Loading judgment…
Facts
The assessee, a sugar cooperative society, claimed deductions for excess cane price paid to farmers and for sale of sugar at concessional rates to its members. The Assessing Officer made additions on both counts. The CIT(A) confirmed the assessment order.
Held
The Tribunal noted that the CIT(A) dismissed one ground without discussing merits and failed to consider relevant aspects for the other ground, particularly in light of Supreme Court directions. The Tribunal set aside the order for de novo adjudication.
Key Issues
Whether the CIT(A) erred in dismissing the ground regarding excess cane price without merit and whether specific details were required to be examined for the sale of sugar at concessional rates.
Sections Cited
155(19), 250, 143(3), 251, 246A, 80IA(4)(iv)(a), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE
Before: SHRI R.K.PANDA & SHRI VINAY BHAMORE
Assessment Year:2012-13 Bhimashankar SSK Ltd., V The ACIT, A/P. Pargaon, Tal.Ambegaon, s Circle-8, Pune. Dist-Pune – 412406. PAN: AAAAB0949G Appellant/ Assessee Respondent / Revenue Assessee by Shri Hanmant Dattatry Dhavle – AR Revenue by Shri Amol Khairnar – CIT(DR) Date of hearing 18/12/2024 Date of pronouncement 11/03/2025 आदेश/ ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is against the order of ld.Commissioner of Income Tax(Appeals)[NFAC] passed under section 250 of the Income Tax Act, 1961; dated 23.03.2024 for Assessment Year 2012-13. The assessee has raised the following grounds of appeal :
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.42,23,17,760/- on account f Excess Cane Price Paid Farmers.
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.71,99,261/- on account of Sale of Sugar at Concessional Rate.
The appellant craves for the leave, add, alter, amend, modify and delete any or all the above grounds of appeal
s before or at the time of hearing.” Submission of ld.AR :
2. Ld.AR submitted that assessee has filed a petition before the Assessing Officer under section 155(19) of the Act. However, the said petition is pending before the Assessing Officer. Therefore, ld.AR requested to set-aside the issue to the AO for re-examination in the light of Section 155(19) of the Act. Ld.AR filed a written submission which is reproduced as under : “This is the second time, the issue is travelled to Hon ITAT Bench. Original assessment order was passed in 2015. After that the matter travelled to CIT(A) and later at Hon. ITAT Bench. In 2019, Hon ITAT Bench set aside the issue to AO with a direction that AO is required to consider directives given in the Hon SC Judgement in the matter of CIT Vs Tasgaon Taluka SSK Ltd (2019) dt. 05.03.2019 Later on, in 2021, AO passed order u/s 143(3) r.w.s. 254 r.w.s. 144B Prayer:- -In Union Budget 2023, Hon. Finance Minister 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. - Accordingly, Section 155(19) inserted in the Income Tax Act, 1961 which is read as follows:
(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. - Accordingly, Assessee have made Application before AO and the same is pending. Therefore, this issue is required to be set aside to AO for re- examination of facts in light of Section 155(19) of the Income Tax Act, 1961.”
Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of the Assessing Officer and ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the records. The Assessee is a Co-operative Society engaged in manufacture and sale of Sugar and its By-products. Assessee filed Return of Income for A.Y.2012-13 on 28.09.2012. Assessee claimed deduction under section 80IA(4)(iv)(a) of the Income Tax Act and Section 80P(2)(d) of the Act. The assessment order under section 143(3) was passed on 12.02.2015. The assessee preferred an appeal before the ld.CIT(A) which was partly allowed vide order dated 25.10.2016. The Assessee filed appeal before the ITAT. ITAT vide order dated 01.05.019 set-aside the issues for verification to the Assessing Officer. The Assessing Officer passed an order under section 143(3) r.w.s. 254 r.w.s. 144B of the Act on 28.09.2021. In the said assessment order, Assessing Officer made addition of Rs.42,23,17,760.26 on account of excess cane paid over FRP. Similarly, AO made addition of Rs.71,99,261/- on account of sale of sugar at concessional rates to its Members. Aggrieved by these additions, Assessee filed appeal before the ld.CIT(A).
4.1 The ld.CIT(A) confirmed the assessment order, hence, Assessee filed appeal before this Tribunal.
4.2 Thus, there are two issues, which are as under : Excess cane price paid to farmers over FRP Sale of Sugar at concessional rate to its Members We will discuss each issue hereunder : Excess cane price paid to farmers over FRP : 5. As per the assessment order, for sugar season 2010-11, the Assessee has paid Rs.2,250/- per metric ton to its Members and Rs.1,800/- per metric ton to Non-members for purchase of Sugarcane. For Sugar Season 2011-12, Assessee has paid Rs.2,450/- per metric ton to its Members for purchase of Sugar Cane. The assessing officer in the assessment order stated that FRP fixed by Central Government for purchase of Sugarcane was Rs.1801.90 per metric ton. However, the Assessing Officer has also observed that Maharashtra State Government has fixed the price at Rs.2450/- per metric ton, the said price is called “State Advised Price”. The Assessing Officer held that Assessee has paid excess price for purchase of sugar cane and accordingly made addition. Aggrieved by the same, assessee filed appeal before the ld.CIT(A). The ld.CIT(A) in para no.4.5 held as under : “4.5. Since specific remedy has been provided for in the Act in Section 155(19) with specified modalities thereof, this issue does not warrant any adjudication under the present appeal proceedings and is therefore, dismissed accordingly with liberty to the appellant to move appropriate petition before the AO as provided under Section 155(19) read with SOP issued vide Circular No.14 of 2023 as above. In the result, Ground No.1 and 3 on the issue are dismissed.”
5.1 Thus, ld.CIT(A) dismissed the Ground No.1 and 3 raised by the Assessee regarding excess sugar cane price paid in limine without discussing merits. As per section 251 of the Act, it is mandatory for the ld.CIT(A) to decide each ground of appeal on merit.
6. The Hon’ble Bombay High Court has held in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF)(Bombay)/[2017] 297 CTR 614 (Bombay) as under : Quote, “8.From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non- prosecution as is evident from the provisions of the Act.” Unquote. 6.1 Thus, the Hon’ble Bombay High Court has categorically held that ld.CIT(A) has to decide the appeal on merit and ld.CIT(A) does not have any power to dismiss appeal for non-prosecution.
6.2 In view of the above, in the interest of justice, we set-aside the order of the ld.CIT(A) to ld.CIT(A) for denovo adjudication. Ld.CIT(A) shall provide opportunity to the assessee. Assessee shall file all the necessary documents before the ld.CIT(A). Accordingly, Ground No.1 raised by the assessee is allowed for statistical purpose.
Sale of Sugar at concessional rate to its Members : 7. As per assessment order, Assessee has sold sugar @1902.15 per quintal to its members, whereas Market Price was Rs.2635.87 per quintal. Therefore, Assessing Officer held that Assessee has sold sugar at concessional rate to its members. It is important to note that the ITAT had given specific directions to find out cost of production of sugar and other details. However, ld.CIT(A) in para 4.16 & 4.19 has held as under :
“4.16 However, as noted by the AO, the appellant had not submitted these specific details before the AO for verification and even during the appeal proceedings only general contentions have been made that it fulfils the conditions laid down which cannot be accepted……………. ………………. 4.19 Considering these, the AO has justly compared the concessional rate with market price to arrive at the disallowance of Rs.71,99,260/- which does not warrant any interference. Ground No.2 on the issue is therefore, not allowed.” 7.1 Thus, it is the contention of the Revenue that Assessee has failed to submit the specific details.
It is noted that ld.AR submitted that it is a customary practice to sale sugar at concessional rate to the Farmers who sell sugar cane to Assessee. Ld.AR further submitted that this is a practice followed by all sugar factories.
8.1 We have observed that indeed it is a customary practice among many sugar factories in this belt to sale sugar at concessional rate to Farmers. However, nowhere the exact number of members to whom sugar has been sold at concessional rate is mentioned by the Assessee. The said fact has not been mentioned by the Assessee even in the paper book filed before us. Also, Assessee has not mentioned to how many non-members sugar was sold at concessional rate.
8.2 The Hon’ble Supreme Court in the case CIT Vs. Krishna Sahakari Karkhana Limited [2012] 27 taxmann.com 162 (SC)(supra) vide order dated 25.09.2012 had given specific directions, the relevant paragraph as under : Quote “The assessee(s) is a Co-operative Society engaged in the business of production of sugar from sugarcane and sale thereof. Assessee(s) buys sugarcane from its Members. Every month and on Diwali, assessee(s) sells certain quantity of sugar (final product) at concessional rate to farmers/cane growers/Members. The difference between the average price of sugar sold in the market and the price of sugar sold by the assessee(s) to its Members at concessional rate is sought to be taxed by the Department under the Head 'Appropriation of Profit'. 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 assessee(s) Society, needs to be re-looked by Commissioner of Income Tax (Appeals) [for short, 'CIT(A)']. Apart from the afore-stated question, CIT(A) would take into account, whether the above-mentioned practice of selling sugar at concessional rate has become the practice or custom in the Co-operative Sugar Industry?; and whether any Resolution has been passed by the State Government supporting the practice? 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? These are some of the questions which have not been addressed by the Authorities below in the impugned orders. The CIT(A) would be entitled to look into the Accounts and verify the basis for sale of sugar at concessional price on month-to-month basis. We, therefore, keep all questions of law and facts open. Needless to add, the CIT(A) would give liberty to both sides to produce relevant documents. For the above reasons, we remit the cases to CIT(A) to de-novo consider the matter.”Unquote 8.3 In this context, it is important to refer to the circular of the Sugar Commissioner – Maharashtra State vide Circular No:“Outward No:CS/Admin-1/Circular/05 dated 01.03.2006”. The Sugar Commissioner of Maharashtra State has elaborately discussed the sale of sugar at concessional rate and given directions. The said circular is reproduced as under : “Commissioner of Sugar Maharashtra Rajya SakharSankul, Shivaji Nagar, Pune-5 Date:01st Date March, 2006 Outward No:CS/Admin-1/Circular/05 CIRCULAR Sub: Sale of Sugar at concessional rate to members and employees of sugar factories of State To give directions as per section 79A of the Maharashtra Co- operative Societies Rules, 1960 Ref: Govt. Letter SSK1005/25859/Letter No. 345/25S dated 14th February, 2006 Terms and conditions and procedure to be followed for sale of sugar at concession rate was fixed through Circular from this office dated 13th April, 2005 and 27th May, 2005. However, some of the factories have informed to this office that they have passed the resolution at their Annual General Meeting/ Extra Ordinary General Meeting regarding not to adopt the provisions contained in this circular on sale of sugar factories are informed that Circular was issued u/s 79A of the Maha. State Co-op Act 1960 pursuant to the decision taken at the meetings of Hon'ble Committee of Ministers on 1st September, 2005 and 30th September, 2005 on sale of sugar at concession rate to the members and employees. Since the provisions of the Act prevail over the Bye-Laws of the Society, sugar factories should sell the sugar at concession rate to their members and employees as per the directions given by the State Government. It may be noted that, action can be taken against Board of Directors of the factories not obeying these directions under Section 88 of the Maharashtra State Co-operative Societies Act, 1960. Following are the directions as per the Section 79(A) of Maharashtra Co-operative Societies Act, 1960:
1. 1. The factories should stop the current practice of selling the sugar at concession rate to their members. Instead, sugar at concession rate can be made available through following method.
2. The rate for concession sugar sale by a Co-op sugar factory to its members shall be at the rate of levy sugar plus excise duty on free sugar.
3. A Co-op sugar factory shall sell maximum 5 kg sugar per month at concession rate to its member.
4. This concession will be limited only to the members and employees.
5. If a factory has crushed less than 50% in the previous season, then it will not be eligible for concession sale of sugar.
6. The sale of sugar at concession rate shall be applicable only to those members who have supplied their cane to factory as per the rules of the factory. After detailed discussion, following directions are given under Section 79 (A) of Maharashtra Co-operative Societies Act, 1960 DIRECTIONS 1. The factories should stop the current practice of selling the sugar at concession rate to their members. Instead, sugar at concession rate can be made available as per following method.
2. The rate for concession sugar sale by a Co-op sugar factory to its members shall be at the rate of levy sugar plus excise duty on free sugar.
3. A Co-op sugar factory shall sell maximum 5 kg sugar per month at concession rate to its member.
4. This concession will be limited only to the members and employees.
If a factory has crushed less than 50% in the previous season, then it will not be eligible for concession sale of sugar.
The sale of sugar at concession shall be applicable only to those members who have supplied their cane to factory as per the rules of the factory.” 8.4 The Sugar Commissioner Maharashtra Government gave the directions to all sugar factories as per Section 79(A) of Maharashtra Co-operative Societies Act, 1960. The Sugar Commissioner gave the direction that Sugar Factories shall sale maximum 5 kgs of sugar per month at concessional rate to its members only. The rate shall be @ levy sugar (+) excise duty. The sale of sugar at concessional rate shall be applicable only to those members who have supplied their Sugar Cane to the factory. However, the Assessee has not submitted exact details of the members who have supplied Sugar Cane to factories and who have been provided sugar at concessional rate.
8.5 The Hon’ble Supreme Court in the case of Krishna SSK Ltd.,(supra) had set-aside the issue with specific direction. Accordingly, ITAT had directed Assessing Officer to verify the issue as per the directions of Hon’ble Supreme Court. One of the Directions of Hon’ble Supreme Court(supra) was to find out whether any resolution passed by State Government. Therefore, the Circular issued by Sugar Commissioner, Maharashtra State in 2006 needs to be considered as directed by Hon’ble Supreme Court(supra). In 2006, the Sugar Commissioner gave specific directions under section 79(A) of the Maharashtra Co-operative Societies Act, 1960. We have already reproduced the relevant paragraphs of ld.CIT(A)’s order. The ld.CIT(A)/AO has not answered following questions :- How many members have been provided sugar at concessional rate? Had those members supplied sugar cane to the factory? Had assessee factory crushed more than 50% in the previous season? What is the Rate at which the sugar was sold at concessional rate and What was the levy sugar rate and excise duty for that year? 8.5 All the above questions are relevant to decide the issue of sale of sugar at concessional rate. However, levy sugar rate and excise duty has not been brought on record.
8.6 Section-79A of the Maharashtra Co-operative Societies Act, 1960 is reproduced here as under : “79- A. Government's powers to give directions in the public interest, etc.-
(1) If the State Government, on receipt of a report from the Registrar or otherwise, it satisfied that in the public interest or for the purposes of securing proper implementation of co-operative production and other development programs approved or undertaken by Government, or to secure the proper management of the business of the society generally, or for preventing the affairs of the society being conducted in a manner detrimental to the interests of the members, or of the depositors or the creditors thereof, it is necessary to issue directions to any class of societies generally or to any society or societies in particular, the State Government may issue directions to them from time to time, and all societies or the societies concerned, as the case may be, shall be bound to comply with such directions.
(2) The State Government may modify or cancel any directions issued under sub-section (1), and in modifying or canceling such directions may impose such conditions as it may deem fit.