Ita/2/2011 Of Commissioner Of Income Tax v. M/S Williamson Tea Assam Ltd

ITA 2/2011BEFOREHON’BLE MR. JUSTICE AMITAVA ROYHON’BLE MR. JUSTICE S.R.SENAmitava Roy, J These appeals by the Revenue under Section 260-A of the Income Tax Act, 1961 (for short, hereinafter referred to as ’the Act’) and preferred against the orders dated 31.8.2007 of the Income Tax Appellate Tribunal, Gauhati Bench, Guwahati in ITA Nos. 7(Gau)/2001, 74(Gau)/2001 and 35(Gau)/2002 corresponding to the assessment years 1996-97, 1997-98 and 1998-99 having been analogously heard, the present adjudication would answer the common question of law framed. By the orders impugned, the cross objections filed by the respondent-assessee were also disposed of. 2.We have heard Mr GK Joshi, Senior Advocate assisted by Mr S Sarma, Advocate for the Revenue and Dr. AK Saraf, Senior Advocate assisted by Ms N Hawelia, Advocate for the respondent. 3.The facts in bare essentials indispensable for the present pursuit disclose that the respondent is an assessee under the Act as a company engaged in the business of growing, manufacturing and selling of tea. It submitted itsreturn for the assessment years 1996-97, 1997-98 and 1998-99 showing, amongst others, expenditure of Rs. 1,02,75,000/-, Rs. 1,30,41,600/- and Rs. 1,17,80,000/-as payments made by it to M/s Gladioli Estates (P) Limited, Kolkata (for short, hereinafter referred to as ’GEPL’) for supply of organic manure for the aforementioned assessment years. The Assessing Officer, however, added these amounts to the income of the assessee and finalized the assessments under Section 143 of the Act. 4.Being aggrieved, the respondent-assessee preferred appeals before the Commissioner of Income Tax (Appeals), Guwahati [for short, hereinafter referred to as ’the CIT (Appeals)] which while disposing of the same held that the expenditure of the aforestated amounts towards the cost of organic manure and application charges paid to M/s GEPL could not be disallowed. The Revenue being dissatisfied, preferred the aforementioned appeals before the Income Tax AppellateTribunal, Gauhati Bench, Guwahati (for short, hereinafter referred to as ’the Tribunal’) which by the orders impugned in the present appeals sustained the determination made by the CIT (Appeals) and remitted the matter to the Assessing Officer with a direction to re-examine the issue on the basis of the orders passed by the Income Tax Appellate Tribunal, Kolkata involving identical transactions concerning M/s GEPL and Bishnauth Tea Company, an associate unit of the respondent-assessee relating the assessment years 1995-96 and 1996-97. The learned Tribunal directed that if on verification of the appellate orders the Assessing Officer found that it (Income Tax Appellate Tribunal, Kolkata) had accepted the genuineness of the transactions between M/s GEPL and other companies belonging to the Williamson Magor Group, then he would complete the assessment according to the findings recorded in the appellate orders. The Assessing Officer was also required to reframe the assessment expeditiously after affording opportunity to the assessee of submitting the relevant orders of the Income Tax Appellate Tribunal, Kolkata. Being aggrieved, the Revenue is in appeal. 5.After hearing the learned counsel for the parties, the following substantial question of law was framed: Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to confine the assessment to the findings recorded by the Calcutta Bench of the Tribunal in the caseof Gladioli Estates (P) Limited and Bisnauth Tea Company Limited while remittin g the issue relating to the cost of organic manure claimed at Rs. 1,02,75,000.00/Rs. 1,17,80,000.00/ Rs. 1,30,41,000.00 to the Assessing Officer and is not the said decision perverse ? 5.After hearing the learned counsel for the parties, the following substantial question of law was framed: Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to confine the assessment to the findings recorded by the Calcutta Bench of the Tribunal in the caseof Gladioli Estates (P) Limited and Bisnauth Tea Company Limited while remittin g the issue relating to the cost of organic manure claimed at Rs. 1,02,75,000.00/Rs. 1,17,80,000.00/ Rs. 1,30,41,000.00 to the Assessing Officer and is not the said decision perverse ? 6.Though initially another question of law was framed, in view of the judicial interpretation provided in connection therewith, the same was answered in favour of the Revenue in terms of the rendering of the Apex Court in Commissioner of Income Tax -vs- Williamson Magor Financial Services & Ors., (2008) 2SCC 202. It is essential to record at this stage that the factual narration hasbeen limited to the extent essential and having a bearing on the question of law required to be answered. The pleaded facts have, thus, been consciously trimmed to suit this purpose. 