Assistant Commissioner of Income Tax, Central Circle, Panaji V. M/s Balaji Mines and Minerals Private Limited, Panaji

ITA 113/PAN/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5543 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Next Hearing Date: 05-06-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.S. SHIVSHANKAR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH : PANAJI [THROUGH VIRTUAL HEARING AT ITAT : PUNE] BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER ITA.Nos.112 & 113/PAN./2023 Assessment Years 2010-2011 & 2011-2012 The ACIT, Central Circle, Pundalik Niwas, Rue-De- Ourem, Panaji, GOA. PIN – 403 001. vs. Balaji Mines and Minerals (P) Ltd., Salgaocar Bhavan, Althinho, Panaji, GOA. PIN – 403 001 PAN AAACB7003P (Appellant) (Respondent) For Revenue : Shri P.S. Shivshankar, CIT-DR For Assessee : Shri Sukhsagar Syal Date of Hearing : 06.06.2024 Date of Pronouncement : 29.07.2024 ORDER PER SATBEER SINGH GODARA, J.M. : These Revenue’s twin appeals for assessment years 2010-2011 & 2011-2012, arise against the CIT(A)-2, Panaji, Panaji’s Din and Order(s) Nos.ITBA/APL/M/250/2022- 23/1050690496(1) and 1050749836(1), dated 13.03.2023 and dated 14.03.2023, in proceedings u/s.144 and 143(3) of the Income Tax Act, 1961 (in short ‘the Act”); assessment year- wise; respectively . Heard both the parties at length. Case files perused. 2 ITA Nos.112 & 113/PAN./2023 2. The Revenue’s former appeal ITA.No.112/PAN./ 2023 for the “lead” assessment year 2010-2011 pleads the following substantive grounds : i. “Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition relating to expenditure towards afforestation charges ? ii. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition relating to expenditure towards afforestation charges holding that the same is a statutory liability without actually verifying the nature of same ? iii. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in accepting fresh claim of the assessee about nature of expenses without confronting the same to the Assessing Officer ? iv. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in holding that the expenditure of Rs.7,20,81,046/- was revenue in nature and not capital expenditure ? v. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition on valuation of closing stock on the ground that the addition is made without rejecting the books of accounts? vi. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition on suppression of sale made at Rs.16,03,20,658/- ignoring the 3 ITA Nos.112 & 113/PAN./2023 computation of average cost of ore made by the AO considering the weighted average cost of ore (Local and Exports), average transport rate and royalty ? vii. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition on suppression of sale made merely on the ground that the AO cannot make addition based on comparative cost price and sale price? viii. For the above grounds and any additional grounds that may be agitated during the course of hearing.” 3. We first come to the first and foremost issue of disallowance of afforestation charges claim amounting to Rs.7,20,81,046/- made in the course of assessment dated 21.03.2013 and reversed in the CIT(A)'s detailed discussion reading as under : 4 ITA Nos.112 & 113/PAN./2023 5 ITA Nos.112 & 113/PAN./2023 6 ITA Nos.112 & 113/PAN./2023 7 ITA Nos.112 & 113/PAN./2023 4. We have given our thoughtful consideration to the rival submissions. The assessee’s detailed paper book running into 370 pages stands perused. Learned DR vehemently argued that the CIT(A) herein has erred in law and on facts in deleting the impugned afforestation charges disallowance thereby treating it as a statutory liability despite the fact that it is in the nature of a capital expenditure only. The assessee on the other hand has strongly supported CIT(A)'s foregoing discussion treating it’s impugned claim as “Forest Development Tax”. 4.1. It is in this factual backdrop that we proceed to decide the nature of the impugned expenditure as to whether it is afforestation charges or not ? A perusal of the assessee’s detailed paper book, and more particularly, page-100 of it’s P & L A/c has categorized the above expenditure as forest development tax only. This is indeed followed by the assessee’s submissions made during remand proceedings involving multiple rounds before the learned CIT(A) wherein each time the Assessing Officer sought to treat the above expenditure as afforestation charges only. Mr. Syal has taken pains to refer to the various proceedings and correspondence(s) between the assessee and the mining authorities concerned wherein the latter had sought to impose the foregoing forest development tax @ 8% of the invoice value at 8 ITA Nos.112 & 113/PAN./2023 the time of release of mineral ore. All these clinching facts have gone un-rebutted from the Revenue side. Coupled with this, this tribunal has already treated such a claim as revenue expenditure only (supra). We therefore, see no merit in the Revenue’s instant first and foremost substantive ground. The same stands rejected in very terms. 