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Facts
The assessee, a cooperative society engaged in sugar manufacturing, faced additions by the AO for (i) sale of sugar at concessional rates to its members and (ii) excess sugarcane payment to farmers. The CIT(A) partly allowed the concessional sugar issue and restored the excess cane price issue to the AO for fresh adjudication. The assessee subsequently appealed to the Tribunal.
Held
The Tribunal restored both issues, namely excess cane price paid and concessional sugar sales, back to the AO for fresh adjudication. This re-adjudication must consider the newly inserted Section 155(19) and directives from the Supreme Court. An additional ground regarding the disallowance of agricultural income was also remanded to the AO for fresh review.
Key Issues
Whether additions for excess cane price paid to members and sale of sugar at concessional rates are justified; and the disallowance of agricultural income due to lack of evidence.
Sections Cited
143(3), 254, 144B, 40A(2), 155(19), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The above four appeals filed by the assessee are directed against the separate orders dated 20.12.2024 and 25.10.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Years (“AYs”) 2009-10 and 2010-11, 2012-13 and 2013-14 respectively. For the sake of convenience, all these appeals were heard together and are being disposed of by this common order. for AY 2010-11 is taken up as a lead case.
ITA No. 2510/PUN/2024, AY 2010-11
Briefly stated the facts are that the assessee is a cooperative society engaged in the business of manufacturing and sale of white sugar, compost and its by-product. For AY 2010-11, the assessee filed its return of income on 18.09.2010 declaring a total income of Rs.2,69,55,135/- after claiming set-off of unabsorbed loss. The case of the assessee was selected for scrutiny under CASS. Statutory notice(s) were accordingly issued and served upon the assessee which were duly responded to by the assessee. The Ld. Assessing Officer (“AO”) initially completed the assessment u/s 143(3) of the Income Tax Act, 1961 (the “Act”) completed the scrutiny assessment for the relevant AY by assessing the income at Rs. 24,36,43,775/-. Against the said order of the AO, the assessee the assessee filed appeal before the CIT(A) and thereafter before the Tribunal. Accordingly, the Tribunal vide order dated 04.09.2019 remitted back the issue to the Ld. AO with similar direction in the case of Majalgaon Sahakari Sakhar Karkhana Ltd Vs ACIT. Accordingly, the Tribunal has remitted the issue to the file of the Ld. AO after considering the judgement of the Hon'ble Supreme Court of India in the case of CIT, Bombay Vs. Tasgaon Taluka S.S.K. Ltd. in Civil Appeal No.8890 of 2012 dated 05.03.2019 and directed the Ld. AO to complete the assessment accordingly. Pursuant to the direction of the Tribunal, the Ld. AO completed the assessment u/s 143(3) with section 254 and section 144B of the Act vide his order dated 30.09.2021 thereby making addition(s) on account of – (i) sale of sugar at concessional rate to its members at Rs.1,05,81,183/- and (ii) excess sugarcane payment to the farmers of Rs.21,83,24,806/-.
Aggrieved by such order of the Ld. AO, the carried the matter in appeal before the Ld. CIT(A)/ NFAC.
3.1 As regards the issue relating to excess cane price paid to the members is concerned, the Ld. CIT(A)/ NFAC restored the issue to the file of the Ld. AO for fresh adjudication in the light of the decision of the Pune Tribunal in the case of Krantiagrani Dr G D Bapu Lad Sahakari Sakhar Karkhana Ltd. vs. ACIT in 68 & 78/PUN/2024, order dated 16.05.2024 and considering the CBDT circular no.14 of 2023 dated 27.07.2023 and the provisions of section 155(19) of the Act.
3.2 As regards the sale of sugar to its members by the assessee at concessional rate is concerned, the Ld. CIT(A)/ NFAC partly allowed the claim of the assessee by observing as under:
“4.2.5 The above submission of the appellant on this issue has been carefully considered. Accordingly, I am of the considered view that the AO has taken entire quantum of the sugar (9,106.88 Quintals) issued on concessional rate to its members for the disallowance u/s. 40A(2) of the Act, instead of the actual excess quantum of sugar issued 1551.68 Quintals (9,106.88 (-) 7,555.20) at concessional rate to its members. It is further notable that during the assessment proceedings, the appellant has submitted that the market price of sugar as Rs. 2,557.19/quintal, whereas, in its submission during the appellate stage, the rate of levy sugar was arrived by the appellant at Rs. 1,968.30/quintal. 4.2.6 In view of the above, the AO is directed to quantify and disallow only the quantum of the excess sale of sugar at concessional rates to its members by applying the prevalent market rate during the relevant FY 2009-10. In this regard, reliance is also placed on the decision of the Honb'le ITAT, Pune in the case of Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd vide order dated 22.10.2020 for the AY 2014-15. Thus, the grounds of appeal filed by the appellant on this issue is partly allowed.
