Asst.C.I.T., Bangalore V. M/s Mysore Minerals Limited, Bangalore

ITA 1496/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95166 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 21-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R REDDY JT
• Section: 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1496/BANG/2014 ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(2), BANGALORE. VS. M/S. MYSORE MINERALS LTD., NO.39, M.G. ROAD, BANGALORE 560 001. PAN : AACCM 2873L APPELLANT RESPONDENT APPELLANT BY : SHRI G.R. REDDY, JT. CIT(DR) RESPONDENT BY : SHRI NARENDRA SHARMA, ADVOCATE DATE OF HEARING : 30.07.2015 DATE OF PRONOUNCEMENT : 03.08.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 28.8.2014 OF CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APP EAL IS PROJECTED IN GROUND NO.2, WHICH READS AS FOLLOWS:- ITA NO.1496/BANG/2014 PAGE 2 OF 6 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS THE SUPPRESSED PROFITS IN RESPECT OF SALES MADE TO M/S KALYANI STEELS WITHOUT APPRECIATI NG THE FACT THAT THE AO HAS GIVEN AN INDEPENDENT FINDING FOR TH E RELEVANT ASSESSMENT YEAR THAT THE ASSESSEE HAD SUPPRESSED IT S PROFITS BY ADOPTING LOWER RATES. 3. THE ASSESSEE IS A GOVERNMENT OF KARNATAKA UNDERT AKING ENGAGED IN EXTRACTION OF MINERALS AND MINERAL ORES. FOR THE ASSESSMENT YEAR 2010- 11, IT FILED RETURN OF INCOME ON 15.10.2010 DECLARI NG AN INCOME OF RS.168,32,90,700/-. THE ASSESSMENT WAS CONCLUDED U/ S. 143 (3) OF THE ACT ON 15.03.2013 AND ASSESSMENT ORDER WAS SERVED ON TH E ASSESSEE ON 19.03.2013 BY MAKING THE FOLLOWING ADDITIONS:- SUPPRESSED PROFIT SALES TO M/S KALYANI STEELS LTD. BELOW MARKET PRICE RS. 11,46,46,400 EXPENDITURE INCURRED IN EARNING DIVIDEND RS. 15,452 ---------------------- TOTAL RS. 11,46,61,852 ---------------------- 4. THE FACTS OF THE CASE ARE; THE ASSESSEE HAD ENT ERED INTO THE RAISING CONTRACT WITH M/S KALYANI STEELS AS PER AGREEMENT D ATED 17.01.2002. THEY HAVE BEEN SHORT LISTED ON THE BASIS OF TENDERS FLOA TED BY THE COMPANY FOR COMMERCIALLY EXPLOITING THE MINES THROUGH PRIVATE P ARTICIPATION WITH A NEED TO AUGMENT FINANCIAL RESOURCES OF THE COMPANY. THEY HAVE BEEN AWARDED CONTRACTS AFTER FOLLOWING PROCEDURES RELATING TO AW ARD OF CONTRACT AND AFTER OBTAINING PERMISSION FROM THE STATE GOVERNMENT. AS PER THE CONTRACT, M/S ITA NO.1496/BANG/2014 PAGE 3 OF 6 KALYANI STEELS HAS TO PURCHASE C-ORES FROM THE ASSE SSEE. DURING THE FY 2009-10, THE ASSESSEE HAD SOLD 286615.000 MTS OF C- ORES AT THE RATE OF RS. 1500/MT. THIS PRICE HAS BEEN FIXED AS PER THE M ANAGEMENTS DECISION AND AFTER TAKING INTO CONSIDERATION VARIOUS COMMERC IAL ASPECTS OF THE CONTRACT AND IN VIEW OF THE FACT THAT M/S. KALYANI STEELS IS A LONG STANDING BUYER. THE RATE FIXED PER MT OF C-ORE IS EX-MINES A ND AS IS WHERE IS BASIS. ROYALTY, LOADING, CESS AND TAXES ARE TO BE PAID SEP ARATELY BY M/S KALYANI STEELS. DURING THE FY 2009-10, SALES TO M/S KALYANI STEELS WAS AT THE RATE OF RS. 1500/MT. THIS IS THE CONSIDERATION REALIZED DURING THE YEAR AND SAME IS ACCOUNTED IN THE BOOKS OF ACCOUNTS. 5. THE ASSESSING OFFICER ADOPTED PRICE OF C-ORE SOL D AT RS. 1900/MT AND ACCORDINGLY, HAS ARRIVED AT A DIFFERENCE IN SAL ES AMOUNT AMOUNTING TO RS. 11,46,46,400 AND TREATED THE SAME AS SUPPRESSED SALES. 6. ON APPEAL, THE CIT(APPEALS), FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE ON AN IDENTICAL ISSUE FOR A. Y. 2009-10, DELETED THE ADDITION MADE BY THE AO. 7. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REVE NUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING OF THE APPEAL, IT WAS BRO UGHT TO OUR NOTICE THAT THIS TRIBUNAL ON AN IDENTICAL ISSUE IN ASSESSEES O WN CASE FOR THE AY 2005- 06 IN ITA NO.351/BANG/2011 BY ORDER DATED 2.11.2012 , HELD AS FOLLOWS:- ITA NO.1496/BANG/2014 PAGE 4 OF 6 18.