M/s. Vinayaka Agro Warehouse v. CIT, Aurangabad
[Citation -2016-LL-0916-116]

Citation 2016-LL-0916-116
Appellant Name M/s. Vinayaka Agro Warehouse
Respondent Name CIT, Aurangabad
Court ITAT-Pune
Relevant Act Income-tax
Date of Order 16/09/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags audited profit and loss account • infrastructure development • appropriate authority • warehousing facility • industrial company • assessment record • reason to believe • service of notice • audit report • rural area
Bot Summary: After considering the various details filed by the assessee the AO had allowed the claim of deduction u/s.80IB(11A) amounting to Rs.17,39,521/- accepting that the assessee derives income from integrated business of handling, storage and transportation of foodgrains. Referring to the following decisions the assessee has stated that where the AO during the scrutiny assessment proceedings has raised a query which was answered by the assessee and the AO is satisfied but the same was not reflected in the assessment order by him a conclusion cannot be drawn by the CIT that no proper enquiry with respect to the issue was made by the AO and enable him to assume jurisdiction u/s.263 of the I.T. Act : 1. As regards the non claiming of depreciation is concerned the assessee has mentioned in the written submission that the Hon ble Bombay High Court in the case of Godavari Sugar Mills Vs. CIT reported in 208 ITR 801 and the Hon ble Andhra Pradesh High Court in the case of CIT Vs. Andhra Cotton Mills reported in 228 ITR 30 have held that assessee has an option not to claim depreciation. The assessee has also relied on the decision of the Pune Bench of the Tribunal in the case of Shri Gendmal Bhikulal Bantha Vs. ITO vide ITA No.1337/PN/2011 order dated 22-03-2013 for A.Y. 2006-07 to the proposition that the words transportation of foodgrains indicate that transportation has to be done by the assessee s own trucks or transport system. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT. Referring to the decision of the Pune Bench of the Tribunal in the case of Anurag Radhesham Attal Vs. ITO and vice-versa vide ITA Nos.829/PN/2012 and ITA No.863/PN/2012 order dated 11-03-2016 he submitted that the Tribunal in the said decision has dismissed the appeal filed by the assessee on the ground that assessee was unable to show from the records that the activities of handling, storage and transportation of foodgrains allegedly carried out by the assessee are part of one composite activity and are integrated in any manner. So far as the non-claim of depreciation is concerned, we find from the chart furnished by the assessee in the written submission that non claim of depreciation by the assessee does not amount to any loss of revenue to the department and therefore it is not prejudicial to the interest of the revenue. So far as the decision of the Pune Bench of the Tribunal in the case of Anurag Radheshyam Atal relied on by the Ld. Departmental Representative is concerned we find in that case the AO has given a finding that the assessee is not engaged in the integrated business of handling, storage and transportation of foodgrains since the assessee was neither having labour on its payroll nor the assessee was having own fleet of vehicles for transportation.


IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM ITA No.1033/PN/2014 Assessment Year : 2009-10 M/s. Vinayaka Agro Warehouse, Plot No.14, Survey No.132, Appellant Loni, Udgir 413517 Dist. Latur PAN :AAHFV0172D v/s CIT, Aurangabad Respondent Appellant by : None (Written Submission) Respondent by : Shri Rajeev Kumar, CIT Date of Hearing :01.09.2016 Date of Pronouncement:16.09.2016 ORDER PER R.K. PANDA, AM : This appeal filed by Assessee is directed against order dated 20-03-2014 passed u/s.263 by CIT, Aurangabad relating to Assessment Year 2009-10. 2. None appeared on behalf of assessee despite service of notice issued by Registry. However, assessee has filed written submission with request to consider same while deciding appeal. Therefore, appeal is being decided on basis of written submission filed by assessee and after hearing Ld. Departmental Representative. 2 ITA No.1033/PN/2014 3. Facts of case, in brief, are that assessee is partnership firm engaged in business of storage of food grains, fumigation, handling and transportation under name and style M/s. Vinayak Agro Warehouse at Loni. It filed its return of income on 14-09-2009 declaring total income at Nil after claiming deduction of Rs.17,39,521/- under u/s.80IB(11A) of I.T. Act. AO completed assessment u/s.143(3) on 30-11-2011 accepting said returned income. Subsequently, Ld.CIT, on verification of assessment record for impugned assessment year, had reason to believe that order passed u/s.143(3) dated 30-11-2011 passed by AO is erroneous as well as prejudicial to interest of revenue for following reasons as mentioned by him in order passed u/s.263 and which reads as under : (i) On verification of P and L Account, it is seen that you have shown following receipts from business activities of storage of food grains, fumigation and transport facility to farmers. 