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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: SHRI SATBEER SINGH GODARA & DR.DIPAK P. RIPOTE
Assessment Year:2010-11 Shri Vitthal Vs DCIT, SahakariSakharKarakhana Circle-1, Solapur. Limited, At Gursale Post Gursale, Tal Pandarpur District, Solapur – 413304. PAN: AAAAS3892H Appellant/ Assessee Respondent / Revenue Assessee by Shri Hanmant D Dhavle – AR Revenue by Shri Sourabh Nayak – Addl.CIT(DR) Date of hearing 18/06/2024 Date of pronouncement 02/09/2024 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the assessee is against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], under section 250 of the Income Tax Act, 1961 dated 17.03.2023 for the Assessment Year 2010-11. The assessee has raised the following grounds of appeal :
“1. On the facts and in the circumstances 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.83,55,371/- on account of Sale of Sugar at Concessional rate.
On the facts and in the circumstances 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.87,40,584/- on account of Sale of Bio composite at Concessional rates.
On the facts and in the circumstances 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.1,66,452/- on account of Advertisement Expenses.
On the facts and in the circumstances 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.5,55,442/- on account of Sabha Samarambha Expenses.
On the facts and in the circumstances 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.75,427,28/- on account of Brought forward Business loss / Depreciation.
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 the hearing.” Submission of ld.AR :
2. The ld.Authorised Representative(ld.AR) of the assessee submitted written submissions as under : “1. Sale of Sugar at Concessional Rate - This is the second time, the issue is travelled to Hon. ITAT Bench. - Original assessment order was passed in 2012. 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 Krishna SSK Ltd Vs CIT - Later on, in 2021, AO passed order u/s 143(3) rws 254 AO as well as CIT(A), failed to comply the first and foremost - directive as to whether difference between market price (in some cases - Levy Sugar Price) and concessional price of sugar should or should not be added to Total Income of the Assessee society. Therefore, this issue is required to be set aside to AO with specific direction of deciding the taxability in the hands of cooperative society.
Sale of Bio Compost at concessional rate - This is the second time, the issue is travelled to Hon. ITAT Bench. - In 2019, Hon Bench has stated that this issue is akin to one of the core issues i.e. sale of sugar at concession rate to members & hence this issue, too, to be restored to AO for deciding it afresh by applying same principle as that of sale of sugar at concession. Therefore, this issue is required to be set aside to AO with direction.
Disallowance of Advertisement Expenses This is the second time, the issue is travelled to Hon. ITAT Bench. In 2019, Hon Bench given favorable decision to assessee society by stating that it is covered issue in favour of assessee - CIT. Vs Shri Panchganga SSK Ltd - HC But again AO while passing Assessment Order u/s 143 rws 254, again made disallowance added to Total Income. Therefore, the addition is required to be deleted as already decided.
Disallowance of Sabh/Samarambh Expenses - In the Original Assessment Order of 2012, AO made disallowance at 10% of Total Expenses. Then matter travelled to Hon ITAT Bench. Hon Bench dismissed ground by stating that 10% is fair and reasonable. - But again AO while passing Assessment Order u/s 143 rws 254, again made disallowance added to Total Income. - CIT(A) NFAC has pointed out that this issue has neither been set aside to AO nor been adjudicated in the order. Hence our appeal was dismissed. - But it was included in the order by AO & added to Total Income. - And if so, Ld CIT(A) are required to consider our submission and say. We have made detailed submission as how the expenses are purely business expenditure. Also quoted some important citations. Therefore, it is requested to give directions that to consider our say & then come to the conclusion.
