Bombay High Court
The Commissioner Of Income Tax-I, ... vs The Akot Ginning And Pressing ... on 8 December, 2015
Bench: B.P. Dharmadhikari
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY :
NAGPUR BENCH : NAGPUR.
Income Tax Appeal No.112 of 2013
The Commissioner of Income Tax-I,
Aayakar Bhawan, Civil Lines, Nagpur. .... Appellant.
Versus
The Akot Ginning and Pressing Factory Ltd.,
Anjangaon Road, Akot. .... Respondent.
.....
Shri Anand Parchure, Advocate for appellant.
Shri K.P. Dewani, Advocate for respondent.
.....
Coram : B.P. Dharmadhikari &
V.M. Deshpande, JJ.
DATE OF RESERVING JUDGMENT : NOVEMBER 23, 2015.
DATE OF PRONOUNCEMENT : DECEMBER 08, 2015.
J U D G M E N T ( Per B.P. Dharmadhikari, J.)
The department has attempted to raise the following
questions as the substantial questions of law in this appeal :-
"1] Whether on the facts and circumstances
of the case and in law, the Hon'ble ITAT has
erred in holding that the assessee was
entitled to the deduction u/s 80P(e) of the
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Income Tax Act, 1961 in respect of the
alleged rental income computed @ 50% in
respect of ginning and pressing charges
received/earned by the assessee during the
year ?
2] Whether the Tribunal below has
perversely appreciated the facts and law
while upholding the order of CIT(A) and
setting aside the order of the A.O., resulting
in serious miscarriage of justice warranting
interference at the hands of this Hon'ble
Court?
3] Whether the authorities below were
justified in reopening the proceedings merely
on the basis of change of opinion?
4] Whether the authorities below were
justified in placing the reliance on the
judgments not relating to the controversy in
the matter to reopen the proceedings in a
grossly perverse manner?"
2. The facts show that for the assessment year 2003-2004
the respondent Cooperative Society filed return on 31-10-2003
declaring the total income at Rs. Nil after claiming the exemption
under Section 80P(2) of the Income Tax Act, 1961 [for short, 'the
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said Act']. This return was processed under Section 143(1) of the
said Act on 27-02-2004 and during the scrutiny a notice was issued
to the assessee on 20-10-2004. The gross total income during that
year was of Rs.31,22,952/-. We are concerned about the provisions
of Section 80P(2)(e) of the said Act and the assessee claimed
deduction of Rs.47,95,215/- i.e. at 50% of the ginning and pressing
charges. It pointed out that it was as per the order dated 14-12-1994
for the assessment year 1990-1991 in assessee's own case passed by
the Commissioner of Income Tax (Appeals)-I, Nagpur [CIT (A)].
The CIT (A) in turn had followed the view of the Nagpur Bench of
the Income Tax Appellate Tribunal, Nagpur.
3. A notice under Section 148 of the said Act was issued
on 19-03-2008. The assessee on 29-03-2008 adopted its return
filed on 31-10-2003. The assessee opposed the reopening and also
pointed out that there was no error. The Income Tax Officer
passed the assessment order on 29-12-2008 and after recording the
finding that the assessee did not receive any commission income
from the Cotton Federation in respect of the ginning and pressing
services under any agreement for the assessment year
2003-2004, the said deduction on 50% of ginning and pressing
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charges under Section 80P(2)(e) of the said Act was disallowed.
Because of this reasoning, the ratio of decision in case of
Commissioner of Income-tax vs. Bhandara Zilla Sahakari Kharedi
Vikri Sangh Ltd, reported at [1995] 78 Taxman 341 (Bombay) was
held not applicable. The assessee approached the CIT (A) and
the appellate authority allowed the appeal after noticing the
previous practice and after recording a finding in favour of the
assessee. The above mentioned ruling was, therefore, found
applicable to the case of the assessee. The ITAT rejected the appeal
filed by the Revenue.
4. Learned Advocate Shri Parchure for the appellant has
submitted that as the assessee was not receiving any commission
separately from the Cotton Growers' Federation, the deduction
under Section 80P(2)(e) of the said Act on 50% of ginning and
pressing charges is not permissible. He points out that there is no
specific provision allowing the deduction on 50% of ginning and
pressing charges. As the deduction was allowed on 50% of such
ginning and pressing charges, income of Rs. 47,95,215/- had
escaped the assessment and therefore notice under Section 148 of
the said Act was rightly issued.
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5. Learned Advocate Shri Dewani for the assessee
submits that the Income Tax Officer had while passing the initial
order of assessment applied the law as settled in case of assessee
itself had granted 50% of ginning and pressing charges for
deduction under Section 80P(2)(e). The deduction is not illegal.
Similarly, when the settled law has been followed, the assessment
could not have been reopened under Section 148 of the said Act.
6. The Division Bench of this Court in judgment
reported at [1995] 78 Taxman 341 (Bombay) noted that there was
fertilizer agreement and the paddy agreement with the assessee
namely Bhandara Zilla Sahakari Kharedi Vikri Sangh Ltd. As per
the fertilizer agreement which related to wholesale distribution, the
assessee was to hold stocks, store the goods in godowns, preserve
them, maintain accounts and sell the goods as per directions of the
Government. It was to get commission at varying rates ranging
between Rs. 35 to Rs. 50 per ton of goods actually sold. The
Division Bench after interpreting this agreement found that the
agreement before it and the agreement considered by the Hon'ble
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Apex Court in case of CIT vs South Arcot District Co-operative
Society Ltd. reported at [1989] 176 ITR 117 was same. Applying
that ratio, the Division Bench found that the whole of income
derived under the fertilizer agreement was entitled to deduction
under Section 80P(2)(e) of the said Act. As far as paddy agreement
is concerned, the Division Bench notices that the activities were
split into two groups viz; (i) pertaining to milling and (ii) pertaining
to use of godowns. As sufficient material was not available on
record to enable the adjudication of exact quantum of deduction,
applying law in Supreme Court judgment in case of South Arcot
District Co-operative Society Ltd. (supra), the Tribunal was directed
to find out the exact quantum of income and decide the deduction.
7. Learned Advocate Shri Parchure for the appellant has
placed reliance upon the judgment reported at [1990] 32 ITD 476
(Nagpur) in case of Janata Sahakari Prakriya Sanstha Ltd vs First
Income-tax Officer, to persuade this Court. The said Tribunal
observes that the deduction is available only in respect of rent and
in that case it was specifically provided for in the agreement. In
[2009] 182 Taxman 287 (SC) the Hon'ble Apex Court after
considering the material on record finds that the assessee was
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storing commodities in its godown as its own trading stock. It is,
therefore, held not entitled to deduction under Section 80P(2)(e) of
the said Act. Thus, the view reached is on account of a specific
finding about the ownership of stocks. In case of Surat Vankar
Sahakari Sangh Ltd vs Commissioner of Income-tax reported at
[1971] 79 ITR 722 (Gujarat), the Gujarat High Court has held that
the deduction under Section 14(3)(iv) of the Indian Income-tax Act,
1922 corresponding to Section 80P of the present Act was not
available on income derived by the assessee from processing or
facilitating marketing of goods. The assessee there was a
cooperative society. Its activities were processing of gray cloth on
labour basis, purchasing of gray cloth from the local market and
after processing, selling it to its members as well as outsiders. It
earned income during the assessment year from processing gray
cloth on labour basis and also from processing its own gray cloth.
The assessee claimed exemption from tax in respect of income from
processing and facilitating the marketing of commodities. As the
income from letting out godowns or warehouses for storage,
processing or facilitating the marketing of commodities was
exempted and claim for exemption was for income not falling in that
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category, the claim was declined. The High Court also accepted
that view. Thus, there the claim was not towards letting out of
godowns or warehouses.
