2022 (9) TMI 548 - AT - Income Tax

Excess cane price paid to members/non members as well as sale of sugar at concessional rate - HELD THAT - Issues are no more res-integra as the tribunal s coordinate bench s recent order in The Malegaon Sahakari Sakhar Karkhana Ltd. 2021 (10) TMI 1357 - ITAT PUNE has restored the same back to the Assessing Officer for his afresh appropriate adjudication. Ordered accordingly. This assessee s former twin substantive ground Nos. 1 2 are allowed for statistical purposes on the very terms. Addition u/s 40(A)(3) - cash payment disallowance made by the assessee to it s employees - HELD THAT - As case law Anupam Teleservices Ltd. 2014 (2) TMI 30 - GUJARAT HIGH COURT has dealt with the similar question of regular continuing relationship between payer and payee to conclude that such an overwhelming genuine instance of cash payment does not attract Section 40A(3) of the Act. We thus conclude that both the lower authorities have erred in law and on facts in disallowing assessee s impugned salary payments under Section 40A(3) of the Act. The same is directed to be deleted. Addition of Bigar Pavati Kharch expenses - As argued that the assessee could not file even basic supportive documents and expenditure vouchers in support of the impugned claim - HELD THAT - This assessee is running a sugar factory procuring sugarcane from remote rural areas involving various overhead expenses. That being the case, such cash expenditure cannot be altogether ruled out. We also deem it appropriate to observe that it was indeed imperative for the assessee as well to file at least some supportive documentary evidence. Faced with this situation, we hold that a lump sum disallowance @ 20% of the assessee s impugned claim would be just and proper with a rider that the same will not be treated as a precedent. Ordered accordingly. The assessee partly succeeds in the instant substantive ground. Cattle camps/fodder depot income made in the course of assessment - HELD THAT - All Revenue s arguments failed to evoke our concurrence. It has come on record that the impugned surplus had come to the assessee from the fodder grants received from the state government without any clear cut indication about the income element embedded therein. We thus quote Chaiunrup Sampatram 1953 (10) TMI 2 - SUPREME COURT that the principles of conservative accountancy indeed permit an assessee to recognise the anticipatory losses at the first sign of reasonable probability but the same principle does not apply regarding anticipated profits which have to be booked at the first sign of reasonable certainty only. Faced with this situation, we conclude that both the lower authorities have erred in law and on facts in making the impugned cattle camps/fodder depot addition in assessee s hands. The same is directed to be deleted.

Summary

Issues Involved:
1. Disallowance of excess cane price and sugar sale at concessional rate
2. Disallowance of cash payment made to employees under Section 40(A)(3)
3. Disallowance of "Bigar Pavati Kharch" expenses
4. Addition of income from cattle camps/fodder depot not offered for tax

Analysis:

Issue 1: Disallowance of Excess Cane Price and Sugar Sale at Concessional Rate
The tribunal noted that the issues of excess cane price paid to members/non-members and sale of sugar at a concessional rate were previously dealt with in a similar case. Referring to a recent order, the tribunal directed the Assessing Officer to re-examine these issues. Consequently, the tribunal allowed the appeal on these grounds for statistical purposes.

Issue 2: Disallowance of Cash Payment to Employees under Section 40(A)(3)
The tribunal analyzed the disallowance of cash payments made to employees under Section 40(A)(3). It was observed that the lower authorities had rejected the claim without questioning the genuineness of the payments. Citing relevant case laws, the tribunal concluded that the disallowance was unwarranted. Therefore, the tribunal directed the deletion of the disallowed amount.

Issue 3: Disallowance of "Bigar Pavati Kharch" Expenses
Regarding the disallowance of "Bigar Pavati Kharch" expenses, the tribunal noted the lack of supporting documents provided by the assessee. Considering the nature of the business and the absence of proper documentation, the tribunal allowed a lump sum disallowance of 20% of the claimed amount. The tribunal emphasized that this decision should not set a precedent.

Issue 4: Addition of Income from Cattle Camps/Fodder Depot
The tribunal addressed the addition of income from cattle camps/fodder depot that was not offered for tax. The Assessing Officer had added the income to the assessee's total income, citing discrepancies in the accounts. However, the tribunal disagreed with this addition, stating that the income had accrued during the relevant assessment year and should be taxed accordingly. The tribunal directed the deletion of the added amount, emphasizing the need for proper computation.

In conclusion, the tribunal partly allowed the assessee's appeal, providing detailed reasoning for each issue addressed in the judgment.