Assistant Commissioner Of Income Tax Circle-1, Bellary V. Shri Vazhyiel House Narayanan Kutty Menon, Bellary

ITA 1545/BANG/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4317 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-09-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 11-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BALACHANDRAN SHRI B
• Keywords: Business income; Commercial expediency; Revised return; Revenue expenditure; Set aside
• Section: 201; 208; 192; 13; 22; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER IT A NO. 1545/ BANG / 2018 ASSESSMENT YEAR : 2014 - 15 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), BENGALURU. VS. LATE SHRI VAZHYEL HOUSE NARAYANAN KUTTY MENON BY L/RS SMT. VIJAYALAKSHMI MENON SHRI URATHE KRISHNA PRASAD SMT. FEBITHA KANDAN KULANGARA MS. ROSHINI KULANGARA URATHE MS. MEGHNA KULANGARA URATHE SHRI PRAMOD MENON SMT. PADMA VIJAYAN MS. KANGANA PRAMOD MS. SANJANA PRAMOD 6, 14 TH WARD, KHB COLONY, SANDUR. BELLARY DIST. PAN: AGXPM 5124G APPELLANT RESPONDENT APPELLANT BY : S HRI B.S. BALACHANDRAN, ADVOCATE RESPONDENT BY : SHRI B.K. SINGH, C IT(DR)(ITAT ), BENGALURU. DATE OF HEARING : 23 .0 9 .202 1 DATE OF PRONOUNCEMENT : 05 . 1 0 .202 1 ITA NO.1545/BANG/2018 PAGE 2 OF 27 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28.02.2018 OF THE CIT(APPEALS), GULBARGA FOR THE AS SESSMENT YEAR 2014-15. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT( A) FAILED TO APPRECIATE THAT THOUGH AS PER THE E-AUCTION CONDUCT ED BY MC/CEC, THE AMOUNTS HAVE BECOME RECEIVABLE BY THE A SSESSEE NOTWITHSTANDING THE CLAIM OF THE ASSESSEE THAT MATE RIAL WAS PARTLY LIFTED IN FY : 2013-14 AND PARTLY IN FY : 2014-15, FOR WHICH REQUIRED DOCUMENTARY EVIDENCE WAS NOT FILED BEFORE THE AO TO PROVES THE SAME. AS SUCH, IT IS REASONABLE TO CONCL UDE THAT THE AOS DECISION IN CONSIDERING THE ENTIRE AMOUNT OF RS.12,83,60,000/- AS SALES DURING THE YEAR FY:2013- 14, IS NOT APPRECIATED BY THE CIT(A). 3. THE LD.CIT(A) ERRED TO PLACE RELIANCE ON DECISIO N OF ITAT IN CASE OF M/S M HANUMANTHA RAO AS MUCH AS THE ORDER OF ITAT WAS NOT ON ACCOUNT OF CORRECT FACTS TO HOLD TH AT RECEIPTS/INCOME ARISING FROM SALE OF E-AUCTIONED IR ON ORE IS NOT LIABLE TO TAX IN AY:2012-13, WHEN, M/S M HANUMANTHA RAO(FIRM) ITSELF HAD OFFERED SUCH RECEIPTS FOR TAXA TION ON ACCRUAL BASIS BY FILING A REVISED RETURN OF INCOME FOR AY:2 012-13. 3. THE FACTS OF THE CASE ARE THAT THE RESPONDENT-A SSESSEE HAD FILED THE RETURN FOR AY 2014-15 ON 22/11/2014 DECLARING A TOTAL INCOME OF RS.3,97,55,770. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS S/S.143(3) OF THE INCOME-TAX ACT, 1961 [THE ACT] THE AO ADDED A SUM OF RS.10,91,75,982 AS UNACCOUNTED SALE PROCEEDS OF E-A UCTIONED IRON ORE BY MONITORING COMMITTEE, EVEN THOUGH THE SAID THE SALE S WERE ACCOUNTED IN ITA NO.1545/BANG/2018 PAGE 3 OF 27 THE SUBSEQUENT AY 2015-16. THE ADDITION WAS SO MADE ON THE GROUND THAT THE INCOME HAD ACCRUED TO THE ASSESSEE IN THE SUBJE CT ASSESSMENT YEAR ITSELF AND RECOGNITION OF INCOME THEREFORE COULD NO T BE DEFERRED TO THE SUBSEQUENT ASSESSMENT YEAR 2015-16. 4. THE SUCCESSFUL PURCHASER IN THE E-AUCTION HAS 30 DAYS TO LIFT THE GOODS AND COMPLETE THE PAYMENTS. THE MONITORING COM MITTEE WOULD RECEIVE THE SALE PROCEEDS AND COMMUNICATE THE FINAL ENTITLEMENT AFTER DEDUCTING THE STATUTORY DUES INCLUDING VAT AND OTHE R CHARGES, SUCH AS 10% / 20% OF THE SALE PROCEEDS TOWARDS THE SPECIAL PURPOSE VEHICLE (SPV), AS PER THE DIRECTIONS OF THE HONOURABLE SUPR EME COURT. IN THIS VIEW, THE ASSESSEE HAS ACCOUNTED THE SALES IN THE SUBSEQU ENT ASSESSMENT YEAR ON THE GROUND THAT THE INCOME ACCRUED TO HIM ONLY W HEN THE MONITORING COMMITTEE COMMUNICATED THE ENTITLEMENTS AFTER THE C ONCLUSION OF THE TRANSACTION OF SALE. 5. THE ASSESSEE CONTESTED THE ASSESSMENT ORDER BEFO RE THE CIT(APPEALS),WHO ALLOWED THE APPEAL BY DELETING THE ADDITION OF RS.10,91,75,982 FOLLOWING THE DECISION OF ITAT, BEN GALURU IN ITA NO. 158/BANG/2017 DATED, 19/12/2017 IN THE CASE OF M/S. M.HANUMANTHA RAO. THE AFORESAID CASE LAW RELIED UPON IS ON THE ISSUE OF YEAR OF ACCOUNTING OF E-AUCTION SALE IN THE CASE AND PERTAINS TO THE SAME JURISDICTION, WHEREIN THE FACTS AND CIRCUMSTANCES OF PRESENT CASE IS EXACTLY SIMILAR TO THE CASE DECIDED BY THE ITAT. 6. THE ISSUE IN THIS APPEAL IS THE SALES OF RS.10,9 1,75,982 WHICH ASSESSEE HAS DECLARED IN ASSESSMENT YEAR 2015-16, B UT THE AO HAS ASSESSED IT FOR AY 2014-15 ON INCOME ACCRUAL BASIS SINCE ONLY THE BIDDING/E-AUCTION HAS TAKEN PLACE DURING THE FY 201 3-2014 BY THE MONITORING COMMITTEE EVEN THOUGH THE SALES HAS TAKE N PLACE BY THE MONITORING COMMITTEE DURING APRIL AND MAY 2014 FOR WHICH THE PROOF OF ITA NO.1545/BANG/2018 PAGE 4 OF 27 SALES DONE BY MONITORING COMMITTEE, THE DETAILS OF WHICH ARE FILED AT PAGE 10 TO 29 OF THE PB. THE ASSESSEE HAS FILED FINANCI AL STATEMENTS FOR AY 2015-16 FOR HAVING ACCOUNTED THE SALES OF RS.10,91, 75,982 VIDE SALES LEDGER AT PAGES 8 AND 9 OF THE PB AND CONFIRMATION LETTERS FROM PARTIES FOR HAVING RECEIVED IRON ORE FROM THE ASSESSEE THROUGH THE MONITORING COMMITTEE FOR WHICH PARTY LEDGER ACCOUNTS FOR THE P ERIOD 01/04/2014 TO 31/03/2015. TOTAL SALES OF RS.10,91,75,982/- ARE A LL DONE DURING THE FY 2014-15 (AY 2015-16) ONLY. EVEN THE VAT AT 5.5% AND ROYALTY IS PAID FOR THE SALES DONE BY THE MONITORING COMMITTEE ONLY DUR ING FY 2014-15 BY THE PURCHASERS AND THE SAME IS REVERSED BY THE ASSESSEE IN JOURNAL ENTRY. THE ASSESSEE HAD FURNISHED CONFIRMATION LETTERS FRO M VARIOUS PURCHASERS/BIDDERS FOR HAVING BID THE MATERIAL IN P REVIOUS YEAR 2013-14 BUT SALES AND LIFTING OF THE ENTIRE QUANTITY WAS DONE D URING THE MONTHS OF APRIL AND MAY 2014, (AY 2015-16) WHICH WAS NOTED IN DETAI L BY THE AO VIDE PARA 5.3 OF HIS ORDER. 7. THE CIT(APPEALS) ALLOWED THE APPEAL CONSIDERING THE ITAT ORDER. IT IS THEREFORE SUBMITTED THAT IT IS A COVERED CASE IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY THE APPEAL OF THE REVENUE IS TO BE DISMISSED. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE COME ACROSS THE ORDER OF THIS TRIBUNAL IN THE CA SE OF M/S. VEERABHADRAPPA SANGAPPA & SONS IN ITA NO.1054/BANG/ 2019 DATED 8.12.2020 WHEREIN IT WAS HELD AS UNDER:- 6.1. GROUND NO. 2.1& 2.2 THESE GROUNDS RAISED BY ASSESSEE ARE AGAINST ADDITI ON OF SALE PROCEEDS OF DECLARED STOCK AMOUNTING TO RS.25,59,99 ,429/- AND UNDECLARED STOCK AMOUNTING TO RS.24,64,49,021/-. LD .AO OBSERVED THAT, SUM OF RS.50,24,48,441/-(RS.25,59,99 ,429/- + RS.24,64,49,021/-), (BEING SALE PROCEEDS OF DECLARE D AND UNDECLARED STOCK), WAS OMITTED TO BE OFFERED TO TAX FOR YEAR UNDER ITA NO.1545/BANG/2018 PAGE 5 OF 27 CONSIDERATION. PLACING RELIANCE ON MONTHLY IBM(INDI AN BUREAU OF MINES) RETURN IN RESPECT OF BOTH MINING PLACED AT P AGES 184-193 OF PAPER BOOK, LD.COUNSEL SUBMITTED THAT MC CALCULA TED PAYMENT DISBURSABLE TO ASSESSEE, BASED ON STOCK DEC LARED IN IBM RETURNS, DETAILS OF WHICH IS PLACED AT PAGE 198-201 OF PAPER BOOK. SALE PROCEEDS OF STOCK AS PER IBM RETURNS WERE CONS IDERED BY MC AS DECLARED. SALE PROCEEDS OF STOCK NOT CONSIDER ED IN IBM RETURN WERE TREATED AS UNDECLARED STOCK BY MC AND