF SATPUDA T API SSK LTD. 326 ITR 42. 4. ON THE OTHER HAND, THE GROUNDS RAISED BY THE REVE NUE IN ITA NO.472/PUN/2017 READS AS UNDER : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROS SLY ERRED IN HOLDING THAT THE ADDITIONAL PAYMENT ON ACCOUNT OF CANE PRIC E UNDER CLAUSE 5A OF THE SUGAR CONTROL ORDER CANNOT BE ASSESSED IN THE A SSESSEE'S HANDS AS SUCH PAYMENT REPRESENTS DIVERSION OF PROFIT BY OVER RIDING TITLE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN HOLDING AS ABOVE AND IN DIRECTING THE ASSESSING OFF ICER TO COMPUTE THE AMOUNT ADMISSIBLE AS DEDUCTION NOTWITHSTANDING THAT AT PARA 20 OF THE SOURCE ORDER (IN THE CASE OF SHRI DNYANESHWAR SSK L TD) IT WAS ADMITTED BY THE APPELLATE AUTHORITY THAT EVEN THE AMOUNT PAYABL E TO THE CANE GROWER 4 UNDER CLAUSE 5A OF THE SUGAR CONTROL ORDER AMOUNTS TO APPLICATION OF INCOME AND IS A PROFIT SHARING NATURE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT CLAUSE 5A OF THE SUGAR C ONTROL ORDER DOES NOT FASTEN ANY OBLIGATION TO THE SOURCE OF INCOME IN TH E ASSESSEE'S HANDS WHICH IS. MANUFACTURE AND MARKETING OF SUGAR AND, I N THE CIRCUMSTANCES, IT COULD BY NO MEANS BE SAID THAT THE AMOUNT PAID U NDER THE AFORESAID CLAUSE REPRESENTS DIVERSION OF PROFIT AT SOURCE BY VIRTUE OF OVERRIDING TITLE. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE PAYMENTS MADE BY THE ASSESSEE OVER AND ABOVE THE STATUTORY MINIMUM PRICE (SMP) ARE IN THE NATURE OF DISTRIBUTION OF PROFIT, HENCE NOT ADMISSIBLE AS DEDUCTION. 6. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) MAY BE VACATED VACATED AND THAT OF THE ASSESSING OFFICER B E RESTORED. 5. WE FIRST PROCEED TO DECIDE THE ASSESSEES APPEAL IN I TA NO.2965/PUN/2016 FOR A.Y. 2009-10. 5.1. BEFORE US, THE ASSESSEE IN GROUND NO.1 IS CHALLENGING THE RE- ASSESSMENT PROCEEDINGS ORDER PASSED U/S 143(3) R.W.S. 147 OF THE AC T. 5.2. BEFORE US, LD.A.R. SUBMITTED THAT NOTICE FOR RE-OPENING OF THE ASSESSMENT HAS BEEN ISSUED WITHIN A PERIOD OF 4 YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR. HE SUBMITTED THAT ORIGINA L ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 30.10.20 11 AND WHILE FRAMING THE ASSESSMENT ORDER, THE AO HAD MADE NECESSAR Y ENQUIRIES AND AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES ASSESSMENT WAS FRAMED WITHOUT MAKING ANY ADDITION ON THE ISSUE ON WHICH THE RE- OPENING HAS BEEN INITIATED. IN SUPPORT OF HIS CONTENTION THAT THE ISSU E WAS EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, HE POINTED TO PARA 2 OF THE ASSESSMENT ORDER WHEREIN AO HAS NOTED ABOUT THE ASSESSEE HAVING PAID THE PRICE FOR PURCHASE OF SUGARCANE. HE POIN TED OUT THAT THE AFORESAID OFFICE NOTE WHICH IS REFERRED TO BY THE AO WH ICH DEMONSTRATES THAT THE ISSUE WAS EXAMINED BY THE AO AN D IN SUCH A SITUATION, HE SUBMITTED THAT IT IS NOT OPEN FOR AO TO RE- OPEN THE 5 ASSESSMENT ON THE ISSUE OF EXCESS CANE PRICE PAID BY TH E ASSESSEE AS IT AMOUNTS TO CHANGE OF OPINION. HE SUBMITTED THAT THE R E-OPENING OF THE ASSESSMENT WAS IMPERMISSIBLE AND WITHOUT JURISDICTION AS TH E SAME IS ONLY ON THE BASIS OF CHANGE OF OPINION BY THE CONCERNED OFFICER. HE FURTHER POINTING TO PARA 3 OF THE RE-ASSESSMENT ORDER S UBMITTED THAT THE OTHER REASON NOTED BY THE AO FOR RE-OPENING THE ASSES SMENT WAS THAT LD.CIT(A) IN THE CASE OF SAHKAR MAHARSHI BHAUSAHEB THORAT SSL LTD., HAD CONFIRMED THE DISALLOWANCE OF SUGARCANE PRICE PAID OVER AND ABOVE THE STATUTORY MINIMUM PRICE (SMP) BUT IN THE CASE OF THE PRESENT ASSESSEE, THE AO HAD NOT DISALLOWED THE EXCESS SUGAR CA NE PRICE, THUS THERE WAS AN ESCAPEMENT OF INCOME. HE SUBMITTED THAT ON THE BASIS OF THE ORDER PASSED BY LD.CIT(A) IN SOME OTHER ASSESSEES CASE, THE FORMATION OF OPINION OF INCOME ESCAPING ASSESSMENT WOULD AM OUNT TO BORROWED SATISFACTION FROM ANOTHER OFFICER. HE SUBMITTED T HAT BORROWED SATISFACTION IN THE ABSENCE OF ANY APPLICATION OF MIND AND AN Y REAL FINDING IN THE CASE OF ASSESSEE DOES NOT CONSTITUTE VALID REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. AND THE RE-OPENIN G ON SUCH BORROWED SATISFACTION IS NOT PERMISSIBLE. IN SUPPORT OF H IS AFORESAID CONTENTION, HE PLACED RELIANCE ON THE DECISION OF HONBLE GU JARAT HIGH COURT IN THE CASE OF SHREE CHALTHAN VIBHAG KHAND VS. DC IT REPORTED IN (2015) 376 ITR 419 (GUJ) AND ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORDER. HE FURTHER SUBMITTED THAT AGAINST THE A FORESAID ORDER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SHREE CHALTHAN VIBHAG KHAND (SUPRA), REVENUE HAD PREFERRED SLP BEFORE THE HONBLE AP EX COURT. THE HONBLE APEX COURT VIDE ORDER DATED 15.03.2016 IN THE C ASE OF ITO VS. SHREE MADHI VIBHAG SAHKARI KHAND UDHYOG MANDLI LTD., HAS DISMISSED THE SLP FILED BY THE ASSESSEE AND WHICH IS REPORTED IN (20 16) 70 TAXAMNN.COM 247 (SC). HE ALSO PLACED ON RECORD THE CO PY OF THE AFORESAID DECISION. HE THEREAFTER SUBMITTED THAT LD.CIT(A) WHILE 6 UPHOLDING THE RE-ASSESSMENT PROCEEDINGS TO BE VALID HAD RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CONSOLIDAT ED PHOTO & FINVEST LIMITED VS. ACIT REPORTED IN 151 TAXMAN 41 DELHI WHICH LD.CIT(A) HAD ALSO QUOTED ON PAGE 5 OF THE ORDER. HE SUB MITTED THAT THE AFORESAID DECISION OF DELHI HIGH COURT WHICH HAS BEEN RELIED B Y LD.CIT(A) HAS BEEN CONSIDERED BY THE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF CIT VS. USHA INTERNATIONAL LIMITED REPORTED IN (2012) 348 ITR 485 AND THE HONBLE DELHI HIGH COURT IN PARA 11 OF THE ORDER HAS OBSERVED THAT THE OBSERVATIONS MADE BY HONBLE HIGH COURT IN THE CA SE OF CONSOLIDATED PHOTO & FINVEST LTD., (SUPRA) DOES NOT REFLECT THE CORRECT LEGAL POSITION. HE THEREFORE SUBMITTED THAT THE PROCEEDING S U/S 147 OF THE ACT BE TREATED AS VOID AND FOR WHICH HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED REPORTED IN (2010) 187 TAXMAN 312 (SC). LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE OF EXCESS CANE PRICE PAID BY TH E ASSESSEE TO THE MEMBERS WAS NOT DISCUSSED AT ALL BY THE AO IN THE ORIGIN AL ASSESSMENT ORDER MEANING THEREBY THAT NO INQUIRY WAS MADE BY HIM IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE IT CANNOT BE SAID THAT ANY OPINION WAS FORMED IN THE FIRST PLACE BY THE AO WHILE FRAMING THE OR IGINAL ASSESSMENT AND THEREFORE THERE CANNOT BE ANY CHANGE OF OPINION. HE THUS SUPPORTED THE ORDER OF AO AND LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE M ATERIAL ON RECORD. IN THE PRESENT GROUND ASSESSEE IS CHALLENGING T HE RE-OPENING OF THE ASSESSMENT U/S 147 / 148 OF THE ACT. IT IS AN UND ISPUTED FACT THAT ASSESSEE HAD FILED ORIGINAL RETURN OF INCOME FOR A.Y. 2009-1 0 ON 13.09.2009 AND THEREAFTER THE ORIGINAL ASSESSMENT WAS FRAM ED U/S 143(3) OF THE ACT VIDE ORDER DT.30.11.2011. SUBSEQUENTLY, N OTICE U/S 148 7 OF THE ACT WAS ISSUED ON 12.03.2014 WHICH IS WITHIN FOUR YEA RS FROM THE END OF THE ASSESSMENT YEAR 2009-10. 7. THE LAW ON RE-OPENING OF AN ASSESSMENT UNDER THE AC T IS FAIRLY SETTLED. THE ASSESSING OFFICER CAN RE-OPEN AN ASSESSMENT ONLY IN ACCORDANCE WITH THE EXPRESS PROVISIONS PROVIDED IN SECTIO N 147/148 OF THE ACT. IT IS ONLY ON THE ASSESSING OFFICER STRICTLY SATIS FYING THE PROVISIONS OF SECTION 147 OF THE ACT THAT HE ACQUIRES JUR ISDICTION TO RE- OPEN AN ASSESSMENT. SECTION 147 OF THE ACT, CLOTHES THE ASSESSING OFFICER WITH JURISDICTION TO REOPEN AN ASSESSMENT ON SATISFACTION OF THE FOLLOW ING: (A) THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT (B) INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT AND (C) I N CASES WHERE THE ASSESSMENT SOUGHT TO BE REOPENED IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEN AN A DDITIONAL CONDITION IS TO BE SATISFIED VIZ: THERE MUST BE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NEC ESSARY FOR ASSESSMENT. 