DIMOND FOOD PRODUCTS vs. THE COMMISSIONER OF INCOME TAX

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 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.

Following substantial questions of law are raised for consideration in these appeals: 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 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? a) Had not the tribunal erred in dismissing the cross objection merely on the ground that it 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?

Heard Sri.K.M.V.Pandalai, learned counsel for the appellant and Sri.Christopher Abraham, learned counsel for the respondents.

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 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.

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 assessing officer, hence no interference is warranted.

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.

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.