T RANSFERRED IN ENTIRETY TO SPV. 6.3. SALE OF DECLARED STOCK DURING THE YEAR UNDER CONSIDERATION LD.AO NOTICED T HAT, MC SOLD IRON ORE BELONGING TO ASSESSEE THROUGH E AUCTION OU T OF THE DECLARED STOCK. THE SALE PROCEEDS OF SUCH DECLARED STOCK WAS TO THE TUNE OF RS.25,52,89,418/-. LD.AO DURING ASSESSM ENT PROCEEDINGS, CALLED UPON ASSESSEE TO EXPLAIN, AS TO WHY, SUCH SALE PROCEEDS WAS OMITTED TO BE OFFERED TO TAX, BEING TH E YEAR OF SALE, RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. AS SESSEE IN RESPONSE, SUBMITTED THAT, THOUGH IT FOLLOWED MERCAN TILE SYSTEM OF ACCOUNTING, DID NOT OFFER SAID SUM, SINCE RECEIPT O F THE SAME WAS HIGHLY UNCERTAIN. ASSESSEE SUBMITTED THAT, REVENUE WAS RECOGNISED BY ASSESSEE ONLY ON RECEIPT BASIS, AS PE R AS-9 ISSUED BY ICAI. IT WAS SUBMITTED THAT, SINCE THERE WAS UNC ERTAINTY ABOUT COLLECTION OF SAID REVENUE, RECOGNITION OF SUCH REV ENUE WAS POSTPONED TO THE EXTENT OF UNCERTAINTY INVOLVED, WH ICH WAS IN ACCORDANCE WITH THEORY OF TAXING ONLY REAL INCOME. IT WAS SUBMITTED THAT, ESSENTIAL CRITERIA FOR RECOGNITION OF REVENUE IS, CONSIDERATION RECEIVABLE FROM SALE OF GOODS SHOULD BE REASONABLY DETERMINED, AND SINCE THE CONSIDERATION WAS NOT DET ERMINABLE WITHIN REASONABLE LIMITS, RECOGNITION OF REVENUE WA S POSTPONED. ASSESSEE, REFERRED TO ICDS-IV NOTIFIED BY CENTRAL G OVERNMENT FOR PURPOSE OF COMPUTATION OF INCOME CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION. IT WAS SUBMITTED THAT, MC HAD COMPLETE CONTROL AND COM MAND OVER DECLARED STOCK. IT WAS ALSO SUBMITTED THAT MC HAD S OLE DISCRETION TO SELL THE STOCK. IT WAS SUBMITTED THAT SALE PROCE EDS WERE TO BE RECEIVED BY MC FROM THE BUYERS. ASSESSEE SUBMITTED THAT, MC AFTER MAKING NECESSARY DEDUCTIONS WOULD DISBURSE BA LANCE SALE PROCEEDS TO ASSESSEE. ASSESSEE SUBMITTED BEFORE LD. AO THAT, IT DID NOT HAVE ANY CONTROL OVER THE VALUE AND TIME OF RECEIPT OF SALE ITA NO.1545/BANG/2018 PAGE 6 OF 27 PROCEEDS. IT WAS THUS CONTENDED BEFORE LD.AO THAT, THE AMOUNT OF RS. 25,52,89,418/- DID NOT ACCRUE TO ASSESSEE, AND THEREFORE THE SAME WAS NOT OFFERED TO TAX DURING THE YEAR UNDER C ONSIDERATION. 6.3.1. ASSESSEE ALSO SUBMITTED BEFORE LD.AO THAT SU M OF RS.25,52,89,418/- WAS RECEIVED BY ASSESSEE IN SUBSE QUENT YEARS, AND ASSESSEE OFFERED THE SAME TO TAX IN ASSESSMENT YEARS BEING 2014-15 AND 2016-17. ASSESSEE ALSO PLACED BEFORE LD .AO, RETURN OF INCOME AND STATEMENT OF COMPUTATION OF INCOME FO R ASSESSMENT YEARS 2014-15 AND 2015-16. LD.AO OBSERVE D THAT ASSESSEE WAS MAINTAINING ACCOUNTS ON MERCANTILE SYS TEM AND HENCE THE ABOVE SAID AMOUNT OF RS.25,52,89,418/-, S HOULD HAVE BEEN RECOGNISED AS INCOME BY ASSESSEE FOR YEAR UNDE R CONSIDERATION. THE LD.AO NOTICED THAT HONBLE SUPRE ME COURT DIRECTED CEC TO SELL THE STOCK ON BEHALF OF ASSESSE E AND TO RETAIN THE SALE PROCEEDS ON ACCOUNT OF ASSESSEE/LEASEHOLDE R. CEC WAS AUTHORISED TO DEDUCT TOWARDS SPV CONTRIBUTION, ESTI MATED COST FOR R&R PLANS AND COMPENSATION FOR ILLEGAL MINING AND I LLEGAL DUMPING AND TO RETURN THE BALANCE SALE PROCEEDS TO ASSESSEE. 6.3.2. LD.AO ACCORDINGLY HELD THAT, THERE WAS NO UN CERTAINTY OF RECEIPT OF SALE PROCEEDS OF THE E-AUCTIONED IRON OR E BY THE MC. 6.4. SALE OF UNDECLARED STOCK: LD.AO NOTICED THAT MC SOLD STOCK TO THE TUNE OF RS.24,64,49,012/- DURING THE YEAR UNDER CONSIDERATI ON ON BEHALF OF ASSESSEE. IT WAS ALSO NOTICED BY LD.AO THAT ASSE SSEE HAD NOT DECLARED THE SAME AS ITS INCOME IN THE ORIGINAL RET URN, AND IT WAS CLAIMED AS EXPENDITURE IN THE REVISED RETURN OF INC OME. LD.AO NOTICED THAT, THE SAID AMOUNT WAS EXCLUDED FROM THE SALES REVENUE ITSELF. IT WAS SUBMITTED BY ASSESSEE THAT T HE SAME DID NOT ACCRUE, AS THE SAME WAS DIVERTED TO SPV BY MC. ASSE SSEE SUBMITTED THAT SUCH STOCK SOLD BY MC WAS NOT RECOGN ISED BY IT IN ITS BOOKS AND WAS OVER AND ABOVE THE STOCK DECLARED IN IBM RETURN. ASSESSEE SUBMITTED THAT, SUCH STOCK RELATED TO ACCUMULATED WASTE/DEBRIS, WHICH WAS NOT RECOGNISED AS SALEABLE. IT WAS SUBMITTED THAT, MC EXCAVATED SUCH STOCK FROM ACCUMULATED DUMP, AFTER SUSPENSION OF MINING ACTIVI TY, WHICH WAS OVER AND ABOVE STOCK DECLARED IN IBM RETURN FIL ED BY ASSESSEE. SUCH STOCK WAS TREATED AS UNDECLARED BY M C IN PAYMENT ADVISES, AND THEREFORE THE SALE PROCEEDS AR ISING FROM ITA NO.1545/BANG/2018 PAGE 7 OF 27 SALE OF SUCH STOCK DOES NOT BELONG TO ASSESSEE. ASS ESSEE SUBMITTED THAT SALE PROCEEDS WERE NEVER TRANSFERRED TO ASSESSEE OF SUCH UNDECLARED STOCK, AND THE SAME WAS CONTRIBUTED TO SPV. 6.4.1. LD.AO THEREFORE TREATED SALE PROCEEDS FROM S UCH UNDECLARED STOCK AS INCOME IN THE HANDS OF ASSESSEE FOR YEAR UNDER CONSIDERATION. 6.5. REVENUE RECOGNITION: LD.AO OBSERVED THAT MC SO LD IRON ORE OF ASSESSEE BY E AUCTION TO THE EXTENT OF RS.50 ,24,48,441/- DURING FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR U NDER CONSIDERATION. THE LD.AO NOTED THAT, IN PROFIT AND LOSS ACCOUNT, ASSESSEE CLAIMED SUM OF RS.50,24,48,441/- AS EXPEND ITURE. LD.AO REJECTED RECOGNITION OF REVENUE ON RECEIPT BA SIS, AS ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING. LD.AO REFERRED TO PARA 9 OF DECISION OF HONBLE SUPREME C OURT IN CASE OF SAMAJ PARIVARTANA SAMUDAYA VS STATE OF KARNATAKA , (SUPRA) WHEREIN HONBLE COURT DIRECTED CEC/MC TO PAY TO CON CERNED LEASEHOLDER BALANCE AMOUNT AFTER ADJUSTING CONTRIBU TIONS UNDER VARIOUS HEADS TOWARDS SPV FOR IMPLEMENTATION OF R & R PLAN ETC. LD.AO WAS OF THE OPINION THAT, THERE WAS NO UN CERTAINTY AND NOWHERE THERE WAS ANY SUSPENSE OF RECEIPT OF SALE P ROCEEDS OF SUCH E- AUCTION OF IRON ORE FROM MC. THEREFORE, AS PER MERCANTILE SYSTEM OF ACCOUNTING, RIGHT TO RECEIVE S UCH AMOUNT ACCRUED TO ASSESSEE DURING THE YEAR UNDER CONSIDERA TION WHICH, CANNOT BE DIVERTED TO SUBSEQUENT ASSESSMENT YEARS. LD.AO OBSERVED THAT, DETAILS OF EAUCTION SALE BY MC, WAS IN THE KNOWLEDGE OF ASSESSEE, AND ASSESSEE WAS WELL AWARE OF RECEIPT OF SALE PROCEEDS, WHICH SHOULD HAVE BEEN ACCOUNTED IN BOOKS OF ACCOUNT, IN THE YEAR OF SALE ITSELF(YEAR UNDER CONS IDERATION), WITHOUT POSTPONING IT TILL DATE OF ACTUAL RECEIPT O F PROCEEDS. LD.AO THUS HELD THAT, ASSESSEE ACQUIRED RIGHT TO RE CEIVE SALE PROCEEDS DURING THE YEAR UNDER CONSIDERATION, AND T HEREFORE HAS TO BE CONSIDERED AS INCOME FOR YEAR UNDER CONSIDERA TION. 6.6. LD.AO THUS OBSERVED AND HELD AS UNDER: 4.1. UNACCOUNTED SALE PROCEEDS OF - I) DECLARED STOCKS - RS.25,59,99,429/- & II) UN- DECLARED STOCKS - RS.24,64,49,012/- ON GOING THROUGH THE ABOVE TABLE OF THIS ORDER, AT SL.NO.1 & 2 OF THE SAID TABLE IT IS NOTICED THAT THE ASSESSEE FIRM HAS DEBITED ITA NO.1545/BANG/2018 PAGE 8 OF 27 AN AMOUNT OF RS.25,59,99,429/- UNDER THE HEAD SALE PROCEEDS OF DECLARED STOCKS RECEIVED IN SUBSEQUENT ASSESSMENT YEARS OFFERED TO TAX AND RS.24,64,49,012 /- UNDER THE HEAD SALE PROCEEDS OF UN-DECLARE STOCKS - YET TO BE RECEIVED. DURING THE COURSE OF SCRUTINY PROCEEDI NGS, THE ASSESSEE FIRM WAS REQUESTED TO EXPLAIN AS TO WH Y THE E- AUCTIONED SALE PROCEEDS DURING THE YEAR OF RS.50,24,48,441/-(RS.25,59,99,429/- + RS.24,64,49,0 12/- ) HAS BEEN OMITTED TO BE OFFERED TO TAX DURING THE YEAR OF SALE RELEVANT TO THE ASST. YEAR UNDER QUESTION. 