M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION LIMITED , RANCHI V. DCIT CIR-1 , RANCHI

ITA 341/RAN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1737 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 19-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL
• Keywords: Rejection of books of accounts; Business income; Business expenditure; Capital expenditure
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.337 TO 342/RAN/2017 ( / ASSESSMENT YEARS: 2008-09 TO 2013-14) M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION NEPAL HOUSE AREA, DORANDA, RANCHI- 834002. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AABCJ 2578 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI P.K. MONDAL, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER BENCH: THE CAPTIONED SIX APPEALS FILED BY THE ASSESSEE , PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2013-14 RESPECTIVELY ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-R ANCHI, WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. SINCE THESE SIX APPEALS FILED BY THE ASSESSEE CO NTAINED COMMON AND IDENTICAL ISSUES THEREFORE THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THESE APPEALS , HOWEVER THE ASSESSEE HAVE RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE ARE CONCISED AND SUMMARIZED AS FOLLOWS: I) THE LD. CIT(A) ERRED IN DISALLOWING THE PRIOR PE RIOD EXPENSES THE DETAILS OF WHICH ARE AS FOLLOWS: A) I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008 -09 PRIOR PERIOD EXPENSES OF RS. 89,98,315/- B) I.T.A NO. 338/RAN/2017 FOR ASSESSMENT YEAR 2009- 10 PRIOR PERIOD EXPENSES OF RS. 3,65,17,347/- C) I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010 -11 PRIOR PERIOD EXPENSES OF RS. 21,45,003/- FOR THESE PRIOR PERIOD EXPENSES WE TAKE ASSESSEES APPEAL IN I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008-09 AS A LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 89 ,98,315/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE LD. ASSESSING OFFICER HELD TH AT THESE EXPENSES IS NON- ADMISSIBLE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E SUBMITTED BEFORE THE A.O. THAT PRIOR PERIOD EXPENSES WERE ADMISSIBLE EXPENDIT URE HOWEVER IN THE MERCANTILE SYSTEM OF ACCOUNTING IT HAS TO BE BROUGHT ON RECORD THAT THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D THE APPELLANT WAS NOT AWARE OF ITS LIABILITY FOR EXPENSES TO PROVIDE FOR THE SAME IN THE RELEVANT ACCOUNTING PERIOD. IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY I N CONTROL OF STATE OF JHARKHAND FOR DEVELOPMENT OF MINOR AND MAJOR MINERALS AND ASS ESSEE DERIVES INCOME MAINLY FROM COAL MINES ALLOTTED TO THE ASSESSEE BY JHARK HAND GOVERNMENT. THERE WERE MANY EXPENSES WHICH WERE NOT KNOWN OR NOT ASCERTAIN ED DURING THE YEAR UNDER M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 CONSIDERATION, AS SUCH, THEY COULD NOT BE PROVIDED . AS THE EXPENSES WERE CRYSTALLIZED , SAME WERE PROVIDED AND CLAIMED AS PR IOR PERIOD EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS EXA MINED BY INTERNAL AUDITOR, BY STATUTORY AUDITOR AND BY CAG BEING THE PUBLIC SECTO R UNDERTAKING. THE LD. ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN MA KING THE DISALLOWANCE. HOWEVER THE LD. ASSESSING OFFICER REJECTED THE CONT ENTION OF THE ASSESSEE AND HAS HELD THAT PRIOR PERIOD EXPENSES WERE NOT ADMISSIB LE EXPENSES AND THEREFORE, HE DISALLOWED THE SAME. 6. AGGRIEVED THE STAND SO TAKEN BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3. APART FROM CLAIMING THAT THE PRIOR PERIOD EXP ENSES WERE BUSINESS EXPENSES AND HAD CRYSTALLIZED DURING THE YEAR NO EVIDENCE TO THIS EFFECT WAS FILED. NATURE OF THESE EXPENSES IS NOT KNOWN. IN WHAT MANNER WERE TH ESE INCURRED IN THE PREVIOUS FINANCIAL YEARS AND CRYSTALLIZED DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 TOO IS NOT KNOWN. THE PLEA OF THE APPE LLANT RESTS ON THE AUDIT CARRIED OUT BY THE C&AG. HOWEVER, IT MUST BE BORNE IN MIND THAT THE MANDATE AND THE SCOPE OF AUDIT OF THE C&AG IS VERY DIFFEREN T AND AN AUDIT BY THE C&AG IPSO FACTO DOES NOT DECLARE AN ITEM OF EXPENSES AS ALLOWABLE UNDER THE ACT. 5.4 THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. T HE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED A ND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ONUS IS ON THE ASSES SEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXPENDITURE IN QUESTION FOR ADMISSIBILITY O F DEDUCTION IS NOT IN' THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY IT SELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME IS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT P RODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER H IMSELF INDEPENDENTLY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS AL LOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FO R THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGH T TAKE OF HIS RIGHTS. AT THE SAME TIME, THE O.NUS IS ON THE ASSESSEE TO ESTABLIS H THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE A SSESSEE TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UN DER SECTION 37(1).THE POSITION IS WELL-SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDU STRIES (I) (P.) LTD. [1969] 74ITR 17. 5.5 ACCORDINGLY, IT IS HELD THAT THE LD. ASSESSING OFFICER HAD CORRECTLY MADE A DISALLOWANCE OF THE AMOUNT. GROUND OF APPEAL IS DIS MISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT PRIOR PERIOD EXPENSES HAVE CRYSTALLIZE D IN THE RESPECTIVE ASSESSMENT YEARS. THESE EXPENSES HAS NOT BEEN ALLOWED BASED ON ACCRUAL CONCEPT IN THE PREVIOUS YEAR. WHEN THE EXISTENCE OF THESE EXPENSES AND CRYSTALLIZATION OF THESE EXPENSES HAPPENED IN THE RESPECTIVE ASSESSMENT YEAR S, THEN THESE EXPENSES SHOULD BE ALLOWED. SINCE THESE EXPENSES HAVE CRYSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE WE ALLOW THE CLAIM OF THE ASSE SSEE, IN THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED IN SUMMARIZED GROUND NO. 3 OF THE ORDER. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IN I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010-11 READS AS UNDER: 2. FOR THAT INCOME RETURNED BY THE APPELLANT WAS RS . 19,87,46,018/- AS SUCH, THE LD. A.O. WAS NOT INITIATED FOR COMPUTING INCOME AT RS. 25,15,36,880/- INCOME SUBMITTED BY APPELLANT. THI S IS FACTUALLY INCORRECT AND NET INCOME AFTER CONSIDERING ALL OUT GOING WAS RS. 19,87,46,018/- INCOME DISCLOSED IN THE RETURN FILED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT INCOME RETURNED BY THE ASSESSEE WAS TO THE TUNE OF RS. 19,87,46,018/- WHER EAS THE ASSESSING OFFICER INITIATED FOR COMPUTATION OF INCOME AT RS. 25,15,36 ,880/-. WE NOTE THAT AS PER ASSESSEE IT IS FACTUALLY INCORRECT AND NET INCOME A FTER CONSIDERING ALL OUTGOING WAS TO THE TUNE OF RS. 19,87,46,018/-, THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THIS ISSUE NE EDS TO BE VERIFIED BY THE ASSESSING OFFICER THEREFORE WE THINK IT FIT AND APP ROPRIATE TO REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR HIS NECESSARY VERIFIC ATION AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THEREFORE WE ALLOW THIS GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 10. GROUND NO. 3 RAISED BY THE ASSESSEE IN I.T.A. N O. 340/RAN/2017 FOR ASSESSMENT YEAR 2011-12, THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 20% WHEREAS THE ASSESSEE SHOWN PROFIT @ 19.5% IN HIS BOOKS OF ACCOUNTS. GROUND RAISED BY THE ASSESSEE IN I.T.A. NO. 341/RAN /2017 FOR ASSESSMENT YEAR 2012-13, THE LD. CIT(A) ESTIMATED GROSS PROFIT 8% W HEREAS THE ASSESSEE SHOWN PROFIT @ 7.5%. IN I.T.A. NO. 342/RAN/2017 FOR ASSESSMENT YEAR 201 3-14 THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 8% WHEREAS ASSESSEE SHOWN GROSS PROF IT @ 1.13%. 11. WE NOTE THESE THREE GROUND RELATE TO ESTIMATED GROSS PROFIT THEREFORE WE TAKE LEAD CASE OF ASSESSEES APPEAL IN I.T.A. NO. 340/RA N/2017 FOR ASSESSMENT YEAR 2011-12. 12. BRIEF FACTS QUA THE ISSUE ARE THAT THE APPELLAN T WHICH IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS. THE LD. ASSESSING OFFICE R HAS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STAT UTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, A CCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE ASSESSEE ON A TURNOVER OF RS. 1,05,97,00,000/- ESTIMATED THE PROFIT @ 20% THEREBY MAKING AN ADDITION OF RS. 71,40,000/- TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED AT RS. 21,19,40,000/-. AS REGARDS THE ADDI TION MADE BY THE ASSESSING OFFICER THE ASSESSEE HAS STATED THAT THE ASSESSEE IS A 100 PERCENT JHARKHAND GOVERNMENT OWNED COMPANY AND WAS DOING BUSINESS OF MINING OF COAL AND OTHER MAJOR AND MINOR MINERALS WITH AN INTENTION TO DEVEL OP MINING OF MINERALS WHICH MAY NOT BE PROFITABLE. ASSESSEE HAD DISCLOSED TOTA L RECEIPTS OF RS. 1,05,97,00,000/- ON WHICH NET PROFIT OF RS. 20,48,0 0,000/- WAS DISCLOSED. THE ACCOUNTS OF THE APPELLANT WERE NOT AUDITED BY CAG E VEN THOUGH STATUTORY AUDIT WAS COMPLETED ON THE BASIS OF WHICH RETURN OF INCOM E WAS FILED DISCLOSING INCOME COMPUTED AS PER STATUTORY AUDIT. NO AUDITED PROFIT AND LOSS ACCOUNT OR BALANCE M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 SHEET WAS FILED. HOWEVER, DETAILS OF SALES IN QUANT ITY AND IN VALUE WITH GROSS PROFIT AND NET PROFIT EARNED WAS SHOWN AS PER PROVISIONAL PROJECT WISE PROFIT AND LOSS ACCOUNT. THE LD. ASSESSING OFFICER MADE AN ESTIMATE OF NET PROFIT AT 20% ON TOTAL SALES DISCLOSED AS PER PROFIT AND LOSS ACCOUNT THER EBY AN ADDITION OF RS. 71,40,000/- WAS MADE. THE APPELLANT DISPUTED THIS A DDITION ON THE GROUND THAT VERIFIABLE BOOKS OF ACCOUNT WERE MAINTAINED AND WER E AUDITED BY STATUTORY AUDITORS AND ALSO BY CAG ALTHOUGH AUDIT OF CAG WAS NOT COMPLETED TILL THE RETURN WAS FILED. THE LD. ASSESSING OFFICER, IN THE ASSESS MENT ORDER HAS NOTED THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. ACCORD INGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS . THE LD. ASSESSING OFFICER HAS NOTED THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STATUTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE APPELLANT ON A TURNOVER OF RS . 