DCIT, VILLUPURAM vs. M/S. CHENGALRAYAN CO-OP. SUGAR MILLS LTD., VILLUPURAM

Both the appeals of the Revenue are directed against the respective orders of the Commissioner of Income Tax (Appeals), Puducherry, dated 05.07.2016 and pertain to assessment years 2006-07 and 2009-10. Since common issue arises for consideration in both the appeals, we heard these appeals together and disposing of the same by this common order.

There was a delay of 13 days in filing both the appeals by the Revenue. The Revenue has filed petitions for condonation of delay. We have heard the Ld. Departmental Representative and the Ld. representative for the assessee. We find that there was sufficient cause for not filing these appeals before the stipulated time. Therefore, we condone the delay and admit both the appeals.

Dr. S. Pandian, the Ld. Departmental Representative, submitted that the only issue arises for consideration is valuation of molasses while considering the opening stock. According to the Ld. D.R., while considering the value of molasses in earth pit at ₹100/- per metric ton, the assessee has not taken into consideration the market value. Therefore, the Assessing Officer fixed the market value of the molasses in the pit at ₹655.28 per metric ton for the assessment year 2006-07 and ₹772.5 per metric ton for the assessment year 2009-10. However, the CIT(Appeals) found that the Assessing Officer has not obtained any new material or information for valuation of molasses. According to the Ld. D.R., the assessee has not disclosed both the value of opening stock and closing stock of molasses in earth pit.

On the contrary, Shri J. Prabhakar, the Ld. representative for the assessee, submitted that Molasses Control Order restricts free trade of molasses in the market. The assessee has to necessarily obtain permission for sale of molasses in the market from Tamil Nadu Pollution Control Board and other regulatory authorities. Therefore, according to the Ld. representative, it has no value. However, for accounting purpose, the assessee has valued the molasses in earth pit at ₹100/- per matric ton. On a query from the Bench which provision of Molasses Control Order prohibits or restricts free trade of molasses in the open market, the Ld. representative could not produce the Molasses Control Order immediately for reference. The Ld. representative further submitted that the opening stock was disclosed on the basis of very same value adopted regularly, therefore, revaluation of molasses rate determined by the Assessing Officer may not have any effect in the Profit & Loss account of the assessee-society. In other words, there will be revenue neutral, hence, according to the Ld. representative, no interference is called for.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee valued the molasses in earth pit at ₹100/- per metric ton. However, the Assessing Officer claims that it was valued on market value. Now the assessee claims that the molasses cannot be traded freely in the open market because of the restriction provided in Molasses Control Order. Copy of Molasses Control Order was not produced before this Tribunal, therefore, we have no occasion to go through the said order. In such circumstances, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer after considering the Molasses Control Order. Accordingly, orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter on the basis of the material that may be filed by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, both the appeals filed by the Revenue stand allowed for statistical purposes.