M/s. Tamil Nadu Magnesite Ltd., Salem V. DCIT, Salem

ITA 2595/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4664 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 22-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G BASKAR
• Keywords: Reopening of assessment; Depreciation; Tangible material; Wrong claim; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 43B; 143(3); 80HHC; 115JB; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 2595/MDS/2016 / ASSESSMENT YEAR : 2008-09 M/S. TAMILNADU MAGNESITE LTD., 5/53, OMALUR MAIN ROAD, JAGIR AMMAPALAYAM, SALEM - 636302. PAN AAACT9933A ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, SALEM - 636007. RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT ! / DATE OF HEARING : 22.02.2017 '# ! / DATE OF PRONOUNCEMENT: 01.05.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS), SALEM DATED 29.7.2016. 2. THE FIRST ISSUE IS WITH REGARD TO REOPENING OF T HE ASSESSMENT. - - ITA 2595/MDS/16 2 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D ORIGINAL RETURN OF INCOME ON 30.9.2008 DECLARING NIL INCOM E UNDER NORMAL COMPUTATION AND 1,48,93,490/- U/S. 115JB OF THE ACT. THE ASSESSMENT WAS PASSED U/S.143(3) OF THE ACT ON 30.12.2010 ACCEPTING THE BOOK PROFIT. LATER, IT CA ME TO THE KNOWLEDGE OF THE AO THAT THE ASSESSEE HAS CLAIMED E XPENDITURE IN RESPECT OF ROYALTY, LEASE RENT AND INTEREST ON R OYALTY, TOTALLING 96,03,956/-, WHICH WAS OUTSTANDING AS PAYABLE. THE AO WAS OF THE OPINION THAT THE PROVISIONS OF SEC.43B ARE A PPLICABLE. ACCORDINGLY, THE ASSESSMENT WAS REOPENED U/S.147 OF THE ACT BY ISSUING A NOTICE U/S.148 OF THE ACT DATED 13.3.2014 . AS THESE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT, RE MAINED OUTSTANDING AND PAYABLE DURING THE YEAR, THE AO OBS ERVED THAT THE PROVISIONS OF SEC. 43B ARE OF THE ACT ARE CLEAR LY ATTRACTED AND THESE EXPENSES SHOULD HAVE BEEN DISALLOWED IN A.Y 2 008-09 IN THE ASSESSMENT ORDER MADE U/S.143(3) OF THE ACT. 3.1 NOW, THE ASSESSEE HAS RAISED THE ISSUE REGARD ING THE REOPENING OF ASSESSMENT. HE SUBMITTED THAT REOPEN ING OF ASSESSMENT TO DISALLOW AMOUNTS U/S.43B IS IMPROPER. FURTHER, LD.A.R SUBMITTED THAT THE AOS OBSERVATION THAT TH E ASSESSEE - - ITA 2595/MDS/16 3 WILFULLY MADE A PATENTLY WRONG CLAIM IS THEREFORE N OT CORRECT, WHILE ALL THE FACTS NECESSARY FOR ASSESSMENT PROCEE DINGS WERE PLACED BEFORE THE LD. ASSESSING OFFICER. ACCORDING TO LD.A.R, THE LD.CIT(A) HAS NOT CONSIDERED THE DECISIONS OF JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. R P G TRANSMISSION LT D. (266 CTR 533) AND THE JUDGEMENT OF SUPREME COURT IN CIT VS. A.RAMAN & CO (67 ITR 11). FURTHER, LD.A.R SUBMITTED THAT TH ERE WAS NO DISCUSSION WHETHER MATERIALS NECESSARY FOR COMPUTI NG INCOME WERE DISCLOSED TRULY AND FULLY OR NOT, DURING THE A SSESSMENT PROCEEDINGS OR IN THE BODY OF ASSESSMENT ORDER. 3.2 THE LD.D.R RELIED ON THE ORDER OF THE LD.CIT( A) AND ALSO THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT V S. RAMAN & CO., IN 67 ITR 11 WHEREIN HELD THAT .. EVEN IF THE INFORMATION BE SUCH THAT IT COULD HAVE BEEN OBTAINED DURING THE PREVIOUS ASSESSMENT FROM AN INVESTIGATI ON OF THE MATERIALS ON RECORD, OR THE FACTS DISCLOSED THEREBY OR FROM OTHE R INQUIRY, OR RESEARCH INTO FACTS OR LAW, BUT WAS NOT OBTAINED, THE JURISDICTIO N OF THE AO IS NOT AFFECTED - - ITA 2595/MDS/16 4 3.3 ACCORDING TO LD DR SUBSEQUENT EVENTS WHICH B RING TO LIGHT MATERIAL CIRCUMSTANCES WHICH WAS UNKNOWN BUT EXIST ING AT THE DATE OF THE ORIGINAL ASSESSMENT WOULD EQUALLY JUSTI FY THE REASSESSMENT. ACCORDINGLY, HE REQUESTED THAT THE ORDER OF LD.CIT(A) TO BE SUSTAINED. 4. THE LD. DR FURTHER SUBMITTED THAT THE AMOUNT O F ROYALTY AND LEASE RENT DEBITED TO THE PROFIT AND LOSS ACCOU NT BUT NOT PAID DURING THE YEAR WAS DISALLOWED U/S.43B OF THE ACT. THE LD. DR, SUBMITTED THAT ON THE ISSUE OF DISALLOWANCE OF ROYA LTY U/S.43B OF THE ACT, THE SUPREME COURT HAS HELD IN THE CASE OF GORELAL DUBEY V. CIT REPORTED IN 248 ITR 3 THAT : THE CONSTITUTION BENCH JUDGMENT IN INDIA CEMENTS L TD. V. STATE OF TAMIL NADU (1991) 188 ITR 690 (SC), LAY S DOWN THE LAW, NAMELY, ROYALTY IS TAX, AND IT IS A T AX FOR ALL PURPOSES INCLUDING SECTION 43B. FURTHER, IN A LATER JUDGMENT THE HIGH COURT OF RAJA STHAN IN THE CASE OF CIT V. POPULAR MINERALS REPORTED IN (2002) 258 ITR 593, FOLLOWING THE SUPREME COURT JUDGMENT SUPRA, HAS HEL D THAT IT IS NOW NO MORE RES INTEGRA THAT THE ROYALTY IS A TAX A ND AS SUCH SECTION 43B IS APPLICABLE TO UNPAID LIABILITY TOWAR DS PAYMENT OF ROYALTY AND THE TRIBUNAL WAS NOT LEGALLY JUSTIFIED IN HOLDING THAT - - ITA 2595/MDS/16 5 THE ROYALTY DID NOT PARTAKE THE CHARACTER OF TAX, DUTY CESS OR FEE, FOR THE PURPOSE OF APPLICABILITY OF THE PROVIS IONS OF SEC.43B OF THE ACT. THE LD.D.R PLEADED THAT THE TRIBUNAL MAY BE SUSTAINED THE ACTION OF LOWER AUTHORITIES AS RIGHTL Y BROUGHT TO TAX THE UNPAID AMOUNT OF ROYALTY AND LEASE RENT U/S.43B OF THE ACT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. BEFORE US, LD.A.R RELIED ON THE JUDGEMEN T OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BA ER SHOES (INDIA) PVT. LTD. IN [2011] 331 ITR 435 (MAD) WHERE IN HELD THAT:- DISMISSING THE APPEAL, (I) THAT THE ASSESSEE AT TH E TIME OF FILING THE RETURN FOR THE ASSESSMENT YEAR 1999-2000 HAD DISCLOSED ALL THE MATERIALS BEFORE THE ASSESSING OF FICER AND CLAIMED DEDUCTION UNDER SECTION 80HHC . IT WAS NOT THE CASE OF THE DEPARTMENT THAT THE ASSESSEE HAD NOT DISCLOS ED THE MATERIALS. THEREFORE, ON A CONSIDERATION OF THE MAT ERIALS AVAILABLE ON RECORD, THE ASSESSING OFFICER PASSED A N ORDER ON THE TWO EARLIER OCCASIONS. THEREAFTER, THE ASSESSIN G OFFICER HAD SOUGHT TO REOPEN THE ASSESSMENT ONCE AGAIN INVO KING THE POWER UNDER SECTION 147 OF THE ACT. THIS WAS NOT PE RMISSIBLE. MERELY BECAUSE A JUDGMENT HAD BEEN RENDERED, THAT C OULD NOT BE A GROUND FOR REOPENING THE ASSESSMENT UNDER SECT ION 147 OF THE ACT. - - ITA 2595/MDS/16 6 6. FURTHER, LD.A.R RELIED IN THE CASE OF CIT VS. K ELVINATOR OF INDIA LTD. IN [2010] 320 ITR 561 (SC) WHEREIN HELD THAT: THE CONCEPT OF CHANGE OF OPINION ON THE PART OF T HE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLI TERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME -TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1 989. AFTER THE AMENDMENT, THE ASSESSING OFFICER HAS TO H AVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE O F OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE AB USE OF POWER. HENCE AFTER APRIL 1, 1989, THE ASSESSING OFFICER HA S POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS TANGIBLE M ATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE F ORMATION OF THE BELIEF. THUS MAIN CONTENTION OF LD.A.R IS THAT IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 30-12-2010. WHILE FRAMING THE ASSESSMENT, THE AO VIDE QUESTIONNAIRE DATED 19. 