4.1.A IN RESPONSE, THE ASSESSEE FIRM HAD FILED THE OBJECTIONS AT PARA NO.12 OF LETTER DATED: 21/01/2016 FILED IN THI S OFFICE ON THE SAME DATE, WHEREIN, IT HAS STATED UNDER : RELEVANT PORTION OF THE LETTER IS EXTRACTED BELOW: '12. AS REGARDS SALE PROCEEDS OF DECLARED STOCKS AN D UN- DECLARED STOCKS: 1) IT IS SUBMITTED THAT THE ASSESS EE DID NOT OFFER TO TAX SALE PROCEEDS OF RS.28,55,04,732/- RELATING TO DECLARED STOCKS AND SALE PROCEEDS OF RS.24,64,49 ,012/- RELATING TO UN-DECLARED STOCKS DURING THE IMPUGNED ASSESSMENT YEAR FOR THE REASON THAT RECEIPT OF THE SAME WAS HIGHLY UNCERTAIN. 2) IT IS SUBMITTED THAT IN THE INSTANT CASE, ASSESS EE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IN MERCANTILE SYST EM, INCOME IS TO BE CHARGED ON ACCRUAL BASIS. INCOME IS SAID TO B E ACCRUED WHEN THERE IS A REASONABLE CERTAINTY OF RECEIVING SUCH I NCOME. WHEN THE SAME CANNOT BE DETERMINED WITH REASONABLE CERTA INTY, THE RECOGNITION OF SUCH INCOME SHOULD BE POSTPONED. 3) IN THIS REGARD A REFERENCE MAY BE MADE TO ACCOUNTING STANDARD - 9 I.E. REVENUE RECOGNITION. THE RELEVANT EXTRACT OF THE SAME READS AS UNDER.' '9. EFFECT OF UNCERTAINTIES ON REVENUE RECOGNITION 9.1 RECOGNITION OF REVENUE REQUIRES THAT REVENUE IS MEASURABLE AND THAT AT THE TIME OF SALE OR THE REND ERING OF THE SERVICE IT WOULD NOT BE UNREASONABLE TO EXPECT ULTIMATE COLLECTION. 9.2 WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLEC TION WITH REASONABLE CERTAINTY IS LACKING AT THE TIME OF RAIS ING ANY CLAIM, E.G., FOR ESCALATION OF PRICE, EXPORT INCENT IVES, INTEREST ETC., REVENUE RECOGNITION IS POSTPONED TO THE ITA NO.1545/BANG/2018 PAGE 9 OF 27 EXTENT OF UNCERTAINTY INVOLVED. IN SUCH CASES, IT M AY BE APPROPRIATE TO RECOGNISE REVENUE ONLY WHEN IT IS REASONABLY CERTAIN THAT THE ULTIMATE COLLECTION WIL L BE MADE. WHERE THERE IS NO UNCERTAINTY AS TO ULTIMATE COLLECTION, REVENUE IS RECOGNISED AT THE TIME OF SA LE OR RENDERING OF SERVICE EVEN THOUGH PAYMENTS ARE MADE BY INSTALLMENTS. 9.3 WHEN THE UNCERTAINTY RELATING TO COLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SALE OR THE RENDERING OF THE SERVICE, IT IS MORE APPROPRIATE TO MAKE A SEPARATE PROVISION TO REFLECT THE UNCERTAINTY RATHER THAN TO ADJUST THE AMOUNT OF REVENUE ORIGINALLY RECORDED. 9.4 AN ESSENTIAL CRITERION FOR THE RECOGNITION OF R EVENUE IS THAT THE CONSIDERATION RECEIVABLE FOR THE SALE OF G OODS, THE RENDERING OF SERVICES OR FROM THE USE BY OTHERS OF ENTERPRISE RESOURCES IS REASONABLY DETERMINABLE. WH EN SUCH CONSIDERATION IS NOT DETERMINABLE WITHIN REASO NABLE LIMITS, THE RECOGNITION OF REVENUE IS POSTPONED. 9.5 WHEN RECOGNITION OF REVENUE IS POSTPONED DUE TO THE EFFECT OF UNCERTAINTIES, IT IS CONSIDERED AS REVENU E OF THE PERIOD IN WHICH IT IS PROPERLY RECOGNISED.' 4) A REFERENCE MAY ALSO BE MADE TO INCOME COMPUTATI ON AND DISCLOSURE STANDARDS (JCDS) - IV NOTIFIED BY THE CE NTRAL GOVERNMENT FOR THE PURPOSES OF COMPUTATION OF INCOM E CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION '. THE RELEVANT EXTRACT OF I CDS IV READS AS UNDER: '4. REVENUE SHALL BE RECOGNISED WHEN THERE IS REASO NABLE CERTAINTY OF ITS ULTIMATE COLLECTION. 5. WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLECTION WITH REASONABLE CERT AINTY IS LACKING AT THE TIME OF RAISING ANY CLAIM FOR ESCALA TION OF PRICE AND EXPORT INCENTIVES, REVENUE RECOGNITION IN RESPECT OF SUCH CLAIM SHALL BE POSTPONED TO THE EXTENT OF UNCERTAINTY INVOLVED.' 5) THUS, FROM THE PERUSAL OF ACCOUNTING STANDARD 9 AND JCDS - IV, IT IS SUBMITTED THAT, THE REVENUE HAS TO BE REC OGNISED WHEN THERE IS A REASONABLE CERTAINTY OF ITS ULTIMATE COL LECTION. IF THE ABILITY TO ASSESS THE ULTIMATE COLLECTION WITH REAS ONABLE CERTAINTY ITA NO.1545/BANG/2018 PAGE 10 OF 27 IS LACKING, THEN THE REVENUE RECOGNITION SHALL BE P OSTPONED TO THE EXTENT OF UNCERTAINTY INVOLVED. 6) IN THE INSTANT CASE, THE MC HAD COMPLETE CONTROL AND COMMAND OVER DECLARED AND UNDECLARED STOCKS. AS SUBMITTED A BOVE, IT WAS THE SOLE DISCRETION OF MC TO DECIDE TO WHOM THE AFO RESAID STOCKS HAVE TO BE SOLD. THE SALE PROCEEDS OF THE SAID STOC KS ARE RECEIVED BY MC FROM THE RESPECTIVE BUYERS. MC, AFTER MAKING NECESSARY DEDUCTIONS GIVES THE BALANCE SALE PROCEEDS TO ASSES SEE. IN THIS ENTIRE PROCESS, ASSESSEE HAS NO CONTROL OVER THE VA LUE AND TIME OF RECEIPT OF THE SALE PROCEEDS. 7) THUS, IT IS SUBMITTED THAT AS THE AMOUNT OF RS. 28,55,04, 732/- AND RS. 24,64,49,0121-, DID NOT ACCRUE TO THE ASSES SEE, THERE IS NO QUESTION OF ANY LIABILITY OF THE SAME TO TAX DUR ING THE IMPUGNED ASSESSMENT YEARS. 8) IN THE CASE OF IN STATE BANK OF TRAVANCORE V. CI T [1986] 158 ITR 102 / 24 TAXMAN 337 (SC), THE HONOURABLE SUPREM E COURT HELD AS UNDER: 'IN DETERMINING THE QUESTION WHETHER IT IS HYPOTHET ICAL INCOME OR WHETHER REAL INCOME HAS MATERIALISED OR N OT, VARIOUS FACTORS WILL HAVE TO BE TAKEN INTO ACCOUNT. IT WOULD BE DIFFICULT AND IMPROPER TO EXTEND THE CONCEPT OF REAL INCOME TO ALL CASES DEPENDING UPON THE IPSE DIXIT O F THE ASSESSEE WHICH WOULD THEN BECOME A VALUE JUDGMENT O NLY. WHAT HAS REALLY ACCRUED TO THE ASSESSEE HAS TO BE F OUND OUT AND WHAT HAS ACCRUED MUST BE CONSIDERED FROM TH E POINT OF VIEW OF REAL INCOME TAKING THE PROBABILITY OR IMPROBABILITY OF REALISATION IN A REALISTIC MANNER AND DOVETAILING OF THESE FACTORS TOGETHER BUT ONCE THE ACCRUAL TAKES PLACE, ON THE CONDUCT OF THE PARTIES SUBSEQUE NT TO THE YEAR OF CLOSING, AN INCOME WHICH HAS ACCRUED CA NNOT BE MADE 'NO INCOME' 9) IN THE CASE OF UNITED NILAGIRI TEA ESTATES CO. V . DY. CIT [2012] 210 TAXMAN 62 (MADRAS), THE HONOURABLE MADRA S HIGH COURT HAS HELD AS UNDER: '8. IN THE BACKGROUND OF THE LAW THUS LAID DOWN, WH AT IS TO BE LOOKED AT TO TEST THE REAL INCOME THAT MIGHT BE TAKEN FOR WORKING OUT AN ASSESSMENT FOR AN ASSESSEE FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNT IS, THE CHANCES OR ITA NO.1545/BANG/2018 PAGE 11 OF 27 PROBABILITIES OF REALISATION IN A REALISTIC MANNER TO HOLD THAT THERE WAS A REAL ACCRUAL OF INCOME TO THE ASSE SSEE COMPANY.' 10) IN THE CASE OF CIT V. ANNAMALAI FINAN CE LTD. [2009] 319 ITR 1961[2010] 186 TAXMAN 296 (MAD. ), THE HONOURABLE MADRAS HIGH COURT HAS HELD AS UNDER: '5. THE RECOGNITION OF REVENUE ON ACCRUAL BASIS PRESUPP OSES THE SATISFACTION OF TWO CONDITIONS VIZ., THE REVENU E IS MEASURABLE AND THAT THE REVENUE IS COLLECTABLE WITH OUT ANY UNCERTAINTY. 11) WITHOUT PREJUDICE TO THE ABOVE , IT IS SUBMITTED THAT AMOUNT OF RS.28,55,04,732/- HAS BEEN RECEIVED BY THE ASSESSEE IN THE SUBSEQUENT YEARS AN D THE ASSESSEE HAS ACCORDINGLY OFFERED THE SAME TO TAX IN THE SUBSEQUENT ASSESSMENT YEARS 2014-2015 & 2015-2016. COPY OF THE RETURN OF INCOME AND STATEMENT OF COMPUTATION OF TOTAL INCOME OF THE ASSESSMENT YEARS 2014-2015 & 2015-2016 IS ENCLOSED HEREWITH AS ANNEX URE 1. THEREFORE, THE QUESTION OF TAXING THE SOME IN IM PUGNED ASSESSMENT YEAR DOES NOT ARISE.' 