The DCIT, Bharuch Circle, Bharuch V. M/s. Jhagadia Copper Ltd, Bharuch

ITA 2028/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73028 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KISHANKUMAR
• Keywords: Principle of natural justice
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH (APPELLANT) VS JHAGADIA COPPER LTD, JHAGADIA, DIST: BHARUCH PAN: AADCS 9799Q (RESPONDENT) REVENUE BY: SRI T.P. KISHANKUMAR, CIT- D.R. ASSESSEE BY: NONE DATE OF HEARING : 24-02-2014 DATE OF PRONOUNCEMENT : 27-02-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-VI BARODA DATED 23-03-2009. ITA NO. 2028/AHD/2010 ASSESSMENT YEAR 2006-07 I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 2 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE DESPITE THE FACT THAT NOTICE FOR TODAYS HEARING WAS SERVED UPON THE ASSESSEE BY AFFIXTURE THROUGH LD. DR WHICH IS EVIDENT FROM THE REPORT OF DR BEING AVAILABLE ON RECORD. SO WE ARE LEFT WITH NO OPTION BUT TO DECIDE THIS APPEAL AFTER HEARING LD. DR. 3. REVENUE HAS TAKEN FOLLOWING THREE EFFECTIVE GROU NDS:- 1. ON THE FACTS END IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,30,3 5,218/- ON ACCOUNT OF INTEREST EARNED ON THE DEPOSITS MADE BY THE ASSE SSEE OUT OF ITS SURPLUS FUNDS BEFORE THE COMMENCEMENT OF BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS . 67,73,433/- ON ACCOUNT OF ACCRUED INTEREST FROM SHALIMAR WIRE IND USTRIES LTD. WHICH WAS ASSESSED AS ''INCOME FROM OTHER SOURCES'. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CTT(A) ERRED IN DELETING THE ADDITION OF RS . 21,78,85,000/- ON ACCOUNT OF INCOME EARNED FROM TOLLING ACTIVITIES, I .E. INCOME FROM JOB WORK, TREATED AS 'INCOME FROM OTHER SOURCES'. 4. GROUND NO. 1 RELATES TO ADDITION OF RS. 1,30,35, 218/- OF INTEREST RECEIVED FROM BANKS UNDER INCOME FROM OTHER SOURCE S. 5. THE ADDITION OF RS. 1,30,35,218/- WAS MADE BY AO , BY TREATING INTEREST RECEIVED FROM THE BANKS AS INCOME FROM O THER SOURCES RELYING ON THE RATIO AS LAID DOWN IN THE CASES OF TUTICORN ALK ALI CHEMICALS AND FERTILIZERS LTD VS. CIT (SC) 227 ITR 172 AND CIT VS . COROMANDEL CEMENTS LTD 234 ITR 412. I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 3 6. BEFORE LD. CIT(A) ASSESSEES SUBMISSION WAS AS U NDER:- 4.2 IN APPEAL, THE LD. AR SUBMITTED THAT THE AMOUNT OF RS.1,30,35,218/- IS NOT THE CORRECT FIGURE OF INTER EST RECEIVED DURING THE FINANCIAL YEAR 2005-06. THE APPELLANT SUBMITS T HAT IT HAD VIDE LETTERS DATED 14 TH OCTOBER 2009 , DATED 6 TH NOVEMBER 2009 AND 24 TH NOVEMBER 2009 DURING THE COURSE OF THE ASSESSMENT P ROCEEDINGS CLARIFIED IN DETAIL WITH THE SUPPORT OF THE INFORMATION/STATEMENT/RECONCILIATION STATEMENTS THA T DURING THE FINANCIAL YEAR 2005-06 THE TOTAL INTEREST OF RS,88, 86,011/- WAS RECEIVED. THE APPELLANT SUBMITTED THAT DURING THE C OURSE OF THE ASSESSMENT PROCEEDINGS IT HAD SUBMITTED BEFORE THE ASSESSING OFFICER AS UNDER:- (A) AS THE COMMERCIAL PRODUCTION AND BUSINESS WERE NOT COMMENCE DURING THE YEAR 2005-06, THE INTEREST OF RS,88,86,0 11/- RECEIVED WAS REDUCED FROM THE 'CAPITAL WORKS IN PROGRESS ACCOUNT ' [IN THE PRE- OPERATIVE & TRIAL RUN EXPENSES] WHEREIN ALL THE EXP ENDITURE INCURRED DURING THE YEAR INCLUDING THE TOTAL INTEREST OF RS. 6019.87 LACS ON THE BORROWED FUNDS AND WORKING CAPITAL HAD BEEN