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2016 (6) TMI 27 - ITAT PUNE

2016 (6) TMI 27 - ITAT PUNE - TMI - Disallowance of deduction u/s. 80IB(11A) - Non-consideration of the Audit Report filed at the time of assessment proceedings - Held that:- . Non-filing of Audit report inadvertently before the Commissioner of Income Tax (Appeals) cannot be considered as sufficient cause when the Assessing Officer has specifically taken a ground to disallow deduction to the assessee for non-filing of Audit report before him. The assessee has been negligent and callous in pursui .....

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ri Sheikh Rashid Shaikh Chand and Shri Siddheshwar Kondiba Sontakke. The Assessing Officer has categorically stated that the payments are made by the assessee to the farmers through them. The Assessing Officer has not stated anywhere in the report that the assessee has purchased agricultural produce from these persons. The Assessing Officer has further stated that the assessee has paid commission to the above mentioned four persons. The Commissioner of Income Tax (Appeals) after considering the .....

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e For The Revenue : Shri Subhash K.R. ORDER PER VIKAS AWASTHY, JM : These cross appeals have been filed by the assessee and the Revenue impugning the order passed by the Commissioner of Income Tax (Appeals), Aurangabad dated 14-02-2012 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the assessment year 2008-09. 2. The brief facts of the case as emanating from records are: The assessee is an individual, engaged in the business of ginning and pressing of cotton an .....

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not engaged in the integrated business of handling, storage and transportation of food grains. The assessee is neither having labourers on its payroll nor the assessee is having own fleet of vehicles for transportation. Therefore, the assessee does not fulfill the requisite conditions for claiming deduction u/s. 80IB(11A) of the Act. The Assessing Officer disallowed the deduction of ₹ 12,03,353/-. Apart from the above, the Assessing Officer made certain other disallowances / additions in .....

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assessee and the Revenue are in appeal before the Tribunal. 3. The assessee has assailed the findings of Commissioner of Income Tax (Appeals) on two counts: i. Confirming the disallowance of deduction u/s. 80IB(11A) amounting to ₹ 12,03,353/-, and ii. Non-consideration of the Audit Report filed at the time of assessment proceedings. 4. Smt. Deepa Khare appearing on behalf of the assessee submitted that the assessee had made claim of deduction u/s.80IB(11A) for the first time in assessment .....

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for food grains in accordance with the norms prescribed by the NABARD. In support of her submissions, the ld. Counsel placed on record a copy of the report by Joint Monitoring Committee dated 20-05-2005 under Rural Godown Scheme. One of the committee members is official of NABARD. The object of the committee is to examine the conditions of warehousing facilities. The ld. Counsel submitted that the Assessing Officer has disallowed the claim of deduction u/s. 80IB(11A) on three counts, viz : i. Th .....

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ection does not require that these activities should be carried out by the assessee by employing labours on its payroll or owning warehouse or having own fleet of vehicles for transportation. The assessee is engaged in the integrated activity by engaging the labourers through outsource agencies and hiring of vehicles from various operators. The requirements of labourer keep on changing throughout the year. More labourers are required immediately after the harvesting season. Accordingly, the requ .....

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ng Officer on 06-12-2012 at page 105 of the paper book. The ld. Counsel submitted that the assessee had submitted the list of vehicles along with the name of owners, details of transportation expenses and completion certificate of warehousing building. The ld. Counsel further submitted that as regards labour charges, the same are collected by the agency directly from the respective parties, although, the labour arrangements for loading and unloading at the warehouse is made by the assessee. To s .....

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t owning of infrastructure facilities is not necessary to claim deduction u/s. 80IB(11A). 5. In respect of second issue raised in the appeal regarding filing of Audit report for claiming deduction, the ld. Counsel submitted that the Audit report in the prescribed form was obtained from the Chartered Accountant on 20-08-2008. However, the same could not be filed along with the return of income. The assessee thereafter offered to file Audit Report before the authorities below but the request of as .....

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es nor it is engaged in the integrated business of handling, storage and transportation of food grains. Further, the assessee had not filed Audit report in the prescribed form which is necessary for claiming deduction u/s. 80IB(11A) of the Act. No sufficient reason has been given for not placing the Audit report either during assessment proceedings or during the first appellate proceedings. In the absence of Audit report the claim of the assessee cannot be accepted. The ld. DR prayed for dismiss .....

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g, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage and transportation of foodgrains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from the operation of .....

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of April, 2009. 8. A bare perusal of the provisions of section show that deduction u/s. 80IB(11A) is available in the case of an undertaking deriving profit from the integrated business of handling, storage and transportation of food grains. The vital word used in the section is integrated . The term integrated has not been defined in the Act nor it is defined under the General Clauses Act, 1897. Thus, to understand the meaning of word integrated in common parlance, we referred to Oxford English .....

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assessee should own the infrastructure facilities or should have manpower on its rolls for carrying out such business activities. If the undertaking is carrying out these integrated activities by employing hired labourers or by taking warehousing facilities on rent and hiring transportation facilities, in our considered opinion the undertaking is eligible to claim deduction u/s. 80IB(11A). 9. The Hyderabad Bench of the Tribunal in the case of A.P. State Warehousing Corporation Vs. Deputy Commis .....

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nor the assessee is owning fleet of vehicles for the transportation. However, the assessee is having warehousing facilities of its own. The assessee in support of his contention has placed on record vouchers for loading, unloading and transportation to substantiate that it is engaged in integrated business. Some of these vouchers are placed on record by the assessee at pages 1 to 16 of the paper book. The First Appellate Authority rejected the claim of the assessee by observing as under: 8.2 &he .....

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also not credited to profit & loss account. As regards transportation facility, the appellant has claimed that it has hired vehicles for transportation of food grains whenever required by the farmers and has debited the said expenses in the books of accounts. The A.O. has claimed that the appellant has not earned any transportation receipt from farmers and has not credited the same in the profit & loss account. In this regard, it has been noticed that the appellant has claimed the expen .....

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s charged for handling charges & the labours are paid for their services & the surplus being margin is credited net to the income of the assessee" is therefore not supported by any documentary evidence. Therefore, I am of the considered view that the appellant has failed to prove that he has carried out business activity of handling of food grains alongwith storage of food grains. Further, as regards providing business activity of transportation, it has been noticed that the appella .....

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us in the preceding paragraphs the deduction u/s. 80IB(11A) can be claimed only if the assessee has been able to show that it is engaged in integrated activities of handling, transportation and storage of food grains. Owning of transportation facilities, warehousing facilities and manpower on payroll is not sinequa- non for claiming the deduction. What is essential is that all the three activities of handling, storage and transportation should be sewn together in a manner that they become a sin .....

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rds that the payments have been made to labourers, except for some self made vouchers, the sanctity of which is highly doubtful, there is no other document to support the claim of assessee. Similarly, in respect of transportation activity the contention of the assessee is that the assessee is using hired trucks. A perusal of records show, that the assessee has claimed ad hoc expenditure of ₹ 10,000/- per month for transportation that to on the basis of internal vouchers. The assessee has n .....

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drawn is that the assessee is providing warehousing facilities for storage of food grains. The assessee has not been able to show from the records that the activities of handling, storage and transportation of food grains allegedly carried out by the assessee are part of one composite activity and are integrated in any manner. The assessee has failed to substantiate handling and transportation component of integrated business. 12. In so far as the objection of the Revenue for non-filing of Audi .....

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t Appellate Authority. Although, one of the reasons for rejecting the claim of the assessee was non-filing of the Audit report. Now, before the Tribunal the assessee has filed an application for admission of additional evidence i.e. the Audit report. The assessee has placed on record Audit report in form 10CCB dated 20-08-2008 at pages 14 to 18 of the paper book. In the application for admission of additional evidence the reason for non-filing of Audit report before the Assessing Officer, as wel .....

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ncome Tax (Appeals) as per Rule 46A(b) of the Income Tax Rules, 1962. Additional evidence can be admitted if the assessee can show sufficient cause for not producing the same before the authorities below. In the said case the assessee could not file Audit report as the assessee had serious disputes with the Auditor whose services were ultimately terminated. 14. The Hon'ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Xavier Kelavani Mandal (P) Ltd. reported as 41 taxmann. .....

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ng Officer has specifically taken a ground to disallow deduction to the assessee for non-filing of Audit report before him. The assessee has been negligent and callous in pursuing his cause before the authorities below. 15. Thus, in the facts of the case and documents on record, we are of the considered opinion that the assessee has failed to show that he is engaged in the integrated business of handling, storage and transportation of food grains and thus, the assessee is not eligible for claim .....

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heikh Rashid Shaikh Chand and Shri Siddheshwar Kondiba Sontakke as agents of the assessee through whom cash payments were made by the assessee. 18. The ld. DR submitted that the assessee has made payments to the commission agents/traders and not to the farmers. Thus, the cash payments made by the assessee would not fall within the exceptions provided under Rule 6DD (e) and (k) of the Income Tax Rules. 19. On the other hand the ld. Counsel for the assessee submitted that the person s name in the .....

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