1. Fumigation charges Rs.1,36,950/- 2. Handling charges Rs.1,75,167/- 3. Transportation charges Rs. 12,940/- 4. Warehouse Rent Rs.21,88,520/- ------------------ Rs.25,16,577/- ------------------ After claiming business related expenses, net profit is shown at Rs.17,39,521/- after claiming deduction uls.80IB(11A) of Act, which was allowed by AO while completing assessment u/s. 143(3) of Act. From aforesaid details, it is gathered that you have shown nominal receipts from transportation. Further, record does not show any documentary evidence to point out that handling and transportation was being carried out by you. balance-sheet of business does not reflect any assets other than warehouse building and also no expenses have been debited to P and L Account on account of freight ale. According to provisions of sec. 80IB(11A) of Act, this deduction is allowable in case of undertaking deriving profit from its integrated business of handling, storage and transportation of food grains. In absence of any corroborative evidence to prove that you have also engaged in handling and transportation of food grains, your claim for deduction u/s.80IB(11A) is not found to be acceptable and allowable. Therefore, deduction u/s. 80IB(11A) claimed by you and allowed by AO deserves to be withdrawn/cancelled. 3 ITA No.1033/PN/2014 (ii) On verification of P and L Account and balance-sheet, it is noticed that you have not claimed depreciation on fixed assets shown at Rs. 1,10,73,412/-. According to Explanation 5 of section 32(1) of Act, depreciation allowable u/s. 32 shall be allowed to assessee whether same has been claimed or not in computing his total income. Accordingly, depreciation u/s.32 is proposed to be allowed to you. He, therefore, issued notice u/s.263 of Act and asked assessee to explain as to why order passed u/s.143(3) should not be set aside. 4. assessee explained that firm has constructed rural godown under Central Government Scheme of Rural Godown Scheme which is also called Gramin Bandharan Yojana. assessee has satisfied entire norms of scheme and obtained certificate of registration of warehousing from District Registrar which is mandatory for claiming deduction and subsidy. It has also obtained insurance for premises as well as for foodgrains of farms. It was emphasized that act nowhere mentions that assessee should own vehicles for transportation and assessee is providing transport facility through external agencies and they got little part of income. It was further explained that merely because assessee has not owned vehicles and not debited transportation expenses to profit and loss account, deduction u/s.80IB(11A) cannot be denied because assessee has created warehouse under scheme of Rural Godown Scheme. It has obtained warehouse license from Appropriate Authority, Obtained insurance for safety of food grains for farms, JMC has visited godown and had given approval for subsidy after 4 ITA No.1033/PN/2014 verification of warehouse infrastructure. firm is providing transportation facility from external agencies to farmers. 5. It was further argued that firm is eligible for deduction u/s.80IB(11A) of Act as basic intention behind this deduction was to motivate infrastructure development in rural area and to give best prices to farmers for their commodities which have been satisfied. It was also mentioned that case cannot be reopened u/s.263 of I.T. Act merely on ground of change of opinion. For above proposition, assessee relied on decision of Hon ble Gujarat High Court in case of CIT Vs. FAG Bearing India Ltd. order dated 01-04-2013. 