7.Mr Joshi has assiduously urged that as the doctrine of res judicata, having regard to the singular features of assessment to ascertain the taxable income yearwise is inapplicable to the exercises prescribed by the Act, the learned Tribunal fell in gross error in directing the Assessing Officer to confine the scrutiny with regard to the allowance/disallowance of the payments made bythe respondent-assessee to M/s GEPL for supply of organic manure on the basis of the orders rendered by the Income Tax Appellate Tribunal, Kolkata in connection with the transactions between it (M/s GEPL) and Bishnauth Tea Company Limited and, thus, the question of law framed ought to be answered in favour of the Revenue. The learned senior counsel clarified that the Revenue does not entertain any demur against the direction of the learned Tribunal to the Assessing Officer to re-examine the issue, but would insist that he be left free to decide the samein accordance with law without being shackled by the determinations made by thelearned Income Tax Appellate Tribunal, Kolkata in transactions different from those involving the respondent-assessee. According to Mr Joshi, the facts and circumstances of the case demonstrated an obvious tax avoiding device of the respondent-assessee, which in the interest of public revenue, ought not to be encouraged and, thus, interference with the impugned directions of the learned Tribunal is warranted. He sought to draw sustenance for his contentions from the decisions of the Apex Court in Income Tax Officer, Award, Sitapur -vs- Murlidhar BhagwanDas, 52 ITR 335 and in McDowell & Co. Ltd. -vs- Commercial Tax Officer, 154 ITR148. 8.Dr. Saraf, in reply, while contending that no substantial question of law is involved in the present appeals, apprised this Court that meanwhilere-assessment for the assessment years in question has already been completed by the Assessing Officer in conformity with the impugned directions of the learned Tribunal allowing the claim of the respondent-assessee qua the payments made to M/s GEPL for supply of organic manure and, thus, the appeals have been rendered infructuous thereby. While admitting that the doctrine of res judicata per se is unavailable in tax jurisprudence, the learned senior counsel emphasised that this proposition, however, did not signify that the decisions rendered on identical fact situations involving common questions of law would be bereft of any precedential value to guide future adjudications. Referring to the text of the orders of the learned Tribunal, Dr. Saraf sought to highlight the inconsistent approach of the Revenue vis-�-vis the transactions involved and insisted that in the interest of finality of assessment, the appeals, in the attendant facts and circumstances, ought to be dismissed in limine. He apprised this Court as well that the Revenue’s move to reopen the assessments of the respondent-assessee on similar grounds for the assessment years 1991-92 to 1994-95 had been interfered with by this Court by rejecting its imputation of the respondent-assessee’s income escaping assessment on account of failure to disclose material facts pertaining toits transactions with M/s GEPL, a determination sustained by the Hon’ble Apex Court. According to Dr. Saraf, the factual premise did not in any manner evience any attempt on the part of the respondent-assessee to withhold its actual incomeand, thus, the plea of fraudulent device to camouflage the same and defraud theRevenue is wholly unfounded. The learned senior counsel relied on the following decisions of the Apex Court as well of this Court in support of his contentions:i) M/s Radhasoami Satsang, Saomi Bagh, Agra -vs- Commissioner of Income Tax, (1992) 1 SCC 659 ii) Bharat Sanchar Nigam Litd & Anr. -vs- Union of India & Ors., (2006) 3 SCC 1 iii)Union of India & Anr. -vs- Azadi Bachao Andolan & Anr. (2004) 10 SCC 1 iv) Eveready Industries India Ltd. -vs- Joint Commissioner of Income Tax (Assessment), 243 ITR 540 v) Joint Commissioner of Income Tax (Assessment) & Ors. -vs- George Williamson (Assam) Ltd., 258 ITR 126 decisions of the Apex Court as well of this Court in support of his contentions:i) M/s Radhasoami Satsang, Saomi Bagh, Agra -vs- Commissioner of Income Tax, (1992) 1 SCC 659 ii) Bharat Sanchar Nigam Litd & Anr. -vs- Union of India & Ors., (2006) 3 SCC 1 iii)Union of India & Anr. -vs- Azadi Bachao Andolan & Anr. (2004) 10 SCC 1 iv) Eveready Industries India Ltd. -vs- Joint Commissioner of Income Tax (Assessment), 243 ITR 540 v) Joint Commissioner of Income Tax (Assessment) & Ors. -vs- George Williamson (Assam) Ltd., 