Asst. Commissioner of Income tax Cent. Cir. 1, Belgaum V. M/s. S B Minerals,

ITA 343/PAN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84750 (ITAT-PANAJI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BARTHAKUR LD
• Assessee Lawyers: S PARTHASARTHI
• Keywords: Business income; Depreciation; Revised return
• Section: 143(3); 133A; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NOS. 342 TO 344 /PNJ/2013 (ASST. YEAR S . 2006 - 07 TO 2008 - 09) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1. (APPELLANT) VS. M/S. S.B. MINERALS NEAR SIDDIVINAYAKA TEMPLE ROAD, COMPOUNDER LANE, HOSPET - 583201. PAN:AAFFS8188L (RESPONDENT) APPELLANT BY : SHRI B.BARTHAKUR , LD. DR RESPONDEN T BY: SHRI S. PARTHASARTHI, ADV. DATE OF HEARING : 05/08 /2014 DATE OF PRONOUNCEM ENT : 26/09 /2014 O R D E R PER: D.T. GARASIA ALL THESE APPEALS HAVE BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT - VI, BANGLORE DATED 28 TH AUGUST, 2013 FOR THE ASSESSMENT YEAR 2006 - 07 TO 2008 - 09. 2. THE ABOVE APPEALS RELATE TO THE SAME ASSESSEE FOR A.Y.2006 - 07, 2007 - 08 & 2008 - 09. THE COMMISSIONER OF INCOME TAX HAS DISPO SED ALL THE CASES BY THE COMMON ORDER, THEREFORE, WE DISPOSE THESE APPEALS BY THIS COMMON ORDER. 3. T HE COMMON GROUNDS ARE RAISED EXCEPT FIGURE IN ALL THE APPEALS BY THE DEPARTMENT READ AS UNDER: 1. WHETHER THE LD. CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS . 2,60,86,447/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y 2006 - 07 TOWARDS STOCK DIFFERENCE. 2 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET 2. WHETHER THE LD CIT(A) IS JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE STOCK EXISTED FOR THE A YS 2003 - 04 TO 2005 - 06 AND THEREFORE ELIGIBLE FOR GIVING CASCADING EFFECT TO THE OPENING STOCK FOR THE ASST YEAR 2006 - 07 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT SUBSTANTIATE HIS CONTENTION WITH ANY DOCUMENTARY EVIDENCE AND DID NOT PROVE THAT THE STOCK FOR THE EARLIER YEARS REALLY EXIST ED AS ON 31/3/2006. ALTERNATIVELY, IT IS HUMBLY PRAYED TO SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. 3.1 THE SHORT FACTS OF THE CASE ARE THAT THE SEARCH OPERATION U/S 132 OF THE INCOME TAX ACT WAS CARRIED ON 25.03.2008 IN THE GROUP CASES OF SRI B. P. ANANDKUMR SINGH, HOSPET. THE CASE WAS COVERED U/S. 153(C). FOR THE RELEVANT YEAR TO THE A.Y.2006 - 07, ASSESSEE FIRM IS ENGAGED IN IRON ORE MINI NG. THE ASSESSEE HAS SUBMITTED IBM REPORTS IN THE CASE OF JAYSINGPUR IRON ORE MIN ES, RAMGAD IRON ORES MINES AS WELL AS SVK IRON ORE MINES. COPY OF THE SAME HAS BEEN FURNISHED. IT HAS BEEN EXPLAINED THAT THE CLOSING STOCK AS ON 31.3.2006 IS BASED UPON THE QUANTITIES AS PER IBM REPORT FOR IRON ORE MINES. ASSESSEE HAS FURNISHED THE BASIS OF VALUATION OF CLOSING STOCK AS ON 31.3.2006. FOR THE RELEVANT TO A.Y.2006 - 07 THERE ARE IRON ORE SALES RS. 51,81,82,315/ - . OTHER INCOME OF RS. 3,90,95,321/ - WHICH COMPRISED OF ROYALTY RECEIPTS AND ACCRUED INTEREST ON FIXED DEPOSITS. IN ORIGINAL RETURN O F INCOME WAS COMPUTED AT RS. 33,24,84,397/ - . HOWEVER , IN THE RETURN OF INCOME FILED U/S. 153C THE SAME IS DECLARED AT 39,57,12,110/ - . THE ASSESSEE FIRM HAS REVISED THE INCOME BY STATING AS UNDER: INCOME AS PER P&L ACCOUNT RS.33,24,84,397 ADD: VALUE OF CLOSING STOCK AS ON 31/3/2006 RS.8,90,14,160 RS. 42,14,98,557 ADD: VALUE OF OPENING STOCK AS ON 1/4/2005 RS.2,66,24,100 RS. 39,48,74,457 LESS: VALUE OF CLOSING STOCK AS PER RETURN FILED U/S. - 