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERU SED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND FROM THE RECORD THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS REQUIRED BY THE ASSESSING OFFICER. FROM THE DETAILS ON RECORD IN RE SPECT OF THE ADDITIONS MADE TO THE RETURNED INCOME ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET PRICE, WE AGREE WIT H THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE PRIC E CHARGED FOR C-ORE IS BELOW THE MARKET PRICE. WE ALSO OBSERVE TH AT THE ASSESSING OFFICER HAS RECORDED THAT KARNATAKA LOK A YUKTA IN ITS REPORT ON THE MINING SCAM ALLEGED MALPRACTICES ON T HE PART OF THE OFFICIALS OF THE ASSESSEE COMPANY. FROM THE SUBMISS IONS MADE BY THE ASSESSEE, A GOVT OF KARNATAKA UNDERTAKING, IT C AN BE INFERRED THAT THE SALES OF C-ORE TO KALYANI STEELS LTD ARE S UPPORTED BY INVOICES RAISED, ENTRIES IN THE BOOKS OF ACCOUNTS A UDITED BY CHARTERED ACCOUNTANTS. THE SYSTEM OF ACCOUNTING FOL LOWED BY THE ASSESSEE IS THE MERCANTILE SYSTEM AS PER THE PR OVISION OF SECTION 145 OF THE ACT AND WE FIND THAT NO FAULT HA S BEEN FOUND THEREIN NOR HAS IT BEEN REJECTED. NOWHERE IN THE OR DER OF ASSESSMENT OR THE MATERIAL ON RECORD DO WE FIND ANY THING TO ESTABLISH THAT THERE WERE ANY REALIZATION ON ACCOUN T OF SALES BEYOND WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. A S PER THE I.T. ACT, 1961 PROFITS FROM BUSINESS ARE TO BE COMPUTED UNDER SECTION 28 OF THE ACT AS PER THE ACCOUNTING POLICIES MANDAT ED BY SECTION 145 OF THE ACT WHICH IN THE ASSESSEE'S CASE IS THE MERCANTILE SYSTEM. THE SCOPE OF TOTAL INCOME IS ALSO DEFINED U NDER SECTION 5 OF THE ACT. THE I.T. ACT, 1961 IS VERY CLEAR THAT W HAT IS TO BE TAXED IS THE REAL INCOME OF AN ASSESSEE AND NOT NOT IONAL OR HYPOTHETICAL INCOME AND IT DOES NOT PERMIT AN ASSES SING OFFICER TO COMPUTE INCOME WITHOUT ANY EVIDENCE. THERE IS NO FINDING BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SOLD IT S C-ORE AT A PRICE LESS THAN THAT AGREED TO IN THE CONTRACT ENTE RED INTO WITH M/S. KALYANI STEELS LTD OR THAT IT HAS REALIZED FRO M M/S. KALYANI STEELS LTD ADDITIONAL AMOUNTS ON SUCH SALES WHICH I T HAD NOT RECORDED IN ITS BOOKS. THE ASSESSEE IS LEGALLY BOUN D TO ABIDE WITH THE TERMS OF THE CONTRACTUAL OBLIGATIONS ARISING OU T OF ITS AGREEMENT TO SELL C-ORE TO M/S. KALYANI STEELS LTD AND THE CONTRACT ENTERED INTO BEING LEGAL AND VALID, IT CAN NOT BE BRUSHED ASIDE. AFTER TAKING INTO ACCOUNT THE FACTS AND CIRC UMSTANCES OF THE CASE ON THIS ISSUE, WE FIND THAT NO EVIDENCE WHATSO EVER HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTAB LISH THAT THE ASSESSEE HAS REALIZED FROM THE SALE OF C-ORE TO M/S . KALYANI STEELS LTD MORE THAN WHAT IS RECORDED IN THE ASSESS EE'S BOOKS OF ITA NO.1496/BANG/2014 PAGE 5 OF 6 ACCOUNT. IN THIS VIEW OF THE MATTER, THE ADDITION M ADE ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET RA TE, IN OUR CONSIDERED OPINION IS NOT FOUNDED ON SOUND AND ACCE PTED ACCOUNTING AND LEGAL PRINCIPLES AND IS THEREFORE LI ABLE TO BE DELETED. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE DECISION OF THE LEARNED CIT(APPEALS) IN DELETING TH E ADDITION OF RS.15,51,45,117. THE GROUNDS AT S.NOS.2 AND 3 RAISE D BY REVENUE ARE ACCORDINGLY DISMISSED. 9. WE ARE OF THE VIEW THAT THE FACTS AND CIRCUMSTAN CES GIVING RISE TO APPEAL ON THE ABOVE ISSUE ARE IDENTICAL AS IN THE E ARLIER ASSESSMENT YEAR. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL ( SUPRA) , WE UPHOLD THE ORDER OF THE CIT(APPEALS) AND DISMISS THE APPEAL BY THE REVENUE. 10. IN THE RESULT, THE APPEAL BY REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF AUGUST, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 7 TH AUGUST, 2015. /D S/ ITA NO.1496/BANG/2014 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.