258 ITR 126 9.We have extended our anxious consideration to the pleaded facts and the arguments advanced. As would be apparent from the Assessment Order dated25.9.99 (as in ITA 2/2011) under Section 143(3) of the Act qua the aspect underscrutiny, on receipt of the letter dated 20.1.99 of the respondent-assessee claiming payment of Rs. 1,02,75,000/- to M/s GEPL during the financial year 1995-96(corresponding to the assessment year 1996-97) and the supporting invoices, vouchers, challans etc., the Assessing Officer issued summons under Section 131 of the Act to M/s GEPL, Kolkata to furnish the particulars regarding supply of organic manure to it (respondent-assessee). In reply, M/s GEPL in writing informed the Assessing Officer that the supply and application of the organic manure to the different Tea Estates of the respondent-assessee had been carried out during the relevant period by its sub-contractors. Acting on the addresses furnished by it, the Assessing Officer, thereafter caused summons under Section 131 of the Act to be served on six sub-contractors and their statements on oath were recorded. These sub-contractors in their statements having categorically denied of executing any sub-contract work under M/s GEPL pertaining to supply and application of organic manure to any of the Tea Estates of the respondent-assessee during thefinancial year 1995-96, the Assessing Officer on the basis thereof required it (respondent-assessee) to show cause as to why the entire amount of Rs. 1,02,75,000/- would not be added to its total income for the assessment year 1996-97. Though the respondent-assessee responded to the notice reiterating its stand, the Assessing Officer rejected the same and branded the entire transaction to be a colourable device to defraud the Revenue and disallowed its claim towards cost of the organic manure and application charges amounting to the aforementioned sum. 10.The CIT (Appeals) on an analysis of the factual matrix observed that there was no dispute that the money was paid by the respondent-assessee to M/s GEPL for supply of organic manure as well as the services rendered in connection with the application thereof in its Tea Estates and, thus, concluded against want of genuineness of the payments claimed to have been made by it (respondent-assessee). It was recorded that the factum of this payment by the respondent-assessee to M/s GEPL was not disputed and that in absence of proved fraud, its (respondent-assessee) claim of expenditure of Rs. 1,02,75,000/- could not be disallowed. 11.The learned Tribunal while broadly endorsing the above conclusion of the CIT (Appeals) was of the further view that the statements of the sub-contractors recorded in absence of the respondent-assessee as well as M/s GEPL could not have been relied upon without affording them an opportunity of cross examining these persons, more particularly, when their testimony had been acted upon to draw adverse inference against the respondent-assessee. The learned Tribunalfurther noticed from the materials on record that in the income tax returns filed by the same sub-contractors the income received by them against rendering of services to M/s GEPL had been offered for tax for the assessment year 1996-97. It recorded as well that M/s GEPL had been regularly supplying organic manure to 11.The learned Tribunal while broadly endorsing the above conclusion of the CIT (Appeals) was of the further view that the statements of the sub-contractors recorded in absence of the respondent-assessee as well as M/s GEPL could not have been relied upon without affording them an opportunity of cross examining these persons, more particularly, when their testimony had been acted upon to draw adverse inference against the respondent-assessee. The learned Tribunalfurther noticed from the materials on record that in the income tax returns filed by the same sub-contractors the income received by them against rendering of services to M/s GEPL had been offered for tax for the assessment year 1996-97. It recorded as well that M/s GEPL had been regularly supplying organic manure to the gardens of the respondent-assessee in the earlier years also. That based on the same information and grounds, the respondent-assessee’s assessment for the assessment year 1991-92 to 1994-95 were re-opened under Section 147 of the Act and that this Court had rejected the Revenue’s allegation that its income had escaped assessment on account of failure to disclose material facts relating to its(assessee) transaction with M/s GEPL was noted. The learned Tribunal further noticed that in the assessment of M/s GEPL for the assessment year 1995-96 the payments made by this company to its sub-contractors had been