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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Sanjay Arora, AM & Shri Manomohan Das, JM
O R D E R
Per Sanjay Arora, AM:
This is an Appeal by the Assessee agitating the Order by the Commissioner of Income-tax (Appeals), Income Tax Department [CIT(A)] dated 25.7.2022, dismissing it’s appeal contesting the order under section 154 of the Income Tax Act, 1961 (‘the Act’) dated 02.01.2020 for assessment year (AY) 2015-2016.
The brief facts of the case are that assessment for the relevant year was made accepting the returned income of nil, allowing the assessee, a primary agricultural co-operative society (PACS) under the Kerala Co-operative Societies Act, 1969 (Kerala Act), deduction u/s.80P(2)(a)(i) on the entirety of it’s gross total income (of Rs.56,27,075) vide order u/s.143(3) of the Act dated 05/12/2017. Subsequently, notice u/s.154 was issued on 18.6.2019 inasmuch as the net profit included income of Rs.9,45,960 on the sale of medicines and manure through retail outlet/s. The assessee, while admitting the same vide it’s reply dated 15.11.2019 (copy on (AY 2015-2016) Thankamany SCB Ltd v. ITO record),submitted that the said figure was only the gross profit on such retail trade. Deducting proportionate indirect expenditure would result in a loss. Accordingly, there had been no excess claim of deduction u/s.80P(2)(a)(i). The same was not accepted, and the income accordingly assessed at Rs.9,45,960, which found confirmation in first appeal, so that, aggrieved, the assessee is in second appeal.
We have heard the parties, and perused the material on record. A mere glance at the profit and loss account for the year (copy on record) clarifies that the sum of Rs.9,45,960 is the gross profit on retail sale. It is therefore incorrect to say that deduction, admittedly wrongly claimed by the assessee, had been on the said sum. Deduction of proportionate indirect expenditure only would yield income, which by definition is net of expenditure there-against, on which, therefore, deduction u/s.80P(2)(a)(i) is exigible. The Revenue’s claim of excess deduction having been allowed in assessment, valid in principle, stands wrongly applied. The question, therefore, is the quantification –and inasmuch as these are rectification proceedings, on the basis of the material on record, of the deduction u/s. 80P(2)(a)(i) referable to the income on the retail trade which stands thus wrongly allowed in assessment. The assessee having filed consolidated accounts, it may not be possible to identify the indirect expenditure relatable to the retail sale, as it claims before us at Rs. 10,63,675. Where, therefore, the net profit on such retail trade is not ascertainable w.r.t. the material on record, the Assessing Officer shall adopt the net profit rate on such activity for the immediately preceding year, where borne out of the record for that year, or, in its absence, for the immediately succeeding year. In the absence of both, he shall adopt the net profit to gross profit ratio as obtains for the current year, i.e,, in aggregate, to determine the net profit on the retail sale, and adjust the assessee’s deduction u/s.80P(2)(a)(i) accordingly. Needless to add, the assessee shall be allowed due opportunity of being heard by him before doing so. We may before parting with this order, also state that the assessment order u/s. 143(3) on record, and purportedly rectified, is dated 27/10/2017, which is not 2
(AY 2015-2016) Thankamany SCB Ltd v. ITO understandable in view of the said date being stated as ‘05/12/2017’ in the order u/s. 154 as also the impugned order. The particulars of income, as also the returned/assessed income, referred to therein, though agree with the order dated 27/10/2017 on record. A rectification is specific to an assessment, so that the instant rectification cannot be regarded as w.r.t. the assessment dated 27/10/2017. At the same time, inasmuch as there cannot be two assessments for a year under the same proceedings, the mention of date ‘05/12/2017’in the rectification and the impugned order may well be a typographical mistake. The AO shall look into the matter, issuing clear findings, including qua the applicability of our adjudication which can be, save the mention of date ‘05/12/2017’ in the rectification and impugned orders being a mistake, regarded as qua he assessment dated 05/12/2017. We decide accordingly.