4.1.B. FROM THE ABOVE SUBMISSION IT IS EVIDENT AND FACT THAT, THE MONITORING COMMITTEE HAS SOLD THE IRON ORE OF THE A SSESSEE FIRM THROUGH E-AUCTION TO THE EXTENT OF RS.50,24,48,441/ - DURING THE F.Y-2012-13 RELEVANT TO ASST. YEAR-2013-14, OUT OF WHICH RS.25,59,99,429/- IS RECEIVED IN THE SUBSEQUENT ASS T. YEARS - 2014-15 & 2015-16 AND RS.24,64,49,C12/- IS YET TO B E RECEIVED. WHEREAS, THESE E-AUCTIONED SALE PROCEEDS OF RS.50,2 4,48,441/- HAVE BEEN CLAIMED AS EXPENDITURE BY THE ASSESSEE FI RM AND DEBITED TO P & L ALE. HOWEVER, THE SAID SALES PROCE EDS OF RS.50,24,48,441/- IS TO BE ASSESSED AS INCOME ON AC CRUAL BASIS IN VIEW OF THE ACCOUNTING METHOD (I.E. MERCANTILE SYST EM) FOLLOWED BY THE ASSESSEE FIRM. 4.1.C. THE SUBMISSIONS/EXPLANATIONS FILED AND JUDIC IAL DECISIONS RELIED ON BY THE ASSESSEE FIRM HAVE BEEN GONE THROU GH IN DETAIL. THE CONTENTION OF THE ASSESSEE FIRM THAT, THE SALE PROCEEDS WILL BE ACCOUNTED AND OFFERED TO TAX AS AND WHEN REALISED C ANNOT BE ACCEPTED AND FURTHER, THE JUDICIAL DECISIONS RELIED ON BY THE ASSESSEE FIRM HAVE NO DIRECT NEXUS WITH THE FACTS O F THE INSTANT CASE AS THE HON'BLE APEX COURT IN ITS ORDER DATED: 18/04/2014 IN WRIT PETITION (CIVIL) NO. 562 OF 2009, REFERRED ABO VE (IN PARA.9) - ORDER THAT, THE CEC WAS ALLOWED TO SELL T HE STOCK ON BEHALF OF THE ASSESSEE AND TO RETAIN THE SALES PROC EEDS ON ACCOUNT OF THE ASSESSEE/LEASEHOLDER AND THE CEC WAS AUTHORI ZED TO DEDUCT ITA NO.1545/BANG/2018 PAGE 12 OF 27 THE ASSESSEE'S COMPENSATORY AND PENAL LIABILITIES O UT OF SUCH SALES PROCEEDS AND TO RETURN THE BALANCE PROCEEDS TO THE ASSESSEE - HERE IT NEEDS TO BE CLARIFIED THAT THE CEC/MONITORING CO MMITTEE IS HOLDING THE SALE PROCEEDS OF THE IRON ORES OF THE L EASE HOLDERS, INCLUDING THE 63 LEASEHOLDS BEING THE SUBJECT OF TH IS ORDER. IN CASE, THE MONEY HELD BY THE CEC/MONITORING COMMITTE E ON THE ACCOUNT OF ANY LEASEHOLDER IS SUFFICIENT TO COVER T HE PAYMENTS UNDER THE AFORESAID THREE HEADS, THE LEASEHOLDER MA Y, IN WRITING, AUTHORIZE THE CEC TO DEDUCT FROM THE SALE PROCEEDS ON ITS ACCOUNT THE AMOUNTS UNDER THE AFORESAID THREE HEADS AND AN UNDERTAKING TO MAKE PAYMENT OF ANY ADDITIONAL AMOUNT AS COMPENS ATORY PAYMENT. ON SUBMISSION OF SUCH AUTHORIZATION AND UN DERTAKING, THE CEC SHALL RETAIN THE AMOUNTS COVERING THE AFORE SAID THREE HEADS AND PAY TO THE CONCERNED LEASEHOLDER THE BALA NCE AMOUNT, IF ANY. IT IS EXPECTED THAT THE BALANCE AMOUNT, AFT ER MAKING THE ADJUSTMENTS AS INDICATED HERE, WOULD BE PAID TO THE CONCERNED LEASEHOLDER WITHIN ONE MONTH FROM THE DATE OF SUBMI SSION OF THE AUTHORIZATION AND THE UNDERTAKING. IN THE CASE OF A NY LEASEHOLDER, IF THE MONEY HELD ON HIS ACCOUNT IS NOT SUFFICIENT TO COVER THE AFORESAID THREE HEADS, HE MUST PAY THE DEFICIT WITH IN TWO MONTHS FROM TODAY. 4.1.D. IT IS CLEAR FROM THE PLAIN READING OF THE SA ID ORDER THAT THERE IS NOWHERE SUSPENSE OR UNCERTAINTY OF SALES PROCEED S OF THE SAID EAUCTIONED IRON-ORE FROM THE MONITORING COMMITTEE, WHEREAS, IN ALL THE ABOVE JUDICIAL DECISIONS RELIED ON BY TH E ASSESSEE FIRM, THERE WAS UNCERTAINTY OF RECEIPT OF MONEY, HENCE, T HE SAID CASES RELIED ON BY THE ASSESSEE FIRM CANNOT BE ACCEPTED A S THE FACTS OF CASES DIFFER FROM THE INSTANT CASE. HENCE, THE ASSE SSEE'S IMPLICIT PLEA THAT, EVEN THOUGH SALES HAD OCCURRED IN THE RE LEVANT YEARS, NO INCOME CAN BE SAID TO HAVE ACCRUED TO THE FIRM IN T HE RELEVANT YEAR AND/OR SINCE, THE SALES PROCEEDS ARE RETAINED BY THE CEC AND THEREFORE, THE SAID SALES PROCEEDS WILL BE OFFERED TO TAX IN THE YEAR OF REALISATION ALSO CANNOT BE ACCEPTED. AS THERE AR E ONLY TWO RECOGNIZED METHODS OF ACCOUNTING NAMELY THE CASH ME THOD OF ACCOUNTING AND THE MERCANTILE METHOD OF ACCOUNTING. IN MERCANTILE METHOD OF ACCOUNTING, ENTRIES ARE POSTED IN THE BOOKS OF ACCOUNT ON THE DATE OF TRANSACTION WHEN THE RIGH TS ACCRUE OR LIABILITIES ARE INCURRED, IRRESPECTIVE OF THE DATE OF PAYMENT. / RECEIPT. THE RIGHT TO RECEIVE THE SAID RETAINED AMO UNT HAS ACCRUED TO THE ASSESSEE FIRM AND IT CANNOT BE DIVERTED ON T HE PLEA CONTRARY ITA NO.1545/BANG/2018 PAGE 13 OF 27 TO THE ACCOUNTING PRACTICE. SINCE THE ASSESSEE FIRM IS FOLLOWING ACCRUAL METHOD OF ACCOUNTING, A PART OF RECEIPT CAN NOT BE TAKEN ON PIECEMEAL / RECEIPT BASIS. HENCE, THE ASSESSEE'S CONTENTION THAT THE SAID AMOUNT IS NOT LIABLE TO TAX SINCE THE SAID AMOUNT WAS NOT ACTUALLY RECEIVED FROM THE CEC/MONITORING COMMITTEE DURING THE FINANCIAL YEAR, CANNOT BE ACCEPTED. 4.1.E. THUS, THE E-AUCTION SALES TOOK PLACE ON BEHA LF OF THE ASSESSEE FIRM AND THE MONEY WAS RECEIVED FROM THE P URCHASER OF IRON-ORE BY THE CEC/MONITORING COMMITTEE ON ACCOUNT OF THE ASSESSEE FIRM. HENCE, THE ASSESSEE FIRM WAS REQUIRE D TO REFLECT THESE SALES AS TRADING RECEIPTS IN ITS BOOKS OF ACC OUNT KEEPING IN VIEW THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWE D BY THE ASSESSEE FIRM AND DISCLOSE THE SAME IN ITS RETURN O F INCOME FILED FOR THE A.Y- 2013-14 BEING THE ASST. YEAR UNDER QUE STION WITHOUT CLAIMING THE SAID AMOUNT AS DEDUCTION IN THE P & L A/C. 4.1.F FURTHER, THE DETAILS OF E-AUCTION SALE ARE AV AILABLE ON PUBLIC DOMAIN HOISTED / POSTED BY MONITORING COMMITTEE. SI MILARLY, THE MONITORING COMMITTEE ALSO E-AUCTIONED MATERIAL WITH THE CONSENT OF THE MINE OWNERS AND ISSUED A SALE ORDER FOR LIFT ING THE MATERIAL FROM THE MINES OF CONCERNED MINE OWNER. FR OM THIS, IT IS EVIDENT THAT THE ASSESSEE WAS WELL AWARE OF THE E-AUCTION SALES AND SHOULD HAVE ACCOUNTED THE SAME IN ITS BOOKS OF ACCOUNTS IN THE YEAR OF SALE ITSELF WITHOUT POSTPONING THE SAME TILL THE DATE OF RECEIPT OF PROCEEDS. INCOME MAY ACCRUE TO AN ASSESS EE WITHOUT ACTUAL RECEIPT OF THE SAME. IF THE ASSESSEE ACQUIRE S A RIGHT TO RECEIVE THE INCOME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM THOUGH IT MAY BE RECEIVED LATER, ON ITS BEING A SCERTAINED - CIT V. SHRI GOVERDHAN LTD. (1968) 69 ITR 675 (SC) / CIT V. NANDRAM HUNATRAM (1976) 103 ITR 433 (ON). RECEIPT I S NOT THE ONLY TEST OF CHARGEABILITY TO TAX, IF INCOME ARISES OR ACCRUES, IT MAY BECOME LIABLE TO TAX - CIT V. ASHOKBHAI CHIMANB HAI (1965) 56 ITR 42 (SC) / CIT V. A.B.V GOWDA (1986) 157 ITR 697 (KAR). EACH YEAR BEING A SELF CONTAINED UNIT, TAXES OF PARTICULAR YEAR IS PAYABLE WITH REFERENCE TO THE INCOME OF THA T YEAR AS COMPUTED IN TERMS OF THE ACT - CIT VS. BRITISH PAIN TS INDIA LTD. (SC) 188 ITR 44. ACCORDINGLY, A SUM EQUIVALENT TO E -AUCTION SALE PROCEEDS ACCRUED / ARISED TO THE ASSESSEE FOR THE F INANCIAL YEAR ENDING 31/03/2013 SHOULD BE ASSESSED IN THE RELEVAN T ASSESSMENT YEAR WHICH IS UNDER CONSIDERATION HENCE, THE ENTIRE E-AUCTION ITA NO.1545/BANG/2018 PAGE 14 OF 27 SALES PROCEEDS OF RS.50,24,48,441/- (RS.25,59,99,42 9/- + RS.24,64,49,012/-) CLAIMED AS EXPENDITURE / DEDUCTI ON ARE ADDED BACK TO THE INCOME RETURNED AND BROUGHT TO TAX. LD. AO THUS ADDED SALE PROCEEDS AMOUNTING TO RS.50,24,48,441/IN THE HANDS OF ASSESSEE FOR YEAR UNDER CONSIDERATION. AGGRIEVED BY ORDER OF LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). 6.7. LD.CIT(A) OBSERVED AND HELD AS UNDER: 3.1.) THE ASSESSEE SUBMITTED THAT THOUGH IT FOLLOWE D MERCANTILE SYSTEM OF ACCOUNTING IT DID NOT OFFER TH E ABOVE AMOUNT OF RS.50,24,48,441/- AS RECEIPT OF THE SAME WAS HIGHLY UNCERTAIN AND RECOGNITION OF INCOME WAS TO B E DONE ONLY ON RECEIPT BASIS AND RELIED ON ACCOUNTING STAN DARD-9 THAT IS REVENUE RECOGNITION. IT WAS SUBMITTED THAT AS PER ACCOUNTING STANDARD-9 (A S9) ISSUED BY ICAI, WHERE THERE IS AN UNCERTAINTY ABOUT THE COLLECTION OF INCOME/RE VENUE, RECOGNITION OF SUCH INCOME/REVENUE IS TO BE POSTPON ED TO THE EXTENT OF UNCERTAINTY INVOLVED, WHICH IS ALSO I N ACCORDANCE WITH THE THEORY OF TAXING ONLY THE REAL INCOME, WHICH IS A SETTLED LAW AS PER VARIOUS JUDICIAL PROC EEDINGS. THE AO HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE SALE PROCEEDS WOULD BE ACCOUNTED AND OFFERED TO TAX AS AND WHEN IT WAS REALISED. 3.2.) I HAVE GONE THROUGH THE FACTS OF THE CASE AN D THE SUBMISSIONS OF THE APPELLANT. THE CONTENTION OF THE APPELLANT THAT DID ITS INCOME WAS HIGHLY UNCERTAIN IS NOT ACCEPTED FOR THE FOLLOWING REASONS: THE CEC WAS AL LOWED TO SELL THE STOCK ON BEHALF OF THE ASSESSEE AND TO READ IN THE SALE PROCEEDS ON ACCOUNT OF THE ASSESSEE/LEASEH OLDER AND THE CEC WAS AUTHORISED TO DEDUCT THE ASSESSEE I S COMPENSATORY AND PENAL LIABILITIES OUT OF SUCH SALE PROCEEDS AND TO RETURN THE BALANCE PROCEEDS TO THE ASSESSEE. THE CEC IS/MONITORING COMMITTEE IS HOLDIN G THE SALE PROCEEDS OF THE IRON ORES OF THE LEASEHOLD ERS. IN CASE, THE MONEY HELD BY THE CEC/MONITORING COMMITTE E ON THE ACCOUNT OF ANY LEASEHOLDER IS SUFFICIENT TO COVER THE PAYMENTS UNDER THE 3 HEADS, THE LEASE HOLDER MAY, I N WRITING, AUTHORISE THE CEC TO DEDUCT FROM THE SALE PROCEEDS ON ITS ACCOUNT THE AMOUNTS UNDER THE AFORE SAID 3 HEADS AND AN UNDERTAKING TO MAKE PAYMENT OF ANY ADDITIONAL AMOUNT AS COMPENSATORY PAYMENT. ON SUBMISSION OF SUCH AUTHORISATION AND UNDERTAKING, T HE CEC SHALL RETAIN THE AMOUNTS COVERING THE AFORESAID 3 ITA NO.1545/BANG/2018 PAGE 15 OF 27 HEADS AND PAY TO THE CONCERNED LEASEHOLDER THE BALA NCE AMOUNT, IF ANY. IT IS EXPECTED THAT THE BALANCE AMO UNT, AFTER MAKING THE ADJUSTMENT AS INDICATED HERE, WOUL D BE PAID TO THE CONCERNED LEASEHOLDER IS WITHIN ONE MON TH FROM THE DATE OF SUBMISSION OF THE AUTHORISATION AN D THE UNDERTAKING. IN THE CASE OF ANY LEASEHOLDER, IF THE MONEY HELD ON THIS ACCOUNT IS NOT SUFFICIENT TO COVER THE AFORESAID 3 HEADS, HE MUST PAY THE DEFICIT WITHIN 2 MONTHS FR OM TODAY. THUS, AS COULD BE SEEN FROM THE ABOVE, NO W HERE THERE IS EITHER SUSPENSE OR UNCERTAINTY OF RECEIPT OF SALE PROCEEDS OF THE SAID E-AUCTIONED IRON ORE FROM THE MONITORING COMMITTEE. AS THE ASSESSEE WAS MAINTAINI NG MERCANTILE SYSTEM OF ACCOUNTING, IT IS BOUND TO OFF ER THE SAME IN THE YEAR OF A CURABLE. AS THE SAME HAS NOT BEEN DONE, THE AO WAS RIGHT IN MAKING THE ADDITION. THIS GROUND IS THUS DISMISSED. AGGRIEVED BY ORDER OF LD.CIT(A), ASSESSEE IS IN APP EAL BEFORE US NOW. 6.8. LD.COUNSEL BEFORE US PLACED HIS ARGUMENTS UNDE R 2 CATEGORIES: A. RECOGNITION OF SALE PROCEEDS FROM DECLARED STOCK , RECEIVED BY ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS ; AND B. ADDITION OF SALE PROCEEDS OF UNDECLARED STOCK IN THE HANDS OF ASSESSEE, WHICH WAS NOT DISBURSED BY MC. A. RECOGNITION OF SALE PROCEEDS FROM DECLARED STOCK RECEIVED BY ASSESSEE LD.COUNSEL IMPUGNED SALE PROCEEDS FROM SALE OF DECL ARED STOCK WERE ACCOUNTED BY ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS, WHEN IT WAS RECEIVED. HE SUBMITTED THAT, HONBLE SU PREME COURT IN CASE OF SAMAJ PARIVARTANA SAMUDAYA VS STATE OF K ARNATAKA, (SUPRA) AUTHORISED MC TO TAKE CONTROL OF STOCK, AND SELL THE SAME THROUGH E-AUCTION, DEPENDING ON DEMAND IN THE MARKE T. SUBSEQUENTLY, SALE PROCEEDS RECEIVED BY MC ARE TO B E DEPOSITED IN NATIONALISED BANK ACCOUNT, AFTER ADJUSTING TOWAR DS ROYALTY, TAXES AND EXPENDITURE. LD.COUNSEL SUBMITTED THAT, I N INSTANT CASE, RIGHT AND CONTROL OVER STOCK WAS WITH MC, AND TILL SUCH TIME MC PARTS WITH SALE PROCEEDS, ASSESSEE HAD NO RIGHT TO RECEIVE THE SAME. HE SUBMITTED THAT, SALE OF STOCK BY MC CANNOT BE REGARDED ITA NO.1545/BANG/2018 PAGE 16 OF 27 AS SALE OF STOCK BY ASSESSEE. HE SUBMITTED THAT ASS ESSEE THUS ACCOUNTED THE SALE PROCEEDS FROM DECLARED STOCK IN SUBSEQUENT ASSESSMENT YEAR, WHEN IT WAS ACTUALLY RECEIVED. A.1. LD.COUNSEL SUBMITTED THAT, THOUGH ASSESSEE FOL LOWED MERCANTILE SYSTEM OF ACCOUNTING, REVENUE ON SALE PR OCEEDS OF STOCK BY MC, COULD BE RECOGNISED AND ASSESSED TO TA X ONLY ON ACTUAL RECEIPT, AS ASSESSEE DID NOT POSSESS RIGHT T O RECEIVE SUCH INCOME DURING THE YEAR UNDER CONSIDERATION. HE SUBM ITTED THAT, MC COULD NOT BE CONSIDERED AS AGENT OF ASSESSEE AS THERE WAS NO AGREEMENT BETWEEN ASSESSEE AND MC, FOR PRINCIPLE AG ENT RELATIONSHIP TO EXIST. LD.COUNSEL SUBMITTED THAT, M C WAS ACTING IN ACCORDANCE WITH DIRECTION OF HONBLE SUPREME COU RT VIS--VIS ASSESSEE. HE ALSO SUBMITTED THAT, ASSESSEE HAD NOT APPOINTED MC TO ACT ON ITS BEHALF IN ORDER TO CONSTITUTE AN AGE NT UNDER SECTION 182 OF INDIAN CONTRACT ACT, 1872. HE THUS SUBMITTED THAT, IT IS SETTLED RULE THAT, CONTRACT IS NOT ASSIGNABLE WITHO UT CONSENT OF BOTH PARTIES THERETO, WHERE, PERSONAL ACTS AND QUAL ITIES OF ONE OF THE PARTIES, FORM MATERIAL AND INGREDIENT PART OF T HE CONTRACT. A.2. LD.COUNSEL ARGUED THAT, REVENUE FROM DECLARED STOCK WAS NOT RECOGNISED DURING THE YEAR UNDER CONSIDERATION DUE TO EXISTENCE OF UNCERTAINTY IN REALISATION OF SAID AMO UNT. IT HAS BEEN SUBMITTED THAT, SECTION 5 OF THE ACT, MANIFESTS THA T, AN INCOME CAN BE SAID TO HAVE ACCRUED, ONLY WHEN A PERSON HAS LEGAL RIGHT TO RECEIVE SUCH INCOME, AND ITS RECOGNITION IS ON SUCH ACCRUAL, WHICH IS TEMPERED BY SECTION 145 READ WITH AS-9 OF ICAI. LD.COUNSEL SUBMITTED THAT, IN ORDER TO CHARGE AN IN COME TO TAX, IT IS NECESSARY THAT SUCH INCOME SHOULD FALL WITHIN TH E SCOPE OF TOTAL INCOME, AS DEFINED UNDER SECTION 2(45) OF THE ACT, AND THAT, SUCH INCOME SHALL BE CHARGED TO TAX UNDER SECTION 5, IF SUCH INCOME SHALL BE RECEIVED OR DEEMED TO HAVE BEEN RECEIVED O R ACCRUE OR ARISES OR DEEMED TO ACCRUE OR ARISE TO A PERSON IN INDIA, DURING THE PREVIOUS YEAR. LD.COUNSEL, THUS SUBMITTED THAT, ASS ESSEE HAD NOT DERIVED ANY LEGAL RIGHT TO RECEIVE SALE PROCEEDS DU RING PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATIO N, AND THEREFORE, THE SALE PROCEEDS CANNOT BE CONSTRUED AS INCOME IN THE HANDS OF ASSESSEE FOR YEAR UNDER CONSIDERATION. A.3. LD.COUNSEL SUBMITTED THAT, TO CONSTITUTE AN I NCOME , ASSESSEE SHOULD HAVE ABSOLUTE COMMAND, CONTROL AND RIGHT OF DISPOSITION OF SUCH RECEIPTS. HE SUBMITTED THAT, IN THE PRESENT ITA NO.1545/BANG/2018 PAGE 17 OF 27 FACTS OF THE CASE, ASSESSEE HAS NO CONTROL OVER THE STOCK AND SALE PROCEEDS, AS SALE WAS CARRIED OUT BY MC THROUGH E A UCTION. HE SUBMITTED THAT, REVENUE FROM SALE OF DECLARED STOCK THEREFORE WAS UNCERTAIN. A.4. LD.COUNSEL THUS CONTENDED THAT, ASSESSEE HAD N OT ACQUIRE ANY RIGHT TO RECEIVE INCOME, IN AS MUCH AS, SUCH RI GHT WAS DEPENDENT ON MC DISBURSING SUCH PAYMENTS. HE THUS S UBMITTED THAT, SALE PROCEEDS THEREFORE, HAD NOT RECEIVED, OR EVEN DEEMED TO HAVE BEEN RECEIVED OR ACCRUED OR ARISEN, OR DEEMED TO HAVE ARISEN TO ASSESSEE. IT HAS BEEN CONTENDED BY LD.COUNSEL TH AT, NECESSARY REQUIREMENT UNDER SECTION 5 OF THE ACT, STANDS UNSA TISFIED FOR RECOGNISING SALE PROCEEDS DURING YEAR UNDER CONSIDE RATION. A.5. IN SUPPORT OF HIS CONTENTIONS HE PLACED RELIAN CE UPON FOLLOWING DECISIONS: ED.SASOON & CO LTD VS CIT REPORTED IN (1954) 26 ITR 27 (SC) CIT VS BALBIR SINGH