S. M. AGRO PLANTERE& PROCESSORS PVT. LTD.,DHENKANAL vs. PCIR RANGE-1,, BHUBANESWAR

Shri J.M.Pattnaik, ld AR appeared for the assessee and Dr. Abani Shri J.M.Pattnaik, ld AR appeared for the assessee and Dr. Abani Shri J.M.Pattnaik, ld AR appeared for the assessee and Dr. Abani Kanta Nayak, ld CIT DR appeared for the revenue. Kanta Nayak, ld CIT DR appeared for the revenue.

The appeal is time barred by 343 days. The assessee has filed an application for condonation of delay of 343 days. In the petition, it is stated that the order of Pr. CIT was challenged by the assessee before the Hon’ble Jurisdictional High Court in W.P.(C) No.9320 of 2022 and the Hon’ble High Court vide its order dated 13.4.2022 directed that the remedy is available before the Tribunal. Accordingly, consequent to the direction of the Hon’ble Jurisdictional High Court, the assessee has filed appeal before the Tribunal, causing 343 days. It was the prayer that the delay be condoned. Ld CIT DR did not have any objection. In view of above, we condone the delay of 343 days and admit the appeal for hearing.

It was submitted by ld AR that the original assessment in the case of the assessee was a ‘Limited Scrutiny’ assessment. It was the submission that the Pr. CIT has invoked his powers u/s.263 of the Act on the ground that the Assessing Officer had not considered the provisions of section 7A of the IT Rules, 1962 when computing the income from the manufacture of rubber. It was the further submission that the second issue raised by the Pr. CIT was in respect of deemed dividend u/s.14A on the ground that the assessee has made huge investment in shares and debentures. The 3rd issue was in regard to the loans and advances made to Kalinga Jute Products Pvt Ltd., and S.M.Granite Pvt Ltd. The next issue was in regard to certain subsidy received by the assessee from Rubber Board, Bhubaneswar. It was the submission that as the assessment was a ‘Limited Scrutiny’

In reply, ld CIT DR vehemently supported the order of the Pr. CIT. It was the submission that in respect of issue whether Rule 7A is to be considered relates to income from manufacture of rubber, which was agricultural income, the issue was within the scope of ‘Limited Scrutiny’ and same was liable to be upheld. It was the prayer that the order of the Pr. CIT is liable to be upheld.

We have considered the rival submissions. A perusal of the facts in the present case clearly shows that in the original assessment, the same was taken up in scrutiny for specific limited purposes being (i) large agricultural income and second was mismatch in sales turnover reported in the audit report and ITR. After considering the explanation of the assessee, the return of income of the assessee had been accepted. A perusal of the order of the Pr. CIT shows that in paras 3.1 to 3.5, the issue raised isin regard to applicability of Rule 7A of IT Rules, same relates to income from manufacture of rubber. Admittedly, when there is income from sale of rubber, Rule 7A is to be considered. The Pr. CIT has brought out various defects in the assessment in respect of computation of income from rubber on account of non-application of Rule 7A of IT Rules, 1962. Admittedly, the P a g e 3 | 5 issue is in relation to the large agricultural income. It was admittedly something that the Assessing Officer has not made any discussion in the assessment order. This being so, we are of the view that in respect of the said issue raised by the Pr. CIT, the order u/s.263 is sustainable and we do so.

Coming the issue of applicability of section 14A and the loans and advances to Kalinga Jute Products p Ltd., and M/s. S.M.Granite (P) Ltd.,, admittedly, these are not issues which were part of the Limited Scrutiny. Consequently, in view of the principles laid down by the Hon’ble Jurisdictional High Court in the M/s. Shark Mines and Minerals (supra), it is not open to the Pr. CIT while exercising suo moto revisional power under section 263 of the Act to find fault with the assessment order of the AO on the ground of its being erroneous on an issue not covered by the Limited Scrutiny when the AO could not have possibly examined such issue. In these circumstances, the issues raised by Pr. CIT in respect of applicability of Section 14A and in respect of issues of the loans and advances to Kalinga Jute Products P. Ltd., and M/s. S.M.Granite Pvt Ltd., and subsidy received from Rubber Board stands quashed.

In the result, appeal of the assessee stands partly allowed.