SAPOI TEA LIMITED ,KOLKATA vs. ITO, WARD-4(4) , KOLKATA

Though the Registry has pointed out that the appeal is time barred 231 days, however, in view of the decision of the Hon’ble Supreme Court in the case of Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period.

The assessee has raised following grounds of appeal:

The first ground is against the confirmation of action of the AO by ld CIT(A) in respect of non-allowance of claim under Rule 8 and second ground is in respect of not allowing the set of brought forward business losses and unabsorbed depreciation.

The facts in brief are that the assessee is engaged in the business of cultivation, manufacturing, processing and selling of black tea. During the year, the assessee filed return of income on 23.09.2010 declaring total income at Rs. 61,68,994/- and also claimed the set of brought forward business losses amounting to Rs. 2,31,030/- as per the return filed. The said return was processed u/s 143(1) of the Act allowing the set of brought forward business losses to the turn of Rs. 2,31,030/- and thus the carry forward business loss remains at Rs. 1,44,58,327/- and accordingly book profit was calculated and brought to tax. Upon examination of the acknowledgement of IT return, the assessee found that the income was not calculated as per Rule 8 of Income Tax Rule, 1962 (hereinafter referred to as the Rules) which provides that the Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax. The assessee immediately wrote to the CPC, Bangalore to correct the said amount and assess them at 40% of such income and allowing the benefit of loss/depreciation brought forward from earlier years however the ITO, CPC rejected the rectification petition vide order dated 27.12.2013. Thereafter the assessee moved rectification petition u/s 154 of the Act on 10.03.2014. Besides, the assessee has moved the petition before Ld. PCIT u/s 264 of the Act on

Thereafter the assessee preferred an appeal before the Ld. CIT(A) which was dismissed by holding that the contention of the assessee appears to be incorrect besides observing that the scope of Section 154 of the Act is limited to apparent mistake from record and therefore in the present case there being no apparent mistake on record and thus provisions section 154 of the Act are not applicable.

Now the assessee is before us challenging the order of Ld. CIT(A) in not directing the AO to assess the income in terms of Rule 8 of Rules and further not directing to allow the set of brought forward business losses and depreciation to the assessee.

After hearing the rival parties and perusing the material on record, we find that the only mistake on the part of the assessee while filing the return of income is that the assessee has inadvertently not calculated the income in accordance with Rule 8 of Rules and thus the returned income has been calculated equal to 100% in place of 40% as per Rule 8 of Rules. But thereafter immediately the assessee took up the matter by moving the rectification petition before ITO, CPC, Bangalore which was rejected. The assessee moved the application for second time before ITO, CPC, Bangalore and it was transferred to the AO concerned. In our considered view, the income of the assessee has to be computed in accordance with the provisions of the Act and mere mistake or lapse on the part of the assessee to compute the income in accordance with the provisions of Act would not disentitle it from benefits available to the assessee under the Act. The Ld. CIT(A) has taken a myopic approach in deciding the issue by citing technicalities that mistake is not apparent from record besides observing also that the scope of section 154 of the Act does not cover such action of omission on the

The issue raised in ground no. 3 is in respect of not allowing the benefit of brought forward losses/ unabsorbed depreciation while computing the tax liability u/s 115JB of the Income Tax Act, 1961. After hearing rival parties and perusing the material on record, we deem it fit to restore the issue back to the file of AO to examine the issue and allow the same as per the provision of the Act.

In the result, the appeal of the assessee is allowed.