UTKAL FLOUR MILLS PVT LTD,BHUBANESWAR, ODISHA vs. INCOME TAX OFFICER, WARD 1(2), BHUBANESWAR, ODISHA

आदेश आदेश / O R D E R आदेश आदेश Per Bench : This is an appeal filed by the assessee against the order of ld. Addl./JCIt(A)-2, Kolkata, dated 30.08.2024, passed in Appeal No.CIT(A), Bhubaneswar-1/14688/2019-20 vide DIN & Order No.ITBA/APL/S/250/2024-25/1068157737(1) for the Assessment Year 2017-2018. 2. The assessee has challenged the appellate order by taking the following grounds :- 1. For that, in the facts and circumstances, the impugned Order is arbitrary, not based on facts but based on surmises and conjectures and the Ld Addl /Jt CIT(A) has erred in confirming the additions to income of Rs 1,99,318/- towards payment of Entry Tax demand which is otherwise an allowable business expense. 2. For that, in the facts and circumstances, the impugned Order is arbitrary, not based on facts but based on surmises and conjectures and the Ld Addl/Jt CIT(A) has erred in confirming the additions to income of Rs 4,16,785/- towards alleged probable proceeds of sale of wastage, which is contrary to the books of accounts, records and registers submitted in course of assessment.

2 ITA No.453/CTK/2024

appeal of the assessee is barred by 04 days. In this regard, the assessee

has filed an application with affidavit for condonation of delay stating

sufficient reasons. Ld. Sr. DR did not raise any serious objection.

Accordingly, delay of 04 days in filing appeal by the assessee is hereby

condoned and appeal is disposed off in the following manner.

3 ITA No.453/CTK/2024

company engaged in the business of flour mill at Charampa, Bhadrak and

having its registered office at Lewis Road, Bhubaneswar, Odisha. The

return of income for the year under appeal was filed on 09.10.2018 at total

income of Rs.14,26,030/-. The assessment was completed u/s 143(3)

vide order dated 23.12.2019 by making disallowances of Entry Tax

expenses claimed at Rs.1,99,318/- and further by making addition of

Rs.4,16,785/- as estimated sales of wastages. In first appeal the ld.

Addl./JCIT(A)-2, Kolkata has confirmed the disallowances, therefore, the

present appeal is filed before us by the asseseee.

made towards the Entry Tax claimed as expenditure u/s 37(1) of the Act.

which the entry tax demand of Rs 2,19,318/- was created. The said

demand relates to the period from 1.04.2005 to 30.11.2006. The

assessee filed the appeal against the levy of such entry tax before the

competent authority i.e. the Commissioner of Sales Tax (LTU), Balasore

Range, Balasore and had paid Rs.20,000/- in Financial Year 2013-2014.

This amount of Rs.20,000/- was claimed as expenditure and was allowed

in assessment year 2014-2015 i.e. the year under which the same was

paid in the assessment completed u/s.143(1) of the Act. During the year

under appeal, the remaining amount of Rs.1,99,318/- was recovered from

the assessee’s bank account and since it was paid during the previous

year, therefore, the same was claimed in the year under appeal. The AO

4 ITA No.453/CTK/2024

has disallowed the same by observing that the demand created by the

department towards the entry tax is penal in nature without appreciating

the fact that the entire demand was in relation to the entry tax and interest

thereon and no penalty was imposed. Ld. AR also submitted that the

appeal filed before the Commission of Sales Tax (LTU), Balasore Range,

Balasore was decided in subsequent year where a relief of Rs.70,385/-

was allowed to the assessee and since the entire payment of entry tax

demand was claimed as expenditure by the assessee, therefore, the

amount of relief of Rs.70,835/- was offered for tax in subsequent year.

The ld. AR, thus, prayed that since the expenditure claimed was towards

the tax and interest and is allowable expenditure u/s.37(1) of the Act,

therefore, the disallowance may be deleted, more particularly, when the

assessee itself has included the amount of relief granted to it in the total

income in subsequent years.

the lower authorities and submitted that the issue may be restored to the

file of AO for verification as to whether this amount is in the nature of

penal or is with regard to the tax and interest only.

available on record. As the levy of entry tax is subjudice before the

competent authorities and since the amount was paid during the year, it

was claimed as expenditure. He further claimed that the amount of relief

granted by appellate authority in Entry Tax dispute of Rs.75,835/- was

offered for tax in subsequent year. Also, the expenses of Rs.20,000/-

5 ITA No.453/CTK/2024

claimed in assessment year 2014-2015 was also not disputed by the

department. In these circumstances, we are of the view that the amount of

entry tax and interest thereon cannot be disallowed. However, in absence

of precise details, we send this issue for the limited purpose of verification

to the file of the AO to verify whether the entire demand relates to tax and

interest only. Had it be towards the tax and interest and if the amount was

actually paid during this year, the same be allowed to the assessee as

expenditure. With this direction, this issue is set aside to the file of AO for

limited purpose as stated above. The Ground No.1 is partly allowed for

statistical purposes.