MAINI REPORTED IN (2017) 398 ITR 531 (SC) CIT VS EXCEL INDUSTRIES LTD REPORTED IN (2013) 3 58 ITR 295 PRAKASHAN LEASING LTD VS DCIT REPORTED IN (2012) 208 TAXMANN 464 (KAR) A.6. LD.COUNSEL ALSO RELIED ON CBDT NOTIFICATION NO .9949 (F.NO.132/7/95-TPL)/SO 69(E), DATED 25/01/1996, SUP ERSEDED BY NOTIFICATION NO.32/2015 (F.N.134/48/ 2010-TPL)/S 0 892 (E), DATED 31/03/2015, REGARDING AS-I, RELATING TO DISCL OSURE OF ACCOUNTING POLICIES. A.7. LD.COUNSEL SUBMITTED THAT , DISCLOSURE STANDARDS APPLICABLE FOR COMPUTATION OF INCOME CHAR GEABLE TO TAX ARE TO BE CONSIDERED FOR RECOGNITION OF REVENUE, AR ISING DURING RELEVANT YEAR. HE SUBMITTED THAT, AS PER DISCLOSURE STANDARDS, REVENUE SHALL BE RECOGNISED WHEN THERE IS REASONABL E UNCERTAINTY OF ITS ULTIMATE COLLECTION. REFERRING TO AS 9, LD.C OUNSEL SUBMITTED THAT, RECOGNITION OF REVENUE REQUIRES THA T IT IS MEASURABLE, AND THAT AT THE TIME OF SALE OR RENDERI NG OF SERVICES, IT ITA NO.1545/BANG/2018 PAGE 18 OF 27 WOULD NOT BE UNREASONABLE TO EXPECT ULTIMATE COLLEC TION. HE RELIED ON AS-9, PARAGRAPH 9.1 AND 9.2, WHERE ABILIT Y TO ASSESS ULTIMATE COLLECTION WITH REASONABLE UNCERTAINTY IS LACKING AT THE TIME OF RAISING ANY CLAIM. HE THUS SUBMITTED THAT R EVENUE RECOGNITION IS TO BE POSTPONED TO THE EXTENT OF UNC ERTAINTY INVOLVED. IN SUCH CIRCUMSTANCES, IT WAS APPROPRIATE TO RECOGNISE SUCH REVENUE, ONLY WHEN IT IS REASONABLY CERTAIN TH AT ULTIMATE COLLECTION WILL BE MADE. HE REFERRED TO DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS WOODWARD GOVERNOR I NDIA PVT.LTD., REPORTED IN (2009) 312 ITR 254, WHEREIN, HONBLE COURT HELD THAT, PROFITS AND GAINS OF PREVIOUS YEAR ARE R EQUIRED TO BE COMPUTED IN ACCORDANCE WITH RELEVANT ACCOUNTING STA NDARD. REFERRING TO DECISION OF HONBLE SUPREME COURT IN C ASE OF JK INDUSTRIES LTD VS UOI, REPORTED IN (2008) 297 ITR 1 76, LD.COUNSEL SUBMITTED THAT, RULES BY WHICH INVENTORI ES ARE TO BE VALUED ARE LAID DOWN IN ACCOUNTING STANDARDS , AND ARE TO BE FOLLOWED IN DETERMINATION OF ACCOUNTING INCOME MAND ATORILY. HE SUBMITTED THAT HONBLE COURT ALSO HELD THAT; 8. FINALLY, ADOPTION OF ACCOUNTING STANDARDS AND O F ACCOUNTING INCOME AS TAXABLE INCOME WOULD AVOID DISTORTION OF ACCOUNTING INCOME WHICH IS THE REAL I NCOME. A.8. HE THUS SUBMITTED THAT IT IS THEREFORE APPROPR IATE TO RECOGNISE REVENUE ONLY WHEN THERE IS A REASONABLE CERTAINTY, THAT, ULTIMATE REALISATION WILL BE MADE. LD.COUNSEL SUBMITTED THAT, THERE IS NO DENIAL BY AUTHORITIES BELOW THAT SALE PROCEEDS WERE RECEIVED BY ASSESSEE IN SUBSEQUENT FINANCIAL YEARS I.E; FINANCI AL YEAR 2013-14 TO 2015-16, HAS BEEN OFFERED TO TAX BY ASSE SSEE. LD.COUNSEL ALSO SUBMITTED THAT, ASSESSEE RECEIVED FOLLOWING AMOUNT IN SUBSEQUENT FINANCIAL YEARS WHIC H HAS BEEN OFFERED TO TAX AS AND WHEN THEY WERE RECEIVED: ITA NO.1545/BANG/2018 PAGE 19 OF 27 A.9. LD.COUNSEL SUBMITTED THAT, ENTIRE AMOUNT OF RS.38,59,72,840/- INCLUDES RS.25,59,99,429/-BEING S ALE PROCEEDS FROM DECLARED STOCK CONSIDERED BY LD.AO AS INCOME O F ASSESSEE FOR YEAR UNDER CONSIDERATION. TAKING SUPPORT FROM A SSESSMENT ORDER, REFERRING TO PARA 4.1.B.,LD.COUNSEL SUBMITTE D THAT, LD.AO HIMSELF RECORDS THAT, SUM OF RS.25,59,99,429/- RECE IVED IN SUBSEQUENT ASSESSMENT YEARS BEING ASSESSMENT YEARS 2014-15 AND 2015-16, WAS OFFERED TO TAX, DURING RELEVANT ASSESS MENT YEAR. HE SUBMITTED THAT HAVING NOTED THE FACT THAT REVENUE R ECEIVED FROM DECLARED STOCK HAS BEEN OFFERED TO TAX IN SUBSEQUEN T YEARS, MAKING ADDITION DURING THE YEAR UNDER CONSIDERATION WOULD AMOUNT TO DOUBLE TAXATION IN THE HANDS OF ASSESSEE. IT HAS BEEN SUBMITTED BY LD.COUNSEL THAT, RIGHT TO RECEIVE SALE PROCEEDS, ACCRUED TO ASSESSEE BY VIRTUE OF DIRECTIONS OF HON BLE SUPREME COURT BY ORDER DATED 18/04/2013 (SUPRA), WHICH WAS IN SUCCEEDING FINANCIAL YEAR, RELEVANT TO YEAR UNDER C ONSIDERATION, AND HAS ALSO BEEN OFFERED TO TAX ON RECEIPT BASIS. A.10. ALTERNATIVELY, LD.COUNSEL SUBMITTED THAT, ENTIRE EX ERCISE IS REVENUE NEUTRAL AS ASSESSEE IS ASSESSED AT UNIFORM RATE OF TAX OVER THE YEARS. A.10.1 LD.COUNSEL SUBMITTED THAT, PRINCIPLE OF MATC HING BETWEEN REVENUE RECEIPT AND EXPENDITURE TO BE INCURRED IS T O BE APPLIED. REFERENCE WAS MADE TO DECISION OF HONBLE SUPREME C OURT IN CIT VS. BILAHARI INVESTMENT (P) LTD. REPORTED IN (2 008) 299 ITR 1, WHEREIN REFERRING TO CONCEPT OF MATCHING HONBLE COURT OBSERVED THAT: 82. MATCHING CONCEPT IS BASED ON THE ACCOUNTING PE RIOD CONCEPT. THE PARAMOUNT OBJECT OF RUNNING A BUSINESS IS TO EARN PROFIT. IN ORDER TO ASCERTAIN THE PROFIT MADE BY THE BUSINESS DURING A PERIOD, IT IS NECESSARY THAT REV ENUES OF THE PERIOD SHOULD BE MATCHED WITH THE COSTS (EXPENS ES) OF THAT PERIOD. IN OTHER WORDS, INCOME MADE BY THE BUS INESS DURING A PERIOD CAN BE MEASURED ONLY WITH THE REVEN UE EARNED DURING A PERIOD IS COMPARED WITH THE EXPENDI TURE INCURRED FOR EARNING THAT REVENUE. HOWEVER, IN CASE S OF MERGERS AND ACQUISITIONS, COMPANIES SOMETIMES UNDERTAKE TO DEFER REVENUE EXPENDITURE OVER FUTURE YEARS WHICH BRINGS IN THE CONCEPT OF DEFERRED TAX ACCOUNT ING. THEREFORE, TODAY IT CANNOT BE SAID THAT THE CONCEPT OF ACCRUAL IS LIMITED TO ONE YEAR. ITA NO.1545/BANG/2018 PAGE 20 OF 27 83. IT IS A PRINCIPLE OF RECOGNIZING COSTS (EXPENSE S) AGAINST REVENUES OR AGAINST THE RELEVANT TIME PERIOD IN ORD ER TO DETERMINE THE PERIODIC INCOME. THIS PRINCIPLE IS AN IMPORTANT COMPONENT OF ACCRUAL BASIS OF ACCOUNTING. AS STATED ABOVE, THE OBJECT OF AS 22 IS TO RECONCILE T HE MATCHING PRINCIPLE WITH THE FAIR VALUATION PRINCIPL ES. IT MAY BE NOTED THAT RECOGNITION, MEASUREMENT AND DISCLOSURE OF VARIOUS ITEMS OF INCOME, EXPENSES, AS SETS AND LIABILITIES IS DONE ONLY BY ACCOUNTING STANDARD S AND NOT BY PROVISIONS OF THE COMPANIES ACT. A.10.2 LD.COUNSEL SUBMITTED THAT, LD.AO IN SUBSEQUE NT YEAR HAS NOT UNDONE LEVY OF TAX OF SUCH SALE PROCEEDS. IT WA S ALSO BEEN SUBMITTED THAT ENTIRE EXERCISE IS REVENUE NEUTRAL A S APPLICABLE RATE OF TAX REMAIN THE SAME IN THE RELEVANT YEAR AND THE SUBSEQUENT YEARS. A.11. ON THE CONTRARY, LD.CIT.DR SUBMITTED THAT, AS SESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. HE SUBMITT ED THAT AS PER MERCANTILE SYSTEM, INCOME ACCRUED TO ASSESSEE I N THE YEAR OF SALE. HE SUBMITTED THAT RIGHT TO RECEIVE SALE PROCE EDS, ACCRUED TO ASSESSEE BY VIRTUE OF DIRECTIONS OF HONBLE SUPREME COURT IN CASE OF SAMAJ PARIVARTANA SAMUDAYA VS STATE OF KARNATAKA , (SUPRA), THOUGH SUBSEQUENTLY RECEIVED. HE SUBMITTED THAT, AM OUNT TO BE DISBURSED BY MC WAS ASCERTAINED DURING RELEVANT YEA R, BEING 80% OF TOTAL SALE PROCEEDS. LD.COUNSEL FURTHER SUBM ITTED THAT, ASSESSEE CLAIMED RS.50,24,48,441/- AS EXPENDITURE B EING TOTAL OF DECLARED AND UNDECLARED STOCK IN IBM RETURNS, WHICH IN ANY EVENT ASSESSEE COULD NOT DO, HAD THE SALE NOT TAKEN PLACE . HE SUBMITTED THAT, SALE OF STOCK WAS EFFECTUATED DURING THE YEAR UNDER CONSIDERATION, AND ENTIRE SALE PROCEEDS WERE RECEIV ED BY MC DURING FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR U NDER CONSIDERATION. LD.CIT.DR SUBMITTED THAT, ASSESSEE H AD GIVEN UNDERTAKING FOR DEDUCTING ROYALTY AND OTHER EXPENSE S PAYABLE TO MC FROM SUCH SALE PROCEEDS AND THE NET AMOUNT THAT