1,05,97,00,000/- ESTIMATED THE PROFIT @20% THEREBY MAKING AN ADDITION OF RS. 7 1,40,000/- TO THE INCOME OF THE APPELLANT. TOTAL INCOME WAS ASSESSED AT RS. 2L, 19,40,000/-. 13. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: UNDER THE CIRCUMSTANCES, THE LD. ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE PROFITS AS SHOWN BY THE ASSESSEE AND APPLYING PROFI T OF 20%. IT MUST ALSO BE NOTED THAT THE ENHANCEMENT OF PROFIT IS ONLY BY HALF A PE RCENTAGE POINT WHICH CANNOT BE CALLED AS EXCESSIVE AND ARBITRARY. IT IS TRUE THAT IN ESTIMATING PROFITS THERE WOULD BE SOME ELEMENT OF GUESS WORK. IN CST V. H.M. ESUFA LI, H, M. ABDULALI [1973] 90 ITR 271 , THE SUPREME COURT OBSERVED THAT IT IS IN EVITABLE THAT THERE IS SOME GUESS WORK WHILE MAKING THE BEST JUDGMENT ASSESSMEN T. THE ASSESSING AUTHORITY WHILE ASSIGNING THE BEST JUDGMENT SHOULD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THE AUTHORITY SHOULD NO T BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE IS BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASE, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. AS WOULD BE SEEN FROM THE ABOVE JUDGMENT, THE ONLY ISSUES WHICH THE LD. ASSESSING OFFICER NEEDS TO COVER WHIL E MAKING A BEST JUDGMENT ARE THAT THERE NEEDS TO BE A RATIONAL BASIS AND THE ES TIMATION SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. THE FACT THAT THE BOOKS O F ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO JUSTIFY ITS RETURN, THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT BY ENHA NCING THE SAME BY HALF A M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 PERCENTAGE POINT MEETS ALL THE CONDITIONS AS MANDAT ED BY THE APEX COURT IN THE ABOVE REFERRED JUDGMENT. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT SINCE ASSESSEES BOOKS ARE AUDITED, TH E ASSESSING OFFICER DID NOT FIND ANY MISTAKE IN ASSESSEES BOOKS. BOOKS OF ACCOUNTS ARE AUDITED. ASSESSEE IS A GOVT. OWNED COMPANY ITS ACCOUNTS ARE SUBJECT TO CAG AUDIT THEREFORE PROFIT ESTIMATED BY LD. CIT(A) AT HIGHER RATE THAN WHAT IS DECLARED BY ASSESSEE IS NOT ACCEPTABLE. THEREFORE, WE ACCEPT THE GROSS PROFIT R ATE DECLARED BY THE ASSESSEE IN A.Y. 2011-12 @ 19.5% IN A.Y. 2012-13 @ 7.5% AND IN A.Y. 2013-14 @ 1.13%. 15. . IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.0 3.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 15/03/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORA TION 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.337 TO 342/RAN/2017 ( / ASSESSMENT YEARS: 2008-09 TO 2013-14) M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION NEPAL HOUSE AREA, DORANDA, RANCHI- 834002. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AABCJ 2578 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI P.K. MONDAL, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER BENCH: THE CAPTIONED SIX APPEALS FILED BY THE ASSESSEE , PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2013-14 RESPECTIVELY ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-R ANCHI, WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. SINCE THESE SIX APPEALS FILED BY THE ASSESSEE CO NTAINED COMMON AND IDENTICAL ISSUES THEREFORE THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THESE APPEALS , HOWEVER THE ASSESSEE HAVE RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE ARE CONCISED AND SUMMARIZED AS FOLLOWS: I) THE LD. CIT(A) ERRED IN DISALLOWING THE PRIOR PE RIOD EXPENSES THE DETAILS OF WHICH ARE AS FOLLOWS: A) I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008 -09 PRIOR PERIOD EXPENSES OF RS. 89,98,315/- B) I.T.A NO. 338/RAN/2017 FOR ASSESSMENT YEAR 2009- 10 PRIOR PERIOD EXPENSES OF RS. 3,65,17,347/- C) I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010 -11 PRIOR PERIOD EXPENSES OF RS. 21,45,003/- FOR THESE PRIOR PERIOD EXPENSES WE TAKE ASSESSEES APPEAL IN I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008-09 AS A LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 89 ,98,315/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE LD. ASSESSING OFFICER HELD TH AT THESE EXPENSES IS NON- ADMISSIBLE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E SUBMITTED BEFORE THE A.O. THAT PRIOR PERIOD EXPENSES WERE ADMISSIBLE EXPENDIT URE HOWEVER IN THE MERCANTILE SYSTEM OF ACCOUNTING IT HAS TO BE BROUGHT ON RECORD THAT THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D THE APPELLANT WAS NOT AWARE OF ITS LIABILITY FOR EXPENSES TO PROVIDE FOR THE SAME IN THE RELEVANT ACCOUNTING PERIOD. IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY I N CONTROL OF STATE OF JHARKHAND FOR DEVELOPMENT OF MINOR AND MAJOR MINERALS AND ASS ESSEE DERIVES INCOME MAINLY FROM COAL MINES ALLOTTED TO THE ASSESSEE BY JHARK HAND GOVERNMENT. THERE WERE MANY EXPENSES WHICH WERE NOT KNOWN OR NOT ASCERTAIN ED DURING THE YEAR UNDER M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 CONSIDERATION, AS SUCH, THEY COULD NOT BE PROVIDED . AS THE EXPENSES WERE CRYSTALLIZED , SAME WERE PROVIDED AND CLAIMED AS PR IOR PERIOD EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS EXA MINED BY INTERNAL AUDITOR, BY STATUTORY AUDITOR AND BY CAG BEING THE PUBLIC SECTO R UNDERTAKING. THE LD. ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN MA KING THE DISALLOWANCE. HOWEVER THE LD. ASSESSING OFFICER REJECTED THE CONT ENTION OF THE ASSESSEE AND HAS HELD THAT PRIOR PERIOD EXPENSES WERE NOT ADMISSIB LE EXPENSES AND THEREFORE, HE DISALLOWED THE SAME. 6. AGGRIEVED THE STAND SO TAKEN BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3. APART FROM CLAIMING THAT THE PRIOR PERIOD EXP ENSES WERE BUSINESS EXPENSES AND HAD CRYSTALLIZED DURING THE YEAR NO EVIDENCE TO THIS EFFECT WAS FILED. NATURE OF THESE EXPENSES IS NOT KNOWN. IN WHAT MANNER WERE TH ESE INCURRED IN THE PREVIOUS FINANCIAL YEARS AND CRYSTALLIZED DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 TOO IS NOT KNOWN. THE PLEA OF THE APPE LLANT RESTS ON THE AUDIT CARRIED OUT BY THE C&AG. HOWEVER, IT MUST BE BORNE IN MIND THAT THE MANDATE AND THE SCOPE OF AUDIT OF THE C&AG IS VERY DIFFEREN T AND AN AUDIT BY THE C&AG IPSO FACTO DOES NOT DECLARE AN ITEM OF EXPENSES AS ALLOWABLE UNDER THE ACT. 5.4 THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. T HE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED A ND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ONUS IS ON THE ASSES SEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXPENDITURE IN QUESTION FOR ADMISSIBILITY O F DEDUCTION IS NOT IN' THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY IT SELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME IS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT P RODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER H IMSELF INDEPENDENTLY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS AL LOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FO R THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGH T TAKE OF HIS RIGHTS. AT THE SAME TIME, THE O.NUS IS ON THE ASSESSEE TO ESTABLIS H THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE A SSESSEE TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UN DER SECTION 37(1).THE POSITION IS WELL-SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDU STRIES (I) (P.) LTD. [1969] 74ITR 17. 5.5 ACCORDINGLY, IT IS HELD THAT THE LD. ASSESSING OFFICER HAD CORRECTLY MADE A DISALLOWANCE OF THE AMOUNT. GROUND OF APPEAL IS DIS MISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT PRIOR PERIOD EXPENSES HAVE CRYSTALLIZE D IN THE RESPECTIVE ASSESSMENT YEARS. THESE EXPENSES HAS NOT BEEN ALLOWED BASED ON ACCRUAL CONCEPT IN THE PREVIOUS YEAR. WHEN THE EXISTENCE OF THESE EXPENSES AND CRYSTALLIZATION OF THESE EXPENSES HAPPENED IN THE RESPECTIVE ASSESSMENT YEAR S, THEN THESE EXPENSES SHOULD BE ALLOWED. SINCE THESE EXPENSES HAVE CRYSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE WE ALLOW THE CLAIM OF THE ASSE SSEE, IN THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED IN SUMMARIZED GROUND NO. 3 OF THE ORDER. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IN I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010-11 READS AS UNDER: 2. FOR THAT INCOME RETURNED BY THE APPELLANT WAS RS . 