AADHAR RICE MILL PVT. LTD.,,RANCHI vs. ITO,WARD-1(1), RANCHI

The sole ground raised by the assessee in the present appeal is as under :-

Brief facts of the case are that the assessee, which runs a ricemill filed its return of income on 26.11.2013 declaring NIL income. Upon selection of the case for scrutiny, notices u/s. 143(2)/142(1) of the Act were issued. On examination of the books of accounts the Ld. Assessing Officer came to the conclusion that the assessee's business was not eligible for deduction u/s.80IB(11A) of the Act and disallowed the claim of the assessee of Rs.16,74,407/- along with disallowance of 10% of the oil loss claimed by the assessee amounting to Rs.2,01,090/- assessing total income of the assessee at Rs.18,75,497/-. Against the assessment order, the assessee preferred appeal before the CIT(A) and the CIT(A) allowed the loss claimed by the assessee on account of loss in oil and upheld the disallowance made by the AO on account of deduction claimed by the assessee u/s.80IB(11A) of the Act.

Now, the assessee is in further appeal before the Tribunal.

I have heard arguments of the both the sides and carefully perused the material available on the record of the Tribunal. 6 Ld. Authorised Representative (AR) of the assessee submitted that the ld. CIT(A) has erred in confirming the disallowance made by the ld.

Placing reliance on the decision of Hon‟ble Madras High Court in the case of CIT Vs. M/s Muthuramalingam Modern Rice Mill, in Tax Case Appeal Nos.51 to 55 of 2009, judgment dated 20.02.2019, ld. AR submitted that the Hon‟ble High Court in paras 14 to 20 has decided that the activity of dehusking of paddy into rice will not amount to “manufacture or production” and there is no justification to give a narrower meaning to these terms, which, by themselves independently or jointly as employed in the said provisions of Section 80IA of the Act are wide enough to cover the industrial activity undergone by the assessee. Ld. AR also submitted that during the scrutiny assessment u/s.143(3) of the Act for A.Y.2014- 2015 in the assessment order dated 27.12.2016 the claim of the assessee u/s.80IB of the Act was allowed and on recommendation of the AO i.e. ITO Ward-1 Ranchi, the ld. ACIT revised the assessment order u/s.263 of the Act.

Replying to the above, ld. DR submitted that during scrutiny assessment proceedings u/s.143(3) of the Act the AO thoroughly examined the claim of the assessee u/s.80IB(11A) of the Act and found the same as not tenable and allowable to the assessee because the assessee is not engaged in the business of integrated bulk handling storage & transportation of food grains and in fact the assessee is engaged in dehusking of paddy into rice and such this is not qualified for deduction u/s.80IB(11A) of the Act.

Ld. AR placing rejoinder to the above, drew the attention of the Bench towards provisions of sub-section (11A) to Section 80IB of the Act and submitted that the amount of deduction in a of undertaking pertaining to profit from business of processing, handling, storage and transportation of food-grains shall be 100% of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year s allowable to the assessee. Therefore, keeping in view the proposition rendered by the Hon‟ble Madras High Court in the case of M/s Muthuramalingam Modern Rice Mill (supra), the claim of the assessee is allowable u/s.80IB(11A) of the Act.

On careful consideration of the above rival submissions, first of all, I may point out that the assessee has been allowed deduction u/s.80IB(11A) of the Act in the assessment order 27.12.2016 for A.Y.2014-2015 passed in scrutiny assessment order u/s.143(3) of the Act, however, such order has been revised by the ld. CIT(A) by invoking provisions of Section 263 of the Act.

Secondly, from the observations recorded by Their Lodships in the judgment of Hon‟ble Madras High Court in the case of M/s Muthuramalingam Modern Rice Mill (supra) from paras 14 to 20, I observe that the Hon‟ble High Court has clearly held that there is no reason to hold that the activity of dehusking of paddy into rice will not amount to “manufacture or production” and there is no justification to give a narrower meaning to these terms. From para 5 of the judgment of the Hon‟ble High Court, I observe that Their Lordships adjudicated the issue/question

On the basis of foregoing discussions, I am inclined to hold that the AO was not correct in disallowing the benefit of Section 80IB(11A) of the Act to the assessee and, thus, the ld. CIT(A) was not also correct and justified in confirming the disallowance made by the AO. Accordingly, the sole ground of assessee is allowed and the AO is directed to allow the deduction as claimed by the assessee u/s.80IB(11A) of the Act. Thus, appeal of the assessee in ITA No.294/Ran/2018 is allowed. ITA No.201/Ran/2019 (2014-2015):

This appeal is filed by the assessee against the order passed by the Pr.CIT u/s.263 of the Act for the assessment year 2014-2015, dated 31.03.2019 on the proposal given by ITO, Ward-1, Ranchi, whereby setting aside the assessment framed by the AO u/s.143(3) of the Act, dated 27.12.2016 for fresh assessment.

