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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE – VIRTUAL COURT
Before: SHRI INTURI RAMA RAO & SHRI RAVISH SOOD
ORDER
PER INTURI RAMA RAO, AM:
This is an appeal filed by the assessee directed against the order of ld. Pr. Commissioner of Income Tax- 2, Nashik [‘Pr.CIT’ for short] passed u/s 263 of the Income Tax Act, 1961 (‘the Act’) dated 17.01.2019 for the assessment year 2015-16.
The appellant raised the following grounds of appeal :- “1. The learned PCIT erred in passing the revision order u/s 263 by holding that the asst. order passed u/s 143(3) in the case of the assessee company for A.Y.2015 - 16 was erroneous and prejudicial to the interest of revenue and thereby directing the A.O. to verify the issue regarding exemption u/s 10(26AAB) de novo.
2. The learned PCIT erred in holding that the A.O. has not applied the proper provisions of law while verifying the issue of allowing 10(26AAB) to the assessee company and thereby holding that the asst. order u/s 143(3) was erroneous in nature so as to warrant revision of the same u/s 263 of the Act without appreciating that the revision u/s 263 was not justified on facts and in law.
3. The learned PCIT failed to appreciate that in the course of the asst. proceedings u/s 143(3), the issue regarding eligibility of exemption u/s 10(26AAB) was verified in details by the A.O. and the view adopted by the A.O. after verification of the details was certainly a possible view and therefore, the asst. order passed u/s 143(3) was not erroneous and hence, the revision order u/s 263 was not valid in law.
4. The learned PCIT erred in not appreciating that the appellant company was a regulator of marketing of agricultural produce and it was not a mere aggregator of agricultural produce as claimed by the Pr. CIT and this fact was also clarified in details before the A.O. who has accepted the claim u/s 10(26AAB) in the original asst. u/s 143(3) and therefore, the revision order passed u/s 263 may be declared as bad in law.
5. The learned PCIT further erred in not appreciating that the Govt. had granted license to the assessee company for regulating the marketing of agricultural produce and all the functions performed by it were identical to APMC and applying the purposive rule of interpretation to the provisions of section 10(26AAB), the A.O. had rightly allowed the said exemption to the assessee and this view adopted by the A.O. in the asst. u/s 143(3) was certainly one of the two possible views, if not the only possible view, and therefore, the asst. order passed u/s 143(3) could not be termed as ‘erroneous’ within the meaning of section 263 of the Act.
6. The appellant craves, leave to add, alter, amend and delete any of the above grounds of appeal.”
3. Briefly, the facts of the case are as under :- The appellant is a company incorporated under the provisions of the Companies Act, 2013. It was formed with the object of carrying on business of Agriculture Produce Market Committee (APMC)/ Board. The return of income for the assessment year 2015-16 was filed on 30.09.2015 disclosing Rs.Nil income after 10(26AAB) of the Act. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2(2), Nashik (‘the Assessing Officer’) vide order dated 30.06.2017 passed u/s 143(3) of the Act accepting the returned income.
4. Subsequently, on examination of the assessment record, ld. Pr.CIT had come to conclusion that the Assessing Officer had allowed the claim of exemption u/s 10(26AAB) without considering the fact that the appellant had not been constituted under any law for time being in force for the purpose of regulating the marketing of agricultural produce, as the appellant company is neither APMC nor a Board as defined u/s 10(26AAB) of the Act. The ld. Pr.CIT had further observed that the Assessing Officer had not examined whether the other income is inextricably linked with the exempt business income. Accordingly, the ld. Pr.CIT issued a show-cause notice u/s 263 of the Act vide notice dated 30.11.2018. In response to which, the appellant had filed a detailed explanation vide his letter dated 08.01.2019 contending that the appellant company had been established to carrying on the business of APMC/ Board as per licence granted by the Government of Maharashtra under the Maharashtra Agricultural Produce Marketing (Development & Regulation) Act, 1963. Therefore, it falls within the ambit of APMC/ Board as envisaged under the provisions of section 10(26AAB) of the Act. It is also brought to notice of ld. Pr.CIT that the issue of exemption u/s 10(26AAB) was examined by the Assessing Officer during the course of assessment proceedings and the Assessing Officer took the plausible view that the appellant company is entitled for exemption u/s 10(26AAB) of the Act. On consideration of the explanation of the appellant, the ld. Pr.CIT by making the following observations held that the assessment order is “erroneous and prejudicial to the interests of the Revenue” and set- aside the issue to the file of the Assessing Officer for fresh adjudication in accordance with law :- (i) The appellant company is an individual private limited company which is not constituted under any prevailing of law by Maharashtra Government. (ii) The appellant company cannot regulate the market of agricultural produce. (iii) The assessment was completed without considering the provisions of section 10(26AAB) of the Act.
(iv) The Assessing Officer had failed to examine the issue whether the assessee is entitled for exemption u/s 10(26AAB) or not?.
Being aggrieved by the above order of the ld. Pr.CIT, the appellant is before us in the present appeal.