CAPITAL IZED AFTER DEDUCTING ALL RECEIPTS INCLUDING THE ABOVE INTEREST RECEIPT, IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT , 1956 AS WELL AS THE ACCOUNTING STANDARDS LAID BY THE INSTITUTE OF C HARTERED ACCOUNTANTS OF INDIA. (B) IN THE AUDITED ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH, 2005 ATTACHED WITH THE RETURN OF INCOME IN THE CAPITAL W ORKS IN PROGRESS ACCOUNT, IN PRE-OPERATIVE & TRIAL RUN EXPENSES THE AMOUNT OF RS. 88.86 LACS OF INTEREST RECEIVED IS DEDUCTED. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED ALL THE SUBMISSIONS MADE AND THE INFORMATION/DETAIL S/DOCUMENTS/ CERTIFICATE OF THE CHARTERED ACCOUNTANT SUBMITTED V IDE LETTERS DATED 14 TH OCTOBER, 2009, 6 TH NOVEMBER, 2009 AND 24 CH NOVEMBER, 2009 AS IS EVIDENT FROM THE PARAGRAPH 4 AND 5 OF THE ASSESS MENT ORDER. ON PERUSAL OF THE PARAGRAPH 4 AND 5 OF THE ASSESSMENT ORDER THE CONTENTIONS OF THE APPELLANT APPEAR TO BE CORRECT. THE APPELLANT SUBMITTED THAT ACTIONS OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.L , 30,35,218/- WITHOUT APPRECIATING ALL THE FACTS IN P ROPER I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 4 PERSPECTIVE AND WITHOUT CONSIDERING THE INFORMATION/DETAILS/DOCUMENTS SUBMITTED AND FOLLOWI NG THE RATIOS OF THE DECISIONS IN THE CASES OF TUTICORIN ALKALIS CHE MICALS & FERTILIZERS LIMITED V/S CIT (SC) 227 AND CIT V/S COMMANDEL CEME NTS LIMITED (SC) 234 ITR 412 ARE CONTRARY TO FACTS AS ALSO THE PROVISIONS OF THE ACT. THE APPELLANT SUBMITS THAT INSTEAD THE RATIO O F THE HON'BLE SUPREME COURT DECISION IN THE CASE OF CIT V/S KARN AL CO. OP, SUGAR MILLS LTD. 243 ITR 2 IS APPLICABLE. THE APPELLANT, WITHOUT PREJUDICE TO THE ABOVE AVERMENTS AND ALTERNATIVELY, SUBMITTED TH AT THE EXPENDITURE OF INTEREST IS A DEDUCTIBLE ITEM WHILE COMPUTING IN COME UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. FOR THE INTEREST EARNED THE APPELLANT HAD INCURRED EXPENDITURE OF INTEREST ON T HE BORROWED FUNDS AND SUCH EXPENDITURE IS ALLOWABLE AS PER THE PROVIS IONS OF SECTION 57 (III) OF THE ACT. THE APPELLANT SUBMITTED THAT THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD A BENCH (THE TRIBUNAL ) HAS IN ITS ORDER DATED 13 RH NOVEMBER, 2009, PASSED IN THE APPEALS OF THE APPEL LANT ITSELF FOR THE ASSESSMENT YEARS 2001-02, 2003-04, 2004-05 AND 2005-06, IN PARAGRAPH 11 ON PAGE 7 AFTER DETAILED CONSIDERATION OF THE FACTS AND SUBMISSIONS, HELD THAT THE INTEREST PAID IN RESPECT OF THE BORROWED MONIES, SHOULD BE ALLOWED AS DEDUCTION UNDER SECTIO N 57(III) OF THE ACT AGAINST THE INTEREST INCOME. 7. AFTER TAKING INTO CONSIDERATION THIS SUBMISSION OF THE ASSESSEE LD. CIT(A) DELETED THIS ADDITION BY OBSERVING AS UNDER: - 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. AR AND FACTS OF THE CASE. I HOLD THAT THE ASSESSING OFFICER WAS NOT JUS TIFIED IN CONCLUDING THAT THE APPELLANT HAD RECEIVED INTEREST OF RS. 1,3 0,35,218/- INSTEAD OF RS. 88,86,011/- AND RESPECTFULLY FOLLOWING THE A BOVE-SAID ORDER DATED 13 TH NOVEMBER, 2009 OF THE TRIBUNAL, HOLD THE INTEREST P AID BY THE APPELLANT SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 57(III) OF THE ACT AND CONSIDERING THE INTEREST PAID BY THE AP PELLANT HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING A DDITION OF THE INTEREST OF RS. 