DAIMOND FOOD PRODUCTS, V. THE COMMISSIONER OF INCOME TAX,

ITA/278/2019

AI Insights

The case involves M/S Diamond Food Products, a partnership firm engaged in rice production, which appealed against the orders of the Income Tax Appellate Tribunal, Cochin Bench. The appeals were related to the assessment year 2013-2014, where the firm declared a total income and made significant purchases from unregistered dealers. The assessing officer disallowed a deduction under Section 40 A(3) of the Income Tax Act, which was partially overturned by the first appellate authority but reinstated by the Tribunal. The main legal contention revolved around the Tribunal's authority to remit issues back to the assessing officer, particularly concerning the examination of purchases from farmers and payments exceeding Rs.20,000, which were not originally part of the revenue's appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 762540 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 01-04-2022
• Assessment Year: misc
• Other Referred Cases: Keerthi Agro Mills P.Ltd [2018] 405 ITR 192(Ker)
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: K M V PANDALAI; S HEMALATHA
• Keywords: Assessment Year 2013-2014; Deduction Disallowance; Income tax appeal; Purchase Verification; Unregistered dealers
• Section: 40A(3); 143

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI FRIDAY, THE 1ST DAY OF APRIL 2022/11TH CHAITHRA, 1944 I.T.A. NO.278 OF 2019 (AGAINST THE ORDER DATED 13.11.2018 IN ITA 51/COCH/2017 OF I.T.A.TRIBUNAL, COCHIN BENCH) APPELLANT/RESPONDENT/APPELLANT/ASSESSEE: M/S.DAIMOND FOOD PRODUCTS, PAVIZHAM BUILDING, KOOVAPADY P.O., PERUMBAVOOR, ERNAKULAM, KOCHI - 683 544, REPRESENTED BY ITS MG.PARTNER N.P.GEORGE. BY ADVS. SRI.KMV.PANDALAI SMT.S.HEMALATHA RESPONDENTS/APPELLANTS/RESPONDENT/REVENUE: 1 THE COMMISSIONER OF INCOME TAX, KOCHI - 2, C.R.BUILDING, I S PRESS ROAD, ERNAKULAM, KOCHI - 682 018. 2 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, KAP COMPLEX, RAILWAY STATION ROAD, ALUVA - 683 101. SRI.CHRISTOPHER ABRAHAM, SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 01.04.2022, ALONG WITH ITA.284/2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.278 & 284 of 2019 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI FRIDAY, THE 1ST DAY OF APRIL 2022/11TH CHAITHRA, 1944 I.T.A. NO.284 OF 2019 (AGAINST THE ORDER DATED 13.11.2018 IN CO 21/COCH/2017 IN ITA No.51/COCH/2017 OF I.T.A.TRIBUNAL, COCHIN BENCH) APPELLANT/CROSS OBJECTOR/APPELLANT/ASSESSEE: M/S.DIAMOND FOOD PRODUCTS, PAVIZHAM BUILDING, KOOVAPADY P.O, PERUMBAVOOR, ERNAKULAM, KOCHI -683 544, REPRESENTED BY ITS MG.PARTNER N.P. GEORGE. BY ADVS. SRI.KMV.PANDALAI SMT.S.HEMALATHA RESPONDENTS/RESPONDENTS/RESPONDENTS/REVENUE: 1 THE COMMISSIONER OF INCOME TAX, KOCHI -2, C.R.BUILDING, I S PRESS ROAD, ERNAKULAM, KOCHI- 682 018. 2 THE ASSISTANT COMMISSIONER OF INCOME – TAX, CIRCLE-I, KAP COMPLEX, RAILWAY STATION ROAD, ALUVA - 683 101 SRI.CHRISTOPHER ABRAHAM, SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 01.04.2022, ALONG WITH ITA.278/2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.278 & 284 of 2019 3 JUDGMENT (Dated: 1st April, 2022) Basant Balaji, J. I.T.A. No.278 of 2019 is filed against the order dated 13.11.2018 in I.T.A. No.51/Coch/2017 on the files of the Income Tax Appellate Tribunal, Cochin Bench for the Assessment Year 2013-2014. I.T.A. No.284 of 2019 is filed against the order dated 13.11.2018 in Cross Objection No.21/Coch/2017 in I.T.A. No.51/Coch/2017 on the files of the Income Tax Appellate Tribunal, Cochin Bench for the Assessment Year 2013-2014. 