8. The facts at hand show that in initial assessment order
for the assessment year 2003-2004 the assessee disclosed gross
total income at Rs.31,22,952/-. It claimed exemption under Section
80P(2)(c) of the said Act of Rs. 50,000/-, under Section 80P(2)(d)
of Rs. 6,17,608/- and under Section 80P(2)(e) of Rs. 47,95,215/-.
This last deduction was 50% of ginning and pressing charges as
already mentioned supra. This 50% ginning and pressing charges
has been accepted towards the letting of godown as per the order
of CIT (A) dated 14-02-1994 since the assessment year 1990-1991
in case of the assessee itself. The effort made to distinguish the
judgment of this Court in case of CIT vs Bhandara Zilla Sahakari
Kharedi Vikri Sangh Ltd (supra), overlooks the fact that the amount
received by the assessee from the Cotton Growers' Federation was
inclusive of the charges towards letting of houses or godowns is
not in dispute. The appellant department has accepted this fact
from the assessment year 1990-1991. As such without finding on
record any material to reach a contrary view and only on the basis
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of data always and already on record, the assessment order has been
passed and a contrary view has been reached. The fact that 50% of
ginning and pressing charges received by the assessee has been
allowed to be appropriated as income derived by it from letting of
godowns or warehouses, is not in dispute. We find that the
substantial question of law as sought to be urged vide question no.1
does not arise for consideration. The judgments relied upon by
learned Advocate Shri Parchure for the appellant, mentioned supra,
take a contrary view because of the facts available on record. The
Revenue has not come up with a fact that the commodity i.e. cotton
in relation to which the petitioner is receiving ginning and
pressing charges is not stored in its godown. In absence of such
assertion, the CIT (A) as also the ITAT are justified in holding that
the controversy stands concluded by the Division Bench judgment
of this Court in case of Commissioner of Income-tax vs Bhandara
Zilla Sahakari Kharedi Vikri Sangh Ltd (supra).
9. The ITAT has found that an audit objection was raised
with regard to the availability of deduction under Section 80P(2)(e)
of the said Act on 17-10-2006 by the Revenue Audit Party. The
Assessment Officer did not accept that audit objection. However,
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a decision to issue notice under Section 148 of the said Act was
taken because of the subsequent direction from the higher
authorities. The appellate authority has relied upon several
judgments including the judgment of Hon'ble Apex Court and held
that the reopening was not permissible as notice under Section 148
of the said Act was based only on the audit objection. The appellate
authority has specifically found that in later order the Assessment
Officer proceeded under wrong impression that the assessee
claimed deduction of 50% ginning and pressing charges. In fact,
the assessee had claimed deduction under Section 80P(2)(e) of the
said Act on godown rent and the claim was based on the order dated
14-02-1994 of the CIT (A) for the assessment year 1991-1992.
10. We have already noted supra that there is no finding
reached by the Assessment Officer and the appellant has also not
come up before us with a case that the deduction is being claimed
without letting out godown or warehouse. Thus, only on account
of audit objection a well settled practice is sought to be disturbed.
The Division Bench of this Court in (2010) 230 CTR (Bom) 157
(Purity Techtextile (P) Ltd vs Assistant Commissioner of Income
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Tax and anr.) has found that such reopening where the Assessment
Officer relied exclusively on audit objection in absence of tangible
material cannot be accepted. The jurisdictional condition under
Section 147 of the said Act is the formation of belief by the
Assessment Officer that income chargeable to tax has escaped
assessment. In the present matter, the Assessment Officer
expressly did not accept the audit objection and later on acted under
the dictate of superior authorities. In (2007) 209 CTR (Bom) 1
(IL & FS Investment Managers Ltd vs Income Tax Officers and
Ors), the Division Bench of this Court has in paragraph no.8 held
such initiation of reassessment on the directions of superiors is bad
in law. There also the Assessment Officer had opposed the
reopening.
11. We, therefore, find that even the other questions sought
to be raised as substantial questions of law do not arise for
consideration in the present matter.
12. Consequently, the appeal is dismissed. No costs.
JUDGE JUDGE
Deshmukh