139(1) RS. 38,97,400 REVISED TAXAB LE INCOME TO BE ADOPTED RS. 39,09,77,057 3 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET THUS, THERE WAS A DIFFERENCE OF RS. 5,84,92,660/ - WHICH IS DECLARED IN EXCESS AS PER THE REVISED COMPUTATION OF INCOME NOW FURNISHED BY THE ASSESSEE AS COMPARED TO ORIGINAL RETURN AND THE SAME IS DECLARED VOLUNTARILY BY THE ASSESSEE ON ACCOUNT STOCK DIFFER ENCE AS ON 31.3.2006 AFTER TAKING INTO ACCOUNT THE IBM REPORT SUBMITTED. IT HAS BEEN STATED IN THE ANNEXURE TO THE RETURN OF INCOME THAT A SURVEY U/S 133A OF THE I.T. ACT, 1961 WAS CONDUCTED AT THE VYSANKERE IRON ORE MINES ON 25/03/2008 AND A SWORN STATEMENT WAS RECORDED FROM THE MINES MANAGER. THE QUESTIONS AND ANSWERS RECORDED IN THE SWORN STATEMENT DOES NOT RESULT IN ANY ADDITIONAL TAXES, BUT THE INVENTORY OF IRON ORE AVAILABLE AT THE MINING AREA IS TAKEN AND THE SAME IS DULY DECLARED IN THE FIRMS RETURN OF INCOME TO BE FILED FOR A.Y.2008 - 09. AS SWORN STATEMENT WAS RECORDED FROM SHRI SRINIVASA SINGH VIDE STATEMENT DATED 24/06/2008, THE FIRM HAS ACCEPTED TO ADOPT THE VALUE OF CLOSING STOCK AS ON 31 /3/2006, 31/3/2007 AND 31/03/2008 AS PER IBM RECO RDS AND TO PAY TAXES ON THE SAME ACCORDINGLY. AS PER THE SWORN STATEMENT, THERE IS ADDITIONAL INCOME LIABLE TO BE TAXED ON ACCOUNT OF STOCK RECONCILIATION AND ACCORDINGLY VALUE OF STOCK AS PER IBM REPORT AND IT HAS BEEN DULY PAID FOR AY 2006 - 07. HOWEVER, I N THE INSTANT CASE, ASSESSEE IS FOUND TO HAVE ADOPTED THE STOCK POSITION AS PER IBM REPORTS RIGHT FROM AY 2003 - 04 AND PROCEEDED TO ADOPT THE STOCK AS PER IBM R EPORT AND GIVE EFFECT TO THE REL EVANT YEARS AND AFTER CASCADING EFFECT THE CLOSING STOCK AY 2005 - 06 IS WORKED OUT TO BE A T RS. 2,66,24,100/ - AND AFTER ADOPTING THE IBM FIGURES THE STOCK DIFFERENCE IS WORKED OUT TO RS. 5,84,92,660/ - . THE ASSESSEE HAS ACCEPTED TO ADOPT THE IBM STOCK FIGURES FOR THE YEAR RELEVANT TO A.Y.2006 - 07, 2007 - 08 AND 2008 - 09 AND AGREED TO DECLARE AN AMOUNT OF RS. 5 CRORES, RS. 15 CRORES AND RS. 11 CRORES, RESPECTIVELY AS ADDITIONAL INCOME. HOWEVER, ON CAREFUL VERIFICATION OF THE RETURN OF INCOME FOR THE ABOVE YEARS, IT HAS BEEN NOTICED THAT THE ABOVE DECLARATION HAS NOT BEEN MAINT AINED FOR THE RELEVANT ASSESSMENT YEARS. THE ASSESSEE TACTFULLY 4 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET USED THE OCCASION OF DECLARATION AND PROCEEDED TO ADOPT THE IBM FIGURES RIGH FROM A.Y.2003 - 04 AND ONWARDS AND CLAIMED THE CASCADING EFFECT FOR ALL THE YEAR. WHEREAS AS PER THE STATEMENT GIVEN BEFORE THE ADIT(INV)., THE IBM FIGURES OUGHT TO HAVE BEEN ADOPTED ONLY FROM THE AY 2006 - 07. IN THE ENTIRE PROCESS OF ADOPTION OF IBM F IGURES, THE INCOME HAS GONE DOWN SUBSTANTIALLY RIGHT FROM A.Y. 2003 - 04 TO 2008 - 09. THE STATEMENT WAS RECORDED AS PER THE STATEMENT THE CLOSING STOCK AS ON 31.3.2006 WAS 5 CRORES WHEREAS THE RETURN OF INCOME FILED FOR 2006 - 07 THE VALUE OF CLOSING STOCK WAS FOUND TO BE NIL. THEREFOR E , THE ASSESSING OFFICER HAS VERIFIED THE STATEMENT AND CONSIDERING THIS HE HAS WORK OUT THE CLOSING STOCK AND MADE THE ADDITION OF RS. 8,93,14,160/ - BY OBSERVING AS UNDER: NAME OF MINES OPENING STOCK PRODUCTION DISPATCH CLOSING STOCK (QUANTITY IN METRIC TONNES) JAISINGHPUR LUMPS & FINES SUB - GRADE WASTE 79,556 -- -- 465,000 -- -- 341,116 -- -- 203,440 -- 5,000 TOTAL 79,556 465,000 341,116 208,440 RAMGAD SGMD - LUMPS SGMD - FINES 102,261 84,421 348,000 1,100,000 294,172 874,499 