Addition on Excess Cane Price and Concessional Sugar Sale Remands for want of Evidence: ITAT directs Fresh Adjudication [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune, remanded appeals, considering (i) excess sugarcane price paid to members and (ii) sale of sugar at concessional rates to members by a cooperative sugar factory on want of evidence.

The Tribunal held that both issues required fresh adjudication by the Assessing Officer (AO) evidence submitted by the assessee and the government resolution.

The appellant, Shri Ganesh Sahakari Sakhar Karkhana Ltd., a cooperative society engaged in the manufacture and sale of white sugar, compost, and related by-products, filed returns for Assessment Years (AYs) 2009-10, 2010-11, 2012-13, and 2013-14.

For AY 2010-11, the Assessing Officer assessed the income at ₹24.36 crore as against the returned income of ₹2.69 crore, primarily due to disallowances of ₹21.83 crore towards alleged excess cane price paid to farmers and ₹1.05 crore for concessional sale of sugar to members. Similar additions were made in other years.

In scrutiny assessment, the Assessing Officer assessed a substantially higher income by making additions of ₹21.83 crore for excess sugarcane payments to farmers and ₹1.05 crore for sale of sugar to members at concessional rates. The Commissioner of Income Tax (Appeals) NFAC Delhi [CIT(A)], partly confirmed these additions, prompting the assessee to approach the Tribunal.

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The assessee represented by Hanmant Dattatry Dhavale, submitted that the excess cane price issue was squarely covered by Section 155(19) of the Income Tax Act, 1961, read with CBDT Circular No. 14 of 2023, which allows recomputation for periods prior to AY 2016-17. It was also argued that concessional sugar sales were a cooperative practice rooted in custom and State policy, supported by the Maharashtra Government Resolution dated March 1, 2006.

Emphasis was further placed on the Supreme Court’s ruling in Krishna Sahakari Sakhar Karkhana Ltd. (2012), which had directed consideration of cooperative norms, State policy, and festive distributions while deciding such issues.

The Revenue, represented by Amol Khairnar, submitted that the issue of excess cane price had already been restored by the CIT(A) for fresh adjudication. Regarding concessional sugar sales, the Department had no objection if the Tribunal were to remit the matter back to the AO for detailed verification in line with the Supreme Court’s directives.

The Bench comprising R.K. Panda Vice President and Astha Chandra Judicial Member, observed that in view of the statutory amendment under Section 155(19), directed the Assessing Officer to verify the assessee’s documentary evidence, including cane payment records, government notifications, and cooperative resolutions, and to compute any disallowance afresh with reference to levy price instead of market price.

Similarly, the issue of concessional sugar sales was remanded to the AO with a direction to examine the assessee’s evidence, including the Government Resolution dated 01.03.2006, and to compute the differential, if any, by comparing levy price with concessional price instead of market price. The appeals for all assessment years were allowed for statistical purposes.

The Tribunal also noted that in AY 2012-13, the assessee’s agricultural income claim of ₹1.22 lakh had been disallowed for want of evidence. That issue was restored for fresh adjudication by the AO.

Accordingly, all four appeals were allowed for statistical purposes.

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