8. IN THE PRESENT CASE, SINCE NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED ON 12.03.2014 IN RELATION THE ASSESSMENT YEAR 2009 -10, THE RE- OPENING OF THE ASSESSMENT IS WITHIN THE PERIOD OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. IN SUCH CASES, THE ASSESSING OFFICER WOULD BE CLOTHED WITH JURISDICTION TO ISSUE A NOTICE FOR REOPENING OF AN ASSESSMENT IF HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. THE REQUIREMENT OF FAILURE TO MAKE TRUE AND FU LL DISCLOSURE AS PROVIDED IN THE PROVISO TO SECTION 147 OF THE ACT IS N OT TO BE SATISFIED FOR ISSUING OF RE-OPENING NOTICE WITHIN THE PERIOD OF FOUR YEA RS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THUS, IN THE ABSENC E OF CUMULATIVE SATISFACTION OF REASON TO BELIEVE AND IN THE ABSENCE OF ANY INCOME 8 CHARGEABLE TO TAX ESCAPING ASSESSMENT, THE ASSESSING OFFIC ER IS NOT EMPOWERED WITH JURISDICTION TO REOPEN AN ASSESSMENT. 9. IN THE PRESENT CASE IT IS ALSO A FACT THAT ORIGINAL ASSESSMENT FOR A.Y. 2009-10 UNDER CONSIDERATION WAS FRAMED UNDER SECTION 143(3) OF THE ACT. IN SUCH A SITUATION, ANOTHER ASPECT THAT HAS TO BE KEPT IN MIND IS AS TO WHETHER THE REOPENING IS BASED UPON ANY TANGIBLE MAT ERIAL WHICH HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUEN T TO THE FRAMING OF THE EARLIER ASSESSMENT OR WHETHER THE SAME IS MERELY A CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER. 10. WHEN THE FACTS OF THE PRESENT CASE IS SEEN IN THE LIG HT OF THE AFORESAID LEGAL POSITION, WE FIND THAT ONE OF THE REASON FOR R ESORTING TO REOPENING THE ASSESSMENT IS ON ACCOUNT OF EXCESS CANE PRICE PAID BY THE ASSESSEE TO THE MEMBERS AND NON-MEMBERS. AO IN THE R EASSESSMENT ORDER HAS ALSO NOTED ABOUT HIS PERUSAL OF THE ASSESSME NT FOLDER WHEREIN IN THE OFFICE NOTE, IT IS NOTED THAT THE AO AFTER CONSIDER ING THE SUBMISSION OF ASSESSEE MADE NO ADDITION ON ACCOUNT OF EXCESS CANE PR ICE IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THE SECOND REASO N NOTED BY THE AO FOR REOPENING WAS THAT LD.CIT(A) IN THE CASE OF SAHAKA R MAHARSHI BHAUSAHEB THORAT SSK LTD., HAD CONFIRMED THE DISALLOWAN CE OF EXCESS SUGAR CANE PRICE OVER AND ABOVE THE SMP PAID BY THE A SSESSEE BUT NO SUCH DISALLOWANCE WAS MADE BY THE AO IN ASSESSEES CASE . AO WAS THEREFORE OF THE VIEW THAT THE INCOME OF THE ASSESSEE HA S BEEN UNDER ASSESSED AND THEREFORE SOUGHT RE-OPENING. WE ARE O F THE VIEW THAT ON THE ISSUE OF THE PAYMENT OF EXCESS CANE PRICE PAID BY AS SESSEE TO MEMBERS AND NON-MEMBERS, WHILE FRAMING THE ORIGINAL ASSESS MENT ORDER AO HAD CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND N O ADDITION WAS MADE AS IS EVIDENT FROM THE OFFICE NOTE WHICH FINDS MENTION IN THE RE- 9 ASSESSMENT ORDER. IN SUCH A SITUATION, WE FIND FORCE IN T HE CONTENTION OF THE LD.A.R. THAT THE IMPUGNED NOTICE HAS BEEN OCCASIONED BY CHANGE OF OPINION. 