Before us, Shri Sanket Joshi, ld. Authorised Representative for the assessee submits that the issue of eligibility of the appellant for exemption u/s 10(26AAB) was examined by the Assessing Officer during the course of regular assessment proceedings. He drawn our attention to the questionnaire along with notice u/s 142(1) dated 07.06.2017 wherein at query no.7 the Assessing Officer sought details from the appellant company to satisfy himself as to the fulfilment of conditions for exemption u/s 10(26AAB) of the Act. It is further submitted that the case was selected for scrutiny assessment under limited scrutiny for the purpose of verifying the very claim u/s 10(26AAB) of the Act. He also drawn our attention to the information filed before the Assessing Officer during the course of assessment proceedings placed at page no.13 wherein it is stated that the appellant company’s object is an agricultural produce market committee/board constituted under Maharashtra Agricultural Produce Marketing (Development & Regulation) Act, 1963 and is engaged in the business of running and regulating open market for all types of agricultural produce. It was licensed by the Government of Maharashtra to act as an Agricultural Produce Market Committee/ Board. The copy of the licence issued by the Government of Maharashtra is also filed. He further submitted that the functions of the appellant company are akin to the agricultural produce market committee. The copy of the information filed before the Assessing Officer is also filed before us in the paper book pages no.12 to 23. The ld. AR also taken us through the recommendation of the Committee of State Ministers, In-charge of Agriculture Marketing to Promote Reforms placed at page no.78 to 119 of the Paper Book wherein, it is stated that the promotion of APMC had to be modified by providing for setting-up of alternate marketing systems in private/cooperative sectors, which can operate in addition and parallel to the existing markets. Thus, it is contended that it cannot be said that the Assessing Officer had passed the assessment order allowing the claim for exemption u/s 10(26AAB) without due enquiry. Further, it is contended that there is no material on record indicating that the assessment order passed Assessing Officer is ‘erroneous and prejudicial to the interests of the Revenue.
On the other hand, ld. CIT-DR placing reliance on the order of the ld. Pr.CIT submitted that the Assessing Officer without looking into the provisions of section 10(26AAB) allowed the claim for exemption u/s 10(26AAB) of the Act. He further submitted that the assessee is not entitled for exemption u/s 10(26AAB) of the Act as the assessee is not a statutory body formed for the purpose of regulating the market for agricultural produce.
We heard the rival submission and perused the material on record. The issue in the present appeal relates to the validity of the revision exercised by the ld. Pr.CIT u/s 263 of the Act. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC).
The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the possible views, the assessment order cannot be termed as an “erroneous”.
Now, we may examine the facts of the present case. We find that the Assessing Officer carried out necessary enquiry and verification while allowing the claim of exemption u/s 10(26AAB) of the Act. On going through the assessment proceedings, it would be evident that the case was selected for scrutiny assessment under limited scrutiny for the very purpose of verifying the claim u/s 10(26AAB) of the Act. The Assessing Officer had issued notice u/s 142(1) dated 07.06.2017 calling for the details complete ledger account of exemptions claimed u/s 10(26AAB) along with supporting bills/vouchers vide query no.7 of the questionnaire. This query was replied by the assessee by filing the detailed explanation as to how the appellant company is entitled to claim u/s 10(26AAB) of the Act. The reply filed by the assessee is extracted below :- “2) The assessee company is an agricultural produce market committee/board constituted under Maharashtra Agricultural Produce Marketing (Development & Regulation) Act, 1963 and is engaged in the business of running and regulating open market for all types of agricultural produce. In support of the above fact copy of license issued by the Director of Agricultural Marketing, Maharashtra State, Pune is enclosed as Annex.2. Further, it is important to note here that the main object of the company also authorize the company to act as an Agricultural Produce Market Committee. In this respect, relevant portion of Main Object of the Assessee is reproduced below: ‘to provide all facilities to fanners to sell their agricultural and allied products, to deal directly with to farmers to sell their agricultural products, to run open market for all types of agricultural produce, to arrange auctions of agricultural produce and to appoint brokers, agents to carry on the activity of the company’. 3) The main premise of the assessee company from where the business activities are operated is situated at Nilgiri Park, Near Yash Lawns, Nashik- 422004.”
On going through the above submission made by the assessee, the Assessing Officer passed the assessment order allowing the claim for exemption u/s 10(26AAB) by discussing the nature of the claim made by the assessee vide para 3 of the assessment order. This facts would clearly show that the Assessing Officer had examined the claim/considered the information/explanation filed during the course of assessment proceedings took a view that claim of the assessee u/s 10(26AAB) of the Act is allowable. Nor can it be said that the Assessing Officer did not consider the provisions of section 10(26AAB) of the Act. In our considered opinion, the order cannot be termed as ‘erroneous’ for want of enquiry on the issue which is sought to be revised by the ld. Pr.CIT. The ratio of decision of Jurisdictional High Court in the case of CIT vs. Nirav Modi, 390 ITR 292 (Bom.); MOIL Ltd. vs. CIT, 396 ITR 244 (Bom.); Idea Cellular Ltd. vs. DCIT, 301 ITR 403 (Bom.) is squarely applicable to the facts of present case.
Thus, the very premise of the order of ld. Pr.CIT is wrong. There is nothing on record to say that the view taken by the Assessing Officer is unsustainable under the law. The Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) clearly held that when the Assessing Officer adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law. Therefore, the assessment order cannot be termed as ‘erroneous and prejudicial to the interests of the Revenue’. Therefore, the ld. Pr.CIT was not justified in exercising the power of revision u/s 263 of the Act and, accordingly, the order of the ld. Pr.CIT passed u/s 263 is hereby set-aside. Thus, the issue raised in grounds of appeal by the assessee stands allowed.