Sterling Farm Research And Services ... vs The Commissioner Of Income Tax
2025 Latest Caselaw 9886 Ker

Kerala High Court

Sterling Farm Research And Services ... vs The Commissioner Of Income Tax on 21 October, 2025

Author: A.Muhamed Mustaque

Bench: A.Muhamed Mustaque

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ITA No.55 of 2024                                      2025:KER:78191




              IN THE HIGH COURT OF KERALA AT ERNAKULAM

                              PRESENT

            THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE
                                  &
           THE HONOURABLE MR. JUSTICE HARISANKAR V. MENON

     TUESDAY, THE 21ST DAY OF OCTOBER 2025 / 29TH ASWINA, 1947

                         ITA NO. 55 OF 2024

AGAINST THE ORDER DATED 09.02.2024 IN ITA NO.661/COCH/2022(A.Y.2016-
       17) OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH
                              --------
APPELLANT/APPELLANT IN ITA/ASSESSEE:

           STERLING FARM RESEARCH AND SERVICES PVT. LTD.,
           29/2469 C2, STERLING HOUSE, PETTAH, POONITHURA S.O.,
           ERNAKULAM, PIN - 682038.


           BY ADVS.
           SRI.KURYAN THOMAS
           SHRI.M.GOPIKRISHNAN NAMBIAR
           SHRI.K.JOHN MATHAI
           SRI.JOSON MANAVALAN
           SHRI.PAULOSE C. ABRAHAM
           SHRI.RAJA KANNAN


RESPONDENT/RESPONDENT IN ITA/REVENUE:

           THE COMMISSIONER OF INCOME TAX,
           AAYAKAR BHAVAN, OLD RAILWAY STATION ROAD,
           KOCHI, PIN - 682018.

           BY SRI.JOSE JOSEPH, STANDING COUNSEL

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 21.10.2025, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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ITA No.55 of 2024                                 2025:KER:78191



                           JUDGMENT

Harisankar V. Menon, J.

This appeal, at the instance of an assessee under the

provisions of the Income Tax Act, 1961 (hereinafter referred to

as the 'Act'), questions the suo motu revisional steps under

Section 263 of the Act (Annexure G) as confirmed by the

impugned order in I.T.A No.661/COCH/2022 dated 09.02.2024

(Annexure M) of the Income Tax Appellate Tribunal. The

assessment year concerned is 2016-17, relevant to the

financial year 2015-16.

2. The appellant had two units/divisions - 'Fertilizer

Division' and 'Test House Division', out of which, the Test House

Division was sold as a case of 'slump sale' with reference to

the provisions of Section 50B of the Act. A return was also

presented in that fashion. Steps under Section 143(3) of the

Act were taken, and by Annexure E order dated 20.12.2018,

the same was finalised. It is worthwhile to notice the following

ITA No.55 of 2024 2025:KER:78191

observations made in Annexure E assessment order:

"6. During the year under consideration assessee has sold various assets of the company and produced supporting documents for income from Capital Gain declared. All the documents/materials produced are verified."

Later, Annexure F notice under Section 263 of the Act dated

15.10.2020 was issued proposing to set aside the assessment

order referred to above, to which the appellant-assessee

sought to file objections placing reliance on the afore

observations, in support of its contention that proper

adjudication has been carried out in the matter by the

assessing authority. The Commissioner, by Annexure G order

dated 24.11.2020, however, found that the Assessing Officer

has not enquired into the entire aspects of the matter and has

merely completed the assessment, accepting the stand taken

by the assessee, which is an incorrect assumption of facts. The

appeal against the afore order is rejected by the Tribunal by

the impugned order at Annexure M. It is in such circumstances

that the captioned appeal is filed by the appellant-assessee

ITA No.55 of 2024 2025:KER:78191

under Section 260A of the Act.

3. We have heard Sri.Kuryan Thomas, the learned

counsel for the appellant-assessee, and Sri.Jose Joseph, the

learned Standing Counsel for the respondent.

4. The main contention urged on behalf of the appellant-

assessee is with reference to the very invocation of the power

under Section 263 of the Act, with reference to the enquiry

carried out by the assessing authority, as is discernible from

paragraph 6 of the assessment order referred to earlier.

5. In this connection, we notice the reasons pointed out

for initiation of steps under Section 263 of the Act as recorded

in the show cause notice at Annexure F as confirmed by the

final order at Annexure G. The very question as to whether

the transaction - sale is to be considered as a case of "slump

sale" under Section 50B of the Act qua the provisions of Section

50 of the Act as per which the same is to be treated as a case

of short term capital gain; does not appear to have been

addressed by the assessing authority while issuing Annexure E

ITA No.55 of 2024 2025:KER:78191

order under Section 143(3) of the Act. True, the assessment

order makes reference to certain documents/materials

produced by the appellant-assessee. However, there is no

adjudication with reference to the provisions of the statute in

the afore assessment order. In Malabar Industrial Co. Ltd v.