disallowed on the basis of their statements denying services for application of manure to the gardensby Williamson Magor Group of companies. That ’B’ Bench of the Income Tax Appellate Tribunal, Calcutta by its order dated 15.5.2002 in ITA 493/C/99 had upheld the order of the CIT (Appeals) deleting such disallowance on the ground that the transactions between the sub-contractors and M/s GEPL were not bogus and that the sub-contractors had later retracted their statements against supply and application of organic manure was taken note of. The learned Tribunal also brought on record that on the same set of facts disallowance had been made in the assessments of Bishnauth Tea Company Ltd., an associate of the respondent-assesse in the assessment years 1995-96 and 1996-97 involving supply of organic manure by M/s GEPL to its gardens in the State of Assam. That the disallowance had been on the same ground i.e. denial of the sub-contractors of M/s GEPL of having supplied the organic manure was noted. It also took into account the order dated 1.7.2004 of the ’C’ Bench of the Income Tax Appellate Tribunal, Kolkata in ITA 1054 and 1039(Cal)99 for the assessment years 1995-96 and 1996-97 preferred by the Revenue against the order of the CIT(Appeals) deleting such disallowance. 12.The learned Tribunal thus concluded that on identical facts its coordinate Benches at Kolkata had recorded concurrent findings that the transactions between M/s GEPL and its sub-contractors and M/s GEPL and Williamson Magor Group of companies were genuine and that the cost of supply and application of manure was allowable business expenditure. It was recorded in particular that M/sGEPL had effected supply of organic manure to the respondent-assessee and Bishnauth Tea Company through the same set of contractors and in an identical manner.It was in this background that the learned Tribunal directed the Assessing Officer to take note of the appellate orders of the two Benches of the Income Tax Appellate Tribunal, Kolkata on the issue while re-framing the assessment.The textual facts witnessing the progression of events as involved in ITA Nos. 3/2012 and 4/2012 are identical. 13.That the appeal preferred by the Revenue against the order dated1.7.2004 passed by the Income Tax Appellate Tribunal, C-Bench, Kolkata in ITA No. 1054 and 1039 (Cal) of 1999 was not admitted by the Hon’ble Calcutta High Court being bereft of any substantial question of law is a matter of record. Havingregard to the overwhelming identicalness on the decisive aspects of the transactions involved and the clarity, consistency and finality of the conclusions recorded by the learned Tribunal with reference, amongst others, to the decisions ofthe Income Tax Appellate Tribunal, B & C Benches, Kolkata, we are of unhesitantopinion that the directions contained in the impugned judgment and order for guiding the Assessing Officer to conduct the assessment afresh cannot be faulted with. Bearing in mind the transacting parties, the commodity and executing agencies involved, the assessment years, the materials acted upon and the logical deductions available on a dialectical assessment of the overall factual conspectus, the assailment of the Revenue in the instant appeals lacks persuasion. 14.Though it has been reiterated in Bharat Sanchar Nigam Ltd. (supra) that res judicata does not apply in matters pertaining to tax for different assessment years, their Lordships underlined as well that the courts will generally adopt an earlier pronouncement of law or a conclusion of fact unless there isa new ground urged or a material change in the factual position. Their Lordships clarified that the reason why the courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent y ear is not because of any principle of res judicata but because of the theory ofprecedent or the precedential value of the earlier pronouncement. It was held further that where the facts and the law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permittedto take a different view. 15.As noticed hereinabove, the transactions involved have in no uncertain terms been held to be genuine sans any semblance of fraud. Moreover, admittedly, assessments have been made afresh for the assessment years involved and the orders to that effect demonstrate that the claim of the respondent-assessee of payment towards supply of organic manure and application thereof to its Tea Estates by M/s GEPL has been accepted. In this view of the matter, the subtle nuances of tax avoidance and tax evasion as dwelt upon in the authorities cited at the Bar, in our view, does not call for any dilation in the present adjudicativepursuit. 16.In the wake of the above, the appeals fail and are dismissed. Nocosts.