6. However, Ld.CIT was not satisfied with arguments advanced by assessee. He observed that AO in assessment order after obtaining and verifying partnership deed, details of gross receipts from godown, expenses debited to profit and loss account and copy of license for carrying on business of warehouse etc. allowed claim of deduction u/s.80IB(11A) of I.T. Act. According to Ld.CIT from above details it appears that AO has examined case of assessee in routine manner without verifying basic conditions for allowing deduction u/s.80IB(11A) of I.T. Act as well as certain conditions laid down u/s.80IB(2) for claiming this deduction. According to Ld. CIT bare reading of section 80IB(11A) shows that deduction is available to undertaking deriving profit from 3 business activities, i.e. (a) handling, (b) storage and (c) transportation of good grains. All these 3 activities should be integrated with each other. scheme under this section relates 5 ITA No.1033/PN/2014 to services in connection with preservation of foodgrains promoted by Government of India following National Policy in respect of handling, storage and transportation of foodgrains. Elaborate guidelines are provided for eligibility of said deduction u/s.80IB(11A). On going through warehouse rent receipts, he observed that warehousing facility was provided to certain business enterprises for keeping their goods in warehouse. He further observed that lumpsum amounts were shown to have been received by assessee on single day. Considering these payments on account of rent he was of opinion that it is difficult to accept that these payments were received from small farmers for keeping their foodgrains. 6.1 He further observed that assessee firm is having fixed assets at Rs.1,10,73,412/- but no depreciation has been claimed by assessee either in profit and loss account or in computation of income. According to him as per Explanation 5 of section 32(1) depreciation allowable u/s.32 shall be allowed to assessee whether same has been claimed or not in computing total income. Rejecting various explanations given by assessee and distinguishing various decisions cited before him Ld.CIT held that order passed by AO is erroneous and prejudicial to interest of revenue. He, therefore, set aside order by invoking powers conferred on him u/s.263 and directed AO to reframe assessment after making necessary enquiries in this regard. He directed AO to verify registers maintained at warehouse in regard to movement of goods, to verify as to which types of goods were kept in warehouse and to verify as to whether assessee firm is satisfying conditions laid 6 ITA No.1033/PN/2014 down u/s.80IB(2) of Act. Further, he also directed AO to compute depreciation on fixed assets as per law and allow same to assessee firm while computing total income of assessee firm. 7. Aggrieved with such order of CIT assessee is in appeal before us with following ground : 1. For that in facts and circumstances of case order u/s.263 of I.T. Act, 1961 passed by CIT, Aurangabad is merely change in opinion . order u/s.143(3) of I.T. Act, 1961 passed by Ld.AO does not in any way represent erroneous in so far as it is prejudicial to interests of revenue. action of Ld.CIT was wholly unreasonable, uncalled for and bad-in-law. 8. assessee in its written submission has mentioned that as per decision of Hon ble Supreme Court in case of Malabar Industrial Company Ltd. Vs. CIT reported in 243 ITR 83 twin conditions, i.e. (a) order of AO sought to be revised is erroneous and (b) it is prejudicial to interest of revenue must be satisfied for assuming jurisdiction u/s.163. If one of them is absent recourse cannot be taken u/s.263(1) of I.T. Act. Therefore, if order of AO is erroneous but it is not prejudicial to interest of revenue or if it is not erroneous but is prejudicial to interest of revenue recourse cannot be taken under section 263(1) of Act. It has further been mentioned in written submission that during assessment proceedings u/s.143(3) assessee has filed copy of audited profit and loss account and balance sheet along with all annexures, computation of total income and audit report in Form 10CCB under Rule 18BBB for claiming deduction u/s.80IB(11A). During course of assessment proceedings AO issued questionnaire. At Question Nos. 6 and 7 AO had enquired about details of 7 ITA No.1033/PN/2014 gross receipts of Rs.3,25,057/- and rent receipts at Rs.21,88,520/-. assessee had given full details which are as under : 1. Fumigation charges Rs.1,36,950/- 2. Handling charges Rs.1,75,167/- 3. Transportation charges Rs. 12,940/- --------------------- Rs.3,25,057/- 4. Warehouse rent Rs.21,88,520/- ---------------------- Total Gross Receipts Rs.25,13,577/- --------------------- 9. All ledger account extracts and above gross receipts were submitted at time of assessment proceedings which was verified by AO. Further, during course of assessment proceedings AO had issued questionnaire and at Question No.13 AO had asked details of deduction claimed under Chapter VIA and assessee has submitted details of deduction claimed under said chapter amounting to Rs.17,39,521/-. After considering various details filed by assessee AO had allowed claim of deduction u/s.80IB(11A) amounting to Rs.17,39,521/- accepting that assessee derives income from integrated business of handling, storage and transportation of foodgrains. Since AO had made proper enquiry and examined accounts it cannot be said there was non-application of mind by AO. Therefore, action u/s.263 has to be held as invalid. For above proposition assessee relied on following decisions : 1. Antala SanjayKumar Ravjibhai Vs. CIT reported in (2012) 135 ITD 506 (Rajkot Tribunal) 2. Roshanlal Vegetable Products Pvt. Ltd. Vs. ITO reported in 51 SOT 1 (URO) (Asr) (Tribunal) 3. Fine Jewellery (India) Ltd. Vs. ACIT reported in 19 ITR 746 (Mumbai Tribunal) 8 ITA No.1033/PN/2014 10. It has further been mentioned in written submission that Ld.CIT while passing order u/s.263 at para 3.1.4 has directed AO to make some further enquiry and verifications. Relying on various decisions as mentioned in written submission, assessee has stated that assessment framed u/s.143(3) cannot be revised on ground that desired enquiry was not made : 1. Amrik Singh Vs. ITO reported in (2003) 127 Taxmann 87 (Mag.) Chd.) (Tribunal). 2. Balijees Vs. ACIT reported in (2003) 127 Taxmann 150 (Mag.) (Chd.) (Tribunal) 11. Referring to following decisions assessee has stated that where AO during scrutiny assessment proceedings has raised query which was answered by assessee and AO is satisfied but same was not reflected in assessment order by him conclusion cannot be drawn by CIT that no proper enquiry with respect to issue was made by AO and enable him to assume jurisdiction u/s.263 of I.T. Act : 1. CIT Vs. Ashish Rajpal reported in (2009) 320 ITR 674 (Delhi High Court) 2. Vikash Polymers reported in (2010) 194 Taxmann 57 (Delhi High Court) 12. It has further been mentioned in said written submission that Ld. CIT in his order nowhere has given finding that order passed by AO on issues discussed therein was erroneous. In absence of any such finding by CIT as required u/s.263 merely saying that assessment order on those issues 9 ITA No.1033/PN/2014 was prejudicial to interest of revenue is not sufficient to assume jurisdiction by him u/s.263 of I.T. Act. 13. As regards non claiming of depreciation is concerned assessee has mentioned in written submission that Hon ble Bombay High Court in case of Godavari Sugar Mills Vs. CIT reported in 208 ITR 801 and Hon ble Andhra Pradesh High Court in case of CIT Vs. Andhra Cotton Mills reported in 228 ITR 30 have held that assessee has option not to claim depreciation. assessee has also filed chart showing that even if depreciation is claimed total income becomes NIL and there is no loss of revenue. Therefore, order of AO cannot be said to be prejudicial to interest of revenue. 14. assessee has also relied on decision of Pune Bench of Tribunal in case of Shri Gendmal Bhikulal Bantha Vs. ITO vide ITA No.1337/PN/2011 order dated 22-03-2013 for A.Y. 2006-07 to proposition that words transportation of foodgrains indicate that transportation has to be done by assessee s own trucks or transport system. Transportation of foodgrains may be through hired vehicles as well. assessee should not be deprived of beneficial provisions of section 80IB(11A) of Act because certainly he is engaged in handling, storage and some part of transportation of foodgrains cannot be ruled out. Further, it has also been held that beneficial provisions should be liberally interpreted in favour of assessee and such beneficial provisions should not be sacrificed for technical narrow interpretation of relevant provisions. Even minor transportation 10 ITA No.1033/PN/2014 facility should help assessee for claiming benefit of provisions of section 80IB(11A) of I.T. Act. 15. Ld. Departmental Representative on other hand heavily relied on order of CIT. Referring to decision of Pune Bench of Tribunal in case of Anurag Radhesham Attal Vs. ITO and vice-versa vide ITA Nos.829/PN/2012 and ITA No.863/PN/2012 order dated 11-03-2016 he submitted that Tribunal in said decision has dismissed appeal filed by assessee on ground that assessee was unable to show from records that activities of handling, storage and transportation of foodgrains allegedly carried out by assessee are part of one composite activity and are integrated in any manner. Accordingly, claim of deduction u/s.80IB(11A) of Act was denied to assessee. Since AO in instant case has not carried out requisite enquiry before allowing claim of deduction u/s.80IB(11A) of Act, therefore, order of AO has become erroneous as well as prejudicial to interest of revenue. Therefore, Ld.CIT was fully justified in invoking powers conferred on him under section 263 of I.T. Act and thereby set aside order passed u/s.143(3) of I.T. Act. 16. We have considered arguments advanced by Ld. Departmental Representative and perused written submission filed by assessee. We have also considered material available on record as well as various decisions relied on by assessee in written submission. We find AO in instant case, in order passed u/s.143(3) of I.T. Act, has accepted claim of deduction u/s.80IB(11A) amounting to Rs.17,39,521/-. 11 ITA No.1033/PN/2014 From written submission filed by assessee as well as on perusal of assessment folder produced at time of hearing of appeal, we find AO vide questionnaire for impugned assessment year annexed to notice u/s.143(2) has asked assessee inter alia vide Q.No.6 to furnish details of gross receipts shown at Rs.3,25,057/- and vide Q.No.7 to furnish name and address of landlord to whom rent has been paid at Rs.21,88,520/-. AO vide Q.No.13 has asked for details of deduction claimed under Chapter VIA. Further, assessee in its computation of income has clearly mentioned deduction u/s.80IB in respect of undertaking deriving profit from integrated business of handling, storage and transportation of foodgrains at Rs.17,39,521/-. Under these circumstances, it cannot be said that AO has not made proper enquiry and there is non-application of mind by him. Merely because Ld.CIT does not agree with manner of enquiry conducted by AO, or he does not agree with view taken by AO, it cannot be said that order is erroneous and prejudicial to interest of revenue. During course of hearing Ld. Departmental Representative has filed details of warehouse rent at Rs.21,88,520/-. From above it is seen that assessee during course of hearing had given date-wise receipt of warehouse rent which runs into several pages. 17. It has been held in various decisions including decision of Hon ble Supreme Court in case of Malabar Industrial Company Ltd. Vs. CIT reported in 243 ITR 83 that for assuming jurisdiction u/s.263 twin conditions, i.e. (a) order must be erroneous and (b) order must be prejudicial to interest of revenue 12 ITA No.1033/PN/2014 must be fulfilled. In absence of either of above Ld.CIT is precluded from assuming jurisdiction u/s.263 of I.T. Act. Further, jurisdiction u/s.263 cannot be invoked on debatable issues. As mentioned earlier, assessee in instant case has given full details as asked by AO during course of assessment proceedings towards its claim of deduction u/s.80IB(11A) amounting to Rs.17,39,521/-. AO after verification of details as called for by him has allowed such claim. 18. So far as non-claim of depreciation is concerned, we find from chart furnished by assessee in written submission that non claim of depreciation by assessee does not amount to any loss of revenue to department and therefore it is not prejudicial to interest of revenue. Since in instant case AO after considering various submissions made by assessee from time to time has accepted claim of deduction u/s.80IB(11A) amounting to Rs.17,39,521/-, therefore, same in our opinion cannot be held to be erroneous. 19. So far as decision of Pune Bench of Tribunal in case of Anurag Radheshyam Atal (Supra) relied on by Ld. Departmental Representative is concerned we find in that case AO has given finding that assessee is not engaged in integrated business of handling, storage and transportation of foodgrains since assessee was neither having labour on its payroll nor assessee was having own fleet of vehicles for transportation. Further, assessee has not filed audit report in prescribed form which was necessary for claiming deduction 13 ITA No.1033/PN/2014 u/s.80IB(11A) of Act. assessee was unable to show from records that activities of handing, storage and transportation of foodgrains allegedly carried out by it are part of one composite activity and are integrated in any manner. However, in instant case facts are completely different. assessee has furnished full details and AO after being satisfied with such details has allowed claim of deduction u/s.80IB(11A) of Act. Therefore, decision relied on by Ld. Departmental Representative is distinguishable and not applicable to facts of present case. In view of above discussion, we set aside order of CIT passed u/s.263 of I.T. Act and allow ground raised by assessee. 20. In result, appeal filed by assessee is allowed. Order pronounced in open court on 16-09-2016. Sd/- Sd/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER iq.ks Pune; Dated : 16th September, 2016. Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT, Aurangabad 4. DR, ITAT, Pune; 5. Guard file. BY ORDER, //True Copy// Sr. Private Secretary ITAT, Pune M/s. Vinayaka Agro Warehouse v. CIT, Aurangabad
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