5. Both the learned representatives next submit that the Revenue’s above fifth substantive ground is consequential to it’s sixth and seventh substantive grounds. We thus take-up these latter twin substantive grounds for adjudication wherein the learned CIT(A) has reversed the assessment findings as under : 9 ITA Nos.112 & 113/PAN./2023 10 ITA Nos.112 & 113/PAN./2023 11 ITA Nos.112 & 113/PAN./2023 6. We have given our thoughtful consideration to the vehement rival submissions against and in support of the CIT(A)’s findings deleting the impugned addition based on alleged suppression of sales. There is no dispute between the parties that this addition is not based upon any material indicating the assessee to have suppressed the actual sale amount by way of under-invoicing the corresponding entries. It is rather an instance wherein the learned Assessing Officer had concluded that the assessee had in fact not charged the correct sale price. We invited learned DR’s attention to the assessee’s tabulation in para-6.3 of the CIT(A)’s order hereinabove making it clear that the cost of the mined ore 12 ITA Nos.112 & 113/PAN./2023 comes to Rs.868/- PMT [“Per Metric Ton”] followed by local sale thereof @ Rs.1139/- PMT and export rate at Rs.1490/- PMT, respectively. This is not even the Revenue’s ground before us that the assessee’s foregoing cost computation suffers from any error based on the relevant material forming part of the case file. We thus hold that the Assessing Officer herein had wrongly made the impugned addition which has been rightly deleted in the lower appellate discussion under challenge. These Revenue’s fifth to seventh substantive grounds fail accordingly. So is the outcome of it’s instant “lead” appeal ITA.No.112/PAN./2023 which stands rejected. 7. The Revenue’s latter appeal ITA.No.113/PAN./2023 raises the following substantive grounds : i. “Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was, correct in giving relief to the assessee on the issue of set off of b/f losses although the decision on AY 2010-11 has not attained finality and is being contested ? ii. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition relating to expenditure towards afforestation Charges ? iii. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition relating to expenditure towards afforestation charges 13 ITA Nos.112 & 113/PAN./2023 holding that the same is a statutory liability without actually verifying the nature of same ? iv. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) was correct in accepting fresh claim of the assessee about nature of expenses without confronting the same to the Assessing Officer ? v. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) was correct in holding that the expenditure of Rs 5,00,093/- was revenue in nature not capital expenditure ? vi. Whether on the facts and circumstances of the case and in Law, the Ld CIT(A) was correct in deleting the addition made u/s.41(1) with respect to the unconfirmed creditors with the reasoning that thex had offered the same to tax in the AY 2014-15 by writing them back? vii. For the above grounds and any additional grounds that may be agitated during the course of hearing.” 8. Both the learned representatives are ad idem that the Revenue’s first and foremost substantive ground is only consequential in nature in light of our detailed discussion in assessment year 2010-2011. Rejected accordingly. 9. The Revenue’s second to fifth substantive grounds hereinabove raise the issue of deduction of afforestation charges vis-à-vis forest development tax wherein we have 14 ITA Nos.112 & 113/PAN./2023 rejected it’s stand hereinabove in the lower appeal. Ordered accordingly. 10. Lastly comes sec.41(1) cessation of liability addition made by the Assessing Officer and deleted in the lower appellate discussion as under : “7.1. The Assessing Officer has added amounting Rs. 47,74,922/- back on the grounds that confirmations from these parties were not filed. I have perused the submissions and case laws produced by the appellant before me. I have also gone through the assessment order carefully. The submissions of the appellant on this ground are accepted. The appellant has submitted that the creditors which have been added were written back by the appellant in the accounts during A.Y. 2014-15 and accordingly included in the taxable income. The appellant has also submitted documents as discussed above in respect of the said claim of having included the creditors write back in the income. Hence, the appeal filed by the appellant on this ground is allowed as the appellant has written back the amount of creditors as its income in the A.Y 2014-15. In view of the aforesaid discussion the appeal on this ground may be treated as allowed and the AO is directed to delete the disallowance of Rs.47,74,922/-.” 15 ITA Nos.112 & 113/PAN./2023 11. It emerges during the course of hearing that right from assessment till date, the Revenue has not been able to pinpoint any specific material indicating the impugned liability(ies) involving 10 sundry creditors as an instance of cessation u/sec.41(1) of the Act. This is indeed coupled with the fact that the very liability stands added and assessed as written back in subsequent assessment year 2014-2015. We thus quote CIT vs. Sugauli Sugar Works (P) Ltd., [1999] 236 ITR 518 (SC) that such an alleged cessation has to be based on actual entries in the books of account than on mere conjectures and surmises. The Revenue’s instant last substantive grounds as well as the latter appeal ITA.No.113/PAN./2023 fail accordingly. 12. These Revenue’s twin appeals ITA.Nos.112 & 113/ PAN./2023 are dismissed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 29.07.2024 Sd/- Sd/- [RAMA KANTA PANDA] [SATBEER SINGH GODARA] VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 29 th July, 2024 VBP/- 16 ITA Nos.112 & 113/PAN./2023 Copy to 1. The applicant 2. The respondent 3. The Pr. CIT, Panaji concerned 4. D.R. ITAT, Panaji-Bench, Panaji. 5. Guard File. //By Order// //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune.