2023 (7) TMI 80 - AT - Income Tax

Assessee's Appeal Allowed for Fresh Adjudication

The appeal by the assessee, concerning disallowance out of sugarcane purchases, sale of sugar at a concessional rate, loss on deduction of fraudulent ... Excess sugarcane price paid by the assessee - Held that:- The issue relating to excess sugarcane price paid by the assessee is restored to the file of Assessing Officer with similar directions as above in the case of Majalgaon Sahakari Sakhar Karkhana Ltd.[2019 (3) TMI 906 - ITAT PUNE]. AO shall decide the issue after affording reasonable opportunity of hearing to the assessee and decide the issue as indicated above. Accordingly, ground No.2 raised by the assessee is allowed for statistical purposes. Sale of sugar at concessional rate - Similar issue has come up for consideration before co-ordinate Bench of Pune Tribunal in the case of Shree Adinath SSK Ltd. [2022 (5) TMI 1561 - ITAT PUNE] issue sale of sugar at concessional rate to member is remanded to the file of Assessing Officer for fresh adjudication for the purpose of giving effect to the directions of Hon’ble Apex Court KRISHNA SAHAKARI SAKHAR KARKHANA LTD. [2012 (11) TMI 669 - SUPREME COURT] in proper perspective. Thus issue remanded back to the file of the ld. A.O for fresh adjudication. Issues Involved:1. Disallowance out of sugarcane purchases.2. Sale of sugar at concessional rate.3. Loss on deduction of fraudulent accounting.4. Disallowance of loss on cane diversion.Summary:1. Disallowance out of sugarcane purchases:The appeal preferred by the assessee emanates from the order of Commissioner of Income Tax (Appeals)-7, Pune, dated 05.09.2018 for A.Y.2014-15. The issue with respect to the disallowance out of sugarcane purchases has already been considered and adjudicated by the Co-ordinate Bench of Tribunal in a batch of appeals, with the lead case being Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT. The Hon'ble Supreme Court in CIT Vs. Tasgaon Taluka S.S.K. Ltd. (2019) 103 taxmann.com 57 (SC) held that the difference between the Statutory Minimum Price (SMP) and the State Advised Price (SAP) has an element of distribution of profit which cannot be allowed as deduction. The matter was remitted to the Assessing Officer (AO) to determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet, and other relevant material supplied to the State Government. Following this precedent, the issue in the present appeal is restored to the file of AO with similar directions.2. Sale of sugar at concessional rate:The issue regarding the sale of sugar at a concessional rate to members was considered by the Co-ordinate Bench of Pune Tribunal in the case of Shree Adinath SSK Ltd. Vs. ACIT. The Hon'ble Supreme Court in CIT vs. Krishna SSK Ltd. directed that the CIT(A) must consider whether the difference between the market price and the concessional price of sugar sold to members should be added to the total income of the assessee society. The CIT(A) should also consider the practice or custom in the cooperative sugar industry, any supporting resolution by the State Government, and the basis for monthly sales apart from Diwali. The issue was remanded to the AO for fresh adjudication in accordance with the directions of the Hon'ble Apex Court.3. Loss on deduction of fraudulent accounting:The remaining grounds pertaining to the loss on deduction of fraudulent accounting will have bearing on the principal issues remitted back to the file of the AO. Therefore, these grounds are also remitted to the file of the AO for adjudication as per law, complying with the principles of natural justice.4. Disallowance of loss on cane diversion:Similar to the issue of fraudulent accounting, the disallowance of loss on cane diversion is remitted to the file of the AO for adjudication as per law, complying with the principles of natural justice.Conclusion:In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in open Court on 28th June, 2023.