Principal Commissioner Of Income ... vs M/S. Shalimar Pellet Feeds ...
2021 Latest Caselaw 1529 Cal/2

Form No.(J2)



                        IN THE HIGH COURT AT CALCUTTA
                      SPECIAL JURISDICTION (INCOME TAX)
                                ORIGINAL SIDE


Present :

THE HON'BLE JUSTICE T.S. SIVAGNANAM

                     A N D

THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA



                                 IA NO.GA/2/2018
                               (Old GA/1615/2018)
                                  ITAT/199/2018

        PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA
                                   -Versus-
                  M/S. SHALIMAR PELLET FEEDS LIMITED


For the Appellant:    Ms. Sucharita Biswas, Adv.
                      Mr. Soumen Bhattacharyya, Adv.

For the Respondent: Mr. J. P. Khaitan, Sr. Adv.

Mr. Siddhartha Das, Adv.

Ms. Swapna Das, Adv.

Heard on : 07.12.2021

Judgment on : 07.12.2021

T. S. SIVAGANANAM, J. : This appeal of revenue filed under

Section 260A of the Income Tax Act, 1961 (the 'Act' in brevity) is

directed against the order dated 17th October, 2012 passed by the

Income Tax Appellate Tribunal, Kolkata "C" Bench (the 'Tribunal'

in short) in ITA No.948 to 952/Kol/2017 for the assessment years

2008-09 to 2011-12 and 2013-14.

The revenue has raised for the following substantial

questions of law for consideration:

"(a) Whether in the facts and circumstances of the case, the Learned

Tribunal was justified in quashing the order under Section 263 of

the Income Tax Act, 1961 for the assessment years 2008-09 to 2011-

12 by holding the assessment orders for these assessment years

passed by the assessing officer as not erroneous and prejudicial to

interest of revenue as the direction of Pr CIT for making additions

on account of additional depreciation, suppression of sale and

disallowance in case of depreciation was not based on incriminating

material ignoring the fact that these additions were not made by

the assessing officer in the assessment order and for making these

additions, there is no requirement of incriminating material as per

the provisions of Section 153A of the Income Tax Act, 1961 ?

(b) Whether in the facts and circumstances of the case, the Learned Tribunal has erred in treating the seized material marked as SHLA-4 and SPG-2 as non-incriminating document and consequently after treating the order of assessing officer as non-erroneous, quashing the order under Section 263 of the Income Tax Act, 1961 for AY 2009-10 and nullifying the addition of Rs.3,24,49,403/- made by the assessing officer on the basis of order u/s 263 of the Act ?

(c) Whether in the facts and circumstances of the case, the Learned Tribunal was justified in quashing the order under Section 263 of the Income Tax Act, 1961 for the assessment year 2013-14 by holding the assessment order passed for this assessment year is not

erroneous and prejudicial to interest of revenue ignoring the fact that the addition on account of disallowance of the additional depreciation was not made by the assessing officer and by wrongly holding the assessee company as engaged in manufacturing activities?

(d) Whether in the facts and on the circumstances of the case, the learned Tribunal was justified in arriving at finding by interpreting the term "Manufacture" occurring in the context of Section 80IB that does not necessarily require that the end product of the manufacturing process by completely different from the ingredients, as regard its chemical composition, integral structure or its use ?

(e) Whether in the facts and circumstances of the case, the learned Tribunal was justified in not appreciating that the process of manufacturing of poultry feeds does not amount to mere mixing together of all the different ingredients, without involving any change in the chemical composition of the ingredients ?

(f) Whether in the facts and circumstances of the case, the learned Tribunal was justified in not appreciating that the process of preparation of poultry feeds does not amount to production of an article within the meaning of Section 80IB of the Income Tax Act, 1961 and as such not eligible for deduction as claimed by the assessee ?

(g) Whether in the facts and circumstances of the case, the Learned Tribunal has erred in quashing the order under Section 263 of the Income Tax Act, 1961 for the assessment year 2009-10 without considering the merit of disallowance of depreciation claim @ 30 % on lorry which are not used for hiring business ?

