Vignahar Sahakari Sakhar Karkhana Ltd v. Income Tax Officer,Ward 10,(1) Pune & Ors

dmt 1/4 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 10259 OF 2012 Vignahar Sahakari Sakhar Karkhana Ltd. ..Petitioner. versus Income Tax Officer,Ward 10,(1) Pune & Ors. ..Respondents. WITH WRIT PETITION NO. 11891 OF 2012 Vignahar Sahakari Sakhar Karkhana Ltd. ..Petitioner. versus The Income-Tax Appellate Tribunal, Pune, Bench “A”, Pune & Ors. … ..Respondents. Mr. Jehangir D. Mistri, Sr. Adv. i/by Mr. Nitin Dhumalfor the Petitioners. Mr. Tejveer Singh for the Respondents. ...... CORAM : DR.D.Y.CHANDRACHUD, AND A.A. SAYED, JJ. 18 JANUARY 2013. P.C. : The Petition arises from an order of the Assessing Officer dated 19 November 2002 rejecting an application for stay of demand for A.Y.s 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. The total demand is Rs. 29.37 crores for A.Y.s 2004-05 to 2008-09. dmt 2/4 2.The Assessing officer noticed that the assessee had purchased sugar-cane from the members of the Society as well as from non-members at a price fixed by the State Government (State Advised Price) which was higher than the Statutory Minimum Price (SMP) fixed by the Union Government. Notices were issued under Section 143 (2) and 142 (1) of the Income Tax Act, 1961 for assessment years 2004-05, 2005-06 and 2006-07. For A.Y.s 2007-08 and 2008-09, the CIT (A) passed orders against which the Petitioner is in appeal before the ITAT. 3.On 17 September 2012 an order has been passed by the Assessing Officer on the applications for stay of demand directing the Petitioner to pay the entire outstanding dues in installments of Rs. 3 crore per month starting from October 2012 in respect of the orders for which the Petitioner Is in appeal before the ITAT (2007-08 AND 2008-09). The Tribunal has passed an order on 9 November 2008 declining to grant a stay. The Tribunal has held that no prima facie case had been made out and that the assessee had not complied with the order of the CIT directing deposit of Rs. 3 crores per month. 4.Initially, in a judgment in Commissioner of Income-Tax v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd. [1] a Division Bench of this Court had considered a batch of appeals by the Revenue on the issue as to whether the additional payment which is made over and above the statutory minimum price (SMP) constitutes a part of the cane price and not a diversion of profit and whether it is allowable as a business expenditure under Section 37(1) of the Income-tax Act, 1961. The Division Bench held that the price as per the SAP fixed by the State Government based on the price recommended by the assessee after the finalisation of accounts could not be regarded as an appropriation of profits. dmt 3/4 5.In a batch of appeals, inter alia in Dy. Commissioner of Income Tax, Nashik v. Shri Satpuda Tapi Parisar SSK Limited,[1]the Supreme Court on 20 January 2010 remanded all the appeals back to the Commissioner of Income Tax (Appeals) for reconsideration of the following question : “Whether the above-mentioned differential payment made by the assessee(s) to the cane growers after the close of the financial year or after the balance-sheet date would constitute an expenditure under Section 37 of the Income Tax Act, 1961; and whether such differential payment would, applying the real income theory, constitute an expenditure or distribution of profits?” Subsequently in C.I.T. Bombay vs. Tasgaon Taluka S.S.K. Ltd.[2]leave to appeal has been granted by the Supreme Court with the direction that a larger bench should be constituted to consider the earlier judgment in Maharashtra Rajya Sahkari Sakhar Karkhana Sangh Ltd., & Ors. vs. State of Maharashtra & Ors.[3] “Whether the above-mentioned differential payment made by the assessee(s) to the cane growers after the close of the financial year or after the balance-sheet date would constitute an expenditure under Section 37 of the Income Tax Act, 1961; and whether such differential payment would, applying the real income theory, constitute an expenditure or distribution of profits?” Subsequently in C.I.T. Bombay vs. Tasgaon Taluka S.S.K. Ltd.[2]leave to appeal has been granted by the Supreme Court with the direction that a larger bench should be constituted to consider the earlier judgment in Maharashtra Rajya Sahkari Sakhar Karkhana Sangh Ltd., & Ors. vs. State of Maharashtra & Ors.[3] 6.The principal grievance of the Petitioner in both the Petitions is that neither the order of the Assessing Officer dated 17 September 2002[4] nor the order of the ITAT dated 9 November 2012[5] furnishes any reasoning while disposing of the applications for stay. The CIT while disposing of the application for stay merely referred to the submissions of the Assessing Officer and on “looking into the facts of the case” directed the payment of the entire outstanding dues in instalments of Rs. 3 crores per month. Similarly, the order passed by the Tribunal merely records that the assessee has no prima facie case and had not complied with the 1Civil Appeal No. 617 of 2010 together with companion matters.2Petition for Special Leave to Appeal (Civil)No. 30452/2010 arising out of a judgment and order of this Court dated 29 April 2009 in ITA No. 1536/2007.2Petition for Special Leave to Appeal (Civil)No. 30452/2010 arising out of a judgment and order of this Court dated 29 April 2009 in ITA No. 1536/2007. 3 1995 Suppl. (3) SCC 475. 4 Exhibit “I” to Writ Petition No. 10259 of 2012. 5 Exhibit “J” in Writ Petition No. 11891 of 2012. dmt 4/4 order passed by the CIT on 17 September 2012. The order of the Tribunal does not reflect even a prima facie assessment on merits since no reasons are disclosed in the order. Merely stating that no prima facie case has been made out would in our view not be sufficient to indicate that there has been a due and proper application of mind, though confined prima facie to the disposal of the application for stay. 7.In these circumstances, since both the orders passed by the CIT on 17 September 2012 as well as the order of the Tribunal dated 9 November 2012 are bereft of any reasoning whatsoever relevant to the disposal of the application for stay, we set aside both the orders and direct reconsideration of the application for stay afresh. 8. We clarify that the observations contained in this order are not intended to preclude the CIT and the Tribunal, as the case may be, from evaluating the merits of the case for disposal of the application for stay afresh. The Tribunal has relied upon the order dated 17 September 2012 which would have to be set aside for the reasons indicated above. We are of the view that fresh consideration will have to be directed also by the Tribunal. Both the CIT and the Tribunal would be at liberty to do so while passing orders afresh. 9.The Petitions shall accordingly stand disposed of in the aforesaid terms. No costs. (DR. D.Y. CHANDRACHUD, J.) (A.A. SAYED, J.)