Punjab State Cooperative Supply And Marketing Federation Ltd.,Chandigarh v. Commissioner Of Income Tax-Ii, Chandigarh

ITA No. 91 of 2014 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 91 of 2014 Date of Decision: 17.9.2015 Punjab State Cooperative Supply and Marketing Federation Ltd.,Chandigarh ....Appellant. Versus Commissioner of Income Tax-II, Chandigarh ...Respondent. CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. S.K. Mukhi, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 29.8.2013 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 189/Chd/2007, relating to theassessment year 1997-98, claiming the following substantial questionsof law:- i) Whether, on the facts and circumstances of thecase, the Tribunal is justified in confirming thedisallowance of business loss claimed undersection 41(1) of the Income Tax Act, 1961 ofRs.5,08,02,633/- on account of damaged stockof paddy on the basis of auditors note/case, the Tribunal is justified in confirming thedisallowance of business loss claimed undersection 41(1) of the Income Tax Act, 1961 ofRs.5,08,02,633/- on account of damaged stockof paddy on the basis of auditors note/ ii) iii) iv) certificate for the year under consideration andby ignoring the fact that amount realized on saleof such damaged stock in subsequent yearshave been taken as income as per theprovisions of Income Tax Act, 1961 as dulyaccepted in the respective assessment underscrutiny u/s 143(3) of Income Tax Act, 1961which would lead to double taxation? Whether, on the facts and circumstances of thecase, the Tribunal is justified in confirming thedisallowance of business loss claimed undersection 41(1) of the Income Tax Act, 1961 ofRs.5,08,02,633/- on account of damaged stockof paddy on the basis of auditors note/certificatefor the year under consideration by erroneouslyholding that no evidence was brought on recordto prove the said stock being damaged or unfitfor milling and also to prove the recovery or saleof the said damaged stock in subsequent yearsby ignoring the fact that amount realized on saleof such damaged stock in subsequent yearshave been taken as income as per theprovisions of Income Tax Act, 1961 dulyaccepted in scrutiny assessment by theRevenue? Whether, on the facts and circumstances of thecase, the Tribunal is justified in confirming thedisallowance of deduction of Rs.29,42,11,642/-u/s 80P(2)(a)(iii) of the Income Tax Act, 1961?Whether, on the facts and circumstances of thecase, the Tribunal is justified in confirming thedisallowance of deduction of Rs.29,42,11,642/-u/s 80P(2)(a)(iii) ignoring the fact that validity ofretrospective amendment in assessee's owncase is pending admitted before Hon'ble ITA No. 91 of 2014 Supreme Court of India? v)Whether the order of the Tribunal is perverseand against the provisions of law? 2.This Court vide order dated 13.8.2014 held that questionsNo.(iii) and (iv) did not arise for consideration as learned counsel for theappellant admitted that the said questions stand covered by the decisionof this Court in CWP No. 3241 of 1999 (Punjab State CooperativeSupply & Marketing Federation Ltd. v. Union of India and others).On 13.8.2014, learned counsel for the appellant prayed for time toamend questions No. (i) and (ii) and filed the amended substantialquestion of law which is to the following effect:- ITA No. 91 of 2014 Supreme Court of India? v)Whether the order of the Tribunal is perverseand against the provisions of law? 2.This Court vide order dated 13.8.2014 held that questionsNo.(iii) and (iv) did not arise for consideration as learned counsel for theappellant admitted that the said questions stand covered by the decisionof this Court in CWP No. 3241 of 1999 (Punjab State CooperativeSupply & Marketing Federation Ltd. v. Union of India and others).On 13.8.2014, learned counsel for the appellant prayed for time toamend questions No. (i) and (ii) and filed the amended substantialquestion of law which is to the following effect:- Whether, on the facts and circumstances of the case,the Tribunal is justified in confirming the disallowanceof business loss claimed by the appellant ofRs.5,08,02,633/- on account of damaged stock ofpaddy on the basis of auditors note/certificate for theyear under consideration by erroneously holding thatno evidence was brought on record to prove the saidstock being damaged or unfit for milling and byignoring the fact that amount realized on sale of suchdamaged stock in subsequent years have been takenas income as per the provisions of Income Tax Act,1961 as duly accepted in the respective assessmentyears under scrutiny assessment u/s 143(3) ofIncome Tax Act, 1961 which would lead to doubletaxation? 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal may be noticed. The appellant is a CooperativeSociety engaged as procurement agency for wheat, paddy andagricultural products. The appellant filed its income of return on31.10.1997 for the assessment year 1997-98 at a gross total income of ITA No. 91 of 2014-4- ` 1,09,15,87,795/-. Thereafter, the assessee filed revised return on8.5.1998 declaring the income at ` 72,98,37,533/-. The said return wasprocessed and notice under Section 143(2) of the Act was issued. Theassessee explained that there was no issue regarding re-audit asreduction has been made under the head “physical balance paddy” from186.32 crores to 181.24 crores in trading account of paddy. It wasexplained that the difference of paddy stock is shown as physicallyavailable but actually damaged and not fit for milling. The stock wasvalued at zero in view of observation of audit vide report/certificate dated29.10.1997 (Annexure A-5). The Assessing Officer vide assessmentorder dated 27.3.2000 (Annexure A-1) made an addition of` 5,08,02,633/-. Against the second issue before the Assessing Officerregarding deduction under Section 80P(2)(a)(iii) of the Act, the SLP hasbeen accepted by the Supreme Court vide order dated 3.9.2012(Annexure A-4). Feeling aggrieved, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”].The CIT(A) vide order dated 7.12.2006 (Annexure A-2) upheld theaddition made by the Assessing Officer. Still dissatisfied, the assesseeapproached the Tribunal by way of an appeal and also submitted writtensubmissions, Annexure A-8. The Tribunal vide order dated 29.8.2013(Annexure A-3) rejected the claim of the assessee. Hence, the presentappeal. 4.Learned counsel for the appellant submitted that certainamount out of the damaged stock of paddy of ` 5.08 crores was receivedby the assessee in the financial year 1997-98 relating to the assessmentyears 1998-99 onwards upto assessment year 2003-04. It was urgedthat the amount so received was taxed in the year of receipt and in such ITA No. 91 of 2014 a situation the matter is required to be referred back to the AssessingOfficer to give benefit of any such amount to the assessee, otherwise itwould amount to double taxation. 5.On the other hand, learned counsel for the revenue couldnot controvert the aforesaid stand of the assessee but maintained andsupported the order passed by the Tribunal. 4.Learned counsel for the appellant submitted that certainamount out of the damaged stock of paddy of ` 5.08 crores was receivedby the assessee in the financial year 1997-98 relating to the assessmentyears 1998-99 onwards upto assessment year 2003-04. It was urgedthat the amount so received was taxed in the year of receipt and in such ITA No. 91 of 2014 a situation the matter is required to be referred back to the AssessingOfficer to give benefit of any such amount to the assessee, otherwise itwould amount to double taxation. 5.On the other hand, learned counsel for the revenue couldnot controvert the aforesaid stand of the assessee but maintained andsupported the order passed by the Tribunal. 6.After hearing learned counsel for the parties, we find thatthe matter is required to be remanded keeping in view the facts urged bythe assessee. Accordingly, the issue is remitted to the Assessing Officerto decide it afresh in accordance with law after affording an opportunityof hearing to the assessee. 7.The appeal stands disposed of. (AJAY KUMAR MITTAL) JUDGE September 17, 2015(RAMENDRA JAIN) gbs JUDGE