2. The appellant is a partnership firm engaged in the business of production of rice from paddy. For the year 2013-14, the appellant filed his return of income on 30.09.2013, declaring a total income of Rs.71,15,290/-. The assessee during the year have made purchase from unregistered dealers to the extent of Rs.15,95,46,806/-, out of the total purchase of ITA Nos.278 & 284 of 2019 4 Rs.68,01,32,694/-, which amounted to 23.45% of the purchases. The appellant was requested to furnish the details of the purchase of paddy from unregistered dealers including their names and addresses. The appellant furnished a list on 28.01.2016. Though the purchase of unregistered dealers amounted to Rs.1,59,46,806/-, the assessee furnished the details to the extent of Rs.66,18,529/- only. Thereafter the assessee furnished names and details of 8503 persons from whom they have made purchases. 3. The assessing officer randomly selected 200 persons from the list and letters were sent to them requesting details with regard to the sale of paddy, details of land owned and details of receipt of money. 81 letters out of 200 letters sent were returned back by the postal authorities shown as 'un-served'. On 10.03.2016, 39 persons to whom letters were issued responded and only five persons confirmed that they have paid the assessment fee. Thereafter, the assessing officer, by Annexure-A order, assessed the ITA Nos.278 & 284 of 2019 5 income under Section 143 of the Income Tax Act and the claim of deduction of Rs.5,53,20,069/- was disallowed under Section 40 A(3) of the Income Tax Act. The appellant challenges the same before the Commissioner of Income Tax Appeals and by Annexure-B order, the first appellate authority allowed the appeal in part. The appellant as well as the revenue filed appeals before the Income Tax Appellate Tribunal, challenging the order of the first appellate authority. The Tribunal, by the impugned order, allowed the appeal filed by the revenue and the Cross Objection filed by the assessee was dismissed. 4. Following substantial questions of law are raised for consideration in these appeals: ITA No.278/2019 a) Had not the tribunal exceeded its powers by remitting an issue to the Assessing Officer for reconsideration, by allowing a 'ground' which was not raised by the Revenue before the tribunal. b) Had not the tribunal erred in remanding the case to the Assessing Officer directing him to ITA Nos.278 & 284 of 2019 6 examine whether each purchase is from the farmers and each payment is more than Rs.20,000/- so as to attract the provisions of Section 40A(3) of the IT Act, admittedly when the disallowance of expenses was made by the Assessing Officer on account of 'purchases not proved' and not u/s 40A(3) of the IT Act? c) On the facts and in the circumstances of the case and in law, was not the order of the tribunal remitting an issue to the Assessing Officer for reconsideration, by allowing a 'ground' which was not raised by the Revenue before the tribunal and directing the Assessing Officer to examine whether each purchase is from the farmers and each payment is more than Rs.20,000/- so as to attract the provisions of section 40A(3) of the IT Act, amounts to enhancement of assessment which is beyond the powers of the tribunal? d) Had not the tribunal erred in not considering, on the facts and in the circumstances of the case, the decision of this Hon'ble Court in Keerthi Agro Mills P.Ltd {[2018] 405 ITR 192(Ker)} which confirmed the decision of the tribunal and had reached finality? ITA No.284/2019 a) Had not the tribunal erred in dismissing the cross objection merely on the ground that it ITA Nos.278 & 284 of 2019 7 has become infructuous on the disposal of the Revenue's appeal which was for a different issue? b) Had not the tribunal erred in remanding the case to the Assessing Officer directing him to examine whether each purchase is from the farmers and each payment is more than Rs.20,000/- so as to attract the provisions of section 40A(3) of the IT Act. Without any direction regarding the issue raised in the cross objection. c) On the facts and in the circumstances of the case and in law in, has not tribunal by remitting an issue to the Assessing Officer for reconsideration, erred in appreciating that the issues involved in the Revenue's appeal and that involved in the Cross Objection filed by the Appellant were entirely different and had to be separately considered? 5. Heard Sri.K.M.V.Pandalai, learned counsel for the appellant and Sri.Christopher Abraham, learned counsel for the respondents. 6. The main contention raised by the counsel for the appellant is that, the ground raised by the revenue before the Tribunal was not available as the ITA Nos.278 & 284 of 2019 8 same was not raised before the first appellate authority or invoked by the assessing officer. He also submitted that, remitting the case back to the assessing officer to examine whether purchase is from the farmers and each payment is more than Rs.20,000/-, so as to attract the provisions of Section 40 A(3) of the IT Act is opposed the law, facts and circumstances of the case. The dis-allowance made to the tune of Rs.5,53,20,069/- was made by the assessing officer not under 40 A(3) of the IT Act. 7. The counsel for the revenue, on the other hand, submitted that, it is well within the powers of the Tribunal to remit the issue back to the assessing officer for fresh consideration and to examine whether the purchase made by the appellant from the farmers is genuine and that the payment is more than Rs.20,000/- to attract the provisions of Section 40 A(3) of the Act. The Tribunal has remitted the issue back to the assessing officer and the appellant is given ample opportunity to substantiate his contentions before the ITA Nos.278 & 284 of 2019 9 assessing officer, hence no interference is warranted. 8. The main contention raised by the counsel for the appellant is that, the Tribunal has allowed the appeal and remitted on a ground which has not been raised before it by any of the parties to the appeal and hence it is beyond the jurisdiction of the Tribunal. 9. We take note of the fact that the said aspect has not been dealt with by the Tribunal. The Tribunal has remitted the issue to the assessing officer for fresh consideration. The Tribunal ought to have taken note of the contention raised by the appellant that the said ground was not available to the revenue as the same was not raised before the first appellate authority. Taking into the consideration of the facts and circumstances of the case, we deem it appropriate that the order needs to be set aside and remitted to the Tribunal for fresh consideration and disposal. Substantial questions of law are answered as indicated above. ITA Nos.278 & 284 of 2019 10 In the result, appeals are allowed and the order of the Tribunal in I.T.A.No.51/Coch/2017 and CO No.21/Coch/2017 are set aside and the Tribunal is directed to dispose of the same afresh, after giving opportunity to the revenue and the assessee, not only to file additional materials but also to raise additional grounds available to them in support of their contentions. The Tribunal shall take all steps to dispose of the same at any rate, within a period of six months from the date of receipt of the certified copy of the judgment. Sd/- S.V.BHATTI, JUDGE Sd/- BASANT BALAJI, JUDGE ss ITA Nos.278 & 284 of 2019 11 APPENDIX OF ITA 284/2019 PETITIONER ANNEXURES ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 30.03.2016 ANNEXURE B TRUE COPY OF THE APPELLATE ORDER DATED 14/12/2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ANNEXURE C TRUE COPY OF CROSS OBJECTION NO.21/COCH/2017 FILED BY THE APPELLANT. ANNEXURE D TRUE COPY OF THE ORDER DATED 13.11.2018 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL. ITA Nos.278 & 284 of 2019 12 APPENDIX OF ITA 278/2019 PETITIONER ANNEXURES ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 30/03/2016. ANNEXURE B TRUE COPY OF THE APPELLATE ORDER DATED 14/12/2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE C TRUE COPY OF APPEAL NO.ITA NO.51/COCH/2017 FILED BY THE RESPONDENT. ANNEXURE D CERTIFIED COPY OF THE ORDER DATED 13/11/2018 PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL. "