Tribunal upholds CIT(A)'s decision on milk price addition, citing statutory compliance and cooperative principles.

The tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition towards the additional price/withheld price of milk produced by the assessee. The tribunal found the assessee's payment practice in line with statutory provisions and cooperative principles, consistent with its prior decision in the assessee's case for A.Y. 2010-11. The delay in filing the appeal was condoned due to the Covid-19 lockdown, and the appeal was ultimately dismissed in favor of the assessee.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deletion of addition towards additional price/withheld price of milk produced.
3. Nature of the payment as distribution of profits without paying due taxes.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal by the assessee was delayed by 76 days. The department filed a petition for condonation of delay, citing the Covid-19 lockdown as the reason. The tribunal found sufficient cause to condone the delay and accordingly, the delay was condoned.

2. Deletion of Addition Towards Additional Price/Withheld Price of Milk Produced:
The assessee, engaged in the production of dairy and related milk products, declared a total loss of Rs. 1,84,64,418/- for the Assessment Year 2017-18. During a search conducted under Section 132 of the Income Tax Act, 1961, certain documents were found that impacted the determination of the assessee's total income. The AO noted that the assessee paid an ad hoc price for milk procured, with a withheld price component. The AO disallowed Rs. 22,90,84,000/- debited to the profit and loss account but not actually paid to milk suppliers, alleging it was a device to increase capital without paying taxes.

On appeal, the CIT(A) referred to the ITAT’s decision in the assessee's own case for A.Y. 2010-11, which upheld the practice of paying an initial price and a withheld price, consistent with the Articles of Association and statutory provisions governing the producer company. The CIT(A) concluded that the withheld price paid to members cannot be considered excessive or a tax avoidance practice.

The tribunal found that the issue was covered by its previous decision in the assessee's case for A.Y. 2010-11. It upheld the CIT(A)'s decision to delete the addition, noting that the assessee's practice was in line with the provisions of the Companies Act and the Articles of Association.

3. Nature of the Payment as Distribution of Profits Without Paying Due Taxes:
The AO argued that the withheld price, not actually paid but capitalized, was a method to avoid taxes. The CIT(A) and the tribunal, however, found that the practice was consistent with cooperative principles and statutory provisions. The tribunal noted that the withheld price could be paid in cash or through equity shares, as per the Articles of Association and Companies Act. The CIT(A) and tribunal concluded that the assessee’s practice did not constitute tax avoidance.

Conclusion:
The tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s order, which was consistent with the tribunal's prior decision in the assessee's case for A.Y. 2010-11. The appeal was dismissed, and the deletion of the addition towards the additional price/withheld price of milk produced was upheld.

Order Pronounced:
The order was pronounced in open court on November 26, 2020.

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