Disallowance of b/f Business Loss and Depreciation Loss - This disallowance was made by AO by stating that all the previous years losses - Business Losses and Depreciation Losses, were already considered and there are no such losses. - These findings are at the time completing assessment in the year 2012. - Now the condition or scenario is different after the budgetary
amendment 2023. AO are passing the orders u/s 154 rws 155(19) of the IT Act for the periods prior to AY 2016-17. - And therefore, after the allowability for Excess Cane Price, assessee has remained in his hand with huge business loss as we as depreciation loss which earlier was nullified or absorbed fully due to excess cane price disallowance. Therefore, this issue is required to be restored to AO for reconsideration along with the core issues.” Submission of ld.DR : 3. Ld.DR for the Revenue vehemently relied on the order of the AO and ld.CIT(A). Ld.DR submitted that specific questionnaire was issued by the AO as per the directions of the Hon’ble ITAT which is at page no.3 - 5 of the paper book filed by the assessee. However, assessee has not filed any specific reply to these questions. Then, AO issued a show cause notice again requesting to provide specific information, however, the specific information had not been filed. Till date, assessee has not informed how many members assessee have got and to how many members sugar was given at concessional rate. Since assessee failed to file specific details, AO was constrained to pass the order.
Findings & Analysis : 4. We have heard both the parties and perused the records. It is observed that this is the second round of appeal. Earlier, ITAT in assessee’s appeal in for A.Y.2010-11 vide order dated 13.06.2019 had remitted back the issue of concessional sugar price, concessional sale of Bio Composite, carry forward of business loss and unabsorbed depreciation to the Assessing Officer(AO) with certain specific directions.
4.1 Regarding the sale of sugar at concessional rate, the ITAT in appeal no.591/PUN/2014 had given following directions. : “13. On hearing both the sides, we find there is merit in the submissions of the AR. In all these appeals, the CiT(A) has failed to decide the appeals of the assessees in consonance with the above discussed direction of Hon’ble Apex Court in the case of Krishna SSK Ltd. (supra). Accordingly, in these bunch of appeals the issue of sale of sugar at concessional price to the members should be ideally remanded to the file of Assessing Officer for fresh consideration and adjudication of the issue on merits and law. In fact, the Hon’ble Supreme Court remanded the issue to the file of the CIT(A) for complying its direction in the case of Krishna SSK Ltd. (supra). However, in order to avoid multiplicity of the proceeding before different officers, and to be in tune with our findings given in para 7 of this order, we find, remanding to the file of the Assessing Officer is appropriate. Thus, we order accordingly The Assessing Officer shall grant reasonable opportunity of hearing to the assessees, in accordance with law. Accordingly, the grounds raised in the appeals of the Revenue and the assessee are allowed for statistical purposes.” 4.2 The ITAT has relied on the order of Hon’ble Supreme Court in the case of CIT vs. Krishna SSK Ltd. [2012] 211 taxmann.com 109 (SC), wherein the Hon’ble Supreme Court held as under : “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.” 4.3 Thus, the Hon’ble Supreme Court has given specific directions to verify whether any resolution has been passed by the State Government supporting the practice of sale of sugar at concessional rate. The Hon’ble Supreme Court had also directed to verify the accounts and verify the basis for sale of sugar at concessional rate. The Hon’ble Supreme Court had directed to verify the basis on which quantity of sugar to be sold at concessional rate was arrived at.
4.4 We have perused the order of the Assessing Officer(AO) and ld.CIT(A) and submission of the assessee filed before these authorities. It is prominently observed that assessee had not provided basic information i.e.number of members to whom sugar was sold at concessional rate. The assessee has also not filed the specific details regarding exact quantity given to these members. It is observed that the AO had asked these specific questions, assessee filed almost 400 pages submission, but consciously did not file the specific details. These 400 pages contains copies of various case laws, copy of Maharashtra Co-operatives Societies Act, 1960, etc. Thus, assessee has not answered the specific questions. A sample of the assessee’s submission is scanned and reproduced here as under : “54. It is specifically contended that the sugar cane price paid as a whole (including SAP/SMP/FRP/Additional cane price) to the sugarcane supplying farmers is definitive and covered under the “Cost of Purchase” of Cane and same price is paid for the member shareholder farmers and Non-shareholder farmers. Further there is no differential price paid to one, i.e. shareholder cannot be treated as including “Cost plus Profit’ when the same price is paid to the others, i.e. non-shareholders is paid in actual as “Cost of Purchase” only. It may also be stated that not all the Shareholders of the sugar mill have supplied the sugar cane. Shri Vithal SSK Ltd has _ _ number of Shareholders. Out of these only _ _ number of member shareholders have supplied the cane in the AY 2010-2011 and number of member shareholders have not supplied the cane. The price of sum of Lacs paid to the member shareholders who have supplied the sugar cane. Not a single penny is paid to member shareholders who have not supplied the cane. Neither have such Shareholders, who have not supplied the cane, has been paid any “Ex-Gratia” amount” which could be treated as a part of dividend distributed from the “PROFIT” earned by the sugar factory in the relevant assessment year.”