WAS PAYABLE TO ASSESSEE BY MC, WHICH WAS VERY WELL ASCERTAINABL E DURING FINANCIAL YEAR RELEVANT TO YEAR UNDER CONSIDERATION . HE THUS SUBMITTED THAT, ASSESSEE WAS WELL WITHIN THE KNOWLE DGE OF AMOUNT THAT ACCRUED FROM SALE OF STOCK. LD.CIT.DR T HUS SUBMITTED THAT, ASSESSEE WAS REQUIRED TO REFLECT TH ESE SALES AS TRADING RECEIPTS IN THE BOOKS OF ACCOUNT IN VIEW OF MERCANTILE SYSTEM CONSISTENTLY FOLLOWED FOR DISCLOSING INCOME. REFERRING TO ITA NO.1545/BANG/2018 PAGE 21 OF 27 OBSERVATIONS OF LD.AO IN PARA 4.1.D TO 4.1.F, LD.CI T.DR SUBMITTED THAT, AUCTION OF DECLARED STOCK TOOK PLAC E DURING THE YEAR UNDER CONSIDERATION, AND ASSESSEE HAD RIGHT TO RECEIVE 80% OF TOTAL SALE PROCEEDS AS ON THE DATE OF SALE BY VI RTUE OF DIRECTIONS OF HONBLE SUPREME COURT IN CASE OF SAMAJ PARIVARTA NA SAMUDAYA VS STATE OF KARNATAKA, (SUPRA). MERELY BEC AUSE MC DISBURSED PAYMENTS IN SUBSEQUENT FINANCIAL YEAR, WO ULD NOT POSTPONE REVENUE RECOGNITION IN THE HANDS OF ASSESS EE TO SUBSEQUENT YEARS. HE VEHEMENTLY OPPOSED ARGUMENT OF LD.COUNSEL THAT, INCOME RECEIVED BY ASSESSEE WAS UN - ASCERTAINABLE AND HYPOTHETICAL. LD.CIT.DR SUBMITTED THAT, ACCRUAL OF INCOME MUST BE JUDGED ON PRINCIPLE OF R EAL INCOME THEORY, AND THAT, WHAT IS NECESSARY TO BE CONSIDER ED IS THE TRUE NATURE OF TRANSACTION. LD.CIT.DR SUBMITTED THAT, WH AT HAS REALLY ACCRUED TO ASSESSEE HAS TO BE FOUND OUT AND WHAT HA S ACCRUED MUST BE CONSIDERED FROM THE POINT OF VIEW OF REAL I NCOME, TAKING THE PROBABILITY OR IMPROBABILITY OF REALISATION IN A REALISTIC MANNER. HE ALSO SUBMITTED THAT, MERELY BECAUSE RECE IPT TAKES PLACE OF SUCH ACCRUED INCOME BY CONDUCT OF PARTIES IN SUBSEQUENT YEAR, INCOME WHICH HAS ACCRUED FOR YEAR UNDER CONSI DERATION, CANNOT BE MADE AS NO INCOME. A.12. LD.CIT.DR EMPHASISED THAT, ADMITTEDLY, IN SUB SEQUENT YEARS, ASSESSEE RECEIVED 80% OF TOTAL SALE PROCEEDS FROM E AUCTION CARRIED OUT BY MC. IT HAS BEEN CONTENDED TH AT INCOME HAS ARISEN/ACCRUED TO ASSESSEE DURING THE YEAR UNDER CO NSIDERATION, AND THEREFORE HAS BEEN RIGHTLY TAXED IN THE HANDS O F ASSESSEE FOR YEAR UNDER CONSIDERATION. A.13. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE ALSO HAVE PER USED VARIOUS DECISIONS RELIED UPON BY LD.COUNSEL REFERRED TO HER EIN ABOVE, AS WELL AS IN THE PAPER BOOK FILED BEFORE. A.13.1. THE ISSUE THAT ARISES BEFORE US, IS IN RESP ECT OF ACCRUAL OF SALE PROCEEDS FROM DECLARED STOCK, DURING THE YEAR UNDER CONSIDERATION. FOLLOWING IS THE SUMMARY OF WHAT HAS BEEN PROPOSED BY LD.COUNSEL. A.13.2. LD.COUNSEL OPPOSED FOR TREATMENT OF SALE PR OCEEDS FROM DISCLOSED STOCK AS INCOME IN THE HANDS OF ASSESSEE FOR YEAR UNDER CONSIDERATION ON THE GROUND THAT, IT NEVER HAD THE RIGHT TO ITA NO.1545/BANG/2018 PAGE 22 OF 27 ACCRUE, DUE TO UNCERTAINTY OF THE AMOUNT. IT WAS C ONTENDED THAT IN VIEW OF UNCERTAINTY, ASSESSEE NEED NOT ACCOUNT F OR THE SAME EVEN UNDER MERCANTILE SYSTEM OF ACCOUNTING. IT WAS SUBMITTED THAT SALES REVENUE ACCRUED TO ASSESSEE ONLY IN THE YEAR IN WHICH PAYMENT ADVICE WAS ISSUED BY MC. A.13.3. INCOME TAX IS A LEVY ON INCOME. IT TAKES IN TO ACCOUNT THE POINT OF TIME AT WHICH LIABILITY TO TAX IS ATTRACTE D, I.E; ACCRUAL OF INCOME OR ITS RECEIPT. HONBLE SUPREME COURT IN CAS E OF CIT VS SHOORJI VALLABHDAS & CO REPORTED IN (1962) 46 ITR 1 44 HELD THAT: . IF INCOME DOES NOT RESULT AT ALL, THERE CANN OT BE A TAX, EVEN THOUGH IN BOOK KEEPING AND ENTRIES MADE A BOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MATERIALISE . WHERE INCOME HAS, IN FACT, BEEN RECEIVED AND SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GI VEN UP, THE TAX MAY BE PAYABLE. WHERE, HOWEVER THE INCO ME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS O BVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF THE INCOME, EVEN THO UGH AN ENTRY TO THAT EFFECT MIGHT, IN CERTAIN CIRCUMSTANCE S, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. A.13.4. IN CIT VS KERALA STATE DRUGS & PHARMACEUTIC ALS LTD., REPORTED IN (1991) 192 ITR 1, HONBLE KERALA HIGH C OURT OBSERVED AND HELD AS UNDER: IN ORDER TO TAX ON INCOME, ONE HAS TO SEE WHETHER IT IS THE REAL INCOME OR WHETHER THE INCOME HAS MATERIALISED. WHAT IS NECESSARY TO BE CONSIDERED IS THE TRUE NATURE OF THE TRANSACTION AND WHETHER IN FACT THE TRANSACTION HAS RESULTED IN PROFIT OR LOSS TO THE ASSESSEE. ONCE AC CRUAL TAKES PLACE AND INCOME ACCRUES, THE SAME CANNOT BE DEFEATED. EVEN UNDER THE MERCANTILE SYSTEM OF ACCOU NTING, IT IS ONLY THE ACCRUAL OF REAL INCOME WHICH IS CHAR GEABLE TO TAX. THE INCOME SHOULD NOT BE HYPOTHETICAL INCOME, BUT REAL INCOME. IF INCOME IS GIVEN UP UNILATERALLY BY THE ASSESSEE AFTER IT HAD ACCRUED, IT COULD NOT ESCAPE LIABILITY TO TAX. WHEN INCOME IS IN FACT RECEIVED BUT SUBSEQU ENTLY GIVEN UP IT REMAINS THE INCOME OF THE RECIPIENT AND TAXES PAYABLE. WHEN INCOME IS NOT RESULTED AT ALL, THERE IS NEITHER ACCRUAL NOR RECEIPT OF INCOME EVEN IF THERE IS AN ENTRY TO THAT EFFECT IN THE BOOKS OF ACCOUNT. MERE ITA NO.1545/BANG/2018 PAGE 23 OF 27 POSTPONING OF AN ENTRY IN THE ACCOUNT BOOKS WOULD N OT ALWAYS SUPPLY CONCLUSIVE EVIDENCE ON THE QUESTION WHETHER THE DISPUTED AMOUNT HAS ACCRUED TO THE ASSE SSEE OR NOT. MERE EFFORT ON THE PART OF THE ASSESSEE TO REALISE THE AMOUNT BY SENDING A BILL OR MAKING A CLAIM OR F ILING A SUIT FOR RECOVERY WOULD NOT IN LAW MAKE IT AN INCOM E WHICH HAS ACCRUED IN THE YEAR IN QUESTION. THE TRAN SFER OF THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT IS BEREFT OF ANY SIGNIFICANCE. A.13.5. WE ALSO REFER TO DECISION BY HONBLE BOMBAY HIGH COURT ON CONCEPT OF REAL INCOME, EMPHASISED IN CASE OF KA SHIPAREKH AND CO LTD (HM) VS. CIT, REPORTED IN (1960) 39 ITR 706. HONBLE COURT HELD THAT, SURRENDER OF INCOME EVEN A FTER CLOSURE OF ACCOUNTING YEAR MAY MAKE NO DIFFERENCE TO THE CO NCEPT OF REAL INCOME. HONBLE BOMBAY HIGH COURT, RELIED ON VIEW E XPRESSED BY HONBLE SUPREME COURT IN CASE OF CIT VS BIRLA GW ALIOR (P) LTD REPORTED IN (1973) 89 ITR 266 AS UNDER: THE PRINCIPLE OF REAL INCOME IS NOT TO BE SUBORDIN ATED AS TO AMOUNT VIRTUALLY TO A NEGATION OF IT WHEN A SURR ENDER OR CONCESSION OR REBATE IN RESPECT OF MANAGING AGENCY COMMISSION IS MADE, AGREED TO OR GIVEN ON GROUNDS O F COMMERCIAL EXPEDIENCY, SIMPLY BECAUSE IT TAKES PLAC E SOMETIME AFTER THE CLOSE OF AN ACCOUNTING YEAR. IN EXAMINING ANY TRANSACTION AND SITUATION OF THIS NAT URE THE COURT WOULD HAVE MORE REGARD TO THE REALITY AND SPE CIALITY OF THE SITUATION RATHER THAN THE PURELY THEORETICAL OR DOCTRINAIRE ASPECT OF IT. IT WILL LAY GREATER EMPHA SIS ON THE BUSINESS ASPECT OF THE MATTER VIEWED AS A WHOLE WHE N THAT CAN BE DONE WITHOUT DISK REGARDING STATUTORY LANGUA GE. FROM THE ABOVE RATIOS LAID DOWN BY HONBLE SUPREME COURT AND MANY HIGH COURTS, IT COULD BE CONSTRUED T HAT, ACCRUAL OF INCOME MUST BE JUDGED, DEPENDING FACTS A ND CIRCUMSTANCES OF EACH CASE. A.13.6. IT HAS BEEN VEHEMENTLY CONTENDED BY LD.COUN SEL THAT, ASSESSEE DID NOT HAVE RIGHT TO ACCRUE SUCH INCOME, SINCE ITS RECEIPT WAS HYPOTHETICAL IN THE YEAR OF SALE. AND, THOUGH ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, IT HAD TO POSTPONED ITS ACCRUAL TO SUBSEQUENT YEARS, WHEN SALE PROCEED WERE