Allowed

Chhattisgarh State Minor Forest Produce (Trading and Development) Co-Operative Federation Limited v. Pr. Commissioner of Income Tax - 1

Chhattisgarh HC25 Jul 2024TAXC/164/2024

Case brief

AI extract

What is this about?

A co-operative federation appealed against an ITAT order upholding a Principal Commissioner's revision under Section 263 that set aside its assessment. Holding the Pr. CIT failed to deliberate on the assessee's reply and documents or record reasons, the High Court answered the question of law in the assessee's favour and remanded for reconsideration.

What did the court decide?

Appeal allowed; question of law answered in assessee's favour; case remanded to Pr. CIT to reconsider reply and documents with opportunity of hearing.

Chhattisgarh State Minor Forest Produce (Trading… — Cooperative Societies | Chhattisgarh HC (2024)

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TAXC No. 164 of 2024

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NAFR

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HIGH COURT OF CHHATTISGARH, BILASPUR

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TAXC No. 164 of 2024

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Chhattisgarh State Minor Forest Produce (Trading and Development) Co-operative Federation Limited, Van Dhan Bhawan, Sector -24, Nava Raipur, Atal Nagar, Raipur, (CG)492 015 PAN: AABAC5137E

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---- Appellant

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Versus

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Pr. Commissioner of Income Tax-1, Raipur, C.G.

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---- Respondent

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For the Appellant - Dr. Rakesh Gupta, Advocate along with Shri S. Rajeshwara Rao, Advocate For the Respondent - Shri Ajay Kumrani, Advocate appears on behalf of Shri Amit Chaudhari, Advocate

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________________________________________________________ Hon'ble Shri Justice Goutam Bhaduri & Hon’ble Shri Justice Radhakishan Agrawal

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Judgment on Board

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Per Goutam Bhaduri, J.

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26/07/2024

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Heard.

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The submission is made that the appellant, which is an apex body of the Co-operative, came into existence by an order of the State Government on 23/02/2001 to facilitate collection, storage, processing and disposal of specified forest produce within the periphery of the State of Chhattisgarh and the society was entitled for a commission of Re.1/- per annum for the aforesaid services rendered by it as an agent of the State Government of Chhattisgarh. The appellant came into

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TAXC No. 164 of 2024

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existence for the reason that the State Government while collecting the forest produce through private contractors found that the forest dwellers were not being fully paid and the benefit is not being passed. In view of such background, the role of the assessee was to act as an agency to facilitate collection, storage, processing and disposal of specified forest produce and to act as a coordinator.

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The documents filed along with this appeal would show that a revision proceeding was drawn under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act, 1961’) by the Principal Commissioner of Income Tax, Raipur-1 (hereinafter referred to as the Pr. CIT). The order of the Pr. CIT dated 30/03/2021 would show that pursuant to the notice issued a detailed reply was filed by the appellant and thereafter the learned Pr. CIT was pleased to dispose of the revision by order dated 30/03/2021 and the relevant part is reproduced hereinbelow:-

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I have gone through the case record and submission of the assessee furnished during assessment proceedings and revision proceedings. From the facts narrated above, it is clear that the Assessing Officer has not conducted proper enquiry regarding genuineness of the contention made by the assessee. Therefore, I am satisfied that the assessment order is erroneous in so far as it is prejudicial to the interest of revenue in view of Explanation 2 of Section 263 of the Income tax Act. The A.O. is directed to verify the claim of deduction u/s 80P(2)(d) of

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TAXC No. 164 of 2024

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the IT Act 1961 on interest received from banks on FDR, FFD, SB interest etc. and verify the claim of expenditure. I, therefore, set aside the assessment order and remand it back to the Assessing Officer for fresh adjudication of the issues discussed herein above by conducting necessary enquiries in this case and framing fresh assessment order after affording adequate opportunities to the assessee.

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When the appeal was filed against such order, the Income Tax Appellate Tribunal, Raipur Bench, Raipur (hereinafter ‘the ITAT’) by its order dated 09/05/2024 maintained the order on the ground that certain documents were sought from the assessee and having not been produced, there was no other option except to pass the order.

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The submission is made that the entire show-cause notice was replied in detail and minimum it is expected that while exercising such quasi judicial power, the authority herein i.e. the Pr. CIT was required to look into it and the reply filed along with the documents wherein everything was explained, but in a cryptic manner the order has been passed and the learned ITAT too failed to take into cognizance.

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We went through the record and the orders of the Pr. CIT and the ITAT. Prima facie , it do not satisfy us, therefore, we admit the appeal on the following question of law:-

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A. Whether the ITAT in confirming the order of learned Principal Commissioner of Income Tax passed under Section 263 of the Act, 1961, whereby the assessment order was set aside without looking into the defence raised and application of mind.

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TAXC No. 164 of 2024

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We went through the reply which was filed by the assessee before the Pr. CIT while power of revision was exercised. Section 263 of the Act, 1961 gives power to the Principal Chief Commissioner or the Officer as it is been prescribed that he may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous, in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order.

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The order of the Pr. CIT, therefore, necessarily would require to explain i.e. record reasons to exercise the power under Section 263 of the Act, 1961 to say that the order was prejudicial to the interest of Revenue. However, in case in hand after that proceedings were initiated, the enquiry was conducted and during such enquiry the reply and the documents were placed by assessee. Section 263 makes it incumbent to the Pr. CIT to conduct enquiry. The enquiry means not to shelve the reply and the documents but to deliberate upon it and the same cannot be set aside on the ground that the Officer is not satisfied with reply. The reasons for satisfaction or non-satisfaction are required to be recorded. In the instant case, after going through para 5 of the order, which is the substratum of the entire issue, it is manifest that the said procedure has not been followed.

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TAXC No. 164 of 2024

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Under the circumstances, we allow the appeal and answer the question of law in favour of the assessee and remand back the case to the Pr. CIT to reconsider the reply and the documents of assessee. It is directed that after giving opportunity of hearing to the assessee, the learned authority shall pass the order, in accordance with law and on its own merits.

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Sd/- Sd/-

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(Goutam Bhaduri) (Radhakishan Agrawal) Judge Judge

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A S H U

Chhattisgarh State Minor Forest Produce (Trading and Development) Co-Operative Federation Limited v. Pr. Commissioner of Income Tax - 1

Case brief

What is this about?

What did the court decide?

Chhattisgarh State Minor Forest Produce (Trading and Development) Co-Operative Federation Limited v. Pr. Commissioner of Income Tax - 1

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

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Case details

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