Dissatisfied, the assessee is in appeal before the Tribunal by raising the following grounds: “
1. On the fact and in the circumstance of the case and in law of the learned NFAC Commissioner of Income Tax (Appeals) Delhi, has erred in disallowing and adding back an amount of Rs.21,83,24,806/- on account of Excess Cane price paid to members.
2. On the fact and in the circumstance of the case and in law of the learned NFAC Commissioner of Income Tax (Appeals) Delhi, has erred in disallowing and adding back an amount of Rs.1,05,81,183/- on account of Sugar Sold at concessional rate.
3. The appellant craves for the leave, add, alter, amend, modify and delete any or all the above grounds of appeals before or at the time of the hearing.”
The Ld. AR at the outset submitted that the matter may be restored to the file of the Ld. AO for fresh adjudication synopsis in respect of both the above grounds.
5.1 Regarding the ground no. 1 relating to excess cane price paid to the members, the Ld. AR referred to the speech of the Hon‟ble Finance Minister in Union Budget 2023 wherein it was proposed to provide an opportunity to sugar cooperatives to claim payments made to sugarcane farmers for the period prior to the AY 2016-17 as expenditure and accordingly, section 155(19) was inserted in the Act. The Ld. AR then referred to the provisions of section 155(19) of the Act which reads as under:
“(19) Where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee, being a co- operative society engaged in the business of manufacture of sugar, and such deduction has been disallowed wholly or partly in any previous year commencing on or before the 1st day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of the assessee for such previous year after allowing deduction to the extent such expenditure is incurred at a price which is equal to or less than the price fixed or approved by the Government for that previous year, and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years specified in sub section (7) of that section shall be reckoned from the end of previous year commencing on the 1st day of April, 2022.
5.2 The Ld. AR submitted that the assessee has made an application before the Ld. AO and the same is pending. Therefore, this issue is required to be set aside to the file of the Ld. AO for re-examination of facts in light of section 155(19) of the Act.
5.3 In respect of ground no. 2 relating to sale of sugar at concessional rate, the Ld. AR submitted that this issue is required to be set aside to the file of the Ld. AO for re-examination of facts in light of directives given by Hon‟ble Supreme Court in the case of CIT Vs. Krishna Sahkari Sakhar Karkhana Ltd., (2012) 211 Taxman 109, dated 25.09.2012 (pages 1 to 10 of Paper Book-II refers). He submitted that the ITAT, „A‟ Bench, Pune in ITA/2580/PUN/2024 vide its order dated 09.09.2019 had set aside the case to the file of the Ld. AO with a direction that the Ld. AO is required to follow all the directives of Hon‟ble Supreme Court in Krishna SSK‟s case (supra) which are mentioned below:
“In light of above, following questions are required to be answered. A- The question, whether the above difference between the fair market price and the concessional price should or should not be added to the total income of the assesse(s) Society, needs to be re-looked by Commissioner of Income Tax (Appeals) (for short, "CIT (A)) B- Apart from the afore-stated question, CIT (A) would take into account (a) impact of custom and trade practice: whether the above mentioned practice of selling sugar at concessional rate has become the practice or with Co-operative Sugar Industry? (b) The State's policy: whether any Resolution has been passed by the State Government supporting the practice (c) Basis for monthly sales and (d) sales during Diwali”
The CIT (A) would also consider on what basis the quantity of the final product i.e. sugar is being fixed for sale to farmers / cane growers / Members each year on month-to-month basis, apart from Diwali?
