Kisan Sahkari Chinni Mills Ltd., ... vs Department Of Income Tax

Dy.Commissioner of Income Tax, vs M/s Kisan Sahkari Chinni Mills Ltd., Circle Najibabad, Sneh Road, Najibabad. Najibabad. (Appellant) (Respondent) Appellant by: Ms Parmidner Kaur, Sr. DR Respondent by : Shri S. K. Arora, CA Date of Hearing: 09.02.2015 Date of pronouncement: 13.3.2015 ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

The above appeal has been filed by the revenue against the order of

CIT(A)-Bareilly dated 3.4.2013 in Appeal No. 380/ACIT/NZB/10-11 for AY

2008-09.

2. Briefly stated the facts giving rise to this appeal are that the case was

selected for scrutiny and statutory notice u/s 143(2) of the Income Tax Act was

issued on 24.8.2009 and after considering the explanation and submissions of

the assessee, the AO made certain additions including addition on account of

under-valuation of closing stock, mis-application of section 145A of the Act and

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capital expenditure. Being aggrieved by the above assessment order, the

assessee preferred an appeal before the CIT(A) which was partly allowed

deleting all the above stated three additions. Now, the aggrieved revenue is

before this Tribunal in this second appeal.

3. We have heard arguments of both the sides and carefully perused the

relevant material placed on record. Ld. DR submitted that the CIT(A) has

deleted the addition of Rs. 49,21,448 rightly made by the AO by enhancing the

value of the closing stock of free sugar for sugar season 2006-07 by applying

the cost price as declared by the assessee i.e. Rs.1443.60 per quintal as it was

lesser than the prevailing market price of free sugar in AY 2007-08 which was

at Rs.1470 per qtl. Ld. DR further contended that the CIT(A) has erred in

allowing relief to the assessee by following the addition without appreciating

the fact that the assessee has not followed its own declared method followed

regularly for valuation of opening and closing stock which is at cost price of

respective year or prevailing market price whichever is lower. Ld. DR further

contended that the CIT(A) deleted the addition without any basis and accepted

the plea of the assessee that the stock of free sugar of sugar season 2006-07 was,

in fact, produced in the month of April and May 2007. Hence, its value was

liable to be computed by applying the rate of cost of production for AY 2007-

08.

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4. Ld. DR further contended that the CIT(A) was not justified in allowing

relief for the assessee deleting the addition of Rs.11,66,511 rightly made by the

AO by including education cess and higher education cess being the integral

components of excise duty in the valuation of closing stock of sugar. On the

last issue, ld. DR submitted that the CIT(A) was not correct in deleting addition

of Rs.19,56,518 rightly made by the AO by disallowing the expenditure being

enduring in nature and having benefit of long lasting nature. Ld. DR also

pointed out that the CIT(A) in the impugned order has simply reproduced

conclusion of the AO and submissions of the AR and after that the CIT(A) has

granted relief for the assessee without any discussion and without addressing

the contentions of the AO as well as submissions of the assessee and without

giving any reasoning in a cryptic manner. Ld. DR prayed that order of the

CIT(A) may be set aside by restoring that of the AO. Alternatively, ld. DR also

submitted that if it is found just and proper, then all three issues may kindly be

restored to the file of CIT(A) for proper adjudication afresh.

5. Ld. AR supported the orders of the CIT(A) and submitted that the CIT(A)

has granted relief for the assessee after considering the detailed sustainable

submissions of the assessee and, therefore, the appeal of the revenue on three

counts may kindly be dismissed. However, ld. AR fairly submitted that if it is

found just and proper, then the case may be restored to the file of AO for a fresh

adjudication and the assessee has no serious objection to that.

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6. On careful consideration of above submissions of both the sides, we note

that the CIT(A) has granted relief for the assessee on all three counts deleting

the impugned additions by passing a cryptic order without assigning any reason

and adjudication on the contentions of the AO and on the submissions and

explanation of the assessee. This is the pious duty of a quasi-judicial or judicial

authority to address and adjudicate all the issues raised before it in a judicious

manner and giving proper and justified reasoning to support its conclusion in

the order which may be subject to appeal, review or scrutiny before any higher

forum. Unless and until this duty is discharged in a proper way, the order of the

first appellate authority viz. CIT(A) is not sustainable. In the present case, the

CIT(A) has decided the appeal of the assessee granting relief to the assessee on

all three counts. From bare reading of the impugned order, we note that the

CIT(A) has reproduced submissions of the AO and at the end the additions

made by the AO have been deleted by simply stating that considering the

submissions of the AO, the addition is not sustainable and the same is deleted.

This is not a proper and judicious approach adopted by the CIT(A). Hence, the

impugned order on all three counts is set aside and the issue of additions on

account of under-valuation of closing stock, misapplication of section 145A of

the Act and capital expenditure is restored to the file of the AO for a fresh

adjudication after affording due opportunity of hearing for the assessee.

Accordingly, ground no. 1 to 5 are deemed to be allowed for statistical

purposes.

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7. In the result, the appeal of the revenue is allowed for statistical purposes

in the manner as indicated above.

Order pronounced in the open court on 13.3.2015.

Sd/- Sd/-

(T.S. KAPOOR) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 13th MARCH 2015 'GS'

Copy forwarded to:-

1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order

Asstt.Registrar

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