09.2009 ENQUIRED ABOUT BREAKUP FOR OUTSTANDING LIABILITY ( Q.NO.23). THE ASSESSEE HAS FURNISHED ALL DETAILS VIDE REPLY DAT ED ON 8.9.2010, 20.9.2010 AND 23.10.2010 TO THE AO AT THE TIME OF ORIGINAL ASSESSMENT AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE PURPO SE OF ASSESSMENT. ACCORDING TO LD.A.R, THE REOPENING AFTER 4 YEARS OF END OF RELEVANT ASSESSMENT YEAR VIDE NOTICE U/S.148 OF THE ACT DATE D13.03.2014, IT IS ONLY A CHANGE OF OPINION. HE SUBMITTED THAT THE AO GOING THROUGH THE SAME DOCUMENTS, WHICH WERE ALREADY ON RECORD, W ANTED TO RE- - - ITA 2595/MDS/16 7 OPEN THE ASSESSMENT, WHICH IS NOTHING BUT REVIEW OF THE EARLIER ASSESSMENT ORDER, WHICH IS NOT POSSIBLE U/S.147 OF THE ACT. IN THIS CASE, THE ASSESSMENT WAS REOPENED TO DISALLOW AMOUT UNDER SECTION 43B OF THE ACT. 6.1 ADMITTEDLY IN THIS CASE, THE ORIGINAL ASSESSME NT WAS COMPLETED U/S.143(3) OF THE ACT ON 30.12.2010. IT IS A SETT LED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE T HE ASSESSING OFFICER, OPINED THAT INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN C ASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUP POSE THAT INCOME HAS ESCAPED ASSESSMENT , ACTION U/S 148 CAN BE TAKE N. BUT OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHI CH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER T HIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME I S NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIR ED IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJE CTIVE MATERIAL EVIDENCE. THE REASON WAS RECORDED AS DISCUSSED ABOV E. THE ARGUMENT OF THE LD.AR IS THAT U/S 147 IN CASE THE A SSESSMENT ORDER - - ITA 2595/MDS/16 8 IS COMPLETED U/S 143(3), AS HAS BEEN DONE IN THIS C ASE, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DI SCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT FOR THAT ASSESSMENT YEAR, INTER ALIA. 6.2 AS SEEN FROM THE REASONS RECORDED, IT IS GIVEN A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENC E TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 14 8 OF THE ACT. THERE CANNOT BE TWO OPINIONS. THE POINT OF TIME WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF IN COME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE LD.AR IS NOT TENA BLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147, THE ASSESSING OFFICER CAN EITHER ASSESS OR RE-ASSESS BUT FOR TAKING ACTION THEREUNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T . IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRI TING. THE REASSESSMENT PROCEEDINGS U/S 147 ARE FURTHER SUBJEC T TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CAS E, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSE SSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS - - ITA 2595/MDS/16 9 LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE A SSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED OR NOT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR(III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER WOULD HAVE VAL ID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASS ESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE , THE CONDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSME NT PROCEEDINGS ARE CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRA CTED IN THE ABOVE PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE AS SESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSM ENT. THIS FACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMEN T. THE POWER TO RE-ASSESS POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF T HE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBIT RARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE B ASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASO N TO REOPEN THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REVIEW - - ITA 2595/MDS/16 10 BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A