M/s. Kalinga Mining Corporation Pvt. Ltd., Cuttack V. Principal CIT, Cuttack Charge, Cuttack

ITA 168/CTK/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7861 (ITAT-CUTTACK)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 03-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J K LENKA
• Assessee Lawyers: P K JESTHI
• Keywords: Cost of acquisition; Assessment record; Set aside
• Section: 201; 263

Judgement Text

P A G E 1 | 7 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 168 /CTK/201 9 ASSESSMENT YEAR : 201 4 - 15 M/S. KALINGA MINING CORPORATION PVT LTD., SAMANTA NIWAS, SHAIKH BAZAR, CUTTACK VS. PR. CIT, CUTTACK PAN/GIR NO. AAKCK 6971 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.JESTHI , AR REVENUE BY : SHRI J.K.LENKA , DR DATE OF HEARING : 06 / 12 / 20 19 DATE OF PRONOUNCEMENT : 28 / 01 /20 20 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PR. CIT(A ), CUTTACK UNDER SECTION 263 OF THE I.T.ACT, 1961 FOR THE ASSESSMENT YEAR 2014 - 15. 2. IN THE GROUNDS OF APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT LD PR. CIT, CUTTACK IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY DERIVING IN COME FROM IRON ORE MINING IN THE DISTRICT OF KEONJHAR OF ODISHA. IT FILED THE RETURN OF INCOME ON 29.9.2014 DISCLOSING INCOME AT RS.90,63,19,010/ - AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.131,42,28,620/ - ON 29.12.2016. THEREAFTER, THE LD. PR. CIT BY EXERCISING HIS POWER VESTED UNDER SECTION 263(1) OF THE ACT CALLED FOR THE ASSESSMENT RECORDS AND SCRUTINIZED THE SAME. ON VERIFICATION, HE ITA NO.168/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 2 | 7 FOUND THAT IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31 ST MAR CH, 2014, THE ASSESSEE HAS CREDITED RS.167,58,34,770/ - UNDER THE HEAD REVENUE FROM OPERATIONS (GROSS) I.E. (GROSS SALE OF RS.196,76,82,602 LESS ROYALTY OF RS.29,18,47,831). THE LD PR. CIT GATHERED FROM FORM H1 PRESCRIBED TO INDIAN BUREAU OF MINES THA T THE ASSESSEE HAD EFFECTED TOTAL SALE OF 940,788.270 (MT) OF IRON ORE FOR A SUM OF RS.202,42,11,422/ - AND AS SUCH GROSS REVENUE FROM OPERATION HAS BEEN WORKED OUT TO RS.173,23, 63,591 I.E. (GROSS SALE OF RS.202,42,11,422 LESS ROYALTY OF RS.29,18,47,831 ). FROM THE ABOVE, PR. CIT WAS OPINED THAT THE ASSESSEE COMPANY HAD UNDERSTATED ITS REVENUE FROM OPERATIONS TO THE EXTENT OF RS.5,65,28,821 (RS.173,23,63,591 RS.167,58,34,770). HENCE, AN AMOUNT OF RS.5,65,28,821/ - WAS REQUIRED TO BE ADDED TO THE TOTAL I NCOME OF THE ASSESSEE BUT THE AO HAS FAILED TO BRING SUCH UNDISCLOSED RECEIPTS TO TAX, THEREBY, PRIMA FACIE RENDERING HIS ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. THE PR. CIT ALSO NOTED THAT THE ASSESSEE WAS SHOWING IDENTICAL AMOU NT OF RS.5,69,13,648/ - TOWARDS BOTH THE OPENING STOCK AS ON 1.4.2013 AND CLOSING STOCK AS ON 31.3.2014 IN ITS PROFIT AND LOSS ACCOUNT. HOWEVER, AS PER FORM, H1 SUBMITTED BY THE ASSESSEE BEFORE THE IBM, THE STOCK OF IRON ORE STOOD AT 1,97,441 MT AS ON 1.4. 2013 AND 4,18,372 MT AS ON 31.3.2014. HENCE, THE ASSESSEE HAS CONCEALED 4,18,372 MTS BUT NOT VALUING ITS CLOSING STOCK, WHICH RENDERED THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE PR. CIT BY EXERCISING HIS POWERS U/S.263 OF THE ACT SET ASIDE THE ASSESSMENT ORDER DATED 29.12.2016 FOR EXAMINING THE ABOVE TWO ISSUES AFRESH AND REFRAME THE ASSESSMENT ORDER IN ACCORDANCE WITH LAW. ITA NO.168/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 3 | 7 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIN D THAT THE PR. C.I.T. HAS INVOKED HIS POWERS U/S. 263 MAINLY ON THE GROUND THAT THE A.O. DID NOT MAKE THE REQUISITE ENQUIRY WITH REGARD TO UNDISCLOSED RECEIPTS OF RS.5,65,28,821/ - AND VALUE THE OPENING STOCK AND CLOSING STOCK OF IRON ORE AND DUMP WORKINGS. 