I have heard arguments of the both the sides and carefully perused the material available on the record of the Tribunal.

Ld. AR submitted that from bare reading of the impugned order passed u/s.263 of the Act, it is clearly discernible that the ld. Pr.CIT has invoked revisonary power on the proposal of revision by the ITO, Ward-1, Ranchi and thereafter in para 3 jumped to a conclusion that assessment order passed by the AO u/s.143(3) of the Act, dated 27.12.2016 is erroneous and prejudicial to the interest of Revenue without any findings, examinations of relevant assessment record or observations. Ld. AR strenuously pointed out that in para 4 the Pr. CIT reproduced the reply of the assessee and thereafter in para 5 observed that the order for A.Y.2013-2014 was passed after the assessment order framed for A.Y.2014-2015, as such the AO could not consider this issue in the light of order of the ld. CIT(A) and then set aside the impugned assessment order invoking Section 263 of the Act. Ld. AR submitted that when the order of ld. CIT(A) for A.Y.2013-2014, dated 9.11.2017 was not in existence and when the AO passed assessment order on 27.12.2016 for A.Y. 2014-2015 then how the ld. Pr. CIT can expect from the AO to consider the non-existence order while framing the scrutiny assessment order. Ld. AR strongly contended that this cannot be a basis for valid assumption of juri iction u/s.263 of the Act for revision of the order. Ld. AR also submitted that the ld. Pr. CIT in last para of the order set aside the assessment order and directed the AO to decide the issue afresh in the light of the appellate order passed by the ld CIT(A) for A.Y.2013-2014

Replying to the above, ld. DR vehemently relied on the impugned order passed by ld. Pr. CIT and submitted that during the scrutiny assessment proceedings, the AO did not consider the first appellate order passed by the ld. CIT(A) for A.Y.2013-2014 and did not make any enquiry or verification pertaining to the claim of the assessee u/s.80IB(11A) of the Act, therefore, ld. Pr.CIT was right in invoking the provisions of Section 263 of the Act for revision of the assessment order which is not only erroneous but prejudicial to the interest of revenue.

On careful consideration, first of all, from careful reading of the impugned order passed by ld. Pr. CIT u/s.263 of the Act, I observe that in para 2 ld. Pr. CIT noted that a proposal for revision sent to him by ITO, Wrd-1, Ranchi, in para 3, ld Pr. CIT, without any discussion or adjudication jumped, to a conclusion that the scrutiny assessment order dated 27.12.2016 is erroneous and prejudicial to the interest of revenue. Thereafter in para 4 ld. Pr. CIT reproduced the reply of the assessee to the notice u/s.263 of the Act and in para 5 observed that the ld. CIT(A)

In view of the above analysis of the impugned order, I failed to understand on which basis the ld. Pr. CIT held that the assessment order dated 27.12.2016 is erroneous or prejudicial to the interest of revenue without calling and perusing the relevant assessment records an merely on the basis of proposal for revision sent to him by the ITO, Ward-1, Ranchi. From the assessment order dated 27.12.2016, I also observe that at page 3, the AO has examined the claim of the assessee u/s.80IB of the Act and thereafter held that the assessee is entitled for claim of deduction u/s.80IB(11A) of the Act, hence, it is not a case of no enquiry. In my humble understanding of provisions of Section 263 of the Act, the ld. Pr.CIT is empowered to revise the assessment order where such assessment order is erroneous or prejudicial to the interest of revenue after calling and examining the relevant assessment records and holding that either there is no enquiry or there is insufficient or inadequate enquiry by the AO on a particular issue but no such exercise has been undertaken by the ld. Pr. CIT while passing the impugned order u/s.263 of the Act

In the result, both appeals of the assessee are allowed. Order pronounced in the open court on 24/05/2019. (CHANDRA MOHAN GARG) न्यानयक सदस्य / JUDICIAL MEMBER रााँची/Ranchi; ददनांक Dated 24/05/2019 Prakash Kumar Mishra, Sr.P.S.

ITO, Ward-1(1), Ranchi 3. आयकर आयुक्त(अऩीऱ) / The CIT(A), 4. आयकर आयुक्त / CIT 5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, रााँची / DR, ITAT, Ranchi 6. गार्ग पाईऱ / Guard file. सत्यावऩत प्रयत //// आदेशािुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, रााँची / ITAT, Ranchi