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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
PER D. KARUNAKARA RAO, AM:
This is the appeal filed by Revenue against the order of CIT(A)-1,
Aurangabad, dated 27-06-2016 for the A.Y. 2005-06.
Grounds raised by the Revenue are extracted here as under :
“1. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is correct in deleting addition made by A.O. on valuation of closing stock of Molasses, by deciding valuation of closing stock at Rs.3000/- per M.T. without any reasonable working based on facts about realizable market value of closing stock. 2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)is correct in deciding inapplicability of section 43B of I.T. Act, 1961 to unpaid fees payable to state govt. for being guarantor of loan & deleting addition made by A.O. on this issue. 3. The order of the AO be restored and that of the CIT(A) be vacated. 4. The appellant craves leave to add, amend or alter any grounds of appeal.”
2 ITA No.2075/PUN/2016 Rameshwar Sahakari Sakhar Karkhana Ltd.,
From the above grounds, the issues relating to (1) addition on account of
closing stock and (2) the applicability of the provisions of section 43B of
the Act to the Guarantee Fee paid by the assessee to the Government are
the bone of contentions for adjudication before us.
Briefly stated relevant facts of the case include that the assessee is
a Co-operative Society (an AOP) and filed its return of income on 27-10-
2004 declaring total loss of Rs.3,55,40,381/-. Assessee filed the revised
return of income on 22-09-2006 declaring total loss of Rs.1,21,69,086/-.
In the assessment, AO noticed that the assessee valued the closing stock
of Molasses @ Rs.3,000/- per Metric Tonne. On finding the sale price of
molasses as per assessee is @ Rs.4,000/- per Metric tonne, the AO
estimated the entire closing stock by computing the closing stock @
Rs.4,000/- per MT. In the First Appellate proceedings, on this addition,
the CIT(A) deleted the addition of Rs.25,09,000/- made by the AO finding
mistakes in the computation by the AO. Relevant discussion is given in
the Para No.7 of the order of CIT(A). Further, AO also made addition of
Rs.72,26,100/- u/s.43B of the Act on account of Guarantee fees. The
CIT(A), vide the discussion given in Para No.9, deleted this addition too.
During the proceedings before us, relying on the order of the AO,
Ld. DR for the Revenue submitted that the CIT(A) did not call for any
remand report on these issues before granting relief to the assessee by
way of deleting the additions made by the AO. Further, regarding the
issue of Guarantee fee, Ld. DR for the Revenue submitted that this issue
of applicability of section 43B of the Act was never raised by the assessee
during the assessment proceedings. He submitted asking for remanding
this matter also to the file of AO for fresh adjudication.
3 ITA No.2075/PUN/2016 Rameshwar Sahakari Sakhar Karkhana Ltd.,
Per Contra, defending the order of the CIT(A) on the issue of
closing stock valuation, Ld. Counsel for the assessee submitted that the
said basis for arriving at the suppression of closing stock is not
sustainable for the reason that other sales in other months of the year
reported to have been sold @ Rs.3,350/- for the months of June to
September and Rs.3,500/- for the month of December etc. It is not the
case of the Revenue that the entire sales of the stock was sold uniformly
at Rs.4,000/- per MT. Further, Ld. Counsel for the assessee drew our
attention to the order of the CIT(A) and stated that the same is fair and
reasonable and submitted that the AO unfairly estimated the closing
stock by using the unscientific methods based on the surmises and
doubts. However, without prejudice, Ld. Counsel mentioned that he has
no objection if the matter is remanded to the file of AO for fresh
adjudication. Further, he also mentioned that the rate of Rs.4,000/- per
MT is not there substantively in the entire sales of the year under
consideration.
On the issue of Guarantee Fee, Ld. Counsel submitted that it is
the requirement that the assessee needs to pay the fee to the
Government for standing as a Guarantor for the assessee with reference
to the loans and other financial activities of the assessee. He firmly
submitted that this mandatory requirement of making payment of
Guarantee fee to the Government is not covered by the provisions of
section 43B of the Act.
We heard both the parties on these 2 issues and find the AO has
left so many gaps before making the additions in the assessment. In our
view, the exact details of sale price of the stock of Molasses over the
months are not coming out of the assessment order to our satisfaction.
4 ITA No.2075/PUN/2016 Rameshwar Sahakari Sakhar Karkhana Ltd.,
Otherwise, we do not find there exists any sale of Molasses with the rate of Rs.4,000/- per MT. It is the case of the Ld. Counsel for the assessee that such figure never recorded in the books of account. As such, Ld. Counsel for the assessee is open to the re-examination of both these issues. Therefore, we are of the opinion that for plugging the loop-holes and gaps on the facts, and therefore, both the issues stand remanded to the file of AO for adjudication. AO is directed to afford reasonable opportunity of hearing to the assessee in accordance with the set principles of the natural justice. Accordingly, the grounds raised by the Revenue are allowed for statistical purposes.
In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced on 26th day of July, 2018.
Sd/- Sd/- (िवकास अव थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER पुणे / Pune; िदनांक / Dated : 26th July, 2018. Satish
आदेश की 'ितिलिप अ)ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��थ� / The Respondent. 2. 3. The CIT(Appeals)-1, Aurangabad 4. The Pr. CIT-1, Aurangabad िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब#च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड& फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER,
// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.