1,30,35,218/- AS' INCOME FROM OTHER SOURCES'. IN VIEW OF THE ABOVE THE ADDITION OF RS.1,30,35,218/- MADE IN RESPECT OF THE INTEREST AS INCOME FROM OTHER SOURCES' IS DELETED. THE SECOND GROUND IS THEREFORE ALLOWED. I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 5 SINCE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE B Y FOLLOWING THE TRIBUNALS ORDER DATED 13 TH NOVEMBER,2004 FOR A.Y. 2001-02,2002-03, 2003-04, 2 004- 05 & 2005-06 IN ASSESSEES OWN CASE AND REVENUE HAS NOT POINTED OUT ANY CHANGE IN FACTS DURING THE YEAR UNDER APPEAL, WE AR E NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DISMISSED. 8. GROUND NO. 2 RELATES TO ADDITION OF RS. 67,73,43 3/- ON ACCOUNT OF ACCRUED INTEREST FROM SHALIMAR WIRE INDUSTRIES LTD. 9. AO DURING THE ASSESSMENT PROCEEDINGS MADE ADDITI ON OF RS. 67,73,433/- AS INTEREST RECEIVABLE FROM SHALIMAR WI RE INDUSTRIES LTD. UNDER THE HEAD INCOME FROM OTHER SOURCES. 10. BEFORE LD. CIT(A) ASSESSEES SUBMISSION WAS AS UNDER:- 5.1 IN APPEAL, THE LD. AR SUBMITTED THAT THE ASSE SSING OFFICER HAS TAKEN REFERENCE FROM THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06 PASSED BY HIS PREDECESSOR AND H AS SUO MOTO MADE THE ADDITION OF RS.67,73,433/- OF INTEREST ALL EGED TO HAVE INCURRED FROM THE SHALIMAR. FROM THE ISSUANCE OF TH E NOTICE FOR REOPENING OF THE ASSESSMENT AND DURING THE COURSE O F ENTIRE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS N OT INFORMED THE APPELLANT OF HIS INTENTION TO TAX THE ABOVE SAID AM OUNT AS INCOME AND HAS ALSO NOT GIVEN ANY NOTICE OR OPPORTUNITY TO THE APPELLANT TO SUBMIT THE DETAILS/INFORMATION /DOCUMENTS/EXPLA NATIONS FOR THE ABOVE-SAID AMOUNT. THE APPELLANT SUBMITTED TH AT SINCE NO NOTICE AND/OR OPPORTUNITY WAS GIVEN THE DETAILS/INFORMATION/DOCUMENTS/EXPLANATIONS FOR THE ABOVE-SAID AMOUNT COULD NOT BE SUBMITTED. THE ACTIONS OF THE A SSESSING OFFICER OF MAKING THE ABOVE ADDITION WITHOUT GIVING ANY NOTICE OR OPPORTUNITY BUT BY SIMPLY RELYING ON THE ASSESSMENT ORDERS OF P REVIOUS ASSESSMENT I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 6 YEARS ARE EX FACIE CONTRARY TO THE PROVISIONS OF TH E NATURAL JUSTICE AND THE DECISION IN THE CASE OF URMILA RATILAL 136 ITR 797 (GUJARAT)- THE JURISDICTIONAL HIGH COURT. THE APPELLANT SU BMITTED THAT EVEN THOUGH NO NOTICE WAS ISSUED AND NO OPPORTUNITY WAS GIVEN FOR SUBMITTING INFORMATION/DETAILS/DOCUMENTS THE ASSE SSING OFFICER HAS IN PARS 10.1 OF THE ASSESSMENT ORDER OBSERVED THAT 'HOWEVER THE ASSESSES HAS NOT SUBMITTED ANY EXPLANATIONS / DETAI LS IN THIS REGARD'. MY ATTENTION IS DRAWN TO THE NOTICE DATED 27 TH JANUARY 2009 OF THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT A ND NOTICES DATED 24 TH SEPTEMBER 2009 AND 13 TH NOVEMBER 2009 OF THE ASSESSING OFFICER CALLING FOR THE DETAILS/ DOCUMENTS/ INFORMATION/EXP LANATIONS, THE RELEVANT PARAGRAPHS OF THE ASSESSMENT ORDER U NDER THE APPEAL AS ALSO TO THE COPIES OF THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06 AND ON CONSIDERATION OF THE SAM E I FIND THAT THE ABOVE-SAID CONTENTIONS OF THE APPELLANT ARE TRUE. T HE APPELLANT SUBMITTED THAT THE FACTS OF THE ISSUE ARE AS UNDER. (A) AS PER THE DEMERGER SCHEME APPROVED BY THE HON' BLE HIGH COURT OF KOLKATA VIDE ORDER DATED 15 TH MAY 2001, EFFECTIVE FROM 1 ST APRIL 2000, THE