(h) Whether in the facts and circumstances of the case, the Learned Tribunal has erred in quashing the order under Section 263 of the

Income Tax Act, 1961 thereby deleting the addition made under Section 153A/143(3) of the Income Tax Act, 1961 in absence of incriminating documents without considering the Apex Court's admission of SLP in the case of CIT - II - Versus - Continental Warehousing Corporation Ltd. Reported in (2015) 64 Taxman.com (SC) where SLP was admitted against an order of High Court that no addition can be made without incriminating documents ?

(i) Whether in the facts and circumstances of the case, the Learned Tribunal has erred in not considering the fact regarding admission of SLP by Supreme Court in the case of CIT-Versus-RRJ Securities Ltd. Reported in 246 Taxman 62 (SC) where Section 153C read with Section 153A of the Income Tax Act, 1961 were initiated without incriminating documents ?"

We have Ms. Sucharita Biswas, learned counsel assisted by

Mr. Soumen Bhattacharyya, learned advocate for the

appellant/revenue and Mr. J. P. Khaitan, learned senior counsel

assisted by Mr. Siddhartha Das and Ms. Swapna Das, learned

advocates for the respondent/assessee.

There are five assessment years involved in this appeal

and the revenue has filed a single appeal challenging the common

order passed by the tribunal. In so far as substantial question

no.(a) is concerned, it arose for all the assessment years.

Substantial question nos.(b) and (g) arose for the assessment year

2009-10; whereas substantial question nos.(c), (d), (e) and (f)

arose for the assessment years 2008-09, 2010-11, 2011-12 and 2013-

14. Substantial question nos.(h) and (i) are also common to all

the assessment years. So far as assessment years 2008-09, 2010-

11, 2011-12 and 2013-14 are concerned, all the appeals filed by

the revenue are below the threshold limit of the tax effect

stipulated by the circular issued by the Central Board of Direct

Taxes (CBDT). Therefore, the appeals with regard to the

aforementioned four assessment years stand disposed of on the

ground of low tax effect. Consequentially, the questions of law

sought to the raised in those appeals for the relevant assessment

years are left open.

In so far as the assessment year 2009-10 is concerned, the

Commissioner of Income Tax, Central-I, Kolkata (CIT), while

exercising his power under Section 263 of the Act, has stated that

there are ample records and documents to indicate that the

assessee company had made sales to M/s. Shalimar Hatcheries

Limited as evident from the sales bill seized during the search

operations forming part of the incriminating evidence. Further it

has been stated that seized materials were available. The

assessing officer ought to have made an enquiry regarding

financial and business transactions of the assessee with M/s.

Shalimar Hatcheries Limited. Further the CIT stated that from the

trial balance it is seen that the assessee had disclosed lorries

as assets and it is also evident from the balance sheet of the

assesee for the year ending on 31st March, 2009 that depreciation

was claimed at the rate of 30% and this should also have prompted

the assessing officer to make proper enquiries to ascertain the

claim of depreciation at the rate of 30% on the lorries. In the

opinion of the CIT the issues are clearly linked with the seized

document and were required to be examined and verified by the

assessing officer during the course of assessment proceeding under

Section 143(3)read with Section 153A of the Act. Therefore, the

CIT rejected the contention of the assessee that no incriminating

evidence related to transactions (sales) with Shalimar Hatcharies

Limited and disallowance of excess depreciation of lorries was

found during the course of search assessment. CIT was of the

opinion that such contention is not based upon facts and therefore

not true. Thus, the contention of the assessee that there was no

incriminating material related to the transactions with M/s.

Shalimar Hatachries Limited and disallowance of excess

depreciation on lorries was rejected. Consequently, the CIT came

to the conclusion that the order of the assessing officer was

erroneous and prejudicial to the interest of revenue. The assessee

carried the matter on appeal to the tribunal contending that

before the CIT the assessee in their reply to the notice under

Section 263 of the Act had brought to his notice that no

incriminating materials were found in the course of search

regarding the aforesaid items and therefore, the conclusion of the

CIT was erroneous.