5.4 The Ld. AR submitted that in consideration of above, as all the documents required to decide the case are submitted before the Tribunal, the documents are required to be verified by the Ld. AO in depth so as to come at exact disallowance on account of sale of sugar at concessional rate and therefore requested that this issue may be set aside to the file of the Ld. AO to decide it afresh. He further submitted that the Ld. AO may be directed to give a detailed finding regarding the taxability in the hands of cooperative society considering the facts and relevant provisions of the Act. Without prejudice, he submitted that if it is found to be taxable, then at the time of following State Government GR dated 01.03.2006 (pages 25 to 34 of Paper Book-II refers), the Ld. AO should be directed to calculate the difference between Levy Price and Concessional Price instead of Market Price and Concessional Price.
The Ld. DR submitted that the issue relating to excess cane price has already been restored by the Ld. CIT(A)/ NFAC to the file of the Ld. AO.
6.1 So far as the issue of sale of sugar at concessional rate is concerned, he submitted that he has no objection if the matter is restored to the file of the Ld. AO to verify the various details filed by the assessee and decide the issue in the light of the decision of Hon‟ble Supreme Court in the case of Krishna SSK Ltd. (supra).
In view of the above submissions made by the Ld. AR and Ld. DR and in view of the provisions of section 155(19) of the Act inserted by the Finance Act, 2023 w.e.f. 01.04.2023, we deem it proper to restore the issue of excess cane price paid to the members to the file of the Ld. AO for fresh adjudication.
7.1 So far as the issue of sale of sugar at concessional rate is concerned, we deem it proper to restore the issue to the file of the Ld. AO with a direction to consider the various documents filed by the assessee and the GR issued by the State Government dated 01.03.2006. The Ld. AO shall consider the plea of the assessee to calculate the difference between levy price and concessional price instead of market price and concessional price and decide the issue afresh and in accordance with law after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
AY 2009-10 and & 2512/PUN/2024, AYs 2012-13 & 2013-14.
Both the sides are unanimous in stating that the facts and the grounds of appeal
in for AY 2009-10 and & 2512/PUN/2024 for AYs 2012-13 & 2013-14 respectively relating to excess cane price and sale of sugar at concessional rate are identical to the grounds raised in ITA No. 2510/PUN/2024 for AY 2010-11 except for the variance in amounts. Thus, in view of the fact that the issue(s) raised in all the appeals are identical and arising from the same set of facts, the finding given by us while adjudicating the appeal in ITA No. 2510/PUN/2024 would mutatis mutandis apply to the appeal in ITA No. 119/PUN/2025 and ITA Nos. 2511 & 2512/PUN/2024 as well. Accordingly, the grounds of appeal raised by the assessee in ITA No. 119/PUN/2025 and ITA Nos.2511 & 2512/PUN/2024 are hereby allowed for statistical purposes in the same terms. for AY 2012-13, the assessee has raised one more ground which reads as under:
3. On the fact and in the circumstance of the case and in law of the learned NFAC Commissioner of Income Tax (Appeals) Delhi, has erred in disallowing and adding back an amount of Rs.1,22,324/- on account of Agricultural Income.”
10.1 We find that the Ld. AO disallowed Rs.1,22,324/- out of the total claim of agricultural income of Rs.2,22,324 based on estimation for the reason that the assessee could not furnish satisfactory evidence in support of its claim. The Ld. CIT(A)/ NFAC has confirmed the addition made by the Ld. AO on the ground that the assessee could not substantiate the income earned through agricultural activities with the documentary evidence both during the assessment proceedings as well as appellate proceedings. Before us, the Ld. AR has submitted that the given an opportunity the assessee is in a position to substantiate its claim by filing all the relevant details/ documents in support of its claim. He therefore prayed that this issue may be set aside to the file of the Ld. AO to decide it afresh in consideration of the submissions already made by the assessee and further submission/ evidence as may be required/called upon, after giving adequate opportunity of being heard to the assessee. The Ld. DR had no objection to the above request of the assessee. In this view of the matter, we deem it fit, to restore this issue to the file of the Ld. AO for fresh adjudication as per fact and law, after giving a reasonable opportunity of hearing to the assessee. The ground no. 3 raised by the assessee in for AY 2012-13 is accordingly allowed for statistical purposes.
To sum up, all the appeals of the assessee in for AY 2009-10 and 2511 & 2512/PUN/2024 for AYs 2010- 11, 2012-13 and 2013-14 respectively are treated as allowed for statistical purposes.
Order pronounced in the open court on 18th August, 2025.