OPERATIONS OF THE APPELLANT SAVE AND EXCE PT THE COPPER CATHODES PROJECT AT JHAGADIA WERE DEMERGED INTO A S EPARATE ENTITY NAMED THE SHALIMAR. (B) IN THE CLAUSE 27 OF THE DE MERGER SCHEME APPRO VED IT WAS PROVIDED THAT THE STAMP DUTY, PREMIUM PAYABLE TO MI DC, COST OF TRANSFER OF ASSETS, ETC. AS AGREED TO BY THE LEAD I NSTITUTION TO THE EXTEND OF RS. 8 CRORES SHALL BE BORNE AND PAID BY T HE APPELLANT AND ANY SUM OVER AND ABOVE RS. 8 CRORES SHALL BE PAID B Y THE SHALIMAR. THE CLAUSE 27 OF THE DE MERGER SCHEME WAS MODIFIED AS THE ORDER DATED 17 TH APRIL 2003 OF THE HON'BLE HIGH COURT OF KOLKATA AN D IT WAS PROVIDED THAT THE STAMP DUTY, PREMIUM PAYABLE TO MI DC, COST OF TRANSFER, ETC, SHALL BE PAID BY THE SHALIMAR. IT W AS ALSO PROVIDED THAT THE APPELLANT SHALL PAY A SUM OF RS.8 CRORES TO THE SHALIMAR IN DISCHARGE OF THE LIABILITIES ON THIS ACCOUNT AFTER DEDUCTING ALL SUMS PAYABLE BY THE SHALIMAR TO THE APPELLANT. (C) AS PER THE AGREEMENT DATED 14 TH JANUARY 2002 EXECUTED BY AND BETWEEN THE APPELLANT AND THE SHALIMAR, INTERNATION AL BUSINESS DIVISION OWNED BY THE APPELLANT WAS TRANSFERRED AS A GOING CONCERN TO THE SHALIMAR AT THE TOTAL AGGREGATE AMOUNT OF RS .5.39 CRORES I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 7 PAYABLE IN 3 EQUAL ANNUAL INSTALLMENTS IN THE 3 RDR 4TH AND 5 TH YEAR FROM THE DATE OF THE AGREEMENT WITH INTEREST @ 12% P.A. (D) IN VIEW OF THE ABOVE DE MERGER ORDER DATED 15 TH MAY 2001, ORDER DATED 17 TH APRIL 2003 AND THE AGREEMENT DATED 14 TH JANUARY 2002 ON 31 ST MARCH 2003 AN AMOUNT OF RS.7,60,04,126/- BECAME PAYABLE BY THE APPELLANT TO THE SHALIMAR AGAINST AN AMOUNT OF RS.5,49,72,021/- RECEIVABLE BY THE APPELLANT FROM T HE SHALIMAR. (E) IN VIEW OF THE ABOVE POSITION AND CONSIDERING T HAT NO INTEREST WAS PAYABLE TO THE SHALIMAR ON THE OUTSTANDING AMOUNT O F RS.7,60,04,126/- THE BOARD OF DIRECTORS OF THE APPE LLANT HAD AT ITS MEETING HELD ON 8 TH NOVEMBER 2003 RESOLVED TO WAIVE THE INTEREST RECEIVABLE FROM THE SHALIMAR FROM I 3T APRIL 2002 TO 17 TH APRIL 2003. THE APPELLANT SUBMITTED THAT IN VIEW OF THE ABOVE P OSITION, IT IS EVIDENT THAT NO INTEREST CAN ACCRUE TO THE APPELLAN T FROM THE SHALIMAR IN ANY PERIOD SUBSEQUENT TO 31 3T MARCH 2003 AND CERTAINLY NOT FOR THE YEAR ENDED 31 ST MARCH 2006 AS INFERRED BY THE ASSESSING OFFICER. T HE APPELLANT HAS PLACED ON RECORD THE CERTIFICATE DATED 8 TH FEBRUARY 2010 OF S.S, IYENGAR & ASSOCIATES, CHARTERED ACCOUNTANTS CERTIFYING THAT IN THE AUDITED ACCOUNTS ATTACHED WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 (A ) IN SCHEDULE F 'LOANS AND ADVANCES (UNSECURED BUT CONSIDERED GOOD) THE AMOUNT OF RS,5,49,72,021/- RECEIVABLE FROM THE SHALIMAR IS SH OWN AND (B) IN SCHEDULE G 'SUNDRY CREDITORS' THE AMOUNT O F RS.7,60,04,126/- PAYABLE THE APPLICANT TO THE SHALIMAR IS INCLUDED. IN THE CERTIFICATE IT IS FURTHER CERTIFIED THAT THERE HAS BEEN NO MOVEMEN T IN THE BALANCES OF BOTH THE ABOVE-MENTIONED ACCOUNTS DURING THE YEAR APRIL, 2005 TO MARCH, 2006. THE APPELLANT SUBMITTED THAT T HE TRIBUNAL HAS IN THE ORDER DATED 13 TH NOVEMBER 2009, IN PARAGRAPH 24 TO PARAGRAPH 35 ON PAGE 13 TO PAGEM 21 OF THE ORDER, AFTER DETAILED CONSIDERATION OF THE FACTS AND RIVAL SUBMI SSIONS DELETED THE ADDITION OF THE INTEREST ALLEGED TO HAVE ACCRUED TO THE APPELLANT FROM THE SHALIMAR FOR THE ASSESSMENT YEARS 2003-04, 2004 - 05 AND 2005- 06. MY ATTENTION IS DRAWN TO THE PARAGRAPH 36 OF THE ORDER OF THE TRIBUNAL WHEREIN WHILE DELETING THE ADDITIO N OF THE INTEREST RECEIVABLE FROM THE SHALIMAR FOR THE ASSESSMENT YEAR 2003-04 IT IS OBSERVED THAT 'FOR THE ABOVE REASONS, WE AGREE WITH THE ASSESSEE' S CONTENTION IN ITS APPEAL FOR THE ASSESSMENT YEAR 2003-04 THAT THE ASS ESSMENT OF THE I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 8 INTEREST OF RS.6773433 WAS NOT JUSTIFIED. GROUND NO . 5 IS ACCORDINGLY ALLOWED. THUS THE APPEAL IS PARTLY ALLOWED.' MY ATTENTION IS ALSO DRAWN THAT THE TRIBUNAL HAS IN THE ABOVE-SAID ORDER AS PER THE ABOVE OBSERVATION DELETED THE SIMI LAR ADDITION FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. THE APPELLANT SUBMITTED THAT THE FACTS OF THE ADDITION OF THE INTEREST ALLEGED T O HAVE ACCRUED FROM THE SHALIMAR AND DELETED BY THE TRIBUNAL IN THE AFO RE-SAID ORDER AND THE ADDITION MADE IN THE ASSESSMENT ORDER UNDER APP EAL ARE NOT ONLY SIMILAR BUT ARE IDENTICAL IN ALL RESPECTS, AND THER EFORE CONSIDERING THE FACTS OF THE CASE AND THE ORDER OF THE TRIBUNAL THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 11. AFTER TAKING INTO CONSIDERATION THIS SUBMISSION OF THE ASSESSEE LD. CIT(A) DELETED THIS ADDITION BY OBSERVING AS UNDER: - 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS AND THE DOCUMENTS PLACED ON RECORD AND THE CONTENTIONS OF THE APPELLANT AS A LSO THE ORDER DATED 13 TH NOVEMBER, 2009 OF THE TRIBUNAL AND HOLD THAT (A) THE ADDITION OF RS. 67,73,4337- HAS BEEN MADE B Y THE ASSESSING OFFICER WITHOUT GIVING ANY NOTICE OR OPPORTUNITY TO THE APPELLANT AND (B) THE FACTS OF THE ADDITION OF THE INTEREST ALLEG ED TO HAVE ACCRUED FROM THE SHALIMAR DELETED BY THE TRIBUNAL IN THE AF ORE-SAID ORDER AND THE ADDITION MADE IN THE ASSESSMENT ORDER UNDER APP EAL ARE NOT ONLY SIMILAR BUT ARE IDENTICAL IN ALL RESPECTS, AND THER EFORE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL THE ADDITION RS .67,73,433/- MADE BY THE ASSESSING OFFICER IS DELETED. THE GROUND NO. 3 IS ALLOWED. SINCE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE B Y FOLLOWING THE TRIBUNALS ORDER DATED 13 TH NOVEMBER,2004 FOR A.Y. 2001-02,2002-03, 2003-04, 2 004- 05 & 2005-06 IN ASSESSEES OWN CASE AND REVENUE HAS NOT POINTED OUT ANY CHANGE IN FACTS DURING THE YEAR UNDER APPEAL, WE AR E NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DISMISSED. I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 9 12. GROUND NO. 3 RELATES TO ADDITION OF RS. 21,78, 85,000/- AS INCOME FROM TOLLING ACTIVITIES I.E. INCOME FROM JOB WORK UNDER THE HEAD INCOME FROM OTHER SOURCES. 13. DURING THE ASSESSMENT PROCEEDINGS AO MADE THIS ADDITION OF RS. 21,78,85,000 OF TOLLING RECEIPTS UNDER THE HEAD IN COME FROM OTHER SOURCES CONSIDERING THE AMOUNT OF THE TOLLING INCOME APPEAR ING IN THE CAPITAL WORK IN PROGRESS ACCOUNT, AND RELYING ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASES OF TUTICORN ALKALI CHEMICALS AND FERTILIZERS LTD VS. CIT (SC) 227 ITR 172 AND CIT VS. COROMALDEL CEMENTS LTD 234 ITR 412. 