With regards to the show cause notice for the assessment

year for consideration, namely, assessment year 2009-10. The CIT

had placed reliance on the seized documents marked as SHLA-4 from

pages 2 to 105 and SPG-2 from pages 18 to 20 as incriminating

documents found during the course of search. The assessee's

contention was that the seized documents marked as SHLA-4 from

pages 2 to 105 contains only sales bill relating to the sales made

by the assessee to M/s. Shalimar Hatacharies Limited and such

information is already part of regular books of account of the

assessee and there is nothing incriminating therein. The assessee

further contended before the tribunal that they had filed a

detailed reconciliation statement before the CIT to substantiate

the case that the same did not emanate from the seized material.

The assessee also gave an explanation for the alleged difference

which has been noted by the tribunal in paragraph-7.1 of the

impugned order. Further the assessee contended that the seized

documents in SPG-2 from pages 18 to 20 contains trial balance for

the period from 1.4.2012 to 31.3.2013 which are part of the

regular books of account of the assessee and there is nothing

incriminating therein and in any case the seized documents pertain

to the assessment year 2013-14 and cannot be termed as

incriminating for the assessment year 2009-10. Thus, the argument

of the assessee was that the CIT has ignored all the explanations

and submissions made by them and merely stated that the assessing

officer has not made enquiry with regard to the seized documents

and treated the order of the assessing officer as erroneous and

prejudicial to the interest of revenue. The tribunal while

examining the correctness of the stand taken by the assessee

before it was required to examine the facts placed before it which

the tribunal has noted in paragraph-7.1 of the impugned order.

While deciding the controversy and rendering a finding, the

tribunal in paragraph-9 held that the assessee has given an

explanation which is acceptable and there was nothing to disturb

the concluded assessment for the assessment year 2009-10. In our

considered view such conclusion appears to be without sufficient

reason. We say so because when the assessee's case was that the

CIT had ignored the explanation and submission therefore, if the

tribunal was of the view that the CIT did not consider the

explanation, it would have been well justified to accept the

explanation, submission and record a finding. The other option

open would have been to send the mater back to CIT for re-

examination of the explanation and submission of the assessee.

Either of the two options had not been chosen by the tribunal but

merely concluded by stating that the explanation offered by the

assessee is acceptable without assigning any reasons therefor.

Thus our considered view would be an incorrect manner of

rendering a conclusion which revolves entirely on facts and

documents which were placed by the assessee before the CIT.

Therefore, we are of the view that such finding of the tribunal

requires to be set aside and the matter has to be remanded back to

the Commissioner of Income Tax for fresh consideration on the said

aspect.

So far as the issue with regard to the claim for direction

under Section 80IB is concerned, it is submitted by the Counsel on

either side that such issue does not arise in the assessment year

2009-10. In the result the appeals in so far as the assessment

years 2008-09, 2010-11, 2011-12 and 2013-14 are dismissed on the

ground of low tax effect. Consequently, the substantial questions

of law raised in this appeal in so far as the assessment years, as

indicated above, are left open.

So far as the order of the tribunal pertaining to the

assessment year 2009-10 on two issues, namely, sales bill and

depreciation on lorries is set aside and the matter is remanded to

the CIT for fresh consideration after giving an opportunity of

hearing to the respondent assessee. Since we have remanded the

matter for fresh consideration by the CIT, we give liberty to the

respondent assessee to raise all issues and more particularly the

argument which has been placed before us that seized documents are

not incriminating materials including the merits of the matter as

well.

Consequently, the order passed by the CIT for the

assessment year 2009-10 is also set aside and the matter is

remanded to the CIT for fresh consideration.

The connected application for stay (IA No.GA/2/2018) also

stands closed.

(T.S. SIVAGNANAM, J.)

I agree.

(HIRANMAY BHATTACHARYYA, J.)

A/s./S.De