6. AT THE TIME OF HEARING BEFORE US, LD D.R. CONTENDED THAT THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE GROUND THAT THE A.O. FAILED TO MAKE THE ENQUIRY WHICH WAS WARRANTED ON THE FACTS OF THE CASE. 7. IN TH E CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [99 ITR 375], THE HONBLE DELHI HIGH COURT HELD AS UNDER : - IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELING THE ASSESSMENT ORDER OF THE INCOME - TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME - TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. THE POSITION AND F UNCTION OF THE INCOME - TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEMENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIM PLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME - TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FU RTHER INQUIRY. IT IS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHICH THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME - TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN TH E RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING W RONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. ITA NO.168/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 4 | 7 SIMILAR VIEW WAS REITERATED BY THEIR LORODSHIPS OF HONBLE DELHI HIGH COURT IN THE CASE OF DUGGAL & CO. VS. CIT [220 ITR 456]. 8 . IN THE CASE OF TARAJAN TEA CO. PVT. LTD. VS. CIT [205 ITR 45], THE HONBLE GAUHATI HIGH COURT HELD AS UNDER : - THAT IT WAS NOT QUITE CERTAIN WHETHER THE TRESS SOLD IN TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR WERE TREES STANDING AT THE TIME OF ACQUISITION OR TREES WHICH GREW ON ROOTS AND TRUNK EXISTING ON THE DATE OF ACQUISITION OR ON ROOTS AND TRUNKS OF TREES EXISTING AT THE TIME OF ACQUISITION AND CUT SUBSEQUENT LY. THIS WAS A MATTER WHICH HAD TO BE INVESTIGATED BY THE INCOME - TAX OFFICER AFTER CALLING UPON THE ASSESSEE TO FURNISH RELEVANT DATA. THE INSPECTING ASSISTANT COMMISSIONER HAD NO SUCH DATA BEFORE HIM IN ORDER TO ENABLE HIM TO CONCLUDE THAT THERE WAS NO COST OF ACQUISITION. IT WAS ALSO TO BE CONSIDERED WHETHER THE SPONTANEOUS GROWTH REQUIRED ANY CARE OR ATTENTION BY WAY OF PROTECTION FROM ANIMALS AND THE LIKE AND, IF SO, WHETHER THE ASSESSEE DID NOT INCUR ANY COST IN THAT REGARD. ANY DECISION EITHER WAY WITHOUT CONSIDERING THESE ASPECTS WOULD CERTAINLY BE ERRONEOUS AND ANY DECISION IN FAVOUR OF THE ASSESSEE WITHOUT CONSIDERING THESE ASPECTS WOULD BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX AND THE O RDER PASSED BY THE TRIBUNAL SUSTAINING THE SAME AS A WHOLE WERE VALID. 9. IN THE CASE OF ADDL. CIT VS. MUKUR CORPORATION [111 ITR 312], HONBLE GUJARAT HIGH COURT HELD AS UNDER : - THAT THE WORDS PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN SECTI ON 263 HAVE NOT BEEN DEFINED BUT THEY MUST MEAN THAT THE ORDERS OF ASSESSMENT CHALLENGED ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZED. IN THE PRESENT CAS E, IT WAS OBVIOUS THAT THE INCOME - TAX OFFICER HAD COMMITTED AN ERROR IN NOT MAKING ENQUIRY INTO THE DETAILS AS REGARDS BOTH THE DEDUCTIONS AND ALSO THAT WANT OF SUCH ENQUIRY HAD RESULTED IN PREJUDICE TO THE INTERESTS OF THE REVENUE. TO THIS EXTENT, THE IN ITIATION OF ACTION UNDER SECTION 263 BY THE COMMISSIONER WAS QUITE PROPER. 10. IN THE CASE OF CIT VS. SOUTH INDIA SHIPPING CORPN. LTD. [233 ITR 546], HONBLE MADRAS HIGH COURT HELD AS UNDER : - ITA NO.168/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 5 | 7 EVEN ASSUMING THAT THE INCOME - TAX OFFICER HAD CALLED FOR THE PARTICULARS, WHICH WERE ALSO FURNISHED BY THE ASSESSEE, IF THE INCOME - TAX OFFICER WITHOUT PROBING INTO THE MATTER FURTHER HAD ALLOWED THE CLAIM OF THE ASSESSEE FOR WEIGHTED DEDUCTION AND IF THE COMMISSIONER ON THE BASIS OF MATERIALS FORMED AN OPINION THAT THE GRANT OF ALLOWANCE MADE BY THE OFFICER WAS ERRONEOUS AND NOT WARRANTED BY LAW, THE JURISDICTION OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT WAS NOT OUSTED. THE COMMISSIONER MAY NOT HAVE RECORDED HIS FINAL CONCLUSION, BUT THE QUESTION FOR EXER CISING THE POWER OF REVISION BY THE COMMISSIONER IS WHETHER THE ORDER OF THE ASSESSING OFFICER CAN BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT MAY BE ERRONEOUS IN LAW OR IN FACT. IT MAY BE ERRONEOUS IN THE SENSE THAT THE INCOME - TAX OFFICER HAD PASSED THE ORDER WITHOUT PROPERLY CONDUCTING THE INQUIRY IN COMPLETION OF THE ASSESSMENT AND THE ORDER MAY ALSO BE ERRONEOUS WHEN THE EXPENDITURE ALLOWED WAS AGAINST THE PROVISIONS OF LAW. 11 . WE FURTHER FIND THAT THE SPECIAL BEN CH OF I.T.A.T., CHENNAI HAS ALSO DECIDED THE IDENTICAL ISSUE IN THE CASE OF RAJALAKSHMI MILLS LTD. VS. ITO [121 ITD 343 (CHENNAI - SB)], WHEREIN THE I.T.A.T. HELD AS UNDER : - IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER ENQUIRIES BEFORE CANCEL ING THE ASSESSMENT ORDER OF THE ASSESSING OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE A SSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WO RD ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. THE WORD ERRONEOUS IN THAT SECTION INCLUDES CASES WHERE THERE HAS BEEN FAILURE TO MAKE THE NECESSARY INQUIRIES. IT IS INCUMBENT ON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS STATED IN THE RET URN WHEN CIRCUMSTANCES MAKE SUCH AN INQUIRY PRUDENT AND THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN ENQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. ITA NO.168/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 6 | 7 IN THE INSTANT CASE, THE ASSESSING OFFICER FAILED TO MAKE ANY ENQUIRY IN REGARD TO THE ALLOWABILITY OF THE PROVISION FOR GRATUITY. AS SUCH, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE CONDITIONS PRECEDENT FOR ASSUMING JURISDICTION UNDER SECTION 263 DID EXIST IN THE FACTS OF THE INSTANT CASE.0 12 . FROM THE READING OF ALL THE ABOVE DECISIONS OF HONBLE HIGH COURTS, IT IS EVIDE NT THAT THEIR LORDSHIPS HAVE TAKEN THE UNANIMOUS VIEW THAT THE INCOME - TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN. WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH SO AS TO PROVOKE AN ENQUIRY, IT IS HIS DUTY TO MAKE PROPER ENQUIRY. FAILURE TO MAKE ENQUIRY IN SUCH CIRCUMSTANCES WOULD MAKE THE ASSESSMENT ORDER ERRONEOUS. 13. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NEITHER DISPUTED THE CORRECTNESS OF THE ABOVE DECISION N OR BROUGHT TO OUR KNOWLEDGE ANY CONTRARY DECISION ON THIS POINT, BUT HE CLAIMED THAT THE A.O. MADE PROPER ENQUIRY. 1 4 . LET US EXAMINE THE FACTS OF THE ASSESSEES CASE SO AS TO ASCERTAIN WHETHER THE A.O. HAS MADE THE REQUISITE ENQUIRIES. IT IS UNDISPUTED THAT DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CREDITED RS.167,58,34,770/ - UNDER THE HEAD REVENUE FROM OPERATIONS (GROSS) I.E. (GROSS SALE OF RS.196,76,82,602 LESS ROYALTY OF RS.29,18,47,831). THE LD PR. CIT GATHERED FROM FORM H1 PRESCRIBED TO INDIAN BUREAU OF MINES THAT THE ASSESSEE HAD EFFECTED TOTAL SALE OF 940,788.270 (MT) OF IRON ORE FOR A SUM OF RS.202,42,11,422/ - AND AS SUCH GROSS REVENUE FROM OPERATION HAS BEEN WORKED OUT TO RS.173,23, 63,591 I.E. (GROSS SALE OF RS.202,42,11,422 LESS ROYALTY OF ITA NO.168/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 7 | 7 RS.29,18,47,831 ). THE ABOVE DISCREPANCIES WERE NOT POINTED OUT BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. HOWEVER, THE PR. CIT AFTER MAKING PROPER ENQUIRY POINTED OUT THAT THAT THE ASSESSEE COMPANY HAD UNDERSTATED ITS REVENUE FROM OPERATIONS TO THE EXTENT OF RS.5,65,28,821 (RS.173,23,63,591 RS.167,58,34,770/ - . WE, THEREFORE, ARE IN AGREEMENT WITH THE LEARNED PR. COMMISSIONER OF INCOME TAX THAT THE ASSESSMENT ORDER WAS ERRONEOU S IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGLY, WE DECLINE TO INTERFERE WITH THE ORDER OF LEARNED COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 28 / 01 /20 20 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 28 / 01 /20 20 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT : M/S. KALINGA MINING CORPORATION PVT LTD., SAMANTA NIWAS, SHAIKH BAZAR, CUTTACK 2. THE RESPONDENT. PR. CIT, CUTTACK 3. THE CIT(A) - , 4. PR.CIT - 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//