The Jagroan Cooperative Sugar Mills Ltd, Ludhiana V. The Asstt. Commissioner Of Income Tax, Moga

ITA 642/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0805 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-04-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR TARUNDEEP KAUR
• Keywords: Question of law; Capital receipt
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A NO. 642(ASR)/2015 ASSESSMENT YEAR: 2003-2004 THE JAGROAN CO-OPERATIVE SUGAR MILLS LTD. FEROZPUR ROAD, JAGROAN DISTRICT, LUDHIANA. PAN:AAAATO626J VS. ASSISTANT/DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-MOGA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. M.R.SHARMA (ADV.) RESPONDENT BY: DR. TARUNDEEP KAUR (DR.) DATE OF HEARING: 27.04. 2016 DATE OF PRONO UNCEMENT: 28.04.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LEARNED CIT(A), LUDHIANA, DATED 30.11.2015 FOR THE ASST. YE AR 2003-04. 2. THE ONLY GRIEVANCE RAISED IN THIS APPEAL IS AGAI NST THE ACTION OF LEARNED CIT(A) BY WHICH HE HAD CONFIRMED THE PENALT Y IMPOSED BY ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE PENA LTY ORDER ARE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY WHICH IS ENG AGED IN THE MANUFACTURING AND SALE OF SUGAR. THE CASE OF THE AS SESSEE WAS RE-OPENED U/S 148 AND AN ADDITION OF RS.19.32 CRORES WAS MADE TO THE INCOME OF ASSESSEE. THE SAID ADDITION WAS MADE BECAUSE OF THE FACT THAT ASSESSEE ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 2 HAD RECEIVED CERTAIN GRANT-IN-AID FROM GOVT. AGAINS T OUTSTANDING LOANS WHICH IT HAD TREATED AS CAPITAL WHEREAS THE ASSESSI NG OFFICER HAD TREATED SUCH AMOUNT OF GRANT-IN-AID AS REVENUE RECEIPT OF T HE ASSESSEE. THE SAID ADDITION WAS UPHELD BY ITAT, CHANDIGARH BENCH VIDE ITS ORDER DATED 24.03.2014 IN ITA NO.1068/CHD/2012. THE ASSESSING O FFICER IN VIEW OF THIS ADDITION INITIATED PENALTY U/S 271(1) (C) AND IMPOSED PENALTY OF RS.5,88,12,283/-. 4. AGGRIEVED WITH THE PENALTY ORDER THE ASSESSEE FI LED APPEAL BEFORE LEARNED CIT(A) AND SUBMITTED THAT THE AMOUNT OF RS. 19.32 CRORES WAS CAPITAL IN NATURE AND IT WAS ALSO SUBMITTED THAT TH E INTEREST OUTSTANDING TO THE TUNE OF RS.6,68,31,059/- ON THE SAID LOAN W AS ALREADY DECLARED AS INCOME OF THE ASSESSEE AS THAT PART REPRESENTED REV ENUE RECEIPT. IT WAS ALSO SUBMITTED TO LEARNED CIT(A) THAT HONBLE ITAT IN THE CASE OF GURDASPUR CO-OPERATIVE SURGAR MILLS LTD. HAD DELETE D THE PENALTY IMPOSED BY ASSESSING OFFICER UNDER SIMILAR FACTS AN D CIRCUMSTANCES AND IT WAS FURTHER SUBMITTED THAT HONBLE PUNJAB & HARY ANA HIGH COURT ALSO HAD DISMISSED THE APPEAL OF REVENUE IN THIS REGARD. HOWEVER, THE LEARNED CIT(A) DISTINGUISHED THE FACTS OF THE ASSESSEE WITH THAT OF GURDASPUR CO- OPERATIVE SUGAR MILLS AND CONFIRMED THE PENALTY BY HOLDING AS UNDER: THE FACTS IN THE CASE OF APPELLANT ARE DISTINGUISH ABLE FROM THE DECISION OF HONBLE ITAT IN THE CASE OF GURDASPUR COOP. SUGAR M ILLS LTD., VS. DEPARTMENT OF INCOME TAX AND JUDGMENT OF THE HONBL E PUNJAB AND HARYANA HIGH COURT IN THE CASE OF ITA NO.88 AND 95 OF 2012 DATED 21.01.2013 RELIED UPON BY THE APPELLANT. IN THE ABO VE REFERRED CASES, THE ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 3 APPELLANT HAD MADE DISCLOSURE OF THE RECEIPT OF GRA NT-IN-AID AS CAPITAL RECEIPT IN THE STATEMENT OF INCOME FILED WITH RETUR N OF INCOME. THIS FACT WAS NOTED BY THE HONBLE ITAT IN THEIR DECISION AND WAS TAKEN NOTE OF WHILE ALLOWING RELIEF TO THE ASSESSEE IN THAT CASE. IN TH AT CASE, ISSUE WAS REGARDING WHETHER THE RECEIPT WAS CAPITAL OR REVENU E IN NATURE. IN VIEW OF FACTS AS STATED IN EARLIER PARAS, THE A PPELLANT HAS FAILED TO MAKE FULL AND TRUE DISCLOSURE OF THE RELEVANT FA CTS IN THE RETURN OF INCOME AND IT DID NOT MENTION RECEIPT OF GRANT-IN-AID OF R S.19.32 CRORES WHICH IT WAS TREATING AS CAPITAL RECEIPT. IN THE TAX AUDIT R EPORT, AS QUOTED ABOVE, IN THE COLUMN REGARDING CAPITAL RECEIPTS, IT WAS SPECI FICALLY MENTIONED AS NIL. IN THE RETURN OF INCOME DISCLOSURE OF RECEIPT OF TH IS AMOUNT WAS NOT MADE IN ANY FORM. ONLY WHEN CONFRONTED DURING ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED THAT THE SAID AMOUNT WAS BEING TREATED AS CAPITAL RECEIPT. THUS FOR FAILURE TO MAKE FULL AND TRUE DISCLOSURE OF THE RELEVANT FACTS IN THE RETURN OF INCOME PENALTY AMOUNTING TO RS.5,88,12,28 3/- IMPOSED U/S 271(1) (C) OF THE ACT, 1961 BY THE ASSESSING OFFICE R IS CONFIRMED. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LEARNED AR EXPLAINED THE FACT S OF THE CASE AND SUBMITTED THAT ALL THE SUGAR MILLS IN CO-OPERATIVE SECTOR IN PUNJAB WERE SUFFERING LOSSES AND THEREFORE, THE PUNJAB GOVERNME NT HAD GIVEN GRANT- IN-AID TO THESE CO-OPERATIVE SOCIETIES WITH A VIEW TO CONVERTING THE NET WORTH OF THE MILLS FROM NEGATIVE TO POSITIVE. IT WA S FURTHER SUBMITTED THAT ASSESSEE HAD DULY DECLARED THE INTEREST OUTSTANDING ON THE ABOVE LOAN IN THE COMPUTATION OF INCOME AND THE PRINCIPAL PORTION WAS TAKEN DIRECTLY TO GENERAL RESERVES CONSIDERING THE SAME TO BE CAPI TAL IN NATURE. THE LEARNED AR SUBMITTED THAT ASSESSING OFFICER MADE TH E ADDITION BY HOLDING THE SAME TO BE REVENUE RECEIPT. HE FURTHER SUBMITTED THAT ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 4 LEARNED CIT(A) THOUGH NOTED THAT PENALTY IMPOSED IN SIMILAR FACTS IN CASE OF GURDASPUR CO-OPERATIVE SUGAR MILLS WAS DELETED B Y ITAT AND FURTHER BY HONBLE PUNJAB & HARYNA HIGH COURT BUT HE UPHELD THE PENALTY BY HOLDING THE FACTS DISTINGUISHABLE WHEREAS THE FACTS ARE PARI-MATERIA WITH THE CASE LAW OF GURDASPUR SUGAR MILLS. THE LEARNED AR INVITED OUR ATTENTION TO PAGE 9 OF THE CIT(A)S ORDER AND SUBMI TTED THAT LEARNED CIT(A) HAD NOTED THAT IN THE CASE OF GURDASPUR SUGA R MILLS, THE ASSESSEE HAD MADE DISCLOSURE OF RECEIPT OF GRANT-IN-AID AS C APITAL RECEIPT IN THE STATEMENT OF INCOME WHEREAS ASSESSEE HAD NOT MADE T HE FULL DISCLOSURE IN THE STATEMENT OF INCOME. IN THIS RESPECT, THE LE ARNED AR TOOK US TO ASSESSMENT ORDER AND INVITED OUR ATTENTION TO PARA 3 OF ASSESSMENT ORDER WHERE THE ASSESSING OFFICER HIMSELF HAD NOTED THAT THE GRANT OF RS.19.32 CRORES WAS TAKEN TO GENERAL RESERVES. THEREFORE, IN VIEW OF THE FINDINGS OF ASSESSING OFFICER THE LEARNED AR SUBMITTED THAT THE FINDING OF LEARNED CIT(A) THAT ASSESSEE HAD NOT DISCLOSED FULLY ARE NO T CORRECT. THE LEARNED AR FURTHER SUBMITTED THAT MOREOVER THE ISSUE OF CAP ITAL REVENUE IS A HIGHLY DEBATABLE ISSUE AND THEREFORE, PENALTY WAS N OT IMPOSSIBLE. 7. THE LEARNED DR, HOWEVER, HEAVILY RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT LEARNED CIT(A) HAS CLEARLY DISTINGUISHED THE FACTS OF THE PRESENT CASE FROM TH E FACTS OF THE GURDASPUR CO-OPERATIVE SUGAR MILLS AND THEREFORE, T HE CASE LAW OF GURDASPUR CO-OPERATIVE SUGAR MILLS CANNOT BE APPLIE D TO THE FACTS OF PRESENT CASE. ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 5 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN UN DISPUTED FACT THAT ASSESSEE HAD AN OUTSTANDING LOAN OF RS.19.32 CORES AND ALSO OUTSTANDING INTEREST LIABILITY ON THIS LOAN TO THE TUNE OF RS.6.68 CORES. ON RECEIPT OF THE GRANT-IN-AID, THE ASSESSEE DECLARED THE GRANT-IN-AID PERTAINING TO INTEREST IN ITS COMPUTATION OF INCOME AND THE REMAINING AMOUNT OF RS.19.32 CRORES REPRESENTING PRINCIPAL WA S TAKEN DIRECTLY TO GENERAL RESERVES BY TREATING THE SAME AS CAPITAL RE CEIPT. THE ASSESSING OFFICER IN PARA 3 HAS HIMSELF NOTED THAT ASSESSEE H AD TAKEN THIS AMOUNT OF RS.19.32 CRORES TO ITS GENERAL RESERVE IN THE BA LANCE SHEET. THE FINDINGS OF ASSESSING OFFICER AS CONTAINED IN PARA 3 REPRODUCED BELOW. 3. ON THE RECEIPT OF THE AFORESAID REPLY OF THE AS SESSEE, IT WAS DISCOVERED THAT THE ASSESSEE HAD BEEN GIVEN GRANT-IN-AID OF TH E TOTAL AMOUNT OF RDF LOAN ALONGWITH INTEREST AS PER LETTER NO.PSF/ALV.F. 123/89 DATED 03.01.2003 ADDRESSED TO THE ASSESSEE BY THE EXECUTI VE DIRECTOR, PUNJAB SUGARFED, CHANDIGARH WHEREIN THE ASSESSEE WAS COMMU NICATED THAT THE RDF LOANS GIVEN TO THE CO-OPERATIVE SUGAR MILLS HAS BEEN CONVERTED INTO GRANT ALONGWITH INTEREST BY THE PUNJAB RURAL DEVELO PMENT BOARD, CHANDIGARH. THE PUNJAB STATE CO-OPERATIVE BANK HAS REQUESTED THAT THE STATUS REGARDING THE MILLS AFTER THE DECISION OF IR DB BY INCORPORATING NECESSARY ENTRIES IN THEIR BOOKS OF ACCOUNTS BE INT IMATED TO THE BANK IMMEDIATELY. CONSEQUENTLY, THE ASSESSEE HAD WRITTE N OFF ITS LIABILITY ON ACCOUNT OF INTEREST OF RDF LOAN OF A SUM OF RS.6,68 ,31,059/- PERTAINING TO EARLIER YEARS UPTO 31.03.2002 AND TAKEN THE SAME AS INCOME IN THE COMPUTATION OF TOTAL INCOME. BUT AS REGARDS THE REM AINING AMOUNT OF GRANT OF RS.19.32 CRORES IT HAS SIMPLY TAKEN THIS AMOUNT TO ITS GENERAL RESERVE A/C IN THE BALANCE SHEET. ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 6 9. FROM THE ABOVE FINDINGS IT IS APPARENT THAT THE ASSESSEE HAD DULY DISCLOSED THE AMOUNT RECEIVED AS GRANT-IN-AID RELAT ING TO PRINCIPAL AMOUNT IN THE GENERAL RESERVE ACCOUNT AND THEREFORE , THE FINDINGS OF LEARNED CIT(A) THAT ASSESSEE HAD NOT DISCLOSED THE SAME IN THE STATEMENT OF INCOME ARE NOT CORRECT. WHEN THE ASSESSEE DISCLO SED THE SAME IN ITS AUDITED ACCOUNTS AND FILED THE SAME BALANCE SHEET W ITH THE REVENUE AUTHORITIES, IT IS DEEMED TO HAVE MADE DISCLOSURE T O THE INCOME TAX AUTHORITIES AND MERELY NOT MENTIONING THE SAME FACT IN THE STATEMENT OF INCOME CANNOT BE SAID TO BE NON DISCLOSURE OF FACTS . THE FACT REMAINS THAT IN THE BALANCE SHEET THE AMOUNT WAS DIRECTLY C REDITED TO GENERAL RESERVES AND IT WAS NOTED BY ASSESSING OFFICER HIMS ELF. THEREFORE, THE FACTS OF THE PRESENT CASE CANNOT BE DISTINGUISHED F ROM THE FACTS OF GURDASPUR SUGAR MILLS. 10. THE HONBLE ITAT, UNDER SIMILAR FACTS AND CIRCU MSTANCES IN THE CASE OF GURDASPUR CO-OPERATIVE SUGAR MILLS IN ITA N O.245/ASR/2010 HAS DELETED THE PENALTY. THE FINDINGS OF HONBLE TRIBUN AL AS CONTAINED IN PARA-9 ARE REPRODUCED BELOW: WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSI DERED THEIR SUBMISSIONS. THE ASSESSEE IS A COOPERATIVE SOCIETY. ITS ACCOUNTS ARE DULY AUDITED. THE ASSESSEE HAS PLACED BEFORE US A COPY O F STATEMENT OF TAXABLE INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL AS FILE D ALONG WITH THE RETURN OF INCOME BEFORE THE AO AND SUBMITTED THAT T HE ASSESSEE HAS STATED IN THE SAID STATEMENT THAT A SUM OF RS.22,52,00,000 /- BEING RDF LOAN WAS CONVERTED BY THE GOVERNMENT AS GRANT-IN-AID AND TAK EN TO THE GENERAL ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 7 RESERVE ACCOUNT. THE AFORESAID FACTUAL POSITION IS QUITE APPARENT ON BARE PERUSAL OF THE STATEMENT OF INCOME FILED BY THE ASS ESSEE ALONG WITH THE RETURN OF INCOME BEFORE THE AO AS STATED EARLIER, T HE ASSESSEE IS A COOPERATIVE SOCIETY. ITS ACCOUNTS ARE DULY AUDITED IN WHICH THE SAID SUM HAS BEEN DULY REFLECTED. IT WAS BY WAY OF CAUTION T HAT THE ASSESSEE CHOSE TO SPECIFICALLY INDICATE IN THE STATEMENT OF INCOME THAT A SUM OF RS.22,52,00,000/- BEING RDF LOAN HAS BEEN CONVERTED BY THE GOVERNMENT INTO GRANT-IN-AID AND TAKEN TO THE GENERAL RESERVE ACCOUNT. ON THE FACTS OF THE CASE, WE ARE UNABLE TO HOLD THAT THE ASSESSEE H AS NOT MADE FULL AND TRUE DISCLOSURE OF ALL THE RELEVANT FACTS IN THE RE TURN OF INCOME AND THE STATEMENTS ACCOMPANYING THE RETURN. WE CONFIRM THE FINDINGS OF THE LD CIT(A) IN THIS BEHALF. 11. WE FURTHER FIND THAT HONBLE PUNJAB & HARYANA H IGH COURT VIDE ITS CONSOLIDATED ORDER DATED 21 ST JANUARY, 2013 IN ITA NO. 88 AND ITA NO.95 OF 2012 IN THE CASE OF GURDASPUR CO-OPERATIVE SUGA R MILLS LTD. AND BATALA CO-OPERATIVE SUGAR MILLS HAS DISMISSED THE A PPEALS FILED BY REVENUE UNDER SIMILAR FACTS AND CIRCUMSTANCES. THE HONBLE COURT HAD FRAMED THE FOLLOWING SUBSTANTIAL QUESTION OF LAW WH ICH IS REPRODUCED AS UNDER: THE ITAT IN THE FACTS AND CIRCUMSTANCES OF CASE AN D UNDER LAW HAS ERRED IN NOT APPRECIATING THE PENALTY OF RS.10,50,00,000/ - WAS LEVIED ON THE BASIS OF FURNISHING OF INACCURATE PARTICULARS OF IN COME BY THE ASSESSEE BY TREATING THE REVENUE RECEIPT OF RS.2,15,00,000/- AS CAPITAL RECEIPT WHEREAS THE SUBSIDY RECEIPT IS A REVENUE RECEIPT AND THE AD DITION HAS BEEN CONFIRMED BY HE HONBLE ITAT, AMRITSAR BENCH, AMRIT SAR ? 12. THE HONBLE COURT HAS HELD THAT THERE WAS NO SU BSTANTIAL QUESTION OF LAW AND HAS DISMISSED THE APPEAL OF REVENUE BY HOLD ING AS UNDER: ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 8 IN THE PRESENT CASE, THERE IS NO DISPUTE ABOUT THE QUANTUM OF RECEIPT OF GRANT IN AID FROM THE STATE GOVERNMENT. THE ASSESSEE REFLECTED THE SAME AS CAPITAL RECEIPT, WHEREAS IT H AS BEEN TREATED AS TO BE REVENUE RECEIPT. THE ISSUE WHETHER THE AMOUNT OF GRANT IN AID IS CAPITAL RECEIPT OR A REVENUE RECEIPT, IS A DEBAT ABLE ISSUE. THE FINDINGS RETURNED IN THE JUDGMENT RELIED UPON IS ON FACT OF NON- FURNISHING OF DETAILS OF EXPENSES. THE ISSUE WHETHE R THE AMOUNT OF GRANT IN AID IS CAPITAL RECEIPT OR A REVENUE RECEIP T, IS A DEBATABLE ISSUE. THE FINDINGS RETURNED IN THE JUDGMENT RELIED UPON IS ON FACT OF NON-FURNISHING OF DETAILS OF EXPENSES. THE ISSUE WA S NOT DEBATABLE AS IN THE PRESENT CASE. THEREFORE, THE RELIANCE ON THE DIVISION BENCH JUDGMENT IS MISCONCEIVED. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ERROR IN THE FINDINGS RECORDED BY TRIBUNAL WHILE SETTING ASIDE THE PENALT Y. CONSEQUENTLY, WE DO NOT FIND THAT THE ORDER OF THE TRIBUNAL GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW FOR THE OPINION OF THIS COURT. 13. WE FIND THAT FACTS IN THE PRESENT CASE ARE PARI-MATERIA WITH THE FACTS OF THE CASE OF GURDASPUR CO-OPERATIVE SUGAR M ILLS AND BATALA CO- OPERATIVE MILLS, THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE ABOVE TWO SAID CASES WE D ELETE THE PENALTY CONFIRMED BY LEARNED CIT(A). 14. IN VIEW OF THE ABOVE, THE APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED:28.04.2016. /PK/ PS. ITA NO.642 (ASR)/2015 ASST. YE AR 2003-04 9 COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.