JCIT(OSD), Circle -4, Kolkata, Kolkata V. M/s Norben Tea & Exports Ltd., Kolkata

ITA 592/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70385 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1998-1999
• Appeal Filed On: 13-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILI P KR RAKSHIT
• Assessee Lawyers: P K SAHA FCA PER SHRI
• Keywords: Rectification of order
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI PRAMOD KUMAR, A.M. & SHRI MAHAVIR SIN GH, J.M. ] I.T.A. NOS. 524 & 592/KOL/2012 : ASSESSMENT YEAR : 1998-99 J.C.I.T.(OSD), CIRCLE-4, KOLKATA VS- M/S. NORBEN TEA & EXPORT LTD. (PAN:AAACN 9786H) ( APPELLANT ) ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 11.07.2013 DATE OF PRONOUNCING THE ORDER : 27.08.2013 APPEARANCES : FOR THE APPELLANT : SHRI DILI P KR. RAKSHIT, JCIT, SR.DR : FOR THE RESPONDENT : SHRI P.K. SAHA, FCA O R D E R PER SHRI PRAMOD KUMAR 1. BY WAY OF THESE APPEALS, THE ASSESSING OFFICER H AS CHALLENGED CORRECTNESS OF LEARNED CIT(A)S CONSOLIDATED ORDER DATED 8 TH DECEMBER, 2011, IN THE MATTER OF RECTIFICATION PROCEEDING U/S. 154 R.W.S. 143(3) OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 1998-99. AS BOTH OF THESE APPEALS C ALL INTO QUESTION CORRECTNESS OF THE SAME CIT(A)S CONSOLIDATED ORDER AND INVOLVE TH E SAME ISSUE, BOTH OF THESE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOL IDATED ORDER. 2. THE COMMON GRIEVANCE RAISED BY THE REVENUE IN O NE OF THE APPEALS IS AS FOLLOWS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE A.O. TO TAKE RS.29,42,802/- BEING PROFIT ON SALE OF BOUGHT TEA AS A PART OF COMPOSITE INCOME FOR APPLYI NG RULE-8 WITHOUT APPRECIATING THE FACT THAT PROFIT ON SALE OF BOUGHT TEA DOES NOT COME WITHIN THE COMPOSITE INCOME AS THE SAID PROFIT DOES NOT RE LATE TO THE ACTIVITY OF GROWING AND MANUFACTURING OF TEA, WHICH IS JUST A T RADING ACTIVITY WHEREFROM THE ASSESSEE GETS PROFIT. 2 I.T.A. NOS.524 & 592/KOL/12 M/S. NORBEN TEA & EXPORT A. Y.: 1998-99 3. WE WILL FIRST TAKE UP THE APPEAL IN ITA NO.592/K OL/2012. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE COMPANY IS, INTER ALIA , ENGAGED IN THE BUSINESS OF GROWING, MANUFACTURING AND TRADI NG IN TEA. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER, WITH REGARD TO THE CLAIM OF RS.29,42,802/- BEING IN THE NATURE OF INCOME FROM G ROWING TEA I.E. AGRICULTURAL ACTIVITY, OBSERVED AS FOLLOWS:- DISCUSSION ON CLAIM OF AGRICULTURAL INCOME : THE ASSESSEE IN ITS COMPUTATION OF INCOME DEDUCTED AGRICULTURAL INCOME OF RS.29,42,802/- AS PER INCOME EXPENDITURE STATEMENT FOR AGRICULTURAL ACTIVITY FILED. THIS CANNOT BE ALLOWED AS PER RULE 8 AND WHICH WILL BE CALCULATED @60% AFTER ARRIVING AT COMPUTATI ON OF COMPOSITE INCOME WHICH IS THE CORRECT METHOD OF COMPUTATION IN TEA M ANUFACTURING BUSINESS. 4. WHILE THE ASSESSING OFFICER REDUCED THE ABOVE AM OUNT FROM PROFIT AS PER PROFIT AND LOSS ACCOUNT, HE DID NOT MAKE ANY FURTHE R ADJUSTMENT IN RESPECT OF THE SAID RS.29,42,802/-. 5. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFIC ER VIDE ORDER DATED 16.09.2003, ADDED BACK RS.29,42,802/- TO THE BUSINE SS INCOME OF THE ASSESSEE AND TREATED THE SAME AS PROFIT ON SALE OF BOUGHT TEA. EVEN THOUGH THE ORDER WAS PASSED ON 16.9.2003, IT WAS EVENTUALLY SERVED ON TH E ASSESSEE, AS STATED IN THE UNCONTROVERTED STATEMENT OF FACTS FILED BEFORE TH E CIT(A), ON 15.5.2009. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE CIT(A). IT WAS SUBMITTED THAT THE AMOUNT OF RS.29,42,802/- REFLECT ING THE GROWING AND MANUFACTURING OF TEA TAKEN PLACE BY THE APPELLANT, THE INCOME OF WHICH IS COMPOSITE NO DOUBT, PROCEEDING TO TREAT THE ENTIRE INCOME OF RS.29,42,802/- SUBJECT TO CENTRAL INCOME-TAX WHICH IS QUITE UNJUST IFIED. THE CONTENTION OF THE ASSESSEE THUS WAS THAT ONLY 40% OF THIS AMOUNT CAN BE TAKEN AS CENTRAL INCOME WHILE THE BALANCE IS TO BE TAKEN AS AGRICULTURAL IN COME SUBJECT TO AGRICULTURAL 3 I.T.A. NOS.524 & 592/KOL/12 M/S. NORBEN TEA & EXPORT A. Y.: 1998-99 INCOME TAX. BASED ON THESE AND OTHER ARGUMENTS ADVA NCED BY THE ASSESSEE, LEARNED CIT(A) UPHELD THE GRIEVANCE OF THE ASSESSEE AND OBS ERVED AS FOLLOWS:- 4. I HAVE CAREFULLY CONSIDERED THE FACTS NARRATED BY APPELLANT AND ORDER PASSED BY A.O. U/S. 143(3) AND U/S.154. IT IS SEEN THAT WHILE PASSING ORDER U/S.143(3), A.O. HAS DETERMINED THE RATIO AS UNDER: 'IN ITS EXPLANATION UNDER THE HEAD FURTHER EXPLAN ATION AND CLAIM UNDER LT. ACT.' IT IS STATED THAT A MAJOR PART OF T EA MANUFACTURING WAS OUT OF BOUGHT TEA LEAVES AND FROM SMALL QUANTITY OF OWN TEA LEAVES WERE CULTIVATED AND USED IN MANUFACTURING ACTIVITIE S. THE RATIO OF BOUGHT TEA LEAVES AND OWN TEA LEAVES WERE 79.59% AN D 20.42% RESPECTIVELY. THEREFORE, AS EXPLAINED, MAIN ACTIVIT Y WAS BASED ON BOUGHT TEA LEAVES. IN VIEW OF THE ABOVE, PROFIT, FR OM BOUGHT TEA HAS BEEN TAKEN AT 79.58% OF TAXABLE PROFIT AND THE SAME HAS BEEN DEDUCTED TO ARRIVE AT COMPOSITE PROFIT AND THEREAFT ER PROPORTIONATE PROFIT OF 79.58% CALCULATED AS PER ABOVE DISCUSSION TO BE INCLUDED IN CENTRAL INCOME VIDE ANNEXURE-I ENCLOSED.' 4.1. IT WAS POINTED OUT THAT THE A.O. HAS DECIDED T HE ABOVE RATIO IN ORDER TO DECIDE THE TAXABLE INCOME IN VIEW OF RULE 8. BUT WH ILE CALCULATING THE TAXABLE INCOME HE HAS NOT PROPERLY APPLIED THE RATI O AS DECIDED AND DISCUSSED IN ASSESSMENT ORDER. 4.2. THE APPELLANT IS TEA COMPANY AND MAJOR PART OF TEA MANUFACTURED WAS OUT OF BOUGHT TEA LEAVES AND SMALL QUANTITY OF OWN TEA LEAVES WERE CULTIVATED AND USED IN MANUFACTURING ACTIVITY. THE RATIO LAID DOWN BY ASSESSING OFFICER WHILE PASSING ORDER U/S. 143(3) O F THE I. T. ACT., 1961 IS BASED ON THE RATIO OF BOUGHT TEA AND CULTIVATED TEA . THE RATIO IS THEREFORE, BASED ON THE FIGURES AVAILABLE IN THE FURTHER EXPLA NATION AND CLAIMED UNDER I. T. ACT., 1961 IN THE ANNUAL REPORT FOR CURRENT Y EAR FILED BY THE APPELLANT. A.O. HAS REJECTED 154 APPLICATION MERELY ON THE GRO UND THAT APPLICATION IS NOT WITHIN TIME. BUT FACT WHICH REMAINS IS THAT ORD ER U/S. 143(3) IS MODIFIED, FIVE TO SIX TIMES DURING THIS PERIOD, ON VARIOUS OC CASIONS. THE LATEST ORDER STATED TO BE PASSED BY A.O. U/S. 254/251/154/143(3) IS DATED 27.10.2008 AND THEREFORE, AS THE ORIGINAL ORDER U/S. 143(3) DA TED 21.03.2001 IS MERGED WITH THE ORDER PASSED ON 27.10.2008. THE TIME LIMIT FOR RECTIFICATION IS STILL AVAILABLE TO A.O. A.O. WHILE PASSING ORDER U/S. 154 HAS NOT GIVEN ANY REASON OR HAS NOT CONTRAVENED THE FACTS NARRATED BY APPELLANT IN APPLICATION U/S. 154. THE FACT WHICH REMAINS IS THAT APPELLANT IS TEA MANUFACTURING COMPANY AND THEREFORE, RULE 8 IS THE ONLY WAY TO DE TERMINE TAXABLE INCOME. AND THEREFORE, ANY METHOD WHAT SO EVER, ADOPTED BY A.O. TO CALCULATE 4 I.T.A. NOS.524 & 592/KOL/12 M/S. NORBEN TEA & EXPORT A. Y.: 1998-99 TAXABLE INCOME HAS TO BE AS PROVISION OF LAW. I HAV E PERUSED ORDER PASSED BY A.O. U/S. 143(3) IN WHICH HE HAS REDUCED 'AS INC OME FROM BOUGHT TEA AS DISCUSSED BUT CLAIMED AS AGRICULTURAL INCOME ON PAG E NO.4 OF ASSESSMENT ORDER DATED 21.03.2001 AT RS.29,42,802/-. THIS INC OME, @100% WAS BROUGHT IN BY A.O. WHILE PASSING ORDER U/S.154 OF T HE I.T.ACT, 1961 ON 16.09.2003. THE A.O. IS DIRECTED THAT THE INCOME OF RS.29,42,802/- SHOULD BE TAKEN AS PART OF COMPOSITE INCOME FOR APPLYING R ULE 8. FURTHER, THE APPELLANTS COMPOSITE INCOME WILL BE COMPRISED 79.5 8% OF 100% CENTRAL INCOME (BOUGHT TEA LEAVES) AND BALANCE 20.42% (OWN TEA LEAVES) WILL BE SUBJECT TO RULE 8. 6. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIALS ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 8. WE HAVE NOTED THAT THERE IS NO FINDING ANYWHERE IN THE ASSESSMENT ORDER TO SUPPORT AOS STAND THAT RS.29,42,802/- REPRESENTS T HE INCOME FROM TRADING OF TEA. WE HAVE ALSO NOTED THAT THERE IS A CATEGORICAL MENT ION OF ASSESSEES CLAIM ABOUT THE SAID PROFIT BEING IN THE NATURE OF AGRICULTURAL PROFITS INASMUCH TEA WAS GROWN BY THE ASSESSEE, AND, THIS CLAIM REMAINS UNCONTROVE RTED. ONCE THE INCOME IS FROM THE TEA GROWN BY THE ASSESSEE, AS IS THE SETTLED LE GAL POSITION IN VIEW OF RULE 8 OF THE INCOME TAX RULES 1962, ONLY 40% OF THE SAME CAN BE TAKEN AS NON- AGRICULTURAL INCOME. THE CIT(A) HAVING DONE SO, IN OUR CONSIDERED VIEW, THERE IS NO NEED TO INTERFERE IN THE MATTER. IT IS ANYWAY EL EMENTARY THAT WHAT CAN BE RECTIFIED U/S.154 IS A MISTAKE WHICH IS GLARING, UN AMBIGUOUS AND INCAPABLE OF TWO VIEWS BEING TAKEN. THEREFORE, PROCEEDING ON THE BAS IS THAT INCOME OF RS.29,42,802/- WAS TRADING INCOME, FOR WHICH NO SUP PORT IS AVAILABLE FROM MATERIAL ON RECORD, WOULD NOT BE POSSIBLE UNDER THE INHERENTLY LIMITED SCOPE OF SECTION 154, EVEN IF THAT BE SO. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) AND YET NO MATERIAL WAS BROUGHT ON RECORD TO SUPPORT SUCH A FINDING. IN THIS VIEW OF THE MATTER, IN VIEW OF THE ABOVE DISCUSSION S AND BEARING IN MIND ENTIRETY 5 I.T.A. NOS.524 & 592/KOL/12 M/S. NORBEN TEA & EXPORT A. Y.: 1998-99 OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 9. ITA NO.592/KOL/12 IS THUS DISMISSED. 10. THERE IS ONE MORE APPEAL IN ITA NO.524/KOL/2012 BEFORE US AND THAT RELATES TO A SUBSEQUENT RECTIFICATION ORDER DATED 27.10.200 8 PASSED BY THE ASSESSING OFFICER. HOWEVER, ONCE THE ORDER DATED 16.9.2003 IT SELF IS QUASHED, THIS APPEAL BECOMES INFRUCTUOUS. 11 IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 27/8/13. SD/- SD/- (MAHAVIR SINGH) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH AUGUST, 2013 COPY OF THE ORDER FORWARDED TO: 1. ASSESSEE M/S. NORBEN TEA & EXPORT LTD., KOLKATA 700 001 2 DEPARTMENT JCIT(OSD), CIRCLE-4, KOLKATA 3. THE CIT(A), 4. CIT, 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR(SR.P.S.) 6 I.T.A. NOS.524 & 592/KOL/12 M/S. NORBEN TEA & EXPORT A. Y.: 1998-99