156,089 309,922 TOTAL 186,682 1,448,000 1,168,671 466,011 VYSANAKERI MINES LUMPS & FINES SUB - GRADE/ WASTE 87,095 -- 20,000 500,000 -- -- 107,095 500,000 TOTAL 87,095 520,000 -- 607,095 VALUATION SUMMAR Y PARTICULARS QUANTITY OF IRON ORES, FINES VALUATION @ RS. 100 QUANTITY OF SUB - GRADE AND WASTE VALUATION @ RS.60 JAISINGPUR MINES 203,440 2,03,44,000 5,000 3,00,000 RAMGAD -- -- 466,011 2,79,60,660 VYSANKERI 107,095 1,07,09,500 500,000 3,00,00,000 TOTAL 3,10,53,500 5,82,60,660 5 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET TOTAL VALUATION = RS.31053500+RS.58260660 = RS. 8,93,14,16 0 WHEREAS IN THE RETURN OF INCOME FILED FOR Y 2006 - 07 ASSESSEE HAS TAKEN T E CLOSING STOCK AS NIL IN THE ACCOUNTS AS ON 31/3/2 006 BUT IN THE STATEMENT ATTACHE D TO THE RETURN FILED U/S - 153C THE CLOSING STOCK AS ON 31/3/2006 IS TAKEN AT RS.8,90,14,160/ - AND THEREAFTER PROCEEDED TO REDUCE THE CLOSING STOCK AS O N 31/3/2005 OF RS.2,57,86,447/ - . IN THE STATE MENT RECORDED ON OATH, THE PARTN ER HAS CATEGORICALLY STATED THAT HE WILL ADOPT THE CLOSING STOCK AS PER IBM REPORT A AN D THERE WILL BE A DECLARATION OF ADDITIONAL INCOME OF RS.5,00,00,000 OVER AND ABOVE THE TOTAL INCOME. IN THE INSTANT CASE, THE CORRECT CLOSING STOCK WORKS OUT TO RS . 8,93,14,160/ - AND THE SAME OUGH T TO HA VE BEEN MAINTAINED BY THE ASSESSEE SINCE ITS CLAIM FOR ADOPTION OF IBM FIGURES HAS BEEN SEPARATELY REJECTED IN THE RESPECTIVE ASSESSMENT YEARS. THEREFORE, AS AG AINST DECLARED UNDISCLOSED INCOM E OF RS.6,32,27,713/ - THE UNDISCLOSED INCOME IS ADOPTED A T RS.8,93,14,160 / - .THEREFORE, THERE WILL BE A NET ADDITION OF RS. 2,60,86,447 (RS.8,93,14,160/ - ) (RS. 6,32,27,713/ - ) BEING UNDISCLOSED INCOME OF THE ASSESSEE ON ACCOUNT OF DIFFERENCE IN STOCK. 3.2 . IN ASSESSMENT YEAR 2007 - 08, THE ASSESSEE FIRM IS ENGAGED IN IRON ORE MINING. THE ASSESSEE HAS SUBMITTED IBM REPORTS IN THE CASE OF JAYSINGPUR IRON ORE MINES, RAMGAD IRON ORES MINES AS WELL AS SVK IRON ORE MINES. THE CLOSING STOCK AS ON 31.3.2007 IS BASED UP ON QUANTITIES AS PER IBM REPORT FOR IRON ORE MINES. AS PER THE VALUATION OF THE CLOSING STOCK FOR 31.3 .20 07 THE TOTAL SALES WERE RS. 52,44,23,773/ - AND OTHER INCOME OF RS. 5,47,78,800/ - . THUS, AS SESSEE HAS NET PROFIT OF RS. 24, 78,82,934/ - . THE ASSESSEE HAS REDUCED THE VALUE OF CLOSING STOCK AS ON 31.3.2006 AMOUNTING TO RS. 8,90,14,160/ - AND TAXABLE INCOME IS DECLARED OF RS.15,88,68,774/ - . HOWEVER, DURING THE SURVEY U/S. 133A ASSESSEE HAS AGREED TO DECLARE AN AMOUNT OF RS. 15 CRORES. HE HAS REDUCED THE CLOSIN G STOCK OF RS. 8,19,14,160/ - , THEREFORE, AO HAS VERIFIED AND THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE AND IN REPLY TO SHOW CAUSE NOTICE THE ASSESSEE HAS STATED THAT VALUE OF CLOSING STOCK AS 31.3.2007 BEFORE ADIT(INV) HAS BEEN APPROXIMATELY AT RS. 15 CORES . THE 15 CRORES IS APPROXIMATELY FIGURE AND THERE WAS A DIFFERENCE. THEREFORE, AFTER CONSIDERING THE REPLY THE ASSESSING OFFICER HAS NOT ALLOWED CASCADING EFFECT AND HE HAS MADE THE ASSESS MENT AT RS.13,74,45,040 / - BY OBSERVING AS UNDER: 6 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET IT IS ONLY ST ATED THAT THE THAT THE INCOME FIGURE FOR AY 2008 - 09 IS SUBJECT TO CASCADING EFFECT OF EARLIER ASSESSMENT YEAR WHICH WOULD BE ROUGHLY RS.4 CRORES. THE ABOVE STATEMENT OF T HE ASSESSEE CLEARLY SHOWS THAT CASCADING IS CLAIMED BY THE FIRM ONLY FOR AY 2008 - 09 AND NOT FOR THE OTHER YEARS. FURTHER, IN