ACTUALLY RECEIVED. IT WAS SUBMITTED BY ASSESSEE THAT, INCOME DID NOT MATERIALISE DURING THE YEAR UNDER CONSIDERATION. IT WAS CONTENDED THAT IN VIEW OF UNCERTAINTY, ASSESSEE NEED NOT ACCO UNT FOR THE ITA NO.1545/BANG/2018 PAGE 24 OF 27 SAME EVEN UNDER MERCANTILE SYSTEM OF ACCOUNTING. IT WAS SUBMITTED THAT SALES REVENUE ACCRUED TO ASSESSEE ON LY IN THE YEAR IN WHICH PAYMENT ADVICE WAS ISSUED BY MC. A.13.7. THE PRESENT FACTS OF THE CASE, WE NOTE THAT , TOTAL SALE PROCEEDS AS ON THE DATE OF SALE BY VIRTUE OF DIRECT IONS OF HONBLE SUPREME COURT IN CASE OF SAMAJ PARIVARTANA SAMUDAYA VS STATE OF KARNATAKA, (SUPRA) APPROVED SALE OF IRON ORE THR OUGH E-AUCTION CONDUCTED BY MC. IT IS ALSO OBSERVED THAT HONBLE C OURT DIRECTED THAT, THE QUANTITY TO BE PUT FOR E-AUCTION, ITS GRA DE, LOT SIZES, ITS BASE/FLOW PRICE AND THE PERIOD OF DELIVERY WOULD BE DECIDED/PROVIDED BY THE RESPECTIVE LEASEHOLDERS. IT IS ALSO NOTED THAT, MC MAY PERMIT THE LEASEHOLDERS TO PUT UP FOR E-AUCTION THE QUANTITIES OF IRON ORE PLANNED TO BE PRODUCED IN SU BSEQUENT MONTHS. HENCE, WE CANNOT AGREE THAT, ASSESSEE WAS U NAWARE REGARDING TOTAL QUANTITY OF IRON ORE SOLD AND TOTAL SALE PROCEEDS RECEIVED TOWARDS TOTAL QUANTITIES SOLD DURING THE Y EAR. A.13.8. ON PERUSAL OF DOCUMENTS PLACED ON RECORD, W E ARE OF THE VIEW THAT, ASSESSEE WAS AWARE OF TOTAL QUANTITY OF IRON ORE SOLD AND DISPATCHED, TOTAL SALE PROCEEDS RECEIVED TOWARD S TOTAL QUANTITY SOLD DURING THE YEAR AND VALUE OF STOCK TH AT WAS NOT CONSIDERED FOR RELEASE. THIS IS EVIDENT FROM PAGE 1 78, 180-181 OF PAPER BOOK, WHEREIN, DATE OF SALE, FOR BOTH MINING LEASES AND AMOUNT REALISED ARE PLACED. UNDER SUCH CIRCUMSTANCE S, ASSESSEE CANNOT ESCAPE FROM INCIDENT OF ACCRUAL OF SUCH INCO ME DURING FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CO NSIDERATION. A.13.9. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT, DECLARED STOCK BELONGS TO ASSESSEE AND ASSESSEE HAS TO RECOG NISE REVENUE ARISING ON SALE OF SUCH STOCK. WE HAVE ALREADY NOTE D THAT THE ROLE OF MC WAS TO CARRY OUT THE E-AUCTION OF THE STOCK A ND SELL THE STOCK ON BEHALF OF ASSESSEE AS PER THE DIRECTIONS O F TOTAL SALE PROCEEDS AS ON THE DATE OF SALE BY VIRTUE OF DIRECT IONS OF HONBLE SUPREME COURT IN CASE OF SAMAJ PARIVARTANA SAMUDAYA VS STATE OF KARNATAKA, (SUPRA). THEREFORE, THE RISK IN SUCH STOCK STOOD TRANSFERRED FROM ASSESSEE TO THE BUYER AS ON THE DA TE OF SALE. FURTHER, ASSESSEE WAS VESTED WITH LEGAL RIGHT TO RE CEIVE SALE PROCEEDS FROM STOCKS SOLD BY MC. THEREFORE, INCOME BECAME DUE TO ASSESSEE AS ON DATE OF SALE OF STOCK, AND IT BEC AME DUE TO ASSESSEE, WHEN SALE PROCEEDS WERE RECEIVED BY MC. W E ALSO NOTE THAT UNDER VAT, THE SALES HAVE BEEN RECOGNISED FOR YEAR UNDER ITA NO.1545/BANG/2018 PAGE 25 OF 27 CONSIDERATION BY ASSESSEE WHICH FURTHER STRENGTHENS OUR VIEW. IN OUR OPINION, UNDER SUCH CIRCUMSTANCES, DATE OF PAYM ENT DOES NOT AFFECT ACCRUAL OF INCOME. A.13.10. IN SUPPORT, WE REFER TO DECISION OF HONBL E SUPREME COURT IN CASE OF CIT VS EXCEL INDUSTRIES LTD (SUPRA ) . HONBLE COURT WHILE DECIDING THE CASE REFERRED TO ITS COORD INATE BENCH DECISION IN CASE OF MORVI INDUSTRIES LTD VS CIT REP ORTED IN (1971) 82 ITR 835. IT WAS OBSERVED THAT INCOME CAN BE SAID TO ACCRUE, THE MOMENT IT BECOMES DUE. IT WAS FURTHER H ELD THAT DATE OF PAYMENT DOES NOT AFFECT THE ACCRUAL OF INCOME. T HE MOMENT INCOME ACCRUES, ASSESSEE GETS VESTED WITH THE RIGHT TO CLAIM IT, EVEN THOUGH IT MAY NOT BE MADE IMMEDIATELY. HENCE, RECEIPT OF THE SALE CONSIDERATION ON A LATER DATE WOULD NOT PO STPONE THE ACCRUAL OF INCOME. UNDER SALE OF GOODS ACT, 1930, A KEY CRITERION FOR DETERMINING WHEN TO RECOGNISE REVENUE FROM A TRANSACTION INVOLVING THE SALE OF GOODS IS THAT THE SELLER HAS TRANSFERRED THE PROPERTY IN THE GOODS TO THE BUYER FOR A CONSIDERATION. THE TRANSFER OF PROPERTY IN GOODS, I N MOST CASES, RESULTS IN OR COINCIDES WITH THE TRANSFER OF SIGNIF ICANT RISKS AND REWARDS OF OWNERSHIP TO THE BUYER. ALSO AS PER ICDS -IV RELATING TO REVENUE RECOGNITION, SALE IS COMPLETED WHEN PROP ERTY IN THE GOODS TRANSFERRED FROM THE BUYER TO THE SELLER FOR A PRICE AND FURTHER THE SELLER RETAINS NO EFFECTIVE CONTROL OF THE GOODS SO TRANSFERRED. IN PRESENT FACTS, IRON ORE STOOD TRANS FERRED TO THE BUYERS AS ON THE DATE OF SALE THROUGH E AUCTION BY MC. WE NOTE THAT ASSESSEE WAS AWARE ABOUT THE AMOUNT TO BE RECE IVED AS SALE CONSIDERATION AND THE DETAILS REGARDING DEDUCTION I S TOWARDS SPV AS PER THE DIRECTIONS OF HONBLE SUPREME COURT. A.13.11. WE THEREFORE DO NOT FIND ANY FORCE IN THE SUBMISSIONS MADE BY LD.COUNSEL THAT THERE IS NO NECESSITY TO AS SESS THE IMPUGNED SALE PROCEEDS DURING THE YEAR SINCE IT HAS BEEN ALREADY OFFERED TO TAX IN SUBSEQUENT ASSESSMENT YEAR AND TH E EXERCISE IS TAX NEUTRAL. UNDER INCOME TAX ACT, TOTAL INCOME OF EACH YEAR IS TO BE DETERMINED SEPARATELY AND HENCE INCOME HAS TO BE ASSESSED IN THE RIGHT ASSESSMENT YEAR. CONSIDERING TOTALITY OF FACTS IN THE PRESENT CASE, WE ARE OF THE VIEW THAT, SALE PROCEED S OF ASSESSEES STOCK ACCRUED TO ASSESSEE DURING FINANCIAL YEAR REL EVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. BASED ON ABOVE DISCUSSIONS AND OBSERVATIONS, IN OUR VIEW, WE ARE OF OPINION TH AT, SALE ITA NO.1545/BANG/2018 PAGE 26 OF 27 PROCEEDS FROM DISCLOSED STOCK ACCRUED TO ASSESSEE D URING THE YEAR UNDER CONSIDERATION AND HAS TO BE CONSIDERED FOR DE TERMINING INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSIN ESS FOR YEAR UNDER CONSIDERATION. WE HAVE ALREADY NOTED THAT ASSESSEE HAS OFFERED THE ABOVE SALE CONSIDERATION ON SUBSEQUENT ASSESSMENT YEARS, AND I NCOME TAX ACT DOES NOT PERMIT TO ASSESS SAME INCOME TWICE. HENCE IN OUR VIEW ASSESSEE MAY MOVE APPROPRIATE PETITION BEFORE THE A UTHORITIES BELOW FOR EXCLUSION OF ABOVE SALE PROCEEDS FROM DEC LARED STOCK IN THE RELEVANT ASSESSMENT YEAR. LD.AO IS DIRECTED TO CONSIDER SUCH APPLICATION LIBERALLY BY GRANTING PROPER OPPOR TUNITY OF BEING HEARD TO ASSESSEE. 9. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, IT I S VERY NECESSARY TO EXAMINE, WHETHER THE QUANTITY OF GOODS SOLD WAS IDE NTIFIED ON THE DATE OF E-AUCTION, AND WHETHER SALE PROCEEDS TO BE RECEIVED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION ARE QUANTIFIED BY THE M.C. IF THESE TWO INGREDIENTS WERE VERIFIABLE ON THE DATE OF E-AU CTION, THEN ONLY THE ASSESSEE IS REQUIRED TO RECOGNIZE THE INCOME AS DEE MED INCOME ACCRUED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. OTHERW ISE, THE ASSESSEE IS NOT REQUIRED TO RECOGNIZE INCOME IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CIT(APPEALS) HAS NOT EXAMINED T HESE TWO INGREDIENTS. WITH THESE OBSERVATIONS, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER TO EXAMINE THESE TWO INGREDIENTS AND DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE ORDER OF THE TRIBUNAL. ITA NO.1545/BANG/2018 PAGE 27 OF 27 10. IN THE RESULT, THE REVENUES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF OCTOBER, 2021. SD/- SD/- ( GEORGE GEORGE K. ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTAN T MEMBER BANGALORE, DATED, THE 5 TH OCTOBER, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.