made by the AO by estimating the sales of wastages.

total purchases of wheat of 86,368.32 quintals out of which the production

was of 83,449.82 and partly was sold/available in stock and claimed

balance quantity of 833.57 quintals as wastage/processing loss which is

0.9988% or nearly 1% approx. of the quantity issued for production of

flour. The AO was of the view that the wastage produced during the

course of milling of wheat has some value and is not total wastages and,

therefore, he estimated base price of wastage @500/- per quintal and

made the addition of Rs.4,16,785/- towards 833.75 quintal of wastage

produced. In first appeal the ld. Addl./JCIT(A)-2, Kolkata though found

force in the arguments of the assessee that only 1% of the quantity issued

for production was claimed as wastages which is quite reasonable,

6 ITA No.453/CTK/2024

however, since the assessee has not disclosed these figures in the tax

audit report, therefore, he upheld the action of the AO in making the

addition by estimating the sale price of such wastages against which the

present appeal is preferred by the assessee.

made before the authorities below and submitted that the wastage

produced from the production of flour is nothing but a total loss and

having no market value and, therefore, it was claimed as total loss. The

AO without bringing on record any comparable case merely on

assumption and presumption held that such wastage might have some

value and estimated the sales at Rs.4,16,785/-. He, thus, prayed for the

deletion of the addition made.

lower authorities and submitted that the assessee has failed to disclose

the quantity of wastage in the quantitative details appearing in form 3CD

annexed to tax audit report while filing the return, therefore, the AO was

right in making the estimation of the shortage of the quantity being

wastage as sales and, therefore, he prayed for the confirmation of the

addition so made.

available on record. In this case, it is seen that out of total quantity issued

for production of wheat at 83,449.82 quintals, only 833.57 quintals was

claimed as wastage which is nearly 1% of the total quantity issued for

production. This wastage 1% of the total material used in production is a

7 ITA No.453/CTK/2024

very reasonable claim. The claim of assessee that such wastage has no

market value has not been controverted by the revenue. Moreover, the

AO has not brought on record any comparable case by which the wastage

claim by the assessee could be held as excessive or unreasonable. It is a

matter of common knowledge that the wastage generated during the

production of flour from wheat has no market value and the AO also has

estimated the value of such waste on assumption and presumption. In the

present case, though in all the previous years the results declared by the

assessee were accepted u/s.143(1) of the Act, however, the fact

remained that in all these years, the assessee also claimed amount of

wastage and was in parity with the wastage claimed in the year under

appeal. Looking to these facts and circumstances of the case, we are of

considered view that the AO has failed to appreciate the nature of

business of the assessee where the claim of wastage as low as 1% is

quite reasonable and also failed to appreciate that such wastage could

not yield in any income, thus, we direct to delete the addition of

Rs.4,16,785/-. These grounds of appeal are allowed.

the Video Conferencing and providing name and location in the notice as

well as in the appellate order which is contrary to the faceless appellate

scheme.

and the ld. AR also not made any arguments in support of these grounds

8 ITA No.453/CTK/2024

of appeal, therefore, these grounds have become academic in nature and

are not adjudicated.

purposes.

Order pronounced in the open court on 27/11/2024

Sd/- Sd/- (GEORGE MATHAN) (MANISH AGARWAL) लेखा सद�य/ ACCOUNTANT MEMBER �याियक �याियक सद�य �याियक �याियक सद�य सद�य / JUDICIAL MEMBER सद�य कटक Cuttack; �दनांक Dated 27/11/2024 कटक कटक कटक Prakash Kumar Mishra, Sr.P.S. आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत अपीलाथ� / The Appellant- 1. Utkal Flour Mills Pvt. Ltd. 246, Lewis Road, Bhubaneswar 2. ��यथ� / The Respondent- ITO, Ward-1(2), Bhubaneswar आयकर आयु�(अपील) / The CIT(A), 3. आयकर आयु� / CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, कटक कटक कटक / DR, ITAT, कटक 5. Cuttack गाड� फाईल / Guard file. 6. स�यािपत �ित //True Copy// आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार

(Assistant Registrar) आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण, कटक कटक/ITAT, Cuttack आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण कटक कटक