19,87,46,018/- AS SUCH, THE LD. A.O. WAS NOT INITIATED FOR COMPUTING INCOME AT RS. 25,15,36,880/- INCOME SUBMITTED BY APPELLANT. THI S IS FACTUALLY INCORRECT AND NET INCOME AFTER CONSIDERING ALL OUT GOING WAS RS. 19,87,46,018/- INCOME DISCLOSED IN THE RETURN FILED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT INCOME RETURNED BY THE ASSESSEE WAS TO THE TUNE OF RS. 19,87,46,018/- WHER EAS THE ASSESSING OFFICER INITIATED FOR COMPUTATION OF INCOME AT RS. 25,15,36 ,880/-. WE NOTE THAT AS PER ASSESSEE IT IS FACTUALLY INCORRECT AND NET INCOME A FTER CONSIDERING ALL OUTGOING WAS TO THE TUNE OF RS. 19,87,46,018/-, THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THIS ISSUE NE EDS TO BE VERIFIED BY THE ASSESSING OFFICER THEREFORE WE THINK IT FIT AND APP ROPRIATE TO REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR HIS NECESSARY VERIFIC ATION AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THEREFORE WE ALLOW THIS GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 10. GROUND NO. 3 RAISED BY THE ASSESSEE IN I.T.A. N O. 340/RAN/2017 FOR ASSESSMENT YEAR 2011-12, THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 20% WHEREAS THE ASSESSEE SHOWN PROFIT @ 19.5% IN HIS BOOKS OF ACCOUNTS. GROUND RAISED BY THE ASSESSEE IN I.T.A. NO. 341/RAN /2017 FOR ASSESSMENT YEAR 2012-13, THE LD. CIT(A) ESTIMATED GROSS PROFIT 8% W HEREAS THE ASSESSEE SHOWN PROFIT @ 7.5%. IN I.T.A. NO. 342/RAN/2017 FOR ASSESSMENT YEAR 201 3-14 THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 8% WHEREAS ASSESSEE SHOWN GROSS PROF IT @ 1.13%. 11. WE NOTE THESE THREE GROUND RELATE TO ESTIMATED GROSS PROFIT THEREFORE WE TAKE LEAD CASE OF ASSESSEES APPEAL IN I.T.A. NO. 340/RA N/2017 FOR ASSESSMENT YEAR 2011-12. 12. BRIEF FACTS QUA THE ISSUE ARE THAT THE APPELLAN T WHICH IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS. THE LD. ASSESSING OFFICE R HAS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STAT UTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, A CCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE ASSESSEE ON A TURNOVER OF RS. 1,05,97,00,000/- ESTIMATED THE PROFIT @ 20% THEREBY MAKING AN ADDITION OF RS. 71,40,000/- TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED AT RS. 21,19,40,000/-. AS REGARDS THE ADDI TION MADE BY THE ASSESSING OFFICER THE ASSESSEE HAS STATED THAT THE ASSESSEE IS A 100 PERCENT JHARKHAND GOVERNMENT OWNED COMPANY AND WAS DOING BUSINESS OF MINING OF COAL AND OTHER MAJOR AND MINOR MINERALS WITH AN INTENTION TO DEVEL OP MINING OF MINERALS WHICH MAY NOT BE PROFITABLE. ASSESSEE HAD DISCLOSED TOTA L RECEIPTS OF RS. 1,05,97,00,000/- ON WHICH NET PROFIT OF RS. 20,48,0 0,000/- WAS DISCLOSED. THE ACCOUNTS OF THE APPELLANT WERE NOT AUDITED BY CAG E VEN THOUGH STATUTORY AUDIT WAS COMPLETED ON THE BASIS OF WHICH RETURN OF INCOM E WAS FILED DISCLOSING INCOME COMPUTED AS PER STATUTORY AUDIT. NO AUDITED PROFIT AND LOSS ACCOUNT OR BALANCE M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 SHEET WAS FILED. HOWEVER, DETAILS OF SALES IN QUANT ITY AND IN VALUE WITH GROSS PROFIT AND NET PROFIT EARNED WAS SHOWN AS PER PROVISIONAL PROJECT WISE PROFIT AND LOSS ACCOUNT. THE LD. ASSESSING OFFICER MADE AN ESTIMATE OF NET PROFIT AT 20% ON TOTAL SALES DISCLOSED AS PER PROFIT AND LOSS ACCOUNT THER EBY AN ADDITION OF RS. 71,40,000/- WAS MADE. THE APPELLANT DISPUTED THIS A DDITION ON THE GROUND THAT VERIFIABLE BOOKS OF ACCOUNT WERE MAINTAINED AND WER E AUDITED BY STATUTORY AUDITORS AND ALSO BY CAG ALTHOUGH AUDIT OF CAG WAS NOT COMPLETED TILL THE RETURN WAS FILED. THE LD. ASSESSING OFFICER, IN THE ASSESS MENT ORDER HAS NOTED THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. ACCORD INGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS . THE LD. ASSESSING OFFICER HAS NOTED THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STATUTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE APPELLANT ON A TURNOVER OF RS . 1,05,97,00,000/- ESTIMATED THE PROFIT @20% THEREBY MAKING AN ADDITION OF RS. 7 1,40,000/- TO THE INCOME OF THE APPELLANT. TOTAL INCOME WAS ASSESSED AT RS. 2L, 19,40,000/-. 13. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: UNDER THE CIRCUMSTANCES, THE LD. ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE PROFITS AS SHOWN BY THE ASSESSEE AND APPLYING PROFI T OF 20%. IT MUST ALSO BE NOTED THAT THE ENHANCEMENT OF PROFIT IS ONLY BY HALF A PE RCENTAGE POINT WHICH CANNOT BE CALLED AS EXCESSIVE AND ARBITRARY. IT IS TRUE THAT IN ESTIMATING PROFITS THERE WOULD BE SOME ELEMENT OF GUESS WORK. IN CST V. H.M. ESUFA LI, H, M. ABDULALI [1973] 90 ITR 271 , THE SUPREME COURT OBSERVED THAT IT IS IN EVITABLE THAT THERE IS SOME GUESS WORK WHILE MAKING THE BEST JUDGMENT ASSESSMEN T. THE ASSESSING AUTHORITY WHILE ASSIGNING THE BEST JUDGMENT SHOULD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THE AUTHORITY SHOULD NO T BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE IS BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASE, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. AS WOULD BE SEEN FROM THE ABOVE JUDGMENT, THE ONLY ISSUES WHICH THE LD. ASSESSING OFFICER NEEDS TO COVER WHIL E MAKING A BEST JUDGMENT ARE THAT THERE NEEDS TO BE A RATIONAL BASIS AND THE ES TIMATION SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. THE FACT THAT THE BOOKS O F ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO JUSTIFY ITS RETURN, THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT BY ENHA NCING THE SAME BY HALF A M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 PERCENTAGE POINT MEETS ALL THE CONDITIONS AS MANDAT ED BY THE APEX COURT IN THE ABOVE REFERRED JUDGMENT. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT SINCE ASSESSEES BOOKS ARE AUDITED, TH E ASSESSING OFFICER DID NOT FIND ANY MISTAKE IN ASSESSEES BOOKS. BOOKS OF ACCOUNTS ARE AUDITED. ASSESSEE IS A GOVT. OWNED COMPANY ITS ACCOUNTS ARE SUBJECT TO CAG AUDIT THEREFORE PROFIT ESTIMATED BY LD. CIT(A) AT HIGHER RATE THAN WHAT IS DECLARED BY ASSESSEE IS NOT ACCEPTABLE. THEREFORE, WE ACCEPT THE GROSS PROFIT R ATE DECLARED BY THE ASSESSEE IN A.Y. 2011-12 @ 19.5% IN A.Y. 2012-13 @ 7.5% AND IN A.Y. 2013-14 @ 1.13%. 15. . IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.0 3.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 15/03/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORA TION 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.337 TO 342/RAN/2017 ( / ASSESSMENT YEARS: 2008-09 TO 2013-14) M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION NEPAL HOUSE AREA, DORANDA, RANCHI- 834002. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AABCJ 2578 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI P.K. MONDAL, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER BENCH: THE CAPTIONED SIX APPEALS FILED BY THE ASSESSEE , PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2013-14 RESPECTIVELY ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-R ANCHI, WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. SINCE THESE SIX APPEALS FILED BY THE ASSESSEE CO NTAINED COMMON AND IDENTICAL ISSUES THEREFORE THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THESE APPEALS , HOWEVER THE ASSESSEE HAVE RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE ARE CONCISED AND SUMMARIZED AS FOLLOWS: I) THE LD. CIT(A) ERRED IN DISALLOWING THE PRIOR PE RIOD EXPENSES THE DETAILS OF WHICH ARE AS FOLLOWS: A) I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008 -09 PRIOR PERIOD EXPENSES OF RS. 89,98,315/- B) I.T.A NO. 338/RAN/2017 FOR ASSESSMENT YEAR 2009- 10 PRIOR PERIOD EXPENSES OF RS. 3,65,17,347/- C) I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010 -11 PRIOR PERIOD EXPENSES OF RS. 21,45,003/- FOR THESE PRIOR PERIOD EXPENSES WE TAKE ASSESSEES APPEAL IN I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008-09 AS A LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 89 ,98,315/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE LD. ASSESSING OFFICER HELD TH AT THESE EXPENSES IS NON- ADMISSIBLE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E SUBMITTED BEFORE THE A.O. THAT PRIOR PERIOD EXPENSES WERE ADMISSIBLE EXPENDIT URE HOWEVER IN THE MERCANTILE SYSTEM OF ACCOUNTING IT HAS TO BE BROUGHT ON RECORD THAT THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D THE APPELLANT WAS NOT AWARE OF ITS LIABILITY FOR EXPENSES TO PROVIDE FOR THE SAME IN THE RELEVANT ACCOUNTING PERIOD. IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY I N CONTROL OF STATE OF JHARKHAND FOR DEVELOPMENT OF MINOR AND MAJOR MINERALS AND ASS ESSEE DERIVES INCOME MAINLY FROM COAL MINES ALLOTTED TO THE ASSESSEE BY JHARK HAND GOVERNMENT. THERE WERE MANY EXPENSES WHICH WERE NOT KNOWN OR NOT ASCERTAIN ED DURING THE YEAR UNDER M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 CONSIDERATION, AS SUCH, THEY COULD NOT BE PROVIDED . AS THE EXPENSES WERE CRYSTALLIZED , SAME WERE PROVIDED AND CLAIMED AS PR IOR PERIOD EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS EXA MINED BY INTERNAL AUDITOR, BY STATUTORY AUDITOR AND BY CAG BEING THE PUBLIC SECTO R UNDERTAKING. THE LD. ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN MA KING THE DISALLOWANCE. HOWEVER THE LD. ASSESSING OFFICER REJECTED THE CONT ENTION OF THE ASSESSEE AND HAS HELD THAT PRIOR PERIOD EXPENSES WERE NOT ADMISSIB LE EXPENSES AND THEREFORE, HE DISALLOWED THE SAME. 6. AGGRIEVED THE STAND SO TAKEN BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3. APART FROM CLAIMING THAT THE PRIOR PERIOD EXP ENSES WERE BUSINESS EXPENSES AND HAD CRYSTALLIZED DURING THE YEAR NO EVIDENCE TO THIS EFFECT WAS FILED. NATURE OF THESE EXPENSES IS NOT KNOWN. IN WHAT MANNER WERE TH ESE INCURRED IN THE PREVIOUS FINANCIAL YEARS AND CRYSTALLIZED DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 TOO IS NOT KNOWN. THE PLEA OF THE APPE LLANT RESTS ON THE AUDIT CARRIED OUT BY THE C&AG. HOWEVER, IT MUST BE BORNE IN MIND THAT THE MANDATE AND THE SCOPE OF AUDIT OF THE C&AG IS VERY DIFFEREN T AND AN AUDIT BY THE C&AG IPSO FACTO DOES NOT DECLARE AN ITEM OF EXPENSES AS ALLOWABLE UNDER THE ACT. 5.4 THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. T HE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED A ND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ONUS IS ON THE ASSES SEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXPENDITURE IN QUESTION FOR ADMISSIBILITY O F DEDUCTION IS NOT IN' THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY IT SELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME IS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT P RODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER H IMSELF INDEPENDENTLY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS AL LOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FO R THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGH T TAKE OF HIS RIGHTS. AT THE SAME TIME, THE O.NUS IS ON THE ASSESSEE TO ESTABLIS H THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE A SSESSEE TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UN DER SECTION 37(1).THE POSITION IS WELL-SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDU STRIES (I) (P.) LTD. [1969] 74ITR 17. 5.5 ACCORDINGLY, IT IS HELD THAT THE LD. ASSESSING OFFICER HAD CORRECTLY MADE A DISALLOWANCE OF THE AMOUNT. GROUND OF APPEAL IS DIS MISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT PRIOR PERIOD EXPENSES HAVE CRYSTALLIZE D IN THE RESPECTIVE ASSESSMENT YEARS. THESE EXPENSES HAS NOT BEEN ALLOWED BASED ON ACCRUAL CONCEPT IN THE PREVIOUS YEAR. WHEN THE EXISTENCE OF THESE EXPENSES AND CRYSTALLIZATION OF THESE EXPENSES HAPPENED IN THE RESPECTIVE ASSESSMENT YEAR S, THEN THESE EXPENSES SHOULD BE ALLOWED. SINCE THESE EXPENSES HAVE CRYSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE WE ALLOW THE CLAIM OF THE ASSE SSEE, IN THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED IN SUMMARIZED GROUND NO. 3 OF THE ORDER. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IN I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010-11 READS AS UNDER: 2. FOR THAT INCOME RETURNED BY THE APPELLANT WAS RS . 19,87,46,018/- AS SUCH, THE LD. A.O. WAS NOT INITIATED FOR COMPUTING INCOME AT RS. 25,15,36,880/- INCOME SUBMITTED BY APPELLANT. THI S IS FACTUALLY INCORRECT AND NET INCOME AFTER CONSIDERING ALL OUT GOING WAS RS. 19,87,46,018/- INCOME DISCLOSED IN THE RETURN FILED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT INCOME RETURNED BY THE ASSESSEE WAS TO THE TUNE OF RS. 19,87,46,018/- WHER EAS THE ASSESSING OFFICER INITIATED FOR COMPUTATION OF INCOME AT RS. 25,15,36 ,880/-. WE NOTE THAT AS PER ASSESSEE IT IS FACTUALLY INCORRECT AND NET INCOME A FTER CONSIDERING ALL OUTGOING WAS TO THE TUNE OF RS. 19,87,46,018/-, THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THIS ISSUE NE EDS TO BE VERIFIED BY THE ASSESSING OFFICER THEREFORE WE THINK IT FIT AND APP ROPRIATE TO REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR HIS NECESSARY VERIFIC ATION AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THEREFORE WE ALLOW THIS GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 10. GROUND NO. 3 RAISED BY THE ASSESSEE IN I.T.A. N O. 340/RAN/2017 FOR ASSESSMENT YEAR 2011-12, THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 20% WHEREAS THE ASSESSEE SHOWN PROFIT @ 19.5% IN HIS BOOKS OF ACCOUNTS. GROUND RAISED BY THE ASSESSEE IN I.T.A. NO. 341/RAN /2017 FOR ASSESSMENT YEAR 2012-13, THE LD. CIT(A) ESTIMATED GROSS PROFIT 8% W HEREAS THE ASSESSEE SHOWN PROFIT @ 7.5%. IN I.T.A. NO. 342/RAN/2017 FOR ASSESSMENT YEAR 201 3-14 THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 8% WHEREAS ASSESSEE SHOWN GROSS PROF IT @ 1.13%. 11. WE NOTE THESE THREE GROUND RELATE TO ESTIMATED GROSS PROFIT THEREFORE WE TAKE LEAD CASE OF ASSESSEES APPEAL IN I.T.A. NO. 340/RA N/2017 FOR ASSESSMENT YEAR 2011-12. 12. BRIEF FACTS QUA THE ISSUE ARE THAT THE APPELLAN T WHICH IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS. THE LD. ASSESSING OFFICE R HAS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STAT UTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, A CCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE ASSESSEE ON A TURNOVER OF RS. 1,05,97,00,000/- ESTIMATED THE PROFIT @ 20% THEREBY MAKING AN ADDITION OF RS. 71,40,000/- TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED AT RS. 21,19,40,000/-. AS REGARDS THE ADDI TION MADE BY THE ASSESSING OFFICER THE ASSESSEE HAS STATED THAT THE ASSESSEE IS A 100 PERCENT JHARKHAND GOVERNMENT OWNED COMPANY AND WAS DOING BUSINESS OF MINING OF COAL AND OTHER MAJOR AND MINOR MINERALS WITH AN INTENTION TO DEVEL OP MINING OF MINERALS WHICH MAY NOT BE PROFITABLE. ASSESSEE HAD DISCLOSED TOTA L RECEIPTS OF RS. 1,05,97,00,000/- ON WHICH NET PROFIT OF RS. 20,48,0 0,000/- WAS DISCLOSED. THE ACCOUNTS OF THE APPELLANT WERE NOT AUDITED BY CAG E VEN THOUGH STATUTORY AUDIT WAS COMPLETED ON THE BASIS OF WHICH RETURN OF INCOM E WAS FILED DISCLOSING INCOME COMPUTED AS PER STATUTORY AUDIT. NO AUDITED PROFIT AND LOSS ACCOUNT OR BALANCE M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 SHEET WAS FILED. HOWEVER, DETAILS OF SALES IN QUANT ITY AND IN VALUE WITH GROSS PROFIT AND NET PROFIT EARNED WAS SHOWN AS PER PROVISIONAL PROJECT WISE PROFIT AND LOSS ACCOUNT. THE LD. ASSESSING OFFICER MADE AN ESTIMATE OF NET PROFIT AT 20% ON TOTAL SALES DISCLOSED AS PER PROFIT AND LOSS ACCOUNT THER EBY AN ADDITION OF RS. 71,40,000/- WAS MADE. THE APPELLANT DISPUTED THIS A DDITION ON THE GROUND THAT VERIFIABLE BOOKS OF ACCOUNT WERE MAINTAINED AND WER E AUDITED BY STATUTORY AUDITORS AND ALSO BY CAG ALTHOUGH AUDIT OF CAG WAS NOT COMPLETED TILL THE RETURN WAS FILED. THE LD. ASSESSING OFFICER, IN THE ASSESS MENT ORDER HAS NOTED THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. ACCORD INGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS . THE LD. ASSESSING OFFICER HAS NOTED THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STATUTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE APPELLANT ON A TURNOVER OF RS . 1,05,97,00,000/- ESTIMATED THE PROFIT @20% THEREBY MAKING AN ADDITION OF RS. 7 1,40,000/- TO THE INCOME OF THE APPELLANT. TOTAL INCOME WAS ASSESSED AT RS. 2L, 19,40,000/-. 13. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: UNDER THE CIRCUMSTANCES, THE LD. ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE PROFITS AS SHOWN BY THE ASSESSEE AND APPLYING PROFI T OF 20%. IT MUST ALSO BE NOTED THAT THE ENHANCEMENT OF PROFIT IS ONLY BY HALF A PE RCENTAGE POINT WHICH CANNOT BE CALLED AS EXCESSIVE AND ARBITRARY. IT IS TRUE THAT IN ESTIMATING PROFITS THERE WOULD BE SOME ELEMENT OF GUESS WORK. IN CST V. H.M. ESUFA LI, H, M. ABDULALI [1973] 90 ITR 271 , THE SUPREME COURT OBSERVED THAT IT IS IN EVITABLE THAT THERE IS SOME GUESS WORK WHILE MAKING THE BEST JUDGMENT ASSESSMEN T. THE ASSESSING AUTHORITY WHILE ASSIGNING THE BEST JUDGMENT SHOULD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THE AUTHORITY SHOULD NO T BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE IS BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASE, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. AS WOULD BE SEEN FROM THE ABOVE JUDGMENT, THE ONLY ISSUES WHICH THE LD. ASSESSING OFFICER NEEDS TO COVER WHIL E MAKING A BEST JUDGMENT ARE THAT THERE NEEDS TO BE A RATIONAL BASIS AND THE ES TIMATION SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. THE FACT THAT THE BOOKS O F ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO JUSTIFY ITS RETURN, THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT BY ENHA NCING THE SAME BY HALF A M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 PERCENTAGE POINT MEETS ALL THE CONDITIONS AS MANDAT ED BY THE APEX COURT IN THE ABOVE REFERRED JUDGMENT. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT SINCE ASSESSEES BOOKS ARE AUDITED, TH E ASSESSING OFFICER DID NOT FIND ANY MISTAKE IN ASSESSEES BOOKS. BOOKS OF ACCOUNTS ARE AUDITED. ASSESSEE IS A GOVT. OWNED COMPANY ITS ACCOUNTS ARE SUBJECT TO CAG AUDIT THEREFORE PROFIT ESTIMATED BY LD. CIT(A) AT HIGHER RATE THAN WHAT IS DECLARED BY ASSESSEE IS NOT ACCEPTABLE. THEREFORE, WE ACCEPT THE GROSS PROFIT R ATE DECLARED BY THE ASSESSEE IN A.Y. 2011-12 @ 19.5% IN A.Y. 2012-13 @ 7.5% AND IN A.Y. 2013-14 @ 1.13%. 15. . IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.0 3.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 15/03/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORA TION 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.337 TO 342/RAN/2017 ( / ASSESSMENT YEARS: 2008-09 TO 2013-14) M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION NEPAL HOUSE AREA, DORANDA, RANCHI- 834002. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AABCJ 2578 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI P.K. MONDAL, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER BENCH: THE CAPTIONED SIX APPEALS FILED BY THE ASSESSEE , PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2013-14 RESPECTIVELY ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-R ANCHI, WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. SINCE THESE SIX APPEALS FILED BY THE ASSESSEE CO NTAINED COMMON AND IDENTICAL ISSUES THEREFORE THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THESE APPEALS , HOWEVER THE ASSESSEE HAVE RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE ARE CONCISED AND SUMMARIZED AS FOLLOWS: I) THE LD. CIT(A) ERRED IN DISALLOWING THE PRIOR PE RIOD EXPENSES THE DETAILS OF WHICH ARE AS FOLLOWS: A) I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008 -09 PRIOR PERIOD EXPENSES OF RS. 89,98,315/- B) I.T.A NO. 338/RAN/2017 FOR ASSESSMENT YEAR 2009- 10 PRIOR PERIOD EXPENSES OF RS. 3,65,17,347/- C) I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010 -11 PRIOR PERIOD EXPENSES OF RS. 21,45,003/- FOR THESE PRIOR PERIOD EXPENSES WE TAKE ASSESSEES APPEAL IN I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008-09 AS A LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 89 ,98,315/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE LD. ASSESSING OFFICER HELD TH AT THESE EXPENSES IS NON- ADMISSIBLE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E SUBMITTED BEFORE THE A.O. THAT PRIOR PERIOD EXPENSES WERE ADMISSIBLE EXPENDIT URE HOWEVER IN THE MERCANTILE SYSTEM OF ACCOUNTING IT HAS TO BE BROUGHT ON RECORD THAT THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D THE APPELLANT WAS NOT AWARE OF ITS LIABILITY FOR EXPENSES TO PROVIDE FOR THE SAME IN THE RELEVANT ACCOUNTING PERIOD. IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY I N CONTROL OF STATE OF JHARKHAND FOR DEVELOPMENT OF MINOR AND MAJOR MINERALS AND ASS ESSEE DERIVES INCOME MAINLY FROM COAL MINES ALLOTTED TO THE ASSESSEE BY JHARK HAND GOVERNMENT. THERE WERE MANY EXPENSES WHICH WERE NOT KNOWN OR NOT ASCERTAIN ED DURING THE YEAR UNDER M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 CONSIDERATION, AS SUCH, THEY COULD NOT BE PROVIDED . AS THE EXPENSES WERE CRYSTALLIZED , SAME WERE PROVIDED AND CLAIMED AS PR IOR PERIOD EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS EXA MINED BY INTERNAL AUDITOR, BY STATUTORY AUDITOR AND BY CAG BEING THE PUBLIC SECTO R UNDERTAKING. THE LD. ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN MA KING THE DISALLOWANCE. HOWEVER THE LD. ASSESSING OFFICER REJECTED THE CONT ENTION OF THE ASSESSEE AND HAS HELD THAT PRIOR PERIOD EXPENSES WERE NOT ADMISSIB LE EXPENSES AND THEREFORE, HE DISALLOWED THE SAME. 6. AGGRIEVED THE STAND SO TAKEN BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3. APART FROM CLAIMING THAT THE PRIOR PERIOD EXP ENSES WERE BUSINESS EXPENSES AND HAD CRYSTALLIZED DURING THE YEAR NO EVIDENCE TO THIS EFFECT WAS FILED. NATURE OF THESE EXPENSES IS NOT KNOWN. IN WHAT MANNER WERE TH ESE INCURRED IN THE PREVIOUS FINANCIAL YEARS AND CRYSTALLIZED DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 TOO IS NOT KNOWN. THE PLEA OF THE APPE LLANT RESTS ON THE AUDIT CARRIED OUT BY THE C&AG. HOWEVER, IT MUST BE BORNE IN MIND THAT THE MANDATE AND THE SCOPE OF AUDIT OF THE C&AG IS VERY DIFFEREN T AND AN AUDIT BY THE C&AG IPSO FACTO DOES NOT DECLARE AN ITEM OF EXPENSES AS ALLOWABLE UNDER THE ACT. 5.4 THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. T HE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED A ND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ONUS IS ON THE ASSES SEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXPENDITURE IN QUESTION FOR ADMISSIBILITY O F DEDUCTION IS NOT IN' THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY IT SELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME IS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT P RODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER H IMSELF INDEPENDENTLY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS AL LOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FO R THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGH T TAKE OF HIS RIGHTS. AT THE SAME TIME, THE O.NUS IS ON THE ASSESSEE TO ESTABLIS H THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE A SSESSEE TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UN DER SECTION 37(1).THE POSITION IS WELL-SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDU STRIES (I) (P.) LTD. [1969] 74ITR 17. 5.5 ACCORDINGLY, IT IS HELD THAT THE LD. ASSESSING OFFICER HAD CORRECTLY MADE A DISALLOWANCE OF THE AMOUNT. GROUND OF APPEAL IS DIS MISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT PRIOR PERIOD EXPENSES HAVE CRYSTALLIZE D IN THE RESPECTIVE ASSESSMENT YEARS. THESE EXPENSES HAS NOT BEEN ALLOWED BASED ON ACCRUAL CONCEPT IN THE PREVIOUS YEAR. WHEN THE EXISTENCE OF THESE EXPENSES AND CRYSTALLIZATION OF THESE EXPENSES HAPPENED IN THE RESPECTIVE ASSESSMENT YEAR S, THEN THESE EXPENSES SHOULD BE ALLOWED. SINCE THESE EXPENSES HAVE CRYSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE WE ALLOW THE CLAIM OF THE ASSE SSEE, IN THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED IN SUMMARIZED GROUND NO. 3 OF THE ORDER. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IN I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010-11 READS AS UNDER: 2. FOR THAT INCOME RETURNED BY THE APPELLANT WAS RS . 19,87,46,018/- AS SUCH, THE LD. A.O. WAS NOT INITIATED FOR COMPUTING INCOME AT RS. 25,15,36,880/- INCOME SUBMITTED BY APPELLANT. THI S IS FACTUALLY INCORRECT AND NET INCOME AFTER CONSIDERING ALL OUT GOING WAS RS. 19,87,46,018/- INCOME DISCLOSED IN THE RETURN FILED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT INCOME RETURNED BY THE ASSESSEE WAS TO THE TUNE OF RS. 19,87,46,018/- WHER EAS THE ASSESSING OFFICER INITIATED FOR COMPUTATION OF INCOME AT RS. 25,15,36 ,880/-. WE NOTE THAT AS PER ASSESSEE IT IS FACTUALLY INCORRECT AND NET INCOME A FTER CONSIDERING ALL OUTGOING WAS TO THE TUNE OF RS. 19,87,46,018/-, THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THIS ISSUE NE EDS TO BE VERIFIED BY THE ASSESSING OFFICER THEREFORE WE THINK IT FIT AND APP ROPRIATE TO REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR HIS NECESSARY VERIFIC ATION AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THEREFORE WE ALLOW THIS GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 10. GROUND NO. 3 RAISED BY THE ASSESSEE IN I.T.A. N O. 340/RAN/2017 FOR ASSESSMENT YEAR 2011-12, THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 20% WHEREAS THE ASSESSEE SHOWN PROFIT @ 19.5% IN HIS BOOKS OF ACCOUNTS. GROUND RAISED BY THE ASSESSEE IN I.T.A. NO. 341/RAN /2017 FOR ASSESSMENT YEAR 2012-13, THE LD. CIT(A) ESTIMATED GROSS PROFIT 8% W HEREAS THE ASSESSEE SHOWN PROFIT @ 7.5%. IN I.T.A. NO. 342/RAN/2017 FOR ASSESSMENT YEAR 201 3-14 THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 8% WHEREAS ASSESSEE SHOWN GROSS PROF IT @ 1.13%. 11. WE NOTE THESE THREE GROUND RELATE TO ESTIMATED GROSS PROFIT THEREFORE WE TAKE LEAD CASE OF ASSESSEES APPEAL IN I.T.A. NO. 340/RA N/2017 FOR ASSESSMENT YEAR 2011-12. 12. BRIEF FACTS QUA THE ISSUE ARE THAT THE APPELLAN T WHICH IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS. THE LD. ASSESSING OFFICE R HAS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STAT UTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, A CCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE ASSESSEE ON A TURNOVER OF RS. 1,05,97,00,000/- ESTIMATED THE PROFIT @ 20% THEREBY MAKING AN ADDITION OF RS. 71,40,000/- TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED AT RS. 21,19,40,000/-. AS REGARDS THE ADDI TION MADE BY THE ASSESSING OFFICER THE ASSESSEE HAS STATED THAT THE ASSESSEE IS A 100 PERCENT JHARKHAND GOVERNMENT OWNED COMPANY AND WAS DOING BUSINESS OF MINING OF COAL AND OTHER MAJOR AND MINOR MINERALS WITH AN INTENTION TO DEVEL OP MINING OF MINERALS WHICH MAY NOT BE PROFITABLE. ASSESSEE HAD DISCLOSED TOTA L RECEIPTS OF RS. 1,05,97,00,000/- ON WHICH NET PROFIT OF RS. 20,48,0 0,000/- WAS DISCLOSED. THE ACCOUNTS OF THE APPELLANT WERE NOT AUDITED BY CAG E VEN THOUGH STATUTORY AUDIT WAS COMPLETED ON THE BASIS OF WHICH RETURN OF INCOM E WAS FILED DISCLOSING INCOME COMPUTED AS PER STATUTORY AUDIT. NO AUDITED PROFIT AND LOSS ACCOUNT OR BALANCE M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 SHEET WAS FILED. HOWEVER, DETAILS OF SALES IN QUANT ITY AND IN VALUE WITH GROSS PROFIT AND NET PROFIT EARNED WAS SHOWN AS PER PROVISIONAL PROJECT WISE PROFIT AND LOSS ACCOUNT. THE LD. ASSESSING OFFICER MADE AN ESTIMATE OF NET PROFIT AT 20% ON TOTAL SALES DISCLOSED AS PER PROFIT AND LOSS ACCOUNT THER EBY AN ADDITION OF RS. 71,40,000/- WAS MADE. THE APPELLANT DISPUTED THIS A DDITION ON THE GROUND THAT VERIFIABLE BOOKS OF ACCOUNT WERE MAINTAINED AND WER E AUDITED BY STATUTORY AUDITORS AND ALSO BY CAG ALTHOUGH AUDIT OF CAG WAS NOT COMPLETED TILL THE RETURN WAS FILED. THE LD. ASSESSING OFFICER, IN THE ASSESS MENT ORDER HAS NOTED THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. ACCORD INGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS . THE LD. ASSESSING OFFICER HAS NOTED THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STATUTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE APPELLANT ON A TURNOVER OF RS . 1,05,97,00,000/- ESTIMATED THE PROFIT @20% THEREBY MAKING AN ADDITION OF RS. 7 1,40,000/- TO THE INCOME OF THE APPELLANT. TOTAL INCOME WAS ASSESSED AT RS. 2L, 19,40,000/-. 13. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: UNDER THE CIRCUMSTANCES, THE LD. ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE PROFITS AS SHOWN BY THE ASSESSEE AND APPLYING PROFI T OF 20%. IT MUST ALSO BE NOTED THAT THE ENHANCEMENT OF PROFIT IS ONLY BY HALF A PE RCENTAGE POINT WHICH CANNOT BE CALLED AS EXCESSIVE AND ARBITRARY. IT IS TRUE THAT IN ESTIMATING PROFITS THERE WOULD BE SOME ELEMENT OF GUESS WORK. IN CST V. H.M. ESUFA LI, H, M. ABDULALI [1973] 90 ITR 271 , THE SUPREME COURT OBSERVED THAT IT IS IN EVITABLE THAT THERE IS SOME GUESS WORK WHILE MAKING THE BEST JUDGMENT ASSESSMEN T. THE ASSESSING AUTHORITY WHILE ASSIGNING THE BEST JUDGMENT SHOULD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THE AUTHORITY SHOULD NO T BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE IS BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASE, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. AS WOULD BE SEEN FROM THE ABOVE JUDGMENT, THE ONLY ISSUES WHICH THE LD. ASSESSING OFFICER NEEDS TO COVER WHIL E MAKING A BEST JUDGMENT ARE THAT THERE NEEDS TO BE A RATIONAL BASIS AND THE ES TIMATION SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. THE FACT THAT THE BOOKS O F ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO JUSTIFY ITS RETURN, THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT BY ENHA NCING THE SAME BY HALF A M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 PERCENTAGE POINT MEETS ALL THE CONDITIONS AS MANDAT ED BY THE APEX COURT IN THE ABOVE REFERRED JUDGMENT. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT SINCE ASSESSEES BOOKS ARE AUDITED, TH E ASSESSING OFFICER DID NOT FIND ANY MISTAKE IN ASSESSEES BOOKS. BOOKS OF ACCOUNTS ARE AUDITED. ASSESSEE IS A GOVT. OWNED COMPANY ITS ACCOUNTS ARE SUBJECT TO CAG AUDIT THEREFORE PROFIT ESTIMATED BY LD. CIT(A) AT HIGHER RATE THAN WHAT IS DECLARED BY ASSESSEE IS NOT ACCEPTABLE. THEREFORE, WE ACCEPT THE GROSS PROFIT R ATE DECLARED BY THE ASSESSEE IN A.Y. 2011-12 @ 19.5% IN A.Y. 2012-13 @ 7.5% AND IN A.Y. 2013-14 @ 1.13%. 15. . IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.0 3.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 15/03/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORA TION 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.337 TO 342/RAN/2017 ( / ASSESSMENT YEARS: 2008-09 TO 2013-14) M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION NEPAL HOUSE AREA, DORANDA, RANCHI- 834002. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AABCJ 2578 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI P.K. MONDAL, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER BENCH: THE CAPTIONED SIX APPEALS FILED BY THE ASSESSEE , PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2013-14 RESPECTIVELY ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-R ANCHI, WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. SINCE THESE SIX APPEALS FILED BY THE ASSESSEE CO NTAINED COMMON AND IDENTICAL ISSUES THEREFORE THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THESE APPEALS , HOWEVER THE ASSESSEE HAVE RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE ARE CONCISED AND SUMMARIZED AS FOLLOWS: I) THE LD. CIT(A) ERRED IN DISALLOWING THE PRIOR PE RIOD EXPENSES THE DETAILS OF WHICH ARE AS FOLLOWS: A) I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008 -09 PRIOR PERIOD EXPENSES OF RS. 89,98,315/- B) I.T.A NO. 338/RAN/2017 FOR ASSESSMENT YEAR 2009- 10 PRIOR PERIOD EXPENSES OF RS. 3,65,17,347/- C) I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010 -11 PRIOR PERIOD EXPENSES OF RS. 21,45,003/- FOR THESE PRIOR PERIOD EXPENSES WE TAKE ASSESSEES APPEAL IN I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008-09 AS A LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 89 ,98,315/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE LD. ASSESSING OFFICER HELD TH AT THESE EXPENSES IS NON- ADMISSIBLE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E SUBMITTED BEFORE THE A.O. THAT PRIOR PERIOD EXPENSES WERE ADMISSIBLE EXPENDIT URE HOWEVER IN THE MERCANTILE SYSTEM OF ACCOUNTING IT HAS TO BE BROUGHT ON RECORD THAT THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D THE APPELLANT WAS NOT AWARE OF ITS LIABILITY FOR EXPENSES TO PROVIDE FOR THE SAME IN THE RELEVANT ACCOUNTING PERIOD. IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY I N CONTROL OF STATE OF JHARKHAND FOR DEVELOPMENT OF MINOR AND MAJOR MINERALS AND ASS ESSEE DERIVES INCOME MAINLY FROM COAL MINES ALLOTTED TO THE ASSESSEE BY JHARK HAND GOVERNMENT. THERE WERE MANY EXPENSES WHICH WERE NOT KNOWN OR NOT ASCERTAIN ED DURING THE YEAR UNDER M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 CONSIDERATION, AS SUCH, THEY COULD NOT BE PROVIDED . AS THE EXPENSES WERE CRYSTALLIZED , SAME WERE PROVIDED AND CLAIMED AS PR IOR PERIOD EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS EXA MINED BY INTERNAL AUDITOR, BY STATUTORY AUDITOR AND BY CAG BEING THE PUBLIC SECTO R UNDERTAKING. THE LD. ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN MA KING THE DISALLOWANCE. HOWEVER THE LD. ASSESSING OFFICER REJECTED THE CONT ENTION OF THE ASSESSEE AND HAS HELD THAT PRIOR PERIOD EXPENSES WERE NOT ADMISSIB LE EXPENSES AND THEREFORE, HE DISALLOWED THE SAME. 6. AGGRIEVED THE STAND SO TAKEN BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3. APART FROM CLAIMING THAT THE PRIOR PERIOD EXP ENSES WERE BUSINESS EXPENSES AND HAD CRYSTALLIZED DURING THE YEAR NO EVIDENCE TO THIS EFFECT WAS FILED. NATURE OF THESE EXPENSES IS NOT KNOWN. IN WHAT MANNER WERE TH ESE INCURRED IN THE PREVIOUS FINANCIAL YEARS AND CRYSTALLIZED DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 TOO IS NOT KNOWN. THE PLEA OF THE APPE LLANT RESTS ON THE AUDIT CARRIED OUT BY THE C&AG. HOWEVER, IT MUST BE BORNE IN MIND THAT THE MANDATE AND THE SCOPE OF AUDIT OF THE C&AG IS VERY DIFFEREN T AND AN AUDIT BY THE C&AG IPSO FACTO DOES NOT DECLARE AN ITEM OF EXPENSES AS ALLOWABLE UNDER THE ACT. 5.4 THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. T HE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED A ND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ONUS IS ON THE ASSES SEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXPENDITURE IN QUESTION FOR ADMISSIBILITY O F DEDUCTION IS NOT IN' THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY IT SELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME IS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT P RODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER H IMSELF INDEPENDENTLY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS AL LOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FO R THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGH T TAKE OF HIS RIGHTS. AT THE SAME TIME, THE O.NUS IS ON THE ASSESSEE TO ESTABLIS H THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE A SSESSEE TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UN DER SECTION 37(1).THE POSITION IS WELL-SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDU STRIES (I) (P.) LTD. [1969] 74ITR 17. 5.5 ACCORDINGLY, IT IS HELD THAT THE LD. ASSESSING OFFICER HAD CORRECTLY MADE A DISALLOWANCE OF THE AMOUNT. GROUND OF APPEAL IS DIS MISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT PRIOR PERIOD EXPENSES HAVE CRYSTALLIZE D IN THE RESPECTIVE ASSESSMENT YEARS. THESE EXPENSES HAS NOT BEEN ALLOWED BASED ON ACCRUAL CONCEPT IN THE PREVIOUS YEAR. WHEN THE EXISTENCE OF THESE EXPENSES AND CRYSTALLIZATION OF THESE EXPENSES HAPPENED IN THE RESPECTIVE ASSESSMENT YEAR S, THEN THESE EXPENSES SHOULD BE ALLOWED. SINCE THESE EXPENSES HAVE CRYSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE WE ALLOW THE CLAIM OF THE ASSE SSEE, IN THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED IN SUMMARIZED GROUND NO. 3 OF THE ORDER. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IN I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010-11 READS AS UNDER: 2. FOR THAT INCOME RETURNED BY THE APPELLANT WAS RS . 19,87,46,018/- AS SUCH, THE LD. A.O. WAS NOT INITIATED FOR COMPUTING INCOME AT RS. 25,15,36,880/- INCOME SUBMITTED BY APPELLANT. THI S IS FACTUALLY INCORRECT AND NET INCOME AFTER CONSIDERING ALL OUT GOING WAS RS. 19,87,46,018/- INCOME DISCLOSED IN THE RETURN FILED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT INCOME RETURNED BY THE ASSESSEE WAS TO THE TUNE OF RS. 19,87,46,018/- WHER EAS THE ASSESSING OFFICER INITIATED FOR COMPUTATION OF INCOME AT RS. 25,15,36 ,880/-. WE NOTE THAT AS PER ASSESSEE IT IS FACTUALLY INCORRECT AND NET INCOME A FTER CONSIDERING ALL OUTGOING WAS TO THE TUNE OF RS. 19,87,46,018/-, THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THIS ISSUE NE EDS TO BE VERIFIED BY THE ASSESSING OFFICER THEREFORE WE THINK IT FIT AND APP ROPRIATE TO REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR HIS NECESSARY VERIFIC ATION AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THEREFORE WE ALLOW THIS GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 10. GROUND NO. 3 RAISED BY THE ASSESSEE IN I.T.A. N O. 340/RAN/2017 FOR ASSESSMENT YEAR 2011-12, THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 20% WHEREAS THE ASSESSEE SHOWN PROFIT @ 19.5% IN HIS BOOKS OF ACCOUNTS. GROUND RAISED BY THE ASSESSEE IN I.T.A. NO. 341/RAN /2017 FOR ASSESSMENT YEAR 2012-13, THE LD. CIT(A) ESTIMATED GROSS PROFIT 8% W HEREAS THE ASSESSEE SHOWN PROFIT @ 7.5%. IN I.T.A. NO. 342/RAN/2017 FOR ASSESSMENT YEAR 201 3-14 THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 8% WHEREAS ASSESSEE SHOWN GROSS PROF IT @ 1.13%. 