DCIT, New Delhi V. M/s. Indo Gulf Industries Ltd., New Delhi

ITA 6299/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97609 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA SINGH
• Assessee Lawyers: S AN JAY K AGARWAL
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SMT. DIVA SINGH , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 6299 /DEL/20 13 ASSESSMENT YEAR: 2009 - 10 DCIT, CIRCLE - 11(1), VS. INDO GULF INDUSTRIES LTD., ROOM NO. 405, FLAT NO. 213, RECTANGLE ONE, C.R. BUILDING, NEW DELHI SAKET DISTRICT CENTRE, SAKET NEW DELHI (PAN: AAACI0120L ) (APPELLANT) (RESPONDENT) APPELLANT BY : MS. PRIYANKA SINGH, SR. DR RESPONDENT BY : SH. S AN JAY K. AGARWAL, ADV. DATE OF HEARING: 13.10.2015 DATE OF PRONOUNCEMENT: 28.10.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), DATED 06.09.2013 PASSED FOR THE ASSESSMENT YEAR 2009 - 10 . THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN ADMITTING THE ADDIT IONAL EVIDENCES UNDER RULE 46A WITHOUT PROVIDING OPPORTUNITY TO THE AO FOR EXAMINATION OF THE SAME. II. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 13,65,553/ - MADE BY DISALLOWING EXPENSES RELATI NG TO EARNING OF EXEMPTED INCOME. III. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2 ITA NO. 6299/DEL/2013 AY : 2009 - 10 IT IS PRAYE D THAT THE ORDER OF THE LD. CIT( A) - XV, NEW DELHI BEING CONTRARY TO THE FACTS ON RECORD AND THE SETTL ED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RESPONDENT ASSESSEE IS A PUBLIC LIMITED COMPANY DULY INCORPORATED UNDER THE PROVISION OF THE COMPANIES ACT, 1956. IT IS ENGAGED I N THE BUSINESS OF MANUFACTURING AND SALE OF SUGAR AND ITS BYE PRODUCTS . THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 WAS FILED ON 27 TH SEPTEMBER, 2009 DECLARING A LOSS OF RS. 13,34,91,356/ - . THE RETURN OF INCOME WAS REVISED ON 22MD DECEMBER, 2007 A T A LOSS OF RS. 6,09,93,179/ - . SUBSEQUENTLY, THE CASE WAS TAKEN FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) VIDE ORDER DATED 07.12.2011 , AFTER MAKING DISALLOWANCE OF RS. 13 ,65,553/ - UNDER THE PROVISIONS OF SECTION 14A IN RESPECT OF THE AGRICULTURAL INCOME OF RS. 6,18,125/ - . BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 6 TH SEPTEMBER, 2013 ALLOWED THE APPEAL IN PARA 6 TH OF HIS ORDER, WHICH READS AS ORDER: 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE SUBMISSION MADE BY THE APPELLANT AND APPLICABLE LAW IN THIS REGARD. ON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, I FIND THAT THE LD. AO MA DE THE DISALLOWANCE IN RESPECT OF EXPENSES DEBITED BY THE APPELLANT IN THE SUGAR DIVISION IN PROPORTION TO THE INCOME FROM FARM OPERATIONS TO THE INCOME FROM SUGAR DIVISION. HOWEVER, IN DOING SO, THE LD. AO. HAS DISREGARDED THE FACT THAT THE APPELLANT HAD MAINTAINED SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF FARM UNIT AND DETAILS OF BILLS/VOUCHERS IN RESPECT OF VARIOUS EXPENSES, DIRECTLY OR INDIRECTLY INCURRED FOR THAT PURPOSE, WERE ALSO PRODUCED BEFORE THE LD. AD. UNDER THE CIRCUMSTANCES, THERE WAS NO PRUDEN CE IN ATTRIBUTING THE EXPENSES OF SUGAR DIVISION TO A SMALL FARM UNIT, WHOSE MAIN OBJECTIVE WAS TO SUPPLY CANE SEEDS TO FARMERS. THE LD. AO 3 ITA NO. 6299/DEL/2013 AY : 2009 - 10 DISREGARDED THE FACT THAT THE ACCOUNTS OF THE APPELLANT WERE DULY AUDITED BY THE CA. AND NO ADVERSE OBSERVATION WAS DRAWN IN THE AUDIT REPORT. FURTHER, I FIND THAT THE LD. AO HAS MADE THE DISALLOWANCE IN RESPECT OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME IN THE NATURE OF AGRICULTURAL INCOME. HOWEVER, HE HAS ADOPTED HIS OWN METHOD EVEN THOUGH FOR THE CURRENT YEAR, PR OVISIONS OF RULE 80 ARE THE ONLY PRESCRIBED METHOD AVAILABLE FOR MAKING SUCH A DISALLOWANCE, WHERE THE AO IS NOT 'SATISFIED' WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF THE EXPENSES INCURRED FOR EARNING EXEMPT INCOME HAVING REGARDS TO ACCOUNTS. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS MAXOPP INVESTMENT LTD. (SUPRA) HELD THAT SUCH A LACK OF SATISFACTION OF THE LD. AO SHOULD BE ON COGENT GROUND. IN THE CASE OF THE APPELLANT, DETAILS IN RESPECT OF THE EXPENSES/INCOME OF FARM OPERATIO NS WERE FURNISHED BEFORE THE AO, WHO HAD THE OPPORTUNITY TO EXAMINE THE AUDIT REPORT AS WELL. HOWEVER, NO SPECIFIC ADVERSE FINDING WITH REGARD TO THE CLAIM OF THE APPELLANT WAS MADE BY THE LD. AO. THE LD. AO DID NOT IDENTIFY ANY SINGLE EXPENSES RELATING TO FORM OPERATION THAT WAY HAVE BEEN BOOKED AGAINST SUGAR MILL'S 'BUSINESS INCOME'. UNDER THE CIRCUMSTANCES, EVEN THE PROVISIONS OF RULE 80 COULD NOT HAVE BEEN APPLIED IN THE CASE OF THE APPELLANT. I ALSO FIND THAT THOUGH THE LD. AO HAS DISTURBED THE BOOK RE SULTS OF THE APPELLANT BY ATTRIBUTING THE EXPENSES IN CONNECTION WITH SUGAR DIVISION TO FARM DIVISION, WHOSE INCOME IS TAX EXEMPT, HE HAS NOT PREFERRED TO REJECT THE BOOKS OF ACCOUNTS AND NO BEST JUDGMENT ASSESSMENT UNDER SECTION 144 WAS MADE. THIS IS A WE LL SETTLED LAW THAT WHERE THE AO IS NOT SATISFIED WITH THE BOOK RESULTS, HE HAS TO MAKE BEST JUDGMENT ASSESSMENT UNDER SECTION 144 ON REJECTING THE BOOKS. IN VIEW OF THE ABOVE, THE IMPUGNED ASSESSMENT ORDER SUFFERS FROM SEVERE LEGAL INFIRMITY. 5.5 IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE LD. AO IS LIABLE TO BE DELETED BOTH ON LAW AND FACTS. 6. STATISTICALLY, THE APPEAL IS ALLOWED. BEING AGGRIEVED, THE REVENUE IS BEFORE US WITH THE PRESENT APPEAL. 3. WE HEARD THE RIVAL SUBMISSION AND PE RUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAD NOT RECORDED ANY SA TISFACTION AS TO HOW THE EXPENDITURE APPORTIONED BY THE ASSESSEE COMPAN Y TOWARDS AGRICULTURAL INCOME IS INCORRECT. FURTHERMORE, THE CIT(A) PASSED A VERY REASONED ORDER AND WE DO NOT 4 ITA NO. 6299/DEL/2013 AY : 2009 - 10 FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A). ACCORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 2 8 T H OCTOBER , 2015. S D / - S D / - ( DIVA SINGH ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 T H OCTOBER , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI