The ITO, Ward-2, Navsari V. Gandevi Taluka Khedut Sahakari Sangh Ltd., Navsari

ITA 813/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6944 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B KULSHRESTHA
• Assessee Lawyers: R N VEPARI
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV , JUDICIAL MEMBER AND SHRI N.S. SAINI , ACCOUNTANT MEMBER ./ ITA NO . 813 / AHD/ 20 1 1 [ [ / ASSESSMENT YEAR : 200 7 - 0 8 INCOME - TAX OFFICER, WARD - 2, NAVSARI VS GANDEVI TALUKA KHEDUT SAHAKARI SANGH LTD., CHAR RASTA, NATIONAL HIGHWAY, GANDEVI, DIST.NAVSARI PAN : AAAAG 0647 C / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI B. KULSHRESTHA, SR DR ASSESSEE(S) BY : SHRI R.N. VEPARI, AR / DATE OF HEARING : 1 2 / 1 1 /2014 / DATE OF PRONOUNCEMENT: 12 / 1 2 /2014 / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN A PPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) , VALSAD DATED 30 . 1 1 .2010 FOR AY 200 7 - 0 8 . 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD, WITHO UT APPRECIATING THE FACTS, HAS ERRED IN DELETING THE ADDITION OF RS.64,66,977/ - IN RESPECT OF ADMINISTRATIVE & MANAGERIAL EXPENSES RELATED TO NON - AGRICULTURAL ACTIVITIES BY DIRECTING NOT TO APPLY THE RULE OF 3, THOUGH PRESENT ASSESSEE, BEING A CO. OP. SOCI ETY, ENGAGED IN BOTH THE AGRICULTURAL AND NON - AGRICULTURAL ACTIVITIE S, RULE OF 3 IS APPLICABLE IN SEQUENCE TO PROVISION OF SECTION 14A AND THE RATIO OF JUDGMENT OF HONBLE HIGH COURT, RAJASTHAN IN THE CASE OF CIT VS. RAJASTHAN RAJYA SAHAKARI UPBHOKTA SANGH LTD. (1996) 84 TAXMAN 33 (RAJ.) AND ALSO ITA NO 813 / AHD / 201 1 AY 200 7 - 0 8 GANDEVI TALUKA KHEDUT SAHAKARI SANGH LTD. - 2 - DECISION IN THE CASE OF KOTA CO - OPERATIVE MARKETING SOCIETY LTD. VS. CIT (1994) 76 TAXMAN 245 (RAJ.) TO TAX THE PROFIT EARNED FROM NON - AGRICULTURAL ACTIVITIES AND INTEREST FROM NATIONALIZED BANK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), VALSAD OUGHT TO HAVE DIRECTED TO ADD BACK AND DISALLOWABLES OF RS.13, 87,547/ - TOWARDS DONATION, PENALTY AND AMOUNT DETERMINED BY THE TAX AUDITOR WHICH WAS REMAINED TO BE ADDED BY AO BUT THE A.R. OF THE ASSESSEE, DURING THE APPELLATE PROCEEDINGS, POINTED OUT TO ADD THE SAME. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE IS A CO - OPERATIVE SOCIETY DOING ACTIVITIES FOR BOTH MEMBERS AND NON - MEMBERS. FURTHER, THE ASSESSEE CARRIES ON BOTH AGRICULTURAL AND NON - AGRICULTURAL ACTIVITIES; SOME OF THESE ARE NOT EXEMPT U/S 80P OF THE ACT. ACCORDING TO THE ASSESSING OFF ICER, THE ASSESSEE MAINTAINS MIXED RECORDS OF THE BOOKS OF ACCOUNTS OF ALL THE ACTIVITIES SUCH AS SALE OF HARDWARE ITEMS, AGRICULTURAL ITEMS, NON - AGRICULTURAL ITEMS, PETROL, DIESEL ETC. THE SOCIETY DOES NOT PREPARE DIFFERENT ACCOUNT FOR THE DIFFERENT ITEMS BEING DEALT BY IT. IT HAS ONE TRADING ACCOUNT AND ONE P&L ACCOUNT. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER APPORTIONED THE ADMINISTRATIVE AND INTEREST EXPENSES IN THE RATIO OF TURNOVER OF AGRICULTURAL ACTIVITIES AND NON - AGRICULTURAL ACTIVITIES AND T HEREBY CONCLUDED THAT RS.64,66,977/ - WAS THE ADMINISTRATIVE AND INTEREST EXPENSES RELATING TO NON - AGRICULTURAL ACTIVITIES. CONSEQUENTLY, EXEMPT ION U/S 80P WAS NOT ALLOWED IN RESPECT OF INCOME FROM NON - AGRICULTURAL ACTIVITIES ASCERTAINED IN THE ABOVE MANNER O F RS.25,89,571/ - . 4. ON APPEAL, THE CIT(A) HELD AS UNDER: - ITA NO 813 / AHD / 201 1 AY 200 7 - 0 8 GANDEVI TALUKA KHEDUT SAHAKARI SANGH LTD. - 3 - 5.9.. . THE SHORT ISSUE WAS WHETHER THE AO WAS RIGHT IN INVOKING RULE 3 FOR ESTIMATING INCOME FROM THE SALE OF AGRICULTURAL & NON - AGRI. ITEMS TO THE MEMBERS & NON - MEMBERS AT RS.64,66,977 / - . IN MY VIEW, THE ACTION OF THE AO WAS NOT SUPPORTED BY VALID REASONS AND CORROBORATED BY EVIDENCES BROUGHT OUT IN RECORDS. THE APPELLANT HAS MAINTAINED SEPARATE SETS OF BOOKS OF A/C FOR INCOME ELIGIBLE/NON - ELIGIBLE FOR DEDUCTION U/S 80P. THE INVOCATIO N OF RULE 3 BY THE AO WAS ARBITRARY AND UNJUSTIFIED. IN THIS CIRCUMSTANCES, THE AO IS DIRECTED TO DELETE THE ADDITION MADE OF RS.64,66,977/ - BY INVOKING RULE 3. ACCORDINGLY, THE APPELLANTS APPEAL IN THIS GROUND IS ALLOWED. 5. WE FIND THAT THE ASSESSIN G OFFICER HAS STATED THAT NO SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR AGRICULTURAL ACTIVITIES AND NON - AGRICULTURAL ACTIVITIES AND THEREFORE, THE TOTAL ADMINISTRATIVE EXPENSES AND INTEREST EXPENSES ARE TO BE APPORTIONED IN RESPECT OF THE SAID ACTIVITI ES TO ASCERTAIN THE INCOME FROM THE ACTIVITIES WHICH ARE EXEMPT U/S 80P OF THE ACT; WHEREAS THE CIT(A) OBSERVED THAT SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED BY THE ASSESSEE IN RESPECT OF ACTIVITIES FROM WHICH INCOME DERIVED WAS EXEMPT U/S 80P OF THE AC T AND IN RESPECT OF NON - ELIGIBLE ACTIVITIES. WE FIND THAT NONE OF THE LOWER AUTHORITIES HAVE STATED THAT THEY HAVE VERIFIED THE BOOKS OF ACCOUNTS ACTUALLY MAINTAINED BY THE ASSESSEE. FROM THE ASSESSMENT ORDER , IT APPEARS THAT THE ASSESSING OFFICER HAS CO NCLUDED THAT SEPARATE BOOKS OF ACCOUNTS WERE NO T MAINTAINED AND ON THE BASIS THAT ONE TRADING ACCOUNT AND ONE P&L ACCOUNT WAS FILED BEFORE HIM. IN OUR CONSIDERED OPINION, MERELY BECAUSE ONE CONSOLIDATED TRADING ACCOUNT OR P&L ACCOUNT HAS BEEN PREPARED, IT CANNOT BE CONCLUDED THAT SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF ELIGIBLE ACTIVITIES AND NON - ELIGIBLE ACTIVITIES WERE MAINTAINED OR NOT. ITA NO 813 / AHD / 201 1 AY 200 7 - 0 8 GANDEVI TALUKA KHEDUT SAHAKARI SANGH LTD. - 4 - 6. FURTHER, THOUGH THE CIT(A) HAS STATED THAT SEPARATE BOOKS OF ACCOUNT S WERE MAINTAINED , BUT THE BASIS OF HIS ABO V E FINDING HAS NOT BEEN STATED IN THE ORDER. FROM THE ORDER OF THE CIT(A) , IT CANNOT BE ASCERTAINED AS ON VERIFICATION OF WHICH MATERIAL THE CIT(A) HAS ARRIVED AT THE ABOVE FINDINGS. FURTHER, BOTH THE PARTIES BEFORE US, HAS BROUGHT NO MATERIAL TO SHOW EIT HER ONE CONSOLIDATED BOOKS OF ACCOUNTS WERE MAINTAINED OR SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR ELIGIBLE/NON - ELIGIBLE ACTIVITIES . THUS, THE CIT(A) HAS OBSERVED THAT THE ASSESSEE HAD DERIVED INCOME FROM AGRICULTURAL ITEMS SOLD TO MEMBERS WAS RS.56, 88,446 (ELIGIBLE FOR DEDUCTION U/S 80P AND NOT DISPUTED BY AO. THERE WAS A LOSS OF RS.40,93,683/ - ON THE SALE OF AGRICULTURAL & NON - AGRI. ITEMS TO THE MEMBERS & NON - MEMBERS SO DEDUCTION U/S. 80 P DOES NOT APPLY , BUT THE BASIS OF ABOVE FINDING OF THE CIT( A) IS NOT CLEAR FROM HIS ORDER. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER VERIFICATION AND THEREAFTER ADJUDICATING THE ISSUE AFRESH BY PASSING A S PEAKING ORDER. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RE - ADJUDICATE THE ISSUE AS PER LAW AFTER PROPER VERIFICATION AND AFTER ALLOWING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUND NO.1 OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. BEFORE US, THE DR SUBMITTED THAT THE CIT(A) HAS FOUND THAT RS.13,87,547/ - TOWARDS DONATION, PENALTY AND AMOUNT DETERMINED BY THE TAX AUDITOR TO BE ADDED TO THE INCOME OF THE ASSESSEE, BUT HAS NOT ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE AR HAS NOT CONTROVERTED THE SUBMISSIONS MADE BY THE DR. AS THE ISSUE RAISED IN GROUND NO.1 HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH , IN OUR CONSIDERED VIEW, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE ALSO BACK TO THE FILE OF THE ASSESSING ITA NO 813 / AHD / 201 1 AY 200 7 - 0 8 GANDEVI TALUKA KHEDUT SAHAKARI SANGH LTD. - 5 - OFFICER FOR ADJUDICATION AFRESH, AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY , THE 12 TH OF DECE MBER , 2014 AT AHMEDABAD. SD/ - SD/ - ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 12 / 1 2 /2014 * BIJU T / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A ) , VALSAD 5. , , / DR, ITAT, AHMEDABAD 6. [ / GUARD FILE . / BY ORDER, TRUE COPY TRUE COPY / ( DY./ASSTT. REGISTRAR) , / ITAT, AHMEDABAD