11. AS FAR AS THE 2 ND REASON FOR RE-OPENING NAMELY THAT LD.CIT(A) HAD CONFIRMED THE DISALLOWANCE OF EXCESS CANE PRICE IN THE CASE OF SAHAKAR MAHARSHI BHAUSAHEB THORAT SSK LTD., BUT IN THE ASSESS EES CASE, AO HAD NOT CONSIDERED THE DECISION OF LD.CIT(A) IN CASE OF SAHAKAR MAHARSH I BHAUSAHEB THORAT SSK (SUPRA) WHILE ALLOWING THE EXPENDITUR E IN ASSESSEES HAND, WE FIND FORCE IN THE LD.A.R.S SUBMISSION TH AT IT IS BASED ON BORROWED SATISFACTION. ON THE ISSUE OF BORROWED SATISFACTION, WE FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF S HREE CHALTHAN VIBHAG KHAND (SUPRA) HAS HELD THAT WHEN THE REOPENING IS ON THE BASIS OF THE ORDER PASSED BY LD.CIT(A) IN THE CASE OF SOME OTHE R ASSESSEE, THE SATISFACTION OF THE AO AND FORMATION OF OPINION CAN BE SAID T O BE A BORROWED SATISFACTION FROM ANOTHER OFFICER AND SUCH BORROW ED SATISFACTION IN THE ABSENCE OF ANY APPLICATION OF MIND DO NO T CONSTITUTE VALID REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASS ESSMENT. THE RELEVANT OBSERVATION OF HIGH COURT ARE AS UNDER : [9.3] AT THIS STAGE IT IS REQUIRED TO BE NOTED THA T IN SOME OF THE CASES THE ASSESSING OFFICER HAS FORMED AN OPINION ON THE BASI S OF THE ORDER PASSED BY THE LEARNED CIT (APPEALS) WHICH WERE PURSUANT TO THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF SHRI SATPUDA TAPI PARI SHAR SSK LTD. (SUPRA). HOWEVER, IT IS REQUIRED TO BE NOTED THAT ON THE BAS IS OF THE ORDER PASSED BY THE LEARNED CIT(APPEALS) IN THE CASE OF SOME OTHER ASSESSEE THE SATISFACTION OF THE ASSESSING OFFICER AND FORMATION OF OPINION IN THE CASE OF PRESENT ASSESSEE CANNOT BE SUSTAINED AND THE SAME C AN BE SAID TO BE A BORROWED SATISFACTION FROM ANOTHER OFFICER. SUCH BO RROWED SATISFACTION IN ABSENCE OF ANY APPLICATION OF MIND AND ANY REAL FIN DING IN THE CASE OF THE ASSESSEE DO NOT CONSTITUTE VALID REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. UNDER THE CIRCUMSTANCES ON THE AFORESAID GROUND ALSO THE IMPUGNED REASSESSMENT PROCEEDINGS WITHIN 4 YEARS AND BEYOND 4 YEARS DESERVES TO BE QUASHED AND SET ASIDE. 12. WE FURTHER FIND THAT AO IN THE RE-ASSESSMENT PROCEE DINGS HAS CONCLUDED THAT THE ADDITIONAL PAYMENT BY THE ASSESSEE SUGAR FACTO RY OVER AND ABOVE THE STATUTORY MINIMUM PRICE WAS DIVERSION OF PROFITS AND 10 THEREFORE WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE U/S 37 OF THE ACT. WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF SHREE CHALTHAN VIBHAG KHAND VS. DCIT (SUPR A). THE HONBLE GUJARAT HIGH COURT HAS OBSERVED THAT MERE PA YMENT OF ANY AMOUNT OF CANE PRICE / PURCHASE PRICE IN EXCESS OF SAP/ SMP PER SE CANNOT SAID TO BE DISTRIBUTION OF PROFITS. IT HAS FURTHER N OTED THAT THE DETAILED ENQUIRY IS REQUIRED TO BE CONDUCTED BY THE AO T O COME TO THE AFORESAID CONCLUSION. THE RELEVANT OBSERVATIONS OF HONBLE HIGH COURT READS AS UNDER : [ 9.2] EVEN OTHERWISE IT IS REQUIRED TO BE NOTED THAT THE REASONS TO BELIEVE MUST NECESSARILY SHOW, INDICATE AND COMMUNICATE WHY AND ON WHAT GROUNDS / CAUSE ANY INCOME HAS ESCAPED ASSESSMENT. REASONS RECORDED MUST BE GERMANE, PRUDENT AND DISCLOSE PRIMA FACIE BE LIEF THAT INCOME HAS ESCAPED ASSESSMENT. EVEN FOR FORMATION OF THE OPINI ON AND/OR REASON TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT, THE RE MUST BE SOME TANGIBLE NEW MATERIAL AVAILABLE WITH THE ASSESSING OFFICER ON THE BASIS OF WHICH THE REASSESSMENT PROCEEDINGS ARE PERMISSIBLE. IN THE PRESENT CASE AS SUCH EXCEPT THE ALLEGATION THAT CANE PRICE / PRI CE HAS BEEN PAID TO THE CANE GROWERS MORE THAN THE PURCHASE PRICE DETERMINE D / DECLARED BY THE GOVERNMENT UNDER THE CONTROL ORDER AND THEREFORE, T HE DIFFERENCE BETWEEN THE SAME IS DISTRIBUTING THE PROFITS AND THEREFORE, THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT. HOWEVER, MERE PAYMENT OF CA NE PRICE PAID IN EXCESS TO THE SMP CANNOT BY IPSO FACTO AND/OR PER S E CAN BE SAID TO BE DISTRIBUTING THE PROFITS. THERE MUST BE TANGIBLE MA TERIAL AVAILABLE WITH THE ASSESSING OFFICER, SUCH AS THE AMOUNT OR CANE PRICE PAID TO THE CANE GROWERS IN EXCESS TO THE SMP EITHER IS EXORBITANT O R TOO EXCESSIVE AND IS NOT JUSTIFIABLE AT ALL AND ON THE BASIS OF THE MATE RIAL AVAILABLE WITH THE ASSESSING OFFICER WITH RESPECT TO THE CANE PRICE PA ID BY OTHER SOCIETIES IT IS FOUND THAT AMOUNT OF CANE PRICE PAID BY A PARTICULA R ASSESSEE/COOPERATIVE SOCIETY IS NOT JUSTIFIABLE AT ALL, AS EITHER IT IS EXORBITANT AND/OR UNREASONABLE, THEN AND THEN ONLY IT CAN BE SAID THA T SUCH EXCESS PAYMENT OF CANE PRICE IS NOTHING BUT DISTRIBUTING THE PROFI TS AND/OR PASSING OF THE PROFITS. HOWEVER, FOR THAT AND FOR REOPENING OF THE ASSESSMENT ON THE AFORESAID GROUND, THERE MUST BE SOME TANGIBLE MATER IAL AVAILABLE WITH THE ASSESSING OFFICER TO HAVE A REASONABLE BELIEF AND/O R FORM SUCH AN OPINION AND IN THAT CASE ONLY THE REASSESSMENT IS PERMISSIB LE. AT THIS STAGE IT IS REQUIRED TO BE NOTED THAT AS SU CH THE SMP DECLARED BY THE GOVERNMENT, DECLARED UNDER THE CONTROL ORDER IS AS SUCH IN THE LARGER INTEREST OF THE CANE GROWERS AND SO AS TO SEE THAT THE CANE GROWERS ARE NOT EXPLOITED AND THEREFORE, IT IS MANDATED THAT THE SU GAR COOPERATIVE SOCIETIES TO PAY THE PURCHASE PRICE OF THE CANE NOT LESS THAN THE SMP DECLARED BY THE GOVERNMENT. UNDER THE CONTROL ORDER AS SUCH THE RE IS NO RESTRICTION AND/OR BAN NOT TO PAY MORE AMOUNT THAN THE SMP DECL ARED. EVEN IN THE CASE OF SHRI SATPUDA TAPI PARISHAR SSK LTD. (SUPRA) , THE HONBLE SUPREME COURT HAS OBSERVED THAT IN DECIDING THE QUESTIONS W HETHER THE DIFFERENTIAL PAYMENT MADE BY THE ASSESSEE TO THE CANE GROWERS AF TER THE CLOSE OF THE FINANCIAL YEAR OR AFTER THE BALANCE-SHEET DATE WOUL D CONSTITUTE AN EXPENDITURE UNDER SECTION 37 OF THE ACT AND WHETHER SUCH DIFFERENTIAL PAYMENT WOULD, APPLYING THE REAL INCOME THEORY, CON STITUTE AN EXPENDITURE OR DISTRIBUTION OF PROFITS, THE ASSESSING OFFICER I S REQUIRED TO TAKE INTO 11 ACCOUNT THE MANNER IN WHICH THE BUSINESS WORKS, RES OLUTIONS OF THE STATE GOVERNMENT, THE MODALITIES AND THE MANNER IN WHICH SAP AND SMP ARE DECIDED, THE TIMING DIFFERENCE WHICH WILL ARISE ON A CCOUNT OF THE DIFFERENCE IN THE ACCOUNTING YEARS ETC. THEREFORE, WHILE CONSI DERING THE AFORESAID QUESTION, NUMBER OF QUESTIONS ARE REQUIRED TO BE EX AMINED BY THE ASSESSING OFFICER, BEFORE EVEN FORMING AN OPINION A ND/OR A REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. MERE PAYMENT OF ANY AMOUNT OF CANE PRICE / PURCHASE PRIC E IN EXCESS TO SAP / SMP PER SE CANNOT BE SAID TO BE DISTRIBUTION OF PRO FITS. FOR WHICH A DETAILED INQUIRY IS REQUIRED TO BE CONDUCTED BY THE ASSESSING OFFICER. IN THE PRESENT CASE NO SUCH INQUIRY HAS BEEN DONE AND/OR C ONDUCTED BY THE ASSESSING OFFICER BEFORE HAVING A REASONABLE BELIEF AND/OR FORMING AN OPINION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT ON THE AFORESAID GROUND. [9.4] AT THIS STAGE EVEN THE PROVISIONS OF SUGARCAN E CONTROL ORDER, 1966 ARE ALSO REQUIRED TO BE REFERRED TO. CLAUSE 3 PROVI DES FOR MINIMUM PRICE OF SUGARCANE PAYABLE BY THE PRODUCER OF THE SUGAR AND IT PROVIDES THAT THE CENTRAL GOVERNMENT MAY, AFTER CONSULTATION WITH SUCH AUTHORITIES, BODIES OR ASSOCIATIONS AS IT MAY DEEM FIT, BY NOTIFICATION IN THE OFFICIAL GAZETTE, FROM TIME TO TIME, FIX THE MINIMUM PRICE OF SUGARCA NE TO BE PAID BY PRODUCERS OF SUGAR OR THEIR AGENTS FOR THE SUGARCAN E PURCHASED BY THEM, HAVING REGARD TO (A) THE COST OF PRODUCTION OF SUGA RCANE; (B) THE RETURN TO THE GROWER FROM ALTERNATIVE CROPS AND THE GENERAL T REND OF PRICES OF AGRICULTURAL COMMODITIES; (C) THE AVAILABILITY OF S UGAR TO THE CONSUMER AT A FAIR PRICE; (D) THE PRICE AT WHICH SUGAR PRODUCED F ROM SUGARCANE IS SOLD BY PRODUCERS OF SUGAR; AND (E) THE RECOVERY OF SUGAR F ROM SUGARCANE. IT IS ALSO REQUIRED TO BE NOTED THAT EVEN THE CONTROL ORDER PR OVIDES FOR ADDITIONAL PRICE FOR SUGARCANE PURCHASED AND IT ALSO FURTHER P ROVIDES THAT NO ADDITIONAL PRICE DETERMINED UNDER SUB-CLAUSE (2) OR SUB-CLAUSE (3) OF SECTION 5A SHALL BECOME PAYABLE BY A PRODUCER OF SU GAR WHO PAYS A PRICE HIGHER THAN THE MINIMUM SUGARCANE PRICE FIXED UNDER CLAUSE (3) TO THE SUGARCANE GROWERS, PROVIDED THAT THE PRICE SO PAID SHALL IN NO CASE BE LESS THAN THE TOTAL PRICE COMPRISING THE MINIMUM SUGARCAN E PRICE FIXED UNDER CLAUSE (3) AND THE ADDITIONAL PRICE DETERMINED UNDE R SUB-CLAUSE (2) OR SUB- CLAUSE (3) AS THE CASE MAY BE OF CLAUSE 5A. THEREFO RE, EVEN IN THE CONTROL ORDER ITSELF THERE IS A REFERENCE TO THE ADDITIONAL PURCHASE PRICE WHICH CAN BE MORE THAN THE PURCHASE PRICE FIXED UNDER CLAUSE (3). HOWEVER, AS OBSERVED HEREINABOVE, IN A GIVEN CASE AFTER HOLDING INQUIRY IF IT IS FOUND THAT THE PURCHASE PRICE PAID IN EXCESS TO THE SMP I S SO EXORBITANT AND/OR UNREASONABLE IT CAN BE SAID TO BE DISTRIBUTING THE PROFITS AND/OR PASSING OF THE PROFITS. HOWEVER, FOR THAT PURPOSE THERE MUST B E SOME FURTHER INQUIRY AND/OR TANGIBLE MATERIAL WITH THE ASSESSING OFFICER . [9.5] UNDER THE CIRCUMSTANCES, THE IMPUGNED NOTICES UNDER SECTION 148 OF THE ACT TO REOPEN THE PROCEEDINGS BEYOND 4 YEARS AN D WITHIN 4 YEARS ON THE AFORESAID GROUND I.E. ON THE GROUND THAT THE PA YMENT OF PURCHASE PRICE IN EXCESS TO THE SMP HAS ESCAPED THE ASSESSMENT CAN NOT BE SUSTAINED AND THE SAME DESERVES TO BE QUASHED AND SET ASIDE. 13. IN THE PRESENT CASE, WE FIND THAT NO INDEPENDENT INQ UIRY HAS BEEN CONDUCTED BY THE AO, IN LINE WITH THE GUIDELINES OF HONBLE G UJARAT HIGH COURT IN THE CASE OF SHREE CHALTHAN VIBHAG KHAND (SUPRA) TO ARRIVE AT A CONCLUSION THAT THE EXCESS PAYMENT OF CANE PRICE IS DISTR IBUTION OF 12 PROFITS. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT CITED HEREINABOVE, W E ARE OF THE VIEW THAT IN THE PRESENT CASE, NOTICE FOR RE-OPENING THE ASSESSMENT U/S 148 OF THE ACT IS ON ACCOUNT OF CHANGE OF OPINION BY THE AO WHICH IS NOT PERMISSIBLE AS PER LAW. WE ARE THEREFORE OF THE VIEW THAT THE IMPUGNED NOTICE CANNOT BE SUSTAINED AND THE SAME DESERVES TO B E QUASHED AND SET ASIDE. WE THEREFORE QUASH THE IMPUGNED REASSESSMENT PRO CEEDINGS FOR A.Y. 2006-2007 ARE THUS SET ASIDE THE SAME. SINCE WE HAV E HEREINABOVE SET ASIDE THE ASSESSMENT FRAMED U/S 143(3) R.W.S 147 OF TH E ACT AND HELD IT TO BE VOID, BAD IN LAW AND THEREFORE THE ISSUE ON MERIT S HAVE BEEN RENDERED ACADEMIC AND REQUIRES NO ADJUDICATION. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED. 14. AS FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, SINC E WE HAVE HEREIN ABOVE HELD THE RE-OPENING OF ASSESSMENT TO BE V OID AND BAD IN LAW, THE GROUNDS RAISED BY THE REVENUE ARE RENDERED AC ADEMIC AND REQUIRES NO ADJUDICATION. THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 15. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED AN D THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 24 TH DAY OF OCTOBER, 2019. SD/- SD/- ( S.S. VISWANETHRA RAVI) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 24 TH OCTOBER, 2019. YAMINI 13 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, PUNE. PR. CIT-1, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.