ITO, Vellore v. M/s. The Sholinghur Cooperative Milk Producers Society Ltd., Sholingur

MA 165/CHNY/2010 | 2003-2004
Pronouncement Date: 03-12-2010 | Result: Dismissed

Appeal Details

RSA Number 16521724 RSA 2010
Assessee PAN AAAJS3448J
Bench Chennai
Appeal Number MA 165/CHNY/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant ITO, Vellore
Respondent M/s. The Sholinghur Cooperative Milk Producers Society Ltd., Sholingur
Appeal Type Miscellaneous Application
Pronouncement Date 03-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 03-12-2010
Date Of Final Hearing 26-11-2010
Next Hearing Date 26-11-2010
Assessment Year 2003-2004
Appeal Filed On 20-09-2010
Judgment Text
IN THE INCOMETAX APPELLATE TRIBUNAL: B- BENCH:CHENN AI (BEFORE SHRI ABRAHAM P. GEORGE. ACCOUNTA NT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER) MA NO.165/MDS/2010 IN ITA NO.1988/ MDS/08 ASST. YEAR 2003-04 THE INCOME-TAX OFFICER WARD I(6) VELLORE VS M/S THE SHOLINGHUR CO-OP. MILK PRODUCERS SOCIETY LTD 25 VENKATARAYAPILLAI ST. SHOLINGHUR 631102 PAN AAAJS3448J (APPLICANT) (RESPONDENT) APPLICANT BY: RESPONDENT BY: SRI SHAJI P.JACOB SRI T.N.SEETHARAMAN ORDER PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER IN THIS MISC. PETITION OF THE REVENUE ITS GRIEVANC E IS THAT THIS TRIBUNAL DISPOSED OF THE APPEAL FOLLOWING ITS OWN O RDER FOR A PRECEDING YEAR WITHOUT CONSIDERING THE METHOD OF ACCOUNTING F OLLOWED BY THE ASSESSEE WHICH WAS CASH SYSTEM. 2. ACCORDING TO THE REVENUE IN CASH SYSTEM ANY PR OVISION MADE FOR EXPENDITURE OR LOSSES COULD NOT BE CONSIDERED. LD. DR SUBMITTED THAT THE DECISION RELIED ON BY THIS TRIBUNAL WHILE DISMISSIN G THE APPEAL OF THE MP 148/MDS/10 2 REVENUE VIZ. THAT OF NEYVELI LIGNITE CORPORATION V. ACIT (2005) (2 SOT 863) WAS ONE WHERE THE ASSESSEE WAS MAINTAINING IT S ACCOUNT ON MERCANTILE BASIS. HENCE ACCORDING TO THE LD. DR R ELIANCE PLACED ON THE SAID DECISION WAS A MISTAKE. FOR THIS PROPOSITION LD. DR RELIED ON THE DECISION OF THE HONBLE KARANATAKA HIGH COURT IN TH E CASE OF CIT VS. ELECTRONIC RESEARCH LTD. (262 ITR 361) THAT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. U.P.SHOE INDUSTRIES (2 35 ITR 663) AND THAT OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHAMPAL AL CHOPRA VS. STATE OF RAJASTHAN (257 ITR 74). 3. PER CONTRA THE LD. AR SUPPORTED THE ORDER OF TH E TRIBUNAL AND SUBMITTED THAT THERE WAS NO MISTAKE THEREIN. 4. THE ISSUE BEFORE THIS TRIBUNAL WAS WHETHER THE C IT(A) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF RESERVE FOR BUSINESS LOSS ON A GROUND THAT THE ASSESSEE HAS BEEN FOLLOWING THAT AC COUNTING PRACTICE REGULARLY. RELEVANT FINDING OF THIS TRIBUNAL IS REP RODUCED HEREUNDER: 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WELL AS THE RELEVANT RECORDS. THE STATE GOVERNMENT FIXES THE PROCUREMEN T PRICE OF MILK AFTER THE SEASON IS OVER AND THERE IS A DELAY IN ISSUING THE ORDERS FOR ENHANCEMENT IN THE PROCUREMENT PRICE OF MILK. THE ASSESSEE IS FOLLOWING CONSISTENTLY THE PRACTICE OF MAKING PROVISION FOR P AYING THE ENHANCED MP 148/MDS/10 3 PRICE OF MILK EVERY YEAR AS FIXED BY THE GOVERNMENT . AS AND WHEN THE ORDER OF ENHANCEMENT IS ANNOUNCED THE ASSESSEE REV ERSED THE PROVISION AND THE SAME IS OFFERED AS INCOME BY CREDITING IN T HE P & L ACCOUNT. THE PROVISION FOR EXPENDITURE FOR BUSINESS LOSS IS MADE ON THE BASIS OF THE PAST EXPERIENCE OF ENHANCEMENT OF PRICE BY THE STAT E GOVERNMENT AND THEREFORE THERE IS A SCIENTIFIC BASIS FOR MAKING T HE PROVISION. MOREOVER WHEN THIS PRACTICE IS COMMON AND CONSISTENTLY FOLLO WED BY THE ASSESSEE THEN THERE IS NO REASON TO DISTURB THE SAME BY THE ASSESSING OFFICER AS THERE IS NO REVENUE LOSS. IN THESE FACTS AND CIRCU MSTANCES THE DECISION RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTAT IVE WILL NOT HELP THE REVENUE WHEREAS IN CASE OF NEYVELI LIGNITE CORPORAT ION LTD. VS. ACIT THIS TRIBUNAL HAS HELD IN PARA 5 AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE PERUSED THE RECORDS OF THE CASE. FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS NOTED EARLIER IT IS CLEAR THAT IF LIABILITY HAD AC CRUED DURING THE RELEVANT PREVIOUS YEAR AND QUITE REASONABLY COULD B E ESTIMATED ON THE BASIS OF MATERIAL AVAILABLE WITH THE ASSESSEE THEN MERELY BECAUSE QUANTIFICATION OF THE SAME IS DONE IN A SUB SEQUENT YEAR IT CANNOT BE SAID THAT THE PROVISION MADE FOR THE SAID LIABILITY ON A REASONABLE ESTIMATE BASIS WAS NOT ALLOWABLE DEDUCTI ON. IN THE PRESENT CASE WE FIND THAT THE WORKERS PROGRESSIVE UNION SUBMITTED ITS LIST OF DEMANDS FOR THE ENSUING WAGE REVISION PERIOD STARTING FROM 1 ST JAN. 1997 ON 25TH JUNE 1997 IT SELF. THEREFORE IT MP 148/MDS/10 4 WAS AN IMPENDING LIABILITY. VIDE LETTER DT. 14TH JAN. 1999 IT WAS POINTED OUT BY THE GOVERNMENT OF INDIA DEPARTMENT OF PUBLIC ENTERPRISES THAT WAGE SETTLEMENT SHOULD BE NEGOTIAT ED BY PUBLIC SECTOR ENTERPRISES FOR WHICH BROAD GUIDELINES WERE MADE. THUS THE PROCESS STARTED IN JANUARY 1999 ITSELF AND THE ASS ESSEE WAS ALSO INFORMED OF THIS DECISION OF GOVERNMENT OF INDIA ON 22ND FEB. 1999. IN PURSUANCE OF THIS P&A DEPARTMENT OF COMPA NY ISSUED INSTRUCTIONS ON 26TH MARCH 2001 IN REGARD TO REVIS ION OF PAY SCALES FOR EXECUTIVE W.EJ. 1ST JAN. 1997. THUS AS FAR AS PROVISION IN RESPECT OF WAGE REVISION RELATING TO EXECUTIVES IS CONCERNED THERE CANNOT BE ANY DISPUTE THAT THE SAME HAS TO BE ALLOW ED. NEGOTIATIONS WITH WORKERS TRADE UNION WERE ALSO GOI NG ON SIMULTANEOUSLY AND THEREFORE THAT LIABILITY ALSO WAS VERY MUCH EXISTING BECAUSE UNDER NO CIRCUMSTANCES WAGE REVISI ON TO EMPLOYEES COULD BE DENIED. NOW WE HAVE TO SEE WHETH ER THE ASSESSEE COULD REASONABLY MAKE ESTIMATE OF LIABILIT Y ON ACCOUNT OF WAGE REVISION RELATING TO WORKERS. IN THIS REGARD T HE ASSESSEE WAS HAVING INSTRUCTIONS OF P&A DEPARTMENT OF COMPANY DA TED 25TH MARCH 2001 IN REGARD TO WAGE REVISION OF EXECUTIVE S AND TWO SETTLEMENTS OF PUBLIC SECTOR UNDERTAKINGS VIZ. NTPC AND BHEL PRIOR TO 31ST MARCH 2001 WHERE ALSO WAGE REVISION WAS TO BE EFFECTED ON THE SAME LINES AS IN THE CASE OF THE AS SESSEE. THEREFORE THE ASSESSEE COULD REASONABLY ESTIMATE I TS ACCRUED MP 148/MDS/10 5 LIABILITY AS THE SERVICES HAD ALREADY BEEN RENDERED BY 31 ST MARCH 2001. IT WAS THEREFORE FULLY JUSTIFIED IN MAKING THIS PROVISION. IT WAS NOT A NEW EVENT OCCURRING IN THE CASE OF THIS COMPA NY. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT TH E ASSESSEE SHOULD HAVE MADE THIS PROVISION IN THE RESPECTIVE Y EARS. HOWEVER FOR ARRIVING AT THE PROVISION THERE SHOULD BE SOME BASIS AVAILABLE TO THE ASSESSEE AND THAT WAS IN THE FORM OF SETTLEMENT S REACHED FOR PAY REVISION OF ITS EXECUTIVES AND ALSO BY NTPC AND BHEL WHICH WERE ALSO MADE AVAILABLE TO THE ASSESSEE BEFORE 31S T MARCH 2001. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE SAME IS UPHELD. 5. THE QUESTION WAS NOT WHETHER ASSESSEE WAS FOLLOW ING MERCANTILE OR CASH SYSTEM BUT WHETHER THE PROVISION FOR ADDITIONA L COST ON ACCOUNT OF INCREASE IN PROCUREMENT PRICE OF MILK COULD BE ALLO WED. THE TRIBUNAL HAS GIVEN A CLEAR FINDING RELYING ON ITS EARLIER ORDER FOR THE PRECEDING YEAR. WHAT THE REVENUE IS NOW SEEKING IS A REVIEW IN TH E GUISE OF A MISC. PETITION. THIS TRIBUNAL HAS NO POWER TO ENTERTAIN A NY REVIEW UPETITION. WE MP 148/MDS/10 6 DO NOT FIND ANY MISTAKE IN THE ORDER OF THE TRIBUNA L MUCH LESS ANY MISTAKE APPARENT ON RECORD. 6. NEVERTHELESS IT WILL BE INAPPROPRIATE ON OUR PA RT IF WE DO NOT DEAL WITH THE DECISIONS RELIED ON BY THE LD. DR. IN THE CASE BEFORE THE HONBLE KARNATAKA HIGH COURT IN CIT VS. ELECTRONIC RESEARCH LTD. (SUPRA) ASSESSEE HAD APPLIED FOR A DELAY CONDONATION BEFORE THE TRIBUNAL AND ON THAT BASIS AVAILED THE BENEFIT OF KAR VIVAD SAMADHA N SCHEME. THE MISC. PETITION FILED BY REVENUE ON A GROUND THAT A FRAUD WAS PLAYED ON THE TRIBUNAL BY THE ASSESSEE WAS DISMISSED. IT WAS HELD BY THE HONBLE HIGH COURT OF KARNATAKA THAT THERE WAS JURISDICTION AVAI LABLE TO THE TRIBUNAL WHEN THERE WAS A PLEA OF FRAUD. HERE ON THE OTHER HAND THERE IS NO QUESTION OF ANY FRAUD BEING PLAYED ON THE TRIBUNAL BY THE ASSESSEE. 7. AS FOR THE SECOND DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. U.P. SHOE INDUSTRIES (SUPRA) THE T RIBUNAL THEREIN THAT ONE OF THE GROUNDS HAD BECOME REDUNDANT ON A MISTAKEN B ELIEF THAT RELIEF WAS ALREADY ALLOWED TO THE ASSESSEE. HONBLE ALLAHABAD HIGH COURT HELD THAT SINCE THE APPLICATION OF SEC.154 WAS ACTUALLY REJEC TED THERE WAS A RECTIFIABLE MISTAKE IN THE ORDER OF THE TRIBUNAL. H ERE ON THE OTHER HAND REVENUE IS ARGUING THAT THE CASE OF NEYVELI LIGNITE CORPORATION LTD. (SUPRA) RELIED ON BY THE TRIBUNAL OUGHT NOT HAVE BEEN RELIE D ON SINCE THE SAID COMPANY WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. THERE IS NO ORDER MP 148/MDS/10 7 UNDER SEC.154 OR ANY REJECTION THEREOF AND HENCE WE ARE OF THE OPINION THAT THE RELIANCE PLACED ON THIS DECISION IS MISPLA CED. 8. COMING TO THE LAST CASE OF RELIED ON BY THE DR VIZ. THAT OF HONBLE RAJASTHAN HIGH COURT VIS. CHAMPA LAL CHOPRA V. STAT E OF RAJASTHAN (SUPRA) THERE WAS A FACTUAL MISTAKE WHICH WAS SO AP PARENT THAT IT BECAME NECESSARY TO CORRECT THE ORDER OF THE TRIBUNAL. HON BLE RAJASTHAN HIGH COURT HELD THAT SUCH A MISTAKE COULD BE RECTIFIED B Y RECALLING THE ORDER. HERE ON THE OTHER HAND AS ALREADY NOTED BY US WH ETHER THE DECISION OF NEYVELI LIGNITE CORPORATION (SUPRA) WAS RENDERED ON THE BASIS OF THE SYSTEM OF ACCOUNTING FOLLOWED BY THE SAID COMPANY IS NOT SOMETHING APPARENT FROM THE RECORD AND MORE SO SINCE IT REQU IRES DETAILED EXAMINATION. HENCE IN OUR OPINION THIS CASE ALSO WOULD NOT HELP THE CASE OF THE REVENUE. 9. IN THE RESULT THE MISC. PETITION OF THE REVENUE STANDS DISMISSED. ORDER PRODUCED IN OPEN COURT ON 3-12--2010. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 3 RD DEC. 2010 NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.