C ONCEPTUAL DIFFERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HAS NO POWER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESS MENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PR E-CONDITIONS BUT THE CONCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CO NSIDERATION OTHERWISE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSI NG OFFICER TO REOPEN ANY AND EVERY ASSESSMENT ORDER WHICH WOULD S IMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FR OM ASSESSMENT AND THE REASONS RECORDED HAVE A LINK WITH THE FORMA TION OF HIS BELIEF, HE HAS THE POWER U/S 147 OF THE ACT. 6.3 NOW THE MOST MATERIAL PART WHICH WAS ARGUED B Y THE LD.AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRST P ROVISO TO SECTION 147 WHICH STATES THAT WHERE AN ASSESSMENT U/S SUB-SECTI ON(3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, WHICH IS 2006- 07, IN THIS CASE, NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH - - ITA 2595/MDS/16 11 ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THERE ARE TWO OTHER CONDITIONS WHICH ARE NOT RELEVANT FOR DECIDING THE LEGAL ISSUE UNDER APPEAL. WE HAVE TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS SIGNIFY. THE EXPRESSION F AILURE TO DISCLOSE MATERIAL FACTS HAS BEEN EXPLAINED IN THE TAXMANS DIRECT TAXES MANUAL VOLUME 3. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISC LOSURE CAN BE EVEN FALSE OR TRUE. IT MAY BE A FULL DISCLOSURE OR IT MA Y NOT BE A FULL ONE. A PART DISCLOSURE MANY A TIMES MAY BE MISLEADING ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND TRUE DISCLOSUR E OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. THIS LAW WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SR I KRISHNA PVT. LTD ETC VS ITO & OTHERS, 221 ITR 538. THE WORDS OM ISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT FOR THAT YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESS MENT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFF ER FROM CASE TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME - - ITA 2595/MDS/16 12 MATERIAL FOUND IN THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BU T DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTI CE OF THE ASSESSING AUTHORITY. THIS OMISSION OR FAILURE MAY BE EITHER D ELIBERATE, OR EVEN INADVERTENT, THAT IS IMMATERIAL, BUT IN CASE THERE IS OMISSION TO DISCLOSE THE MATERIAL FACTS THEN SUBJECT TO THE OTH ER CONDITIONS JURISDICTION TO REOPEN IS ATTRACTED. 6.4 IN THE PRESENT CASE, THE ASSESSEE HAS SHOWN RO YALTY, LEASE RENT AND INTEREST ON ROYALTY AS PAYABLE AS ON 31.03.2008 . IN OUR CONSIDERED OPINION APPLICABILITY OF PROVISIONS OF T HE SECTION 43B IS NOT EXAMINED BY ASSESSING OFFICER. IN OUR OPINION, THE PROVISION OF THE SECTION 43B IS APPLICABLE. AS PER EXPLANATION 2 OF SECTION147 IT IS VERY CLEAR THAT DUE TO THIS NON-APPLICABILITY OF SE C.43B OF THE ACT, THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. T HE ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS) TO SHOW AS TO HOW THIS FACT WAS FULLY AND TRULY DISCLOSED BEFORE THE ASSESSING AUTHORITY AND THAT THERE WAS N OT FAILURE ON THE PART OF ASSESSEE, ESPECIALLY WHEN PROVISIONS OF THE SECTION 43B IS APPLICABLE. HENCE, THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ACTION OF THE ASSESSING OFFICER IS F ULLY COVERED BY THE - - ITA 2595/MDS/16 13 PROVISIONS OF EXPLANATION 1 TO SECTION 147 OF THE I NCOME TAX ACT WHICH READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD W ITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE THE ASSESSI NG OFFICER WOULD HAVE ASCERTAINED THIS FAT