11. WE NOTE THESE THREE GROUND RELATE TO ESTIMATED GROSS PROFIT THEREFORE WE TAKE LEAD CASE OF ASSESSEES APPEAL IN I.T.A. NO. 340/RA N/2017 FOR ASSESSMENT YEAR 2011-12. 12. BRIEF FACTS QUA THE ISSUE ARE THAT THE APPELLAN T WHICH IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS. THE LD. ASSESSING OFFICE R HAS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STAT UTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, A CCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE ASSESSEE ON A TURNOVER OF RS. 1,05,97,00,000/- ESTIMATED THE PROFIT @ 20% THEREBY MAKING AN ADDITION OF RS. 71,40,000/- TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED AT RS. 21,19,40,000/-. AS REGARDS THE ADDI TION MADE BY THE ASSESSING OFFICER THE ASSESSEE HAS STATED THAT THE ASSESSEE IS A 100 PERCENT JHARKHAND GOVERNMENT OWNED COMPANY AND WAS DOING BUSINESS OF MINING OF COAL AND OTHER MAJOR AND MINOR MINERALS WITH AN INTENTION TO DEVEL OP MINING OF MINERALS WHICH MAY NOT BE PROFITABLE. ASSESSEE HAD DISCLOSED TOTA L RECEIPTS OF RS. 1,05,97,00,000/- ON WHICH NET PROFIT OF RS. 20,48,0 0,000/- WAS DISCLOSED. THE ACCOUNTS OF THE APPELLANT WERE NOT AUDITED BY CAG E VEN THOUGH STATUTORY AUDIT WAS COMPLETED ON THE BASIS OF WHICH RETURN OF INCOM E WAS FILED DISCLOSING INCOME COMPUTED AS PER STATUTORY AUDIT. NO AUDITED PROFIT AND LOSS ACCOUNT OR BALANCE M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 SHEET WAS FILED. HOWEVER, DETAILS OF SALES IN QUANT ITY AND IN VALUE WITH GROSS PROFIT AND NET PROFIT EARNED WAS SHOWN AS PER PROVISIONAL PROJECT WISE PROFIT AND LOSS ACCOUNT. THE LD. ASSESSING OFFICER MADE AN ESTIMATE OF NET PROFIT AT 20% ON TOTAL SALES DISCLOSED AS PER PROFIT AND LOSS ACCOUNT THER EBY AN ADDITION OF RS. 71,40,000/- WAS MADE. THE APPELLANT DISPUTED THIS A DDITION ON THE GROUND THAT VERIFIABLE BOOKS OF ACCOUNT WERE MAINTAINED AND WER E AUDITED BY STATUTORY AUDITORS AND ALSO BY CAG ALTHOUGH AUDIT OF CAG WAS NOT COMPLETED TILL THE RETURN WAS FILED. THE LD. ASSESSING OFFICER, IN THE ASSESS MENT ORDER HAS NOTED THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. ACCORD INGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS . THE LD. ASSESSING OFFICER HAS NOTED THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STATUTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE APPELLANT ON A TURNOVER OF RS . 1,05,97,00,000/- ESTIMATED THE PROFIT @20% THEREBY MAKING AN ADDITION OF RS. 7 1,40,000/- TO THE INCOME OF THE APPELLANT. TOTAL INCOME WAS ASSESSED AT RS. 2L, 19,40,000/-. 13. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: UNDER THE CIRCUMSTANCES, THE LD. ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE PROFITS AS SHOWN BY THE ASSESSEE AND APPLYING PROFI T OF 20%. IT MUST ALSO BE NOTED THAT THE ENHANCEMENT OF PROFIT IS ONLY BY HALF A PE RCENTAGE POINT WHICH CANNOT BE CALLED AS EXCESSIVE AND ARBITRARY. IT IS TRUE THAT IN ESTIMATING PROFITS THERE WOULD BE SOME ELEMENT OF GUESS WORK. IN CST V. H.M. ESUFA LI, H, M. ABDULALI [1973] 90 ITR 271 , THE SUPREME COURT OBSERVED THAT IT IS IN EVITABLE THAT THERE IS SOME GUESS WORK WHILE MAKING THE BEST JUDGMENT ASSESSMEN T. THE ASSESSING AUTHORITY WHILE ASSIGNING THE BEST JUDGMENT SHOULD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THE AUTHORITY SHOULD NO T BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE IS BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASE, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. AS WOULD BE SEEN FROM THE ABOVE JUDGMENT, THE ONLY ISSUES WHICH THE LD. ASSESSING OFFICER NEEDS TO COVER WHIL E MAKING A BEST JUDGMENT ARE THAT THERE NEEDS TO BE A RATIONAL BASIS AND THE ES TIMATION SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. THE FACT THAT THE BOOKS O F ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO JUSTIFY ITS RETURN, THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT BY ENHA NCING THE SAME BY HALF A M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 PERCENTAGE POINT MEETS ALL THE CONDITIONS AS MANDAT ED BY THE APEX COURT IN THE ABOVE REFERRED JUDGMENT. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT SINCE ASSESSEES BOOKS ARE AUDITED, TH E ASSESSING OFFICER DID NOT FIND ANY MISTAKE IN ASSESSEES BOOKS. BOOKS OF ACCOUNTS ARE AUDITED. ASSESSEE IS A GOVT. OWNED COMPANY ITS ACCOUNTS ARE SUBJECT TO CAG AUDIT THEREFORE PROFIT ESTIMATED BY LD. CIT(A) AT HIGHER RATE THAN WHAT IS DECLARED BY ASSESSEE IS NOT ACCEPTABLE. THEREFORE, WE ACCEPT THE GROSS PROFIT R ATE DECLARED BY THE ASSESSEE IN A.Y. 2011-12 @ 19.5% IN A.Y. 2012-13 @ 7.5% AND IN A.Y. 2013-14 @ 1.13%. 15. . IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.0 3.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 15/03/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORA TION 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.337 TO 342/RAN/2017 ( / ASSESSMENT YEARS: 2008-09 TO 2013-14) M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION NEPAL HOUSE AREA, DORANDA, RANCHI- 834002. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO.: AABCJ 2578 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI P.K. MONDAL, JCIT / DATE OF HEARING : 11/01/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER BENCH: THE CAPTIONED SIX APPEALS FILED BY THE ASSESSEE , PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2013-14 RESPECTIVELY ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL)-R ANCHI, WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICER U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. SINCE THESE SIX APPEALS FILED BY THE ASSESSEE CO NTAINED COMMON AND IDENTICAL ISSUES THEREFORE THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. IN THESE APPEALS , HOWEVER THE ASSESSEE HAVE RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE ARE CONCISED AND SUMMARIZED AS FOLLOWS: I) THE LD. CIT(A) ERRED IN DISALLOWING THE PRIOR PE RIOD EXPENSES THE DETAILS OF WHICH ARE AS FOLLOWS: A) I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008 -09 PRIOR PERIOD EXPENSES OF RS. 89,98,315/- B) I.T.A NO. 338/RAN/2017 FOR ASSESSMENT YEAR 2009- 10 PRIOR PERIOD EXPENSES OF RS. 3,65,17,347/- C) I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010 -11 PRIOR PERIOD EXPENSES OF RS. 21,45,003/- FOR THESE PRIOR PERIOD EXPENSES WE TAKE ASSESSEES APPEAL IN I.T.A. NO. 337/RAN/2017 FOR ASSESSMENT YEAR 2008-09 AS A LEAD CASE. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 89 ,98,315/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE LD. ASSESSING OFFICER HELD TH AT THESE EXPENSES IS NON- ADMISSIBLE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E SUBMITTED BEFORE THE A.O. THAT PRIOR PERIOD EXPENSES WERE ADMISSIBLE EXPENDIT URE HOWEVER IN THE MERCANTILE SYSTEM OF ACCOUNTING IT HAS TO BE BROUGHT ON RECORD THAT THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D THE APPELLANT WAS NOT AWARE OF ITS LIABILITY FOR EXPENSES TO PROVIDE FOR THE SAME IN THE RELEVANT ACCOUNTING PERIOD. IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY I N CONTROL OF STATE OF JHARKHAND FOR DEVELOPMENT OF MINOR AND MAJOR MINERALS AND ASS ESSEE DERIVES INCOME MAINLY FROM COAL MINES ALLOTTED TO THE ASSESSEE BY JHARK HAND GOVERNMENT. THERE WERE MANY EXPENSES WHICH WERE NOT KNOWN OR NOT ASCERTAIN ED DURING THE YEAR UNDER M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 CONSIDERATION, AS SUCH, THEY COULD NOT BE PROVIDED . AS THE EXPENSES WERE CRYSTALLIZED , SAME WERE PROVIDED AND CLAIMED AS PR IOR PERIOD EXPENSES. THE EXPENSES INCURRED WERE FULLY VERIFIABLE AND WAS EXA MINED BY INTERNAL AUDITOR, BY STATUTORY AUDITOR AND BY CAG BEING THE PUBLIC SECTO R UNDERTAKING. THE LD. ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN MA KING THE DISALLOWANCE. HOWEVER THE LD. ASSESSING OFFICER REJECTED THE CONT ENTION OF THE ASSESSEE AND HAS HELD THAT PRIOR PERIOD EXPENSES WERE NOT ADMISSIB LE EXPENSES AND THEREFORE, HE DISALLOWED THE SAME. 6. AGGRIEVED THE STAND SO TAKEN BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: 5.3. APART FROM CLAIMING THAT THE PRIOR PERIOD EXP ENSES WERE BUSINESS EXPENSES AND HAD CRYSTALLIZED DURING THE YEAR NO EVIDENCE TO THIS EFFECT WAS FILED. NATURE OF THESE EXPENSES IS NOT KNOWN. IN WHAT MANNER WERE TH ESE INCURRED IN THE PREVIOUS FINANCIAL YEARS AND CRYSTALLIZED DURING THE FINANCI AL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 TOO IS NOT KNOWN. THE PLEA OF THE APPE LLANT RESTS ON THE AUDIT CARRIED OUT BY THE C&AG. HOWEVER, IT MUST BE BORNE IN MIND THAT THE MANDATE AND THE SCOPE OF AUDIT OF THE C&AG IS VERY DIFFEREN T AND AN AUDIT BY THE C&AG IPSO FACTO DOES NOT DECLARE AN ITEM OF EXPENSES AS ALLOWABLE UNDER THE ACT. 5.4 THE LAW REGARDING CLAIM OF EXPENSES IS CLEAR. T HE ONUS IS CLEARLY ON THE APPELLANT TO SHOW THAT THE EXPENSES WERE INCURRED A ND THAT THEY WERE REVENUE IN NATURE WHILE AT THE SAME TIME THAT THEY WERE LAID O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE BURDEN OF PROVING THAT A PARTICULAR EXPENDITURE HAS BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS SO THAT THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTIO N IS ON THE ASSESSEE. THE MERE OBJECT OF INCURRING EXPENDITURE IS NOT DECISIVE WHE THER IT IS OF A CAPITAL NATURE OR REVENUE NATURE. THEREFORE, THE ONUS IS ON THE ASSES SEE TO PROVE, INTER ALIA, THAT THE ITEM OF EXPENDITURE IN QUESTION FOR ADMISSIBILITY O F DEDUCTION IS NOT IN' THE NATURE OF CAPITAL EXPENDITURE. FURTHER, MERE PAYMENT BY IT SELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF THE SAID EXPENDITURE UNLES S THE SAME IS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS OF PROOF IS ALWAYS UPON THE ASSESSEE. IT CANNOT BE SAID THAT EVEN IF THE TAXPAYER DOES NOT P RODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM FOR DEDUCTION, THE ASSESSING OFFICER H IMSELF INDEPENDENTLY IS TO COLLECT AND DECIDE THAT THE DEDUCTION CLAIMED IS AL LOWABLE HAVING REGARD TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE. IT IS FO R THE TAXPAYER TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. BUT, WHETHER AN ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON THE PROVISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH HE MIGH T TAKE OF HIS RIGHTS. AT THE SAME TIME, THE O.NUS IS ON THE ASSESSEE TO ESTABLIS H THAT THERE ARE FACTS IN EXISTENCE WHICH ENTITLE IT TO A DEDUCTION AND IT IS FOR THE A SSESSEE TO ADDUCE NECESSARY EVIDENCE IN THIS REGARD. THEREFORE, IF THE ASSESSEE FAILS TO PLACE SUFFICIENT MATERIALS, HE IS NOT ENTITLED TO CLAIM ALLOWANCE UN DER SECTION 37(1).THE POSITION IS WELL-SETTLED BY THE JUDGMENTS OF THE APEX COURT IN CIT V. CALCUTTA AGENCY LTD. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 [1951] 19 ITR 191 AND CIT V. IMPERIAL CHEMICAL INDU STRIES (I) (P.) LTD. [1969] 74ITR 17. 5.5 ACCORDINGLY, IT IS HELD THAT THE LD. ASSESSING OFFICER HAD CORRECTLY MADE A DISALLOWANCE OF THE AMOUNT. GROUND OF APPEAL IS DIS MISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT PRIOR PERIOD EXPENSES HAVE CRYSTALLIZE D IN THE RESPECTIVE ASSESSMENT YEARS. THESE EXPENSES HAS NOT BEEN ALLOWED BASED ON ACCRUAL CONCEPT IN THE PREVIOUS YEAR. WHEN THE EXISTENCE OF THESE EXPENSES AND CRYSTALLIZATION OF THESE EXPENSES HAPPENED IN THE RESPECTIVE ASSESSMENT YEAR S, THEN THESE EXPENSES SHOULD BE ALLOWED. SINCE THESE EXPENSES HAVE CRYSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION, HENCE WE ALLOW THE CLAIM OF THE ASSE SSEE, IN THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED IN SUMMARIZED GROUND NO. 3 OF THE ORDER. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IN I.T.A. NO. 339/RAN/2017 FOR ASSESSMENT YEAR 2010-11 READS AS UNDER: 2. FOR THAT INCOME RETURNED BY THE APPELLANT WAS RS . 19,87,46,018/- AS SUCH, THE LD. A.O. WAS NOT INITIATED FOR COMPUTING INCOME AT RS. 25,15,36,880/- INCOME SUBMITTED BY APPELLANT. THI S IS FACTUALLY INCORRECT AND NET INCOME AFTER CONSIDERING ALL OUT GOING WAS RS. 19,87,46,018/- INCOME DISCLOSED IN THE RETURN FILED. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT INCOME RETURNED BY THE ASSESSEE WAS TO THE TUNE OF RS. 19,87,46,018/- WHER EAS THE ASSESSING OFFICER INITIATED FOR COMPUTATION OF INCOME AT RS. 25,15,36 ,880/-. WE NOTE THAT AS PER ASSESSEE IT IS FACTUALLY INCORRECT AND NET INCOME A FTER CONSIDERING ALL OUTGOING WAS TO THE TUNE OF RS. 19,87,46,018/-, THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THIS ISSUE NE EDS TO BE VERIFIED BY THE ASSESSING OFFICER THEREFORE WE THINK IT FIT AND APP ROPRIATE TO REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR HIS NECESSARY VERIFIC ATION AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THEREFORE WE ALLOW THIS GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 10. GROUND NO. 3 RAISED BY THE ASSESSEE IN I.T.A. N O. 340/RAN/2017 FOR ASSESSMENT YEAR 2011-12, THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 20% WHEREAS THE ASSESSEE SHOWN PROFIT @ 19.5% IN HIS BOOKS OF ACCOUNTS. GROUND RAISED BY THE ASSESSEE IN I.T.A. NO. 341/RAN /2017 FOR ASSESSMENT YEAR 2012-13, THE LD. CIT(A) ESTIMATED GROSS PROFIT 8% W HEREAS THE ASSESSEE SHOWN PROFIT @ 7.5%. IN I.T.A. NO. 342/RAN/2017 FOR ASSESSMENT YEAR 201 3-14 THE LD. CIT(A) ESTIMATED GROSS PROFIT @ 8% WHEREAS ASSESSEE SHOWN GROSS PROF IT @ 1.13%. 11. WE NOTE THESE THREE GROUND RELATE TO ESTIMATED GROSS PROFIT THEREFORE WE TAKE LEAD CASE OF ASSESSEES APPEAL IN I.T.A. NO. 340/RA N/2017 FOR ASSESSMENT YEAR 2011-12. 12. BRIEF FACTS QUA THE ISSUE ARE THAT THE APPELLAN T WHICH IS A STATE PUBLIC SECTOR UNDERTAKING (SPSU) ENGAGED IN THE BUSINESS OF MININ G WORK, DID NOT FILE ITS RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 148 OF THE ACT W AS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS. THE LD. ASSESSING OFFICE R HAS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STAT UTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, A CCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE ASSESSEE ON A TURNOVER OF RS. 1,05,97,00,000/- ESTIMATED THE PROFIT @ 20% THEREBY MAKING AN ADDITION OF RS. 71,40,000/- TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED AT RS. 21,19,40,000/-. AS REGARDS THE ADDI TION MADE BY THE ASSESSING OFFICER THE ASSESSEE HAS STATED THAT THE ASSESSEE IS A 100 PERCENT JHARKHAND GOVERNMENT OWNED COMPANY AND WAS DOING BUSINESS OF MINING OF COAL AND OTHER MAJOR AND MINOR MINERALS WITH AN INTENTION TO DEVEL OP MINING OF MINERALS WHICH MAY NOT BE PROFITABLE. ASSESSEE HAD DISCLOSED TOTA L RECEIPTS OF RS. 1,05,97,00,000/- ON WHICH NET PROFIT OF RS. 20,48,0 0,000/- WAS DISCLOSED. THE ACCOUNTS OF THE APPELLANT WERE NOT AUDITED BY CAG E VEN THOUGH STATUTORY AUDIT WAS COMPLETED ON THE BASIS OF WHICH RETURN OF INCOM E WAS FILED DISCLOSING INCOME COMPUTED AS PER STATUTORY AUDIT. NO AUDITED PROFIT AND LOSS ACCOUNT OR BALANCE M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 SHEET WAS FILED. HOWEVER, DETAILS OF SALES IN QUANT ITY AND IN VALUE WITH GROSS PROFIT AND NET PROFIT EARNED WAS SHOWN AS PER PROVISIONAL PROJECT WISE PROFIT AND LOSS ACCOUNT. THE LD. ASSESSING OFFICER MADE AN ESTIMATE OF NET PROFIT AT 20% ON TOTAL SALES DISCLOSED AS PER PROFIT AND LOSS ACCOUNT THER EBY AN ADDITION OF RS. 71,40,000/- WAS MADE. THE APPELLANT DISPUTED THIS A DDITION ON THE GROUND THAT VERIFIABLE BOOKS OF ACCOUNT WERE MAINTAINED AND WER E AUDITED BY STATUTORY AUDITORS AND ALSO BY CAG ALTHOUGH AUDIT OF CAG WAS NOT COMPLETED TILL THE RETURN WAS FILED. THE LD. ASSESSING OFFICER, IN THE ASSESS MENT ORDER HAS NOTED THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. ACCORD INGLY, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.10.2014. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLANT WAS NOT ABLE TO PRODUCE BOOKS OF ACCOUNTS . THE LD. ASSESSING OFFICER HAS NOTED THAT THE APPELLANT WAS NOT ABLE TO SUBMIT ANY OTHER DETAILS AS NO STATUTORY AUDIT AS MANDATED UNDER THE ACT WAS CONDUCTED. THE LD. ASSESSING OFFICER, ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND IN PLACE OF PROFIT OF 19.5% SHOWN BY THE APPELLANT ON A TURNOVER OF RS . 1,05,97,00,000/- ESTIMATED THE PROFIT @20% THEREBY MAKING AN ADDITION OF RS. 7 1,40,000/- TO THE INCOME OF THE APPELLANT. TOTAL INCOME WAS ASSESSED AT RS. 2L, 19,40,000/-. 13. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: UNDER THE CIRCUMSTANCES, THE LD. ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE PROFITS AS SHOWN BY THE ASSESSEE AND APPLYING PROFI T OF 20%. IT MUST ALSO BE NOTED THAT THE ENHANCEMENT OF PROFIT IS ONLY BY HALF A PE RCENTAGE POINT WHICH CANNOT BE CALLED AS EXCESSIVE AND ARBITRARY. IT IS TRUE THAT IN ESTIMATING PROFITS THERE WOULD BE SOME ELEMENT OF GUESS WORK. IN CST V. H.M. ESUFA LI, H, M. ABDULALI [1973] 90 ITR 271 , THE SUPREME COURT OBSERVED THAT IT IS IN EVITABLE THAT THERE IS SOME GUESS WORK WHILE MAKING THE BEST JUDGMENT ASSESSMEN T. THE ASSESSING AUTHORITY WHILE ASSIGNING THE BEST JUDGMENT SHOULD ARRIVE AT HIS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THE AUTHORITY SHOULD NO T BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE IS BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASE, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUAT ION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. AS WOULD BE SEEN FROM THE ABOVE JUDGMENT, THE ONLY ISSUES WHICH THE LD. ASSESSING OFFICER NEEDS TO COVER WHIL E MAKING A BEST JUDGMENT ARE THAT THERE NEEDS TO BE A RATIONAL BASIS AND THE ES TIMATION SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. THE FACT THAT THE BOOKS O F ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO JUSTIFY ITS RETURN, THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT BY ENHA NCING THE SAME BY HALF A M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORATION ITA NOS.337 TO 342/RAN/2017 ASSESSMENT YEARS:2008-09 TO 2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 PERCENTAGE POINT MEETS ALL THE CONDITIONS AS MANDAT ED BY THE APEX COURT IN THE ABOVE REFERRED JUDGMENT. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT SINCE ASSESSEES BOOKS ARE AUDITED, TH E ASSESSING OFFICER DID NOT FIND ANY MISTAKE IN ASSESSEES BOOKS. BOOKS OF ACCOUNTS ARE AUDITED. ASSESSEE IS A GOVT. OWNED COMPANY ITS ACCOUNTS ARE SUBJECT TO CAG AUDIT THEREFORE PROFIT ESTIMATED BY LD. CIT(A) AT HIGHER RATE THAN WHAT IS DECLARED BY ASSESSEE IS NOT ACCEPTABLE. THEREFORE, WE ACCEPT THE GROSS PROFIT R ATE DECLARED BY THE ASSESSEE IN A.Y. 2011-12 @ 19.5% IN A.Y. 2012-13 @ 7.5% AND IN A.Y. 2013-14 @ 1.13%. 15. . IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.0 3.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 15/03/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S JHARKHAND STATE MINERALS DEVELOPMENT CORPORA TION 2. DCIT, CIRCLE-1, RANCHI 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH