Itta/447/2011 Of Commissioner Of Incometax v. M/S.mahateja Rice Mills Pvt.ltd

HON’BLE SRI JUSTICE GODA RAGHURAMAND HON’BLE SRI JUSTICE N.RAVI SHANKAR I.T.T.A. NO. 447 OF 2011 Between: Commissioner of Income Tax, Hyderabad … Petitioner And: M/s Mahateja Rice Mills Pvt, Ltd,, Miryalaguda … Respondent HON’BLE SRI JUSTICE GODA RAGHURAMANDHON’BLE SRI JUSTICE N.RAVI SHANKARI.T.T.A. NO. 447 OF 2011 Judgment: (per SRI JUSTICE G. RAGHURAM) This appeal by the Revenue u/Sec. 260A of the Income Tax Act1961 (‘the Act’) is directed against the order dated 13.08.2009 of theIncome Tax Appellate Tribunal (‘the Tribunal’), Hyderabad Bench, inITA No. 504/HYD/09. The respondent (assessee – Company) which is in thebusiness of paddy milling filed its return of income for the assessmentyear 2004-05, declaring the total income as ‘nil’. After the return wasprocessed the Assessing Officer (Income Tax Officer, Ward-1,Nalgonda) u/Sec. 143(1) of the Act passed an order of assessmentdated 29.12.2006 accepting the income returned, by a laconic order,merely stating that after “careful examination of the material produced”the return is accepted. The Commissioner of Income Tax (CIT) exercising jurisdiction u/Sec.263 of the Act revised the order of assessment, set aside thesame and remanded the matter to the Assessing Officer directingpassing of a fresh order of assessment, in the light of the findings,observations and directions recorded by him. The revision wasinitiated on the ground that the assessee has claimed excessdepreciation of Rs.4,58,750/- which was accepted by the AssessmentOfficer without applying his mind; the assessee had inflated the claimof wastage in the processing of paddy and this was accepted withoutanalysis of the consumption – output ratio; and though the assessmentwas selected for scrutiny to examine the cost of factory building byreferring to the departmental valuation cell, the assessment wascompleted without making any such reference, to the valuation cell. Ithowever requires to be noticed that the CIT while remanding thematter to the Assessing Officer for fresh assessment, had recordedclear findings as to excess claim of depreciation and inflated claim ofwastage in the processing of paddy. Aggrieved by the revisional order, the assessee preferred anappeal to the Tribunal which was allowed by the order under appealherein. The Tribunal having considered the rival submissions of theassessee and the Revenue and the material on record held that on allthe three counts i.e., excess claim of depreciation; excess claim ofwastage; and non-reference of valuation of factory building etc, to thevaluation cell, there was no justification for invoking jurisdictionu/Sec.263 of the Act. On excess claim of depreciation the Tribunal went into thisaspect and held that indisputably the assessee Company hadreceived a subsidy of Rs. 37,50,000/- in March 2004 and therefore hadreduced the same from plant and machinery in the 2[nd] half of the yearand claimed the depreciation thereafter. In the circumstances theexcess depreciation assumed by the CIT, relating to the first half of theyear, during which period the value of the plant and machinery wasrightly not reduced by the amount of subsidy received, was an erroneous assumption and the order of the Assessing Officer wasneither erroneous nor prejudicial to the interest of the Revenue,concluded the Tribunal. As to excess claim of wastage, the Tribunal held that theassessee had shown an aggregate yield of 75% comprising rice bran,broken rice and param as against 69% pointed out by the CIT, thoughthis was the first year of operation and that the wastage disclosed bythe assessee was far below the industrial standard and there occurredno prejudice to the interest of the Revenue even as per theCommissioner’s computation and therefore there was no justificationfor exercise of power u/Sec. 263. erroneous assumption and the order of the Assessing Officer wasneither erroneous nor prejudicial to the interest of the Revenue,concluded the Tribunal. As to excess claim of wastage, the Tribunal held that theassessee had shown an aggregate yield of 75% comprising rice bran,broken rice and param as against 69% pointed out by the CIT, thoughthis was the first year of operation and that the wastage disclosed bythe assessee was far below the industrial standard and there occurredno prejudice to the interest of the Revenue even as per theCommissioner’s computation and therefore there was no justificationfor exercise of power u/Sec. 263. With regard to the Assessing Officer proceeding with theassessment without referring valuation of the factory building to theValuation Cell, the Tribunal held that only on account of the fact that noreference was made to the valuation cell the assessment cannot beheld vitiated even where it is made in the course of scrutiny, warrantinginvocation of jurisdiction u/Sec. 263. Sri S.R. Ashok, the learned senior Standing Counsel for theIncome Tax contended that the Tribunal erred in setting aside therevisional order of the CIT in totoand the proper course for the Tribunalwas to invalidate the revisional order on the ground that no finding onthe merits of assessment ought to have been recorded when the matterwas being remanded for de novoassessment. Sri Ravi S, the learned senior counsel representing theassessee contended per contrathat the order of the Tribunal is notsusceptible to interference in this appeal u/Sec. 260A, in the absenceof any substantial error of law in the order under appeal. Sri Ravicontended that the assessee had canvassed the correctness of therevisional order passed by the CIT on its merits as well, before theTribunal. The Tribunal having considered the rival submissions andperused the material on record had recorded clear and impeccablefindings on facts that there was no excess depreciation claim by theassessee, there was no inflated wastage claimed and non-reference to the valuation cell per sewould not vitiate the order of assessment andno substantial question of law arises in the circumstances, warrantinginterference. Sri Ashok did not seriously contest the assessee’s propositionthat the Tribunal was within its jurisdiction in adjudicating upon thecorrectness of the revisional order on its merits and proceeding toanalyze the relevant facts therefor. On a careful consideration of the material on record we hold thatthe order of the Tribunal suffers from no substantial error of law,warranting interference u/Sec. 260A of the Act. No substantialquestion of law falls for consideration. The appeal is accordinglydismissed. No costs however. Dt: 27-06-2012 Pvsn/ndr/* ------------------------- Justice G. Raghuram ----------------------------- Justice N. RaviShankar Justice N. Ravi