AT THE TIME OF ORIGINAL A SSESSMENT ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NOT MEAN THA T THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPEN ING U/S.147 IS HELD TO BE VALID. THE ASSESSEE HAS TRIED TO TAKE SHELTE R UNDER THE EXCEPTION PROVIDED BY THE ABOVE STATED PROVISO WHER E AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN COMPLETED, NO ACTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CAN BE TAKEN. BUT AS STATED ABOVE, WHEN THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY THE FACT S NECESSARY FOR THE ASSESSMENT, THIS PROVISO WILL NOT COME TO ITS RESCU E. CONSEQUENTLY, WE HOLD THAT THE ENTIRE REASSESSMENT PROCEEDING IN THIS CASE IS VALID AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THE ASSESSEE FAILS ON THIS LEGAL ISSUE. - - ITA 2595/MDS/16 14 7. THE ASSESSEE HAS ALSO RAISED THE ISSUE REGARDIN G THE ADDITIONS ON MERIT. ACCORDING TO THE LD. AR, THESE ARE NOT S TATUTORY PAYMENTS, AS SUCH, THE PROVISIONS OF SEC.43B OF THE ACT ARE N OT APPLICABLE TO THESE PAYMENTS FOR ROYALTY AND LEASE RENT. FURTHER , LD.A.R SUBMITTED THAT THE PROVISIONS OF THE SECTION 43B AR E NOT APPLICABLE TO THE FACTS OF THE CASE. HE ALSO DREW OUR ATTENTION T O THE PARA 3.6 AT PAGE 5 IN THE ASSESSMENT ORDER ITSELF STATES AS FOL LOWS: 3.6 THE APEX COURT WHILE DECIDING THIS ISSUE IN TH E CASE OF CIT V. GORELAL DUBEY (248 ITR 3) HAS PLACED THEIR RELIANCE ON THEIR EARLIER DECISION IN THE CASE OF M/S.INDIA CEMENTS LTD. V. STATE OF T AMIL NADU 188 ITR 690 WHERE THE SUPREME COURT AFTER CONSIDERING THE ISSU E OF ROYALTY IN DEPTH AND DETAIL HELD AS UNDER: ROYALTY ON MINERAL RIGHTS IS NOT A TAX ON LAND BUT A PAYMENT FOR THE USER OF LAND. HENCE, LD.A.R PLEADED THAT SEC.43B OF THE ACT IS NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE. 8. REGARDING ALLOWABILITY OF EXPENDITURE TOWARDS R OYALTY, LD.A.R SUBMITTED THAT WHATEVER PAID IS ONLY RELATIN G TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND IT IS NOT R ELATED TO THE EARLIER ASSESSMENT YEARS. HE ALSO SUBMITTED THAT I T MAY BE - - ITA 2595/MDS/16 15 VERIFIED. THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 9. WE CONSIDER THE ARGUMENT OF BOTH THE PARTIES. ADMITTEDLY, SEC.43B OF THE ACT IS APPLICABLE TO THE ROYALTY PAY MENT, IF IT IS OUTSTANDING AT THE END OF THE CLOSE OF THE FINANCI AL YEAR.AS HELD BY THE SUPREME COURT IN THE CASE OF INDIA CEMENTS L TD. V. STATE OF TAMILNADU (1991) 188 ITR 690(SC). HOWEVER, IF I T IS NOT OUTSTANDING ON THE DUE DATE OF FILING RETURNED, THE RE CANNOT BE ANY DISALLOWANCE U/S.43B OF THE ACT IN RESPECT OF R OYALTY. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILE OF AO F OR FRESH CONSIDERATION AND AO HAS TO DECIDE IT AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE 10. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE U/S.43B FOR LEASE RENT 11. AT THE TIME OF HEARING, LD.A.R SUBMITTED THAT THIS GROUND WAS NOT ADJUDICATED BY THE LD.CIT(A) SEPARATELY. WE FIND THAT THE LD.CIT(A) HAD ERRED IN NOT INDEPENDENTLY ADJUDI CATING THIS GROUND. HENCE, THIS GROUND IS REMITTED BACK TO THE FILE OF AO FOR FRESH CONSIDERATION ON SIMILAR DIRECTION AS ABOVE. - - ITA 2595/MDS/16 16 12. SINCE WE HAVE REMITTED THE ISSUE OF PAYMENT OF ROYALTY AND LEASE RENT, CONSEQUENTLY GROUNDS RELATING TO IN TEREST ON ROYALTY IS ALSO REMITTED TO THE FILE OF AO FOR HI S CONSIDERATION AS ABOVE. 13. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 01 ST MAY, 2017 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 01 ST MAY, 2017. K S SUNDARAM 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.