ITAT Remands Excess Cane Price and Concessional Sugar Sale Issues for Fresh Consideration

The assessee in this case is a cooperative society engaged in manufacturing and selling white sugar, compost, and related by‑products. For the assessment year 2011-12, it filed its return declaring a net loss of Rs. 3,33,44,202, after adjusting unabsoITAT Remands Excess Cane Price and Concessional Sugar Sale Issues for Fresh Considerationrbed losses. However, the Assessing Officer, through an order passed under section 143(3), did not accept this addition and instead assessed the society’s income at Rs. 9,66,93,983, and it was further revised upward to Rs. 10,35,48,661 by invoking section 154.

CIT (A) Appeal: The aggrieved assessee went into appeal before the CIT(A) and later before the Tribunal. The Tribunal remanded the case back to the AO, relying on the Supreme Court’s ruling in CIT, Bombay v. Tasgaon Taluka S.S.K. Ltd. and Majalgaon Sahakari Sakhar Karkhana Ltd. v. ACIT.

Acting on these directions, the AO passed a fresh order under section 143(3) read with section 254, wherein two major additions were made, which were as follows:

1. Rs. 12,62,40,328/- on account of alleged excess payment for sugarcane to farmers, and

2. Rs. 37,97,857/- for supplying sugar at concessional rates to members.

Issue Before ITAT: Whether additions for excess cane price and concessional sugar sales were sustainable or required fresh consideration under Section 155(19) and under directions passed in Krishna SSK.

Tribunal’s Decision in Second Appeal: The assessee society’s appeal was allowed on statistical grounds by the Hon’ble Tribunal, remanding both issues for fresh consideration by the Assessing Officer.

The Appellant tribunal noted that the legislature had introduced Section 155(19) via the Finance Act 2023, allowing cooperative sugar factories to claim deductions for cane price payments at or below government‑approved rates for years up to AY 2016-17. As the assessee had already filed an application under this provision, the AO was directed to reassess the cane price issue in its light.

On the issue of concessional sugar sales, the Tribunal relied on the Supreme Court’s ruling in Krishna SSK Ltd. (2017), directing the AO to verify whether such sales arose from established trade practices, State Government policy, or special allocations like Diwali sales, etc., and to calculate the difference based on levy price versus concessional price as per the government-prescribed rates instead of using market price.

Finally, the AO was directed to review all supporting documents and provide the assessee with an adequate opportunity of being heard before passing a fresh order.

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