4.5 Thus, from the above paras, one can understand that the assessee has consciously left the figure of number of members blank.
4.6 The moot question is that the Hon’ble Supreme Court had directed to verify the accounts and arrive at basis of quantity, basis of concessional price. However, on perusal of the submission of the assessee, it is observed that assessee has not filed any details regarding the same. Ironically, even before us, the assessee has not even filed copy of annual report, list of members. The Hon’ble Supreme Court had also directed to verify whether there is any guideline issued by State Government. It is observed that Commissioner of Sugar, Government of Maharashtra had issued an order no.CS/Admin-1/Circular/05 dated 13.04.2005 vide which the sugar factories were specifically directed to sale only five kilograms sugar per month at concessional rate to members. It is also mentioned in the said order that violation of these directions will attract action u/sec.88 of Maharashtra Co-operative Societies Act, 1960. This issue is also not discussed by the AO.
4.7 In these facts and circumstances of the case, we are constrained to set-aside the issue to the Assessing Officer again for de-novo adjudication. The AO shall verify accounts as directed by the Hon’ble Supreme Court. The assessee shall produce relevant ledgers and complete set of books before the Assessing Officer. The assessee shall file name of the members to whom assessee had sold sugar at concessional rate along with evidence of the same. AO shall also answer the question raised by assessee i.e. the section under which said amount can be added. If required, AO shall also get information from the Commissioner of Sugar, Maharashtra State. The ld.AR had also pleaded that the issue needs to be re-looked by the Assessing Officer. With these elaborate directions, we set-aside the issue of sale of concessional rate to the Assessing Officer.
Sale of Bio Compost : 5. In this also, assessee has not provided list of members to whom sale of Bio Compost was made at concessional rate. It is observed that cost of production of Bio Compost was around Rs.800 to Rs.850 per metric ton, however assessee has sold it at a rate between Rs.364 to Rs.450 per metric ton. We have already observed that no specific details had been filed by the assessee during the assessment proceedings. Even before us, assessee has not filed list of members to whom Bio Compost was sold at concessional rate and evidence of the same. Nowhere in the submission, assessee has mentioned the basis on which assessee has arrived at the selling cost of Rs.364 to Rs.450 per metric ton and who were the members to whom it was sold at Rs.364 and to whom it was sold at Rs.450 per metric ton. In these facts and circumstances of the case, and as ld.AR has also pleaded that this issue needs to be set-aside to the AO, we hereby set-aside this issue to the Assessing Officer for de-novo adjudication. The assessee shall produce all the details before the AO within the three effective opportunities. Accordingly, Ground No.2 of the assessee is allowed for statistical purpose.
Advertisement Expenses : 6. The issue of advertisement expenditure was decided by ITAT in for A.Y.2010-11 in favour of assessee. In spite of this, the AO has made addition on account of disallowance of Advertisement Expenditure. Therefore, we hereby direct the AO to delete the addition of Rs.1,66,316/-. Accordingly, Ground No.3 raised by the assessee is allowed.
Sabha Samarambha Expenses : 7. The issue of Sabha Samarambha Expenditure was decided by ITAT in for A.Y.2010-11 in favour of Revenue. The ITAT held that disallowance of 10% was fair and reasonable. Therefore, Rs.5,54,442/- is upheld. Accordingly, Ground No.4 raised by the assessee is dismissed.
Disallowance of Brought forward Business Loss/Depreciation : 8. Assessee has not produced copies of earlier returns and earlier assessment orders to demonstrate Brought Forward Business Loss and Brought Forward Unabsorbed Depreciation. Therefore, this issue is set-aside to the AO for de-novo adjudication. Assessee shall produce all the necessary details before the Assessing Officer.
Ground No.6 is general in nature, needs no adjudication. Hence, dismissed.
Shri Vitthal Sahakari Sakhar Ltd., [A] 10. In the result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 2nd September, 2024.