REPLY TO Q.NO.22 ASSESSEE HAS AGREED TO FURNISH THE INCOME EFFECT FOR AY 2007 - 08 AND 2008 - 09 AS WELL AS RECONCILIATION OF THE PRODUCTION FIGURES OF THE ROM IN RES PECT OF VYASANKERE MINES FIGURES OF THE ROM IN RESPECT OF VYASANKERE MINES WITHIN ONE WEEK AND PRINTOUTS OF THE COMPUTERIZED BOOKS OF ACCOUNTS WITHIN TWO DAYS BEFORE THE INVESTIGATION WING. IT APPEARS THAT NO SUCH COMPUTATION HAS BEEN FURNISHED BY THE ASSE SSEE AND NOW FILING THE RETURN ASSESSEE TAKES THE PLEA THAT THE CASCADING EFFECT SHAT BE GIVEN FOR Y 2007 - 08 ALSO. THIS IS NOTHING BUT AN AFTER THOUGH CONVENIENTLY PUT FORTH BY THE ASSESSEE W HILE ADOPTING THE IBM FIGURES FOR VALUATION OF STOCK. THE STOCK POSITION FOR Y 2007 - 08 AS PER IBM REPORTS IS AS UNDER : NAME OF MINES OPENING STOCK PRODUCTION DISPATCH CLOSING STOCK (QUANTITY IN METRIC TONNES) JAISINGHPUR LUMPS FINES WASTE 34,717 168,773 -- 10,600 266,500 9,450 70,921 -- 35,867 364,302 10,000 TOTAL 203,440 277,100 80,371 410,169 RAMGAD LUMPS & FINES SUB - GRADE 466,011 -- 1,268,000 900,000 1,566,813 143,406 167,198 756,594 TOTAL 466,011 2,168,000 1,710,219 9,23,792 VYSANAKERI MINES LUMPS & FINES SUB - GRADE/ WASTE 107 ,095 500,000 175,000 -- 234,968 -- 47,127 500,000 TOTAL 607,095 175,000 234,968 547,127 VALUATION SUMMARY PARTICULARS QUANTITY OF IRON ORES, FINES VALUATION @ RS. 100 QUANTITY OF SUB - GRADE AND WASTE VALUATION @ RS.60 JAISINGPUR MINES 400,169 4,00,16,900 10,000 6,00,000 RAMGAD 167,198 1,67,19,800 756,594 4,53,95,640 VYSANKERI 47,127 47,12,700 500,000 3,00,00,000 TOTAL 6,14,49,400 7,59,95,640 TOTAL VALUATION = RS.61449400+RS.75995640 = RS. 13,74,45,040 / - 7 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET WHEREAS IN THE RETURN OF INCOME FILED FOR Y 2007 - 08 ASSESSEE HAS TAKEN THE VALUATION OF CLOSING STOCK IN THE ACCOUNTS AS ON 31/3/2007 TO BE AT RS.13,68,45,040/ - , HOWEVER, PROCEEDED TO CLAIM CASCADING EFFECT OF CLOSING STOCK OF RS.8,90,14,160/ - AND THE PRO FIT IS REDUCED TO RS.15,88,68,774/ - . THIS ACTION OF THE ASSESSEE IS NOT ADMISSIBLE TO HIM AS IT IS CLEARLY STATED IN THE STATEMENT THAT T HE IN COME EFFECT FOR Y 2007 - 08 WOULD BE RS. 15 CRORES AND THE SAME IS ADDITION TO THE INCOME AS PER TENTATIVE COMPUTAT ION OF INCOME FILED BY IT. THE CASCADING EFFECT IS CLAIMED ONLY FOR Y 2008 - 09. IT IS ALSO PERTINENT TO NOTE THAT AS ON THE DATE OF SEARCH AS ADMITTED IN ANSWER TO Q.NO.3 OF THE STATEMENT DATED 24/6/2008 THAT THE RETURN OF INCOME FOR Y 2007 - 08 WAS YET TO BE FILED. THE INCOME ARRIVED AS PER COMPUTATION OF INCOME IS SUBJECT TO VALUATION OF CLOSING STOCK, THOUGH AS SURED TO FILE THE RECONCILIATION OF THE STOCK AS WELL AS PRINTOUTS OF THE BOOKS OF ACCOUNTS WITHIN A WEEK OR SO ASSESSEE HAS FAILED TO PRODUCE THE SAME BEFORE THE INVESTIGATION WING. UNDER THESE CIRCUMSTANCES, THE CLAIM NOW PUT FORTH BY THE ASSESSEE IS NOT ADMISSIBLE. IT IS ALSO WORTHWHILE TO NOTE HERE THAT ASSESSEES BOOKS OF ACCOUNTS ARE AUDITED AND CLOSED AS ON THE DATE OF SEARCH. THEREFORE, FURTH ER CLAIM OF CASCADING EFFECT BASED ON THE IBM FIGURES IS ALSO NOT TENABLE. THEREFORE, THE CLAIM OF CASCADING EFFECT AMOUNTING TO RS.8,90,14,160/ - (THE CORRECT FIGURE WOULD BE RS.8,93,14,160/ - AS WORKED OUT FOR Y 2006 - 07) IS REJECTED. WHILE REJECTING THIS CLAIM THE DIFFERENCE IN VALUATION WORKED OUT IN THE ABOVE MENTIONED TABLE IS ALSO TAKEN INTO ACCOUNT. IN THE ASSESSEES BOOK THE CLOSING STOCK IS VALUED AT RS.13,68,45,040/. HOWEVER, AS WORKED OUT ABOVE, THE SAME IS ARRIVED AT RS.13,74,45,040/ - . THE ASSESS EE OUGHT TO HAVE MAINTAINED THE CLOSING STOCK AT RS.13,74,45,040/ - AND ON FACTS OF THE CASE, NO CASCADING IS ALLOWABLE TO THE ASSESSEE FOR THE REASONS DISCUSSED AS ABOVE. THEREFORE, ASSES SEES CLAIM O F CASCADING OF RS.8,90,14,160/ - OF AY. 2006 - 07 (THE CORREC T AMOUNT WOULD RS.8,93,14,160/ - ) IS NOT ALLOWABLE TO THE ASSESSEE AND THE SAME IS DISALLOWED HEREWITH. SINCE THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS REMAINED TO BE FILED AS ON THE DATE OF SEARCH AND THE SAME IS FURNISHED ONLY AFTER ISSUE OF NOTICE U/S - 153C, THE ENTIRE INCOME IS TREATED AS UNDISCLOSED INCOME OF THE ASSESSE E . 8 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET 3.3. IN ASSESSMENT YEAR 2008 - 09 THE ASSESSEE HAS SUBMITTED IBM REPORTS IN THE CASE OF JAYSINGPUR IRON ORE MINES, RAMGAD IRON ORES MINES AS WELL AS SVK IRON ORE MINES. THE CLOSING STOCK AS ON 31.3.2007 IS BASED UPON QUANTITIES AS PER IBM REPORT FOR IRON ORE MIN ES. FOR THE RELEVANT TO ASSESSMENT YEAR 2008 - 09 THERE ARE IRON ORE SALES OF RS. 32,18,71,920/ - . THE ASSESSEE HAS IRO N ORE SALES OTHER INCOME IS RS. 4,01,25,902/ - . IN SAID PROCEEDING THE ASSESSEE H AS DECLARED AN AMOUNT OF RS. 11 CRORES ON ACCOUNT OF STOCK DIFFERENCE BUT THE ASSESSEE DID NOT DECLARE OF RS. 11 CRORES WHEN HE FILED RETURNS OF INCOME. THEREFORE, THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS. 10,75,76,975/ - BY OBSERVING AS UNDER: THIS CONTENTION OF THE ASSESSEE IS NOT ADMISSIBLE SINCE ASSESSEE HAS CLEARLY STATED BEFORE THE INVESTIGATION WING THAT THE INCOME EFFECT FOR THE Y 2007 - 08 WOULD BE RS.15 CRORES APPROXIMATELY AND FOR Y 2008 - 09 THE SAME WOULD BE RS.11 CRORES APPROXIMATELY. THIS IS IN ADDITION TO THE INCOME AS PER TENTATIVE COMPUTATION OF INCOME FILED BY THE FIRM. IT IS ONLY STATED THAT THE INCOME FIGURE FOR Y 2008 - 09 IS SUBJECT TO CASCADING EFFECT OF EARLIER ASSESSMENT YEAR WHICH WOULD BE ROUGHLY RS.4 CRORES. THE ABOVE STATEMENT OF THE ASSESSEE CLEARLY SHO WS THAT CASCADING IS CLAIMED BY THE FIRM ONLY FOR Y 2008 - 09 AND NOT FOR THE OTHER YEARS. FURTHER, IN REPLY TO Q.NO.22 ASSESSEE HAS AGREED TO FURNISH THE INCOME EFFECT FOR Y 2007 - 08 AND 2008 - 09 AS WELL AS RECONCILIATION OF THE PRODUCTION F I GU RES OF THE RO M IN RESPECT OF VYASANKERE MINES WITHIN ONE WEEK AND PRINTOUTS OF THE COMPUTERIZED BOOKS OF ACCOUNTS WITHIN TWO DAYS BEFORE THE INVESTIGATION WING. IT APPEARS THAT NO SUCH COMPUTATION HAS BEEN FURNISHED BY THE ASSESSEE AND NOW FILING THE RETURN ASSESSEE TA KES THE PLEA THAT THE CASCADING EFFECT SHALL BE GIVEN FOR Y 2007 - 08 AND 2008 - 09 ALSO. THIS IS NOTHING BUT AN AF TER THOUGHT CONVENIENTL Y PUT FORTH BY THE ASSESSEE WHIL E ADOPTING THE IBM FIGURES FOR VALUATION OF STOCK. THE STOCK POSITION FOR Y 2008 - 09 AS PE R IBM REPORTS IS AS UNDER : - 9 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET NAME OF MINES OPENING STOCK PRODUCTION DISPATCH CLOSING STOCK (QUANTITY IN METRIC TONNES) JAISINGHPUR LUMPS FINES 35,867 364,302 160,000 21,500 141,037 168,390 54,830 217,412 TOTAL 400,169 181,500 309,427 272,242 RAMGAD LUMPS & FINES SUB - GRADE 167,198 756,594 694,000 (756,594) 717,529 -- 143,669 -- TOTAL 923,792 (62,594) 717,529 143,669 VYSANAKERI MINES LUMPS & FINES SUB - GRADE/ WASTE 47,127 500,000 365,000 -- 384,741 -- 27,386 500,000 TOTAL 547,127 365,000 384,741 5 27,386 VALUATION SUMMARY PARTICULARS QUANTITY OF IRON ORES, FINES VALUATION @ RS. 175 QUANTITY OF SUB - GRADE AND WASTE VALUATION @ RS.60 JAISINGPUR MINES 272,242 4,76,42,350 -- 6,00,000 RAMGAD 143,669 2,51,42,075 -- 4,53,95,640 VYSANKERI 27,386 47,92,550 500,000 3,00,00,000 TOTAL 443,297 7,75,76,975 500,000 3,00,00,000 TOTAL VALUATION = RS.77576975+RS.30000000 = RS. 10,75,76,975 WHEREAS IN THE RETURN OF INCOME FILED FOR AY 2008 - 09 ASSESSEE HAS TAKEN THE VALUATION OF CLOSING STOCK IN THE ACCOUNTS AS ON 31/3/2008 TO BE AT RS. 10,75,76,975/ - . TO HAVE A CLEAR PICTURE, THE PROFIT AND LOSS ACCOUNT IS RECASTED AFTER ADOPTIN G OPENING STOCK AS ON 1/4/2007 AT RS. 13,74,45,040/ - . DR. PARTICULARS AMOUNT (RS.) PARTICULARS AMOUNT (RS.) TO OPENING STOCK 137445040 BY IRON ORE SALES 321871920 TO PURCHASE 455555 BY OTHER INCOME 40125902 TO RAISING CHARGES 261638625 BY INADMISSIBLE EXPENSES 0 TO TRANSPORT CHARGES 37889110 BY CLOSING STOCK 107576975 TO REPAIRS AND MAINTENANCE 4625441 TO ADMINISTRATIVE AND OPERATIVE EXPENSES 10307290 10 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET TO INTEREST & BANK CHARGES 13960 TO DEPRECIATION 548884 TO DEFERRED REVENUE EXPENSES WRITTEN OFF 100612 TO NET PROFIT 16550280 469574797 469574797 IN THE ABOVE COMPUTATION, THE CLOSING STOCK OF AY 2007 - 08 HAS BEEN TAKEN AS OPENING STOCK FOR AY 2008 - 09. IN THE STATEMENT RECORDED ON 24/06/2008, ASSESSEE HAS STATED THAT IN VIEW OF PENDING RECONCILIATION HE HAS AGREED TO MAKE A DECLARATION OF RS. 11 CRORES FOR AY 2008 - 09 SUBJECT TO CASCADING EFFECT OF THE EARLIER YEARS STOCK. ACCORDINGLY, CASCADING EFFECT IS ALLOWED TO THE ASSESSEE BEING THE OPENING STOCK OF AY 2008 - 09 OF RS. 13,74,45,040/ - . THUS, DUE TO CASCADING EFFEC T THE NET PROFIT ARRIVED AT RS. 1,65,50,280/ - AS AGAINST PROFIT WORKED OUT BY ASSESSEE OF RS. 1,71,50,280/ - AND THE SAME IS ADOPTED. 4. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE EXPLANATIONS GIVEN BY THE APPELLANT INCLUDING THE STATEMENT OF SRI B S SRINIVAS SINGH, RECORDED U/S 131 OF INCOME TAX ACT DATED 24.06.2008. FROM THE FACTS ON RECORD, I FIND THA T THE APPELLANT HAS REVISED ITS RETURN OF INCOME WITH REGARD TO DISCLOSURE OF STOCK AS PER STOCK DECLARED BEFORE IBM AUTHORITIES FROM A.Y. 2003 - 04 TO 2007 - 08. THE CREDIT FOR OPENING STOCK IN EACH YEAR WILL ALSO HAVE TO BE GIVEN EFFECT. THE DIFFERENCE IN ST OCK VALUE WITH REGARD TO EACH YEAR AS PER THE ASSESSING OFFICERS WORKING AND THAT MADE BY THE APPELLANT IS ONLY ON ACCOUNT OF OPENING STOCK OF EACH YEAR. FOR A.Y. 2008 - 09, THE APPELLANT FILED THE RETURN OF INCOME FOR THE FIRST TIME. NO RETURNS OF INCOME HAD BEEN FILED/DUE AT THE TIME WHEN THE STATEMENT WAS RECORDED. THE STOCK VALUE DECLARED BY THE APPELLANT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. AS IS APPARENT FROM THE ABOVE, THE APPELLANT HAS IN EFFECT DECLARED THE VALUE OF STOCK AS AGREED TO DURIN G THE COURSE OF SURVEY (SUBJECT TO THE CASCADING EFFECT IN EACH YEAR). IT IS ALSO ON RECORD THAT THE APPELLANT DECLARED ADDITIONAL STOCK, OF RS.2,45,71,100/ - FOR A.Y. 2005 - 06 (OVER AND ABOVE THE DECLARATION MADE TO THE INVESTIGATION WING AS A RESULT OF STO CK RECONCILIATION) WHICH THOUGH REJECTED BY THE ASSESSING OFFICER IN THE ORDER U/S 143(3) R.W.S. 153C DATED 30.12.2009 HAS BEEN BROUGHT TO TAX AS DECLARED BY THE APPELLANT. 