Commissioner of Income Tax, Kerala State [(2000) 2

SCC 718], the Apex Court has categorically found that in a

situation where the Commissioner is satisfied as regards the

existence of the twin conditions - the assessment order being

erroneous and prejudicial to the interest of revenue - power

under Section 263 of the Act can be exercised. Elaborating

further, the Apex Court held that if the assessing authority

accepts the case of the assessee, without any enquiry, exercise

of the jurisdiction under Section 263 of the Act was justified.

6. With reference to the touchstone of the principles laid

down in the afore judgment, we note that since the assessment

order does not appear to have addressed the issue with

reference to the competing provisions, exercise of the power

ITA No.55 of 2024 2025:KER:78191

under Section 263 of the Act was justified. In the light of this,

we find no reason to interfere with the impugned order of the

Tribunal.

7. At this juncture, we take note of the submission made

by the Sri.Kuryan Thomas, the learned counsel, with reference

to subsequent completion of the assessment pursuant to the

directions issued by the revisional authority by adopting the

reasonings contained in Section 263 order as concluding the

issue, which, when pointed out before the Tribunal, the

Tribunal, after finding the said course as "unfortunate",

brushed aside the same as a subsequent development.

However, we note that any observation made by the

Commissioner in his order under Section 263 of the Act will not

preclude the appellant-assessee from making submissions

before the assessing authority in accordance with law and the

assessing authority or the appellate authority before whom the

appeal against the revised assessment is stated to be pending,

would have to consider the legality or otherwise of the

ITA No.55 of 2024 2025:KER:78191

respective contentions in accordance with law.

With the above clarification regarding the findings in

Annexure G order, as confirmed by the Tribunal, we dismiss

this appeal.

Sd/-

A.MUHAMED MUSTAQUE, JUDGE

Sd/-

                               HARISANKAR V. MENON, JUDGE
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ITA No.55 of 2024                                       2025:KER:78191





APPELLANT'S ANNEXURES:

ANNEXURE -A    THE TRUE COPY OF THE DIVISION WISE BALANCE SHEET

AS ON 31ST MARCH, 2016 AND THE CONSOLIDATED BALANCE SHEET ALONG WITH PROFIT AND LOSS ACCOUNT AND SCHEDULES OF THE APPELLANT COMPANY AS ON 31ST MARCH, 2016.

ANNEXURE -B A TRUE COPY OF THE AGREEMENT DATED 21.05.2015 ENTERED INTO BETWEEN THE APPELLANT AND NEOGEN.

ANNEXURE-C A TRUE COPY OF THE ADDENDUM TO ANNEXURE-B AGREEMENT DATED 10.08.2015.

ANNEXURE -D A TRUE COPY OF THE ADDENDUM TO ANNEXURE-B AGREEMENT DATED 19.07.2016.

ANNEXURE-E A TRUE COPY OF THE ASSESSMENT ORDER DATED 20.12.2018 PASSED BY THE ASSESSING AUTHORITY UNDER SECTION 143(3) OF THE ACT.

ANNEXURE-F A TRUE COPY OF THE NOTICE DATED 15.10.2020 ISSUED BY THE PRINCIPAL COMMISSIONER OF INCOME, KOCHI ON THE APPELLANT.

ANNEXURE-G A TRUE COPY OF THE ORDER DATED 24.11.2020 PASSED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOCHI-1, UNDER SECTION 263 OF THE INCOME TAX ACT.

ANNEXURE-H A TRUE COPY OF THE ORDER DATED 23.03.2022 PASSED BY THE ASSESSING AUTHORITY UNDER SECTION 143(3) READ WITH SECTION 263 OF THE ACT, PURSUANT TO ANNEXURE-G ORDER OF THE PRINCIPAL COMMISSIONER ALONG WITH THE COMPUTATION SHEET AND THE DEMAND NOTICE.

ANNEXURE-I A TRUE COPY OF THE APPEAL MEMORANDUM DATED 28.05.2022 (WITHOUT ANNEXURES) FILED BY THE APPELLANT BEFORE THE APPELLATE TRIBUNAL.

ITA No.55 of 2024 2025:KER:78191

ANNEXURE-J A TRUE COPY OF THE PETITION DATED 14.11.2023 (WITHOUT ANNEXURES) FILED BEFORE THE APPELLATE TRIBUNAL.

ANNEXURE-K A TRUE COPY OF THE RETURN OF INCOME DATED 20.10.2017, (FILED ON 21.10.2017).

ANNEXURE-L A TRUE COPY OF THE ARGUMENT NOTES DATED 15.11.2023 FILED BY THE APPELLANT BEFORE THE APPELLATE TRIBUNAL.

ANNEXURE-M THE CERTIFIED COPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED 09.02.2024 (RECEIVED BY THE APPELLANT ON 16.04.2024)