14. BEFORE LD. CIT(A) ASSESSEES SUBMISSION WAS AS UNDER:- 6.2 IN APPEAL, THE LD. AR SUBMITTED THAT DURING TH E YEAR 2005-06 GROSS RECEIPT OF RS. 3,23,31,227/- WAS RECEIVED FRO M THE TOLLING ACTIVITY AND NOT THE GROSS RECEIPT OF RS.21,78,85,0 00/- ADDED AS INCOME IN THE ASSESSMENT ORDER AS 'INCOME FROM OTHE R SOURCES'. THE APPELLANT SUBMITTED THAT IT HAD VIDE LETTERS DATED 6 TH NOVEMBER 2009 AND DATED 24 TH NOVEMBER 2009 AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED BEFORE THE ASSESSI NG OFFICER VARIOUS DETAILS / INFORMATION / EXPLANATIONS /PARTY -WISE TOTAL TOLLING RECEIPTS OF RS.3,23,31,227/- THE RECONCILIATION OF THE TOLLING INCOME WITH THE TDS CERTIFICATES AND THE CERTIFICATE OF TH E CHARTERED ACCOUNTANT CERTIFYING THE TOTAL EXPENDITURE INCURRE D FOR EARNING THE TOLLING INCOME DURING THE YEAR. THE APPELLANT SUBMI TTED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED ALL THE SUBMIS SIONS MADE AND THE INFORMATION / DETAILS / DOCUMENTS /RECONCILIATION/ THE CERTIFICATE OF THE CHARTERED ACCOUNTANT SUBMITTED VIDE LETTERS DATED 6 TH NOVEMBER 2009 AND 24 TH NOVEMBER 2009 AS IS EVIDENT FROM PARAGRAPH 11 OF T HE ASSESSMENT ORDER. ON PERUSAL OF THE PARAGRAPH 11 OF THE ASSESSMENT ORDER THE CONTENTIONS OF THE APPELLANT APPEAR TO BE CORRECT. THE APPELLANT SUBMITTED THAT DURING THE COURSE OF THE A SSESSMENT PROCEEDINGS IT WAS ALSO SUBMITTED BEFORE THE ASSESS ING OFFICER AS I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 10 UNDER. THE MAIN PRODUCT OF THE APPELLANT IS COPPER CATHODES CONFORMING TO LME GRADE 'A' SPECIFICATIONS. THE ENT IRE PROJECT IS SMELTER-CUM-REFINERY TO PRODUCE COPPER CATHODES AND WHETHER THE SAME ARE PRODUCED FROM OUT OF THE OWN RAW MATERIALS AND SOLD OR OUT OF RAW MATERIAL SUPPLIED BY OTHER PARTIES AND RETUR NED TO THEM AS COPPER CATHODES BECOMES IRRELEVANT SINCE THE PLANT AND MACHINERY OF THE APPELLANT ARE USED IN BOTH THE CASES. AS THE WO RKING CAPITAL AVAILABLE WAS NOT ADEQUATE DURING THE YEAR 2005-06, THE STRATEGIC TIE UPS WERE ENTERED INTO WITH HINDUSTAN COPPER LIMITED (THE HCL) (A GOVERNMENT OF INDIA ENTERPRISE) AND 3 OTHER PRIVATE PARTIES (KAATYANI EXPORTS, PARAS MOTOR MANUFACTURING COMPAN Y AND FINOLEX CABFES LIMITED) FOR RECEIVING COPPER BEARIN G RAW MATERIALS FROM THEM FOR CONVERSION INTO COPPER CATHODES ON TO LLING BASIS (I.E. PROCESSING OF COPPER BEARING RAW MATERIALS AND RETU RNING THE COPPER CATHODES ON PAYMENT OF THE AMOUNT ON AGREED TERMS), FOR COMPLETING TRIAL RUN PRODUCTION BEFORE DECLARATION OF COMMERCI AL PRODUCTION. AS THE COMMERCIAL PRODUCTION AND BUSINESS WERE NOT COM MENCED DURING THE YEAR 2005-06 AND AS THE CONVERSION OF COPPER BE ARING RAW MATERIALS INTO COPPER CATHODES RECEIVED TOLLING BAS IS, WAS PART OF TRIAL RUNS BEFORE COMMENCEMENT OF COMMERCIAL PRODUCTION AND THE BUSINESS, THE RECEIPTS OF THE TOLLING ACTIVITY WERE REDUCED FROM THE 'CAPITAL WORKS IN PROGRESS ACCOUNT' [IN THE PRE-OPE RATIVE & TRIAL RUN EXPENSES] WHEREIN ALL THE EXPENDITURE INCUR RED DURING THE YEAR (INCLUDING THE EXPENDITURE INCURRED FOR CO NVERSION OF THE RAW MATERIALS RECEIVED ON TOLLING BASIS) HAD BEEN CAP ITALIZED AFTER DEDUCTING ALL RECEIPTS INCLUDING THE RECEIPT FROM T HE TOLLING ACTIVITY; IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT , 1956 AS WELL AS THE ACCOUNTING STANDARDS LAID BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE APPELLANT SUBMITTED THA T IT WAS NOT GIVEN ANY SHOW CAUSE NOTICE BY THE ASSESSING OFFICER OF H IS INTENTION OF TREATING RS.21,78,85,000/- AS TOLLING INCOME BY TAK ING THE FIGURE FROM THE DETAILS OF THE CAPITAL WORKS IN PROGRESS ACC OUNT AND MAKING ADDITION OF THE SAME AS INCOME WITHOUT ALLOWING ANY EXPENDITURE AND WITHOUT CONSIDERING THE SUBMISSIONS MADE AND THE CLARIFICATIONS/INFORMATION/ CERTIFICATE OF THE CHAR TERED ACCOUNTANT PROVIDED. THE APPELLANT SUBMITTED THAT IF THE SHOW CAUSE NOTICE WOULD HAVE BEEN ISSUED BY THE ASSESSING OFFICER OF HIS IN TENTIONS OF TREATING THE ABOVE SAID FIGURE OF RS,21,73,85,000/- AS TOLLI NG INCOME AS INCOME WITHOUT ALLOWING ANY EXPENDITURE THE APPELLANT WOUL D HAVE CLARIFIED I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 11 THE DISCREPANCY IN THE FIGURE. BUT IN THE ABSENCE O F ANY SHOW CAUSE NOTICE, THE APPELLANT NEVER HAD ANY OPPORTUNITY TO CLARIFY THE DISCREPANCY IN THE SAID FIGURE RESULTING IN HUGE AD DITION. THE APPELLANT SUBMITTED THAT THE ABOVE ACTIONS OF THE A SSESSING OFFICER ARE NOT IN CONFORMITY WITH THE PRINCIPLES OF NA TURAL JUSTICE AND THE DECISION IN THE CASE OF URMILA RATILAL 136 IT R 797 (GUJARAT)- JURISDICTIONAL HIGH COURT. 15. AFTER TAKING INTO CONSIDERATION THIS SUBMISSION OF THE ASSESSEE, LD. CIT(A) DELETED THIS ADDITION BY OBSERVING AS UNDER: - ON CAREFUL CONSIDERATION OF THE DETAILS/DOCUMENTS/ INFORMATION PLACED ON RECORDS BY THE APPELLANT, I FIND THAT THE ABOVE-SAID CONTENTIONS OF THE APPELLANT ARE TRUE. THE APPELLANT SUBMITS THAT IN FACT THE AMOUNT OF RS .21,75,85,442/- REPRESENTS GROSS RECEIPTS FROM TOLLING ACTIVITY FRO M AUGUST - 2004 TO 31ST MARCH,2006. THE YEAR-WISE BREAK-UP OF GROSS RE CEIPTS FROM TOLLING ACTIVITY IS AS UNDER: FINANCIAL YEAR 2004-05 (ASST YEAR 2005-06) RS. 1 8,55,54,215/~ FINANCIAL YEAR 2005-06 (ASST. YEAR Z006-07) RS. 3 ,23,31,227/- TOTAL RS. 21,78,85,442/- THE APPELLANT SUBMITS THAT IN THE AUDITED ACCOUNT F OR THE FINANCIAL YEAR 2004-05, THE AMOUNT OF CAPITAL WORKS IN PROGRE SS WAS ARRIVED AT AFTER DEDUCTING TOLLING INCOME WHEREAS IN THE AU DITED ACCOUNT FOR THE FINANCIAL YEAR 2005-06, FIGURES WERE REGROUPED AND ACCORDINGLY TOLLING INCOME WAS SHOWN AS SEPARATE ITEM. IN SUPPO RT OF THE ABOVE CONTENTIONS, THE APPELLANT HAS PLACED ON RECORDS TH E COPY OF THE CERTIFICATE DATED 8 TH JANUARY, 2010 ISSUED BY M/S. N. M. RAIJI & CO., CHARTERED ACCOUNTANTS, STATUTORY AUDITORS AND TAX A UDITORS OF THE APPELLANT CERTIFYING THE ABOVE AND FURTHER CERTIFYI NG THAT THE TOLLING INCOME RECEIVED DURING THE YEAR 2005-06 IS RS. 3,23 ,31,227/- THE APPELLANT HAS PACED BEFORE ME THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06 AND HAS DRAWN MY ATTENTION THAT AMOUNT OF RS.18,55,54,215/- OF THE TOLLING RECEIPTS RECEIVED DURING THE FINANCIAL YEAR 2004-05 WAS CONSIDERED BY THE ASSESSING OFFICE R AS INCOME IN THE ASSESSMENT ORDER AND WAS TAXED. THE APPELLANT S UBMITTED THAT THE ACTIONS OF THE ASSESSING OFFICER OF TAXING THE GROS S TOLLING INCOME UNDER 'INCOME FROM OTHER SOURCES' ARE NOT ONLY CONT RARY TO THE I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 12 PROVISIONS OF THE ACT BUT TANTAMOUNT TO VIOLATION O F NATURAL JUSTICE AND FAIR PLAY AND ALSO THE NORMS OF ACCOUNTING STANDARD S LAID DOWN BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA WHI CH HAS APPROVAL OF THE HON'BLE SUPREME COURT. THE APPELLANT HAS IN THI S REGARD PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF CHELLAPALLI SUGAR MILLS LTD. THE APPELLANT SUBMITTE D THAT THE TRIBUNAL HAS IN THE ORDER DATED 13 LH NOVEMBER, 2009 IN PARAGRAPH 53 TO 62 ON PAGE 27 TO 37, DECIDED THE ISSUE OF TAXABILITY OF T HE TOLLING RECEIPTS IN THE ASSESSMENT YEAR 2005-06 AND HAS HELD THAT THE F ACTS OF THE CASE ATTRACT RATIO LAID IN THE JUDGMENT IN THE CASE OF C 1T V/S BOKARO STEEL LIMITED (1999) 236 ITR 315 AND THAT THE TOLLING REC EIPTS ARE RIGHTLY REDUCED FROM THE CAPITAL WORKS IN PROGRESS ACCOUNT AND THE DEPARTMENTAL AUTHORITIES WERE NOT RIGHT IN ASSESSIN G THE TOLLING INCOME SEPARATELY UNDER THE HEAD ' INCOME FROM OTHE R SOURCES'. THE APPELLANT HAS DRAWN MY ATTENTION TO PARA 62 OF THE ABOVE-SAID ORDER THE TRIBUNAL WHEREIN IT HAS BEEN OBSERVED AS UNDER. IT WILL THUS BE SEEN THAT THE INCOME BY WAY OF TOLL ING RECEIPTS WAS CONSIDERED AS INCOME FROM TRIAL RUN AND WAS REDUCED FROM THE CAPITAL-WORKS-IN -PROGRESS ACCOUNT. SINCE WE HAVE H ELD THAT THE FACTS OF THE PRESENT CASE ATTRACT THE RATIO OF THE JUDGME NT OF THE SUPREME COURT IN CIT V/S BOKARO (SUPRA) WE HOLD THAT THE TO ILING RECEIPTS WERE RIGHTLY REDUCED BY THE ASSESSEE FROM THE CAPITAL-WO RKS-IN-PROGRESS ACCOUNT AND THE DEPARTMENTAL AUTHORITIES WERE NOT R IGHT IN ASSESSING THE TOLLING INCOME SEPARATELY UNDER THE HEAD 'INCOM E FROM OTHER SOURCES'. THE APPELLANT SUBMITTED THAT THE FACTS OF THE ADDITION OF THE TOLLING RECEIPTS CONSIDERED AND DELETED BY THE TRIB UNAL IN THE ABOVE- SAID ORDER AND THE ADDITION OF THE TOLLING RECEIPTS IN THE ASSESSMENT ORDER UNDER THE APPEAL, ARE NOT ONLY SIMILAR BUT AR E IDENTICAL IN ALL RESPECTS, AND THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL, THE ADDITION OF THE TOLLING RECEIPTS MADE AS INCOME BY THE ASSESSING OFFICER NEED TO BE DELETED. 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND THE DOCUMENTS PLACED ON RECORD AND THE CONTENTIONS OF THE APPELLANT AS A LSO THE ORDER DATED 13 LH NOVEMBER, 2009 OF THE TRIBUNAL AND I HOLD THAT (A) THE ADDITION OF RS, 21,78,85,442/- HAS BEEN MAD E BY THE ASSESSING OFFICER WITHOUT GIVING ANY NOTICE OR OPPORTUNITY TO THE APPELLANT (B) THE APPELLANT HAS RECEIVED TOLLING RECEIPTS OF RS. 3,23,31,227, DURING THE ASSESSMENT YEAR 2006-07 AND NOT RS.21,78 ,85,442/- AS ARRIVED AT BY THE ASSESSING OFFICER. I.T.A NO.2028/AHD/2010 A.Y. 2006-07 PAGE NO DCIT VS. JHAGADIA COPPER LTD 13 (C) THE FACTS OF THE ADDITION OF THE TOLLING INCOM E DELETED BY THE TRIBUNAL IN THE AFORE-SAID ORDER AND THE ADDITION M ADE IN THE ASSESSMENT ORDER UNDER APPEAL ARE NOT ONLY SIMILAR BUT ARE IDENTICAL IN ALL RESPECTS, AND THEREFORE RESPECTFULLY FOLLOWI NG THE ORDER OF THE TRIBUNAL THE ADDITION RS. 21,73,85,442/- MADE BY TH E ASSESSING OFFICER IS DELETED. THE GROUND NO. 5 IS ALLOWED. SINCE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE B Y FOLLOWING THE TRIBUNALS ORDER DATED 13 TH NOVEMBER,2004 FOR A.Y. 2001-02,2002-03, 2003-04, 2 004- 05 & 2005-06 IN ASSESSEES OWN CASE AND REVENUE HAS NOT POINTED OUT ANY CHANGE IN FACTS DURING THE YEAR UNDER APPEAL, WE AR E NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DISMISSED. 16. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 27/02/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,