11 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET THE APPELLANT HAS STATED THAT NO APPEAL HAS BEEN FILED AGAINST THE SAME AND THE SAM E IS THEREFORE FINAL. HAVING DONE SO, THE OPENING STOCK OF 2,66,24,100/ - FOR A.Y.2006 - 07 CANNOT BE DENIED. AS REGARDS CASCADING EFFECT FOR A.Y. 2007 - 08 PERTAINING TO OPENING STOCK WHICH IS THE CLOSING STOCK OF A.Y.2006 - 07, THE ASSESSING OFFICER HAS ACCEPTE D THE SAME CLOSING STOCK AS ON 31.03.2006 IN THE ASSESSMENT ORDER FOR A.Y. 2006 - 07 ALSO. ON SUCH FACTS, THE VALUE OF OPENING STOCK AS ON 01.04.2007 AT RS.8,90,14,160/ - CANNOT BE DENIED. A CLOSE LOOK AT THE TABLE ABOVE SHOWS THAT THE DECLARATION MADE BY THE APPELLANT IN THE RETURNS OF INCOME ON ACCOUNT OF VALUE OF CLOSING STOCK IS IN ACCORDANCE WITH THE DECLARATION BEFORE IBM AUTHORITIES AND ALSO PRIMARILY IN COMPLIANCE WITH WHAT HAD BEEN DECLARED BEFORE THE INVESTIGATING AUTHORITIES SUBSEQUENT TO THE SURVEY IF ALL THE ASSESSMENT YEARS ARE TAKEN INTO ACCOUNT. ALTHOUGH, BEFORE INCOME TAX AUTHORITIES, HE HAD PROMISED TO REVISE STOCK VALUES FOR A.Y.S 2006 - 07 TO 2008 - 09 (ONLY), THAT HE HAS ADOPTED CORRECTION IN THE STOCK FIGURES FOR A.YS. 2003 - 04 TO 2008 - 09 AS PE R IBM STOCK CANNOT BE DISREGARDED. THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ON RECORD ANY OTHER INFORMATION REGARDING VARIATION IN STOCK. THE CLOSING STOCK FOR THE YEARS IN QUESTION IS ACCEPTED AND NO ADDITION IS CALLED FOR ON THIS ACCOUNT. THE APPEALS O N THIS ISSUE ARE ALLOWED. HOWEVER, THIS FINDING WILL NOT AFFECT ANY FINDING ON UNACCOUNTED PRODUCTION AND SALES WHICH HAVE BEEN BROUGHT ON RECOR D AND DISCUSSED AT PARA 5 BELOW . 5. UNDISCLOSED INCOME BEING SUPPRESSED (RELEVANT FOR A.YS. 2008 - 09 & 2007 - 08) FOR A.Y. 2008 - 09, UNDISCLOSED INCOME ON ACCOUNT OF SUPPRESSED SALES RS. 1,26,49,906/ - RS. 26,22,892/ - AND RS. 4,15,87,157/ - FOR A.Y. 2008 - 09, AS PER SEIZED MATERIAL A4/1/VM SVK/SB AND A/VM/3 RESPECTIVELY HAVE BEEN MADE FOR A.Y. 2008 - 09. THERE WAS AN UN DISCLOSED SALES FOR THE SPECIFIC PERIOD AS DETAILED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS APPLIED THE GROSS PROFIT RATE AT 18.4% AND BROUGHT THE PROFIT ELEMENT TO TAX OF RS. 23,38,967/ - , RS. 4,84,972/ - AND RS. 4,15,87,157/ - . THE APPELLANT WAS UNABLE TO EXPLAIN THE DISCREPANCY TO THE ASSESSING OFFICER. SIMILARLY FOR A.Y.2007 - 08, AS PER SEIZED MATERIAL MARKED AS A5/P1/VM/SVK/SB, UNDISCLOSED INCOME BEING PROFIT DERIVED ON UNACCOUNTED SALES AS DISCUSSED AT PARA 5 OF ASSESSMENT ORDER AT RS.31,04,5 39/ - FOR THE PERIOD APRIL 2006 TO AUGUST 2006 WAS BROUGHT TO TAX. DURING THE COURSE OF APPEAL, THE APPELLANT HAS REITERATED THE STAND TAKEN BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS PASSED A REASONED ORDER ON THIS ISSUE FOR BOTH THE ASSESSMENT YEARS AND THE APPELLANT HAS FAILED TO EXPLAIN THE DISCREPANCY EI THER BEFORE THE ASSESSING OFFICER OR BEFORE ME IN APPEAL. I AM UNABLE TO DIFFER WITH THE FINDINGS OF THE ASSESSING OFFICER. THE ADDITIONS MADE IN THIS REGARD IS UPHELD. 12 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET 5. THE LEARNED DR SUBMITTED THAT ASSESSEE HAS FILED THE RETURN FOR A.Y. 2006 - 07 AND DECLARING THE CLOSING STOCK NIL IN ACCOUNTS AS ON 31 ST MARCH, 2006. BUT THE STATEMENT ATTRACTS IN THE FILE D U/S 153C THE CLOSING STOCK AS ON 31 ST MARCH, 2006 IS TAKEN RS. 8,90,14,160/ - AND THEREAFTER, REDUCING THE CLOSING STOCK AS ON 31 ST MARCH, 2005 OF R S. 2,57,86,447/ - . IN THE STATEMENT RECORDED ASSESSEE ADMITTED THAT THE CLOSING STOCK AS PER IBM REPORT WILL BE DECLARED AS ADDITIONAL INCOME OF RS. 5,00,00,000/ - OVER AND ABOVE THE TOTAL INCOME. THE ASSESSEE SHOULD HAVE DECALED THE TOTAL CORRECT CLOSING ST OCK WORKS OUT TO RS. 8, 93,14,160/ - . THEREFORE, THE AO IS JUSTIFIED IN MAKING THE ADDITION. 6. THE LEARNED AR ARGUED THE CASE BEFORE US AS WELL AS FILED THE WRITTEN SUBMISSION WHICH READ AS UNDER: WRITTEN SUBMISSIONS DE TAILS OF RETURN OF FILED AND INCOME DECLARED BEFORE AND AFTER SEARCH IN THE ASSESSMENT ORDER FOR ASSESSMENT 2003 - 2004, IN PAGE 3 (PAPER BOOK PAGE NO.70) THE ASSESSING OFFICER AS CLEARLY STATED THAT THE SWORN AS PER SWORN STATEMENT OF SRINIVAS SINGH RECORDED ON 24 - 6 - 2008 THE FIRM AS ACCEPTED TO ADOPT THE VALUE OF CLOSING STOCK A S ON 31 - 3 - 2006, 31 - 3 - 2007 AND 3 1 - 3 - 2008 AS PER IBM RECORDS AND PAY TAXES ACCORDINGLY. ASSESSMEN T YEAR INCOME RETURNED BEFORE SEARCH INCOME RETURNED AFTER SEARCH DIFFERENCE ADDL. INCOME DECLARED IN Q. NO. 21 OF S.S. STOCK DECLARED AS PER IBM TOTAL INCOME ASSESSED BY AO TOTAL INCOME AS PER CIT(A) ORDER PAGE NOS. 2006 - 07 33,24,84,397 39,57,12,110 6,32,27,713 5 CRORES 8,90,14,160 42,17,98,557 39,57,12,110 85 2007 - 08 NO RETURN FILED 15.88,68,774 15,88,68,774 15 CRORES 13,68,45,040 25,09,87,473 16,19,73,313 87 2008 - 09 NO RETURN FILED 1,72,36,090 1,72,36,090 - 10,75,76,975 6,10,47,188 6,10,47,188 87 IN ADDITION TO BE ABOVE, SUO MOTTO THE TAX PAYER RECONCILED AND REVISED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005 - 06 ADMITTING ADDITIONAL INCOME ON ACCOUNT OF CLOSING STOCK AT RS.2,66,24,100. A REVISED RETURN WAS FILED ON 1 - 4 - 13 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET 2009 MAKING PAYMENT OF ADDITIONAL TAX OF RS.94,66,570 THIS CLOSING STOCK OF 2005 - 06 WAS TAKEN AS OPENING STOCK OF 2006 - 07. IN ANSWER TO QUESTION NO.7 OF SWORN STATEMENT STOCK OFFERED ON ESTIMATE AS ON 31 - 3 - 2006 WAS 5 CRORES. WHEREAS THE CORRECT STOCK IS ADOPTED AT RS.8,90,14,160. FOR ASSESSMENT YEAR 200 8 - 09, IN QUESTION NO.21 OF SWORN STATEMENT IT WAS ADMITTED THAT THE INCOME EFFECT OF 11 CRORES WOULD TO SUBJECT TO CASCADING OF STOCK. THE OPENING STOCK IS 15 CRORES AND THE CLOSING STOCK IS 11 CRORES IN ROUND FIGURE. AND THE INCOME FIGURE AS STATED IN THE STATEMENT AT 4 CRORES ON ACCOUNT OF STOCK VALUATION IS CORRECTLY ESTIMATED. THERE IS NO DEVIATION FROM THE ADMISSION. THE VALUE OF STOCK AS PER IBM ADOPTED FOR STATEMENTS OF ACCOUNT COMPARES AND ALMOST MATCHES WITH THE ESTIMATED ADMISSION IN THE SWORN STATEMENT. ASSESSMENT YEAR STOCK AS PER IBM ADOPTED TO ARRIVE TOTAL INCOME STOCK OFFERED IN SWORN STATEMENT ON ESTIMATION 2006 - 07 8,90,14,160 5 CRORES 2007 - 08 13,68,45,040 15CRORES 2008 - 09 10,75,76,975 11 CRORES TOTAL 33,34,36,175 31 CRORES (PAGE NO. 18) 7. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE CIT(A) HAS VERIFIED THE RETURN OF INCOME FOR A.Y. 2003 - 04 TO 2007 - 08 AND HE HAS ALSO VERIFIED THE STOCK DECLARED BEFORE IBM AUTHORITIES AND AFTER CONSIDERING THE STOCK BEFORE THE IBM AUTHORITIES TH E CIT(A) H AS VERIFIED THE SEIZE D MATERIAL ALONG WITH DISCLOSURE AND CONSIDERING ALL THESE EVIDENCES ON RECORD, HE HAS DELETED THE ADDITION IN RESPECT TO ASSESSMENT YEAR I.E., A.Y. 2006 - 07, 2007 - 08 & 2008 - 09 AND OUR INTERFERENCE IS NOT REQUIRED. 14 . ITA NOS.342, 343 & 344/PNJ/2013 ACIT VS. M/S. S.B. MINERALS, HOSPET 6. IN THE RESULT, THE APPEAL S FILED BY THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T ON 26 . 09 .2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 26 .09 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER